Fair value measurements (Tables)

12 Months Ended

Dec. 31, 2018

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

The following table presents the carrying or notional amount, fair value, and placement in the fair value hierarchy of the Company’s financial instruments. For stock in Federal Home Loan Bank, the carrying amount is a reasonable estimate of fair value because it can only be redeemed at par.



			Estimated fair value
(in thousands)	Carrying or notional amount		Quoted prices in active markets for identical assets (Level 1)		Significant other observable inputs (Level 2)		Significant unobservable inputs (Level 3)		Total
December 31, 2018
Financial assets
HEI consolidated
Available-for-sale investment securities	$	1,388,533	$	—	$	1,364,897	$	23,636	$	1,388,533
Held-to-maturity investment securities	141,875		—		142,057		—		142,057
Stock in Federal Home Loan Bank	9,958		—		9,958		—		9,958
Loans, net	4,792,707		—		1,809		4,800,244		4,802,053
Mortgage servicing rights	8,062		—		—		13,618		13,618
Derivative assets	10,180		—		91		—		91
Financial liabilities
HEI consolidated
Deposit liabilities¹	827,841		—		817,667		—		817,667
Short-term borrowings—other than bank	73,992		—		73,992		—		73,992
Other bank borrowings	110,040		—		110,037		—		110,037
Long-term debt, net—other than bank	1,879,641		—		1,904,261		—		1,904,261
Derivative liabilities	34,132		34		596		—		630
Hawaiian Electric consolidated
Short-term borrowings	25,000		—		25,000		—		25,000
Long-term debt, net	1,418,802		—		1,443,968		—		1,443,968
December 31, 2017
Financial assets
HEI consolidated
Available-for-sale investment securities	$	1,401,198	$	—	$	1,385,771	$	15,427	$	1,401,198
Held-to-maturity investment securities	44,515		—		44,412		—		44,412
Stock in Federal Home Loan Bank	9,706		—		9,706		—		9,706
Loans, net	4,628,381		—		11,254		4,770,497		4,781,751
Mortgage servicing rights	8,639		—		—		12,052		12,052
Derivative assets	17,812		—		393		—		393
Hawaiian Electric consolidated
Derivative assets-window forward contracts	3,240		—		256		—		256
Financial liabilities
HEI consolidated
Deposit liabilities¹	5,890,597		—		5,884,071		—		5,884,071
Short-term borrowings—other than bank	117,945		—		117,945		—		117,945
Other bank borrowings	190,859		—		190,829		—		190,829
Long-term debt, net—other than bank	1,683,797		—		1,813,295		—		1,813,295
Derivative liabilities	13,562		20		10		—		30
Hawaiian Electric consolidated
Short-term borrowings	4,999		—		4,999		—		4,999
Long-term debt, net	1,368,479		—		1,497,079		—		1,497,079

¹ As of December 31, 2018, deposit liabilities include only fixed-maturity certificates of deposit as a result of the Company’s adoption of ASU No. 2016-01 in the first quarter of 2018. As of December 31, 2017, deposit liabilities include noninterest-bearing demand, interest-bearing demand, and savings and money market deposits, for which the carrying amount represents a reasonable estimate of fair value, as such liabilities have no stated maturity.

Schedule of assets and liabilities measured at fair value on a recurring basis

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



December 31	2018						2017
	Fair value measurements using						Fair value measurements using
(in thousands)	Level 1		Level 2		Level 3		Level 1		Level 2		Level 3
Available-for-sale investment securities (bank segment)
Mortgage-backed securities — issued or guaranteed by U.S. Government agencies or sponsored agencies	$	—	$	1,161,416	$	—	$	—	$	1,201,473	$	—
U.S. Treasury and federal agency obligations	—		154,349		—		—		184,298		—
Corporate bonds	—		49,132		—		—		—		—
Mortgage revenue bonds	—		—		23,636		—		—		15,427
	$	—	$	1,364,897	$	23,636	$	—	$	1,385,771	$	15,427
Derivative assets
Interest rate lock commitments (bank segment)¹	$	—	$	91	$	—	$	—	$	133	$	—
Forward commitments (bank segment)¹	—		—		—		—		4		—
Window forward contracts (electric utility segment)²	—		—		—		—		256		—
	$	—	$	91	$	—	$	—	$	393	$	—
Derivative liabilities
Interest rate lock commitments (bank segment)¹	$	—	$	—	$	—	$	—	$	2	$	—
Forward commitments (bank segment)¹	34		9		—		20		8		—
Interest rate swap (Other segment)³	—		587		—		—		—		—
	$	34	$	596	$	—	$	20	$	10	$	—


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


²	Derivatives were included in regulatory assets and/or liabilities in the balance sheets in 2017.


³	Derivatives are included in Other liabilities in the balance sheets.

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

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



(in thousands)	2018		2017
Mortgage revenue bonds
Balance, January 1	$	15,427	$	15,427
Principal payments received	—		—
Purchases	8,209		—
Unrealized gain (loss) included in other comprehensive income	—		—
Balance, December 31	$	23,636	$	15,427

Schedule of assets measured at fair value on a nonrecurring basis

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



			Fair value measurements using
(in thousands)	Balance		Level 1		Level 2		Level 3
December 31, 2018
Loans	$	77	$	—	$	—	$	77
Real estate acquired in settlement of loans	186		—		—		186
December 31, 2017
Loans	2,621		—		—		2,621

Schedule of significant unobservable inputs used in the fair value measurement

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



December 31	2018			2017
(dollars in thousands)
Unpaid principal balance	$	1,188,514		$	1,195,454
Weighted average note rate	3.98		%	3.94		%
Weighted average discount rate	10.0		%	10.0		%
Weighted average prepayment speed	6.5		%	9.0		%

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



					Significant unobservable input value (1)
(dollars in thousands)	Fair value		Valuation technique	Significant unobservable input	Range	Weighted Average
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)
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 asset in each fair value measurement type.