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Bank segment (HEI only)

12 Months Ended

Dec. 31, 2023


Note 5 · Bank segment (HEI only)

Selected financial information

American Savings Bank, F.S.B.

Statements of Income and Comprehensive Income Data


Years ended December 31	2023		2022		2021
(in thousands)
Interest and dividend income
Interest and fees on loans	$	276,688	$	207,830	$	198,802
Interest and dividends on investment securities	58,095		58,044		43,464
Total interest and dividend income	334,783		265,874		242,266
Interest expense
Interest on deposit liabilities	48,905		7,327		4,981
Interest on other borrowings	33,892		5,974		59
Total interest expense	82,797		13,301		5,040
Net interest income	251,986		252,573		237,226
Provision for credit losses	10,357		2,037		(25,825)
Net interest income after provision for credit losses	241,629		250,536		263,051
Noninterest income
Fees from other financial services	19,034		19,830		21,225
Fee income on deposit liabilities	19,131		18,762		16,663
Fee income on other financial products	10,616		10,291		8,770
Bank-owned life insurance	7,390		2,533		7,318
Mortgage banking income	910		1,692		9,305
Gain on sale of real estate	495		1,778		—
Gain (loss) on sale of investment securities, net	(14,965)		—		528
Other income, net	2,799		2,086		851
Total noninterest income	45,410		56,972		64,660
Noninterest expense
Compensation and employee benefits	118,297		113,839		113,970
Occupancy	21,703		24,026		20,584
Data processing	20,545		17,681		17,634
Services	13,943		10,679		10,327
Equipment	11,842		10,100		9,510
Office supplies, printing and postage	4,315		4,398		4,239
Marketing	4,001		3,968		3,870
FDIC insurance	6,230		3,591		3,235
Other expense	22,762		16,985		13,783
Total noninterest expense	223,638		205,267		197,152
Income before income taxes	63,401		102,241		130,559
Income taxes	10,039		22,252		29,325
Net income	53,362		79,989		101,234
Other comprehensive income (loss), net of taxes	44,343		(298,833)		(52,728)
Comprehensive income (loss)	$	97,705	$	(218,844)	$	48,506

Reconciliation to amounts per HEI Consolidated Statements of Income*:


Years ended December 31	2023		2022		2021
(in thousands)
Interest and dividend income	$	334,783	$	265,874	$	242,266
Noninterest income	45,410		56,972		64,660
Less: Gain on sale of real estate	495		1,778		—
Less: Loss on sale of investment securities, net	(14,965)		—		528
*Revenues-Bank	394,663		321,068		306,398
Total interest expense	82,797		13,301		5,040
Provision for credit losses	10,357		2,037		(25,825)
Noninterest expense	223,638		205,267		197,152
Less: Retirement defined benefits expense (credit)—other than service costs	(754)		(723)		(1,828)
Add: Gain on sale of real estate	495		1,778		—
*Expenses-Bank	317,051		219,550		178,195
*Operating income-Bank	77,612		101,518		128,203
Add back: Retirement defined benefits expense (credit)—other than service costs	(754)		(723)		(1,828)
Add back: Loss on sale of investment securities, net	(14,965)		—		528
Income before income taxes	$	63,401	$	102,241	$	130,559

Balance Sheets Data


December 31			2023				2022
(in thousands)
Assets
Cash and due from banks			$	184,383			$	153,042
Interest-bearing deposits			251,072				3,107
Cash and cash equivalents			435,455				156,149
Investment securities
Available-for-sale, at fair value			1,136,439				1,429,667
Held-to-maturity, at amortized cost (fair value of $1,103,668 and $1,150,971 at December 31, 2023 and 2022, respectively)			1,201,314				1,251,747
Stock in Federal Home Loan Bank, at cost			14,728				26,560
Loans held for investment			6,180,810				5,978,906
Allowance for credit losses			(74,372)				(72,216)
Net loans			6,106,438				5,906,690
Loans held for sale, at lower of cost or fair value			15,168				824
Other			681,460				692,143
Goodwill			82,190				82,190
Total assets			$	9,673,192			$	9,545,970
Liabilities and shareholder’s equity
Deposit liabilities–noninterest-bearing			$	2,599,762			$	2,811,077
Deposit liabilities–interest-bearing			5,546,016				5,358,619
Other borrowings			750,000				695,120
Other			247,563				212,269
Total liabilities			9,143,341				9,077,085
Commitments and contingencies
Common stock			1				1
Additional paid in capital			358,067				355,806
Retained earnings			464,055				449,693
Accumulated other comprehensive loss, net of tax benefits
Net unrealized losses on securities	$	(282,963)			$	(328,904)
Retirement benefit plans	(9,309)		(292,272)		(7,711)		(336,615)
Total shareholder’s equity			529,851				468,885
Total liabilities and shareholder’s equity			$	9,673,192			$	9,545,970


December 31	2023		2022
(in thousands)
Other assets
Bank-owned life insurance	$	187,857	$	182,986
Premises and equipment, net	187,042		195,324
Accrued interest receivable	28,472		25,077
Mortgage servicing rights	8,169		9,047
Low-income housing investments	112,234		106,978

Deferred tax asset	104,292		116,441

Other	53,394		56,290
	$	681,460	$	692,143
Other liabilities
Accrued expenses	$	115,231	$	97,295
Federal income taxes payable	—		863
Cashier’s checks	40,479		36,401
Advance payments by borrowers	10,107		9,637
Other	81,746		68,073
	$	247,563	$	212,269

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.

Investment securities. The major components of investment securities were as follows:


									Gross unrealized losses
			Gross unrealized gains		Gross unrealized losses		Estimated fair value		Less than 12 months					12 months or longer
(dollars in thousands)	Amortized cost								Number of issues	Fair value		Amount		Number of issues	Fair value		Amount
December 31, 2023
Available-for-sale
U.S. Treasury and federal agency obligations	$	12,437	$	—	$	(427)	$	12,010	—	$	—	$	—	9	$	12,010	$	(427)
Mortgage-backed securities*	1,279,852		—		(202,684)		1,077,168		3	1,649		(22)		116	1,075,519		(202,662)
Corporate bonds	35,239		—		(2,336)		32,903		—	—		—		3	32,903		(2,336)
Mortgage revenue bonds	14,358		—		—		14,358		—	—		—		—	—		—
	$	1,341,886	$	—	$	(205,447)	$	1,136,439	3	$	1,649	$	(22)	128	$	1,120,432	$	(205,425)
Held-to-maturity
U.S. Treasury and federal agency obligations	$	59,917	$	—	$	(7,135)	$	52,782	—	$	—	$	—	3	$	52,782	$	(7,135)
Mortgage-backed securities*	1,141,397		2,221		(92,732)		1,050,886		37	378,326		(7,610)		43	432,082		(85,122)
	$	1,201,314	$	2,221	$	(99,867)	$	1,103,668	37	$	378,326	$	(7,610)	46	$	484,864	$	(92,257)
December 31, 2022
Available-for-sale
U.S. Treasury and federal agency obligations	$	88,344	$	—	$	(7,281)	$	81,063	12	$	41,201	$	(2,120)	4	$	39,862	$	(5,161)
Mortgage-backed securities*	1,530,582		—		(237,614)		1,292,968		113	455,836		(56,999)		70	837,132		(180,615)
Corporate bonds	44,377		—		(3,643)		40,734		4	29,644		(2,028)		1	11,090		(1,615)
Mortgage revenue bonds	14,902		—		—		14,902		—	—		—		—	—		—
	$	1,678,205	$	—	$	(248,538)	$	1,429,667	129	$	526,681	$	(61,147)	75	$	888,084	$	(187,391)
Held-to-maturity
U.S. Treasury and federal agency obligations	$	59,894	$	—	$	(8,478)	$	51,416	1	$	16,874	$	(3,222)	2	$	34,542	$	(5,256)
Mortgage-backed securities*	1,191,853		2,670		(94,968)		1,099,555		22	183,629		(10,593)		51	567,250		(84,375)
	$	1,251,747	$	2,670	$	(103,446)	$	1,150,971	23	$	200,503	$	(13,815)	53	$	601,792	$	(89,631)

* Issued or guaranteed by U.S. Government agencies or sponsored agencies

ASB does not believe that the investment securities that were in an unrealized loss position as of December 31, 2023, represent a credit loss. 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 rated 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’s investment securities portfolio did not require an allowance for credit losses as of December 31, 2023.

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, 2023	Cost		value
(in thousands)
Available-for-sale
Due in one year or less	$	1,419	$	1,404
Due after one year through five years	46,257		43,509
Due after five years through ten years	14,358		14,358
Due after ten years	—		—
	62,034		59,271
Mortgage-backed securities — issued or guaranteed by U.S. Government agencies or sponsored agencies	1,279,852		1,077,168
Total available-for-sale securities	$	1,341,886	$	1,136,439
Held-to-maturity
Due in one year or less	$	—	$	—
Due after one year through five years	39,832		35,597
Due after five years through ten years	20,085		17,185
Due after ten years	—		—
	59,917		52,782
Mortgage-backed securities — issued or guaranteed by U.S. Government agencies or sponsored agencies	1,141,397		1,050,886
Total held-to-maturity securities	$	1,201,314	$	1,103,668

The proceeds, gross gains and losses from sales of available-for-sale securities were as follows:


Years ended December 31	2023		2022		2021
(in thousands)
Proceeds	$	170,481	$	—	$	197,354
Gross gains	—		—		975
Gross losses	(14,965)		—		(447)
Tax expense (benefit) on realized gains (losses)	(4,011)		—		142

Interest income from taxable and non-taxable investment securities were as follows:


Years ended December 31	2023		2022		2021
(in thousands)
Taxable	$	56,450	$	56,731	$	42,534
Non-taxable	1,645		1,313		930
	$	58,095	$	58,044	$	43,464

ASB pledged securities with a market value of approximately $1.7 billion and $0.9 billion as of December 31, 2023 and 2022, respectively, as collateral for public funds and other deposits, mortgage pipeline hedge margin, automated clearinghouse transactions, the Federal Reserve Bank of San Francisco discount window and bankruptcy account, and the Federal Home Loan Bank of Des Moines advance line. In addition, ASB pledged securities with a market value of nil and $327 million as of December 31, 2023 and 2022, respectively, as collateral for securities sold under agreements to repurchase.

Transfer of available-for-sale securities to held-to-maturity. In October 2022, ASB transferred 66 available-for-sale investment securities with a fair value of $755 million to the held-to-maturity category. On the date of transfer, these securities had a total unrealized loss of $206 million, which will be amortized from accumulated other comprehensive loss over the remaining life of the securities to Interest and dividends on investment securities in the statements of income and comprehensive income data. The unamortized amount was $133 million at December 31, 2023.

These transfers were executed to mitigate the potential future impact to capital through accumulated other comprehensive loss and the impact of rising rates on the market value of the investment securities. ASB believes that it maintains sufficient liquidity for future business needs and it has the positive intent and ability to hold these securities to maturity.

Stock in FHLB. As of December 31, 2023 and 2022, ASB’s stock in FHLB was carried at cost ($14.7 million and $26.6 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 credit losses as of December 31, 2023, consistent with its accounting policy. ASB did not recognize any credit losses for 2023, 2022 and 2021 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	2023		2022
(in thousands)
Real estate:
Residential 1-4 family	$	2,595,162	$	2,479,637
Commercial real estate	1,374,038		1,358,123
Home equity line of credit	1,017,207		1,002,905
Residential land	18,364		20,679
Commercial construction	172,405		88,489
Residential construction	17,843		20,788
Total real estate	5,195,019		4,970,621
Commercial	743,303		779,691
Consumer	272,256		254,709
Total loans	6,210,578		6,005,021
Less: Deferred fees and discounts	(29,768)		(26,115)
Allowance for credit losses	(74,372)		(72,216)
Total loans, net	$	6,106,438	$	5,906,690

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.

ASB services real estate loans for investors (principal balance of $1.5 billion, $1.5 billion and $1.5 billion as of December 31, 2023, 2022 and 2021, respectively), 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, 2023 and 2022, ASB had pledged loans with an amortized cost of approximately $3.2 billion and $3.0 billion, respectively, as collateral to secure advances from the FHLB.

As of December 31, 2023 and 2022, 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 $23.5 million and $10.7 million, respectively. As of December 31, 2023 and 2022, there were loans to a related interest of a director of ASB totaling $21.6 million and $10.0 million, respectively. The loans were made at ASB’s normal credit terms.

Allowance for credit losses. As discussed in Note 1, ASB must maintain an allowance for credit losses that is adequate to absorb estimated expected credit losses associated with its loan portfolio.

The allowance for credit losses (balances and changes) and financing receivables by portfolio segment 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, 2023
Allowance for credit losses:
Beginning balance	$	6,270		$	21,898		$	6,125		$	717		$	1,195		$	46		$	12,426		$	23,539		$	72,216
Charge-offs	(994)			—			(375)			—			—			—			(723)			(11,227)			(13,319)
Recoveries	89			—			176			4			—			—			1,983			3,566			5,818
Net (charge-offs) recoveries	(905)			—			(199)			4			—			—			1,260			(7,661)			(7,501)
Provision	2,070			287			1,852			(100)			2,408			(3)			(4,564)			7,707			9,657
Ending balance	$	7,435		$	22,185		$	7,778		$	621		$	3,603		$	43		$	9,122		$	23,585		$	74,372
Average loans outstanding	$	2,523,767		$	1,380,924		$	1,030,983		$	20,077		$	127,332		$	17,634		$	754,601		$	258,149		$	6,113,467
Net charge-offs (recoveries) to average loans	0.04		%	—		%	0.02		%	(0.02		%)	—		%	—		%	(0.17		%)	2.97		%	0.12		%






December 31, 2022
Allowance for credit losses:
Beginning balance	$	6,545		$	24,696		$	5,657		$	646		$	2,186		$	18		$	15,798		$	15,584		$	71,130
Charge-offs	(13)			—			—			—			—			—			(563)			(6,254)			(6,830)
Recoveries	79			—			71			104			—			—			1,288			3,837			5,379
Net (charge-offs) recoveries	66			—			71			104			—			—			725			(2,417)			(1,451)
Provision	(341)			(2,798)			397			(33)			(991)			28			(4,097)			10,372			2,537
Ending balance	$	6,270		$	21,898		$	6,125		$	717		$	1,195		$	46		$	12,426		$	23,539		$	72,216
Average loans outstanding	$	2,331,473		$	1,204,756		$	918,563		$	21,442		$	90,021		$	18,317		$	710,658		$	161,722		$	5,456,952
Net charge-offs (recoveries) to average loans	—		%	—		%	(0.01		%)	(0.49		%)	—		%	—		%	(0.10		%)	1.49		%	0.03		%
December 31, 2021
Allowance for credit losses:
Beginning balance	$	4,600		$	35,607		$	6,813		$	609		$	4,149		$	11		$	25,462		$	23,950		$	101,201
Charge-offs	(67)			—			(45)			—			—			—			(1,561)			(8,027)			(9,700)
Recoveries	92			—			113			61			—			—			1,468			4,320			6,054
Net (charge-offs) recoveries	25			—			68			61			—			—			(93)			(3,707)			(3,646)
Provision	1,920			(10,911)			(1,224)			(24)			(1,963)			7			(9,571)			(4,659)			(26,425)
Ending balance	$	6,545		$	24,696		$	5,657		$	646		$	2,186		$	18		$	15,798		$	15,584		$	71,130
Average loans outstanding	$	2,155,322		$	1,046,276		$	885,759		$	18,227		$	111,711		$	11,361		$	856,226		$	135,609		$	5,220,491
Net charge-offs (recoveries) to average loans	—		%	—		%	(0.01		%)	(0.33		%)	—		%	—		%	0.01		%	2.73		%	0.07		%

Allowance for loan commitments. The allowance for loan commitments by portfolio segment were as follows:


(in thousands)	Home equity line of credit		Commercial construction		Commercial loans		Total
Year ended December 31, 2023
Allowance for loan commitments:
Beginning balance	$	400	$	2,600	$	1,400	$	4,400
Provision	200		1,700		(1,200)		700
Ending balance	$	600	$	4,300	$	200	$	5,100

Year ended December 31, 2022
Allowance for loan commitments:
Beginning balance	$	400	$	3,700	$	800	$	4,900
Provision	—		(1,100)		600		(500)
Ending balance	$	400	$	2,600	$	1,400	$	4,400

Year ended December 31, 2021
Allowance for loan commitments:
Beginning balance	$	300	$	3,000	$	1,000	$	4,300
Provision	100		700		(200)		600
Ending balance	$	400	$	3,700	$	800	$	4,900

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 ASB 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 vintage date based on payment activity or internally assigned grade for loans was as follows:


	Term loans by origination year												Revolving loans
(in thousands)	2023		2022		2021		2020		2019		Prior		Revolving loans		Converted to term loans		Total
December 31, 2023
Residential 1-4 family
Current	$	263,605	$	407,304	$	729,256	$	399,766	$	104,487	$	672,408	$	—	$	—	$	2,576,826
30-59 days past due	—		708		—		268		—		3,525		—		—		4,501
60-89 days past due	—		726		2,694		—		—		1,745		—		—		5,165
Greater than 89 days past due	—		2,519		871		1,129		489		3,662		—		—		8,670
	263,605		411,257		732,821		401,163		104,976		681,340		—		—		2,595,162
Current YTD period
Gross charge-offs	—		—		—		—		—		994		—		—		994
Home equity line of credit
Current	—		—		—		—		—		—		954,461		59,146		1,013,607
30-59 days past due	—		—		—		—		—		—		1,219		262		1,481
60-89 days past due	—		—		—		—		—		—		597		—		597
Greater than 89 days past due	—		—		—		—		—		—		1,111		411		1,522
	—		—		—		—		—		—		957,388		59,819		1,017,207


	Term loans by origination year												Revolving loans
(in thousands)	2023		2022		2021		2020		2019		Prior		Revolving loans		Converted to term loans		Total
Current YTD period
Gross charge-offs	—		—		—		—		—		—		92		283		375
Residential land
Current	3,788		4,097		7,234		1,847		—		723		—		—		17,689
30-59 days past due	—		—		—		—		—		—		—		—		—
60-89 days past due	—		675		—		—		—		—		—		—		675
Greater than 89 days past due	—		—		—		—		—		—		—		—		—
	3,788		4,772		7,234		1,847		—		723		—		—		18,364
Current YTD period
Gross charge-offs	—		—		—		—		—		—		—		—		—
Residential construction
Current	5,369		10,984		1,490		—		—		—		—		—		17,843
30-59 days past due	—		—		—		—		—		—		—		—		—
60-89 days past due	—		—		—		—		—		—		—		—		—
Greater than 89 days past due	—		—		—		—		—		—		—		—		—
	5,369		10,984		1,490		—		—		—		—		—		17,843
Current YTD period
Gross charge-offs	—		—		—		—		—		—		—		—		—
Consumer
Current	87,686		153,239		9,852		1,654		451		200		10,663		2,779		266,524
30-59 days past due	805		1,314		176		29		24		—		56		163		2,567
60-89 days past due	385		886		114		41		21		—		60		69		1,576
Greater than 89 days past due	354		786		101		24		34		—		67		223		1,589
	89,230		156,225		10,243		1,748		530		200		10,846		3,234		272,256
Current YTD period
Gross charge-offs	2,139		6,539		1,032		194		378		40		422		483		11,227
Commercial real estate
Pass	104,368		384,144		180,986		267,458		65,625		307,367		15,482		—		1,325,430
Special Mention	—		1,975		11,159		—		14,110		3,008		—		—		30,252
Substandard	—		—		1,538		—		11,048		5,770		—		—		18,356
Doubtful	—		—		—		—		—		—		—		—		—
	104,368		386,119		193,683		267,458		90,783		316,145		15,482		—		1,374,038
Current YTD period
Gross charge-offs	—		—		—		—		—		—		—		—		—
Commercial construction
Pass	45,863		33,240		26,133		1,333		—		—		65,836		—		172,405
Special Mention	—		—		—		—		—		—		—		—		—
Substandard	—		—		—		—		—		—		—		—		—
Doubtful	—		—		—		—		—		—		—		—		—
	45,863		33,240		26,133		1,333		—		—		65,836		—		172,405
Current YTD period
Gross charge-offs	—		—		—		—		—		—		—		—		—
Commercial
Pass	124,667		199,796		106,669		73,976		37,580		80,012		87,206		6,250		716,156
Special Mention	1,860		6,989		951		—		250		—		7,352		—		17,402
Substandard	—		2,962		1,848		98		60		3,369		1,275		133		9,745
Doubtful	—		—		—		—		—		—		—		—		—
	126,527		209,747		109,468		74,074		37,890		83,381		95,833		6,383		743,303
Current YTD period
Gross charge-offs	$	—	$	—	$	51	$	—	$	—	$	—	$	332	$	340	$	723
Total loans	$	638,750	$	1,212,344	$	1,081,072	$	747,623	$	234,179	$	1,081,789	$	1,145,385	$	69,436	$	6,210,578


	Term loans by origination year												Revolving loans
(in thousands)	2022		2021		2020		2019		2018		Prior		Revolving loans		Converted to term loans		Total
December 31, 2022
Residential 1-4 family
Current	$	432,707	$	755,056	$	423,455	$	113,096	$	51,860	$	698,354	$	—	$	—	$	2,474,528
30-59 days past due	—		—		—		—		448		1,098		—		—		1,546
60-89 days past due	—		—		268		—		—		90		—		—		358
Greater than 89 days past due	—		—		—		—		809		2,396		—		—		3,205
	432,707		755,056		423,723		113,096		53,117		701,938		—		—		2,479,637
Home equity line of credit
Current	—		—		—		—		—		—		959,131		40,814		999,945
30-59 days past due	—		—		—		—		—		—		1,103		209		1,312
60-89 days past due	—		—		—		—		—		—		209		226		435
Greater than 89 days past due	—		—		—		—		—		—		587		626		1,213
	—		—		—		—		—		—		961,030		41,875		1,002,905
Residential land
Current	5,245		9,010		5,222		203		522		477		—		—		20,679
30-59 days past due	—		—		—		—		—		—		—		—		—
60-89 days past due	—		—		—		—		—		—		—		—		—
Greater than 89 days past due	—		—		—		—		—		—		—		—		—
	5,245		9,010		5,222		203		522		477		—		—		20,679
Residential construction
Current	7,986		11,624		1,178		—		—		—		—		—		20,788
30-59 days past due	—		—		—		—		—		—		—		—		—
60-89 days past due	—		—		—		—		—		—		—		—		—
Greater than 89 days past due	—		—		—		—		—		—		—		—		—
	7,986		11,624		1,178		—		—		—		—		—		20,788
Consumer
Current	199,574		21,330		5,543		7,580		527		140		10,810		4,782		250,286
30-59 days past due	1,110		287		65		239		30		—		81		167		1,979
60-89 days past due	756		163		88		137		19		—		45		107		1,315
Greater than 89 days past due	621		105		37		176		28		—		20		142		1,129
	202,061		21,885		5,733		8,132		604		140		10,956		5,198		254,709
Commercial real estate
Pass	390,206		177,130		283,321		51,542		63,084		278,280		8,235		—		1,251,798
Special Mention	—		11,250		3,446		40,423		—		24,466		—		—		79,585
Substandard	—		—		665		11,357		—		14,718		—		—		26,740
Doubtful	—		—		—		—		—		—		—		—		—
	390,206		188,380		287,432		103,322		63,084		317,464		8,235		—		1,358,123
Commercial construction
Pass	15,094		47,478		44		—		—		—		25,873		—		88,489
Special Mention	—		—		—		—		—		—		—		—		—
Substandard	—		—		—		—		—		—		—		—		—
Doubtful	—		—		—		—		—		—		—		—		—
	15,094		47,478		44		—		—		—		25,873		—		88,489
Commercial
Pass	239,852		185,013		85,220		68,161		46,142		53,192		60,871		13,964		752,415
Special Mention	—		—		—		2,374		—		645		9,005		8		12,032
Substandard	3,322		2,305		401		1,304		1,346		3,849		1,664		1,053		15,244
Doubtful	—		—		—		—		—		—		—		—		—
	243,174		187,318		85,621		71,839		47,488		57,686		71,540		15,025		779,691
Total loans	$	1,296,473	$	1,220,751	$	808,953	$	296,592	$	164,815	$	1,077,705	$	1,077,634	$	62,098	$	6,005,021

Revolving loans converted to term loans during 2023 in the commercial, home equity line of credit and consumer portfolios were $2.8 million, $26.4 million and $1.1 million, respectively.

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, 2023
Real estate:
Residential 1-4 family	$	4,501	$	5,165	$	8,670	$	18,336	$	2,576,826	$	2,595,162	$	425
Commercial real estate	—		—		11,048		11,048		1,362,990		1,374,038		—
Home equity line of credit	1,481		597		1,522		3,600		1,013,607		1,017,207		—
Residential land	—		675		—		675		17,689		18,364		—
Commercial construction	—		—		—		—		172,405		172,405		—
Residential construction	—		—		—		—		17,843		17,843		—
Commercial	163		135		244		542		742,761		743,303		—
Consumer	2,567		1,576		1,589		5,732		266,524		272,256		—
Total loans	$	8,712	$	8,148	$	23,073	$	39,933	$	6,170,645	$	6,210,578	$	425
December 31, 2022
Real estate:
Residential 1-4 family	$	1,546	$	358	$	3,205	$	5,109	$	2,474,528	$	2,479,637	$	—
Commercial real estate	508		217		—		725		1,357,398		1,358,123		—
Home equity line of credit	1,312		435		1,213		2,960		999,945		1,002,905		—
Residential land	—		—		—		—		20,679		20,679		—
Commercial construction	—		—		—		—		88,489		88,489		—
Residential construction	—		—		—		—		20,788		20,788		—
Commercial	614		18		77		709		778,982		779,691		—
Consumer	1,979		1,315		1,129		4,423		250,286		254,709		—
Total loans	$	5,959	$	2,343	$	5,624	$	13,926	$	5,991,095	$	6,005,021	$	—

The credit risk profile based on nonaccrual loans were as follows:


	December 31, 2023						December 31, 2022
(in thousands)	With a related ACL		Without a related ACL		Total		With a related ACL		Without a related ACL		Total
Real estate:
Residential 1-4 family	$	7,755	$	2,190	$	9,945	$	4,198	$	2,981	$	7,179
Commercial real estate	11,048		—		11,048		—		—		—
Home equity line of credit	2,626		1,135		3,761		3,654		1,442		5,096
Residential land	780		—		780		420		—		420
Commercial construction	—		—		—		—		—		—
Residential construction	—		—		—		—		—		—
Commercial	133		301		434		2,183		—		2,183
Consumer	2,458		—		2,458		1,588		—		1,588
Total	$	24,800	$	3,626	$	28,426	$	12,043	$	4,423	$	16,466

ASB did not recognize interest on nonaccrual loans for 2023, 2022 and 2021.

Modifications Made to Borrowers Experiencing Financial Difficulty. The allowance for credit losses incorporates an estimate of lifetime expected credit losses and is recorded on each asset upon origination. The starting point for the estimate of the allowance for credit losses is historical loan information, which includes losses from modifications of receivables to borrowers experiencing financial difficulty. ASB uses a probability of default/loss given default model to determine the allowance for credit losses. An assessment of whether a borrower is experiencing financial difficulty is made at the time of the modification.

Because the effect of most modifications made to borrowers experiencing financial difficulty is already included in the allowance for credit losses, a change to the allowance for credit losses is generally not recorded upon modification.

Modifications may include interest rate reductions, interest only payments for an extended period of time, protracted terms such as amortization and maturity beyond the customary length of time found in the normal marketplace, and other actions intended to minimize economic loss and to provide alternatives to foreclosure or repossession of collateral.

During 2023, no loans received a material modification based on borrower financial difficulty.

Troubled debt restructurings. Prior to January 1, 2023, a loan modification was deemed to be a TDR when the borrower was determined to be experiencing financial difficulties and ASB granted a concession it would not have otherwise considered. With the adoption of ASU No. 2022-02, accounting guidance for TDRs by creditors was eliminated. Loan refinancing and restructuring guidance was applied to determine whether a modification resulted in a new loan or a continuation of an existing loan. The disclosures below relate to TDRs for prior periods in accordance with Subtopic 310-40, Receivables-Troubled Debt Restructurings by Creditors.

When a borrower who was experiencing financial difficulty failed to make a required payment on a loan or was in imminent default, ASB took a number of steps to improve the collectability of the loan and maximize the likelihood of full repayment. At times, ASB may have modified or restructured a loan to help a distressed borrower improve its financial position to eventually be able to fully repay the loan, provided the borrower had demonstrated both the willingness and the ability to fulfill the modified terms. TDR loans were considered an alternative to foreclosure or liquidation with the goal of minimizing losses to ASB and maximizing recovery.

ASB may have considered 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 granted principal forgiveness in its TDR modifications. Residential loan TDR modifications generally involved interest rate reduction, extending the amortization period, or capitalizing certain delinquent amounts owed not to exceed the original loan balance. Land loan TDR modifications typically involved extending the maturity date up to three years and converting the payments from interest-only to principal and interest monthly, at the same or higher interest rate. Commercial loan TDR modifications generally involved extensions of maturity dates, extending the interest only or amortization period, and temporary deferral or reduction of principal payments. ASB generally did not reduce the interest rate on commercial loan TDR modifications. Occasionally, additional collateral and/or guaranties were obtained.

The allowance for credit losses on TDR loans that did not share risk characteristics were individually evaluated based on the present value of expected future cash flows discounted at the loan’s effective original contractual rate or based on the fair value of collateral less cost to sell. The financial impact of the estimated loss was an increase to the allowance associated with the modified loan. When available information confirmed that specific loans or portions thereof are uncollectible (confirmed losses), those amounts were charged off against the allowance for credit losses.

The credit risk profile based on loans whose terms have been modified and accruing interest were as follows:


(in thousands)	December 31, 2022
Real estate:
Residential 1-4 family	$	8,821
Commercial real estate	9,477
Home equity line of credit	4,404
Residential land	782
Commercial construction	—
Residential construction	—
Commercial	6,596
Consumer	50
Total troubled debt restructured loans accruing interest	$	30,130

Loan modifications that occurred during 2022 and 2021 were as follows:



(dollars in thousands)	Number of contracts	Outstanding recorded investment (as of period end)1		Related allowance (as of period end)

Year ended December 31, 2022
Real estate:
Residential 1-4 family	5	$	1,475	$	164
Commercial real estate	—	—		—
Home equity line of credit	—	—		—
Residential land	1	203		42
Commercial construction	—	—		—
Residential construction	—	—		—
Commercial	3	2,634		497
Consumer	—	—		—
	9	$	4,312	$	703
Year ended December 31, 2021
Real estate:
Residential 1-4 family	14	$	8,379	$	442
Commercial real estate	—	—		—
Home equity line of credit	—	—		—
Residential land	3	799		38
Commercial construction	—	—		—
Residential construction	—	—		—
Commercial	7	2,931		205
Consumer	—	—		—
	24	$	12,109	$	685

1 The period end balances reflect all paydowns and charge-offs since the modification period. TDRs fully paid off, charged-off, or foreclosed upon by period end are not included.

Loans modified in TDRs that experienced a payment default of 90 days or more in 2022 and 2021 and for which the payment default occurred within one year of the modification, were as follows:


Years ended December 31	2022			2021
(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	$	474
Commercial real estate	—	—		—	—
Home equity line of credit	—	—		—	—
Residential land	—	—		—	—
Commercial construction	—	—		—	—
Residential construction	—	—		—	—
Commercial	—	—		1	9
Consumer	—	—		—	—
	—	$	—	2	$	483

If a loan modified in a TDR subsequently defaulted, ASB evaluated 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 totaled nil at December 31, 2022.

Collateral-dependent loans. A loan is considered collateral-dependent when the borrower is experiencing financial difficulty and repayment of the loan is expected to be provided substantially through the operation or sale of the collateral.

Loans considered collateral-dependent were as follows:


	December 31, 2023			December 31, 2022
	Amortized cost		Collateral type	Amortized cost		Collateral type
(in thousands)
Real estate:
Residential 1-4 family	$	2,272	Residential real estate property	$	3,959	Residential real estate property
Commercial real estate	11,048		Commercial real estate property	—
Home equity line of credit	1,135		Residential real estate property	1,425		Residential real estate property
Residential land	—			—

Total real estate	14,455			5,384
Commercial	301		Business assets	—
Total	$	14,756		$	5,384

ASB had $3.4 million and $4.2 million of consumer mortgage loans collateralized by residential real estate property that were in the process of foreclosure at December 31, 2023 and 2022, 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 $49.2 million, $136.5 million and $364.8 million of proceeds from the sale of residential mortgages in 2023, 2022, and 2021, respectively, and recognized gains on such sales of $0.9 million, $1.7 million, and $9.3 million in 2023, 2022, and 2021, respectively.

There was one repurchased mortgage loan for 2022 and no repurchased mortgage loans for 2023 and 2021. ASB believes that the current unpaid principal balance of loans sold to date represents the maximum exposure to repurchases and has established a repurchase reserve of $0.1 million as of December 31, 2023 and 2022, to estimate its probable exposure to repurchases.

Mortgage servicing fees, a component of other income, net, were $3.5 million, $3.7 million and $3.8 million for the years ended December 31, 2023, 2022, and 2021, respectively.

Changes in the carrying value of MSRs were as follows:


(in thousands)	Gross carrying amount		Accumulated amortization		Valuation allowance		Net carrying amount
December 31, 2023	$	18,241	$	(10,072)	$	—	$	8,169
December 31, 2022	$	19,544	$	(10,497)	$	—	$	9,047

Changes related to MSRs were as follows:


(in thousands)	2023		2022		2021
Mortgage servicing rights
Balance, January 1	$	9,047	$	9,950	$	10,280
Amount capitalized	423		1,130		3,404
Amortization	(1,301)		(2,033)		(3,734)
Sale of mortgage servicing rights	—		—		—
Other-than-temporary impairment	—		—		—
Carrying amount before valuation allowance, December 31	8,169		9,047		9,950
Valuation allowance for mortgage servicing rights
Balance, January 1	—		—		260
Provision	—		—		(260)
Other-than-temporary impairment	—		—		—
Balance, December 31	—		—		—
Net carrying value of mortgage servicing rights	$	8,169	$	9,047	$	9,950

The estimated aggregate amortization expenses of MSRs for 2024, 2025, 2026, 2027 and 2028 are $1.0 million, $0.9 million, $0.8 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 uses a present value cash flow model 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	2023			2022
(dollars in thousands)
Unpaid principal balance	$	1,402,736		$	1,451,322
Weighted average note rate	3.47		%	3.38		%
Weighted average discount rate	10.00		%	10.00		%
Weighted average prepayment speed	5.71		%	6.56		%

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	2023		2022
(in thousands)
Prepayment rate:
25 basis points adverse rate change	$	(90)	$	(92)
50 basis points adverse rate change	(204)		(214)
Discount rate:
25 basis points adverse rate change	(203)		(182)
50 basis points adverse rate change	(402)		(361)

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	2023				2022
(dollars in thousands)	Weighted-average stated rate		Amount		Weighted-average stated rate		Amount
Savings	0.15	%	$	2,765,175	0.03	%	$	3,198,329
Checking
Interest-bearing	0.85		1,427,225		0.17		1,359,519
Noninterest-bearing	—		1,383,197		—		1,453,937
Commercial checking	—		1,216,565		—		1,357,140
Money market	3.52		289,709		0.82		189,053
Time certificates	3.99		1,063,907		2.39		611,718
	0.85	%	$	8,145,778	0.24	%	$	8,169,696

As of December 31, 2023 and 2022, time certificates of $250,000 or more totaled $348.2 million and $346.9 million, respectively.

The approximate scheduled maturities of time certificates outstanding at December 31, 2023 were as follows:


(in thousands)
2024	$	898,996
2025	136,462
2026	14,405
2027	6,158
2028	5,854
Thereafter	2,032
	$	1,063,907

Overdrawn deposit accounts are classified as loans and totaled $3.9 million and $1.5 million at December 31, 2023 and 2022, respectively.

Interest expense on deposit liabilities by type of deposit was as follows:


Years ended December 31	2023		2022		2021
(in thousands)
Time certificates	$	31,366	$	5,372	$	3,805
Savings	2,367		860		802
Money market	8,669		330		132
Interest-bearing checking	6,503		765		242
	$	48,905	$	7,327	$	4,981

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, 2023	$	—	$	—	$	—
December 31, 2022	281		—		281


	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, 2023	$	—	$	—	$	—




December 31, 2022	281		327		—

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 thousands)	2023			2022			2021
Amount outstanding as of December 31	$	—		$	281,120		$	88,305
Average amount outstanding during the year	62,441			127,170			88,405
Maximum amount outstanding as of any month-end	148,060			284,040			129,665
Weighted-average interest rate as of December 31	—		%	3.02		%	0.02		%
Weighted-average interest rate during the year	3.48		%	0.99		%	0.02		%
Weighted-average remaining days to maturity as of December 31	0			1			1

Securities sold under agreements to repurchase were summarized as follows:


December 31	2023						2022
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	$	—	—	%	$	—	$	281,120	3.02	%	$	326,841
1 to 29 days	—		—	%	—		—		—	%	—
30 to 90 days	—		—	%	—		—		—	%	—
Over 90 days	—		—	%	—		—		—	%	—
	$	—	—	%	$	—	$	281,120	3.02	%	$	326,841

Advances from Federal Home Loan Bank. Outstanding FHLB advances were $200 million and $414 million as of December 31, 2023 and 2022, respectively. 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, investment securities and stock in the FHLB. As of December 31, 2023 and 2022, ASB’s available FHLB borrowing capacity was $1.9 billion, and $1.6 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, 2023 and 2022.

Borrowings from Federal Reserve Bank. In March 2023, the Federal Reserve Bank created the Bank Term Funding Program (BTFP) to provide an additional source of liquidity to eligible depository institutions. The BTFP offers loans up to one year in length that can be prepaid without penalty. The amount that can be borrowed under the BTFP is based upon the par value of securities pledged as collateral to the program. Advances can be requested under the BTFP until March 11, 2024. At December 31, 2023, ASB had $550.0 million of BTFP borrowings at a weighted average fixed rate of 4.37%, collateralized by investment securities with a book value of $804.3 million, maturing in March 2024.

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 they 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, 2023, 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. In addition to OCC oversight, federal law and Federal Reserve Board policy require that HEI, as a savings and loan holding company, serve as a source of financial and managerial strength for any FDIC-insured depository institution that it controls. Accordingly, if ASB were to be in financial distress or to otherwise be viewed by the regulators as in unsatisfactory condition, HEI could be required to provide additional capital or liquidity support or take other action, in support of ASB.

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, 2023, and 2022 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, 2023
Tier 1 leverage	$	759,921	7.68	%	$	395,812	4.00	%	$	494,765	5.00	%
Common equity tier 1	759,921		12.27	%	278,681		4.50	%	402,539		6.50	%
Tier 1 capital	759,921		12.27	%	371,575		6.00	%	495,433		8.00	%
Total capital	828,901		13.38	%	495,433		8.00	%	619,291		10.00	%
December 31, 2022
Tier 1 leverage	750,851		7.78	%	386,265		4.00	%	482,831		5.00	%
Common equity tier 1	750,851		12.15	%	278,076		4.50	%	401,665		6.50	%
Tier 1 capital	750,851		12.15	%	370,767		6.00	%	494,356		8.00	%
Total capital	811,729		13.14	%	494,356		8.00	%	617,946		10.00	%

In 2023, ASB paid cash dividends of $39.0 million to HEI, compared to cash dividends of $42.0 million in 2022. The FRB and OCC approved the dividends.

Related-party transactions. HEI charged ASB $2.3 million, $1.9 million and $2.1 million for general management and administrative services in 2023, 2022 and 2021, 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	2023				2022
(in thousands)	Notional amount		Fair value		Notional amount		Fair value
Interest rate lock commitments	$	6,246	$	86	$	1,720	$	9
Forward commitments	5,500		(18)		1,500		18

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	2023				2022
(in thousands)	Asset derivatives		Liability derivatives		Asset derivatives		Liability derivatives
Interest rate lock commitments	$	86	$	—	$	9	$	—
Forward commitments	—		18		18		—
	$	86	$	18	$	27	$	—

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	2023		2022		2021
Interest rate lock commitments	Mortgage banking income	$	77	$	(629)	$	(3,898)
Forward commitments	Mortgage banking income	(36)		29		489
		$	41	$	(600)	$	(3,409)

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	2023		2022
(in thousands)
Unfunded commitments to extend credit:
Home equity line of credit	$	1,141,891	$	1,264,320
Commercial and commercial real estate	602,973		692,989
Consumer	67,229		85,768
Residential 1-4 family	25,037		20,546
Commercial and financial standby letters of credit	9,359		15,521
Total	$	1,846,489	$	2,079,144

Federal Deposit Insurance Corporation assessment. The Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act) raised the minimum reserve ratio for the Deposit Insurance Fund (DIF) to 1.35 percent. As of June 30, 2020, the Federal Deposit Insurance Corporation (FDIC) DIF reserve ratio fell to 1.30%, below the statutory minimum of 1.35%. The FDIC, as required under the Federal Deposit Insurance Act, established a plan on September 15, 2020 to restore the DIF reserve ratio to meet or exceed the statutory minimum of 1.35% within eight years. On October 18, 2022, the FDIC adopted an amended restoration plan to increase the likelihood that the reserve ratio would be restored to at least 1.35% by September 30, 2028. The FDIC’s amended restoration plan increases the initial base deposit insurance assessment rate schedules uniformly by 2 basis points, beginning in 2023. For the years ended December 31, 2023, 2022 and 2021 ASB’s FDIC insurance expenses were $6.2 million, $3.6 million and $3.2 million, respectively.