Loans

Most of the Company

’s business activities are with customers located in the predominately Asian areas of Southern and Northern California; New York City, New York; Dallas and Houston, 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 Company’s condensed consolidated balance sheets as of

March

31,

2017,

and

December

31,

2016,

were as follows:

	March 31, 2017			December 31, 2016
	(In thousands)
Commercial loans	$	2,152,269		$	2,248,187
Residential mortgage loans		2,584,477			2,444,048
Commercial mortgage loans		5,906,084			5,785,248
Real estate construction loans		554,218			548,088
Equity lines		163,877			171,711
Installment & other loans		4,584			3,993
Gross loans	$	11,365,509		$	11,201,275
Allowance for loan losses		(115,544	)		(118,966	)
Unamortized deferred loan fees		(4,395	)		(4,994	)
Total loans, net	$	11,245,570		$	11,077,315
Loans held for sale	$	5,835		$	7,500

s of

March

31,

2017,

recorded investment in impaired loans totaled

$128.4

million and was comprised of non-accrual loans, excluding loans held for sale, of

$48.0

million and accruing troubled debt restructured loans (TDRs) of

$80.4

million. As of

December

31,

2016,

recorded investment in impaired loans totaled

$115.1

million and was comprised of non-accrual loans, excluding loans held for sale, of

$49.7

million and accruing TDRs of

$65.4

million. For impaired loans, the amounts previously charged off represent

10.3%

as of

March

31,

2017,

and

8.4%

as of

December

31,

2016,

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				Three months ended
	March 31,				March 31,
	2017		2016		2017		2016
	(In thousands)
Commercial loans	$	23,335	$	12,670	$	83	$	120
Real estate construction loans		16,930		20,292		340		65
Commercial mortgage loans		61,405		87,452		445		890
Residential mortgage loans and equity lines		16,543		16,991		132		132
Total impaired loans	$	118,213	$	137,405	$	1,000	$	1,207

The following table present

s impaired loans and the related allowance for loan losses as of the dates indicated:

	Impaired Loans
	March 31, 2017						December 31, 2016
	Unpaid Principal Balance		Recorded Investment		Allowance		Unpaid Principal Balance		Recorded Investment		Allowance
	(In thousands)

With no allocated allowance
Commercial loans	$	19,836	$	17,973	$	-	$	24,037	$	23,121	$	-
Real estate construction loans		5,776		33,044		-		5,776		5,458		-
Commercial mortgage loans		49,567		43,458		-		60,522		54,453		-
Residential mortgage loans and equity lines		4,261		4,261		-		5,472		5,310		-
Subtotal	$	79,440	$	98,736	$	-	$	95,807	$	88,342	$	-
With allocated allowance
Commercial loans	$	2,410	$	1,979	$	1,062	$	5,216	$	4,640	$	1,827
Commercial mortgage loans		16,282		15,814		818		10,158		10,017		573
Residential mortgage loans and equity lines		13,113		11,847		395		13,263		12,075		396
Subtotal	$	31,805	$	29,640	$	2,275	$	28,637	$	26,732	$	2,796
Total impaired loans	$	111,245	$	128,376	$	2,275	$	124,444	$	115,074	$	2,796

The following table

s present the aging of the loan portfolio by type as of

March

31,

2017,

and as of

December

31,

2016:

	March 31, 2017
	30-59 Days Past Due		60-89 Day s 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	$	27,682	$	315	$	-	$	13,865	$	41,862	$	2,110,407	$	2,152,269
Real estate construction loans		3,045		-		-		5,361		8,406		545,812		554,218
Commercial mortgage loans		30,852		13,852		-		21,117		65,821		5,840,263		5,906,084
Residential mortgage loans and equity lines		4,067		-		-		7,613		11,680		2,736,674		2,748,354
Installment and other loans		-		-		-		-		-		4,584		4,584
Total loans	$	65,646	$	14,167	$	-	$	47,956	$	127,769	$	11,237,740	$	11,365,509

	December 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
	(In thousands)
Type of Loans:
Commercial loans	$	22,753	$	27,190	$	-	$	15,710	$	65,653	$	2,182,534	$	2,248,187
Real estate construction loans		10,390		5,835		-		5,458		21,683		526,405		548,088
Commercial mortgage loans		5,886		700		-		20,078		26,664		5,758,584		5,785,248
Residential mortgage loans and equity lines		4,390		-		-		8,436		12,826		2,602,933		2,615,759
Installment and other loans		-		-		-		-		-		3,993		3,993
Total loans	$	43,419	$	33,725	$	-	$	49,682	$	126,826	$	11,074,449	$	11,201,275

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 econo

mic 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.

TDR

s 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,

2017,

accruing TDRs were

$80.4

million and non-accrual TDRs were

$32.8

million compared to accruing TDRs of

$65.4

million and non-accrual TDRs of

$29.7

million as of

December

31,

2016.

The Company allocated specific reserves of

$586,000

to accruing TDRs and

$1.3

million to non-accrual TDRs as of

March

31,

2017,

and

$1.3

million to accruing TDRs and

$1.1

million to non-accrual TDRs as of

December

31,

2016.

There were

TDRs that were modified during the

first

quarter of

2016.

The following tables present TDRs that were modified during the

first

quarter ended

March

31,

2017,

their specific reserve

s as of

March

31,

2017,

and charge-off

during

the

first

quarter ended

March

31,

2017:

	Three months ended March 31, 2017								March 31, 2017
	No. of Contracts		Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment		Charge-offs		Specific Reserve
	(Dollars in thousands)
Real estate construction loans		2	$	27,683	$	27,683	$	-	$	-
Total		2	$	27,683	$	27,683	$	-	$	-

Modifications of the loan terms during the

first

quarter of

2017

were in the form of extensions of maturity dates. The length of time for which modifications involving extensions of maturity dates were documented ranged from

three

ten

months from the modification date.

We expect that the TDR

s on accruing status as of

March

31,

2017,

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,

2017,

and

December

31,

2016,

is shown below:

	March 31, 2017
Accruing TDRs	Payment Deferral		Rate Reduction		Rate Reduction and Payment Deferral		Total
	(In thousands)
Commercial loans	$	5,752	$	-	$	335	$	6,087
Real estate construction loans		27,683		-		-		27,683
Commercial mortgage loans		25,806		5,939		6,410		38,155
Residential mortgage loans		5,036		596		2,862		8,494
Total accruing TDRs	$	64,277	$	6,535	$	9,607	$	80,419

	March 31, 2017
Non-accrual TDRs	Payment Deferral		Rate Reduction		Rate Reduction and Payment Deferral		Total
	(In thousands)
Commercial loans	$	13,560	$	-	$	-	$	13,560
Commercial mortgage loans		2,206		1,765		14,952		18,923
Residential mortgage loans		132		-		164		296
Total non-accrual TDRs	$	15,898	$	1,765	$	15,116	$	32,779

	December 31, 2016
Accruing TDRs	Payment Deferral		Rate Reduction		Rate Reduction and Payment Deferral		Total
	(In thousands)
Commercial loans	$	7,971	$	-	$	4,081	$	12,052
Commercial mortgage loans		25,979		5,961		12,452		44,392
Residential mortgage loans		5,104		789		3,056		8,949
Total accruing TDRs	$	39,054	$	6,750	$	19,589	$	65,393

	December 31, 2016
Non-accrual TDRs	Payment Deferral		Rate Reduction		Rate Reduction and Paymen t Deferral		Total
	(In thousands)
Commercial loans	$	14,565	$	-	$	-	$	14,565
Commercial mortgage loans		2,510		1,795		10,328		14,633
Residential mortgage loans		356		-		168		524
Total non-accrual TDRs	$	17,431	$	1,795	$	10,496	$	29,722

The activity within our TDR

s for the periods indicated are shown below:

	Three months ended March 31,
Accruing TDRs	2017			2016
	(In thousands)
Beginning balance	$	65,393		$	81,680
New restructurings		27,683			-
Restructured loans restored to accrual status		-			10,303
Payments		(4,595	)		(1,811	)
Restructured loans placed on non-accrual status		(5,822	)		-
Expiration of loan concession upon renewal		(2,240	)		-
Ending balance	$	80,419		$	90,172

	Three months ended March 31,
Non-accrual TDRs	2017			2016
	(In thousands)
Beginning balance	$	29,722		$	39,923
New restructurings		-			-
Restructured loans placed on non-accrual status		5,822			-
Charge-offs		(1,049	)		-
Payments		(990	)		(6,411	)
Foreclosures		(726	)		-
Restructured loans restored to accrual status		-			(10,303	)
Ending balance	$	32,779		$	23,209

A loan is considered to be in payment default once it is

days contractually past due under the modified terms.

One commercial loan of

$547,000

with charge-offs of

$1.6

million had payments defaults within the previous

twelve

months ended

March

31,

2017.

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,

2017

, there were

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 table

s present the loan portfolio by risk rating as of

March

31,

2017,

and as of

December

31,

2016:

	March 31, 2017
	Pass/Watch		Special Mention		Substandard		Doubtful		Total
	(In thousands)
Commercial loans	$	1,975,243	$	112,157	$	64,794	$	75	$	2,152,269
Real estate construction loans		466,878		45,466		41,874		-		554,218
Commercial mortgage loans		5,531,743		260,717		113,624		-		5,906,084
Residential mortgage loans and equity lines		2,738,792		269		9,293		-		2,748,354
Installment and other loans		4,584		-		-		-		4,584
Total gross loans	$	10,717,240	$	418,609	$	229,585	$	75	$	11,365,509

Loans held for sale	$	-	$	-	$	5,835	$	-	$	5,835

	December 31, 2016
	Pass/Watch		Special Mention		Substandard		Doubtful		Total
	(In thousands)
Commercial loans	$	2,023,114	$	140,682	$	84,293	$	98	$	2,248,187
Real estate construction loans		469,909		44,129		34,050		-		548,088
Commercial mortgage loans		5,410,623		250,221		124,404		-		5,785,248
Residential mortgage loans and equity lines		2,605,834		-		9,925		-		2,615,759
Installment and other loans		3,993		-		-		-		3,993
Total gross loans	$	10,513,473	$	435,032	$	252,672	$	98	$	11,201,275

Loans held for sale	$	-	$	-	$	7,500	$	-	$	7,500

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,

2017,

and as of

December

31,

2016:

	Commercial Loans		Real Estate Construction Loans		Commercial Mortgage Loans		Residential Mortgage Loans and Equity Lines		Installment and Other Loans		Total
	(In thousands)
March 31, 2017
Loans individually evaluated for impairment
Allowance	$	1,062	$	-	$	818	$	395	$	-	$	2,275
Balance	$	19,951	$	33,044	$	59,272	$	16,108	$	-	$	128,375

Loans collectively evaluated for impairment
Allowance	$	46,214	$	19,768	$	35,142	$	12,131	$	14	$	113,269
Balance	$	2,132,318	$	521,174	$	5,846,812	$	2,732,246	$	4,584	$	11,237,134

Total allowance	$	47,276	$	19,768	$	35,960	$	12,526	$	14	$	115,544
Total balance	$	2,152,269	$	554,218	$	5,906,084	$	2,748,354	$	4,584	$	11,365,509

December 31, 2016
Loans individually evaluated for impairment
Allowance	$	1,827	$	-	$	573	$	396	$	-	$	2,796
Balance	$	27,761	$	5,458	$	64,470	$	17,385	$	-	$	115,074


Loans collectively evaluated for impairment
Allowance	$	47,376	$	23,268	$	34,291	$	11,224	$	11	$	116,170
Balance	$	2,220,426	$	542,630	$	5,720,778	$	2,598,374	$	3,993	$	11,086,201

Total allowance	$	49,203	$	23,268	$	34,864	$	11,620	$	11	$	118,966
Total balance	$	2,248,187	$	548,088	$	5,785,248	$	2,615,759	$	3,993	$	11,201,275

The following table

s detail activity in the allowance for loan losses by portfolio segment for the

three

months ended

March

31,

2017,

and

March

31,

2016.

Allocation of a portion of the allowance to

one

category of loans does not preclude its availability to absorb losses in other categories.

				Real Estate			Commercial			Residential			Installment
	Commercial			Construction			Mortgage			Mortgage Loans			and Other
	Loans			Loans			Loans			and Equity Lines			Loans			Total
	(In thousands)

2017 Beginning Balance	$	49,203		$	23,268		$	34,864		$	11,620		$	11		$	118,966
Provision/(credit) for possible credit losses		(1,214	)		(3,549	)		1,362			898			3			(2,500	)
Charge-offs		(1,204	)		-			(555	)		-			-			(1,759	)
Recoveries		491			49			289			8			-			837
Net (charge-offs)/recoveries		(713	)		49			(266	)		8			-			(922	)

March 31, 2017 Ending Balance	$	47,276		$	19,768		$	35,960		$	12,526		$	14		$	115,544
Reserve for impaired loans	$	1,062		$	-		$	818		$	395		$	-		$	2,275
Reserve for non-impaired loans	$	46,214		$	19,768		$	35,142		$	12,131		$	14		$	113,269
Reserve for off-balance sheet credit commitments	$	2,243		$	909		$	120		$	146		$	6		$	3,424

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