Capital Adequacy and Restriction on Dividends

12 Months Ended

Dec. 31, 2015

Capital Adequacy and Restriction on Dividends [Abstract]

Capital Adequacy and Restriction on Dividends

(18) Capital Adequacy and Restriction on Dividends

The Company is subject to various regulatory capital requirements administered by the federal banking agencies.  Failure to meet minimum capital requirements can initiate mandatory and possibly additional discretionary actions by regulators that, if undertaken, could have a material effect on the Company's consolidated financial statements.  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 the Company's and the Bank's assets, liabilities, and certain off-balance-sheet items as calculated under regulatory accounting practices.  The Company's 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 help ensure capital adequacy require the Bank to maintain minimum amounts and ratios (set forth in the table below).

In July 2013, the Federal Reserve Board and the other U.S. federal banking agencies adopted final rules making significant changes to the U.S. regulatory capital framework for U.S. banking organizations and to conform this framework to the Basel Committee's current international regulatory capital accord (Basel III). These rules replaced the federal banking agencies' general risk-based capital rules, advanced approaches rule, market-risk rule, and leverage rules, in accordance with certain transition provisions. The Bank became subject to the new rules on January 1, 2015. The new rules implement higher minimum capital requirements, include a new common equity Tier 1 capital requirement, and establish criteria that instruments must meet in order to be considered common equity Tier 1 capital, additional Tier 1 capital, or Tier 2 capital. When fully phased in, the final rules will provide for increased minimum capital ratios as follows: (a) a common equity Tier 1 capital ratio of 4.5%; (b) a Tier 1 capital ratio of 6% (which is an increase from 4.0%); (c) a total capital ratio of 8%; and (d) a Tier 1 leverage ratio to average consolidated assets of 4%. Under the new rules, in order to avoid certain limitations on capital distributions, including dividend payments and certain discretionary bonus payments to executive officers, a banking organization must hold a capital conservation buffer composed of common equity Tier 1 capital above its minimum risk based capital requirements (equal to 2.5% of total risk-weighted assets). The phase-in of the capital conservation buffer began on January 1, 2016, and will be completed by January 1, 2019. The new rules also provide for various adjustments and deductions to the definitions of regulatory capital that will phase in through December 31, 2017.

Management believes, as of December 31, 2015, that the Bank met all capital adequacy requirements to which it is subject.  As of December 31, 2015, the most recent notification from the Federal Deposit Insurance Corporation ("FDIC") categorized the Bank as "well capitalized" under the regulatory framework for prompt corrective action.  To be categorized as well capitalized the Bank must meet the minimum ratios as set forth below. As of the date hereof, there have been no conditions or events since that notification that management believes have changed the institution's category.

The Company and the Bank had Tier I Leverage, Common Equity Tier 1, Tier I Risk-Based and Total Risk-Based capital above the "well capitalized" levels at December 31, 2015, respectively, as set forth in the following tables (calculated in accordance with the Basel III capital rules):

	The Company
	2015						Adequately Capitalized
	Capital			Ratio			Ratio
Tier 1 Leverage Capital (to Average Assets)		$	86,344		8.3	%		4.0	%
Common Equity Tier 1 Capital (to Risk-Weighted Assets)			86,344		12.4	%		4.5	%
Tier 1 Capital (to Risk-Weighted Assets)			86,344		12.4	%		6.0	%
Total Risk-Based Capital (to Risk-Weighted Assets)			95,067		13.7	%		8.0	%

	The Bank
	2015						Adequately Capitalized			Well Capitalized
	Capital			Ratio			Ratio			Ratio
Tier 1 Leverage Capital (to Average Assets)		$	84,100		8.0	%		4.0	%		5.0	%
Common Equity Tier 1 Capital (to Risk-Weighted Assets)			84,100		12.1	%		4.5	%		6.5	%
Tier 1 Capital (to Risk-Weighted Assets)			84,100		12.1	%		6.0	%		8.0	%
Total Risk-Based Capital (to Risk-Weighted Assets)			92,823		13.3	%		8.0	%		10.0	%

The Company and the Bank had Tier I Leverage, Tier I risk-based and Total Risk-Based capital above the "well capitalized" levels at December 31, 2014, respectively, as set forth in the following tables (calculated in accordance with the Basel I capital rules):

	The Company
	2014						Adequately Capitalized
	Capital			Ratio			Ratio
Tier 1 Leverage Capital (to Average Assets)		$	91,799		9.4	%		4.0	%
Tier 1 Capital (to Risk-Weighted Assets)			91,799		15.7	%		4.0	%
Total Risk-Based Capital (to Risk-Weighted Assets)			99,137		17.0	%		8.0	%

	The Bank
	2014						Adequately Capitalized			Well Capitalized
	Capital			Ratio			Ratio			Ratio
Tier 1 Leverage Capital (to Average Assets)		$	87,903		9.0	%		4.0	%		5.0	%
Tier 1 Capital (to Risk-Weighted Assets)			87,903		15.0	%		4.0	%		6.0	%
Total Risk-Based Capital (to Risk-Weighted Assets)			95,241		16.3	%		8.0	%		10.0	%

Cash dividends declared by the Bank are restricted under California State banking laws to the lesser of the Bank's retained earnings or the Bank's net income for the latest three fiscal years, less dividends previously declared during that period.