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Bank segment (Tables)
 9 Months Ended
Sep. 30, 2018
Bank Subsidiary [Abstract]  
Schedule of statements of income data
Statements of Income Data
 
 
Three months ended September 30
 
Nine months ended September 30
(in thousands)
 
2018
 
2017
 
2018
 
2017
Interest and dividend income
 
 

 
 

 
 

 
 

Interest and fees on loans
 
$
55,885

 
$
52,210

 
$
163,318

 
$
155,269

Interest and dividends on investment securities
 
9,300

 
6,850

 
27,130

 
20,593

Total interest and dividend income
 
65,185

 
59,060

 
190,448

 
175,862

Interest expense
 
 

 
 

 
 

 
 

Interest on deposit liabilities
 
3,635

 
2,444

 
9,876

 
6,858

Interest on other borrowings
 
404

 
470

 
1,293

 
2,110

Total interest expense
 
4,039

 
2,914

 
11,169

 
8,968

Net interest income
 
61,146

 
56,146

 
179,279

 
166,894

Provision for loan losses
 
6,033

 
490

 
12,337

 
7,231

Net interest income after provision for loan losses
 
55,113

 
55,656

 
166,942

 
159,663

Noninterest income
 
 

 
 

 
 

 
 

Fees from other financial services
 
4,543

 
5,635

 
13,941

 
17,055

Fee income on deposit liabilities
 
5,454

 
5,533

 
15,781

 
16,526

Fee income on other financial products
 
1,746

 
1,904

 
5,075

 
5,741

Bank-owned life insurance
 
2,663

 
1,257

 
4,667

 
4,165

Mortgage banking income
 
169

 
520

 
1,399

 
1,896

Other income, net
 
736

 
380

 
1,708

 
1,229

Total noninterest income
 
15,311

 
15,229

 
42,571

 
46,612

Noninterest expense
 
 

 
 

 
 

 
 

Compensation and employee benefits
 
23,952

 
23,512

 
72,047

 
71,095

Occupancy
 
4,363

 
4,284

 
12,837

 
12,623

Data processing
 
3,583

 
3,262

 
10,587

 
9,749

Services
 
2,485

 
2,863

 
8,560

 
7,989

Equipment
 
1,783

 
1,814

 
5,385

 
5,333

Office supplies, printing and postage
 
1,556

 
1,444

 
4,554

 
4,506

Marketing
 
993

 
934

 
2,723

 
2,290

FDIC insurance
 
638

 
746

 
2,078

 
2,296

Other expense
 
4,240

 
5,262

 
12,897

 
14,674

Total noninterest expense
 
43,593

 
44,121

 
131,668

 
130,555

Income before income taxes
 
26,831

 
26,764

 
77,845

 
75,720

Income taxes
 
5,610

 
9,172

 
17,103

 
25,582

Net income
 
$
21,221

 
$
17,592

 
$
60,742

 
$
50,138




Reconciliation to amounts per HEI Condensed Consolidated Statements of Income*:
 
 
Three months ended September 30
 
Nine months ended September 30
(in thousands)
 
2018
 
2017
 
2018
 
2017
Interest and dividend income
 
65,185

 
59,060

 
$
190,448

 
$
175,862

Noninterest income
 
15,311

 
15,229

 
42,571

 
46,612

*Revenues-Bank
 
80,496

 
74,289

 
233,019

 
222,474

Total interest expense
 
4,039

 
2,914

 
11,169

 
8,968

Provision for loan losses
 
6,033

 
490

 
12,337

 
7,231

Noninterest expense
 
43,593

 
44,121

 
131,668

 
130,555

Less: Retirement defined benefits expense—other than service costs
 
(433
)
 
(212
)
 
(1,223
)
 
(608
)
*Expenses-Bank
 
53,232

 
47,313

 
153,951

 
146,146

*Operating income-Bank
 
27,264

 
26,976

 
79,068

 
76,328

Add back: Retirement defined benefits expense—other than service costs
 
433

 
212

 
1,223

 
608

Income before income taxes
 
$
26,831

 
$
26,764

 
$
77,845

 
$
75,720
Schedule of statements of comprehensive income data
Statements of Comprehensive Income Data
 
 
Three months ended September 30
 
Nine months ended September 30
(in thousands)
 
2018
 
2017
 
2018
 
2017
Net income
 
$
21,221

 
$
17,592

 
$
60,742

 
$
50,138

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 tax benefits (taxes) of $1,876, $(137), $8,335 and $(1,619), respectively
 
(5,123
)
 
208

 
(22,768
)
 
2,452

Retirement benefit plans:
 
 

 
 

 
 

 
 

Adjustment for amortization of prior service credit and net losses recognized during the period in net periodic benefit cost, net of tax benefits of $141, $138, $968 and $675, respectively
 
382

 
209

 
1,970

 
1,023

Other comprehensive income (loss), net of taxes
 
(4,741
)
 
417

 
(20,798
)
 
3,475

Comprehensive income
 
$
16,480

 
$
18,009

 
$
39,944

 
$
53,613
Schedule of balance sheets data
Balance Sheets Data
(in thousands)
 
September 30, 2018
 
December 31, 2017
Assets
 
 

 
 

 
 

 
 

Cash and due from banks
 
 

 
$
119,453

 
 

 
$
140,934

Interest-bearing deposits
 
 
 
39,575

 
 
 
93,165

Investment securities
 
 
 
 
 
 
 
 
Available-for-sale, at fair value
 
 

 
1,387,571

 
 

 
1,401,198

Held-to-maturity, at amortized cost (fair value of $99,929 and $44,412, respectively)
 
 
 
102,498

 
 
 
44,515

Stock in Federal Home Loan Bank, at cost
 
 

 
8,158

 
 

 
9,706

Loans held for investment
 
 

 
4,754,359

 
 

 
4,670,768

Allowance for loan losses
 
 

 
(54,127
)
 
 

 
(53,637
)
Net loans
 
 

 
4,700,232

 
 

 
4,617,131

Loans held for sale, at lower of cost or fair value
 
 

 
1,036

 
 

 
11,250

Other
 
 

 
488,743

 
 

 
398,570

Goodwill
 
 

 
82,190

 
 

 
82,190

Total assets
 
 

 
$
6,929,456

 
 

 
$
6,798,659

Liabilities and shareholder’s equity
 
 

 
 

 
 

 
 

Deposit liabilities—noninterest-bearing
 
 

 
$
1,789,351

 
 

 
$
1,760,233

Deposit liabilities—interest-bearing
 
 

 
4,341,064

 
 

 
4,130,364

Other borrowings
 
 

 
71,110

 
 

 
190,859

Other
 
 

 
115,401

 
 

 
110,356

Total liabilities
 
 

 
6,316,926

 
 

 
6,191,812

Commitments and contingencies
 
 

 


 
 

 


Common stock
 
 

 
1

 
 

 
1

Additional paid in capital
 
 
 
346,757

 
 
 
345,018

Retained earnings
 
 

 
317,519

 
 

 
292,957

Accumulated other comprehensive loss, net of tax benefits
 
 

 
 

 
 

 
 

Net unrealized losses on securities
 
$
(37,719
)
 
 

 
$
(14,951
)
 
 

Retirement benefit plans
 
(14,028
)
 
(51,747
)
 
(16,178
)
 
(31,129
)
Total shareholder’s equity
 
 

 
612,530

 
 

 
606,847

Total liabilities and shareholder’s equity
 
 

 
$
6,929,456

 
 

 
$
6,798,659

 
 
 
 
 
 
 
 
 
Other assets
 
 

 
 

 
 

 
 

Bank-owned life insurance
 
 

 
$
150,772

 
 

 
$
148,775

Premises and equipment, net
 
 

 
203,062

 
 

 
136,270

Prepaid expenses
 
 

 
5,477

 
 

 
3,961

Accrued interest receivable
 
 

 
19,818

 
 

 
18,724

Mortgage-servicing rights
 
 

 
8,426

 
 

 
8,639

Low-income housing equity investments
 
 
 
69,865

 
 
 
59,016

Real estate acquired in settlement of loans, net
 
 

 
438

 
 

 
133

Other
 
 

 
30,885

 
 

 
23,052

 
 
 

 
$
488,743

 
 

 
$
398,570

Other liabilities
 
 

 
 

 
 

 
 

Accrued expenses
 
 

 
$
56,830

 
 

 
$
39,312

Federal and state income taxes payable
 
 

 
1,287

 
 

 
3,736

Cashier’s checks
 
 

 
23,711

 
 

 
27,000

Advance payments by borrowers
 
 

 
4,998

 
 

 
10,245

Other
 
 

 
28,575

 
 

 
30,063

 
 
 

 
$
115,401

 
 

 
$
110,356
Schedule of the book value and aggregate fair value by major security type
The major components of investment securities were as follows:
 
 
Amortized cost
 
Gross unrealized gains
 
Gross unrealized losses
 
Estimated fair
value
 
Gross unrealized losses
 
 
 
 
 
 
Less than 12 months
 
12 months or longer
(dollars in thousands)
 
 
 
 
 
Number of issues
 
Fair 
value
 
Amount
 
Number of issues
 
Fair 
value
 
Amount
September 30, 2018
 
 

 
 

 
 

 
 

 
 
 
 

 
 

 
 
 
 

 
 

Available-for-sale
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
U.S. Treasury and federal agency obligations
 
$
175,144

 
$
24

 
$
(4,754
)
 
$
170,414

 
11

 
$
67,258

 
$
(1,339
)
 
17

 
$
93,132

 
$
(3,415
)
Mortgage-related securities- FNMA, FHLMC and GNMA
 
1,195,492

 
292

 
(47,094
)
 
1,148,690

 
59

 
473,714

 
(13,996
)
 
111

 
666,149

 
(33,098
)
Corporate bonds
 
49,378

 
46

 
(41
)
 
49,383

 
5

 
22,839

 
(41
)
 
—

 
—

 
—

Mortgage revenue bonds
 
19,084

 
—

 
—

 
19,084

 
—

 
—

 
—

 
—

 
—

 
—

 
 
$
1,439,098

 
$
362

 
$
(51,889
)
 
$
1,387,571

 
75

 
$
563,811

 
$
(15,376
)
 
128

 
$
759,281

 
$
(36,513
)
Held-to-maturity
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Mortgage-related securities- FNMA, FHLMC and GNMA
 
$
102,498

 
$
—

 
$
(2,569
)
 
$
99,929

 
7

 
$
99,929

 
$
(2,569
)
 
—

 
$
—

 
$
—

 
 
$
102,498

 
$
—

 
$
(2,569
)
 
$
99,929

 
7

 
$
99,929

 
$
(2,569
)
 
—

 
$
—

 
$
—

December 31, 2017
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Available-for-sale
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
U.S. Treasury and federal agency obligations
 
$
185,891

 
$
438

 
$
(2,031
)
 
$
184,298

 
15

 
$
83,137

 
$
(825
)
 
8

 
$
62,296

 
$
(1,206
)
Mortgage-related securities- FNMA, FHLMC and GNMA
 
1,220,304

 
793

 
(19,624
)
 
1,201,473

 
67

 
653,635

 
(6,839
)
 
77

 
459,912

 
(12,785
)
Mortgage revenue bond
 
15,427

 
—

 
—

 
15,427

 
—

 
—

 
—

 
—

 
—

 
—

 
 
$
1,421,622

 
$
1,231

 
$
(21,655
)
 
$
1,401,198

 
82

 
$
736,772

 
$
(7,664
)
 
85

 
$
522,208

 
$
(13,991
)
Held-to-maturity
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Mortgage-related securities- FNMA, FHLMC and GNMA
 
$
44,515

 
$
1

 
$
(104
)
 
$
44,412

 
2

 
$
35,744

 
$
(104
)
 
—

 
$
—

 
$
—

 
 
$
44,515

 
$
1

 
$
(104
)
 
$
44,412

 
2

 
$
35,744

 
$
(104
)
 
—

 
$
—

 
$
—
Schedule of contractual maturities of available-for-sale securities
The contractual maturities of investment securities were as follows:
September 30, 2018
 
Amortized cost
 
Fair value
(in thousands)
 
 
 
 
Available-for-sale
 
 
 
 
Due in one year or less
 
$
25,004

 
$
24,896

Due after one year through five years
 
108,364

 
106,774

Due after five years through ten years
 
82,720

 
80,439

Due after ten years
 
27,518

 
26,772

 
 
243,606

 
238,881

Mortgage-related securities-FNMA, FHLMC and GNMA
 
1,195,492

 
1,148,690

Total available-for-sale securities
 
$
1,439,098

 
$
1,387,571

Held-to-maturity
 
 
 
 
Mortgage-related securities-FNMA, FHLMC and GNMA
 
$
102,498

 
$
99,929

Total held-to-maturity securities
 
$
102,498

 
$
99,929
Schedule of components of loans receivable
The components of loans were summarized as follows:
 
September 30, 2018
 
December 31, 2017
(in thousands)
 

 
 

Real estate:
 

 
 

Residential 1-4 family
$
2,110,489

 
$
2,118,047

Commercial real estate
733,749

 
733,106

Home equity line of credit
949,872

 
913,052

Residential land
12,982

 
15,797

Commercial construction
112,838

 
108,273

Residential construction
13,441

 
14,910

Total real estate
3,933,371

 
3,903,185

Commercial
574,243

 
544,828

Consumer
247,058

 
223,564

Total loans
4,754,672

 
4,671,577

Less: Deferred fees and discounts
(313
)
 
(809
)
          Allowance for loan losses
(54,127
)
 
(53,637
)
Total loans, net
$
4,700,232

 
$
4,617,131
Schedule of allowance for loan losses
The allowance for loan losses (balances and changes) and financing receivables were as follows:
(in thousands)
 
Residential
1-4 family
 
Commercial real
estate
 
Home
equity line of credit
 
Residential land
 
Commercial construction
 
Residential construction
 
Commercial loans
 
Consumer loans
 
Unallo-cated
 
Total
Three months ended September 30, 2018
 
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

Allowance for loan losses:
 
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

Beginning balance
 
$
2,939

 
$
15,298

 
$
7,334

 
$
642

 
$
4,616

 
$
4

 
$
10,161

 
$
11,809

 
$
—

 
$
52,803

Charge-offs
 
—

 
—

 
(80
)
 
(1
)
 
—

 
—

 
(788
)
 
(4,508
)
 
—

 
(5,377
)
Recoveries
 
5

 
—

 
71

 
122

 
—

 
—

 
105

 
365

 
—

 
668

Provision
 
(623
)
 
(1,033
)
 
(347
)
 
(296
)
 
(356
)
 
—

 
1,255

 
7,433

 
—

 
6,033

Ending balance
 
$
2,321

 
$
14,265

 
$
6,978

 
$
467

 
$
4,260

 
$
4

 
$
10,733

 
$
15,099

 
$
—

 
$
54,127

Three months ended September 30, 2017
 
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

Allowance for loan losses:
 
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

Beginning balance
 
$
3,130

 
$
18,840

 
$
5,527

 
$
1,264

 
$
4,706

 
$
9

 
$
14,552

 
$
8,328

 
$
—

 
$
56,356

Charge-offs
 
(522
)
 
—

 
—

 
—

 
—

 
—

 
(1,215
)
 
(3,160
)
 
—

 
(4,897
)
Recoveries
 
33

 
—

 
164

 
259

 
—

 
—

 
326

 
316

 
—

 
1,098

Provision
 
347

 
(2,800
)
 
(36
)
 
(141
)
 
370

 
2

 
(595
)
 
3,343

 
—

 
490

Ending balance
 
$
2,988

 
$
16,040

 
$
5,655

 
$
1,382

 
$
5,076

 
$
11

 
$
13,068

 
$
8,827

 
$
—

 
$
53,047

Nine months ended September 30, 2018
 
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

Allowance for loan losses:
 
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

Beginning balance
 
$
2,902

 
$
15,796

 
$
7,522

 
$
896

 
$
4,671

 
$
12

 
$
10,851

 
$
10,987

 
$
—

 
$
53,637

Charge-offs
 
(31
)
 
—

 
(224
)
 
(18
)
 
—

 
—

 
(1,930
)
 
(12,628
)
 
—

 
(14,831
)
Recoveries
 
73

 
—

 
98

 
173

 
—

 
—

 
1,555

 
1,085

 
—

 
2,984

Provision
 
(623
)
 
(1,531
)
 
(418
)
 
(584
)
 
(411
)
 
(8
)
 
257

 
15,655

 
—

 
12,337

Ending balance
 
$
2,321

 
$
14,265

 
$
6,978

 
$
467

 
$
4,260

 
$
4

 
$
10,733

 
$
15,099

 
$
—

 
$
54,127

September 30, 2018
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Ending balance: individually evaluated for impairment
 
$
1,020

 
$
51

 
$
1,088

 
$
—

 
$
—

 
$
—

 
$
728

 
$
3

 
 
 
$
2,890

Ending balance: collectively evaluated for impairment
 
$
1,301

 
$
14,214

 
$
5,890

 
$
467

 
$
4,260

 
$
4

 
$
10,005

 
$
15,096

 
$
—

 
$
51,237

Financing Receivables:
 
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

Ending balance
 
$
2,110,489

 
$
733,749

 
$
949,872

 
$
12,982

 
$
112,838

 
$
13,441

 
$
574,243

 
$
247,058

 
 
 
$
4,754,672

Ending balance: individually evaluated for impairment
 
$
17,703

 
$
981

 
$
14,602

 
$
2,057

 
$
—

 
$
—

 
$
5,727

 
$
90

 
 
 
$
41,160

Ending balance: collectively evaluated for impairment
 
$
2,092,786

 
$
732,768

 
$
935,270

 
$
10,925

 
$
112,838

 
$
13,441

 
$
568,516

 
$
246,968

 
 
 
$
4,713,512

Nine months ended September 30, 2017
 
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

Allowance for loan losses:
 
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

Beginning balance
 
$
2,873

 
$
16,004

 
$
5,039

 
$
1,738

 
$
6,449

 
$
12

 
$
16,618

 
$
6,800

 
$
—

 
$
55,533

Charge-offs
 
(528
)
 
—

 
(14
)
 
(92
)
 
—

 
—

 
(3,477
)
 
(8,360
)
 
—

 
(12,471
)
Recoveries
 
91

 
—

 
294

 
477

 
—

 
—

 
922

 
970

 
—

 
2,754

Provision
 
552

 
36

 
336

 
(741
)
 
(1,373
)
 
(1
)
 
(995
)
 
9,417

 
—

 
7,231

Ending balance
 
$
2,988

 
$
16,040

 
$
5,655

 
$
1,382

 
$
5,076

 
$
11

 
$
13,068

 
$
8,827

 
$
—

 
$
53,047

December 31, 2017
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Ending balance: individually evaluated for impairment
 
$
1,248

 
$
65

 
$
647

 
$
47

 
$
—

 
$
—

 
$
694

 
$
29

 
 
 
$
2,730

Ending balance: collectively evaluated for impairment
 
$
1,654

 
$
15,731

 
$
6,875

 
$
849

 
$
4,671

 
$
12

 
$
10,157

 
$
10,958

 
$
—

 
$
50,907

Financing Receivables:
 
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

Ending balance
 
$
2,118,047

 
$
733,106

 
$
913,052

 
$
15,797

 
$
108,273

 
$
14,910

 
$
544,828

 
$
223,564

 
 
 
$
4,671,577

Ending balance: individually evaluated for impairment
 
$
18,284

 
$
1,016

 
$
8,188

 
$
1,265

 
$
—

 
$
—

 
$
4,574

 
$
66

 
 
 
$
33,393

Ending balance: collectively evaluated for impairment
 
$
2,099,763

 
$
732,090

 
$
904,864

 
$
14,532

 
$
108,273

 
$
14,910

 
$
540,254

 
$
223,498

 
 
 
$
4,638,184
Schedule of credit risk profile by internally assigned grade for loans
The credit risk profile by internally assigned grade for loans was as follows:
 
 
September 30, 2018
 
December 31, 2017
(in thousands)
 
Commercial
real estate
 
Commercial
construction
 
Commercial
 
Commercial
real estate
 
Commercial
construction
 
Commercial
Grade:
 
 

 
 

 
 

 
 

 
 

 
 

Pass
 
$
651,524

 
$
88,049

 
$
523,335

 
$
630,877

 
$
83,757

 
$
492,942

Special mention
 
35,642

 
22,500

 
18,512

 
49,347

 
22,500

 
27,997

Substandard
 
46,583

 
2,289

 
32,396

 
52,882

 
2,016

 
23,421

Doubtful
 
—

 
—

 
—

 
—

 
—

 
468

Loss
 
—

 
—

 
—

 
—

 
—

 
—

Total
 
$
733,749

 
$
112,838

 
$
574,243

 
$
733,106

 
$
108,273

 
$
544,828
Schedule of credit risk profile based on payment activity for loans
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
 
Current
 
Total
financing
receivables
 
Recorded
investment>
90 days and
accruing
September 30, 2018
 
 

 
 

 
 

 
 

 
 

 
 

 
 

Real estate:
 
 

 
 

 
 

 
 

 
 

 
 

 
 

Residential 1-4 family
 
$
2,000

 
$
2,254

 
$
4,132

 
$
8,386

 
$
2,102,103

 
$
2,110,489

 
$
—

Commercial real estate
 
—

 
—

 
—

 
—

 
733,749

 
733,749

 
—

Home equity line of credit
 
1,375

 
493

 
3,194

 
5,062

 
944,810

 
949,872

 
—

Residential land
 
—

 
—

 
418

 
418

 
12,564

 
12,982

 
—

Commercial construction
 
—

 
—

 
—

 
—

 
112,838

 
112,838

 
—

Residential construction
 
—

 
—

 
—

 
—

 
13,441

 
13,441

 
—

Commercial
 
1,053

 
417

 
463

 
1,933

 
572,310

 
574,243

 
—

Consumer
 
4,679

 
2,200

 
1,969

 
8,848

 
238,210

 
247,058

 
—

Total loans
 
$
9,107

 
$
5,364

 
$
10,176

 
$
24,647

 
$
4,730,025

 
$
4,754,672

 
$
—

December 31, 2017
 
 

 
 

 
 

 
 

 
 

 
 

 
 

Real estate:
 
 

 
 

 
 

 
 

 
 

 
 

 
 

Residential 1-4 family
 
$
1,532

 
$
1,715

 
$
5,071

 
$
8,318

 
$
2,109,729

 
$
2,118,047

 
$
—

Commercial real estate
 
—

 
—

 
—

 
—

 
733,106

 
733,106

 
—

Home equity line of credit
 
425

 
114

 
2,051

 
2,590

 
910,462

 
913,052

 
—

Residential land
 
23

 
—

 
625

 
648

 
15,149

 
15,797

 
—

Commercial construction
 
—

 
—

 
—

 
—

 
108,273

 
108,273

 
—

Residential construction
 
—

 
—

 
—

 
—

 
14,910

 
14,910

 
—

Commercial
 
1,825

 
2,025

 
730

 
4,580

 
540,248

 
544,828

 
—

Consumer
 
3,432

 
2,159

 
1,876

 
7,467

 
216,097

 
223,564

 
—

Total loans
 
$
7,237

 
$
6,013

 
$
10,353

 
$
23,603

 
$
4,647,974

 
$
4,671,577

 
$
—
Schedule of credit risk profile based on nonaccrual loans, accruing loans 90 days or more past due
The credit risk profile based on nonaccrual loans, accruing loans 90 days or more past due and troubled debt restructuring (TDR) loans was as follows:
(in thousands)
 
September 30, 2018
 
December 31, 2017
Real estate:
 
 

 
 

Residential 1-4 family
 
$
12,768

 
$
12,598

Commercial real estate
 
—

 
—

Home equity line of credit
 
7,191

 
4,466

Residential land
 
516

 
841

Commercial construction
 
—

 
—

Residential construction
 
—

 
—

Commercial
 
4,176

 
3,069

Consumer
 
3,266

 
2,617

  Total nonaccrual loans
 
$
27,917

 
$
23,591

Real estate:
 
 
 
 
Residential 1-4 family
 
$
—

 
$
—

Commercial real estate
 
—

 
—

Home equity line of credit
 
—

 
—

Residential land
 
—

 
—

Commercial construction
 
—

 
—

Residential construction
 
—

 
—

Commercial
 
—

 
—

Consumer
 
—

 
—

     Total accruing loans 90 days or more past due
 
$
—

 
$
—

Real estate:
 
 
 
 
Residential 1-4 family
 
$
10,701

 
$
10,982

Commercial real estate
 
981

 
1,016

Home equity line of credit
 
11,131

 
6,584

Residential land
 
1,542

 
425

Commercial construction
 
—

 
—

Residential construction
 
—

 
—

Commercial
 
1,806

 
1,741

Consumer
 
63

 
66

     Total troubled debt restructured loans not included above
 
$
26,224

 
$
20,814
Schedule of the carrying amount and the total unpaid principal balance of impaired loans, with and without recorded allowance for loans losses
The total carrying amount and the total unpaid principal balance of impaired loans were as follows:
 
 
September 30, 2018
 
Three months ended September 30, 2018
 
Nine months ended September 30, 2018
(in thousands)
 
Recorded
investment
 
Unpaid
principal
balance
 
Related
Allowance
 
Average
recorded
investment
 
Interest
income
recognized*
 
Average
recorded
investment
 
Interest
income
recognized*
With no related allowance recorded
 
 

 
 

 
 

 
 

 
 

 
 

Real estate:
 
 

 
 

 
 

 
 

 
 

 
 

 
 

Residential 1-4 family
 
$
8,689

 
$
9,200

 
$
—

 
$
8,940

 
$
239

 
$
8,779

 
$
396

Commercial real estate
 
—

 
—

 
—

 
—

 
—

 
—

 
—

Home equity line of credit
 
2,359

 
2,714

 
—

 
2,234

 
23

 
2,103

 
35

Residential land
 
2,057

 
2,256

 
—

 
1,773

 
6

 
1,358

 
16

Commercial construction
 
—

 
—

 
—

 
—

 
—

 
—

 
—

Residential construction
 
—

 
—

 
—

 
—

 
—

 
—

 
—

Commercial
 
3,948

 
4,915

 
—

 
3,915

 
6

 
3,099

 
26

Consumer
 
32

 
32

 
—

 
33

 
—

 
18

 
—

 
 
$
17,085

 
$
19,117

 
$
—

 
$
16,895

 
$
274

 
$
15,357

 
$
473

With an allowance recorded
 
 

 
 

 
 

 
 

 
 

 
 

Real estate:
 
 

 
 

 
 

 
 

 
 

 
 

 
 

Residential 1-4 family
 
$
9,014

 
$
9,218

 
$
1,020

 
$
8,820

 
$
84

 
$
8,909

 
$
274

Commercial real estate
 
981

 
981

 
51

 
985

 
11

 
997

 
32

Home equity line of credit
 
12,243

 
12,327

 
1,088

 
12,090

 
111

 
10,083

 
288

Residential land
 
—

 
—

 
—

 
20

 
—

 
45

 
3

Commercial construction
 
—

 
—

 
—

 
—

 
—

 
—

 
—

Residential construction
 
—

 
—

 
—

 
—

 
—

 
—

 
—

Commercial
 
1,779

 
1,779

 
728

 
1,774

 
28

 
1,824

 
94

Consumer
 
58

 
58

 
3

 
57

 
1

 
58

 
3

 
 
$
24,075

 
$
24,363

 
$
2,890

 
$
23,746

 
$
235

 
$
21,916

 
$
694

Total
 
 

 
 

 
 

 
 

 
 

 
 

 
 

Real estate:
 
 

 
 

 
 

 
 

 
 

 
 

 
 

Residential 1-4 family
 
$
17,703

 
$
18,418

 
$
1,020

 
$
17,760

 
$
323

 
$
17,688

 
$
670

Commercial real estate
 
981

 
981

 
51

 
985

 
11

 
997

 
32

Home equity line of credit
 
14,602

 
15,041

 
1,088

 
14,324

 
134

 
12,186

 
323

Residential land
 
2,057

 
2,256

 
—

 
1,793

 
6

 
1,403

 
19

Commercial construction
 
—

 
—

 
—

 
—

 
—

 
—

 
—

Residential construction
 
—

 
—

 
—

 
—

 
—

 
—

 
—

Commercial
 
5,727

 
6,694

 
728

 
5,689

 
34

 
4,923

 
120

Consumer
 
90

 
90

 
3

 
90

 
1

 
76

 
3

 
 
$
41,160

 
$
43,480

 
$
2,890

 
$
40,641

 
$
509

 
$
37,273

 
$
1,167


 
 
December 31, 2017
 
Three months ended September 30, 2017
 
Nine months ended September 30, 2017
(in thousands)
 
Recorded
investment
 
Unpaid
principal
balance
 
Related
allowance
 
Average
recorded
investment
 
Interest
income
recognized*
 
Average
recorded
investment
 
Interest
income
recognized*
With no related allowance recorded
 
 

 
 

 
 

 
 

 
 

 
 

Real estate:
 
 

 
 

 
 

 
 

 
 

 
 

 
 

Residential 1-4 family
 
$
9,097

 
$
9,644

 
$
—

 
$
9,650

 
$
70

 
$
9,503

 
$
230

Commercial real estate
 
—

 
—

 
—

 
—

 
—

 
121

 
11

Home equity line of credit
 
1,496

 
1,789

 
—

 
1,918

 
32

 
2,108

 
97

Residential land
 
1,143

 
1,434

 
—

 
1,209

 
73

 
1,080

 
107

Commercial construction
 
—

 
—

 
—

 
—

 
—

 
—

 
—

Residential construction
 
—

 
—

 
—

 
—

 
—

 
—

 
—

Commercial
 
2,328

 
3,166

 
—

 
1,808

 
29

 
2,888

 
37

Consumer
 
8

 
8

 
—

 
—

 
—

 
—

 
—

 
 
$
14,072

 
$
16,041

 
$
—

 
$
14,585

 
$
204

 
$
15,700

 
$
482

With an allowance recorded
 
 

 
 

 
 

 
 

 
 

 
 

 
 

Real estate:
 
 

 
 

 
 

 
 

 
 

 
 

 
 

Residential 1-4 family
 
$
9,187

 
$
9,390

 
$
1,248

 
$
9,788

 
$
97

 
$
9,963

 
$
333

Commercial real estate
 
1,016

 
1,016

 
65

 
1,284

 
13

 
1,292

 
41

Home equity line of credit
 
6,692

 
6,736

 
647

 
5,076

 
68

 
4,670

 
164

Residential land
 
122

 
122

 
47

 
1,251

 
12

 
1,620

 
73

Commercial construction
 
—

 
—

 
—

 
—

 
—

 
—

 
—

Residential construction
 
—

 
—

 
—

 
—

 
—

 
—

 
—

Commercial
 
2,246

 
2,252

 
694

 
2,482

 
225

 
4,104

 
694

Consumer
 
58

 
58

 
29

 
67

 
1

 
55

 
2

 
 
$
19,321

 
$
19,574

 
$
2,730

 
$
19,948

 
$
416

 
$
21,704

 
$
1,307

Total
 
 

 
 

 
 

 
 

 
 

 
 

 
 

Real estate:
 
 

 
 

 
 

 
 

 
 

 
 

 
 

Residential 1-4 family
 
$
18,284

 
$
19,034

 
$
1,248

 
$
19,438

 
$
167

 
$
19,466

 
$
563

Commercial real estate
 
1,016

 
1,016

 
65

 
1,284

 
13

 
1,413

 
52

Home equity line of credit
 
8,188

 
8,525

 
647

 
6,994

 
100

 
6,778

 
261

Residential land
 
1,265

 
1,556

 
47

 
2,460

 
85

 
2,700

 
180

Commercial construction
 
—

 
—

 
—

 
—

 
—

 
—

 
—

Residential construction
 
—

 
—

 
—

 
—

 
—

 
—

 
—

Commercial
 
4,574

 
5,418

 
694

 
4,290

 
254

 
6,992

 
731

Consumer
 
66

 
66

 
29

 
67

 
1

 
55

 
2

 
 
$
33,393

 
$
35,615

 
$
2,730

 
$
34,533

 
$
620

 
$
37,404

 
$
1,789

*
Since loan was classified as impaired.
Schedule of loan modifications
Loan modifications that occurred during the third quarters and first nine months of 2018 and 2017 and the impact on the allowance for loan losses were as follows:
 
 
Three months ended September 30, 2018
 
Nine months ended September 30, 2018
 
 
Number of contracts
 
Outstanding recorded 
investment1
 
Net increase in allowance
 
Number of contracts
 
Outstanding recorded 
investment1
 
Net increase in allowance
(dollars in thousands)
 
 
Pre-modification
 
Post-modification
 
(as of period end)
 
 
Pre-modification
 
Post-modification
 
(as of period end)
Troubled debt restructurings
 
 

 
 

 
 

 
 
 
 

 
 

 
 

 
 
Real estate:
 
 

 
 

 
 

 
 
 
 

 
 

 
 

 
 
Residential 1-4 family
 
3

 
$
632

 
$
649

 
$
1

 
4

 
$
971

 
$
993

 
$
17

Commercial real estate
 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

Home equity line of credit
 
16

 
1,584

 
1,585

 
263

 
55

 
7,092

 
7,097

 
1,205

Residential land
 
3

 
1,562

 
1,568

 
—

 
4

 
1,671

 
1,677

 
—

Commercial construction
 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

Residential construction
 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

Commercial
 
6

 
256

 
256

 
134

 
13

 
2,550

 
2,550

 
176

Consumer
 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
 
28

 
$
4,034

 
$
4,058

 
$
398

 
76

 
$
12,284

 
$
12,317

 
$
1,398

 
 
Three months ended September 30, 2017
 
Nine months ended September 30, 2017
 
 
Number of contracts
 
Outstanding recorded 
investment1
 
Net increase in allowance
 
Number of contracts
 
Outstanding recorded 
investment1
 
Net increase in allowance
(dollars in thousands)
 
 
Pre-modification
 
Post-modification
 
(as of period end)
 
 
Pre-modification
 
Post-modification
 
(as of period end)
Troubled debt restructurings
 
 

 
 

 
 

 
 
 
 
 
 

 
 

 
 
Real estate:
 
 

 
 

 
 

 
 
 
 
 
 

 
 

 
 
Residential 1-4 family
 
2

 
$
83

 
$
83

 
$
—

 
7

 
$
955

 
$
963

 
$
45

Commercial real estate
 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

Home equity line of credit
 
15

 
862

 
862

 
184

 
28

 
1,386

 
1,372

 
277

Residential land
 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

Commercial construction
 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

Residential construction
 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

Commercial
 
1

 
330

 
330

 
38

 
2

 
672

 
672

 
38

Consumer
 
—

 
—

 
—

 
—

 
1

 
59

 
59

 
27

 
 
18

 
$
1,275

 
$
1,275

 
$
222

 
38

 
$
3,072

 
$
3,066

 
$
387


1
The reported balances include loans that became TDR during the period, and were fully paid-off, charged-off, or sold prior to period end.
Schedule of troubled debt restructuring on financing receivables that experienced default
Loans modified in TDRs that experienced a payment default of 90 days or more during the third quarters and first nine months of 2018 and 2017, and for which the payment of default occurred within one year of the modification, were as follows:
 
 
Three months ended September 30, 2018
 
Nine months ended September 30, 2018
(dollars in thousands)
 
Number of contracts
 
Recorded investment
 
Number of contracts
 
Recorded investment
Troubled debt restructurings that
 subsequently defaulted
 
 
 
 
 
 
 
 
Real estate:
 
 
 
 

 
 
 
 
Residential 1-4 family
 
—
 
$
—

 
—
 
$
—

Commercial real estate
 
—
 
—

 
—
 
—

Home equity line of credit
 
—
 
—

 
1
 
81

Residential land
 
—
 
—

 
—
 
—

Commercial construction
 
—
 
—

 
—
 
—

Residential construction
 
—
 
—

 
—
 
—

Commercial
 
—
 
—

 
1
 
291

Consumer
 
—
 
—

 
—
 
—

 
 
—
 
$
—

 
2
 
$
372

 
 
Three months ended September 30, 2017
 
Nine months ended September 30, 2017
(dollars in thousands)
 
Number of contracts
 
Recorded investment
 
Number of contracts
 
Recorded investment
Troubled debt restructurings that
 subsequently defaulted
 
 
 
 
 
 
 
 
Real estate:
 
 
 
 

 
 
 
 
Residential 1-4 family
 
—
 
$
—

 
1
 
$
222

Commercial real estate
 
—
 
—

 
—
 
—

Home equity line of credit
 
—
 
—

 
—
 
—

Residential land
 
—
 
—

 
—
 
—

Commercial construction
 
—
 
—

 
—
 
—

Residential construction
 
—
 
—

 
—
 
—

Commercial
 
—
 
—

 
—
 
—

Consumer
 
—
 
—

 
—
 
—

 
 
—
 
$
—

 
1
 
$
222
Schedule of amortized intangible assets
Changes in the carrying value of MSRs were as follows:
(in thousands)
 
Gross
carrying amount1
 
Accumulated amortization1
 
Valuation allowance
 
Net
carrying amount
September 30, 2018
 
$
18,543

 
$
(10,117
)
 
$
—

 
$
8,426

December 31, 2017
 
17,511

 
(8,872
)
 
—

 
8,639

1 Reflects the impact of loans paid in full.

Changes related to MSRs were as follows:
 
 
Three months ended September 30
 
Nine months ended September 30
(in thousands)
 
2018
 
2017
 
2018
 
2017
Mortgage servicing rights
 
 
 
 
 
 
 
 
Beginning balance
 
$
8,509

 
$
9,181

 
$
8,639

 
$
9,373

Amount capitalized
 
305

 
394

 
1,032

 
1,192

Amortization
 
(388
)
 
(505
)
 
(1,245
)
 
(1,495
)
Other-than-temporary impairment
 
—

 
—

 
—

 
—

Carrying amount before valuation allowance
 
8,426

 
9,070

 
8,426

 
9,070

Valuation allowance for mortgage servicing rights
 
 
 
 
 
 
 
 
Beginning balance
 
—

 
—

 
—

 
—

Provision (recovery)
 
—

 
—

 
—

 
—

Other-than-temporary impairment
 
—

 
—

 
—

 
—

Ending balance
 
—

 
—

 
—

 
—

Net carrying value of mortgage servicing rights
 
$
8,426

 
$
9,070

 
$
8,426

 
$
9,070
Schedule of key assumptions used in estimating fair value
Key assumptions used in estimating the fair value of ASB’s MSRs used in the impairment analysis were as follows:
(dollars in thousands)
 
September 30, 2018

 
December 31, 2017

Unpaid principal balance
 
$
1,206,025

 
$
1,195,454

Weighted average note rate
 
3.98
%
 
3.94
%
Weighted average discount rate
 
10.0
%
 
10.0
%
Weighted average prepayment speed
 
7.0
%
 
9.0
%
The following table summarizes the assumptions used to determine the fair value of the LTIP awards linked to TSR and the resulting fair value of LTIP awards granted:
 
 
2018

 
2017

Risk-free interest rate
 
2.29
%
 
1.46
%
Expected life in years
 
3

 
3

Expected volatility
 
17.0
%
 
20.1
%
Range of expected volatility for Peer Group
 
15.1% to 26.2%

 
15.4% to 26.0%

Grant date fair value (per share)
 
$38.20
 
$39.51
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
September 30, 2018
 
 
 
 
 
 
 
 
 
 
Home equity lines of credit
 
$
77

 
Fair value of collateral
 
Appraised value less 7% selling cost
 
 
 
N/A (2)
Total loans
 
$
77

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
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.
(2) N/A - Not applicable. There is one loan in each fair value measurement type.
Schedule of sensitivity analysis of fair value, transferor's interests in transferred financial assets
The sensitivity analysis of fair value of MSRs to hypothetical adverse changes of 25 and 50 basis points in certain key assumptions was as follows:
(dollars in thousands)
 
September 30, 2018

 
December 31, 2017

Prepayment rate:
 
 
 
 
  25 basis points adverse rate change
 
$
(379
)
 
$
(869
)
  50 basis points adverse rate change
 
(836
)
 
(1,828
)
Discount rate:
 
 
 
 
  25 basis points adverse rate change
 
(134
)
 
(111
)
  50 basis points adverse rate change
 
(265
)
 
(220
)
Schedule of securities sold under agreements to repurchase
The following tables present information about the securities sold under agreements to repurchase, including the related collateral received from or pledged to counterparties:
(in millions)
 
Gross amount of
recognized liabilities
 
Gross amount offset in
the Balance Sheet
 
Net amount of liabilities presented
in the Balance Sheet
Repurchase agreements
 
 

 
 

 
 

September 30, 2018
 
$
71

 
$
—

 
$
71

December 31, 2017
 
141

 
—

 
141

 
 
Gross amount not offset in the Balance Sheet
(in millions)
 
 Net amount of liabilities presented
in the Balance Sheet
 
Financial
instruments
 
Cash
collateral
pledged
Commercial account holders
 
 
 
 
 
 
September 30, 2018
 
$
71

 
$
154

 
$
—

December 31, 2017
 
141

 
165

 
—
Schedule of notional and fair value of derivatives
The notional amount and fair value of ASB’s derivative financial instruments were as follows:
 
 
September 30, 2018
 
December 31, 2017
(in thousands)
 
Notional amount
 
Fair value
 
Notional amount
 
Fair value
Interest rate lock commitments
 
$
—

 
$
—

 
$
13,669

 
$
131

Forward commitments
 
—

 
—

 
14,465

 
(24
)
Schedule of derivative financial instruments
ASB’s derivative financial instruments, their fair values and balance sheet location were as follows:
Derivative Financial Instruments Not Designated as Hedging Instruments 1
 
September 30, 2018
 
December 31, 2017
(in thousands)
 
 Asset derivatives
 
 Liability
derivatives
 
 Asset derivatives
 
 Liability
derivatives
Interest rate lock commitments
 
$
—

 
$
—

 
$
133

 
$
2

Forward commitments
 
—

 
—

 
4

 
28

 
 
$
—

 
$
—

 
$
137

 
$
30

1 Asset derivatives are included in other assets and liability derivatives are included in other liabilities in the balance sheets.
Schedule of derivative financial instruments and net gain or loss
The following table presents ASB’s derivative financial instruments and the amount and location of the net gains or losses recognized in ASB’s statements of income:
Derivative Financial Instruments Not Designated as Hedging Instruments
 
Location of net gains (losses) recognized in the Statement of Income
 
Three months ended September 30
 
Nine months ended September 30
(in thousands)
 
 
2018
 
2017
 
2018
 
2017
Interest rate lock commitments
 
Mortgage banking income
 
$
(248
)
 
$
(119
)
 
$
(131
)
 
$
(414
)
Forward commitments
 
Mortgage banking income
 
62

 
(90
)
 
24

 
175

 
 
 
 
$
(186
)
 
$
(209
)
 
$
(107
)
 
$
(239
)