LOANS AND LEASES

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



(dollars in thousands)	March 31, 2016		December 31, 2015
Commercial, financial and agricultural	$	534,562	$	520,457
Real estate:
Construction	101,663		85,196
Mortgage - residential	1,456,715		1,433,862
Mortgage - commercial	773,828		761,566
Consumer	439,824		408,024
Leases	936		1,028
	3,307,528		3,210,133
Net deferred costs	1,440		1,399
Total loans and leases, net of deferred costs	$	3,308,968	$	3,211,532

During the three months ended March 31, 2016, we did not foreclose on any portfolio loans and did not transfer any loans to the held-for-sale category. In addition, we did not sell any portfolio loans.

In March 2016, we purchased a direct auto loan portfolio totaling $23.2 million which included a $0.3 million premium over the $22.9 million outstanding balance. At the time of purchase, the auto loans had a weighted average remaining term of 56 months and a weighted average yield of 3.88%. During the first quarter of 2016, we also purchased unsecured consumer loans totaling $29.2 million, which represented the outstanding balance at the time of purchases. At the time of purchases, the unsecured consumer loans had a weighted average remaining term of 38 months and a weighted average yield of 7.55%.

During the three months ended March 31, 2015, we transferred the collateral in three portfolio loans with a carrying value of $1.4 million to other real estate owned. We did not transfer any portfolio loans to the held-for-sale category and no portfolio loans were sold or purchased during the three months ended March 31, 2015.

Impaired Loans

The following tables present 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, 2016 and December 31, 2015:



			Real Estate
(dollars in thousands)	Commercial, Financial & Agricultural		Construction			Mortgage -Residential		Mortgage -Commercial			Consumer			Leases		Total
March 31, 2016
Allowance for loan and lease losses:
Ending balance attributable to loans:
Individually evaluated for impairment	$	500	$	—		$	—	$	46		$	—		$	—	$	546
Collectively evaluated for impairment	6,500		4,128			18,005		25,127			5,843			—		59,603
	7,000		4,128			18,005		25,173			5,843			—		60,149
Unallocated																2,000
Total ending balance	$	7,000	$	4,128		$	18,005	$	25,173		$	5,843		$	—	$	62,149

Loans and leases:
Individually evaluated for impairment	$	2,244	$	4,001		$	22,078	$	10,041		$	—		$	—	$	38,364
Collectively evaluated for impairment	532,318		97,662			1,434,637		763,787			439,824			936		3,269,164
	534,562		101,663			1,456,715		773,828			439,824			936		3,307,528
Net deferred costs (income)	529		(309		)	2,487		(792		)	(475		)	—		1,440
Total loans and leases, net of deferred costs (income)	$	535,091	$	101,354		$	1,459,202	$	773,036		$	439,349		$	936	$	3,308,968



			Real Estate
(dollars in thousands)	Commercial, Financial & Agricultural		Construction			Mortgage -Residential		Mortgage -Commercial			Consumer			Leases		Total
December 31, 2015
Allowance for loan and lease losses:
Ending balance attributable to loans:
Individually evaluated for impairment	$	—	$	—		$	—	$	51		$	—		$	—	$	51
Collectively evaluated for impairment	6,905		8,454			17,738		21,796			6,230			—		61,123
	6,905		8,454			17,738		21,847			6,230			—		61,174
Unallocated																2,140
Total ending balance	$	6,905	$	8,454		$	17,738	$	21,847		$	6,230		$	—	$	63,314

Loans and leases:
Individually evaluated for impairment	$	1,044	$	4,126		$	22,716	$	10,318		$	—		$	—	$	38,204
Collectively evaluated for impairment	519,413		81,070			1,411,146		751,248			408,024			1,028		3,171,929
	520,457		85,196			1,433,862		761,566			408,024			1,028		3,210,133
Net deferred costs (income)	629		(311		)	2,443		(817		)	(545		)	—		1,399
Total loans and leases, net of deferred costs (income)	$	521,086	$	84,885		$	1,436,305	$	760,749		$	407,479		$	1,028	$	3,211,532

The following tables present by class, information related to impaired loans as of March 31, 2016 and December 31, 2015:



(dollars in thousands)	Unpaid Principal Balance		Recorded Investment		Allowance Allocated
March 31, 2016
Impaired loans with no related allowance recorded:
Commercial, financial & agricultural	$	1,854	$	1,744	$	—
Real estate:
Construction	10,346		4,001		—
Mortgage - residential	24,040		22,078		—
Mortgage - commercial	9,793		8,935		—
Total impaired loans with no related allowance recorded	46,033		36,758		—

Impaired loans with an allowance recorded:
Commercial, financial & agricultural	500		500		500
Real estate:
Mortgage - commercial	1,106		1,106		46
Total impaired loans with an allowance recorded	1,606		1,606		546
Total	$	47,639	$	38,364	$	546



(dollars in thousands)	Unpaid Principal Balance		Recorded Investment		Allowance Allocated
December 31, 2015
Impaired loans with no related allowance recorded:
Commercial, financial & agricultural	$	1,155	$	1,044	$	—
Real estate:
Construction	10,472		4,126		—
Mortgage - residential	24,792		22,716		—
Mortgage - commercial	10,010		9,152		—
Total impaired loans with no related allowance recorded	46,429		37,038		—

Impaired loans with an allowance recorded:
Real estate:
Mortgage - commercial	1,166		1,166		51
Total impaired loans with an allowance recorded	1,166		1,166		51
Total	$	47,595	$	38,204	$	51

The following table presents by class, the average recorded investment and interest income recognized on impaired loans for the three months ended March 31, 2016 and 2015:



	Three Months Ended
	March 31, 2016					March 31, 2015
(dollars in thousands)	Average Recorded Investment		Interest Income Recognized			Average Recorded Investment		Interest Income Recognized
Commercial, financial & agricultural	$	1,423	$	—		$	13,646	$	5
Real estate:
Construction	4,046		36			4,699		86
Mortgage - residential	22,308		(2		)	28,954		1
Mortgage - commercial	10,140		34			22,751		164
Total	$	37,917	$	68		$	70,050	$	256

Foreclosure Proceedings

The Company had $1.1 million of consumer mortgage loans collateralized by residential real estate property that were in the process of foreclosure at March 31, 2016.

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 tables present by class, the aging of the recorded investment in past due loans and leases as of March 31, 2016 and December 31, 2015:



(dollars in thousands)	Accruing Loans 30 - 59 Days Past Due		Accruing Loans 60 - 89 Days Past Due		Accruing Loans Greater Than 90 Days Past Due		Nonaccrual Loans		Total Past Due and Nonaccrual		Loans and Leases Not Past Due		Total
March 31, 2016
Commercial, financial & agricultural	$	297	$	356	$	—	$	2,244	$	2,897	$	532,194	$	535,091
Real estate:
Construction	95		—		—		—		95		101,259		101,354
Mortgage - residential	4,554		—		656		5,527		10,737		1,448,465		1,459,202
Mortgage - commercial	—		—		—		6,913		6,913		766,123		773,036
Consumer	960		372		125		—		1,457		437,892		439,349
Leases	—		—		—		—		—		936		936
Total	$	5,906	$	728	$	781	$	14,684	$	22,099	$	3,286,869	$	3,308,968



(dollars in thousands)	Accruing Loans 30 - 59 Days Past Due		Accruing Loans 60 - 89 Days Past Due		Accruing Loans Greater Than 90 Days Past Due		Nonaccrual Loans		Total Past Due and Nonaccrual		Loans and Leases Not Past Due		Total
December 31, 2015
Commercial, financial & agricultural	$	276	$	140	$	—	$	1,044	$	1,460	$	519,626	$	521,086
Real estate:
Construction	—		—		—		—		—		84,885		84,885
Mortgage - residential	3,834		545		—		6,130		10,509		1,425,796		1,436,305
Mortgage - commercial	54		—		—		7,094		7,148		753,601		760,749
Consumer	1,443		521		273		—		2,237		405,242		407,479
Leases	—		—		—		—		—		1,028		1,028
Total	$	5,607	$	1,206	$	273	$	14,268	$	21,354	$	3,190,178	$	3,211,532

Modifications

Troubled debt restructurings (“TDRs”) included in nonperforming assets at March 31, 2016 totaled $6.3 million and consisted of 22 Hawaii residential mortgage loans with a combined principal balance of $3.2 million, one Hawaii commercial mortgage loan of $2.1 million, and three Hawaii commercial loans with a combined principal balance of $1.0 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 $20.1 million of TDRs still accruing interest at March 31, 2016, none of which were more than 90 days delinquent. At December 31, 2015, there were $20.3 million of TDRs still accruing interest, none of which were more than 90 days delinquent.

Some loans modified in a TDR may already be on nonaccrual status and partial charge-offs may have already been taken against the outstanding loan balance. 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. Loans that were not on nonaccrual status when modified in a TDR may have the financial effect of increasing the specific allowance associated with the loan. The loans modified in a TDR did not have a material effect on our provision for loan and lease losses (the “Provision”) and the Allowance during the three months ended March 31, 2016.

The following table presents by class, information related to loans modified in a TDR during the three months ended March 31, 2015. No loans were modified in a TDR during the three months ended March 31, 2016.



(dollars in thousands)	Number of Contracts	Recorded Investment (as of Period End)		Increase in the Allowance

Three Months Ended March 31, 2015
Real estate: Mortgage - commercial	11	$	910	$	—

No loans were modified as a TDR within the previous twelve months that subsequently defaulted during the three months ended March 31, 2016 and 2015.

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 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 estimated 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 are considered to be pass-rated. The following table presents by class and credit indicator, the recorded investment in the Company’s loans and leases as of March 31, 2016 and December 31, 2015:



(dollars in thousands)	Pass		Special Mention		Substandard		Loss		Subtotal		Net Deferred Costs (Income)			Total
March 31, 2016
Commercial, financial & agricultural	$	529,448	$	2,033	$	3,081	$	—	$	534,562	$	529		$	535,091
Real estate:
Construction	97,915		2,914		834		—		101,663		(309		)	101,354
Mortgage - residential	1,450,416		116		6,183		—		1,456,715		2,487			1,459,202
Mortgage - commercial	715,337		40,655		17,836		—		773,828		(792		)	773,036
Consumer	439,608		—		163		53		439,824		(475		)	439,349
Leases	936		—		—		—		936		—			936
Total	$	3,233,660	$	45,718	$	28,097	$	53	$	3,307,528	$	1,440		$	3,308,968

December 31, 2015
Commercial, financial & agricultural	$	514,971	$	2,168	$	3,318	$	—	$	520,457	$	629		$	521,086
Real estate:
Construction	83,601		808		787		—		85,196		(311		)	84,885
Mortgage - residential	1,427,732		—		6,130				1,433,862		2,443			1,436,305
Mortgage - commercial	705,520		41,335		14,711		—		761,566		(817		)	760,749
Consumer	407,778		95		151		—		408,024		(545		)	407,479
Leases	1,028		—		—		—		1,028		—			1,028
Total	$	3,140,630	$	44,406	$	25,097	$	—	$	3,210,133	$	1,399		$	3,211,532

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, 2016 and December 31, 2015, we did not have any loans that we considered to be subprime.