6. LOANS AND LEASES

Loans and leases, excluding loans held for sale, consisted of the following:

	December 31,
	2011			2010
	(Dollars in thousands)

Commercial, financial & agricultural	$	180,571		$	207,900
Real estate:
Construction		161,126			314,530
Mortgage - residential		896,566			747,870
Mortgage - commercial		701,399			761,710
Consumer		108,810			112,950
Leases		17,702			28,163
		2,066,174			2,173,123
Unearned income		(1,727	)		(3,679	)
Total loans and leases	$	2,064,447		$	2,169,444

During the year ended December 31, 2011, we transferred five loans, which were non-performing, with a carrying value of $13.6 million, to the held-for-sale category. In addition, we transferred loans with a carrying value of $47.1 million to other real estate. No portfolio loans were sold or purchased during the year ended December 31, 2011. During the year ended December 31, 2010, we transferred 18 loans with a carrying value of $74.9 million, to the held-for-sale category and sold portfolio loans with a carrying value of $173.3 million. In addition, we transferred loans with a carrying value of $67.3 million to other real estate. No loans were purchased during the year ended December 31, 2010.

In the normal course of business, our bank makes loans to certain directors, executive officers and their affiliates under terms that management believes are consistent with its general lending policies. An analysis of the activity of such loans follows:

	December 31,
	2011			2010
	(Dollars in thousands)

Balance, beginning of year	$	5,974		$	13,007
Additions		1,382			3,543
Repayments		(2,585	)		(10,108	)
Other		(192	)		(468	)
Balance, end of year	$	4,579		$	5,974

Impaired Loans

The following table presents by class, the balance in the Allowance and the recorded investment in loans and leases based on the Company's impairment method as of December 31, 2011 and 2010:

	Commercial,		Real estate
	financial & agricultural		Construction			Mortgage - residential			Mortgage- commercial			Consumer			Leases		Total
	(Dollars in thousands)
December 31, 2011
Allowance for loan and lease losses:
Ending balance attributable to loans:
Individually evaluated for impairment	$	-	$	401		$	-		$	371		$	-		$	-	$	772
Collectively evaluated for impairment		6,110		28,229			32,736			47,358			2,335			553		117,321
		6,110		28,630			32,736			47,729			2,335			553		118,093
Unallocated																		4,000
Total ending balance	$	6,110	$	28,630		$	32,736		$	47,729		$	2,335		$	553	$	122,093

Loans and leases:
Individually evaluated for impairment	$	1,367	$	62,569		$	50,221		$	18,451		$	-		$	-	$	132,608
Collectively evaluated for impairment		179,204		98,557			846,345			682,948			108,810			17,702		1,933,566
		180,571		161,126			896,566			701,399			108,810			17,702		2,066,174
Unearned income		133		(63	)		(467	)		(1,330	)		-			-		(1,727	)
Total ending balance	$	180,704	$	161,063		$	896,099		$	700,069		$	108,810		$	17,702	$	2,064,447

December 31, 2010
Allowance for loan and lease losses:
Ending balance attributable to loans:
Individually evaluated for impairment	$	81	$	18,197		$	89		$	1,158		$	-		$	-	$	19,525
Collectively evaluated for impairment		13,345		58,359			31,741			63,150			3,155			1,579		171,329
		13,426		76,556			31,830			64,308			3,155			1,579		190,854
Unallocated																		2,000
Total ending balance	$	13,426	$	76,556		$	31,830		$	64,308		$	3,155		$	1,579	$	192,854

Loans and leases:
Individually evaluated for impairment	$	485	$	144,956		$	61,589		$	18,004		$	-		$	-	$	225,034
Collectively evaluated for impairment		207,415		169,574			686,281			743,706			112,950			28,163		1,948,089
		207,900		314,530			747,870			761,710			112,950			28,163		2,173,123
Unearned income		80		(745	)		(1,609	)		(1,404	)		(1	)		-		(3,679	)
Total ending balance	$	207,980	$	313,785		$	746,261		$	760,306		$	112,949		$	28,163	$	2,169,444

The following table presents by class, impaired loans as of December 31, 2011 and 2010:

	Unpaid Principal Balance		Recorded Investment		Allowance Allocated
	(Dollars in thousands)
December 31, 2011
Impaired loans with no related allowance recorded:
Commercial, financial & agricultural	$	2,107	$	1,367	$	-
Real estate:
Construction		80,283		47,877		-
Mortgage - residential		57,195		50,221		-
Mortgage - commercial		14,084		13,756		-
Total impaired loans with no related allowance recorded		153,669		113,221		-
Impaired loans with an allowance recorded:
Real estate:
Construction		24,262		14,692		401
Mortgage - commercial		6,188		4,695		371
Total impaired loans with an allowance recorded		30,450		19,387		772
Total	$	184,119	$	132,608	$	772

December 31, 2010
Impaired loans with no related allowance recorded:
Real estate:
Construction	$	112,675	$	85,571	$	-
Mortgage - residential		66,203		58,333		-
Mortgage - commercial		10,917		10,917		-
Total impaired loans with no related allowance recorded		189,795		154,821		-
Impaired loans with an allowance recorded:
Commercial, financial & agricultural		1,184		485		81
Real estate:
Construction		104,429		59,384		18,197
Mortgage - residential		3,681		3,256		89
Mortgage - commercial		7,746		7,088		1,158
Total impaired loans with an allowance recorded		117,040		70,213		19,525
Total	$	306,835	$	225,034	$	19,525

The following table presents by class, the average recorded investment and interest income recognized on impaired loans as of December 31, 2011, 2010 and 2009:

	Average Recorded Investment		Interest Income Recognized
	(Dollars in thousands)
December 31, 2011
Commercial, financial & agricultural	$	549	$	-
Real estate:
Construction		115,612		772
Mortgage - residential		58,262		616
Mortgage - commercial		19,116		469
Total	$	193,539	$	1,857

December 31, 2010
Commercial, financial & agricultural	$	15,517	$	-
Real estate:
Construction		242,069		2,082
Mortgage - residential		59,826		-
Mortgage - commercial		51,441		70
Leases		262		-
Total	$	369,115	$	2,152

December 31, 2009
Commercial, financial & agricultural	$	7,535	$	112
Real estate:
Construction		186,165		1,690
Mortgage - residential		14,250		-
Mortgage - commercial		18,437		306
Leases		972		-
Total	$	227,359	$	2,108

Aging Analysis of Accruing and Non-Accruing Loans and Leases

For all loan types, the Company determines delinquency status by considering the number of days full payments required by the contractual terms of the loan are past due. The following table presents by class, the aging of the recorded investment in past due loans and leases as of December 31, 2011 and 2010:

	30 - 59 Days Past Due		60 - 89 Days Past Due		Accruing Loans Greater than 90 Days Past Due		Nonaccrual Loans		Total Past Due		Loans and Leases Not Past Due		Total
	(Dollars in thousands)
December 31, 2011
Commercial, financial & agricultural	$	180	$	80	$	-	$	1,367	$	1,627	$	179,077	$	180,704
Real estate:
Construction		-		442		-		69,765		70,207		90,856		161,063
Mortgage - residential		2,972		631		-		47,128		50,731		845,368		896,099
Mortgage - commercial		602		-		-		15,653		16,255		683,814		700,069
Consumer		390		79		28		-		497		108,313		108,810
Leases		28		-		-		-		28		17,674		17,702
Total	$	4,172	$	1,232	$	28	$	133,913	$	139,345	$	1,925,102	$	2,064,447

December 31, 2010
Commercial, financial & agricultural	$	495	$	252	$	-	$	982	$	1,729	$	206,251	$	207,980
Real estate:
Construction		12,551		118		6,550		182,073		201,292		112,493		313,785
Mortgage - residential		4,183		7,494		1,800		47,560		61,037		685,224		746,261
Mortgage - commercial		273		3,169		-		14,464		17,906		742,400		760,306
Consumer		620		444		181		225		1,470		111,479		112,949
Leases		100		-		-		-		100		28,063		28,163
Total	$	18,222	$	11,477	$	8,531	$	245,304	$	283,534	$	1,885,910	$	2,169,444

Interest income totaling $0.8 million, $0.4 million and $0.2 million was recognized on nonaccrual loans, including loans held for sale, in 2011, 2010 and 2009, respectively. Additional interest income of $14.2 million, $18.6 million and $18.4 million would have been recognized in 2011, 2010 and 2009, respectively, had these loans been accruing interest throughout those periods. Additionally, interest income of $0.7 million, $0.3 million and $0.2 million was collected and recognized on charged-off loans in 2011, 2010 and 2009, respectively.

Modifications

TDRs included in nonperforming assets at December 31, 2011 consisted of 96 Hawaii residential mortgage loans with a combined principal balance of $38.9 million, five Hawaii construction and development loans with a combined principal balance of $17.1 million, two Mainland construction and development loans with a combined principal balance of $19.8 million, and one Hawaii commercial loan with a principal balance of $0.3 million. Concessions made to the original contractual terms of these loans consisted primarily of the deferral of interest and/or principal payments due to deterioration in the borrowers' financial condition. The principal balances on these TDRs had matured and/or were in default at the time of restructure and we have no commitments to lend additional funds to any of these borrowers. There were $8.3 million of TDRs still accruing interest at December 31, 2011, none of which were more than 90 days delinquent. At December 31, 2010, there were $14.2 million of TDRs still accruing interest, including two residential mortgage loans totaling $0.8 million that were more than 90 days delinquent.

The majority of loans modified in a TDR are typically on nonaccrual status. Thus, these loans have already been identified as impaired and have already been evaluated under the Company's Allowance methodology. As a result, the loans modified in a TDR did not have a material affect to our Provision and Allowance during the years ended December 31, 2011 and 2010.

The following table presents by class, information related to loans modified in a TDR during the years ended December 31, 2011 and 2010:

	Number of Contracts	Recorded Investment (as of period end)		Additional Partial Charge-offs
	(Dollars in thousands)
Year ended December 31, 2011
Real estate:
Construction	4	$	25,457	$	6,310
Mortgage - residential	25		8,828		447
Total	29	$	34,285	$	6,757

Year ended December 31, 2010
Real estate:
Construction	5	$	15,966	$	7,187
Mortgage - residential	79		35,072		3,422
Total	84	$	51,038	$	10,609

The following table presents by class, loans modified as a TDR within the previous twelve months that subsequently defaulted during the years ended December 31, 2011 and 2010:

	Year EndedDecember 31,
	2011			2010
	Number of Contracts	Recorded Investment (as of period end)		Number of Contracts		Recorded Investment (as of period end)
	(Dollars in thousands)
Real estate:
Construction	3	$	20,287		3	$	6,267
Mortgage - residential	18		7,175		43		17,760
Total	21	$	27,462		46	$	24,027

Credit Quality Indicators

The Company categorizes loans and leases into risk categories based on relevant information about the ability of borrowers to service their debt such as: current financial information, historical payment experience, credit documentation, public information, and current economic trends, among other factors. The Company analyzes loans and leases individually by classifying the loans and leases as to credit risk. This analysis includes loans and leases with an outstanding balance greater than $0.5 million or $1.0 million, depending on loan type, and non-homogeneous loans and leases, such as commercial and commercial real estate loans. This analysis is performed on a quarterly basis. The Company uses the following definitions for risk ratings:

Special Mention. Loans and leases classified as special mention, while still adequately protected by the borrower's capital adequacy and payment capability, exhibit distinct weakening trends and/or elevated levels of exposure to external conditions. If left unchecked or uncorrected, these potential weaknesses may result in deteriorated prospects of repayment. These exposures require management's close attention so as to avoid becoming undue or unwarranted credit exposures.

Substandard. Loans and leases classified as substandard are inadequately protected by the borrower's current financial condition and payment capability or of the collateral pledged, if any. Loans and leases so classified have a well-defined weakness or weaknesses that jeopardize the orderly repayment of debt. They are characterized by the distinct possibility that the bank will sustain some loss if the deficiencies are not corrected.

Doubtful. Loans and leases classified as doubtful have all the weaknesses inherent in those classified as substandard, with the added characteristic that the weaknesses make collection or orderly repayment in full, on the basis of current existing facts, conditions and values, highly questionable and improbable. Possibility of loss is extremely high, but because of certain important and reasonably specific factors that may work to the advantage and strengthening of the exposure, its classification as an estimate loss is deferred until its more exact status may be determined.

Loss. Loans and leases classified as loss are considered to be non-collectible and of such little value that their continuance as bankable assets is not warranted. This does not mean the loan has absolutely no recovery value, but rather it is neither practical nor desirable to defer writing off the loan, even though partial recovery may be obtained in the future. Losses are taken in the period in which they surface as uncollectible.

Loans and leases not meeting the criteria above that are analyzed individually as part of the process described above are considered to be pass rated loans and leases. Loans and leases listed as not rated are either less than $0.5 million or are included in groups of homogeneous loan pools. The following table presents by class and credit indicator, the recorded investment in the Company's loans and leases as of December 31, 2011 and 2010:

	Pass		Special Mention		Substandard		Doubtful		Loss		Not Rated		Less: Unearned Income			Total
	(Dollars in thousands)
December 31, 2011
Commercial, financial
& agricultural	$	107,419	$	6,087	$	15,389	$	-	$	-	$	51,676	$	(133	)	$	180,704
Real estate:
Construction		52,882		18,808		84,716		-		-		4,720		63			161,063
Mortgage - residential		62,314		3,823		55,017		-		-		775,412		467			896,099
Mortgage - commercial		557,494		54,170		58,599		-		-		31,136		1,330			700,069
Consumer		4,659		-		79		-		-		104,072		-			108,810
Leases		16,111		327		1,264		-		-		-		-			17,702
Total	$	800,879	$	83,215	$	215,064	$	-	$	-	$	967,016	$	1,727		$	2,064,447

December 31, 2010
Commercial, financial
& agricultural	$	109,619	$	22,529	$	19,370	$	-	$	-	$	56,382	$	(80	)	$	207,980
Real estate:
Construction		44,488		41,330		215,187		5,789		-		7,736		745			313,785
Mortgage - residential		70,747		17,475		55,533		-		-		604,115		1,609			746,261
Mortgage - commercial		557,511		67,639		97,871		2,883		-		35,806		1,404			760,306
Consumer		5,778		307		769		-		14		106,082		1			112,949
Leases		21,761		4,039		2,363		-		-		-		-			28,163
Total	$	809,904	$	153,319	$	391,093	$	8,672	$	14	$	810,121	$	3,679		$	2,169,444

In accordance with applicable Interagency Guidance issued by our primary bank regulators, we define subprime borrowers as typically having weakened credit histories that include payment delinquencies and possibly more severe problems such as charge-offs, judgments, and bankruptcies. They may also display reduced repayment capacity as measured by credit scores, debt-to-income ratios, or other criteria that may encompass borrowers with incomplete credit histories. Subprime loans are loans to borrowers displaying one or more of these characteristics at the time of origination or purchase. Such loans have a higher risk of default than loans to prime borrowers. At December 31, 2011 and 2010, we did not have any loans that we considered to be subprime.