4 ·Bank subsidiary

Selected financial information

American Savings Bank, F.S.B.

Statements of Income Data

	Three months ended June 30					Six months ended June 30
(in thousands)	2013			2012		2013		2012
Interest income
Interest and fees on loans	$	43,624		$	44,473	$	86,227	$	89,361
Interest on investment and mortgage-related securities	3,234			3,297		6,698		7,102
Total interest income	46,858			47,770		92,925		96,463
Interest expense
Interest on deposit liabilities	1,296			1,696		2,608		3,475
Interest on other borrowings	1,178			1,214		2,342		2,475
Total interest expense	2,474			2,910		4,950		5,950
Net interest income	44,384			44,860		87,975		90,513
Provision (credit) for loan losses	(959		)	2,378		899		5,924
Net interest income after provision (credit) for loan losses	45,343			42,482		87,076		84,589
Noninterest income
Fees from other financial services	7,996			7,463		15,639		14,800
Fee income on deposit liabilities	4,433			4,322		8,747		8,600
Fee income on other financial products	1,780			1,532		3,574		3,081
Mortgage banking income	2,003			2,185		5,349		4,220
Gain on sale of securities	1,226			134		1,226		134
Other income	1,731			1,315		3,323		2,675
Total noninterest income	19,169			16,951		37,858		33,510
Noninterest expense
Compensation and employee benefits	20,063			18,696		40,151		37,342
Occupancy	4,219			4,241		8,342		8,466
Data processing	2,827			2,489		5,814		4,600
Services	2,328			2,221		4,431		4,004
Equipment	1,870			1,807		3,644		3,537
Other expense	8,500			8,106		16,095		14,813
Total noninterest expense	39,807			37,560		78,477		72,762
Income before income taxes	24,705			21,873		46,457		45,337
Income taxes	8,786			7,684		16,383		15,271
Net income	$	15,919		$	14,189	$	30,074	$	30,066

American Savings Bank, F.S.B.

Statements of Comprehensive Income Data

	Three months ended June 30						Six months ended June 30
(in thousands)	2013			2012			2013			2012
Net income	$	15,919		$	14,189		$	30,074		$	30,066
Other comprehensive income (loss), net of taxes:
Net unrealized gains (losses) on securities:
Net unrealized gains (losses) on securities arising during the period, net of (taxes) benefits, of $5,485 and ($721) for the three months ended June 30, 2013 and 2012 and $6,032 and ($572) for the six months ended June 30, 2013 and 2012, respectively	(8,307		)	1,093			(9,135		)	867
Less: reclassification adjustment for net realized gains, included in net income , net of taxes, of $488 and $53 for the three months ended June 30, 2013 and 2012 and $488 and $53 for the six months ended June 30, 2013 and 2012, respectively	(738		)	(81		)	(738		)	(81		)
Retirement benefit plans:
Less: amortization of prior service credit and net losses recognized during the period in net periodic benefit cost, net of tax benefits of $308 and $168 for the three months ended June 30, 2013 and 2012 and $1,732 and $332 for the six months ended June 30, 2013 and 2012, respectively	466			255			2,623			503
Other comprehensive income (loss), net of taxes	(8,579		)	1,267			(7,250		)	1,289
Comprehensive income	$	7,340		$	15,456		$	22,824		$	31,355

American Savings Bank, F.S.B.

Balance Sheets Data

(in thousands)	June 30, 2013						December 31, 2012

Assets
Cash and cash equivalents				$	143,912					$	184,430
Available-for-sale investment and mortgage-related securities				560,172						671,358
Investment in stock of Federal Home Loan Bank of Seattle				94,281						96,022
Loans receivable held for investment				3,953,634						3,779,218
Allowance for loan losses				(41,004		)				(41,985		)
Loans receivable held for investment, net				3,912,630						3,737,233
Loans held for sale, at lower of cost or fair value				34,073						26,005
Other				241,513						244,435
Goodwill				82,190						82,190
Total assets				$	5,068,771					$	5,041,673

Liabilities and shareholder’s equity
Deposit liabilities—noninterest-bearing				$	1,168,937					$	1,164,308
Deposit liabilities—interest-bearing				3,107,306						3,065,608
Other borrowings				187,884						195,926
Other				102,516						117,752
Total liabilities				4,566,643						4,543,594

Commitments and contingencies (see “Litigation” below)

Common stock				334,937						333,712
Retained earnings				189,837						179,763
Accumulated other comprehensive income (loss), net of taxes
Net unrealized gains on securities	$	888					$	10,761
Retirement benefit plans	(23,534		)	(22,646		)	(26,157		)	(15,396		)
Total shareholder’s equity				502,128						498,079
Total liabilities and shareholder’s equity				$	5,068,771					$	5,041,673

Other assets
Bank-owned life insurance				$	127,851					$	125,726
Premises and equipment, net				68,124						62,458
Prepaid expenses				4,064						13,199
Accrued interest receivable				13,472						13,228
Mortgage-servicing rights				11,363						10,818
Real estate acquired in settlement of loans, net				2,987						6,050
Other				13,652						12,956
				$	241,513					$	244,435

Other liabilities
Accrued expenses				$	15,456					$	17,103
Federal and state income taxes payable				30,932						35,408
Cashier’s checks				22,737						23,478
Advance payments by borrowers				10,300						9,685
Other				23,091						32,078
				$	102,516					$	117,752

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 securities sold under agreements to repurchase and advances from the Federal Home Loan Bank (FHLB) of Seattle of $138 million and $50 million, respectively, as of June 30, 2013 and $146 million and $50 million, respectively, as of December 31, 2012.

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 balance sheet. 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 Sheet		Net amount of liabilities presented in the Balance Sheet
Repurchase agreements
June 30, 2013	$	138	$	—	$	138
December 31, 2012	146		—		146

	Gross amount not offset in the Balance Sheet
(in millions)	Net amount of liabilities presented in the Balance Sheet		Financial instruments		Cash collateral pledged		Net amount
June 30, 2013
Financial institution	$	50	$	50	$	—	$	—
Commercial account holders	88		88		—		—
Total	$	138	$	138	$	—	$	—

December 31, 2012
Financial institution	$	50	$	50	$	—	$	—
Commercial account holders	96		96		—		—
Total	$	146	$	146	$	—	$	—

Investment and mortgage-related securities portfolio.

Available-for-sale securities. The book value (amortized cost), gross unrealized gains and losses, estimated fair value and gross unrealized losses (fair value and amount by duration of time in which positions have been held in a continuous loss position) for securities held in ASB’s “available-for-sale” portfolio by major security type were as follows:

			Gross		Gross			Estimated		Gross unrealized losses
	Amortized		unrealized		unrealized			fair		Less than 12 months					12 months or longer
(in thousands)	cost		gains		losses			value		Fair value		Amount			Fair value		Amount

June 30, 2013
Federal agency obligations	$	99,963	$	561	$	(1,460	)	$	99,064	$	30,383	$	(1,460	)	$	—	$	—
Mortgage-related securities- FNMA, FHLMC and GNMA	381,281		6,257		(5,494		)	382,044		178,144		(5,494		)	—		—
Municipal bonds	77,455		1,929		(320		)	79,064		26,561		(320		)	—		—
	$	558,699	$	8,747	$	(7,274	)	$	560,172	$	235,088	$	(7,274	)	$	—	$	—

December 31, 2012
Federal agency obligations	$	168,324	$	3,167	$	—		$	171,491	$	—	$	—		$	—	$	—
Mortgage-related securities- FNMA, FHLMC and GNMA	407,175		10,412		(204		)	417,383		32,269		(204		)	—		—
Municipal bonds	77,993		4,491		—			82,484		—		—			—		—
	$	653,492	$	18,070	$	(204	)	$	671,358	$	32,269	$	(204	)	$	—	$	—

The unrealized losses on ASB’s investments in mortgage-related securities and obligations issued by federal agencies were caused by interest rate movements. The contractual terms of these investments do not permit the issuer to settle the securities at a price less than the amortized cost basis of the investments. Because ASB does not intend to sell the securities and has determined it is more likely than not that it will not be required to sell the investments before recovery of their amortized costs basis, which may be at maturity, ASB did not consider these investments to be other-than-temporarily impaired at June 30, 2013.

The fair values of ASB’s investment securities could decline if interest rates rise or spreads widen.

The following table details the contractual maturities of available-for-sale securities. All positions with variable maturities (e.g. callable debentures and mortgage-related securities) are disclosed based upon the bond’s contractual maturity. Actual maturities will likely differ from these contractual maturities because borrowers have the right to prepay obligations with or without prepayment penalties.

June 30, 2013	Amortized cost		Fair value
(in thousands)
Due in one year or less	$	28,120	$	28,192
Due after one year through five years	34,885		35,220
Due after five years through ten years	89,055		90,477
Due after ten years	25,358		24,239
	177,418		178,128
Mortgage-related securities-FNMA,FHLMC and GNMA	381,281		382,044
Total available-for-sale securities	$	558,699	$	560,172

Allowance for loan losses. ASB must maintain an allowance for loan losses that is adequate to absorb estimated probable credit losses associated with its loan portfolio. The allowance for loan losses consists of an allocated portion, which estimates credit losses for specifically identified loans and pools of loans, and an unallocated portion.

The allowance for loan losses (balances and changes) and financing receivables were as follows:

	Residential			Commercial real		Home equity line			Residential			Commercial		Residential		Commercial			Consumer
(in thousands)	1-4 family			estate		of credit			land			construction		construction		loans			loans			Unallocated		Total
Six months ended June 30, 2013
Allowance for loan losses:
Beginning balance	$	6,068		$	2,965	$	4,493		$	4,275		$	2,023	$	9	$	15,931		$	4,019		$	2,202	$	41,985
Charge-offs	(1,056		)	—		(738		)	(235		)	—		—		(1,350		)	(1,404		)	—		(4,783		)
Recoveries	1,225			—		256			500			—		—		612			310			—		2,903
Provision	120			1,152		998			(2,353		)	282		5		1,114			(526		)	107		899
Ending balance	$	6,357		$	4,117	$	5,009		$	2,187		$	2,305	$	14	$	16,307		$	2,399		$	2,309	$	41,004
Ending balance: individually evaluated for impairment	$	944		$	820	$	—		$	1,641		$	—	$	—	$	3,367		$	—		$	—	$	6,772
Ending balance: collectively evaluated for impairment	$	5,413		$	3,297	$	5,009		$	546		$	2,305	$	14	$	12,940		$	2,399		$	2,309	$	34,232

Financing Receivables:
Ending balance	$	2,001,035		$	382,735	$	673,727		$	21,836		$	50,114	$	9,664	$	719,519		$	104,759		$	—	$	3,963,389
Ending balance: individually evaluated for impairment	$	21,417		$	3,811	$	837		$	16,041		$	—	$	—	$	21,431		$	20		$	—	$	63,557
Ending balance: collectively evaluated for impairment	$	1,979,618		$	378,924	$	672,890		$	5,795		$	50,114	$	9,664	$	698,088		$	104,739		$	—	$	3,899,832
Year ended December 31, 2012
Allowance for loan losses:
Beginning balance	$	6,500		$	1,688	$	4,354		$	3,795		$	1,888	$	4	$	14,867		$	3,806		$	1,004	$	37,906
Charge-offs	(3,183		)	—		(716		)	(2,808		)	—		—		(3,606		)	(2,517		)	—		(12,830		)
Recoveries	1,328			—		108			1,443			—		—		649			498			—		4,026
Provision	1,423			1,277		747			1,845			135		5		4,021			2,232			1,198		12,883
Ending balance	$	6,068		$	2,965	$	4,493		$	4,275		$	2,023	$	9	$	15,931		$	4,019		$	2,202	$	41,985
Ending balance: individually evaluated for impairment	$	384		$	535	$	—		$	3,221		$	—	$	—	$	2,659		$	—		$	—	$	6,799
Ending balance: collectively evaluated for impairment	$	5,684		$	2,430	$	4,493		$	1,054		$	2,023	$	9	$	13,272		$	4,019		$	2,202	$	35,186

Financing Receivables:
Ending balance	$	1,866,450		$	375,677	$	630,175		$	25,815		$	43,988	$	6,171	$	721,349		$	121,231		$	—	$	3,790,856
Ending balance: individually evaluated for impairment	$	25,279		$	6,751	$	1,560		$	18,563		$	—	$	—	$	20,298		$	22		$	—	$	72,473
Ending balance: collectively evaluated for impairment	$	1,841,171		$	368,926	$	628,615		$	7,252		$	43,988	$	6,171	$	701,051		$	121,209		$	—	$	3,718,383

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 and industrial, commercial real estate and commercial construction loans.

A dual ten-point risk rating system is used to reflect the probability of default (borrower risk rating) and loss given default (transaction risk rating). The borrower risk rating addresses risk presented by the individual borrower and is based on the overall assessment of the borrower’s financial and operating strength including earnings, operating cash flow, debt service capacity, asset and liability structure, competitive issues, experience and quality of management, financial reporting quality and industry/economic factors. Separately, the transaction risk rating addresses risk in the transaction and is a function of the type of collateral control exercised over the collateral, loan structure, guarantees, and other structural support or enhancements to the loan.

The numerical representation of the risk categories are:

1- Substantially risk free

2- Minimal risk

3- Modest risk

4- Better than average risk

5- Average risk

6- Acceptable risk

7- Special mention

8- Substandard

9- Doubtful

10- Loss

Grades 1 through 6 are considered pass grades. 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.

The credit risk profile by internally assigned grade for loans was as follows:

	June 30, 2013						December 31, 2012
(in thousands)	Commercial real estate		Commercial construction		Commercial		Commercial real estate		Commercial construction		Commercial
Grade:
Pass	$	319,751	$	44,703	$	629,293	$	314,182	$	39,063	$	638,854
Special mention	36,141		—		19,655		25,437		4,925		24,511
Substandard	23,032		5,411		66,925		29,308		—		53,538
Doubtful	3,811		—		3,646		6,750		—		4,446
Loss	—		—		—		—		—		—
Total	$	382,735	$	50,114	$	719,519	$	375,677	$	43,988	$	721,349

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
June 30, 2013
Real estate loans:
Residential 1-4 family	$	2,656	$	580	$	17,899	$	21,135	$	1,979,900	$	2,001,035	$	—
Commercial real estate	—		—		3,811		3,811		378,924		382,735		—
Home equity line of credit	923		126		975		2,024		671,703		673,727		—
Residential land	167		852		9,493		10,512		11,324		21,836		2,187
Commercial construction	—		—		—		—		50,114		50,114		—
Residential construction	—		—		—		—		9,664		9,664		—
Commercial loans	577		834		5,528		6,939		712,580		719,519		—
Consumer loans	408		161		136		705		104,054		104,759		—
Total loans	$	4,731	$	2,553	$	37,842	$	45,126	$	3,918,263	$	3,963,389	$	2,187
December 31, 2012
Real estate loans:
Residential 1-4 family	$	6,353	$	1,741	$	24,054	$	32,148	$	1,834,302	$	1,866,450	$	—
Commercial real estate	85		—		6,750		6,835		368,842		375,677		—
Home equity line of credit	1,077		142		1,319		2,538		627,637		630,175		—
Residential land	2,851		75		7,788		10,714		15,101		25,815		—
Commercial construction	—		—		—		—		43,988		43,988		—
Residential construction	—		—		—		—		6,171		6,171		—
Commercial loans	3,052		2,814		1,098		6,964		714,385		721,349		131
Consumer loans	598		348		424		1,370		119,861		121,231		242
Total loans	$	14,016	$	5,120	$	41,433	$	60,569	$	3,730,287	$	3,790,856	$	373

The credit risk profile based on nonaccrual loans and accruing loans 90 days or more past due was as follows:

	June 30, 2013				December 31, 2012
(in thousands)	Nonaccrual loans		Accruing loans 90 days or more past due		Nonaccrual loans		Accruing loans 90 days or more past due
Real estate loans:
Residential 1-4 family	$	21,392	$	—	$	26,721	$	—
Commercial real estate	3,811		—		6,750		—
Home equity line of credit	2,160		—		2,349		—
Residential land	7,565		2,187		8,561		—
Commercial construction	—		—		—		—
Residential construction	—		—		—		—
Commercial loans	21,935		—		20,222		131
Consumer loans	263		—		284		242
Total	$	57,126	$	2,187	$	64,887	$	373

The total carrying amount and the total unpaid principal balance of impaired loans, with and without recorded allowance for loan losses and combined, were as follows:

	June 30, 2013						Three months ended June 30, 2013				Six months ended June 30, 2013
(in thousands)	Recorded investment		Unpaid principal balance		Related Allowance		Average recorded investment		Interest income recognized*		Average recorded investment		Interest income recognized*
With no related allowance recorded

Real estate loans:
Residential 1-4 family	$	10,921	$	14,527	$	—	$	12,380	$	98	$	13,568	$	232
Commercial real estate	—		—		—		—		—		1,604		—
Home equity line of credit	536		1,077		—		637		—		646		—
Residential land	8,429		9,809		—		8,502		122		8,167		219
Commercial construction	—		—		—		—		—		—		—
Residential construction	—		—		—		—		—		—		—
Commercial loans	4,306		6,408		—		4,393		1		4,306		1
Consumer loans	20		20		—		20		—		21		—
	24,212		31,841		—		25,932		221		28,312		452

With an allowance recorded
Real estate loans:
Residential 1-4 family	7,172		7,193		944		7,069		75		6,039		176
Commercial real estate	3,811		3,834		820		8,341		151		7,221		151
Home equity line of credit	—		—		—		—		—		—		—
Residential land	6,229		6,356		1,641		6,379		89		7,632		202
Commercial construction	—		—		—		—		—		—		—
Residential construction	—		—		—		—		—		—		—
Commercial loans	17,125		18,427		3,367		15,073		—		15,147		5
Consumer loans	—		—		—		—		—		—		—
	34,337		35,810		6,772		36,862		315		36,039		534

Total
Real estate loans:
Residential 1-4 family	18,093		21,720		944		19,449		173		19,607		408
Commercial real estate	3,811		3,834		820		8,341		151		8,825		151
Home equity line of credit	536		1,077		—		637		—		646		—
Residential land	14,658		16,165		1,641		14,881		211		15,799		421
Commercial construction	—		—		—		—		—		—		—
Residential construction	—		—		—		—		—		—		—
Commercial loans	21,431		24,835		3,367		19,466		1		19,453		6
Consumer loans	20		20		—		20		—		21		—
	$	58,549	$	67,651	$	6,772	$	62,794	$	536	$	64,351	$	986

	December 31, 2012						Year ended December 31, 2012
(in thousands)	Recorded investment		Unpaid principal balance		Related allowance		Average recorded investment		Interest income recognized*
With no related allowance recorded

Real estate loans:
Residential 1-4 family	$	14,633	$	20,247	$	—	$	16,688	$	294
Commercial real estate	2,929		2,929		—		7,771		237
Home equity line of credit	581		1,374		—		632		1
Residential land	7,691		10,624		—		21,589		1,185
Commercial construction	—		—		—		—		—
Residential construction	—		—		—		—		—
Commercial loans	4,265		6,994		—		24,605		986
Consumer loans	21		21		—		23		—
	30,120		42,189		—		71,308		2,703

With an allowance recorded
Real estate loans:
Residential 1-4 family	4,803		4,803		384		4,204		250
Commercial real estate	3,821		3,840		535		1,295		—
Home equity line of credit	—		—		—		26		—
Residential land	9,984		10,364		3,221		7,428		575
Commercial construction	—		—		—		—		—
Residential construction	—		—		—		—		—
Commercial loans	16,033		16,912		2,659		8,429		23
Consumer loans	—		—		—		—		—
	34,641		35,919		6,799		21,382		848

Total
Real estate loans:
Residential 1-4 family	19,436		25,050		384		20,892		544
Commercial real estate	6,750		6,769		535		9,066		237
Home equity line of credit	581		1,374		—		658		1
Residential land	17,675		20,988		3,221		29,017		1,760
Commercial construction	—		—		—		—		—
Residential construction	—		—		—		—		—
Commercial loans	20,298		23,906		2,659		33,034		1,009
Consumer loans	21		21		—		23		—
	$	64,761	$	78,108	$	6,799	$	92,690	$	3,551

* Since loan was classified as impaired.

Troubled debt restructurings. A loan modification is deemed to be a troubled debt restructuring (TDR) when ASB grants a concession it would not otherwise consider were it not for the borrower’s financial difficulty. 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 five 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 amortization period, and temporary deferral of principal payments. ASB does not reduce the interest rate on commercial loan TDR modifications. Occasionally, additional collateral and/or guaranties are obtained.

All TDR loans are classified as impaired and are segregated and reviewed separately when assessing the adequacy of the allowance for loan losses based on the appropriate method of measuring impairment: (1) present value of expected future cash flows discounted at the loan’s effective original contractual rate, (2) fair value of collateral less cost to sell, or (3) observable market price. The financial impact of the calculated impairment amount 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 loan losses.

Loan modifications that occurred were as follows for the indicated periods:

	Three months ended June 30, 2013					Six months ended June 30, 2013
	Number of	Outstanding recorded investment				Number of	Outstanding recorded investment
(dollars in thousands)	contracts	Pre-modification		Post-modification		contracts	Pre-modification		Post-modification
Troubled debt restructurings
Real estate loans:
Residential 1-4 family	14	$	4,645	$	4,775	18	$	5,767	$	5,838
Commercial real estate	—	—		—		—	—		—
Home equity line of credit	—	—		—		4	462		215
Residential land	4	1,116		1,163		7	2,040		2,031
Commercial loans	3	714		714		3	714		714
Consumer loans	—	—		—		—	—		—
	21	$	6,475	$	6,652	32	$	8,983	$	8,798

	Three months ended June 30, 2012					Six months ended June 30, 2012
	Number of	Outstanding recorded investment				Number of	Outstanding recorded investment
(dollars in thousands)	contracts	Pre-modification		Post-modification		contracts	Pre-modification		Post-modification
Troubled debt restructurings
Real estate loans:
Residential 1-4 family	15	$	3,056	$	2,872	22	$	4,469	$	4,282
Commercial real estate	—	—		—		—	—		—
Home equity line of credit	—	—		—		—	—		—
Residential land	8	1,774		1,580		15	3,508		3,021
Commercial loans	8	1,869		1,869		14	2,029		2,029
Consumer loans	—	—		—		—	—		—
	31	$	6,699	$	6,321	51	$	10,006	$	9,332

ASB did not have any loans modified in TDRs that experienced a payment default of 90 or more days in 2013, and for which the payment default occurred within one year of the modification. Loans modified in TDRs that experienced a payment default of 90 days or more in 2012, and for which the payment default occurred within one year of the modification, were as follows:

	Three months ended June 30, 2012			Six months ended June 30, 2012
(dollars in thousands)	Number of contracts	Recorded investment		Number of contracts	Recorded investment
Troubled debt restructurings that subsequently defaulted
Real estate loans:
Residential 1-4 family	—	$	—	—	$	—
Commercial real estate	—	—		—	—
Home equity line of credit	—	—		—	—
Residential land	—	—		—	—
Commercial loans	—	—		3	847
Consumer loans	—	—		—	—
	—	$	—	3	$	847

The three commercial loans that subsequently defaulted were modified by temporarily lowering the monthly payments and deferring principal payments for a short period of time. There are no commitments to lend additional funds to borrowers whose loan terms have been impaired or modified in TDRs as of June 30, 2013.

Litigation. In March 2011, a purported class action lawsuit was filed in the First Circuit Court of the State of Hawaii by a customer who claimed that ASB had improperly charged overdraft fees on debit card transactions. The lawsuit is still in its preliminary stage, thus, the probable outcome and range of reasonably possible loss are not determinable at this time.

ASB is subject in the normal course of business to pending and threatened legal proceedings. Management does not anticipate that the aggregate ultimate liability arising out of these pending or threatened legal proceedings will be material to its financial position. However, ASB cannot rule out the possibility that such outcomes could have a material adverse effect on the results of operations or liquidity for a particular reporting period in the future.