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HAWEL Hawaiian Electric

Filed: 10 May 21, 5:06pm

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
 FORM 10-Q
 
     QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2021
 OR
             TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Exact Name of Registrant as 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
State of Hawaii
(State or other jurisdiction of incorporation or organization)
 
Hawaiian Electric Industries, Inc. – 1001 Bishop Street, Suite 2900, Honolulu, Hawaii  96813
Hawaiian Electric Company, Inc. – 1001 Bishop Street, Suite, 2500, Honolulu, Hawaii  96813
(Address of principal executive offices and zip code)
 
Hawaiian Electric Industries, Inc. – (808) 543-5662
Hawaiian Electric Company, Inc. – (808) 543-7771
(Registrant’s telephone number, including area code) 
Not applicable
(Former name, former address and former fiscal year, if changed since last report)
RegistrantTitle of each classTrading Symbol(s)Name of each exchange on which registered
Hawaiian Electric Industries, Inc.Common Stock, Without Par ValueHENew York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Hawaiian Electric Industries, Inc.YesNo Hawaiian Electric Company, Inc.YesNo
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
Hawaiian Electric Industries, Inc.YesNo Hawaiian Electric Company, Inc.YesNo
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Securities Exchange Act of 1934.
Hawaiian Electric Industries, Inc.: Hawaiian Electric Company, Inc.:
Large accelerated filerSmaller reporting companyLarge accelerated filerSmaller reporting company
Accelerated filerEmerging growth companyAccelerated filerEmerging growth company
Non-accelerated filerNon-accelerated filer
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Hawaiian Electric Industries, Inc.Hawaiian Electric Company, Inc.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Hawaiian Electric Industries, Inc.YesNoHawaiian Electric Company, Inc.YesNo
Securities registered pursuant to 12(b) of the Act:
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuers’ classes of common stock, as of the latest practicable date.
Class of Common Stock Outstanding April 23, 2021
Hawaiian Electric Industries, Inc. (Without Par Value) 109,181,493 Shares
Hawaiian Electric Company, Inc. ($6-2/3 Par Value) 17,324,376 Shares (not publicly traded)
Hawaiian Electric Industries, Inc. (HEI) is the sole holder of Hawaiian Electric Company, Inc. (Hawaiian Electric) common stock.
This combined Form 10-Q is separately filed by HEI and Hawaiian Electric. Information contained herein relating to any individual registrant is filed by such registrant on its own behalf. No registrant makes any representation as to information relating to the other registrant, except that information relating to Hawaiian Electric is also attributed to HEI.



Hawaiian Electric Industries, Inc. and Subsidiaries
Hawaiian Electric Company, Inc. and Subsidiaries
Form 10-Q—Quarter ended March 31, 2021
 
TABLE OF CONTENTS
 
Page No. 
  
 
  
 
three months ended March 31, 2021 and 2020
 
three months ended March 31, 2021 and 2020
 
 
three months ended March 31, 2021 and 2020
 
three months ended March 31, 2021 and 2020
  
 
three months ended March 31, 2021 and 2020
 
three months ended March 31, 2021 and 2020
 
 
three months ended March 31, 2021 and 2020
 
three months ended March 31, 2021 and 2020
 
 
 
 
  
 
 
i


Hawaiian Electric Industries, Inc. and Subsidiaries
Hawaiian Electric Company, Inc. and Subsidiaries
Form 10-Q—Quarter ended March 31, 2021
GLOSSARY OF TERMS
Terms Definitions
ACLAllowance for credit losses, which is the current credit loss standard, requires recording the allowance based on the expected loss model
AES HawaiiAES Hawaii, Inc.
AFSAvailable for sale
AMIAdvanced Metering Infrastructure
AOCI Accumulated other comprehensive income/(loss)
ARAAnnual revenue adjustment
ASB American Savings Bank, F.S.B., a wholly owned subsidiary of ASB Hawaii, Inc.
ASB Hawaii ASB Hawaii, Inc., a wholly owned subsidiary of Hawaiian Electric Industries, Inc. and the parent company of American Savings Bank, F.S.B.
ASU Accounting Standards Update
CARES ActThe Coronavirus Aid, Relief, and Economic Security Act enacted March 27, 2020
CBRECommunity-based renewable energy
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), Mauo, LLC and Ka‘ie‘ie Waho Company, LLC; and The Old Oahu Tug Service, Inc. (formerly Hawaiian Tug & Barge Corp.)
Consumer Advocate Division of Consumer Advocacy, Department of Commerce and Consumer Affairs of the State of Hawaii
D&O Decision and order from the PUC
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
ECRCEnergy cost recovery clause
EIP 2010 Equity and Incentive Plan, as amended and restated
EPA Environmental Protection Agency — federal
EPRMExceptional Project Recovery Mechanism
EPS Earnings per share
ERP/EAMEnterprise Resource Planning/Enterprise Asset Management
ESGEnvironmental, Social & Governance
ESMEarnings Sharing Mechanism
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
GNMA Government National Mortgage Association
Hamakua EnergyHamakua Energy, LLC, an indirect subsidiary of HEI
Hawaii Electric Light Hawaii Electric Light Company, Inc., an electric utility subsidiary of Hawaiian Electric Company, Inc.

ii

GLOSSARY OF TERMS, continued

Terms Definitions
Hawaiian Electric Hawaiian Electric Company, Inc., an electric utility subsidiary of Hawaiian Electric Industries, Inc. and parent company of Hawaii Electric Light Company, Inc., Maui Electric Company, Limited and Renewable Hawaii, Inc. Uluwehiokama Biofuels Corp. was dissolved effective as of July 14, 2020
HEI Hawaiian Electric Industries, Inc., direct parent company of Hawaiian Electric Company, Inc., ASB Hawaii, Inc., Pacific Current, LLC and The Old Oahu Tug Service, Inc. (formerly Hawaiian Tug & Barge Corp.)
HEIRSP Hawaiian Electric Industries Retirement Savings Plan
HELOCHome equity line of credit
HPOWER City and County of Honolulu with respect to a power purchase agreement for a refuse-fired plant
IPP Independent power producer
Kalaeloa Kalaeloa Partners, L.P.
kWh Kilowatthour/s (as applicable)
LTIP Long-term incentive plan
Maui Electric Maui Electric Company, Limited, an electric utility subsidiary of Hawaiian Electric Company, Inc.
MauoMauo, LLC, an indirect subsidiary of HEI
MPIRMajor Project Interim Recovery
MSRMortgage servicing right
MW Megawatt/s (as applicable)
MRPMulti-year rate period
NII Net interest income
NPBCNet periodic benefit costs
NPPCNet periodic pension costs
O&M Other operation and maintenance
OCC Office of the Comptroller of the Currency
OPEB Postretirement benefits other than pensions
Pacific CurrentPacific Current, LLC, a wholly owned subsidiary of HEI and parent company of Hamakua Holdings, LLC, Mauo, LLC, and Ka‘ie‘ie Waho Company, LLC
PBRPerformance-based regulation
PGVPuna Geothermal Venture
PIMsPerformance incentive mechanisms
PPA Power purchase agreement
PPAC Purchased power adjustment clause
PUC Public Utilities Commission of the State of Hawaii
PVPhotovoltaic
RAM Rate adjustment mechanism
RBA Revenue balancing account
REIPRenewable Energy Infrastructure Program
RFP Request for proposals
ROACE Return on average common equity
RORB Return on rate base
RPS Renewable portfolio standards
SEC Securities and Exchange Commission
See Means the referenced material is incorporated by reference
Tax Act2017 Tax Cuts and Jobs Act (H.R. 1, An Act to provide for reconciliation pursuant to titles II and V of the concurrent resolution on the budget for fiscal year 2018)
TDR Troubled debt restructuring
UtilitiesHawaiian Electric Company, Inc., Hawaii Electric Light Company, Inc. and Maui Electric Company, Limited
VIE Variable interest entity
 
iii


CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
This report and other presentations made by Hawaiian Electric Industries, Inc. (HEI) and Hawaiian Electric Company, Inc. (Hawaiian Electric) and their subsidiaries contain “forward-looking statements,” which include statements that are predictive in nature, depend upon or refer to future events or conditions and usually include words such as “will,” “expects,” “anticipates,” “intends,” “plans,” “believes,” “predicts,” “estimates” or similar expressions. In addition, any statements concerning future financial performance, ongoing business strategies or prospects or possible future actions are also forward-looking statements. Forward-looking statements are based on current expectations and projections about future events and are subject to risks, uncertainties and the accuracy of assumptions concerning HEI and its subsidiaries (collectively, the Company), the performance of the industries in which they do business and economic, political and market factors, among other things. These forward-looking statements are not guarantees of future performance and actual results and financial condition may differ materially from those indicated in the forward-looking statements.
Risks, uncertainties and other important factors that could cause actual results to differ materially from those described in forward-looking statements and from historical results include, but are not limited to, the following:
international, national and local economic and political conditions—including the state of the Hawaii tourism, defense and construction industries; the strength or weakness of the Hawaii and continental U.S. real estate markets (including the fair value and/or the actual performance of collateral underlying loans held by ASB, which could result in higher loan loss provisions and write-offs); decisions concerning the extent of the presence of the federal government and military in Hawaii; the implications and potential impacts of future Federal government shutdowns, including the impact to our customers to pay their electric bills and/or bank loans and the impact on the state of Hawaii economy; the implications and potential impacts of U.S. and foreign capital and credit market conditions and federal, state and international responses to those conditions; the potential impacts of global and local developments (including global economic conditions and uncertainties, unrest, terrorist acts, wars, conflicts, political protests, deadly virus epidemic or other crisis); the effects of changes that have or may occur in U.S. policy, such as with respect to immigration and trade; and pandemics;
the extent of the impact of the COVID-19 pandemic, including the duration, spread, severity and any recurrence of the COVID-19 pandemic, the duration and scope of related government orders and restrictions, the impact on our employees, customers and suppliers, and the impact of the COVID-19 pandemic on the overall demand for the Company’s goods and services, all of which could be affected by the pace of distribution, administration, and efficacy of COVID-19 vaccines over the short- and long-term, as well as the proportion of the population vaccinated;
ability to adequately address risks and capitalize on opportunities related to our ESG priority areas, which currently include decarbonization, economic health and affordability, reliability and resilience, secure digitalization, diversity, equity and inclusion, employee engagement, and climate-related risks and opportunities;
citizen activism, including civil unrest, especially in times of severe economic depression and social divisiveness, which could negatively impact customers and employees, impair the ability of the Company and the Utilities to operate and maintain its facilities in an effective and safe manner, and citizen activism and stakeholder activism could delay the construction, increase project costs or preclude the completion, of third-party or Utility projects that are required to meet electricity demand, reliability objectives and renewable portfolio standards (RPS) goals;
the effects of future actions or inaction of the U.S. government or related agencies, including those related to the U.S. debt ceiling or budget funding, monetary policy, trade policy and tariffs, energy and environmental policy, and other policy and regulatory changes advanced or proposed by President Biden and his administration;
weather, natural disasters (e.g., hurricanes, earthquakes, tsunamis, lightning strikes, lava flows and the increasing effects of climate change, such as more severe storms, flooding, droughts, heat waves, and rising sea levels) and wildfires, including their impact on the resilience and reliability of the Company’s and Utilities’ operations and the economy;
the timing, speed and extent of changes in interest rates and the shape of the yield curve, which could result in lower portfolio yields and net interest margin;
the ability of the Company and the Utilities to access the credit and capital markets (e.g., to obtain commercial paper and other short-term and long-term debt financing, including lines of credit, and, in the case of HEI, to issue common stock) under volatile and challenging market conditions, and the cost of such financings, if available;
the risks inherent in changes in the value of the Company’s pension and other retirement plan assets and ASB’s securities available for sale, and the risks inherent in changes in the value of the Company’s pension liabilities, including changes driven by interest rates;
changes in laws, regulations (including tax regulations), market conditions, interest rates and other factors that result in changes in assumptions used to calculate retirement benefits costs and funding requirements;
the impact of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (Dodd-Frank Act) and of the rules and regulations that the Dodd-Frank Act requires to be promulgated, as amended by the Economic Growth, Regulatory Relief and Consumer Protection Act;
increasing competition in the banking industry (e.g., increased price competition for deposits, or an outflow of deposits to alternative investments, which may have an adverse impact on ASB’s cost of funds);
iv


the potential delay by the Public Utilities Commission of the State of Hawaii (PUC) in considering (and potential disapproval of actual or proposed) renewable energy proposals and related costs; reliance by the Utilities on outside parties such as the state, independent power producers (IPPs) and developers; and uncertainties surrounding technologies, solar power, wind power, biofuels, environmental assessments required to meet RPS goals; the impacts of implementation of the renewable energy proposals on future costs of electricity and potential penalties imposed by the PUC for delays in the commercial operations of renewable energy projects;
the ability of the Utilities to develop, implement and recover the costs of implementing the Utilities’ action plans included in their updated Power Supply Improvement Plans, Demand Response Portfolio Plan, Distributed Generation Interconnection Plan, Grid Modernization Plans, and business model changes, which have been and are continuing to be developed and updated in response to the orders issued by the PUC, the PUC’s April 2014 statement of its inclinations on the future of Hawaii’s electric utilities and the vision, business strategies and regulatory policy changes required to align the Utilities’ business model with customer interests and the state’s public policy goals, and subsequent orders of the PUC;
the ability of the Utilities to recover undepreciated cost of fossil fuel generating units, if they are retired before the end of their expected useful life;
capacity and supply constraints or difficulties, especially if generating units (utility-owned or IPP-owned) fail or measures such as demand-side management, distributed generation, combined heat and power or other firm capacity supply-side resources fall short of achieving their forecasted benefits or are otherwise insufficient to reduce or meet peak demand;
fuel oil price changes, delivery of adequate fuel by suppliers and the continued availability to the electric utilities of their energy cost recovery clauses (ECRCs);
the continued availability to the electric utilities or modifications of other cost recovery mechanisms, including the purchased power adjustment clauses (PPACs), rate adjustment mechanisms (RAMs) and pension and postretirement benefits other than pensions (OPEB) tracking mechanisms, and the continued decoupling of revenues from sales to mitigate the effects of declining kilowatthour sales;
the ability of the Utilities to recover increasing costs and earn a reasonable return on capital investments not covered by the annual revenue adjustment (ARA);
the ability of the Utilities to achieve performance incentive goals currently in place;
the impact from the PUC’s implementation of performance-based ratemaking for the Utilities pursuant to Act 005, Session Laws 2018, including the potential addition of new performance incentive mechanisms (PIMs), third-party proposals adopted by the PUC in its implementation of performance-based regulation (PBR), and the implications of not achieving performance incentive goals;
the impact of fuel price levels and volatility on customer satisfaction and political and regulatory support for the Utilities;
the risks associated with increasing reliance on renewable energy, including the availability and cost of non-fossil fuel supplies for renewable energy generation and the operational impacts of adding intermittent sources of renewable energy to the electric grid;
the growing risk that energy production from renewable generating resources may be curtailed and the interconnection of additional resources will be constrained as more generating resources are added to the Utilities’ electric systems and as customers reduce their energy usage;
the ability of IPPs to deliver the firm capacity anticipated in their power purchase agreements (PPAs);
the potential that, as IPP contracts near the end of their terms, there may be less economic incentive for the IPPs to make investments in their units to ensure the availability of their units;
the ability of the Utilities to negotiate, periodically, favorable agreements for significant resources such as fuel supply contracts and collective bargaining agreements and avoid or mitigate labor disputes and work stoppages;
new technological developments that could affect the operations and prospects of the Utilities and ASB or their competitors such as the commercial development of energy storage and microgrids and banking through alternative channels;
cybersecurity risks and the potential for cyber incidents, including potential incidents at HEI, its third-party vendors, and its subsidiaries (including at ASB branches and electric utility plants) and incidents at data processing centers used, to the extent not prevented by intrusion detection and prevention systems, anti-virus software, firewalls and other general IT controls;
failure to achieve remaining cost savings commitment related to the Enterprise Resource Planning/Enterprise Asset Management (ERP/EAM) project-related benefits and the management audit committed savings of $33 million over the 2021 to 2025 multi-year rate period (MRP);
federal, state, county and international governmental and regulatory actions, such as existing, new and changes in laws, rules and regulations applicable to HEI, the Utilities and ASB (including changes in taxation and tax rates, increases in capital requirements, regulatory policy changes, environmental laws and regulations (including resulting compliance costs and risks of fines and penalties and/or liabilities), the regulation of greenhouse gas emissions, governmental fees and assessments (such as Federal Deposit Insurance Corporation assessments), and potential carbon “cap and trade” legislation that may fundamentally alter costs to produce electricity and accelerate the move to renewable generation);
developments in laws, regulations and policies governing protections for historic, archaeological and cultural sites, and plant and animal species and habitats, as well as developments in the implementation and enforcement of such laws, regulations and policies;
v


discovery of conditions that may be attributable to historical chemical releases, including any necessary investigation and remediation, and any associated enforcement, litigation or regulatory oversight;
decisions by the PUC in rate cases and other proceedings (including the risks of delays in the timing of decisions, adverse changes in final decisions from interim decisions and the disallowance of project costs as a result of adverse regulatory audit reports or otherwise);
decisions by the PUC and by other agencies and courts on land use, environmental and other permitting issues (such as required corrective actions, restrictions and penalties that may arise, such as with respect to environmental conditions or RPS);
potential enforcement actions by the Office of the Comptroller of the Currency (OCC), the Federal Reserve Board (FRB), the Federal Deposit Insurance Corporation (FDIC) and/or other governmental authorities (such as consent orders, required corrective actions, restrictions and penalties that may arise, for example, with respect to compliance deficiencies under existing or new banking and consumer protection laws and regulations or with respect to capital adequacy);
the risks associated with the geographic concentration of HEI’s businesses and ASB’s loans, ASB’s concentration in a single product type (i.e., first mortgages) and ASB’s significant credit relationships (i.e., concentrations of large loans and/or credit lines with certain customers);
changes in accounting principles applicable to HEI and its subsidiaries, including the adoption of new U.S. accounting standards, the potential discontinuance of regulatory accounting related to PBR or other regulatory changes, the effects of potentially required consolidation of variable interest entities (VIEs), or required finance lease or on-balance-sheet operating lease accounting for PPAs with IPPs;
downgrades by securities rating agencies in their ratings of the securities of HEI and Hawaiian Electric and their impact on results of financing efforts;
faster than expected loan prepayments that can cause an acceleration of the amortization of premiums on loans and investments and the impairment of mortgage-servicing assets of ASB;
changes in ASB’s loan portfolio credit profile and asset quality and/or mix, which may increase or decrease the required level of provision for credit losses, allowance for credit losses (ACL) and charge-offs;
changes in ASB’s deposit cost or mix which may have an adverse impact on ASB’s cost of funds;
unanticipated changes from the expected discontinuance of LIBOR and the transition to an alternative reference rate, which may include adverse impacts to the Company’s cost of capital, loan portfolio and interest income on loans;
the final outcome of tax positions taken by HEI and its subsidiaries;
the risks of suffering losses and incurring liabilities that are uninsured (e.g., damages to the Utilities’ transmission and distribution system and losses from business interruption) or underinsured (e.g., losses not covered as a result of insurance deductibles or other exclusions or exceeding policy limits), and the risks associated with the operation of transmission and distribution assets and power generation facilities, including public and employee safety issues, and assets causing or contributing to wildfires;
the ability of the Company’s non-regulated subsidiary, Pacific Current, LLC (Pacific Current), to achieve its performance and growth objectives, which in turn could affect its ability to service its non-recourse debt;
the Company’s reliance on third parties and the risk of their non-performance, which has increased due to the impact from the COVID-19 pandemic; and
other risks or uncertainties described elsewhere in this report and in other reports (e.g., “Item 1A. Risk Factors” in the Company’s Annual Report on Form 10-K) previously and subsequently filed by HEI and/or Hawaiian Electric with the Securities and Exchange Commission.
Forward-looking statements speak only as of the date of the report, presentation or filing in which they are made. Except to the extent required by the federal securities laws, HEI, Hawaiian Electric, ASB, Pacific Current and their subsidiaries undertake no obligation to publicly update or revise any forward-looking statements, whether written or oral and whether as a result of new information, future events or otherwise.
vi


PART I - FINANCIAL INFORMATION

Item 1.  Financial Statements

Hawaiian Electric Industries, Inc. and Subsidiaries
Condensed Consolidated Statements of Income (unaudited)
Three months ended March 31
(in thousands, except per share amounts)20212020
Revenues  
Electric utility$564,864 $597,442 
Bank77,131 79,738 
Other951 
Total revenues642,946 677,186 
Expenses  
Electric utility495,750 553,484 
Bank41,835 60,335 
Other7,330 3,665 
Total expenses544,915 617,484 
Operating income (loss)  
Electric utility69,114 43,958 
Bank35,296 19,403 
Other(6,379)(3,659)
Total operating income98,031 59,702 
Retirement defined benefits credit (expense)—other than service costs2,435 (934)
Interest expense, net—other than on deposit liabilities and other bank borrowings(23,736)(21,775)
Allowance for borrowed funds used during construction747 688 
Allowance for equity funds used during construction2,191 2,015 
Gain on sale of investment securities, net528 
Income before income taxes80,196 39,696 
Income taxes15,365 5,803 
Net income64,831 33,893 
Preferred stock dividends of subsidiaries473 473 
Net income for common stock$64,358 $33,420 
Basic earnings per common share$0.59 $0.31 
Diluted earnings per common share$0.59 $0.31 
Weighted-average number of common shares outstanding109,221 109,051 
Net effect of potentially dilutive shares271 314 
Weighted-average shares assuming dilution109,492 109,365 
This report should be read in conjunction with the Notes herein and the Notes to Consolidated Financial Statements appearing in the 2020 Form 10-K.

1


Hawaiian Electric Industries, Inc. and Subsidiaries
Condensed Consolidated Statements of Comprehensive Income (unaudited)
 Three months ended March 31
(in thousands)20212020
Net income for common stock$64,358 $33,420 
Other comprehensive income (loss), net of taxes:  
Net unrealized gains on available-for-sale investment securities:  
Net unrealized gains on available-for-sale investment securities arising during the period, net of taxes of $(16,616) and $7,120, respectively(45,390)19,448 
Reclassification adjustment for net realized gains included in net income, net of taxes of $(142) and NaN, respectively(387)
Derivatives qualifying as cash flow hedges:  
Unrealized interest rate hedging losses arising during the period, net of taxes of $542 and $(619), respectively1,562 (1,784)
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 of $2,084 and $1,986, respectively6,010 5,706 
Reclassification adjustment for impact of D&Os of the PUC included in regulatory assets, net of taxes of $(2,015) and $(1,789), respectively(5,811)(5,158)
Other comprehensive income (loss), net of taxes(44,016)18,212 
Comprehensive income attributable to Hawaiian Electric Industries, Inc.$20,342 $51,632 
This report should be read in conjunction with the Notes herein and the Notes to Consolidated Financial Statements appearing in the 2020 Form 10-K.

2


Hawaiian Electric Industries, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets (unaudited) 
(dollars in thousands)March 31, 2021December 31, 2020
Assets  
Cash and cash equivalents$277,579 $341,421 
Restricted cash14,067 17,558 
Accounts receivable and unbilled revenues, net273,197 281,216 
Available-for-sale investment securities, at fair value2,305,257 1,970,417 
Held-to-maturity investment securities, at amortized cost295,046 226,947 
Stock in Federal Home Loan Bank, at cost10,000 8,680 
Loans held for investment, net5,218,288 5,232,642 
Loans held for sale, at lower of cost or fair value23,637 28,275 
Property, plant and equipment, net of accumulated depreciation of $2,947,647 and $2,903,144 at March 31, 2021 and December 31, 2020, respectively5,283,768 5,265,735 
Operating lease right-of-use assets162,713 153,069 
Regulatory assets773,426 766,708 
Other639,505 629,149 
Goodwill82,190 82,190 
Total assets$15,358,673 $15,004,007 
Liabilities and shareholders’ equity  
Liabilities  
Accounts payable$164,936 $182,347 
Interest and dividends payable32,405 23,547 
Deposit liabilities7,745,294 7,386,957 
Short-term borrowings—other than bank100,242 129,379 
Other bank borrowings102,685 89,670 
Long-term debt, net—other than bank2,229,738 2,119,129 
Deferred income taxes380,365 395,089 
Operating lease liabilities175,334 160,432 
Regulatory liabilities956,139 959,786 
Defined benefit pension and other postretirement benefit plans liability558,191 567,438 
Other557,758 618,438 
Total liabilities13,003,087 12,632,212 
Preferred stock of subsidiaries - not subject to mandatory redemption34,293 34,293 
Commitments and contingencies (Notes 3 and 4)00
Shareholders’ equity  
Preferred stock, 0 par value, authorized 10,000,000 shares; issued: NaN
Common stock, 0 par value, authorized 200,000,000 shares; issued and outstanding: 109,281,493 shares and 109,181,124 shares at March 31, 2021 and December 31, 2020, respectively1,678,973 1,678,368 
Retained earnings687,600 660,398 
Accumulated other comprehensive loss, net of tax benefits(45,280)(1,264)
Total shareholders’ equity2,321,293 2,337,502 
Total liabilities and shareholders’ equity$15,358,673 $15,004,007 
This report should be read in conjunction with the Notes herein and the Notes to Consolidated Financial Statements appearing in the 2020 Form 10-K.

3


Hawaiian Electric Industries, Inc. and Subsidiaries
Condensed Consolidated Statements of Changes in Shareholders’ Equity (unaudited) 
 Common stockRetainedAccumulated
other
comprehensive
 
(in thousands)SharesAmountEarningsincome (loss)Total
Balance, December 31, 2020109,181 $1,678,368 $660,398 $(1,264)$2,337,502 
Net income for common stock— — 64,358 — 64,358 
Other comprehensive income, net of taxes— — — (44,016)(44,016)
Share-based expenses and other, net100 605 — — 605 
Common stock dividends (34¢ per share)— — (37,156)— (37,156)
Balance, March 31, 2021109,281 $1,678,973 $687,600 $(45,280)$2,321,293 
Balance, December 31, 2019108,973 $1,678,257 $622,042 $(20,039)$2,280,260 
Impact of adoption of ASU No. 2016-13
— — (15,372)— (15,372)
Balance, January 1, 2020 after adoption of
ASU No. 2016-13
108,973 1,678,257 606,670 (20,039)2,264,888 
Net income for common stock— — 33,420 — 33,420 
Other comprehensive income, net of taxes— — — 18,212 18,212 
Share-based expenses and other, net172 (3,996)— — (3,996)
Common stock dividends (33¢ per share)— — (36,019)— (36,019)
Balance, March 31, 2020109,145 $1,674,261 $604,071 $(1,827)$2,276,505 
This report should be read in conjunction with the Notes herein and the Notes to Consolidated Financial Statements appearing in the 2020 Form 10-K.

4


Hawaiian Electric Industries, Inc. and Subsidiaries
Condensed Consolidated Statements of Cash Flows (unaudited)
Three months ended March 31
(in thousands)20212020
Cash flows from operating activities  
Net income$64,831 $33,893 
Adjustments to reconcile net income to net cash provided by operating activities  
Depreciation of property, plant and equipment61,427 59,614 
Other amortization10,951 11,418 
Provision for credit losses(8,435)10,401 
Loans originated, held for sale(162,901)(76,770)
Proceeds from sale of loans, held for sale170,862 72,533 
Gain on sale of investment securities, net(528)
Gain on sale of loans(4,300)(2,000)
Deferred income taxes(2,196)(4,996)
Share-based compensation expense2,602 1,704 
Allowance for equity funds used during construction(2,191)(2,015)
Other(3,519)224 
Changes in assets and liabilities  
Decrease (increase) in accounts receivable and unbilled revenues, net5,664 (6,563)
Decrease (increase) in fuel oil stock(16,400)2,566 
Decrease (increase) in regulatory assets(14,869)1,171 
Increase (decrease) in regulatory liabilities(4,716)16,586 
Increase in accounts, interest and dividends payable7,677 8,935 
Change in prepaid and accrued income taxes, tax credits and utility revenue taxes(25,513)(45,205)
Decrease in defined benefit pension and other postretirement benefit plans liability(2,621)(490)
Change in other assets and liabilities(34,095)(19,713)
Net cash provided by operating activities41,730 61,293 
Cash flows from investing activities  
Available-for-sale investment securities purchased(781,992)(159,173)
Principal repayments on available-for-sale investment securities184,755 77,642 
Proceeds from sale of available-for-sale investment securities197,354 
Principal repayments of held-to-maturity investment securities20,185 4,851 
Purchases of held-to-maturity investment securities(88,262)
Purchase of stock from Federal Home Loan Bank(22,296)(20,766)
Redemption of stock from Federal Home Loan Bank20,976 19,440 
Net increase in loans held for investment23,922 (65,544)
Proceeds from sale of low-income housing investments6,725 
Capital expenditures(74,079)(125,554)
Contributions to low income housing investments(3,205)(1,026)
Other4,622 2,942 
Net cash used in investing activities(518,020)(260,463)
Cash flows from financing activities  
Net increase in deposit liabilities358,337 111,881 
Net increase (decrease) in short-term borrowings with original maturities of three months or less35,751 (135,710)
Net increase in other bank borrowings with original maturities of three months or less13,015 42,495 
Proceeds from issuance of short-term debt50,000 
Repayment of short-term debt(65,000)
Proceeds from issuance of long-term debt161,800 186,925 
Repayment of long-term debt(50,699)(909)
Withheld shares for employee taxes on vested share-based compensation(1,997)(5,700)
Common stock dividends(37,156)(36,018)
Preferred stock dividends of subsidiaries(473)(473)
Other(4,621)(4,590)
Net cash provided by financing activities408,957 207,901 
Net increase (decrease) in cash, cash equivalents and restricted cash(67,333)8,731 
Cash, cash equivalents and restricted cash, beginning of period358,979 227,685 
Cash, cash equivalents and restricted cash, end of period291,646 236,416 
Less: Restricted cash(14,067)(30,902)
Cash and cash equivalents, end of period$277,579 $205,514 
This report should be read in conjunction with the Notes herein and the Notes to Consolidated Financial Statements appearing in the 2020 Form 10-K.
5


Hawaiian Electric Company, Inc. and Subsidiaries
Condensed Consolidated Statements of Income (unaudited)
Three months ended March 31
(in thousands)20212020
Revenues$564,864 $597,442 
Expenses  
Fuel oil127,427 173,221 
Purchased power142,296 139,816 
Other operation and maintenance114,570 127,547 
Depreciation57,355 55,850 
Taxes, other than income taxes54,102 57,050 
Total expenses495,750 553,484 
Operating income69,114 43,958 
Allowance for equity funds used during construction2,191 2,015 
Retirement defined benefits credit (expense)—other than service costs1,021 (381)
Interest expense and other charges, net(17,983)(16,594)
Allowance for borrowed funds used during construction747 688 
Income before income taxes55,090 29,686 
Income taxes11,233 5,282 
Net income43,857 24,404 
Preferred stock dividends of subsidiaries229 229 
Net income attributable to Hawaiian Electric43,628 24,175 
Preferred stock dividends of Hawaiian Electric270 270 
Net income for common stock$43,358 $23,905 
This report should be read in conjunction with the Notes herein and the Notes to Consolidated Financial Statements appearing in the 2020 Form 10-K.
HEI owns all of the common stock of Hawaiian Electric. Therefore, per share data with respect to shares of common stock of Hawaiian Electric are not meaningful.

Hawaiian Electric Company, Inc. and Subsidiaries
Condensed Consolidated Statements of Comprehensive Income (unaudited)
 Three months ended March 31
(in thousands)20212020
Net income for common stock$43,358 $23,905 
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 taxes of $2,027 and $1,798, respectively5,845 5,184 
Reclassification adjustment for impact of D&Os of the PUC included in regulatory assets, net of taxes of $(2,015) and $(1,789), respectively(5,811)(5,158)
Other comprehensive income, net of taxes34 26 
Comprehensive income attributable to Hawaiian Electric Company, Inc.$43,392 $23,931 
This report should be read in conjunction with the Notes herein and the Notes to Consolidated Financial Statements appearing in the 2020 Form 10-K.
6


Hawaiian Electric Company, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets (unaudited)
(dollars in thousands, except par value)March 31, 2021December 31, 2020
Assets  
Property, plant and equipment
Utility property, plant and equipment  
Land$51,611 $51,611 
Plant and equipment7,551,879 7,509,343 
Less accumulated depreciation(2,859,719)(2,819,079)
Construction in progress203,988 188,342 
Utility property, plant and equipment, net4,947,759 4,930,217 
Nonutility property, plant and equipment, less accumulated depreciation of $116 and $115 as of March 31, 2021 and December 31, 2020, respectively6,952 6,953 
Total property, plant and equipment, net4,954,711 4,937,170 
Current assets  
Cash and cash equivalents51,743 47,360 
Restricted cash11,506 15,966 
Customer accounts receivable, net141,649 147,832 
Accrued unbilled revenues, net101,813 101,036 
Other accounts receivable, net5,073 7,673 
Fuel oil stock, at average cost74,688 58,238 
Materials and supplies, at average cost69,726 67,344 
Prepayments and other36,419 44,083 
Regulatory assets54,322 30,435 
Total current assets546,939 519,967 
Other long-term assets  
Operating lease right-of-use assets138,534 127,654 
Regulatory assets719,104 736,273 
Other135,620 136,309 
Total other long-term assets993,258 1,000,236 
Total assets$6,494,908 $6,457,373 
Capitalization and liabilities  
Capitalization  
Common stock ($6 2/3 par value, authorized 50,000,000 shares; outstanding 17,324,376 shares at
March 31, 2021 and December 31, 2020)
$115,515 $115,515 
Premium on capital stock746,987 746,987 
Retained earnings1,297,768 1,282,335 
Accumulated other comprehensive loss, net of tax benefits-retirement benefit plans(2,885)(2,919)
Common stock equity2,157,385 2,141,918 
Cumulative preferred stock — not subject to mandatory redemption34,293 34,293 
Long-term debt, net1,675,863 1,561,302 
Total capitalization3,867,541 3,737,513 
Commitments and contingencies (Note 3)00
Current liabilities  
Current portion of operating lease liabilities66,301 64,730 
Short-term borrowings from non-affiliates49,979 
Accounts payable123,199 133,849 
Interest and preferred dividends payable28,172 20,350 
Taxes accrued, including revenue taxes155,125 192,524 
Regulatory liabilities30,370 37,301 
Other70,000 74,262 
Total current liabilities473,167 572,995 
Deferred credits and other liabilities  
Operating lease liabilities84,102 69,494 
Deferred income taxes396,758 397,798 
Regulatory liabilities925,769 922,485 
Unamortized tax credits110,181 111,915 
Defined benefit pension and other postretirement benefit plans liability522,286 530,532 
Other115,104 114,641 
Total deferred credits and other liabilities2,154,200 2,146,865 
Total capitalization and liabilities$6,494,908 $6,457,373 
This report should be read in conjunction with the Notes herein and the Notes to Consolidated Financial Statements appearing in the 2020 Form 10-K.
7


Hawaiian Electric Company, Inc. and Subsidiaries
Condensed Consolidated Statements of Changes in Common Stock Equity (unaudited)
 
 Common stockPremium
on
capital
RetainedAccumulated
other
comprehensive
 
(in thousands)SharesAmountstockearningsincome (loss)Total
Balance, December 31, 202017,324 $115,515 $746,987 $1,282,335 $(2,919)$2,141,918 
Net income for common stock— — — 43,358 — 43,358 
Other comprehensive income, net of taxes— — — — 34 34 
Common stock dividends— — — (27,925)— (27,925)
Balance, March 31, 202117,324 $115,515 $746,987 $1,297,768 $(2,885)$2,157,385 
Balance, December 31, 201917,048 $113,678 $714,824 $1,220,129 $(1,279)$2,047,352 
Net income for common stock— — — 23,905 — 23,905 
Other comprehensive income, net of taxes— — — — 26 26 
Common stock dividends— — — (26,784)— (26,784)
Balance, March 31, 202017,048 $113,678 $714,824 $1,217,250 $(1,253)$2,044,499 
This report should be read in conjunction with the Notes herein and the Notes to Consolidated Financial Statements appearing in the 2020 Form 10-K.


8


Hawaiian Electric Company, Inc. and Subsidiaries
Condensed Consolidated Statements of Cash Flows (unaudited)
Three months ended March 31
(in thousands)20212020
Cash flows from operating activities  
Net income$43,857 $24,404 
Adjustments to reconcile net income to net cash provided by operating activities  
Depreciation of property, plant and equipment57,355 55,850 
Other amortization6,577 7,704 
Deferred income taxes(4,671)(3,762)
State refundable credit(2,662)(2,530)
Bad debt expense457 2,724 
Allowance for equity funds used during construction(2,191)(2,015)
Other(1)20 
Changes in assets and liabilities  
Decrease (increase) in accounts receivable6,078 (9,020)
Decrease (increase) in accrued unbilled revenues(427)2,704 
Decrease (increase) in fuel oil stock(16,450)2,410 
Increase in materials and supplies(2,382)(496)
Decrease (increase) in regulatory assets(14,869)1,171 
Increase (decrease) in regulatory liabilities(4,716)16,586 
Increase (decrease) in accounts payable6,254 (7,153)
Change in prepaid and accrued income taxes, tax credits and revenue taxes(24,802)(43,919)
Decrease in defined benefit pension and other postretirement benefit plans liability(1,434)(1,017)
Change in other assets and liabilities(14,012)(4,520)
Net cash provided by operating activities31,961 39,141 
Cash flows from investing activities  
Capital expenditures(70,361)(119,144)
Other1,863 2,713 
Net cash used in investing activities(68,498)(116,431)
Cash flows from financing activities  
Common stock dividends(27,925)(26,784)
Preferred stock dividends of Hawaiian Electric and subsidiaries(499)(499)
Proceeds from issuance of short-term debt50,000 
Repayment of short-term debt(50,000)
Proceeds from issuance of long-term debt115,000 95,000 
Net decrease in short-term borrowings from non-affiliates and affiliates with original maturities of three months or less(38,987)
Other(116)(23)
Net cash provided by financing activities36,460 78,707 
Net increase (decrease) in cash and cash equivalents(77)1,417 
Cash, cash equivalents and restricted cash, beginning of period63,326 41,894 
Cash, cash equivalents and restricted cash, end of period63,249 43,311 
Less: Restricted cash(11,506)(30,902)
Cash and cash equivalents, end of period$51,743 $12,409 
This report should be read in conjunction with the Notes herein and the Notes to Consolidated Financial Statements appearing in the 2020 Form 10-K.

9


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, 2020.
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 March 31, 2021 and December 31, 2020 and the results of their operations and cash flows for the three months ended March 31, 2021 and 2020. 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.
Income Taxes. In December 2019, Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2019-12, “Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes,” which removes specific exceptions to the general principles in Topic 740, improves financial statement preparers’ application of income tax-related guidance and simplifies GAAP under certain situations. ASU 2019-12 is effective for public business entities for fiscal years beginning after December 15, 2020, and interim periods within those fiscal years. The Company adopted the ASU as of January 1, 2021 with no material impact on its consolidated financial statements and related disclosures.



10


NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - continued (Unaudited)
Note 2 · Segment financial information
(in thousands) Electric utilityBankOtherTotal
Three months ended March 31, 2021    
Revenues from external customers$564,855 $77,131 $960 $642,946 
Intersegment revenues (eliminations)(9)
Revenues$564,864 $77,131 $951 $642,946 
Income (loss) before income taxes$55,090 $37,102 $(11,996)$80,196 
Income taxes (benefit)11,233 7,546 (3,414)15,365 
Net income (loss)43,857 29,556 (8,582)64,831 
Preferred stock dividends of subsidiaries499 (26)473 
Net income (loss) for common stock$43,358 $29,556 $(8,556)$64,358 
Total assets (at March 31, 2021)$6,494,908 $8,718,024 $145,741 $15,358,673 
Three months ended March 31, 2020    
Revenues from external customers$597,430 $79,738 $18 $677,186 
Intersegment revenues (eliminations)12 (12)
Revenues$597,442 $79,738 $$677,186 
Income (loss) before income taxes$29,686 $18,969 $(8,959)$39,696 
Income taxes (benefit)5,282 3,208 (2,687)5,803 
Net income (loss)24,404 15,761 (6,272)33,893 
Preferred stock dividends of subsidiaries499 (26)473 
Net income (loss) for common stock$23,905 $15,761 $(6,246)$33,420 
Total assets (at December 31, 2020)$6,457,373 $8,396,533 $150,101 $15,004,007 
 
Intercompany electricity sales of the Utilities to ASB 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.
Hamakua Energy, LLC’s (Hamakua Energy’s) sales to Hawaii Electric Light (a regulated affiliate) are eliminated in consolidation.
11


NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - continued (Unaudited)
Note 3 · Electric utility segment
Unconsolidated variable interest entities.
Power purchase agreements.  As of March 31, 2021, the Utilities had 5 PPAs for firm capacity (including the Puna Geothermal Venture (PGV) PPA as PGV went offline in May 2018 due to lava flow on Hawaii Island, but returned to service with firm capacity of 13 MW in the first quarter of 2021) 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 are 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 Hamakua Energy by reason of the provisions of the PPA that the Utilities have with the 3 IPPs. However, management has concluded that the Utilities are not the primary beneficiary of Kalaeloa, AES Hawaii and Hamakua Energy because the Utilities do not have the power to direct the activities that most significantly impact the 3 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 Hamakua Energy in its condensed consolidated financial statements. Hamakua Energy is an indirect subsidiary of Pacific Current and is consolidated in HEI’s condensed consolidated financial 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 IPP was considered a “governmental organization,” and thus excluded from the scope of accounting standards for VIEs. 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.
Commitments and contingencies.
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.
Power purchase agreements.  Purchases from all IPPs were as follows:
 Three months ended March 31
(in millions)20212020
Kalaeloa$37 $38 
AES Hawaii30 31 
HPOWER17 17 
Hamakua Energy11 13 
Puna Geothermal Venture
Wind IPPs29 28 
Solar IPPs12 11 
Other IPPs 1
Total IPPs$142 $140 
 
1Includes hydro power and other 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 continue 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. 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 May 31, 2021, to allow for a negotiated resolution.
AES Hawaii, Inc. Under a PPA entered into in March 1988, as amended (through Amendment No. 2) for a period of 30 years ending September 2022, Hawaiian Electric agreed to purchase 180 MW of firm capacity from AES Hawaii. Hawaiian
12


NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - continued (Unaudited)
Electric and AES Hawaii have been in dispute over an additional 9 MW of capacity. In February 2018, Hawaiian Electric reached agreement with AES Hawaii on an amendment to the PPA. However, in June 2018, the PUC issued an order suspending review of the amendment pending a Department of Health of the State of Hawaii (DOH) decision on AES Hawaii’s 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 (Hu Honua). In May 2012, Hawaii Electric Light signed a PPA, which the PUC approved in December 2013, with 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, which resulted in an amended and restated PPA between Hawaii Electric Light and Hu Honua dated May 9, 2017. In July 2017, the PUC approved the amended and restated PPA, which becomes effective once the PUC’s order is final and non-appealable. In August 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 greenhouse gas (GHG) 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, including re-examining all of the issues in the proceedings. On September 29, 2019, the PUC issued an order setting the procedural schedule for the matter and on December 20, 2019, issued an order modifying the procedural schedule. Pre-hearing matters were completed on March 6, 2020. On July 9, 2020, the PUC issued an order denying Hawaii Electric Light’s request to waive the amended and restated PPA from the PUC’s competitive bidding requirements and therefore, dismissed the request for approval of the amended and restated PPA without prejudice to possible participation in any future competitive bidding process. On July 20, 2020, Hu Honua filed a motion for reconsideration of the PUC’s order which was denied by the PUC on September 9, 2020. On September 16, 2020, Hu Honua filed its notice of appeal to the Hawaii Supreme Court of the PUC’s order denying Hu Honua’s motion for reconsideration. Oral arguments were held before the Supreme Court on April 22, 2021.
Molokai New Energy Partners (MNEP). In July 2018, the PUC approved Maui Electric’s PPA with MNEP to purchase solar energy from a photovoltaic (PV) plus battery storage project. The 4.88 MW PV and 3 MW Battery Energy Storage System project was to deliver no more than 2.64 MW at any time to the Molokai system. On March 25, 2020, MNEP filed a complaint in the United Stated District Court for the District of Hawaii against Maui Electric claiming breach of contract. On June 3, 2020, Maui Electric provided Notice of Default and Termination of the PPA to MNEP terminating the PPA with an effective date of July 10, 2020. Thereafter, MNEP filed an amended Complaint to include claims relating to the termination and Hawaiian Electric filed its Answer to the Amended Complaint on September 11, 2020, disputing the facts presented by MNEP and all claims within the original and amended complaint.
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 or community support 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. The ERP/EAM Implementation Project went live in October 2018. Hawaii Electric Light and Hawaiian Electric began to incorporate their portion of the deferred project costs in rate base and started the amortization over a 12-year period in January 2020 and November 2020, respectively. The PUC required the benefit savings of the project to be passed on to customers.
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. In October 2019, the PUC approved the Utilities and the Consumer Advocate’s Stipulated Performance Metrics and Tracking Mechanism. As of March 31, 2021, the Utilities’ regulatory liability was $11.2 million ($6.5 million for Hawaiian Electric, $1.9 million for Hawaii Electric Light and $2.8 million for Maui Electric) for the O&M expense savings that are being amortized or to be included in future rates. As part of the settlement agreement approved in the Hawaiian Electric 2020 test year rate case, the regulatory liability for Hawaiian Electric will be amortized over five years, beginning in November 2020, and the O&M benefits for Hawaiian Electric will be considered flowed through to customers. As part of the PBR proceeding, the regulatory liability as of
13


NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - continued (Unaudited)
December 31, 2020 of approximately $1.6 million and $2.3 million, respectively, for Hawaii Electric Light and Maui Electric will be flowed to customers as part of the customer dividend in the annual revenue adjustment in 2021.
At the PUC’s direction, the Utilities have been filing Semi-Annual Enterprise System Benefits (SAESB) reports on the achieved benefits savings. The most recent SAESB report was filed on February 26, 2021 for the period July 1 through December 31, 2020.
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 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 federal Environmental Protection Agency (EPA) has since identified environmental impacts in the subsurface soil at the Site. In cooperation with the DOH and EPA, Maui Electric further investigated the Site and the Adjacent Parcel to determine the extent of impacts of polychlorinated biphenyls (PCBs), residual fuel oils and other subsurface contaminants. Maui Electric has a reserve balance of $2.7 million as of March 31, 2021, representing the probable and reasonably estimable undiscounted cost for remediation of the Site and the Adjacent Parcel; however, final costs of remediation will depend on the cleanup approach implemented.
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 PCBs contamination in sediment in the area offshore of the Waiau Power Plant as part of the Pearl Harbor Superfund Site. Hawaiian Electric was also required by the EPA to assess potential sources and extent of PCB contamination onshore at Waiau Power Plant.
As of March 31, 2021, the reserve account balance recorded by Hawaiian Electric to address the PCB contamination was $9.8 million. The reserve balance represents the probable and reasonably estimable undiscounted cost for the onshore and offshore investigation and remediation. The final remediation costs will depend on the actual onshore and offshore cleanup costs.
Regulatory proceedings
Current 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 current decoupling mechanism has the following major components: (1) monthly revenue balancing account (RBA) revenues or refunds for the difference between PUC-approved target revenues and recorded adjusted revenues, which delinks revenues from kWh sales, (2) rate adjustment mechanism (RAM) revenues for escalation in certain O&M expenses and rate base changes, (3) major project interim recovery (MPIR) component, (4) performance incentive mechanisms (PIMs), and (5) an earnings sharing mechanism, which would 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.
Performance-based regulation framework. On December 23, 2020, the PUC issued a D&O (PBR D&O) approving a new performance-based regulation framework (PBR Framework). Under the PBR Framework, the Utilities’ current decoupling will continue to be used with modifications, as described below. The existing cost recovery mechanisms will continue as currently implemented (e.g., the Energy Cost Recovery Clause (ECRC), Purchased Power Adjustment Clause (PPAC), Demand Side Management surcharge (DSM), Renewable Energy Infrastructure Program (REIP), Demand Response Adjustment Clause (DRAC), Pension and Other Post-Employment Benefits (OPEB) tracking mechanisms). In addition to annual revenues provided by the annual revenue adjustment (ARA), the Utilities may seek relief for extraordinary projects or programs through the Exceptional Project Recovery Mechanism (EPRM) (formerly known as the Major Project Interim Recovery (MPIR) adjustment mechanism) and earn financial rewards for exemplary performance as provided through a portfolio of Performance Incentive Mechanisms (PIMs) and Shared Savings Mechanisms (SSMs). The PBR Framework will incorporate a variety of other performance mechanisms, including Scorecards, Reported Metrics, and an expedited Pilot Process. The PBR Framework also contains a number of safeguards, including a symmetric Earnings Sharing Mechanism (ESM) which protects the Utilities and customers from excessive earnings or losses, as measured by the Utilities’ Return on Equity (ROE) and a Re-Opener
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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - continued (Unaudited)
mechanism, under which the PUC will open an examination, at its discretion, to determine if adjustments or modifications to specific PBR mechanisms are appropriate.
Subsequent to the issuance of the PBR D&O, the PUC has initiated a collaborative process during which working groups consisting of the PUC, the Utilities and other parties have addressed the development of the proposed PBR implementation tariffs and the final details of the Prioritized Performance Mechanisms (i.e., Interconnection Approval PIM, Low-to-Moderate Income (LMI) Energy Efficiency PIM, Advanced Metering Infrastructure (AMI) Utilization PIM and the portfolio of Scorecards and Reported Metrics). The Utilities and other parties filed their refined proposals addressing the Prioritized Performance Mechanisms on March 16, 2021 and April 9, 2021. An order addressing the Prioritized Performance Mechanisms is expected to be issued in May 2021. Written tariffs to implement the PBR Framework have been either approved (see below) or will be submitted for PUC approval in May 2021 and expected to go into effect June 1, 2021.
Rate adjustment mechanism. The existing RAM is based on the lesser of: a) an inflationary adjustment for certain O&M expenses and return on investment for certain rate base changes, or b) cumulative annual compounded increase in Gross Domestic Product Price Index applied to annualized target revenues (the RAM Cap). Annualized target revenues may be reset upon the issuance of an interim or final decision and order (D&O) in a rate case. All Utilities were limited to the RAM Cap in 2020. Under the new PBR Framework, the ARA mechanism will replace the RAM, effective on June 1, 2021. The transition to the new ARA includes the continuation of the 2020 RAM Revenue adjustment.
Annual revenue adjustment mechanism. The PBR Framework established a five-year multi-year rate period during which there will be no general rate cases. Target revenues will be adjusted according to an index-driven ARA based on (i) an inflation factor, (ii) a predetermined X-factor to encompass productivity, which is set at zero, (iii) a Z-factor to account for exceptional circumstances not in the Utilities’ control and (iv) a customer dividend consisting of a negative adjustment of 0.22% compounded annually and a flow through of the “pre-PBR” savings commitment from the management audit recommendations developed in a prior docket.
As a result of an Order issued by the PUC pursuant to a motion for partial reconsideration the customer dividend for “pre-PBR” savings commitment portion to be delivered to customers will be at a rate of $6.6 million per year from 2021 to 2025, and the Enterprise Resource Planning system benefits savings of $3.9 million, to be delivered to customers in 2021. The implementation of the ARA is scheduled to occur on June 1, 2021.
Earnings sharing mechanism. A symmetrical ESM for actual return on equity outside of a 300 basis points dead band above and below a target ROE of 9.5%, which is the current authorized ROE for the Utilities. There is a 50/50 sharing between customers and Utilities for the actual earnings falling within 150 basis points outside of the dead band in either direction, and a 90/10 sharing for any further difference. A reopening or review of the PBR terms will be triggered if the Utilities credit rating outlook indicates a potential credit downgrade below investment grade status, or if its earned ROE enters the outer most tier of the ESM.
Major project interim recovery. On April 27, 2017, the PUC issued an 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 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.
On March 31, 2021, the Utilities submitted 2021 MPIR amounts totaling $21.8 million for the Schofield Generating Station ($17.6 million), West Loch PV Project ($3.3 million), and Grid Modernization Strategy Phase 1 project ($0.9 million for all three utilities) for the accrual of revenues effective January 1, 2021, that included the 2021 return on project amount (based on approved amounts) in rate base, depreciation and incremental O&M expenses. Subject to PUC approval, as part of the transition to the PBR framework, the Utilities will begin recovery of the annualized 2021 MPIR amounts effective June 1, 2021 through the RBA rate adjustment.
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Exceptional project recovery mechanism. The existing MPIR adjustment mechanism was renamed EPRM to include deferred and O&M expense projects and to permit the Utilities to include the full amount of approved costs in the EPRM for recovery in the first year the project goes into service, pro-rated for the portion of the year the project is in service. Any pending application for MPIR relief submitted by the Utilities prior to the PBR D&O, will be grandfathered under the MPIR Guidelines. The Utilities may alternatively request that pending MPIR applications be reviewed under EPRM Guidelines. EPRM recovery will be in accordance with the EPRM Guidelines limited to the lesser of actual incurred project costs or PUC- approved amounts, net of savings. To date, the Utilities have requested approval of 4 projects with total estimated capital costs of $95 million for recovery through EPRM.
Performance incentive mechanisms. The PUC has established the following PIMs: (1) Service Quality performance incentives, (2) Phase 1 Request for proposal (RFP) PIM for procurement of low-cost renewable energy, (3) Phase 2 RFP PIMs for generation and generation plus storage project, and Grid Services and standalone storage.
Service Quality performance incentives (ongoing). Service Quality performance 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 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 $6.8 million - 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 reward is 8 basis points applied to the common equity share of each respective utility’s approved rate base (or maximum penalties or rewards of approximately $1.4 million - in total for the three utilities).
In December 2020, the Utilities accrued $0.9 million in estimated rewards for call center performance, net of service reliability penalties, for 2020. The net service quality performance rewards related to 2020 was reflected in the 2021 annual decoupling filing and pending PUC’s approval, will increase customer rates effective June 1, 2021.
Phase 1 RFP PIM. 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. Half of the incentive was earned upon PUC approval of the PPAs. Based on the 7 PPAs approved in 2019, the Utilities recognized $1.7 million in 2019 with the remaining award to be recognized in the year following the in-service date of the projects, which is estimated to occur from 2023 to 2024.
Phase 2 RFP PIMs. The PUC order issued on October 9, 2019 establishes pricing thresholds, timelines to complete contracting, and other performance criteria for the performance incentive eligibility. The PIMs provide incentives only without penalties. The order requires contracts under the Grid Service RFP be filed for approval by May 2020 (subsequently extended to July 9, 2020), and by September 2020 under the Renewable RFPs, with a declining PIM for projects that are not filed by these deadlines. On July 9, 2020, the Utilities filed 2 Grid Service Purchase Agreements for the Grid Service RFP, which qualify for PIMs, however, details of the incentive metrics will be determined by PUC. On September 15, 2020, the Utilities filed 8 power purchase agreements for the Phase 2 RFP. Of those 8, only 1 project qualified for a potential PIM incentive. On February 16, 2021, the Utilities filed 1 additional power purchase agreement that qualifies for the declining PIM. On December 31, 2020, the PUC approved the 2 Grid Services Purchase Agreements without further clarification regarding the PIM. The Utility has filed a letter to the PUC in January 2021 to seek guidance to the next step of defining the details of the incentive metrics.
The PUC established the following 2 new PIMs in its PBR D&O, which were approved in an order issued on March 23, 2021. The effective date for these PIM tariffs is June 1, 2021.
Renewable portfolio standard (RPS)-A PIM that provides a financial reward for accelerating the achievement of RPS goals. The Utilities may earn a reward for the amount of system generation above the interpolated statutory RPS goal at $20/MWh in 2021 and 2022, $15/MWh in 2023, and $10/MWh for the remainder of the multi-year rate period (MRP). Penalties are already prescribed in the RPS as $20/MWh for failing to meet RPS targets in 2030, 2040 and 2045. The evaluation period commenced on January 1, 2021.
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Grid Services Procurement PIM that provides financial rewards for grid services acquired in 2021 and 2022. The Utilities can earn a total maximum reward of $1.5 million over 2021 and 2022. The evaluation period commenced on January 1, 2021.
The PUC also established the following 3 new PIMs in its PBR D&O, which are subject to PUC final design approval anticipated by June 1, 2021.
Interconnection Approval PIM that provides financial rewards and penalties for interconnection times for distributed energy resources systems <100 kW in size. The Utilities can earn a total annual maximum reward of $3.0 million or a total annual maximum penalty of $0.9 million. The evaluation period commenced on January 1, 2021.
Low-to-Moderate Income (LMI) Energy Efficiency PIM that provides financial rewards for collaboration between the Utilities and the third-party Public Benefits Fee Administrator to deliver energy savings for low- and moderate-income customers. The rewards for the PIM metrics will be collectively capped at $2.0 million. The PIM will initially have a duration of three years and be subject to an annual review. The evaluation period will commence as of the date of the effective tariff.
Advanced Metering Infrastructure (AMI) Utilization PIM that provides financial rewards for acceleration of the number of customers with advanced meters enabled to support time-varying rates and next generation distributed energy resources programs. The Utilities can earn a total annual maximum reward of $2.0 million. The evaluation period will commence as of the date of the effective tariff.
Annual decoupling filings. The Utilities filed annual decoupling filings on March 31, 2021, which are subject to PUC approval. The net annual incremental amounts proposed to be collected (refunded) from June 1, 2021 through December 31, 2021 are as follows:
(in millions)Hawaiian ElectricHawaii Electric LightMaui ElectricTotal
2021 Annual incremental RAM adjusted revenues and ARA revenues$(13.8)$(2.0)$(5.9)$(21.7)
Annual change in accrued RBA balance as of December 31, 2020 (and associated revenue taxes)10.4 5.7 8.9 25.0 
Incremental Performance Incentive Mechanisms (net)0.2 0.5 0.7 
Incremental MPIR/EPRM Revenue Adjustment12.6 0.1 0.1 12.8
Incremental Affiliate Transaction Refund/PUC Ordered AdjustmentN/A2.0 2.0
Net annual incremental amount to be collected under the tariffs$9.1 $4.0 $5.6 $18.7 
Note: Columns may not foot due to rounding.
Most recent rate proceedings.
Hawaiian Electric 2020 test year rate case. On October 22, 2020, the PUC issued a final D&O approving the stipulated settlement agreement filed in the proceeding. As a result, there will be no increase in base electric rates established in the 2017 test year rate case. In the final D&O, the PUC approved the capital structure that consists of a 58% total equity ratio, and a ROACE of 9.5% for the 2020 test year. The resulting return on rate base (RORB) is 7.37%. The D&O approved the agreement to implement the overall lower depreciation rates approved in the last depreciation study proceeding, effective January 1, 2020. See “Annual revenue adjustment mechanism” under “Performance-based regulation framework” above, regarding the PUC’s decision on the treatment of Hawaiian Electric’s Management Audit savings commitment. Hawaiian Electric’s proposed RBA provision tariff and ECRC tariff submitted on November 6, 2020 were approved by the PUC on December 11, 2020 and took effect on January 1, 2021.
Hawaii Electric Light 2019 test year rate case. On July 28, 2020, the PUC issued a final D&O, approving the Stipulated Partial Settlement Letter in part and ordering final rates for the 2019 test year to remain at current effective rates such that there is a zero increase in rates. The PUC determined that an appropriate ROACE for the 2019 test year is 9.5%, approved a capital structure of 58% total equity and approved as fair a 7.52% RORB. In addition, the order, among others, (1) approved a 10-year amortization period for the state investment tax credit; and (2) approved a modification to Hawaii Electric Light’s ECRC to incorporate a 98%/2% risk-sharing split between customers and Hawaii Electric Light with an annual maximum exposure cap of +/- $600,000. The proposed final tariffs and PIM tariffs took effect on November 1, 2020, and the ECRC tariff took effect on January 1, 2021.
Regulatory assets for COVID-19 related costs. On May 4, 2020, the PUC issued an order, authorizing all utilities, including the Utilities, to establish regulatory assets to record costs resulting from the suspension of disconnections of service during the
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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - continued (Unaudited)
pendency of the Governor’s Emergency Proclamation and until otherwise ordered by the PUC. In future proceedings, the PUC will consider the reasonableness of the costs, the appropriate period of recovery, any amount of carrying costs thereon, and any savings directly attributable to suspension of disconnects, and other related matters. As part of the order, the PUC prohibits the Utilities from charging late payment fees on past due payments. On June 30, 2020, the PUC issued an order approving the Utilities’ request made in April 2020 for deferral treatment of COVID-19 related costs through December 31, 2020. On March 8, 2021, the PUC approved the Utilities’ request to extend the deferral period to June 30, 2021. The Utilities are required to file quarterly reports to update the Utilities’ financial condition, report measures in place to assist their customers during the COVID-19 emergency situation, identify the planned deferred costs and details for the deferred costs, and identify funds received or benefits received that have resulted from the COVID-19 emergency period. The recovery of the regulatory assets would be determined in a subsequent proceeding and management believes the deferred costs are probable of recovery. In addition, starting in December 2020 and monthly moving forward until otherwise ordered by the PUC, the Utilities are required to file information on, among other things, number of customers, arrears balances, payment arrangements entered into, and available assistance used to assists customer bill payment. The monthly report is intended to assist the PUC in determining next steps regarding appropriate regulatory measures. As of March 31, 2021, the Utilities recorded a total of $22.2 million in regulatory assets pursuant to the orders.
Condensed consolidating financial information. Condensed consolidating financial information for Hawaiian Electric and its subsidiaries are presented for the three month periods ended March 31, 2021 and 2020, and as of March 31, 2021 and December 31, 2020.
Hawaiian Electric 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, and (b) under their respective private placement note agreements and the Hawaii Electric Light notes and Maui Electric notes issued thereunder. 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.
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Hawaiian Electric Company, Inc. and Subsidiaries
Condensed Consolidating Statement of Income
Three months ended March 31, 2021

(in thousands)Hawaiian ElectricHawaii Electric LightMaui ElectricOther subsidiariesConsolidating adjustmentsHawaiian Electric
Consolidated
Revenues$400,554 85,149 79,181 (20)$564,864 
Expenses
Fuel oil88,728 16,485 22,214 127,427 
Purchased power108,604 21,597 12,095 142,296 
Other operation and maintenance77,335 17,912 19,323 114,570 
Depreciation38,914 10,048 8,393 57,355 
Taxes, other than income taxes38,627 7,993 7,482 54,102 
   Total expenses352,208 74,035 69,507 495,750 
Operating income48,346 11,114 9,674 (20)69,114 
Allowance for equity funds used during construction1,748 132 311 2,191 
Equity in earnings of subsidiaries12,510 (12,510)
Retirement defined benefits expense—other than service costs886 168 (33)1,021 
Interest expense and other charges, net(12,832)(2,581)(2,590)20 (17,983)
Allowance for borrowed funds used during construction591 44 112 747 
Income before income taxes51,249 8,877 7,474 (12,510)55,090 
Income taxes7,621 2,051 1,561 11,233 
Net income43,628 6,826 5,913 (12,510)43,857 
Preferred stock dividends of subsidiaries134 95 229 
Net income attributable to Hawaiian Electric43,628 6,692 5,818 (12,510)43,628 
Preferred stock dividends of Hawaiian Electric270 270 
Net income for common stock$43,358 6,692 5,818 (12,510)$43,358 


Hawaiian Electric Company, Inc. and Subsidiaries
Condensed Consolidating Statement of Comprehensive Income
Three months ended March 31, 2021

(in thousands)Hawaiian ElectricHawaii Electric LightMaui ElectricOther subsidiariesConsolidating adjustmentsHawaiian Electric Consolidated
Net income for common stock$43,358 6,692 5,818 (12,510)$43,358 
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 taxes5,845 835 761 (1,596)5,845 
Reclassification adjustment for impact of D&Os of the PUC included in regulatory assets, net of taxes(5,811)(834)(761)1,595 (5,811)
Other comprehensive income, net of taxes34 (1)34 
Comprehensive income attributable to common shareholder$43,392 6,693 5,818 (12,511)$43,392 

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - continued (Unaudited)

Hawaiian Electric Company, Inc. and Subsidiaries
Condensed Consolidating Statement of Income
Three months ended March 31, 2020


(in thousands)Hawaiian ElectricHawaii Electric LightMaui ElectricOther subsidiariesConsolidating adjustmentsHawaiian Electric
Consolidated
Revenues$421,166 89,293 87,198 (215)$597,442 
Expenses
Fuel oil120,535 22,432 30,254 173,221 
Purchased power107,951 19,521 12,344 139,816 
Other operation and maintenance85,637 19,104 22,806 127,547 
Depreciation38,011 9,760 8,079 55,850 
Taxes, other than income taxes40,501 8,342 8,207 57,050 
   Total expenses392,635 79,159 81,690 553,484 
Operating income28,531 10,134 5,508 (215)43,958 
Allowance for equity funds used during construction1,743 119 153 2,015 
Equity in earnings of subsidiaries8,804 (8,804)
Retirement defined benefits expense—other than service costs(546)194 (29)(381)
Interest expense and other charges, net(12,002)(2,484)(2,323)215 (16,594)
Allowance for borrowed funds used during construction602 36 50 688 
Income before income taxes27,132 7,999 3,359 (8,804)29,686 
Income taxes2,957 1,798 527 005,282 
Net income24,175 6,201 2,832 (8,804)24,404 
Preferred stock dividends of subsidiaries134 95 0229 
Net income attributable to Hawaiian Electric24,175 6,067 2,737 (8,804)24,175 
Preferred stock dividends of Hawaiian Electric270 270 
Net income for common stock$23,905 6,067 2,737 (8,804)$23,905 


Hawaiian Electric Company, Inc. and Subsidiaries
Condensed Consolidating Statement of Comprehensive Income
Three months ended March 31, 2020

(in thousands)Hawaiian ElectricHawaii Electric LightMaui ElectricOther subsidiariesConsolidating adjustmentsHawaiian Electric Consolidated
Net income for common stock$23,905 6,067 2,737 (8,804)$23,905 
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 benefits5,184 748 652 (1,400)5,184 
Reclassification adjustment for impact of D&Os of the PUC included in regulatory assets, net of taxes(5,158)(747)(652)1,399 (5,158)
Other comprehensive income, net of taxes26 (1)26 
Comprehensive income attributable to common shareholder$23,931 6,068 2,737 (8,805)$23,931 

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - continued (Unaudited)

Hawaiian Electric Company, Inc. and Subsidiaries
Condensed Consolidating Balance Sheet
March 31, 2021
(in thousands)Hawaiian ElectricHawaii Electric LightMaui ElectricOther
subsi-
diaries
Consoli-
dating
adjustments
Hawaiian Electric
Consolidated
Assets      
Property, plant and equipment
Utility property, plant and equipment      
Land$42,411 5,606 3,594 $51,611 
Plant and equipment4,986,417 1,358,367 1,207,095 7,551,879 
Less accumulated depreciation(1,706,529)(604,021)(549,169)(2,859,719)
Construction in progress160,331 13,927 29,730 203,988 
Utility property, plant and equipment, net3,482,630 773,879 691,250 4,947,759 
Nonutility property, plant and equipment, less accumulated depreciation5,305 115 1,532 6,952 
Total property, plant and equipment, net3,487,935 773,994 692,782 4,954,711 
Investment in wholly owned subsidiaries, at equity631,976 (631,976)
Current assets      
Cash and cash equivalents29,727 7,730 14,209 77 51,743 
Restricted cash11,506 11,506 
Customer accounts receivable, net101,605 21,358 18,686 141,649 
Accrued unbilled revenues, net72,784 14,911 14,118 101,813 
Other accounts receivable, net12,967 3,006 3,570 (14,470)5,073 
Fuel oil stock, at average cost51,894 9,981 12,813 74,688 
Materials and supplies, at average cost40,395 9,873 19,458 69,726 
Prepayments and other29,769 3,534 3,791 (675)36,419 
Regulatory assets42,852 2,840 8,630 54,322 
Total current assets393,499 73,233 95,275 77 (15,145)546,939 
Other long-term assets      
Operating lease right-of-use assets123,992 14,198 344 138,534 
Regulatory assets501,393 111,700 106,011 719,104 
Other102,767 18,591 20,424 (6,162)135,620 
Total other long-term assets728,152 144,489 126,779 (6,162)993,258 
Total assets$5,241,562 991,716 914,836 77 (653,283)$6,494,908 
Capitalization and liabilities      
Capitalization      
Common stock equity$2,157,385 320,494 311,405 77 (631,976)$2,157,385 
Cumulative preferred stock—not subject to mandatory redemption22,293 7,000 5,000 34,293 
Long-term debt, net1,176,229 246,310 253,324 1,675,863 
Total capitalization3,355,907 573,804 569,729 77 (631,976)3,867,541 
Current liabilities      
Current portion of operating lease liabilities64,423 1,844 34 66,301 
Accounts payable87,437 16,037 19,725 123,199 
Interest and preferred dividends payable20,075 3,698 4,400 (1)28,172 
Taxes accrued, including revenue taxes107,552 25,372 22,876 (675)155,125 
Regulatory liabilities17,000 5,901 7,469 30,370 
Other55,478 11,951 17,189 (14,618)70,000 
Total current liabilities351,965 64,803 71,693 (15,294)473,167 
Deferred credits and other liabilities      
Operating lease liabilities71,431 12,353 318 84,102 
Deferred income taxes282,513 53,582 60,663 396,758 
Regulatory liabilities658,584 174,820 92,365 925,769 
Unamortized tax credits81,297 15,126 13,758 110,181 
Defined benefit pension and other postretirement benefit plans liability373,376 76,357 78,566 (6,013)522,286 
Other66,489 20,871 27,744 115,104 
Total deferred credits and other liabilities1,533,690 353,109 273,414 (6,013)2,154,200 
Total capitalization and liabilities$5,241,562 991,716 914,836 77 (653,283)$6,494,908 

21


NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - continued (Unaudited)

Hawaiian Electric Company, Inc. and Subsidiaries
Condensed Consolidating Balance Sheet
December 31, 2020
(in thousands)Hawaiian ElectricHawaii Electric LightMaui ElectricOther
subsi-diaries
Consoli-
dating
adjustments
Hawaiian Electric
Consolidated
Assets      
Property, plant and equipment
Utility property, plant and equipment      
Land$42,411 5,606 3,594 $51,611 
Plant and equipment4,960,470 1,352,885 1,195,988 7,509,343 
Less accumulated depreciation(1,677,256)(597,606)(544,217)(2,819,079)
Construction in progress143,616 13,043 31,683 188,342 
Utility property, plant and equipment, net3,469,241 773,928 687,048 4,930,217 
Nonutility property, plant and equipment, less accumulated depreciation5,306 115 1,532 6,953 
Total property, plant and equipment, net3,474,547 774,043 688,580 4,937,170 
Investment in wholly owned subsidiaries, at equity
626,890 (626,890)
Current assets      
Cash and cash equivalents42,205 3,046 2,032 77 47,360 
Restricted cash15,966 15,966 
Advances to affiliates26,700 (26,700)
Customer accounts receivable, net102,736 23,989 21,107 147,832 
Accrued unbilled revenues, net73,628 13,631 13,777 101,036 
Other accounts receivable, net17,984 3,028 2,856 (16,195)7,673 
Fuel oil stock, at average cost38,777 8,471 10,990 58,238 
Materials and supplies, at average cost38,786 9,896 18,662 67,344 
Prepayments and other34,306 5,197 4,580 44,083 
Regulatory assets22,095 1,954 6,386 30,435 
Total current assets413,183 69,212 80,390 77 (42,895)519,967 
Other long-term assets      
Operating lease right-of-use assets125,858 1,443 353 127,654 
Regulatory assets513,192 114,461 108,620 736,273 
Other98,307 17,992 20,010 136,309 
Total other long-term assets737,357 133,896 128,983 1,000,236 
Total assets$5,251,977 977,151 897,953 77 (669,785)$6,457,373 
Capitalization and liabilities      
Capitalization
Common stock equity$2,141,918 317,451 309,363 77 (626,891)$2,141,918 
Cumulative preferred stock—not subject to mandatory redemption22,293 7,000 5,000 34,293 
Long-term debt, net1,116,426 216,447 228,429 1,561,302 
Total capitalization3,280,637 540,898 542,792 77 (626,891)3,737,513 
Current liabilities     
Current portion of operating lease liabilities64,599 98 33 64,730 
Short-term borrowings-non-affiliate49,979 49,979 
Short-term borrowings-affiliate18,800 7,900 (26,700)
Accounts payable97,102 19,570 17,177 133,849 
Interest and preferred dividends payable14,480 3,138 2,790 (58)20,350 
Taxes accrued, including revenue taxes135,018 29,869 27,637 192,524 
Regulatory liabilities20,224 8,785 8,292 37,301 
Other57,926 13,851 18,621 (16,136)74,262 
Total current liabilities439,328 94,111 82,450 (42,894)572,995 
Deferred credits and other liabilities     
Operating lease liabilities67,824 1,344 326 69,494 
Deferred income taxes282,685 54,108 61,005 397,798 
Regulatory liabilities656,270 173,938 92,277 922,485 
Unamortized tax credits82,563 15,363 13,989 111,915 
Defined benefit pension and other postretirement benefit plans liability373,112 77,679 79,741 530,532 
Other69,558 19,710 25,373 114,641 
Total deferred credits and other liabilities1,532,012 342,142 272,711 2,146,865 
Total capitalization and liabilities$5,251,977 977,151 897,953 77 (669,785)$6,457,373 

22


NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - continued (Unaudited)

Hawaiian Electric Company, Inc. and Subsidiaries
Condensed Consolidating Statement of Changes in Common Stock Equity
Three months ended March 31, 2021
(in thousands)Hawaiian ElectricHawaii Electric LightMaui ElectricOther
subsidiaries
Consolidating
adjustments
Hawaiian Electric
Consolidated
Balance, December 31, 2020$2,141,918 317,451 309,363 77 (626,891)$2,141,918 
Net income for common stock43,358 6,692 5,818 — (12,510)43,358 
Other comprehensive income, net of taxes34 — — (1)34 
Common stock dividends(27,925)(3,650)(3,776)— 7,426 (27,925)
Balance, March 31, 2021$2,157,385 320,494 311,405 77 (631,976)$2,157,385 
 
Hawaiian Electric Company, Inc. and Subsidiaries
Condensed Consolidating Statement of Changes in Common Stock Equity
Three months ended March 31, 2020  
(in thousands)Hawaiian ElectricHawaii Electric LightMaui ElectricOther
subsidiaries
Consolidating
adjustments
Hawaiian Electric
Consolidated
Balance, December 31, 2019$2,047,352 298,998 292,870 101 (591,969)$2,047,352 
Net income for common stock23,905 6,067 2,737 — (8,804)23,905 
Other comprehensive income, net of taxes26 — — (1)26 
Common stock dividends(26,784)(4,080)(3,596)— 7,676 (26,784)
Common stock issuance expenses— — (1)— 
Balance, March 31, 2020$2,044,499 300,986 292,010 101 (593,097)$2,044,499 

23


NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - continued (Unaudited)

Hawaiian Electric Company, Inc. and Subsidiaries
Condensed Consolidating Statement of Cash Flows
Three months ended March 31, 2021
(in thousands)Hawaiian ElectricHawaii Electric LightMaui ElectricOther
subsidiaries
Consolidating
adjustments
Hawaiian Electric
Consolidated
Net cash provided by operating activities$18,764 9,635 10,988 (7,426)$31,961 
Cash flows from investing activities      
Capital expenditures(45,293)(12,728)(12,340)(70,361)
Advances from affiliates26,700 (26,700)
Other1,182 372 309 1,863 
Net cash used in investing activities(17,411)(12,356)(12,031)(26,700)(68,498)
Cash flows from financing activities      
Common stock dividends(27,925)(3,650)(3,776)7,426 (27,925)
Preferred stock dividends of Hawaiian Electric and subsidiaries(270)(134)(95)(499)
Repayment of short-term debt(50,000)(50,000)
Proceeds from issuance of long-term debt60,000 30,000 25,000 115,000 
Net decrease in short-term borrowings from non-affiliates and affiliate with original maturities of three months or less(18,800)(7,900)26,700 
Other(96)(11)(9)(116)
Net cash provided by (used in) financing activities(18,291)7,405 13,220 34,126 36,460 
Net increase (decrease) in cash and cash equivalents(16,938)4,684 12,177 (77)
Cash, cash equivalents and restricted cash, beginning of period58,171 3,046 2,032 77 63,326 
Cash, cash equivalents and restricted cash, end of period41,233 7,730 14,209 77 63,249 
Less: Restricted cash(11,506)(11,506)
Cash and cash equivalents, end of period$29,727 7,730 14,209 77 $51,743 

24


NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - continued (Unaudited)

Hawaiian Electric Company, Inc. and Subsidiaries
Condensed Consolidating Statement of Cash Flows
Three months ended March 31, 2020
(in thousands)Hawaiian ElectricHawaii Electric LightMaui ElectricOther
subsidiaries
Consolidating
adjustments
Hawaiian Electric
Consolidated
Net cash provided by operating activities$29,004 9,478 7,931 (7,272)$39,141 
Cash flows from investing activities                                                                                                                                        
Capital expenditures(83,191)(18,181)(17,772)(119,144)
Advances from (to) affiliates(17,000)8,000 9,000 
Other2,752 64 301 (404)2,713 
Net cash used in investing activities(97,439)(10,117)(17,471)8,596 (116,431)
Cash flows from financing activities     
Common stock dividends(26,784)(4,080)(3,596)7,676 (26,784)
Preferred stock dividends of Hawaiian Electric and subsidiaries(270)(134)(95)(499)
Proceeds from issuance of short-term debt50,000 50,000 
Proceeds from issuance of long-term debt95,000 95,000 
Net increase (decrease) in short-term borrowings from non-affiliates and affiliate with original maturities of three months or less(46,987)2,500 14,500 (9,000)(38,987)
Other(21)(1)(1)(23)
Net cash provided by (used in) financing activities70,938 (1,715)10,808 (1,324)78,707 
Net increase (decrease) in cash and cash equivalents2,503 (2,354)1,268 1,417 
Cash, cash equivalents and restricted cash, beginning of period32,988 7,008 1,797 101 41,894 
Cash, cash equivalents and restricted cash, end of period35,491 4,654 3,065 101 43,311 
Less: Restricted cash(30,902)(30,902)
Cash and cash equivalents, end of period$4,589 4,654 3,065 101 $12,409 

25


NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - continued (Unaudited)
Note 4 · Bank segment
Selected financial information
American Savings Bank, F.S.B.
Statements of Income and Comprehensive Income Data
 Three months ended March 31
(in thousands)20212020
Interest and dividend income  
Interest and fees on loans$49,947 $55,545 
Interest and dividends on investment securities8,673 9,430 
Total interest and dividend income58,620 64,975 
Interest expense  
Interest on deposit liabilities1,462 3,587 
Interest on other borrowings27 313 
Total interest expense1,489 3,900 
Net interest income57,131 61,075 
Provision for credit losses(8,435)10,401 
Net interest income after provision for credit losses65,566 50,674 
Noninterest income  
Fees from other financial services5,073 4,571 
Fee income on deposit liabilities3,863 5,113 
Fee income on other financial products2,442 1,872 
Bank-owned life insurance2,561 794 
Mortgage banking income4,300 2,000 
Gain on sale of investment securities, net528 
Other income, net272 413 
Total noninterest income19,039 14,763 
Noninterest expense  
Compensation and employee benefits28,037 25,777 
Occupancy4,969 5,267 
Data processing4,351 3,837 
Services2,862 2,809 
Equipment2,222 2,339 
Office supplies, printing and postage1,044 1,341 
Marketing648 802 
FDIC insurance816 102 
Other expense2,554 4,194 
Total noninterest expense47,503 46,468 
Income before income taxes37,102 18,969 
Income taxes7,546 3,208 
Net income29,556 15,761 
Other comprehensive income (loss), net of taxes(45,754)19,847 
Comprehensive income (loss)$(16,198)$35,608 


26


NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - continued (Unaudited)

Reconciliation to amounts per HEI Condensed Consolidated Statements of Income*:
 Three months ended March 31
(in thousands)20212020
Interest and dividend income$58,620 $64,975 
Noninterest income19,039 14,763 
Less: Gain on sale of investment securities, net528 
*Revenues-Bank77,131 79,738 
Total interest expense1,489 3,900 
Provision for credit losses(8,435)10,401 
Noninterest expense47,503 46,468 
Less: Retirement defined benefits expense (credit)—other than service costs(1,278)434 
*Expenses-Bank41,835 60,335 
*Operating income-Bank35,296 19,403 
Add back: Retirement defined benefits expense (credit)—other than service costs(1,278)434 
Add back: Gain on sale of investment securities, net528 
Income before income taxes$37,102 $18,969 


27


NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - continued (Unaudited)
American Savings Bank, F.S.B.
Balance Sheets Data
(in thousands)March 31, 2021December 31, 2020
Assets    
Cash and due from banks $113,698  $178,422 
Interest-bearing deposits110,365 114,304 
Cash and cash equivalents224,063 292,726 
Investment securities
Available-for-sale, at fair value 2,305,257  1,970,417 
Held-to-maturity, at amortized cost (fair value of $285,599 and $229,963, respectively)295,046 226,947 
Stock in Federal Home Loan Bank, at cost 10,000  8,680 
Loans held for investment 5,310,081  5,333,843 
Allowance for credit losses (91,793) (101,201)
Net loans 5,218,288  5,232,642 
Loans held for sale, at lower of cost or fair value 23,637  28,275 
Other 559,543  554,656 
Goodwill 82,190  82,190 
Total assets $8,718,024  $8,396,533 
Liabilities and shareholder’s equity    
Deposit liabilities—noninterest-bearing $2,833,844  $2,598,500 
Deposit liabilities—interest-bearing 4,911,450  4,788,457 
Other borrowings 102,685  89,670 
Other 154,418  183,731 
Total liabilities 8,002,397  7,660,358 
Commitments and contingencies 0 0
Common stock  
Additional paid-in capital352,408 351,758 
Retained earnings 394,026  369,470 
Accumulated other comprehensive income (loss), net of taxes    
Net unrealized gains (losses) on securities$(25,791) $19,986 
Retirement benefit plans(5,017)(30,808)(5,040)14,946 
Total shareholder’s equity715,627  736,175 
Total liabilities and shareholder’s equity $8,718,024  8,396,533 
Other assets    
Bank-owned life insurance $162,821  $163,265 
Premises and equipment, net 206,247  206,134 
Accrued interest receivable 24,381  24,616 
Mortgage-servicing rights 10,685  10,020 
Low-income housing investments80,791 83,435 
Other 74,618  67,186 
  $559,543  $554,656 
Other liabilities    
Accrued expenses $55,073  $62,694 
Federal and state income taxes payable 1,709  6,582 
Cashier’s checks 29,363  38,011 
Advance payments by borrowers 5,863  10,207 
Other 62,410  66,237 
  $154,418  $183,731 
    
28


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, federal funds purchased and advances from the Federal Home Loan Bank (FHLB) of $102.7 million, NaN and NaN, respectively, as of March 31, 2021 and $89.7 million, NaN and NaN, respectively, as of December 31, 2020.
Investment securities.  The major components of investment securities were as follows:
 Amortized costGross unrealized gainsGross unrealized lossesEstimated fair
value
Gross unrealized losses
 Less than 12 months12 months or longer
(dollars in thousands)Number of issuesFair 
value
AmountNumber of issuesFair 
value
Amount
March 31, 2021        
Available-for-sale
U.S. Treasury and federal agency obligations$55,969 $1,719 $(41)$57,647 $4,908 $(41)$$
Mortgage-backed securities*2,239,311 15,404 (53,363)2,201,352 92 1,613,008 (53,344)958 (19)
Corporate bonds29,781 1,050 30,831 
Mortgage revenue bonds15,427 15,427 
 $2,340,488 $18,173 $(53,404)$2,305,257 93 $1,617,916 $(53,385)$958 $(19)
Held-to-maturity
Mortgage-backed securities*$295,046 $2,812 $(12,259)$285,599 16 $220,908 $(12,259)$$
 $295,046 $2,812 $(12,259)$285,599 16 $220,908 $(12,259)$$
December 31, 2020
Available-for-sale
U.S. Treasury and federal agency obligations$60,260 $2,062 $$62,322 $$$$
Mortgage-backed securities*1,825,893 26,817 (3,151)1,849,559 22 373,924 (3,151)
Corporate bonds29,776 1,575 31,351 
Mortgage revenue bonds27,185 27,185 
 $1,943,114 $30,454 $(3,151)$1,970,417 22 $373,924 $(3,151)$$
Held-to-maturity
Mortgage-backed securities*$226,947 $3,846 $(830)$229,963 $114,152 $(830)$$
 $226,947 $3,846 $(830)$229,963 $114,152 $(830)$$
* Issued or guaranteed by U.S. Government agencies or sponsored agencies
ASB does not believe that the investment securities that were in an unrealized loss position at March 31, 2021, represent a credit loss. Total gross unrealized losses were primarily attributable to change in market conditions. On a quarterly basis the investment securities are evaluated for changes in financial condition of the issuer. Based upon ASB’s evaluation, all securities held within the investment portfolio continue to be investment grade by one or more agencies. The contractual cash flows of the U.S. Treasury, federal agency obligations and agency mortgage-backed securities are backed by the full faith and credit guaranty of the United States government or an agency of the government. 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’s investment securities portfolio did not require an allowance for credit losses at March 31, 2021 and December 31, 2020.
U.S. Treasury, federal agency obligations, corporate bonds, and mortgage revenue bonds have contractual terms to maturity. 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.
29


NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - continued (Unaudited)
The contractual maturities of investment securities were as follows:
March 31, 2021Amortized costFair value
(in thousands)  
Available-for-sale
Due in one year or less$11,996 $12,011 
Due after one year through five years43,530 45,180 
Due after five years through ten years30,224 31,287 
Due after ten years15,427 15,427 
 101,177 103,905 
Mortgage-backed securities — issued or guaranteed by U.S. Government agencies or sponsored agencies2,239,311 2,201,352 
Total available-for-sale securities$2,340,488 $2,305,257 
Held-to-maturity
Mortgage-backed securities — issued or guaranteed by U.S. Government agencies or sponsored agencies$295,046 $285,599 
Total held-to-maturity securities$295,046 $285,599 
Proceeds from the sale of available-for-sale securities were $197.4 million and NaN, respectively, for the three months ended March 31, 2021 and 2020. Gross realized gains and losses for the three months ended March 31, 2021 were $1.0 million and $0.5 million, respectively. Gross realized gains and losses for the three months ended March 31, 2020 were NaN.
Loans. The components of loans were summarized as follows:
March 31, 2021December 31, 2020
(in thousands)  
Real estate:  
Residential 1-4 family$2,107,537 $2,144,239 
Commercial real estate1,012,968 983,865 
Home equity line of credit901,462 963,578 
Residential land17,468 15,617 
Commercial construction114,455 121,424 
Residential construction13,365 11,022 
Total real estate4,167,255 4,239,745 
Commercial1,010,004 936,748 
Consumer148,511 168,733 
Total loans5,325,770 5,345,226 
          Deferred fees and discounts(15,689)(11,383)
          Allowance for credit losses(91,793)(101,201)
Total loans, net$5,218,288 $5,232,642 
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 property purchases, the loan-to-value ratio may not exceed 75% of the lower of the appraised value or purchase price at origination.
30


NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - continued (Unaudited)
Allowance for credit losses. The allowance for credit losses (balances and changes) by portfolio segment were as follows:
(in thousands)Residential
1-4 family
Commercial real
estate
Home
equity line of credit
Residential landCommercial constructionResidential constructionCommercial loansConsumer loansTotal
Three months ended March 31, 2021        
Allowance for credit losses:         
Beginning balance$4,600 $35,607 $6,813 $609 $4,149 $11 $25,462 $23,950 $101,201 
Charge-offs(50)(771)(2,860)(3,681)
Recoveries15 10 273 1,007 1,308 
Provision658 (1,262)(877)(46)(2,696)(460)(2,357)(7,035)
Ending balance$5,261 $34,345 $5,901 $573 $1,453 $16 $24,504 $19,740 $91,793 
Three months ended March 31, 2020        
Allowance for credit losses:         
Beginning balance, prior to adoption of ASU No. 2016-13
$2,380 $15,053 $6,922 $449 $2,097 $$10,245 $16,206 $53,355 
Impact of adopting ASU No. 2016-13
2,150 208 (541)(64)289 14 922 16,463 19,441 
Charge-offs(8)(369)(6,254)(6,631)
Recoveries53 186 764 1,018 
Provision(107)1,326 (162)(34)1,060 (3)1,993 5,828 9,901 
Ending balance$4,476 $16,587 $6,225 $352 $3,446 $14 $12,977 $33,007 $77,084 

Allowance for loan commitments. The allowance for loan commitments by portfolio segment were as follows:
(in thousands)Home equity
 line of credit
Commercial constructionCommercial loansTotal
Three months ended March 31, 2021
Allowance for loan commitments:
Beginning balance$300 $3,000 $1,000 $4,300 
Provision100 (1,700)200 (1,400)
Ending balance$400 $1,300 $1,200 $2,900 
Three months ended March 31, 2020
Allowance for loan commitments:
Beginning balance, prior to adoption of ASU No. 2016-13$392 $931 $418 $1,741 
Impact of adopting ASU No. 2016-13
(92)1,745 (94)1,559 
Provision515 (15)500 
Ending balance$300 $3,191 $309 $3,800 
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.
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 ASB 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.
31


NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - continued (Unaudited)
The credit risk profile by vintage date based on payment activity or internally assigned grade for loans was as follows:
Term Loans by Origination YearRevolving Loans
(in thousands)20212020201920182017PriorRevolvingConverted to term loansTotal
March 31, 2021
Residential 1-4 family
Current$150,713 $549,327 $184,339 $97,560 $179,131 $934,471 $$$2,095,541 
30-59 days past due280 2,081 2,361 
60-89 days past due3,018 431 1,954 5,403 
Greater than 89 days past due942 3,290 4,232 
150,713 549,607 188,299 97,991 179,131 941,796 2,107,537 
Home equity line of credit
Current861,116 36,792 897,908 
30-59 days past due659 473 1,132 
60-89 days past due261 73 334 
Greater than 89 days past due1,243 845 2,088 
863,279 38,183 901,462 
Residential land
Current2,794 8,354 2,884 1,290 855 292 16,469 
30-59 days past due699 699 
60-89 days past due
Greater than 89 days past due300 300 
2,794 8,354 2,884 1,290 855 1,291 17,468 
Residential construction
Current1,114 7,865 3,344 383 659 13,365 
30-59 days past due
60-89 days past due
Greater than 89 days past due
1,114 7,865 3,344 383 659 13,365 
Consumer
Current6,658 25,307 57,781 29,734 4,219 475 16,332 3,729 144,235 
30-59 days past due125 164 577 452 90 106 125 1,640 
60-89 days past due149 623 372 119 80 92 1,436 
Greater than 89 days past due218 356 280 56 199 90 1,200 
6,783 25,838 59,337 30,838 4,484 478 16,717 4,036 148,511 
Commercial real estate
Pass23,091 274,952 69,384 60,627 28,174 222,617 11,000 689,845 
Special Mention4,914 29,597 57,489 51,586 97,247 240,833 
Substandard14,647 4,170 1,877 61,596 82,290 
Doubtful
23,091 279,866 113,628 122,286 81,637 381,460 11,000 1,012,968 
Commercial construction
Pass21,414 39,513 26,990 2,917 20,972 111,806 
Special Mention245 2,404 2,649 
Substandard
Doubtful
245 23,818 39,513 26,990 2,917 20,972 114,455 
Commercial
Pass169,095 337,753 96,251 60,462 28,545 51,072 91,178 19,666 854,022 
Special Mention65 38,316 15,024 1,820 6,725 33,990 26,301 26 122,267 
Substandard275 7,921 2,004 3,765 11,276 6,665 1,809 33,715 
Doubtful
169,160 376,344 119,196 64,286 39,035 96,338 124,144 21,501 1,010,004 
Total loans$353,900 $1,271,692 $526,201 $344,064 $305,801 $1,424,280 $1,036,112 $63,720 $5,325,770 

32


NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - continued (Unaudited)
Term Loans by Origination YearRevolving Loans
(in thousands)20202019201820172016PriorRevolvingConverted to term loansTotal
December 31, 2020
Residential 1-4 family
Current$567,282 $218,988 $111,243 $203,916 $184,888 $849,788 $$$2,136,105 
30-59 days past due2,629 2,629 
60-89 days past due476 2,314 2,790 
Greater than 89 days past due353 2,362 2,715 
567,282 219,464 111,243 204,269 184,888 857,093 2,144,239 
Home equity line of credit
Current927,106 33,228 960,334 
30-59 days past due552 298 850 
60-89 days past due267 75 342 
Greater than 89 days past due1,463 589 2,052 
929,388 34,190 963,578 
Residential land
Current8,357 3,427 1,598 939 22 272 14,615 
30-59 days past due702 702 
60-89 days past due
Greater than 89 days past due300 300 
8,357 3,427 1,598 939 22 1,274 15,617 
Residential construction
Current6,919 3,093 385 625 11,022 
30-59 days past due
60-89 days past due
Greater than 89 days past due
6,919 3,093 385 625 11,022 
Consumer
Current28,818 67,159 37,072 7,207 293 348 18,351 3,758 163,006 
30-59 days past due406 1,085 727 155 138 90 2,605 
60-89 days past due191 549 427 165 97 59 1,491 
Greater than 89 days past due131 532 409 119 262 171 1,631 
29,546 69,325 38,635 7,646 307 348 18,848 4,078 168,733 
Commercial real estate
Pass270,603 63,301 62,168 28,432 55,089 155,654 11,000 646,247 
Special Mention10,261 36,405 57,952 33,763 68,287 48,094 254,762 
Substandard14,720 4,181 1,892 4,423 57,640 82,856 
Doubtful
280,864 114,426 124,301 64,087 127,799 261,388 11,000 983,865 
Commercial construction
Pass14,480 31,965 26,990 5,562 22,517 101,514 
Special Mention1,910 18,000 19,910 
Substandard
Doubtful
16,390 31,965 26,990 18,000 5,562 22,517 121,424 
Commercial
Pass392,088 117,791 75,533 29,211 12,520 35,770 74,520 11,004 748,437 
Special Mention37,836 23,087 1,920 6,990 30,264 13,250 31,362 11,218 155,927 
Substandard304 7,785 2,043 4,017 7,542 3,113 5,265 1,928 31,997 
Doubtful387 387 
430,228 148,663 79,496 40,218 50,326 52,133 111,534 24,150 936,748 
Total loans$1,339,586 $590,363 $382,648 $335,784 $368,904 $1,172,236 $1,093,287 $62,418 $5,345,226 
33


NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - continued (Unaudited)
Revolving loans converted to term loans during the three months ended March 31, 2021 in the commercial, home equity line of credit and consumer portfolios was $0.5 million, $6.2 million, and $0.7 million, respectively. Revolving loans converted to term loans during the three months ended March 31, 2020 in the commercial, home equity line of credit and consumer portfolios was $2.0 million, $1.8 million and $1.0 million, respectively.
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
CurrentTotal
financing
receivables
Amortized cost>
90 days and
accruing
March 31, 2021       
Real estate:       
Residential 1-4 family$2,361 $5,403 $4,232 $11,996 $2,095,541 $2,107,537 $
Commercial real estate1,681 1,681 1,011,287 1,012,968 
Home equity line of credit1,132 334 2,088 3,554 897,908 901,462 
Residential land699 300 999 16,469 17,468 
Commercial construction114,455 114,455 
Residential construction13,365 13,365 
Commercial146 47 73 266 1,009,738 1,010,004 
Consumer1,640 1,436 1,200 4,276 144,235 148,511 
Total loans$7,659 $7,220 $7,893 $22,772 $5,302,998 $5,325,770 $
December 31, 2020       
Real estate:       
Residential 1-4 family$2,629 $2,790 $2,715 $8,134 $2,136,105 $2,144,239 $
Commercial real estate488 488 983,377 983,865 
Home equity line of credit850 342 2,052 3,244 960,334 963,578 
Residential land702 300 1,002 14,615 15,617 
Commercial construction121,424 121,424 
Residential construction11,022 11,022 
Commercial608 300 132 1,040 935,708 936,748 
Consumer2,605 1,491 1,631 5,727 163,006 168,733 
Total loans$7,394 $5,411 $6,830 $19,635 $5,325,591 $5,345,226 $

The credit risk profile based on nonaccrual loans were as follows:
(in thousands)March 31, 2021December 31, 2020
With a Related ACLWithout a Related ACLTotalWith a Related ACLWithout a Related ACLTotal
Real estate:
Residential 1-4 family$16,945 $2,987 $19,932 $8,991 $2,835 $11,826 
Commercial real estate15,634 2,828 18,462 15,847 2,875 18,722 
Home equity line of credit5,075 1,587 6,662 5,791 1,567 7,358 
Residential land107 300 407 108 300 408 
Commercial construction
Residential construction
Commercial1,763 2,918 4,681 1,819 3,328 5,147 
Consumer3,192 3,192 3,935 3,935 
  Total$42,716 $10,620 $53,336 $36,491 $10,905 $47,396 

34


NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - continued (Unaudited)
The credit risk profile based on loans whose terms have been modified and accruing interest were as follows:
(in thousands)March 31, 2021December 31, 2020
Real estate:
Residential 1-4 family$7,453 $7,932 
Commercial real estate3,254 3,281 
Home equity line of credit7,727 8,148 
Residential land1,738 1,555 
Commercial construction
Residential construction
Commercial5,737 6,108 
Consumer54 54 
Total troubled debt restructured loans accruing interest$25,963 $27,078 

ASB did not recognize interest on nonaccrual loans for the three months ended March 31, 2021 and 2020.
Troubled debt restructurings.  A loan modification is deemed to be a TDR when the borrower is determined to be experiencing financial difficulties and ASB grants a concession it would not otherwise consider.
The allowance for credit losses on TDR loans that do not share risk characteristics are individually evaluated based on the present value of expected future cash flows discounted at the loan’s effective original contractual rate or based on the fair value of collateral less cost to sell. The financial impact of the estimated loss is an increase to the allowance associated with the modified loan. When available information confirms that specific loans or portions thereof are uncollectible (confirmed losses), these amounts are charged off against the allowance for credit losses.
Loan modifications that occurred during the first three months of 2021 and 2020 were as follows:
Loans modified as a TDRThree months ended March 31, 2021
(dollars in thousands)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 family12 $8,283 $298 
Commercial real estate482 
Home equity line of credit170 21 
Residential land271 11 
Commercial construction
Residential construction
Commercial59 19 
Consumer
 17 $9,265 $349 



35


NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - continued (Unaudited)

Three months ended March 31, 2020
(dollars in thousands)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$148 $
Commercial real estate16,584 4,281 
Home equity line of credit
Residential land
Commercial construction
Residential construction
Commercial756 278 
Consumer
 $17,488 $4,567 

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.

There were no loans modified in TDRs that experienced a payment default of 90 days or more during the first three months of 2021 and 2020.
If a loan modified in a TDR subsequently defaults, ASB evaluates the loan for further impairment. Based on its evaluation, adjustments may be made in the allocation of the allowance or partial charge-offs may be taken to further write-down the carrying value of the loan. Commitments to lend additional funds to borrowers whose loan terms have been modified in a TDR totaled NaN at March 31, 2021 and December 31, 2020.
The Coronavirus Aid, Relief, and Economic Security Act (CARES Act) provides that a financial institution may elect to suspend the requirements under GAAP for certain loan modifications that would otherwise be categorized as a TDR and any related impairment for accounting purposes.
In response to the COVID-19 pandemic, the Board of Governors of the FRB, the FDIC, the National Credit Union Administration, the OCC, and the Consumer Financial Protection Bureau, in consultation with the state financial regulators (collectively, the “agencies”) issued a joint interagency statement (issued March 22, 2020; revised statement issued April 7, 2020). Some of the provisions applicable to the Company include, but are not limited to accounting for loan modifications, past due reporting and nonaccrual status and charge-offs.
Loan modifications that do not meet the conditions of the CARES Act may still qualify as a modification that does not need to be accounted for as a TDR. The agencies confirmed with the FASB staff that short-term modifications made on a good faith basis in response to COVID-19 to borrowers who were current prior to any relief are not TDRs. This includes short-term (e.g., six months) modifications such as payment deferrals, fee waivers, extensions of repayment terms, or insignificant delays in payment. Financial institutions are not expected to designate loans with deferrals granted due to COVID-19 as past due because of the deferral. A loan’s payment date is governed by the due date stipulated in the legal agreement. If a financial institution agrees to a payment deferral, these loans would not be considered past due during the period of the deferral. Lastly, during short-term COVID-19 modifications, these loans generally should not be reported as nonaccrual or as classified.
36


NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - continued (Unaudited)
Collateral-dependent loans. A loan is considered collateral-dependent when the borrower is experiencing financial difficulty and repayment of the loan is expected to be provided substantially through the operation or sale of the collateral. Loans considered collateral-dependent were as follows:
March 31, 2021December 31, 2020
(in thousands)Amortized costAmortized costCollateral type
Real estate:
   Residential 1-4 family$2,782 $2,541  Residential real estate property
Commercial real estate2,828 2,875  Commercial real estate property
   Home equity line of credit1,587 1,567  Residential real estate property
Residential land300 300  Residential real estate property
     Total real estate7,497 7,283 
Commercial889 934  Business assets
     Total$8,386 $8,217 
ASB had $3.8 million of mortgage loans collateralized by residential real estate property that were in the process of foreclosure at March 31, 2021 and December 31, 2020.
Mortgage servicing rights (MSRs). In its mortgage banking business, ASB sells residential mortgage loans to government-sponsored entities and other parties, who may issue securities backed by pools of such loans. ASB retains no beneficial interests in these loans other than the servicing rights of certain loans sold.
ASB received proceeds from the sale of residential mortgages of $170.9 million and $72.5 million for the three months ended March 31, 2021 and 2020, respectively, and recognized gains on such sales of $4.3 million and $2.0 million for the three months ended March 31, 2021 and 2020, respectively.
There were no repurchased mortgage loans for the three months ended March 31, 2021 and 2020. The repurchase reserve was $0.1 million as of March 31, 2021 and 2020.
Mortgage servicing fees, a component of other income, net, were $0.9 million and $0.8 million for the three months ended March 31, 2021 and 2020, respectively.
Changes in the carrying value of MSRs were as follows:
(in thousands)
Gross
carrying amount1
Accumulated amortizationValuation allowanceNet
carrying amount
March 31, 2021$20,830 $(10,141)$(4)$10,685 
December 31, 202022,950 (12,670)(260)10,020 
1     Reflects impact of loans paid in full
Changes related to MSRs were as follows:
Three months ended March 31
(in thousands)20212020
Mortgage servicing rights
Beginning balance$10,280 $9,101 
Amount capitalized1,547 636 
Amortization(1,138)(617)
Other-than-temporary impairment
Carrying amount before valuation allowance10,689 9,120 
Valuation allowance for mortgage servicing rights
Beginning balance260 
Provision(256)
Other-than-temporary impairment
Ending balance
Net carrying value of mortgage servicing rights$10,685 $9,120 
37


NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - continued (Unaudited)
ASB capitalizes MSRs acquired upon the sale of mortgage loans with servicing rights retained. On a monthly basis, ASB compares the net carrying value of the MSRs to its fair value to determine if there are any changes to the valuation allowance and/or other-than-temporary impairment for the MSRs.
ASB uses a present value cash flow model to estimate the fair value of MSRs. Impairment is recognized through a valuation allowance for each stratum when the carrying amount exceeds fair value, with any associated provision recorded as a component of loan servicing fees included in “Revenues - bank” in the consolidated statements of income. A direct write-down is recorded when the recoverability of the valuation allowance is deemed to be unrecoverable.
Key assumptions used in estimating the fair value of ASB’s MSRs used in the impairment analysis were as follows:
(dollars in thousands)March 31, 2021December 31, 2020
Unpaid principal balance$1,505,963 $1,450,312 
Weighted average note rate3.57 %3.68 %
Weighted average discount rate9.25 %9.25 %
Weighted average prepayment speed12.0 %17.7 %
The sensitivity analysis of fair value of MSRs to hypothetical adverse changes of 25 and 50 basis points in certain key assumptions was as follows:
(dollars in thousands)March 31, 2021December 31, 2020
Prepayment rate:
  25 basis points adverse rate change$(659)$(738)
  50 basis points adverse rate change(1,376)(1,445)
Discount rate:
  25 basis points adverse rate change(110)(68)
  50 basis points adverse rate change(218)(135)
The effect of a variation in certain assumptions on fair value is calculated without changing any other assumptions. This analysis typically cannot be extrapolated because the relationship of a change in one key assumption to the changes in the fair value of MSRs typically is not linear.
Other borrowings.  As of March 31, 2021 and December 31, 2020, ASB had no FHLB advances outstanding or federal funds purchased with the Federal Reserve Bank. ASB was in compliance with all Advances, Pledge and Security Agreement requirements as of March 31, 2021.
Securities sold under agreements to repurchase are accounted for as financing transactions and the obligations to repurchase these securities are recorded as liabilities in the condensed consolidated balance sheets. ASB pledges investment securities as collateral for securities sold under agreements to repurchase. All such agreements are subject to master netting arrangements, which provide for a conditional right of set-off in case of default by either party; however, ASB presents securities sold under agreements to repurchase on a gross basis in the balance sheet. The following tables present information about the securities sold under agreements to repurchase, including the related collateral received from or pledged to counterparties:
(in millions)Gross amount
 of recognized
 liabilities
Gross amount
 offset in the 
Balance Sheets
Net amount of
liabilities presented
in the Balance Sheets
Repurchase agreements   
March 31, 2021$103 $$103 
December 31, 202090 90 

 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
March 31, 2021$103 $122 $
December 31, 202090 92 
38


NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - continued (Unaudited)
The securities underlying the agreements to repurchase are book-entry securities and were delivered by appropriate entry into the counterparties’ accounts or into segregated tri-party custodial accounts at the FHLB. The securities underlying the agreements to repurchase continue to be reflected in ASB’s asset accounts.
Derivative financial instruments. ASB enters into interest rate lock commitments (IRLCs) with borrowers, and forward commitments to sell loans or to-be-announced mortgage-backed securities to investors to hedge against the inherent interest rate and pricing risks associated with selling loans.
ASB enters into IRLCs for residential mortgage loans, which commit ASB to lend funds to a potential borrower at a specific interest rate and within a specified period of time. IRLCs that relate to the origination of mortgage loans that will be held for sale are considered derivative financial instruments under applicable accounting guidance. Outstanding IRLCs expose ASB to the risk that the price of the mortgage loans underlying the commitments may decline due to increases in mortgage interest rates from inception of the rate lock to the funding of the loan. The IRLCs are free-standing derivatives which are carried at fair value with changes recorded in mortgage banking income.
ASB enters into forward commitments to hedge the interest rate risk for rate locked mortgage applications in process and closed mortgage loans held for sale. These commitments are primarily forward sales of to-be-announced mortgage backed securities. Generally, when mortgage loans are closed, the forward commitment is liquidated and replaced with a mandatory delivery forward sale of the mortgage to a secondary market investor. In some cases, a best-efforts forward sale agreement is utilized as the forward commitment. These commitments are free-standing derivatives which are carried at fair value with changes recorded in mortgage banking income.
Changes in the fair value of IRLCs and forward commitments subsequent to inception are based on changes in the fair value of the underlying loan resulting from the fulfillment of the commitment and changes in the probability that the loan will fund within the terms of the commitment, which is affected primarily by changes in interest rates and the passage of time.
The notional amount and fair value of ASB’s derivative financial instruments were as follows:
 March 31, 2021December 31, 2020
(in thousands)Notional amountFair valueNotional amountFair value
Interest rate lock commitments$49,316 $438 $120,980 $4,536 
Forward commitments49,500 340 100,500 (500)
ASB’s derivative financial instruments, their fair values and balance sheet location were as follows:
Derivative Financial Instruments Not Designated as Hedging Instruments 1
March 31, 2021December 31, 2020
(in thousands) Asset derivatives Liability
derivatives
 Asset derivatives Liability
derivatives
Interest rate lock commitments$456 $(18)$4,536 $
Forward commitments340 500 
 $796 $(18)$4,536 $500 
1 Asset derivatives are included in other assets and liability derivatives are included in other liabilities in the balance sheets.
The following table presents ASB’s derivative financial instruments and the amount and location of the net gains or losses recognized in ASB’s statements of income:
Derivative Financial Instruments Not Designated as Hedging InstrumentsLocation of net gains (losses) recognized in the Statements of IncomeThree months ended March 31
(in thousands)20212020
Interest rate lock commitmentsMortgage banking income$(4,098)$1,555 
Forward commitmentsMortgage banking income840 (543)
 $(3,258)$1,012 
Low-Income Housing Tax Credit (LIHTC). ASB’s unfunded commitments to fund its LIHTC investment partnerships were $37.8 million and $41.0 million at March 31, 2021 and December 31, 2020, respectively. These unfunded commitments were unconditional and legally binding and are recorded in other liabilities with a corresponding increase in other assets. As of March 31, 2021, ASB did not have any impairment losses resulting from forfeiture or ineligibility of tax credits or other circumstances related to its LIHTC investment partnerships.
39


NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - continued (Unaudited)
Note 5 · Credit agreements
HEI and Hawaiian Electric each entered into a separate agreement with a syndicate of 8 financial institutions (the HEI Facility and Hawaiian Electric Facility, respectively, and together, the Credit Facilities), effective July 3, 2017, to amend and restate their respective previously existing revolving unsecured credit agreements. The $150 million HEI Facility and $200 million Hawaiian Electric Facility both will terminate on June 30, 2022. Neither of the facilities are collateralized. As of March 31, 2021 and December 31, 2020, 0 amounts were outstanding under the Credit Facilities.
The Credit Facilities will be maintained to support each company’s respective short-term commercial paper program, but may be drawn on to meet each company’s respective working capital needs and general corporate purposes.
Hawaiian Electric has a $75 million 364-day revolving credit agreement with 0 amount outstanding at March 31, 2021. On April 19, 2021, the revolving credit agreement terminated and was not renewed.

Note 6 · Shareholders’ equity
Accumulated other comprehensive income/(loss). Changes in the balances of each component of accumulated other comprehensive income/(loss) (AOCI) were as follows:
HEI ConsolidatedHawaiian Electric Consolidated
 (in thousands) Net unrealized gains (losses) on securities Unrealized gains (losses) on derivativesRetirement benefit plansAOCIAOCI-Retirement benefit plans
Balance, December 31, 2020$19,986 $(3,363)$(17,887)$(1,264)$(2,919)
Current period other comprehensive income (loss)(45,777)1,562 199 (44,016)34 
Balance, March 31, 2021$(25,791)$(1,801)$(17,688)$(45,280)$(2,885)
Balance, December 31, 2019$2,481 $(1,613)$(20,907)$(20,039)$(1,279)
Current period other comprehensive income (loss)19,448 (1,784)548 18,212 26 
Balance, March 31, 2020$21,929 $(3,397)$(20,359)$(1,827)$(1,253)

Reclassifications out of AOCI were as follows:
 Amount reclassified from AOCIAffected line item in the
 Statements of Income / Balance Sheets
Three months ended March 3120212020
(in thousands)
HEI consolidated
Net realized gains on securities included in net income$(387)$Gain on sale of investment securities, net
Retirement benefit plans:   
Amortization of prior service credit and net losses recognized during the period in net periodic benefit cost6,010 5,706 See Note 8 for additional details
Impact of D&Os of the PUC included in regulatory assets(5,811)(5,158)See Note 8 for additional details
Total reclassifications$(188)$548  
Hawaiian Electric consolidated
Retirement benefit plans:  
Amortization of prior service credit and net losses recognized during the period in net periodic benefit cost$5,845 $5,184 See Note 8 for additional details
Impact of D&Os of the PUC included in regulatory assets(5,811)(5,158)See Note 8 for additional details
Total reclassifications$34 $26  

40


NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - continued (Unaudited)
Note 7 · Revenues
Revenue from contracts with customers. The following tables disaggregate revenues by major source, timing of revenue recognition, and segment:
Three months ended March 31, 2021
(in thousands) Electric utilityBankOtherTotal
Revenues from contracts with customers
Electric energy sales - residential$181,239 $$$