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Hawaiian Electric (HAWEL)

Filed: 8 Aug 22, 4:18pm
0000354707us-gaap:TransferredOverTimeMemberhe:ElectricUtilitySegmentMember2021-01-012021-06-30

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 June 30, 2022
 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 CharterCommission File NumberI.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 July 25, 2022
Hawaiian Electric Industries, Inc. (Without Par Value) 109,469,093 Shares
Hawaiian Electric Company, Inc. ($6-2/3 Par Value) 17,753,533 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 June 30, 2022
 
TABLE OF CONTENTS
 
Page No. 
  
 
  
 
three and six months ended June 30, 2022 and 2021
 
three and six months ended June 30, 2022 and 2021
 
 
three and six months ended June 30, 2022 and 2021
 
six months ended June 30, 2022 and 2021
  
 
three and six months ended June 30, 2022 and 2021
 
three and six months ended June 30, 2022 and 2021
 
 
three and six months ended June 30, 2022 and 2021
 
six months ended June 30, 2022 and 2021
 
 
 
 
  
 
 
i


Hawaiian Electric Industries, Inc. and Subsidiaries
Hawaiian Electric Company, Inc. and Subsidiaries
Form 10-Q—Quarter ended June 30, 2022
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.
AOCIAccumulated other comprehensive income/(loss)
ARAAnnual revenue adjustment
ASBAmerican Savings Bank, F.S.B., a wholly owned subsidiary of ASB Hawaii, Inc.
ASB HawaiiASB Hawaii, Inc., a wholly owned subsidiary of Hawaiian Electric Industries, Inc. and the parent company of American Savings Bank, F.S.B.
ASUAccounting Standards Update
CARES ActThe Coronavirus Aid, Relief, and Economic Security Act enacted March 27, 2020
CBRECommunity-based renewable energy
CompanyHawaiian 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. and Pacific Current, LLC and its subsidiaries (listed under Pacific Current). The Old Oahu Tug Service, Inc. was dissolved in March 2022.
Consumer AdvocateDivision of Consumer Advocacy, Department of Commerce and Consumer Affairs of the State of Hawaii
CSSMCollective Shared Savings Mechanism
D&ODecision and order from the PUC
DERDistributed energy resources
DRIPHEI Dividend Reinvestment and Stock Purchase Plan
ECRCEnergy cost recovery clause
EIP2010 Equity and Incentive Plan, as amended and restated
EPAEnvironmental Protection Agency — federal
EPRMExceptional Project Recovery Mechanism
EPSEarnings per share
ESMEarnings Sharing Mechanism
EVEEconomic value of equity
Exchange ActSecurities Exchange Act of 1934
FASBFinancial Accounting Standards Board
FDICFederal Deposit Insurance Corporation
federalU.S. Government
FHLBFederal Home Loan Bank
FHLMCFederal Home Loan Mortgage Corporation
FitchFitch Ratings, Inc.
FNMAFederal National Mortgage Association
FRBFederal Reserve Board
GAAPAccounting principles generally accepted in the United States of America
GHGGreenhouse gas
GNMAGovernment National Mortgage Association
GSPAGrid Services Purchase Agreement
Hamakua EnergyHamakua Energy, LLC, an indirect subsidiary of Pacific Current
Hawaii Electric LightHawaii Electric Light Company, Inc., an electric utility subsidiary of Hawaiian Electric Company, Inc.
ii

GLOSSARY OF TERMS, continued
Terms Definitions
Hawaiian ElectricHawaiian 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.
HEIHawaiian Electric Industries, Inc., direct parent company of Hawaiian Electric Company, Inc., ASB Hawaii, Inc. and Pacific Current, LLC. The Old Oahu Tug Service, Inc. was dissolved in March 2022.
HEIRSPHawaiian Electric Industries Retirement Savings Plan
HELOCHome equity line of credit
HPOWERCity and County of Honolulu with respect to a power purchase agreement for a refuse-fired plant
IPPIndependent power producer
IRLCsInterest rate lock commitments
KalaeloaKalaeloa Partners, L.P.
kWhKilowatthour/s (as applicable)
LMILow-to-moderate income
LTIPLong-term incentive plan
Maui ElectricMaui Electric Company, Limited, an electric utility subsidiary of Hawaiian Electric Company, Inc.
MauoMauo, LLC, a subsidiary of Pacific Current
MPIRMajor Project Interim Recovery
MRPMulti-year rate period
MSRsMortgage servicing rights
MWMegawatt/s (as applicable)
NIINet interest income
NPBCNet periodic benefit costs
NPPCNet periodic pension costs
O&MOther operation and maintenance
OCCOffice of the Comptroller of the Currency
OPEBPostretirement benefits other than pensions
Pacific Current
Pacific Current, LLC, a wholly owned subsidiary of HEI and parent company of Hamakua Holdings, LLC, Mauo, LLC, Alenuihaha Developments, LLC, Kaʻieʻie Waho Company, LLC, Kaʻaipuaʻa, LLC, Upena, LLC and Mahipapa, LLC
PBRPerformance-based regulation
PIMsPerformance incentive mechanisms
PPAPower purchase agreement
PPACPurchased power adjustment clause
PUCPublic Utilities Commission of the State of Hawaii
PVPhotovoltaic
RAMRevenue adjustment mechanism
RBARevenue balancing account
RFPRequest for proposals
ROACEReturn on average common equity
RORBReturn on rate base
RPSRenewable portfolio standards
SBASmall Business Administration
SECSecurities and Exchange Commission
SeeMeans the referenced material is incorporated by reference
TDRTroubled debt restructuring
UtilitiesHawaiian Electric Company, Inc., Hawaii Electric Light Company, Inc. and Maui Electric Company, Limited
VIEsVariable interest entities
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’ ability 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 (such as the Russia-Ukraine war), 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 due to new variants or insufficient vaccinations, 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 or ability to pay 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 environmental, social and governance 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 their facilities in an effective and safe manner, and citizen or stakeholder activism that could delay the construction, increase project costs or preclude the completion, of third-party or Utility projects that are required to meet electricity demand, resilience and reliability objectives and renewable portfolio standards (RPS) and other climate-related 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 and cost 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, or higher borrowing costs;
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 potential higher 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 and mortality improvements;
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;
increasing competition in the banking industry from traditional financial institutions as well as from non-traditional providers of financial services, including financial service subsidiaries of commercial and manufacturing companies (e.g., increased price competition for loans and deposits, or an outflow of deposits to alternative investments or platforms, which may have an adverse impact on ASB’s net interest margin and portfolio growth);
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; supply-chain challenges; and uncertainties surrounding technologies, solar power, wind power, biofuels, environmental assessments required to meet RPS and other climate-related 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 required to be 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;
high and/or volatile fuel prices, which increases working capital requirements and customer bills, or delivery of adequate fuel by suppliers (including as a result of the Russia-Ukraine war), which could affect the reliability of utility operations, 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), annual revenue adjustment (ARA) 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 kilowatt-hour sales;
the ability of the Utilities to recover increasing costs and earn a reasonable return on capital investments not covered by the ARA, while providing the customer dividend required by performance-based regulation (PBR);
the ability of the Utilities to achieve performance incentive goals currently in place;
the impact from the PUC’s implementation of PBR 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 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;
unfavorable changes in economic conditions, such as sustained inflation, higher interest rates or recession, may negatively impact the ability of the Company’s customers to pay their utility bills or loan payments, reduce loan production, and increase operating costs of the Utilities or Bank that cannot be passed on to, or recovered, from customers;
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, including use of digital currencies, which could include a central bank digital currency;
cybersecurity risks and the potential for cyber incidents, including potential incidents at HEI, its third-party vendors, and its subsidiaries (including at ASB branches, electric utility plants and IPP-owned facilities) 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 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
v


Federal Deposit Insurance Corporation assessments), and potential carbon pricing or “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;
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 a decrease in net interest income and portfolio yields, 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 June 30Six months ended June 30
(in thousands, except per share amounts)2022202120222021
Revenues    
Electric utility$818,873 $601,879 $1,527,665 $1,166,743 
Bank75,324 77,260 150,439 154,391 
Other1,410 1,118 2,571 2,069 
Total revenues895,607 680,257 1,680,675 1,323,203 
Expenses    
Electric utility747,719 534,195 1,382,916 1,029,945 
Bank53,401 37,454 98,486 79,289 
Other7,819 6,752 13,329 14,082 
Total expenses808,939 578,401 1,494,731 1,123,316 
Operating income (loss)    
Electric utility71,154 67,684 144,749 136,798 
Bank21,923 39,806 51,953 75,102 
Other(6,409)(5,634)(10,758)(12,013)
Total operating income86,668 101,856 185,944 199,887 
Retirement defined benefits credit—other than service costs1,246 1,216 2,489 3,651 
Interest expense, net—other than on deposit liabilities and other bank borrowings(24,965)(23,317)(49,314)(47,053)
Allowance for borrowed funds used during construction798 812 1,576 1,559 
Allowance for equity funds used during construction2,470 2,377 4,879 4,568 
Gain on sales of investment securities, net and equity-method investment— — 8,123 528 
Income before income taxes66,217 82,944 153,697 163,140 
Income taxes13,203 18,599 31,043 33,964 
Net income53,014 64,345 122,654 129,176 
Preferred stock dividends of subsidiaries473 473 946 946 
Net income for common stock$52,541 $63,872 $121,708 $128,230 
Basic earnings per common share$0.48 $0.58 $1.11 $1.17 
Diluted earnings per common share$0.48 $0.58 $1.11 $1.17 
Weighted-average number of common shares outstanding109,432 109,282 109,397 109,252 
Net effect of potentially dilutive shares230 233 317 305 
Weighted-average shares assuming dilution109,662 109,515 109,714 109,557 
This report should be read in conjunction with the Notes herein and the Notes to Consolidated Financial Statements appearing in the 2021 Form 10-K.

1


Hawaiian Electric Industries, Inc. and Subsidiaries
Condensed Consolidated Statements of Comprehensive Income (unaudited)
 Three months ended June 30Six months ended June 30
(in thousands)2022202120222021
Net income for common stock$52,541 $63,872 $121,708 $128,230 
Other comprehensive income (loss), net of taxes:    
Net unrealized gains (losses) on available-for-sale investment securities:    
Net unrealized gains (losses) on available-for-sale investment securities arising during the period, net of taxes of $(32,529), $6,214, $(76,608) and $(10,402), respectively(88,857)16,976 (209,264)(28,414)
Reclassification adjustment for net realized gains included in net income, net of taxes of nil, nil, nil and $(142), respectively— — — (387)
Derivatives qualifying as cash flow hedges:    
Unrealized interest rate hedging gains (losses) arising during the period, net of taxes of $273, $(243), $1,319 and $299, respectively786 (701)3,803 861 
Reclassification adjustment for net realized losses included in net income, net of taxes of $18, nil, $37 and nil, respectively53 — 108 — 
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 $44, $2,086, $1,606 and $4,170, respectively122 6,008 4,623 12,018 
Reclassification adjustment for impact of D&Os of the PUC included in regulatory assets, net of taxes of $19, $(2,016), $(1,481) and $(4,031), respectively56 (5,811)(4,269)(11,622)
Other comprehensive income (loss), net of taxes(87,840)16,472 (204,999)(27,544)
Comprehensive income (loss) attributable to Hawaiian Electric Industries, Inc.$(35,299)$80,344 $(83,291)$100,686 
This report should be read in conjunction with the Notes herein and the Notes to Consolidated Financial Statements appearing in the 2021 Form 10-K.

2


Hawaiian Electric Industries, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets (unaudited) 
(dollars in thousands)June 30, 2022December 31, 2021
Assets  
Cash and cash equivalents$159,672 $305,551 
Restricted cash5,386 5,911 
Accounts receivable and unbilled revenues, net457,470 344,213 
Available-for-sale investment securities, at fair value2,444,267 2,574,618 
Held-to-maturity investment securities, at amortized cost513,767 522,270 
Stock in Federal Home Loan Bank, at cost13,200 10,000 
Loans held for investment, net5,357,539 5,139,984 
Loans held for sale, at lower of cost or fair value3,738 10,404 
Property, plant and equipment, net of accumulated depreciation of $3,122,324 and $3,028,130 at June 30, 2022 and December 31, 2021, respectively5,429,420 5,392,068 
Operating lease right-of-use assets120,600 122,416 
Regulatory assets530,900 565,543 
Other883,594 747,469 
Goodwill82,190 82,190 
Total assets$16,001,743 $15,822,637 
Liabilities and shareholders’ equity  
Liabilities  
Accounts payable$244,239 $205,544 
Interest and dividends payable20,661 19,889 
Deposit liabilities8,253,536 8,172,212 
Short-term borrowings—other than bank124,017 53,998 
Other bank borrowings241,610 88,305 
Long-term debt, net—other than bank2,374,500 2,321,937 
Deferred income taxes302,346 384,760 
Operating lease liabilities136,445 136,760 
Regulatory liabilities1,008,075 996,768 
Defined benefit pension and other postretirement benefit plans liability341,535 348,072 
Other686,982 669,215 
Total liabilities13,733,946 13,397,460 
Preferred stock of subsidiaries - not subject to mandatory redemption34,293 34,293 
Commitments and contingencies (Notes 3 and 4)00
Shareholders’ equity  
Preferred stock, no par value, authorized 10,000,000 shares; issued: none— — 
Common stock, no par value, authorized 200,000,000 shares; issued and outstanding: 109,466,829 shares and 109,311,785 shares at June 30, 2022 and December 31, 2021, respectively1,688,009 1,685,496 
Retained earnings803,027 757,921 
Accumulated other comprehensive loss, net of tax benefits(257,532)(52,533)
Total shareholders’ equity2,233,504 2,390,884 
Total liabilities and shareholders’ equity$16,001,743 $15,822,637 
This report should be read in conjunction with the Notes herein and the Notes to Consolidated Financial Statements appearing in the 2021 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, 2021109,312 $1,685,496 $757,921 $(52,533)$2,390,884 
Net income for common stock— — 69,167 — 69,167 
Other comprehensive loss, net of tax benefits— — — (117,159)(117,159)
Share-based expenses and other, net119 (949)— — (949)
Common stock dividends (35¢ per share)— — (38,301)— (38,301)
Balance, March 31, 2022109,431 1,684,547 788,787 (169,692)2,303,642 
Net income for common stock— — 52,541 — 52,541 
Other comprehensive loss, net of tax benefits— — — (87,840)(87,840)
Share-based expenses and other, net36 3,462 — — 3,462 
Common stock dividends (35¢ per share)— — (38,301)— (38,301)
Balance, June 30, 2022109,467 $1,688,009 $803,027 $(257,532)$2,233,504 
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 loss, net of tax benefits— — — (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 
Net income for common stock— — 63,872 — 63,872 
Other comprehensive income, net of taxes— — — 16,472 16,472 
Share-based expenses and other, net30 2,847 — — 2,847 
Common stock dividends (34¢ per share)— — (37,155)— (37,155)
Balance, June 30, 2021109,311 $1,681,820 $714,317 $(28,808)$2,367,329 
This report should be read in conjunction with the Notes herein and the Notes to Consolidated Financial Statements appearing in the 2021 Form 10-K.

4


Hawaiian Electric Industries, Inc. and Subsidiaries
Condensed Consolidated Statements of Cash Flows (unaudited)
Six months ended June 30
(in thousands)20222021
Cash flows from operating activities  
Net income$122,654 $129,176 
Adjustments to reconcile net income to net cash provided by operating activities  
Depreciation of property, plant and equipment126,112 122,921 
Other amortization19,134 17,896 
Provision for credit losses(506)(20,642)
Loans originated, held for sale(108,695)(239,761)
Proceeds from sale of loans, held for sale114,299 266,497 
Gain on sales of investment securities, net and equity-method investment(8,123)(528)
Gain on sale of loans, net(1,449)(6,225)
Deferred income taxes(14,683)(7,355)
Share-based compensation expense5,593 5,454 
Allowance for equity funds used during construction(4,879)(4,568)
Other(3,858)(5,037)
Changes in assets and liabilities  
Increase in accounts receivable and unbilled revenues, net(101,641)(41,884)
Increase in fuel oil stock(119,890)(43,681)
Decrease (increase) in regulatory assets12,956 (17,731)
Increase in regulatory liabilities11,288 5,824 
Increase in accounts, interest and dividends payable62,115 2,683 
Change in prepaid and accrued income taxes, tax credits and utility revenue taxes22,173 (1,818)
Decrease in defined benefit pension and other postretirement benefit plans liability(2,698)(3,834)
Change in other assets and liabilities(55,260)(39,800)
Net cash provided by operating activities74,642 117,587 
Cash flows from investing activities  
Available-for-sale investment securities purchased(366,177)(1,101,289)
Principal repayments on available-for-sale investment securities209,094 320,597 
Proceeds from sale of available-for-sale investment securities— 197,354 
Purchases of held-to-maturity investment securities— (187,172)
Proceeds from repayments or maturities of held-to-maturity investment securities7,932 38,401 
Purchase of stock from Federal Home Loan Bank(18,720)(32,780)
Redemption of stock from Federal Home Loan Bank15,520 31,460 
Net decrease (increase) in loans held for investment(212,744)91,686 
Proceeds from sale of residential loans— 17,398 
Capital expenditures(147,749)(148,414)
Contributions to low income housing investments— (6,478)
Other15,813 7,805 
Net cash used in investing activities(497,031)(771,432)
(continued)

5


Hawaiian Electric Industries, Inc. and Subsidiaries
Condensed Consolidated Statements of Cash Flows (unaudited) (continued)
Six months ended June 30
(in thousands)20222021
Cash flows from financing activities  
Net increase in deposit liabilities81,324 486,473 
Net increase in short-term borrowings with original maturities of three months or less70,019 31,257 
Net increase in other bank borrowings with original maturities of three months or less153,305 39,995 
Repayment of short-term debt— (65,000)
Proceeds from issuance of long-term debt67,312 191,487 
Repayment of long-term debt(15,030)(51,989)
Withheld shares for employee taxes on vested share-based compensation(3,079)(2,002)
Common stock dividends(76,602)(74,311)
Preferred stock dividends of subsidiaries(946)(946)
Other(318)(2,037)
Net cash provided by financing activities275,985 552,927 
Net decrease in cash, cash equivalents and restricted cash(146,404)(100,918)
Cash, cash equivalents and restricted cash, beginning of period311,462 358,979 
Cash, cash equivalents and restricted cash, end of period165,058 258,061 
Less: Restricted cash(5,386)(10,618)
Cash and cash equivalents, end of period$159,672 $247,443 
This report should be read in conjunction with the Notes herein and the Notes to Consolidated Financial Statements appearing in the 2021 Form 10-K.
6


Hawaiian Electric Company, Inc. and Subsidiaries
Condensed Consolidated Statements of Income (unaudited)
Three months ended June 30Six months ended June 30
(in thousands)2022202120222021
Revenues$818,873 $601,879 $1,527,665 $1,166,743 
Expenses    
Fuel oil269,655 139,136 490,941 266,563 
Purchased power218,085 162,465 381,618 304,761 
Other operation and maintenance124,892 118,142 250,149 232,712 
Depreciation58,739 57,381 117,210 114,736 
Taxes, other than income taxes76,348 57,071 142,998 111,173 
Total expenses747,719 534,195 1,382,916 1,029,945 
Operating income71,154 67,684 144,749 136,798 
Allowance for equity funds used during construction2,470 2,377 4,879 4,568 
Retirement defined benefits credit —other than service costs991 1,020 1,981 2,041 
Interest expense and other charges, net(18,800)(17,995)(37,126)(35,978)
Allowance for borrowed funds used during construction798 812 1,576 1,559 
Income before income taxes56,613 53,898 116,059 108,988 
Income taxes11,979 11,498 24,517 22,731 
Net income44,634 42,400 91,542 86,257 
Preferred stock dividends of subsidiaries229 229 458 458 
Net income attributable to Hawaiian Electric44,405 42,171 91,084 85,799 
Preferred stock dividends of Hawaiian Electric270 270 540 540 
Net income for common stock$44,135 $41,901 $90,544 $85,259 
This report should be read in conjunction with the Notes herein and the Notes to Consolidated Financial Statements appearing in the 2021 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 June 30Six months ended June 30
(in thousands)2022202120222021
Net income for common stock$44,135 $41,901 $90,544 $85,259 
Other comprehensive income, 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), $2,028, $1,516 and $4,055, respectively(5)5,846 4,371 11,691 
Reclassification adjustment for impact of D&Os of the PUC included in regulatory assets, net of taxes of $19, $(2,016), $(1,481) and $(4,031), respectively56 (5,811)(4,269)(11,622)
Other comprehensive income, net of taxes51 35 102 69 
Comprehensive income attributable to Hawaiian Electric Company, Inc.$44,186 $41,936 $90,646 $85,328 
This report should be read in conjunction with the Notes herein and the Notes to Consolidated Financial Statements appearing in the 2021 Form 10-K.
7


Hawaiian Electric Company, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets (unaudited)
(dollars in thousands, except par value)June 30, 2022December 31, 2021
Assets  
Property, plant and equipment
Utility property, plant and equipment  
Land$52,060 $51,937 
Plant and equipment7,840,615 7,735,983 
Less accumulated depreciation(3,026,295)(2,940,517)
Construction in progress226,679 204,569 
Utility property, plant and equipment, net5,093,059 5,051,972 
Nonutility property, plant and equipment, less accumulated depreciation of $61 and $59 as of June 30, 2022 and December 31, 2021, respectively6,947 6,949 
Total property, plant and equipment, net5,100,006 5,058,921 
Current assets  
Cash and cash equivalents15,503 52,169 
Restricted cash1,129 3,089 
Customer accounts receivable, net247,270 186,859 
Accrued unbilled revenues, net178,876 129,155 
Other accounts receivable, net10,388 7,267 
Fuel oil stock, at average cost223,787 104,078 
Materials and supplies, at average cost74,581 71,877 
Prepayments and other36,540 46,031 
Regulatory assets73,578 66,664 
Total current assets861,652 667,189 
Other long-term assets  
Operating lease right-of-use assets99,690 101,470 
Regulatory assets457,322 498,879 
Other168,326 165,166 
Total other long-term assets725,338 765,515 
Total assets$6,686,996 $6,491,625 
Capitalization and liabilities  
Capitalization  
Common stock ($6 2/3 par value, authorized 50,000,000 shares; outstanding 17,753,533 shares at
June 30, 2022 and December 31, 2021)
$118,376 $118,376 
Premium on capital stock798,526 798,526 
Retained earnings1,375,871 1,348,277 
Accumulated other comprehensive loss, net of tax benefits-retirement benefit plans(3,178)(3,280)
Common stock equity2,289,595 2,261,899 
Cumulative preferred stock — not subject to mandatory redemption34,293 34,293 
Long-term debt, net1,684,520 1,624,427 
Total capitalization4,008,408 3,920,619 
Commitments and contingencies (Note 3)00
Current liabilities  
Current portion of operating lease liabilities27,976 49,368 
Current portion of long-term debt, net51,988 51,975 
Short-term borrowings from non-affiliates54,987 — 
Accounts payable199,156 160,007 
Interest and preferred dividends payable17,796 17,325 
Taxes accrued, including revenue taxes211,999 208,280 
Regulatory liabilities22,633 29,760 
Other80,624 71,569 
Total current liabilities667,159 588,284 
Deferred credits and other liabilities  
Operating lease liabilities86,111 65,780 
Deferred income taxes400,110 408,634 
Regulatory liabilities985,442 967,008 
Unamortized tax credits100,112 103,945 
Defined benefit pension and other postretirement benefit plans liability315,475 321,780 
Other124,179 115,575 
Total deferred credits and other liabilities2,011,429 1,982,722 
Total capitalization and liabilities$6,686,996 $6,491,625 
This report should be read in conjunction with the Notes herein and the Notes to Consolidated Financial Statements appearing in the 2021 Form 10-K.
8


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, 202117,753 $118,376 $798,526 $1,348,277 $(3,280)$2,261,899 
Net income for common stock— — — 46,409 — 46,409 
Other comprehensive income, net of taxes— — — — 51 51 
Common stock dividends— — — (31,475)— (31,475)
Balance, March 31, 202217,753 118,376 798,526 1,363,211 (3,229)2,276,884 
Net income for common stock— — — 44,135 — 44,135 
Other comprehensive income, net of taxes— — — — 51 51 
Common stock dividends— — — (31,475)— (31,475)
Balance, June 30, 202217,753 $118,376 $798,526 $1,375,871 $(3,178)$2,289,595 
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 
Net income for common stock— — — 41,901 — 41,901 
Other comprehensive income, net of taxes— — — — 35 35 
Common stock dividends— — — (27,925)— (27,925)
Balance, June 30, 202117,324 $115,515 $746,987 $1,311,744 $(2,850)$2,171,396 
This report should be read in conjunction with the Notes herein and the Notes to Consolidated Financial Statements appearing in the 2021 Form 10-K.


9


Hawaiian Electric Company, Inc. and Subsidiaries
Condensed Consolidated Statements of Cash Flows (unaudited)
Six months ended June 30
(in thousands)20222021
Cash flows from operating activities  
Net income$91,542 $86,257 
Adjustments to reconcile net income to net cash provided by operating activities  
Depreciation of property, plant and equipment117,210 114,736 
Other amortization12,703 12,245 
Deferred income taxes(15,964)(11,871)
State refundable credit(5,517)(5,309)
Bad debt expense3,128 810 
Allowance for equity funds used during construction(4,879)(4,568)
Other(4)810 
Changes in assets and liabilities  
Increase in accounts receivable(51,927)(12,972)
Increase in accrued unbilled revenues(49,711)(31,398)
Increase in fuel oil stock(119,709)(43,828)
Increase in materials and supplies(2,704)(5,615)
Decrease (increase) in regulatory assets12,956 (17,731)
Increase in regulatory liabilities11,288 5,824 
Increase in accounts payable59,850 12,297 
Change in prepaid and accrued income taxes, tax credits and revenue taxes10,016 (9,051)
Decrease in defined benefit pension and other postretirement benefit plans liability(2,515)(2,549)
Change in other assets and liabilities(21,613)(30,634)
Net cash provided by operating activities44,150 57,453 
Cash flows from investing activities  
Capital expenditures(140,245)(138,025)
Other6,685 4,670 
Net cash used in investing activities(133,560)(133,355)
Cash flows from financing activities  
Common stock dividends(62,950)(55,850)
Preferred stock dividends of Hawaiian Electric and subsidiaries(998)(998)
Repayment of short-term debt— (50,000)
Proceeds from issuance of long-term debt60,000 115,000 
Net increase in short-term borrowings from non-affiliates and affiliates with original maturities of three months or less54,987 37,999 
Other(255)(941)
Net cash provided by financing activities50,784 45,210 
Net decrease in cash, cash equivalents and restricted cash(38,626)(30,692)
Cash, cash equivalents and restricted cash, beginning of period55,258 63,326 
Cash, cash equivalents and restricted cash, end of period16,632 32,634 
Less: Restricted cash(1,129)(8,968)
Cash and cash equivalents, end of period$15,503 $23,666 
This report should be read in conjunction with the Notes herein and the Notes to Consolidated Financial Statements appearing in the 2021 Form 10-K.

10


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, 2021.
In the opinion of HEI’s and Hawaiian Electric’s management, the accompanying unaudited condensed consolidated financial statements contain all material adjustments required by GAAP to fairly state consolidated HEI’s and Hawaiian Electric’s financial positions as of June 30, 2022 and December 31, 2021 and the results of their operations for the three and six months ended June 30, 2022 and 2021 and cash flows for the six months ended June 30, 2022 and 2021. 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.
Credit Losses. In March 2022, Financial Accounting Standards Board issued Accounting Standards Update (ASU) No. 2022-02, “Financial Instruments-Credit Losses (Topic 326): Troubled Debt Restructurings and Vintage Disclosures,” which eliminates the accounting guidance for Troubled Debt Restructurings (TDRs) by creditors in Subtopic 310-40, Receivables-Troubled Debt Restructurings by Creditors, while enhancing disclosure requirements for certain loan refinancings and restructurings by creditors when a borrower is experiencing financial difficulty. Specifically, rather than applying the recognition and measurement guidance for TDRs, an entity must apply the loan refinancing and restructuring guidance in paragraphs 310-20-35-9 through 35-11 to determine whether a modification results in a new loan or a continuation of an existing loan. The amendments in this update also require that an entity disclose current-period gross write-offs by year of origination for financing receivables and net investments in leases within the scope of Subtopic 326-20, “Financial Instruments-Credit Losses-Measured at Amortized Cost.” Gross write-off information must be included in the vintage disclosures required for public business entities in accordance with paragraph 325-20-50-6, which requires that an entity disclose the amortized cost basis of financing receivables by credit-quality indicator and class of financing receivable by year of origination. The amendments in this update are effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. ASB is assessing the requirements of the ASU.
11


NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - continued (Unaudited)
Note 2 · Segment financial information
(in thousands) Electric utilityBankOtherTotal
Three months ended June 30, 2022    
Revenues from external customers$818,873 $75,324 $1,410 $895,607 
Intersegment revenues (eliminations)— — — — 
Revenues$818,873 $75,324 $1,410 $895,607 
Income (loss) before income taxes$56,613 $22,109 $(12,505)$66,217 
Income taxes (benefit)11,979 4,643 (3,419)13,203 
Net income (loss)44,634 17,466 (9,086)53,014 
Preferred stock dividends of subsidiaries499 — (26)473 
Net income (loss) for common stock$44,135 $17,466 $(9,060)$52,541 
Six months ended June 30, 2022    
Revenues from external customers$1,527,661 $150,439 $2,575 $1,680,675 
Intersegment revenues (eliminations)— (4)— 
Revenues$1,527,665 $150,439 $2,571 $1,680,675 
Income (loss) before income taxes$116,059 $52,324 $(14,686)$153,697 
Income taxes (benefit)24,517 10,988 (4,462)31,043 
Net income (loss)91,542 41,336 (10,224)122,654 
Preferred stock dividends of subsidiaries998 — (52)946 
Net income (loss) for common stock$90,544 $41,336 $(10,172)$121,708 
Total assets (at June 30, 2022)$6,686,996 $9,214,865 $99,882 $16,001,743 
Three months ended June 30, 2021    
Revenues from external customers$601,869 $77,260 $1,128 $680,257 
Intersegment revenues (eliminations)10 — (10)— 
Revenues$601,879 $77,260 $1,118 $680,257 
Income (loss) before income taxes$53,898 $39,992 $(10,946)$82,944 
Income taxes (benefit)11,498 9,708 (2,607)18,599 
Net income (loss)42,400 30,284 (8,339)64,345 
Preferred stock dividends of subsidiaries499 — (26)473 
Net income (loss) for common stock$41,901 $30,284 $(8,313)$63,872 
Six months ended June 30, 2021    
Revenues from external customers$1,166,724 $154,391 $2,088 $1,323,203 
Intersegment revenues (eliminations)19 — (19)— 
Revenues$1,166,743 $154,391 $2,069 $1,323,203 
Income (loss) before income taxes$108,988 $77,094 $(22,942)$163,140 
Income taxes (benefit)22,731 17,254 (6,021)33,964 
Net income (loss)86,257 59,840 (16,921)129,176 
Preferred stock dividends of subsidiaries998 — (52)946 
Net income (loss) for common stock$85,259 $59,840 $(16,869)$128,230 
Total assets (at December 31, 2021)$6,491,625 $9,181,603 $149,409 $15,822,637 
 
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.
12


NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - continued (Unaudited)
Note 3 · Electric utility segment
Unconsolidated variable interest entities.
Power purchase agreements.  As of June 30, 2022, the Utilities had 5 PPAs for firm capacity (including the Puna Geothermal Venture PPA that went offline in May 2018 due to lava flow on Hawaii Island, but returned to service with firm capacity of 13.0 MW in the first quarter of 2021, ramped up to 23.9 MW in the second quarter of 2021, and further increased to 25.7 MW in June 2022) 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. However, 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 June 30Six months ended June 30
(in millions)2022202120222021
Kalaeloa$83 $49 $143 $86 
AES Hawaii34 36 61 66 
HPOWER19 14 38 31 
Hamakua Energy14 12 30 23 
Puna Geothermal Venture14 24 11 
Wind IPPs38 28 56 57 
Solar IPPs13 16 26 28 
Other IPPs 1
Total IPPs$218 $163 $382 $305 
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. In October 2021, Hawaiian Electric and Kalaeloa signed the Amended and Restated Power Purchase Agreement for Firm Dispatchable Capacity and Energy (Amended and Restated PPA) to extend the PPA for an additional term of 10 years. In November 2021, Hawaiian Electric submitted an application for approval of the Amended and Restated PPA to the PUC, which is pending approval before the PUC. The price of purchases from Kalaeloa in the second quarter of 2022 have increased 69% over the second quarter of 2021, primarily due to increased fuel oil cost.
13


NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - continued (Unaudited)
AES Hawaii, Inc. Under a PPA entered into in March 1988, as amended (through Amended and Restated Amendment No. 4) for a period of 30 years ending September 2022, Hawaiian Electric agreed to purchase 180 MW of firm capacity from AES Hawaii. Hawaiian Electric does not intend to extend the term of the PPA which will expire on September 1, 2022.
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. As a result, the PUC reopened the docket for further proceedings, including re-examining all of the issues in the proceedings. 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 September 9, 2020, the PUC denied Hu Honua’s motion for reconsideration of the PUC’s order. Hu Honua filed its notice of appeal to the Hawaii Supreme Court of the PUC’s order denying Hu Honua’s motion for reconsideration. On May 24, 2021, the Hawaii Supreme Court vacated the PUC’s decision and remanded the matter back to the PUC for further proceedings. On June 30, 2021, the PUC issued an order reopening the docket consistent with the Hawaii Supreme Court’s order. A contested case hearing was held in March 2022. On May 23, 2022, the PUC issued a decision and order denying the amended and restated PPA, based on, among other things, findings that: (1) the project will result in significant GHG emissions, (2) Hu Honua’s proposed carbon commitment to sequester more GHG emissions than produced by the project are speculative and unsupported, (3) the amended and restated PPA is likely to result in high costs to customers through its relatively high cost of electricity and through potential displacement of other, lower cost, renewable resources, and (4) based on the foregoing, approving the amended and restated PPA is not prudent or in the public interest. On June 2, 2022, Hawaii Electric Light and Hu Honua filed their separate motions for reconsideration. On June 24, 2022, the PUC issued an order denying Hawaii Electric Light and Hu Honua’s respective motions for reconsideration. On June 29, 2022, Hu Honua filed its notice of appeal to the Hawaii Supreme Court of the PUC’s May 23, 2022 decision and order denying the amended and restated PPA, and the PUC’s June 24, 2022 order denying Hawaii Electric Light and Hu Honua’s motions for reconsideration.
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. Currently, the discovery phase is ongoing.
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 a minimum of $246 million ERP/EAM project-related benefit to be delivered to customers over the system’s 12-year service life.
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
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$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 June 30, 2022, the Utilities’ regulatory liability was $9.6 million ($4.8 million for Hawaiian Electric, $1.9 million for Hawaii Electric Light and $2.9 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 was considered flowed through to customers.
On July 7, 2021, the PUC issued an order modifying the reporting frequency of the Semi-Annual Enterprise System Benefits (SAESB) reports to an Annual Enterprise System Benefits (AESB) report on the achieved benefits savings. The most recent AESB report was filed on February 14, 2022 for the period January 1 through December 31, 2021.
West Loch PV Project. In November 2019, Hawaiian Electric placed into service a 20-MW (ac) utility-owned and operated renewable and dispatchable solar facility on property owned by the Department of the Navy. PUC orders resulted in a project cost cap of $67 million (including a cap of $4.7 million for the in-kind work performed in exchange for use of the Navy property) with capital cost recovery approved under MPIR (See “Performance-based regulation framework” section below for MPIR guidelines and cost recovery discussion.) Project costs incurred as of June 30, 2022 amounted to $60.1 million and generated $14.7 million and $14.0 million in federal and state nonrefundable tax credits, respectively. For book and regulatory purposes, the tax credits are being deferred and amortized, starting in 2020, over 25 years and 10 years for federal and state credits, respectively. In June 2022, the in-kind consideration services were completed and fully accepted by the Navy as partial consideration in lieu of rent payment. Satisfaction of the full-term rent requires on-going compliance with all terms of the lease, which, among other things, includes provision of contingent power upon written notice of the Department of the Navy. Hawaiian Electric accounted for the arrangement as a lease, recording $6.4 million as right-of-use asset with no lease liability and will amortize the right-of-use asset over the remaining term of the lease ending June 30, 2054.
Waena Switchyard/Synchronous Condenser Project. In October 2020, to support efforts to increase renewable energy generation and reduce fossil fuel consumption by deactivating current generating units, Maui Electric filed a PUC application to construct a switchyard, which includes the extension of 2 69 kV transmission lines and the relocation of another 69 kV transmission line; and the conversion of 2 generating units to synchronous condensers at Kahului Power Plant in central Maui. In November 2021, the PUC approved Maui Electric’s request to commit funds estimated at $38.8 million for the project, and to recover capital expenditures for the project under Exceptional Project Recovery Mechanism (EPRM) not to exceed $38.8 million, which shall be further reduced to reflect the total project cost exclusive of overhead costs not directly attributable to the project.
In approving the project, the PUC recognized that the project will facilitate the ability to accommodate increased renewable energy, as contemplated under the EPRM guidelines. As of June 30, 2022, $10.2 million has been incurred for the project.
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 and left the property in 1987. The federal Environmental Protection Agency (EPA) has since identified environmental impacts in the subsurface soil at the Site. In cooperation with the Department of Health of State of Hawaii 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 June 30, 2022, representing the probable and reasonably estimable undiscounted cost for remediation of the Site and the adjacent parcel based on presently available information; however, final costs of remediation will depend on the cleanup approach implemented.
Additionally, on November 24, 2021, the current landowners of the Site, Misaki’s, Inc., filed a lawsuit against Hawaiian Electric (as alleged successor in interest to Molokai Electric, the prior owner of the Site) in the Circuit Court of the Second Circuit of the State of Hawaii (removed to the U.S. District Court for the District of Hawaii). The complaint which was
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subsequently amended to include Maui Electric, alleges that Hawaiian Electric is responsible for remediation of the Site based on the Comprehensive Environmental Response, Compensation, and Liability Act of 1980 (CERCLA), and the Hawaii Environmental Response Law under Hawaii Revised Statutes Chapter 128D, as well as being liable on contractual claims related to a short leaseback period during the transition of ownership from Molokai Electric. The amended complaint was dismissed and a new complaint is pending subject to the parties attempt to enter into settlement negotiations, but the Utilities intend to vigorously defend the action if necessary. At this time, the Utilities are unable to determine the ultimate outcome of the lawsuit or the amount of any possible loss. As of June 30, 2022, the reserve balance recorded by the Utilities to address the lawsuit was not material.
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 under CERCLA responsible for the costs of investigation and cleanup of PCB contamination in sediment in the area offshore of the Waiau Power Plant as part of the Pearl Harbor Superfund Site. Hawaiian Electric was also required by the EPA to assess potential sources and extent of PCB contamination onshore at Waiau Power Plant.
As of June 30, 2022, the reserve account balance recorded by Hawaiian Electric to address the PCB contamination was $10.1 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
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. Decoupling delinks the utility’s revenues from the utility’s sales, removing the disincentive to promote energy efficiency and accept more renewable energy. Decoupling continues under the PBR Framework.
Performance-based regulation framework. On December 23, 2020, the PUC issued a decision and order (PBR D&O) establishing a new PBR Framework to govern the Utilities. The PBR Framework incorporates an annual revenue adjustment (ARA) and a suite of new regulatory mechanisms in addition to previously established regulatory mechanisms. Under the PBR Framework, the decoupling mechanism (i.e., the Revenue Balancing Account (RBA)) established by the previous regulatory framework will continue. The existing cost recovery mechanisms will continue as currently implemented (i.e., the Energy Cost Recovery Clause (ECRC), Purchased Power Adjustment Clause (PPAC), Demand Side Management surcharge, Renewable Energy Infrastructure Program, Demand Response Adjustment Clause (DRAC), Pension and Other Post-Employment Benefits (OPEB) tracking mechanisms). In addition to annual revenues provided by the 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 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 incorporates a variety of additional 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’ achieved rate-making ROACE and a Re-Opener mechanism, under which the PUC will open an examination, at its discretion, to determine if adjustments or modifications to specific PBR mechanisms are appropriate. The new PBR Framework became fully effective on June 1, 2021.
On June 17, 2022, the PUC issued a decision and order (June 2022 D&O) establishing additional PIMs under the PBR Framework for the Utilities. In 2021, the PUC Staff originally proposed consideration of 11 PIMs and other mechanisms to address identified areas of concern. NaN of the staff proposed PIMs were designed as penalty-only. The June 2022 D&O approved 2 new PIMs, a new SSM, and extended the timeframe for an existing PIM. Of the new PIMs, only 1 is penalty-only. Specifically, the PUC approved (1) a new (penalty-only) generation-caused interruption reliability PIM, (2) a new (penalty/reward) interconnection requirements study (IRS) PIM, (3) a new (reward-only) Collective Shared Savings Mechanism (CSSM), and (4) a modification and extension of the existing interim (reward-only) Grid Services PIM. The effective date for the changes has not yet been established. On July 15, 2022, the Utilities submitted for the PUC’s review and approval, proposed tariffs to implement the aforementioned PIMs with an evaluation period proposed for the generation-caused interruption reliability PIMs, IRS PIM, and CSSM to start on January 1, 2023. The evaluation period is the calendar year period over which performance is compared to performance targets of the PIM to determine the amount of reward or penalty.
In addition, the June 2022 D&O instructed the Utilities to prepare and submit: a detailed fossil fuel retirement report outlining necessary steps to safely and reliably retire certain existing fossil fuel power plants during the first multi-year rate period (MRP); and a functional integration plan for DER to increase transparency into the Utilities’ plans and progress for
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utilizing cost-effective grid services from DERs and ensure that the necessary functionalities and requisite technologies are in place to do so. The PUC also instructed the PBR Working Group to continue its ongoing collaborative efforts to consider other potential new incentive mechanisms and to address other issues raised during the proceeding. Following the PUC’s review of the Utilities’ tariffs to implement the approved PIMs, an order will be issued providing details on next steps for the proceeding.
Revenue adjustment mechanism. Prior to the implementation of the PBR Framework, the revenue adjustment mechanism (RAM) was a major component of the previously established regulatory framework. The RAM was 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). Under the PBR Framework, the ARA mechanism replaced the RAM, and became effective on June 1, 2021. RAM revenue adjustments approved by the PUC in 2020 will continue to be included in the RBA provision’s target revenue and RBA rate adjustment unless modified with PUC approval.
Annual revenue adjustment mechanism. The PBR Framework established a five-year MRP 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% of adjusted revenue requirements compounded annually and a flow through of the “pre-PBR” savings commitment from the management audit recommendations developed in a prior docket at a rate of $6.6 million per year from 2021 to 2025. The implementation of the ARA occurred on June 1, 2021.
Earnings sharing mechanism. The PBR Framework established a symmetrical ESM for achieved rate-making ROACE outside of a 300 basis points dead band above or below the current authorized ROACE of 9.5% for each of the Utilities. There is a 50/50 sharing between customers and Utilities for the achieved rate-making ROACE 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 achieved rate-making ROACE enters the outer most tier of the ESM.
Exceptional project recovery mechanism. Prior to the implementation of the PBR Framework, the PUC established the Major Project Interim Recovery (MPIR) adjustment mechanism and MPIR Guidelines. The MPIR mechanism provides the opportunity to recover revenues for net costs of approved eligible projects placed in service between general rate cases. In establishing the PBR Framework, the MPIR Guidelines were terminated and replaced with the EPRM Guidelines. Although the MPIR Guidelines were terminated and replaced by the EPRM Guidelines, the MPIR mechanism will continue within the PBR Framework to provide recovery of project costs previously approved for recovery under the MPIR. The newly established EPRM Guidelines 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. Deferred and O&M expense projects are also eligible for EPRM recovery under the EPRM Guidelines. EPRM recoverable costs will be limited to the lesser of actual incurred project costs or PUC‑approved amounts, net of savings.
As of June 30, 2022, the Utilities submitted 2022 MPIR amounts totaling $25.9 million, including revenue taxes, for the Schofield Generating Station ($16.5 million), West Loch PV Project ($3.3 million), and Grid Modernization Strategy (GMS) Phase 1 project ($6.1 million for all three utilities) for the accrual of revenues effective January 1, 2022, that included the 2022 return on project amount (based on approved amounts) in rate base, depreciation and incremental O&M expenses. The PUC approved the Utilities’ recovery of the annualized 2022 MPIR amounts effective June 1, 2022 through the RBA rate adjustment.
As of June 30, 2022, the PUC approved 2 EPRM applications for projects totaling $41 million to the extent that the project costs are not included in rates. Currently, the Utilities have outstanding applications seeking EPRM recovery for 5 projects with total project costs of $450 million, subject to PUC approval.
Pilot process. The PBR D&O approved a Pilot Process to foster innovation by establishing an expedited implementation process for pilots that test new technologies, programs, business models, and other arrangements. This is intended to support initiatives by the Utilities to test new programs and ideas quickly and elevate any successful pilots for consideration of full-scale implementation. The proposed pilots are subject to PUC approval with a total annual cap of $10 million. The Pilot Process includes an initial workplan development phase, during which the Utilities identify and scope areas of interests, so as to inform the subsequent implementation phase, during which the Utilities submit specific pilot proposals for expedited review by the PUC and implement the pilots upon approval. The PUC will issue an order, approving, denying, or modifying a proposed Pilot within 45 days of receiving notice of a specific pilot project.
On July 9, 2021, the PUC issued an order approving the Utilities’ proposed Pilot Process submitted in April 2021 with modifications, including a cost recovery process that generally allows the Utilities to defer and recover total annual
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expenditures of approved pilot projects in full over twelve months beginning June 1 of the year following implementation through the RBA rate adjustment, although the Utilities may determine on a case-by-case basis that a particular project’s deferred costs should be amortized over a period greater than twelve months. On July 28, 2021, the Utilities submitted the finalized Pilot Process to govern the review of the pilot project proposals in accordance with the July 9, 2021 order.
On November 12, 2021, the Utilities requested PUC approval of their proposed Pilot Process Workplan to guide the development of pilot projects over the next three years. A PUC order on the Workplan is pending.
On February 28, 2022, the Utilities filed their first annual Pilot Update report covering pilot projects approved through the Pilot Process framework. The Pilot Update reported on approximately $0.1 million of 2021 deferred costs which was incorporated in the Utilities’ adjustments to target revenue in the 2022 spring revenue report. The PUC approved the Utilities’ recovery of the 2021 Pilot amounts effective June 1, 2022 through the RBA rate adjustment.
Performance incentive mechanisms. The PUC has established the following PIMs and SSMs: (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, (4) new PIMs established in the PBR D&O and (5) new PIMs and a SSM established in the June 2022 D&O.
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 remain constant in interim periods, unless otherwise amended by order of the PUC.
Service Reliability Performance measured by Transmission and Distribution-caused 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). For the 2021 evaluation period, the Utilities earned $0.2 million in penalties.
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).
Phase 1 RFP PIM. Procurement of low-cost variable renewable resources through the RFP 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. On July 9, 2020, the Utilities filed 2 Grid Services Purchase Agreements (GSPA) for the Grid Service RFP that potentially qualify for a demand response PIM; however, details of the incentive metrics will be determined by the PUC. On September 15, 2020, the Utilities filed a PPA that qualified for a PIM incentive and on February 16, 2021, the Utilities filed 1 additional PPA that qualified for a declining PIM incentive. The PUC approved 2 PPAs in September 2021 and November 2021 and 2 GSPAs on December 31, 2020. For the 2021 evaluation period, the Utilities earned $0.1 million in rewards related to the 2 PPAs.
The PUC previously established the following 2 PIMs in its PBR D&O, which were approved in an order issued on March 23, 2021 and became effective on June 1, 2021. In its June 2022 D&O, the PUC modified and extended the Grid Services PIM.
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 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. For the 2021 evaluation period, the Utilities earned $1.0 million in rewards.
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Grid Services PIM that provides financial rewards on a $/kW basis for the acquisition of eligible grid services. The eligibility period for this PIM initially commenced on January 1, 2021 and was scheduled to end on December 31, 2022. However, the June 2022 D&O extended the eligibility period for this PIM through December 31, 2023. The June 2022 D&O also increased the incentive rate for the acquisition of load reduction grid services. During the PIM performance period, newly acquired committed capacity in the Oahu Scheduled Dispatch Program (SDP), the Oahu Fast DR program (up to the 7 MW cap), and the Maui SDP program shall qualify for the incentive. The Utilities can earn a maximum reward of $1.5 million from 2021 through 2023. The effective date of the revised Grid Services PIM tariff is pending.
The PUC also previously established the following 3 PIMs in its PBR D&O, which were approved by the PUC on May 17, 2021 and became effective on June 1, 2021.
Interconnection Approval PIM that provides financial rewards and penalties for interconnection times for DER 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. For the 2021 evaluation period, the Utilities earned $2.8 million in rewards.
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 Utilities can earn a total annual maximum reward of $2.0 million. The PIM will initially have a duration of three years and be subject to an annual review. The evaluation period is based on Hawaii Energy’s program year with the initial evaluation year being the period of July 1, 2021 through June 30, 2022.
Advanced Metering Infrastructure Utilization PIM that provides financial rewards for leveraging grid modernization investments and engaging customers beyond what is already planned in the Phase 1 Grid Modernization program. The Utilities can earn a total annual maximum reward of $2.0 million. The PIM will initially have a duration of three years after which it will be re-evaluated. The evaluation period commenced on January 1, 2021.
The PUC established the following new PIMs and SSM in its June 2022 D&O. The proposed tariffs and the effective date for these PIMs and SSM are pending the PUC’s review and approval.
Generation-caused System Average Interruption Duration and Frequency Indexes PIMs to incentivize achievement of generation-based reliability targets, measured by Generation 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 3 basis points applied to the common equity share of each respective utility’s approved rate base (or maximum penalties of approximately $1 million - for both indices in total for the three utilities).
An IRS PIM to incentivize the timely completion of the IRS process for large-scale renewable energy projects (rewards and penalties) measured by the number of months between final model checkout and delivery of IRS results to the developer. Target performance is ten months with an asymmetrical deadband of two-months for penalties and no deadband for rewards. The maximum penalty and reward will depend on the specifics of the upcoming procurement.
A CSSM to incentivize cost control over the Utilities’ fuel, purchased power, and EPRM/MPIR costs (collectively, non-ARA costs). This is a reward only incentive where the Utilities retain a portion of savings when non-ARA costs in a performance year are lower than target year non-ARA costs, which are adjusted for changes in fuel prices, inflation, and system generation from a base year (calendar year 2021). The CSSM does not have a maximum reward, however, rewards are tiered, with the Utilities retaining a 20% share of the first $5 million in savings at Hawaiian Electric and of the first $1 million in savings at both Hawaii Electric Light and Maui Electric, with the Utilities’ share at 5% of any savings beyond the initial amounts of CSSM savings for each utility.
For the 2021 evaluation period, the Utilities accrued $3.7 million ($2.8 million for Hawaiian Electric, $0.4 million for Hawaii Electric Light and $0.5 million for Maui Electric) in rewards net of penalties. The net rewards related to 2021 were reflected in the 2021 fall revenue report and 2022 spring revenue report filings.
Annual review cycle. PBR D&O established an annual review cycle for revenue adjustments under the PBR Framework, including the biannual submission of the revenue reports. The Utilities spring revenue report filed on March 31, 2022, was approved by the PUC on May 25, 2022.

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The net incremental amounts between the 2021 fall and 2022 spring revenue reports are to be collected (refunded) from June 1, 2022 through May 31, 2023 as follows:
(in millions)Hawaiian ElectricHawaii Electric LightMaui ElectricTotal
Incremental accrued RBA balance through September 30, 2021 (and associated revenue taxes)$(5.7)$2.1 $(4.7)$(8.3)
Incremental Performance Incentive Mechanisms (net)1.9 0.4 0.4 2.7 
Incremental MPIR/EPRM Revenue Adjustment1.3 0.8 0.7 2.8
Other(0.1)— — $(0.1)
Net incremental amount to be collected under the RBA rate tariffs$(2.6)$3.3 $(3.6)$(2.9)

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 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. As the moratorium on customer disconnections ended on May 31, 2021, the Utilities have resumed charging late payment fees in July 2021. Pursuant to PUC orders, the deferral of COVID-19 related costs by the Utilities ended on December 31, 2020. On October 1, 2021, the PUC approved the Utilities’ request to extend the deferral period to December 31, 2021. In December 2021, to keep customers connected and provide some relief to customers experiencing financial difficulty during the pandemic, the Utilities committed to issuing $2 million in bill credits to qualified customers. The Utilities will not seek recovery for the issued bill credits, resulting in a reduction to the cumulative deferred costs. On June 9, 2022, the Utilities filed an application with the PUC, requesting recovery of a portion of the COVID-19 related deferral costs, net of cost savings realized, not to exceed the amount of $27.8 million over three years, from June 2023 through May 2026. Annual requests will be limited to actual costs incurred.
Army privatization. On October 30, 2020, the PUC approved Hawaiian Electric’s 50-year contract with the U.S. Army to own, operate and maintain the electric distribution system serving the U.S. Army’s 12 installations on Oahu, including Schofield Barracks, Wheeler Army Airfield, Tripler Army Medical Center, Fort Shafter, and Army housing areas. On March 1, 2022, Hawaiian Electric acquired the Army’s existing distribution system for a purchase price of $14.5 million, and will pay the Army in the form of a monthly credit against the monthly utility services charge over the 50-year term of the contract. The acquisition of additional assets contemplated in the contract, with an estimated value of $4 million, is planned for 2023.
Hawaiian Electric took ownership and all responsibilities for operation and maintenance of the system on March 1, 2022 for a 50-year term after a one-year transition period. Under the contract, Hawaiian Electric will make initial capital upgrades over the first six years of the contract and replace aging infrastructure over the 50-year term. In addition to its regular monthly electricity bill, the Army will pay Hawaiian Electric a monthly utility services charge to cover operations and maintenance expenses and provide recovery for capital upgrades, capital replacements, and the existing distribution system based on a rate of return determined by the PUC for regulated utility investments, as well as depreciation expense. The PUC requires Hawaiian Electric to file regular periodic reports on the activities and investments in fulfillment of the contract and will review the major projects planned on behalf of the Army. The annual impact on Hawaiian Electric’s earnings is not expected to be material and will depend on a number of factors, including the amount and timing of capital upgrades and capital replacement.
Condensed consolidating financial information. Condensed consolidating financial information for Hawaiian Electric and its subsidiaries are presented for the three and six month periods ended June 30, 2022 and 2021, and as of June 30, 2022 and December 31, 2021.
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.

20


NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - continued (Unaudited)


Hawaiian Electric Company, Inc. and Subsidiaries
Condensed Consolidating Statement of Income
Three months ended June 30, 2022

(in thousands)Hawaiian ElectricHawaii Electric LightMaui ElectricOther subsidiariesConsolidating adjustments
Hawaiian Electric
Consolidated
Revenues$576,472 124,502 117,928 — (29)$818,873 
Expenses
Fuel oil184,297 33,065 52,293 — — 269,655 
Purchased power165,202 38,735 14,148 — — 218,085 
Other operation and maintenance82,707 21,331 20,854 — — 124,892 
Depreciation39,501 10,352 8,886 — — 58,739 
Taxes, other than income taxes54,025 11,378 10,945 — — 76,348 
   Total expenses525,732 114,861 107,126 — — 747,719 
Operating income50,740 9,641 10,802 — (29)71,154 
Allowance for equity funds used during construction1,946 217 307 — — 2,470 
Equity in earnings of subsidiaries12,237 — — — (12,237)— 
Retirement defined benefits credit (expense)—other than service costs856 167 (32)— — 991 
Interest expense and other charges, net(13,519)(2,642)(2,668)— 29 (18,800)
Allowance for borrowed funds used during construction637 67 94 — — 798 
Income before income taxes52,897 7,450 8,503 — (12,237)56,613 
Income taxes8,492 1,659 1,828 — — 11,979 
Net income44,405 5,791 6,675 — (12,237)44,634 
Preferred stock dividends of subsidiaries— 133 96 — — 229 
Net income attributable to Hawaiian Electric44,405 5,658 6,579 — (12,237)44,405 
Preferred stock dividends of Hawaiian Electric270 — — — — 270 
Net income for common stock$44,135 5,658 6,579 — (12,237)$44,135 

Hawaiian Electric Company, Inc. and Subsidiaries
Condensed Consolidating Statement of Comprehensive Income
Three months ended June 30, 2022
(in thousands)Hawaiian ElectricHawaii Electric LightMaui ElectricOther
subsidiaries
Consolidating
adjustments
Hawaiian Electric
Consolidated
Net income for common stock$44,135 5,658 6,579 — (12,237)$44,135 
Other comprehensive income, 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(5)(72)603 — (531)(5)
Reclassification adjustment for impact of D&Os of the PUC included in regulatory assets, net of taxes56 74 (602)— 528 56 
Other comprehensive income, net of taxes51 — (3)51 
Comprehensive income attributable to common shareholder$44,186 5,660 6,580 — (12,240)$44,186 

21


NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - continued (Unaudited)
Hawaiian Electric Company, Inc. and Subsidiaries
Condensed Consolidating Statement of Income
Three months ended June 30, 2021
(in thousands)Hawaiian ElectricHawaii Electric LightMaui ElectricOther subsidiariesConsolidating adjustments
Hawaiian Electric
Consolidated
Revenues$422,697 91,512 87,670 — — $601,879 
Expenses
Fuel oil91,345 19,586 28,205 — — 139,136 
Purchased power124,948 24,236 13,281 — — 162,465 
Other operation and maintenance77,903 19,474 20,765 — — 118,142 
Depreciation38,907 10,053 8,421 — — 57,381 
Taxes, other than income taxes40,301 8,539 8,231 — — 57,071 
   Total expenses373,404 81,888 78,903 — — 534,195 
Operating income49,293 9,624 8,767 — — 67,684 
Allowance for equity funds used during construction1,930 140 307 — — 2,377 
Equity in earnings of subsidiaries10,744 — — — (10,744)— 
Retirement defined benefits credit (expense)—other than service costs884 169 (33)— — 1,020 
Interest expense and other charges, net(12,829)(2,573)(2,593)— — (17,995)
Allowance for borrowed funds used during construction654 48 110 — — 812 
Income before income taxes50,676 7,408 6,558 — (10,744)53,898 
Income taxes8,505 1,668 1,325 — — 11,498 
Net income42,171 5,740 5,233 — (10,744)42,400 
Preferred stock dividends of subsidiaries— 133 96 — — 229 
Net income attributable to Hawaiian Electric42,171 5,607 5,137 — (10,744)42,171 
Preferred stock dividends of Hawaiian Electric270 — — — — 270 
Net income for common stock$41,901 5,607 5,137 — (10,744)$41,901 


Hawaiian Electric Company, Inc. and Subsidiaries
Condensed Consolidating Statement of Comprehensive Income
Three months ended June 30, 2021
(in thousands)Hawaiian ElectricHawaii Electric LightMaui ElectricOther
subsidiaries
Consolidating
adjustments
Hawaiian Electric
Consolidated
Net income for common stock$41,901 5,607 5,137 — (10,744)$41,901 
Other comprehensive income, 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 taxes5,846 834 761 — (1,595)5,846 
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 taxes35 — — — — 35 
Comprehensive income attributable to common shareholder$41,936 5,607 5,137 — (10,744)$41,936 

22


NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - continued (Unaudited)
Hawaiian Electric Company, Inc. and Subsidiaries
Condensed Consolidating Statement of Income
Six months ended June 30, 2022
(in thousands)Hawaiian ElectricHawaii Electric LightMaui ElectricOther subsidiariesConsolidating adjustmentsHawaiian Electric
Consolidated
Revenues$1,076,714 233,030 217,956 — (35)$1,527,665 
Expenses
Fuel oil338,722 58,316 93,903 — — 490,941 
Purchased power289,385 69,447 22,786 — — 381,618 
Other operation and maintenance166,363 41,545 42,241 — — 250,149 
Depreciation78,985 20,703 17,522 — — 117,210 
Taxes, other than income taxes101,299 21,410 20,289 — — 142,998 
   Total expenses974,754 211,421 196,741 — — 1,382,916 
Operating income101,960 21,609 21,215 — (35)144,749 
Allowance for equity funds used during construction3,936 410 533 — — 4,879 
Equity in earnings of subsidiaries25,898 — — — (25,898)— 
Retirement defined benefits credit (expense)—other than service costs1,711 334 (64)— — 1,981 
Interest expense and other charges, net(26,612)(5,251)(5,298)— 35 (37,126)
Allowance for borrowed funds used during construction1,288 127 161 — — 1,576 
Income before income taxes108,181 17,229 16,547 — (25,898)116,059 
Income taxes17,097 3,927 3,493 — — 24,517 
Net income91,084 13,302 13,054 — (25,898)91,542 
Preferred stock dividends of subsidiaries— 267 191 — — 458 
Net income attributable to Hawaiian Electric91,084 13,035 12,863 — (25,898)91,084 
Preferred stock dividends of Hawaiian Electric540 — — — — 540 
Net income for common stock$90,544 13,035 12,863 — (25,898)$90,544 


Hawaiian Electric Company, Inc. and Subsidiaries
Condensed Consolidating Statement of Comprehensive Income
Six months ended June 30, 2022
(in thousands)Hawaiian ElectricHawaii Electric LightMaui ElectricOther subsidiariesConsolidating adjustmentsHawaiian Electric Consolidated
Net income for common stock$90,544 13,035 12,863 — (25,898)$90,544 
Other comprehensive income, 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 taxes4,371 598 1,206 — (1,804)4,371 
Reclassification adjustment for impact of D&Os of the PUC included in regulatory assets, net of taxes(4,269)(596)(1,205)— 1,801 (4,269)
Other comprehensive income, net of taxes102 — (3)102 
Comprehensive income attributable to common shareholder$90,646 13,037 12,864 — (25,901)$90,646 
23


NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - continued (Unaudited)
Hawaiian Electric Company, Inc. and Subsidiaries
Condensed Consolidating Statement of Income
Six months ended June 30, 2021

(in thousands)Hawaiian ElectricHawaii Electric LightMaui ElectricOther subsidiariesConsolidating adjustmentsHawaiian Electric
Consolidated
Revenues$823,251 176,661 166,851 — (20)$1,166,743 
Expenses
Fuel oil180,073 36,071 50,419 — — 266,563 
Purchased power233,552 45,833 25,376 — — 304,761 
Other operation and maintenance155,238 37,386 40,088 — — 232,712 
Depreciation77,821 20,101 16,814 — — 114,736 
Taxes, other than income taxes78,928 16,532 15,713 — — 111,173 
   Total expenses725,612 155,923 148,410 — — 1,029,945 
Operating income97,639 20,738 18,441 — (20)136,798 
Allowance for equity funds used during construction3,678 272 618 — — 4,568 
Equity in earnings of subsidiaries23,254 — — — (23,254)— 
Retirement defined benefits credit (expense)—other than service costs1,770 337 (66)— — 2,041 
Interest expense and other charges, net(25,661)(5,154)(5,183)— 20 (35,978)
Allowance for borrowed funds used during construction1,245 92 222 — — 1,559 
Income before income taxes101,925 16,285 14,032 — (23,254)108,988 
Income taxes16,126 3,719 2,886 — — 22,731 
Net income85,799 12,566 11,146 — (23,254)86,257 
Preferred stock dividends of subsidiaries— 267 191 — — 458 
Net income attributable to Hawaiian Electric85,799 12,299 10,955 — (23,254)85,799 
Preferred stock dividends of Hawaiian Electric540 — — — — 540 
Net income for common stock$85,259 12,299 10,955 — (23,254)$85,259 


Hawaiian Electric Company, Inc. and Subsidiaries
Condensed Consolidating Statement of Comprehensive Income
Six months ended June 30, 2021
(in thousands)Hawaiian ElectricHawaii Electric LightMaui ElectricOther subsidiariesConsolidating adjustmentsHawaiian Electric Consolidated
Net income for common stock$85,259 12,299 10,955 — (23,254)$85,259 
Other comprehensive income, 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 taxes11,691 1,669 1,522 — (3,191)11,691 
Reclassification adjustment for impact of D&Os of the PUC included in regulatory assets, net of taxes(11,622)(1,668)(1,522)— 3,190 (11,622)
Other comprehensive income, net of taxes69 — — (1)69 
Comprehensive income attributable to common shareholder$85,328 12,300 10,955 — (23,255)$85,328 

24


NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - continued (Unaudited)
Hawaiian Electric Company, Inc. and Subsidiaries
Condensed Consolidating Balance Sheet
June 30, 2022
(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$42,860 5,606 3,594 — — $52,060 
Plant and equipment5,178,903 1,399,002 1,262,710 — — 7,840,615 
Less accumulated depreciation(1,816,724)(633,559)(576,012)— — (3,026,295)
Construction in progress173,970 20,725 31,984 — — 226,679 
Utility property, plant and equipment, net3,579,009 791,774 722,276 — — 5,093,059 
Nonutility property, plant and equipment, less accumulated depreciation5,300 115 1,532 — — 6,947 
Total property, plant and equipment, net3,584,309 791,889 723,808 — — 5,100,006 
Investment in wholly owned subsidiaries, at equity686,338 — — — (686,338)— 
Current assets      
Cash and cash equivalents6,578 5,754 3,094 77 — 15,503 
Restricted cash1,129 — — — — 1,129 
Advances to affiliates3,000 — 10,000 — (13,000)— 
Customer accounts receivable, net176,838 37,631 32,801 — — 247,270 
Accrued unbilled revenues, net128,083 26,245 24,548 — — 178,876 
Other accounts receivable, net20,525 3,063 3,320 — (16,520)10,388 
Fuel oil stock, at average cost178,911 17,254 27,622 — — 223,787 
Materials and supplies, at average cost43,836 10,001 20,744 — — 74,581 
Prepayments and other27,424 4,911 3,593 — 612 36,540 
Regulatory assets64,999 4,452 4,127 — — 73,578 
Total current assets651,323 109,311 129,849 77 (28,908)861,652 
Other long-term assets      
Operating lease right-of-use assets49,326 36,743 13,621 — — 99,690 
Regulatory assets309,077 76,660 71,585 — — 457,322 
Other129,402 19,163 20,280 — (519)168,326 
Total other long-term assets487,805 132,566 105,486 — (519)725,338 
Total assets$5,409,775 1,033,766 959,143 77 (715,765)$6,686,996 
Capitalization and liabilities      
Capitalization      
Common stock equity$2,289,595 337,737 348,524 77 (686,338)$2,289,595 
Cumulative preferred stock—not subject to mandatory redemption22,293 7,000 5,000 — — 34,293 
Long-term debt, net1,176,691 244,393 263,436 — — 1,684,520 
Total capitalization3,488,579 589,130 616,960 77 (686,338)4,008,408 
Current liabilities      
Current portion of operating lease liabilities18,985 6,441 2,550 — — 27,976 
Current portion of long-term debt39,991 11,997 — — — 51,988 
Short-term borrowings from non-affiliates54,987 — — — — 54,987 
Short-term borrowings from affiliate10,000 3,000 — — (13,000)— 
Accounts payable156,222 22,524 20,410 — — 199,156 
Interest and preferred dividends payable12,779 2,677 2,350 — (10)17,796 
Taxes accrued, including revenue taxes145,594 34,157 31,636 — 612 211,999 
Regulatory liabilities14,614 3,532 4,487 — — 22,633 
Other61,438 17,749 18,105 — (16,668)80,624 
Total current liabilities514,610 102,077 79,538 — (29,066)667,159 
Deferred credits and other liabilities      
Operating lease liabilities44,498 30,428 11,185 — — 86,111 
Deferred income taxes285,438 51,403 63,269 — — 400,110 
Regulatory liabilities709,954 182,303 93,185 — — 985,442 
Unamortized tax credits73,441 13,643 13,028 — — 100,112 
Defined benefit pension and other postretirement benefit plans liability216,789 47,783 51,264 — (361)315,475 
Other76,466 16,999 30,714 — — 124,179 
Total deferred credits and other liabilities1,406,586 342,559 262,645 — (361)2,011,429 
Total capitalization and liabilities$5,409,775 1,033,766 959,143 77 (715,765)$6,686,996 

25


NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - continued (Unaudited)
Hawaiian Electric Company, Inc. and Subsidiaries
Condensed Consolidating Balance Sheet
December 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$42,737 5,606 3,594 — — $51,937 
Plant and equipment5,097,033 1,390,361 1,248,589 — — 7,735,983 
Less accumulated depreciation(1,757,096)(619,991)(563,430)— — (2,940,517)
Construction in progress159,854 17,129 27,586 — — 204,569 
Utility property, plant and equipment, net3,542,528 793,105 716,339 — — 5,051,972 
Nonutility property, plant and equipment, less accumulated depreciation5,302 115 1,532 — — 6,949 
Total property, plant and equipment, net3,547,830 793,220 717,871 — — 5,058,921 
Investment in wholly owned subsidiaries, at equity
676,237 — — — (676,237)— 
Current assets      
Cash and cash equivalents23,344 5,326 23,422 77 — 52,169 
Restricted cash3,089 — — — — 3,089 
Advances to affiliates1,000 — — — (1,000)— 
Customer accounts receivable, net135,949 28,469 22,441 — — 186,859 
Accrued unbilled revenues, net92,469 19,529 17,157 — — 129,155 
Other accounts receivable, net18,624 3,347 3,031 — (17,735)7,267 
Fuel oil stock, at average cost71,184 12,814 20,080 — — 104,078 
Materials and supplies, at average cost42,006 9,727 20,144 — — 71,877 
Prepayments and other32,140 6,052 7,114 — 725 46,031 
Regulatory assets58,695 3,051 4,918 — — 66,664 
Total current assets478,500 88,315 118,307 77 (18,010)667,189 
Other long-term assets      
Operating lease right-of-use assets78,710 22,442 318 — — 101,470 
Regulatory assets337,903 81,645 79,331 — — 498,879 
Other130,546 17,124 18,510 — (1,014)165,166 
Total other long-term assets547,159 121,211 98,159 — (1,014)765,515 
Total assets$5,249,726 1,002,746 934,337 77 (695,261)$6,491,625 
Capitalization and liabilities      
Capitalization
Common stock equity$2,261,899 332,900 343,260 77 (676,237)$2,261,899 
Cumulative preferred stock—not subject to mandatory redemption22,293 7,000 5,000 — — 34,293 
Long-term debt, net1,136,620 234,390 253,417 — — 1,624,427 
Total capitalization3,420,812 574,290 601,677 77 (676,237)3,920,619 
Current liabilities     
Current portion of operating lease liabilities45,955 3,378 35 — — 49,368 
Current portion of long-term debt39,981 11,994 — — — 51,975 
Short-term borrowings-affiliate— 1,000 — — (1,000)— 
Accounts payable111,024 26,139 22,844 — — 160,007 
Interest and preferred dividends payable12,442 2,617 2,269 — (3)17,325 
Taxes accrued, including revenue taxes143,723 33,153 30,679 — 725 208,280 
Regulatory liabilities22,240 3,247 4,273 — — 29,760 
Other56,752 14,158 18,540 — (17,881)71,569 
Total current liabilities432,117 95,686 78,640 — (18,159)588,284 
Deferred credits and other liabilities     
Operating lease liabilities46,426 19,063 291 — — 65,780 
Deferred income taxes291,027 53,298 64,309 — — 408,634 
Regulatory liabilities695,152 179,267 92,589 — — 967,008 
Unamortized tax credits76,201 14,212 13,532 — — 103,945 
Defined benefit pension and other postretirement benefit plans liability220,480 48,900 53,257 — (857)321,780 
Other67,511 18,030 30,042 — (8)115,575 
Total deferred credits and other liabilities1,396,797 332,770 254,020 — (865)1,982,722 
Total capitalization and liabilities$5,249,726 1,002,746 934,337 77 (695,261)$6,491,625 

26


NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - continued (Unaudited)

Hawaiian Electric Company, Inc. and Subsidiaries
Condensed Consolidating Statement of Changes in Common Stock Equity
Six months ended June 30, 2022
(in thousands)Hawaiian ElectricHawaii Electric LightMaui ElectricOther
subsidiaries
Consolidating
adjustments
Hawaiian Electric
Consolidated
Balance, December 31, 2021$2,261,899 332,900 343,260 77 (676,237)$2,261,899 
Net income for common stock90,544 13,035 12,863 — (25,898)90,544 
Other comprehensive income, net of taxes102 — (3)102 
Common stock dividends(62,950)(8,200)(7,600)— 15,800 (62,950)
Balance, June 30, 2022$2,289,595 337,737 348,524 77 (686,338)$2,289,595 
 
Hawaiian Electric Company, Inc. and Subsidiaries
Condensed Consolidating Statement of Changes in Common Stock Equity
Six months ended June 30, 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 stock85,259 12,299 10,955 — (23,254)85,259 
Other comprehensive income, net of taxes69 — — (1)69 
Common stock dividends(55,850)(7,300)(7,550)— 14,850 (55,850)
Balance, June 30, 2021$2,171,396 322,451 312,768 77 (635,296)$2,171,396 

27


NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - continued (Unaudited)

Hawaiian Electric Company, Inc. and Subsidiaries
Condensed Consolidating Statement of Cash Flows
Six months ended June 30, 2022
(in thousands)Hawaiian ElectricHawaii Electric LightMaui ElectricOther
subsidiaries
Consolidating
adjustments
Hawaiian Electric
Consolidated
Net cash provided by operating activities$25,367 19,742 14,841 — (15,800)$44,150 
Cash flows from investing activities      
Capital expenditures(87,892)(23,638)(28,715)— — (140,245)
Advances to affiliates(2,000)— (10,000)— 12,000 — 
Other4,471 834 1,380 — — 6,685 
Net cash used in investing activities(85,421)(22,804)(37,335)— 12,000 (133,560)
Cash flows from financing activities      
Common stock dividends(62,950)(8,200)(7,600)— 15,800 (62,950)
Preferred stock dividends of Hawaiian Electric and subsidiaries(540)(267)(191)— — (998)
Proceeds from issuance of long-term debt40,000 10,000 10,000 — — 60,000 
Net increase in short-term borrowings from non-affiliates and affiliate with original maturities of three months or less64,987 2,000 — — (12,000)54,987 
Other(169)(43)(43)— — (255)
Net cash provided by financing activities41,328 3,490 2,166 — 3,800 50,784 
Net increase (decrease) in cash, cash equivalents and restricted cash(18,726)428 (20,328)— — (38,626)
Cash, cash equivalents and restricted cash, beginning of period26,433 5,326 23,422 77 — 55,258 
Cash, cash equivalents and restricted cash, end of period7,707 5,754 3,094 77 — 16,632 
Less: Restricted cash(1,129)— — — — (1,129)
Cash and cash equivalents, end of period$6,578 5,754 3,094 77 — $15,503 

28


NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - continued (Unaudited)

Hawaiian Electric Company, Inc. and Subsidiaries
Condensed Consolidating Statement of Cash Flows
Six months ended June 30, 2021
(in thousands)Hawaiian ElectricHawaii Electric LightMaui ElectricOther
subsidiaries
Consolidating
adjustments
Hawaiian Electric
Consolidated
Net cash provided by operating activities$43,623 15,315 13,365 — (14,850)$57,453 
Cash flows from investing activities     
Capital expenditures(92,352)(22,135)(23,538)— — (138,025)
Advances from affiliates22,900 — — — (22,900)— 
Other3,087 911 672 — — 4,670 
Net cash used in investing activities(66,365)(21,224)(22,866)— (22,900)(133,355)
Cash flows from financing activities     
Common stock dividends(55,850)(7,300)(7,550)— 14,850 (55,850)
Preferred stock dividends of Hawaiian Electric and subsidiaries(540)(267)(191)— — (998)
Repayment of short-term debt(50,000)— — — — (50,000)
Proceeds from issuance of long-term debt60,000 30,000 25,000 — — 115,000 
Net increase (decrease) in short-term borrowings from non-affiliates and affiliate with original maturities of three months or less37,999 (15,700)(7,200)— 22,900 37,999 
Other(703)(116)(122)— — (941)
Net cash provided by (used in) financing activities(9,094)6,617 9,937 — 37,750 45,210 
Net increase (decrease) in cash, cash equivalents and restricted cash(31,836)708 436 — — (30,692)
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 period26,335 3,754 2,468 77 — 32,634 
Less: Restricted cash(8,968)— — — — (8,968)
Cash and cash equivalents, end of period$17,367 3,754 2,468 77 — $23,666 

29


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 June 30Six months ended June 30
(in thousands)2022202120222021
Interest and dividend income    
Interest and fees on loans$48,129 $51,026 $94,134 $100,973 
Interest and dividends on investment securities14,693 11,040 28,677 19,713 
Total interest and dividend income62,822 62,066 122,811 120,686 
Interest expense    
Interest on deposit liabilities921 1,281 1,868 2,743 
Interest on other borrowings139 23 144 50 
Total interest expense1,060 1,304 2,012 2,793 
Net interest income61,762 60,762 120,799 117,893 
Provision for credit losses2,757 (12,207)(506)(20,642)
Net interest income after provision for credit losses59,005 72,969 121,305 138,535 
Noninterest income    
Fees from other financial services4,716 5,464 10,303 10,537 
Fee income on deposit liabilities4,552 3,904 9,243 7,767 
Fee income on other financial products2,529 2,201 5,247 4,643 
Bank-owned life insurance(142)1,624 539 4,185 
Mortgage banking income372 1,925 1,449 6,225 
Gain on sale of real estate— — 1,002 — 
Gain on sale of investment securities, net— — — 528 
Other income, net475 76 847 348 
Total noninterest income12,502 15,194 28,630 34,233 
Noninterest expense    
Compensation and employee benefits27,666 27,670 54,881 55,707 
Occupancy5,467 5,100 11,419 10,069 
Data processing4,484 4,533 8,635 8,884 
Services2,522 2,475 4,961 5,337 
Equipment2,402 2,394 4,731 4,616 
Office supplies, printing and postage1,073 978 2,133 2,022 
Marketing934 665 1,952 1,313 
FDIC insurance891 788 1,699 1,604 
Other expense3,959 3,568 7,200 6,122 
Total noninterest expense49,398 48,171 97,611 95,674 
Income before income taxes22,109 39,992 52,324 77,094 
Income taxes4,643 9,708 10,988 17,254 
Net income17,466 30,284 41,336 59,840 
Other comprehensive income (loss), net of taxes(88,835)16,999 (211,276)(28,755)
Comprehensive income (loss)$(71,369)$47,283 $(169,940)$31,085 

30


NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - continued (Unaudited)

Reconciliation to amounts per HEI Condensed Consolidated Statements of Income*:
 Three months ended June 30Six months ended June 30
(in thousands)2022202120222021
Interest and dividend income$62,822 $62,066 $122,811 $120,686 
Noninterest income12,502 15,194 28,630 34,233 
Less: Gain on sale of real estate— — 1,002 — 
Less: Gain on sale of investment securities, net— — — 528 
*Revenues-Bank75,324 77,260 150,439 154,391 
Total interest expense1,060 1,304 2,012 2,793 
Provision for credit losses2,757 (12,207)(506)(20,642)
Noninterest expense49,398 48,171 97,611 95,674 
Less: Gain on sale of real estate— — 1,002  
Less: Retirement defined benefits credit—other than service costs(186)(186)(371)(1,464)
*Expenses-Bank53,401 37,454 98,486 79,289 
*Operating income-Bank21,923 39,806 51,953 75,102 
Add back: Retirement defined benefits credit—other than service costs(186)(186)(371)(1,464)
Add back: Gain on sale of investment securities, net— — — 528 
Income before income taxes$22,109 $39,992 $52,324 $77,094 


31


NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - continued (Unaudited)
American Savings Bank, F.S.B.
Balance Sheets Data
(in thousands)June 30, 2022December 31, 2021
Assets    
Cash and due from banks $128,971  $100,051 
Interest-bearing deposits12,054 151,189 
Cash and cash equivalents141,025 251,240 
Investment securities
Available-for-sale, at fair value 2,444,267  2,574,618 
Held-to-maturity, at amortized cost (fair value of $440,023 and $510,474, respectively)513,767 522,270 
Stock in Federal Home Loan Bank, at cost 13,200  10,000 
Loans held for investment 5,426,995  5,211,114 
Allowance for credit losses (69,456) (71,130)
Net loans 5,357,539  5,139,984 
Loans held for sale, at lower of cost or fair value 3,738  10,404 
Other 659,139  590,897 
Goodwill 82,190  82,190 
Total assets $9,214,865  $9,181,603 
Liabilities and shareholder’s equity    
Deposit liabilities—noninterest-bearing $2,993,900  $2,976,632 
Deposit liabilities—interest-bearing 5,259,636  5,195,580 
Other borrowings 241,610  88,305 
Other 187,770  193,268 
Total liabilities 8,682,916  8,453,785 
  
Common stock  
Additional paid-in capital354,966 353,895 
Retained earnings 426,040  411,704 
Accumulated other comprehensive loss, net of tax benefits    
Net unrealized losses on securities$(241,301) $(32,037)
Retirement benefit plans(7,757)(249,058)(5,745)(37,782)
Total shareholder’s equity531,949  727,818 
Total liabilities and shareholder’s equity $9,214,865  $9,181,603 
Other assets    
Bank-owned life insurance $181,166  $177,566 
Premises and equipment, net 199,429  202,299 
Accrued interest receivable 21,335  20,854 
Mortgage-servicing rights 9,696  9,950 
Low-income housing investments104,592 110,989 
Real estate acquired in settlement of loans, net 271  — 
Real estate held for sale3,030 — 
Deferred tax asset84,814 7,699 
Other 54,806  61,540 
  $659,139  $590,897 
Other liabilities    
Accrued expenses $83,915  $87,905 
Federal and state income taxes payable —  — 
Cashier’s checks 33,747  33,675 
Advance payments by borrowers 9,980  9,994 
Other 60,128  61,694 
  $187,770  $193,268 
32


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 FHLB advances of $80.0 million and nil at June 30, 2022 and December 31, 2021, respectively, and securities sold under agreements to repurchase of $161.6 million and $88.3 million at June 30, 2022 and December 31, 2021, respectively.
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
June 30, 2022        
Available-for-sale
U.S. Treasury and federal agency obligations$107,389 $— $(4,902)$102,487 17 $102,487 $(4,902)— $— $— 
Mortgage-backed securities*2,606,904 467 (322,185)2,285,186 180 1,409,947 (158,235)66 845,879 (163,950)
Corporate bonds44,447 — (3,018)41,429 41,429 (3,018)— — — 
Mortgage revenue bonds15,165 — — 15,165 — — — — — — 
 $2,773,905 $467 $(330,105)$2,444,267 202 $1,553,863 $(166,155)66 $845,879 $(163,950)
Held-to-maturity
U.S. Treasury and Federal agency obligations$59,882 $— $(5,997)$53,885 $53,885 $(5,997)— $— $— 
Mortgage-backed securities*453,885 — (67,747)386,138 24 236,918 (35,867)13 149,220 (31,880)
 $513,767 $— $(73,744)$440,023 27 $290,803 $(41,864)13 $149,220 $(31,880)
December 31, 2021
Available-for-sale
U.S. Treasury and federal agency obligations$89,714 $803 $(427)$90,090 $44,827 $(427)— $— $— 
Mortgage-backed securities*2,482,618 6,511 (51,206)2,437,923 120 1,845,243 (38,321)18 271,012 (12,885)
Corporate bonds30,625 655 (102)31,178 12,780 (102)— — — 
Mortgage revenue bonds15,427 — — 15,427 — — — — — — 
 $2,618,384 $7,969 $(51,735)$2,574,618 125 $1,902,850 $(38,850)18 $271,012 $(12,885)
Held-to-maturity
U.S. Treasury and Federal agency obligations$59,871 $168 $(170)$59,869 $39,594 $(170)— $— $— 
Mortgage-backed securities*462,399 1,480 (13,274)450,605 22 290,883 (7,665)106,483 (5,609)
 $522,270 $1,648 $(13,444)$510,474 24 $330,477 $(7,835)$106,483 $(5,609)
* 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 June 30, 2022 and December 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 June 30, 2022 and December 31, 2021.
33


NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - continued (Unaudited)
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.
The contractual maturities of investment securities were as follows:
June 30, 2022Amortized costFair value
(in thousands)  
Available-for-sale
Due in one year or less$15,807 $15,781 
Due after one year through five years84,406 81,286 
Due after five years through ten years66,788 62,014 
Due after ten years— — 
 167,001 159,081 
Mortgage-backed securities — issued or guaranteed by U.S. Government agencies or sponsored agencies2,606,904 2,285,186 
Total available-for-sale securities$2,773,905 $2,444,267 
Held-to-maturity
Due in one year or less$— $— 
Due after one year through five years— — 
Due after five years through ten years59,882 53,885 
Due after ten years— — 
59,882 53,885 
Mortgage-backed securities — issued or guaranteed by U.S. Government agencies or sponsored agencies453,885 386,138 
Total held-to-maturity securities$513,767 $440,023 
The proceeds, gross gains and losses from sales of available-for-sale securities were as follows:
Three months ended June 30Six months ended June 30
(in thousands)2022202120222021
Proceeds$— $— $— $197,354 
Gross gains— — — 975 
Gross losses— — — 447 
Tax expense on realized gains— — — 142 
34


NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - continued (Unaudited)
The components of loans were summarized as follows:
June 30, 2022December 31, 2021
(in thousands)  
Real estate:  
Residential 1-4 family$2,310,041 $2,299,212 
Commercial real estate1,261,389 1,056,982 
Home equity line of credit923,976 835,663 
Residential land21,535 19,859 
Commercial construction94,060 91,080 
Residential construction19,230 11,138 
Total real estate4,630,231 4,313,934 
Commercial660,478 793,304 
Consumer148,637 113,966 
Total loans5,439,346 5,221,204 
Less: Deferred fees and discounts(12,351)(10,090)
Allowance for credit losses(69,456)(71,130)
Total loans, net$5,357,539 $5,139,984 
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.
35


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 June 30, 2022        
Allowance for credit losses:         
Beginning balance$7,874 $20,176 $5,650 $697 $2,340 $31 $14,314 $16,129 $67,211 
Charge-offs— — — — — — (148)(1,369)(1,517)
Recoveries— 31 96 — — 399 976 1,505 
Provision643 724 415 (116)294 15 (2,152)2,434 2,257 
Ending balance$8,520 $20,900 $6,096 $677 $2,634 $46 $12,413 $18,170 $69,456 
Three months ended June 30, 2021        
Allowance for credit losses:         
Beginning balance$5,261 $34,345 $5,901 $573 $1,453 $16 $24,504 $19,740 $91,793 
Charge-offs(20)— 10 — — — (319)(1,931)(2,260)
Recoveries51 — 61 11 — — 366 1,187 1,676 
Provision226 (5,637)(637)34 176 — (4,493)(2,626)(12,957)
Ending balance$5,518 $28,708 $5,335 $618 $1,629 $16 $20,058 $16,370 $78,252 
Six months ended June 30, 2022        
Allowance for credit losses:         
Beginning balance$6,545 $24,696 $5,657 $646 $2,186 $18 $15,798 $15,584 $71,130 
Charge-offs— — — — — — (224)(2,851)(3,075)
Recoveries11 — 42 101 — — 752 2,001 2,907 
Provision1,964 (3,796)397 (70)448 28 (3,913)3,436 (1,506)
Ending balance$8,520 $20,900 $6,096 $677 $2,634 $46 $12,413 $18,170 $69,456 
Six months ended June 30, 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(20)— (40)— — — (1,090)(4,791)(5,941)
Recoveries54 — 76 21 — — 639 2,194 2,984 
Provision884 (6,899)(1,514)(12)(2,520)(4,953)(4,983)(19,992)
Ending balance$5,518 $28,708 $5,335 $618 $1,629 $16 $20,058 $16,370 $78,252 

36


NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - continued (Unaudited)
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 June 30, 2022
Allowance for loan commitments:
Beginning balance$400 $3,600 $1,400 $5,400 
Provision— 500 — 500 
Ending balance$400 $4,100 $1,400 $5,900 
Three months ended June 30, 2021
Allowance for loan commitments:
Beginning balance$400 $1,300 $1,200 $2,900 
Provision— 1,100 (350)750 
Ending balance$400 $2,400 $850 $3,650 
Six months ended June 30, 2022
Allowance for loan commitments:
Beginning balance$400 $3,700 $800 $4,900 
Provision— 400 600 1,000 
Ending balance$400 $4,100 $1,400 $5,900 
Six months ended June 30, 2021
Allowance for loan commitments:
Beginning balance$300 $3,000 $1,000 $4,300 
Provision100 (600)(150)(650)
Ending balance$400 $2,400 $850 $3,650 
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.
37


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)20222021202020192018PriorRevolvingConverted to term loansTotal
June 30, 2022
Residential 1-4 family
Current$176,333 $768,123 $437,911 $119,503 $56,469 $742,653 $— $— $2,300,992 
30-59 days past due— — 572 217 453 3,288 — — 4,530 
60-89 days past due— — — — — 637 — — 637 
Greater than 89 days past due— — — — 809 3,073 — — 3,882 
176,333 768,123 438,483 119,720 57,731 749,651 — — 2,310,041 
Home equity line of credit
Current— — — — — — 881,505 41,295 922,800 
30-59 days past due— — — — — — 110 101 211 
60-89 days past due— — — — — — 106 83 189 
Greater than 89 days past due— — — — — — 423 353 776 
— — — — — — 882,144 41,832 923,976 
Residential land
Current4,290 9,861 5,410 753 527 283 — — 21,124 
30-59 days past due— — — — — — — — — 
60-89 days past due— — — — — 109 — — 109 
Greater than 89 days past due— — — 205 — 97 — — 302 
4,290 9,861 5,410 958 527 489 — — 21,535 
Residential construction
Current5,614 11,071 2,297 — — 248 — — 19,230 
30-59 days past due— — — — — — — — — 
60-89 days past due— — — — — — — — — 
Greater than 89 days past due— — — — — — — — — 
5,614 11,071 2,297 — — 248 — — 19,230 
Consumer
Current71,436 28,455 10,209 16,525 3,385 198 11,509 4,235 145,952 
30-59 days past due268 224 68 330 82 107 110 1,191 
60-89 days past due74 109 78 161 91 — 45 57 615 
Greater than 89 days past due80 159 67 255 107 — 91 120 879 
71,858 28,947 10,422 17,271 3,665 200 11,752 4,522 148,637 
Commercial real estate
Pass229,603 171,805 301,360 52,361 61,179 289,835 4,235 — 1,110,378 
Special Mention— 19,600 3,488 41,235 14,174 36,958 — — 115,455 
Substandard— — 675 11,444 1,835 21,602 — — 35,556 
Doubtful— — — — — — — — — 
229,603 191,405 305,523 105,040 77,188 348,395 4,235 — 1,261,389 
Commercial construction
Pass— 35,982 25,123 — 11,341 — 21,614 — 94,060 
Special Mention— — — — — — — — — 
Substandard— — — — — — — — — 
Doubtful— — — — — — — — — 
— 35,982 25,123 — 11,341 — 21,614 — 94,060 
Commercial
Pass41,268 181,637 87,936 74,326 45,637 87,962 78,344 14,590 611,700 
Special Mention— 23 9,702 6,533 101 1,011 15,414 14 32,798 
Substandard315 409 156 2,122 1,548 5,975 4,308 1,147 15,980 
Doubtful— — — — — — — — — 
41,583 182,069 97,794 82,981 47,286 94,948 98,066 15,751 660,478 
Total loans$529,281 $1,227,458 $885,052 $325,970 $197,738 $1,193,931 $1,017,811 $62,105 $5,439,346 
38


NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - continued (Unaudited)
Term Loans by Origination YearRevolving Loans
(in thousands)20212020201920182017PriorRevolvingConverted to term loansTotal
December 31, 2021
Residential 1-4 family
Current$791,758 $461,683 $133,345 $64,421 $124,994 $712,452 $— $— $2,288,653 
30-59 days past due— — — 809 — 2,210 — — 3,019 
60-89 days past due— — — — — 1,468 — — 1,468 
Greater than 89 days past due— — 2,987 — — 3,085 — — 6,072 
791,758 461,683 136,332 65,230 124,994 719,215 — — 2,299,212 
Home equity line of credit
Current— — — — — — 794,518 39,116 833,634 
30-59 days past due— — — — — — 296 313 609 
60-89 days past due— — — — — — 16 70 86 
Greater than 89 days past due— — — — — — 838 496 1,334 
— — — — — — 795,668 39,995 835,663 
Residential land
Current10,572 6,794 1,116 532 267 181 — — 19,462 
30-59 days past due— — — — — — — — — 
60-89 days past due— — — — — — — — — 
Greater than 89 days past due— — — — — 397 — — 397 
10,572 6,794 1,116 532 267 578 — — 19,859 
Residential construction
Current7,856 3,019 — — 263 — — — 11,138 
30-59 days past due— — — — — — — — — 
60-89 days past due— — — — — — — — — 
Greater than 89 days past due— — — — — — — — — 
7,856 3,019 — — 263 — — — 11,138 
Consumer
Current37,563 15,488 29,383 10,897 302 238 12,740 4,157 110,768 
30-59 days past due202 181 517 234 15 — 156 70 1,375 
60-89 days past due59 127 392 183 — 106 882 
Greater than 89 days past due14 93 387 192 27 — 141 87 941 
37,838 15,889 30,679 11,506 352 238 13,044 4,420 113,966 
Commercial real estate
Pass173,794 275,242 49,317 56,490 33,581 259,583 11,602 — 859,609 
Special Mention19,600 3,529 42,935 30,870 20,788 32,824 — — 150,546 
Substandard— 684 13,936 1,859 1,805 28,543 — — 46,827 
Doubtful— — — — — — — — — 
193,394 279,455 106,188 89,219 56,174 320,950 11,602 — 1,056,982 
Commercial construction
Pass17,140 43,261 — 11,342 — — 19,337 — 91,080 
Special Mention— — — — — — — — — 
Substandard— — — — — — — — — 
Doubtful— — — — — — — — — 
17,140 43,261 — 11,342 — — 19,337 — 91,080 
Commercial
Pass266,087 96,963 79,329 56,497 31,019 66,570 96,673 15,510 708,648 
Special Mention40 27,336 10,071 202 439 8,966 15,303 18 62,375 
Substandard427 184 3,737 1,777 4,457 2,961 7,083 1,655 22,281 
Doubtful— — — — — — — — — 
266,554 124,483 93,137 58,476 35,915 78,497 119,059 17,183 793,304 
Total loans$1,325,112 $934,584 $367,452 $236,305 $217,965 $1,119,478 $958,710 $61,598 $5,221,204 
39


NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - continued (Unaudited)
Revolving loans converted to term loans during the six months ended June 30, 2022 in the commercial, home equity line of credit and consumer portfolios were $1.0 million, $10.0 million and $1.7 million, respectively. Revolving loans converted to term loans during the six months ended June 30, 2021 in the commercial, home equity line of credit and consumer portfolios were $0.6 million, $9.8 million and $1.5 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
June 30, 2022       
Real estate:       
Residential 1-4 family$4,530 $637 $3,882 $9,049 $2,300,992 $2,310,041 $— 
Commercial real estate472 — — 472 1,260,917 1,261,389 — 
Home equity line of credit211 189 776 1,176 922,800 923,976 — 
Residential land— 109 302 411 21,124 21,535 — 
Commercial construction— — — — 94,060 94,060 — 
Residential construction— — — — 19,230 19,230 — 
Commercial87 763 859 659,619 660,478 — 
Consumer1,191 615 879 2,685 145,952 148,637 — 
Total loans$6,491 $2,313 $5,848 $14,652 $5,424,694 $5,439,346 $— 
December 31, 2021       
Real estate:       
Residential 1-4 family$3,019 $1,468 $6,072 $10,559 $2,288,653 $2,299,212 $— 
Commercial real estate— — — — 1,056,982 1,056,982 — 
Home equity line of credit609 86 1,334 2,029 833,634 835,663 — 
Residential land— — 397 397 19,462 19,859 — 
Commercial construction— — — — 91,080 91,080 — 
Residential construction— — — — 11,138 11,138 — 
Commercial700 313 48 1,061 792,243 793,304 — 
Consumer1,375 882 941 3,198 110,768 113,966 — 
Total loans$5,703 $2,749 $8,792 $17,244 $5,203,960 $5,221,204 $— 
The credit risk profile based on nonaccrual loans were as follows:
(in thousands)June 30, 2022December 31, 2021
With a Related ACLWithout a Related ACLTotalWith a Related ACLWithout a Related ACLTotal
Real estate:
Residential 1-4 family$11,487 $3,571 $15,058 $16,045 $3,703 $19,748 
Commercial real estate— — — 14,104 1,221 15,325 
Home equity line of credit3,225 725 3,950 4,227 1,294 5,521 
Residential land205 97