Bank segment (HEI only)

12 Months Ended

Dec. 31, 2020

Bank Segment Disclosure [Abstract]

Bank segment (HEI only)

Note 4· Bank segment (HEI only)

Selected financial information

American Savings Bank, F.S.B.

Statements of Income and Comprehensive Income Data

Years ended December 31	2020		2019		2018
(in thousands)
Interest and dividend income
Interest and fees on loans	$	214,134	$	233,632	$	220,463
Interest and dividends on investment securities	30,529		32,922		37,762
Total interest and dividend income	244,663		266,554		258,225
Interest expense
Interest on deposit liabilities	10,654		16,830		13,991
Interest on other borrowings	460		1,610		1,548
Total interest expense	11,114		18,440		15,539
Net interest income	233,549		248,114		242,686
Provision for credit losses	50,811		23,480		14,745
Net interest income after provision for credit losses	182,738		224,634		227,941
Noninterest income
Fees from other financial services	16,447		19,275		18,937
Fee income on deposit liabilities	16,059		20,877		21,311
Fee income on other financial products	6,381		6,507		7,052
Bank-owned life insurance	6,483		7,687		5,057
Mortgage banking income	23,734		4,943		1,493
Gain on sale of real estate	—		10,762		—
Gain on sale of investment securities, net	9,275		653		—
Other income, net	(256)		2,074		2,200
Total noninterest income	78,123		72,778		56,050
Noninterest expense
Compensation and employee benefits	104,443		103,009		98,387
Occupancy	21,573		21,272		17,073
Data processing	14,769		15,306		14,268
Services	11,121		10,239		10,847
Equipment	9,001		8,760		7,186
Office supplies, printing and postage	4,623		5,512		6,134
Marketing	3,435		4,490		3,567
FDIC insurance	2,342		1,204		2,713
Other expense1	20,283		15,586		17,238
Total noninterest expense	191,590		185,378		177,413
Income before income taxes	69,271		112,034		106,578
Income taxes	11,688		23,061		24,069
Net income	57,583		88,973		82,509
Other comprehensive income (loss), net of taxes	23,608		29,406		(7,119)
Comprehensive income	$	81,191	$	118,379	$	75,390

1 2020 includes approximately $5.1 million of certain direct and incremental COVID-19 related costs. For 2020, these costs, which have been recorded in Other expense, include $2.5 million of compensation expense and $2.0 million of enhanced cleaning and sanitation costs.

Reconciliation to amounts per HEI Consolidated Statements of Income*:

Years ended December 31	2020		2019		2018
(in thousands)
Interest and dividend income	$	244,663	$	266,554	$	258,225
Noninterest income	78,123		72,778		56,050
Less: Gain on sale of real estate	—		10,762		—
Less: Gain on sale of investment securities, net	9,275		653		—
*Revenues-Bank	313,511		327,917		314,275
Total interest expense	11,114		18,440		15,539
Provision for credit losses	50,811		23,480		14,745
Noninterest expense	191,590		185,378		177,413
Less: Retirement defined benefits expense (credit)—other than service costs	1,813		(472)		1,657
Add: Gain on sale of real estate	—		10,762		—
*Expenses-Bank	251,702		217,008		206,040
*Operating income-Bank	61,809		110,909		108,235
Add back: Retirement defined benefits expense (credit)—other than service costs	1,813		(472)		1,657
Add back: Gain on sale of investment securities, net	9,275		653		—
Income before income taxes	$	69,271	$	112,034	$	106,578

Balance Sheets Data

December 31			2020				2019
(in thousands)
Assets
Cash and due from banks			$	178,422			$	129,770
Interest-bearing deposits			114,304				48,628
Cash and cash equivalents			292,726				178,398
Investment securities
Available-for-sale, at fair value			1,970,417				1,232,826
Held-to-maturity, at amortized cost (fair value of $229,963 and $143,467 at December 31, 2020 and 2019, respectively)			226,947				139,451
Stock in Federal Home Loan Bank, at cost			8,680				8,434
Loans held for investment			5,333,843				5,121,176
Allowance for credit losses			(101,201)				(53,355)
Net loans			5,232,642				5,067,821
Loans held for sale, at lower of cost or fair value			28,275				12,286
Other			554,656				511,611
Goodwill			82,190				82,190
Total assets			$	8,396,533			$	7,233,017
Liabilities and shareholder’s equity
Deposit liabilities–noninterest-bearing			$	2,598,500			$	1,909,682
Deposit liabilities–interest-bearing			4,788,457				4,362,220
Other borrowings			89,670				115,110
Other			183,731				146,954
Total liabilities			7,660,358				6,533,966
Commitments and contingencies
Common stock			1				1
Additional paid in capital			351,758				349,453
Retained earnings			369,470				358,259
Accumulated other comprehensive income (loss), net of taxes
Net unrealized gains (losses) on securities	$	19,986			$	2,481
Retirement benefit plans	(5,040)		14,946		(11,143)		(8,662)
Total shareholder’s equity			736,175				699,051
Total liabilities and shareholder’s equity			$	8,396,533			$	7,233,017

December 31	2020		2019
(in thousands)
Other assets
Bank-owned life insurance	$	163,265	$	157,465
Premises and equipment, net	206,134		204,449
Accrued interest receivable	24,616		19,365
Mortgage servicing rights	10,020		9,101
Low-income housing investments	83,435		66,302
Other	67,186		54,929
	$	554,656	$	511,611
Other liabilities
Accrued expenses	$	62,694	$	45,822
Federal and state income taxes payable	6,582		14,996
Cashier’s checks	38,011		23,647
Advance payments by borrowers	10,207		10,486
Other	66,237		52,003
	$	183,731	$	146,954

Bank-owned life insurance is life insurance purchased by ASB on the lives of certain key employees, with ASB as the beneficiary. The insurance is used to fund employee benefits through tax-free income from increases in the cash value of the policies and insurance proceeds paid to ASB upon an insured’s death.

Investment securities. The major components of investment securities were as follows:

									Gross unrealized losses
			Gross unrealized gains		Gross unrealized losses		Estimated fair value		Less than 12 months					12 months or longer
(dollars in thousands)	Amortized cost								Number of issues	Fair value		Amount		Number of issues	Fair value		Amount
December 31, 2020
Available-for-sale
U.S. Treasury and federal agency obligations	$	60,260	$	2,062	$	—	$	62,322	—	$	—	$	—	—	$	—	$	—
Mortgage-backed securities*	1,825,893		26,817		(3,151)		1,849,559		22	373,924		(3,151)		—	—		—
Corporate bonds	29,776		1,575		—		31,351		—	—		—		—	—		—
Mortgage revenue bonds	27,185		—		—		27,185		—	—		—		—	—		—
	$	1,943,114	$	30,454	$	(3,151)	$	1,970,417	22	$	373,924	$	(3,151)	—	$	—	$	—
Held-to-maturity
Mortgage-backed securities*	$	226,947	$	3,846	$	(830)	$	229,963	7	$	114,152	$	(830)	—	$	—	$	—
	$	226,947	$	3,846	$	(830)	$	229,963	7	$	114,152	$	(830)	—	$	—	$	—
December 31, 2019
Available-for-sale
U.S. Treasury and federal agency obligations	$	117,255	$	652	$	(120)	$	117,787	2	$	4,110	$	(11)	3	$	27,637	$	(109)
Mortgage-backed securities*	1,024,892		6,000		(4,507)		1,026,385		19	152,071		(819)		75	318,020		(3,688)
Corporate bonds	58,694		1,363		—		60,057		—	—		—		—	—		—
Mortgage revenue bonds	28,597		—		—		28,597		—	—		—		—	—		—
	$	1,229,438	$	8,015	$	(4,627)	$	1,232,826	21	$	156,181	$	(830)	78	$	345,657	$	(3,797)
Held-to-maturity
Mortgage-backed securities*	$	139,451	$	4,087	$	(71)	$	143,467	1	$	12,986	$	(71)	—	$	—	$	—
	$	139,451	$	4,087	$	(71)	$	143,467	1	$	12,986	$	(71)	—	$	—	$	—

* Issued or guaranteed by U.S. Government agencies or sponsored agencies

ASB does not believe that the investment securities that were in an unrealized loss position as of December 31, 2020, represent a credit loss. Total gross unrealized losses were primarily attributable to change in market conditions. On a quarterly basis the investment securities are evaluated for changes in financial condition of the issuer. Based upon ASB’s evaluation, all securities held within the investment portfolio continue to be investment grade by one or more agencies. The contractual cash flows of the U.S. Treasury, federal agency obligations and agency mortgage-backed securities are backed by the full faith and credit guaranty of the United States government or an agency of the government. ASB does not intend to sell the securities before the recovery of its amortized cost basis and there have been no adverse changes in the timing of the contractual cash flows for the securities. ASB’s investment securities portfolio did not require an allowance for credit losses as of December 31, 2020.

U.S. Treasury, federal agency obligations, corporate bonds, and mortgage revenue bonds have contractual terms to maturity. Mortgage-backed securities have contractual terms to maturity, but require periodic payments to reduce principal. In addition, expected maturities will differ from contractual maturities because borrowers have the right to prepay the underlying mortgages.

The contractual maturities of investment securities were as follows:

	Amortized		Fair
December 31, 2020	Cost		value
(in thousands)
Available-for-sale
Due in one year or less	$	16,974	$	17,098
Due after one year through five years	41,551		43,285
Due after five years through ten years	31,511		33,290
Due after ten years	27,185		27,185
	117,221		120,858
Mortgage-backed securities — issued or guaranteed by U.S. Government agencies or sponsored agencies	1,825,893		1,849,559
Total available-for-sale securities	$	1,943,114	$	1,970,417
Held-to-maturity
Mortgage-backed securities — issued or guaranteed by U.S. Government agencies or sponsored agencies	$	226,947	$	229,963
Total held-to-maturity securities	$	226,947	$	229,963

The proceeds, gross gains and losses from sales of available-for-sale securities were as follows:

Years ended December 31	2020		2019		2018
(in thousands)
Proceeds	$	169,157	$	19,810	$	—
Gross gains	9,275		653		—
Gross losses	—		—		—

Interest income from taxable and non-taxable investment securities were as follows:

Years ended December 31	2020		2019		2018
(in thousands)
Taxable	$	29,760	$	31,848	$	37,153
Non-taxable	769		1,074		609
	$	30,529	$	32,922	$	37,762

ASB pledged securities with a market value of approximately $445 million and $546 million as of December 31, 2020 and 2019, respectively, as collateral for public funds and other deposits, mortgage pipeline hedge margin, automated clearinghouse transactions, The Federal Reserve Bank of San Francisco Discount Window and bankruptcy account, and The Federal Home Loan Bank of Des Moines advance line. In addition, ASB pledged securities with a market value of $92 million and $130 million as of December 31, 2020 and 2019, respectively, as collateral for securities sold under agreements to repurchase.

Stock in FHLB.  As of December 31, 2020 and 2019, ASB’s stock in FHLB was carried at cost ($8.7 million and $8.4 million, respectively) because it can only be redeemed at par and it is a required investment based on measurements of ASB’s capital, assets and borrowing levels.

Quarterly and as conditions warrant, ASB reviews its investment in the stock of the FHLB for impairment. ASB evaluated its investment in FHLB stock for credit losses as of December 31, 2020, consistent with its accounting policy. ASB did not recognize any credit losses for 2020, 2019 and 2018 based on its evaluation of the underlying investment.

Future deterioration in the FHLB’s financial position and/or negative developments in any of the factors considered in ASB’s impairment evaluation may result in future impairment losses.

Loans. The components of loans were summarized as follows:

December 31	2020		2019
(in thousands)
Real estate:
Residential 1-4 family	$	2,144,239	$	2,178,135
Commercial real estate	983,865		824,830
Home equity line of credit	963,578		1,092,125
Residential land	15,617		14,704
Commercial construction	121,424		70,605
Residential construction	11,022		11,670
Total real estate	4,239,745		4,192,069
Commercial	936,748		670,674
Consumer	168,733		257,921
Total loans	5,345,226		5,120,664
Less: Deferred fees and discounts	(11,383)		512
Allowance for credit losses	(101,201)		(53,355)
Total loans, net	$	5,232,642	$	5,067,821

ASB’s policy is to require private mortgage insurance on all real estate loans when the loan-to-value ratio of the property exceeds 80% of the lower of the appraised value or purchase price at origination. For non-owner occupied residential property purchases, the loan-to-value ratio may not exceed 75% of the lower of the appraised value or purchase price at origination.

ASB services real estate loans for investors (principal balance of $1.5 billion, $1.3 billion and $1.2 billion as of December 31, 2020, 2019 and 2018, respectively), which are not included in the accompanying balance sheets data. ASB reports fees earned for servicing such loans as income when the related mortgage loan payments are collected and charges loan servicing cost to expense as incurred.

As of December 31, 2020 and 2019, ASB had pledged loans with an amortized cost of approximately $3.0 billion and $2.9 billion, respectively, as collateral to secure advances from the FHLB.

As of December 31, 2020 and 2019, the aggregate amount of loans to directors and executive officers of ASB and its affiliates and any related interests (as defined in Federal Reserve Board (FRB) Regulation O) of such individuals, was $13.2 million and $24.1 million, respectively. As of December 31, 2020 and 2019, $10.0 million and $18.0 million of the loan balances, respectively, were to related interests of individuals who are directors of ASB. All such loans were made at ASB’s normal credit terms.

Allowance for credit losses.  As discussed in Note 1, ASB must maintain an allowance for credit losses that is adequate to absorb estimated probable credit losses associated with its loan portfolio.

The allowance for credit losses (balances and changes) and financing receivables by portfolio segment were as follows:

(in thousands)	Residential 1-4 family			Commercial real estate			Home equity line of credit			Residential land			Commercial construction			Residential construction			Commercial			Consumer			Total
December 31, 2020
Allowance for credit losses:
Beginning balance, prior to adoption of ASU No. 2016-13	$	2,380		$	15,053		$	6,922		$	449		$	2,097		$	3		$	10,245		$	16,206		$	53,355
Impact of adopting ASU No. 2016-13	2,150			208			(541)			(64)			289			14			922			16,463			19,441
Charge-offs	(7)			—			(77)			(351)			—			—			(5,819)			(19,900)			(26,154)
Recoveries	394			—			63			38			—			—			872			3,381			4,748
Net (charge-offs) recoveries	387			—			(14)			(313)			—			—			(4,947)			(16,519)			(21,406)
Provision	(317)			20,346			446			537			1,763			(6)			19,242			7,800			49,811
Ending balance	$	4,600		$	35,607		$	6,813		$	609		$	4,149		$	11		$	25,462		$	23,950		$	101,201
Average loans outstanding	$	2,148,848		$	861,096		$	1,060,444		$	13,799		$	93,740		$	10,703		$	935,663		$	215,994		$	5,340,287
Net charge-offs (recoveries) to average loans	(0.02)		%	—		%	—		%	2.27		%	—		%	—		%	0.53		%	7.65		%	0.40		%
December 31, 2019
Allowance for credit losses:
Beginning balance	$	1,976		$	14,505		$	6,371		$	479		$	2,790		$	4		$	9,225		$	16,769		$	52,119
Charge-offs	(26)			—			(144)			(4)			—			—			(6,811)			(21,677)			(28,662)
Recoveries	854			—			17			229			—			—			2,351			2,967			6,418
Net (charge-offs) recoveries	828			—			(127)			225			—			—			(4,460)			(18,710)			(22,244)
Provision	(424)			548			678			(255)			(693)			(1)			5,480			18,147			23,480
Ending balance	$	2,380		$	15,053		$	6,922		$	449		$	2,097		$	3		$	10,245		$	16,206		$	53,355
Average loans outstanding	$	2,164,759		$	781,531		$	1,043,479		$	14,065		$	81,937		$	10,513		$	620,206		$	270,340		$	4,986,830
Net charge-offs (recoveries) to average loans	(0.04)		%	—		%	0.01		%	(1.60		%)	—		%	—		%	0.72		%	6.92		%	0.45		%
Ending balance: individually evaluated for impairment	$	898		$	2		$	322		$	—		$	—		$	—		$	1,015		$	454		$	2,691
Ending balance: collectively evaluated for impairment	$	1,482		$	15,051		$	6,600		$	449		$	2,097		$	3		$	9,230		$	15,752		$	50,664
Financing Receivables:
Ending balance	$	2,178,135		$	824,830		$	1,092,125		$	14,704		$	70,605		$	11,670		$	670,674		$	257,921		$	5,120,664
Ending balance: individually evaluated for impairment	$	15,600		$	1,048		$	12,073		$	3,091		$	—		$	—		$	8,418		$	507		$	40,737
Ending balance: collectively evaluated for impairment	$	2,162,535		$	823,782		$	1,080,052		$	11,613		$	70,605		$	11,670		$	662,256		$	257,414		$	5,079,927
December 31, 2018
Allowance for credit losses:
Beginning balance	$	2,902		$	15,796		$	7,522		$	896		$	4,671		$	12		$	10,851		$	10,987		$	53,637
Charge-offs	(128)			—			(353)			(18)			—			—			(2,722)			(17,296)			(20,517)
Recoveries	74			—			257			179			—			—			2,136			1,608			4,254
Net (charge-offs) recoveries	(54)			—			(96)			161			—			—			(586)			(15,688)			(16,263)
Provision	(872)			(1,291)			(1,055)			(578)			(1,881)			(8)			(1,040)			21,470			14,745
Ending balance	$	1,976		$	14,505		$	6,371		$	479		$	2,790		$	4		$	9,225		$	16,769		$	52,119
Average loans outstanding	$	2,105,674		$	745,186		$	944,065		$	14,935		$	114,969		$	14,959		$	579,133		$	240,414		$	4,759,335
Net charge-offs (recoveries) to average loans	—		%	—		%	0.01		%	(1.08		%)	—		%	—		%	0.10		%	6.53		%	0.34		%
Ending balance: individually evaluated for impairment	$	876		$	7		$	701		$	6		$	—		$	—		$	628		$	4		$	2,222
Ending balance: collectively evaluated for impairment	$	1,100		$	14,498		$	5,670		$	473		$	2,790		$	4		$	8,597		$	16,765		$	49,897
Financing Receivables:
Ending balance	$	2,143,397		$	748,398		$	978,237		$	13,138		$	92,264		$	14,307		$	587,891		$	266,002		$	4,843,634
Ending balance: individually evaluated for impairment	$	16,494		$	915		$	14,800		$	2,059		$	—		$	—		$	5,340		$	89		$	39,697
Ending balance: collectively evaluated for impairment	$	2,126,903		$	747,483		$	963,437		$	11,079		$	92,264		$	14,307		$	582,551		$	265,913		$	4,803,937

Allowance for loan commitments.  The allowance for loan commitments by portfolio segment were as follows:

(in thousands)	Home equity  line of credit		Commercial construction		Commercial loans		Total
Year ended December 31, 2020
Allowance for loan commitments:
Beginning balance, prior to adoption of ASU No. 2016-13	$	392	$	931	$	418	$	1,741
Impact of adopting ASU No. 2016-13	(92)		1,745		(94)		1,559
Provision	—		324		676		1,000
Ending balance	$	300	$	3,000	$	1,000	$	4,300

Credit quality.  ASB performs an internal loan review and grading on an ongoing basis. The review provides management with periodic information as to the quality of the loan portfolio and effectiveness of its lending policies and procedures. The objectives of the loan review and grading procedures are to identify, in a timely manner, existing or emerging credit trends so that appropriate steps can be initiated to manage risk and avoid or minimize future losses. Loans subject to grading include commercial, commercial real estate and commercial construction loans.

Each commercial and commercial real estate loan is assigned an Asset Quality Rating (AQR) reflecting the likelihood of repayment or orderly liquidation of that loan transaction pursuant to regulatory credit classifications:  Pass, Special Mention, Substandard, Doubtful, and Loss. The AQR is a function of the probability of default model rating, the loss given default, and possible non-model factors which impact the ultimate collectability of the loan such as character of the business owner/guarantor, interim period performance, litigation, tax liens and major changes in business and economic conditions. Pass exposures generally are well protected by the current net worth and paying capacity of the obligor or by the value of the asset or underlying collateral. Special Mention loans have potential weaknesses that, if left uncorrected, could jeopardize the liquidation of the debt. Substandard loans have well-defined weaknesses that jeopardize the liquidation of the debt and are characterized by the distinct possibility that ASB may sustain some loss. An asset classified Doubtful has the weaknesses of those classified Substandard, with the added characteristic that the weaknesses make collection or liquidation in full, on the basis of currently existing facts, conditions, and values, highly questionable and improbable. An asset classified Loss is considered uncollectible and has such little value that its continuance as a bankable asset is not warranted.

The credit risk profile by vintage date based on payment activity or internally assigned grade for loans was as follows:

	Term Loans by Origination Year												Revolving Loans
(in thousands)	2020		2019		2018		2017		2016		Prior		Revolving loans		Converted to term loans		Total
December 31, 2020
Residential 1-4 family
Current	$	567,282	$	218,988	$	111,243	$	203,916	$	184,888	$	849,788	$	—	$	—	$	2,136,105
30-59 days past due	—		—		—		—		—		2,629		—		—		2,629
60-89 days past due	—		476		—		—		—		2,314		—		—		2,790
Greater than 89 days past due	—		—		—		353		—		2,362		—		—		2,715
	567,282		219,464		111,243		204,269		184,888		857,093		—		—		2,144,239
Home equity line of credit
Current	—		—		—		—		—		—		927,106		33,228		960,334
30-59 days past due	—		—		—		—		—		—		552		298		850
60-89 days past due	—		—		—		—		—		—		267		75		342
Greater than 89 days past due	—		—		—		—		—		—		1,463		589		2,052
	—		—		—		—		—		—		929,388		34,190		963,578
Residential land
Current	8,357		3,427		1,598		939		22		272		—		—		14,615
30-59 days past due	—		—		—		—		—		702		—		—		702
60-89 days past due	—		—		—		—		—		—		—		—		—
Greater than 89 days past due	—		—		—		—		—		300		—		—		300
	8,357		3,427		1,598		939		22		1,274		—		—		15,617
Residential construction
Current	6,919		3,093		385		625		—		—		—		—		11,022
30-59 days past due	—		—		—		—		—		—		—		—		—
60-89 days past due	—		—		—		—		—		—		—		—		—
Greater than 89 days past due	—		—		—		—		—		—		—		—		—
	6,919		3,093		385		625		—		—		—		—		11,022
Consumer
Current	28,818		67,159		37,072		7,207		293		348		18,351		3,758		163,006
30-59 days past due	406		1,085		727		155		4		—		138		90		2,605
60-89 days past due	191		549		427		165		3		—		97		59		1,491
Greater than 89 days past due	131		532		409		119		7		—		262		171		1,631
	29,546		69,325		38,635		7,646		307		348		18,848		4,078		168,733
Commercial real estate
Pass	270,603		63,301		62,168		28,432		55,089		155,654		11,000		—		646,247
Special Mention	10,261		36,405		57,952		33,763		68,287		48,094		—		—		254,762
Substandard	—		14,720		4,181		1,892		4,423		57,640		—		—		82,856
Doubtful	—		—		—		—		—		—		—		—		—
	280,864		114,426		124,301		64,087		127,799		261,388		11,000		—		983,865
Commercial construction
Pass	14,480		31,965		26,990		—		5,562		—		22,517		—		101,514
Special Mention	1,910		—		—		18,000		—		—		—		—		19,910
Substandard	—		—		—		—		—		—		—		—		—
Doubtful	—		—		—		—		—		—		—		—		—
	16,390		31,965		26,990		18,000		5,562		—		22,517		—		121,424
Commercial
Pass	392,088		117,791		75,533		29,211		12,520		35,770		74,520		11,004		748,437
Special Mention	37,836		23,087		1,920		6,990		30,264		13,250		31,362		11,218		155,927
Substandard	304		7,785		2,043		4,017		7,542		3,113		5,265		1,928		31,997
Doubtful	—		—		—		—		—		—		387		—		387
	430,228		148,663		79,496		40,218		50,326		52,133		111,534		24,150		936,748
Total loans	$	1,339,586	$	590,363	$	382,648	$	335,784	$	368,904	$	1,172,236	$	1,093,287	$	62,418	$	5,345,226

Revolving loans converted to term loans during 2020 in the commercial, home equity line of credit and consumer portfolios were $14.4 million, $11.3 million and $2.8 million, respectively.

The credit risk profile based on payment activity for loans was as follows:

(in thousands)	30-59 days past due		60-89 days past due		Greater than 90 days		Total past due		Current		Total financing receivables		Recorded investment> 90 days and accruing
December 31, 2020
Real estate:
Residential 1-4 family	$	2,629	$	2,790	$	2,715	$	8,134	$	2,136,105	$	2,144,239	$	—
Commercial real estate	—		488		—		488		983,377		983,865		—
Home equity line of credit	850		342		2,052		3,244		960,334		963,578		—
Residential land	702		—		300		1,002		14,615		15,617		—
Commercial construction	—		—		—		—		121,424		121,424		—
Residential construction	—		—		—		—		11,022		11,022		—
Commercial	608		300		132		1,040		935,708		936,748		—
Consumer	2,605		1,491		1,631		5,727		163,006		168,733		—
Total loans	$	7,394	$	5,411	$	6,830	$	19,635	$	5,325,591	$	5,345,226	$	—
December 31, 2019
Real estate:
Residential 1-4 family	$	2,588	$	290	$	1,808	$	4,686	$	2,173,449	$	2,178,135	$	—
Commercial real estate	—		—		—		—		824,830		824,830		—
Home equity line of credit	813		—		2,117		2,930		1,089,195		1,092,125		—
Residential land	—		—		25		25		14,679		14,704		—
Commercial construction	—		—		—		—		70,605		70,605		—
Residential construction	—		—		—		—		11,670		11,670		—
Commercial	1,077		311		172		1,560		669,114		670,674		—
Consumer	4,386		3,257		2,907		10,550		247,371		257,921		—
Total loans	$	8,864	$	3,858	$	7,029	$	19,751	$	5,100,913	$	5,120,664	$	—

The credit risk profile based on nonaccrual loans were as follows:

	December 31, 2020						December 31, 2019
(in thousands)	With a Related ACL		Without a Related ACL		Total		Total
Real estate:
Residential 1-4 family	$	8,991	$	2,835	$	11,826	$	11,395
Commercial real estate	15,847		2,875		18,722		195
Home equity line of credit	5,791		1,567		7,358		6,638
Residential land	108		300		408		448
Commercial construction	—		—		—		—
Residential construction	—		—		—		—
Commercial	1,819		3,328		5,147		5,947
Consumer	3,935		—		3,935		5,113
Total	$	36,491	$	10,905	$	47,396	$	29,736

The credit risk profile based on loans whose terms have been modified and accruing interest were as follows:

(in thousands)	December 31, 2020		December 31, 2019
Real estate:
Residential 1-4 family	$	7,932	$	9,869
Commercial real estate	3,281		853
Home equity line of credit	8,148		10,376
Residential land	1,555		2,644
Commercial construction	—		—
Residential construction	—		—
Commercial	6,108		2,614
Consumer	54		57
Total troubled debt restructured loans accruing interest	$	27,078	$	26,413

ASB did not recognize interest on nonaccrual loans for 2020 and 2019.

Troubled debt restructurings.  A loan modification is deemed to be a TDR when the borrower is determined to be experiencing financial difficulties and ASB grants a concession it would not otherwise consider. When a borrower experiencing financial difficulty fails to make a required payment on a loan or is in imminent default, ASB takes a number of steps to improve the collectability of the loan and maximize the likelihood of full repayment. At times, ASB may modify or restructure a loan to help a distressed borrower improve its financial position to eventually be able to fully repay the loan, provided the borrower has demonstrated both the willingness and the ability to fulfill the modified terms. TDR loans are considered an alternative to foreclosure or liquidation with the goal of minimizing losses to ASB and maximizing recovery.

ASB may consider various types of concessions in granting a TDR including maturity date extensions, extended amortization of principal, temporary deferral of principal payments, and temporary interest rate reductions. ASB rarely grants principal forgiveness in its TDR modifications. Residential loan modifications generally involve interest rate reduction, extending the amortization period, or capitalizing certain delinquent amounts owed not to exceed the original loan balance. Land loans at origination are typically structured as a three-year term, interest-only monthly payment with a balloon payment due at maturity. Land loan TDR modifications typically involve extending the maturity date up to three years and converting the payments from interest-only to principal and interest monthly, at the same or higher interest rate. Commercial loan modifications generally involve extensions of maturity dates, extending the interest only or amortization period, and temporary deferral or reduction of principal payments. ASB generally does not reduce the interest rate on commercial loan TDR modifications. Occasionally, additional collateral and/or guaranties are obtained.

The allowance for credit losses on TDR loans that do not share risk characteristics are individually evaluated based on the present value of expected future cash flows discounted at the loan’s effective original contractual rate or based on the fair value of collateral less cost to sell. The financial impact of the estimated loss is an increase to the allowance associated with the modified loan. When available information confirms that specific loans or portions thereof are uncollectible (confirmed losses), these amounts are charged off against the allowance for credit losses.

Loan modifications that occurred during 2020, 2019, and 2018 were as follows:

Years ended	December 31, 2020					December 31, 2019
(dollars in thousands)	Number of contracts	Outstanding  recorded  investment  (as of period end)1		Related allowance (as of period end)		Number of contracts	Outstanding  recorded  investment  (as of period end)1		Related allowance (as of period end)
Real estate:
Residential 1-4 family	1	$	144	$	6	11	$	1,770	$	190
Commercial real estate	6	20,714		4,439		—	—		—
Home equity line of credit	3	85		11		3	442		73
Residential land	4	668		54		3	1,086		—
Commercial construction	—	—		—		—	—		—
Residential construction	—	—		—		—	—		—
Commercial	54	5,380		869		8	5,523		417
Consumer	—	—		—		—	—		—
	68	$	26,991	$	5,379	25	$	8,821	$	680
Year ended	December 31, 2018
(dollars in thousands)	Number of contracts	Outstanding  recorded  investment  (as of period end)1		Related allowance (as of period end)
Real estate:
Residential 1-4 family	3	$	566	$	26
Commercial real estate	—	—		—
Home equity line of credit	53	6,659		578
Residential land	2	1,338		—
Commercial construction	—	—		—
Residential construction	—	—		—
Commercial	12	2,165		211
Consumer	—	—		—
	70	$	10,728	$	815

1     The period end balances reflect all paydowns and charge-offs since the modification period. TDRs fully paid off, charged-off, or foreclosed upon by period end are not included.

Loans modified in TDRs that experienced a payment default of 90 days or more in 2020, 2019, and 2018 and for which the payment default occurred within one year of the modification, were as follows:

Years ended December 31	2020			2019			2018
(dollars in thousands)	Number of  contracts	Recorded investment		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	246
Consumer	—	—		—	—		—	—
	—	$	—	—	$	—	2	$	327

If a loan modified in a TDR subsequently defaults, ASB evaluates the loan for further impairment. Based on its evaluation, adjustments may be made in the allocation of the allowance or partial charge-offs may be taken to further write-down the carrying value of the loan. Commitments to lend additional funds to borrowers whose loan terms have been modified in a TDR totaled nil at December 31, 2020 and 2019.

The Coronavirus Aid, Relief, and Economic Security Act (CARES Act) provides that a financial institution may elect to suspend the requirements under GAAP for certain loan modifications that would otherwise be categorized as a TDR and any related impairment for accounting purposes.

In response to the COVID-19 pandemic, the Board of Governors of the FRB, the FDIC, the National Credit Union Administration, the OCC, and the Consumer Financial Protection Bureau, in consultation with the state financial regulators (collectively, the “agencies”) issued a joint interagency statement (issued March 22, 2020; revised statement issued April 7, 2020). Some of the provisions applicable to the Company include, but are not limited to accounting for loan modifications, past due reporting and nonaccrual status and charge-offs.

Loan modifications that do not meet the conditions of the CARES Act may still qualify as a modification that does not need to be accounted for as a TDR. The agencies confirmed with the FASB staff that short-term modifications made on a good faith basis in response to COVID-19 to borrowers who were current prior to any relief are not TDRs. This includes short-term (e.g., six months) modifications such as payment deferrals, fee waivers, extensions of repayment terms, or insignificant delays in payment. Financial institutions are not expected to designate loans with deferrals granted due to COVID-19 as past due because of the deferral. A loan’s payment date is governed by the due date stipulated in the legal agreement. If a financial institution agrees to a payment deferral, these loans would not be considered past due during the period of the deferral. Lastly, during short-term COVID-19 modifications, these loans generally should not be reported as nonaccrual or as classified.

Collateral-dependent loans. A loan is considered collateral-dependent when the borrower is experiencing financial difficulty and repayment of the loan is expected to be provided substantially through the operation or sale of the collateral.

Loans considered collateral-dependent were as follows:

December 31, 2020	Amortized cost		Collateral type
(in thousands)
Real estate:
Residential 1-4 family	$	2,541	Residential real estate property
Commercial real estate	2,875		Commercial real estate property
Home equity line of credit	1,567		Residential real estate property
Residential land	300		Residential real estate property
Total real estate	7,283
Commercial	934		Business assets
Total	$	8,217

ASB had $3.8 million and $3.5 million of consumer mortgage loans collateralized by residential real estate property that were in the process of foreclosure at December 31, 2020 and 2019, respectively. The credit risk profile by internally assigned grade for loans was as follows:

December 31, 2019
(in thousands)	Commercial real estate		Commercial construction		Commercial		Total
Grade:
Pass	$	756,747	$	68,316	$	621,657	$	1,446,720
Special mention	4,451		—		29,921		34,372
Substandard	63,632		2,289		19,096		85,017
Doubtful	—		—		—		—
Loss	—		—		—		—
Total	$	824,830	$	70,605	$	670,674	$	1,566,109

The total carrying amount and the total unpaid principal balance of impaired loans and ASB’s average recorded investment of, and interest income recognized from, impaired loans were as follows:

December 31	2019						2019				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	$	6,817	$	7,207	$	—	$	8,169	$	907	$	8,595	$	445
Commercial real estate	195		200		—		16		—		—		—
Home equity line of credit	1,984		2,135		—		2,020		84		2,206		75
Residential land	3,091		3,294		—		2,662		129		1,532		40
Commercial construction	—		—		—		—		—		—		—
Residential construction	—		—		—		—		—		—		—
Commercial	1,948		2,285		—		4,534		276		3,275		28
Consumer	2		2		—		21		4		22		—
	14,037		15,123		—		17,422		1,400		15,630		588
With an allowance recorded
Real estate:
Residential 1-4 family	8,783		8,835		898		8,390		359		8,878		363
Commercial real estate	853		853		2		886		37		982		42
Home equity line of credit	10,089		10,099		322		11,319		567		10,617		440
Residential land	—		—		—		27		—		37		3
Commercial construction	—		—		—		—		—		—		—
Residential construction	—		—		—		—		—		—		—
Commercial	6,470		6,470		1,015		6,990		132		1,789		122
Consumer	505		505		454		360		24		57		4
	26,700		26,762		2,691		27,972		1,119		22,360		974
Total
Real estate:
Residential 1-4 family	15,600		16,042		898		16,559		1,266		17,473		808
Commercial real estate	1,048		1,053		2		902		37		982		42
Home equity line of credit	12,073		12,234		322		13,339		651		12,823		515
Residential land	3,091		3,294		—		2,689		129		1,569		43
Commercial construction	—		—		—		—		—		—		—
Residential construction	—		—		—		—		—		—		—
Commercial	8,418		8,755		1,015		11,524		408		5,064		150
Consumer	507		507		454		381		28		79		4
	$	40,737	$	41,885	$	2,691	$	45,394	$	2,519	$	37,990	$	1,562

* Since loan was classified as impaired.

Mortgage servicing rights (MSRs). In its mortgage banking business, ASB sells residential mortgage loans to government-sponsored entities and other parties, who may issue securities backed by pools of such loans. ASB retains no beneficial interests in these loans other than the servicing rights of certain loans sold.

ASB received $567.7 million, $277.1 million and $112.2 million of proceeds from the sale of residential mortgages in 2020, 2019, and 2018, respectively, and recognized gains on such sales of $23.7 million, $4.9 million, and $1.5 million in 2020, 2019, and 2018, respectively. Repurchased mortgage loans were nil for 2020, 2019 and 2018. The repurchase reserve was $0.1 million as of December 31, 2020 and 2019.

Mortgage servicing fees, a component of other income, net, were $3.4 million, $3.0 million and $3.0 million for the years ended December 31, 2020, 2019, and 2018, respectively.

Changes in the carrying value of MSRs were as follows:

(in thousands)	Gross carrying amount1		Accumulated amortization1		Valuation allowance		Net carrying amount
December 31, 2020	$	22,950	$	(12,670)	$	(260)	$	10,020
December 31, 2019	$	21,543	$	(12,442)	$	—	$	9,101

1 Reflects impact of loans paid in full.

Changes related to MSRs were as follows:

(in thousands)	2020		2019		2018
Mortgage servicing rights
Balance, January 1	$	9,101	$	8,062	$	8,639
Amount capitalized	5,096		2,987		1,045
Amortization	(3,917)		(1,948)		(1,622)
Sale of mortgage servicing rights	—		—		—
Other-than-temporary impairment	—		—		—
Carrying amount before valuation allowance, December 31	10,280		9,101		8,062
Valuation allowance for mortgage servicing rights
Balance, January 1	—		—		—
Provision	260		—		—
Other-than-temporary impairment	—		—		—
Balance, December 31	260		—		—
Net carrying value of mortgage servicing rights	$	10,020	$	9,101	$	8,062

The estimated aggregate amortization expenses of MSRs for 2021, 2022, 2023, 2024 and 2025 are $2.1 million, $1.7 million, $1.3 million, $1.0 million and $0.8 million, respectively.

ASB capitalizes MSRs acquired upon the sale of mortgage loans with servicing rights retained. On a monthly basis, ASB compares the net carrying value of the MSRs to its fair value to determine if there are any changes to the valuation allowance and/or other-than-temporary impairment for the MSRs.

ASB uses a present value cash flow model to estimate the fair value of MSRs. Impairment is recognized through a valuation allowance for each stratum when the carrying amount exceeds fair value, with any associated provision recorded as a component of loan servicing fees included in “Revenues - bank” in the consolidated statements of income. A direct write-down is recorded when the recoverability of the valuation allowance is deemed to be unrecoverable.

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

December 31	2020			2019
(dollars in thousands)
Unpaid principal balance	$	1,450,312		$	1,276,437
Weighted average note rate	3.68		%	3.96		%
Weighted average discount rate	9.25		%	9.25		%
Weighted average prepayment speed	17.7		%	11.4		%

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:

December 31	2020		2019
(in thousands)
Prepayment rate:
25 basis points adverse rate change	$	(738)	$	(950)
50 basis points adverse rate change	(1,445)		(1,947)
Discount rate:
25 basis points adverse rate change	(68)		(102)
50 basis points adverse rate change	(135)		(202)

The effect of a variation in certain assumptions on fair value is calculated without changing any other assumptions. This analysis typically cannot be extrapolated because the relationship of a change in one key assumption to the changes in the fair value of MSRs typically is not linear.

Deposit liabilities. The summarized components of deposit liabilities were as follows:

December 31	2020				2019
(dollars in thousands)	Weighted-average stated rate		Amount		Weighted-average stated rate		Amount
Savings	0.03	%	$	2,873,727	0.09	%	$	2,379,522
Checking
Interest-bearing	0.02		1,196,675		0.09		1,062,122
Noninterest-bearing	—		1,329,264		—		977,459
Commercial checking	—		1,269,236		—		932,223
Money market	0.09		169,225		0.69		150,751
Time certificates	0.99		548,830		1.42		769,825
	0.09	%	$	7,386,957	0.24	%	$	6,271,902

As of December 31, 2020 and 2019, time certificates of $250,000 or more totaled $121.3 million and $302.0 million, respectively.

The approximate scheduled maturities of time certificates outstanding at December 31, 2020 were as follows:

(in thousands)
2021	$	348,420
2022	88,675
2023	50,146
2024	33,944
2025	25,225
Thereafter	2,420
	$	548,830

Overdrawn deposit accounts are classified as loans and totaled $1.0 million and $2.4 million at December 31, 2020 and 2019, respectively.

Interest expense on deposit liabilities by type of deposit was as follows:

Years ended December 31	2020		2019		2018
(in thousands)
Time certificates	$	7,944	$	12,675	$	11,044
Savings	1,774		1,904		1,639
Money market	465		953		602
Interest-bearing checking	471		1,298		706
	$	10,654	$	16,830	$	13,991

Other borrowings.

Securities sold under agreements to repurchase.  Securities sold under agreements to repurchase are accounted for as financing transactions and the obligations to repurchase these securities are recorded as liabilities in the consolidated balance sheets. ASB pledges investment securities as collateral for securities sold under agreements to repurchase. All such agreements are subject to master netting arrangements, which provide for conditional right of set-off in case of default by either party; however, ASB presents securities sold under agreements to repurchase on a gross basis in the balance sheet. 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 Sheets		Net amount of  liabilities presented in the Balance Sheets
Repurchase agreements
December 31, 2020	$	90	$	—	$	90
December 31, 2019	115		—		115

	Gross amount not offset in the Balance Sheets
(in millions)	Net amount of  liabilities presented in the Balance Sheets		Financial instruments		Cash collateral pledged
Commercial account holders
December 31, 2020	$	90	$	92	$	—
December 31, 2019	115		130		—

The securities underlying the agreements to repurchase are book-entry securities and were delivered by appropriate entry into the counterparties’ accounts or into segregated tri-party custodial accounts at the FHLB. The securities underlying the agreements to repurchase continue to be reflected in ASB’s asset accounts. The counterparties or tri-parties may determine that additional collateral is required based on movements in the fair value of the collateral. Typically, a five percent discount is taken from the fair value of the investment securities to determine the value of the collateral pledged for the repurchase agreements.

Information concerning securities sold under agreements to repurchase, which provided for the repurchase of identical securities, was as follows:

(dollars in thousands)	2020			2019			2018
Amount outstanding as of December 31	$	89,670		$	115,110		$	65,040
Average amount outstanding during the year	73,738			79,598			99,162
Maximum amount outstanding as of any month-end	100,580			115,110			152,255
Weighted-average interest rate as of December 31	0.02		%	0.98		%	0.75		%
Weighted-average interest rate during the year	0.42		%	0.96		%	0.71		%
Weighted-average remaining days to maturity as of December 31	1			1			1

Securities sold under agreements to repurchase were summarized as follows:

December 31	2020						2019
Maturity	Repurchase liability		Weighted-average interest rate		Collateralized by mortgage-backed securities and federal agency obligations at fair value plus accrued interest		Repurchase liability		Weighted-average interest rate		Collateralized by mortgage-backed securities and federal agency obligations at fair value plus accrued interest
(dollars in thousands)
Overnight	$	89,670	0.02	%	$	92,478	$	115,110	0.98	%	$	129,527
1 to 29 days	—		—	%	—		—		—	%	—
30 to 90 days	—		—	%	—		—		—	%	—
Over 90 days	—		—	%	—		—		—	%	—
	$	89,670	0.02	%	$	92,478	$	115,110	0.98	%	$	129,527

Advances from Federal Home Loan Bank. FHLB advances were nil as of December 31, 2020 and 2019. ASB and the FHLB are parties to an Advances, Pledge and Security Agreement (Advances Agreement), which applies to currently outstanding and future advances, and governs the terms and conditions under which ASB borrows and the FHLB makes loans or advances from time to time. Under the Advances Agreement, ASB agrees to abide by the FHLB’s credit policies, and makes certain warranties and representations to the FHLB. Upon the occurrence of and during the continuation of an “Event of Default” (which term includes any event of nonpayment of interest or principal of any advance when due or failure to perform any promise or obligation under the Advances Agreement or other credit arrangements between the parties), the FHLB may, at its option, declare all indebtedness and accrued interest thereon, including any prepayment fees or charges, to be immediately due and payable. Advances from the FHLB are collateralized by loans and stock in the FHLB. As of December 31, 2020 and 2019, ASB’s available FHLB borrowing capacity was $2.1 billion, and $2.3 billion, respectively. In February 2020, the FHLB of Des Moines notified its members that certain assets, which included high-quality home equity lines of credit that were priced off a variable index with a fixed rate option, would no longer qualify as collateral for FHLB Advances and effective October 1, 2020, the FHLB of Des Moines no longer accepted the fixed rate portion of any home equity lines of credit as collateral. In addition, effective July 13, 2020, the FHLB of Des Moines lowered their Loan to Value (LTV), a system-wide percentage applied to eligible pledged collateral to determine borrowing capacity, to reflect ongoing risks in the market due to COVID-19. The lower LTV reduced ASB’s collateral value of the existing pledged loans and the borrowing capacity. To increase the borrowing capacity at the FHLB of Des Moines, ASB pledged commercial real estate loans and is evaluating other assets to pledge as collateral to increase its reserve borrowing capacity with the FHLB.

ASB is required to obtain and hold a specific number of shares of capital stock of the FHLB. ASB was in compliance with all Advances Agreement requirements as of December 31, 2020 and 2019.

Common stock equity.  ASB is regulated and supervised by the OCC. Failure to meet minimum capital requirements can initiate certain mandatory and possibly additional discretionary actions by regulators that, if undertaken, could have a direct material effect on ASB’s financial statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, ASB must meet specific capital guidelines that involve quantitative measures of ASB’s assets, liabilities, and certain off-balance sheet items as calculated under regulatory accounting practices. The capital amounts and classification are also subject to qualitative judgments by the regulators about components, risk weightings, and other factors.

The prompt corrective action provisions impose certain restrictions on institutions that are undercapitalized. The restrictions imposed become increasingly more severe as an institution’s capital category declines from “undercapitalized” to “critically undercapitalized.” The regulators have substantial discretion in the corrective actions that might direct and could include restrictions on dividends and other distributions that ASB may make to ASB Hawaii and the requirement that ASB develop and implement a plan to restore its capital. In 1988, HEI agreed with the OTS predecessor regulatory agency at the time, to contribute additional capital to ASB up to a maximum aggregate amount of approximately $65.1 million (Capital Maintenance Agreement). As of December 31, 2020, as a result of capital contributions in prior years, HEI’s maximum obligation to contribute additional capital under the Capital Maintenance Agreement has been reduced to approximately $28.3 million.

To be categorized as “well capitalized,” ASB must maintain minimum total capital, Tier 1 capital, and Tier 1 leverage ratios as set forth in the table below. Beginning in the second quarter of 2020, ASB had adopted the community bank leverage ratio framework and was only required to comply with Tier 1 leverage ratio. As of December 31, 2020, and 2019 ASB was in compliance with the minimum capital requirements under OCC regulations, and was categorized as “well capitalized” under the regulatory framework for prompt corrective action. There are no conditions or events that management believes have changed the institution’s category under the capital guidelines.

The tables below set forth actual and minimum required capital amounts and ratios:

	Actual				Minimum required				Required to be well capitalized
(dollars in thousands)	Capital		Ratio		Capital		Ratio		Capital		Ratio
December 31, 2020
Tier 1 leverage	$	677,786	8.38	%	$	323,700	4.00	%	$	404,625	5.00	%
December 31, 2019
Tier 1 leverage	641,547		9.06	%	283,122		4.00	%	353,903		5.00	%
Common equity tier 1	641,547		13.18	%	219,071		4.50	%	316,435		6.50	%
Tier 1 capital	641,547		13.18	%	292,094		6.00	%	389,459		8.00	%
Total capital	696,643		14.31	%	389,459		8.00	%	486,823		10.00	%

In 2020, ASB paid cash dividends of $31.0 million to HEI, compared to cash dividends of $56.0 million in 2019. The FRB and OCC approved the dividends.

Related-party transactions. HEI charged ASB $2.3 million, $2.3 million and $2.2 million for general management and administrative services in 2020, 2019 and 2018, respectively. The amounts charged by HEI for services performed by HEI employees to its subsidiaries are allocated primarily on the basis of time expended in providing such services. All amounts charged to ASB were settled as a capital contribution by HEI to ASB.

Derivative financial instruments. ASB enters into interest rate lock commitments (IRLCs) with borrowers, and forward commitments to sell loans or to-be-announced mortgage-backed securities to investors to hedge against the inherent interest rate and pricing risks associated with selling loans.

ASB enters into IRLCs for residential mortgage loans, which commit ASB to lend funds to a potential borrower at a specific interest rate and within a specified period of time. IRLCs that relate to the origination of mortgage loans that will be held for sale are considered derivative financial instruments under applicable accounting guidance. Outstanding IRLCs expose ASB to the risk that the price of the mortgage loans underlying the commitments may decline due to increases in mortgage interest rates from inception of the rate lock to the funding of the loan. The IRLCs are free-standing derivatives which are carried at fair value with changes recorded in mortgage banking income.

ASB enters into forward commitments to hedge the interest rate risk for rate locked mortgage applications in process and closed mortgage loans held for sale. These commitments are primarily forward sales of to-be-announced mortgage backed securities. Generally, when mortgage loans are closed, the forward commitment is liquidated and replaced with a mandatory delivery forward sale of the mortgage to a secondary market investor. In some cases, a best-efforts forward sale agreement is utilized as the forward commitment. These commitments are free-standing derivatives which are carried at fair value with changes recorded in mortgage banking income.

Changes in the fair value of IRLCs and forward commitments subsequent to inception are based on changes in the fair value of the underlying loan resulting from the fulfillment of the commitment and changes in the probability that the loan will fund within the terms of the commitment, which is affected primarily by changes in interest rates and the passage of time.

The notional amount and fair value of ASB’s derivative financial instruments were as follows:

December 31	2020				2019
(in thousands)	Notional amount		Fair value		Notional amount		Fair value
Interest rate lock commitments	$	120,980	$	4,536	$	23,171	$	297
Forward commitments	100,500		(500)		29,383		(42)

ASB’s derivative financial instruments, their fair values, and balance sheet location were as follows:

Derivative Financial Instruments Not Designated
as Hedging Instruments 1
December 31	2020				2019
(in thousands)	Asset derivatives		Liability derivatives		Asset derivatives		Liability derivatives
Interest rate lock commitments	$	4,536	$	—	$	297	$	—
Forward commitments	—		500		3		45
	$	4,536	$	500	$	300	$	45

1 Asset derivatives are included in other assets and liability derivatives are included in other liabilities in the balance sheets.

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	Location of net gains
as Hedging Instruments	(losses) recognized in	Years ended December 31
(in thousands)	the Statements of Income	2020		2019		2018
Interest rate lock commitments	Mortgage banking income	$	4,239	$	206	$	(40)
Forward commitments	Mortgage banking income	(458)		1		(19)
		$	3,781	$	207	$	(59)

Commitments. Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established in the commitments. Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee. Since certain commitments are expected to expire without being drawn upon, the total commitment amounts do not necessarily represent future cash requirements. ASB minimizes its exposure to loss under these commitments by requiring that customers meet certain conditions prior to disbursing funds. The amount of collateral, if any, is based on a credit evaluation of the borrower and may include residential real estate, accounts receivable, inventory and property, plant and equipment.

Letters of credit are conditional commitments issued by ASB to guarantee payment and performance of a customer to a third party. The credit risk involved in issuing letters of credit is essentially the same as that involved in extending loan facilities to customers. ASB holds collateral supporting those commitments for which collateral is deemed necessary.

The following is a summary of outstanding off-balance sheet arrangements:

December 31	2020		2019
(in thousands)
Unfunded commitments to extend credit:
Home equity line of credit	$	1,248,773	$	1,290,854
Commercial and commercial real estate	574,281		484,806
Consumer	69,168		70,088
Residential 1-4 family	57,862		21,131
Commercial and financial standby letters of credit	13,718		11,912
Total	$	1,963,802	$	1,878,791

Federal Deposit Insurance Corporation assessment. The Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act) raised the minimum reserve ratio for the Deposit Insurance Fund to 1.35 percent but required the Federal Deposit Insurance Corporation (FDIC) to offset the effect of the increase in the minimum reserve ratio on small institutions (generally insured depository institutions with total consolidated assets of $10 billion or less) when setting assessments. In September 2018, the reserve ratio reached 1.36 percent and the FDIC awarded the small institutions an assessment credit, which was applied to a portion of the 2019 and 2020 assessments for these banks. For the years ended December 31, 2020, 2019 and 2018 ASB’s FDIC insurance expenses were $2.3 million, $1.2 million and $2.5 million, respectively.