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Bank subsidiary | 12 Months Ended
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Dec. 31, 2011
Bank subsidiary |
Bank subsidiary |
4 · Bank subsidiary Selected financial information American Savings Bank, F.S.B. and Subsidiaries Consolidated Statements of Income Data
Years ended December 31 |  | 201 | 1 | 2010 |  | 2009 |
(in thousands) |  |  |  |  |  |  |
Interest and dividend income |  |  |  |  |  |  |
Interest and fees on loans |  | $184,485 |  | $195,192 |  | $217,838 |
Interest and dividends on investment and mortgage-related securities |  | 14,568 |  | 14,946 |  | 26,977 |
Total interest and dividend income |  | 199,053 |  | 210,138 |  | 244,815 |
Interest expense |  |  |  |  |  |  |
Interest on deposit liabilities |  | 8,983 |  | 14,696 |  | 34,046 |
Interest on other borrowings |  | 5,486 |  | 5,653 |  | 9,497 |
Total interest expense |  | 14,469 |  | 20,349 |  | 43,543 |
Net interest income |  | 184,584 |  | 189,789 |  | 201,272 |
Provision for loan losses |  | 15,009 |  | 20,894 |  | 32,000 |
Net interest income after provision for loan losses |  | 169,575 |  | 168,895 |  | 169,272 |
Noninterest income |  |  |  |  |  |  |
Fee income on deposit liabilities |  | 18,026 |  | 26,369 |  | 30,713 |
Fees from other financial services |  | 28,881 |  | 27,280 |  | 25,267 |
Fee income on other financial products |  | 6,704 |  | 6,487 |  | 5,833 |
Net gains (losses) on sale of securities |  | 371 |  | – |  | (32,034 | )
Net losses on available-for-sale securities (includes $32,167 of other-than-temporary impairment losses, net of $16,723 of non-credit losses recognized in other comprehensive income, for 2009) |  | – |  | – |  | (15,444 | )
Other income |  | 11,372 |  | 12,419 |  | 15,569 |
Total noninterest income |  | 65,354 |  | 72,555 |  | 29,904 |
Noninterest expense |  |  |  |  |  |  |
Compensation and employee benefits |  | 71,137 |  | 71,476 |  | 73,990 |
Occupancy |  | 17,154 |  | 16,548 |  | 22,057 |
Data processing |  | 8,155 |  | 13,213 |  | 14,382 |
Services |  | 7,396 |  | 6,594 |  | 11,189 |
Equipment |  | 6,903 |  | 6,620 |  | 8,849 |
Office supplies, printing and postage |  | 3,934 |  | 3,928 |  | 3,758 |
Marketing |  | 3,001 |  | 2,418 |  | 2,134 |
Communication |  | 1,764 |  | 2,221 |  | 2,446 |
Loss on early extinguishment of debt |  | – |  | – |  | 760 |
Other expense |  | 23,949 |  | 25,920 |  | 27,906 |
Total noninterest expense |  | 143,393 |  | 148,938 |  | 167,471 |
Income before income taxes |  | 91,536 |  | 92,512 |  | 31,705 |
Income taxes |  | 31,693 |  | 34,056 |  | 9,938 |
Net income |  | $ 59,843 |  | $ 58,456 |  | $ 21,767 |
Consolidated Balance Sheet Data
December 31 |  | 2011 |  | 2010 |
(in thousands) |  |  |  |  |
Assets |  |  |  |  |
Cash and cash equivalents |  | $ 219,678 |  | $ 204,397 |
Federal funds sold |  | – |  | 1,721 |
Available-for-sale investment and mortgage-related securities |  | 624,331 |  | 678,152 |
Investment in stock of Federal Home Loan Bank of Seattle |  | 97,764 |  | 97,764 |
Loans receivable held for investment, net |  | 3,642,818 |  | 3,489,880 |
Loans held for sale, at lower of cost or fair value |  | 9,601 |  | 7,849 |
Other |  | 233,592 |  | 234,806 |
Goodwill |  | 82,190 |  | 82,190 |
Total assets |  | $4,909,974 |  | $4,796,759 |
Liabilities and shareholder’s equity |  |  |  |  |
Deposit liabilities–noninterest-bearing |  | $ 993,828 |  | $ 865,642 |
Deposit liabilities–interest-bearing |  | 3,076,204 |  | 3,109,730 |
Other borrowings |  | 233,229 |  | 237,319 |
Other |  | 118,078 |  | 90,683 |
Total liabilities |  | 4,421,339 |  | 4,303,374 |
Commitments and contingencies (see below) |  |  |  |  |
Common stock |  | 331,880 |  | 330,562 |
Retained earnings |  | 166,126 |  | 169,111 |
Accumulated other comprehensive loss, net of tax benefits |  | (9,371 | ) | (6,288 | )
Total shareholder’s equity |  | 488,635 |  | 493,385 |
Total liabilities and shareholder’s equity |  | $4,909,974 |  | $4,796,759 |
Other assets |  |  |  |  |
Bank-owned life insurance |  | $121,470 |  | $117,565 |
Premises and equipment, net |  | 52,940 |  | 56,495 |
Prepaid expenses |  | 15,297 |  | 18,608 |
Accrued interest receivable |  | 14,190 |  | 14,887 |
Mortgage-servicing rights |  | 8,227 |  | 6,699 |
Real estate acquired in settlement of loans, net |  | 7,260 |  | 4,292 |
Other |  | 14,208 |  | 16,260 |
|  | $233,592 |  | $234,806 |
Other liabilities |  |  |  |  |
Accrued expenses |  | $ 21,216 |  | $16,426 |
Federal and state income taxes payable |  | 35,002 |  | 28,372 |
Cashier’s checks |  | 22,802 |  | 22,396 |
Advance payments by borrowers |  | 10,100 |  | 10,216 |
Other |  | 28,958 |  | 13,273 |
|  | $118,078 |  | $ 90,683 |
Investment and mortgage-related securities. ASB owns investment securities (federal agency obligations) and mortgage-related securities issued by the Federal National Mortgage Association (FNMA), Federal Home Loan Mortgage Corporation (FHLMC), Government National Mortgage Association (GNMA) and municipal bonds. In the past, ASB owned private-issue mortgage-related securities (PMRS). To further improve its credit risk profile and reduce the potential volatility of future earnings, and in light of the improvement in the fixed-income securities markets, ASB sold the PMRS held in its investment portfolio in the fourth quarter of 2009. As of December 31, 2011, ASB’s investment portfolio distribution was 55% mortgage-related securities issued by FNMA, FHLMC or GNMA, 35% federal agency obligations and 10% municipal bonds. These investment and mortgage-related securities are all active and readily priced. Prices for investments and mortgage-related securities are provided by an independent third party pricing service and are based on observable inputs, including historical trading levels or sector yields, using market-based valuation techniques. The price of these securities is generally based on observable inputs, which includes market liquidity, credit considerations of the underlying collateral, the levels of interest rates, expectations of prepayments and defaults, limited investor base, market sector concerns and overall market psychology. To validate the accuracy and completeness of security pricing, a separate third party pricing service is used on a quarterly basis to compare prices that were received from the initial third party pricing service. If the pricing differential between the two pricing sources exceeds an established threshold, the security price will be re-evaluated by sending a re-pricing request to both independent third party pricing services, to another third party vendor, or to an independent broker to determine the most accurate price based on all observable inputs found in the market place. The third party price selected will be based on the value that best reflects the data and observable characteristics of the security.
December 31, 2011 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
|  |  |  | Gross |  | Gross |  | Estimated |  | Gross unrealized losses
|  | Amortized |  | unrealized |  | unrealized |  | fair |  | Less than 12 months |  | 12 months or longer
(dollars in thousands) |  | cost |  | gains |  | losses |  | value |  | Fair value |  | Amount |  | Fair value |  | Amount |
Available-for-sale |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Federal agency obligations |  | $218,342 |  | $ 2,393 |  | $ (8) |  | $220,727 |  | $ 19,992 |  | $ (8) |  | $ – |  | $ – |
Mortgage-related securities-FNMA, FHLMC and GNMA |  | 334,183 |  | 10,699 |  | (17) |  | 344,865 |  | 11,994 |  | (17) |  | – |  | – |
Municipal bonds |  | 55,393 |  | 3,346 |  | – |  | 58,739 |  | – |  | – |  | – |  | – |
|  | $607,918 |  | $16,438 |  | $(25) |  | $624,331 |  | $31,986 |  | $(25) |  | $ – |  | $ – |
December 31, 2010 |  |  |  |  |  |  |  |  |  |
|  |  |  | Gross |  | Gross |  | Estimated |  | Gross unrealized losses
|  | Amortized |  | unrealized |  | unrealized |  | fair |  | Less than 12 months |  | 12 months or longer
(dollars in thousands) |  | cost |  | gains |  | losses |  | value |  | Fair value |  | Amount |  | Fair value |  | Amount |
Available-for-sale |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Federal agency obligations |  | $317,945 |  | $ 171 |  | $(2,220) |  | $315,896 |  | $205,316 |  | $(2,220) |  | $ – |  | $ – |
Mortgage-related securities- FNMA, FHLMC and GNMA |  | 310,711 |  | 9,570 |  | (311) |  | 319,970 |  | 30,986 |  | (311) |  | – |  | – |
Municipal bonds |  | 43,632 |  | 7 |  | (1,353) |  | 42,286 |  | 41,479 |  | (1,353) |  | – |  | – |
|  | $672,288 |  | $9,748 |  | $(3,884) |  | $678,152 |  | $277,781 |  | $(3,884) |  | $ – |  | $ – |
Federal agency obligations have contractual terms to maturity. Mortgage-related 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 (see contractual maturities table below). The contractual maturities of available-for-sale securities were as follows:
|  | Amortized |  | Fair |
(in thousands) |  | Cost |  | value |
Due in one year or less |  | $ – |  | $ – |
Due after one year through five years |  | 208,342 |  | 210,106 |
Due after five years through ten years |  | 58,113 |  | 61,585 |
Due after ten years |  | 7,280 |  | 7,775 |
|  | 273,735 |  | 279,466 |
Mortgage-related securities-FNMA,FHLMC and GNMA |  | 334,183 |  | 344,865 |
Total available-for-sale securities |  | $607,918 |  | $624,331 |
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 may have the right to call or prepay obligations with or without call or prepayment penalties. In 2011, 2010 and 2009, proceeds from sales of available-for-sale mortgage-related securities were $30.7 million, nil and $185.1 million, resulting in gross realized gains of $0.4 million, nil and $0.8 million and gross realized losses of nil, nil and $32.9 million, respectively. In 2011, proceeds from the sale of municipal bonds were $2.1 million resulting in gross realized gains of $5,000 and no gross realized losses. There were no sales of municipal bonds in 2010 and 2009. ASB pledged mortgage-related securities and federal agency obligations with a carrying value of approximately $91.9 million and $60.8 million as of December 31, 2011 and 2010, respectively, as collateral for public funds deposits, automated clearinghouse transactions with Bank of Hawaii, and deposits in ASB’s bankruptcy and treasury, tax, and loan accounts with the Federal Reserve Bank of San Francisco. As of December 31, 2011 and 2010, mortgage-related securities and federal agency obligations with a carrying value of $219.7 million and $204.8 million, respectively, were pledged as collateral for securities sold under agreements to repurchase. FHLB of Seattle stock. As of December 31, 2011 and 2010, ASB’s investment in stock of the FHLB of Seattle was carried at cost because it can only be redeemed at par and it is a required investment based on measurements of ASB’s capital, assets and/or borrowing levels. Periodically and as conditions warrant, ASB reviews its investment in the stock of the FHLB of Seattle for impairment. ASB evaluated its investment in FHLB stock for OTTI as of December 31, 2011, consistent with its accounting policy. ASB did not recognize an OTTI loss for 2011 based on its evaluation of the underlying investment, including: · the net income recorded by the FHLB of Seattle in the first nine months of 2011; · the significance of the decline in net assets of the FHLB of Seattle as compared to its capital stock amount and the length of time this situation has persisted; · commitments by the FHLB of Seattle to make payments required by law or regulation and the level of such payments in relation to the operating performance of the FHLB of Seattle; · the impact of legislative and regulatory changes on institutions and, accordingly, on the customer base of the FHLB of Seattle; · the liquidity position of the FHLB of Seattle; and · ASB’s intent and assessment of whether it will more likely than not be required to sell before recovery of its par value. Deterioration in the FHLB of Seattle’s financial position may result in future impairment losses. Other-than-temporary impaired securities. All securities are reviewed for impairment in accordance with accounting standards for OTTI recognition. Under these standards ASB’s intent to sell the security, the probability of more-likely-than-not being forced to sell the position prior to recovery of its cost basis and the probability of more-likely-than-not recovering the amortized cost of the position was determined. If ASB’s intent is to hold positions determined to be other-than-temporarily impaired, credit losses, which are recognized in earnings, are quantified using the position’s pre-impairment discount rate and the net present value of cash flows expected to be collected from the security. Non-credit related impairments are reflected in other comprehensive income. Cumulative OTTIs for expected losses that have been recognized in earnings were as follows:
|  | Nine months ended
(in thousands) |  | December 31, 2009
Balance, April 1, 2009 |  | $ 1,486 |
Additions: |  |  |
Initial credit impairments |  | 4,870 |
Subsequent credit impairments |  | 10,574 |
Reductions: |  |  |
For securities sold |  | (16,930 | )
Balance, December 31, 2009 |  | $ – |
The beginning balance for the nine months ended December 31, 2009 relates to credit losses realized prior to April 1, 2009 on debt securities held by ASB as of March 31, 2009. This beginning balance includes the net impact of non-credit losses that were originally reported as losses prior to March 31, 2009 and were subsequently recharacterized from retained earnings as a result of the adoption of new accounting standards for OTTI recognition effective April 1, 2009. Additions to this balance include new securities in which initial credit impairments have been identified and incremental increases of credit impairments on positions that had already taken similar impairments. In the fourth quarter of 2009, ASB sold its private-issue mortgage-related securities portfolio. ASB did not recognize OTTI for 2011 or 2010. Loans receivable.
December 31 |  | 2011 |  | 2010
(in thousands) |  |  |  |  |  |
Real estate loans: |  |  |  |  |  |
Residential 1-4 family |  | $1,926,774 |  |  | $2,087,813 |
Commercial real estate |  | 331,931 |  |  | 300,689 |
Home equity line of credit |  | 535,481 |  |  | 416,453 |
Residential land |  | 45,392 |  |  | 65,599 |
Commercial construction |  | 41,950 |  |  | 38,079 |
Residential construction |  | 3,327 |  |  | 5,602 |
Total real estate loans |  | 2,884,855 |  |  | 2,914,235 |
Commercial loans |  | 716,427 |  |  | 551,683 |
Consumer loans |  | 93,253 |  |  | 80,138 |
Total loans |  | 3,694,535 |  |  | 3,546,056 |
Deferred loan fees, net and unamortized discounts |  | (13,811 | ) |  | (15,530 | )
Allowance for loan losses |  | (37,906 | ) |  | (40,646 | )
Total loans, net |  | $3,642,818 |  |  | $3,489,880 |
As of December 31, 2011 and 2010, ASB’s commitments to originate loans, including the undisbursed portion of loans in process, approximated $95.4 million and $77.6 million, respectively. 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 of the 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. As of December 31, 2011 and 2010, ASB had commitments to sell residential loans of $44.9 million and $21.9 million, respectively. The loans are included in loans receivable as held for sale or represent commitments to make loans at an interest rate set prior to funding (rate lock commitments). Rate lock commitments guarantee a specified interest rate for a loan if ASB’s underwriting standards are met, but do not obligate the potential borrower. Rate lock commitments on loans intended to be sold in the secondary market are derivative instruments, but have not been designated as hedges. Rate lock commitments are carried at fair value and adjustments are recorded in “Other income,” with an offset on the ASB balance sheet in “Other” liabilities. As of December 31, 2011 and 2010, ASB had rate lock commitments on outstanding loans totaling notional amounts of $35.8 million and $15.1 million, respectively. To offset the impact of changes in market interest rates on the rate lock commitments on loans held for sale, ASB utilizes short-term forward sale contracts. Forward sales contracts are also derivative instruments, but have not been designated as hedges, and thus any changes in fair value are also recorded in ASB “Other income,” with an offset in the ASB balance sheet in “Other” assets or liabilities. As of December 31, 2011 and 2010, the notional amounts for forward sales contracts were $44.9 million and $21.9 million, respectively. Valuation models are applied using current market information to estimate fair value. There were no significant gains or losses on derivatives in 2011, 2010 and 2009. As of December 31, 2011 and 2010, standby, commercial and banker’s acceptance letters of credit totaled $10.8 million and $16.3 million, respectively. 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. As of December 31, 2011 and 2010, undrawn consumer lines of credit, including credit cards, totaled $943.1 million and $856.7 million, respectively, and undrawn commercial loans including lines of credit totaled $289.3 million and $263.4 million, respectively. ASB services real estate loans for investors ($1.0 billion, $0.8 billion and $0.6 billion as of December 31, 2011, 2010 and 2009, respectively), which are not included in the accompanying consolidated financial statements. ASB reports fees earned for servicing such loans as income when the related mortgage loan payments are collected and charges loan servicing costs to expense as incurred. As of December 31, 2011 and 2010, ASB had pledged loans with an amortized cost of approximately $1.1 billion and $1.4 billion, respectively, as collateral to secure advances from the FHLB of Seattle. As of December 31, 2011 and 2010, 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 $62.1 million and $60.9 million, respectively. The $1.2 million increase in such loans in 2011 was attributed to new commitments and loans of $15.9 million to new and existing directors and executive officers, offset by closed lines of credits and repayments of $14.7 million. As of December 31, 2011 and 2010, $56.4 million and $52.5 million of the loan balances, respectively, were to related interests of individuals who are directors of ASB. All such loans were made at ASB’s normal credit terms except that residential real estate loans and consumer loans to directors and executive officers of ASB were made at preferred employee interest rates. Management believes these loans do not represent more than a normal risk of collection. Allowance for loan losses. As discussed in Note 1, 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. Segmentation. ASB segments its loan portfolio by three levels. In the first level, the loan portfolio is separated into homogeneous and non-homogeneous loan portfolios. Residential, consumer and credit scored business loans are considered homogeneous loans. These are loans that are typically underwritten based on common, uniform standards, and are generally classified as to the level of loss exposure based on delinquency status. Commercial loans and commercial real estate (CRE) loans are defined as non-homogeneous loans and ASB utilitizes a uniform ten–point risk rating system for evaluating the credit quality of the loans. These are loans where the underwriting criteria are not uniform and the risk rating classification is based upon considerations broader than just delinquency performance. In the second level of segmentation, the loan portfolios are further stratified into individual products with common risk characteristics. For residential loans, the loan portfolio is segmented by loan categories and geographic location first within the State of Hawaii (Oahu vs. the neighbor islands) and second collectively outside of the state. The consumer loan portfolio is segmented into various secured and unsecured loan product types. The credit scored business loan portfolio is segmented by loans under lines of credit or term loans, and corporate credit cards. For commercial loans, the portfolio is differentiated by separating Commercial & Industrial (C&I) loans and C&I loans guaranteed by Small Business Administration programs while CRE loans are grouped by owner-occupied loans, investor loans, construction loans, and vacant land loans. For the third and last level of segmentation, loans are categorized into the regulatory asset quality classifications – Pass, Substandard, and Loss for homogeneous loans based primarily on delinquency status, and Pass (Risk Rating 1 to 6), Special Mention (Risk Rating 7), Substandard (Risk Rating 8), Doubtful (Risk Rating 9), and Loss (Risk Rating 10) for non-homogeneous loans based on credit quality. Specific allocation. Residential real estate. All residential real estate loans that are 180 days delinquent, or where ASB has initiated foreclosure action or have been modified in a TDR are reviewed for impairment based on the fair value of the collateral, net of costs to sell. Generally, impairment amounts derived under this method are immediately charged off. Consumer. The consumer loan portfolio specific allocation is determined based on delinquency; unsecured consumer loans are generally charged-off based on delinquency status varying from 120 to 180 days. Commercial and CRE. A specific allocation is determined for impaired commercial and CRE loans. See further discussion in Note 1. Pooled allocation. Residential real estate and consumer. Pooled allocation for non-impaired residential real estate and consumer loans are determined using a historical loss rate analysis and qualitative factor considerations. Commercial and CRE. Pooled allocation for pass, special mention, substandard, and doubtful grade commercial and CRE loans that share common risk characteristics and properties are determined using a historical loss rate analysis and qualitative factor considerations. Qualitative adjustments. Qualitative adjustments to historical loss rates or other static sources may be necessary since these rates may not be an accurate guide to assessing losses inherent in the current portfolio. To estimate the level of adjustments, management considers factors including levels and trends in problem loans, volume and term of loans, changes in risk from changes in lending policies and practices, management expertise, economic conditions, industry trends, and the effect of credit concentrations. Unallocated allowance. ASB’s allowance incorporates an unallocated portion to cover risk factors and events that may have occurred as of the evaluation date that have not been reflected in the risk measures due to inherent limitations to the precision of the estimation process. These risk factors, in addition to micro- and macro- economic factors, past, current and anticipated events based on facts at the balance sheet date, and realistic courses of action that management expects to take, are assessed in determining the level of unallocated allowance. The allowance for loan losses was comprised of the following:
|  | 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
December 31, 2011 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Allowance for loan losses: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Beginning balance |  | $ 6,497 |  | $1,474 |  | $ 4,269 |  | $ 6,411 |  | $ 1,714 |  | $ 7 |  | $16,015 |  | $3,325 |  | $ 934 |  | $ 40,646
Charge-offs |  | (5,528) |  | – |  | (1,439) |  | (4,071 | ) | – |  | – |  | (5,335 | ) | (3,117 | ) | – |  | (19,490)
Recoveries |  | 110 |  | – |  | 25 |  | 170 |  | – |  | – |  | 869 |  | 567 |  | – |  | 1,741
Provision |  | 5,421 |  | 214 |  | 1,499 |  | 1,285 |  | 174 |  | (3 | ) | 3,318 |  | 3,031 |  | 70 |  | 15,009
Ending balance |  | $ 6,500 |  | $1,688 |  | $ 4,354 |  | $ 3,795 |  | $ 1,888 |  | $ 4 |  | $14,867 |  | $3,806 |  | $1,004 |  | $ 37,906
Ending balance: individually evaluated for impairment |  | $203 |  | $ – |  | $ – |  | $2,525 |  | $ – |  | $ – |  | $976 |  | $ – |  | $ – |  | $3,704
Ending balance: collectively evaluated for impairment |  | $6,297 |  | $1,688 |  | $4,354 |  | $1,270 |  | $1,888 |  | $ 4 |  | $13,891 |  | $3,806 |  | $1,004 |  | $34,202
Financing Receivables: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Ending balance |  | $1,926,774 |  | $331,931 |  | $535,481 |  | $45,392 |  | $41,950 |  | $3,327 |  | $716,427 |  | $93,253 |  | $ – |  | $3,694,535
Ending balance: individually evaluated for impairment |  | $26,012 |  | $13,397 |  | $1,450 |  | $39,364 |  | $ – |  | $ – |  | $48,241 |  | $24 |  | $ – |  | $128,488
Ending balance: collectively evaluated for impairment |  | $1,900,762 |  | $318,534 |  | $534,031 |  | $6,028 |  | $41,950 |  | $3,327 |  | $668,186 |  | $93,229 |  | $ – |  | $3,566,047
December 31, 2010 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Allowance for loan losses: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Beginning balance |  | $ 5,522 |  | $ 861 |  | $ 4,679 |  | $ 4,252 |  | $ 3,068 |  | $ 19 |  | $19,498 |  | $ 2,590 |  | $1,190 |  | $ 41,679
Charge-offs |  | (6,142 | ) | – |  | (2,517) |  | (6,487 | ) | – |  | – |  | (6,261 | ) | (3,408 | ) | – |  | (24,815)
Recoveries |  | 744 |  | – |  | 63 |  | 63 |  | – |  | – |  | 1,537 |  | 481 |  | – |  | 2,888
Provision |  | 6,373 |  | 613 |  | 2,044 |  | 8,583 |  | (1,354) |  | (12 | ) | 1,241 |  | 3,662 |  | (256 | ) | 20,894
Ending balance |  | $ 6,497 |  | $1,474 |  | $ 4,269 |  | $ 6,411 |  | $ 1,714 |  | $ 7 |  | $16,015 |  | $3,325 |  | $ 934 |  | $ 40,646
Ending balance: individually evaluated for impairment |  | $230 |  | $ – |  | $ – |  | $1,642 |  | $ – |  | $ – |  | $ 1,588 |  | $ – |  | $ – |  | $ 3,460
Ending balance: collectively evaluated for impairment |  | $6,267 |  | $1,474 |  | $4,269 |  | $4,769 |  | $1,714 |  | $ 7 |  | $ 14,427 |  | $3,325 |  | $934 |  | $37,186
Financing Receivables: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Ending balance |  | $2,087,813 |  | $300,689 |  | $416,453 |  | $65,599 |  | $38,079 |  | $5,602 |  | $551,683 |  | $80,138 |  | $ – |  | $3,546,056
Ending balance: individually evaluated for impairment |  | $34,615 |  | $12,156 |  | $827 |  | $39,631 |  | $ – |  | $ – |  | $28,886 |  | $76 |  | $ – |  | $116,191
Ending balance: collectively evaluated for impairment |  | $2,053,198 |  | $288,533 |  | $415,626 |  | $25,968 |  | $38,079 |  | $5,602 |  | $522,797 |  | $80,062 |  | $ – |  | $3,429,865
Changes in the allowance for loan losses were as follows:
(dollars in thousands) |  | 2011 |  | 2010 |  | 2009 |
Allowance for loan losses, January 1 |  | $40,646 |  | $41,679 |  | $35,798 |
Provision for loan losses |  | 15,009 |  | 20,894 |  | 32,000 |
Charge-offs, net of recoveries |  |  |  |  |  |  |
Real estate loans |  | 10,733 |  | 14,276 |  | 9,526 |
Other loans |  | 7,016 |  | 7,651 |  | 16,593 |
Net charge-offs |  | 17,749 |  | 21,927 |  | 26,119 |
Allowance for loan losses, December 31 |  | $37,906 |  | $40,646 |  | $41,679 |
Ratio of net charge-offs to average loans outstanding |  | 0.49% |  | 0.61% |  | 0.66% |
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 quality problems so that appropriate steps can be initiated to avoid or minimize future losses. Loans subject to grading include commercial and CRE loans. A ten-point risk rating system is used to determine loan grade and is based on borrower loan risk. The risk rating is a numerical representation of risk 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 issues and industry/economic factors. The loan grade categories are:
1- Substantially risk free | 6- Acceptable risk
2- Minimal risk | 7- Special mention
3- Modest risk | 8- Substandard
4- Better than average risk | 9- Doubtful
5- Average risk | 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:
December 31 |  | 2011 |  | 2010 |
(in thousands) |  | Commercial real estate |  | Commercial construction |  | Commercial |  | Commercial real estate |  | Commercial construction |  | Commercial |
Grade: |  |  |  |  |  |  |  |  |  |  |  |  |
Pass |  | $308,843 |  | $41,950 |  | $650,234 |  | $285,624 |  | $38,079 |  | $462,078 |
Special mention |  | 8,594 |  | – |  | 14,660 |  | 526 |  | – |  | 44,759 |
Substandard |  | 11,058 |  | – |  | 47,607 |  | 14,539 |  | – |  | 44,259 |
Doubtful |  | 3,436 |  | – |  | 3,926 |  | – |  | – |  | 556 |
Loss |  | – |  | – |  | – |  | – |  | – |  | 31 |
Total |  | $331,931 |  | $41,950 |  | $716,427 |  | $300,689 |  | $38,079 |  | $551,683 |
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, 2011 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Real estate loans: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Residential 1-4 family |  | $10,391 |  | $4,583 |  | $28,113 |  | $43,087 |  | $1,883,687 |  | $1,926,774 |  | $ – |
Commercial real estate |  | – |  | – |  | – |  | – |  | 331,931 |  | 331,931 |  | – |
Home equity line of credit |  | 1,671 |  | 494 |  | 1,421 |  | 3,586 |  | 531,895 |  | 535,481 |  | – |
Residential land |  | 2,352 |  | 575 |  | 13,037 |  | 15,964 |  | 29,428 |  | 45,392 |  | 205 |
Commercial construction |  | – |  | – |  | – |  | – |  | 41,950 |  | 41,950 |  | – |
Residential construction |  | – |  | – |  | – |  | – |  | 3,327 |  | 3,327 |  | – |
Commercial loans |  | 226 |  | 733 |  | 1,340 |  | 2,299 |  | 714,128 |  | 716,427 |  | 28 |
Consumer loans |  | 553 |  | 344 |  | 486 |  | 1,383 |  | 91,870 |  | 93,253 |  | 308 |
Total loans |  | $15,193 |  | $6,729 |  | $44,397 |  | $66,319 |  | $3,628,216 |  | $3,694,535 |  | $541 |
December 31, 2010 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Real estate loans: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Residential 1-4 family |  | $ 8,245 |  | $3,719 |  | $36,419 |  | $48,383 |  | $2,039,430 |  | $2,087,813 |  | $ – |
Commercial real estate |  | – |  | 4 |  | – |  | 4 |  | 300,685 |  | 300,689 |  | – |
Home equity line of credit |  | 1,103 |  | 227 |  | 1,659 |  | 2,989 |  | 413,464 |  | 416,453 |  | – |
Residential land |  | 1,543 |  | 1,218 |  | 16,060 |  | 18,821 |  | 46,778 |  | 65,599 |  | 581 |
Commercial construction |  | – |  | – |  | – |  | – |  | 38,079 |  | 38,079 |  | – |
Residential construction |  | – |  | – |  | – |  | – |  | 5,602 |  | 5,602 |  | – |
Commercial loans |  | 892 |  | 1,317 |  | 3,191 |  | 5,400 |  | 546,283 |  | 551,683 |  | 64 |
Consumer loans |  | 629 |  | 410 |  | 617 |  | 1,656 |  | 78,482 |  | 80,138 |  | 320 |
Total loans |  | $12,412 |  | $6,895 |  | $57,946 |  | $77,253 |  | $3,468,803 |  | $3,546,056 |  | $965 |
The credit risk profile based on nonaccrual loans and accruing loans 90 days or more past was as follows:
December 31 |  | 2011 |  | 2010 |
|  | Nonaccrual loans |  | Accruing loans 90 days or more past due |  | Nonaccrual loans |  | Accruing loans 90 days or more past due |
(in thousands) |  |  |  |  |  |  |  |  |
Real estate loans: |  |  |  |  |  |  |  |  |
Residential 1-4 family |  | $28,298 |  | $ – |  | $36,420 |  | $ – |
Commercial real estate |  | 3,436 |  | – |  | – |  | – |
Home equity line of credit |  | 2,258 |  | – |  | 1,659 |  | – |
Residential land |  | 14,535 |  | 205 |  | 15,479 |  | 581 |
Commercial construction |  | – |  | – |  | – |  | – |
Residential construction |  | – |  | – |  | – |  | – |
Commercial loans |  | 17,946 |  | 28 |  | 4,956 |  | 64 |
Consumer loans |  | 281 |  | 308 |  | 341 |  | 320 |
Total |  | $66,754 |  | $541 |  | $58,855 |  | $965 |
The total carrying amount and the total unpaid principal balance of impaired loans was as follows:
December 31 |  | 2011 |  |  | 2010 |
(in thousands) |  | Recorded investment |  | Unpaid principal balance |  | Related Allowance |  | Average recorded investment |  | Interest income recognized |  |  | 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 |  | $ 19,217 |  | $ 26,614 |  | $ – |  | $ 21,385 |  | $ 282 |  |  | $ 18,205 |  | $ 24,692 |  | $ – |  | $14,609 |  | $ 278 |
Commercial real estate |  | 13,397 |  | 13,397 |  | – |  | 13,404 |  | 747 |  |  | 12,156 |  | 12,156 |  | – |  | 14,276 |  | 979 |
Home equity line of credit |  | 711 |  | 1,612 |  | – |  | 954 |  | 6 |  |  | – |  | – |  | – |  | – |  | – |
Residential land |  | 30,781 |  | 39,136 |  | – |  | 33,398 |  | 1,779 |  |  | 33,777 |  | 40,802 |  | – |  | 29,914 |  | 1,499 |
Commercial construction |  | – |  | – |  | – |  | – |  | – |  |  | – |  | – |  | – |  | – |  | – |
Residential construction |  | – |  | – |  | – |  | – |  | – |  |  | – |  | – |  | – |  | – |  | – |
Commercial loans |  | 41,680 |  | 43,516 |  | – |  | 40,952 |  | 2,912 |  |  | 22,041 |  | 22,041 |  | – |  | 29,636 |  | 1,846 |
Consumer loans |  | 25 |  | 25 |  | – |  | 16 |  | – |  |  | – |  | – |  | – |  | – |  | – |
|  | 105,811 |  | 124,300 |  | – |  | 110,109 |  | 5,726 |  |  | 86,179 |  | 99,691 |  | – |  | 88,435 |  | 4,602 |
With an allowance recorded |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Real estate loans: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Residential 1-4 family |  | 3,525 |  | 3,525 |  | 203 |  | 3,527 |  | 201 |  |  | 3,917 |  | 3,917 |  | 230 |  | 2,807 |  | 175 |
Commercial real estate |  | – |  | – |  | – |  | – |  | – |  |  | – |  | – |  | – |  | – |  | – |
Home equity line of credit |  | – |  | – |  | – |  | – |  | – |  |  | – |  | – |  | – |  | – |  | – |
Residential land |  | 7,792 |  | 7,852 |  | 2,525 |  | 8,158 |  | 603 |  |  | 5,041 |  | 5,090 |  | 1,642 |  | 3,753 |  | 327 |
Commercial construction |  | – |  | – |  | – |  | – |  | – |  |  | – |  | – |  | – |  | – |  | – |
Residential construction |  | – |  | – |  | – |  | – |  | – |  |  | – |  | – |  | – |  | – |  | – |
Commercial loans |  | 6,561 |  | 6,561 |  | 976 |  | 8,131 |  | 737 |  |  | 6,845 |  | 6,845 |  | 1,588 |  | 2,796 |  | 182 |
Consumer loans |  | – |  | – |  | – |  | – |  | – |  |  | – |  | – |  | – |  | – |  | – |
|  | 17,878 |  | 17,938 |  | 3,704 |  | 19,816 |  | 1,541 |  |  | 15,803 |  | 15,852 |  | 3,460 |  | 9,356 |  | 684 |
Total |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Real estate loans: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Residential 1-4 family |  | 22,742 |  | 30,139 |  | 203 |  | 24,912 |  | 483 |  |  | 22,122 |  | 28,609 |  | 230 |  | 17,416 |  | 453 |
Commercial real estate |  | 13,397 |  | 13,397 |  | – |  | 13,404 |  | 747 |  |  | 12,156 |  | 12,156 |  | – |  | 14,276 |  | 979 |
Home equity line of credit |  | 711 |  | 1,612 |  | – |  | 954 |  | 6 |  |  | – |  | – |  | – |  | – |  | – |
Residential land |  | 38,573 |  | 46,988 |  | 2,525 |  | 41,556 |  | 2,382 |  |  | 38,818 |  | 45,892 |  | 1,642 |  | 33,667 |  | 1,826 |
Commercial construction |  | – |  | – |  | – |  | – |  | – |  |  | – |  | – |  | – |  | – |  | – |
Residential construction |  | – |  | – |  | – |  | – |  | – |  |  | – |  | – |  | – |  | – |  | – |
Commercial loans |  | 48,241 |  | 50,077 |  | 976 |  | 49,083 |  | 3,649 |  |  | 28,886 |  | 28,886 |  | 1,588 |  | 32,432 |  | 2,028 |
Consumer loans |  | 25 |  | 25 |  | – |  | 16 |  | – |  |  | – |  | – |  | – |  | – |  | – |
|  | $123,689 |  | $142,238 |  | $3,704 |  | $129,925 |  | $7,267 |  |  | $101,982 |  | $115,543 |  | $3,460 |  | $97,791 |  | $5,286 |
Troubled debt restructurings. A loan modification is deemed to be a TDR when ASB grants a concession it would not otherwise consider were it not for the borrower’s financial difficulty. When a borrower fails to make a required payment on a loan or is in imminent default, ASB takes a number of steps to induce the borrower to cure the delinquency and restore the loan to current status or to avoid payment default. At times, ASB may restructure a loan to help a distressed borrower improve their financial position to eventually be able to fully repay the loan, provided the borrower has demonstrated both the willingness and the ability to handle 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, temporary deferral of principal payments, temporary interest rate reductions, and covenant amendments or waivers. ASB does not grant principal forgiveness in its TDR modifications. Residential loan modifications generally involve the deferral of principal payments for a period of time not exceeding one year or a temporary reduction of principal and/or interest rate for a period of time generally not exceeding two years. Land loans 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 another one 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, amendment or waiver of financial covenants, and to a lesser extent 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 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 original effective interest rate, (2) fair value of collateral less costs 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. L oan modifications that occurred during 2011 were as follows:
|  | 2011
|  |  |  | Outstanding recorded investment
(dollars in thousands) |  | Number of contracts |  | Pre-modification |  | Post-modification |
Troubled debt restructurings |  |  |  |  |  |  |
Real estate loans: |  |  |  |  |  |  |
Residential 1-4 family |  | 42 |  | $11,233 |  | $ 9,853 |
Commercial real estate |  | – |  | – |  | – |
Home equity line of credit |  | 1 |  | 93 |  | 93 |
Residential land |  | 46 |  | 9,965 |  | 9,946 |
Commercial loans |  | 56 |  | 35,349 |  | 35,349 |
Consumer loans |  | 1 |  | 25 |  | 25 |
|  | 146 |  | $56,665 |  | $55,266 |
Loans modified in TDRs that experienced a payment default of 90 days or more in 2011, and for which the payment default occurred within one year of the modification, were as follows:
|  | 2011
(dollars in thousands) |  | 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 |  | 1 |  | 528 |
Commercial loans |  | 4 |  | 799 |
Consumer loans |  | – |  | – |
|  | 5 |  | $1,327 |
The residential land loan TDR that subsequently defaulted was modified by extending the maturity date. The four commercial loans that subsequently defaulted were modified by extending the maturity date and deferring principal payments for a short period of time. Deposit liabilities.
December 31 |  | 2011 |  | 2010 |
|  | Weighted-average |  |  |  | Weighted-average |  |  |
(dollars in thousands) |  | stated rate |  | Amount |  | stated rate |  | Amount |
Savings |  | 0.07% |  | $1,684,875 |  | 0.12% |  | $1,623,211 |
Other checking |  |  |  |  |  |  |  |  |
Interest-bearing |  | 0.02 |  | 610,542 |  | 0.05 |  | 589,228 |
Noninterest-bearing |  | – |  | 538,214 |  | – |  | 473,297 |
Commercial checking |  | – |  | 455,614 |  | – |  | 392,345 |
Money market |  | 0.21 |  | 236,641 |  | 0.28 |  | 230,990 |
Term certificates |  | 0.98 |  | 544,146 |  | 1.25 |  | 666,301 |
|  | 0.18% |  | $4,070,032 |  | 0.28% |  | $3,975,372 |
As of December 31, 2011 and 2010, certificate accounts of $100,000 or more totaled $119 million and $153 million, respectively. The approximate amounts of term certificates outstanding as of December 31, 2011 with scheduled maturities for 2012 through 2016 were $325 million in 2012, $79 million in 2013, $45 million in 2014, $56 million in 2015, $26 million in 2016, and $13 million thereafter. Interest expense on deposit liabilities by type of deposit was as follows:
(in thousands) |  | 2011 |  | 2010 |  | 2009 |
Term certificates |  | $6,393 |  | $11,221 |  | $27,369 |
Savings |  | 1,756 |  | 2,262 |  | 4,952 |
Money market |  | 650 |  | 884 |  | 886 |
Interest-bearing checking |  | 184 |  | 329 |  | 839 |
|  | $8,983 |  | $14,696 |  | $34,046 |
Other borrowings. Securities sold under agreements to repurchase.
December 31, 2011 |  |  |  |  |  |  |
Maturity |  | Repurchase liability |  | Weighted-average interest rate |  | Collateralized by mortgage-related securities and federal agency obligations– fair value plus accrued interest |
(dollars in thousands) |  |  |  |  |  |  |
Overnight |  | $132,932 |  | 0.35% |  | $156,478 |
1 to 29 days |  | – |  | – |  | – |
30 to 90 days |  | – |  | – |  | – |
Over 90 days |  | 50,297 |  | 4.75 |  | 63,930 |
|  | $183,229 |  | 1.56% |  | $220,408 |
At December 31, 2011, $50 million of securities sold under agreements to repurchase with a rate of 4.75% and maturity date over 90 days is callable quarterly at par until maturity. The securities underlying the agreements to repurchase are book-entry securities and were delivered by appropriate entry into the counterparties’ accounts at the Federal Reserve System. 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. The securities underlying the agreements to repurchase continue to be reflected in ASB’s asset accounts. Information concerning securities sold under agreements to repurchase, which provided for the repurchase of identical securities, was as follows:
(dollars in millions) |  | 2011 |  | 2010 |  | 2009 |
Amount outstanding as of December 31 |  | $183 |  | $172 |  | $233 |
Average amount outstanding during the year |  | $183 |  | $201 |  | $230 |
Maximum amount outstanding as of any month-end |  | $186 |  | $238 |  | $241 |
Weighted-average interest rate as of December 31 |  | 1.56% |  | 1.71% |  | 1.38% |
Weighted-average interest rate during the year |  | 1.61% |  | 1.53% |  | 1.55% |
Weighted-average remaining days to maturity as of December 31 |  | 490 |  | 628 |  | 544 |
Advances from Federal Home Loan Bank.
December 31, 2011 |  | Weighted-average stated rate |  | Amount |
(dollars in thousands) |  |  |  |  |
Due in |  |  |  |  |
2012 |  | –% |  | $ – |
2013 |  | – |  | – |
2014 |  | – |  | – |
2015 |  | – |  | – |
2016 |  | – |  | – |
Thereafter |  | 4.28 |  | 50,000 |
|  | 4.28% |  | $50,000 |
At December 31, 2011, $50 million of fixed rate FHLB advances with a rate of 4.28% is callable quarterly at par until maturity in 2017. ASB and the FHLB of Seattle are parties to an Advances, Security and Deposit Agreement (Advances Agreement), which applies to currently outstanding and future advances, and governs the terms and conditions under which ASB borrows and the FHLB of Seattle makes loans or advances from time to time. Under the Advances Agreement, ASB agrees to abide by the FHLB of Seattle’s credit policies, and makes certain warranties and representations to the FHLB of Seattle. 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 of Seattle 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 of Seattle are collateralized by loans and stock in the FHLB of Seattle. ASB is required to obtain and hold a specific number of shares of capital stock of the FHLB of Seattle. ASB was in compliance with all Advances Agreement requirements as of December 31, 2011 and 2010. Common stock equity. 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, 2011, as a result of capital contributions in prior years, HEI’s maximum obligation to contribute additional capital under the Capital Maintenance Agreement had been reduced to approximately $28.3 million. As of December 31, 2011, ASB was in compliance with the minimum capital requirements under OCC regulations. In 2011, ASB paid cash dividends of $58 million and distributed noncash dividends of $5 million to HEI, compared to cash dividends of $62 million in 2010. The noncash dividend was the fair value of assets associated with an ASB office lease assumed by HEI. The FRB and OCC approved the dividends. Guarantees. In October 2007, ASB, as a member financial institution of Visa U.S.A. Inc., received restricted shares of Visa, Inc. (Visa) as a result of a restructuring of Visa U.S.A. Inc. in preparation for an initial public offering by Visa. As a part of the restructuring, ASB entered into a judgment and loss sharing agreement with Visa in order to apportion financial responsibilities arising from any potential adverse judgment or negotiated settlements related to indemnified litigation involving Visa. As of December 31, 2011, ASB had accrued $1.1 million related to the agreement. Because the extent of ASB’s obligations under this agreement depends entirely upon the occurrence of future events, ASB’s maximum potential future liability under this agreement is not determinable. Federal Deposit Insurance Corporation restoration plan. In November 2009, the Board of Directors of the Federal Deposit Insurance Corporation (FDIC) approved a restoration plan that required banks to prepay, by December 30, 2009, their estimated quarterly, risk-based assessments for the fourth quarter of 2009, and for all of 2010, 2011 and 2012. For the fourth quarter of 2009 and all of 2010, the prepaid assessment rate was assessed according to a risk-based premium schedule adopted earlier in 2009. The prepaid assessment rate for 2011 and 2012 was the current assessment rate plus 3 basis points. The prepaid assessment was recorded as a prepaid asset as of December 30, 2009, and each quarter thereafter ASB will record a charge to earnings for its regular quarterly assessment and offset the prepaid expense until the asset is exhausted. Once the asset is exhausted, ASB will record an accrued expense payable each quarter for the assessment to be paid. If the prepaid assessment is not exhausted by December 30, 2014, any remaining amount will be returned to ASB. ASB’s prepaid assessment was approximately $24 million. For the year ended December 31, 2010, ASB’s assessment rate was 14 basis points of deposits, or $5.7 million. In February 2011, the FDIC finalized rules to change its assessment base from total domestic deposits to average total assets minus average tangible equity, as required in the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act). Assessment rates were reduced to a range of 2.5 to 9 basis points on the new assessment base for financial institutions in the lowest risk category. Financial institutions in the highest risk category have assessment rates of 30 to 45 basis points. The new rate schedule was effective April 1, 2011. For the year ended December 31, 2011, ASB’s FDIC insurance assessment was $3.6 million. The FDIC may impose additional special assessments in the future if it is deemed necessary to ensure the Deposit Insurance Fund ratio does not decline to a level that is close to zero or that could otherwise undermine public confidence in federal deposit insurance. Deposit insurance coverage. In July 2010, the Dodd-Frank Act permanently raised the current standard maximum deposit insurance amount to $250,000. Previously, the standard maximum deposit insurance amount of $100,000 had been temporarily raised to $250,000 through December 31, 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. Management is evaluating the merits of the claims alleged in the lawsuit, which is still in its preliminary stage. Thus, the probable outcome and range of reasonably possible loss are not determinable. 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.

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Name: | he_BankSubsidiaryDisclosureAbstract
Namespace Prefix: | he_
Data Type: | xbrli:stringItemType
Balance Type: | na
Period Type: | duration

X
- Definition This element encapsulates disclosures pertaining to banking subsidiary. + References No definition available. + Details
Name: | he_BankSubsidiaryTextBlock
Namespace Prefix: | he_
Data Type: | nonnum:textBlockItemType
Balance Type: | na
Period Type: | duration