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Bank segment (Tables)

3 Months Ended

Mar. 31, 2020

Statements of Income and Comprehensive Income Data


	Three months ended March 31
(in thousands)	2020		2019
Interest and dividend income
Interest and fees on loans	$	55,545	$	57,860
Interest and dividends on investment securities	9,430		10,628
Total interest and dividend income	64,975		68,488
Interest expense
Interest on deposit liabilities	3,587		4,252
Interest on other borrowings	313		528
Total interest expense	3,900		4,780
Net interest income	61,075		63,708
Provision for credit losses	10,401		6,870
Net interest income after provision for credit losses	50,674		56,838
Noninterest income
Fees from other financial services	4,571		4,562
Fee income on deposit liabilities	5,113		5,078
Fee income on other financial products	1,872		1,593
Bank-owned life insurance	794		2,259
Mortgage banking income	2,000		614

Other income, net	413		458
Total noninterest income	14,763		14,564
Noninterest expense
Compensation and employee benefits	25,777		25,512
Occupancy	5,267		4,670
Data processing	3,837		3,738
Services	2,809		2,426
Equipment	2,339		2,064
Office supplies, printing and postage	1,341		1,360
Marketing	802		990
FDIC insurance	102		626
Other expense	4,194		3,854
Total noninterest expense	46,468		45,240
Income before income taxes	18,969		26,162
Income taxes	3,208		5,323
Net income	15,761		20,839
Other comprehensive income, net of taxes	19,847		6,252
Comprehensive income	$	35,608	$	27,091

Reconciliation to amounts per HEI Condensed Consolidated Statements of Income*:


	Three months ended March 31
(in thousands)	2020		2019
Interest and dividend income	$	64,975	$	68,488
Noninterest income	14,763		14,564
*Revenues-Bank	79,738		83,052
Total interest expense	3,900		4,780
Provision for credit losses	10,401		6,870
Noninterest expense	46,468		45,240
Less: Retirement defined benefits gain (expense)—other than service costs	(434)		40
*Expenses-Bank	60,335		56,930
*Operating income-Bank	19,403		26,122
Add back: Retirement defined benefits (gain) expense—other than service costs	434		(40)
Income before income taxes	$	18,969	$	26,162

Schedule of statements of comprehensive income data

Statements of Income and Comprehensive Income Data


	Three months ended March 31
(in thousands)	2020		2019
Interest and dividend income
Interest and fees on loans	$	55,545	$	57,860
Interest and dividends on investment securities	9,430		10,628
Total interest and dividend income	64,975		68,488
Interest expense
Interest on deposit liabilities	3,587		4,252
Interest on other borrowings	313		528
Total interest expense	3,900		4,780
Net interest income	61,075		63,708
Provision for credit losses	10,401		6,870
Net interest income after provision for credit losses	50,674		56,838
Noninterest income
Fees from other financial services	4,571		4,562
Fee income on deposit liabilities	5,113		5,078
Fee income on other financial products	1,872		1,593
Bank-owned life insurance	794		2,259
Mortgage banking income	2,000		614

Other income, net	413		458
Total noninterest income	14,763		14,564
Noninterest expense
Compensation and employee benefits	25,777		25,512
Occupancy	5,267		4,670
Data processing	3,837		3,738
Services	2,809		2,426
Equipment	2,339		2,064
Office supplies, printing and postage	1,341		1,360
Marketing	802		990
FDIC insurance	102		626
Other expense	4,194		3,854
Total noninterest expense	46,468		45,240
Income before income taxes	18,969		26,162
Income taxes	3,208		5,323
Net income	15,761		20,839
Other comprehensive income, net of taxes	19,847		6,252
Comprehensive income	$	35,608	$	27,091

Reconciliation to amounts per HEI Condensed Consolidated Statements of Income*:


	Three months ended March 31
(in thousands)	2020		2019
Interest and dividend income	$	64,975	$	68,488
Noninterest income	14,763		14,564
*Revenues-Bank	79,738		83,052
Total interest expense	3,900		4,780
Provision for credit losses	10,401		6,870
Noninterest expense	46,468		45,240
Less: Retirement defined benefits gain (expense)—other than service costs	(434)		40
*Expenses-Bank	60,335		56,930
*Operating income-Bank	19,403		26,122
Add back: Retirement defined benefits (gain) expense—other than service costs	434		(40)
Income before income taxes	$	18,969	$	26,162

Schedule of balance sheets data

Balance Sheets Data


(in thousands)	March 31, 2020						December 31, 2019
Assets
Cash and due from banks			$	186,897			$	129,770
Interest-bearing deposits			2,635				48,628

Investment securities
Available-for-sale, at fair value			1,340,241				1,232,826
Held-to-maturity, at amortized cost (fair value of $142,570 and $143,467, respectively)			134,656				139,451
Stock in Federal Home Loan Bank, at cost			9,760				8,434
Loans held for investment			5,180,932				5,121,176
Allowance for credit losses			(77,084)				(53,355)
Net loans			5,103,848				5,067,821
Loans held for sale, at lower of cost or fair value			18,155				12,286
Other			507,363				511,611
Goodwill			82,190				82,190
Total assets			$	7,385,745			$	7,233,017
Liabilities and shareholder’s equity
Deposit liabilities—noninterest-bearing			$	1,969,694			$	1,909,682
Deposit liabilities—interest-bearing			4,414,089				4,362,220
Other borrowings			157,605				115,110
Other			152,365				146,954
Total liabilities			6,693,753				6,533,966
Commitments and contingencies
Common stock			1				1
Additional paid-in capital			350,158				349,453
Retained earnings			330,648				358,259
Accumulated other comprehensive loss, net of tax benefits
Net unrealized gains on securities	$	21,929			$	2,481
Retirement benefit plans	(10,744)		11,185		(11,143)		(8,662)
Total shareholder’s equity			691,992				699,051
Total liabilities and shareholder’s equity			$	7,385,745			$	7,233,017

Other assets
Bank-owned life insurance			$	158,269			$	157,465
Premises and equipment, net			203,622				204,449

Accrued interest receivable			19,490				19,365
Mortgage-servicing rights			9,120				9,101
Low-income housing investments			63,967				66,302
Real estate acquired in settlement of loans, net			139				—

Other			52,756				54,929
			$	507,363			$	511,611
Other liabilities
Accrued expenses			$	38,928			$	45,822
Federal and state income taxes payable			17,138				14,996
Cashier’s checks			32,372				23,647
Advance payments by borrowers			5,919				10,486
Other			58,008				52,003
			$	152,365			$	146,954

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
March 31, 2020
Available-for-sale
U.S. Treasury and federal agency obligations	$	108,298	$	1,995	$	—	$	110,293	—	$	—	$	—	—	$	—	$	—
Mortgage-backed securities*	1,114,580		27,493		(621)		1,141,452		6	28,937		(129)		15	40,892		(492)
Corporate bonds	58,681		1,236		(147)		59,770		1	14,753		(147)		—	—		—
Mortgage revenue bonds	28,726		—		—		28,726		—					—	—		—
	$	1,310,285	$	30,724	$	(768)	$	1,340,241	7	$	43,690	$	(276)	15	$	40,892	$	(492)
Held-to-maturity
Mortgage-backed securities*	$	134,656	$	7,914	$	—	$	142,570	—	$	—	$	—	—	$	—	$	—
	$	134,656	$	7,914	$	—	$	142,570	—	$	—	$	—	—	$	—	$	—
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

Schedule of contractual maturities of available-for-sale securities

The contractual maturities of investment securities were as follows:


March 31, 2020	Amortized cost		Fair value
(in thousands)
Available-for-sale
Due in one year or less	$	60,299	$	60,622
Due after one year through five years	70,894		73,071
Due after five years through ten years	49,085		49,669
Due after ten years	15,427		15,427
	195,705		198,789
Mortgage-backed securities — issued or guaranteed by U.S. Government agencies or sponsored agencies	1,114,580		1,141,452
Total available-for-sale securities	$	1,310,285	$	1,340,241
Held-to-maturity
Mortgage-backed securities — issued or guaranteed by U.S. Government agencies or sponsored agencies	$	134,656	$	142,570
Total held-to-maturity securities	$	134,656	$	142,570

Schedule of components of loans receivable

The components of loans were summarized as follows:


	March 31, 2020		December 31, 2019
(in thousands)
Real estate:
Residential 1-4 family	$	2,161,894	$	2,178,135
Commercial real estate	852,120		824,830
Home equity line of credit	1,095,677		1,092,125
Residential land	13,720		14,704
Commercial construction	79,377		70,605
Residential construction	9,190		11,670
Total real estate	4,211,978		4,192,069
Commercial	722,647		670,674
Consumer	245,753		257,921
Total loans	5,180,378		5,120,664
Deferred fees and discounts	554		512
Allowance for credit losses	(77,084)		(53,355)
Total loans, net	$	5,103,848	$	5,067,821

Schedule of allowance for credit losses

The allowance for credit losses 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 loans		Consumer loans		Total














Three months ended March 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	—		—		—		(8)		—		—		(369)		(6,254)		(6,631)
Recoveries	53		—		6		9		—		—		186		764		1,018
Provision	(107)		1,326		(162)		(34)		1,060		(3)		1,993		5,828		9,901
Ending balance	$	4,476	$	16,587	$	6,225	$	352	$	3,446	$	14	$	12,977	$	33,007	$	77,084







Three months ended March 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	(14)		—		—		—		—		—		(618)		(5,559)		(6,191)
Recoveries	609		—		5		7		—		—		180		698		1,499
Provision	(660)		320		117		(61)		53		(1)		2,027		5,075		6,870
Ending balance	$	1,911	$	14,825	$	6,493	$	425	$	2,843	$	3	$	10,814	$	16,983	$	54,297
December 31, 2019
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

Schedule of allowance for loan commitments

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
Three months ended March 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	—		515		(15)		500
Ending balance	$	300	$	3,191	$	309	$	3,800

Schedule of credit risk profile by internally assigned grade for loans

The credit risk profile based on payment activity and internally assigned grade for loans was as follows:


(in thousands)	2020		2019		2018		2017		2016		Prior		Revolving loans		Revolving loans converted to term loans		Total
March 31, 2020
Residential 1-4 family
Current	$	72,453	$	292,483	$	194,702	$	276,153	$	230,719	$	1,089,697	$	—	$	—	$	2,156,207
30-59 days past due	—		—		—		—		4		2,777		—		—		2,781
60-89 days past due	—		—		—		—		—		1,630		—		—		1,630
Greater than 89 days past due	—		—		—		353		—		923		—		—		1,276
	72,453		292,483		194,702		276,506		230,723		1,095,027		—		—		2,161,894
Home equity line of credit
Current	—		—		—		—		—		—		1,062,097		30,327		1,092,424
30-59 days past due	—		—		—		—		—		—		633		592		1,225
60-89 days past due	—		—		—		—		—		—		26		198		224
Greater than 89 days past due	—		—		—		—		—		—		1,375		429		1,804
	—		—		—		—		—		—		1,064,131		31,546		1,095,677
Residential land
Current	305		5,402		2,024		2,954		22		3,013		—		—		13,720
30-59 days past due	—		—		—		—		—		—		—		—		—
60-89 days past due	—		—		—		—		—		—		—		—		—
Greater than 89 days past due	—		—		—		—		—		—		—		—		—
	305		5,402		2,024		2,954		22		3,013		—		—		13,720
Residential construction
Current	1,069		5,410		682		2,029		—		—		—		—		9,190
30-59 days past due	—		—		—		—		—		—		—		—		—
60-89 days past due	—		—		—		—		—		—		—		—		—
Greater than 89 days past due	—		—		—		—		—		—		—		—		—
	1,069		5,410		682		2,029		—		—		—		—		9,190
Consumer
Current	23,191		98,543		62,983		19,183		3,099		600		26,079		3,001		236,679
30-59 days past due	263		1,180		1,311		486		82		—		258		92		3,672
60-89 days past due	—		843		1,225		337		43		—		128		40		2,616
Greater than 89 days past due	—		762		1,115		386		73		1		358		91		2,786
	23,454		101,328		66,634		20,392		3,297		601		26,823		3,224		245,753
Commercial real estate
Pass	87,054		119,868		128,356		60,786		122,917		233,064		17,442		—		769,487
Special Mention	3,560		—		4,331		4,700		3,457		3,421		—		—		19,469
Substandard	—		—		1,940		608		3,682		56,934		—		—		63,164
Doubtful	—		—		—		—		—		—		—		—		—
	90,614		119,868		134,627		66,094		130,056		293,419		17,442		—		852,120
Commercial construction
Pass	3,139		6,889		25,925		17,771		2,068		—		21,296		—		77,088
Special Mention	—		—		—		—		—		—		—		—		—
Substandard	—		—		—		—		—		2,289		—		—		2,289
Doubtful	—		—		—		—		—		—		—		—		—
	3,139		6,889		25,925		17,771		2,068		2,289		21,296		—		79,377
Commercial
Pass	29,594		180,576		103,190		40,697		35,704		66,885		184,425		17,315		658,386
Special Mention	473		6,625		2,252		5,219		18,782		9,651		2,261		—		45,263
Substandard	198		5,108		330		1,650		4,291		3,554		2,404		1,463		18,998
Doubtful	—		—		—		—		—		—		—		—		—
	30,265		192,309		105,772		47,566		58,777		80,090		189,090		18,778		722,647
Total loans	$	221,299	$	723,689	$	530,366	$	433,312	$	424,943	$	1,474,439	$	1,318,782	$	53,548	$	5,180,378

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

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		90 days or more past due		Total past due		Current		Total financing receivables		Amortized cost> 90 days and accruing
March 31, 2020
Real estate:
Residential 1-4 family	$	2,781	$	1,630	$	1,276	$	5,687	$	2,156,207	$	2,161,894	$	—
Commercial real estate	—		—		—		—		852,120		852,120		—
Home equity line of credit	1,225		224		1,804		3,253		1,092,424		1,095,677		—
Residential land	—		—		—		—		13,720		13,720		—
Commercial construction	—		—		2,289		2,289		77,088		79,377		—
Residential construction	—		—		—		—		9,190		9,190		—
Commercial	3,712		311		309		4,332		718,315		722,647		—
Consumer	3,672		2,616		2,786		9,074		236,679		245,753		—
Total loans	$	11,390	$	4,781	$	8,464	$	24,635	$	5,155,743	$	5,180,378	$	—
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	$	—

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)	March 31, 2020		December 31, 2019
Real estate:
Residential 1-4 family	$	10,747	$	11,395
Commercial real estate	16,390		195
Home equity line of credit	6,596		6,638
Residential land	413		448
Commercial construction	2,289		—
Residential construction	—		—
Commercial	5,366		5,947
Consumer	4,965		5,113
Total nonaccrual loans	$	46,766	$	29,736










Real estate:
Residential 1-4 family	$	9,254	$	9,869
Commercial real estate	1,035		853
Home equity line of credit	9,628		10,376
Residential land	2,622		2,644
Commercial construction	—		—
Residential construction	—		—
Commercial	3,261		2,614
Consumer	56		57
Total troubled debt restructured loans not included above	$	25,856	$	26,413

Schedule of loan modifications

Loan modifications that occurred during the first three months of 2020 and 2019 were as follows:


Loans modified as a TDR	Three months ended March 31, 2020
(dollars in thousands)	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	$	148	$	8
Commercial real estate	2	16,584		4,281
Home equity line of credit	—	—		—
Residential land	—	—		—
Commercial construction	—	—		—
Residential construction	—	—		—
Commercial	4	756		278
Consumer	—	—		—
	7	$	17,488	$	4,567

	Three months ended March 31, 2019
(dollars in thousands)	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	8	$	1,048	$	5
Commercial real estate	—	—		—
Home equity line of credit	2	264		23
Residential land	1	335		—
Commercial construction	—	—		—
Residential construction	—	—		—
Commercial	1	195		17
Consumer	—	—		—
	12	$	1,842	$	45

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 during the first quarters of 2020 and 2019, and for which the payment of default occurred within one year of the modification, were as follows:
















	Three months ended March 31, 2020				Three months ended March 31, 2019
(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	—	—		—	—
Residential land	—	—		—	—
Commercial construction	—	—		—	—
Residential construction	—	—		—	—
Commercial	—	—		1	19
Consumer	—	—		—	—
	—	$	—	1	$	19

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 collateral-dependent loans

Loans considered collateral-dependent were as follows:

March 31, 2020

Amortized cost

Collateral type

(in thousands)

Real estate:

Residential 1-4 family

2,315

Residential real estate property

Home equity line of credit

1,567

Residential real estate property

Commercial construction

2,290

Commercial real estate property

Total real estate

6,172

Commercial

Business assets

Total

6,262

The total carrying amount and the total unpaid principal balance of impaired loans were as follows:


	December 31, 2019										Three months ended March 31, 2019
(in thousands)	Recorded investment		Unpaid principal balance		Related allowance		Average recorded investment		Interest income recognized*
With no related allowance recorded
Real estate:
Residential 1-4 family	$	6,817	$	7,207	$	—	$	7,991	$	160
Commercial real estate	195		200		—		—		—
Home equity line of credit	1,984		2,135		—		2,534		12
Residential land	3,091		3,294		—		2,036		26
Commercial construction	—		—		—		—		—
Residential construction	—		—		—		—		—
Commercial	1,948		2,285		—		3,973		—
Consumer	2		2		—		31		—
	$	14,037	$	15,123	$	—	$	16,565	$	198
With an allowance recorded
Real estate:
Residential 1-4 family	$	8,783	$	8,835	$	898	$	8,394	$	83
Commercial real estate	853		853		2		906		10
Home equity line of credit	10,089		10,099		322		11,823		130
Residential land	—		—		—		29		—
Commercial construction	—		—		—		—		—
Residential construction	—		—		—		—		—
Commercial	6,470		6,470		1,015		4,750		26
Consumer	505		505		454		57		1
	$	26,700	$	26,762	$	2,691	$	25,959	$	250
Total
Real estate:
Residential 1-4 family	$	15,600	$	16,042	$	898	$	16,385	$	243
Commercial real estate	1,048		1,053		2		906		10
Home equity line of credit	12,073		12,234		322		14,357		142
Residential land	3,091		3,294		—		2,065		26
Commercial construction	—		—		—		—		—
Residential construction	—		—		—		—		—
Commercial	8,418		8,755		1,015		8,723		26
Consumer	507		507		454		88		1
	$	40,737	$	41,885	$	2,691	$	42,524	$	448

* Since loan was classified as impaired.

Schedule of amortized intangible assets

Changes in the carrying value of MSRs were as follows:


(in thousands)	Gross carrying amount¹		Accumulated amortization		Valuation allowance		Net carrying amount

March 31, 2020	$	22,178	$	13,058	$	—	$	9,120
December 31, 2019	21,543		(12,442)		—		9,101

¹ Reflects impact of loans paid in full

Changes related to MSRs were as follows:


	Three months ended March 31
(in thousands)	2020		2019
Mortgage servicing rights
Beginning balance	$	9,101	$	8,062
Amount capitalized	636		230
Amortization	(617)		(395)
Other-than-temporary impairment	—		—
Carrying amount before valuation allowance	9,120		7,897
Valuation allowance for mortgage servicing rights
Beginning balance	—		—
Provision (recovery)	—		—
Other-than-temporary impairment	—		—
Ending balance	—		—
Net carrying value of mortgage servicing rights	$	9,120	$	7,897

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)	March 31, 2020			December 31, 2019
Unpaid principal balance	$	1,308,847		$	1,276,437
Weighted average note rate	3.94		%	3.96		%
Weighted average discount rate	9.3		%	9.3		%
Weighted average prepayment speed	16.7		%	11.4		%

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

December 31, 2019

Residential land

Fair value of property or collateral

Appraised value less 7% selling cost

N/A (2)

Total loans

(1) Represents 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)	March 31, 2020		December 31, 2019
Prepayment rate:
25 basis points adverse rate change	$	(1,052)	$	(950)
50 basis points adverse rate change	(1,921)		(1,947)
Discount rate:
25 basis points adverse rate change	(71)		(102)
50 basis points adverse rate change	(140)		(202)

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
March 31, 2020	$	81	$	—	$	81
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



March 31, 2020	$	81	$	105	$	—




December 31, 2019	115		130		—

Schedule of notional and fair value of derivatives

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


	March 31, 2020						December 31, 2019
(in thousands)	Notional amount		Fair value		Notional amount		Fair value
Interest rate lock commitments	$	63,662	$	1,852	$	23,171	$	297
Forward commitments	50,800		(585)		29,383		(42)

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	March 31, 2020						December 31, 2019
(in thousands)	Asset derivatives		Liability derivatives		Asset derivatives		Liability derivatives
Interest rate lock commitments	$	1,852	$	—	$	297	$	—
Forward commitments	—		585		3		45
	$	1,852	$	585	$	300	$	45

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 March 31
(in thousands)				2020			2019
Interest rate lock commitments	Mortgage banking income	$	1,555		$	371
Forward commitments	Mortgage banking income	(543)			(118)
		$	1,012		$	253