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, 2017 and 2016 : December 31, (dollars in thousands) 2017 2016 Commercial Commercial and Industrial $ 1,279,347 $ 1,249,791 Commercial Mortgage 2,103,967 1,889,551 Construction 202,253 270,018 Lease Financing 180,931 208,332 Total Commercial 3,766,498 3,617,692 Consumer Residential Mortgage 3,466,773 3,163,073 Home Equity 1,585,455 1,334,163 Automobile 528,474 454,333 Other 1 449,747 380,524 Total Consumer 6,030,449 5,332,093 Total Loans and Leases $ 9,796,947 $ 8,949,785 1 Comprised of other revolving credit, installment, and lease financing. Total loans and leases were reported net of unearned income of $20.2 million and $36.3 million as of December 31, 2017 and 2016 , respectively. Commercial loans and residential mortgage loans of $1.0 billion and $1.1 billion were pledged to secure an undrawn FRB line of credit as of December 31, 2017 and 2016 , respectively. As of December 31, 2017 and 2016 , residential mortgage loans of $2.9 billion and $2.3 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, 2017 and 2016 . Net gains related to sales of residential mortgage loans, recorded as a component of mortgage banking income, were $4.9 million , $11.8 million , and $5.9 million for the years ended December 31, 2017 , 2016 , and 2015 , respectively. Net gains on sales of commercial loans were not material for the years ended December 31, 2017 , 2016 , and 2015 . 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, 2017 , 2016 , and 2015 . 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, 2017 , 2016 , and 2015 . (dollars in thousands) Commercial Consumer Total For the Year Ended December 31, 2017 Allowance for Loan and Lease Losses: Balance at Beginning of Period $ 65,680 $ 38,593 $ 104,273 Loans and Leases Charged-Off (1,408 ) (21,847 ) (23,255 ) Recoveries on Loans and Leases Previously Charged-Off 1,485 7,943 9,428 Net Loans and Leases Recovered (Charged-Off) 77 (13,904 ) (13,827 ) Provision for Credit Losses 65 16,835 16,900 Balance at End of Period $ 65,822 $ 41,524 $ 107,346 As of December 31, 2017 Allowance for Loan and Lease Losses: Individually Evaluated for Impairment $ 141 $ 3,775 $ 3,916 Collectively Evaluated for Impairment 65,681 37,749 103,430 Total $ 65,822 $ 41,524 $ 107,346 Recorded Investment in Loans and Leases: Individually Evaluated for Impairment $ 20,216 $ 41,002 $ 61,218 Collectively Evaluated for Impairment 3,746,282 5,989,447 9,735,729 Total $ 3,766,498 $ 6,030,449 $ 9,796,947 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 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, 2017 and 2016 . December 31, 2017 (dollars in thousands) Commercial Commercial Construction Lease Total Pass $ 1,234,738 $ 2,046,745 $ 198,926 $ 180,522 $ 3,660,931 Special Mention 15,394 35,762 6 11 51,173 Classified 29,215 21,460 3,321 398 54,394 Total $ 1,279,347 $ 2,103,967 $ 202,253 $ 180,931 $ 3,766,498 (dollars in thousands) Residential Home Automobile Other 1 Total Pass $ 3,457,531 $ 1,580,917 527,587 $ 449,008 $ 6,015,043 Classified 9,242 4,538 887 739 15,406 Total $ 3,466,773 $ 1,585,455 $ 528,474 $ 449,747 $ 6,030,449 Total Recorded Investment in Loans and Leases $ 9,796,947 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 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, 2017 and 2016 . (dollars in thousands) 30 - 59 60 - 89 Past Due Non- Total Current Total Loans Non-Accrual 2 As of December 31, 2017 Commercial Commercial and Industrial $ 4,196 $ 641 $ — $ 448 $ 5,285 $ 1,274,062 $ 1,279,347 $ 313 Commercial Mortgage 187 404 — 1,398 1,989 2,101,978 2,103,967 465 Construction — — — — — 202,253 202,253 — Lease Financing — — — — — 180,931 180,931 — Total Commercial 4,383 1,045 — 1,846 7,274 3,759,224 3,766,498 778 Consumer Residential Mortgage 7,815 2,008 2,703 9,243 21,769 3,445,004 3,466,773 806 Home Equity 2,532 2,736 1,624 3,991 10,883 1,574,572 1,585,455 1,312 Automobile 11,728 2,232 886 — 14,846 513,628 528,474 — Other 1 3,007 1,639 1,934 — 6,580 443,167 449,747 — Total Consumer 25,082 8,615 7,147 13,234 54,078 5,976,371 6,030,449 2,118 Total $ 29,465 $ 9,660 $ 7,147 $ 15,080 $ 61,352 $ 9,735,595 $ 9,796,947 $ 2,896 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 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, 2017 and 2016 . (dollars in thousands) Recorded Unpaid Related December 31, 2017 Impaired Loans with No Related Allowance Recorded: Commercial Commercial and Industrial $ 8,094 $ 15,747 $ — Commercial Mortgage 8,696 12,196 — Construction 1,415 1,415 — Total Commercial 18,205 29,358 — Total Impaired Loans with No Related Allowance Recorded $ 18,205 $ 29,358 $ — Impaired Loans with an Allowance Recorded: Commercial Commercial and Industrial $ 811 $ 811 $ 21 Commercial Mortgage 1,200 1,200 120 Total Commercial 2,011 2,011 141 Consumer Residential Mortgage 21,581 26,324 3,118 Home Equity 1,965 1,965 276 Automobile 14,811 14,811 305 Other 1 2,645 2,645 76 Total Consumer 41,002 45,745 3,775 Total Impaired Loans with an Allowance Recorded $ 43,013 $ 47,756 $ 3,916 Impaired Loans: Commercial $ 20,216 $ 31,369 $ 141 Consumer 41,002 45,745 3,775 Total Impaired Loans $ 61,218 $ 77,114 $ 3,916 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 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, 2017 and 2016 . Year Ended Year Ended (dollars in thousands) Average Interest Average Interest Impaired Loans with No Related Allowance Recorded: Commercial Commercial and Industrial $ 8,810 $ 351 $ 10,760 $ 463 Commercial Mortgage 9,251 299 9,906 339 Construction 1,464 94 1,559 101 Total Commercial 19,525 744 22,225 903 Total Impaired Loans with No Related Allowance Recorded $ 19,525 $ 744 $ 22,225 $ 903 Impaired Loans with an Allowance Recorded: Commercial Commercial and Industrial $ 709 $ 42 $ 939 $ 72 Commercial Mortgage 690 54 151 9 Total Commercial 1,399 96 1,090 81 Consumer Residential Mortgage 22,981 845 27,436 962 Home Equity 1,707 82 1,395 66 Automobile 12,235 825 7,974 522 Other 1 2,571 215 2,003 174 Total Consumer 39,494 1,967 38,808 1,724 Total Impaired Loans with an Allowance Recorded $ 40,893 $ 2,063 $ 39,898 $ 1,805 Impaired Loans: Commercial $ 20,924 $ 840 $ 23,315 $ 984 Consumer 39,494 1,967 38,808 1,724 Total Impaired Loans $ 60,418 $ 2,807 $ 62,123 $ 2,708 1 Comprised of other revolving credit and installment financing. For the year ended December 31, 2015 , the average recorded investment in impaired loans was $66.4 million and the interest income recognized on impaired loans was $2.6 million . For the years ended December 31, 2017 , 2016 , and 2015 , 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, 2017 , 2016 , and 2015 , 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 $60.1 million and $60.0 million as of December 31, 2017 and 2016 , respectively. As of December 31, 2017 , there were $1.5 million commitments to lend additional funds on loans modified in a TDR. As of December 31, 2016 , there were $0.4 million 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, 2017 and 2016 . 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 13 $ 7,299 $ 11 6 $ 3,525 $ 21 Commercial Mortgage 4 2,336 93 1 204 20 Total Commercial 17 9,635 104 7 3,729 41 Consumer Residential Mortgage 2 368 1 10 3,146 522 Home Equity 4 604 13 2 651 7 Automobile 424 8,623 177 267 5,451 116 Other 2 171 1,395 35 199 1,404 37 Total Consumer 601 10,990 226 478 10,652 682 Total 618 $ 20,625 $ 330 485 $ 14,381 $ 723 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, 2017 and 2016 , 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, 2017 Year Ended December 31, 2016 TDRs that Defaulted During the Period, (dollars in thousands) Number of Recorded 1 Number of Recorded 1 Commercial Commercial and Industrial 1 $ 48 — $ — Commercial Mortgage 1 341 — — Total Commercial 2 389 — — Consumer Residential Mortgage 1 94 4 1,445 Home Equity 1 237 1 157 Automobile 28 515 19 373 Other 2 36 208 40 278 Total Consumer 66 1,054 64 2,253 Total 68 $ 1,443 64 $ 2,253 1 The period end balances reflect all 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 $6.2 million as of December 31, 2017 . |