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Section 1: 8-K (8-K)

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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 8-K
CURRENT REPORT

Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934

Date of Report: January 30, 2019

Exact Name of Registrant
Commission
I.R.S. Employer
as Specified in Its Charter
File Number
Identification No.
Hawaiian Electric Industries, Inc.
1-8503
99-0208097


State of Hawaii
(State or other jurisdiction of incorporation)
 
1001 Bishop Street, Suite 2900, Honolulu, Hawaii  96813
(Address of principal executive offices and zip code)
 
Registrant’s telephone number, including area code:
 (808) 543-5662
 
None
(Former name or former address, if changed since last report.)
 
 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
[ ]
Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
[ ]
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
[ ]
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
[ ]
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule12b-2 of the Securities Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company
Hawaiian Electric Industries, Inc. [ ]
 
Hawaiian Electric Company, Inc. [ ]

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Hawaiian Electric Industries, Inc. [ ]
 
Hawaiian Electric Company, Inc. [ ]






Item 7.01 Regulation FD Disclosure.
On January 30, 2019, HEI issued a news release, “American Savings Bank Reports 2018 Year-End and Fourth Quarter Earnings.” This news release is furnished as Exhibit 99.


Item 9.01 Financial Statements and Exhibits.
    
(d) Exhibits
 
Exhibit 99
News release, dated January 30, 2019, “American Savings Bank Reports 2018 Year-End and Fourth Quarter Earnings”

The information furnished in connection with this current report on Form 8-K shall not be deemed "filed" for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the Exchange Act), or incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act, except as shall be expressly set forth by specific reference in such a filing.













SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

HAWAIIAN ELECTRIC INDUSTRIES, INC.
 
 
(Registrant)
 
 
/s/ Gregory C. Hazelton
 
 
Gregory C. Hazelton
 
 
Executive Vice President and
 
 
   Chief Financial Officer
 
 
(Principal Financial Officer)
 
 
 
 
 
Date: January 30, 2019
 
 
 
 
 


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EXHIBIT INDEX

Exhibit No.
Description
News release, dated January 30, 2019, “American Savings Bank Reports 2018 Year-End and Fourth Quarter Earnings”


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Section 2: EX-99 (EXHIBIT 99)

Exhibit


Exhibit 99

396562769_heicatalyst2a20.jpg NEWS RELEASE
January 30, 2019
Contact:
Julie R. Smolinski
Telephone: (808) 543-7300
 
Director, Investor Relations
E-mail: ir@hei.com

AMERICAN SAVINGS BANK REPORTS 2018 YEAR-END AND FOURTH QUARTER EARNINGS

Fourth Quarter 2018 Net Income of $21.8 Million
2018 Net Income of $82.5 Million - Highest in Bank’s History
Solid Earnings Growth and Profitability

Selected 2018 Highlights
Continued improvement in 2018 earnings and profitability
Return on equity of 13.5%
Deposit growth of 4.6%
Net interest margin expanded 14 bps to 3.83%
Efficiency ratio of 59.4%, improved more than 200 bps versus 2017

HONOLULU - American Savings Bank, F.S.B. (American), a wholly-owned subsidiary of Hawaiian Electric Industries, Inc. (NYSE - HE) today reported 2018 net income of $82.5 million compared to $67.0 million in 2017. Net income for the fourth quarter of 2018 was $21.8 million, compared to $21.2 million in the third, or linked, quarter of 2018 and $16.9 million in the fourth quarter of 2017. Key measures of efficiency and profitability strengthened over the prior year, with an efficiency ratio for the full year of 59.4% compared to 61.6% in 2017, net interest margin expanding to 3.83% compared to 3.69% for 2017, and return on average equity of 13.5% compared to 11.2% for 2017.
“2018 was a record year for the bank, reflecting the combination of a healthy Hawaii economy, the benefits of tax reform, and the hard work of our ASB teammates to improve efficiency and deliver disciplined growth. We are excited about the opportunity for continued efficiency and operational improvements with our transition to our new corporate campus during the first quarter of 2019,” said Rich Wacker, president and chief executive officer of American.





Hawaiian Electric Industries, Inc. Ÿ American Savings Bank, F.S.B.
January 30, 2019
Page 2    

Financial Highlights
    Net interest income was $242.7 million in 2018, an increase of 8% compared to $223.9 million in 2017. Fourth quarter 2018 net interest income was $63.4 million, compared to $61.1 million in the linked quarter and $57.0 million in fourth quarter of 2017. The increase in net interest income reflects growth in interest earning assets along with the improved interest rate environment, which resulted in higher yields on interest earning assets. Net interest margin grew to 3.83% in 2018 compared to 3.69% in 2017. Fourth quarter of 2018 net interest margin was 3.95% compared to 3.81% in the linked quarter and 3.68% in the fourth quarter of 2017, with the improvement primarily attributable to higher yields on interest earning assets and continued low funding costs.
The provision for loan losses was $14.7 million in 2018 compared to $10.9 million in 2017. The fourth quarter of 2018 provision for loan losses was $2.4 million compared to $6.0 million in the linked quarter and $3.7 million in the fourth quarter of 2017. The year over year increase in the provision for loan losses was primarily due to additional loan loss reserves for the consumer loan portfolio. The decrease in the fourth quarter of 2018 provision for loan losses compared to the linked quarter was primarily due to releases of reserves in the commercial and commercial real estate loan portfolios as a result of improved credit quality and the payoff of a criticized commercial real estate construction loan. The 2018 net charge-off ratio was 0.34% compared to 0.27% in 2017 primarily due to charge off activity in the personal unsecured loan portfolio. Nonaccrual loans as a percent of total loans receivable held for investment was 0.56% compared to 0.59% in the linked quarter and 0.51% in the prior year quarter.  
Noninterest income for 2018 was $56.1 million, compared to $61.6 million in 2017, and fourth quarter 2018 noninterest income was $13.5 million, compared to $15.3 million in the linked quarter and $15.0 million in the fourth quarter of 2017. The lower noninterest income for the year was primarily due to lower debit card interchange fees as a result of a new accounting standard that reclassified $4.2 million of debit card expenses in 2018 to noninterest income.
Noninterest expense for 2018 was $177.4 million compared to $175.9 million in 2017. Fourth quarter of 2018 noninterest expense was $45.7 million compared to $43.6 million in the linked quarter and $45.3 million in the fourth quarter of 2017. The increase in noninterest expense for the year was primarily due






Hawaiian Electric Industries, Inc. Ÿ American Savings Bank, F.S.B.
January 30, 2019
Page 3

to higher compensation and benefit expenses as a result of annual merit increases and the bank’s decision to increase the entry salary for employees, partially offset by the reclassification of debit card expenses described above.
Total loans were $4.8 billion as of December 31, 2018, up 3.7% from December 31, 2017, with retail loans up $130 million, or 3.9%, reflecting American’s disciplined approach toward growing the loan portfolio. The commercial real estate construction portfolio was down 14.8% from December 31, 2017.
    Total deposits were $6.2 billion at December 31, 2018, an increase of $268 million or 4.6% from December 31, 2017. The average cost of funds was 0.25% for the full year 2018, up 4 basis points from the prior year. For the fourth quarter of 2018, the average cost of funds was 0.28%, up 2 basis points from the linked quarter and up 7 basis points from the prior year quarter.
     Overall, American’s return on average equity for the full year was solid at 13.5% in 2018 compared to 11.2% in 2017 and the return on average assets for the full year was 1.20% in 2018 compared to 1.02% in 2017. For the fourth quarter of 2018, the return on average equity was 14.1%, compared to 13.8% in the linked quarter and 11.1% in the fourth quarter of 2017. Return on average assets was 1.25% for the fourth quarter of 2018, compared to 1.22% in the linked quarter and 1.01% in the same quarter last year.
In 2018, American paid dividends of $50 million to HEI while maintaining healthy capital levels - leverage ratio of 8.7% and total capital ratio of 13.9% at December 31, 2018.

HEI EARNINGS RELEASE, HEI WEBCAST AND CONFERENCE CALL TO DISCUSS EARNINGS AND 2019 EPS GUIDANCE
Concurrent with American’s regulatory filing 30 days after the end of the quarter, American announced its fourth quarter and full year 2018 financial results today. Please note that these reported results relate only to American and are not necessarily indicative of HEI’s consolidated financial results for the fourth quarter and full year 2018.
HEI plans to announce its fourth quarter and 2018 consolidated financial results on Friday, February 15, 2019 and will conduct a webcast and conference call to discuss its consolidated earnings, including American’s earnings, and 2019 EPS guidance that same day at 11:15 a.m. Hawaii time (4:15 p.m. Eastern time).
Interested parties within the United States may listen to the conference by calling (844) 834-0652




Hawaiian Electric Industries, Inc. Ÿ American Savings Bank, F.S.B.
January 30, 2019
Page 4

and international parties may listen to the conference by calling (412) 317-5198 or by accessing the webcast on HEI’s website at www.hei.com under the heading “Investor Relations,” sub-heading "News and Events - Events and Presentations."  HEI and Hawaiian Electric Company, Inc. (Hawaiian Electric) intend to continue to use HEI’s website, www.hei.com, as a means of disclosing additional information. Such disclosures will be included on HEI’s website in the Investor Relations section.
Accordingly, investors should routinely monitor such portions of HEI’s website at www.hei.com in addition to following HEI’s, Hawaiian Electric’s and American’s press releases, HEI’s and Hawaiian Electric’s Securities and Exchange Commission (SEC) filings and HEI’s public conference calls and webcasts. Investors may also sign up to receive e-mail alerts (based on each investor's selected preferences) by visiting the "Investor Relations" section of the website, sub-heading "Email Notification." The information on HEI’s website is not incorporated by reference in this document or in HEI’s and Hawaiian Electric’s SEC filings unless, and except to the extent, specifically incorporated by reference. Investors may also wish to refer to the Public Utilities Commission of the State of Hawaii (PUC) website at dms.puc.hawaii.gov/dms in order to review documents filed with and issued by the PUC. No information on the PUC website is incorporated by reference in this document or in HEI’s and Hawaiian Electric’s SEC filings.
An on-line replay of the February 15, 2019 webcast will be available on HEI’s website beginning about two hours after the event.  Replays of the conference call will also be available approximately two hours after the event through March 1, 2019 by dialing (877) 344-7529 or (412) 317-0088 and entering passcode: 10127920.
HEI supplies power to approximately 95% of Hawaii’s population through its electric utilities, Hawaiian Electric, Hawaii Electric Light Company, Inc. and Maui Electric Company, Limited; provides a wide array of banking and other financial services to consumers and businesses through American, one of Hawaii’s largest financial institutions; and helps advance Hawaii’s clean energy and sustainability goals through investments by its non-regulated subsidiary, Pacific current, LLC.

FORWARD-LOOKING STATEMENTS
This release may contain “forward-looking statements,” which include statements that are predictive in nature, depend upon or refer to future events or conditions, and usually include words such as “will,” “expects,” “anticipates,” “intends,” “plans,” “believes,” “predicts,” “estimates” or similar expressions. In addition, any statements concerning future financial performance, ongoing business strategies or prospects or possible future actions are also forward-looking statements. Forward-looking statements are based on current expectations and





Hawaiian Electric Industries, Inc. Ÿ American Savings Bank, F.S.B.
January 30, 2019
Page 5

projections about future events and are subject to risks, uncertainties and the accuracy of assumptions concerning HEI and its subsidiaries, the performance of the industries in which they do business and economic and market factors, among other things. These forward-looking statements are not guarantees of future performance.
Forward-looking statements in this release should be read in conjunction with the “Cautionary Note Regarding Forward-Looking Statements” and “Risk Factors” discussions (which are incorporated by reference herein) set forth in HEI’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2018 and HEI’s future periodic reports that discuss important factors that could cause HEI’s results to differ materially from those anticipated in such statements. These forward-looking statements speak only as of the date of the report, presentation or filing in which they are made. Except to the extent required by the federal securities laws, HEI, Hawaiian Electric, American and their subsidiaries undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

###





American Savings Bank, F.S.B.
STATEMENTS OF INCOME DATA
(Unaudited)
 
 
Three months ended 
 
Years ended December 31
(in thousands)
 
December 31, 2018
 
September 30, 2018
 
December 31, 2017
 
2018
 
2017
Interest and dividend income
 
 

 
 

 
 

 
 
 
 
Interest and fees on loans
 
$
57,145

 
$
55,885

 
$
51,986

 
$
220,463

 
$
207,255

Interest and dividends on investment securities
 
10,632

 
9,300

 
8,230

 
37,762

 
28,823

Total interest and dividend income
 
67,777

 
65,185

 
60,216

 
258,225

 
236,078

Interest expense
 
 
 
 

 
 
 
 
 
 
Interest on deposit liabilities
 
4,115

 
3,635

 
2,802

 
13,991

 
9,660

Interest on other borrowings
 
255

 
404

 
386

 
1,548

 
2,496

Total interest expense
 
4,370

 
4,039

 
3,188

 
15,539

 
12,156

Net interest income
 
63,407

 
61,146

 
57,028

 
242,686

 
223,922

Provision for loan losses
 
2,408

 
6,033

 
3,670

 
14,745

 
10,901

Net interest income after provision for loan losses
 
60,999

 
55,113

 
53,358

 
227,941

 
213,021

Noninterest income
 
 
 
 

 
 
 
 
 
 
Fees from other financial services
 
4,996

 
4,543

 
5,741

 
18,937

 
22,796

Fee income on deposit liabilities
 
5,530

 
5,454

 
5,678

 
21,311

 
22,204

Fee income on other financial products
 
1,977

 
1,746

 
1,464

 
7,052

 
7,205

Bank-owned life insurance
 
390

 
2,663

 
1,374

 
5,057

 
5,539

Mortgage banking income
 
94

 
169

 
305

 
1,493

 
2,201

Other income, net
 
492

 
736

 
388

 
2,200

 
1,617

Total noninterest income
 
13,479

 
15,311

 
14,950

 
56,050

 
61,562

Noninterest expense
 
 
 
 

 
 
 
 
 
 
Compensation and employee benefits
 
26,340

 
23,952

 
23,836

 
98,387

 
94,931

Occupancy
 
4,236

 
4,363

 
4,076

 
17,073

 
16,699

Data processing
 
3,681

 
3,583

 
3,531

 
14,268

 
13,280

Services
 
2,287

 
2,485

 
3,005

 
10,847

 
10,994

Equipment
 
1,801

 
1,783

 
1,899

 
7,186

 
7,232

Office supplies, printing and postage
 
1,580

 
1,556

 
1,676

 
6,134

 
6,182

Marketing
 
844

 
993

 
1,211

 
3,567

 
3,501

FDIC insurance
 
635

 
638

 
608

 
2,713

 
2,904

Other expense
 
4,341

 
4,240

 
5,470

 
17,238

 
20,144

Total noninterest expense
 
45,745

 
43,593

 
45,312

 
177,413

 
175,867

Income before income taxes
 
28,733

 
26,831

 
22,996

 
106,578

 
98,716

Income taxes
 
6,966

 
5,610

 
6,137

 
24,069

 
31,719

Net income
 
$
21,767

 
$
21,221

 
$
16,859

 
$
82,509

 
$
66,997

Comprehensive income
 
$
35,446

 
$
16,480

 
$
10,245

 
$
75,390

 
$
63,858

OTHER BANK INFORMATION (annualized %, except as of period end)
 
 
 
 
 
 
 
 
Return on average assets
 
1.25

 
1.22

 
1.01

 
1.20

 
1.02

Return on average equity
 
14.08

 
13.80

 
11.09

 
13.51

 
11.20

Return on average tangible common equity
 
16.23

 
15.93

 
12.82

 
15.61

 
12.99

Net interest margin
 
3.95

 
3.81

 
3.68

 
3.83

 
3.69

Efficiency ratio
 
59.50

 
57.02

 
62.95

 
59.39

 
61.60

Net charge-offs to average loans outstanding
 
0.37

 
0.40

 
0.26

 
0.34

 
0.27

As of period end
 
 
 
 
 
 
 
 
 
 
Nonaccrual loans to loans receivable held for investment
 
0.56

 
0.59

 
0.51

 
 
 
 
Allowance for loan losses to loans outstanding
 
1.08

 
1.14

 
1.15

 
 
 
 
Tangible common equity to tangible assets
 
7.95

 
7.75

 
7.81

 
 
 
 
Tier-1 leverage ratio
 
8.7

 
8.6

 
8.6

 
 
 
 
Total capital ratio
 
13.9

 
13.8

 
14.2

 
 
 
 
Dividend paid to HEI (via ASB Hawaii, Inc.) ($ in millions)
 
$
14.0

 
$
14.0

 
$
9.4

 
$
50.0

 
$
37.5

The Statements of Income Data reflects the retrospective application of ASU No. 2017-07, “Compensation-Retirement Benefits (Topic 715): Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost,” which was adopted in the first quarter of 2018. Nonservice cost was reclassified from “Compensation and employee benefits” to “Other expense.”
This information should be read in conjunction with the consolidated financial statements and the notes thereto in HEI filings with the SEC.

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American Savings Bank, F.S.B.
BALANCE SHEETS DATA
(Unaudited)
December 31
2018
 
2017
 
(in thousands)
 
 
 
 
Assets
 
 

 
 
Cash and due from banks
 
$
122,059

 
$
140,934

Interest-bearing deposits
 
4,225

 
93,165

Investment securities
 
 
 
 
Available-for-sale, at fair value
 
1,388,533

 
1,401,198

Held-to-maturity, at amortized cost
 
141,875

 
44,515

Stock in Federal Home Loan Bank, at cost
 
9,958

 
9,706

Loans held for investment
 
4,843,021

 
4,670,768

Allowance for loan losses
 
(52,119
)
 
(53,637
)
Net loans
 
4,790,902

 
4,617,131

Loans held for sale, at lower of cost or fair value
 
1,805

 
11,250

Other
 
486,347

 
398,570

Goodwill
 
82,190

 
82,190

Total assets
 
$
7,027,894

 
$
6,798,659

Liabilities and shareholder’s equity
 
 
 
 
Deposit liabilities–noninterest-bearing
 
$
1,800,727

 
$
1,760,233

Deposit liabilities–interest-bearing
 
4,358,125

 
4,130,364

Other borrowings
 
110,040

 
190,859

Other
 
124,613

 
110,356

Total liabilities
 
6,393,505

 
6,191,812

Common stock
 
1

 
1

Additional paid in capital
 
347,170

 
345,018

Retained earnings
 
325,286

 
292,957

Accumulated other comprehensive loss, net of tax benefits
 
 
 
 
     Net unrealized losses on securities
$
(24,423
)
 

$
(14,951
)
 

     Retirement benefit plans
(13,645
)
(38,068
)
(16,178
)
(31,129
)
Total shareholder’s equity
 
634,389

 
606,847

Total liabilities and shareholder’s equity
 
$
7,027,894

 
$
6,798,659


This information should be read in conjunction with the consolidated financial statements and the notes thereto in HEI filings with the SEC.


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