<PAGE>
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K/A
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report: December 6, 1997
================================================================================
<TABLE>
<CAPTION>
Exact Name of Registrant Commission I.R.S. Employer
as Specified in Its Charter File Number Identification No.
- --------------------------- ----------- ------------------
<S> <C> <C>
Hawaiian Electric Industries, Inc. 1-8503 99-0208097
</TABLE>
================================================================================
State of Hawaii
----------------------------------------------
(State or other jurisdiction of incorporation)
900 Richards Street, Honolulu, Hawaii 96813
----------------------------------------------------------------
(Address of principal executive offices and zip code)
Registrant's telephone number, including area code: (808) 543-5662
None
--------------------------------------------------------------
(Former name or former address, if changed since last report.)
================================================================================
<PAGE>
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
- ------------------------------------------
The following financial statements and pro forma financial information are
being filed pursuant to subparts (a) and (b) of Item 7 as an amendment to the
Current Report on Form 8-K filed on December 19, 1997, which reported the
acquisition by registrant's subsidiary, American Savings Bank, F.S.B., of
substantially all the deposits and certain of the branches and other assets of
the Hawaii Division of Bank of America, FSB, effective as of December 6, 1997.
(a) Audited and Unaudited Statements of the acquired Bank of America, FSB (BoA)
Hawaii Division operations prepared pursuant to Rule 3-05 of Regulation S-X.
Page
11 Report of Independent Certified Public Accountants, KPMG Peat Marwick
- ----
LLP, dated January 26, 1998
12 Statements of Assets to be Sold and Liabilities to be Transferred -
- ----
December 31, 1996 and September 30, 1997 (Unaudited)
13 Statements of Direct Revenues and Expenses Before Income Taxes - Year
- ----
Ended December 31, 1996 and the Nine Months Ended September 30, 1997
(Unaudited)
14 Notes to Statements of Assets to be Sold and Liabilities to be
- ----
Transferred and Direct Revenues and Expenses Before Income Taxes -
December 31, 1996 and September 30, 1997 (Unaudited)
20 Schedule 1 - Average Balances of Deposit Liabilities to be Transferred
- ----
(Unaudited)
21 Schedule 2 - Interest Expense (Unaudited)
- ----
22 Schedule 3 - Commercial Real Estate and Commercial and Industrial Loans
- ----
(Unaudited)
23 Schedule 4 - Allowance for Loan Losses Allocation (Unaudited)
- ----
(b) THE FOLLOWING UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS
OF HAWAIIAN ELECTRIC INDUSTRIES, INC. (HEI) ARE PRESENTED FOR COMPARATIVE
PURPOSES ONLY AND AS REQUIRED BY AND IN ACCORDANCE WITH ARTICLE 11 OF
REGULATION S-X. HOWEVER, MANAGEMENT DOES NOT BELIEVE THAT THESE PRO FORMA
CONDENSED COMBINED FINANCIAL STATEMENTS OF HEI ARE INDICATIVE OF THE
COMBINED FINANCIAL POSITION OR RESULTS OF OPERATIONS WHICH MAY BE OBTAINED
IN THE FUTURE. IN ADDITION, THESE PRO FORMA CONDENSED COMBINED FINANCIAL
STATEMENTS OF HEI ARE NOT NECESSARILY INDICATIVE OF THE COMBINED FINANCIAL
POSITION OR RESULTS OF OPERATIONS WHICH WOULD HAVE BEEN REALIZED HAD THE
ACQUISITION BEEN CONSUMMATED DURING THE PERIODS OR AS OF THE DATES FOR WHICH
THE PRO FORMA FINANCIAL STATEMENTS ARE PRESENTED. AMONG OTHER THINGS, THESE
PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS OF HEI DO NOT GIVE EFFECT
TO THE ESTIMATED EARNINGS ON CASH AND EQUIVALENT AMOUNTS RECEIVED FROM BOA
UPON CONSUMMATION, MOST OF WHICH CASH WAS INVESTED IN INTEREST-BEARING
ASSETS, OR REDUCTIONS IN THE EXPENSES OF THE ACQUIRED OPERATIONS WHICH
MANAGEMENT EXPECTS TO ACHIEVE SUBSEQUENT TO THE AFOREMENTIONED ACQUISITION.
1
<PAGE>
Hawaiian Electric Industries, Inc. and Subsidiaries
PRO FORMA CONDENSED COMBINED BALANCE SHEET
(Unaudited)
September 30, 1997
(Assumed Date of Acquisition: September 30, 1997)
<TABLE>
<CAPTION>
HEI BoA
and Hawaii Division
Subsidiaries Operations Pro Forma Pro Forma
(in thousands) (Historical) (Historical) Adjustments Combined
- --------------------------------------------------------------------------------------------------
ASSETS
- ------
<S> <C> <C> <C> <C> <C>
Cash and equivalents......... $ 124,610 $ 76,797 $ 700,505 (B) $1,061,912
160,000 (A)
Investment and
mortgage-backed
securities................ 1,482,388 -- -- 1,482,388
Loans receivable, net........ 2,113,929 876,032 2,194 (B) 2,992,155
Property, plant and
equipment, net............ 1,984,057 19,838 (1,549) (B) 2,002,346
Due from Bank of
America, FSB............... -- 792,857 (792,857) (B) --
Other........................ 499,421 6,139 -- 505,560
Goodwill and other
intangibles............... 33,878 -- 94,239 (B) 128,117
---------- ---------- --------- ----------
$6,238,283 $1,771,663 $ 162,532 $8,172,478
========== ========== ========= ==========
LIABILITIES AND
- ---------------
STOCKHOLDERS' EQUITY
--------------------
LIABILITIES
Deposit liabilities.......... $2,220,326 $1,757,370 $ 2,532 (B) $3,980,228
Short-term borrowings........ 116,364 -- 160,000 (A) 276,364
Securities sold
under agreements
to repurchase............. 629,785 -- -- 629,785
Advances from Federal
Home Loan Bank............ 706,774 -- -- 706,774
Long-term debt............... 803,672 -- -- 803,672
Deferred income taxes........ 189,997 -- -- 189,997
Other........................ 533,566 14,293 -- 547,859
---------- ---------- --------- ----------
5,200,484 1,771,663 162,532 7,134,679
---------- ---------- --------- ----------
HEI and HECO-
obligated
preferred securities of
trust subsidiaries........ 150,000 -- -- 150,000
Preferred stock of
electric utility
subsidiaries.............. 84,363 -- -- 84,363
---------- ---------- --------- ----------
234,363 -- -- 234,363
---------- ---------- --------- ----------
STOCKHOLDERS' EQUITY
Preferred stock.............. -- -- -- --
Common stock................. 647,062 -- -- 647,062
Retained earnings............ 156,374 -- -- 156,374
---------- ---------- --------- ----------
803,436 -- -- 803,436
---------- ---------- --------- ----------
$6,238,283 $1,771,663 $ 162,532 $8,172,478
=========== ========== ========= ==========
</TABLE>
See notes to unaudited pro forma condensed combined financial statements.
2
<PAGE>
Hawaiian Electric Industries, Inc. and Subsidiaries
PRO FORMA CONDENSED COMBINED STATEMENT OF INCOME
(Unaudited)
Nine Months Ended September 30, 1997
(Assumed Date of Acquisition: January 1, 1997)
<TABLE>
<CAPTION>
HEI BoA
and Hawaii Division Pro Forma
Subsidiaries Operations Adjustments Pro Forma
(in thousands) (Historical) (Historical) (C) Combined
- -------------------------------------------------------------------------------------------------------
REVENUES
<S> <C> <C> <C> <C>
Electric utility........................ $ 831,314 $ -- $ -- $ 831,314
Savings bank............................ 210,211 68,552 -- 278,763
Other................................... 45,042 -- -- 45,042
---------- -------- ------- ----------
1,086,567 68,552 -- 1,155,119
---------- -------- ------- ----------
EXPENSES
Electric utility........................ 704,179 -- -- 704,179
Savings bank............................ 173,843 84,158 1,860 259,861
Other................................... 52,711 -- -- 52,711
---------- ------- ------- ----------
930,733 84,158 1,860 1,016,751
---------- ------- ------- ----------
OPERATING INCOME
(LOSS)
Electric utility........................ 127,135 -- -- 127,135
Savings bank............................ 36,368 (15,606) (1,860) 18,902
Other................................... (7,669) -- -- (7,669)
---------- -------- ------- ----------
155,834 (15,606) (1,860) 138,368
---------- -------- ------- ----------
Interest expense --
electric utility
and other (48,074) -- (7,044) (55,118)
Other, net.............................. (39) -- -- (39)
Preferred securities
distributions of
trust subsidiaries................... (7,503) -- -- (7,503)
Allowance for
equity funds used
during construction.................. 8,079 -- -- 8,079
---------- -------- ------- ----------
INCOME (LOSS) BEFORE
INCOME TAXES......................... 108,297 (15,606) (8,904) 83,787
Income taxes (benefit).................. 44,701 -- (9,804) 34,897
---------- -------- ------- ----------
NET INCOME (LOSS)....................... $ 63,596 $(15,606) $ 900 $ 48,890
========== ======== ======= ==========
Historical and basic
earnings per
common share......................... $ 2.04 $ 1.56
========== =========
Diluted earnings
per common share..................... $ 2.03 $ 1.56
========== =========
Dividends per
common share......................... $ 1.83 $ 1.83
========== =========
Weighted average
number of common
shares outstanding:
Historical and basic............... 31,244 31,244
========== =========
Diluted............................ 31,343 31,343
========== =========
</TABLE>
See notes to unaudited pro forma condensed combined financial statements.
3
<PAGE>
Hawaiian Electric Industries, Inc. and Subsidiaries
PRO FORMA CONDENSED COMBINED STATEMENT OF INCOME
(Unaudited)
Year Ended December 31, 1996
(Assumed Date of Acquisition: January 1, 1996)
<TABLE>
<CAPTION>
HEI BoA
and Hawaii Division Pro Forma
Subsidiaries Operations Adjustments Pro Forma
(in thousands) (Historical) (Historical) (C) Combined
- -------------------------------------------------------------------------------------------------------
REVENUES
<S> <C> <C> <C> <C>
Electric utility........................ $1,080,868 $ -- -- $1,080,868
Savings bank............................ 271,402 89,542 -- 360,944
Other................................... 58,302 -- -- 58,302
---------- -------- -------- ----------
1,410,572 89,542 -- 1,500,114
---------- -------- -------- ----------
EXPENSES
Electric utility........................ 907,255 -- -- 907,255
Savings bank............................ 231,346 105,080 2,988 339,414
FDIC special
assessment........................ 13,835 2,278 -- 16,113
Other................................... 69,890 -- -- 69,890
---------- -------- -------- ----------
1,222,326 107,358 2,988 1,332,672
---------- -------- -------- ----------
OPERATING INCOME
(LOSS)
Electric utility........................ 173,613 -- -- 173,613
Savings bank............................ 26,221 (17,816) (2,988) 5,417
Other................................... (11,588) -- -- (11,588)
---------- -------- -------- ----------
188,246 (17,816) (2,988) 167,442
---------- -------- -------- ----------
Interest expense --
electric utility
and other............................ (65,832) -- (9,392) (75,224)
Other, net.............................. (667) -- -- (667)
Allowance for
equity funds used
during construction.................. 11,741 -- -- 11,741
---------- -------- -------- ----------
INCOME (LOSS) BEFORE
INCOME TAXES......................... 133,488 (17,816) (12,380) 103,292
Income taxes (benefit).................. 54,830 -- (12,078) 42,752
---------- -------- -------- ----------
NET INCOME (LOSS)....................... $ 78,658 $(17,816) $ (302) $ 60,540
========== ======== ======== ==========
Historical and basic
earnings per
common share......................... $ 2.60 $ 2.00
========== ==========
Diluted earnings
per common share..................... $ 2.59 $ 1.99
========== ==========
Dividends per
common share......................... $ 2.41 $ 2.41
========== ==========
Weighted average
number of common
shares outstanding:
Historical and basic............... 30,310 30,310
========== ==========
Diluted............................ 30,388 30,388
========== ==========
</TABLE>
See notes to unaudited pro forma
condensed combined financial
statements.
4
<PAGE>
Hawaiian Electric Industries, Inc. and subsidiaries
NOTES TO PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS
September 30, 1997 and December 31, 1996
(Unaudited)
Basis of Presentation
- ---------------------
In accordance with pro forma reporting requirements of Regulation S-X, the
unaudited pro forma combined financial statements give effect to the acquisition
of substantially all of the Bank of America, FSB (BoA) Hawaii Division deposits
and certain of its branches and other assets by American Savings Bank, F.S.B.
(ASB), an indirect subsidiary of Hawaiian Electric Industries, Inc. (HEI), as
if the acquisition had occurred on September 30, 1997 for the unaudited pro
forma condensed combined balance sheet, and as if the acquisition had occurred
on January 1, 1997 and January 1, 1996, respectively, for the unaudited pro
forma condensed combined statements of income.
Management does not believe that these Pro Forma Condensed Combined
Financial Statements of HEI are indicative of the combined financial position or
results of operations which may be obtained in the future. In addition, these
Pro Forma Condensed Combined Financial Statements of HEI are not necessarily
indicative of the combined financial position or results of operations which
would have been realized had the acquisition been consummated during the periods
or as of the dates for which the pro forma financial statements are presented.
Among other things, these Pro Forma Condensed Combined Financial Statements of
HEI do not give effect to the estimated earnings on cash and equivalent amounts
received from BoA upon consummation, most of which cash was invested in
interest-bearing assets, or reductions in the expenses of the acquired
operations which management expects to achieve subsequent to the aforementioned
acquisition.
The pro forma information is based on the historical financial statements
of HEI and the statements of assets to be sold and liabilities to be transferred
and direct revenues and expenses before income taxes (hereinafter referred to as
"Statements") of the acquired BoA Hawaii Division operations (filed with this
report under Item 7(a)) after giving effect to the assumptions and adjustments
set forth in the following notes to the pro forma financial statements. Pro
forma adjustments are based on the following assumptions:
1. The transaction is accounted for as a purchase. Under this method of
accounting, BoA assets acquired and liabilities assumed are adjusted
to their estimated fair values and combined with the recorded book
values of the assets and liabilities of HEI.
2. To maintain its "well-capitalized" classification subsequent to the
acquisition, HEI Diversified, Inc. (a subsidiary of HEI and parent
company of ASB) provided additional capital, amounting to $160 million
to ASB, a portion of which was in the form of the purchase of ASB
preferred stock and the balance of which was a capital contribution.
The $160 million equity infusion was financed by HEI with 5.87% short-
term debt and contributed by HEI to HEI Diversified, Inc. (HEIDI).
3. The Statements for BoA Hawaii Division do not include the effect of
income taxes. The pro forma income tax benefit relating to BoA Hawaii
Division operations was imputed using a tax rate of 40%, representing
the combined statutory federal and state rates in effect for the
periods presented.
5
<PAGE>
4. The expected useful lives/amortization periods of the significant
assets acquired in this transaction are as follows:
. Goodwill - straight line; 25 years.
. Core deposit intangible - greater of actual attrition rate or 10%
of original value (annually).
. Property, plant and equipment - straight line; 3 years to 39
years.
5. The purchase price relative to this transaction is determined as
follows (in thousands):
<TABLE>
<S> <C> <C>
. Estimated fair value of liabilities assumed $1,774,195
. Premium paid on certain deposit liabilities
to be transferred (at 7%) 92,352
----------
$1,866,547
==========
</TABLE>
6. For purposes of these pro forma financial statements, the
aforementioned purchase price has been allocated as follows (in
thousands):
<TABLE>
<S> <C> <C>
. Cash and equivalents $ 869,654
. Loans receivable, net 878,226
. Property, plant and equipment 18,289
. Other assets 6,139
. Core deposit and other intangibles (excluding
goodwill) 23,361
----------
1,795,669
. Goodwill 70,878
----------
$1,866,547
==========
</TABLE>
At the date of this filing, certain matters are pending that may have
an effect on the ultimate allocation of the purchase price. However,
management does not expect resolution of these pending matters to
significantly alter the above allocation.
The pro forma statements were prepared in accordance with the requirements
of Article 11 of Regulation S-X. The reader is cautioned, however, that economic
conditions (including prevailing interest rates) existing at the assumed dates
of acquisition for pro forma purposes (September 30, 1997, January 1, 1997 and
January 1, 1996) may be different from conditions existing at the actual date of
closing (December 6, 1997).
Pro Forma Adjustments
- ---------------------
(A) This pro forma adjustment reflects the $160 million capital infusion into
ASB by HEIDI that was financed by HEI with short-term debt.
(B) These pro forma adjustments reflect the allocation of the purchase price to
assets acquired and liabilities assumed, including the adjustment of those
assets and liabilities to their estimated fair values, and recognition of
intangible assets (in thousands):
<TABLE>
<S> <C> <C>
. Increase in cash and equivalents --
Decrease in due from BoA $ 792,857
Premium paid on certain deposit liabilities to
be transferred (92,352)
----------
700,505
----------
. Increase in loans receivable, net --
Adjustment to estimated fair value 2,194
. Decrease in property, plant and equipment, net --
Adjustment to estimated fair value (1,549)
</TABLE>
6
<PAGE>
<TABLE>
<S> <C> <C>
. Increase in goodwill and other intangibles --
Excess purchase price over estimated fair value of
net assets acquired (goodwill) 70,878
Core deposit intangible 20,276
Adjustment for estimated fair value, mortgage servicing
rights 3,085
---------
94,239
---------
. Increase in deposit liabilities --
Adjustment to estimated fair value (2,532)
</TABLE>
(C) The following pro forma adjustments are included in the pro forma
condensed combined statements of income for the nine months ended
September 30, 1997 and the year ended December 31, 1996 (assuming an
acquisition date of January 1, 1997 and January 1, 1996, respectively):
<TABLE>
<CAPTION>
Nine Months Ended Year Ended
(in thousands) September 30, 1997 December 31, 1996
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
. Increase in HEI interest expense on
$160 million of short-term debt used
to finance the equity infusion into ASB,
assuming an interest rate of 5.87% $(7,044) $(9,392)
. Purchase accounting and other
acquisition related adjustments
are as follows:
Operating, administrative and
general expenses:
Amortization of goodwill $(2,126) $(2,835)
Amortization of core deposit
intangible (1,521) (2,028)
Amortization of mortgage
servicing rights (231) (309)
Amortization of estimated
fair value premium
on loans receivable (329) (439)
Amortization of estimated
fair value premium
on deposit liabilities 2,279 2,532
Amortization of estimated
fair value discount on
property, plant and equipment 68 91
------- -------
(1,860) (2,988)
- ------- ------
. Pro forma adjustments to income (loss)
before income taxes (8,904) (12,380)
. Decrease in income taxes:
Income tax benefit related to
pro forma adjustments (at 40%) 3,562 4,952
Income tax benefit related to
BoA Hawaii Division
operations (at 40%) 6,242 7,126
------- -------
9,804 12,078
------- --------
Increase (decrease) in net income $ 900 $ (302)
======= ========
</TABLE>
7
<PAGE>
(c) Exhibits previously furnished (in Form 8-K dated December 6, 1997 and filed
on December 19, 1997) in accordance with the provisions of Item 601 of
Regulation S-K:
Exhibits
--------
2.1 Purchase and Assumption Agreement dated as of May 26, 1997
Between Bank of America, FSB ("Seller") and American Savings
Bank, F.S.B. ("Purchaser")
2.2 Amendment No. 1 dated November 25, 1997 to Purchase and
Assumption Agreement dated as of May 26, 1997 Between Bank
of America, FSB ("Seller") and American Savings Bank, F.S.B.
("Purchaser")
2.3 Exhibit A of Purchase and Assumption Agreement dated as of
May 26, 1997 Between Bank of America, FSB ("Seller") and
American Savings Bank, F.S.B. ("Purchaser") -- Statement
Procedures -- procedures for preparation of the Statement
(estimating the dollar values as of the Closing Date of the
Assets and Liabilities expected to be transferred at the
Closing), the Initial Final Statement and the Final
Statement
2.4 Covenant Not to Solicit Customers or Take Deposits dated
December 5, 1997 executed by Bank of America, FSB ("Seller")
in favor of American Savings Bank, F.S.B. ("Purchaser")
2.5 Limited Guaranty dated December 5, 1997 executed by
BankAmerica Corporation ("Guarantor") to and for the benefit
of American Savings Bank, F.S.B. ("Purchaser")
The following exhibits and schedules were omitted from Exhibits 2.1 and 2.2:
Exhibit 2.1 Purchase and Assumption Agreement Dated as of May 26, 1997
- ----------------------------------------------------------------------
Exhibit B Covenant Not to Solicit Customers or Take Deposits --
provided in final form as Exhibit 2.4
Exhibit C Limited Guaranty -- provided in final form as Exhibit 2.5
Exhibit D Bill of Sale and Assignment
Exhibit E Calculation of Time Deposit Rate Penalty
Schedule 1.1(b) Assumed Contracts -- Schedule which lists all assumed
contracts, including FF&E Agreements and contracts related
to the Servicing Rights identified in Schedule 1.1(m)
Schedule 1.1(c) Branches and Operating Sites in Hawaii Owned by Seller or
Leased or Subleased to Seller and Automated Teller Machines
(ATMs) in Hawaii Owned by Seller
Schedule 1.1(d) List of Hawaii Division Employees of BoA
Schedule 1.1(j) List of "Other Assets" to be Acquired by Purchaser
Schedule 1.1(k) List of "Other Liabilities" to be Assumed by Purchaser
Schedule 1.1(l) List of Permitted Exceptions -- First pages of title reports
(for identification purposes only) detailing defects in
title, title exceptions, liens and encumbrances with respect
to certain properties in which the Seller has delivered to
Purchaser
Schedule 1.1(m) List of Servicing Rights to be Acquired by Seller at Closing
Schedule 1.1(n) Leases and Subleases of Seller's Tenants to be Transferred
to Purchaser
Schedule 1.1(o)-1 Knowledgeable Parties at Closing
Schedule 1.1(o)-2 Knowledgeable Parties at Closing
Schedule 5.2 No Conflict -- Refers to Schedule 5.9
Schedule 5.5 Leases and Tenant Leases
Schedule 5.8 List of Management Letters and Pricing Information
Schedule 5.9 Legal Proceedings
Schedule 5.12 Environmental Matters
Schedule 5.13 Changes since December 31, 1996
Schedule 5.14 IRA Plans and KEOGH Plans
Schedule 5.18 (a) Loans Serviced by Third Parties
8
<PAGE>
Exhibit 2.2 Amendment No. 1 dated November 25, 1997 to Purchase and Assumption
- --------------------------------------------------------------------------------
Agreement Dated as of May 26, 1997
- ----------------------------------
Exhibit A Memorandum dated September 29, 1997 from Rick Robel, SVP
Operations Division of BoA to Allen Ono, EVP of ASB regarding
forwarding of loan checks and State of Hawaii incoming wires
Exhibit B Memoranda dated October 8, 1997 regarding incoming wires
Exhibit C Memorandum dated October 10, 1997 from Anna Marie Springer, SVP
of ASB to Chuck Sted, EVP of BoA regarding Delinquent PRA
checking overdraft lines of credit
Exhibit D Memorandum dated October 27, 1997 from Allen Ono, EVP of ASB to
Rick Robel, SVP Operations Division of BoA memorializing
agreements regarding the Closing Date, access to air conditioning
space, check orders and check routing
Exhibit E Memorandum dated November 17, 1997 from Abel Malczon, VP,
Facilities Management of ASB to Allen Kubota, Manager/CRE of BoA
regarding Early Entry to Designated Operating Site and Branches
Exhibit F Memorandum dated July 18, 1997 from Chuck Sted, EVP of BoA to
Arlene Nakamoto, EVP of ASB regarding Lanihau Extra Teller Window
Exhibit G Memorandum dated September 5, 1997 from Chuck Sted, EVP of BoA to
Ralph Nakatsuka, EVP of ASB regarding Loans Secured by Deposit
Accounts
Exhibit H Memorandum dated October 7, 1997 from Sarah Frizelle of BoA to
Earl Inouye of BoA regarding Fixed Asset Settlement
Exhibit I Memorandum dated November 14, 1997 from Anna Marie Springer, SVP
of ASB to Chuck Sted, EVP of BoA regarding Foreign PRA's
The Company agrees to furnish a copy of any omitted exhibit or schedule to the
Securities and Exchange Commission upon request.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
HAWAIIAN ELECTRIC INDUSTRIES, INC.
(Registrant)
/s/ Curtis Y. Harada
----------------------
Curtis Y. Harada
Controller
(Principal Accounting Officer)
Date: January 30, 1998
9
<PAGE>
BANK OF AMERICA, FSB - HAWAII DIVISION
Statements of Assets to be Sold and Liabilities to be Transferred and
Direct Revenues and Expenses Before Income Taxes and Schedules
December 31, 1996 and September 30, 1997 (Unaudited)
(With Independent Auditors' Report Thereon)
10
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors
Bank of America, FSB:
We have audited the accompanying statement of assets to be sold and liabilities
to be transferred of Bank of America, FSB - Hawaii Division (Division) as of
December 31, 1996, and the related statement of direct revenues and expenses
before income taxes for the year then ended. These statements are the
responsibility of the Bank's management. Our responsibility is to express an
opinion on these statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the amounts and
disclosures in the statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall statement presentation. We believe that our audit
provides a reasonable basis for our opinion.
The accompanying statements were prepared for the purpose of presenting
historical financial data of the Division assets to be sold and liabilities to
be transferred as of December 31, 1996, and the related direct revenues and
expenses, excluding income taxes, for the year then ended to comply with the
rules and regulations of the Securities and Exchange Commission. They are not
intended to be a complete presentation of the financial position and results of
operations of the Division.
In our opinion, the statements referred to above present fairly, in all material
respects, the assets to be sold and liabilities to be transferred of the Bank as
of December 31, 1996, and the direct revenues and expenses before income taxes
for the year ended December 31, 1996 in conformity with generally accepted
accounting principles.
Our audit was made for the purpose of forming an opinion on the basic financial
statements taken as a whole. The supplementary information included in Schedules
1 through 4 is presented for purposes of additional analysis and is not a
required part of the basic financial statements. Such information has not been
subjected to the auditing procedures applied in the audit of the basic financial
statements, and accordingly, we express no opinion on it.
/s/ KPMG Peat Marwick LLP
January 26, 1998
11
<PAGE>
BANK OF AMERICA, FSB - HAWAII DIVISION
Statements of Assets to be Sold and Liabilities to be Transferred
December 31, 1996 and September 30, 1997
(in thousands)
<TABLE>
<CAPTION>
SEPTEMBER 30,
DECEMBER 31, 1997
1996 (UNAUDITED)
------------ ------------
<S> <C> <C>
Assets to be sold:
Cash and due from banks $ 97,146 $ 76,797
Loans receivable, net (note 3) 906,464 876,032
Premises and equipment, net (note 4) 21,535 19,838
Accrued interest receivable 4,864 5,082
Due from Bank of America, FSB 571,197 792,857
Prepaid expenses and other assets 584 1,057
---------- ----------
$1,601,790 $1,771,663
========== ==========
Liabilities to be transferred:
Deposit liabilities (note 5) $1,591,532 $1,757,370
Accounts payable and other liabilities 10,258 14,293
---------- ----------
$1,601,790 $1,771,663
========== ==========
</TABLE>
See accompanying notes to statements of assets to be sold and liabilities to be
transferred and direct revenues and expenses before income taxes.
12
<PAGE>
BANK OF AMERICA, FSB - HAWAII DIVISION
Statements of Direct Revenues and Expenses Before Income Taxes
Year ended December 31, 1996
and the nine months ended September 30, 1997
(in thousands)
<TABLE>
<CAPTION>
NINE MONTHS
ENDED
YEAR ENDED SEPTEMBER 30,
DECEMBER 31, 1997
1996 (UNAUDITED)
------- -------
<S> <C> <C>
Direct interest income $75,976 $56,208
Direct interest expense (note 5) 48,975 43,468
------- -------
Net direct interest income 27,001 12,740
Provision for loan losses 189 178
------- -------
Net direct interest income after provision
for loan losses 26,812 12,562
------- -------
Other direct revenues:
Fee income on deposit liabilities 12,757 11,787
Fee income on loans serviced for others (note 3) 809 557
------- -------
13,566 12,344
------- -------
Direct general and administrative expenses:
Compensation and employee benefits 26,934 17,812
Office occupancy (note 4) 5,405 4,898
Federal insurance premiums 2,278 773
Data processing 2,095 1,603
Equipment 2,000 1,407
Other 19,482 14,019
------- -------
58,194 40,512
------- -------
Excess of direct expenses over
direct revenues before income taxes $17,816 $15,606
======= =======
</TABLE>
See accompanying notes to statements of assets to be sold and liabilities to be
transferred and direct revenues and expenses before income taxes.
13
<PAGE>
BANK OF AMERICA, FSB - HAWAII DIVISION
Notes to Statements of Assets to be Sold and Liabilities to be
Transferred and Direct Revenues and Expenses Before Income Taxes
December 31, 1996 and September 30, 1997
(Information as of September 30, 1997
and for the nine months ended
September 30, 1997 is unaudited)
1. BACKGROUND AND BASIS OF PRESENTATION
On December 6, 1997, Bank of America, FSB (Bank) sold certain assets and
transferred certain liabilities of its Hawaii Division (Division) to American
Savings Bank (ASB) pursuant to a Purchase and Assumption Agreement
(Agreement) executed by both parties on May 26, 1997. The accompanying
financial statements have been prepared for the purpose of presenting
historical financial data of the assets to be sold and liabilities to be
transferred as of December 31, 1996 and September 30, 1997, and the related
direct revenues and expenses, excluding income taxes, for the year ended
December 31, 1996 and the nine months ended September 30, 1997. They are not
intended to be a complete presentation of the financial position and results
of operations of the Division and may not be indicative of the results after
the acquisition by ASB.
The statements of assets to be sold and liabilities to be transferred as of
December 31, 1996 and September 30, 1997 and the statements of direct
revenues and expenses before income taxes for the year ended December 31,
1996 and the nine months ended September 30, 1997 were prepared from the
accounting records of the Division. The Division's accounting records include
certain revenues and expenses which are based on transactions between the
Division and third parties and certain revenues and expenses which are based
on transactions with affiliated units, all of which are part of BankAmerica
Corporation, parent of Bank of America, FSB. The affiliate transactions are
compliant with applicable law and regulation and the related amounts
approximate amounts which would be experienced if the transactions were with
third parties. No allocation of federal and state income tax is made by the
Bank to the Division. Further, no deferred income taxes are provided at the
Division level. Accordingly, no provision for current or deferred income
taxes is included in the statement of direct revenues and expenses for the
year ended December 31, 1996, or the nine months ended September 30, 1997.
Because the Division's accounting records do not hold separate assets to be
sold, liabilities to be transferred, and direct revenues and expenses,
certain assumptions were made in the determination of certain of those items
as described below.
LOANS RECEIVABLE TO BE SOLD. Loans receivable to be sold were estimated
by specific identification of the contractual balance receivable of
loans at December 31, 1996 and September 30, 1997 which did not meet the
criteria of excludable loans defined in Article I of the Agreement. ASB,
at its option, may purchase certain excludable loans upon closing, the
effects of which are not considered in the determination of loans
receivable to be sold at December 31, 1996 and September 30, 1997.
Included in the definition of excludable loans are nonaccrual, past due,
troubled debt restructured and problem loans. ASB has not opted to
purchase these types of loans. All real estate loans to be sold are
collateralized by properties located in the state of Hawaii.
DUE FROM BANK OF AMERICA, FSB. Amounts due from Bank of America, FSB
represent the amount of cash due to ASB upon closing. No interest
amounts were imputed on this receivable.
14
<PAGE>
INTEREST INCOME. Interest income in the accompanying statement of direct
revenues and expenses before income taxes was estimated. The average
coupon yield for the major classes of loans receivable to be sold were
multiplied by the total loans receivable to be sold as estimated at
December 31, 1996 and September 30, 1997. The major classes of loans
receivable to be sold are commercial real estate, commercial and
industrial, fixed-rate first mortgage residential, adjustable-rate first
mortgage residential, second mortgage residential and other consumer
loans. Deferred loan fee amortization was not included in the yield as
these amounts were not sold.
INTEREST EXPENSE. Interest expense in the accompanying statement of
direct revenues and expenses before income taxes is the contractual
expense incurred on deposits based on the agreements for the various
deposit products.
PROVISION FOR LOAN LOSSES. The provision for loan losses was estimated
as the change in the allowance for loan losses between December 31, 1995
and 1996, and between December 31, 1996 and September 30, 1997.
Management of ASB and the Bank agreed on the method of calculating the
allowance for loan losses under the Agreement as producing a result
which reflected industry experience for the various classes of loans
while taking into consideration factors related to the Hawaii market.
GENERAL AND ADMINISTRATIVE EXPENSES. In estimating general and
administrative expenses related to assets to be sold and liabilities to
be transferred, management allocated each of the general and
administrative expense balances per the general ledger between loan and
deposit related expenses. The results of the allocation were multiplied
by the ratio of loans to be sold to total loans receivable or to the
ratio of deposit liabilities transferred to total deposit liabilities,
as applicable.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
LOANS RECEIVABLE. Loans receivable are stated at the unpaid principal
balance less the allowance for loan losses. Loan origination and commitment
fees, purchase accounting premiums and discounts are not included as these
amounts are not to be sold.
The Bank's management provides valuation allowances for estimated losses on
loans receivable at levels considered adequate to provide for potential
losses. Several factors are collectively weighed by management in
determining the adequacy of the allowance. These factors include management's
review of the existing risks in the loan portfolio, prevailing economic
conditions and historical loss experience. The Bank generally ceases the
accrual of interest on loans that are more than 90 days past due or when
there is reasonable doubt as to its collectibility. Subsequent recognition of
interest income for such loans is generally on the cash method. No delinquent
loans are included in the statement of assets to be sold and liabilities to
be purchased.
Bank management used significant judgment in estimating the allowance for
loan losses. While management utilizes available information to recognize
the allowance for loan losses, future additions may be necessary based on
changes in economic conditions, particularly in the state of Hawaii.
Accordingly, actual results could differ from this estimate.
DEPRECIATION AND AMORTIZATION. Premises, equipment and leasehold
improvements are recorded at cost less accumulated depreciation and
amortization. Depreciation and amortization expense was computed on a
straight-line basis over the estimated useful lives of the assets or terms of
the leases.
15
<PAGE>
3. LOANS RECEIVABLE
The components of loans receivable at December 31, 1996 and September 30,
1997 are summarized as follows:
<TABLE>
<CAPTION>
DECEMBER 31, 1996 SEPTEMBER 30, 1997
------------------------------- -------------------------------
WEIGHTED WEIGHTED
AVERAGE AVERAGE
RATE AMOUNT RATE AMOUNT
--------------- -------------- --------------- ----------
(dollars in thousands)
<S> <C> <C> <C> <C>
Commercial real estate 8.74% $ 32,919 8.85% $ 44,782
Commercial and industrial 10.28 21,763 9.55 46,074
First mortgages 8.04 715,249 8.17 645,918
Second mortgages 8.71 120,291 8.75 125,741
Loans secured by savings 6.93 2,416 7.25 1,587
Checking overdraft lines of credit
16.13 5,366 16.02 5,750
Other consumer loans 12.06 14,800 13.06 12,698
============ ---------- ========= ----------
912,804 882,550
Less allowance for loan losses
6,340 6,518
---------- ----------
$ 906,464 $ 876,032
========== ==========
</TABLE>
At December 31, 1996 and September 30, 1997, the weighted average rates of
loans receivable were 8.31% and 8.47%, respectively.
The Bank services real estate loans for investors of $324 million and $297
million at December 31, 1996 and September 30, 1997, respectively, which are
not included in the accompanying statement of assets to be sold and
liabilities to be transferred. Fees earned for servicing loans are reported
as income when the related mortgage loan payments are collected. Loan
servicing costs are charged to expense as incurred.
4. PREMISES AND EQUIPMENT
Premises and equipment to be sold at December 31, 1996 and September 30, 1997
are summarized as follows:
<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30, ESTIMATED
1996 1997 USEFUL LIVES
-------------- ---------------- -----------
(in thousands)
<S> <C> <C> <C>
Land $ 1,606 $ 1,606 --
Buildings 14,586 14,930 2 yrs - 60 yrs
Furniture and equipment 10,216 10,267 3 yrs - 33 yrs
Leasehold improvements 13,030 13,162 3 yrs - 30 yrs
-------------- ---------------
39,438 39,965
Less accumulated
depreciation and
amortization 17,903 20,127
-------------- ---------------
$ 21,535 $ 19,838
============= ===============
</TABLE>
16
<PAGE>
Included in office occupancy expense in the accompanying statements of direct
revenues and expenses before income taxes is depreciation and amortization
expense of approximately $3.0 million and $2.4 million for the year ended
December 31, 1996 and the nine months ended September 30, 1997, respectively.
Certain premises are leased under agreements which expire at various dates in
the future. Pursuant to such lease agreements, the Division incurred rent
expense of $1.8 million and $1.5 million for the year ended December 31, 1996
and the nine months ended September 30, 1997, respectively (net of related
sublease income of $1 million in 1996 and $0.8 million for the nine months
ended September 30, 1997).
At December 31, 1996, future minimum net rental payments pursuant to such
operating lease agreements were as follows (in thousands):
<TABLE>
<CAPTION>
GROSS FUTURE NET FUTURE
MINIMUM MINIMUM
RENTAL SUBLEASE RENTAL
PAYMENTS INCOME PAYMENTS
------------ -------- ----------
<S> <C> <C> <C> <C>
1997 $ 3,341 $ 670 $ 2,671
1998 3,159 369 2,790
1999 2,606 175 2,431
2000 2,208 65 2,143
2001 1,564 48 1,516
Thereafter 16,970 900 16,070
------- ------ -------
$29,848 $2,227 $27,621
======= ====== =======
</TABLE>
5. DEPOSIT LIABILITIES
The components of deposit liabilities at December 31, 1996 and September 30,
1997 are summarized as follows:
<TABLE>
<CAPTION>
DECEMBER 31, 1996 SEPTEMBER 30, 1997
----------------------- -----------------------
WEIGHTED WEIGHTED
AVERAGE AVERAGE
STATED STATED
(dollars in thousands) RATE AMOUNT RATE AMOUNT
----- ---------- ----- ----------
<S> <C> <C> <C> <C>
Noninterest checking --% $ 140,735 --% $ 150,423
Interest checking 1.17 255,249 1.41 214,303
Money market 3.83 253,082 4.02 272,073
Savings 2.60 406,476 2.60 323,155
Certificates of deposit 5.16 535,990 5.32 797,416
----- ---------- ----- ----------
3.20% $1,591,532 3.69% $1,757,370
===== ========== ===== ==========
</TABLE>
At December 31, 1996, certificate of deposit accounts of $100,000 or more
amounted to $206 million. Maturities of these accounts at December 31, 1996
are as follows (in millions):
<TABLE>
<S> <C>
3 months or less $132
Over 3 months through 6 months 32
Over 6 months through 12 months 29
Over 12 months 13
----
$206
====
</TABLE>
17
<PAGE>
At September 30, 1997, certificate of deposit accounts of $100,000 or more
amounted to $436 million. Maturities of these accounts at September 30, 1997
are as follows (in millions):
<TABLE>
<S> <C>
3 months or less $246
Over 3 months through 6 months 95
Over 6 months through 12 months 69
Over 12 months 26
----
$436
====
</TABLE>
Interest expense on savings deposits by type of deposit was as follows:
<TABLE>
<CAPTION>
NINE MONTHS
YEAR ENDED ENDED
DECEMBER 31, SEPTEMBER 30,
1996 1997
------------ -------------
(in thousands)
<S> <C> <C>
Interest checking $ 3,073 $ 2,376
Money market 7,314 8,058
Savings 12,314 7,103
Certificates of deposit 26,274 25,931
------- -------
$48,975 $43,468
======= =======
</TABLE>
6. DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS
Statement of Financial Accounting Standards No. 107, "Disclosures about Fair
Value of Financial Instruments," requires the disclosure of estimated fair
values for the Division's financial instruments to be sold. Fair value
estimates are made at a specific point in time, based on relevant market
information and information about the financial instrument. These estimates
do not reflect any premium or discount that could result from offering for
sale at one time the Division's holdings of a particular financial
instrument. Because a limited or no market exists for a significant portion
of the Division's financial instruments, fair value estimates are based on
judgments regarding future expected loss experience, current economic
conditions, risk characteristics of various financial instruments and other
factors. These estimates are subjective in nature and involve uncertainties
and matters of significant judgment and, therefore, cannot be determined with
precision. Changes in assumptions could significantly affect the estimates.
Fair value estimates are based on existing on- and off-balance sheet
financial instruments without attempting to estimate the value of anticipated
future business and the value of assets and liabilities that are not
considered financial instruments. In addition, the tax ramifications related
to the realization of the unrealized gains and losses can have a significant
effect on fair value estimates and have not been considered in any of the
estimates.
The following methods and assumptions were used to estimate the fair value of
each class of financial instruments for which it is practicable to estimate
that value:
SHORT-TERM FINANCIAL INSTRUMENTS. The carrying amounts of short-term
financial instruments are deemed to approximate fair values. Such instruments
are considered readily convertible to cash and include cash and due from
banks, accrued interest receivable and accounts payable and other
liabilities.
18
<PAGE>
LOANS RECEIVABLE. For certain homogenous categories of loans, such as some
conventional real estate loans, fair value is estimated using the quoted
market prices for securities backed by similar loans, adjusted for
differences in loan characteristics and estimated servicing. The fair value
of other types of loans is estimated by discounting the future cash flows
using the current rates at which similar loans would be made to borrowers
with similar credit ratings and for the same remaining maturities.
DEPOSIT LIABILITIES. The fair value of demand deposits, savings accounts,
and certain money market deposits is the amount payable on demand at the
reporting date. The fair value of fixed-maturity certificates of deposit is
estimated using the rates currently offered for deposits of similar remaining
maturities.
The estimated fair values of the Division's financial instruments at December
31, 1996 are as follows (in thousands):
<TABLE>
<CAPTION>
ASSETS CARRYING AMOUNT ESTIMATED FAIR VALUE
- ---------------------------------------- ------------------ -----------------------
<S> <C> <C>
Cash and due from banks $ 97,146 $ 97,146
Loans receivable, net 906,464 912,641
Accrued interest receivable 4,864 4,864
LIABILITIES
- ----------------------------------------
Deposit liabilities $1,591,532 $1,589,661
Accounts payable and other liabilities 10,258 10,258
</TABLE>
At December 31, 1996, neither the commitment fees received on commitments to
extend credit nor the fair value thereof were significant.
19
<PAGE>
Schedule 1
BANK OF AMERICA, FSB - HAWAII DIVISION
Average Balances of Deposit Liabilities to be Transferred
December 31, 1996 and September 30, 1997
(Unaudited)
The following table sets forth average balances of deposit liabilities to be
transferred as of December 31, 1996 and September 30, 1997. Average balances
have been calculated using the average month-end or daily average balances
during the period.
<TABLE>
<CAPTION>
DECEMBER 31, 1996 SEPTEMBER 30, 1997
--------------------- -------------------
AVERAGE PERCENT AVERAGE PERCENT
(dollars in thousands) BALANCE TO TOTAL BALANCE TO TOTAL
--------------------- -------------------
<S> <C> <C> <C> <C>
Deposit liabilities to be
transferred:
Demand $ 328,039 22.6% $ 343,764 20.9%
Savings and money market 662,248 45.5 642,113 39.1
Time deposits 464,373 31.9 658,050 40.0
---------- ----- ---------- -----
$1,454,660 100.0% $1,643,927 100.0%
========== ===== ========== =====
</TABLE>
It was impracticable to estimate average balances of loans to be sold as of
December 31, 1996 and September 30, 1997 due to the method of segregating loans
to be sold.
See accompanying independent auditors' report.
20
<PAGE>
Schedule 2
BANK OF AMERICA, FSB - HAWAII DIVISION
Interest Expense
December 31, 1996 and September 30, 1997
(Unaudited)
The following tables set forth average balances, interest expense and weighted
average rates paid for deposit liabilities to be transferred for the year ended
December 31, 1996 and the nine months ended September 30, 1997. Average balances
have been calculated using the daily average balances during the period.
<TABLE>
<CAPTION>
AVERAGE AVERAGE AMOUNT
(dollars in thousands) BALANCE YIELD/RATES OF INTEREST
---------- ----------- -----------
<S> <C> <C> <C>
Deposit liabilities to be transferred:
Interest checking $ 199,902 1.54% $ 3,073
Money market 198,874 3.68 7,314
Savings 463,374 2.66 12,314
Certificates of deposit 464,373 5.66 26,274
---------- ----- -------
$1,326,523 3.69% $48,975
========== ===== =======
Nine months ended September 30, 1997:
Deposit liabilities to be transferred:
Interest checking $ 210,901 1.50% $ 2,376
Money market 275,748 3.90 8,058
Savings 366,365 2.59 7,103
Certificates of deposit 658,050 5.25 25,931
---------- ----- -------
$1,511,064 3.84% $43,468
========== ===== =======
</TABLE>
It was impracticable to estimate average balances of loans to be sold as of
December 31, 1996 and September 30, 1997 due to the method of segregating loans
to be sold.
See accompanying independent auditors' report.
21
<PAGE>
Schedule 3
BANK OF AMERICA, FSB - HAWAII DIVISION
Commercial Real Estate and Commercial and Industrial Loans
December 31, 1996
(Unaudited)
The following table sets forth the maturities of commercial real estate and
commercial and industrial loans to be sold as of December 31, 1996 (in
thousands):
<TABLE>
<S> <C>
Due in one year or less $13,817
Due after one year through five years 22,175
Due after five years 18,690
-------
$54,682
=======
</TABLE>
Of the total amount of commercial real estate and commercial and industrial
loans to be sold that are due after one year, $22 million have predetermined
interest rates and $19 million have adjustable rates at December 31, 1996.
See accompanying independent auditors' report.
22
<PAGE>
Schedule 4
BANK OF AMERICA, FSB - HAWAII DIVISION
Allowance for Loan Losses Allocation
December 31, 1996
(Unaudited)
The allocation of the allowance for loan losses at December 31, 1996 and
September 30, 1997 is summarized as follows:
<TABLE>
<CAPTION>
DECEMBER 31, 1996 SEPTEMBER 30, 1997
---------------------- ----------------------
PERCENT PERCENT
OF LOANS OF LOANS
IN EACH IN EACH
CATEGORY CATEGORY
TO TOTAL TO TOTAL
(dollars in thousands) AMOUNT LOANS AMOUNT LOANS
------ -------- ------ --------
<S> <C> <C> <C> <C>
Commercial real estate $ 412 3.61% $ 560 5.07%
Commercial and industrial 332 2.38 683 5.22
First mortgages 2,152 78.36 1,945 73.19
Second mortgages 962 13.18 1,006 14.25
Loans secured by savings 3 0.26 2 0.18
Checking overdraft lines of credit 261 0.59 267 0.65
Other consumer loans 968 1.62 805 1.44
Unallocated 1,250 -- 1,250 --
------ ------- ------ -------
$6,340 100.00% $6,518 100.00%
====== ======= ====== =======
</TABLE>
See accompanying independent auditors' report.
23
