What changed in this filing

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Item 1. Business

2022-03-11 compared with 2021-03-09 · 75 added, 60 removed, 812 unchanged (14% of the section changed)

12 unchanged sentences

The Bank initially offered lending products that included traditional commercial real estate (“CRE”) loans, secured commercial and industrial (“C&I”) loans, and trade finance services for companies doing business in China, Taiwan and other Asian countries.

In 2014, we began originating a significant amount of non-conforming single family residential (“SFR”) mortgage loans, a portion of which we accumulate and sell to other banks.

In 2014, we began originating a significant amount of non-conforming single family residential (“SFR”) mortgage loans, a portion of which we accumulate and may sell to other banks.

In 2018, with the acquisition of First American International Bank ("FAIB") we became a FNMA originator and servicer. 

Since 2010, we have also originated Small Business Administration (“SBA”) loans, with the intent to accumulate and periodically sell the guaranteed portion of such loans.

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In May 2013, we acquired Los Angeles National Bank (“LANB”) in an all cash transaction, which added $190.7 million in total assets and $162.0 million in total deposits.

In February 2016, we acquired TFC Holding Company (“TFC”) and its wholly-owned subsidiary, TomatoBank, which added $469.9 million in total assets and $405.3 million in total deposits.

In March 2016, we further supplemented our capital by issuing $50.0 million of subordinated notes, which we refer to as long-term debt in our consolidated financial statements, and in July 2017, we completed an initial public offering of our common stock, raising $86 million in gross proceeds.

In October 2018, we acquired First American International Corp.

(“FAIC”) and its wholly-owned subsidiary First American International Bank (“FAIB”), located in the New York City metropolitan area.

(“FAIC”) and its wholly-owned subsidiary FAIB, located in the New York City metropolitan area.

This transaction involved the issuance by the Company of 3,011,762 shares of common stock (which was valued as of the date of the closing of the acquisition at $69.6 million) and $34.8 million of cash, and which added $850.3 million in total assets, $715.6 million in loans, and $629.7 million in total deposits.

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At the time of the acquisition, PGB had approximately $217.9 million in total assets, $191.7 million in total deposits, and three branches in Chicago, Illinois.

In March 2021, we issued $120.0 million subordinated debt for growth and liquidity purposes.

In July 2021, we entered into an agreement, and in September 2021 we received regulatory approval in September, to purchase the Honolulu, Hawaii branch of the Bank of the Orient.

The transaction was completed on January 14, 2022.

The Company received a payment of $71.0 million to acquire all the premises and equipment at the Branch, all deposits totaling $81.7 million and performing loans totaling $7.4 million as of December 31, 2021, reflecting a premium paid by us of approximately $3.0 million.

On December 28, 2021, the Company announced that it entered into a definitive agreement to acquire Gateway Bank , F.S.B.

("Gateway Bank") in a cash transaction valued at approximately $22.9 million, subject to certain terms and conditions, including the receipt of the requisite regulatory approvals. 

Th e Company expects the transaction to be accretive to earnings per share in 2022 in the mid-single digit range.

The Company also expects to incur tangible book value per share dilution of approximately 1.8% upon closing of the transaction, with a tangible book value dilution payback period of approximately 1.8 years.

The earnings per share accretion estimates are based on estimated cost savings of approximately 60% of Gateway Bank's non-interest expense, with the cost savings phased in during 2022.

The earnings per share accretion estimates do not include any assumption of revenue synergies.

The transaction is expected to close in second quarter of 2022.

We intend to continue to pursue growth opportunities, both organically as well as through acquisitions that meet our criteria .

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Department of the Treasury, (“Treasury”) which provide funds to CDFIs through a variety of programs.

The Bank has received grants totaling $1.1 million from the CDFI Fund (zero in 2020, $479,000 in 2019, $233,000 in 2018 and $415,000 in prior years).

The Bank has received grants totaling $1.1 million from the CDFI Fund (zero in both 2021 and 2020, $479,000 in 2019 and $648,000 in prior years).

We have established a CDFI advisory board to assist the Bank in finding organizations that provide services to low-to-moderate income people.

In our commitment to this designation, the Bank has a policy that requires all directors and management above the level of vice president to contribute at least 24 hours of community service annually to a qualified organization. In mid-June, 2021 the Bank was awarded a $1.8 million CDFI grant under the US Treasury’s Rapid Response Program to facilitate a rapid response to the economic impacts of the COVID-19 pandemic in distressed and underserved communities.

The award was received in August 2021 after finalization of the contract between the Bank and the US Treasury which included various performance goals and measures that specify the use of the funds to provide affordable housing.

The Bank utilized all of such funds to originate two loans that provide affordable housing to underserved communities. 

The Bank currently operates 23 branches across two separate regions:

the Western region (sometimes referred to as the Los Angeles region) with branches in Los Angeles County, California;

the Western region with branches in Los Angeles County, California;

Orange County, California;

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Clark County, Nevada;

and our Eastern region (sometimes referred to as the New York region) with branches in Manhattan, Brooklyn and Queens, New York;

Chicago, Illinois and Edison, New Jersey.

We currently have nine branches in Los Angeles County, located in downtown Los Angeles, San Gabriel, Torrance, Rowland Heights, Monterey Park, Silver Lake, Arcadia, Cerritos, and Diamond Bar;

we have one branch in Orange County, located in Irvine.

We have two branches in Ventura County, located in Oxnard and Westlake Village, and one branch in Las Vegas, Nevada.

We have six branches located in Manhattan, Brooklyn, Queens in New York State and one in Edison, New Jersey. 

We have two branches in Chicago;

one in the Bridgeport area and one in the Chinatown area.

As of December 31, 2020, the Company had total consolidated assets of $3.4 billion, total consolidated held for investment loans of $2.7 billion, total consolidated deposits of $2.6 billion and total consolidated shareholders’

Honolulu, Hawaii; and our Eastern region (sometimes referred to as the New York region) with branches in Manhattan, Brooklyn and Queens, New York;

Chicago, Illinois and Edison, New Jersey. 

As of December 31, 2021, the Company had total consolidated assets of $4.2 billion, total consolidated held for investment loans of $2.9 billion, total consolidated deposits of $3.4 billion and total consolidated shareholders’

equity of $466.7 million.

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Focus on a target market consisting of businesses that:

are located in southern California, the San Francisco Bay area, the Chicago metropolitan area, the New York metropolitan area (including northern New Jersey), and Nevada, with possible future geographic expansion currently focused on Hawaii, Seattle, Philadelphia and Houston;

are located in southern California, the San Francisco Bay area, the Chicago metropolitan area, the New York metropolitan area (including northern New Jersey), Nevada and Hawaii, with possible future geographic expansion currently focused on Seattle, Philadelphia and Houston;

provide or receive goods or services to or from Asian countries, primarily China (including Hong Kong and Macau) and Taiwan;

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A central part of the MSA is the Las Vegas Valley, a 600 square mile basin that includes the MSA’s largest city, Las Vegas.

With a 2016 gross domestic product of approximately $118 billion, this MSA contains the largest concentration of people in the state (approximately 2.2 million), and is a significant tourist destination, drawing over 43 million international and domestic visitors in 2016.

With a 2020 gross domestic product of approximately $119.4 billion, this MSA contains the largest concentration of people in the state (approximately 2.2 million), and is a significant tourist destination, drawing over 19 million international and domestic visitors in 2016.

According to the U.S.

Census Bureau, Asian Americans account for 10.0% of the over 2.3 million residents in Clark County as of 2019.

Census Bureau, Asian Americans account for 10.0% of the 2.3 million residents in Clark County as of 2019.

We operate seven branches in the New York City/New Jersey metropolitan MSA.

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A central part of the MSA is the borough of Manhattan.

With a 2016 gross domestic product of approximately $1.7 billion, this MSA contains the largest concentration of people in the state, and is a significant business and tourist destination.

With a 2020 gross domestic product of approximately $1.8 trillion, this MSA contains the largest concentration of people in the state, and is a significant business and tourist destination.

According to the 2019 U.S.

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Census Bureau, as of 2019, Asians account for 90% of Chicago’s Chinatown population, and the Asian population is 7% of the over 9.5 million residents in the Chicago metropolitan area.  

As of January 18, 2022, we operate one branch in Honolulu, Hawaii. 

The branch was purchased from the Bank of the Orient.  According to the 2020 U.S.

Census Bureau, Asian Americans account for 56% of the nearly 1.5 million residents in the state of Hawaii.

Our Competition

We view the Chinese-American banking market, including the Company, as comprised of 32 banks divided into three segments:

publicly-traded banks (4 banks), locally-owned banks (15 banks), and banks that are subsidiaries of Taiwanese or Chinese banks (17 banks).  Fifteen of the locally-owned banks are based in California.

We are currently the sixth-largest bank among this group of 32 banks.

We view the Chinese-American banking market, including the Company, as comprised of 23 banks divided into three overlapping segments:

publicly-traded banks (7 banks), locally-owned banks (16 banks), and banks that are subsidiaries of Taiwanese or Chinese banks (7 banks). 

Fourteen of the locally-owned banks are based in California.

We are currently the fifth-largest bank among this group of 24 banks.

In addition to these Chinese-American banks, we also compete with other banks in the region, particularly with Korean-American banks in our SFR and SBA lending areas.

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As described below, the type of collateral supporting a loan is not necessarily indicative of the business line from which the loan was generated.

(1) Includes construction and land development loans

We have an extensive loan approval process in which we require not only financial and other information from our borrowers, but our loan and executive officers have an extensive knowledge of the local market area and of the borrower’s past transactions.

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As of December 31, 2021, we had outstanding commercial and industrial loans of $268.7 million, or 9.2% of our total loan portfolio.

We had $2.2 million non-performing commercial and industrial loans as of December 31, 2020 and no non-performing commercial and industrial loans as of December 31, 2019.

We had $3.7 million non-accrual commercial and industrial loans as of December 31, 2021 compared to $1.7 million non-accrual commercial and industrial loans as of December 31, 2020.

Commercial Real Estate Loans.

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The real estate securing our existing commercial real estate loans includes a wide variety of property types, such as owner occupied offices, warehouses and production facilities, office buildings, hotels, mixed-use residential and commercial, retail centers, multi-family properties and assisted living facilities.

The total commercial real estate portfolio was $1.0 billion at December 31, 2020 of which $198.8 million was secured by owner occupied properties.

The total commercial real estate portfolio was $1.2 billion at December 31, 2021 of which $222.8 million was secured by owner occupied properties.

The multi-family residential loan portfolio totaled $545.9 million as of December 31, 2021.

The single-family residential loan portfolio originated for a business purpose totaled $65.6  million as of December 31, 2021.

Our non-performing commercial real estate loans as of December 31, 2020 were $2.6 million.

Our non-accrual commercial real estate loans as of December 31, 2021 were $4.7 million.

Construction and land development loans.

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In 2021, we originated $60.3  million 

in SBA loans, of which $32.9 million were PPP loans and $19.4 million were SBA 7A originations. Of SBA loan originations, $45.2 million, or  86 .4%,  were produced by branch staff and loan officers.

in SBA loans, of which $22.5 million were PPP loans, $26.2 million were SBA 7A originations and $11.6 million were SBA 504 originations. Of SBA loan originations, $43.9 million, or  72.8 %,  were produced by branch staff and loan officers.

The remaining $16.4 million, or 27.2%, was referred to us through SBA brokers.

As of December 31, 2020 our SBA portfolio totaled $97.8 million of which $48.5 million is guaranteed by the SBA and $49.4 million is unguaranteed, of which $37.6 million is secured by real estate and $11.8 million is unsecured or secured by business assets.  There are $32.9 million SBA loans originated under the Payroll Protection Program (“PPP”).  We monitor the unguaranteed portfolio by type of real estate collateral.

As of December 31, 2021 our SBA portfolio totaled $76.1 million of which $17.9 million is guaranteed by the SBA and $58.2 million is unguaranteed, of which $56.6 million is secured by real estate and $1.6 million is unsecured or secured by business assets.  There are $22.5 million SBA loans originated under the Paycheck Protection Program (“PPP”) in 2021.  We monitor the unguaranteed portfolio by type of real estate collateral.

As of December 31, 2021, $25.4 million or 43.6% is secured by hotel/motels;

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As of December 31, 2021, $27.8 million or 47.7% is located in California;

$8.3 million or 16.8% is located in Washington state;

$6.0 million or 10.3% is located in Washington state;

$5.1 million or 8.7% is located in Nevada;

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As of December 31, 2021, we had $1.0 billion of SFR mortgage loans, representing 34.3% of our total loan portfolio, excluding available for sale SFR loans.

We had 12 non-performing single-family residential real estate loans as of December 31, 2020 totaling $7.7 million.

We had 13 non-accrual single-family residential real estate loans as of December 31, 2021 totaling $4.2 million compared to 12 loans totaling $7.7 million at December 31, 2020.

We originate these non-qualified single-family residential mortgage loans both to sell and hold for investment.

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During 2021, we originated $410.0 million of such loans through our retail channel, and $62.1 million through our correspondent and wholesale channel.

During 2020, we originated $287.3 million of such loans through our retail channel, and $131.8 million through our correspondent and wholesale channel. 

We sell many of these non-qualified single-family residential mortgage loans to other Asian-American banks, FNMA and other investors.

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During 2019, we started an automobile lending unit to support the Chinese-American immigrant community.

We do not expect material volumes of business in this area as it is an accommodation to our customers.

As of December 31, 2020, such loans amounted to $4.1 million, and consist primarily of automobile loans.

We do not expect material volumes of business in this area as it is an accommodation to our customers. In 2021, we purchased home improvement loans of $29.7 million.

As of December 31, 2021, consumer loans amounted to $30.8 million.

The quality of our deposit franchise and access to stable funding are key components to our success.

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As many of our customers have more than $250,000 on deposit with us, we believe that using this method reflects a more accurate assessment of our deposit base.

As of December 31, 2020, $2.3 billion or 87.72% of our relationships are considered core relationships.

As of December 31, 2021, $3.0 billion or 87.5% of our relationships are considered adjusted core relationships.

Many of our management team members, including in many cases branch managers, have worked together for up to 30 years, and our deposits relationships have been cultivated over that time period.

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Our ability to gather deposits, particularly core deposits, is an important aspect of our business franchise and we believe core deposits are a significant driver of franchise value as a cost efficient and stable source of funding to support our growth.

As of December 31, 2020, we had $2.6 billion of total deposits, with an average total interest-bearing deposit cost of 1.01% for the year 2020.

As of December 31, 2021, we had $3.4 billion of total deposits, with an average total interest-bearing deposit cost of 0.46% at December 31, 2021.

Other Subsidiaries

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The purpose of the REIT is to minimize New York State and local taxes.

With the acquisition of FAIC, we acquired four inactive subsidiaries:

FAIC Insurance Services (a New York corporation formed in 2006), and P4G8, LLC, FAIB Reacquisitions I, LLC and FAIB REO Acquisition II, LLC, each of which are New York limited liability companies.

FAIC Insurance Services was dissolved in January 2020, and the other three subsidiaries were dissolved in 2019.

RBB Asset Management Company .

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We also employ regular part-time associates and some seasonal/temporary associates.

As of December 31, 2020, we had 360 full-time employees and 11 part-time employees, totaling 365.5 full-time equivalent staff. 

As of December 31, 2021, we had 362 full-time employees and 3 part-time employees, totaling 365 full-time equivalent staff. 

We do not outsource job functions or use subcontractors to fill open positions. None of our employees are represented by any collective bargaining unit or are parties to a collective bargaining agreement. 

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Our executive committee is comprised of seven Asian-Americans and one Caucasian, of which two are women. 

Our workforce includes 332 Asian-Americans, 20 Latin-Americans, 17 Caucasians and 3 African-Americans.

Our workforce includes 330 Asian-Americans, 20 Latin-Americans, 20 Caucasians and 3 African-Americans.

Health & Safety.

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federal and state law.

As a result, the growth and earnings performance of the Company and its subsidiaries may be affected not only by management decisions and general economic conditions, but also by the requirements of federal and state statutes and by the regulations and policies of various bank regulatory agencies, including the California Department of Financial Protection and Innovation (DFPI), previously known as the California Department of Business Oversight, the Board of Governors of the Federal Reserve System (“Federal Reserve”), the FDIC, and the Consumer Financial Protection Bureau (“CFPB”).

As a result, the growth and earnings performance of the Company and its subsidiaries may be affected not only by management decisions and general economic conditions, but also by the requirements of federal and state statutes and by the regulations and policies of various bank regulatory agencies, including the California Department of Financial Protection and Innovation ("DFPI"), the Board of Governors of the Federal Reserve System (“Federal Reserve”), the FDIC, and the Consumer Financial Protection Bureau (“CFPB”).

Furthermore, tax laws administered by the Internal Revenue Service and state taxing authorities, accounting rules developed by the FASB, securities laws administered by the SEC and state securities authorities, anti-money laundering laws enforced by the Treasury, and mortgage related rules, including with respect to loan securitization and servicing by the U.S.

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If the Bank fails to adequately serve its communities, restrictions may be imposed, including denials of applications for branches, for adding subsidiaries or affiliate companies, for engaging in new activities or for the merger with or purchase of other financial institutions.

In its last reported examination by the FDIC in July 2020, the Bank received a CRA rating of “Satisfactory.”

In its last reported examination by the FDIC in April 2020, the Bank received a CRA rating of “Satisfactory.”

Compliance with the Bank Secrecy Act, the USA Patriot Act, and other anti-money laundering laws (“AML”), and the regulations of the Treasury’s Office of Foreign Assets Control (“OFAC”).

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The Dodd-Frank Act expanded definitions and restrictions on transactions with affiliates and insiders under Sections 23A and 23B, and also lending limits for derivative transactions, repurchase agreements and securities lending, and borrowing transactions.

The Bank operates branches and/or loan production offices in California, Illinois, Nevada, New York and New Jersey.

The Bank operates branches and/or loan production offices in California, Illinois, Nevada, New York, New Jersey and Hawaii.

While the DFPI remains the Bank’s primary state regulator, the Bank’s operations in these jurisdictions are subject to examination and supervision by local bank regulators, and transactions with customers in those jurisdictions are subject to local laws, including consumer protection laws.

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State regulation of financial products and potential enforcement actions could also adversely affect our business, financial condition or results of operations.

In 2020, the California Legislature passed Assembly Bill 1864, which enacts the California Consumer Financial Protection Law ("CCFPL"). 

Among other items, the CCFPL:

Establishes UDAAP authority for the new DFPI, adding “abusive” to “unfair or deceptive” acts or practices prohibited by California law, and authorizing remedies similar to those provided in the Dodd-Frank Act;

Authorizes the DFPI to impose penalties of $2,500 for “each act or omission” in violation of the law without a showing that the violation was willful, which, arguably, represents an enhancement of DBO’s existing enforcement powers in contrast to Dodd-Frank and existing California law, enhanced penalties for “reckless” violations of up to $25,000 per day or $10,000 per violation, and for “knowing” violations, the penalty may be up to $1,000,000 per day or 1% of the violator’s net worth (whichever is less) or $25,000 per violation;

Exempts from the DFPI’s new UDAAP authority, banks, credit unions, federal savings and loan associations, and similar entities, as well as current licensees of the former DBO and licensees of other California agencies, “to the extent that licensee or employee is acting under the authority of” the license;

Authorizes the DFPI to impose penalties of $2,500 for “each act or omission” in violation of the law without a showing that the violation was willful, which, arguably, represents an enhancement of DFPI’s existing enforcement powers in contrast to Dodd-Frank and existing California law, enhanced penalties for “reckless” violations of up to $25,000 per day or $10,000 per violation, and for “knowing” violations, the penalty may be up to $1,000,000 per day or 1% of the violator’s net worth (whichever is less) or $25,000 per violation;

Exempts from the DFPI’s new UDAAP authority, banks, credit unions, federal savings and loan associations, and similar entities, as well as current licensees of the DFPI and licensees of other California agencies, “to the extent that licensee or employee is acting under the authority of” the license;

Creates a “registration” requirement (subject to the DFPI’s implementing regulations) that greatly expands the reach of the DFPI to oversee entities that are not currently subject to licensure/registration;

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The minimum capital conservation buffer was phased in over a four year transition period with minimum buffers of 0.625%, 1.25%, 1.875%, and 2.50% during 2017, 2018, 2019 and 2020, respectively.

As fully phased-in on January 1, 2019, Basel III subjects 

As fully phased-in on January 1, 2019, Basel III subjects bank holding companies and banks to the following risk-based capital requirements:

a minimum ratio of CET1 to risk-weighted assets of at least 4.5%, plus a 2.5% “capital conservation buffer”, or 7.0%;

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a minimum leverage ratio of 4%, calculated as the ratio of Tier 1 capital to balance sheet exposures plus certain off-balance sheet exposures.

To be considered “well capitalized,”

a bank holding company or bank must have the following minimum ratios:

(i) a Tier 1 leverage ratio of 5.0%, (ii) a common equity Tier 1 risk-based capital ratio of 6.5%, (iii) a Tier 1 risk-based capital ratio of 8.0%, and (iv) a total risk-based capital ratio of 10.0%.

The Basel III final framework provides for a number of deductions from and adjustments to CET1.

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loans, as defined as pursuant to applicable federal regulations, are required to be assigned a 150% risk weighting, and require additional capital support.

The Federal Reserve’s Small Bank Holding Company Policy Statement (the "Policy Statement") applies to bank holding companies ("BHCs") with pro forma consolidated assets of less than $3 billion.

The Policy Statement was designed to permit the creation of small BHCs and to allow for their expansion by allowing them to have debt levels in excess of what is otherwise allowed for larger BHCs.

Under the Policy Statement, a BHC is exempt from the Federal Reserve's risk-based capital and leverage rules (Appendixes A and D of Regulation Y);

and may use debt to finance up to 75% of the purchase price of an acquisition allowing (in theory) a BHC to have a debt-to-equity ratio of up to 3:1.

The Policy Statement also applies to expedited processing by the Federal Reserve of applications filed by a qualifying BHC and the payment of dividends and the completion of stock redemptions by a qualifying BHC.  

In addition to the uniform risk-based capital guidelines and regulatory capital ratios that apply across the industry, the regulators have the discretion to set individual minimum capital requirements for specific institutions at rates significantly above the minimum guidelines and ratios.

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Prompt Corrective Action (“PCA”)

The Federal Deposit Insurance Act, as amended, or FDIA, requires federal banking agencies to take PCA in respect of depository institutions that do not meet minimum capital requirements.

The Federal Deposit Insurance Act, as amended (the "FDIA"), requires federal banking agencies to take PCA in respect of depository institutions that do not meet minimum capital requirements.

The FDIA includes the following five capital tiers:

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Under the revised PCA provisions of the FDIA, an insured depository institution generally will be classified in the following categories based on the capital measures indicated:

Capital Ratio

Total Risk-Based Capital Ratio

Tier I Risk-Based Capital Ratio

CET1 Risk-Based Ratio

Tier I Leverage Ratio

Well capitalized

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The amount of the assessment paid by a California bank to the DFPI is calculated on the basis of the institution’s total assets, including consolidated subsidiaries, as reported to the DFPI.

During the year ended December 31, 2020, the Bank paid supervisory assessments to the DFPI totaling $164,000.

During the years ended December 31, 2021 and 2020, the Bank paid supervisory assessments to the DFPI totaling $201,000 

and $164,000, respectively.

Capital Requirements.

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We will continue to evaluate the impact of any changes to the CRA regulations.  The Bank received a “satisfactory”

rating on its most recent CRA examination, which was conducted in July 2020.

rating on its most recent CRA examination, which was conducted in April 2020.

Anti-Money Laundering and OFAC Regulation.

The Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001, or the Patriot Act, is designed to deny terrorists and criminals the ability to obtain access to the U.S.

The Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001 (the "Patriot Act") is designed to deny terrorists and criminals the ability to obtain access to the U.S.

financial system and has significant implications for depository institutions, brokers, dealers and other businesses involved in the transfer of money.

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Many states and local jurisdictions including California have consumer protection laws analogous, and in addition, to those listed above.

These federal, state and local laws regulate the manner in which financial institutions deal with customers when taking deposits, making loans or conducting other types of transactions.  

These federal, state and local laws regulate the manner in which financial institutions deal with customers when taking deposits, making loans or conducting other types of transactions.  Examples include but are not limited to the CCPA and the CCFPL described above. 

Failure to comply with these laws and regulations could give rise to regulatory sanctions, customer rescission rights, action by state and local attorneys general and civil or criminal liability.

The structure of federal consumer protection regulation applicable to all providers of consumer financial products and services changed significantly on July 21, 2011, when the CFPB commenced operations to supervise and enforce consumer protection laws.

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Failure to sustain compliance with these requirements or correct any non-compliance within a fixed time period could lead to divestiture of subsidiary banks or require all activities to conform to those permissible for a bank holding company.

Pursuant to the Federal Deposit Insurance Act (“FDI Act”) and the California Financial Code, California state chartered commercial banks may generally engage in any activity permissible for national banks.

Pursuant to the FDIA and the California Financial Code, California state chartered commercial banks may generally engage in any activity permissible for national banks.

Therefore, the Bank may form subsidiaries to engage in the many so-called “closely related to banking”

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These increases in FDIC insurance assessments may have a material and adverse effect on our earnings and could have a material adverse effect on the value of, or market for, our common stock.

Under the FDI Act, the FDIC may terminate deposit insurance upon a finding that the institution has engaged in unsafe and unsound practices, is in an unsafe or unsound condition to continue operations, or has violated any applicable law, regulation, rule, order or condition imposed by the FDIC.

Under the FDIA, the FDIC may terminate deposit insurance upon a finding that the institution has engaged in unsafe and unsound practices, is in an unsafe or unsound condition to continue operations, or has violated any applicable law, regulation, rule, order or condition imposed by the FDIC.

Operations, Consumer and Privacy Compliance Laws

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Federal Banking Agency Compensation Guidelines

Guidelines adopted by the federal banking agencies pursuant to the FDI Act prohibit excessive compensation as an unsafe and unsound practice and describe compensation as excessive when the amounts paid are unreasonable or disproportionate to the services performed by an executive officer, employee, director or principal stockholder.

Guidelines adopted by the federal banking agencies pursuant to the FDIA prohibit excessive compensation as an unsafe and unsound practice and describe compensation as excessive when the amounts paid are unreasonable or disproportionate to the services performed by an executive officer, employee, director or principal stockholder.

The federal banking agencies have issued comprehensive guidance on incentive compensation policies intended to ensure that the incentive compensation policies of banking organizations do not undermine the safety and soundness of such organizations by encouraging excessive risk-taking.

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Because we generate significant amounts of net interest income, we do not expect to be impacted by this limitation.

However, with the new Biden administration and the Democrat controlled Congress, tax laws and banking regulations are subject to change.

However, under the Biden administration and the Democrat controlled Congress, tax laws and banking regulations are subject to change.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 1. Business