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, 2016 and 2015 : December 31, (dollars in thousands) 2016 2015 Commercial Commercial and Industrial $ 1,249,791 $ 1,115,168 Commercial Mortgage 1,889,551 1,677,147 Construction 270,018 156,660 Lease Financing 208,332 204,877 Total Commercial 3,617,692 3,153,852 Consumer Residential Mortgage 3,163,073 2,925,605 Home Equity 1,334,163 1,069,400 Automobile 454,333 381,735 Other 1 380,524 348,393 Total Consumer 5,332,093 4,725,133 Total Loans and Leases $ 8,949,785 $ 7,878,985 1 Comprised of other revolving credit, installment, and lease financing. Total loans and leases were reported net of unearned income of $36.3 million and $47.3 million as of December 31, 2016 and 2015 , respectively. Commercial loans and residential mortgage loans of $1.1 billion and $1.0 billion were pledged to secure an undrawn FRB line of credit as of December 31, 2016 and 2015 , respectively. As of December 31, 2016 and 2015 , residential mortgage loans of $2.3 billion and $1.7 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, 2016 and 2015 . Net gains related to sales of residential mortgage loans, recorded as a component of mortgage banking income, were $11.8 million , $5.9 million , and $2.4 million for the years ended December 31, 2016 , 2015 , and 2014 , respectively. Net gains on sales of commercial loans were not material for the years ended December 31, 2016 , 2015 , and 2014 . 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, 2016 , 2015 , and 2014 . 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, 2016 , 2015 , and 2014 . (dollars in thousands) Commercial Consumer Total For the Year Ended December 31, 2016 Allowance for Loan and Lease Losses: Balance at Beginning of Period $ 60,714 $ 42,166 $ 102,880 Loans and Leases Charged-Off (865 ) (17,644 ) (18,509 ) Recoveries on Loans and Leases Previously Charged-Off 8,137 7,015 15,152 Net Loans and Leases Recovered (Charged-Off) 7,272 (10,629 ) (3,357 ) Provision for Credit Losses (2,306 ) 7,056 4,750 Balance at End of Period $ 65,680 $ 38,593 $ 104,273 As of December 31, 2016 Allowance for Loan and Lease Losses: Individually Evaluated for Impairment $ 45 $ 3,510 $ 3,555 Collectively Evaluated for Impairment 65,635 35,083 100,718 Total $ 65,680 $ 38,593 $ 104,273 Recorded Investment in Loans and Leases: Individually Evaluated for Impairment $ 21,572 $ 39,126 $ 60,698 Collectively Evaluated for Impairment 3,596,120 5,292,967 8,889,087 Total $ 3,617,692 $ 5,332,093 $ 8,949,785 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 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 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. 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, 2016 and 2015 . December 31, 2016 (dollars in thousands) Commercial Commercial Construction Lease Total Pass $ 1,203,025 $ 1,792,119 $ 264,287 $ 207,386 $ 3,466,817 Special Mention 20,253 66,734 4,218 5 91,210 Classified 26,513 30,698 1,513 941 59,665 Total $ 1,249,791 $ 1,889,551 $ 270,018 $ 208,332 $ 3,617,692 (dollars in thousands) Residential Home Automobile Other 1 Total Pass $ 3,149,294 $ 1,327,676 453,439 $ 379,793 $ 5,310,202 Special Mention — 2,964 — — 2,964 Classified 13,779 3,523 894 731 18,927 Total $ 3,163,073 $ 1,334,163 $ 454,333 $ 380,524 $ 5,332,093 Total Recorded Investment in Loans and Leases $ 8,949,785 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 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, 2016 and 2015 . (dollars in thousands) 30 - 59 60 - 89 Past Due Non- Total Current Total Loans Non-Accrual 2 As of December 31, 2016 Commercial Commercial and Industrial $ 10,698 $ 1,016 $ — $ 151 $ 11,865 $ 1,237,926 $ 1,249,791 $ — Commercial Mortgage 128 17 — 997 1,142 1,888,409 1,889,551 416 Construction — — — — — 270,018 270,018 — Lease Financing — — — — — 208,332 208,332 — Total Commercial 10,826 1,033 — 1,148 13,007 3,604,685 3,617,692 416 Consumer Residential Mortgage 6,491 106 3,127 13,780 23,504 3,139,569 3,163,073 1,628 Home Equity 3,063 2,244 1,457 3,147 9,911 1,324,252 1,334,163 1,015 Automobile 11,692 2,162 894 — 14,748 439,585 454,333 — Other 1 3,200 1,532 1,592 — 6,324 374,200 380,524 — Total Consumer 24,446 6,044 7,070 16,927 54,487 5,277,606 5,332,093 2,643 Total $ 35,272 $ 7,077 $ 7,070 $ 18,075 $ 67,494 $ 8,882,291 $ 8,949,785 $ 3,059 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 — 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 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, 2016 and 2015 . (dollars in thousands) Recorded Unpaid Related December 31, 2016 Impaired Loans with No Related Allowance Recorded: Commercial Commercial and Industrial $ 9,556 $ 16,518 $ — Commercial Mortgage 9,373 12,873 — Construction 1,513 1,513 — Total Commercial 20,442 30,904 — Total Impaired Loans with No Related Allowance Recorded $ 20,442 $ 30,904 $ — Impaired Loans with an Allowance Recorded: Commercial Commercial and Industrial $ 765 $ 765 $ 24 Commercial Mortgage 365 365 21 Total Commercial 1,130 1,130 45 Consumer Residential Mortgage 25,625 30,615 3,224 Home Equity 1,516 1,516 15 Automobile 9,660 9,660 206 Other 1 2,325 2,325 65 Total Consumer 39,126 44,116 3,510 Total Impaired Loans with an Allowance Recorded $ 40,256 $ 45,246 $ 3,555 Impaired Loans: Commercial $ 21,572 $ 32,034 $ 45 Consumer 39,126 44,116 3,510 Total Impaired Loans $ 60,698 $ 76,150 $ 3,555 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 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, 2016 and 2015 . Year Ended Year Ended (dollars in thousands) Average Interest Average Interest Impaired Loans with No Related Allowance Recorded: Commercial Commercial and Industrial $ 10,760 $ 463 $ 12,589 $ 406 Commercial Mortgage 9,906 339 7,521 268 Construction 1,559 101 1,647 106 Total Commercial 22,225 903 21,757 780 Total Impaired Loans with No Related Allowance Recorded $ 22,225 $ 903 $ 21,757 $ 780 Impaired Loans with an Allowance Recorded: Commercial Commercial and Industrial $ 939 $ 72 $ 5,379 $ 98 Commercial Mortgage 151 9 — — Total Commercial 1,090 81 5,379 98 Consumer Residential Mortgage 27,436 962 30,895 1,133 Home Equity 1,395 66 1,137 42 Automobile 7,974 522 5,992 432 Other 1 2,003 174 1,198 111 Total Consumer 38,808 1,724 39,222 1,718 Total Impaired Loans with an Allowance Recorded $ 39,898 $ 1,805 $ 44,601 $ 1,816 Impaired Loans: Commercial $ 23,315 $ 984 $ 27,136 $ 878 Consumer 38,808 1,724 39,222 1,718 Total Impaired Loans $ 62,123 $ 2,708 $ 66,358 $ 2,596 1 Comprised of other revolving credit and installment financing. For the year ended December 31, 2014 , the average recorded investment in impaired loans was $68.1 million and the interest income recognized on impaired loans was $2.3 million . For the years ended December 31, 2016 , 2015 , and 2014 , 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, 2016 , 2015 , and 2014 , 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 $60.0 million and $65.0 million as of December 31, 2016 and 2015 , respectively. As of December 31, 2016 , there were $0.4 million commitments to lend additional funds on loans modified in a TDR. As of December 31, 2015 , there were no commitments to lend additional funds on loans modified in a TDR. 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, 2016 and 2015 . 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 6 $ 3,525 $ 21 30 $ 5,414 $ 1 Commercial Mortgage 1 204 20 4 4,307 — Total Commercial 7 3,729 41 34 9,721 1 Consumer Residential Mortgage 10 3,146 522 13 4,255 99 Home Equity 2 651 7 3 367 4 Automobile 267 5,451 116 170 3,996 81 Other 2 199 1,404 37 168 1,099 31 Total Consumer 478 10,652 682 354 9,717 215 Total 485 $ 14,381 $ 723 388 $ 19,438 $ 216 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, 2016 and 2015 , 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, 2016 Year Ended December 31, 2015 TDRs that Defaulted During the Period, (dollars in thousands) Number of Recorded 1 Number of Recorded 1 Commercial Commercial and Industrial — $ — 2 $ 4,924 Total Commercial — — 2 4,924 Consumer Residential Mortgage 4 1,445 4 1,449 Home Equity 1 157 — — Automobile 19 373 10 220 Other 2 40 278 21 118 Total Consumer 64 2,253 35 1,787 Total 64 $ 2,253 37 $ 6,711 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 a loan modified in a TDR subsequently defaults, 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 $6.6 million as of December 31, 2016 . |