Loans

Most of the Company

’s business activities are with customers located in the predominately Asian-populated 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

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

September 30, 2017,

and

December 31, 2016,

were as follows:

	September 30, 2017			December 31, 2016
	(In thousands)
Commercial loans	$	2,419,891		$	2,248,187
Residential mortgage loans		2,922,537			2,444,048
Commercial mortgage loans		6,377,047			5,785,248
Real estate construction loans		691,486			548,088
Equity lines		181,751			171,711
Installment & other loans		4,722			3,993
Gross loans	$	12,597,434		$	11,201,275
Allowance for loan losses		(121,535	)		(118,966	)
Unamortized deferred loan fees		(3,424	)		(4,994	)
Total loans, net	$	12,472,475		$	11,077,315
Loans held for sale	$	-		$	7,500

s of

September 30, 2017,

recorded investment in impaired loans totaled

$127.7

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

$65.3

million and accruing troubled debt restructured loans (TDRs) of

$62.4

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

7.1%

as of

September 30, 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				Nine months ended				Three months ended				Nine months ended
	September 30,				September 30,				September 30,				September 30,
	2017		2016		2017		2016		2017		2016		2017		2016
					(In thousands)
Commercial loans	$	24,987	$	28,091	$	22,572	$	18,602	$	678	$	170	$	760	$	488
Real estate construction loans		29,780		5,869		29,868		12,005		99		66		287		196
Commercial mortgage loans		58,555		81,005		60,074		86,456		391		776		1,015		2,124
Residential mortgage loans and equity lines		13,937		18,256		15,208		17,456		96		148		287		401
Total impaired loans	$	127,259	$	133,221	$	127,722	$	134,519	$	1,264	$	1,160	$	2,349	$	3,209

The following table present

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

	Impaired Loans
	September 30, 2017						December 31, 2016

	Unpaid Principal Balance		Recorded Investment		Allowance		Unpaid Principal Balance		Recorded Investment		Allowance
	(In thousands)

With no allocated allowance
Commercial loans	$	23,953	$	23,373	$	-	$	24,037	$	23,121	$	-
Real estate construction loans		22,309		21,748		-		5,776		5,458		-
Commercial mortgage loans		39,154		32,370		-		60,522		54,453		-
Residential mortgage loans and equity lines		2,264		2,264		-		5,472		5,310		-
Subtotal	$	87,680	$	79,755	$	-	$	95,807	$	88,342	$	-
With allocated allowance
Commercial loans	$	14,082	$	13,985	$	1,461	$	5,216	$	4,640	$	1,827
Commercial mortgage loans		23,061		22,820		823		10,158		10,017		573
Residential mortgage loans and equity lines		12,461		11,111		322		13,263		12,075		396
Subtotal	$	49,604	$	47,916	$	2,606	$	28,637	$	26,732	$	2,796
Total impaired loans	$	137,284	$	127,671	$	2,606	$	124,444	$	115,074	$	2,796

The following table

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

September 30, 2017,

and as of

December 31, 2016:

	September 30, 2017
	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	$	8,412	$	14,855	$	3,900	$	15,942	$	43,109	$	2,376,782	$	2,419,891
Real estate construction loans		-		-		-		14,267		14,267		677,219		691,486
Commercial mortgage loans		-		-		-		28,379		28,379		6,348,668		6,377,047
Residential mortgage loans and equity lines		-		89		-		6,725		6,814		3,097,474		3,104,288
Installment and other loans		-		-		-		-		-		4,722		4,722
Total loans	$	8,412	$	14,944	$	3,900	$	65,313	$	92,569	$	12,504,865	$	12,597,434

	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
Type of Loans:	(In thousands)
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

September 30, 2017,

accruing TDRs were

$62.4

million and non-accrual TDRs were

$33.7

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

$1.1

million to accruing TDRs and

$143,000

to non-accrual TDRs as of

September 30, 2017,

and

$1.3

million to accruing TDRs and

$1.1

million to non-accrual TDRs as of

December 31, 2016.

The following tables present TDRs that were modified during the

three

and

nine

months ended

September 30, 2017

and

2016,

their specific reserve

s as of

September 30, 2017

and

2016,

and charge-off

for the

three

and

nine

months ended

September 30, 2017

and

2016:

	Three months ended September 30, 2017								September 30, 2017
	No. of Contracts		Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment		Charge-offs		Specific Reserve
	(Dollars in thousands)

Commercial loans		8	$	18,873	$	18,873	$	-	$	636
Commercial mortgage loans		5		4,123		3,818		305		10
Residential mortgage loans and equity lines		1		483		483		-		32
Total		14	$	23,479	$	23,174	$	305	$	678

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

Commercial loans		7	$	18,258	$	18,258	$	-	$	208
Commercial mortgage loans		1		738		738		-		-
Total		8	$	18,996	$	18,996	$	-	$	208

	Nine months ended September 30, 2017								September 30, 2017
	No. of Contracts		Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment		Charge-offs		Specific Reserve
	(Dollars in thousands)

Commercial loans		13	$	19,543	$	19,543	$	-	$	641
Real estate construction loans		2		28,489		28,489		-		-
Commercial mortgage loans		5		4,123		3,818		305		10
Residential mortgage loans and equity lines		1		483		483		-		32
Total		21	$	52,638	$	52,333	$	305	$	683

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

Commercial loans		11	$	23,102	$	23,102	$	-	$	222
Commercial mortgage loans		1		738		738		-		-
Residential mortgage loans and equity lines		2		367		367		-		-
Total		14	$	24,207	$	24,207	$	-	$	222

Modifications of the loan terms during the

first

nine

months of

2017

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

three

twelve

months from the modification date.

We expect that the TDR

s on accruing status as of

September 30, 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

September 30, 2017,

and

December 31, 2016,

is shown below:

	September 30, 2017
Accruing TDRs	Payment Deferral		Rate Reduction		Rate Reduction and Payment Deferral		Total
	(In thousands)
Commercial loans	$	21,416	$	-	$	-	$	21,416
Real estate construction loans		7,480		-		-		7,480
Commercial mortgage loans		16,130		5,895		4,787		26,812
Residential mortgage loans		3,516		337		2,797		6,650
Total accruing TDRs	$	48,542	$	6,232	$	7,584	$	62,358

	September 30, 2017
Non-accrual TDRs	Payment Deferral		Rate Reduction		Rate Reduction and Payment Deferral		Total
	(In thousands)
Commercial loans	$	13,259	$	-	$	-	$	13,259
Commercial mortgage loans		1,347		1,706		16,508		19,561
Residential mortgage loans		714		-		157		871
Total non-accrual TDRs	$	15,320	$	1,706	$	16,665	$	33,691

	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 Payment 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 is shown below:

	Three months ended September 30,						Nine months ended September 30,
Accruing TDRs	2017			2016			2017			2016
	(In thousands)
Beginning balance	$	79,819		$	74,708		$	65,393		$	81,680
New restructurings		21,790			18,347			49,973			20,412
Restructured loans restored to accrual status		-			-			-			10,303
Payments		(35,677	)		(6,500	)		(41,372	)		(9,816	)
Restructured loans placed on non-accrual status		(3,574	)		-			(9,396	)		(1,138	)
Expiration of loan concession upon renewal		-			-			(2,240	)		(14,886	)
Ending balance	$	62,358		$	86,555		$	62,358		$	86,555

	Three months ended September 30,						Nine months ended September 30,
Non-accrual TDRs	2017			2016			2017			2016
	(In thousands)
Beginning balance	$	30,045		$	25,442		$	29,722		$	39,923
New restructurings		2,360			649			2,360			3,794
Restructured loans placed on non-accrual status		3,574			-			9,396			1,138
Charge-offs		(355	)		(3,407	)		(1,901	)		(4,352	)
Payments		(1,933	)		(1,814	)		(5,160	)		(9,330	)
Foreclosures		-			-			(726	)		-
Restructured loans restored to accrual status		-			-			-			(10,303	)
Ending balance	$	33,691		$	20,870		$	33,691		$	20,870

The Company considers a

loan to be in payment default once it is

days contractually past due under the modified terms. One commercial loan of

$50,000

with charge-offs of

$2.1

million had payment defaults within the previous

twelve

months ended

September 30, 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

September

30,

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

longer warranted.

The following table

s present the loan portfolio by risk rating as of

September 30, 2017,

and as of

December 31, 2016:

	September 30, 2017
	Pass/Watch		Special Mention		Substandard		Doubtful		Total
	(In thousands)
Commercial loans	$	2,216,816	$	146,479	$	56,565	$	31	$	2,419,891
Real estate construction loans		604,363		65,375		21,748		-		691,486
Commercial mortgage loans		5,904,023		305,927		167,097		-		6,377,047
Residential mortgage loans and equity lines		3,064,118		31,858		8,312		-		3,104,288
Installment and other loans		4,722		-		-		-		4,722
Total gross loans	$	11,794,042	$	549,639	$	253,722	$	31	$	12,597,434

Loans held for sale	$	-	$	-	$	-	$	-	$	-

	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

September 30, 2017,

and as of

December 31, 2016:

			Real Estate		Commercial		Residential
	Commercial		Construction		Mortgage		Mortgage Loans		Installment and
	Loans		Loans		Loans		and Equity Lines		Other Loans		Total
	(In thousands)
September 30, 2017
Loans individually evaluated for impairment
Allowance	$	1,461	$	-	$	823	$	322	$	-	$	2,606
Balance	$	37,358	$	21,748	$	55,190	$	13,376	$	-	$	127,672

Loans collectively evaluated for impairment
Allowance	$	49,578	$	22,008	$	36,579	$	10,740	$	24	$	118,929
Balance	$	2,382,533	$	669,738	$	6,321,857	$	3,090,912	$	4,722	$	12,469,762

Total allowance	$	51,039	$	22,008	$	37,402	$	11,062	$	24	$	121,535
Total balance	$	2,419,891	$	691,486	$	6,377,047	$	3,104,288	$	4,722	$	12,597,434

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

and

nine

months ended

September 30, 2017,

and

September 30, 2016.

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, 2017 and 2016
				Real Estate			Commercial			Residential			Installment
	Commercial			Construction			Mortgage			Mortgage Loans			and Other
	Loans			Loans			Loans			and Equity Lines			Loans			Total
	(In thousands)

June 30, 2017 Ending Balance	$	46,744		$	17,844		$	36,840		$	14,364		$	17			115,809
Provision/(credit) for possible credit losses		3,800			4,117			(4,615	)		(3,309	)		7			-
Charge-offs		(80	)		-			(305	)		-			-			(385	)
Recoveries		575			47			5,482			7			-			6,111
Net (charge-offs)/recoveries		495			47			5,177			7			-			5,726
September 30, 2017 Ending Balance	$	51,039		$	22,008		$	37,402		$	11,062		$	24		$	121,535

June 30, 2016 Ending Balance	$	50,590		$	10,753		$	46,090		$	15,503		$	12		$	122,948
Provision/(credit) for possible credit losses		4,380			(2,056	)		3,132			(5,452	)		(4	)		-
Charge-offs		(3,277	)		-			(4,626	)		-			-			(7,903	)
Recoveries		2,006			548			337			6			-			2,897
Net (charge-offs)/recoveries		(1,271	)		548			(4,289	)		6			-			(5,006	)
September 30, 2016 Ending Balance	$	53,699		$	9,245		$	44,933		$	10,057		$	8		$	117,942

Nine months ended September 30, 2017 and 2016
				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		2,245			(1,403	)		(2,775	)		(580	)		13			(2,500	)
Charge-offs		(1,810	)		-			(860	)		-			-			(2,670	)
Recoveries		1,401			143			6,173			22			-			7,739
Net (charge-offs)/recoveries		(409	)		143			5,313			22			-			5,069

September 30, 2017 Ending Balance	$	51,039		$	22,008		$	37,402		$	11,062		$	24		$	121,535
Reserve for impaired loans	$	1,461		$	-		$	823		$	322		$	-		$	2,606
Reserve for non-impaired loans	$	49,578		$	22,008		$	36,579		$	10,740		$	24		$	118,929
Reserve for off-balance sheet credit commitments	$	2,760		$	1,206		$	109		$	175		$	4		$	4,254

2016 Beginning Balance	$	56,199		$	22,170		$	49,440		$	11,145		$	9		$	138,963
Provision/(credit) for possible credit losses		5,815			(20,796	)		295			(963	)		(1	)		(15,650	)
Charge-offs		(12,035	)		-			(5,681	)		(149	)		-			(17,865	)
Recoveries		3,720			7,871			879			24			-			12,494
Net (charge-offs)/recoveries		(8,315	)		7,871			(4,802	)		(125	)		-			(5,371	)

September 30, 2016 Ending Balance	$	53,699		$	9,245		$	44,933		$	10,057		$	8		$	117,942
Reserve for impaired loans	$	1,320		$	-		$	1,248		$	375		$	-		$	2,943
Reserve for non-impaired loans	$	52,379		$	9,245		$	43,685		$	9,682		$	8		$	114,999
Reserve for off-balance sheet credit commitments	$	2,112		$	-		$	35		$	80		$	2		$	2,229