Note 7 - Loans

6 Months Ended

Jun. 30, 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 June 30, 2012, and December 31, 2011, were as follows:

	June 30, 2012			December 31, 2011
	(In thousands)
Type of Loans:
Commercial loans	$	1,945,720		$	1,868,275
Residential mortgage loans		1,001,976			972,262
Commercial mortgage loans		3,695,440			3,748,897
Equity lines		203,788			214,707
Real estate construction loans		180,086			237,372
Installment and other loans		16,673			17,699
Gross loans		7,043,683			7,059,212
Less:
Allowance for loan losses		(192,274	)		(206,280	)
Unamortized deferred loan fees		(8,855	)		(8,449	)
Total loans, net	$	6,842,554		$	6,844,483
Loans held for sale	$	500		$	760

Loans held for sale of $500,000 at June 30, 2012, decreased $260,000 from $760,000 at December 31, 2011.  In the six months of 2012, we added three new loans of $16.0 million and sold four loans of $16.2 million for a net loss on sale of $26,000.  At June 30, 2012, loans held for sale were comprised of a residential construction loan of $500,000.

At June 30, 2012, recorded investment in impaired loans totaled $276.6 million and was comprised of nonaccrual loans of $122.8 million, nonaccrual loans held for sale of $500,000, and accruing troubled debt restructured (“TDR”) loans of $153.2 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 21.9% at June 30, 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				For the Six Months Ended				For the Three Months Ended				For the Six Months Ended
	June 30,				June 30,				June 30,				June 30,
	2012		2011		2012		2011		2012		2011		2012		2011
	(In thousands)
Commercial loans	$	29,970	$	50,379	$	37,556	$	46,204	$	32	$	263	$	62	$	525
Real estate construction loans		45,775		84,787		56,115		85,402		111		77		221		153
Commercial mortgage loans		179,835		242,697		182,351		247,885		1,849		1,052		3,115		2,099
Residential mortgage and equity lines		19,177		17,424		18,446		16,974		38		57		76		100
Total	$	274,757	$	395,287	$	294,468	$	396,465	$	2,030	$	1,449	$	3,474	$	2,877

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

	Impaired Loans
	June 30, 2012						December 31, 2011
	Unpaid Principal Balance		Recorded Investment		Allowance		Unpaid Principal Balance		Recorded Investment		Allowance
	(In thousands)
With no allocated allowance
Commercial loans	$	24,282	$	15,472	$	-	$	46,671	$	38,194	$	-
Real estate construction loans		66,473		44,622		-		134,836		78,767		-
Commercial mortgage loans		209,480		171,248		-		187,580		149,034		-
Residential mortgage and equity lines		5,891		5,818		-		8,555		7,987		-
Subtotal	$	306,126	$	237,160	$	-	$	377,642	$	273,982	$	-
With allocated allowance
Commercial loans	$	18,247	$	12,932	$	3,687	$	11,795	$	7,587	$	3,336
Commercial mortgage loans		14,413		13,435		1,896		29,722		28,023		2,969
Residential mortgage and equity lines		15,178		13,044		1,659		13,813		12,381		1,249
Subtotal	$	47,838	$	39,411	$	7,242	$	55,330	$	47,991	$	7,554
Total impaired loans	$	353,964	$	276,571	$	7,242	$	432,972	$	321,973	$	7,554

The following table presents the aging of the loan portfolio by type as of June 30, 2012 and as of December 31, 2011:

	As of June 30, 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
	(In thousands)
Type of Loans:
Commercial loans	$	-	$	4,182	$	746	$	25,716	$	30,644	$	1,915,076	$	1,945,720
Real estate construction loans		10,689		-		-		11,946		22,635		157,451		180,086
Commercial mortgage loans		-		20,362		-		70,630		90,992		3,604,448		3,695,440
Residential mortgage and equity lines		14,728		18,853		-		14,530		48,111		1,157,653		1,205,764
Installment and other loans		-		-		-		-		-		16,673		16,673
Total loans	$	25,417	$	43,397	$	746	$	122,822	$	192,382	$	6,851,301	$	7,043,683

	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
	(In thousands)
Type of Loans:
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.

TDRs on accrual status are comprised of the loans that have, pursuant to the Bank’s policy, performed under the restructured terms and have demonstrated sustained performance under the modified terms for six months before being returned to accrual status.  The sustained performance considered by management pursuant to its policy includes the periods prior to the modification if the prior performance met or exceeded the modified terms.  This would include cash paid by the borrower prior to the restructure to set up interest reserves.

At June 30, 2012, accruing TDRs were $153.2 million and non-accrual TDRs were $23.3 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 $1.3 million to accruing TDRs and $206,000 to non-accrual TDRs at June 30, 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 six months of 2012 and 2011, their specific reserve at June 30, and charge-offs during the first six months of 2012 and 2011:

	For the Six Months Ended June 30, 2012								As of June 30, 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	$	-	$	60
Commercial mortgage loans		12		44,619		40,940		3,679		-
Residential mortgage and equity lines		3		1,802		1,802		-		14
Total		20	$	48,409	$	44,730	$	3,679	$	74

	For the Six Months Ended June 30, 2011								As of June 30, 2011
	No. of Contracts		Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment		Charge-offs		Specific Reserve
			(Dollars in thousands)
Commercial loans		5	$	15,124	$	15,124	$	-	$	53
Commercial mortgage loans		2		1,929		1,929		-		1
Residential mortgage and equity lines		1		501		501		-		93
Total		8	$	17,554	$	17,554	$	-	$	147

Modifications of the loan terms during the first six 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.  The length of time for which modifications involving a reduction of the stated interest rate were documented ranged from two months to four years from the existing maturity date.  Modifications involving an extension of the maturity date were for periods ranging from two months to four years from the existing maturity date. 

Accruing TDRs at June 30, 2012, were comprised of loans collateralized by fourteen retail shopping and commercial use buildings of $81.8 million, ten office and commercial use buildings of $37.6 million, two hotels of $12.7 million, twelve single family residences of $19.1 million, three multi-family residences of $1.1 million, one land of $413,000, and five unsecured commercial loans of $542,000.  We expect that the troubled debt restructuring loans on accruing status as of June 30, 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 June 30, 2012, and as of December 31, 2011, is shown below:

	As of June 30,2012
Accruing TDRs	Principal Deferral		Rate Reduction		Rate Reduction and Forgiveness of Principal		Rate Reduction and Payment Deferral		Total
	(In thousands)
Commercial loans	$	546	$	1,720	$	-	$	422	$	2,688
Real estate construction loans		16,820		9,581		-		5,776		32,177
Commercial mortgage loans		26,882		31,602		1,141		54,427		114,052
Residential mortgage loans		1,287		1,030		-		2,015		4,332
Total accruing TDRs	$	45,535	$	43,933	$	1,141	$	62,640	$	153,249

	As of June 30, 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	$	-	$	585	$	1,370	$	1,145	$	-	$	3,100
Commercial mortgage loans		2,596		2,471		6,944		-		6,238		18,249
Residential mortgage loans		293		1,347		-		-		296		1,936
Total non-accrual TDRs	$	2,889	$	4,403	$	8,314	$	1,145	$	6,534	$	23,285

	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 the period indicated are shown below:

	For the Three Months Ended June 30,						For the Six Months Ended June 30,
Accruing TDRs	2012			2011			2012			2011
	(In thousands)
Beginning balance	$	143,233		$	135,327		$	120,016		$	136,800
New restructurings		17,047			263			38,759			13,999
Restructured loans restored to accrual status		-			1,037			2,853			1,037
Charge-offs		-			(659	)		-			(659	)
Payments		(1,207	)		(2,414	)		(2,555	)		(4,074	)
Restructured loans placed on nonaccrual		(5,824	)		(17,226	)		(5,824	)		(30,042	)
Expiration of loan concession		-			-			-			(733	)
Ending balance	$	153,249		$	116,328		$	153,249		$	116,328

	For the Three Months Ended June 30,						For the Six Months Ended June 30,
Non-accrual TDRs	2012			2011			2012			2011
				(In thousands)
Beginning balance	$	21,543		$	43,130		$	50,870		$	28,147
New restructurings		733			-			5,971			3,556
Restructured loans placed on nonaccrual		5,824			17,225			5,824			30,041
Charge-offs		(267	)		(3,725	)		(4,285	)		(4,829	)
Payments		(4,548	)		(10,118	)		(32,242	)		(10,403	)
Foreclosures		-			(7,245	)		-			(7,245	)
Restructured loans restored to accrual status		-			(1,037	)		(2,853	)		(1,037	)
Ending balance	$	23,285		$	38,230		$	23,285		$	38,230

A loan is considered to be in payment default once it is 60 to 90 days contractually past due under the modified terms.  Five commercial real estate TDRs of $13.3 million, three commercial TDRs of $1.4 million, one land TDR of $1.2 million and one mortgage TDR of $1.2 million had payments defaults within the twelve months ended June 30, 2012.  The TDRs that subsequently defaulted incurred charge-offs of $502,000 within the twelve months ended June 30, 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 June 30, 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 June 30, 2012, and as of December 31, 2011:

	As of June 30, 2012
	Pass/Watch		Special Mention		Substandard		Doubtful		Total
	(In thousands)
Commercial loans	$	1,779,114	$	61,298	$	91,940	$	13,368	$	1,945,720
Real estate construction loans		107,217		21,718		44,033		7,118		180,086
Commercial mortgage loans		3,266,362		138,544		290,534		-		3,695,440
Residential mortgage and equity lines		1,188,160		-		17,390		214		1,205,764
Installment and other loans		16,673		-		-		-		16,673
Total gross loans	$	6,357,526	$	221,560	$	443,897	$	20,700	$	7,043,683
Loans held for sale	$	-	$	-	$	-	$	500	$	500

	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 June 30, 2012, and as of December 31, 2011.

	Commercial Loans		Real Estate Construction Loans		Commercial Mortgage Loans		Residential Mortgage Loans and Equity Lines		Consumer and Other Loans		Total
	(In thousands)
June 30, 2012
Loans individually evaluated for impairment
Allowance	$	3,687	$	-	$	1,896	$	1,659	$	-	$	7,242
Balance	$	28,404	$	44,622	$	184,683	$	18,862	$	-	$	276,571
Loans collectively evaluated for impairment
Allowance	$	62,908	$	16,360	$	97,113	$	8,595	$	56	$	185,032
Balance	$	1,917,316	$	135,464	$	3,510,757	$	1,186,902	$	16,673	$	6,767,112
Total allowance	$	66,595	$	16,360	$	99,009	$	10,254	$	56	$	192,274
Total balance	$	1,945,720	$	180,086	$	3,695,440	$	1,205,764	$	16,673	$	7,043,683
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  and six months ended June 30, 2012, and June 30, 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 June 30, 2012 and 2011
	Commercial Loans			Real Estate Construction Loans			Commercial Mortgage Loans			Residential Mortgage and Equity Line			Installment and Other Loans			Total
	(In thousands)
March 31, 2011 Ending Balance	$	63,194		$	42,554		$	125,295		$	9,949		$	38		$	241,030
Provision/(credit) for possible credit losses		11,004			(3,265	)		3,532			(642	)		(2	)		10,627
Charge-offs		(8,618	)		(4,607	)		(13,696	)		-			-			(26,921	)
Recoveries		280			3,001			1,883			-			-			5,164
Net (charge-offs)/recoveries		(8,338	)		(1,606	)		(11,813	)		-			-			(21,757	)
June 30, 2011 Ending Balance	$	65,860		$	37,683		$	117,014		$	9,307		$	36		$	229,900
March 31, 2012 Ending Balance	$	60,404		$	17,992		$	106,175		$	10,122		$	50		$	194,743
Provision/(credit) for possible credit losses		8,171			(2,972	)		(10,906	)		671			6			(5,030	)
Charge-offs		(2,133	)		(251	)		(1,458	)		(550	)		-			(4,392	)
Recoveries		153			1,591			5,198			11			-			6,953
Net (charge-offs)/recoveries		(1,980	)		1,340			3,740			(539	)		-			2,561
June 30, 2012 Ending Balance	$	66,595		$	16,360		$	99,009		$	10,254		$	56		$	192,274

For the Six Months Ended June 30, 2012 and 2011
	Commercial Loans			Real Estate Construction Loans			Commercial Mortgage Loans			Residential Mortgage and Equity Line			Installment and Other Loans			Total
	(In thousands)
2011 Beginning Balance	$	63,919		$	43,261		$	128,347		$	9,668		$	36		$	245,231
Provision/(credit) for possible credit losses		10,882			1,389			4,880			(361	)		-			16,790
Charge-offs		(9,996	)		(10,855	)		(19,045	)		-			-			(39,896	)
Recoveries		1,055			3,888			2,832			-			-			7,775
Net (charge-offs)/recoveries		(8,941	)		(6,967	)		(16,213	)		-			-			(32,121	)
June 30, 2011 Ending Balance	$	65,860		$	37,683		$	117,014		$	9,307		$	36		$	229,900
Reserve for impaired loans	$	2,482		$	7,140		$	3,481		$	1,161		$	-		$	14,264
Reserve for non-impaired loans	$	63,378		$	30,543		$	113,533		$	8,146		$	36		$	215,636
Reserve for off-balance sheet credit commitments	$	564		$	863		$	82		$	35		$	3		$	1,547
2012 Beginning Balance	$	65,658		$	21,749		$	108,021		$	10,795		$	57		$	206,280
Provision/(credit) for possible credit losses		7,130			(9,411	)		(6,587	)		410			21			(8,437	)
Charge-offs		(7,092	)		(1,126	)		(9,681	)		(1,328	)		(25	)		(19,252	)
Recoveries		899			5,148			7,256			377			3			13,683
Net (charge-offs)/recoveries		(6,193	)		4,022			(2,425	)		(951	)		(22	)		(5,569	)
June 30, 2012 Ending Balance	$	66,595		$	16,360		$	99,009		$	10,254		$	56		$	192,274
Reserve for impaired loans	$	3,687		$	-		$	1,896		$	1,659		$	-		$	7,242
Reserve for non-impaired loans	$	62,908		$	16,360		$	97,113		$	8,595		$	56		$	185,032
Reserve for off-balance sheet credit commitments	$	747		$	617		$	104		$	35		$	2		$	1,505