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Bank segment (Tables)

6 Months Ended

Jun. 30, 2020

Statements of Income and Comprehensive Income Data


	Three months ended June 30,						Six months ended June 30
(in thousands)	2020		2019		2020		2019
Interest and dividend income
Interest and fees on loans	$	53,541	$	58,620	$	109,086	$	116,480
Interest and dividends on investment securities	6,288		7,535		15,718		18,163
Total interest and dividend income	59,829		66,155		124,804		134,643
Interest expense
Interest on deposit liabilities	3,071		4,287		6,658		8,539
Interest on other borrowings	75		411		388		939
Total interest expense	3,146		4,698		7,046		9,478
Net interest income	56,683		61,457		117,758		125,165
Provision for credit losses	15,133		7,688		25,534		14,558
Net interest income after provision for credit losses	41,550		53,769		92,224		110,607
Noninterest income
Fees from other financial services	3,102		4,798		7,673		9,360
Fee income on deposit liabilities	2,897		5,004		8,010		10,082
Fee income on other financial products	1,212		1,830		3,084		3,423
Bank-owned life insurance	1,673		2,390		2,467		4,649
Mortgage banking income	6,252		976		8,252		1,590
Gain on sale of investment securities, net	9,275		—		9,275		—
Other income, net	(251)		534		162		992
Total noninterest income	24,160		15,532		38,923		30,096
Noninterest expense
Compensation and employee benefits	25,079		25,750		50,856		51,262
Occupancy	5,442		5,479		10,709		10,149
Data processing	3,849		3,852		7,686		7,590
Services	2,474		2,606		5,283		5,032
Equipment	2,290		2,189		4,629		4,253
Office supplies, printing and postage	1,049		1,663		2,390		3,023
Marketing	379		1,323		1,181		2,313
FDIC insurance	751		628		853		1,254
Other expense¹	7,063		4,519		11,257		8,373
Total noninterest expense	48,376		48,009		94,844		93,249
Income before income taxes	17,334		21,292		36,303		47,454
Income taxes	3,320		4,276		6,528		9,599
Net income	14,014		17,016		29,775		37,855
Other comprehensive income (loss), net of taxes	(280)		14,275		19,567		20,527
Comprehensive income	$	13,734	$	31,291	$	49,342	$	58,382

¹The three- and six-month periods ended June 30, 2020 include approximately $3.7 million and $3.8 million, respectively, of certain significant direct and incremental COVID-19 related costs. These costs, which have been recorded in Other expense, include $2.3 million of compensation expense and $1.1 million of enhanced cleaning and sanitation costs.

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


	Three months ended June 30,						Six months ended June 30
(in thousands)	2020		2019		2020		2019
Interest and dividend income	$	59,829	$	66,155	$	124,804	$	134,643
Noninterest income	24,160		15,532		38,923		30,096
Less: Gain on sale of investment securities, net	(9,275)		—		(9,275)		—
*Revenues-Bank	74,714		81,687		154,452		164,739
Total interest expense	3,146		4,698		7,046		9,478
Provision for credit losses	15,133		7,688		25,534		14,558
Noninterest expense	48,376		48,009		94,844		93,249
Less: Retirement defined benefits gain (expense)—other than service costs	(434)		40		(868)		80
*Expenses-Bank	66,221		60,435		126,556		117,365
*Operating income-Bank	8,493		21,252		27,896		47,374
Add back: Retirement defined benefits (gain) expense—other than service costs	434		(40)		868		(80)
Add back: Gain on sale of investment securities, net	(9,275)		—		(9,275)		—
Income before income taxes	$	17,334	$	21,292	$	36,303	$	47,454

Schedule of statements of comprehensive income data

Statements of Income and Comprehensive Income Data


	Three months ended June 30,						Six months ended June 30
(in thousands)	2020		2019		2020		2019
Interest and dividend income
Interest and fees on loans	$	53,541	$	58,620	$	109,086	$	116,480
Interest and dividends on investment securities	6,288		7,535		15,718		18,163
Total interest and dividend income	59,829		66,155		124,804		134,643
Interest expense
Interest on deposit liabilities	3,071		4,287		6,658		8,539
Interest on other borrowings	75		411		388		939
Total interest expense	3,146		4,698		7,046		9,478
Net interest income	56,683		61,457		117,758		125,165
Provision for credit losses	15,133		7,688		25,534		14,558
Net interest income after provision for credit losses	41,550		53,769		92,224		110,607
Noninterest income
Fees from other financial services	3,102		4,798		7,673		9,360
Fee income on deposit liabilities	2,897		5,004		8,010		10,082
Fee income on other financial products	1,212		1,830		3,084		3,423
Bank-owned life insurance	1,673		2,390		2,467		4,649
Mortgage banking income	6,252		976		8,252		1,590
Gain on sale of investment securities, net	9,275		—		9,275		—
Other income, net	(251)		534		162		992
Total noninterest income	24,160		15,532		38,923		30,096
Noninterest expense
Compensation and employee benefits	25,079		25,750		50,856		51,262
Occupancy	5,442		5,479		10,709		10,149
Data processing	3,849		3,852		7,686		7,590
Services	2,474		2,606		5,283		5,032
Equipment	2,290		2,189		4,629		4,253
Office supplies, printing and postage	1,049		1,663		2,390		3,023
Marketing	379		1,323		1,181		2,313
FDIC insurance	751		628		853		1,254
Other expense¹	7,063		4,519		11,257		8,373
Total noninterest expense	48,376		48,009		94,844		93,249
Income before income taxes	17,334		21,292		36,303		47,454
Income taxes	3,320		4,276		6,528		9,599
Net income	14,014		17,016		29,775		37,855
Other comprehensive income (loss), net of taxes	(280)		14,275		19,567		20,527
Comprehensive income	$	13,734	$	31,291	$	49,342	$	58,382

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


	Three months ended June 30,						Six months ended June 30
(in thousands)	2020		2019		2020		2019
Interest and dividend income	$	59,829	$	66,155	$	124,804	$	134,643
Noninterest income	24,160		15,532		38,923		30,096
Less: Gain on sale of investment securities, net	(9,275)		—		(9,275)		—
*Revenues-Bank	74,714		81,687		154,452		164,739
Total interest expense	3,146		4,698		7,046		9,478
Provision for credit losses	15,133		7,688		25,534		14,558
Noninterest expense	48,376		48,009		94,844		93,249
Less: Retirement defined benefits gain (expense)—other than service costs	(434)		40		(868)		80
*Expenses-Bank	66,221		60,435		126,556		117,365
*Operating income-Bank	8,493		21,252		27,896		47,374
Add back: Retirement defined benefits (gain) expense—other than service costs	434		(40)		868		(80)
Add back: Gain on sale of investment securities, net	(9,275)		—		(9,275)		—
Income before income taxes	$	17,334	$	21,292	$	36,303	$	47,454

Schedule of balance sheets data

Balance Sheets Data


(in thousands)	June 30, 2020						December 31, 2019
Assets
Cash and due from banks			$	140,968			$	129,770
Interest-bearing deposits			365,996				48,628

Investment securities
Available-for-sale, at fair value			1,389,633				1,232,826
Held-to-maturity, at amortized cost (fair value of $131,131 and $143,467, respectively)			124,623				139,451
Stock in Federal Home Loan Bank, at cost			9,880				8,434
Loans held for investment			5,437,817				5,121,176
Allowance for credit losses			(81,307)				(53,355)
Net loans			5,356,510				5,067,821
Loans held for sale, at lower of cost or fair value			37,143				12,286
Other			512,722				511,611
Goodwill			82,190				82,190
Total assets			$	8,019,665			$	7,233,017
Liabilities and shareholder’s equity
Deposit liabilities—noninterest-bearing			$	2,422,042			$	1,909,682
Deposit liabilities—interest-bearing			4,607,910				4,362,220
Other borrowings			124,975				115,110
Other			158,344				146,954
Total liabilities			7,313,271				6,533,966
Commitments and contingencies
Common stock			1				1
Additional paid-in capital			350,826				349,453
Retained earnings			344,662				358,259
Accumulated other comprehensive income (loss), net of taxes
Net unrealized gains on securities	$	21,264			$	2,481
Retirement benefit plans	(10,359)		10,905		(11,143)		(8,662)
Total shareholder’s equity			706,394				699,051
Total liabilities and shareholder’s equity			$	8,019,665			$	7,233,017

Other assets
Bank-owned life insurance			$	159,951			$	157,465
Premises and equipment, net			203,217				204,449

Accrued interest receivable			23,381				19,365
Mortgage-servicing rights			9,647				9,101
Low-income housing investments			61,632				66,302
Real estate acquired in settlement of loans, net			43				—

Other			54,851				54,929
			$	512,722			$	511,611
Other liabilities
Accrued expenses			$	40,382			$	45,822
Federal and state income taxes payable			18,021				14,996
Cashier’s checks			25,284				23,647
Advance payments by borrowers			10,458				10,486
Other			64,199				52,003
			$	158,344			$	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
June 30, 2020
Available-for-sale
U.S. Treasury and federal agency obligations	$	100,195	$	2,219	$	—	$	102,414	—	$	—	$	—	—	$	—	$	—
Mortgage-backed securities*	1,201,796		25,469		(280)		1,226,985		6	96,296		(258)		1	1,803		(22)
Corporate bonds	29,767		1,640		—		31,407		—	—		—		—	—		—
Mortgage revenue bonds	28,827		—		—		28,827		—					—	—		—
	$	1,360,585	$	29,328	$	(280)	$	1,389,633	6	$	96,296	$	(258)	1	$	1,803	$	(22)
Held-to-maturity
Mortgage-backed securities*	$	124,623	$	6,508	$	—	$	131,131	—	$	—	$	—	—	$	—	$	—
	$	124,623	$	6,508	$	—	$	131,131	—	$	—	$	—	—	$	—	$	—
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:


June 30, 2020	Amortized cost		Fair value
(in thousands)
Available-for-sale
Due in one year or less	$	65,330	$	65,776
Due after one year through five years	44,570		46,378
Due after five years through ten years	33,462		35,067
Due after ten years	15,427		15,427
	158,789		162,648
Mortgage-backed securities — issued or guaranteed by U.S. Government agencies or sponsored agencies	1,201,796		1,226,985
Total available-for-sale securities	$	1,360,585	$	1,389,633
Held-to-maturity
Mortgage-backed securities — issued or guaranteed by U.S. Government agencies or sponsored agencies	$	124,623	$	131,131
Total held-to-maturity securities	$	124,623	$	131,131

Schedule of components of loans receivable

The components of loans were summarized as follows:


	June 30, 2020		December 31, 2019
(in thousands)
Real estate:
Residential 1-4 family	$	2,123,226	$	2,178,135
Commercial real estate	855,566		824,830
Home equity line of credit	1,065,264		1,092,125
Residential land	13,224		14,704
Commercial construction	92,904		70,605
Residential construction	10,759		11,670
Total real estate	4,160,943		4,192,069
Commercial	1,073,829		670,674
Consumer	216,030		257,921
Total loans	5,450,802		5,120,664
Deferred fees and discounts	(12,985)		512
Allowance for credit losses	(81,307)		(53,355)
Total loans, net	$	5,356,510	$	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 June 30, 2020
Allowance for credit losses:
Beginning balance	$	4,476	$	16,587	$	6,225	$	352	$	3,446	$	14	$	12,977	$	33,007	$	77,084
Charge-offs	(7)		—		—		(343)		—		—		(699)		(6,331)		(7,380)
Recoveries	2		—		—		5		—		—		106		657		770
Provision	(560)		4,513		(11)		342		1,311		—		1,484		3,754		10,833
Ending balance	$	3,911	$	21,100	$	6,214	$	356	$	4,757	$	14	$	13,868	$	31,087	$	81,307
Three months ended June 30, 2019
Allowance for credit losses:
Beginning balance	$	1,911	$	14,825	$	6,493	$	425	$	2,843	$	3	$	10,814	$	16,983	$	54,297
Charge-offs	(5)		—		(19)		(4)		—		—		(494)		(5,102)		(5,624)
Recoveries	8		—		4		7		—		—		1,281		764		2,064
Provision	101		986		403		109		(797)		(1)		1,472		5,415		7,688
Ending balance	$	2,015	$	15,811	$	6,881	$	537	$	2,046	$	2	$	13,073	$	18,060	$	58,425
Six months ended June 30, 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)		—		—		(351)		—		—		(1,068)		(12,585)		(14,011)
Recoveries	55		—		6		14		—		—		292		1,421		1,788
Provision	(667)		5,839		(173)		308		2,371		(3)		3,477		9,582		20,734
Ending balance	$	3,911	$	21,100	$	6,214	$	356	$	4,757	$	14	$	13,868	$	31,087	$	81,307







Six months ended June 30, 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	(19)		—		(19)		(4)		—		—		(1,112)		(10,661)		(11,815)
Recoveries	617		—		9		14		—		—		1,461		1,462		3,563
Provision	(559)		1,306		520		48		(744)		(2)		3,499		10,490		14,558
Ending balance	$	2,015	$	15,811	$	6,881	$	537	$	2,046	$	2	$	13,073	$	18,060	$	58,425
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 June 30, 2020
Allowance for loan commitments:
Beginning balance	$	300	$	3,191	$	309	$	3,800
Provision	—		4,309		(9)		4,300
Ending balance	$	300	$	7,500	$	300	$	8,100
Six months ended June 30, 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	—		4,824		(24)		4,800
Ending balance	$	300	$	7,500	$	300	$	8,100

Schedule of credit risk profile by internally assigned grade for loans

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		Converted to term loans		Total
June 30, 2020
Residential 1-4 family
Current	$	176,536	$	272,951	$	165,584	$	258,111	$	215,920	$	1,029,434	$	—	$	—	$	2,118,536
30-59 days past due	—		—		—		—		—		2,192		—		—		2,192
60-89 days past due	—		—		—		—		—		606		—		—		606
Greater than 89 days past due	—		—		—		353		—		1,539		—		—		1,892
	176,536		272,951		165,584		258,464		215,920		1,033,771		—		—		2,123,226
Home equity line of credit
Current	—		—		—		—		—		—		1,027,589		33,797		1,061,386
30-59 days past due	—		—		—		—		—		—		790		312		1,102
60-89 days past due	—		—		—		—		—		—		408		175		583
Greater than 89 days past due	—		—		—		—		—		—		1,358		835		2,193
	—		—		—		—		—		—		1,030,145		35,119		1,065,264
Residential land
Current	2,095		4,975		2,024		2,041		22		2,067		—		—		13,224
30-59 days past due	—		—		—		—		—		—		—		—		—
60-89 days past due	—		—		—		—		—		—		—		—		—
Greater than 89 days past due	—		—		—		—		—		—		—		—		—
	2,095		4,975		2,024		2,041		22		2,067		—		—		13,224
Residential construction
Current	2,725		5,034		974		2,026		—		—		—		—		10,759
30-59 days past due	—		—		—		—		—		—		—		—		—
60-89 days past due	—		—		—		—		—		—		—		—		—
Greater than 89 days past due	—		—		—		—		—		—		—		—		—
	2,725		5,034		974		2,026		—		—		—		—		10,759
Consumer
Current	25,186		87,908		53,640		14,851		1,602		505		21,691		3,062		208,445
30-59 days past due	105		573		583		229		18		—		200		44		1,752
60-89 days past due	83		741		792		209		24		—		248		67		2,164
Greater than 89 days past due	95		1,258		1,172		483		73		—		424		164		3,669
	25,469		90,480		56,187		15,772		1,717		505		22,563		3,337		216,030
Commercial real estate
Pass	89,882		77,350		78,115		29,390		56,246		172,941		17,219		—		521,143
Special Mention	9,684		41,662		54,791		35,400		69,418		60,098		—		—		271,053
Substandard	—		488		1,930		605		3,669		56,678		—		—		63,370
Doubtful	—		—		—		—		—		—		—		—		—
	99,566		119,500		134,836		65,395		129,333		289,717		17,219		—		855,566
Commercial construction
Pass	6,933		13,458		29,873		—		7,472		—		14,060		—		71,796
Special Mention	819		—		—		18,000		—		—		—		—		18,819
Substandard	—		—		—		—		—		2,289		—		—		2,289
Doubtful	—		—		—		—		—		—		—		—		—
	7,752		13,458		29,873		18,000		7,472		2,289		14,060		—		92,904
Commercial
Pass	450,699		154,672		94,309		33,771		13,876		38,911		92,475		14,868		893,581
Special Mention	6,593		29,695		4,759		10,578		38,970		20,813		44,521		11,222		167,151
Substandard	165		4,681		145		1,637		1,241		3,139		607		1,482		13,097
Doubtful	—		—		—		—		—		—		—		—		—
	457,457		189,048		99,213		45,986		54,087		62,863		137,603		27,572		1,073,829
Total loans	$	771,600	$	695,446	$	488,691	$	407,684	$	408,551	$	1,391,212	$	1,221,590	$	66,028	$	5,450,802

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
June 30, 2020
Real estate:
Residential 1-4 family	$	2,192	$	606	$	1,892	$	4,690	$	2,118,536	$	2,123,226	$	—
Commercial real estate	642		—		—		642		854,924		855,566		—
Home equity line of credit	1,102		583		2,193		3,878		1,061,386		1,065,264		—
Residential land	—		—		—		—		13,224		13,224		—
Commercial construction	—		—		2,289		2,289		90,615		92,904		—
Residential construction	—		—		—		—		10,759		10,759		—
Commercial	461		575		452		1,488		1,072,341		1,073,829		—
Consumer	1,752		2,164		3,669		7,585		208,445		216,030		—
Total loans	$	6,149	$	3,928	$	10,495	$	20,572	$	5,430,230	$	5,450,802	$	—
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 were as follows:


(in thousands)	June 30, 2020								December 31, 2019
	With a Related ACL		Without a Related ACL		Total		Total
Real estate:
Residential 1-4 family	$	7,584	$	3,395	$	10,979	$	11,395
Commercial real estate	16,241		—		16,241		195
Home equity line of credit	6,249		1,616		7,865		6,638
Residential land	—		413		413		448
Commercial construction	—		2,289		2,289		—
Residential construction	—		—		—		—
Commercial	616		2,939		3,555		5,947
Consumer	5,637		—		5,637		5,113
Total nonaccrual loans	$	36,327	$	10,652	$	46,979	$	29,736

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


(in thousands)	June 30, 2020		December 31, 2019
Real estate:
Residential 1-4 family	$	8,667	$	9,869
Commercial real estate	1,016		853
Home equity line of credit	9,430		10,376
Residential land	2,007		2,644
Commercial construction	—		—
Residential construction	—		—
Commercial	3,203		2,614
Consumer	55		57
Total troubled debt restructured loans accruing interest	$	24,378	$	26,413

Schedule of loan modifications

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


Loans modified as a TDR	Three months ended June 30, 2020								Six months ended June 30, 2020
(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	$	147	$	7
Commercial real estate	—	—		—		2	16,430		4,301
Home equity line of credit	2	19		3		2	19		3
Residential land	2	330		—		2	330		—
Commercial construction	—	—		—		—	—		—
Residential construction	—	—		—		—	—		—
Commercial	—	—		—		4	751		275
Consumer	—	—		—		—	—		—
	4	$	349	$	3	11	$	17,677	$	4,586

	Three months ended June 30, 2019								Six months ended June 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	$	469	$	154	9	$	1,501	$	161
Commercial real estate	—	—		—		—	—		—
Home equity line of credit	2	311		59		3	432		83
Residential land	2	825		—		2	825		—
Commercial construction	—	—		—		—	—		—
Residential construction	—	—		—		—	—		—
Commercial	2	1,317		133		3	1,507		150
Consumer	—	—		—		—	—		—
	7	$	2,922	$	346	17	$	4,265	$	394

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:

June 30, 2020

Amortized cost

Collateral type

(in thousands)

Real estate:

Residential 1-4 family

1,795

Residential real estate property

Home equity line of credit

1,387

Residential real estate property

Commercial construction

2,289

Commercial real estate property

Total real estate

5,471

Commercial

Business assets

Total

5,561

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


	December 31, 2019										Three months ended June 30, 2019				Six months ended June 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	$	6,817	$	7,207	$	—	$	8,993	$	87	$	8,492	$	247
Commercial real estate	195		200		—		—		—		—		—
Home equity line of credit	1,984		2,135		—		1,940		54		2,238		66
Residential land	3,091		3,294		—		2,280		24		2,158		50
Commercial construction	—		—		—		—		—		—		—
Residential construction	—		—		—		—		—		—		—
Commercial	1,948		2,285		—		4,626		—		4,299		—
Consumer	2		2		—		31		—		31		—
	$	14,037	$	15,123	$	—	$	17,870	$	165	$	17,218	$	363
With an allowance recorded
Real estate:
Residential 1-4 family	$	8,783	$	8,835	$	898	$	8,440	$	96	$	8,417	$	179
Commercial real estate	853		853		2		894		9		900		19
Home equity line of credit	10,089		10,099		322		11,665		152		11,743		282
Residential land	—		—		—		79		—		54		—
Commercial construction	—		—		—		—		—		—		—
Residential construction	—		—		—		—		—		—		—
Commercial	6,470		6,470		1,015		10,997		30		7,874		56
Consumer	505		505		454		288		1		173		2
	$	26,700	$	26,762	$	2,691	$	32,363	$	288	$	29,161	$	538
Total
Real estate:
Residential 1-4 family	$	15,600	$	16,042	$	898	$	17,433	$	183	$	16,909	$	426
Commercial real estate	1,048		1,053		2		894		9		900		19
Home equity line of credit	12,073		12,234		322		13,605		206		13,981		348
Residential land	3,091		3,294		—		2,359		24		2,212		50
Commercial construction	—		—		—		—		—		—		—
Residential construction	—		—		—		—		—		—		—
Commercial	8,418		8,755		1,015		15,623		30		12,173		56
Consumer	507		507		454		319		1		204		2
	$	40,737	$	41,885	$	2,691	$	50,233	$	453	$	46,379	$	901

* 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
June 30, 2020	$	23,904	$	(13,993)	$	(264)	$	9,647
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 June 30,						Six months ended June 30
(in thousands)	2020		2019		2020		2019
Mortgage servicing rights
Beginning balance	$	9,120	$	7,897	$	9,101	$	8,062
Amount capitalized	1,726		632		2,362		862
Amortization	(935)		(426)		(1,552)		(821)
Other-than-temporary impairment	—		—		—		—
Carrying amount before valuation allowance	9,911		8,103		9,911		8,103
Valuation allowance for mortgage servicing rights
Beginning balance	—		—		—		—
Provision (recovery)	264		—		264		—
Other-than-temporary impairment	—		—		—		—
Ending balance	264		—		264		—
Net carrying value of mortgage servicing rights	$	9,647	$	8,103	$	9,647	$	8,103

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)	June 30, 2020			December 31, 2019
Unpaid principal balance	$	1,360,920		$	1,276,437
Weighted average note rate	3.87		%	3.96		%
Weighted average discount rate	9.3		%	9.3		%
Weighted average prepayment speed	16.9		%	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










June 30, 2020
Mortgage servicing rights	$	5,419	Discounted cash flow	Prepayment Speed	13.9% - 18.4%		16.6	%
				Discount rate	9.3	%	9.3	%
December 31, 2019
Residential land	$	25	Fair value of property or collateral	Appraised value less 7% selling cost	N/A (2)		N/A (2)
Total loans	$	25

(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)	June 30, 2020		December 31, 2019
Prepayment rate:
25 basis points adverse rate change	$	(539)	$	(950)
50 basis points adverse rate change	(1,062)		(1,947)
Discount rate:
25 basis points adverse rate change	(64)		(102)
50 basis points adverse rate change	(128)		(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
June 30, 2020	$	95	$	—	$	95
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



June 30, 2020	$	95	$	143	$	—




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:


	June 30, 2020						December 31, 2019
(in thousands)	Notional amount		Fair value		Notional amount		Fair value
Interest rate lock commitments	$	70,190	$	2,341	$	23,171	$	297
Forward commitments	57,750		(287)		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	June 30, 2020						December 31, 2019
(in thousands)	Asset derivatives		Liability derivatives		Asset derivatives		Liability derivatives
Interest rate lock commitments	$	2,341	$	—	$	297	$	—
Forward commitments	—		287		3		45
	$	2,341	$	287	$	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 June 30,									Six months ended June 30
(in thousands)				2020			2019			2020			2019
Interest rate lock commitments	Mortgage banking income	$	489		$	11		$	2,044		$	382
Forward commitments	Mortgage banking income	298			46			(245)			(72)
		$	787		$	57		$	1,799		$	310