Note 8 - Loans

6 Months Ended

Jun. 30, 2019

Notes to Financial Statements

Loans, Notes, Trade and Other Receivables Disclosure [Text Block]

8.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; and Las Vegas, Nevada.  The Company also has loan customers in Hong Kong. The Company has no specific industry concentration, and generally its loans are secured by real property or other collateral of the borrowers. The Company generally expects loans 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 June 30, 2019, and December 31, 2018, were as follows:

	June 30, 2019			December 31, 2018
	(In thousands)
Commercial loans	$	2,772,982		$	2,741,965
Residential mortgage loans		3,967,135			3,693,853
Commercial mortgage loans		6,945,562			6,724,200
Equity lines		302,351			249,967
Real estate construction loans		598,849			581,454
Installment and other loans		6,631			4,349
Gross loans	$	14,593,510		$	13,995,788
Allowance for loan losses		(122,651	)		(122,391	)
Unamortized deferred loan fees, net		(1,415	)		(1,565	)
Total loans, net	$	14,469,444		$	13,871,832

As of June 30, 2019, recorded investment in impaired loans totaled $119.6 million and was comprised of non-accrual loans of $54.7 million and accruing troubled debt restructured loans (“TDRs”) of $64.9 million. As of December 31, 2018, recorded investment in impaired loans totaled $106.9 million and was comprised of non-accrual loans of $41.8 million and accruing TDRs of $65.1 million. For impaired loans, the amounts previously charged off represent 9.9% and 9.3% of the contractual balances for impaired loans as of June 30, 2019 and December 31, 2018, respectively.

The following table presents the average recorded investment and interest income recognized on impaired loans for the periods indicated:

	Three Months Ended June 30,								Six Months Ended June 30,
	2019				2018				2019				2018
	Average Recorded Investment		Interest Income Recognized		Average Recorded Investment		Interest Income Recognized		Average Recorded Investment		Interest Income Recognized		Average Recorded Investment		Interest Income Recognized
	(In thousands)
Commercial loans	$	46,792	$	587	$	46,763	$	498	$	42,388	$	820	$	45,978	$	825
Real estate construction loans		4,726		—		8,378		—		4,771		—		8,258		—
Commercial mortgage loans		54,404		448		64,004		633		56,724		942		61,316		1,264
Residential mortgage loans and equity lines		12,983		81		14,664		93		13,123		165		14,189		186
Total impaired loans	$	118,905	$	1,116	$	133,809	$	1,224	$	117,006	$	1,927	$	129,741	$	2,275

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

	June 30, 2019						December 31, 2018
	Unpaid Principal Balance		Recorded Investment		Allowance		Unpaid Principal Balance		Recorded Investment		Allowance
	(In thousands)
With no allocated allowance
Commercial loans	$	45,022	$	40,260	$	—	$	32,015	$	30,368	$	—
Real estate construction loans		5,776		4,702		—		5,776		4,873		—
Commercial mortgage loans		33,410		23,436		—		34,129		24,409		—
Residential mortgage loans and equity lines		7,043		6,997		—		5,685		5,665		—
Subtotal	$	91,251	$	75,395	$	—	$	77,605	$	65,315	$	—
With allocated allowance
Commercial loans	$	12,577	$	12,563	$	832	$	6,653	$	6,570	$	1,837
Commercial mortgage loans		25,761		25,704		620		27,099		27,063		877
Residential mortgage loans and equity lines		7,055		5,984		234		8,934		7,938		1,088
Subtotal	$	45,393	$	44,251	$	1,686	$	42,686	$	41,571	$	3,802
Total impaired loans	$	136,644	$	119,646	$	1,686	$	120,291	$	106,886	$	3,802

The following tables present the aging of the loan portfolio by type as of June 30, 2019, and as of December 31, 2018:

	June 30, 2019
	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)
Commercial loans	$	4,998	$	970	$	—	$	28,070	$	34,038	$	2,738,944	$	2,772,982
Real estate construction loans		2,827		—		—		4,702		7,529		591,320		598,849
Commercial mortgage loans		4,930		4,264		14,469		14,515		38,178		6,907,384		6,945,562
Residential mortgage loans and equity lines		—		511		—		7,461		7,972		4,261,514		4,269,486
Installment and other loans		—		—		—		—		—		6,631		6,631
Total loans	$	12,755	$	5,745	$	14,469	$	54,748	$	87,717	$	14,505,793	$	14,593,510

	December 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
	(In thousands)
Commercial loans	$	25,494	$	2,454	$	514	$	18,805	$	47,267	$	2,694,698	$	2,741,965
Real estate construction loans		—		3,156		—		4,872		8,028		573,426		581,454
Commercial mortgage loans		10,797		8,545		3,259		10,611		33,212		6,690,988		6,724,200
Residential mortgage loans and equity lines		9,687		336		—		7,527		17,550		3,926,270		3,943,820
Installment and other loans		—		—		—		—		—		4,349		4,349
Total loans	$	45,978	$	14,491	$	3,773	$	41,815	$	106,057	$	13,889,731	$	13,995,788

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 TDRs 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, market and environmental conditions, among other factors.

A TDR 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 June 30, 2019, accruing TDRs were $64.9 million and non-accrual TDRs were $22.5 million compared to accruing TDRs of $65.1 million and non-accrual TDRs of $24.2 million as of December 31, 2018. The Company allocated specific reserves of $1.3 million to accruing TDRs and $54 thousand to non-accrual TDRs as of June 30, 2019, and $1.5 million to accruing TDRs and $826 thousand to non-accrual TDRs as of December 31, 2018. The following tables set forth TDRs that were modified during the three and six months ended June 30, 2019 and 2018, their specific reserves as of June 30, 2019 and 2018, and charge-offs for the three and six months ended June 30, 2019 and 2018:

	Three Months Ended June 30, 2019								June 30, 2019
	No. of Contracts		Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment		Charge-offs		Specific Reserve
	(In thousands)
Commercial loans		19	$	16,405	$	15,551	$	811	$	37
Total		19	$	16,405	$	15,551	$	811	$	37

	Three Months Ended June 30, 2018								June 30, 2018
	No. of Contracts		Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment		Charge-offs		Specific Reserve
	(In thousands)
Commercial loans		15	$	5,127	$	5,127	$	—	$	—
Total		15	$	5,127	$	5,127	$	—	$	—

	Six Months Ended June 30, 2019								June 30, 2019
	No. of Contracts		Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment		Charge-offs		Specific Reserve
	(In thousands)
Commercial loans		20	$	18,352	$	16,381	$	811	$	37
Total		20	$	18,352	$	16,381	$	811	$	37

	Six Months Ended June 30, 2018								June 30, 2018
	No. of Contracts		Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment		Charge-offs		Specific Reserve
	(In thousands)
Commercial loans		18	$	7,590	$	7,590	$	—	$	—
Commercial mortgage loans		6		14,287		14,287		—		126
Residential mortgage loans and equity lines		2		801		801		—		8
Total		26	$	22,678	$	22,678	$	—	$	134

Modifications of the loan terms in the six months ended June 30, 2019 were in the form of extensions of maturity dates, which ranged generally from three to twelve months from the modification date. 

We expect that the TDRs on accruing status as of June 30, 2019, 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, 2019, and December 31, 2018, is set forth in the table below:

	June 30, 2019
	Payment Deferral		Rate Reduction		Rate Reduction and Payment Deferral		Total
	(In thousands)
Accruing TDRs
Commercial loans	$	24,753	$	—	$	—	$	24,753
Commercial mortgage loans		9,761		5,775		19,090		34,626
Residential mortgage loans		3,010		321		2,188		5,519
Total accruing TDRs	$	37,524	$	6,096	$	21,278	$	64,898

	June 30, 2019
	Payment Deferral		Rate Reduction		Rate Reduction and Payment Deferral		Total
	(In thousands)
Non-accrual TDRs
Commercial loans	$	16,278	$	—	$	—	$	16,278
Commercial mortgage loans		—		—		4,417		4,417
Residential mortgage loans		1,658		—		104		1,762
Total non-accrual TDRs	$	17,936	$	—	$	4,521	$	22,457

	December 31, 2018
	Payment Deferral		Rate Reduction		Rate Reduction and Payment Deferral		Total
	(In thousands)
Accruing TDRs
Commercial loans	$	18,135	$	—	$	—	$	18,135
Commercial mortgage loans		14,022		7,420		19,418		40,860
Residential mortgage loans		3,353		327		2,396		6,076
Total accruing TDRs	$	35,510	$	7,747	$	21,814	$	65,071

	December 31, 2018
	Payment Deferral		Rate Reduction		Rate Reductio and Payment Deferral		Total
	(In thousands)
Non-accrual TDRs
Commercial loans	$	13,771	$	—	$	—	$	13,771
Commercial mortgage loans		3,682		—		4,884		8,566
Residential mortgage loans		1,741		—		111		1,852
Total non-accrual TDRs	$	19,194	$	—	$	4,995	$	24,189

The activity within TDRs for the periods indicated is set forth below:

	Three Months Ended June 30,						Six Months Ended June 30,
	2019			2018			2019			2018
	(In thousands)
Accruing TDRs
Beginning balance	$	62,948		$	82,785		$	65,071		$	68,566
New restructurings		13,244			5,127			15,192			22,447
Restructured loans restored to accrual status		—			—			—			2,318
Payments		(9,998	)		(2,855	)		(14,069	)		(6,746	)
Restructured loans placed on non-accrual status		(1,296	)		(570	)		(1,296	)		(2,098	)
Ending balance	$	64,898		$	84,487		$	64,898		$	84,487

	Three Months Ended June 30,						Six Months Ended June 30,
	2019			2018			2019			2018
	(In thousands)
Non-accrual TDRs
Beginning balance	$	23,301		$	31,195		$	24,189		$	33,415
New restructurings		3,160			—			3,160			231
Restructured loans placed on non-accrual status		1,296			570			1,296			2,098
Charge-offs		(811	)		(161	)		(1,218	)		(161	)
Payments		(4,489	)		(1,257	)		(4,970	)		(2,918	)
Restructured loans restored to accrual status		—			—			—			(2,318	)
Ending balance	$	22,457		$	30,347		$	22,457		$	30,347

The Company considers a loan 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 had subsequently defaulted as of June 30, 2019.

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, 2019, 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 set forth the loan portfolio by risk rating as of June 30, 2019, and as of December 31, 2018:

	June 30, 2019
	Pass/Watch		Special Mention		Substandard		Doubtful		Total
	(In thousands)
Commercial loans	$	2,568,884	$	111,658	$	92,440	$	—	$	2,772,982
Real estate construction loans		538,843		55,303		4,703		—		598,849
Commercial mortgage loans		6,632,331		222,932		90,299		—		6,945,562
Residential mortgage loans and equity lines		4,260,303		939		8,244		—		4,269,486
Installment and other loans		6,631		—		—		—		6,631
Total gross loans	$	14,006,992	$	390,832	$	195,686	$	—	$	14,593,510

	December 31, 2018
	Pass/Watch		Special Mention		Substandard		Doubtful		Total
	(In thousands)
Commercial loans	$	2,603,901	$	87,987	$	50,077	$	—	$	2,741,965
Real estate construction loans		514,406		62,175		4,873		—		581,454
Commercial mortgage loans		6,337,368		304,791		82,041		—		6,724,200
Residential mortgage loans and equity lines		3,934,762		—		9,058		—		3,943,820
Installment and other loans		4,349		—		—		—		4,349
Total gross loans	$	13,394,786	$	454,953	$	146,049	$	—	$	13,995,788

The following tables set forth the balance in the allowance for loan losses by portfolio segment and based on impairment method as of June 30, 2019, and as of December 31, 2018:

	June 30, 2019
			Real Estate		Commercial		Residential		Installment
	Commercial		Construction		Mortgage		Mortgage Loans		and
	Loans		Loans		Loans		and Equity Lines		Other Loans		Total
	(In thousands)
Loans individually evaluated for impairment
Allowance	$	832	$	—	$	620	$	234	$	—	$	1,686
Balance	$	52,823	$	4,702	$	49,140	$	12,981	$	—	$	119,646
Loans collectively evaluated for impairment
Allowance	$	53,461	$	21,010	$	32,534	$	13,930	$	30	$	120,965
Balance	$	2,720,159	$	594,147	$	6,896,422	$	4,256,505	$	6,631	$	14,473,864
Total allowance	$	54,293	$	21,010	$	33,154	$	14,164	$	30	$	122,651
Total balance	$	2,772,982	$	598,849	$	6,945,562	$	4,269,486	$	6,631	$	14,593,510

	December 31, 2018
			Real Estate		Commercial		Residential		Installment
	Commercial		Construction		Mortgage		Mortgage Loans		and
	Loans		Loans		Loans		and Equity Lines		Other Loans		Total
	(In thousands)
Loans individually evaluated for impairment
Allowance	$	1,837	$	—	$	877	$	1,088	$	—	$	3,802
Balance	$	36,940	$	4,873	$	51,471	$	13,602	$	—	$	106,886
Loans collectively evaluated for impairment
Allowance	$	53,141	$	19,626	$	32,610	$	13,194	$	18	$	118,589
Balance	$	2,705,025	$	576,581	$	6,672,729	$	3,930,218	$	4,349	$	13,888,902
Total allowance	$	54,978	$	19,626	$	33,487	$	14,282	$	18	$	122,391
Total balance	$	2,741,965	$	581,454	$	6,724,200	$	3,943,820	$	4,349	$	13,995,788

The following tables set forth activity in the allowance for loan losses by portfolio segment for the three and six months ended June 30, 2019, and June 30, 2018. 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, 2019 and 2018
									Residential
				Real Estate		Commercial			Mortgage Loans		Installment
	Commercial			Construction		Mortgage			and		and Other
	Loans			Loans		Loans			Equity Lines		Loans			Total
	(In thousands)
March 31, 2019 Ending Balance	$	54,750		$	20,723	$	33,073		$	13,975	$	34		$	122,555
Provision/(reversal) for possible credit losses		(100	)		257		(180	)		27		(4	)		—
Charge-offs		(1,713	)		—		—			—		—			(1,713	)
Recoveries		1,356			30		261			162		—			1,809
Net (charge-offs)/recoveries		(357	)		30		261			162		—			96
June 30, 2019 Ending Balance	$	54,293		$	21,010	$	33,154		$	14,164	$	30		$	122,651

										Residential
				Real Estate			Commercial			Mortgage Loans			Installment
	Commercial			Construction			Mortgage			and			and Other
	Loans			Loans			Loans			Equity Lines			Loans			Total
	(In thousands)
March 31, 2018 Ending Balance	$	54,597		$	21,864		$	34,230		$	11,372		$	21		$	122,084
Provision/(reversal) for possible credit losses		920			(1,245	)		(533	)		860			(2	)		—
Charge-offs		(488	)		—			(161	)		(229	)		—			(878	)
Recoveries		150			44			440			59			—			693
Net (charge-offs)/recoveries		(338	)		44			279			(170	)		—			(185	)
June 30, 2018 Ending Balance	$	55,179		$	20,663		$	33,976		$	12,062		$	19		$	121,899

Six months ended June 30, 2019 and 2018
									Residential
				Real Estate		Commercial			Mortgage Loans			Installment
	Commercial			Construction		Mortgage			and			and Other
	Loans			Loans		Loans			Equity Lines			Loans		Total
	(In thousands)
2019 Beginning Balance	$	54,978		$	19,626	$	33,487		$	14,282		$	18	$	122,391
Provision/(reversal) for possible credit losses		862			310		(746	)		(438	)		12		—
Charge-offs		(2,944	)		—		—			—			—		(2,944	)
Recoveries		1,397			1,074		413			320			—		3,204
Net (charge-offs)/recoveries		(1,547	)		1,074		413			320			—		260
June 30, 2019 Ending Balance	$	54,293		$	21,010	$	33,154		$	14,164		$	30	$	122,651
Reserve for impaired loans	$	832		$	—	$	620		$	234		$	—	$	1,686
Reserve for non-impaired loans	$	53,461		$	21,010	$	32,534		$	13,930		$	30	$	120,965
Reserve for off-balance sheet credit commitments	$	2,090		$	2,029	$	137		$	290		$	4	$	4,550

										Residential
				Real Estate			Commercial			Mortgage Loans			Installment
	Commercial			Construction			Mortgage			and			and Other
	Loans			Loans			Loans			Equity Lines			Loans			Total
	(In thousands)
2018 Beginning Balance	$	49,796		$	24,838		$	37,610		$	11,013		$	22		$	123,279
Provision/(reversal) for possible credit losses		4,827			(4,263	)		(4,696	)		1,135			(3	)		(3,000	)
Charge-offs		(507	)		—			(161	)		(229	)		—			(897	)
Recoveries		1,063			88			1,223			143			—			2,517
Net recoveries/(charge-offs)		556			88			1,062			(86	)		—			1,620
June 30, 2018 Ending Balance	$	55,179		$	20,663		$	33,976		$	12,062		$	19		$	121,899
Reserve for impaired loans	$	2,463		$	—		$	1,036		$	334		$	—		$	3,833
Reserve for non-impaired loans	$	52,716		$	20,663		$	32,940		$	11,728		$	19		$	118,066
Reserve for off-balance sheet credit commitments	$	1,606		$	1,207		$	77		$	190		$	8		$	3,088