| Bank segment (HEI only) | 4 · Bank segment (HEI only) Selected financial information American Savings Bank, F.S.B. Statements of Income Data Years ended December 31 2017 2016 2015 (in thousands) Interest and dividend income Interest and fees on loans $ 207,255 $ 199,774 $ 184,782 Interest and dividends on investment securities 28,823 19,184 15,120 Total interest and dividend income 236,078 218,958 199,902 Interest expense Interest on deposit liabilities 9,660 7,167 5,348 Interest on other borrowings 2,496 5,588 5,978 Total interest expense 12,156 12,755 11,326 Net interest income 223,922 206,203 188,576 Provision for loan losses 10,901 16,763 6,275 Net interest income after provision for loan losses 213,021 189,440 182,301 Noninterest income Fees from other financial services 22,796 22,384 22,211 Fee income on deposit liabilities 22,204 21,759 22,368 Fee income on other financial products 7,205 8,707 8,094 Bank-owned life insurance 5,539 4,637 4,078 Mortgage banking income 2,201 6,625 6,330 Gains on sale of investment securities, net — 598 — Other income, net 1,617 2,256 4,750 Total noninterest income 61,562 66,966 67,831 Noninterest expense Compensation and employee benefits 95,751 90,117 90,518 Occupancy 16,699 16,321 16,365 Data processing 13,280 13,030 12,103 Services 10,994 11,054 10,204 Equipment 7,232 6,938 6,577 Office supplies, printing and postage 6,182 6,075 5,749 Marketing 3,501 3,489 3,463 FDIC insurance 2,904 3,543 3,274 Other expense 19,324 18,487 18,067 Total noninterest expense 175,867 169,054 166,320 Income before income taxes 98,716 87,352 83,812 Income taxes 31,719 30,073 29,082 Net income $ 66,997 $ 57,279 $ 54,730 Reconciliation to amounts per HEI Consolidated Statements of Income*: Years ended December 31 2017 2016 2015 Interest and dividend income $ 236,078 $ 218,958 $ 199,902 Noninterest income 61,562 66,966 67,831 *Revenues-Bank 297,640 285,924 267,733 Total interest expense 12,156 12,755 11,326 Provision for loan losses 10,901 16,763 6,275 Total noninterest expense 175,867 169,054 166,320 *Expenses-Bank 198,924 198,572 183,921 Income before income taxes/*Operating income-Bank $ 98,716 $ 87,352 $ 83,812 Statements of Comprehensive Income Data Years ended December 31 2017 2016 2015 (in thousands) Net income $ 66,997 $ 57,279 $ 54,730 Other comprehensive income (loss), net of taxes: Net unrealized losses on available-for sale investment securities: Net unrealized losses on available-for sale investment securities arising during the period, net of tax benefits of $2,886, $3,763 and $1,541 for 2017, 2016 and 2015, respectively (4,370 ) (5,699 ) (2,334 ) Reclassification adjustment for net realized gains included in net income, net of taxes of nil, $238 and nil for 2017, 2016 and 2015, respectively — (360 ) — Retirement benefit plans: Net gains arising during the period, net of taxes of nil, nil and $59 for 2017, 2016 and 2015, respectively — — 90 Adjustment for amortization of prior service credit and net losses recognized during the period in net periodic benefit cost, net of tax benefits of $812, $566 and $1,011 for 2017, 2016 and 2015, respectively 1,231 857 1,531 Other comprehensive loss, net of tax benefits (3,139 ) (5,202 ) (713 ) Comprehensive income $ 63,858 $ 52,077 $ 54,017 Balance Sheets Data December 31 2017 2016 (in thousands) Assets Cash and due from banks $ 140,934 $ 137,083 Interest-bearing deposits 93,165 52,128 Restricted cash — 1,764 Investment securities Available-for-sale, at fair value 1,401,198 1,105,182 Held-to-maturity, at amortized cost (fair value of $44,412 and nil, respectively) 44,515 — Stock in Federal Home Loan Bank, at cost 9,706 11,218 Loans receivable held for investment 4,670,768 4,738,693 Allowance for loan losses (53,637 ) (55,533 ) Net loans 4,617,131 4,683,160 Loans held for sale, at lower of cost or fair value 11,250 18,817 Other 398,570 329,815 Goodwill 82,190 82,190 Total assets $ 6,798,659 $ 6,421,357 Liabilities and shareholder’s equity Deposit liabilities–noninterest-bearing $ 1,760,233 $ 1,639,051 Deposit liabilities–interest-bearing 4,130,364 3,909,878 Other borrowings 190,859 192,618 Other 110,356 101,635 Total liabilities 6,191,812 5,843,182 Commitments and contingencies Common stock 1 1 Additional paid in capital 345,018 342,704 Retained earnings 292,957 257,943 Accumulated other comprehensive loss, net of tax benefits Net unrealized losses on securities $ (14,951 ) $ (7,931 ) Retirement benefit plans (16,178 ) (31,129 ) (14,542 ) (22,473 ) Total shareholder’s equity 606,847 578,175 Total liabilities and shareholder’s equity $ 6,798,659 $ 6,421,357 December 31 2017 2016 (in thousands) Other assets Bank-owned life insurance $ 148,775 $ 143,197 Premises and equipment, net 136,270 90,570 Prepaid expenses 3,961 3,348 Accrued interest receivable 18,724 16,824 Mortgage-servicing rights 8,639 9,373 Low-income housing investments 59,016 47,081 Real estate acquired in settlement of loans, net 133 1,189 Other 23,052 18,233 $ 398,570 $ 329,815 Other liabilities Accrued expenses $ 39,312 $ 36,754 Federal and state income taxes payable 3,736 4,728 Cashier’s checks 27,000 24,156 Advance payments by borrowers 10,245 10,335 Other 30,063 25,662 $ 110,356 $ 101,635 Bank-owned life insurance is life insurance purchased by ASB on the lives of certain key employees, with ASB as the beneficiary. The insurance is used to fund employee benefits through tax-free income from increases in the cash value of the policies and insurance proceeds paid to ASB upon an insured’s death. The increase in premises and equipment, net was due to the expenditures of $32.7 million for the new campus project. Investment securities. The major components of investment securities were as follows: Gross unrealized losses Gross Gross Estimated Less than 12 months 12 months or longer (dollars in thousands) Amortized cost unrealized gains unrealized losses fair value Number of issues Fair value Amount Number of issues Fair value Amount December 31, 2017 Available-for-sale U.S. Treasury and federal agency obligations $ 185,891 $ 438 $ (2,031 ) $ 184,298 15 $ 83,137 $ (825 ) 8 $ 62,296 $ (1,206 ) Mortgage-related securities- FNMA, FHLMC and GNMA 1,220,304 793 (19,624 ) 1,201,473 67 653,635 (6,839 ) 77 459,912 (12,785 ) Mortgage revenue bond 15,427 — — 15,427 — — — — — — $ 1,421,622 $ 1,231 $ (21,655 ) $ 1,401,198 82 $ 736,772 $ (7,664 ) 85 $ 522,208 $ (13,991 ) Held-to-maturity Mortgage-related securities- FNMA, FHLMC and GNMA $ 44,515 $ 1 $ (104 ) $ 44,412 2 $ 35,744 $ (104 ) — $ — $ — $ 44,515 $ 1 $ (104 ) $ 44,412 2 $ 35,744 $ (104 ) — $ — $ — December 31, 2016 Available-for-sale U.S. Treasury and federal agency obligations $ 193,515 $ 920 $ (2,154 ) $ 192,281 18 $ 123,475 $ (2,010 ) 1 $ 3,485 $ (144 ) Mortgage-related securities- FNMA, FHLMC and GNMA 909,408 1,742 (13,676 ) 897,474 88 709,655 (12,143 ) 13 47,485 (1,533 ) Mortgage revenue bond 15,427 — — 15,427 — — — — — — $ 1,118,350 $ 2,662 $ (15,830 ) $ 1,105,182 106 $ 833,130 $ (14,153 ) 14 $ 50,970 $ (1,677 ) ASB did not have any investment securities classified as held-to-maturity as of December 31, 2016. ASB does not believe that the investment securities that were in an unrealized loss position as of December 31, 2017 , represent an OTTI. Total gross unrealized losses were primarily attributable to rising interest rates relative to when the investment securities were purchased and not due to the credit quality of the investment securities. The contractual cash flows of the U.S. Treasury, federal agency obligations and mortgage-related securities are backed by the full faith and credit guaranty of the United States government or an agency of the government. ASB does not intend to sell the securities before the recovery of its amortized cost basis and there have been no adverse changes in the timing of the contractual cash flows for the securities. ASB did not recognize OTTI for 2017 , 2016 and 2015 . U.S. Treasury, federal agency obligations, and the mortgage revenue bond have contractual terms to maturity. Mortgage-related 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, 2017 Cost value (in thousands) Available-for-sale Due in one year or less $ 5,000 $ 4,992 Due after one year through five years 87,404 87,020 Due after five years through ten years 80,161 79,358 Due after ten years 28,753 28,355 201,318 199,725 Mortgage-related securities-FNMA, FHLMC and GNMA 1,220,304 1,201,473 $ 1,421,622 $ 1,401,198 Held-to-maturity Mortgage-related securities-FNMA, FHLMC and GNMA $ 44,515 $ 44,412 $ 44,515 $ 44,412 The proceeds, gross gains and losses from sales of available-for-sale investment securities were as follows: Years ended December 31 2017 2016 2015 (in millions) Proceeds $ — $ 16.4 $ — Gross gains — 0.6 — Gross losses — — — Interest income from taxable and non-taxable investment securities were as follows: Years ended December 31 2017 2016 2015 (in thousands) Taxable $ 28,398 $ 19,166 $ 15,120 Non-taxable 425 18 — $ 28,823 $ 19,184 $ 15,120 ASB pledged securities with a market value of approximately $411.4 million and $277.1 million as of December 31, 2017 and 2016 , respectively, as collateral for public funds and other deposits, automated clearinghouse transactions with Bank of Hawaii, borrowing at the discount window of the Federal Reserve Bank of San Francisco, and deposits in ASB’s bankruptcy account with the Federal Reserve Bank of San Francisco. As of December 31, 2017 and 2016 , securities with a carrying value of $165.1 million and $114.9 million , respectively, were pledged as collateral for securities sold under agreements to repurchase. Stock in FHLB . As of December 31, 2017 and 2016 , ASB’s stock in FHLB was carried at cost ( $9.7 million and $11.2 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. Periodically and as conditions warrant, ASB reviews its investment in the stock of the FHLB for impairment. ASB evaluated its investment in FHLB stock for OTTI as of December 31, 2017 , consistent with its accounting policy. ASB did not recognize an OTTI loss for 2017 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 receivable. The components of loans receivable were summarized as follows: December 31 2017 2016 (in thousands) Real estate: Residential 1-4 family $ 2,118,047 $ 2,048,051 Commercial real estate 733,106 800,395 Home equity line of credit 913,052 863,163 Residential land 15,797 18,889 Commercial construction 108,273 126,768 Residential construction 14,910 16,080 Total real estate 3,903,185 3,873,346 Commercial 544,828 692,051 Consumer 223,564 178,222 Total loans 4,671,577 4,743,619 Less: Deferred fees and discounts (809 ) (4,926 ) Allowance for loan losses (53,637 ) (55,533 ) Total loans, net $ 4,617,131 $ 4,683,160 ASB's policy is to require private mortgage insurance on all real estate loans when the loan-to-value ratio of the property exceeds 80% of the lower of the appraised value or purchase price at origination. For non-owner occupied residential properties, the loan-to-value ratio may not exceed 80% of the lower of the appraised value or purchase price at origination. ASB is subject to the risk that the insurance company cannot satisfy the bank's claim on policies. ASB services real estate loans for investors (principal balance of $1.2 billion , $1.2 billion and $1.5 billion as of December 31, 2017 , 2016 and 2015 , 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, 2017 and 2016 , ASB had pledged loans with an amortized cost of approximately $2.4 billion as collateral to secure advances from the FHLB. As of December 31, 2017 and 2016 , 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 $23.8 million and $22.9 million , respectively. As of December 31, 2017 and 2016 , $18.7 million and $19.0 million of the loan balances, respectively, were to related interests of individuals who are directors of ASB. All such loans were made at ASB’s normal credit terms. Allowance for loan losses. As discussed in Note 1 , ASB must maintain an allowance for loan losses that is adequate to absorb estimated probable credit losses associated with its loan portfolio. The allowance for loan losses (balances and changes) and financing receivables were as follows: (in thousands) Residential 1-4 family Commercial Home equity Residential land Commercial construction Residential construction Commercial Consumer Unallo- cated Total December 31, 2017 Allowance for loan losses: Beginning balance $ 2,873 $ 16,004 $ 5,039 $ 1,738 $ 6,449 $ 12 $ 16,618 $ 6,800 $ — $ 55,533 Charge-offs (826 ) — (14 ) (210 ) — — (4,006 ) (11,757 ) — (16,813 ) Recoveries 157 — 308 482 — — 1,852 1,217 — 4,016 Provision 698 (208 ) 2,189 (1,114 ) (1,778 ) — (3,613 ) 14,727 — 10,901 Ending balance $ 2,902 $ 15,796 $ 7,522 $ 896 $ 4,671 $ 12 $ 10,851 $ 10,987 $ — $ 53,637 Ending balance: individually evaluated for impairment $ 1,248 $ 65 $ 647 $ 47 $ — $ — $ 694 $ 29 $ 2,730 Ending balance: collectively evaluated for impairment $ 1,654 $ 15,731 $ 6,875 $ 849 $ 4,671 $ 12 $ 10,157 $ 10,958 $ — $ 50,907 Financing Receivables: Ending balance $ 2,118,047 $ 733,106 $ 913,052 $ 15,797 $ 108,273 $ 14,910 $ 544,828 $ 223,564 $ 4,671,577 Ending balance: individually evaluated for impairment $ 18,284 $ 1,016 $ 8,188 $ 1,265 $ — $ — $ 4,574 $ 66 $ 33,393 Ending balance: collectively evaluated for impairment $ 2,099,763 $ 732,090 $ 904,864 $ 14,532 $ 108,273 $ 14,910 $ 540,254 $ 223,498 $ 4,638,184 December 31, 2016 Allowance for loan losses: Beginning balance $ 4,186 $ 11,342 $ 7,260 $ 1,671 $ 4,461 $ 13 $ 17,208 $ 3,897 $ — $ 50,038 Charge-offs (639 ) — (112 ) (138 ) — — (5,943 ) (7,413 ) — (14,245 ) Recoveries 421 — 59 461 — — 1,093 943 — 2,977 Provision (1,095 ) 4,662 (2,168 ) (256 ) 1,988 (1 ) 4,260 9,373 — 16,763 Ending balance $ 2,873 $ 16,004 $ 5,039 $ 1,738 $ 6,449 $ 12 $ 16,618 $ 6,800 $ — $ 55,533 Ending balance: individually evaluated for impairment $ 1,352 $ 80 $ 215 $ 789 $ — $ — $ 1,641 $ 6 $ 4,083 Ending balance: collectively evaluated for impairment $ 1,521 $ 15,924 $ 4,824 $ 949 $ 6,449 $ 12 $ 14,977 $ 6,794 $ — $ 51,450 Financing Receivables: Ending balance $ 2,048,051 $ 800,395 $ 863,163 $ 18,889 $ 126,768 $ 16,080 $ 692,051 $ 178,222 $ 4,743,619 Ending balance: individually evaluated for impairment $ 19,854 $ 1,569 $ 6,158 $ 3,629 $ — $ — $ 20,539 $ 10 $ 51,759 Ending balance: collectively evaluated for impairment $ 2,028,197 $ 798,826 $ 857,005 $ 15,260 $ 126,768 $ 16,080 $ 671,512 $ 178,212 $ 4,691,860 December 31, 2015 Allowance for loan losses: Beginning balance $ 4,662 $ 8,954 $ 6,982 $ 1,875 $ 5,471 $ 28 $ 14,017 $ 3,629 $ — $ 45,618 Charge-offs (356 ) — (205 ) — — — (1,074 ) (4,791 ) — (6,426 ) Recoveries 226 — 80 507 — — 2,773 985 — 4,571 Provision (346 ) 2,388 403 (711 ) (1,010 ) (15 ) 1,492 4,074 — 6,275 Ending balance $ 4,186 $ 11,342 $ 7,260 $ 1,671 $ 4,461 $ 13 $ 17,208 $ 3,897 $ — $ 50,038 Ending balance: individually evaluated for impairment $ 1,453 $ — $ 442 $ 891 $ — $ — $ 3,527 $ 7 $ 6,320 Ending balance: collectively evaluated for impairment $ 2,733 $ 11,342 $ 6,818 $ 780 $ 4,461 $ 13 $ 13,681 $ 3,890 $ — $ 43,718 Financing Receivables: Ending balance $ 2,069,665 $ 690,561 $ 846,294 $ 18,229 $ 100,796 $ 14,089 $ 758,659 $ 123,775 $ 4,622,068 Ending balance: individually evaluated for impairment $ 22,457 $ 1,188 $ 3,225 $ 5,683 $ — $ — $ 21,119 $ 13 $ 53,685 Ending balance: collectively evaluated for impairment $ 2,047,208 $ 689,373 $ 843,069 $ 12,546 $ 100,796 $ 14,089 $ 737,540 $ 123,762 $ 4,568,383 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 loan is assigned an Asset Quality Rating (AQR) reflecting the likelihood of repayment or orderly liquidation of that loan transaction pursuant to regulatory credit classifications: Pass, Special Mention, Substandard, Doubtful, and Loss. The AQR is a function of the probability of default model rating, the loss given default, and possible non-model factors which impact the ultimate collectability of the loan such as character of the business owner/guarantor, interim period performance, litigation, tax liens and major changes in business and economic conditions. Pass exposures generally are well protected by the current net worth and paying capacity of the obligor or by the value of the asset or underlying collateral. Special Mention loans have potential weaknesses that, if left uncorrected, could jeopardize the liquidation of the debt. Substandard loans have well-defined weaknesses that jeopardize the liquidation of the debt and are characterized by the distinct possibility that the Bank may sustain some loss. An asset classified Doubtful has the weaknesses of those classified Substandard, with the added characteristic that the weaknesses make collection or liquidation in full, on the basis of currently existing facts, conditions, and values, highly questionable and improbable. An asset classified Loss is considered uncollectible and has such little value that its continuance as a bankable asset is not warranted. The credit risk profile by internally assigned grade for loans was as follows: December 31 2017 2016 (in thousands) Commercial real estate Commercial construction Commercial Total Commercial real estate Commercial construction Commercial Total Grade: Pass $ 630,877 $ 83,757 $ 492,942 $ 1,207,576 $ 701,657 $ 102,955 $ 614,139 $ 1,418,751 Special mention 49,347 22,500 27,997 99,844 65,541 — 25,229 90,770 Substandard 52,882 2,016 23,421 78,319 33,197 23,813 52,683 109,693 Doubtful — — 468 468 — — — — Loss — — — — — — — — Total $ 733,106 $ 108,273 $ 544,828 $ 1,386,207 $ 800,395 $ 126,768 $ 692,051 $ 1,619,214 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, 2017 Real estate: Residential 1-4 family $ 1,532 $ 1,715 $ 5,071 $ 8,318 $ 2,109,729 $ 2,118,047 $ — Commercial real estate — — — — 733,106 733,106 — Home equity line of credit 425 114 2,051 2,590 910,462 913,052 — Residential land 23 — 625 648 15,149 15,797 — Commercial construction — — — — 108,273 108,273 — Residential construction — — — — 14,910 14,910 — Commercial 1,825 2,025 730 4,580 540,248 544,828 — Consumer 3,432 2,159 1,876 7,467 216,097 223,564 — Total loans $ 7,237 $ 6,013 $ 10,353 $ 23,603 $ 4,647,974 $ 4,671,577 $ — December 31, 2016 Real estate: Residential 1-4 family $ 5,467 $ 2,338 $ 3,505 $ 11,310 $ 2,036,741 $ 2,048,051 $ — Commercial real estate 2,416 — — 2,416 797,979 800,395 — Home equity line of credit 1,263 381 1,342 2,986 860,177 863,163 — Residential land — — 255 255 18,634 18,889 — Commercial construction — — — — 126,768 126,768 — Residential construction — — — — 16,080 16,080 — Commercial 413 510 1,303 2,226 689,825 692,051 — Consumer 1,945 1,001 963 3,909 174,313 178,222 — Total loans $ 11,504 $ 4,230 $ 7,368 $ 23,102 $ 4,720,517 $ 4,743,619 $ — The credit risk profile based on nonaccrual loans, accruing loans 90 days or more past due, and TDR loans was as follows: December 31 2017 2016 (in thousands) Real estate: Residential 1-4 family $ 12,598 $ 11,154 Commercial real estate — 223 Home equity line of credit 4,466 3,080 Residential land 841 878 Commercial construction — — Residential construction — — Commercial 3,069 6,708 Consumer 2,617 1,282 Total nonaccrual loans $ 23,591 $ 23,325 Real estate: Residential 1-4 family $ — $ — Commercial real estate — — Home equity line of credit — — Residential land — — Commercial construction — — Residential construction — — Commercial — — Consumer — — Total accruing loans 90 days or more past due $ — $ — Real estate: Residential 1-4 family $ 10,982 $ 14,450 Commercial real estate 1,016 1,346 Home equity line of credit 6,584 4,934 Residential land 425 2,751 Commercial construction — — Residential construction — — Commercial 1,741 14,146 Consumer 66 10 Total troubled debt restructured loans not included above $ 20,814 $ 37,637 The total carrying amount and the total unpaid principal balance of impaired loans were as follows: December 31 2017 2016 (in thousands) Recorded investment Unpaid principal balance Related allowance Recorded investment Unpaid principal balance Related allowance With no related allowance recorded Real estate: Residential 1-4 family $ 9,097 $ 9,644 $ — $ 9,571 $ 10,400 $ — Commercial real estate — — — 223 228 — Home equity line of credit 1,496 1,789 — 1,500 1,900 — Residential land 1,143 1,434 — 1,218 1,803 — Commercial construction — — — — — — Residential construction — — — — — — Commercial 2,328 3,166 — 6,299 8,869 — Consumer 8 8 — — — — 14,072 16,041 — 18,811 23,200 — With an allowance recorded Real estate: Residential 1-4 family 9,187 9,390 1,248 10,283 10,486 1,352 Commercial real estate 1,016 1,016 65 1,346 1,346 80 Home equity line of credit 6,692 6,736 647 4,658 4,712 215 Residential land 122 122 47 2,411 2,411 789 Commercial construction — — — — — — Residential construction — — — — — — Commercial 2,246 2,252 694 14,240 14,240 1,641 Consumer 58 58 29 10 10 6 19,321 19,574 2,730 32,948 33,205 4,083 Total Real estate: Residential 1-4 family 18,284 19,034 1,248 19,854 20,886 1,352 Commercial real estate 1,016 1,016 65 1,569 1,574 80 Home equity line of credit 8,188 8,525 647 6,158 6,612 215 Residential land 1,265 1,556 47 3,629 4,214 789 Commercial construction — — — — — — Residential construction — — — — — — Commercial 4,574 5,418 694 20,539 23,109 1,641 Consumer 66 66 29 10 10 6 $ 33,393 $ 35,615 $ 2,730 $ 51,759 $ 56,405 $ 4,083 ASB's average recorded investment of, and interest income recognized from, impaired loans were as follows: December 31 2017 2016 2015 (in thousands) Average Interest Average Interest Average Interest With no related allowance recorded Real estate: Residential 1-4 family $ 9,440 $ 316 $ 10,136 $ 324 $ 11,215 $ 332 Commercial real estate 91 11 1,124 — 370 74 Home equity line of credit 1,976 101 1,105 23 484 4 Residential land 1,094 117 1,518 66 2,397 137 Commercial construction — — — — — — Residential construction — — — — — — Commercial 2,776 54 8,694 370 5,185 157 Consumer 1 — 2 — — — 15,378 599 22,579 783 19,651 704 With an allowance recorded Real estate: Residential 1-4 family 9,818 493 11,589 457 11,578 562 Commercial real estate 1,241 54 1,962 15 1,699 — Home equity line of credit 5,045 251 3,765 137 1,597 49 Residential land 1,308 97 2,964 206 4,337 318 Commercial construction — — — — — — Residential construction — — — — — — Commercial 3,691 723 16,106 456 12,507 211 Consumer 57 3 12 — 14 — 21,160 1,621 36,398 1,271 31,732 1,140 Total Real estate: Residential 1-4 family 19,258 809 21,725 781 22,793 894 Commercial real estate 1,332 65 3,086 15 2,069 74 Home equity line of credit 7,021 352 4,870 160 2,081 53 Residential land 2,402 214 4,482 272 6,734 455 Commercial construction — — — — — — Residential construction — — — — — — Commercial 6,467 777 24,800 826 17,692 368 Consumer 58 3 14 — 14 — $ 36,538 $ 2,220 $ 58,977 $ 2,054 $ 51,383 $ 1,844 * Since loan was classified as impaired. Troubled debt restructurings. A loan modification is deemed to be a TDR when the borrower is determined to be experiencing financial difficulties and ASB grants a concession it would not otherwise consider. When a borrower experiencing financial difficulty fails to make a required payment on a loan or is in imminent default, ASB takes a number of steps to improve the collectability of the loan and maximize the likelihood of full repayment. At times, ASB may modify or restructure a loan to help a distressed borrower improve its financial position to eventually be able to fully repay the loan, provided the borrower has demonstrated both the willingness and the ability to fulfill the modified terms. TDR loans are considered an alternative to foreclosure or liquidation with the goal of minimizing losses to ASB and maximizing recovery. ASB may consider various types of concessions in granting a TDR including maturity date extensions, extended amortization of principal, temporary deferral of principal payments, and temporary interest rate reductions. ASB rarely grants principal forgiveness in its TDR modifications. Residential loan modifications generally involve interest rate reduction, extending the amortization period, or capitalizing certain delinquent amounts owed not to exceed the original loan balance. Land loans at origination are typically structured as a three -year term, interest-only monthly payment with a balloon payment due at maturity. Land loan TDR modifications typically involve extending the maturity date up to five years and converting the payments from interest-only to principal and interest monthly, at the same or higher interest rate. Commercial loan modifications generally involve extensions of maturity dates, extending the amortization period, and temporary deferral or reduction of principal payments. ASB generally does not reduce the interest rate on commercial loan TDR modifications. Occasionally, additional collateral and/or guaranties are obtained. All TDR loans are classified as impaired and are segregated and reviewed separately when assessing the adequacy of the allowance for loan losses based on the appropriate method of measuring impairment: (1) present value of expected future cash flows discounted at the loan’s effective original contractual rate, (2) fair value of collateral less cost to sell or (3) observable market price. The financial impact of the calculated impairment amount is an increase to the allowance associated with the modified loan. When available information confirms that specific loans or portions thereof are uncollectible (confirmed losses), these amounts are charged off against the allowance for loan losses. Loan modifications that occurred during 2017 , 2016 , and 2015 and the impact on the allowance for loan losses were as follows: (dollars in thousands) Number of contracts Outstanding recorded investment Net increase in ALLL Years ended Pre-modification Post-modification December 31, 2017 Real estate: Residential 1-4 family 7 $ 742 $ 750 $ 45 Commercial real estate — — — — Home equity line of credit 46 3,016 3,002 557 Residential land 1 92 92 — Commercial construction — — — — Residential construction — — — — Commercial 9 889 889 248 Consumer 1 59 59 27 64 $ 4,798 $ 4,792 $ 877 December 31, 2016 Real estate: Residential 1-4 family 14 $ 3,131 $ 3,245 $ 337 Commercial real estate — — — — Home equity line of credit 36 3,337 3,337 554 Residential land 2 203 204 — Commercial construction — — — — Residential construction — — — — Commercial 15 20,266 20,266 865 Consumer — — — — 67 $ 26,937 $ 27,052 $ 1,756 December 31, 2015 Real estate: Residential 1-4 family 19 $ 3,594 $ 3,668 $ 87 Commercial real estate 1 1,500 1,500 — Home equity line of credit 39 2,441 2,441 370 Residential land 1 218 218 — Commercial construction — — — — Residential construction — — — — Commercial 8 2,267 2,267 486 Consumer — — — — 68 $ 10,020 $ 10,094 $ 943 Loans modified in TDRs that experienced a payment default of 90 days or more in 2017 , 2016 , and 2015 and for which the payment default occurred within one year of the modification, were as follows: Years ended December 31 2017 2016 2015 (dollars in thousands) Number of contracts Recorded investment Number of contracts Recorded investment Number of Recorded Troubled debt restructurings that subsequently defaulted Real estate: Residential 1-4 family 1 $ 222 1 $ 239 — $ — Commercial real estate — — — — — — Home equity line of credit — — — — 1 6 Residential land — — — — — — Commercial construction — — — — — — Residential construction — — — — — — Commercial — — 1 24 1 1,056 Consumer — — — — — — 1 $ 222 2 $ 263 2 $ 1,062 If loans modified in a TDR subsequently default, ASB evaluates the loan for further impairment. Based on its evaluation, adjustments may be made in the allocation of the allowance or partial charge-offs may be taken to further write-down the carrying value of the loan. Commitments to lend additional funds to borrowers whose loan terms have been modified in a TDR totaled nil and $2.6 million at December 31, 2017 and 2016 , respectively. The Company had $4.3 million and $3.9 million of consumer mortgage loans collateralized by residential real estate property that were in the process of foreclosure at December 31, 2017 and 2016 , respectively. Mortgage servicing rights. 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 $128.0 million , $236.1 million and $275.3 million of proceeds from the sale of residential mortgages in 2017 , 2016 , and 2015 , respectively, and recognized gains on such sales of $2.2 million , $6.6 million , and $6.3 million in 2017 , 2016 , and 2015 , respectively. Repurchased mortgage loans were nil for 2017 , 2016 and 2015 . Mortgage servicing fees, a component of other income, net, were $3.0 million , $2.9 million , and $3.5 million for the years ended December 31, 2017 , 2016 , and 2015 , respectively. Changes in the carrying value of mortgage servicing rights were as follows: (in thousands) Gross 1 Accumulated amortization 1 Valuation allowance Net December 31, 2017 $ 17,511 $ (8,872 ) $ — $ 8,639 December 31, 2016 $ 17,271 $ (7,898 ) $ — $ 9,373 1 Reflects impact of loans paid in full. Changes related to mortgage servicing rights were as follows: (in thousands) 2017 2016 2015 Mortgage servicing rights Balance, January 1 $ 9,373 $ 8,884 $ 11,749 Amount capitalized 1,239 2,740 3,123 Amortization (1,973 ) (2,251 ) (2,682 ) Sale of mortgage servicing rights — — (3,302 ) Other-than-temporary impairment — — (4 ) Carrying amount before valuation allowance, December 31 8,639 9,373 8,884 Valuation allowance for mortgage servicing rights Balance, January 1 — — 209 Provision (recovery) — — (205 ) Other-than-temporary impairment — — (4 ) Balance, December 31 — — — Net carrying value of mortgage servicing rights $ 8,639 $ 9,373 $ 8,884 The estimated aggregate amortization expenses of mortgage servicing rights for 2018 , 2019 , 2020 , 2021 and 2022 are $1.3 million , $1.1 million , $1.0 million , $0.9 million and $0.8 million , respectively. ASB capitalizes mortgage servicing rights acquired upon the sale of mortgage loans with servicing rights retained. On a monthly basis, ASB compares the net carrying value of the mortgage servicing rights to its fair value to determine if there are any changes to the valuation allowance and/or other-than-temporary impairment for the mortgage servicing rights. ASB's MSRs are stratified based on predominant risk characteristics of the underlying loans including loan type such as fixed-rate 15 and 30 year mortgages and note rate in bands of 50 to 100 basis points. For each stratum, fair value is calculated by discounting expected net income streams using discount rates that reflect industry pricing for similar assets. Changes in mortgage interest rates impact the value of ASB's mortgage servicing rights. Rising interest rates typically result in slower prepayment speeds in the loans being serviced for others, which increases the value of mortgage serv |
