HEI First Quarter 2008 Earnings Recover

Hawaiian Electric Industries, Inc. (NYSE:HE) today reported consolidated net income for the first quarter of 2008 of $34.0 million or 41 cents per share, compared with $6.8 million or 8 cents per share and $32.3 million or 40 cents per share for the first quarters of 2007 and 2006, respectively. "First quarter earnings recovered from depressed levels a year ago on better results from both utility and banking operations,” said Constance H. Lau, HEI president and chief executive officer. "A year ago, utility earnings declined severely as the company sought rate increases to recover and earn a return on reliability investments and costs at all three of its electric utilities and wrote off $7 million after-tax of Keahole power plant expansion costs. In this year’s first quarter, interim rate increases granted by the Hawaii Public Utilities Commission later in 2007 helped utility earnings,” noted Lau. "Bank earnings increased 26% quarter-over-quarter as the Federal Reserve’s easing of interest rates helped improve American Savings Bank’s net interest margin and there were improvements in both noninterest income and noninterest expense. Additionally, credit quality remained good.” UTILITY RESULTS Electric utility net income for the first quarter of 2008 was $24.6 million compared with $0.5 million and $21.0 million for the first quarters in 2007 and 2006, respectively. "After a tough first quarter last year due to the Keahole write-off and pending rate case decisions, we are now in a better position to earn a more reasonable return for our investors,” said Lau. Kilowatthour sales were flat compared with the same quarter of 2007 largely because conservation and demand-side management programs offset the impact of slightly warmer temperatures and an additional day of sales in February due to the leap year. "Operations and maintenance expenses were up $4.7 million or 6% quarter-over-quarter and we expect this higher level of expense to continue due to additional planned production and transmission and distribution maintenance work,” said Lau. The utility also recorded $1.2 million in higher quarter-over-quarter depreciation expenses due to 2007 plant additions. BANK RESULTS Bank net income was $14.6 million in the first quarter of 2008 compared to $11.6 million for the same quarter last year, an increase of $3.0 million. "Given the volatility in the financial and credit markets, we are especially pleased with the bank’s solid first quarter results,” said Lau. Net interest income in the first quarter of 2008 was $50.5 million compared to $49.3 million in the first quarter of 2007. Lower interest expense, primarily due to lower rates on deposits and borrowings, more than offset lower interest income, primarily due to lower yields on loans. Net interest margin expanded to 3.16% in the first quarter of 2008, compared with 3.07% in the first quarter of 2007. In the first quarter of 2008, the bank recorded a $0.9 million provision for loan losses. No provision for loan losses was recorded in the same period in 2007. "The overall credit quality of the bank’s loan portfolio remains good. We are not seeing any significant deterioration in the quality of our residential loan portfolio. The provision taken in the quarter was due to loan growth as well as the reclassification of certain commercial loans. Our delinquent and nonaccrual loans remain near historical lows. However, as the economy begins to slow and we add more loans to the portfolio, we expect to see an increase in loan loss provisions,” added Lau. Noninterest income increased $1.9 million compared to the first quarter of 2007. Fee income from deposits was higher by $0.7 million and fees from other financial services were higher by $0.3 million. The bank recorded a $0.9 million gain on the sale of stock in a membership organization in the first quarter of 2008. Noninterest expense for the quarter ended March 31, 2008 was $2.7 million lower than the same period in 2007, primarily due to lower legal and litigation related expenses. HOLDING AND OTHER COMPANIES’ RESULTS The holding and other companies’ net losses were $5.2 million in the first quarter of 2008 versus net losses of $5.3 million for the first quarter of 2007, relatively flat quarter-over-quarter. WEBCAST AND TELECONFERENCE Hawaiian Electric Industries, Inc. will conduct a webcast and teleconference call to review its first quarter 2008 earnings on Wednesday, May 7, 2008 at 8:00 a.m. Hawaii Time (2:00 p.m. Eastern Time). The event can be accessed through HEI’s website at http://www.hei.com or by dialing (800) 638-4817, passcode: 92157354 for the teleconference call. An online replay of the webcast will be available at the same website beginning about two hours after the event. Replays of the teleconference call will also be available approximately two hours after the event through May 21, 2008, by dialing (888) 286-8010, passcode: 87186146. Representing management will be Constance H. Lau, president and chief executive officer, Hawaiian Electric Industries, Inc., chairman, Hawaiian Electric Company, Inc. and chairman and chief executive officer, American Savings Bank, F.S.B.; T. Michael May, president and chief executive officer, Hawaiian Electric Company, Inc.; and Timothy K. Schools, president, American Savings Bank, F.S.B. HEI supplies power to over 400,000 customers or 95% of Hawaii’s population through its electric utilities, Hawaiian Electric Company, Inc., Hawaii Electric Light Company, Inc. and Maui Electric Company, Limited and provides a wide array of banking and other financial services to consumers and businesses through American Savings Bank, F.S.B., the state’s third largest financial institution based on year-end asset size. 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 expects, anticipates, intends, plans, believes, predicts, estimates or similar expressions. In addition, any statements concerning future financial performance (including future revenues, expenses, earnings or losses or growth rates), ongoing business strategies or prospects and possible future actions, which may be provided by management, 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 assumptions about 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 "Forward-Looking Statements” discussion (which is incorporated by reference herein) set forth on page v of HEI’s Annual Report on Form 10-K for the year ended December 31, 2007, and in HEI’s future periodic reports that discuss important factors that could cause HEI’s results to differ materially from those anticipated in such statements. Forward-looking statements speak only as of the date of this release. Hawaiian Electric Industries, Inc. (HEI) and Subsidiaries CONSOLIDATED STATEMENTS OF INCOME     (Unaudited)   Three months ended Twelve months ended   March 31, March 31, (in thousands, except per share amounts)     2008       2007       2008       2007   Revenues Electric utility $ 623,889 $ 447,678 $ 2,282,525 $ 2,027,512 Bank 105,844 104,460 426,879 412,821 Other   (116 )   1,885     2,608     (368 )   729,617     554,023     2,712,012     2,439,965   Expenses Electric utility 572,906 434,686 2,113,949 1,893,382 Bank 82,481 86,032 337,934 332,850 Other   3,484     4,764     14,192     14,947     658,871     525,482     2,466,075     2,241,179   Operating income (loss) Electric utility 50,983 12,992 168,576 134,130 Bank 23,363 18,428 88,945 79,971 Other   (3,600 )   (2,879 )   (11,584 )   (15,315 )   70,746     28,541     245,937     198,786   Interest expense – other than on deposit liabilities and other bank borrowings (19,249 ) (20,511 ) (77,294 ) (77,072 ) Allowance for borrowed funds used during construction 762 598 2,716 2,775 Preferred stock dividends of subsidiaries (473 ) (473 ) (1,890 ) (1,890 ) Allowance for equity funds used during construction   1,901     1,232     5,888     6,032   Income before income taxes 53,687 9,387 175,357 128,631 Income taxes   19,720     2,623     63,375     46,203   Net income $ 33,967   $ 6,764   $ 111,982   $ 82,428   Basic earnings per common share $ 0.41   $ 0.08   $ 1.35   $ 1.01   Diluted earnings per common share $ 0.41     $ 0.08   $ 1.35   $ 1.01   Dividends per common share $ 0.31   $ 0.31   $ 1.24   $ 1.24   Weighted-average number of common shares outstanding   83,472     81,448     82,716     81,260   Adjusted weighted-average shares   83,614     81,713     82,876     81,435     Income (loss) by segment Electric utility $ 24,585 $ 453 $ 76,288 $ 54,412 Bank 14,576 11,596 56,087 50,551 Other   (5,194 )   (5,285 )   (20,393 )   (22,535 ) Net income $ 33,967   $ 6,764   $ 111,982   $ 82,428     This information should be read in conjunction with the consolidated financial statements and the notes thereto for the year ended December 31, 2007 (included in HEI’s Form 8-K dated February 21, 2008) and the consolidated financial statements and the notes thereto in HEI's Quarterly Report on SEC Form 10-Q for the quarter ended March 31, 2008 (when filed). Results of operations for interim periods are not necessarily indicative of results to be expected for future interim periods or the full year. Hawaiian Electric Company, Inc. (HECO) and Subsidiaries   CONSOLIDATED STATEMENTS OF INCOME (Unaudited)     Three months ended March 31,     2008       2007   (in thousands) Operating revenues $ 622,494   $ 446,797   Operating expenses Fuel oil 249,543 159,929 Purchased power 150,795 111,516 Other operation 55,579 47,193 Maintenance 23,613 27,336 Depreciation 35,434 34,267 Taxes, other than income taxes 57,486 42,547 Income taxes   15,378     4,506     587,828     427,294   Operating income   34,666     19,503   Other income (loss) Allowance for equity funds used during construction 1,901 1,232 Other, net   1,096     (6,198 )   2,997     (4,966 ) Income before interest and other charges   37,663     14,537   Interest and other charges Interest on long-term debt 11,724 11,496 Amortization of net bond premium and expense 631 546 Other interest charges 986 2,141 Allowance for borrowed funds used during construction (762 ) (598 ) Preferred stock dividends of subsidiaries   229     229     12,808     13,814   Income before preferred stock dividends of HECO 24,855 723 Preferred stock dividends of HECO   270     270   Net income for common stock $ 24,585   $ 453   OTHER ELECTRIC UTILITY INFORMATION Kilowatthour sales (millions) 2,409 2,404 Cooling degree days (Oahu) 954 845 Average fuel oil cost per barrel $ 93.89 $ 58.19   This information should be read in conjunction with the consolidated financial statements and the notes thereto for the year ended December 31, 2007 (included in HECO Exhibit 99.1 to HECO's Form 8-K dated February 21, 2008) and the consolidated financial statements and the notes thereto in HECO's Quarterly Report on SEC Form 10-Q for the quarter ended March 31, 2008 (when filed). Results of operations for interim periods are not necessarily indicative of results to be expected for future interim periods or the full year. American Savings Bank, F.S.B. and Subsidiaries     CONSOLIDATED STATEMENTS OF INCOME (Unaudited)   Three months ended March 31,     2008     2007 (in thousands) Interest and dividend income Interest and fees on loans $ 63,465 $ 60,281 Interest and dividends on investment and mortgage-related securities   24,451   28,165   87,916   88,446 Interest expense Interest on deposit liabilities 18,220 20,738 Interest on other borrowings   19,149   18,406   37,369   39,144 Net interest income 50,547 49,302 Provision for loan losses   900   - Net interest income after provision for loan losses   49,647   49,302 Noninterest income Fees from other financial services 6,823 6,501 Fee income on deposit liabilities 6,794 6,055 Fee income on other financial products 1,804 2,012 Gain on sale of securities 935 - Other income   1,572   1,446   17,928   16,014 Noninterest expense Compensation and employee benefits 18,240 18,396 Occupancy 5,397 4,948 Equipment 3,114 3,478 Services 5,673 8,358 Data processing 2,616 2,557 Other expense   9,194   9,180   44,234   46,917 Income before income taxes 23,341 18,399 Income taxes   8,765   6,803 Net income $ 14,576 $ 11,596   Net interest margin (%) 3.16 3.07   This information should be read in conjunction with the consolidated financial statements and the notes thereto for the year ended December 31, 2007 (included in HEI Exhibit 13 to HEI’s Form 8-K dated February 21, 2008) and the consolidated financial statements and the notes thereto in HEI's Quarterly Report on SEC Form 10-Q for the quarter ended March 31, 2008 (when filed). Results of operations for interim periods are not necessarily indicative of results to be expected for future interim periods or the full year.