XML 33 R25.htm IDEA: XBRL DOCUMENT
v3.3.0.814

Fair value measurements | 9 Months Ended
--- | ---
Sep. 30, 2015
Fair Value Disclosures [Abstract] |
Fair value measurements | Fair value measurements Fair value estimates are estimates of the price that would be received to sell an asset, or paid upon the transfer of a liability, in an orderly transaction between market participants at the measurement date. The fair value estimates are generally determined based on assumptions that market participants would use in pricing the asset or liability and are based on market data obtained from independent sources. However, in certain cases, the Company and the Utilities use their own assumptions about market participant assumptions based on the best information available in the circumstances. These valuations are estimates at a specific point in time, based on relevant market information, information about the financial instrument and judgments regarding future expected loss experience, economic conditions, risk characteristics of various financial instruments and other factors. These estimates do not reflect any premium or discount that could result if the Company or the Utilities were to sell its entire holdings of a particular financial instrument at one time. Because no active trading market exists for a portion of the Company’s and the Utilities’ financial instruments, fair value estimates cannot be determined with precision. Changes in the underlying assumptions used, including discount rates and estimates of future cash flows, could significantly affect the estimates. In addition, the tax ramifications related to the realization of the unrealized gains and losses could have a significant effect on fair value estimates, but have not been considered in making such estimates. The Company and the Utilities group their financial assets measured at fair value in three levels outlined as follows: Level 1: Inputs to the valuation methodology are quoted prices, unadjusted, for identical assets or liabilities in active markets. A quoted price in an active market provides the most reliable evidence of fair value and is used to measure fair value whenever available. Level 2: Inputs to the valuation methodology include quoted prices for similar assets or liabilities in active markets; inputs to the valuation methodology include quoted prices for identical or similar assets or liabilities in markets that are not active; or inputs to the valuation methodology that are derived principally from or can be corroborated by observable market data by correlation or other means. Level 3: Inputs to the valuation methodology are unobservable and significant to the fair value measurement. Level 3 assets and liabilities include financial instruments whose value is determined using discounted cash flow methodologies, as well as instruments for which the determination of fair value requires significant management judgment or estimation. Classification in the hierarchy is based upon the lowest level input that is significant to the fair value measurement of the asset or liability. For instruments classified in Level 1 and 2 where inputs are primarily based upon observable market data, there is less judgment applied in arriving at the fair value. For instruments classified in Level 3, management judgment is more significant due to the lack of observable market data. Fair value is also used on a nonrecurring basis to evaluate certain assets for impairment or for disclosure purposes. Examples of nonrecurring uses of fair value include mortgage servicing rights accounted for by the amortization method, loan impairments for certain loans, goodwill and AROs. The fair value of Hawaiian Electric’s ARO (Level 3) was determined by discounting the expected future cash flows using market-observable risk-free rates as adjusted by Hawaiian Electric’s credit spread (also see Note 4). Fair value measurement and disclosure valuation methodology. Following are descriptions of the valuation methodologies used for assets and liabilities recorded at fair value and for estimating fair value for financial instruments not carried at fair value: Short-term borrowings—other than bank. The carrying amount approximated fair value because of the short maturity of these instruments. Investment securities. The fair value of ASB’s investment securities is determined quarterly through pricing obtained from independent third-party pricing services or from brokers not affiliated with the trade. Non-binding broker quotes are infrequent and generally occur for new securities that are settled close to the month-end pricing date. The third-party pricing vendors the Company uses for pricing its securities are reputable firms that provide pricing services on a global basis and have processes in place to ensure quality and control. The third-party pricing services use a variety of methods to determine the fair value of securities that fall under Level 2 of the Company’s fair value measurement hierarchy. Among the considerations are quoted prices for similar securities in an active market, yield spreads for similar trades, adjustments for liquidity, size, collateral characteristics, historic and generic prepayment speeds, and other observable market factors. To enhance the robustness of the pricing process, ASB will on a quarterly basis compare its standard third-party vendor’s price with that of another third-party vendor. If the prices are within an acceptable tolerance range, the price of the standard vendor will be accepted. If the variance is beyond the tolerance range, an evaluation will be conducted by ASB and a challenge to the price may be made. Fair value in such cases will be based on the value that best reflects the data and observable characteristics of the security. In all cases, the fair value used will have been independently determined by a third-party pricing vendor or non-affiliated broker and not by ASB. Loans held for sale. Residential mortgage loans carried at the lower of cost or market are valued using market observable pricing inputs, which are derived from third party loan sales and securitizations and, therefore, are classified within Level 2 of the valuation hierarchy. Loans held for investment. Fair value of loans held for investment is derived using a discounted cash flow approach which includes an evaluation of the underlying loan characteristics. The valuation model uses loan characteristics which includes product type, maturity dates, and the underlying interest rate of the portfolio. This information is input into the valuation models along with various forecast valuation assumptions including prepayment forecasts, to determine the discount rate. These assumptions are derived from internal and third party sources. Noting the valuation is derived from model-based techniques, ASB includes loans held for investment within Level 3 of the valuation hierarchy. Impaired loans. At the time a loan is considered impaired, it is valued at the lower of cost or fair value. Fair value is determined primarily by using an income, cost, or market approach and is normally provided through appraisals. Impaired loans carried at fair value generally receive specific allocations within the allowance for loan losses. For collateral-dependent loans, fair value is commonly based on recent real estate appraisals. These appraisals may utilize a single valuation approach or a combination of approaches including comparable sales and the income approach. Adjustments are routinely made in the appraisal process by the independent appraisers to adjust for differences between the comparable sales and income data available. Such adjustments typically result in a Level 3 classification of the inputs for determining fair value. Non-real estate collateral may be valued using an appraisal, net book value per the borrower’s financial statements, or aging reports, adjusted or discounted based on management’s historical knowledge, changes in market conditions from the time of the valuation, and management’s expertise and knowledge of the client and client’s business, resulting in a Level 3 fair value classification. Generally, impaired loans are evaluated quarterly for additional impairment and adjusted accordingly. Other real estate owned. Foreclosed assets are carried at fair value (less estimated costs to sell) and is generally based upon appraisals or independent market prices that are periodically updated subsequent to classification as real estate owned. Such adjustments typically result in a Level 3 classification of the inputs for determining fair value. ASB estimates the fair value of collateral-dependent loans and real estate owned using the sales comparison approach. Mortgage servicing rights. Mortgage servicing rights (MSR) are capitalized at fair value based on market data at the time of sale and accounted for in subsequent periods at the lower of amortized cost or fair value. Mortgage servicing rights are evaluated for impairment at each reporting date. ASB's MSR is stratified based on predominant risk characteristics of the underlying loans including loan type and note rate. For each stratum, fair value is calculated by discounting expected net income streams using discount rates that reflect industry pricing for similar assets. Expected net income streams are estimated based on industry assumptions regarding prepayment expectations and income and expenses associated with servicing residential mortgage loans for others. Impairment is recognized through a valuation allowance for each stratum when the carrying amount exceeds fair value, with any associated provision recorded as a component of loan servicing fees included in "Other income, net" in the consolidated statements of income. A direct write-down is recorded when the recoverability of the valuation allowance is deemed to be unrecoverable. ASB compares the fair value of MSR to an estimated value calculated by an independent third-party. The third-party relies on both published and unpublished sources of market related assumptions and their own experience and expertise to arrive at a value. ASB uses the third-party value only to assess the reasonableness of its own estimate. Time deposits. The fair value of fixed-maturity certificates of deposit was estimated by discounting the future cash flows using the rates currently offered for deposits of similar remaining maturities. Other borrowings. For advances and repurchase agreements, fair value is estimated using quantitative discounted cash flow models that require the use of interest rate inputs that are currently offered for advances and repurchase agreements of similar remaining maturities. The majority of market inputs are actively quoted and can be validated through external sources. Long-term debt. Fair value was obtained from third-party financial services providers based on the current rates offered for debt of the same or similar remaining maturities and from discounting the future cash flows using the current rates offered for debt of the same or similar remaining maturities. Interest rate lock commitments (IRLCs). The estimated fair value of commitments to originate residential mortgage loans for sale is based on quoted prices for similar loans in active markets. IRLCs are classified as Level 2 measurements. Forward sales commitments. To be announced (TBA) mortgage-backed securities forward commitments are classified as Level 1, and consist of publicly-traded debt securities for which identical fair values can be obtained through quoted market prices in active exchange markets. The fair values of ASB’s best efforts and mandatory delivery loan sale commitments are determined using quoted prices in the market place that are observable and are classified as Level 2 measurements. The following table presents the carrying 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. For financial liabilities such as noninterest-bearing demand, interest-bearing demand, and savings and money market deposits, the carrying amount is a reasonable estimate of fair value as these liabilities have no stated maturity.
|  |  |  | Estimated fair value
|  | Carrying 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, 2015 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Financial assets |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Money market funds |  | $ | 10 |  |  | $ | — |  |  | $ | 10 |  |  | $ | — |  |  | $ | 10 |
Available-for-sale investment securities |  | 785,837 |  |  | — |  |  | 785,837 |  |  | — |  |  | 785,837 |
Stock in Federal Home Loan Bank |  | 10,678 |  |  | — |  |  | 10,678 |  |  | — |  |  | 10,678 |
Loans receivable, net |  | 4,492,728 |  |  | — |  |  | — |  |  | 4,700,042 |  |  | 4,700,042 |
Derivative assets |  | 586 |  |  | — |  |  | 586 |  |  | — |  |  | 586 |
Financial liabilities |  |  |  |  |  |  |  |  |  |  |  |  |  |
Deposit liabilities |  | 4,825,954 |  |  | — |  |  | 4,828,402 |  |  | — |  |  | 4,828,402 |
Short-term borrowings—other than bank |  | 171,992 |  |  | — |  |  | 171,992 |  |  | — |  |  | 171,992 |
The Utilities’ short-term borrowings (included in amount above) |  | 94,995 |  |  | — |  |  | 94,995 |  |  | — |  |  | 94,995 |
Other bank borrowings |  | 368,593 |  |  | — |  |  | 375,428 |  |  | — |  |  | 375,428 |
Long-term debt, net—other than bank |  | 1,506,546 |  |  | — |  |  | 1,595,161 |  |  | — |  |  | 1,595,161 |
The Utilities’ long-term debt, net (included in amount above) |  | 1,206,546 |  |  | — |  |  | 1,288,112 |  |  | — |  |  | 1,288,112 |
Derivative liabilities |  | 125 |  |  | 112 |  |  | 13 |  |  | — |  |  | 125 |
December 31, 2014 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Financial assets |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Money market funds |  | $ | 10 |  |  | $ | — |  |  | $ | 10 |  |  | $ | — |  |  | $ | 10 |
Available-for-sale investment securities |  | 550,394 |  |  | — |  |  | 550,394 |  |  | — |  |  | 550,394 |
Stock in Federal Home Loan Bank |  | 69,302 |  |  | — |  |  | 69,302 |  |  | — |  |  | 69,302 |
Loans receivable, net |  | 4,397,457 |  |  | — |  |  | — |  |  | 4,578,822 |  |  | 4,578,822 |
Derivative assets |  | 398 |  |  | — |  |  | 398 |  |  | — |  |  | 398 |
Financial liabilities |  |  |  |  |  |  |  |  |  |  |  |  |  |
Deposit liabilities |  | 4,623,415 |  |  | — |  |  | 4,623,773 |  |  | — |  |  | 4,623,773 |
Short-term borrowings—other than bank |  | 118,972 |  |  | — |  |  | 118,972 |  |  | — |  |  | 118,972 |
Other bank borrowings |  | 290,656 |  |  | — |  |  | 298,837 |  |  | — |  |  | 298,837 |
Long-term debt, net—other than bank |  | 1,506,546 |  |  | — |  |  | 1,622,736 |  |  | — |  |  | 1,622,736 |
The Utilities’ long-term debt, net (included in amount above) |  | 1,206,546 |  |  | — |  |  | 1,313,893 |  |  | — |  |  | 1,313,893 |
Derivative liabilities |  | 114 |  |  | 71 |  |  | 43 |  |  | — |  |  | 114 |
As of September 30, 2015 and December 31, 2014, loans serviced by ASB for others had notional amounts of $1.6 billion and $1.4 billion, and the estimated fair value of the mortgage servicing rights for such loans was $16.0 million and $14.5 million, respectively. Fair value measurements on a recurring basis. Assets and liabilities measured at fair value on a recurring basis were as follows:
|  | September 30, 2015 |  | December 31, 2014
|  | Fair value measurements using |  | Fair value measurements using
(in thousands) |  | Level 1 |  | Level 2 |  | Level 3 |  | Level 1 |  | Level 2 |  | Level 3
Money market funds (“other” segment) |  | $ | — |  |  | $ | 10 |  |  | $ | — |  |  | $ | — |  |  | $ | 10 |  |  | $ | — |
Available-for-sale investment securities (bank segment) |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Mortgage-related securities-FNMA, FHLMC and GNMA |  | $ | — |  |  | $ | 574,719 |  |  | $ | — |  |  | $ | — |  |  | $ | 430,834 |  |  | $ | — |
U.S. Treasury and federal agency obligations |  | — |  |  | 211,118 |  |  | — |  |  | — |  |  | 119,560 |  |  | — |
|  | $ | — |  |  | $ | 785,837 |  |  | $ | — |  |  | $ | — |  |  | $ | 550,394 |  |  | $ | — |
Derivative assets 1 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Interest rate lock commitments |  | $ | — |  |  | $ | 585 |  |  | $ | — |  |  | $ | — |  |  | $ | 393 |  |  | $ | — |
Forward commitments |  | — |  |  | 1 |  |  | — |  |  | — |  |  | 5 |  |  | — |
|  | $ | — |  |  | $ | 586 |  |  | $ | — |  |  | $ | — |  |  | $ | 398 |  |  | $ | — |
Derivative liabilities 1 |  |  |  |  |  |  |  |  |  |  |  |
Interest rate lock commitments |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | 3 |  |  | $ | — |
Forward commitments |  | 112 |  |  | 13 |  |  | — |  |  | 71 |  |  | 40 |  |  | — |
|  | $ | 112 |  |  | $ | 13 |  |  | $ | — |  |  | $ | 71 |  |  | $ | 43 |  |  | $ | — |
1 Derivatives are carried at fair value with changes in value reflected in the balance sheet in other assets or other liabilities and included in mortgage banking income. There were no transfers of financial assets and liabilities between Level 1 and Level 2 of the fair value hierarchy during the quarter ended September 30, 2015. Fair value measurements on a nonrecurring basis. Certain assets and liabilities are measured at fair value on a nonrecurring basis and therefore are not included in the tables above. These measurements primarily result from assets carried at the lower of cost or fair value or from impairment of individual assets. 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, 2015 |  |  |  |  |  |  |  |
Loans |  | $ | 951 |  |  | $ | — |  |  | $ | — |  |  | $ | 951 |
Real estate acquired in settlement of loans |  | 70 |  |  | — |  |  | — |  |  | 70 |
December 31, 2014 |  |  |  |  |  |  |  |
Loans |  | 2,445 |  |  | — |  |  | — |  |  | 2,445 |
Real estate acquired in settlement of loans |  | 288 |  |  | — |  |  | — |  |  | 288 |
At September 30, 2015 and 2014, there were no adjustments to fair value for ASB’s loans held for sale. 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, 2015 |  |  |  |  |  |  |  |  |  |
Residential loans |  | $ | 823 |  |  | Fair value of property or collateral |  | Appraised value less 7% selling costs |  | 31-91% |  | 70%
Home equity lines of credit |  | 128 |  |  | Fair value of property or collateral |  | Appraised value less 7% selling costs |  |  |  | 52%
Total loans |  | $ | 951 |  |  |  |  |  |  |  |  |
Real estate acquired in settlement of loans |  | $ | 70 |  |  | Fair value of property or collateral |  | Appraised value less 7% selling costs |  | 100% |  | 100%
December 31, 2014 |  |  |  |  |  |  |  |  |  |
Residential loans |  | $ | 2,297 |  |  | Fair value of property or collateral |  | Appraised value less 7% selling costs |  | 39-99% |  | 83%
Home equity lines of credit |  | 3 |  |  | Fair value of property or collateral |  | Appraised value less 7% selling costs |  |  |  | 7%
Commercial loans |  | 145 |  |  | Fair value of property or collateral |  | Fair value of business assets |  |  |  | 91%
Total loans |  | $ | 2,445 |  |  |  |  |  |  |  |  |
Real estate acquired in settlement of loans |  | $ | 288 |  |  | Fair value of property or collateral |  | Appraised value less 7% selling cost |  | 100% |  | 100%
1 Represent percent of outstanding principal balance. Significant increases (decreases) in any of those inputs in isolation would result in significantly higher (lower) fair value measurements.

X
- References No definition available. + Details
Name: | us-gaap_FairValueDisclosuresAbstract
Namespace Prefix: | us-gaap_
Data Type: | xbrli:stringItemType
Balance Type: | na
Period Type: | duration

X
- Definition The entire disclosure for the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments as well as disclosures related to the fair value of non-financial assets and liabilities. Such disclosures about the financial instruments, assets, and liabilities would include: (1) the fair value of the required items together with their carrying amounts (as appropriate); (2) for items for which it is not practicable to estimate fair value, disclosure would include: (a) information pertinent to estimating fair value (including, carrying amount, effective interest rate, and maturity, and (b) the reasons why it is not practicable to estimate fair value; (3) significant concentrations of credit risk including: (a) information about the activity, region, or economic characteristics identifying a concentration, (b) the maximum amount of loss the entity is exposed to based on the gross fair value of the related item, (c) policy for requiring collateral or other security and information as to accessing such collateral or security, and (d) the nature and brief description of such collateral or security; (4) quantitative information about market risks and how such risks are managed; (5) for items measured on both a recurring and nonrecurring basis information regarding the inputs used to develop the fair value measurement; and (6) for items presented in the financial statement for which fair value measurement is elected: (a) information necessary to understand the reasons for the election, (b) discussion of the effect of fair value changes on earnings, (c) a description of [similar groups] items for which the election is made and the relation thereof to the balance sheet, the aggregate carrying value of items included in the balance sheet that are not eligible for the election; (7) all other required (as defined) and desired information. + References Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 820 -SubTopic 10 -Section 50 -Paragraph 2 -URI http://asc.fasb.org/extlink&oid=36462937&loc=d3e19207-110258 Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 825 -SubTopic 10 -Section 50 -Paragraph 30 -URI http://asc.fasb.org/extlink&oid=6957238&loc=d3e14172-108612 Reference 3: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 825 -SubTopic 10 -Section 50 -Paragraph 28 -URI http://asc.fasb.org/extlink&oid=6957238&loc=d3e14064-108612 Reference 4: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 825 -SubTopic 10 -Section 50 -Paragraph 21 -URI http://asc.fasb.org/extlink&oid=35750535&loc=d3e13537-108611 Reference 5: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 825 -SubTopic 10 -Section 50 -Paragraph 16 -URI http://asc.fasb.org/extlink&oid=35750535&loc=d3e13504-108611 Reference 6: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 825 -SubTopic 10 -Section 50 -Paragraph 10 -URI http://asc.fasb.org/extlink&oid=35750535&loc=d3e13433-108611 + Details
Name: | us-gaap_FairValueDisclosuresTextBlock
Namespace Prefix: | us-gaap_
Data Type: | nonnum:textBlockItemType
Balance Type: | na
Period Type: | duration