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. The Company’s loans generally are collateralized by real property or other pledged collateral of the borrowers. The Company generally expects loans to be paid off from the operating profits of the borrowers, 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, 2018,

and

December 31, 2017,

were as follows:

	September 30, 2018			December 31, 2017
	(In thousands)
Commercial loans	$	2,674,089		$	2,461,266
Residential mortgage loans		3,569,111			3,062,050
Commercial mortgage loans		6,580,254			6,482,695
Real estate construction loans		597,018			678,805
Equity lines		221,599			180,304
Installment & other loans		5,575			5,170
Gross loans	$	13,647,646		$	12,870,290

Allowance for loan losses		(123,457	)		(123,279	)
Unamortized deferred loan fees		(2,086	)		(3,245	)

Total loans, net	$	13,522,103		$	12,743,766
Loans held for sale	$	-		$	8,000

As of

September 30, 2018,

recorded investment in impaired loans totaled

$117.0

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

$42.4

million and accruing troubled debt restructured loans (“TDRs”) of

$74.6

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

7.4%

as of

September 30, 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				Nine months ended				Three months ended				Nine months ended
	September 30,				September 30,				September 30,				September 30,
	2018		2017		2018		2017		2018		2017		2018		2017
	(In thousands)
Commercial loans	$	48,772	$	24,987	$	46,920	$	22,572	$	461	$	678	$	1,152	$	760
Real estate construction loans		5,980		29,780		7,490		29,868		-		99		-		287
Commercial mortgage loans		55,375		58,555		59,314		60,074		576		391		1,757		1,015
Residential mortgage loans and equity lines		13,724		13,937		14,032		15,208		108		96		279		287
Total impaired loans	$	123,851	$	127,259	$	127,756	$	127,722	$	1,145	$	1,264	$	3,188	$	2,349

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

	Impaired Loans
	September 30, 2018						December 31, 2017
	Unpaid Principal Balance		Recorded Investment		Allowance		Unpaid Principal Balance		Recorded Investment		Allowance
	(In thousands)

With no allocated allowance
Commercial loans	$	40,426	$	38,556	$	-	$	43,483	$	42,702	$	-
Real estate construction loans		5,776		4,922		-		8,821		8,185		-
Commercial mortgage loans		34,276		26,912		-		37,825		31,029		-
Residential mortgage loans and equity lines		6,791		6,776		-		1,301		1,301		-
Subtotal	$	87,269	$	77,166	$	-	$	91,430	$	83,217	$	-
With allocated allowance
Commercial loans	$	5,792	$	5,715	$	2,506	$	891	$	793	$	43
Commercial mortgage loans		27,549		27,523		917		21,733		21,635		1,738
Residential mortgage loans and equity lines		7,670		6,605		281		13,022		11,708		353
Subtotal	$	41,011	$	39,843	$	3,704	$	35,646	$	34,136	$	2,134
Total impaired loans	$	128,280	$	117,009	$	3,704	$	127,076	$	117,353	$	2,134

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

September 30, 2018,

and as of

December 31, 2017:

	September 30, 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	$	28,212	$	17,329	$	3,467	$	17,118	$	66,126	$	2,607,963	$	2,674,089
Real estate construction loans		-		-		-		4,922		4,922		592,096		597,018
Commercial mortgage loans		-		9,157		3,214		13,172		25,543		6,554,711		6,580,254
Residential mortgage loans and equity lines		-		-		-		7,198		7,198		3,783,512		3,790,710
Installment and other loans		-		-		-		-		-		5,575		5,575
Total loans	$	28,212	$	26,486	$	6,681	$	42,410	$	103,789	$	13,543,857	$	13,647,646

	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

September 30, 2018,

accruing TDRs were

$74.6

million and non-accrual TDRs were

$27.7

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

$1.6

million to accruing TDRs and

$1.9

million to non-accrual TDRs as of

September 30, 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

three

and

nine

months ended

September 30, 2018

and

2017,

their specific reserves as of

September 30, 2018

and

2017,

and charge-offs for the

three

and

nine

months ended

September 30, 2018

and

2017:

	Three months ended September 30, 2018								September 30, 2018
	No. of Contracts		Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment		Charge-offs		Specific Reserve
	(Dollars in thousands)

Commercial loans		3	$	4,621	$	4,621	$	-	$	2,467
Commercial mortgage loans		1		339		339		-		-
Residential mortgage loans and equity lines		2		413		413		-		16
Total		6	$	5,373	$	5,373	$	-	$	2,483

	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

	Nine months ended September 30, 2018								September 30, 2018
	No. of Contracts		Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment		Charge-offs		Specific Reserve
	(Dollars in thousands)

Commercial loans		21	$	12,212	$	12,212	$	-	$	2,493
Commercial mortgage loans		7		14,626		14,626		-		119
Residential mortgage loans and equity lines		4		1,213		1,213		-		24
Total		32	$	28,051	$	28,051	$	-	$	2,636

	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

Modifications of the loan terms during the

first

nine

months of

2018

were in the form of extensions of maturity dates, which ranged from

three

twelve

months from the modification date.

We expect that the TDRs on accruing status as of

September 30, 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

September 30, 2018,

and

December 31, 2017,

is shown below:

	September 30, 2018
Accruing TDRs	Payment Deferral		Rate Reduction		Rate Reduction and Payment Deferral		Total
	(In thousands)
Commercial loans	$	27,153	$	-	$	-	$	27,153
Commercial mortgage loans		14,248		7,446		19,568		41,262
Residential mortgage loans		3,433		329		2,421		6,183
Total accruing TDRs	$	44,834	$	7,775	$	21,989	$	74,598

	September 30, 2018
Non-accrual TDRs	Payment Deferral		Rate Reduction		Rate Reduction and Payment Deferral		Total
	(In thousands)
Commercial loans	$	14,579	$	-	$	-	$	14,579
Commercial mortgage loans		3,863		-		7,261		11,124
Residential mortgage loans		1,901		-		114		2,015
Total non-accrual TDRs	$	20,343	$	-	$	7,375	$	27,718

	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 September 30,						Nine months ended September 30,
Accruing TDRs	2018			2017			2018			2017
	(In thousands)
Beginning balance	$	84,487		$	79,819		$	68,566		$	65,393
New restructurings		2,589			21,790			25,036			49,973
Restructured loans restored to accrual status		577			-			2,895			-
Payments		(13,055	)		(35,677	)		(19,801	)		(41,372	)
Restructured loans placed on non-accrual status		-			(3,574	)		(2,098	)		(9,396	)
Expiration of loan concession upon renewal		-			-			-			(2,240	)
Ending balance	$	74,598		$	62,358		$	74,598		$	62,358

	Three months ended September 30,						Nine months ended September 30,
Non-accrual TDRs	2018			2017			2018			2017
	(In thousands)
Beginning balance	$	30,347		$	30,045		$	33,415		$	29,722
New restructurings		2,784			2,360			3,015			2,360
Restructured loans placed on non-accrual status		-			3,574			2,098			9,396
Charge-offs		-			(355	)		(161	)		(1,901	)
Payments		(4,836	)		(1,933	)		(7,754	)		(5,160	)
Foreclosures		-			-			-			(726	)
Restructured loans restored to accrual status		(577	)		-			(2,895	)		-
Ending balance	$	27,718		$	33,691		$	27,718		$	33,691

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

September 30, 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

September 30, 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

September 30, 2018,

and as of

December 31, 2017:

	September 30, 2018
	Pass/Watch		Special Mention		Substandard		Doubtful		Total
	(In thousands)
Commercial loans	$	2,494,780	$	125,373	$	53,936	$	-	$	2,674,089
Real estate construction loans		531,579		60,517		4,922		-		597,018
Commercial mortgage loans		6,181,227		315,010		84,017		-		6,580,254
Residential mortgage loans and equity lines		3,782,077		-		8,633		-		3,790,710
Installment and other loans		5,575		-		-		-		5,575
Total gross loans	$	12,995,238	$	500,900	$	151,508	$	-	$	13,647,646

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

	December 31, 2017
	Pass/Watch		Special Mention		Substandard		Doubtful		Total

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

September 30, 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)
September 30, 2018
Loans individually evaluated for impairment
Allowance	$	2,506	$	-	$	917	$	281	$	-	$	3,704
Balance	$	44,272	$	4,922	$	54,435	$	13,381	$	-	$	117,010

Loans collectively evaluated for impairment
Allowance	$	54,008	$	21,226	$	31,865	$	12,628	$	26	$	119,753
Balance	$	2,629,817	$	592,096	$	6,525,819	$	3,777,329	$	5,575	$	13,530,636

Total allowance	$	56,514	$	21,226	$	32,782	$	12,909	$	26	$	123,457
Total balance	$	2,674,089	$	597,018	$	6,580,254	$	3,790,710	$	5,575	$	13,647,646

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

and

nine

months ended

September 30, 2018,

and

September 30, 2017.

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, 2018

and

2017

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

June 30, 2018 Ending Balance	$	55,179		$	20,663	$	33,976		$	12,062		$	19		121,899
Provision/(credit) for possible credit losses		1,270			519		(4,138	)		842			7		(1,500	)
Charge-offs		(122	)		-		-			-			-		(122	)
Recoveries		187			44		2,944			5			-		3,180
Net (charge-offs)/recoveries		65			44		2,944			5			-		3,058
September 30, 2018 Ending Balance	$	56,514		$	21,226	$	32,782		$	12,909		$	26	$	123,457

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

Nine months ended

September 30, 2018

and

2017

				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		6,097			(3,744	)		(8,672	)		1,815			4		(4,500	)
Charge-offs		(629	)		-			(390	)		-			-		(1,019	)
Recoveries		1,250			132			4,234			81			-		5,697
Net recoveries		621			132			3,844			81			-		4,678
September 30, 2018 Ending Balance	$	56,514		$	21,226		$	32,782		$	12,909		$	26	$	123,457
Reserve for impaired loans	$	2,506		$	-		$	917		$	281		$	-	$	3,704
Reserve for non-impaired loans	$	54,008		$	21,226		$	31,865		$	12,628		$	26	$	119,753
Reserve for off-balance sheet credit commitments	$	1,615		$	1,174		$	78		$	215		$	6	$	3,088

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