Note 7 - Loans

9 Months Ended

Sep. 30, 2013

Receivables [Abstract]

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

7. Loans 

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

The components of loans in the condensed consolidated balance sheets as of September 30, 2013, and December 31, 2012, were as follows:

	September 30, 2013			December 31, 2012
	(In thousands)
Type of Loans:
Commercial loans	$	2,237,902		$	2,127,107
Residential mortgage loans		1,293,849			1,146,230
Commercial mortgage loans		3,921,348			3,768,452
Equity lines		173,798			193,852
Real estate construction loans		189,867			180,950
Installment and other loans		15,249			12,556
Gross loans		7,832,013			7,429,147
Less:
Allowance for loan losses		(181,452	)		(183,322	)
Unamortized deferred loan fees		(12,933	)		(10,238	)
Total loans, net	$	7,637,628		$	7,235,587

At September 30, 2013, recorded investment in impaired loans totaled $215.8 million and was comprised of non-accrual loans of $99.9 million, and accruing troubled debt restructured (“TDR”) loans of $115.9 million. At December 31, 2012, recorded investment in impaired loans totaled $248.6 million and was comprised of non-accrual loans of $103.9 million and accruing TDRs of $144.7 million. For impaired loans, the amounts previously charged off represent 22.2% at September 30, 2013, and 23.2% at December 31, 2012, 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
	Three months ended September 30,				Nine months ended September 30,				Three months ended September 30,				Nine months ended September 30,
	2013		2012		2013		2012		2013		2012		2013		2012
	(In thousands)
Commercial loans	$	32,187	$	25,987	$	24,873	$	33,672	$	166	$	49	$	395	$	146
Real estate construction loans		34,946		41,404		39,014		51,176		67		177		199		531
Commercial mortgage loans		132,921		178,206		145,380		180,959		730		1,971		3,289		5,477
Residential mortgage and equity lines		16,884		18,370		17,574		18,420		106		49		227		148
Total	$	216,938	$	263,967	$	226,841	$	284,227	$	1,069	$	2,246	$	4,110	$	6,302

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

	Impaired Loans
	September 30, 2013						December 31, 2012
	Unpaid Principal Balance		Recorded Investment		Allowance		Unpaid Principal Balance		Recorded Investment		Allowance
	(In thousands)
With no allocated allowance
Commercial loans	$	20,896	$	17,699	$	-	$	29,359	$	18,963	$	-
Real estate construction loans		25,438		15,135		-		9,304		7,277		-
Commercial mortgage loans		125,489		94,167		-		189,871		152,957		-
Residential mortgage loans and equity lines		2,978		2,969		-		4,303		4,229		-
Subtotal	$	174,801	$	129,970	$	-	$	232,837	$	183,426	$	-
With allocated allowance
Commercial loans	$	22,099	$	17,352	$	10,849	$	7,804	$	4,959	$	1,467
Real estate construction loans		28,847		19,694		5,691		54,718		34,856		8,158
Commercial mortgage loans		35,582		34,688		6,129		14,163		12,928		1,336
Residential mortgage loans and equity lines		15,951		14,097		693		14,264		12,428		1,222
Subtotal	$	102,479	$	85,831	$	23,362	$	90,949	$	65,171	$	12,183
Total impaired loans	$	277,280	$	215,801	$	23,362	$	323,786	$	248,597	$	12,183

The following table presents the aging of the loan portfolio by type as of September 30, 2013, and as of December 31, 2012:

	September 30, 2013
	30-59 Days Past Due		60-89 Days Past Due		90 Days or More Past Due		Non-accrual Loans		Total Past Due		Loans Not Past Due		Total
Type of Loans:	(In thousands)
Commercial loans	$	17,034	$	4,136	$	-	$	24,506	$	45,676	$	2,192,226	$	2,237,902
Real estate construction loans		-		-		-		28,995		28,995		160,872		189,867
Commercial mortgage loans		2,396		262		499		35,996		39,153		3,882,195		3,921,348
Residential mortgage loans		3,310		2,237		-		10,364		15,911		1,451,736		1,467,647
Installment and other loans		208		-		-		-		208		15,041		15,249
Total loans	$	22,948	$	6,635	$	499	$	99,861	$	129,943	$	7,702,070	$	7,832,013

	December 31, 2012
	30-59 Days Past Due		60-89 Days Past Due		90 Days or More 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

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 they are considered to be impaired loans.

A troubled debt restructuring 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 a change in the stated interest rate, a reduction in the loan balance or accrued interest, or an 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 nine 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 September 30, 2013, accruing TDRs were $115.9 million and non-accrual TDRs were $43.6 million compared to accruing TDRs of $144.7 million and non-accrual TDRs of $47.7 million at December 31, 2012. The Company allocated specific reserves of $6.3 million to accruing TDRs and $4.5 million to non-accrual TDRs at September 30, 2013, and $1.1 million to accruing TDRs and $7.8 million to non-accrual TDRs at December 31, 2012. The following table presents TDRs that were modified during the first nine months of 2013 and 2012, their specific reserve at September 30, 2013, and charge-offs during the first nine months of 2013 and 2012:

	Nine months ended September 30, 2013								September 30, 2013
	No. of Contracts		Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment		Charge-offs		Specific Reserve
	(Dollars in thousands)
Commercial loans		9		11,705		10,516	$	1,189	$	71
Commercial mortgage loans		3		7,474		7,474		-		191
Residential mortgage loans and equity lines		11		3,736		3,658		78		125
Total		23	$	22,915	$	21,648	$	1,267	$	387

	Nine months ended September 30, 2012								September 30, 2013
	No. of Contracts		Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment		Charge-offs		Specific Reserve
	(Dollars in thousands)
Commercial loans		8	$	2,144	$	2,144	$	-	$	75
Commercial mortgage loans		15		59,299		55,610		3,689		-
Residential mortgage loans and equity lines		7		2,895		2,895		-		70
Total		30	$	64,338	$	60,649	$	3,689	$	145

Modifications of the loan terms during the first nine months of 2013 were in the form of changes in the stated interest rate, and in payment terms to interest only from principal and interest or reduction in monthly payment amount, multiple note structure, and waiver of late charges and collection fees.  The length of time for which modifications involving a reduction of the stated interest rate or changes in payment terms that were documented ranged from twelve months to three years from the modification date. 

We expect that the TDR loans on accruing status as of September 30, 2013, 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, and by type of loan as of September 30, 2013, and December 31, 2012, is shown below:

	September 30, 2013
Accruing TDRs	Principal Deferral		Rate Reduction		Rate Reduction and Payment Deferral		Total
	(In thousands)
Commercial loans	$	4,813	$	2,943	$	2,788	$	10,544
Real estate construction loans		-		-		5,833		5,833
Commercial mortgage loans		12,740		9,130		70,991		92,861
Residential mortgage loans		1,573		1,588		3,541		6,702
Total accruing TDRs	$	19,126	$	13,661	$	83,153	$	115,940

	September 30, 2013
Non-accrual TDRs	Interest Deferral		Principal Deferral		Rate Reduction and Forgiveness of Principal		Rate Reduction and Payment Deferral		Total
	(In thousands)
Commercial loans	$	-	$	3,026	$	1,391	$	-	$	4,417
Real estate construction loans		-		16,199		-		9,301		25,500
Commercial mortgage loans		1,464		1,640		-		6,677		9,781
Residential mortgage loans		249		2,241		-		1,420		3,910
Total non-accrual TDRs	$	1,713	$	23,106	$	1,391	$	17,398	$	43,608

	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

The activity within our TDR loans for the periods indicated are shown below:

	Three months ended September 30,						Nine months ended September 30,
Accruing TDRs	2013			2012			2013			2012
	(In thousands)
Beginning balance	$	115,464		$	153,249		$	144,695		$	120,016
New restructurings		10,669			14,765			15,485			53,524
Restructured loans restored to accrual status		5,397			3,957			6,851			6,810
Charge-offs		-			(251	)		(78	)		(251	)
Payments		(15,274	)		(1,569	)		(48,663	)		(4,124	)
Restructured loans placed on nonaccrual		(316	)		-			(2,350	)		(5,824	)
Ending balance	$	115,940		$	170,151		$	115,940		$	170,151

	Three months ended September 30,						Nine months ended September 30,
Non-accrual TDRs	2013			2012			2013			2012
	(In thousands)
Beginning balance	$	48,524		$	23,285		$	47,731		$	50,870
New restructurings		2,415			1,153			6,163			7,124
Restructured loans placed on nonaccrual		316			-			2,350			5,824
Charge-offs		(1,188	)		-			(2,121	)		(4,285	)
Payments		(1,062	)		(1,405	)		(3,664	)		(33,647	)
Restructured loans restored to accrual status		(5,397	)		(3,957	)		(6,851	)		(6,810	)
Ending balance	$	43,608		$	19,076		$	43,608		$	19,076

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 loans of $1.4 million were modified as TDRs during the previous twelve months and subsequently defaulted as of September 30, 2013, within the three months and nine months ended September 30, 2013.  None of these TDRs incurred any charge-offs within the twelve month period.

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 September 30, 2013, 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 September 30, 2013, and as of December 31, 2012:

	September 30, 2013
	Pass/Watch		Special Mention		Substandard		Doubtful		Total
	(In thousands)
Commercial loans	$	2,047,158	$	84,776	$	94,088	$	11,880	$	2,237,902
Real estate construction loans		151,696		-		34,676		3,495		189,867
Commercial mortgage loans		3,543,731		137,183		240,434		-		3,921,348
Residential mortgage loans and equity lines		1,453,498		-		14,149		-		1,467,647
Installment and other loans		15,249		-		-		-		15,249
Total gross loans	$	7,211,332	$	221,959	$	383,347	$	15,375	$	7,832,013

	December 31, 2012
	Pass/Watch		Special Mention		Substandard		Doubtful		Total
	(In thousands)
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 loans 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

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 September 30, 2013, and as of December 31, 2012:

	Commercial Loans		Real Estate Construction Loans		Commercial Mortgage Loans		Residential Mortgage Loans and Equity Lines		Installment and Other Loans		Total
	(In thousands)
September 30, 2013
Loans individually evaluated for impairment
Allowance	$	10,849	$	5,691	$	6,129	$	693	$	-	$	23,362
Balance	$	35,051	$	34,829	$	128,855	$	17,066	$	-	$	215,801
Loans collectively evaluated for impairment
Allowance	$	55,887	$	10,960	$	79,959	$	11,249	$	35	$	158,090
Balance	$	2,202,851	$	155,038	$	3,792,493	$	1,450,581	$	15,249	$	7,616,212
Total allowance	$	66,736	$	16,651	$	86,088	$	11,942	$	35	$	181,452
Total balance	$	2,237,902	$	189,867	$	3,921,348	$	1,467,647	$	15,249	$	7,832,013
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

The following table details activity in the allowance for loan losses by portfolio segment for the three and nine months ended September 30, 2013, and September 30, 2012. Allocation of a portion of the allowance to one category of loans does not preclude its availability to absorb losses in other categories.

Three months ended September 30, 2013 and 2012

	Commercial Loans			Real Estate Construction Loans			Commercial Mortgage Loans			Residential Mortgage Loans and Equity Lines			Installment and Other Loans			Total
	(In thousands)
June 30, 2012 Ending Balance		66,595			16,360			99,009			10,254			56			192,274
Provision/(credit) for possible credit losses		6,199			(670	)		(6,350	)		740			(23	)		(104	)
Charge-offs		(7,387	)		(39	)		(966	)		(477	)		-			(8,869	)
Recoveries		331			477			318			11			-			1,137
Net (charge-offs)/recoveries		(7,056	)		438			(648	)		(466	)		-			(7,732	)
September 30, 2012 Ending Balance	$	65,738		$	16,128		$	92,011		$	10,528		$	33		$	184,438
June 30, 2013 Ending Balance	$	64,379		$	13,755		$	89,678		$	11,892		$	29		$	179,733
Provision/(credit) for possible credit losses		2,121			1,660			(5,710	)		52			6			(1,871	)
Charge-offs		(200	)		-			(394	)		(160	)		-			(754	)
Recoveries		436			1,236			2,514			158			-			4,344
Net (charge-offs)/recoveries		236			1,236			2,120			(2	)		-			3,590
September 30, 2013 Ending Balance	$	66,736		$	16,651		$	86,088		$	11,942		$	35		$	181,452

Nine months ended September 30, 2013 and 2012

	Commercial Loans			Real Estate Construction Loans			Commercial Mortgage Loans			Residential Mortgage Loans and Equity Lines			Installment and Other Loans			Total
	(In thousands)
2012 Beginning Balance	$	65,658		$	21,749		$	108,021		$	10,795		$	57		$	206,280
Provision/(credit) for possible credit losses		13,329			(10,081	)		(12,937	)		1,150			(2	)		(8,541	)
Charge-offs		(14,479	)		(1,165	)		(10,647	)		(1,805	)		(25	)		(28,121	)
Recoveries		1,230			5,625			7,574			388			3			14,820
Net (charge-offs)/recoveries		(13,249	)		4,460			(3,073	)		(1,417	)		(22	)		(13,301	)
September 30, 2012 Ending Balance	$	65,738		$	16,128		$	92,011		$	10,528		$	33		$	184,438
Reserve for impaired loans	$	1,791		$	279		$	1,729		$	1,626		$	-		$	5,425
Reserve for non-impaired loans	$	63,947		$	15,849		$	90,282		$	8,902		$	33		$	179,013
Reserve for off-balance sheet credit commitments	$	801		$	668		$	104		$	34		$	3		$	1,610
2013 Beginning Balance	$	66,101		$	23,017		$	82,473		$	11,703		$	28		$	183,322
Provision/(credit) for possible credit losses		3,200			(8,622	)		935			780			(4	)		(3,711	)
Charge-offs		(4,580	)		-			(3,425	)		(766	)		-			(8,771	)
Recoveries		2,015			2,256			6,105			225			11			10,612
Net (charge-offs)/recoveries		(2,565	)		2,256			2,680			(541	)		11			1,841
September 30, 2013 Ending Balance	$	66,736		$	16,651		$	86,088		$	11,942		$	35		$	181,452
Reserve for impaired loans	$	10,849		$	5,691		$	6,129		$	693		$	-		$	23,362
Reserve for non-impaired loans	$	55,887		$	10,960		$	79,959		$	11,249		$	35		$	158,090
Reserve for off-balance sheet credit commitments	$	953		$	287		$	799		$	34		$	1		$	2,074