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Note 17 - Regulatory Matters | 12 Months Ended
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Dec. 31, 2023
Notes to Financial Statements |
Regulatory Capital Requirements under Banking Regulations [Text Block] | NOTE 17 - REGULATORY MATTERS Update on Previously Disclosed Regulatory Matters As previously disclosed in the Company's Current Report on Form 8-K filed with the Securities and Exchange Commission (“SEC”) on October 31, 2023, effective on October 25, 2023, the Bank entered into a Stipulation to the Issuance of a Consent Order (the “Stipulation”) with the Federal Deposit Insurance Corporation (the “FDIC”) and the California Department of Financial Protection and Innovation (the “DFPI”), consenting to the issuance of a consent order (the “Consent Order”) relating to the Bank’s Anti-Money Laundering/Countering the Financing of Terrorism (“AML/CFT”) compliance program. In connection to the issuance of the Consent Order, the Bank did not admit or deny any charges of violating Bank Secrecy Act (“BSA”) and its implementing regulations. Regulatory Capital Holding companies (with assets over $3 billion at the beginning of the year) and banks are subject to various regulatory capital requirements administered by the federal 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 effect on the Company's financial statements. In July 2013, the federal bank regulatory agencies approved the final rules implementing the Basel Committee on Banking Supervision's capital guidelines for U.S. banks. The new rules became effective on January 1, 2015, with certain of the requirements phased-in over a multi-year schedule. Under the rules, minimum requirements increased for both the quantity and quality of capital held by the Bank. The rules include a new common equity Tier 1 (“CET1”) capital to risk-weighted assets ratio with minimums for capital adequacy and prompt corrective action purposes of 4.5% and 6.5%, respectively. The minimum Tier 1 capital to risk-weighted assets ratio was raised from 4.0% to 6.0% under the capital adequacy framework and from 6.0% to 8.0% to be well capitalized under the prompt corrective action framework. In addition, the rules introduced the concept of a “conservation buffer” of 2.5% applicable to the three capital adequacy risk-weighted asset ratios (CET1, Tier 1, and Total). The implementation of the capital conservation buffer began on January 1, 2016 at 0.625% and was phased in over a four-year period (increasing by that amount on each subsequent January 1, until it reached 2.5% on January 1, 2019). If the capital adequacy minimum ratios plus the phased-in conservation buffer amount exceed actual risk-weighted capital ratios, then dividends, share buybacks, and discretionary bonuses to executives could be limited in amount. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, the Bank must meet specific capital guidelines that involve quantitative measures of the Bank's assets, liabilities, and certain off-balance-sheet items as calculated under regulatory accounting practices. Capital amounts and classification are also subject to qualitative judgments by the regulators about components, risk weightings, and other factors. Quantitative measures established by regulation to ensure capital adequacy require the Bank to maintain minimum amounts and ratios (set forth in the table below) of total, Tier 1 and CET1 capital (as defined in the regulations) to risk-weighted assets (as defined), and of Tier 1 capital (as defined) to average assets (as defined). As permitted by the regulators for financial institutions that are not deemed to be “advanced approaches” institutions, the Company has elected to opt out of the Basel III requirement to include accumulated other comprehensive income in risk-based capital. Management believes, at December 31, 2023 and December 31, 2022, that the Bank satisfied all capital adequacy requirements to which it is subject. In February 2019, the U.S. federal bank regulatory agencies approved a final rule modifying their regulatory capital rules and providing an option to phase in over a three-year period the day-one adverse regulatory capital effects of ASU 2016-13. Additionally, in March 2020, the U.S. federal bank regulatory agencies issued an interim final rule that provides banking organizations an option to delay the estimated CECL impact on regulatory capital for an additional two years for a total transition period of up to five years to provide regulatory relief to banking organizations to better focus on supporting lending to creditworthy households and businesses in light of recent strains on the U.S. economy as a result of the novel coronavirus disease 2019 (“COVID-19”) pandemic. As a result, entities that adopted CECL in 2020 had the option to gradually phase in the full effect of CECL on regulatory capital over a five-year transition period. Effective January 1, 2022, the Company adopted ASU 2016-13, reflected the full effect of CECL at December 31, 2022, and did not elect the three-year CECL phase-in options on regulatory capital. As of December 31, 2023 and 2022, the most recent notification from the FDIC categorized the Bank as well capitalized under the regulatory framework for prompt corrective action (there are no conditions or events since that notification that management believes have changed the Bank’s category). To be categorized as well capitalized, the Bank must maintain minimum ratios as set forth in the table below. The following table sets forth Bancorp’s consolidated and the Bank’s actual capital amounts and ratios and related regulatory requirements for the Bank as of December 31, 2023:
|  |  |  |  |  |  |  |  |  | Amount of Capital Required |
|  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | To Be Well Capitalized |
|  |  |  |  |  |  |  |  |  | Minimum Required for |  |  | Under Prompt Corrective |
|  | Actual |  |  | Capital Adequacy Purposes |  |  | Provisions |
(dollars in thousands) |  | Amount |  |  | Ratio |  |  | Amount |  |  | Ratio (1) |  |  | Amount |  |  | Ratio |
As of December 31, 2023: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Tier 1 Leverage Ratio |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Consolidated |  | $ | 472,152 |  |  |  | 11.99 | % |  | $ | 157,526 |  |  |  | 4.0 | % |  | $ | 196,907 |  |  |  | 5.0 | %
Bank |  |  | 535,952 |  |  |  | 13.62 | % |  |  | 157,454 |  |  |  | 4.0 | % |  |  | 196,818 |  |  |  | 5.0 | %
Common Equity Tier 1 Risk-Based Capital Ratio |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Consolidated |  | $ | 457,214 |  |  |  | 19.07 | % |  | $ | 107,886 |  |  |  | 4.5 | % |  | $ | 155,836 |  |  |  | 6.5 | %
Bank |  |  | 535,952 |  |  |  | 22.41 | % |  |  | 107,598 |  |  |  | 4.5 | % |  |  | 155,419 |  |  |  | 6.5 | %
Tier 1 Risk-Based Capital Ratio |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Consolidated |  | $ | 472,152 |  |  |  | 19.69 | % |  | $ | 143,849 |  |  |  | 6.0 | % |  | $ | 191,798 |  |  |  | 8.0 | %
Bank |  |  | 535,952 |  |  |  | 22.41 | % |  |  | 143,464 |  |  |  | 6.0 | % |  |  | 191,285 |  |  |  | 8.0 | %
Total Risk-Based Capital Ratio |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Consolidated |  | $ | 621,423 |  |  |  | 25.92 | % |  | $ | 191,798 |  |  |  | 8.0 | % |  | $ | 239,748 |  |  |  | 10.0 | %
Bank |  |  | 565,997 |  |  |  | 23.67 | % |  |  | 191,285 |  |  |  | 8.0 | % |  |  | 239,106 |  |  |  | 10.0 | %
(1) These ratios are exclusive of the capital conservation buffer. The following table sets forth Bancorp’s consolidated and the Bank’s actual capital amounts and ratios and related regulatory requirements for the Bank as of December 31, 2022:
|  |  |  |  |  |  |  |  |  | Amount of Capital Required |
|  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | To Be Well Capitalized |
|  |  |  |  |  |  |  |  |  | Minimum Required for |  |  | Under Prompt Corrective |
|  | Actual |  |  | Capital Adequacy Purposes |  |  | Provisions |
(dollars in thousands) |  | Amount |  |  | Ratio |  |  | Amount |  |  | Ratio (1) |  |  | Amount |  |  | Ratio |
As of December 31, 2022: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Tier 1 Leverage Ratio |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Consolidated |  | $ | 446,776 |  |  |  | 11.67 | % |  | $ | 153,116 |  |  |  | 4.0 | % |  | $ | 191,395 |  |  |  | 5.0 | %
Bank |  |  | 569,071 |  |  |  | 14.89 | % |  |  | 152,900 |  |  |  | 4.0 | % |  |  | 191,124 |  |  |  | 5.0 | %
Common Equity Tier 1 Risk Based Capital Ratio |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Consolidated |  | $ | 432,056 |  |  |  | 16.03 | % |  | $ | 121,291 |  |  |  | 4.5 | % |  | $ | 175,199 |  |  |  | 6.5 | %
Bank |  |  | 569,071 |  |  |  | 21.14 | % |  |  | 121,110 |  |  |  | 4.5 | % |  |  | 174,937 |  |  |  | 6.5 | %
Tier 1 Risk-Based Capital Ratio |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Consolidated |  | $ | 446,776 |  |  |  | 16.58 | % |  | $ | 161,722 |  |  |  | 6.0 | % |  | $ | 215,629 |  |  |  | 8.0 | %
Bank |  |  | 569,071 |  |  |  | 21.14 | % |  |  | 161,481 |  |  |  | 6.0 | % |  |  | 215,307 |  |  |  | 8.0 | %
Total Risk-Based Capital Ratio |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Consolidated |  | $ | 654,159 |  |  |  | 24.27 | % |  | $ | 215,629 |  |  |  | 8.0 | % |  | $ | 269,537 |  |  |  | 10.0 | %
Bank |  |  | 602,819 |  |  |  | 22.40 | % |  |  | 215,307 |  |  |  | 8.0 | % |  |  | 269,134 |  |  |  | 10.0 | %
(1) These ratios are exclusive of the capital conservation buffer. The California Financial Code generally acts to prohibit banks from making a cash distribution to its shareholders in excess of the lesser of the bank’s undivided profits or the bank's net income for its last three fiscal years less the amount of any distribution made by the bank’s shareholders during the same period. The California General Corporation Law generally acts to prohibit companies from paying dividends on common stock unless retained earnings, immediately prior to the dividend payment, equals or exceeds the amount of the dividend. If a company fails this test, then it may still pay dividends if after giving effect to the dividend the company’s assets are at least 125% of its liabilities. Additionally, the Federal Reserve has issued guidance, which requires that they be consulted before payment of a dividend if a bank holding company does not have earnings over the prior four quarters of at least equal to the dividend to be paid, plus other holding company obligations.

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