Bank segment (HEI only)

12 Months Ended

Dec. 31, 2021

Bank Segment Disclosure [Abstract]

Bank segment (HEI only)

Note 4· Bank segment (HEI only)

Selected financial information

American Savings Bank, F.S.B.

Statements of Income and Comprehensive Income Data

Years ended December 31	2021		2020		2019
(in thousands)
Interest and dividend income
Interest and fees on loans	$	198,802	$	214,134	$	233,632
Interest and dividends on investment securities	43,464		30,529		32,922
Total interest and dividend income	242,266		244,663		266,554
Interest expense
Interest on deposit liabilities	4,981		10,654		16,830
Interest on other borrowings	59		460		1,610
Total interest expense	5,040		11,114		18,440
Net interest income	237,226		233,549		248,114
Provision for credit losses	(25,825)		50,811		23,480
Net interest income after provision for credit losses	263,051		182,738		224,634
Noninterest income
Fees from other financial services	21,225		16,447		19,275
Fee income on deposit liabilities	16,663		16,059		20,877
Fee income on other financial products	8,770		6,381		6,507
Bank-owned life insurance	7,318		6,483		7,687
Mortgage banking income	9,305		23,734		4,943
Gain on sale of real estate	—		—		10,762
Gain on sale of investment securities, net	528		9,275		653
Other income, net	851		(256)		2,074
Total noninterest income	64,660		78,123		72,778
Noninterest expense
Compensation and employee benefits	113,970		104,443		103,009
Occupancy	20,584		21,573		21,272
Data processing	17,634		14,769		15,306
Services	10,327		11,121		10,239
Equipment	9,510		9,001		8,760
Office supplies, printing and postage	4,239		4,623		5,512
Marketing	3,870		3,435		4,490
FDIC insurance	3,235		2,342		1,204
Other expense1	13,783		20,283		15,586
Total noninterest expense	197,152		191,590		185,378
Income before income taxes	130,559		69,271		112,034
Income taxes	29,325		11,688		23,061
Net income	101,234		57,583		88,973
Other comprehensive income (loss), net of taxes	(52,728)		23,608		29,406
Comprehensive income	$	48,506	$	81,191	$	118,379

1 2021 and 2020 include approximately $0.6 million and $5.1 million of certain direct and incremental COVID-19 related costs, respectively. For 2020, these costs include $2.5 million of compensation expense and $2.0 million of enhanced cleaning and sanitation costs.

Reconciliation to amounts per HEI Consolidated Statements of Income*:

Years ended December 31	2021		2020		2019
(in thousands)
Interest and dividend income	$	242,266	$	244,663	$	266,554
Noninterest income	64,660		78,123		72,778
Less: Gain on sale of real estate	—		—		10,762
Less: Gain on sale of investment securities, net	528		9,275		653
*Revenues-Bank	306,398		313,511		327,917
Total interest expense	5,040		11,114		18,440
Provision for credit losses	(25,825)		50,811		23,480
Noninterest expense	197,152		191,590		185,378
Less: Retirement defined benefits expense (credit)—other than service costs	(1,828)		1,813		(472)
Add: Gain on sale of real estate	—		—		10,762
*Expenses-Bank	178,195		251,702		217,008
*Operating income-Bank	128,203		61,809		110,909
Add back: Retirement defined benefits expense (credit)—other than service costs	(1,828)		1,813		(472)
Add back: Gain on sale of investment securities, net	528		9,275		653
Income before income taxes	$	130,559	$	69,271	$	112,034

Balance Sheets Data

December 31			2021				2020
(in thousands)
Assets
Cash and due from banks			$	100,051			$	178,422
Interest-bearing deposits			151,189				114,304
Cash and cash equivalents			251,240				292,726
Investment securities
Available-for-sale, at fair value			2,574,618				1,970,417
Held-to-maturity, at amortized cost (fair value of $510,474 and $229,963 at December 31, 2021 and 2020, respectively)			522,270				226,947
Stock in Federal Home Loan Bank, at cost			10,000				8,680
Loans held for investment			5,211,114				5,333,843
Allowance for credit losses			(71,130)				(101,201)
Net loans			5,139,984				5,232,642
Loans held for sale, at lower of cost or fair value			10,404				28,275
Other			590,897				554,656
Goodwill			82,190				82,190
Total assets			$	9,181,603			$	8,396,533
Liabilities and shareholder’s equity
Deposit liabilities–noninterest-bearing			$	2,976,632			$	2,598,500
Deposit liabilities–interest-bearing			5,195,580				4,788,457
Other borrowings			88,305				89,670
Other			193,268				183,731
Total liabilities			8,453,785				7,660,358
Commitments and contingencies
Common stock			1				1
Additional paid in capital			353,895				351,758
Retained earnings			411,704				369,470
Accumulated other comprehensive income (loss), net of taxes
Net unrealized gains (losses) on securities	$	(32,037)			$	19,986
Retirement benefit plans	(5,745)		(37,782)		(5,040)		14,946
Total shareholder’s equity			727,818				736,175
Total liabilities and shareholder’s equity			$	9,181,603			$	8,396,533

December 31	2021		2020
(in thousands)
Other assets
Bank-owned life insurance	$	177,566	$	163,265
Premises and equipment, net	202,299		206,134
Accrued interest receivable	20,854		24,616
Mortgage servicing rights	9,950		10,020
Low-income housing investments	110,989		83,435
Other	69,239		67,186
	$	590,897	$	554,656
Other liabilities
Accrued expenses	$	87,905	$	62,694
Federal and state income taxes payable	—		6,582
Cashier’s checks	33,675		38,011
Advance payments by borrowers	9,994		10,207
Other	61,694		66,237
	$	193,268	$	183,731

Bank-owned life insurance is life insurance purchased by ASB on the lives of certain key employees, with ASB as the beneficiary. The insurance is used to fund employee benefits through tax-free income from increases in the cash value of the policies and insurance proceeds paid to ASB upon an insured’s death.

Investment securities. The major components of investment securities were as follows:

									Gross unrealized losses
			Gross unrealized gains		Gross unrealized losses		Estimated fair value		Less than 12 months					12 months or longer
(dollars in thousands)	Amortized cost								Number of issues	Fair value		Amount		Number of issues	Fair value		Amount
December 31, 2021
Available-for-sale
U.S. Treasury and federal agency obligations	$	89,714	$	803	$	(427)	$	90,090	4	$	44,827	$	(427)	—	$	—	$	—
Mortgage-backed securities*	2,482,618		6,511		(51,206)		2,437,923		120	1,845,243		(38,321)		18	271,012		(12,885)
Corporate bonds	30,625		655		(102)		31,178		1	12,780		(102)		—	—		—
Mortgage revenue bonds	15,427		—		—		15,427		—	—		—		—	—		—
	$	2,618,384	$	7,969	$	(51,735)	$	2,574,618	125	$	1,902,850	$	(38,850)	18	$	271,012	$	(12,885)
Held-to-maturity
US Treasury and Federal agency obligations	$	59,871	$	168	$	(170)	$	59,869	2	$	39,594	$	(170)	—	$	—	$	—
Mortgage-backed securities*	462,399		1,480		(13,274)		450,605		22	290,883		(7,665)		7	106,483		(5,609)
	$	522,270	$	1,648	$	(13,444)	$	510,474	24	$	330,477	$	(7,835)	7	$	106,483	$	(5,609)
December 31, 2020
Available-for-sale
U.S. Treasury and federal agency obligations	$	60,260	$	2,062	$	—	$	62,322	—	$	—	$	—	—	$	—	$	—
Mortgage-backed securities*	1,825,893		26,817		(3,151)		1,849,559		22	373,924		(3,151)		—	—		—
Corporate bonds	29,776		1,575		—		31,351		—	—		—		—	—		—
Mortgage revenue bonds	27,185		—		—		27,185		—	—		—		—	—		—
	$	1,943,114	$	30,454	$	(3,151)	$	1,970,417	22	$	373,924	$	(3,151)	—	$	—	$	—
Held-to-maturity
Mortgage-backed securities*	$	226,947	$	3,846	$	(830)	$	229,963	7	$	114,152	$	(830)	—	$	—	$	—
	$	226,947	$	3,846	$	(830)	$	229,963	7	$	114,152	$	(830)	—	$	—	$	—

* Issued or guaranteed by U.S. Government agencies or sponsored agencies

ASB does not believe that the investment securities that were in an unrealized loss position as of December 31, 2021, represent a credit loss. Total gross unrealized losses were primarily attributable to change in market conditions. On a quarterly basis the investment securities are evaluated for changes in financial condition of the issuer. Based upon ASB’s evaluation, all securities held within the investment portfolio continue to be investment grade by one or more agencies. The contractual cash flows of the U.S. Treasury, federal agency obligations and agency mortgage-backed securities are backed by the full faith and credit guaranty of the United States government or an agency of the government. ASB does not intend to sell the securities before the recovery of its amortized cost basis and there have been no adverse changes in the timing of the contractual cash flows for the securities. ASB’s investment securities portfolio did not require an allowance for credit losses as of December 31, 2021.

U.S. Treasury, federal agency obligations, corporate bonds, and mortgage revenue bonds have contractual terms to maturity. Mortgage-backed securities have contractual terms to maturity, but require periodic payments to reduce principal. In addition, expected maturities will differ from contractual maturities because borrowers have the right to prepay the underlying mortgages.

The contractual maturities of investment securities were as follows:

	Amortized		Fair
December 31, 2021	Cost		value
(in thousands)
Available-for-sale
Due in one year or less	$	15,055	$	15,298
Due after one year through five years	62,461		63,256
Due after five years through ten years	58,250		58,141
Due after ten years	—		—
	135,766		136,695
Mortgage-backed securities — issued or guaranteed by U.S. Government agencies or sponsored agencies	2,482,618		2,437,923
Total available-for-sale securities	$	2,618,384	$	2,574,618
Held-to-maturity
Due in one year or less	$	—	$	—
Due after one year through five years	—		—
Due after five years through ten years	59,871		59,869
Due after ten years	—		—
	59,871		59,869
Mortgage-backed securities — issued or guaranteed by U.S. Government agencies or sponsored agencies	462,399		450,605
Total held-to-maturity securities	$	522,270	$	510,474

The proceeds, gross gains and losses from sales of available-for-sale securities were as follows:

Years ended December 31	2021		2020		2019
(in thousands)
Proceeds	$	197,354	$	169,157	$	19,810
Gross gains	975		9,275		653
Gross losses	(447)		—		—

Interest income from taxable and non-taxable investment securities were as follows:

Years ended December 31	2021		2020		2019
(in thousands)
Taxable	$	42,534	$	29,760	$	31,848
Non-taxable	930		769		1,074
	$	43,464	$	30,529	$	32,922

ASB pledged securities with a market value of approximately $416 million and $353 million as of December 31, 2021 and 2020, respectively, as collateral for public funds and other deposits, mortgage pipeline hedge margin, automated clearinghouse transactions, The Federal Reserve Bank of San Francisco Discount Window and bankruptcy account, and The Federal Home Loan Bank of Des Moines advance line. In addition, ASB pledged securities with a market value of $161 million and $92 million as of December 31, 2021 and 2020, respectively, as collateral for securities sold under agreements to repurchase.

Stock in FHLB.  As of December 31, 2021 and 2020, ASB’s stock in FHLB was carried at cost ($10.0 million and $8.7 million, respectively) because it can only be redeemed at par and it is a required investment based on measurements of ASB’s capital, assets and borrowing levels.

Quarterly and as conditions warrant, ASB reviews its investment in the stock of the FHLB for impairment. ASB evaluated its investment in FHLB stock for credit losses as of December 31, 2021, consistent with its accounting policy. ASB did not recognize any credit losses for 2021, 2020 and 2019 based on its evaluation of the underlying investment.

Future deterioration in the FHLB’s financial position and/or negative developments in any of the factors considered in ASB’s impairment evaluation may result in future impairment losses.

Loans. The components of loans were summarized as follows:

December 31	2021		2020
(in thousands)
Real estate:
Residential 1-4 family	$	2,299,212	$	2,144,239
Commercial real estate	1,056,982		983,865
Home equity line of credit	835,663		963,578
Residential land	19,859		15,617
Commercial construction	91,080		121,424
Residential construction	11,138		11,022
Total real estate	4,313,934		4,239,745
Commercial	793,304		936,748
Consumer	113,966		168,733
Total loans	5,221,204		5,345,226
Less: Deferred fees and discounts	(10,090)		(11,383)
Allowance for credit losses	(71,130)		(101,201)
Total loans, net	$	5,139,984	$	5,232,642

ASB’s policy is to require private mortgage insurance on all real estate loans when the loan-to-value ratio of the property exceeds 80% of the lower of the appraised value or purchase price at origination. For non-owner occupied residential property purchases, the loan-to-value ratio may not exceed 75% of the lower of the appraised value or purchase price at origination.

ASB services real estate loans for investors (principal balance of $1.5 billion, $1.5 billion and $1.3 billion as of December 31, 2021, 2020 and 2019, respectively), which are not included in the accompanying balance sheets data. ASB reports fees earned for servicing such loans as income when the related mortgage loan payments are collected and charges loan servicing cost to expense as incurred.

As of December 31, 2021 and 2020, ASB had pledged loans with an amortized cost of approximately $2.8 billion and $3.0 billion, respectively, as collateral to secure advances from the FHLB.

As of December 31, 2021 and 2020, the aggregate amount of loans to directors and executive officers of ASB and its affiliates and any related interests (as defined in Federal Reserve Board (FRB) Regulation O) of such individuals, was $13.1 million and $13.2 million, respectively. As of December 31, 2021 and 2020, there was a loan to a related interest of a director of ASB for $10.0 million. The loan was made at ASB’s normal credit terms.

Allowance for credit losses.  As discussed in Note 1, ASB must maintain an allowance for credit losses that is adequate to absorb estimated expected credit losses associated with its loan portfolio.

The allowance for credit losses (balances and changes) and financing receivables 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			Consumer			Total
December 31, 2021
Allowance for credit losses:
Beginning balance	$	4,600		$	35,607		$	6,813		$	609		$	4,149		$	11		$	25,462		$	23,950		$	101,201
Charge-offs	(67)			—			(45)			—			—			—			(1,561)			(8,027)			(9,700)
Recoveries	92			—			113			61			—			—			1,468			4,320			6,054
Net (charge-offs) recoveries	25			—			68			61			—			—			(93)			(3,707)			(3,646)
Provision	1,920			(10,911)			(1,224)			(24)			(1,963)			7			(9,571)			(4,659)			(26,425)
Ending balance	$	6,545		$	24,696		$	5,657		$	646		$	2,186		$	18		$	15,798		$	15,584		$	71,130
Average loans outstanding	$	2,155,322		$	1,046,276		$	885,759		$	18,227		$	111,711		$	11,361		$	856,226		$	135,609		$	5,220,491
Net charge-offs (recoveries) to average loans	—		%	—		%	(0.01		%)	(0.33		%)	—		%	—		%	0.01		%	2.73		%	0.07		%
December 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	(7)			—			(77)			(351)			—			—			(5,819)			(19,900)			(26,154)
Recoveries	394			—			63			38			—			—			872			3,381			4,748
Net (charge-offs) recoveries	387			—			(14)			(313)			—			—			(4,947)			(16,519)			(21,406)
Provision	(317)			20,346			446			537			1,763			(6)			19,242			7,800			49,811
Ending balance	$	4,600		$	35,607		$	6,813		$	609		$	4,149		$	11		$	25,462		$	23,950		$	101,201
Average loans outstanding	$	2,148,848		$	861,096		$	1,060,444		$	13,799		$	93,740		$	10,703		$	935,663		$	215,994		$	5,340,287
Net charge-offs (recoveries) to average loans	(0.02)		%	—		%	—		%	2.27		%	—		%	—		%	0.53		%	7.65		%	0.40		%
December 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	(26)			—			(144)			(4)			—			—			(6,811)			(21,677)			(28,662)
Recoveries	854			—			17			229			—			—			2,351			2,967			6,418
Net (charge-offs) recoveries	828			—			(127)			225			—			—			(4,460)			(18,710)			(22,244)
Provision	(424)			548			678			(255)			(693)			(1)			5,480			18,147			23,480
Ending balance	$	2,380		$	15,053		$	6,922		$	449		$	2,097		$	3		$	10,245		$	16,206		$	53,355
Average loans outstanding	$	2,164,759		$	781,531		$	1,043,479		$	14,065		$	81,937		$	10,513		$	620,206		$	270,340		$	4,986,830
Net charge-offs (recoveries) to average loans	(0.04)		%	—		%	0.01		%	(1.60		%)	—		%	—		%	0.72		%	6.92		%	0.45		%
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

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
Year ended December 31, 2021
Allowance for loan commitments:
Beginning balance	$	300	$	3,000	$	1,000	$	4,300
Provision	100		700		(200)		600
Ending balance	$	400	$	3,700	$	800	$	4,900
Year ended December 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	—		324		676		1,000
Ending balance	$	300	$	3,000	$	1,000	$	4,300

Credit quality.  ASB performs an internal loan review and grading on an ongoing basis. The review provides management with periodic information as to the quality of the loan portfolio and effectiveness of its lending policies and procedures. The objectives of the loan review and grading procedures are to identify, in a timely manner, existing or emerging credit trends so that appropriate steps can be initiated to manage risk and avoid or minimize future losses. Loans subject to grading include commercial, commercial real estate and commercial construction loans.

Each commercial and commercial real estate loan is assigned an Asset Quality Rating (AQR) reflecting the likelihood of repayment or orderly liquidation of that loan transaction pursuant to regulatory credit classifications:  Pass, Special Mention, Substandard, Doubtful, and Loss. The AQR is a function of the probability of default model rating, the loss given default, and possible non-model factors which impact the ultimate collectability of the loan such as character of the business owner/guarantor, interim period performance, litigation, tax liens and major changes in business and economic conditions. Pass exposures generally are well protected by the current net worth and paying capacity of the obligor or by the value of the asset or underlying collateral. Special Mention loans have potential weaknesses that, if left uncorrected, could jeopardize the liquidation of the debt. Substandard loans have well-defined weaknesses that jeopardize the liquidation of the debt and are characterized by the distinct possibility that ASB may sustain some loss. An asset classified Doubtful has the weaknesses of those classified Substandard, with the added characteristic that the weaknesses make collection or liquidation in full, on the basis of currently existing facts, conditions, and values, highly questionable and improbable. An asset classified Loss is considered uncollectible and has such little value that its continuance as a bankable asset is not warranted.

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)	2021		2020		2019		2018		2017		Prior		Revolving loans		Converted to term loans		Total
December 31, 2021
Residential 1-4 family
Current	$	791,758	$	461,683	$	133,345	$	64,421	$	124,994	$	712,452	$	—	$	—	$	2,288,653
30-59 days past due	—		—		—		809		—		2,210		—		—		3,019
60-89 days past due	—		—		—		—		—		1,468		—		—		1,468
Greater than 89 days past due	—		—		2,987		—		—		3,085		—		—		6,072
	791,758		461,683		136,332		65,230		124,994		719,215		—		—		2,299,212
Home equity line of credit
Current	—		—		—		—		—		—		794,518		39,116		833,634
30-59 days past due	—		—		—		—		—		—		296		313		609
60-89 days past due	—		—		—		—		—		—		16		70		86
Greater than 89 days past due	—		—		—		—		—		—		838		496		1,334
	—		—		—		—		—		—		795,668		39,995		835,663
Residential land
Current	10,572		6,794		1,116		532		267		181		—		—		19,462
30-59 days past due	—		—		—		—		—		—		—		—		—
60-89 days past due	—		—		—		—		—		—		—		—		—
Greater than 89 days past due	—		—		—		—		—		397		—		—		397
	10,572		6,794		1,116		532		267		578		—		—		19,859
Residential construction
Current	7,856		3,019		—		—		263		—		—		—		11,138
30-59 days past due	—		—		—		—		—		—		—		—		—
60-89 days past due	—		—		—		—		—		—		—		—		—
Greater than 89 days past due	—		—		—		—		—		—		—		—		—
	7,856		3,019		—		—		263		—		—		—		11,138
Consumer
Current	37,563		15,488		29,383		10,897		302		238		12,740		4,157		110,768
30-59 days past due	202		181		517		234		15		—		156		70		1,375
60-89 days past due	59		127		392		183		8		—		7		106		882
Greater than 89 days past due	14		93		387		192		27		—		141		87		941
	37,838		15,889		30,679		11,506		352		238		13,044		4,420		113,966
Commercial real estate
Pass	173,794		275,242		49,317		56,490		33,581		259,583		11,602		—		859,609
Special Mention	19,600		3,529		42,935		30,870		20,788		32,824		—		—		150,546
Substandard	—		684		13,936		1,859		1,805		28,543		—		—		46,827
Doubtful	—		—		—		—		—		—		—		—		—
	193,394		279,455		106,188		89,219		56,174		320,950		11,602		—		1,056,982
Commercial construction
Pass	17,140		43,261		—		11,342		—		—		19,337		—		91,080
Special Mention	—		—		—		—		—		—		—		—		—
Substandard	—		—		—		—		—		—		—		—		—
Doubtful	—		—		—		—		—		—		—		—		—
	17,140		43,261		—		11,342		—		—		19,337		—		91,080
Commercial
Pass	266,087		96,963		79,329		56,497		31,019		66,570		96,673		15,510		708,648
Special Mention	40		27,336		10,071		202		439		8,966		15,303		18		62,375
Substandard	427		184		3,737		1,777		4,457		2,961		7,083		1,655		22,281
Doubtful	—		—		—		—		—		—		—		—		—
	266,554		124,483		93,137		58,476		35,915		78,497		119,059		17,183		793,304
Total loans	$	1,325,112	$	934,584	$	367,452	$	236,305	$	217,965	$	1,119,478	$	958,710	$	61,598	$	5,221,204

	Term Loans by Origination Year												Revolving Loans
(in thousands)	2020		2019		2018		2017		2016		Prior		Revolving loans		Converted to term loans		Total
December 31, 2020
Residential 1-4 family
Current	$	567,282	$	218,988	$	111,243	$	203,916	$	184,888	$	849,788	$	—	$	—	$	2,136,105
30-59 days past due	—		—		—		—		—		2,629		—		—		2,629
60-89 days past due	—		476		—		—		—		2,314		—		—		2,790
Greater than 89 days past due	—		—		—		353		—		2,362		—		—		2,715
	567,282		219,464		111,243		204,269		184,888		857,093		—		—		2,144,239
Home equity line of credit
Current	—		—		—		—		—		—		927,106		33,228		960,334
30-59 days past due	—		—		—		—		—		—		552		298		850
60-89 days past due	—		—		—		—		—		—		267		75		342
Greater than 89 days past due	—		—		—		—		—		—		1,463		589		2,052
	—		—		—		—		—		—		929,388		34,190		963,578
Residential land
Current	8,357		3,427		1,598		939		22		272		—		—		14,615
30-59 days past due	—		—		—		—		—		702		—		—		702
60-89 days past due	—		—		—		—		—		—		—		—		—
Greater than 89 days past due	—		—		—		—		—		300		—		—		300
	8,357		3,427		1,598		939		22		1,274		—		—		15,617
Residential construction
Current	6,919		3,093		385		625		—		—		—		—		11,022
30-59 days past due	—		—		—		—		—		—		—		—		—
60-89 days past due	—		—		—		—		—		—		—		—		—
Greater than 89 days past due	—		—		—		—		—		—		—		—		—
	6,919		3,093		385		625		—		—		—		—		11,022
Consumer
Current	28,818		67,159		37,072		7,207		293		348		18,351		3,758		163,006
30-59 days past due	406		1,085		727		155		4		—		138		90		2,605
60-89 days past due	191		549		427		165		3		—		97		59		1,491
Greater than 89 days past due	131		532		409		119		7		—		262		171		1,631
	29,546		69,325		38,635		7,646		307		348		18,848		4,078		168,733
Commercial real estate
Pass	270,603		63,301		62,168		28,432		55,089		155,654		11,000		—		646,247
Special Mention	10,261		36,405		57,952		33,763		68,287		48,094		—		—		254,762
Substandard	—		14,720		4,181		1,892		4,423		57,640		—		—		82,856
Doubtful	—		—		—		—		—		—		—		—		—
	280,864		114,426		124,301		64,087		127,799		261,388		11,000		—		983,865
Commercial construction
Pass	14,480		31,965		26,990		—		5,562		—		22,517		—		101,514
Special Mention	1,910		—		—		18,000		—		—		—		—		19,910
Substandard	—		—		—		—		—		—		—		—		—
Doubtful	—		—		—		—		—		—		—		—		—
	16,390		31,965		26,990		18,000		5,562		—		22,517		—		121,424
Commercial
Pass	392,088		117,791		75,533		29,211		12,520		35,770		74,520		11,004		748,437
Special Mention	37,836		23,087		1,920		6,990		30,264		13,250		31,362		11,218		155,927
Substandard	304		7,785		2,043		4,017		7,542		3,113		5,265		1,928		31,997
Doubtful	—		—		—		—		—		—		387		—		387
	430,228		148,663		79,496		40,218		50,326		52,133		111,534		24,150		936,748
Total loans	$	1,339,586	$	590,363	$	382,648	$	335,784	$	368,904	$	1,172,236	$	1,093,287	$	62,418	$	5,345,226

Revolving loans converted to term loans during 2021 in the commercial, home equity line of credit and consumer portfolios were $1.8 million, $16.0 million and $2.7 million, respectively.

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		Greater than 90 days		Total past due		Current		Total financing receivables		Recorded investment> 90 days and accruing
December 31, 2021
Real estate:
Residential 1-4 family	$	3,019	$	1,468	$	6,072	$	10,559	$	2,288,653	$	2,299,212	$	—
Commercial real estate	—		—		—		—		1,056,982		1,056,982		—
Home equity line of credit	609		86		1,334		2,029		833,634		835,663		—
Residential land	—		—		397		397		19,462		19,859		—
Commercial construction	—		—		—		—		91,080		91,080		—
Residential construction	—		—		—		—		11,138		11,138		—
Commercial	700		313		48		1,061		792,243		793,304		—
Consumer	1,375		882		941		3,198		110,768		113,966		—
Total loans	$	5,703	$	2,749	$	8,792	$	17,244	$	5,203,960	$	5,221,204	$	—
December 31, 2020
Real estate:
Residential 1-4 family	$	2,629	$	2,790	$	2,715	$	8,134	$	2,136,105	$	2,144,239	$	—
Commercial real estate	—		488		—		488		983,377		983,865		—
Home equity line of credit	850		342		2,052		3,244		960,334		963,578		—
Residential land	702		—		300		1,002		14,615		15,617		—
Commercial construction	—		—		—		—		121,424		121,424		—
Residential construction	—		—		—		—		11,022		11,022		—
Commercial	608		300		132		1,040		935,708		936,748		—
Consumer	2,605		1,491		1,631		5,727		163,006		168,733		—
Total loans	$	7,394	$	5,411	$	6,830	$	19,635	$	5,325,591	$	5,345,226	$	—

The credit risk profile based on nonaccrual loans were as follows:

	December 31, 2021						December 31, 2020
(in thousands)	With a Related ACL		Without a Related ACL		Total		With a Related ACL		Without a Related ACL		Total
Real estate:
Residential 1-4 family	$	16,045	$	3,703	$	19,748	$	8,991	$	2,835	$	11,826
Commercial real estate	14,104		1,221		15,325		15,847		2,875		18,722
Home equity line of credit	4,227		1,294		5,521		5,791		1,567		7,358
Residential land	97		300		397		108		300		408
Commercial construction	—		—		—		—		—		—
Residential construction	—		—		—		—		—		—
Commercial	1,446		692		2,138		1,819		3,328		5,147
Consumer	1,845		—		1,845		3,935		—		3,935
Total	$	37,764	$	7,210	$	44,974	$	36,491	$	10,905	$	47,396

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

(in thousands)	December 31, 2021		December 31, 2020
Real estate:
Residential 1-4 family	$	6,949	$	7,932
Commercial real estate	3,055		3,281
Home equity line of credit	6,021		8,148
Residential land	980		1,555
Commercial construction	—		—
Residential construction	—		—
Commercial	7,860		6,108
Consumer	52		54
Total troubled debt restructured loans accruing interest	$	24,917	$	27,078

ASB did not recognize interest on nonaccrual loans for 2021, 2020 and 2019.

Troubled debt restructurings.  A loan modification is deemed to be a TDR when the borrower is determined to be experiencing financial difficulties and ASB grants a concession it would not otherwise consider. When a borrower experiencing financial difficulty fails to make a required payment on a loan or is in imminent default, ASB takes a number of steps to improve the collectability of the loan and maximize the likelihood of full repayment. At times, ASB may modify or restructure a loan to help a distressed borrower improve its financial position to eventually be able to fully repay the loan, provided the borrower has demonstrated both the willingness and the ability to fulfill the modified terms. TDR loans are considered an alternative to foreclosure or liquidation with the goal of minimizing losses to ASB and maximizing recovery.

ASB may consider various types of concessions in granting a TDR including maturity date extensions, extended amortization of principal, temporary deferral of principal payments, and temporary interest rate reductions. ASB rarely grants principal forgiveness in its TDR modifications. Residential loan modifications generally involve interest rate reduction, extending the amortization period, or capitalizing certain delinquent amounts owed not to exceed the original loan balance. Land loans at origination are typically structured as a three-year term, interest-only monthly payment with a balloon payment due at maturity. Land loan TDR modifications typically involve extending the maturity date up to three years and converting the payments from interest-only to principal and interest monthly, at the same or higher interest rate. Commercial loan modifications generally involve extensions of maturity dates, extending the interest only or amortization period, and temporary deferral or reduction of principal payments. ASB generally does not reduce the interest rate on commercial loan TDR modifications. Occasionally, additional collateral and/or guaranties are obtained.

The allowance for credit losses on TDR loans that do not share risk characteristics are individually evaluated based on the present value of expected future cash flows discounted at the loan’s effective original contractual rate or based on the fair value of collateral less cost to sell. The financial impact of the estimated loss is an increase to the allowance associated with the modified loan. When available information confirms that specific loans or portions thereof are uncollectible (confirmed losses), these amounts are charged off against the allowance for credit losses.

Loan modifications that occurred during 2021, 2020, and 2019 were as follows:

(dollars in thousands)	Number of contracts	Outstanding recorded  investment  (as of period end)1		Related allowance (as of period end)
Year ended December 31, 2021
Real estate:
Residential 1-4 family	14	$	8,379	$	442
Commercial real estate	—	—		—
Home equity line of credit	—	—		—
Residential land	3	799		38
Commercial construction	—	—		—
Residential construction	—	—		—
Commercial	7	2,931		205
Consumer	—	—		—
	24	$	12,109	$	685
Year ended December 31, 2020
Real estate:
Residential 1-4 family	1	$	144	$	6
Commercial real estate	6	20,714		4,439
Home equity line of credit	3	85		11
Residential land	4	668		54
Commercial construction	—	—		—
Residential construction	—	—		—
Commercial	54	5,380		869
Consumer	—	—		—
	68	$	26,991	$	5,379
Year ended December 31, 2019
Real estate:
Residential 1-4 family	11	$	1,770	$	190
Commercial real estate	—	—		—
Home equity line of credit	3	442		73
Residential land	3	1,086		—
Commercial construction	—	—		—
Residential construction	—	—		—
Commercial	8	5,523		417
Consumer	—	—		—
	25	$	8,821	$	680

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 in 2021, 2020, and 2019 and for which the payment default occurred within one year of the modification, were as follows:

Years ended December 31	2021			2020			2019
(dollars in thousands)	Number of  contracts	Recorded investment		Number of  contracts	Recorded investment		Number of  contracts	Recorded  investment
Troubled debt restructurings that subsequently defaulted
Real estate:
Residential 1-4 family	1	$	474	—	$	—	—	$	—
Commercial real estate	—	—		—	—		—	—
Home equity line of credit	—	—		—	—		—	—
Residential land	—	—		—	—		—	—
Commercial construction	—	—		—	—		—	—
Residential construction	—	—		—	—		—	—
Commercial	1	9		—	—		—	—
Consumer	—	—		—	—		—	—
	2	$	483	—	$	—	—	$	—

If a loan modified in a TDR subsequently defaults, ASB evaluates the loan for further impairment. Based on its evaluation, adjustments may be made in the allocation of the allowance or partial charge-offs may be taken to further write-down the carrying value of the loan. Commitments to lend additional funds to borrowers whose loan terms have been modified in a TDR totaled nil at December 31, 2021 and 2020.

The Coronavirus Aid, Relief, and Economic Security Act (CARES Act) provides that a financial institution may elect to suspend the requirements under GAAP for certain loan modifications that would otherwise be categorized as a TDR and any related impairment for accounting purposes.

In response to the COVID-19 pandemic, the Board of Governors of the FRB, the FDIC, the National Credit Union Administration, the OCC, and the Consumer Financial Protection Bureau, in consultation with the state financial regulators (collectively, the “agencies”) issued a joint interagency statement (issued March 22, 2020; revised statement issued April 7, 2020). Some of the provisions applicable to the Company include, but are not limited to accounting for loan modifications, past due reporting and nonaccrual status and charge-offs.

Loan modifications that do not meet the conditions of the CARES Act may still qualify as a modification that does not need to be accounted for as a TDR. The agencies confirmed with the FASB staff that short-term modifications made on a good faith basis in response to COVID-19 to borrowers who were current prior to any relief are not TDRs. This includes short-term (e.g., six months) modifications such as payment deferrals, fee waivers, extensions of repayment terms, or insignificant delays in payment. Financial institutions are not expected to designate loans with deferrals granted due to COVID-19 as past due because of the deferral. A loan’s payment date is governed by the due date stipulated in the legal agreement. If a financial institution agrees to a payment deferral, these loans would not be considered past due during the period of the deferral. Lastly, during short-term COVID-19 modifications, these loans generally should not be reported as nonaccrual or as classified.

Collateral-dependent loans. A loan is considered collateral-dependent when the borrower is experiencing financial difficulty and repayment of the loan is expected to be provided substantially through the operation or sale of the collateral.

Loans considered collateral-dependent were as follows:

	December 31, 2021			December 31, 2020
	Amortized cost		Collateral type	Amortized cost		Collateral type
(in thousands)
Real estate:
Residential 1-4 family	$	3,493	Residential real estate property	$	2,541	Residential real estate property
Commercial real estate	1,221		Commercial real estate property	2,875		Commercial real estate property
Home equity line of credit	1,294		Residential real estate property	1,567		Residential real estate property
Residential land	300		Residential real estate property	300		Residential real estate property
Total real estate	6,308			7,283
Commercial	692		Business assets	934		Business assets
Total	$	7,000		$	8,217

ASB had $3.4 million and $3.8 million of consumer mortgage loans collateralized by residential real estate property that were in the process of foreclosure at December 31, 2021 and 2020, respectively.

The total carrying amount and the total unpaid principal balance of impaired loans and ASB’s average recorded investment of, and interest income recognized from, impaired loans were as follows:

December 31	2019						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	$	—	$	8,169	$	907
Commercial real estate	195		200		—		16		—
Home equity line of credit	1,984		2,135		—		2,020		84
Residential land	3,091		3,294		—		2,662		129
Commercial construction	—		—		—		—		—
Residential construction	—		—		—		—		—
Commercial	1,948		2,285		—		4,534		276
Consumer	2		2		—		21		4
	14,037		15,123		—		17,422		1,400
With an allowance recorded
Real estate:
Residential 1-4 family	8,783		8,835		898		8,390		359
Commercial real estate	853		853		2		886		37
Home equity line of credit	10,089		10,099		322		11,319		567
Residential land	—		—		—		27		—
Commercial construction	—		—		—		—		—
Residential construction	—		—		—		—		—
Commercial	6,470		6,470		1,015		6,990		132
Consumer	505		505		454		360		24
	26,700		26,762		2,691		27,972		1,119
Total
Real estate:
Residential 1-4 family	15,600		16,042		898		16,559		1,266
Commercial real estate	1,048		1,053		2		902		37
Home equity line of credit	12,073		12,234		322		13,339		651
Residential land	3,091		3,294		—		2,689		129
Commercial construction	—		—		—		—		—
Residential construction	—		—		—		—		—
Commercial	8,418		8,755		1,015		11,524		408
Consumer	507		507		454		381		28
	$	40,737	$	41,885	$	2,691	$	45,394	$	2,519

* Since loan was classified as impaired.

Mortgage servicing rights (MSRs). In its mortgage banking business, ASB sells residential mortgage loans to government-sponsored entities and other parties, who may issue securities backed by pools of such loans. ASB retains no beneficial interests in these loans other than the servicing rights of certain loans sold.

ASB received $364.8 million, $567.7 million and $277.1 million of proceeds from the sale of residential mortgages in 2021, 2020, and 2019, respectively, and recognized gains on such sales of $9.3 million, $23.7 million, and $4.9 million in 2021, 2020, and 2019, respectively. Repurchased mortgage loans were nil for 2021, 2020 and 2019. The repurchase reserve was $0.1 million as of December 31, 2021 and 2020.

Mortgage servicing fees, a component of other income, net, were $3.8 million, $3.4 million and $3.0 million for the years ended December 31, 2021, 2020, and 2019, respectively.

Changes in the carrying value of MSRs were as follows:

(in thousands)	Gross carrying amount1		Accumulated amortization1		Valuation allowance		Net carrying amount
December 31, 2021	$	18,674	$	(8,724)	$	—	$	9,950
December 31, 2020	$	22,950	$	(12,670)	$	(260)	$	10,020

1 Reflects impact of loans paid in full.

Changes related to MSRs were as follows:

(in thousands)	2021		2020		2019
Mortgage servicing rights
Balance, January 1	$	10,280	$	9,101	$	8,062
Amount capitalized	3,404		5,096		2,987
Amortization	(3,734)		(3,917)		(1,948)
Sale of mortgage servicing rights	—		—		—
Other-than-temporary impairment	—		—		—
Carrying amount before valuation allowance, December 31	9,950		10,280		9,101
Valuation allowance for mortgage servicing rights
Balance, January 1	260		—		—
Provision	(260)		260		—
Other-than-temporary impairment	—		—		—
Balance, December 31	—		260		—
Net carrying value of mortgage servicing rights	$	9,950	$	10,020	$	9,101

The estimated aggregate amortization expenses of MSRs for 2022, 2023, 2024, 2025 and 2026 are $1.6 million, $1.3 million, $1.2 million, $1.0 million and $0.9 million, respectively.

ASB capitalizes MSRs acquired upon the sale of mortgage loans with servicing rights retained. On a monthly basis, ASB compares the net carrying value of the MSRs to its fair value to determine if there are any changes to the valuation allowance and/or other-than-temporary impairment for the MSRs.

ASB uses a present value cash flow model to estimate the fair value of MSRs. Impairment is recognized through a valuation allowance for each stratum when the carrying amount exceeds fair value, with any associated provision recorded as a component of loan servicing fees included in “Revenues - bank” in the consolidated statements of income. A direct write-down is recorded when the recoverability of the valuation allowance is deemed to be unrecoverable.

Key assumptions used in estimating the fair value of ASB’s MSRs used in the impairment analysis were as follows:

December 31	2021			2020
(dollars in thousands)
Unpaid principal balance	$	1,481,899		$	1,450,312
Weighted average note rate	3.38		%	3.68		%
Weighted average discount rate	9.25		%	9.25		%
Weighted average prepayment speed	9.77		%	17.70		%

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:

December 31	2021		2020
(in thousands)
Prepayment rate:
25 basis points adverse rate change	$	(714)	$	(738)
50 basis points adverse rate change	(1,608)		(1,445)
Discount rate:
25 basis points adverse rate change	(129)		(68)
50 basis points adverse rate change	(256)		(135)

The effect of a variation in certain assumptions on fair value is calculated without changing any other assumptions. This analysis typically cannot be extrapolated because the relationship of a change in one key assumption to the changes in the fair value of MSRs typically is not linear.

Deposit liabilities. The summarized components of deposit liabilities were as follows:

December 31	2021				2020
(dollars in thousands)	Weighted-average stated rate		Amount		Weighted-average stated rate		Amount
Savings	0.03	%	$	3,234,646	0.03	%	$	2,873,727
Checking
Interest-bearing	0.02		1,344,049		0.02		1,196,675
Noninterest-bearing	—		1,472,727		—		1,329,264
Commercial checking	—		1,503,905		—		1,269,236
Money market	0.06		192,909		0.09		169,225
Time certificates	0.67		423,976		0.99		548,830
	0.05	%	$	8,172,212	0.09	%	$	7,386,957

As of December 31, 2021 and 2020, time certificates of $250,000 or more totaled $87.6 million and $121.3 million, respectively.

The approximate scheduled maturities of time certificates outstanding at December 31, 2021 were as follows:

(in thousands)
2022	$	275,702
2023	60,049
2024	47,248
2025	24,278
2026	13,736
Thereafter	2,963
	$	423,976

Overdrawn deposit accounts are classified as loans and totaled $1.3 million and $1.0 million at December 31, 2021 and 2020, respectively.

Interest expense on deposit liabilities by type of deposit was as follows:

Years ended December 31	2021		2020		2019
(in thousands)
Time certificates	$	3,805	$	7,944	$	12,675
Savings	802		1,774		1,904
Money market	132		465		953
Interest-bearing checking	242		471		1,298
	$	4,981	$	10,654	$	16,830

Other borrowings.

Securities sold under agreements to repurchase.  Securities sold under agreements to repurchase are accounted for as financing transactions and the obligations to repurchase these securities are recorded as liabilities in the consolidated balance sheets. ASB pledges investment securities as collateral for securities sold under agreements to repurchase. All such agreements are subject to master netting arrangements, which provide for conditional right of set-off in case of default by either party; however, ASB presents securities sold under agreements to repurchase on a gross basis in the balance sheet. 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
December 31, 2021	$	88	$	—	$	88
December 31, 2020	90		—		90

	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
December 31, 2021	$	88	$	161	$	—
December 31, 2020	90		92		—

The securities underlying the agreements to repurchase are book-entry securities and were delivered by appropriate entry into the counterparties’ accounts or into segregated tri-party custodial accounts at the FHLB. The securities underlying the agreements to repurchase continue to be reflected in ASB’s asset accounts. The counterparties or tri-parties may determine that additional collateral is required based on movements in the fair value of the collateral. Typically, a five percent discount is taken from the fair value of the investment securities to determine the value of the collateral pledged for the repurchase agreements.

Information concerning securities sold under agreements to repurchase, which provided for the repurchase of identical securities, was as follows:

(dollars in thousands)	2021			2020			2019
Amount outstanding as of December 31	$	88,305		$	89,670		$	115,110
Average amount outstanding during the year	88,405			73,738			79,598
Maximum amount outstanding as of any month-end	129,665			100,580			115,110
Weighted-average interest rate as of December 31	0.02		%	0.02		%	0.98		%
Weighted-average interest rate during the year	0.02		%	0.42		%	0.96		%
Weighted-average remaining days to maturity as of December 31	1			1			1

Securities sold under agreements to repurchase were summarized as follows:

December 31	2021						2020
Maturity	Repurchase liability		Weighted-average interest rate		Collateralized by  mortgage-backed securities and federal agency obligations at fair value plus  accrued interest		Repurchase liability		Weighted-average interest rate		Collateralized by  mortgage-backed securities and federal agency obligations at fair value plus  accrued interest
(dollars in thousands)
Overnight	$	88,305	0.02	%	$	160,847	$	89,670	0.02	%	$	92,478
1 to 29 days	—		—	%	—		—		—	%	—
30 to 90 days	—		—	%	—		—		—	%	—
Over 90 days	—		—	%	—		—		—	%	—
	$	88,305	0.02	%	$	160,847	$	89,670	0.02	%	$	92,478

Advances from Federal Home Loan Bank. FHLB advances were nil as of December 31, 2021 and 2020. ASB and the FHLB are parties to an Advances, Pledge and Security Agreement (Advances Agreement), which applies to currently outstanding and future advances, and governs the terms and conditions under which ASB borrows and the FHLB makes loans or advances from time to time. Under the Advances Agreement, ASB agrees to abide by the FHLB’s credit policies, and makes certain warranties and representations to the FHLB. Upon the occurrence of and during the continuation of an “Event of Default” (which term includes any event of nonpayment of interest or principal of any advance when due or failure to perform any promise or obligation under the Advances Agreement or other credit arrangements between the parties), the FHLB may, at its option, declare all indebtedness and accrued interest thereon, including any prepayment fees or charges, to be immediately due and payable. Advances from the FHLB are collateralized by loans, investment securities and stock in the FHLB. As of December 31, 2021 and 2020, ASB’s available FHLB borrowing capacity was $2.0 billion, and $2.1 billion, respectively. In February 2020, the FHLB of Des Moines notified its members that certain assets, which included high-quality home equity lines of credit that were priced off a variable index with a fixed rate option, would no longer qualify as collateral for FHLB Advances and effective October 1, 2020, the FHLB of Des Moines no longer accepted the fixed rate portion of any home equity lines of credit as collateral. In addition, effective July 13, 2020, the FHLB of Des Moines lowered their Loan to Value (LTV), a system-wide percentage applied to eligible pledged collateral to determine borrowing capacity, to reflect ongoing risks in the market due to COVID-19. The lower LTV reduced ASB’s collateral value of the existing pledged loans and the borrowing capacity. To increase the borrowing capacity at the FHLB of Des Moines, ASB pledged commercial real estate loans and is evaluating other assets to pledge as collateral to increase its reserve borrowing capacity with the FHLB.

ASB is required to obtain and hold a specific number of shares of capital stock of the FHLB. ASB was in compliance with all Advances Agreement requirements as of December 31, 2021 and 2020.

Common stock equity.  ASB is regulated and supervised by the OCC. Failure to meet minimum capital requirements can initiate certain mandatory and possibly additional discretionary actions by regulators that, if undertaken, could have a direct material effect on ASB’s financial statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, ASB must meet specific capital guidelines that involve quantitative measures of ASB’s assets, liabilities, and certain off-balance sheet items as calculated under regulatory accounting practices. The capital amounts and classification are also subject to qualitative judgments by the regulators about components, risk weightings, and other factors.

The prompt corrective action provisions impose certain restrictions on institutions that are undercapitalized. The restrictions imposed become increasingly more severe as an institution’s capital category declines from “undercapitalized” to “critically undercapitalized.” The regulators have substantial discretion in the corrective actions that might direct and could include restrictions on dividends and other distributions that ASB may make to ASB Hawaii and the requirement that ASB develop and implement a plan to restore its capital. In 1988, HEI agreed with the OTS predecessor regulatory agency at the time, to contribute additional capital to ASB up to a maximum aggregate amount of approximately $65.1 million (Capital Maintenance Agreement). As of December 31, 2021, as a result of capital contributions in prior years, HEI’s maximum obligation to contribute additional capital under the Capital Maintenance Agreement has been reduced to approximately $28.3 million.

To be categorized as “well capitalized,” ASB must maintain minimum total capital, Tier 1 capital, and Tier 1 leverage ratios as set forth in the table below. Beginning in the second quarter of 2020, ASB had adopted the community bank leverage ratio framework and was only required to comply with Tier 1 leverage ratio. Beginning in the third quarter of 2021, ASB began reporting all of the required capital ratios as the Bank did not meet the requirements to use the community bank leverage ratio

framework. As of December 31, 2021, and 2020 ASB was in compliance with the minimum capital requirements under OCC regulations, and was categorized as “well capitalized” under the regulatory framework for prompt corrective action. There are no conditions or events that management believes have changed the institution’s category under the capital guidelines.

The tables below set forth actual and minimum required capital amounts and ratios:

	Actual				Minimum required				Required to be well capitalized
(dollars in thousands)	Capital		Ratio		Capital		Ratio		Capital		Ratio
December 31, 2021
Tier 1 leverage	$	714,789	7.86	%	$	363,630	4.00	%	$	454,538	5.00	%
Common equity tier 1	714,789		13.29	%	242,072		4.50	%	349,659		6.50	%
Tier 1 capital	714,789		13.29	%	322,762		6.00	%	430,350		8.00	%
Total capital	769,836		14.31	%	430,350		8.00	%	537,937		10.00	%
December 31, 2020
Tier 1 leverage	677,786		8.38	%	323,700		4.00	%	404,625		5.00	%

In 2021, ASB paid cash dividends of $59.0 million to HEI, compared to cash dividends of $31.0 million in 2020. The FRB and OCC approved the dividends.

Related-party transactions. HEI charged ASB $2.1 million, $2.3 million and $2.3 million for general management and administrative services in 2021, 2020 and 2019, respectively. The amounts charged by HEI for services performed by HEI employees to its subsidiaries are allocated primarily on the basis of time expended in providing such services. All amounts charged to ASB were settled as a capital contribution by HEI to ASB.

Derivative financial instruments. ASB enters into interest rate lock commitments (IRLCs) with borrowers, and forward commitments to sell loans or to-be-announced mortgage-backed securities to investors to hedge against the inherent interest rate and pricing risks associated with selling loans.

ASB enters into IRLCs for residential mortgage loans, which commit ASB to lend funds to a potential borrower at a specific interest rate and within a specified period of time. IRLCs that relate to the origination of mortgage loans that will be held for sale are considered derivative financial instruments under applicable accounting guidance. Outstanding IRLCs expose ASB to the risk that the price of the mortgage loans underlying the commitments may decline due to increases in mortgage interest rates from inception of the rate lock to the funding of the loan. The IRLCs are free-standing derivatives which are carried at fair value with changes recorded in mortgage banking income.

ASB enters into forward commitments to hedge the interest rate risk for rate locked mortgage applications in process and closed mortgage loans held for sale. These commitments are primarily forward sales of to-be-announced mortgage backed securities. Generally, when mortgage loans are closed, the forward commitment is liquidated and replaced with a mandatory delivery forward sale of the mortgage to a secondary market investor. In some cases, a best-efforts forward sale agreement is utilized as the forward commitment. These commitments are free-standing derivatives which are carried at fair value with changes recorded in mortgage banking income.

Changes in the fair value of IRLCs and forward commitments subsequent to inception are based on changes in the fair value of the underlying loan resulting from the fulfillment of the commitment and changes in the probability that the loan will fund within the terms of the commitment, which is affected primarily by changes in interest rates and the passage of time.

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

December 31	2021				2020
(in thousands)	Notional amount		Fair value		Notional amount		Fair value
Interest rate lock commitments	$	39,377	$	638	$	120,980	$	4,536
Forward commitments	38,000		(11)		100,500		(500)

ASB’s derivative financial instruments, their fair values, and balance sheet location were as follows:

Derivative Financial Instruments Not Designated
as Hedging Instruments 1
December 31	2021				2020
(in thousands)	Asset derivatives		Liability derivatives		Asset derivatives		Liability derivatives
Interest rate lock commitments	$	638	$	—	$	4,536	$	—
Forward commitments	—		11		—		500
	$	638	$	11	$	4,536	$	500

1 Asset derivatives are included in other assets and liability derivatives are included in other liabilities in the balance sheets.

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	Location of net gains
as Hedging Instruments	(losses) recognized in	Years ended December 31
(in thousands)	the Statements of Income	2021		2020		2019
Interest rate lock commitments	Mortgage banking income	$	(3,898)	$	4,239	$	206
Forward commitments	Mortgage banking income	489		(458)		1
		$	(3,409)	$	3,781	$	207

Commitments. Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established in the commitments. Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee. Since certain commitments are expected to expire without being drawn upon, the total commitment amounts do not necessarily represent future cash requirements. ASB minimizes its exposure to loss under these commitments by requiring that customers meet certain conditions prior to disbursing funds. The amount of collateral, if any, is based on a credit evaluation of the borrower and may include residential real estate, accounts receivable, inventory and property, plant and equipment.

Letters of credit are conditional commitments issued by ASB to guarantee payment and performance of a customer to a third party. The credit risk involved in issuing letters of credit is essentially the same as that involved in extending loan facilities to customers. ASB holds collateral supporting those commitments for which collateral is deemed necessary.

The following is a summary of outstanding off-balance sheet arrangements:

December 31	2021		2020
(in thousands)
Unfunded commitments to extend credit:
Home equity line of credit	$	1,181,496	$	1,248,773
Commercial and commercial real estate	612,158		574,281
Consumer	62,090		69,168
Residential 1-4 family	44,262		57,862
Commercial and financial standby letters of credit	11,723		13,718
Total	$	1,911,729	$	1,963,802

Federal Deposit Insurance Corporation assessment. The Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act) raised the minimum reserve ratio for the Deposit Insurance Fund to 1.35 percent but required the Federal Deposit Insurance Corporation (FDIC) to offset the effect of the increase in the minimum reserve ratio on small institutions (generally insured depository institutions with total consolidated assets of $10 billion or less) when setting assessments. In September 2018, the reserve ratio reached 1.36 percent and the FDIC awarded the small institutions an assessment credit, which was applied to a portion of the 2019 and 2020 assessments for these banks. For the years ended December 31, 2021, 2020 and 2019 ASB’s FDIC insurance expenses were $3.2 million, $2.3 million and $1.2 million, respectively.