Note 5 - Loans

12 Months Ended

Dec. 31, 2012

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

5.      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 Consolidated Balance Sheets as of December 31, 2012, and December 31, 2011, were as follows:

	2012			2011
	(In thousands)
Type of Loans:
Commercial loans	$	2,127,107		$	1,868,275
Real estate construction loans		180,950			237,372
Commercial mortgage loans		3,768,452			3,748,897
Residential mortgage loans		1,146,230			972,262
Equity lines		193,852			214,707
Installment and other loans		12,556			17,699
Gross loans		7,429,147			7,059,212
Less:
Allowance for loan losses		(183,322	)		(206,280	)
Unamortized deferred loan fees		(10,238	)		(8,449	)
Total loans and leases, net	$	7,235,587		$	6,844,483
Loans held for sale	$	-		$	760

No loans were held for sale at December 31, 2012, compared to $760,000 at December 31, 2011.  In 2012, we added three new loans of $16.0 million, sold four loans of $16.2 million for a net loss on sale of $26,000, and transferred a loan of $500,000 to held for investment. At December 31, 2011, non-accrual loans held for sale of $760,000 decreased $2.1 million from $2.9 million at December 31, 2010.  In 2011, we added six new loans of $4.4 million, transferred one loan of $2.9 million to OREO, and sold four loans of $3.6 million for a net gain on sale of $88,000.  At December 31, 2011, loans held for sale were comprised of a commercial construction loan of $500,000 and a residential mortgage loan of $260,000.

The Company pledged real estate loans of $1.6 billion at December 31, 2012, and $2.0 billion at December 31, 2011, to the Federal Home Loan Bank of San Francisco under its specific pledge program.  In addition, the Bank pledged $211.6 million at December 31, 2012, and $250.9 million at December 31, 2011, of its commercial loans to the Federal Reserve Bank’s Discount Window under the Borrower-in-Custody program.

Loans serviced for others as of December 31, 2012, totaled $201.4 million and were comprised of $42.1 million of commercial loans, $62.2 million of commercial real estate loans, $3.6 million in construction loans, and $93.5 million of residential mortgages.

      The Company has entered into transactions with its directors, executive officers, or principal holders of its equity securities, or the associates of such persons (“Related Parties”).  Such transactions were made in the ordinary course of business on substantially the same terms and conditions, including interest rates and collateral, as those prevailing at the same time for comparable transactions with customers who are not related parties.  In management’s opinion, these transactions did not involve more than normal credit risk or present other unfavorable features.  All loans to Related Parties were current as of December 31, 2012.  In July 2011, the Bank sold a participation in a substandard real estate loan to a Related Party for $24.5 million, which represented 98% of the contractual balance.  In March 2012, the Bank sold participations in two substandard real estate loans to the same Related Party for $7.9 million, which represented 92.5% of the contractual balance. An analysis of the activity with respect to loans to Related Parties for the years indicated is as follows:

	December 31,
	2012			2011
	(In thousands)
Balance at beginning of year	$	160,069		$	134,161
Additional loans made		92,249			89,985
Payment received		(79,734	)		(64,077	)
Balance at end of year	$	172,584		$	160,069

At December 31, 2012, recorded investment in impaired loans totaled $248.6 million and was comprised of nonaccrual loans of $103.9 million and accruing TDR’s of $144.7 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.   The average balance of impaired loans was $277.8 million in 2012 and $361.4 million in 2011.  We considered all non-accrual loans and troubled debt restructurings ("TDR") to be impaired.  Interest recognized on impaired loans totaled $9.3 million in 2012 and $5.3 million in 2011.  The Bank recognizes interest income on impaired loans based on its existing method of recognizing interest income on non-accrual loans except accruing TDRs.  For impaired loans, the amounts previously charged off represent 23.2% at December 31, 2012, and 25.6% at December 31, 2011, of the contractual balances for impaired loans.  The following table presents impaired loans and the related allowance and charge-off as of the dates indicated:

	Impaired Loans
	At December 31, 2012						At December 31, 2011
	Unpaid Principal Balance		Recorded Investment		Allowance		Unpaid Principal Balance		Recorded Investment		Allowance
	(Dollars in thousands)
With no allocated allowance
Commercial loans	$	29,359	$	18,963	$	-	$	46,671	$	38,194	$	-
Real estate construction loans		9,304		7,277		-		134,837		78,767		-
Commercial mortgage loans		189,871		152,957		-		187,580		149,034		-
Residential mortgage and equity lines		4,303		4,229		-		8,555		7,987		-
Subtotal	$	232,837	$	183,426	$	-	$	377,643	$	273,982	$	-
With allocated allowance
Commercial loans	$	7,804	$	4,959	$	1,467	$	11,795	$	7,587	$	3,336
Real estate construction loans		54,718		34,856		8,158		-		-		-
Commercial mortgage loans		14,163		12,928		1,336		29,722		28,023		2,969
Residential mortgage and equity lines		14,264		12,428		1,222		13,813		12,381		1,249
Subtotal	$	90,949	$	65,171	$	12,183	$	55,330	$	47,991	$	7,554
Total impaired loans	$	323,786	$	248,597	$	12,183	$	432,973	$	321,973	$	7,554

The following table presents the average balance and interest income recognized related to impaired loans for the period indicated:

	For the year ended December 31,
	2012		2011		2012		2011
	Average Recorded Investment				Interest Income Recognized
	(In thousands)
Commercial loans	$	31,798	$	48,349	$	580	$	1,053
Real estate construction loans		49,094		82,529		265		940
Commercial mortgage loans		178,822		212,555		8,221		3,101
Residential mortgage and equity lines		18,062		17,920		239		236
Subtotal	$	277,776	$	361,353	$	9,305	$	5,330

The following is a summary of non-accrual loans as of December 31, 2012, 2011, and 2010 and the related net interest foregone for the years then ended:

	2012		2011		2010
	(In thousands)
Non-accrual portfolio loans	$	103,902	$	201,197	$	242,319
Non-accrual loans held-for-sale		-		760		2,873
Total non-accrual loans	$	103,902	$	201,957	$	245,192
Contractual interest due	$	6,621	$	13,049	$	17,304
Interest recognized		1,006		71		4,853
Net interest foregone	$	5,615	$	12,978	$	12,451

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

	As of December 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	$	16,832	$	1,610	$	630	$	19,958	$	39,030	$	2,088,077	$	2,127,107
Real estate construction loans		-		1,471		-		36,299		37,770		143,180		180,950
Commercial mortgage loans		21,570		3,627		-		35,704		60,901		3,707,551		3,768,452
Residential mortgage loans		5,324		1,972		-		11,941		19,237		1,320,845		1,340,082
Installment and other loans		-		-		-		-		-		12,556		12,556
Total loans	$	43,726	$	8,680	$	630	$	103,902	$	156,938	$	7,272,209	$	7,429,147

	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 loans		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 problem 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 TDRs since TDRs are considered to be impaired loans.   As a result of adopting the amendments in ASU 2012-02, the Company reassessed all restructurings that occurred on or after January 1, 2011, for identification as TDRs.

At December 31, 2012, accruing TDRs were $144.7 million and non-accrual TDRs were $47.7 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 $1.1 million to accruing TDRs and $7.8 million to non-accrual TDRs at December 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 2012, their specific reserve at December 31, 2012, and charge-off during 2012:

	No. of Contracts		Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment		Specific Reserve		Charge-off
	(Dollars in thousands)
Commercial loans		9	$	3,646	$	3,646	$	1,213	$	-
Commercial mortgage loans		20		62,118		58,393		27		3,725
Residential mortgage and equity lines		14		4,305		4,223		162		82
Total		43	$	70,069	$	66,262	$	1,402	$	3,807

The following table presents TDRs that were modified during 2011, their specific reserve at December 31, 2011, and charge-off during 2011:

	No. of Contracts		Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment		Specific Reserve		Charge-off
	(Dollars in thousands)
Commercial loans		7	$	15,025	$	15,025	$	104	$	-
Real estate construction loans		3		33,669		21,522		-		12,147
Commercial mortgage loans		6		17,343		14,294		1		3,049
Residential mortgage and equity lines		3		1,574		1,574		114		-
Total		19	$	67,611	$	52,415	$	219	$	15,196

A summary of TDRs by type of concession and by type of loans is shown below:

		December 31, 2012
Accruing TDRs		Principal Deferral		Rate Reduction		Rate Reduction  and Forgiveness of Principal		Rate Reduction and Payment Deferral		Total
	(In thousands)
Commercial loans		$	531	$	3,020	$	-	$	413	$	3,964
Real estate construction loans			-		-		-		5,834		5,834
Commercial mortgage loans			27,003		16,656		739		85,783		130,181
Residential mortgage loans			1,461		1,024		-		2,231		4,716
Total accruing TDRs		$	28,995	$	20,700	$	739	$	94,261	$	144,695

	December 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	$	-	$	912	$	-	$	1,518	$	-	$	2,430
Real estate construction loans		-		16,767		9,579		-		-		26,346
Commercial mortgage loans		1,685		2,817		5,746		-		5,076		15,324
Residential mortgage loans		275		2,010		586		-		760		3,631
Total non-accrual TDRs	$	1,960	$	22,506	$	15,911	$	1,518	$	5,836	$	47,731

	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

Troubled debt restructurings on accrual status totaled $144.7 million at December 31, 2012, and were comprised of 61 loans, an increase of $24.7 million, compared to 32 loans totaling $120.0 million at December 31, 2011.  TDRs at December 31, 2012, were comprised of sixteen retail shopping and commercial use building loans of $68.1 million, fifteen office and commercial use building loans of $40.4 million, two hotel loans of $12.4 million, seventeen single family residential loans of $19.1 million, two land loans of $2.3 million, six commercial loans of $1.3 million, and three multi-family residential loans of $1.1 million.  We expect that the troubled debt restructuring loans on accruing status as of December 31, 2012, which are 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.  The comparable TDRs at December 31, 2011, were comprised of eleven retail shopping and commercial use building loans of $74.4 million, seven office and commercial use building loans of $23.8 million, one hotel loan of $7.9 million, ten single family residential loans of $13.3 million, one land loan of $635,000 and two commercial loans of $39,000.  The activity within our TDR loans for 2012 and 2011 are shown below:

Accruing TDRs	2012			2011
	(In thousands)
Beginning balance	$	120,016		$	136,800
New restructurings		53,958			60,863
Restructured loans restored to accrual status		8,356			709
Charge-offs		(251	)		(2,341	)
Payments		(5,159	)		(46,313	)
Restructured loans placed on nonaccrual		(32,225	)		(28,969	)
Expiration of loan concession		-			(733	)
Ending balance	$	144,695		$	120,016

Non-accrual TDRs	2012			2011
	(In thousands)
Beginning balance	$	50,870		$	28,146
New restructurings		12,304			13,269
Restructured loans placed on non-accrual		32,225			28,969
Charge-offs		(4,182	)		(7,303	)
Payments		(33,931	)		(3,355	)
Foreclosures		(1,199	)		(8,147	)
Restructured loans restored to accrual status		(8,356	)		(709	)
Ending balance	$	47,731		$	50,870

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 construction TDRs of $26.3 million, four commercial real estate TDRs of $12.2 million, and two mortgage TDRs of $1.6 million had payments defaults within the previous twelve months ended December 31, 2012.  One of the TDRs that subsequently defaulted incurred a charge-off of $46,000 during 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 December 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.  Loans are risk rated based on analysis of the current state of the borrower’s credit quality.  The analysis of credit quality includes a review of all sources of repayment, the borrower’s current financial and liquidity status and all other relevant information. 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 the 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 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 December 31, 2012, and as of December 31, 2011:

	As of December 31, 2012
	Pass/Watch		Special Mention		Substandard		Doubtful		Total
Commercial loans	$	1,944,989	$	76,776	$	94,077	$	11,265	$	2,127,107
Real estate construction loans		109,269		18,000		45,171		8,510		180,950
Commercial mortgage loans		3,344,783		162,455		261,214		-		3,768,452
Residential mortgage and equity lines		1,322,768		816		16,084		414		1,340,082
Installment and other loans		12,556		-		-		-		12,556
Total gross loans	$	6,734,365	$	258,047	$	416,546	$	20,189	$	7,429,147

	As of December 31, 2011
	Pass/Watch		Special Mention		Substandard		Doubtful		Total
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 December 31, 2012, and as of December 31, 2011.

	Commercial Loans		Real Estate Construction Loans		Commercial Mortgage Loans		Residential mortgage and equity line		Consumer and Other		Total
	(In thousands)
December 31, 2012
Loans individually evaluated for impairment
Allowance	$	1,467	$	8,158	$	1,336	$	1,222	$	-	$	12,183
Balance	$	23,922	$	42,133	$	165,885	$	16,657	$	-	$	248,597
Loans collectively evaluated for impairment
Allowance	$	64,634	$	14,859	$	81,137	$	10,481	$	28	$	171,139
Balance	$	2,103,185	$	138,817	$	3,602,567	$	1,323,425	$	12,556	$	7,180,550
Total allowance	$	66,101	$	23,017	$	82,473	$	11,703	$	28	$	183,322
Total balance	$	2,127,107	$	180,950	$	3,768,452	$	1,340,082	$	12,556	$	7,429,147
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 years ended December 31, 2012 and 2011.  Allocation of a portion of the allowance to one category of loans does not preclude its availability to absorb losses in other categories.

	Commercial Loans			Real Estate Construction Loans			Commercial Mortgage Loans			Residential mortgage and equity line			Installment and Other Loans			Total
	(In thousands)
2011 Beginning Balance	$	63,918		$	43,262		$	128,348		$	9,668		$	35		$	245,231
Provision for possible loan losses		11,711			11,514			1,454			2,392			197			27,268
Charge-offs		(11,745	)		(37,500	)		(26,750	)		(1,456	)		(175	)		(77,626	)
Recoveries		1,774			4,473			4,969			191			-			11,407
Net Charge-offs		(9,971	)		(33,027	)		(21,781	)		(1,265	)		(175	)		(66,219	)
2011 Ending Balance	$	65,658		$	21,749		$	108,021		$	10,795		$	57		$	206,280
Reserve to impaired loans	$	3,336		$	-		$	2,969		$	1,247		$	-		$	7,552
Reserve to non-impaired loans	$	62,322		$	21,749		$	105,052		$	9,548		$	57		$	198,728
Reserve for off-balance sheet credit commitments	$	816		$	1,103		$	113		$	34		$	3		$	2,069
2012 Beginning Balance	$	65,658		$	21,749		$	108,021		$	10,795		$	57		$	206,280
Provision/(reversal) for possible loan losses		16,201			(3,720	)		(23,128	)		2,360			(7	)		(8,294	)
Charge-offs		(17,707	)		(1,165	)		(11,762	)		(2,132	)		(25	)		(32,791	)
Recoveries		1,949			6,153			9,342			680			3			18,127
Net Charge-offs		(15,758	)		4,988			(2,420	)		(1,452	)		(22	)		(14,664	)
2012 Ending Balance	$	66,101		$	23,017		$	82,473		$	11,703		$	28		$	183,322
Reserve to impaired loans	$	1,467		$	8,158		$	1,336		$	1,222		$	-		$	12,183
Reserve to non-impaired loans	$	64,634		$	14,859		$	81,137		$	10,481		$	28		$	171,139
Reserve for off-balance sheet credit commitments	$	837		$	390		$	98		$	34		$	3		$	1,362

An analysis of the activity in the allowance for credit losses for the year ended 2012, 2011, and 2010 is as follows:

	December 31,
	2012			2011			2010
Allowance for Loan Losses	(In thousands)
Balance at beginning of year	$	206,280		$	245,231		$	211,889
(Reversal)/provision for credit losses		(9,000	)		27,000			156,900
Transfers from reserve for off-balance sheet credit commitments		706			268			2,870
Loans charged off		(32,791	)		(77,626	)		(138,755	)
Recoveries of charged off loans		18,127			11,407			12,327
Balance at end of year	$	183,322		$	206,280		$	245,231
Reserve for Off-balance Sheet Credit Commitments
Balance at beginning of year	$	2,069		$	2,337		$	5,207
Provision for credit losses/transfers		(706	)		(268	)		(2,870	)
Balance at end of year	$	1,363		$	2,069		$	2,337