Hawaiian Electric Company, Inc. and Subsidiaries

Condensed Consolidated Statements of Changes in Common Stock Equity (unaudited)


	Common stock			Premium on capital			Retained			Accumulated other comprehensive						Common stock			Premium on capital			Retained			Accumulated other comprehensive
(in thousands)	Shares	Amount		stock			earnings			income (loss)			Total			Shares	Amount		stock			earnings			income (loss)			Total
Balance, December 31, 2018																16,751	$	111,696	$	681,305		$	1,164,541		$	99		$	1,957,641
Net income for common stock																—	—		—			32,126			—			32,126
Other comprehensive income, net of taxes																—	—		—			—			24			24
Common stock dividends																—	—		—			(25,313		)	—			(25,313		)
Balance, March 31, 2019																16,751	$	111,696	$	681,305		$	1,171,354		$	123		$	1,964,478
Net income for common stock																—	—		—			32,574			—			32,574
Other comprehensive income, net of taxes																—	—		—			—			23			23
Common stock dividends																—	—		—			(25,313		)	—			(25,313		)
Balance, June 30, 2019																16,751	$	111,696	$	681,305		$	1,178,615		$	146		$	1,971,762
Balance, December 31, 2017	16,142	$	107,634	$	614,675		$	1,124,193		$	(1,219	)	$	1,845,283		16,142	$	107,634	$	614,675		$	1,124,193		$	(1,219	)	$	1,845,283
Net income for common stock	—	—		—			58,644			—			58,644			—	—		—			27,475			—			27,475
Other comprehensive income, net of taxes	—	—		—			—			57			57			—	—		—			—			31			31
Common stock dividends	—	—		—			(51,652		)	—			(51,652		)	—	—		—			(25,826		)	—			(25,826		)
Common stock issuance expenses	—	—		(8		)	—			—			(8		)	—	—		(8		)	—			—			(8		)
Balance, June 30, 2018	16,142	$	107,634	$	614,667		$	1,131,185		$	(1,162	)	$	1,852,324
Balance, December 31, 2016	16,020	$	106,818	$	601,491		$	1,091,800		$	(322	)	$	1,799,787
Balance, March 31, 2018																16,142	$	107,634	$	614,667		$	1,125,842		$	(1,188	)	$	1,846,955
Net income for common stock	—	—		—			47,109			—			47,109			—	—		—			31,169			—			31,169
Other comprehensive income, net of taxes	—	—		—			—			499			499			—	—		—			—			26			26
Common stock dividends	—	—		—			(43,884		)	—			(43,884		)	—	—		—			(25,826		)	—			(25,826		)
Common stock issuance expenses	—	—		(5		)	—			—			(5		)
Balance, June 30, 2017	16,020	$	106,818	$	601,486		$	1,095,025		$	177		$	1,803,506
Balance, June 30, 2018																16,142	$	107,634	$	614,667		$	1,131,185		$	(1,162	)	$	1,852,324

This report should be read in conjunction with the Notes herein and the Notes to Consolidated Financial Statements appearing in the ~~2017~~2018 Form 10-K.

Hawaiian Electric Company, Inc. and Subsidiaries

Condensed Consolidated Statements of Cash Flows (unaudited)


	Six months ended June 30						Six months ended June 30
(in thousands)	2018			2017			2019			2018
Cash flows from operating activities
Net income	$	59,642		$	48,107		$	65,698		$	59,642
Adjustments to reconcile net income to net cash provided by operating activities
Depreciation of property, plant and equipment	100,827			96,372			107,860			100,827
Other amortization	13,021			4,262			13,661			13,021
Deferred income taxes	(8,343		)	23,599			(6,611		)	(8,343		)
Allowance for equity funds used during construction	(6,277		)	(5,426		)	(6,085		)	(6,277		)
Other	978			1,615			(3,553		)	978
Changes in assets and liabilities
Increase in accounts receivable	(34,068		)	(1,729		)
Increase in accrued unbilled revenues	(3,785		)	(11,903		)
Decrease (increase) in accounts receivable							9,994			(34,068		)
Decrease (increase) in accrued unbilled revenues							2,590			(3,785		)
Increase in fuel oil stock	(20,143		)	(5,962		)	(41,706		)	(20,143		)
Increase in materials and supplies	(3,544		)	(3,420		)	(5,890		)	(3,544		)
Decrease (increase) in regulatory assets	(19,600		)	8,179			25,392			(19,600		)
Increase in accounts payable	18,284			39,716
Increase (decrease) in accounts payable							(45		)	18,284
Change in prepaid and accrued income taxes, tax credits and revenue taxes	(31,061		)	(40,910		)	(45,785		)	(31,061		)
Increase (decrease) in defined benefit pension and other postretirement benefit plans liability	(1,961		)	302
Decrease in defined benefit pension and other postretirement benefit plans liability							(1,899		)	(1,961		)
Change in other assets and liabilities	5,866			(14,047		)	(12,805		)	5,866
Net cash provided by operating activities	69,836			138,755			100,816			69,836
Cash flows from investing activities
Capital expenditures	(213,220		)	(190,159		)	(199,896		)	(199,647		)
Contributions in aid of construction	13,573			17,571
Other	4,301			6,250			2,510			4,301
Net cash used in investing activities	(195,346		)	(166,338		)	(197,386		)	(195,346		)
Cash flows from financing activities
Common stock dividends	(51,652		)	(43,884		)	(50,626		)	(51,652		)
Preferred stock dividends of Hawaiian Electric and subsidiaries	(998		)	(998		)	(998		)	(998		)
Proceeds from issuance of short-term debt							25,000			—
Proceeds from issuance of long-term debt	100,000			265,000			50,000			100,000
Funds transferred for redemption of special purpose revenue bonds	—			(265,000		)
Repayment of long-term debt							(51,546		)	—
Net increase in short-term borrowings from non-affiliates and affiliate with original maturities of three months or less	86,881			43,990			111,901			86,881
Other	(378		)	(3,229		)	323			(378		)
Net cash provided by (used in) financing activities	133,853			(4,121		)
Net cash provided by financing activities							84,054			133,853
Net increase (decrease) in cash and cash equivalents	8,343			(31,704		)	(12,516		)	8,343
Cash and cash equivalents, beginning of period	12,517			74,286			35,877			12,517
Cash and cash equivalents, end of period	$	20,860		$	42,582		$	23,361		$	20,860

This report should be read in conjunction with the Notes herein and the Notes to Consolidated Financial Statements appearing in the ~~2017~~2018 Form 10-K.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

Note 1 · Basis of presentation

The accompanying unaudited condensed consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (GAAP) for interim financial information, the instructions to SEC Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. In preparing the unaudited condensed consolidated financial statements, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the balance sheet and the reported amounts of revenues and expenses for the period. Actual results could differ significantly from those estimates. The accompanying unaudited condensed consolidated financial statements and the following notes should be read in conjunction with the audited consolidated financial statements and the notes thereto in HEI’s and Hawaiian Electric’s Form 10-K for the year ended December 31, ~~2017~~2018.

In the opinion of HEI’s and Hawaiian Electric’s management, the accompanying unaudited condensed consolidated financial statements contain all material adjustments required by GAAP to fairly state consolidated HEI’s and Hawaiian Electric’s financial positions as of June 30, ~~2018~~2019 and December 31, ~~2017~~2018 and the results of their operations for the three and six months ended June 30, ~~2018~~2019 and ~~2017~~2018 and cash flows for the six months ended June 30, ~~2018~~2019 and ~~2017.~~2018. All such adjustments are of a normal recurring nature, unless otherwise disclosed below or in other referenced material. Results of operations for interim periods are not necessarily indicative of results for the full year.

Recent accounting pronouncements.

~~Revenues from contracts with customers~~Leases. In ~~May 2014,~~February 2016, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2014-09, “Revenue from Contracts with Customers (Topic 606).” The core principle of the guidance in ASU No. 2014-09 is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. ASU No. 2014-09 also requires disclosure of the nature, amount, timing and uncertainty of revenue and cash flows arising from contracts with customers.

The Company and Hawaiian Electric adopted ASU No. 2014-09 (and subsequently issued revenue-related ASUs, as applicable) in the first quarter of 2018. There was no cumulative effect adjustment and no impact on the timing or pattern of revenue recognition, but ASU No. 2014-09 required changes with respect to the Company’s and Hawaiian Electric’s revenue disclosures. See Note 7.

~~Financial instruments~~. In January 2016, the FASB issued ASU No. 2016-01, “Financial Instruments-Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities,” which, among other things:

Requires equity investments (except those accounted for under the equity method of accounting, or those that result in consolidation of the investee) to be measured at fair value with changes in fair value recognized in net income.

~~Requires public business entities to use the exit price notion when measuring the fair value of financial instruments for disclosure purposes.~~

~~Requires separate presentation of financial assets and financial liabilities by measurement category and form of financial asset (i.e., securities or loans and receivables).~~

Eliminates the requirement for public business entities to disclose the method(s) and significant assumptions used to estimate the fair value that is required to be disclosed for financial instruments measured at amortized cost.

~~The Company adopted ASU No. 2016-01 in the first quarter of 2018 and the impact of adoption was not material to the Company’s and Hawaiian Electric’s consolidated financial statements.~~

~~Cash flows~~. In August 2016, the FASB issued ASU No. 2016-15, “Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments,” which provides guidance on eight specific cash flow issues - debt prepayment or debt extinguishment costs, settlement of zero-coupon debt instruments or other debt instruments with coupon interest rates that are insignificant in relation to the effective interest rate of the borrowing, contingent consideration payments made after a business combination, proceeds from the settlement of insurance claims, proceeds from the settlement of corporate-owned life insurance policies (including bank-owned life insurance policies), distributions received from equity method investees, beneficial interests in securitization transactions, and separately identifiable cash flows and application of the predominance principle.

The Company adopted ASU No. 2016-15 in the first quarter of 2018 using a retrospective transition method and there was no impact from the adoption to the Company’s and Hawaiian Electric’s consolidated statements of cash flows.

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~ ~~- continued(Unaudited)~~

~~Restricted cash~~. In November 2016, the FASB issued ASU No. 2016-18, “Statement of Cash Flows (Topic 230): Restricted Cash,” which requires that a statement of cash flows explain the change during the period in the total of cash, cash equivalents, and amounts generally described as restricted cash or restricted cash equivalents.

The Company adopted ASU No. 2016-18 in the first quarter of 2018 using a retrospective transition method and the impact of adoption was not material to the Company’s and Hawaiian Electric’s consolidated statements of cash flows.

~~Definition of a Business~~. In January 2017, the FASB issued ASU No. 2017-01, “Business Combinations—Clarifying the Definition of a Business.” This update clarifies the definition of a business and adds guidance to assist entities with evaluating whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. The Company adopted ASU No. 2017-01 in the first quarter of 2018 and the impact of adoption was not material to the Company’s and Hawaiian Electric’s consolidated financial statements.

~~Net periodic pension cost and net periodic postretirement benefit cost~~. In March 2017, the FASB issued ASU No. 2017-07, “Compensation-Retirement Benefits (Topic 715): Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost,” which requires that an employer report the service cost component in the same line item or items as other compensation costs arising from services rendered by the pertinent employees during the period. It also requires the other components of net periodic pension cost (NPPC) and net periodic postretirement benefit cost (NPBC) as defined in paragraphs 715-30-35-4 and 715-60-35-9 to be presented in the income statement separately from the service cost component and outside a subtotal of income from operations. Additionally, only the service cost component is eligible for capitalization under GAAP, when applicable.

The Company adopted ASU No. 2017-07 in the first quarter of 2018: (1) retrospectively for the presentation in the income statement of the service cost component and the other components of NPPC and NPBC, and (2) prospectively for the capitalization in assets of the service cost component of NPPC and NPBC for Hawaiian Electric and its subsidiaries. HEI and ASB do not capitalize pension and OPEB costs.

In settlement agreements in the 2018 Maui Electric, 2017 Hawaiian Electric and 2016 Hawaii Electric Light rate cases, Maui Electric, Hawaiian Electric and Hawaii Electric Light, respectively, and the Consumer Advocate agreed to the deferral of the non-service cost components of NPPC and NPBC, which would have been capitalized prior to ASU No. 2017-07, as part of the pension tracking mechanism. The PUC approved this treatment in the final decision and order (D&O) in the Hawaiian Electric and Hawaii Electric Light rate cases. The treatment under the settlement agreements was followed beginning in 2018 until each utility’s next rate case. In each utility’s next rate case, rates established would include recovery of the deferred non-service cost components and seek to adopt the capitalization policy which reflects the requirements of ASU No. 2017-07 (i.e., only the service cost components of NPPC and NPBC will be capitalized).

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~ ~~- continued(Unaudited)~~

Thus, the adoption of ASU 2017-07 in the first quarter of 2018 does not have a net income impact. The following table summarizes the impact to the prior period financial statements of the adoption of ASU No. 2017-07:

Three months ended June 30, 2017 Six months ended June 30, 2017
(in thousands) As previously filed Adjustment from adoption of ASU No. 2017-07 As currently reported As previously filed Adjustment from adoption of ASU No. 2017-07 As currently reported
HEI Condensed Consolidated Income Statement
Expenses
Electric utility $ 501,828
$ (1,435 ) $ 500,393
$ 971,501
$ (2,858 ) $ 968,643
Bank 50,533
(201 ) 50,332
99,229
(396 ) 98,833
Other 4,024
(270 ) 3,754
9,355
(528 ) 8,827
Total expenses 556,385
(1,906 ) 554,479
1,080,085
(3,782 ) 1,076,303
Operating income
Electric utility 55,047
1,435
56,482
103,985
2,858
106,843
Bank 24,796
201
24,997
48,956
396
49,352
Other (3,947 ) 270
(3,677 ) (9,183 ) 528
(8,655 )
Total operating income 75,896
1,906
77,802
143,758
3,782
147,540
Retirement defined benefits expense--other than service costs —
(1,906 ) (1,906 ) —
(3,782 ) (3,782 )
Hawaiian Electric Condensed Consolidated Income Statement
Other operation and maintenance 106,374
(1,435 ) 104,939
206,614
(2,858 ) 203,756
Total expense 501,828
(1,435 ) 500,393
971,501
(2,858 ) 968,643
Operating income 55,047
1,435
56,482
103,985
2,858
106,843
Retirement defined benefits expense--other than service costs —
(1,435 ) (1,435 ) —
(2,858 ) (2,858 )
Hawaiian Electric Condensed Consolidating Income Statement (in Note 3)
Hawaiian Electric (parent only)
Other operation and maintenance 70,961
(1,302 ) 69,659
138,239
(2,587 ) 135,652
Total expense 357,575
(1,302 ) 356,273
690,763
(2,587 ) 688,176
Operating income 36,839
1,302
38,141
66,494
2,587
69,081
Retirement defined benefits expense--other than service costs —
(1,302 ) (1,302 ) —
(2,587 ) (2,587 )
Hawaii Electric Light
Other operation and maintenance 17,558
85
17,643
33,074
168
33,242
Total expense 72,903
85
72,988
141,400
168
141,568
Operating income 8,807
(85 ) 8,722
19,292
(168 ) 19,124
Retirement defined benefits expense--other than service costs —
85
85
—
168
168
Maui Electric
Other operation and maintenance 17,855
(218 ) 17,637
35,301
(439 ) 34,862
Total expense 71,350
(218 ) 71,132
139,338
(439 ) 138,899
Operating income 9,415
218
9,633
18,220
439
18,659
Retirement defined benefits expense--other than service costs —
(218 ) (218 ) —
(439 ) (439 )
ASB Statements of Income Data (in Note 4)
Compensation and employee benefits 24,742
(201 ) 24,541
47,979
(396 ) 47,583
Other expense 4,705
201
4,906
9,016
396
9,412

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~ ~~- continued(Unaudited)~~

~~Derivatives and Hedging.~~ In August 2017, the FASB issued ASU No. 2017-12, “Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities,” which is intended to improve and simplify accounting rules around hedge accounting. The amendments in ASU No. 2017-12 improve the financial reporting of hedging relationships to better portray the economic results of an entity’s risk management activities and financial reporting for hedging relationships through changes to both the designation and measurement guidance for qualifying hedging relationships and the presentation of hedge results in the financial statements. The amendments also expand and refine hedge accounting for both nonfinancial and financial risk components and align the recognition and presentation of the effects of the hedging instrument and the hedged item in the financial statements. For public business entities, the new guidance is effective for annual periods beginning after December 15, 2018, including interim periods within those annual periods, but early adoption is permitted. The Company early adopted ASU No. 2017-12 in the second quarter of 2018, with an effective date of April 1, 2018, and the adoption did not have a material impact on the Company’s consolidated financial statements.

~~Leases~~. ~~In February 2016, the FASB issued ASU~~ No. 2016-02, “Leases (Topic 842),” which requires that lessees recognize a liability to make lease payments (the lease liability) and a right-of-use (ROU) asset, representing its right to use the underlying asset for the lease term, for all leases (except short-term leases) at the commencement date. For leases with a term of 12 months or less, a lessee is permitted to make an accounting policy election and recognize lease expense for such leases generally on a straight-line basis over the lease term. For finance leases, a lessee is required to recognize interest on the lease liability separately from amortization of the ~~right-of-use~~ROU asset in the ~~statement~~consolidated statements of income. For operating leases, a lessee is required to recognize a single lease cost, calculated so that the cost of the lease is allocated over the lease term on a generally straight-line basis.

The Company ~~plans to adopt~~adopted ASU No. 2016-02 ~~in the first quarter of~~on January 1, 2019 and ~~is currently analyzing~~used the ~~potential impact~~effective date as the date of ~~adoption, including~~initial application. Consequently, financial information for dates and periods before January 1, 2019 will not be updated and the impact of electing certain practical expedients available under the standard. The Company has reviewed its agreements and has compiled a preliminary inventory of its operating leases and other arrangements that meet the definition of a leasedisclosures required under the new ~~standard. The~~standard will not be provided (i.e., the Company iswill continue to report prior comparative periods presented in the ~~process of analyzing~~financial statements under Accounting Standards Codification (ASC) 840, including the ~~measurement provisions~~required disclosures under ASC 840).

The most significant effect of the new standard relates to the recognition of new ROU assets and ~~their impact~~lease liabilities on the Company’s balance sheet for purchase power agreements and real estate operating leases. On adoption, the Company recognized lease liabilities of approximately $257 million for the Company and approximately $236 million for the Utilities ($215 million related to ~~its~~PPAs), based on the present value of the remaining minimum rental payments, with corresponding ROU assets for existing operating leases, under current leasing standards. In determining the lease ~~arrangements that fall within~~liability upon transition, the ~~scope~~Company used the incremental borrowing rates as of ~~ASU No. 2016-02.~~the adoption date based on the remaining lease term and remaining lease payments. See Note 6 for more information.

Credit losses. In June 2016, the FASB issued ASU No. 2016-13, “Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments,” which is intended to improve financial reporting by requiring timelier recording of credit losses on loans and other financial instruments held by financial institutions and other organizations. ASU No. 2016-13 requires the measurement of all expected credit losses for financial assets held at the reporting date (based on historical experience, current conditions and reasonable and supportable forecasts) and enhanced disclosures to help financial statement users better understand significant estimates and judgments used in estimating credit losses, as well as the credit quality and underwriting standards of an organization’s portfolio. In addition, ASU No. 2016-13 amends the accounting for credit losses on available-for-sale ~~(AFS)~~ debt securities and purchased financial assets with credit deterioration. The other-than-temporary impairment model of accounting for credit losses on ~~AFS~~available-for-sale debt securities will be replaced with an estimate of expected credit losses only when the fair value is below the amortized cost of the asset. The length of time the fair value of an ~~AFS~~available-for-sale debt security has been below the amortized cost will no longer impact the determination of whether a credit loss exists. The ~~AFS~~available-for-sale debt security model will also require the use of an allowance to record the estimated losses (and subsequent recoveries). The accounting for the initial recognition of the estimated expected credit losses for purchased financial assets with credit deterioration would be recognized through an allowance for credit losses with an offset to the cost basis of the related financial asset at acquisition (i.e., there is no impact to net income at initial recognition).

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - continued(Unaudited)

The Company plans to adopt ASU No. 2016-13 in the first quarter of 2020. The guidance is to be applied on a modified retrospective basis with the cumulative effect of initially applying the amendments recognized in retained earnings at the date of initial application. The Company has assembled a ~~project~~cross-functional team that ~~meets regularly~~continues to ~~evaluate~~work through its implementation plan, including the ~~provisions~~assessment and documentation of ~~this ASU, identify additional~~processes, internal controls and data requirements ~~necessary and determine an approach for implementation. The team has assigned roles and responsibilities and developed key tasks to complete and a general timeline to be followed.~~as well as model development. The Company is evaluating the effect that this ASU will have on the consolidated financial statements and disclosures. Economic conditions and the composition of the Company’s loan portfolio at the time of adoption will influence the extent of the adopting accounting adjustment.

Codification Improvements. In April 2019, the FASB issued ASU No. 2019-04, “Codification Improvements to Topic 326, Financial Instruments - Credit Losses, Topic 815, Derivatives and Hedging, and Topic 825, Financial Instruments,” which is intended to clarify certain issues related to the accounting for financial instruments.

•

With respect to Topic 326, Financial Instruments - Credit Losses, ASU No. 2019-04 allows entities to measure the allowance for credit losses on accrued interest receivable balances separately from other components of the amortized cost basis of associated financial assets, or to make an accounting policy election not to measure an allowance for credit losses on accrued interest receivable amounts if an entity writes off the uncollectible accrued interest receivable balance in a timely manner and makes certain disclosures. ASU No. 2019-04 also allows an entity to make an accounting policy election regarding the presentation and disclosure of accrued interest receivables and the related allowance for credit losses for those accrued interest receivables. ASU No. 2019-04 also clarifies certain issues related to transfers between classifications or categories for loans and debt securities, recoveries, variable interest rates and prepayments, vintage disclosures, and contractual extensions and renewal options.


•	With respect to Topic 815, Derivatives and Hedging, ASU No. 2019-04 provides amendments, among others, that address partial-term fair value hedges, fair value hedge basis adjustments, and certain transition requirements.


•	With respect to Topic 825, Financial Instruments, ASU No. 2019-04 clarifies the scope of the guidance and disclosure requirements with respect to recognizing and measuring financial instruments.

The amended guidance in ASU No. 2019-04 will be effective for fiscal years and interim periods beginning after December 15, 2019, with early adoption permitted. The Company plans to adopt ASU No. 2019-04 in the first quarter of 2020 and is currently evaluating the impact of the ASU on the Company’s consolidated financial statements.

~~Condensed Consolidated Statements of Cash Flows error.~~ ~~Subsequent~~Reclassifications. Reclassifications made to prior year financial statements to conform to the ~~issuance~~2019 presentation include classifying contributions in aid of ~~interim Condensed Consolidated Financial Statements (unaudited)~~construction with capital expenditures in the cash flows from investing activities section of the condensed consolidated statements of cash flows for ~~the quarter ended June 30, 2017, the Company~~HEI and Hawaiian Electric. In addition, prior period disclosure of proceeds and repayments of other bank borrowings and the Utilities identified an error within their previously reported interim Condensed Consolidated Statements of Cash Flows (unaudited). The timing of certain capital expenditure payments, including those that had retainage balances or were related to certain capitalized amounts were not reflected timely. The Company andnet increase in retail repurchase agreements contained in the ~~Utilities have evaluated the effect~~“Net cash provided by financing activities” section of the ~~error, both qualitatively and quantitatively, and concluded that it is immaterial~~consolidated statements of cash flows have been combined to ~~their respective previously issued condensed consolidated financial statements. For~~conform to the ~~six months ended June 30, 2017, the correction of this error resulted in decreases in Net Cash Provided by Operating Activities~~current period presentation.

1311

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - continued(Unaudited)

(impacting the change in Accounts, Interest and Dividends Payable for the Company and Accounts Payable for the Utilities) and Net Cash Used in Investing Activities (impacting the Capital Expenditures for the Company and the Utilities) of $12 million.

~~Reclassifications.~~ Reclassifications made to prior year-end financial statements to conform to 2018 presentation include a reclassification of contributions in aid of construction (CIAC) balances to “Property, plant and equipment, net” and “Total property, plant and equipment, net” for the Company and Hawaiian Electric, respectively, which reduced the amounts of the respective balances.

Note 2 · Segment financial information



(in thousands)	Electric utility		Bank		Other			Total
Three months ended June 30, 2019
Revenues from external customers	$	633,771	$	81,687	$	27		$	715,485
Intersegment revenues (eliminations)	13		—		(13		)	—
Revenues	$	633,784	$	81,687	$	14		$	715,485
Income (loss) before income taxes	$	40,817	$	21,292	$	(9,415	)	$	52,694
Income taxes (benefit)	7,744		4,276		(2,311		)	9,709
Net income (loss)	33,073		17,016		(7,104		)	42,985
Preferred stock dividends of subsidiaries	499		—		(26		)	473
Net income (loss) for common stock	$	32,574	$	17,016	$	(7,078	)	$	42,512
Six months ended June 30, 2019
Revenues from external customers	$	1,212,253	$	164,739	$	108		$	1,377,100
Intersegment revenues (eliminations)	26		—		(26		)	—
Revenues	$	1,212,279	$	164,739	$	82		$	1,377,100
Income (loss) before income taxes	$	82,676	$	47,454	$	(19,397	)	$	110,733
Income taxes (benefit)	16,978		9,599		(4,990		)	21,587
Net income (loss)	65,698		37,855		(14,407		)	89,146
Preferred stock dividends of subsidiaries	998		—		(52		)	946
Net income (loss) for common stock	$	64,700	$	37,855	$	(14,355	)	$	88,200
Total assets (at June 30, 2019)	$	6,253,846	$	7,164,054	$	119,866		$	13,537,766
Three months ended June 30, 2018
Revenues from external customers	$	608,112	$	77,104	$	61		$	685,277
Intersegment revenues (eliminations)	14		—		(14		)	—
Revenues	$	608,126	$	77,104	$	47		$	685,277
Income (loss) before income taxes	$	40,344	$	26,514	$	(7,276	)	$	59,582
Income taxes (benefit)	8,676		5,953		(1,574		)	13,055
Net income (loss)	31,668		20,561		(5,702		)	46,527
Preferred stock dividends of subsidiaries	499		—		(26		)	473
Net income (loss) for common stock	$	31,169	$	20,561	$	(5,676	)	$	46,054
Six months ended June 30, 2018
Revenues from external customers	$	1,178,526	$	152,523	$	102		$	1,331,151
Intersegment revenues (eliminations)	27		—		(27		)	—
Revenues	$	1,178,553	$	152,523	$	75		$	1,331,151
Income (loss) before income taxes	$	77,493	$	51,014	$	(15,649	)	$	112,858
Income taxes (benefit)	17,851		11,493		(3,733		)	25,611
Net income (loss)	59,642		39,521		(11,916		)	87,247
Preferred stock dividends of subsidiaries	998		—		(52		)	946
Net income (loss) for common stock	$	58,644	$	39,521	$	(11,864	)	$	86,301
Total assets (at December 31, 2018)	$	5,967,503	$	7,027,894	$	108,654		$	13,104,051

(in thousands) Electric utility Bank Other Total
Three months ended June 30, 2018

Revenues from external customers $ 608,112
$ 77,104
$ 61
$ 685,277
Intersegment revenues (eliminations) 14
—
(14 ) —
Revenues $ 608,126
$ 77,104
$ 47
$ 685,277
Income (loss) before income taxes $ 40,344
$ 26,514
$ (7,276 ) $ 59,582
Income taxes (benefit) 8,676
5,953
(1,574 ) 13,055
Net income (loss) 31,668
20,561
(5,702 ) 46,527
Preferred stock dividends of subsidiaries 499
—
(26 ) 473
Net income (loss) for common stock $ 31,169
$ 20,561
$ (5,676 ) $ 46,054
Six months ended June 30, 2018

Revenues from external customers $ 1,178,526
$ 152,523
$ 102
$ 1,331,151
Intersegment revenues (eliminations) 27
—
(27 ) —
Revenues $ 1,178,553
$ 152,523
$ 75
$ 1,331,151
Income (loss) before income taxes $ 77,493
$ 51,014
$ (15,649 ) $ 112,858
Income taxes (benefit) 17,851
11,493
(3,733 ) 25,611
Net income (loss) 59,642
39,521
(11,916 ) 87,247
Preferred stock dividends of subsidiaries 998
—
(52 ) 946
Net income (loss) for common stock $ 58,644
$ 39,521
$ (11,864 ) $ 86,301
Total assets (at June 30, 2018) $ 5,803,714
$ 6,983,583
$ 96,807
$ 12,884,104
Three months ended June 30, 2017

Revenues from external customers $ 556,836
$ 75,329
$ 116
$ 632,281
Intersegment revenues (eliminations) 39
—
(39 ) —
Revenues $ 556,875
$ 75,329
$ 77
$ 632,281
Income (loss) before income taxes $ 41,003
$ 24,796
$ (6,173 ) $ 59,626
Income taxes (benefit) 14,860
8,063
(2,431 ) 20,492
Net income (loss) 26,143
16,733
(3,742 ) 39,134
Preferred stock dividends of subsidiaries 499
—
(26 ) 473
Net income (loss) for common stock $ 25,644
$ 16,733
$ (3,716 ) $ 38,661
Six months ended June 30, 2017

Revenues from external customers $ 1,075,402
$ 148,185
$ 256
$ 1,223,843
Intersegment revenues (eliminations) 84
—
(84 ) —
Revenues $ 1,075,486
$ 148,185
$ 172
$ 1,223,843
Income (loss) before income taxes $ 75,725
$ 48,956
$ (13,473 ) $ 111,208
Income taxes (benefit) 27,618
16,410
(6,620 ) 37,408
Net income (loss) 48,107
32,546
(6,853 ) 73,800
Preferred stock dividends of subsidiaries 998
—
(52 ) 946
Net income (loss) for common stock $ 47,109
$ 32,546
$ (6,801 ) $ 72,854
Total assets (at December 31, 2017) $ 5,630,613
$ 6,798,659
$ 104,888
$ 12,534,160

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~ ~~- continued(Unaudited)~~

Intercompany electricity sales of the Utilities to the bank and “other” segments are not eliminated because those segments would need to purchase electricity from another source if it were not provided by the Utilities and the profit on such sales is nominal.

Bank fees that ASB charges the Utilities and “other” segments are not eliminated because those segments would pay fees to another financial institution if they were to bank with another institution and the profit on such fees is nominal.

Hamakua ~~Energy’s~~Energy, LLC’s (Hamakua Energy’s) sales to Hawaii Electric Light (a regulated affiliate) are eliminated in consolidation. ~~Hamakua Energy's profit on electricity sales to Hawaii~~

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - continued(Unaudited)

Note 3 · Electric Light is not required to be eliminated because the PPA was approved by the PUC and it is probable that, through the ratemaking process, future revenue from Hawaii Electric Light’s sale of the electricity will approximate its purchase price from Hamakua Energy under the PPA.utility segment

~~Note 3~~ · HECO Capital Trust III. Trust III, a statutory trust, which was formed to effect the issuance of $50 million of cumulative quarterly income trust preferred securities in 2004 (2004 Trust Preferred Securities), and had at all times been a wholly-owned unconsolidated subsidiary of Hawaiian Electric, ~~utility segment~~redeemed $50 million of its outstanding 2004 Trust Preferred Securities and $1.5 million of trust common securities on May 15, 2019. Subsequently, a Certificate of Cancellation of Statutory Trust was filed with the Delaware Secretary of State in order to cancel the Trust III, which became effective on June 10, 2019.

~~Revenue taxes.~~ ~~The Utilities’ revenues include amounts for recovery of various Hawaii state revenue taxes. Revenue taxes are generally recorded as an expense in the period the related revenues are recognized.~~ For ~~the second quarters of 2018 and 2017 and~~ the six months ended June 30, ~~2018~~2019 and ~~2017, the Utilities’ revenues include recovery of revenue taxes of approximately $54 million, $50 million,~~ ~~$105 million~~ ~~and~~ ~~$96 million~~, respectively, which amounts are included in “Taxes, other than income taxes” expense, in the unaudited condensed consolidated statements of income. However, the Utilities pay revenue taxes to the taxing authorities in the period based on (1) the prior year’s billed revenues (in the case of public service company taxes and PUC fees) in the current year or (2) the current year’s cash collections from electric sales (in the case of franchise taxes) after year-end.

~~Unconsolidated variable interest entities.~~

~~HECO Capital Trust III~~. Trust III has at all times been an unconsolidated subsidiary of Hawaiian Electric. Since Hawaiian Electric, as the holder of 100% of the trust common securities, does not have the power to direct the activities that most significantly impact the economic performance of Trust III nor the obligation to absorb its expected losses, if any, that could potentially be significant to Trust III, Hawaiian Electric is not the primary beneficiary and does not consolidate Trust III in accordance with accounting rules on the consolidation of VIEs. Trust III’s balance sheets as of June 30, 2018, ~~and December 31, 2017 each consisted of $51.5 million of 2004 Debentures; $50.0 million of 2004 Trust Preferred Securities; and $1.5 million of trust common securities.~~ Trust III’s income statements ~~for the six months ended June 30, 2018 and 2017~~ consisted of $1.2 million and $1.7 million, respectively, of interest income received from the 2004 Debentures; $1.2 million and $1.6 million, respectively, of distributions to holders of the Trust Preferred Securities; $37,000 and $50,000, respectively, of common dividends on the trust common securities to Hawaiian Electric.

Unconsolidated variable interest entities.

Power purchase agreements. As of June 30, ~~2018~~,2019, the Utilities had ~~five~~four PPAs for firm capacity (excluding the PGV PPA as PGV has been offline since May 2018 due to lava flow on Hawaii Island) and other PPAs with independent power producers (IPPs) and Schedule Q providers (i.e., customers with cogeneration and/or power production facilities who buy power from or sell power to the Utilities), none of which isare currently required to be consolidated as VIEs.

Pursuant to the current accounting standards for VIEs, the Utilities are deemed to have a variable interest in Kalaeloa Partners, L.P. (Kalaeloa), AES Hawaii, Inc. (AES Hawaii) and ~~the predecessor of~~ Hamakua Energy by reason of the provisions of the PPA that the Utilities have with the three IPPs. However, management has concluded that the Utilities are not the primary beneficiary of Kalaeloa, AES Hawaii and ~~the predecessor of~~ Hamakua Energy because the Utilities do not have the power to direct the activities that most significantly impact the three IPPs’ economic performance nor the obligation to absorb their expected losses, if any, that could potentially be significant to the IPPs. Thus, the Utilities have not consolidated Kalaeloa, AES Hawaii and ~~the predecessor of~~ Hamakua Energy in its ~~unaudited~~ condensed consolidated financial statements. ~~In November 2017, HEI acquired the Hamakua project through~~ Hamakua Energy is an indirect subsidiary of Pacific Current and ~~has~~is consolidated it in HEI’s ~~unaudited~~ condensed consolidated financial ~~statements since the acquisition.~~statements.

For the other PPAs with IPPs, the Utilities have concluded that the consolidation of the IPPs was not required because either the Utilities do not have variable interests in the IPPs due to the absence of an obligation in the PPAs for the Utilities to absorb any variability of the IPPs, or the ~~IPPs were~~IPP was considered a “governmental organization,” and thus excluded from the scope of accounting standards for VIEs. Two IPPs of as-available energy declined to provide the information necessary for Utilities to determine the applicability of accounting standards for VIEs. If information is ultimately received from the IPPs, a possible outcome of future analyses of such information is the consolidation of one or both of such IPPs in the unaudited condensed consolidated financial statements. The consolidation of any significant IPP could have a material effect on the unaudited condensed consolidated financial statements, including the recognition of a significant amount of assets and liabilities and, if such a consolidated IPP were operating at a loss and had insufficient equity, the potential recognition of such losses. If the Utilities determine they are required to consolidate the financial statements of such an IPP and the consolidation has a material effect, the Utilities would retrospectively apply accounting standards for VIEs to the IPP.

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~ ~~- continued(Unaudited)~~

Commitments and contingencies.

~~Contingencies~~Fuel Contracts. The fuel contract entered into in January 2019, by the Utilities and PAR Hawaii Refining, LLC, for the Utilities' low sulfur fuel oil, high sulfur fuel oil, No. 2 diesel, and ultra-low sulfur diesel requirements was approved by the PUC, and became effective on April 28, 2019 and terminates on December 31, 2022. The existing fuel contracts with Island Energy Services, LLC (IES), terminated on April 27, 2019, as agreed with IES under a mutual termination and release agreement entered into in November 2018.

Contingencies. The Utilities are subject in the normal course of business to pending and threatened legal proceedings. Management does not anticipate that the aggregate ultimate liability arising out of these pending or threatened legal proceedings will be material to its financial position. However, the Utilities cannot rule out the possibility that such outcomes could have a material effect on the results of operations or liquidity for a particular reporting period in the future.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - continued(Unaudited)

Power purchase agreements. Purchases from all IPPs were as follows:


	Three months ended June 30				Six months ended June 30				Three months ended June 30				Six months ended June 30
(in millions)	2018		2017		2018		2017		2019		2018		2019		2018
Kalaeloa	$	52	$	48	$	92	$	88	$	61	$	52	$	101	$	92
AES Hawaii	32		35		69		64		32		32		64		69
HPOWER	17		16		32		33		19		17		37		32
Puna Geothermal Venture	4		10		15		18		—		4		—		15
Hamakua Energy	15		10		22		17		18		15		34		22
Wind IPPs									23		31		43		53
Solar IPPs									8		8		15		14
Other IPPs ¹	41		34		71		60		1		2		2		4
Total IPPs	$	161	$	153	$	301	$	280	$	162	$	161	$	296	$	301


¹	Includes ~~wind~~hydro power ~~solar power, feed-in tariff projects~~ and other ~~PPAs.~~PPAs

Kalaeloa Partners, L.P. Under a 1988 PPA, as amended, Hawaiian Electric is committed to purchase 208 MW of firm capacity from Kalaeloa. Hawaiian Electric and Kalaeloa are currently in negotiations to address the PPA term that ended on May 23, 2016. The PPA automatically extends on a month-to-month basis as long as the parties are still negotiating in good ~~faith, but would end 60 days after either party notifies the other in writing that negotiations have terminated.~~faith. Hawaiian Electric and Kalaeloa have agreed that neither party will terminate the PPA (which has been subject to automatic extension on a month-to-month basis) prior to October 31, ~~2018. This agreement contemplates continued negotiations between the parties and accounts~~2019, to allow for ~~time needed for PUC approval of~~ a negotiated ~~resolution.~~resolution and PUC approval.

AES Hawaii, Inc. Under a PPA entered into in March 1988, as amended (through Amendment No. 2) for a period of 30 years ~~beginning~~ending September ~~1992,~~2022, Hawaiian Electric agreed to purchase 180 MW of firm capacity from AES Hawaii. In August 2012, Hawaiian Electric filed an application with the PUC seeking an exemption from the PUC’s Competitive Bidding Framework to negotiate an amendment to the PPA to purchase 186 MW of firm capacity, and amend the energy pricing formula in the PPA. The PUC approved the exemption in April 2013, but Hawaiian Electric and AES Hawaii ~~were not able to reach agreement on the amendment. In June 2015, AES Hawaii filed~~have been in dispute over an ~~arbitration demand regarding a dispute about whether Hawaiian Electric was obligated to buy up to~~additional 9 MW of additional capacity based on a 1992 letter. Hawaiian Electric responded to the arbitration demand and in October 2015, AES Hawaii and Hawaiian Electric entered into a settlement agreement to stay the arbitration proceeding. The settlement agreement included certain conditions precedent which, if satisfied, would have released the parties from the claims under the arbitration proceeding. Among the conditions precedent was the successful negotiation and PUC approval of an amendment to the existing PPA.

In November 2015, Hawaiian Electric entered into Amendment No. 3 for which PUC approval was requested and subsequently denied in January 2017. Approval of Amendment No. 3 would have satisfied the final condition for effectiveness of the settlement agreement and resolved AES Hawaii's claims. Following the PUC's decision, the parties agreed to extend the stay of the arbitration proceeding, while settlement discussions continued.capacity. In February 2018, Hawaiian Electric reached agreement with AES Hawaii on ~~Amendment No. 4, which was submitted~~an amendment to the ~~PUC for approval~~PPA. However, in April 2018. Amendment No. 4, among other things, provides (1) that AES Hawaii will make certain operational commitments to improve reliability, (2) for inclusion of AES Hawaii in the Utilities’ greenhouse gas partnership, (3) provisions to allow AES Hawaii to reduce coal combustion by modifying its fuel consumption to include biomass upon approval by Hawaiian Electric, and (4) for release of an option agreement by Hawaiian Electric for land owned by AES Hawaii. Amendment No. 4 includes a stay of the arbitration proceeding pending review by the PUC. If approved by the PUC, Amendment No. 4 will resolve AES Hawaii’s claims. In June 2018, the PUC issued an order suspending review of the ~~Amendment No. 4 docket~~amendment pending a DOH decision on AES’ request for approval of its Emission Reduction Plan and partnership with Hawaiian Electric. If approved by the PUC, the amendment will resolve AES Hawaii’s claims related to the additional capacity.

Hu Honua Bioenergy, ~~LLC.~~ LLC (Hu Honua). In May 2012, Hawaii Electric Light signed a PPA, which the PUC approved in December 2013, with Hu Honua ~~Bioenergy, LLC (Hu Honua)~~ for 21.5 MW of renewable, dispatchable firm capacity fueled by locally grown biomass from a facility on the island of Hawaii. Under the terms of the PPA, the Hu Honua plant was scheduled to be in service in 2016. However, Hu Honua encountered construction and litigation delays, failed to meet its obligations under the PPA and failed to provide adequate assurances that it could perform or had the financial means to perform. Hawaii Electric Light terminated the PPA on March 1, 2016. On November 30, 2016, Hu Honua filed a civil complaintwhich resulted in ~~the United States District Court for the District of Hawaii that included claims purportedly arising out of the termination of Hu Honua’s PPA. On May 26, 2017,~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~ ~~- continued(Unaudited)~~

Hawaii Electric Light and Hu Honua entered into a settlement agreement that will settle all claims related to the termination of the original PPA. The settlement agreement was contingent on the PUC’s approval of an amended and restated PPA between Hawaii Electric Light and Hu Honua dated May 5, 2017. In July 2017, the PUC approved the amended and restated ~~PPA. On~~PPA, which becomes effective once the PUC’s order is final and non-appealable. In August ~~25,~~ 2017, the PUC’s approval was appealed by a third party. On May 10, 2019, the Hawaii Supreme Court issued a decision remanding the matter to the PUC for further proceedings consistent with the court’s decision which must include express consideration of Green House Gas emissions that would result from approving the PPA, whether the cost of energy under the PPA is reasonable in light of the potential for GHG emissions, and whether the terms of the PPA are prudent and in the public interest, in light of its potential hidden and long-term consequences. On June 20, 2019, the PUC issued an order reopening the docket for further proceedings. The ~~appeal is still pending.~~parties have submitted updated status reports and the PUC will be establishing a procedural schedule. Hu Honua ~~is expected~~expects to ~~be on-line by~~complete construction of the ~~end~~plant in the fourth quarter of ~~2018.~~2019.

Utility projects. Many public utility projects require PUC approval and various permits from other governmental agencies. Difficulties in obtaining, or the inability to obtain, the necessary approvals or permits can result in significantly increased project costs or even cancellation of projects. In the event a project does not proceed, or if it becomes probable the PUC will disallow cost recovery for all or part of a project, or if PUC-imposed caps on project costs are expected to be exceeded, project costs may need to be written off in amounts that could result in significant reductions in Hawaiian Electric’s consolidated net income.

Enterprise Resource Planning/Enterprise Asset Management (ERP/EAM) implementation project. ~~On August 11, 2016,~~ The ERP/EAM Implementation Project went live in October 2018. In the Hawaiian Electric 2017 rate case, a settlement agreement approved by the PUC included authorization for the deferred project costs to accrue a return at 1.75% after the project went into service and until the deferred project costs are included in rate base, and for amortization of the deferred costs to not begin until the amortization expense is incorporated in rates and the unamortized deferred project costs are included in rate base. As of June 30, 2019, the total deferred project costs and accrued carrying costs after the project went into service amounted to $58.9 million.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - continued(Unaudited)

In February 2019, the PUC approved a methodology for passing the future cost saving benefits of the new ERP/EAM system to customers developed by the Utilities in collaboration with the Consumer Advocate. The Utilities filed a benefits clarification document on June 10, 2019, reflecting $150 million in future net O&M expense reductions and cost avoidance, and $96 million in capital cost reductions and tax savings over the 12-year service life. To the extent the reduction in O&M expense relates to amounts reflected in electric rates, the Utilities would reduce future rates for such amounts. As of June 2019, the Utilities recorded $0.5 million as a regulatory liability for amounts to be returned to customers for reduction in O&M expense included in rates.

West Loch PV Project. In June 2017, the PUC approved the Utilities’ request to commence the ERP/EAM implementation project, subject to certain conditions, including a $77.6 million cap on cost recovery as well as a requirement that the Utilities pass onto customers a minimumexpenditure of ~~$244 million in benefits associated with the system over its 12-year service life. The D&O approved the deferral of certain project costs and allowed the accrual of allowance~~funds for funds used during construction (AFUDC), but limited the AFUDC rate to 1.75%. Pursuant to the D&O and subsequent orders, in September 2017, the Utilities filed a bottom-up, low-level analysis of the project’s benefits and performance metrics and tracking mechanism for passing the project’s benefits on to customers.

On November 30, 2017, the PUC issued an order, which, among other things, directed the Utilities to file a position statement regarding the reasonableness of the project, a reworked low-level benefits analysis and initial details of the metrics that will be used to demonstrate the achievement of benefits. On December 18, 2017, the Utilities filed their response to the order, re-affirming the need for the project and guaranteed minimum level of $244 million in benefits to customers. The response further noted that in Hawaiian Electric’s 2017 test year rate case, Hawaiian Electric and the Consumer Advocate have agreed in principle to a “rate case-centric” approach for a benefits delivery mechanism pending PUC approval. On January 4, 2018, the Consumer Advocate filed a statement of position (SOP) on the Utilities’ response, stating that it does not recommend revocation of the PUC’s prior conditional approval of the project or reductions to the previously ordered cost caps, and continues to recommend the use of a rate case-centric approach to facilitate pass through of the system’s benefits to customers. The Utilities filed a response to the Consumer Advocate’s SOP on January 11, 2018, noting among other things that the Consumer Advocate’s SOP is in general alignment with the Utilities’ position on the project. Monthly reports on the status and costs of the project continue to be filed. The parties have reached substantive agreement regarding the approach for delivering system benefits to customers, but are still in the process of developing an annual enterprise systems benefits report.

The ERP/EAM Implementation Project is expected to go live in October 2018. As of June 30, 2018, the Project incurred costs of $61.2 million of which $10.6 million were charged to other operation and maintenance (O&M) expense, $2.6 million relate to capital costs and $48.0 million are deferred costs.

~~Schofield Generating Station Project.~~ In August 2012, the PUC approved a waiver from the competitive bidding framework to allow Hawaiian Electric to negotiate with the U.S. Army for the construction of a 50 MW utility owned and operated firm, renewable and dispatchable generation facility at Schofield Barracks. In September 2015, the PUC approved Hawaiian Electric’s application to expend $167 million for the project. In approving the project, the PUC placed a cost cap of $167 million for the project, stated 90% of the cap is allowed for cost recovery through cost recovery mechanisms other than base rates, and stated the $167 million cap will be adjusted downward due to any reduction in the cost of the engine contract due to a reduction in the foreign exchange rate. Hawaiian Electric was required to take all necessary steps to lock in the lowest possible exchange rate. On January 5, 2016, Hawaiian Electric executed window forward contracts, which lowered the cost of the engine contract by $9.7 million, resulting in a revised project cost cap of $157.3 million. Hawaiian Electric received all of the major permits for the project, including a 35-year site lease from the U.S. Army. Construction of the facility began in October 2016, and the facility was placed in service on June 7, 2018. A request to recover the capital costs of the project through the newly-established Major Project Interim Recovery (MPIR) adjustment mechanism was approved by the PUC on June 27, 2018. (See “Decoupling” section below for MPIR guidelines and capital cost recovery discussion.) A decision on recovery of related operation and maintenance expense (approximately $1.8 million annualized) during the interim period (i.e., between the in-service date and the next rate case) is pending. Project costs incurred as of June 30, 2018 amounted to $141.5 million.

~~West Loch PV Project.~~ ~~In July 2016, Hawaiian Electric announced plans~~ to build, own and operate a utility-owned, grid-tied 20-MW (ac) solar facility on property owned by the Department of the ~~Navy. In June 2017, the PUC approved the expenditure of funds for the project,~~Navy, including ~~Hawaiian Electric’s~~a proposed project cost cap of $67 million and a performance guarantee to provide energy at 9.56 cents/~~KWH~~kWh or less to the system.

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~ ~~- continued(Unaudited)~~

In approving the project, the PUC agreed that the project is eligible for recovery of costs offset by related net benefits under the newly-established ~~MPIR~~major project interim recovery (MPIR) adjustment mechanism. (See “Decoupling” section below for MPIR guidelines and ~~capital~~ cost recovery discussion.) Hawaiian Electric has provided supplemental materials, ~~in August 2017,~~ as requested by the PUC, to support meeting the MPIR guidelines, accompanied by system performance guarantee and cost savings sharing mechanisms. A decision on these matters is pending.

Hawaiian Electric executed a fixed-price Engineering, Procurement, and Construction (EPC) contract for the project on December 6, 2017. The EPC contract includes the cost of the solar panels for the project, which is not subject to modification due to any tariffs that may be imposed under the current photovoltaic (PV) cell and module import tariffs. Construction of the facility began in the second quarter of 2018, and the facility is expected to be placed in service ~~in the second quarter of~~no later than October 2019. Project costs incurred as of June 30, ~~2018~~2019 amounted to ~~$9.1~~$46.5 million.

~~Hawaiian Telcom~~. The Utilities each have separate agreements for the joint ownership and maintenance of utility poles with Hawaiian Telcom, Inc. (Hawaiian Telcom), the respective county or counties in which each utility operates and other third parties, such as the State of Hawaii. The agreements set forth various circumstances requiring pole removal/installation/replacement and the sharing of costs among the joint pole owners. The agreements allow for the cost of work done by one joint pole owner to be shared by the other joint pole owners based on the apportionment of costs in the agreements. The Utilities have maintained, replaced and installed the majority of the jointly-owned poles in each of the respective service territories, and have billed the other joint pole owners for their respective share of the costs. The counties and the State have been reimbursing the Utilities for their share of the costs. However, Hawaiian Telcom has been delinquent in reimbursing the Utilities for its share of the costs.

~~Hawaiian Electric initiated a dispute resolution process to collect the unpaid amounts from Hawaiian Telcom as specified~~

~~by the joint pole agreement. This dispute resolution process is stayed pending PUC approval of a settlement agreement further~~

~~described below. For Hawaii Electric Light, the agreement does not specify an alternative dispute resolution process, and thus a~~

~~complaint for payment was filed with the Circuit Court in June 2016. This complaint is stayed pending PUC approval of a~~

~~settlement agreement further described below. Maui Electric has not yet commenced any legal action to recover the delinquent~~

amounts. On April 4, 2018, the Utilities and Hawaiian Telcom entered into several agreements, subject to PUC approval, for the purchase by the Utilities of Hawaiian Telcom’s interest in all the joint poles, and licensing and operating agreement between the Utilities and Hawaiian Telcom subsequent to the transfer of the joint pole interest to the Utilities. Consideration of approximately $48 million to be paid for Hawaiian Telcom’s interest in the poles will be offset in part by the receivables owed by Hawaiian Telcom to the Utilities. As of June 30, 2018, receivables under the joint pole agreement, net of a reserve for a portion of the interest, from Hawaiian Telcom are $17.4 million ($11.6 million at Hawaiian Electric, $4.7 million at Hawaii Electric Light, and $1.1 million at Maui Electric). Although PUC approval has not yet been received, management expects the net receivable amounts will be realized. The remaining consideration for acquiring Hawaiian Telcom’s interest in the joint poles is to be settled through the set-off of current and future license fees due from Hawaiian Telcom, after which Hawaiian Telcom would make cash payments for license fees under the agreement.

Environmental regulation. The Utilities are subject to environmental laws and regulations that regulate the operation of existing facilities, the construction and operation of new facilities and the proper cleanup and disposal of hazardous waste and toxic substances.

Hawaiian Electric, Hawaii Electric Light and Maui Electric, like other utilities, periodically encounter petroleum or other chemical releases associated with current or previous operations. The Utilities report and take action on these releases when and as required by applicable law and regulations. The Utilities believe the costs of responding to such releases identified to date will not have a material effect, individually or in the aggregate, on Hawaiian Electric’s consolidated results of operations, financial condition or liquidity.

Former Molokai Electric Company generation site. In 1989, Maui Electric acquired by merger Molokai Electric Company. Molokai Electric Company had sold its former generation site (Site) in 1983, but continued to operate at the Site under a lease until 1985. The Environmental Protection Agency (EPA) has since identified environmental impacts in the subsurface soil at the Site. ~~Although Maui Electric never operated at the Site or owned the Site property, after discussions~~In cooperation with ~~the EPA and~~ the Hawaii Department of Health (DOH), Maui Electric agreed to undertake additional investigations at the Site and an adjacent parcel that Molokai Electric Company had used for equipment storage (the Adjacent Parcel) to determine the extent of environmental contamination. A 2011 assessment by a Maui Electric contractor of the Adjacent Parcel identified environmental impacts, including elevated polychlorinated biphenyls (PCBs) in the subsurface soils. In cooperation with the DOH and EPA, Maui Electric is further ~~investigating~~investigated the Site and the Adjacent Parcel to determine the extent of impacts of ~~PCBs,~~polychlorinated biphenyls (PCBs), residual fuel oils and other subsurface contaminants. Maui Electric has a reserve balance of $2.7 million as of June 30, ~~2018,~~2019, representing the probable and reasonably ~~estimated~~estimable cost ~~to complete the additional investigation and estimated cleanup costs at~~for remediation of the Site and the Adjacent Parcel; however, final costs of remediation will depend on ~~the results of continued investigation.~~cleanup approach implemented.

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~ ~~- continued(Unaudited)~~

Pearl Harbor sediment study. In July 2014, the U.S. Navy notified Hawaiian Electric of the Navy’s determination that Hawaiian Electric is a Potentially Responsible Party responsible for the costs of investigation and cleanup of PCB contamination in sediment in the area offshore of the Waiau Power Plant as part of the Pearl Harbor Superfund Site. ~~The Navy has also requested that~~ Hawaiian Electric ~~reimburse the costs incurred~~was also required by the Navy to investigate the area. The Navy has completed a remedial investigation and a feasibility study (FS) for the remediation of contaminated sediment at several locations in Pearl Harbor and issued its Final FS Report on June 29, 2015. On February 2, 2016, the Navy released the Proposed Plan for Pearl Harbor Sediment Remediation and Hawaiian Electric submitted comments. The extent of the contamination, the appropriate remedial measures to address it and Hawaiian Electric’s potential responsibility for any associated costs have not been determined.

~~On March 23, 2015, Hawaiian Electric received a letter from the~~ EPA ~~requesting that Hawaiian Electric submit a work plan~~ to assess potential sources and extent of PCB contamination onshore at ~~the~~ Waiau Power Plant. Hawaiian Electric submitted a sampling and analysis (SAP) work plan to the EPA and the DOH. Onshore sampling at the Waiau Power Plant was completed in two phases in December 2015 and June 2016. Appropriate remedial measures are being developed to address the extent of the onshore contamination, and any associated costs have not yet been determined.

As of June 30, ~~2018,~~2019, the reserve account balance recorded by Hawaiian Electric to address the PCB contamination was $4.7 million. The reserve balance represents the probable and reasonably estimable cost ~~to complete~~for the onshore ~~and offshore investigations~~investigation and the remediation of PCB contamination in the offshore sediment. The final remediation costs will depend on the ~~assessment of~~ potential onshore source control requirements ~~as well as the further investigation of contaminated sediment~~and actual offshore ~~from the Waiau Power Plant by the Navy.~~cleanup costs.

Regulatory proceedings

Decoupling.Decoupling is a regulatory model that is intended to provide the Utilities with financial stability and facilitate meeting the State of Hawaii’s goals to transition to a clean energy economy and achieve an aggressive renewable portfolio standard. The decoupling ~~model, implemented in Hawaii in 2011, delinks revenues from sales and includes annual rate adjustments. The decoupling~~ mechanism has the following major components: (1) ~~a sales decoupling component via a~~monthly revenue balancing account (RBA), revenues or refunds for the difference between PUC-approved target revenues and recorded adjusted revenues, which delinks revenues from kilowatthour sales, (2) ~~a revenue~~RAM revenues for escalation ~~component via a~~in certain O&M expenses and rate ~~adjustment mechanism (RAM),~~base changes, (3) ~~major project interim recovery~~MPIR component, ~~(MPIR),~~ (4) performance incentive mechanisms (PIMs), and (5) an earnings sharing mechanism, which would

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - continued(Unaudited)

provide for a reduction of revenues between rate cases in the event the utility exceeds the return on average common equity (ROACE) allowed in its most recent rate case. Under the decoupling mechanism, triennial general rate cases are required.

Rate adjustment mechanism. ~~On March 31, 2015, the PUC issued an Order (the 2015 Decoupling Order) that modified the~~The RAM ~~portion of the decoupling mechanism to be capped at~~is based on the lesser ~~of the RAM revenue adjustment as then determined (based on~~of: a) an inflationary adjustment for certain O&M expenses and return on investment for certain rate base ~~changes) and a RAM revenue adjustment calculated based on the~~changes, or b) cumulative annual compounded increase in Gross Domestic Product Price Index applied to annualized target revenues (the RAM Cap). ~~The 2015 Decoupling Order provided a specific basis for calculating the~~Annualized target revenues ~~until the next rate case, at which time the target revenues will~~ reset upon the issuance of an interim or final ~~D&O~~decision and order (D&O) in a rate case.

~~The RAM Cap impacted~~ Each of the ~~Utilities' recovery of capital investments as follows:~~

~~Hawaiian Electric's~~Utilities’ RAM revenues ~~were limited to the~~was below its respective RAM Cap in 2019. The 2019 RAM also incorporated additional amortization of the regulatory liability associated with certain excess deferred taxes resulting from the 2017 Tax Cuts and ~~2018.~~

~~Maui Electric's~~Jobs Act decrease in tax rates. The reduction in the RAM revenues ~~in 2017 and 2018 were below~~will be counterbalanced by the ~~RAM Cap.~~lower income tax expense, therefore will have no net income impact.

~~Hawaii Electric Light’s RAM revenues in 2017 and 2018 were below the RAM Cap.~~

For the RAM years 2014 - 2016, Hawaiian Electric was allowed to record RAM revenue beginning on January 1 and to bill such amounts from June 1 of the applicable year through May 31 of the following year. Subsequent to 2016, Hawaiian Electric reverted to the RAM provisions initially approved in March 2011—i.e., RAM is both accrued and billed from June 1 of each year through May 31 of the following year.

Major project interim recovery. On April 27, 2017, the PUC issued an ~~Order~~order that provided guidelines for interim recovery of revenues to support major projects placed in service between general rate cases.

Projects eligible for recovery through the MPIR adjustment mechanism are major projects (i.e., projects with capital expenditures net of customer contributions in excess of $2.5 million), including, but not restricted to, renewable energy, energy efficiency, utility scale generation, grid modernization and smaller qualifying projects grouped into programs for review. The MPIR adjustment mechanism provides the opportunity to recover revenues for approved costs of eligible projects placed in service between general rate cases wherein cost recovery is limited by a revenue cap and is not provided by other effective recovery mechanisms. The request for PUC approval must include a business case and all costs that are allowed to be recovered through the MPIR adjustment mechanism must be offset by any related benefits. The guidelines provide for accrual of revenues approved for recovery upon in-service date to be collected from customers through the annual RBA tariff. Capital projects that

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~ ~~- continued(Unaudited)~~

~~are not recovered through the MPIR would be included in the RAM and be subject to the RAM Cap, until the next rate case when the Utilities would request recovery in base rates.~~

The PUC ~~has~~ approved recovery of ~~a capped portion of~~capital costs under the ~~Schofield generating station through the MPIR mechanism. Hawaiian Electric has filed an~~ MPIR for Schofield ~~of $6.6 million in annual revenues,~~Generating Station, which ~~would adjust~~increased revenues in ~~July through December~~ 2018 by $3.6 million and will be collected in customer bills beginning in June 2019. In February 2019, Hawaiian Electric submitted an MPIR filing of $19.8 million for 2019 (which accrued effective January 1, 2019) that included the 2019 return on project amount (up to the capped amount) in rate base, depreciation and incremental O&M expenses, for collection from June 2020 through May 2021. The PUC has also indicated that it intends to approve MPIR recovery for the West Loch PV Project.

Performance incentive mechanisms. The PUC has ordered the following PIMs.

Service Quality performance ~~incentive mechanisms (PIM), which will be reflected in the annual decoupling filing beginning in 2019.~~incentives are measured on a calendar-year basis. The PIM tariff requires the performance targets, deadbands and the amount of maximum financial incentives used to determine the PIM financial incentive levels for each of the PIMs to be re-determined upon issuance of an interim or final order in a general rate case for each utility.

~~Service Quality performance incentives are measured on a calendar-year basis beginning in 2018.~~

Service Reliability Performance measured by System Average Interruption Duration and Frequency Indexes (penalties only). Target performance is based on each utility’s historical 10-year average performance with a deadband of one standard deviation. The maximum penalty for each performance index is 20 basis points applied to the common equity share of each respective utility’s approved rate base (or maximum penalties of approximately ~~$6.2 million - pending adjustment to~~ $6.7 million ~~as a result of the final orders for the Hawaiian Electric and Hawaii Electric Light rate cases~~ - for both indices in total for the three utilities).

Call Center Performance measured by the percentage of calls answered within 30 seconds. Target performance is based on the annual average performance for each utility for the most recent 8 quarters with a deadband of 3% above and below the target. The maximum penalty or incentive is 8 basis points applied to the common equity share of each respective utility’s approved rate base (or maximum penalties or incentives of approximately ~~$1.2 million - pending adjustment to~~ $1.3 million ~~as a result of the final orders for the Hawaiian Electric and Hawaii Electric Light rate cases~~ - in total for the three utilities).

~~Demand Response measured by~~In 2018, the ~~demand response resources acquired~~Utilities accrued $2.1 million in estimated penalties for service reliability net of call center performance incentives for 2018. As a result of a PUC order denying the exclusion of the impact of a specific project on the service reliability performance, in May 2019, Hawaiian Electric accrued an additional $1.3 million in service reliability penalties related to 2018. The ~~award is equal~~net service quality performance penalties related to 5%2018 were reflected in the 2019 annual decoupling filing and will reduce customer rates in the period June 1, 2019 through May 31, 2020.

In May 2019, the Utilities filed an application for approval to among other things, modify the measurement of performance for the System Average Interruption Duration and Frequency Indexes, adjust the PIM targets, deadbands, and financial incentive levels for each of the ~~total~~PIMs upon issuance of a final order in a general rate case, and adjust the ~~annual maintenance cost~~call center performance PIM level for cost-effective demand response capability contracted with aggregators by December 31, 2018. The maximum award is $0.5 million for the three utilities in total and there are no penalties. This incentive applies to one-time performance in 2018 only.Hawaii Electric Light.

Procurement of low-cost variable renewable resources through the request for proposal process in 2018 is measured by comparison of the procurement price to target prices. The incentive is ~~20%~~a percentage of the savings determined by comparing procured price to a target of 11.5 cents per kilowatt-hour for renewable projects with storage capability and 9.5 cents per kilowatt-hour for energy-only renewable projects. ~~This~~For PPAs filed by December 31, 2018 and subsequently approved by the PUC, the incentive ~~has~~is 20% of the savings, with a cap of $3.5 million for the three utilities in ~~total~~total. For PPAs filed in January, February, and ~~has~~March 2019 and subsequently approved by the PUC, scaled incentives are 15%, 10% and 5%, respectively, of the savings for PPAs, with a cap of $3 million for the three utilities in total. There are no ~~penalty.~~penalties. On March 25, 2019, the PUC approved six contracts, which were filed by December 31, 2018 and qualified for incentives. Half of the incentive is earned upon PUC approval of the contract and the other half is eligible to be earned in the year following the in-service date of the projects. The Utilities accrued $1.7 million in incentives in March 2019, which were reflected in the 2019 annual decoupling filing and will be recovered in rates in the period June 1, 2019 through May 31, 2020.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - continued(Unaudited)

Annual decoupling filings. The net annual incremental amounts approved to be collected (refunded) from June 1, ~~2018~~2019 through May 31, ~~2019~~2020 are as follows:

(in millions) Hawaiian Electric Hawaii Electric Light Maui Electric
2018 Annual incremental RAM adjusted revenues $ 13.8
$ 3.4
$ 2.0
Annual change in accrued RBA balance as of December 31, 2017 (and associated revenue taxes) $ 6.6
$ 0.7
$ 3.2
2017 Tax Act Adjustment $ —
$ —
$ (2.8 )
Net annual incremental amount to be collected under the tariffs $ 20.4
$ 4.1
$ 2.4



(in millions)	Hawaiian Electric			Hawaii Electric Light			Maui Electric			Total
2019 Annual incremental RAM adjusted revenues, net of changes in Tax Act adjustment*	$	6.5		$	1.1		$	5.4		$	13.0
Annual change in accrued RBA balance as of December 31, 2018 (and associated revenue taxes) which incorporates MPIR recovery	(12.2		)	(2.0		)	0.8			(13.4		)
Performance Incentive Mechanisms (net)	(1.3		)	—			(0.4		)	(1.7		)
Net annual incremental amount to be collected (refunded) under the tariffs	$	(7.0	)	$	(0.9	)	$	5.8		$	(2.1	)

* Maui Electric incorporated a $2.8 million adjustment into its 2018 annual decoupling filing to incorporate the impact of the lower corporate income tax rate and the exclusion of the domestic production activities deduction, as a result of theThe 2017 Tax Cuts and Jobs Act (the Tax Act). had two incremental impacts in 2019. First, the 2019 RAM calculation for all of the Utilities incorporated additional amortization of the regulatory liability associated with certain deferred taxes. Secondly, Maui Electric incorporated a $2.8 million adjustment in its 2018 annual decoupling filing related to the Tax ~~adjustments for Hawaiian Electric and Hawaii Electric Light are described~~Act which is not recurring in ~~the discussion below of their respective on-going rate cases.~~2019.

Performance-based regulation proceeding. On April 18, 2018, the PUC issued an order, instituting a proceeding to investigate performance-based regulation (PBR). ~~The PUC intends to provide a forum to collaboratively develop modifications or new components to better align utility and customer interests.~~ The PUC stated that PBR seeks to utilize both revenue adjustment mechanisms and performance mechanisms to more strongly align utilities’ incentives with customer interests.

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~ ~~- continued(Unaudited)~~

The order stated that, in general, the PUC is interested in ratemaking elements and/or mechanisms that result in:

Greater cost control and reduced rate volatility;

Efficient investment and allocation of resources regardless of classification as capital or operating expense;

Fair distribution of risks between utilities and customers; and

Fulfillment of State policy goals.

The PUC envisions that the PBR components through this investigation are those that: (a) target areas of current utility performance that may benefit from improvement; and (b) reward the utility for achieving specific outcomes that are in the public interest and/or penalize the utility for not achieving said outcomes. To that end, through this investigation, the PUC intends to: (1) identify specific areas of utility performance that should be improved; (2) determine appropriate metrics for measuring successful outcomes in those areas; and (3) establish reasonable financial rewards and/or penalties that are sufficient to incent the utility to achieve those outcomes.

~~The order indicated that the~~ proceeding ~~would have~~has two phases. Phase 1 ~~would examine~~examined the current regulatory framework and ~~identify~~identified those areas of utility performance that are deserving of further focus ~~for PBR framework development and/or PIMs~~ in Phase 2. ~~A subsequent order established a procedural process and schedule for Phase I, which~~In May 2019, the PUC ~~anticipated would take approximately nine months.~~

~~On July 10, 2018, the PUC submitted a Staff Report to provide the Parties with~~issued an ~~initial set of proposed~~order concluding Phase 1, which established guiding principles, regulatory goals, and priority outcomes to ~~respond to, or expand upon, and to offer alternatives. Specifically,~~guide the ~~Staff Report: (a) provides an overview of Phase 1~~development of the ~~proceeding; (b) discusses~~PBR mechanisms in Phase 2. The PUC identified the ~~terms and concepts that form~~following guiding principles, which will inform the development of the PBR ~~process framework;~~framework: 1) a customer-centric approach, 2) administrative efficiency to reduce regulatory burdens; and ~~(c) proposes three overarching~~3) utility financial integrity to maintain the utility’s financial health. Priority goals ~~(enhance~~(and priority outcomes) identified by the PUC were: enhance customer experience (affordability, reliability, interconnection experience, and customer engagement), improve utility performance (cost control, DER asset effectiveness, and grid investment efficiency), and advance societal ~~outcomes) along~~outcomes (capital formation, customer equity, greenhouse gas reduction, electrification of transportation, and resilience).

The order also outlined the PUC’s vision of a comprehensive PBR framework that would be further developed in Phase 2. The framework envisioned would include 1) a five-year multi-year rate plan with an index-driven annual revenue adjustment based on an inflation factor, an X-factor which would encompass productivity, a ~~preliminary set of associated outcomes~~Z-factor to ~~help guide PBR evaluation and development.~~

~~On July 23 and 24, 2018, the PUC held a technical workshop on goals and outcomes, attended by the parties~~account for exceptional circumstances not in the ~~proceeding.~~utility’s control and a customer dividend, 2) a symmetric earnings sharing mechanism that would help ensure that utility earnings do not excessively benefit or suffer from external factors outside of utility control or unforeseen results of regulatory mechanisms, 3) off-ramp provisions, 4) continuation of the RBA, MPIR adjustment mechanism, the pension and OPEB tracking mechanism, and other recovery mechanisms, and 5) a portfolio of performance incentive mechanisms for customer engagement and DER asset effectiveness (rewards only), and interconnection experience (both rewards and penalties), in addition to scorecards to track progress against targeted performance levels, shared savings mechanisms to apportion savings to the utility and customers, and reported metrics.

~~Performance-based ratemaking legislation.~~ ~~On April 24, 2018, Senate Bill No. 2939 SD2 was signed into law, which establishes performance metrics that~~The Phase 2 schedule includes working group meetings through the ~~PUC shall consider while establishing performance incentives~~first half of 2020, followed by statements of positions, evidentiary hearing in October 2020 and ~~penalty mechanisms under a performance-based ratemaking model. The law requires that the PUC establish these performance-based ratemaking mechanisms on or before January 1,~~anticipated decision in December 2020. ~~The PUC opened a proceeding on April 18, 2018. See “Performance-based regulation proceeding” above.~~

Most recent rate proceedings.

Hawaiian Electric ~~consolidated 2014 and 2017~~2020 test year rate ~~cases~~case. ~~In June 2014, Hawaiian Electric submitted its 2014 test year rate case filing, stating that it intended to forgo the opportunity to seek a general rate increase in base rates. In December 2016,~~ On April 26, 2019, Hawaiian Electric filed a notice that it intends to file an application ~~with the PUC~~ for a general rate increase and the PUC issued an order consolidating the Hawaiian Electric filings for the 2014 and 2017 test year rate cases. On February 16, 2018, Hawaiian Electric implemented an interim increase of $36.0 million. On April 13, 2018, Hawaiian Electric implemented an additional interim rate adjustment to adjust rates for the impact of the Tax Act.

Onafter June ~~22, 2018, the PUC issued its Final D&O, approving final rate relief of a $37.7 million increase before the Tax Act impact reduction of $38.3 million,~~30, 2019, but not later than September 30, 2019, based on ~~an ROACE of 9.5% and an overall rate of return of 7.57%. The PUC indicated that the ECRC mechanism shall reflect~~ a ~~98/2% risk-sharing split between ratepayers and Hawaiian Electric, with an annual maximum exposure cap of $2.5 million.~~2020 calendar year test period.

Maui Electric consolidated 2015 and 2018 test year rate cases. ~~In December 2014,~~ On August 9, 2018, the PUC approved an interim rate increase based on a stipulated settlement, that included the effects of the 2017 Tax Act, between Maui Electric ~~submitted its 2015 test year rate case filing, proposing no change to its base rates. In August 2017,~~and the Consumer Advocate. On March 18, 2019, the PUC issued ~~an order consolidating~~its D&O that approved, with certain modifications, the ~~Maui Electric filings for~~stipulated settlement, addressed all issues in the ~~2015 and 2018 test year~~ rate ~~cases. In October 2017, Maui Electric filed its 2018 test year rate case application with the PUC for~~case.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - continued(Unaudited)

Revised tariffs reflecting a ~~general rate~~final increase of ~~$30.1~~$12.2 million over revenues at current effective rates (for a 9.3% increase in revenues) based on a 2018 test year and an 8.05% rate of return (which incorporates a ROACE of 10.6% and a capital structure that includes a 56.9% common equity capitalization) on a $473 million rate base. Subsequently, in accordance with a PUC order, on February 26, 2018, Maui Electric filed revised schedules to reflect the following adjustments resulting from the Tax Act in its 2018 test year revenue requirement: (1) $8.1 million income tax expense reduction; (2) $0.5 million annual amortization credit for excess ~~accumulated deferred income tax balances (ADIT); and (3) $7.1 million increase in rate base resulting from the decrease in ADIT for bonus depreciation loss and CIAC taxability.~~

Maui Electric and the Consumer Advocate filed a stipulated settlement letter and the Parties’ joint statement of probable entitlement on June 15, 2018 and July 6, 2018, respectively. The stipulated settlement resolved all issues between the parties,

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~ ~~- continued(Unaudited)~~

except for the narrow issue of whether the ROACE should be reduced from 9.75% by up to 25 basis points based solely on the impact of decoupling, considering current circumstances and relevant precedents. The parties agreed that the ROACE issue shall be addressed based on the information contained in the record without the need for an evidentiary hearing, and further agreed to the use of a 9.50% ROACE for the limited purpose of determining the revenue requirement for the interim order. The joint statement of probable entitlement reflects a general rate increase of $6.4 million over revenues at current effective rates (for a 1.95% increase in revenues) based onapproved 7.43% rate of return (which incorporates a ROACE of 9.5% and a capital structure that includes a 57% common equity capitalization) on a ~~$465~~$454 million rate ~~base.~~base became effective on June 1, 2019. Maui Electric’s ECRC tariff, resulting in the recovery of all fuel and purchased energy through the ECRC and the removal of the recovery of these costs from base rates, will be effective September 1, 2019. The ECRC will reflect a 98%/2% fossil fuel generation cost risk-sharing split between ratepayers and Maui Electric, with an annual maximum increase or decrease to revenues to $0.6 million for the utility.

Hawaii Electric Light 2019 test year rate case. On December 14, 2018, Hawaii Electric Light filed an application for a general rate increase ~~would be $12.5~~for its 2019 test year rate case, requesting an increase of $13.4 million over revenues at current effective rates ~~with~~(for a 3.4% increase in revenues), based on an 8.3% rate of return (which incorporates a ROACE of 10.5%). The procedural schedule for the ~~depreciation rates approved in the depreciation proceeding. In the decision and order issued on July 30, 2018 in the depreciation~~ proceeding the PUC ordered that the effective date of the approved depreciation rates shall coincide with the effective date of interim or final rates in each of the Utilities’ subsequent general rate case proceedings, beginning with Maui Electric’s 2018 test year rate case. The PUC may consider the Parties’ joint statement of probable entitlement in issuing its interim order. The interim D&O is scheduled for August 13, 2018.

~~Hawaii Electric Light 2016 test year rate case. In September 2016, Hawaii Electric Light filed an application with the PUC for a general rate increase.~~

~~In August 2017, the PUC issued an order granting~~includes an interim ~~rate increase~~decision by November 14, 2019, and evidentiary hearings during the week of $9.9 million based on the Stipulated Settlement Letter of Hawaii Electric Light and the Consumer Advocate filed on July 11, 2017 and an ROACE of 9.5% and subject to refund with interest, if it exceeds amounts allowed in a final order. The interim rate increase was implemented on August 31, 2017. On May 1, 2018, Hawaii Electric Light implemented an interim rate reduction of $9.9 million which was primarily to incorporate the effects of the Tax Act.

~~On June 29, 2018, the PUC issued its Final D&O, approving the rates implemented in the interim rate reduction.~~

~~Tax Cuts and Jobs Act impact on utility rates~~. The Utilities began tracking the impact of the Tax Cuts and Jobs Act of 2017 (Tax Act) as of January 1, 2018. Each Utility accrued regulatory liabilities for estimated tax savings from January 1 to the date incorporated in rates. Hawaiian Electric’s rates for the 2017 test year reflected the Tax Act reductions effective April 13, 2018. Hawaii Electric Light’s rates for the 2016 test year reflect the Tax Act reductions effective May 1, 2018. Adjustments to Maui Electric’s current rates for the Tax Act are incorporated in the annual Revenue Balancing Account adjustment which became effective on June 1, 2018. See discussion in “Decoupling” section above.December 16, 2019.

Condensed consolidating financial information. ~~Hawaiian Electric is not required to provide separate~~Condensed consolidating financial statements or other disclosures concerning Hawaii Electric Light and Maui Electric to holders of the 2004 Debentures issued by Hawaii Electric Light and Maui Electric to Trust III since all of their voting capital stock is owned, and their obligations with respect to these securities have been fully and unconditionally guaranteed, on a subordinated basis, by Hawaiian Electric. Consolidating information ~~is provided below~~ for Hawaiian Electric and ~~each of~~ its subsidiaries are presented for the three and six month periods ended June 30, 2019 and 2018, and as of ~~the dates indicated.~~June 30, 2018 and December 31, 2018.

Hawaiian Electric ~~also~~ unconditionally guarantees Hawaii Electric Light’s and Maui Electric’s obligations (a) to the State of Hawaii for the repayment of principal and interest on Special Purpose Revenue Bonds issued for the benefit of Hawaii Electric Light and Maui Electric, (b) under their respective private placement note agreements and the Hawaii Electric Light notes and Maui Electric notes issued thereunder and (c) relating to the trust preferred securities of Trust ~~III.~~III, which were redeemed on May 15, 2019. Hawaiian Electric is also obligated, after the satisfaction of its obligations on its own preferred stock, to make dividend, redemption and liquidation payments on Hawaii Electric Light’s and Maui Electric’s preferred stock if the respective subsidiary is unable to make such payments.

2218

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - continued(Unaudited)

Hawaiian Electric Company, Inc. and Subsidiaries

Condensed Consolidating Statement of Income

Three months ended June 30, ~~2018~~2019



(in thousands)	Hawaiian Electric			Hawaii Electric Light		Maui Electric		Other subsidiaries	Consolidating adjustments		Hawaiian Electric Consolidated
Revenues	$	450,020		89,916		94,050		—	(202	)	$	633,784
Expenses
Fuel oil	125,431			19,941		36,248		—	—		181,620
Purchased power	126,871			24,029		11,954		—	—		162,854
Other operation and maintenance	78,551			18,031		22,678		—	—		119,260
Depreciation	35,868			10,453		7,592		—	—		53,913
Taxes, other than income taxes	42,590			8,706		9,147		—	—		60,443
Total expenses	409,311			81,160		87,619		—	—		578,090
Operating income	40,709			8,756		6,431		—	(202	)	55,694
Allowance for equity funds used during construction	2,614			218		343		—	—		3,175
Equity in earnings of subsidiaries	8,086			—		—		—	(8,086	)	—
Retirement defined benefits expense—other than service costs	(567		)	(105	)	(29	)	—	—		(701		)
Interest expense and other charges, net	(13,390		)	(2,920	)	(2,422	)	—	202		(18,530		)
Allowance for borrowed funds used during construction	962			91		126		—	—		1,179
Income before income taxes	38,414			6,040		4,449		—	(8,086	)	40,817
Income taxes	5,570			1,241		933		—	—		7,744
Net income	32,844			4,799		3,516		—	(8,086	)	33,073
Preferred stock dividends of subsidiaries	—			133		96		—	—		229
Net income attributable to Hawaiian Electric	32,844			4,666		3,420		—	(8,086	)	32,844
Preferred stock dividends of Hawaiian Electric	270			—		—		—	—		270
Net income for common stock	$	32,574		4,666		3,420		—	(8,086	)	$	32,574

(in thousands) Hawaiian Electric Hawaii Electric Light Maui Electric Other subsidiaries Consolidating adjustments Hawaiian Electric
Consolidated
Revenues $ 431,699
89,548
86,938
—
(59 ) $ 608,126
Expenses
Fuel oil 120,007
19,432
32,278
—
—
171,717
Purchased power 121,812
24,664
14,262
—
—
160,738
Other operation and maintenance 76,845
19,015
16,782
—
—
112,642
Depreciation 34,391
10,038
5,932
—
—
50,361
Taxes, other than income taxes 40,951
8,408
8,165
—
—
57,524
Total expenses 394,006
81,557
77,419
—
—
552,982
Operating income 37,693
7,991
9,519
—
(59 ) 55,144
Allowance for equity funds used during construction 2,588
124
271
—
—
2,983
Equity in earnings of subsidiaries 9,080
—
—
—
(9,080 ) —
Retirement defined benefits expense—other than service costs (554 ) (105 ) (329 ) —
—
(988 )
Interest expense and other charges, net (12,930 ) (2,922 ) (2,367 ) —
59
(18,160 )
Allowance for borrowed funds used during construction 1,150
77
138
—
—
1,365
Income before income taxes 37,027
5,165
7,232
—
(9,080 ) 40,344
Income taxes 5,588
1,269
1,819
—
—
8,676
Net income 31,439
3,896
5,413
—
(9,080 ) 31,668
Preferred stock dividends of subsidiaries —
133
96
—
—
229
Net income attributable to Hawaiian Electric 31,439
3,763
5,317
—
(9,080 ) 31,439
Preferred stock dividends of Hawaiian Electric 270
—
—
—
—
270
Net income for common stock $ 31,169
3,763
5,317
—
(9,080 ) $ 31,169

Hawaiian Electric Company, Inc. and Subsidiaries

Condensed Consolidating Statement of Comprehensive Income

Three months ended June 30, ~~2018~~2019



(in thousands)	Hawaiian Electric			Hawaii Electric Light		Maui Electric		Other subsidiaries	Consolidating adjustments		Hawaiian Electric Consolidated
Net income for common stock	$	32,574		4,666		3,420		—	(8,086	)	$	32,574
Other comprehensive income (loss), net of taxes:
Retirement benefit plans:
Adjustment for amortization of prior service credit and net losses recognized during the period in net periodic benefit cost, net of tax benefits	2,321			352		289		—	(641	)	2,321
Reclassification adjustment for impact of D&Os of the PUC included in regulatory assets, net of taxes	(2,298		)	(351	)	(289	)	—	640		(2,298		)
Other comprehensive income, net of taxes	23			1		—		—	(1	)	23
Comprehensive income attributable to common shareholder	$	32,597		4,667		3,420		—	(8,087	)	$	32,597

(in thousands) Hawaiian Electric Hawaii Electric Light Maui Electric
Other
subsidiaries

Consolidating
adjustments
Hawaiian Electric
Consolidated
Net income for common stock $ 31,169
3,763
5,317
—
(9,080 ) $ 31,169
Other comprehensive income (loss), net of taxes:

Retirement benefit plans:

Adjustment for amortization of prior service credit and net losses recognized during the period in net periodic benefit cost, net of tax benefits 4,853
734
649
—
(1,383 ) 4,853
Reclassification adjustment for impact of D&Os of the PUC included in regulatory assets, net of taxes (4,827 ) (733 ) (649 ) —
1,382
(4,827 )
Other comprehensive income, net of taxes 26
1
—
—
(1 ) 26
Comprehensive income attributable to common shareholder $ 31,195
3,764
5,317
—
(9,081 ) $ 31,195

2319

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - continued(Unaudited)

Hawaiian Electric Company, Inc. and Subsidiaries

Condensed Consolidating Statement of Income

Three months ended June 30, ~~2017~~2018



(in thousands)	Hawaiian Electric			Hawaii Electric Light		Maui Electric		Other subsidiaries	Consolidating adjustments		Hawaiian Electric Consolidated
Revenues	$	431,699		89,548		86,938		—	(59	)	$	608,126
Expenses
Fuel oil	120,007			19,432		32,278		—	—		171,717
Purchased power	121,812			24,664		14,262		—	—		160,738
Other operation and maintenance	76,845			19,015		16,782		—	—		112,642
Depreciation	34,391			10,038		5,932		—	—		50,361
Taxes, other than income taxes	40,951			8,408		8,165		—	—		57,524
Total expenses	394,006			81,557		77,419		—	—		552,982
Operating income	37,693			7,991		9,519		—	(59	)	55,144
Allowance for equity funds used during construction	2,588			124		271		—	—		2,983
Equity in earnings of subsidiaries	9,080			—		—		—	(9,080	)	—
Retirement defined benefits expense—other than service costs	(554		)	(105	)	(329	)	—	—		(988		)
Interest expense and other charges, net	(12,930		)	(2,922	)	(2,367	)	—	59		(18,160		)
Allowance for borrowed funds used during construction	1,150			77		138		—	—		1,365
Income before income taxes	37,027			5,165		7,232		—	(9,080	)	40,344
Income taxes	5,588			1,269		1,819		—	—		8,676
Net income	31,439			3,896		5,413		—	(9,080	)	31,668
Preferred stock dividends of subsidiaries	—			133		96		—	—		229
Net income attributable to Hawaiian Electric	31,439			3,763		5,317		—	(9,080	)	31,439
Preferred stock dividends of Hawaiian Electric	270			—		—		—	—		270
Net income for common stock	$	31,169		3,763		5,317		—	(9,080	)	$	31,169

(in thousands) Hawaiian Electric Hawaii Electric Light Maui Electric Other subsidiaries Consolidating adjustments Hawaiian Electric
Consolidated
Revenues $ 394,414
81,710
80,765
—
(14 ) $ 556,875
Expenses
Fuel oil 99,814
14,475
26,970
—
—
141,259
Purchased power 116,458
23,482
13,127
—
—
153,067
Other operation and maintenance 69,659
17,643
17,637
—
—
104,939
Depreciation 32,723
9,686
5,747
—
—
48,156
Taxes, other than income taxes 37,619
7,702
7,651
—
—
52,972
Total expenses 356,273
72,988
71,132
—
—
500,393
Operating income 38,141
8,722
9,633
—
(14 ) 56,482
Allowance for equity funds used during construction 2,659
134
234
—
—
3,027
Equity in earnings of subsidiaries 7,936
—
—
—
(7,936 ) —
Retirement defined benefits expense—other than service costs (1,302 ) 85
(218 ) —
—
(1,435 )
Interest expense and other charges, net (12,562 ) (2,996 ) (2,670 ) —
14
(18,214 )
Allowance for borrowed funds used during construction 988
55
100
—
—
1,143
Income before income taxes 35,860
6,000
7,079
—
(7,936 ) 41,003
Income taxes 9,946
2,235
2,679
—
—
14,860
Net income 25,914
3,765
4,400
—
(7,936 ) 26,143
Preferred stock dividends of subsidiaries —
133
96
—
—
229
Net income attributable to Hawaiian Electric 25,914
3,632
4,304
—
(7,936 ) 25,914
Preferred stock dividends of Hawaiian Electric 270
—
—
—
—
270
Net income for common stock $ 25,644
3,632
4,304
—
(7,936 ) $ 25,644

Hawaiian Electric Company, Inc. and Subsidiaries

Condensed Consolidating Statement of Comprehensive Income

Three months ended June 30, ~~2017~~2018



(in thousands)	Hawaiian Electric			Hawaii Electric Light		Maui Electric		Other subsidiaries	Consolidating adjustments		Hawaiian Electric Consolidated
Net income for common stock	$	31,169		3,763		5,317		—	(9,080	)	$	31,169
Other comprehensive income (loss), net of taxes:
Retirement benefit plans:
Adjustment for amortization of prior service credit and net losses recognized during the period in net periodic benefit cost, net of tax benefits	4,853			734		649		—	(1,383	)	4,853
Reclassification adjustment for impact of D&Os of the PUC included in regulatory assets, net of taxes	(4,827		)	(733	)	(649	)	—	1,382		(4,827		)
Other comprehensive income, net of taxes	26			1		—		—	(1	)	26
Comprehensive income attributable to common shareholder	$	31,195		3,764		5,317		—	(9,081	)	$	31,195

(in thousands) Hawaiian Electric Hawaii Electric Light Maui Electric
Other
subsidiaries

Consolidating
adjustments
Hawaiian Electric
Consolidated
Net income for common stock
$ 25,644
3,632
4,304
—
(7,936 ) $ 25,644
Other comprehensive income (loss), net of taxes:

Retirement benefit plans:

Adjustment for amortization of prior service credit and net losses recognized during the period in net periodic benefit cost, net of tax benefits 3,621
449
344
—
(793 ) 3,621
Reclassification adjustment for impact of D&Os of the PUC included in regulatory assets, net of taxes (3,581 ) (448 ) (343 ) —
791
(3,581 )
Other comprehensive income, net of taxes 40
1
1
—
(2 ) 40
Comprehensive income attributable to common shareholder $ 25,684
3,633
4,305
—
(7,938 ) $ 25,684

2420

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - continued(Unaudited)

Hawaiian Electric Company, Inc. and Subsidiaries

Condensed Consolidating Statement of Income

Six months ended June 30, ~~2018~~2019



(in thousands)	Hawaiian Electric			Hawaii Electric Light		Maui Electric		Other subsidiaries	Consolidating adjustments		Hawaiian Electric Consolidated
Revenues	$	855,689		177,121		179,703		—	(234	)	$	1,212,279
Expenses
Fuel oil	234,353			40,783		67,093		—	—		342,229
Purchased power	232,094			43,206		21,999		—	—		297,299
Other operation and maintenance	159,729			36,767		40,894		—	—		237,390
Depreciation	71,735			20,906		15,219		—	—		107,860
Taxes, other than income taxes	81,221			16,811		17,215		—	—		115,247
Total expenses	779,132			158,473		162,420		—	—		1,100,025
Operating income	76,557			18,648		17,283		—	(234	)	112,254
Allowance for equity funds used during construction	5,061			350		674		—	—		6,085
Equity in earnings of subsidiaries	19,935			—		—		—	(19,935	)	—
Retirement defined benefits expense—other than service costs	(1,134		)	(211	)	(59	)	—	—		(1,404		)
Interest expense and other charges, net	(26,190		)	(5,821	)	(4,739	)	—	234		(36,516		)
Allowance for borrowed funds used during construction	1,864			147		246		—	—		2,257
Income before income taxes	76,093			13,113		13,405		—	(19,935	)	82,676
Income taxes	10,853			3,011		3,114		—	—		16,978
Net income	65,240			10,102		10,291		—	(19,935	)	65,698
Preferred stock dividends of subsidiaries	—			267		191		—	—		458
Net income attributable to Hawaiian Electric	65,240			9,835		10,100		—	(19,935	)	65,240
Preferred stock dividends of Hawaiian Electric	540			—		—		—	—		540
Net income for common stock	$	64,700		9,835		10,100		—	(19,935	)	$	64,700

(in thousands) Hawaiian Electric Hawaii Electric Light Maui Electric Other subsidiaries Consolidating adjustments Hawaiian Electric
Consolidated
Revenues $ 832,879
177,481
168,294
—
(101 ) $ 1,178,553
Expenses
Fuel oil 234,505
37,919
66,261
—
—
338,685
Purchased power 229,182
48,498
22,968
—
—
300,648
Other operation and maintenance 149,785
35,113
35,354
—
—
220,252
Depreciation 68,830
20,093
11,904
—
—
100,827
Taxes, other than income taxes 79,118
16,620
15,890
—
—
111,628
Total expenses 761,420
158,243
152,377
—
—
1,072,040
Operating income 71,459
19,238
15,917
—
(101 ) 106,513
Allowance for equity funds used during construction 5,475
235
567
—
—
6,277
Equity in earnings of subsidiaries 18,405
—
—
—
(18,405 ) —
Retirement defined benefits expense—other than service costs (1,616 ) (208 ) (428 ) —
—
(2,252 )
Interest expense and other charges, net (25,425 ) (5,829 ) (4,701 ) —
101
(35,854 )
Allowance for borrowed funds used during construction 2,388
141
280
—
—
2,809
Income before income taxes 70,686
13,577
11,635
—
(18,405 ) 77,493
Income taxes 11,502
3,446
2,903
—
—
17,851
Net income 59,184
10,131
8,732
—
(18,405 ) 59,642
Preferred stock dividends of subsidiaries —
267
191
—
—
458
Net income attributable to Hawaiian Electric 59,184
9,864
8,541
—
(18,405 ) 59,184
Preferred stock dividends of Hawaiian Electric 540
—
—
—
—
540
Net income for common stock $ 58,644
9,864
8,541
—
(18,405 ) $ 58,644

Hawaiian Electric Company, Inc. and Subsidiaries

Condensed Consolidating Statement of Comprehensive Income

Six months ended June 30, ~~2018~~2019



(in thousands)	Hawaiian Electric			Hawaii Electric Light		Maui Electric		Other subsidiaries	Consolidating adjustments		Hawaiian Electric Consolidated
Net income for common stock	$	64,700		9,835		10,100		—	(19,935	)	$	64,700
Other comprehensive income (loss), net of taxes:
Retirement benefit plans:
Adjustment for amortization of prior service credit and net losses recognized during the period in net periodic benefit cost, net of tax benefits	4,643			704		578		—	(1,282	)	4,643
Reclassification adjustment for impact of D&Os of the PUC included in regulatory assets, net of taxes	(4,596		)	(702	)	(578	)	—	1,280		(4,596		)
Other comprehensive income, net of taxes	47			2		—		—	(2	)	47
Comprehensive income attributable to common shareholder	$	64,747		9,837		10,100		—	(19,937	)	$	64,747

(in thousands) Hawaiian Electric Hawaii Electric Light Maui Electric
Other
subsidiaries

Consolidating
adjustments
Hawaiian Electric
Consolidated
Net income for common stock $ 58,644
9,864
8,541
—
(18,405 ) $ 58,644
Other comprehensive income (loss), net of taxes:

Retirement benefit plans:

Adjustment for amortization of prior service credit and net losses recognized during the period in net periodic benefit cost, net of tax benefits 9,506
1,409
1,211
—
(2,620 ) 9,506
Reclassification adjustment for impact of D&Os of the PUC included in regulatory assets, net of taxes (9,449 ) (1,408 ) (1,211 ) —
2,619
(9,449 )
Other comprehensive income, net of taxes 57
1
—
—
(1 ) 57
Comprehensive income attributable to common shareholder $ 58,701
9,865
8,541
—
(18,406 ) $ 58,701

2521

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - continued(Unaudited)

Hawaiian Electric Company, Inc. and Subsidiaries

Condensed Consolidating Statement of Income

Six months ended June 30, ~~2017~~2018



(in thousands)	Hawaiian Electric			Hawaii Electric Light		Maui Electric		Other subsidiaries	Consolidating adjustments		Hawaiian Electric Consolidated
Revenues	$	832,879		177,481		168,294		—	(101	)	$	1,178,553
Expenses
Fuel oil	234,505			37,919		66,261		—	—		338,685
Purchased power	229,182			48,498		22,968		—	—		300,648
Other operation and maintenance	149,785			35,113		35,354		—	—		220,252
Depreciation	68,830			20,093		11,904		—	—		100,827
Taxes, other than income taxes	79,118			16,620		15,890		—	—		111,628
Total expenses	761,420			158,243		152,377		—	—		1,072,040
Operating income	71,459			19,238		15,917		—	(101	)	106,513
Allowance for equity funds used during construction	5,475			235		567		—	—		6,277
Equity in earnings of subsidiaries	18,405			—		—		—	(18,405	)	—
Retirement defined benefits expense—other than service costs	(1,616		)	(208	)	(428	)	—	—		(2,252		)
Interest expense and other charges, net	(25,425		)	(5,829	)	(4,701	)	—	101		(35,854		)
Allowance for borrowed funds used during construction	2,388			141		280		—	—		2,809
Income before income taxes	70,686			13,577		11,635		—	(18,405	)	77,493
Income taxes	11,502			3,446		2,903		—	—		17,851
Net income	59,184			10,131		8,732		—	(18,405	)	59,642
Preferred stock dividends of subsidiaries	—			267		191		—	—		458
Net income attributable to Hawaiian Electric	59,184			9,864		8,541		—	(18,405	)	59,184
Preferred stock dividends of Hawaiian Electric	540			—		—		—	—		540
Net income for common stock	$	58,644		9,864		8,541		—	(18,405	)	$	58,644

(in thousands) Hawaiian Electric Hawaii Electric Light Maui Electric Other subsidiaries Consolidating adjustments Hawaiian Electric
Consolidated
Revenues $ 757,257
160,692
157,558
—
(21 ) $ 1,075,486
Expenses
Fuel oil 197,815
31,732
55,982
—
—
285,529
Purchased power 216,605
42,071
21,515
—
—
280,191
Other operation and maintenance 135,652
33,242
34,862
—
—
203,756
Depreciation 65,445
19,371
11,556
—
—
96,372
Taxes, other than income taxes 72,659
15,152
14,984
—
—
102,795
Total expenses 688,176
141,568
138,899
—
—
968,643
Operating income 69,081
19,124
18,659
—
(21 ) 106,843
Allowance for equity funds used during construction 4,715
249
462
—
—
5,426
Equity in earnings of subsidiaries 16,539
—
—
—
(16,539 ) —
Retirement defined benefits expense—other than service costs (2,587 ) 168
(439 ) —
—
(2,858 )
Interest expense and other charges, net (24,619 ) (6,000 ) (5,120 ) —
21
(35,718 )
Allowance for borrowed funds used during construction 1,737
100
195
—
—
2,032
Income before income taxes 64,866
13,641
13,757
—
(16,539 ) 75,725
Income taxes 17,217
5,158
5,243
—
—
27,618
Net income 47,649
8,483
8,514
—
(16,539 ) 48,107
Preferred stock dividends of subsidiaries —
267
191
—
—
458
Net income attributable to Hawaiian Electric 47,649
8,216
8,323
—
(16,539 ) 47,649
Preferred stock dividends of Hawaiian Electric 540
—
—
—
—
540
Net income for common stock $ 47,109
8,216
8,323
—
(16,539 ) $ 47,109

Hawaiian Electric Company, Inc. and Subsidiaries

Condensed Consolidating Statement of Comprehensive Income

Six months ended June 30, ~~2017~~2018



(in thousands)	Hawaiian Electric			Hawaii Electric Light		Maui Electric		Other subsidiaries	Consolidating adjustments		Hawaiian Electric Consolidated
Net income for common stock	$	58,644		9,864		8,541		—	(18,405	)	$	58,644
Other comprehensive income (loss), net of taxes:
Retirement benefit plans:
Adjustment for amortization of prior service credit and net losses recognized during the period in net periodic benefit cost, net of tax benefits	9,506			1,409		1,211		—	(2,620	)	9,506
Reclassification adjustment for impact of D&Os of the PUC included in regulatory assets, net of taxes	(9,449		)	(1,408	)	(1,211	)	—	2,619		(9,449		)
Other comprehensive income, net of taxes	57			1		—		—	(1	)	57
Comprehensive income attributable to common shareholder	$	58,701		9,865		8,541		—	(18,406	)	$	58,701

(in thousands) Hawaiian Electric Hawaii Electric Light Maui Electric
Other
subsidiaries

Consolidating
adjustments
Hawaiian Electric
Consolidated
Net income for common stock
$ 47,109
8,216
8,323
—
(16,539 ) $ 47,109
Other comprehensive income (loss), net of taxes:

Derivatives qualifying as cash flow hedges:
Reclassification adjustment to net income, net of taxes 454
—
—
—
—
454
Retirement benefit plans:

Adjustment for amortization of prior service credit and net losses recognized during the period in net periodic benefit cost, net of tax benefits 7,239
952
810
—
(1,762 ) 7,239
Reclassification adjustment for impact of D&Os of the PUC included in regulatory assets, net of taxes (7,194 ) (951 ) (810 ) —
1,761
(7,194 )
Other comprehensive income, net of taxes 499
1
—
—
(1 ) 499
Comprehensive income attributable to common shareholder $ 47,608
8,217
8,323
�� —
(16,540 ) $ 47,608

2622

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - continued(Unaudited)

Hawaiian Electric Company, Inc. and Subsidiaries

Condensed Consolidating Balance Sheet

June 30, ~~2018~~2019



(in thousands)	Hawaiian Electric			Hawaii Electric Light		Maui Electric		Other subsidiaries	Consoli- dating adjustments		Hawaiian Electric Consolidated
Assets
Property, plant and equipment
Utility property, plant and equipment
Land	$	42,183		5,606		3,612		—	—		$	51,401
Plant and equipment	4,558,178			1,268,694		1,112,171		—	—		6,939,043
Less accumulated depreciation	(1,573,545		)	(562,286	)	(514,379	)	—	—		(2,650,210		)
Construction in progress	222,328			17,791		35,193		—	—		275,312
Utility property, plant and equipment, net	3,249,144			729,805		636,597		—	—		4,615,546
Nonutility property, plant and equipment, less accumulated depreciation	5,312			115		1,532		—	—		6,959
Total property, plant and equipment, net	3,254,456			729,920		638,129		—	—		4,622,505
Investment in wholly owned subsidiaries, at equity	584,149			—		—		—	(584,149	)	—
Current assets
Cash and cash equivalents	17,121			3,352		2,787		101	—		23,361
Advances to affiliates	25,300			5,000		—		—	(30,300	)	—
Customer accounts receivable, net	109,401			26,864		25,824		—	—		162,089
Accrued unbilled revenues, net	86,291			15,429		17,428		—	—		119,148
Other accounts receivable, net	17,447			8,526		2,086		—	(19,570	)	8,489
Fuel oil stock, at average cost	100,903			11,376		9,362		—	—		121,641
Materials and supplies, at average cost	33,874			9,611		17,609		—	—		61,094
Prepayments and other	23,804			5,202		2,980		—	—		31,986
Regulatory assets	46,673			2,122		6,830		—	—		55,625
Total current assets	460,814			87,482		84,906		101	(49,870	)	583,433
Other long-term assets
Operating lease right-of-use assets	205,148			1,582		402		—	—		207,132
Regulatory assets	513,738			115,178		103,224		—	—		732,140
Other	74,994			16,677		16,965		—	—		108,636
Total other long-term assets	793,880			133,437		120,591		—	—		1,047,908
Total assets	$	5,093,299		950,839		843,626		101	(634,019	)	$	6,253,846
Capitalization and liabilities
Capitalization
Common stock equity	$	1,971,762		300,619		283,429		101	(584,149	)	$	1,971,762
Cumulative preferred stock—not subject to mandatory redemption	22,293			7,000		5,000		—	—		34,293
Long-term debt, net	937,068			217,845		181,065		—	—		1,335,978
Total capitalization	2,931,123			525,464		469,494		101	(584,149	)	3,342,033
Current liabilities
Current portion of operating lease liabilities	61,941			92		30		—	—		62,063
Current portion of long-term debt	61,946			—		19,993		—	—		81,939
Short-term borrowings from non-affiliates	161,901			—		—		—	—		161,901
Short-term borrowings from affiliate	5,000			—		25,300		—	(30,300	)	—
Accounts payable	121,032			15,059		18,414		—	—		154,505
Interest and preferred dividends payable	16,287			4,225		2,914		—	(81	)	23,345
Taxes accrued	127,413			28,748		27,305		—	—		183,466
Regulatory liabilities	5,687			5,781		3,485		—	—		14,953
Other	53,450			14,842		13,249		—	(19,489	)	62,052
Total current liabilities	614,657			68,747		110,690		—	(49,870	)	744,224
Deferred credits and other liabilities
Operating lease liabilities	142,905			1,490		374		—	—		144,769
Deferred income taxes	271,441			53,564		57,559		—	—		382,564
Regulatory liabilities	660,351			178,018		99,224		—	—		937,593
Unamortized tax credits	60,375			16,514		14,725		—	—		91,614
Defined benefit pension and other postretirement benefit plans liability	362,174			71,830		70,243		—	—		504,247
Other	50,273			35,212		21,317		—	—		106,802
Total deferred credits and other liabilities	1,547,519			356,628		263,442		—	—		2,167,589
Total capitalization and liabilities	$	5,093,299		950,839		843,626		101	(634,019	)	$	6,253,846

(in thousands) Hawaiian Electric Hawaii Electric Light Maui Electric
Other
subsidiaries

Consoli-
dating
adjustments
Hawaiian Electric
Consolidated
Assets

Property, plant and equipment
Utility property, plant and equipment

Land $ 44,023
5,876
3,015
—
—
$ 52,914
Plant and equipment 4,363,195
1,217,147
1,072,640
—
—
6,652,982
Less accumulated depreciation (1,491,505 ) (536,210 ) (506,713 ) —
—
(2,534,428 )
Construction in progress 127,343
10,154
28,111
—
—
165,608
Utility property, plant and equipment, net 3,043,056
696,967
597,053
—
—
4,337,076
Nonutility property, plant and equipment, less accumulated depreciation 5,934
115
1,532
—
—
7,581
Total property, plant and equipment, net 3,048,990
697,082
598,585
—
—
4,344,657
Investment in wholly owned subsidiaries, at equity 561,764
—
—
—
(561,764 ) —
Current assets

Cash and cash equivalents 13,922
4,516
2,321
101
—
20,860
Advances to affiliates 5,600
1,000
—
—
(6,600 ) —
Customer accounts receivable, net 109,285
24,005
23,970
—
—
157,260
Accrued unbilled revenues, net 80,239
15,243
15,357
—
—
110,839
Other accounts receivable, net 10,657
2,561
1,124
—
(7,446 ) 6,896
Fuel oil stock, at average cost 74,485
12,632
19,899
—
—
107,016
Materials and supplies, at average cost 31,077
8,600
18,264
—
—
57,941
Prepayments and other 21,482
6,329
2,943
—
(1,514 ) 29,240
Regulatory assets 88,581
6,353
8,632
—
—
103,566
Total current assets 435,328
81,239
92,510
101
(15,560 ) 593,618
Other long-term assets

Regulatory assets 538,925
118,000
99,919
—
—
756,844
Other 71,486
19,378
17,731
—
—
108,595
Total other long-term assets 610,411
137,378
117,650
—
—
865,439
Total assets $ 4,656,493
915,699
808,745
101
(577,324 ) $ 5,803,714
Capitalization and liabilities

Capitalization

Common stock equity $ 1,852,324
288,865
272,798
101
(561,764 ) $ 1,852,324
Cumulative preferred stock—not subject to mandatory redemption 22,293
7,000
5,000
—
—
34,293
Long-term debt, net 999,915
217,699
200,860
—
—
1,418,474
Total capitalization 2,874,532
513,564
478,658
101
(561,764 ) 3,305,091
Current liabilities

Current portion of long-term debt 29,990
10,996
8,997
—
—
49,983
Short-term borrowings from non-affiliates 91,880
—
—
—
—
91,880
Short-term borrowings from affiliate 1,000
—
5,600
—
(6,600 ) —
Accounts payable 115,806
17,405
20,548
—
—
153,759
Interest and preferred dividends payable 15,743
4,203
2,752
—
(14 ) 22,684
Taxes accrued 120,513
27,353
25,711
—
(1,514 ) 172,063
Regulatory liabilities 2,751
2,499
4,537
—
—
9,787
Other 42,449
10,223
13,963
—
(7,432 ) 59,203
Total current liabilities 420,132
72,679
82,108
—
(15,560 ) 559,359
Deferred credits and other liabilities

Deferred income taxes 277,599
54,505
56,771
—
—
388,875
Regulatory liabilities 627,369
173,305
94,755
—
—
895,429
Unamortized tax credits 60,893
16,463
15,442
—
—
92,798
Defined benefit pension and other postretirement benefit plans liability 330,356
64,175
63,422
—
—
457,953
Other 65,612
21,008
17,589
—
—
104,209
Total deferred credits and other liabilities 1,361,829
329,456
247,979
—
—
1,939,264
Total capitalization and liabilities $ 4,656,493
915,699
808,745
101
(577,324 ) $ 5,803,714

2723

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - continued(Unaudited)

Hawaiian Electric Company, Inc. and Subsidiaries

Condensed Consolidating Balance Sheet

December 31, ~~2017~~2018



(in thousands)	Hawaiian Electric			Hawaii Electric Light		Maui Electric		Other subsidiaries	Consoli- dating adjustments		Hawaiian Electric Consolidated
Assets
Property, plant and equipment
Utility property, plant and equipment
Land	$	40,449		5,606		3,612		—	—		$	49,667
Plant and equipment	4,456,090			1,259,553		1,094,028		—	—		6,809,671
Less accumulated depreciation	(1,523,861		)	(547,848	)	(505,633	)	—	—		(2,577,342		)
Construction in progress	193,677			8,781		30,687		—	—		233,145
Utility property, plant and equipment, net	3,166,355			726,092		622,694		—	—		4,515,141
Nonutility property, plant and equipment, less accumulated depreciation	5,314			115		1,532		—	—		6,961
Total property, plant and equipment, net	3,171,669			726,207		624,226		—	—		4,522,102
Investment in wholly owned subsidiaries, at equity	576,838			—		—		—	(576,838	)	—
Current assets
Cash and cash equivalents	16,732			15,623		3,421		101	—		35,877
Customer accounts receivable, net	125,960			26,483		25,453		—	—		177,896
Accrued unbilled revenues, net	88,060			17,051		16,627		—	—		121,738
Other accounts receivable, net	21,962			3,131		3,033		—	(21,911	)	6,215
Fuel oil stock, at average cost	54,262			11,027		14,646		—	—		79,935
Materials and supplies, at average cost	30,291			7,155		17,758		—	—		55,204
Prepayments and other	23,214			5,212		3,692		—	—		32,118
Regulatory assets	60,093			3,177		7,746		—	—		71,016
Total current assets	420,574			88,859		92,376		101	(21,911	)	579,999
Other long-term assets
Regulatory assets	537,708			120,658		104,044		—	—		762,410
Other	69,749			15,944		17,299		—	—		102,992
Total other long-term assets	607,457			136,602		121,343		—	—		865,402
Total assets	$	4,776,538		951,668		837,945		101	(598,749	)	$	5,967,503
Capitalization and liabilities
Capitalization
Common stock equity	$	1,957,641		295,874		280,863		101	(576,838	)	$	1,957,641
Cumulative preferred stock—not subject to mandatory redemption	22,293			7,000		5,000		—	—		34,293
Long-term debt, net	1,000,137			217,749		200,916		—	—		1,418,802
Total capitalization	2,980,071			520,623		486,779		101	(576,838	)	3,410,736
Current liabilities
Short-term borrowings-non-affiliate	25,000			—		—		—	—		25,000
Accounts payable	126,384			20,045		25,362		—	—		171,791
Interest and preferred dividends payable	16,203			4,203		2,841		—	(32	)	23,215
Taxes accrued	164,747			34,128		34,458		—	—		233,333
Regulatory liabilities	7,699			4,872		5,406		—	—		17,977
Other	46,391			15,077		20,414		—	(21,879	)	60,003
Total current liabilities	386,424			78,325		88,481		—	(21,911	)	531,319
Deferred credits and other liabilities
Deferred income taxes	271,438			54,936		56,823		—	—		383,197
Regulatory liabilities	657,210			176,101		98,948		—	—		932,259
Unamortized tax credits	60,271			16,217		15,034		—	—		91,522
Defined benefit pension and other postretirement benefit plans liability	359,174			73,147		71,338		—	—		503,659
Other	61,950			32,319		20,542		—	—		114,811
Total deferred credits and other liabilities	1,410,043			352,720		262,685		—	—		2,025,448
Total capitalization and liabilities	$	4,776,538		951,668		837,945		101	(598,749	)	$	5,967,503

(in thousands) Hawaiian Electric Hawaii Electric Light Maui Electric
Other
subsidiaries

Consoli-
dating
adjustments
Hawaiian Electric
Consolidated
Assets

Property, plant and equipment
Utility property, plant and equipment

Land $ 43,972
6,189
3,016
—
—
$ 53,177
Plant and equipment 4,140,892
1,206,776
1,053,372
—
—
6,401,040
Less accumulated depreciation (1,451,612 ) (528,024 ) (496,716 ) —
—
(2,476,352 )
Construction in progress 231,571
8,182
23,341
—
—
263,094
Utility property, plant and equipment, net 2,964,823
693,123
583,013
—
—
4,240,959
Nonutility property, plant and equipment, less accumulated depreciation 5,933
115
1,532
—
—
7,580
Total property, plant and equipment, net 2,970,756
693,238
584,545
—
—
4,248,539
Investment in wholly owned subsidiaries, at equity
557,013
—
—
—
(557,013 ) —
Current assets

Cash and cash equivalents 2,059
4,025
6,332
101
—
12,517
Advances to affiliates —
—
12,000
—
(12,000 ) —
Customer accounts receivable, net 86,987
22,510
18,392
—
—
127,889
Accrued unbilled revenues, net 77,176
15,940
13,938
—
—
107,054
Other accounts receivable, net 11,376
2,268
1,210
—
(7,691 ) 7,163
Fuel oil stock, at average cost 64,972
8,698
13,203
—
—
86,873
Materials and supplies, at average cost 28,325
8,041
18,031
—
—
54,397
Prepayments and other 17,928
4,514
2,913
—
—
25,355
Regulatory assets 76,203
5,038
7,149
—
—
88,390
Total current assets 365,026
71,034
93,168
101
(19,691 ) 509,638
Other long-term assets

Regulatory assets 557,464
122,783
100,660
—
—
780,907
Other 60,157
16,311
15,061
—
—
91,529
Total other long-term assets 617,621
139,094
115,721
—
—
872,436
Total assets $ 4,510,416
903,366
793,434
101
(576,704 ) $ 5,630,613
Capitalization and liabilities

Capitalization

Common stock equity $ 1,845,283
286,647
270,265
101
(557,013 ) $ 1,845,283
Cumulative preferred stock—not subject to mandatory redemption 22,293
7,000
5,000
—
—
34,293
Long-term debt, net 924,979
202,701
190,836
—
—
1,318,516
Total capitalization 2,792,555
496,348
466,101
101
(557,013 ) 3,198,092
Current liabilities

Current portion of long-term debt 29,978
10,992
8,993
—
—
49,963
Short-term borrowings-non-affiliate 4,999
—
—
—
—
4,999
Short-term borrowings-affiliate 12,000
—
—
—
(12,000 ) —
Accounts payable 121,328
17,855
20,427
—
—
159,610
Interest and preferred dividends payable 15,677
4,174
2,735
—
(11 ) 22,575
Taxes accrued 133,839
34,950
30,312
—
—
199,101
Regulatory liabilities 607
1,245
1,549
—
—
3,401
Other 43,121
9,818
14,197
—
(7,680 ) 59,456
Total current liabilities 361,549
79,034
78,213
—
(19,691 ) 499,105
Deferred credits and other liabilities

Deferred income taxes 281,223
56,955
55,863
—
—
394,041
Regulatory liabilities 613,329
169,139
94,901
—
—
877,369
Unamortized tax credits 59,039
16,167
15,163
—
—
90,369
Defined benefit pension and other postretirement benefit plans liability 340,983
66,447
65,518
—
—
472,948
Other 61,738
19,276
17,675
—
—
98,689
Total deferred credits and other liabilities 1,356,312
327,984
249,120
—
—
1,933,416
Total capitalization and liabilities $ 4,510,416
903,366
793,434
101
(576,704 ) $ 5,630,613

2824

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - continued(Unaudited)

Hawaiian Electric Company, Inc. and Subsidiaries

Condensed Consolidating Statement of Changes in Common Stock Equity

Six months ended June 30, ~~2018~~2019



(in thousands)	Hawaiian Electric			Hawaii Electric Light		Maui Electric		Other subsidiaries	Consolidating adjustments		Hawaiian Electric Consolidated
Balance, December 31, 2018	$	1,957,641		295,874		280,863		101	(576,838	)	$	1,957,641
Net income for common stock	32,126			5,169		6,680		—	(11,849	)	32,126
Other comprehensive income, net of taxes	24			1		—		—	(1	)	24
Common stock dividends	(25,313		)	(2,545	)	(3,767	)	—	6,312		(25,313		)
Common stock issuance expenses	—			(2	)	—		—	2		—
Balance, March 31, 2019	1,964,478			298,497		283,776		101	(582,374	)	1,964,478
Net income for common stock	32,574			4,666		3,420		—	(8,086	)	32,574
Other comprehensive income, net of taxes	23			1		—		—	(1	)	23
Common stock dividends	(25,313		)	(2,545	)	(3,767	)	—	6,312		(25,313		)
Balance, June 30, 2019	$	1,971,762		300,619		283,429		101	(584,149	)	$	1,971,762

(in thousands) Hawaiian Electric Hawaii Electric Light Maui Electric
Other
subsidiaries

Consolidating
adjustments
Hawaiian Electric
Consolidated
Balance, December 31, 2017 $ 1,845,283
286,647
270,265
101
(557,013 ) $ 1,845,283
Net income for common stock 58,644
9,864
8,541
—
(18,405 ) 58,644
Other comprehensive income, net of taxes 57
1
—
—
(1 ) 57
Common stock dividends (51,652 ) (7,644 ) (6,010 ) —
13,654
(51,652 )
Common stock issuance expenses (8 ) (3 ) 2
—
1
(8 )
Balance, June 30, 2018 $ 1,852,324
288,865
272,798
101
(561,764 ) $ 1,852,324

Hawaiian Electric Company, Inc. and Subsidiaries

Condensed Consolidating Statement of Changes in Common Stock Equity

Six months ended June 30, ~~2017~~2018



(in thousands)	Hawaiian Electric			Hawaii Electric Light		Maui Electric		Other subsidiaries	Consolidating adjustments		Hawaiian Electric Consolidated
Balance, December 31, 2017	$	1,845,283		286,647		270,265		101	(557,013	)	$	1,845,283
Net income for common stock	27,475			6,101		3,224		—	(9,325	)	27,475
Other comprehensive income, net of taxes	31			—		—		—	—		31
Common stock dividends	(25,826		)	(3,821	)	(3,006	)	—	6,827		(25,826		)
Common stock issuance expenses	(8		)	—		—		—	—		(8		)
Balance, March 31, 2018	1,846,955			288,927		270,483		101	(559,511	)	1,846,955
Net income for common stock	31,169			3,763		5,317		—	(9,080	)	31,169
Other comprehensive income, net of taxes	26			1		—		—	(1	)	26
Common stock dividends	(25,826		)	(3,823	)	(3,004	)	—	6,827		(25,826		)
Common stock issuance expenses	—			(3	)	2		—	1		—
Balance, June 30, 2018	$	1,852,324		288,865		272,798		101	(561,764	)	$	1,852,324

(in thousands) Hawaiian Electric Hawaii Electric Light Maui Electric
Other
subsidiaries

Consolidating
adjustments
Hawaiian Electric
Consolidated
Balance, December 31, 2016 $ 1,799,787
291,291
259,554
101
(550,946 ) $ 1,799,787
Net income for common stock 47,109
8,216
8,323
—
(16,539 ) 47,109
Other comprehensive income, net of taxes 499
1
—
—
(1 ) 499
Common stock dividends (43,884 ) (7,748 ) (5,973 ) —
13,721
(43,884 )
Common stock issuance expenses (5 ) —
(1 ) —
1
(5 )
Balance, June 30, 2017 $ 1,803,506
291,760
261,903
101
(553,764 ) $ 1,803,506

2925

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - continued(Unaudited)

Hawaiian Electric Company, Inc. and Subsidiaries

Condensed Consolidating Statement of Cash Flows

Six months ended June 30, ~~2018~~2019



(in thousands)	Hawaiian Electric			Hawaii Electric Light		Maui Electric		Other subsidiaries	Consolidating adjustments		Hawaiian Electric Consolidated
Cash flows from operating activities
Net income	$	65,240		10,102		10,291		—	(19,935	)	$	65,698
Adjustments to reconcile net income to net cash provided by operating activities:
Equity in earnings of subsidiaries	(19,972		)	—		—		—	19,935		(37		)
Common stock dividends received from subsidiaries	12,661			—		—		—	(12,624	)	37
Depreciation of property, plant and equipment	71,735			20,906		15,219		—	—		107,860
Other amortization	11,444			2,142		75		—	—		13,661
Deferred income taxes	(5,354		)	(1,554	)	297		—	—		(6,611		)
Allowance for equity funds used during construction	(5,061		)	(350	)	(674	)	—	—		(6,085		)
Other	(2,494		)	(292	)	(767	)	—	—		(3,553		)
Changes in assets and liabilities:
Decrease (increase) in accounts receivable	19,969			(6,446	)	(1,188	)	—	(2,341	)	9,994
Decrease (increase) in accrued unbilled revenues	1,769			1,622		(801	)	—	—		2,590
Decrease (increase) in fuel oil stock	(46,641		)	(349	)	5,284		—	—		(41,706		)
Decrease (increase) in materials and supplies	(3,583		)	(2,456	)	149		—	—		(5,890		)
Decrease (increase) in regulatory assets	24,318			2,288		(1,214	)	—	—		25,392
Increase (decrease) in accounts payable	5,804			(3,454	)	(2,395	)	—	—		(45		)
Change in prepaid and accrued income taxes, tax credits and revenue taxes	(34,328		)	(5,111	)	(6,346	)	—	—		(45,785		)
Decrease in defined benefit pension and other postretirement benefit plans liability	(1,205		)	(377	)	(317	)	—	—		(1,899		)
Change in other assets and liabilities	(9,875		)	(265	)	(5,006	)	—	2,341		(12,805		)
Net cash provided by operating activities	84,427			16,406		12,607		—	(12,624	)	100,816
Cash flows from investing activities
Capital expenditures	(150,945		)	(18,083	)	(30,868	)	—	—		(199,896		)
Advances to affiliates	(25,300		)	(5,000	)	—		—	30,300		—
Other	2,821			(280	)	(31	)	—	—		2,510
Net cash used in investing activities	(173,424		)	(23,363	)	(30,899	)	—	30,300		(197,386		)
Cash flows from financing activities
Common stock dividends	(50,626		)	(5,090	)	(7,534	)	—	12,624		(50,626		)
Preferred stock dividends of Hawaiian Electric and subsidiaries	(540		)	(267	)	(191	)	—	—		(998		)
Proceeds from issuance of short-term debt	25,000			—		—		—	—		25,000
Proceeds from issuance of long-term debt	30,000			10,000		10,000		—	—		50,000
Repayment of long-term debt	(31,546		)	(10,000	)	(10,000	)	—	—		(51,546		)
Increase (decrease) in short-term borrowings from non-affiliates and affiliate with original maturities of three months or less	116,901			—		25,300		—	(30,300	)	111,901
Other	197			43		83		—	—		323
Net cash provided by (used in) financing activities	89,386			(5,314	)	17,658		—	(17,676	)	84,054
Net increase (decrease) in cash and cash equivalents	389			(12,271	)	(634	)	—	—		(12,516		)
Cash and cash equivalents, beginning of period	16,732			15,623		3,421		101	—		35,877
Cash and cash equivalents, end of period	$	17,121		3,352		2,787		101	—		$	23,361

(in thousands) Hawaiian Electric Hawaii Electric Light Maui Electric
Other
subsidiaries

Consolidating
adjustments
Hawaiian Electric
Consolidated
Cash flows from operating activities

Net income $ 59,184
10,131
8,732
—
(18,405 ) $ 59,642
Adjustments to reconcile net income to net cash provided by operating activities:

Equity in earnings of subsidiaries (18,455 ) —
—
—
18,405
(50 )
Common stock dividends received from subsidiaries 13,679
—
—
—
(13,654 ) 25
Depreciation of property, plant and equipment 68,830
20,093
11,904
—
—
100,827
Other amortization 9,200
2,976
845
—
—
13,021
Deferred income taxes (6,708 ) (2,429 ) 794
—
—
(8,343 )
Allowance for equity funds used during construction (5,475 ) (235 ) (567 ) —
—
(6,277 )
Other 1,469
(322 ) (169 ) —
—
978
Changes in assets and liabilities:

Increase in accounts receivable (25,673 ) (2,387 ) (5,763 ) —
(245 ) (34,068 )
Decrease (increase) in accrued unbilled revenues (3,063 ) 697
(1,419 ) —
—
(3,785 )
Increase in fuel oil stock (9,513 ) (3,934 ) (6,696 ) —
—
(20,143 )
Increase in materials and supplies (2,752 ) (559 ) (233 ) —
—
(3,544 )
Increase in regulatory assets (14,728 ) (1,974 ) (2,898 ) —
—
(19,600 )
Increase in accounts payable 13,093
3,096
2,095
—
—
18,284
Change in prepaid and accrued income taxes, tax credits and revenue taxes (15,343 ) (9,952 ) (5,165 ) —
(601 ) (31,061 )
Decrease in defined benefit pension and other postretirement benefit plans liability (1,117 ) (380 ) (464 ) —
—
(1,961 )
Change in other assets and liabilities 1,116
3,173
1,357
—
245
5,891
Net cash provided by operating activities 63,744
17,994
2,353
—
(14,255 ) 69,836
Cash flows from investing activities

Capital expenditures (156,600 ) (26,667 ) (29,953 ) —
—
(213,220 )
Contributions in aid of construction 9,680
2,243
1,650
—
—
13,573
Other 2,241
884
575
—
601
4,301
Advances (to) from affiliates (5,600 ) (1,000 ) 12,000
—
(5,400 ) —
Net cash used in investing activities (150,279 ) (24,540 ) (15,728 ) —
(4,799 ) (195,346 )
Cash flows from financing activities

Common stock dividends (51,652 ) (7,644 ) (6,010 ) —
13,654
(51,652 )
Preferred stock dividends of Hawaiian Electric and subsidiaries (540 ) (267 ) (191 ) —
—
(998 )
Proceeds from issuance of long-term debt 75,000
15,000
10,000
—
—
100,000
Net increase in short-term borrowings from non-affiliates and affiliate with original maturities of three months or less 75,881
—
5,600
—
5,400
86,881
Other (291 ) (52 ) (35 ) —
—
(378 )
Net cash provided by financing activities 98,398
7,037
9,364
—
19,054
133,853
Net increase (decrease) in cash and cash equivalents 11,863
491
(4,011 ) —
—
8,343
Cash and cash equivalents, beginning of period 2,059
4,025
6,332
101
—
12,517
Cash and cash equivalents, end of period $ 13,922
4,516
2,321
101
—
$ 20,860

3026

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - continued(Unaudited)

Hawaiian Electric Company, Inc. and Subsidiaries

Condensed Consolidating Statement of Cash Flows

Six months ended June 30, ~~2017~~2018



(in thousands)	Hawaiian Electric			Hawaii Electric Light		Maui Electric		Other subsidiaries	Consolidating adjustments		Hawaiian Electric Consolidated
Cash flows from operating activities
Net income	$	59,184		10,131		8,732		—	(18,405	)	$	59,642
Adjustments to reconcile net income to net cash provided by operating activities:
Equity in earnings of subsidiaries	(18,455		)	—		—		—	18,405		(50		)
Common stock dividends received from subsidiaries	13,679			—		—		—	(13,654	)	25
Depreciation of property, plant and equipment	68,830			20,093		11,904		—	—		100,827
Other amortization	9,200			2,976		845		—	—		13,021
Deferred income taxes	(6,708		)	(2,429	)	794		—	—		(8,343		)
Allowance for equity funds used during construction	(5,475		)	(235	)	(567	)	—	—		(6,277		)
Other	1,469			(322	)	(169	)	—	—		978
Changes in assets and liabilities:
Increase in accounts receivable	(25,673		)	(2,387	)	(5,763	)	—	(245	)	(34,068		)
Decrease (increase) in accrued unbilled revenues	(3,063		)	697		(1,419	)	—	—		(3,785		)
Increase in fuel oil stock	(9,513		)	(3,934	)	(6,696	)	—	—		(20,143		)
Increase in materials and supplies	(2,752		)	(559	)	(233	)	—	—		(3,544		)
Increase in regulatory assets	(14,728		)	(1,974	)	(2,898	)	—	—		(19,600		)
Increase in accounts payable	13,093			3,096		2,095		—	—		18,284
Change in prepaid and accrued income taxes, tax credits and revenue taxes	(15,343		)	(9,952	)	(5,165	)	—	(601	)	(31,061		)
Decrease in defined benefit pension and other postretirement benefit plans liability	(1,117		)	(380	)	(464	)	—	—		(1,961		)
Change in other assets and liabilities	1,116			3,173		1,357		—	245		5,891
Net cash provided by operating activities	63,744			17,994		2,353		—	(14,255	)	69,836
Cash flows from investing activities
Capital expenditures	(146,920		)	(24,424	)	(28,303	)	—	—		(199,647		)
Advances (to) from affiliates	(5,600		)	(1,000	)	12,000		—	(5,400	)	—
Other	2,241			884		575		—	601		4,301
Net cash used in investing activities	(150,279		)	(24,540	)	(15,728	)	—	(4,799	)	(195,346		)
Cash flows from financing activities
Common stock dividends	(51,652		)	(7,644	)	(6,010	)	—	13,654		(51,652		)
Preferred stock dividends of Hawaiian Electric and subsidiaries	(540		)	(267	)	(191	)	—	—		(998		)
Proceeds from issuance of long-term debt	75,000			15,000		10,000		—	—		100,000
Net increase in short-term borrowings from non-affiliates and affiliate with original maturities of three months or less	75,881			—		5,600		—	5,400		86,881
Other	(291		)	(52	)	(35	)	—	—		(378		)
Net cash provided by financing activities	98,398			7,037		9,364		—	19,054		133,853
Net increase (decrease) in cash and cash equivalents	11,863			491		(4,011	)	—	—		8,343
Cash and cash equivalents, beginning of period	2,059			4,025		6,332		101	—		12,517
Cash and cash equivalents, end of period	$	13,922		4,516		2,321		101	—		$	20,860

(in thousands) Hawaiian Electric Hawaii Electric Light Maui Electric Other
subsidiaries Consolidating
adjustments Hawaiian Electric
Consolidated
Cash flows from operating activities

Net income $ 47,649
8,483
8,514
—
(16,539 ) $ 48,107
Adjustments to reconcile net income to net cash provided by operating activities:

Equity in earnings of subsidiaries (16,589 ) —
—
—
16,539
(50 )
Common stock dividends received from subsidiaries 13,771
—
—
—
(13,721 ) 50
Depreciation of property, plant and equipment 65,445
19,371
11,556
—
—
96,372
Other amortization 1,875
905
1,482
—
—
4,262
Deferred income taxes 15,060
3,590
4,988
—
(39 ) 23,599
Allowance for equity funds used during construction (4,715 ) (249 ) (462 ) —
—
(5,426 )
Other 1,089
699
(173 ) —
—
1,615
Changes in assets and liabilities:
Decrease (increase) in accounts receivable (5,100 ) 1,182
(1,067 ) —
3,256
(1,729 )
Increase in accrued unbilled revenues (8,819 ) (602 ) (2,482 ) —
—
(11,903 )
Decrease (increase) in fuel oil stock (4,250 ) 94
(1,806 ) —
—
(5,962 )
Increase in materials and supplies (788 ) (1,472 ) (1,160 ) —
—
(3,420 )
Decrease (increase) in regulatory assets 11,378
(1,575 ) (1,624 ) —
—
8,179
Increase in accounts payable 33,121
970
5,625
—
—
39,716
Change in prepaid and accrued income taxes, tax credits and revenue taxes (29,430 ) (6,290 ) (4,725 ) —
(465 ) (40,910 )
Increase (decrease) in defined benefit pension and other postretirement benefit plans liability 355
26
(79 ) —
—
302
Change in other assets and liabilities (12,727 ) 129
1,807
—
(3,256 ) (14,047 )
Net cash provided by operating activities 107,325
25,261
20,394
—
(14,225 ) 138,755
Cash flows from investing activities

Capital expenditures (146,721 ) (22,423 ) (21,015 ) —
—
(190,159 )
Contributions in aid of construction 14,078
1,870
1,623
—
—
17,571
Other 4,820
619
307
—
504
6,250
Advances (to) from affiliates —
(600 ) 9,000
—
(8,400 ) —
Net cash used in investing activities (127,823 ) (20,534 ) (10,085 ) —
(7,896 ) (166,338 )
Cash flows from financing activities

Common stock dividends (43,884 ) (7,748 ) (5,973 ) —
13,721
(43,884 )
Preferred stock dividends of Hawaiian Electric and subsidiaries (540 ) (267 ) (191 ) —
—
(998 )
Proceeds from issuance of special purpose revenue bonds 162,000
28,000
75,000
—
—
265,000
Funds transferred for redemption of special purpose revenue bonds (162,000 ) (28,000 ) (75,000 ) —
—
(265,000 )
Net increase in short-term borrowings from non-affiliates and affiliate with original maturities of three months or less 35,590
—
—
—
8,400
43,990
Other (2,068 ) (357 ) (804 ) —
—
(3,229 )
Net cash used in financing activities (10,902 ) (8,372 ) (6,968 ) —
22,121
(4,121 )
Net increase (decrease) in cash and cash equivalents (31,400 ) (3,645 ) 3,341
—
—
(31,704 )
Cash and cash equivalents, beginning of period 61,388
10,749
2,048
101
—
74,286
Cash and cash equivalents, end of period $ 29,988
7,104
5,389
101
—
$ 42,582

3127

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - continued(Unaudited)

Note 4 · Bank segment

Selected financial information

American Savings Bank, F.S.B.

Statements of Income Data



	Three months ended June 30				Six months ended June 30
(in thousands)	2019		2018		2019		2018
Interest and dividend income
Interest and fees on loans	$	58,620	$	54,633	$	116,480	$	107,433
Interest and dividends on investment securities	7,535		8,628		18,163		17,830
Total interest and dividend income	66,155		63,261		134,643		125,263
Interest expense
Interest on deposit liabilities	4,287		3,284		8,539		6,241
Interest on other borrowings	411		393		939		889
Total interest expense	4,698		3,677		9,478		7,130
Net interest income	61,457		59,584		125,165		118,133
Provision for loan losses	7,688		2,763		14,558		6,304
Net interest income after provision for loan losses	53,769		56,821		110,607		111,829
Noninterest income
Fees from other financial services	4,798		4,744		9,360		9,398
Fee income on deposit liabilities	5,004		5,138		10,082		10,327
Fee income on other financial products	1,830		1,675		3,423		3,329
Bank-owned life insurance	2,390		1,133		4,649		2,004
Mortgage banking income	976		617		1,590		1,230
Other income, net	534		536		992		972
Total noninterest income	15,532		13,843		30,096		27,260
Noninterest expense
Compensation and employee benefits	25,750		23,655		51,262		48,095
Occupancy	5,479		4,194		10,149		8,474
Data processing	3,852		3,540		7,590		7,004
Services	2,606		3,028		5,032		6,075
Equipment	2,189		1,874		4,253		3,602
Office supplies, printing and postage	1,663		1,491		3,023		2,998
Marketing	1,323		1,085		2,313		1,730
FDIC insurance	628		727		1,254		1,440
Other expense	4,519		4,556		8,373		8,657
Total noninterest expense	48,009		44,150		93,249		88,075
Income before income taxes	21,292		26,514		47,454		51,014
Income taxes	4,276		5,953		9,599		11,493
Net income	$	17,016	$	20,561	$	37,855	$	39,521

Three months ended June 30 Six months ended June 30
(in thousands) 2018 2017 2018 2017
Interest and dividend income

Interest and fees on loans $ 54,633
$ 52,317
$ 107,433
$ 103,059
Interest and dividends on investment securities 8,628
6,763
17,830
13,743
Total interest and dividend income 63,261
59,080
125,263
116,802
Interest expense

Interest on deposit liabilities 3,284
2,311
6,241
4,414
Interest on other borrowings 393
824
889
1,640
Total interest expense 3,677
3,135
7,130
6,054
Net interest income 59,584
55,945
118,133
110,748
Provision for loan losses 2,763
2,834
6,304
6,741
Net interest income after provision for loan losses 56,821
53,111
111,829
104,007
Noninterest income

Fees from other financial services 4,744
5,810
9,398
11,420
Fee income on deposit liabilities 5,138
5,565
10,327
10,993
Fee income on other financial products 1,675
1,971
3,329
3,837
Bank-owned life insurance 1,133
1,925
2,004
2,908
Mortgage banking income 617
587
1,230
1,376
Other income, net 536
391
972
849
Total noninterest income 13,843
16,249
27,260
31,383
Noninterest expense

Compensation and employee benefits 23,655
24,541
48,095
47,583
Occupancy 4,194
4,185
8,474
8,339
Data processing 3,540
3,207
7,004
6,487
Services 3,028
2,766
6,075
5,126
Equipment 1,874
1,771
3,602
3,519
Office supplies, printing and postage 1,491
1,527
2,998
3,062
Marketing 1,085
839
1,730
1,356
FDIC insurance 727
822
1,440
1,550
Other expense 4,556
4,906
8,657
9,412
Total noninterest expense 44,150
44,564
88,075
86,434
Income before income taxes 26,514
24,796
51,014
48,956
Income taxes 5,953
8,063
11,493
16,410
Net income $ 20,561
$ 16,733
$ 39,521
$ 32,546

3228

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - continued(Unaudited)

Reconciliation to amounts per HEI Condensed Consolidated Statements of Income*:



	Three months ended June 30						Six months ended June 30
(in thousands)	2019			2018			2019			2018
Interest and dividend income	66,155			63,261			$	134,643		$	125,263
Noninterest income	15,532			13,843			30,096			27,260
*Revenues-Bank	81,687			77,104			164,739			152,523
Total interest expense	4,698			3,677			9,478			7,130
Provision for loan losses	7,688			2,763			14,558			6,304
Noninterest expense	48,009			44,150			93,249			88,075
Less: Retirement defined benefits gain (expense)—other than service costs	40			(403		)	80			(790		)
*Expenses-Bank	60,435			50,187			117,365			100,719
*Operating income-Bank	21,252			26,917			47,374			51,804
Add back: Retirement defined benefits (gain) expense—other than service costs	(40		)	403			(80		)	790
Income before income taxes	$	21,292		$	26,514		$	47,454		$	51,014

Three months ended June 30 Six months ended June 30
(in thousands) 2018 2017 2018 2017
Interest and dividend income 63,261
59,080
$ 125,263
$ 116,802
Noninterest income 13,843
16,249
27,260
31,383
*Revenues-Bank 77,104
75,329
152,523
148,185
Total interest expense 3,677
3,135
7,130
6,054
Provision for loan losses 2,763
2,834
6,304
6,741
Noninterest expense 44,150
44,564
88,075
86,434
Less: Retirement defined benefits expense—other than service costs (403 ) (201 ) (790 ) (396 )
*Expenses-Bank 50,187
50,332
100,719
98,833
*Operating income-Bank 26,917
24,997
51,804
49,352
Add back: Retirement defined benefits expense—other than service costs 403
201
790
396
Income before income taxes $ 26,514
$ 24,796
$ 51,014
$ 48,956

American Savings Bank, F.S.B.

Statements of Comprehensive Income Data



	Three months ended June 30					Six months ended June 30
(in thousands)	2019		2018			2019			2018
Net income	$	17,016	$	20,561		$	37,855		$	39,521
Other comprehensive income (loss), net of taxes:
Net unrealized gains (losses) on available-for-sale investment securities:
Net unrealized gains (losses) on available-for-sale investment securities arising during the period, net of (taxes) benefits of $(5,182), $1,592, $(8,637) and $6,459, respectively	14,154		(4,348		)	23,593			(17,645		)
Retirement benefit plans:
Adjustment for amortization of prior service credit and net losses recognized during the period in net periodic benefit cost, net of (taxes) benefits of $44, $133, $(1,122), and $827, respectively	121		366			(3,066		)	1,588
Other comprehensive income (loss), net of taxes	14,275		(3,982		)	20,527			(16,057		)
Comprehensive income	$	31,291	$	16,579		$	58,382		$	23,464

Three months ended June 30 Six months ended June 30
(in thousands) 2018 2017 2018 2017
Net income $ 20,561
$ 16,733
$ 39,521
$ 32,546
Other comprehensive income (loss), net of taxes:

Net unrealized gains (losses) on available-for-sale investment securities:

Net unrealized gains (losses) on available-for-sale investment securities arising during the period, net of tax benefits (taxes) of $1,592, $(1,334), $6,459 and $(1,482), respectively (4,348 ) 2,021
(17,645 ) 2,244
Retirement benefit plans:

Adjustment for amortization of prior service credit and net losses recognized during the period in net periodic benefit cost, net of tax benefits of $133, $133, $827 and $537, respectively 366
202
1,588
814
Other comprehensive income (loss), net of taxes (3,982 ) 2,223
(16,057 ) 3,058
Comprehensive income $ 16,579
$ 18,956
$ 23,464
$ 35,604

3329

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - continued(Unaudited)

American Savings Bank, F.S.B.

Balance Sheets Data


(in thousands)	June 30, 2018						December 31, 2017						June 30, 2019						December 31, 2018
Assets
Cash and due from banks				$	120,189					$	140,934					$	115,214					$	122,059
Interest-bearing deposits				109,230						93,165						52,415						4,225
Investment securities
Available-for-sale, at fair value				1,409,528						1,401,198						1,298,010						1,388,533
Held-to-maturity, at amortized cost (fair value of $61,444 and $44,412, respectively)				62,630						44,515
Held-to-maturity, at amortized cost (fair value of $141,231 and $142,057, respectively)																137,029						141,875
Stock in Federal Home Loan Bank, at cost				10,158						9,706						8,434						9,958
Loans held for investment				4,774,744						4,670,768						5,008,489						4,843,021
Allowance for loan losses				(52,803		)				(53,637		)				(58,425		)				(52,119		)
Net loans				4,721,941						4,617,131						4,950,064						4,790,902
Loans held for sale, at lower of cost or fair value				5,248						11,250						9,196						1,805
Other				462,469						398,570						511,502						486,347
Goodwill				82,190						82,190						82,190						82,190
Total assets				$	6,983,583					$	6,798,659					$	7,164,054					$	7,027,894
Liabilities and shareholder’s equity
Deposit liabilities—noninterest-bearing				$	1,812,348					$	1,760,233					$	1,883,044					$	1,800,727
Deposit liabilities—interest-bearing				4,303,761						4,130,364						4,374,339						4,358,125
Other borrowings				126,930						190,859						111,485						110,040
Other				131,063						110,356						134,162						124,613
Total liabilities				6,374,102						6,191,812						6,503,030						6,393,505
Commitments and contingencies
Common stock				1						1						1						1
Additional paid in capital				346,188						345,018
Additional paid-in capital																348,423						347,170
Retained earnings				310,298						292,957						330,141						325,286
Accumulated other comprehensive loss, net of tax benefits
Net unrealized losses on securities	$	(32,596	)				$	(14,951	)				$	(830	)				$	(24,423	)
Retirement benefit plans	(14,410		)	(47,006		)	(16,178		)	(31,129		)	(16,711		)	(17,541		)	(13,645		)	(38,068		)
Total shareholder’s equity				609,481						606,847						661,024						634,389
Total liabilities and shareholder’s equity				$	6,983,583					$	6,798,659					$	7,164,054					$	7,027,894

Other assets
Bank-owned life insurance				$	150,797					$	148,775					$	151,607					$	151,172
Premises and equipment, net				186,620						136,270						208,956						214,415
Prepaid expenses				4,993						3,961
Accrued interest receivable				19,597						18,724						20,675						20,140
Mortgage-servicing rights				8,509						8,639						8,103						8,062
Low-income housing equity investments				63,033						59,016						71,484						67,626
Real estate acquired in settlement of loans, net				—						133						—						406
Real estate held for sale																9,014						—
Other				28,920						23,052						41,663						24,526
				$	462,469					$	398,570					$	511,502					$	486,347
Other liabilities
Accrued expenses				$	63,734					$	39,312					$	42,129					$	54,084
Federal and state income taxes payable				1,200						3,736						7,176						2,012
Cashier’s checks				28,236						27,000						25,135						26,906
Advance payments by borrowers				10,415						10,245						11,080						10,183
Other				27,478						30,063						48,642						31,428
				$	131,063					$	110,356					$	134,162					$	124,613

3430

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - continued(Unaudited)

Bank-owned life insurance is life insurance purchased by ASB on the lives of certain key employees, with ASB as the beneficiary. The insurance is used to fund employee benefits through tax-free income from increases in the cash value of the policies and insurance proceeds paid to ASB upon an insured’s death.

Other borrowings consisted of securities sold under agreements to repurchase and advances from the Federal Home Loan Bank (FHLB) of $77111 million and ~~$50 million~~,nil, respectively, as of June 30, ~~2018~~2019 and ~~$141~~$65 million and ~~$50~~$45 million, respectively, as of December 31, ~~2017~~2018.

Investment securities. The major components of investment securities were as follows:



	Amortized cost		Gross unrealized gains		Gross unrealized losses			Estimated fair value		Gross unrealized losses
										Less than 12 months						12 months or longer
(dollars in thousands)										Number of issues	Fair value		Amount			Number of issues	Fair value		Amount
June 30, 2019
Available-for-sale
U.S. Treasury and federal agency obligations	$	130,810	$	736	$	(340	)	$	131,206	—	$	—	$	—		8	$	55,125	$	(340	)
Mortgage-backed securities — issued or guaranteed by U.S. Government agencies or sponsored agencies	1,090,729		4,083		(7,325		)	1,087,487		1	1,071		(3		)	113	628,194		(7,322		)
Corporate bonds	49,438		1,713		—			51,151		—	—		—			—	—		—
Mortgage revenue bonds	28,166		—		—			28,166		—	—		—			—	—		—
	$	1,299,143	$	6,532	$	(7,665	)	$	1,298,010	1	$	1,071	$	(3	)	121	$	683,319	$	(7,662	)
Held-to-maturity
Mortgage-backed securities — issued or guaranteed by U.S. Government agencies or sponsored agencies	$	137,029	$	4,202	$	—		$	141,231	—	$	—	$	—		—	$	—	$	—
	$	137,029	$	4,202	$	—		$	141,231	—	$	—	$	—		—	$	—	$	—
December 31, 2018
Available-for-sale
U.S. Treasury and federal agency obligations	$	156,694	$	62	$	(2,407	)	$	154,349	5	$	25,882	$	(208	)	19	$	118,405	$	(2,199	)
Mortgage-backed securities — issued or guaranteed by U.S. Government agencies or sponsored agencies	1,192,169		789		(31,542		)	1,161,416		22	129,011		(1,330		)	145	947,890		(30,212		)
Corporate bonds	49,398		103		(369		)	49,132		6	23,175		(369		)	—	—		—
Mortgage revenue bonds	23,636		—		—			23,636		—	—		—			—	—		—
	$	1,421,897	$	954	$	(34,318	)	$	1,388,533	33	$	178,068	$	(1,907	)	164	$	1,066,295	$	(32,411	)
Held-to-maturity
Mortgage-backed securities — issued or guaranteed by U.S. Government agencies or sponsored agencies	$	141,875	$	1,446	$	(1,264	)	$	142,057	3	$	29,814	$	(400	)	2	$	31,505	$	(864	)
	$	141,875	$	1,446	$	(1,264	)	$	142,057	3	$	29,814	$	(400	)	2	$	31,505	$	(864	)

Amortized cost Gross unrealized gains Gross unrealized losses
Estimated fair
value
Gross unrealized losses
Less than 12 months 12 months or longer
(dollars in thousands) Number of issues
Fair
value
Amount Number of issues
Fair
value
Amount
June 30, 2018

Available-for-sale
U.S. Treasury and federal agency obligations $ 179,986
$ 72
$ (4,125 ) $ 175,933
19
$ 98,578
$ (2,018 ) 9
$ 67,283
$ (2,107 )
Mortgage-related securities- FNMA, FHLMC and GNMA 1,218,313
350
(40,831 ) 1,177,832
81
694,629
(19,345 ) 83
456,218
(21,486 )
Corporate bonds 40,331
23
(18 ) 40,336
4
23,841
(18 ) —
—
—
Mortgage revenue bond 15,427
—
—
15,427
—
—
—
—
—
—
$ 1,454,057
$ 445
$ (44,974 ) $ 1,409,528
104
$ 817,048
$ (21,381 ) 92
$ 523,501
$ (23,593 )
Held-to-maturity
Mortgage-related securities- FNMA, FHLMC and GNMA $ 62,630
$ 41
$ (1,227 ) $ 61,444
3
$ 41,138
$ (1,227 ) —
$ —
$ —
$ 62,630
$ 41
$ (1,227 ) $ 61,444
3
$ 41,138
$ (1,227 ) —
$ —
$ —
December 31, 2017
Available-for-sale
U.S. Treasury and federal agency obligations $ 185,891
$ 438
$ (2,031 ) $ 184,298
15
$ 83,137
$ (825 ) 8
$ 62,296
$ (1,206 )
Mortgage-related securities- FNMA, FHLMC and GNMA 1,220,304
793
(19,624 ) 1,201,473
67
653,635
(6,839 ) 77
459,912
(12,785 )
Mortgage revenue bond 15,427
—
—
15,427
—
—
—
—
—
—
$ 1,421,622
$ 1,231
$ (21,655 ) $ 1,401,198
82
$ 736,772
$ (7,664 ) 85
$ 522,208
$ (13,991 )
Held-to-maturity
Mortgage-related securities- FNMA, FHLMC and GNMA $ 44,515
$ 1
$ (104 ) $ 44,412
2
$ 35,744
$ (104 ) —
$ —
$ —
$ 44,515
$ 1
$ (104 ) $ 44,412
2
$ 35,744
$ (104 ) —
$ —
$ —

ASB does not believe that the investment securities that were in an unrealized loss position at June 30, ~~2018,~~2019, represent an other-than-temporary impairment (OTTI). Total gross unrealized losses were primarily attributable to ~~rising interest rates relative to when~~change in market conditions. On a quarterly basis the investment securities ~~were purchased and not due to the credit quality~~are evaluated for changes in financial condition of the issuer. Based upon ASB’s evaluation, all securities held within the investment ~~securities.~~portfolio continue to be investment grade by one or more agencies. The contractual cash flows of the U.S. Treasury, federal agency obligations and ~~mortgage-related~~agency mortgage-backed securities are backed by the full faith and credit guaranty of the United States government or an agency of the government. ~~The corporate bonds are all investment grade and rated A- or higher.~~ ASB does not intend to sell the securities before the recovery of its amortized cost basis and there have been no adverse changes in the timing of the contractual cash flows for the securities. ASB did not recognize OTTI for the quarters and six months ended June 30, ~~2018~~2019 and ~~2017.~~2018.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - continued(Unaudited)

U.S. Treasury, federal agency obligations, corporate bonds, and ~~the~~ mortgage revenue ~~bond~~bonds have contractual terms to maturity. ~~Mortgage-related~~Mortgage-backed securities have contractual terms to maturity, but require periodic payments to reduce principal. In addition, expected maturities will differ from contractual maturities because borrowers have the right to prepay the underlying mortgages.

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~ ~~- continued(Unaudited)~~

The contractual maturities of investment securities were as follows:



June 30, 2019	Amortized cost		Fair value
(in thousands)
Available-for-sale
Due in one year or less	$	12,062	$	12,076
Due after one year through five years	126,045		127,461
Due after five years through ten years	54,880		55,559
Due after ten years	15,427		15,427
	208,414		210,523
Mortgage-backed securities — issued or guaranteed by U.S. Government agencies or sponsored agencies	1,090,729		1,087,487
Total available-for-sale securities	$	1,299,143	$	1,298,010
Held-to-maturity
Mortgage-backed securities — issued or guaranteed by U.S. Government agencies or sponsored agencies	$	137,029	$	141,231
Total held-to-maturity securities	$	137,029	$	141,231

June 30, 2018 Amortized cost Fair value
(in thousands)
Available-for-sale
Due in one year or less $ 25,005
$ 24,860
Due after one year through five years 105,425
104,020
Due after five years through ten years 77,526
75,563
Due after ten years 27,788
27,253
235,744
231,696
Mortgage-related securities-FNMA, FHLMC and GNMA 1,218,313
1,177,832
Total available-for-sale securities $ 1,454,057
$ 1,409,528
Held-to-maturity
Mortgage-related securities-FNMA, FHLMC and GNMA $ 62,630
$ 61,444
Total held-to-maturity securities $ 62,630
$ 61,444

Proceeds from the sale of available-for-sale securities were nil for both the three and six months ended June 30, ~~2018~~2019 and ~~2017.~~2018. Gross realized gains and losses were nil for both the three and six months ended June 30, ~~2018~~2019 and ~~2017.~~2018.

Loans. The components of loans were summarized as follows:



	June 30, 2019			December 31, 2018
(in thousands)
Real estate:
Residential 1-4 family	$	2,189,976		$	2,143,397
Commercial real estate	790,174			748,398
Home equity line of credit	1,036,985			978,237
Residential land	14,696			13,138
Commercial construction	68,676			92,264
Residential construction	8,165			14,307
Total real estate	4,108,672			3,989,741
Commercial	626,524			587,891
Consumer	272,949			266,002
Total loans	5,008,145			4,843,634
Less: Deferred fees and discounts	344			(613		)
Allowance for loan losses	(58,425		)	(52,119		)
Total loans, net	$	4,950,064		$	4,790,902

June 30, 2018 December 31, 2017
(in thousands)

Real estate:

Residential 1-4 family $ 2,099,950
$ 2,118,047
Commercial real estate 758,835
733,106
Home equity line of credit 938,902
913,052
Residential land 16,032
15,797
Commercial construction 124,421
108,273
Residential construction 14,873
14,910
Total real estate 3,953,013
3,903,185
Commercial 593,596
544,828
Consumer 228,804
223,564
Total loans 4,775,413
4,671,577
Less: Deferred fees and discounts (669 ) (809 )
Allowance for loan losses (52,803 ) (53,637 )
Total loans, net $ 4,721,941
$ 4,617,131

ASB's policy is to require private mortgage insurance on all real estate loans when the loan-to-value ratio of the property exceeds 80% of the lower of the appraised value or purchase price at origination. For non-owner occupied residential properties, the loan-to-value ratio may not exceed 80% of the lower of the appraised value or purchase price at origination. ASB is subject to the risk that the private mortgage insurance company cannot satisfy the bank's claim on policies.

3632

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - continued(Unaudited)

Allowance for loan losses.The allowance for loan losses (balances and changes) and financing receivables were as follows:



(in thousands)	Residential 1-4 family			Commercial real estate			Home equity line of credit			Residential land			Commercial construction			Residential construction			Commercial loans			Consumer loans			Total
Three months ended June 30, 2019
Allowance for loan losses:
Beginning balance	$	1,911		$	14,825		$	6,493		$	425		$	2,843		$	3		$	10,814		$	16,983		$	54,297
Charge-offs	(5		)	—			(19		)	(4		)	—			—			(494		)	(5,102		)	(5,624		)
Recoveries	8			—			4			7			—			—			1,281			764			2,064
Provision	101			986			403			109			(797		)	(1		)	1,472			5,415			7,688
Ending balance	$	2,015		$	15,811		$	6,881		$	537		$	2,046		$	2		$	13,073		$	18,060		$	58,425
Three months ended June 30, 2018
Allowance for loan losses:
Beginning balance	$	2,525		$	15,959		$	7,982		$	674		$	4,361		$	4		$	10,355		$	12,035		$	53,895
Charge-offs	—			—			(144		)	(9		)	—			—			(540		)	(3,888		)	(4,581		)
Recoveries	14			—			13			46			—			—			280			373			726
Provision	400			(661		)	(517		)	(69		)	255			—			66			3,289			2,763
Ending balance	$	2,939		$	15,298		$	7,334		$	642		$	4,616		$	4		$	10,161		$	11,809		$	52,803
Six months ended June 30, 2019
Allowance for loan losses:
Beginning balance	$	1,976		$	14,505		$	6,371		$	479		$	2,790		$	4		$	9,225		$	16,769		$	52,119
Charge-offs	(19		)	—			(19		)	(4		)	—			—			(1,112		)	(10,661		)	(11,815		)
Recoveries	617			—			9			14			—			—			1,461			1,462			3,563
Provision	(559		)	1,306			520			48			(744		)	(2		)	3,499			10,490			14,558
Ending balance	$	2,015		$	15,811		$	6,881		$	537		$	2,046		$	2		$	13,073		$	18,060		$	58,425
June 30, 2019
Ending balance: individually evaluated for impairment	$	904		$	7		$	465		$	—		$	—		$	—		$	4,983		$	501		$	6,860
Ending balance: collectively evaluated for impairment	$	1,111		$	15,804		$	6,416		$	537		$	2,046		$	2		$	8,090		$	17,559		$	51,565
Financing Receivables:
Ending balance	$	2,189,976		$	790,174		$	1,036,985		$	14,696		$	68,676		$	8,165		$	626,524		$	272,949		$	5,008,145
Ending balance: individually evaluated for impairment	$	17,537		$	890		$	13,376		$	2,869		$	—		$	—		$	16,033		$	586		$	51,291
Ending balance: collectively evaluated for impairment	$	2,172,439		$	789,284		$	1,023,609		$	11,827		$	68,676		$	8,165		$	610,491		$	272,363		$	4,956,854
Six months ended June 30, 2018
Allowance for loan losses:
Beginning balance	$	2,902		$	15,796		$	7,522		$	896		$	4,671		$	12		$	10,851		$	10,987		$	53,637
Charge-offs	(31		)	—			(144		)	(17		)	—			—			(1,142		)	(8,120		)	(9,454		)
Recoveries	68			—			27			51			—			—			1,450			720			2,316
Provision	—			(498		)	(71		)	(288		)	(55		)	(8		)	(998		)	8,222			6,304
Ending balance	$	2,939		$	15,298		$	7,334		$	642		$	4,616		$	4		$	10,161		$	11,809		$	52,803
December 31, 2018
Ending balance: individually evaluated for impairment	$	876		$	7		$	701		$	6		$	—		$	—		$	628		$	4		$	2,222
Ending balance: collectively evaluated for impairment	$	1,100		$	14,498		$	5,670		$	473		$	2,790		$	4		$	8,597		$	16,765		$	49,897
Financing Receivables:
Ending balance	$	2,143,397		$	748,398		$	978,237		$	13,138		$	92,264		$	14,307		$	587,891		$	266,002		$	4,843,634
Ending balance: individually evaluated for impairment	$	16,494		$	915		$	14,800		$	2,059		$	—		$	—		$	5,340		$	89		$	39,697
Ending balance: collectively evaluated for impairment	$	2,126,903		$	747,483		$	963,437		$	11,079		$	92,264		$	14,307		$	582,551		$	265,913		$	4,803,937

(in thousands)
Residential
1-4 family

Commercial real
estate
Home
equity line of credit Residential land Commercial construction Residential construction Commercial loans Consumer loans Unallo-cated Total
Three months ended June 30, 2018

Allowance for loan losses:

Beginning balance $ 2,525
$ 15,959
$ 7,982
$ 674
$ 4,361
$ 4
$ 10,355
$ 12,035
$ —
$ 53,895
Charge-offs —
—
(144 ) (9 ) —
—
(540 ) (3,888 ) —
(4,581 )
Recoveries 14
—
13
46
—
—
280
373
—
726
Provision 400
(661 ) (517 ) (69 ) 255
—
66
3,289
—
2,763
Ending balance $ 2,939
$ 15,298
$ 7,334
$ 642
$ 4,616
$ 4
$ 10,161
$ 11,809
$ —
$ 52,803
Three months ended June 30, 2017

Allowance for loan losses:

Beginning balance $ 2,781
$ 16,504
$ 5,417
$ 1,479
$ 7,257
$ 11
$ 14,902
$ 7,646
$ —
$ 55,997
Charge-offs —
—
—
(92 ) —
—
(752 ) (2,390 ) —
(3,234 )
Recoveries 49
—
39
15
—
—
299
357
—
759
Provision 300
2,336
71
(138 ) (2,551 ) (2 ) 103
2,715
—
2,834
Ending balance $ 3,130
$ 18,840
$ 5,527
$ 1,264
$ 4,706
$ 9
$ 14,552
$ 8,328
$ —
$ 56,356
Six months ended June 30, 2018

Allowance for loan losses:

Beginning balance $ 2,902
$ 15,796
$ 7,522
$ 896
$ 4,671
$ 12
$ 10,851
$ 10,987
$ —
$ 53,637
Charge-offs (31 ) —
(144 ) (17 ) —
—
(1,142 ) (8,120 ) —
(9,454 )
Recoveries 68
—
27
51
—
—
1,450
720
—
2,316
Provision —
(498 ) (71 ) (288 ) (55 ) (8 ) (998 ) 8,222
—
6,304
Ending balance $ 2,939
$ 15,298
$ 7,334
$ 642
$ 4,616
$ 4
$ 10,161
$ 11,809
$ —
$ 52,803
June 30, 2018
Ending balance: individually evaluated for impairment $ 1,027
$ 53
$ 1,161
$ 7
$ —
$ —
$ 597
$ 3
$ 2,848
Ending balance: collectively evaluated for impairment $ 1,912
$ 15,245
$ 6,173
$ 635
$ 4,616
$ 4
$ 9,564
$ 11,806
$ —
$ 49,955
Financing Receivables:

Ending balance $ 2,099,950
$ 758,835
$ 938,902
$ 16,032
$ 124,421
$ 14,873
$ 593,596
$ 228,804
$ 4,775,413
Ending balance: individually evaluated for impairment $ 17,605
$ 993
$ 13,849
$ 1,171
$ —
$ —
$ 5,874
$ 91
$ 39,583
Ending balance: collectively evaluated for impairment $ 2,082,345
$ 757,842
$ 925,053
$ 14,861
$ 124,421
$ 14,873
$ 587,722
$ 228,713
$ 4,735,830
Six months ended June 30, 2017

Allowance for loan losses:

Beginning balance $ 2,873
$ 16,004
$ 5,039
$ 1,738
$ 6,449
$ 12
$ 16,618
$ 6,800
$ —
$ 55,533
Charge-offs (6 ) —
(14 ) (92 ) —
—
(2,262 ) (5,200 ) —
(7,574 )
Recoveries 58
—
130
218
—
—
596
654
—
1,656
Provision 205
2,836
372
(600 ) (1,743 ) (3 ) (400 ) 6,074
—
6,741
Ending balance $ 3,130
$ 18,840
$ 5,527
$ 1,264
$ 4,706
$ 9
$ 14,552
$ 8,328
$ —
$ 56,356
December 31, 2017
Ending balance: individually evaluated for impairment $ 1,248
$ 65
$ 647
$ 47
$ —
$ —
$ 694
$ 29
$ 2,730
Ending balance: collectively evaluated for impairment $ 1,654
$ 15,731
$ 6,875
$ 849
$ 4,671
$ 12
$ 10,157
$ 10,958
$ —
$ 50,907
Financing Receivables:

Ending balance $ 2,118,047
$ 733,106
$ 913,052
$ 15,797
$ 108,273
$ 14,910
$ 544,828
$ 223,564
$ 4,671,577
Ending balance: individually evaluated for impairment $ 18,284
$ 1,016
$ 8,188
$ 1,265
$ —
$ —
$ 4,574
$ 66
$ 33,393
Ending balance: collectively evaluated for impairment $ 2,099,763
$ 732,090
$ 904,864
$ 14,532
$ 108,273
$ 14,910
$ 540,254
$ 223,498
$ 4,638,184

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~ ~~- continued(Unaudited)~~

Credit quality. ASB performs an internal loan review and grading on an ongoing basis. The review provides management with periodic information as to the quality of the loan portfolio and effectiveness of its lending policies and procedures. The objectives of the loan review and grading procedures are to identify, in a timely manner, existing or emerging credit trends so that appropriate steps can be initiated to manage risk and avoid or minimize future losses. Loans subject to grading include commercial, commercial real estate and commercial construction loans.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - continued(Unaudited)

Each commercial and commercial real estate loan is assigned an Asset Quality Rating (AQR) reflecting the likelihood of repayment or orderly liquidation of that loan transaction pursuant to regulatory credit classifications: Pass, Special Mention, Substandard, Doubtful and Loss. The AQR is a function of the probability of default model rating, the loss given default and possible non-model factors which impact the ultimate collectability of the loan such as character of the business owner/guarantor, interim period performance, litigation, tax liens and major changes in business and economic conditions. Pass exposures generally are well protected by the current net worth and paying capacity of the obligor or by the value of the asset or underlying collateral. Special Mention loans have potential weaknesses that, if left uncorrected, could jeopardize the liquidation of the debt. Substandard loans have well-defined weaknesses that jeopardize the liquidation of the debt and are characterized by the distinct possibility that the Bank may sustain some loss. An asset classified Doubtful has the weaknesses of those classified Substandard, with the added characteristic that the weaknesses make collection or liquidation in full, on the basis of currently existing facts, conditions, and values, highly questionable and improbable. An asset classified Loss is considered uncollectible and has such little value that its continuance as a bankable asset is not warranted.

The credit risk profile by internally assigned grade for loans was as follows:



	June 30, 2019								December 31, 2018
(in thousands)	Commercial real estate		Commercial construction		Commercial		Total		Commercial real estate		Commercial construction		Commercial		Total
Grade:
Pass	$	703,028	$	66,387	$	570,099	$	1,339,514	$	658,288	$	89,974	$	547,640	$	1,295,902
Special mention	11,012		—		28,263		39,275		32,871		—		11,598		44,469
Substandard	76,134		2,289		19,336		97,759		57,239		2,290		28,653		88,182
Doubtful	—		—		8,826		8,826		—		—		—		—
Loss	—		—		—		—		—		—		—		—
Total	$	790,174	$	68,676	$	626,524	$	1,485,374	$	748,398	$	92,264	$	587,891	$	1,428,553

June 30, 2018 December 31, 2017
(in thousands)
Commercial
real estate

Commercial
construction
Commercial
Commercial
real estate

Commercial
construction
Commercial
Grade:

Pass $ 671,592
$ 99,632
$ 539,168
$ 630,877
$ 83,757
$ 492,942
Special mention 38,424
22,500
32,711
49,347
22,500
27,997
Substandard 48,819
2,289
21,717
52,882
2,016
23,421
Doubtful —
—
—
—
—
468
Loss —
—
—
—
—
—
Total $ 758,835
$ 124,421
$ 593,596
$ 733,106
$ 108,273
$ 544,828

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~ ~~- continued(Unaudited)~~

The credit risk profile based on payment activity for loans was as follows:



(in thousands)	30-59 days past due		60-89 days past due		Greater than 90 days		Total past due		Current		Total financing receivables		Recorded investment> 90 days and accruing
June 30, 2019
Real estate:
Residential 1-4 family	$	4,125	$	661	$	3,763	$	8,549	$	2,181,427	$	2,189,976	$	—
Commercial real estate	—		—		—		—		790,174		790,174		—
Home equity line of credit	1,444		813		1,798		4,055		1,032,930		1,036,985		—
Residential land	—		—		376		376		14,320		14,696		—
Commercial construction	—		—		—		—		68,676		68,676		—
Residential construction	—		—		—		—		8,165		8,165		—
Commercial	410		305		2,264		2,979		623,545		626,524		—
Consumer	4,583		2,536		2,276		9,395		263,554		272,949		—
Total loans	$	10,562	$	4,315	$	10,477	$	25,354	$	4,982,791	$	5,008,145	$	—
December 31, 2018
Real estate:
Residential 1-4 family	$	3,757	$	2,773	$	2,339	$	8,869	$	2,134,528	$	2,143,397	$	—
Commercial real estate	—		—		—		—		748,398		748,398		—
Home equity line of credit	1,139		681		2,720		4,540		973,697		978,237		—
Residential land	9		—		319		328		12,810		13,138		—
Commercial construction	—		—		—		—		92,264		92,264		—
Residential construction	—		—		—		—		14,307		14,307		—
Commercial	315		281		548		1,144		586,747		587,891		—
Consumer	5,220		3,166		2,702		11,088		254,914		266,002		—
Total loans	$	10,440	$	6,901	$	8,628	$	25,969	$	4,817,665	$	4,843,634	$	—

(in thousands)
30-59
days
past due

60-89
days
past due

Greater
than
90 days

Total
past due
Current
Total
financing
receivables

Recorded
investment>
90 days and
accruing
June 30, 2018

Real estate:

Residential 1-4 family $ 2,975
$ 1,348
$ 4,360
$ 8,683
$ 2,091,267
$ 2,099,950
$ —
Commercial real estate —
725
—
725
758,110
758,835
—
Home equity line of credit 2,075
288
2,545
4,908
933,994
938,902
—
Residential land 741
111
631
1,483
14,549
16,032
—
Commercial construction —
—
—
—
124,421
124,421
—
Residential construction —
—
—
—
14,873
14,873
—
Commercial 1,721
491
551
2,763
590,833
593,596
—
Consumer 3,421
2,019
1,579
7,019
221,785
228,804
—
Total loans $ 10,933
$ 4,982
$ 9,666
$ 25,581
$ 4,749,832
$ 4,775,413
$ —
December 31, 2017

Real estate:

Residential 1-4 family $ 1,532
$ 1,715
$ 5,071
$ 8,318
$ 2,109,729
$ 2,118,047
$ —
Commercial real estate —
—
—
—
733,106
733,106
—
Home equity line of credit 425
114
2,051
2,590
910,462
913,052
—
Residential land 23
—
625
648
15,149
15,797
—
Commercial construction —
—
—
—
108,273
108,273
—
Residential construction —
—
—
—
14,910
14,910
—
Commercial 1,825
2,025
730
4,580
540,248
544,828
—
Consumer 3,432
2,159
1,876
7,467
216,097
223,564
—
Total loans $ 7,237
$ 6,013
$ 10,353
$ 23,603
$ 4,647,974
$ 4,671,577
$ —

3934

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - continued(Unaudited)

The credit risk profile based on nonaccrual loans, accruing loans 90 days or more past due and troubled debt restructuring (TDR) loans was as follows:



(in thousands)		June 30, 2019		December 31, 2018
Real estate:
Residential 1-4 family		$	13,087	$	12,037
Commercial real estate		—		—
Home equity line of credit		7,506		6,348
Residential land		818		436
Commercial construction		—		—
Residential construction		—		—
Commercial		13,595		4,278
Consumer	��	4,362		4,196
Total nonaccrual loans		$	39,368	$	27,295
Real estate:
Residential 1-4 family		$	—	$	—
Commercial real estate		—		—
Home equity line of credit		—		—
Residential land		—		—
Commercial construction		—		—
Residential construction		—		—
Commercial		—		—
Consumer		—		—
Total accruing loans 90 days or more past due		$	—	$	—
Real estate:
Residential 1-4 family		$	10,269	$	10,194
Commercial real estate		890		915
Home equity line of credit		11,116		11,597
Residential land		2,402		1,622
Commercial construction		—		—
Residential construction		—		—
Commercial		2,611		1,527
Consumer		59		62
Total troubled debt restructured loans not included above		$	27,347	$	25,917

(in thousands) June 30, 2018 December 31, 2017
Real estate:

Residential 1-4 family $ 13,121
$ 12,598
Commercial real estate —
—
Home equity line of credit 6,051
4,466
Residential land 843
841
Commercial construction —
—
Residential construction —
—
Commercial 4,385
3,069
Consumer 2,820
2,617
  Total nonaccrual loans $ 27,220
$ 23,591
Real estate:
Residential 1-4 family $ —
$ —
Commercial real estate —
—
Home equity line of credit —
—
Residential land —
—
Commercial construction —
—
Residential construction —
—
Commercial —
—
Consumer —
—
     Total accruing loans 90 days or more past due $ —
$ —
Real estate:
Residential 1-4 family $ 10,777
$ 10,982
Commercial real estate 993
1,016
Home equity line of credit 10,255
6,584
Residential land 328
425
Commercial construction —
—
Residential construction —
—
Commercial 1,716
1,741
Consumer 64
66
     Total troubled debt restructured loans not included above $ 24,133
$ 20,814

4035

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - continued(Unaudited)

The total carrying amount and the total unpaid principal balance of impaired loans were as follows:


		June 30, 2018						Three months ended June 30, 2018				Six months ended June 30, 2018					June 30, 2019						Three months ended June 30, 2019				Six months ended June 30, 2019
(in thousands)		Recorded investment		Unpaid principal balance		Related Allowance		Average recorded investment		Interest income recognized*		Average recorded investment		Interest income recognized*			Recorded investment		Unpaid principal balance		Related Allowance		Average recorded investment		Interest income recognized*		Average recorded investment		Interest income recognized*
With no related allowance recorded	With no related allowance recorded															With no related allowance recorded
Real estate:
Residential 1-4 family		$	8,966	$	9,498	$	—	$	8,900	$	50	$	8,699	$	157		$	9,208	$	9,833	$	—	$	8,993	$	87	$	8,492	$	247
Commercial real estate		—		—		—		—		—		—		—			—		—		—		—		—		—		—
Home equity line of credit		2,505		2,803		—		2,374		7		2,037		12			1,787		2,073		—		1,940		54		2,238		66
Residential land		1,141		1,449		—		1,132		5		1,150		10			2,869		3,072		—		2,280		24		2,158		50
Commercial construction		—		—		—		—		—		—		—			—		—		—		—		—		—		—
Residential construction		—		—		—		—		—		—		—			—		—		—		—		—		—		—
Commercial		4,158		5,079		—		3,026		10		2,691		20			4,553		5,774		—		4,626		—		4,299		—
Consumer		33		33		—		15		—		11		—			30		30		—		31		—		31		—
		$	16,803	$	18,862	$	—	$	15,447	$	72	$	14,588	$	199		$	18,447	$	20,782	$	—	$	17,870	$	165	$	17,218	$	363
With an allowance recorded	With an allowance recorded															With an allowance recorded
Real estate:
Residential 1-4 family		$	8,639	$	8,842	$	1,027	$	8,778	$	97	$	8,953	$	190		$	8,329	$	8,382	$	904	$	8,440	$	96	$	8,417	$	179
Commercial real estate		993		993		53		997		10		1,003		21			890		890		7		894		9		900		19
Home equity line of credit		11,344		11,414		1,161		10,420		96		9,080		177			11,589		11,623		465		11,665		152		11,743		282
Residential land		30		30		7		40		1		58		3			—		—		—		79		—		54		—
Commercial construction		—		—		—		—		—		—		—			—		—		—		—		—		—		—
Residential construction		—		—		—		—		—		—		—			—		—		—		—		—		—		—
Commercial		1,716		1,716		597		1,738		30		1,848		66			11,480		11,584		4,983		10,997		30		7,874		56
Consumer		58		58		3		58		1		58		2			556		556		501		288		1		173		2
		$	22,780	$	23,053	$	2,848	$	22,031	$	235	$	21,000	$	459		$	32,844	$	33,035	$	6,860	$	32,363	$	288	$	29,161	$	538
Total
Real estate:
Residential 1-4 family		$	17,605	$	18,340	$	1,027	$	17,678	$	147	$	17,652	$	347		$	17,537	$	18,215	$	904	$	17,433	$	183	$	16,909	$	426
Commercial real estate		993		993		53		997		10		1,003		21			890		890		7		894		9		900		19
Home equity line of credit		13,849		14,217		1,161		12,794		103		11,117		189			13,376		13,696		465		13,605		206		13,981		348
Residential land		1,171		1,479		7		1,172		6		1,208		13			2,869		3,072		—		2,359		24		2,212		50
Commercial construction		—		—		—		—		—		—		—			—		—		—		—		—		—		—
Residential construction		—		—		—		—		—		—		—			—		—		—		—		—		—		—
Commercial		5,874		6,795		597		4,764		40		4,539		86			16,033		17,358		4,983		15,623		30		12,173		56
Consumer		91		91		3		73		1		69		2			586		586		501		319		1		204		2
		$	39,583	$	41,915	$	2,848	$	37,478	$	307	$	35,588	$	658		$	51,291	$	53,817	$	6,860	$	50,233	$	453	$	46,379	$	901



Exact Name of Registrant as	~~Commission~~	~~I.R.S. Employer~~
Specified in Its Charter	Commission File Number	I.R.S. Employer Identification No.
HAWAIIAN ELECTRIC INDUSTRIES, INC.	1-8503	99-0208097
and Principal Subsidiary
HAWAIIAN ELECTRIC COMPANY, INC.	1-4955	99-0040500



Registrant	Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Hawaiian Electric Industries, Inc.	Common Stock, Without Par Value	HE	New York Stock Exchange



Hawaiian Electric Industries, Inc.	Yesx	☒	Noo	☐	Hawaiian Electric Company, Inc.	Yesx	☒	Noo	☐



Hawaiian Electric Industries, Inc.	Yesx	☒	Noo	☐	Hawaiian Electric Company, Inc.	Yesx	☒	Noo	☐



Hawaiian Electric Industries, Inc.				~~Large accelerated filer~~ x :		Hawaiian Electric Company, Inc.:
Large accelerated filero	☒	Smaller reporting company	☐	Large accelerated filer	☐	Smaller reporting company	☐
		Accelerated filero	☐	Emerging growth company	☐	Accelerated filer	☐	Emerging growth company	☐
Non-accelerated filer	☐			Non-accelerated filer	☒				~~Accelerated filer~~ o
		~~Non-accelerated filer~~ o				~~Non-accelerated filer~~ x
		~~(Do not check if a smaller reporting company)~~				~~(Do not check if a smaller reporting company)~~
		~~Smaller reporting company~~ o				~~Smaller reporting company~~ o
		~~Emerging growth company~~ o				~~Emerging growth company~~ o



Hawaiian Electric Industries, Inc.o	☐	Hawaiian Electric Company, Inc.o	☐



Hawaiian Electric Industries, Inc.	Yeso	☐	Nox	☒	Hawaiian Electric Company, Inc.	Yeso	☐	Nox	☒



Class of Common Stock	Outstanding July ~~27, 2018~~26, 2019
Hawaiian Electric Industries, Inc. (Without Par Value)	~~108,879,245~~ 108,972,564	Shares
Hawaiian Electric Company, Inc. ($6-2/3 Par Value)	~~16,142,216~~ 16,751,488	Shares (not publicly traded)



Page No.
ii	Glossary of Terms
iv	Cautionary Note Regarding Forward-Looking Statements

	PART I. FINANCIAL INFORMATION
1	Item 1.	Financial Statements
		Hawaiian Electric Industries, Inc. and Subsidiaries
1		Condensed Consolidated Statements of Income (unaudited) - three and six months ended June 30, ~~2018~~2019 and ~~2017~~2018
2		Condensed Consolidated Statements of Comprehensive Income (unaudited) - three and six months ended June 30, ~~2018~~2019 and ~~2017~~2018
3		Condensed Consolidated Balance Sheets (unaudited) - June 30, ~~2018~~2019 and December 31, ~~2017~~2018
4		Condensed Consolidated Statements of Changes in Shareholders’ Equity (unaudited) - three and six months ended June 30, ~~2018~~2019 and ~~2017~~2018
5		Condensed Consolidated Statements of Cash Flows (unaudited) - six months ended June 30, ~~2018~~2019 and ~~2017~~2018
		Hawaiian Electric Company, Inc. and Subsidiaries
6		Condensed Consolidated Statements of Income (unaudited) - three and six months ended June 30, ~~2018~~2019 and ~~2017~~2018
6		Condensed Consolidated Statements of Comprehensive Income (unaudited) - three and six months ended June 30, ~~2018~~2019 and ~~2017~~2018
7		Condensed Consolidated Balance Sheets (unaudited) - June 30, ~~2018~~2019 and December 31, ~~2017~~2018
8		Condensed Consolidated Statements of Changes in Common Stock Equity (unaudited) - three and six months ended June 30, ~~2018~~2019 and ~~2017~~2018
9		Condensed Consolidated Statements of Cash Flows (unaudited) - six months ended June 30, ~~2018~~2019 and ~~2017~~2018
10		Notes to Condensed Consolidated Financial Statements (unaudited)
6257	Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations
6257		HEI consolidated
6660		Electric Utilities
7869		Bank
8676	Item 3.	Quantitative and Qualitative Disclosures About Market Risk
8777	Item 4.	Controls and Procedures

	PART II.	OTHER INFORMATION
8778	Item 1.	Legal Proceedings
8778	Item 1A.	Risk Factors
8878	Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds
8879	Item 5.	Other Information
8980	Item 6.	Exhibits
9081	Signatures



Terms		Definitions
ADIT		Accumulated deferred income tax balances
AES Hawaii		AES Hawaii, Inc.
AFUDC		Allowance for funds used during construction
AOCI		Accumulated other comprehensive income/(loss)
~~ASC~~		~~Accounting Standards Codification~~
ASB		American Savings Bank, F.S.B., a wholly-owned subsidiary of ASB Hawaii, Inc.
ASB Hawaii		ASB Hawaii, Inc. (formerly American Savings Holdings, Inc.), a wholly owned subsidiary of Hawaiian Electric Industries, Inc. and the parent company of American Savings Bank, F.S.B.
ASC		Accounting Standards Codification
ASU		Accounting Standards Update
CBRE		Community-based renewable energy
CIAC		Contributions in aid of construction
CIP CT-1		Campbell Industrial Park 110 MW combustion turbine No. 1
Company		Hawaiian Electric Industries, Inc. and its direct and indirect subsidiaries, including, without limitation, Hawaiian Electric Company, Inc. and its subsidiaries (listed under Hawaiian Electric); ASB Hawaii, Inc. and its subsidiary, American Savings Bank, F.S.B.; Pacific Current, LLC and its subsidiaries, Hamakua Holdings, LLC (and its subsidiary, Hamakua Energy, LLC) and Mauo Holdings, LLC (and its subsidiary, Mauo, LLC); and The Old Oahu Tug Service, Inc. (formerly Hawaiian Tug & Barge Corp.)~~; and HEI Properties, Inc. (dissolved in 2015 and wound up in 2017)~~
Consumer Advocate		Division of Consumer Advocacy, Department of Commerce and Consumer Affairs of the State of Hawaii
~~CBRE~~		~~Community-based renewable energy~~
~~DER~~		~~Distributed energy resources~~
D&O		Decision and order from the PUC
DER		Distributed energy resources
Dodd-Frank Act		Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010
DOH		Department of Health of the State of Hawaii
DRIP		HEI Dividend Reinvestment and Stock Purchase Plan
ECAC		Energy cost adjustment clause
ECRC		Energy cost recovery clause
EIP		2010 Equity and Incentive Plan, as amended and restated
EPA		Environmental Protection Agency — federal
~~EPS~~		~~Earnings per share~~
ERP/EAM		Enterprise Resource Planning/Enterprise Asset Management
EPS		Earnings per share
EVE		Economic value of equity
Exchange Act		Securities Exchange Act of 1934
FASB		Financial Accounting Standards Board
FDIC		Federal Deposit Insurance Corporation
federal		U.S. Government
FHLB		Federal Home Loan Bank
FHLMC		Federal Home Loan Mortgage Corporation
FNMA		Federal National Mortgage Association
FRB		Federal Reserve Board
GAAP		Accounting principles generally accepted in the United States of America



~~Terms~~		~~Definitions~~
GNMA		Government National Mortgage Association
Hamakua Energy		Hamakua Energy, LLC, an indirect subsidiary of HEI and successor in interest to Hamakua Energy Partners, L.P., an affiliate of Arclight Capital Partners (a Boston-based private equity firm focused on energy infrastructure investments) and successor in interest to Encogen Hawaii, L.P.
Hawaii Electric Light		Hawaii Electric Light Company, Inc., an electric utility subsidiary of Hawaiian Electric Company, Inc.


(dollars in thousands, except par value)	June 30, 2018			December 31, 2017			June 30, 2019			December 31, 2018
Assets
Property, plant and equipment
Utility property, plant and equipment
Land	$	52,914		$	53,177		$	51,401		$	49,667
Plant and equipment	6,652,982			6,401,040			6,939,043			6,809,671
Less accumulated depreciation	(2,534,428		)	(2,476,352		)	(2,650,210		)	(2,577,342		)
Construction in progress	165,608			263,094			275,312			233,145
Utility property, plant and equipment, net	4,337,076			4,240,959			4,615,546			4,515,141
Nonutility property, plant and equipment, less accumulated depreciation of $1,253 as of June 30, 2018 and $1,251 as of December 31, 2017	7,581			7,580
Nonutility property, plant and equipment, less accumulated depreciation of $109 and $1,255 as of June 30, 2019 and December 31, 2018, respectively							6,959			6,961
Total property, plant and equipment, net	4,344,657			4,248,539			4,622,505			4,522,102
Current assets
Cash and cash equivalents	20,860			12,517			23,361			35,877
Customer accounts receivable, net	157,260			127,889			162,089			177,896
Accrued unbilled revenues, net	110,839			107,054			119,148			121,738
Other accounts receivable, net	6,896			7,163			8,489			6,215
Fuel oil stock, at average cost	107,016			86,873			121,641			79,935
Materials and supplies, at average cost	57,941			54,397			61,094			55,204
Prepayments and other	29,240			25,355			31,986			32,118
Regulatory assets	103,566			88,390			55,625			71,016
Total current assets	593,618			509,638			583,433			579,999
Other long-term assets
Operating lease right-of-use assets							207,132			—
Regulatory assets	756,844			780,907			732,140			762,410
Other	108,595			91,529			108,636			102,992
Total other long-term assets	865,439			872,436			1,047,908			865,402
Total assets	$	5,803,714		$	5,630,613		$	6,253,846		$	5,967,503
Capitalization and liabilities
Capitalization
Common stock ($6 2/3 par value, authorized 50,000,000 shares; outstanding 16,142,216 shares at June 30, 2018 and December 31, 2017)	$	107,634		$	107,634
Common stock ($6 2/3 par value, authorized 50,000,000 shares; outstanding 16,751,488 shares at June 30, 2019 and December 31, 2018)							$	111,696		$	111,696
Premium on capital stock	614,667			614,675			681,305			681,305
Retained earnings	1,131,185			1,124,193			1,178,615			1,164,541
Accumulated other comprehensive loss, net of tax benefits	(1,162		)	(1,219		)
Accumulated other comprehensive income, net of taxes-retirement benefit plans							146			99
Common stock equity	1,852,324			1,845,283			1,971,762			1,957,641
Cumulative preferred stock — not subject to mandatory redemption	34,293			34,293			34,293			34,293
Long-term debt, net	1,418,474			1,318,516			1,335,978			1,418,802
Total capitalization	3,305,091			3,198,092			3,342,033			3,410,736
Commitments and contingencies (Note 3)
Current liabilities
Current portion of operating lease liabilities							62,063			—
Current portion of long-term debt	49,983			49,963			81,939			—
Short-term borrowings from non-affiliates	91,880			4,999			161,901			25,000
Accounts payable	153,759			159,610			154,505			171,791
Interest and preferred dividends payable	22,684			22,575			23,345			23,215
Taxes accrued, including revenue taxes	172,063			199,101			183,466			233,333
Regulatory liabilities	9,787			3,401			14,953			17,977
Other	59,203			59,456			62,052			60,003
Total current liabilities	559,359			499,105			744,224			531,319
Deferred credits and other liabilities
Operating lease liabilities							144,769			—
Deferred income taxes	388,875			394,041			382,564			383,197
Regulatory liabilities	895,429			877,369			937,593			932,259
Unamortized tax credits	92,798			90,369			91,614			91,522
Defined benefit pension and other postretirement benefit plans liability	457,953			472,948			504,247			503,659
Other	104,209			98,689			106,802			114,811
Total deferred credits and other liabilities	1,939,264			1,933,416			2,167,589			2,025,448
Total capitalization and liabilities	$	5,803,714		$	5,630,613		$	6,253,846		$	5,967,503



	Three months ended June 30, 2017									Six months ended June 30, 2017
(in thousands)	As previously filed			Adjustment from adoption of ASU No. 2017-07			As currently reported			As previously filed			Adjustment from adoption of ASU No. 2017-07			As currently reported
HEI Condensed Consolidated Income Statement
Expenses
Electric utility	$	501,828		$	(1,435	)	$	500,393		$	971,501		$	(2,858	)	$	968,643
Bank	50,533			(201		)	50,332			99,229			(396		)	98,833
Other	4,024			(270		)	3,754			9,355			(528		)	8,827
Total expenses	556,385			(1,906		)	554,479			1,080,085			(3,782		)	1,076,303
Operating income
Electric utility	55,047			1,435			56,482			103,985			2,858			106,843
Bank	24,796			201			24,997			48,956			396			49,352
Other	(3,947		)	270			(3,677		)	(9,183		)	528			(8,655		)
Total operating income	75,896			1,906			77,802			143,758			3,782			147,540
Retirement defined benefits expense--other than service costs	—			(1,906		)	(1,906		)	—			(3,782		)	(3,782		)
Hawaiian Electric Condensed Consolidated Income Statement
Other operation and maintenance	106,374			(1,435		)	104,939			206,614			(2,858		)	203,756
Total expense	501,828			(1,435		)	500,393			971,501			(2,858		)	968,643
Operating income	55,047			1,435			56,482			103,985			2,858			106,843
Retirement defined benefits expense--other than service costs	—			(1,435		)	(1,435		)	—			(2,858		)	(2,858		)
Hawaiian Electric Condensed Consolidating Income Statement (in Note 3)
Hawaiian Electric (parent only)
Other operation and maintenance	70,961			(1,302		)	69,659			138,239			(2,587		)	135,652
Total expense	357,575			(1,302		)	356,273			690,763			(2,587		)	688,176
Operating income	36,839			1,302			38,141			66,494			2,587			69,081
Retirement defined benefits expense--other than service costs	—			(1,302		)	(1,302		)	—			(2,587		)	(2,587		)
Hawaii Electric Light
Other operation and maintenance	17,558			85			17,643			33,074			168			33,242
Total expense	72,903			85			72,988			141,400			168			141,568
Operating income	8,807			(85		)	8,722			19,292			(168		)	19,124
Retirement defined benefits expense--other than service costs	—			85			85			—			168			168
Maui Electric
Other operation and maintenance	17,855			(218		)	17,637			35,301			(439		)	34,862
Total expense	71,350			(218		)	71,132			139,338			(439		)	138,899
Operating income	9,415			218			9,633			18,220			439			18,659
Retirement defined benefits expense--other than service costs	—			(218		)	(218		)	—			(439		)	(439		)
ASB Statements of Income Data (in Note 4)
Compensation and employee benefits	24,742			(201		)	24,541			47,979			(396		)	47,583
Other expense	4,705			201			4,906			9,016			396			9,412


	Three months ended June 30, 2018											Six months ended June 30, 2018
	Number of contracts		Outstanding recorded investment¹						Net increase in allowance			Number of contracts	Outstanding recorded investment¹						Net increase in allowance
Loans modified as a TDR																			Three months ended June 30, 2019							Six months ended June 30, 2019
(dollars in thousands)	Number of contracts	Number of contracts			Pre-modification			Post-modification			(as of period end)		Number of contracts		Pre-modification			Post-modification			(as of period end)		Number of contracts		Outstanding recorded investment (as of period end)¹			Related allowance (as of period end)		Number of contracts		Outstanding recorded investment (as of period end)¹			Related allowance (as of period end)
Troubled debt restructurings												Number of contracts	Number of contracts
Real estate:		Number of contracts
Residential 1-4 family	—		$	—		$	—		$	—		1	$	339		$	344		$	16		1	$	469		$	154		9	$	1,501		$	161
Commercial real estate	—		—			—			—			—	—			—			—			—	—			—			—	—			—
Home equity line of credit	21		3,338			3,338			554			39	5,508			5,512			942			2	311			59			3	432			83
Residential land	—		—			—			—			1	109			109			—			2	825			—			2	825			—
Commercial construction	—		—			—			—			—	—			—			—			—	—			—			—	—			—
Residential construction	—		—			—			—			—	—			—			—			—	—			—			—	—			—
Commercial	2		43			43			42			7	2,294			2,294			42			2	1,317			133			3	1,507			150
Consumer	—		—			—			—			—	—			—			—			—	—			—			—	—			—
	23		$	3,381		$	3,381		$	596		48	$	8,250		$	8,259		$	1,000		7	$	2,922		$	346		17	$	4,265		$	394

Loans modified as a TDR																						Three months ended June 30, 2018							Six months ended June 30, 2018
(dollars in thousands)																						Number of contracts	Outstanding recorded investment (as of period end)¹			Related allowance (as of period end)			Number of contracts	Outstanding recorded investment (as of period end)¹			Related allowance (as of period end)
Troubled debt restructurings
Real estate:
Residential 1-4 family																						—	$	—		$	—		—	$	—		$	—
Commercial real estate																						—	—			—			—	—			—
Home equity line of credit																						20	3,260			578			37	5,293			953
Residential land																						—	—			—			—	—			—
Commercial construction																						—	—			—			—	—			—
Residential construction																						—	—			—			—	—			—
Commercial																						2	43			43			7	2,200			43
Consumer																						—	—			—			—	—			—
																						22	$	3,303		$	621		44	$	7,493		$	996


¹	~~The reported balances include loans that became TDR during the period, and were fully paid-off, charged-off, or sold prior to period end.~~


¹	The period end balances reflect all paydowns and charge-offs since the modification period. TDRs fully paid off, charged-off, or foreclosed upon by period end are not included.



(in thousands)	Gross carrying amount		Accumulated amortization			Valuation allowance		Net carrying amount
June 30, 2019	$	19,418	$	(11,315	)	$	—	$	8,103
December 31, 2018	18,556		(10,494		)	—		8,062



(in thousands)	Gross carrying amount¹		Accumulated amortization¹			Valuation allowance		Net carrying amount
June 30, 2018	$	18,238	$	(9,729	)	$	—	$	8,509
December 31, 2017	17,511		(8,872		)	—		8,639


(in millions)	Gross amount of recognized liabilities		Gross amount offset in the Balance Sheet		Net amount of liabilities presented in the Balance Sheet		Gross amount of recognized liabilities		Gross amount offset in the Balance Sheets		Net amount of liabilities presented in the Balance Sheets
Repurchase agreements
June 30, 2018	$	77	$	—	$	77
December 31, 2017	141		—		141
June 30, 2019							$	111	$	—	$	111
December 31, 2018							65		—		65



	Gross amount not offset in the Balance Sheets
(in millions)	Net amount of liabilities presented in the Balance Sheets		Financial instruments		Cash collateral pledged
Commercial account holders
June 30, 2019	$	111	$	128	$	—
December 31, 2018	65		92		—


Derivative Financial Instruments Not Designated as Hedging Instruments ¹	June 30, 2018				December 31, 2017				June 30, 2019				December 31, 2018
(in thousands)	Asset derivatives		Liability derivatives		Asset derivatives		Liability derivatives		Asset derivatives		Liability derivatives		Asset derivatives		Liability derivatives
Interest rate lock commitments	$	248	$	—	$	133	$	2	$	473	$	—	$	91	$	—
Forward commitments	2		64		4		28		10		125		—		43
	$	250	$	64	$	137	$	30	$	483	$	125	$	91	$	43



Derivative Financial Instruments Not Designated as Hedging Instruments	Location of net gains (losses) recognized in the Statements of Income	Three months ended June 30					Six months ended June 30
(in thousands)		2019		2018			2019			2018
Interest rate lock commitments	Mortgage banking income	$	11	$	(7	)	$	382		$	117
Forward commitments	Mortgage banking income	46		(2		)	(72		)	(38		)
		$	57	$	(9	)	$	310		$	79



	Series 2018A	Series 2018B	Series 2018C
Aggregate principal amount	$67.5 million	$17.5 million	$15 million
Fixed coupon interest rate	4.38%	4.53%	4.72%
Maturity date	May 30, 2028	March 30, 2033	May 30, 2048
Principal amount by company:
Hawaiian Electric	$52 million	$12.5 million	$10.5 million
Hawaii Electric Light	$9 million	$3 million	$3 million
Maui Electric	$6.5 million	$2 million	$1.5 million



	Series 2019A
Aggregate principal amount	$50 million
Fixed coupon interest rate	4.21%
Maturity date	May 15, 2034
Principal amount by company:
Hawaiian Electric	$30 million
Hawaii Electric Light	$10 million
Maui Electric	$10 million



	2004 Junior subordinated deferrable interest debentures redeemed
Aggregate principal amount	$51.5 million
Fixed coupon interest rate	6.50%
Maturity date	May 15, 2034
Principal amount by company:
Hawaiian Electric	$31.5 million
Hawaii Electric Light	$10 million
Maui Electric	$10 million



	Refunding Series 2019 Special Purpose Revenue Bonds
Aggregate principal amount	$150 million
Fixed coupon interest rate	3.20%
Maturity date	July 1, 2039
DBF loaned the proceeds to:
Hawaiian Electric	$90 million
Hawaii Electric Light	$60 million



	Series 2009 Special Purpose Revenue Bonds Redeemed
Aggregate principal amount	$150 million
Fixed coupon interest rate	6.50%
Maturity date	July 1, 2039
Principal amount by company:
Hawaiian Electric	$90 million
Hawaii Electric Light	$60 million



	HEI consolidated						Hawaiian Electric consolidated
Three months ended June 30, 2019 (in thousands)	Other leases		PPAs classified as leases		Total		Other leases		PPAs classified as leases		Total
Operating lease cost	$	3,056	$	15,478	$	18,534	$	1,523	$	15,478	$	17,001
Variable lease cost	3,396		43,985		47,381		2,764		43,985		46,749
Total lease cost	$	6,452	$	59,463	$	65,915	$	4,287	$	59,463	$	63,750
Other information
Cash paid for amounts included in the measurement of lease liabilities—Operating cash flows from operating leases	$	2,593	$	14,329	$	16,922	$	1,411	$	14,329	$	15,740



	HEI consolidated									Hawaiian Electric consolidated
Six months ended June 30, 2019 (in thousands)	Other leases			PPAs classified as leases			Total			Other leases			PPAs classified as leases			Total
Operating lease cost	$	5,740		$	30,956		$	36,696		$	3,009		$	30,956		$	33,965
Variable lease cost	6,200			85,265			91,465			4,850			85,265			90,115
Total lease cost	$	11,940		$	116,221		$	128,161		$	7,859		$	116,221		$	124,080
Other information
Cash paid for amounts included in the measurement of lease liabilities—Operating cash flows from operating leases	$	5,179		$	29,367		$	34,546		$	2,808		$	29,367		$	32,175
Weighted-average remaining lease term—operating leases (in years)	6.6			3.3			3.8			4.8			3.3			3.4
Weighted-average discount rate—operating leases	3.70		%	4.08		%	4.01		%	4.17		%	4.08		%	4.09		%



	Amount reclassified from AOCI
	Three months ended June 30						Six months ended June 30						Affected line item in the
(in thousands)	2019			2018			2019			2018			Statements of Income / Balance Sheets
HEI consolidated
Retirement benefit plans:
Amortization of prior service credit and net losses recognized during the period in net periodic benefit cost	$	2,503		$	5,350		$	5,006		$	10,496		See Note 9 for additional details
Impact of D&Os of the PUC included in regulatory assets	(2,298		)	(4,827		)	(4,596		)	(9,449		)	See Note 9 for additional details
Total reclassifications	$	205		$	523		$	410		$	1,047
Hawaiian Electric consolidated
Retirement benefit plans:
Amortization of prior service credit and net losses recognized during the period in net periodic benefit cost	$	2,321		$	4,853		$	4,643		$	9,506		See Note 9 for additional details
Impact of D&Os of the PUC included in regulatory assets	(2,298		)	(4,827		)	(4,596		)	(9,449		)	See Note 9 for additional details
Total reclassifications	$	23		$	26		$	47		$	57



	Three months ended June 30												Six months ended June 30
	Pension benefits						Other benefits						Pension benefits						Other benefits
(in thousands)	2019			2018			2019			2018			2019			2018			2019			2018
HEI consolidated
Service cost	$	15,382		$	17,428		$	542		$	692		$	30,764		$	34,541		$	1,083		$	1,361
Interest cost	21,033			19,459			1,997			2,030			42,066			38,693			3,994			3,961
Expected return on plan assets	(27,999		)	(27,224		)	(3,086		)	(3,267		)	(55,997		)	(54,478		)	(6,172		)	(6,459		)
Amortization of net prior service gain	(11		)	(11		)	(452		)	(451		)	(22		)	(21		)	(904		)	(903		)
Amortization of net actuarial (gains) losses	3,839			7,634			(4		)	48			7,678			15,029			(7		)	46
Net periodic pension/benefit cost (return)	12,244			17,286			(1,003		)	(948		)	24,489			33,764			(2,006		)	(1,994		)
Impact of PUC D&Os	12,278			7,179			811			1,024			24,557			9,836			1,622			2,095
Net periodic pension/benefit cost (adjusted for impact of PUC D&Os)	$	24,522		$	24,465		$	(192	)	$	76		$	49,046		$	43,600		$	(384	)	$	101
Hawaiian Electric consolidated
Service cost	$	15,001		$	17,007		$	538		$	688		$	30,002		$	33,680		$	1,075		$	1,352
Interest cost	19,414			17,937			1,918			1,955			38,828			35,647			3,835			3,814
Expected return on plan assets	(26,164		)	(25,577		)	(3,036		)	(3,216		)	(52,328		)	(51,184		)	(6,071		)	(6,356		)
Amortization of net prior service (gain) cost	2			2			(451		)	(451		)	4			4			(902		)	(902		)
Amortization of net actuarial loss	3,576			6,941			—			49			7,152			13,651			—			49
Net periodic pension/benefit cost (return)	11,829			16,310			(1,031		)	(975		)	23,658			31,798			(2,063		)	(2,043		)
Impact of PUC D&Os	12,278			7,179			811			1,024			24,557			9,836			1,622			2,095
Net periodic pension/benefit cost (adjusted for impact of PUC D&Os)	$	24,107		$	23,489		$	(220	)	$	49		$	48,215		$	41,634		$	(441	)	$	52


¹	For the three and six months ended June 30, ~~2018~~2019 and ~~2017,~~2018, the Company has not capitalized any share-based compensation.



	Three months ended June 30				Six months ended June 30
(dollars in millions)	2019		2018		2019		2018
Shares granted	35,580		37,747		35,580		38,821
Fair value	$	1.5	$	1.3	$	1.5	$	1.3
Income tax benefit	0.4		0.3		0.4		0.3


(1)	Weighted-average grant-date fair value per share based on the average price of HEI common stock on the date of grant.



	2019		2018
Risk-free interest rate	2.48	%	2.29	%
Expected life in years	3		3
Expected volatility	15.8	%	17.0	%
Range of expected volatility for Peer Group	15.0% to 73.2%		15.1% to 26.2%
Grant date fair value (per share)	$41.07		$38.20