Hawaiian Electric Industries Inc. said its first quarter profit increased modestly despite an environment that included regulatory challenges for its electric utility and revenue declines at its banking unit.

HEI reported net income of $28.5 million, or 30 cents a share in the january-through-March period compared with $27.1 million, or 29 cents a share in first quarter of 2010.  

“This was a solid quarter for HEI.  We achieved another significant milestone in the implementation of our new regulatory model at our largest utility, advanced several clean energy projects, and delivered continued strong performance at the bank,” Constance Lau, HEI president and chief executive officer, said in a news release.

Hawaiian Electric Co. reported net income of $19.2 million compared with $18.1 million in the first quarter of 2010. Higher electricity sales systemwide and rate increases on Maui and the Big Island more than offset higher maintenance expenses and the impact of an accounting rule dealing with interest costs on construction projects, according to HEI.

Lau said earnings and return on equity also “remain depressed” pending a decision by regulators on HECO’s rate hike request for Oahu.

HEI’s American Savings Bank subsidiary reported net income of $13.9 million in the first quarter compared with $13.7 million a year earlier.

The bank said it was able to achieve a $2 million reduction in noninterest expense following the completion of a performance improvement project. Those savings were largely offset by a reduction in noninterest income resulting from regulatory changes that reduced inflows from overdraft fees, and a cut in net interest income due to lower yields and lower earning asset balances largely in the residential loan portfolio.

HEI shares closed up 9 cents at $26.09 today on the New York Stock Exchange.