Loans

Most of the Company’s business activities are with customers located in the high-density 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

March 31, 2018,

and

December 31, 2017,

were as follows:

	March 31, 2018			December 31, 2017
	(In thousands)
Commercial loans	$	2,436,421		$	2,461,266
Residential mortgage loans		3,198,750			3,062,050
Commercial mortgage loans		6,610,254			6,482,695
Real estate construction loans		587,927			678,805
Equity lines		176,714			180,304
Installment & other loans		4,473			5,170
Gross loans	$	13,014,539		$	12,870,290
Allowance for loan losses		(122,084	)		(123,279	)
Unamortized deferred loan fees		(3,289	)		(3,245	)
Total loans, net	$	12,889,166		$	12,743,766
Loans held for sale	$	-		$	8,000

As of

March 31, 2018,

recorded investment in impaired loans totaled

$132.1

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

$49.3

million and accruing troubled debt restructured loans ("TDRs") of

$82.8

million. As of

December 31, 2017,

recorded investment in impaired loans totaled

$117.4

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

$48.8

million and accruing TDRs of

$68.6

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

6.4%

as of

March 31, 2018,

and

7.2%

as of

December 31, 2017,

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,
	2018		2017		2018		2017

Commercial loans	$	45,183	$	23,335	$	334	$	83
Real estate construction loans		8,137		16,930		-		340
Commercial mortgage loans		58,598		61,405		644		445
Residential mortgage loans and equity lines		13,709		16,543		100		132
Total impaired loans	$	125,627	$	118,213	$	1,078	$	1,000

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

	Impaired Loans
	March 31, 2018						December 31, 2017
	Unpaid Principal Balance		Recorded Investment		Allowance		Unpaid Principal Balance		Recorded Investment		Allowance
	(In thousands)

With no allocated allowance
Commercial loans	$	45,698	$	44,680	$	-	$	43,483	$	42,702	$	-
Real estate construction loans		8,821		8,113		-		8,821		8,185		-
Commercial mortgage loans		44,486		37,471		-		37,825		31,029		-
Residential mortgage loans and equity lines		6,377		6,377		-		1,301		1,301		-
Subtotal	$	105,382	$	96,641	$	-	$	91,430	$	83,217	$	-
With allocated allowance
Commercial loans	$	258	$	231	$	11	$	891	$	793	$	43
Commercial mortgage loans		27,315		27,276		1,145		21,733		21,635		1,738
Residential mortgage loans and equity lines		9,091		7,965		346		13,022		11,708		353
Subtotal	$	36,664	$	35,472	$	1,502	$	35,646	$	34,136	$	2,134
Total impaired loans	$	142,046	$	132,113	$	1,502	$	127,076	$	117,353	$	2,134

The following tables present the aging of the loan portfolio by type as of

March 31, 2018,

and as of

December 31, 2017:

	March 31, 2018
	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	$	15,571	$	146	$	-	$	15,916	$	31,633	$	2,404,788	$	2,436,421
Real estate construction loans		920		-		-		8,113		9,033		578,894		587,927
Commercial mortgage loans		26,015		-		-		17,780		43,795		6,566,459		6,610,254
Residential mortgage loans and equity lines		4,094		-		-		7,519		11,613		3,363,851		3,375,464
Installment and other loans		170		95		-		-		265		4,208		4,473
Total loans	$	46,770	$	241	$	-	$	49,328	$	96,339	$	12,918,200	$	13,014,539

	December 31, 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	$	11,079	$	5,192	$	-	$	14,296	$	30,567	$	2,430,699	$	2,461,266
Real estate construction loans		3,028		-		-		8,185		11,213		667,592		678,805
Commercial mortgage loans		17,573		5,602		-		19,820		42,995		6,439,700		6,482,695
Residential mortgage loans and equity lines		6,613		732		-		6,486		13,831		3,228,523		3,242,354
Installment and other loans		103		-		-		-		103		5,067		5,170
Total loans	$	38,396	$	11,526	$	-	$	48,787	$	98,709	$	12,771,581	$	12,870,290

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. 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.

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, 2018,

accruing TDRs were

$82.8

million and non-accrual TDRs were

$31.2

million compared to accruing TDRs of

$68.6

million and non-accrual TDRs of

$33.4

million as of

December 31, 2017.

The Company allocated specific reserves of

$1.2

million to accruing TDRs and

$75,000

to non-accrual TDRs as of

March 31, 2018,

and

$1.9

million to accruing TDRs and

$83,000

to non-accrual TDRs as of

December 31, 2017.

The following tables present TDRs that were modified during the

first

quarter ended

March 31, 2018

and

2017,

their specific reserves as of

March 31, 2018

and

2017,

and charge-offs for the

first

quarter ended

March 31, 2018

and

2017:

	Three months ended March 31, 2018								March 31, 2018
	No. of Contracts		Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment		Charge-offs		Specific Reserve
	(Dollars in thousands)

Commercial loans		3	$	2,463	$	2,463	$	-	$	-
Commercial mortgage loans		6		14,287		14,287		-		134
Residential mortgage loans and equity lines		2		801		801		-		8
Total		11	$	17,551	$	17,551	$	-	$	142

	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

2018

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 TDRs on accruing status as of

March 31, 2018,

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, 2018,

and

December 31, 2017,

is shown below:

	March 31, 2018
Accruing TDRs	Payment Deferral		Rate Reduction		Rate Reduction and Payment Deferral		Total
	(In thousands)
Commercial loans	$	28,995	$	-	$	-	$	28,995
Commercial mortgage loans		19,609		7,499		19,859		46,967
Residential mortgage loans		3,744		333		2,746		6,823
Total accruing TDRs	$	52,348	$	7,832	$	22,605	$	82,785

	March 31, 2018
Non-accrual TDRs	Payment Deferral		Rate Reduction and Payment Deferral		Total
	(In thousands)
Commercial loans	$	14,568	$	-	$	14,568
Commercial mortgage loans		4,011		10,871		14,882
Residential mortgage loans		1,594		151		1,745
Total non-accrual TDRs	$	20,173	$	11,022	$	31,195

	December 31, 2017
Accruing TDRs	Payment Deferral		Rate Reduction		Rate Reduction and Payment Deferral		Total
	(In thousands)
Commercial loans	$	29,199	$	-	$	-	$	29,199
Commercial mortgage loans		11,504		5,871		15,468		32,843
Residential mortgage loans		3,416		335		2,772		6,523
Total accruing TDRs	$	44,119	$	6,206	$	18,240	$	68,565

	December 31, 2017
Non-accrual TDRs	Payment Deferral		Rate Reduction		Rate Reduction and Payment Deferral		Total
	(In thousands)
Commercial loans	$	12,944	$	-	$	-	$	12,944
Commercial mortgage loans		6,231		1,677		11,113		19,021
Residential mortgage loans		1,297		-		154		1,451
Total non-accrual TDRs	$	20,472	$	1,677	$	11,267	$	33,416

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

	Three months ended March 31,
Accruing TDRs	2018			2017
	(In thousands)
Beginning balance	$	68,566		$	65,393
New restructurings		17,320			27,683
Restructured loans restored to accrual status		2,318			-
Payments		(3,891	)		(4,595	)
Restructured loans placed on non-accrual status		(1,528	)		(5,822	)
Expiration of loan concession upon renewal		-			(2,240	)
Ending balance	$	82,785		$	80,419

	Three months ended March 31,
Non-accrual TDRs	2018			2017
	(In thousands)
Beginning balance	$	33,415		$	29,722
New restructurings		231			-
Restructured loans placed on non-accrual status		1,528			5,822
Charge-offs		-			(1,049	)
Payments		(1,661	)		(990	)
Foreclosures		-			(726	)
Restructured loans restored to accrual status		(2,318	)		-
Ending balance	$	31,195		$	32,779

The Company considers a loan to be in payment default once it is

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 had subsequently defaulted as of

March 31, 2018.

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, 2018,

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 tables present the loan portfolio by risk rating as of

March 31, 2018,

and as of

December 31, 2017:

	March 31, 2018
	Pass/Watch		Special Mention		Substandard		Doubtful		Total
	(In thousands)
Commercial loans	$	2,224,463	$	139,985	$	71,973	$	-	$	2,436,421
Real estate construction loans		522,983		55,911		9,033		-		587,927
Commercial mortgage loans		6,202,696		292,647		114,911		-		6,610,254
Residential mortgage loans and equity lines		3,365,642		-		9,822		-		3,375,464
Installment and other loans		4,378		-		95		-		4,473
Total gross loans	$	12,320,162	$	488,543	$	205,834	$	-	$	13,014,539

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

	December 31, 2017
	Pass/Watch		Special Mention		Substandard		Doubtful		Total
	(In thousands)
Commercial loans	$	2,281,698	$	118,056	$	61,503	$	9	$	2,461,266
Real estate construction loans		616,411		54,209		8,185		-		678,805
Commercial mortgage loans		6,004,258		308,924		169,513		-		6,482,695
Residential mortgage loans and equity lines		3,232,606		-		9,748		-		3,242,354
Installment and other loans		5,170		-		-		-		5,170
Total gross loans	$	12,140,143	$	481,189	$	248,949	$	9	$	12,870,290

Loans held for sale	$	-	$	-	$	8,000	$	-	$	8,000

The following table presents the balance in the allowance for loan losses by portfolio segment and based on impairment method as of

March 31, 2018,

and as of

December 31, 2017:

			Real Estate		Commercial		Residential
	Commercial		Construction		Mortgage		Mortgage Loans		Installment and
	Loans		Loans		Loans		and Equity Lines		Other Loans		Total
	(In thousands)
March 31, 2018
Loans individually evaluated for impairment
Allowance	$	11	$	-	$	1,145	$	346	$	-	$	1,502
Balance	$	44,911	$	8,113	$	64,747	$	14,342	$	-	$	132,113

Loans collectively evaluated for impairment
Allowance	$	54,586	$	21,864	$	33,085	$	11,026	$	21	$	120,582
Balance	$	2,391,510	$	579,814	$	6,545,507	$	3,361,122	$	4,473	$	12,882,426

Total allowance	$	54,597	$	21,864	$	34,230	$	11,372	$	21	$	122,084
Total balance	$	2,436,421	$	587,927	$	6,610,254	$	3,375,464	$	4,473	$	13,014,539

December 31, 2017
Loans individually evaluated for impairment
Allowance	$	43	$	-	$	1,738	$	353	$	-	$	2,134
Balance	$	43,495	$	8,185	$	52,664	$	13,009	$	-	$	117,353

Loans collectively evaluated for impairment
Allowance	$	49,753	$	24,838	$	35,872	$	10,660	$	22	$	121,145
Balance	$	2,417,771	$	670,620	$	6,430,031	$	3,229,345	$	5,170	$	12,752,937

Total allowance	$	49,796	$	24,838	$	37,610	$	11,013	$	22	$	123,279
Total balance	$	2,461,266	$	678,805	$	6,482,695	$	3,242,354	$	5,170	$	12,870,290

The following tables detail activity in the allowance for loan losses by portfolio segment for the

three

months ended

March 31, 2018,

and

March 31, 2017.

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)

2018 Beginning Balance	$	49,796		$	24,838		$	37,610		$	11,013	$	22		$	123,279
Provision/(credit) for possible credit losses		3,907			(3,018	)		(4,163	)		275		(1	)		(3,000	)
Charge-offs		(19	)		-			-			-		-			(19	)
Recoveries		913			44			783			84		-			1,824
Net recoveries		894			44			783			84		-			1,805

March 31, 2018 Ending Balance	$	54,597		$	21,864		$	34,230		$	11,372	$	21		$	122,084
Reserve for impaired loans	$	11		$	-		$	1,145		$	346	$	-		$	1,502
Reserve for non-impaired loans	$	54,586		$	21,864		$	33,085		$	11,026	$	21		$	120,582
Reserve for off-balance sheet credit commitments	$	2,747		$	1,515		$	138		$	182	$	6		$	4,588

2017 Beginning Balance	$	49,203		$	23,268		$	34,864		$	11,620	$	11		$	118,966
(Credit)/provision 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