5. LOANS AND LEASES

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

	March 31,			December 31,
	2012			2011
	(Dollars in thousands)

Commercial, financial and agricultural	$	186,851		$	180,571
Real estate:
Construction		147,591			161,126
Mortgage - residential		912,212			896,566
Mortgage - commercial		715,105			701,399
Consumer		107,056			108,810
Leases		15,766			17,702
		2,084,581			2,066,174
Unearned income		(1,829	)		(1,727	)
Total loans and leases	$	2,082,752		$	2,064,447

During the three months ended March 31, 2012, we transferred one loan, which was non-performing, with a carrying value of $0.3 million, to the held-for-sale category. In addition, we transferred loans with a carrying value of $0.5 million to other real estate. No portfolio loans were sold or purchased during the three months ended March 31, 2012.

During the three months ended March 31, 2011, we did not transfer any loans to the held-for-sale category. In addition, we transferred loans with a carrying value of $6.6 million to other real estate. No portfolio loans were sold or purchased during the three months ended March 31, 2011.

Impaired Loans

The following table presents by class, the balance in the allowance for loan and lease losses and the recorded investment in loans and leases based on the Company's impairment measurement method as of March 31, 2012 and December 31, 2011:

	Commercial,		Real estate
	financial & agricultural		Construction			Mortgage - residential			Mortgage - commercial			Consumer		Leases		Total
	(Dollars in thousands)
March 31, 2012
Allowance for loan and lease losses:
Ending balance attributable to loans:
Individually evaluated for impairment	$	1,092	$	7,497		$	831		$	89		$	-	$	-	$	9,509
Collectively evaluated for impairment		4,209		13,883			32,614			45,822			2,105		180		98,813
		5,301		21,380			33,445			45,911			2,105		180		108,322
Unallocated																	6,000
Total ending balance	$	5,301	$	21,380		$	33,445		$	45,911		$	2,105	$	180	$	114,322

Loans and leases:
Individually evaluated for impairment	$	4,633	$	70,538		$	50,679		$	24,255		$	-	$	-	$	150,105
Collectively evaluated for impairment		182,218		77,053			861,533			690,850			107,056		15,766		1,934,476
		186,851		147,591			912,212			715,105			107,056		15,766		2,084,581
Unearned income		105		(24	)		(479	)		(1,431	)		-		-		(1,829	)
Total ending balance	$	186,956	$	147,567		$	911,733		$	713,674		$	107,056	$	15,766	$	2,082,752

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

The following table presents by class, impaired loans as of March 31, 2012 and December 31, 2011:

	Unpaid Principal Balance		Recorded Investment		Allowance Allocated
	(Dollars in thousands)
March 31, 2012
Impaired loans with no related allowance recorded:
Commercial, financial & agricultural	$	1,038	$	339	$	-
Real estate:
Construction		38,136		30,231		-
Mortgage - residential		55,468		48,679		-
Mortgage - commercial		21,891		21,097		-
Total impaired loans with no related allowance recorded		116,533		100,346		-
Impaired loans with an allowance recorded:
Commercial, financial & agricultural		5,729		4,294		1,092
Real estate:
Construction		52,960		40,307		7,497
Mortgage - residential		2,000		2,000		831
Mortgage - commercial		4,195		3,158		89
Total impaired loans with an allowance recorded		64,884		49,759		9,509
Total	$	181,417	$	150,105	$	9,509

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

The following table presents by class, the average recorded investment and interest income recognized on impaired loans as of March 31, 2012 and 2011:

	Three Months Ended March 31,
	2012				2011
	Average Recorded Investment		Interest Income Recognized		Average Recorded Investment		Interest Income Recognized
	(Dollars in thousands)

Commercial, financial & agricultural	$	2,086	$	3	$	466	$	-
Real estate:
Construction		76,184		645		141,921		135
Mortgage - residential		49,904		57		70,792		413
Mortgage - commercial		18,402		22		6,790		-
Total	$	146,576	$	727	$	219,969	$	548

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 March 31, 2012 and December 31, 2011:

	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)
March 31, 2012
Commercial, financial & agricultural	$	201	$	108	$	17	$	4,633	$	4,959	$	181,997	$	186,956
Real estate:
Construction		-		-		128		70,538		70,666		76,901		147,567
Mortgage - residential		4,843		118		51		45,981		50,993		860,740		911,733
Mortgage - commercial		414		-		-		20,638		21,052		692,622		713,674
Consumer		218		42		12		-		272		106,784		107,056
Leases		-		27		-		333		360		15,406		15,766
Total	$	5,676	$	295	$	208	$	142,123	$	148,302	$	1,934,450	$	2,082,752

December 31, 2011
Commercial, financial & agricultural	$	180	$	80	$	-	$	1,367	$	1,627	$	179,077	$	180,704
Real estate:
Construction		-		442		-		57,351		57,793		103,270		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	$	121,499	$	126,931	$	1,937,516	$	2,064,447

Modifications

Troubled debt restructurings ("TDRs") included in nonperforming assets at March 31, 2012 consisted of 95 Hawaii residential mortgage loans with a combined principal balance of $38.1 million, five Hawaii construction and development loans with a combined principal balance of $15.1 million, a Mainland construction and development loan with a principal balance of $13.4 million, a Mainland commercial mortgage loan with a principal balance of $3.2 million, a Hawaii commercial mortgage loan with a principal balance of $0.5 million and four Hawaii commercial loans with a combined principal balance of $0.4 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 $10.1 million of TDRs still accruing interest at March 31, 2012, none of which were more than 90 days delinquent. At December 31, 2011, there were $8.3 million of TDRs still accruing interest, none of which 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 for loan and lease losses (the "Allowance") methodology. As a result, the loans modified in a TDR did not have a material affect to our provision for loan and lease losses expense (the "Provision") and the Allowance during the three months ended March 31, 2012.

The following table presents by class, information related to loans modified in a TDR during the three months ended March 31, 2012 and 2011:

	Number of Contracts	Recorded Investment (as of period end)		Additional Partial Charge-offs
	(Dollars in thousands)
Three months ended March 31, 2012
Real estate:
Mortgage - residential	6	$	3,209	$	-
Mortgage - commercial	2		6,775		-
Total	8	$	9,984	$	-

Three months ended March 31, 2011
Real estate:
Construction	1	$	5,500	$	-
Mortgage - residential	9		2,677		-
Total	10	$	8,177	$	-

The following table presents by class, loans modified as a TDR within the previous twelve months that subsequently defaulted during the three months ended March 31, 2012 and 2011:

	Three Months Ended March 31,
	2012			2011
	Number of Contracts	Recorded Investment (as of period end)		Number of Contracts	Recorded Investment (as of period end)
	(Dollars in thousands)
Real estate:
Mortgage - residential	2	$	445	4	$	84
Mortgage - commercial	1		3,158	-		-
Total	3	$	3,603	4	$	84

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 March 31, 2012 and December 31, 2011:

	Pass		Special Mention		Substandard		Doubtful		Loss		Not Rated		Less: Unearned Income			Total
	(Dollars in thousands)
March 31, 2012
Commercial, financial
& agricultural	$	122,842	$	1,960	$	8,434	$	-	$	-	$	53,614	$	(105	)	$	186,955
Real estate:
Construction		52,767		18,941		71,525		-		-		4,358		24			147,567
Mortgage - residential		59,671		1,791		53,689		-		-		797,062		479			911,734
Mortgage - commercial		587,504		49,210		49,065		-		-		29,326		1,431			713,674
Consumer		10,131		-		-		-		9		96,916		-			107,056
Leases		14,380		259		1,127		-		-		-		-			15,766
Total	$	847,295	$	72,161	$	183,840	$	-	$	9	$	981,276	$	1,829		$	2,082,752

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

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 March 31, 2012 and December 31, 2011, we did not have any loans that we considered to be subprime.