Bank segment

3 Months Ended

Mar. 31, 2024

Bank Subsidiary [Abstract]

Bank segment

Bank segment

Selected financial information

American Savings Bank, F.S.B.

Statements of Income and Comprehensive Income Data

	Three months ended March 31
(in thousands)	2024		2023
Interest and dividend income
Interest and fees on loans	$	72,971	$	64,842
Interest and dividends on investment securities	14,964		14,637
Total interest and dividend income	87,935		79,479
Interest expense
Interest on deposit liabilities	17,432		6,837
Interest on other borrowings	8,154		7,721
Total interest expense	25,586		14,558
Net interest income	62,349		64,921
Provision for credit losses	(2,159)		1,175
Net interest income after provision for credit losses	64,508		63,746
Noninterest income
Fees from other financial services	4,874		4,679
Fee income on deposit liabilities	4,898		4,599
Fee income on other financial products	2,743		2,744
Bank-owned life insurance	3,584		1,425
Mortgage banking income	424		130
Other income, net	686		801
Total noninterest income	17,209		14,378
Noninterest expense
Compensation and employee benefits	32,459		30,204
Occupancy	5,063		5,588
Data processing	4,846		5,012
Services	4,151		2,595
Equipment	2,649		2,646
Office supplies, printing and postage	1,018		1,165
Marketing	776		1,016
Other expense	4,942		6,191
Total noninterest expense	55,904		54,417
Income before income taxes	25,813		23,707
Income taxes	4,879		5,145
Net income	20,934		18,562
Other comprehensive income (loss), net of taxes	(9,768)		18,430
Comprehensive income	$	11,166	$	36,992

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

	Three months ended March 31
(in thousands)	2024		2023
Interest and dividend income	$	87,935	$	79,479
Noninterest income	17,209		14,378
*Revenues-Bank	105,144		93,857
Total interest expense	25,586		14,558
Provision for credit losses	(2,159)		1,175
Noninterest expense	55,904		54,417
Less: Retirement defined benefits credit—other than service costs	(281)		(187)
*Expenses-Bank	79,612		70,337
*Operating income-Bank	25,532		23,520
Add back: Retirement defined benefits credit—other than service costs	(281)		(187)
Income before income taxes	$	25,813	$	23,707

American Savings Bank, F.S.B.

Balance Sheets Data

(in thousands)	March 31, 2024				December 31, 2023
Assets
Cash and due from banks			$	126,259			$	184,383
Interest-bearing deposits			100,681				251,072
Cash and cash equivalents			226,940				435,455
Investment securities
Available-for-sale, at fair value			1,091,889				1,136,439
Held-to-maturity, at amortized cost (fair value of $1,074,735 and $1,103,668, at March 31, 2024 and December 31, 2023, respectively)			1,191,074				1,201,314
Stock in Federal Home Loan Bank, at cost			32,489				14,728
Loans held for investment			6,116,722				6,180,810
Allowance for credit losses			(71,057)				(74,372)
Net loans			6,045,665				6,106,438
Loans held for sale, at lower of cost or fair value			2,923				15,168
Other			687,059				681,460
Goodwill			82,190				82,190
Total assets			$	9,360,229			$	9,673,192
Liabilities and shareholder’s equity
Deposit liabilities—noninterest-bearing			$	2,557,240			$	2,599,762
Deposit liabilities—interest-bearing			5,447,824				5,546,016
Other borrowings			593,000				750,000
Other			220,570				247,563
Total liabilities			8,818,634				9,143,341
Common stock			1				1
Additional paid-in capital			358,645				358,067
Retained earnings			484,989				464,055
Accumulated other comprehensive loss, net of tax benefits
Net unrealized losses on securities	$	(293,466)			$	(282,963)
Retirement benefit plans	(8,574)		(302,040)		(9,309)		(292,272)
Total shareholder’s equity			541,595				529,851
Total liabilities and shareholder’s equity			$	9,360,229			$	9,673,192
Other assets
Bank-owned life insurance			$	191,448			$	187,857
Premises and equipment, net			184,684				187,042
Accrued interest receivable			29,697				28,472
Mortgage-servicing rights			8,050				8,169
Low-income housing investments			108,314				112,234
Deferred tax asset			108,240				104,292
Other			56,626				53,394
			$	687,059			$	681,460
Other liabilities
Accrued expenses			$	114,289			$	115,231
Cashier’s checks			34,908				40,479
Advance payments by borrowers			5,559				10,107
Other			65,814				81,746
			$	220,570			$	247,563

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.

Other borrowings consisted of FHLB advances and borrowings from the Federal Reserve Bank.

Investment securities.  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
March 31, 2024
Available-for-sale
U.S. Treasury and federal agency obligations	$	10,052	$	—	$	(415)	$	9,637	—	$	—	$	—	8	$	9,637	$	(415)
Mortgage-backed securities*	1,256,426		—		(221,292)		1,035,134		2	1,340		(17)		115	1,033,794		(221,275)
Corporate bonds	35,205		—		(2,304)		32,901		—	—		—		3	32,901		(2,304)
Mortgage revenue bonds	14,217		—		—		14,217		—	—		—		—	—		—
	$	1,315,900	$	—	$	(224,011)	$	1,091,889	2	$	1,340	$	(17)	126	$	1,076,332	$	(223,994)
Held-to-maturity
U.S. Treasury and federal agency obligations	$	59,923	$	—	$	(7,830)	$	52,093	—	$	—	$	—	3	$	52,094	$	(7,830)
Mortgage-backed securities*	1,131,151		85		(108,594)		1,022,642		55	549,389		(18,604)		45	448,729		(89,990)
	$	1,191,074	$	85	$	(116,424)	$	1,074,735	55	$	549,389	$	(18,604)	48	$	500,823	$	(97,820)
December 31, 2023
Available-for-sale
U.S. Treasury and federal agency obligations	$	12,437	$	—	$	(427)	$	12,010	—	$	—	$	—	9	$	12,010	$	(427)
Mortgage-backed securities*	1,279,852		—		(202,684)		1,077,168		3	1,649		(22)		116	1,075,519		(202,662)
Corporate bonds	35,239		—		(2,336)		32,903		—	—		—		3	32,903		(2,336)
Mortgage revenue bonds	14,358		—		—		14,358		—	—		—		—	—		—
	$	1,341,886	$	—	$	(205,447)	$	1,136,439	3	$	1,649	$	(22)	128	$	1,120,432	$	(205,425)
Held-to-maturity
U.S. Treasury and federal agency obligations	$	59,917	$	—	$	(7,135)	$	52,782	—	$	—	$	—	3	$	52,782	$	(7,135)
Mortgage-backed securities*	1,141,397		2,221		(92,732)		1,050,886		37	378,326		(7,610)		43	432,082		(85,122)
	$	1,201,314	$	2,221	$	(99,867)	$	1,103,668	37	$	378,326	$	(7,610)	46	$	484,864	$	(92,257)

* 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 at March 31, 2024 and December 31, 2023, 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 rated 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, an agency of the government or a government-sponsored entity. 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 at March 31, 2024 and December 31, 2023.

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:

March 31, 2024	Amortized  cost		Fair value
(in thousands)
Available-for-sale
Due in one year or less	$	777	$	759
Due after one year through five years	44,480		41,779
Due after five years through ten years	14,217		14,217
Due after ten years	—		—
	59,474		56,755
Mortgage-backed securities — issued or guaranteed by U.S. Government agencies or sponsored agencies	1,256,426		1,035,134
Total available-for-sale securities	$	1,315,900	$	1,091,889
Held-to-maturity
Due in one year or less	$	—	$	—
Due after one year through five years	39,841		35,225
Due after five years through ten years	20,082		16,868
Due after ten years	—		—
	59,923		52,093
Mortgage-backed securities — issued or guaranteed by U.S. Government agencies or sponsored agencies	1,131,151		1,022,642
Total held-to-maturity securities	$	1,191,074	$	1,074,735

There were no sales of available-for-sale securities for the three months ended March 31, 2024 and 2023.

The components of loans were summarized as follows:

	March 31, 2024		December 31, 2023
(in thousands)
Real estate:
Residential 1-4 family	$	2,598,091	$	2,595,162
Commercial real estate	1,368,394		1,374,038
Home equity line of credit	996,049		1,017,207
Residential land	18,197		18,364
Commercial construction	185,857		172,405
Residential construction	17,756		17,843
Total real estate	5,184,344		5,195,019
Commercial	704,638		743,303
Consumer	256,273		272,256
Total loans	6,145,255		6,210,578
Less: Deferred fees and discounts	(28,533)		(29,768)
Allowance for credit losses	(71,057)		(74,372)
Total loans, net	$	6,045,665	$	6,106,438

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.

As of March 31, 2024, ASB had commitments to borrowers for loans and unused lines and letters of credit of $1.9 billion, of which, commitments to lend to borrowers whose loan terms have been modified in troubled debt restructurings were nil.

Allowance for credit losses.  The allowance for credit losses (balances and changes) 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 March 31, 2024
Allowance for credit losses:
Beginning balance	$	7,435	$	22,185	$	7,778	$	621	$	3,603	$	43	$	9,122	$	23,585	$	74,372
Charge-offs	(842)		—		—		—		—		—		(114)		(2,719)		(3,675)
Recoveries	186		—		238		—		—		—		95		1,000		1,519
Provision	(373)		(1,851)		57		51		(202)		(2)		(1,489)		2,650		(1,159)
Ending balance	$	6,406	$	20,334	$	8,073	$	672	$	3,401	$	41	$	7,614	$	24,516	$	71,057
Three months ended March 31, 2023
Allowance for credit losses:
Beginning balance	$	6,270	$	21,898	$	6,125	$	717	$	1,195	$	46	$	12,426	$	23,539	$	72,216
Charge-offs	(809)		—		(63)		—		—		—		(227)		(2,323)		(3,422)
Recoveries	4		—		17		—		—		—		398		908		1,327
Provision	(853)		803		(26)		(97)		(460)		(18)		(661)		2,487		1,175
Ending balance	$	4,612	$	22,701	$	6,053	$	620	$	735	$	28	$	11,936	$	24,611	$	71,296

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 March 31, 2024
Allowance for loan commitments:
Beginning balance	$	600	$	4,300	$	200	$	5,100
Provision	—		(1,200)		200		(1,000)
Ending balance	$	600	$	3,100	$	400	$	4,100
Three months ended March 31, 2023
Allowance for loan commitments:
Beginning balance	$	400	$	2,600	$	1,400	$	4,400
Provision	—		—		—		—
Ending balance	$	400	$	2,600	$	1,400	$	4,400

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)	2024		2023		2022		2021		2020		Prior		Revolving		Converted to term loans		Total
March 31, 2024
Residential 1-4 family
Current	$	43,536	$	260,253	$	401,887	$	722,614	$	395,190	$	761,888	$	—	$	—	$	2,585,368
30-59 days past due	—		—		—		—		—		2,191		—		—		2,191
60-89 days past due	—		—		—		—		—		773		—		—		773
Greater than 89 days past due	—		—		1,928		1,893		1,129		4,809		—		—		9,759
	43,536		260,253		403,815		724,507		396,319		769,661		—		—		2,598,091
Home equity line of credit
Current	—		—		—		—		—		—		929,649		62,087		991,736
30-59 days past due	—		—		—		—		—		—		971		700		1,671
60-89 days past due	—		—		—		—		—		—		740		169		909
Greater than 89 days past due	—		—		—		—		—		—		1,418		315		1,733
	—		—		—		—		—		—		932,778		63,271		996,049
Residential land
Current	1,955		3,748		3,888		5,467		1,746		718		—		—		17,522
30-59 days past due	—		—		—		—		—		—		—		—		—
60-89 days past due	—		—		—		—		—		—		—		—		—
Greater than 89 days past due	—		—		675		—		—		—		—		—		675
	1,955		3,748		4,563		5,467		1,746		718		—		—		18,197
Residential construction
Current	388		6,189		10,440		739		—		—		—		—		17,756
30-59 days past due	—		—		—		—		—		—		—		—		—
60-89 days past due	—		—		—		—		—		—		—		—		—
Greater than 89 days past due	—		—		—		—		—		—		—		—		—
	388		6,189		10,440		739		—		—		—		—		17,756
Consumer
Current	8,829		76,930		141,903		8,207		1,127		406		10,207		2,395		250,004
30-59 days past due	205		612		1,559		167		11		11		152		110		2,827
60-89 days past due	—		613		1,150		84		15		3		70		49		1,984
Greater than 89 days past due	—		369		681		68		26		10		90		214		1,458
	9,034		78,524		145,293		8,526		1,179		430		10,519		2,768		256,273
Commercial real estate
Pass	8,436		104,489		382,853		191,109		265,611		363,035		15,482		—		1,331,015
Special Mention	—		—		1,975		—		—		17,338		—		—		19,313
Substandard	—		—		—		1,527		—		13,991		—		—		15,518
Doubtful	—		—		—		—		—		2,548		—		—		2,548
	8,436		104,489		384,828		192,636		265,611		396,912		15,482		—		1,368,394
Commercial construction
Pass	—		55,494		39,399		26,545		1,333		—		63,086		—		185,857
Special Mention	—		—		—		—		—		—		—		—		—
Substandard	—		—		—		—		—		—		—		—		—
Doubtful	—		—		—		—		—		—		—		—		—
	—		55,494		39,399		26,545		1,333		—		63,086		—		185,857
Commercial
Pass	11,996		102,699		178,426		105,411		72,558		83,332		99,943		6,284		660,649
Special Mention	—		19,524		6,774		933		—		228		7,176		—		34,635
Substandard	—		—		2,869		1,790		—		3,182		1,276		139		9,256
Doubtful	—		—		—		—		98		—		—		—		98
	11,996		122,223		188,069		108,134		72,656		86,742		108,395		6,423		704,638
Total loans	$	75,345	$	630,920	$	1,176,407	$	1,066,554	$	738,844	$	1,254,463	$	1,130,260	$	72,462	$	6,145,255

	Term Loans by Origination Year												Revolving Loans
(in thousands)	2023		2022		2021		2020		2019		Prior		Revolving		Converted to term loans		Total
December 31, 2023
Residential 1-4 family
Current	$	263,605	$	407,304	$	729,256	$	399,766	$	104,487	$	672,408	$	—	$	—	$	2,576,826
30-59 days past due	—		708		—		268		—		3,525		—		—		4,501
60-89 days past due	—		726		2,694		—		—		1,745		—		—		5,165
Greater than 89 days past due	—		2,519		871		1,129		489		3,662		—		—		8,670
	263,605		411,257		732,821		401,163		104,976		681,340		—		—		2,595,162
Home equity line of credit
Current	—		—		—		—		—		—		954,461		59,146		1,013,607
30-59 days past due	—		—		—		—		—		—		1,219		262		1,481
60-89 days past due	—		—		—		—		—		—		597		—		597
Greater than 89 days past due	—		—		—		—		—		—		1,111		411		1,522
	—		—		—		—		—		—		957,388		59,819		1,017,207
Residential land
Current	3,788		4,097		7,234		1,847		—		723		—		—		17,689
30-59 days past due	—		—		—		—		—		—		—		—		—
60-89 days past due	—		675		—		—		—		—		—		—		675
Greater than 89 days past due	—		—		—		—		—		—		—		—		—
	3,788		4,772		7,234		1,847		—		723		—		—		18,364
Residential construction
Current	5,369		10,984		1,490		—		—		—		—		—		17,843
30-59 days past due	—		—		—		—		—		—		—		—		—
60-89 days past due	—		—		—		—		—		—		—		—		—
Greater than 89 days past due	—		—		—		—		—		—		—		—		—
	5,369		10,984		1,490		—		—		—		—		—		17,843
Consumer
Current	87,686		153,239		9,852		1,654		451		200		10,663		2,779		266,524
30-59 days past due	805		1,314		176		29		24		—		56		163		2,567
60-89 days past due	385		886		114		41		21		—		60		69		1,576
Greater than 89 days past due	354		786		101		24		34		—		67		223		1,589
	89,230		156,225		10,243		1,748		530		200		10,846		3,234		272,256
Commercial real estate
Pass	104,368		384,144		180,986		267,458		65,625		307,367		15,482		—		1,325,430
Special Mention	—		1,975		11,159		—		14,110		3,008		—		—		30,252
Substandard	—		—		1,538		—		11,048		5,770		—		—		18,356
Doubtful	—		—		—		—		—		—		—		—		—
	104,368		386,119		193,683		267,458		90,783		316,145		15,482		—		1,374,038
Commercial construction
Pass	45,863		33,240		26,133		1,333		—		—		65,836		—		172,405
Special Mention	—		—		—		—		—		—		—		—		—
Substandard	—		—		—		—		—		—		—		—		—
Doubtful	—		—		—		—		—		—		—		—		—
	45,863		33,240		26,133		1,333		—		—		65,836		—		172,405
Commercial
Pass	124,667		199,796		106,669		73,976		37,580		80,012		87,206		6,250		716,156
Special Mention	1,860		6,989		951		—		250		—		7,352		—		17,402
Substandard	—		2,962		1,848		98		60		3,369		1,275		133		9,745
Doubtful	—		—		—		—		—		—		—		—		—
	126,527		209,747		109,468		74,074		37,890		83,381		95,833		6,383		743,303
Total loans	$	638,750	$	1,212,344	$	1,081,072	$	747,623	$	234,179	$	1,081,789	$	1,145,385	$	69,436	$	6,210,578

Gross charge-offs by portfolio segment and vintage were as follows:

(in thousands)	2024		2023		2022		2021		2020		Prior		Total
Three months ended March 31, 2024
Residential 1-4 family	$	—	$	—	$	361	$	277	$	—	$	204	$	842
Commercial real estate	—		—		—		—		—		—		—
Home equity line of credit	—		—		—		—		—		—		—
Residential land	—		—		—		—		—		—		—
Commercial construction	—		—		—		—		—		—		—
Residential construction	—		—		—		—		—		—		—
Commercial	—		—		—		14		—		100		114
Consumer	166		937		1,342		127		36		111		2,719
Total	$	166	$	937	$	1,703	$	418	$	36	$	415	$	3,675

(in thousands)	2023		2022		2021		2020		2019		Prior		Total
Three months ended March 31, 2023
Residential 1-4 family	$	—	$	—	$	—	$	—	$	—	$	809	$	809
Commercial real estate	—		—		—		—		—		—		—
Home equity line of credit	—		—		43		—		—		20		63
Residential land	—		—		—		—		—		—		—
Commercial construction	—		—		—		—		—		—		—
Residential construction	—		—		—		—		—		—		—
Commercial	—		—		51		—		8		168		227
Consumer	189		1,524		319		57		176		58		2,323
Total	$	189	$	1,524	$	413	$	57	$	184	$	1,055	$	3,422

Revolving loans converted to term loans during the three months ended March 31, 2024 in the commercial, home equity line of credit and consumer portfolios were $0.8 million, $6.5 million and $0.2 million, respectively. Revolving loans converted to term loans during the three months ended March 31, 2023 in the commercial, home equity line of credit and consumer portfolios were $1.2 million, $7.8 million and $1.1 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		90 days or more past due		Total past due		Current		Total financing receivables		Amortized cost> 90 days and accruing
March 31, 2024
Real estate:
Residential 1-4 family	$	2,191	$	773	$	9,759	$	12,723	$	2,585,368	$	2,598,091	$	425
Commercial real estate	—		—		11,048		11,048		1,357,346		1,368,394		—
Home equity line of credit	1,671		909		1,733		4,313		991,736		996,049		—
Residential land	—		—		675		675		17,522		18,197		—
Commercial construction	—		—		—		—		185,857		185,857		—
Residential construction	—		—		—		—		17,756		17,756		—
Commercial	72		—		139		211		704,427		704,638		—
Consumer	2,827		1,984		1,458		6,269		250,004		256,273		—
Total loans	$	6,761	$	3,666	$	24,812	$	35,239	$	6,110,016	$	6,145,255	$	425
December 31, 2023
Real estate:
Residential 1-4 family	$	4,501	$	5,165	$	8,670	$	18,336	$	2,576,826	$	2,595,162	$	425
Commercial real estate	—		—		11,048		11,048		1,362,990		1,374,038		—
Home equity line of credit	1,481		597		1,522		3,600		1,013,607		1,017,207		—
Residential land	—		675		—		675		17,689		18,364		—
Commercial construction	—		—		—		—		172,405		172,405		—
Residential construction	—		—		—		—		17,843		17,843		—
Commercial	163		135		244		542		742,761		743,303		—
Consumer	2,567		1,576		1,589		5,732		266,524		272,256		—
Total loans	$	8,712	$	8,148	$	23,073	$	39,933	$	6,170,645	$	6,210,578	$	425

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

(in thousands)	March 31, 2024						December 31, 2023
	With a related ACL		Without a related ACL		Total		With a related ACL		Without a related ACL		Total
Real estate:
Residential 1-4 family	$	8,758	$	5,225	$	13,983	$	7,755	$	2,190	$	9,945
Commercial real estate	11,048		—		11,048		11,048		—		11,048
Home equity line of credit	2,404		1,538		3,942		2,626		1,135		3,761
Residential land	675		—		675		780		—		780
Commercial construction	—		—		—		—		—		—
Residential construction	—		—		—		—		—		—
Commercial	238		188		426		133		301		434
Consumer	2,516		—		2,516		2,458		—		2,458
Total	$	25,639	$	6,951	$	32,590	$	24,800	$	3,626	$	28,426

ASB did not recognize interest on nonaccrual loans for the three months ended March 31, 2024 and 2023.

Modifications Made to Borrowers Experiencing Financial Difficulty. The allowance for credit losses incorporates an estimate of lifetime expected credit losses and is recorded on each asset upon origination. The starting point for the estimate of the allowance for credit losses is historical loan information, which includes losses from modifications of receivables to borrowers experiencing financial difficulty. ASB uses a probability of default/loss given default model to determine the allowance for credit losses. An assessment of whether a borrower is experiencing financial difficulty is made at the time of the modification.

Because the effect of most modifications made to borrowers experiencing financial difficulty is already included in the allowance for credit losses, a change to the allowance for credit losses is generally not recorded upon modification.

Modifications may include interest rate reductions, interest only payments for an extended period of time, protracted terms such as amortization and maturity beyond the customary length of time found in the normal marketplace, and other actions intended to minimize economic loss and to provide alternatives to foreclosure or repossession of collateral.

Loan modifications made to borrowers experiencing financial difficulty during the three months ended March 31, 2024 were as follows:

(in thousands)	Term extension		Payment delay		Combination payment delay & term extension		Total		% of total class of loans
Real estate loans
Residential 1-4 family	$	266	$	3,311	$	—	$	3,577	0.14	%
Commercial real estate	—		—		1,975		1,975		0.14	%
Home equity line of credit	—		447		—		447		0.04	%
Residential land	—		675		—		675		3.71	%
Commercial construction	—		—		—		—		—
Residential construction	—		—		—		—		—
Commercial	—		—		—		—		—
Consumer	—		—		—		—		—
Total	$	266	$	4,433	$	1,975	$	6,674	0.11	%

Financial effect of loan modifications during the three months ended March 31, 2024 for borrowers experiencing financial difficulty were as follows:

	Weighted average
	Term extension (in months)	Payment delay (in months)
Real estate loans
Residential 1-4 family	156	9
Commercial real estate	9	9
Home equity line of credit	—	9
Residential land	—	9
Commercial construction	—	—
Residential construction	—	—
Commercial	—	—
Consumer	—	—

Credit risk profile based on payment activity for loans modified during the three months ended March 31, 2024 were as follows:

(in thousands)	Current		30-59 days past due		60-89 days past due		90 days or more past due		Total
Real estate loans
Residential 1-4 family	$	266	$	—	$	—	$	3,311	$	3,577
Commercial real estate	1,975		—		—		—		1,975
Home equity line of credit	447		—		—		—		447
Residential land	—		—		—		675		675
Commercial construction	—		—		—		—		—
Residential construction	—		—		—		—		—
Commercial	—		—		—		—		—
Consumer	—		—		—		—		—
Total	$	2,688	$	—	$	—	$	3,986	$	6,674

During the three months ended March 31, 2024, there were no loan modifications made to borrowers experiencing financial difficulty that defaulted.

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:

	Amortized cost
(in thousands)	March 31, 2024		December 31, 2023		Collateral type
Real estate:
Residential 1-4 family	$	5,731	$	2,272	Residential real estate property
Commercial real estate	11,048		11,048		Commercial real estate property
Home equity line of credit	1,674		1,135		Residential real estate property
Total real estate	18,453		14,455
Commercial	286		301		Business assets
Total	$	18,739	$	14,756

ASB had $4.8 million and $3.4 million of consumer mortgage loans collateralized by residential real estate property that were in the process of foreclosure at March 31, 2024 and December 31, 2023, respectively.

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 proceeds from the sale of residential mortgages of $26.4 million and $5.7 million for the three months ended March 31, 2024 and 2023, respectively, and recognized gains on such sales of $0.4 million and $0.1 million for the three months ended March 31, 2024 and 2023, respectively.

There were no repurchased mortgage loans for the three months ended March 31, 2024 and 2023.

Mortgage servicing fees, a component of other income, net, were $0.9 million for the three months ended March 31, 2024 and 2023.

Changes in the carrying value of MSRs were as follows:

(in thousands)	Gross carrying amount		Accumulated amortization		Valuation allowance		Net carrying amount
March 31, 2024	$	17,939	$	(9,889)	$	—	$	8,050
December 31, 2023	18,241		(10,072)		—		8,169

Changes related to MSRs were as follows:

	Three months ended March 31
(in thousands)	2024		2023
Mortgage servicing rights
Beginning balance	$	8,169	$	9,047
Amount capitalized	198		51
Amortization	(317)		(353)
Other-than-temporary impairment	—		—
Carrying amount before valuation allowance	8,050		8,745
Valuation allowance for mortgage servicing rights
Beginning balance	—		—
Provision	—		—
Other-than-temporary impairment	—		—
Ending balance	—		—
Net carrying value of mortgage servicing rights	$	8,050	$	8,745

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 condensed 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:

(dollars in thousands)	March 31, 2024			December 31, 2023
Unpaid principal balance	$	1,399,266		$	1,402,736
Weighted average note rate	3.52		%	3.47		%
Weighted average discount rate	10.00		%	10.00		%
Weighted average prepayment speed	6.13		%	5.71		%

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)	March 31, 2024		December 31, 2023
Prepayment rate:
25 basis points adverse rate change	$	(125)	$	(90)
50 basis points adverse rate change	(274)		(204)
Discount rate:
25 basis points adverse rate change	(197)		(203)
50 basis points adverse rate change	(391)		(402)

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.

Other borrowings.  As of March 31, 2024 and December 31, 2023, ASB had $593.0 million and $200.0 million of FHLB advances outstanding, respectively, and borrowings with the Federal Reserve Bank of nil and $550.0 million, respectively. As of March 31, 2024, ASB was in compliance with all FHLB Advances, Pledge and Security Agreement requirements and all requirements to borrow at the Federal Reserve Discount Window Primary Credit Facility under 12 CFR 201.4(a) guidelines.

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:

	March 31, 2024				December 31, 2023
(in thousands)	Notional amount		Fair value		Notional amount		Fair value
Interest rate lock commitments	$	8,938	$	136	$	6,246	$	86
Forward commitments	6,900		(13)		5,500		(18)

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

Derivative Financial Instruments Not Designated as Hedging Instruments 1	March 31, 2024				December 31, 2023
(in thousands)	Asset derivatives		Liability derivatives		Asset derivatives		Liability derivatives
Interest rate lock commitments	$	136	$	—	$	86	$	—
Forward commitments	1		14		—		18
	$	137	$	14	$	86	$	18

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 as Hedging Instruments	Location of net gains (losses) recognized in the Statements of Income	Three months ended March 31
(in thousands)		2024		2023
Interest rate lock commitments	Mortgage banking income	$	50	$	17
Forward commitments	Mortgage banking income	5		(13)
		$	55	$	4

Low-Income Housing Tax Credit (LIHTC). ASB’s unfunded commitments to fund its LIHTC investment partnerships were $87.9 million at March 31, 2024 and December 31, 2023. These unfunded commitments were unconditional and legally binding and are recorded in other liabilities with a corresponding increase in other assets. As of March 31, 2024, ASB did not have any impairment losses resulting from forfeiture or ineligibility of tax credits or other circumstances related to its LIHTC investment partnerships.