Loans and Leases and the Allowance for Loan and Lease Losses | Loans and Leases The Company's loan and lease portfolio was comprised of the following as of December 31, 2015 and 2014 : December 31, (dollars in thousands) 2015 2014 Commercial Commercial and Industrial $ 1,115,168 $ 1,055,243 Commercial Mortgage 1,677,147 1,437,513 Construction 156,660 109,183 Lease Financing 204,877 226,189 Total Commercial 3,153,852 2,828,128 Consumer Residential Mortgage 2,925,605 2,571,090 Home Equity 1,069,400 866,688 Automobile 381,735 323,848 Other 1 348,393 307,835 Total Consumer 4,725,133 4,069,461 Total Loans and Leases $ 7,878,985 $ 6,897,589 1 Comprised of other revolving credit, installment, and lease financing. Total loans and leases were reported net of unearned income of $47.3 million and $57.0 million as of December 31, 2015 and 2014 , respectively. Commercial loans and residential mortgage loans of $1.0 billion were pledged to secure an undrawn FRB line of credit as of December 31, 2015 and 2014 . As of December 31, 2015 and 2014 , residential mortgage loans of approximately $1.7 billion and $1.1 billion , respectively, were pledged under a blanket pledge arrangement to secure FHLB advances. See Note 10 (Other Debt) for FHLB advances outstanding as of December 31, 2015 and 2014 . Net gains related to sales of residential mortgage loans, recorded as a component of mortgage banking income, were $5.9 million , $2.4 million , and $8.7 million for the years ended December 31, 2015 , 2014 , and 2013 , respectively. Net gains on sales of commercial loans were not material for the years ended December 31, 2015 , 2014 , and 2013 . Substantially all of the Company's lending activity is with customers located in Hawaii. A substantial portion of the Company's real estate loans are secured by real estate in Hawaii. Allowance for Loan and Lease Losses The following presents by portfolio segment, the activity in the Allowance for the years ended December 31, 2015 , 2014 , and 2013 . The following also presents by portfolio segment, the balance in the Allowance disaggregated on the basis of the Company's impairment measurement method and the related recorded investment in loans and leases as of December 31, 2015 , 2014 , and 2013 . (dollars in thousands) Commercial Consumer Total For the Year Ended December 31, 2015 Allowance for Loan and Lease Losses: Balance at Beginning of Period $ 64,551 $ 44,137 $ 108,688 Loans and Leases Charged-Off (954 ) (15,485 ) (16,439 ) Recoveries on Loans and Leases Previously Charged-Off 2,173 7,458 9,631 Net Loans and Leases Recovered (Charged-Off) 1,219 (8,027 ) (6,808 ) Provision for Credit Losses (5,056 ) 6,056 1,000 Balance at End of Period $ 60,714 $ 42,166 $ 102,880 As of December 31, 2015 Allowance for Loan and Lease Losses: Individually Evaluated for Impairment $ 205 $ 3,373 $ 3,578 Collectively Evaluated for Impairment 60,509 38,793 99,302 Total $ 60,714 $ 42,166 $ 102,880 Recorded Investment in Loans and Leases: Individually Evaluated for Impairment $ 27,950 $ 38,747 $ 66,697 Collectively Evaluated for Impairment 3,125,902 4,686,386 7,812,288 Total $ 3,153,852 $ 4,725,133 $ 7,878,985 For the Year Ended December 31, 2014 Allowance for Loan and Lease Losses: Balance at Beginning of Period $ 71,446 $ 44,008 $ 115,454 Loans and Leases Charged-Off (2,068 ) (13,371 ) (15,439 ) Recoveries on Loans and Leases Previously Charged-Off 4,721 8,816 13,537 Net Loans and Leases Recovered (Charged-Off) 2,653 (4,555 ) (1,902 ) Provision for Credit Losses (9,548 ) 4,684 (4,864 ) Balance at End of Period $ 64,551 $ 44,137 $ 108,688 As of December 31, 2014 Allowance for Loan and Lease Losses: Individually Evaluated for Impairment $ 2,387 $ 3,561 $ 5,948 Collectively Evaluated for Impairment 62,164 40,576 102,740 Total $ 64,551 $ 44,137 $ 108,688 Recorded Investment in Loans and Leases: Individually Evaluated for Impairment $ 25,116 $ 39,631 $ 64,747 Collectively Evaluated for Impairment 2,803,012 4,029,830 6,832,842 Total $ 2,828,128 $ 4,069,461 $ 6,897,589 For the Year Ended December 31, 2013 Allowance for Loan and Lease Losses: Balance at Beginning of Period $ 72,704 $ 56,153 $ 128,857 Loans and Leases Charged-Off (8,099 ) (17,021 ) (25,120 ) Recoveries on Loans and Leases Previously Charged-Off 2,644 9,073 11,717 Net Loans and Leases Charged-Off (5,455 ) (7,948 ) (13,403 ) Provision for Credit Losses 4,197 (4,197 ) — Balance at End of Period $ 71,446 $ 44,008 $ 115,454 As of December 31, 2013 Allowance for Loan and Lease Losses: Individually Evaluated for Impairment $ 9,054 $ 3,722 $ 12,776 Collectively Evaluated for Impairment 62,392 40,286 102,678 Total $ 71,446 $ 44,008 $ 115,454 Recorded Investment in Loans and Leases: Individually Evaluated for Impairment $ 38,469 $ 38,646 $ 77,115 Collectively Evaluated for Impairment 2,489,964 3,528,308 6,018,272 Total $ 2,528,433 $ 3,566,954 $ 6,095,387 Credit Quality Indicators The Company uses several credit quality indicators to manage credit risk in an ongoing manner. The Company uses an internal credit risk rating system that categorizes loans and leases into pass, special mention, or classified categories. Credit risk ratings are applied individually to those classes of loans and leases that have significant or unique credit characteristics that benefit from a case-by-case evaluation. These are typically loans and leases to businesses or individuals in the classes which comprise the commercial portfolio segment. Groups of loans and leases that are underwritten and structured using standardized criteria and characteristics, such as statistical models (e.g., credit scoring or payment performance), are typically risk-rated and monitored collectively. These are typically loans and leases to individuals in the classes which comprise the consumer portfolio segment. The following are the definitions of the Company's credit quality indicators: Pass: Loans and leases in all classes within the commercial and consumer portfolio segments that are not adversely rated, are contractually current as to principal and interest, and are otherwise in compliance with the contractual terms of the loan or lease agreement. Management believes that there is a low likelihood of loss related to those loans and leases that are considered pass. Special Mention: Loans and leases in the classes within the commercial portfolio segment that have potential weaknesses that deserve management's close attention. If not addressed, these potential weaknesses may result in deterioration of the repayment prospects for the loan or lease. The special mention credit quality indicator is not used for classes of loans and leases that are included in the consumer portfolio segment. Management believes that there is a moderate likelihood of some loss related to those loans and leases that are considered special mention. Classified: Loans and leases in the classes within the commercial portfolio segment that are inadequately protected by the sound worth and paying capacity of the borrower or of the collateral pledged, if any. Classified loans and leases are also those in the classes within the consumer portfolio segment that are past due 90 days or more as to principal or interest. Residential mortgage loans that are past due 90 days or more as to principal or interest may be considered pass if the Company is in the process of collection and the current loan-to-value ratio is 60% or less. Home equity loans that are past due 90 days or more as to principal or interest may be considered pass if the Company is in the process of collection, the first mortgage is with the Company, and the current combined loan-to-value ratio is 60% or less. Residential mortgage and home equity loans may be current as to principal and interest, but may be considered classified for a period of up to six months following a loan modification. Following a period of demonstrated performance in accordance with the modified contractual terms, the loan may be removed from classified status. Management believes that there is a distinct possibility that the Company will sustain some loss if the deficiencies related to classified loans and leases are not corrected in a timely manner. The Company's credit quality indicators are periodically updated on a case-by-case basis. The following presents by class and by credit quality indicator, the recorded investment in the Company's loans and leases as of December 31, 2015 and 2014 . December 31, 2015 (dollars in thousands) Commercial Commercial Construction Lease Total Pass $ 1,059,475 $ 1,591,696 $ 154,976 $ 204,348 $ 3,010,495 Special Mention 28,076 43,674 80 76 71,906 Classified 27,617 41,777 1,604 453 71,451 Total $ 1,115,168 $ 1,677,147 $ 156,660 $ 204,877 $ 3,153,852 (dollars in thousands) Residential Home Automobile Other 1 Total Pass $ 2,910,667 $ 1,064,253 $ 381,420 $ 347,710 $ 4,704,050 Classified 14,938 5,147 315 683 21,083 Total $ 2,925,605 $ 1,069,400 $ 381,735 $ 348,393 $ 4,725,133 Total Recorded Investment in Loans and Leases $ 7,878,985 December 31, 2014 (dollars in thousands) Commercial Commercial Construction Lease Total Pass $ 1,001,474 $ 1,358,812 $ 107,381 $ 225,783 $ 2,693,450 Special Mention 17,364 45,082 — 17 62,463 Classified 36,405 33,619 1,802 389 72,215 Total $ 1,055,243 $ 1,437,513 $ 109,183 $ 226,189 $ 2,828,128 (dollars in thousands) Residential Home Automobile Other 1 Total Pass $ 2,556,140 $ 862,258 $ 323,232 $ 307,123 $ 4,048,753 Classified 14,950 4,430 616 712 20,708 Total $ 2,571,090 $ 866,688 $ 323,848 $ 307,835 $ 4,069,461 Total Recorded Investment in Loans and Leases $ 6,897,589 1 Comprised of other revolving credit, installment, and lease financing. Aging Analysis The following presents by class, an aging analysis of the Company's loan and lease portfolio as of December 31, 2015 and 2014 . (dollars in thousands) 30 - 59 60 - 89 Past Due Non- Total Current Total Loans Non-Accrual 2 As of December 31, 2015 Commercial Commercial and Industrial $ 1,118 $ 359 $ — $ 5,829 $ 7,306 $ 1,107,862 $ 1,115,168 $ 452 Commercial Mortgage 1,245 27 — 3,469 4,741 1,672,406 1,677,147 2,890 Construction 2,120 — — — 2,120 154,540 156,660 — Lease Financing — — — — — 204,877 204,877 — Total Commercial 4,483 386 0 9,298 14,167 3,139,685 3,153,852 3,342 Consumer Residential Mortgage 7,148 3,993 4,453 14,598 30,192 2,895,413 2,925,605 2,056 Home Equity 3,856 1,906 1,710 4,081 11,553 1,057,847 1,069,400 1,710 Automobile 8,103 1,803 315 — 10,221 371,514 381,735 — Other 1 2,281 1,448 1,096 — 4,825 343,568 348,393 — Total Consumer 21,388 9,150 7,574 18,679 56,791 4,668,342 4,725,133 3,766 Total $ 25,871 $ 9,536 $ 7,574 $ 27,977 $ 70,958 $ 7,808,027 $ 7,878,985 $ 7,108 As of December 31, 2014 Commercial Commercial and Industrial $ 992 $ 356 $ 2 $ 9,088 $ 10,438 $ 1,044,805 $ 1,055,243 $ 7,819 Commercial Mortgage 458 — — 745 1,203 1,436,310 1,437,513 — Construction — — — — — 109,183 109,183 — Lease Financing — — — — — 226,189 226,189 — Total Commercial 1,450 356 2 9,833 11,641 2,816,487 2,828,128 7,819 Consumer Residential Mortgage 4,907 2,107 4,506 14,841 26,361 2,544,729 2,571,090 632 Home Equity 3,461 2,661 2,596 3,097 11,815 854,873 866,688 375 Automobile 7,862 1,483 616 — 9,961 313,887 323,848 — Other 1 2,416 1,049 941 — 4,406 303,429 307,835 — Total Consumer 18,646 7,300 8,659 17,938 52,543 4,016,918 4,069,461 1,007 Total $ 20,096 $ 7,656 $ 8,661 $ 27,771 $ 64,184 $ 6,833,405 $ 6,897,589 $ 8,826 1 Comprised of other revolving credit, installment, and lease financing. 2 Represents non-accrual loans that are not past due 30 days or more; however, full payment of principal and interest is still not expected. Impaired Loans The following presents by class, information related to impaired loans as of December 31, 2015 and 2014 . (dollars in thousands) Recorded Unpaid Related December 31, 2015 Impaired Loans with No Related Allowance Recorded: Commercial Commercial and Industrial $ 14,650 $ 28,212 $ — Commercial Mortgage 10,407 13,907 — Construction 1,604 1,604 — Total Commercial 26,661 43,723 — Total Impaired Loans with No Related Allowance Recorded $ 26,661 $ 43,723 $ — Impaired Loans with an Allowance Recorded: Commercial Commercial and Industrial $ 1,289 $ 1,289 $ 205 Total Commercial 1,289 1,289 205 Consumer Residential Mortgage 28,981 34,694 3,171 Home Equity 1,089 1,089 12 Automobile 7,012 7,012 143 Other 1 1,665 1,665 47 Total Consumer 38,747 44,460 3,373 Total Impaired Loans with an Allowance Recorded $ 40,036 $ 45,749 $ 3,578 Impaired Loans: Commercial $ 27,950 $ 45,012 $ 205 Consumer 38,747 44,460 3,373 Total Impaired Loans $ 66,697 $ 89,472 $ 3,578 December 31, 2014 Impaired Loans with No Related Allowance Recorded: Commercial Commercial and Industrial $ 9,763 $ 15,013 $ — Commercial Mortgage 6,480 6,480 — Construction 1,689 1,689 — Total Commercial 17,932 23,182 — Total Impaired Loans with No Related Allowance Recorded $ 17,932 $ 23,182 $ — Impaired Loans with an Allowance Recorded: Commercial Commercial and Industrial $ 7,184 $ 13,784 $ 2,387 Total Commercial 7,184 13,784 2,387 Consumer Residential Mortgage 32,331 37,989 3,445 Home Equity 1,012 1,012 16 Automobile 5,375 5,375 66 Other 1 913 913 34 Total Consumer 39,631 45,289 3,561 Total Impaired Loans with an Allowance Recorded $ 46,815 $ 59,073 $ 5,948 Impaired Loans: Commercial $ 25,116 $ 36,966 $ 2,387 Consumer 39,631 45,289 3,561 Total Impaired Loans $ 64,747 $ 82,255 $ 5,948 1 Comprised of other revolving credit and installment financing. The following presents by class, information related to the average recorded investment and interest income recognized on impaired loans for the years ended December 31, 2015 and 2014 . Year Ended Year Ended (dollars in thousands) Average Interest Average Interest Impaired Loans with No Related Allowance Recorded: Commercial Commercial and Industrial $ 12,589 $ 406 $ 11,167 $ 318 Commercial Mortgage 7,521 268 8,529 225 Construction 1,647 106 1,570 93 Total Commercial 21,757 780 21,266 636 Consumer Other 1 — — 6 — Total Consumer — — 6 — Total Impaired Loans with No Related Allowance Recorded $ 21,757 $ 780 $ 21,272 $ 636 Impaired Loans with an Allowance Recorded: Commercial Commercial and Industrial $ 5,379 $ 98 $ 8,045 $ 118 Total Commercial 5,379 98 8,045 118 Consumer Residential Mortgage 30,895 1,133 31,998 1,028 Home Equity 1,137 42 964 34 Automobile 5,992 432 5,263 433 Other 1 1,198 111 560 49 Total Consumer 39,222 1,718 38,785 1,544 Total Impaired Loans with an Allowance Recorded $ 44,601 $ 1,816 $ 46,830 $ 1,662 Impaired Loans: Commercial $ 27,136 $ 878 $ 29,311 $ 754 Consumer 39,222 1,718 38,791 1,544 Total Impaired Loans $ 66,358 $ 2,596 $ 68,102 $ 2,298 1 Comprised of other revolving credit and installment financing. For the year ended December 31, 2013 , the average recorded investment in impaired loans was $61.2 million and the interest income recognized on impaired loans was $1.8 million . For the years ended December 31, 2015 , 2014 , and 2013 , the amount of interest income recognized by the Company within the period that the loans were impaired were primarily related to loans modified in a troubled debt restructuring that were on accrual status. For the years ended December 31, 2015 , 2014 , and 2013 , the amount of interest income recognized using a cash-basis method of accounting during the time within that period that the loans were impaired was not material. Modifications A modification of a loan constitutes a troubled debt restructuring ("TDR") when the Company for economic or legal reasons related to a borrower's financial difficulties grants a concession to the borrower that it would not otherwise consider. Loans modified in a TDR were $65.0 million and $60.2 million as of December 31, 2015 and 2014 , respectively. There were no commitments to lend additional funds on loans modified in a TDR as of December 31, 2015 and 2014 . The Company offers various types of concessions when modifying a loan or lease. Commercial and industrial loans modified in a TDR often involve temporary interest-only payments, term extensions, and converting revolving credit lines to term loans. Additional collateral, a co-borrower, or a guarantor is often requested. Commercial mortgage and construction loans modified in a TDR often involve reducing the interest rate for the remaining term of the loan, extending the maturity date at an interest rate lower than the current market rate for new debt with similar risk, or substituting or adding a co-borrower or guarantor. Construction loans modified in a TDR may also involve extending the interest-only payment period. Residential mortgage loans modified in a TDR generally include a lower interest rate and the loan being fully amortized for up to 40 years from the modification effective date. In some cases, the Company may forbear a portion of the unpaid principal balance with a balloon payment due upon maturity or pay-off of the loan. Land loans are also included in the class of residential mortgage loans. Land loans are typically structured as interest-only monthly payments with a balloon payment due at maturity. Land loan modifications usually involve extending the interest-only payments up to an additional five years with a balloon payment due at maturity, or re-amortizing the remaining balance over a period up to 360 months . Interest rates are not changed for land loan modifications. Home equity modifications are made infrequently and uniquely designed to meet the specific needs of each borrower. Automobile loans modified in a TDR are primarily comprised of loans where the Company has lowered monthly payments by extending the term. Loans modified in a TDR are typically already on non-accrual status and partial charge-offs have in some cases already been taken against the outstanding loan balance. As a result, loans modified in a TDR may have the financial effect of increasing the specific Allowance associated with the loan. An Allowance for impaired commercial and consumer loans that have been modified in a TDR is measured based on the present value of expected future cash flows discounted at the loan's effective interest rate, the loan's observable market price, or the estimated fair value of the collateral, less any selling costs, if the loan is collateral dependent. Management exercises significant judgment in developing these estimates. The following presents by class, information related to loans modified in a TDR during the years ended December 31, 2015 and 2014 . Loans Modified as a TDR for the Loans Modified as a TDR for the Troubled Debt Restructurings (dollars in thousands ) Number of Recorded 1 Increase in Number of Recorded 1 Increase in Commercial Commercial and Industrial 30 $ 5,414 $ 1 19 $ 10,263 $ 2,360 Commercial Mortgage 4 4,307 — 1 315 — Total Commercial 34 9,721 1 20 10,578 2,360 Consumer Residential Mortgage 13 4,255 99 17 6,329 278 Home Equity 3 367 4 2 156 2 Automobile 170 3,996 81 131 2,576 32 Other 2 168 1,099 31 84 666 25 Total Consumer 354 9,717 215 234 9,727 337 Total 388 $ 19,438 $ 216 254 $ 20,305 $ 2,697 1 The period end balances reflect all partial paydowns and charge-offs since the modification date. TDRs fully paid off, charged off, or foreclosed upon by period end are not included. 2 Comprised of other revolving credit and installment financing. The following presents by class, loans modified in a TDR that defaulted during the year ended December 31, 2015 and 2014 , and within twelve months of their modification date. A TDR is considered to be in default once it becomes 60 days or more past due following a modification. Year Ended December 31, 2015 Year Ended December 31, 2014 TDRs that Defaulted During the Period, (dollars in thousands) Number of Recorded 1 Number of Recorded 1 Commercial Commercial and Industrial 2 $ 4,924 4 $ 728 Total Commercial 2 4,924 4 728 Consumer Residential Mortgage 4 1,449 2 506 Automobile 10 220 6 77 Other 2 21 118 6 48 Total Consumer 35 1,787 14 631 Total 37 $ 6,711 18 $ 1,359 1 The period end balances reflect all partial paydowns and charge-offs since the modification date. TDRs fully paid off, charged off, or foreclosed upon by period end are not included. 2 Comprised of other revolving credit and installment financing. Loans modified in a TDR are closely monitored for delinquency as an early indicator of possible future default. If loans modified in a TDR subsequently default, the Company evaluates the loan for possible further impairment. The specific Allowance associated with the loan may be increased, 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. Foreclosure Proceedings Consumer mortgage loans collateralized by residential real estate property that are in the process of foreclosure totaled $8.5 million as of December 31, 2015 . Related Party Loans Certain directors and executive officers of the Company, companies in which they are principal owners, and trusts in which they are involved, have loans with the Bank. These loans were made in the ordinary course of business at normal credit terms, including interest rate and collateral requirements. As of December 31, 2015 and 2014 , related party loan balances were $16.7 million and $17.0 million , respectively. |