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Significant Accounting Policies (Policies)

12 Months Ended

Dec. 31, 2017

Use of Estimates, Policy [Policy Text Block]

Use of Estimates.

The preparation of the Consolidated Financial Statements in accordance with GAAP requires management of the Company to make a number of estimates and assumptions relating to the reported amount of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the Consolidated Financial Statements and the reported amounts of revenues and expenses during the period. Actual results could differ from those estimates. The significant estimates subject to change relate to the allowance for loan losses.

Concentration Risk, Credit Risk, Policy [Policy Text Block]

Concentration

The Bank was incorporated in California and started its business from California. Therefore, loans originated and deposits solicited were mainly from California. As of

December 31, 2017,

gross loans were primarily comprised of

50.4%

of commercial mortgage loans,

23.8%

of residential mortgage loans, and

19.1%

of commercial loans. As of

December 31, 2017,

approximately

61%

of the Bank’s residential mortgages were for properties located in California.

Loans and Leases Receivable, Allowance for Loan Losses Policy [Policy Text Block]

Allowance for

Loan

Losses.

The determination of the amount of the provision for loan losses charged to operations reflects management’s current judgment about the credit quality of the loan portfolio and takes into consideration changes in lending policies and procedures, changes in economic and business conditions, changes in the nature and volume of the portfolio and in the terms of loans, changes in the experience, ability and depth of lending management, changes in the volume and severity of past due, non-accrual and adversely classified or graded loans, changes in the quality of the loan review system, changes in the value of underlying collateral for collateral-dependent loans, the existence and effect of any concentrations of credit and the effect of competition, legal and regulatory requirements, and other external factors. The nature of the process by which loan losses is determined and the appropriate allowance for loan losses requires the exercise of considerable judgment. The allowance is increased or decreased by the provision or credit to the allowance for loan losses and decreased by charge-offs when management believes the uncollectability of a loan is confirmed.

Subsequent recoveries, if any, are credited to the

allowance. A weakening of the economy or other factors that adversely affect asset quality could result in an increase in the number of delinquencies, bankruptcies, or defaults, and a higher level of non-performing assets, net charge-offs, and provision for loan losses in future periods.

The total allowance for loan losses consists of

two

components: specific allowances and general allowances. To determine the

appropriateness of the allowance in each of these

two

components,

two

primary methodologies are employed, the individual loan review analysis methodology and the classification migration methodology. These methodologies support the basis for determining allocations between the various loan categories and the overall appropriateness of our allowance to provide for probable losses inherent in the loan portfolio. These methodologies are further supported by additional analysis of relevant factors such as the historical losses in the portfolio, and environmental factors which include trends in delinquency and non-accrual, and other significant factors, such as the national and local economy, the volume and composition of the portfolio, strength of management and loan staff, underwriting standards, and the concentration of credit.

The Bank

’s management allocates a specific allowance for “Impaired Credits,” in accordance with Accounting Standard Codification (“ASC”) Section

310

35.

For non-Impaired Credits, a general allowance is established for those loans internally classified and risk graded Pass, Watch

, Special Mention, or Substandard based on historical losses in the specific loan portfolio and a reserve based on environmental factors determined for that loan group. The level of the general allowance is established to provide coverage for management’s estimate of the credit risk in the loan portfolio by various loan segments

not

covered by the specific allowance.

Investment in Federal Home Loan Bank Stock [Policy Text Block]

Investment in Federal Home Loan Bank (“

FHLB”) Stock.

As a member of the FHLB system the Bank is required to maintain an investment in the capital stock of the FHLB. The amount of investment is also affected by the outstanding advances under the line of credit the Bank maintains with the FHLB. FHLB stock is carried at cost and is pledged as collateral to the FHLB. FHLB stock is

periodically evaluated for impairment based on ultimate recovery of par value. The carrying amount of the FHLB stock was

$23.1

million at

December 31, 2017,

and

$17.3

million at

December 31, 2016.

As of

December 31, 2017,

the Company owned

230

,85

shares of FHLB stock

, which exceeded the minimum stock requirement of

150,000

shares.

Marketable Securities, Held-to-maturity Securities, Policy [Policy Text Block]

Securities.

Securities are classified as held-to-maturity when management has the ability and intent to hold these securities until maturity. Securities are classified as available-for-sale when management intends to hold the securities for an indefinite period of time, or when the securities

may

be utilized for tactical asset/liability purposes, and

may

be sold from time to time to manage interest rate exposure and resultant prepayment risk and liquidity needs. Securities are classified as trading securities when management intends to sell the securities in the near term. Securities purchased are designated as held-to-maturity

, available-for-sale, or trading securities at the time of acquisition.

Securities held-to-maturity are stated at cost, adjusted for the amortization of premiums and the accretion of discounts on a level-yield basis. The carrying value of these assets is

not

adjusted for temporary declines in fair value since the Company has the positive intent and ability to hold them to maturity. Securities available-for-sale are carried at fair value, and any unrealized holding gains or losses are excluded from earnings and reported as a separate component of stockholders’ equity, net of tax, in accumulated other comprehensive income until realized. Realized gains or losses are determined on the specific identification method. Premiums and discounts are amortized or accreted as adjustment of yield on a level-yield basis.

ASC Topic

320

requires an entity to assess whether the entity has the intent to sell the debt security or more likely than

not

will be required to sell the debt security before its anticipated re

covery. If either of these conditions is met, an entity must recognize an other-than-temporary impairment (“OTTI”). If an entity does

not

intend to sell the debt security and will

not

be required to sell the debt security, the entity must consider whether it will recover the amortized cost basis of the security. If the present value of expected cash flows is less than the amortized cost basis of the security, OTTI shall be considered to have occurred.

OTTI is then separated into the amount of the total impairment related to credit losses and the amount of the total impairment related to all other factors. An entity determines the impairment related to credit losses by comparing the present value of cash flows expected to be collected from the security with the amortized cost basis of the security. OTTI related to the credit loss is then recognized in earnings. OTTI related to all other factors is recognized in other comprehensive income. OTTI

not

related to the credit loss for a held-to-maturity security should be recognized separately in a new category of other comprehensive income and amortized over the remaining life of the debt security as an increase in the carrying value of the security only when the entity does

not

intend to sell the security and it is

not

more likely than

not

that the entity will be required to sell the security before recovery of its remaining amortized cost basis. The Company has both the ability and the intent to hold and it is

not

more likely than

not

that the Company will be required to sell those securities with unrealized losses before recovery of their amortized cost basis.

Trading securities are reported at fair value, with unrealized gains or losses included in income.

Finance, Loan and Lease Receivables, Held-for-investment, Policy [Policy Text Block]

Loans

Held for Investment.

Loans receivable that the Company has the intent and ability to hold for the foreseeable future or until maturity are stated at their out

standing principal, reduced by an allowance for loan losses and net of deferred loan fees or costs on originated loans and unamortized premiums or discounts on purchased loans. Nonrefundable fees and direct costs associated with the origination or purchase of loans are deferred and netted against outstanding loan balances. The deferred net loan fees and costs are recognized in interest income as an adjustment to yield over the loan term using the effective interest method or straight-line method. Discounts or premiums on purchased loans are accreted or amortized to interest income using the effective interest method or straight-line method over the remaining period to contractual maturity. Interest on loans is calculated using the simple-interest method on daily balances of the principal amounts outstanding based on an actual or

360

-day basis. Generally, loans are placed on nonaccrual status when they become

days past due. Loans are considered past due when contractually required principal or interest payments have

not

been made on the due dates. Loans are also placed on nonaccrual status when management believes, after considering economic and business conditions and collection efforts, that the borrower’s financial condition is such that full collection of principal or interest becomes uncertain, regardless of the length of past due status. Once a loan is placed on nonaccrual status, interest accrual is discontinued and all unpaid accrued interest is reversed against interest income. Interest payments received on nonaccrual loans are reflected as a reduction of principal and

not

as interest income. A loan is returned to accrual status when the borrower has demonstrated a satisfactory payment trend subject to management’s assessment of the borrower’s ability to repay the loan.

Finance, Loan and Lease Receivables, Held-for-sale, Policy [Policy Text Block]

Loans held

for sale

are carried at the lower of aggregate cost or fair value. Gains and losses are recorded in non-interest income based on the difference between sales proceeds, net of sales commissions, and carrying value. When a determination is made at the time of commitment to originate or purchase loans as held-for-investment, it is the Company’s intent to hold these loans to maturity or for the “foreseeable future,” subject to periodic review under the Company’s management evaluation processes, including asset/liability management. When the Company subsequently changes its intent to hold certain loans, the loans are transferred from the loans held-for-investment portfolio to the loans held-for-sale portfolio at lower of aggregate cost or fair value.

Impaired Financing Receivable, Policy [Policy Text Block]

Impaired Loans.

A loan is considered impaired when it is probable that the Bank will be unable to collect all amounts due (i.e. both principal and interest) according to the contractual terms of the loan agreement. The measurement of impairment

may

be based on (

) the present value of the expected future cash flows of the impaired loan discounted at the loan’s original effective interest rate, (

) the observable market price of the impaired loan or (

) the fair value of the collateral of a collateral-dependent loan. The amount by which the recorded investment in the loan exceeds the measure of the impaired loan is recognized by recording a valuation allowance with a corresponding charge to the provision for loan losses. The Company stratifies its loan portfolio by size and treats smaller non-performing loans with an outstanding balance based on the Company’s defined criteria, generally where the loan amount is

$500,000

or less, as a homogenous portfolio. Once a loan has been identified as a possible problem loan, the Company conducts a periodic review of such loan in order to test for impairment. When loans are placed on an impaired status, previously accrued but unpaid

interest is reversed against current income

and subsequent payments received are generally

first

applied toward the outstanding principal balance of the loan.

Loans and Leases Receivable, Troubled Debt Restructuring Policy [Policy Text Block]

Troubled Debt Restructured Loan

(“TDR”)

A TDR is a formal modification of the terms of a loan when the lender, for economic or legal reasons related to the borrower’s financial difficulties, grants a concession to the borrower. The concessions

may

be granted in various forms, including reduction in the stated interest rate, reduction in the loan balance or accrued interest, or extension of the maturity date

. Although these loan modifications are considered TDRs, TDR loans that have, pursuant to the Bank’s policy, performed under the restructured terms and have demonstrated sustained performance under the modified terms for

six

months are returned to accrual status. The sustained performance considered by management pursuant to its policy includes the periods prior to the modification if the prior performance met or exceeded the modified terms. This would include cash paid by the borrower prior to the restructure to set up interest reserves. Loans classified as TDRs are reported as impaired loans.

Loan Commitments, Policy [Policy Text Block]

Unfunded Loan Commitments.

Unfunded loan commitments are generally related to providing credit facilities to clients of the Bank, and are

not

actively traded financial instruments. These unfunded commitments are disclosed as off-balance sheet financial instruments in Note

in the Notes to Consolidated Financial Statements.

Letter of Credit Fees [Policy Text Block]

Letter of Credit Fees.

Issuance and commitment fees received for the issuance of commercial or standby letters of credit are recognized over the term of the instruments.

Property, Plant and Equipment, Policy [Policy Text Block]

Premises and Equipment.

Premises and equipment are carried at cost, less accumulated depreciation. Depreciation is computed on the straight-line method based on the following estimated useful lives of the assets:

Typ e	Estimated Useful Lif e (years)
Buildings	15	to	45
Building improvements	5	to	20
Furniture, fixtures, and equipment	3	to	25
Leasehold improvements	Shorter of useful lives or the terms of the lease s

Improvements are capitalized and amortized to occupancy expense based on the above table. Construction in process is carried at cost and includes land acquisition cost, architectural fees, general contractor fees, capitalized interest and other costs related directly to the construction of a property.

Real Estate Owned, Valuation Allowance, Policy [Policy Text Block]

Other Real Estate Owned.

Real estate acquired in the settlement of loans is initially recorded at fair value, less estimated costs to sell. Specific valuation allowances on other real estate owned are recorded through charges to operations to recognize declines in fair value subsequent to foreclosure. Gain or loss on sale is recognized when certain criteria relating to the buyer’s initial and continuing investment in the property are met.

Investments In Affordable Housing [Policy Text Block]

Investments in Affordable Housing

Partnerships and Other Tax Credit Investments

The Company is a limited partner in limited partnerships that invest in low-income housing projects that qualify for Federal and/or State income tax credits and limited partnerships that invests in alternative energy systems. As further discussed in Note

the partnership interests are accounted for utilizing the equity method of accounting. As of

December 31, 2017,

eight

of the limited partnerships in which the Company has an equity interest were determined to be variable interest entities for which the Company is the primary beneficiary. The Company therefore consolidated the financial statements of these

eight

limited partnerships into its Consolidated Financial Statements. The tax credits from these partnerships are recognized in the consolidated financial statements to the extent they are utilized on the Company’s income tax returns. The investments are reviewed for impairment on an annual basis or on an interim basis if an event occurs that would trigger potential impairment.

Investments in Venture Capital [Policy Text Block]

Investments in

enture

apital.

The Company invests in limited partnerships that invest in nonpublic companies. These are commonly referred to as venture capital investments. These limited partnership interests are carried under the cost method with other-than-temporary impairment charged against net income.

Goodwill and Intangible Assets, Policy [Policy Text Block]

Goodwi

and Goodwill Impairment

Goodwill represents the excess of costs over fair value of assets of businesses acquired. Goodwill and intangible assets acquired in a purchase business combination and determined to have an indefinite useful life are

not

amortized, but instead are tested for impairment at least annually in accordance with the provisions of ASC Topic

350.

ASC Topic

350

also requires that intangible assets with estimable useful lives be amortized over their respective estimated useful lives to their estimated residual values, and reviewed for impairment in accordance with ASC Topic

360.

The Company

’s policy is to assess goodwill for impairment at the reporting unit level on an annual basis or between annual assessments if a triggering event occurs or circumstances change that would more likely than

not

reduce the fair value of a reporting unit below its carrying amount. Impairment is the condition that exists when the carrying amount of goodwill exceeds its implied fair value. Accounting standards require management to estimate the fair value of each reporting unit in making the assessment of impairment at least annually.

The Company

first

assesses qualitative factors to determine whether it is more likely than

not

that the fair value of a reporting unit is less than its carrying amount as a basis for determining whether it is necessary to perform the

two

-step goodwill impairment test described in ASC Topic

350.

The

two

-step impairment testing process conducted by us, if needed, begins by assigning net assets and goodwill to our reporting units. The Company then completes “step one” of the impairment test by comparing the fair value of each reporting unit (as determined based on the discussion below) with the recorded book value (or “carrying amount”) of its net assets, with goodwill included in the computation of the carrying amount. If the fair value of a reporting unit exceeds its carrying amount, goodwill of that reporting unit is

not

considered impaired, and “step two” of the impairment test is

not

necessary. If the carrying amount of a reporting unit exceeds its fair value, step

two

of the impairment test is performed to determine the amount of impairment. Step

two

of the impairment test compares the carrying amount of the reporting unit’s goodwill to the “implied fair value” of that goodwill. The implied fair value of goodwill is computed by assuming that all assets and liabilities of the reporting unit would be adjusted to the current fair value, with the offset as an adjustment to goodwill. This adjusted goodwill balance is the implied fair value used in step two. An impairment charge is recognized for the amount by which the carrying amount of goodwill exceeds its implied fair value.

The

Company has identified

two

reporting units for its business: the Commercial Lending unit and the Retail Banking unit. The reporting unit fair values were determined based on an equal weighting of (

) a market approach using a combination of price to earnings multiples determined based on a representative peer group applied to

2017

and forecasted

2018

and

2019

earnings, and a price to book multiple and (

) a dividend discount model with the discount rate determined using the same representative peer group. A control premium was then applied to the unit fair values so determined as of

December 31, 2017.

As a result of this analysis, the Company determined that there was

goodwill impairment at

December 31, 2017

as the fair value of all reporting units exceeded the current carrying amount of the units.

assurance can be given that goodwill will

not

be written down in future periods.

Intangible Assets, Finite-Lived, Policy [Policy Text Block]

Core Deposit

Intangible

Core deposit intangible, which represents the purchase price over the fair value of the deposits acquired from other financial institutions, is amortized over its estimated useful life to its residual value in proportion to the economic benefits consumed. If a pattern of consumption cannot be reliably determined, straight-line amortization is used. The Company assesses the recoverability of this intangible asset by determining whether the amortization of the premium balance over its remaining life can be recovered through the remaining deposit portfolio and amortizes core deposit premium over its estimated useful life.

Repurchase Agreements, Valuation, Policy [Policy Text Block]

Securities Sold Under Agreements to Repurchase.

The Company sells certain securities under agreements to repurchase. The agreements are treated as collateralized financing transactions and the obligations to repurchase securities sold are reflected as a liability in the accompanying Consolidated Balance Sheets. The securities underlying the agreements remain in the applicable asset accounts.

Share-based Compensation, Option and Incentive Plans Policy [Policy Text Block]

Stock-Based Compensation.

Stock option compensation expense is calculated based on the fair value of the award at the grant date for those options expected to vest, and is recognized as an expense over the vesting period of the grant using the straight-line method. The Company uses the Black-Scholes option pricing model to estimate the value of granted options. This model takes into account the option exercise price, the expected life, the current price of the underlying stock, the expected volatility of the Company’s stock, expected dividends on the stock and a risk-free interest rate. The Company estimates the expected volatility based on the Company’s historical stock prices for the period corresponding to the expected life of the stock options. Restricted stock units are valued at the closing price of the Company’s stock on the date of the grant.

Derivatives, Policy [Policy Text Block]

Derivatives

. The Company follows ASC Topic

815

that establishes accounting and reporting standards for financial derivatives, including certain financial derivatives embedded in other contracts, and hedging activities. It requires the recognition of all financial derivatives as assets or liabilities in the Company’s consolidated balance sheet at fair value. The accounting treatment of changes in fair value is dependent upon whether or

not

a financial derivative is designated as a hedge and, if so, the type of hedge. Fair value is determined using

third

-party models with observable market data. For derivatives designated as cash flow hedges, changes in fair value are recognized in other comprehensive income and are reclassified to earnings when the hedged transaction is reflected in earnings. For derivatives designated as fair value hedges, changes in the fair value of the derivatives are reflected in current earnings, together with changes in the fair value of the related hedged item if there is a highly effective correlation between changes in the fair value of the interest rate swaps and changes in the fair value of the underlying asset or liability that is intended to be hedged. If there is

not

a highly effective correlation between changes in the fair value of the interest rate swap and changes in the fair value of the underlying asset or liability that is intended to be hedged, then only the changes in the fair value of the interest rate swaps are reflected in the Company’s consolidated financial statements.

Foreign Exchanged Forwards and Foreign Currency Option Contracts [Policy Text Block]

Foreign Exchange Forwards and Foreign Currency Option Contracts.

We enter into foreign exchange forward contracts and foreign currency option contracts with correspondent banks to mitigate the risk of fluctuations in foreign currency exchange rates for foreign currency certificates of deposit, foreign exchange contracts or foreign currency option contracts entered into with our clients. These contracts are

not

designated as hedging instruments and are recorded at fair value in our Consolidated Balance Sheets. Changes in the fair value of these contracts as well as the related foreign currency certificates of deposit, foreign exchange contracts or foreign currency option contracts, are recognized immediately in net income as a component of non-interest income. Period end gross positive fair values are recorded in other assets and gross negative fair values are recorded in other liabilities.

Income Tax, Policy [Policy Text Block]

Income Taxes.

The provision for income taxes is based on income reported for financial statement purposes, and differs from the amount of taxes currently payable, since certain income and expense items are reported for financial statement purposes in different periods than those for tax reporting purposes. The Company accounts for income taxes using the asset and liability approach, the objective of which is to establish deferred tax assets and liabilities for the temporary differences between the financial reporting basis and the tax basis of the Company’s assets and liabilities at enacted tax rates expected to be in effect when such amounts are realized or settled. A valuation allowance is established for deferred tax assets if, based on the weight of available evidence, it is more likely than

not

that some portion or all of the deferred tax assets will

not

be realized.

Comprehensive Income, Policy [Policy Text Block]

Comprehensive Income

/(loss)

Comprehensive income/(loss) is defined as the change in equity during a period from transactions and other events and circumstances from non-owner sources. Comprehensive income/(loss) generally includes net income/(loss), unrealized gains and losses on investments in securities available-for-sale, and cash flow hedges. Comprehensive income/(loss) and its components are reported and displayed in the Company’s consolidated statements of operations and comprehensive income/(loss).

Earnings Per Share, Policy [Policy Text Block]

Net Income per Common Share.

Earnings per share (“EPS”) is computed on a basic and diluted basis. Basic EPS excludes dilution and is computed by dividing net income available to common stockholders by the weighted-average number of common shares outstanding for the period. Diluted EPS reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock or resulted in the issuance of common stock that then shares in the earnings of the Company.

Potential dilution is excluded from computation of diluted per-share amounts when a net loss from operations exists.

Foreign Currency Transactions and Translations Policy [Policy Text Block]

Foreign Currency Translation.

The Company considers the functional currency of its foreign operations to be the United States dollar. Accordingly, the Company remeasures monetary assets and liabilities at year-end exchange rates, while nonmonetary items are remeasured at historical rates. Income and expense accounts are remeasured at the average rates in effect during the year, except for depreciation, which is remeasured at historical rates. Foreign currency transaction gains and losses are recognized in income in the period of occurrence.

Cash and Cash Equivalents, Policy [Policy Text Block]

Statement of Cash Flows.

Cash and cash equivalents include short-term highly-liquid investments that generally have an original maturity of

three

months or less.

Segment Reporting, Policy [Policy Text Block]

Segment Information and Disclosures.

Accounting principles generally accepted in the United States of America establish standards to report information about operating segments in annual financial statements and require reporting of selected information about operating segments in interim reports to stockholders. It also establishes standards for related disclosures about products and services, geographic areas, and major customers. The Company has concluded it has

one

operating segment.

New Accounting Pronouncements, Policy [Policy Text Block]

Accounting Standards adopted in

2017

March 2016,

the FASB issued ASU

2016

09,

“Compensation

--Stock Compensation (Topic

718

): Improvements to Employee Share-Based Payment Accounting.” ASU

2016

changes aspects of the accounting for share-based payment award transactions, including: (

) accounting for income taxes; (

) classification of excess tax benefits on the statement of cash flows; (

) forfeitures; (

) minimum statutory tax withholding requirements; and (

) classification of employee taxes paid on the statement of cash flows when an employer withholds shares for tax-withholding purposes. ASU

2016

became effective for interim and annual periods beginning on

January 1, 2017.

The method of adoption differs for each of the topics covered by the ASU. The Company elected to apply all topics covered by the ASU on a prospective basis and has elected to continue to estimate forfeitures expected to occur in determining the amount of compensation cost to be recognized each period.

Under ASU

2016

09,

all excess tax benefits and tax deficiencies from share based payments are recognized as income tax expense or benefit in the income statement instead of the previous accounting which credited excess tax benefits to additional paid-in capital and tax deficiencies as a charge to income tax expense or as an offset to accumulated excess tax benefits, if any. Excess tax benefits or deficiencies are included in income tax expense as discrete items in the period in which they occur. For diluted earnings per share calculations, excess tax benefits are

longer included in assumed proceeds when determining average diluted shares outstanding under the treasury stock method. ASU

2016

resulted in a

$3.8

million tax benefit from the distribution of restricted stock units in the year ended

2017.