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Bank segment (Tables)

6 Months Ended

Jun. 30, 2018

Statements of Income Data



	Three months ended June 30				Six months ended June 30
(in thousands)	2018		2017		2018		2017
Interest and dividend income
Interest and fees on loans	$	54,633	$	52,317	$	107,433	$	103,059
Interest and dividends on investment securities	8,628		6,763		17,830		13,743
Total interest and dividend income	63,261		59,080		125,263		116,802
Interest expense
Interest on deposit liabilities	3,284		2,311		6,241		4,414
Interest on other borrowings	393		824		889		1,640
Total interest expense	3,677		3,135		7,130		6,054
Net interest income	59,584		55,945		118,133		110,748
Provision for loan losses	2,763		2,834		6,304		6,741
Net interest income after provision for loan losses	56,821		53,111		111,829		104,007
Noninterest income
Fees from other financial services	4,744		5,810		9,398		11,420
Fee income on deposit liabilities	5,138		5,565		10,327		10,993
Fee income on other financial products	1,675		1,971		3,329		3,837
Bank-owned life insurance	1,133		1,925		2,004		2,908
Mortgage banking income	617		587		1,230		1,376
Other income, net	536		391		972		849
Total noninterest income	13,843		16,249		27,260		31,383
Noninterest expense
Compensation and employee benefits	23,655		24,541		48,095		47,583
Occupancy	4,194		4,185		8,474		8,339
Data processing	3,540		3,207		7,004		6,487
Services	3,028		2,766		6,075		5,126
Equipment	1,874		1,771		3,602		3,519
Office supplies, printing and postage	1,491		1,527		2,998		3,062
Marketing	1,085		839		1,730		1,356
FDIC insurance	727		822		1,440		1,550
Other expense	4,556		4,906		8,657		9,412
Total noninterest expense	44,150		44,564		88,075		86,434
Income before income taxes	26,514		24,796		51,014		48,956
Income taxes	5,953		8,063		11,493		16,410
Net income	$	20,561	$	16,733	$	39,521	$	32,546

Reconciliation to amounts per HEI Condensed Consolidated Statements of Income*:



	Three months ended June 30						Six months ended June 30
(in thousands)	2018			2017			2018			2017
Interest and dividend income	63,261			59,080			$	125,263		$	116,802
Noninterest income	13,843			16,249			27,260			31,383
*Revenues-Bank	77,104			75,329			152,523			148,185
Total interest expense	3,677			3,135			7,130			6,054
Provision for loan losses	2,763			2,834			6,304			6,741
Noninterest expense	44,150			44,564			88,075			86,434
Less: Retirement defined benefits expense—other than service costs	(403		)	(201		)	(790		)	(396		)
*Expenses-Bank	50,187			50,332			100,719			98,833
*Operating income-Bank	26,917			24,997			51,804			49,352
Add back: Retirement defined benefits expense—other than service costs	403			201			790			396
Income before income taxes	$	26,514		$	24,796		$	51,014		$	48,956

Schedule of statements of comprehensive income data

Statements of Comprehensive Income Data



	Three months ended June 30					Six months ended June 30
(in thousands)	2018			2017		2018			2017
Net income	$	20,561		$	16,733	$	39,521		$	32,546
Other comprehensive income (loss), net of taxes:
Net unrealized gains (losses) on available-for-sale investment securities:
Net unrealized gains (losses) on available-for-sale investment securities arising during the period, net of tax benefits (taxes) of $1,592, $(1,334), $6,459 and $(1,482), respectively	(4,348		)	2,021		(17,645		)	2,244
Retirement benefit plans:
Adjustment for amortization of prior service credit and net losses recognized during the period in net periodic benefit cost, net of tax benefits of $133, $133, $827 and $537, respectively	366			202		1,588			814
Other comprehensive income (loss), net of taxes	(3,982		)	2,223		(16,057		)	3,058
Comprehensive income	$	16,579		$	18,956	$	23,464		$	35,604

Schedule of balance sheets data

Balance Sheets Data



(in thousands)	June 30, 2018						December 31, 2017
Assets
Cash and due from banks				$	120,189					$	140,934
Interest-bearing deposits				109,230						93,165
Investment securities
Available-for-sale, at fair value				1,409,528						1,401,198
Held-to-maturity, at amortized cost (fair value of $61,444 and $44,412, respectively)				62,630						44,515
Stock in Federal Home Loan Bank, at cost				10,158						9,706
Loans held for investment				4,774,744						4,670,768
Allowance for loan losses				(52,803		)				(53,637		)
Net loans				4,721,941						4,617,131
Loans held for sale, at lower of cost or fair value				5,248						11,250
Other				462,469						398,570
Goodwill				82,190						82,190
Total assets				$	6,983,583					$	6,798,659
Liabilities and shareholder’s equity
Deposit liabilities—noninterest-bearing				$	1,812,348					$	1,760,233
Deposit liabilities—interest-bearing				4,303,761						4,130,364
Other borrowings				126,930						190,859
Other				131,063						110,356
Total liabilities				6,374,102						6,191,812
Commitments and contingencies
Common stock				1						1
Additional paid in capital				346,188						345,018
Retained earnings				310,298						292,957
Accumulated other comprehensive loss, net of tax benefits
Net unrealized losses on securities	$	(32,596	)				$	(14,951	)
Retirement benefit plans	(14,410		)	(47,006		)	(16,178		)	(31,129		)
Total shareholder’s equity				609,481						606,847
Total liabilities and shareholder’s equity				$	6,983,583					$	6,798,659

Other assets
Bank-owned life insurance				$	150,797					$	148,775
Premises and equipment, net				186,620						136,270
Prepaid expenses				4,993						3,961
Accrued interest receivable				19,597						18,724
Mortgage-servicing rights				8,509						8,639
Low-income housing equity investments				63,033						59,016
Real estate acquired in settlement of loans, net				—						133
Other				28,920						23,052
				$	462,469					$	398,570
Other liabilities
Accrued expenses				$	63,734					$	39,312
Federal and state income taxes payable				1,200						3,736
Cashier’s checks				28,236						27,000
Advance payments by borrowers				10,415						10,245
Other				27,478						30,063
				$	131,063					$	110,356

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

The major components of investment securities 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
(dollars in thousands)										Number of issues	Fair value		Amount			Number of issues	Fair value		Amount
June 30, 2018
Available-for-sale
U.S. Treasury and federal agency obligations	$	179,986	$	72	$	(4,125	)	$	175,933	19	$	98,578	$	(2,018	)	9	$	67,283	$	(2,107	)
Mortgage-related securities- FNMA, FHLMC and GNMA	1,218,313		350		(40,831		)	1,177,832		81	694,629		(19,345		)	83	456,218		(21,486		)
Corporate bonds	40,331		23		(18		)	40,336		4	23,841		(18		)	—	—		—
Mortgage revenue bond	15,427		—		—			15,427		—	—		—			—	—		—
	$	1,454,057	$	445	$	(44,974	)	$	1,409,528	104	$	817,048	$	(21,381	)	92	$	523,501	$	(23,593	)
Held-to-maturity
Mortgage-related securities- FNMA, FHLMC and GNMA	$	62,630	$	41	$	(1,227	)	$	61,444	3	$	41,138	$	(1,227	)	—	$	—	$	—
	$	62,630	$	41	$	(1,227	)	$	61,444	3	$	41,138	$	(1,227	)	—	$	—	$	—
December 31, 2017
Available-for-sale
U.S. Treasury and federal agency obligations	$	185,891	$	438	$	(2,031	)	$	184,298	15	$	83,137	$	(825	)	8	$	62,296	$	(1,206	)
Mortgage-related securities- FNMA, FHLMC and GNMA	1,220,304		793		(19,624		)	1,201,473		67	653,635		(6,839		)	77	459,912		(12,785		)
Mortgage revenue bond	15,427		—		—			15,427		—	—		—			—	—		—
	$	1,421,622	$	1,231	$	(21,655	)	$	1,401,198	82	$	736,772	$	(7,664	)	85	$	522,208	$	(13,991	)
Held-to-maturity
Mortgage-related securities- FNMA, FHLMC and GNMA	$	44,515	$	1	$	(104	)	$	44,412	2	$	35,744	$	(104	)	—	$	—	$	—
	$	44,515	$	1	$	(104	)	$	44,412	2	$	35,744	$	(104	)	—	$	—	$	—

Schedule of contractual maturities of available-for-sale securities

The contractual maturities of investment securities were as follows:



June 30, 2018	Amortized cost		Fair value
(in thousands)
Available-for-sale
Due in one year or less	$	25,005	$	24,860
Due after one year through five years	105,425		104,020
Due after five years through ten years	77,526		75,563
Due after ten years	27,788		27,253
	235,744		231,696
Mortgage-related securities-FNMA, FHLMC and GNMA	1,218,313		1,177,832
Total available-for-sale securities	$	1,454,057	$	1,409,528
Held-to-maturity
Mortgage-related securities-FNMA, FHLMC and GNMA	$	62,630	$	61,444
Total held-to-maturity securities	$	62,630	$	61,444

Schedule of components of loans receivable

The components of loans were summarized as follows:



	June 30, 2018			December 31, 2017
(in thousands)
Real estate:
Residential 1-4 family	$	2,099,950		$	2,118,047
Commercial real estate	758,835			733,106
Home equity line of credit	938,902			913,052
Residential land	16,032			15,797
Commercial construction	124,421			108,273
Residential construction	14,873			14,910
Total real estate	3,953,013			3,903,185
Commercial	593,596			544,828
Consumer	228,804			223,564
Total loans	4,775,413			4,671,577
Less: Deferred fees and discounts	(669		)	(809		)
Allowance for loan losses	(52,803		)	(53,637		)
Total loans, net	$	4,721,941		$	4,617,131

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			Unallo-cated		Total
Three months ended June 30, 2018
Allowance for loan losses:
Beginning balance	$	2,525		$	15,959		$	7,982		$	674		$	4,361		$	4		$	10,355		$	12,035		$	—	$	53,895
Charge-offs	—			—			(144		)	(9		)	—			—			(540		)	(3,888		)	—		(4,581		)
Recoveries	14			—			13			46			—			—			280			373			—		726
Provision	400			(661		)	(517		)	(69		)	255			—			66			3,289			—		2,763
Ending balance	$	2,939		$	15,298		$	7,334		$	642		$	4,616		$	4		$	10,161		$	11,809		$	—	$	52,803
Three months ended June 30, 2017
Allowance for loan losses:
Beginning balance	$	2,781		$	16,504		$	5,417		$	1,479		$	7,257		$	11		$	14,902		$	7,646		$	—	$	55,997
Charge-offs	—			—			—			(92		)	—			—			(752		)	(2,390		)	—		(3,234		)
Recoveries	49			—			39			15			—			—			299			357			—		759
Provision	300			2,336			71			(138		)	(2,551		)	(2		)	103			2,715			—		2,834
Ending balance	$	3,130		$	18,840		$	5,527		$	1,264		$	4,706		$	9		$	14,552		$	8,328		$	—	$	56,356
Six months ended June 30, 2018
Allowance for loan losses:
Beginning balance	$	2,902		$	15,796		$	7,522		$	896		$	4,671		$	12		$	10,851		$	10,987		$	—	$	53,637
Charge-offs	(31		)	—			(144		)	(17		)	—			—			(1,142		)	(8,120		)	—		(9,454		)
Recoveries	68			—			27			51			—			—			1,450			720			—		2,316
Provision	—			(498		)	(71		)	(288		)	(55		)	(8		)	(998		)	8,222			—		6,304
Ending balance	$	2,939		$	15,298		$	7,334		$	642		$	4,616		$	4		$	10,161		$	11,809		$	—	$	52,803
June 30, 2018
Ending balance: individually evaluated for impairment	$	1,027		$	53		$	1,161		$	7		$	—		$	—		$	597		$	3				$	2,848
Ending balance: collectively evaluated for impairment	$	1,912		$	15,245		$	6,173		$	635		$	4,616		$	4		$	9,564		$	11,806		$	—	$	49,955
Financing Receivables:
Ending balance	$	2,099,950		$	758,835		$	938,902		$	16,032		$	124,421		$	14,873		$	593,596		$	228,804				$	4,775,413
Ending balance: individually evaluated for impairment	$	17,605		$	993		$	13,849		$	1,171		$	—		$	—		$	5,874		$	91				$	39,583
Ending balance: collectively evaluated for impairment	$	2,082,345		$	757,842		$	925,053		$	14,861		$	124,421		$	14,873		$	587,722		$	228,713				$	4,735,830
Six months ended June 30, 2017
Allowance for loan losses:
Beginning balance	$	2,873		$	16,004		$	5,039		$	1,738		$	6,449		$	12		$	16,618		$	6,800		$	—	$	55,533
Charge-offs	(6		)	—			(14		)	(92		)	—			—			(2,262		)	(5,200		)	—		(7,574		)
Recoveries	58			—			130			218			—			—			596			654			—		1,656
Provision	205			2,836			372			(600		)	(1,743		)	(3		)	(400		)	6,074			—		6,741
Ending balance	$	3,130		$	18,840		$	5,527		$	1,264		$	4,706		$	9		$	14,552		$	8,328		$	—	$	56,356
December 31, 2017
Ending balance: individually evaluated for impairment	$	1,248		$	65		$	647		$	47		$	—		$	—		$	694		$	29				$	2,730
Ending balance: collectively evaluated for impairment	$	1,654		$	15,731		$	6,875		$	849		$	4,671		$	12		$	10,157		$	10,958		$	—	$	50,907
Financing Receivables:
Ending balance	$	2,118,047		$	733,106		$	913,052		$	15,797		$	108,273		$	14,910		$	544,828		$	223,564				$	4,671,577
Ending balance: individually evaluated for impairment	$	18,284		$	1,016		$	8,188		$	1,265		$	—		$	—		$	4,574		$	66				$	33,393
Ending balance: collectively evaluated for impairment	$	2,099,763		$	732,090		$	904,864		$	14,532		$	108,273		$	14,910		$	540,254		$	223,498				$	4,638,184

Schedule of credit risk profile by internally assigned grade for loans

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



	June 30, 2018						December 31, 2017
(in thousands)	Commercial real estate		Commercial construction		Commercial		Commercial real estate		Commercial construction		Commercial
Grade:
Pass	$	671,592	$	99,632	$	539,168	$	630,877	$	83,757	$	492,942
Special mention	38,424		22,500		32,711		49,347		22,500		27,997
Substandard	48,819		2,289		21,717		52,882		2,016		23,421
Doubtful	—		—		—		—		—		468
Loss	—		—		—		—		—		—
Total	$	758,835	$	124,421	$	593,596	$	733,106	$	108,273	$	544,828

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
June 30, 2018
Real estate:
Residential 1-4 family	$	2,975	$	1,348	$	4,360	$	8,683	$	2,091,267	$	2,099,950	$	—
Commercial real estate	—		725		—		725		758,110		758,835		—
Home equity line of credit	2,075		288		2,545		4,908		933,994		938,902		—
Residential land	741		111		631		1,483		14,549		16,032		—
Commercial construction	—		—		—		—		124,421		124,421		—
Residential construction	—		—		—		—		14,873		14,873		—
Commercial	1,721		491		551		2,763		590,833		593,596		—
Consumer	3,421		2,019		1,579		7,019		221,785		228,804		—
Total loans	$	10,933	$	4,982	$	9,666	$	25,581	$	4,749,832	$	4,775,413	$	—
December 31, 2017
Real estate:
Residential 1-4 family	$	1,532	$	1,715	$	5,071	$	8,318	$	2,109,729	$	2,118,047	$	—
Commercial real estate	—		—		—		—		733,106		733,106		—
Home equity line of credit	425		114		2,051		2,590		910,462		913,052		—
Residential land	23		—		625		648		15,149		15,797		—
Commercial construction	—		—		—		—		108,273		108,273		—
Residential construction	—		—		—		—		14,910		14,910		—
Commercial	1,825		2,025		730		4,580		540,248		544,828		—
Consumer	3,432		2,159		1,876		7,467		216,097		223,564		—
Total loans	$	7,237	$	6,013	$	10,353	$	23,603	$	4,647,974	$	4,671,577	$	—

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, accruing loans 90 days or more past due and troubled debt restructuring (TDR) loans was as follows:



(in thousands)	June 30, 2018		December 31, 2017
Real estate:
Residential 1-4 family	$	13,121	$	12,598
Commercial real estate	—		—
Home equity line of credit	6,051		4,466
Residential land	843		841
Commercial construction	—		—
Residential construction	—		—
Commercial	4,385		3,069
Consumer	2,820		2,617
Total nonaccrual loans	$	27,220	$	23,591
Real estate:
Residential 1-4 family	$	—	$	—
Commercial real estate	—		—
Home equity line of credit	—		—
Residential land	—		—
Commercial construction	—		—
Residential construction	—		—
Commercial	—		—
Consumer	—		—
Total accruing loans 90 days or more past due	$	—	$	—
Real estate:
Residential 1-4 family	$	10,777	$	10,982
Commercial real estate	993		1,016
Home equity line of credit	10,255		6,584
Residential land	328		425
Commercial construction	—		—
Residential construction	—		—
Commercial	1,716		1,741
Consumer	64		66
Total troubled debt restructured loans not included above	$	24,133	$	20,814

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 were as follows:



	June 30, 2018						Three months ended June 30, 2018				Six months ended June 30, 2018
(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:
Residential 1-4 family	$	8,966	$	9,498	$	—	$	8,900	$	50	$	8,699	$	157
Commercial real estate	—		—		—		—		—		—		—
Home equity line of credit	2,505		2,803		—		2,374		7		2,037		12
Residential land	1,141		1,449		—		1,132		5		1,150		10
Commercial construction	—		—		—		—		—		—		—
Residential construction	—		—		—		—		—		—		—
Commercial	4,158		5,079		—		3,026		10		2,691		20
Consumer	33		33		—		15		—		11		—
	$	16,803	$	18,862	$	—	$	15,447	$	72	$	14,588	$	199
With an allowance recorded
Real estate:
Residential 1-4 family	$	8,639	$	8,842	$	1,027	$	8,778	$	97	$	8,953	$	190
Commercial real estate	993		993		53		997		10		1,003		21
Home equity line of credit	11,344		11,414		1,161		10,420		96		9,080		177
Residential land	30		30		7		40		1		58		3
Commercial construction	—		—		—		—		—		—		—
Residential construction	—		—		—		—		—		—		—
Commercial	1,716		1,716		597		1,738		30		1,848		66
Consumer	58		58		3		58		1		58		2
	$	22,780	$	23,053	$	2,848	$	22,031	$	235	$	21,000	$	459
Total
Real estate:
Residential 1-4 family	$	17,605	$	18,340	$	1,027	$	17,678	$	147	$	17,652	$	347
Commercial real estate	993		993		53		997		10		1,003		21
Home equity line of credit	13,849		14,217		1,161		12,794		103		11,117		189
Residential land	1,171		1,479		7		1,172		6		1,208		13
Commercial construction	—		—		—		—		—		—		—
Residential construction	—		—		—		—		—		—		—
Commercial	5,874		6,795		597		4,764		40		4,539		86
Consumer	91		91		3		73		1		69		2
	$	39,583	$	41,915	$	2,848	$	37,478	$	307	$	35,588	$	658



	December 31, 2017						Three months ended June 30, 2017				Six months ended June 30, 2017
(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:
Residential 1-4 family	$	9,097	$	9,644	$	—	$	9,304	$	76	$	9,429	$	160
Commercial real estate	—		—		—		143		11		182		11
Home equity line of credit	1,496		1,789		—		2,401		51		2,203		65
Residential land	1,143		1,434		—		1,075		8		1,016		34
Commercial construction	—		—		—		—		—		—		—
Residential construction	—		—		—		—		—		—		—
Commercial	2,328		3,166		—		1,949		2		3,428		8
Consumer	8		8		—		1		—		—		—
	$	14,072	$	16,041	$	—	$	14,873	$	148	$	16,258	$	278
With an allowance recorded
Real estate:
Residential 1-4 family	$	9,187	$	9,390	$	1,248	$	10,054	$	117	$	10,051	$	236
Commercial real estate	1,016		1,016		65		1,292		14		1,296		28
Home equity line of credit	6,692		6,736		647		4,372		47		4,467		96
Residential land	122		122		47		1,532		24		1,804		61
Commercial construction	—		—		—		—		—		—		—
Residential construction	—		—		—		—		—		—		—
Commercial	2,246		2,252		694		2,562		68		4,915		469
Consumer	58		58		29		68		1		49		1
	$	19,321	$	19,574	$	2,730	$	19,880	$	271	$	22,582	$	891
Total
Real estate:
Residential 1-4 family	$	18,284	$	19,034	$	1,248	$	19,358	$	193	$	19,480	$	396
Commercial real estate	1,016		1,016		65		1,435		25		1,478		39
Home equity line of credit	8,188		8,525		647		6,773		98		6,670		161
Residential land	1,265		1,556		47		2,607		32		2,820		95
Commercial construction	—		—		—		—		—		—		—
Residential construction	—		—		—		—		—		—		—
Commercial	4,574		5,418		694		4,511		70		8,343		477
Consumer	66		66		29		69		1		49		1
	$	33,393	$	35,615	$	2,730	$	34,753	$	419	$	38,840	$	1,169


*	Since loan was classified as impaired.

Schedule of loan modifications

Loan modifications that occurred during the second quarters and first six months of 2018 and 2017 and the impact on the allowance for loan losses were as follows:



	Three months ended June 30, 2018							Six months ended June 30, 2018
	Number of contracts	Outstanding recorded investment¹				Net increase in allowance		Number of contracts	Outstanding recorded investment¹				Net increase in allowance
(dollars in thousands)	Number of contracts	Pre-modification		Post-modification		(as of period end)		Number of contracts	Pre-modification		Post-modification		(as of period end)
Troubled debt restructurings
Real estate:
Residential 1-4 family	—	$	—	$	—	$	—	1	$	339	$	344	$	16
Commercial real estate	—	—		—		—		—	—		—		—
Home equity line of credit	21	3,338		3,338		554		39	5,508		5,512		942
Residential land	—	—		—		—		1	109		109		—
Commercial construction	—	—		—		—		—	—		—		—
Residential construction	—	—		—		—		—	—		—		—
Commercial	2	43		43		42		7	2,294		2,294		42
Consumer	—	—		—		—		—	—		—		—
	23	$	3,381	$	3,381	$	596	48	$	8,250	$	8,259	$	1,000



	Three months ended June 30, 2017							Six months ended June 30, 2017
	Number of contracts	Outstanding recorded investment¹				Net increase in allowance		Number of contracts	Outstanding recorded investment¹				Net increase in allowance
(dollars in thousands)	Number of contracts	Pre-modification		Post-modification		(as of period end)		Number of contracts	Pre-modification		Post-modification		(as of period end)
Troubled debt restructurings
Real estate:
Residential 1-4 family	2	$	360	$	360	$	—	5	$	872	$	880	$	45
Commercial real estate	—	—		—		—		—	—		—		—
Home equity line of credit	5	298		298		59		13	524		510		93
Residential land	—	—		—		—		—	—		—		—
Commercial construction	—	—		—		—		—	—		—		—
Residential construction	—	—		—		—		—	—		—		—
Commercial	—	—		—		—		1	342		342		—
Consumer	—	—		—		—		1	59		59		27
	7	$	658	$	658	$	59	20	$	1,797	$	1,791	$	165


¹	The reported balances include loans that became TDR during the period, and were fully paid-off, charged-off, or sold prior to period end.

Schedule of troubled debt restructuring on financing receivables that experienced default

Loans modified in TDRs that experienced a payment default of 90 days or more during the second quarters and first six months of 2018 and 2017, and for which the payment of default occurred within one year of the modification, were as follows:



	Three months ended June 30, 2018			Six months ended June 30, 2018
(dollars in thousands)	Number of contracts	Recorded investment		Number of contracts	Recorded investment
Troubled debt restructurings that subsequently defaulted
Real estate:
Residential 1-4 family	—	$	—	—	$	—
Commercial real estate	—	—		—	—
Home equity line of credit	1	100		2	181
Residential land	—	—		—	—
Commercial construction	—	—		—	—
Residential construction	—	—		—	—
Commercial	1	291		1	291
Consumer	—	—		—	—
	2	$	391	3	$	472



	Three months ended June 30, 2017			Six months ended June 30, 2017
(dollars in thousands)	Number of contracts	Recorded investment		Number of contracts	Recorded investment
Troubled debt restructurings that subsequently defaulted
Real estate:
Residential 1-4 family	1	$	222	2	$	523
Commercial real estate	—	—		—	—
Home equity line of credit	—	—		—	—
Residential land	—	—		—	—
Commercial construction	—	—		—	—
Residential construction	—	—		—	—
Commercial	—	—		—	—
Consumer	—	—		—	—
	1	$	222	2	$	523

Schedule of amortized intangible assets

Changes in the carrying value of mortgage servicing rights were as follows:



(in thousands)	Gross carrying amount¹		Accumulated amortization¹			Valuation allowance		Net carrying amount
June 30, 2018	$	18,238	$	(9,729	)	$	—	$	8,509
December 31, 2017	17,511		(8,872		)	—		8,639

¹ Reflects the impact of loans paid in full.

Changes related to mortgage servicing rights were as follows:



	Three months ended June 30						Six months ended June 30
(in thousands)	2018			2017			2018			2017
Mortgage servicing rights
Beginning balance	$	8,541		$	9,294		$	8,639		$	9,373
Amount capitalized	392			362			727			798
Amortization	(424		)	(475		)	(857		)	(990		)
Other-than-temporary impairment	—			—			—			—
Carrying amount before valuation allowance	8,509			9,181			8,509			9,181
Valuation allowance for mortgage servicing rights
Beginning balance	—			—			—			—
Provision (recovery)	—			—			—			—
Other-than-temporary impairment	—			—			—			—
Ending balance	—			—			—			—
Net carrying value of mortgage servicing rights	$	8,509		$	9,181		$	8,509		$	9,181

Schedule of key assumptions used in estimating fair value

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



(dollars in thousands)	June 30, 2018			December 31, 2017
Unpaid principal balance	$	1,192,901		$	1,195,454
Weighted average note rate	3.96		%	3.94		%
Weighted average discount rate	10.0		%	10.0		%
Weighted average prepayment speed	6.8		%	9.0		%

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



	2018		2017
Risk-free interest rate	2.29	%	1.46	%
Expected life in years	3		3
Expected volatility	17.0	%	20.1	%
Range of expected volatility for Peer Group	15.1% to 26.2%		15.4% to 26.0%
Grant date fair value (per share)	$38.20		$39.51

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
June 30, 2018
Residential loans	$	232	Fair value of collateral	Appraised value less 7% selling cost	62-69%	68%
Total loans	$	232

December 31, 2017
Residential loans	$	613	Fair value of collateral	Appraised value less 7% selling cost	71-92%	84%
Commercial loans	2,008		Fair value of collateral	Appraised value	71-76%	75%
Total loans	$	2,621

(1) Represent percent of outstanding principal balance.

Schedule of sensitivity analysis of fair value, transferor's interests in transferred financial assets

The sensitivity analysis of fair value of MSRs to hypothetical adverse changes of 25 and 50 basis points in certain key assumptions was as follows:



(dollars in thousands)	June 30, 2018			December 31, 2017
Prepayment rate:
25 basis points adverse rate change	$	(344	)	$	(869	)
50 basis points adverse rate change	(797		)	(1,828		)
Discount rate:
25 basis points adverse rate change	(135		)	(111		)
50 basis points adverse rate change	(268		)	(220		)

Schedule of securities sold under agreements to repurchase

The following tables present information about the securities sold under agreements to repurchase, including the related collateral received from or pledged to counterparties:



(in millions)	Gross amount of recognized liabilities		Gross amount offset in the Balance Sheet		Net amount of liabilities presented in the Balance Sheet
Repurchase agreements
June 30, 2018	$	77	$	—	$	77
December 31, 2017	141		—		141



	Gross amount not offset in the Balance Sheet
(in millions)	Net amount of liabilities presented in the Balance Sheet		Financial instruments		Cash collateral pledged
June 30, 2018
Commercial account holders	$	77	$	193	$	—
Total	$	77	$	193	$	—
December 31, 2017
Commercial account holders	$	141	$	165	$	—
Total	$	141	$	165	$	—

Schedule of notional and fair value of derivatives

The notional amount and fair value of ASB’s derivative financial instruments were as follows:



	June 30, 2018					December 31, 2017
(in thousands)	Notional amount		Fair value			Notional amount		Fair value
Interest rate lock commitments	$	21,954	$	248		$	13,669	$	131
Forward commitments	24,911		(62		)	14,465		(24		)

Schedule of derivative financial instruments

ASB’s derivative financial instruments, their fair values and balance sheet location were as follows:



Derivative Financial Instruments Not Designated as Hedging Instruments ¹	June 30, 2018				December 31, 2017
(in thousands)	Asset derivatives		Liability derivatives		Asset derivatives		Liability derivatives
Interest rate lock commitments	$	248	$	—	$	133	$	2
Forward commitments	2		64		4		28
	$	250	$	64	$	137	$	30

¹ Asset derivatives are included in other assets and liability derivatives 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 ASB’s statements of income:



Derivative Financial Instruments Not Designated as Hedging Instruments	Location of net gains (losses) recognized in the Statement of Income	Three months ended June 30						Six months ended June 30
(in thousands)		2018			2017			2018			2017
Interest rate lock commitments	Mortgage banking income	$	(7	)	$	(191	)	$	117		$	(295	)
Forward commitments	Mortgage banking income	(2		)	192			(38		)	265
		$	(9	)	$	1		$	79		$	(30	)