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Bank segment (HEI only) | 12 Months Ended
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Dec. 31, 2018
Bank Segment Disclosure [Abstract] |
Bank segment (HEI only) |
Note 4· Bank segment (HEI only)
Selected financial information American Savings Bank, F.S.B. Statements of Income Data
Years ended December 31 | 2018 |  |  | 2017 |  |  | 2016 |
(in thousands) |  |  |  |  |  |  |  |
Interest and dividend income |  |  |  |  |  |  |  |
Interest and fees on loans | $ | 220,463 |  |  | $ | 207,255 |  |  | $ | 199,774 |
Interest and dividends on investment securities | 37,762 |  |  | 28,823 |  |  | 19,184 |
Total interest and dividend income | 258,225 |  |  | 236,078 |  |  | 218,958 |
Interest expense |  |  |  |  |  |  |  |
Interest on deposit liabilities | 13,991 |  |  | 9,660 |  |  | 7,167 |
Interest on other borrowings | 1,548 |  |  | 2,496 |  |  | 5,588 |
Total interest expense | 15,539 |  |  | 12,156 |  |  | 12,755 |
Net interest income | 242,686 |  |  | 223,922 |  |  | 206,203 |
Provision for loan losses | 14,745 |  |  | 10,901 |  |  | 16,763 |
Net interest income after provision for loan losses | 227,941 |  |  | 213,021 |  |  | 189,440 |
Noninterest income |  |  |  |  |  |  |  |
Fees from other financial services | 18,937 |  |  | 22,796 |  |  | 22,384 |
Fee income on deposit liabilities | 21,311 |  |  | 22,204 |  |  | 21,759 |
Fee income on other financial products | 7,052 |  |  | 7,205 |  |  | 8,707 |
Bank-owned life insurance | 5,057 |  |  | 5,539 |  |  | 4,637 |
Mortgage banking income | 1,493 |  |  | 2,201 |  |  | 6,625 |
Gains on sale of investment securities, net | — |  |  | — |  |  | 598 |
Other income, net | 2,200 |  |  | 1,617 |  |  | 2,256 |
Total noninterest income | 56,050 |  |  | 61,562 |  |  | 66,966 |
Noninterest expense |  |  |  |  |  |  |  |
Compensation and employee benefits | 98,387 |  |  | 94,931 |  |  | 89,242 |
Occupancy | 17,073 |  |  | 16,699 |  |  | 16,321 |
Data processing | 14,268 |  |  | 13,280 |  |  | 13,030 |
Services | 10,847 |  |  | 10,994 |  |  | 11,054 |
Equipment | 7,186 |  |  | 7,232 |  |  | 6,938 |
Office supplies, printing and postage | 6,134 |  |  | 6,182 |  |  | 6,075 |
Marketing | 3,567 |  |  | 3,501 |  |  | 3,489 |
FDIC insurance | 2,713 |  |  | 2,904 |  |  | 3,543 |
Other expense | 17,238 |  |  | 20,144 |  |  | 19,362 |
Total noninterest expense | 177,413 |  |  | 175,867 |  |  | 169,054 |
Income before income taxes | 106,578 |  |  | 98,716 |  |  | 87,352 |
Income taxes | 24,069 |  |  | 31,719 |  |  | 30,073 |
Net income | $ | 82,509 |  |  | $ | 66,997 |  |  | $ | 57,279 |
Reconciliation to amounts per HEI Consolidated Statements of Income*:
Years ended December 31 | 2018 |  |  | 2017 |  |  | 2016 |
(in thousands) |  |  |  |  |
Interest and dividend income | $ | 258,225 |  |  | $ | 236,078 |  |  | $ | 218,958 |
Noninterest income | 56,050 |  |  | 61,562 |  |  | 66,966 |
*Revenues-Bank | 314,275 |  |  | 297,640 |  |  | 285,924 |
Total interest expense | 15,539 |  |  | 12,156 |  |  | 12,755 |
Provision for loan losses | 14,745 |  |  | 10,901 |  |  | 16,763 |
Total noninterest expense | 177,413 |  |  | 175,867 |  |  | 169,054 |
Less: Retirement defined benefits expense—other than service costs | (1,657 | ) |  | (820 | ) |  | (875 | )
*Expenses-Bank | 206,040 |  |  | 198,104 |  |  | 197,697 |
*Operating income-Bank | 108,235 |  |  | 99,536 |  |  | 88,227 |
Add back: Retirement defined benefits expense—other than service costs | 1,657 |  |  | 820 |  |  | 875 |
Income before income taxes | $ | 106,578 |  |  | $ | 98,716 |  |  | $ | 87,352 |
Statements of Comprehensive Income Data
Years ended December 31 | 2018 |  |  | 2017 |  |  | 2016 |
(in thousands) |  |  |  |  |  |  |  |
Net income | $ | 82,509 |  |  | $ | 66,997 |  |  | $ | 57,279 |
Other comprehensive income (loss), net of taxes: |  |  |  |  |  |  |  |
Net unrealized losses on available-for sale investment securities: |  |  |  |  |  |  |  |
Net unrealized losses on available-for sale investment securities arising during the period, net of tax benefits of $3,468, $2,886 and $3,763 for 2018, 2017 and 2016, respectively | (9,472 | ) |  | (4,370 | ) |  | (5,699 | )
Reclassification adjustment for net realized gains included in net income, net of taxes of nil, nil and $238 for 2018, 2017 and 2016, respectively | — |  |  | — |  |  | (360 | )
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 $1,108, $812 and $566 for 2018, 2017 and 2016, respectively | 2,353 |  |  | 1,231 |  |  | 857 |
Other comprehensive loss, net of tax benefits | (7,119 | ) |  | (3,139 | ) |  | (5,202 | )
Comprehensive income | $ | 75,390 |  |  | $ | 63,858 |  |  | $ | 52,077 |
Balance Sheets Data
December 31 |  | 2018 |  |  | 2017 |
(in thousands) |  |  |  |  |  |
Assets |  |  |  |  |  |
Cash and due from banks |  | $ | 122,059 |  |  | $ | 140,934 |
Interest-bearing deposits |  | 4,225 |  |  | 93,165 |
Investment securities |  |  |  |
Available-for-sale, at fair value |  | 1,388,533 |  |  | 1,401,198 |
Held-to-maturity, at amortized cost (fair value of $142,057 and $44,412 at December 31, 2018 and 2017, respectively) |  | 141,875 |  |  | 44,515 |
Stock in Federal Home Loan Bank, at cost |  | 9,958 |  |  | 9,706 |
Loans held for investment |  | 4,843,021 |  |  | 4,670,768 |
Allowance for loan losses |  | (52,119 | ) |  | (53,637 | )
Net loans |  | 4,790,902 |  |  | 4,617,131 |
Loans held for sale, at lower of cost or fair value |  | 1,805 |  |  | 11,250 |
Other |  | 486,347 |  |  | 398,570 |
Goodwill |  | 82,190 |  |  | 82,190 |
Total assets |  | $ | 7,027,894 |  |  | $ | 6,798,659 |
Liabilities and shareholder’s equity |  |  |  |  |  |
Deposit liabilities–noninterest-bearing |  | $ | 1,800,727 |  |  | $ | 1,760,233 |
Deposit liabilities–interest-bearing |  | 4,358,125 |  |  | 4,130,364 |
Other borrowings |  | 110,040 |  |  | 190,859 |
Other |  | 124,613 |  |  | 110,356 |
Total liabilities |  | 6,393,505 |  |  | 6,191,812 |
Commitments and contingencies |  |  |  |  |  |
Common stock |  | 1 |  |  | 1 |
Additional paid in capital |  | 347,170 |  |  | 345,018 |
Retained earnings |  | 325,286 |  |  | 292,957 |
Accumulated other comprehensive loss, net of tax benefits |  |  |  |
Net unrealized losses on securities | $ | (24,423 | ) |  | $ | (14,951 | ) |
Retirement benefit plans | (13,645 | ) | (38,068 | ) | (16,178 | ) | (31,129 | )
Total shareholder’s equity |  | 634,389 |  |  | 606,847 |
Total liabilities and shareholder’s equity |  | $ | 7,027,894 |  |  | $ | 6,798,659 |
December 31 |  | 2018 |  |  | 2017 |
(in thousands) |  |  |  |  |  |
Other assets |  |  |  |  |  |
Bank-owned life insurance |  | $ | 151,172 |  |  | $ | 148,775 |
Premises and equipment, net |  | 214,415 |  |  | 136,270 |
Accrued interest receivable |  | 20,140 |  |  | 18,724 |
Mortgage servicing rights |  | 8,062 |  |  | 8,639 |
Low-income housing investments |  | 67,626 |  |  | 59,016 |
Real estate acquired in settlement of loans, net |  | 406 |  |  | 133 |
Other |  | 24,526 |  |  | 27,013 |
|  | $ | 486,347 |  |  | $ | 398,570 |
Other liabilities |  |  |  |  |  |
Accrued expenses |  | $ | 54,084 |  |  | $ | 39,312 |
Federal and state income taxes payable |  | 2,012 |  |  | 3,736 |
Cashier’s checks |  | 26,906 |  |  | 27,000 |
Advance payments by borrowers |  | 10,183 |  |  | 10,245 |
Other |  | 31,428 |  |  | 30,063 |
|  | $ | 124,613 |  |  | $ | 110,356 |
Bank-owned life insurance is life insurance purchased by ASB on the lives of certain key employees, with ASB as the beneficiary. The insurance is used to fund employee benefits through tax-free income from increases in the cash value of the policies and insurance proceeds paid to ASB upon an insured’s death. The increase in premises and equipment, net was due to the expenditures of $76.5 million for the new campus project. Investment securities. The major components of investment securities were as follows:
|  |  |  |  |  |  |  |  | Gross unrealized losses
|  |  | Gross |  | Gross |  | Estimated |  | Less than 12 months |  | 12 months or longer
(dollars in thousands) | Amortized cost |  | unrealized gains |  | unrealized losses |  | fair value |  | Number of issues |  | Fair value |  | Amount |  | Number of issues |  | Fair value |  | Amount
December 31, 2018 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Available-for-sale |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
U.S. Treasury and federal agency obligations | $ | 156,694 |  |  | $ | 62 |  |  | $ | (2,407 | ) |  | $ | 154,349 |  |  | 5 |  | $ | 25,882 |  |  | $ | (208 | ) |  | 19 |  | $ | 118,405 |  |  | $ | (2,199 | )
Mortgage-backed securities — issued or guaranteed by U.S. Government agencies or sponsored agencies | 1,192,169 |  |  | 789 |  |  | (31,542 | ) |  | 1,161,416 |  |  | 22 |  | 129,011 |  |  | (1,330 | ) |  | 145 |  | 947,890 |  |  | (30,212 | )
Corporate bonds | 49,398 |  |  | 103 |  |  | (369 | ) |  | 49,132 |  |  | 6 |  | 23,175 |  |  | (369 | ) |  | — |  | — |  |  | — |
Mortgage revenue bonds | 23,636 |  |  | — |  |  | — |  |  | 23,636 |  |  | — |  | — |  |  | — |  |  | — |  | — |  |  | — |
| $ | 1,421,897 |  |  | $ | 954 |  |  | $ | (34,318 | ) |  | $ | 1,388,533 |  |  | 33 |  | $ | 178,068 |  |  | $ | (1,907 | ) |  | 164 |  | $ | 1,066,295 |  |  | $ | (32,411 | )
Held-to-maturity |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Mortgage-backed securities — issued or guaranteed by U.S. Government agencies or sponsored agencies | $ | 141,875 |  |  | $ | 1,446 |  |  | $ | (1,264 | ) |  | $ | 142,057 |  |  | 3 |  | $ | 29,814 |  |  | $ | (400 | ) |  | 2 |  | $ | 31,505 |  |  | $ | (864 | )
| $ | 141,875 |  |  | $ | 1,446 |  |  | $ | (1,264 | ) |  | $ | 142,057 |  |  | 3 |  | $ | 29,814 |  |  | $ | (400 | ) |  | 2 |  | $ | 31,505 |  |  | $ | (864 | )
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-backed securities — issued or guaranteed by U.S. Government agencies or sponsored agencies | 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-backed securities — issued or guaranteed by U.S. Government agencies or sponsored agencies | $ | 44,515 |  |  | $ | 1 |  |  | $ | (104 | ) |  | $ | 44,412 |  |  | 2 |  | $ | 35,744 |  |  | $ | (104 | ) |  | — |  | $ | — |  |  | $ | — |
| $ | 44,515 |  |  | $ | 1 |  |  | $ | (104 | ) |  | $ | 44,412 |  |  | 2 |  | $ | 35,744 |  |  | $ | (104 | ) |  | — |  | $ | — |  |  | $ | — |
ASB does not believe that the investment securities that were in an unrealized loss position as of December 31, 2018, represent an OTTI. Total gross unrealized losses were primarily attributable to change in market conditions. On a quarterly basis the investment securities are evaluated for changes in financial condition of the issuer. Based upon ASB’s evaluation, all securities held within the investment portfolio continue to be investment grade by one or more agencies. The contractual cash flows of the U.S. Treasury, federal agency obligations and agency mortgage-backed securities are backed by the full faith and credit guaranty of the United States government or an agency of the government. ASB does not intend to sell the securities before the recovery of its amortized cost basis and there have been no adverse changes in the timing of the contractual cash flows for the securities. ASB did not recognize OTTI for 2018, 2017 and 2016. U.S. Treasury, federal agency obligations, corporate bonds, and mortgage revenue bonds have contractual terms to maturity. Mortgage-backed 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. The contractual maturities of investment securities were as follows:
| Amortized |  | Fair
December 31, 2018 | Cost |  | value
(in thousands) |  |  |
Available-for-sale |  |  |
Due in one year or less | $ | 20,002 |  |  | $ | 19,955 |
Due after one year through five years | 117,549 |  |  | 116,508 |
Due after five years through ten years | 76,750 |  |  | 75,227 |
Due after ten years | 15,427 |  |  | 15,427 |
| 229,728 |  |  | 227,117 |
Mortgage-backed securities — issued or guaranteed by U.S. Government agencies or sponsored agencies | 1,192,169 |  |  | 1,161,416 |
Total available-for-sale securities | $ | 1,421,897 |  |  | $ | 1,388,533 |
Held-to-maturity |  |  |
Mortgage-backed securities — issued or guaranteed by U.S. Government agencies or sponsored agencies | $ | 141,875 |  |  | $ | 142,057 |
Total held-to-maturity securities | $ | 141,875 |  |  | $ | 142,057 |
The proceeds, gross gains and losses from sales of available-for-sale securities were as follows:
Years ended December 31 | 2018 |  |  | 2017 |  |  | 2016 |
(in millions) |  |  |  |  |
Proceeds | $ | — |  |  | $ | — |  |  | $ | 16.4 |
Gross gains | — |  |  | — |  |  | 0.6 |
Gross losses | — |  |  | — |  |  | — |
Interest income from taxable and non-taxable investment securities were as follows:
Years ended December 31 | 2018 |  |  | 2017 |  |  | 2016 |
(in thousands) |  |  |  |  |
Taxable | $ | 37,153 |  |  | $ | 28,398 |  |  | $ | 19,166 |
Non-taxable | 609 |  |  | 425 |  |  | 18 |
| $ | 37,762 |  |  | $ | 28,823 |  |  | $ | 19,184 |
ASB pledged securities with a market value of approximately $546.1 million and $411.4 million as of December 31, 2018 and 2017, respectively, as collateral for public funds and other deposits, automated clearinghouse transactions with Bank of Hawaii, borrowing at the discount window of the Federal Reserve Bank of San Francisco, and deposits in ASB’s bankruptcy account with the Federal Reserve Bank of San Francisco. As of December 31, 2018 and 2017, securities with a carrying value of $92.0 million and $165.1 million, respectively, were pledged as collateral for securities sold under agreements to repurchase. Stock in FHLB. As of December 31, 2018 and 2017, ASB’s stock in FHLB was carried at cost ($10.0 million and $9.7 million, respectively) because it can only be redeemed at par and it is a required investment based on measurements of ASB’s capital, assets and borrowing levels. Quarterly and as conditions warrant, ASB reviews its investment in the stock of the FHLB for impairment. ASB evaluated its investment in FHLB stock for OTTI as of December 31, 2018, consistent with its accounting policy. ASB did not recognize an OTTI loss for 2018, 2017 and 2016 based on its evaluation of the underlying investment. Future deterioration in the FHLB’s financial position and/or negative developments in any of the factors considered in ASB’s impairment evaluation may result in future impairment losses. Loans. The components of loans were summarized as follows:
December 31 | 2018 |  |  | 2017 |
(in thousands) |  |  |  |  |
Real estate: |  |  |  |  |
Residential 1-4 family | $ | 2,143,397 |  |  | $ | 2,118,047 |
Commercial real estate | 748,398 |  |  | 733,106 |
Home equity line of credit | 978,237 |  |  | 913,052 |
Residential land | 13,138 |  |  | 15,797 |
Commercial construction | 92,264 |  |  | 108,273 |
Residential construction | 14,307 |  |  | 14,910 |
Total real estate | 3,989,741 |  |  | 3,903,185 |
Commercial | 587,891 |  |  | 544,828 |
Consumer | 266,002 |  |  | 223,564 |
Total loans | 4,843,634 |  |  | 4,671,577 |
Less: Deferred fees and discounts | (613 | ) |  | (809 | )
Allowance for loan losses | (52,119 | ) |  | (53,637 | )
Total loans, net | $ | 4,790,902 |  |  | $ | 4,617,131 |
ASB’s policy is to require private mortgage insurance on all real estate loans when the loan-to-value ratio of the property exceeds 80% of the lower of the appraised value or purchase price at origination. For non-owner occupied residential properties, the loan-to-value ratio may not exceed 80% of the lower of the appraised value or purchase price at origination. ASB services real estate loans for investors (principal balance of $1.2 billion as of December 31, 2018, 2017 and 2016), which are not included in the accompanying balance sheets data. ASB reports fees earned for servicing such loans as income when the related mortgage loan payments are collected and charges loan servicing cost to expense as incurred. As of December 31, 2018 and 2017, ASB had pledged loans with an amortized cost of approximately $2.7 billion and $2.4 billion, respectively, as collateral to secure advances from the FHLB. As of December 31, 2018 and 2017, 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 $24.0 million and $23.8 million, respectively. As of December 31, 2018 and 2017, $18.3 million and $18.7 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. 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 (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 |  | Consumer |  | Total
December 31, 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 | (128 | ) |  | — |  |  | (353 | ) |  | (18 | ) |  | — |  |  | — |  |  | (2,722 | ) |  | (17,296 | ) |  | (20,517 | )
Recoveries | 74 |  |  | — |  |  | 257 |  |  | 179 |  |  | — |  |  | — |  |  | 2,136 |  |  | 1,608 |  |  | 4,254 |
Provision | (872 | ) |  | (1,291 | ) |  | (1,055 | ) |  | (578 | ) |  | (1,881 | ) |  | (8 | ) |  | (1,040 | ) |  | 21,470 |  |  | 14,745 |
Ending balance | $ | 1,976 |  |  | $ | 14,505 |  |  | $ | 6,371 |  |  | $ | 479 |  |  | $ | 2,790 |  |  | $ | 4 |  |  | $ | 9,225 |  |  | $ | 16,769 |  |  | $ | 52,119 |
Ending balance: individually evaluated for impairment | $ | 876 |  |  | $ | 7 |  |  | $ | 701 |  |  | $ | 6 |  |  | $ | — |  |  | $ | — |  |  | $ | 628 |  |  | $ | 4 |  |  | $ | 2,222 |
Ending balance: collectively evaluated for impairment | $ | 1,100 |  |  | $ | 14,498 |  |  | $ | 5,670 |  |  | $ | 473 |  |  | $ | 2,790 |  |  | $ | 4 |  |  | $ | 8,597 |  |  | $ | 16,765 |  |  | $ | 49,897 |
Financing Receivables: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Ending balance | $ | 2,143,397 |  |  | $ | 748,398 |  |  | $ | 978,237 |  |  | $ | 13,138 |  |  | $ | 92,264 |  |  | $ | 14,307 |  |  | $ | 587,891 |  |  | $ | 266,002 |  |  | $ | 4,843,634 |
Ending balance: individually evaluated for impairment | $ | 16,494 |  |  | $ | 915 |  |  | $ | 14,800 |  |  | $ | 2,059 |  |  | $ | — |  |  | $ | — |  |  | $ | 5,340 |  |  | $ | 89 |  |  | $ | 39,697 |
Ending balance: collectively evaluated for impairment | $ | 2,126,903 |  |  | $ | 747,483 |  |  | $ | 963,437 |  |  | $ | 11,079 |  |  | $ | 92,264 |  |  | $ | 14,307 |  |  | $ | 582,551 |  |  | $ | 265,913 |  |  | $ | 4,803,937 |
December 31, 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 | (826 | ) |  | — |  |  | (14 | ) |  | (210 | ) |  | — |  |  | — |  |  | (4,006 | ) |  | (11,757 | ) |  | (16,813 | )
Recoveries | 157 |  |  | — |  |  | 308 |  |  | 482 |  |  | — |  |  | — |  |  | 1,852 |  |  | 1,217 |  |  | 4,016 |
Provision | 698 |  |  | (208 | ) |  | 2,189 |  |  | (1,114 | ) |  | (1,778 | ) |  | — |  |  | (3,613 | ) |  | 14,727 |  |  | 10,901 |
Ending balance | $ | 2,902 |  |  | $ | 15,796 |  |  | $ | 7,522 |  |  | $ | 896 |  |  | $ | 4,671 |  |  | $ | 12 |  |  | $ | 10,851 |  |  | $ | 10,987 |  |  | $ | 53,637 |
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 |
December 31, 2016 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Allowance for loan losses: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Beginning balance | $ | 4,186 |  |  | $ | 11,342 |  |  | $ | 7,260 |  |  | $ | 1,671 |  |  | $ | 4,461 |  |  | $ | 13 |  |  | $ | 17,208 |  |  | $ | 3,897 |  |  | $ | 50,038 |
Charge-offs | (639 | ) |  | — |  |  | (112 | ) |  | (138 | ) |  | — |  |  | — |  |  | (5,943 | ) |  | (7,413 | ) |  | (14,245 | )
Recoveries | 421 |  |  | — |  |  | 59 |  |  | 461 |  |  | — |  |  | — |  |  | 1,093 |  |  | 943 |  |  | 2,977 |
Provision | (1,095 | ) |  | 4,662 |  |  | (2,168 | ) |  | (256 | ) |  | 1,988 |  |  | (1 | ) |  | 4,260 |  |  | 9,373 |  |  | 16,763 |
Ending balance | $ | 2,873 |  |  | $ | 16,004 |  |  | $ | 5,039 |  |  | $ | 1,738 |  |  | $ | 6,449 |  |  | $ | 12 |  |  | $ | 16,618 |  |  | $ | 6,800 |  |  | $ | 55,533 |
Ending balance: individually evaluated for impairment | $ | 1,352 |  |  | $ | 80 |  |  | $ | 215 |  |  | $ | 789 |  |  | $ | — |  |  | $ | — |  |  | $ | 1,641 |  |  | $ | 6 |  |  | $ | 4,083 |
Ending balance: collectively evaluated for impairment | $ | 1,521 |  |  | $ | 15,924 |  |  | $ | 4,824 |  |  | $ | 949 |  |  | $ | 6,449 |  |  | $ | 12 |  |  | $ | 14,977 |  |  | $ | 6,794 |  |  | $ | 51,450 |
Financing Receivables: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Ending balance | $ | 2,048,051 |  |  | $ | 800,395 |  |  | $ | 863,163 |  |  | $ | 18,889 |  |  | $ | 126,768 |  |  | $ | 16,080 |  |  | $ | 692,051 |  |  | $ | 178,222 |  |  | $ | 4,743,619 |
Ending balance: individually evaluated for impairment | $ | 19,854 |  |  | $ | 1,569 |  |  | $ | 6,158 |  |  | $ | 3,629 |  |  | $ | — |  |  | $ | — |  |  | $ | 20,539 |  |  | $ | 10 |  |  | $ | 51,759 |
Ending balance: collectively evaluated for impairment | $ | 2,028,197 |  |  | $ | 798,826 |  |  | $ | 857,005 |  |  | $ | 15,260 |  |  | $ | 126,768 |  |  | $ | 16,080 |  |  | $ | 671,512 |  |  | $ | 178,212 |  |  | $ | 4,691,860 |
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 trends so that appropriate steps can be initiated to manage risk and avoid or minimize future losses. Loans subject to grading include commercial, commercial real estate and commercial construction loans. Each commercial and commercial real estate loan is assigned an Asset Quality Rating (AQR) reflecting the likelihood of repayment or orderly liquidation of that loan transaction pursuant to regulatory credit classifications: Pass, Special Mention, Substandard, Doubtful, and Loss. The AQR is a function of the probability of default model rating, the loss given default, and possible non-model factors which impact the ultimate collectability of the loan such as character of the business owner/guarantor, interim period performance, litigation, tax liens and major changes in business and economic conditions. 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. Special Mention loans have potential weaknesses that, if left uncorrected, could jeopardize the liquidation of the debt. Substandard loans have well-defined weaknesses that jeopardize the liquidation of the debt and are characterized by the distinct possibility that the Bank may sustain some loss. An asset classified Doubtful has the weaknesses of those classified Substandard, with the added characteristic that the weaknesses make collection or liquidation in full, on the basis of currently existing facts, conditions, and values, highly questionable and improbable. An asset classified Loss is considered uncollectible and has such little value that its continuance as a bankable asset is not warranted. The credit risk profile by internally assigned grade for loans was as follows:
December 31 | 2018 |  | 2017
(in thousands) | Commercial real estate |  | Commercial construction |  | Commercial |  | Total |  | Commercial real estate |  | Commercial construction |  | Commercial |  | Total
Grade: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Pass | $ | 658,288 |  |  | $ | 89,974 |  |  | $ | 547,640 |  |  | $ | 1,295,902 |  |  | $ | 630,877 |  |  | $ | 83,757 |  |  | $ | 492,942 |  |  | $ | 1,207,576 |
Special mention | 32,871 |  |  | — |  |  | 11,598 |  |  | 44,469 |  |  | 49,347 |  |  | 22,500 |  |  | 27,997 |  |  | 99,844 |
Substandard | 57,239 |  |  | 2,290 |  |  | 28,653 |  |  | 88,182 |  |  | 52,882 |  |  | 2,016 |  |  | 23,421 |  |  | 78,319 |
Doubtful | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 468 |  |  | 468 |
Loss | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |
Total | $ | 748,398 |  |  | $ | 92,264 |  |  | $ | 587,891 |  |  | $ | 1,428,553 |  |  | $ | 733,106 |  |  | $ | 108,273 |  |  | $ | 544,828 |  |  | $ | 1,386,207 |
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, 2018 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Real estate: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Residential 1-4 family | $ | 3,757 |  |  | $ | 2,773 |  |  | $ | 2,339 |  |  | $ | 8,869 |  |  | $ | 2,134,528 |  |  | $ | 2,143,397 |  |  | $ | — |
Commercial real estate | — |  |  | — |  |  | — |  |  | — |  |  | 748,398 |  |  | 748,398 |  |  | — |
Home equity line of credit | 1,139 |  |  | 681 |  |  | 2,720 |  |  | 4,540 |  |  | 973,697 |  |  | 978,237 |  |  | — |
Residential land | 9 |  |  | — |  |  | 319 |  |  | 328 |  |  | 12,810 |  |  | 13,138 |  |  | — |
Commercial construction | — |  |  | — |  |  | — |  |  | — |  |  | 92,264 |  |  | 92,264 |  |  | — |
Residential construction | — |  |  | — |  |  | — |  |  | — |  |  | 14,307 |  |  | 14,307 |  |  | — |
Commercial | 315 |  |  | 281 |  |  | 548 |  |  | 1,144 |  |  | 586,747 |  |  | 587,891 |  |  | — |
Consumer | 5,220 |  |  | 3,166 |  |  | 2,702 |  |  | 11,088 |  |  | 254,914 |  |  | 266,002 |  |  | — |
Total loans | $ | 10,440 |  |  | $ | 6,901 |  |  | $ | 8,628 |  |  | $ | 25,969 |  |  | $ | 4,817,665 |  |  | $ | 4,843,634 |  |  | $ | — |
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 |  |  | $ | — |
The credit risk profile based on nonaccrual loans, accruing loans 90 days or more past due, and TDR loans was as follows:
December 31 | 2018 |  |  | 2017 |
(in thousands) |  |  |
Real estate: |  |  |  |  |
Residential 1-4 family | $ | 12,037 |  |  | $ | 12,598 |
Commercial real estate | — |  |  | — |
Home equity line of credit | 6,348 |  |  | 4,466 |
Residential land | 436 |  |  | 841 |
Commercial construction | — |  |  | — |
Residential construction | — |  |  | — |
Commercial | 4,278 |  |  | 3,069 |
Consumer | 4,196 |  |  | 2,617 |
Total nonaccrual loans | $ | 27,295 |  |  | $ | 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 | $ | 10,194 |  |  | $ | 10,982 |
Commercial real estate | 915 |  |  | 1,016 |
Home equity line of credit | 11,597 |  |  | 6,584 |
Residential land | 1,622 |  |  | 425 |
Commercial construction | — |  |  | — |
Residential construction | — |  |  | — |
Commercial | 1,527 |  |  | 1,741 |
Consumer | 62 |  |  | 66 |
Total troubled debt restructured loans not included above | $ | 25,917 |  |  | $ | 20,814 |
The total carrying amount and the total unpaid principal balance of impaired loans were as follows:
December 31 | 2018 |  | 2017
(in thousands) | Recorded investment |  | Unpaid principal balance |  | Related allowance |  | Recorded investment |  | Unpaid principal balance |  | Related allowance
With no related allowance recorded |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Real estate: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Residential 1-4 family | $ | 7,822 |  |  | $ | 8,333 |  |  | $ | — |  |  | $ | 9,097 |  |  | $ | 9,644 |  |  | $ | — |
Commercial real estate | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |
Home equity line of credit | 2,743 |  |  | 3,004 |  |  | — |  |  | 1,496 |  |  | 1,789 |  |  | — |
Residential land | 2,030 |  |  | 2,228 |  |  | — |  |  | 1,143 |  |  | 1,434 |  |  | — |
Commercial construction | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |
Residential construction | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |
Commercial | 3,722 |  |  | 4,775 |  |  | — |  |  | 2,328 |  |  | 3,166 |  |  | — |
Consumer | 32 |  |  | 32 |  |  | — |  |  | 8 |  |  | 8 |  |  | — |
| 16,349 |  |  | 18,372 |  |  | — |  |  | 14,072 |  |  | 16,041 |  |  | — |
With an allowance recorded |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Real estate: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Residential 1-4 family | 8,672 |  |  | 8,875 |  |  | 876 |  |  | 9,187 |  |  | 9,390 |  |  | 1,248 |
Commercial real estate | 915 |  |  | 915 |  |  | 7 |  |  | 1,016 |  |  | 1,016 |  |  | 65 |
Home equity line of credit | 12,057 |  |  | 12,086 |  |  | 701 |  |  | 6,692 |  |  | 6,736 |  |  | 647 |
Residential land | 29 |  |  | 29 |  |  | 6 |  |  | 122 |  |  | 122 |  |  | 47 |
Commercial construction | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |
Residential construction | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |
Commercial | 1,618 |  |  | 1,618 |  |  | 628 |  |  | 2,246 |  |  | 2,252 |  |  | 694 |
Consumer | 57 |  |  | 57 |  |  | 4 |  |  | 58 |  |  | 58 |  |  | 29 |
| 23,348 |  |  | 23,580 |  |  | 2,222 |  |  | 19,321 |  |  | 19,574 |  |  | 2,730 |
Total |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Real estate: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Residential 1-4 family | 16,494 |  |  | 17,208 |  |  | 876 |  |  | 18,284 |  |  | 19,034 |  |  | 1,248 |
Commercial real estate | 915 |  |  | 915 |  |  | 7 |  |  | 1,016 |  |  | 1,016 |  |  | 65 |
Home equity line of credit | 14,800 |  |  | 15,090 |  |  | 701 |  |  | 8,188 |  |  | 8,525 |  |  | 647 |
Residential land | 2,059 |  |  | 2,257 |  |  | 6 |  |  | 1,265 |  |  | 1,556 |  |  | 47 |
Commercial construction | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |
Residential construction | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |
Commercial | 5,340 |  |  | 6,393 |  |  | 628 |  |  | 4,574 |  |  | 5,418 |  |  | 694 |
Consumer | 89 |  |  | 89 |  |  | 4 |  |  | 66 |  |  | 66 |  |  | 29 |
| $ | 39,697 |  |  | $ | 41,952 |  |  | $ | 2,222 |  |  | $ | 33,393 |  |  | $ | 35,615 |  |  | $ | 2,730 |
ASB’s average recorded investment of, and interest income recognized from, impaired loans were as follows:
December 31 | 2018 |  | 2017 |  | 2016
(in thousands) | Average recorded investment |  | Interest income recognized* |  | Average recorded investment |  | Interest income recognized* |  | Average recorded investment |  | Interest income recognized*
With no related allowance recorded |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Real estate: |  |  |  |  |  |  |  |  |  |  |
Residential 1-4 family | $ | 8,595 |  |  | $ | 445 |  |  | $ | 9,440 |  |  | $ | 316 |  |  | $ | 10,136 |  |  | $ | 324 |
Commercial real estate | — |  |  | — |  |  | 91 |  |  | 11 |  |  | 1,124 |  |  | — |
Home equity line of credit | 2,206 |  |  | 75 |  |  | 1,976 |  |  | 101 |  |  | 1,105 |  |  | 23 |
Residential land | 1,532 |  |  | 40 |  |  | 1,094 |  |  | 117 |  |  | 1,518 |  |  | 66 |
Commercial construction | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |
Residential construction | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |
Commercial | 3,275 |  |  | 28 |  |  | 2,776 |  |  | 54 |  |  | 8,694 |  |  | 370 |
Consumer | 22 |  |  | — |  |  | 1 |  |  | — |  |  | 2 |  |  | — |
| 15,630 |  |  | 588 |  |  | 15,378 |  |  | 599 |  |  | 22,579 |  |  | 783 |
With an allowance recorded |  |  |  |  |  |  |  |  |  |  |
Real estate: |  |  |  |  |  |  |  |  |  |  |
Residential 1-4 family | 8,878 |  |  | 363 |  |  | 9,818 |  |  | 493 |  |  | 11,589 |  |  | 457 |
Commercial real estate | 982 |  |  | 42 |  |  | 1,241 |  |  | 54 |  |  | 1,962 |  |  | 15 |
Home equity line of credit | 10,617 |  |  | 440 |  |  | 5,045 |  |  | 251 |  |  | 3,765 |  |  | 137 |
Residential land | 37 |  |  | 3 |  |  | 1,308 |  |  | 97 |  |  | 2,964 |  |  | 206 |
Commercial construction | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |
Residential construction | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |
Commercial | 1,789 |  |  | 122 |  |  | 3,691 |  |  | 723 |  |  | 16,106 |  |  | 456 |
Consumer | 57 |  |  | 4 |  |  | 57 |  |  | 3 |  |  | 12 |  |  | — |
| 22,360 |  |  | 974 |  |  | 21,160 |  |  | 1,621 |  |  | 36,398 |  |  | 1,271 |
Total |  |  |  |  |  |  |  |  |  |  |
Real estate: |  |  |  |  |  |  |  |  |  |  |
Residential 1-4 family | 17,473 |  |  | 808 |  |  | 19,258 |  |  | 809 |  |  | 21,725 |  |  | 781 |
Commercial real estate | 982 |  |  | 42 |  |  | 1,332 |  |  | 65 |  |  | 3,086 |  |  | 15 |
Home equity line of credit | 12,823 |  |  | 515 |  |  | 7,021 |  |  | 352 |  |  | 4,870 |  |  | 160 |
Residential land | 1,569 |  |  | 43 |  |  | 2,402 |  |  | 214 |  |  | 4,482 |  |  | 272 |
Commercial construction | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |
Residential construction | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |
Commercial | 5,064 |  |  | 150 |  |  | 6,467 |  |  | 777 |  |  | 24,800 |  |  | 826 |
Consumer | 79 |  |  | 4 |  |  | 58 |  |  | 3 |  |  | 14 |  |  | — |
| $ | 37,990 |  |  | $ | 1,562 |  |  | $ | 36,538 |  |  | $ | 2,220 |  |  | $ | 58,977 |  |  | $ | 2,054 |
* Since loan was classified as impaired. Troubled debt restructurings. A loan modification is deemed to be a TDR when the borrower is determined to be experiencing financial difficulties and ASB grants a concession it would not otherwise consider. When a borrower experiencing financial difficulty fails to make a required payment on a loan or is in imminent default, ASB takes a number of steps to improve the collectability of the loan and maximize the likelihood of full repayment. At times, ASB may modify or restructure a loan to help a distressed borrower improve its financial position to eventually be able to fully repay the loan, provided the borrower has demonstrated both the willingness and the ability to fulfill 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, extended amortization of principal, temporary deferral of principal payments, and temporary interest rate reductions. ASB rarely grants principal forgiveness in its TDR modifications. Residential loan modifications generally involve interest rate reduction, extending the amortization period, or capitalizing certain delinquent amounts owed not to exceed the original loan balance. Land loans at origination 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 up to five 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, extending the amortization period, and temporary deferral or reduction of principal payments. ASB generally does not reduce the interest rate on commercial loan TDR modifications. Occasionally, additional collateral and/or guaranties are obtained. All TDR loans are classified as 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 effective original contractual rate, (2) fair value of collateral less cost 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. Loan modifications that occurred during 2018, 2017, and 2016 and the impact on the allowance for loan losses were as follows:
(dollars in thousands) | Number of contracts |  | Outstanding recorded investment |  | Net increase in ALLL
Years ended |  | Pre-modification |  | Post-modification |
December 31, 2018 |  |  |  |  |  |  |
Real estate: |  |  |  |  |  |  |  |  |  |
Residential 1-4 family | 5 |  |  | $ | 1,107 |  |  | $ | 1,133 |  |  | $ | 17 |
Commercial real estate | — |  |  | — |  |  | — |  |  | — |
Home equity line of credit | 58 |  |  | 7,487 |  |  | 7,492 |  |  | 1,220 |
Residential land | 5 |  |  | 1,776 |  |  | 1,786 |  |  | — |
Commercial construction | — |  |  | — |  |  | — |  |  | — |
Residential construction | — |  |  | — |  |  | — |  |  | — |
Commercial | 13 |  |  | 2,550 |  |  | 2,550 |  |  | 176 |
Consumer | — |  |  | — |  |  | — |  |  | — |
| 81 |  |  | $ | 12,920 |  |  | $ | 12,961 |  |  | $ | 1,413 |
December 31, 2017 |  |  |  |  |  |  |
Real estate: |  |  |  |  |  |  |
Residential 1-4 family | 7 |  |  | $ | 742 |  |  | $ | 750 |  |  | $ | 45 |
Commercial real estate | — |  |  | — |  |  | — |  |  | — |
Home equity line of credit | 46 |  |  | 3,016 |  |  | 3,002 |  |  | 557 |
Residential land | 1 |  |  | 92 |  |  | 92 |  |  | — |
Commercial construction | — |  |  | — |  |  | — |  |  | — |
Residential construction | — |  |  | — |  |  | — |  |  | — |
Commercial | 9 |  |  | 889 |  |  | 889 |  |  | 248 |
Consumer | 1 |  |  | 59 |  |  | 59 |  |  | 27 |
| 64 |  |  | $ | 4,798 |  |  | $ | 4,792 |  |  | $ | 877 |
December 31, 2016 |  |  |  |  |  |  |
Real estate: |  |  |  |  |  |  |
Residential 1-4 family | 14 |  |  | $ | 3,131 |  |  | $ | 3,245 |  |  | $ | 337 |
Commercial real estate | — |  |  | — |  |  | — |  |  | — |
Home equity line of credit | 36 |  |  | 3,337 |  |  | 3,337 |  |  | 554 |
Residential land | 2 |  |  | 203 |  |  | 204 |  |  | — |
Commercial construction | — |  |  | — |  |  | — |  |  | — |
Residential construction | — |  |  | — |  |  | — |  |  | — |
Commercial | 15 |  |  | 20,266 |  |  | 20,266 |  |  | 865 |
Consumer | — |  |  | — |  |  | — |  |  | — |
| 67 |  |  | $ | 26,937 |  |  | $ | 27,052 |  |  | $ | 1,756 |
Loans modified in TDRs that experienced a payment default of 90 days or more in 2018, 2017, and 2016 and for which the payment default occurred within one year of the modification, were as follows:
Years ended December 31 | 2018 |  | 2017 |  | 2016
(dollars in thousands) | Number of contracts |  | Recorded investment |  | Number of contracts |  | Recorded investment |  | Number of contracts |  | Recorded investment
Troubled debt restructurings that subsequently defaulted |  |  |  |  |  |  |  |  |  |  |  |  |
Real estate: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Residential 1-4 family | — |  |  | $ | — |  |  | 1 |  |  | $ | 222 |  |  | 1 |  |  | $ | 239 |
Commercial real estate | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |
Home equity line of credit | 1 |  |  | 81 |  |  | — |  |  | — |  |  | — |  |  | — |
Residential land | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |
Commercial construction | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |
Residential construction | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |
Commercial | 1 |  |  | 246 |  |  | — |  |  | — |  |  | 1 |  |  | 24 |
Consumer | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |
| 2 |  |  | $ | 327 |  |  | 1 |  |  | $ | 222 |  |  | 2 |  |  | $ | 263 |
If loans modified in a TDR subsequently default, ASB evaluates the loan for further impairment. Based on its evaluation, adjustments may be made in the allocation of the allowance or partial charge-offs may be taken to further write-down the carrying value of the loan. Commitments to lend additional funds to borrowers whose loan terms have been modified in a TDR were nil at December 31, 2018 and 2017. The Company had $4.2 million and $4.3 million of consumer mortgage loans collateralized by residential real estate property that were in the process of foreclosure at December 31, 2018 and 2017, respectively. Mortgage servicing rights (MSRs). In its mortgage banking business, ASB sells residential mortgage loans to government-sponsored entities and other parties, who may issue securities backed by pools of such loans. ASB retains no beneficial interests in these loans other than the servicing rights of certain loans sold. ASB received $112.2 million, $128.0 million and $236.1 million of proceeds from the sale of residential mortgages in 2018, 2017, and 2016, respectively, and recognized gains on such sales of $1.5 million, $2.2 million, and $6.6 million in 2018, 2017, and 2016, respectively. Repurchased mortgage loans were nil for 2018, 2017 and 2016. Mortgage servicing fees, a component of other income, net, were $3.0 million, $3.0 million, and $2.9 million for the years ended December 31, 2018, 2017, and 2016, respectively. Changes in the carrying value of MSRs were as follows:
(in thousands) | Gross carrying amount 1 |  | Accumulated amortization 1 |  | Valuation allowance |  | Net carrying amount
December 31, 2018 | $ | 18,556 |  |  | $ | (10,494 | ) |  | $ | — |  |  | $ | 8,062 |
December 31, 2017 | $ | 17,511 |  |  | $ | (8,872 | ) |  | $ | — |  |  | $ | 8,639 |
1 Reflects impact of loans paid in full. Changes related to MSRs were as follows:
(in thousands) | 2018 |  |  | 2017 |  |  | 2016 |
Mortgage servicing rights |  |  |  |  |
Balance, January 1 | $ | 8,639 |  |  | $ | 9,373 |  |  | $ | 8,884 |
Amount capitalized | 1,045 |  |  | 1,239 |  |  | 2,740 |
Amortization | (1,622 | ) |  | (1,973 | ) |  | (2,251 | )
Sale of mortgage servicing rights | — |  |  | — |  |  | — |
Other-than-temporary impairment | — |  |  | — |  |  | — |
Carrying amount before valuation allowance, December 31 | 8,062 |  |  | 8,639 |  |  | 9,373 |
Valuation allowance for mortgage servicing rights |  |  |  |  |
Balance, January 1 | — |  |  | — |  |  | — |
Provision (recovery) | — |  |  | — |  |  | — |
Other-than-temporary impairment | — |  |  | — |  |  | — |
Balance, December 31 | — |  |  | — |  |  | — |
Net carrying value of mortgage servicing rights | $ | 8,062 |  |  | $ | 8,639 |  |  | $ | 9,373 |
The estimated aggregate amortization expenses of MSRs for 2019, 2020, 2021, 2022 and 2023 are $1.1 million, $1.0 million, $0.9 million, $0.8 million and $0.7 million, respectively. ASB capitalizes MSRs acquired upon the sale of mortgage loans with servicing rights retained. On a monthly basis, ASB compares the net carrying value of the MSRs to its fair value to determine if there are any changes to the valuation allowance and/or other-than-temporary impairment for the MSRs. ASB’s MSRs are stratified based on predominant risk characteristics of the underlying loans including loan type such as fixed-rate 15- and 30-year mortgages and note rate in bands of 50 to 100 basis points. For each stratum, fair value is calculated by discounting expected net income streams using discount rates that reflect industry pricing for similar assets. Changes in mortgage interest rates impact the value of ASB’s MSRs. Rising interest rates typically result in slower prepayment speeds in the loans being serviced for others, which increases the value of MSRs, whereas declining interest rates typically result in faster prepayment speeds which decrease the value of MSRs and increase the amortization of the MSRs. 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. ASB uses a present value cash flow model using techniques described above to estimate the fair value of MSRs. 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 “Revenues - bank” in the consolidated statements of income. A direct write-down is recorded when the recoverability of the valuation allowance is deemed to be unrecoverable. Key assumptions used in estimating the fair value of ASB’s MSRs used in the impairment analysis were as follows:
December 31 | 2018 |  |  | 2017 |
(dollars in thousands) |  |  |
Unpaid principal balance | $ | 1,188,514 |  |  | $ | 1,195,454 |
Weighted average note rate | 3.98 | % |  | 3.94 | %
Weighted average discount rate | 10.0 | % |  | 10.0 | %
Weighted average prepayment speed | 6.5 | % |  | 9.0 | %
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:
December 31 | 2018 |  |  | 2017 |
(in thousands) |  |  |
Prepayment rate: |  |  |
25 basis points adverse rate change | $ | (250 | ) |  | $ | (869 | )
50 basis points adverse rate change | (566 | ) |  | (1,828 | )
Discount rate: |  |  |
25 basis points adverse rate change | (139 | ) |  | (111 | )
50 basis points adverse rate change | (275 | ) |  | (220 | )
The effect of a variation in certain assumptions on fair value is calculated without changing any other assumptions. This analysis typically cannot be extrapolated because the relationship of a change in one key assumption to the changes in the fair value of MSRs typically is not linear. Deposit liabilities. The summarized components of deposit liabilities were as follows:
December 31 | 2018 |  | 2017
(dollars in thousands) | Weighted-average stated rate |  |  | Amount |  |  | Weighted-average stated rate |  |  | Amount |
Savings | 0.07 | % |  | $ | 2,322,552 |  |  | 0.07 | % |  | $ | 2,303,450 |
Checking |  |  |  |  |  |  |  |  |
Interest-bearing | 0.09 |  |  | 1,055,019 |  |  | 0.03 |  |  | 944,833 |
Noninterest-bearing | — |  |  | 932,608 |  |  | — |  |  | 896,292 |
Commercial checking | — |  |  | 868,119 |  |  | — |  |  | 863,941 |
Money market | 0.63 |  |  | 152,713 |  |  | 0.09 |  |  | 114,797 |
Time certificates | 1.61 |  |  | 827,841 |  |  | 1.26 |  |  | 767,284 |
| 0.27 | % |  | $ | 6,158,852 |  |  | 0.20 | % |  | $ | 5,890,597 |
As of December 31, 2018 and 2017, time certificates of $100,000 or more totaled $500.2 million and $433.4 million, respectively. The approximate scheduled maturities of time certificates outstanding at December 31, 2018 were as follows:
(in thousands) |
2019 | $ | 508,833 |
2020 | 128,613 |
2021 | 107,095 |
2022 | 49,329 |
2023 | 30,456 |
Thereafter | 3,515 |
| $ | 827,841 |
Overdrawn deposit accounts are classified as loans and totaled $2.1 million and $1.7 million at December 31, 2018 and 2017, respectively. Interest expense on deposit liabilities by type of deposit was as follows:
Years ended December 31 | 2018 |  |  | 2017 |  |  | 2016 |
(in thousands) |  |  |  |  |
Time certificates | $ | 11,044 |  |  | $ | 7,687 |  |  | $ | 5,390 |
Savings | 1,639 |  |  | 1,567 |  |  | 1,402 |
Money market | 602 |  |  | 168 |  |  | 202 |
Interest-bearing checking | 706 |  |  | 238 |  |  | 173 |
| $ | 13,991 |  |  | $ | 9,660 |  |  | $ | 7,167 |
Other borrowings. Securities sold under agreements to repurchase. 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. ASB pledges investment securities as collateral for securities sold under agreements to repurchase. All such agreements are subject to master netting arrangements, which provide for conditional right of set-off in case of default by either party; however, ASB presents securities sold under agreements to repurchase on a gross basis in the balance sheet. 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 Sheets |  | Net amount of liabilities presented in the Balance Sheets
Repurchase agreements |  |  |  |  |  |  |  |  |
December 31, 2018 |  | $ | 65 |  |  | $ | — |  |  | $ | 65 |
December 31, 2017 |  | 141 |  |  | — |  |  | 141 |
|  | Gross amount not offset in the Balance Sheets
(in millions) |  | Net amount of liabilities presented in the Balance Sheets |  | Financial instruments |  | Cash collateral pledged
Commercial account holders |  |  |  |  |  |  |  |  |
December 31, 2018 |  | $ | 65 |  |  | $ | 92 |  |  | $ | — |
December 31, 2017 |  | 141 |  |  | 165 |  |  | — |
The securities underlying the agreements to repurchase are book-entry securities and were delivered by appropriate entry into the counterparties’ accounts or into segregated tri-party custodial accounts at the FHLB. The securities underlying the agreements to repurchase continue to be reflected in ASB’s asset accounts. The counterparties or tri-parties may determine that additional collateral is required based on movements in the fair value of the collateral. Typically, a five percent discount is taken from the fair value of the investment securities to determine the value of the collateral pledged for the repurchase agreements. Information concerning securities sold under agreements to repurchase, which provided for the repurchase of identical securities, was as follows:
(dollars in millions) | 2018 |  |  | 2017 |  |  | 2016 |
Amount outstanding as of December 31 | $ | 65 |  |  | $ | 141 |  |  | $ | 93 |
Average amount outstanding during the year | $ | 99 |  |  | $ | 98 |  |  | $ | 170 |
Maximum amount outstanding as of any month-end | $ | 152 |  |  | $ | 141 |  |  | $ | 229 |
Weighted-average interest rate as of December 31 | 0.75 | % |  | 0.65 | % |  | 0.23 | %
Weighted-average interest rate during the year | 0.71 | % |  | 0.26 | % |  | 1.43 | %
Weighted-average remaining days to maturity as of December 31 | 1 |  |  | 1 |  |  | 6 |
Securities sold under agreements to repurchase were summarized as follows:
December 31 | 2018 |  | 2017
Maturity | Repurchase liability |  |  | Weighted-average interest rate |  |  | Collateralized by mortgage-backed securities and federal agency obligations at fair value plus accrued interest |  |  | Repurchase liability |  |  | Weighted-average interest rate |  |  | Collateralized by mortgage-backed securities and federal agency obligations at fair value plus accrued interest |
(dollars in thousands) |  |  |  |  |  |  |  |  |  |  |  |  |  |
Overnight | $ | 65,040 |  |  | 0.75 | % |  | $ | 92,290 |  |  | $ | 140,859 |  |  | 0.65 | % |  | $ | 165,464 |
1 to 29 days | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |
30 to 90 days | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |
Over 90 days | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |
| $ | 65,040 |  |  | 0.75 | % |  | $ | 92,290 |  |  | $ | 140,859 |  |  | 0.65 | % |  | $ | 165,464 |
Advances from Federal Home Loan Bank. FHLB advances are fixed rate for a specific term and consist of the following:
December 31, 2018 | Weighted-average stated rate |  | Amount
(dollars in thousands) |  |  |  |  |
Due in |  |  |  |  |
2019 | 2.63 | % |  | $ | 45,000 |
2020 | — |  |  | — |
2021 | — |  |  | — |
2022 | — |  |  | — |
2023 | — |  |  | — |
Thereafter | — |  |  | — |
| 2.63 | % |  | $ | 45,000 |
ASB and the FHLB are parties to an Advances, Pledge and Security Agreement (Advances Agreement), which applies to currently outstanding and future advances, and governs the terms and conditions under which ASB borrows and the FHLB makes loans or advances from time to time. Under the Advances Agreement, ASB agrees to abide by the FHLB’s credit policies, and makes certain warranties and representations to the FHLB. 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 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 are collateralized by loans and stock in the FHLB. As of December 31, 2018 and 2017, ASB’s available FHLB borrowing capacity was $2.0 billion, and $1.8 billion, respectively. ASB is required to obtain and hold a specific number of shares of capital stock of the FHLB. ASB was in compliance with all Advances Agreement requirements as of December 31, 2018 and 2017. Common stock equity. ASB is regulated and supervised by the OCC. Failure to meet minimum capital requirements can initiate certain mandatory and possibly additional discretionary actions by regulators that, if undertaken, could have a direct material effect on ASB’s financial statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, ASB must meet specific capital guidelines that involve quantitative measures of ASB’s assets, liabilities, and certain off-balance sheet items as calculated under regulatory accounting practices. The capital amounts and classification are also subject to qualitative judgments by the regulators about components, risk weightings, and other factors. The prompt corrective action provisions impose certain restrictions on institutions that are undercapitalized. The restrictions imposed become increasingly more severe as an institution’s capital category declines from “undercapitalized” to “critically undercapitalized.” The regulators have substantial discretion in the corrective actions that might direct and could include restrictions on dividends and other distributions that ASB may make to ASB Hawaii and the requirement that ASB develop and implement a plan to restore its capital. 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, 2018, as a result of capital contributions in prior years, HEI’s maximum obligation to contribute additional capital under the Capital Maintenance Agreement has been reduced to approximately $28.3 million. To be categorized as “well capitalized,” ASB must maintain minimum total capital, Tier 1 capital, and Tier 1 leverage ratios as set forth in the table below. As of December 31, 2018, and 2017 ASB was in compliance with the minimum capital requirements under OCC regulations, and was categorized as “well capitalized” under the regulatory framework for prompt corrective action. There are no conditions or events that management believes have changed the institution’s category under the capital guidelines. The tables below set forth actual and minimum required capital amounts and ratios:
| Actual |  | Minimum required |  | Required to be well capitalized
(dollars in thousands) | Capital |  | Ratio |  | Capital |  | Ratio |  | Capital |  | Ratio
December 31, 2018 |  |  |  |  |  |  |  |  |  |  |
Tier 1 leverage | 606,291 |  |  | 8.70 | % |  | 278,811 |  |  | 4.00 | % |  | 348,514 |  |  | 5.00 | %
Common equity tier 1 | 606,291 |  |  | 12.80 | % |  | 213,190 |  |  | 4.50 | % |  | 307,941 |  |  | 6.50 | %
Tier 1 capital | 606,291 |  |  | 12.80 | % |  | 284,253 |  |  | 6.00 | % |  | 379,004 |  |  | 8.00 | %
Total capital | 660,151 |  |  | 13.93 | % |  | 379,004 |  |  | 8.00 | % |  | 473,755 |  |  | 10.00 | %
December 31, 2017 |  |  |  |  |  |  |  |  |  |  |
Tier 1 leverage | 571,810 |  |  | 8.58 | % |  | 266,430 |  |  | 4.00 | % |  | 333,038 |  |  | 5.00 | %
Common equity tier 1 | 571,810 |  |  | 12.95 | % |  | 198,628 |  |  | 4.50 | % |  | 286,907 |  |  | 6.50 | %
Tier 1 capital | 571,810 |  |  | 12.95 | % |  | 264,838 |  |  | 6.00 | % |  | 353,117 |  |  | 8.00 | %
Total capital | 626,987 |  |  | 14.20 | % |  | 353,117 |  |  | 8.00 | % |  | 441,396 |  |  | 10.00 | %
In 2018, ASB paid cash dividends of $50.0 million to HEI, compared to cash dividends of $37.5 million in 2017. The FRB and OCC approved the dividends. Related-party transactions. HEI charged ASB $2.2 million, $2.1 million and $2.3 million for general management and administrative services in 2018, 2017 and 2016, respectively. The amounts charged by HEI for services performed by HEI employees to its subsidiaries are allocated primarily on the basis of time expended in providing such services. All amounts charged to ASB were settled as a capital contribution by HEI to ASB. Derivative financial instruments. ASB enters into interest rate lock commitments (IRLCs) with borrowers, and forward commitments to sell loans or to-be-announced mortgage-backed securities to investors to hedge against the inherent interest rate and pricing risks associated with selling loans. ASB enters into IRLCs for residential mortgage loans, which commit ASB to lend funds to a potential borrower at a specific interest rate and within a specified period of time. IRLCs that relate to the origination of mortgage loans that will be held for sale are considered derivative financial instruments under applicable accounting guidance. Outstanding IRLCs expose ASB to the risk that the price of the mortgage loans underlying the commitments may decline due to increases in mortgage interest rates from inception of the rate lock to the funding of the loan. The IRLCs are free-standing derivatives which are carried at fair value with changes recorded in mortgage banking income. ASB enters into forward commitments to hedge the interest rate risk for rate locked mortgage applications in process and closed mortgage loans held for sale. These commitments are primarily forward sales of to-be-announced mortgage backed securities. Generally, when mortgage loans are closed, the forward commitment is liquidated and replaced with a mandatory delivery forward sale of the mortgage to a secondary market investor. In some cases, a best-efforts forward sale agreement is utilized as the forward commitment. These commitments are free-standing derivatives which are carried at fair value with changes recorded in mortgage banking income. Changes in the fair value of IRLCs and forward commitments subsequent to inception are based on changes in the fair value of the underlying loan resulting from the fulfillment of the commitment and changes in the probability that the loan will fund within the terms of the commitment, which is affected primarily by changes in interest rates and the passage of time. The notional amount and fair value of ASB’s derivative financial instruments were as follows:
December 31 | 2018 |  | 2017
(in thousands) | Notional amount |  | Fair value |  | Notional amount |  | Fair value
Interest rate lock commitments | $ | 10,180 |  |  | $ | 91 |  |  | $ | 13,669 |  |  | $ | 131 |
Forward commitments | 10,132 |  |  | (43 | ) |  | 14,465 |  |  | (24 | )
ASB’s derivative financial instruments, their fair values, and balance sheet location were as follows:
Derivative Financial Instruments Not Designated |  |  |  |  |  |  |
as Hedging Instruments 1 |  |  |  |  |  |  |
December 31 | 2018 |  | 2017
(in thousands) | Asset derivatives |  | Liability derivatives |  | Asset derivatives |  | Liability derivatives
Interest rate lock commitments | $ | 91 |  |  | $ | — |  |  | $ | 133 |  |  | $ | 2 |
Forward commitments | — |  |  | 43 |  |  | 4 |  |  | 28 |
| $ | 91 |  |  | $ | 43 |  |  | $ | 137 |  |  | $ | 30 |
1 Asset derivatives are included in other assets and liability derivatives are included in other liabilities in the balance sheets. 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 | Location of net gains |  |  |  |  |  |
as Hedging Instruments | (losses) recognized in |  | Years ended December 31
(in thousands) | the Statements of Income |  | 2018 |  | 2017 |  | 2016
Interest rate lock commitments | Mortgage banking income |  | $ | (40 | ) |  | $ | (290 | ) |  | $ | 37 |
Forward commitments | Mortgage banking income |  | (19 | ) |  | 153 |  |  | (148 | )
|  |  | $ | (59 | ) |  | $ | (137 | ) |  | $ | (111 | )
Commitments. 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 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. 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. The following is a summary of outstanding off-balance sheet arrangements:
December 31 | 2018 |  |  | 2017 |
(in thousands) |  |  |
Unfunded commitments to extend credit: |  |  |  |
Home equity line of credit | $ | 1,242,804 |  |  | $ | 1,214,103 |
Commercial and commercial real estate | 515,058 |  |  | 466,510 |
Consumer | 70,292 |  |  | 68,053 |
Residential 1-4 family | 17,552 |  |  | 18,635 |
Commercial and financial standby letters of credit | 13,340 |  |  | 13,136 |
Total | $ | 1,859,046 |  |  | $ | 1,780,437 |
Contingency. 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. In November 2012, a federal judge granted preliminary approval to a proposed settlement between merchants and Visa over credit card fees and in December 2013, a federal judge granted final approval to the settlement. Some merchants and trade organizations filed a notice of appeal shortly after the approval was issued. As of December 31, 2018, ASB had accrued a reserve of $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 assessment. In February 2011, the Federal Deposit Insurance Corporation (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. As of June 30, 2016, the deposit insurance fund surpassed a target of 1.15 percent of estimated insured deposits that triggered important changes in the FDIC assessments for all banks. The changes took effect for premiums billed and paid in December 2016. Banks with less than $10 billion in assets saw their overall schedule decline by two basis points for banks paying the lowest premiums and up to five points for those at the top end of the assessment scale. In addition, a new formula for calculating risk-based assessment rates is now in effect. For the years ended December 31, 2018, 2017 and 2016 ASB’s FDIC insurance assessments were $2.5 million, $2.6 million and $3.2 million, respectively. The FDIC may impose 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.

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