Hawaiian Electric reports increase in operating income
By Frank Cho
Advertiser Staff Writer
Hawaiian Electric Industries Inc. yesterday said income from continuing operations rose 14 percent on strong performance from its savings bank subsidiary.
HEI, the parent of Hawai'i's largest electric company and American Savings Bank, said earnings from continuing operations for the three months ended Sept. 30 rose to $32.8 million, or 90 cents a share, compared with $28.7 million, or 85 cents a share, in the same quarter of 2001.
While profits at the company's Hawaiian Electric Co. utility were largely flat, a 32 percent increase in net income from the bank subsidiary helped fuel the increase in operating income.
"Lower interest expense at the holding company also contributed to HEI's income from continuing operations growth," said Robert Clarke, HEI's chairman, president and chief executive officer.
Although income from continuing operations was up 14 percent, earnings per share were up only 6 percent because of an 8 percent increase in the company's average number of shares outstanding from a stock offering last year.
Electric utility net income during the quarter was $25.6 million, down slightly from $25.7 million a year ago. For the nine months that ended in September, income was $69.8 million, unchanged from the same time a year ago.
"Increases in the usage and the number of residential customers caused kilowatt-hour sales to grow by 1.8 percent for the quarter despite slightly cooler weather," Clarke said. But increased operation and maintenance expenses and depreciation compared to a year ago more than offset the increase in sales.
The company said operating expenses were higher primarily because of a $1.6 million drop in pension credits because of the poor investment climate for the company's pension funds. In addition, maintenance costs rose because of overhauls to generating units.
For the bank, net income in the third quarter was $14.7 million compared to $11.1 million in the same quarter last year. Bank net income for the nine months was $42.8 million compared to $33.2 million in the same period of 2001.
"Our bank continues to benefit from favorable interest rates that kept its cost of funds low," Clarke said.
The interest rate spread increased to 3.28 percent during the most recent quarter, compared with 3.08 percent for the same quarter in 2001.
"Also delinquencies have been at five-year lows, which translated into lower provision for loan losses in the third quarter compared with the same quarter last year," Clarke said.
The bank also benefitted from new accounting rules established by the Financial Accounting Standards Board calling for the discontinuation of goodwill amortization. That change added $1 million of the $3.6 million increase in bank net income for the third quarter as compared to the same quarter last year.
For the nine months, the discontinuation of goodwill amortization resulted in a $2.9 million increase in bank net income.
Continued low interest rates and record mortgage refinancing volume, however, are beginning to pressure the bank's interest rate spread as the bank's loan portfolio reprices lower while deposit rates are already at low levels.
