10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2015

OR

o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                     to                    

Commission file number 0-30777

PACIFIC MERCANTILE BANCORP

(Exact name of Registrant as specified in its charter)

California	33-0898238
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
949 South Coast Drive, Suite 300, Costa Mesa, California	92626
(Address of principal executive offices)	(Zip Code)

(714) 438-2500

(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports); and (2) has been subject to such filing requirements for the past 90 days.    Yes  x    No  ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  x    No  ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See definitions of “large accelerated filer,” “accelerated filer,” “non-accelerated filer,” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer	o	Accelerated filer	x
Non-accelerated filer	o	Smaller reporting company	o

Indicate by check mark whether the registrant is a shell company (as defined in Securities Exchange Act Rule 12b-2). Yes  ¨    No  x

As of August 5, 2015, there were 19,780,786 shares of Common Stock outstanding.

1

PACIFIC MERCANTILE BANCORP

QUARTERLY REPORT ON FORM 10Q

FOR THE QUARTER ENDED JUNE 30, 2015

TABLE OF CONTENTS

		Page No.
Part I. Financial Information
Item 1.	Financial Statements (unaudited)	3
	Consolidated Statements of Financial Condition at June 30, 2015 and December 31, 2014	3
	Consolidated Statements of Operations for the Three and Six Months Ended June 30, 2015 and 2014	4
	Consolidated Statements of Comprehensive Income (Loss) for the Three and Six Months Ended June 30, 2015 and 2014	5
	Consolidated Statement of Shareholders' Equity for the Six Months Ended June 30, 2015	6
	Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2015 and 2014	7
	Notes to Interim Consolidated Financial Statements	8
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	31
Item 3.	Quantitative and Qualitative Disclosure About Market Risk	52
Item 4.	Controls and Procedures	52
Part II. Other Information
Item 1.	Legal Proceedings	54
Item 1A.	Risk Factors	54
Item 6.	Exhibits	54
Signatures		55

2

PACIFIC MERCANTILE BANCORP AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION

(Dollars in thousands, except for per share data)

(Unaudited)

	June 30, 2015			December 31, 2014
ASSETS
Cash and due from banks	$	20,613		$	9,997
Interest bearing deposits with financial institutions	112,966			167,138
Cash and cash equivalents	133,579			177,135
Interest-bearing time deposits with financial institutions	4,668			4,668
Federal Reserve Bank of San Francisco and Federal Home Loan Bank Stock, at cost	8,170			8,137
Securities available for sale, at fair value	56,396			60,926
Loans (net of allowances of $12,343 and $13,833, respectively)	821,273			824,197
Other real estate owned	1,872			1,592
Accrued interest receivable	2,105			2,436
Premises and equipment, net	1,160			1,092
Net deferred tax assets	6,031			5,933
Other assets	11,607			13,494
Total assets	$	1,046,861		$	1,099,610
LIABILITIES AND SHAREHOLDERS’ EQUITY
Deposits:
Noninterest-bearing	$	236,361		$	237,491
Interest-bearing	635,589			678,818
Total deposits	871,950			916,309
Borrowings	30,000			39,500
Accrued interest payable	183			222
Other liabilities	6,104			6,771
Junior subordinated debentures	17,527			17,527
Total liabilities	925,764			980,329
Commitments and contingencies (Note 10)
Shareholders’ equity:
Preferred stock, no par value, 2,000,000 shares authorized:
Series B Convertible 8.4% Noncumulative Preferred Stock, 300,000 shares authorized; 112,000 issued and outstanding at June 30, 2015 and December 31, 2014; liquidation preference $100 per share, plus accumulated but undeclared dividends at June 30, 2015 and December 31, 2014	8,747			8,747
Series C 8.4% Noncumulative Preferred Stock, 300,000 shares authorized; 35,225 and 29,308 issued and outstanding at June 30, 2015 and December 31, 2014, respectively; liquidation preference $100 per share plus accumulated but undeclared dividends at June 30, 2015 and December 31, 2014	3,523			2,930
Common stock, no par value, 85,000,000 shares authorized; 19,780,086 and 19,462,561 shares issued and outstanding at June 30, 2015 and December 31, 2014, respectively	133,082			131,181
Accumulated deficit	(23,424		)	(22,885		)
Accumulated other comprehensive loss	(831		)	(692		)
Total shareholders’ equity	121,097			119,281
Total liabilities and shareholders’ equity	$	1,046,861		$	1,099,610

The accompanying notes are an integral part of these consolidated financial statements.

3

PACIFIC MERCANTILE BANCORP AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(Dollars in thousands, except for per share data)

(Unaudited)

	Three Months Ended June 30,						Six Months Ended June 30,
	2015			2014			2015			2014
Interest income:
Loans, including fees	$	9,175		$	8,652		$	18,194		$	17,445
Securities available for sale and stock	558			403			932			821
Interest-bearing deposits with financial institutions	80			79			159			155
Total interest income	9,813			9,134			19,285			18,421
Interest expense:
Deposits	1,144			1,225			2,269			2,410
Borrowings	180			283			378			541
Total interest expense	1,324			1,508			2,647			2,951
Net interest income	8,489			7,626			16,638			15,470
Provision for loan and lease losses	—			600			—			1,050
Net interest income after provision for loan and lease losses	8,489			7,026			16,638			14,420
Noninterest income
Service fees on deposits and other banking services	234			218			446			426
Net gain on sale of small business administration loans	—			474			—			1,160
Other noninterest income	382			292			1,052			576
Total noninterest income	616			984			1,498			2,162
Noninterest expense
Salaries and employee benefits	5,423			5,420			11,330			11,023
Occupancy	752			610			1,412			1,198
Equipment and depreciation	430			363			823			732
Data processing	255			200			491			451
FDIC expense	339			359			692			653
Other real estate owned expense, net	59			313			161			1,057
Professional fees	744			665			1,372			1,239
Business development	198			169			392			338
Loan related expense	170			129			239			216
Insurance	88			141			175			278
Other operating expense	509			409			995			898
Total noninterest expense	8,967			8,778			18,082			18,083
Income (loss) from continuing operations before income taxes	138			(768		)	54			(1,501		)
Income tax (benefit) provision	—			—			—			—
Net income (loss) from continuing operations	138			(768		)	54			(1,501		)
Discontinued Operations
Income from discontinued operations before income taxes	—			772			—			1,956
Income tax provision (benefit)	—			—			—			—
Net income from discontinued operations	—			772			—			1,956
Net income	138			4			54			455
Accumulated undeclared dividends on preferred stock	(309		)	(308		)	(618		)	(604		)
Net loss allocable to common shareholders	$	(171	)	$	(304	)	$	(564	)	$	(149	)
Basic loss per common share:
Net loss from continuing operations	$	(0.01	)	$	(0.06	)	$	(0.03	)	$	(0.11	)
Net loss available to common shareholders	$	(0.01	)	$	(0.02	)	$	(0.03	)	$	(0.01	)
Diluted (loss) income per common share:
Net loss from continuing operations	$	(0.01	)	$	(0.06	)	$	(0.03	)	$	(0.11	)
Net (loss) income available to common shareholders	$	(0.01	)	$	(0.02	)	$	(0.03	)	$	(0.01	)
Weighted average number of common shares outstanding:
Basic	19,773,799			19,254,985			19,695,679			19,200,492
Diluted	19,773,799			19,254,985			19,695,679			19,200,492

The accompanying notes are an integral part of these consolidated financial statements.

4

PACIFIC MERCANTILE BANCORP AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(Dollars in thousands)

(Unaudited)

	Three Months Ended June 30,					Six Months Ended June 30,
	2015			2014		2015			2014
Net income	$	138		$	4	$	54		$	455
Other comprehensive (loss) income, net of tax:
Change in unrealized (loss) gain on securities available for sale	(327		)	406		(139		)	1,023
Total comprehensive (loss) income	$	(189	)	$	410	$	(85	)	$	1,478

The accompanying notes are an integral part of these consolidated financial statements.

5

PACIFIC MERCANTILE BANCORP AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

(Shares and dollars in thousands)

(Unaudited)

For the Six Months EndedJune 30, 2015

	Series B and C Preferred stock			Common stock					Retained earnings (accumulated deficit)			Accumulated other comprehensive income (loss)			Total
	Number of shares	Amount		Number of shares		Amount
Balance at December 31, 2014	141	$	11,677	19,463		$	131,181		$	(22,885	)	$	(692	)	$	119,281
Issuance of restricted stock, net	—	—		95		—			—			—			—
Tax effect from vesting of restricted stock	—	—		(4	)	(23		)	—			—			(23		)
Series C Preferred Stock issued as a stock dividend on Series B Preferred Stock	6	593		—		—			(593		)	—			—
Common stock based compensation expense	—	—		—		683			—			—			683
Common stock options exercised	—	—		226		1,241			—			—			1,241
Net income	—	—		—		—			54			—			54
Other comprehensive loss	—	—		—		—			—			(139		)	(139		)
Balance at June 30, 2015	147	$	12,270	19,780		$	133,082		$	(23,424	)	$	(831	)	$	121,097

The accompanying notes are an integral part of these consolidated financial statements.

6

PACIFIC MERCANTILE BANCORP AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOW

(Dollars in thousands)

(Unaudited)

	Six Months Ended June 30,
	2015			2014
Cash Flows From Operating Activities:
Net income	$	54		$	455
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	261			296
Provision for loan and lease losses	—			1,050
Amortization of premium on securities	163			163
Net amortization of deferred fees and unearned income on loans	(332		)	(160		)
Net gain on sale of premises and equipment	(27		)	(21		)
Net gain on sale of small business administration loans	—			(1,160		)
Small business administration loan originations	—			(14,815		)
Proceeds from sale of small business administration loans	—			16,001
Write down of other real estate owned	—			298
Stock-based compensation expense	683			540
Tax effect included in stockholders equity of restricted stock vesting	(23		)	—
Other	—			(89		)
Changes in operating assets and liabilities:
Net decrease in accrued interest receivable	331			11
Net increase in other assets	(142		)	(531		)
Net decrease in deferred taxes	—			695
Net increase in income taxes receivable	(58		)	(23		)
Net (decrease) increase in accrued interest payable	(39		)	329
Net decrease in other liabilities	(667		)	(2,174		)
Net cash provided by discontinued operations	—			9,223
Net cash provided by operating activities	204			10,088
Cash Flows From Investing Activities:
Net increase in interest-bearing time deposits with financial institutions	—			(500		)
Maturities of and principal payments received on securities available for sale and other stock	4,130			5,398
Purchase of securities available for sale and other stock	(33		)	—
Principal payments received on other investments	2,087			—
Proceeds from sale of other real estate owned	—			1,130
Capitalized cost of other real estate owned	—			(21		)
Net decrease (increase) in loans	2,976			(34,956		)
Purchases of premises and equipment	(329		)	(288		)
Proceeds from sale of premises and equipment	27			38
Net cash provided by (used in) investing activities	8,858			(29,199		)
Cash Flows From Financing Activities:
Net (decrease) increase in deposits	(44,359		)	39,069
Payments of borrowings	(9,500		)	(22,500		)
Proceeds from exercise of common stock options	1,241			344
Net cash (used in) provided by financing activities	(52,618		)	16,913
Net (decrease) increase in cash and cash equivalents	(43,556		)	(2,198		)
Cash and Cash Equivalents, beginning of period	177,135			106,940
Cash and Cash Equivalents, end of period	$	133,579		$	104,742
Supplementary Cash Flow Information:
Cash paid for interest on deposits and other borrowings	$	2,686		$	2,622
Cash paid for income taxes	$	58		$	—
Non-Cash Investing Activities:
Transfer of loans into other real estate owned	$	280		$	5,188
Non-Cash Financing Activities:
Series C Preferred Stock issued in connection with dividends on Series B Preferred Stock	$	593		$	544

The accompanying notes are an integral part of these consolidated financial statements.

7

1. Nature of Business

Organization

Pacific Mercantile Bancorp (“PMBC”) is a bank holding company which, through its wholly owned subsidiary, Pacific Mercantile Bank (the “Bank”), is engaged in the commercial banking business in Southern California. PMBC is registered as a one bank holding company under the United States Bank Holding Company Act of 1956, as amended, and, as such, is regulated by the Board of Governors of the Federal Reserve System (the “Federal Reserve Board”) and the Federal Reserve Bank of San Francisco (“FRBSF”) under delegated authority from the Federal Reserve Board. Substantially all of our operations are conducted and substantially all of our assets are owned by the Bank, which accounts for substantially all of our consolidated revenues, expenses, and income. The Bank provides a full range of banking services to small and medium-size businesses, professionals and the general public in Orange, Los Angeles, San Bernardino and San Diego counties in Southern California and is subject to competition from other banks and financial institutions and from financial services organizations conducting operations in those same markets. The Bank is chartered by the California Department of Business Oversight under the Division of Financial Institutions and is a member of the FRBSF. In addition, the deposit accounts of the Bank’s customers are insured by the Federal Deposit Insurance Corporation up to the maximum amount allowed by law. PM Asset Resolution, Inc. ("PMAR") is a wholly owned subsidiary of PMBC which exists for the purpose of purchasing certain non-performing loans and other real estate from the Bank and thereafter collecting on or disposing of those assets.

During the fourth quarter of 2013, the Bank announced the closure of our mortgage banking business, which was completed during the third quarter of 2014. The Bank operated a direct-to-consumer retail mortgage banking business, originating and funding residential mortgage loans and selling those loans, generally within the succeeding 30 days. Our mortgage banking operations are classified as discontinued operations within the consolidated financial statements and footnotes for all presented periods.

PMBC, the Bank and PMAR are sometimes referred to, together, on a consolidated basis, in this report as the “Company” or as “we”, “us” or “our”.

2. Significant Accounting Policies

Except as discussed below, our accounting policies are described in Note 2, Significant Accounting Policies of our audited consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2014 (“Form 10-K”).

Interim Consolidated Financial Statements Basis of Presentation

Our interim consolidated financial statements are prepared in accordance with generally accepted accounting principles in effect in the United States (“GAAP”) for interim financial information pursuant to rules and regulations of the U.S. Securities and Exchange Commission (the “SEC”), including instructions to Form 10-Q and Article 10 of Regulation S-X, on a basis consistent with prior periods. Our financial statements reflect all adjustments that are, in the opinion of management, necessary to present a fair statement of the results for the interim periods presented. The interim results are not necessarily indicative of operating results for the full year. The interim information should be read in conjunction with our audited consolidated financial statements in our Form 10-K.

Use of Estimates

The preparation of the financial statements in conformity with GAAP requires us to make certain estimates and assumptions that could affect the reported amounts of certain of our assets, liabilities, and contingencies at the date of the financial statements and the reported amounts of our revenues and expenses during the reporting periods. For the fiscal periods covered by this report, those estimates related primarily to our determinations of the allowance for loan and lease losses (“ALLL”), other real estate owned (“OREO”), the fair values of securities available for sale, repurchase reserves, and the determination of the valuation allowance pertaining to deferred tax assets. If circumstances or financial trends on which those estimates were based were to change in the future or there were to occur any currently unanticipated events affecting the amounts of those estimates, our future financial position or results of operations could differ, possibly materially, from those expected at the current time.

Principles of Consolidation

Our consolidated financial statements for the three and six months ended June 30, 2015 and 2014 include the accounts of PMBC, the Bank and PMAR. All significant intercompany balances and transactions were eliminated in consolidation.

8

Recent Accounting Pronouncements

In February 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standard Update (“ASU”) 2014-04, “Receivables — Troubled Debt Restructurings by Creditors (Subtopic 310-40) — Reclassification of Residential Real Estate Collateralized Consumer Mortgage Loans upon Foreclosure,” which amended its guidance to clarify when a creditor should be considered to have received physical possession of residential real estate property collateralizing a consumer mortgage loan such that the loan should be derecognized and the real estate recognized. This guidance is effective for interim and annual periods beginning after December 15, 2014. Early adoption is permitted. We adopted this guidance on January 1, 2015 and it did not have a material effect on our consolidated financial statements.

In April 2014, the FASB issued ASU 2014-08, “Presentation of Financial Statements (Topic 205) and Property, Plant, and Equipment (Topic 360): Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity,” which amended its guidance on classification and reporting of discontinued operations. The amendments clarify when an entity should classify a component as discontinued operations, how to report the balances related to discontinued operations for prior periods, and additional disclosure requirements for discontinued operations. This guidance is effective for interim and annual periods beginning after December 15, 2014. Early adoption is permitted only for disposals which have not been previously reported. We adopted this guidance on January 1, 2015 and it did not have a material effect on our consolidated financial statements.

In May 2014, the FASB issued ASU 2014-09, “Revenue from Contracts with Customers (Topic 606),” which amended its guidance on revenue recognition to conform with international accounting guidance under the International Accounting Standards Board. The ASU provides a framework for addressing revenue recognition and replaces most existing revenue recognition guidance, as well as requires increased disclosure requirements. In July 2015, the FASB voted to defer the effective date of ASU 2014-09. Accordingly, this guidance is effective for interim and annual periods beginning after December 15, 2017 with early adoption permitted for interim and annual periods beginning after December 15, 2016. We will adopt this guidance on January 1, 2018. We are currently evaluating the expected impact on our consolidated financial statements.

In June 2014, the FASB issued ASU 2014-11, “Accounting for Share-Based Payments When the Terms of an Award Provide That a Performance Target Could Be Achieved after the Requisite Service Period,” which amended its guidance on how to account for certain performance related share-based compensation plans. The amendments clarify the guidance on how to account for performance based awards when the requisite service period is met prior to potential performance targets being achieved. This guidance is effective for interim and annual periods beginning after December 15, 2015. Early adoption is permitted. We will adopt this guidance on January 1, 2016 and do not expect it to have a material effect on our consolidated financial statements.

In August 2014, the FASB issued ASU 2014-15, “Presentation of Financial Statements — Going Concern (Subtopic 205-40): Disclosure of Uncertainties about an Entity's Ability to Continue as a Going Concern,” which defines management's responsibility to evaluate whether there is substantial doubt about an organization's ability to continue as a going concern and clarifies when to provide related footnote disclosure. This guidance is effective for interim and annual periods beginning after December 15, 2016. Early adoption is permitted. We will adopt this guidance on January 1, 2017 and do not expect it to have a material effect on our consolidated financial statements.

In January 2015, the FASB issued ASU 2015-01, “Income Statement - Extraordinary and Unusual Items (Subtopic 225-20): Simplifying Income Statement Presentation by Eliminating the Concept of Extraordinary Items,” which eliminated the concept of extraordinary items from GAAP. This guidance is effective for interim and annual periods beginning after December 15, 2015. Early adoption is permitted. We adopted this guidance on January 1, 2015 and it did not have an impact on our consolidated financial statements.

In February 2015, the FASB issued ASU 2015-02, “Consolidation (Topic 810): Amendments to the Consolidation Analysis,” amends the guidance for assessing how relationships of related parties affect the consolidation analysis, eliminates the presumption that a general partner should consolidate a limited partnership, eliminates the consolidation model specific to limited partnerships, clarifies when fees paid to a decision maker should be a factor in consolidation of a variable interest entity, and reduces the number of variable interest entity consolidation models. This guidance is effective for interim and annual periods beginning after December 15, 2015. Early adoption is permitted. We will adopt this guidance on January 1, 2016 and do not expect it to have an impact on our financial statements.

In April 2015, the FASB issued ASU 2015-03, “Interest - Imputation of Interest (Subtopic 835-30): Simplifying the Presentation of Debt Issuance Costs,” which requires that the debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability. This simplifies the presentation of debt issuance costs and makes the presentation consistent with the presentation of debt discounts. This guidance is effective for interim and annual periods beginning after December 15, 2015. Early adoption is permitted. We will adopt this guidance on January 1, 2016 and do not expect it to have a material impact on our financial statements.

9

3. Fair Value Measurements

Under FASB Accounting Standards Codification (“ASC”) 820-10, we group assets and liabilities at fair value in three levels, based on the markets in which the assets and liabilities are traded and the reliability of the assumptions used to determine fair value. These levels are:

Level 1	Valuation is based upon quoted prices for identical instruments traded in active markets.
Level 2	Valuation is based upon quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active, and model-based valuation techniques for which all significant assumptions are observable in the market.
Level 3	Valuation is generated from model-based techniques that use at least one significant assumption not observable in the market. These unobservable assumptions reflect estimates of assumptions that market participants would use in pricing the asset or liability. Valuation techniques include use of option pricing models, discounted cash flow models and similar techniques.

Risks with Fair Value Measurements

Fair value estimates are made at a discrete point in time based on relevant market information and other information about the financial instruments. Because no active market exists for a significant portion of our financial instruments, fair value estimates are based in large part on judgments we make primarily regarding current economic conditions, risk characteristics of various financial instruments, prepayment rates, and future expected loss experience. These estimates are subjective in nature and invariably involve some inherent uncertainties. Additionally, the occurrence of unexpected events or changes in circumstances can occur that could require us to make changes to our assumptions and which, in turn, could significantly affect and require us to make changes to our previous estimates of fair value.

In addition, the fair value estimates are based on existing on and off-balance sheet financial instruments without attempting to estimate the value of existing and anticipated future customer relationships and the value of assets and liabilities that are not considered financial instruments, such as premises and equipment and OREO.

Measurement Methodology

Cash and Cash Equivalents. The fair value of cash and cash equivalents approximates its carrying value.

Interest-Bearing Deposits with Financial Institutions. The fair values of interest-bearing deposits maturing within one year approximate their carrying values.

FHLB and FRBSF Stock. The Bank is a member of the Federal Home Loan Bank of San Francisco (“FHLB”) and the FRBSF. As members, we are required to own stock of the FHLB and the FRBSF, the amount of which is based primarily on the level of our borrowings from those institutions. We also have the right to acquire additional shares of stock in either or both of the FHLB and the FRBSF. During the three and six months ended June 30, 2015, we purchased $33 thousand in value of FHLB stock. The fair values of the FHLB and FRBSF stock are equal to their respective carrying amounts, are classified as restricted securities and are periodically evaluated for impairment based on our assessment of the ultimate recoverability of our investments in that stock. Any cash or stock dividends paid to us on such stock are reported as income.

Investment Securities Available for Sale.Fair value measurement for our investment securities available for sale is based upon quoted prices, if available. If quoted prices are not available, fair values are measured using independent pricing models or other model-based valuation techniques such as the present value of future cash flows, adjusted for the security’s credit rating, prepayment assumptions and other factors such as credit loss assumptions. Level 1 investment securities include those traded on an active exchange, such as the New York Stock Exchange, U.S. Treasury securities that are traded by dealers or brokers in active over-the- counter markets and money market funds. Level 2 investment securities include mortgage-backed securities issued by government sponsored entities, municipal bonds and corporate debt securities. Securities classified as Level 3 include asset-backed securities in less liquid markets.

Impaired Loans. Loans measured for impairment are measured at an observable market price (if available), or the fair value of the loan’s collateral (if the loan is collateral dependent). The fair value of an impaired loan may be estimated using one of several methods, including collateral value, market value of similar debt, liquidation value and discounted cash flows. Those impaired loans not requiring a specific loan loss reserve represent loans for which the fair value of the expected repayments or collateral exceeds the recorded investments in such loans. When the fair value of the collateral is based on an observable market price or a current appraised value, we record the impaired loan at Level 2. When an appraised value is not available or we determine that the fair value of the collateral is further impaired below the appraised value and there is no observable market price, we record the impaired loan at Level 3.

10

Loans. The fair value for loans with variable interest rates less a credit discount is the carrying amount. The fair value of fixed rate loans is derived by calculating the discounted value of future cash flows expected to be received by the various homogeneous categories of loans. All loans have been adjusted to reflect changes in credit risk. Changes are not recorded directly as an adjustment to current earnings or comprehensive income, but rather as an adjustment component in determining the overall adequacy of the loan loss reserve.

Other Real Estate Owned. OREO is reported at its net realizable value (fair value less estimated costs to sell), at the time any real estate collateral is acquired by the Bank in satisfaction of a loan. Subsequently, OREO is carried at the lower of carrying value or fair value less estimated costs to sell. Fair value is determined based upon independent market prices, appraised values of the collateral or management’s estimation of the value of the collateral. When the fair value of the collateral is based on an observable market price or a current appraised value, we record the foreclosed asset at Level 2. When an appraised value is not available or management determines the fair value of the collateral is further impaired below the appraised value and there is no observable market price, we record the foreclosed asset at Level 3.

Deposits. Deposits are carried at historical cost. The carrying amounts of deposits from savings and money market accounts are deemed to approximate fair value as they either have no stated maturities or short-term maturities. Certificates of deposit are estimated utilizing discounted cash flow techniques. The interest rates applied are rates currently being offered for similar certificates of deposit.

Borrowings. The fair value of borrowings is the carrying amount for those borrowings that mature on a daily basis. The fair value of term borrowings is derived by calculating the discounted value of future cash flows expected to be paid out by the Company.

Junior Subordinated Debentures. The fair value of the junior subordinated debentures is based on quoted market prices of the underlying securities. These securities are variable rate in nature and repriced quarterly.

Commitments to Extend Credit and Standby Letters of Credit. The fair value of commitments to extend credit and standby letters of credit are based on fees currently charged to enter into similar agreements, taking into account the remaining terms of the agreements and the counterparties’ credit standing.

Interest Receivable and Interest Payable. The carrying amounts of our accrued interest receivable and accrued interest payable are deemed to approximate fair value.

Assets Recorded at Fair Value on a Recurring Basis

The following tables show the recorded amounts of assets and liabilities measured at fair value on a recurring basis at June 30, 2015 and December 31, 2014:

	At June 30, 2015
(Dollars in thousands)	Total		Level 1		Level 2		Level 3
Assets and Liabilities at Fair Value:
Investment securities available for sale
Residential mortgage backed securities issued by U.S. agencies	$	49,474	$	—	$	49,474	$	—
Residential collateralized mortgage obligations issued by non-agency	715		—		715		—
Asset-backed security	1,465		—		—		1,465
Mutual funds	4,742		4,742		—		—
Total securities available for sale at fair value	$	56,396	$	4,742	$	50,189	$	1,465

11

	At December 31, 2014
(Dollars in thousands)	Total		Level 1		Level 2		Level 3
Assets and Liabilities at Fair Value:
Investment securities available for sale
Residential mortgage backed securities issued by U.S. agencies	$	53,739	$	—	$	53,739	$	—
Residential collateralized mortgage obligations issued by non-agency	777		—		777		—
Asset-backed security	1,650		—		—		1,650
Mutual funds	4,760		4,760		—		—
Total securities available for sale at fair value	$	60,926	$	4,760	$	54,516	$	1,650

The changes in Level 3 assets measured at fair value on a recurring basis are summarized as follows for the six months ended June 30, 2015:

	Asset Backed Securities
	(Dollars in thousands)
Balance of recurring Level 3 instruments at December 31, 2014	$	1,650
Total gains or losses (realized/unrealized):
Included in other comprehensive income	(152		)
Settlements	(33		)
Transfers in and/or out of Level 3	—
Balance of Level 3 assets at June 30, 2015	$	1,465

Assets Recorded at Fair Value on a Nonrecurring Basis

We may be required, from time to time, to measure certain assets at fair value on a nonrecurring basis in accordance with GAAP. These nonrecurring fair value adjustments typically involve application of lower of cost or market accounting or write-downs of individual assets. Information regarding assets measured at fair value on a nonrecurring basis is set forth in the table below.

	At June 30, 2015
	Total		Level 1		Level 2		Level 3
Assets at Fair Value:	(Dollars in thousands)
Impaired loans	$	31,646	$	—	$	—	$	31,646
Other real estate owned	1,872		—		1,872		—
Total	$	33,518	$	—	$	1,872	$	31,646

Significant Unobservable Inputs and Valuation Techniques of Level 3 Fair Value Measurements

For our fair value measurements classified in Level 3 of the fair value hierarchy as of June 30, 2015, a summary of the significant unobservable inputs and valuation techniques is as follows:

	Fair Value Measurement as of June 30, 2015		Valuation Techniques(3)	Unobservable Inputs(3)	Range	Weighted Average
	(Dollars in thousands)
Assets
Asset-backed security	$	1,465	Third-Party Pricing	Marketability discount	N/A (1)	N/A (1)
				Illiquidity discount	N/A (1)	N/A (1)
Impaired loans	31,646		Third-Party Pricing	Appraisals	N/A (2)	N/A (2)
	$	33,111

(1) Information is unavailable as valuation was obtained from third-party pricing services.

(2) We obtain appraisals for our various properties included within impaired loans which primarily rely upon market comparisons. These market comparisons support our assumption that the carrying value of the respective loans either requires or does not require additional impairment.

(3) As of June 30, 2015, there has been no change to our valuation techniques or the types of unobservable inputs used in the calculation of fair value from December 31, 2014.

12

Fair Value Measurements for Other Financial Instruments

The table below provides estimated fair values and related carrying amounts of our financial instruments as of June 30, 2015 and December 31, 2014, excluding financial assets and liabilities which are recorded at fair value on a recurring basis.

	Estimated Fair Value
	At June 30, 2015										At December 31, 2014
	Carrying Value		Total		Level 1		Level 2		Level 3		Carrying Value		Total		Level 1	Level 2	Level 3
	(Dollars in thousands)
Financial assets:
Cash and cash equivalents	$	133,579	$	133,579	$	133,579	$	—	$	—	$	177,135	$	177,135	177,135	—	—
Interest-bearing deposits with financial institutions	4,668		4,668		4,668		—		—		4,668		4,668		4,668	—	—
Federal Reserve Bank of San Francisco and Federal Home Loan Bank stock	8,170		8,170		8,170		—		—		8,137		8,137		8,137	—	—
Loans, net	821,273		819,939		—		—		819,939		824,197		818,547		—	—	818,547
Accrued interest receivable	2,105		2,105		2,105		—		—		2,436		2,436		2,436	—	—
Financial liabilities:
Noninterest bearing deposits	236,361		236,361		236,361		—		—		237,491		237,491		237,491	—	—
Interest-bearing deposits	635,589		635,287		—		635,287		—		678,818		678,890		—	678,890	—
Borrowings	30,000		29,968		—		29,968		—		39,500		39,418		—	39,418	—
Junior subordinated debentures	17,527		17,527		—		17,527		—		17,527		17,527		—	17,527	—
Accrued interest payable	183		183		183		—		—		222		222		222	—	—

4. Investments

Securities Available For Sale, at Fair Value

The following table sets forth the major components of securities available for sale and compares the amortized costs and estimated fair market values of, and the gross unrealized gains and losses on, these securities at June 30, 2015 and December 31, 2014:

(Dollars in thousands)	June 30, 2015									December 31, 2014
	Amortized Cost		Gross Unrealized					Estimated Fair Value		Amortized Cost		Gross Unrealized					Estimated Fair Value
			Gain		Loss							Gain		Loss
Securities Available for Sale
Residential mortgage backed securities issued by U.S. Agencies(1)	$	50,451	$	13	$	(990	)	$	49,474	$	54,653	$	26	$	(940	)	$	53,739
Residential collateralized mortgage obligations issued by non agencies(1)	731		—		(16		)	715		790		—		(13		)	777
Asset backed security(2)	2,050		—		(585		)	1,465		2,083		—		(433		)	1,650
Mutual funds(3)	4,750		37		(45		)	4,742		4,750		45		(35		)	4,760
Total	$	57,982	$	50	$	(1,636	)	$	56,396	$	62,276	$	71	$	(1,421	)	$	60,926

(1) Secured by closed-end first liens on 1-4 family residential mortgages.

(2) Comprised of a security that represents an interest in a pool of trust preferred securities issued by U.S.-based banks and insurance companies.

(3) Consists primarily of mutual fund investments in closed-end first lien 1-4 family residential mortgages.

At June 30, 2015, U.S. agency mortgage backed securities with an aggregate fair market value of $3.8 million were pledged to secure repurchase agreements, local agency deposits and treasury, tax and loan accounts. At December 31, 2014, U.S. agency mortgage backed securities and collateralized mortgage obligations with an aggregate fair market value of $3.6 million were pledged to secure repurchase agreements, local agency deposits and treasury, tax and loan accounts.

The amortized cost and estimated fair values of securities available for sale at June 30, 2015 and December 31, 2014 are shown in the tables below by contractual maturities taking into consideration historical prepayments based on the prior twelve months of principal payments. Expected maturities will differ from contractual maturities and historical prepayments, particularly with respect to collateralized mortgage obligations, primarily because prepayment rates are affected by changes in conditions in the interest rate market and, therefore, future prepayment rates may differ from historical prepayment rates.

13

	At June 30, 2015 Maturing in
(Dollars in thousands)	One year or less			Over one year through five years			Over five years through ten years			Over ten Years			Total
Securities available for sale, amortized cost	$	7,616		$	28,071		$	15,445		$	6,850		$	57,982
Securities available for sale, estimated fair value	7,443			27,739			15,064			6,150			56,396
Weighted average yield	1.56		%	1.63		%	1.58		%	1.90		%	1.63		%

	At December 31, 2014 Maturing in
(Dollars in thousands)	One year or less			Over one year through five years			Over five years through ten years			Over ten Years			Total
Securities available for sale, amortized cost	$	7,483		$	29,008		$	17,448		$	8,337		$	62,276
Securities available for sale, estimated fair value	7,359			28,614			17,148			7,805			60,926
Weighted average yield	1.54		%	1.64		%	1.60		%	1.83		%	1.64		%

We had no sales of securities available for sale during the three and six months ended June 30, 2015 and 2014.

The tables below indicate, as of June 30, 2015 and December 31, 2014, the gross unrealized losses and fair values of our investments, aggregated by investment category, and length of time that the individual securities have been in a continuous unrealized loss position.

	Securities with Unrealized Loss at June 30, 2015
	Less than 12 months					12 months or more					Total
(Dollars in thousands)	Fair Value		Unrealized Loss			Fair Value		Unrealized Loss			Fair Value		Unrealized Loss
Residential mortgage backed securities issued by U.S. Agencies	$	22,504	$	(143	)	$	25,854	$	(847	)	$	48,358	$	(990	)
Residential collateralized mortgage obligations issued by non-agencies	—		—			716		(16		)	716		(16		)
Asset backed security	—		—			1,465		(585		)	1,465		(585		)
Mutual funds	2,455		(45		)	—		—			2,455		(45		)
Total	$	24,959	$	(188	)	$	28,035	$	(1,448	)	$	52,994	$	(1,636	)

	Securities With Unrealized Loss at December 31, 2014
	Less than 12 months					12 months or more					Total
(Dollars In thousands)	Fair Value		Unrealized Loss			Fair Value		Unrealized Loss			Fair Value		Unrealized Loss
Residential mortgage backed securities issued by U.S. Agencies	$	—	$	—		$	50,697	$	(940	)	$	50,697	$	(940	)
Residential collateralized mortgage obligations issued by non-agencies	—		—			776		(13		)	776		(13		)
Asset-backed security	—		—			1,651		(433		)	1,651		(433		)
Mutual funds	2,464		(35		)	—		—			2,464		(35		)
Total	$	2,464	$	(35	)	$	53,124	$	(1,386	)	$	55,588	$	(1,421	)

We regularly monitor investments for significant declines in fair value. We have determined that declines in the fair values of these investments below their respective amortized costs, as set forth in the tables above, are temporary because (i) those declines were due to interest rate changes and not to a deterioration in the creditworthiness of the issuers of those investment securities, and (ii) we have the ability to hold those securities until there is a recovery in their values or until their maturity.

We recognize other-than-temporary impairments (“OTTI”) to our available-for-sale debt securities in accordance with FASB ASC 320-10. When there are credit losses associated with, but we have no intention to sell, an impaired debt security, and it is more likely than not that we will not have to sell the security before recovery of its cost basis, we will separate the amount of impairment, or OTTI, between the amount that is credit related and the amount that is related to non-credit factors. Credit-related impairments are recognized in our consolidated statements of operations. Any non-credit-related impairments are recognized and reflected in other comprehensive income (loss) in our consolidated statements of financial condition.

Through the impairment assessment process, we determined that the available-for-sale securities discussed below were other-than-temporarily impaired at June 30, 2015. We recorded no impairment credit losses on available-for-sale securities in our

14

consolidated statements of operations for the three and six months ended June 30, 2015 and 2014. The OTTI related to factors other than credit losses, in the aggregate amount of $585 thousand, and was recognized as other comprehensive loss in our accompanying consolidated statement of financial condition as of June 30, 2015.

The table below presents, for the six months ended June 30, 2015, a roll-forward of OTTI in those instances when a portion of the OTTI was attributable to non-credit related factors and, therefore, was recognized in other comprehensive loss:

(Dollars in thousands)	Gross Other- Than- Temporary Impairments			Other-Than- Temporary Impairments Included in Other Comprehensive Loss			Net Other-Than- Temporary Impairments Included in Retained  Earnings (Deficit)
Balance – December 31, 2014	$	(986	)	$	(433	)	$	(553	)
Change in market value on a security for which an OTTI was previously recognized	(180		)	(180		)	—
Principal received on OTTI security	28			28			—
Balance – June 30, 2015	$	(1,138	)	$	(585	)	$	(553	)

In determining the component of OTTI related to credit losses, we compare the amortized cost basis of each OTTI security to the present value of its expected cash flows, discounted using the effective interest rate implicit in the security at the date of acquisition.

As a part of our OTTI assessment process with respect to securities available for sale with unrealized losses, we consider available information about (i) the performance of the collateral underlying each such security, including any credit enhancements, (ii) historical prepayment speeds, (iii) delinquency and default rates, (iv) loss severities, (v) the age or “vintage” of the security, and (vi) any rating agency reports on the security. Significant judgments are required with respect to these and other factors in order to make a determination of the future cash flows that can be expected to be generated by the security.

Based on our OTTI assessment process, we determined that there is one asset-backed security in our portfolio of securities available for sale that was impaired as of June 30, 2015. This security is a multi-class, cash flow collateralized bond obligation backed by a pool of trust preferred securities issued by a diversified pool of 56 issuers that consisted of 45 U.S. depository institutions and 11 insurance companies at the time of the security’s issuance in November 2007. We purchased $3.0 million face amount of this security in November 2007 at a price of 95.21% for a total purchase price of $2.9 million, out of a total of $363 million of this security sold at the time of issuance. The security that we own (CUSIP 74042CAE8) is the mezzanine class B piece security with a variable interest rate of 3 month LIBOR plus 60 basis points, which had a rating of Aa2 and AA by Moody’s and Fitch, respectively, at the time of issuance in 2007.

As of June 30, 2015, the amortized cost of this security was $2.1 million with a fair value of $1.5 million, for an unrealized loss of approximately $585 thousand. As of June 30, 2015, the security had a Baa3 rating from Moody’s and a CCC rating from Fitch and had experienced $42.5 million in defaults (12.5% of total current collateral) and $12.0 million in deferring securities (3.5% of total current collateral) from issuance to June 30, 2015. As of June 30, 2015, the mezzanine class B tranche had $52.5 million in excess subordination.

We have made a determination that the remainder of our securities with respect to which there were unrealized losses as of June 30, 2015 are not other-than-temporarily impaired, because we have concluded that we have the ability to continue to hold those securities until their respective fair market values increase above their respective amortized costs or, if necessary, until their respective maturities. In reaching that conclusion we considered a number of factors and other information, which included: (i) the significance of each such security, (ii) the amount of the unrealized losses attributable to each such security, (iii) our liquidity position, (iv) the impact that retention of those securities could have on our capital position and (v) our evaluation of the expected future performance of these securities (based on the criteria discussed above).

15

Other Investments

As of December 31, 2014, we had one investment in a limited partnership which was accounted for under the equity method of accounting and included within other assets on the consolidated statements of financial condition. During the six months ended June 30, 2015, we redeemed 100% of our investment in the limited partnership for a return of capital of $2.1 million. As of June 30, 2015 and December 31, 2014, our other investment was as follows:

	June 30, 2015		December 31, 2014
	(Dollars in thousands)
Investment accounted for under the equity method	$	—	$	2,081

5. Loans and Allowance for Loan and Lease Losses

The loan portfolio consisted of the following at:

	June 30, 2015					December 31, 2014
(Dollars in thousands)	Amount			Percent		Amount			Percent
Commercial loans	$	323,241		38.8	%	$	301,746		36.0	%
Commercial real estate loans – owner occupied	203,445			24.4	%	212,515			25.4	%
Commercial real estate loans – all other	135,966			16.3	%	146,676			17.5	%
Residential mortgage loans – multi-family	84,976			10.2	%	95,276			11.4	%
Residential mortgage loans – single family	60,191			7.2	%	64,326			7.7	%
Land development loans	5,575			0.7	%	7,745			0.9	%
Consumer loans	19,907			2.4	%	9,687			1.2	%
Total loans	833,301			100.0	%	837,971			100.0	%
Deferred loan origination costs, net	315					59
Allowance for loan and lease losses	(12,343		)			(13,833		)
Loans, net	$	821,273				$	824,197

At June 30, 2015 and December 31, 2014, loans of approximately $517 million and $425 million, respectively, were pledged to secure borrowings obtained from the FHLB and to support our unfunded borrowing capacity.

Allowance for Loan and Lease Losses

The ALLL represents our estimate of credit losses in our loan and lease portfolio that are probable and estimable at the balance sheet date. We employ economic models that are based on bank regulatory guidelines, industry standards and our own historical loan loss experience, as well as a number of more subjective qualitative factors, to determine both the sufficiency of the ALLL and the amount of the provisions that are required to increase or replenish the ALLL.

The ALLL is first determined by (i) analyzing all classified loans (graded as “Substandard” or “Doubtful” under our internal asset quality grading parameters) on non-accrual status for loss exposure and (ii) establishing specific reserves as needed. ASC 310-10 defines loan impairment as the existence of uncertainty concerning collection of all principal and interest in accordance with the contractual terms of a loan. For collateral dependent loans, impairment is typically measured by comparing the loan amount to the fair value of collateral, less estimated costs to sell, with any “shortfall” amount charged off. Other methods can be used in estimating impairment, including market price and the present value of expected future cash flows discounted at the loan’s original interest rate. We are an active lender with the U.S. Small Business Administration and collection of a percentage of the loan balance of many of the loans originated is guaranteed.  The ALLL reserves are calculated against the non-guaranteed loan balances. 

On a quarterly basis, we utilize a classification based loan loss migration model as well as review individual loans in determining the adequacy of the ALLL for homogenous pools of loans that are not subject to specific reserve allocations. Our loss migration analysis tracks a certain number of quarters of loan loss history and industry loss factors to determine historical losses by classification category for each loan type, except certain consumer loans. We then apply these calculated loss factors, together with qualitative factors based on external economic conditions and trends and internal assessments, to the outstanding loan balances in each homogenous group of loans, and then, using our internal asset quality grading parameters, we grade the loans as “Pass,” “Special Mention,” “Substandard” or “Doubtful”. We analyze impaired loans individually. This grading is based on the credit classifications of assets as prescribed by government regulations and industry standards and is separated into the following groups:

16

• Pass: Loans classified as pass include current loans performing in accordance with contractual terms, installment/consumer loans that are not individually risk rated, and loans which exhibit certain risk factors that require greater than usual monitoring by management.

• Special Mention: Loans classified as special mention, while generally not delinquent, have potential weaknesses that deserve management’s close attention. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the loan or in the Bank’s credit position at some future date.

• Substandard: Loans classified as substandard have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt. There is a distinct possibility that the Bank will sustain some loss if the deficiencies are not corrected.

• Doubtful: Loans classified as doubtful have all the weaknesses inherent in a substandard loan, and may also be at delinquency status and have defined weaknesses based on currently existing facts, conditions and values making collection or liquidation in full highly questionable and improbable.

17

Set forth below is a summary of the activity in the ALLL during the three and six months ended June 30, 2015 and 2014:

(Dollars in thousands)	Commercial			Real  Estate			Land Development			Consumer and Single Family Mortgages			Total
ALLL in the three months ended June 30, 2015:
Balance at beginning of period	$	7,353		$	4,287		$	120		$	879		$	12,639
Charge offs	(730		)	—			—			(151		)	(881		)
Recoveries	582			1			—			2			585
Provision	(724		)	601			(76		)	199			—
Balance at end of period	$	6,481		$	4,889		$	44		$	929		$	12,343
ALLL in the six months ended June 30, 2015:
Balance at beginning of period	$	7,670		$	5,133		$	296		$	734		$	13,833
Charge offs	(2,117		)	—			(85		)	(151		)	(2,353		)
Recoveries	857			2			—			4			863
Provision	71			(246		)	(167		)	342			—
Balance at end of period	$	6,481		$	4,889		$	44		$	929		$	12,343
ALLL in the three months ended June 30, 2014:
Balance at beginning of period	$	5,988		$	5,039		$	154		$	759		$	11,940
Charge offs	(166		)	—			—			(2		)	(168		)
Recoveries	169			1			—			38			208
Provision	486			357			(69		)	(174		)	600
Balance at end of period	$	6,477		$	5,397		$	85		$	621		$	12,580
ALLL in the six months ended June 30, 2014:
Balance at beginning of period	$	5,812		$	4,517		$	165		$	864		$	11,358
Charge offs	$	(276	)	$	—		$	—		$	(102	)	$	(378	)
Recoveries	452			19			—			79			550
Provision	489			861			(80		)	(220		)	1,050
Balance at end of period	$	6,477		$	5,397		$	85		$	621		$	12,580

Set forth below is information regarding loan balances and the related ALLL, by portfolio type, as of June 30, 2015 and December 31, 2014.

(Dollars in thousands)	Commercial		Real  Estate		Land Development		Consumer and Single Family Mortgages		Total
ALLL balance at June 30, 2015 related to:
Loans individually evaluated for impairment	$	405	$	—	$	—	$	—	$	405
Loans collectively evaluated for impairment	6,076		4,889		44		929		11,938
Total	$	6,481	$	4,889	$	44	$	929	$	12,343
Loans balance at June 30, 2015 related to:
Loans individually evaluated for impairment	$	14,333	$	11,573	$	1,685	$	4,055	$	31,646
Loans collectively evaluated for impairment	308,908		412,814		3,890		76,043		801,655
Total	$	323,241	$	424,387	$	5,575	$	80,098	$	833,301
ALLL Balance at December 31, 2014 related to:
Loans individually evaluated for impairment	$	995	$	537	$	—	$	—	$	1,532
Loans collectively evaluated for impairment	6,675		4,596		296		734		12,301
Total	$	7,670	$	5,133	$	296	$	734	$	13,833
Loans balance at December 31, 2014 related to:
Loans individually evaluated for impairment	$	21,117	$	7,536	$	2,111	$	4,373	$	35,137
Loans collectively evaluated for impairment	280,629		446,931		5,634		69,640		802,834
Total	$	301,746	$	454,467	$	7,745	$	74,013	$	837,971

18

Credit Quality

The amounts of nonperforming assets and delinquencies that occur within our loan portfolio factor into our evaluation of the adequacy of the ALLL.

The following table provides a summary of the delinquency status of loans by portfolio type at June 30, 2015 and December 31, 2014:

(Dollars in thousands)	30-59 Days Past Due		60-89 Days Past Due		90 Days and Greater		Total Past Due		Current		Total Loans Outstanding		Loans >90 Days and Accruing
At June 30, 2015
Commercial loans	$	296	$	231	$	12,132	$	12,659	$	310,582	$	323,241	$	—
Commercial real estate loans – owner-occupied	—		798		—		798		202,647		203,445		—
Commercial real estate loans – all other	1,132		2,917		—		4,049		131,917		135,966		—
Residential mortgage loans – multi-family	—		—		—		—		84,976		84,976		—
Residential mortgage loans – single family	—		—		763		763		59,428		60,191		—
Land development loans	—		—		1,685		1,685		3,890		5,575		—
Consumer loans	—		—		—		—		19,907		19,907		—
Total(1)	$	1,428	$	3,946	$	14,580	$	19,954	$	813,347	$	833,301	$	—
At December 31, 2014
Commercial loans	$	553	$	—	$	—	$	553	$	301,193	$	301,746	$	—
Commercial real estate loans – owner-occupied	—		—		—		—		212,515		212,515		—
Commercial real estate loans – all other	20		—		2,117		2,137		144,539		146,676		—
Residential mortgage loans – multi-family	—		—		—		—		95,276		95,276		—
Residential mortgage loans – single family	835		—		285		1,120		63,206		64,326		—
Land development loans	—		—		364		364		7,381		7,745		—
Consumer loans	17		—		—		17		9,670		9,687		—
Total	$	1,425	$	—	$	2,766	$	4,191	$	833,780	$	837,971	$	—

(1)    Loans 90 days or more past due included two consumer mortgage loans collateralized by residential real estate with a recorded investment of $763 thousand which are in the process of foreclosure.

Generally, the accrual of interest on a loan is discontinued when principal or interest payments become more than 90 days past due, unless we believe that the loan is adequately collateralized and it is in the process of collection. There were no loans 90 days or more past due and still accruing interest at June 30, 2015 or December 31, 2014. In certain instances, when a loan is placed on non-accrual status, previously accrued but unpaid interest is reversed against current income. Subsequent collections of cash are applied as principal reductions when received (referred to as full nonaccrual basis of accounting), except when the ultimate collectability of principal is probable, in which case such payments are applied to accrued and unpaid interest, which is credited to income (referred to as nonaccrual cash basis of accounting). Non-accrual loans may be restored to accrual status when principal and interest become current and full repayment becomes expected.

19

The following table provides information with respect to loans on nonaccrual status, by portfolio type, as of June 30, 2015 and December 31, 2014:

	June 30, 2015		December 31, 2014
	(Dollars in thousands)
Nonaccrual loans:
Commercial loans	$	14,238	$	16,182
Commercial real estate loans – owner occupied	2,104		2,171
Commercial real estate loans – all other	2,117		2,117
Residential mortgage loans – multi-family	453		—
Residential mortgage loans – single family	1,187		1,472
Land development loans	1,685		2,111
Total(1)	$	21,784	$	24,053

(1)    Nonaccrual loans may include loans that are currently considered performing loans.

We classify our loan portfolio using internal asset quality ratings. The following table provides a summary of loans by portfolio type and our internal asset quality ratings as of June 30, 2015 and December 31, 2014:

	June 30, 2015		December 31, 2014
	(Dollars in thousands)
Pass:
Commercial loans	$	308,761	$	280,102
Commercial real estate loans – owner occupied	196,963		208,687
Commercial real estate loans – all other	117,257		128,974
Residential mortgage loans – multi family	84,523		94,817
Residential mortgage loans – single family	59,005		62,854
Land development loans	3,890		5,634
Consumer loans	19,907		9,687
Total pass loans	$	790,306	$	790,755
Special Mention:
Commercial loans	$	—	$	351
Commercial real estate loans – owner occupied	2,741		—
Commercial real estate loans – all other	8,854		6,588
Residential mortgage loans – multi family	—		459
Total special mention loans	$	11,595	$	7,398
Substandard:
Commercial loans	$	14,080	$	19,655
Commercial real estate loans – owner occupied	3,741		3,828
Commercial real estate loans – all other	9,855		11,114
Residential mortgage loans – multi family	453		—
Residential mortgage loans – single family	1,186		1,472
Land development loans	1,685		2,111
Total substandard loans	$	31,000	$	38,180
Doubtful:
Commercial loans	$	400	$	1,638
Total doubtful loans	$	400	$	1,638
Total Loans:	$	833,301	$	837,971

Impaired Loans

A loan generally is classified as impaired when, in our opinion, principal or interest is not likely to be collected in accordance with the contractual terms of the loan agreement. We measure for impairments on a loan-by-loan basis, using either

20

the present value of expected future cash flows discounted at the loan’s effective interest rate, or the fair value of the collateral if the loan is collateral dependent.

The following table sets forth information regarding impaired loans, at June 30, 2015 and December 31, 2014:

	June 30, 2015		December 31, 2014
	(Dollars in thousands)
Impaired loans:
Nonaccruing loans	$	6,683	$	18,118
Nonaccruing restructured loans	15,101		5,935
Accruing restructured loans (1)	9,862		11,084
Accruing impaired loans	—		—
Total impaired loans	$	31,646	$	35,137
Impaired loans less than 90 days delinquent and included in total impaired loans	$	17,066	$	32,371

(1) See "Troubled Debt Restructurings" below for a description of accruing restructured loans at June 30, 2015 and December 31, 2014.

The table below contains additional information with respect to impaired loans, by portfolio type, as of June 30, 2015 and December 31, 2014:

	June 30, 2015						December 31, 2014
	Recorded Investment		Unpaid Principal Balance		Related Allowance (1)		Recorded Investment		Unpaid Principal Balance		Related Allowance (1)
	(Dollars in thousands)
No allowance recorded:
Commercial loans	$	13,683	$	14,858	$	—	$	18,563	$	18,839	$	—
Commercial real estate loans – owner occupied	4,845		5,173		—		2,171		2,440		—
Commercial real estate loans – all other	6,275		6,275		—		5,365		5,423		—
Residential mortgage loans – multi-family	453		454		—		—		—		—
Residential mortgage loans – single family	4,055		4,351		—		4,373		4,610		—
Land development loans	1,685		1,732		—		2,111		2,146		—
Total	30,996		32,843		—		32,583		33,458		—
With allowance recorded:
Commercial loans	$	650	$	925	$	405	$	2,554	$	2,983	$	1,532
Total	650		925		405		2,554		2,983		1,532
Total
Commercial loans	$	14,333	$	15,783	$	405	$	21,117	$	21,822	$	1,532
Commercial real estate loans – owner occupied	4,845		5,173		—		2,171		2,440		—
Commercial real estate loans – all other	6,275		6,275		—		5,365		5,423		—
Residential mortgage loans – multi-family	453		454		—		—		—		—
Residential mortgage loans – single family	4,055		4,351		—		4,373		4,610		—
Land development loans	1,685		1,732		—		2,111		2,146		—
Total	31,646		33,768		405		35,137		36,441		1,532

(1) When the discounted cash flows, collateral value or market price equals or exceeds the recorded investment in the loan, then specific reserves are not required to be set aside for the loan within the ALLL. This typically occurs when the impaired loans have been partially charged-off and/or there have been interest payments received and applied to the balance of the principal outstanding.

At June 30, 2015 and December 31, 2014, there were $31.0 million and $32.6 million, respectively, of impaired loans for which no specific reserves had been allocated because these loans, in our judgment, were sufficiently collateralized. Of the impaired loans at June 30, 2015 for which no specific reserves were allocated, $23.7 million had been deemed impaired in the prior year.

Average balances and interest income recognized on impaired loans, by portfolio type, for the three and six months ended June 30, 2015 and 2014 were as follows:

21

	Three Months Ended June 30,								Six Months Ended June 30,
	2015				2014				2015				2014
	Average Balance		Interest Income Recognized		Average Balance		Interest Income Recognized		Average Balance		Interest Income Recognized		Average Balance		Interest Income Recognized
	(Dollars in thousands)
No allowance recorded:
Commercial loans	$	14,533	$	25	$	7,420	$	54	$	15,876	$	99	$	8,441	$	168
Commercial real estate loans – owner occupied	3,492		81		2,002		—		3,051		81		1,926		22
Commercial real estate loans – all other	5,812		201		6,574		70		5,663		201		6,608		188
Residential mortgage loans – multi-family	454		4		—		—		303		9		—		—
Residential mortgage loans – single family	4,143		29		3,075		30		4,220		58		3,661		60
Land development loans	1,701		7		374		—		1,838		7		380		—
Total	30,135		347		19,445		154		30,951		455		21,016		438
With allowance recorded:
Commercial loans	1,057		6		1,827		28		1,556		6		1,218		27
Commercial real estate loans – owner occupied	—		—		3,993		156		—		—		3,912		156
Total	1,057		6		5,820		184		1,556		6		5,130		183
Total
Commercial loans	15,590		31		9,247		82		17,432		105		9,659		195
Commercial real estate loans – owner occupied	3,492		81		5,995		156		3,051		81		5,838		178
Commercial real estate loans – all other	5,812		201		6,574		70		5,663		201		6,608		188
Residential mortgage loans – multi-family	454		4		—		—		303		9		—		—
Residential mortgage loans – single family	4,143		29		3,075		30		4,220		58		3,661		60
Land development loans	1,701		7		374		—		1,838		7		380		—
Total	$	31,192	$	353	$	25,265	$	338	$	32,507	$	461	$	26,146	$	621

The interest that would have been earned had the impaired loans remained current in accordance with their original terms was $304 thousand and $142 thousand during the three months ended June 30, 2015 and 2014, respectively. The interest that would have been earned had the impaired loans remained current in accordance with their original terms was $508 thousand and $206 thousand during the six months ended June 30, 2015 and 2014, respectively.

Troubled Debt Restructurings (“TDRs”)

Pursuant to the FASB's ASU No. 2011-2, A Creditor's Determination of whether a Restructuring is a Troubled Debt Restructuring, the Bank's TDRs totaled $25.0 million and $17.0 million at June 30, 2015 and December 31, 2014, respectively. TDRs consist of loans to which modifications have been made for the purpose of alleviating temporary impairments of the borrower's financial condition and cash flows. Those modifications have come in the forms of changes in amortization terms, reductions in interest rates, interest only payments and, in limited cases, concessions to outstanding loan balances. The modifications are made as part of workout plans we enter into with the borrower that are designed to provide a bridge for the borrower's cash flow shortfalls in the near term. If a borrower works through the near term issues, then in most cases, the original contractual terms of the borrower's loan will be reinstated.

Of the $25.0 million of TDRs outstanding at June 30, 2015, $9.9 million were performing in accordance with their terms and accruing interest, and $15.1 million were not. Our impairment analysis determined no specific reserves were required on the TDR balances outstanding at June 30, 2015.

The following table presents loans restructured as TDRs during the three and six months ended June 30, 2015 and 2014:

22

	Three Months Ended
	June 30, 2015					June 30, 2014
(Dollars in thousands)	Number of Loans	Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment		Number of loans	Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment
Performing
Commercial loans	1	$	94	$	94	—	$	—	$	—
Commercial real estate – owner occupied	1	2,741		2,741		—	—		—
Commercial real estate – all other	1	4,158		4,158		—	—		—
	3	6,993		6,993		—	—		—
Nonperforming
Commercial loans	1	250		250		1	300		193
	1	250		250		1	300		193
Total Troubled Debt Restructurings	4	$	7,243	$	7,243	1	$	300	$	193
	Six Months Ended
	June 30, 2015					June 30, 2014
(Dollars in thousands)	Number of loans	Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment		Number of loans	Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment
Performing
Commercial loans	1	$	94	$	94	—	$	—	$	—
Commercial real estate – owner occupied	1	2,741		2,741		—	—		—
Commercial real estate – all other	1	4,158		4,158		—	—		—
	3	6,993		6,993		—	—		—
Nonperforming
Commercial loans	1	250		250		1	300		193
	1	250		250		1	300		193
Total Troubled Debt Restructurings	4	$	7,243	$	7,243	1	$	300	$	193

During the three and six months ended June 30, 2015 and 2014, we had no TDRs that were modified within the preceding 12-month period which subsequently defaulted.

6. Income Taxes

For the three and six months ended June 30, 2015 and June 30, 2014, we recorded no income tax provision. Our net deferred tax asset at June 30, 2015 was $6.0 million, net of a valuation allowance of $11.4 million. Based on the analysis performed, and the positive and negative evidence considered, management chose not to release any portion of the $11.4 million valuation allowance as of June 30, 2015. Positive evidence included our current period taxable income, improvement in asset quality, tax planning strategies, and economic conditions. Negative evidence included historical losses over the previous 12 quarter look back period and our accumulated deficit. Management determined the negative evidence was significant enough to outweigh the positive evidence and support no reversal of the valuation allowance; however, we did conclude that it was more-likely-than-not that the existing $6.0 million net deferred tax asset would be realized. Our net deferred tax asset at June 30, 2014 was $6.9 million, net of a valuation allowance of $11.8 million. Based on the analysis performed, and the positive and negative evidence considered, management chose not to release any portion of the $11.8 million valuation allowance as of June 30, 2014. Positive evidence included improvement in our asset quality, tax planning strategies, and economic conditions. Negative evidence included historical operating losses and our accumulated deficit. Management determined the negative evidence was significant enough to outweigh the positive evidence and support no reversal of the valuation allowance; however, we did conclude that it was more-likely-than-not that the existing $6.9 million net deferred tax asset at the time would be realized.

We file income tax returns with the U.S. federal government and the state of California. As of June 30, 2015, we were subject to examination by the Internal Revenue Service with respect to our U.S. federal tax returns for the 2011 to 2013 tax years and Franchise Tax Board for California state income tax returns for the 2010 to 2013 tax years. Net operating losses (“NOLs”)

23

on our U.S. federal and California state income tax returns may be carried forward twenty years. As of June 30, 2015, we do not believe there will be any material adverse changes in our unrecognized tax benefits over the next 12 months.

Our policy is to recognize interest and penalties accrued on any unrecognized tax benefits as a component of tax expense. We did not have any accrued interest or penalties associated with any unrecognized tax benefits, and no interest expense was recognized during the three and six months ended June 30, 2015 and 2014.

7. Stock-Based Employee Compensation Plans

In May 2010, our shareholders approved the adoption of our 2010 Equity Incentive Plan (the “2010 Incentive Plan”), which authorized and set aside a total of 400,000 shares of our common stock for issuance on the exercise of stock options or the grant of restricted stock or other equity incentives to our officers, and other key employees and directors. An additional 158,211 shares of common stock were also set aside which was equal to the total of the shares that were available for the grant of equity incentives under our shareholder-approved 2008 and 2004 Equity Incentive Plans (the "Previously Approved Plans") at the time of the adoption of the 2010 Incentive Plan. Options to purchase a total of 514,348 shares of our common stock granted under the Previously Approved Plans were outstanding at June 30, 2015. The 2010 Incentive Plan provides that if any of these outstanding options under the Previously Approved Plans expire or are terminated for any reason, then the number of shares that would become available for grants or awards of equity incentives under the 2010 Incentive Plan would be increased by an equivalent number of shares. At the Annual Shareholders meeting held in May 2013, our shareholders approved an additional 800,000 share increase in the maximum number of shares of our common stock that may be issued pursuant to grants or exercises of options or restricted shares or other equity incentives under the 2010 Incentive Plan, of which 60,848 shares of restricted stock have vested as of June 30, 2015 thereby decreasing the maximum number of shares authorized under the 2010 Incentive Plan. As a result, as of June 30, 2015, the maximum number of shares that were authorized for the grant of options or other equity incentives under the 2010 Incentive Plan totaled 1,811,711 (assuming that all 514,348 shares of our common stock subject to options under the Previously Approved Plans expire or are terminated), or approximately 9% of the shares of our common stock then outstanding.

A stock option entitles the recipient to purchase shares of our common stock at a price per share that may not be less than 100% of the fair market value of the Company’s shares on the date the option is granted. Restricted shares may be granted at such purchase prices and on such other terms, including restrictions and Company repurchase or reacquisition rights, as are fixed by the Compensation Committee at the time rights to purchase such restricted shares are granted. Stock Appreciation Rights ("SARs") entitle the recipient to receive a cash payment in an amount equal to the difference between the fair market value of the Company’s shares on the date of vesting and a “base price” (which, in most cases, will be equal to the fair market value of the Company’s shares on the date the SAR is granted), subject to the right of the Company to make such payment in shares of its common stock at their then fair market value. Options, restricted shares and SARs may vest immediately or in installments over various periods generally ranging up to five years, subject to the recipient’s continued employment or service or the achievement of specified performance goals, as determined by the Compensation Committee at the time it grants or awards the options, the restricted shares or the SARs. Stock options and SARs may be granted for terms of up to 10 years after the date of grant, but will terminate sooner upon or shortly after a termination of service occurring prior to the expiration of the term of the option or SAR. The Company will become entitled to repurchase any unvested restricted shares, at the same price that was paid for the shares by the recipient, or to cancel those shares in the event of a termination of employment or service of the holder of such shares or if any performance goals specified in the award are not satisfied. To date, the Company has not granted any SARs.

Under FASB ASC 718-10, we are required to recognize, in our financial statements, the fair value of the options or any restricted shares that we grant as compensation cost over their respective service periods. The fair values of the options that were outstanding at June 30, 2015 under the 2010 Incentive Plan were estimated as of their respective dates of grant using the Black-Scholes option-pricing model. The Company, under the 2010 Incentive Plan, granted restricted stock for the benefit of its employees and directors. These restricted shares vest over a period of three years for employees and one year for directors. The recipients of restricted shares have the right to vote all shares subject to such grant and receive all dividends with respect to such shares whether or not the shares have vested. The recipients do not pay any cash consideration for the shares.

Stock Options

The table below summarizes the weighted average assumptions used to determine the fair values of the options granted during the following periods:

24

	Three Months Ended June 30,						Six Months Ended June 30,
Assumptions with respect to:	2015(1)			2014(1)			2015			2014
Expected volatility	—		%	—		%	44		%	44		%
Risk-free interest rate	—		%	—		%	1.82		%	2.08		%
Expected dividends	—		%	—		%	—		%	0.61		%
Expected term (years)	—			—			6.0			6.7
Weighted average fair value of options granted during period	$	—		$	—		$	3.13		$	2.75

(1) No stock options were granted during the three months ended June 30, 2015 or June 30, 2014.

The following table summarizes the stock option activity under the Company’s equity incentive plans during the six months ended June 30, 2015 and 2014, respectively.

	Number of Shares		Weighted- Average Exercise Price Per Share		Number of Shares		Weighted- Average Exercise Price Per Share
	2015				2014
Outstanding – January 1,	1,257,390		$	6.51	1,821,000		$	6.88
Granted	112,828		7.09		41,892		6.18
Exercised	(226,564	)	5.54		(92,200	)	3.74
Forfeited/Canceled	(134,553	)	11.56		(290,733	)	10.63
Outstanding – June 30,	1,009,101		6.12		1,479,959		6.32
Options Exercisable – June 30,	529,284		$	5.80	779,465		$	6.47
Options Vested – June 30,	529,284		$	5.80	779,465		$	6.47

Options to purchase 22,252 and 27,200 shares of our common stock were exercised during the three months ended June 30, 2015 and 2014, respectively. Options to purchase 226,564 and 92,200 shares of our common stock were exercised during the six months ended June 30, 2015 and 2014, respectively. The aggregate intrinsic value of options exercised during the three months ended June 30, 2015 and 2014 was $21 thousand and $58 thousand, respectively. The aggregate intrinsic value of options exercised during the six months ended June 30, 2015 and 2014 was $343 thousand and $232 thousand, respectively. The fair values of options that vested during the three months ended June 30, 2015 and 2014 was $96 thousand and $144 thousand, respectively. The fair values of options that vested during the six months ended June 30, 2015 and 2014 was $170 thousand and $214 thousand, respectively.

The following table provides additional information regarding the vested and unvested options that were outstanding at June 30, 2015.

Options Outstanding as of June 30, 2015						Options Exercisable as of June 30, 2015(1)
	Vested	Unvested	Weighted Average Exercise Price		Weighted Average Remaining Contractual Life (Years)	Shares	Weighted Average Exercise Price
$2.97 – $5.99	251,408	7,792	$	3.89	5.17	251,408	$	3.88
$6.00 – $9.99	246,576	472,025	6.47		8.25	246,576	6.41
$13.00 – $17.99	19,800	—	15.44		1.04	19,800	15.44
$18.00 – $18.84	11,500	—	18.11		0.57	11,500	18.11
	529,284	479,817	$	6.12	7.23	529,284	$	5.80

(1) The weighted average remaining contractual life of the options that were exercisable as of June 30, 2015 was 6.13 years.

The aggregate intrinsic value of options that were outstanding and exercisable under the 2010 Incentive Plan at June 30, 2015 and December 31, 2014 was $1.2 million and $1.2 million, respectively.

A summary of the status of the unvested options outstanding as of June 30, 2015, and changes in the weighted average grant date fair values of the unvested options during the six months ended June 30, 2015, are set forth in the following table.

25

	For the six months ended June 30,
	2015				2014
	Number of Shares Subject to Options		Weighted Average Grant Date Fair Value		Number of Shares Subject to Options		Weighted Average Grant Date Fair Value
Unvested at the beginning of the period	468,504		$	2.68	785,566		$	2.57
Granted	112,828		3.13		41,892		2.75
Vested	(74,301	)	2.57		(99,865	)	2.14
Forfeited/Canceled	(27,214	)	2.26		(27,099	)	2.68
Unvested at the end of the period	479,817		2.86		700,494		2.63

At June 30, 2015, the weighted average period over which nonvested awards were expected to be recognized was 1.94 years.

Restricted Stock

The following table summarizes the activity related to restricted stock granted, vested and forfeited under our equity incentive plans during the six months ended June 30, 2015 and 2014.

	For the Six Months Ended June 30,
	2015				2014
	Number of Shares		Average Grant Date Fair Value		Number of Shares		Average Grant Date Fair Value
Outstanding at the beginning of the period	141,254		$	6.29	141,284		$	6.23
Granted	98,829		7.10		43,608		6.29
Vested	(15,848	)	6.43		—		—
Forfeited	(3,638	)	6.18		(6,286	)	6.21
Outstanding at the end of the period	220,597		$	6.63	178,606		$	6.25

Compensation Expense

We expect that the compensation expense that will be recognized during the periods presented below in respect of stock options and restricted stock outstanding at June 30, 2015, will be as follows:

	Estimated Stock Based Compensation Expense Stock Options		Estimated Stock Based Compensation Expense Restricted Stock		Estimated Stock Based Compensation Expense Total
(Dollars in thousands)
For the years ending December 31,
Remainder of 2015	$	263	$	347	$	609
2016	303		478		781
2017	109		187		296
2018	34		23		57
2019 and beyond	6		—		6
	$	714	$	1,035	$	1,749

The aggregate amounts of stock based compensation expense recognized in our consolidated statements of operations for the three months ended June 30, 2015 and 2014 were $367 thousand and $260 thousand, respectively, and for the six months ended June 30, 2015 and 2014 were $683 thousand and $537 thousand, respectively, in each case net of taxes.

8. Earnings Per Share (“EPS”)

Basic EPS excludes dilution and is computed by dividing net income or loss available to common shareholders by the weighted average number of common shares outstanding for the period. Diluted EPS reflects the potential dilution that could occur if stock options or other contracts to issue common stock were exercised or converted into common stock that would then share in our earnings.

26

The following table shows how we computed basic and diluted EPS for the three and six months ended June 30, 2015 and 2014.

(In thousands, except per share data)	For the Three Months Ended June 30,						For the Six Months Ended June 30,
	2015			2014			2015			2014
Numerator:
Net income (loss) from continuing operations	$	138		$	(768	)	$	54		$	(1,501	)
Accumulated undeclared dividends on preferred stock	(309		)	(308		)	(618		)	(604		)
Numerator for basic and diluted net loss from continuing operations	(171		)	(1,076		)	(564		)	(2,105		)
Net income from discontinued operations	—			772			—			1,956
Numerator for basic and diluted net (loss) income available to common shareholders	$	(171	)	$	(304	)	$	(564	)	$	(149	)
Denominator:
Basic weighted average outstanding shares of common stock	19,774			19,255			19,696			19,200
Dilutive effect of employee stock options and contingently issuable shares	—			—			—			—
Diluted weighted average common stock and common stock equivalents	19,774			19,255			19,696			19,200
Basic (loss) income per common share:
Net loss from continuing operations	$	(0.01	)	$	(0.06	)	$	(0.03	)	$	(0.11	)
Net income from discontinued operations	$	—		$	0.04		$	—		$	0.10
Net (loss) income available to common shareholders	$	(0.01	)	$	(0.02	)	$	(0.03	)	$	(0.01	)
Diluted (loss) income per common share:
Net loss from continuing operations	$	(0.01	)	$	(0.06	)	$	(0.03	)	$	(0.11	)
Net income from discontinued operations	$	—		$	0.04		$	—		$	0.10
Net (loss) income available to common shareholders	$	(0.01	)	$	(0.02	)	$	(0.03	)	$	(0.01	)

The weighted average shares that have an antidilutive effect in the calculation of diluted net loss per share and have been excluded from the computations above were as follows:

	For the Three Months Ended June 30,		For the Six Months Ended June 30,
	2015	2014	2015	2014
Stock options(1)	1,023,375	1,519,378	1,079,309	1,591,697
Convertible securities(2)	2,767,385	2,549,247	2,750,794	2,535,700
Shares subject to stock purchase warrants(3)	761,278	761,278	761,278	761,278

(1) Stock options were excluded from the computation of diluted earnings per common share for the three and six months ended June 30, 2015 and 2014 as we reported a net loss from continuing operations.

(2) Convertible securities were excluded from the computation of diluted earnings per common share for the three and six months ended June 30, 2015 and 2014 as we reported a net loss from continuing operations.

(3) Stock purchase warrants were excluded from the computation of diluted earnings per common share for the three and six months ended June 30, 2015 and 2014 because the exercisability of those warrants is conditioned on the happening of certain future events.

27

9. Shareholders’ Equity

Accumulated Other Comprehensive Income (Loss), net

Accumulated other comprehensive income (loss), net as of June 30, 2015 and December 31, 2014 was as follows:

	Unrealized Gain (Loss) on Securities Available-for-Sale, net of tax			Accumulated Other Comprehensive Income, Net
	(Dollars in thousands)
Ending balance as of December 31, 2013	$	(2,154	)	$	(2,154	)
Other comprehensive income before reclassifications, net of tax provision of $847 thousand (1)	1,462			1,462
Amounts reclassified from accumulated other comprehensive loss, net of tax	—			—
Other comprehensive income, net of tax provision of $847 thousand	1,462			1,462
Ending balance as of December 31, 2014	$	(692	)	$	(692	)
Other comprehensive loss before reclassifications, net of tax benefit of $98 thousand	(139		)	(139		)
Amounts reclassified from accumulated other comprehensive income, net of tax	—			—
Other comprehensive loss, net of tax benefit of $98 thousand	(139		)	(139		)
Ending balance as of June 30, 2015	$	(831	)	$	(831	)

(1) Tax impact included in Deferred tax assets.

10. Commitments and Contingencies

Repurchase Reserves

We have historically maintained reserves for possible repurchases that we may have been required to make of certain of the mortgage loans which we sold as a result of deficiencies or defects that may be found to exist in such loans. Our repurchase reserve also covered returns of any premiums earned and administrative fees pertaining to the repurchase of mortgage loans that did not meet investor guidelines, including potential loss of advances on Veterans Affairs or Federal Housing Authority Ginnie Mae loans.  As a result of our exit from the mortgage banking business and no longer being subject to potential loss for anything other than mortgage fraud, we have undertaken an analysis of our accrual. Our analysis assumes that the repurchase liability exposure will decrease over time as mortgage loans are paid off and as we are no longer originating new mortgage loans. We repurchased $619 thousand of loans during the six months ended June 30, 2015. We repurchased $1.3 million of loans during the six months ended June 30, 2014 by adjusting the gains on sale recorded for these loans. No loans were repurchased during the three months ended June 30, 2015 and June 30, 2014. The following table sets forth information at June 30, 2015 and December 31, 2014, with respect to our repurchase reserves:

	At and For the Six Months Ended			At and For the Year Ended
	June 30, 2015			December 31, 2014
	(Dollars in thousands)
Beginning balance	$	381		$	1,883
(Recovery of)/Provision for repurchases	31			(1,502		)
Settlements	(66		)	—
Total repurchases reserve	$	346		$	381

Commitments

To meet the financing needs of our customers in the normal course of business, we are a party to financial instruments with off-balance sheet risk. These financial instruments include commitments to extend credit and standby letters of credit. These instruments involve, to varying degrees, elements of credit and interest rate risk in excess of the amount recognized in the consolidated financial statements. At June 30, 2015 and December 31, 2014, we were committed to fund certain loans including letters of credit amounting to approximately $187 million and $148 million, respectively. The contractual amounts of a credit-related financial instrument, such as a commitment to extend credit, a credit-card arrangement or a letter of credit, represent the amount of potential accounting loss should the commitment be fully drawn upon, the customer were to default, and the value of

28

any existing collateral securing the customer’s payment obligation becomes worthless. The loss reserve for unfunded loan commitments was $275 thousand at each of June 30, 2015 and December 31, 2014.

As a result, we use the same credit policies in making commitments to extend credit and conditional obligations as we do for on-balance sheet instruments. Commitments generally have fixed expiration dates; however, since many of the commitments are expected to expire without being drawn upon, the total commitment amounts do not necessarily represent future cash requirements. We evaluate each customer’s creditworthiness on a case-by-case basis, using the same credit underwriting standards that are employed in making commercial loans. The amount of collateral obtained, if any, upon an extension of credit is based on our evaluation of the creditworthiness of the customer. Collateral held varies, but may include accounts receivable, inventory, property, plant and equipment, residential real estate and income-producing commercial properties.

Litigation, Claims and Assessments

We are a defendant in or a party to a number of legal actions or proceedings that arise in the ordinary course of business. In some of these actions and proceedings, claims for monetary damages are asserted against us.

In accordance with applicable accounting guidance, we assess the likelihood of any loss or exposure with respect to lawsuits and other proceedings that are pending against us. We establish an accrued liability for lawsuits or other legal proceedings when they present loss contingencies that are both probable and estimable. Where a loss is not probable but it is reasonably possible or where a loss in excess of an amount accrued is reasonably possible, we disclose an estimate of the amount of the loss or range of possible losses for the claim if a reasonable estimate can be made, unless the amount of reasonably possible losses with respect to the matter is not material to our financial condition, results of operations or cash flows. We estimate any potential loss based upon currently available information and significant judgments and a variety of assumptions, and known and unknown uncertainties. Moreover, the facts and circumstances on which such estimates are based will change over time. Therefore, the amount of any losses we might incur in any lawsuits or other legal proceedings may exceed amounts which we had accrued based on our estimates and those estimates do not represent the maximum loss exposure that we may have in connection with any lawsuits or other legal proceedings.

Based on our evaluation of the lawsuits and other proceedings that were pending against us as of June 30, 2015, the outcomes in those suits or other proceedings are not expected to have, either individually or in the aggregate, a material adverse effect on our consolidated financial position, results of operations or cash flows. However, in light of the inherent uncertainties involved, some of which are beyond our control, and the very large or indeterminate damages often sought in such legal actions or proceedings, an adverse outcome in one or more of these suits or proceedings could be material to our financial position, results of operations or cash flows for any particular reporting period.

11. Business Segment Information

We have one reportable business segment, commercial banking. The commercial banking segment provides small and medium-size businesses, professional firms and individuals with a diversified range of products and services such as various types of deposit accounts, various types of commercial and consumer loans, cash management services, and online banking services. We also have one non-reportable segment, discontinued operations, which is comprised of our mortgage banking business. Our mortgage banking business originated mortgage loans that, for the most part, were resold within 30 days to long-term investors in the secondary residential mortgage market.

Since our operating segment derives all of its revenues from interest and noninterest income and interest expense constitutes its most significant expense, this segment, as well as our discontinued operations, are reported below using net interest income (interest income less interest expense) and noninterest income (primarily net gains on sales of SBA loans and fee income). We do not allocate general and administrative expenses or income taxes to our operating segment.

29

The following table sets forth information regarding the net interest income and noninterest income for our commercial banking and discontinued operations segments, respectively, for the three and six months ended June 30, 2015 and 2014.

(Dollars in thousands)	Commercial		Other			Total from continuing operations		Discontinued Operations			Total including discontinued operations
Net interest income for the three months ended June 30,
2015	$	8,562	$	(73	)	$	8,489	$	—		$	8,489
2014	$	7,698	$	(72	)	$	7,626	$	3		$	7,629
Noninterest income for the three months ended June 30,
2015	$	613	$	3		$	616	$	—		$	616
2014	$	984	$	—		$	984	$	(254	)	$	730
Net interest income for the six months ended June 30,
2015	$	16,805	$	(167	)	$	16,638	$	—		$	16,638
2014	$	15,539	$	(69	)	$	15,470	$	77		$	15,547
Noninterest income for the six months ended June 30,
2015	$	1,492	$	6		$	1,498	$	—		$	1,498
2014	$	2,162	$	—		$	2,162	$	1,435		$	3,597
Segment Assets at:
June 30, 2015	$	1,041,558	$	5,303		$	1,046,861	$	—		$	1,046,861
December 31, 2014	$	1,094,120	$	5,490		$	1,099,610	$	—		$	1,099,610

30

12. Regulatory Capital

Under federal banking regulations that apply to all United States based bank holding companies and federally insured banks, the Company (on a consolidated basis) and the Bank (on a stand-alone basis) must meet specific capital adequacy requirements that, for the most part, involve quantitative measures, primarily in terms of the ratios of their capital to their assets, liabilities, and certain off-balance sheet items, calculated under regulatory accounting practices. Under those regulations, each bank holding company must meet a minimum capital ratio and each federally insured bank is determined by its primary federal bank regulatory agency to come within one of the following capital adequacy categories on the basis of its capital ratios:

• well capitalized

• adequately capitalized

• undercapitalized

• significantly undercapitalized; or

• critically undercapitalized

Certain qualitative assessments also are made by a banking institution’s primary federal regulatory agency that could lead the agency to determine that the banking institution should be assigned to a lower capital category than the one indicated by the quantitative measures used to assess the institution’s capital adequacy. At each successive lower capital category, a banking institution is subject to greater operating restrictions and increased regulatory supervision by its federal bank regulatory agency.

The following table sets forth the capital and capital ratios of the Company (on a consolidated basis) and the Bank (on a stand-alone basis) at June 30, 2015, as compared to the respective regulatory requirements applicable to them.

					Applicable Federal Regulatory Requirement
					For Capital Adequacy Purposes			To be Categorized As Well Capital
	Amount		Ratio		Amount		Ratio	Amount		Ratio
	(Dollars in thousands)
Total Capital to Risk Weighted Assets:
Company	$	147,057	16.9	%	$	69,785	At least 8.0	N/A		N/A
Bank	127,577		14.7	%	69,306		At least 8.0	$	86,633	At least 10.0
Common Equity Tier 1 Capital to Risk Weighted Assets:
Company	$	108,374	12.4	%	$	39,254	At least 4.5	N/A		N/A
Bank	116,702		13.5	%	38,985		At least 4.5	$	56,311	At least 6.5
Tier 1 Capital to Risk Weighted Assets:
Company	$	136,109	15.6	%	$	52,339	At least 6.0	N/A		N/A
Bank	116,702		13.5	%	51,980		At least 6.0	$	69,306	At least 8.0
Tier 1 Capital to Average Assets:
Company	$	136,109	13.1	%	$	41,715	At least 4.0	N/A		N/A
Bank	116,702		11.3	%	41,512		At least 4.0	$	51,890	At least 5.0

In early July 2013, the Federal Reserve Board and the FDIC issued final rules implementing the Basel III regulatory capital framework and related Dodd-Frank Wall Street Reform and Consumer Protection Act changes.  The rules revise minimum capital requirements and adjust prompt correct action thresholds.  The final rules revise the regulatory capital elements, add a new common equity Tier 1 capital ratio, increase the minimum Tier 1 capital ratio requirement, and implement a new capital conservation buffer.  The rules also permit certain banking organizations to retain, through a one-time election, the existing treatment for accumulated other comprehensive income.  The final rules took effect for community banks on January 1, 2015, subject to a transition period for certain parts of the rules.  At June 30, 2015, the Bank (on a stand-alone basis) continued to qualify as a well-capitalized institution, and the Company continued to exceed the minimum required capital ratios applicable to it, under the capital adequacy guidelines described above.

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Forward Looking Statements

31

Statements contained in this Quarterly Report on Form 10-Q (this “Report”) that are not historical facts or that discuss our expectations, beliefs or views regarding our future operations or future financial performance, or financial or other trends in our business or in the markets in which we operate, constitute “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended (the "Securities Act"), and Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). Forward-looking statements can be identified by the fact that they do not relate strictly to historical or current facts. Often, they include words such as “believe,” “expect,” “anticipate,” “intend,” “plan,” “estimate,” “project,” "forecast," or words of similar meaning, or future or conditional verbs such as “will,” “would,” “should,” “could,” or “may.” The information contained in such forward-looking statements is based on current information available to us and on assumptions that we make about future economic and market conditions and other events over which we do not have control. In addition, our business and the markets in which we operate are subject to a number of risks and uncertainties. Such risks and uncertainties, and the occurrence of events in the future or changes in circumstances that had not been anticipated, could cause our financial condition or actual operating results in the future to differ materially from our expected financial condition or operating results that are set forth in the forward-looking statements contained in this Report and could, therefore, also affect the price performance of our shares.

In addition to the risk of incurring loan losses, which is an inherent risk of the banking business, these risks and uncertainties include, but are not limited to, the following: the risk that the economic recovery in the United States, which is improving but still relatively fragile, will be adversely affected by domestic or international economic conditions, which could cause us to incur additional loan losses and adversely affect our results of operations in the future; the risk that our interest margins and, therefore, our net interest income will be adversely affected by changes in prevailing interest rates; the risk that we will not succeed in further reducing our remaining nonperforming assets, in which event we would face the prospect of further loan charge-offs and write-downs of assets; the risk that we will not be able to manage our interest rate risks effectively, in which event our operating results could be harmed; the prospect that government regulation of banking and other financial services organizations will increase, causing our costs of doing business to increase and restricting our ability to take advantage of business and growth opportunities; the risk that our efforts to develop a robust commercial banking platform may not succeed; and the risk that we may be unable to realize our expected level of increasing deposit inflows. Additional information regarding these and other risks and uncertainties to which our business is subject is contained in our Annual Report on Form 10-K for the year ended December 31, 2014 (the “2014 Form 10-K”) that we filed with the Securities and Exchange Commission (“SEC”) on March 13, 2015, and readers of this Report are urged to review the additional information contained in that report, and in any subsequent Quarterly Report on Form 10-Q that we file with the SEC. We urge you to read those risk factors in conjunction with your review of the following discussion and analysis of our results of operations for the three and six months ended, and our financial condition at, June 30, 2015.

Due to the risks and uncertainties we face, readers are cautioned not to place undue reliance on the forward-looking statements contained in this Report, which speak only as of the date of this Report, or to make predictions about future performance based solely on historical financial performance. We also disclaim any obligation to update forward-looking statements contained in this Report as a result of new information, future events or otherwise, except as may otherwise be required by law.

Overview

The following discussion presents information about our consolidated results of operations, financial condition, liquidity and capital resources and should be read in conjunction with our consolidated financial statements and the notes thereto included in Item 1 above of this Report.

Our principal operating subsidiary is Pacific Mercantile Bank (the “Bank”), which is a California state chartered bank. The Bank accounts for substantially all of our consolidated revenues, expenses and income and our consolidated assets and liabilities. Accordingly, the following discussion focuses primarily on the Bank’s results of operations and financial condition.

As of June 30, 2015, our total assets, net loans and total deposits were $1.0 billion, $821 million and $872 million, respectively.

The Bank, which is headquartered in Orange County, California, approximately 40 miles south of Los Angeles, conducts a commercial banking business in Orange, Los Angeles, San Bernardino and San Diego counties in Southern California. The Bank is also a member of the Federal Reserve System and its deposits are insured, to the maximum extent permitted by law, by the Federal Deposit Insurance Corporation (the “FDIC”). For the six months ended June 30, 2015 and 2014, we operated as one reportable segment, Commercial Banking, and one non-reportable segment, Discontinued Operations.

Unless the context otherwise requires, the “Company,” “we,” “our,” “ours,” and “us” refer to Pacific Mercantile Bancorp and its consolidated subsidiaries.

Current Developments

32

During the first quarter of 2015, the Company made the strategic decision to discontinue its business of funding broker-originated Small Business Administration (“SBA”) loans. The Bank employed a group that was originally hired in May 2012 which focused on originating loans through the SBA 504 and 7(a) lending programs (“SBA Group”). The SBA Group sourced loans through broker relationships, which generally did not result in the Bank having the borrower's full banking relationship. We concluded that the transactional nature of the business model in the SBA Group was not in line with our strategy of transitioning to a relationship-oriented commercial banking model. As a result of this decision, we terminated the 15 employees within the SBA Group and we incurred total personnel expense including severance pay of $611 thousand, which is recorded within noninterest expense for the six months ended June 30, 2015 and will be nonrecurring. We do not expect any additional expenses to be incurred as a result of this decision. The Bank continues to be in good standing with the SBA as a Preferred Lender and we will continue to originate SBA 504 and 7(a) loans through our core relationship banking strategy. We intend to sell the guaranteed portion of the 7(a) loans in the secondary market from time to time.

In July 2015, SBAV LP, Carpenter Community BancFund, L.P. and Carpenter Community BancFund - A, L.P. (collectively, the “Holders”) and the Company have agreed to non-binding terms and conditions to exchange all of the Company's 112,000 outstanding shares of Series B Convertible 8.4% Noncumulative Preferred Stock (the “Series B Shares”), 35,225 shares of Series C 8.4% Noncumulative Preferred Stock (the “Series C Shares”) and 761,278 warrants held by the Holders for 3,009,148 shares of the Company's common stock, no par value (the “Exchange Transaction”). The Holders also would forfeit all accrued and unpaid dividends with respect to the Series B Shares and Series C Shares through the date of the proposed transaction. The proposed Exchange Transaction will simplify the Company capital structure, leaving common stock as the only equity component.

The Exchange Transaction is subject to a range of conditions and contingencies including but not limited to negotiation and execution of definitive documentation, receipt of required regulatory approvals, if any, listing of the Exchange Shares on the NASDAQ Stock Market, and the satisfaction or waiver of certain other customary closing conditions. The Company expects to complete the Exchange Transaction in the third quarter of 2015.

Results of Operations

Discontinued Operations

In connection with our exit from the mortgage banking business described in our 2014 Form 10-K, the revenues and expenses of our mortgage banking division have been classified as discontinued operations for all periods presented. As a result, all comparisons below reflect results from continuing operations. We completed the final wind down of the mortgage banking division during 2014 and had no additional revenue or expense during the six months ended June 30, 2015.

Operating Results for the Three and Six Months Ended June 30, 2015 and 2014

Our operating results for the three and six months ended June 30, 2015, compared to the same periods in June 30, 2014, were as follows:

	Three Months Ended June 30,			2015 vs. 2014 % Change		Six Months Ended June 30,			2015 vs. 2014 % Change
	2015	2014				2015	2014
						(Dollars in thousands)
Interest income	9,813	9,134		7.4	%	19,285	18,421		4.7	%
Interest expense	1,324	1,508		(12.2	)%	2,647	2,951		(10.3	)%
Provision for loan and lease losses	—	600		(100.0	)%	—	1,050		(100.0	)%
Non-interest income	616	984		(37.4	)%	1,498	2,162		(30.7	)%
Non-interest expense	8,967	8,778		2.2	%	18,082	18,083		—	%
Net loss from continuing operations	138	(768	)	(118.0	)%	54	(1,501	)	(103.6	)%
Net income from discontinued operations	—	772		(100.0	)%	—	1,956		(100.0	)%
Net income (loss)	138	4		3,350.0	%	54	455		(88.1	)%

Interest Income

Three Months Ended June 30, 2015 and 2014

Total interest income increased 7.4% to $9.8 million for the three months ended June 30, 2015 from $9.1 million for the three months ended June 30, 2014, with an average yield on interest-earning assets of 3.87% for the three months ended June 30, 2015 compared to 3.70% for the three months ended June 30, 2014. This increase was primarily due to an increase in interest

33

income on loans during the three months ended June 30, 2015 compared to the same prior year period due to an increase in average loan balances and an increase in the average yield on loans. During the three months ended June 30, 2015 and 2014, interest income on loans was $9.2 million and $8.7 million, respectively, yielding 4.46% and 4.40% on average loan balances of $824.7 million and $787.9 million, respectively. The increase in the average loan balances is attributable to an increase in loan demand.

During the three months ended June 30, 2015 and 2014, interest income from our securities available-for-sale and stock was $558 thousand and $403 thousand, respectively, yielding 3.38% and 2.25% on average balances of $66.1 million and $71.9 million, respectively. The investment yield increase is primarily due to our receipt of a cash dividend paid on our Federal Home Loan Bank of San Francisco (“FHLB”) stock during the three months ended June 30, 2015. The average securities balances decreased as a result of maturities of, and payments on, securities which we did not fully replace due to liquidity needs. Interest income from our short-term investments, including our federal funds sold and interest-bearing deposits, was $80 thousand and $79 thousand for the three months ended June 30, 2015 and 2014, respectively, yielding 0.25% and 0.24% on average balances of $126.3 million and $130.1 million, respectively. As a result, total interest income on investments increased for the three months ended June 30, 2015 as compared to the three months ended June 30, 2014.

Six Months Ended June 30, 2015 and 2014

Total interest income increased 4.7% to $19.3 million for the six months ended June 30, 2015 from $18.4 million for the six months ended June 30, 2014, with an average yield on interest-earning assets of 3.82% for the six months ended June 30, 2015 compared to 3.78% for the six months ended June 30, 2014. This increase was primarily due to an increase in interest income on loans during the six months ended June 30, 2015 compared to the same prior year period due to an increase in average loan balances, partially offset by a decline in the average yield on loans over the same period. During the six months ended June 30, 2015 and 2014, interest income on loans was $18.2 million and $17.4 million, respectively, yielding 4.44% and 4.49% on average loan balances of $826.1 million and $783.6 million, respectively. The increase in the average loan balances is attributable to an increase in loan demand. The decrease in loan yield is primarily attributable to the actions of the Federal Reserve Board to keep short-term interest rates low.

During the six months ended June 30, 2015 and 2014, interest income from our securities available-for-sale and stock, was $931 thousand and $821 thousand, respectively, yielding 2.79% and 2.27% on average balances of $67.2 million and $72.8 million, respectively. The investment yield increase is primarily due to our receipt of a cash dividend paid on our FHLB stock during the six months ended June 30, 2015 and lower premium amortization attributable to slower projected prepayment speeds on our securities available-for-sale, returning our prepayment speed to a more historically normal level as compared to the accelerated prepayment speed seen in the prior year. The average securities balances decreased as a result of maturities of, and payments on, securities which we did not fully replace due to liquidity needs. Interest income from our short-term investments, including our federal funds sold and interest-bearing deposits, was $160 thousand and $155 thousand for the six months ended June 30, 2015 and 2014, respectively, yielding 0.26% and 0.25% on average balances of $125.9 million and $126.3 million, respectively. As a result, total interest income on investments increased for the six months ended June 30, 2015 and 2014.

Interest Expense

Three Months Ended June 30, 2015 and 2014

Total interest expense decreased 12.2% to $1.3 million for the three months ended June 30, 2015 from $1.5 million for the three months ended June 30, 2014. The decrease was primarily due to a decrease in average interest-bearing liabilities of $692.6 million and $713.5 million at June 30, 2015 and 2014, respectively, with a cost of funds of 0.77% and 0.85%, respectively, which consisted of deposits, borrowings and junior subordinated debentures. The decrease in our interest expense was also partially attributable to the decrease in the cost of our borrowings as a result of our decision to decrease our FHLB borrowings as well as a decrease in the volume of certificates of deposit and a decrease in the rates of interest paid on certificates of deposit. Interest expense on our certificates of deposit for the three months ended June 30, 2015 and 2014 was $700 thousand and $1.1 million, respectively, with a cost of funds of 0.88% and 0.95% on average balances of $317.4 million and $454.0 million, respectively.

Six Months Ended June 30, 2015 and 2014

Total interest expense decreased 10.3% to $2.6 million for the six months ended June 30, 2015 from $3.0 million for the six months ended June 30, 2014. The decrease was primarily due to a decrease in average interest-bearing liabilities of $697.2 million and $711.4 million at June 30, 2015 and 2014, respectively, with a cost of funds of 0.77% and 0.84%, respectively, which consisted of deposits, borrowings and junior subordinated debentures. The decrease in our interest expense was also partially attributable to the decrease in the cost of our borrowings as a result of our decision to decrease our FHLB borrowings as well as a decrease in the volume of certificates of deposit and a decrease in the rates of interest paid on certificates of deposit. Interest expense on our certificates of deposit for the six months ended June 30, 2015 and 2014 was $1.4 million and $2.1 million, respectively, with a cost of funds of 0.89% and 0.97% on average balances of $317.0 million and $439.9 million, respectively.

Net Interest Margin

34

One of the principal determinants of a bank’s income is its net interest income, which is the difference between (i) the interest that a bank earns on loans, investment securities and other interest earning assets, on the one hand, and (ii) its interest expense, which consists primarily of the interest it must pay to attract and retain deposits and the interest that it pays on borrowings and other interest-bearing liabilities, on the other hand. As a general rule, all other things being equal, the greater the difference or "spread" between the amount of our interest income and the amount of our interest expense, the greater will be our net income; whereas, a decline in that difference or "spread" will generally result in a decline in our net income.

A bank’s interest income and interest expense are affected by a number of factors, some of which are outside of its control, including national and local economic conditions and the monetary policies of the Federal Reserve Board which affect interest rates, competition in the market place for loans and deposits, the demand for loans and the ability of borrowers to meet their loan payment obligations. Net interest income, when expressed as a percentage of total average interest earning assets, is a banking organization’s “net interest margin.”

The following tables set forth information regarding our average balance sheet, yields on interest earning assets, interest expense on interest-bearing liabilities, the interest rate spread and the interest rate margin for the three and six months ended June 30, 2015 and 2014. Average balances are calculated based on average daily balances.

	Three Months Ended June 30,
	2015						2014
	Average Balance		Interest Earned/ Paid		Average Yield/ Rate		Average Balance		Interest Earned/ Paid		Average Yield/ Rate
	(Dollars in thousands)
Interest-earning assets
Short-term investments(1)	$	126,287	$	80	0.25	%	$	130,146	$	79	0.24	%
Securities available for sale and stock(2)	66,132		558		3.38	%	71,928		403		2.25	%
Loans(3)	824,712		9,175		4.46	%	787,882		8,652		4.40	%
Total interest-earning assets	1,017,131		9,813		3.87	%	989,956		9,134		3.70	%
Noninterest-earning assets
Cash and due from banks	18,710						11,830
All other assets	9,863						27,487
Total assets	$	1,045,704					$	1,029,273
Interest-bearing liabilities:
Interest-bearing checking accounts	$	35,852	25		0.28	%	$	35,457	25		0.28	%
Money market and savings accounts	291,758		419		0.58	%	154,591		119		0.31	%
Certificates of deposit	317,443		700		0.88	%	454,041		1,081		0.95	%
Other borrowings	30,022		55		0.73	%	51,911		129		1.00	%
Junior subordinated debentures	17,527		125		2.86	%	17,527		154		3.52	%
Total interest bearing liabilities	692,602		1,324		0.77	%	713,527		1,508		0.85	%
Noninterest bearing liabilities
Demand deposits	224,954						191,089
Accrued expenses and other liabilities	6,510						7,903
Shareholders' equity	121,638						116,754
Total liabilities and shareholders' equity	$	1,045,704					$	1,029,273
Net interest income			$	8,489					$	7,626
Net interest income/spread					3.10	%					2.85	%
Net interest margin					3.35	%					3.09	%

(1) Short-term investments consist of federal funds sold and interest bearing deposits that we maintain at other financial institutions.

(2) Stock consists of FHLB stock and Federal Reserve Bank of San Francisco (“FRBSF”) stock.

(3) Loans include the average balance of nonaccrual loans.

35

	Six Months Ended June 30,
	2015						2014
	Average Balance		Interest Earned/ Paid		Average Yield/ Rate		Average Balance		Interest Earned/ Paid		Average Yield/ Rate
	(Dollars in thousands)
Interest-earning assets
Short-term investments(1)	$	125,895	$	160	0.26	%	$	126,255	$	155	0.25	%
Securities available for sale and stock(2)	67,216		931		2.79	%	72,827		821		2.27	%
Loans(3)	826,084		18,194		4.44	%	783,559		17,445		4.49	%
Total interest-earning assets	1,019,195		19,285		3.82	%	982,641		18,421		3.78	%
Noninterest-earning assets
Cash and due from banks	16,761						12,569
All other assets	10,120						29,638
Total assets	$	1,046,076					$	1,024,848
Interest-bearing liabilities:
Interest-bearing checking accounts	$	37,541	48		0.26	%	$	34,682	49		0.28	%
Money market and savings accounts	290,625		824		0.57	%	158,789		250		0.32	%
Certificates of deposit	316,968		1,397		0.89	%	439,855		2,111		0.97	%
Other borrowings	34,530		127		0.74	%	60,565		282		0.94	%
Junior subordinated debentures	17,527		251		2.89	%	17,527		259		2.98	%
Total interest bearing liabilities	697,191		2,647		0.77	%	711,418		2,951		0.84	%
Noninterest bearing liabilities
Demand deposits	221,300						188,862
Accrued expenses and other liabilities	6,642						8,615
Shareholders' equity	120,943						115,953
Total liabilities and shareholders' equity	$	1,046,076					$	1,024,848
Net interest income			$	16,638					$	15,470
Net interest income/spread					3.05	%					2.94	%
Net interest margin					3.29	%					3.17	%

(1) Short-term investments consist of federal funds sold and interest bearing deposits that we maintain at other financial institutions.

(2) Stock consists of FHLB stock and FRBSF stock.

(3) Loans include the average balance of nonaccrual loans.

The following table sets forth changes in interest income, including loan fees, and interest paid in the three and six months ended June 30, 2015 and 2014 and the extent to which those changes were attributable to changes in (i) the volumes of or the rates of interest earned on interest-earning assets and (ii) the volumes of or the rates of interest paid on our interest-bearing liabilities.

36

	Three Months Ended June 30, 2015 Compared to Three Months Ended June 30, 2014 Increase (Decrease) due to Changes in									SIx Months Ended June 30, 2015 Compared to Six Months Ended June 30, 2014 Increase (Decrease) due to Changes in
	Volume			Rates			Total Increase (Decrease)			Volume			Rates			Total Increase (Decrease)
	(Dollars in thousands)
Interest income
Short-term investments(1)	$	(2	)	$	3		$	1		$	—		$	5		$	5
Securities available for sale and stock(2)	(35		)	190			155			(67		)	177			110
Loans	409			114			523			938			(189		)	749
Total earning assets	372			307			679			871			(7		)	864
Interest expense
Interest-bearing checking accounts	—			—			—			4			(5		)	(1		)
Money market and savings accounts	152			148			300			292			282			574
Certificates of deposit	(306		)	(75		)	(381		)	(553		)	(161		)	(714		)
Borrowings	(46		)	(28		)	(74		)	(104		)	(51		)	(155		)
Junior subordinated debentures	—			(29		)	(29		)	—			(8		)	(8		)
Total interest-bearing liabilities	(200		)	16			(184		)	(361		)	57			(304		)
Net interest income	$	572		$	291		$	863		$	1,232		$	(64	)	$	1,168

(1) Short-term investments consist of federal funds sold and interest bearing deposits that we maintain at financial institutions.

(2) Stock consists of FHLB stock and FRBSF stock.

Provision for Loan and Lease Losses

We maintain reserves to provide for loan losses that occur in the ordinary course of the banking business. When it is determined that the payment in full of a loan has become unlikely, the carrying value of the loan is reduced ("written down") to what management believes is its realizable value or, if it is determined that a loan no longer has any realizable value, the carrying value of the loan is written off in its entirety (a loan "charge-off"). Loan charge-offs and write-downs are charged against our allowance for loan and lease losses (“ALLL”). The amount of the ALLL is increased periodically to replenish the ALLL after it has been reduced due to loan write-downs or charge-offs. The ALLL also is increased or decreased periodically to reflect increases or decreases in the volume of outstanding loans and to take account of changes in the risk of potential loan losses due to a deterioration or improvement in the condition of borrowers or in the value of properties securing non-performing loans or adverse changes or improvements in economic conditions. Increases in the ALLL are made through a charge, recorded as an expense in the statement of operations, referred to as the "provision for loan and lease losses." Recoveries of loans previously charged-off are added back to and, therefore, to that extent increase the ALLL and reduce the amount of the provision for loan and lease losses that might otherwise have had to be made to replenish or increase the ALLL.

We employ economic models that are based on bank regulatory guidelines, industry standards and our own historical loan loss experience, as well as a number of more subjective qualitative factors, to determine both the sufficiency of the ALLL and the amount of the provisions that we believe need to be made for potential loan losses to increase or replenish the ALLL. However, those determinations involve judgments and assumptions about trends in current economic conditions and other events that can affect the ability of borrowers to meet their loan obligations to us and a weighting among the quantitative and qualitative factors we consider in determining the amount of the ALLL. Moreover, the duration and anticipated effects of prevailing economic conditions or trends can be uncertain and can be affected by a number of risks and circumstances that are outside of our ability to control. If changes in economic or market conditions or unexpected subsequent events or changes in circumstances were to occur, or if changes were made to bank regulatory guidelines or industry standards that are used to assess the sufficiency of the ALLL, it could become necessary for us to record additional, and possibly significant, charges to increase the ALLL, which would have the effect of reducing our income or causing us to incur losses.

In addition, the FRBSF and the California Department of Business Oversight (“CDBO”), as an integral part of their examination processes, periodically review the adequacy of our ALLL. These agencies may require us to make additional provisions for possible loan losses, over and above the provisions that we have already made, the effect of which would be to reduce our income or increase any losses we might incur.

During the three months ended June 30, 2015, we recorded no provision for loan and lease losses, as compared to $600 thousand recorded during the three months ended June 30, 2014. There was no provision for loan and lease losses during the three months ended June 30, 2015 as our loan portfolio decreased by $7.0 million during the three months ended June 30, 2015. Taking

37

into account net recoveries of $40 thousand during the three months ended June 30, 2014 and net loan growth of $28.0 millionduring the same period, our analysis supported a provision of $600 thousand during the three months ended June 30, 2014 in order to maintain the ALLL within the determined range.

During the six months ended June 30, 2015, we recorded no provision for loan and lease losses, as compared to $1.1 million recorded during the six months ended June 30, 2014. There was no provision for loan and lease losses during the six months ended June 30, 2015 as our loan portfolio decreased by $4.7 million during the six months ended June 30, 2015. Taking into account net recoveries of $172 thousand during the six months ended June 30, 2014 and net loan growth of $29.8 million during the same period, our analysis supported a provision of $1.1 million during the six months ended June 30, 2014 in order to maintain the ALLL within the determined range.

See "—Financial Condition—Nonperforming Assets and Allowance for Loan and Lease Losses" below in this Item 2 for additional information regarding the ALLL.

Noninterest Income

The following table identifies the components of and the percentage changes in noninterest income during the three and six months ended June 30, 2015 and 2014:

	Three Months Ended June 30,						Six Months Ended June 30,
	Amount		Amount		Percentage Change		Amount		Amount		Percentage Change
	2015		2014		2015 vs. 2014		2015		2014		2015 vs. 2014
							(Dollars in thousands)
Service fees on deposits and other banking services	234		218		7.3	%	446		426		4.7	%
Net gain on sale of small business administration loans	—		474		(100.0	)%	—		1,160		100.0	%
Other noninterest income	382		292		30.8	%	1,052		576		82.6	%
Total noninterest income	$	616	$	984	(37.4	)%	$	1,498	$	2,162	(30.7	)%

Three Months Ended June 30, 2015 and 2014

Noninterest income decreased by $368 thousand for the three months ended June 30, 2015 as compared to the three months ended June 30, 2014 primarily as a result of a $474 thousand decrease in net gain on sale of SBA loans partially offset by an increase in loan servicing and referral fees.

Six Months Ended June 30, 2015 and 2014

Noninterest income decreased$664 thousand, or 30.7%, for the six months ended June 30, 2015 as compared to the six months ended June 30, 2014, primarily as a result of:

• A decrease of $1.2 million in net gain on sale of SBA loans; partially offset by

• A $200 thousand recovery during the six months ended June 30, 2015 on a charged off loan in excess of the amount previously charged off against the ALLL;

• A $27 thousand gain on sale of assets related to the sale of a company automobile during the six months ended June 30, 2015; and

• An increase in loan servicing and referral fees during the six months ended June 30, 2015 as compared to the same period in 2014.

Noninterest Expense

The following table sets forth the principal components and the amounts of, and the percentage changes in, noninterest expense during the three and six months ended June 30, 2015 and 2014.

38

	Three Months Ended June 30,						Six Months Ended June 30,
	2015		2014		2015 vs. 2014		2015		2014		2015 vs. 2014
	Amount		Amount		Percent Change		Amount		Amount		Percent Change
							(Dollars in thousands)
Salaries and employee benefits	$	5,423	$	5,420	0.1	%	$	11,330	$	11,023	2.8	%
Occupancy	752		610		23.3	%	1,412		1,198		17.9	%
Equipment and depreciation	430		363		18.5	%	823		732		12.4	%
Data processing	255		200		27.5	%	491		451		8.9	%
FDIC expense	339		359		(5.6	)%	692		653		6.0	%
Other real estate owned expense, net	59		313		(81.2	)%	161		1,057		(84.8	)%
Professional fees	744		665		11.9	%	1,372		1,239		10.7	%
Business development	198		169		17.2	%	392		338		16.0	%
Loan related expense	170		129		31.8	%	239		216		10.6	%
Insurance	88		141		(37.6	)%	175		278		(37.1	)%
Other operating expenses (1)	509		409		24.4	%	995		898		10.8	%
Total noninterest expense	$	8,967	$	8,778	2.2	%	$	18,082	$	18,083	—	%

(1) Other operating expenses primarily consist of telephone, investor relations, promotional, regulatory expenses, and correspondent bank fees.

Three Months Ended June 30, 2015 and 2014

Noninterest expense increased$189 thousand, or 2.2%, for the three months ended June 30, 2015 as compared to the three months ended June 30, 2014, primarily as a result of:

• An increase in various expense accounts related to the normal course of operating, including expenses related to an increase in the square footage of our leased premises, the implementation of our mobile banking platform and the roll out of our new credit card platform; partially offset by

• A decrease of $254 thousand in the carrying costs and other costs associated with real properties acquired by or in lieu of loan foreclosures (commonly referred to as other real estate owned or “OREO”) as a result of lower carrying costs and other expenses related to OREO during the three months ended June 30, 2015 as compared to the same period in 2014.

Six Months Ended June 30, 2015 and 2014

Noninterest expense remained flat for the six months ended June 30, 2015 as compared to the six months ended June 30, 2014.

Provision for (Benefit from) Income Tax

For the three and six months ended June 30, 2015 and the three and six months ended June 30, 2014, we recorded no income tax provision. Our net deferred tax asset at June 30, 2015 was $6.0 million, net of a valuation allowance of $11.4 million. Based on the analysis performed, and the positive and negative evidence considered, management chose not to release any portion of the $11.4 million valuation allowance as of June 30, 2015. Positive evidence included our current period income, improvement in asset quality, tax planning strategies, and economic conditions. Negative evidence included our historical losses over the previous 12 quarter look back period and our accumulated deficit. Management determined the negative evidence was significant enough to outweigh the positive evidence and support no reversal of the valuation allowance; however, we did conclude that it was more-likely-than-not that the existing $6.0 million net deferred tax asset would be realized. Our net deferred tax asset at June 30, 2014 was $6.9 million, net of a valuation allowance of $11.8 million. Based on the analysis performed, and the positive and negative evidence considered, management chose not to release any portion of the $11.8 million valuation allowance as of June 30, 2014. Positive evidence included improvement in our asset quality, tax planning strategies, and economic conditions. Negative evidence included historical operating losses and our accumulated deficit. Management determined the negative evidence was significant enough to outweigh the positive evidence and support no reversal of the valuation allowance; however, we did conclude that it was more-likely-than-not that the existing $6.9 million net deferred tax asset at the time would be realized.

39

Financial Condition

Assets

Our total assets decreased by $53 million to $1.0 billion at June 30, 2015 from $1.1 billion at December 31, 2014. The following table sets forth the composition of our interest earning assets at:

	June 30, 2015		December 31, 2014
	(Dollars in thousands)
Interest-bearing deposits with financial institutions (1)	$	112,966	$	167,138
Interest-bearing time deposits with financial institutions	4,668		4,668
Federal Reserve Bank of San Francisco and Federal Home Loan Bank Stock, at cost	8,170		8,137
Securities available for sale, at fair value	56,396		60,926
Loans (net of allowances of $12,343 and $13,833, respectively)	821,273		824,197

(1) Includes interest-earning balances maintained at the FRBSF.

Investment Portfolio

Securities Available for Sale. Securities that we intend to hold for an indefinite period of time, but which may be sold in response to changes in liquidity needs, in interest rates, or in prepayment risks or other similar factors, are classified as “securities available for sale”. Such securities are recorded on our balance sheet at their respective fair values and increases or decreases in those values are recorded as unrealized gains or losses, respectively, and are reported as other comprehensive income (loss) on our accompanying consolidated statements of financial condition, rather than included in or deducted from our earnings.

The following is a summary of the major components of securities available for sale and a comparison of the amortized cost, estimated fair values and the gross unrealized gains and losses attributable to those securities, as of June 30, 2015 and December 31, 2014:

(Dollars in thousands)	Amortized Cost		Gross Unrealized Gain		Gross Unrealized Loss			Estimated Fair Value
Securities available for sale at June 30, 2015:
Residential mortgage backed securities issued by U.S. Agencies	$	50,451	$	13	$	(990	)	$	49,474
Residential collateralized mortgage obligations issued by non agencies	731		—		(16		)	715
Asset backed security	2,050		—		(585		)	1,465
Mutual funds	4,750		37		(45		)	4,742
Total securities available for sale	$	57,982	$	50	$	(1,636	)	$	56,396
Securities available for sale at December 31, 2014:
Residential mortgage backed securities issued by U.S. Agencies	$	54,653	$	26	$	(940	)	$	53,739
Residential collateralized mortgage obligations issued by non agencies	790		—		(13		)	777
Asset backed security	2,083		—		(433		)	1,650
Mutual funds	4,750		45		(35		)	4,760
Total securities available for sale	$	62,276	$	71	$	(1,421	)	$	60,926

The amortized cost of securities available for sale at June 30, 2015 is shown in the table below by contractual maturities taking into consideration historical prepayments based on the prior twelve months of principal payments. Expected maturities will differ from contractual maturities and historical prepayments, particularly with respect to collateralized mortgage obligations, primarily because prepayment rates are affected by changes in conditions in the interest rate market and, therefore, future prepayment rates may differ from historical prepayment rates.

40

	June 30, 2015 Maturing in
	One year or less				Over one year through five years				Over five years through ten years				Over ten years				Total
(Dollars in thousands)	Amortized Cost		Weighted Average Yield		Amortized Cost		Weighted Average Yield		Amortized Cost		Weighted Average Yield		Amortized Cost		Weighted Average Yield		Amortized Cost		Weighted Average Yield
Securities available for sale:
Residential mortgage-backed securities issued by U.S. Agencies	$	7,616	1.56	%	$	22,590	1.52	%	$	15,445	1.58	%	$	4,800	1.67	%	$	50,451	1.56	%
Non-agency collateralized mortgage obligations	—		—		731		2.94	%	—		—		—		—		731		2.94	%
Asset backed securities	—		—		—		—		—		—		2,050		2.44	%	2,050		2.44	%
Mutual funds	—		—		4,750		1.93	%	—		—		—		—		4,750		1.93	%
Total Securities Available for sale	$	7,616	1.56	%	$	28,071	1.63	%	$	15,445	1.58	%	$	6,850	1.90	%	$	57,982	1.64	%

Loans

The following table sets forth the composition, by loan category, of our loan portfolio at June 30, 2015 and December 31, 2014:

	June 30, 2015					December 31, 2014
	Amount			Percent		Amount			Percent
	(Dollars in thousands)
Commercial loans	$	323,241		38.8	%	$	301,746		36.0	%
Commercial real estate loans – owner occupied	203,445			24.4	%	212,515			25.4	%
Commercial real estate loans – all other	135,966			16.3	%	146,676			17.5	%
Residential mortgage loans – multi-family	84,976			10.2	%	95,276			11.4	%
Residential mortgage loans – single family	60,191			7.2	%	64,326			7.7	%
Land development loans	5,575			0.7	%	7,745			0.9	%
Consumer loans	19,907			2.4	%	9,687			1.2	%
Total loans	833,301			100.0	%	837,971			100.0	%
Deferred loan origination costs, net	315					59
Allowance for loan and lease losses	(12,343		)			(13,833		)
Loans, net	$	821,273				$	824,197

Commercial loans are loans to businesses to finance capital purchases or improvements, or to provide cash flow for operations. Commercial real estate and residential mortgage loans are loans secured by trust deeds on real properties, including commercial properties and single family and multi-family residences. Land development loans are loans secured by non-arable bare land. Consumer loans include installment loans to consumers.

The following table sets forth the maturity distribution of our loan portfolio (excluding single and multi-family residential mortgage loans and consumer loans) at June 30, 2015:

41

	June 30, 2015
	One Year or Less		Over One Year Through Five Years		Over Five Years		Total
	(Dollars in thousands)
Real estate loans(1)
Floating rate	$	10,455	$	22,014	$	152,722	$	185,191
Fixed rate	26,680		67,079		66,036		159,795
Commercial loans
Floating rate	57,553		41,266		15,912		114,731
Fixed rate	133,375		64,908		10,227		208,510
Total	$	228,063	$	195,267	$	244,897	$	668,227

(1) Does not include mortgage loans on single or multi-family residences or consumer loans, which totaled $145.2 million and $19.9 million, respectively, at June 30, 2015.

Nonperforming Assets and Allowance for Loan and Lease Losses

Nonperforming Assets. Non-performing loans consist of (i) loans on non-accrual status which are loans on which the accrual of interest has been discontinued and include restructured loans when there has not been a history of past performance on debt service in accordance with the contractual terms of the restructured loans, and (ii) loans 90 days or more past due and still accruing interest. Non-performing assets are comprised of non-performing loans and OREO, which consists of real properties which we have acquired by or in lieu of foreclosure and which we intend to offer for sale.

Loans are placed on non-accrual status when, in our opinion, the full timely collection of principal or interest is in doubt. Generally, the accrual of interest is discontinued when principal or interest payments become more than 90 days past due, unless we believe the loan is adequately collateralized and the loan is in the process of collection. However, in certain instances, we may place a particular loan on non-accrual status earlier, depending upon the individual circumstances involved in that loan’s delinquency. When a loan is placed on non-accrual status, previously accrued but unpaid interest is reversed against current income. Subsequent collections of unpaid amounts on such a loan are applied to reduce principal when received, except when the ultimate collectability of principal is probable, in which case such payments are applied to interest and are credited to income. Non-accrual loans may be restored to accrual status if and when principal and interest become current and full repayment is expected. Interest income is recognized on the accrual basis for impaired loans which, based on our non-accrual policy, do not require non-accrual treatment.

The following table sets forth information regarding our nonperforming assets, as well as information regarding restructured loans, at June 30, 2015 and December 31, 2014:

	At June 30, 2015		At December 31, 2014
	(Dollars in thousands)
Nonaccrual loans:
Commercial loans	$	14,238	$	16,182
Commercial real estate	4,221		4,288
Residential real estate	1,640		1,472
Land development	1,685		2,111
Total nonaccrual loans	$	21,784	$	24,053
Loans past due 90 days and still accruing interest:
Total loans past due 90 days and still accruing interest	$	—	$	—
Other real estate owned (OREO):
Residential real estate	962		962
Construction and land development	910		630
Total other real estate owned	$	1,872	$	1,592
Total nonperforming assets	$	23,656	$	25,645
Restructured loans:
Accruing loans	$	9,862	$	11,084
Nonaccruing loans (included in nonaccrual loans above)	15,101		5,935
Total restructured loans	$	24,963	$	17,019

42

As the above table indicates, total nonperforming assets decreased by approximately $2.0 million, or 7.8%, to $23.7 million as of June 30, 2015 from $25.6 million as of December 31, 2014, attributable to regular payment amortizations and payoffs and the charge off of loans that were no longer deemed collectible in the ordinary course of business.

Information Regarding Impaired Loans. At June 30, 2015, loans deemed impaired totaled $31.6 million as compared to $35.1 million at December 31, 2014. We had an average investment in impaired loans of $32.5 million for the six months ended June 30, 2015 as compared to $26.1 million for the six months ended June 30, 2014. The interest that would have been earned during the six months ended June 30, 2015 had the nonaccruing impaired loans remained current in accordance with their original terms was approximately $508 thousand.

The following table sets forth the amount of impaired loans to which a portion of the ALLL has been specifically allocated, and the aggregate amount so allocated, in accordance with Accounting Standards Codification (“ASC”) 310-10, and the amount of the ALLL and the amount of impaired loans for which no such allocations were made, in each case at June 30, 2015 and December 31, 2014:

	June 30, 2015						December 31, 2014
	Loans		Reserves for Loan Losses		% of Reserves to Loans		Loans		Reserves for Loan Losses		% of Reserves to Loans
	(Dollars in thousands)
Impaired loans with specific reserves	$	650	$	405	62.3	%	$	2,554	$	1,532	60.0	%
Impaired loans without specific reserves	30,996		—		—		32,583		—		—
Total impaired loans	$	31,646	$	405	1.3	%	$	35,137	$	1,532	4.4	%

The $3.5 milliondecrease in impaired loans to $31.6 million at June 30, 2015 from $35.1 million at December 31, 2014 was primarily attributable to paydowns of $10.1 million and net charge-offs of $2.1 million, partially offset by the addition of five impaired loans, consisting of three commercial loans and two commercial real estate loans. Accruing restructured loans were comprised of a number of loans performing in accordance with modified terms, which included lowering of interest rates, deferral of payments, or modifications to payment terms. Based on an internal analysis, using the current estimated fair values of the collateral or the discounted present values of the future estimated cash flows of the impaired loans, we concluded that, at June 30, 2015, $405 thousand of specific reserves were required on two impaired loans and that all remaining impaired loans were well secured and adequately collateralized with no specific reserves required.

Allowance for Loan and Lease Losses. The ALLL totaled $12.3 million, representing 1.48% of loans outstanding, at June 30, 2015, as compared to $13.8 million, or 1.65% of loans outstanding, at December 31, 2014.

The adequacy of the ALLL is determined through periodic evaluations of the loan portfolio and other factors that can reasonably be expected to affect the ability of borrowers to meet their loan obligations. Those factors are inherently subjective as the process for determining the adequacy of the ALLL involves some significant estimates and assumptions about such matters such as (i) economic conditions and trends and the amounts and timing of expected future cash flows of borrowers which can affect their ability to meet their loan obligations to us, (ii) the fair value of the collateral securing non-performing loans, (iii) estimates of losses that we may incur on non-performing loans, which are determined on the basis of historical loss experience and industry loss factors and bank regulatory guidelines, which are subject to change, and (iv) various qualitative factors. Since those factors are subject to changes in economic and other conditions and changes in regulatory guidelines or other circumstances over which we have no control, the amount of the ALLL may prove to be insufficient to cover all of the loan losses we might incur in the future. In such an event, it may become necessary for us to increase the ALLL from time to time to maintain its adequacy. Such increases are effectuated by means of a charge to income, referred to as the “provision for loan and lease losses”, in our statements of our operations. See “—Results of Operations— Provision for Loan and Lease Losses, above in this Item 2.

The amount of the ALLL is first determined by assigning reserve ratios for all loans. All non-accrual loans and other loans classified as “Special Mention,” “Substandard” or “Doubtful” (“classified loans” or “classification categories”) and not fully collateralized are then assigned specific reserves within the ALLL, with greater reserve allocations made to loans deemed to be of a higher risk. These ratios are determined based on prior loss history and industry guidelines and loss factors, by type of loan, adjusted for current economic factors and current economic trends. Refer to Note 5, Loans and Allowance for Loan and Lease Losses, in Item 1 for definitions related to our internal asset quality indicators stated above.

On a quarterly basis, we utilize a classification based loan loss migration model as well as review individual loans in determining the adequacy of the ALLL. Our loss migration analysis tracks a certain number of quarters of loan loss history and industry loss factors to determine historical losses by classification category for each loan type, except certain loans (automobile, mortgage and credit cards), which are analyzed as homogeneous loan pools. These calculated loss factors are then applied to outstanding loan balances. We analyze impaired loans individually.

43

In determining whether and the extent to which we will make adjustments to our loan loss migration model for purposes of determining the ALLL, we also consider a number of qualitative factors that can affect the performance and the collectability of the loans in our loan portfolio. Such qualitative factors include:

• The effects of changes that we may make in our loan policies or underwriting standards on the quality of the loans and the risks in our loan portfolios;

• Trends and changes in local, regional and national economic conditions, as well as changes in industry specific conditions, and any other reasonably foreseeable events that could affect the performance or the collectability of the loans in our loan portfolios;

• Material changes that may occur in the mix or in the volume of the loans in our loan portfolios that could alter, whether positively or negatively, the risk profile of those portfolios;

• Changes in management or loan personnel or other circumstances that could, either positively or negatively, impact the application of our loan underwriting standards, the monitoring of nonperforming loans or our loan collection efforts; and

• External factors that, in addition to economic conditions, can affect the ability of borrowers to meet their loan obligations, such as fires, earthquakes and terrorist attacks.

Determining the effects that these qualitative factors may have on the performance of each category of loans in our loan portfolio requires numerous judgments, assumptions and estimates about conditions, trends and events which may subsequently prove to have been incorrect due to circumstances outside of our control. Moreover, the effects of qualitative factors such as these on the performance of our loan portfolios are often difficult to quantify. As a result, we may sustain loan losses in any particular period that are sizable in relation to the ALLL or that may even exceed the ALLL.

In response to the economic recession, we (i) implemented more stringent loan underwriting standards, (ii) strengthened loan underwriting and approval processes, and (iii) added personnel with experience in addressing problem assets.

Set forth below is information regarding loan balances and the related ALLL, by portfolio type, for the six months ended June 30, 2015 and 2014 (excluding mortgage loans held for sale).

(Dollars in thousands)	Commercial			Real  Estate			Land Development			Consumer and Single Family Mortgages			Total
ALLL for the six months ended June 30, 2015:
Balance at beginning of year	$	7,670		$	5,133		$	296		$	734		$	13,833
Charge offs	(2,117		)	—			(85		)	(151		)	(2,353		)
Recoveries	857			2			—			4			863
Provision	71			(246		)	(167		)	342			—
Balance at end of year	$	6,481		$	4,889		$	44		$	929		$	12,343
Allowance for loan and lease losses as a percentage of average total loans													1.49		%
Allowance for loan and lease losses as a percentage of total outstanding loans													1.48		%
Ratio of net charge-offs to average loans outstanding (annualized)													0.36		%
ALLL for the six months ended June 30, 2014:
Balance at beginning of year	$	5,812		$	4,517		$	165		$	864		$	11,358
Charge offs	(276		)	—			—			(102		)	(378		)
Recoveries	452			19			—			79			550
Provision	489			861			(80		)	(220		)	1,050
Balance at end of year	$	6,477		$	5,397		$	85		$	621		$	12,580
Allowance for loan and lease losses as a percentage of average total loans													1.61		%
Allowance for loan and lease losses as a percentage of total outstanding loans													1.50		%
Ratio of net charge-offs to average loans outstanding (annualized)													(0.04		)%

The ALLL decreased$237 thousand from June 30, 2014 to June 30, 2015 primarily as a result of significant recoveries during the twelve-month period ended June 30, 2015 partially offset by the new loan growth during the same period. The decrease

44

in the provision for loan and lease losses from June 30, 2014 to June 30, 2015 was primarily a result of improving asset quality evidenced by declining delinquencies, lower levels of classified loans and generally positive asset quality trends which more than offset the portfolio growth.

We classify our loan portfolios using asset quality ratings. The credit quality table in Note 5, Loans and Allowance for Loan and Lease Losses above in Item 1, provides a summary of loans by portfolio type and asset quality ratings as of June 30, 2015 and December 31, 2014. Loans totaled approximately $833.3 million at June 30, 2015, a decrease of $4.7 million from $838.0 million at December 31, 2014. The disaggregation of the loan portfolio by risk rating in the credit quality table located in Note 5 reflects the following changes that occurred between December 31, 2014 and June 30, 2015:

• Loans rated "Pass" totaled $790.3 million, a decrease of $449 thousand from $790.8 million at December 31, 2014. The decrease was primarily attributable to the planned exit of one syndicated loan, downgrades and other paydowns partially offset by new loan growth.

• Loans rated "Special Mention" totaled $11.6 million, an increase of $4.2 million from $7.4 million at December 31, 2014. The increase was primarily the result of the downgrade of two commercial real estate - owner occupied loans from "Pass", partially offset by the payoff of one commercial real estate loan and the downgrade to "Substandard" of a related multi-family loan.

• Loans rated "Substandard" totaled $31.0 million, a decrease of $7.2 million from $38.2 million at December 31, 2014. This decrease was primarily the result of principal payments of $755 thousand on performing "Substandard" loans, payoffs of $11.2 million, the foreclosure and transfer to OREO of a $280 thousand land development loan and $651 thousand of loans charged off, partially offset by $5.7 million downgraded from "Pass" and "Special Mention".

• Loans rated "Doubtful" totaled $400 thousand, a decrease of $1.2 million from $1.6 million at December 31, 2014. The decrease is attributable to the charge off of one commercial loan of $1.0 million and the write down of $224 thousand on a commercial loan.

Our loss migration analysis currently utilizes a series of twelve staggered 16-quarter migration periods, which was increased during the second quarter of 2015 from four staggered 16-quarter migration periods in order to broaden the loss experience incorporated into the analysis. As a result, for purposes of determining applicable loss factors at June 30, 2015, our migration analysis covered the period from December 1, 2010 to June 30, 2015. We believe this was consistent with and reasonably reflects current economic conditions, portfolio trends and the risks that were inherent in our loan portfolio at June 30, 2015.

The table below sets forth loan delinquencies, by quarter, for the five preceding quarters ended June 30, 2015.

	June 30, 2015		March 31, 2015		December 31, 2014		September 30, 2014		June 30, 2014
Loans Delinquent:	(Dollars in thousands)
90 days or more:
Commercial loans	$	12,132	$	—	$	—	$	303	$	1,647
Commercial real estate	—		—		2,117		2,117		2,117
Residential mortgages	763		733		285		244		—
Land development loans	1,685		—		364		364		—
	14,580		733		2,766		3,028		3,764
30-89 days:
Commercial loans	527		24,143		553		1,079		4,251
Commercial real estate	4,847		891		20		—		485
Residential mortgages	—		181		835		43		264
Land development loans	—		1,717		—		—		368
Consumer loans	—		—		17		—		—
	5,374		26,932		1,425		1,122		5,368
Total Past Due(1):	$	19,954	$	27,665	$	4,191	$	4,150	$	9,132

(1) Past due balances include nonaccrual loans.

As the above table indicates, total past due loans increased by $15.8 million, to $20.0 million at June 30, 2015 from $4.2 million at December 31, 2014. Loans past due 90 days or more increased by $11.8 million, to $14.6 million at June 30, 2015, from

45

$2.8 million at December 31, 2014 primarily attributable to one loan relationship of $12.7 million partially offset by payments received on a $2.1 million loan relationship during the six months ended June 30, 2015 and the foreclosure and transfer to OREO of a $280 thousand nonaccrual land development loan. Subsequent to June 30, 2015, we have received a $1.2 million paydown toward the $12.7 million loan relationship that was past due 90 days or more.

Loans 30-89 days past due increased by $3.9 million to $5.4 million at June 30, 2015 from $1.4 million at December 31, 2014 primarily attributable to two commercial real estate loan relationships of $3.7 million, which included a $1.1 million loan that was previously included within the 90 days or more past due category at December 31, 2014.

Deposits

Average Balances of and Average Interest Rates Paid on Deposits

Set forth below are the average amounts of, and the average rates paid on, deposits for the six months ended June 30, 2015 and year ended December 31, 2014:

	Six Months Ended June 30, 2015				Year Ended December 31, 2014
	Average Balance		Average Rate		Average Balance		Average Rate
	(Dollars in thousands)
Noninterest bearing demand deposits	$	221,300	—		$	206,295	—
Interest-bearing checking accounts	37,541		0.26	%	36,281		0.28	%
Money market and savings deposits	290,625		0.57	%	170,047		0.34	%
Time deposits(1)	316,968		0.89	%	431,789		0.96	%
Total deposits	$	866,434	0.53	%	$	844,412	0.57	%

(1) Comprised of time certificates of deposit in denominations of less than and more than $100,000.

Deposit Totals

Deposits totaled $872.0 million at June 30, 2015 as compared to $916.3 million at December 31, 2014. The following table provides information regarding the mix of our deposits at June 30, 2015 and December 31, 2014:

	At June 30, 2015				At December 31, 2014
	Amounts		% of Total Deposits		Amounts		% of Total Deposits
	(Dollars in thousands)
Deposits
Noninterest bearing demand deposits	$	236,361	27.2	%	$	237,491	25.9	%
Savings and other interest-bearing transaction deposits	317,988		36.5	%	318,096		34.7	%
Time deposits(1)	317,601		36.4	%	360,722		39.4	%
Total deposits	$	871,950	100.0	%	$	916,309	100.0	%

(1) Comprised of time certificates of deposit in denominations of less than and more than $100,000.

Certificates of deposit in denominations of $100,000 or more, on which we pay higher rates of interest than on other deposits, aggregated $279.3 million, or 32.0%, of total deposits at June 30, 2015, as compared to $315.0 million, or 34.4%, of total deposits at December 31, 2014.

Set forth below is a maturity schedule of domestic time certificates of deposit outstanding at June 30, 2015 and December 31, 2014:

46

	June 30, 2015				December 31, 2014
Maturities	Certificates of Deposit Under $ 100,000		Certificates of Deposit $100,000 or more		Certificates of Deposit Under $100,000		Certificates of Deposit $100,000 or more
	(Dollars in thousands)
Three months or less	$	8,176	$	56,414	$	16,841	$	118,302
Over three and through six months	6,724		56,458		6,740		29,933
Over six and through twelve months	18,361		131,417		13,707		96,507
Over twelve months	5,082		34,969		8,433		70,259
Total	$	38,343	$	279,258	$	45,721	$	315,001

Liquidity

We actively manage our liquidity needs to ensure that sufficient funds are available to meet our needs for cash, including to fund new loans and deposit withdrawals by our customers. We project the future sources and uses of funds and maintain liquid funds for unanticipated events. Our primary sources of cash include cash we have on deposit at other financial institutions, payments from borrowers on their loans, proceeds from sales or maturities of securities held for sale, sales of residential mortgage loans, increases in deposits and increases in borrowings principally from the FHLB. The primary uses of cash include funding new loans and making advances on existing lines of credit, purchasing investments, including securities available for sale, funding new residential mortgage loans, funding deposit withdrawals and paying operating expenses. We maintain funds in overnight federal funds and other short-term investments to provide for short-term liquidity needs. We also have obtained credit lines from the FHLB and other financial institutions to meet any additional liquidity requirements we might have. See "—Contractual Obligations—Borrowings" below for additional information related to our borrowings from the FHLB.

Our liquid assets, which included cash and due from banks, federal funds sold, interest earning deposits that we maintain with financial institutions and unpledged securities available for sale (excluding FRBSF and FHLB stock) totaled $178.9 million, which represented 17% of total assets, at June 30, 2015. We believe that our cash and cash equivalent resources, together with available borrowings under our credit facilities, will be sufficient to meet normal operating requirements for at least the next twelve months, including to enable us to meet any increase in deposit withdrawals that might occur in the foreseeable future.

Cash Flow Provided by Operating Activities. During the six months ended June 30, 2015, operating activities provided net cash of $204 thousand, primarily attributable to a decrease in our accrued interest receivable and our net income of $54 thousand. During the six months ended June 30, 2014, operating activities provided net cash of $10.1 million, comprised primarily of $9.2 million provided by our discontinued operations and our net income of $455 thousand.

Cash Flow Provided by (Used in) Investing Activities. During the six months ended June 30, 2015, investing activities provided cash of $8.9 million, primarily comprised of $4.1 million of cash from maturities of and principal payments on securities available for sale, $2.1 million of cash from principal payments on other investments and $3.0 million provided by paydowns in loans. During the six months ended June 30, 2014, investing activities used net cash of $29.2 million, primarily attributable to $35.0 million used to fund an increase in loans, partially offset by $5.4 million of cash from maturities and principal payments on securities available for sale and $1.1 million from sale of OREO.

Cash Flow (Used in) Provided by Financing Activities. During the six months ended June 30, 2015, financing activities used net cash of $52.6 million, consisting primarily of a $43.2 million net decrease in interest bearing deposits, which resulted primarily from a decision to decrease the rates of interest we pay on our certificates of deposit in order to increase our loan-to-deposit ratio and decrease our cost of funds, and a $9.5 million decrease in borrowings. During the six months ended June 30, 2014, financing activities provided net cash of $16.9 million, consisting primarily of a $49.5 million net increase in interest bearing deposits, which resulted primarily from a decision to increase the rates of interest we pay on our certificates of deposit in order to decrease our loan-to-deposit ratio and increase our liquidity, partially offset by a $22.5 million decrease in borrowings.

Ratio of Loans to Deposits. The relationship between gross loans and total deposits can provide a useful measure of a bank’s liquidity. Since repayment of loans tends to be less predictable than the maturity of investments and other liquid resources, the higher the loan-to-deposit ratio the less liquid are our assets. On the other hand, since we realize greater yields on loans than we do on investments, a lower loan-to-deposit ratio can adversely affect interest income and earnings. As a result, our goal is to achieve a loan-to-deposit ratio that appropriately balances the requirements of liquidity and the need to generate a fair return on our assets. At June 30, 2015 and December 31, 2014, the loan-to-deposit ratio was 96% and 91%, respectively.

Capital Resources

Regulatory Capital Requirements Applicable to Banking Institutions

47

Under federal banking regulations that apply to all United States based bank holding companies and federally insured banks, the Company (on a consolidated basis) and the Bank (on a stand-alone basis) must meet specific capital adequacy requirements that, for the most part, involve quantitative measures, primarily in terms of the ratios of their capital to their assets, liabilities, and certain off-balance sheet items, calculated under regulatory accounting practices. Under those regulations, each bank holding company must meet a minimum capital ratio and each federally insured bank is determined by its primary federal bank regulatory agency to come within one of the following capital adequacy categories on the basis of its capital ratios:

• well capitalized

• adequately capitalized

• undercapitalized

• significantly undercapitalized; or

• critically undercapitalized

Certain qualitative assessments also are made by a banking institution’s primary federal regulatory agency that could lead the agency to determine that the banking institution should be assigned to a lower capital category than the one indicated by the quantitative measures used to assess the institution’s capital adequacy. At each successive lower capital category, a banking institution is subject to greater operating restrictions and increased regulatory supervision by its federal bank regulatory agency.

The following table sets forth the capital and capital ratios of the Company (on a consolidated basis) and the Bank (on a stand-alone basis) at June 30, 2015, as compared to the respective regulatory requirements applicable to them.

					Applicable Federal Regulatory Requirement
					For Capital Adequacy Purposes			To be Categorized As Well Capital
	Amount		Ratio		Amount		Ratio	Amount		Ratio
	(Dollars in thousands)
Total Capital to Risk Weighted Assets:
Company	$	147,057	16.9	%	$	69,785	At least 8.0	N/A		N/A
Bank	127,577		14.7	%	69,306		At least 8.0	$	86,633	At least 10.0
Common Equity Tier 1 Capital to Risk Weighted Assets:
Company	$	108,374	12.4	%	$	39,254	At least 4.5	N/A		N/A
Bank	116,702		13.5	%	38,985		At least 4.5	$	56,311	At least 6.5
Tier 1 Capital to Risk Weighted Assets:
Company	$	136,109	15.6	%	$	52,339	At least 6.0	N/A		N/A
Bank	116,702		13.5	%	51,980		At least 6.0	$	69,306	At least 8.0
Tier 1 Capital to Average Assets:
Company	$	136,109	13.1	%	$	41,715	At least 4.0	N/A		N/A
Bank	116,702		11.3	%	41,512		At least 4.0	$	51,890	At least 5.0

In early July 2013, the Federal Reserve Board and the FDIC issued final rules implementing the Basel III regulatory capital framework and related Dodd-Frank Wall Street Reform and Consumer Protection Act changes.  The rules revise minimum capital requirements and adjust prompt correct action thresholds.  The final rules revise the regulatory capital elements, add a new common equity Tier 1 capital ratio, increase the minimum Tier 1 capital ratio requirement, and implement a new capital conservation buffer.  The rules also permit certain banking organizations to retain, through a one-time election, the existing treatment for accumulated other comprehensive income.  The final rules took effect for community banks on January 1, 2015, subject to a transition period for certain parts of the rules.  At June 30, 2015 the Bank (on a stand-alone basis) continued to qualify as a well-capitalized institution, and the Company continued to exceed the minimum required capital ratios applicable to it, under the capital adequacy guidelines described above.

The consolidated total capital and Tier 1 capital of the Company at June 30, 2015 includes an aggregate of $17.0 million principal amount of the $17.5 million of junior subordinated debentures that we issued in 2002 and 2004. See “—Contractual Obligations—Junior Subordinated Debentures” below for additional information. We contributed the net proceeds from the sales of the junior subordinated debentures to the Bank over the nine year period ended June 30, 2015, thereby providing it with additional cash to fund the growth of its banking operations and, at the same time, to increase its total capital and Tier 1 capital.

Quarterly interest payments on the junior subordinated debentures require prior approval of the FRBSF. As of June 30, 2015, we were current on all interest payments.

48

Dividend Policy and Share Repurchase Programs.

It is, and since the beginning of 2009 it has been, the policy of the Boards of Directors of the Company and the Bank to preserve cash to enhance our capital positions and the Bank's liquidity. Accordingly, we do not expect to pay dividends or make share repurchases for the foreseeable future.

The principal source of cash available to a bank holding company consists of cash dividends from its bank subsidiaries. There are currently several restrictions on the Bank’s ability to pay us cash dividends. Government regulations, including the laws of the State of California, as they pertain to the payment of cash dividends by California state chartered banks, limits the amount of funds that the Bank is permitted to dividend to us. Further, Section 23(a) of the Federal Reserve Act limits the amounts that a bank may loan to its bank holding company to an aggregate of no more than 10% of the bank subsidiary’s capital surplus and retained earnings and requires that such loans be secured by specified assets of the bank holding company. See Note 14, Shareholders’ Equity, in the notes to our consolidated financial statements included in our 2014 Form 10-K for more detail regarding the restrictions on dividends and inter-company transactions. While restrictions on the payment of dividends from the Bank to us exist, there are no restrictions on the dividends that PM Asset Resolution, Inc. (“PMAR”), our wholly owned subsidiary, may pay us. PMAR has approximately $15.2 million in assets and could provide us with additional cash if required. In addition, we currently have sufficient cash on hand to meet our cash obligations. As a result, we do not expect that these restrictions will impact our ability to meet our cash obligations.

Off Balance Sheet Arrangements

Loan Commitments and Standby Letters of Credit. To meet the financing needs of our customers in the normal course of business, we are a party to financial instruments with off-balance sheet risk. These financial instruments include commitments to extend credit and standby letters of credit. At June 30, 2015 and December 31, 2014, we were committed to fund certain loans including letters of credit amounting to approximately $187 million and $148 million, respectively.

Commitments to extend credit and standby letters of credit generally have fixed expiration dates or other termination clauses and the customer may be required to pay a fee and meet other conditions in order to draw on those commitments or standby letters of credit. We expect, based on historical experience, that many of the commitments will expire without being drawn upon and, therefore, the total commitment amounts do not necessarily represent future cash requirements.

To varying degrees, commitments to extend credit involve elements of credit and interest rate risk for us that are in excess of the amounts recognized in our balance sheets. Our maximum exposure to credit loss in the event of nonperformance by the customers to whom such commitments are made could potentially be equal to the amount of those commitments. As a result, before making such a commitment to a customer, we evaluate the customer’s creditworthiness using the same underwriting standards that we would apply if we were approving loans to the customer. In addition, we often require the customer to secure its payment obligations for amounts drawn on such commitments with collateral such as accounts receivable, inventory, property, plant and equipment, income-producing commercial properties, residential properties and properties under construction. As a consequence, our exposure to credit and interest rate risk on such commitments is not different in character or amount than risks inherent in the outstanding loans in our loan portfolio.

Standby letters of credit are conditional commitments issued by the Bank to guarantee a payment obligation of a customer to a third party. The credit risk involved in issuing letters of credit is essentially the same as that involved in extending loan commitments to customers.

Contractual Obligations

Borrowings. As of June 30, 2015, we had $20.0 million of outstanding short-term borrowings and $10.0 million of outstanding long-term borrowings that we had obtained from the FHLB. The table below sets forth the amounts of, the interest rates we pay on and the maturity dates of these FHLB borrowings. These borrowings had a weighted-average annualized interest rate of 0.74% for the six months ended June 30, 2015.

Principal Amounts		Interest Rate		Maturity Dates	Principal Amounts		Interest Rate		Maturity Dates
(Dollars in thousands)
$	10,000	0.61	%	August 31, 2015	$	5,000	1.08	%	September 19, 2016
5,000		0.61	%	September 18, 2015	5,000		0.96	%	September 30, 2016
5,000		0.57	%	September 30, 2015

At June 30, 2015, $517 million of loans were pledged to secure these FHLB borrowings and to support our unfunded borrowing capacity. At June 30, 2015, we had unused borrowing capacity of $228 million with the FHLB.

49

The highest amount of borrowings outstanding at any month-end during the three months ended June 30, 2015 was $39.5 million, which consisted of borrowings from the FHLB. By comparison, the highest amount of borrowings outstanding at any month end in 2014 consisted of $70 million of borrowings from the FHLB.

Junior Subordinated Debentures. Pursuant to rulings of the Federal Reserve Board, bank holding companies were permitted to issue long term subordinated debt instruments that, subject to certain conditions, would qualify as and, therefore, augment capital for regulatory purposes. At June 30, 2015, we had outstanding approximately $17.5 million principal amount of 30-year junior subordinated floating rate debentures (the “Debentures”), of which $17.0 million qualified as additional Tier 1 capital for regulatory purposes as of June 30, 2015.

Set forth below is certain information regarding the Debentures:

Original Issue Dates	Principal Amount		Interest Rates	Maturity Dates
September 2002	$	7,217	LIBOR plus 3.40%	September 2032
October 2004	10,310		LIBOR plus 2.00%	October 2034
Total	$	17,527

(1) Subject to the receipt of prior regulatory approval, we may redeem the Debentures, in whole or in part, without premium or penalty, at any time prior to maturity.

These Debentures require quarterly interest payments, which are used to make quarterly distributions required to be paid on the corresponding trust preferred securities. Subject to certain conditions, we have the right, at our discretion, to defer those interest payments, and the corresponding distributions on the trust preferred securities, for up to five years. Exercise of this deferral right does not constitute a default of our obligations to pay the interest on the Debentures or the corresponding distributions that are payable on the trust preferred securities. As of June 30, 2015, we were current on all interest payments.

Credit Risk

Credit risk is the risk of loss arising from adverse changes in a client’s or counterparty’s ability to meet its financial obligations under agreed-upon terms. Credit risk primarily exists in our loan and investment portfolio. The degree of credit risk will vary based on many factors including the duration of the transaction, the financial capacity of the client, the contractual terms of the agreement and the availability and quality of collateral. We manage credit risk by limiting the total amount of credit extended to a single borrower relationship, by verification of its business operations and assets and with a thorough understanding of the nature and scope of the business activities in which they are engaged.

As appropriate, management and Board level committees evaluate and approve credit standards and oversee the credit risk management function related to loans and investments. These committees’ primary responsibilities include ensuring the adequacy of our credit risk management infrastructure, overseeing credit risk management strategies and methodologies, monitoring economic and market conditions that may impact our credit-related activities, and finally, evaluating and monitoring overall portfolio credit risk.

We maintain a comprehensive credit policy that includes specific underwriting guidelines as well as standards for loan origination and reporting as well as portfolio management. The credit policy is developed by credit management and approved by the Board of Directors, which also reviews it at least annually. In addition, the credit policy sets forth requirements that ensure compliance with all applicable laws and regulatory guidance.

Our underwriting guidelines outline specific standards and risk management criteria for each lending product offered. Loan types are further segmented into subsections where the inherent credit risk warrants detailed transaction and monitoring parameters, as follows:

• Loan structures, which includes the lien priority, amortization terms and loan tenors;

• Collateral requirements, coverage margins and valuation methods;

• Underwriting considerations which include recommended due diligence and verification requirements; and

• Specific credit performance standards. Examples include minimum debt service coverage ratios, liquidity requirements as well as limits on financial leverage.

We measure and document each loan’s compliance with our policy criteria at underwriting. If an exception to these criteria exists, an explanation of the factors that mitigate this additional risk is considered before an approval is granted. A report of loans with policy exceptions is reported to the Credit Policy Committee of the Board of Directors of the Bank on a monthly basis.

50

We continuously monitor a client’s ability to perform under its obligations. Reporting requirements and loan covenants are set forth in each loan approval and compliance with these items are monitored on at least an annual basis or more frequently as conditions warrant. Loan covenant compliance is tracked and results are reported to credit management.

Under our credit risk management structure, each loan is assigned an internal asset quality rating that is based on defined credit standards. While the criteria may vary by product, each rating focuses on the borrower’s inherent operating risks, the quality of management, historical financial performance, financial capacity, the stability of profits and cash flow, and the adequacy of the secondary repayment sources. Asset quality ratings for each loan are monitored and reassessed on an ongoing basis. If necessary, ratings are adjusted to reflect changes in the client’s financial condition, cash flow or financial position. Regular reporting to management and the Board includes the aggregated portfolio exposure by asset quality rating as one measure of credit risk within the loan portfolio. Refer to “Financial Condition — Allowance for Loan and Lease Losses” above in this Item 2 for further detail regarding our internal asset quality ratings.

The Bank recognizes that substantial risks are posed by concentrations of credit assets. As such, it maintains a diversified loan portfolio by limiting exposures by loan structure, business type or purpose, collateral type, and perceived asset quality. Credit management defines areas of concentration, recommends appropriate thresholds to the Board of Directors and takes action if needed to manage potential risk where asset concentrations exist.

Market Risk

Market risk is the risk that values of assets and liabilities or revenues will be adversely affected by changes in market conditions such as interest rate fluctuations. This risk is inherent in the financial instruments associated with our operations and/or activities, including loans, securities and short-term borrowings.

The primary market risk to which we are exposed is interest rate risk, which is inherent in the financial instruments associated with our operations, primarily including our loans, deposits and borrowings. Interest rate risk is the exposure of a company’s financial condition, both earnings and the market value of assets and liabilities, to adverse movements in interest rates. Interest rate risk results from differences in the maturity or timing of interest earning assets and interest bearing liabilities, changes in the slope of the yield curve over time, imperfect correlation in the adjustment of rates earned and paid on different instruments with otherwise similar characteristics (e.g. three-month Treasury bill versus three-month LIBOR) and from interest-rate-related options embedded in bank products (e.g. loan prepayments, floors and caps, callable investment securities, customers redeploying non-interest bearing to interest bearing deposits, etc.).

The potential impact of interest rate risk is significant because of the liquidity and capital adequacy consequences that reduced earnings or net operating losses caused by a reduction in net interest income imply. We recognize and accept that interest rate risk is a routine part of bank operations and will from time to time impact our profits and capital position. The objective of interest rate risk management is to control exposure of net interest income to risks associated with interest rate movements in the market, to achieve consistent growth in net interest income and to profit from favorable market opportunities.

We measure interest rate risk and the effect of changes in market interest rates using a net interest income simulation analysis. The analysis incorporates our balance sheet as of June 30, 2015 and assumptions that reflect the current interest rate environment. The analysis estimates the interest rate impact of a parallel increase in interest rates over a twelve-month horizon.

The analysis below incorporates our assumptions for the market yield curve, pricing sensitivities on loans and deposits, reinvestment of asset and liability cash flows, and prepayments on loans and securities. The new loans, investment securities, borrowings and deposits are assumed to have interest rates that reflect our forecast of prevailing market terms. We also assumed that LIBOR and prime rates do not fall below 0% for loans and borrowings. FHLB borrowings are assumed to convert to cash as they run off. Actual results may differ from forecasted results due to changes in market conditions as well as changes in management strategies.

The estimated changes in net interest income for a twelve-month period based on changes in the interest rates applied as of June 30, 2015 were as follows:

Change in Market Interest Rates (basis points)	Amount ($)			Percent (%)
	(in thousands)
+200	$	2,346		7.22	%
+100	603			1.86	%
-100	(53		)	(0.16	)%

51

In addition to NII simulation, we measure the impact of market interest rate changes on our economic value of equity (“EVE”). EVE is defined as the net present value of assets, less the net present value of liabilities, adjusted for any off-balance sheet items.

The estimated changes in EVE in the following table are based on a discounted cash flow analysis which incorporates the impacts of changes in market interest rates. The model simulations and calculations are highly assumption-dependent and will change regularly as our asset/liability structure changes, as interest rate environments evolve, and as we change our assumptions in response to relevant market or business circumstances. These calculations do not reflect the changes that we anticipate or may make to reduce our EVE exposure in response to a change in market interest rates as part of our overall interest rate risk management strategy. As with any method of measuring interest rate risk, certain limitations are inherent in the method of analysis presented in the preceding table. We are exposed to yield curve risk, prepayment risk and basis risk, which cannot be fully modeled and expressed using the above methodology. Accordingly, the results in the following table should not be relied upon as a precise indicator of actual results in the event of changing market interest rates. Additionally, the resulting changes in EVE and NII estimates are not intended to represent, and should not be construed to represent the underlying value.

The estimated changes in EVE based on interest rates applied as of June 30, 2015 were as follows:

Change in Market Interest Rates (basis points)	Amount ($)			Percent (%)
	(in thousands)
+200	$	8,340		6.35	%
+100	4,775			3.63	%
-100	(454		)	(0.35	)%

Critical Accounting Policies

Our consolidated financial statements are prepared in accordance with generally accepted accounting principles in the United States (“GAAP”) and general practices in the banking industry. Certain of those accounting policies are considered critical accounting policies, because they require us to make assumptions and judgments regarding circumstances or trends that could affect the carrying value of our material assets, such as, for example, assumptions regarding economic conditions or trends that could impact our ability to fully collect our loans or ultimately realize the carrying value of certain of our other assets, such as securities available for sale and our deferred tax asset. Those assumptions and judgments are based on current information available to us regarding those economic conditions or trends or other circumstances. If adverse changes were to occur in the conditions, trends or other events on which our assumptions or judgments had been based, then under GAAP it could become necessary for us to reduce the carrying values of any affected assets on our balance sheet. In addition, because reductions in the carrying value of assets are sometimes effectuated by or require charges to income, such reductions also may have the effect of reducing our income.

There have been no significant changes during the six months ended June 30, 2015 to the items that we disclosed as our critical accounting policies and estimates in Critical Accounting Policies within Management's Discussion and Analysis of Financial Condition and Results of Operations included in our 2014 Form 10-K.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

We are exposed to certain financial risks, which are discussed in detail in Management's Discussion and Analysis of Financial Condition and Results of Operations in the Credit Risk and Market Risk sections.

ITEM 4.     CONTROLS AND PROCEDURES

Disclosure Controls and Procedures

We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our reports under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the SEC, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding required disclosure. In designing and evaluating our disclosure controls and procedures, our management recognized that any system of controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of

52

achieving the desired control objectives, as ours are designed to do, and management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.

As required by SEC rules, an evaluation was performed under the supervision and with the participation of our Chief Executive Officer and Chief Financial Officer of the effectiveness, as of June 30, 2015, of the Company’s disclosure controls and procedures (as defined in Rule 13a-15(e) under the Exchange Act). Based on that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that, as of June 30, 2015, the Company’s disclosure controls and procedures were effective to provide reasonable assurance that information required to be disclosed in the reports that we file under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and that such information is accumulated and communicated to management, including our Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding required disclosure.

Internal Control Over Financial Reporting

There were no changes in our internal control over financial reporting during the three months ended June 30, 2015 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

53

PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

We are subject to legal actions that arise from time to time in the ordinary course of our business. Currently, neither we nor any of our subsidiaries is a party to, and none of our or our subsidiaries' property is the subject of, any material legal proceeding.

ITEM 1A. RISK FACTORS

There have been no material changes in our assessment of our risk factors from those set forth in our 2014 Form 10-K.

ITEM 6. EXHIBITS

(a) Exhibits

The Index to Exhibits attached hereto is incorporated by reference.

54

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, on August 7, 2015.

PACIFIC MERCANTILE BANCORP
By:	/S/   STEVEN K. BUSTER
	Steven K. Buster
	President and Chief Executive Officer

PACIFIC MERCANTILE BANCORP
By:	/S/   CURT A. CHRISTIANSSEN
	Curt A. Christianssen
	Chief Financial Officer

55

EXHIBIT INDEX

Exhibit No.	Description of Exhibit
3.1	Articles of Incorporation of Pacific Mercantile Bancorp (Incorporated by reference to the same numbered exhibit to the Company's Registration Statement (No. 333-33452) on Form S-1 filed with the Commission on June 14, 2000.)
3.2	Certificate of Amendment of Articles of Incorporation of Pacific Mercantile Bancorp (Incorporated by reference to Exhibit 3.1 to the Quarterly Report on Form 10-Q dated August 14, 2001.)
3.3	Certificate of Amendment of Articles of Incorporation of Pacific Mercantile Bancorp (Incorporated by reference to Exhibit 3.1 to the Current Report on Form 8-K dated January 26, 2012 and filed with the Commission on February 1, 2012.)
3.4	Certificate of Determination of Rights, Preferences, Privileges and Restrictions of Series A Convertible 10% Cumulative Preferred Stock of Pacific Mercantile Bancorp. (Incorporated by reference to Exhibit 3.1 to the Current Report on Form 8-K (No. 000-30777) dated October 6, 2010.)
3.5	Certificate of Amendment of Certificate of Determination of Rights, Preferences, Privileges and Restrictions of the Series A Convertible 10% Cumulative Preferred Stock of Pacific Mercantile Bancorp. (Incorporated by reference to Exhibit 3.2 to the Current Report on Form 8-K dated January 26, 2012 and filed with the Commission on February 1, 2012.)
3.6	Certificate of Determination of Rights, Preferences, Privileges and Restrictions of the Series B Convertible 8.4% Noncumulative Preferred Stock of Pacific Mercantile Bancorp. (Incorporated by reference to Exhibit 3.1 to the Current Report on Form 8-K (No. 000-30777) dated August 22, 2011.)
3.7	Certificate of Determination of Rights, Preferences, Privileges and Restrictions of the Series C 8.4% Noncumulative Preferred Stock of Pacific Mercantile Bancorp. (Incorporated by reference to Exhibit 3.2 to the Current Report on Form 8-K (No. 000-30777) dated August 22, 2011.)
3.8	Pacific Mercantile Bancorp Bylaws, Amended and Restated as of January 22, 2014. (Incorporated by reference to Exhibit 3.1 to the Company's Current Report on Form 8-K (No. 000-30777) dated January 22, 2014.)
10.1	Employment Agreement entered into as of September 24, 2012 by and among Thomas M. Vertin, on the one hand, and Pacific Mercantile Bancorp and Pacific Mercantile Bank, on the other hand*
10.2	First Amendment, dated May 20, 2015, to Employment Agreement entered into as of September 24, 2012 by and among Thomas M. Vertin, on the one hand, and Pacific Mercantile Bancorp and Pacific Mercantile Bank, on the other hand.*
31.1	Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2	Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1	Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2	Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
Exhibit 101.INS	XBRL Instance Document
Exhibit 101.SCH	XBRL Taxonomy Extension Schema Document
Exhibit 101.CAL	XBRL Taxonomy Extension Calculation Linkbase Document
Exhibit 101.DEF	XBRL Taxonomy Extension Definition Linkbase Document
Exhibit 101.LAB	XBRL Taxonomy Extension Labels Linkbase Document
Exhibit 101.PRE	XBRL Taxonomy Extension Presentation Linkbase Document

* Management contract or compensatory plan or arrangement required to be filed as an exhibit pursuant to applicable rules of the Securities and Exchange Commission.

56

EX-10.1

EX-10.2

EX-31.1

Exhibit 31.1

CERTIFICATIONS OF CHIEF EXECUTIVE OFFICER

UNDER

SECTION 302 OF THE SARBANES-OXLEY ACT

I, Steven K. Buster, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of Pacific Mercantile Bancorp for the quarter ended June 30, 2015.

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: August 7, 2015

/S/    STEVEN K. BUSTER

Steven K. Buster

President and Chief Executive Officer

EX-31.2

Exhibit 31.2

CERTIFICATIONS OF CHIEF FINANCIAL OFFICER

UNDER

SECTION 302 OF THE SARBANES-OXLEY ACT

I, Curt Christianssen, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of Pacific Mercantile Bancorp for the quarter ended June 30, 2015.

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a)  All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: August 7, 2015

/S/    CURT CHRISTIANSSEN

Curt Christianssen

Chief Financial Officer

EX-32.1

Exhibit 32.1

CERTIFICATIONS OF CHIEF EXECUTIVE OFFICER

UNDER

SECTION 906 OF THE SARBANES-OXLEY ACT

PACIFIC MERCANTILE BANCORP

Quarterly Report on Form 10-Q

for the quarter ended June 30, 2015

In connection with the accompanying Quarterly Report on Form 10-Q of Pacific Mercantile Bancorp (the “Company”) for the quarter ended June 30, 2015 (the “Quarterly Report”), and pursuant to 18 U.S.C. §1350, as adopted pursuant to §906 of the Sarbanes-Oxley Act of 2003, I, Steven K. Buster, certify that:

(1) The Quarterly Report fully complies with the requirements of Section 13(a) and 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Quarterly Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Dated: August 7, 2015

/S/    STEVEN K. BUSTER

Steven K. Buster

President and Chief Executive Officer

EX-32.2

Exhibit 32.2

CERTIFICATIONS OF CHIEF FINANCIAL OFFICER

UNDER

SECTION 906 OF THE SARBANES-OXLEY ACT

PACIFIC MERCANTILE BANCORP

Quarterly Report on Form 10-Q

for the quarter ended June 30, 2015

In connection with the accompanying Quarterly Report on Form 10-Q of Pacific Mercantile Bancorp (the “Company”) for the quarter ended June 30, 2015 (the “Quarterly Report”), and pursuant to 18 U.S.C. §1350, as adopted pursuant to §906 of the Sarbanes-Oxley Act of 2003, I, Curt Christianssen, certify that:

(1) The Quarterly Report fully complies with the requirements of Section 13(a) and 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Quarterly Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Dated: August 7, 2015

/S/    CURT CHRISTIANSSEN

Curt Christianssen

Chief Financial Officer

XML

Investments - Amortized Cost and Estimated Fair Value by Contractual Maturities (Details) - USD ($) $ in Thousands	Jun. 30, 2015	Dec. 31, 2014
Available for Sale, Amortized Cost
One year or less	$ 7,616	$ 7,483
Over one year through five years	28,071	29,008
Over five years through ten years	15,445	17,448
Over ten Years	6,850	8,337
Total	57,982	62,276
Available for Sale, Estimated Fair Value
One year or less	7,443	7,359
Over one year through five years	27,739	28,614
Over five years through ten years	15,064	17,148
Over ten Years	6,150	7,805
Total	$ 56,396	$ 60,926
Available for Sale, Weighted Average Yield
One year or less	1.56%	1.54%
Over one year through five years	1.63%	1.64%
Over five years through ten years	1.58%	1.60%
Over ten Years	1.90%	1.83%
Total	1.63%	1.64%

XML

Stock-Based Employee Compensation Plans - Additional Information (Detail) - USD ($) $ in Thousands	1 Months Ended		3 Months Ended		6 Months Ended
	May. 31, 2013	May. 31, 2010	Jun. 30, 2015	Jun. 30, 2014	Jun. 30, 2015	Jun. 30, 2014	Dec. 31, 2014	Dec. 31, 2013
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Options outstanding (shares)			1,009,101	1,479,959	1,009,101	1,479,959	1,257,390	1,821,000
Options exercised (shares)			22,252	27,200	226,564	92,200
Aggregate intrinsic value of options exercised			$ 21	$ 58	$ 343	$ 232
Fair value of options vested			96	144	170	214
Aggregate intrinsic values of options outstanding and exercisable			1,200		$ 1,200		$ 1,200
Nonvested awards, expected weighted average recognition period					1 year 11 months 8 days
Aggregate amounts of stock based compensation expense, net of taxes			$ 367	$ 260	$ 683	$ 537
Restricted Stock [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Number of shares vested prior to reporting date			60,848		60,848
Restricted Stock [Member] | Employees [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Options, restricted shares and SARs, vesting period					3 years
Restricted Stock [Member] | Directors [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Options, restricted shares and SARs, vesting period					1 year
Minimum [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Purchase price per share of common stock as percentage of fair market value of shares on respective grant dates of stock options					100.00%
Maximum [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Options, restricted shares and SARs, vesting period					5 years
Options and SARs, terms after date of grant					10 years
Equity Incentive Plan 2010 [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Number of shares authorized		400,000	1,811,711		1,811,711
Additional shares authorized	800,000
Maximum number of shares available for grant, percent of common stock outstanding					9.00%
Previously Approved Equity Incentive Plans [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Additional shares authorized		158,211
Options outstanding (shares)			514,348		514,348

XML

Loans and Allowance for Loan and Lease Losses - Loans on Nonaccrual Status by Portfolio Type (Detail) - USD ($) $ in Thousands	Jun. 30, 2015	Dec. 31, 2014
Financing Receivable Recorded Investment Nonaccrual Status [Line Items]
Nonaccrual loans	$ 21,784	$ 24,053
Commercial loans [Member]
Financing Receivable Recorded Investment Nonaccrual Status [Line Items]
Nonaccrual loans	14,238	16,182
Commercial real estate [Member] | Owner occupied [Member]
Financing Receivable Recorded Investment Nonaccrual Status [Line Items]
Nonaccrual loans	2,104	2,171
Commercial real estate [Member] | All other [Member]
Financing Receivable Recorded Investment Nonaccrual Status [Line Items]
Nonaccrual loans	2,117	2,117
Residential mortgage loans [Member] | Multi-family [Member]
Financing Receivable Recorded Investment Nonaccrual Status [Line Items]
Nonaccrual loans	453	0
Residential mortgage loans [Member] | Single family [Member]
Financing Receivable Recorded Investment Nonaccrual Status [Line Items]
Nonaccrual loans	1,187	1,472
Land development loans [Member]
Financing Receivable Recorded Investment Nonaccrual Status [Line Items]
Nonaccrual loans	$ 1,685	$ 2,111

XML

Regulatory Capital - Actual Amount and Capital Ratios of Company and Bank (Detail) - Jun. 30, 2015 - USD ($) $ in Thousands	Total
Company
Total Capital to Risk Weighted Assets
Total Capital to Risk Weighted Assets, Actual Capital Amount	$ 147,057
Total Capital to Risk Weighted Assets, Actual Capital Ratio	16.90%
Total Capital to Risk Weighted Assets, For Capital Adequacy Purposes, Amount	$ 69,785
Common Equity Tier 1 Capital to Risk Weighted Assets
Common Equity Tier 1 Capital to Risk Weighted Assets, Actual Capital Amount	$ 108,374
Common Equity Tier 1 Capital to Risk Weighted Asset, Actual Capital Ratio	12.40%
Common Equity Tier 1 Capital to Risk Weighted Assets, For Capital adequacy Purposes, Amount	$ 39,254
Tier 1 Capital to Risk Weighted Assets
Tier 1 Capital to Risk Weighted Assets, Actual Capital Amount	$ 136,109
Tier 1 Capital to Risk Weighted Asset, Actual Capital Ratio	15.60%
Tier 1 Capital to Risk Weighted Assets, For Capital adequacy Purposes, Amount	$ 52,339
Tier 1 Capital to Average Assets
Tier 1 Capital to Average Assets, Actual Capital Amount	$ 136,109
Tier 1 Capital to Average Asset, Actual Capital Ratio	13.10%
Tier 1 Capital to Average Assets, For Capital adequacy Purposes, Amount	$ 41,715
Bank
Total Capital to Risk Weighted Assets
Total Capital to Risk Weighted Assets, Actual Capital Amount	$ 127,577
Total Capital to Risk Weighted Assets, Actual Capital Ratio	14.70%
Total Capital to Risk Weighted Assets, For Capital Adequacy Purposes, Amount	$ 69,306
Total Capital to Risk Weighted Assets To be Categorized as Well Capitalized, Amount	86,633
Common Equity Tier 1 Capital to Risk Weighted Assets
Common Equity Tier 1 Capital to Risk Weighted Assets, Actual Capital Amount	$ 116,702
Common Equity Tier 1 Capital to Risk Weighted Asset, Actual Capital Ratio	13.50%
Common Equity Tier 1 Capital to Risk Weighted Assets, For Capital adequacy Purposes, Amount	$ 38,985
Common Equity Tier 1 Capital to Risk Weighted Assets, To be Categorized As Well Capitalized, Amount	56,311
Tier 1 Capital to Risk Weighted Assets
Tier 1 Capital to Risk Weighted Assets, Actual Capital Amount	$ 116,702
Tier 1 Capital to Risk Weighted Asset, Actual Capital Ratio	13.50%
Tier 1 Capital to Risk Weighted Assets, For Capital adequacy Purposes, Amount	$ 51,980
Tier 1 Capital to Risk Weighted Assets, To be Categorized As Well Capitalized, Amount	69,306
Tier 1 Capital to Average Assets
Tier 1 Capital to Average Assets, Actual Capital Amount	$ 116,702
Tier 1 Capital to Average Asset, Actual Capital Ratio	11.30%
Tier 1 Capital to Average Assets, For Capital adequacy Purposes, Amount	$ 41,512
Tier 1 Capital to Risk Weighted Assets, To be Categorized As Well Capitalized, Amount	$ 51,890
Minimum [Member] | Company
Total Capital to Risk Weighted Assets
Total Capital to Risk Weighted Assets, For Capital Adequacy Purposes, Ratio	8.00%
Common Equity Tier 1 Capital to Risk Weighted Assets
Common Equity Tier 1 Capital to Risk Weighted Assets, For Capital adequacy Purposes, Ratio	4.50%
Tier 1 Capital to Risk Weighted Assets
Tier 1 Capital to Risk Weighted Assets, For Capital adequacy Purposes, Ratio	6.00%
Tier 1 Capital to Average Assets
Tier 1 Capital to Average Assets, For Capital adequacy Purposes, Ratio	4.00%
Minimum [Member] | Bank
Total Capital to Risk Weighted Assets
Total Capital to Risk Weighted Assets, For Capital Adequacy Purposes, Ratio	8.00%
Total Capital to Risk Weighted Assets To be Categorized as Well Capitalized, Ratio	10.00%
Common Equity Tier 1 Capital to Risk Weighted Assets
Common Equity Tier 1 Capital to Risk Weighted Assets, For Capital adequacy Purposes, Ratio	4.50%
Common Equity Tier 1 Capital to Risk Weighted Assets, To be Categorized As Well Capitalized, Ratio	6.50%
Tier 1 Capital to Risk Weighted Assets
Tier 1 Capital to Risk Weighted Assets, For Capital adequacy Purposes, Ratio	6.00%
Tier 1 Capital to Risk Weighted Assets, To be Categorized As Well Capitalized, Ratio	8.00%
Tier 1 Capital to Average Assets
Tier 1 Capital to Average Assets, For Capital adequacy Purposes, Ratio	4.00%
Tier 1 Capital to Average Assets, To be Categorized As Well Capitalized, Ratio	5.00%

XML

Stock-Based Employee Compensation Plans - Weighted Average Assumptions (Detail) - $ / shares	3 Months Ended		6 Months Ended
	Jun. 30, 2015	Jun. 30, 2014	Jun. 30, 2015	Jun. 30, 2014
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Weighted average fair value of options granted during period (in dollars per share)			$ 3.13	$ 2.75
Options granted	0	0	112,828	41,892
Stock Options [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Expected volatility			44.00%	44.00%
Risk-free interest rate			1.82%	2.08%
Expected dividends			0.00%	0.61%
Expected term (years)			6 years	6 years 8 months
Weighted average fair value of options granted during period (in dollars per share)			$ 3.13	$ 2.75

XML

Loans and Allowance for Loan and Lease Losses - Loan Balances and Related ALLL (Detail) - USD ($) $ in Thousands	Jun. 30, 2015	Mar. 31, 2015	Dec. 31, 2014	Jun. 30, 2014	Mar. 31, 2014	Dec. 31, 2013
Financing Receivable, Allowance for Credit Losses [Line Items]
Allowance for loans individually evaluated for impairment	$ 405		$ 1,532
Allowance for loans collectively evaluated for impairment	11,938		12,301
Total allowance	12,343	$ 12,639	13,833	$ 12,580	$ 11,940	$ 11,358
Loans individually evaluated for impairment	31,646		35,137
Loans collectively evaluated for impairment	801,655		802,834
Total loans balance	833,301		837,971
Commercial loans [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Allowance for loans individually evaluated for impairment	405		995
Allowance for loans collectively evaluated for impairment	6,076		6,675
Total allowance	6,481	7,353	7,670	6,477	5,988	5,812
Loans individually evaluated for impairment	14,333		21,117
Loans collectively evaluated for impairment	308,908		280,629
Total loans balance	323,241		301,746
Real Estate [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Allowance for loans individually evaluated for impairment	0		537
Allowance for loans collectively evaluated for impairment	4,889		4,596
Total allowance	4,889	4,287	5,133	5,397	5,039	4,517
Loans individually evaluated for impairment	11,573		7,536
Loans collectively evaluated for impairment	412,814		446,931
Total loans balance	424,387		454,467
Land Development [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Allowance for loans individually evaluated for impairment	0		0
Allowance for loans collectively evaluated for impairment	44		296
Total allowance	44	120	296	85	154	165
Loans individually evaluated for impairment	1,685		2,111
Loans collectively evaluated for impairment	3,890		5,634
Total loans balance	5,575		7,745
Consumer and Single Family Mortgages [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Allowance for loans individually evaluated for impairment	0		0
Allowance for loans collectively evaluated for impairment	929		734
Total allowance	929	$ 879	734	$ 621	$ 759	$ 864
Loans individually evaluated for impairment	4,055		4,373
Loans collectively evaluated for impairment	76,043		69,640
Total loans balance	$ 80,098		$ 74,013

XML

Fair Value Measurements - Changes in Level 3 Assets Measured at Fair Value on Recurring Basis (Detail) - Asset Backed Securities [Member] $ in Thousands	6 Months Ended
	Jun. 30, 2015 USD ($)
Changes in Level 3 assets measured at fair value on a recurring basis
Balance of recurring Level 3 instruments at December 31, 2014	$ 1,650
Total gains or losses (realized/unrealized):
Included in other comprehensive income	(152)
Settlements	(33)
Transfers in and/or out of Level 3	0
Balance of Level 3 assets at June 30, 2015	$ 1,465

XML

Stock-Based Employee Compensation Plans - Additional Information Regarding Vested and Unvested Options Outstanding (Detail) - $ / shares	6 Months Ended
	Jun. 30, 2015	Dec. 31, 2014	Jun. 30, 2014	Dec. 31, 2013
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Options outstanding, vested (shares)	529,284		779,465
Options outstanding, unvested (shares)	479,817
Options outstanding, weighted average exercise price (in dollars per share)	$ 6.12	$ 6.51	$ 6.32	$ 6.88
Options outstanding, weighted average remaining contractual life (years)	7 years 2 months 22 days
Options exercisable (shares)	529,284		779,465
Options exercisable, weighted average exercise price (in dollars per share)	$ 5.80		$ 6.47
$2.97 - $5.99 [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Option outstanding, exercise price, lower limit (in dollars per share)	2.97
Option outstanding, exercise price, upper limit (in dollars per share)	$ 5.99
Options outstanding, vested (shares)	251,408
Options outstanding, unvested (shares)	7,792
Options outstanding, weighted average exercise price (in dollars per share)	$ 3.89
Options outstanding, weighted average remaining contractual life (years)	5 years 2 months 3 days
Options exercisable (shares)	251,408
Options exercisable, weighted average exercise price (in dollars per share)	$ 3.88
$6.00 - $9.99 [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Option outstanding, exercise price, lower limit (in dollars per share)	6.00
Option outstanding, exercise price, upper limit (in dollars per share)	$ 9.99
Options outstanding, vested (shares)	246,576
Options outstanding, unvested (shares)	472,025
Options outstanding, weighted average exercise price (in dollars per share)	$ 6.47
Options outstanding, weighted average remaining contractual life (years)	8 years 2 months 30 days
Options exercisable (shares)	246,576
Options exercisable, weighted average exercise price (in dollars per share)	$ 6.41
$13.00 - $17.99 [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Option outstanding, exercise price, lower limit (in dollars per share)	13.00
Option outstanding, exercise price, upper limit (in dollars per share)	$ 17.99
Options outstanding, vested (shares)	19,800
Options outstanding, unvested (shares)	0
Options outstanding, weighted average exercise price (in dollars per share)	$ 15.44
Options outstanding, weighted average remaining contractual life (years)	1 year 13 days
Options exercisable (shares)	19,800
Options exercisable, weighted average exercise price (in dollars per share)	$ 15.44
$18.00 - $18.84 [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Option outstanding, exercise price, lower limit (in dollars per share)	18.00
Option outstanding, exercise price, upper limit (in dollars per share)	$ 18.84
Options outstanding, vested (shares)	11,500
Options outstanding, unvested (shares)	0
Options outstanding, weighted average exercise price (in dollars per share)	$ 18.11
Options outstanding, weighted average remaining contractual life (years)	6 months 27 days
Options exercisable (shares)	11,500
Options exercisable, weighted average exercise price (in dollars per share)	$ 18.11

XML

Earnings Per Share ("EPS") (Tables)

6 Months Ended

Jun. 30, 2015

Earnings Per Share [Abstract]

Computation of Basic and Diluted Earnings Per Share

The following table shows how we computed basic and diluted EPS for the three and six months ended June 30, 2015 and 2014.

(In thousands, except per share data)	For the Three Months Ended June 30,						For the Six Months Ended June 30,
	2015			2014			2015			2014
Numerator:
Net income (loss) from continuing operations	$	138		$	(768	)	$	54		$	(1,501	)
Accumulated undeclared dividends on preferred stock	(309		)	(308		)	(618		)	(604		)
Numerator for basic and diluted net loss from continuing operations	(171		)	(1,076		)	(564		)	(2,105		)
Net income from discontinued operations	—			772			—			1,956
Numerator for basic and diluted net (loss) income available to common shareholders	$	(171	)	$	(304	)	$	(564	)	$	(149	)
Denominator:
Basic weighted average outstanding shares of common stock	19,774			19,255			19,696			19,200
Dilutive effect of employee stock options and contingently issuable shares	—			—			—			—
Diluted weighted average common stock and common stock equivalents	19,774			19,255			19,696			19,200
Basic (loss) income per common share:
Net loss from continuing operations	$	(0.01	)	$	(0.06	)	$	(0.03	)	$	(0.11	)
Net income from discontinued operations	$	—		$	0.04		$	—		$	0.10
Net (loss) income available to common shareholders	$	(0.01	)	$	(0.02	)	$	(0.03	)	$	(0.01	)
Diluted (loss) income per common share:
Net loss from continuing operations	$	(0.01	)	$	(0.06	)	$	(0.03	)	$	(0.11	)
Net income from discontinued operations	$	—		$	0.04		$	—		$	0.10
Net (loss) income available to common shareholders	$	(0.01	)	$	(0.02	)	$	(0.03	)	$	(0.01	)

Antidilutive Securities Excluded from Earnings Per Share

The weighted average shares that have an antidilutive effect in the calculation of diluted net loss per share and have been excluded from the computations above were as follows:

	For the Three Months Ended June 30,		For the Six Months Ended June 30,
	2015	2014	2015	2014
Stock options(1)	1,023,375	1,519,378	1,079,309	1,591,697
Convertible securities(2)	2,767,385	2,549,247	2,750,794	2,535,700
Shares subject to stock purchase warrants(3)	761,278	761,278	761,278	761,278

(1) Stock options were excluded from the computation of diluted earnings per common share for the three and six months ended June 30, 2015 and 2014 as we reported a net loss from continuing operations.

(2) Convertible securities were excluded from the computation of diluted earnings per common share for the three and six months ended June 30, 2015 and 2014 as we reported a net loss from continuing operations.

(3) Stock purchase warrants were excluded from the computation of diluted earnings per common share for the three and six months ended June 30, 2015 and 2014 because the exercisability of those warrants is conditioned on the happening of certain future events.

XML

Loans and Allowance for Loan and Lease Losses - Nonaccrual Loans and Restructured Loans (Detail) - USD ($) $ in Thousands	Jun. 30, 2015	Dec. 31, 2014
Impaired loans:
Nonaccruing loans	$ 6,683	$ 18,118
Nonaccruing restructured loans	15,101	5,935
Accruing restructured loans	9,862	11,084
Accruing impaired loans	0	0
Total impaired loans	31,646	35,137
Impaired loans less than 90 days delinquent [Member]
Impaired loans:
Total impaired loans	$ 17,066	$ 32,371

XML

Investments - Other Investments (Details) $ in Thousands	6 Months Ended
	Jun. 30, 2015 USD ($)	Jun. 30, 2014 USD ($)	Dec. 31, 2014 USD ($) Investment
Investments [Abstract]
Number of investments accounted for under the equity method | Investment			1
Investment in limited partnership, percent of investment redeemed	100.00%
Return of capital	$ 2,087	$ 0
Investments accounted for under the equity method	$ 0		$ 2,081

XML

Investments - Additional Information (Details)	1 Months Ended	6 Months Ended
	Nov. 30, 2007 USD ($) issuer institution company	Jun. 30, 2015 USD ($) Investment	Jun. 30, 2014 USD ($)	Dec. 31, 2014 USD ($)
Schedule of Available-for-sale Securities [Line Items]
Aggregate fair market value of securities pledged as collateral		$ 3,800,000		$ 3,600,000
Impairment credit losses on available-for-sale securities		0	$ 0
Portion of other-than-temporary impairment losses recognized in other comprehensive loss		585,000		433,000
Amortized Cost		57,982,000		62,276,000
Estimated Fair Value		56,396,000		60,926,000
Gross Unrealized Loss		$ 1,636,000		1,421,000
Asset-backed security [Member]
Schedule of Available-for-sale Securities [Line Items]
Number of securities | Investment		1
Trust preferred securities, number of issuers | issuer	56
Trust preferred securities, number of U.S. depository institutions | institution	45
Trust preferred securities, number of insurance companies | company	11
Available for sale security purchased, face value	$ 3,000,000.0
Available for sale security purchased, price as percentage of face amount	95.21%
Available for sale security purchased, price paid	$ 2,900,000
Trust preferred securities issued, value	$ 363,000,000
Basis points over 3 months LIBOR	0.60%
Amortized Cost		$ 2,050,000		2,083,000
Estimated Fair Value		1,465,000		1,650,000
Gross Unrealized Loss		585,000		$ 433,000
Available-for-sale securities, default experienced		$ 42,500,000
Percentage of default to total current collateral		12.50%
Security payment deferrals		$ 12,000,000
Percentage of payment deferrals to total current collateral		3.50%
Excess subordination		$ 52,500,000

XML

Loans and Allowance for Loan and Lease Losses - Troubled Debt Restructurings (Detail) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2015 USD ($) Loan	Jun. 30, 2014 USD ($) Loan	Jun. 30, 2015 USD ($) Loan	Jun. 30, 2014 USD ($) Loan
Financing Receivable, Modifications [Line Items]
Number of loans | Loan	4	1	4	1
Pre-Modification Outstanding Recorded Investment	$ 7,243	$ 300	$ 7,243	$ 300
Post Modification Outstanding Recorded Investment	$ 7,243	$ 193	$ 7,243	$ 193
Performing [Member]
Financing Receivable, Modifications [Line Items]
Number of loans | Loan	3	0	3	0
Pre-Modification Outstanding Recorded Investment	$ 6,993	$ 0	$ 6,993	$ 0
Post Modification Outstanding Recorded Investment	$ 6,993	$ 0	$ 6,993	$ 0
Performing [Member] | Commercial loans [Member]
Financing Receivable, Modifications [Line Items]
Number of loans | Loan	1	0	1	0
Pre-Modification Outstanding Recorded Investment	$ 94	$ 0	$ 94	$ 0
Post Modification Outstanding Recorded Investment	$ 94	$ 0	$ 94	$ 0
Performing [Member] | Owner occupied [Member] | Commercial real estate [Member]
Financing Receivable, Modifications [Line Items]
Number of loans | Loan	1	0	1	0
Pre-Modification Outstanding Recorded Investment	$ 2,741	$ 0	$ 2,741	$ 0
Post Modification Outstanding Recorded Investment	$ 2,741	$ 0	$ 2,741	$ 0
Performing [Member] | All other [Member] | Commercial real estate [Member]
Financing Receivable, Modifications [Line Items]
Number of loans | Loan	1	0	1	0
Pre-Modification Outstanding Recorded Investment	$ 4,158	$ 0	$ 4,158	$ 0
Post Modification Outstanding Recorded Investment	$ 4,158	$ 0	$ 4,158	$ 0
Nonperforming [Member]
Financing Receivable, Modifications [Line Items]
Number of loans | Loan	1	1	1	1
Pre-Modification Outstanding Recorded Investment	$ 250	$ 300	$ 250	$ 300
Post Modification Outstanding Recorded Investment	$ 250	$ 193	$ 250	$ 193
Nonperforming [Member] | Commercial loans [Member]
Financing Receivable, Modifications [Line Items]
Number of loans | Loan	1	1	1	1
Pre-Modification Outstanding Recorded Investment	$ 250	$ 300	$ 250	$ 300
Post Modification Outstanding Recorded Investment	$ 250	$ 193	$ 250	$ 193

XML

Commitments and Contingencies - Repurchase Reserves (Details) - USD ($) $ in Thousands	6 Months Ended	12 Months Ended
	Jun. 30, 2015	Dec. 31, 2014
Repurchase Reserve [Roll Forward]
Beginning balance	$ 381	$ 1,883
(Recovery of)/Provision for repurchases	31	(1,502)
Settlements	(66)	0
Total repurchases reserve	$ 346	$ 381

XML

Stock-Based Employee Compensation Plans - Compensation Expense Expected to be Recognized (Detail) $ in Thousands	Jun. 30, 2015 USD ($)
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Estimated Stock Based Compensation Expense for remainder of year 2015	$ 609
Estimated Stock Based Compensation Expense for year 2016	781
Estimated Stock Based Compensation Expense for year 2017	296
Estimated Stock Based Compensation Expense for year 2018	57
Estimated Stock Based Compensation Expense for year 2019 and Beyond	6
Estimated Stock Based Compensation Expense	1,749
Stock Options [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Estimated Stock Based Compensation Expense for remainder of year 2015	263
Estimated Stock Based Compensation Expense for year 2016	303
Estimated Stock Based Compensation Expense for year 2017	109
Estimated Stock Based Compensation Expense for year 2018	34
Estimated Stock Based Compensation Expense for year 2019 and Beyond	6
Estimated Stock Based Compensation Expense	714
Restricted Stock [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Estimated Stock Based Compensation Expense for remainder of year 2015	347
Estimated Stock Based Compensation Expense for year 2016	478
Estimated Stock Based Compensation Expense for year 2017	187
Estimated Stock Based Compensation Expense for year 2018	23
Estimated Stock Based Compensation Expense for year 2019 and Beyond	0
Estimated Stock Based Compensation Expense	$ 1,035

XML

Loans and Allowance for Loan and Lease Losses - Summary of Delinquency Status of Loans by Portfolio Type (Detail)	Jun. 30, 2015 USD ($) Loan	Dec. 31, 2014 USD ($)
Financing Receivable, Recorded Investment, Past Due [Line Items]
30-59 Days Past Due	$ 1,428,000	$ 1,425,000
60-89 Days Past Due	3,946,000	0
90 Days and Greater	14,580,000	2,766,000
Total Past Due	19,954,000	4,191,000
Current	813,347,000	833,780,000
Total loans balance	833,301,000	837,971,000
Loans greater than 90 Days and Accruing	$ 0	0
Mortgage loans in process of foreclosure | Loan	2
Mortgage loans in process of foreclosure	$ 763,000
Commercial loans [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
30-59 Days Past Due	296,000	553,000
60-89 Days Past Due	231,000	0
90 Days and Greater	12,132,000	0
Total Past Due	12,659,000	553,000
Current	310,582,000	301,193,000
Total loans balance	323,241,000	301,746,000
Loans greater than 90 Days and Accruing	0	0
Consumer loans [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
30-59 Days Past Due	0	17,000
60-89 Days Past Due	0	0
90 Days and Greater	0	0
Total Past Due	0	17,000
Current	19,907,000	9,670,000
Total loans balance	19,907,000	9,687,000
Loans greater than 90 Days and Accruing	0	0
Commercial real estate [Member] | Owner occupied [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
30-59 Days Past Due	0	0
60-89 Days Past Due	798,000	0
90 Days and Greater	0	0
Total Past Due	798,000	0
Current	202,647,000	212,515,000
Total loans balance	203,445,000	212,515,000
Loans greater than 90 Days and Accruing	0	0
Commercial real estate [Member] | All other [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
30-59 Days Past Due	1,132,000	20,000
60-89 Days Past Due	2,917,000	0
90 Days and Greater	0	2,117,000
Total Past Due	4,049,000	2,137,000
Current	131,917,000	144,539,000
Total loans balance	135,966,000	146,676,000
Loans greater than 90 Days and Accruing	0	0
Residential mortgage loans [Member] | Multi-family [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
30-59 Days Past Due	0	0
60-89 Days Past Due	0	0
90 Days and Greater	0	0
Total Past Due	0	0
Current	84,976,000	95,276,000
Total loans balance	84,976,000	95,276,000
Loans greater than 90 Days and Accruing	0	0
Residential mortgage loans [Member] | Single family [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
30-59 Days Past Due	0	835,000
60-89 Days Past Due	0	0
90 Days and Greater	763,000	285,000
Total Past Due	763,000	1,120,000
Current	59,428,000	63,206,000
Total loans balance	60,191,000	64,326,000
Loans greater than 90 Days and Accruing	0	0
Land development loans [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
30-59 Days Past Due	0	0
60-89 Days Past Due	0	0
90 Days and Greater	1,685,000	364,000
Total Past Due	1,685,000	364,000
Current	3,890,000	7,381,000
Total loans balance	5,575,000	7,745,000
Loans greater than 90 Days and Accruing	$ 0	$ 0

XML

Significant Accounting Policies

6 Months Ended

Jun. 30, 2015

Accounting Policies [Abstract]

Significant Accounting Policies

Significant Accounting Policies

Except as discussed below, our accounting policies are described in Note 2, Significant Accounting Policies of our audited consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2014 (“Form 10-K”).

Interim Consolidated Financial Statements Basis of Presentation

Our interim consolidated financial statements are prepared in accordance with generally accepted accounting principles in effect in the United States (“GAAP”) for interim financial information pursuant to rules and regulations of the U.S. Securities and Exchange Commission (the “SEC”), including instructions to Form 10-Q and Article 10 of Regulation S-X, on a basis consistent with prior periods. Our financial statements reflect all adjustments that are, in the opinion of management, necessary to present a fair statement of the results for the interim periods presented. The interim results are not necessarily indicative of operating results for the full year. The interim information should be read in conjunction with our audited consolidated financial statements in our Form 10-K.

Use of Estimates

The preparation of the financial statements in conformity with GAAP requires us to make certain estimates and assumptions that could affect the reported amounts of certain of our assets, liabilities, and contingencies at the date of the financial statements and the reported amounts of our revenues and expenses during the reporting periods. For the fiscal periods covered by this report, those estimates related primarily to our determinations of the allowance for loan and lease losses (“ALLL”), other real estate owned (“OREO”), the fair values of securities available for sale, repurchase reserves, and the determination of the valuation allowance pertaining to deferred tax assets. If circumstances or financial trends on which those estimates were based were to change in the future or there were to occur any currently unanticipated events affecting the amounts of those estimates, our future financial position or results of operations could differ, possibly materially, from those expected at the current time.

Principles of Consolidation

Our consolidated financial statements for the three and six months ended June 30, 2015 and 2014 include the accounts of PMBC, the Bank and PMAR. All significant intercompany balances and transactions were eliminated in consolidation.

Recent Accounting Pronouncements

In February 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standard Update (“ASU”) 2014-04, “Receivables — Troubled Debt Restructurings by Creditors (Subtopic 310-40) — Reclassification of Residential Real Estate Collateralized Consumer Mortgage Loans upon Foreclosure,” which amended its guidance to clarify when a creditor should be considered to have received physical possession of residential real estate property collateralizing a consumer mortgage loan such that the loan should be derecognized and the real estate recognized. This guidance is effective for interim and annual periods beginning after December 15, 2014. Early adoption is permitted. We adopted this guidance on January 1, 2015 and it did not have a material effect on our consolidated financial statements.

In April 2014, the FASB issued ASU 2014-08, “Presentation of Financial Statements (Topic 205) and Property, Plant, and Equipment (Topic 360): Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity,” which amended its guidance on classification and reporting of discontinued operations. The amendments clarify when an entity should classify a component as discontinued operations, how to report the balances related to discontinued operations for prior periods, and additional disclosure requirements for discontinued operations. This guidance is effective for interim and annual periods beginning after December 15, 2014. Early adoption is permitted only for disposals which have not been previously reported. We adopted this guidance on January 1, 2015 and it did not have a material effect on our consolidated financial statements.

In May 2014, the FASB issued ASU 2014-09, “Revenue from Contracts with Customers (Topic 606),” which amended its guidance on revenue recognition to conform with international accounting guidance under the International Accounting Standards Board. The ASU provides a framework for addressing revenue recognition and replaces most existing revenue recognition guidance, as well as requires increased disclosure requirements. In July 2015, the FASB voted to defer the effective date of ASU 2014-09. Accordingly, this guidance is effective for interim and annual periods beginning after December 15, 2017 with early adoption permitted for interim and annual periods beginning after December 15, 2016. We will adopt this guidance on January 1, 2018. We are currently evaluating the expected impact on our consolidated financial statements.

In June 2014, the FASB issued ASU 2014-11, “Accounting for Share-Based Payments When the Terms of an Award Provide That a Performance Target Could Be Achieved after the Requisite Service Period,” which amended its guidance on how to account for certain performance related share-based compensation plans. The amendments clarify the guidance on how to account for performance based awards when the requisite service period is met prior to potential performance targets being achieved. This guidance is effective for interim and annual periods beginning after December 15, 2015. Early adoption is permitted. We will adopt this guidance on January 1, 2016 and do not expect it to have a material effect on our consolidated financial statements.

In August 2014, the FASB issued ASU 2014-15, “Presentation of Financial Statements — Going Concern (Subtopic 205-40): Disclosure of Uncertainties about an Entity's Ability to Continue as a Going Concern,” which defines management's responsibility to evaluate whether there is substantial doubt about an organization's ability to continue as a going concern and clarifies when to provide related footnote disclosure. This guidance is effective for interim and annual periods beginning after December 15, 2016. Early adoption is permitted. We will adopt this guidance on January 1, 2017 and do not expect it to have a material effect on our consolidated financial statements.

In January 2015, the FASB issued ASU 2015-01, “Income Statement - Extraordinary and Unusual Items (Subtopic 225-20): Simplifying Income Statement Presentation by Eliminating the Concept of Extraordinary Items,” which eliminated the concept of extraordinary items from GAAP. This guidance is effective for interim and annual periods beginning after December 15, 2015. Early adoption is permitted. We adopted this guidance on January 1, 2015 and it did not have an impact on our consolidated financial statements.

In February 2015, the FASB issued ASU 2015-02, “Consolidation (Topic 810): Amendments to the Consolidation Analysis,” amends the guidance for assessing how relationships of related parties affect the consolidation analysis, eliminates the presumption that a general partner should consolidate a limited partnership, eliminates the consolidation model specific to limited partnerships, clarifies when fees paid to a decision maker should be a factor in consolidation of a variable interest entity, and reduces the number of variable interest entity consolidation models. This guidance is effective for interim and annual periods beginning after December 15, 2015. Early adoption is permitted. We will adopt this guidance on January 1, 2016 and do not expect it to have an impact on our financial statements.

In April 2015, the FASB issued ASU 2015-03, “Interest - Imputation of Interest (Subtopic 835-30): Simplifying the Presentation of Debt Issuance Costs,” which requires that the debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability. This simplifies the presentation of debt issuance costs and makes the presentation consistent with the presentation of debt discounts. This guidance is effective for interim and annual periods beginning after December 15, 2015. Early adoption is permitted. We will adopt this guidance on January 1, 2016 and do not expect it to have a material impact on our financial statements.

XML

Earnings Per Share ("EPS") - Computation of Basic and Diluted Earnings Per Share (Details) - USD ($) $ / shares in Units, $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2015	Jun. 30, 2014	Jun. 30, 2015	Jun. 30, 2014
Numerator:
Net income (loss) from continuing operations	$ 138	$ (768)	$ 54	$ (1,501)
Numerator for basic and diluted net loss from continuing operations	(171)	(1,076)	(564)	(2,105)
Net income from discontinued operations	0	772	0	1,956
Numerator for basic and diluted net (loss) income available to common shareholders	$ (171)	$ (304)	$ (564)	$ (149)
Denominator:
Basic weighted average outstanding shares of common stock	19,773,799	19,254,985	19,695,679	19,200,492
Dilutive effect of employee stock options and contingently issuable shares	0	0	0	0
Diluted weighted average common stock and common stock equivalents	19,773,799	19,254,985	19,695,679	19,200,492
Basic (loss) income per common share:
Net loss from continuing operations (in dollars per share)	$ (0.01)	$ (0.06)	$ (0.03)	$ (0.11)
Net (loss) income from discontinued operations (in dollars per share)	0.00	0.04	0.00	0.10
Net loss available to common shareholders (in dollars per share)	(0.01)	(0.02)	(0.03)	(0.01)
Diluted (loss) income per common share:
Net loss from continuing operations (in dollars per share)	(0.01)	(0.06)	(0.03)	(0.11)
Net (loss) income from discontinued operations (in dollars per share)	0.00	0.04	0.00	0.10
Net (loss) income available to common shareholders (in dollars per share)	$ (0.01)	$ (0.02)	$ (0.03)	$ (0.01)
Dividend Undeclared [Member]
Numerator:
Accumulated dividends on preferred stock	$ (309)	$ (308)	$ (618)	$ (604)

XML

Loans and Allowance for Loan and Lease Losses - Additional Information (Detail)	3 Months Ended		6 Months Ended
	Jun. 30, 2015 USD ($) Loan	Jun. 30, 2014 USD ($) Loan	Jun. 30, 2015 USD ($) Loan	Jun. 30, 2014 USD ($) Loan	Dec. 31, 2014 USD ($)
Accounts, Notes, Loans and Financing Receivable [Line Items]
Real estate loans pledged to secured borrowings obtained from Federal Home Loan Bank	$ 517,000,000		$ 517,000,000		$ 425,000,000
Loans greater than 90 Days and Accruing	0		0		0
Impaired loans with no specific reserves	31,000,000		31,000,000		32,600,000
Interest that would have been earned had impaired loans remained current in accordance with original terms	304,000	$ 142,000	508,000	$ 206,000
Troubled debt restructurings, totals	25,000,000		25,000,000		$ 17,000,000
Specific reserves on TDR's	$ 0		$ 0
TDRs that were modified within the preceding 12-month period which subsequently defaulted, number of loans | Loan	0	0	0	0
Deemed Impairment [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Impaired loans with no specific reserves	$ 23,700,000		$ 23,700,000
Nonperforming [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Troubled debt restructurings, totals	15,100,000		15,100,000
Performing [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Troubled debt restructurings, totals	$ 9,900,000		$ 9,900,000

XML

Regulatory Capital (Tables)

6 Months Ended

Jun. 30, 2015

Regulatory Capital Requirements [Abstract]

Actual Amount and Capital Ratios of Company and Bank

The following table sets forth the capital and capital ratios of the Company (on a consolidated basis) and the Bank (on a stand-alone basis) at June 30, 2015, as compared to the respective regulatory requirements applicable to them.

					Applicable Federal Regulatory Requirement
					For Capital Adequacy Purposes			To be Categorized As Well Capital
	Amount		Ratio		Amount		Ratio	Amount		Ratio
	(Dollars in thousands)
Total Capital to Risk Weighted Assets:
Company	$	147,057	16.9	%	$	69,785	At least 8.0	N/A		N/A
Bank	127,577		14.7	%	69,306		At least 8.0	$	86,633	At least 10.0
Common Equity Tier 1 Capital to Risk Weighted Assets:
Company	$	108,374	12.4	%	$	39,254	At least 4.5	N/A		N/A
Bank	116,702		13.5	%	38,985		At least 4.5	$	56,311	At least 6.5
Tier 1 Capital to Risk Weighted Assets:
Company	$	136,109	15.6	%	$	52,339	At least 6.0	N/A		N/A
Bank	116,702		13.5	%	51,980		At least 6.0	$	69,306	At least 8.0
Tier 1 Capital to Average Assets:
Company	$	136,109	13.1	%	$	41,715	At least 4.0	N/A		N/A
Bank	116,702		11.3	%	41,512		At least 4.0	$	51,890	At least 5.0

XML

Business Segment Information (Tables)

6 Months Ended

Jun. 30, 2015

Segment Reporting [Abstract]

Net Interest Income and Noninterest Income

The following table sets forth information regarding the net interest income and noninterest income for our commercial banking and discontinued operations segments, respectively, for the three and six months ended June 30, 2015 and 2014.

(Dollars in thousands)	Commercial		Other			Total from continuing operations		Discontinued Operations			Total including discontinued operations
Net interest income for the three months ended June 30,
2015	$	8,562	$	(73	)	$	8,489	$	—		$	8,489
2014	$	7,698	$	(72	)	$	7,626	$	3		$	7,629
Noninterest income for the three months ended June 30,
2015	$	613	$	3		$	616	$	—		$	616
2014	$	984	$	—		$	984	$	(254	)	$	730
Net interest income for the six months ended June 30,
2015	$	16,805	$	(167	)	$	16,638	$	—		$	16,638
2014	$	15,539	$	(69	)	$	15,470	$	77		$	15,547
Noninterest income for the six months ended June 30,
2015	$	1,492	$	6		$	1,498	$	—		$	1,498
2014	$	2,162	$	—		$	2,162	$	1,435		$	3,597
Segment Assets at:
June 30, 2015	$	1,041,558	$	5,303		$	1,046,861	$	—		$	1,046,861
December 31, 2014	$	1,094,120	$	5,490		$	1,099,610	$	—		$	1,099,610

XML

Stock-Based Employee Compensation Plans - Stock Option Activity under Plans (Detail) - $ / shares	3 Months Ended		6 Months Ended
	Jun. 30, 2015	Jun. 30, 2014	Jun. 30, 2015	Jun. 30, 2014
Number of Shares
Outstanding, beginning of period (shares)			1,257,390	1,821,000
Granted (shares)			112,828	41,892
Exercised (shares)	(22,252)	(27,200)	(226,564)	(92,200)
Forfeited/Canceled (shares)			(134,553)	(290,733)
Outstanding, end of period (shares)	1,009,101	1,479,959	1,009,101	1,479,959
Option Exercisable, end of period (shares)	529,284	779,465	529,284	779,465
Options Vested, end of period (shares)	529,284	779,465	529,284	779,465
Weighted Average Exercise Price Per Share
Weighted Average Exercise Price, beginning of period (in dollars per share)			$ 6.51	$ 6.88
Granted (in dollars per share)			7.09	6.18
Exercised (in dollars per share)			5.54	3.74
Forfeited/Canceled (in dollars per share)			11.56	10.63
Weighted Average Exercise Price, end of period (in dollars per share)	$ 6.12	$ 6.32	6.12	6.32
Options Exercisable, end of period (in dollars per share)	5.80	6.47	5.80	6.47
Options Vested, end of period (in dollars per share)	$ 5.80	$ 6.47	$ 5.80	$ 6.47

XML

Loans and Allowance for Loan and Lease Losses - Components of Loan Portfolio (Detail) - USD ($) $ in Thousands	Jun. 30, 2015	Mar. 31, 2015	Dec. 31, 2014	Jun. 30, 2014	Mar. 31, 2014	Dec. 31, 2013
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total loans	$ 833,301		$ 837,971
Deferred loan origination costs, net	315		59
Allowance for loan and lease losses	(12,343)	$ (12,639)	(13,833)	$ (12,580)	$ (11,940)	$ (11,358)
Loans, net	$ 821,273		$ 824,197
Percentage of loan portfolio	100.00%		100.00%
Commercial loans [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total loans	$ 323,241		$ 301,746
Allowance for loan and lease losses	$ (6,481)	$ (7,353)	$ (7,670)	$ (6,477)	$ (5,988)	$ (5,812)
Percentage of loan portfolio	38.80%		36.00%
Consumer loans [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total loans	$ 19,907		$ 9,687
Percentage of loan portfolio	2.40%		1.20%
Commercial real estate [Member] | Owner occupied [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total loans	$ 203,445		$ 212,515
Percentage of loan portfolio	24.40%		25.40%
Commercial real estate [Member] | All other [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total loans	$ 135,966		$ 146,676
Percentage of loan portfolio	16.30%		17.50%
Residential mortgage loans [Member] | Multi-family [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total loans	$ 84,976		$ 95,276
Percentage of loan portfolio	10.20%		11.40%
Residential mortgage loans [Member] | Single family [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total loans	$ 60,191		$ 64,326
Percentage of loan portfolio	7.20%		7.70%
Land development loans [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total loans	$ 5,575		$ 7,745
Percentage of loan portfolio	0.70%		0.90%

XML

Nature of Business (Details)	6 Months Ended
	Jun. 30, 2015
Organization, Consolidation and Presentation of Financial Statements [Abstract]
Reselling period of originated mortgage loans	30 days

XML

Fair Value Measurements Fair Value Measurements - Additional Disclosures (Details) - Jun. 30, 2015 - USD ($) $ in Thousands	Total	Total
Fair Value Disclosures [Abstract]
Purchase of additional FHLB stock	$ 33	$ 33

XML

Nature of Business

6 Months Ended

Jun. 30, 2015

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Nature of Business

Nature of Business

Organization

Pacific Mercantile Bancorp (“PMBC”) is a bank holding company which, through its wholly owned subsidiary, Pacific Mercantile Bank (the “Bank”), is engaged in the commercial banking business in Southern California. PMBC is registered as a one bank holding company under the United States Bank Holding Company Act of 1956, as amended, and, as such, is regulated by the Board of Governors of the Federal Reserve System (the “Federal Reserve Board”) and the Federal Reserve Bank of San Francisco (“FRBSF”) under delegated authority from the Federal Reserve Board. Substantially all of our operations are conducted and substantially all of our assets are owned by the Bank, which accounts for substantially all of our consolidated revenues, expenses, and income. The Bank provides a full range of banking services to small and medium-size businesses, professionals and the general public in Orange, Los Angeles, San Bernardino and San Diego counties in Southern California and is subject to competition from other banks and financial institutions and from financial services organizations conducting operations in those same markets. The Bank is chartered by the California Department of Business Oversight under the Division of Financial Institutions and is a member of the FRBSF. In addition, the deposit accounts of the Bank’s customers are insured by the Federal Deposit Insurance Corporation up to the maximum amount allowed by law. PM Asset Resolution, Inc. ("PMAR") is a wholly owned subsidiary of PMBC which exists for the purpose of purchasing certain non-performing loans and other real estate from the Bank and thereafter collecting on or disposing of those assets.

During the fourth quarter of 2013, the Bank announced the closure of our mortgage banking business, which was completed during the third quarter of 2014. The Bank operated a direct-to-consumer retail mortgage banking business, originating and funding residential mortgage loans and selling those loans, generally within the succeeding 30 days. Our mortgage banking operations are classified as discontinued operations within the consolidated financial statements and footnotes for all presented periods.

PMBC, the Bank and PMAR are sometimes referred to, together, on a consolidated basis, in this report as the “Company” or as “we”, “us” or “our”.

XML

Fair Value Measurements - Assets Measured at Fair Value on Recurring Basis (Detail) - USD ($) $ in Thousands	Jun. 30, 2015	Dec. 31, 2014
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Securities available for sale, at fair value	$ 56,396	$ 60,926
Recurring [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Securities available for sale, at fair value	56,396	60,926
Recurring [Member] | Level 1 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Securities available for sale, at fair value	4,742	4,760
Recurring [Member] | Level 2 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Securities available for sale, at fair value	50,189	54,516
Recurring [Member] | Level 3 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Securities available for sale, at fair value	1,465	1,650
Mortgage backed securities issued by U.S. Agencies [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Securities available for sale, at fair value	49,474	53,739
Mortgage backed securities issued by U.S. Agencies [Member] | Recurring [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Securities available for sale, at fair value	49,474	53,739
Mortgage backed securities issued by U.S. Agencies [Member] | Recurring [Member] | Level 1 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Securities available for sale, at fair value	0	0
Mortgage backed securities issued by U.S. Agencies [Member] | Recurring [Member] | Level 2 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Securities available for sale, at fair value	49,474	53,739
Mortgage backed securities issued by U.S. Agencies [Member] | Recurring [Member] | Level 3 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Securities available for sale, at fair value	0	0
Collateralized mortgage obligations issued by non-agency [Member] | Recurring [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Securities available for sale, at fair value	715	777
Collateralized mortgage obligations issued by non-agency [Member] | Recurring [Member] | Level 1 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Securities available for sale, at fair value	0	0
Collateralized mortgage obligations issued by non-agency [Member] | Recurring [Member] | Level 2 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Securities available for sale, at fair value	715	777
Collateralized mortgage obligations issued by non-agency [Member] | Recurring [Member] | Level 3 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Securities available for sale, at fair value	0	0
Asset-backed security [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Securities available for sale, at fair value	1,465	1,650
Asset-backed security [Member] | Recurring [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Securities available for sale, at fair value	1,465	1,650
Asset-backed security [Member] | Recurring [Member] | Level 1 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Securities available for sale, at fair value	0	0
Asset-backed security [Member] | Recurring [Member] | Level 2 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Securities available for sale, at fair value	0	0
Asset-backed security [Member] | Recurring [Member] | Level 3 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Securities available for sale, at fair value	1,465	1,650
Mutual funds [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Securities available for sale, at fair value	4,742	4,760
Mutual funds [Member] | Recurring [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Securities available for sale, at fair value	4,742	4,760
Mutual funds [Member] | Recurring [Member] | Level 1 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Securities available for sale, at fair value	4,742	4,760
Mutual funds [Member] | Recurring [Member] | Level 2 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Securities available for sale, at fair value	0	0
Mutual funds [Member] | Recurring [Member] | Level 3 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Securities available for sale, at fair value	$ 0	$ 0

XML

Investments - Securities in Continuous Unrealized Loss Position (Details) - USD ($) $ in Thousands	Jun. 30, 2015	Dec. 31, 2014
Schedule of Available-for-sale Securities [Line Items]
Less than 12 months, Fair Value	$ 24,959	$ 2,464
Less than 12 months, Unrealized Loss	(188)	(35)
12 months or more, Fair Value	28,035	53,124
12 months or more, Unrealized Loss	(1,448)	(1,386)
Total, Fair Value	52,994	55,588
Total, Unrealized Loss	(1,636)	(1,421)
Residential mortgage backed securities issued by U.S.Agencies [Member]
Schedule of Available-for-sale Securities [Line Items]
Less than 12 months, Fair Value	22,504	0
Less than 12 months, Unrealized Loss	(143)	0
12 months or more, Fair Value	25,854	50,697
12 months or more, Unrealized Loss	(847)	(940)
Total, Fair Value	48,358	50,697
Total, Unrealized Loss	(990)	(940)
Residential collateralized mortgage obligations issued by non-agency [Member]
Schedule of Available-for-sale Securities [Line Items]
Less than 12 months, Fair Value	0	0
Less than 12 months, Unrealized Loss	0	0
12 months or more, Fair Value	716	776
12 months or more, Unrealized Loss	(16)	(13)
Total, Fair Value	716	776
Total, Unrealized Loss	(16)	(13)
Asset-backed security [Member]
Schedule of Available-for-sale Securities [Line Items]
Less than 12 months, Fair Value	0	0
Less than 12 months, Unrealized Loss	0	0
12 months or more, Fair Value	1,465	1,651
12 months or more, Unrealized Loss	(585)	(433)
Total, Fair Value	1,465	1,651
Total, Unrealized Loss	(585)	(433)
Mutual funds [Member]
Schedule of Available-for-sale Securities [Line Items]
Less than 12 months, Fair Value	2,455	2,464
Less than 12 months, Unrealized Loss	(45)	(35)
12 months or more, Fair Value	0	0
12 months or more, Unrealized Loss	0	0
Total, Fair Value	2,455	2,464
Total, Unrealized Loss	$ (45)	$ (35)

XML

Income Taxes - Additional Information (Details) - USD ($)	3 Months Ended		6 Months Ended
	Jun. 30, 2015	Jun. 30, 2014	Jun. 30, 2015	Jun. 30, 2014	Dec. 31, 2014
Income Tax Disclosure [Abstract]
Income tax provision	$ 0	$ 0	$ 0	$ 0
Net deferred tax assets	6,031,000	6,900,000	6,031,000	6,900,000	$ 5,933,000
Valuation allowance	11,400,000	11,800,000	11,400,000	11,800,000
Accrued interest or penalties associated with unrecognized tax benefits	0		0
Interest expense recognized	$ 0	$ 0	$ 0	$ 0

XML

CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION - USD ($) $ in Thousands	Jun. 30, 2015	Dec. 31, 2014
ASSETS
Cash and due from banks	$ 20,613	$ 9,997
Interest bearing deposits with financial institutions	112,966	167,138
Cash and cash equivalents	133,579	177,135
Interest-bearing time deposits with financial institutions	4,668	4,668
Federal Reserve Bank of San Francisco and Federal Home Loan Bank Stock, at cost	8,170	8,137
Securities available for sale, at fair value	56,396	60,926
Loans (net of allowances of $12,343 and $13,833, respectively)	821,273	824,197
Other real estate owned	1,872	1,592
Accrued interest receivable	2,105	2,436
Premises and equipment, net	1,160	1,092
Net deferred tax assets	6,031	5,933
Other assets	11,607	13,494
Total assets	1,046,861	1,099,610
Deposits:
Noninterest-bearing	236,361	237,491
Interest-bearing	635,589	678,818
Total deposits	871,950	916,309
Borrowings	30,000	39,500
Accrued interest payable	183	222
Other liabilities	6,104	6,771
Junior subordinated debentures	17,527	17,527
Total liabilities	$ 925,764	$ 980,329
Commitments and contingencies
Preferred stock, no par value, 2,000,000 shares authorized:
Common stock, no par value, 85,000,000 shares authorized; 19,780,086 and 19,462,561 shares issued and outstanding at June 30, 2015 and December 31, 2014, respectively	$ 133,082	$ 131,181
Accumulated deficit	(23,424)	(22,885)
Accumulated other comprehensive loss	(831)	(692)
Total shareholders’ equity	121,097	119,281
Total liabilities and shareholders’ equity	1,046,861	1,099,610
Series B Convertible 8.4% Noncumulative Preferred Stock [Member]
Preferred stock, no par value, 2,000,000 shares authorized:
Preferred Stock	8,747	8,747
Series C Convertible 8.4% Noncumulative Preferred Stock [Member]
Preferred stock, no par value, 2,000,000 shares authorized:
Preferred Stock	$ 3,523	$ 2,930

XML

Loans and Allowance for Loan and Lease Losses - Summary of Activity in ALLL (Detail) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2015	Jun. 30, 2014	Jun. 30, 2015	Jun. 30, 2014
Allowance for Loan and Lease Losses [Roll Forward]
Balance at beginning of period	$ 12,639	$ 11,940	$ 13,833	$ 11,358
Charge offs	(881)	(168)	(2,353)	(378)
Recoveries	585	208	863	550
Provision	0	600	0	1,050
Balance at end of period	12,343	12,580	12,343	12,580
Commercial loans [Member]
Allowance for Loan and Lease Losses [Roll Forward]
Balance at beginning of period	7,353	5,988	7,670	5,812
Charge offs	(730)	(166)	(2,117)	(276)
Recoveries	582	169	857	452
Provision	(724)	486	71	489
Balance at end of period	6,481	6,477	6,481	6,477
Real Estate [Member]
Allowance for Loan and Lease Losses [Roll Forward]
Balance at beginning of period	4,287	5,039	5,133	4,517
Charge offs	0	0	0	0
Recoveries	1	1	2	19
Provision	601	357	(246)	861
Balance at end of period	4,889	5,397	4,889	5,397
Land Development [Member]
Allowance for Loan and Lease Losses [Roll Forward]
Balance at beginning of period	120	154	296	165
Charge offs	0	0	(85)	0
Recoveries	0	0	0	0
Provision	(76)	(69)	(167)	(80)
Balance at end of period	44	85	44	85
Consumer and Single Family Mortgages [Member]
Allowance for Loan and Lease Losses [Roll Forward]
Balance at beginning of period	879	759	734	864
Charge offs	(151)	(2)	(151)	(102)
Recoveries	2	38	4	79
Provision	199	(174)	342	(220)
Balance at end of period	$ 929	$ 621	$ 929	$ 621

XML

CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY - 6 months ended Jun. 30, 2015 - USD ($) $ in Thousands	Total	Series B and C Preferred stock [Member]	Common stock [Member]	Retained earnings (accumulated deficit) [Member]	Accumulated other comprehensive income (loss) [Member]
Beginning Balance at Dec. 31, 2014	$ 119,281	$ 11,677	$ 131,181	$ (22,885)	$ (692)
Beginning Balance (in shares) at Dec. 31, 2014		141,000	19,463,000
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Issuance of restricted stock, net			95,000
Tax effect from vesting of restricted stock	(23)		$ (23)
Tax effect from vesting of restricted stock (in shares)			(4,000)
Series C Preferred Stock issued as a stock dividend on Series B Preferred Stock		$ 593		(593)
Series C Preferred Stock issued as a stock dividend on Series B Preferred Stock (in shares)		6,000
Common stock based compensation expense	683		$ 683
Common stock options exercised	$ 1,241		$ 1,241
Common stock options exercised (in shares)	226,564		226,000
Net income	$ 54			54
Other comprehensive loss	(139)				(139)
Ending Balance at Jun. 30, 2015	$ 121,097	$ 12,270	$ 133,082	$ (23,424)	$ (831)
Ending Balance (in shares) at Jun. 30, 2015		147,000	19,780,000

XML

Stock-Based Employee Compensation Plans - Summary of Status of Unvested Options Outstanding and Changes in Number of Shares Subject to and in Weighted Average Grant Date Fair Values (Detail) - $ / shares	3 Months Ended		6 Months Ended
	Jun. 30, 2015	Jun. 30, 2014	Jun. 30, 2015	Jun. 30, 2014
Number of Shares Subject to Options
Unvested, Beginning of Period (shares)			468,504	785,566
Granted (shares)	0	0	112,828	41,892
Vested (shares)			(74,301)	(99,865)
Forfeited/Canceled (shares)			(27,214)	(27,099)
Unvested, End of Period (shares)	479,817	700,494	479,817	700,494
Weighted Average Grant Date Fair Value
Unvested, Beginning of Period (in dollars per share)			$ 2.68	$ 2.57
Granted (in dollars per share)			3.13	2.75
Vested (in dollars per share)			2.57	2.14
Forfeited/Canceled (in dollars per share)			2.26	2.68
Unvested, End of Period (in dollars per share)	$ 2.86	$ 2.63	$ 2.86	$ 2.63

XML

Fair Value Measurements - Valuation Techniques for Level 3 Financial Instruments (Details) - Level 3 [Member] $ in Thousands	Jun. 30, 2015 USD ($)
Assets [Member]
Fair Value Inputs, Assets, Quantitative Information [Line Items]
Assets, Fair Value Disclosure	$ 33,111
Asset-backed security [Member] | Third-Party Pricing
Fair Value Inputs, Assets, Quantitative Information [Line Items]
Assets, Fair Value Disclosure	1,465
Impaired loans [Member] | Third-Party Pricing
Fair Value Inputs, Assets, Quantitative Information [Line Items]
Assets, Fair Value Disclosure	$ 31,646

XML

Shareholders' Equity - Accumulated Other Comprehensive Income (Loss) (Details 2) - USD ($) $ in Thousands	6 Months Ended	12 Months Ended
	Jun. 30, 2015	Dec. 31, 2014
Unrealized Gain (Loss) on Securities Available-for-Sale, Tax
Other comprehensive income (loss) before reclassifications, tax provision (benefit)	$ (98)	$ 847
Other comprehensive income (loss), tax provision (benefit)	$ (98)	$ 847

XML

Investments (Tables)

6 Months Ended

Jun. 30, 2015

Investments [Abstract]

Major Components of Securities Available for Sale and Comparison of Amortized Cost, Estimated Fair Market Values, and Gross Unrealized Gains and Losses

The following table sets forth the major components of securities available for sale and compares the amortized costs and estimated fair market values of, and the gross unrealized gains and losses on, these securities at June 30, 2015 and December 31, 2014:

(Dollars in thousands)	June 30, 2015									December 31, 2014
	Amortized Cost		Gross Unrealized					Estimated Fair Value		Amortized Cost		Gross Unrealized					Estimated Fair Value
			Gain		Loss							Gain		Loss
Securities Available for Sale
Residential mortgage backed securities issued by U.S. Agencies(1)	$	50,451	$	13	$	(990	)	$	49,474	$	54,653	$	26	$	(940	)	$	53,739
Residential collateralized mortgage obligations issued by non agencies(1)	731		—		(16		)	715		790		—		(13		)	777
Asset backed security(2)	2,050		—		(585		)	1,465		2,083		—		(433		)	1,650
Mutual funds(3)	4,750		37		(45		)	4,742		4,750		45		(35		)	4,760
Total	$	57,982	$	50	$	(1,636	)	$	56,396	$	62,276	$	71	$	(1,421	)	$	60,926

(1) Secured by closed-end first liens on 1-4 family residential mortgages.

(2) Comprised of a security that represents an interest in a pool of trust preferred securities issued by U.S.-based banks and insurance companies.

(3) Consists primarily of mutual fund investments in closed-end first lien 1-4 family residential mortgages.

Amortized Cost and Estimated Fair Values of Securities Available for Sale by Contractual Maturities and Historical Prepayments based on Prior Twelve Months of Principal Payments

The amortized cost and estimated fair values of securities available for sale at June 30, 2015 and December 31, 2014 are shown in the tables below by contractual maturities taking into consideration historical prepayments based on the prior twelve months of principal payments. Expected maturities will differ from contractual maturities and historical prepayments, particularly with respect to collateralized mortgage obligations, primarily because prepayment rates are affected by changes in conditions in the interest rate market and, therefore, future prepayment rates may differ from historical prepayment rates.

	At June 30, 2015 Maturing in
(Dollars in thousands)	One year or less			Over one year through five years			Over five years through ten years			Over ten Years			Total
Securities available for sale, amortized cost	$	7,616		$	28,071		$	15,445		$	6,850		$	57,982
Securities available for sale, estimated fair value	7,443			27,739			15,064			6,150			56,396
Weighted average yield	1.56		%	1.63		%	1.58		%	1.90		%	1.63		%

	At December 31, 2014 Maturing in
(Dollars in thousands)	One year or less			Over one year through five years			Over five years through ten years			Over ten Years			Total
Securities available for sale, amortized cost	$	7,483		$	29,008		$	17,448		$	8,337		$	62,276
Securities available for sale, estimated fair value	7,359			28,614			17,148			7,805			60,926
Weighted average yield	1.54		%	1.64		%	1.60		%	1.83		%	1.64		%

Gross Unrealized Losses and Fair Values of Investments

The tables below indicate, as of June 30, 2015 and December 31, 2014, the gross unrealized losses and fair values of our investments, aggregated by investment category, and length of time that the individual securities have been in a continuous unrealized loss position.

	Securities with Unrealized Loss at June 30, 2015
	Less than 12 months					12 months or more					Total
(Dollars in thousands)	Fair Value		Unrealized Loss			Fair Value		Unrealized Loss			Fair Value		Unrealized Loss
Residential mortgage backed securities issued by U.S. Agencies	$	22,504	$	(143	)	$	25,854	$	(847	)	$	48,358	$	(990	)
Residential collateralized mortgage obligations issued by non-agencies	—		—			716		(16		)	716		(16		)
Asset backed security	—		—			1,465		(585		)	1,465		(585		)
Mutual funds	2,455		(45		)	—		—			2,455		(45		)
Total	$	24,959	$	(188	)	$	28,035	$	(1,448	)	$	52,994	$	(1,636	)

	Securities With Unrealized Loss at December 31, 2014
	Less than 12 months					12 months or more					Total
(Dollars In thousands)	Fair Value		Unrealized Loss			Fair Value		Unrealized Loss			Fair Value		Unrealized Loss
Residential mortgage backed securities issued by U.S. Agencies	$	—	$	—		$	50,697	$	(940	)	$	50,697	$	(940	)
Residential collateralized mortgage obligations issued by non-agencies	—		—			776		(13		)	776		(13		)
Asset-backed security	—		—			1,651		(433		)	1,651		(433		)
Mutual funds	2,464		(35		)	—		—			2,464		(35		)
Total	$	2,464	$	(35	)	$	53,124	$	(1,386	)	$	55,588	$	(1,421	)

Other-Than-Temporary Impairments, Portion Attributable to Non-Credit Related Factors Recognized in Other Comprehensive Loss

The table below presents, for the six months ended June 30, 2015, a roll-forward of OTTI in those instances when a portion of the OTTI was attributable to non-credit related factors and, therefore, was recognized in other comprehensive loss:

(Dollars in thousands)	Gross Other- Than- Temporary Impairments			Other-Than- Temporary Impairments Included in Other Comprehensive Loss			Net Other-Than- Temporary Impairments Included in Retained  Earnings (Deficit)
Balance – December 31, 2014	$	(986	)	$	(433	)	$	(553	)
Change in market value on a security for which an OTTI was previously recognized	(180		)	(180		)	—
Principal received on OTTI security	28			28			—
Balance – June 30, 2015	$	(1,138	)	$	(585	)	$	(553	)

Schedule of equity method investments

During the six months ended June 30, 2015, we redeemed 100% of our investment in the limited partnership for a return of capital of $2.1 million. As of June 30, 2015 and December 31, 2014, our other investment was as follows:

	June 30, 2015		December 31, 2014
	(Dollars in thousands)
Investment accounted for under the equity method	$	—	$	2,081

XML

Fair Value Measurements - Fair Values and Related Carrying Amounts of Financial Instruments (Detail) - USD ($) $ in Thousands	Jun. 30, 2015	Dec. 31, 2014
Carrying Value [Member]
Financial assets:
Cash and cash equivalents	$ 133,579	$ 177,135
Interest-bearing deposits with financial institutions	4,668	4,668
Federal Reserve Bank of San Francisco and Federal Home Loan Bank stock	8,170	8,137
Loans, net	821,273	824,197
Accrued interest receivable	2,105	2,436
Financial liabilities:
Noninterest bearing deposits	236,361	237,491
Interest-bearing deposits	635,589	678,818
Borrowings	30,000	39,500
Junior subordinated debentures	17,527	17,527
Accrued interest payable	183	222
Total [Member]
Financial assets:
Cash and cash equivalents	133,579	177,135
Interest-bearing deposits with financial institutions	4,668	4,668
Federal Reserve Bank of San Francisco and Federal Home Loan Bank stock	8,170	8,137
Loans, net	819,939	818,547
Accrued interest receivable	2,105	2,436
Financial liabilities:
Noninterest bearing deposits	236,361	237,491
Interest-bearing deposits	635,287	678,890
Borrowings	29,968	39,418
Junior subordinated debentures	17,527	17,527
Accrued interest payable	183	222
Level 1 [Member]
Financial assets:
Cash and cash equivalents	133,579	177,135
Interest-bearing deposits with financial institutions	4,668	4,668
Federal Reserve Bank of San Francisco and Federal Home Loan Bank stock	8,170	8,137
Loans, net	0	0
Accrued interest receivable	2,105	2,436
Financial liabilities:
Noninterest bearing deposits	236,361	237,491
Interest-bearing deposits	0	0
Borrowings	0	0
Junior subordinated debentures	0	0
Accrued interest payable	183	222
Level 2 [Member]
Financial assets:
Cash and cash equivalents	0	0
Interest-bearing deposits with financial institutions	0	0
Federal Reserve Bank of San Francisco and Federal Home Loan Bank stock	0	0
Loans, net	0	0
Accrued interest receivable	0	0
Financial liabilities:
Noninterest bearing deposits	0	0
Interest-bearing deposits	635,287	678,890
Borrowings	29,968	39,418
Junior subordinated debentures	17,527	17,527
Accrued interest payable	0	0
Level 3 [Member]
Financial assets:
Cash and cash equivalents	0	0
Interest-bearing deposits with financial institutions	0	0
Federal Reserve Bank of San Francisco and Federal Home Loan Bank stock	0	0
Loans, net	819,939	818,547
Accrued interest receivable	0	0
Financial liabilities:
Noninterest bearing deposits	0	0
Interest-bearing deposits	0	0
Borrowings	0	0
Junior subordinated debentures	0	0
Accrued interest payable	$ 0	$ 0

XML

Stock-Based Employee Compensation Plans (Tables)

6 Months Ended

Jun. 30, 2015

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

Weighted Average Assumptions used to Determine Fair Values of Options Granted

The table below summarizes the weighted average assumptions used to determine the fair values of the options granted during the following periods:

	Three Months Ended June 30,						Six Months Ended June 30,
Assumptions with respect to:	2015(1)			2014(1)			2015			2014
Expected volatility	—		%	—		%	44		%	44		%
Risk-free interest rate	—		%	—		%	1.82		%	2.08		%
Expected dividends	—		%	—		%	—		%	0.61		%
Expected term (years)	—			—			6.0			6.7
Weighted average fair value of options granted during period	$	—		$	—		$	3.13		$	2.75

(1) No stock options were granted during the three months ended June 30, 2015 or June 30, 2014.

Stock Option Activity under Plans

The following table summarizes the stock option activity under the Company’s equity incentive plans during the six months ended June 30, 2015 and 2014, respectively.

	Number of Shares		Weighted- Average Exercise Price Per Share		Number of Shares		Weighted- Average Exercise Price Per Share
	2015				2014
Outstanding – January 1,	1,257,390		$	6.51	1,821,000		$	6.88
Granted	112,828		7.09		41,892		6.18
Exercised	(226,564	)	5.54		(92,200	)	3.74
Forfeited/Canceled	(134,553	)	11.56		(290,733	)	10.63
Outstanding – June 30,	1,009,101		6.12		1,479,959		6.32
Options Exercisable – June 30,	529,284		$	5.80	779,465		$	6.47
Options Vested – June 30,	529,284		$	5.80	779,465		$	6.47

Additional Information Regarding Vested and Unvested Options Outstanding

The following table provides additional information regarding the vested and unvested options that were outstanding at June 30, 2015.

Options Outstanding as of June 30, 2015						Options Exercisable as of June 30, 2015(1)
	Vested	Unvested	Weighted Average Exercise Price		Weighted Average Remaining Contractual Life (Years)	Shares	Weighted Average Exercise Price
$2.97 – $5.99	251,408	7,792	$	3.89	5.17	251,408	$	3.88
$6.00 – $9.99	246,576	472,025	6.47		8.25	246,576	6.41
$13.00 – $17.99	19,800	—	15.44		1.04	19,800	15.44
$18.00 – $18.84	11,500	—	18.11		0.57	11,500	18.11
	529,284	479,817	$	6.12	7.23	529,284	$	5.80

(1) The weighted average remaining contractual life of the options that were exercisable as of June 30, 2015 was 6.13 years.

Summary of Status of Unvested Options and Changes in Number of Shares Subject to and in Weighted Average Grant Date Fair Values of Unvested Options

A summary of the status of the unvested options outstanding as of June 30, 2015, and changes in the weighted average grant date fair values of the unvested options during the six months ended June 30, 2015, are set forth in the following table.

	For the six months ended June 30,
	2015				2014
	Number of Shares Subject to Options		Weighted Average Grant Date Fair Value		Number of Shares Subject to Options		Weighted Average Grant Date Fair Value
Unvested at the beginning of the period	468,504		$	2.68	785,566		$	2.57
Granted	112,828		3.13		41,892		2.75
Vested	(74,301	)	2.57		(99,865	)	2.14
Forfeited/Canceled	(27,214	)	2.26		(27,099	)	2.68
Unvested at the end of the period	479,817		2.86		700,494		2.63

Schedule of Restricted Stock Activity

The following table summarizes the activity related to restricted stock granted, vested and forfeited under our equity incentive plans during the six months ended June 30, 2015 and 2014.

	For the Six Months Ended June 30,
	2015				2014
	Number of Shares		Average Grant Date Fair Value		Number of Shares		Average Grant Date Fair Value
Outstanding at the beginning of the period	141,254		$	6.29	141,284		$	6.23
Granted	98,829		7.10		43,608		6.29
Vested	(15,848	)	6.43		—		—
Forfeited	(3,638	)	6.18		(6,286	)	6.21
Outstanding at the end of the period	220,597		$	6.63	178,606		$	6.25

Compensation Expense of Non-Vested Stock Options Outstanding

We expect that the compensation expense that will be recognized during the periods presented below in respect of stock options and restricted stock outstanding at June 30, 2015, will be as follows:

	Estimated Stock Based Compensation Expense Stock Options		Estimated Stock Based Compensation Expense Restricted Stock		Estimated Stock Based Compensation Expense Total
(Dollars in thousands)
For the years ending December 31,
Remainder of 2015	$	263	$	347	$	609
2016	303		478		781
2017	109		187		296
2018	34		23		57
2019 and beyond	6		—		6
	$	714	$	1,035	$	1,749

XML

Business Segment Information - Additional Information (Detail) - 6 months ended Jun. 30, 2015 - Segment	Total
Segment Reporting [Abstract]
Reportable business segments	1
Non-reportable segments	1
Originated mortgage loans, reselling period to long-term investors in the secondary residential mortgage market	30 days

XML

CONSOLIDATED STATEMENTS OF CASH FLOW - USD ($) $ in Thousands	6 Months Ended
	Jun. 30, 2015	Jun. 30, 2014
Cash Flows From Operating Activities:
Net income	$ 54	$ 455
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	261	296
Provision for loan and lease losses	0	1,050
Amortization of premium on securities	163	163
Net amortization of deferred fees and unearned income on loans	(332)	(160)
Net gain on sale of premises and equipment	(27)	(21)
Net gain on sale of small business administration loans	0	(1,160)
Small business administration loan originations	0	(14,815)
Proceeds from sale of small business administration loans	0	16,001
Write down of other real estate owned	0	298
Stock-based compensation expense	683	540
Tax effect included in stockholders equity of restricted stock vesting	(23)	0
Other	0	(89)
Changes in operating assets and liabilities:
Net decrease in accrued interest receivable	331	11
Net increase in other assets	(142)	(531)
Net decrease in deferred taxes	0	695
Net increase in income taxes receivable	(58)	(23)
Net (decrease) increase in accrued interest payable	(39)	329
Net decrease in other liabilities	(667)	(2,174)
Net cash provided by discontinued operations	0	9,223
Net cash provided by operating activities	204	10,088
Cash Flows From Investing Activities:
Net increase in interest-bearing time deposits with financial institutions	0	(500)
Maturities of and principal payments received on securities available for sale and other stock	4,130	5,398
Purchase of securities available for sale and other stock	(33)	0
Principal payments received on other investments	2,087	0
Proceeds from sale of other real estate owned	0	1,130
Capitalized cost of other real estate owned	0	(21)
Net decrease (increase) in loans	2,976	(34,956)
Purchases of premises and equipment	(329)	(288)
Proceeds from sale of premises and equipment	27	38
Net cash provided by (used in) investing activities	8,858	(29,199)
Cash Flows From Financing Activities:
Net (decrease) increase in deposits	(44,359)	39,069
Payments of borrowings	(9,500)	(22,500)
Proceeds from exercise of common stock options	1,241	344
Net cash (used in) provided by financing activities	(52,618)	16,913
Net (decrease) increase in cash and cash equivalents	(43,556)	(2,198)
Cash and Cash Equivalents, beginning of period	177,135	106,940
Cash and Cash Equivalents, end of period	133,579	104,742
Supplementary Cash Flow Information:
Cash paid for interest on deposits and other borrowings	2,686	2,622
Cash paid for income taxes	58	0
Non-Cash Investing Activities:
Transfer of loans into other real estate owned	280	5,188
Non-Cash Financing Activities:
Series C Preferred Stock issued in connection with dividends on Series B Preferred Stock	$ 593	$ 544

XML

CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION (Parenthetical) - USD ($) $ in Thousands	6 Months Ended	12 Months Ended
	Jun. 30, 2015	Dec. 31, 2014
Loans, allowances	$ 12,343	$ 13,833
Preferred stock, par value (in dollars per share)
Preferred stock, shares authorized	2,000,000	2,000,000
Common stock, par value (in dollars per share)
Common stock, shares authorized	85,000,000	85,000,000
Common stock, shares issued	19,780,086	19,462,561
Common stock, shares outstanding	19,780,086	19,462,561
Series B Convertible 8.4% Noncumulative Preferred Stock [Member]
Preferred stock, dividend rate	8.40%	8.40%
Preferred stock, shares authorized	300,000	300,000
Preferred Stock, shares issued	112,000	112,000
Preferred Stock, shares outstanding	112,000	112,000
Preferred Stock, liquidation preference (in dollars per share)	$ 100	$ 100
Series C Convertible 8.4% Noncumulative Preferred Stock [Member]
Preferred stock, dividend rate	8.40%	8.40%
Preferred stock, shares authorized	300,000	300,000
Preferred Stock, shares issued	35,225	29,308
Preferred Stock, shares outstanding	35,225	29,308
Preferred Stock, liquidation preference (in dollars per share)	$ 100	$ 100

XML

Commitments and Contingencies

6 Months Ended

Jun. 30, 2015

Commitments and Contingencies Disclosure [Abstract]

Commitments and Contingencies

Commitments and Contingencies

Repurchase Reserves

We have historically maintained reserves for possible repurchases that we may have been required to make of certain of the mortgage loans which we sold as a result of deficiencies or defects that may be found to exist in such loans. Our repurchase reserve also covered returns of any premiums earned and administrative fees pertaining to the repurchase of mortgage loans that did not meet investor guidelines, including potential loss of advances on Veterans Affairs or Federal Housing Authority Ginnie Mae loans.  As a result of our exit from the mortgage banking business and no longer being subject to potential loss for anything other than mortgage fraud, we have undertaken an analysis of our accrual. Our analysis assumes that the repurchase liability exposure will decrease over time as mortgage loans are paid off and as we are no longer originating new mortgage loans. We repurchased $619 thousand of loans during the six months ended June 30, 2015. We repurchased $1.3 million of loans during the six months ended June 30, 2014 by adjusting the gains on sale recorded for these loans. No loans were repurchased during the three months ended June 30, 2015 and June 30, 2014. The following table sets forth information at June 30, 2015 and December 31, 2014, with respect to our repurchase reserves:

	At and For the Six Months Ended			At and For the Year Ended
	June 30, 2015			December 31, 2014
	(Dollars in thousands)
Beginning balance	$	381		$	1,883
(Recovery of)/Provision for repurchases	31			(1,502		)
Settlements	(66		)	—
Total repurchases reserve	$	346		$	381

Commitments

To meet the financing needs of our customers in the normal course of business, we are a party to financial instruments with off-balance sheet risk. These financial instruments include commitments to extend credit and standby letters of credit. These instruments involve, to varying degrees, elements of credit and interest rate risk in excess of the amount recognized in the consolidated financial statements. At June 30, 2015 and December 31, 2014, we were committed to fund certain loans including letters of credit amounting to approximately $187 million and $148 million, respectively. The contractual amounts of a credit-related financial instrument, such as a commitment to extend credit, a credit-card arrangement or a letter of credit, represent the amount of potential accounting loss should the commitment be fully drawn upon, the customer were to default, and the value of any existing collateral securing the customer’s payment obligation becomes worthless. The loss reserve for unfunded loan commitments was $275 thousand at each of June 30, 2015 and December 31, 2014.

As a result, we use the same credit policies in making commitments to extend credit and conditional obligations as we do for on-balance sheet instruments. Commitments generally have fixed expiration dates; however, since many of the commitments are expected to expire without being drawn upon, the total commitment amounts do not necessarily represent future cash requirements. We evaluate each customer’s creditworthiness on a case-by-case basis, using the same credit underwriting standards that are employed in making commercial loans. The amount of collateral obtained, if any, upon an extension of credit is based on our evaluation of the creditworthiness of the customer. Collateral held varies, but may include accounts receivable, inventory, property, plant and equipment, residential real estate and income-producing commercial properties.

Litigation, Claims and Assessments

We are a defendant in or a party to a number of legal actions or proceedings that arise in the ordinary course of business. In some of these actions and proceedings, claims for monetary damages are asserted against us.

In accordance with applicable accounting guidance, we assess the likelihood of any loss or exposure with respect to lawsuits and other proceedings that are pending against us. We establish an accrued liability for lawsuits or other legal proceedings when they present loss contingencies that are both probable and estimable. Where a loss is not probable but it is reasonably possible or where a loss in excess of an amount accrued is reasonably possible, we disclose an estimate of the amount of the loss or range of possible losses for the claim if a reasonable estimate can be made, unless the amount of reasonably possible losses with respect to the matter is not material to our financial condition, results of operations or cash flows. We estimate any potential loss based upon currently available information and significant judgments and a variety of assumptions, and known and unknown uncertainties. Moreover, the facts and circumstances on which such estimates are based will change over time. Therefore, the amount of any losses we might incur in any lawsuits or other legal proceedings may exceed amounts which we had accrued based on our estimates and those estimates do not represent the maximum loss exposure that we may have in connection with any lawsuits or other legal proceedings.

Based on our evaluation of the lawsuits and other proceedings that were pending against us as of June 30, 2015, the outcomes in those suits or other proceedings are not expected to have, either individually or in the aggregate, a material adverse effect on our consolidated financial position, results of operations or cash flows. However, in light of the inherent uncertainties involved, some of which are beyond our control, and the very large or indeterminate damages often sought in such legal actions or proceedings, an adverse outcome in one or more of these suits or proceedings could be material to our financial position, results of operations or cash flows for any particular reporting period.

XML

Document and Entity Information - shares	6 Months Ended
	Jun. 30, 2015	Aug. 05, 2015
Document and Entity Information [Abstract]
Entity Registrant Name	PACIFIC MERCANTILE BANCORP
Entity Central Index Key	0001109546
Current Fiscal Year End Date	--12-31
Entity Filer Category	Accelerated Filer
Document Type	10-Q
Document Period End Date	Jun. 30, 2015
Document Fiscal Year Focus	2015
Document Fiscal Period Focus	Q2
Trading Symbol	PMBC
Amendment Flag	false
Entity Common Stock, Shares Outstanding		19,780,786

XML

Business Segment Information

6 Months Ended

Jun. 30, 2015

Segment Reporting [Abstract]

Business Segment Information

Business Segment Information

We have one reportable business segment, commercial banking. The commercial banking segment provides small and medium-size businesses, professional firms and individuals with a diversified range of products and services such as various types of deposit accounts, various types of commercial and consumer loans, cash management services, and online banking services. We also have one non-reportable segment, discontinued operations, which is comprised of our mortgage banking business. Our mortgage banking business originated mortgage loans that, for the most part, were resold within 30 days to long-term investors in the secondary residential mortgage market.

Since our operating segment derives all of its revenues from interest and noninterest income and interest expense constitutes its most significant expense, this segment, as well as our discontinued operations, are reported below using net interest income (interest income less interest expense) and noninterest income (primarily net gains on sales of SBA loans and fee income). We do not allocate general and administrative expenses or income taxes to our operating segment.

The following table sets forth information regarding the net interest income and noninterest income for our commercial banking and discontinued operations segments, respectively, for the three and six months ended June 30, 2015 and 2014.

(Dollars in thousands)	Commercial		Other			Total from continuing operations		Discontinued Operations			Total including discontinued operations
Net interest income for the three months ended June 30,
2015	$	8,562	$	(73	)	$	8,489	$	—		$	8,489
2014	$	7,698	$	(72	)	$	7,626	$	3		$	7,629
Noninterest income for the three months ended June 30,
2015	$	613	$	3		$	616	$	—		$	616
2014	$	984	$	—		$	984	$	(254	)	$	730
Net interest income for the six months ended June 30,
2015	$	16,805	$	(167	)	$	16,638	$	—		$	16,638
2014	$	15,539	$	(69	)	$	15,470	$	77		$	15,547
Noninterest income for the six months ended June 30,
2015	$	1,492	$	6		$	1,498	$	—		$	1,498
2014	$	2,162	$	—		$	2,162	$	1,435		$	3,597
Segment Assets at:
June 30, 2015	$	1,041,558	$	5,303		$	1,046,861	$	—		$	1,046,861
December 31, 2014	$	1,094,120	$	5,490		$	1,099,610	$	—		$	1,099,610

XML

CONSOLIDATED STATEMENTS OF OPERATIONS - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2015	Jun. 30, 2014	Jun. 30, 2015	Jun. 30, 2014
Interest income:
Loans, including fees	$ 9,175	$ 8,652	$ 18,194	$ 17,445
Securities available for sale and stock	558	403	932	821
Interest-bearing deposits with financial institutions	80	79	159	155
Total interest income	9,813	9,134	19,285	18,421
Interest expense:
Deposits	1,144	1,225	2,269	2,410
Borrowings	180	283	378	541
Total interest expense	1,324	1,508	2,647	2,951
Net interest income	8,489	7,626	16,638	15,470
Provision for loan and lease losses	0	600	0	1,050
Net interest income after provision for loan and lease losses	8,489	7,026	16,638	14,420
Noninterest income
Service fees on deposits and other banking services	234	218	446	426
Net gain on sale of small business administration loans	0	474	0	1,160
Other noninterest income	382	292	1,052	576
Total noninterest income	616	984	1,498	2,162
Noninterest expense
Salaries and employee benefits	5,423	5,420	11,330	11,023
Occupancy	752	610	1,412	1,198
Equipment and depreciation	430	363	823	732
Data processing	255	200	491	451
FDIC expense	339	359	692	653
Other real estate owned expense, net	59	313	161	1,057
Professional fees	744	665	1,372	1,239
Business development	198	169	392	338
Loan related expense	170	129	239	216
Insurance	88	141	175	278
Other operating expense	509	409	995	898
Total noninterest expense	8,967	8,778	18,082	18,083
Income (loss) from continuing operations before income taxes	138	(768)	54	(1,501)
Income tax (benefit) provision	0	0	0	0
Net income (loss) from continuing operations	138	(768)	54	(1,501)
Discontinued Operations
Income from discontinued operations before income taxes	0	772	0	1,956
Income tax provision (benefit)	0	0	0	0
Net income from discontinued operations	0	772	0	1,956
Net income	138	4	54	455
Net loss allocable to common shareholders	$ (171)	$ (304)	$ (564)	$ (149)
Basic loss per common share:
Net loss from continuing operations (in dollars per share)	$ (0.01)	$ (0.06)	$ (0.03)	$ (0.11)
Net loss available to common shareholders (in dollars per share)	(0.01)	(0.02)	(0.03)	(0.01)
Diluted (loss) income per common share:
Net loss from continuing operations (in dollars per share)	(0.01)	(0.06)	(0.03)	(0.11)
Net (loss) income available to common shareholders (in dollars per share)	$ (0.01)	$ (0.02)	$ (0.03)	$ (0.01)
Weighted average number of common shares outstanding:
Basic (in shares)	19,773,799	19,254,985	19,695,679	19,200,492
Diluted (in shares)	19,773,799	19,254,985	19,695,679	19,200,492
Dividend Undeclared [Member]
Discontinued Operations
Accumulated undeclared dividends on preferred stock	$ (309)	$ (308)	$ (618)	$ (604)

XML

Loans and Allowance for Loan and Lease Losses

6 Months Ended

Jun. 30, 2015

Receivables [Abstract]

Loans and Allowance for Loan Losses

Loans and Allowance for Loan and Lease Losses

The loan portfolio consisted of the following at:

	June 30, 2015					December 31, 2014
(Dollars in thousands)	Amount			Percent		Amount			Percent
Commercial loans	$	323,241		38.8	%	$	301,746		36.0	%
Commercial real estate loans – owner occupied	203,445			24.4	%	212,515			25.4	%
Commercial real estate loans – all other	135,966			16.3	%	146,676			17.5	%
Residential mortgage loans – multi-family	84,976			10.2	%	95,276			11.4	%
Residential mortgage loans – single family	60,191			7.2	%	64,326			7.7	%
Land development loans	5,575			0.7	%	7,745			0.9	%
Consumer loans	19,907			2.4	%	9,687			1.2	%
Total loans	833,301			100.0	%	837,971			100.0	%
Deferred loan origination costs, net	315					59
Allowance for loan and lease losses	(12,343		)			(13,833		)
Loans, net	$	821,273				$	824,197

At June 30, 2015 and December 31, 2014, loans of approximately $517 million and $425 million, respectively, were pledged to secure borrowings obtained from the FHLB and to support our unfunded borrowing capacity.

Allowance for Loan and Lease Losses

The ALLL represents our estimate of credit losses in our loan and lease portfolio that are probable and estimable at the balance sheet date. We employ economic models that are based on bank regulatory guidelines, industry standards and our own historical loan loss experience, as well as a number of more subjective qualitative factors, to determine both the sufficiency of the ALLL and the amount of the provisions that are required to increase or replenish the ALLL.

The ALLL is first determined by (i) analyzing all classified loans (graded as “Substandard” or “Doubtful” under our internal asset quality grading parameters) on non-accrual status for loss exposure and (ii) establishing specific reserves as needed. ASC 310-10 defines loan impairment as the existence of uncertainty concerning collection of all principal and interest in accordance with the contractual terms of a loan. For collateral dependent loans, impairment is typically measured by comparing the loan amount to the fair value of collateral, less estimated costs to sell, with any “shortfall” amount charged off. Other methods can be used in estimating impairment, including market price and the present value of expected future cash flows discounted at the loan’s original interest rate. We are an active lender with the U.S. Small Business Administration and collection of a percentage of the loan balance of many of the loans originated is guaranteed.  The ALLL reserves are calculated against the non-guaranteed loan balances. 

On a quarterly basis, we utilize a classification based loan loss migration model as well as review individual loans in determining the adequacy of the ALLL for homogenous pools of loans that are not subject to specific reserve allocations. Our loss migration analysis tracks a certain number of quarters of loan loss history and industry loss factors to determine historical losses by classification category for each loan type, except certain consumer loans. We then apply these calculated loss factors, together with qualitative factors based on external economic conditions and trends and internal assessments, to the outstanding loan balances in each homogenous group of loans, and then, using our internal asset quality grading parameters, we grade the loans as “Pass,” “Special Mention,” “Substandard” or “Doubtful”. We analyze impaired loans individually. This grading is based on the credit classifications of assets as prescribed by government regulations and industry standards and is separated into the following groups:

• Pass: Loans classified as pass include current loans performing in accordance with contractual terms, installment/consumer loans that are not individually risk rated, and loans which exhibit certain risk factors that require greater than usual monitoring by management.

• Special Mention: Loans classified as special mention, while generally not delinquent, have potential weaknesses that deserve management’s close attention. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the loan or in the Bank’s credit position at some future date.

• Substandard: Loans classified as substandard have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt. There is a distinct possibility that the Bank will sustain some loss if the deficiencies are not corrected.

• Doubtful: Loans classified as doubtful have all the weaknesses inherent in a substandard loan, and may also be at delinquency status and have defined weaknesses based on currently existing facts, conditions and values making collection or liquidation in full highly questionable and improbable.

Set forth below is a summary of the activity in the ALLL during the three and six months ended June 30, 2015 and 2014:

(Dollars in thousands)	Commercial			Real  Estate			Land Development			Consumer and Single Family Mortgages			Total
ALLL in the three months ended June 30, 2015:
Balance at beginning of period	$	7,353		$	4,287		$	120		$	879		$	12,639
Charge offs	(730		)	—			—			(151		)	(881		)
Recoveries	582			1			—			2			585
Provision	(724		)	601			(76		)	199			—
Balance at end of period	$	6,481		$	4,889		$	44		$	929		$	12,343
ALLL in the six months ended June 30, 2015:
Balance at beginning of period	$	7,670		$	5,133		$	296		$	734		$	13,833
Charge offs	(2,117		)	—			(85		)	(151		)	(2,353		)
Recoveries	857			2			—			4			863
Provision	71			(246		)	(167		)	342			—
Balance at end of period	$	6,481		$	4,889		$	44		$	929		$	12,343
ALLL in the three months ended June 30, 2014:
Balance at beginning of period	$	5,988		$	5,039		$	154		$	759		$	11,940
Charge offs	(166		)	—			—			(2		)	(168		)
Recoveries	169			1			—			38			208
Provision	486			357			(69		)	(174		)	600
Balance at end of period	$	6,477		$	5,397		$	85		$	621		$	12,580
ALLL in the six months ended June 30, 2014:
Balance at beginning of period	$	5,812		$	4,517		$	165		$	864		$	11,358
Charge offs	$	(276	)	$	—		$	—		$	(102	)	$	(378	)
Recoveries	452			19			—			79			550
Provision	489			861			(80		)	(220		)	1,050
Balance at end of period	$	6,477		$	5,397		$	85		$	621		$	12,580

Set forth below is information regarding loan balances and the related ALLL, by portfolio type, as of June 30, 2015 and December 31, 2014.

(Dollars in thousands)	Commercial		Real  Estate		Land Development		Consumer and Single Family Mortgages		Total
ALLL balance at June 30, 2015 related to:
Loans individually evaluated for impairment	$	405	$	—	$	—	$	—	$	405
Loans collectively evaluated for impairment	6,076		4,889		44		929		11,938
Total	$	6,481	$	4,889	$	44	$	929	$	12,343
Loans balance at June 30, 2015 related to:
Loans individually evaluated for impairment	$	14,333	$	11,573	$	1,685	$	4,055	$	31,646
Loans collectively evaluated for impairment	308,908		412,814		3,890		76,043		801,655
Total	$	323,241	$	424,387	$	5,575	$	80,098	$	833,301
ALLL Balance at December 31, 2014 related to:
Loans individually evaluated for impairment	$	995	$	537	$	—	$	—	$	1,532
Loans collectively evaluated for impairment	6,675		4,596		296		734		12,301
Total	$	7,670	$	5,133	$	296	$	734	$	13,833
Loans balance at December 31, 2014 related to:
Loans individually evaluated for impairment	$	21,117	$	7,536	$	2,111	$	4,373	$	35,137
Loans collectively evaluated for impairment	280,629		446,931		5,634		69,640		802,834
Total	$	301,746	$	454,467	$	7,745	$	74,013	$	837,971

Credit Quality

The amounts of nonperforming assets and delinquencies that occur within our loan portfolio factor into our evaluation of the adequacy of the ALLL.

The following table provides a summary of the delinquency status of loans by portfolio type at June 30, 2015 and December 31, 2014:

(Dollars in thousands)	30-59 Days Past Due		60-89 Days Past Due		90 Days and Greater		Total Past Due		Current		Total Loans Outstanding		Loans >90 Days and Accruing
At June 30, 2015
Commercial loans	$	296	$	231	$	12,132	$	12,659	$	310,582	$	323,241	$	—
Commercial real estate loans – owner-occupied	—		798		—		798		202,647		203,445		—
Commercial real estate loans – all other	1,132		2,917		—		4,049		131,917		135,966		—
Residential mortgage loans – multi-family	—		—		—		—		84,976		84,976		—
Residential mortgage loans – single family	—		—		763		763		59,428		60,191		—
Land development loans	—		—		1,685		1,685		3,890		5,575		—
Consumer loans	—		—		—		—		19,907		19,907		—
Total(1)	$	1,428	$	3,946	$	14,580	$	19,954	$	813,347	$	833,301	$	—
At December 31, 2014
Commercial loans	$	553	$	—	$	—	$	553	$	301,193	$	301,746	$	—
Commercial real estate loans – owner-occupied	—		—		—		—		212,515		212,515		—
Commercial real estate loans – all other	20		—		2,117		2,137		144,539		146,676		—
Residential mortgage loans – multi-family	—		—		—		—		95,276		95,276		—
Residential mortgage loans – single family	835		—		285		1,120		63,206		64,326		—
Land development loans	—		—		364		364		7,381		7,745		—
Consumer loans	17		—		—		17		9,670		9,687		—
Total	$	1,425	$	—	$	2,766	$	4,191	$	833,780	$	837,971	$	—

(1)    Loans 90 days or more past due included two consumer mortgage loans collateralized by residential real estate with a recorded investment of $763 thousand which are in the process of foreclosure.

Generally, the accrual of interest on a loan is discontinued when principal or interest payments become more than 90 days past due, unless we believe that the loan is adequately collateralized and it is in the process of collection. There were no loans 90 days or more past due and still accruing interest at June 30, 2015 or December 31, 2014. In certain instances, when a loan is placed on non-accrual status, previously accrued but unpaid interest is reversed against current income. Subsequent collections of cash are applied as principal reductions when received (referred to as full nonaccrual basis of accounting), except when the ultimate collectability of principal is probable, in which case such payments are applied to accrued and unpaid interest, which is credited to income (referred to as nonaccrual cash basis of accounting). Non-accrual loans may be restored to accrual status when principal and interest become current and full repayment becomes expected.

The following table provides information with respect to loans on nonaccrual status, by portfolio type, as of June 30, 2015 and December 31, 2014:

	June 30, 2015		December 31, 2014
	(Dollars in thousands)
Nonaccrual loans:
Commercial loans	$	14,238	$	16,182
Commercial real estate loans – owner occupied	2,104		2,171
Commercial real estate loans – all other	2,117		2,117
Residential mortgage loans – multi-family	453		—
Residential mortgage loans – single family	1,187		1,472
Land development loans	1,685		2,111
Total(1)	$	21,784	$	24,053

(1)    Nonaccrual loans may include loans that are currently considered performing loans.

We classify our loan portfolio using internal asset quality ratings. The following table provides a summary of loans by portfolio type and our internal asset quality ratings as of June 30, 2015 and December 31, 2014:

	June 30, 2015		December 31, 2014
	(Dollars in thousands)
Pass:
Commercial loans	$	308,761	$	280,102
Commercial real estate loans – owner occupied	196,963		208,687
Commercial real estate loans – all other	117,257		128,974
Residential mortgage loans – multi family	84,523		94,817
Residential mortgage loans – single family	59,005		62,854
Land development loans	3,890		5,634
Consumer loans	19,907		9,687
Total pass loans	$	790,306	$	790,755
Special Mention:
Commercial loans	$	—	$	351
Commercial real estate loans – owner occupied	2,741		—
Commercial real estate loans – all other	8,854		6,588
Residential mortgage loans – multi family	—		459
Total special mention loans	$	11,595	$	7,398
Substandard:
Commercial loans	$	14,080	$	19,655
Commercial real estate loans – owner occupied	3,741		3,828
Commercial real estate loans – all other	9,855		11,114
Residential mortgage loans – multi family	453		—
Residential mortgage loans – single family	1,186		1,472
Land development loans	1,685		2,111
Total substandard loans	$	31,000	$	38,180
Doubtful:
Commercial loans	$	400	$	1,638
Total doubtful loans	$	400	$	1,638
Total Loans:	$	833,301	$	837,971

Impaired Loans

A loan generally is classified as impaired when, in our opinion, principal or interest is not likely to be collected in accordance with the contractual terms of the loan agreement. We measure for impairments on a loan-by-loan basis, using either the present value of expected future cash flows discounted at the loan’s effective interest rate, or the fair value of the collateral if the loan is collateral dependent.

The following table sets forth information regarding impaired loans, at June 30, 2015 and December 31, 2014:

	June 30, 2015		December 31, 2014
	(Dollars in thousands)
Impaired loans:
Nonaccruing loans	$	6,683	$	18,118
Nonaccruing restructured loans	15,101		5,935
Accruing restructured loans (1)	9,862		11,084
Accruing impaired loans	—		—
Total impaired loans	$	31,646	$	35,137
Impaired loans less than 90 days delinquent and included in total impaired loans	$	17,066	$	32,371

(1) See "Troubled Debt Restructurings" below for a description of accruing restructured loans at June 30, 2015 and December 31, 2014.

The table below contains additional information with respect to impaired loans, by portfolio type, as of June 30, 2015 and December 31, 2014:

	June 30, 2015						December 31, 2014
	Recorded Investment		Unpaid Principal Balance		Related Allowance (1)		Recorded Investment		Unpaid Principal Balance		Related Allowance (1)
	(Dollars in thousands)
No allowance recorded:
Commercial loans	$	13,683	$	14,858	$	—	$	18,563	$	18,839	$	—
Commercial real estate loans – owner occupied	4,845		5,173		—		2,171		2,440		—
Commercial real estate loans – all other	6,275		6,275		—		5,365		5,423		—
Residential mortgage loans – multi-family	453		454		—		—		—		—
Residential mortgage loans – single family	4,055		4,351		—		4,373		4,610		—
Land development loans	1,685		1,732		—		2,111		2,146		—
Total	30,996		32,843		—		32,583		33,458		—
With allowance recorded:
Commercial loans	$	650	$	925	$	405	$	2,554	$	2,983	$	1,532
Total	650		925		405		2,554		2,983		1,532
Total
Commercial loans	$	14,333	$	15,783	$	405	$	21,117	$	21,822	$	1,532
Commercial real estate loans – owner occupied	4,845		5,173		—		2,171		2,440		—
Commercial real estate loans – all other	6,275		6,275		—		5,365		5,423		—
Residential mortgage loans – multi-family	453		454		—		—		—		—
Residential mortgage loans – single family	4,055		4,351		—		4,373		4,610		—
Land development loans	1,685		1,732		—		2,111		2,146		—
Total	31,646		33,768		405		35,137		36,441		1,532

(1) When the discounted cash flows, collateral value or market price equals or exceeds the recorded investment in the loan, then specific reserves are not required to be set aside for the loan within the ALLL. This typically occurs when the impaired loans have been partially charged-off and/or there have been interest payments received and applied to the balance of the principal outstanding.

At June 30, 2015 and December 31, 2014, there were $31.0 million and $32.6 million, respectively, of impaired loans for which no specific reserves had been allocated because these loans, in our judgment, were sufficiently collateralized. Of the impaired loans at June 30, 2015 for which no specific reserves were allocated, $23.7 million had been deemed impaired in the prior year.

Average balances and interest income recognized on impaired loans, by portfolio type, for the three and six months ended June 30, 2015 and 2014 were as follows:

	Three Months Ended June 30,								Six Months Ended June 30,
	2015				2014				2015				2014
	Average Balance		Interest Income Recognized		Average Balance		Interest Income Recognized		Average Balance		Interest Income Recognized		Average Balance		Interest Income Recognized
	(Dollars in thousands)
No allowance recorded:
Commercial loans	$	14,533	$	25	$	7,420	$	54	$	15,876	$	99	$	8,441	$	168
Commercial real estate loans – owner occupied	3,492		81		2,002		—		3,051		81		1,926		22
Commercial real estate loans – all other	5,812		201		6,574		70		5,663		201		6,608		188
Residential mortgage loans – multi-family	454		4		—		—		303		9		—		—
Residential mortgage loans – single family	4,143		29		3,075		30		4,220		58		3,661		60
Land development loans	1,701		7		374		—		1,838		7		380		—
Total	30,135		347		19,445		154		30,951		455		21,016		438
With allowance recorded:
Commercial loans	1,057		6		1,827		28		1,556		6		1,218		27
Commercial real estate loans – owner occupied	—		—		3,993		156		—		—		3,912		156
Total	1,057		6		5,820		184		1,556		6		5,130		183
Total
Commercial loans	15,590		31		9,247		82		17,432		105		9,659		195
Commercial real estate loans – owner occupied	3,492		81		5,995		156		3,051		81		5,838		178
Commercial real estate loans – all other	5,812		201		6,574		70		5,663		201		6,608		188
Residential mortgage loans – multi-family	454		4		—		—		303		9		—		—
Residential mortgage loans – single family	4,143		29		3,075		30		4,220		58		3,661		60
Land development loans	1,701		7		374		—		1,838		7		380		—
Total	$	31,192	$	353	$	25,265	$	338	$	32,507	$	461	$	26,146	$	621

The interest that would have been earned had the impaired loans remained current in accordance with their original terms was $304 thousand and $142 thousand during the three months ended June 30, 2015 and 2014, respectively. The interest that would have been earned had the impaired loans remained current in accordance with their original terms was $508 thousand and $206 thousand during the six months ended June 30, 2015 and 2014, respectively.

Troubled Debt Restructurings (“TDRs”)

Pursuant to the FASB's ASU No. 2011-2, A Creditor's Determination of whether a Restructuring is a Troubled Debt Restructuring, the Bank's TDRs totaled $25.0 million and $17.0 million at June 30, 2015 and December 31, 2014, respectively. TDRs consist of loans to which modifications have been made for the purpose of alleviating temporary impairments of the borrower's financial condition and cash flows. Those modifications have come in the forms of changes in amortization terms, reductions in interest rates, interest only payments and, in limited cases, concessions to outstanding loan balances. The modifications are made as part of workout plans we enter into with the borrower that are designed to provide a bridge for the borrower's cash flow shortfalls in the near term. If a borrower works through the near term issues, then in most cases, the original contractual terms of the borrower's loan will be reinstated.

Of the $25.0 million of TDRs outstanding at June 30, 2015, $9.9 million were performing in accordance with their terms and accruing interest, and $15.1 million were not. Our impairment analysis determined no specific reserves were required on the TDR balances outstanding at June 30, 2015.

The following table presents loans restructured as TDRs during the three and six months ended June 30, 2015 and 2014:

	Three Months Ended
	June 30, 2015					June 30, 2014
(Dollars in thousands)	Number of Loans	Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment		Number of loans	Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment
Performing
Commercial loans	1	$	94	$	94	—	$	—	$	—
Commercial real estate – owner occupied	1	2,741		2,741		—	—		—
Commercial real estate – all other	1	4,158		4,158		—	—		—
	3	6,993		6,993		—	—		—
Nonperforming
Commercial loans	1	250		250		1	300		193
	1	250		250		1	300		193
Total Troubled Debt Restructurings	4	$	7,243	$	7,243	1	$	300	$	193
	Six Months Ended
	June 30, 2015					June 30, 2014
(Dollars in thousands)	Number of loans	Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment		Number of loans	Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment
Performing
Commercial loans	1	$	94	$	94	—	$	—	$	—
Commercial real estate – owner occupied	1	2,741		2,741		—	—		—
Commercial real estate – all other	1	4,158		4,158		—	—		—
	3	6,993		6,993		—	—		—
Nonperforming
Commercial loans	1	250		250		1	300		193
	1	250		250		1	300		193
Total Troubled Debt Restructurings	4	$	7,243	$	7,243	1	$	300	$	193

During the three and six months ended June 30, 2015 and 2014, we had no TDRs that were modified within the preceding 12-month period which subsequently defaulted.

XML

Investments

6 Months Ended

Jun. 30, 2015

Investments [Abstract]

Investments

Investments

Securities Available For Sale, at Fair Value

The following table sets forth the major components of securities available for sale and compares the amortized costs and estimated fair market values of, and the gross unrealized gains and losses on, these securities at June 30, 2015 and December 31, 2014:

(Dollars in thousands)	June 30, 2015									December 31, 2014
	Amortized Cost		Gross Unrealized					Estimated Fair Value		Amortized Cost		Gross Unrealized					Estimated Fair Value
			Gain		Loss							Gain		Loss
Securities Available for Sale
Residential mortgage backed securities issued by U.S. Agencies(1)	$	50,451	$	13	$	(990	)	$	49,474	$	54,653	$	26	$	(940	)	$	53,739
Residential collateralized mortgage obligations issued by non agencies(1)	731		—		(16		)	715		790		—		(13		)	777
Asset backed security(2)	2,050		—		(585		)	1,465		2,083		—		(433		)	1,650
Mutual funds(3)	4,750		37		(45		)	4,742		4,750		45		(35		)	4,760
Total	$	57,982	$	50	$	(1,636	)	$	56,396	$	62,276	$	71	$	(1,421	)	$	60,926

(1) Secured by closed-end first liens on 1-4 family residential mortgages.

(2) Comprised of a security that represents an interest in a pool of trust preferred securities issued by U.S.-based banks and insurance companies.

(3) Consists primarily of mutual fund investments in closed-end first lien 1-4 family residential mortgages.

At June 30, 2015, U.S. agency mortgage backed securities with an aggregate fair market value of $3.8 million were pledged to secure repurchase agreements, local agency deposits and treasury, tax and loan accounts. At December 31, 2014, U.S. agency mortgage backed securities and collateralized mortgage obligations with an aggregate fair market value of $3.6 million were pledged to secure repurchase agreements, local agency deposits and treasury, tax and loan accounts.

The amortized cost and estimated fair values of securities available for sale at June 30, 2015 and December 31, 2014 are shown in the tables below by contractual maturities taking into consideration historical prepayments based on the prior twelve months of principal payments. Expected maturities will differ from contractual maturities and historical prepayments, particularly with respect to collateralized mortgage obligations, primarily because prepayment rates are affected by changes in conditions in the interest rate market and, therefore, future prepayment rates may differ from historical prepayment rates.

	At June 30, 2015 Maturing in
(Dollars in thousands)	One year or less			Over one year through five years			Over five years through ten years			Over ten Years			Total
Securities available for sale, amortized cost	$	7,616		$	28,071		$	15,445		$	6,850		$	57,982
Securities available for sale, estimated fair value	7,443			27,739			15,064			6,150			56,396
Weighted average yield	1.56		%	1.63		%	1.58		%	1.90		%	1.63		%

	At December 31, 2014 Maturing in
(Dollars in thousands)	One year or less			Over one year through five years			Over five years through ten years			Over ten Years			Total
Securities available for sale, amortized cost	$	7,483		$	29,008		$	17,448		$	8,337		$	62,276
Securities available for sale, estimated fair value	7,359			28,614			17,148			7,805			60,926
Weighted average yield	1.54		%	1.64		%	1.60		%	1.83		%	1.64		%

We had no sales of securities available for sale during the three and six months ended June 30, 2015 and 2014.

The tables below indicate, as of June 30, 2015 and December 31, 2014, the gross unrealized losses and fair values of our investments, aggregated by investment category, and length of time that the individual securities have been in a continuous unrealized loss position.

	Securities with Unrealized Loss at June 30, 2015
	Less than 12 months					12 months or more					Total
(Dollars in thousands)	Fair Value		Unrealized Loss			Fair Value		Unrealized Loss			Fair Value		Unrealized Loss
Residential mortgage backed securities issued by U.S. Agencies	$	22,504	$	(143	)	$	25,854	$	(847	)	$	48,358	$	(990	)
Residential collateralized mortgage obligations issued by non-agencies	—		—			716		(16		)	716		(16		)
Asset backed security	—		—			1,465		(585		)	1,465		(585		)
Mutual funds	2,455		(45		)	—		—			2,455		(45		)
Total	$	24,959	$	(188	)	$	28,035	$	(1,448	)	$	52,994	$	(1,636	)

	Securities With Unrealized Loss at December 31, 2014
	Less than 12 months					12 months or more					Total
(Dollars In thousands)	Fair Value		Unrealized Loss			Fair Value		Unrealized Loss			Fair Value		Unrealized Loss
Residential mortgage backed securities issued by U.S. Agencies	$	—	$	—		$	50,697	$	(940	)	$	50,697	$	(940	)
Residential collateralized mortgage obligations issued by non-agencies	—		—			776		(13		)	776		(13		)
Asset-backed security	—		—			1,651		(433		)	1,651		(433		)
Mutual funds	2,464		(35		)	—		—			2,464		(35		)
Total	$	2,464	$	(35	)	$	53,124	$	(1,386	)	$	55,588	$	(1,421	)

We regularly monitor investments for significant declines in fair value. We have determined that declines in the fair values of these investments below their respective amortized costs, as set forth in the tables above, are temporary because (i) those declines were due to interest rate changes and not to a deterioration in the creditworthiness of the issuers of those investment securities, and (ii) we have the ability to hold those securities until there is a recovery in their values or until their maturity.

We recognize other-than-temporary impairments (“OTTI”) to our available-for-sale debt securities in accordance with FASB ASC 320-10. When there are credit losses associated with, but we have no intention to sell, an impaired debt security, and it is more likely than not that we will not have to sell the security before recovery of its cost basis, we will separate the amount of impairment, or OTTI, between the amount that is credit related and the amount that is related to non-credit factors. Credit-related impairments are recognized in our consolidated statements of operations. Any non-credit-related impairments are recognized and reflected in other comprehensive income (loss) in our consolidated statements of financial condition.

Through the impairment assessment process, we determined that the available-for-sale securities discussed below were other-than-temporarily impaired at June 30, 2015. We recorded no impairment credit losses on available-for-sale securities in our consolidated statements of operations for the three and six months ended June 30, 2015 and 2014. The OTTI related to factors other than credit losses, in the aggregate amount of $585 thousand, and was recognized as other comprehensive loss in our accompanying consolidated statement of financial condition as of June 30, 2015.

The table below presents, for the six months ended June 30, 2015, a roll-forward of OTTI in those instances when a portion of the OTTI was attributable to non-credit related factors and, therefore, was recognized in other comprehensive loss:

(Dollars in thousands)	Gross Other- Than- Temporary Impairments			Other-Than- Temporary Impairments Included in Other Comprehensive Loss			Net Other-Than- Temporary Impairments Included in Retained  Earnings (Deficit)
Balance – December 31, 2014	$	(986	)	$	(433	)	$	(553	)
Change in market value on a security for which an OTTI was previously recognized	(180		)	(180		)	—
Principal received on OTTI security	28			28			—
Balance – June 30, 2015	$	(1,138	)	$	(585	)	$	(553	)

In determining the component of OTTI related to credit losses, we compare the amortized cost basis of each OTTI security to the present value of its expected cash flows, discounted using the effective interest rate implicit in the security at the date of acquisition.

As a part of our OTTI assessment process with respect to securities available for sale with unrealized losses, we consider available information about (i) the performance of the collateral underlying each such security, including any credit enhancements, (ii) historical prepayment speeds, (iii) delinquency and default rates, (iv) loss severities, (v) the age or “vintage” of the security, and (vi) any rating agency reports on the security. Significant judgments are required with respect to these and other factors in order to make a determination of the future cash flows that can be expected to be generated by the security.

Based on our OTTI assessment process, we determined that there is one asset-backed security in our portfolio of securities available for sale that was impaired as of June 30, 2015. This security is a multi-class, cash flow collateralized bond obligation backed by a pool of trust preferred securities issued by a diversified pool of 56 issuers that consisted of 45 U.S. depository institutions and 11 insurance companies at the time of the security’s issuance in November 2007. We purchased $3.0 million face amount of this security in November 2007 at a price of 95.21% for a total purchase price of $2.9 million, out of a total of $363 million of this security sold at the time of issuance. The security that we own (CUSIP 74042CAE8) is the mezzanine class B piece security with a variable interest rate of 3 month LIBOR plus 60 basis points, which had a rating of Aa2 and AA by Moody’s and Fitch, respectively, at the time of issuance in 2007.

As of June 30, 2015, the amortized cost of this security was $2.1 million with a fair value of $1.5 million, for an unrealized loss of approximately $585 thousand. As of June 30, 2015, the security had a Baa3 rating from Moody’s and a CCC rating from Fitch and had experienced $42.5 million in defaults (12.5% of total current collateral) and $12.0 million in deferring securities (3.5% of total current collateral) from issuance to June 30, 2015. As of June 30, 2015, the mezzanine class B tranche had $52.5 million in excess subordination.

We have made a determination that the remainder of our securities with respect to which there were unrealized losses as of June 30, 2015 are not other-than-temporarily impaired, because we have concluded that we have the ability to continue to hold those securities until their respective fair market values increase above their respective amortized costs or, if necessary, until their respective maturities. In reaching that conclusion we considered a number of factors and other information, which included: (i) the significance of each such security, (ii) the amount of the unrealized losses attributable to each such security, (iii) our liquidity position, (iv) the impact that retention of those securities could have on our capital position and (v) our evaluation of the expected future performance of these securities (based on the criteria discussed above).

Other Investments

As of December 31, 2014, we had one investment in a limited partnership which was accounted for under the equity method of accounting and included within other assets on the consolidated statements of financial condition. During the six months ended June 30, 2015, we redeemed 100% of our investment in the limited partnership for a return of capital of $2.1 million. As of June 30, 2015 and December 31, 2014, our other investment was as follows:

	June 30, 2015		December 31, 2014
	(Dollars in thousands)
Investment accounted for under the equity method	$	—	$	2,081

XML

Loans and Allowance for Loan and Lease Losses (Tables)

6 Months Ended

Jun. 30, 2015

Receivables [Abstract]

Composition of Loan Portfolio

The loan portfolio consisted of the following at:

	June 30, 2015					December 31, 2014
(Dollars in thousands)	Amount			Percent		Amount			Percent
Commercial loans	$	323,241		38.8	%	$	301,746		36.0	%
Commercial real estate loans – owner occupied	203,445			24.4	%	212,515			25.4	%
Commercial real estate loans – all other	135,966			16.3	%	146,676			17.5	%
Residential mortgage loans – multi-family	84,976			10.2	%	95,276			11.4	%
Residential mortgage loans – single family	60,191			7.2	%	64,326			7.7	%
Land development loans	5,575			0.7	%	7,745			0.9	%
Consumer loans	19,907			2.4	%	9,687			1.2	%
Total loans	833,301			100.0	%	837,971			100.0	%
Deferred loan origination costs, net	315					59
Allowance for loan and lease losses	(12,343		)			(13,833		)
Loans, net	$	821,273				$	824,197

Allowance for Loan Losses and Loan Balances

Set forth below is a summary of the activity in the ALLL during the three and six months ended June 30, 2015 and 2014:

(Dollars in thousands)	Commercial			Real  Estate			Land Development			Consumer and Single Family Mortgages			Total
ALLL in the three months ended June 30, 2015:
Balance at beginning of period	$	7,353		$	4,287		$	120		$	879		$	12,639
Charge offs	(730		)	—			—			(151		)	(881		)
Recoveries	582			1			—			2			585
Provision	(724		)	601			(76		)	199			—
Balance at end of period	$	6,481		$	4,889		$	44		$	929		$	12,343
ALLL in the six months ended June 30, 2015:
Balance at beginning of period	$	7,670		$	5,133		$	296		$	734		$	13,833
Charge offs	(2,117		)	—			(85		)	(151		)	(2,353		)
Recoveries	857			2			—			4			863
Provision	71			(246		)	(167		)	342			—
Balance at end of period	$	6,481		$	4,889		$	44		$	929		$	12,343
ALLL in the three months ended June 30, 2014:
Balance at beginning of period	$	5,988		$	5,039		$	154		$	759		$	11,940
Charge offs	(166		)	—			—			(2		)	(168		)
Recoveries	169			1			—			38			208
Provision	486			357			(69		)	(174		)	600
Balance at end of period	$	6,477		$	5,397		$	85		$	621		$	12,580
ALLL in the six months ended June 30, 2014:
Balance at beginning of period	$	5,812		$	4,517		$	165		$	864		$	11,358
Charge offs	$	(276	)	$	—		$	—		$	(102	)	$	(378	)
Recoveries	452			19			—			79			550
Provision	489			861			(80		)	(220		)	1,050
Balance at end of period	$	6,477		$	5,397		$	85		$	621		$	12,580

Set forth below is information regarding loan balances and the related ALLL, by portfolio type, as of June 30, 2015 and December 31, 2014.

(Dollars in thousands)	Commercial		Real  Estate		Land Development		Consumer and Single Family Mortgages		Total
ALLL balance at June 30, 2015 related to:
Loans individually evaluated for impairment	$	405	$	—	$	—	$	—	$	405
Loans collectively evaluated for impairment	6,076		4,889		44		929		11,938
Total	$	6,481	$	4,889	$	44	$	929	$	12,343
Loans balance at June 30, 2015 related to:
Loans individually evaluated for impairment	$	14,333	$	11,573	$	1,685	$	4,055	$	31,646
Loans collectively evaluated for impairment	308,908		412,814		3,890		76,043		801,655
Total	$	323,241	$	424,387	$	5,575	$	80,098	$	833,301
ALLL Balance at December 31, 2014 related to:
Loans individually evaluated for impairment	$	995	$	537	$	—	$	—	$	1,532
Loans collectively evaluated for impairment	6,675		4,596		296		734		12,301
Total	$	7,670	$	5,133	$	296	$	734	$	13,833
Loans balance at December 31, 2014 related to:
Loans individually evaluated for impairment	$	21,117	$	7,536	$	2,111	$	4,373	$	35,137
Loans collectively evaluated for impairment	280,629		446,931		5,634		69,640		802,834
Total	$	301,746	$	454,467	$	7,745	$	74,013	$	837,971

Summary of Delinquency Status of Loans by Portfolio Type

The following table provides a summary of the delinquency status of loans by portfolio type at June 30, 2015 and December 31, 2014:

(Dollars in thousands)	30-59 Days Past Due		60-89 Days Past Due		90 Days and Greater		Total Past Due		Current		Total Loans Outstanding		Loans >90 Days and Accruing
At June 30, 2015
Commercial loans	$	296	$	231	$	12,132	$	12,659	$	310,582	$	323,241	$	—
Commercial real estate loans – owner-occupied	—		798		—		798		202,647		203,445		—
Commercial real estate loans – all other	1,132		2,917		—		4,049		131,917		135,966		—
Residential mortgage loans – multi-family	—		—		—		—		84,976		84,976		—
Residential mortgage loans – single family	—		—		763		763		59,428		60,191		—
Land development loans	—		—		1,685		1,685		3,890		5,575		—
Consumer loans	—		—		—		—		19,907		19,907		—
Total(1)	$	1,428	$	3,946	$	14,580	$	19,954	$	813,347	$	833,301	$	—
At December 31, 2014
Commercial loans	$	553	$	—	$	—	$	553	$	301,193	$	301,746	$	—
Commercial real estate loans – owner-occupied	—		—		—		—		212,515		212,515		—
Commercial real estate loans – all other	20		—		2,117		2,137		144,539		146,676		—
Residential mortgage loans – multi-family	—		—		—		—		95,276		95,276		—
Residential mortgage loans – single family	835		—		285		1,120		63,206		64,326		—
Land development loans	—		—		364		364		7,381		7,745		—
Consumer loans	17		—		—		17		9,670		9,687		—
Total	$	1,425	$	—	$	2,766	$	4,191	$	833,780	$	837,971	$	—

(1)    Loans 90 days or more past due included two consumer mortgage loans collateralized by residential real estate with a recorded investment of $763 thousand which are in the process of foreclosure.

Loans on Nonaccrual Status by Portfolio Type

The following table provides information with respect to loans on nonaccrual status, by portfolio type, as of June 30, 2015 and December 31, 2014:

	June 30, 2015		December 31, 2014
	(Dollars in thousands)
Nonaccrual loans:
Commercial loans	$	14,238	$	16,182
Commercial real estate loans – owner occupied	2,104		2,171
Commercial real estate loans – all other	2,117		2,117
Residential mortgage loans – multi-family	453		—
Residential mortgage loans – single family	1,187		1,472
Land development loans	1,685		2,111
Total(1)	$	21,784	$	24,053

(1)    Nonaccrual loans may include loans that are currently considered performing loans.

Summary of Loans by Portfolio Type and Internal Credit Quality Ratings

We classify our loan portfolio using internal asset quality ratings. The following table provides a summary of loans by portfolio type and our internal asset quality ratings as of June 30, 2015 and December 31, 2014:

	June 30, 2015		December 31, 2014
	(Dollars in thousands)
Pass:
Commercial loans	$	308,761	$	280,102
Commercial real estate loans – owner occupied	196,963		208,687
Commercial real estate loans – all other	117,257		128,974
Residential mortgage loans – multi family	84,523		94,817
Residential mortgage loans – single family	59,005		62,854
Land development loans	3,890		5,634
Consumer loans	19,907		9,687
Total pass loans	$	790,306	$	790,755
Special Mention:
Commercial loans	$	—	$	351
Commercial real estate loans – owner occupied	2,741		—
Commercial real estate loans – all other	8,854		6,588
Residential mortgage loans – multi family	—		459
Total special mention loans	$	11,595	$	7,398
Substandard:
Commercial loans	$	14,080	$	19,655
Commercial real estate loans – owner occupied	3,741		3,828
Commercial real estate loans – all other	9,855		11,114
Residential mortgage loans – multi family	453		—
Residential mortgage loans – single family	1,186		1,472
Land development loans	1,685		2,111
Total substandard loans	$	31,000	$	38,180
Doubtful:
Commercial loans	$	400	$	1,638
Total doubtful loans	$	400	$	1,638
Total Loans:	$	833,301	$	837,971

Schedule of Impaired Loans

The table below contains additional information with respect to impaired loans, by portfolio type, as of June 30, 2015 and December 31, 2014:

	June 30, 2015						December 31, 2014
	Recorded Investment		Unpaid Principal Balance		Related Allowance (1)		Recorded Investment		Unpaid Principal Balance		Related Allowance (1)
	(Dollars in thousands)
No allowance recorded:
Commercial loans	$	13,683	$	14,858	$	—	$	18,563	$	18,839	$	—
Commercial real estate loans – owner occupied	4,845		5,173		—		2,171		2,440		—
Commercial real estate loans – all other	6,275		6,275		—		5,365		5,423		—
Residential mortgage loans – multi-family	453		454		—		—		—		—
Residential mortgage loans – single family	4,055		4,351		—		4,373		4,610		—
Land development loans	1,685		1,732		—		2,111		2,146		—
Total	30,996		32,843		—		32,583		33,458		—
With allowance recorded:
Commercial loans	$	650	$	925	$	405	$	2,554	$	2,983	$	1,532
Total	650		925		405		2,554		2,983		1,532
Total
Commercial loans	$	14,333	$	15,783	$	405	$	21,117	$	21,822	$	1,532
Commercial real estate loans – owner occupied	4,845		5,173		—		2,171		2,440		—
Commercial real estate loans – all other	6,275		6,275		—		5,365		5,423		—
Residential mortgage loans – multi-family	453		454		—		—		—		—
Residential mortgage loans – single family	4,055		4,351		—		4,373		4,610		—
Land development loans	1,685		1,732		—		2,111		2,146		—
Total	31,646		33,768		405		35,137		36,441		1,532

(1) When the discounted cash flows, collateral value or market price equals or exceeds the recorded investment in the loan, then specific reserves are not required to be set aside for the loan within the ALLL. This typically occurs when the impaired loans have been partially charged-off and/or there have been interest payments received and applied to the balance of the principal outstanding.

The following table sets forth information regarding impaired loans, at June 30, 2015 and December 31, 2014:

	June 30, 2015		December 31, 2014
	(Dollars in thousands)
Impaired loans:
Nonaccruing loans	$	6,683	$	18,118
Nonaccruing restructured loans	15,101		5,935
Accruing restructured loans (1)	9,862		11,084
Accruing impaired loans	—		—
Total impaired loans	$	31,646	$	35,137
Impaired loans less than 90 days delinquent and included in total impaired loans	$	17,066	$	32,371

(1) See "Troubled Debt Restructurings" below for a description of accruing restructured loans at June 30, 2015 and December 31, 2014.

Average balances and interest income recognized on impaired loans, by portfolio type, for the three and six months ended June 30, 2015 and 2014 were as follows:

	Three Months Ended June 30,								Six Months Ended June 30,
	2015				2014				2015				2014
	Average Balance		Interest Income Recognized		Average Balance		Interest Income Recognized		Average Balance		Interest Income Recognized		Average Balance		Interest Income Recognized
	(Dollars in thousands)
No allowance recorded:
Commercial loans	$	14,533	$	25	$	7,420	$	54	$	15,876	$	99	$	8,441	$	168
Commercial real estate loans – owner occupied	3,492		81		2,002		—		3,051		81		1,926		22
Commercial real estate loans – all other	5,812		201		6,574		70		5,663		201		6,608		188
Residential mortgage loans – multi-family	454		4		—		—		303		9		—		—
Residential mortgage loans – single family	4,143		29		3,075		30		4,220		58		3,661		60
Land development loans	1,701		7		374		—		1,838		7		380		—
Total	30,135		347		19,445		154		30,951		455		21,016		438
With allowance recorded:
Commercial loans	1,057		6		1,827		28		1,556		6		1,218		27
Commercial real estate loans – owner occupied	—		—		3,993		156		—		—		3,912		156
Total	1,057		6		5,820		184		1,556		6		5,130		183
Total
Commercial loans	15,590		31		9,247		82		17,432		105		9,659		195
Commercial real estate loans – owner occupied	3,492		81		5,995		156		3,051		81		5,838		178
Commercial real estate loans – all other	5,812		201		6,574		70		5,663		201		6,608		188
Residential mortgage loans – multi-family	454		4		—		—		303		9		—		—
Residential mortgage loans – single family	4,143		29		3,075		30		4,220		58		3,661		60
Land development loans	1,701		7		374		—		1,838		7		380		—
Total	$	31,192	$	353	$	25,265	$	338	$	32,507	$	461	$	26,146	$	621

Troubled Debt Restructurings

The following table presents loans restructured as TDRs during the three and six months ended June 30, 2015 and 2014:

	Three Months Ended
	June 30, 2015					June 30, 2014
(Dollars in thousands)	Number of Loans	Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment		Number of loans	Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment
Performing
Commercial loans	1	$	94	$	94	—	$	—	$	—
Commercial real estate – owner occupied	1	2,741		2,741		—	—		—
Commercial real estate – all other	1	4,158		4,158		—	—		—
	3	6,993		6,993		—	—		—
Nonperforming
Commercial loans	1	250		250		1	300		193
	1	250		250		1	300		193
Total Troubled Debt Restructurings	4	$	7,243	$	7,243	1	$	300	$	193
	Six Months Ended
	June 30, 2015					June 30, 2014
(Dollars in thousands)	Number of loans	Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment		Number of loans	Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment
Performing
Commercial loans	1	$	94	$	94	—	$	—	$	—
Commercial real estate – owner occupied	1	2,741		2,741		—	—		—
Commercial real estate – all other	1	4,158		4,158		—	—		—
	3	6,993		6,993		—	—		—
Nonperforming
Commercial loans	1	250		250		1	300		193
	1	250		250		1	300		193
Total Troubled Debt Restructurings	4	$	7,243	$	7,243	1	$	300	$	193

XML

Regulatory Capital

6 Months Ended

Jun. 30, 2015

Regulatory Capital Requirements [Abstract]

Regulatory Capital

Regulatory Capital

Under federal banking regulations that apply to all United States based bank holding companies and federally insured banks, the Company (on a consolidated basis) and the Bank (on a stand-alone basis) must meet specific capital adequacy requirements that, for the most part, involve quantitative measures, primarily in terms of the ratios of their capital to their assets, liabilities, and certain off-balance sheet items, calculated under regulatory accounting practices. Under those regulations, each bank holding company must meet a minimum capital ratio and each federally insured bank is determined by its primary federal bank regulatory agency to come within one of the following capital adequacy categories on the basis of its capital ratios:

• well capitalized

• adequately capitalized

• undercapitalized

• significantly undercapitalized; or

• critically undercapitalized

Certain qualitative assessments also are made by a banking institution’s primary federal regulatory agency that could lead the agency to determine that the banking institution should be assigned to a lower capital category than the one indicated by the quantitative measures used to assess the institution’s capital adequacy. At each successive lower capital category, a banking institution is subject to greater operating restrictions and increased regulatory supervision by its federal bank regulatory agency.

The following table sets forth the capital and capital ratios of the Company (on a consolidated basis) and the Bank (on a stand-alone basis) at June 30, 2015, as compared to the respective regulatory requirements applicable to them.

					Applicable Federal Regulatory Requirement
					For Capital Adequacy Purposes			To be Categorized As Well Capital
	Amount		Ratio		Amount		Ratio	Amount		Ratio
	(Dollars in thousands)
Total Capital to Risk Weighted Assets:
Company	$	147,057	16.9	%	$	69,785	At least 8.0	N/A		N/A
Bank	127,577		14.7	%	69,306		At least 8.0	$	86,633	At least 10.0
Common Equity Tier 1 Capital to Risk Weighted Assets:
Company	$	108,374	12.4	%	$	39,254	At least 4.5	N/A		N/A
Bank	116,702		13.5	%	38,985		At least 4.5	$	56,311	At least 6.5
Tier 1 Capital to Risk Weighted Assets:
Company	$	136,109	15.6	%	$	52,339	At least 6.0	N/A		N/A
Bank	116,702		13.5	%	51,980		At least 6.0	$	69,306	At least 8.0
Tier 1 Capital to Average Assets:
Company	$	136,109	13.1	%	$	41,715	At least 4.0	N/A		N/A
Bank	116,702		11.3	%	41,512		At least 4.0	$	51,890	At least 5.0

In early July 2013, the Federal Reserve Board and the FDIC issued final rules implementing the Basel III regulatory capital framework and related Dodd-Frank Wall Street Reform and Consumer Protection Act changes.  The rules revise minimum capital requirements and adjust prompt correct action thresholds.  The final rules revise the regulatory capital elements, add a new common equity Tier 1 capital ratio, increase the minimum Tier 1 capital ratio requirement, and implement a new capital conservation buffer.  The rules also permit certain banking organizations to retain, through a one-time election, the existing treatment for accumulated other comprehensive income.  The final rules took effect for community banks on January 1, 2015, subject to a transition period for certain parts of the rules.  At June 30, 2015, the Bank (on a stand-alone basis) continued to qualify as a well-capitalized institution, and the Company continued to exceed the minimum required capital ratios applicable to it, under the capital adequacy guidelines described above.

XML

Earnings Per Share ("EPS")

6 Months Ended

Jun. 30, 2015

Earnings Per Share [Abstract]

Earnings Per Share ("EPS")

Earnings Per Share (“EPS”)

Basic EPS excludes dilution and is computed by dividing net income or loss available to common shareholders by the weighted average number of common shares outstanding for the period. Diluted EPS reflects the potential dilution that could occur if stock options or other contracts to issue common stock were exercised or converted into common stock that would then share in our earnings.

The following table shows how we computed basic and diluted EPS for the three and six months ended June 30, 2015 and 2014.

(In thousands, except per share data)	For the Three Months Ended June 30,						For the Six Months Ended June 30,
	2015			2014			2015			2014
Numerator:
Net income (loss) from continuing operations	$	138		$	(768	)	$	54		$	(1,501	)
Accumulated undeclared dividends on preferred stock	(309		)	(308		)	(618		)	(604		)
Numerator for basic and diluted net loss from continuing operations	(171		)	(1,076		)	(564		)	(2,105		)
Net income from discontinued operations	—			772			—			1,956
Numerator for basic and diluted net (loss) income available to common shareholders	$	(171	)	$	(304	)	$	(564	)	$	(149	)
Denominator:
Basic weighted average outstanding shares of common stock	19,774			19,255			19,696			19,200
Dilutive effect of employee stock options and contingently issuable shares	—			—			—			—
Diluted weighted average common stock and common stock equivalents	19,774			19,255			19,696			19,200
Basic (loss) income per common share:
Net loss from continuing operations	$	(0.01	)	$	(0.06	)	$	(0.03	)	$	(0.11	)
Net income from discontinued operations	$	—		$	0.04		$	—		$	0.10
Net (loss) income available to common shareholders	$	(0.01	)	$	(0.02	)	$	(0.03	)	$	(0.01	)
Diluted (loss) income per common share:
Net loss from continuing operations	$	(0.01	)	$	(0.06	)	$	(0.03	)	$	(0.11	)
Net income from discontinued operations	$	—		$	0.04		$	—		$	0.10
Net (loss) income available to common shareholders	$	(0.01	)	$	(0.02	)	$	(0.03	)	$	(0.01	)

The weighted average shares that have an antidilutive effect in the calculation of diluted net loss per share and have been excluded from the computations above were as follows:

	For the Three Months Ended June 30,		For the Six Months Ended June 30,
	2015	2014	2015	2014
Stock options(1)	1,023,375	1,519,378	1,079,309	1,591,697
Convertible securities(2)	2,767,385	2,549,247	2,750,794	2,535,700
Shares subject to stock purchase warrants(3)	761,278	761,278	761,278	761,278

(1) Stock options were excluded from the computation of diluted earnings per common share for the three and six months ended June 30, 2015 and 2014 as we reported a net loss from continuing operations.

(2) Convertible securities were excluded from the computation of diluted earnings per common share for the three and six months ended June 30, 2015 and 2014 as we reported a net loss from continuing operations.

(3) Stock purchase warrants were excluded from the computation of diluted earnings per common share for the three and six months ended June 30, 2015 and 2014 because the exercisability of those warrants is conditioned on the happening of certain future events.

XML

Stock-Based Employee Compensation Plans - Restricted Stock Activity (Details) - Restricted Stock [Member] - $ / shares	6 Months Ended
	Jun. 30, 2015	Jun. 30, 2014
Number of Shares
Outstanding, at beginning of year (shares)	141,254	141,284
Granted (shares)	98,829	43,608
Vested (shares)	(15,848)	0
Forfeited (shares)	(3,638)	(6,286)
Outstanding, at end of year (shares)	220,597	178,606
Average Grant Date Fair Value
Outstanding, at beginning of year (in dollars per share)	$ 6.29	$ 6.23
Granted (in dollars per share)	7.10	6.29
Vested (in dollars per share)	6.43	0.00
Forfeited (in dollars per share)	6.18	6.21
Outstanding, at end of year (in dollars per share)	$ 6.63	$ 6.25

XML

Income Taxes

6 Months Ended

Jun. 30, 2015

Income Tax Disclosure [Abstract]

Income Taxes

Income Taxes

For the three and six months ended June 30, 2015 and June 30, 2014, we recorded no income tax provision. Our net deferred tax asset at June 30, 2015 was $6.0 million, net of a valuation allowance of $11.4 million. Based on the analysis performed, and the positive and negative evidence considered, management chose not to release any portion of the $11.4 million valuation allowance as of June 30, 2015. Positive evidence included our current period taxable income, improvement in asset quality, tax planning strategies, and economic conditions. Negative evidence included historical losses over the previous 12 quarter look back period and our accumulated deficit. Management determined the negative evidence was significant enough to outweigh the positive evidence and support no reversal of the valuation allowance; however, we did conclude that it was more-likely-than-not that the existing $6.0 million net deferred tax asset would be realized. Our net deferred tax asset at June 30, 2014 was $6.9 million, net of a valuation allowance of $11.8 million. Based on the analysis performed, and the positive and negative evidence considered, management chose not to release any portion of the $11.8 million valuation allowance as of June 30, 2014. Positive evidence included improvement in our asset quality, tax planning strategies, and economic conditions. Negative evidence included historical operating losses and our accumulated deficit. Management determined the negative evidence was significant enough to outweigh the positive evidence and support no reversal of the valuation allowance; however, we did conclude that it was more-likely-than-not that the existing $6.9 million net deferred tax asset at the time would be realized.

We file income tax returns with the U.S. federal government and the state of California. As of June 30, 2015, we were subject to examination by the Internal Revenue Service with respect to our U.S. federal tax returns for the 2011 to 2013 tax years and Franchise Tax Board for California state income tax returns for the 2010 to 2013 tax years. Net operating losses (“NOLs”) on our U.S. federal and California state income tax returns may be carried forward twenty years. As of June 30, 2015, we do not believe there will be any material adverse changes in our unrecognized tax benefits over the next 12 months.

Our policy is to recognize interest and penalties accrued on any unrecognized tax benefits as a component of tax expense. We did not have any accrued interest or penalties associated with any unrecognized tax benefits, and no interest expense was recognized during the three and six months ended June 30, 2015 and 2014.

XML

Stock-Based Employee Compensation Plans

6 Months Ended

Jun. 30, 2015

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

Stock-Based Employee Compensation Plans

Stock-Based Employee Compensation Plans

In May 2010, our shareholders approved the adoption of our 2010 Equity Incentive Plan (the “2010 Incentive Plan”), which authorized and set aside a total of 400,000 shares of our common stock for issuance on the exercise of stock options or the grant of restricted stock or other equity incentives to our officers, and other key employees and directors. An additional 158,211 shares of common stock were also set aside which was equal to the total of the shares that were available for the grant of equity incentives under our shareholder-approved 2008 and 2004 Equity Incentive Plans (the "Previously Approved Plans") at the time of the adoption of the 2010 Incentive Plan. Options to purchase a total of 514,348 shares of our common stock granted under the Previously Approved Plans were outstanding at June 30, 2015. The 2010 Incentive Plan provides that if any of these outstanding options under the Previously Approved Plans expire or are terminated for any reason, then the number of shares that would become available for grants or awards of equity incentives under the 2010 Incentive Plan would be increased by an equivalent number of shares. At the Annual Shareholders meeting held in May 2013, our shareholders approved an additional 800,000 share increase in the maximum number of shares of our common stock that may be issued pursuant to grants or exercises of options or restricted shares or other equity incentives under the 2010 Incentive Plan, of which 60,848 shares of restricted stock have vested as of June 30, 2015 thereby decreasing the maximum number of shares authorized under the 2010 Incentive Plan. As a result, as of June 30, 2015, the maximum number of shares that were authorized for the grant of options or other equity incentives under the 2010 Incentive Plan totaled 1,811,711 (assuming that all 514,348 shares of our common stock subject to options under the Previously Approved Plans expire or are terminated), or approximately 9% of the shares of our common stock then outstanding.

A stock option entitles the recipient to purchase shares of our common stock at a price per share that may not be less than 100% of the fair market value of the Company’s shares on the date the option is granted. Restricted shares may be granted at such purchase prices and on such other terms, including restrictions and Company repurchase or reacquisition rights, as are fixed by the Compensation Committee at the time rights to purchase such restricted shares are granted. Stock Appreciation Rights ("SARs") entitle the recipient to receive a cash payment in an amount equal to the difference between the fair market value of the Company’s shares on the date of vesting and a “base price” (which, in most cases, will be equal to the fair market value of the Company’s shares on the date the SAR is granted), subject to the right of the Company to make such payment in shares of its common stock at their then fair market value. Options, restricted shares and SARs may vest immediately or in installments over various periods generally ranging up to five years, subject to the recipient’s continued employment or service or the achievement of specified performance goals, as determined by the Compensation Committee at the time it grants or awards the options, the restricted shares or the SARs. Stock options and SARs may be granted for terms of up to 10 years after the date of grant, but will terminate sooner upon or shortly after a termination of service occurring prior to the expiration of the term of the option or SAR. The Company will become entitled to repurchase any unvested restricted shares, at the same price that was paid for the shares by the recipient, or to cancel those shares in the event of a termination of employment or service of the holder of such shares or if any performance goals specified in the award are not satisfied. To date, the Company has not granted any SARs.

Under FASB ASC 718-10, we are required to recognize, in our financial statements, the fair value of the options or any restricted shares that we grant as compensation cost over their respective service periods. The fair values of the options that were outstanding at June 30, 2015 under the 2010 Incentive Plan were estimated as of their respective dates of grant using the Black-Scholes option-pricing model. The Company, under the 2010 Incentive Plan, granted restricted stock for the benefit of its employees and directors. These restricted shares vest over a period of three years for employees and one year for directors. The recipients of restricted shares have the right to vote all shares subject to such grant and receive all dividends with respect to such shares whether or not the shares have vested. The recipients do not pay any cash consideration for the shares.

Stock Options

The table below summarizes the weighted average assumptions used to determine the fair values of the options granted during the following periods:

	Three Months Ended June 30,						Six Months Ended June 30,
Assumptions with respect to:	2015(1)			2014(1)			2015			2014
Expected volatility	—		%	—		%	44		%	44		%
Risk-free interest rate	—		%	—		%	1.82		%	2.08		%
Expected dividends	—		%	—		%	—		%	0.61		%
Expected term (years)	—			—			6.0			6.7
Weighted average fair value of options granted during period	$	—		$	—		$	3.13		$	2.75

(1) No stock options were granted during the three months ended June 30, 2015 or June 30, 2014.

The following table summarizes the stock option activity under the Company’s equity incentive plans during the six months ended June 30, 2015 and 2014, respectively.

	Number of Shares		Weighted- Average Exercise Price Per Share		Number of Shares		Weighted- Average Exercise Price Per Share
	2015				2014
Outstanding – January 1,	1,257,390		$	6.51	1,821,000		$	6.88
Granted	112,828		7.09		41,892		6.18
Exercised	(226,564	)	5.54		(92,200	)	3.74
Forfeited/Canceled	(134,553	)	11.56		(290,733	)	10.63
Outstanding – June 30,	1,009,101		6.12		1,479,959		6.32
Options Exercisable – June 30,	529,284		$	5.80	779,465		$	6.47
Options Vested – June 30,	529,284		$	5.80	779,465		$	6.47

Options to purchase 22,252 and 27,200 shares of our common stock were exercised during the three months ended June 30, 2015 and 2014, respectively. Options to purchase 226,564 and 92,200 shares of our common stock were exercised during the six months ended June 30, 2015 and 2014, respectively. The aggregate intrinsic value of options exercised during the three months ended June 30, 2015 and 2014 was $21 thousand and $58 thousand, respectively. The aggregate intrinsic value of options exercised during the six months ended June 30, 2015 and 2014 was $343 thousand and $232 thousand, respectively. The fair values of options that vested during the three months ended June 30, 2015 and 2014 was $96 thousand and $144 thousand, respectively. The fair values of options that vested during the six months ended June 30, 2015 and 2014 was $170 thousand and $214 thousand, respectively.

The following table provides additional information regarding the vested and unvested options that were outstanding at June 30, 2015.

Options Outstanding as of June 30, 2015						Options Exercisable as of June 30, 2015(1)
	Vested	Unvested	Weighted Average Exercise Price		Weighted Average Remaining Contractual Life (Years)	Shares	Weighted Average Exercise Price
$2.97 – $5.99	251,408	7,792	$	3.89	5.17	251,408	$	3.88
$6.00 – $9.99	246,576	472,025	6.47		8.25	246,576	6.41
$13.00 – $17.99	19,800	—	15.44		1.04	19,800	15.44
$18.00 – $18.84	11,500	—	18.11		0.57	11,500	18.11
	529,284	479,817	$	6.12	7.23	529,284	$	5.80

(1) The weighted average remaining contractual life of the options that were exercisable as of June 30, 2015 was 6.13 years.

The aggregate intrinsic value of options that were outstanding and exercisable under the 2010 Incentive Plan at June 30, 2015 and December 31, 2014 was $1.2 million and $1.2 million, respectively.

A summary of the status of the unvested options outstanding as of June 30, 2015, and changes in the weighted average grant date fair values of the unvested options during the six months ended June 30, 2015, are set forth in the following table.

	For the six months ended June 30,
	2015				2014
	Number of Shares Subject to Options		Weighted Average Grant Date Fair Value		Number of Shares Subject to Options		Weighted Average Grant Date Fair Value
Unvested at the beginning of the period	468,504		$	2.68	785,566		$	2.57
Granted	112,828		3.13		41,892		2.75
Vested	(74,301	)	2.57		(99,865	)	2.14
Forfeited/Canceled	(27,214	)	2.26		(27,099	)	2.68
Unvested at the end of the period	479,817		2.86		700,494		2.63

At June 30, 2015, the weighted average period over which nonvested awards were expected to be recognized was 1.94 years.

Restricted Stock

The following table summarizes the activity related to restricted stock granted, vested and forfeited under our equity incentive plans during the six months ended June 30, 2015 and 2014.

	For the Six Months Ended June 30,
	2015				2014
	Number of Shares		Average Grant Date Fair Value		Number of Shares		Average Grant Date Fair Value
Outstanding at the beginning of the period	141,254		$	6.29	141,284		$	6.23
Granted	98,829		7.10		43,608		6.29
Vested	(15,848	)	6.43		—		—
Forfeited	(3,638	)	6.18		(6,286	)	6.21
Outstanding at the end of the period	220,597		$	6.63	178,606		$	6.25

Compensation Expense

We expect that the compensation expense that will be recognized during the periods presented below in respect of stock options and restricted stock outstanding at June 30, 2015, will be as follows:

	Estimated Stock Based Compensation Expense Stock Options		Estimated Stock Based Compensation Expense Restricted Stock		Estimated Stock Based Compensation Expense Total
(Dollars in thousands)
For the years ending December 31,
Remainder of 2015	$	263	$	347	$	609
2016	303		478		781
2017	109		187		296
2018	34		23		57
2019 and beyond	6		—		6
	$	714	$	1,035	$	1,749

The aggregate amounts of stock based compensation expense recognized in our consolidated statements of operations for the three months ended June 30, 2015 and 2014 were $367 thousand and $260 thousand, respectively, and for the six months ended June 30, 2015 and 2014 were $683 thousand and $537 thousand, respectively, in each case net of taxes.

XML

Shareholders' Equity

6 Months Ended

Jun. 30, 2015

Equity [Abstract]

Shareholders' Equity

Shareholders’ Equity

Accumulated Other Comprehensive Income (Loss), net

Accumulated other comprehensive income (loss), net as of June 30, 2015 and December 31, 2014 was as follows:

	Unrealized Gain (Loss) on Securities Available-for-Sale, net of tax			Accumulated Other Comprehensive Income, Net
	(Dollars in thousands)
Ending balance as of December 31, 2013	$	(2,154	)	$	(2,154	)
Other comprehensive income before reclassifications, net of tax provision of $847 thousand (1)	1,462			1,462
Amounts reclassified from accumulated other comprehensive loss, net of tax	—			—
Other comprehensive income, net of tax provision of $847 thousand	1,462			1,462
Ending balance as of December 31, 2014	$	(692	)	$	(692	)
Other comprehensive loss before reclassifications, net of tax benefit of $98 thousand	(139		)	(139		)
Amounts reclassified from accumulated other comprehensive income, net of tax	—			—
Other comprehensive loss, net of tax benefit of $98 thousand	(139		)	(139		)
Ending balance as of June 30, 2015	$	(831	)	$	(831	)

(1) Tax impact included in Deferred tax assets.

XML

Shareholders' Equity - Accumulated Other Comprehensive Income (Loss) (Details) - USD ($) $ in Thousands	6 Months Ended	12 Months Ended
	Jun. 30, 2015	Dec. 31, 2014
Accumulated Other Comprehensive Income (Loss), Net of Tax [Roll Forward]
Beginning Balance	$ (692)	$ (2,154)
Other comprehensive income (loss) before reclassifications, net of tax	(139)	1,462
Amounts reclassified from accumulated other comprehensive income (loss), net of tax	0	0
Other comprehensive income (loss), net of tax	(139)	1,462
Ending Balance	(831)	(692)
Unrealized Gain (Loss) on Securities Available-for-Sale, net of tax [Member]
Accumulated Other Comprehensive Income (Loss), Net of Tax [Roll Forward]
Beginning Balance	(692)	(2,154)
Other comprehensive income (loss) before reclassifications, net of tax	(139)	1,462
Amounts reclassified from accumulated other comprehensive income (loss), net of tax	0	0
Other comprehensive income (loss), net of tax	(139)	1,462
Ending Balance	$ (831)	$ (692)

XML

Commitments and Contingencies - Additional Information (Details) - USD ($)	3 Months Ended		6 Months Ended		12 Months Ended
	Jun. 30, 2015	Jun. 30, 2014	Jun. 30, 2015	Jun. 30, 2014	Dec. 31, 2014
Commitments and Contingencies Disclosure [Abstract]
Repurchased loans	$ 0	$ 0	$ 619,000	$ 1,300,000
Commitment to fund certain loans including letter of credit	$ 187,000,000		187,000,000		$ 148,000,000
Loss reserve for unfunded loan commitments			$ 275,000		$ 275,000

XML

Earnings Per Share ("EPS") - Anti-dilutive Securities (Details) - shares	3 Months Ended		6 Months Ended
	Jun. 30, 2015	Jun. 30, 2014	Jun. 30, 2015	Jun. 30, 2014
Stock options [Member]
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Anti-dilutive shares excluded from computation of earnings per share	1,023,375	1,519,378	1,079,309	1,591,697
Convertible securities [Member]
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Anti-dilutive shares excluded from computation of earnings per share	2,767,385	2,549,247	2,750,794	2,535,700
Stock purchase warrants [Member]
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Anti-dilutive shares excluded from computation of earnings per share	761,278	761,278	761,278	761,278

XML

Fair Value Measurements - Assets Measured at Fair Value on Nonrecurring Basis (Detail) $ in Thousands	Jun. 30, 2015 USD ($)
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair value of assets on nonrecurring basis	$ 33,518
Impaired loans [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair value of assets on nonrecurring basis	31,646
Other real estate owned [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair value of assets on nonrecurring basis	1,872
Level 1 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair value of assets on nonrecurring basis	0
Level 1 [Member] | Impaired loans [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair value of assets on nonrecurring basis	0
Level 1 [Member] | Other real estate owned [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair value of assets on nonrecurring basis	0
Level 2 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair value of assets on nonrecurring basis	1,872
Level 2 [Member] | Impaired loans [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair value of assets on nonrecurring basis	0
Level 2 [Member] | Other real estate owned [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair value of assets on nonrecurring basis	1,872
Level 3 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair value of assets on nonrecurring basis	31,646
Level 3 [Member] | Impaired loans [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair value of assets on nonrecurring basis	31,646
Level 3 [Member] | Other real estate owned [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair value of assets on nonrecurring basis	$ 0

XML

Loans and Allowance for Loan and Lease Losses - Additional Information with Respect to Impaired Loans, by Portfolio Type (Detail) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2015	Jun. 30, 2014	Jun. 30, 2015	Jun. 30, 2014	Dec. 31, 2014
Financing Receivable, Impaired [Line Items]
Recorded Investment	$ 31,646		$ 31,646		$ 35,137
Unpaid Principal Balance	33,768		33,768		36,441
Related Allowance	405		405		1,532
Average Balance	31,192	$ 25,265	32,507	$ 26,146
Interest Income Recognized	353	338	461	621
Commercial loans [Member]
Financing Receivable, Impaired [Line Items]
Recorded Investment	14,333		14,333		21,117
Unpaid Principal Balance	15,783		15,783		21,822
Related Allowance	405		405		1,532
Average Balance	15,590	9,247	17,432	9,659
Interest Income Recognized	31	82	105	195
Commercial real estate [Member] | Owner occupied [Member]
Financing Receivable, Impaired [Line Items]
Recorded Investment	4,845		4,845		2,171
Unpaid Principal Balance	5,173		5,173		2,440
Related Allowance	0		0		0
Average Balance	3,492	5,995	3,051	5,838
Interest Income Recognized	81	156	81	178
Commercial real estate [Member] | All other [Member]
Financing Receivable, Impaired [Line Items]
Recorded Investment	6,275		6,275		5,365
Unpaid Principal Balance	6,275		6,275		5,423
Related Allowance	0		0		0
Average Balance	5,812	6,574	5,663	6,608
Interest Income Recognized	201	70	201	188
Residential mortgage loans [Member] | Multi-family [Member]
Financing Receivable, Impaired [Line Items]
Recorded Investment	453		453		0
Unpaid Principal Balance	454		454		0
Related Allowance	0		0		0
Average Balance	454	0	303	0
Interest Income Recognized	4	0	9	0
Residential mortgage loans [Member] | Single family [Member]
Financing Receivable, Impaired [Line Items]
Recorded Investment	4,055		4,055		4,373
Unpaid Principal Balance	4,351		4,351		4,610
Related Allowance	0		0		0
Average Balance	4,143	3,075	4,220	3,661
Interest Income Recognized	29	30	58	60
Land development loans [Member]
Financing Receivable, Impaired [Line Items]
Recorded Investment	1,685		1,685		2,111
Unpaid Principal Balance	1,732		1,732		2,146
Related Allowance	0		0		0
Average Balance	1,701	374	1,838	380
Interest Income Recognized	7	0	7	0
Loans with no specific reserves established [Member]
Financing Receivable, Impaired [Line Items]
Recorded Investment	30,996		30,996		32,583
Unpaid Principal Balance	32,843		32,843		33,458
Related Allowance	0		0		0
Average Balance	30,135	19,445	30,951	21,016
Interest Income Recognized	347	154	455	438
Loans with no specific reserves established [Member] | Commercial loans [Member]
Financing Receivable, Impaired [Line Items]
Recorded Investment	13,683		13,683		18,563
Unpaid Principal Balance	14,858		14,858		18,839
Related Allowance	0		0		0
Average Balance	14,533	7,420	15,876	8,441
Interest Income Recognized	25	54	99	168
Loans with no specific reserves established [Member] | Commercial real estate [Member] | Owner occupied [Member]
Financing Receivable, Impaired [Line Items]
Recorded Investment	4,845		4,845		2,171
Unpaid Principal Balance	5,173		5,173		2,440
Related Allowance	0		0		0
Average Balance	3,492	2,002	3,051	1,926
Interest Income Recognized	81	0	81	22
Loans with no specific reserves established [Member] | Commercial real estate [Member] | All other [Member]
Financing Receivable, Impaired [Line Items]
Recorded Investment	6,275		6,275		5,365
Unpaid Principal Balance	6,275		6,275		5,423
Related Allowance	0		0		0
Average Balance	5,812	6,574	5,663	6,608
Interest Income Recognized	201	70	201	188
Loans with no specific reserves established [Member] | Residential mortgage loans [Member] | Multi-family [Member]
Financing Receivable, Impaired [Line Items]
Recorded Investment	453		453		0
Unpaid Principal Balance	454		454		0
Related Allowance	0		0		0
Average Balance	454	0	303	0
Interest Income Recognized	4	0	9	0
Loans with no specific reserves established [Member] | Residential mortgage loans [Member] | Single family [Member]
Financing Receivable, Impaired [Line Items]
Recorded Investment	4,055		4,055		4,373
Unpaid Principal Balance	4,351		4,351		4,610
Related Allowance	0		0		0
Average Balance	4,143	3,075	4,220	3,661
Interest Income Recognized	29	30	58	60
Loans with no specific reserves established [Member] | Land development loans [Member]
Financing Receivable, Impaired [Line Items]
Recorded Investment	1,685		1,685		2,111
Unpaid Principal Balance	1,732		1,732		2,146
Related Allowance	0		0		0
Average Balance	1,701	374	1,838	380
Interest Income Recognized	7	0	7	0
Loans with specific reserves established [Member]
Financing Receivable, Impaired [Line Items]
Recorded Investment	650		650		2,554
Unpaid Principal Balance	925		925		2,983
Related Allowance	405		405		1,532
Average Balance	1,057	5,820	1,556	5,130
Interest Income Recognized	6	184	6	183
Loans with specific reserves established [Member] | Commercial loans [Member]
Financing Receivable, Impaired [Line Items]
Recorded Investment	650		650		2,554
Unpaid Principal Balance	925		925		2,983
Related Allowance	405		405		$ 1,532
Average Balance	1,057	1,827	1,556	1,218
Interest Income Recognized	6	28	6	27
Loans with specific reserves established [Member] | Commercial real estate [Member] | Owner occupied [Member]
Financing Receivable, Impaired [Line Items]
Average Balance	0	3,993	0	3,912
Interest Income Recognized	$ 0	$ 156	$ 0	$ 156

XML

Fair Value Measurements (Tables)

6 Months Ended

Jun. 30, 2015

Fair Value Disclosures [Abstract]

Assets and Liabilities Measured at Fair Value on Recurring Basis

The following tables show the recorded amounts of assets and liabilities measured at fair value on a recurring basis at June 30, 2015 and December 31, 2014:

	At June 30, 2015
(Dollars in thousands)	Total		Level 1		Level 2		Level 3
Assets and Liabilities at Fair Value:
Investment securities available for sale
Residential mortgage backed securities issued by U.S. agencies	$	49,474	$	—	$	49,474	$	—
Residential collateralized mortgage obligations issued by non-agency	715		—		715		—
Asset-backed security	1,465		—		—		1,465
Mutual funds	4,742		4,742		—		—
Total securities available for sale at fair value	$	56,396	$	4,742	$	50,189	$	1,465

	At December 31, 2014
(Dollars in thousands)	Total		Level 1		Level 2		Level 3
Assets and Liabilities at Fair Value:
Investment securities available for sale
Residential mortgage backed securities issued by U.S. agencies	$	53,739	$	—	$	53,739	$	—
Residential collateralized mortgage obligations issued by non-agency	777		—		777		—
Asset-backed security	1,650		—		—		1,650
Mutual funds	4,760		4,760		—		—
Total securities available for sale at fair value	$	60,926	$	4,760	$	54,516	$	1,650

Changes in Level 3 Assets Measured at Fair Value on Recurring Basis

The changes in Level 3 assets measured at fair value on a recurring basis are summarized as follows for the six months ended June 30, 2015:

	Asset Backed Securities
	(Dollars in thousands)
Balance of recurring Level 3 instruments at December 31, 2014	$	1,650
Total gains or losses (realized/unrealized):
Included in other comprehensive income	(152		)
Settlements	(33		)
Transfers in and/or out of Level 3	—
Balance of Level 3 assets at June 30, 2015	$	1,465

Assets Measured at Fair Value on Nonrecurring Basis

Information regarding assets measured at fair value on a nonrecurring basis is set forth in the table below.

	At June 30, 2015
	Total		Level 1		Level 2		Level 3
Assets at Fair Value:	(Dollars in thousands)
Impaired loans	$	31,646	$	—	$	—	$	31,646
Other real estate owned	1,872		—		1,872		—
Total	$	33,518	$	—	$	1,872	$	31,646

Summary of Significant Unobservable Inputs and Valuation Techniques

For our fair value measurements classified in Level 3 of the fair value hierarchy as of June 30, 2015, a summary of the significant unobservable inputs and valuation techniques is as follows:

	Fair Value Measurement as of June 30, 2015		Valuation Techniques(3)	Unobservable Inputs(3)	Range	Weighted Average
	(Dollars in thousands)
Assets
Asset-backed security	$	1,465	Third-Party Pricing	Marketability discount	N/A (1)	N/A (1)
				Illiquidity discount	N/A (1)	N/A (1)
Impaired loans	31,646		Third-Party Pricing	Appraisals	N/A (2)	N/A (2)
	$	33,111

(1) Information is unavailable as valuation was obtained from third-party pricing services.

(2) We obtain appraisals for our various properties included within impaired loans which primarily rely upon market comparisons. These market comparisons support our assumption that the carrying value of the respective loans either requires or does not require additional impairment.

(3) As of June 30, 2015, there has been no change to our valuation techniques or the types of unobservable inputs used in the calculation of fair value from December 31, 2014.

Estimated Fair Values and Amounts of Financial Instruments

The table below provides estimated fair values and related carrying amounts of our financial instruments as of June 30, 2015 and December 31, 2014, excluding financial assets and liabilities which are recorded at fair value on a recurring basis.

	Estimated Fair Value
	At June 30, 2015										At December 31, 2014
	Carrying Value		Total		Level 1		Level 2		Level 3		Carrying Value		Total		Level 1	Level 2	Level 3
	(Dollars in thousands)
Financial assets:
Cash and cash equivalents	$	133,579	$	133,579	$	133,579	$	—	$	—	$	177,135	$	177,135	177,135	—	—
Interest-bearing deposits with financial institutions	4,668		4,668		4,668		—		—		4,668		4,668		4,668	—	—
Federal Reserve Bank of San Francisco and Federal Home Loan Bank stock	8,170		8,170		8,170		—		—		8,137		8,137		8,137	—	—
Loans, net	821,273		819,939		—		—		819,939		824,197		818,547		—	—	818,547
Accrued interest receivable	2,105		2,105		2,105		—		—		2,436		2,436		2,436	—	—
Financial liabilities:
Noninterest bearing deposits	236,361		236,361		236,361		—		—		237,491		237,491		237,491	—	—
Interest-bearing deposits	635,589		635,287		—		635,287		—		678,818		678,890		—	678,890	—
Borrowings	30,000		29,968		—		29,968		—		39,500		39,418		—	39,418	—
Junior subordinated debentures	17,527		17,527		—		17,527		—		17,527		17,527		—	17,527	—
Accrued interest payable	183		183		183		—		—		222		222		222	—	—

XML

Shareholders' Equity (Tables)

6 Months Ended

Jun. 30, 2015

Equity [Abstract]

Schedule of Accumulated Other Comprehensive Income

Accumulated other comprehensive income (loss), net as of June 30, 2015 and December 31, 2014 was as follows:

	Unrealized Gain (Loss) on Securities Available-for-Sale, net of tax			Accumulated Other Comprehensive Income, Net
	(Dollars in thousands)
Ending balance as of December 31, 2013	$	(2,154	)	$	(2,154	)
Other comprehensive income before reclassifications, net of tax provision of $847 thousand (1)	1,462			1,462
Amounts reclassified from accumulated other comprehensive loss, net of tax	—			—
Other comprehensive income, net of tax provision of $847 thousand	1,462			1,462
Ending balance as of December 31, 2014	$	(692	)	$	(692	)
Other comprehensive loss before reclassifications, net of tax benefit of $98 thousand	(139		)	(139		)
Amounts reclassified from accumulated other comprehensive income, net of tax	—			—
Other comprehensive loss, net of tax benefit of $98 thousand	(139		)	(139		)
Ending balance as of June 30, 2015	$	(831	)	$	(831	)

(1) Tax impact included in Deferred tax assets.

XML

Loans and Allowance for Loan and Lease Losses - Summary of Loans by Portfolio Type and Internal Credit Quality Ratings (Detail) - USD ($) $ in Thousands	Jun. 30, 2015	Dec. 31, 2014
Financing Receivable, Recorded Investment [Line Items]
Total loans	$ 833,301	$ 837,971
Commercial loans [Member]
Financing Receivable, Recorded Investment [Line Items]
Total loans	323,241	301,746
Consumer loans [Member]
Financing Receivable, Recorded Investment [Line Items]
Total loans	19,907	9,687
Commercial real estate [Member] | Owner occupied [Member]
Financing Receivable, Recorded Investment [Line Items]
Total loans	203,445	212,515
Commercial real estate [Member] | All other [Member]
Financing Receivable, Recorded Investment [Line Items]
Total loans	135,966	146,676
Residential mortgage loans [Member] | Multi-family [Member]
Financing Receivable, Recorded Investment [Line Items]
Total loans	84,976	95,276
Residential mortgage loans [Member] | Single family [Member]
Financing Receivable, Recorded Investment [Line Items]
Total loans	60,191	64,326
Land development loans [Member]
Financing Receivable, Recorded Investment [Line Items]
Total loans	5,575	7,745
Pass [Member]
Financing Receivable, Recorded Investment [Line Items]
Total loans	790,306	790,755
Pass [Member] | Commercial loans [Member]
Financing Receivable, Recorded Investment [Line Items]
Total loans	308,761	280,102
Pass [Member] | Consumer loans [Member]
Financing Receivable, Recorded Investment [Line Items]
Total loans	19,907	9,687
Pass [Member] | Commercial real estate [Member] | Owner occupied [Member]
Financing Receivable, Recorded Investment [Line Items]
Total loans	196,963	208,687
Pass [Member] | Commercial real estate [Member] | All other [Member]
Financing Receivable, Recorded Investment [Line Items]
Total loans	117,257	128,974
Pass [Member] | Residential mortgage loans [Member] | Multi-family [Member]
Financing Receivable, Recorded Investment [Line Items]
Total loans	84,523	94,817
Pass [Member] | Residential mortgage loans [Member] | Single family [Member]
Financing Receivable, Recorded Investment [Line Items]
Total loans	59,005	62,854
Pass [Member] | Land development loans [Member]
Financing Receivable, Recorded Investment [Line Items]
Total loans	3,890	5,634
Special Mention [Member]
Financing Receivable, Recorded Investment [Line Items]
Total loans	11,595	7,398
Special Mention [Member] | Commercial loans [Member]
Financing Receivable, Recorded Investment [Line Items]
Total loans	0	351
Special Mention [Member] | Commercial real estate [Member] | Owner occupied [Member]
Financing Receivable, Recorded Investment [Line Items]
Total loans	2,741	0
Special Mention [Member] | Commercial real estate [Member] | All other [Member]
Financing Receivable, Recorded Investment [Line Items]
Total loans	8,854	6,588
Special Mention [Member] | Residential mortgage loans [Member] | Multi-family [Member]
Financing Receivable, Recorded Investment [Line Items]
Total loans	0	459
Substandard [Member]
Financing Receivable, Recorded Investment [Line Items]
Total loans	31,000	38,180
Substandard [Member] | Commercial loans [Member]
Financing Receivable, Recorded Investment [Line Items]
Total loans	14,080	19,655
Substandard [Member] | Commercial real estate [Member] | Owner occupied [Member]
Financing Receivable, Recorded Investment [Line Items]
Total loans	3,741	3,828
Substandard [Member] | Commercial real estate [Member] | All other [Member]
Financing Receivable, Recorded Investment [Line Items]
Total loans	9,855	11,114
Substandard [Member] | Residential mortgage loans [Member] | Multi-family [Member]
Financing Receivable, Recorded Investment [Line Items]
Total loans	453	0
Substandard [Member] | Residential mortgage loans [Member] | Single family [Member]
Financing Receivable, Recorded Investment [Line Items]
Total loans	1,186	1,472
Substandard [Member] | Land development loans [Member]
Financing Receivable, Recorded Investment [Line Items]
Total loans	1,685	2,111
Doubtful [Member]
Financing Receivable, Recorded Investment [Line Items]
Total loans	400	1,638
Doubtful [Member] | Commercial loans [Member]
Financing Receivable, Recorded Investment [Line Items]
Total loans	$ 400	$ 1,638

XML

Investments - Roll-forward of OTTI (Details) $ in Thousands	6 Months Ended
	Jun. 30, 2015 USD ($)
Gross Other-Than-Temporary Impairments
Gross Other-Than-Temporary Impairments, Beginning Balance	$ (986)
Changes for credit losses on securities for which an OTTI was not previously recognized	(180)
Principal received on OTTI security	28
Gross Other-Than-Temporary Impairments, Ending Balance	(1,138)
Other-Than-Temporary Impairments Included in Other Comprehensive Loss
Other-Than Temporary Impairments Included in Other Comprehensive Income, Beginning Balance	(433)
Changes for credit losses on securities for which an OTTI was not previously recognized	(180)
Principal received on OTTI security	28
Other-Than Temporary Impairments Included in Other Comprehensive Income, Ending Balance	(585)
Net Other-Than Temporary Impairments Included in Retained Earnings
Net Other-Than Temporary Impairments Included in Retained Earnings, Beginning Balance	(553)
Changes for credit losses on securities for which an OTTI was not previously recognized	0
Principal received on OTTI security	0
Net Other-Than Temporary Impairments Included in Retained Earnings, Ending Balance	$ (553)

XML

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2015	Jun. 30, 2014	Jun. 30, 2015	Jun. 30, 2014
Statement of Comprehensive Income [Abstract]
Net income	$ 138	$ 4	$ 54	$ 455
Other comprehensive (loss) income, net of tax:
Change in unrealized (loss) gain on securities available for sale	(327)	406	(139)	1,023
Total comprehensive (loss) income	$ (189)	$ 410	$ (85)	$ 1,478

XML

Fair Value Measurements

6 Months Ended

Jun. 30, 2015

Fair Value Disclosures [Abstract]

Fair Value Measurements

Fair Value Measurements

Under FASB Accounting Standards Codification (“ASC”) 820-10, we group assets and liabilities at fair value in three levels, based on the markets in which the assets and liabilities are traded and the reliability of the assumptions used to determine fair value. These levels are:

Level 1	Valuation is based upon quoted prices for identical instruments traded in active markets.
Level 2	Valuation is based upon quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active, and model-based valuation techniques for which all significant assumptions are observable in the market.
Level 3	Valuation is generated from model-based techniques that use at least one significant assumption not observable in the market. These unobservable assumptions reflect estimates of assumptions that market participants would use in pricing the asset or liability. Valuation techniques include use of option pricing models, discounted cash flow models and similar techniques.

Risks with Fair Value Measurements

Fair value estimates are made at a discrete point in time based on relevant market information and other information about the financial instruments. Because no active market exists for a significant portion of our financial instruments, fair value estimates are based in large part on judgments we make primarily regarding current economic conditions, risk characteristics of various financial instruments, prepayment rates, and future expected loss experience. These estimates are subjective in nature and invariably involve some inherent uncertainties. Additionally, the occurrence of unexpected events or changes in circumstances can occur that could require us to make changes to our assumptions and which, in turn, could significantly affect and require us to make changes to our previous estimates of fair value.

In addition, the fair value estimates are based on existing on and off-balance sheet financial instruments without attempting to estimate the value of existing and anticipated future customer relationships and the value of assets and liabilities that are not considered financial instruments, such as premises and equipment and OREO.

Measurement Methodology

Cash and Cash Equivalents. The fair value of cash and cash equivalents approximates its carrying value.

Interest-Bearing Deposits with Financial Institutions. The fair values of interest-bearing deposits maturing within one year approximate their carrying values.

FHLB and FRBSF Stock. The Bank is a member of the Federal Home Loan Bank of San Francisco (“FHLB”) and the FRBSF. As members, we are required to own stock of the FHLB and the FRBSF, the amount of which is based primarily on the level of our borrowings from those institutions. We also have the right to acquire additional shares of stock in either or both of the FHLB and the FRBSF. During the three and six months ended June 30, 2015, we purchased $33 thousand in value of FHLB stock. The fair values of the FHLB and FRBSF stock are equal to their respective carrying amounts, are classified as restricted securities and are periodically evaluated for impairment based on our assessment of the ultimate recoverability of our investments in that stock. Any cash or stock dividends paid to us on such stock are reported as income.

Investment Securities Available for Sale.Fair value measurement for our investment securities available for sale is based upon quoted prices, if available. If quoted prices are not available, fair values are measured using independent pricing models or other model-based valuation techniques such as the present value of future cash flows, adjusted for the security’s credit rating, prepayment assumptions and other factors such as credit loss assumptions. Level 1 investment securities include those traded on an active exchange, such as the New York Stock Exchange, U.S. Treasury securities that are traded by dealers or brokers in active over-the- counter markets and money market funds. Level 2 investment securities include mortgage-backed securities issued by government sponsored entities, municipal bonds and corporate debt securities. Securities classified as Level 3 include asset-backed securities in less liquid markets.

Impaired Loans. Loans measured for impairment are measured at an observable market price (if available), or the fair value of the loan’s collateral (if the loan is collateral dependent). The fair value of an impaired loan may be estimated using one of several methods, including collateral value, market value of similar debt, liquidation value and discounted cash flows. Those impaired loans not requiring a specific loan loss reserve represent loans for which the fair value of the expected repayments or collateral exceeds the recorded investments in such loans. When the fair value of the collateral is based on an observable market price or a current appraised value, we record the impaired loan at Level 2. When an appraised value is not available or we determine that the fair value of the collateral is further impaired below the appraised value and there is no observable market price, we record the impaired loan at Level 3.

Loans. The fair value for loans with variable interest rates less a credit discount is the carrying amount. The fair value of fixed rate loans is derived by calculating the discounted value of future cash flows expected to be received by the various homogeneous categories of loans. All loans have been adjusted to reflect changes in credit risk. Changes are not recorded directly as an adjustment to current earnings or comprehensive income, but rather as an adjustment component in determining the overall adequacy of the loan loss reserve.

Other Real Estate Owned. OREO is reported at its net realizable value (fair value less estimated costs to sell), at the time any real estate collateral is acquired by the Bank in satisfaction of a loan. Subsequently, OREO is carried at the lower of carrying value or fair value less estimated costs to sell. Fair value is determined based upon independent market prices, appraised values of the collateral or management’s estimation of the value of the collateral. When the fair value of the collateral is based on an observable market price or a current appraised value, we record the foreclosed asset at Level 2. When an appraised value is not available or management determines the fair value of the collateral is further impaired below the appraised value and there is no observable market price, we record the foreclosed asset at Level 3.

Deposits. Deposits are carried at historical cost. The carrying amounts of deposits from savings and money market accounts are deemed to approximate fair value as they either have no stated maturities or short-term maturities. Certificates of deposit are estimated utilizing discounted cash flow techniques. The interest rates applied are rates currently being offered for similar certificates of deposit.

Borrowings. The fair value of borrowings is the carrying amount for those borrowings that mature on a daily basis. The fair value of term borrowings is derived by calculating the discounted value of future cash flows expected to be paid out by the Company.

Junior Subordinated Debentures. The fair value of the junior subordinated debentures is based on quoted market prices of the underlying securities. These securities are variable rate in nature and repriced quarterly.

Commitments to Extend Credit and Standby Letters of Credit. The fair value of commitments to extend credit and standby letters of credit are based on fees currently charged to enter into similar agreements, taking into account the remaining terms of the agreements and the counterparties’ credit standing.

Interest Receivable and Interest Payable. The carrying amounts of our accrued interest receivable and accrued interest payable are deemed to approximate fair value.

Assets Recorded at Fair Value on a Recurring Basis

The following tables show the recorded amounts of assets and liabilities measured at fair value on a recurring basis at June 30, 2015 and December 31, 2014:

	At June 30, 2015
(Dollars in thousands)	Total		Level 1		Level 2		Level 3
Assets and Liabilities at Fair Value:
Investment securities available for sale
Residential mortgage backed securities issued by U.S. agencies	$	49,474	$	—	$	49,474	$	—
Residential collateralized mortgage obligations issued by non-agency	715		—		715		—
Asset-backed security	1,465		—		—		1,465
Mutual funds	4,742		4,742		—		—
Total securities available for sale at fair value	$	56,396	$	4,742	$	50,189	$	1,465

	At December 31, 2014
(Dollars in thousands)	Total		Level 1		Level 2		Level 3
Assets and Liabilities at Fair Value:
Investment securities available for sale
Residential mortgage backed securities issued by U.S. agencies	$	53,739	$	—	$	53,739	$	—
Residential collateralized mortgage obligations issued by non-agency	777		—		777		—
Asset-backed security	1,650		—		—		1,650
Mutual funds	4,760		4,760		—		—
Total securities available for sale at fair value	$	60,926	$	4,760	$	54,516	$	1,650

The changes in Level 3 assets measured at fair value on a recurring basis are summarized as follows for the six months ended June 30, 2015:

	Asset Backed Securities
	(Dollars in thousands)
Balance of recurring Level 3 instruments at December 31, 2014	$	1,650
Total gains or losses (realized/unrealized):
Included in other comprehensive income	(152		)
Settlements	(33		)
Transfers in and/or out of Level 3	—
Balance of Level 3 assets at June 30, 2015	$	1,465

Assets Recorded at Fair Value on a Nonrecurring Basis

We may be required, from time to time, to measure certain assets at fair value on a nonrecurring basis in accordance with GAAP. These nonrecurring fair value adjustments typically involve application of lower of cost or market accounting or write-downs of individual assets. Information regarding assets measured at fair value on a nonrecurring basis is set forth in the table below.

	At June 30, 2015
	Total		Level 1		Level 2		Level 3
Assets at Fair Value:	(Dollars in thousands)
Impaired loans	$	31,646	$	—	$	—	$	31,646
Other real estate owned	1,872		—		1,872		—
Total	$	33,518	$	—	$	1,872	$	31,646

Significant Unobservable Inputs and Valuation Techniques of Level 3 Fair Value Measurements

For our fair value measurements classified in Level 3 of the fair value hierarchy as of June 30, 2015, a summary of the significant unobservable inputs and valuation techniques is as follows:

	Fair Value Measurement as of June 30, 2015		Valuation Techniques(3)	Unobservable Inputs(3)	Range	Weighted Average
	(Dollars in thousands)
Assets
Asset-backed security	$	1,465	Third-Party Pricing	Marketability discount	N/A (1)	N/A (1)
				Illiquidity discount	N/A (1)	N/A (1)
Impaired loans	31,646		Third-Party Pricing	Appraisals	N/A (2)	N/A (2)
	$	33,111

(1) Information is unavailable as valuation was obtained from third-party pricing services.

(2) We obtain appraisals for our various properties included within impaired loans which primarily rely upon market comparisons. These market comparisons support our assumption that the carrying value of the respective loans either requires or does not require additional impairment.

(3) As of June 30, 2015, there has been no change to our valuation techniques or the types of unobservable inputs used in the calculation of fair value from December 31, 2014.

Fair Value Measurements for Other Financial Instruments

The table below provides estimated fair values and related carrying amounts of our financial instruments as of June 30, 2015 and December 31, 2014, excluding financial assets and liabilities which are recorded at fair value on a recurring basis.

	Estimated Fair Value
	At June 30, 2015										At December 31, 2014
	Carrying Value		Total		Level 1		Level 2		Level 3		Carrying Value		Total		Level 1	Level 2	Level 3
	(Dollars in thousands)
Financial assets:
Cash and cash equivalents	$	133,579	$	133,579	$	133,579	$	—	$	—	$	177,135	$	177,135	177,135	—	—
Interest-bearing deposits with financial institutions	4,668		4,668		4,668		—		—		4,668		4,668		4,668	—	—
Federal Reserve Bank of San Francisco and Federal Home Loan Bank stock	8,170		8,170		8,170		—		—		8,137		8,137		8,137	—	—
Loans, net	821,273		819,939		—		—		819,939		824,197		818,547		—	—	818,547
Accrued interest receivable	2,105		2,105		2,105		—		—		2,436		2,436		2,436	—	—
Financial liabilities:
Noninterest bearing deposits	236,361		236,361		236,361		—		—		237,491		237,491		237,491	—	—
Interest-bearing deposits	635,589		635,287		—		635,287		—		678,818		678,890		—	678,890	—
Borrowings	30,000		29,968		—		29,968		—		39,500		39,418		—	39,418	—
Junior subordinated debentures	17,527		17,527		—		17,527		—		17,527		17,527		—	17,527	—
Accrued interest payable	183		183		183		—		—		222		222		222	—	—

XML

Stock-Based Employee Compensation Plans - Additional Information Regarding Vested and Unvested Options Outstanding (Detail 2)	6 Months Ended
	Jun. 30, 2015
Disclosure of Compensation Related Costs, Share-based Payments [Abstract]
Options Exercisable, Weighted Average Remaining Contractual life	6 years 1 month 17 days

XML

Business Segment Information - Net Interest Income and Noninterest Income (Detail) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2015	Jun. 30, 2014	Jun. 30, 2015	Jun. 30, 2014	Dec. 31, 2014
Segment Reporting Information [Line Items]
Net interest income	$ 8,489	$ 7,629	$ 16,638	$ 15,547
Noninterest income	616	730	1,498	3,597
Assets	1,046,861		1,046,861		$ 1,099,610
Continuing Operations [Member]
Segment Reporting Information [Line Items]
Net interest income	8,489	7,626	16,638	15,470
Noninterest income	616	984	1,498	2,162
Assets	1,046,861		1,046,861		1,099,610
Continuing Operations [Member] | Commercial [Member]
Segment Reporting Information [Line Items]
Net interest income	8,562	7,698	16,805	15,539
Noninterest income	613	984	1,492	2,162
Assets	1,041,558		1,041,558		1,094,120
Continuing Operations [Member] | Other [Member]
Segment Reporting Information [Line Items]
Net interest income	(73)	(72)	(167)	(69)
Noninterest income	3	0	6	0
Assets	5,303		5,303		5,490
Discontinued Operations [Member]
Segment Reporting Information [Line Items]
Net interest income	0	3	0	77
Noninterest income	0	$ (254)	0	$ 1,435
Assets	$ 0		$ 0		$ 0

XML

Commitments and Contingencies (Tables)

6 Months Ended

Jun. 30, 2015

Commitments and Contingencies Disclosure [Abstract]

Activity Related Repurchase Reserves For Previously Sold Loans

The following table sets forth information at June 30, 2015 and December 31, 2014, with respect to our repurchase reserves:

	At and For the Six Months Ended			At and For the Year Ended
	June 30, 2015			December 31, 2014
	(Dollars in thousands)
Beginning balance	$	381		$	1,883
(Recovery of)/Provision for repurchases	31			(1,502		)
Settlements	(66		)	—
Total repurchases reserve	$	346		$	381

XML

Investments - Major Components of Securities Available for Sale (Details) - USD ($) $ in Thousands	Jun. 30, 2015	Dec. 31, 2014
Schedule of Available-for-sale Securities [Line Items]
Total	$ 57,982	$ 62,276
Gross Unrealized Gain	50	71
Gross Unrealized Loss	(1,636)	(1,421)
Estimated Fair Value	56,396	60,926
Mortgage backed securities issued by U.S. Agencies [Member]
Schedule of Available-for-sale Securities [Line Items]
Total	50,451	54,653
Gross Unrealized Gain	13	26
Gross Unrealized Loss	(990)	(940)
Estimated Fair Value	49,474	53,739
Residential collateralized mortgage obligations issued by non-agency [Member]
Schedule of Available-for-sale Securities [Line Items]
Total	731	790
Gross Unrealized Gain	0	0
Gross Unrealized Loss	(16)	(13)
Estimated Fair Value	715	777
Asset-backed security [Member]
Schedule of Available-for-sale Securities [Line Items]
Total	2,050	2,083
Gross Unrealized Gain	0	0
Gross Unrealized Loss	(585)	(433)
Estimated Fair Value	1,465	1,650
Mutual funds [Member]
Schedule of Available-for-sale Securities [Line Items]
Total	4,750	4,750
Gross Unrealized Gain	37	45
Gross Unrealized Loss	(45)	(35)
Estimated Fair Value	$ 4,742	$ 4,760

XML

Significant Accounting Policies (Policies)

6 Months Ended

Jun. 30, 2015

Accounting Policies [Abstract]

Interim Consolidated Financial Statements Basis of Presentation

Interim Consolidated Financial Statements Basis of Presentation

Our interim consolidated financial statements are prepared in accordance with generally accepted accounting principles in effect in the United States (“GAAP”) for interim financial information pursuant to rules and regulations of the U.S. Securities and Exchange Commission (the “SEC”), including instructions to Form 10-Q and Article 10 of Regulation S-X, on a basis consistent with prior periods. Our financial statements reflect all adjustments that are, in the opinion of management, necessary to present a fair statement of the results for the interim periods presented. The interim results are not necessarily indicative of operating results for the full year. The interim information should be read in conjunction with our audited consolidated financial statements in our Form 10-K.

Use of Estimates

Use of Estimates

The preparation of the financial statements in conformity with GAAP requires us to make certain estimates and assumptions that could affect the reported amounts of certain of our assets, liabilities, and contingencies at the date of the financial statements and the reported amounts of our revenues and expenses during the reporting periods. For the fiscal periods covered by this report, those estimates related primarily to our determinations of the allowance for loan and lease losses (“ALLL”), other real estate owned (“OREO”), the fair values of securities available for sale, repurchase reserves, and the determination of the valuation allowance pertaining to deferred tax assets. If circumstances or financial trends on which those estimates were based were to change in the future or there were to occur any currently unanticipated events affecting the amounts of those estimates, our future financial position or results of operations could differ, possibly materially, from those expected at the current time.

Principles of Consolidation

Principles of Consolidation

Our consolidated financial statements for the three and six months ended June 30, 2015 and 2014 include the accounts of PMBC, the Bank and PMAR. All significant intercompany balances and transactions were eliminated in consolidation.

Recent Accounting Pronouncements

Recent Accounting Pronouncements

In February 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standard Update (“ASU”) 2014-04, “Receivables — Troubled Debt Restructurings by Creditors (Subtopic 310-40) — Reclassification of Residential Real Estate Collateralized Consumer Mortgage Loans upon Foreclosure,” which amended its guidance to clarify when a creditor should be considered to have received physical possession of residential real estate property collateralizing a consumer mortgage loan such that the loan should be derecognized and the real estate recognized. This guidance is effective for interim and annual periods beginning after December 15, 2014. Early adoption is permitted. We adopted this guidance on January 1, 2015 and it did not have a material effect on our consolidated financial statements.

In April 2014, the FASB issued ASU 2014-08, “Presentation of Financial Statements (Topic 205) and Property, Plant, and Equipment (Topic 360): Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity,” which amended its guidance on classification and reporting of discontinued operations. The amendments clarify when an entity should classify a component as discontinued operations, how to report the balances related to discontinued operations for prior periods, and additional disclosure requirements for discontinued operations. This guidance is effective for interim and annual periods beginning after December 15, 2014. Early adoption is permitted only for disposals which have not been previously reported. We adopted this guidance on January 1, 2015 and it did not have a material effect on our consolidated financial statements.

In May 2014, the FASB issued ASU 2014-09, “Revenue from Contracts with Customers (Topic 606),” which amended its guidance on revenue recognition to conform with international accounting guidance under the International Accounting Standards Board. The ASU provides a framework for addressing revenue recognition and replaces most existing revenue recognition guidance, as well as requires increased disclosure requirements. In July 2015, the FASB voted to defer the effective date of ASU 2014-09. Accordingly, this guidance is effective for interim and annual periods beginning after December 15, 2017 with early adoption permitted for interim and annual periods beginning after December 15, 2016. We will adopt this guidance on January 1, 2018. We are currently evaluating the expected impact on our consolidated financial statements.

In June 2014, the FASB issued ASU 2014-11, “Accounting for Share-Based Payments When the Terms of an Award Provide That a Performance Target Could Be Achieved after the Requisite Service Period,” which amended its guidance on how to account for certain performance related share-based compensation plans. The amendments clarify the guidance on how to account for performance based awards when the requisite service period is met prior to potential performance targets being achieved. This guidance is effective for interim and annual periods beginning after December 15, 2015. Early adoption is permitted. We will adopt this guidance on January 1, 2016 and do not expect it to have a material effect on our consolidated financial statements.

In August 2014, the FASB issued ASU 2014-15, “Presentation of Financial Statements — Going Concern (Subtopic 205-40): Disclosure of Uncertainties about an Entity's Ability to Continue as a Going Concern,” which defines management's responsibility to evaluate whether there is substantial doubt about an organization's ability to continue as a going concern and clarifies when to provide related footnote disclosure. This guidance is effective for interim and annual periods beginning after December 15, 2016. Early adoption is permitted. We will adopt this guidance on January 1, 2017 and do not expect it to have a material effect on our consolidated financial statements.

In January 2015, the FASB issued ASU 2015-01, “Income Statement - Extraordinary and Unusual Items (Subtopic 225-20): Simplifying Income Statement Presentation by Eliminating the Concept of Extraordinary Items,” which eliminated the concept of extraordinary items from GAAP. This guidance is effective for interim and annual periods beginning after December 15, 2015. Early adoption is permitted. We adopted this guidance on January 1, 2015 and it did not have an impact on our consolidated financial statements.

In February 2015, the FASB issued ASU 2015-02, “Consolidation (Topic 810): Amendments to the Consolidation Analysis,” amends the guidance for assessing how relationships of related parties affect the consolidation analysis, eliminates the presumption that a general partner should consolidate a limited partnership, eliminates the consolidation model specific to limited partnerships, clarifies when fees paid to a decision maker should be a factor in consolidation of a variable interest entity, and reduces the number of variable interest entity consolidation models. This guidance is effective for interim and annual periods beginning after December 15, 2015. Early adoption is permitted. We will adopt this guidance on January 1, 2016 and do not expect it to have an impact on our financial statements.

In April 2015, the FASB issued ASU 2015-03, “Interest - Imputation of Interest (Subtopic 835-30): Simplifying the Presentation of Debt Issuance Costs,” which requires that the debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability. This simplifies the presentation of debt issuance costs and makes the presentation consistent with the presentation of debt discounts. This guidance is effective for interim and annual periods beginning after December 15, 2015. Early adoption is permitted. We will adopt this guidance on January 1, 2016 and do not expect it to have a material impact on our financial statements.