Note 7 - Loans

9 Months Ended

Sep. 30, 2014

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, 2014, and December 31, 2013, were as follows:

	September 30, 2014			December 31, 2013
	(In thousands)
Type of Loans:
Commercial loans	$	2,450,118		$	2,298,724
Residential mortgage loans		1,516,711			1,355,255
Commercial mortgage loans		4,414,067			4,023,051
Equity lines		172,223			171,277
Real estate construction loans		301,459			221,701
Installment and other loans		3,676			14,555
Gross loans		8,858,254			8,084,563
Less:
Allowance for loan losses		(169,198	)		(173,889	)
Unamortized deferred loan fees		(12,903	)		(13,487	)
Total loans, net	$	8,676,153		$	7,897,187

At September 30, 2014, recorded investment in impaired loans totaled $188.3 million and was comprised of non-accrual loans of $65.2 million and accruing troubled debt restructured loans (“TDRs) of $123.1 million. At December 31, 2013, recorded investment in impaired loans totaled $200.8 million and was comprised of non-accrual loans of $83.2 million and accruing TDRs of $117.6 million. For impaired loans, the amounts previously charged off represent 12.6% at September 30, 2014, and 23.9% at December 31, 2013, 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				Nine months ended				Three months ended				Nine months ended
	September 30,				September 30,				September 30,				September 30,
	2014		2013		2014		2013		2014		2013		2014		2013
							(In thousands)
Commercial loans	$	21,706	$	32,187	$	26,741	$	24,873	$	205	$	166	$	636	$	395
Real estate construction loans		33,276		34,946		33,459		39,014		66		67		198		199
Commercial mortgage loans		119,611		132,921		114,663		145,380		1,153		730		3,310		3,289
Residential mortgage and equity lines		16,151		16,884		17,889		17,574		128		106		363		227
Total impaired loans	$	190,744	$	216,938	$	192,752	$	226,841	$	1,552	$	1,069	$	4,507	$	4,110

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

	Impaired Loans
	September 30, 2014						December 31, 2013
	Unpaid Principal Balance		Recorded Investment		Allowance		Unpaid Principal Balance		Recorded Investment		Allowance
	(In thousands)
With no allocated allowance
Commercial loans	$	19,792	$	18,764	$	-	$	20,992	$	18,905	$	-
Real estate construction loans		37,403		16,133		-		25,401		15,097		-
Commercial mortgage loans		84,274		82,586		-		105,593		78,930		-
Residential mortgage loans and equity lines		2,541		2,541		-		4,892		4,892		-
Subtotal	$	144,010	$	120,024	$	-	$	156,878	$	117,824	$	-
With allocated allowance
Commercial loans	$	8,951	$	6,985	$	2,730	$	22,737	$	13,063	$	2,519
Real estate construction loans		15,377		15,377		2,604		28,475		19,323		3,460
Commercial mortgage loans		33,749		32,973		7,999		39,223		35,613		6,584
Residential mortgage loans and equity lines		13,422		12,988		481		16,535		14,957		721
Subtotal	$	71,499	$	68,323	$	13,814	$	106,970	$	82,956	$	13,284
Total impaired loans	$	215,509	$	188,347	$	13,814	$	263,848	$	200,780	$	13,284

The following tables present the aging of the loan portfolio by type as of September 30, 2014, and as of December 31, 2013:

	September 30, 2014
	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
	(In thousands)
Type of Loans:
Commercial loans	$	8,307	$	3,920	$	662	$	8,851	$	21,740	$	2,428,378	$	2,450,118
Real estate construction loans		-		-		-		25,728		25,728		275,731		301,459
Commercial mortgage loans		171		1,676		-		23,830		25,677		4,388,390		4,414,067
Residential mortgage loans and equity lines		408		807		-		6,849		8,064		1,680,870		1,688,934
Installment and other loans		168		-		-		-		168		3,508		3,676
Total loans	$	9,054	$	6,403	$	662	$	65,258	$	81,377	$	8,776,877	$	8,858,254

	December 31, 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
	(In thousands)
Type of Loans:
Commercial loans	$	7,170	$	16,562	$	-	$	21,232	$	44,964	$	2,253,760	$	2,298,724
Real estate construction loans		-		-		-		28,586		28,586		193,115		221,701
Commercial mortgage loans		20,043		7,862		982		19,621		48,508		3,974,543		4,023,051
Residential mortgage loans and equity lines		3,508		832		-		13,744		18,084		1,508,448		1,526,532
Installment and other loans		100		-		-		-		100		14,455		14,555
Total loans	$	30,821	$	25,256	$	982	$	83,183	$	140,242	$	7,944,321	$	8,084,563

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 collectability 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 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 September 30, 2014, accruing TDRs were $123.1 million and non-accrual TDRs were $34.2 million compared to accruing TDRs of $117.6 million and non-accrual TDRs of $38.8 million at December 31, 2013. The Company allocated specific reserves of $8.0 million to accruing TDRs and $3.9 million to non-accrual TDRs at September 30, 2014, and $6.9 million to accruing TDRs and $2.2 million to non-accrual TDRs at December 31, 2013. The following tables present TDRs that were modified during the first nine months of 2014 and 2013, their specific reserves at September 30, 2014 and 2013, and charge-offs during the first nine months of 2014 and 2013:

	Nine months ended September 30, 2014								September 30, 2014
	No. of Contracts		Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment		Charge-offs		Specific Reserve
	(Dollars in thousands)
Commercial loans		6	$	10,773	$	10,773	$	-	$	26
Commercial mortgage loans		3		11,818		11,818		-		564
Residential mortgage loans and equity lines		5		2,226		2,226		-		16
Total		14	$	24,817	$	24,817	$	-	$	606

	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

Modifications of the loan terms during the first nine months of 2014 were in the form of changes in the stated interest rate, and/or extension of maturity dates, and/or reduction in monthly payment amount.  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 seven months to two years from the modification date. 

We expect that the TDRs on accruing status as of September 30, 2014, 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, 2014, and December 31, 2013, is shown below:

	September 30, 2014
Accruing TDRs	Principal Deferral		Rate Reduction		Rate Reduction and Forgiveness of Principal		Rate Reduction and Payment Deferral		Total
	(In thousands)
Commercial loans	$	13,006	$	1,558	$	-	$	2,333	$	16,897
Real estate construction loans		-		-		-		5,782		5,782
Commercial mortgage loans		19,116		8,317		-		64,296		91,729
Residential mortgage loans		3,557		1,013		216		3,895		8,681
Total accruing TDRs	$	35,679	$	10,888	$	216	$	76,306	$	123,089

	September 30, 2014
Non-accrual TDRs	Interest Deferral		Principal Deferral		Rate Reduction and Forgiveness of Principal		Rate Reduction and Payment Deferral		Total
	(In thousands)
Commercial loans	$	-	$	2,186	$	1,225	$	243	$	3,654
Real estate construction loans		-		15,377		-		8,851		24,228
Commercial mortgage loans		226		3,159		-		1,369		4,754
Residential mortgage loans		213		-		-		1,313		1,526
Total non-accrual TDRs	$	439	$	20,722	$	1,225	$	11,776	$	34,162

	December 31, 2013
Accruing TDRs	Principal Deferral		Rate Reduction		Rate Reduction and Payment Deferral		Total
	(In thousands)
Commercial loans	$	9,112	$	2,916	$	2,708	$	14,736
Real estate construction loans		-		-		5,834		5,834
Commercial mortgage loans		11,333		9,389		70,200		90,922
Residential mortgage loans		1,564		1,024		3,517		6,105
Total accruing TDRs	$	22,009	$	13,329	$	82,259	$	117,597

	December 31, 2013
Non-accrual TDRs	Interest Deferral		Principal Deferral		Rate Reduction and Forgiveness of Principal		Rate Reduction and Payment Deferral		Total
	(In thousands)
Commercial loans	$	-	$	2,866	$	1,352	$	-	$	4,218
Real estate construction loans		-		16,009		-		9,263		25,272
Commercial mortgage loans		1,443		2,168		-		1,843		5,454
Residential mortgage loans		241		2,206		-		1,378		3,825
Total non-accrual TDRs	$	1,684	$	23,249	$	1,352	$	12,484	$	38,769

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

	Three months ended September 30,						Nine months ended September 30,
Accruing TDRs	2014			2013			2014			2013
	(In thousands)
Beginning balance	$	111,136		$	115,464		$	117,597		$	144,695
New restructurings		14,900			10,669			22,997			15,485
Restructured loans restored to accrual status		660			5,397			1,622			6,851
Charge-offs		-			-			-			(78	)
Payments		(3,607	)		(15,274	)		(11,897	)		(48,663	)
Restructured loans placed on nonaccrual		-			(316	)		(7,230	)		(2,350	)
Ending balance	$	123,089		$	115,940		$	123,089		$	115,940

	Three months ended September 30,						Nine months ended September 30,
Non-accrual TDRs	2014			2013			2014			2013
	(In thousands)
Beginning balance	$	43,605		$	48,524		$	38,769		$	47,731
New restructurings		34			2,415			1,820			6,163
Restructured loans placed on nonaccrual		-			316			7,230			2,350
Charge-offs		(234	)		(1,188	)		(833	)		(2,121	)
Payments		(8,583	)		(1,062	)		(11,202	)		(3,664	)
Restructured loans restored to accrual status		(660	)		(5,397	)		(1,622	)		(6,851	)
Ending balance	$	34,162		$	43,608		$	34,162		$	43,608

A loan is considered to be in payment default once it is 60 to 90 days contractually past due under the modified terms.  The Company had one commercial mortgage loan in the amount of $62,000 that was modified as a TDR during the previous twelve months and which subsequently defaulted as of September 30, 2014. 

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, 2014, 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 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 tables present loan portfolio by risk rating as of September 30, 2014, and as of December 31, 2013:

	September 30, 2014
	Pass/Watch		Special Mention		Substandard		Doubtful		Total
		(In thousands)
Commercial loans	$	2,283,837	$	82,731	$	80,180	$	3,370	$	2,450,118
Real estate construction loans		267,760		-		32,199		1,500		301,459
Commercial mortgage loans		4,124,943		112,825		176,299		-		4,414,067
Residential mortgage loans and equity lines		1,679,920		-		9,014		-		1,688,934
Installment and other loans		3,676		-		-		-		3,676
Total gross loans	$	8,360,136	$	195,556	$	297,692	$	4,870	$	8,858,254

	December 31, 2013
	Pass/Watch		Special Mention		Substandard		Doubtful		Total
		(In thousands)
Commercial loans	$	2,108,191	$	84,786	$	102,088	$	3,659	$	2,298,724
Real estate construction loans		184,449		-		33,939		3,313		221,701
Commercial mortgage loans		3,686,788		127,436		208,827		-		4,023,051
Residential mortgage loans and equity lines		1,510,647		-		15,885		-		1,526,532
Installment and other loans		14,555		-		-		-		14,555
Total gross loans	$	7,504,630	$	212,222	$	360,739	$	6,972	$	8,084,563

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, 2014, and as of December 31, 2013:

	Commercial		Real Estate Construction		Commercial Mortgage		Residential Mortgage Loans and		Installment and
	Loans		Loans		Loans		Equity Lines		Other Loans		Total
	(In thousands)
September 30, 2014
Loans individually evaluated for impairment
Allowance	$	2,730	$	2,604	$	7,999	$	481	$	-	$	13,814
Balance	$	25,749	$	31,510	$	115,559	$	15,529	$	-	$	188,347
Loans collectively evaluated for impairment
Allowance	$	53,566	$	32,099	$	58,740	$	10,962	$	17	$	155,384
Balance	$	2,424,369	$	269,949	$	4,298,508	$	1,673,405	$	3,676	$	8,669,907
Total allowance	$	56,296	$	34,703	$	66,739	$	11,443	$	17	$	169,198
Total balance	$	2,450,118	$	301,459	$	4,414,067	$	1,688,934	$	3,676	$	8,858,254
December 31, 2013
Loans individually evaluated for impairment
Allowance	$	2,519	$	3,460	$	6,584	$	721	$	-	$	13,284
Balance	$	31,968	$	34,420	$	114,544	$	19,848	$	-	$	200,780
Loans collectively evaluated for impairment
Allowance	$	62,584	$	8,539	$	78,169	$	11,284	$	29	$	160,605
Balance	$	2,266,756	$	187,281	$	3,908,507	$	1,506,684	$	14,555	$	7,883,783
Total allowance	$	65,103	$	11,999	$	84,753	$	12,005	$	29	$	173,889
Total balance	$	2,298,724	$	221,701	$	4,023,051	$	1,526,532	$	14,555	$	8,084,563

The following table details activity in the allowance for loan losses by portfolio segment for the three and nine months ended September 30, 2014, and September 30, 2013. 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, 2014 and 2013 

	Commercial			Real Estate Construction		Commercial Mortgage			Residential Mortgage Loans and			Installment and Other
	Loans			Loans		Loans			Equity Lines			Loans			Total
	(In thousands)
June 30, 2014 Ending Balance	$	63,239		$	9,555	$	83,395		$	12,870		$	18			169,077
Provision/(credit) for possible credit losses		(10,839	)		25,116		(17,950	)		(1,427	)		(1	)		(5,101	)
Charge-offs		(252	)		-		(903	)		-			-			(1,155	)
Recoveries		4,148			32		2,197			-			-			6,377
Net (charge-offs)/recoveries		3,896			32		1,294			-			-			5,222
September 30, 2014 Ending Balance	$	56,296		$	34,703	$	66,739		$	11,443		$	17		$	169,198
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, 2014 and 2013 

	Commercial			Real Estate Construction			Commercial Mortgage			Residential Mortgage Loans and			Installment and Other
	Loans			Loans			Loans			Equity Lines			Loans			Total
	(In thousands)
2014 Beginning Balance	$	65,103		$	11,999		$	84,753		$	12,005		$	29		$	173,889
Provision/(credit) for possible credit losses		(12,067	)		24,460			(20,991	)		(562	)		(12	)		(9,172	)
Charge-offs		(7,592	)		(1,813	)		(3,327	)		-			-			(12,732	)
Recoveries		10,852			57			6,304			-			-			17,213
Net (charge-offs)/recoveries		3,260			(1,756	)		2,977			-			-			4,481
September 30, 2014 Ending Balance	$	56,296		$	34,703		$	66,739		$	11,443		$	17		$	169,198
Reserve for impaired loans	$	2,730		$	2,604		$	7,999		$	481		$	-		$	13,814
Reserve for non-impaired loans	$	53,566		$	32,099		$	58,740		$	10,962		$	17		$	155,384
Reserve for off-balance sheet credit commitments	$	901		$	668		$	410		$	39		$	-		$	2,018
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