Fair value measurements (Tables)

9 Months Ended

Sep. 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
September 30, 2020
Financial assets
HEI consolidated

Available-for-sale investment securities	$	1,747,658	$	—	$	1,720,473	$	27,185	$	1,747,658
Held-to-maturity investment securities	133,858		—		138,622		—		138,622
Stock in Federal Home Loan Bank	10,920		—		10,920		—		10,920
Loans, net	5,406,249		—		16,806		5,574,616		5,591,422
Mortgage servicing rights	9,553		—		—		10,102		10,102

Derivative assets	129,806		—		5,271		—		5,271


Financial liabilities
HEI consolidated
Deposit liabilities	558,177		—		563,169		—		563,169
Short-term borrowings—other than bank	137,783		—		137,783		—		137,783
Other bank borrowings	151,875		—		151,874		—		151,874
Long-term debt, net—other than bank	2,068,852		—		2,440,950		—		2,440,950
Derivative liabilities	141,611		243		5,041		—		5,284
Hawaiian Electric consolidated
Short-term borrowings	49,948		—		49,948		—		49,948
Long-term debt, net	1,561,128		—		1,895,820		—		1,895,820


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:


	September 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	$	—	$	1,625,548	$	—	$	—	$	1,026,385	$	—
U.S. Treasury and federal agency obligations	—		63,588		—		—		117,787		—
Corporate bonds	—		31,337		—		—		60,057		—
Mortgage revenue bonds	—		—		27,185		—		—		28,597
	$	—	$	1,720,473	$	27,185	$	—	$	1,204,229	$	28,597
Derivative assets
Interest rate lock commitments (bank segment)1	$	—	$	5,271	$	—	$	—	$	297	$	—
Forward commitments (bank segment)1	—		—		—		—		3		—

	$	—	$	5,271	$	—	$	—	$	300	$	—
Derivative liabilities

Forward commitments (bank segment)1	$	243	$	—	$	—	$	33	$	12	$	—

Interest rate swap (Other segment)2	—		5,041		—		—		2,173		—
	$	243	$	5,041	$	—	$	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 September 30				Nine months ended September 30
Mortgage revenue bonds	2020		2019		2020		2019
(in thousands)
Beginning balance	$	28,827	$	28,166	$	28,597	$	23,636
Principal payments received	(1,642)		—		(1,642)		—
Purchases	—		293		230		4,823
Unrealized gain (loss) included in other comprehensive income	—		—		—		—
Ending balance	$	27,185	$	28,459	$	27,185	$	28,459

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
September 30, 2020



Mortgage servicing rights	$	6,260	$	—	$	—	$	6,260
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)	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.