| Bank segment | Bank segment Selected financial information American Savings Bank, F.S.B. Statements of Income and Comprehensive Income Data Three months ended June 30 Six months ended June 30 (in thousands) 2024 2023 2024 2023 Interest and dividend income Interest and fees on loans $ 72,960 $ 67,966 $ 145,931 $ 132,808 Interest and dividends on investment securities 13,218 13,775 28,182 28,412 Total interest and dividend income 86,178 81,741 174,113 161,220 Interest expense Interest on deposit liabilities 18,015 9,661 35,447 16,498 Interest on other borrowings 6,479 8,852 14,633 16,573 Total interest expense 24,494 18,513 50,080 33,071 Net interest income 61,684 63,228 124,033 128,149 Provision for credit losses (1,910) 43 (4,069) 1,218 Net interest income after provision for credit losses 63,594 63,185 128,102 126,931 Noninterest income Fees from other financial services 5,133 5,009 10,007 9,688 Fee income on deposit liabilities 4,630 4,504 9,528 9,103 Fee income on other financial products 2,960 2,768 5,703 5,512 Bank-owned life insurance 2,255 1,955 5,839 3,380 Mortgage banking income 364 230 788 360 Gain on sale of real estate — 495 — 495 Other income, net 423 678 1,109 1,479 Total noninterest income 15,765 15,639 32,974 30,017 Noninterest expense Compensation and employee benefits 29,802 29,394 62,261 59,598 Occupancy 5,220 5,539 10,283 11,127 Data processing 4,960 5,095 9,806 10,107 Services 4,250 2,689 8,401 5,284 Equipment 2,477 2,957 5,126 5,603 Office supplies, printing and postage 1,006 1,109 2,024 2,274 Marketing 747 834 1,523 1,850 Goodwill impairment 82,190 — 82,190 — Other expense 5,813 6,152 10,755 12,343 Total noninterest expense 136,465 53,769 192,369 108,186 Income (loss) before income taxes (57,106) 25,055 (31,293) 48,762 Income tax (benefit) (11,319) 4,851 (6,440) 9,996 Net income (loss) (45,787) 20,204 (24,853) 38,766 Other comprehensive income (loss), net of taxes 1,633 (7,210) (8,135) 11,220 Comprehensive income (loss) $ (44,154) $ 12,994 $ (32,988) $ 49,986 Reconciliation to amounts per HEI Condensed Consolidated Statements of Income*: Three months ended June 30 Six months ended June 30 (in thousands) 2024 2023 2024 2023 Interest and dividend income $ 86,178 $ 81,741 $ 174,113 $ 161,220 Noninterest income 15,765 15,639 32,974 30,017 Less: Gain on sale of real estate — 495 — 495 *Revenues-Bank 101,943 96,885 207,087 190,742 Total interest expense 24,494 18,513 50,080 33,071 Provision for credit losses (1,910) 43 (4,069) 1,218 Noninterest expense 136,465 53,769 192,369 108,186 Less: Gain on sale of real estate — 495 — 495 Less: Retirement defined benefits credit—other than service costs (280) (187) (561) (374) *Expenses-Bank 159,329 72,017 238,941 142,354 *Operating income (loss)-Bank (57,386) 24,868 (31,854) 48,388 Add back: Retirement defined benefits credit—other than service costs (280) (187) (561) (374) Income (loss) before income taxes $ (57,106) $ 25,055 $ (31,293) $ 48,762 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 our June 30, 2024 impairment test we recorded a pretax goodwill impairment charge of $82.2 million for the three and six months ended June 30, 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) June 30, 2024 December 31, 2023 Assets Cash and due from banks $ 139,114 $ 184,383 Interest-bearing deposits 195,721 251,072 Cash and cash equivalents 334,835 435,455 Investment securities Available-for-sale, at fair value 1,061,687 1,136,439 Held-to-maturity, at amortized cost (fair value of $1,058,691 and $1,103,668, at June 30, 2024 and December 31, 2023, respectively) 1,179,182 1,201,314 Stock in Federal Home Loan Bank, at cost 29,204 14,728 Loans held for investment 6,030,158 6,180,810 Allowance for credit losses (66,813) (74,372) Net loans 5,963,345 6,106,438 Loans held for sale, at lower of cost or fair value 13,904 15,168 Other 698,648 681,460 Goodwill — 82,190 Total assets $ 9,280,805 $ 9,673,192 Liabilities and shareholder’s equity Deposit liabilities—noninterest-bearing $ 2,515,062 $ 2,599,762 Deposit liabilities—interest-bearing 5,521,411 5,546,016 Other borrowings 520,000 750,000 Other 226,488 247,563 Total liabilities 8,782,961 9,143,341 Common stock 1 1 Additional paid-in capital 359,048 358,067 Retained earnings 439,202 464,055 Accumulated other comprehensive loss, net of tax benefits Net unrealized losses on securities $ (291,864) $ (282,963) Retirement benefit plans (8,543) (300,407) (9,309) (292,272) Total shareholder’s equity 497,844 529,851 Total liabilities and shareholder’s equity $ 9,280,805 $ 9,673,192 Other assets Bank-owned life insurance $ 197,714 $ 187,857 Premises and equipment, net 181,855 187,042 Accrued interest receivable 29,003 28,472 Mortgage-servicing rights 7,906 8,169 Low-income housing investments 104,394 112,234 Deferred tax asset 122,927 104,292 Other 54,849 53,394 Total other assets $ 698,648 $ 681,460 Other liabilities Accrued expenses $ 110,173 $ 115,231 Cashier’s checks 37,372 40,479 Advance payments by borrowers 11,477 10,107 Other 67,466 81,746 Total other liabilities $ 226,488 $ 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 Gross unrealized losses Less than 12 months 12 months or longer (dollars in thousands) Number of issues Fair Amount Number of issues Fair Amount June 30, 2024 Available-for-sale U.S. Treasury and federal agency obligations $ 9,226 $ — $ (343) $ 8,883 — $ — $ — 8 $ 8,883 $ (343) Mortgage-backed securities* 1,229,529 3 (223,731) 1,005,801 — — — 115 1,005,191 (223,731) Corporate bonds 35,171 — (2,244) 32,927 — — — 3 32,927 (2,244) Mortgage revenue bonds 14,076 — — 14,076 — — — — — — $ 1,288,002 $ 3 $ (226,318) $ 1,061,687 — $ — $ — 126 $ 1,047,001 $ (226,318) Held-to-maturity U.S. Treasury and federal agency obligations $ 59,929 $ — $ (7,839) $ 52,090 — $ — $ — 3 $ 52,090 $ (7,839) Mortgage-backed securities* 1,119,253 41 (112,693) 1,006,601 30 314,047 (9,253) 72 685,612 (103,440) $ 1,179,182 $ 41 $ (120,532) $ 1,058,691 30 $ 314,047 $ (9,253) 75 $ 737,702 $ (111,279) 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 June 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 June 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: June 30, 2024 Amortized Fair value (in thousands) Available-for-sale Due in one year or less $ 626 $ 614 Due after one year through five years 43,771 41,196 Due after five years through ten years 14,076 14,076 Due after ten years — — 58,473 55,886 Mortgage-backed securities — issued or guaranteed by U.S. Government agencies or sponsored agencies 1,229,529 1,005,801 Total available-for-sale securities $ 1,288,002 $ 1,061,687 Held-to-maturity Due in one year or less $ — $ — Due after one year through five years 39,849 35,286 Due after five years through ten years 20,080 16,804 Due after ten years — — 59,929 52,090 Mortgage-backed securities — issued or guaranteed by U.S. Government agencies or sponsored agencies 1,119,253 1,006,601 Total held-to-maturity securities $ 1,179,182 $ 1,058,691 There were no sales of available-for-sale securities for the three and six months ended June 30, 2024 and 2023. The components of loans were summarized as follows: June 30, 2024 December 31, 2023 (in thousands) Real estate: Residential 1-4 family $ 2,603,825 $ 2,595,162 Commercial real estate 1,368,907 1,374,038 Home equity line of credit 973,216 1,017,207 Residential land 20,818 18,364 Commercial construction 181,148 172,405 Residential construction 17,254 17,843 Total real estate 5,165,168 5,195,019 Commercial 648,286 743,303 Consumer 244,637 272,256 Total loans 6,058,091 6,210,578 Less: Deferred fees and discounts (27,933) (29,768) Allowance for credit losses (66,813) (74,372) Total loans, net $ 5,963,345 $ 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 June 30, 2024, ASB had commitments to borrowers for loans and unused lines and letters of credit of $1.9 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 Commercial real Home Residential land Commercial construction Residential construction Commercial loans Consumer loans Total Three months ended June 30, 2024 Allowance for credit losses: Beginning balance $ 6,406 $ 20,334 $ 8,073 $ 672 $ 3,401 $ 41 $ 7,614 $ 24,516 $ 71,057 Charge-offs — — — — — — (126) (3,000) (3,126) Recoveries 7 — 9 — — — 190 686 892 Provision (194) (1,678) 1,470 87 (32) (3) (1,361) (299) (2,010) Ending balance $ 6,219 $ 18,656 $ 9,552 $ 759 $ 3,369 $ 38 $ 6,317 $ 21,903 $ 66,813 Three months ended June 30, 2023 Allowance for credit losses: Beginning balance $ 4,612 $ 22,701 $ 6,053 $ 620 $ 735 $ 28 $ 11,936 $ 24,611 $ 71,296 Charge-offs (181) — (297) — — — (157) (2,568) (3,203) Recoveries 2 — 17 3 — — 206 904 1,132 Provision 275 (2,423) 1,366 30 1,814 (2) (627) (590) (157) Ending balance $ 4,708 $ 20,278 $ 7,139 $ 653 $ 2,549 $ 26 $ 11,358 $ 22,357 $ 69,068 Six months ended June 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 (842) — — — — — (240) (5,719) (6,801) Recoveries 193 — 247 — — — 285 1,686 2,411 Provision (567) (3,529) 1,527 138 (234) (5) (2,850) 2,351 (3,169) Ending balance $ 6,219 $ 18,656 $ 9,552 $ 759 $ 3,369 $ 38 $ 6,317 $ 21,903 $ 66,813 Six months ended June 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) — — — (384) (4,891) (6,625) Recoveries 6 — 34 3 — — 604 1,812 2,459 Provision (578) (1,620) 1,340 (67) 1,354 (20) (1,288) 1,897 1,018 Ending balance $ 4,708 $ 20,278 $ 7,139 $ 653 $ 2,549 $ 26 $ 11,358 $ 22,357 $ 69,068 Allowance for loan commitments. The allowance for loan commitments by portfolio segment were as follows: (in thousands) Home equity Commercial construction Commercial loans Total Three months ended June 30, 2024 Allowance for loan commitments: Beginning balance $ 600 $ 3,100 $ 400 $ 4,100 Provision 100 — — 100 Ending balance $ 700 $ 3,100 $ 400 $ 4,200 Three months ended June 30, 2023 Allowance for loan commitments: Beginning balance $ 400 $ 2,600 $ 1,400 $ 4,400 Provision 200 1,200 (1,200) 200 Ending balance $ 600 $ 3,800 $ 200 $ 4,600 Six months ended June 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 Six months ended June 30, 2023 Allowance for loan commitments: Beginning balance $ 400 $ 2,600 $ 1,400 $ 4,400 Provision 200 1,200 (1,200) 200 Ending balance $ 600 $ 3,800 $ 200 $ 4,600 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 June 30, 2024 Residential 1-4 family Current $ 89,885 $ 255,714 $ 399,372 $ 715,212 $ 390,719 $ 745,688 $ — $ — $ 2,596,590 30-59 days past due — — — — — 1,362 — — 1,362 60-89 days past due — — — 543 — 1,304 — — 1,847 Greater than 89 days past due — — 726 — — 3,300 — — 4,026 89,885 255,714 400,098 715,755 390,719 751,654 — — 2,603,825 Home equity line of credit Current — — — — — — 905,690 63,617 969,307 30-59 days past due — — — — — — 1,403 632 2,035 60-89 days past due — — — — — — 542 216 758 Greater than 89 days past due — — — — — — 885 231 1,116 — — — — — — 908,520 64,696 973,216 Residential land Current 5,402 3,748 4,524 4,797 1,737 610 — — 20,818 30-59 days past due — — — — — — — — — 60-89 days past due — — — — — — — — — Greater than 89 days past due — — — — — — — — — 5,402 3,748 4,524 4,797 1,737 610 — — 20,818 Residential construction Current 550 7,501 9,203 — — — — — 17,254 30-59 days past due — — — — — — — — — 60-89 days past due — — — — — — — — — Greater than 89 days past due — — — — — — — — — 550 7,501 9,203 — — — — — 17,254 Consumer Current 18,275 70,089 130,936 6,589 840 328 9,746 2,071 238,874 30-59 days past due 242 552 1,040 126 12 3 61 141 2,177 60-89 days past due 22 602 1,053 53 7 3 43 25 1,808 Greater than 89 days past due — 454 916 63 10 — 179 156 1,778 18,539 71,697 133,945 6,831 869 334 10,029 2,393 244,637 Commercial real estate Pass 22,976 105,110 376,911 189,510 263,783 373,432 15,482 — 1,347,204 Special Mention — — 1,208 1,465 — 1,116 — — 3,789 Substandard — — — 1,516 — 13,990 — — 15,506 Doubtful — — — — — 2,408 — — 2,408 22,976 105,110 378,119 192,491 263,783 390,946 15,482 — 1,368,907 Commercial construction Pass — 62,306 36,925 16,416 1,333 — 64,168 — 181,148 Special Mention — — — — — — — — — Substandard — — — — — — — — — Doubtful — — — — — — — — — — 62,306 36,925 16,416 1,333 — 64,168 — 181,148 Commercial Pass 33,205 88,184 166,815 92,150 71,214 79,756 97,353 6,929 635,606 Special Mention — 1,685 — — — — 3,801 — 5,486 Substandard — — 2,775 472 — 3,049 730 80 7,106 Doubtful — — — — 88 — — — 88 33,205 89,869 169,590 92,622 71,302 82,805 101,884 7,009 648,286 Total loans $ 170,557 $ 595,945 $ 1,132,404 $ 1,028,912 $ 729,743 $ 1,226,349 $ 1,100,083 $ 74,098 $ 6,058,091 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 Six months ended June 30, 2024 Residential 1-4 family $ — $ — $ 361 $ 277 $ — $ 204 $ 842 Commercial real estate — — — — — — — Home equity line of credit — — — — — — — Residential land — — — — — — — Commercial construction — — — — — — — Residential construction — — — — — — — Commercial — — — 14 — 226 240 Consumer 398 1,969 2,803 281 75 193 5,719 Total $ 398 $ 1,969 $ 3,164 $ 572 $ 75 $ 623 $ 6,801 Revolving loans converted to term loans during the six months ended June 30, 2024 in the commercial, home equity line of credit and consumer portfolios were $1.9 million, $11.3 million and $0.4 million, respectively. Revolving loans converted to term loans during the six months ended June 30, 2023 in the commercial, home equity line of credit and consumer portfolios were $2.0 million, $14.9 million and $0.9 million, respectively. The credit risk profile based on payment activity for loans was as follows: (in thousands) 30-59 60-89 90 days or more past due Total Current Total Amortized cost> June 30, 2024 Real estate: Residential 1-4 family $ 1,362 $ 1,847 $ 4,026 $ 7,235 $ 2,596,590 $ 2,603,825 $ — Commercial real estate — — 10,908 10,908 1,357,999 1,368,907 — Home equity line of credit 2,035 758 1,116 3,909 969,307 973,216 — Residential land — — — — 20,818 20,818 — Commercial construction — — — — 181,148 181,148 — Residential construction — — — — 17,254 17,254 — Commercial 107 150 108 365 647,921 648,286 — Consumer 2,177 1,808 1,778 5,763 238,874 244,637 — Total loans $ 5,681 $ 4,563 $ 17,936 $ 28,180 $ 6,029,911 $ 6,058,091 $ — 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) June 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 $ 9,542 $ 4,446 $ 13,988 $ 7,755 $ 2,190 $ 9,945 Commercial real estate 10,908 — 10,908 11,048 — 11,048 Home equity line of credit 2,211 1,091 3,302 2,626 1,135 3,761 Residential land 675 — 675 780 — 780 Commercial construction — — — — — — Residential construction — — — — — — Commercial 169 173 342 133 301 434 Consumer 2,656 — 2,656 2,458 — 2,458 Total $ 26,161 $ 5,710 $ 31,871 $ 24,800 $ 3,626 $ 28,426 ASB did not recognize interest on nonaccrual loans for the six months ended June 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 six months ended June 30, 2024 were as follows: (in thousands) Term extension Payment delay Combination payment delay & term extension Total % of total class of loans Three months ended June 30, 2024 Real estate loans Residential 1-4 family $ 50 $ 2,093 $ — $ 2,143 0.08 % Commercial real estate — — — — — Home equity line of credit — — — — — Residential land — — — — — Commercial construction — — — — — Residential construction — — — — — Commercial — — — — — Consumer — — — — — Total $ 50 $ 2,093 $ — $ 2,143 0.04 % Six months ended June 30, 2024 Real estate loans Residential 1-4 family $ 315 $ 4,931 $ — $ 5,246 0.20 % Commercial real estate — — 1,208 1,208 0.09 % Home equity line of credit — 447 — 447 0.05 % Residential land — 675 — 675 3.24 % Commercial construction — — — — — Residential construction — — — — — Commercial — — — — — Consumer — — — — — Total $ 315 $ 6,053 $ 1,208 $ 7,576 0.13 % Financial effect of loan modifications during the three and six months ended June 30, 2024 for borrowers experiencing financial difficulty were as follows: Weighted average Term extension (in months) Payment delay (in months) Three months ended June 30, 2024 Real estate loans Residential 1-4 family 114 11 Commercial real estate — — Home equity line of credit — — Residential land — — Commercial construction — — Residential construction — — Commercial — — Consumer — — Six months ended June 30, 2024 Real estate loans Residential 1-4 family 149 10 Commercial real estate 9 9 Home equity line of credit — 9 Residential land — 9 Commercial construction — — Residential construction — — Commercial — — Consumer — — Credit risk profile based on payment activity for loans modified during the six months ended June 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 $ 3,144 $ — $ — $ 2,102 $ 5,246 Commercial real estate 1,208 — — — 1,208 Home equity line of credit 447 — — — 447 Residential land 675 — — — 675 Commercial construction — — — — — Residential construction — — — — — Commercial — — — — — Consumer — — — — — Total $ 5,474 $ — $ — $ 2,102 $ 7,576 During the six months ended June 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) June 30, 2024 December 31, 2023 Collateral type Real estate: Residential 1-4 family $ 4,524 $ 2,272 Residential real estate property Commercial real estate 10,908 11,048 Commercial real estate property Home equity line of credit 1,200 1,135 Residential real estate property Total real estate 16,632 14,455 Commercial 262 301 Business assets Total $ 16,894 $ 14,756 ASB had $3.6 million and $3.4 million of consumer mortgage loans collateralized by residential real estate property that were in the process of foreclosure at June 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 $30.9 million and $8.9 million for the three months ended June 30, 2024 and 2023, respectively, and recognized gains on such sales of $0.4 million and $0.3 million for the three months ended June 30, 2024 and 2023, respectively. ASB received proceeds from the sale of residential mortgages of $57.3 million and $14.6 million for the six months ended June 30, 2024 and 2023, respectively, and recognized gains on such sales of $0.8 million and $0.4 million for the six months ended June 30, 2024 and 2023, respectively. There were no repurchased mortgage loans for the six months ended June 30, 2024 and 2023. Mortgage servicing fees, a component of other income, net, were $0.8 million and $0.9 million for the three months ended June 30, 2024 and 2023, respectively. Mortgage servicing fees, a component of other income, net, were $1.7 million and $1.8 million for the six months ended June 30, 2024 and 2023, respectively. Changes in the carrying value of MSRs were as follows: (in thousands) Gross Accumulated amortization Valuation allowance Net June 30, 2024 $ 18,114 $ (10,208) $ — $ 7,906 December 31, 2023 18,241 (10,072) — 8,169 Changes related to MSRs were as follows: Three months ended June 30 Six months ended June 30 (in thousands) 2024 2023 2024 2023 Mortgage servicing rights Beginning balance $ 8,050 $ 8,745 $ 8,169 $ 9,047 Amount capitalized 179 84 377 135 Amortization (323) (334) (640) (687) Other-than-temporary impairment — — — — Carrying amount before valuation allowance 7,906 8,495 7,906 8,495 Valuation allowance for mortgage servicing rights Beginning balance — — — — Provision — — — — Other-than-temporary impairment — — — — Ending balance — — — — Net carrying value of mortgage servicing rights $ 7,906 $ 8,495 $ 7,906 $ 8,495 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 |
