Note 7 - Loans

3 Months Ended

Mar. 31, 2012

Loans, Notes, Trade and Other Receivables Disclosure [Text Block]

7. Loans

Most of the Company’s business activity is predominately with Asian customers located in Southern and Northern California; New York City; Houston and Dallas, Texas; Seattle, Washington; Boston, Massachusetts; Chicago, Illinois; Edison, New Jersey; and Hong Kong.  The Company has no specific industry concentration, and generally its loans are collateralized with real property or other pledged collateral of the borrowers.  Loans are generally expected to be paid off from the operating profits of the borrowers, refinancing by another lender, or through sale by the borrowers of the secured collateral.

The components of loans in the condensed consolidated balance sheets as of March 31, 2012, and December 31, 2011, were as follows:

	March 31, 2012			December 31, 2011
	(In thousands)
Type of Loans:
Commercial loans	$	1,844,849		$	1,868,275
Residential mortgage loans		985,105			972,262
Commercial mortgage loans		3,662,436			3,748,897
Equity lines		208,602			214,707
Real estate construction loans		188,081			237,372
Installment and other loans		19,471			17,699
Gross loans		6,908,544			7,059,212
Less:
Allowance for loan losses		(194,743	)		(206,280	)
Unamortized deferred loan fees		(7,921	)		(8,449	)
Total loans, net	$	6,705,880		$	6,844,483
Loans held for sale	$	3,709		$	760

Loans held for sale of $3.7 million at March 31, 2012, increased $3.0 million from $760,000 at December 31, 2011.  In the first quarter of 2012, we added three new loans of $16.0 million and sold three loans of $13.0 million for a net loss on sale of $26,000.  At March 31, 2012, loans held for sale were comprised of a residential construction loan of $500,000 and a commercial real estate loans of $3.2 million.

At March 31, 2012, recorded investment in impaired loans totaled $275.2 million and was comprised of nonaccrual loans of $131.5 million, nonaccrual loans held for sale of $500,000, and accruing troubled debt restructured (“TDR”) loans of $143.2 million.  At December 31, 2011, recorded investment in impaired loans totaled $322.0 million and was comprised of nonaccrual loans of $201.2 million, nonaccrual loans held for sale of $760,000, and accruing TDR’s of $120.0 million.  For impaired loans, the amounts previously charged off represent 22.4% at March 31, 2012, and 25.6% at December 31, 2011, of the contractual balances for impaired loans.  The following table presents the average balance and interest income recognized related to impaired loans for the periods  indicated:

	Impaired Loans
	Average Recorded Investment				Interest Income Recognized
	For the three months ended March 31,
	2012		2011		2012		2011
	(In thousands)
Commercial loans	$	45,142	$	41,982	$	257	$	272
Real estate construction loans		66,455		86,024		176		330
Commercial mortgage loans		184,867		253,130		1,088		1,066
Residential mortgage and equity lines		17,715		16,519		40		25
Subtotal	$	314,179	$	397,655	$	1,561	$	1,693

The following table presents impaired loans and the related allowance for credit losses as of the dates indicated:
 

	Impaired Loans
	March 31, 2012						December 31, 2011
	Unpaid Principal Balance		Recorded Investment		Allowance		Unpaid Principal Balance		Recorded Investment		Allowance
	(In thousands)
With no allocated allowance
Commercial loans	$	38,012	$	28,077	$	-	$	46,671	$	38,194	$	-
Real estate construction loans		65,839		43,426		-		134,836		78,767		-
Commercial mortgage loans		174,252		134,562		-		187,580		149,034		-
Residential mortgage and equity lines		4,347		4,273		-		8,555		7,987		-
Subtotal	$	282,450	$	210,338	$	-	$	377,642	$	273,982	$	-
With allocated allowance
Commercial loans	$	20,689	$	17,329	$	1,272	$	11,795	$	7,587	$	3,336
Commercial mortgage loans		36,200		34,191		2,529		29,722		28,023		2,969
Residential mortgage and equity lines		15,480		13,372		1,806		13,813		12,381		1,247
Subtotal	$	72,369	$	64,892	$	5,607	$	55,330	$	47,991	$	7,552
Total impaired loans	$	354,819	$	275,230	$	5,607	$	432,972	$	321,973	$	7,552

The following table presents the aging of the loan portfolio by type as of March 31, 2012 and as of December 31, 2011:

	As of March 31, 2012
	30-59 Days Past Due		60-89 Days Past Due		Greater than 90 Days Past Due		Non-accrual Loans		Total Past Due		Loans Not Past Due		Total
Type of Loans:	(In thousands)
Commercial loans	$	16,248	$	605	$	845	$	30,329	$	48,027	$	1,796,822	$	1,844,849
Real estate construction loans		22,674		3,553		-		10,711		36,938		151,143		188,081
Commercial mortgage loans		11,718		591		544		76,619		89,472		3,572,964		3,662,436
Residential mortgage and equity lines		6,175		668		-		13,838		20,681		1,173,026		1,193,707
Installment and other loans		-		-		-		-		-		19,471		19,471
Total loans	$	56,815	$	5,417	$	1,389	$	131,497	$	195,118	$	6,713,426	$	6,908,544

	As of December 31, 2011
	30-59 Days Past Due		60-89 Days Past Due		Greater than 90 Days Past Due		Non-accrual Loans		Total Past Due		Loans Not Past Due		Total
Type of Loans:	(In thousands)
Commercial loans	$	1,683	$	-	$	-	$	30,661	$	32,344	$	1,835,931	$	1,868,275
Real estate construction loans		20,326		-		-		46,012		66,338		171,034		237,372
Commercial mortgage loans		13,627		20,277		6,726		107,784		148,414		3,600,483		3,748,897
Residential mortgage and equity lines		5,871		-		-		16,740		22,611		1,164,358		1,186,969
Installment and other loans		-		-		-		-		-		17,699		17,699
Total loans	$	41,507	$	20,277	$	6,726	$	201,197	$	269,707	$	6,789,505	$	7,059,212

The determination of the amount of the allowance for credit losses for impaired loans is based on management’s current judgment about the credit quality of the loan portfolio and takes into consideration known relevant internal and external factors that affect collectibility when determining the appropriate level for the allowance for credit losses.   The nature of the process by which the Bank determines the appropriate allowance for credit losses requires the exercise of considerable judgment.   This allowance evaluation process is also applied to troubled debt restructurings since trouble debt restructurings are  considered  to be impaired loans.

A troubled debt restructuring (“TDR”) is a formal modification of the terms of a loan when the lender, for economic or legal reasons related to the borrower’s financial difficulties, grants a concession to the borrower.  The concessions may be granted in various forms, including change in the stated interest rate, reduction in the loan balance or accrued interest, or extension of the maturity date that causes significant delay in payment.

At March 31, 2012, accruing TDRs were $143.2 million and non-accrual TDRs were $21.5 million compared to accruing TDRs of $120.0 million and non-accrual TDRs of $50.9 million at December 31, 2011.  The Company has allocated specific reserves of $2.2 million to accruing TDRs and $288,000 to non-accrual TDRs at March 31, 2012, and $1.4 million to accruing TDRs and $1.6 million to non-accrual TDRs at December 31, 2011.  The following table presents TDRs that were modified during the first quarters of 2012 and 2011, their specific reserve at March 31, and charge-offs during the first quarters of 2012 and 2011:

	For the Three Months Ended March 31, 2012								As of March 31, 2012
	No. of Contracts		Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment		Charge-offs		Specific Reserve
	(Dollars in thousands)
Commercial loans		5	$	1,988	$	1,988	$	-	$	68
Commercial mortgage loans		9		26,693		23,375		3,318		268
Residential mortgage and equity lines		2		1,587		1,587		-		-
Total		16	$	30,268	$	26,950	$	3,318	$	336

	For the Three Months Ended March 31, 2011								As of March 31, 2011
	No. of Contracts		Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment		Charge-offs		Specific Reserve
	(Dollars in thousands)
Commercial loans		4	$	14,862	$	14,862	$	-	$	5
Commercial mortgage loans		2		1,930		1,929		1		1
Residential mortgage and equity lines		1		591		501		90		93
Total		7	$	17,383	$	17,292	$	91	$	99

Modifications of the loan terms during the first three months of 2012 and 2011 were in the form of changes in the stated interest rate, multiple note structure, or extensions of the maturity date.  Modifications involving a reduction of the stated interest rate were for periods ranging from ten months to four years.  Modifications involving an extension of the maturity date were for periods ranging from ten months to four years. 

Accruing TDRs at March 31, 2012, were comprised of loans collateralized by thirteen retail shopping and commercial use buildings of $80.7 million, eleven office and commercial use buildings of $29.0 million, two hotels of $12.8 million, eleven single family residences of $19.3 million, two multi-family residences of $805,000,  one land of $537,000, and four commercial loans of $106,000.  We expect that the troubled debt restructuring loans on accruing status as of March 31, 2012, which were all performing in accordance with their restructured terms, will continue to comply with the restructured terms because of the reduced principal or interest payments on these loans. A summary of TDRs by type of concession, by type of loan as of March 31, 2012, and as of December 31, 2011, is shown below:

	As of March 31, 2012
Accruing TDRs	Principal Deferral		Rate Reduction		Rate Reduction and Forgiveness of Principal			Rate Reduction and Payment Deferral		Total
	(In thousands)
Commercial loans	$	12,911	$	1,738		$	-	$	427	$	15,076
Real estate construction loans		16,820		9,620			-		5,776		32,216
Commercial mortgage loans		14,275		37,600			1,506		38,753		92,134
Residential mortgage loans		1,291		1,032			-		1,484		3,807
Total accruing TDRs	$	45,297	$	49,990		$	1,506	$	46,440	$	143,233

	As of March 31, 2012
Non-accrual TDRs	Interest Deferral		Principal Deferral		Rate Reduction		Rate Reduction and Forgiveness of Principal		Rate Reduction and Payment Deferral		Total
	(In thousands)
Commercial loans	$	-	$	1,073	$	1,397	$	1,145	$	-	$	3,615
Commercial mortgage loans		2,614		6,859		1,167		-		5,006		15,646
Residential mortgage loans		302		1,349		-		-		631		2,282
Total non-accrual TDRs	$	2,916	$	9,281	$	2,564	$	1,145	$	5,637	$	21,543

	As of December 31, 2011
Accruing TDRs	Principal Deferral		Rate Reduction		Rate Reduction and Forgiveness of Principal		Rate Reduction and Payment Deferral		Total
	(In thousands)
Commercial loans	$	12,933	$	1,756	$	-	$	431	$	15,120
Real estate construction loans		16,820		9,659		-		5,776		32,255
Commercial mortgage loans		471		37,796		2,071		28,935		69,273
Residential mortgage loans		1,294		587		-		1,487		3,368
Total accruing TDRs	$	31,518	$	49,798	$	2,071	$	36,629	$	120,016

	As of December 31, 2011
Non-accrual TDRs	Interest Deferral		Principal Deferral		Rate Reduction		Rate Reduction and Forgiveness of Principal		Rate Reduction and Payment Deferral		Total
	(In thousands)
Commercial loans	$	-	$	616	$	1,859	$	1,506	$	-	$	3,981
Real estate construction loans		-		13,579		12,376		-		-		25,955
Commercial mortgage loans		2,633		9,727		-		-		5,076		17,436
Residential mortgage loans		311		2,427		449		-		311		3,498
Total non-accrual TDRs	$	2,944	$	26,349	$	14,684	$	1,506	$	5,387	$	50,870

The activity within our TDR loans for three months ended March 31, 2012, and  for the three months ended March 31, 2011, are shown below:

	For the Three Months Ended March 31,
Accruing TDRs	2012			2011
	(In thousands)
Beginning balance	$	120,016		$	136,800
New restructurings		21,712			13,736
Restructured loans restored to accrual status		2,853			-
Payments		(1,348	)		(1,660	)
Restructured loans placed on nonaccrual		-			(12,816	)
Expiration of loan concession		-			(733	)
Ending balance	$	143,233		$	135,327

	For the Three Months Ended March 31,
Non-accrual TDRs	2012			2011
	(In thousands)
Beginning balance	$	50,870		$	28,147
New restructurings		5,238			3,679
Restructured loans placed on nonaccrual		-			12,816
Charge-offs		(4,018	)		(1,104	)
Payments		(27,694	)		(408	)
Restructured loans restored to accrual status		(2,853	)		-
Ending balance	$	21,543		$	43,130

A loan is considered to be in payment default once it is 60 to 90 days contractually past due under the modified terms.  Two commercial real estate TDRs of $6.4 million, three commercial TDRs of $1.4 million, and one land TDR of $1.2 million had payments defaults within the twelve months ended March 31, 2012.  The TDRs that subsequently defaulted incurred charge-off of $495,000 within the  twelve months ended March 31, 2012.

Under the Company’s internal underwriting policy, an evaluation is performed of the probability that the borrower will be in payment default on any of its debt in the foreseeable future without the modification in order to determine whether a borrower is experiencing financial difficulty.

As of March 31, 2012, there were no commitments to lend additional funds to those borrowers whose loans have been restructured, were considered impaired, or were on non-accrual status.

As part of the on-going monitoring of the credit quality of our loan portfolio, the Company utilizes a risk grading matrix to assign a risk grade to each loan.  The risk rating categories can be generally described by the following grouping for non-homogeneous loans: 

· Pass/Watch – These loans range from minimal credit risk to lower than average, but still acceptable, credit risk.

· Special Mention – Borrower is fundamentally sound and loan is currently protected but adverse trends are apparent that, if not corrected, may affect ability to repay.  Primary source of loan repayment remains viable but there is increasing reliance on collateral or guarantor support.

· Substandard – These loans are inadequately protected by current sound net worth, paying capacity or pledged collateral.  Well-defined weaknesses exist that could jeopardize repayment of debt.  Loss may not be imminent, but if weaknesses are not corrected, there is a good possibility of some loss.

· Doubtful – The possibility of loss is extremely high, but due to identifiable and important pending events (which may strengthen the loan) a loss classification is deferred until the situation is better defined.

· Loss – These loans are considered uncollectible and of such little value that to continue to carry the loan as an active asset is no longer warranted.

The following table presents loan portfolio by risk rating as of March 31, 2012, and as of December 31, 2011:

	As of March 31, 2012
	Pass/Watch		Special Mention		Substandard		Doubtful		Total
	(In thousands)
Commercial loans	$	1,697,108	$	66,297	$	74,643	$	6,801	$	1,844,849
Real estate construction loans		110,965		21,718		48,280		7,118		188,081
Commercial mortgage loans		3,245,353		112,335		304,748		-		3,662,436
Residential mortgage and equity lines		1,173,660		403		19,500		144		1,193,707
Installment and other loans		19,405		66		-		-		19,471
Total gross loans	$	6,246,491	$	200,819	$	447,171	$	14,063	$	6,908,544
Loans held for sale	$	3,209	$	-	$	-	$	500	$	3,709

	As of December 31, 2011
	Pass/Watch		Special Mention		Substandard		Doubtful		Total
	(In thousands)
Commercial loans	$	1,689,842	$	64,290	$	108,858	$	5,285	$	1,868,275
Real estate construction loans		115,538		23,555		90,132		8,147		237,372
Commercial mortgage loans		3,275,431		69,925		403,541		-		3,748,897
Residential mortgage and equity lines		1,149,225		4,439		33,160		145		1,186,969
Installment and other loans		17,636		63		-		-		17,699
Total gross loans	$	6,247,672	$	162,272	$	635,691	$	13,577	$	7,059,212
Loans held for sale	$	-	$	-	$	260	$	500	$	760

The allowance for loan losses and the reserve for off-balance sheet credit commitments are significant estimates that can and do change based on management’s process in analyzing the loan portfolio and on management’s assumptions about specific borrowers, underlying collateral, and applicable economic and environmental conditions, among other factors.

The following table presents the balance in the allowance for loan losses by portfolio segment and based on impairment method as of March 31, 2012, and as of December 31, 2011.

			Real Estate		Commercial		Residential
	Commercial		Construction		Mortgage		Mortgage Loans		Consumer and
	Loans		Loans		Loans		and Equity Lines		Other Loans		Total
	(In thousands)
March 31, 2012
Loans individually evaluated for impairment
Allowance	$	1,272	$	-	$	2,529	$	1,806	$	-	$	5,607
Balance	$	45,406	$	43,426	$	168,753	$	17,645	$	-	$	275,230
Loans collectively evaluated for impairment
Allowance	$	59,119	$	17,993	$	103,657	$	8,317	$	50	$	189,136
Balance	$	1,799,443	$	144,655	$	3,493,683	$	1,176,062	$	19,471	$	6,633,314
Total allowance	$	60,391	$	17,993	$	106,186	$	10,123	$	50	$	194,743
Total balance	$	1,844,849	$	188,081	$	3,662,436	$	1,193,707	$	19,471	$	6,908,544
December 31, 2011
Loans individually evaluated for impairment
Allowance	$	3,336	$	-	$	2,969	$	1,247	$	-	$	7,552
Balance	$	45,781	$	78,766	$	177,058	$	20,368	$	-	$	321,973
Loans collectively evaluated for impairment
Allowance	$	62,322	$	21,749	$	105,052	$	9,548	$	57	$	198,728
Balance	$	1,822,494	$	158,606	$	3,571,839	$	1,166,601	$	17,699	$	6,737,239
Total allowance	$	65,658	$	21,749	$	108,021	$	10,795	$	57	$	206,280
Total balance	$	1,868,275	$	237,372	$	3,748,897	$	1,186,969	$	17,699	$	7,059,212

The following table details activity in the allowance for loan losses by portfolio segment for the three months ended March 31, 2012, and for the three months ended March 31, 2011.  Allocation of a portion of the allowance to one category of loans does not preclude its availability to absorb losses in other categories.

For the Three Months Ended March 31, 2012 and 2011

	Commercial Loans			Real Estate Construction Loans			Commercial Mortgage Loans			Residential Mortgage and Equity Line			Installment and Other Loans			Total
	(In thousands)
2012 Beginning Balance	$	65,658		$	21,749		$	108,021		$	10,795		$	57		$	206,280
Provision for possible credit losses		(1,041	)		(6,439	)		4,318			(260	)		15			(3,407	)
Charge-offs		(4,959	)		(875	)		(8,222	)		(779	)		(25	)		(14,860	)
Recoveries		746			3,557			2,058			366			3			6,730
Net charge-offs		(4,213	)		2,682			(6,164	)		(413	)		(22	)		(8,130	)
March 31, 2012 Ending Balance	$	60,404		$	17,992		$	106,175		$	10,122		$	50		$	194,743
Reserve for impaired loans	$	1,272		$	-		$	2,529		$	1,806		$	-		$	5,607
Reserve for non-impaired loans	$	59,119		$	17,993		$	103,657		$	8,317		$	50		$	189,136
Reserve for off-balance sheet credit commitments	$	720		$	635		$	84		$	34		$	2		$	1,475
2011 Beginning Balance	$	63,919		$	43,261		$	128,347		$	9,668		$	36		$	245,231
Provision for possible credit losses		(122	)		4,654			1,218			423			(10	)		6,163
Charge-offs		(1,378	)		(6,248	)		(5,123	)		(226	)		-			(12,975	)
Recoveries		775			887			853			84			12			2,611
Net charge-offs		(603	)		(5,361	)		(4,270	)		(142	)		12			(10,364	)
March 31, 2011 Ending Balance	$	63,194		$	42,554		$	125,295		$	9,949		$	38		$	241,030
Reserve for impaired loans	$	2,953		$	7,569		$	3,664		$	1,106		$	-		$	15,292
Reserve for non-impaired loans	$	60,241		$	34,985		$	121,631		$	8,843		$	38		$	225,738
Reserve for off-balance sheet credit commitments	$	689		$	1,355		$	93		$	35		$	2		$	2,174