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Bank segment (Tables)
 9 Months Ended
Sep. 30, 2019
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)
 
2019
 
2018
 
2019
 
2018
Interest and dividend income
 
 

 
 

 
 

 
 

Interest and fees on loans
 
$
59,260

 
$
55,885

 
$
175,740

 
$
163,318

Interest and dividends on investment securities
 
7,599

 
9,300

 
25,762

 
27,130

Total interest and dividend income
 
66,859

 
65,185

 
201,502

 
190,448

Interest expense
 
 

 
 

 
 

 
 

Interest on deposit liabilities
 
4,384

 
3,635

 
12,923

 
9,876

Interest on other borrowings
 
422

 
404

 
1,361

 
1,293

Total interest expense
 
4,806

 
4,039

 
14,284

 
11,169

Net interest income
 
62,053

 
61,146

 
187,218

 
179,279

Provision for loan losses
 
3,315

 
6,033

 
17,873

 
12,337

Net interest income after provision for loan losses
 
58,738

 
55,113

 
169,345

 
166,942

Noninterest income
 
 

 
 

 
 

 
 

Fees from other financial services
 
5,085

 
4,543

 
14,445

 
13,941

Fee income on deposit liabilities
 
5,320

 
5,454

 
15,402

 
15,781

Fee income on other financial products
 
1,706

 
1,746

 
5,129

 
5,075

Bank-owned life insurance
 
1,660

 
2,663

 
6,309

 
4,667

Mortgage banking income
 
1,490

 
169

 
3,080

 
1,399

Gains on sale of investment securities, net
 
653

 
—

 
653

 
—

Other income, net
 
428

 
736

 
1,420

 
1,708

Total noninterest income
 
16,342

 
15,311

 
46,438

 
42,571

Noninterest expense
 
 

 
 

 
 

 
 

Compensation and employee benefits
 
25,364

 
23,952

 
76,626

 
72,047

Occupancy
 
5,694

 
4,363

 
15,843

 
12,837

Data processing
 
3,763

 
3,583

 
11,353

 
10,587

Services
 
2,829

 
2,485

 
7,861

 
8,560

Equipment
 
2,163

 
1,783

 
6,416

 
5,385

Office supplies, printing and postage
 
1,297

 
1,556

 
4,320

 
4,554

Marketing
 
1,142

 
993

 
3,455

 
2,723

FDIC insurance
 
(5
)
 
638

 
1,249

 
2,078

Other expense
 
3,676

 
4,240

 
12,049

 
12,897

Total noninterest expense
 
45,923

 
43,593

 
139,172

 
131,668

Income before income taxes
 
29,157

 
26,831

 
76,611

 
77,845

Income taxes
 
6,269

 
5,610

 
15,868

 
17,103

Net income
 
$
22,888

 
$
21,221

 
$
60,743

 
$
60,742




Reconciliation to amounts per HEI Condensed Consolidated Statements of Income*:
 
 
Three months ended September 30,
 
Nine months ended September 30
(in thousands)
 
2019
 
2018
 
2019
 
2018
Interest and dividend income
 
66,859

 
65,185

 
$
201,502

 
$
190,448

Noninterest income
 
16,342

 
15,311

 
46,438

 
42,571

*Revenues-Bank
 
83,201

 
80,496

 
247,940

 
233,019

Total interest expense
 
4,806

 
4,039

 
14,284

 
11,169

Provision for loan losses
 
3,315

 
6,033

 
17,873

 
12,337

Noninterest expense
 
45,923

 
43,593

 
139,172

 
131,668

Less: Retirement defined benefits gain (expense)—other than service costs
 
196

 
(433
)
 
276

 
(1,223
)
*Expenses-Bank
 
54,240

 
53,232

 
171,605

 
153,951

*Operating income-Bank
 
28,961

 
27,264

 
76,335

 
79,068

Add back: Retirement defined benefits (gain) expense—other than service costs
 
(196
)
 
433

 
(276
)
 
1,223

Income before income taxes
 
$
29,157

 
$
26,831

 
$
76,611

 
$
77,845
Schedule of statements of comprehensive income data
Statements of Comprehensive Income Data
 
 
Three months ended September 30,
 
Nine months ended September 30
(in thousands)
 
2019
 
2018
 
2019
 
2018
Net income
 
$
22,888

 
$
21,221

 
$
60,743

 
$
60,742

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 (taxes) benefits of $(1,557), $1,876, $(10,194) and $8,335, respectively
 
4,253

 
(5,123
)
 
27,846

 
(22,768
)
Reclassification adjustment for net realized gains included in net income, net of taxes of $175, nil, $175, and nil, respectively
 
(478
)
 
—

 
(478
)
 
—

Retirement benefit plans:
 
 

 
 

 
 

 
 

Adjustment for amortization of prior service credit and net losses recognized during the period in net periodic benefit cost, net of (taxes) benefits of $13, $141, $(1,109) and $968, respectively
 
34

 
382

 
(3,032
)
 
1,970

Other comprehensive income (loss), net of taxes
 
3,809

 
(4,741
)
 
24,336

 
(20,798
)
Comprehensive income
 
$
26,697

 
$
16,480

 
$
85,079

 
$
39,944
Schedule of balance sheets data
Balance Sheets Data
(in thousands)
 
September 30, 2019
 
December 31, 2018
Assets
 
 

 
 

 
 

 
 

Cash and due from banks
 
 

 
$
135,813

 
 

 
$
122,059

Interest-bearing deposits
 
 
 
1,315

 
 
 
4,225

Investment securities
 
 
 
 
 
 
 
 
Available-for-sale, at fair value
 
 

 
1,210,748

 
 

 
1,388,533

Held-to-maturity, at amortized cost (fair value of $137,497 and $142,057, respectively)
 
 
 
132,704

 
 
 
141,875

Stock in Federal Home Loan Bank, at cost
 
 

 
9,953

 
 

 
9,958

Loans held for investment
 
 

 
5,084,336

 
 

 
4,843,021

Allowance for loan losses
 
 

 
(53,040
)
 
 

 
(52,119
)
Net loans
 
 

 
5,031,296

 
 

 
4,790,902

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

 
17,115

 
 

 
1,805

Other
 
 

 
514,116

 
 

 
486,347

Goodwill
 
 

 
82,190

 
 

 
82,190

Total assets
 
 

 
$
7,135,250

 
 

 
$
7,027,894

Liabilities and shareholder’s equity
 
 

 
 

 
 

 
 

Deposit liabilities—noninterest-bearing
 
 

 
$
1,885,028

 
 

 
$
1,800,727

Deposit liabilities—interest-bearing
 
 

 
4,311,195

 
 

 
4,358,125

Other borrowings
 
 

 
129,190

 
 

 
110,040

Other
 
 

 
135,606

 
 

 
124,613

Total liabilities
 
 

 
6,461,019

 
 

 
6,393,505

Commitments and contingencies
 
 

 


 
 

 


Common stock
 
 

 
1

 
 

 
1

Additional paid-in capital
 
 
 
348,933

 
 
 
347,170

Retained earnings
 
 

 
339,029

 
 

 
325,286

Accumulated other comprehensive loss, net of tax benefits
 
 

 
 

 
 

 
 

Net unrealized gains (losses) on securities
 
$
2,945

 
 

 
$
(24,423
)
 
 

Retirement benefit plans
 
(16,677
)
 
(13,732
)
 
(13,645
)
 
(38,068
)
Total shareholder’s equity
 
 

 
674,231

 
 

 
634,389

Total liabilities and shareholder’s equity
 
 

 
$
7,135,250

 
 

 
$
7,027,894

 
 
 
 
 
 
 
 
 
Other assets
 
 

 
 

 
 

 
 

Bank-owned life insurance
 
 

 
$
156,077

 
 

 
$
151,172

Premises and equipment, net
 
 

 
207,659

 
 

 
214,415

Accrued interest receivable
 
 

 
19,743

 
 

 
20,140

Mortgage-servicing rights
 
 

 
8,567

 
 

 
8,062

Low-income housing equity investments
 
 
 
69,286

 
 
 
67,626

Real estate acquired in settlement of loans, net
 
 

 
—

 
 

 
406

Real estate held for sale
 
 
 
9,074

 
 
 
—

Other
 
 

 
43,710

 
 

 
24,526

 
 
 

 
$
514,116

 
 

 
$
486,347

Other liabilities
 
 

 
 

 
 

 
 

Accrued expenses
 
 

 
$
41,264

 
 

 
$
54,084

Federal and state income taxes payable
 
 

 
9,472

 
 

 
2,012

Cashier’s checks
 
 

 
27,498

 
 

 
26,906

Advance payments by borrowers
 
 

 
5,164

 
 

 
10,183

Other
 
 

 
52,208

 
 

 
31,428

 
 
 

 
$
135,606

 
 

 
$
124,613
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, 2019
 
 

 
 

 
 

 
 

 
 
 
 

 
 

 
 
 
 

 
 

Available-for-sale
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
U.S. Treasury and federal agency obligations
 
$
126,084

 
$
822

 
$
(198
)
 
$
126,708

 
—

 
$
—

 
$
—

 
4

 
$
32,686

 
$
(198
)
Mortgage-backed securities — issued or guaranteed by U.S. Government agencies or sponsored agencies
 
1,017,256

 
6,647

 
(4,598
)
 
1,019,305

 
12

 
67,163

 
(252
)
 
85

 
389,212

 
(4,346
)
Corporate bonds
 
34,926

 
1,350

 
—

 
36,276

 
—

 
—

 
—

 
—

 
—

 
—

Mortgage revenue bonds
 
28,459

 
—

 
—

 
28,459

 
—

 
—

 
—

 
—

 
—

 
—

 
 
$
1,206,725

 
$
8,819

 
$
(4,796
)
 
$
1,210,748

 
12

 
$
67,163

 
$
(252
)
 
89

 
$
421,898

 
$
(4,544
)
Held-to-maturity
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Mortgage-backed securities — issued or guaranteed by U.S. Government agencies or sponsored agencies
 
$
132,704

 
$
4,793

 
$
—

 
$
137,497

 
—

 
$
—

 
$
—

 
—

 
$
—

 
$
—

 
 
$
132,704

 
$
4,793

 
$
—

 
$
137,497

 
—

 
$
—

 
$
—

 
—

 
$
—

 
$
—

December 31, 2018
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Available-for-sale
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
U.S. Treasury and federal agency obligations
 
$
156,694

 
$
62

 
$
(2,407
)
 
$
154,349

 
5

 
$
25,882

 
$
(208
)
 
19

 
$
118,405

 
$
(2,199
)
Mortgage-backed securities — issued or guaranteed by U.S. Government agencies or sponsored agencies
 
1,192,169

 
789

 
(31,542
)
 
1,161,416

 
22

 
129,011

 
(1,330
)
 
145

 
947,890

 
(30,212
)
Corporate bonds
 
49,398

 
103

 
(369
)
 
49,132

 
6

 
23,175

 
(369
)
 
—

 
—

 
—

Mortgage revenue bonds
 
23,636

 
—

 
—

 
23,636

 
—

 
—

 
—

 
—

 
—

 
—

 
 
$
1,421,897

 
$
954

 
$
(34,318
)
 
$
1,388,533

 
33

 
$
178,068

 
$
(1,907
)
 
164

 
$
1,066,295

 
$
(32,411
)
Held-to-maturity
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Mortgage-backed securities — issued or guaranteed by U.S. Government agencies or sponsored agencies
 
$
141,875

 
$
1,446

 
$
(1,264
)
 
$
142,057

 
3

 
$
29,814

 
$
(400
)
 
2

 
$
31,505

 
$
(864
)
 
 
$
141,875

 
$
1,446

 
$
(1,264
)
 
$
142,057

 
3

 
$
29,814

 
$
(400
)
 
2

 
$
31,505

 
$
(864
)
Schedule of contractual maturities of available-for-sale securities
The contractual maturities of investment securities were as follows:
September 30, 2019
 
Amortized cost
 
Fair value
(in thousands)
 
 
 
 
Available-for-sale
 
 
 
 
Due in one year or less
 
$
47,046

 
$
47,021

Due after one year through five years
 
89,085

 
90,675

Due after five years through ten years
 
37,911

 
38,320

Due after ten years
 
15,427

 
15,427

 
 
189,469

 
191,443

Mortgage-backed securities — issued or guaranteed by U.S. Government agencies or sponsored agencies
 
1,017,256

 
1,019,305

Total available-for-sale securities
 
$
1,206,725

 
$
1,210,748

Held-to-maturity
 
 
 
 
Mortgage-backed securities — issued or guaranteed by U.S. Government agencies or sponsored agencies
 
$
132,704

 
$
137,497

Total held-to-maturity securities
 
$
132,704

 
$
137,497
Schedule of components of loans receivable The components of loans were summarized as follows:
 
September 30, 2019
 
December 31, 2018
(in thousands)
 

 
 

Real estate:
 

 
 

Residential 1-4 family
$
2,183,888

 
$
2,143,397

Commercial real estate
810,971

 
748,398

Home equity line of credit
1,079,262

 
978,237

Residential land
15,095

 
13,138

Commercial construction
76,382

 
92,264

Residential construction
10,104

 
14,307

Total real estate
4,175,702

 
3,989,741

Commercial
638,213

 
587,891

Consumer
269,741

 
266,002

Total loans
5,083,656

 
4,843,634

Less: Deferred fees and discounts
680

 
(613
)
          Allowance for loan losses
(53,040
)
 
(52,119
)
Total loans, net
$
5,031,296

 
$
4,790,902
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
 
Total
Three months ended September 30, 2019
 
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

Allowance for loan losses:
 
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

Beginning balance
 
$
2,015

 
$
15,811

 
$
6,881

 
$
537

 
$
2,046

 
$
2

 
$
13,073

 
$
18,060

 
$
58,425

Charge-offs
 
(7
)
 
—

 
(13
)
 
—

 
—

 
—

 
(4,900
)
 
(5,311
)
 
(10,231
)
Recoveries
 
27

 
—

 
4

 
28

 
—

 
—

 
726

 
746

 
1,531

Provision
 
(56
)
 
(396
)
 
135

 
(104
)
 
196

 
1

 
(517
)
 
4,056

 
3,315

Ending balance
 
$
1,979

 
$
15,415

 
$
7,007

 
$
461

 
$
2,242

 
$
3

 
$
8,382

 
$
17,551

 
$
53,040

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

Nine months ended September 30, 2019
 
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

Allowance for loan losses:
 
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

Beginning balance
 
$
1,976

 
$
14,505

 
$
6,371

 
$
479

 
$
2,790

 
$
4

 
$
9,225

 
$
16,769

 
$
52,119

Charge-offs
 
(26
)
 
—

 
(32
)
 
(4
)
 
—

 
—

 
(6,012
)
 
(15,972
)
 
(22,046
)
Recoveries
 
644

 
—

 
13

 
42

 
—

 
—

 
2,187

 
2,208

 
5,094

Provision
 
(615
)
 
910

 
655

 
(56
)
 
(548
)
 
(1
)
 
2,982

 
14,546

 
17,873

Ending balance
 
$
1,979

 
$
15,415

 
$
7,007

 
$
461

 
$
2,242

 
$
3

 
$
8,382

 
$
17,551

 
$
53,040

September 30, 2019
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Ending balance: individually evaluated for impairment
 
$
906

 
$
7

 
$
500

 
$
—

 
$
—

 
$
—

 
$
905

 
$
504

 
$
2,822

Ending balance: collectively evaluated for impairment
 
$
1,073

 
$
15,408

 
$
6,507

 
$
461

 
$
2,242

 
$
3

 
$
7,477

 
$
17,047

 
$
50,218

Financing Receivables:
 
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

Ending balance
 
$
2,183,888

 
$
810,971

 
$
1,079,262

 
$
15,095

 
$
76,382

 
$
10,104

 
$
638,213

 
$
269,741

 
$
5,083,656

Ending balance: individually evaluated for impairment
 
$
16,556

 
$
877

 
$
12,909

 
$
3,194

 
$
—

 
$
—

 
$
9,370

 
$
558

 
$
43,464

Ending balance: collectively evaluated for impairment
 
$
2,167,332

 
$
810,094

 
$
1,066,353

 
$
11,901

 
$
76,382

 
$
10,104

 
$
628,843

 
$
269,183

 
$
5,040,192

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

December 31, 2018
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
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
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, 2019
 
December 31, 2018
(in thousands)
 
Commercial
real estate
 
Commercial
construction
 
Commercial
 
Total
 
Commercial
real estate
 
Commercial
construction
 
Commercial
 
Total
Grade:
 
 

 
 

 
 

 
 
 
 

 
 

 
 

 
 
Pass
 
$
723,864

 
$
74,093

 
$
593,952

 
$
1,391,909

 
$
658,288

 
$
89,974

 
$
547,640

 
$
1,295,902

Special mention
 
18,038

 
—

 
25,822

 
43,860

 
32,871

 
—

 
11,598

 
44,469

Substandard
 
69,069

 
2,289

 
14,753

 
86,111

 
57,239

 
2,290

 
28,653

 
88,182

Doubtful
 
—

 
—

 
3,686

 
3,686

 
—

 
—

 
—

 
—

Loss
 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

Total
 
$
810,971

 
$
76,382

 
$
638,213

 
$
1,525,566

 
$
748,398

 
$
92,264

 
$
587,891

 
$
1,428,553
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, 2019
 
 

 
 

 
 

 
 

 
 

 
 

 
 

Real estate:
 
 

 
 

 
 

 
 

 
 

 
 

 
 

Residential 1-4 family
 
$
2,162

 
$
807

 
$
2,452

 
$
5,421

 
$
2,178,467

 
$
2,183,888

 
$
—

Commercial real estate
 
347

 
—

 
—

 
347

 
810,624

 
810,971

 
—

Home equity line of credit
 
736

 
814

 
2,127

 
3,677

 
1,075,585

 
1,079,262

 
—

Residential land
 
—

 
—

 
25

 
25

 
15,070

 
15,095

 
—

Commercial construction
 
—

 
—

 
—

 
—

 
76,382

 
76,382

 
—

Residential construction
 
—

 
—

 
—

 
—

 
10,104

 
10,104

 
—

Commercial
 
359

 
174

 
1,280

 
1,813

 
636,400

 
638,213

 
—

Consumer
 
4,230

 
2,923

 
2,461

 
9,614

 
260,127

 
269,741

 
—

Total loans
 
$
7,834

 
$
4,718

 
$
8,345

 
$
20,897

 
$
5,062,759

 
$
5,083,656

 
$
—

December 31, 2018
 
 

 
 

 
 

 
 

 
 

 
 

 
 

Real estate:
 
 

 
 

 
 

 
 

 
 

 
 

 
 

Residential 1-4 family
 
$
3,757

 
$
2,773

 
$
2,339

 
$
8,869

 
$
2,134,528

 
$
2,143,397

 
$
—

Commercial real estate
 
—

 
—

 
—

 
—

 
748,398

 
748,398

 
—

Home equity line of credit
 
1,139

 
681

 
2,720

 
4,540

 
973,697

 
978,237

 
—

Residential land
 
9

 
—

 
319

 
328

 
12,810

 
13,138

 
—

Commercial construction
 
—

 
—

 
—

 
—

 
92,264

 
92,264

 
—

Residential construction
 
—

 
—

 
—

 
—

 
14,307

 
14,307

 
—

Commercial
 
315

 
281

 
548

 
1,144

 
586,747

 
587,891

 
—

Consumer
 
5,220

 
3,166

 
2,702

 
11,088

 
254,914

 
266,002

 
—

Total loans
 
$
10,440

 
$
6,901

 
$
8,628

 
$
25,969

 
$
4,817,665

 
$
4,843,634

 
$
—
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, 2019
 
December 31, 2018
Real estate:
 
 

 
 

Residential 1-4 family
 
$
12,076

 
$
12,037

Commercial real estate
 
—

 
—

Home equity line of credit
 
7,859

 
6,348

Residential land
 
457

 
436

Commercial construction
 
—

 
—

Residential construction
 
—

 
—

Commercial
 
7,004

 
4,278

Consumer
 
4,632

 
4,196

  Total nonaccrual loans
 
$
32,028

 
$
27,295

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
 
$
9,981

 
$
10,194

Commercial real estate
 
877

 
915

Home equity line of credit
 
10,686

 
11,597

Residential land
 
2,737

 
1,622

Commercial construction
 
—

 
—

Residential construction
 
—

 
—

Commercial
 
2,564

 
1,527

Consumer
 
58

 
62

     Total troubled debt restructured loans not included above
 
$
26,903

 
$
25,917
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, 2019
 
Three months ended September 30, 2019
 
Nine months ended September 30, 2019
(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
 
$
8,277

 
$
8,877

 
$
—

 
$
8,562

 
$
175

 
$
8,515

 
$
422

Commercial real estate
 
—

 
—

 
—

 
—

 
—

 
—

 
—

Home equity line of credit
 
1,806

 
1,967

 
—

 
1,797

 
12

 
2,091

 
78

Residential land
 
3,194

 
3,398

 
—

 
3,205

 
40

 
2,507

 
90

Commercial construction
 
—

 
—

 
—

 
—

 
—

 
—

 
—

Residential construction
 
—

 
—

 
—

 
—

 
—

 
—

 
—

Commercial
 
6,749

 
11,894

 
—

 
4,812

 
239

 
4,470

 
239

Consumer
 
2

 
2

 
—

 
21

 
4

 
27

 
4

 
 
$
20,028

 
$
26,138

 
$
—

 
$
18,397

 
$
470

 
$
17,610

 
$
833

With an allowance recorded
 
 

 
 

 
 

 
 

 
 

 
 

Real estate:
 
 

 
 

 
 

 
 

 
 

 
 

 
 

Residential 1-4 family
 
$
8,279

 
$
8,332

 
$
906

 
$
8,296

 
$
86

 
$
8,377

 
$
265

Commercial real estate
 
877

 
877

 
7

 
881

 
9

 
894

 
28

Home equity line of credit
 
11,103

 
11,133

 
500

 
11,332

 
143

 
11,606

 
425

Residential land
 
—

 
—

 
—

 
—

 
—

 
36

 
—

Commercial construction
 
—

 
—

 
—

 
—

 
—

 
—

 
—

Residential construction
 
—

 
—

 
—

 
—

 
—

 
—

 
—

Commercial
 
2,621

 
2,621

 
905

 
8,330

 
38

 
8,026

 
94

Consumer
 
556

 
556

 
504

 
556

 
12

 
301

 
14

 
 
$
23,436

 
$
23,519

 
$
2,822

 
$
29,395

 
$
288

 
$
29,240

 
$
826

Total
 
 

 
 

 
 

 
 

 
 

 
 

 
 

Real estate:
 
 

 
 

 
 

 
 

 
 

 
 

 
 

Residential 1-4 family
 
$
16,556

 
$
17,209

 
$
906

 
$
16,858

 
$
261

 
$
16,892

 
$
687

Commercial real estate
 
877

 
877

 
7

 
881

 
9

 
894

 
28

Home equity line of credit
 
12,909

 
13,100

 
500

 
13,129

 
155

 
13,697

 
503

Residential land
 
3,194

 
3,398

 
—

 
3,205

 
40

 
2,543

 
90

Commercial construction
 
—

 
—

 
—

 
—

 
—

 
—

 
—

Residential construction
 
—

 
—

 
—

 
—

 
—

 
—

 
—

Commercial
 
9,370

 
14,515

 
905

 
13,142

 
277

 
12,496

 
333

Consumer
 
558

 
558

 
504

 
577

 
16

 
328

 
18

 
 
$
43,464

 
$
49,657

 
$
2,822

 
$
47,792

 
$
758

 
$
46,850

 
$
1,659


 
 
December 31, 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
 
$
7,822

 
$
8,333

 
$
—

 
$
8,940

 
$
239

 
$
8,779

 
$
396

Commercial real estate
 
—

 
—

 
—

 
—

 
—

 
—

 
—

Home equity line of credit
 
2,743

 
3,004

 
—

 
2,234

 
23

 
2,103

 
35

Residential land
 
2,030

 
2,228

 
—

 
1,773

 
6

 
1,358

 
16

Commercial construction
 
—

 
—

 
—

 
—

 
—

 
—

 
—

Residential construction
 
—

 
—

 
—

 
—

 
—

 
—

 
—

Commercial
 
3,722

 
4,775

 
—

 
3,915

 
6

 
3,099

 
26

Consumer
 
32

 
32

 
—

 
33

 
—

 
18

 
—

 
 
$
16,349

 
$
18,372

 
$
—

 
$
16,895

 
$
274

 
$
15,357

 
$
473

With an allowance recorded
 
 

 
 

 
 

 
 

 
 

 
 

 
 

Real estate:
 
 

 
 

 
 

 
 

 
 

 
 

 
 

Residential 1-4 family
 
$
8,672

 
$
8,875

 
$
876

 
$
8,820

 
$
84

 
$
8,909

 
$
274

Commercial real estate
 
915

 
915

 
7

 
985

 
11

 
997

 
32

Home equity line of credit
 
12,057

 
12,086

 
701

 
12,090

 
111

 
10,083

 
288

Residential land
 
29

 
29

 
6

 
20

 
—

 
45

 
3

Commercial construction
 
—

 
—

 
—

 
—

 
—

 
—

 
—

Residential construction
 
—

 
—

 
—

 
—

 
—

 
—

 
—

Commercial
 
1,618

 
1,618

 
628

 
1,774

 
28

 
1,824

 
94

Consumer
 
57

 
57

 
4

 
57

 
1

 
58

 
3

 
 
$
23,348

 
$
23,580

 
$
2,222

 
$
23,746

 
$
235

 
$
21,916

 
$
694

Total
 
 

 
 

 
 

 
 

 
 

 
 

 
 

Real estate:
 
 

 
 

 
 

 
 

 
 

 
 

 
 

Residential 1-4 family
 
$
16,494

 
$
17,208

 
$
876

 
$
17,760

 
$
323

 
$
17,688

 
$
670

Commercial real estate
 
915

 
915

 
7

 
985

 
11

 
997

 
32

Home equity line of credit
 
14,800

 
15,090

 
701

 
14,324

 
134

 
12,186

 
323

Residential land
 
2,059

 
2,257

 
6

 
1,793

 
6

 
1,403

 
19

Commercial construction
 
—

 
—

 
—

 
—

 
—

 
—

 
—

Residential construction
 
—

 
—

 
—

 
—

 
—

 
—

 
—

Commercial
 
5,340

 
6,393

 
628

 
5,689

 
34

 
4,923

 
120

Consumer
 
89

 
89

 
4

 
90

 
1

 
76

 
3

 
 
$
39,697

 
$
41,952

 
$
2,222

 
$
40,641

 
$
509

 
$
37,273

 
$
1,167

*
Since loan was classified as impaired.
Schedule of loan modifications
Loan modifications that occurred during the third quarters and first nine months of 2019 and 2018 were as follows:
Loans modified as a TDR
 
Three months ended September 30, 2019
 
Nine months ended September 30, 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)
Troubled debt restructurings
 
 

 
 

 
 
 
 

 
 

 
 
Real estate:
 
 

 
 

 
 
 
 

 
 

 
 
Residential 1-4 family
 
1

 
$
324

 
$
—

 
10

 
$
1,563

 
$
165

Commercial real estate
 
—

 
—

 
—

 
—

 
—

 
—

Home equity line of credit
 
—

 
—

 
—

 
3

 
429

 
85

Residential land
 
1

 
350

 
—

 
3

 
1,169

 
—

Commercial construction
 
—

 
—

 
—

 
—

 
—

 
—

Residential construction
 
—

 
—

 
—

 
—

 
—

 
—

Commercial
 
3

 
275

 
58

 
6

 
1,761

 
218

Consumer
 
—

 
—

 
—

 
—

 
—

 
—

 
 
5

 
$
949

 
$
58

 
22

 
$
4,922

 
$
468

 
 
 
 
 
 
 
 
 
 
 
 
 
Loans modified as a TDR
 
Three months ended September 30, 2018
 
Nine months ended September 30, 2018
(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)
Troubled debt restructurings
 
 

 
 

 
 
 
 

 
 

 
 
Real estate:
 
 

 
 

 
 
 
 

 
 

 
 
Residential 1-4 family
 
2

 
$
427

 
$
19

 
2

 
$
427

 
$
19

Commercial real estate
 
—

 
—

 
—

 
—

 
—

 
—

Home equity line of credit
 
16

 
1,571

 
283

 
52

 
6,540

 
930

Residential land
 
2

 
1,343

 
—

 
2

 
1,343

 
—

Commercial construction
 
—

 
—

 
—

 
—

 
—

 
—

Residential construction
 
—

 
—

 
—

 
—

 
—

 
—

Commercial
 
6

 
255

 
174

 
13

 
2,381

 
218

Consumer
 
—

 
—

 
—

 
—

 
—

 
—

 
 
26

 
$
3,596

 
$
476

 
69

 
$
10,691

 
$
1,167


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.

There were no loans modified in TDRs that experienced a payment default of 90 days or more during the third quarter and first nine months of 2019. Loans modified in TDRs that experienced a payment default of 90 days or more during the third quarter and first nine months of 2018, 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
 
Outstanding 
recorded 
investment
(as of period end)1
 
Number of contracts
 
Outstanding 
recorded 
investment
 (as of period end)1
TDRs that defaulted during the period within twelve months of their modification date
 
 
 
 

 
 
 
 
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

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.
Schedule of amortized intangible assets
Changes in the carrying value of MSRs were as follows:
(in thousands)
 
Gross
carrying amount
 
Accumulated amortization
 
Valuation allowance
 
Net
carrying amount
September 30, 2019
 
$
20,413

 
$
(11,846
)
 
$
—

 
$
8,567

December 31, 2018
 
18,556

 
(10,494
)
 
—

 
8,062



Changes related to MSRs were as follows:
 
 
Three months ended September 30,
 
Nine months ended September 30
(in thousands)
 
2019
 
2018
 
2019
 
2018
Mortgage servicing rights
 
 
 
 
 
 
 
 
Beginning balance
 
$
8,103

 
$
8,509

 
$
8,062

 
$
8,639

Amount capitalized
 
995

 
305

 
1,857

 
1,032

Amortization
 
(531
)
 
(388
)
 
(1,352
)
 
(1,245
)
Other-than-temporary impairment
 
—

 
—

 
—

 
—

Carrying amount before valuation allowance
 
8,567

 
8,426

 
8,567

 
8,426

Valuation allowance for mortgage servicing rights
 
 
 
 
 
 
 
 
Beginning balance
 
—

 
—

 
—

 
—

Provision (recovery)
 
—

 
—

 
—

 
—

Other-than-temporary impairment
 
—

 
—

 
—

 
—

Ending balance
 
—

 
—

 
—

 
—

Net carrying value of mortgage servicing rights
 
$
8,567

 
$
8,426

 
$
8,567

 
$
8,426
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, 2019

 
December 31, 2018

Unpaid principal balance
 
$
1,232,240

 
$
1,188,514

Weighted average note rate
 
3.99
%
 
3.98
%
Weighted average discount rate
 
9.3
%
 
10.0
%
Weighted average prepayment speed
 
12.8
%
 
6.5
%

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:
 
 
2019

 
2018

Risk-free interest rate
 
2.48
%
 
2.29
%
Expected life in years
 
3

 
3

Expected volatility
 
15.8
%
 
17.0
%
Range of expected volatility for Peer Group
 
15.0% to 73.2%

 
15.1% to 26.2%

Grant date fair value (per share)
 
$41.07
 
$38.20

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, 2019
 
 
 
 
 
 
 
 
 
 
Home equity line of credit
 
$
199

 
Fair value of property or collateral
 
Appraised value less 7% selling cost
 
 
 
N/A (2)
Residential land
 
25

 
Fair value of property or collateral
 
Appraised value less 7% selling cost
 
 
 
N/A (2)
Commercial
 
3,687

 
Discounted cash flow
 
Expected cash flows
 
3.9%-6.8%
 
4.6%
Total loans
 
$
3,911

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
December 31, 2018
 
 
 
 
 
 
 
 
 
 
Home equity line of credit
 
$
77

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

 
 
 
 
 
 
 
 
Real estate acquired in settlement of loans
 
$
186

 
Fair value of property or collateral
 
Appraised value less 7% selling cost
 
 
 
N/A (2)
(1) Represent percent of outstanding principal balance.
(2) N/A - Not applicable. There is one asset 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, 2019

 
December 31, 2018

Prepayment rate:
 
 
 
 
  25 basis points adverse rate change
 
$
(1,058
)
 
$
(250
)
  50 basis points adverse rate change
 
(2,093
)
 
(566
)
Discount rate:
 
 
 
 
  25 basis points adverse rate change
 
(90
)
 
(139
)
  50 basis points adverse rate change
 
(180
)
 
(275
)
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 Sheets
 
Net amount of liabilities presented
in the Balance Sheets
Repurchase agreements
 
 

 
 

 
 

September 30, 2019
 
$
91

 
$
—

 
$
91

December 31, 2018
 
65

 
—

 
65

 
 
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
 
 
 
 
 
 
September 30, 2019
 
$
91

 
$
111

 
$
—

December 31, 2018
 
65

 
92

 
—
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, 2019
 
December 31, 2018
(in thousands)
 
Notional amount
 
Fair value
 
Notional amount
 
Fair value
Interest rate lock commitments
 
$
42,073

 
$
470

 
$
10,180

 
$
91

Forward commitments
 
55,791

 
(76
)
 
10,132

 
(43
)
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, 2019
 
December 31, 2018
(in thousands)
 
 Asset derivatives
 
 Liability
derivatives
 
 Asset derivatives
 
 Liability
derivatives
Interest rate lock commitments
 
$
477

 
$
7

 
$
91

 
$
—

Forward commitments
 
9

 
85

 
—

 
43

 
 
$
486

 
$
92

 
$
91

 
$
43

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 Statements of Income
 
Three months ended September 30,
 
Nine months ended September 30
(in thousands)
 
 
2019
 
2018
 
2019
 
2018
Interest rate lock commitments
 
Mortgage banking income
 
$
(3
)
 
$
(248
)
 
$
379

 
$
(131
)
Forward commitments
 
Mortgage banking income
 
39

 
62

 
(33
)
 
24

 
 
 
 
$
36

 
$
(186
)
 
$
346

 
$
(107
)