Fair value measurements (Tables)

3 Months Ended

Mar. 31, 2018

Schedule of estimated fair values of certain of the Company's financial instruments

The following table presents the carrying or notional amount, fair value and placement in the fair value hierarchy of the Company’s financial instruments. For stock in Federal Home Loan Bank, the carrying amount is a reasonable estimate of fair value because it can only be redeemed at par. For financial liabilities such as noninterest-bearing demand, interest-bearing demand, and savings and money market deposits, the carrying amount is a reasonable estimate of fair value as these liabilities have no stated maturity.



			Estimated fair value
	Carrying or notional amount		Quoted prices in active markets for identical assets		Significant other observable inputs		Significant unobservable inputs
(in thousands)			(Level 1)		(Level 2)		(Level 3)		Total
March 31, 2018
Financial assets
HEI consolidated
Available-for-sale investment securities	$	1,418,490	$	—	$	1,403,063	$	15,427	$	1,418,490
Held-to-maturity investment securities	43,450		—		42,491		—		42,491
Stock in Federal Home Loan Bank	10,158		—		10,158		—		10,158
Loans, net	4,695,508		—		7,380		4,772,870		4,780,250
Mortgage servicing rights	8,541		—		—		12,882		12,882
Derivative assets	29,840		—		611		—		611
Hawaiian Electric consolidated
Derivative assets-window forward contracts	3,240		—		329		—		329
Financial liabilities
HEI consolidated
Deposit liabilities¹	777,390		—		766,425		—		766,425
Short-term borrowings—other than bank	238,445		—		238,445		—		238,445
Other bank borrowings	100,430		—		100,377		—		100,377
Long-term debt, net—other than bank	1,684,002		—		1,741,324		—		1,741,324
Derivative liabilities	24,985		60		27		—		87
Hawaiian Electric consolidated
Short-term borrowings	121,983		—		121,983		—		121,983
Long-term debt, net	1,368,627		—		1,432,134		—		1,432,134
December 31, 2017
Financial assets
HEI consolidated
Available-for-sale investment securities	1,401,198		—		1,385,771		15,427		1,401,198
Held-to-maturity investment securities	44,515		—		44,412		—		44,412
Stock in Federal Home Loan Bank	9,706		—		9,706		—		9,706
Loans, net	4,628,381		—		11,254		4,770,497		4,781,751
Mortgage servicing rights	8,639		—		—		12,052		12,052
Derivative assets	17,812		—		393		—		393
Hawaiian Electric consolidated
Derivative assets-window forward contracts	3,240		—		256		—		256
Financial liabilities
HEI consolidated
Deposit liabilities¹	5,890,597		—		5,884,071		—		5,884,071
Short-term borrowings—other than bank	117,945		—		117,945		—		117,945
Other bank borrowings	190,859		—		190,829		—		190,829
Long-term debt, net—other than bank	1,683,797		—		1,813,295		—		1,813,295
Derivative liabilities	13,562		20		10		—		30
Hawaiian Electric consolidated
Short-term borrowings	4,999		—		4,999		—		4,999
Long-term debt, net	1,368,479		—		1,497,079		—		1,497,079

¹ Deposit liabilities as of December 31, 2017 include noninterest-bearing demand, interest-bearing demand, and savings and money market deposits, for which the carrying amount represents a reasonable estimate of fair value, as such liabilities have no stated maturity. The fair value of such financial liabilities are not included as of March 31, 2018 as a result of the Company’s adoption of ASU No. 2016-01.

Schedule of assets measured at fair value on a recurring basis

Assets and liabilities measured at fair value on a recurring basis were as follows:



	March 31, 2018						December 31, 2017
	Fair value measurements using						Fair value measurements using
(in thousands)	Level 1		Level 2		Level 3		Level 1		Level 2		Level 3
Available-for-sale investment securities (bank segment)
Mortgage-related securities-FNMA, FHLMC and GNMA	$	—	$	1,224,235	$	—	$	—	$	1,201,473	$	—
U.S. Treasury and federal agency obligations	—		178,828		—		—		184,298		—
Mortgage revenue bond	—		—		15,427		—		—		15,427
	$	—	$	1,403,063	$	15,427	$	—	$	1,385,771	$	15,427
Derivative assets
Interest rate lock commitments (bank segment)¹	$	—	$	264	$	—	$	—	$	133	$	—
Forward commitments (bank segment)¹	—		18		—		—		4		—
Window forward contracts (electric utility segment)²	—		329		—		—		256		—
	$	—	$	611	$	—	$	—	$	393	$	—
Derivative liabilities
Interest rate lock commitments (bank segment) ¹	$	—	$	9	$	—	$	—	$	2	$	—
Forward commitments (bank segment) ¹	60		18		—		20		8		—
	$	60	$	27	$	—	$	20	$	10	$	—

¹ Derivatives are carried at fair value with changes in value reflected in the balance sheet in other assets or other liabilities and included in mortgage banking income.

² Derivatives are included in regulatory assets and/or liabilities in the balance sheets.

Schedule of changes in Level 3 assets and liabilities measured at fair value on a recurring basis

The changes in Level 3 assets and liabilities measured at fair value on a recurring basis were as follows:



	Three months ended March 31
Mortgage revenue bond	2018		2017
(in thousands)
Beginning balance	$	15,427	$	15,427
Principal payments received	—		—
Purchases	—		—
Unrealized gain (loss) included in other comprehensive income	—		—
Ending balance	$	15,427	$	15,427

Schedule of assets measured at fair value on a nonrecurring basis

The carrying value of assets measured at fair value on a nonrecurring basis were as follows:



			Fair value measurements
(in thousands)	Balance		Level 1		Level 2		Level 3
March 31, 2018
Loans	$	545	$	—	$	—	$	545
December 31, 2017
Loans	2,621		—		—		2,621

Schedule of significant unobservable inputs used in the fair value measurement

Key assumptions used in estimating the fair value of ASB’s mortgage servicing rights used in the impairment analysis were as follows:



(dollars in thousands)	March 31, 2018			December 31, 2017
Unpaid principal balance	$	1,184,160		$	1,195,454
Weighted average note rate	3.94		%	3.94		%
Weighted average discount rate	10.0		%	10.0		%
Weighted average prepayment speed	7.1		%	9.0		%

The following table presents quantitative information about Level 3 fair value measurements for financial instruments measured at fair value on a nonrecurring basis:



					Significant unobservable input value ⁽¹⁾
($ in thousands)	Fair value		Valuation technique	Significant unobservable input	Range	Weighted Average
March 31, 2018
Residential loans	$	545	Fair value of collateral	Appraised value less 7% selling cost	69-95%	84%
Total loans	$	545

December 31, 2017
Residential loans	$	613	Fair value of collateral	Appraised value less 7% selling cost	71-92%	84%
Commercial loans	2,008		Fair value of collateral	Appraised value	71-76%	75%
Total loans	$	2,621

(1) Represent percent of outstanding principal balance.