HOPE BANCORP INC - FORM 10-Q

Attached files

file	filename
EX-31.1 - EXHIBIT 31.1 - HOPE BANCORP INC	ex311-33116.htm
EX-32.2 - EXHIBIT 32.2 - HOPE BANCORP INC	ex322-33116.htm
EX-31.2 - EXHIBIT 31.2 - HOPE BANCORP INC	ex312-33116.htm
EX-32.1 - EXHIBIT 32.1 - HOPE BANCORP INC	ex321-33116.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

______________________________________________

FORM 10-Q

______________________________________________

(Mark One)



x	Quarterly report pursuant to section 13 or 15 (d) of the Securities Exchange Act of 1934

For the quarterly period ended March 31, 2016



o	Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the transition period from to

Commission File Number: 000-50245

______________________________________________

BBCN BANCORP, INC.

(Exact name of registrant as specified in its charter)

______________________________________________



Delaware		95-4849715
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification Number)

3731 Wilshire Boulevard, Suite 1000, Los Angeles, California		90010
(Address of principal executive offices)		(ZIP Code)

(213) 639-1700

(Registrant’s telephone number, including area code)

(Former name, former address and former fiscal year, if changed since last report)

______________________________________________

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See definition of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):



Large accelerated filer	x	Accelerated filer	o

Non-accelerated filer	o	Smaller Reporting Company	o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No x

As of May 5, 2016, there were 79,604,188 outstanding shares of the issuer’s common stock, $0.001 par value.

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		Page
PART I FINANCIAL INFORMATION

	Forward-Looking Statements	3

Item 1.	FINANCIAL STATEMENTS

	Condensed Consolidated Statements of Financial Condition - March 31, 2016 (Unaudited) and December 31, 2015	4

	Condensed Consolidated Statements of Income - Three Months Ended March 31, 2016 and 2015 (Unaudited)	6

	Condensed Consolidated Statements of Comprehensive Income - Three Months Ended March 31, 2016 and 2015 (Unaudited)	7

	Condensed Consolidated Statements of Changes in Stockholders’ Equity - Three Months Ended March 31, 2016 and 2015 (Unaudited)	8

	Condensed Consolidated Statements of Cash Flows - Three Months Ended March 31, 2016 and 2015 (Unaudited)	9

	Notes to Condensed Consolidated Financial Statements (Unaudited)	10

Item 2	MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	51

Item 3.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	70

Item 4.	CONTROLS AND PROCEDURES	71

PART II OTHER INFORMATION

Item 1.	Legal Proceedings	72

Item 1A.	Risk Factors	72

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	72

Item 3.	Defaults Upon Senior Securities	72

Item 4.	Mine Safety Disclosures	72

Item 5.	Other Information	72

Item 6.	Exhibits	72

	Signatures	73

	Index to Exhibits	74

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Forward-Looking Statements

Some statements in this Quarterly Report on Form 10-Q constitute forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. These forward-looking statements relate to, among other things, expectations regarding the business environment in which we operate, projections of future performance, perceived opportunities in the market and statements regarding our business strategies, objectives and vision. Forward-looking statements include, but are not limited to, statements preceded by, followed by or that include the words “will,” “believes,” “expects,” “anticipates,” “intends,” “plans,” “estimates” or similar expressions. With respect to any such forward-looking statements, the Company claims the protection provided for in the Private Securities Litigation Reform Act of 1995. These statements involve risks and uncertainties. Our actual results, performance or achievements may differ significantly from the results, performance or achievements expressed or implied in any forward-looking statements. The risks and uncertainties include: possible deterioration in economic conditions in our areas of operation; interest rate risk associated with volatile interest rates and related asset-liability matching risk; liquidity risks; risk of significant non-earning assets, and net credit losses that could occur, particularly in times of weak economic conditions or times of rising interest rates; risks associated with failure to close the currently pending merger with Wilshire Bancorp, Inc. or to successfully integrate and operate the combined banking franchise assuming the merger closes; and regulatory risks associated with current and future regulations. For additional information concerning these and other risk factors, see Part II, Item 1A. Risk Factors contained herein and Part I, Item 1A. Risk Factors contained in our Annual Report on Form 10-K for the year ended December 31, 2015.

The Company does not undertake, and specifically disclaims any obligation, to update any forward looking statements to reflect the occurrence of events or circumstances after the date of such statements except as required by law.

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PART I

FINANCIAL INFORMATION


Item 1.	Financial Statements

BBCN BANCORP, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION

	(Unaudited)
	March 31, 2016		December 31, 2015
ASSETS	(In thousands, except share data)
Cash and cash equivalents:
Cash and due from banks	$	82,945	$	94,934
Interest bearing deposits in other banks	153,156		203,455
Total cash and cash equivalents	236,101		298,389
Other investments	49,365		47,895
Securities available for sale, at fair value	1,087,897		1,010,556
Loans held for sale, at the lower of cost or fair value	13,843		8,273
Loans receivable (net of allowance for loan losses of $76,856 and $76,408 at March 31, 2016 and December 31, 2015, respectively)	6,295,079		6,171,933
Other real estate owned (“OREO”), net	19,794		21,035
Federal Home Loan Bank (“FHLB”) stock, at cost	18,964		18,964
Premises and equipment (net of accumulated depreciation and amortization of $37,513 and $35,792 at March 31, 2016 and December 31, 2015, respectively)	35,134		34,575
Accrued interest receivable	15,660		15,195
Deferred tax assets, net	53,564		67,004
Customers’ liabilities on acceptances	2,769		1,463
Bank owned life insurance (“BOLI”)	47,292		47,018
Investments in affordable housing partnerships	24,379		25,014
Goodwill	105,401		105,401
Core deposit intangible assets, net	2,607		2,820
Servicing assets	11,856		12,000
Other assets	44,047		25,113
Total assets	$	8,063,752	$	7,912,648

(Continued)

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BBCN BANCORP, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION

	(Unaudited)
	March 31, 2016		December 31, 2015
LIABILITIES AND STOCKHOLDERS’ EQUITY	(In thousands, except share data)
LIABILITIES:
Deposits:
Noninterest bearing	$	1,695,040	$	1,694,427
Interest bearing:
Money market and NOW accounts	1,951,561		1,983,250
Savings deposits	181,779		187,498
Time deposits of $100,000 or more	1,885,842		1,772,984
Other time deposits	753,189		702,817
Total deposits	6,467,411		6,340,976
FHLB advances	530,495		530,591
Subordinated debentures	42,371		42,327
Accrued interest payable	6,746		6,007
Acceptances outstanding	2,769		1,463
Other liabilities	51,978		53,189
Total liabilities	7,101,770		6,974,553
STOCKHOLDERS’ EQUITY:
Common stock, $0.001 par value; authorized 150,000,000 shares at March 31, 2016 and December 31, 2015; issued and outstanding, 79,597,106 and 79,566,356 shares at March 31, 2016 and December 31, 2015, respectively	80		80
Additional paid-in capital	541,625		541,596
Retained earnings	413,122		398,251
Accumulated other comprehensive income (loss), net	7,155		(1,832		)
Total stockholders’ equity	961,982		938,095
Total liabilities and stockholders’ equity	$	8,063,752	$	7,912,648

See accompanying Notes to Condensed Consolidated Financial Statements (Unaudited).

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BBCN BANCORP, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Unaudited)

	Three Months Ended March 31,
	2016		2015
	(In thousands, except per share data)
INTEREST INCOME:
Interest and fees on loans	$	77,118	$	69,639
Interest on securities	5,677		4,207
Interest on federal funds sold and other investments	666		708
Total interest income	83,461		74,554
INTEREST EXPENSE:
Interest on deposits	9,907		7,754
Interest on FHLB advances	1,523		1,297
Interest on other borrowings	424		380
Total interest expense	11,854		9,431
NET INTEREST INCOME BEFORE PROVISION FOR LOAN LOSSES	71,607		65,123
PROVISION FOR LOAN LOSSES	500		1,500
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES	71,107		63,623
NONINTEREST INCOME:
Service fees on deposit accounts	2,683		3,062
International service fees	776		814
Loan servicing fees, net	690		720
Wire transfer fees	914		763
Other income and fees	1,887		2,039
Net gains on sales of SBA loans	1,825		3,044
Net gains on sales of other loans	—		182
Net gains on sales of securities available for sale	—		424
Total noninterest income	8,775		11,048
NONINTEREST EXPENSE:
Salaries and employee benefits	21,569		21,181
Occupancy	4,817		4,692
Furniture and equipment	2,287		2,263
Advertising and marketing	1,136		1,391
Data processing and communication	2,171		2,349
Professional fees	1,083		1,424
FDIC assessments	1,038		1,112
Credit related expenses	421		855
OREO expense	1,428		1,177
Merger and integration expense	1,207		52
Other	2,892		2,581
Total noninterest expense	40,049		39,077
INCOME BEFORE INCOME TAX PROVISION	39,833		35,594
INCOME TAX PROVISION	16,210		14,236
NET INCOME	$	23,623	$	21,358
EARNINGS PER COMMON SHARE
Basic	$	0.30	$	0.27
Diluted	$	0.30	$	0.27

See accompanying Notes to Condensed Consolidated Financial Statements (Unaudited).

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BBCN BANCORP, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Unaudited)

	Three Months Ended March 31,
	2016		2015
	(In thousands)
Net income	$	23,623	$	21,358
Other comprehensive income:
Unrealized gains on securities available for sale and interest only strips	15,592		5,255
Reclassification adjustments for gains realized in income	—		(424		)
Tax expense	6,605		2,048
Change in unrealized gains or losses on securities available for sale and interest only strips	8,987		2,783
Total comprehensive income	$	32,610	$	24,141

See accompanying Notes to Condensed Consolidated Financial Statements (Unaudited).

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BBCN BANCORP, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (Unaudited)

		Common stock
		Shares	Amount		Additional paid-in capital		Retained earnings			Accumulated other comprehensive (loss) income, net
	(Dollars in thousands, except share data)
BALANCE, JANUARY 1, 2015		79,503,552	$	79	$	541,589	$	339,400		$	1,705
Issuance of additional shares pursuant to various stock plans		38,769
Stock-based compensation					235
Cash dividends declared on common stock							(7,951		)
Comprehensive income:
Net income							21,358
Other comprehensive income										2,783
BALANCE, MARCH 31, 2015		79,542,321	$	79	$	541,824	$	352,807		$	4,488

BALANCE, JANUARY 1, 2016		79,566,356	$	80	$	541,596	$	398,251		$	(1,832	)
Issuance of additional shares pursuant to various stock plans		30,750			7
Stock-based compensation					22
Cash dividends declared on common stock							(8,752		)
Comprehensive income:
Net income							23,623
Other comprehensive income										8,987
BALANCE, MARCH 31, 2016		79,597,106	$	80	$	541,625	$	413,122		$	7,155

See accompanying Notes to Condensed Consolidated Financial Statements (Unaudited).

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BBCN BANCORP, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)

	Three Months Ended March 31,
	2016			2015
	(In thousands)
CASH FLOWS FROM OPERATING ACTIVITIES
Net income	$	23,623		$	21,358
Adjustments to reconcile net income to net cash from operating activities:
Depreciation, amortization, net of discount accretion	(798		)	(715		)
Stock-based compensation expense	22			235
Provision for loan losses	500			1,500
Valuation adjustment of OREO	695			378
Change in deferred income taxes, net	6,794			5,290
Proceeds from sales of loans held for sale	25,900			36,066
Originations of loans held for sale	(29,593		)	(31,837		)
Net gains on sales of SBA and other loans	(1,825		)	(3,226		)
Additions in servicing assets	(777		)	(1,045		)
Net change in BOLI	(274		)	(269		)
Loss on disposal of equipment	—			7
Net gains on sales of securities available for sale	—			(424		)
Net gains on sales of OREO	(132		)	(110		)
Change in accrued interest receivable	(465		)	(270		)
Change in investments in affordable housing partnership	405			(599		)
Change in other assets	(18,978		)	(12,428		)
Change in accrued interest payable	739			622
Change in other liabilities	(981		)	1,715
Net cash provided by operating activities	4,855			16,248
CASH FLOWS FROM INVESTING ACTIVITIES
Net change in loans receivable	(120,570		)	(141,318		)
Proceeds from sales of securities available for sale	—			22,510
Proceeds from sales of OREO	2,617			2,400
Proceeds from sales of other loans held for sale	—			1,326
Proceeds from sales and disposals of equipment	—			6
Purchase of premises and equipment	(2,303		)	(1,101		)
Purchase of securities available for sale	(99,566		)	(65,632		)
Purchases of other investments	(1,470		)	—
Redemption of FHLB stock	—			35
Proceeds from matured or paid-down securities available for sale	36,435			31,461
Net cash used in investing activities	(184,857		)	(150,313		)
CASH FLOWS FROM FINANCING ACTIVITIES
Net change in deposits	126,459			109,727
Cash dividends paid on Common Stock	(8,752		)	(7,951		)
Proceeds from FHLB advances	150,000			—
Repayment of FHLB advances	(150,000		)	—
Issuance of additional stock pursuant to various stock plans	7			—
Net cash provided by financing activities	117,714			101,776
NET CHANGE IN CASH AND CASH EQUIVALENTS	(62,288		)	(32,289		)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD	298,389			462,160
CASH AND CASH EQUIVALENTS, END OF PERIOD	$	236,101		$	429,871

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Interest paid	$	11,115		$	8,809
Income taxes paid	$	20,862		$	15,852
SUPPLEMENTAL DISCLOSURES OF NON-CASH ACTIVITIES
Transfer from loans receivable to OREO	$	1,895		$	412
Transfer from loans receivable to other loans held for sale	$	52		$	450

See accompanying Notes to Condensed Consolidated Financial Statements (Unaudited).

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BBCN BANCORP, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)


1.	BBCN Bancorp, Inc.

BBCN Bancorp, Inc. (“BBCN Bancorp” on a parent-only basis and the “Company” on a consolidated basis), headquartered in Los Angeles, California, is the holding company for BBCN Bank (“BBCN Bank” or the “Bank”). The Bank has branches in California, New Jersey, and the New York City, Chicago, Seattle and Washington, D.C. metropolitan areas, as well as loan production offices in Atlanta, Annandale, Dallas, Denver, Portland, Seattle, and Northern California. The Company is a corporation organized under the laws of the state of Delaware and a bank holding company registered under the Bank Holding Company Act of 1956, as amended.

On December 7, 2015 the Company announced the signing of a definitive agreement and plan of merger (the “Merger Agreement”) with Wilshire Bancorp, Inc. (“Wilshire”) pursuant to which Wilshire will merge (the “merger”) with and into BBCN Bancorp with BBCN Bancorp as the surviving corporation. As part of the merger, Wilshire Bank, a wholly-owned subsidiary of Wilshire, will merge with and into the Bank. Under the terms of the Merger Agreement, Wilshire shareholders will receive a fixed exchange ratio of 0.7034 of a share of the Company’s common stock in exchange for each share of Wilshire common stock they own in a 100% stock-for-stock transaction.

The Merger Agreement contains customary representations and warranties, and each party has agreed to customary covenants, including, among others, covenants relating to the conduct of its business during the interim period between execution of the Merger Agreement and the closing time. In addition, the consummation of the Merger Agreement is subject to customary conditions and the receipt of requisite regulatory approvals. We currently expect to close the merger in mid-2016 subject to satisfaction of the conditions set forth in the Merger Agreement.


2.	Basis of Presentation

The condensed consolidated financial statements included herein have been prepared without an audit, pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”), except for the Condensed Consolidated Statement of Financial Condition as of December 31, 2015 which was derived from audited financial statements included in the Company’s 2015 Annual Report on Form 10-K. Certain information and footnote disclosures normally included in consolidated financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted pursuant to such SEC rules and regulations.

The condensed consolidated financial statements include the accounts of BBCN Bancorp and its wholly owned subsidiaries, principally BBCN Bank. All intercompany transactions and balances have been eliminated in consolidation. The Company has made all adjustments, consisting solely of normal accruals, that in the opinion of management, are necessary to fairly present the Company’s financial position at March 31, 2016 and the results of operations for the three months then ended. Certain reclassifications have been made to prior period amounts to conform to the current year presentation. The results of operations for the interim periods are not necessarily indicative of results to be anticipated for the full year.

The preparation of consolidated financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Material estimates that are susceptible to change in the near term relate to the determination of the allowance and provision for loan losses, the evaluation of other than temporary impairment of investment securities, accounting for derivatives and hedging activities, the determination of the carrying value for cash surrender value of life insurance, the determination of the carrying value of goodwill and other intangible assets, accounting for deferred tax assets and related valuation allowances, the determination of the fair values of investment securities and other financial instruments, accounting for lease arrangements, accounting for incentive compensation, profit sharing and bonus payments, and the valuation of servicing assets.

These unaudited condensed consolidated financial statements should be read along with the audited consolidated financial statements and accompanying notes included in the Company’s 2015 Annual Report on Form 10-K.

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Recent Accounting Pronouncements:

FASB ASU No. 2015-05, Intangibles-Goodwill and Other-Internal-Use Software (Subtopic 350-40): Customer’s Accounting or Fees Paid in a Cloud Computing Arrangement. The amendments in ASU 2015-05 provide guidance to customers about whether a cloud computing arrangement includes a software license. If a cloud computing arrangement includes a software license, the customer should account for the software license element of the arrangement consistent with the acquisition of other software licenses. If a cloud computing arrangement does not include a software license, the customer should account for the arrangement as a service contract. The amendments do not change the accounting for a customer’s accounting for service contracts. As a result of the amendments, all software licenses within the scope of Subtopic 350-40 will be accounted for consistently with other licenses of intangible assets. The amendments became effective for annual periods and interim periods within those annual periods beginning after December 15, 2015. The adoption of ASU 2015-05 did not have a material effect on the Company’s financial statements.

FASB ASU No. 2015-10, Technical Corrections and Improvements. The amendments in ASU 2015-10 represent changes to clarify the Codification, correct unintended application of guidance, or make minor improvements to the Codification that are not expected to have significant effect on current accounting practice or create a significant administrative cost to most entities. The amendments that require transition guidance became effective for fiscal years and interim periods within those fiscal years beginning after December 15, 2015. The adoption of ASU 2015-10 did not have a significant impact on the Company’s financial statements.

FASB ASU No. 2015-16, Business Combinations (Topic 805): Simplifying the Accounting for Measurement-Period Adjustments. The FASB issued guidance that requires an acquirer in a business combination to recognize adjustments to estimated amounts that are identified during the measurement period in the reporting period in which the adjustment amounts are determined. The amendments also require that the acquirer record, in the same period’s financial statements, the effect on earnings of changes in depreciation, amortization, or other income effects, if any, as a result of the change to the estimated amounts, calculated as if the accounting had been completed at the acquisition date. The amendments became effective for fiscal years and interim periods within those fiscal years beginning after December 15, 2015. The adoption of ASU 2015-16 did not have a significant impact on the Company’s financial statements.

FASB ASU No. 2015-17, Income Taxes (Topic 740): Balance Sheet Classification of Deferred Taxes. The amendments eliminate the current requirement for organizations to present deferred tax liabilities and assets as current and noncurrent in a classified balance sheet. Instead, organizations will be required to classify all deferred tax assets and liabilities as noncurrent. The amendments become effective for fiscal years and interim periods within those fiscal years beginning after December 15, 2016. The adoption of ASU 2015-17 is not expected to have a significant impact on the Company’s consolidated financial statements.

FASB ASU No. 2016-01, Financial Instruments─Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities. The amendments require equity investments (except those accounted for under the equity method of accounting, or those that result in consolidation of the investee) to be measured at fair value with changes in fair value recognized in net income. The amendments become effective for fiscal years beginning after December 15, 2017. The adoption of ASU 2016-01 is not expected to have a significant impact on the Company’s consolidated financial statements.

FASB ASU No. 2016-02, Leases (Topic 842). The new standard establishes a right-of-use (ROU) model that requires a lessee to record a ROU asset and a lease liability on the balance sheet for all leases with terms longer than 12 months. Leases will be classified as either finance or operating, with classification affecting the pattern of expense recognition in the income statement. The new standard is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. A modified retrospective transition approach is required for lessees for capital and operating leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements, with certain practical expedients available. The Company is evaluating the impact of the pending adoption of the new standard on its consolidated financial statements.

FASB ASU No. 2016-07, Investments - Equity Method and Joint Ventures (Topic 323): Simplifying the Transition to the Equity Method of Accounting. The amendments eliminate the requirement that when an investment qualifies for use of the equity method as a result of an increase in the level of ownership interest or degree of influence, an investor must adjust the investment, results of operations, and retained earnings retroactively on a step-by-step basis as if the equity method had been in effect during all previous periods that the investment had been held. The amendments require that the equity method investor add the cost of acquiring the additional interest in the investee to the current basis of the investor’s previously held interest and adopt the equity method of accounting as of the date the investment becomes qualified for equity method accounting. Therefore, upon qualifying for the equity method of accounting, no retroactive adjustment of the investment is required. The amendments become effective for fiscal years beginning after December 15, 2016, and interim periods within those fiscal years and early adoption is permitted. The Company is currently in the process of evaluating the impact of the pending adoption of the new standard on its consolidated financial statements.

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FASB ASU No. 2016-08, Revenue from Contracts with Customers (Topic 606): Principal versus Agent Considerations (Reporting Revenue Gross versus Net). The amendments are intended to improve the operability and understandability of the implementation guidance on principal versus agent considerations by amending certain existing illustrative examples and adding additional illustrative examples to assist in the application of the guidance. The amendments become effective for fiscal years and interim periods within those fiscal years beginning after December 15, 2017. The Company is currently in the process of evaluating the impact of the pending adoption of the new standard on its consolidated financial statements.

FASB ASU No. 2016-09, Compensation - Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting. The amendments require recognition of all excess tax benefits and tax deficiencies through income tax expense or benefit in the income statement. Other amendments in ASU 2016-09 include guidance on the classification of share based payment transactions in the statement of cash flows and an option to account for forfeitures of share-based awards as they occur rather than estimating the compensation cost based on the number of awards that are expected to vest. The amendments become effective for annual periods beginning after December 15, 2016, and interim periods within those annual periods. The Company is currently in the process of evaluating the impact of the pending adoption of the new standard on its consolidated financial statements.

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3.	Stock-Based Compensation

The Company has a stock-based incentive plan, the 2007 BBCN Bancorp Equity Incentive Plan (the “2007 Plan”). The 2007 Plan, approved by the Company’s stockholders on May 31, 2007, was amended and restated on July 25, 2007 and again on December 1, 2011. The 2007 Plan provides for grants of stock options, stock appreciation rights (“SARs”), restricted stock, performance shares and performance units (sometimes referred to individually or collectively as “awards”) to non-employee directors, officers, employees and consultants of the Company. Stock options may be either incentive stock options (“ISOs”), as defined in Section 422 of the Internal Revenue Code of 1986, as amended (the “Code”), or nonqualified stock options (“NQSOs”).

The 2007 Plan gives the Company flexibility to (i) attract and retain qualified non-employee directors, executives and other key employees and consultants with appropriate equity-based awards; (ii) motivate high levels of performance; (iii) recognize employee contributions to the Company’s success; and (iv) align the interests of the 2007 Plan participants with those of the Company’s stockholders. The exercise price for shares under an ISO may not be less than 100% of fair market value on the date the award is granted under Code Section 422. Similarly, under the terms of the 2007 Plan the exercise price for SARs and NQSOs may not be less than 100% of fair market value on the date of grant. Performance units are awarded to a participant at the market price of the Company’s common stock on the date of award (after the lapse of the restriction period and the attainment of the performance criteria). No minimum exercise price is prescribed for performance shares and restricted stock awarded under the 2007 Plan.

ISOs, SARs and NQSOs have vesting periods of three to five years and have 10-year contractual terms. Restricted stock, performance shares, and performance units will be granted with a restriction period of not less than one year from the grant date for performance-based awards and not more than three years from the grant date for time-based vesting of grants. Compensation expense for awards is recognized over the vesting period.

The Company has another stock-based incentive plan, the 2006 Stock Incentive Plan, adopted April 12, 2006, as amended and restated June 13, 2007 (the “2006 Plan”). The 2006 Plan provides for the granting of incentive stock options to officers and employees and non-qualified stock options and restricted stock awards to employees (including officers) and non-employee directors. The option prices of all options granted under the 2006 Plan may not be less than 100% of the fair market value at the date of grant. All options granted generally vest at the rate of 20% per year except that the options granted to the non-employee directors vest at the rate of 33% per year. All options not exercised generally expire ten years after the date of grant.

Under the 2007 Plan and 2006 Plan, 2,589,428 shares were available for future grants as of March 31, 2016.

The total shares reserved for issuance will serve as the underlying value for all equity awards under the 2007 Plan and 2006 Plan. With the exception of the shares underlying stock options and restricted stock awards, the board of directors may choose to settle the awards by paying the equivalent cash value or by delivering the appropriate number of shares.

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The following is a summary of stock option activity under the 2007 Plan and 2006 Plan for the three months ended March 31, 2016:



	Number of Shares		Weighted- Average Exercise Price Per Share		Weighted- Average Remaining Contractual Life (Years)	Aggregate Intrinsic Value
Outstanding - January 1, 2016	457,851		$	19.29
Granted	—		—
Exercised	—		—
Expired	(23,415	)	18.99
Forfeited	—		—
Outstanding - March 31, 2016	434,436		$	19.30	2.19	$	480
Options exercisable - March 31, 2016	296,436		$	20.92	2.19	$	480

The following is a summary of restricted stock and performance unit activity under the 2007 Plan and 2006 Plan for the three months ended March 31, 2016:



	Number of Shares		Weighted- Average Grant Date Fair Value
Outstanding - January 1, 2016	107,049		$	13.72
Granted	—		—
Vested	(34,086	)	11.12
Forfeited	(2,163	)	10.42
Outstanding - March 31, 2016	70,800		$	15.07

The total fair value of restricted performance units vested for the three months ended March 31, 2016 and 2015 was $492 thousand and $575 thousand, respectively.

The amount charged against income related to stock-based payment arrangements was $22 thousand and $235 thousand for the three months ended March 31, 2016 and 2015, respectively.

The income tax benefit recognized was $9 thousand and $83 thousand for the three months ended March 31, 2016 and 2015, respectively.

At March 31, 2016, the unrecognized compensation expense related to non-vested stock option grants was $309 thousand which is expected to be recognized over a weighted average vesting period of 3.06 years. At March 31, 2016, the unrecognized compensation expense related to non-vested restricted units and performance units was $855 thousand which is expected to be recognized over a weighted average vesting period of 3.07 years.

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4.	Earnings Per Share (“EPS”)

Basic EPS does not reflect the possibility of dilution that could result from the issuance of additional shares of common stock upon exercise or conversion of outstanding securities, and is computed by dividing net income by the weighted average number of common shares outstanding for the period. Diluted EPS reflects the potential dilution that could occur if stock options or other contracts to issue common stock were exercised or converted to common stock that would then share in our earnings. For the three months ended March 31, 2016, stock options and restricted shares awards for 443,956 shares of common stock were excluded in computing diluted earnings per common share because they were antidilutive. Additionally, warrants issued pursuant to the Company’s participation in the U.S. Treasury’s TARP Capital Purchase Plan, to purchase 19,420 shares and 18,882 shares of common stock were antidilutive and excluded for the three months ended March 31, 2016 and 2015, respectively.

The following tables show the computation of basic and diluted EPS for the three months ended March 31, 2016 and 2015.



	Three Months Ended March 31,
	2016					2015
	Net Income (Numerator)		Weighted-Average Shares (Denominator)	Per Share (Amount)		Net Income (Numerator)		Weighted-Average Shares (Denominator)	Per Share (Amount)
	(In thousands, except share and per share data)
Basic EPS - common stock	$	23,623	79,583,188	$	0.30	$	21,358	79,526,218	$	0.27
Effect of dilutive securities:
Stock options and restricted stock			30,057					27,359
Common stock warrants			—					48,545
Diluted EPS - common stock	$	23,623	79,613,245	$	0.30	$	21,358	79,602,122	$	0.27

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5. Securities Available for Sale

The following is a summary of securities available for sale as of the dates indicated:



	At March 31, 2016
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Estimated Fair Value
	(In thousands)
Debt securities:
U.S. Government agency and U.S. Government sponsored enterprises
Collateralized mortgage obligations	$	493,539	$	5,189	$	(702	)	$	498,026
Mortgage-backed securities	520,254		7,245		(589		)	526,910
Trust preferred securities	4,549		—		(1,155		)	3,394
Municipal bonds	44,000		2,120		(7		)	46,113
Total debt securities	1,062,342		14,554		(2,453		)	1,074,443
Mutual funds	13,425		29		—			13,454
	$	1,075,767	$	14,583	$	(2,453	)	$	1,087,897

	At December 31, 2015
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Estimated Fair Value
	(In thousands)
Debt securities:
U.S. Government agency and U.S. Government sponsored enterprises
Collateralized mortgage obligations	$	454,096	$	839	$	(4,955	)	$	449,980
Mortgage-backed securities	497,889		3,003		(2,845		)	498,047
Trust preferred securities	4,545		—		(796		)	3,749
Municipal bonds	44,105		1,406		—			45,511
Total debt securities	1,000,635		5,248		(8,596		)	997,287
Mutual funds	13,425		—		(156		)	13,269
	$	1,014,060	$	5,248	$	(8,752	)	$	1,010,556

As of March 31, 2016 and December 31, 2015, there were no holdings of securities of any one issuer, other than the U.S. Government and its agencies, in an amount greater than 10% of stockholders’ equity.

For the three months ended March 31, 2016 and 2015, $15.6 million and $5.3 million of unrealized gains, respectively, were included in accumulated other comprehensive income. A total of $0 and $424 thousand of net gains on sales of securities were reclassified out of accumulated other comprehensive income into earnings for the three months ended March 31, 2016 and 2015, respectively.

The proceeds from sales of securities and the associated gross gains and losses recorded in earnings are listed below:



	Three Months Ended March 31,
	2016		2015
	(In thousands)
Proceeds	$	—	$	22,510
Gross gains	—		437
Gross losses	—		(13		)

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The amortized cost and estimated fair value of investment securities at March 31, 2016, by contractual maturity, are shown below. Expected maturities may differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties. Securities not due at a single maturity date are shown separately.



	Amortized Cost		Estimated Fair Value
	(In thousands)
Available for sale:
Due within one year	$	—	$	—
Due after one year through five years	2,171		2,338
Due after five years through ten years	28,847		30,177
Due after ten years	17,531		16,992
U.S. Government agency and U.S. Government sponsored enterprises
Collateralized mortgage obligations	493,539		498,026
Mortgage-backed securities	520,254		526,910
Mutual funds	13,425		13,454
	$	1,075,767	$	1,087,897

Securities with carrying values of approximately $350.4 million and $359.6 million at March 31, 2016 and December 31, 2015, respectively, were pledged to secure public deposits, various borrowings and for other purposes as required or permitted by law.

The following tables show our investments’ gross unrealized losses and estimated fair value, aggregated by investment category and the length of time that the individual securities have been in a continuous unrealized loss position as of the dates indicated.



	As of March 31, 2016
	Less than 12 months						12 months or longer						Total
Description of Securities	Number of Securities	Fair Value		Gross Unrealized Losses			Number of Securities	Fair Value		Gross Unrealized Losses			Number of Securities	Fair Value		Gross Unrealized Losses
	(In thousands)
Collateralized mortgage obligations*	1	$	7,098	$	(26	)	9	$	78,032	$	(676	)	10	$	85,130	$	(702	)
Mortgage-backed securities*	7	13,612		(42		)	4	30,527		(547		)	11	44,139		(589		)
Trust preferred securities	—	—		—			1	3,394		(1,155		)	1	3,394		(1,155		)
Municipal bonds	2	1,076		(7		)	—	—		—			2	1,076		(7		)
Mutual funds	—	—		—			—	—		—			—	—		—
	10	$	21,786	$	(75	)	14	$	111,953	$	(2,378	)	24	$	133,739	$	(2,453	)

* Investments in U.S. Government agency and U.S. Government sponsored enterprises

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	As of December 31, 2015
	Less than 12 months						12 months or longer						Total
Description of Securities	Number of Securities	Fair Value		Gross Unrealized Losses			Number of Securities	Fair Value		Gross Unrealized Losses			Number of Securities	Fair Value		Gross Unrealized Losses
	(In thousands)
Collateralized mortgage obligations*	31	$	300,202	$	(2,611	)	8	$	70,857	$	(2,344	)	39	$	371,059	$	(4,955	)
Mortgage-backed securities*	28	247,160		(1,487		)	3	27,947		(1,358		)	31	275,107		(2,845		)
Trust Preferred securities	—	—		—			1	3,750		(796		)	1	3,750		(796		)
Municipal bonds	1	127		—			—	—		—			1	127		—
Mutual funds	1	13,269		(156		)	—	—		—			1	13,269		(156		)
	61	$	560,758	$	(4,254	)	12	$	102,554	$	(4,498	)	73	$	663,312	$	(8,752	)

* Investments in U.S. Government agency and U.S. Government sponsored enterprises

The Company evaluates securities for other-than-temporary-impairment (“OTTI”) on at least a quarterly basis, and more frequently when economic or market concerns warrant such evaluation. Consideration is given to the financial condition and near-term prospects of the issuer, the length of time and the extent to which the fair values of the securities have been less than the cost of the securities, and management’s intention to sell, or whether it is more likely than not that management will be required to sell a security in an unrealized loss position before recovery of its amortized cost basis. In analyzing an issuer’s financial condition, the Company considers, among other considerations, whether the securities are issued by the federal government or its agencies, whether downgrades by bond rating agencies have occurred, and the results of reviews of the issuer’s financial condition.

The Company has certain collateralized mortgage obligations, mortgage-backed securities and trust preferred securities that were in a continuous unrealized loss position for twelve months or longer as of March 31, 2016. The trust preferred securities at March 31, 2016 had an amortized cost of $4.5 million and an unrealized loss of $1.2 million at March 31, 2016. The trust preferred securities are scheduled to mature in May 2047. These securities were rated investment grade and there were no credit quality concerns with the obligor. The collateralized mortgage obligations and mortgage-backed securities in a continuous loss position for twelve months or longer had an unrealized loss of $676 thousand and $547 thousand, respectively at March 31, 2016. These securities were issued by U.S. Government agency and U.S. Government sponsored enterprises and have high credit ratings of “AA” grade or better. Interest on the trust preferred securities and the U.S. Government agency and U.S. Government sponsored enterprise investments have been paid as agreed, and management believes this will continue in the future and that the securities will be repaid in full as scheduled. The market value declines for these securities were primarily due to movements in interest rates and are not reflective of management’s expectations of the Company’s ability to fully recover these investments, which may be at maturity. For these reasons, no OTTI was recognized on the trust preferred securities and the U.S. Government agency and U.S. Government sponsored collateralized mortgage obligations and mortgage-backed securities that are in an unrealized loss position at March 31, 2016.

The Company considers the losses on the investments in unrealized loss positions at March 31, 2016 to be temporary based on: 1) the likelihood of recovery; 2) the information relative to the extent and duration of the decline in market value; and 3) the Company’s intention not to sell, and management’s determination that it is more likely than not that the Company will not be required to sell a security in an unrealized loss position before recovery of its amortized cost basis.

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6.	Loans Receivable and Allowance for Loan Losses

The following is a summary of loans receivable by major category:



	March 31, 2016			December 31, 2015
	(In thousands)
Loan portfolio composition
Real estate loans:
Residential	$	32,390		$	33,797
Commercial & industrial	4,957,751			4,912,655
Construction	142,376			123,030
Total real estate loans	5,132,517			5,069,482
Commercial business	1,032,078			980,153
Trade finance	86,342			99,163
Consumer and other	124,064			102,573
Total loans outstanding	6,375,001			6,251,371
Less: deferred loan fees	(3,066		)	(3,030		)
Loans receivable	6,371,935			6,248,341
Less: allowance for loan losses	(76,856		)	(76,408		)
Loans receivable, net of allowance for loan losses	$	6,295,079		$	6,171,933

The loan portfolio is made up of four segments: real estate loans, commercial business, trade finance and consumer and other. These segments are further segregated between loans accounted for under the amortized cost method (“Legacy Loans”) and acquired loans that were originally recorded at fair value with no carryover of the related pre-acquisition allowance for loan losses (“Acquired Loans”). Acquired Loans are further segregated between Acquired Credit Impaired Loans (loans with credit deterioration on the acquisition date and accounted for under ASC 310-30, or “ACILs”) and Acquired Performing Loans (loans that were pass graded on the acquisition date and the fair value adjustment is amortized over the contractual life under ASC 310-20, or “APLs”).

The following table presents changes in the accretable discount on the ACILs for the three months ended March 31, 2016 and 2015:



	Three Months Ended March 31,
	2016			2015
	(In thousands)
Balance at beginning of period	$	23,777		$	24,051
Accretion	(3,029		)	(1,555		)
Changes in expected cash flows	1,349			149
Balance at end of period	$	22,097		$	22,645

On the acquisition date, the amount by which the undiscounted expected cash flows exceed the estimated fair value of the ACILs is the “accretable yield.” The accretable yield is then measured at each financial reporting date and represents the difference between the remaining undiscounted expected cash flows and the current carrying value of the loans. The accretable yield will change from period to period due to the following: 1) estimates of the remaining life of acquired loans will affect the amount of future interest income; 2) indices for variable rates of interest on ACILs may change; and 3) estimates of the amount of the contractual principal and interest that will not be collected (nonaccretable difference) may change.

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The following tables detail the activity in the allowance for loan losses by portfolio segment for the three months ended March 31, 2016 and 2015:




	Legacy												Acquired											Total
	Real Estate			Commercial Business			Trade Finance			Consumer and Other			Real Estate			Commercial Business			Trade Finance		Consumer and Other			Total
	(In thousands)
Three Months Ended March 31, 2016
Balance, beginning of period	$	42,829		$	16,332		$	3,592		$	556		$	12,823		$	214		$	—	$	62		$	76,408
Provision (credit) for loan losses	(1,218		)	3,147			(1,507		)	276			(82		)	(112		)	—		(4		)	500
Loans charged off	(19		)	(621		)	—			(65		)	(116		)	—			—		—			(821		)
Recoveries of charge offs	523			190			—			1			1			52			—		2			769
Balance, end of period	$	42,115		$	19,048		$	2,085		$	768		$	12,626		$	154		$	—	$	60		$	76,856




	Legacy												Acquired											Total
	Real Estate			Commercial Business			Trade Finance			Consumer and Other			Real Estate			Commercial Business			Trade Finance		Consumer and Other			Total
	(In thousands)
Three Months Ended March 31, 2015
Balance, beginning of period	$	38,775		$	15,986		$	3,456		$	427		$	8,573		$	485		$	—	$	56		$	67,758
Provision (credit) for loan losses	(3,621		)	(22		)	(186		)	(1		)	5,310			23			—		(3		)	1,500
Loans charged off	(182		)	(451		)	(229		)	(13		)	(159		)	(87		)	—		(4		)	(1,125		)
Recoveries of charge offs	800			655			—			3			—			1			—		2			1,461
Balance, end of period	$	35,772		$	16,168		$	3,041		$	416		$	13,724		$	422		$	—	$	51		$	69,594

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The following tables disaggregate the allowance for loan losses and the loans outstanding by impairment methodology at March 31, 2016 and December 31, 2015:



	March 31, 2016
	Legacy								Acquired								Total
	Real Estate		Commercial Business		Trade Finance		Consumer and Other		Real Estate		Commercial Business		Trade Finance		Consumer and Other		Total
	(In thousands)
Allowance for loan losses:
Individually evaluated for impairment	$	1,760	$	6,513	$	1,307	$	—	$	208	$	96	$	—	$	—	$	9,884
Collectively evaluated for impairment	40,355		12,535		778		768		541		58		—		60		55,095
ACILs	—		—		—		—		11,877		—		—		—		11,877
Total	$	42,115	$	19,048	$	2,085	$	768	$	12,626	$	154	$	—	$	60	$	76,856

Loans outstanding:
Individually evaluated for impairment	$	65,354	$	46,534	$	8,081	$	786	$	17,952	$	1,262	$	—	$	455	$	140,424
Collectively evaluated for impairment	4,815,539		949,346		78,261		84,441		166,190		16,328		—		19,813		6,129,918
ACILs	—		—		—		—		67,482		18,608		—		18,569		104,659
Total	$	4,880,893	$	995,880	$	86,342	$	85,227	$	251,624	$	36,198	$	—	$	38,837	$	6,375,001



	December 31, 2015
	Legacy								Acquired								Total
	Real Estate		Commercial Business		Trade Finance		Consumer and Other		Real Estate		Commercial Business		Trade Finance		Consumer and Other		Total
	(In thousands)
Allowance for loan losses:
Individually evaluated for impairment	$	1,663	$	4,188	$	2,603	$	—	$	225	$	128	$	—	$	—	$	8,807
Collectively evaluated for impairment	41,166		12,144		989		556		616		86		—		62		55,619
ACILs	—		—		—		—		11,982		—		—		—		11,982
Total	$	42,829	$	16,332	$	3,592	$	556	$	12,823	$	214	$	—	$	62	$	76,408

Loans outstanding:
Individually evaluated for impairment	$	63,376	$	40,352	$	12,548	$	812	$	19,109	$	1,235	$	—	$	658	$	138,090
Collectively evaluated for impairment	4,717,300		896,041		86,615		60,570		200,753		22,660		—		20,533		6,004,472
ACILs	—		—		—		—		68,944		19,865		—		20,000		108,809
Total	$	4,780,676	$	936,393	$	99,163	$	61,382	$	288,806	$	43,760	$	—	$	41,191	$	6,251,371

As of March 31, 2016 and December 31, 2015, the liability for unfunded commitments was $1.4 million and $2.0 million, respectively. For the three months ended March 31, 2016 and 2015, the recognized credit for losses related to unfunded commitments was $570 thousand and $240 thousand, respectively.

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The recorded investment in individually impaired loans was as follows:



	March 31, 2016			December 31, 2015
	(In thousands)
With allocated allowance
Without charge off	$	79,747		$	77,922
With charge off	458			155
With no allocated allowance
Without charge off	57,138			57,585
With charge off	3,081			2,428
Allowance on impaired loans	(9,884		)	(8,807		)
Impaired loans, net of allowance	$	130,540		$	129,283

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The following tables detail impaired loans (Legacy and APLs that became impaired subsequent to being acquired) as of March 31, 2016 and December 31, 2015 and for the three months ended March 31, 2016 and 2015 and for the year ended December 31, 2015. Loans with no related allowance for loan losses are believed by management to have adequate collateral securing their carrying value.



	As of March 31, 2016						For the Three Months Ended March 31, 2016
Total Impaired Loans	Recorded Investment*		Unpaid Contractual Principal Balance		Related Allowance		Average Recorded Investment*		Interest Income Recognized during Impairment
	(In thousands)
With related allowance:
Real estate—residential	$	—	$	—	$	—	$	—	$	—
Real estate—commercial
Retail	1,553		1,686		195		1,712		—
Hotel & motel	4,526		4,526		258		4,611		57
Gas station & car wash	530		562		26		1,050		—
Mixed use	562		1,085		8		563		2
Industrial & warehouse	556		556		—		560		6
Other	24,321		24,562		1,481		24,462		275
Real estate—construction	—		—		—		—		—
Commercial business	39,956		40,326		6,609		35,742		265
Trade finance	8,081		8,083		1,307		10,314		94
Consumer and other	120		120		—		128		1
	$	80,205	$	81,506	$	9,884	$	79,142	$	700
With no related allowance:
Real estate—residential	$	—	$	—	$	—	$	—	$	—
Real estate—commercial
Retail	10,906		11,795		—		11,105		100
Hotel & motel	8,107		12,173		—		7,849		22
Gas station & car wash	5,576		8,423		—		4,665		34
Mixed use	2,346		2,589		—		2,364		12
Industrial & warehouse	10,808		12,222		—		9,888		85
Other	12,173		13,473		—		12,712		90
Real estate—construction	1,342		1,465		—		1,355		—
Commercial business	7,840		9,770		—		8,950		41
Trade finance	—		—		—		—		—
Consumer and other	1,121		1,176		—		1,228		7
	$	60,219	$	73,086	$	—	$	60,116	$	391
Total	$	140,424	$	154,592	$	9,884	$	139,258	$	1,091


*	Unpaid contractual principal balance less charge offs, interest applied to principal and purchase discounts.

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	For the Three Months Ended March 31, 2015
Total Impaired Loans	Average Recorded Investment*		Interest Income Recognized during Impairment
	(In thousands)
With related allowance:
Real estate—residential	$	—	$	—
Real estate—commercial
Retail	4,406		44
Hotel & motel	12,493		129
Gas station & car wash	1,359		—
Mixed use	481		—
Industrial & warehouse	4,516		76
Other	8,845		88
Real estate—construction	—		—
Commercial business	33,856		287
Trade finance	4,509		35
Consumer and other	7		—
	$	70,472	$	659
With no related allowance:
Real estate—residential	$	—	$	—
Real estate—commercial
Retail	10,792		87
Hotel & motel	5,922		—
Gas station & car wash	3,245		25
Mixed use	1,793		9
Industrial & warehouse	11,917		77
Other	8,620		38
Real estate—construction	1,500		—
Commercial business	7,958		79
Trade finance	1,638		—
Consumer and other	1,084		7
	$	54,469	$	322
Total	$	124,941	$	981


*	Unpaid contractual principal balance less charge offs, interest applied to principal and purchase discounts.

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	As of March 31, 2016						For the Three Months Ended March 31, 2016
Impaired APLs	Recorded Investment*		Unpaid Contractual Principal Balance		Related Allowance		Average Recorded Investment*		Interest Income Recognized during Impairment
	(In thousands)
With related allowance:
Real estate—residential	$	—	$	—	$	—	$	—	$	—
Real estate—commercial
Retail	1,168		1,263		184		1,169		—
Hotel & motel	—		—		—		—		—
Gas station & car wash	—		—		—		509		—
Mixed use	493		489		8		493		2
Industrial & warehouse	—		—		—		—		—
Other	303		303		16		305		4
Real estate—construction	—		—		—		—
Commercial business	586		653		96		576		3
Trade finance	—		—		—		—		—
Consumer and other	—		—		—		—		—
	$	2,550	$	2,708	$	304	$	3,052	$	9
With no related allowance:
Real estate—residential	$	—	$	—	$	—	$	—	$	—
Real estate—commercial
Retail	2,500		2,652		—		2,571		26
Hotel & motel	6,751		9,058		—		6,882		17
Gas station & car wash	1,595		1,846		—		1,392		25
Mixed use	272		282		—		273		3
Industrial & warehouse	1,095		1,281		—		1,111		2
Other	3,775		4,784		—		3,826		14
Real estate—construction	—		—		—		—		—
Commercial business	676		1,036		—		672		8
Trade finance	—		—		—		—		—
Consumer and other	455		501		—		557		2
	$	17,119	$	21,440	$	—	$	17,284	$	97
Total	$	19,669	$	24,148	$	304	$	20,336	$	106


*	Unpaid contractual principal balance less charge offs, interest applied to principal and purchase discounts.

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	For the Three Months Ended March 31, 2015
Impaired APLs	Average Recorded Investment*		Interest Income Recognized during Impairment
	(In thousands)
With related allowance:
Real estate—residential	$	—	$	—
Real estate—commercial
Retail	2,128		37
Hotel & motel	—		—
Gas station & car wash	1,237		—
Mixed use	352		—
Industrial & warehouse	180		5
Other	1,040		4
Real estate—construction	—		—
Commercial business	713		1
Trade finance	—		—
Consumer and other	1		—
	$	5,651	$	47
With no related allowance:
Real estate—residential	$	—	$	—
Real estate—commercial
Retail	2,370		6
Hotel & motel	5,555		—
Gas station & car wash	521		15
Mixed use	111		—
Industrial & warehouse	1,481		1
Other	4,490		10
Real estate—construction	—		—
Commercial business	1,021		3
Trade finance	—		—
Consumer and other	622		2
	$	16,171	$	37
Total	$	21,822	$	84


*	Unpaid contractual principal balance less charge offs, interest applied to principal and purchase discounts.

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	As of December 31, 2015						For the Year Ended December 31, 2015
Total Impaired Loans	Recorded Investment*		Unpaid Contractual Principal Balance		Related Allowance		Average Recorded Investment*		Interest Income Recognized during Impairment
	(In thousands)
With related allowance:
Real estate—residential	$	—	$	—	$	—	$	—	$	—
Real estate—commercial
Retail	1,871		1,984		230		3,388		—
Hotel & motel	4,697		4,707		158		10,512		230
Gas station & car wash	1,569		1,625		47		1,542		59
Mixed use	564		1,087		13		498		9
Industrial & warehouse	563		563		—		3,686		25
Other	24,603		24,851		1,440		12,585		1,110
Real estate—construction	—		—		—		—		—
Commercial business	31,527		31,832		4,316		31,790		998
Trade finance	12,548		12,548		2,603		6,209		527
Consumer and other	135		135		—		153		7
	$	78,077	$	79,332	$	8,807	$	70,363	$	2,965
With no related allowance:
Real estate—residential	$	—	$	—	$	—	$	—	$	—
Real estate—commercial
Retail	11,305		12,051		—		10,779		464
Hotel & motel	7,592		10,180		—		6,455		93
Gas station & car wash	3,754		6,435		—		3,685		107
Mixed use	2,382		2,604		—		2,375		51
Industrial & warehouse	8,967		10,608		—		10,186		254
Other	13,250		14,234		—		9,355		362
Real estate—construction	1,369		1,470		—		1,153		—
Commercial business	10,059		12,063		—		8,722		345
Trade finance	—		—		—		986		—
Consumer and other	1,335		1,431		—		1,177		26
	$	60,013	$	71,076	$	—	$	54,873	$	1,702
Total	$	138,090	$	150,408	$	8,807	$	125,236	$	4,667


*	Unpaid contractual principal balance less charge offs, interest applied to principal and purchase discounts.

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	As of December 31, 2015						For the Year Ended December 31, 2015
Impaired APLs	Recorded Investment*		Unpaid Contractual Principal Balance		Related Allowance		Average Recorded Investment*		Interest Income Recognized during Impairment
	(In thousands)
With related allowance:
Real estate—residential	$	—	$	—	$	—	$	—	$	—
Real estate—commercial
Retail	1,171		1,173		197		1,835		—
Hotel & motel	—		—		—		—		—
Gas station & car wash	1,017		1,062		6		1,246		59
Mixed use	494		491		5		380		9
Industrial & warehouse	—		—		—		72		—
Other	306		306		17		797		16
Real estate—construction	—		—		—		—		—
Commercial business	566		645		128		671		15
Trade finance	—		—		—		—		—
Consumer and other	—		—		—		—		—
	$	3,554	$	3,677	$	353	$	5,001	$	99
With no related allowance:
Real estate—residential	$	—	$	—	$	—	$	—	$	—
Real estate—commercial
Retail	2,642		2,756		—		2,301		105
Hotel & motel	7,014		9,303		—		5,889		73
Gas station & car wash	1,188		1,299		—		651		64
Mixed use	273		282		—		210		13
Industrial & warehouse	1,127		1,298		—		1,275		9
Other	3,876		4,615		—		4,162		53
Real estate—construction	—		—		—		—		—
Commercial business	668		1,039		—		892		55
Trade finance	—		—		—		—		—
Consumer and other	658		748		—		629		7
	$	17,446	$	21,340	$	—	$	16,009	$	379
Total	$	21,000	$	25,017	$	353	$	21,010	$	478


*	Unpaid contractual principal balance less charge offs, interest applied to principal and purchase discounts.

Generally, loans are placed on nonaccrual status if principal or interest payments become 90 days past due and/or management deems the collectibility of the principal and/or interest to be in question, as well as when required by regulatory requirements. Loans to a customer whose financial condition has deteriorated are considered for nonaccrual status whether or not the loan is 90 days or more past due. Generally, payments received on nonaccrual loans are recorded as principal reductions. Loans are returned to accrual status when all the principal and interest amounts contractually due are brought current and future payments are reasonably assured.

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The following tables present the aging of past due loans as of March 31, 2016 and December 31, 2015 by class of loans:



	As of March 31, 2016
	Past Due and Accruing
	30-59 Days Past Due		60-89 Days Past Due		90 or More Days Past Due		Total		Nonaccrual Loans ⁽²⁾		Total Delinquent Loans
	(In thousands)
Legacy Loans:
Real estate—residential	$	—	$	—	$	—	$	—	$	—	$	—
Real estate—commercial
Retail	69		427		—		496		2,816		3,312
Hotel & motel	175		—		—		175		953		1,128
Gas station & car wash	—		—		—		—		3,672		3,672
Mixed use	—		—		—		—		1,377		1,377
Industrial & warehouse	109		—		—		109		2,215		2,324
Other	—		844		—		844		2,866		3,710
Real estate—construction	—		—		—		—		1,342		1,342
Commercial business	1,340		101		—		1,441		14,371		15,812
Trade finance	—		—		—		—		1,937		1,937
Consumer and other	2,795		138		45		2,978		233		3,211
Subtotal	$	4,488	$	1,510	$	45	$	6,043	$	31,782	$	37,825
Acquired Loans: ⁽¹⁾
Real estate—residential	$	—	$	—	$	—	$	—	$	—	$	—
Real estate—commercial
Retail	1,189		—		—		1,189		1,983		3,172
Hotel & motel	—		—		—		—		4,930		4,930
Gas station & car wash	—		—		—		—		—		—
Mixed use	—		—		—		—		414		414
Industrial & warehouse	—		—		—		—		959		959
Other	—		—		—		—		2,596		2,596
Real estate—construction	—		—		—		—		—		—
Commercial business	267		47		—		314		534		848
Trade finance	—		—		—		—		—		—
Consumer and other	—		—		—		—		350		350
Subtotal	$	1,456	$	47	$	—	$	1,503	$	11,766	$	13,269
TOTAL	$	5,944	$	1,557	$	45	$	7,546	$	43,548	$	51,094


⁽¹⁾	The Acquired Loans exclude ACILs.


⁽²⁾	Nonaccrual loans exclude the guaranteed portion of delinquent SBA loans that are in liquidation totaling $15.4 million.

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	As of December 31, 2015
	Past Due and Accruing
	30-59 Days Past Due		60-89 Days Past Due		90 or More Days Past Due		Total		Nonaccrual Loans ⁽²⁾		Total Delinquent Loans
	(In Thousands)
Legacy Loans:
Real estate—residential	$	—	$	—	$	—	$	—	$	—	$	—
Real estate—commercial
Retail	574		—		—		574		2,383		2,957
Hotel & motel	854		—		—		854		318		1,172
Gas station & car wash	—		640		330		970		2,418		3,388
Mixed use	—		—		—		—		1,407		1,407
Industrial & warehouse	—		110		—		110		2,275		2,385
Other	—		—		—		—		2,930		2,930
Real estate—construction	—		—		—		—		1,369		1,369
Commercial business	905		770		—		1,675		13,393		15,068
Trade finance	—		—		—		—		1,731		1,731
Consumer and other	770		158		45		973		245		1,218
Subtotal	$	3,103	$	1,678	$	375	$	5,156	$	28,469	$	33,625
Acquired Loans: ⁽¹⁾
Real estate—residential	$	—	$	—	$	—	$	—	$	—	$	—
Real estate—commercial
Retail	2,572		—		—		2,572		2,113		4,685
Hotel & motel	—		—		—		—		5,072		5,072
Gas station & car wash	—		—		—		—		—		—
Mixed use	—		—		—		—		415		415
Industrial & warehouse	—		—		—		—		990		990
Other	—		—		—		—		2,684		2,684
Real estate—construction	—		—		—		—		—		—
Commercial business	310		39		—		349		476		825
Trade finance	—		—		—		—		—		—
Consumer and other	287		—		—		287		582		869
Subtotal	$	3,169	$	39	$	—	$	3,208	$	12,332	$	15,540
TOTAL	$	6,272	$	1,717	$	375	$	8,364	$	40,801	$	49,165


⁽¹⁾	The Acquired Loans exclude ACILs.


⁽²⁾	Nonaccrual loans exclude guaranteed portion of delinquent SBA loans that are in liquidation totaling $18.7 million.

Loans accounted for under ASC 310-30 are generally considered accruing and performing loans and the accretable discount is accreted to interest income over the estimated life of the loan when cash flows are reasonably estimable. Accordingly, ACILs that are contractually past due are still considered to be accruing and performing loans. The loans may be classified as nonaccrual if the timing and amount of future cash flows is not reasonably estimable.

The Company categorizes loans into risk categories based on relevant information about the ability of borrowers to service their debt, including, but not limited to, current financial information, historical payment experience, credit documentation, public information, and current economic trends. The Company analyzes loans individually by classifying the loans as to credit risk. This analysis includes all non-homogeneous loans. This analysis is performed at least on a quarterly basis. The definitions for risk ratings are as follows:


•	Pass: Loans that meet a preponderance or more of the Company’s underwriting criteria and evidence an acceptable level of risk.


•	Special Mention: Loans that have a potential weakness that deserves management’s close attention. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the loan or of the institution’s credit position at some future date.

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•	Substandard: Loans that are inadequately protected by the current net worth and paying capacity of the obligor or of the collateral pledged, if any. Loans so classified have a well-defined weakness or weaknesses that jeopardize the repayment of the debt. They are characterized by the distinct possibility that the institution will sustain some loss if the deficiencies are not corrected.


•	Doubtful/Loss: Loans that have all the weaknesses inherent in those classified as substandard, with the added characteristic that the weaknesses make collection or repayment in full, on the basis of currently existing facts, conditions, and values, highly questionable and improbable.

The following tables present the risk rating for Legacy Loans and Acquired Loans as of March 31, 2016 and December 31, 2015 by class of loans:



	As of March 31, 2016
	Pass		Special Mention		Substandard		Doubtful/Loss		Total
	(In thousands)
Legacy Loans:
Real estate—residential	$	31,147	$	462	$	—	$	—	$	31,609
Real estate—commercial
Retail	1,198,910		26,784		14,550		—		1,240,244
Hotel & motel	1,036,478		2,877		6,469		—		1,045,824
Gas station & car wash	629,787		6,154		3,997		—		639,938
Mixed use	337,416		1,182		2,562		—		341,160
Industrial & warehouse	460,309		10,020		13,830		—		484,159
Other	906,232		16,073		33,277		—		955,582
Real estate—construction	141,035		—		1,342		—		142,377
Commercial business	931,827		19,500		44,420		133		995,880
Trade finance	74,291		3,970		8,081		—		86,342
Consumer and other	84,438		3		786		—		85,227
Subtotal	$	5,831,870	$	87,025	$	129,314	$	133	$	6,048,342
Acquired Loans:
Real estate—residential	$	503	$	278	$	—	$	—	$	781
Real estate—commercial
Retail	73,951		2,019		13,507		—		89,477
Hotel & motel	12,780		4,339		13,581		—		30,700
Gas station & car wash	21,828		352		6,016		—		28,196
Mixed use	13,703		6,337		3,929		8		23,977
Industrial & warehouse	30,427		1,337		4,662		354		36,780
Other	31,802		362		9,549		—		41,713
Real estate—construction	—		—		—		—		—
Commercial business	21,370		897		13,813		118		36,198
Trade finance	—		—		—		—		—
Consumer and other	29,327		1,096		6,897		1,517		38,837
Subtotal	$	235,691	$	17,017	$	71,954	$	1,997	$	326,659
Total	$	6,067,561	$	104,042	$	201,268	$	2,130	$	6,375,001

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	As of December 31, 2015
	Pass		Special Mention		Substandard		Doubtful/Loss		Total
	(In thousands)
Legacy Loans:
Real estate—residential	$	32,543	$	465	$	—	$	—	$	33,008
Real estate—commercial
Retail	1,168,844		25,686		14,838		—		1,209,368
Hotel & motel	1,009,493		789		5,937		—		1,016,219
Gas station & car wash	610,749		6,192		3,758		—		620,699
Mixed use	326,902		1,191		2,610		—		330,703
Industrial & warehouse	461,938		10,099		11,966		—		484,003
Other	913,304		15,805		34,537		—		963,646
Real estate—construction	121,661		—		1,369		—		123,030
Commercial business	875,989		21,886		38,505		13		936,393
Trade finance	82,797		3,818		12,548		—		99,163
Consumer and other	60,549		14		812		7		61,382
Subtotal	$	5,664,769	$	85,945	$	126,880	$	20	$	5,877,614
Acquired Loans:
Real estate—residential	$	508	$	281	$	—	$	—	$	789
Real estate—commercial
Retail	91,076		2,364		14,926		—		108,366
Hotel & motel	21,306		4,339		13,835		—		39,480
Gas station & car wash	22,231		356		6,548		—		29,135
Mixed use	14,195		6,382		3,762		—		24,339
Industrial & warehouse	31,606		1,361		4,708		378		38,053
Other	38,311		366		9,967		—		48,644
Real estate—construction	—		—		—		—		—
Commercial business	27,413		1,149		14,835		363		43,760
Trade finance	—		—		—		—		—
Consumer and other	32,194		1,643		5,901		1,453		41,191
Subtotal	$	278,840	$	18,241	$	74,482	$	2,194	$	373,757
Total	$	5,943,609	$	104,186	$	201,362	$	2,214	$	6,251,371




	Three Months Ended March 31,
	2016		2015
Reclassification to held for sale	(In thousands)
Real estate - Commercial	$	—	$	384
Real estate - Construction	—		—
Commercial Business	—		66
Consumer	400		—
Total	$	400	$	450

The adequacy of the allowance for loan losses is determined by management based upon an evaluation and review of the credit quality of the loan portfolio, consideration of historical loan loss experience, relevant internal and external factors that affect the collection of a loan, and other pertinent factors.

Migration analysis is a formula methodology derived from the Bank’s actual historical net charge off experience for each loan class (type) pool and risk grade. The migration analysis (“Migration Analysis”) is centered on the Bank’s internal credit risk rating system. Management’s internal loan review and external contracted credit review examinations are used to determine and validate loan risk grades. This credit review system takes into consideration factors such as: borrower’s background and experience; historical and current financial condition; credit history and payment performance; economic

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conditions and their impact on various industries; type, fair value and volatility of the fair value of collateral; lien position; and the financial strength of any guarantors.

A general loan loss allowance is provided on loans not specifically identified as impaired (“non-impaired loans”). The Bank’s general loan loss allowance has two components: quantitative and qualitative risk factors. The quantitative risk factors are based on a migration analysis methodology described above. The loans are classified by class and risk grade and the historical loss migration is tracked for the various classes. Loss experience is quantified for a specified period and then weighted to place more significance on the most recent loss history. That loss experience is then applied to the stratified portfolio at each quarter end. For ACILs, a general loan loss allowance is provided to the extent that there has been credit deterioration since the date of acquisition.

Additionally, in order to systematically quantify the credit risk impact of other trends and changes within the loan portfolio, the Bank utilizes qualitative adjustments to the Migration Analysis within established parameters. The parameters for making adjustments are established under a Credit Risk Matrix that provides seven possible scenarios for each of the factors below. The matrix allows for up to three positive (Major, Moderate, and Minor), three negative (Major, Moderate, and Minor), and one neutral credit risk scenarios within each factor for each loan type pool. However, if information exists to warrant adjustment to the Migration Analysis, changes are made in accordance with the established parameters supported by narrative and/or statistical analysis. The Credit Risk Matrix and the nine possible scenarios enable the Bank to qualitatively adjust the Loss Migration Ratio by as much as 50 basis points in either direction (positive or negative) for each loan type pool. This matrix considers the following nine factors, which are patterned after the guidelines provided under the FFIEC Interagency Policy Statement on the Allowance for Loan and Lease Losses:


•	Changes in lending policies and procedures, including underwriting standards and collection, charge off, and recovery practices;


•	Changes in national and local economic and business conditions and developments, including the condition of various market segments;


•	Changes in the nature and volume of the loan portfolio;


•	Changes in the experience, ability and depth of lending management and staff;


•	Changes in the trends of the volume and severity of past due loans, Classified Loans, nonaccrual loans, troubled debt restructurings and other loan modifications;


•	Changes in the quality of our loan review system and the degree of oversight by the Directors;


•	Changes in the value of underlying collateral for collateral-dependent loans;


•	The existence and effect of any concentrations of credit and changes in the level of such concentrations; and


•	The effect of external factors, such as competition and legal and regulatory requirements, on the level of estimated losses in our loan portfolio.

The Company also establishes specific loss allowances for loans that have identified potential credit risk conditions or circumstances related to a specific individual credit. The specific allowance amounts are determined by a method prescribed by FASB ASC 310-10-35-22, Measurement of Impairment. The loans identified as impaired will be accounted for in accordance with one of the three acceptable valuation methods: 1) the present value of future cash flows discounted at the loan’s effective interest rate; 2) the loan’s observable market price; or 3) the fair value of the collateral, if the loan is collateral dependent. For the collateral dependent impaired loans, management obtains a new appraisal to determine the amount of impairment as of the date that the loan became impaired. The appraisals are based on an “as is” valuation. To ensure that appraised values remain current, management either obtains updated appraisals every twelve months from a qualified independent appraiser or an internal evaluation of the collateral is performed by qualified personnel. If the third party market data indicates that the value of the collateral property has declined since the most recent valuation date, management adjusts the value of the property downward to reflect current market conditions. If the fair value of the collateral is less than the recorded amount of the loan, management recognizes impairment by creating or adjusting an existing valuation allowance with a corresponding charge to the provision for loan losses. If an impaired loan is expected to be collected through liquidation of the underlying collateral, the loan is deemed to be collateral dependent and the amount of impairment is charged off against the allowance for loan losses.

The Company considers a loan to be impaired when it is probable that not all amounts due (principal and interest) will be collectible in accordance with the contractual terms of the loan agreement. Factors considered by management in determining impairment include payment status, collateral value and the probability of collecting scheduled principal and interest payments when due. Loans that experience insignificant payment delays and payment shortfalls generally are not classified as impaired. The significance of payment delays and payment shortfalls is determined on a case-by-case basis by taking into consideration all of the circumstances surrounding the loan and the borrower, including the length of the delay, the reasons for the delay, the borrower’s prior payment record and the amount of the shortfall in relation to the principal and interest owed.

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For commercial business loans, real estate loans and certain consumer loans, management bases the measurement of loan impairment on the present value of the expected future cash flows, discounted at the loan’s effective interest rate or on the fair value of the loan’s collateral if the loan is collateral dependent. Management evaluates most consumer loans for impairment on a collective basis because these loans generally have smaller balances and are homogeneous in the underwriting of terms and conditions and in the type of collateral.

For ACILs, the allowance for loan losses is based upon expected cash flows for these loans. To the extent that a deterioration in borrower credit quality results in a decrease in expected cash flows subsequent to the acquisition of the loans, an allowance for loan losses would be established based on an estimate of future credit losses over the remaining life of the loans.

The following table presents loans by portfolio segment and impairment method at March 31, 2016 and December 31, 2015:



	As of March 31, 2016
	Real Estate— Residential			Real Estate— Commercial			Real Estate— Construction			Commercial Business			Trade Finance			Consumer and Other			Total
	(In thousands)
Impaired loans (gross carrying value)	$	—		$	81,964		$	1,342		$	47,796		$	8,081		$	1,241		$	140,424
Specific allowance	$	—		$	1,968		$	—		$	6,609		$	1,307		$	—		$	9,884
Loss coverage ratio	N/A			2.4		%	0.0		%	13.8		%	16.2		%	0.0		%	7.0		%
Non-impaired loans	$	32,390		$	4,875,787		$	141,034		$	984,282		$	78,261		$	122,823		$	6,234,577
General allowance	$	221		$	51,498		$	1,054		$	12,593		$	778		$	828		$	66,972
Loss coverage ratio	0.7		%	1.1		%	0.7		%	1.3		%	1.0		%	0.7		%	1.1		%
Total loans	$	32,390		$	4,957,751		$	142,376		$	1,032,078		$	86,342		$	124,064		$	6,375,001
Total allowance for loan losses	$	221		$	53,466		$	1,054		$	19,202		$	2,085		$	828		$	76,856
Loss coverage ratio	0.7		%	1.1		%	0.7		%	1.9		%	2.4		%	0.7		%	1.2		%



	As of December 31, 2015
	Real Estate— Residential			Real Estate— Commercial			Real Estate— Construction			Commercial Business			Trade Finance			Consumer and Other			Total
	(In thousands)
Impaired loans (gross carrying value)	$	—		$	81,117		$	1,369		$	41,586		$	12,548		$	1,470		$	138,090
Specific allowance	$	—		$	1,888		$	—		$	4,316		$	2,603		$	—		$	8,807
Loss coverage ratio	N/A			2.3		%	0.0		%	10.4		%	20.7		%	0.0		%	6.4		%
Non-impaired loans	$	33,797		$	4,831,538		$	121,661		$	938,567		$	86,615		$	101,103		$	6,113,281
General allowance	$	230		$	52,617		$	917		$	12,231		$	989		$	617		$	67,601
Loss coverage ratio	0.7		%	1.1		%	0.8		%	1.3		%	1.1		%	0.6		%	1.1		%
Total loans	$	33,797		$	4,912,655		$	123,030		$	980,153		$	99,163		$	102,573		$	6,251,371
Total allowance for loan losses	$	230		$	54,505		$	917		$	16,547		$	3,592		$	617		$	76,408
Loss coverage ratio	0.7		%	1.1		%	0.7		%	1.7		%	3.6		%	0.6		%	1.2		%

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Under certain circumstances, the Company provides borrowers relief through loan modifications. These modifications are either temporary in nature (“temporary modifications”) or are more substantive. At March 31, 2016, total modified loans were $77.8 million, compared to $72.2 million at December 31, 2015. The temporary modifications generally consist of interest only payments for a three to six month period, whereby principal payments are deferred. At the end of the modification period, the remaining principal balance is re-amortized based on the original maturity date. Loans subject to temporary modifications are generally downgraded to Special Mention or Substandard. At the end of the modification period, the loan either 1) returns to the original contractual terms; 2) is further modified and accounted for as a troubled debt restructuring in accordance with ASC 310-10-35; or 3) is disposed of through foreclosure or liquidation.

Troubled Debt Restructurings (“TDRs”) of loans are defined by ASC 310-40, “Troubled Debt Restructurings by Creditors” and ASC 470-60, “Troubled Debt Restructurings by Debtors” and evaluated for impairment in accordance with ASC 310-10-35. The concessions may be granted in various forms, including reduction in the stated interest rate, reduction in the amount of principal amortization, forgiveness of a portion of a loan balance or accrued interest, or extension of the maturity date. In order to determine whether a borrower is experiencing financial difficulty, an evaluation is performed on the probability that the borrower will be in payment default on any of its debt in the foreseeable future without the modification. This evaluation is performed under the Bank’s internal underwriting policy.

A summary of TDRs on accrual and nonaccrual status by type of concession as of March 31, 2016 and December 31, 2015 is presented below:



	As of March 31, 2016
	TDRs on Accrual								TDRs on Nonaccrual								Total
	Real Estate— Commercial		Commercial Business		Other		Total		Real Estate— Commercial		Commercial Business		Other		Total		Total
	(In thousands)
Payment concession	$	11,515	$	355	$	—	$	11,870	$	3,773	$	2,607	$	—	$	6,380	$	18,250
Maturity / amortization concession	3,500		23,529		6,766		33,795		2,018		7,501		2,272		11,791		45,586
Rate concession	6,694		401		—		7,095		6,250		453		163		6,866		13,961
Principal forgiveness	—		—		—		—		—		—		—		—		—
	$	21,709	$	24,285	$	6,766	$	52,760	$	12,041	$	10,561	$	2,435	$	25,037	$	77,797



	As of December 31, 2015
	TDRs on Accrual								TDRs on Nonaccrual								Total
	Real Estate— Commercial		Commercial Business		Other		Total		Real Estate— Commercial		Commercial Business		Other		Total		Total
	(In thousands)
Payment concession	$	11,604	$	375	$	—	$	11,979	$	3,891	$	2,410	$	—	$	6,301	$	18,280
Maturity / amortization concession	4,009		18,192		5,311		27,512		1,583		6,818		2,297		10,698		38,210
Rate concession	7,215		1,278		—		8,493		6,445		641		166		7,252		15,745
Principal forgiveness	—		—		—		—		—		—		—		—		—
	$	22,828	$	19,845	$	5,311	$	47,984	$	11,919	$	9,869	$	2,463	$	24,251	$	72,235

TDRs on accrual status are comprised of loans that were accruing at the time of restructuring and for which the Bank anticipates full repayment of both principal and interest under the restructured terms. TDRs that are on nonaccrual status can be returned to accrual status after a period of sustained performance, generally determined to be six months of timely payments as modified. Sustained performance includes the periods prior to the modification if the prior performance met or exceeded the modified terms. TDRs on accrual status at March 31, 2016 were comprised of 22 commercial real estate loans totaling $21.7 million, 26 commercial business loans totaling $24.3 million, and 6 other loans totaling $6.8 million. TDRs on accrual status at December 31, 2015 were comprised of 24 commercial real estate loans totaling $22.8 million, 28 commercial business loans totaling $19.8 million and 4 consumer and other loans totaling $5.3 million. The Company expects that the TDRs on accrual status as of March 31, 2016, which were all performing in accordance with their restructured terms, to continue to comply with the restructured terms because of the reduced principal or interest payments on these loans. TDRs that were restructured at market interest rates and had sustained performance as agreed under the modified loan terms may be reclassified as non-TDRs after each year end but are reserved for under ASC 310-10.

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The Company has allocated $7.9 million and $5.7 million of specific reserves to TDRs as of March 31, 2016 and December 31, 2015, respectively.

The following table presents loans by class modified as TDRs that occurred during the three months ended March 31, 2016:



	Three Months Ended March 31, 2016
	Number of Loans	Pre- Modification		Post- Modification
	(Dollars in thousands)
Legacy Loans:
Real estate—commercial
Retail	—	$	—	$	—
Hotel & motel	—	—		—
Gas station & car wash	—	—		—
Mixed use	—	—		—
Industrial & warehouse	—	—		—
Other	—	—		—
Real estate - construction	—	—		—
Commercial business	6	11,088		7,039
Trade finance	1	2,199		1,586
Consumer and other	—	—		—
Subtotal	7	$	13,287	$	8,625
Acquired Loans:
Real estate—commercial
Retail	—	$	—	$	—
Hotel & motel	—	—		—
Gas station & car wash	—	—		—
Mixed use	—	—		—
Industrial & warehouse	—	—		—
Other	—	—		—
Real estate—construction	—	—		—
Commercial business	—	—		—
Trade finance	—	—		—
Consumer and other	1	30		29
Subtotal	1	$	30	$	29
Total	8	$	13,317	$	8,654

The specific reserves for the TDRs that occurred during the three months ended March 31, 2016 totaled $2.1 million and there were $0 in charge offs for the three months ended March 31, 2016, respectively.

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The following table presents loans by class for TDRs that have been modified within the previous twelve months and have subsequently had a payment default during the three months ended March 31, 2016:



	Three Months Ended March 31, 2016
	Number of Loans	Balance
	(Dollars In thousands)
Legacy Loans:
Real estate—commercial
Retail	—	$	—
Gas station & car wash	2	729
Industrial & warehouse	—	—
Other	—	—
Commercial business	6	2,272
Subtotal	8	$	3,001
Acquired Loans:
Real estate—commercial
Retail	—	$	—
Gas station & car wash	—	—
Hotel & motel	—	—
Mixed Use	1	62
Industrial & warehouse	—	—
Other	—	—
Commercial business	—	—
Subtotal	1	$	62
	9	$	3,063

A loan is considered to be in payment default once it is 30 days contractually past due under the modified terms. As of March 31, 2016, the specific reserves totaled $144 thousand for the TDRs that had payment defaults during the three months ended March 31, 2016. The total charge offs for the TDRs that had payment defaults during the three months ended March 31, 2016 were $30 thousand.

There were eight Legacy Loans that subsequently defaulted during the three months ended March 31, 2016 that were modified as follows: four Commercial Business loans totaling $2.0 million were modified through payment concessions, two Commercial Business loans totaling $249 thousand were modified through maturity concessions, and two Real Estate Commercial loans totaling $729 thousand were modified through maturity concessions.

There was one Acquired Loan totaling $62 thousand that defaulted during the three months ended March 31, 2016 that was modified through payment concession.

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Covered Assets

On April 16, 2010, the Department of Financial Institutions closed Innovative Bank, California, and appointed the FDIC as its receiver. On the same date, the Bank assumed the banking operations of Innovative Bank from the FDIC under a purchase and assumption agreement and two related loss sharing agreements with the FDIC. These agreements provide for the sharing of losses and recoveries on the covered assets. The loss sharing provisions of the agreements expired on June 30, 2015, however, the Company will continue to reimburse the FDIC for recoveries on its covered assets until June 30, 2018.

Covered nonperforming assets totaled $2.0 million and $1.3 million at March 31, 2016 and December 31, 2015, respectively. These covered nonperforming assets are subject to the loss sharing agreements with the FDIC. The covered nonperforming assets at March 31, 2016 and December 31, 2015 were as follows:



	March 31, 2016		December 31, 2015
	(In thousands)
Covered loans on nonaccrual status	$	1,102	$	1,118
Covered OREO	915		220
Total covered nonperforming assets	$	2,017	$	1,338

Acquired covered loans	$	21,769	$	22,989

Related Party Loans

In the ordinary course of business, the Company enters into loan transactions with certain of its directors or associates of such directors (“Related Parties”). The loans to Related Parties are on substantially the same terms and conditions, including interest rates and collateral, as those prevailing at the same time for comparable transactions with unrelated parties. In management’s opinion, these transactions did not involve more than normal credit risk or present other unfavorable features. All loans to Related Parties were current as of March 31, 2016 and December 31, 2015, and the outstanding principal balance as of March 31, 2016 and December 31, 2015 was $2.9 million and $3.8 million, respectively.

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7.	Borrowings

The Company maintains a secured credit facility with the FHLB against which the Bank may take advances. The borrowing capacity is limited to the lower of 25% of the Bank’s total assets or the Bank’s collateral capacity, which was $2.39 billion at March 31, 2016 and $2.36 billion at December 31, 2015. The terms of this credit facility require the Company to pledge eligible collateral with the FHLB equal to at least 100% of outstanding advances.

At March 31, 2016 and December 31, 2015, real estate secured loans with a carrying amount of approximately $3.17 billion and $3.13 billion, respectively, were pledged as collateral for borrowings from the FHLB. At March 31, 2016 and December 31, 2015, other than FHLB stock, no securities are pledged as collateral for borrowings from the FHLB.

At March 31, 2016 and December 31, 2015, FHLB advances were $530.5 million and $530.6 million, respectively, had a weighted average interest rate of 1.15% and 1.15%, respectively, and had various maturities through June 2020. At March 31, 2016 and December 31, 2015, $20.5 million and $20.6 million, respectively, of the advances were putable advances with various putable dates and strike prices. The stated rate of FHLB advances as of March 31, 2016 ranged between 0.44% and 2.02%. At March 31, 2016, the Company had a remaining borrowing capacity of $1.86 billion.

At March 31, 2016, the contractual maturities for FHLB advances were as follows:



	Contractual Maturities		Maturity/ Put Date
	(In thousands)
Due within one year	$	175,000	$	195,495
Due after one year through five years	355,495		335,000
	$	530,495	$	530,495

In addition, as a member of the FRB system, the Bank may also borrow from the FRB of San Francisco. The maximum amount that the Bank may borrow from the FRB’s discount window is up to 95% of the outstanding principal balance of the qualifying loans and the fair value of the securities that are pledged. At March 31, 2016, the outstanding principal balance of the qualifying loans was $742.9 million, and the collateral value of investment securities was $984 thousand. There were no borrowings outstanding against this line as of March 31, 2016 and December 31, 2015.


8.	Subordinated Debentures

At March 31, 2016, the Company had five wholly owned subsidiary grantor trusts that had issued $46 million of pooled trust preferred securities. Trust preferred securities accrue and pay distributions periodically at specified annual rates as provided in the indentures. The trusts used the net proceeds from the offering to purchase a like amount of subordinated debentures (the “Debentures”) of BBCN Bancorp. The Debentures are the sole assets of the trusts. The Company’s obligations under the subordinated debentures and related documents, taken together, constitute a full and unconditional guarantee by the Company of the obligations of the trusts. The trust preferred securities are mandatorily redeemable upon the maturity of the Debentures, or upon earlier redemption as provided in the indentures. The Company has the right to redeem the Debentures in whole (but not in part) on or after specific dates, at a redemption price specified in the indentures plus any accrued but unpaid interest to the redemption date. The Company also has a right to defer consecutive payments of interest on the debentures for up to five years.

The following table is a summary of trust preferred securities and Debentures at March 31, 2016:



Issuance Trust	Issuance Date	Trust Preferred Security Amount		Carrying Value of Subordinated Debentures		Rate Type	Current Rate		Maturity Date
		(Dollars in thousands)
Nara Capital Trust III	6/5/2003	$	5,000	$	5,155	Variable	3.78	%	6/15/2033
Nara Statutory Trust IV	12/22/2003	5,000		5,155		Variable	3.47	%	1/7/2034
Nara Statutory Trust V	12/17/2003	10,000		10,310		Variable	3.59	%	12/17/2033
Nara Statutory Trust VI	3/22/2007	8,000		8,248		Variable	2.28	%	6/15/2037
Center Capital Trust I	12/30/2003	18,000		13,503		Variable	3.47	%	1/7/2034
TOTAL ISSUANCE		$	46,000	$	42,371

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The Company’s investment in the common trust securities of the issuer trusts of $1.5 million and $1.5 million at March 31, 2016 and December 31, 2015, respectively, is included in other assets. Although the subordinated debt issued by the trusts are not included as a component of stockholders’ equity in the consolidated balance sheets, the debt is treated as capital for regulatory purposes. The trust preferred security debt issuances are includable in Tier I capital up to a maximum of 25% of capital on an aggregate basis. Any amount that exceeds 25% qualifies as Tier 2 capital.

9. Derivative Financial Instruments

The Company offers a loan hedging program to certain loan customers. Through this program, the Company originates a variable rate loan with the customer. The Company and the customer will then enter into a fixed interest rate swap. Lastly, an identical offsetting swap is entered into by the Company with a correspondent bank. These “back-to-back” swap arrangements are intended to offset each other and allow the Company to book a variable rate loan, while providing the customer with a contract for fixed interest payments. In these arrangements, the Company’s net cash flow is equal to the interest income received from the variable rate loan originated with the customer. These customer swaps are not designated as hedging instruments and are recorded at fair value in other assets and other liabilities. The changes in fair value are recognized in the income statement in other income and fees.

At March 31, 2016, the following interest rate swaps related to our loan hedging program were outstanding:



	As of March 31, 2016
Interest rate swaps on loans with loan customers
Notional amount (in thousands)	$	120,583
Weighted average remaining term	7.5 years
Received fixed rate (weighted average)	4.45		%
Pay variable rate (weighted average)	2.81		%
Estimated fair value (in thousands)	$	6,260
Back to back interest rate swaps with correspondent banks
Notional amount (in thousands)	$	120,583
Weighted average remaining term	7.5 years
Received variable rate (weighted average)	2.81		%
Pay fixed rate (weighted average)	4.45		%
Estimated fair value (in thousands)	$	(6,260	)

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10.	Intangible Assets

The carrying amount of the Company’s goodwill as of March 31, 2016 and December 31, 2015 was $105.4 million. There was no impairment of goodwill during the three months ended March 31, 2016 and 2015.

Core deposit intangible assets are amortized over their estimated lives, which range from seven to ten years. Amortization expense related to core deposit intangible assets totaled $212 thousand and $267 thousand for the three months ended March 31, 2016 and 2015, respectively. The following table provides information regarding the core deposit intangibles at March 31, 2016:



		As of March 31, 2016
	Amortization period	Gross Carrying Amount		Accumulated Amortization
		(In thousands)
Core deposit—Center Financial Corporation acquisition	7 years	$	4,100	$	(3,365	)
Core deposit—PIB acquisition	7 years	603		(401		)
Core deposit—Foster acquisition	10 years	2,763		(1,093		)
Total		$	7,466	$	(4,859	)

Servicing assets are recognized when SBA loans are sold with servicing retained with the income statement effect recorded in net gains on sales of SBA loans. Servicing assets are initially recorded at fair value based on the present value of the contractually specified servicing fee, net of servicing costs, over the estimated life of the loan, using a discount rate based on the related note rate. The Company’s servicing costs approximates the industry average servicing costs of 40 basis points. All classes of servicing assets are subsequently measured using the amortization method which requires servicing rights to be amortized into noninterest income in proportion to, and over the period of, the estimated future net servicing income of the underlying loans.

Management periodically evaluates servicing assets for impairment based upon the fair value of the rights as compared to the carrying amount. Impairment is determined by stratifying rights into groupings based on loan type. Impairment is recognized through a valuation allowance for an individual grouping, to the extent that fair value is less than the carrying amount.

The changes in servicing assets for the three months ended March 31, 2016 were as follows:



	Three Months Ended March 31,
	2016			2015
	(In thousands)
Balance at beginning of period	$	12,000		$	10,341
Additions through originations of servicing assets	777			1,045
Amortization	(921		)	(857		)
Balance at end of period	$	11,856		$	10,529

The Company utilizes the discounted cash flow method to calculate the initial excess servicing assets. The inputs used in determining the fair value of the servicing assets at March 31, 2016 and December 31, 2015 are presented below.



	March 31, 2016	December 31, 2015
	Range	Range
Weighted-average discount rate	5.57% ~ 6.12%	5.59% ~ 6.01%
Constant prepayment rate	7.20% ~ 11.90%	7.30% ~11.90%

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11.	Income Taxes

The Company and its subsidiaries are subject to U.S. federal income tax, as well as state income taxes. The Company had total unrecognized tax benefits of $1.8 million and $1.8 million at March 31, 2016 and December 31, 2015, respectively, that relate primarily to uncertainties in California enterprise zone loan interest deductions.

Management believes it is reasonably possible that the unrecognized tax benefits may decrease by approximately $329 thousand in the next twelve months.

The statute of limitations for the assessment of income taxes related to the consolidated Federal income tax returns is closed for all tax years up to and including 2011. The expiration of the statute of limitations for the assessment of income and franchise taxes related to the various state income and franchise tax returns varies by state. The Company is currently under examination by the California Franchise Tax Board (FTB) for the 2009, 2010, 2012, and 2013 tax years. While the outcome of the examinations is unknown, the Company expects no material adjustments. The Company recognizes interest and penalties related to income tax matters in income tax expense. The Company recorded approximately $169 thousand and $154 thousand for accrued interest and penalties at March 31, 2016 and December 31, 2015, respectively.

Income tax expense is the total of the current year income tax due or refundable and the change in deferred tax assets and liabilities. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carry forwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.

Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion, or all, of the deferred tax asset will not be realized. In assessing the realization of deferred tax assets, management evaluates both positive and negative evidence, including the existence of any cumulative losses in the current year and the prior two years, the amount of taxes paid in available carry-back years, the forecasts of future income, applicable tax planning strategies, and assessments of current and future economic and business conditions. This analysis is updated quarterly and adjusted as necessary. Based on the analysis, the Company has determined that a valuation allowance for deferred tax assets was not required as of March 31, 2016.

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12.	Fair Value Measurements

Accounting guidance establishes a fair value hierarchy which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The standard describes three levels of inputs that may be used to measure fair value:


Level 1:	Quoted prices (unadjusted) for identical assets or liabilities in active markets that the entity has the ability to access as of the measurement date.


Level 2:	Significant other observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data.


Level 3:	Significant unobservable inputs that reflect estimates of assumptions that market participants would use in pricing the asset or liability.

Securities Available for Sale

The fair values of securities available for sale are determined by obtaining quoted prices on nationally recognized securities exchanges (Level 1 inputs) or matrix pricing, which is a technique widely used in the industry to value debt securities without relying exclusively on quoted prices for the specific securities but rather by relying on the securities’ relationship to other benchmark quoted securities (Level 2 inputs).

The fair values of the Company’s Level 3 securities available for sale were measured using an income approach valuation technique. The primary inputs and assumptions used in the fair value measurement were derived from the securities’ underlying collateral, which included discount rates, prepayment speeds, payment delays, and an assessment of the risk of default of the underlying collateral, among other factors. Significant increases or decreases in any of the inputs or assumptions would result in a significant increase or decrease in the fair value measurement.

Impaired Loans

The fair values of impaired loans are generally measured for impairment using the practical expedients permitted by FASB ASC 310-10-35 including impaired loans measured at an observable market price (if available), or at the fair value of the loan’s collateral (if the loan is collateral dependent). Fair value of the loan’s collateral, when the loan is dependent on collateral, is determined by appraisals or independent valuation, less costs to sell of 8.5%. For commercial and industrial and asset backed loans, independent valuations may be comprised of a 20-60% discount for accounts receivable and a 50-70% discount for inventory. These result in a Level 3 classification.

OREO

OREO is fair valued at the time the loan is foreclosed upon and the asset is transferred to OREO. The value is based primarily on third party appraisals, less costs to sell of 8.5% and result in a Level 3 classification of the inputs for determining fair value. OREO is reviewed and evaluated on at least an annual basis for additional impairment and adjusted to lower of cost or market accordingly, based on the same factors identified above.

Loans held for sale

Loans held for sale are carried at the lower of cost or fair value, as determined by outstanding commitments from investors, or based on recent comparable sales (Level 2 inputs), if available, and if not available, are based on discounted cash flows using current market rates applied to the estimated life and credit risk (Level 3 inputs) or may be assessed based upon the fair value of the collateral, which is obtained from recent real estate appraisals (Level 3 inputs). These appraisals may utilize a single valuation approach or a combination of approaches including the income approach. Adjustments are routinely made in the appraisal process by the appraisers to adjust for differences between the comparable sales and income data available. Such adjustments are typically significant and result in Level 3 classification of the inputs for determining fair value.

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Assets and liabilities measured at fair value on a recurring basis are summarized below:



			Fair Value Measurements at the End of the Reporting Period Using
	March 31, 2016		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
	(In thousands)
Assets:
Securities available for sale:
GSE collateralized mortgage obligations	$	498,026	$	—	$	498,026	$	—
GSE mortgage-backed securities	526,910		—		526,910		—
Trust preferred securities	3,394		—		3,394		—
Municipal bonds	46,113		—		44,904		1,209
Mutual funds	13,454		13,454		—		—
Interest rate swaps	6,260		—		6,260		—

Liabilities:
Interest rate swaps	6,260		—		6,260		—



			Fair Value Measurements at the End of the Reporting Period Using
	December 31, 2015		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
	(In thousands)
Assets:
Securities available for sale:
GSE collateralized mortgage obligations	$	449,980	$	—	$	449,980	$	—
GSE mortgage-backed securities	498,047		—		498,047		—
Trust preferred securities	3,749		—		3,749		—
Municipal bonds	45,511		—		44,345		1,166
Mutual funds	13,269		13,269		—		—
Interest rate swaps	2,680		—		2,680		—

Liabilities:
Interest rate swaps	2,680		—		2,680		—

There were no transfers between Level 1, 2 and 3 during the three months ended March 31, 2016 and 2015. There were no gains or losses recognized in earnings during the three months ended March 31, 2016 and 2015.

The table below presents a reconciliation and income statement classification of gains and losses for all assets measured at fair value on a recurring basis using significant unobservable inputs (Level 3) for the three months ended March 31, 2016:

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	Three Months Ended March 31,
	2016		2015
	(In thousands)
Beginning Balance, January 1	$	1,166	$	1,178
Purchases, issuances and settlements	—		—
Amortization	—		—
Total gains included in other comprehensive income	43		17
Ending Balance, March 31	$	1,209	$	1,195

Assets measured at fair value on a non-recurring basis are summarized below:



			Fair Value Measurements at the End of the Reporting Period Using
	March 31, 2016		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
	(In thousands)
Assets:
Impaired loans at fair value:
Real estate loans	$	44,616	$	—	$	—	$	44,616
Commercial business	6,026		—		—		6,026
Trade finance	—		—		—		—
Consumer	264		—		—		264
Loans held for sale, net	400		—		400		—
OREO	5,514		—		—		5,514



			Fair Value Measurements at the End of the Reporting Period Using
	December 31, 2015		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
	(In thousands)
Assets:
Impaired loans at fair value:
Real estate loans	$	18,251	$	—	$	—	$	18,251
Commercial business	9,366		—		—		9,366
Trade Finance	15,540		—		—		15,540
Consumer	391		—		—		391
Loans held for sale, net	348		—		348		—
OREO	18,308		—		—		18,308

For assets measured at fair value on a non-recurring basis, the total net gains (losses), which include charge offs, recoveries, specific reserves, and gains and losses on sales recognized are summarized below:

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	For the Three Months Ended March 31,
	2016			2015
	(In thousands)
Assets:
Impaired loans at fair value:
Real estate loans	$	309		$	534
Commercial business	(2,672		)	1,274
Trade Finance	1,296			(310		)
Consumer	(62		)	(12		)
Loans held for sale, net	15			182
OREO	(577		)	(425		)

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Fair Value of Financial Instruments

Carrying amounts and estimated fair values of financial instruments, not previously presented, at March 31, 2016 and December 31, 2015 were as follows:



	March 31, 2016
	Carrying Amount		Estimated Fair Value		Fair Value Measurement Using
	(In thousands)
Financial Assets:
Cash and cash equivalents	$	236,101	$	236,101	Level 1
Other investments	49,365		49,461		Level 3
Loans held for sale	13,843		14,535		Level 2
Loans receivable—net	6,295,079		6,713,741		Level 3
Customers’ liabilities on acceptances	2,769		2,769		Level 2
Financial Liabilities:
Noninterest bearing deposits	$	1,695,040	$	1,695,040	Level 2
Saving and other interest bearing demand deposits	2,133,340		2,133,340		Level 2
Time deposits	2,639,031		2,643,155		Level 2
FHLB advances	530,495		535,782		Level 2
Subordinated debentures	42,371		44,138		Level 2
Bank’s liabilities on acceptances outstanding	2,769		2,769		Level 2
	December 31, 2015
	Carrying Amount		Estimated Fair Value		Fair Value Measurement Using
	(In thousands)
Financial Assets:
Cash and cash equivalents	$	298,389	$	298,389	Level 1
Other investments	47,895		47,919		Level 3
Loans held for sale	8,273		8,669		Level 2
Loans receivable—net	6,171,933		6,559,838		Level 3
Customers’ liabilities on acceptances	1,463		1,463		Level 2
Financial Liabilities:
Noninterest bearing deposits	$	1,694,427	$	1,694,427	Level 2
Saving and other interest bearing demand deposits	2,170,748		2,170,748		Level 2
Time deposits	2,475,801		2,478,858		Level 2
FHLB advances	530,591		532,137		Level 2
Subordinated debentures	42,327		44,084		Level 2
Bank’s liabilities on acceptances outstanding	1,463		1,463		Level 2

The methods and assumptions used to estimate fair value are described as follows:

The carrying amount is the estimated fair value for cash and cash equivalents, savings and other interest bearing demand deposits, customer’s and Bank’s liabilities on acceptances, noninterest bearing deposits, short-term debt, secured borrowings and variable rate loans or deposits that reprice frequently and fully. For fixed rate loans or deposits and for variable rate loans or deposits with infrequent repricing or repricing limits, fair value is based on discounted cash flows using current market rates applied to the estimated life and credit risk. The allowance for loan losses is considered to be a reasonable estimate of discount for credit quality concerns. Fair value of SBA loans held for sale is based on market quotes. For fair value of non-SBA loans held for sale, see the measurement method discussed previously. Fair value of time deposits and debt is based on current rates for similar financing. It was not practicable to determine the fair value of FRB stock or FHLB stock due to restrictions placed on their transferability. The fair value of commitments to fund loans represents fees currently charged to enter into similar

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agreements with similar remaining maturities and is not presented herein. The fair value of these financial instruments is not material to the consolidated financial statements.


13.	Stockholders’ Equity

In June 2012, the Company redeemed all of the Fixed Rate Cumulative Perpetual Preferred Stock issued under the U.S. Treasury Department’s TARP Capital Purchase Program.

The Company assumed certain warrants (related to the TARP Capital Purchase Plan) to purchase shares of the Company’s common stock. On May 20, 2015, the U.S. Treasury Department completed an auction to sell certain of its warrant positions, and the Company submitted the winning bid to repurchase an outstanding warrant to purchase 350,767 shares of the Company’s common stock. The Company repurchased this warrant for $1.2 million. As of March 31, 2016, the U.S. Treasury Department held one remaining warrant for the purchase of 19,420 shares of the Company’s common stock.

The Company’s Board of Directors declared quarterly dividends of $0.11 per common share for the first quarter of 2016 and $0.10 per common share for the first quarter of 2015.

The following table presents the changes to accumulated other comprehensive income at March 31, 2016 and March 31, 2015:



	March 31, 2016		March 31, 2015
	(In thousands)
Balance at beginning of period	(1,832	)	1,705
Unrealized gains on securities available for sale and interest only strips	15,592		5,255
Reclassification adjustments for gains realized in income	—		(424	)
Tax expense	6,605		2,048
Total other comprehensive income	8,987		2,783
Balance at end of period	7,155		4,488

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14.	Regulatory Matters

The Company and the Bank are subject to various regulatory capital requirements administered by the federal and state banking agencies. Failure to meet minimum capital requirements can initiate certain mandatory and possibly additional discretionary actions by regulators that, if undertaken, could have a direct material and adverse effect on the Company’s and the Bank’s financial statements, such as restrictions on growth or the payment of dividends or other capital distributions or management fees. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, the Company and the Bank must meet specific capital guidelines that involve quantitative measures of their assets, liabilities and certain off-balance-sheet items as calculated under regulatory accounting practices. The capital amounts and classification are also subject to qualitative judgments by the regulators about components, risk weightings and other factors. Prompt corrective action provisions are not applicable to bank holding companies.

In July, 2013, the federal bank regulatory agencies adopted final regulations, which revised their risk-based and leverage capital requirements for banking organizations to meet requirements of Dodd-Frank and to implement Basel III international agreements reached by the Basel Committee. The final rules began for the Company and the Bank on January 1, 2015 and are subject to a phase-in period through January 1, 2019. The final rules that had an impact on the Company and the Bank include:


•	An increase in the minimum Tier 1 capital ratio from 4.00% to 6.00% of risk-weighted assets;


•	A new category and a required 4.50% of risk-weighted assets ratio is established for “common equity Tier 1” as a subset of Tier 1 capital limited to common equity;


•	A minimum non-risk-based leverage ratio is set at 4.00%, eliminating a 3.00% exception for higher rated banks;


•	Changes in the permitted composition of Tier 1 capital to exclude trust preferred securities, mortgage servicing rights and certain deferred tax assets and include unrealized gains and losses on available for sale debt and equity securities;


•	The risk-weights of certain assets for purposes of calculating the risk-based capital ratios are changed for high volatility commercial real estate acquisition, development and construction loans, certain past due non-residential mortgage loans and certain mortgage-backed and other securities exposures; and


•	A new additional capital conservation buffer of 2.5% of risk weighted assets over each of the required capital ratios will be phased in from 2016 to 2019 and must be met to avoid limitations on the ability of the Bank to pay dividends, repurchase shares or pay discretionary bonuses.

Management believes that the capital ratios for the Company and the Bank under Basel III will continue to exceed the well capitalized minimum capital requirements. As of March 31, 2016, the ratios for the Company and the Bank are sufficient to meet the fully phased-in conservation buffer.

As of March 31, 2016 and December 31, 2015, the most recent regulatory notification categorized the Bank as “well-capitalized” under the regulatory framework for prompt corrective action. To be categorized as “well-capitalized”, the Bank must maintain minimum total risk-based, Tier I risk-based and Tier I leverage ratios as set forth in the table below. There are no conditions or events since the notification that management believes have changed the Bank’s category.

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The Company’s and the Bank’s actual capital amounts and ratios are presented in the table below:



	Actual				Required For Capital Adequacy Purposes				Minimum Capital Adequacy With Capital Buffer				Required To Be Well Capitalized Under Prompt Corrective Action Provisions
	Amount		Ratio		Amount		Ratio		Amount		Ratio		Amount		Ratio
	(Dollars in thousands)
As of March 31, 2016
Common equity tier 1 capital (to risk weighted assets):
Company	$	848,429	11.96	%	$	319,220	4.50	%	$	363,556	5.125	%	N/A		N/A
Bank	$	882,569	12.45	%	$	319,097	4.50	%	$	363,416	5.125	%	$	460,918	6.50	%
Total capital (to risk-weighted assets):
Company	$	967,615	13.64	%	$	567,502	8.00	%	$	611,838	8.625	%	N/A		N/A
Bank	$	960,808	13.55	%	$	567,284	8.00	%	$	611,603	8.625	%	$	709,105	10.00	%
Tier I capital (to risk-weighted assets):
Company	$	889,375	12.54	%	$	425,627	6.00	%	$	469,963	6.625	%	N/A		N/A
Bank	$	882,569	12.45	%	$	425,463	6.00	%	$	469,782	6.625	%	$	567,284	8.00	%
Tier I capital (to average assets):
Company	$	889,375	11.44	%	$	310,909	4.00	%	N/A		N/A		N/A		N/A
Bank	$	882,569	11.36	%	$	310,874	4.00	%	N/A		N/A		$	388,593	5.00	%



	Actual				Required For Capital Adequacy Purposes				Required To Be Well Capitalized Under Prompt Corrective Action Provisions
	Amount		Ratio		Amount		Ratio		Amount		Ratio
	(Dollars in thousands)
As of December 31, 2015
Common equity tier 1 capital (to risk weighted assets):
Company	$	833,868	12.08	%	$	310,732	4.5	%	N/A		N/A
Bank	$	866,652	12.56	%	$	310,627	4.5	%	$	448,684	6.5	%
Total capital (to risk-weighted assets):
Company	$	953,132	13.80	%	$	552,412	8.00	%	N/A		N/A
Bank	$	945,013	13.69	%	$	552,226	8.00	%	$	690,283	10.00	%
Tier I capital (to risk-weighted assets):
Company	$	874,771	12.67	%	$	414,309	6.00	%	N/A		N/A
Bank	$	866,652	12.56	%	$	414,170	6.00	%	$	552,226	8.00	%
Tier I capital (to average assets):
Company	$	874,771	11.53	%	$	303,528	4.00	%	N/A		N/A
Bank	$	866,652	11.43	%	$	303,410	4.00	%	$	379,262	5.00	%

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Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations (MD&A)

The following discussion and analysis should be read in conjunction with Management’s Discussion and Analysis of Financial Condition and Results of Operations in our Annual Report on Form 10-K for the year ended December 31, 2015 and the unaudited consolidated financial statements and notes set forth elsewhere in this report.

GENERAL

Selected Financial Data

The following tables set forth a performance overview concerning the periods indicated and should be read in conjunction with the unaudited consolidated financial statements and notes set forth elsewhere in this report and the following Results of Operations and Financial Condition sections in the MD&A.



	At or for the Three Months Ended March 31,
	2016			2015
	(Dollars in thousands, except share and per share data)
Income Statement Data:
Interest income	$	83,461		$	74,554
Interest expense	11,854			9,431
Net interest income	71,607			65,123
Provision for loan losses	500			1,500
Net interest income after provision for loan losses	71,107			63,623
Noninterest income	8,775			11,048
Noninterest expense	40,049			39,077
Income before income tax provision	39,833			35,594
Income tax provision	16,210			14,236
Net income	$	23,623		$	21,358
Per Share Data:
Earnings per common share - basic	$	0.30		$	0.27
Earnings per common share - diluted	$	0.30		$	0.27
Book value per common share (period end, excluding warrants) ⁽⁸⁾	$	12.09		$	11.30
Cash dividends declared per common share	$	0.11		$	0.10
Tangible book value per common share (period end, excluding warrants)^{(8) (10)}	$	10.73		$	9.93
Number of common shares outstanding (period end)	79,597,106			79,542,321
Weighted average shares - basic	79,583,188			79,526,218
Weighted average shares - diluted	79,613,245			79,602,122
Tangible common equity to tangible assets ⁽⁸⁾	10.73		%	11.03		%
Statement of Financial Condition Data - at Period End:
Assets	$	8,063,752		$	7,267,905
Securities available for sale	1,087,897			808,372
Loans receivable	6,371,935			5,710,639
Deposits	6,467,411			5,803,254
FHLB advances	530,495			480,881
Subordinated debentures	42,371			42,199
Stockholders’ equity	961,982			899,198

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	At or for the Three Months Ended March 31,
	2016			2015
	(Dollars in thousands)
Average Balance Sheet Data:
Assets	$	7,875,940		$	7,161,811
Securities available for sale	1,016,865			778,305
Loans receivable and loans held for sale	6,269,428			5,617,929
Deposits	6,290,704			5,703,376
Stockholders’ equity	945,634			890,206

Selected Performance Ratios:
Return on average assets ⁽¹⁾	1.20		%	1.19		%
Return on average stockholders’ equity⁽¹⁾	9.99		%	9.60		%
Average stockholders’ equity to average assets	12.01		%	12.43		%
Return on average tangible equity ⁽¹⁾ ⁽⁹⁾	11.28		%	10.94		%
Dividend payout ratio (dividends per share / earnings per share)	36.67		%	37.04		%
Efficiency ratio⁽²⁾	49.82		%	51.30		%
Net interest spread	3.56		%	3.62		%
Net interest margin ⁽³⁾	3.84		%	3.87		%

Regulatory Capital Ratios ⁽⁴⁾
Leverage capital ratio⁽⁵⁾	11.44		%	11.76		%
Tier 1 risk-based capital ratio	12.54		%	13.39		%
Total risk-based capital ratio	13.64		%	14.53		%
Common equity tier 1 capital ratio ⁽¹¹⁾	11.96		%	12.73		%

Asset Quality Ratios:
Allowance for loan losses to loans receivable	1.21		%	1.22		%
Allowance for loan losses to nonaccrual loans	176.49		%	179.57		%
Allowance for loan losses to nonperforming loans⁽⁶⁾	79.77		%	72.00		%
Allowance for loan losses to nonperforming assets⁽⁷⁾	66.17		%	59.86		%
Nonaccrual loans to loans receivable	0.68		%	0.68		%
Nonperforming loans to loans receivable ⁽⁶⁾	1.51		%	1.69		%
Nonperforming assets to loans receivable and OREO ⁽⁷⁾	1.82		%	2.03		%
Nonperforming assets to total assets ⁽⁷⁾	1.44		%	1.60		%

Legacy Portfolio:
Nonaccrual loans to loans receivable	0.53		%	0.45		%
Nonperforming loans to loans receivable	1.36		%	1.53		%
Allowance for loan losses to loans receivable	1.06		%	1.08		%
Allowance for loan losses to nonaccrual loans	201.42		%	238.66		%
Allowance for loan losses to nonperforming loans	78.07		%	70.64		%

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	At or for the Three Months Ended March 31,
	2016		2,015
	(Dollars in thousands)
Asset Quality Ratios (continued):

Acquired Portfolio:
Nonaccrual loans to loans receivable	3.60	%	2.65	%
Nonperforming loans to loans receivable	4.39	%	3.11	%
Allowance for loan losses to loans receivable	3.93	%	2.42	%
Allowance for loan losses to nonaccrual loans	109.13	%	91.34	%
Allowance for loan losses to nonperforming loans	89.45	%	77.85	%


⁽¹⁾	Annualized.


⁽²⁾	Efficiency ratio is defined as noninterest expense divided by the sum of net interest income before provision for loan losses and noninterest income.


⁽³⁾	Net interest margin is calculated by dividing annualized net interest income by average total interest earning assets.


⁽⁴⁾	The ratios generally required to meet the definition of a “well-capitalized” institution under certain banking regulations are 5% leverage capital, 8% tier I risk-based capital, 10% total risk-based capital, and 6.5% common equity tier 1 capital.


⁽⁵⁾	Calculations are based on average quarterly asset balances.


⁽⁶⁾	Nonperforming loans include nonaccrual loans, Legacy Loans and APLs past due 90 days or more and still accruing interest, and accruing restructured loans.


⁽⁷⁾	Nonperforming assets consist of nonperforming loans and OREO.


⁽⁸⁾	Excludes TARP preferred stock related stock warrants of $0 and $378 thousand at March 31, 2016 and 2015, respectively.


⁽⁹⁾	Average tangible equity is calculated by subtracting average goodwill and average core deposit intangibles assets from average stockholders’ equity. This is a non-GAAP measure that we believe provides investors with information that is useful in understanding our financial performance and position.



	Three Months Ended March 31,
	2016			2015
	(Dollars in thousands)
Net income	$	23,623		$	21,358

Average stockholders’ equity	$	945,634		$	890,206
Less: Average goodwill and core deposit intangible assets, net	(108,120		)	(109,173		)
Average tangible equity	$	837,514		$	781,033

Net income (annualized) to average tangible equity	11.28		%	10.94		%


⁽¹⁰⁾	Tangible book value per common share is calculated by subtracting goodwill and core deposit intangible assets from total stockholders’ equity and dividing the difference by the number of shares of common stock outstanding. This is a non-GAAP measure that we believe provides investors with information that is useful in understanding our financial performance and position.



	March 31, 2016			March 31, 2015
	(In thousands, except per share data)
Total stockholders’ equity	$	961,982		$	899,198
Less: Common stock warrant	—			(378		)
Goodwill and core deposit intangible assets, net	(108,008		)	(109,021		)
Tangible common equity	$	853,974		$	789,799

Common shares outstanding	79,597,106			79,542,321

Tangible book value per common share	$	10.73		$	9.93

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⁽¹¹⁾	The Common equity tier 1 capital ratio is calculated by dividing Tier 1 capital less non-common elements, including perpetual preferred stock and related surplus, minority interest in subsidiaries, trust preferred securities and mandatory convertible preferred securities by total risk-weighted assets less the disallowed allowance for loan losses.



	March 31, 2016			March 31, 2015
	(Dollars in thousands)
Tier 1 capital	$	889,375		$	829,375
Less: Trust preferred securities less unamortized acquisition discount	(40,946		)	(40,774		)
Common equity tier 1 capital	$	848,429		$	788,601

Total risk weighted assets less disallowed allowance for loan losses	$	7,093,779		$	6,194,595

Common equity tier 1 capital ratio	11.96		%	12.73		%

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Results of Operations

Overview

Total assets increased $151.1 million from $7.91 billion at December 31, 2015 to $8.06 billion at March 31, 2016. The increase in total assets was primarily due to a $123.1 million increase in loans receivable, net of allowance for loan losses, from $6.17 billion at December 31, 2015 to $6.30 billion at March 31, 2016. The increase in total assets was also related to increases in securities available for sale of $77.3 million from $1.01 billion at December 31, 2015 to $1.09 billion at March 31, 2016. The increase in assets was primarily offset by a $62.3 million decrease in cash and cash equivalents from $298.4 million at December 31, 2015 to $236.1 million at March 31, 2016. The increase in total assets was primarily funded by a $126.4 million increase in total deposits to $6.47 billion at March 31, 2016 and net income of $23.6 million for the three months ended March 31, 2016.

Net income for the first quarter of 2016 was $23.6 million, or $0.30 per diluted common share, compared to $21.4 million, or $0.27 per diluted common share, for the same period of 2015, which was an increase of $2.2 million, or 10.6%. The increase in net income was primarily due to an increase in interest income of $8.9 million and a decrease in the provision for loan losses of $1.0 million. The increase was primarily offset by a decrease in noninterest income of $2.3 million, an increase in noninterest expense of $972 thousand, and an increase in income tax provision of $2.0 million.

The following table summarizes the accretion and amortization adjustments that are included in net income for the three months ended March 31, 2016 and 2015:



	Three Months Ended March 31,
	2016			2015
	(Dollars in thousands)
Accretion of discounts on acquired performing loans	$	1,966		$	2,183
Accretion of discounts on acquired credit impaired loans	1,965			1,555
Amortization of premiums on assumed FHLB advances	97			94
Accretion of discounts on assumed subordinated debt	(44		)	(41		)
Amortization of premiums on assumed time deposits	24			75
Amortization of core deposit intangible assets	(212		)	(267		)
Total	$	3,796		$	3,599

The annualized return on average assets was 1.20% for the first quarter of 2016, compared to 1.19% for the same period of 2015. The annualized return on average stockholders’ equity was 9.99% for the first quarter of 2016, compared to 9.60% for the same period of 2015. The efficiency ratio was 49.82% for the first quarter of 2016, compared to 51.30% for the same period of 2015.

Net Interest Income and Net Interest Margin

Net Interest Income

A principal component of our earnings is net interest income, which is the difference between the interest and fees earned on loans and investments and the interest paid on deposits and borrowed funds. Net interest income expressed as a percentage of average interest earning assets is referred to as the net interest margin. The net interest spread is the yield on average interest earning assets less the cost of average interest bearing liabilities. Net interest income is affected by changes in the balances of interest earning assets and interest bearing liabilities and changes in the yields earned on interest earning assets and the rates paid on interest bearing liabilities.

Comparison of Three Months Ended March 31, 2016 with the Same Period of 2015

Net interest income before provision for loan losses was $71.6 million for the first quarter of 2016, compared to $65.1 million for the same period of 2015, an increase of $6.5 million, or 10.0%.

Interest income for the first quarter of 2016 was $83.5 million, an increase of $8.9 million, or 11.9%, compared to $74.6 million for the same period of 2015. An increase of $9.5 million was primarily attributed to the increase in the balance of

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interest earning loans and securities available for sale during the quarter. The increase in interest income was partially offset by a $1.2 million decrease attributable to lower yields on loans during the quarter.

Interest expense for the first quarter of 2016 was $11.9 million, an increase of $2.4 million or 25.7% compared to $9.4 million for the same period of 2015. A $1.1 million increase in interest expense was attributable to increases in average balances during the quarter, primarily in interest bearing demand accounts and time deposits. Also, a $603 thousand increase and a $619 thousand increase was attributable to the increase in rates on time deposits and interest bearing demand accounts, respectively.

Net Interest Margin

Our reported net interest margin is impacted by the weighted average rates we earn on interest earning assets and pay on interest bearing liabilities and the effect of acquisition accounting adjustments. The net interest margin for the first quarter of 2016 was 3.84%, a decrease of 3 basis points from 3.87% for the same period of 2015.

The change in our reported net interest margin for the three and nine months ended March 31, 2016 and 2015 is summarized in the table below.



	Three Months Ended March 31,
	2016		2015
Net interest margin, excluding the effect of acquisition accounting adjustments	3.60	%	3.61	%
Acquisition accounting adjustments⁽¹⁾	0.24		0.26
Reported net interest margin	3.84	%	3.87	%
⁽¹⁾Acquisition accounting adjustments are calculated by subtracting net interest margin, excluding the effect of acquisition accounting adjustments, from reported net interest margin.

As noted in the table above, excluding the effect of the acquisition accounting adjustments, the net interest margin for the first quarter of 2016 decreased 1 basis point to 3.60% from 3.61% for the same period of 2015.

The decrease in the net interest margin was due to a decline in the effect of acquisition accounting adjustments and a decline in the weighted average yield on the loan portfolio. The decrease in net interest margin was also caused by an increase in the cost of deposits.

The acquisition related adjustments that impact the net interest margin increased by $0.1 million, totaling $4.0 million during the first quarter of 2016, compared to $3.9 million for the same period of 2015.

The weighted average yield on loans decreased to 4.95% for the first quarter of 2016 from 5.03% for the first quarter of 2015. The change in the yield was due to continued pricing pressure on loan interest rates as well a decline of 3 basis points in the effects of acquisition accounting adjustments for the three months ended March 31, 2016 as summarized in the following table.



	Three Months Ended March 31,
	2016		2015
The weighted average yield on loans, excluding the effect of acquisition accounting adjustments	4.66	%	4.71	%
Acquisition accounting adjustments⁽¹⁾	0.29		0.32
Reported weighted average yield on loans	4.95	%	5.03	%
⁽¹⁾ Acquisition accounting adjustments are calculated by subtracting the weighted average yield on loans, excluding the effect of acquisition accounting adjustments, from the reported weighted average yield on loans.

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Excluding the effect of acquisition accounting adjustments, the weighted average yield on loans for the first quarter of 2016 decreased 5 basis points to 4.66% from 4.71% for the same period of 2015. In addition to the continued pricing pressures, the declining loan yields were caused by a higher mix of lower yielding fixed rate loans. At March 31, 2016, fixed rate loans accounted for 53% of the loan portfolio, compared to 52% at March 31, 2015. The weighted average yield on the variable rate and fixed rate loan portfolios (excluding loan discount accretion) at March 31, 2016 was 4.14% and 4.63%, respectively, compared with 4.14% and 4.72% at March 31, 2015.

The weighted average yield on securities available for sale for the first quarter of 2016 was 2.23%, compared to 2.16% for the same period of 2015. The increase was primarily attributable to an increase in treasury yields resulting in higher interest earned for the newly purchased collateralized mortgage obligations and mortgage-backed securities, compared to the same period in 2015.

The weighted average cost of deposits for the first quarter of 2016 was 0.63%, an increase of 8 basis points from 0.55% for the same period of 2015.



	Three Months Ended March 31,
	2016		2015
The weighted average cost of deposits, excluding the effect of acquisition accounting adjustments	0.63	%	0.56	%
Acquisition accounting adjustments⁽¹⁾	0.00		(0.01	)
Reported weighted average cost of deposits	0.63	%	0.55	%

Excluding the amortization of premiums on time deposits assumed in acquisitions, the weighted average cost of deposits was 0.63% for the first quarter of 2016, compared to 0.56% for the same period of 2015. The increase was due to an increase in retail deposits, primarily money market and time deposits, due to our deposit campaigns and promotions. The average cost of the retail deposits was 0.92% at March 31, 2016, compared to 0.84% at March 31, 2015.

The weighted average cost of FHLB advances for the first quarter of 2016 was 1.15%, an increase of 7 basis points from 1.08% for the same period of 2015.



	Three Months Ended March 31,
	2016		2015
The weighted average cost of FHLB advances, excluding the effect of acquisition accounting adjustments	1.22	%	1.17	%
Acquisition accounting adjustments⁽¹⁾	(0.07	)	(0.09	)
Reported weighted average cost of FHLB advances	1.15	%	1.08	%
⁽¹⁾ Acquisition accounting adjustments are calculated by subtracting the weighted average cost on FHLB advances, excluding the effect of acquisition accounting adjustments, from reported weighted average cost on FHLB advances.

Excluding amortization of premiums on FHLB advances assumed in acquisitions, the weighted average cost of FHLB advances increased to 1.22% for the first quarter of 2016 from 1.17% for the same period of 2015. The average cost increased due to the maturity of eight advances totaling $450.0 million that had effective rates ranging from 0.21% to 0.60%, while the effective rates for FHLB advances obtained during the most recent twelve months ranged from 0.22 to 1.88%.

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The following table presents our condensed consolidated average balance sheet information, together with interest rates earned and paid on the various sources and uses of funds for the periods indicated:



	Three Months Ended March 31, 2016						Three Months Ended March 31, 2015
	Average Balance		Interest Income/ Expense		Average Yield/ Rate *		Average Balance		Interest Income/ Expense		Average Yield/ Rate *
	(Dollars in thousands)
INTEREST EARNINGS ASSETS:
Loans^(1) (2)	$	6,269,428	$	77,118	4.95	%	$	5,617,929	$	69,639	5.03	%
Securities available for sale⁽³⁾	1,016,865		5,677		2.23	%	778,305		4,207		2.16	%
FRB and FHLB stock and other investments	217,048		666		1.21	%	414,973		708		0.68	%
Total interest earning assets	$	7,503,341	$	83,461	4.47	%	$	6,811,207	$	74,554	4.44	%
INTEREST BEARING LIABILITIES:
Deposits:
Demand, interest bearing	$	1,968,637	$	4,004	0.82	%	$	1,625,641	$	2,765	0.68	%
Savings	186,462		366		0.79	%	195,063		425		0.88	%
Time deposits:
$100,000 or more	1,806,609		4,057		0.90	%	1,713,331		3,377		0.80	%
Other	699,431		1,480		0.85	%	626,197		1,187		0.77	%
Total time deposits	2,506,040		5,537		0.89	%	2,339,528		4,564		0.79	%
Total interest bearing deposits	4,661,139		9,907		0.85	%	4,160,232		7,754		0.76	%
FHLB advances	532,206		1,523		1.15	%	480,942		1,297		1.09	%
Other borrowings	40,813		424		4.11	%	40,624		380		3.74	%
Total interest bearing liabilities	5,234,158		$	11,854	0.91	%	4,681,798		$	9,431	0.82	%
Noninterest bearing demand deposits	1,629,565						1,543,144
Total funding liabilities/cost of funds	$	6,863,723			0.69	%	$	6,224,942			0.61	%
Net interest income/net interest spread			$	71,607	3.56	%			$	65,123	3.62	%
Net interest margin					3.84	%					3.87	%
Net interest margin, excluding the effect of nonaccrual loan income (expense)⁽⁴⁾					3.84	%					3.88	%
Net interest margin, excluding the effect of nonaccrual loan income (expense) and prepayment fee income^(4) (5)					3.81	%					3.85	%
Cost of deposits:
Noninterest bearing demand deposits	$	1,629,565	$	—			$	1,543,144	—
Interest bearing deposits	4,661,139		9,907		0.85	%	4,160,232		7,754		0.76	%
Total deposits	$	6,290,704	$	9,907	0.63	%	$	5,703,376	$	7,754	0.55	%


*	Annualized


⁽¹⁾	Interest income on loans includes loan fees.


⁽²⁾	Average balances of loans consist of loans receivable and loans held for sale.


⁽³⁾	Interest income and yields are not presented on a tax-equivalent basis.


⁽⁴⁾	Nonaccrual interest income reversed was $123 and $24 thousand for the three months ended March 31, 2016 and 2015, respectively.


⁽⁵⁾	Loan prepayment fee income excluded was $631 thousand and $510 thousand for the three months ended March 31, 2016 and 2015, respectively.

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Changes in net interest income are a function of changes in interest rates and volumes of interest earning assets and interest bearing liabilities. The following table sets forth information regarding the changes in interest income and interest expense for the periods indicated. The total change for each category of interest earning assets and interest bearing liabilities is segmented into the change attributable to variations in volume (changes in volume multiplied by the old rate) and the change attributable to variations in interest rates (changes in rates multiplied by the old volume). Nonaccrual loans are included in average loans used to compute this table.




	Three Months Ended March 31, 2016 over March 31, 2015
	Net Increase (Decrease)
				Change due to
				Rate			Volume
	(In thousands)
INTEREST INCOME:
Interest and fees on loans	$	7,479		$	(1,178	)	$	8,657
Interest on securities	1,470			147			1,323
Interest on FRB and FHLB stock and other investments	(42		)	390			(432		)
Total interest income	$	8,907		$	(641	)	$	9,548
INTEREST EXPENSE:
Interest on demand, interest bearing	$	1,239		$	619		$	620
Interest on savings	(58		)	(43		)	(15		)
Interest on time deposits	972			603			369
Interest on FHLB advances	226			76			150
Interest on other borrowings	44			38			6
Total interest expense	$	2,423		$	1,293		$	1,130
NET INTEREST INCOME	$	6,484		$	(1,934	)	$	8,418

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Provision for Loan Losses

The provision for loan losses reflects our judgment of the current period cost associated with credit risk inherent in our loan portfolio. The loan loss provision for each period is dependent upon many factors, including loan growth, net charge offs, changes in the composition of the loan portfolio, delinquencies, assessments by management, third parties’ and regulators’ examination of the loan portfolio, the value of the underlying collateral for problem loans and the general economic conditions in our market areas. Specifically, the provision for loan losses represents the amount charged against current period earnings to achieve an allowance for loan losses that, in our judgment, is adequate to absorb probable incurred losses inherent in our loan portfolio. Periodic fluctuations in the provision for loan losses result from management’s assessment of the adequacy of the allowance for loan losses; however, actual loan losses may vary in material respects from current estimates. If the allowance for loan losses is inadequate, it may have a material adverse effect on our financial condition.

The provision for loan losses for the first quarter of 2016 was $500 thousand, a decrease of $1.0 million, or 66.7%, from $1.5 million for the same period last year. The decrease in the provision primarily reflects a decrease in quantitative reserves due to declining historical loss rates.

See Financial Condition section of this MD&A for additional information and further discussion.

Noninterest Income

Noninterest income is primarily comprised of service fees on deposit accounts, fees received on trade finance letters of credit, net gains on sales of loans, and other income.

Noninterest income for the first quarter of 2016 was $8.8 million, compared to $11.0 million for the same quarter of 2015, a decrease of $2.3 million, or 20.6%. The decrease was primarily due to a decrease of $1.2 million, or 40.0%, in net gains on sales of SBA loans and a decrease of $379 thousand, or 12.4%, in service fees on deposit accounts.

Noninterest income by category is summarized below:



	Three Months Ended March 31,				Increase (Decrease)
	2016		2015		Amount			Percent (%)
	(Dollars in thousands)
Service fees on deposit accounts	$	2,683	$	3,062	$	(379	)	(12.4	)%
International service fees	776		814		(38		)	(4.7	)%
Loan servicing fees, net	690		720		(30		)	(4.2	)%
Wire transfer fees	914		763		151			19.8	%
Other income and fees	1,887		2,039		(152		)	(7.5	)%
Net gains on sales of SBA loans	1,825		3,044		(1,219		)	(40.0	)%
Net gains on sales of other loans	—		182		(182		)	N/A
Net gains on sales of securities available for sale	—		424		(424		)	N/A
Total noninterest income	$	8,775	$	11,048	$	(2,273	)	(20.6	)%

Noninterest Expense

Noninterest expense for the first quarter of 2016 was $40.0 million, an increase of $972 thousand, or 2.5%, from $39.1 million for the same period of 2015. Merger and integration expenses increased $1.2 million primarily consisting of fees for legal counsel and financial advisors which were associated with the plan of merger agreement with Wilshire Bancorp, Inc. on December 7, 2015. Salaries and employee benefits expense increased $388 thousand due to an increase in the number of full-time equivalent employees, which increased to 945 at March 31, 2016 from 933 at March 31, 2015. The increases in noninterest expenses were offset by a decrease of $434 thousand in credit related expenses, $255 thousand in advertising and marketing expenses, and $341 thousand in professional fees.

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The breakdown of changes in noninterest expense by category is shown in the following table:



	Three Months Ended March 31,				Increase (Decrease)
	2016		2015		Amount			Percent (%)
	(Dollars in thousands)
Salaries and employee benefits	$	21,569	$	21,181	$	388		1.8	%
Occupancy	4,817		4,692		125			2.7	%
Furniture and equipment	2,287		2,263		24			1.1	%
Advertising and marketing	1,136		1,391		(255		)	(18.3	)%
Data processing and communications	2,171		2,349		(178		)	(7.6	)%
Professional fees	1,083		1,424		(341		)	(23.9	)%
FDIC assessment	1,038		1,112		(74		)	(6.7	)%
Credit related expenses	421		855		(434		)	(50.8	)%
OREO expense	1,428		1,177		251			21.3	%
Merger and integration expenses	1,207		52		1,155			NA
Other	2,892		2,581		311			12.0	%
Total noninterest expense	$	40,049	$	39,077	$	972		2.5	%

Provision for Income Taxes

Income tax expense was $16.2 million and $14.2 million for the quarters ended March 31, 2016 and 2015, respectively. The effective income tax rates were 40.7% and 40.0% for the quarters ended March 31, 2016 and 2015, respectively.

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Financial Condition

At March 31, 2016, our total assets were $8.06 billion, an increase of $151.1 million from $7.91 billion at December 31, 2015. The increase was principally due to a $123.1 million increase in loans receivable, net of allowance for loan losses, a $77.3 million increase in securities available for sale, and a $1.5 million increase in other investments. The increase was offset by a decrease in cash and cash equivalents totaling $62.3 million. The increase in total assets was funded primarily by a $126.4 million increase in deposits and net income of $23.6 million.

Investment Securities Portfolio

As of March 31, 2016, we had $1.09 billion in available for sale securities, compared to $1.01 billion at December 31, 2015. The net unrealized gain on the available for sale securities at March 31, 2016 was $12.1 million, compared to a net unrealized loss on such securities of $3.5 million at December 31, 2015. During the three months ended March 31, 2016, $99.6 million in securities were purchased and $36.4 million in mortgage related securities were paid down. During the same period last year, $65.6 million in securities were purchased, $31.5 in mortgage related securities were paid down and $22.1 million in securities were sold. The weighted average life of the available for sale securities was 4.52 years and 5.09 years at March 31, 2016 and December 31, 2015, respectively.

Loan Portfolio

As of March 31, 2016, loans outstanding totaled $6.38 billion, an increase of $123.6 million from $6.25 billion at December 31, 2015. Total loan originations during the three months ended March 31, 2016 were $333.5 million, including SBA loan originations of $54.3 million, of which $37.6 million was included as additions to loans held for sale during the period.

The following table summarizes our loan portfolio by amount and percentage of total loans outstanding in each major loan category at the dates indicated:



	March 31, 2016					December 31, 2015
	Amount			Percent (%)		Amount			Percent (%)
				(Dollars in thousands)
Loan portfolio composition
Real estate loans:
Residential	$	32,390		1	%	$	33,797		0	%
Commercial & industrial	4,957,751			78	%	4,912,655			78	%
Construction	142,376			2	%	123,030			2	%
Total real estate loans	5,132,517			81	%	5,069,482			80	%
Commercial business	1,032,078			16	%	980,153			16	%
Trade finance	86,342			1	%	99,163			2	%
Consumer and other	124,064			2	%	102,573			2	%
Total loans outstanding	6,375,001			100	%	6,251,371			100	%
Less: deferred loan fees	(3,066		)			(3,030		)
Loans receivable	6,371,935					6,248,341
Less: allowance for loan losses	(76,856		)			(76,408		)
Loans receivable, net of allowance for loan losses	$	6,295,079				$	6,171,933

SBA loans are included in commercial business loans and commercial and industrial real estate loans. SBA loans included in commercial business loans were $44.2 million at March 31, 2016 and $46.2 million at December 31, 2015. SBA loans included in commercial and industrial real estate loans were $186.6 million at March 31, 2016 and $187.9 million at December 31, 2015.

We normally do not extend lines of credit or make loan commitments to business customers for periods in excess of one year. We use the same credit policies in making commitments and conditional obligations as we do for providing loan facilities to our customers. We perform annual reviews of such commitments prior to renewal.

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The following table shows our loan commitments and letters of credit outstanding at the dates indicated:



	March 31, 2016		December 31, 2015
	(In thousands)
Loan commitments	$	851,744	$	802,251
Standby letters of credit	36,590		45,083
Other commercial letters of credit	45,406		36,256
	$	933,740	$	883,590

Nonperforming Assets

Nonperforming assets, which consist of nonaccrual loans, loans 90 days or more past due and on accrual status, accruing restructured loans and OREO, were $116.1 million at March 31, 2016, compared to $110.2 million at December 31, 2015. The ratio of nonperforming assets to loans receivable and OREO was 1.82% and 1.76% at March 31, 2016 and December 31, 2015, respectively.

The following table summarizes the composition of our nonperforming assets as of the dates indicated.



	March 31, 2016		December 31, 2015
	(Dollars in thousands)
Nonaccrual loans ⁽¹⁾	$	43,548	$	40,801
Loans 90 days or more days past due, still accruing	45		375
Accruing restructured loans	52,760		47,984
Total nonperforming loans	96,353		89,160
OREO	19,794		21,035
Total nonperforming assets	$	116,147	$	110,195

Nonaccrual loans:
Legacy Portfolio	$	31,782	$	23,212
Acquired Portfolio	11,766		15,543
Total nonaccrual loans	$	43,548	$	38,755

Nonperforming loans:
Legacy Portfolio	$	81,998	$	78,424
Acquired Portfolio	14,355		18,236
Total nonperforming loans	$	96,353	$	96,660


⁽¹⁾	Nonaccrual loans exclude the guaranteed portion of delinquent SBA loans that are in liquidation totaling $15.4 million and $18.7 million as of March 31, 2016 and December 31, 2015, respectively.

Allowance for Loan Losses

The allowance for loan losses was $76.9 million at March 31, 2016, compared to $76.4 million at December 31, 2015. The allowance for loan losses was 1.21% of loans receivable at March 31, 2016 and 1.22% of loans receivable at December 31, 2015. The increase in the allowance for loan losses was driven by an increase in the amount of qualitative reserves. The qualitative reserves increased due to an increase in the volume of loans compared to December 31, 2015. The increase in qualitative reserves were offset by decreases in the quantitative reserves which was caused by decreasing historical losses. In addition, the reserve on our impaired loans increased to $9.9 million at March 31, 2016 from $8.8 million at December 31, 2015.

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The following table reflects our allocation of the allowance for loan and lease losses (“ALLL”) by loan type and the ratio of each loan category to total loans as of the dates indicated:



	Allocation of Allowance for Loan Losses
	March 31, 2016				December 31, 2015
	Amount of Allowance for Loan Losses		Percent of ALLL to Total ALLL		Amount of Allowance for Loan Losses		Percent of ALLL to Total ALLL
	(Dollars in thousands)
Loan Type
Real estate - residential	$	221	0.29	%	$	230	0.30	%
Real estate - commercial	53,466		69.57	%	54,505		71.33	%
Real estate - construction	1,054		1.37	%	917		1.20	%
Commercial business	19,202		24.98	%	16,547		21.66	%
Trade finance	2,085		2.71	%	3,592		4.70	%
Consumer and other	828		1.08	%	617		0.81	%
Total	$	76,856	100	%	$	76,408	100	%

For a better understanding of the changes in the ALLL, the loan portfolio has been segmented for disclosures purposes between loans which are accounted for under the amortized cost method (Legacy Loans) and loans acquired from acquisitions (Acquired Loans). Acquired Loans have been further segregated between Acquired Credit Impaired Loans (loans with credit deterioration at the time they were acquired and accounted for under ASC 310-30, or “ACILs”) and performing loans (loans that were pass graded at the time they were acquired, or “APLs”). The activity in the ALLL for the three months ended March 31, 2016 is as follows:



				Acquired Loans⁽²⁾
Three Months Ended March 31, 2016	Legacy Loans⁽¹⁾			ACILs			APLs			Total
	(Dollars in thousands)
Balance, beginning of period	$	63,309		$	11,982		$	1,117		$	76,408
Provision for loan losses	698			(105		)	(93		)	500
Loans charged off	(705		)	—			(116		)	(821		)
Recoveries of loan charge offs	714			—			55			769
Balance, end of period	$	64,016		$	11,877		$	963		$	76,856

Total loans outstanding	$	6,048,342		$	104,659		$	222,000		$	6,375,001
Loss coverage ratio	1.06		%	11.35		%	0.43		%	1.21		%
Net loan charge offs to beginning allowance	(0.01		)%	0.00		%	5.46		%	0.07		%
Net loan charge offs to provision for loan losses	1.29		%	0.00		%	65.59		%	10.40		%

⁽¹⁾ Legacy Loans includes Acquired Loans that have been renewed or refinanced subsequent to the acquisition date.
⁽²⁾ Acquired Loans were marked to fair value at the acquisition date and provisions for loan losses reflect credit deterioration subsequent to the acquisition date.

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The following table shows the provisions made for loan losses, the amount of loans charged off and the recoveries on loans previously charged off, together with the balance in the ALLL at the beginning and end of each period, the amount of average and loans receivable outstanding, and certain other ratios as of the dates and for the periods indicated:



	At or for the Three Months Ended March 31,
	2016			2015
	(Dollars in thousands)
LOANS:
Average loans receivable, including loans held for sale	$	6,269,428		$	5,617,929
Loans receivable	$	6,371,935		$	5,710,639
ALLOWANCE:
Balance, beginning of period	$	76,408		$	67,758
Less loan charge offs:
Commercial & industrial real estate	(135		)	(341		)
Commercial business loans	(621		)	(538		)
Trade finance	—			(229		)
Consumer and other loans	(65		)	(17		)
Total loan charge offs	(821		)	(1,125		)
Plus loan recoveries:
Commercial & industrial real estate	524			800
Commercial business loans	242			656
Trade Finance	—			—
Consumer and other loans	3			5
Total loans recoveries	769			1,461
Net loan charge offs	(52		)	336
Provision for loan losses	500			1,500
Balance, end of period	$	76,856		$	69,594
Net loan (recoveries) charge offs to average loans receivable, including loans held for sale*	0.00		%	(0.02		)%
Allowance for loan losses to loans receivable at end of period	1.21		%	1.22		%
Net loan (recoveries) charge offs to beginning allowance *	0.27		%	(1.98		)%
Net loan (recoveries) charge offs to provision for loan losses	10.40		%	(22.40		)%
* Annualized

We believe the allowance for loan losses as of March 31, 2016 is adequate to absorb probable incurred losses in the loan portfolio. However, no assurance can be given that actual losses will not exceed the estimated amounts.

Deposits and Other Borrowings

Deposits. Deposits are our primary source of funds used in our lending and investment activities. At March 31, 2016, deposits increased $126.4 million, or 2.0%, to $6.47 billion from $6.34 billion at December 31, 2015. The net increase in deposits primarily reflects increases in retail deposits due to the impact of recent deposit campaigns and promotions. In addition, wholesale deposits were increased to help fund loan growth. Interest bearing demand deposits, including money market and Super Now accounts and time deposits, totaled $4.77 billion at March 31, 2016 and $4.65 billion at December 31, 2015.

At March 31, 2016, 26% of total deposits were noninterest bearing demand deposits, 41% were time deposits and 33% were interest bearing demand and savings deposits. At December 31, 2015, 27% of total deposits were noninterest bearing demand deposits, 39% were time deposits, and 34% were interest bearing demand and savings deposits.

At March 31, 2016, we had $510.0 million in brokered deposits and $300.0 million in California State Treasurer deposits, compared to $374.6 million and $300.0 million of such deposits at December 31, 2015, respectively. The California State Treasurer deposits had three-month maturities with a weighted average interest rate of 0.29% at March 31, 2016 and were collateralized with securities with a carrying value of $349.4 million.

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The following is a schedule of certificates of deposit maturities as of March 31, 2016:




	Balance		Percent (%)
	(Dollars in thousands)
Three months or less	$	871,856	33.04	%
Over three months through six months	643,378		24.38	%
Over six months through nine months	474,243		17.97	%
Over nine months through twelve months	485,071		18.38	%
Over twelve months	164,483		6.23	%
Total time deposits	$	2,639,031	100.00	%

Other Borrowings. Advances may be obtained from the FHLB as an alternative source of funds. FHLB advances are typically secured by a pledge of commercial real estate loans and/or securities with a market value at least equal to the outstanding advances plus our investment in FHLB stock.

At March 31, 2016, we had $530.5 million of FHLB advances with average remaining maturities of 1.7 years, compared to $530.6 million with average remaining maturities of 1.9 years at December 31, 2015. The weighted average rate was 1.15% and 1.15% at March 31, 2016 and December 31, 2015, respectively.

Subordinated debentures totaled $42.4 million at March 31, 2016 and $42.3 million at December 31, 2015. The Trust Preferred Securities accrue and pay distributions periodically at specified annual rates as provided in the related indentures for the securities. The trusts used the net proceeds from their respective offerings to purchase a like amount of subordinated debentures (the “Debentures”) issued by us. The Debentures are the sole assets of the trusts. Our obligations under the Debentures and related documents, taken together, constitute a full and unconditional guarantee by us of the obligations of the trusts. The Trust Preferred Securities are mandatorily redeemable upon the maturity of the Debentures, or upon earlier redemption as provided in the indentures. We have the right to redeem the Debentures in whole (but not in part) on or after specific dates, at a redemption price specified in the indentures plus any accrued but unpaid interest to the redemption date.

Off-Balance-Sheet Activities and Contractual Obligations

We routinely engage in activities that involve, to varying degrees, elements of risk that are not reflected, in whole or in part, in the consolidated financial statements. These activities are part of our normal course of business and include traditional off-balance-sheet credit-related financial instruments, interest rate swap contracts, operating leases and long-term debt.

Traditional off-balance-sheet credit-related financial instruments are primarily commitments to extend credit and standby letters of credit. These activities could require us to make cash payments to third parties if certain specified future events occur. The contractual amounts represent the extent of our exposure in these off-balance-sheet activities. However, since certain off-balance-sheet commitments, particularly standby letters of credit, are expected to expire or be only partially used, the total amount of commitments does not necessarily represent future cash requirements. These activities are necessary to meet the financing needs of our customers.

We enter into interest rate swap contracts under which we are required to either receive cash from or pay cash to counterparties depending on changes in interest rates. We also purchase interest rate caps to protect against increases in market interest rates. We utilize interest rate swap contracts and interest rate caps to help manage the risk of changing interest rates.

We sell interest rate swaps to certain adjustable rate commercial loan customers to fix the interest rate on their floating rate loan. When the fixed rate swap is originated with the customer, an identical offsetting swap is also entered into by us with a correspondent bank.

Our leased banking facilities and equipment are leased under non-cancelable operating leases under which we must make monthly payments over periods up to 15 years.

We do not anticipate that our current off-balance-sheet activities will have a material impact on our future results of operations or our financial condition. Further information regarding our financial instruments with off-balance-sheet risk can be found in Item 3 “Quantitative and Qualitative Disclosures about Market Risk.”

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Stockholders’ Equity and Regulatory Capital

Historically, our primary source of capital has been the retention of earnings, net of dividend payments to shareholders. We seek to maintain capital at a level sufficient to assure our stockholders, our customers and our regulators that our Company and our bank subsidiary are financially sound. For this purpose, we perform ongoing assessments of our components of capital, as well as projected sources and uses of capital in conjunction with projected increases in assets and levels of risks.

Total stockholders’ equity was $962.0 million at March 31, 2016, compared to $938.1 million at December 31, 2015.

The federal banking agencies require a minimum ratio of qualifying total capital to risk-weighted assets of 8% and a minimum ratio of Tier I capital to risk-weighted assets of 6% to generally be considered “adequately capitalized” under the Prompt Corrective Action regulations. In addition to the risk-based guidelines, federal banking agencies require banking organizations to maintain a minimum amount of Tier I capital to average total assets, referred to as the leverage ratio, of 4% to generally be considered “adequately capitalized” under the Prompt Corrective Action regulations. Beginning January 1, 2015, federal banking agencies required a minimum Common Equity Tier 1 capital to risk weighted assets ratio of 4.5% to generally be considered “adequately capitalized” under the Prompt Corrective Action regulations. Beginning January 1, 2016, federal banking agencies required a capital conservation buffer of 0.625% in addition to the ratios required to generally be considered “adequately capitalized” under the Prompt Corrective Action regulations. Failure to maintain this capital conservation buffer results in limits or prohibitions on capital distributions and discretionary compensation payments. Capital requirements apply to the Company and the Bank separately. In addition to these uniform risk-based capital guidelines and leverage ratios that apply across the industry, the regulators have the discretion to set individual minimum capital requirements for specific institutions at rates significantly above the minimum guidelines and ratios.

At March 31, 2016, our Common Equity Tier 1 capital was $848.4 million compared to $833.9 million at December 31, 2015. Our Tier I capital, defined as stockholders’ equity less intangible assets, was $889.4 million, compared to $874.8 million at December 31, 2015, representing an increase of $14.6 million, or 1.7%. The increase was primarily due to an increase of $23.6 million in retained earnings from net income during the three months ended March 31, 2016, which was partially offset by $8.8 million of cash dividends. At March 31, 2016, the Common Equity Tier 1 capital ratio was 11.96%. The total capital to risk-weighted assets ratio was 13.64% and the Tier I capital to risk-weighted assets ratio was 12.54%. The Tier I leverage capital ratio was 11.44%.

As of March 31, 2016 and December 31, 2015, the most recent regulatory notification categorized the Bank as “well capitalized” under the regulatory framework for prompt corrective action. To be generally categorized as “well-capitalized”, the Bank must maintain minimum Common Equity Tier 1 capital, total risk-based, Tier I risk-based and Tier I leverage capital ratios as set forth in the table below.

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	As of March 31, 2016 (Dollars in thousands)
	Actual				To Be Well-Capitalized				Excess
	Amount		Ratio		Amount		Ratio		Amount		Ratio
BBCN Bancorp, Inc
Common Equity Tier 1 capital ratio	$	848,429	11.96	%	N/A		N/A
Total risk-based capital ratio	$	967,615	13.64	%	N/A		N/A
Tier 1 risk-based capital ratio	$	889,375	12.54	%	N/A		N/A
Tier 1 capital to total assets	$	889,375	11.44	%	N/A		N/A
BBCN Bank
Common Equity Tier 1 capital ratio	$	882,569	12.45	%	$	460,918	6.50	%	$	421,651	5.95	%
Total risk-based capital ratio	$	960,808	13.55	%	$	709,105	10.00	%	$	251,703	3.55	%
Tier 1 risk-based capital ratio	$	882,569	12.45	%	$	567,284	8.00	%	$	315,285	4.45	%
Tier I capital to total assets	$	882,569	11.36	%	$	388,593	5.00	%	$	493,976	6.36	%

	As of December 31, 2015 (Dollars in thousands)
	Actual				To Be Well-Capitalized				Excess
	Amount		Ratio		Amount		Ratio		Amount		Ratio
BBCN Bancorp, Inc
Common Equity Tier 1 capital ratio	$	833,868	12.08	%	N/A		N/A
Total risk-based capital ratio	$	953,132	13.80	%	N/A		N/A
Tier 1 risk-based capital ratio	$	874,771	12.67	%	N/A		N/A
Tier 1 capital to total assets	$	874,771	11.53	%	N/A		N/A
BBCN Bank
Common Equity Tier 1 capital ratio	$	866,652	12.56	%	$	448,684	6.50	%	$	417,968	6.06	%
Total risk-based capital ratio	$	945,013	13.69	%	$	690,283	10.00	%	$	254,730	3.69	%
Tier 1 risk-based capital ratio	$	866,652	12.56	%	$	552,226	6.00	%	$	314,426	6.56	%
Tier I capital to total assets	$	866,652	11.43	%	$	379,262	5.00	%	$	487,390	6.43	%

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Liquidity Management

Liquidity risk is the risk of reduction in our earnings or capital that would result if we were not able to meet our obligations when they come due without incurring unacceptable losses. Liquidity risk includes the risk of unplanned decreases or changes in funding sources and changes in market conditions that affect our ability to liquidate assets quickly and with minimum loss of value. Factors considered in liquidity risk management are the stability of the deposit base; the marketability, maturity, and pledging of our investments; the availability of alternative sources of funds; and our demand for credit. The objective of our liquidity management is to have funds available to meet cash flow requirements arising from fluctuations in deposit levels and the demands of daily operations, which include funding of securities purchases, providing for customers’ credit needs, and ongoing repayment of borrowings.

Our primary sources of liquidity are derived from financing activities, which include customer and broker deposits, federal funds facilities, and borrowings from the FHLB and the FRB Discount Window. These funding sources are augmented by payments of principal and interest on loans and securities, proceeds from sale of loans and the liquidation or sale of securities from our available for sale portfolio. Primary uses of funds include withdrawal of and interest payments on deposits, originations of loans, purchases of investment securities, and payment of operating expenses.

At March 31, 2016, our total borrowing capacity from the FHLB was $2.39 billion, of which $1.86 billion was unused and available to borrow. At March 31, 2016, our total borrowing capacity from the FRB was $549.0 million, which was unused and available to borrow. In addition to these lines, our liquid assets, consisting of cash and cash equivalents, interest bearing cash deposits and time deposits with other banks, overnight federal funds sold to other banks, liquid investment securities available for sale, and loan repayments within 30 days, were $1.03 billion at March 31, 2016, compared to $1.0 billion at December 31, 2015. Cash and cash equivalents, including federal funds sold, were $236.1 million at March 31, 2016, compared to $298.4 million at December 31, 2015. We believe our liquidity sources are sufficient to meet all reasonably foreseeable short-term and intermediate-term needs.

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Item 3.	Quantitative and Qualitative Disclosures About Market Risk

The objective of our asset and liability management activities is to maximize our earnings while maintaining adequate liquidity and an exposure to interest rate risk deemed by management to be acceptable by adjusting the type and mix of assets and liabilities to seek to effectively address changing conditions and risks. Through overall management of our balance sheet and by seeking to control various risks, we seek to optimize our financial returns within safe and sound parameters. Our operating strategies for attaining this objective include managing net interest margin through appropriate risk/return pricing of assets and liabilities and emphasizing growth in retail deposits, as a percentage of interest bearing liabilities, to reduce our cost of funds. We also seek to improve earnings by controlling noninterest expense, and enhancing noninterest income. We also use risk management instruments to modify interest rate characteristics of certain assets and liabilities to hedge against our exposure to interest rate fluctuations with the objective of reducing the effects fluctuations might have on associated cash flows or values. Finally, we perform internal analysis to measure, evaluate and monitor risk.

Interest Rate Risk

Interest rate risk is the most significant market risk impacting us. Interest rate risk occurs when interest rate sensitive assets and liabilities do not reprice simultaneously and in equal volume. A key objective of asset and liability management is to manage interest rate risk associated with changing asset and liability cash flows and values of our assets and liabilities and market interest rate movements. The management of interest rate risk is governed by policies reviewed and approved annually by the Board of Directors. Our Board delegates responsibility for interest rate risk management to the Asset and Liability Committee of the Board (“ALCO”) and to the Asset and Liability Management Committee (“ALM”), which is composed of the Bank’s senior executives and other designated officers.

Market risk is the risk of adverse impacts on our future earnings, the fair values of our assets and liabilities, or our future cash flows that may result from changes in the price of a financial instrument. The fundamental objective of our ALM is to manage our exposure to interest rate fluctuations while maintaining adequate levels of liquidity and capital. Our ALM meets regularly to monitor interest rate risk, the sensitivity of our assets and liabilities to interest rate changes, the book and market values of our assets and liabilities, and our investment activities. It also directs changes in the composition of our assets and liabilities. Our strategy has been to reduce the sensitivity of our earnings to interest rate fluctuations by more closely matching the effective maturities or repricing characteristics of our assets and liabilities. Certain assets and liabilities, however, may react in different degrees to changes in market interest rates. Furthermore, interest rates on certain types of assets and liabilities may fluctuate prior to changes in market interest rates, while interest rates on other types may lag behind changes in market interest rates. We consider the anticipated effects of these factors when implementing our interest rate risk management objectives.

Interest Rate Sensitivity

We monitor interest rate risk through the use of a simulation model that provides us with the ability to simulate our net interest income. In order to measure, at March 31, 2016, the sensitivity of our forecasted net interest income to changing interest rates, both rising and falling interest rate scenarios were projected and compared to base market interest rate forecasts. One application of our simulation model measures the impact of market interest rate changes on the net present value of estimated cash flows from our assets and liabilities, defined as our market value of equity. This analysis assesses the changes in market values of interest rate sensitive financial instruments that would occur in response to immediate and parallel changes in market interest rates.

The impacts on our net interest income and market value of equity exposed to immediate and parallel hypothetical changes in market interest rates as projected by the model we use for this purpose are illustrated in the following table.



	March 31, 2016				December 31, 2015
Simulated	Estimated Net Interest Income Sensitivity		Market Value Of Equity Volatility		Estimated Net Interest Income Sensitivity		Market Value Of Equity Volatility
Rate Changes	Estimated Net Interest Income Sensitivity		Market Value Of Equity Volatility		Estimated Net Interest Income Sensitivity		Market Value Of Equity Volatility
+ 200 basis points	2.21	%	(6.25	)%	3.38	%	(5.57	)%
+ 100 basis points	1.07	%	(2.61	)%	1.49	%	(2.47	)%
- 100 basis points	0.58	%	0.89	%	0.37	%	1.33	%
- 200 basis points	(0.33	)%	0.20	%	(0.71	)%	0.41	%

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Item 4.	Controls and Procedures

Evaluation of Disclosure Controls and Procedures

The Company maintains disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act), designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the U.S. Securities and Exchange Commission’s rules and forms and that such information is accumulated and communicated to management, including the Principal Executive Officer and the Principal Financial Officer, as appropriate, to allow for timely decisions regarding required disclosure. In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives.

The Company’s management, with the participation of our Principal Executive Officer and Principal Financial Officer, has evaluated the effectiveness of our disclosure controls and procedures as of the end of the period covered by this Quarterly Report on Form 10-Q. Based on such evaluation, our Principal Executive Officer and Principal Financial Officer have concluded that, as of the end of such period, our disclosure controls and procedures are effective in ensuring that information required to be disclosed by the Company in the reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the U.S. Securities and Exchange Commission’s rules and forms, and is accumulated and communicated to management, including the Principal Executive Officer and the Principal Financial Officer, as appropriate, to allow for timely decisions regarding required disclosure.

Changes in Internal Control over Financial Reporting

There have been no changes in our internal control over financial reporting during the quarter ended March 31, 2016 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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PART II

OTHER INFORMATION


Item 1.	Legal Proceedings

We are involved in routine litigation incidental to our business, none of which is expected to have a material adverse effect on us.


Item 1A.	Risk Factors

Management is not aware of any material changes to the risk factors discussed in Part 1, Item 1A of the Annual Report on Form 10-K for the year ended December 31, 2015. In addition to the other information set forth in this Quarterly Report on Form 10-Q, you should carefully consider the risk factors discussed in Part I, Item 1A of the Annual Report on Form 10-K for the year ended December 31, 2015, which could materially and adversely affect the Company’s business, financial condition and results of operations. The risks described in the Annual Report on Form 10-K are not the only risks facing the Company. Additional risks and uncertainties not presently known to management or that management presently believes not to be material

may also result in material and adverse effects on our business, financial condition and results of operations.


Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds

None.


Item 3.	Defaults Upon Senior Securities

None.


Item 4.	Mine Safety Disclosures

None.


Item 5.	Other Information

(a) Additional Disclosures. None.

(b) Stockholder Nominations. There have been no material changes in the procedures by which shareholders may recommend nominees to the Board of Directors during the three months ended March 31, 2016. Please see the discussion of these procedures in the most recent proxy statement forming part of the Registration Statement on Form S-4/A recently filed with the U.S. Securities and Exchange Commission.


Item 6.	Exhibits

See “Index to Exhibits.”

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.



		BBCN BANCORP, INC.

Date:	May 10, 2016	/s/ Kevin S. Kim
		Kevin S. Kim
		Chairman, President and Chief Executive Officer

Date:	May 10, 2016	/s/ Douglas J. Goddard
		Douglas J. Goddard
		Executive Vice President and Chief Financial Officer

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INDEX TO EXHIBITS



Exhibit Number		Description

31.1		Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002*

31.2		Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002*

32.1		Certification of Chief Executive Officer pursuant to Section 906 of the Public Company Accounting Reform and Investor Protection Act of 2002**

32.2		Certification of Chief Financial Officer pursuant to section 906 of the Public Company Accounting Reform and Investor Protection Act of 2002**

101.INS		XBRL Instance Document**

101.SCH		XBRL Taxonomy Extension Schema Document**

101.CAL		XBRL Taxonomy Extension Calculation Linkbase Document**

101.DEF		XBRL Taxonomy Extension Definition Linkbase Document**

101.LAB		XBRL Taxonomy Extension Label Linkbase Document**

101.PRE		XBRL Taxonomy Extension Presentation Linkbase Document**

__________________________________


*	Filed herewith


**	Furnished herewith

Attached files

HOPE BANCORP INC Reports

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