Fair value measurements (Tables)

6 Months Ended

Jun. 30, 2020

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
June 30, 2020
Financial assets
HEI consolidated

Available-for-sale investment securities	$	1,389,633	$	—	$	1,360,806	$	28,827	$	1,389,633
Held-to-maturity investment securities	124,623		—		131,131		—		131,131
Stock in Federal Home Loan Bank	9,880		—		9,880		—		9,880
Loans, net	5,393,653		—		37,345		5,540,050		5,577,395
Mortgage servicing rights	9,647		—		—		10,328		10,328

Derivative assets	70,190		—		2,341		—		2,341


Financial liabilities
HEI consolidated
Deposit liabilities	657,627		—		663,296		—		663,296
Short-term borrowings—other than bank	131,180		—		131,180		—		131,180
Other bank borrowings	124,975		—		124,966		—		124,966
Long-term debt, net—other than bank	2,070,224		—		2,427,374		—		2,427,374
Derivative liabilities	81,861		287		4,843		—		5,130
Hawaiian Electric consolidated
Short-term borrowings	49,919		—		49,919		—		49,919
Long-term debt, net	1,574,955		—		1,895,365		—		1,895,365


December 31, 2019
Financial assets
HEI consolidated

Available-for-sale investment securities	$	1,232,826	$	—	$	1,204,229	$	28,597	$	1,232,826
Held-to-maturity investment securities	139,451		—		143,467		—		143,467
Stock in Federal Home Loan Bank	8,434		—		8,434		—		8,434
Loans, net	5,080,107		—		12,295		5,145,242		5,157,537
Mortgage servicing rights	9,101		—		—		12,379		12,379

Derivative assets	25,179		—		300		—		300


Financial liabilities
HEI consolidated
Deposit liabilities	769,825		—		765,976		—		765,976
Short-term borrowings—other than bank	185,710		—		185,710		—		185,710
Other bank borrowings	115,110		—		115,107		—		115,107
Long-term debt, net—other than bank	1,964,365		—		2,156,927		—		2,156,927
Derivative liabilities	51,375		33		2,185		—		2,218
Hawaiian Electric consolidated
Short-term borrowings	88,987		—		88,987		—		88,987
Long-term debt, net	1,497,667		—		1,670,189		—		1,670,189

Schedule of assets measured at fair value on a recurring basis

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


	June 30, 2020										December 31, 2019
	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	$	—	$	1,226,985	$	—	$	—	$	1,026,385	$	—
U.S. Treasury and federal agency obligations	—		102,414		—		—		117,787		—
Corporate bonds	—		31,407		—		—		60,057		—
Mortgage revenue bonds	—		—		28,827		—		—		28,597
	$	—	$	1,360,806	$	28,827	$	—	$	1,204,229	$	28,597
Derivative assets
Interest rate lock commitments (bank segment)¹	$	—	$	2,341	$	—	$	—	$	297	$	—
Forward commitments (bank segment)¹	—		—		—		—		3		—

	$	—	$	2,341	$	—	$	—	$	300	$	—
Derivative liabilities

Forward commitments (bank segment)¹	$	287	$	—	$	—	$	33	$	12	$	—

Interest rate swap (Other segment)²	—		4,843		—		—		2,173		—
	$	287	$	4,843	$	—	$	33	$	2,185	$	—

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 are included in other liabilities in the balance sheets.

Schedule of changes in 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:


	Three months ended June 30						Six months ended June 30
Mortgage revenue bonds	2020		2019		2020		2019
(in thousands)
Beginning balance	$	28,726	$	27,970	$	28,597	$	23,636
Principal payments received	—		—		—		—
Purchases	101		196		230		4,530
Unrealized gain (loss) included in other comprehensive income	—		—		—		—
Ending balance	$	28,827	$	28,166	$	28,827	$	28,166

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
June 30, 2020



Mortgage servicing rights	$	5,419	$	—	$	—	$	5,419
December 31, 2019
Loans	25		—		—		25

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:


(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.