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Bank segment (Tables)

9 Months Ended

Sep. 30, 2020

Statements of Income and Comprehensive Income Data


	Three months ended September 30				Nine months ended September 30
(in thousands)	2020		2019		2020		2019
Interest and dividend income
Interest and fees on loans	$	52,419	$	59,260	$	161,505	$	175,740
Interest and dividends on investment securities	7,221		7,599		22,939		25,762
Total interest and dividend income	59,640		66,859		184,444		201,502
Interest expense
Interest on deposit liabilities	2,287		4,384		8,945		12,923
Interest on other borrowings	61		422		449		1,361
Total interest expense	2,348		4,806		9,394		14,284
Net interest income	57,292		62,053		175,050		187,218
Provision for credit losses	13,970		3,315		39,504		17,873
Net interest income after provision for credit losses	43,322		58,738		135,546		169,345
Noninterest income
Fees from other financial services	4,233		5,085		11,906		14,445
Fee income on deposit liabilities	3,832		5,320		11,842		15,402
Fee income on other financial products	1,524		1,706		4,608		5,129
Bank-owned life insurance	1,965		1,660		4,432		6,309
Mortgage banking income	7,681		1,490		15,933		3,080
Gain on sale of investment securities, net	—		653		9,275		653
Other income, net	(231)		428		(69)		1,420
Total noninterest income	19,004		16,342		57,927		46,438
Noninterest expense
Compensation and employee benefits	26,431		25,364		77,287		76,626
Occupancy	5,693		5,694		16,402		15,843
Data processing	3,366		3,763		11,052		11,353
Services	2,624		2,829		7,907		7,861
Equipment	2,001		2,163		6,630		6,416
Office supplies, printing and postage	1,187		1,297		3,577		4,320
Marketing	727		1,142		1,908		3,455
FDIC insurance	714		(5)		1,567		1,249
Other expense1	4,556		3,676		15,813		12,049
Total noninterest expense	47,299		45,923		142,143		139,172
Income before income taxes	15,027		29,157		51,330		76,611
Income taxes	2,877		6,269		9,405		15,868
Net income	12,150		22,888		41,925		60,743
Other comprehensive income, net of taxes	1,393		3,809		20,960		24,336
Comprehensive income	$	13,543	$	26,697	$	62,885	$	85,079

1 The three and nine-month periods ended September 30, 2020 include approximately $0.7 million and $4.5 million, respectively, of certain direct and incremental COVID-19 related costs. For the nine months ended September 30, 2020, these costs, which have been recorded in Other expense, include $2.4 million of compensation expense and $1.7 million of enhanced cleaning and sanitation costs.

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


	Three months ended September 30,				Nine months ended September 30
(in thousands)	2020		2019		2020		2019
Interest and dividend income	$	59,640	$	66,859	$	184,444	$	201,502
Noninterest income	19,004		16,342		57,927		46,438
Less: Gain on sale of investment securities, net	—		(653)		(9,275)		(653)
*Revenues-Bank	78,644		82,548		233,096		247,287
Total interest expense	2,348		4,806		9,394		14,284
Provision for credit losses	13,970		3,315		39,504		17,873
Noninterest expense	47,299		45,923		142,143		139,172
Less: Retirement defined benefits gain (expense)—other than service costs	(473)		196		(1,341)		276
*Expenses-Bank	63,144		54,240		189,700		171,605
*Operating income-Bank	15,500		28,308		43,396		75,682
Add back: Retirement defined benefits (gain) expense—other than service costs	473		(196)		1,341		(276)
Add back: Gain on sale of investment securities, net	—		(653)		(9,275)		(653)
Income before income taxes	$	15,027	$	29,157	$	51,330	$	76,611

Schedule of statements of comprehensive income data

Statements of Income and Comprehensive Income Data


	Three months ended September 30				Nine months ended September 30
(in thousands)	2020		2019		2020		2019
Interest and dividend income
Interest and fees on loans	$	52,419	$	59,260	$	161,505	$	175,740
Interest and dividends on investment securities	7,221		7,599		22,939		25,762
Total interest and dividend income	59,640		66,859		184,444		201,502
Interest expense
Interest on deposit liabilities	2,287		4,384		8,945		12,923
Interest on other borrowings	61		422		449		1,361
Total interest expense	2,348		4,806		9,394		14,284
Net interest income	57,292		62,053		175,050		187,218
Provision for credit losses	13,970		3,315		39,504		17,873
Net interest income after provision for credit losses	43,322		58,738		135,546		169,345
Noninterest income
Fees from other financial services	4,233		5,085		11,906		14,445
Fee income on deposit liabilities	3,832		5,320		11,842		15,402
Fee income on other financial products	1,524		1,706		4,608		5,129
Bank-owned life insurance	1,965		1,660		4,432		6,309
Mortgage banking income	7,681		1,490		15,933		3,080
Gain on sale of investment securities, net	—		653		9,275		653
Other income, net	(231)		428		(69)		1,420
Total noninterest income	19,004		16,342		57,927		46,438
Noninterest expense
Compensation and employee benefits	26,431		25,364		77,287		76,626
Occupancy	5,693		5,694		16,402		15,843
Data processing	3,366		3,763		11,052		11,353
Services	2,624		2,829		7,907		7,861
Equipment	2,001		2,163		6,630		6,416
Office supplies, printing and postage	1,187		1,297		3,577		4,320
Marketing	727		1,142		1,908		3,455
FDIC insurance	714		(5)		1,567		1,249
Other expense1	4,556		3,676		15,813		12,049
Total noninterest expense	47,299		45,923		142,143		139,172
Income before income taxes	15,027		29,157		51,330		76,611
Income taxes	2,877		6,269		9,405		15,868
Net income	12,150		22,888		41,925		60,743
Other comprehensive income, net of taxes	1,393		3,809		20,960		24,336
Comprehensive income	$	13,543	$	26,697	$	62,885	$	85,079

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


	Three months ended September 30,				Nine months ended September 30
(in thousands)	2020		2019		2020		2019
Interest and dividend income	$	59,640	$	66,859	$	184,444	$	201,502
Noninterest income	19,004		16,342		57,927		46,438
Less: Gain on sale of investment securities, net	—		(653)		(9,275)		(653)
*Revenues-Bank	78,644		82,548		233,096		247,287
Total interest expense	2,348		4,806		9,394		14,284
Provision for credit losses	13,970		3,315		39,504		17,873
Noninterest expense	47,299		45,923		142,143		139,172
Less: Retirement defined benefits gain (expense)—other than service costs	(473)		196		(1,341)		276
*Expenses-Bank	63,144		54,240		189,700		171,605
*Operating income-Bank	15,500		28,308		43,396		75,682
Add back: Retirement defined benefits (gain) expense—other than service costs	473		(196)		1,341		(276)
Add back: Gain on sale of investment securities, net	—		(653)		(9,275)		(653)
Income before income taxes	$	15,027	$	29,157	$	51,330	$	76,611

Schedule of balance sheets data

Balance Sheets Data


(in thousands)	September 30, 2020				December 31, 2019
Assets
Cash and due from banks			$	150,087			$	129,770
Interest-bearing deposits			10,918				48,628

Investment securities
Available-for-sale, at fair value			1,747,658				1,232,826
Held-to-maturity, at amortized cost (fair value of $138,622 and $143,467, respectively)			133,858				139,451
Stock in Federal Home Loan Bank, at cost			10,920				8,434
Loans held for investment			5,480,902				5,121,176
Allowance for credit losses			(91,459)				(53,355)
Net loans			5,389,443				5,067,821
Loans held for sale, at lower of cost or fair value			16,806				12,286
Other			533,865				511,611
Goodwill			82,190				82,190
Total assets			$	8,075,745			$	7,233,017
Liabilities and shareholder’s equity
Deposit liabilities—noninterest-bearing			$	2,424,539			$	1,909,682
Deposit liabilities—interest-bearing			4,613,598				4,362,220
Other borrowings			151,875				115,110
Other			165,300				146,954
Total liabilities			7,355,312				6,533,966
Commitments and contingencies
Common stock			1				1
Additional paid-in capital			351,322				349,453
Retained earnings			356,812				358,259
Accumulated other comprehensive income (loss), net of taxes
Net unrealized gains on securities	$	22,248			$	2,481
Retirement benefit plans	(9,950)		12,298		(11,143)		(8,662)
Total shareholder’s equity			720,433				699,051
Total liabilities and shareholder’s equity			$	8,075,745			$	7,233,017

Other assets
Bank-owned life insurance			$	161,206			$	157,465
Premises and equipment, net			206,190				204,449

Accrued interest receivable			24,770				19,365
Mortgage-servicing rights			9,553				9,101
Low-income housing investments			71,467				66,302
Real estate acquired in settlement of loans, net			42				—

Other			60,637				54,929
			$	533,865			$	511,611
Other liabilities
Accrued expenses			$	52,170			$	45,822
Federal and state income taxes payable			9,750				14,996
Cashier’s checks			28,638				23,647
Advance payments by borrowers			5,413				10,486
Other			69,329				52,003
			$	165,300			$	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
September 30, 2020
Available-for-sale
U.S. Treasury and federal agency obligations	$	61,359	$	2,229	$	—	$	63,588	—	$	—	$	—	—	$	—	$	—
Mortgage-backed securities*	1,598,949		27,580		(981)		1,625,548		17	304,930		(981)		—	—		—
Corporate bonds	29,772		1,565		—		31,337		—	—		—		—	—		—
Mortgage revenue bonds	27,185		—		—		27,185		—					—	—		—
	$	1,717,265	$	31,374	$	(981)	$	1,747,658	17	$	304,930	$	(981)	—	$	—	$	—
Held-to-maturity
Mortgage-backed securities*	$	133,858	$	4,878	$	(114)	$	138,622	2	$	28,486	$	(114)	—	$	—	$	—
	$	133,858	$	4,878	$	(114)	$	138,622	2	$	28,486	$	(114)	—	$	—	$	—
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:


September 30, 2020	Amortized cost		Fair value
(in thousands)
Available-for-sale
Due in one year or less	$	16,952	$	17,193
Due after one year through five years	41,941		43,735
Due after five years through ten years	32,238		33,997
Due after ten years	27,185		27,185
	118,316		122,110
Mortgage-backed securities — issued or guaranteed by U.S. Government agencies or sponsored agencies	1,598,949		1,625,548
Total available-for-sale securities	$	1,717,265	$	1,747,658
Held-to-maturity
Mortgage-backed securities — issued or guaranteed by U.S. Government agencies or sponsored agencies	$	133,858	$	138,622
Total held-to-maturity securities	$	133,858	$	138,622

Schedule of components of loans receivable

The components of loans were summarized as follows:


	September 30, 2020		December 31, 2019
(in thousands)
Real estate:
Residential 1-4 family	$	2,195,093	$	2,178,135
Commercial real estate	900,912		824,830
Home equity line of credit	1,028,011		1,092,125
Residential land	14,310		14,704
Commercial construction	112,930		70,605
Residential construction	10,281		11,670
Total real estate	4,261,537		4,192,069
Commercial	1,042,435		670,674
Consumer	190,138		257,921
Total loans	5,494,110		5,120,664
Deferred fees and discounts	(13,208)		512
Allowance for credit losses	(91,459)		(53,355)
Total loans, net	$	5,389,443	$	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 September 30, 2020
Allowance for credit losses:
Beginning balance	$	3,911	$	21,100	$	6,214	$	356	$	4,757	$	14	$	13,868	$	31,087	$	81,307
Charge-offs	—		—		—		—		—		—		(1,727)		(3,881)		(5,608)
Recoveries	12		—		50		12		—		—		211		1,005		1,290
Provision	(286)		11,049		(390)		178		1,282		(3)		5,840		(3,200)		14,470
Ending balance	$	3,637	$	32,149	$	5,874	$	546	$	6,039	$	11	$	18,192	$	25,011	$	91,459
Three months ended September 30, 2019
Allowance for credit 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
Nine months ended September 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)		—		—		(2,795)		(16,466)		(19,619)
Recoveries	67		—		56		26		—		—		503		2,426		3,078
Provision	(953)		16,888		(563)		486		3,653		(6)		9,317		6,382		35,204
Ending balance	$	3,637	$	32,149	$	5,874	$	546	$	6,039	$	11	$	18,192	$	25,011	$	91,459







Nine months ended September 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	(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
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 September 30, 2020
Allowance for loan commitments:
Beginning balance	$	300	$	7,500	$	300	$	8,100
Provision	—		(800)		300		(500)
Ending balance	$	300	$	6,700	$	600	$	7,600
Nine months ended September 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	—		4,024		276		4,300
Ending balance	$	300	$	6,700	$	600	$	7,600

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
September 30, 2020
Residential 1-4 family
Current	$	425,930	$	242,811	$	138,155	$	233,944	$	201,532	$	947,343	$	—	$	—	$	2,189,715
30-59 days past due	—		—		—		—		—		2,461		—		—		2,461
60-89 days past due	—		—		—		—		—		1,028		—		—		1,028
Greater than 89 days past due	—		—		—		353		—		1,536		—		—		1,889
	425,930		242,811		138,155		234,297		201,532		952,368		—		—		2,195,093
Home equity line of credit
Current	—		—		—		—		—		—		991,199		33,800		1,024,999
30-59 days past due	—		—		—		—		—		—		419		349		768
60-89 days past due	—		—		—		—		—		—		158		—		158
Greater than 89 days past due	—		—		—		—		—		—		1,287		799		2,086
	—		—		—		—		—		—		993,063		34,948		1,028,011
Residential land
Current	4,606		4,433		1,598		1,600		22		1,751		—		—		14,010
30-59 days past due	—		—		—		—		—		300		—		—		300
60-89 days past due	—		—		—		—		—		—		—		—		—
Greater than 89 days past due	—		—		—		—		—		—		—		—		—
	4,606		4,433		1,598		1,600		22		2,051		—		—		14,310
Residential construction
Current	4,368		4,897		386		630		—		—		—		—		10,281
30-59 days past due	—		—		—		—		—		—		—		—		—
60-89 days past due	—		—		—		—		—		—		—		—		—
Greater than 89 days past due	—		—		—		—		—		—		—		—		—
	4,368		4,897		386		630		—		—		—		—		10,281
Consumer
Current	25,661		77,454		45,485		10,916		764		423		19,906		3,221		183,830
30-59 days past due	387		981		723		239		13		—		467		131		2,941
60-89 days past due	95		717		674		152		5		—		70		87		1,800
Greater than 89 days past due	32		507		411		156		18		—		359		84		1,567
	26,175		79,659		47,293		11,463		800		423		20,802		3,523		190,138
Commercial real estate
Pass	161,130		73,086		63,082		28,685		55,742		154,297		11,000		—		547,022
Special Mention	9,634		38,908		65,840		33,921		68,502		65,431		—		—		282,236
Substandard	—		3,165		4,193		1,896		4,461		57,939		—		—		71,654
Doubtful	—		—		—		—		—		—		—		—		—
	170,764		115,159		133,115		64,502		128,705		277,667		11,000		—		900,912
Commercial construction
Pass	11,122		21,322		30,655		—		5,999		—		24,200		—		93,298
Special Mention	1,632		—		—		18,000		—		—		—		—		19,632
Substandard	—		—		—		—		—		—		—		—		—
Doubtful	—		—		—		—		—		—		—		—		—
	12,754		21,322		30,655		18,000		5,999		—		24,200		—		112,930
Commercial
Pass	454,219		131,481		91,147		30,680		13,067		37,580		76,449		13,397		848,020
Special Mention	36,029		23,458		3,681		7,176		30,864		15,105		32,494		11,221		160,028
Substandard	132		9,420		371		4,402		8,547		3,742		6,943		830		34,387
Doubtful	—		—		—		—		—		—		—		—		—
	490,380		164,359		95,199		42,258		52,478		56,427		115,886		25,448		1,042,435
Total loans	$	1,134,977	$	632,640	$	446,401	$	372,750	$	389,536	$	1,288,936	$	1,164,951	$	63,919	$	5,494,110

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
September 30, 2020
Real estate:
Residential 1-4 family	$	2,461	$	1,028	$	1,889	$	5,378	$	2,189,715	$	2,195,093	$	—
Commercial real estate	—		—		—		—		900,912		900,912		—
Home equity line of credit	768		158		2,086		3,012		1,024,999		1,028,011		—
Residential land	300		—		—		300		14,010		14,310		—
Commercial construction	—		—		—		—		112,930		112,930		—
Residential construction	—		—		—		—		10,281		10,281		—
Commercial	1,702		326		105		2,133		1,040,302		1,042,435		—
Consumer	2,941		1,800		1,567		6,308		183,830		190,138		—
Total loans	$	8,172	$	3,312	$	5,647	$	17,131	$	5,476,979	$	5,494,110	$	—
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)	September 30, 2020						December 31, 2019
	With a Related ACL		Without a Related ACL		Total		Total
Real estate:
Residential 1-4 family	$	8,271	$	1,919	$	10,190	$	11,395
Commercial real estate	15,965		—		15,965		195
Home equity line of credit	6,246		1,555		7,801		6,638
Residential land	410		—		410		448
Commercial construction	—		—		—		—
Residential construction	—		—		—		—
Commercial	758		2,552		3,310		5,947
Consumer	4,304		—		4,304		5,113
Total nonaccrual loans	$	35,954	$	6,026	$	41,980	$	29,736

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


(in thousands)	September 30, 2020		December 31, 2019
Real estate:
Residential 1-4 family	$	8,224	$	9,869
Commercial real estate	997		853
Home equity line of credit	8,809		10,376
Residential land	1,891		2,644
Commercial construction	—		—
Residential construction	—		—
Commercial	2,531		2,614
Consumer	54		57
Total troubled debt restructured loans accruing interest	$	22,506	$	26,413

Schedule of loan modifications

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


Loans modified as a TDR	Three months ended September 30, 2020					Nine months ended September 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	$	146	$	7
Commercial real estate	—	—		—		2	16,149		4,019
Home equity line of credit	—	—		—		2	22		1
Residential land	—	—		—		2	228		15
Commercial construction	—	—		—		—	—		—
Residential construction	—	—		—		—	—		—
Commercial	2	52		45		5	207		180
Consumer	—	—		—		—	—		—
	2	$	52	$	45	12	$	16,752	$	4,222

	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

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:

September 30, 2020

Amortized cost

Collateral type

(in thousands)

Real estate:

Residential 1-4 family

2,057

Residential real estate property

Home equity line of credit

1,555

Residential real estate property

Commercial construction

—

Total real estate

3,612

Commercial

—

Total

3,612

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


	December 31, 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	$	6,817	$	7,207	$	—	$	8,562	$	175	$	8,515	$	422
Commercial real estate	195		200		—		—		—		—		—
Home equity line of credit	1,984		2,135		—		1,797		12		2,091		78
Residential land	3,091		3,294		—		3,205		40		2,507		90
Commercial construction	—		—		—		—		—		—		—
Residential construction	—		—		—		—		—		—		—
Commercial	1,948		2,285		—		4,812		239		4,470		239
Consumer	2		2		—		21		4		27		4
	$	14,037	$	15,123	$	—	$	18,397	$	470	$	17,610	$	833
With an allowance recorded
Real estate:
Residential 1-4 family	$	8,783	$	8,835	$	898	$	8,296	$	86	$	8,377	$	265
Commercial real estate	853		853		2		881		9		894		28
Home equity line of credit	10,089		10,099		322		11,332		143		11,606		425
Residential land	—		—		—		—		—		36		—
Commercial construction	—		—		—		—		—		—		—
Residential construction	—		—		—		—		—		—		—
Commercial	6,470		6,470		1,015		8,330		38		8,026		94
Consumer	505		505		454		556		12		301		14
	$	26,700	$	26,762	$	2,691	$	29,395	$	288	$	29,240	$	826
Total
Real estate:
Residential 1-4 family	$	15,600	$	16,042	$	898	$	16,858	$	261	$	16,892	$	687
Commercial real estate	1,048		1,053		2		881		9		894		28
Home equity line of credit	12,073		12,234		322		13,129		155		13,697		503
Residential land	3,091		3,294		—		3,205		40		2,543		90
Commercial construction	—		—		—		—		—		—		—
Residential construction	—		—		—		—		—		—		—
Commercial	8,418		8,755		1,015		13,142		277		12,496		333
Consumer	507		507		454		577		16		328		18
	$	40,737	$	41,885	$	2,691	$	47,792	$	758	$	46,850	$	1,659

* 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
September 30, 2020	$	25,024	$	(15,089)	$	(382)	$	9,553
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 September 30,				Nine months ended September 30
(in thousands)	2020		2019		2020		2019
Mortgage servicing rights
Beginning balance	$	9,911	$	8,103	$	9,101	$	8,062
Amount capitalized	1,119		995		3,481		1,857
Amortization	(1,095)		(531)		(2,647)		(1,352)
Other-than-temporary impairment	—		—		—		—
Carrying amount before valuation allowance	9,935		8,567		9,935		8,567
Valuation allowance for mortgage servicing rights
Beginning balance	264		—		—		—
Provision	118		—		382		—
Other-than-temporary impairment	—		—		—		—
Ending balance	382		—		382		—
Net carrying value of mortgage servicing rights	$	9,553	$	8,567	$	9,553	$	8,567

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, 2020			December 31, 2019
Unpaid principal balance	$	1,456,434		$	1,276,437
Weighted average note rate	3.77		%	3.96		%
Weighted average discount rate	9.3		%	9.3		%
Weighted average prepayment speed	17.8		%	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










September 30, 2020
Mortgage servicing rights	$	6,260	Discounted cash flow	Prepayment Speed	11.2% - 21.3%		17.5	%
				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)	September 30, 2020		December 31, 2019
Prepayment rate:
25 basis points adverse rate change	$	(826)	$	(950)
50 basis points adverse rate change	(1,524)		(1,947)
Discount rate:
25 basis points adverse rate change	(65)		(102)
50 basis points adverse rate change	(129)		(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
September 30, 2020	$	96	$	—	$	96
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



September 30, 2020	$	96	$	116	$	—




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:


	September 30, 2020				December 31, 2019
(in thousands)	Notional amount		Fair value		Notional amount		Fair value
Interest rate lock commitments	$	129,806	$	5,271	$	23,171	$	297
Forward commitments	104,500		(243)		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	September 30, 2020				December 31, 2019
(in thousands)	Asset derivatives		Liability derivatives		Asset derivatives		Liability derivatives
Interest rate lock commitments	$	5,271	$	—	$	297	$	—
Forward commitments	—		243		3		45
	$	5,271	$	243	$	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 September 30,				Nine months ended September 30
(in thousands)		2020		2019		2020		2019
Interest rate lock commitments	Mortgage banking income	$	2,930	$	(3)	$	4,974	$	379
Forward commitments	Mortgage banking income	44		39		(201)		(33)
		$	2,974	$	36	$	4,773	$	346