Hawaiian Electric Industries, Inc. Reports Solid Third Quarter 2008 Results

Hawaiian Electric Industries, Inc. (NYSE:HE) today reported consolidated net income for the third quarter of 2008 of $37.3 million, or $0.44 per share, compared to $19.9 million, or $0.24 per share for the third quarter of 2007.

"Our earnings showed significant improvement over our unusually low results in the third quarter of 2007, which included a utility customer refund accrual that reduced those results by $0.10 a share,” said Constance H. Lau, HEI president and chief executive officer. "Our utilities continued to regain financial strength due to interim rate relief received primarily in the last quarter of 2007. The bank’s earnings improved 31% quarter-over-quarter, benefitting from a steeper yield curve, continued good credit quality and lower expenses resulting from performance improvement initiatives. Additionally, holding and other companies’ losses in the quarter were lower than in the same period in 2007 primarily due to lower interest expense,” noted Lau.

UTILITY RESULTS

Electric utility net income for the third quarter of 2008 was $25.9 million compared with $12.9 million for the same quarter in 2007 and $23.7 million for the same quarter in 2006. "Third quarter earnings a year ago were unusually low as our Oahu utility accrued an $8.3 million, or $0.10 per share, net-of-tax refund related to its 2005 test year rate case and awaited rate increases to recover and earn a return on reliability investments and to recover higher operating costs,” said Lau.

Kilowatthour sales were lower by 2.6% quarter-over-quarter due to greater customer conservation and a slowing economy. These two factors are expected to reduce our 2008 and 2009 sales forecasts slightly below original projections. "Clearly, with the economic downturn and the dramatic impact of rising fuel costs on electricity prices during the quarter, customers have redoubled their efforts to conserve energy. In view of the economic downturn, we expect this conservation trend to continue even with recent declines in the fuel price component of our customer bills,” said Lau.

Other operations and maintenance (O&M) expenses were up 5% quarter-over-quarter as higher operations expenses for customer efficiency programs and production operations were partially offset by lower production maintenance expenses resulting primarily from changes in generating unit overhaul schedules. The expected increase in full-year 2008 O&M expenses continues to be roughly 6% over 2007, but actual levels could be influenced by a number of factors that cannot be predicted.

The utility also recorded $1.1 million in higher quarter-over-quarter depreciation expenses due to 2007 plant additions.

BANK RESULTS

Bank net income for the third quarter of 2008 was $15.4 million, compared to $11.7 million for the same quarter last year. Return on assets in the third quarter of 2008 was 1.11% compared to 0.69% in the third quarter of 2007.

Net interest income in the third quarter of 2008 was $52.3 million compared to $47.7 million in the third quarter of 2007. The impact of lower interest expense, primarily due to lower balances of borrowings and lower rates on deposits and borrowings, more than offset the decline in interest income primarily from lower investment balances and lower yields on loans. The lower balances of investments and borrowings in the third quarter of 2008 were a result of the balance sheet restructuring executed in June 2008. Net interest margin expanded to 4.08% in the third quarter of 2008, compared with 2.97% in the third quarter of 2007.

"We are pleased with the bank’s third quarter results,” said Lau. "In spite of the continued volatility in the financial and credit markets during the quarter, the bank continued to perform well. Third quarter results show the improvements in net interest margin and return on assets we expected to achieve from the June balance sheet restructuring.”

The bank recorded a $2.0 million provision for possible loan losses in the third quarter, compared to a $2.7 million provision in the third quarter of 2007. "The overall credit quality of the bank’s loan portfolio remains good. However, we are seeing the effects of the slowing economy in modestly rising delinquencies and the reclassification of some commercial loans. We remain cautious and continue to actively monitor our loan portfolios,” added Lau.

Noninterest income in the third quarter of 2008 was $16.7 million compared to $17.2 million in the same quarter in 2007. Higher fee income from deposit liabilities was more than offset by lower fee income from other financial services, other financial products and other income.

Noninterest expense was $1.3 million lower in the third quarter of 2008 than in the third quarter of 2007. Lower services and other expenses were partially offset by an increase in compensation and benefits expense quarter over quarter. The $3.0 million increase in compensation and benefits was primarily due to a $0.9 million accrual for incentive compensation in the third quarter of 2008, compared with a $1.4 million reversal of accrued incentive compensation in the third quarter of 2007.

HOLDING AND OTHER COMPANIES’ RESULTS

The holding and other companies’ net losses were $4.1 million in the third quarter of 2008 compared with $4.7 million in the third quarter of 2007.

WEBCAST AND TELECONFERENCE

Hawaiian Electric Industries, Inc. will conduct a webcast and teleconference call to review its third quarter 2008 earnings on Wednesday, November 5, 2008, at 8:00 a.m. Hawaii Time (1:00 p.m. Eastern Time). The event can be accessed through HEI’s website at http://www.hei.com or by dialing (800) 299-7089, passcode: 86433944 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 November 19, 2008, by dialing (888) 286-8010, passcode: 98026401.

Representing management will be Constance H. Lau, president and chief executive officer, Hawaiian Electric Industries, Inc. and chairman, 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, Ltd. and provides a wide array of banking and other financial services to consumers and businesses through American Savings Bank, F.S.B., one of Hawaii’s largest financial institutions.

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 iv of HEI’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2008, 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.