Note 7 - Loans

3 Months Ended

Mar. 31, 2016

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; Rockville, Maryland; 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 types of loans in the condensed consolidated balance sheets as of March 31, 2016, and December 31, 2015, were as follows:

	March 31, 2016			December 31, 2015
	(In thousands)
Type of Loans:
Commercial loans	$	2,251,187		$	2,316,863
Residential mortgage loans		2,043,789			1,932,355
Commercial mortgage loans		5,445,575			5,301,218
Real estate construction loans		453,469			441,543
Equity lines		168,283			168,980
Installment and other loans		1,344			2,493
Gross loans	$	10,363,647		$	10,163,452
Less:
Allowance for loan losses		(134,552	)		(138,963	)
Unamortized deferred loan fees		(7,585	)		(8,262	)
Total loans, net	$	10,221,510		$	10,016,227
Loans held for sale	$	-		$	6,676

As of March 31, 2016, recorded investment in impaired loans totaled $134.8 million and was comprised of non-accrual loans of $44.6 million and accruing troubled debt restructured loans (TDRs) of $90.2 million. As of December 31, 2015, recorded investment in impaired loans totaled $133.8 million and was comprised of non-accrual loans of $52.1 million and accruing TDRs of $81.7 million. For impaired loans, the amounts previously charged off represent 14.2% as of March 31, 2016, and 22.4% as of December 31, 2015, 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 March 31,				Three months ended March 31,
	2016		2015		2016		2015
Commercial loans	$	12,670	$	25,426	$	120	$	229
Real estate construction loans		20,292		22,990		65		65
Commercial mortgage loans		87,452		110,293		890		917
Residential mortgage loans and equity lines		16,991		17,280		132		124
Total impaired loans	$	137,405	$	175,989	$	1,207	$	1,335

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

	Impaired Loans
	March 31, 2016						December 31, 2015
	Unpaid Principal Balance		Recorded Investment		Allowance		Unpaid Principal Balance		Recorded Investment		Allowance
	(In thousands)
With no allocated allowance
Commercial loans	$	10,912	$	8,968	$	-	$	15,493	$	6,721	$	-
Real estate construction loans		33,009		11,857		-		51,290		22,002		-
Commercial mortgage loans		74,480		67,988		-		59,954		54,625		-
Residential mortgage loans and equity lines		4,929		4,784		-		3,233		3,026		-
Subtotal	$	123,330	$	93,597	$	-	$	129,970	$	86,374	$	-
With allocated allowance
Commercial loans	$	4,188	$	2,718	$	225	$	7,757	$	6,847	$	530
Commercial mortgage loans		27,369		26,157		6,593		28,258		27,152		6,792
Residential mortgage loans and equity lines		13,334		12,343		372		14,383		13,437		427
Subtotal	$	44,891	$	41,218	$	7,190	$	50,398	$	47,436	$	7,749
Total impaired loans	$	168,221	$	134,815	$	7,190	$	180,368	$	133,810	$	7,749

The following tables present the aging of the loan portfolio by type as of March 31, 2016, and as of December 31, 2015:

	March 31, 2016
	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	$	35,329	$	7,920	$	-	$	2,645	$	45,894	$	2,205,293	$	2,251,187
Real estate construction loans		1,529		-		-		6,179		7,708		445,761		453,469
Commercial mortgage loans		17,136		1,144		-		28,537		46,817		5,398,758		5,445,575
Residential mortgage loans and equity lines		6,087		-		-		7,282		13,369		2,198,703		2,212,072
Installment and other loans		-		-		-		-		-		1,344		1,344
Total loans	$	60,081	$	9,064	$	-	$	44,643	$	113,788	$	10,249,859	$	10,363,647

	December 31, 2015
	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	$	8,367	$	221	$	-	$	3,545	$	12,133	$	2,304,730	$	2,316,863
Real estate construction loans		7,285		-		-		16,306		23,591		417,952		441,543
Commercial mortgage loans		2,243		2,223		-		25,231		29,697		5,271,521		5,301,218
Residential mortgage loans and equity lines		4,959		1,038		-		7,048		13,045		2,088,290		2,101,335
Installment and other loans		-		-		-		-				2,493		2,493
Total loans	$	22,854	$	3,482	$	-	$	52,130	$	78,466	$	10,084,986	$	10,163,452

The determination of the amount of the allowance for loan 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 loan losses. The nature of the process by which the Bank determines the appropriate allowance for loan 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.

As of March 31, 2016, accruing TDRs were $90.2 million and non-accrual TDRs were $23.2 million compared to accruing TDRs of $81.7 million and non-accrual TDRs of $39.9 million as of December 31, 2015. The Company allocated specific reserves of $1.5 million to accruing TDRs and $5.3 million to non-accrual TDRs as of March 31, 2016, and $2.0 million to accruing TDRs and $5.4 million to non-accrual TDRs as of December 31, 2015. There were no TDRs that were modified during the first quarter of 2016. The following table presents TDRs that were modified during the first quarter of 2015, their specific reserves as of March 31, 2015, and charge-offs during the first quarter of 2015:

	Three months ended March 31, 2015								March 31, 2015
	No. of Contracts		Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment		Charge-offs		Specific Reserve
	(Dollars in thousands)
Commercial loans		1	$	850	$	850	$	-	$	-
Commercial mortgage loans		3		8,613		8,613		-		-
Residential mortgage loans and equity lines		4		1,522		1,374		148		46
Total		8	$	10,985	$	10,837	$	148	$	46

Modifications of the loan terms during the first quarter of 2015 were in the form of changes in the stated interest rate, an extension of maturity dates, and/or a reduction in monthly payment amounts. 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 six months to three years from the modification date. 

We expect that the TDRs on accruing status as of March 31, 2016, 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 March 31, 2016, and December 31, 2015, is shown below:

	March 31, 2016
Accruing TDRs	Payment Deferral		Rate Reduction		Rate Reduction and Payment Deferral		Total
	(In thousands)
Commercial loans	$	7,446	$	-	$	1,595	$	9,041
Real estate construction loans		-		-		5,679		5,679
Commercial mortgage loans		26,393		6,025		33,189		65,607
Residential mortgage loans		5,154		996		3,695		9,845
Total accruing TDRs	$	38,993	$	7,021	$	44,158	$	90,172

	March 31, 2016
Non-accrual TDRs	Payment Deferral		Rate Reduction and Payment Deferral		Total
	(In thousands)
Commercial loans	$	1,001	$	90	$	1,091
Commercial mortgage loans		1,532		20,028		21,560
Residential mortgage loans		381		177		558
Total non-accrual TDRs	$	2,914	$	20,295	$	23,209

	December 31, 2015
Accruing TDRs	Payment Deferral		Rate Reduction		Rate Reduction and Payment Deferral		Total
Commercial loans	$	8,298	$	-	$	1,726	$	10,024
Real estate construction loans		-		-		5,696		5,696
Commercial mortgage loans		16,701		6,045		33,800		56,546
Residential mortgage loans		5,201		999		3,214		9,414
Total accruing TDRs	$	30,200	$	7,044	$	44,436	$	81,680

	December 31, 2015
Non-accrual TDRs	Payment Deferral		Rate Reduction and Payment Deferral		Total
	(In thousands)
Commercial loans	$	1,033	$	90	$	1,123
Real estate construction loans		9,981		5,825		15,806
Commercial mortgage loans		1,544		20,362		21,906
Residential mortgage loans		388		700		1,088
Total non-accrual TDRs	$	12,946	$	26,977	$	39,923

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

	Three months ended March 31,
Accruing TDRs	2016			2015
	(In thousands)
Beginning balance	$	81,680		$	104,356
New restructurings		-			10,628
Restructured loans restored to accrual status		10,303			-
Charge-offs		-			(148	)
Payments		(1,811	)		(4,254	)
Restructured loans placed on non-accrual status		-			(10,189	)
Ending balance	$	90,172		$	100,393

	Three months ended March 31,
Non-accrual TDRs	2016			2015
	(In thousands)
Beginning balance	$	39,923		$	41,618
New restructurings		-			209
Restructured loans placed on non-accrual status		-			10,189
Charge-offs		-			(2,754	)
Payments		(6,411	)		(4,721	)
Restructured loans restored to accrual status		(10,303	)		-
Ending balance	$	23,209		$	44,541

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 did not have any loans that were modified as a TDR during the previous twelve months and which subsequently defaulted as of March 31, 2016. 

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, 2016, there were no commitments to lend additional funds to those borrowers whose loans had 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 Company had no loans held for sale as of March 31, 2016. The following tables present the loan portfolio by risk rating as of March 31, 2016, and as of December 31, 2015:

	March 31, 2016
	Pass/Watch		Special Mention		Substandard		Doubtful		Total
		(In thousands)
Commercial loans	$	2,081,780	$	92,891	$	75,461	$	1,055	$	2,251,187
Real estate construction loans		436,415		5,197		11,357		500		453,469
Commercial mortgage loans		5,131,844		187,237		117,324		9,170		5,445,575
Residential mortgage loans and equity lines		2,200,400		1,931		9,741		-		2,212,072
Installment and other loans		1,344		-		-		-		1,344
Total gross loans	$	9,851,783	$	287,256	$	213,883	$	10,725	$	10,363,647

	December 31, 2015
	Pass/Watch		Special Mention		Substandard		Doubtful		Total
		(In thousands)
Commercial loans	$	2,143,270	$	110,338	$	61,297	$	1,958	$	2,316,863
Real estate construction loans		413,765		5,776		21,502		500		441,543
Commercial mortgage loans		5,018,199		155,553		118,196		9,270		5,301,218
Residential mortgage loans and equity lines		2,091,434		399		9,502		-		2,101,335
Installment and other loans		2,493		-		-		-		2,493
Total gross loans	$	9,669,161	$	272,066	$	210,497	$	11,728	$	10,163,452
Loans held for sale	$	732	$	-	$	5,944	$	-	$	6,676

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, 2016, and as of December 31, 2015:

	Commercial Loans		Real Estate Construction Loans		Commercial Mortgage Loans		Residential Mortgage Loans and Equity Lines		Installment and Other Loans		Total
	(In thousands)
March 31, 2016
Loans individually evaluated for impairment
Allowance	$	225	$	-	$	6,593	$	372	$	-	$	7,190
Balance	$	11,686	$	11,857	$	94,145	$	17,127	$	-	$	134,815
Loans collectively evaluated for impairment
Allowance	$	56,156	$	12,744	$	43,858	$	14,597	$	7	$	127,362
Balance	$	2,239,501	$	441,612	$	5,351,430	$	2,194,945	$	1,344	$	10,228,832
Total allowance	$	56,381	$	12,744	$	50,451	$	14,969	$	7	$	134,552
Total balance	$	2,251,187	$	453,469	$	5,445,575	$	2,212,072	$	1,344	$	10,363,647
December 31, 2015
Loans individually evaluated for impairment
Allowance	$	530	$	-	$	6,792	$	427	$	-	$	7,749
Balance	$	13,568	$	22,002	$	81,776	$	16,464	$	-	$	133,810
Loans collectively evaluated for impairment
Allowance	$	55,669	$	22,170	$	42,648	$	10,718	$	9	$	131,214
Balance	$	2,303,295	$	419,541	$	5,219,442	$	2,084,871	$	2,493	$	10,029,642
Total allowance	$	56,199	$	22,170	$	49,440	$	11,145	$	9	$	138,963
Total balance	$	2,316,863	$	441,543	$	5,301,218	$	2,101,335	$	2,493	$	10,163,452

The following tables detail activity in the allowance for loan losses by portfolio segment for the three months ended March 31, 2016, and March 31, 2015. 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 Loans and Equity Lines			Installment and Other Loans			Total
	(In thousands)
2016 Beginning Balance	$	56,199		$	22,170		$	49,440		$	11,145		$	9		$	138,963
Provision/(credit) for possible credit losses		1,265			(16,702	)		978			3,961			(2	)		(10,500	)
Charge-offs		(2,070	)		-			(110	)		(149	)		-			(2,329	)
Recoveries		987			7,276			143			12						8,418
Net (charge-offs)/recoveries		(1,083	)		7,276			33			(137	)		-			6,089
March 31, 2016 Ending Balance	$	56,381		$	12,744		$	50,451		$	14,969		$	7		$	134,552
Reserve for impaired loans	$	225		$	-		$	6,593		$	372		$	-		$	7,190
Reserve for non-impaired loans	$	56,156		$	12,744		$	43,858		$	14,597		$	7		$	127,362
Reserve for off-balance sheet credit commitments	$	2,641		$	-		$	53		$	-		$	-		$	2,694
2015 Beginning Balance	$	47,501		$	27,652		$	74,673		$	11,578		$	16		$	161,420
Provision/(credit) for possible credit losses		793			(4,427	)		(1,697	)		328			3			(5,000	)
Charge-offs		(864	)		-			(3,452	)		(148	)		-			(4,464	)
Recoveries		2,275			45			1,794			19			-			4,133
Net (charge-offs)/recoveries		1,411			45			(1,658	)		(129	)		-			(331	)
March 31, 2015 Ending Balance	$	49,705		$	23,270		$	71,318		$	11,777		$	19		$	156,089
Reserve for impaired loans	$	3,911		$	-		$	6,635		$	498		$	-		$	11,044
Reserve for non-impaired loans	$	45,794		$	23,270		$	64,683		$	11,279		$	19		$	145,045
Reserve for off-balance sheet credit commitments	$	903		$	527		$	181		$	40		$	1		$	1,652