Bank segment

9 Months Ended

Sep. 30, 2024

Selected financial information

American Savings Bank, F.S.B.

Statements of Income and Comprehensive Income Data


	Three months ended September 30				Nine months ended September 30
(in thousands)	2024		2023		2024		2023
Interest and dividend income
Interest and fees on loans	$	73,654	$	71,540	$	219,585	$	204,348
Interest and dividends on investment securities	14,001		14,096		42,183		42,508
Total interest and dividend income	87,655		85,636		261,768		246,856
Interest expense
Interest on deposit liabilities	19,018		14,446		54,465		30,944
Interest on other borrowings	6,403		8,598		21,036		25,171
Total interest expense	25,421		23,044		75,501		56,115
Net interest income	62,234		62,592		186,267		190,741
Provision for credit losses	248		8,835		(3,821)		10,053
Net interest income after provision for credit losses	61,986		53,757		190,088		180,688
Noninterest income
Fees from other financial services	5,188		4,703		15,195		14,391
Fee income on deposit liabilities	5,156		4,924		14,684		14,027
Fee income on other financial products	3,131		2,440		8,834		7,952
Bank-owned life insurance	2,993		2,303		8,832		5,683
Mortgage banking income	363		341		1,151		701
Gain on sale of real estate	—		—		—		495

Other income, net	658		627		1,767		2,106
Total noninterest income	17,489		15,338		50,463		45,355
Noninterest expense
Compensation and employee benefits	31,485		29,902		93,746		89,500
Occupancy	5,630		5,154		15,913		16,281
Data processing	4,974		5,133		14,780		15,240
Services	3,816		3,627		12,217		8,911
Equipment	2,436		3,125		7,562		8,728
Office supplies, printing and postage	1,014		1,022		3,038		3,296
Marketing	885		984		2,408		2,834

Goodwill impairment	—		—		82,190		—
Other expense	5,806		7,399		16,561		19,742
Total noninterest expense	56,046		56,346		248,415		164,532
Income (loss) before income taxes	23,429		12,749		(7,864)		61,511
Income tax (benefit)	4,651		1,384		(1,789)		11,380
Net income (loss)	18,778		11,365		(6,075)		50,131
Other comprehensive income (loss), net of taxes	40,204		(34,231)		32,069		(23,011)
Comprehensive income (loss)	$	58,982	$	(22,866)	$	25,994	$	27,120

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


	Three months ended September 30				Nine months ended September 30
(in thousands)	2024		2023		2024		2023
Interest and dividend income	$	87,655	$	85,636	$	261,768	$	246,856
Noninterest income	17,489		15,338		50,463		45,355
Less: Gain on sale of real estate	—		—		—		495

*Revenues-Bank	105,144		100,974		312,231		291,716
Total interest expense	25,421		23,044		75,501		56,115
Provision for credit losses	248		8,835		(3,821)		10,053
Noninterest expense	56,046		56,346		248,415		164,532
Less: Gain on sale of real estate	—		—		—		495
Less: Retirement defined benefits credit—other than service costs	(257)		(190)		(818)		(564)
*Expenses-Bank	81,972		88,415		320,913		230,769
*Operating income (loss)-Bank	23,172		12,559		(8,682)		60,947
Add back: Retirement defined benefits credit—other than service costs	(257)		(190)		(818)		(564)

Income (loss) before income taxes	$	23,429	$	12,749	$	(7,864)	$	61,511

Goodwill. Goodwill is initially recorded as the excess of the purchase price over the fair value of the net assets acquired in a business combination and is subsequently evaluated at least annually for impairment. The Company has identified ASB as a reporting unit and ASB’s goodwill relates to past acquisitions and is ASB’s only intangible asset with an indefinite useful life. The Company performs assessments of the carrying value of its goodwill at least annually and whenever events occur or circumstances change that would more-likely-than-not reduce the fair value of a reporting unit below its carrying amount. Examples of these events and circumstances include a significant change in business climate, an adverse action or assessment by a regulator, competition, loss of key personnel, a more-likely-than-not expectation that a reporting unit or a significant portion of a reporting unit will be sold or otherwise disposed of, and other factors.

HEI and ASB have been undertaking a comprehensive review of strategic options for ASB. During the course of this process, HEI and ASB had determined it is more-likely-than-not that the fair value of ASB is less than its carrying value. In light of this, as part of its on-going goodwill evaluation and the change in circumstances, after performing the goodwill impairment test as of June 30, 2024, HEI and ASB determined the full amount of its goodwill was impaired. As a result of the June 30, 2024 impairment test ASB recorded a pretax goodwill impairment charge of $82.2 million in the second quarter 2024. The impairment charge is recorded in “Total Noninterest Expense” in ASB’s Statements of Income and Comprehensive Income Data, and recorded in “Bank Expenses” in the Company’s Condensed Consolidated Statements of Income. The impairment charge was non-cash in nature and did not affect the Company’s current liquidity, cash flows or any debt covenants under the Company’s existing credit agreements.

American Savings Bank, F.S.B.

Balance Sheets Data


(in thousands)	September 30, 2024				December 31, 2023
Assets
Cash and due from banks			$	155,869			$	184,383
Interest-bearing deposits			176,784				251,072
Cash and cash equivalents			332,653				435,455

Investment securities
Available-for-sale, at fair value			1,084,083				1,136,439
Held-to-maturity, at amortized cost (fair value of $1,086,205 and $1,103,668, at September 30, 2024 and December 31, 2023, respectively)			1,159,229				1,201,314
Stock in Federal Home Loan Bank, at cost			29,204				14,728
Loans held for investment			6,037,410				6,180,810
Allowance for credit losses			(64,796)				(74,372)
Net loans			5,972,614				6,106,438
Loans held for sale, at lower of cost or fair value			2,704				15,168
Other			687,359				681,460
Goodwill			—				82,190
Total assets			$	9,267,846			$	9,673,192
Liabilities and shareholder’s equity
Deposit liabilities—noninterest-bearing			$	2,486,717			$	2,599,762
Deposit liabilities—interest-bearing			5,512,493				5,546,016
Other borrowings			520,000				750,000
Other			191,512				247,563
Total liabilities			8,710,722				9,143,341

Common stock			1				1
Additional paid-in capital			359,346				358,067
Retained earnings			457,980				464,055
Accumulated other comprehensive loss, net of tax benefits
Net unrealized losses on securities	$	(251,703)			$	(282,963)
Retirement benefit plans	(8,500)		(260,203)		(9,309)		(292,272)
Total shareholder’s equity			557,124				529,851
Total liabilities and shareholder’s equity			$	9,267,846			$	9,673,192

Other assets
Bank-owned life insurance			$	199,741			$	187,857
Premises and equipment, net			180,073				187,042
Accrued interest receivable			28,764				28,472
Mortgage-servicing rights			7,722				8,169
Low-income housing investments			100,499				112,234


Deferred tax asset			108,338				104,292

Other			62,222				53,394
Total other assets			$	687,359			$	681,460
Other liabilities
Accrued expenses			$	80,788			$	115,231

Cashier’s checks			35,625				40,479
Advance payments by borrowers			4,373				10,107
Other			70,726				81,746
Total other liabilities			$	191,512			$	247,563

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.

Other borrowings consisted of FHLB advances and borrowings from the Federal Reserve Bank.

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


	Amortized cost		Gross unrealized gains		Gross unrealized losses		Estimated fair value		Gross unrealized losses
									Less than 12 months					12 months or longer
(dollars in thousands)									Number of issues	Fair value		Amount		Number of issues	Fair value		Amount
September 30, 2024
Available-for-sale
U.S. Treasury and federal agency obligations	$	7,789	$	—	$	(192)	$	7,597	—	$	—	$	—	6	$	7,597	$	(192)
Mortgage-backed securities*	1,203,271		31		(174,675)		1,028,627		—	—		—		108	1,025,897		(174,675)
Corporate bonds	35,137		—		(1,213)		33,924		—	—		—		3	33,924		(1,213)
Mortgage revenue bonds	13,935		—		—		13,935		—	—		—		—	—		—
	$	1,260,132	$	31	$	(176,080)	$	1,084,083	—	$	—	$	—	117	$	1,067,418	$	(176,080)
Held-to-maturity
U.S. Treasury and federal agency obligations	$	59,935	$	—	$	(5,686)	$	54,249	—	$	—	$	—	3	$	54,249	$	(5,686)
Mortgage-backed securities*	1,099,294		6,355		(73,693)		1,031,956		—	—		—		65	648,634		(73,693)
	$	1,159,229	$	6,355	$	(79,379)	$	1,086,205	—	$	—	$	—	68	$	702,883	$	(79,379)
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)

* 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 at September 30, 2024 and 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, an agency of the government or a government-sponsored entity. 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 at September 30, 2024 and 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:


September 30, 2024	Amortized cost		Fair value
(in thousands)
Available-for-sale
Due in one year or less	$	370	$	364
Due after one year through five years	42,557		41,157
Due after five years through ten years	13,934		13,935
Due after ten years	—		—
	56,861		55,456
Mortgage-backed securities — issued or guaranteed by U.S. Government agencies or sponsored agencies	1,203,271		1,028,627
Total available-for-sale securities	$	1,260,132	$	1,084,083
Held-to-maturity
Due in one year or less	$	—	$	—
Due after one year through five years	39,858		36,634
Due after five years through ten years	20,077		17,615
Due after ten years	—		—
	59,935		54,249
Mortgage-backed securities — issued or guaranteed by U.S. Government agencies or sponsored agencies	1,099,294		1,031,956
Total held-to-maturity securities	$	1,159,229	$	1,086,205

There were no sales of available-for-sale securities for the three and nine months ended September 30, 2024 and 2023.

The components of loans were summarized as follows:


	September 30, 2024		December 31, 2023
(in thousands)
Real estate:
Residential 1-4 family	$	2,608,281	$	2,595,162
Commercial real estate	1,366,214		1,374,038
Home equity line of credit	959,607		1,017,207
Residential land	19,900		18,364
Commercial construction	208,867		172,405
Residential construction	16,998		17,843
Total real estate	5,179,867		5,195,019
Commercial	645,571		743,303
Consumer	239,410		272,256
Total loans	6,064,848		6,210,578
Less: Deferred fees and discounts	(27,438)		(29,768)
Allowance for credit losses	(64,796)		(74,372)
Total loans, net	$	5,972,614	$	6,106,438

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.

As of September 30, 2024, ASB had commitments to borrowers for loans and unused lines and letters of credit of $1.8 billion, of which, commitments to lend to borrowers experiencing financial difficulty whose loan terms have been modified were nil.

Allowance for credit losses. The allowance for credit losses (balances and changes) 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 loans		Consumer loans		Total
Three months ended September 30, 2024
Allowance for credit losses:
Beginning balance	$	6,219	$	18,656	$	9,552	$	759	$	3,369	$	38	$	6,317	$	21,903	$	66,813
Charge-offs	(8)		—		—		—		—		—		(120)		(2,999)		(3,127)
Recoveries	9		—		12		—		—		—		100		741		862
Provision	(211)		96		(443)		(147)		(278)		(1)		(292)		1,524		248
Ending balance	$	6,009	$	18,752	$	9,121	$	612	$	3,091	$	37	$	6,005	$	21,169	$	64,796
Three months ended September 30, 2023
Allowance for credit losses:
Beginning balance	$	4,708	$	20,278	$	7,139	$	653	$	2,549	$	26	$	11,358	$	22,357	$	69,068
Charge-offs	—		—		—		—		—		—		(125)		(2,667)		(2,792)
Recoveries	57		—		131		1		—		—		725		841		1,755
Provision	1,702		2,180		505		(33)		1,075		16		(1,175)		4,065		8,335
Ending balance	$	6,467	$	22,458	$	7,775	$	621	$	3,624	$	42	$	10,783	$	24,596	$	76,366
Nine months ended September 30, 2024
Allowance for credit losses:
Beginning balance	$	7,435	$	22,185	$	7,778	$	621	$	3,603	$	43	$	9,122	$	23,585	$	74,372
Charge-offs	(850)		—		—		—		—		—		(360)		(8,718)		(9,928)
Recoveries	202		—		259		—		—		—		385		2,427		3,273
Provision	(778)		(3,433)		1,084		(9)		(512)		(6)		(3,142)		3,875		(2,921)
Ending balance	$	6,009	$	18,752	$	9,121	$	612	$	3,091	$	37	$	6,005	$	21,169	$	64,796
Nine months ended September 30, 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	(990)		—		(360)		—		—		—		(509)		(7,558)		(9,417)
Recoveries	63		—		165		4		—		—		1,329		2,653		4,214
Provision	1,124		560		1,845		(100)		2,429		(4)		(2,463)		5,962		9,353
Ending balance	$	6,467	$	22,458	$	7,775	$	621	$	3,624	$	42	$	10,783	$	24,596	$	76,366

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
Three months ended September 30, 2024
Allowance for loan commitments:
Beginning balance	$	700	$	3,100	$	400	$	4,200
Provision	—		—		—		—
Ending balance	$	700	$	3,100	$	400	$	4,200
Three months ended September 30, 2023
Allowance for loan commitments:
Beginning balance	$	600	$	3,800	$	200	$	4,600
Provision	—		500		—		500
Ending balance	$	600	$	4,300	$	200	$	5,100
Nine months ended September 30, 2024
Allowance for loan commitments:
Beginning balance	$	600	$	4,300	$	200	$	5,100
Provision	100		(1,200)		200		(900)
Ending balance	$	700	$	3,100	$	400	$	4,200
Nine months ended September 30, 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

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)	2024		2023		2022		2021		2020		Prior		Revolving		Converted to term loans		Total
September 30, 2024
Residential 1-4 family
Current	$	131,347	$	253,155	$	397,855	$	706,189	$	385,208	$	726,220	$	—	$	—	$	2,599,974
30-59 days past due	—		—		—		333		264		1,541		—		—		2,138
60-89 days past due	—		—		—		—		—		891		—		—		891
Greater than 89 days past due	—		—		727		543		—		4,008		—		—		5,278
	131,347		253,155		398,582		707,065		385,472		732,660		—		—		2,608,281
Home equity line of credit
Current	—		—		—		—		—		—		888,858		67,452		956,310
30-59 days past due	—		—		—		—		—		—		969		419		1,388
60-89 days past due	—		—		—		—		—		—		624		449		1,073
Greater than 89 days past due	—		—		—		—		—		—		732		104		836
	—		—		—		—		—		—		891,183		68,424		959,607
Residential land
Current	5,889		3,689		4,513		3,473		1,729		607		—		—		19,900
30-59 days past due	—		—		—		—		—		—		—		—		—
60-89 days past due	—		—		—		—		—		—		—		—		—
Greater than 89 days past due	—		—		—		—		—		—		—		—		—
	5,889		3,689		4,513		3,473		1,729		607		—		—		19,900
Residential construction
Current	831		9,640		6,527		—		—		—		—		—		16,998
30-59 days past due	—		—		—		—		—		—		—		—		—
60-89 days past due	—		—		—		—		—		—		—		—		—
Greater than 89 days past due	—		—		—		—		—		—		—		—		—
	831		9,640		6,527		—		—		—		—		—		16,998
Consumer
Current	31,632		63,848		120,783		5,061		648		280		9,635		1,790		233,677
30-59 days past due	503		566		1,387		101		4		—		67		96		2,724
60-89 days past due	111		402		990		61		8		—		21		40		1,633
Greater than 89 days past due	88		353		602		40		6		—		116		171		1,376
	32,334		65,169		123,762		5,263		666		280		9,839		2,097		239,410
Commercial real estate
Pass	35,630		104,725		376,087		188,549		256,108		368,171		15,482		—		1,344,752
Special Mention	—		—		1,208		1,455		—		1,106		—		—		3,769
Substandard	—		—		—		1,505		—		13,990		—		—		15,495
Doubtful	—		—		—		—		—		2,198		—		—		2,198
	35,630		104,725		377,295		191,509		256,108		385,465		15,482		—		1,366,214
Commercial construction
Pass	—		68,962		41,201		17,685		1,333		—		79,686		—		208,867
Special Mention	—		—		—		—		—		—		—		—		—
Substandard	—		—		—		—		—		—		—		—		—
Doubtful	—		—		—		—		—		—		—		—		—
	—		68,962		41,201		17,685		1,333		—		79,686		—		208,867
Commercial
Pass	90,529		80,793		171,002		71,410		44,575		75,689		95,912		7,074		636,984
Special Mention	—		—		—		—		—		—		—		—		—
Substandard	1,058		—		3,812		158		—		2,635		799		51		8,513
Doubtful	—		—		—		—		74		—		—		—		74
	91,587		80,793		174,814		71,568		44,649		78,324		96,711		7,125		645,571
Total loans	$	297,618	$	586,133	$	1,126,694	$	996,563	$	689,957	$	1,197,336	$	1,092,901	$	77,646	$	6,064,848


	Term Loans by Origination Year												Revolving Loans
(in thousands)	2023		2022		2021		2020		2019		Prior		Revolving		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


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


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


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


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


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


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


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


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

Gross charge-offs by portfolio segment and vintage were as follows:


(in thousands)	2024		2023		2022		2021		2020		Prior		Total
Nine months ended September 30, 2024
Residential 1-4 family	$	—	$	—	$	361	$	277	$	—	$	212	$	850
Commercial real estate	—		—		—		—		—		—		—
Home equity line of credit	—		—		—		—		—		—		—
Residential land	—		—		—		—		—		—		—
Commercial construction	—		—		—		—		—		—		—
Residential construction	—		—		—		—		—		—		—
Commercial	—		—		12		63		—		285		360
Consumer	733		2,853		4,329		481		102		220		8,718
Total	$	733	$	2,853	$	4,702	$	821	$	102	$	717	$	9,928

Revolving loans converted to term loans during the nine months ended September 30, 2024 in the commercial, home equity line of credit and consumer portfolios were $2.6 million, $18.1 million and $0.5 million, respectively. Revolving loans converted to term loans during the nine months ended September 30, 2023 in the commercial, home equity line of credit and consumer portfolios were $6.1 million, $20.4 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		90 days or more past due		Total past due		Current		Total financing receivables		Amortized cost> 90 days and accruing
September 30, 2024
Real estate:
Residential 1-4 family	$	2,138	$	891	$	5,278	$	8,307	$	2,599,974	$	2,608,281	$	—
Commercial real estate	—		—		10,698		10,698		1,355,516		1,366,214		—
Home equity line of credit	1,388		1,073		836		3,297		956,310		959,607		—
Residential land	—		—		—		—		19,900		19,900		—
Commercial construction	—		—		—		—		208,867		208,867		—
Residential construction	—		—		—		—		16,998		16,998		—
Commercial	309		9		74		392		645,179		645,571		—
Consumer	2,724		1,633		1,376		5,733		233,677		239,410		—
Total loans	$	6,559	$	3,606	$	18,262	$	28,427	$	6,036,421	$	6,064,848	$	—
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

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


(in thousands)	September 30, 2024						December 31, 2023
	With a related ACL		Without a related ACL		Total		With a related ACL		Without a related ACL		Total
Real estate:
Residential 1-4 family	$	4,335	$	4,107	$	8,442	$	7,755	$	2,190	$	9,945
Commercial real estate	10,698		—		10,698		11,048		—		11,048
Home equity line of credit	3,346		553		3,899		2,626		1,135		3,761
Residential land	—		—		—		780		—		780
Commercial construction	—		—		—		—		—		—
Residential construction	—		—		—		—		—		—
Commercial	175		158		333		133		301		434
Consumer	2,273		—		2,273		2,458		—		2,458
Total	$	20,827	$	4,818	$	25,645	$	24,800	$	3,626	$	28,426

ASB did not recognize interest on nonaccrual loans for the nine months ended September 30, 2024 and 2023.

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.

Loan modifications made to borrowers experiencing financial difficulty during the three and nine months ended September 30, 2024 were as follows:


(in thousands)	Term extension		Interest Rate Reduction		Payment delay		Combination payment delay & term extension		Total		% of total class of loans
Three months ended September 30, 2024
Real estate loans
Residential 1-4 family	$	153	$	—	$	1,850	$	—	$	2,003	0.08	%
Commercial real estate	—		—		—		—		—		—
Home equity line of credit	—		153		—		—		153		0.02
Residential land	—		—		—		—		—		—
Commercial construction	—		—		—		—		—		—
Residential construction	—		—		—		—		—		—
Commercial	—		—		—		—		—		—
Consumer	—		—		—		—		—		—
Total	$	153	$	153	$	1,850	$	—	$	2,156	0.04	%
Nine months ended September 30, 2024
Real estate loans
Residential 1-4 family	$	468	$	—	$	6,764	$	—	$	7,232	0.28	%
Commercial real estate	—		—		—		1,208		1,208		0.09	%
Home equity line of credit	—		153		447		—		600		0.06	%
Residential land	—		—		675		—		675		3.39	%
Commercial construction	—		—		—		—		—		—
Residential construction	—		—		—		—		—		—
Commercial	—		—		—		—		—		—
Consumer	—		—		—		—		—		—
Total	$	468	$	153	$	7,886	$	1,208	$	9,715	0.16	%

Financial effect of loan modifications during the three and nine months ended September 30, 2024 for borrowers experiencing financial difficulty were as follows:


	Weighted average
	Term extension (in months)	Interest Rate Reduction (in percent)		Payment delay (in months)
Three months ended September 30, 2024
Real estate loans
Residential 1-4 family	329	—		6
Commercial real estate	—	—		—
Home equity line of credit	—	3.00	%	—
Residential land	—	—		—
Commercial construction	—	—		—
Residential construction	—	—		—
Commercial	—	—		—
Consumer	—	—		—
Nine months ended September 30, 2024
Real estate loans
Residential 1-4 family	208	—		9
Commercial real estate	9	—		9
Home equity line of credit	—	3.00	%	11
Residential land	—	—		9
Commercial construction	—	—		—
Residential construction	—	—		—
Commercial	—	—		—
Consumer	—	—		—

Credit risk profile based on payment activity for loans modified during the nine months ended September 30, 2024 were as follows:


(in thousands)	Current		30-59 days past due		60-89 days past due		90 days or more past due		Total
Real estate loans
Residential 1-4 family	$	4,867	$	264	$	—	$	2,101	$	7,232
Commercial real estate	1,208		—		—		—		1,208
Home equity line of credit	447		—		153		—		600
Residential land	675		—		—		—		675
Commercial construction	—		—		—		—		—
Residential construction	—		—		—		—		—
Commercial	—		—		—		—		—
Consumer	—		—		—		—		—
Total	$	7,197	$	264	$	153	$	2,101	$	9,715

During the nine months ended September 30, 2024, there were no loan modifications made to borrowers experiencing financial difficulty that defaulted.

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:


	Amortized cost
(in thousands)	September 30, 2024		December 31, 2023		Collateral type
Real estate:
Residential 1-4 family	$	4,184	$	2,272	Residential real estate property
Commercial real estate	10,698		11,048		Commercial real estate property
Home equity line of credit	662		1,135		Residential real estate property

Total real estate	15,544		14,455
Commercial	232		301		Business assets
Total	$	15,776	$	14,756

ASB had $2.7 million and $3.4 million of consumer mortgage loans collateralized by residential real estate property that were in the process of foreclosure at September 30, 2024 and December 31, 2023, 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 proceeds from the sale of residential mortgages of $28.1 million and $21.5 million for the three months ended September 30, 2024 and 2023, respectively, and recognized gains on such sales of $0.4 million and $0.3 million for the three months ended September 30, 2024 and 2023, respectively. ASB received proceeds from the sale of residential mortgages of $85.4 million and $36.1 million for the nine months ended September 30, 2024 and 2023, respectively, and recognized gains on such sales of $1.2 million and $0.7 million for the nine months ended September 30, 2024 and 2023, respectively.

There were no repurchased mortgage loans for the nine months ended September 30, 2024 and 2023.

Mortgage servicing fees, a component of other income, net, were $0.9 million for the three months ended September 30, 2024 and 2023. Mortgage servicing fees, a component of other income, net, were $2.6 million and $2.7 million for the nine months ended September 30, 2024 and 2023, respectively.

Changes in the carrying value of MSRs were as follows:


(in thousands)	Gross carrying amount		Accumulated amortization		Valuation allowance		Net carrying amount
September 30, 2024	$	18,284	$	(10,562)	$	—	$	7,722
December 31, 2023	18,241		(10,072)		—		8,169

Changes related to MSRs were as follows:


	Three months ended September 30				Nine months ended September 30
(in thousands)	2024		2023		2024		2023
Mortgage servicing rights
Beginning balance	$	7,906	$	8,495	$	8,169	$	9,047
Amount capitalized	171		184		548		319
Amortization	(355)		(303)		(995)		(990)
Other-than-temporary impairment	—		—		—		—
Carrying amount before valuation allowance	7,722		8,376		7,722		8,376
Valuation allowance for mortgage servicing rights
Beginning balance	—		—		—		—
Provision	—		—		—		—
Other-than-temporary impairment	—		—		—		—
Ending balance	—		—		—		—
Net carrying value of mortgage servicing rights	$	7,722	$	8,376	$	7,722	$	8,376

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 condensed 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:


(dollars in thousands)	September 30, 2024			December 31, 2023
Unpaid principal balance	$	1,392,423		$	1,402,736
Weighted average note rate	3.61		%	3.47		%
Weighted average discount rate	10.00		%	10.00		%
Weighted average prepayment speed	7.47		%	5.71		%

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


(dollars in thousands)	September 30, 2024		December 31, 2023
Prepayment rate:
25 basis points adverse rate change	$	(232)	$	(90)
50 basis points adverse rate change	(494)		(204)
Discount rate:
25 basis points adverse rate change	(171)		(203)
50 basis points adverse rate change	(340)		(402)

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.

Other borrowings. As of September 30, 2024 and December 31, 2023, ASB had $520.0 million and $200.0 million of FHLB advances outstanding, respectively, and borrowings with the Federal Reserve Bank of nil and $550.0 million, respectively. As of September 30, 2024, ASB was in compliance with all FHLB Advances, Pledge and Security Agreement requirements and all requirements to borrow at the Federal Reserve Discount Window Primary Credit Facility under 12 CFR 201.4(a) guidelines.

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:


	September 30, 2024				December 31, 2023
(in thousands)	Notional amount		Fair value		Notional amount		Fair value
Interest rate lock commitments	$	4,672	$	68	$	6,246	$	86
Forward commitments	4,250		10		5,500		(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	September 30, 2024				December 31, 2023
(in thousands)	Asset derivatives		Liability derivatives		Asset derivatives		Liability derivatives
Interest rate lock commitments	$	68	$	—	$	86	$	—
Forward commitments	10		—		—		18
	$	78	$	—	$	86	$	18

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 as Hedging Instruments	Location of net gains (losses) recognized in the Statements of Income	Three months ended September 30				Nine months ended September 30
(in thousands)		2024		2023		2024		2023
Interest rate lock commitments	Mortgage banking income	$	(21)	$	(34)	$	(18)	$	45
Forward commitments	Mortgage banking income	5		(36)		28		(3)
		$	(16)	$	(70)	$	10	$	42

Low-Income Housing Tax Credit (LIHTC). ASB’s unfunded commitments to fund its LIHTC investment partnerships were $54.4 million and $87.9 million at September 30, 2024 and December 31, 2023, respectively. These unfunded commitments were unconditional and legally binding and are recorded in other liabilities with a corresponding increase in other assets. As of September 30, 2024, ASB did not have any impairment losses resulting from forfeiture or ineligibility of tax credits or other circumstances related to its LIHTC investment partnerships.