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Bank segment (Tables)

9 Months Ended

Sep. 30, 2014

Selected financial information

American Savings Bank, F.S.B.

Statements of Income Data



	Three months ended September 30				Nine months ended September 30
(in thousands)	2014		2013		2014		2013
Interest and dividend income
Interest and fees on loans	$	45,532	$	43,337	$	133,065	$	129,564
Interest and dividends on investment and mortgage-related securities	2,773		3,025		8,758		9,723
Total interest and dividend income	48,305		46,362		141,823		139,287
Interest expense
Interest on deposit liabilities	1,312		1,262		3,774		3,870
Interest on other borrowings	1,438		1,206		4,263		3,548
Total interest expense	2,750		2,468		8,037		7,418
Net interest income	45,555		43,894		133,786		131,869
Provision for loan losses	1,550		54		3,566		953
Net interest income after provision for loan losses	44,005		43,840		130,220		130,916
Noninterest income
Fees from other financial services	5,642		5,728		15,987		21,367
Fee income on deposit liabilities	5,109		4,819		14,175		13,566
Fee income on other financial products	1,971		2,714		6,325		6,288
Mortgage banking income	875		1,547		1,749		6,896
Gain on sale of securities	—		—		2,847		1,226
Other income, net	1,634		3,888		4,865		7,211
Total noninterest income	15,231		18,696		45,948		56,554
Noninterest expense
Compensation and employee benefits	19,892		20,564		60,050		60,715
Occupancy	4,517		4,208		12,959		12,550
Data processing	2,684		2,168		8,715		7,982
Services	2,580		2,424		7,708		6,855
Equipment	1,672		1,825		4,926		5,469
Office supplies, printing and postage	1,415		907		4,487		2,806
Marketing	948		692		2,690		2,054
Communication	412		479		1,363		1,374
Other expense	5,544		6,461		15,026		18,400
Total noninterest expense	39,664		39,728		117,924		118,205
Income before income taxes	19,572		22,808		58,244		69,265
Income taxes	6,312		7,532		18,769		23,915
Net income	$	13,260	$	15,276	$	39,475	$	45,350

Schedule of statements of comprehensive income data

American Savings Bank, F.S.B.

Statements of Comprehensive Income Data



	Three months ended September 30						Nine months ended September 30
(in thousands)	2014			2013			2014			2013
Net income	$	13,260		$	15,276		$	39,475		$	45,350
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) tax benefits of $1,094, $1,049, ($2,249) and $7,081 for the respective periods	(1,657		)	(1,589		)	3,406			(10,724		)
Less: reclassification adjustment for net realized gains included in net income, net of taxes of nil, nil, $1,132 and $488 for the respective periods	—			—			(1,715		)	(738		)
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 $138, $278, $424 and $2,010 for the respective periods	208			420			642			3,043
Other comprehensive income (loss), net of taxes	(1,449		)	(1,169		)	2,333			(8,419		)
Comprehensive income	$	11,811		$	14,107		$	41,808		$	36,931

Schedule of balance sheets data

American Savings Bank, F.S.B.

Balance Sheets Data



(in thousands)	September 30, 2014						December 31, 2013
Assets
Cash and due from banks				$	98,879					$	108,998
Interest-bearing deposits				74,654						47,605
Available-for-sale investment and mortgage-related securities				531,603						529,007
Investment in stock of Federal Home Loan Bank of Seattle				75,063						92,546
Loans receivable held for investment				4,335,421						4,150,229
Allowance for loan losses				(43,461		)				(40,116		)
Loans receivable held for investment, net				4,291,960						4,110,113
Loans held for sale, at lower of cost or fair value				2,328						5,302
Other				285,659						268,063
Goodwill				82,190						82,190
Total assets				$	5,442,336					$	5,243,824

Liabilities and shareholder’s equity
Deposit liabilities—noninterest-bearing				$	1,298,726					$	1,214,418
Deposit liabilities—interest-bearing				3,235,071						3,158,059
Other borrowings				263,204						244,514
Other				107,814						105,679
Total liabilities				4,904,815						4,722,670
Commitments and contingencies (see “Litigation” section)
Common stock				1						1
Additional paid in capital				337,862						336,053
Retained earnings				209,522						197,297
Accumulated other comprehensive loss, net of tax benefits
Net unrealized losses on securities	$	(1,972	)				$	(3,663	)
Retirement benefit plans	(7,892		)	(9,864		)	(8,534		)	(12,197		)
Total shareholder’s equity				537,521						521,154
Total liabilities and shareholder’s equity				$	5,442,336					$	5,243,824

Other assets
Bank-owned life insurance				$	133,066					$	129,963
Premises and equipment, net				70,105						67,766
Prepaid expenses				3,941						3,616
Accrued interest receivable				13,436						13,133
Mortgage-servicing rights				11,524						11,687
Low-income housing equity investments				22,825						14,543
Real estate acquired in settlement of loans, net				580						1,205
Other				30,182						26,150
				$	285,659					$	268,063
Other liabilities
Accrued expenses				$	24,733					$	19,989
Federal and state income taxes payable				35,096						37,807
Cashier’s checks				23,754						21,110
Advance payments by borrowers				5,013						9,647
Other				19,218						17,126
				$	107,814					$	105,679

Schedule of the book value and aggregate fair value by major security type

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:



	Amortized cost		Gross unrealized gains		Gross unrealized losses			Estimated fair value		Gross unrealized losses
										Less than 12 months					12 months or longer
(in thousands)										Fair value		Amount			Fair value		Amount
September 30, 2014
U.S. Treasury and federal agency obligations	$	107,072	$	631	$	(1,407	)	$	106,296	$	29,628	$	(137	)	$	29,168	$	(1,270	)
Mortgage-related securities- FNMA, FHLMC and GNMA	427,804		5,327		(7,824		)	425,307		89,402		(910		)	148,544		(6,914		)
Municipal bonds	—		—		—			—		—		—			—		—
	$	534,876	$	5,958	$	(9,231	)	$	531,603	$	119,030	$	(1,047	)	$	177,712	$	(8,184	)
December 31, 2013
Federal agency obligations	$	83,193	$	174	$	(2,394	)	$	80,973	$	70,799	$	(2,394	)	$	—	$	—
Mortgage-related securities- FNMA, FHLMC and GNMA	374,993		4,911		(10,460		)	369,444		228,543		(8,819		)	19,655		(1,641		)
Municipal bonds	76,904		1,826		(140		)	78,590		14,478		(140		)	—		—
	$	535,090	$	6,911	$	(12,994	)	$	529,007	$	313,820	$	(11,353	)	$	19,655	$	(1,641	)

Schedule of contractual maturities of available-for-sale securities

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.



September 30, 2014	Amortized cost		Fair value
(in thousands)
Due in one year or less	$	—	$	—
Due after one year through five years	44,498		44,419
Due after five years through ten years	37,332		37,641
Due after ten years	25,242		24,236
	107,072		106,296
Mortgage-related securities-FNMA,FHLMC and GNMA	427,804		425,307
Total available-for-sale securities	$	534,876	$	531,603

Schedule of allowance for loan losses

The allowance for loan losses (balances and changes) and financing receivables 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			Unallocated			Total
Three months ended September 30, 2014
Allowance for loan losses:
Beginning balance	$	5,667		$	7,230	$	7,081		$	1,837		$	3,390	$	26	$	15,144		$	1,997		$	—		$	42,372
Charge-offs	(632		)	—		(46		)	(28		)	—		—		(886		)	(592		)	—			(2,184		)
Recoveries	160			—		299			90			—		—		952			222			—			1,723
Provision	670			3		(119		)	(92		)	1,724		3		(1,130		)	491			—			1,550
Ending balance	$	5,865		$	7,233	$	7,215		$	1,807		$	5,114	$	29	$	14,080		$	2,118		$	—		$	43,461
Three months ended September 30, 2013
Allowance for loan losses:
Beginning balance	$	6,357		$	4,117	$	5,009		$	2,187		$	2,305	$	14	$	16,307		$	2,399		$	2,309		$	41,004
Charge-offs	(106		)	—		(44		)	(3		)	—		—		(305		)	(407		)	—			(865		)
Recoveries	157			—		78			282			—		—		166			176			—			859
Provision	(604		)	204		12			(361		)	44		2		(361		)	42			1,076			54
Ending balance	$	5,804		$	4,321	$	5,055		$	2,105		$	2,349	$	16	$	15,807		$	2,210		$	3,385		$	41,052
Nine months ended September 30, 2014
Allowance for loan losses:
Beginning balance	$	5,534		$	5,059	$	5,229		$	1,817		$	2,397	$	19	$	15,803		$	2,367		$	1,891		$	40,116
Charge-offs	(992		)	—		(182		)	(81		)	—		—		(1,256		)	(1,614		)	—			(4,125		)
Recoveries	1,056			—		624			253			—		—		1,277			694			—			3,904
Provision	267			2,174		1,544			(182		)	2,717		10		(1,744		)	671			(1,891		)	3,566
Ending balance	$	5,865		$	7,233	$	7,215		$	1,807		$	5,114	$	29	$	14,080		$	2,118		$	—		$	43,461
Ending balance: individually evaluated for impairment	$	917		$	4	$	8		$	1,171		$	—	$	—	$	810		$	5		$	—		$	2,915
Ending balance: collectively evaluated for impairment	$	4,948		$	7,229	$	7,207		$	636		$	5,114	$	29	$	13,270		$	2,113		$	—		$	40,546
Financing Receivables:
Ending balance	$	2,030,337		$	502,356	$	808,991		$	16,935		$	87,461	$	18,699	$	770,079		$	107,531		$	—		$	4,342,389
Ending balance: individually evaluated for impairment	$	20,015		$	754	$	392		$	8,872		$	—	$	—	$	15,058		$	16		$	—		$	45,107
Ending balance: collectively evaluated for impairment	$	2,010,322		$	501,602	$	808,599		$	8,063		$	87,461	$	18,699	$	755,021		$	107,515		$	—		$	4,297,282
Nine months ended September 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	(1,162		)	—		(782		)	(238		)	—		—		(1,655		)	(1,811		)	—			(5,648		)
Recoveries	1,382			—		334			782			—		—		778			486			—			3,762
Provision	(484		)	1,356		1,010			(2,714		)	326		7		753			(484		)	1,183			953
Ending balance	$	5,804		$	4,321	$	5,055		$	2,105		$	2,349	$	16	$	15,807		$	2,210		$	3,385		$	41,052
Ending balance: individually evaluated for impairment	$	944		$	888	$	—		$	1,585		$	—	$	—	$	2,679		$	—		$	—		$	6,096
Ending balance: collectively evaluated for impairment	$	4,860		$	3,433	$	5,055		$	520		$	2,349	$	16	$	13,128		$	2,210		$	3,385		$	34,956
Financing Receivables:																									0
Ending balance	$	2,015,082		$	405,037	$	703,210		$	18,400		$	51,067	$	10,460	$	749,733		$	102,400		$	—		$	4,055,389
Ending balance: individually evaluated for impairment	$	22,123		$	4,484	$	960		$	12,747		$	—	$	—	$	22,777		$	19		$	—		$	63,110
Ending balance: collectively evaluated for impairment	$	1,992,959		$	400,553	$	702,250		$	5,653		$	51,067	$	10,460	$	726,956		$	102,381		$	—		$	3,992,279

Schedule of credit risk profile by internally assigned grade for loans

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



	September 30, 2014						December 31, 2013
(in thousands)	Commercial real estate		Commercial construction		Commercial		Commercial real estate		Commercial construction		Commercial
Grade:
Pass	$	444,723	$	70,335	$	715,284	$	375,217	$	52,112	$	703,053
Special mention	18,199		—		8,500		33,436		—		17,634
Substandard	39,434		17,126		45,101		28,020		—		59,663
Doubtful	—		—		1,194		3,770		—		3,038
Loss	—		—		—		—		—		—
Total	$	502,356	$	87,461	$	770,079	$	440,443	$	52,112	$	783,388

Schedule of credit risk profile based on payment activity for loans

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
September 30, 2014
Real estate loans:
Residential 1-4 family	$	6,449	$	909	$	14,427	$	21,785	$	2,008,552	$	2,030,337	$	—
Commercial real estate	—		—		—		—		502,356		502,356		—
Home equity line of credit	578		166		143		887		808,104		808,991		—
Residential land	260		—		525		785		16,150		16,935		525
Commercial construction	—		—		—		—		87,461		87,461		—
Residential construction	—		—		—		—		18,699		18,699		—
Commercial loans	239		34		954		1,227		768,852		770,079		—
Consumer loans	781		377		293		1,451		106,080		107,531		—
Total loans	$	8,307	$	1,486	$	16,342	$	26,135	$	4,316,254	$	4,342,389	$	525
December 31, 2013
Real estate loans:
Residential 1-4 family	$	2,728	$	622	$	15,411	$	18,761	$	1,987,246	$	2,006,007	$	—
Commercial real estate	—		—		3,770		3,770		436,673		440,443		—
Home equity line of credit	765		312		960		2,037		737,294		739,331		—
Residential land	184		48		2,756		2,988		13,188		16,176		—
Commercial construction	—		—		—		—		52,112		52,112		—
Residential construction	—		—		—		—		12,774		12,774		—
Commercial loans	1,668		612		3,026		5,306		778,082		783,388		—
Consumer loans	436		158		304		898		107,824		108,722		—
Total loans	$	5,781	$	1,752	$	26,227	$	33,760	$	4,125,193	$	4,158,953	$	—

Schedule of credit risk profile based on nonaccrual loans, accruing loans 90 days or more past due

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



	September 30, 2014				December 31, 2013
(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	$	20,499	$	—	$	19,679	$	—
Commercial real estate	596		—		4,439		—
Home equity line of credit	1,105		—		2,060		—
Residential land	2,798		525		3,161		—
Commercial construction	—		—		—		—
Residential construction	—		—		—		—
Commercial loans	11,414		—		18,781		—
Consumer loans	502		—		401		—
Total	$	36,914	$	525	$	48,521	$	—

Schedule of the carrying amount and the total unpaid principal balance of impaired loans, with and without recorded allowance for loans losses

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:



	September 30, 2014						Three months ended September 30, 2014				Nine months ended September 30, 2014
(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	$	8,718	$	10,398	$	—	$	8,519	$	30	$	9,077	$	189
Commercial real estate	596		642		—		199		—		66		—
Home equity line of credit	208		332		—		274		—		450		4
Residential land	2,500		3,356		—		2,610		40		2,823		138
Commercial construction	—		—		—		—		—		—		—
Residential construction	—		—		—		—		—		—		—
Commercial loans	8,858		14,147		—		6,152		6		4,145		22
Consumer loans	—		—		—		—		—		10		—
	20,880		28,875		—		17,754		76		16,571		353
With an allowance recorded
Real estate loans:
Residential 1-4 family	11,297		11,338		917		10,232		112		8,019		303
Commercial real estate	158		158		4		3,045		455		4,049		458
Home equity line of credit	184		212		8		198		1		89		2
Residential land	6,372		6,450		1,171		6,379		81		6,685		301
Commercial construction	—		—		—		—		—		—		—
Residential construction	—		—		—		—		—		—		—
Commercial loans	6,200		6,637		810		10,549		207		14,249		301
Consumer loans	16		16		5		17		—		8		—
	24,227		24,811		2,915		30,420		856		33,099		1,365
Total
Real estate loans:
Residential 1-4 family	20,015		21,736		917		18,751		142		17,096		492
Commercial real estate	754		800		4		3,244		455		4,115		458
Home equity line of credit	392		544		8		472		1		539		6
Residential land	8,872		9,806		1,171		8,989		121		9,508		439
Commercial construction	—		—		—		—		—		—		—
Residential construction	—		—		—		—		—		—		—
Commercial loans	15,058		20,784		810		16,701		213		18,394		323
Consumer loans	16		16		5		17		—		18		—
	$	45,107	$	53,686	$	2,915	$	48,174	$	932	$	49,670	$	1,718



	December 31, 2013						Year ended December 31, 2013
(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	$	9,708	$	12,144	$	—	$	11,674	$	386
Commercial real estate	—		—		—		802		—
Home equity line of credit	672		1,227		—		623		2
Residential land	2,622		3,612		—		6,675		482
Commercial construction	—		—		—		—		—
Residential construction	—		—		—		—		—
Commercial loans	3,466		4,715		—		4,837		12
Consumer loans	19		19		—		20		—
	16,487		21,717		—		24,631		882
With an allowance recorded
Real estate loans:
Residential 1-4 family	6,216		6,236		642		6,455		372
Commercial real estate	4,604		4,686		1,118		5,745		152
Home equity line of credit	—		—		—		—		—
Residential land	7,452		7,623		1,332		6,844		409
Commercial construction	—		—		—		—		—
Residential construction	—		—		—		—		—
Commercial loans	17,759		20,640		2,246		15,635		139
Consumer loans	—		—		—		—		—
	36,031		39,185		5,338		34,679		1,072
Total
Real estate loans:
Residential 1-4 family	15,924		18,380		642		18,129		758
Commercial real estate	4,604		4,686		1,118		6,547		152
Home equity line of credit	672		1,227		—		623		2
Residential land	10,074		11,235		1,332		13,519		891
Commercial construction	—		—		—		—		—
Residential construction	—		—		—		—		—
Commercial loans	21,225		25,355		2,246		20,472		151
Consumer loans	19		19		—		20		—
	$	52,518	$	60,902	$	5,338	$	59,310	$	1,954


*	Since loan was classified as impaired.

Schedule of loan modifications

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



	Three months ended September 30, 2014					Nine months ended September 30, 2014
	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	6	$	1,800	$	1,825	18	$	4,915	$	4,972
Commercial real estate	—	—		—		—	—		—
Home equity line of credit	1	91		91		1	91		91
Residential land	2	256		256		18	4,304		4,304
Commercial loans	2	2,600		2,600		7	3,827		3,827
Consumer loans	—	—		—		—	—		—
	11	$	4,747	$	4,772	44	$	13,137	$	13,194



	Three months ended September 30, 2013					Nine months ended September 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	$	2,864	$	2,874	32	$	8,631	$	8,712
Commercial real estate	—	—		—		—	—		—
Home equity line of credit	—	—		—		4	462		215
Residential land	9	2,943		2,943		16	4,983		4,974
Commercial loans	3	2,076		2,076		6	2,790		2,790
Consumer loans	—	—		—		—	—		—
	26	$	7,883	$	7,893	58	$	16,866	$	16,691

Loans modified in TDRs that experienced a payment default of 90 days or more for the indicated periods, and for which the payment default occurred within one year of the modification, were as follows:



	Three months ended September 30, 2014			Nine months ended September 30, 2014
(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	—	$	—	1	$	390
Commercial real estate	—	—		—	—
Home equity line of credit	—	—		—	—
Residential land	—	—		—	—
Commercial loans	—	—		—	—
Consumer loans	—	—		—	—
	—	$	—	1	$	390

Schedule of information about the securities sold under agreements to repurchase, including the related collateral received from or pledged to counterparties

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
September 30, 2014	$153	$—	$153
December 31, 2013	145	—	145



	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
September 30, 2014
Financial institution	$	50	$	50	$	—	$	—
Government entities	15		15		—		—
Commercial account holders	88		88		—		—
Total	$	153	$	153	$	—	$	—

December 31, 2013
Financial institution	$	51	$	51	$	—	$	—
Commercial account holders	94		94		—		—
Total	$	145	$	145	$	—	$	—

Schedule of amortized intangible assets

Amortized intangible assets. The table below presents the gross carrying amount, accumulated amortization, valuation allowance and net carrying amount of ASB’s mortgage servicing assets as of September 30, 2014 and 2013:



September 30	2014								2013
(in thousands)	Gross carrying amount		Accumulated amortization		Valuation allowance		Net carrying amount		Gross carrying amount		Accumulated amortization		Valuation allowance		Net carrying amount
Mortgage servicing assets	$	26,685	(15,003	)	(158	)	$	11,524	$	25,198	(13,265	)	(127	)	$	11,806

Changes in the valuation allowance for mortgage servicing assets were as follows:



(in thousands)	2014			2013
Valuation allowance, January 1	$	251		$	498
Provision (recovery)	(36		)	(215		)
Other-than-temporary impairment	(57		)	(156		)
Valuation allowance, September 30	$	158		$	127

Schedule of key assumptions used in estimating fair value

Key assumptions used in estimating the fair value of the bank’s mortgage servicing rights were as follows:



(dollars in thousands)	September 30, 2014			September 30, 2013
Unpaid principal balance	$	1,380,299		$	1,329,815
Weighted average note rate	4.08		%	4.06		%
Weighted average discount rate	9.6		%	10.1		%
Weighted average prepayment speed	8.1		%	6.6		%

For loans and real estate acquired in settlement of loans classified as Level 3 as of September 30, 2014 and December 31, 2013, the significant unobservable inputs used in the fair value measurement were as follows:



					Significant unobservable input value ¹
($ in thousands)	Fair value		Valuation technique	Significant unobservable input	Range	Weighted Average
September 30, 2014
Residential loans	$	1,928	Fair value of property or collateral	Appraised value less 7% selling costs	44-96%	83%
Commercial loans	216		Fair value of property or collateral	Fair value of business assets		19%
Total loans	$	2,144
Real estate acquired in settlement of loans	$	554	Fair value of property or collateral	Appraised value less 7% selling costs	100%	100%
December 31, 2013
Residential loans	$	2,361	Fair value of property or collateral	Appraised value less 7% selling costs	44-96%	87%
Home equity lines of credit	170		Fair value of property or collateral	Appraised value less 7% selling costs	45-50%	50%
Commercial loans	217		Fair value of property or collateral	Fair value of business assets		19%
Commercial loans	1,668		Discounted cash flows	Present value of expected future cash flows		58%
				Discount rate		4.5%
Total loans	$	4,416

¹ Represent percent of outstanding principal balance.

Schedule of notional and fair value of derivatives

The notional amount and fair value of ASB’s derivative financial instruments as of September 30, 2014 and December 31, 2013 were as follows:



	September 30, 2014					December 31, 2013
(dollars in thousands)	Notional amount		Fair value			Notional amount		Fair value
Interest rate lock commitments	$	14,511	$	215		$	25,070	$	464
Forward commitments	12,707		(25		)	26,018		139

Schedule of derivative financial instruments

The following table presents ASB’s derivative financial instruments, their fair values, and balance sheet location as of September 30, 2014 and December 31, 2013:



Derivative Financial Instruments Not Designated as Hedging Instruments ¹	September 30, 2014				December 31, 2013
(dollars in thousands)	Derivative asset		Derivative liability		Derivative asset		Derivative liability
Interest rate lock commitments	$	216	$	1	$	488	$	24
Forward commitments	1		26		141		2
	$	217	$	27	$	629	$	26

¹ Derivative assets are included in other assets and derivative liabilities are included in other liabilities in the balance sheets.

Schedule of derivative financial instruments and net gain or loss

The following table presents ASB’s derivative financial instruments and the amount and location of the net gains or losses recognized in the statements of income for the three and nine months ended September 30, 2014 and 2013.



Derivative Financial Instruments Not Designated as Hedging Instruments	Location of net gains (losses) recognized in the Statement of Income	Three months ended September 30						Nine months ended September 30
(dollars in thousands)		2014			2013			2014			2013
Interest rate lock commitments	Mortgage banking income	$	215		$	818		$	(249	)	$	556
Forward commitments	Mortgage banking income	(25		)	(1,173		)	(164		)	(273		)
		$	190		$	(355	)	$	(413	)	$	283