. 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 June 30, 2016, and December 31, 2015, were as follows:

	June 30, 2016			December 31, 2015
	(Dollars in thousands)
Commercial loans	$	2,188,047		$	2,316,863
Residential mortgage loans		2,146,895			1,932,355
Commercial mortgage loans		5,531,186			5,301,218
Real estate construction loans		481,820			441,543
Equity lines		171,972			168,980
Installment & other loans		3,180			2,493

Gross loans	$	10,523,100		$	10,163,452

Allowance for loan losses		(122,948	)		(138,963	)
Unamortized deferred loan fees		(6,679	)		(8,262	)

Total loans, net	$	10,393,473		$	10,016,227
Loans held for sale	$	2,925		$	6,676

As of June 30, 2016, recorded investment in impaired loans totaled $127.8 million and was comprised of non-accrual loans of $53.1 million and accruing troubled debt restructured loans (TDRs) of $74.7 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 17.2% as of June 30, 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				Six months ended				Three months ended				Six months ended
	June 30,				June 30,				June 30,				June 30,
	2016		2015		2016		2015		2016		2015		2016		2015
	(In thousands)
Commercial loans	$	14,940	$	25,620	$	13,805	$	25,523	$	167	$	201	$	370	$	412
Real estate construction loans		9,923		20,790		15,107		21,884		-		65		-		130
Commercial mortgage loans		90,971		105,815		89,212		108,042		713		793		1,513		1,574
Residential mortgage loans and equity lines		17,112		17,025		17,052		17,152		140		120		285		240
Total impaired loans	$	132,946	$	169,250	$	135,176	$	172,601	$	1,020	$	1,179	$	2,168	$	2,356

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

	Impaired Loans
	June 30, 2016						December 31, 2015
	Unpaid Principal Balance		Recorded Investment		Allowance		Unpaid Principal Balance		Recorded Investment		Allowance
	(In thousands)

With no allocated allowance
Commercial loans	$	18,965	$	12,774	$	-	$	15,493	$	6,721	$	-
Real estate construction loans		27,331		6,081		-		51,290		22,002		-
Commercial mortgage loans		67,496		60,796		-		59,954		54,625		-
Residential mortgage loans and equity lines		4,312		4,161		-		3,233		3,026		-
Subtotal	$	118,104	$	83,812	$	-	$	129,970	$	86,374	$	-
With allocated allowance
Commercial loans	$	6,342	$	5,426	$	1,394	$	7,757	$	6,847	$	530
Commercial mortgage loans		26,894		24,733		5,891		28,258		27,152		6,792
Residential mortgage loans and equity lines		14,925		13,875		439		14,383		13,437		427
Subtotal	$	48,161	$	44,034	$	7,724	$	50,398	$	47,436	$	7,749
Total impaired loans	$	166,265	$	127,846	$	7,724	$	180,368	$	133,810	$	7,749

The following tables present the aging of the loan portfolio by type as of June 30, 2016, and as of December 31, 2015:

	June 30, 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	$	23,122	$	6,743	$	-	$	8,251	$	38,116	$	2,149,931	$	2,188,047
Real estate construction loans		-		-		-		6,081		6,081		475,739		481,820
Commercial mortgage loans		5,272		3,008		-		30,725		39,005		5,492,181		5,531,186
Residential mortgage loans and equity lines		242		378		-		8,081		8,701		2,310,166		2,318,867
Installment and other loans		-		-		-		-		-		3,180		3,180
Total loans	$	28,636	$	10,129	$	-	$	53,138	$	91,903	$	10,431,197	$	10,523,100

	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 it would not otherwise consider. 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 June 30, 2016, accruing TDRs were $74.7 million and non-accrual TDRs were $25.4 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 $1.6 million to accruing TDRs and $4.4 million to non-accrual TDRs as of June 30, 2016, and $2.0 million to accruing TDRs and $5.4 million to non-accrual TDRs as of December 31, 2015.

The following tables present TDRs that were modified during the first six months of 2016 and of 2015, their specific reserve

s at

June 30, 2016, and 2015, and charge-off

s during

the first six months of 2016 and of 2015:

	Six months ended June 30, 2016								June 30, 2016
	No. of Contracts		Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment		Charge-offs		Specific Reserve
	(Dollars in thousands)

Commercial loans		4	$	4,844	$	4,844	$	-	$	148
Residential mortgage loans and equity lines		2		367		367		-		23
Total		6	$	5,211	$	5,211	$	-	$	171

	Six months ended June 30, 2015								June 30, 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		4		14,411		14,411		-		40
Residential mortgage loans and equity lines		4		1,522		1,374		148		43
Total		9	$	16,783	$	16,635	$	148	$	83

Modifications of the loan terms during the first six months of 2016 were in the form of changes in the stated interest rate, extensions of maturity dates, and/or reductions 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 three to ten months from the modification date.

We expect that the TDRs on accruing status as of June 30, 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 June 30, 2016, and December 31, 2015, is shown below:

	June 30, 2016

Accruing TDRs	Payment Deferral		Rate Reduction		Rate Reduction and Payment Deferral		Total
	(In thousands)
Commercial loans	$	8,464	$	-	$	1,485	$	9,949
Commercial mortgage loans		26,256		6,006		22,542		54,804
Residential mortgage loans		5,301		993		3,661		9,955
Total accruing TDRs	$	40,021	$	6,999	$	27,688	$	74,708

	June 30, 2016

Non-accrual TDRs	Payment Deferral		Rate Reduction and Payment Deferral		Total
	(In thousands)
Commercial loans	$	3,114	$	90	$	3,204
Commercial mortgage loans		1,520		20,007		21,527
Residential mortgage loans		538		173		711
Total non-accrual TDRs	$	5,172	$	20,270	$	25,442

	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 June 30,						Six months ended June 30,
Accruing TDRs	2016			2015			2016			2015
	(In thousands)
Beginning balance	$	90,172		$	100,393		$	81,680		$	104,356
New restructurings		2,065			5,798			2,065			16,426
Restructured loans restored to accrual status		-			-			10,303			-
Charge-offs		-			-			-			(148	)
Payments		(1,505	)		(6,180	)		(3,316	)		(10,434	)
Restructured loans placed on non-accrual status		(1,138	)		-			(1,138	)		(10,189	)
Expiration of loan concession upon renewal		(14,886	)		-			(14,886	)		-
Ending balance	$	74,708		$	100,011		$	74,708		$	100,011

	Three months ended June 30,						Six months ended June 30,
Non-accrual TDRs	2016			2015			2016			2015
	(In thousands)
Beginning balance	$	23,209		$	44,541		$	39,923		$	41,618
New restructurings		3,145			-			3,145			209
Restructured loans placed on non-accrual status		1,138			-			1,138			10,189
Charge-offs		(945	)		(489	)		(945	)		(3,243	)
Payments		(1,105	)		(1,457	)		(7,516	)		(6,178	)
Restructured loans restored to accrual status		-			-			(10,303	)		-
Ending balance	$	25,442		$	42,595		$	25,442		$	42,595

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 June 30, 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 June 30, 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 following tables present the loan portfolio by risk rating as of June 30, 2016, and as of December 31, 2015:

	June 30, 2016
	Pass/Watch		Special Mention		Substandard		Doubtful		Total

Commercial loans	$	2,017,005	$	91,097	$	78,910	$	1,035	$	2,188,047
Real estate construction loans		461,282		14,457		5,581		500		481,820
Commercial mortgage loans		5,156,885		246,844		119,300		8,157		5,531,186
Residential mortgage loans and equity lines		2,307,970		394		10,503		-		2,318,867
Installment and other loans		3,180		-		-		-		3,180
Total gross loans	$	9,946,322	$	352,792	$	214,294	$	9,692	$	10,523,100

Loans held for sale	$	-	$	-	$	2,925	$	-	$	2,925

	December 31, 2015
	Pass/Watch		Special Mention		Substandard		Doubtful		Total

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 June 30, 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)
June 30, 2016
Loans individually evaluated for impairment
Allowance	$	1,395	$	-	$	5,891	$	438	$	-	$	7,724
Balance	$	18,200	$	6,081	$	85,529	$	18,036	$	-	$	127,846

Loans collectively evaluated for impairment
Allowance	$	49,195	$	10,753	$	40,199	$	15,065	$	12	$	115,224
Balance	$	2,169,847	$	475,739	$	5,445,657	$	2,300,831	$	3,180	$	10,395,254

Total allowance	$	50,590	$	10,753	$	46,090	$	15,503	$	12	$	122,948
Total balance	$	2,188,047	$	481,820	$	5,531,186	$	2,318,867	$	3,180	$	10,523,100

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 and six months ended June 30, 2016, and June 30, 2015. 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 June 30, 2016 and 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 Ending Balance	$	56,381		$	12,744		$	50,451		$	14,969		$	7		134,552
Provision/(credit) for possible credit losses		170			(2,038	)		(3,815	)		528			5		(5,150	)
Charge-offs		(6,688	)		-			(945	)		-			-		(7,633	)
Recoveries		727			47			399			6			-		1,179
Net (charge-offs)/recoveries		(5,961	)		47			(546	)		6			-		(6,454	)
June 30, 2016 Ending Balance	$	50,590		$	10,753		$	46,090		$	15,503		$	12	$	122,948

March 31, 2015 Ending Balance	$	49,705		$	23,270		$	71,318		$	11,777		$	19	$	156,089

Provision/(credit) for possible credit losses		184			2,982			(5,880	)		559			5		(2,150	)
Charge-offs		(2,580	)		-			(65	)		(13	)		-		(2,658	)
Recoveries		231			52			1,872			-			1		2,156
Net (charge-offs)/recoveries		(2,349	)		52			1,807			(13	)		1		(502	)
June 30, 2015 Ending Balance	$	47,540		$	26,304		$	67,245		$	12,323		$	25	$	153,437

Six months ended June 30, 2016 and 2015
	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		1,435			(18,740	)		(2,837	)		4,488			3		(15,651	)

Charge-offs		(8,758	)		-			(1,055	)		(148	)		-		(9,961	)
Recoveries		1,714			7,323			542			18					9,597
Net (charge-offs)/recoveries		(7,044	)		7,323			(513	)		(130	)		-		(364	)

June 30, 2016 Ending Balance	$	50,590		$	10,753		$	46,090		$	15,503		$	12	$	122,948
Reserve for impaired loans	$	1,395		$	-		$	5,891		$	438		$	-	$	7,724
Reserve for non-impaired loans	$	49,195		$	10,753		$	40,199		$	15,065		$	12	$	115,224
Reserve for off-balance sheet credit commitments	$	1,969		$	-		$	34		$	119		$	2	$	2,124

2015 Beginning Balance	$	47,501		$	27,652		$	74,673		$	11,578		$	16	$	161,420

Provision/(credit) for possible credit losses		1,005			(1,470	)		(7,580	)		886			9		(7,150	)

Charge-offs		(3,444	)		-			(3,516	)		(161	)		-		(7,121	)
Recoveries		2,478			122			3,668			20			-		6,288
Net (charge-offs)/recoveries		(966	)		122			152			(141	)		-		(833	)

June 30, 2015 Ending Balance	$	47,540		$	26,304		$	67,245		$	12,323		$	25	$	153,437
Reserve for impaired loans	$	966		$	-		$	6,554		$	464		$	-	$	7,984
Reserve for non-impaired loans	$	46,574		$	26,304		$	60,691		$	11,859		$	25	$	145,453
Reserve for off-balance sheet credit commitments	$	942		$	427		$	163		$	42		$	-	$	1,574