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Section 1: 8-K (8-K)

he-20201030
0000354707false00003547072020-10-302020-10-30




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: October 30, 2020

Exact Name of RegistrantCommissionI.R.S. Employer
as Specified in Its CharterFile NumberIdentification No.
Hawaiian Electric Industries, Inc.1-850399-0208097


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
 
Not applicable
(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))

Securities registered pursuant to 12(b) of the Act:
RegistrantTitle of each classTrading Symbol(s)Name of each exchange on which registered
Hawaiian Electric Industries, Inc.Common Stock, Without Par ValueHENew York Stock Exchange

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

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.



Item 7.01 Regulation FD Disclosure.
    On October 30, 2020, HEI issued a news release, “American Savings Bank Reports Third Quarter 2020 Financial Results.” This news release is furnished as Exhibit 99.


Item 9.01 Financial Statements and Exhibits.
    
(d) Exhibits
News release, dated October 30, 2020, “American Savings Bank Reports Third Quarter 2020 Financial Results"
104Cover Page Interactive Data File (embedded within the Inline XBRL document)

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: October 30, 2020

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Section 2: EX-99 (EX-99)

Document

Exhibit 99
405805415_heicatalyst2a381a.jpg NEWS RELEASE
October 30, 2020
Contact:Julie R. SmolinskiTelephone: (808) 543-7300
Director, Investor RelationsE-mail: ir@hei.com

AMERICAN SAVINGS BANK REPORTS THIRD QUARTER 2020 FINANCIAL RESULTS
3Q 2020 Net Income of $12.2 Million
Results Reflect Economic Dynamics and Improved Noninterest Income from Core Activities
HONOLULU - American Savings Bank, F.S.B. (American), a wholly-owned subsidiary of Hawaiian Electric Industries, Inc. (NYSE - HE), today reported net income for the third quarter of 2020 of $12.2 million. This compares to $14.0 million in the second, or linked, quarter of 2020, and $22.9 million in the third quarter of 2019.
“I continue to be impressed by the resilience of our customers as they adapt to the ongoing challenges of Hawaii’s still-suppressed economy. Even so, because the timing of a sustained reopening of our tourism sector remains uncertain, our results again reflect elevated provision for potential credit losses,” said Rich Wacker, president and chief executive officer of American. “While low interest rates continue to compress lending margins, in the third quarter we were able to reduce expenses and improve noninterest income from core activities, including strong mortgage banking income from our residential lending activity, replacing most of the prior quarter’s gains on sales of securities.”
Financial Highlights
Net interest income was $57.3 million in the third quarter of 2020 compared to $56.7 million in the linked quarter, and $62.1 million in the third quarter of 2019. Net interest income increased over the linked quarter as the bank deployed excess liquidity into the investment portfolio and lowered its funding costs during the quarter by increasing its low cost core deposit funding. Yield on earning assets continued to be impacted by the lower interest rate environment. Net interest margin for the third quarter of 2020 was 3.12%, compared to 3.21% in the linked quarter and 3.82% in the third quarter of 2019. Year to date net interest margin was 3.34%.




The provision for credit losses was $14.0 million in the third quarter of 2020 compared to $15.1 million in the linked quarter and $3.3 million in the third quarter of 2019. The provision for the third quarter of 2020 included approximately $12.3 million in additional reserves related to economic impacts from the pandemic. Total COVID-19 related reserves added year to date totaled $23.4 million.
The net charge-off ratio for the third quarter of 2020 was 0.32%, compared to 0.49% in the linked quarter and 0.69% in the third quarter of 2019. The lower net charge-off ratio in the third quarter of 2020 reflected improvement in credit quality of the personal unsecured loan portfolio. Nonaccrual loans as a percent of total loans receivable held for investment was 0.77% in the third quarter of 2020, compared to 0.86% in the linked quarter and 0.63% in the prior year quarter.
Noninterest income was $19.0 million in the third quarter of 2020, compared to $24.2 million in the linked quarter and $16.3 million in the third quarter of 2019. The decrease in noninterest income from the linked quarter was primarily due to higher second quarter gains on sales of securities of $9.3 million. Noninterest income in the third quarter of 2020 included the reinstatement of certain fees that had been temporarily suspended to support customers during the initial impact of COVID-19. Noninterest income was positively impacted in the third quarter by higher loan sales from increased mortgage banking originations due to the lower interest rate environment.
Noninterest expense was $47.3 million in the third quarter of 2020, compared to $48.4 million in the linked quarter and $45.9 million in the third quarter of 2019. Compared to the linked quarter, compensation and employee benefit expense was $1.4 million higher, reflecting increased mortgage banking activity, and was more than offset by $3.1 million lower COVID-19 related expenses.
Total loans were $5.5 billion as of September 30, 2020, up 7.3%1 from December 31, 2019, driven mainly by the addition of $370 million in Paycheck Protection Program loans, as well as increases in the commercial real estate and residential loan portfolios, offset by reductions in the home equity line of credit and consumer loan portfolios.
Total deposits were $7.0 billion as of September 30, 2020, an increase of 12.2%2 from December 31, 2019. The average cost of funds was 0.13% for the quarter, down five basis points versus the linked quarter and down seventeen basis points versus the prior year quarter.
Overall, American’s return on average equity for the third quarter of 2020 was 6.75%, compared to 8.00% in the linked quarter and 13.75% in the third quarter of 2019. Return on average assets was 0.61%
_______________
1    Annualized from December 31, 2019, total loans as of September 30, 2020 increased 9.7%.
2    Annualized from December 31, 2019, total deposits as of September 30, 2020 increased 16.3%.
    
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for the third quarter of 2020, compared to 0.72% in the linked quarter and 1.29% in the same quarter last year.
In the third quarter of 2020, American retained capital and did not pay a dividend to HEI. American had a leverage ratio of 8.3% at September 30, 2020.

HEI EARNINGS RELEASE, HEI WEBCAST AND CONFERENCE CALL TO DISCUSS EARNINGS AND 2020 GUIDANCE

Concurrent with American’s regulatory filing 30 days after the end of the quarter, American announced its third quarter 2020 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 third quarter 2020.
HEI plans to announce its third quarter 2020 consolidated financial results on Friday, November 6, 2020 and will also conduct a webcast and conference call at 11:15 a.m. Hawaii time (4:15 p.m. Eastern time) that same day to discuss its consolidated earnings, including American’s earnings, and 2020 guidance.
Interested parties within the United States may listen to the conference by calling (844) 834-0652 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 “Investor Relations” section, 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 the Investor Relations section 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. 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 November 6, 2020 webcast will be available on HEI’s website beginning about two hours after the event. Audio replays of the conference call will also be available approximately
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two hours after the event through November 20, 2020 by dialing (877) 344-7529 or (412) 317-0088 and entering passcode 10148946.
HEI supplies power to approximately 95% of Hawaii’s population through its electric utility, Hawaiian Electric; 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 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, political 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 Annual Report on Form 10-K for the year ended December 31, 2019 and HEI’s other 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.
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American Savings Bank, F.S.B.
STATEMENTS OF INCOME DATA
(Unaudited)
Three months ended Nine months ended September 30,
(in thousands)September 30, 2020June 30, 2020September 30, 201920202019
Interest and dividend income   
Interest and fees on loans$52,419 $53,541 $59,260 $161,505 $175,740 
Interest and dividends on investment securities7,221 6,288 7,599 22,939 25,762 
Total interest and dividend income59,640 59,829 66,859 184,444 201,502 
Interest expense    
Interest on deposit liabilities2,287 3,071 4,384 8,945 12,923 
Interest on other borrowings61 75 422 449 1,361 
Total interest expense2,348 3,146 4,806 9,394 14,284 
Net interest income57,292 56,683 62,053 175,050 187,218 
Provision for credit losses13,970 15,133 3,315 39,504 17,873 
Net interest income after provision for credit losses43,322 41,550 58,738 135,546 169,345 
Noninterest income  
Fees from other financial services4,233 3,102 5,085 11,906 14,445 
Fee income on deposit liabilities3,832 2,897 5,320 11,842 15,402 
Fee income on other financial products1,524 1,212 1,706 4,608 5,129 
Bank-owned life insurance1,965 1,673 1,660 4,432 6,309 
Mortgage banking income7,681 6,252 1,490 15,933 3,080 
Gain on sale of securities, net— 9,275 653 9,275 653 
Other income, net(231)(251)428 (69)1,420 
Total noninterest income19,004 24,160 16,342 57,927 46,438 
Noninterest expense   
Compensation and employee benefits26,431 25,079 25,364 77,287 76,626 
Occupancy5,693 5,442 5,694 16,402 15,843 
Data processing3,366 3,849 3,763 11,052 11,353 
Services2,624 2,474 2,829 7,907 7,861 
Equipment2,001 2,290 2,163 6,630 6,416 
Office supplies, printing and postage1,187 1,049 1,297 3,577 4,320 
Marketing727 379 1,142 1,908 3,455 
FDIC insurance714 751 (5)1,567 1,249 
Other expense1
4,556 7,063 3,676 15,813 12,049 
Total noninterest expense47,299 48,376 45,923 142,143 139,172 
Income before income taxes15,027 17,334 29,157 51,330 76,611 
Income taxes2,877 3,320 6,269 9,405 15,868 
Net income$12,150 $14,014 $22,888 $41,925 $60,743 
Comprehensive income$13,543 $13,734 $26,697 $62,885 $85,079 
OTHER BANK INFORMATION (annualized %, except as of period end)
Return on average assets0.61 0.72 1.29 0.73 1.14 
Return on average equity6.75 8.00 13.75 7.95 12.44 
Return on average tangible common equity7.62 9.07 15.68 9.00 14.23 
Net interest margin3.12 3.21 3.82 3.34 3.87 
Efficiency ratio61.99 59.84 58.58 61.01 59.56 
Net charge-offs to average loans outstanding0.32 0.49 0.69 0.41 0.46 
As of period end
Nonaccrual loans to loans receivable held for investment0.77 0.86 0.63 
Allowance for credit losses to loans outstanding1.67 1.50 1.04 
Tangible common equity to tangible assets8.0 7.9 8.4 
Tier-1 leverage ratio 8.3 8.4 8.8 
Dividend paid to HEI (via ASB Hawaii, Inc.) ($ in millions)$— $— $14.0 $28.0 $47.0 
1 The three and nine-month periods ended September 30, 2020 include approximately $0.7 million and $4.5 million, respectively, of certain direct and incremental COVID-19 related costs. For the nine months ended September 30, 2020, these costs, which have been recorded in Other expense, include $2.4 million of compensation expense and $1.7 million of enhanced cleaning and sanitation costs.
This information should be read in conjunction with the consolidated financial statements and the notes thereto in HEI filings with the SEC. Results of operations for interim periods are not necessarily indicative of results to be expected for future interim periods or the full year.
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American Savings Bank, F.S.B.
BALANCE SHEETS DATA
(Unaudited)
(in thousands)September 30, 2020December 31, 2019
Assets 
Cash and due from banks$150,087 $129,770 
Interest-bearing deposits10,918 48,628 
Investment securities
Available-for-sale, at fair value1,747,658 1,232,826 
Held-to-maturity, at amortized cost133,858 139,451 
Stock in Federal Home Loan Bank, at cost10,920 8,434 
Loans held for investment5,480,902 5,121,176 
Allowance for credit losses(91,459)(53,355)
Net loans5,389,443 5,067,821 
Loans held for sale, at lower of cost or fair value16,806 12,286 
Other533,865 511,611 
Goodwill82,190 82,190 
Total assets$8,075,745 $7,233,017 
Liabilities and shareholder’s equity
Deposit liabilities–noninterest-bearing$2,424,539 $1,909,682 
Deposit liabilities–interest-bearing4,613,598 4,362,220 
Other borrowings151,875 115,110 
Other165,300 146,954 
Total liabilities7,355,312 6,533,966 
Common stock
Additional paid-in capital351,322 349,453 
Retained earnings356,812 358,259 
Accumulated other comprehensive income (loss), net of taxes  
     Net unrealized gains on securities$22,248  $2,481  
     Retirement benefit plans(9,950)12,298 (11,143)(8,662)
Total shareholder’s equity720,433 699,051 
Total liabilities and shareholder’s equity$8,075,745 $7,233,017 

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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