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Fair value measurements (Tables)
 9 Months Ended
Sep. 30, 2019
Fair Value Disclosures [Abstract]  
Schedule of estimated fair values of certain of the Company's financial instruments
The following table presents the carrying or notional amount, fair value and placement in the fair value hierarchy of the Company’s financial instruments. For stock in Federal Home Loan Bank, the carrying amount is a reasonable estimate of fair value because it can only be redeemed at par.
 
 
 
 
Estimated fair value
 
 
Carrying or notional amount
 
Quoted prices in
active markets
for identical assets
 
Significant
 other observable
 inputs
 
Significant
unobservable
inputs
 
 
(in thousands)
 
 
(Level 1)
 
(Level 2)
 
(Level 3)
 
Total
September 30, 2019
 
 

 
 

 
 

 
 

 
 

Financial assets
 
 

 
 

 
 

 
 

 
 

HEI consolidated
 
 
 
 
 
 
 
 
 
 
Available-for-sale investment securities
 
$
1,210,748

 
$
—

 
$
1,182,289

 
$
28,459

 
$
1,210,748

Held-to-maturity investment securities
 
132,704

 
—

 
137,497

 
—

 
137,497

Stock in Federal Home Loan Bank
 
9,953

 
—

 
9,953

 
—

 
9,953

Loans, net
 
5,048,411

 
—

 
17,164

 
5,121,275

 
5,138,439

Mortgage servicing rights
 
8,567

 
—

 
—

 
11,485

 
11,485

Derivative assets
 
58,473

 
2

 
484

 
—

 
486

Financial liabilities
 
 

 
 

 
 

 
 

 
 
HEI consolidated
 
 
 
 
 
 
 
 
 
 
Deposit liabilities
 
783,308

 
—

 
779,370

 
—

 
779,370

Short-term borrowings—other than bank
 
163,836

 
—

 
163,836

 
—

 
163,836

Other bank borrowings
 
129,190

 
—

 
129,187

 
—

 
129,187

Long-term debt, net—other than bank
 
1,885,454

 
—

 
2,085,217

 
—

 
2,085,217

   Derivative liabilities
 
63,391

 
18

 
2,901

 
—

 
2,919

Hawaiian Electric consolidated
 
 
 
 
 
 
 
 
 
 
Short-term borrowings
 
112,353

 
—

 
112,353

 
—

 
112,353

Long-term debt, net
 
1,418,220

 
—

 
1,594,271

 
—

 
1,594,271

December 31, 2018
 
 

 
 

 
 

 
 

 
 

Financial assets
 
 

 
 

 
 

 
 

 
 

HEI consolidated
 
 
 
 
 
 
 
 
 
 
Available-for-sale investment securities
 
1,388,533

 
—

 
1,364,897

 
23,636

 
1,388,533

Held-to-maturity investment securities
 
141,875

 
—

 
142,057

 
—

 
142,057

Stock in Federal Home Loan Bank
 
9,958

 
—

 
9,958

 
—

 
9,958

Loans, net
 
4,792,707

 
—

 
1,809

 
4,800,244

 
4,802,053

Mortgage servicing rights
 
8,062

 
—

 
—

 
13,618

 
13,618

Derivative assets
 
10,180

 
—

 
91

 
—

 
91

Financial liabilities
 
 

 
 

 
 

 
 

 
 
HEI consolidated
 
 
 
 
 
 
 
 
 
 
Deposit liabilities
 
827,841

 
—

 
817,667

 
—

 
817,667

Short-term borrowings—other than bank
 
73,992

 
—

 
73,992

 
—

 
73,992

Other bank borrowings
 
110,040

 
—

 
110,037

 
—

 
110,037

Long-term debt, net—other than bank
 
1,879,641

 
—

 
1,904,261

 
—

 
1,904,261

Derivative liabilities
 
34,132

 
34

 
596

 
—

 
630

Hawaiian Electric consolidated
 
 
 
 
 
 
 
 
 
 
Short-term borrowings
 
25,000

 
—

 
25,000

 
—

 
25,000

Long-term debt, net
 
1,418,802

 
—

 
1,443,968

 
—

 
1,443,968
Schedule of assets measured at fair value on a recurring basis Assets and liabilities measured at fair value on a recurring basis were as follows:
 
 
September 30, 2019
 
December 31, 2018
 
 
Fair value measurements using
 
Fair value measurements using
(in thousands)
 
Level 1
 
Level 2
 
Level 3
 
Level 1
 
Level 2
 
Level 3
Available-for-sale investment securities (bank segment)
 
 

 
 

 
 

 
 

 
 

 
 

Mortgage-backed securities — issued or guaranteed by U.S. Government agencies or sponsored agencies
 
$
—

 
$
1,019,305

 
$
—

 
$
—

 
$
1,161,416

 
$
—

U.S. Treasury and federal agency obligations
 
—

 
126,708

 
—

 
—

 
154,349

 
—

Corporate bonds
 
—

 
36,276

 
—

 
—

 
49,132

 
—

Mortgage revenue bonds
 
—

 
—

 
28,459

 
—

 
—

 
23,636

 
 
$
—

 
$
1,182,289

 
$
28,459

 
$
—

 
$
1,364,897

 
$
23,636

Derivative assets
 
 

 
 

 
 

 
 

 
 

 
 

Interest rate lock commitments (bank segment)1
 
$
—

 
$
477

 
$
—

 
$
—

 
$
91

 
$
—

Forward commitments (bank segment)1
 
2

 
7

 
—

 
—

 
—

 
—

 
 
$
2

 
$
484

 
$
—

 
$
—

 
$
91

 
$
—

Derivative liabilities
 
 
 
 
 
 
 
 
 
 
 
 
Interest rate lock commitments (bank segment)1
 
$
—

 
$
7

 
$
—

 
$
—

 
$
—

 
$
—

Forward commitments (bank segment)1
 
18

 
67

 
—

 
34

 
9

 
—

Interest rate swap (Other segment)2
 
—

 
2,827

 
—

 
—

 
587

 
—

 
 
$
18

 
$
2,901

 
$
—

 
$
34

 
$
596

 
$
—

1  Derivatives are carried at fair value in other assets or other liabilities in the balance sheets with changes in value included in mortgage banking income.
2 Derivatives are included in other liabilities in the balance sheets.
Schedule of changes in Level 3 assets and liabilities measured at fair value on a recurring basis
The changes in Level 3 assets and liabilities measured at fair value on a recurring basis were as follows:
 
 
Three months ended September 30
 
Nine months ended September 30
Mortgage revenue bonds
 
2019
2018
 
2019
2018
(in thousands)
 
 
 
 
 
 
Beginning balance
 
$
28,166

$
15,427

 
$
23,636

$
15,427

Principal payments received
 
—

—

 
—

—

Purchases
 
293

3,657

 
4,823

3,657

Unrealized gain (loss) included in other comprehensive income
 
—

—

 
—

—

Ending balance
 
$
28,459

$
19,084

 
$
28,459

$
19,084
Schedule of assets measured at fair value on a nonrecurring basis The carrying value of assets measured at fair value on a nonrecurring basis were as follows:
 
 
 
 
Fair value measurements
(in thousands) 
 
Balance
 
Level 1
 
Level 2
 
Level 3
September 30, 2019
 
 
 
 
 
 
 
 
Loans
 
$
3,911

 
$
—

 
$
—

 
$
3,911

December 31, 2018
 
 
 
 
 
 
 
 
Loans
 
77

 
—

 
—

 
77

Real estate acquired in settlement of loans
 
186

 
—

 
—

 
186
Schedule of significant unobservable inputs used in the fair value measurement
Key assumptions used in estimating the fair value of ASB’s MSRs used in the impairment analysis were as follows:
(dollars in thousands)
 
September 30, 2019

 
December 31, 2018

Unpaid principal balance
 
$
1,232,240

 
$
1,188,514

Weighted average note rate
 
3.99
%
 
3.98
%
Weighted average discount rate
 
9.3
%
 
10.0
%
Weighted average prepayment speed
 
12.8
%
 
6.5
%

The following table summarizes the assumptions used to determine the fair value of the LTIP awards linked to TSR and the resulting fair value of LTIP awards granted:
 
 
2019

 
2018

Risk-free interest rate
 
2.48
%
 
2.29
%
Expected life in years
 
3

 
3

Expected volatility
 
15.8
%
 
17.0
%
Range of expected volatility for Peer Group
 
15.0% to 73.2%

 
15.1% to 26.2%

Grant date fair value (per share)
 
$41.07
 
$38.20

The following table presents quantitative information about Level 3 fair value measurements for financial instruments measured at fair value on a nonrecurring basis:
 
 
 
 
 
 
 
 
Significant unobservable
 input value (1)
($ in thousands)
 
Fair value
 
Valuation technique
 
Significant unobservable input
 
Range
 
Weighted
Average
September 30, 2019
 
 
 
 
 
 
 
 
 
 
Home equity line of credit
 
$
199

 
Fair value of property or collateral
 
Appraised value less 7% selling cost
 
 
 
N/A (2)
Residential land
 
25

 
Fair value of property or collateral
 
Appraised value less 7% selling cost
 
 
 
N/A (2)
Commercial
 
3,687

 
Discounted cash flow
 
Expected cash flows
 
3.9%-6.8%
 
4.6%
Total loans
 
$
3,911

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
December 31, 2018
 
 
 
 
 
 
 
 
 
 
Home equity line of credit
 
$
77

 
Fair value of property or collateral
 
Appraised value less 7% selling cost
 
 
 
N/A (2)
Total loans
 
$
77

 
 
 
 
 
 
 
 
Real estate acquired in settlement of loans
 
$
186

 
Fair value of property or collateral
 
Appraised value less 7% selling cost
 
 
 
N/A (2)
(1) Represent percent of outstanding principal balance.
(2) N/A - Not applicable. There is one asset in each fair value measurement type.