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Fair value measurements (Tables)

6 Months Ended

Jun. 30, 2018

Fair Value Disclosures [Abstract]

Schedule of estimated fair values of certain of the Company's financial instruments

The following table presents the carrying or notional amount, fair value and placement in the fair value hierarchy of the Company’s financial instruments. For stock in Federal Home Loan Bank, the carrying amount is a reasonable estimate of fair value because it can only be redeemed at par. 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 or notional amount				Quoted prices in active markets for identical assets				Significant  other observable  inputs				Significant unobservable inputs
(in thousands)						(Level 1)				(Level 2)				(Level 3)				Total
June 30, 2018
Financial assets
HEI consolidated
Available-for-sale investment securities		$	1,409,528			$	—			$	1,394,101			$	15,427			$	1,409,528
Held-to-maturity investment securities		62,630				—				61,444				—				61,444
Stock in Federal Home Loan Bank		10,158				—				10,158				—				10,158
Loans, net		4,727,189				—				5,250				4,774,079				4,779,329
Mortgage servicing rights		8,509				—				—				13,423				13,423
Derivative assets		24,537				—				250				—				250
Financial liabilities
HEI consolidated
Deposit liabilities1		757,265				—				745,295				—				745,295
Short-term borrowings—other than bank		202,857				—				202,857				—				202,857
Other bank borrowings		126,930				—				126,904				—				126,904
Long-term debt, net—other than bank		1,783,009				—				1,816,310				—				1,816,310
Derivative liabilities		25,445				56				114				—				170
Hawaiian Electric consolidated
Short-term borrowings		91,880				—				91,880				—				91,880
Long-term debt, net		1,468,457				—				1,511,103				—				1,511,103
Derivative liabilities-window forward contracts		3,117				—				106				—				106
December 31, 2017
Financial assets
HEI consolidated
Available-for-sale investment securities		1,401,198				—				1,385,771				15,427				1,401,198
Held-to-maturity investment securities		44,515				—				44,412				—				44,412
Stock in Federal Home Loan Bank		9,706				—				9,706				—				9,706
Loans, net		4,628,381				—				11,254				4,770,497				4,781,751
Mortgage servicing rights		8,639				—				—				12,052				12,052
Derivative assets		17,812				—				393				—				393
Hawaiian Electric consolidated
Derivative assets-window forward contracts		3,240				—				256				—				256
Financial liabilities
HEI consolidated
Deposit liabilities1		5,890,597				—				5,884,071				—				5,884,071
Short-term borrowings—other than bank		117,945				—				117,945				—				117,945
Other bank borrowings		190,859				—				190,829				—				190,829
Long-term debt, net—other than bank		1,683,797				—				1,813,295				—				1,813,295
Derivative liabilities		13,562				20				10				—				30
Hawaiian Electric consolidated
Short-term borrowings		4,999				—				4,999				—				4,999
Long-term debt, net		1,368,479				—				1,497,079				—				1,497,079

¹  Deposit liabilities as of December 31, 2017 include noninterest-bearing demand, interest-bearing demand, and savings and money market deposits, for which the carrying amount represents a reasonable estimate of fair value, as such liabilities have no stated maturity. The fair value of such financial liabilities are not included as of June 30, 2018 as a result of the Company’s adoption of ASU No. 2016-01.

Schedule of assets measured at fair value on a recurring basis

Assets and liabilities measured at fair value on a recurring basis were as follows:

		June 30, 2018												December 31, 2017
		Fair value measurements using												Fair value measurements using
(in thousands)		Level 1				Level 2				Level 3				Level 1				Level 2				Level 3
Available-for-sale investment securities (bank segment)
Mortgage-related securities-FNMA, FHLMC and GNMA		$	—			$	1,177,832			$	—			$	—			$	1,201,473			$	—
U.S. Treasury and federal agency obligations		—				175,933				—				—				184,298				—
Corporate bonds		—				40,336				—				—				—				—
Mortgage revenue bond		—				—				15,427				—				—				15,427
		$	—			$	1,394,101			$	15,427			$	—			$	1,385,771			$	15,427
Derivative assets
Interest rate lock commitments (bank segment) 1		$	—			$	248			$	—			$	—			$	133			$	—
Forward commitments (bank segment) 1		—				2				—				—				4				—
Window forward contracts (electric utility segment)2		—				—				—				—				256				—
		$	—			$	250			$	—			$	—			$	393			$	—
Derivative liabilities
Interest rate lock commitments (bank segment) 1		$	—			$	—			$	—			$	—			$	2			$	—
Forward commitments (bank segment) 1		56				8				—				20				8				—
Window forward contracts (electric utility segment)2		—				106				—				—				—				—
		$	56			$	114			$	—			$	20			$	10			$	—

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.

² Derivatives are included in regulatory assets and/or liabilities in the balance sheets.

Schedule of changes in Level 3 assets and liabilities measured at fair value on a recurring basis

The changes in Level 3 assets and liabilities measured at fair value on a recurring basis were as follows:

		Three months ended June 30							Six months ended June 30
Mortgage revenue bond		2018			2017				2018			2017
(in thousands)
Beginning balance		$	15,427		$	15,427			$	15,427		$	15,427
Principal payments received		—			—				—			—
Purchases		—			—				—			—
Unrealized gain (loss) included in other comprehensive income		—			—				—			—
Ending balance		$	15,427		$	15,427			$	15,427		$	15,427

Schedule of assets measured at fair value on a nonrecurring basis

The carrying value of assets measured at fair value on a nonrecurring basis were as follows:

						Fair value measurements
(in thousands)		Balance				Level 1				Level 2				Level 3
June 30, 2018
Loans		$	232			$	—			$	—			$	232
December 31, 2017
Loans		2,621				—				—				2,621

Schedule of significant unobservable inputs used in the fair value measurement

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.

X

- Definition

Tabular disclosure of input and valuation technique used to measure fair value and change in valuation approach and technique for each separate class of asset and liability measured on recurring and nonrecurring basis.

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Tabular disclosure of assets and liabilities by class, including financial instruments measured at fair value that are classified in shareholders' equity, if any, that are measured at fair value on a nonrecurring basis in periods after initial recognition (for example, impaired assets). Disclosures may include, but are not limited to: (a) the fair value measurements recorded and the reasons for the measurements and (b) the level within the fair value hierarchy in which the fair value measurements are categorized in their entirety (levels 1, 2, 3).

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Tabular disclosure of the fair value measurement of assets using significant unobservable inputs (Level 3), a reconciliation of the beginning and ending balances, separately presenting changes during the period attributable to the following: (1) total gains or losses for the period (realized and unrealized), segregating those gains or losses included in earnings (or changes in net assets) and gains or losses recognized in other comprehensive income (loss), and a description of where those gains or losses included in earnings (or changes in net assets) are reported in the statement of income (or activities); (2) purchases, sales, issues, and settlements (each type disclosed separately); and (3) transfers in and transfers out of Level 3 (for example, transfers due to changes in the observability of significant inputs), by class of asset.

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Tabular disclosure of the fair value of financial instruments, including financial assets and financial liabilities, and the measurements of those instruments, assets, and liabilities.

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Tabular disclosure of assets and liabilities, including [financial] instruments measured at fair value that are classified in stockholders' equity, if any, that are measured at fair value on a recurring basis. The disclosures contemplated herein include the fair value measurements at the reporting date by the level within the fair value hierarchy in which the fair value measurements in their entirety fall, segregating fair value measurements using quoted prices in active markets for identical assets (Level 1), significant other observable inputs (Level 2), and significant unobservable inputs (Level 3).

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