. Stockholders’ Equity and Earnings per Share

As a bank holding company, the Bancorp’s ability to pay dividends will depend upon the dividends it receives from the Bank and on the income it

may

generate from any other activities in which it

may

engage, either directly or through other subsidiaries.

Under California banking law, the Bank

may

not, without regulatory approval, pay a cash dividend that exceeds the lesser of the Bank’s retained earnings or its net income for the last

three

fiscal years, less any cash distributions made during that period.

Under this regulation, the amount of retained earnings available for cash dividends to the Company immediately after

December

31,

2016,

is restricted to approximately

$178.2

million.

Activity in accumulated other comprehensive income, net of tax, and reclassification out of accumulated other comprehensive income for the years ended

December

31,

2016

, and

2015

was as follows:

	2016									2015
	Pre-tax			Tax expense/ (Benefit)			Net-of-tax			Pre-tax			Tax expense/ (Benefit)			Net-of-tax
	(In thousands)
Beginning balance, loss, net of tax
Securities available-for-sale							$	(5,431	)							$	(3,172	)
Cash flow hedge derivatives								(2,995	)								(2,397	)
Total							$	(8,426	)							$	(5,569	)
Net unrealized (losses)/gains arising during the period
Securities available-for-sale	$	11,603		$	4,878		$	6,725		$	(7,247	)	$	(3,047	)	$	(4,200	)
Cash flow hedge derivatives		1,423			598			825			(1,032	)		(434	)		(598	)
Total		13,026			5,476			7,550			(8,279	)		(3,481	)		(4,798	)
Reclassification adjustment for net losses/(gains) included in net income
Securities available-for-sale		(4,898	)		(2,059	)		(2,839	)		3,349			1,408			1,941
Cash flow hedge derivatives		-			-			-			-			-			-
Total		(4,898	)		(2,059	)		(2,839	)		3,349			1,408			1,941
Total other comprehensive (loss)/income
Securities available-for-sale		6,705			2,819			3,886			(3,898	)		(1,639	)		(2,259	)
Cash flow hedge derivatives		1,423			598			825			(1,032	)		(434	)		(598	)
Total	$	8,128		$	3,417		$	4,711		$	(4,930	)	$	(2,073	)	$	(2,857	)
Ending balance, loss, net of tax
Securities available-for sale							$	(1,545	)							$	(5,431	)
Cash flow hedge derivatives								(2,170	)								(2,995	)
Total							$	(3,715	)							$	(8,426	)

The Board of Directors of the Bancorp is authorized to issue preferred stock in

one

or more series and to fix the voting powers, designations, preferences or other rights of the shares of each such class or series and the qualifications, limitations, and restrictions thereon. Any preferred stock issued by the Bancorp

may

rank prior to the Bancorp common stock as to dividend rights, liquidation preferences, or both,

may

have full or limited voting rights, and

may

be convertible into shares of the Bancorp common stock.

The following is the reconciliation of the numerators and denominators of the basic and diluted earnings per share computations for the years as indicated:

	2016						2015						2014
					Per						Per						Per
	Income		Shares		Share		Income		Shares		Share		Income		Shares		Share
	(Numerator)		(Denominator)		Amount		(Numerator)		(Denominator)		Amount		(Numerator)		(Denominator)		Amount
	(In thousands, except shares and per share data)
Net income	$	175,099					$	161,109					$	137,830
Basic EPS, income	$	175,099		79,153,762	$	2.21	$	161,109		80,563,577	$	2.00	$	137,830		79,661,571	$	1.73

Effect of dilutive stock options				775,500						731,219						445,324

Diluted EPS, income	$	175,099		79,929,262	$	2.19	$	161,109		81,294,796	$	1.98	$	137,830		80,106,895	$	1.72

Options to purchase an additional

242,419

shares at

December

31,

2016

, and

988,569

shares at

December

31,

2015,

were not included in the computation of diluted earnings per share because their inclusion would have had an anti-dilutive effect.