The carrying values of short-term financial instruments are deemed to approximate fair values. Such instruments are considered readily convertible to cash and include cash and due from financial institutions, interest-bearing deposits in other financial institutions, accrued interest receivable, the majority of FHLB advances and other short-term borrowings, and accrued interest payable.

The fair value of investment securities is based on market price quotations received from third-party pricing services. The third-party pricing services utilize pricing models supported with timely market data information. Where quoted market prices are not available, fair values are based on quoted market prices of comparable securities.

Fair values of loans are estimated based on discounted cash flows of portfolios of loans with similar financial characteristics including the type of loan, interest terms and repayment history. Fair values are calculated by discounting scheduled cash flows through estimated maturities using estimated market discount rates. Estimated market discount rates are reflective of credit and interest rate risks inherent in the Company’s various loan types and are derived from available market information, as well as specific borrower information. The weighted-average discount rate used in the valuation of loans was 7.44% as of December 31, 2022. In accordance with ASU 2016-01, the fair value of loans are based on the notion of exit price as of December 31, 2022 and 2021.

The fair value of loans classified as held for sale are generally based upon quoted prices for similar assets in active markets, acceptance of firm offer letters with agreed upon purchase prices, discounted cash flow models that take into account market observable assumptions, or independent appraisals of the underlying collateral securing the loans. The fair values of Hawaii and U.S. Mainland construction and commercial real estate loans, if any, are reported net of applicable selling costs on the Company's consolidated balance sheets.

The fair values of deposits with no stated maturity, such as noninterest-bearing demand deposits and interest-bearing demand and savings accounts, are equal to the amount payable on demand. The fair value of time deposits is estimated using discounted cash flow analyses. The fair value of time deposits is estimated by discounting future cash flows using rates currently offered for FHLB advances of similar remaining maturities. The weighted-average discount rate used in the valuation of time deposits was 4.96% as of December 31, 2022.

The fair value of our long-term debt is estimated by discounting scheduled cash flows over the contractual borrowing period at the estimated market rate for similar borrowing arrangements. The weighted-average discount rate used in the valuation of long-term debt was 7.28% as of December 31, 2022.

The fair values of derivative financial instruments are based upon current market values, if available. If there are no relevant comparables, fair values are based on pricing models using current assumptions for interest rate swaps and options.

The fair values of off-balance sheet financial instruments are estimated based on the fees currently charged to enter into similar agreements, taking into account the remaining terms of the agreements and the present creditworthiness of the counterparties, current settlement values or quoted market prices of comparable instruments.

Fair value estimates are made at a specific point in time based on relevant market information and information about the financial instrument. These estimates do not reflect any premium or discount that could result from offering for sale at one time our entire holdings of a particular financial instrument. Because no market exists for a significant portion of our financial instruments, fair value estimates are based on judgments regarding future expected loss experience, current economic conditions, risk characteristics of various financial instruments and other factors. These estimates are subjective in nature and involve uncertainties and matters of significant judgment and therefore cannot be determined with precision. Changes in assumptions could significantly affect the estimates.

Fair value estimates are based on existing on- and off-balance sheet financial instruments without attempting to estimate the value of future business and the value of assets and liabilities that are not considered financial instruments. For example, significant assets and liabilities that are not considered financial assets or liabilities include deferred tax assets and liabilities and premises and equipment.


					Fair Value Measurement Using
(Dollars in thousands)	Carrying Amount		Estimated Fair Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
December 31, 2022
Financial assets:
Cash and due from financial institutions	$	97,150	$	97,150	$	97,150	$	—	$	—
Interest-bearing deposits in other financial institutions	14,894		14,894		14,894		—		—
Investment securities	1,336,677		1,268,574		—		1,261,306		7,268
Loans held for sale	1,105		1,105		—		1,105		—
Loans, net of ACL	5,491,728		5,043,436		—		—		5,043,436

Accrued interest receivable	20,345		20,345		20,345		—		—

Financial liabilities:
Deposits:
Noninterest-bearing deposits	2,092,823		2,092,823		2,092,823		—		—
Interest-bearing demand and savings deposits	3,652,195		3,652,195		3,652,195		—		—
Time deposits	991,205		975,086		—		—		975,086
FHLB advances and other short-term borrowings	5,000		5,000		—		5,000		—
Long-term debt	105,859		93,729		—		—		93,729
Accrued interest payable (included in other liabilities)	4,739		4,739		4,739		—		—


							Fair Value Measurement Using
(Dollars in thousands)	Notional Amount		Carrying Amount		Estimated Fair Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
December 31, 2022
Off-balance sheet financial instruments:
Commitments to extend credit	$	1,328,791	$	—	$	1,270	$	—	$	1,270	$	—
Standby letters of credit and financial guarantees written	5,367		—		80		—		80		—

Derivatives:
Back-to-back swap agreements:
Assets	32,335		4,611		4,611		—		—		4,611
Liabilities	(32,335)		(4,611)		(4,611)		—		—		(4,611)

Forward sale commitments	1,110		8		8		—		8		—
Risk participation agreements	36,835		—		—		—		—		—
Interest rate swap agreements	115,545		5,986		5,986		—		—		5,986


					Fair Value Measurement Using
(Dollars in thousands)	Carrying Amount		Estimated Fair Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
December 31, 2021
Financial assets:
Cash and due from financial institutions	$	81,506	$	81,506	$	81,506	$	—	$	—
Interest-bearing deposits in other financial institutions	247,401		247,401		247,401		—		—
Investment securities	1,631,699		1,631,699		—		1,623,080		8,619
Loans held for sale	3,531		3,531		—		3,531		—
Loans, net of ACL	5,033,552		4,741,379		—		—		4,741,379

Accrued interest receivable	16,709		16,709		16,709		—		—

Financial liabilities:
Deposits:
Noninterest-bearing deposits	2,291,246		2,291,246		2,291,246		—		—
Interest-bearing demand and savings deposits	3,641,180		3,641,180		3,641,180		—		—
Time deposits	706,732		704,645		—		—		704,645

Long-term debt	105,616		94,558		—		—		94,558
Accrued interest payable (included in other liabilities)	1,122		1,122		1,122		—		—


							Fair Value Measurement Using
(Dollars in thousands)	Notional Amount		Carrying Amount		Estimated Fair Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
December 31, 2021
Off-balance sheet financial instruments:
Commitments to extend credit	$	1,266,596	$	—	$	1,347	$	—	$	1,347	$	—
Standby letters of credit and financial guarantees written	6,634		—		100		—		100		—

Derivatives:
Back-to-back swap agreements:
Assets	33,112		435		435		—		—		435
Liabilities	33,112		(435)		(435)		—		—		(435)

Forward sale commitments	3,525		1		1		—		1		—
Risk participation agreements	37,531		(16)		(16)		—		—		(16)

Financial assets and liabilities are grouped at fair value into three levels based on the markets in which the financial assets and liabilities are traded and the reliability of the assumptions used to determine fair value as follows:

•Level 1 — Valuation is based upon quoted prices (unadjusted) for identical assets or liabilities traded in active markets. A quoted price in an active market provides the most reliable evidence of fair value and shall be used to measure fair value whenever available.

•Level 2 — Valuation is based upon quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active, and model-based valuation techniques for which all significant assumptions are observable in the market.

•Level 3 — Valuation is generated from model-based techniques that use significant assumptions not observable in the market. These unobservable assumptions reflect our own estimates of assumptions that market participants would use

Fair values are based on the price that the Company would expect to receive if an asset were sold or pay to transfer a liability in an orderly transaction between market participants at the measurement date. When developing fair value measurements, the use of observable inputs are maximized and the use of unobservable inputs are minimized.

Fair value measurements are used to record adjustments to certain financial assets and liabilities and to determine fair value disclosures. Available-for-sale investment securities and derivatives are recorded at fair value on a recurring basis. From time to time, the Company may be required to record other financial assets at fair value on a nonrecurring basis such as loans held for sale, impaired loans and mortgage servicing rights. These nonrecurring fair value adjustments typically involve application of the lower of cost or fair value accounting or write-downs of individual assets.


			Fair Value at Reporting Date Using
(Dollars in thousands)	Fair Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
December 31, 2022
Available-for-sale investment securities:
Debt securities:
States and political subdivisions	$	135,752	$	—	$	129,168	$	6,584
Corporate securities	30,211		—		30,211		—
U.S. Treasury obligations and direct obligations of U.S Government agencies	25,715		—		25,715		—
Mortgage-backed securities:
Residential - U.S. Government-sponsored entities ("GSEs")	423,803		—		423,803		—
Residential - Non-government sponsored entities ("Non-GSEs")	8,662		—		7,978		684
Commercial - U.S. GSEs and agencies	46,144		—		46,144		—
Commercial - Non-GSEs	1,507		—		1,507		—

Total investment securities	671,794		—		664,526		7,268

Derivatives:

Forward sale commitments	8		—		8		—
Interest rate swap agreements	5,986		—		—		5,986


Total derivatives	5,994		—		8		5,986
Total	$	677,788	$	—	$	664,534	$	13,254


			Fair Value at Reporting Date Using
(Dollars in thousands)	Fair Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
December 31, 2021
Available-for-sale investment securities:
Debt securities:
States and political subdivisions	$	236,828	$	—	$	229,147	$	7,681
Corporate securities	40,646		—		40,646		—
U.S. Treasury obligations and direct obligations of U.S Government agencies	35,334		—		35,334		—
Mortgage-backed securities:
Residential - U.S. Government-sponsored entities ("GSEs")	1,198,816		—		1,198,816		—
Residential - Non-government sponsored entities ("Non-GSEs")	12,213		—		11,275		938
Commercial - U.S. GSEs and agencies	65,849		—		65,849		—
Commercial - Non-GSEs	42,013		—		42,013		—

Total investment securities	1,631,699		—		1,623,080		8,619

Derivatives:
Interest rate lock commitments	1		—		1		—
Forward sale commitments	(16)		—		—		(16)



Total derivatives	(15)		—		1		(16)
Total	$	1,631,684	$	—	$	1,623,081	$	8,603


	Available-For-Sale Debt Securities:
(Dollars in thousands)	States and Political Subdivisions		Residential - Non-Government Agencies		Total
Balance as of December 31, 2020	$	11,337	$	989	$	12,326
Principal payments received	(2,841)		(22)		(2,863)

Unrealized net loss included in other comprehensive loss	(815)		(29)		(844)
Balance as of December 31, 2021	7,681		938		8,619
Principal payments received	(212)		(23)		(235)

Unrealized net loss included in other comprehensive loss	(885)		(231)		(1,116)
Balance as of December 31, 2022	$	6,584	$	684	$	7,268

Within the state and political subdivisions debt securities category, the Company holds two mortgage revenue bonds issued by the City and County of Honolulu with an aggregate fair value of $6.6 million and $7.7 million at December 31, 2022 and 2021, respectively. Within the residential non-government agency available-for-sale debt securities category, the Company holds two mortgage backed bonds issued by Habitat for Humanity with an aggregate fair value of $0.7 million and $0.9 million at December 31, 2022 and 2021, respectively. The Company estimates the aggregate fair value of $7.3 million by using a discounted cash flow model to calculate the present value of estimated future principal and interest payments.

The significant unobservable input used in the fair value measurement of the Company’s mortgage revenue bonds and Habitat for Humanity mortgage backed bonds is the weighted-average discount rate. As of December 31, 2022, the weighted-average discount rate utilized was 6.41%, which was derived by incorporating a credit spread over the FHLB Fixed-Rate Advance curve. Significant increases (decreases) in the weighted-average discount rate could result in a significantly lower (higher) fair value measurement.