Note 20 - Regulatory Capital

12 Months Ended

Dec. 31, 2015

Disclosure Text Block [Abstract]

Regulatory Capital Requirements under Banking Regulations [Text Block]

NOTE 20. REGULATORY CAPITAL

The Holding Company and the Bank are subject to various regulatory capital requirements administered by 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 effect on our 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 their assets, liabilities and certain off-balance sheet items as calculated under regulatory accounting practices.

On July 2, 2013, the federal banking agencies substantially amended the regulatory risk-based capital rules applicable to the Holding Company and the Bank. Effective January 1, 2015 the new rules create “Tier 1 Common Equity,” a new measure of regulatory capital closer to pure tangible common equity than the present Tier 1 definition; The required minimum risk-based capital ratio for Tier 1 Common Equity is 4.5 percent and with a 2.5 percent capital conservation buffer.

The new capital rules require the Bank to meet the capital conservation buffer requirement by 2019 in order to avoid constraints on capital distributions, such as dividends and equity repurchases, and certain bonus compensation for executive officers. These new capital rules also change the risk-weights of certain assets for purposes of the risk-based capital ratios and phases out certain instruments as qualifying capital.

The capital amounts and the Bank’s prompt corrective action classifications 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. 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 following table as defined in the regulations. Management believes as of December 31, 2015 that the Company and the Bank met all capital adequacy requirements to which they are subject.

As of December 31, 2015, the most recent notification from the FDIC categorized the Bank as “well capitalized” under the regulatory framework for prompt corrective action. To be categorized as “well capitalized”, an institution must maintain minimum ratios as set forth in the following table. There are no conditions or events since that notification that management believes have changed the Bank’s capital rating category. The Holding Company’s and the Bank’s actual capital amounts and ratios as of December 31, 2015 and 2014 are presented in the following table.

	Actual					For Capital Adequacy Purposes					To Be Well Capitalized
(Amounts in thousands)	Amount		Ratio			Amount		Ratio			Amount		Ratio
At December 31, 2015:
Company
Common equity tier 1 capital ratio	$	90,743		10.06	%	$	40,587		4.50	%		n/a		n/a
Tier 1 capital ratio	$	100,694		11.16	%	$	54,117		6.00	%		n/a		n/a
Total capital ratio	$	121,976		13.52	%	$	72,155		8.00	%		n/a		n/a
Tier 1 leverage ratio	$	100,694		10.03	%	$	40,159		4.00	%		n/a		n/a
Bank
Common equity tier 1 capital ratio	$	119,980		13.31	%	$	40,570		4.50	%	$	58,601		6.50	%
Tier 1 capital ratio	$	119,980		13.31	%	$	54,094		6.00	%	$	72,125		8.00	%
Total capital ratio	$	131,257		14.56	%	$	72,125		8.00	%	$	90,156		10.00	%
Tier 1 leverage ratio	$	119,980		11.98	%	$	40,067		4.00	%	$	50,084		5.00	%
At December 31, 2014:
Company
Tier 1 capital ratio	$	113,963		13.91	%	$	32,764		4.00	%		n/a		n/a
Total capital ratio	$	124,217		15.16	%	$	65,529		8.00	%		n/a		n/a
Tier 1 leverage ratio	$	113,963		11.59	%	$	39,328		4.00	%		n/a		n/a
Bank
Tier 1 capital ratio	$	113,640		13.89	%	$	32,734		4.00	%	$	49,101		8.00	%
Total capital ratio	$	123,885		15.14	%	$	65,469		8.00	%	$	81,836		10.00	%
Tier 1 leverage ratio	$	113,640		11.57	%	$	39,279		4.00	%	$	49,098		5.00	%

The principal source of cash for the Holding Company is dividends from the Bank. Dividends from the Bank to the Holding Company are restricted under California law 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. With the approval of the CDBO, the dividend restriction can be expanded to the greatest of the retained earnings of the Bank, the net income of the Bank for its last fiscal year, or the net income of the Bank for its current fiscal year. Also with the prior approval of the CDBO and the shareholders of the Bank, the Bank may make a distribution to its shareholders, as a reduction in capital of the Bank.

In the event that the Commissioner determines that the shareholders' equity of a bank is inadequate or that the making of a distribution by a bank would be unsafe or unsound, the Commissioner may order a bank to refrain from making such a proposed distribution. As of January 1, 2015, the Bank was required to obtain regulatory approval from the CDBO for a dividend or other distribution to the Holding Company and was granted permission by the CDBO to make four dividend payments, one for each calendar quarter of 2015. As of January 1, 2016, the California Financial Code requires the Bank to obtain regulatory approval for any one dividend or other distribution to the Company exceeding $387 thousand. During 2016, management does not anticipate needing to obtain prior regulatory approval from the CDBO.

The Bank is subject to certain restrictions under the Federal Reserve Act, including restrictions on the extension of credit to affiliates. In particular, it is prohibited from lending to an affiliated company unless the loans are secured by specific types of collateral. Such secured loans and other advances from the subsidiaries are limited to 10% of the Bank’s Tier 1 and Tier 2 capital.