Regulatory Matters

12 Months Ended

Dec. 31, 2021

Broker-Dealer, Net Capital Requirement, SEC Regulation [Abstract]

17. REGULATORY MATTERS

The Company (on a consolidated basis) and the Bank are subject to various regulatory capital requirements administered by the federal banking regulatory 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 effect on the Company’s and the Bank’s financial statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, the Company and Bank must meet specific capital guidelines that involve quantitative measures of assets, liabilities, and certain off-balance-sheet items as calculated under regulatory accounting practices. The capital amounts and classification are also subject to qualitative judgment by the regulators about components, risk-weightings, and other factors. Prompt corrective action provisions are not applicable to bank holding companies.

The Bank and the Company are required to meet risk-based capital standards under the revised capital framework referred to as Basel III set by their respective regulatory authorities. The risk-based capital standards require the achievement of a minimum total risk-based capital ratio of 8.0%, a Tier 1 risk-based capital ratio of 6.0% and a common equity Tier 1 (“CET1”) capital ratio of 4.5%. In addition, the regulatory authorities require the highest rated institutions to maintain a minimum leverage ratio of 4.0%. To be considered “well-capitalized” for bank regulatory purposes, the Bank and the Company are required to have a CET1 capital ratio equal to or greater than 6.5%, a Tier 1 risk-based capital ratio equal to or greater than 8.0%, a total risk-based capital ratio equal to or greater than 10.0% and a Tier 1 leverage ratio equal to or greater than 5.0%.

Quantitative measures established by regulation to ensure capital adequacy require the Company and the Bank to maintain minimum amounts and ratios (set forth in the table below) of total capital, Tier 1 capital and CET1 capital to risk-weighted assets, and of Tier 1 capital to average assets. Management believes that, as of December 31, 2021 and 2020, the Company and the Bank meet all capital adequacy requirements to which they are subject.

As of December 31, 2021 and 2020, the most recent notifications from the FDIC categorized the Bank as well capitalized under the regulatory framework for prompt corrective action. To be categorized as well capitalized, the minimum total risk-based, Tier 1 risk-based, CET1 risk-based, and Tier 1 leverage (tangible Tier 1 capital divided by average total assets) ratios as set forth in the table below must be maintained. There are no conditions or events since said notification that management believes have changed the Bank’s category.

As of December 31, 2020, the Company had $25.8 million of trust-preferred securities, which were included in Tier 1 capital for regulatory purposes, respectively. These securities were redeemed on June 15, 2021.

The following table summarizes regulatory capital amounts and ratios for the Company and the Bank as of December 31, 2021 and 2020.


	Actual					For Capital Adequacy Purposes						To Be Well Capitalized under Prompt Corrective Action Provisions
	Amount		Ratio			Amount			Ratio			Amount			Ratio
	(Dollars in thousands)
As of December 31, 2021:
Total Capital (to Risk-Weighted Assets)
Company	$	1,479,453		15.63	%	$	757,166	≥		8.00	%				N/A
Bank	$	1,436,988		15.18	%	$	757,136	≥		8.00	%	$	946,420	≥		10.00	%
Tier 1 Capital (to Risk-Weighted Assets)
Company	$	1,406,434		14.86	%	$	567,875	≥		6.00	%				N/A
Bank	$	1,363,879		14.41	%	$	567,852	≥		6.00	%	$	757,136	≥		8.00	%
Common equity Tier 1 capital ratio
Company	$	1,406,434		14.86	%	$	425,906	≥		4.50	%				N/A
Bank	$	1,363,879		14.41	%	$	425,889	≥		4.50	%	$	615,173	≥		6.50	%
Tier 1 Capital (to Average-Assets)
Company	$	1,406,434		9.18	%	$	613,072	≥		4.00	%				N/A
Bank	$	1,363,879		8.90	%	$	612,983	≥		4.00	%	$	766,229	≥		5.00	%
As of December 31, 2020:
Total Capital (to Risk-Weighted Assets)
Company	$	1,415,008		16.24	%	$	697,258	≥		8.00	%				N/A
Bank	$	1,372,184		15.75	%	$	696,849	≥		8.00	%	$	871,061	≥		10.00	%
Tier 1 Capital (to Risk-Weighted Assets)
Company	$	1,312,316		15.06	%	$	522,944	≥		6.00	%				N/A
Bank	$	1,269,492		14.57	%	$	522,636	≥		6.00	%	$	696,849	≥		8.00	%
Common equity Tier 1 capital ratio
Company	$	1,287,316		14.77	%	$	392,208	≥		4.50	%				N/A
Bank	$	1,269,492		14.57	%	$	391,977	≥		4.50	%	$	566,189	≥		6.50	%
Tier 1 Capital (to Average-Assets)
Company	$	1,312,316		9.90	%	$	530,424	≥		4.00	%				N/A
Bank	$	1,269,492		9.58	%	$	530,164	≥		4.00	%	$	662,705	≥		5.00	%

In addition, the California Financial Code limits the amount of dividends a bank can pay without obtaining prior approval from bank regulators. Under this law, the Bank could, as of December 31, 2021, declare and pay additional dividends of approximately $160.3 million.

- Definition

The entire disclosure for regulatory capital requirement for depository and lending institutions. Institutions include, but not are not limited to, finance company, insured depository institution, bank holding company, savings and loan association holding company, bank and savings institution not federally insured, mortgage company, foreign financial institution and credit union.

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