| Bank segment (HEI only) | Note 4 · Bank segment (HEI only) Selected financial information American Savings Bank, F.S.B. Statements of Income and Comprehensive Income Data Years ended December 31 2022 2021 2020 (in thousands) Interest and dividend income Interest and fees on loans $ 207,830 $ 198,802 $ 214,134 Interest and dividends on investment securities 58,044 43,464 30,529 Total interest and dividend income 265,874 242,266 244,663 Interest expense Interest on deposit liabilities 7,327 4,981 10,654 Interest on other borrowings 5,974 59 460 Total interest expense 13,301 5,040 11,114 Net interest income 252,573 237,226 233,549 Provision for credit losses 2,037 (25,825) 50,811 Net interest income after provision for credit losses 250,536 263,051 182,738 Noninterest income Fees from other financial services 19,830 21,225 16,447 Fee income on deposit liabilities 18,762 16,663 16,059 Fee income on other financial products 10,291 8,770 6,381 Bank-owned life insurance 2,533 7,318 6,483 Mortgage banking income 1,692 9,305 23,734 Gain on sale of real estate 1,778 — — Gain on sale of investment securities, net — 528 9,275 Other income, net 2,086 851 (256) Total noninterest income 56,972 64,660 78,123 Noninterest expense Compensation and employee benefits 113,839 113,970 104,443 Occupancy 24,026 20,584 21,573 Data processing 17,681 17,634 14,769 Services 10,679 10,327 11,121 Equipment 10,100 9,510 9,001 Office supplies, printing and postage 4,398 4,239 4,623 Marketing 3,968 3,870 3,435 FDIC insurance 3,591 3,235 2,342 Other expense 1 16,985 13,783 20,283 Total noninterest expense 205,267 197,152 191,590 Income before income taxes 102,241 130,559 69,271 Income taxes 22,252 29,325 11,688 Net income 79,989 101,234 57,583 Other comprehensive income (loss), net of taxes (298,833) (52,728) 23,608 Comprehensive income (loss) $ (218,844) $ 48,506 $ 81,191 1 2020, included approximately $5.1 million of certain direct and incremental COVID-19 related costs, including $2.5 million of compensation expense and $2.0 million of enhanced cleaning and sanitation costs. Reconciliation to amounts per HEI Consolidated Statements of Income*: Years ended December 31 2022 2021 2020 (in thousands) Interest and dividend income $ 265,874 $ 242,266 $ 244,663 Noninterest income 56,972 64,660 78,123 Less: Gain on sale of real estate 1,778 — — Less: Gain on sale of investment securities, net — 528 9,275 *Revenues-Bank 321,068 306,398 313,511 Total interest expense 13,301 5,040 11,114 Provision for credit losses 2,037 (25,825) 50,811 Noninterest expense 205,267 197,152 191,590 Less: Retirement defined benefits expense (credit)—other than service costs (723) (1,828) 1,813 Add: Gain on sale of real estate 1,778 — — *Expenses-Bank 219,550 178,195 251,702 *Operating income-Bank 101,518 128,203 61,809 Add back: Retirement defined benefits expense (credit)—other than service costs (723) (1,828) 1,813 Add back: Gain on sale of investment securities, net — 528 9,275 Income before income taxes $ 102,241 $ 130,559 $ 69,271 Balance Sheets Data December 31 2022 2021 (in thousands) Assets Cash and due from banks $ 153,042 $ 100,051 Interest-bearing deposits 3,107 151,189 Cash and cash equivalents 156,149 251,240 Investment securities Available-for-sale, at fair value 1,429,667 2,574,618 Held-to-maturity, at amortized cost (fair value of $1,150,971 and $510,474 at December 31, 2022 and 2021, respectively) 1,251,747 522,270 Stock in Federal Home Loan Bank, at cost 26,560 10,000 Loans held for investment 5,978,906 5,211,114 Allowance for credit losses (72,216) (71,130) Net loans 5,906,690 5,139,984 Loans held for sale, at lower of cost or fair value 824 10,404 Other 692,143 590,897 Goodwill 82,190 82,190 Total assets $ 9,545,970 $ 9,181,603 Liabilities and shareholder’s equity Deposit liabilities–noninterest-bearing $ 2,811,077 $ 2,976,632 Deposit liabilities–interest-bearing 5,358,619 5,195,580 Other borrowings 695,120 88,305 Other 212,269 193,268 Total liabilities 9,077,085 8,453,785 Commitments and contingencies Common stock 1 1 Additional paid in capital 355,806 353,895 Retained earnings 449,693 411,704 Accumulated other comprehensive loss, net of tax benefits Net unrealized losses on securities $ (328,904) $ (32,037) Retirement benefit plans (7,711) (336,615) (5,745) (37,782) Total shareholder’s equity 468,885 727,818 Total liabilities and shareholder’s equity $ 9,545,970 $ 9,181,603 December 31 2022 2021 (in thousands) Other assets Bank-owned life insurance $ 182,986 $ 177,566 Premises and equipment, net 195,324 202,299 Accrued interest receivable 25,077 20,854 Mortgage servicing rights 9,047 9,950 Low-income housing investments 106,978 110,989 Deferred tax asset 116,441 7,699 Real estate acquired in settlement of loans, net 115 — Other 56,175 61,540 $ 692,143 $ 590,897 Other liabilities Accrued expenses $ 97,295 $ 87,905 Federal income taxes payable 863 — Cashier’s checks 36,401 33,675 Advance payments by borrowers 9,637 9,994 Other 68,073 61,694 $ 212,269 $ 193,268 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 Gross unrealized Estimated fair value Less than 12 months 12 months or longer (dollars in thousands) Amortized Number of issues Fair value Amount Number of issues Fair value Amount 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) December 31, 2021 Available-for-sale U.S. Treasury and federal agency obligations $ 89,714 $ 803 $ (427) $ 90,090 4 $ 44,827 $ (427) — $ — $ — Mortgage-backed securities* 2,482,618 6,511 (51,206) 2,437,923 120 1,845,243 (38,321) 18 271,012 (12,885) Corporate bonds 30,625 655 (102) 31,178 1 12,780 (102) — — — Mortgage revenue bonds 15,427 — — 15,427 — — — — — — $ 2,618,384 $ 7,969 $ (51,735) $ 2,574,618 125 $ 1,902,850 $ (38,850) 18 $ 271,012 $ (12,885) Held-to-maturity U.S. Treasury and federal agency obligations $ 59,871 $ 168 $ (170) $ 59,869 2 $ 39,594 $ (170) — $ — $ — Mortgage-backed securities* 462,399 1,480 (13,274) 450,605 22 290,883 (7,665) 7 106,483 (5,609) $ 522,270 $ 1,648 $ (13,444) $ 510,474 24 $ 330,477 $ (7,835) 7 $ 106,483 $ (5,609) * 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, 2022, 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, 2022. 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, 2022 Cost value (in thousands) Available-for-sale Due in one year or less $ 1,193 $ 1,171 Due after one year through five years 106,628 98,871 Due after five years through ten years 39,802 36,657 Due after ten years — — 147,623 136,699 Mortgage-backed securities — issued or guaranteed by U.S. Government agencies or sponsored agencies 1,530,582 1,292,968 Total available-for-sale securities $ 1,678,205 $ 1,429,667 Held-to-maturity Due in one year or less $ — $ — Due after one year through five years — — Due after five years through ten years 59,894 51,416 Due after ten years — — 59,894 51,416 Mortgage-backed securities — issued or guaranteed by U.S. Government agencies or sponsored agencies 1,191,853 1,099,555 Total held-to-maturity securities $ 1,251,747 $ 1,150,971 The proceeds, gross gains and losses from sales of available-for-sale securities were as follows: Years ended December 31 2022 2021 2020 (in thousands) Proceeds $ — $ 197,354 $ 169,157 Gross gains — 975 9,275 Gross losses — (447) — Tax expense on realized gains — 142 2,486 Interest income from taxable and non-taxable investment securities were as follows: Years ended December 31 2022 2021 2020 (in thousands) Taxable $ 56,731 $ 42,534 $ 29,760 Non-taxable 1,313 930 769 $ 58,044 $ 43,464 $ 30,529 ASB pledged securities with a market value of approximately $929 million and $416 million as of December 31, 2022 and 2021, 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 $327 million and $161 million as of December 31, 2022 and 2021, 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. There was no impact to net income as a result of the transfer. 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, 2022 and 2021, ASB’s stock in FHLB was carried at cost ($26.6 million and $10.0 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, 2022, consistent with its accounting policy. ASB did not recognize any credit losses for 2022, 2021 and 2020 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 2022 2021 (in thousands) Real estate: Residential 1-4 family $ 2,479,637 $ 2,299,212 Commercial real estate 1,358,123 1,056,982 Home equity line of credit 1,002,905 835,663 Residential land 20,679 19,859 Commercial construction 88,489 91,080 Residential construction 20,788 11,138 Total real estate 4,970,621 4,313,934 Commercial 779,691 793,304 Consumer 254,709 113,966 Total loans 6,005,021 5,221,204 Less: Deferred fees and discounts (26,115) (10,090) Allowance for credit losses (72,216) (71,130) Total loans, net $ 5,906,690 $ 5,139,984 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 property purchases, the loan-to-value ratio may not exceed 75% 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, 2022, 2021 and 2020, 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, 2022 and 2021, ASB had pledged loans with an amortized cost of approximately $3.0 billion and $2.8 billion, respectively, as collateral to secure advances from the FHLB. As of December 31, 2022 and 2021, 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 $10.7 million and $13.1 million, respectively. As of December 31, 2022 and 2021, there was a loan to a related interest of a director of ASB for $10.0 million. The loan was 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 Home equity Residential land Commercial construction Residential construction Commercial Consumer Total 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 % December 31, 2020 Allowance for credit losses: Beginning balance, prior to adoption of ASU No. 2016-13 $ 2,380 $ 15,053 $ 6,922 $ 449 $ 2,097 $ 3 $ 10,245 $ 16,206 $ 53,355 Impact of adopting ASU No. 2016-13 2,150 208 (541) (64) 289 14 922 16,463 19,441 Charge-offs (7) — (77) (351) — — (5,819) (19,900) (26,154) Recoveries 394 — 63 38 — — 872 3,381 4,748 Net (charge-offs) recoveries 387 — (14) (313) — — (4,947) (16,519) (21,406) Provision (317) 20,346 446 537 1,763 (6) 19,242 7,800 49,811 Ending balance $ 4,600 $ 35,607 $ 6,813 $ 609 $ 4,149 $ 11 $ 25,462 $ 23,950 $ 101,201 Average loans outstanding $ 2,148,848 $ 861,096 $ 1,060,444 $ 13,799 $ 93,740 $ 10,703 $ 935,663 $ 215,994 $ 5,340,287 Net charge-offs (recoveries) to average loans (0.02) % — % — % 2.27 % — % — % 0.53 % 7.65 % 0.40 % Allowance for loan commitments. The allowance for loan commitments by portfolio segment were as follows: (in thousands) Home equity Commercial construction Commercial loans Total 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 Year ended December 31, 2020 Allowance for loan commitments: Beginning balance, prior to adoption of ASU No. 2016-13 $ 392 $ 931 $ 418 $ 1,741 Impact of adopting ASU No. 2016-13 (92) 1,745 (94) 1,559 Provision — 324 676 1,000 Ending balance $ 300 $ 3,000 $ 1,000 $ 4,300 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) 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 Term loans by origination year Revolving loans (in thousands) 2021 2020 2019 2018 2017 Prior Revolving loans Converted to term loans Total December 31, 2021 Residential 1-4 family Current $ 791,758 $ 461,683 $ 133,345 $ 64,421 $ 124,994 $ 712,452 $ — $ — $ 2,288,653 30-59 days past due — — — 809 — 2,210 — — 3,019 60-89 days past due — — — — — 1,468 — — 1,468 Greater than 89 days past due — — 2,987 — — 3,085 — — 6,072 791,758 461,683 136,332 65,230 124,994 719,215 — — 2,299,212 Home equity line of credit Current — — — — — — 794,518 39,116 833,634 30-59 days past due — — — — — — 296 313 609 60-89 days past due — — — — — — 16 70 86 Greater than 89 days past due — — — — — — 838 496 1,334 — — — — — — 795,668 39,995 835,663 Residential land Current 10,572 6,794 1,116 532 267 181 — — 19,462 30-59 days past due — — — — — — — — — 60-89 days past due — — — — — — — — — Greater than 89 days past due — — — — — 397 — — 397 10,572 6,794 1,116 532 267 578 — — 19,859 Residential construction Current 7,856 3,019 — — 263 — — — 11,138 30-59 days past due — — — — — — — — — 60-89 days past due — — — — — — — — — Greater than 89 days past due — — — — — — — — — 7,856 3,019 — — 263 — — — 11,138 Consumer Current 37,563 15,488 29,383 10,897 302 238 12,740 4,157 110,768 30-59 days past due 202 181 517 234 15 — 156 70 1,375 60-89 days past due 59 127 392 183 8 — 7 106 882 Greater than 89 days past due 14 93 387 192 27 — 141 87 941 37,838 15,889 30,679 11,506 352 238 13,044 4,420 113,966 Commercial real estate Pass 173,794 275,242 49,317 56,490 33,581 259,583 11,602 — 859,609 Special Mention 19,600 3,529 42,935 30,870 20,788 32,824 — — 150,546 Substandard — 684 13,936 1,859 1,805 28,543 — — 46,827 Doubtful — — — — — — — — — 193,394 279,455 106,188 89,219 56,174 320,950 11,602 — 1,056,982 Commercial construction Pass 17,140 43,261 — 11,342 — — 19,337 — 91,080 Special Mention — — — — — — — — — Substandard — — — — — — — — — Doubtful — — — — — — — — — 17,140 43,261 — 11,342 — — 19,337 — 91,080 Commercial Pass 266,087 96,963 79,329 56,497 31,019 66,570 96,673 15,510 708,648 Special Mention 40 27,336 10,071 202 439 8,966 15,303 18 62,375 Substandard 427 184 3,737 1,777 4,457 2,961 7,083 1,655 22,281 Doubtful — — — — — — — — — 266,554 124,483 93,137 58,476 35,915 78,497 119,059 17,183 793,304 Total loans $ 1,325,112 $ 934,584 $ 367,452 $ 236,305 $ 217,965 $ 1,119,478 $ 958,710 $ 61,598 $ 5,221,204 Revolving loans converted to term loans during 2022 in the commercial, home equity line of credit and consumer portfolios were $1.9 million, $15.6 million and $3.5 million, respectively. The credit risk profile based on payment activity for loans was as follows: (in thousands) 30-59 60-89 Greater Total Current Total Recorded 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 $ — December 31, 2021 Real estate: Residential 1-4 family $ 3,019 $ 1,468 $ 6,072 $ 10,559 $ 2,288,653 $ 2,299,212 $ — Commercial real estate — — — — 1,056,982 1,056,982 — Home equity line of credit 609 86 1,334 2,029 833,634 835,663 — Residential land — — 397 397 19,462 19,859 — Commercial construction — — — — 91,080 91,080 — Residential construction — — — — 11,138 11,138 — Commercial 700 313 48 1,061 792,243 793,304 — Consumer 1,375 882 941 3,198 110,768 113,966 — Total loans $ 5,703 $ 2,749 $ 8,792 $ 17,244 $ 5,203,960 $ 5,221,204 $ — The credit risk profile based on nonaccrual loans were as follows: December 31, 2022 December 31, 2021 (in thousands) With a related Without a Total With a related Without a Total Real estate: Residential 1-4 family $ 4,198 $ 2,981 $ 7,179 $ 16,045 $ 3,703 $ 19,748 Commercial real estate — — — 14,104 1,221 15,325 Home equity line of credit 3,654 1,442 5,096 4,227 1,294 5,521 Residential land 420 — 420 97 300 397 Commercial construction — — — — — — Residential construction — — — — — — Commercial 2,183 — 2,183 1,446 692 2,138 Consumer 1,588 — 1,588 1,845 — 1,845 Total $ 12,043 $ 4,423 $ 16,466 $ 37,764 $ 7,210 $ 44,974 The credit risk profile based on loans whose terms have been modified and accruing interest were as follows: (in thousands) December 31, 2022 December 31, 2021 Real estate: Residential 1-4 family $ 8,821 $ 6,949 Commercial real estate 9,477 3,055 Home equity line of credit 4,404 6,021 Residential land 782 980 Commercial construction — — Residential construction — — Commercial 6,596 7,860 Consumer 50 52 Total troubled debt restructured loans accruing interest $ 30,130 $ 24,917 ASB did not recognize interest on nonaccrual loans for 2022, 2021 and 2020. 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 three 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 interest only or 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. The allowance for credit losses on TDR loans that do not share risk characteristics are 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 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 credit losses. Loan modifications that occurred during 2022, 2021, and 2020 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 Year ended December 31, 2020 Real estate: Residential 1-4 family 1 $ 144 $ 6 Commercial real estate 6 20,714 4,439 Home equity line of credit 3 85 11 Residential land 4 668 54 Commercial construction — — — Residential construction — — — Commercial 54 5,380 869 Consumer — — — 68 $ 26,991 $ 5,379 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, 2021, and 2020 and for which the payment default occurred within one year of the modification, were as follows: Years ended December 31 2022 2021 2020 (dollars in thousands) Number of Recorded Number of Recorded Number of Recorded 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 defaults, 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 at December 31, 2022 and 2021. The Coronavirus Aid, Relief, and Economic Security Act (CARES Act) provides that a financial institution may elect to suspend the requirements under GAAP for certain loan modifications that would otherwise be categorized as a TDR and any related impairment for accounting purposes. In response to the COVID-19 pandemic, the Board of Governors of the FRB, the FDIC, the National Credit Union Administration, the OCC, and the Consumer Financial Protection Bureau, in consultation with the state financial regulators (collectively, the “agencies”) issued a joint interagency statement (issued March 22, 2020; revised statement issued April 7, 2020). Some of the provisions applicable to |
