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, 2018 and 2017 : December 31, (dollars in thousands) 2018 2017 Commercial Commercial and Industrial $ 1,331,149 $ 1,279,347 Commercial Mortgage 2,302,356 2,103,967 Construction 170,061 202,253 Lease Financing 176,226 180,931 Total Commercial 3,979,792 3,766,498 Consumer Residential Mortgage 3,673,796 3,466,773 Home Equity 1,681,442 1,585,455 Automobile 658,133 528,474 Other 1 455,611 449,747 Total Consumer 6,468,982 6,030,449 Total Loans and Leases $ 10,448,774 $ 9,796,947 1 Comprised of other revolving credit, installment, and lease financing. Total loans and leases were reported net of unearned income of $15.1 million and $20.2 million as of December 31, 2018 and 2017 , 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, 2018 and 2017 . As of December 31, 2018 and 2017 , residential mortgage loans of $2.9 billion , were pledged under a blanket pledge arrangement to secure FHLB advances. See Note 10 Other Debt for FHLB advances outstanding as of December 31, 2018 and 2017 . Net gains related to sales of residential mortgage loans, recorded as a component of mortgage banking income, were $1.5 million , $4.9 million , and $11.8 million for the years ended December 31, 2018 , 2017 , and 2016 , respectively. Net gains on sales of commercial loans were not material for the years ended December 31, 2018 , 2017 , and 2016 . 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, 2018 , 2017 , and 2016 . 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, 2018 , 2017 , and 2016 . (dollars in thousands) Commercial Consumer Total For the Year Ended December 31, 2018 Allowance for Loan and Lease Losses: Balance at Beginning of Period $ 65,822 $ 41,524 $ 107,346 Loans and Leases Charged-Off (1,505 ) (23,059 ) (24,564 ) Recoveries on Loans and Leases Previously Charged-Off 2,039 8,447 10,486 Net Loans and Leases Recovered (Charged-Off) 534 (14,612 ) (14,078 ) Provision for Credit Losses 518 12,907 13,425 Balance at End of Period $ 66,874 $ 39,819 $ 106,693 As of December 31, 2018 Allowance for Loan and Lease Losses: Individually Evaluated for Impairment $ 222 $ 3,754 $ 3,976 Collectively Evaluated for Impairment 66,652 36,065 102,717 Total $ 66,874 $ 39,819 $ 106,693 Recorded Investment in Loans and Leases: Individually Evaluated for Impairment $ 12,298 $ 42,327 $ 54,625 Collectively Evaluated for Impairment 3,967,494 6,426,655 10,394,149 Total $ 3,979,792 $ 6,468,982 $ 10,448,774 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 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, 2018 and 2017 . December 31, 2018 (dollars in thousands) Commercial Commercial Construction Lease Total Pass $ 1,302,278 $ 2,256,128 $ 168,740 $ 175,223 $ 3,902,369 Special Mention 17,688 30,468 — 5 48,161 Classified 11,183 15,760 1,321 998 29,262 Total $ 1,331,149 $ 2,302,356 $ 170,061 $ 176,226 $ 3,979,792 (dollars in thousands) Residential Home Automobile Other 1 Total Pass $ 3,668,475 $ 1,677,193 657,620 $ 454,697 $ 6,457,985 Classified 5,321 4,249 513 914 10,997 Total $ 3,673,796 $ 1,681,442 $ 658,133 $ 455,611 $ 6,468,982 Total Recorded Investment in Loans and Leases $ 10,448,774 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 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, 2018 and 2017 . (dollars in thousands) 30 - 59 60 - 89 Past Due Non- Total Current Total Loans Non-Accrual 2 As of December 31, 2018 Commercial Commercial and Industrial $ 3,653 $ 118 $ 10 $ 542 $ 4,323 $ 1,326,826 $ 1,331,149 $ 515 Commercial Mortgage 561 — — 2,040 2,601 2,299,755 2,302,356 2,040 Construction — — — — — 170,061 170,061 — Lease Financing — — — — — 176,226 176,226 — Total Commercial 4,214 118 10 2,582 6,924 3,972,868 3,979,792 2,555 Consumer Residential Mortgage 5,319 638 2,446 5,321 13,724 3,660,072 3,673,796 1,203 Home Equity 3,323 1,581 2,684 3,671 11,259 1,670,183 1,681,442 765 Automobile 12,372 2,240 513 — 15,125 643,008 658,133 — Other 1 2,913 1,245 914 — 5,072 450,539 455,611 — Total Consumer 23,927 5,704 6,557 8,992 45,180 6,423,802 6,468,982 1,968 Total $ 28,141 $ 5,822 $ 6,567 $ 11,574 $ 52,104 $ 10,396,670 $ 10,448,774 $ 4,523 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 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, 2018 and 2017 . (dollars in thousands) Recorded Unpaid Related December 31, 2018 Impaired Loans with No Related Allowance Recorded: Commercial Commercial and Industrial $ 4,587 $ 4,587 $ — Commercial Mortgage 2,712 6,212 — Construction 1,321 1,321 — Total Commercial 8,620 12,120 — Total Impaired Loans with No Related Allowance Recorded $ 8,620 $ 12,120 $ — Impaired Loans with an Allowance Recorded: Commercial Commercial and Industrial $ 1,856 $ 2,099 $ 130 Commercial Mortgage 1,822 1,822 92 Total Commercial 3,678 3,921 222 Consumer Residential Mortgage 19,753 23,635 3,051 Home Equity 3,359 3,359 350 Automobile 17,117 17,117 296 Other 1 2,098 2,098 57 Total Consumer 42,327 46,209 3,754 Total Impaired Loans with an Allowance Recorded $ 46,005 $ 50,130 $ 3,976 Impaired Loans: Commercial $ 12,298 $ 16,041 $ 222 Consumer 42,327 46,209 3,754 Total Impaired Loans $ 54,625 $ 62,250 $ 3,976 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 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, 2018 and 2017 . Year Ended Year Ended (dollars in thousands) Average Interest Average Interest Impaired Loans with No Related Allowance Recorded: Commercial Commercial and Industrial $ 6,342 $ 310 $ 8,810 $ 351 Commercial Mortgage 4,642 160 9,251 299 Construction 1,360 69 1,464 94 Total Commercial 12,344 539 19,525 744 Total Impaired Loans with No Related Allowance Recorded $ 12,344 $ 539 $ 19,525 $ 744 Impaired Loans with an Allowance Recorded: Commercial Commercial and Industrial $ 1,475 $ 100 $ 709 $ 42 Commercial Mortgage 623 25 690 54 Total Commercial 2,098 125 1,399 96 Consumer Residential Mortgage 20,324 1,080 22,981 845 Home Equity 2,676 121 1,707 82 Automobile 16,190 1,116 12,235 825 Other 1 2,624 215 2,571 215 Total Consumer 41,814 2,532 39,494 1,967 Total Impaired Loans with an Allowance Recorded $ 43,912 $ 2,657 $ 40,893 $ 2,063 Impaired Loans: Commercial $ 14,442 $ 664 $ 20,924 $ 840 Consumer 41,814 2,532 39,494 1,967 Total Impaired Loans $ 56,256 $ 3,196 $ 60,418 $ 2,807 1 Comprised of other revolving credit and installment financing. For the year ended December 31, 2016 , the average recorded investment in impaired loans was $62.1 million and the interest income recognized on impaired loans was $2.7 million . For the years ended December 31, 2018 , 2017 , and 2016 , 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, 2018 , 2017 , and 2016 , 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 $54.0 million and $60.1 million as of December 31, 2018 and 2017 , respectively. As of December 31, 2018 , there were $0.2 million commitments to lend additional funds on loans modified in a TDR. As of December 31, 2017 , there were $1.5 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, 2018 and 2017 . 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 12 $ 1,449 $ 96 13 $ 7,299 $ 11 Commercial Mortgage 1 1,650 74 4 2,336 93 Total Commercial 13 3,099 170 17 9,635 104 Consumer Residential Mortgage 6 1,458 200 2 368 1 Home Equity 9 1,438 77 4 604 13 Automobile 366 7,400 128 424 8,623 177 Other 2 138 927 25 171 1,395 35 Total Consumer 519 11,223 430 601 10,990 226 Total 532 $ 14,322 $ 600 618 $ 20,625 $ 330 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, 2018 and 2017 , 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, 2018 Year Ended December 31, 2017 TDRs that Defaulted During the Period, (dollars in thousands) Number of Recorded 1 Number of Recorded 1 Commercial Commercial and Industrial 1 $ 3 1 $ 48 Commercial Mortgage — — 1 341 Total Commercial 1 3 2 389 Consumer Residential Mortgage — — 1 94 Home Equity — — 1 237 Automobile 38 680 28 515 Other 2 34 194 36 208 Total Consumer 72 874 66 1,054 Total 73 $ 877 68 $ 1,443 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 $4.0 million as of December 31, 2018 . |