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, 2013

OR

¨ 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 Number)
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)

Not Applicable

(Former name, former address and former fiscal year, if changed, since last year)

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 website, if any, every interactive data file required to be submitted and posted pursuant to Rule 405 of Regulation S-T (section 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 definition of “accelerated filer”, “large accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.) (Check one):

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

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

APPLICABLE ONLY TO CORPORATE ISSUERS:

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

18,905,941 shares of Common Stock as of August 5, 2013

QUARTERLY REPORT ON FORM 10Q

FOR

THE QUARTER ENDED JUNE 30, 2013

TABLE OF CONTENTS

		Page
Part I. Financial Information
Item 1.	Financial Statements (unaudited)		1
	Consolidated Statements of Financial Condition at June 30, 2013 and December 31, 2012		1
	Consolidated Statements of Operations for the Six Months ended June 30, 2013 and 2012		2
	Consolidated Statements of Comprehensive (Loss) Income for the Six Months ended June 30, 2013 and 2012		3
	Consolidated Statements of Cash Flows for the Six Months ended June 30, 2013 and 2012		4
	Consolidated Statement of Shareholders’ Equity for the Six Months ended June 30, 2013		5
	Notes to Interim Consolidated Financial Statements		6
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		32
Item 4T.	Controls and Procedures		59
Part II. Other Information
Item 1A.	Risk Factors		60
Item 6.	Exhibits		60
Signatures			S-1
Exhibit Index			E-1
Exhibit 31.1 Certification of Chief Executive Officer under Section 302 of the Sarbanes – Oxley Act of 2002
Exhibit 31.2 Certification of Chief Financial Officer under Section 302 of the Sarbanes – Oxley Act of 2002
Exhibit 32.1 Certification of Chief Executive Officer under Section 906 of the Sarbanes – Oxley Act of 2002
Exhibit 32.2 Certification of Chief Financial Officer under 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

(i)

PART I.—FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

PACIFIC MERCANTILE BANCORP AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION

(Dollars in thousands, except share and per share data)

(Unaudited)

	June 30, 2013			December 31, 2012
ASSETS
Cash and due from banks	$	15,671		$	12,256
Interest bearing deposits with financial institutions		73,691			115,952
Cash and cash equivalents		89,362			128,208
Interest-bearing time deposits with financial institutions		2,423			2,423
Federal Reserve Bank and Federal Home Loan Bank Stock, at cost		8,918			10,284
Securities available for sale, at fair value		69,950			86,378
Loans held for sale at fair value		10,672			55,809
Loans (net of allowances of $11,123 and $10,881, respectively)		717,818			719,257
Other real estate owned		17,331			17,710
Accrued interest receivable		2,178			2,242
Premises and equipment, net		1,414			1,362
Other assets		32,047			30,268
Total assets	$	952,113		$	1,053,941
LIABILITIES AND SHAREHOLDERS’ EQUITY
Deposits:
Noninterest-bearing	$	188,149		$	170,259
Interest-bearing		560,831			675,136
Total deposits		748,980			845,395
Borrowings		45,000			55,000
Accrued interest payable		2,055			1,832
Other liabilities		8,231			11,311
Junior subordinated debentures		17,527			17,527
Total liabilities		821,793			931,065
Commitments and contingencies (Note 2)
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, 2013 and December 31, 2012; liquidation preference $100 per share, plus accumulated but undeclared dividends at June 30, 2013 and December 31, 2012		8,747			8,747
Series C Convertible 8.4% Noncumulative Preferred Stock, 300,000 shares authorized; 12,803 issued and outstanding at June 30, 2013 and December 31, 2012; liquidation preference $100 per share plus accumulated but undeclared dividends at June 30, 2013 and December 31, 2012		1,280			1,280
Common stock, no par value, 85,000,000 shares authorized; 18,905,941 and 16,677,419 shares issued and outstanding at June 30, 2013 and December 31, 2012, respectively		128,168			112,790
Retained (deficit) earnings		(5,687	)		624
Accumulated other comprehensive loss		(2,188	)		(565	)
Total shareholders’ equity		130,320			122,876
Total liabilities and shareholders’ equity	$	952,113		$	1,053,941

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

1

Part I. Item 1. (continued)

PACIFIC MERCANTILE BANCORP AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(Dollars in thousands, except for shares and per share data)

(Unaudited)

	Three Months Ended June 30,						Six Months Ended June 30,
	2013			2012			2013			2012
Interest income
Loans, including fees	$	8,359		$	9,887		$	16,878		$	19,265
Securities available for sale and stock		387			392			757			1,269
Interest-bearing deposits with financial institutions		76			74			171			129
Total interest income		8,822			10,353			17,806			20,663
Interest expense
Deposits		1,173			1,898			2,576			3,949
Borrowings		209			311			432			555
Total interest expense		1,382			2,209			3,008			4,504
Net interest income		7,440			8,144			14,798			16,159
Provision for (recovery of) loan losses		—			1,850			1,150			1,450
Net interest income after provision for loan losses		7,440			6,294			13,648			14,709
Noninterest income
Total other-than-temporary impairment of securities		—			—			—			(25	)
Less: Portion of other-than-temporary impairment losses recognized in other comprehensive loss		—			—			—			52
Net impairment loss recognized in earnings		—			—			—			(77	)
Service fees on deposits and other banking services		196			245			392			478
Mortgage banking (including net gains on sales of loans held for sale)		1,719			8,450			3,308			12,981
Net gains on sale of securities available for sale		—			—			23			1,186
Net (loss) gain on sale of other real estate owned		1			130			1			111
Other		(523	)		301			(298	)		475
Total noninterest income		1,393			9,126			3,426			15,154
Noninterest expense
Salaries and employee benefits		6,761			6,531			12,878			12,148
Occupancy		703			669			1,369			1,321
Equipment and depreciation		486			520			1,115			918
Data processing		200			180			398			375
FDIC expense		546			545			1,092			1,159
Other real estate owned expense		857			1,877			2,974			3,701
Professional fees		902			1,403			2,568			2,290
Mortgage related loan expense		317			925			744			1,278
Provision for (recovery of) contingencies		(279	)		—			(539	)		339
Other operating expense		1,482			1,032			2,715			2,390
Total noninterest expense		11,975			13,682			25,314			25,919
(Loss) Income before income taxes		(3,142	)		1,738			(8,240	)		3,944
Income tax (benefit) provision		—			(4,058	)		(1,929	)		(3,234	)
Net (loss) income		(3,142	)		5,796			(6,311	)		7,178
Accumulated undeclared dividends on preferred stock		(262	)		(234	)		(524	)		(468	)
Net (loss) income allocable to common shareholders	$	(3,404	)	$	5,562		$	(6,835	)	$	6,710
(Loss) Income per common share
Basic	$	(0.18	)	$	0.35		$	(0.38	)	$	0.48
Diluted	$	(0.18	)	$	0.35		$	(0.38	)	$	0.47
Weighted average number of common shares outstanding
Basic		18,905,842			15,778,678			17,825,311			14,087,522
Diluted		18,905,842			15,977,939			17,825,311			14,205,583

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

2

Part I. Item 1. (continued)

PACIFIC MERCANTILE BANCORP AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME (LOSS)

(Dollars in thousands)

(Unaudited)

	Three Months Ended June 30,					Six Months Ended June 30,
	2013			2012		2013			2012
Net (loss) income	$	(3,142	)	$	5,796	$	(6,311	)	$	7,178
Other comprehensive (loss) income net of tax:
Change in unrealized gain (loss) on securities available for sale		(1,014	)		1,405		(1,643	)		1,053
Change in net unrealized gain (loss) and prior service benefit on supplemental executive retirement plan		—			9		20			18
Total comprehensive (loss) income	$	(4,156	)	$	7,210	$	(7,934	)	$	8,249

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

3

Part I. Item 1. (continued)

PACIFIC MERCANTILE BANCORP AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Dollars in thousands)

(Unaudited)

	Six Months Ended June 30,
	2013			2012
Cash Flows From Operating Activities:
Net (loss) income	$	(6,311	)	$	7,178
Adjustments to reconcile net (loss) income to net cash provided by (used in) operating activities:
Depreciation and amortization		280			268
Provision for loan losses		1,150			1,450
Amortization of premium on securities		278			183
Net gains on sales of securities available for sale		(23	)		(1,186	)
Net gains on sales of loans held for sale		(5,333	)		(13,995	)
Other than temporary impairment on securities available for sale		—			77
Net mark-to-market on mortgage loans held for sale		2,192			(6,352	)
Proceeds from sales and principal reductions of mortgage loans held for sale		153,920			359,337
Originations and purchases of mortgage loans held for sale		(103,366	)		(424,540	)
Repurchases of mortgage loans held for sale		—			(864	)
Net amortization of deferred fees and unearned income on loans		(132	)		(270	)
Net gain on sale of fixed assets		—			(25	)
Net gain on sales of other real estate owned		(1	)		(111	)
Write down of other real estate owned		1,922			429
Stock-based compensation expense		355			207
Net mark-to-market (gain) loss on derivatives		(803	)		2,268
Net mark to market (gain) loss on mortgage servicing rights		(1,021	)		—
Changes in operating assets and liabilities:
Net (increase) decrease in accrued interest receivable		64			(103	)
Net increase in other assets		(3,765	)		(2,730	)
Net increase in deferred taxes		(587	)		(6,369	)
Net (increase) decrease in income taxes receivable		(2,246	)		159
Net increase in accrued interest payable		223			175
Net increase (decrease) in other liabilities		(3,060	)		3,377
Net cash provided by operating activities		33,736			81,437
Cash Flows From Investing Activities:
Net increase in interest-bearing time deposits with financial institutions		—			(130	)
Maturities of and principal payments received on securities available for sale and other stock		14,552			22,085
Purchase of securities available for sale and other stock		—			(107,357	)
Proceeds from sale of securities available for sale and other stock		6,164			135,619
Proceeds from sale of other real estate owned		—			6,000
Capitalized cost of other real estate owned		—			(337	)
Net increase in loans		(1,121	)		(48,191	)
Purchases of premises and equipment		(332	)		(574	)
Proceeds from sale of premises and equipment		—			36
Net cash provided by investing activities		19,263			7,151
Cash Flows From Financing Activities:
Proceeds from sale of common stock		14,999			24,591
Net decrease in deposits		(96,415	)		(5,041	)
Net (decrease) increase in borrowings		(10,000	)		20,000
Proceeds from exercise of common stock options		23			1
Proceeds from sale of stock purchase warrants		—			44
Net cash provided by (used in) financing activities		(91,393	)		39,595
Net decrease in cash and cash equivalents		(38,846	)		(34,691	)
Cash and Cash Equivalents, beginning of period		128,208			96,467
Cash and Cash Equivalents, end of period	$	89,362		$	61,776
Supplementary Cash Flow Information:
Cash paid for interest on deposits and other borrowings	$	2,785		$	4,329
Cash paid for income taxes		—			318
Non-Cash Investing Activities:
Transfer of loans held for sale to loans held for investment	$	—		$	6,788
Transfer of loans into other real estate owned	$	1,544		$	416

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

4

Part I. Item 1. (continued)

PACIFIC MERCANTILE BANCORP AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF SHAREHOLDERS’ EQUITY

(Shares and dollars in thousands)

(Unaudited)

For The Six Months Ended June 30, 2013

	Series B and C Preferred Stock				Common Stock				Retained Earnings (Deficit)			Accumulated Other Comprehensive Loss			Total
	Number of Shares		Amount		Number of Shares		Amount
Balance at January 1, 2013		125	$	10,027		16,677	$	112,790	$	624		$	(565	)	$	122,876
Issuance of common stock		—		—		2,222		15,000		—			—			15,000
Common stock based compensation expense		—		—		—		355		—			—			355
Common stock options exercised		—		—		6		23		—			—			23
Net loss		—		—		—		—		(6,311	)		—			(6,311	)
Change in accumulated other comprehensive loss		—		—		—		—		—			(1,623	)		(1,623	)
Balance at June 30, 2013		125	$	10,027		18,905	$	128,168	$	(5,687	)	$	(2,188	)	$	130,320

The accompanying notes are an integral part of this consolidated financial statement.

5

Part I. Item 1. (continued)

PACIFIC MERCANTILE BANCORP AND SUBSIDIARIES

Notes to Interim Consolidated Financial Statements

(Unaudited)

1. Nature of Business

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” or the “FRB”) and the Federal Reserve Bank of San Francisco under delegated authority from the Federal Reserve Board. Substantially all of our operations are conducted and substantially all our assets are owned by the Bank, which accounts for substantially all of our consolidated revenues and expenses, and our earnings. 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 of 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 Division of Financial Institutions (DFI) of the Department of Business Oversight (“DBO”) and is a member of the Federal Reserve Bank of San Francisco (the “FRBSF”). In addition, the deposit accounts of the Bank’s customers are insured by the Federal Deposit Insurance Corporation (“FDIC”) up to the maximum amount allowed by law.

During the first quarter of 2013, PMBC organized a new wholly-owned subsidiary, PM Asset Resolution, Inc. (“PMAR”) for the purpose of purchasing certain non-performing loans and other real estate from the Bank and thereafter collecting or disposing of those. 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, Recent Accounting Pronouncements, Commitments and Contingencies

The accompanying unaudited interim consolidated financial statements have been prepared in accordance with the instructions to Form 10-Q and, therefore, do not include all footnotes that would be required for a full presentation of our financial position, results of operations, changes in cash flows and comprehensive income (loss) in accordance with generally accepted accounting principles in the United States (“GAAP”). However, these interim financial statements reflect all adjustments (consisting of normal recurring adjustments and accruals) which, in the opinion of management, are necessary for a fair presentation of our consolidated financial position and results of operations for the interim periods presented. These interim consolidated financial statements also reflect any events which may have occurred between July 1, 2013 and the date on which this Quarterly Report on Form 10-Q was filed with the Securities and Exchange Commission (the “SEC”) and which required any adjustments to or disclosure in these financial statements.

These unaudited consolidated financial statements have been prepared on a basis consistent with prior periods and should be read in conjunction with our audited consolidated financial statements as of and for the year ended December 31, 2012, and the notes thereto, included in our Annual Report on Form 10-K for the year ended December 31, 2012 (our “2012 10-K”), as filed with the SEC under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)

Our consolidated financial position at June 30, 2013, and the consolidated results of operations for the six months then ended, are not necessarily indicative of what our financial position will be at December 31, 2013, or of the results of our operations that may be expected for any other interim period or for the full year ending December 31, 2013.

Use of Estimates

The preparation of 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 losses, the fair values of securities available for sale and mortgage loans held for sale, repurchase reserves on mortgage loans held for sale, and the determination of reserves 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.

6

2. Significant Accounting Policies, Recent Accounting Pronouncements, Commitments and Contingencies  (Cont,-)

Recently Adopted Accounting Pronouncements

In February 2013, the FASB issued Accounting Standards Update (“ASU”) 2013-02, “Reporting of Amounts Reclassified out of Accumulated Other Comprehensive Income”, ASU No. 2013-02, which requires an entity to report the effect of significant reclassifications out of accumulated other comprehensive income on the respective lines in the entity’s net income if the amount being reclassified is required under GAAP to be reclassified in its entirety to net income. The ASU is effective for fiscal years, and interim periods within those years, beginning after December 15, 2012. The adoption of ASU No. 2013-02 did not have a material impact on our consolidated financial condition or results of operations.

Commitments and Contingencies

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, 2013, loan commitments and letters of credit totaled $118 million and $2 million, respectively. The contractual amount of a credit-related financial instrument such as a commitment to extend credit, a credit-card arrangement or a letter of credit represents the amounts 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.

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 credit worthiness of the customer. Collateral held varies, but may include accounts receivable, inventory, property, plant and equipment, real estate and income-producing commercial properties.

During the first quarter of 2012, we began selling a portion of our mortgage loan production directly to secondary market investors on a “mandatory commitment” basis, agreeing to sell a specified dollar amount of mortgage loans at an agreed-upon price within a specified timeframe in order to avail ourselves of more favorable pricing on mortgage loan sales to investors. In order to mitigate interest rate risk on loans subject to such mandatory commitments, when we locked the interest rate for the borrowers on those loans prior to funding, we locked the price to sell the loans to investors in a mandatory commitment and entered into a mortgage backed to-be-announced (“TBA”) security. The mandatory commitment and the TBA security act as a hedge against market interest rate movements between the time the interest rate is locked and the loan is funded and sold in the secondary market. TBA securities are deemed to be derivatives and involve off-balance sheet financial risk. The contractual or notional amounts of the TBA securities are tied to the Bank’s loan origination volume and we bear a financial risk from such securities. The unrealized gains from the interest rate contracts and TBA security hedges were $584,000 and $393,000 for the three and six months ended June 30, 2013, respectively. These gains or losses depend upon the value of the underlying financial instruments and are affected by market changes in interest rates.

TBA securities pose credit risk for us if and to the extent that the institutional counterparties are unable to meet the terms of the agreements. We control counterparty credit risk by using multiple counterparties and limiting them to major financial institutions with investment grade credit ratings. In addition, we regularly monitor the potential risk of loss with any one party resulting from this type of credit risk.

Legal Proceedings

Mark Zigner vs. Pacific Mercantile Bank, et al., filed in January, 2010, in the California Superior Court for the County of Orange (Case No.0337433). This lawsuit was filed by plaintiff asserting that a set-off by the Bank of funds in plaintiff’s deposit accounts in the Bank’s efforts to recover borrowings owed to it by plaintiff was wrongful.

As previously reported, at the conclusion of a jury trial in February 2012, the plaintiff was awarded $250,000 of compensatory damages and $950,000 in punitive damages against the Bank. In addition, the trial court entered an award to plaintiff of his attorney’s fees and costs, in the amount of $762,000. Promptly thereafter, the Bank filed an appeal of the trial court’s rulings and the jury verdict, asserting that those rulings and the jury’s verdict were erroneous.

7

2. Significant Accounting Policies, Recent Accounting Pronouncements, Commitments and Contingencies  (Cont,-)

Due to the inherent uncertainties with respect to the ultimate outcome of appeals and the opportunity to put an end to what was becoming a lengthy and costly appellate process, on May 13, 2013, we entered into a settlement with the plaintiff pursuant to which plaintiff released all claims that he had or might have had against the Bank in exchange for the payment by the Bank to plaintiff of $1,316,377, and to plaintiff’s lien claimant of $33,623, totaling $1,350,000, which was less than the contingency reserve previously established by the Bank for this suit. As a result, the settlement had no material effect on the Company’s results of operations for the three or the six months ended June 30, 2013.

Other Claims. We also are subject to legal actions that arise from time to time in the ordinary course of our business. Currently there are no such pending legal proceedings that we believe their resolution will be material to our financial condition or results of operations.

Regulatory Matters

On August 31, 2010, the Company and the Bank entered into a Written Agreement (the “FRBSF Agreement”) with FRBSF. On the same date, the Bank consented to the issuance of a regulatory order by the DFI (“DFI Order”). The principal purposes of the FRBSF Written Agreement and DFI Order, which constitute formal supervisory actions by the FRBSF and the DFI, were to require us to adopt and implement formal plans and take certain actions, as well as to continue to implement other measures that we previously adopted, to address the adverse consequences that the economic recession has had on the performance of our loan portfolio and our operating results, to improve our operating results, and to increase our capital to strengthen our ability to weather any further adverse economic conditions that might arise in the future.

The FRBSF Agreement and DFI Order contain substantially similar provisions. They required the Boards of Directors of the Company and the Bank to prepare and submit written plans to the FRBSF and the DFI to address the following matters: (i) strengthening board oversight of the management operations of the Bank; (ii) strengthening credit risk management practices; (iii) improving credit administration policies and procedures; (iv) improving the Bank’s position with respect to problem assets; (v) maintaining adequate reserves for loan losses in accordance with applicable supervisory guidelines; (vi) improving the capital position of the Bank and, in the case of the FRBSF Agreement, the capital position of the Company; (vii) improving the Bank’s earnings through the formulation, adoption and implementation of a new strategic plan, and (viii) submitting a satisfactory funding contingency plan for the Bank that would identify available sources of liquidity and a plan for dealing with possible future adverse economic and market conditions. The Bank is also prohibited from paying dividends to the Company without the prior approval of the DFI, and the Company may not declare or pay cash dividends, repurchase any of its shares, make payments on its trust preferred securities or incur or guarantee any debt, without the prior approval of the FRBSF.

The Company and the Bank already have made substantial progress with respect to several of these requirements, including a requirement, achieved in August 2011, that the Bank raise additional capital to increase its ratio of adjusted tangible shareholders’ equity to its tangible assets to 9.0%. Additionally, both the Board and management are committed to achieving all of the requirements on a timely basis. However, a failure by the Company or the Bank to meet any of those remaining requirements could be deemed, by the FRBSF or the DFI, to be conducting business in an unsafe manner which could subject the Company or the Bank to further regulatory enforcement action.

8

3. Fair Value Measurements

The following tables shows the recorded amounts of assets and liabilities measured at fair value on a recurring basis at June 30, 2013 and December 31, 2012:

	At June 30, 2013
(Dollars in thousands)	Total			Level 1		Level 2			Level 3
Investment securities available for sale
Mortgage backed securities issued by U.S. agencies	$	62,634		$	—	$	62,634		$	—
Collateralized mortgage obligations issued by non-agency		2,308			—		2,308			—
Asset backed securities		775			—		—			775
Mutual funds		4,233			4,233		—			—
Total securities available for sale at fair value		69,950			4,233		64,942			775
Loans held for sale		10,672			—		10,672			—
Other assets – Mortgage servicing rights		3,823			—		—			3,823
Derivative assets – IRLC’s		81			—		—			81
Derivative assets – TBA securities		540			—		—			540
Total assets measured at fair value on a recurring basis	$	85,066		$	4,233	$	75,614		$	5,219
	At December 31, 2012
(Dollars in thousands)	Total			Level 1		Level 2			Level 3
Investment securities available for sale
Mortgage backed securities issued by U.S. agencies	$	78,446		$	—	$	78,446		$	—
Collateralized mortgage obligations issued by non agency		2,625			—		1,963			662
Asset back securities		900			—		—			900
Mutual funds		4,407			4,407		—			—
Total securities available for sale at fair value		86,378			4,407		80,409			1,562
Loans held for sale		55,809			—		55,809			—
Other assets – Mortgage servicing rights		2,801			—		—			2,801
Derivative assets – IRLC’s		580			—		—			580
Total assets measured at fair value on a recurring basis	$	145,568		$	4,407	$	136,218		$	4,943
Derivative liabilities – TBA securities	$	(158	)	$	—	$	(158	)	$	—
Total liabilities measured at fair value on a recurring basis	$	(158	)	$	—	$	(158	)	$	—

The changes in Level 3 assets measured at fair value on a recurring basis are summarized in the following table:

(Dollars in thousands)	Investment Securities Available for Sale
Balance of recurring Level 3 instruments at January 1, 2013	$	4,943
Total gains or losses (realized/unrealized):
Included in earnings-realized		—
Included in earnings-unrealized		—
Included in other comprehensive income		(1,413	)
Purchases		—
Sales		—
Issuances		—
Settlements		1,689
Transfers in and/or out of Level 3		—
Balance of Level 3 assets at June 30, 2013	$	5,219

9

3. Fair Value Measurements  (Cont,-)

The following is a description of valuation methodologies used for assets and liabilities recorded at fair value on a recurring basis.

Investment Securities Available for Sale. Fair value measurement 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 investments 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.

Loans Held for Sale (LHFS). Effective December 1, 2011, the Company elected to measure new LHFS at fair value. The remaining LHFS are carried at the lower of cost or market. Fair value is based on quoted market prices, if available, prices for other traded mortgage loans with similar characteristics, purchase commitments and bid information received from market participants. We classify those loans subject to recurring fair value adjustments as Level 2, given the meaningful level of secondary market activity for conforming mortgage loans.

Mortgage Servicing Rights. Fair value measurement 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 that would incorporate assumptions that market participants would use in estimating the fair value of servicing. These assumptions might include estimates of prepayment speeds, discount rate, costs to service, escrow account earnings, contractual servicing fee income, prepayment and late fees, among other considerations. Mortgage servicing rights are considered a Level 3 measurement at June 30, 2013 and are included in other assets in the accompanying consolidated balance sheets.

Derivative Assets and Liabilities. The Company’s derivative assets and liabilities are carried at fair value as required by GAAP and are accounted for as free standing derivatives. The derivative assets are interest rate lock commitments (“IRLCs”) with prospective residential mortgage borrowers whereby the interest rate on the loan is determined prior to funding and the borrowers have locked in that interest rate. These commitments are determined to be derivative instruments in accordance with GAAP. The derivative liabilities are hedging instruments (typically TBA securities) used to hedge the risk of fair value changes associated with changes in interest rates relating to its mortgage loan origination operations. The Company hedges the period from the interest rate lock (assuming a fall-out factor) to the date of the loan sale. The estimated fair value is based on current market prices for similar assets plus a fall-out factor estimated by management and accordingly, the Company classifies its derivative assets and liabilities as Level 3 measurement at June 30, 2013 and such assets are included in other assets in the accompanying consolidated statement of financial condition.

The following descriptions present qualitative information about the valuation techniques and unobservable inputs applied to Level 3 fair value measurements for financial instruments measured at fair value on a recurring and non-recurring basis at June 30, 2013.

Investment Securities Available for Sale. The valuation technique used for Level 3 investment securities is a discounted cash flow. Inputs considered in determining Level 3 pricing include, the securities anticipated prepayment rates, default rates, and the loss severity given a future default. Significant increases or decreases in any of those inputs in isolation would result in significantly lower or higher fair value measurement. In general, a change in the assumption regarding the probability of default is accompanied by a directionally similar change in the assumption used for the loss severity in an event of default. Prepayment rates are subject to change based on market conditions. For the asset backed security, the security was priced using an option adjusted discounted cash flow model. This discount margin of 6.5% was based on sector spreads and trading in related credit markets. A 2% constant default rate was presumed based on historical analysis and forward projection. A loss severity of 90% was based on low recovery expectations in this sector.

Mortgage Servicing Rights. The valuation technique used for Level 3 mortgage servicing rights is based upon market prices for similar instruments and an internal discounted cash flow model. The valuation model incorporates assumptions that market participants would use in estimating the fair value of servicing, the most significant of which include estimates of prepayment speeds of between 10% and 15%, and a discount rate of 12%. For mortgage servicing rights, a significant increase in discount rates would result in a significantly lower estimated fair value. The impact of changes in prepayment speeds would have differing impacts depending on the seniority or other characteristics of the instrument.

Derivative assets – IRLC’s. The valuation technique used for Level 3 IRLC’s is based on pricing of related loan instruments (which includes the value of servicing), which are Level 2 inputs, however also includes an estimate for a fall-out factor, otherwise known as the “pull-through” rate. A significant increase or decrease in pull-through rate assumptions would result in a significant increase or decrease in the fair value of IRLCs. The Company believes that the imprecision of an estimate could be significant.

10

3. Fair Value Measurements  (Cont,-)

Derivative assets and liabilities – TBA’s. The valuation technique used for Level 2 TBA’s is based on pricing of the hedging instruments (TBA’s), which are used to hedge the fair value changes associated with changes in interest rates relating to its mortgage lending operations. The Company hedges the period from the interest rate lock (assuming a fall-out factor) to the date of the loan sale. The fair value of the hedging instruments is based on the actively quoted TBA MBS market using observable inputs related to the characteristics of the underlying MBS stratified by product, coupon and settlement date. TBA’s are classified as Level 2 measurement as of June 30, 2013.

Assets Recorded at Fair Value on a Nonrecurring Basis

The Company 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.

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, enterprise value, liquidation value and discounted cash flows. Those impaired loans not requiring an allowance for loan losses 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.

Foreclosed Assets. Foreclosed assets are adjusted to fair value, less estimated costs to sell, at the time the loans are transferred to foreclosed assets. Subsequently, foreclosed assets are 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 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 foreclosed asset at Level 3.

Loans Held for Sale. Mortgage loans held for sale and funded prior to December 1, 2011 are carried at the lower of cost or market value. The fair value of these loans held for sale is based on what secondary markets are currently offering for portfolios with similar characteristics. As such, the Company classifies loans subject to nonrecurring fair value adjustments as Level 2.

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

	At June 30, 2013
(Dollars in thousands)	Total		Level 1		Level 2		Level 3
Assets at Fair Value:
Impaired loans	$	31,085	$	—	$	6,743	$	24,342
Loans held for sale		10,672		—		10,672		—
Other assets(1)		17,331		—		17,331		—
Total	$	59,088	$	—	$	34,746	$	24,342

⁽¹⁾  Includes foreclosed assets.

There were no transfers in or out of Level 3 measurements for nonrecurring items during the six months ended June 30, 2013.

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.

11

3. Fair Value Measurements  (Cont,-)

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 other real estate owned.

Fair Value Measurements for all Financial Instruments.

The following methods and assumptions were used to estimate the fair value of financial instruments not previously discussed.

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 ninety days approximate their carrying values.

Federal Home Loan Bank and Federal Reserve Bank Stock. The Bank is a member of the Federal Home Loan Bank (the “FHLB”) and the Federal Reserve Bank of San Francisco (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; however, to date, we have not done so. The fair values of that 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.

Deposits. The fair value of demand deposits, savings deposits, and money market deposits is defined as the amounts payable on demand at quarter-end. The fair value of fixed maturity certificates of deposit is estimated based on the discounted value of the future cash flows expected to be paid on the deposits.

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 reprice 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.

12

3. Fair Value Measurements  (Cont,-)

The estimated fair values and related carrying amounts of all of the Company’s financial instruments are as follows:

	At June 30, 2013
(Dollars in thousands)	Total			Level 1			Level 2			Level 3
Cash and cash equivalents	$	89,362		$	89,362		$	—		$	—
Interest-bearing deposits with financial institutions		2,423			2,423			—			—
Federal Reserve Bank and Federal Home Loan Bank Stock		8,918			8,918			—			—
Investment securities available for sale:
Mortgage backed securities issued by U.S. agencies		62,634			—			62,634			—
Collateralized mortgage obligations issued by non-agency		2,308			—			2,308			—
Asset backed securities		775			—			—			775
Mutual funds		4,233			4,233			—			—
Loans held for sale		10,672			—			10,672			—
Loans, net		717,818			—			717,818			—
Other assets – Mortgage servicing rights		3,823			—			—			3,823
Derivative assets – IRLC’s		81			—			—			81
Derivative assets – TBA securities		540			—			540			—
Total assets measured at fair value on a recurring basis	$	903,587		$	104,936		$	793,972		$	4,679
Noninterest bearing deposits	$	(188,149	)	$	(188,149	)	$	—		$	—
Interest-bearing deposits		(560,831	)		(560,831	)		—			—
Borrowings		(45,000	)		(45,000	)		—			—
Junior subordinated debentures		(17,527	)		(17,527	)		—			—
Total liabilities measured at fair value on a recurring basis	$	(811,507	)	$	(811,507	)	$	—		$	—
	At December 31, 2012
(Dollars in thousands)	Total			Level 1			Level 2			Level 3
Cash and cash equivalents	$	128,208		$	128,208		$	—		$	—
Interest-bearing deposits with financial institutions		2,423			2,423			—			—
Federal Reserve Bank and Federal Home Loan Bank Stock		10,284			10,284			—			—
Investment securities available for sale:
Mortgage backed securities issued by U.S. agencies		78,446			—			78,446			—
Collateralized mortgage obligations issued by non agency		2,625			—			1,963			662
Asset back securities		900			—			—			900
Mutual funds		4,407			4,407			—			—
Loans held for sale		55,809			—			55,809			—
Loans, net		719,257			—			719,257			—
Other assets – Mortgage servicing rights		2,801			—			—			2,801
Derivative assets – IRLC’s		580			—			—			580
Total assets measured at fair value on a recurring basis	$	1,005,740		$	145,322		$	855,475		$	4,943
Noninterest bearing deposits	$	(170,259	)	$	(170,259	)	$	—		$	—
Interest-bearing deposits		(675,136	)		(675,136	)		—			—
Borrowings		(45,000	)		(45,000	)		—			—
Junior subordinated debentures		(17,527	)		(17,527	)		—			—
Derivative liabilities – TBA securities		(158	)		—			(158	)		—
Total liabilities measured at fair value on a recurring basis	$	(908,080	)	$	(907,922	)	$	(158	)	$	—

13

3. Fair Value Measurements  (Cont,-)

Fair Value Option.

The following table reflects the differences between the fair value carrying amount of LHFS measured at fair value under ASU 825 and the aggregate unpaid principal amount we are contractually entitled to receive at maturity.

The assets accounted for under the fair value option are initially measured at fair value. Gains and losses from initial measurement and subsequent changes in fair value are recognized in earnings. The changes in fair value related to initial measurement and subsequent changes in fair value included in earnings for these assets measured at fair value are shown, by income statement line item, below.

Loans Held for Sale at Fair Value	Three Months Ended June 30,					Six Months Ended June 30,
(Dollars in thousands)	2013			2012		2013			2012
Changes in fair value included in net income:
Mortgage banking noninterest income (loss)	$	(610	)	$	4,901	$	(2,192	)	$	6,352

	June 30, 2013
(Dollars in thousands)	Fair Value Carrying Amount		Aggregate Unpaid Principal		Fair Value Carrying Amount Less Aggregate Unpaid Principal
Loans held for sale reported at fair value:
Total loans	$	10,672	$	10,595	$	77
Nonaccrual loans		—		—		—
Loans 90 days or more past due and still accruing interest		—		—		—

Information Regarding Derivative Financial Instruments.

The following table includes information for the derivative assets and liabilities for the periods presented:

					Total Gains (Losses)
	Notional Balance				Three Months Ended June 30						Six Months Ended June 30
(Dollars in thousands)	June 30, 2013		June 30, 2012		2013			2012			2013			2012
Derivative assets – IRLC’s	$	8,712	$	80,836	$	(238	)	$	1,581		$	(427	)	$	2,600
Derivative liabilities – TBAs	$	15,500	$	132,719	$	628		$	(1,029	)	$	698		$	(1,005	)

4. Investment Securities Available For Sale

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, 2013 and December 31, 2012:

(Dollars in thousands)	Amortized Cost		Gross Unrealized Gain		Gross Unrealized Loss			Estimated Fair Value
Securities available for sale at June 30, 2013:
Mortgage backed securities issued by U.S. agencies(1)	$	64,883	$	22	$	(2,271	)	$	62,634
Collateralized mortgage obligations issued by non-agency(1)		2,309		60		(61	)		2,308
Asset backed securities(2)		2,247		—		(1,472	)		775
Mutual funds(3)		4,233		—		—			4,233
Total securities available for sale	$	73,672	$	82	$	(3,804	)	$	69,950
Securities available for sale at December 31, 2012:
Mortgage-backed securities issued by U.S. agencies(1)	$	78,053	$	553	$	(160	)	$	78,446
Collateralized mortgage obligations issued by non-agency(1)		2,599		87		(61	)		2,625
Asset backed securities(2)		2,247		—		(1,347	)		900
Mutual funds(3)		4,407		—		—			4,407
Total securities available for sale	$	87,306	$	640	$	(1,568	)	$	86,378

⁽¹⁾  Secured by closed-end first lien 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.

14

4. Investment Securities Available For Sale  (Cont,-)

At June 30, 2013 and December 31, 2012, U.S. agency mortgage backed securities and collateralized mortgage obligations with an aggregate fair market value of $13 million and $10 million, respectively, were pledged to secure Federal Home Loan Bank borrowings, repurchase agreements, local agency deposits and Treasury, tax and loan accounts.

The amortized costs and estimated fair values of securities available for sale at June 30, 2013 and December 31, 2012, are shown in the table below by contractual maturities and 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, 2013 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	$	11,443		$	32,600		$	17,803		$	11,826		$	73,672
Securities available for sale, estimated fair value		11,113			31,723			17,096			10,018			69,950
Weighted average yield		1.28	%		1.51	%		1.49	%		1.36	%		1.45	%
	At December 31, 2012 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	$	11,679		$	35,038		$	24,738		$	15,851		$	87,306
Securities available for sale, estimated fair value		11,788			35,264			24,747			14,579			86,378
Weighted average yield		1.59	%		1.62	%		1.62	%		1.43	%		1.58	%

The Company recognized net gains on sales of securities available for sale of $23,000, on sale proceeds of $6.2 million during the six months ended June 30, 2013 and $1.2 million, on sale proceeds of $136 million during the six months ended June 30, 2012.

The table below indicates, as of June 30, 2013, 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, 2013
	Less than 12 months					12 months or more					Total
Dollars in thousands	Fair Value		Unrealized Loss			Fair Value		Unrealized Loss			Fair Value		Unrealized Loss
Mortgage backed securities issued by U.S. agencies	$	61,183		(2,270	)		38		(1	)		61,221		(2,271	)
Collateralized mortgage obligations issued by non-agency		—		—			1,065		(61	)		1,065		(61	)
Asset backed securities		—		—			775		(1,472	)		775		(1,472	)
Total temporarily impaired securities	$	61,183	$	(2,270	)	$	1,878	$	(1,534	)	$	63,061	$	(3,804	)

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 table 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”) for our available-for-sale debt securities in accordance with ASC 320-10. When there are credit losses associated with an impaired debt security, but we have no intention of selling, 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).

15

4. Investment Securities Available For Sale  (Cont,-)

Through the impairment assessment process, we determined that the available-for-sale securities discussed below were other-than-temporarily impaired at June 30, 2013. We recorded no impairments of credit losses on available-for-sale securities in our consolidated statement of operations for the six months ended June 30, 2013. The OTTI related to factors other than credit losses, in the aggregate amount of $1.4 million, was recognized as other comprehensive loss in our balance sheet at June 30, 2013.

The table below presents a roll-forward of OTTI where a portion attributable to non-credit related factors was recognized in other comprehensive loss for the six months ended June 30, 2013:

(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, 2012	$	(1,995	)	$	(1,264	)	$	(731	)
Additions for credit losses on securities for which an OTTI was not previously recognized		(44	)		(44	)		—
Balance – March 31, 2013	$	(2,039	)	$	(1,308	)	$	(731	)
Additions for credit losses on securities for which an OTTI was not previously recognized		(105	)		(105	)		—
Balance – June 30, 2013	$	(2,144	)	$	(1,413	)	$	(731	)

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 held 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 when making 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 held for sale that was impaired as of June 30, 2013. 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 consisting 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 +60 basis points, which had a rating of Aa2/AA by Moody’s and Fitch at the time of issuance in 2007.

16

4. Investment Securities Available For Sale  (Cont,-)

As of June 30, 2013 the amortized cost of this security was $2.25 million with a fair value of $775,000, for an unrealized loss of approximately $1.5 million. As of June 30, 2013, the security had a Ca rating from Moody’s and CC rating from Fitch and had experienced $42.5 million in defaults (12.5% of total current collateral) and $43.5 million in deferring securities (12.8% of total current collateral) from issuance to June 30, 2013. The security did not pay its scheduled second quarter 2013 interest payment. We are not currently accruing interest on this security. We estimate that the security could experience another $72.5 million in defaults before the issuer would not receive all of the contractual cash flows under this security. This analysis is based on the following assumptions: future default rates of 2.5%, prepayment rates of 1% until maturity, and 15% recovery of future defaults. With respect to this security, we did not recognize any impairment losses to earnings during the second quarter of 2013; whereas we recognized $77,000 of impairment losses to earnings for the same period in 2012. Set forth below is additional information regarding impairment losses that we recognized in earnings for the six months ended June 30, 2013 and 2012:

Impairment Losses on OTTI Securities	For the Three Months Ended June 30,				For the Six Months Ended June 30,
(Dollars in thousands)	2013		2012		2013		2012
Asset backed securities	$	0	$	—	$	0	$	77
Total impairment loss recognized in earnings	$	0	$	—	$	0	$	77

We have made a determination that the remainder of our securities with respect to which there were unrealized losses as of June 30, 2013 were not other-than-temporarily impaired, because we concluded that we had 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).

5. Mortgage Banking

Mortgage Loans Held for Sale (LHFS), at fair value

A summary of the unpaid principal balances of mortgage loans held-for-sale (“LHFS”) for which the fair value option has been elected, by type, is presented below:

(Dollars in thousands)	At June 30, 2013		At December 31, 2012
Government	$	5,798	$	16,902
Conventional		3,040		10,805
Jumbo		1,757		20,514
Fair value adjustment		77		2,269
Total mortgage loans held-for-sale at fair value	$	10,672	$	50,490

We did not have any delinquent or nonaccrual LHFS as of June 30, 2013.

Gains on LHFS for the six months ended June 30, 2013 and 2012 are as follows:

	Three Months Ended						Six Months Ended
(Dollars in thousands)	June 30, 2013			June 30, 2012			June 30, 2013			June 30, 2012
Gain on sale of mortgage loans	$	1,424		$	9,290		$	5,333		$	13,995
Net loan servicing		296			(13	)		494			(17	)
Unrealized gains (losses) from derivative financial statements		584			461			393			1,513
Realized gains (losses) derivative financial instruments		367			(255	)		519			(291	)
Mark-to-market (loss) gain on LHFS		(610	)		4,726			(2,192	)		6,418
Direct origination (expenses) fees, net		(964	)		(5,948	)		(1,943	)		(8,830	)
Provision for repurchases		(32	)		(411	)		(83	)		(438	)
Total gain on LHFS	$	1,065		$	7,850		$	2,521		$	12,350

17

5. Mortgage Banking  (Cont,-)

Repurchase Reserves

We maintain reserves for possible repurchases that we may be required to make of certain of the mortgage loans which we sell due to deficiencies or defects that may be found to exist in such loans. The following table sets forth information, at June 30, 2013 and December 31, 2012, with respect to such reserves:

(Dollars in thousands)	At June 30, 2013		At December 31, 2012
Beginning balance	$	906	$	115
Provision for repurchases		83		791
Settlements		—		—
Total repurchases reserve	$	989	$	906

We did not repurchase any loans in the six months ended June 30, 2013 or six months ended June 30, 2012. We review the repurchase reserves throughout the year for adequacy.

Mortgage Servicing Rights

We sometimes retain mortgage servicing rights on mortgage loans that we sell. Such rights represent the net positive cash flows generated from the servicing of such mortgage loans and we recognize such rights as assets on our statements of financial condition based on their estimated fair values. We receive servicing fees, less any subservicing costs, on the unpaid principal balances of such mortgage loans. Those fees are collected from the monthly payments made by the mortgagors or from the proceeds of the sale or foreclosure and liquidation of the underlying real property collateralizing the loans. We also generally receive various mortgagor-contracted fees, such as late charges, collateral reconveyance charges and nonsufficient fund fees. In addition, we generally are entitled to retain interest earned on funds held pending remittance (or float) related to the collection of principal, interest, taxes and insurance payments on the mortgage loans which we service. At June 30, 2013 and December 31, 2012, mortgage servicing rights totaled $3.8 million and $2.8 million, respectively, and are included in other assets in the accompanying consolidated statement of financial condition.

The following table sets forth the principal amounts of the mortgage loans we were servicing, categorized by type of loan, at June 30, 2013 and December 31, 2012, we were servicing approximately $488 million, and $456 million, respectively, in principal amount of mortgage loans with the following characteristics:

	Unpaid Principal Balance
(Dollars in thousands)	At June 30, 2013		At December 31, 2012
Government	$	401,509	$	396,951
Conventional		86,401		58,867
Total loans serviced	$	487,910	$	455,818

18

6. Loans and Allowance for Loan Losses

The composition of the Company’s loan portfolio as of June 30, 2013 and December 31, 2012 was as follows:

	June 30, 2013						December 31, 2012
(Dollars in thousands)	Amount			Percent			Amount			Percent
Commercial loans	$	195,439			26.8	%	$	170,792			23.4	%
Commercial real estate loans – owner occupied		156,215			21.4	%		165,922			22.7	%
Commercial real estate loans – all other		158,179			21.7	%		150,189			20.6	%
Residential mortgage loans – multi-family		97,383			13.4	%		105,119			14.4	%
Residential mortgage loans – single family		75,241			10.3	%		87,263			11.9	%
Land development loans		19,653			2.7	%		24,018			3.3	%
Consumer loans		27,106			3.7	%		27,296			3.7	%
Gross loans		729,216			100.0	%		730,599			100.0	%
Deferred fee (income) costs, net		(275	)					(461	)
Allowance for loan losses		(11,123	)					(10,881	)
Loans, net	$	717,818					$	719,257

At June 30, 2013 and December 31, 2012, real estate loans of approximately $216 million and $162 million, respectively, were pledged to secure borrowings obtained from the Federal Home Loan Bank.

Allowance for Loan Losses

The allowance for loan losses (“ALL”) represents our estimate of credit losses inherent in the loan portfolio 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 ALL and the amount of the provisions that are required to be made for potential loan losses to increase or replenish the ALL.

The ALL is first determined by (i) analyzing all classified loans (graded as “Substandard” or “Doubtful” under our internal credit quality grading parameters—see below) 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 a specific reserve established for any “shortfall” amount. 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.

On a quarterly basis, we utilize a classification migration model and individual loan review analytical tools as starting points for determining the adequacy of the ALL 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 a 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 credit quality grading parameters, we grade the loans as “Pass,” “Special Mention,” “Substandard” or “Doubtful”. We also conduct individual loan review analysis, as part of the ALL allocation process, applying specific monitoring policies and procedures in analyzing the existing loan portfolios. Set forth below is a summary of the activity in the ALL during the following periods:

	Three Months Ended June 30, 2013			Six Months Ended June 30, 2013			Year Ended December 31, 2012
(Dollars in thousands)
Balance, beginning of period	$	11,018			10,881		$	15,627
Charged off loans		(1,433	)		(2,918	)		(8,574	)
Recoveries on loans previously charged off		1,538			2,010			1,878
Provision for loan losses		—			1,150			1,950
Balance, end of period	$	11,123			11,123		$	10,881

19

6. Loans and Allowance for Loan Losses  (Cont,-)

Set forth below is information regarding loan balances and the related allowance for loan losses, by portfolio type, for the six months ended June 30, 2013, June 30, 2012, and the year ended December 31, 2012 (excluding mortgage loans held for sale).

(Dollars in thousands)	Commercial			Real  Estate(1)			Land Development			Consumer and Single Family Mortgages			Total
Allowance for Loan Losses:
Six months ended June 30, 2013
Balance at beginning of period	$	6,340		$	3,487		$	248		$	806		$	10,881
Charge offs		(2,603	)		(308	)		(5	)		(2	)		(2,918	)
Recoveries		1,932			2			54			22			2,010
Provision		1,284			(327	)		—			193			1,150
Balance at end of period	$	6,953		$	2,854		$	297		$	1,019		$	11,123
Three months ended June 30, 2013
Balance at beginning of period	$	6,850		$	3,053		$	216		$	899		$	11,018
Charge offs		(1,433	)		—			—			—			(1,433	)
Recoveries		1,532			1			—			5			1,538
Provision		4			(200	)		81			115			—
Balance at end of period	$	6,953		$	2,854		$	297		$	1,019		$	11,123
ALL balance at end of period related to:
Loans individually evaluated for impairment	$	2,158		$	—		$	—		$	—		$	2,158
Loans collectively evaluated for impairment	$	4,795		$	2,854		$	297		$	1,019		$	8,965
Loans balance at end of period:
Loans individually evaluated for impairment	$	11,867		$	18,016		$	414		$	788		$	31,085
Loans collectively evaluated for impairment		183,572			393,761			19,239			101,559			698,131
Ending Balance	$	195,439		$	411,777		$	19,653		$	102,347		$	729,216
ALL for the six months ended June 30, 2012:
Balance at beginning of quarter	$	8,908		$	5,777		$	316		$	626		$	15,627
Charge offs		(1,668	)		(655	)		(80	)		(258	)		(2,661	)
Recoveries		221			1			0			10			232
Provision		947			(219	)		490			232			1,450
Balance at end of quarter	$	8,408		$	4,904		$	726		$	610		$	14,648
ALL balance at June 30, 2012 related to:
Loans individually evaluated for impairment	$	4,049		$	189		$	—		$	—		$	4,238
Loans collectively evaluated for impairment	$	4,359		$	4,715		$	726		$	610		$	10,410
Loans balance at June 30, 2012:
Loans individually evaluated for impairment	$	18,761		$	16,921		$	528		$	733		$	36,943
Loans collectively evaluated for impairment		154,876			371,166			26,960			118,453			671,455
Ending Balance	$	173,637		$	388,087		$	27,488		$	119,186		$	708,398
ALL for the year ended December 31, 2012:
Balance at beginning of year	$	8,908		$	5,777		$	316		$	626		$	15,627
Charge offs		(6,664	)		(1,184	)		(158	)		(568	)		(8,574	)
Recoveries		1,657			198			—			23			1,878
Provision		2,439			(1,304	)		90			725			1,950
Balance at end of year	$	6,340		$	3,487		$	248		$	806		$	10,881
ALL balance at end of year related to:
Loans individually evaluated for impairment	$	2,428		$	—		$	—		$	—		$	2,428
Loans collectively evaluated for impairment	$	3,912		$	3,487		$	248		$	806		$	8,453
Loans balance at end of year:
Loans individually evaluated for impairment	$	16,180		$	21,918		$	314		$	839		$	39,251
Loans collectively evaluated for impairment		154,612			399,312			23,704			113,720			691,348
Ending Balance	$	170,792		$	421,230		$	24,018		$	114,559		$	730,599

Credit Quality

The amounts of nonperforming assets and delinquencies that occur within our loan portfolio factors in our evaluation of the adequacy of the ALL.

20

6. Loans and Allowance for Loan Losses  (Cont,-)

The following table provides a summary of the delinquency status of loans by portfolio type at June 30, 2013 and December 31, 2012:

(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 still Accruing Interest
June 30, 2013
Commercial loans	$	103	$	4,489	$	756	$	5,348	$	190,091	$	195,439	$	—
Commercial real estate loans – owner-occupied		—		—		—		—		156,215		156,215		—
Commercial real estate loans – all other		—		4,792		2,117		6,909		151,270		158,179		—
Residential mortgage loans – multi-family		—		—		—		—		97,383		97,383		—
Residential mortgage loans – single family		—		—		—		—		75,241		75,241		—
Land development loans		—		—		—		—		19,653		19,653		—
Consumer loans		—		—		—		—		27,106		27,106		—
Total	$	103	$	9,281	$	2,873	$	12,257	$	716,959	$	729,216	$	—
December 31, 2012
Commercial loans	$	1,321	$	778	$	4,295	$	6,394	$	164,398	$	170,792	$	—
Commercial real estate loans – owner occupied		—		—		3,232		3,232		162,690		165,922		—
Commercial real estate loans – all other		—		—		2,599		2,599		147,590		150,189		—
Residential mortgage loans – multi-family		—		—		—		—		105,119		105,119		—
Residential mortgage loans – single family		259		378		359		996		86,267		87,263		—
Land development loans		—		—		314		314		23,704		24,018		—
Consumer loans		—		—		—		—		27,296		27,296		—
Total	$	1,580	$	1,156	$	10,799	$	13,535	$	717,064	$	730,599	$	—

As the above table indicates, total past due loans decreased by $1.2 million, to $12.3 million at June 30, 2013 from $13.5 million at December 31, 2012. Loans past due 90 days or more decreased by $7.9 million, to $2.9 million at June 30, 2013, from $10.8 million at December 31, 2012, primarily due to the foreclosure, and transfers of $5.6 million of real estate loans to OREO and $1.5 million in loan charge offs during the six months ended June 30, 2013.

Loans 30-89 days past due increased by $6.6 million to $9.4 million at June 30, 2013, from $2.7 million at December 31, 2012, primarily due to bankruptcy filings on a $4.8 million commercial real estate loan and a $4.3 million commercial loan relationship.

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, 2013 or December 31, 2012. 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, 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. Non-accrual loans may be restored to accrual status when principal and interest become current and full repayment becomes expected.

21

6. Loans and Allowance for Loan Losses  (Cont,-)

The following table provides information, as of June 30, 2013 and December 31, 2012, with respect to loans on nonaccrual status, by portfolio type:

	June 30, 2013		December 31, 2012
	(Dollars in thousands)
Nonaccrual loans:
Commercial loans	$	3,595	$	6,846
Commercial real estate loans – owner occupied		1,811		3,232
Commercial real estate loans – all other		2,117		6,424
Residential mortgage loans – single family		788		839
Land development loans		414		314
Total	$	8,725	$	17,655

At June 30, 2013 nonaccrual loans totaled to $8.7 million, down from $17.7 million at December 31, 2012, primarily due to (i) the restoration to accrual status of a $2.0 million commercial real estate-all other loan as a result of the receipt from the borrower of loan payments in accordance with the modified terms over a period of time, (ii) the foreclosure of $5.6 million of loans collateralized primarily by commercial real estate, and (iii) impairment write-downs of $1.8 million, based on our loan impairment analysis.

22

6. Loans and Allowance for Loan Losses  (Cont,-)

We classify our loan portfolio using internal credit quality ratings. The following table provides a summary of loans by portfolio type and our internal credit quality ratings as of June 30, 2013 and December 31, 2012, respectively.

(Dollars in thousands)	June 30, 2013		December 31, 2012		Increase (Decrease)
Pass:
Commercial loans	$	173,199	$	146,952	$	26,247
Commercial real estate loans – owner occupied		152,691		162,689		(9,998	)
Commercial real estate loans – all other		140,186		135,274		4,912
Residential mortgage loans – multi family		97,383		104,747		(7,364	)
Residential mortgage loans – single family		73,264		84,237		(10,973	)
Land development loans		11,106		12,461		(1,355	)
Consumer loans		26,544		27,296		(752	)
Total pass loans	$	674,373	$	673,656	$	717
Special Mention:
Commercial loans	$	217	$	2,381	$	(2,164	)
Commercial real estate loans – owner occupied		—		—		—
Commercial real estate loans – all other		4,523		3,859		664
Residential mortgage loans – multi family		—		373		(373	)
Residential mortgage loans – single family		—		990		(990	)
Land development loans		—		8,201		(8,201	)
Consumer loans		562		—		562
Total special mention loans	$	5,302	$	15,804	$	(10,502	)
Substandard:
Commercial loans	$	21,047	$	21,347	$	(300	)
Commercial real estate loans – owner occupied		3,523		3,232		291
Commercial real estate loans – all other		13,470		11,057		2,413
Residential mortgage loans – multi family		—		—		—
Residential mortgage loans – single family		1,978		2,036		(58	)
Land development loans		8,547		3,355		5,192
Consumer loans		—		—		—
Total substandard loans	$	48,565	$	41,027	$	7,538
Doubtful:
Commercial loans	$	976	$	112	$	864
Commercial real estate loans – owner occupied		—		—		—
Commercial real estate loans – all other		—		—		—
Residential mortgage loans – multi family		—		—		—
Residential mortgage loans – single family		—		—		—
Land development loans		—		—		—
Consumer loans		—		—		—
Total doubtful loans	$	976	$	112	$	864
Total Outstanding Loans, gross:	$	729,216	$	730,599	$	(1,383	)

As the above table indicates, loans totaled approximately $729 million at June 30, 2013, a decrease of $1.4 million from $731 million at December 31, 2012. The disaggregation of the loan portfolio by risk rating in the table above reflects the following changes between December 31, 2012 and June 30, 2013:

• Loans rated “pass” totaled $674 million, approximately the same as December 31, 2012. The composition of the loan portfolio has changed due primarily to a $26 million increase in commercial loans between December 31, 2012 and June 30, 2013, offset by decreases of $11 million in residential mortgage single-family loans, $10 million in commercial real estate owner-occupied real estate loans and a $7 million in residential mortgage multi-family loans.

• Loans rated “special mention” decreased by $10.5 million to $5.3 million at June 30, 2013 from $15.8 million at year-end 2012. The decrease was primarily the result of the downgrade of a $10.7 million loan relationship, comprised of $9.5 million in commercial real estate loans-all other and a $1.1 million commercial loan. Those real estate loans are collateralized and through June 30, 2013 borrower payments had been current.

23

6. Loans and Allowance for Loan Losses  (Cont,-)

• Loans rated “substandard” increased by $7.6 million to $48.6 million at June 30, 2013, from $41.0 million at year-end 2012. The increase was comprised of $11.5 million of loans transferred from “special mention” and $5.1 million of loans from “pass” to substandard, partially offset by $2.3 million of loan charge offs and the foreclosure and transfer to OREO of $5.6 million of real estate loans during the six months ended June 30, 2013.

Impaired Loans

A loan is generally classified as impaired and placed on nonaccrual status when, in our judgment, principal or interest is not likely to be collected in accordance with the contractual terms of the loan agreement. We measure for impairment 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, 2013 and December 31, 2012:

(Dollars in thousands)	June 30, 2013		December 31, 2012
Impaired loans:
Nonaccruing loans	$	3,846	$	12,018
Nonaccruing restructured loans		4,879		5,637
Accruing restructured loans(1)		22,360		21,596
Accruing impaired loans		—		—
Total impaired loans	$	31,085	$	39,251
Impaired loans less than 90 days delinquent and included in total impaired loans	$	30,328	$	28,452

⁽¹⁾  See “Trouble Debt Restructurings” below for a description of accruing restructured loans at June 30, 2013 and December 31, 2012.

The $8.2 million decrease in impaired loans to $31.1 million at June 30, 2013, from $39.3 million at December 31, 2012, was primarily attributable to the foreclosure and transfer to OREO of $5.6 million of nonaccrual loans and $2.9 million in write downs to impaired loans. Accruing restructured loans were comprised of a number of loans performing in accordance with modified terms, which included a 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, 2013, $2.2 million of specific reserves were required on a $4.3 million troubled debt restructured (“TDR”) loan relationship and that the other impaired loans were well secured and adequately collateralized.

24

6. Loans and Allowance for Loan Losses  (Cont,-)

The following tables contain additional information with respect to impaired loans, by portfolio type, at June 30, 2013 and December 31, 2012:

(Dollars in thousands)	Recorded Investment		Unpaid Principal Balance		Related Allowance  (1)		Average Recorded Investment		Interest Income Recognized
2013 Loans with no specific reserves established:
Commercial loans	$	7,555	$	9,678	$	—	$	8,699	$	104
Commercial real estate loans – owner occupied		3,205		3,266		—		4,365		28
Commercial real estate loans – all other		14,811		15,420		—		17,373		290
Residential mortgage loans – multi-family		—		—		—		—		—
Residential mortgage loans – single family		788		1,017		—		812		—
Land development loans		414		417		—		261		15
Consumer loans		—		—		—		—		—
2013 Loans with specific reserves established:
Commercial loans	$	4,312	$	4,325	$	2,158	$	5,125	$	64
Commercial real estate loans – owner occupied		—		—		—		—		—
Commercial real estate loans – all other		—		—		—		—		—
Residential mortgage loans – multi-family		—		—		—		—		—
Residential mortgage loans – single family		—		—		—		—		—
Land development loans		—		—		—		—		—
Consumer loans		—		—		—		—		—
2013 Total:
Commercial loans	$	11,867	$	14,003	$	2,158	$	13,824	$	168
Commercial real estate loans – owner occupied		3,205		3,266		—		4,365		28
Commercial real estate loans – all other		14,811		15,420		—		17,373		290
Residential mortgage loans – multi-family		—		—		—		—		—
Residential mortgage loans – single family		788		1,017		—		812		—
Land development loans		414		417		—		261		15
Consumer loans		—		—		—		—		—
2012 Loans with no specific reserves established:
Commercial loans	$	11,782	$	12,770	$	—	$	7,733	$	377
Commercial real estate loans – owner occupied		4,644		4,649		—		5,584		92
Commercial real estate loans – all other		17,274		17,317		—		10,893		703
Residential mortgage loans – multi-family		—		—		—		45		—
Residential mortgage loans – single family		839		1,033		—		1,050		41
Land development loans		314		318		—		424		33
Consumer loans		—		—		—		—		—
2012 Loans with specific reserves established:
Commercial loans	$	4,398	$	4,398	$	2,428	$	6,976	$	221
Commercial real estate loans – owner occupied		—		—		—		—		—
Commercial real estate loans – all other		—		—		—		2,053		—
Residential mortgage loans – multi-family		—		—		—		—		—
Residential mortgage loans – single family		—		—		—		—		—
Land development loans		—		—		—		—		—
Consumer loans		—		—		—		—		—
2012 Total:
Commercial loans	$	16,180	$	17,168	$	2,428	$	14,709	$	598
Commercial real estate loans – owner occupied		4,644		4,649		—		5,584		92
Commercial real estate loans – all other		17,274		17,317		—		12,946		703
Residential mortgage loans – multi-family		—		—		—		45		—
Residential mortgage loans – single family		839		1,033		—		1,050		41
Land development loans		314		318		—		424		33
Consumer loans		—		—		—		—		—

⁽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 ALL. 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.

25

6. Loans and Allowance for Loan Losses  (Cont,-)

At June 30, 2013 and December 31, 2012 there were $26.8 million and $34.9 million, respectively, of impaired loans to which no specific reserves had been allocated because these loans, in our judgment, were sufficiently collateralized. Of the impaired loans at June 30, 2013 for which no specific reserves were allocated, $30.7 million had been deemed impaired in prior quarters and the deficiencies were charged off during the periods in which the loans were determined to have become impaired.

We had average investments in impaired loans of $36.6 million and $34.8 million for the six months ended June 30, 2013 and the 12 months ended December 31, 2012, respectively. The interest that would have been earned, in the second quarter of 2013, had the impaired loans remained current in accordance with their original terms was approximately $325,000.

Troubled Debt Restructurings

Pursuant to the FASB’s Accounting Standard Update No. 2011-02, A Creditor’s Determination of Whether a Restructuring is a Troubled Debt Restructuring (“ASU No. 2011-02”), the Bank’s troubled debt restructured loans (“TDRs”) totaled $27.2 million at both June 30, 2013 and December 31, 2012. TDRs consist of loans to which modifications have been made for the purpose of alleviating temporary impairments of the borrowers’ 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 borrowers that are designed to provide a bridge for the borrowers’ 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 $27.2 million of TDRs outstanding at June 30, 2013, $22.4 million were performing in accordance with their terms and accruing interest; and $4.9 million were not. We carried $2.2 million of specific reserves for $4.3 million of TDRs, of which $1.0 million were nonperforming and $3.3 million were performing at June 30, 2013. The TDR totals have remained relatively unchanged between June 30, 2013 and December 31, 2012.

	June 30, 2013
(Dollars in thousands)	Number of  Loans		Pre- Modification Outstanding Recorded Investment		Post Modification Outstanding Recorded Investment		End of Period Balance
Performing
Commercial loans		2	$	8,310	$	8,310	$	8,273
Commercial real estate – all other		6		16,451		16,451		12,693
Land development loans		1		1,429		1,429		1,394
		9		26,190		26,190		22,360
Nonperforming
Commercial loans		6		4,944		3,830		2,599
Commercial real estate – owner occupied		1		1,872		1,867		1,811
Land development loans		1		439		439		414
Residential mortgage loans – single family		1		171		64		55
		9		7,426		6,200		4,879
Total Troubled Debt Restructurings		18	$	33,616	$	32,390	$	27,239

26

6. Loans and Allowance for Loan Losses  (Cont,-)

	December 31, 2012
(Dollars in thousands)	Number of Loans		Pre- Modification Outstanding Recorded Investment		Post- Modification Outstanding Recorded Investment		End of Period Balance
Performing
Commercial loans		4	$	9,754	$	9,754	$	9,334
Commercial real estate – all other		4		10,897		10,897		10,849
Land development loans		1		1,429		1,429		1,412
		9		22,080		22,080		21,595
Nonperforming
Commercial loans		3		1,943		1,855		1,753
Commercial real estate – all other		2		6,814		6,685		3,825
Residential mortgage loans – single family		1		171		64		59
		6		8,928		8,604		5,637
Total Troubled Debt Restructurings		15	$	31,008	$	30,684	$	27,232

7. Income Taxes

For the three months ended June 30, 2013, we did not record a tax benefit for the losses incurred during the second quarter ended June 30, 2013. For the six months ended June 30, 2013, we recorded an income tax benefit of $1.9 million. That effective tax rate differed from our statutory federal rate of 34% as a result of state income taxes (net of federal benefit), less a permanent tax difference associated with an addition to our deferred tax valuation allowance of approximately $633,000.

We record as a deferred tax asset on our balance sheet an amount equal to the tax credit and tax loss carryforwards and tax deductions (“tax benefits”) that we believe will be available to us to offset or reduce the amounts of our income taxes in future periods. Under applicable federal and state income tax laws and regulations, such tax benefits will expire if not used within specified periods of time. Accordingly, the ability to fully use our deferred tax asset depends on the amount of taxable income that we generate during those time periods. At least once each year, or more frequently, if warranted, we make estimates of future taxable income that we believe we are likely to generate during those future periods. If we conclude, on the basis of those estimates and the amount of the tax benefits available to us, that it is more likely than not that we will be able to fully utilize those tax benefits prior to their expiration, we recognize the deferred tax asset in full on our balance sheet. On the other hand, if we conclude on the basis of those estimates and the amount of the tax benefits available to us that it has become more likely than not that we will be unable to utilize those tax benefits in full prior to their expiration, then, we would establish (or increase any existing) valuation allowance to reduce the deferred tax asset on our balance sheet to the amount which we believe we are more likely than not to be able to utilize. Such a reduction is implemented by recognizing a non-cash charge that would have the effect of increasing the provision, or reducing any credit, for income taxes that we would otherwise have recorded in our statements of operations. The determination of whether and the extent to which we will be able to utilize our deferred tax asset involves significant management judgments and assumptions that are subject to period to period changes as a result of changes in tax laws, changes in market or economic conditions that could affect our operating results or variances between our actual operating results and our projected operating results, as wells as other factors.

At June 30, 2013, we have a net deferred tax asset of $13.7 million, as compared with $11.7 million at December 31, 2012. The increase in our deferred tax asset was directly attributable to the losses we incurred during the six months ended June 30, 2013. Adjustments to our deferred tax valuation allowance could be required in the future if we were to conclude, on the basis of our assessment of the realizability of the deferred tax asset, that the amount of that asset which is more likely, than not, to be available to offset or reduce future taxes has decreased. Any such decrease could result in an increase in our provision for income taxes or reductions to our income tax benefits.

27

7. Income Taxes  (Cont,-)

We file income tax returns with the U.S. federal government and the state of California. As of June 30, 2013, we were subject to examination by the Internal Revenue Service with respect to our U.S. federal income tax return for the 2008 to 2012 tax year and Franchise Tax Board for California state income tax returns for the 2008 to 2012 tax years. We do not believe there will be any material adverse changes in our unrecognized tax benefits over the next 12 months. Net operating losses (“NOLs”) on our U.S. federal and California state income tax returns may be carried forward 20 years. Beginning in 2012, California taxpayers may carryback losses for two years and carryforward for 20 years, which conforms to the U.S. tax laws. We expect (although no assurance can be given) that we will generate taxable income in future years sufficient to enable us to use the California NOL generated in prior years.

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 quarters ended June 30, 2013 and 2012.

8. Sale of Common Stock

Effective as of March 30, 2013, we sold and issued a total of 2,222,222 shares of our common stock to Carpenter Community Bancfund L.P. and Carpenter Community Bancfund-A, L.P. (the “Carpenter Funds”), at a price of $6.75 per share in cash, generating gross proceeds to us of $15 million. The purchase price of $6.75 per share of common stock was equal to the Company’s tangible book value per share of common stock as of December 31, 2012, which exceeded the closing price per share of our common stock on NASDAQ on March 29, 2013. As a result of this sale of shares, the Carpenter Funds, which are the Company’s largest shareholder, own approximately 34% of our outstanding voting shares, as compared to the 28% which they had owned prior to this sale of shares.

The proceeds from the sale of those shares were contributed by the Company to capitalize a new wholly-owned asset management subsidiary, which has used those proceeds to fund the purchase of $15.8 million of nonperforming loans and foreclosed real properties from the Bank and is engaged in the business of collecting those nonperforming loans and disposing of the foreclosed properties.

9. Stock-Based and Other Employee Compensation

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. At the 2013 Annual Shareholders Meeting, our shareholders approved an 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. As a result, as of June 30, 2013, the maximum number of shares that were available for the grant of options or other equity incentives under the 2010 Incentive Plan totaled 2,475,959 shares, or approximately 13% 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 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 restricted shares or any SARs.

Under 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, 2013 under the 2010 Plan were estimated as of their respective dates of grant using the Black-Scholes option-pricing model. For additional information regarding the Company’s stock based compensation plans, refer to Note 14—“Stock-Based Employee Compensation Plans” in the Notes to the Company’s Consolidated Financial Statements included in its Form 10-K for the year ended December 31, 2012.

28

9. Stock-Based and Other Employee Compensation  (Cont,-)

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:	2013			2012			2013			2012
Expected volatility		43	%		40	%		43	%		40	%
Risk-free interest rate		1.77	%		1.54	%		1.77	%		1.54	%
Expected dividends		0.57	%		0.26	%		0.57	%		0.26	%
Expected term (years)		2.0–6.9			6.6–8.2			2.0–6.9			6.6–8.2
Weighted average fair value of options granted during period	$	1.91		$	1.54		$	1.91		$	1.54

The following table summarizes the stock option activity under the Company’s equity incentive plans during the six months ended June 30, 2013 and 2012, respectively.

	Number of Shares			Weighted- Average Exercise Price Per Share		Number of Shares			Weighted- Average Exercise Price Per Share
	2013					2012
Outstanding – January 1,		1,565,965		$	6.90		1,153,741		$	7.35
Granted		214,000			6.05		421,300			4.88
Exercised		(6,300	)		3.52		(5,328	)		3.16
Forfeited/Canceled		(243,600	)		6.60		(100,066	)		7.50
Outstanding – June 30,		1,530,065			6.84		1,469,847			6.74
Options Exercisable – June 30,		980,789		$	7.52		828,899		$	8.55

Options to purchase 6,100 shares and 200 shares of our common stock were exercised during the three and six months ended June 30, 2013, respectively. Options to purchase 128 and 5,328 shares of our common stock were exercised during the three and six months ended June 30, 2012, respectively. The fair values of options vested during the six months ended June 30, 2013 and 2012 were $270,629 and $158,300, respectively.

The following table provides additional information regarding the vested and unvested options that were outstanding at June 30, 2013.

	Options Outstanding as of June 30, 2013								Options Exercisable as of June 30, 2013 (1)
	Vested		Unvested		Weighted Average Exercise Price		Weighted Average Remaining Contractual Life (Years)		Shares		Weighted Average Exercise Price
$2.97 – $5.99		569,246		233,876	$	4.06		7.69		569,246	$	3.90
$6.00 – $9.99		11,100		315,400		6.53		9.35		11,100		7.19
$10.00 – $12.99		265,100		—		11.21		0.63		265,100		11.21
$13.00 – $17.99		115,843		—		15.12		2.13		115,843		15.21
$18.00 – $18.84		19,500		—		18.06		2.59		19,500		18.06
		980,789		549,276	$	6.84		6.33		980,789	$	7.52

⁽¹⁾  The weighted average remaining contractual life of the options that were exercisable as of June 30, 2013 was 4.82 years.

The aggregate intrinsic values of options that were outstanding and exercisable under the Company’s equity incentive plans at June 30, 2013 and 2012 were $1.1 million and $1.2 million, respectively.

29

9. Stock-Based and Other Employee Compensation  (Cont,-)

A summary of the status of the unvested options at June 30, 2013, and changes in the number of shares subject to and in the weighted average grant date fair values of the unvested options during the six months ended June 30, 2013, are set forth in the following table.

	Number of Shares Subject to Options			Weighted Average Grant Date Fair Value
Unvested at December 31, 2012		635,706		$	2.30
Granted		214,000			1.91
Vested		(135,831	)		1.99
Forfeited/Cancelled		(164,599	)		2.56
Unvested at June 30, 2013		549,276		$	2.15

The aggregate amounts of stock based compensation expense recognized in our consolidated statements of operations for the six months ended June 30, 2013 and 2012, were $354,000 and $216,000, respectively, net of taxes. At June 30, 2013, the weighted average period over which unvested options were expected to be recognized was 1.15 years.

We expect that the compensation expense that will be recognized during the periods presented below in respect of unvested stock options outstanding at June 30, 2013, will be as follows:

	Estimated Stock Based Compensation Expense
(Dollars in thousands)
For the period and years ending December 31,
Remainder 2013	$	237
2014		458
2015		247
2016		32
2017		12
	$	986

In 1999, we established a Supplemental Retirement Plan (“SERP”) for our Chief Executive Officer, who retired from that position in April 2013. The components of net periodic benefit cost for the SERP are set forth in the table below:

	Three Months Ended June 30,				Six Months Ended June 30,
	2013		2012		2013		2012
	(Dollars in thousands)
Service cost	$	—	$	50	$	18	$	99
Interest cost		44		36		89		71
Expected return on plan assets		—		—		—		—
Amortization of prior service cost		—		4		1		8
Amortization of net actuarial loss		—		2		29		3
Net periodic SERP cost	$	44	$	92	$	137	$	181

10. Earnings Per Share (“EPS”)

Basic EPS is computed by dividing net income or loss allocable to our common shareholders by the weighted average number of common shares outstanding for the period. Diluted EPS gives effect to the potential dilution that could occur if stock options, convertible preferred stock or other contracts to issue common stock were either exercised or converted into common stock that would then share in our earnings. For the six months ended June 30, 2013 and 2012, 1,520,265 and 882,543 shares, respectively, of our common stock that were purchasable on exercise of outstanding stock options and 2,345,919 shares of our common stock into which our outstanding shares of Series B Preferred Stock were convertible, were excluded from the computation of diluted earnings per common share, because they were anti-dilutive. An additional 761,278 shares of our common stock subject to outstanding stock purchase warrants were also excluded from the computation of diluted earnings per common share for the six months ended June 30, 2013 and 2012, because the exercisability of those warrants is conditioned on future events which may not occur.

30

10. Earnings Per Share (“EPS”)  (Cont,-)

The following table shows how we computed basic and diluted EPS for the six month periods ended June 30, 2013 and 2012.

	Three Months Ended June 30,						Six Months Ended June 30,
(In thousands, except earnings per share data)	2013			2012			2013			2012
Net (loss) income	$	(3,142	)	$	5,796		$	(6,311	)	$	7,178
Accumulated undeclared dividends on preferred stock		(262	)		(234	)		(524	)		(468	)
Net (loss) income allocable to common shareholders (A)	$	(3,404	)	$	5,562		$	(6,835	)	$	6,710
Weighted average outstanding shares of common stock (B)		18,906			15,779			17,825			14,088
Dilutive effect of convertible preferred stock, employee stock options and warrants		—			199			—			118
Common stock and common stock equivalents (C)		18,906			15,978			17,825			14,206
(Loss) income per common share:
Basic (A/B)	$	(0.18	)	$	0.35		$	(0.38	)	$	0.48
Diluted (A/C)	$	(0.18	)	$	0.35		$	(0.38	)	$	0.47

11. Business Segment Information

We have two reportable business segments, commercial banking and mortgage banking. Our 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. Our mortgage banking segment originates mortgage loans that, for the most part, are resold within 30 days to long-term investors in the secondary residential mortgage market.

Since these operating segments derive all of their revenues from interest and noninterest income and interest expense constitutes their most significant expense, these two segments are reported below using net interest income (interest income less interest expense) and noninterest income (primarily net gains on sales of loans held for sale and fee income). We do not allocate general and administrative expenses or income taxes to our operating segments.

The following table sets forth information regarding the interest income and noninterest income of our commercial banking and mortgage banking segments, respectively, for the six months ended June, 2013 and 2012.

(Dollars in thousands)	Commercial		Mortgage		Other			Total
Net interest income for the period ended: June 30,
2013	$	14,643	$	372	$	(217	)	$	14,798
2012	$	14,696	$	1,689	$	(226	)	$	16,159
Noninterest income for the period ended: June 30,
2013	$	21	$	3,192	$	213		$	3,426
2012	$	14,696	$	1,689	$	(1,231	)	$	15,154
Segment Assets at:
June 30, 2013	$	903,483	$	4,482	$	44,148		$	952,113
December 31, 2012	$	940,748	$	99,829	$	13,024		$	1,053,601

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

Introduction

Pacific Mercantile Bancorp is a bank holding company (the “Company”) which owns all of the stock of Pacific Mercantile Bank (the “Bank”), which is a commercial bank that provides a full range of banking services to small and medium-size businesses and to professionals and the general public in Orange, Los Angeles, San Bernardino and San Diego counties, in Southern California. The Bank also operates a mortgage banking business, originating and funding residential mortgage loans and selling those loans, generally within the succeeding 30 days, into the secondary mortgage market. 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 operating income. For ease of reference we will sometimes refer to the Company and the Bank, together as “we”, “us” or “our”.

The following discussion presents information about (i) our consolidated results of operations for the three and six month periods ended June 30, 2013 and comparisons of those results with our results of operations for the corresponding three and six month periods of 2012, and (ii) our consolidated financial condition, liquidity and capital resources at June 30, 2013. The information in the following discussion should be read in conjunction with our interim consolidated financial statements and the notes thereto included elsewhere in this Report.

Forward-Looking Information

Statements contained in 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 significantly 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.

Many of those risks and uncertainties are discussed in Item 1A Part I, entitled “Risk Factors,” in our Annual Report on Form 10-K for the year ended December 31, 2012 (the “2012 10-K”) that we filed with the SEC on March 20, 2013. 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 month periods ended, and our financial condition at, June 30, 2013.

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, except as may otherwise be required by law or NASDAQ rules.

32

Overview of Operating Results in the Three and Six Months Ended June 30, 2013

The following table provides comparative information with respect to our results of operations for the three and six month periods ended June 30, 2013 and 2012, respectively.

	Three Months Ended June 30,									Six Months Ended June 30,
	2013			2012			2013 vs. 2012			2013			2012			2013 vs. 2012
	Amount			Amount			% Change			Amount			Amount			% Change
	(Dollars in thousands, except per share data)
Interest income	$	8,822		$	10,353			(14.8	)%	$	17,806		$	20,663			(13.8	)%
Interest expense		1,382			2,209			(37.4	)%		3,008			4,504			(33.2	)%
Net interest income		7,440			8,144			(8.6	)%		14,798			16,159			(8.4	)%
Provision for loan losses		—			1,850			(100.0	)%		1,150			1,450			(20.7	)%
Net interest income after provision for loan losses		7,440			6,294			18.2	%		13,648			14,709			(7.2	)%
Noninterest income		1,393			9,126			(84.7	)%		3,426			15,154			(77.4	)%
Noninterest expense		11,975			13,682			(12.5	)%		25,314			25,919			(2.3	)%
Income (loss) before income taxes		(3,142	)		1,738			(280.8	)%		(8,240	)		3,944			(308.9	)%
Income tax benefit		—			(4,058	)		(100.0	)%		(1,929	)		(3,234	)		(40.4	)%
Net income (loss)		(3,142	)		5,796			(154.2	)%		(6,311	)		7,178			(187.9	)%
Accumulated undeclared dividends on preferred stock		(262	)		(234	)		12.0	%		(524	)		(468	)		(12.0	)%
Net income (loss) allocable to common shareholders	$	(3,404	)	$	5,562			(161.2	)%	$	(6,835	)	$	6,710			(201.9	)%
Net income per common share
Basic	$	(0.18	)	$	0.35			(151.4	)%	$	(0.38	)	$	0.48			(179.2	)%
Diluted	$	(0.18	)	$	0.35			(151.4	)%	$	(0.38	)	$	0.47			(180.9	)%

Results of Operations in the Three and Six Months ended June 30, 2013.

The net loss in the three months ended June 30, 2013 was primarily attributable to a decrease in noninterest income of $7.7 million, or 84.7%, and a decline in net interest income of $700,000, or 8.6%, as compared to the same three month of 2012. The net loss in the six months ended June 30, 2013 was primarily attributable to a decrease in noninterest income of $11.7 million, or 77.4%, and a decline in net interest income of $1.6 million, or 8.4%, as compared to the same six months of 2012.

The decreases in noninterest income were primarily attributable to decreases in mortgage banking revenues of $6.7, or 79.7%, in the three months ended June 30, 2013 and $9.7 million, or 74.5%, in the six months ended June 30, 2013, which were primarily the result of our exit from the wholesale residential mortgage loan business in late August 2012.

The declines in net interest income were due to decreases in interest income of $1.5 million, or 14.8%, and $2.9 million, or 13.8%, in the three and six months ended June 30, 2013, respectively, partially offset by decreases of $827,000, or 37.4%, and $1.5 million, or 33.2%, respectively, in interest expense. The decrease in interest income in the three months ended June 30, 2013 was primarily attributable to (i) a decline in loan demand and (ii) a decline in interest earned on loans as a result of actions taken by the Federal Reserve Board designed to keep interest rates low. The decrease in interest income in the six months ended June 30, 2013 was primarily attributable to an overall decrease in interest rates, also as a result primarily of the actions of the Federal Reserve Board, and, to a lesser extent, decreases in loan volume and in the volume of securities held for sale. The decreases in interest expense in the three and six months ended June 30, 2013 were due primarily to a combination of declines in the rates of interest paid on higher priced time deposits and on money market and savings deposits and decreases in the volume of higher priced time deposits and Federal Home Loan Bank (“FHLB”) borrowings.

Outlook for the Six Months Ending December 31, 2013

As previously reported, effective August 31, 2012 we exited the wholesale residential mortgage loan business. As a result, our mortgage banking division is currently engaged in the direct-to-consumer retail mortgage business in which we originate mortgage loans directly from consumers seeking to refinance existing mortgage loans or finance the purchase of residential real estate. The decision to exit the wholesale mortgage business was made to enable us (i) to redeploy some of

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our capital resources, which had been committed to the wholesale mortgage business, to our core commercial lending business, (ii) to reduce and control our staffing costs and operating expenses, which had grown significantly to a large extent as a result of the growth of the wholesale mortgage business, and (iii) to manage and limit interest rate and other risks inherent in a residential mortgage lending business. As discussed above, the losses we incurred in the three and six months ended June 30, 2013 were primarily attributable to our exit from the wholesale residential mortgage loan business, which also is expected to adversely affect our results of operations during the remainder of 2013.

Financial Ratios. The following table sets forth our net interest margin for the three and six months ended June 30, 2013 and 2012, and the return on average assets and average shareholders’ equity for the same respective periods:

	Three Months Ended June 30,						Six Months Ended June 30,
	2013			2012			2013			2012
Net interest margin(1)(2)		3.20	%		3.24	%		3.10	%		3.29	%
Return on average assets(1)		(1.29	)%		2.09	%		(1.26	)%		1.29	%
Return on average shareholders’ equity(1)		(10.64	)%		28.13	%		(10.56	)%		16.06	%

⁽¹⁾  Annualized.

⁽²⁾  Net interest income expressed as a percentage of total average interest earning assets.

Critical Accounting Policies

Introduction. 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 values 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 values 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 sometime effectuated by or require charges to income, such reductions also may have the effect of reducing our income.

Our critical accounting policies consist of the accounting policies and practices we follow in determining (i) the sufficiency of the allowance we establish for loan losses; (ii) the fair values of our investment securities that we hold for sale and financial instruments related to our mortgage banking assets and liabilities, and (iii) the amount of our deferred tax asset, consisting primarily of tax loss carryforwards and tax credits that we believe will be able to use to offset income taxes in future periods. There were no significant changes in the Company’s critical accounting policies or their application during the six months ended June 30, 2013, as compared to our critical accounting policies in effect as of December 31, 2012. Information regarding our critical accounting policies in effect as of December 31, 2012 is contained in the sections captioned “Critical Accounting Policies” and “Allowance for Loan Losses” in Item 7, entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” contained in our 2012 10-K, for more detailed information regarding our critical accounting policies.

Results of Operations

Net Interest Income

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, in turn, 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, and 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.”

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The following table sets forth our interest income, interest expense and net interest income (in thousands of dollars) and our net interest margin for the three and six months ended June 30, 2013 and 2012, respectively:

	Three Months Ended June 30,									Six Months Ended June 30,
	Amount			Amount			Amount			Amount			Amount			Percentage Change
	2013			2012			2013 vs. 2012			2013			2012			2013 vs. 2012
Interest income	$	8,822		$	10,353			(14.8	)%	$	17,806		$	20,663			(13.8	)%
Interest expense		1,382			2,209			(37.4	)%		3,008			4,504			(33.2	)%
Net interest income	$	7,440		$	8,144			(8.6	)%	$	14,798		$	16,159			(8.4	)%
Net interest margin		3.20	%		3.24	%					3.10	%		3.29	%

Our net interest income decreased by $704,000, or 8.6%, and by $1.4 million, or 8.4%, respectively, in the three and six months ended June 30, 2013, as compared to the same respective periods of 2012, due to decreases in interest income of $1.5 million, or 14.8%, and $2.9 million, or 13.8%, respectively, in the three and six months ended June 30, 2013. Those decreases in interest income were partially offset by decreases in interest expense of $827,000, or 37.4%, and $1.5 million, or 33.2%, in the three and six months ended June 30, 2013, respectively.

The decrease in interest income in the three months ended June 30, 2013 was primarily attributable to declines in loan demand and, to a lesser extent, in interest earned on loans as a result of actions taken by the Federal Reserve Board to keep interest rates low. The decrease in interest income in the six months ended June 30, 2013 was primarily attributable to (i) an overall decrease in interest rates, also primarily as a result of the actions of the Federal Reserve Board, (ii) a decrease in loan demand, and (iii) a reduction in the volume of securities held for sale that was due primarily to sales and the maturities of, and payments on, such securities in the six months ended June 30, 2013.

The decreases in interest expense in the three and six months ended June 30, 2013 were due primarily to (i) a decision we made to reduce the rates of interest we pay on higher priced time deposits which enabled us to achieve a reduction in the volume of those deposits and, thereby reduce our overall interest expense, (ii) declines in the interest rates we paid on money market and savings deposits due primarily to the actions of the Federal Reserve Board that were designed to keep interest rates low, and (iii) principal reduction payments we made on our outstanding FHLB borrowings.

Due primarily to the decreases in interest income in the three and six months ended June 30, 2013, (i) the average interest rate we earned on interest-earning assets decreased to 3.79% and 3.73%, respectively, from 4.13% and 4.22%, respectively, in the same periods of 2012, and (ii) our net interest margin decreased by four basis points to 3.20%, and by 19 basis points to 3.10%, respectively, from 3.24% and 3.29%, respectively, in the same periods of 2012.

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Average Balances

Information Regarding Average Assets and Average Liabilities

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, 2013 and 2012.

	Three Months Ended June 30,
	2013							2012
(Dollars in thousands)	Average Balance		Interest Earned/ Paid		Average Yield/ Rate			Average Balance		Interest Earned/ Paid		Average Yield/ Rate
Interest earning assets:
Short-term investments(1)	$	120,012	$	76		0.25	%	$	117,327	$	74		0.25	%
Securities available for sale and stock(2)		83,375		387		1.86	%		82,647		392		1.91	%
Loans(3)		729,495		8,359		4.60	%		807,944		9,887		4.92	%
Total earning assets		932,882		8,822		3.79	%		1,007,918		10,353		4.13	%
Noninterest earning assets		47,374							61,451
Total Assets	$	980,256						$	1,069,369
Interest-bearing liabilities:
Interest-bearing checking accounts	$	32,735		22		0.27	%	$	27,056		20		0.30	%
Money market and savings accounts		160,124		151		0.38	%		181,089		366		0.81	%
Certificates of deposit		402,897		999		0.99	%		492,326		1,511		1.24	%
Other borrowings		45,011		71		0.63	%		64,110		158		0.98	%
Junior subordinated debentures		17,527		139		3.18	%		17,682		154		3.50	%
Total interest-bearing liabilities		658,294		1,382		0.84	%		782,263		2,209		1.14	%
Noninterest-bearing liabilities		203,484							207,569
Total Liabilities		861,778							989,832
Shareholders’ equity		118,478							79,537
Total Liabilities and Shareholders’ Equity	$	980,256						$	1,069,369
Net interest income			$	7,440						$	8,144
Interest rate spread						2.95	%						2.99	%
Net interest margin						3.20	%						3.24	%

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

⁽²⁾  Stock consists of Federal Home Loan Bank Stock and Federal Reserve Bank Stock.

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

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	Six Months Ended June 30,
	2013							2012
(Dollars in thousands)	Average Balance		Interest Earned/ Paid		Average Yield/ Rate			Average Balance		Interest Earned/ Paid		Average Yield/ Rate
Interest earning assets:
Short-term investments(1)	$	136,619	$	171		0.25	%	$	102,400	$	129		0.25	%
Securities available for sale and stock(2)		87,150		757		1.75	%		117,130		1,269		2.18	%
Loans(3)		738,890		16,878		4.61	%		766,288		19,265		5.06	%
Total earning assets		962,659		17,806		3.73	%		985,818		20,663		4.22	%
Noninterest earning assets		51,095							60,136
Total Assets	$	1,013,754						$	1,045,954
Interest-bearing liabilities:
Interest-bearing checking accounts	$	32,980		43		0.26	%	$	28,031		41		0.29	%
Money market and savings accounts		164,218		349		0.43	%		179,223		752		0.84	%
Certificates of deposit		430,101		2,184		1.02	%		494,547		3,156		1.28	%
Other borrowings		47,713		163		0.69	%		53,728		264		0.99	%
Junior subordinated debentures		17,604		269		3.08	%		17,682		291		3.31	%
Total interest-bearing liabilities		692,616		3,008		0.88	%		773,211		4,504		1.17	%
Noninterest-bearing liabilities		200,618							188,710
Total Liabilities		893,234							961,921
Shareholders’ equity		120,520							84,033
Total Liabilities and Shareholders’ Equity	$	1,013,754						$	1,045,954
Net interest income			$	14,798						$	16,159
Interest rate spread						2.85	%						3.05	%
Net interest margin						3.10	%						3.29	%

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

⁽²⁾  Stock consists of Federal Home Loan Bank Stock and Federal Reserve Bank Stock.

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

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The following table sets forth, in thousands of dollars, the changes in our interest income, including loan fees, and interest expense in the three and six months ended June 30, 2013, as compared to the same period of 2012, and the extent to which those changes were attributable to changes in (i) the volume of, or in the rates of interest earned on interest-earning assets and (ii) the volume of, or the rates of interest paid on our interest-bearing liabilities.

	Three Months Ended June 30, 2013 vs. 2012									Six Months Ended June 30, 2013 vs. 2012
	Increase (Decrease) due to:									Increase (Decrease) due to:
	Volume			Rate			Total			Volume			Rate			Total
Interest income:
Short term investments(1)	$	2			—		$	2		$	43		$	(1	)	$	42
Securities available for sale and stock(2)		3			(8	)		(5	)		(289	)		(223	)		(512	)
Loans		(924	)		(604	)		(1,528	)		(671	)		(1,716	)		(2,387	)
Total earning assets		(919	)		(612	)		(1,531	)		(917	)		(1,940	)		(2,857	)
Interest expense
Interest bearing checking accounts		4			(2	)		2			7			(5	)		2
Money market and savings accounts		(38	)		(177	)		(215	)		(58	)		(345	)		(403	)
Certificates of deposit		(249	)		(263	)		(512	)		(379	)		(593	)		(972	)
Borrowings		(39	)		(48	)		(87	)		(27	)		(74	)		(101	)
Junior subordinated debentures		(1	)		(14	)		(15	)		(1	)		(21	)		(22	)
Total interest bearing liabilities		(323	)		(504	)		(827	)		(458	)		(1,038	)		(1,496	)
Net interest income	$	(596	)	$	(108	)	$	(704	)	$	(459	)	$	(902	)	$	(1,361	)

(1) Short-term investments consist of federal funds sold and interest bearing deposits with financial institutions.

(2) Stock consists of Federal Home Loan Bank Stock and Federal Reserve Bank Stock.

Provision for Loan Losses

Like virtually all banks and other financial institutions, we follow the practice of maintaining 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 losses (the “Allowance for Loan Losses” or the “ALL”). The amount of the ALL is increased periodically to replenish the ALL after it has been reduced due to loan write-downs or charge-offs. The ALL 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 ALL are made through a charge, recorded as an expense in the statement of operations, referred to as the “provision for loan losses.” Recoveries of loans previously charged-off are added back to and, therefore, to that extent increase the ALL and reduce the amount of the provision for loan losses that might otherwise have had to be made to replenish or increase the ALL. See “—Financial Condition—Nonperforming Loans and the Allowance for Loan Losses” below in this Item 2 for additional information regarding the ALL.

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 ALL and the amount of the provisions that we believe need to be made for potential loan losses. 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 ALL. Moreover, the duration and anticipated effects of prevailing economic conditions or trends can be uncertain and can be affected by number of risks and circumstances that are outside of our ability to control. See the discussion below in this Item 2 under the caption “Financial Condition—Nonperforming Loans and the Allowance for Loan Losses”. 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 ALL, it could become necessary for us to record additional, and possibly significant, charges to increase the allowance for loan losses, which would have the effect of reducing our income or causing us to incur losses.

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In addition, the FRBSF and the DFI, as an integral part of their examination processes, periodically review the adequacy of our ALL. 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.

At June 30, 2013, the ALL totaled $11.1 million, which was approximately $200,000, or 2%, higher than at December 31, 2012. The ALL activity in the first six months of 2013 included net charge-offs of $900,000, which were more than offset by a $1.15 million provision that we made for loan losses. The ratio of the ALL to total loans outstanding as of June 30, 2013 was 1.53% as compared to 1.49% as of December 31, 2012. On the basis of the methodologies we use to assess asset quality, bank regulatory guidelines and our historical loan loss history, we believe that the ALL was adequate at June 30, 2013 to cover inherent losses in the loan portfolio.

Noninterest Income

The following table identifies the components of and the percentage changes in noninterest income in the three and six months ended June 30, 2013, as compared to the same period of 2012:

	Three Months Ended June 30,								Six Months Ended June 30,
	Amounts					Percent Change			Amounts						Percent Change
(Dollars in thousands)	2013			2012		2013 vs. 2012			2013			2012			2013 vs. 2012
Total other-than-temporary impairment of securities	$	—		$	—		N/M			—		$	(25	)		N/M
Portion of other-than-temporary impairment losses recognized in other comprehensive loss		—			—		N/M			—			52			N/M
Net impairment loss recognized in earnings		—			—		N/M			—			(77	)		N/M
Service fees on deposits and other banking services		196			245		(20	)%		392			478			(18.0	)%
Mortgage banking (including net gains on sales of loans held for sale)		1,719			8,450		(79.7	)%		3,308			12,981			(74.5	)%
Net gains on sale of securities available for sale		—			—		N/M			23			1,186			(98.1	)%
Net gain on sale of other real estate owned		1			130		(99.2	)%		1			111			(99.1	)%
Other		(523	)		301		(273.8	)%		(298	)		475			(162.7	)%
Total noninterest income	$	1,393		$	9,126		(84.7	)%	$	3,426		$	15,154			(77.4	)%

As the table above indicates, noninterest income decreased by $7.7 million, or 84.7%, in the three months ended June 30, 2013, due primarily to $6.7 million, or 79.7%, decrease in mortgage banking revenues. In the six months ended June 30, 2013, noninterest income decreased by $11.7 million, or 77.4%, primarily as a result of a $9.7 million, or 74.5%, decrease in mortgage banking revenues and $1.2 million, or 98.1%, decrease in net gains on sales of securities available for sale.

The decreases in mortgage banking revenue in the three and six months ended June 30, 2013, as compared to the same respective periods of 2012, were primarily attributable to our exit from the wholesale residential mortgage business in August 2012, which, as we had previously reported, was expected to result in a significant decrease in our mortgage banking revenues during 2013. The $1.2 million decline in net gains on sales of securities in the first six months of 2013 was due primarily to a decrease to $6 million in volume of sales of such securities, from approximately $135 million in the six months ended June 30, 2012. Sales of securities available for sale can vary, sometimes materially, from period to period primarily in response to changes in market rates of interest.

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Noninterest Expense

The following table compares the amounts of the principal components of noninterest expense in the three and six months ended June 30, 2013 and 2012.

	Three Months Ended June 30,								Six Months Ended June 30,
	Amounts					Percentage Change			Amounts					Percentage Change
(Dollars in thousands)	2013			2012		2013 vs. 2012			2013			2012		2013 vs. 2012
Salaries and employee benefits	$	6,761		$	6,531		3.5	%	$	12,878		$	12,148		6.0	%
Occupancy		703			669		5.1	%		1,369			1,321		3.6	%
Equipment and depreciation		486			520		(6.5	)%		1,115			918		21.5	%
Data processing		200			180		11.1	%		398			375		6.1	%
FDIC expense		546			545		0.2	%		1,092			1,159		(5.8	)%
Other real estate owned expense		857			1,877		(54.3	)%		2,974			3,701		(19.6	)%
Professional fees		902			1,403		(35.7	)%		2,568			2,629		(2.3	)%
Mortgage related loan expense(1)		317			925		(65.7	)%		744			1,278		(41.8	)%
Provision for contingencies		(279	)		—		N/M			(539	)		339		259.0	%
Other operating expense(2)		1,482			1,032		43.6	%		2,715			2,051		32.4	%
Total noninterest expense	$	11,975		$	13,682		(12.5	)%	$	25,314		$	25,919		(2.3	)%

⁽¹⁾  Mortgage related loan expense consist primarily of repurchase provision expense, appraisal, underwriting and document expense.

⁽²⁾  Other operating expenses consist of telephone, advertising, and investor relations, charges for promotional, business development, and regulatory expenses, insurance premiums and correspondent bank fees.

As the above table indicates, noninterest expense decreased by $1.7 million, or 12.5%, in the three months ended June 30, 2013, as compared to the same three months of 2012. This decrease was primarily attributable to (i) a $1.0 million, or 54.3%, decrease in OREO expense primarily as a result of a 50% reduction in OREO from June 30, 2012, (ii) a $608,000 decrease in mortgage related expenses due primarily to the reduction in mortgage loan originations resulting from our exit from the wholesale mortgage lending business in August 2012, (iii) a $501,000 decrease in professional fees due to the settlement of certain lawsuits and a decline in nonperforming loans, and (iv) a $279,000 reduction in the reserve for contingencies made possible by settlements of certain lawsuits, including the Zigner lawsuit. These decreases were partially offset by a $231,000, or 3.5% increase in compensation expense, due primarily to staffing increases in our commercial banking division which more than offset staff reductions in the mortgage lending division, and a $148,000, or 17.8%, increase in other operating expenses.

In the six months ended June 30, 2013, noninterest expense decreased by $605,000, or 2.3%, as compared to the same six months of 2012. That decrease was primarily attributable to (i) a $878,000, or 259%, reduction in contingency reserves due to the entry of a favorable judgment in one lawsuit and the settlement of the Zigner lawsuit, (ii) a $534,000 decrease in mortgage related expenses due primarily to the reduction in mortgage loan originations resulting from our exit from the wholesale mortgage lending business in August 2012, and (iii) a $727,000, or 19.6%, decrease in OREO expense primarily as a result of the decrease in OREO. Those decreases were substantially, but not entirely, offset by a $731,000 increase in compensation expense due primarily to increases in staffing in the Bank’s commercial lending division, a $389,000, or 19.4%, increase in other operating expenses, and a $197,000 increase in equipment expense incurred primarily in connection with infrastructure upgrades during this year’s first quarter.

A measure of our ability to control noninterest expense is our efficiency ratio, which is the ratio of noninterest expense to net revenue (net interest income plus noninterest income). As a general rule, a lower efficiency ratio indicates an ability to generate increased revenue without a commensurate increase in the staffing and equipment and third party services and, therefore, would be indicative of greater operational efficiencies. Due to the substantial decreases in noninterest income, primarily attributable to our exit from the wholesale residential mortgage business, our efficiency ratios grew to 135.6% and 138.9% in the three and six months ended June 30, 2013, respectively, from 79.2% and 82.8%, respectively, in the corresponding three and six month periods of 2012.

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Income Tax Benefit

The income tax benefit recorded in the six months ended June 30, 2013 was primarily attributable to the pre-tax loss incurred in that period. Our effective tax rate in the six months ended June 30, 2013 was 24%, as compared to 37% in the same period of 2012.

Asset/Liability Management

The primary objective of asset/liability management is to reduce our exposure to interest rate fluctuations, which can affect our net interest margins and, therefore, our net interest income and net earnings. We seek to achieve this objective by matching interest rate sensitive assets and liabilities, and maintaining the maturities of and repricing these assets and liabilities in response to the changes in the interest rate environment. Generally, if rate sensitive assets exceed rate sensitive liabilities, net interest income will be positively impacted during a rising interest rate environment and negatively impacted during a declining interest rate environment. When rate sensitive liabilities exceed rate sensitive assets, net interest income generally will be positively impacted during a declining interest rate environment and negatively impacted during a rising interest rate environment. However, interest rates for different asset and liability products offered by depository institutions respond differently to changes in the interest rate environment. As a result, the relationship or “gap” between interest sensitive assets and interest sensitive liabilities is only a general indicator of interest rate sensitivity and how our net interest income might be affected by changing rates of interest.

For example, rates on certain assets or liabilities typically lag behind changes in market rates of interest. Additionally, prepayments of loans and securities available for sale, and early withdrawals of certificates of deposit, can cause the interest sensitivities to vary.

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The table below sets forth information concerning our rate sensitive assets and liabilities at June 30, 2013. The assets and liabilities are classified by the earlier of maturity or repricing dates in accordance with their contractual terms. As described above, certain shortcomings are inherent in the method of analysis presented in this table.

(Dollars in thousands)	Six Months or Less		Over Six Through Twelve Months		Over One Year Through Five Years		Over Five Years		Non- Interest- Bearing		Total
Assets
Interest-bearing time deposits in other financial institutions	$	1,075	$	1,348	$	—	$	—	$	—	$	2,423
Investment in unconsolidated trust subsidiaries		—		—		—		—		—		—
Securities available for sale		10,424		10,593		34,122		14,811		—		69,950
Federal Reserve Bank and Federal Home Loan Bank stock		8,918		—		—		—		—		8,918
Interest bearing deposits with financial institutions		73,691		—		—		—		—		73,691
Loans held for sale, at fair value		10,672		—		—		—		—		10,672
Loans, gross		319,480		70,436		250,909		88,116		—		728,941
Noninterest earning assets, net		—		—		—		—		57,518		57,518
Total assets	$	424,260	$	82,377	$	285,031	$	102,927	$	57,518	$	952,113
Liabilities and Shareholders’ Equity
Noninterest-bearing deposits	$	—	$	—	$	—	$	—	$	188,149	$	188,149
Interest-bearing deposits(1)(2)		256,505		247,123		57,203		—		—		560,831
Borrowings		5,000		27,500		12,500		—		—		45,000
Junior subordinated debentures		17,527		—		—		—		—		17,527
Other liabilities		—		—		—		—		10,286		10,286
Shareholders’ equity		—		—		—		—		130,320		130,320
Total liabilities and shareholders’ equity	$	279,032	$	274,623	$	69,703	$	—	$	328,755	$	952,113

(Dollars in thousands)	Six Months or Less			Over Six Through Twelve Months			Over One Year Through Five Years			Over Five Years			Non- Interest- Bearing			Total
Interest rate sensitivity gap	$	145,228		$	(192,246	)	$	215,328		$	102,928		$	(271,238	)	$	—
Cumulative interest rate sensitivity gap	$	145,228		$	(47,018	)	$	168,310		$	271,238		$	—		$	—
Cumulative % of rate sensitive assets in maturity period		45	%		53	%		83	%		94	%		100	%
Rate sensitive assets to rate sensitive liabilities and shareholders’ equity		152	%		30	%		409	%		—	%		18	%
Cumulative ratio		152	%		92	%		127	%		144	%		100	%

⁽¹⁾  Excludes savings accounts that we maintain at the Bank totaling $16.3 million.

⁽²⁾  Excludes a $250,000 certificate of deposit issued to us by the Bank, which matures January 2014.

At June 30, 2013, our rate sensitive balance sheet was shown to be in a negative twelve-month gap position. This would imply that our net interest margin would decrease in the short-term if interest rates were to rise and would increase in the short-term if interest rates were to fall. However, as noted above, the extent to which our net interest margin will be impacted by changes in prevailing interest rates will depend on a number of factors, including how quickly rate sensitive assets and liabilities react to interest rate changes, the mix of our interest earning assets (loans versus other lower yielding interest earning assets, such as securities or federal funds sold) and the mix of our interest bearing deposits (between, for example, lower interest core deposits and higher cost time certificates of deposit) and our other interest-bearing liabilities.

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Financial Condition

Assets

Our consolidated assets totaled $953 million at June 30, 2013, which represents a $101 million, or 9.6%, decrease from our total consolidated assets of $1.054 billion at December 31, 2012. The decrease in assets is primarily due to a $45.1 million decrease in loans available for sale, to $10.7 million, at June 30, 2013 from $55.8 million at December 31, 2012, and a $38.8 million decrease in cash and cash equivalents, to $89.4 million, at June 30, 2013 from $128.2 million at December 31, 2012. We used that cash and the cash equivalents primarily to fund withdrawals of the time deposits we elected not to renew in the six months ended June 30, 2013.

The following table sets forth the composition of our interest-earning assets (in thousands of dollars) at:

	June 30, 2013		December 31, 2012
Interest-bearing deposits with financial institutions(1)	$	73,691	$	115,952
Interest-bearing time deposits with financial institutions		2,423		2,423
Federal Reserve Bank and Federal Home Loan Bank Stock, at cost		8,918		10,284
Securities available for sale, at fair value		69,950		86,378
Loans held for sale		10,672		55,809
Loans (net of allowances of $11,123 and $10,881 at June 30, 2013 and December 31, 2012, respectively)		717,818		719,257

⁽¹⁾  Includes interest-earning balances maintained at the Federal Reserve Bank of San Francisco.

Loans Held for Sale

We commenced a mortgage banking business during the second quarter of 2009 to originate, primarily in Southern California, and fund residential real estate mortgage loans that qualify for sale into the secondary mortgage market. Our mortgage loan originations have been primarily for the financing of purchases of residential property and, to a lesser extent, refinancing of existing residential mortgage loans. In addition to conventional mortgage loans, we offer loan programs for low to moderate income families that qualify for mortgage assistance, such as the FHLB’s Wish Program, Homepath-financing on Fannie Mae repossessed homes, and Southern California Home Financing Authority and various mortgage assistance programs in counties and cities within our branch network. As a general rule, most of the residential mortgage loans that we originate are sold in the secondary mortgage market within a period of less than 30 days following their origination. The following table reflects the activity, in thousands of dollars, of our mortgage loan operations.

	Six Months Ended June 30, 2013		Year Ended December 31, 2012
Single family mortgage loans funded	$	103,367	$	933,214
Single family mortgage loans sold		138,568		937,201
Loans held for sale (LHFS)		10,672		55,809

The declines in mortgage loan fundings and sales of mortgage loans in the six months ended June 30, 2013, as compared to mortgage loan fundings and sales of mortgage loans in the year ended December 31, 2012, are the result not only of the difference in the lengths of those periods, but also the result of our exit from the wholesale residential mortgage lending business in August 2012.

Loans held for sale (“LHFS”) that were originated prior to December 1, 2011 are carried at the lower of aggregate cost or market. Effective December 1, 2011 we adopted ASU 825, The Fair Value Option for Financial Assets and Financial Liabilities, including an amendment of FASB Statement No. 115 (ASU 825) and, therefore, we elected to measure LHFS originated on or after December 1, 2011 at fair value. Fair values of LHFS are based on quoted market prices. Gains and losses on LHFS at fair value are, respectively, added to or charged against mortgage banking revenues. Loan origination costs related to LHFS for which we elect the fair value option are recognized in noninterest expense when incurred.

Any net unrealized losses on loans carried at the lower of aggregate cost or market are required to be recognized through a valuation allowance established by a charge to income. Loan origination costs for LHFS carried at the lower of cost or market are capitalized as part of the carrying amount of the loans and recognized as a reduction of mortgage banking revenues upon the sale of such loans.

During the first quarter of 2012, we began selling a portion of the mortgage loans we originate directly to secondary market investors on a “mandatory commitment” basis, agreeing to sell a specified dollar amount of mortgage loans at an agreed-upon price within a specified timeframe in order to avail ourselves of more favorable pricing on loan sales to investors. In order to mitigate interest rate risk on loans subject to such mandatory commitments, when we lock the interest rate for the borrowers on those loans prior to funding, we also lock the price at which we will sell the loans to the investors and enter into a mortgaged backed to-be-announced (“TBA”) security. The mandatory commitment and the TBA security act as a hedge against market interest rate movements between the time the interest rate is locked and the loan is funded and sold into the secondary market. TBA securities are deemed to be derivatives and involve off-balance sheet financial risk. The contractual or notional amounts of the TBA securities are tied to the Bank’s mortgage loan origination volume and we bear a financial risk from such securities. The unrealized gains from the interest rate contracts and TBA security hedges were $584,000 and $393,000 for the three and six months ended June 30, 2013, respectively. These gains or losses depend upon the value of the underlying financial instruments and are affected by changes in market rates of interest.

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Loans

The following table sets forth the composition, by loan category, of our loan portfolio at June 30, 2013 and December 31, 2012, respectively:

	June 30, 2013						December 31, 2012
(Dollars in thousands)	Amount			Percent			Amount			Percent
Commercial loans	$	195,439			26.8	%	$	170,792			23.4	%
Commercial real estate loans – owner occupied		156,215			21.4	%		165,922			22.7	%
Commercial real estate loans – all other		158,179			21.7	%		150,189			20.6	%
Residential mortgage loans – multi-family		97,383			13.4	%		105,119			14.4	%
Residential mortgage loans – single family		75,241			10.3	%		87,263			11.9	%
Land development loans		19,653			2.7	%		24,018			3.3	%
Consumer loans		27,106			3.7	%		27,296			3.7	%
Gross loans		729,216			100.0	%		730,599			100.0	%
Deferred fee (income) costs, net		(275	)					(461	)
Allowance for loan losses		(11,123	)					(10,881	)
Loans, net	$	717,818					$	719,257

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 property, including commercial property and single family and multi-family residences. Land development loans are interim loans to finance specific construction projects. Consumer loans consist primarily of installment loans to consumers.

The following table sets forth the maturity distribution of our loan portfolio (excluding consumer and residential mortgage loans) at June 30, 2013:

	June 30, 2013
(Dollars in thousands)	One Year or Less		Over One Year through Five Years		Over Five Years		Total
Real estate and land development loans(1)
Floating rate	$	91,232	$	47,842	$	12,288	$	151,362
Fixed rate		33,792		82,886		66,006		182,684
Commercial loans
Floating rate		42,960		—		—		42,960
Fixed rate		95,281		44,544		12,654		152,479
Total	$	263,265	$	175,272	$	90,948	$	529,485

⁽¹⁾  Does not include mortgage loans on single and multi-family residences and consumer loans, which totaled $172.6 million and $27.1 million, respectively, at June 30, 2013.

Nonperforming Loans and Allowance for Loan Losses

Nonperforming Loans. 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 other real estate owned, or 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 or 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

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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 restructured loans, at June 30, 2013 and December 31, 2012:

(Dollars in thousands)	At June 30, 2013		At December 31, 2012
Nonaccrual loans:
Commercial loans	$	3,595	$	6,846
Commercial real estate		3,928		9,656
Residential real estate		788		839
Land development		414		314
Total nonaccrual loans	$	8,725	$	17,655
Loans past due 90 days and still accruing:
Total loans past due 90 days and still accruing	$	—	$	—
Other real estate owned (OREO):
Commercial real estate	$	14,549	$	12,944
Residential real estate		—		—
Construction and land development		2,782		4,766
Total other real estate owned	$	17,331	$	17,710
Other nonperforming assets:
Asset backed security		775		900
Total other nonperforming assets	$	775	$	900
Total nonperforming assets	$	26,831	$	36,265
Restructured loans:
Accruing loans	$	22,360	$	21,595
Nonaccruing loans (included in nonaccrual loans above)		4,879		5,637
Total restructured loans	$	27,239	$	27,232

As the above table indicates, nonaccrual loans decreased by approximately $9.0 million, or 51%, to $8.7 million at June 30, 2013, from $17.7 million at December 31, 2012, primarily due to (i) the restoration to accrual status of a $2.0 million commercial real estate loan as a result of a history of principal and interest payments in accordance with previously modified terms of the loan, (ii) the foreclosure of $5.6 million of nonperforming loans, comprised primarily of commercial real estate loans, and their resulting transfer to OREO, and (iii) $1.8 million of impairment write-downs based on loan impairment analyses we conducted of nonperforming loans.

We have allocated specific reserves within the ALL to provide for losses we may incur on nonaccrual loans, and we have established specific reserves on OREO.

Information Regarding Impaired Loans. At June 30, 2013, loans deemed impaired totaled $31.1 million as compared to $39.3 million at December 31, 2012. At June 30, 2013 we had an average investment in impaired loans of $36.6 million as compared to an average investment in impaired loans of $34.8 million at December 31, 2012. The interest that would have been earned during the six months ended June 30, 2013 had the nonaccruing impaired loans remained current in accordance with their original terms was approximately $325,000.

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The following table sets forth the amount of impaired loans to which a portion of the ALL has been specifically allocated, and the aggregate amount so allocated, in accordance with ASC 310-10, and the amount of the ALL and the amount of impaired loans for which no such allocations were made, in each case at June 30, 2013 and December 31, 2012, respectively:

	June 30, 2013							December 31, 2012
Impaired Loans	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	$	4,312	$	2,158		50.0	%	$	4,398	$	2,448		55.7	%
Impaired loans without specific reserves		26,773		—		—			34,853		—		—
Total impaired loans	$	31,085	$	2,158		6.9	%	$	39,251	$	2,448		6.2	%

Allowance for Loan Losses. The ALL totaled $11.1 million, representing 1.53% of loans outstanding, at June 30, 2013, as compared to $10.9 million, and 1.49%, of loans outstanding at December 31, 2012.

The adequacy of the ALL 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 ALL involves some significant estimates and assumptions about such matters as (i) the amounts and timing of expected future cash flows of borrowers, (ii) the fair value of the collateral securing non-performing loans, (iii) estimates of losses that the we may incur on non-performing loans, which are determined on the basis of historical loss experience, industry loss factors and bank regulatory guidelines, and (iv) various qualitative factors. Those factors are subject to changes in economic and other conditions and changes in regulatory guidelines or circumstances over which we have no control. As a result, the amount of the ALL may prove to be insufficient to cover all of the loan losses we might incur in the future and, in that event, it would become necessary for us to increase the ALL from time to time to maintain its adequacy by recording additional provisions for loan losses in our statements of operations.

The amount of the ALL is first determined by assigning reserve ratios to non-accrual loans and other loans classified as “special mention,” “substandard” or “doubtful” (“classified loans” or “classification categories”). These ratios are determined based on prior loss history and industry guidelines and loss factors, by type of loan, adjusted for current economic factors, with greater reserve ratios or percentages applied to loans deemed to pose a higher collection risk.

On a quarterly basis, we utilize a classification migration model and individual loan review analysis tools as starting points for determining the adequacy of the ALL. 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. As part of the ALL allocation process, we also conduct individual loan analyses, applying specific monitoring policies and procedures in analyzing the existing loan portfolios.

In determining whether and the extent to which we will make adjustments to our loan loss migration model for purposes of determining the ALL, 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;

• Changes in the concentration of risk in the loan portfolio; and

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• 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 our loan portfolios 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 ALL or that may even exceed the ALL.

In response to the economic recession and resulting weakness in the economy, which has resulted in increased and relatively persistent high rates of unemployment, and the credit crisis that led to a severe tightening in the availability of credit, preventing borrowers from refinancing their loans, we (i) implemented and have maintained more stringent loan underwriting standards, (ii) strengthened loan underwriting and approval processes and (iii) added personnel with experience in addressing problem assets.

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The following table compares the total amount of loans outstanding, and the allowance for loan losses, by loan category, in each case, in thousands of dollars, and certain related ratios, as of June 30, 2013 and December 31, 2012.

	June 30, 2013			December 31, 2012			Increase (Decrease)
(Dollars in thousands)							June 30, 2013 to December 31, 2012
Commercial loans	$	195,439		$	170,792		$	24,647
Loans impaired(1)		11,867			16,180			(4,313	)
Loans 90 days past due		756			4,295			(3,539	)
Loans 30 days past due		4,592			2,099			2,493
Allowance for loan losses
General component	$	4,795		$	3,912		$	883
Specific component(1)		2,158			2,428			(270	)
Total allowance	$	6,953		$	6,340		$	613
Ratio of allowance to loan category		3.56	%		3.71	%		(0.15	)%
Real estate loans:	$	411,777		$	421,230		$	(9,453	)
Loans impaired(1)		18,016			21,918			(3,902	)
Loans 90 days past due		2,117			5,831			(3,714	)
Loans 30 days past due		4,792			—			4,792
Allowance for loan losses
General component		2,854			3,487			(633	)
Specific component(1)		—			—			—
Total allowance	$	2,854		$	3,487		$	(633	)
Ratio of allowance to loan category		0.69	%		0.83	%		0.14	%
Land development	$	19,653		$	24,018		$	(4,365	)
Loans impaired(1)		414			314			100
Loans 90 days past due		—			314			(314	)
Loans 30 days past due		—			—			—
Allowance for loan losses
General component	$	297		$	248		$	49
Specific component(1)		—			—			—
Total allowance	$	297		$	248		$	49
Ratio of allowance to loan category		1.51	%		1.03	%		0.48	%
Consumer loans and single family mortgages	$	102,347		$	114,559		$	(12,212	)
Loans impaired(1)		788			839			(51	)
Loans 90 days past due		—			359			(359	)
Loans 30 days past due		—			637			(637	)
Allowance for loan losses
General component	$	1,019		$	806		$	213
Specific component(1)		—			—			—
Total allowance	$	1,019		$	806		$	213
Ratio of allowance to loan category		1.00	%		0.70	%		0.30	%
Total loans outstanding	$	729,216		$	730,599		$	(1,383	)
Loans impaired(1)		31,085			39,251			(8,166	)
Loans 90 days past due		2,873			10,799			(7,926	)
Loans 30 days past due		9,384			2,736			6,648
Allowance for loan losses
General component	$	8,965		$	8,453		$	512
Specific component(1)		2,158			2,428			(270	)
Total allowance	$	11,123		$	10,881		$	242
Ratio of allowance to total loans outstanding		1.53	%		1.49	%		0.04	%

⁽¹⁾  Amounts in impaired loans and in specific components include nonperforming delinquent loans.

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We classify our loan portfolios using internal credit quality ratings. The following table provides a summary of loans by portfolio type and the Company’s internal credit quality ratings as of June 30, 2013 and December 31, 2012.

(Dollars in thousands)	June 30, 2013		December 31, 2012		Increase (Decrease)
Pass:
Commercial loans	$	173,199	$	146,952	$	26,247
Commercial real estate loans – owner occupied		152,691		162,689		(9,998	)
Commercial real estate loans – all other		140,186		135,274		4,912
Residential mortgage loans – multi family		97,383		104,747		(7,364	)
Residential mortgage loans – single family		73,264		84,237		(10,973	)
Land development loans		11,106		12,461		(1,355	)
Consumer loans		26,544		27,296		(752	)
Total pass loans	$	674,373	$	673,656	$	717
Special Mention:
Commercial loans	$	217	$	2,381	$	(2,164	)
Commercial real estate loans – owner occupied		—		—		—
Commercial real estate loans – all other		4,523		3,859		664
Residential mortgage loans – multi family		—		373		(373	)
Residential mortgage loans – single family		—		990		(990	)
Land development loans		—		8,201		(8,201	)
Consumer loans		562		—		562
Total special mention loans	$	5,302	$	15,804	$	(10,502	)
Substandard:
Commercial loans	$	21,047	$	21,347	$	(300	)
Commercial real estate loans – owner occupied		3,523		3,232		291
Commercial real estate loans – all other		13,470		11,057		2,413
Residential mortgage loans – multi family		—		—		—
Residential mortgage loans – single family		1,978		2,036		(58	)
Land development loans		8,547		3,355		5,192
Consumer loans		—		—		—
Total substandard loans	$	48,565	$	41,027	$	7,538
Doubtful:
Commercial loans	$	976	$	112	$	864
Commercial real estate loans – owner occupied		—		—		—
Commercial real estate loans – all other		—		—		—
Residential mortgage loans – multi family		—		—		—
Residential mortgage loans – single family		—		—		—
Land development loans		—		—		—
Consumer loans		—		—		—
Total doubtful loans	$	976	$	112	$	864
Total Outstanding Loans, gross:	$	729,216	$	730,599	$	(1,383	)

The disaggregation of the loan portfolio by risk rating in the table above reflects the following changes that occurred between December 31, 2012 and June 30, 2013:

• Loans rated “pass” totaled $674 million, substantially unchanged from December 31, 2012. During the six months ended June 30, 2013, the composition of the loan portfolio changed due primarily to a $26 million increase in commercial loans, offset by decreases of $11 million in residential mortgage-single family loans, $10 million in commercial real estate-owner occupied real estate loans and $7 million in residential mortgage-multifamily loans.

• The loans rated “special mention” decreased by $10.5 million to $5.3 million at June 30, 2013 from $15.8 million at December 31, 2012. The decrease was primarily the result of the downgrading to “substandard” of a $10.7 million loan relationship, comprised of $9.5 million in commercial real estate loans-all other and a $1.1 million commercial loan. The loans are collateralized by real properties and through June 30, 2013 borrower payments had been current.

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• Loans rated “substandard” increased by $7.6 million to $48.6 million at June 30, 2013, from $41.0 million at December 31, 2012. The increase was the result of transfers of $11.5 million of loans from “special mention” and $5.1 million of loans from “pass” to substandard, partially offset by $2.3 million of loan charge offs and the foreclosure and transfer to OREO of $5.6 million of real estate loans during the six months ended June 30, 2013.

We use a rolling eight quarter loss migration analysis to determine the loss factors we will apply to each of the above-described loan classification categories. As a result, for purposes of determining applicable loss factors at the June 30, 2013, our migration analysis covered the period from June 30, 2011 to June 30, 2013. That migration analysis resulted in a modest reduction in the loss factors in the quantitative component of our June 30, 2013 ALL analysis, which we believe was consistent with and reasonably reflects current economic conditions and the risks that were inherent in our loan portfolio at June 30, 2013.

The table below sets forth loan delinquencies, by quarter, from June 30, 2013 to June 30, 2012.

	2013				2012
(Dollars in thousands)	At June 30		At March 31		At December 31		At September 30		At June 30
Loans Delinquent:
90 days or more:
Commercial loans	$	756	$	2,935	$	4,295	$	4,727	$	4,775
Commercial real estate		2,117		5,043		5,831		3,863		5,491
Residential mortgages		—		735		359		348		—
Land development loans		—		—		314		—		528
		2,873		8,713		10,799		8,938		10,794
30-89 days:
Commercial loans		4,592		5,255		2,099		609		12,239
Commercial real estate		4,792		6,103		—		428		—
Residential mortgages		—		—		637		1,237		347
Land development loans		—		—		—		664		320
Consumer loans		—		—		—		5		2
		9,384		11,358		2,736		2,943		12,908
Total Past Due(1) :	$	12,257	$	20,071	$	13,535	$	11,881	$	23,702

⁽¹⁾  Past due balances include nonaccrual loans.

As the above table indicates, total past due loans decreased by $1.2 million, to $12.3 million at June 30, 2013 from $13.5 million at December 31, 2012. Loans past due 90 days or more decreased by $7.9 million, to $2.9 million at June 30, 2013, from $10.8 million at December 31, 2012, primarily due to (i) the foreclosure and transfers to OREO of $5.6 million of real estate loans, and (ii) $1.5 million in loan charge offs, during the six months ended June 30, 2013.

Loans 30-89 days past due increased by $6.7 million to $9.4 million at June 30, 2013, from $2.7 million at December 31, 2012, primarily due to bankruptcy filings on a $4.8 million commercial real estate loan and a $1.0 million commercial loan.

Set forth below is a summary of the transactions in the ALL in the six months ended June 30, 2013 and the year ended December 31, 2012:

	Three Months Ended June 30, 2013			Six Months Ended June 30, 2013			Year Ended December 31, 2012
(Dollars in thousands)
Balance, beginning of period	$	11,018			10,881		$	15,627
Charged off loans		(1,433	)		(2,918	)		(8,574	)
Recoveries on loans previously charged off		1,538			2,010			1,878
Provision for loan losses		—			1,150			1,950
Balance, end of period	$	11,123			11,123		$	10,881

As the above table indicates, at June 30, 2013 the ALL totaled $11.1 million, or 1.53% of the loans then outstanding. The ALL was approximately $240,000 higher than at December 31, 2012. We recorded net recoveries of $100,000 during the three months ended June 30, 2013 and had net charge-offs of $900,000 during the first six months of 2013. We did not record any provision for loan losses in the three months ended June 30, 2013, whereas we recorded a $1.2 million provision

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for loan losses for the three months ended March 31, 2013. On the basis of the methodologies we use to assess asset quality, bank regulatory guidelines and our historical loan loss history, we believe that, at June 30, 2013, the ALL was adequate to cover potential losses in the loan portfolio at June 30, 2013.

Deposits

Average Balances of and Average Interest Rates Paid on Deposits

Set forth below are the average amounts (in thousands of dollars) of, and the average rates paid on, deposits in the six months ended June 30, 2013:

	Six Months Ended June 30, 2013
	Average Balance		Average Rate
Noninterest-bearing demand deposits	$	191,300		—
Interest-bearing checking accounts		32,980		0.26	%
Money market and savings deposits		164,218		0.43	%
Time deposits		430,101		1.02	%
Average total deposits	$	818,599		0.63	%

Deposit Totals. Deposits totaled $749 million at June 30, 2013 as compared to $845 million at December 31, 2012 and $857 million at June 30, 2012. The following table provides information regarding the mix of our deposits at June 30, 2013, December 31, 2012 and June 30, 2012, respectively:

	At June 30, 2013					At December 31, 2012					At June 30, 2012
(Dollars in thousands)	Amounts		Percent of Total Deposits			Amounts		Percent of Total Deposits			Amounts		Percent of Total Deposits
Core deposits
Noninterest bearing demand deposits	$	188,149		25.1	%	$	170,259		20.1	%	$	170,011		19.8	%
Savings and other interest-bearing transaction deposits		180,731		24.1	%		194,215		23.0	%		196,021		22.9	%
Time deposits		380,100		50.8	%		480,921		56.9	%		490,974		57.3	%
Total deposits	$	748,980		100.0	%	$	845,395		100.0	%	$	857,006		100	%

As indicated in the above table, as a percentage of total deposits at June 30, 2013, (i) noninterest bearing demand deposits increased to 25.1%, from 20.1% and 19.8% at December 31, 2012 and June 30, 2012, respectively, (ii) savings and other interest-bearing deposits increased to 24.1% from 23.0% and 22.9% at December 31, 2012 and June 30, 2012, respectively, and (iii) higher-priced time deposits decreased to 50.8% of total deposits from 56.9% and 57.3% respectively, at December 31, 2012 and June 30, 2013. The change in the mix of deposits during the 12 months ended June 30, 2013 contributed to the reduction in interest expense in the three and six months ended June 30, 2013, as compared to the same respective periods of 2012. See “—Results of Operations—Net Interest Income” above in this Section of this Report.

Set forth below, in thousands of dollars, is a maturity schedule of domestic time certificates of deposit outstanding at June 30, 2013:

	At June 30, 2013
	Certificates of Deposit under $100,000		Certificates of Deposit of $100,000 or More
Maturities
Six months or less	$	26,564	$	151,847
Over six and through nine months		17,984		90,129
Over nine and through twelve months		6,192		30,183
Over twelve months		6,981		50,220
Total certificates of deposit	$	57,721	$	322,379

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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 to 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 the 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.

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 Federal Reserve Bank and Federal Home Loan Bank stock) totaled $138 million, which represented 14% of total assets at June 30, 2013.

Cash Flow Provided by Operating Activities. In the six months ended June 30, 2013, operating activities provided net cash of $34 million, comprised primarily of $154 million from sales of mortgages loans available for sale, partially offset by the use of $103 million to fund new mortgage loan originations. By contrast, operating activities used $81 million of cash in the six months ended June 30, 2012 as mortgage loan originations, totaling $425 million, exceeded proceeds from sales of mortgage loans, which totaled $359 million. The decrease in mortgage loan originations in the six months ended June 30, 2013 was due primarily to our exit from the wholesale residential mortgage business in August 2012.

Cash Flow Provided by Investing Activities. In the six months ended June 30, 2013, investing activities provided net cash of $19 million, comprised primarily of $15 million from maturities of and principal payments received on securities available for sale and $6 million from sales of securities available for sale. In the six months ended June 30, 2012, investing activities provided net cash of $7 million consisting primarily of $136 million of proceeds from sales of securities available for sale, and $22 million from the maturities of or payments of principal on securities available for sale, which more than offset the use of $107 million to purchase securities available for sale.

Cash Flow Used in Financing Activities. In the six months ended June 30, 2013, we used $91 million in financing activities, comprised primarily of a $96 million decrease in deposits, consisting primarily of higher-priced time deposits, and a $10 million decrease in borrowings, partially offset by $15 million of proceeds from the sale of 2,222,222 shares of our common stock, at a price of $6.75 per share, to the Carpenter Funds in March 2013. In the six months ended June 30, 2012, financing activities provided cash of $40 million, comprised of increases of $25 million from the sale of shares of our common stock in April 2012, and $20 million 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 repayments of loans tend to be less predictable than the maturity of investments and other liquid resources, the higher the loan-to-deposit ratio the less liquid are a bank’s 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 our 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, 2013 and December 31, 2012, the loan-to-deposit ratios were 97% and 86%, respectively.

Off Balance Sheet Arrangements

Loan Commitments and Standby Letters of Credit. In order to meet the financing needs of our customers, in the normal course of business we make commitments to extend credit and issue standby commercial letters of credit to or for our customers. At June 30, 2013 and December 31, 2012, we were committed to fund certain loans, including letters of credit, amounting to approximately $120 million and $118 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

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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.

We believe that our cash and cash equivalent resources, together with available borrowings under our credit facilities, will be sufficient to enable us to meet any increases in demand for loans or in the utilization of outstanding loan commitments or standby letters of credit and any increase in deposit withdrawals that might occur in the foreseeable future.

Borrowings and Contractual Obligations

Borrowings. As of June 30, 2013, we had $32.5 million of outstanding short-term borrowings and $12.5 million of outstanding long-term borrowings that we had obtained from the FHLB. The following table sets forth the principal amounts of, the interest rates we paid on, and the maturity dates of these FHLB borrowings which, together with securities sold under agreements to repurchase, had a weighted-average annualized interest rate of 0.62% during the second quarter of 2013.

Principal Amounts		Interest Rate			Maturity Dates	Principal Amounts		Interest Rate			Maturity Dates
(Dollars in thousands)
	$5,000		1.06	%	August 9, 2013	$	5,000		0.48	%	May 6, 2014
	5,000		0.41	%	November 5, 2013		3,000		0.64	%	September 26, 2014
	7,500		0.49	%	March 3, 2014		4,500		0.78	%	March 26, 2015
	5,000		0.56	%	March 26, 2014		5,000		0.76	%	March 30, 2015
	5,000		0.48	%	April 14, 2014

At June 30, 2013, U.S. Agency and mortgage backed securities, U.S. Government agency securities and collateralized mortgage obligations with an aggregate fair market value of $2 million and $209 million of residential mortgage and other real estate secured loans were pledged to secure these FHLB borrowings, repurchase agreements, local agency deposits and treasury, tax and loan accounts.

The highest amount of borrowings outstanding at any month end in the quarter ended June 30, 2013 consisted of $45 million of borrowings from the FHLB. By comparison, the highest amount of borrowings outstanding at any month end in 2012 consisted of $69 million of FHLB borrowings.

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, 2013, we had outstanding approximately $17.5 million principal amount of 30-year junior subordinated floating rate debentures (the “Debentures”), of which $17 million qualified as Tier 1 capital for regulatory purposes as of June 30, 2013. See discussion below under the subcaption “—Capital Resources-Regulatory Capital Requirements.”

Set forth below is certain information regarding the Debentures:

(Dollars in thousands)	Principal Amount		Interest Rate	Maturity Dates(1)
September 2002	$	7,217	90 day Libor plus 3.40%		September 2032
October 2004		10,310	90 day 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.

Interest on the Debentures is payable quarterly. However, subject to certain conditions, we are entitled by the express terms of the Debentures to defer those interest payments for up to 20 quarters.

As we have previously reported, since July 2009 we have been required to obtain the prior approval of the FRBSF to make interest payments on the Debentures. Since September 2010, we have been unable to obtain such approvals. As a result,

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as of June 30, 2013, we had deferred 11 quarterly interest payments, totaling $954,000, on the $7.2 million of Debentures due in September, 2032, and 12 quarterly interest payments, totaling $883,000, on the $10.3 million of Debentures due in October, 2034. We cannot predict when or if the FRBSF will approve our resumption of such interest payments and until such approval can be obtained it will be necessary for us to continue deferring interest payments on the Debentures. Since we have the right, under the terms of the Debentures, to defer interest payments for up to twenty (20) quarters, the deferrals of interest payments to date have not, and any deferral of future interest payments through January, 2015, will not constitute a default under or with respect to the Debentures. However, if we are not able to obtain regulatory approval to pay all of the deferred interest payments by January, 2015, we would then be in default under the Debentures. For additional information regarding the restrictions on the payment by us of interest on the Debentures, as well as other regulatory restrictions that apply to us and the Bank under a regulatory agreement entered into with the FRBSF and a regulatory order issued by the California Department of Business Oversight, see “Capital Resources-Capital and Other Requirements under FRBSF Agreement and DFI Order” below in this section of this report and “Supervision and Regulation-Regulatory Action by the FRBSF and DFI” in Item 1 and “RISK FACTORS” in Item 1A in Part I of our 2012 10-K.

Investment Policy and Securities Available for Sale

Our investment policy is designed to provide for our liquidity needs and to generate a favorable return on investments without undue interest rate risk, credit risk or asset concentrations.

Our investment policy:

• authorizes us to invest in obligations issued or fully guaranteed by the United States Government, certain federal agency obligations, time deposits issued by federally insured depository institutions, municipal securities and in federal funds sold;

• provides that the aggregate weighted average life of U.S. Government obligations and federal agency securities exclusive of variable rate securities cannot, without approval by the Board of Directors, exceed 10 years and municipal obligations cannot exceed 25 years;

• provides that time deposits must be placed with federally insured financial institutions, cannot exceed the current federally insured amount in any one institution and may not have a maturity exceeding 60 months, unless that time deposit is matched to a liability instrument issued by the Bank; and

• prohibits engaging in securities trading activities.

Securities available for sale are those that we intend to hold for an indefinite period of time, but which we may sell in response to changes in liquidity needs, changes in interest rates, changes in prepayment risks or other similar factors. Such securities are recorded at fair value. Any unrealized gains and losses are reported as “Other Comprehensive Income (Loss)” rather than included in or deducted from earnings.

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The following table sets forth information with respect to the major components of securities available for sale and a comparison of the amortized cost, estimated fair values and gross unrealized gains and losses, in each case, in thousands of dollars, as of June 30, 2013 and December 31, 2012:

(Dollars in thousands)	Amortized Cost		Gross Unrealized Gain		Gross Unrealized Loss			Estimated Fair Value
Securities available for sale at June 30, 2013:
Mortgage backed securities issued by U.S. Agencies(1)	$	64,883	$	22	$	(2,271	)	$	62,634
Collateralized non-agency mortgage obligations(1)		2,309		60		(61	)		2,308
Asset backed securities(2)		2,247		—		(1,472	)		775
Mutual funds(3)		4,233		—		—			4,233
Total securities available for sale	$	73,672	$	82	$	(3,804	)	$	69,950
Securities available for sale at December 31, 2012:
Mortgage-backed securities issued by U.S. agencies(1)	$	78,053	$	553	$	(160	)	$	78,446
Collateralized non-agency mortgage obligations(1)		2,599		87		(61	)		2,625
Asset backed securities(2)		2,247		—		(1,347	)		900
Mutual funds(3)		4,407		—		—			4,407
Total securities available for sale	$	87,306	$	640	$	(1,568	)	$	86,378

⁽¹⁾  Secured by closed-end first lien 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, 2013, U.S. agencies and mortgage backed securities, U.S. government agency securities, collateralized mortgage obligations and time deposits with an aggregate fair market value of $13 million were pledged to secure FHLB borrowings, repurchase agreements, local agency deposits, to secure lines of credit at our correspondent banks and treasury, and tax and loan accounts.

The amortized costs, at June 30, 2013, of securities available for sale are shown in the following table, by contractual maturities and historical prepayments based on the prior three months of principal payments. Expected maturities will differ from contractual maturities and historical prepayments, particularly with respect to collateralized mortgage obligations, because borrowers may react to interest rate market conditions differently than the historical prepayment rates.

	June 30, 2013 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)	Book Value		Weighted Average Yield			Book Value		Weighted Average Yield			Book Value		Weighted Average Yield			Book Value		Weighted Average Yield			Book Value		Weighted Average Yield
Securities available for sale:
Mortgage-backed securities issued by U.S. Agencies	$	10,797		1.21	%	$	27,241		1.36	%	$	17,803		1.49	%	$	9,042		1.54	%	$	64,883		1.40	%
Collateralized non-agency mortgage obligations		646		2.51	%		1,126		—			—		—			537		4.08	%		2,309		3.30	%
Asset backed securities		—		—			—		—			—		—			2,247		—			2,247		—
Mutual funds		—		—			4,233		1.96	%		—		—			—		—			4,233		1.96	%
Total securities available for sale	$	11,443		1.28	%	$	32,600		1.51	%	$	17,803		1.49	%	$	11,826		1.36	%	$	73,672		1.45	%

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The table below shows, as of June 30, 2013, the gross unrealized losses and fair values of our investments, aggregated by investment category, and the length of time that the individual securities have been in a continuous unrealized loss position.

	Securities with Unrealized Loss at June 30, 2013
	Less than 12 months					12 months or more					Total
Dollars in thousands	Fair Value		Unrealized Loss			Fair Value		Unrealized Loss			Fair Value		Unrealized Loss
Mortgage backed securities issued by U.S. agencies		61,183		(2,270	)		38		(1	)		61,221		(2,271	)
Collateralized non-agency mortgage obligations		—		—			1,065		(61	)		1,065		(61	)
Asset backed securities		—		—			775		(1,472	)		775		(1,472	)
Total temporarily impaired securities	$	61,183	$	(2,270	)	$	1,878	$	(1,534	)	$	63,061	$	(3,804	)

Impairment exists when the fair value of the security has declined below its cost. We perform quarterly assessments of the securities that have an unrealized loss to determine whether the decline in fair value of those securities below their cost is other-than-temporary.

We adopted ASC 321-10 effective April 1, 2009 and, accordingly, we recognize other-than-temporary impairments (“OTTI”) to our available-for-sale debt securities. In accordance with ASC 321-10, when there are credit losses associated with an impaired debt security and (i) we do not have the intent to sell the security and (ii) it is more likely than not that we will not have to sell the security before recovery of its cost basis, then, we will separate the amount of an impairment that is credit-related from the amount thereof related to non-credit factors. The credit-related impairment is recognized in our consolidated statements of income. The non-credit-related impairment is recognized and reflected in Other Comprehensive Income.

Capital Resources

Capital Regulatory Requirements Applicable to Banking Institutions.

Under current 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, which are based primarily on those quantitative measures, 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.

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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, 2013, as compared to the respective regulatory requirements applicable to them.

	Actual					Applicable Federal Regulatory Requirement
						To be Categorized as Adequately Capitalized					To be Categorized as Well Capitalized
(Dollars in thousands)	Amount		Ratio			Amount		Ratio			Amount		Ratio
Total Capital to Risk Weighted Assets:
Company	$	150,125		19.4	%	$	61,768		At least 8	%		N/A		N/A
Bank		127,957		16.9	%		60,432		At least 8	%	$	75,539		At least 10	%
Tier 1 Capital to Risk Weighted Assets:
Company	$	140,453		18.1	%	$	30,884		At least 4	%		N/A		N/A
Bank		118,492		15.7	%		30,216		At least 4	%	$	45,324		At least 6	%
Tier 1 Capital to Average Assets:
Company	$	140,453		14.4	%	$	38,822		At least 4	%		N/A		N/A
Bank		118,492		12.2	%		38,847		At least 4	%	$	48,559		At least 5	%

At June 30, 2013, the Bank (on a stand-alone basis) continued to qualify as a well-capitalized institution, and the Company continued to exceed all required capital ratios, under the capital adequacy guidelines described above.

The Company’s consolidated total capital and Tier 1 capital, at June 30, 2013, includes an aggregate of $17 million principal amount of the $17.5 million of Junior Subordinated Debentures that we issued in 2002 and 2004. We contributed that amount to the Bank over the six year period ended December 31, 2009, 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.

New Basel III Capital Rules

The current risk-based capital rules are based on the 1988 capital accord of the International Basel Committee on Banking Supervision (the “Basel Committee”), which is comprised of central banks and bank supervisors and regulators from the major industrialized countries. The Basel Committee develops broad policy guidelines for use by each country’s banking regulators in determining the banking supervisory policies and rules they apply. In December 2010, the BCBS issued a new set of international guidelines for determining regulatory capital, known as “Basel III”. In June 2012, the FRB issued, for public comment, three notices of proposed rulemaking that, if adopted, would result in significant changes to the regulatory risk-based capital and leverage requirements for banks and bank holding companies (“banking organizations”) in the United States consistent with the Basel III guidelines.

In July 2013, the FRB adopted final rules (the “New Capital Rules”) establishing a new comprehensive capital framework for U.S. banking organizations, and the FDIC adopted substantially identical rules on an interim basis. The rules implement the Basel Committee’s December 2010 framework for strengthening international capital standards as well as certain provisions of the Dodd-Frank Act. The New Capital Rules substantially revise the risk-based capital requirements applicable to U.S. banking organizations, including the Company and the Bank, from the current U.S. risk-based capital rules, define the components of capital and address other issues affecting banking institutions’ regulatory capital ratios. The New Capital Rules also replace the existing approach used in risk-weighting of a banking organization’s assets with a more risk-sensitive approach. The New Capital Rules are effective for the Company and the Bank on January 1, 2015 (subject in the case of certain of those Rules to phase-in periods).

The New Capital Rules, among other things, (i) introduce a new capital measure called “Common Equity Tier 1” (“CET-1”), (ii) specify that Tier 1 capital consist of CET-1 and “Additional Tier 1 capital” instruments meeting specified requirements, (iii) apply most deductions and adjustments to regulatory capital measures to CET-1 and not to the other components of capital, thus potentially requiring banking organizations to achieve and maintain higher levels of CET-1 in order to meet minimum capital ratios, and (iv) expand the scope of the deductions and adjustments from capital as compared to existing capital rules.

Under the New Capital Rules, the minimum capital ratios as of January 1, 2015 will be as follows:

CET-1 to risk-weighted assets	4.5%
Tier 1 capital (i.e., CET-1 plus Additional Tier 1) to risk-weighted assets	6.0%
Total capital (i.e., Tier 1 plus Tier 2) to risk-weighted assets	8.0%
Tier 1 capital to average consolidated assets as reported on consolidated financial statements (known as the “leverage ratio”)	4.0%

When fully phased in on January 1, 2019, the New Capital Rules also will require the Company and the Bank, as well as most other bank holding companies and banks, to maintain a 2.5% “capital conservation buffer,” composed entirely of CET-1, on top of the minimum risk-weighted asset ratios set forth in the above table. This capital conservation buffer will have the effect of increasing (i) the CET-1-to-risk-weighted asset ratio to 7.0%, (ii) the Tier 1 capital-to-risk-weighted asset ratio to 8.5%, and (iii) the Total capital-to-risk weighted asset ratio to 10.5%.

The capital conservation buffer is designed to absorb losses during periods of economic stress. Banking organizations with a ratio of CET-1 to risk-weighted assets above the minimum, but below the capital conservation buffer, will face constraints on dividends, equity repurchases and executive compensation based on the amount of the shortfall. The implementation of the capital conservation buffer will begin on January 1, 2016 at 0.625%, and will increase by 0.625% on each subsequent January 1, until it reaches 2.5% on January 1, 2019.

The New Capital Rules provide for a number of deductions from and adjustments to CET-1. These include, for example, the requirement that mortgage servicing rights, deferred tax assets dependent upon future taxable income, and significant investments in common equity issued by nonconsolidated financial entities be deducted from CET-1 to the extent that any one such category exceeds 10% of CET-1 or all such categories in the aggregate exceed 15% of CET-1. The deductions and other adjustments to CET-1 will be phased in incrementally between January 1, 2015 and January 1, 2018. Additionally, the impact may be mitigated prior to or during the phase-in period by the determination of other than temporary impairments (“OTTI”) and additional accumulation of retained earnings. Under current capital standards, the effects of certain items of Accumulated Other Comprehensive Income (“AOCI”) included in capital are excluded for purposes of determining regulatory capital ratios. By contrast, under the New Capital Rules, the effects of certain items of AOCI will not be excluded. However, most banking organizations, including the Company and the Bank, may make a one-time permanent election, not later than January 1, 2014, to continue to exclude these items from capital. We have not yet determined whether to make this election.

The New Capital Rules require that trust preferred securities, such as those issued by the Company in connection with the sale of its subordinated debentures in 2002 and 2004, be phased out from Tier 1 capital by January 1, 2016. However, under the New Capital Rules, banking organizations, such as the Company, which have total consolidated assets of less than $15 billion, will be permitted to include trust preferred securities, issued prior to May 19, 2010, in Tier 2 capital, without any limitations.

With respect to the Bank, the New Capital Rules also revise the “prompt corrective action” regulations under the Federal Deposit Insurance Act, by (i) introducing a CET-1 ratio requirement at each capital quality level (other than critically undercapitalized), of a CET-1 ratio of 6.5% for well-capitalized status; (ii) increasing the minimum Tier 1 capital ratio for each category, with the minimum Tier 1 capital ratio for well-capitalized status being 8% (as compared to the current 6%); and (iii) requiring a leverage ratio of 4% to be adequately capitalized (as compared to the current 3% leverage ratio for a bank with a composite supervisory rating of 1 and a leverage ratio of 5% to be well-capitalized. The New Capital Rules do not change the total risk-based capital requirement for any “prompt corrective action” category.

The New Capital Rules prescribe a standardized approach for calculating risk-weighted assets that expand the risk-weighting categories from the current four Basel I-derived categories (0%, 20%, 50% and 100%) to a much larger and more risk-sensitive number of categories, depending on the nature of the assets, generally ranging from 0% for U.S. Government and agency securities, to 600% for certain equity exposures, and resulting in higher risk weights for a variety of asset categories. In addition, the New Capital Rules also provide more advantageous risk weights for derivatives and repurchase-style transactions cleared through a qualifying central counterparty and increase the scope of eligible guarantors and eligible collateral for purposes of credit risk mitigation.

Capital and Other Requirements under FRBSF Agreement and DFI Order.

On August 31, 2010, the Company and the Bank entered into a regulatory agreement with the FRBSF (the “FRBSF Agreement”) and the Bank consented to the issuance, by California Division of Financial Institutions (the “DFI”), of a regulatory order (the “DFI Order”).

The principal purposes of the FRBSF Agreement and the DFI Order, which constitute formal supervisory actions by the FRBSF and the DFI, required the Company and the Bank to adopt and implement formal plans and take certain actions, as well as to continue implementing measures that we previously adopted, to address the adverse consequences that the economic recession and weakened state of the economy have had on the performance of our loan portfolio and our operating results and to increase our capital to strengthen our ability to weather any further adverse economic conditions that might arise in the future.

57

The FRBSF Agreement and DFI Order contain substantially similar provisions. They require the Boards of Directors of the Company and the Bank to prepare and submit written plans to the FRBSF and the DFI that address a number of matters, including improving the Bank’s position with respect to problem assets, maintaining adequate reserves for loan and lease losses in accordance with applicable supervisory guidelines, and improving the capital position of the Bank and, in the case of the FRBSF Agreement, the capital position of the Company. The Bank is also prohibited from paying dividends to the Company without the prior approval of the DFI, and the Company may not declare or pay cash dividends, repurchase any of its shares, make interest or principal payments on its Junior Subordinated Debentures or incur or guarantee any debt without the prior approval of the FRBSF.

The DFI Order also states that if we were to violate or fail to comply with the Order, the Bank could be deemed to be conducting business in an unsafe manner which could subject the Bank to further regulatory enforcement action.

The FRBSF Agreement also required us to submit a capital plan to the FRBSF that would meet with its approval and then to implement that plan. Under the DFI Order, the Bank was required to achieve a ratio of adjusted tangible shareholders’ equity to its tangible assets of 9% by January 31, 2011, by raising additional capital, generating earnings or reducing the Bank’s tangible assets (subject to a 15% limitation on such a reduction) or a combination thereof and, upon achieving that ratio, to maintain at least a 9% ratio during the remaining term of the Order.

The Company and the Bank have made substantial progress with respect to the requirements of the FRBSF Agreement and the DFI Order and both the Board and management are committed to achieving all of those requirements.

Among other things, on August 26, 2011, we sold to six institutional investors (the “Investors”) a total of 112,000 shares of a newly created Series B Convertible 8.4% Noncumulative Preferred Stock (the “Series B Shares”), at a price of $100.00 per share in cash, generating aggregate gross proceeds to the Company of $11.2 million. The Investors were SBAV LP, an affiliate of the Clinton Group, which purchased 75,000 Series B Shares, and the Carpenter Funds which, together, purchased a total of 37,000 Series B Shares. We contributed the net proceeds from the sale of those Series B Shares to the Bank, which enabled it to increase the ratio of its adjusted tangible shareholders’ equity to its tangible assets above 9% and thereby meet the capital requirements under the DFI Order.

As previously reported, on April 20, 2012 we sold to the Carpenter Funds a total of 4,201,278 shares of our common stock at a price of $6.26 per share in cash, generating aggregate gross proceeds to the Company of $26.3 million, which has further increased the amount of our Tier 1 capital. We then used $15.0 million of those proceeds to make a capital contribution to the Bank.

As a result of these capital contributions by us to, and the earnings generated by the Bank since 2011, the ratio of the Bank’s adjusted tangible shareholders’ equity to its tangible assets had increased to 12.4% at June 30, 2013.

Additional information regarding the FRBSF Agreement and the DFI Order is set forth in our 2012 10-K in the subsection of Item 1 thereof entitled “Supervision and Regulation—Regulatory Action by the FRBSF and DFI” and in Item 1A thereof entitled “RISK FACTORS”.

Also, as we previously reported, effective as of March 30, 2013, we sold a total of 2,222,222 shares of our common stock to Carpenter Community Bancfund L.P. and Carpenter Community Bancfund-A, L.P. (the “Carpenter Funds”), at a price of $6.75 per share in cash, generating gross proceeds to us of $15 million. The purchase price of $6.75 per share of common stock was equal to the Company’s tangible book value per share of common stock as of December 31, 2012 and represented a 15% premium over the market price of our shares on the last trading day immediately preceding the date the sale was consummated. The proceeds from the sale of those shares were contributed by the Company to capitalize a new wholly-owned asset management subsidiary, which has used those proceeds to fund the purchase of $10 million of nonperforming loans and foreclosed real properties from the Bank.

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 their capital positions and the Bank’s liquidity. Moreover, since mid-2009, bank regulatory restrictions, including those under the FRBSF Agreement and DFI Order, have precluded the Company and the Bank from paying cash dividends, and we have been precluded from repurchasing our shares, without the prior approval of the FRBSF. Accordingly, we do not expect to pay dividends or make share repurchases at least for the foreseeable future.

58

ITEM 4T. CONTROLS AND PROCEDURES

We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our reports filed 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 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. 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 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 Rules 13a-15 and 15d-15 under the Exchange Act, in connection with the filing of this Quarterly Report on Form 10-Q, an evaluation was performed under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures as of June 30, 2013. Based on that evaluation, our CEO and CFO have concluded that, as of June 30, 2013, the Company’s disclosure controls and procedures were effective to provide reasonable assurance that information required to be disclosed in our reports filed under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the rules of the Securities and Exchange Commission and that such information is accumulated and communicated to management, including our Chief Executive and Chief Financial Officers, to allow timely decisions regarding required disclosure.

Changes in Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting during the six months ended June 30, 2013 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

59

PART II

ITEM 1 LEGAL PROCEEDINGS

Mark Zigner vs. Pacific Mercantile Bank, et al., filed in January, 2010, in the California Superior Court for the County of Orange (Case No.0337433). This lawsuit was filed by plaintiff asserting that a set-off by the Bank of funds in plaintiff’s deposit accounts in the Bank’s efforts to recover borrowings owed to it by plaintiff was wrongful.

As previously reported, at the conclusion of a jury trial in February 2012, the plaintiff was awarded $250,000 of compensatory damages and $950,000 in punitive damages against the Bank. In addition, the trial court entered an award to plaintiff of his attorney’s fees and costs, in the amount of $762,000. Promptly thereafter, the Bank filed an appeal of the trial court’s rulings and the jury verdict, asserting that those rulings and the jury’s verdict were erroneous.

Due to the inherent uncertainties as to the ultimate outcome of appeals and the opportunity to put an end to what was becoming a lengthy and costly appellate process, on May 13, 2013 we entered into a settlement with the plaintiff without admitting any of plaintiff’s allegations. Pursuant to that settlement, the plaintiff released all claims that he had or might have had against the Bank in exchange for the payment by the Bank to or for the account of plaintiff of a total of $1,350,000, which was less than the contingency reserve that we previously established for this suit. As a result, the settlement had no material effect on our results of operations for the three or the six months ended June 30, 2013.

ITEM 1A. RISK FACTORS

There have been no material changes in our assessment of our risk factors from those set forth in our 2012 10-K.

ITEM 6. EXHIBITS

The following documents are filed as Exhibits to this Quarterly Report on Form 10-Q:

Exhibit No.	Description of Exhibit
Exhibit 31.1	Certification of Chief Executive Officer under Section 302 of the Sarbanes-Oxley Act of 2002
Exhibit 31.2	Certification of Chief Financial Officer under Section 302 of the Sarbanes-Oxley Act of 2002
Exhibit 32.1	Certification of Chief Executive Officer under Section 906 of the Sarbanes-Oxley Act of 2002
Exhibit 32.2	Certification of Chief Financial Officer under 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

60

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.

	PACIFIC MERCANTILE BANCORP
Date: August 12, 2013	By:	/s/ NANCY A. GRAY
		Nancy A. Gray, Chief Financial Officer

S-1

EXHIBIT INDEX

Exhibit No.	Description of Exhibit
Exhibit 31.1	Certification of Chief Executive Officer under Section 302 of the Sarbanes-Oxley Act of 2002
Exhibit 31.2	Certification of Chief Financial Officer under Section 302 of the Sarbanes-Oxley Act of 2002
Exhibit 32.1	Certification of Chief Executive Officer under Section 906 of the Sarbanes-Oxley Act of 2002
Exhibit 32.2	Certification of Chief Financial Officer under 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

E-1

EX-31.1

Exhibit 31.1

CERTIFICATION 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, 2013;

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 12, 2013	/s/ STEVEN K. BUSTER
	Steven K. Buster, President and Chief Executive Officer

EX-31.2

Exhibit 31.2

CERTIFICATION OF CHIEF FINANCIAL OFFICER

UNDER

SECTION 302 OF THE SARBANES-OXLEY ACT

I, Nancy A. Gray, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Pacific Mercantile Bancorp for the quarter ended June 30, 2013;

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 12, 2013	/s/ NANCY A. GRAY
	Nancy A. Gray, Chief Financial Officer

EX-32.1

Exhibit 32.1

CERTIFICATION 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, 2013

The undersigned, who is the Chief Executive Officer of Pacific Mercantile Bancorp (the “Company”), hereby certifies that (i) the Quarterly Report on Form 10-Q for the quarter ended June 30, 2013, as filed by the Company with the Securities and Exchange Commission (the “Quarterly Report”), to which this Certification is an Exhibit, fully complies with the applicable requirements of Section 13(a) and 15(d) of the Exchange Act; and (ii) the information contained in this Quarterly Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: August 12, 2013	/s/ STEVEN K. BUSTER
	Steven K. Buster, President and Chief Executive Officer
	A signed original of this written statement required by Section 906 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.

EX-32.2

Exhibit 32.2

CERTIFICATION 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, 2013

The undersigned, who is the Chief Financial Officer of Pacific Mercantile Bancorp (the “Company”), hereby certifies that (i) the Quarterly Report on Form 10-Q for the quarter ended June 30, 2013, as filed by the Company with the Securities and Exchange Commission (the “Quarterly Report”), to which this Certification is an Exhibit, fully complies with the applicable requirements of Section 13(a) and 15(d) of the Exchange Act; and (ii) the information contained in this Quarterly Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: August 12, 2013	/s/ NANCY A. GRAY
	Nancy A. Gray, Chief Financial Officer
	A signed original of this written statement required by Section 906 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.

XML

Earnings Per Share ("EPS")

6 Months Ended

Jun. 30, 2013

Earnings Per Share [Abstract]

Earnings Per Share ("EPS")

10. Earnings Per Share (“EPS”)

Basic EPS is computed by dividing net income or loss allocable to our common shareholders by the weighted average number of common shares outstanding for the period. Diluted EPS gives effect to the potential dilution that could occur if stock options, convertible preferred stock or other contracts to issue common stock were either exercised or converted into common stock that would then share in our earnings. For the six months ended June 30, 2013 and 2012, 1,520,265 and 882,543 shares, respectively, of our common stock that were purchasable on exercise of outstanding stock options and 2,345,919 shares of our common stock into which our outstanding shares of Series B Preferred Stock were convertible, were excluded from the computation of diluted earnings per common share, because they were anti-dilutive. An additional 761,278 shares of our common stock subject to outstanding stock purchase warrants were also excluded from the computation of diluted earnings per common share for the six months ended June 30, 2013 and 2012, because the exercisability of those warrants is conditioned on future events which may not occur.

The following table shows how we computed basic and diluted EPS for the six month periods ended June 30, 2013 and 2012.

	Three Months Ended June 30,						Six Months Ended June 30,
(In thousands, except earnings per share data)	2013			2012			2013			2012
Net (loss) income	$	(3,142	)	$	5,796		$	(6,311	)	$	7,178
Accumulated undeclared dividends on preferred stock		(262	)		(234	)		(524	)		(468	)
Net (loss) income allocable to common shareholders (A)	$	(3,404	)	$	5,562		$	(6,835	)	$	6,710
Weighted average outstanding shares of common stock (B)		18,906			15,779			17,825			14,088
Dilutive effect of convertible preferred stock, employee stock options and warrants		—			199			—			118
Common stock and common stock equivalents (C)		18,906			15,978			17,825			14,206
(Loss) income per common share:
Basic (A/B)	$	(0.18	)	$	0.35		$	(0.38	)	$	0.48
Diluted (A/C)	$	(0.18	)	$	0.35		$	(0.38	)	$	0.47

XML

Summary of Loans by Portfolio Type and Internal Credit Quality Ratings (Detail) (USD $) In Thousands, unless otherwise specified	6 Months Ended
	Jun. 30, 2013	Dec. 31, 2012	Jun. 30, 2012
Financing Receivable, Recorded Investment [Line Items]
Gross loans	$ 729,216	$ 730,599	$ 708,398
Increase (Decrease) in loan portfolios	(1,383)
Commercial loans
Financing Receivable, Recorded Investment [Line Items]
Gross loans	195,439	170,792	173,637
Consumer loans
Financing Receivable, Recorded Investment [Line Items]
Gross loans	27,106	27,296
Commercial real estate | Owner occupied
Financing Receivable, Recorded Investment [Line Items]
Gross loans	156,215	165,922
Commercial real estate | All other
Financing Receivable, Recorded Investment [Line Items]
Gross loans	158,179	150,189
Residential mortgage loans | Multi-family
Financing Receivable, Recorded Investment [Line Items]
Gross loans	97,383	105,119
Residential mortgage loans | Single-family
Financing Receivable, Recorded Investment [Line Items]
Gross loans	75,241	87,263
Land development loans
Financing Receivable, Recorded Investment [Line Items]
Gross loans	19,653	24,018
Pass
Financing Receivable, Recorded Investment [Line Items]
Gross loans	674,373	673,656
Increase (Decrease) in loan portfolios	717
Pass | Commercial loans
Financing Receivable, Recorded Investment [Line Items]
Gross loans	173,199	146,952
Increase (Decrease) in loan portfolios	26,247
Pass | Consumer loans
Financing Receivable, Recorded Investment [Line Items]
Gross loans	26,544	27,296
Increase (Decrease) in loan portfolios	(752)
Pass | Commercial real estate | Owner occupied
Financing Receivable, Recorded Investment [Line Items]
Gross loans	152,691	162,689
Increase (Decrease) in loan portfolios	(9,998)
Pass | Commercial real estate | All other
Financing Receivable, Recorded Investment [Line Items]
Gross loans	140,186	135,274
Increase (Decrease) in loan portfolios	4,912
Pass | Residential mortgage loans | Multi-family
Financing Receivable, Recorded Investment [Line Items]
Gross loans	97,383	104,747
Increase (Decrease) in loan portfolios	(7,364)
Pass | Residential mortgage loans | Single-family
Financing Receivable, Recorded Investment [Line Items]
Gross loans	73,264	84,237
Increase (Decrease) in loan portfolios	(10,973)
Pass | Land development loans
Financing Receivable, Recorded Investment [Line Items]
Gross loans	11,106	12,461
Increase (Decrease) in loan portfolios	(1,355)
Special Mention
Financing Receivable, Recorded Investment [Line Items]
Gross loans	5,302	15,804
Increase (Decrease) in loan portfolios	(10,502)
Special Mention | Commercial loans
Financing Receivable, Recorded Investment [Line Items]
Gross loans	217	2,381
Increase (Decrease) in loan portfolios	(2,164)
Special Mention | Consumer loans
Financing Receivable, Recorded Investment [Line Items]
Gross loans	562
Increase (Decrease) in loan portfolios	562
Special Mention | Commercial real estate
Financing Receivable, Recorded Investment [Line Items]
Increase (Decrease) in loan portfolios	9,500
Special Mention | Commercial real estate | All other
Financing Receivable, Recorded Investment [Line Items]
Gross loans	4,523	3,859
Increase (Decrease) in loan portfolios	664
Special Mention | Residential mortgage loans | Multi-family
Financing Receivable, Recorded Investment [Line Items]
Gross loans		373
Increase (Decrease) in loan portfolios	(373)
Special Mention | Residential mortgage loans | Single-family
Financing Receivable, Recorded Investment [Line Items]
Gross loans		990
Increase (Decrease) in loan portfolios	(990)
Special Mention | Land development loans
Financing Receivable, Recorded Investment [Line Items]
Gross loans		8,201
Increase (Decrease) in loan portfolios	(8,201)
Substandard
Financing Receivable, Recorded Investment [Line Items]
Gross loans	48,565	41,027
Increase (Decrease) in loan portfolios	7,538
Substandard | Commercial loans
Financing Receivable, Recorded Investment [Line Items]
Gross loans	21,047	21,347
Increase (Decrease) in loan portfolios	(300)
Substandard | Commercial real estate | Owner occupied
Financing Receivable, Recorded Investment [Line Items]
Gross loans	3,523	3,232
Increase (Decrease) in loan portfolios	291
Substandard | Commercial real estate | All other
Financing Receivable, Recorded Investment [Line Items]
Gross loans	13,470	11,057
Increase (Decrease) in loan portfolios	2,413
Substandard | Residential mortgage loans | Single-family
Financing Receivable, Recorded Investment [Line Items]
Gross loans	1,978	2,036
Increase (Decrease) in loan portfolios	(58)
Substandard | Land development loans
Financing Receivable, Recorded Investment [Line Items]
Gross loans	8,547	3,355
Increase (Decrease) in loan portfolios	5,192
Doubtful
Financing Receivable, Recorded Investment [Line Items]
Gross loans	976	112
Increase (Decrease) in loan portfolios	864
Doubtful | Commercial loans
Financing Receivable, Recorded Investment [Line Items]
Gross loans	976	112
Increase (Decrease) in loan portfolios	864
Doubtful | Land development loans
Financing Receivable, Recorded Investment [Line Items]
Gross loans

XML

CONSOLIDATED STATEMENTS OF OPERATIONS (USD $) In Thousands, except Share data, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2013	Jun. 30, 2012	Jun. 30, 2013	Jun. 30, 2012
Interest income
Loans, including fees	$ 8,359	$ 9,887	$ 16,878	$ 19,265
Securities available for sale and stock	387	392	757	1,269
Interest-bearing deposits with financial institutions	76	74	171	129
Total interest income	8,822	10,353	17,806	20,663
Interest expense
Deposits	1,173	1,898	2,576	3,949
Borrowings	209	311	432	555
Total interest expense	1,382	2,209	3,008	4,504
Net interest income	7,440	8,144	14,798	16,159
Provision for (recovery of) loan losses		1,850	1,150	1,450
Net interest income after provision for loan losses	7,440	6,294	13,648	14,709
Noninterest income
Total other-than-temporary impairment of securities				(25)
Less: Portion of other-than-temporary impairment losses recognized in other comprehensive loss				52
Net impairment loss recognized in earnings	0		0	(77)
Service fees on deposits and other banking services	196	245	392	478
Mortgage banking (including net gains on sales of loans held for sale)	1,719	8,450	3,308	12,981
Net gains on sale of securities available for sale			23	1,186
Net (loss) gain on sale of other real estate owned	1	130	1	111
Other	(523)	301	(298)	475
Total noninterest income	1,393	9,126	3,426	15,154
Noninterest expense
Salaries and employee benefits	6,761	6,531	12,878	12,148
Occupancy	703	669	1,369	1,321
Equipment and depreciation	486	520	1,115	918
Data processing	200	180	398	375
FDIC expense	546	545	1,092	1,159
Other real estate owned expense	857	1,877	2,974	3,701
Professional fees	902	1,403	2,568	2,290
Mortgage related loan expense	317	925	744	1,278
Provision for (recovery of) contingencies	(279)		(539)	339
Other operating expense	1,482	1,032	2,715	2,390
Total noninterest expense	11,975	13,682	25,314	25,919
(Loss) Income before income taxes	(3,142)	1,738	(8,240)	3,944
Income tax (benefit) provision		(4,058)	(1,929)	(3,234)
Net (loss) income	(3,142)	5,796	(6,311)	7,178
Net (loss) income allocable to common shareholders	(3,404)	5,562	(6,835)	6,710
(Loss) Income per common share
Basic	$ (0.18)	$ 0.35	$ (0.38)	$ 0.48
Diluted	$ (0.18)	$ 0.35	$ (0.38)	$ 0.47
Weighted average number of common shares outstanding
Basic	18,905,842	15,778,678	17,825,311	14,087,522
Diluted	18,905,842	15,977,939	17,825,311	14,205,583
Dividend Undeclared
Noninterest expense
Accumulative dividends on preferred stock	$ (262)	$ (234)	$ (524)	$ (468)

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Fair Value Measurements

6 Months Ended

Jun. 30, 2013

Fair Value Disclosures [Abstract]

Fair Value Measurements

3. Fair Value Measurements

The following tables shows the recorded amounts of assets and liabilities measured at fair value on a recurring basis at June 30, 2013 and December 31, 2012:

	At June 30, 2013
(Dollars in thousands)	Total			Level 1		Level 2			Level 3
Investment securities available for sale
Mortgage backed securities issued by U.S. agencies	$	62,634		$	—	$	62,634		$	—
Collateralized mortgage obligations issued by non-agency		2,308			—		2,308			—
Asset backed securities		775			—		—			775
Mutual funds		4,233			4,233		—			—
Total securities available for sale at fair value		69,950			4,233		64,942			775
Loans held for sale		10,672			—		10,672			—
Other assets – Mortgage servicing rights		3,823			—		—			3,823
Derivative assets – IRLC’s		81			—		—			81
Derivative assets – TBA securities		540			—		—			540
Total assets measured at fair value on a recurring basis	$	85,066		$	4,233	$	75,614		$	5,219
	At December 31, 2012
(Dollars in thousands)	Total			Level 1		Level 2			Level 3
Investment securities available for sale
Mortgage backed securities issued by U.S. agencies	$	78,446		$	—	$	78,446		$	—
Collateralized mortgage obligations issued by non agency		2,625			—		1,963			662
Asset back securities		900			—		—			900
Mutual funds		4,407			4,407		—			—
Total securities available for sale at fair value		86,378			4,407		80,409			1,562
Loans held for sale		55,809			—		55,809			—
Other assets – Mortgage servicing rights		2,801			—		—			2,801
Derivative assets – IRLC’s		580			—		—			580
Total assets measured at fair value on a recurring basis	$	145,568		$	4,407	$	136,218		$	4,943
Derivative liabilities – TBA securities	$	(158	)	$	—	$	(158	)	$	—
Total liabilities measured at fair value on a recurring basis	$	(158	)	$	—	$	(158	)	$	—

The changes in Level 3 assets measured at fair value on a recurring basis are summarized in the following table:

(Dollars in thousands)	Investment Securities Available for Sale
Balance of recurring Level 3 instruments at January 1, 2013	$	4,943
Total gains or losses (realized/unrealized):
Included in earnings-realized		—
Included in earnings-unrealized		—
Included in other comprehensive income		(1,413	)
Purchases		—
Sales		—
Issuances		—
Settlements		1,689
Transfers in and/or out of Level 3		—
Balance of Level 3 assets at June 30, 2013	$	5,219

The following is a description of valuation methodologies used for assets and liabilities recorded at fair value on a recurring basis.

Investment Securities Available for Sale. Fair value measurement 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 investments 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.

Loans Held for Sale (LHFS). Effective December 1, 2011, the Company elected to measure new LHFS at fair value. The remaining LHFS are carried at the lower of cost or market. Fair value is based on quoted market prices, if available, prices for other traded mortgage loans with similar characteristics, purchase commitments and bid information received from market participants. We classify those loans subject to recurring fair value adjustments as Level 2, given the meaningful level of secondary market activity for conforming mortgage loans.

Mortgage Servicing Rights. Fair value measurement 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 that would incorporate assumptions that market participants would use in estimating the fair value of servicing. These assumptions might include estimates of prepayment speeds, discount rate, costs to service, escrow account earnings, contractual servicing fee income, prepayment and late fees, among other considerations. Mortgage servicing rights are considered a Level 3 measurement at June 30, 2013 and are included in other assets in the accompanying consolidated balance sheets.

Derivative Assets and Liabilities. The Company’s derivative assets and liabilities are carried at fair value as required by GAAP and are accounted for as free standing derivatives. The derivative assets are interest rate lock commitments (“IRLCs”) with prospective residential mortgage borrowers whereby the interest rate on the loan is determined prior to funding and the borrowers have locked in that interest rate. These commitments are determined to be derivative instruments in accordance with GAAP. The derivative liabilities are hedging instruments (typically TBA securities) used to hedge the risk of fair value changes associated with changes in interest rates relating to its mortgage loan origination operations. The Company hedges the period from the interest rate lock (assuming a fall-out factor) to the date of the loan sale. The estimated fair value is based on current market prices for similar assets plus a fall-out factor estimated by management and accordingly, the Company classifies its derivative assets and liabilities as Level 3 measurement at June 30, 2013 and such assets are included in other assets in the accompanying consolidated statement of financial condition.

The following descriptions present qualitative information about the valuation techniques and unobservable inputs applied to Level 3 fair value measurements for financial instruments measured at fair value on a recurring and non-recurring basis at June 30, 2013.

Investment Securities Available for Sale. The valuation technique used for Level 3 investment securities is a discounted cash flow. Inputs considered in determining Level 3 pricing include, the securities anticipated prepayment rates, default rates, and the loss severity given a future default. Significant increases or decreases in any of those inputs in isolation would result in significantly lower or higher fair value measurement. In general, a change in the assumption regarding the probability of default is accompanied by a directionally similar change in the assumption used for the loss severity in an event of default. Prepayment rates are subject to change based on market conditions. For the asset backed security, the security was priced using an option adjusted discounted cash flow model. This discount margin of 6.5% was based on sector spreads and trading in related credit markets. A 2% constant default rate was presumed based on historical analysis and forward projection. A loss severity of 90% was based on low recovery expectations in this sector.

Mortgage Servicing Rights. The valuation technique used for Level 3 mortgage servicing rights is based upon market prices for similar instruments and an internal discounted cash flow model. The valuation model incorporates assumptions that market participants would use in estimating the fair value of servicing, the most significant of which include estimates of prepayment speeds of between 10% and 15%, and a discount rate of 12%. For mortgage servicing rights, a significant increase in discount rates would result in a significantly lower estimated fair value. The impact of changes in prepayment speeds would have differing impacts depending on the seniority or other characteristics of the instrument.

Derivative assets – IRLC’s. The valuation technique used for Level 3 IRLC’s is based on pricing of related loan instruments (which includes the value of servicing), which are Level 2 inputs, however also includes an estimate for a fall-out factor, otherwise known as the “pull-through” rate. A significant increase or decrease in pull-through rate assumptions would result in a significant increase or decrease in the fair value of IRLCs. The Company believes that the imprecision of an estimate could be significant.

Derivative assets and liabilities – TBA’s. The valuation technique used for Level 2 TBA’s is based on pricing of the hedging instruments (TBA’s), which are used to hedge the fair value changes associated with changes in interest rates relating to its mortgage lending operations. The Company hedges the period from the interest rate lock (assuming a fall-out factor) to the date of the loan sale. The fair value of the hedging instruments is based on the actively quoted TBA MBS market using observable inputs related to the characteristics of the underlying MBS stratified by product, coupon and settlement date. TBA’s are classified as Level 2 measurement as of June 30, 2013.

Assets Recorded at Fair Value on a Nonrecurring Basis

The Company 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.

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, enterprise value, liquidation value and discounted cash flows. Those impaired loans not requiring an allowance for loan losses 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.

Foreclosed Assets. Foreclosed assets are adjusted to fair value, less estimated costs to sell, at the time the loans are transferred to foreclosed assets. Subsequently, foreclosed assets are 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 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 foreclosed asset at Level 3.

Loans Held for Sale. Mortgage loans held for sale and funded prior to December 1, 2011 are carried at the lower of cost or market value. The fair value of these loans held for sale is based on what secondary markets are currently offering for portfolios with similar characteristics. As such, the Company classifies loans subject to nonrecurring fair value adjustments as Level 2.

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

	At June 30, 2013
(Dollars in thousands)	Total		Level 1		Level 2		Level 3
Assets at Fair Value:
Impaired loans	$	31,085	$	—	$	6,743	$	24,342
Loans held for sale		10,672		—		10,672		—
Other assets(1)		17,331		—		17,331		—
Total	$	59,088	$	—	$	34,746	$	24,342

⁽¹⁾  Includes foreclosed assets.

There were no transfers in or out of Level 3 measurements for nonrecurring items during the six months ended June 30, 2013.

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 other real estate owned.

Fair Value Measurements for all Financial Instruments.

The following methods and assumptions were used to estimate the fair value of financial instruments not previously discussed.

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 ninety days approximate their carrying values.

Federal Home Loan Bank and Federal Reserve Bank Stock. The Bank is a member of the Federal Home Loan Bank (the “FHLB”) and the Federal Reserve Bank of San Francisco (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; however, to date, we have not done so. The fair values of that 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.

Deposits. The fair value of demand deposits, savings deposits, and money market deposits is defined as the amounts payable on demand at quarter-end. The fair value of fixed maturity certificates of deposit is estimated based on the discounted value of the future cash flows expected to be paid on the deposits.

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 reprice 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.

The estimated fair values and related carrying amounts of all of the Company’s financial instruments are as follows:

	At June 30, 2013
(Dollars in thousands)	Total			Level 1			Level 2			Level 3
Cash and cash equivalents	$	89,362		$	89,362		$	—		$	—
Interest-bearing deposits with financial institutions		2,423			2,423			—			—
Federal Reserve Bank and Federal Home Loan Bank Stock		8,918			8,918			—			—
Investment securities available for sale:
Mortgage backed securities issued by U.S. agencies		62,634			—			62,634			—
Collateralized mortgage obligations issued by non-agency		2,308			—			2,308			—
Asset backed securities		775			—			—			775
Mutual funds		4,233			4,233			—			—
Loans held for sale		10,672			—			10,672			—
Loans, net		717,818			—			717,818			—
Other assets – Mortgage servicing rights		3,823			—			—			3,823
Derivative assets – IRLC’s		81			—			—			81
Derivative assets – TBA securities		540			—			540			—
Total assets measured at fair value on a recurring basis	$	903,587		$	104,936		$	793,972		$	4,679
Noninterest bearing deposits	$	(188,149	)	$	(188,149	)	$	—		$	—
Interest-bearing deposits		(560,831	)		(560,831	)		—			—
Borrowings		(45,000	)		(45,000	)		—			—
Junior subordinated debentures		(17,527	)		(17,527	)		—			—
Total liabilities measured at fair value on a recurring basis	$	(811,507	)	$	(811,507	)	$	—		$	—
	At December 31, 2012
(Dollars in thousands)	Total			Level 1			Level 2			Level 3
Cash and cash equivalents	$	128,208		$	128,208		$	—		$	—
Interest-bearing deposits with financial institutions		2,423			2,423			—			—
Federal Reserve Bank and Federal Home Loan Bank Stock		10,284			10,284			—			—
Investment securities available for sale:
Mortgage backed securities issued by U.S. agencies		78,446			—			78,446			—
Collateralized mortgage obligations issued by non agency		2,625			—			1,963			662
Asset back securities		900			—			—			900
Mutual funds		4,407			4,407			—			—
Loans held for sale		55,809			—			55,809			—
Loans, net		719,257			—			719,257			—
Other assets – Mortgage servicing rights		2,801			—			—			2,801
Derivative assets – IRLC’s		580			—			—			580
Total assets measured at fair value on a recurring basis	$	1,005,740		$	145,322		$	855,475		$	4,943
Noninterest bearing deposits	$	(170,259	)	$	(170,259	)	$	—		$	—
Interest-bearing deposits		(675,136	)		(675,136	)		—			—
Borrowings		(45,000	)		(45,000	)		—			—
Junior subordinated debentures		(17,527	)		(17,527	)		—			—
Derivative liabilities – TBA securities		(158	)		—			(158	)		—
Total liabilities measured at fair value on a recurring basis	$	(908,080	)	$	(907,922	)	$	(158	)	$	—

Fair Value Option.

The following table reflects the differences between the fair value carrying amount of LHFS measured at fair value under ASU 825 and the aggregate unpaid principal amount we are contractually entitled to receive at maturity.

The assets accounted for under the fair value option are initially measured at fair value. Gains and losses from initial measurement and subsequent changes in fair value are recognized in earnings. The changes in fair value related to initial measurement and subsequent changes in fair value included in earnings for these assets measured at fair value are shown, by income statement line item, below.

Loans Held for Sale at Fair Value	Three Months Ended June 30,					Six Months Ended June 30,
(Dollars in thousands)	2013			2012		2013			2012
Changes in fair value included in net income:
Mortgage banking noninterest income (loss)	$	(610	)	$	4,901	$	(2,192	)	$	6,352

	June 30, 2013
(Dollars in thousands)	Fair Value Carrying Amount		Aggregate Unpaid Principal		Fair Value Carrying Amount Less Aggregate Unpaid Principal
Loans held for sale reported at fair value:
Total loans	$	10,672	$	10,595	$	77
Nonaccrual loans		—		—		—
Loans 90 days or more past due and still accruing interest		—		—		—

Information Regarding Derivative Financial Instruments.

The following table includes information for the derivative assets and liabilities for the periods presented:

					Total Gains (Losses)
	Notional Balance				Three Months Ended June 30						Six Months Ended June 30
(Dollars in thousands)	June 30, 2013		June 30, 2012		2013			2012			2013			2012
Derivative assets – IRLC’s	$	8,712	$	80,836	$	(238	)	$	1,581		$	(427	)	$	2,600
Derivative liabilities – TBAs	$	15,500	$	132,719	$	628		$	(1,029	)	$	698		$	(1,005	)

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Stock-Based and Other Employee Compensation (Tables)

6 Months Ended

Jun. 30, 2013

Disclosure Of Compensation Related Costs Sharebased 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:	2013			2012			2013			2012
Expected volatility		43	%		40	%		43	%		40	%
Risk-free interest rate		1.77	%		1.54	%		1.77	%		1.54	%
Expected dividends		0.57	%		0.26	%		0.57	%		0.26	%
Expected term (years)		2.0–6.9			6.6–8.2			2.0–6.9			6.6–8.2
Weighted average fair value of options granted during period	$	1.91		$	1.54		$	1.91		$	1.54

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, 2013 and 2012, respectively.

	Number of Shares			Weighted- Average Exercise Price Per Share		Number of Shares			Weighted- Average Exercise Price Per Share
	2013					2012
Outstanding – January 1,		1,565,965		$	6.90		1,153,741		$	7.35
Granted		214,000			6.05		421,300			4.88
Exercised		(6,300	)		3.52		(5,328	)		3.16
Forfeited/Canceled		(243,600	)		6.60		(100,066	)		7.50
Outstanding – June 30,		1,530,065			6.84		1,469,847			6.74
Options Exercisable – June 30,		980,789		$	7.52		828,899		$	8.55

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, 2013.

	Options Outstanding as of June 30, 2013								Options Exercisable as of June 30, 2013 (1)
	Vested		Unvested		Weighted Average Exercise Price		Weighted Average Remaining Contractual Life (Years)		Shares		Weighted Average Exercise Price
$2.97 – $5.99		569,246		233,876	$	4.06		7.69		569,246	$	3.90
$6.00 – $9.99		11,100		315,400		6.53		9.35		11,100		7.19
$10.00 – $12.99		265,100		—		11.21		0.63		265,100		11.21
$13.00 – $17.99		115,843		—		15.12		2.13		115,843		15.21
$18.00 – $18.84		19,500		—		18.06		2.59		19,500		18.06
		980,789		549,276	$	6.84		6.33		980,789	$	7.52

⁽¹⁾  The weighted average remaining contractual life of the options that were exercisable as of June 30, 2013 was 4.82 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 at June 30, 2013, and changes in the number of shares subject to and in the weighted average grant date fair values of the unvested options during the six months ended June 30, 2013, are set forth in the following table.

	Number of Shares Subject to Options			Weighted Average Grant Date Fair Value
Unvested at December 31, 2012		635,706		$	2.30
Granted		214,000			1.91
Vested		(135,831	)		1.99
Forfeited/Cancelled		(164,599	)		2.56
Unvested at June 30, 2013		549,276		$	2.15

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 unvested stock options outstanding at June 30, 2013, will be as follows:

	Estimated Stock Based Compensation Expense
(Dollars in thousands)
For the period and years ending December 31,
Remainder 2013	$	237
2014		458
2015		247
2016		32
2017		12
	$	986

Components of Net Periodic Benefit Cost for SERP

The components of net periodic benefit cost for the SERP are set forth in the table below:

	Three Months Ended June 30,				Six Months Ended June 30,
	2013		2012		2013		2012
	(Dollars in thousands)
Service cost	$	—	$	50	$	18	$	99
Interest cost		44		36		89		71
Expected return on plan assets		—		—		—		—
Amortization of prior service cost		—		4		1		8
Amortization of net actuarial loss		—		2		29		3
Net periodic SERP cost	$	44	$	92	$	137	$	181

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Earnings Per Share - Additional Information (Detail)	6 Months Ended
	Jun. 30, 2013	Jun. 30, 2012
Stock Option
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Anti-dilutive shares excluded from computation of diluted earnings (loss) per common share	1,520,265	882,543
Series B Convertible 8.4% Noncumulative Preferred Stock
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Anti-dilutive shares excluded from computation of diluted earnings (loss) per common share	2,345,919
Stock purchase warrants
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Anti-dilutive shares excluded from computation of diluted earnings (loss) per common share	761,278	761,278

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Troubled Debt Restructurings (Detail) (USD $) In Thousands, unless otherwise specified	6 Months Ended	12 Months Ended
	Jun. 30, 2013 Loan	Dec. 31, 2012 Loan
Financing Receivable, Modifications [Line Items]
Number of Loans	18	15
Pre-Modification Outstanding Recorded Investment	$ 33,616	$ 31,008
Post-Modification Outstanding Recorded Investment	32,390	30,684
End of Period Balance	27,232	27,232
Performing
Financing Receivable, Modifications [Line Items]
Number of Loans	9	9
Pre-Modification Outstanding Recorded Investment	26,190	22,080
Post-Modification Outstanding Recorded Investment	26,190	22,080
End of Period Balance	33,000	21,595
Performing | Land development loans
Financing Receivable, Modifications [Line Items]
Number of Loans	1	1
Pre-Modification Outstanding Recorded Investment	1,429	1,429
Post-Modification Outstanding Recorded Investment	1,429	1,429
End of Period Balance	1,394	1,412
Performing | Commercial loans
Financing Receivable, Modifications [Line Items]
Number of Loans	2	4
Pre-Modification Outstanding Recorded Investment	8,310	9,754
Post-Modification Outstanding Recorded Investment	8,310	9,754
End of Period Balance	8,273	9,334
Performing | All other | Commercial real estate
Financing Receivable, Modifications [Line Items]
Number of Loans	6	4
Pre-Modification Outstanding Recorded Investment	16,451	10,897
Post-Modification Outstanding Recorded Investment	16,451	10,897
End of Period Balance	12,693	10,849
Nonperforming
Financing Receivable, Modifications [Line Items]
Number of Loans	9	6
Pre-Modification Outstanding Recorded Investment	7,426	8,928
Post-Modification Outstanding Recorded Investment	6,200	8,604
End of Period Balance	4,879	5,637
Nonperforming | Land development loans
Financing Receivable, Modifications [Line Items]
Number of Loans	1
Pre-Modification Outstanding Recorded Investment	439
Post-Modification Outstanding Recorded Investment	439
End of Period Balance	414
Nonperforming | Commercial loans
Financing Receivable, Modifications [Line Items]
Number of Loans	6	3
Pre-Modification Outstanding Recorded Investment	4,944	1,943
Post-Modification Outstanding Recorded Investment	3,830	1,855
End of Period Balance	2,599	1,753
Nonperforming | All other | Commercial real estate
Financing Receivable, Modifications [Line Items]
Number of Loans		2
Pre-Modification Outstanding Recorded Investment		6,814
Post-Modification Outstanding Recorded Investment		6,685
End of Period Balance		3,825
Nonperforming | Owner occupied | Commercial real estate
Financing Receivable, Modifications [Line Items]
Number of Loans	1
Pre-Modification Outstanding Recorded Investment	1,872
Post-Modification Outstanding Recorded Investment	1,867
End of Period Balance	1,811
Nonperforming | Single-family | Residential mortgage loans
Financing Receivable, Modifications [Line Items]
Number of Loans	1	1
Pre-Modification Outstanding Recorded Investment	171	171
Post-Modification Outstanding Recorded Investment	64	64
End of Period Balance	$ 55	$ 59

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Business Segment Information

6 Months Ended

Jun. 30, 2013

Segment Reporting [Abstract]

Business Segment Information

11. Business Segment Information

We have two reportable business segments, commercial banking and mortgage banking. Our 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. Our mortgage banking segment originates mortgage loans that, for the most part, are resold within 30 days to long-term investors in the secondary residential mortgage market.

Since these operating segments derive all of their revenues from interest and noninterest income and interest expense constitutes their most significant expense, these two segments are reported below using net interest income (interest income less interest expense) and noninterest income (primarily net gains on sales of loans held for sale and fee income). We do not allocate general and administrative expenses or income taxes to our operating segments.

The following table sets forth information regarding the interest income and noninterest income of our commercial banking and mortgage banking segments, respectively, for the six months ended June, 2013 and 2012.

(Dollars in thousands)	Commercial		Mortgage		Other			Total
Net interest income for the period ended: June 30,
2013	$	14,643	$	372	$	(217	)	$	14,798
2012	$	14,696	$	1,689	$	(226	)	$	16,159
Noninterest income for the period ended: June 30,
2013	$	21	$	3,192	$	213		$	3,426
2012	$	14,696	$	1,689	$	(1,231	)	$	15,154
Segment Assets at:
June 30, 2013	$	903,483	$	4,482	$	44,148		$	952,113
December 31, 2012	$	940,748	$	99,829	$	13,024		$	1,053,601

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Loans and Allowance for Loan Losses - Additional Information (Detail) (USD $)	6 Months Ended		12 Months Ended
	Jun. 30, 2013		Dec. 31, 2012		Jun. 30, 2012
Accounts, Notes, Loans and Financing Receivable [Line Items]
Real estate loans pledged to secured borrowings obtained from Federal Home Loan Bank	$ 216,000,000		$ 162,000,000
Decrease in total past due loans	1,200,000
Total past due loans	12,257,000		13,535,000
Decrease of Loans past due for 90 days or more	7,900,000
Loans past due 90 days or more	2,873,000		10,799,000
Nonaccrual loans	8,725,000		17,655,000
Loan foreclosure	5,600,000
Impairment write-downs	1,800,000
Gross loans	729,216,000		730,599,000		708,398,000
Increase (Decrease) in loan portfolios	(1,383,000)
Total impaired loans	31,085,000		39,251,000
Decrease in impaired loans	8,200,000
Allocated specific reserves required on modified TDR	2,200,000
Troubled debt restructurings	27,232,000		27,232,000
Impaired loans with no specific reserves	26,800,000		34,900,000
Investment in impaired loans	36,600,000		34,800,000
Interest that would have been earned had impaired loans remained current in accordance with original terms	325,000
Accruing TDR's	22,360,000	[1]	21,596,000	[1]
TDR's covered with specific reserve	4,300,000
Commercial loans
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total past due loans	5,348,000		6,394,000
Loans past due 90 days or more	756,000		4,295,000
Loans 30 - 89 days past due	4,300,000
Nonaccrual loans	3,595,000		6,846,000
Gross loans	195,439,000		170,792,000		173,637,000
Net transfers of loan	5,600,000
Total impaired loans	11,867,000		16,180,000
Investment in impaired loans	13,824,000		14,709,000
Deemed Impairment
Accounts, Notes, Loans and Financing Receivable [Line Items]
Impaired loans with no specific reserves	30,700,000
Borrower one
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total impaired loans	5,600,000
Borrower two
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total impaired loans	2,900,000
Loans to 30 - 89 days past due
Accounts, Notes, Loans and Financing Receivable [Line Items]
Increased in past due loans	6,600,000
Loans 30 - 89 days past due	9,400,000		2,700,000
TDR Loan
Accounts, Notes, Loans and Financing Receivable [Line Items]
Troubled debt restructurings	4,300,000
Pass
Accounts, Notes, Loans and Financing Receivable [Line Items]
Gross loans	674,373,000		673,656,000
Increase (Decrease) in loan portfolios	717,000
Net transfers of loan	5,100,000
Pass | Commercial loans
Accounts, Notes, Loans and Financing Receivable [Line Items]
Gross loans	173,199,000		146,952,000
Increase (Decrease) in loan portfolios	26,247,000
Special Mention
Accounts, Notes, Loans and Financing Receivable [Line Items]
Gross loans	5,302,000		15,804,000
Increase (Decrease) in loan portfolios	(10,502,000)
Special Mention | Commercial loans
Accounts, Notes, Loans and Financing Receivable [Line Items]
Gross loans	217,000		2,381,000
Increase (Decrease) in loan portfolios	(2,164,000)
Substandard
Accounts, Notes, Loans and Financing Receivable [Line Items]
Gross loans	48,565,000		41,027,000
Increase (Decrease) in loan portfolios	7,538,000
Net transfers of loan	2,300,000
Substandard | Commercial loans
Accounts, Notes, Loans and Financing Receivable [Line Items]
Gross loans	21,047,000		21,347,000
Increase (Decrease) in loan portfolios	(300,000)
Performing
Accounts, Notes, Loans and Financing Receivable [Line Items]
Allocated specific reserves required on modified TDR	3,300,000
Troubled debt restructurings	33,000,000		21,595,000
Accruing TDR's	22,400,000
Performing | Commercial loans
Accounts, Notes, Loans and Financing Receivable [Line Items]
Troubled debt restructurings	8,273,000		9,334,000
Nonperforming
Accounts, Notes, Loans and Financing Receivable [Line Items]
Allocated specific reserves required on modified TDR	1,000,000
Troubled debt restructurings	4,879,000		5,637,000
Accruing TDR's	4,900,000
Nonperforming | Commercial loans
Accounts, Notes, Loans and Financing Receivable [Line Items]
Troubled debt restructurings	2,599,000		1,753,000
Commercial real estate
Accounts, Notes, Loans and Financing Receivable [Line Items]
Amount of loan transfer into OREO	5,600,000
Charge offs loans	1,500,000
Loans 30 - 89 days past due	4,800,000
Commercial real estate loan, past due amount	2,000,000
Commercial real estate | Owner occupied
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total past due loans			3,232,000
Loans past due 90 days or more			3,232,000
Nonaccrual loans	1,811,000		3,232,000
Gross loans	156,215,000		165,922,000
Total impaired loans	3,205,000		4,644,000
Investment in impaired loans	4,365,000		5,584,000
Commercial real estate | Pass | Owner occupied
Accounts, Notes, Loans and Financing Receivable [Line Items]
Gross loans	152,691,000		162,689,000
Increase (Decrease) in loan portfolios	(9,998,000)
Commercial real estate | Special Mention
Accounts, Notes, Loans and Financing Receivable [Line Items]
Increase (Decrease) in loan portfolios	9,500,000
Commercial real estate | Substandard | Owner occupied
Accounts, Notes, Loans and Financing Receivable [Line Items]
Gross loans	3,523,000		3,232,000
Increase (Decrease) in loan portfolios	291,000
Commercial real estate | Nonperforming | Owner occupied
Accounts, Notes, Loans and Financing Receivable [Line Items]
Troubled debt restructurings	1,811,000
Consumer relationship | Special Mention
Accounts, Notes, Loans and Financing Receivable [Line Items]
Increase (Decrease) in loan portfolios	1,100,000
Residential mortgage loans | Single-family
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total past due loans			996,000
Loans past due 90 days or more			359,000
Nonaccrual loans	788,000		839,000
Gross loans	75,241,000		87,263,000
Total impaired loans	788,000		839,000
Investment in impaired loans	812,000		1,050,000
Residential mortgage loans | Multi-family
Accounts, Notes, Loans and Financing Receivable [Line Items]
Gross loans	97,383,000		105,119,000
Investment in impaired loans			45,000
Residential mortgage loans | Pass | Single-family
Accounts, Notes, Loans and Financing Receivable [Line Items]
Gross loans	73,264,000		84,237,000
Increase (Decrease) in loan portfolios	(10,973,000)
Residential mortgage loans | Pass | Multi-family
Accounts, Notes, Loans and Financing Receivable [Line Items]
Gross loans	97,383,000		104,747,000
Increase (Decrease) in loan portfolios	(7,364,000)
Residential mortgage loans | Special Mention | Single-family
Accounts, Notes, Loans and Financing Receivable [Line Items]
Gross loans			990,000
Increase (Decrease) in loan portfolios	(990,000)
Residential mortgage loans | Special Mention | Multi-family
Accounts, Notes, Loans and Financing Receivable [Line Items]
Gross loans			373,000
Increase (Decrease) in loan portfolios	(373,000)
Residential mortgage loans | Substandard | Single-family
Accounts, Notes, Loans and Financing Receivable [Line Items]
Gross loans	1,978,000		2,036,000
Increase (Decrease) in loan portfolios	(58,000)
Residential mortgage loans | Nonperforming | Single-family
Accounts, Notes, Loans and Financing Receivable [Line Items]
Troubled debt restructurings	$ 55,000		$ 59,000

[1] See "Trouble Debt Restructurings" below for a description of accruing restructured loans at June 30, 2013 and December 31, 2012.

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Income Taxes - Additional Information (Detail) (USD $)	3 Months Ended	6 Months Ended
	Jun. 30, 2012	Jun. 30, 2013	Jun. 30, 2012	Dec. 31, 2012
Income Taxes [Line Items]
Recorded income tax (benefit) expense	$ (4,058,000)	$ (1,929,000)	$ (3,234,000)
Effective rate differed from our statutory federal rate		34.00%
Valuation allowance against deferred tax asset		633,000
Deferred tax asset, net		$ 13,700,000		$ 11,700,000
Federal
Income Taxes [Line Items]
Carry forward period for net operating losses on income tax returns		20 years
California State
Income Taxes [Line Items]
Carry forward period for net operating losses on income tax returns		20 years
Net operating losses, carry back years		2 years

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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 (Detail) (USD $) In Thousands, unless otherwise specified	Jun. 30, 2013	Dec. 31, 2012
Investments Debt And Equity Securities [Abstract]
Securities available for sale, amortized cost, maturing in one year or less	$ 11,443	$ 11,679
Securities available for sale, estimated fair value, maturing in one year or less	11,113	11,788
Weighted average yield, maturing in one year or less	1.28%	1.59%
Securities available for sale, amortized cost, maturing over one year through five years	32,600	35,038
Securities available for sale, estimated fair value, maturing over one year through five years	31,723	35,264
Weighted average yield, maturing over one year through five years	1.51%	1.62%
Securities available for sale, amortized cost, maturing over five years through ten years	17,803	24,738
Securities available for sale, estimated fair value, maturing over five years through ten years	17,096	24,747
Weighted average yield, maturing over five years through ten years	1.49%	1.62%
Securities available for sale, amortized cost, maturing over ten years	11,826	15,851
Securities available for sale, estimated fair value, maturing over ten years	10,018	14,579
Weighted average yield, maturing over ten years	1.36%	1.43%
Securities available for sale, amortized cost, total	73,672	87,306
Securities available for sale, estimated fair value, total	$ 69,950	$ 86,378
Weighted average yield	1.45%	1.58%

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Significant Accounting Policies, Recent Accounting Pronouncements, Commitments and Contingencies - Additional Information (Detail) (USD $)	1 Months Ended		3 Months Ended	6 Months Ended
	May 13, 2013	Feb. 29, 2012	Jun. 30, 2013	Jun. 30, 2013	Aug. 31, 2011
Accounting Policies [Abstract]
Commitment to extend credit			$ 118,000,000	$ 118,000,000
Commitment related to standby letters of credit			2,000,000	2,000,000
Unrealized gains from interest rate contracts and TBA security hedges			584,000,000	393,000,000
Amount of compensatory damage awarded to plaintiff		250,000
Punitive damages		950,000
Attorneys fees and costs		762,000
Settlement paid to plaintiff on claims	1,316,377
Settlement paid to lien claimant on claims	33,623
Total settlement on claims	$ 1,350,000
Ratio of adjusted tangible shareholders' equity to tangible assets					9.00%

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Business Segment Information (Tables)

6 Months Ended

Jun. 30, 2013

Segment Reporting [Abstract]

Net Interest Income and Noninterest Income

The following table sets forth information regarding the interest income and noninterest income of our commercial banking and mortgage banking segments, respectively, for the six months ended June, 2013 and 2012.

(Dollars in thousands)	Commercial		Mortgage		Other			Total
Net interest income for the period ended: June 30,
2013	$	14,643	$	372	$	(217	)	$	14,798
2012	$	14,696	$	1,689	$	(226	)	$	16,159
Noninterest income for the period ended: June 30,
2013	$	21	$	3,192	$	213		$	3,426
2012	$	14,696	$	1,689	$	(1,231	)	$	15,154
Segment Assets at:
June 30, 2013	$	903,483	$	4,482	$	44,148		$	952,113
December 31, 2012	$	940,748	$	99,829	$	13,024		$	1,053,601

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Loans Held for Sale Unpaid Principal Balance (Detail) (USD $) In Thousands, unless otherwise specified	Jun. 30, 2013	Dec. 31, 2012
Financing Receivable, Recorded Investment [Line Items]
Total loans serviced	$ 487,910	$ 455,818
Government
Financing Receivable, Recorded Investment [Line Items]
Total loans serviced	401,509	396,951
Conventional Mortgage Loan
Financing Receivable, Recorded Investment [Line Items]
Total loans serviced	$ 86,401	$ 58,867

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Differences Between Fair Value Carrying Amount of Loans Held for Sale Measured at Fair Value and Aggregate Unpaid Principal Amount Entitled to Receive at Maturity (Detail) (USD $) In Thousands, unless otherwise specified	Jun. 30, 2013	Dec. 31, 2012
Fair Value Disclosures [Abstract]
Fair Value Carrying Amount, Total loans	$ 10,672	$ 55,809
Aggregate Unpaid Principal, Total loans	10,595
Fair Value Carrying Amount Less Aggregate Unpaid Principal, Total loans	$ 77

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Roll-Forward of Other-Than-Temporary Impairments where Portion Attributable to Non-Credit Related Factors Recognized in Other Comprehensive Loss (Detail) (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Jun. 30, 2013	Mar. 31, 2013
Investments Debt And Equity Securities [Abstract]
Gross Other-Than-Temporary Impairments, Beginning Balance	$ (2,039)	$ (1,995)
Additions for credit losses on securities for which an OTTI was not previously recognized	(105)	(44)
Gross Other-Than-Temporary Impairments, Ending Balance	(2,144)	(2,039)
Other-Than-Temporary Impairments Included in Other Comprehensive Loss, Beginning Balance	(1,308)	(1,264)
Additions for credit losses on securities for which an OTTI was not previously recognized	(105)	(44)
Other-Than-Temporary Impairments Included in Other Comprehensive Loss, Ending Balance	1,413	(1,308)
Net Other-Than Temporary Impairments Included in Retained Earnings, Beginning Balance	(731)	(731)
Additions for credit losses on securities for which an OTTI was not previously recognized
Net Other-Than Temporary Impairments Included in Retained Earnings, Ending Balance	$ (731)	$ (731)

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Activity in Allowance for Loan Losses (Detail) (USD $) In Thousands, unless otherwise specified	3 Months Ended		6 Months Ended		12 Months Ended
	Jun. 30, 2013	Jun. 30, 2012	Jun. 30, 2013	Jun. 30, 2012	Dec. 31, 2012
Receivables [Abstract]
Allowance for loan losses, balance at beginning of period	$ 11,018		$ 10,881	$ 15,627	$ 15,627
Charged off loans	(1,433)		(2,918)	(2,661)	(8,574)
Recoveries on loans previously charged off	1,538		2,010	232	1,878
Provision for loan losses		1,850	1,150	1,450	1,950
Allowance for loan losses, balance at end of period	$ 11,123	$ 14,648	$ 11,123	$ 14,648	$ 10,881

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Assets Measured at Fair Value on Nonrecurring Basis (Detail) (USD $) In Thousands, unless otherwise specified	Jun. 30, 2013
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair value of assets on nonrecurring basis	$ 59,088
Impaired loans
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair value of assets on nonrecurring basis	31,085
Loans held for sale
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair value of assets on nonrecurring basis	10,672
Other assets
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair value of assets on nonrecurring basis	17,331	[1]
Level 2
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair value of assets on nonrecurring basis	34,746
Level 2 | Impaired loans
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair value of assets on nonrecurring basis	6,743
Level 2 | Loans held for sale
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair value of assets on nonrecurring basis	10,672
Level 2 | Other assets
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair value of assets on nonrecurring basis	17,331	[1]
Level 3
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair value of assets on nonrecurring basis	24,342
Level 3 | Impaired loans
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair value of assets on nonrecurring basis	$ 24,342

[1] Includes foreclosed assets.

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Summary of Status of Unvested Options Outstanding and Changes in Number of Shares Subject to and in Weighted Average Grant Date Fair Values (Detail) (USD $)	6 Months Ended
	Jun. 30, 2013
Number of Shares Subject to Options
Unvested, Beginning of Period	635,706
Granted	214,000
Vested	(135,831)
Forfeited/Cancelled	(164,599)
Unvested, End of Period	549,276
Weighted Average Grant Date Fair Value
Unvested, Beginning of Period	$ 2.30
Granted	$ 1.91
Vested	$ 1.99
Forfeited/Cancelled	$ 2.56
Unvested, End of Period	$ 2.15

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Additional Information Regarding Vested and Unvested Options Outstanding (Parenthetical) (Detail)	6 Months Ended
	Jun. 30, 2013
Disclosure Of Compensation Related Costs Sharebased Payments [Abstract]
Options Exercisable, Weighted Average Remaining Contractual life	4 years 9 months 26 days

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Gain on Loans Held for Sale (Detail) (USD $) In Thousands, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2013	Jun. 30, 2012	Jun. 30, 2013	Jun. 30, 2012
Loans Held for Sale [Line Items]
Gain on sale of mortgage loans			$ (2,192)	$ 6,352
Loans held for sale
Loans Held for Sale [Line Items]
Gain on sale of mortgage loans	1,424	9,290	5,333	13,995
Net loan servicing	296	(13)	494	(17)
Unrealized gains (losses) from derivative financial statements	584	461	393	1,513
Realized gains (losses) derivative financial instruments	367	(255)	519	(291)
Mark-to-market (loss) gain on LHFS	(610)	4,726	(2,192)	6,418
Direct origination (expenses) fees, net	(964)	(5,948)	(1,943)	(8,830)
Provision for repurchases	(32)	(411)	(83)	(438)
Total gain on LHFS	$ 1,065	$ 7,850	$ 2,521	$ 12,350

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Business Segment Information - Additional Information (Detail)	6 Months Ended
	Jun. 30, 2013 Segment
Segment Reporting [Abstract]
Reportable business segments	2

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Earnings Per Share ("EPS") (Tables)

6 Months Ended

Jun. 30, 2013

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 six month periods ended June 30, 2013 and 2012.

	Three Months Ended June 30,						Six Months Ended June 30,
(In thousands, except earnings per share data)	2013			2012			2013			2012
Net (loss) income	$	(3,142	)	$	5,796		$	(6,311	)	$	7,178
Accumulated undeclared dividends on preferred stock		(262	)		(234	)		(524	)		(468	)
Net (loss) income allocable to common shareholders (A)	$	(3,404	)	$	5,562		$	(6,835	)	$	6,710
Weighted average outstanding shares of common stock (B)		18,906			15,779			17,825			14,088
Dilutive effect of convertible preferred stock, employee stock options and warrants		—			199			—			118
Common stock and common stock equivalents (C)		18,906			15,978			17,825			14,206
(Loss) income per common share:
Basic (A/B)	$	(0.18	)	$	0.35		$	(0.38	)	$	0.48
Diluted (A/C)	$	(0.18	)	$	0.35		$	(0.38	)	$	0.47

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CONSOLIDATED STATEMENTS OF CASH FLOWS (USD $) In Thousands, unless otherwise specified	6 Months Ended
	Jun. 30, 2013	Jun. 30, 2012
Cash Flows From Operating Activities:
Net (loss) income	$ (6,311)	$ 7,178
Adjustments to reconcile net (loss) income to net cash provided by (used in) operating activities:
Depreciation and amortization	280	268
Provision for loan losses	1,150	1,450
Amortization of premium on securities	278	183
Net gains on sales of securities available for sale	(23)	(1,186)
Net gains on sales of loans held for sale	(5,333)	(13,995)
Other than temporary impairment on securities available for sale	0	77
Net mark-to-market on mortgage loans held for sale	2,192	(6,352)
Proceeds from sales and principal reductions of mortgage loans held for sale	153,920	359,337
Originations and purchases of mortgage loans held for sale	(103,366)	(424,540)
Repurchases of mortgage loans held for sale		(864)
Net amortization of deferred fees and unearned income on loans	(132)	(270)
Net gain on sale of fixed assets		(25)
Net gain on sales of other real estate owned	(1)	(111)
Write down of other real estate owned	1,922	429
Stock-based compensation expense	355	207
Net mark-to-market (gain) loss on derivatives	(803)	2,268
Net mark to market (gain) loss on mortgage servicing rights	(1,021)
Changes in operating assets and liabilities:
Net (increase) decrease in accrued interest receivable	64	(103)
Net increase in other assets	(3,765)	(2,730)
Net increase in deferred taxes	(587)	(6,369)
Net (increase) decrease in income taxes receivable	(2,246)	159
Net increase in accrued interest payable	223	175
Net increase (decrease) in other liabilities	(3,060)	3,377
Net cash provided by operating activities	33,736	81,437
Cash Flows From Investing Activities:
Net increase in interest-bearing time deposits with financial institutions		(130)
Maturities of and principal payments received on securities available for sale and other stock	14,552	22,085
Purchase of securities available for sale and other stock		(107,357)
Proceeds from sale of securities available for sale and other stock	6,164	135,619
Proceeds from sale of other real estate owned		6,000
Capitalized cost of other real estate owned		(337)
Net increase in loans	(1,121)	(48,191)
Purchases of premises and equipment	(332)	(574)
Proceeds from sale of premises and equipment		36
Net cash provided by investing activities	19,263	7,151
Cash Flows From Financing Activities:
Proceeds from sale of common stock	14,999	24,591
Net decrease in deposits	(96,415)	(5,041)
Net (decrease) increase in borrowings	(10,000)	20,000
Proceeds from exercise of common stock options	23	1
Proceeds from sale of stock purchase warrants		44
Net cash provided by (used in) financing activities	(91,393)	39,595
Net decrease in cash and cash equivalents	(38,846)	(34,691)
Cash and Cash Equivalents, beginning of period	128,208	96,467
Cash and Cash Equivalents, end of period	89,362	61,776
Supplementary Cash Flow Information:
Cash paid for interest on deposits and other borrowings	2,785	4,329
Cash paid for income taxes		318
Non-Cash Investing Activities:
Transfer of loans held for sale to loans held for investment		6,788
Transfer of loans into other real estate owned	$ 1,544	$ 416

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Nature of Business

6 Months Ended

Jun. 30, 2013

Accounting Policies [Abstract]

Nature of Business

1. Nature of Business

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” or the “FRB”) and the Federal Reserve Bank of San Francisco under delegated authority from the Federal Reserve Board. Substantially all of our operations are conducted and substantially all our assets are owned by the Bank, which accounts for substantially all of our consolidated revenues and expenses, and our earnings. 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 of 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 Division of Financial Institutions (DFI) of the Department of Business Oversight (“DBO”) and is a member of the Federal Reserve Bank of San Francisco (the “FRBSF”). In addition, the deposit accounts of the Bank’s customers are insured by the Federal Deposit Insurance Corporation (“FDIC”) up to the maximum amount allowed by law.

During the first quarter of 2013, PMBC organized a new wholly-owned subsidiary, PM Asset Resolution, Inc. (“PMAR”) for the purpose of purchasing certain non-performing loans and other real estate from the Bank and thereafter collecting or disposing of those. 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”.

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Investment Securities Available For Sale

6 Months Ended

Jun. 30, 2013

Investments Schedule [Abstract]

Investment Securities Available For Sale

4. Investment Securities Available For Sale

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, 2013 and December 31, 2012:

(Dollars in thousands)	Amortized Cost		Gross Unrealized Gain		Gross Unrealized Loss			Estimated Fair Value
Securities available for sale at June 30, 2013:
Mortgage backed securities issued by U.S. agencies(1)	$	64,883	$	22	$	(2,271	)	$	62,634
Collateralized mortgage obligations issued by non-agency(1)		2,309		60		(61	)		2,308
Asset backed securities(2)		2,247		—		(1,472	)		775
Mutual funds(3)		4,233		—		—			4,233
Total securities available for sale	$	73,672	$	82	$	(3,804	)	$	69,950
Securities available for sale at December 31, 2012:
Mortgage-backed securities issued by U.S. agencies(1)	$	78,053	$	553	$	(160	)	$	78,446
Collateralized mortgage obligations issued by non-agency(1)		2,599		87		(61	)		2,625
Asset backed securities(2)		2,247		—		(1,347	)		900
Mutual funds(3)		4,407		—		—			4,407
Total securities available for sale	$	87,306	$	640	$	(1,568	)	$	86,378

⁽¹⁾  Secured by closed-end first lien 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, 2013 and December 31, 2012, U.S. agency mortgage backed securities and collateralized mortgage obligations with an aggregate fair market value of $13 million and $10 million, respectively, were pledged to secure Federal Home Loan Bank borrowings, repurchase agreements, local agency deposits and Treasury, tax and loan accounts.

The amortized costs and estimated fair values of securities available for sale at June 30, 2013 and December 31, 2012, are shown in the table below by contractual maturities and 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, 2013 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	$	11,443		$	32,600		$	17,803		$	11,826		$	73,672
Securities available for sale, estimated fair value		11,113			31,723			17,096			10,018			69,950
Weighted average yield		1.28	%		1.51	%		1.49	%		1.36	%		1.45	%
	At December 31, 2012 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	$	11,679		$	35,038		$	24,738		$	15,851		$	87,306
Securities available for sale, estimated fair value		11,788			35,264			24,747			14,579			86,378
Weighted average yield		1.59	%		1.62	%		1.62	%		1.43	%		1.58	%

The Company recognized net gains on sales of securities available for sale of $23,000, on sale proceeds of $6.2 million during the six months ended June 30, 2013 and $1.2 million, on sale proceeds of $136 million during the six months ended June 30, 2012.

The table below indicates, as of June 30, 2013, 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, 2013
	Less than 12 months					12 months or more					Total
Dollars in thousands	Fair Value		Unrealized Loss			Fair Value		Unrealized Loss			Fair Value		Unrealized Loss
Mortgage backed securities issued by U.S. agencies	$	61,183		(2,270	)		38		(1	)		61,221		(2,271	)
Collateralized mortgage obligations issued by non-agency		—		—			1,065		(61	)		1,065		(61	)
Asset backed securities		—		—			775		(1,472	)		775		(1,472	)
Total temporarily impaired securities	$	61,183	$	(2,270	)	$	1,878	$	(1,534	)	$	63,061	$	(3,804	)

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 table 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”) for our available-for-sale debt securities in accordance with ASC 320-10. When there are credit losses associated with an impaired debt security, but we have no intention of selling, 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).

Through the impairment assessment process, we determined that the available-for-sale securities discussed below were other-than-temporarily impaired at June 30, 2013. We recorded no impairments of credit losses on available-for-sale securities in our consolidated statement of operations for the six months ended June 30, 2013. The OTTI related to factors other than credit losses, in the aggregate amount of $1.4 million, was recognized as other comprehensive loss in our balance sheet at June 30, 2013.

The table below presents a roll-forward of OTTI where a portion attributable to non-credit related factors was recognized in other comprehensive loss for the six months ended June 30, 2013:

(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, 2012	$	(1,995	)	$	(1,264	)	$	(731	)
Additions for credit losses on securities for which an OTTI was not previously recognized		(44	)		(44	)		—
Balance – March 31, 2013	$	(2,039	)	$	(1,308	)	$	(731	)
Additions for credit losses on securities for which an OTTI was not previously recognized		(105	)		(105	)		—
Balance – June 30, 2013	$	(2,144	)	$	(1,413	)	$	(731	)

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 held 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 when making 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 held for sale that was impaired as of June 30, 2013. 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 consisting 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 +60 basis points, which had a rating of Aa2/AA by Moody’s and Fitch at the time of issuance in 2007.

As of June 30, 2013 the amortized cost of this security was $2.25 million with a fair value of $775,000, for an unrealized loss of approximately $1.5 million. As of June 30, 2013, the security had a Ca rating from Moody’s and CC rating from Fitch and had experienced $42.5 million in defaults (12.5% of total current collateral) and $43.5 million in deferring securities (12.8% of total current collateral) from issuance to June 30, 2013. The security did not pay its scheduled second quarter 2013 interest payment. We are not currently accruing interest on this security. We estimate that the security could experience another $72.5 million in defaults before the issuer would not receive all of the contractual cash flows under this security. This analysis is based on the following assumptions: future default rates of 2.5%, prepayment rates of 1% until maturity, and 15% recovery of future defaults. With respect to this security, we did not recognize any impairment losses to earnings during the second quarter of 2013; whereas we recognized $77,000 of impairment losses to earnings for the same period in 2012. Set forth below is additional information regarding impairment losses that we recognized in earnings for the six months ended June 30, 2013 and 2012:

Impairment Losses on OTTI Securities	For the Three Months Ended June 30,				For the Six Months Ended June 30,
(Dollars in thousands)	2013		2012		2013		2012
Asset backed securities	$	0	$	—	$	0	$	77
Total impairment loss recognized in earnings	$	0	$	—	$	0	$	77

We have made a determination that the remainder of our securities with respect to which there were unrealized losses as of June 30, 2013 were not other-than-temporarily impaired, because we concluded that we had 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).

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Significant Accounting Policies, Recent Accounting Pronouncements, Commitments and Contingencies

6 Months Ended

Jun. 30, 2013

Accounting Policies [Abstract]

Significant Accounting Policies, Recent Accounting Pronouncements, Commitments and Contingencies

2. Significant Accounting Policies, Recent Accounting Pronouncements, Commitments and Contingencies

The accompanying unaudited interim consolidated financial statements have been prepared in accordance with the instructions to Form 10-Q and, therefore, do not include all footnotes that would be required for a full presentation of our financial position, results of operations, changes in cash flows and comprehensive income (loss) in accordance with generally accepted accounting principles in the United States (“GAAP”). However, these interim financial statements reflect all adjustments (consisting of normal recurring adjustments and accruals) which, in the opinion of management, are necessary for a fair presentation of our consolidated financial position and results of operations for the interim periods presented. These interim consolidated financial statements also reflect any events which may have occurred between July 1, 2013 and the date on which this Quarterly Report on Form 10-Q was filed with the Securities and Exchange Commission (the “SEC”) and which required any adjustments to or disclosure in these financial statements.

These unaudited consolidated financial statements have been prepared on a basis consistent with prior periods and should be read in conjunction with our audited consolidated financial statements as of and for the year ended December 31, 2012, and the notes thereto, included in our Annual Report on Form 10-K for the year ended December 31, 2012 (our “2012 10-K”), as filed with the SEC under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)

Our consolidated financial position at June 30, 2013, and the consolidated results of operations for the six months then ended, are not necessarily indicative of what our financial position will be at December 31, 2013, or of the results of our operations that may be expected for any other interim period or for the full year ending December 31, 2013.

Use of Estimates

The preparation of 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 losses, the fair values of securities available for sale and mortgage loans held for sale, repurchase reserves on mortgage loans held for sale, and the determination of reserves 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.

Recently Adopted Accounting Pronouncements

In February 2013, the FASB issued Accounting Standards Update (“ASU”) 2013-02, “Reporting of Amounts Reclassified out of Accumulated Other Comprehensive Income”, ASU No. 2013-02, which requires an entity to report the effect of significant reclassifications out of accumulated other comprehensive income on the respective lines in the entity’s net income if the amount being reclassified is required under GAAP to be reclassified in its entirety to net income. The ASU is effective for fiscal years, and interim periods within those years, beginning after December 15, 2012. The adoption of ASU No. 2013-02 did not have a material impact on our consolidated financial condition or results of operations.

Commitments and Contingencies

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, 2013, loan commitments and letters of credit totaled $118 million and $2 million, respectively. The contractual amount of a credit-related financial instrument such as a commitment to extend credit, a credit-card arrangement or a letter of credit represents the amounts 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.

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 credit worthiness of the customer. Collateral held varies, but may include accounts receivable, inventory, property, plant and equipment, real estate and income-producing commercial properties.

During the first quarter of 2012, we began selling a portion of our mortgage loan production directly to secondary market investors on a “mandatory commitment” basis, agreeing to sell a specified dollar amount of mortgage loans at an agreed-upon price within a specified timeframe in order to avail ourselves of more favorable pricing on mortgage loan sales to investors. In order to mitigate interest rate risk on loans subject to such mandatory commitments, when we locked the interest rate for the borrowers on those loans prior to funding, we locked the price to sell the loans to investors in a mandatory commitment and entered into a mortgage backed to-be-announced (“TBA”) security. The mandatory commitment and the TBA security act as a hedge against market interest rate movements between the time the interest rate is locked and the loan is funded and sold in the secondary market. TBA securities are deemed to be derivatives and involve off-balance sheet financial risk. The contractual or notional amounts of the TBA securities are tied to the Bank’s loan origination volume and we bear a financial risk from such securities. The unrealized gains from the interest rate contracts and TBA security hedges were $584,000 and $393,000 for the three and six months ended June 30, 2013, respectively. These gains or losses depend upon the value of the underlying financial instruments and are affected by market changes in interest rates.

TBA securities pose credit risk for us if and to the extent that the institutional counterparties are unable to meet the terms of the agreements. We control counterparty credit risk by using multiple counterparties and limiting them to major financial institutions with investment grade credit ratings. In addition, we regularly monitor the potential risk of loss with any one party resulting from this type of credit risk.

Legal Proceedings

Mark Zigner vs. Pacific Mercantile Bank, et al., filed in January, 2010, in the California Superior Court for the County of Orange (Case No.0337433). This lawsuit was filed by plaintiff asserting that a set-off by the Bank of funds in plaintiff’s deposit accounts in the Bank’s efforts to recover borrowings owed to it by plaintiff was wrongful.

As previously reported, at the conclusion of a jury trial in February 2012, the plaintiff was awarded $250,000 of compensatory damages and $950,000 in punitive damages against the Bank. In addition, the trial court entered an award to plaintiff of his attorney’s fees and costs, in the amount of $762,000. Promptly thereafter, the Bank filed an appeal of the trial court’s rulings and the jury verdict, asserting that those rulings and the jury’s verdict were erroneous.

Due to the inherent uncertainties with respect to the ultimate outcome of appeals and the opportunity to put an end to what was becoming a lengthy and costly appellate process, on May 13, 2013, we entered into a settlement with the plaintiff pursuant to which plaintiff released all claims that he had or might have had against the Bank in exchange for the payment by the Bank to plaintiff of $1,316,377, and to plaintiff’s lien claimant of $33,623, totaling $1,350,000, which was less than the contingency reserve previously established by the Bank for this suit. As a result, the settlement had no material effect on the Company’s results of operations for the three or the six months ended June 30, 2013.

Other Claims. We also are subject to legal actions that arise from time to time in the ordinary course of our business. Currently there are no such pending legal proceedings that we believe their resolution will be material to our financial condition or results of operations.

Regulatory Matters

On August 31, 2010, the Company and the Bank entered into a Written Agreement (the “FRBSF Agreement”) with FRBSF. On the same date, the Bank consented to the issuance of a regulatory order by the DFI (“DFI Order”). The principal purposes of the FRBSF Written Agreement and DFI Order, which constitute formal supervisory actions by the FRBSF and the DFI, were to require us to adopt and implement formal plans and take certain actions, as well as to continue to implement other measures that we previously adopted, to address the adverse consequences that the economic recession has had on the performance of our loan portfolio and our operating results, to improve our operating results, and to increase our capital to strengthen our ability to weather any further adverse economic conditions that might arise in the future.

The FRBSF Agreement and DFI Order contain substantially similar provisions. They required the Boards of Directors of the Company and the Bank to prepare and submit written plans to the FRBSF and the DFI to address the following matters: (i) strengthening board oversight of the management operations of the Bank; (ii) strengthening credit risk management practices; (iii) improving credit administration policies and procedures; (iv) improving the Bank’s position with respect to problem assets; (v) maintaining adequate reserves for loan losses in accordance with applicable supervisory guidelines; (vi) improving the capital position of the Bank and, in the case of the FRBSF Agreement, the capital position of the Company; (vii) improving the Bank’s earnings through the formulation, adoption and implementation of a new strategic plan, and (viii) submitting a satisfactory funding contingency plan for the Bank that would identify available sources of liquidity and a plan for dealing with possible future adverse economic and market conditions. The Bank is also prohibited from paying dividends to the Company without the prior approval of the DFI, and the Company may not declare or pay cash dividends, repurchase any of its shares, make payments on its trust preferred securities or incur or guarantee any debt, without the prior approval of the FRBSF.

The Company and the Bank already have made substantial progress with respect to several of these requirements, including a requirement, achieved in August 2011, that the Bank raise additional capital to increase its ratio of adjusted tangible shareholders’ equity to its tangible assets to 9.0%. Additionally, both the Board and management are committed to achieving all of the requirements on a timely basis. However, a failure by the Company or the Bank to meet any of those remaining requirements could be deemed, by the FRBSF or the DFI, to be conducting business in an unsafe manner which could subject the Company or the Bank to further regulatory enforcement action.

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Impairment Losses on Other-Than-Temporary Impairments Securities (Detail) (USD $) In Thousands, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2013	Jun. 30, 2012	Jun. 30, 2013	Jun. 30, 2012
Other than Temporary Impairment, Credit Losses Recognized in Earnings [Line Items]
Impairment loss recognized in earnings	$ 0		$ 0	$ 77
Asset backed security
Other than Temporary Impairment, Credit Losses Recognized in Earnings [Line Items]
Impairment loss recognized in earnings	$ 0		$ 0	$ 77

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Assets Measured at Fair Value on Recurring Basis (Detail) (USD $) In Thousands, unless otherwise specified	Jun. 30, 2013		Dec. 31, 2012
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Securities available for sale, at fair value	$ 69,950		$ 86,378
Loans held for sale	10,672		55,809
Other assets - Mortgage servicing rights	3,823		2,801
Derivative assets - IRLC's	81		580
Derivative assets - TBA securities	540
Total assets measured at fair value on a recurring basis	85,066		145,568
Derivative liabilities - TBA securities			(158)
Total liabilities measured at fair value on a recurring basis			(158)
Mortgage backed securities issued by U.S. Agencies
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Securities available for sale, at fair value	62,634	[1]	78,446	[1]
Collateralized Mortgage Obligations
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Securities available for sale, at fair value	2,308		2,625
Asset backed security
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Securities available for sale, at fair value	775	[2]	900	[2]
Mutual funds
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Securities available for sale, at fair value	4,233	[3]	4,407	[3]
Level 1
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Securities available for sale, at fair value	4,233		4,407
Total assets measured at fair value on a recurring basis	4,233		4,407
Level 1 | Mutual funds
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Securities available for sale, at fair value	4,233		4,407
Level 2
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Securities available for sale, at fair value	64,942		80,409
Loans held for sale	10,672		55,809
Total assets measured at fair value on a recurring basis	75,614		136,218
Derivative liabilities - TBA securities			(158)
Total liabilities measured at fair value on a recurring basis			(158)
Level 2 | Mortgage backed securities issued by U.S. Agencies
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Securities available for sale, at fair value	62,634		78,446
Level 2 | Collateralized Mortgage Obligations
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Securities available for sale, at fair value	2,308		1,963
Level 3
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Securities available for sale, at fair value	775		1,562
Other assets - Mortgage servicing rights	3,823		2,801
Derivative assets - IRLC's	81		580
Derivative assets - TBA securities	540
Total assets measured at fair value on a recurring basis	5,219		4,943
Level 3 | Collateralized Mortgage Obligations
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Securities available for sale, at fair value			662
Level 3 | Asset backed security
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Securities available for sale, at fair value	$ 775		$ 900

[1] Secured by closed-end first lien 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.

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Fair Values and Related Carrying Amounts of Financial Instruments (Detail) (USD $) In Thousands, unless otherwise specified	Jun. 30, 2013		Dec. 31, 2012		Jun. 30, 2012	Dec. 31, 2011
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Cash and cash equivalents	$ 89,362		$ 128,208		$ 61,776	$ 96,467
Interest-bearing deposits with financial institutions	2,423		2,423
Federal Reserve Bank and Federal Home Loan Bank Stock	8,918		10,284
Securities available for sale, at fair value	69,950		86,378
Loans held for sale	10,672		55,809
Loans, net	717,818		719,257
Other assets - Mortgage servicing rights	3,823		2,801
Derivative assets - IRLC's	81		580
Derivative assets - TBA securities	540
Total assets measured at fair value on a recurring basis	85,066		145,568
Noninterest bearing deposits	(188,149)		(170,259)
Interest-bearing deposits	(560,831)		(675,136)
Borrowings	(45,000)		(55,000)
Junior subordinated debentures	(17,527)		(17,527)
Derivative liabilities - TBA securities			(158)
Total liabilities measured at fair value on a recurring basis			(158)
Mortgage backed securities issued by U.S. Agencies
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Securities available for sale, at fair value	62,634	[1]	78,446	[1]
Collateralized Mortgage Obligations
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Securities available for sale, at fair value	2,308		2,625
Asset backed security
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Securities available for sale, at fair value	775	[2]	900	[2]
Mutual funds
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Securities available for sale, at fair value	4,233	[3]	4,407	[3]
Level 1
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Securities available for sale, at fair value	4,233		4,407
Total assets measured at fair value on a recurring basis	4,233		4,407
Level 1 | Mutual funds
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Securities available for sale, at fair value	4,233		4,407
Level 2
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Securities available for sale, at fair value	64,942		80,409
Loans held for sale	10,672		55,809
Total assets measured at fair value on a recurring basis	75,614		136,218
Derivative liabilities - TBA securities			(158)
Total liabilities measured at fair value on a recurring basis			(158)
Level 2 | Mortgage backed securities issued by U.S. Agencies
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Securities available for sale, at fair value	62,634		78,446
Level 2 | Collateralized Mortgage Obligations
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Securities available for sale, at fair value	2,308		1,963
Level 3
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Securities available for sale, at fair value	775		1,562
Other assets - Mortgage servicing rights	3,823		2,801
Derivative assets - IRLC's	81		580
Derivative assets - TBA securities	540
Total assets measured at fair value on a recurring basis	5,219		4,943
Level 3 | Collateralized Mortgage Obligations
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Securities available for sale, at fair value			662
Level 3 | Asset backed security
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Securities available for sale, at fair value	775		900
Derivative Financial Instruments
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Cash and cash equivalents	89,362		128,208
Interest-bearing deposits with financial institutions	2,423		2,423
Federal Reserve Bank and Federal Home Loan Bank Stock	8,918		10,284
Loans held for sale	10,672		55,809
Loans, net	717,818		719,257
Other assets - Mortgage servicing rights	3,823		2,801
Derivative assets - IRLC's	81		580
Derivative assets - TBA securities	540
Total assets measured at fair value on a recurring basis	903,587		1,005,740
Noninterest bearing deposits	(188,149)		(170,259)
Interest-bearing deposits	(560,831)		(675,136)
Borrowings	(45,000)		(45,000)
Junior subordinated debentures	(17,527)		(17,527)
Derivative liabilities - TBA securities			(158)
Total liabilities measured at fair value on a recurring basis	(811,507)		(908,080)
Derivative Financial Instruments | Mortgage backed securities issued by U.S. Agencies
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Securities available for sale, at fair value	62,634		78,446
Derivative Financial Instruments | Collateralized Mortgage Obligations
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Securities available for sale, at fair value	2,308		2,625
Derivative Financial Instruments | Asset backed security
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Securities available for sale, at fair value	775		900
Derivative Financial Instruments | Mutual funds
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Securities available for sale, at fair value	4,233		4,407
Derivative Financial Instruments | Level 1
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Cash and cash equivalents	89,362		128,208
Interest-bearing deposits with financial institutions	2,423		2,423
Federal Reserve Bank and Federal Home Loan Bank Stock	8,918		10,284
Total assets measured at fair value on a recurring basis	104,936		145,322
Noninterest bearing deposits	(188,149)		(170,259)
Interest-bearing deposits	(560,831)		(675,136)
Borrowings	(45,000)		(45,000)
Junior subordinated debentures	(17,527)		(17,527)
Total liabilities measured at fair value on a recurring basis	(811,507)		(907,922)
Derivative Financial Instruments | Level 1 | Mutual funds
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Securities available for sale, at fair value	4,233		4,407
Derivative Financial Instruments | Level 2
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Loans held for sale	10,672		55,809
Loans, net	717,818		719,257
Derivative assets - TBA securities	540
Total assets measured at fair value on a recurring basis	793,972		855,475
Derivative liabilities - TBA securities			(158)
Total liabilities measured at fair value on a recurring basis			(158)
Derivative Financial Instruments | Level 2 | Mortgage backed securities issued by U.S. Agencies
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Securities available for sale, at fair value	62,634		78,446
Derivative Financial Instruments | Level 2 | Collateralized Mortgage Obligations
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Securities available for sale, at fair value	2,308		1,963
Derivative Financial Instruments | Level 3
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Other assets - Mortgage servicing rights	3,823		2,801
Derivative assets - IRLC's	81		580
Total assets measured at fair value on a recurring basis	4,679		4,943
Derivative Financial Instruments | Level 3 | Collateralized Mortgage Obligations
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Securities available for sale, at fair value			662
Derivative Financial Instruments | Level 3 | Asset backed security
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Securities available for sale, at fair value	$ 775		$ 900

[1] Secured by closed-end first lien 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.

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Investment Securities Available For Sale - Additional Information (Detail) (USD $)	3 Months Ended		6 Months Ended				1 Months Ended	3 Months Ended	6 Months Ended
	Jun. 30, 2013	Jun. 30, 2012	Jun. 30, 2013	Jun. 30, 2012	Mar. 31, 2013	Dec. 31, 2012	Nov. 30, 2007 Asset backed security Entity Investment	Jun. 30, 2012 Asset backed security	Jun. 30, 2013 Asset backed security		Dec. 31, 2012 Asset backed security
Schedule of Available-for-sale Securities [Line Items]
Aggregate fair market value of securities pledged as collateral	$ 13,000,000		$ 13,000,000			$ 10,000,000
Net gains on sales of securities available for sale			23,000	12,000,000
Proceeds from sale of securities available for sale			6,200,000	136,000,000
Portion of other-than-temporary impairment losses recognized in other comprehensive loss	1,413,000		1,413,000		(1,308,000)	(1,264,000)
Number of securities							1
Trust preferred securities, number of issuers							56
Trust preferred securities, number of U.S. depository institutions							45
Trust preferred securities, number of insurance companies							11
Trust preferred securities issued, value							363,000,000
Basis points over 3 months LIBOR							60.00%
Available for sale security purchased, face value							3,000,000
Available for sale security purchased, price as percentage of face amount							95.21%
Available for sale security purchased, price paid							2,900,000
Amortized Cost	73,672,000		73,672,000			87,306,000			2,247,000	[1]	2,247,000	[1]
Estimated Fair Value	69,950,000		69,950,000			86,378,000			775,000	[1]	900,000	[1]
Gross Unrealized Loss	3,804,000		3,804,000			1,568,000			1,472,000	[1]	1,347,000	[1]
Available-for-sale securities, default experienced									42,500,000
Percentage of default to total current collateral									12.50%
Security payment deferrals									43,500,000
Percentage of payment deferrals to total current collateral									12.80%
Estimated additional defaults									72,500,000
Assumption in estimating security defaults, future default rates									2.50%
Fair value inputs, prepayment rate									1.00%
Fair value inputs, recovery rate									15.00%
Impairment loss on securities	$ 0		$ 0	$ 77,000				$ 77,000

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

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Net Interest Income and Noninterest Income (Detail) (USD $) In Thousands, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2013	Jun. 30, 2012	Jun. 30, 2013	Jun. 30, 2012	Dec. 31, 2012
Segment Reporting Information [Line Items]
Net interest income	$ 7,440	$ 8,144	$ 14,798	$ 16,159
Noninterest income	1,393	9,126	3,426	15,154
Asset	952,113		952,113		1,053,941
Operating Segments | Commercial
Segment Reporting Information [Line Items]
Net interest income			14,643	14,696
Noninterest income			21	14,696
Asset	903,483		903,483		940,748
Operating Segments | Mortgage
Segment Reporting Information [Line Items]
Net interest income			372	1,689
Noninterest income			3,192	1,689
Asset	4,482		4,482		99,829
Operating Segments | Other
Segment Reporting Information [Line Items]
Net interest income			(217)	(226)
Noninterest income			213	(1,231)
Asset	$ 44,148		$ 44,148		$ 13,024

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Additional Information with Respect to Impaired Loans, by Portfolio Type (Detail) (USD $) In Thousands, unless otherwise specified	6 Months Ended		12 Months Ended
	Jun. 30, 2013		Dec. 31, 2012
Financing Receivable, Impaired [Line Items]
Recorded Investment	$ 31,085		$ 39,251
Average Recorded Investment	36,600		34,800
Commercial loans
Financing Receivable, Impaired [Line Items]
Recorded Investment	11,867		16,180
Unpaid Principal Balance	14,003		17,168
Related Allowance	2,158	[1]	2,428	[1]
Average Recorded Investment	13,824		14,709
Interest Income Recognized	168		598
Commercial real estate | Owner occupied
Financing Receivable, Impaired [Line Items]
Recorded Investment	3,205		4,644
Unpaid Principal Balance	3,266		4,649
Average Recorded Investment	4,365		5,584
Interest Income Recognized	28		92
Commercial real estate | All other
Financing Receivable, Impaired [Line Items]
Recorded Investment	14,811		17,274
Unpaid Principal Balance	15,420		17,317
Average Recorded Investment	17,373		12,946
Interest Income Recognized	290		703
Residential mortgage loans | Multi-family
Financing Receivable, Impaired [Line Items]
Average Recorded Investment			45
Residential mortgage loans | Single-family
Financing Receivable, Impaired [Line Items]
Recorded Investment	788		839
Unpaid Principal Balance	1,017		1,033
Average Recorded Investment	812		1,050
Interest Income Recognized			41
Land development loans
Financing Receivable, Impaired [Line Items]
Recorded Investment	414		314
Unpaid Principal Balance	417		318
Average Recorded Investment	261		424
Interest Income Recognized	15		33
Loans with no specific reserves established | Commercial loans
Financing Receivable, Impaired [Line Items]
Recorded Investment	7,555		11,782
Unpaid Principal Balance	9,678		12,770
Average Recorded Investment	8,699		7,733
Interest Income Recognized	104		377
Loans with no specific reserves established | Commercial real estate | Owner occupied
Financing Receivable, Impaired [Line Items]
Recorded Investment	3,205		4,644
Unpaid Principal Balance	3,266		4,649
Average Recorded Investment	4,365		5,584
Interest Income Recognized	28		92
Loans with no specific reserves established | Commercial real estate | All other
Financing Receivable, Impaired [Line Items]
Recorded Investment	14,811		17,274
Unpaid Principal Balance	15,420		17,317
Average Recorded Investment	17,373		10,893
Interest Income Recognized	290		703
Loans with no specific reserves established | Residential mortgage loans | Multi-family
Financing Receivable, Impaired [Line Items]
Average Recorded Investment			45
Loans with no specific reserves established | Residential mortgage loans | Single-family
Financing Receivable, Impaired [Line Items]
Recorded Investment	788		839
Unpaid Principal Balance	1,017		1,033
Average Recorded Investment	812		1,050
Interest Income Recognized			41
Loans with no specific reserves established | Land development loans
Financing Receivable, Impaired [Line Items]
Recorded Investment	414		314
Unpaid Principal Balance	417		318
Average Recorded Investment	261		424
Interest Income Recognized	15		33
Loans with specific reserves established | Commercial loans
Financing Receivable, Impaired [Line Items]
Recorded Investment	4,312		4,398
Unpaid Principal Balance	4,325		4,398
Related Allowance	2,158	[1]	2,428	[1]
Average Recorded Investment	5,125		6,976
Interest Income Recognized	64		221
Loans with specific reserves established | Commercial real estate | All other
Financing Receivable, Impaired [Line Items]
Average Recorded Investment			$ 2,053

[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 ALL. 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.

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Loan Balances and Related Allowance for Loan Losses, by Portfolio Type (Detail) (USD $) In Thousands, unless otherwise specified	3 Months Ended		6 Months Ended		12 Months Ended
	Jun. 30, 2013	Jun. 30, 2012	Jun. 30, 2013	Jun. 30, 2012	Dec. 31, 2012
Financing Receivable, Allowance for Credit Losses [Line Items]
Allowance for loan losses, balance at beginning of period	$ 11,018		$ 10,881	$ 15,627	$ 15,627
Charge offs	(1,433)		(2,918)	(2,661)	(8,574)
Recoveries	1,538		2,010	232	1,878
Provision		1,850	1,150	1,450	1,950
Allowance for loan losses, balance at end of period	11,123	14,648	11,123	14,648	10,881
Allowance for loans individually evaluated for impairment	2,158	4,238	2,158	4,238	2,428
Allowance for loans collectively evaluated for impairment	8,965	10,410	8,965	10,410	8,453
Loans individually evaluated for impairment	31,085	36,943	31,085	36,943	39,251
Loans collectively evaluated for impairment	698,131	671,455	698,131	671,455	691,348
Total Loans Outstanding	729,216	708,398	729,216	708,398	730,599
Commercial loans
Financing Receivable, Allowance for Credit Losses [Line Items]
Allowance for loan losses, balance at beginning of period	6,850		6,340	8,908	8,908
Charge offs	(1,433)		(2,603)	(1,668)	(6,664)
Recoveries	1,532		1,932	221	1,657
Provision	4		1,284	947	2,439
Allowance for loan losses, balance at end of period	6,953	8,408	6,953	8,408	6,340
Allowance for loans individually evaluated for impairment	2,158	4,049	2,158	4,049	2,428
Allowance for loans collectively evaluated for impairment	4,795	4,359	4,795	4,359	3,912
Loans individually evaluated for impairment	11,867	18,761	11,867	18,761	16,180
Loans collectively evaluated for impairment	183,572	154,876	183,572	154,876	154,612
Total Loans Outstanding	195,439	173,637	195,439	173,637	170,792
Real Estate
Financing Receivable, Allowance for Credit Losses [Line Items]
Allowance for loan losses, balance at beginning of period	3,053		3,487	5,777	5,777
Charge offs			(308)	(655)	(1,184)
Recoveries	1		2	1	198
Provision	(200)		(327)	(219)	(1,304)
Allowance for loan losses, balance at end of period	2,854	4,904	2,854	4,904	3,487
Allowance for loans individually evaluated for impairment		189		189
Allowance for loans collectively evaluated for impairment	2,854	4,715	2,854	4,715	3,487
Loans individually evaluated for impairment	18,016	16,921	18,016	16,921	21,918
Loans collectively evaluated for impairment	393,761	371,166	393,761	371,166	399,312
Total Loans Outstanding	411,777	388,087	411,777	388,087	421,230
Land Development
Financing Receivable, Allowance for Credit Losses [Line Items]
Allowance for loan losses, balance at beginning of period	216		248	316	316
Charge offs			(5)	(80)	(158)
Recoveries			54	0
Provision	81			490	90
Allowance for loan losses, balance at end of period	297	726	297	726	248
Allowance for loans collectively evaluated for impairment	297	726	297	726	248
Loans individually evaluated for impairment	414	528	414	528	314
Loans collectively evaluated for impairment	19,239	26,960	19,239	26,960	23,704
Total Loans Outstanding	19,653	27,488	19,653	27,488	24,018
Consumer and Single Family Mortgages
Financing Receivable, Allowance for Credit Losses [Line Items]
Allowance for loan losses, balance at beginning of period	899		806	626	626
Charge offs			(2)	(258)	(568)
Recoveries	5		22	10	23
Provision	115		193	232	725
Allowance for loan losses, balance at end of period	1,019	610	1,019	610	806
Allowance for loans collectively evaluated for impairment	1,019	610	1,019	610	806
Loans individually evaluated for impairment	788	733	788	733	839
Loans collectively evaluated for impairment	101,559	118,453	101,559	118,453	113,720
Total Loans Outstanding	$ 102,347	$ 119,186	$ 102,347	$ 119,186	$ 114,559

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Mortgage Banking - Additional Information (Detail) (USD $) In Thousands, unless otherwise specified	Jun. 30, 2013	Dec. 31, 2012
Financing Receivable, Recorded Investment [Line Items]
Other assets	$ 32,047	$ 30,268
Principal amounts of servicing mortgage loans	487,910	455,818
Mortgage Servicing Rights
Financing Receivable, Recorded Investment [Line Items]
Other assets	$ 3,800	$ 2,800

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CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION (Parenthetical) (USD $) In Thousands, except Share data, unless otherwise specified	Jun. 30, 2013	Dec. 31, 2012
Loans, allowances	$ 11,123	$ 10,881
Preferred stock, par value
Preferred stock, shares authorized	2,000,000	2,000,000
Common stock, par value
Common stock, shares authorized	85,000,000	85,000,000
Common stock, shares issued	18,905,941	18,905,941
Common stock, shares outstanding	16,677,419	16,677,419
Series B Convertible 8.4% Noncumulative Preferred Stock
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	$ 100	$ 100
Series C Convertible 8.4% Noncumulative Preferred Stock
Preferred stock, shares authorized	300,000	300,000
Preferred Stock, shares issued	12,803	12,803
Preferred Stock, shares outstanding	12,803	12,803
Preferred Stock, liquidation preference	$ 100	$ 100

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Income Taxes

6 Months Ended

Jun. 30, 2013

Income Tax Disclosure [Abstract]

Income Taxes

7. Income Taxes

For the three months ended June 30, 2013, we did not record a tax benefit for the losses incurred during the second quarter ended June 30, 2013. For the six months ended June 30, 2013, we recorded an income tax benefit of $1.9 million. That effective tax rate differed from our statutory federal rate of 34% as a result of state income taxes (net of federal benefit), less a permanent tax difference associated with an addition to our deferred tax valuation allowance of approximately $633,000.

We record as a deferred tax asset on our balance sheet an amount equal to the tax credit and tax loss carryforwards and tax deductions (“tax benefits”) that we believe will be available to us to offset or reduce the amounts of our income taxes in future periods. Under applicable federal and state income tax laws and regulations, such tax benefits will expire if not used within specified periods of time. Accordingly, the ability to fully use our deferred tax asset depends on the amount of taxable income that we generate during those time periods. At least once each year, or more frequently, if warranted, we make estimates of future taxable income that we believe we are likely to generate during those future periods. If we conclude, on the basis of those estimates and the amount of the tax benefits available to us, that it is more likely than not that we will be able to fully utilize those tax benefits prior to their expiration, we recognize the deferred tax asset in full on our balance sheet. On the other hand, if we conclude on the basis of those estimates and the amount of the tax benefits available to us that it has become more likely than not that we will be unable to utilize those tax benefits in full prior to their expiration, then, we would establish (or increase any existing) valuation allowance to reduce the deferred tax asset on our balance sheet to the amount which we believe we are more likely than not to be able to utilize. Such a reduction is implemented by recognizing a non-cash charge that would have the effect of increasing the provision, or reducing any credit, for income taxes that we would otherwise have recorded in our statements of operations. The determination of whether and the extent to which we will be able to utilize our deferred tax asset involves significant management judgments and assumptions that are subject to period to period changes as a result of changes in tax laws, changes in market or economic conditions that could affect our operating results or variances between our actual operating results and our projected operating results, as wells as other factors.

At June 30, 2013, we have a net deferred tax asset of $13.7 million, as compared with $11.7 million at December 31, 2012. The increase in our deferred tax asset was directly attributable to the losses we incurred during the six months ended June 30, 2013. Adjustments to our deferred tax valuation allowance could be required in the future if we were to conclude, on the basis of our assessment of the realizability of the deferred tax asset, that the amount of that asset which is more likely, than not, to be available to offset or reduce future taxes has decreased. Any such decrease could result in an increase in our provision for income taxes or reductions to our income tax benefits.

We file income tax returns with the U.S. federal government and the state of California. As of June 30, 2013, we were subject to examination by the Internal Revenue Service with respect to our U.S. federal income tax return for the 2008 to 2012 tax year and Franchise Tax Board for California state income tax returns for the 2008 to 2012 tax years. We do not believe there will be any material adverse changes in our unrecognized tax benefits over the next 12 months. Net operating losses (“NOLs”) on our U.S. federal and California state income tax returns may be carried forward 20 years. Beginning in 2012, California taxpayers may carryback losses for two years and carryforward for 20 years, which conforms to the U.S. tax laws. We expect (although no assurance can be given) that we will generate taxable income in future years sufficient to enable us to use the California NOL generated in prior years.

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 quarters ended June 30, 2013 and 2012.

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CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME (LOSS) (USD $) In Thousands, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2013	Jun. 30, 2012	Jun. 30, 2013	Jun. 30, 2012
Statement Of Income And Comprehensive Income [Abstract]
Net (loss) income	$ (3,142)	$ 5,796	$ (6,311)	$ 7,178
Other comprehensive (loss) income net of tax:
Change in unrealized gain (loss) on securities available for sale	(1,014)	1,405	(1,643)	1,053
Change in net unrealized gain (loss) and prior service benefit on supplemental executive retirement plan		9	20	18
Total comprehensive (loss) income	$ (4,156)	$ 7,210	$ (7,934)	$ 8,249

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Sale of Common Stock - Additional Information (Detail) (USD $) In Millions, except Share data, unless otherwise specified			1 Months Ended
	Jun. 30, 2013	Dec. 31, 2012	Mar. 30, 2013 Carpenter Funds
Stockholders Equity Note [Line Items]
Share purchase agreement, additional capital to be raised			$ 15
Common stock to be issued			2,222,222
Share price per share			$ 6.75
Percentage of expected voting rights	34.00%	28.00%
Nonperforming loans and foreclosed real properties	$ 15.8

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CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION (USD $) In Thousands, unless otherwise specified	Jun. 30, 2013	Dec. 31, 2012
ASSETS
Cash and due from banks	$ 15,671	$ 12,256
Interest bearing deposits with financial institutions	73,691	115,952
Cash and cash equivalents	89,362	128,208
Interest-bearing time deposits with financial institutions	2,423	2,423
Federal Reserve Bank and Federal Home Loan Bank Stock, at cost	8,918	10,284
Securities available for sale, at fair value	69,950	86,378
Loans held for sale at fair value	10,672	55,809
Loans (net of allowances of $11,123 and $10,881, respectively)	717,818	719,257
Other real estate owned	17,331	17,710
Accrued interest receivable	2,178	2,242
Premises and equipment, net	1,414	1,362
Other assets	32,047	30,268
Total assets	952,113	1,053,941
Deposits:
Noninterest-bearing	188,149	170,259
Interest-bearing	560,831	675,136
Total deposits	748,980	845,395
Borrowings	45,000	55,000
Accrued interest payable	2,055	1,832
Other liabilities	8,231	11,311
Junior subordinated debentures	17,527	17,527
Total liabilities	821,793	931,065
Commitments and contingencies (Note 2)
Preferred stock, no par value, 2,000,000 shares authorized:
Common stock, no par value, 85,000,000 shares authorized; 18,905,941 and 16,677,419 shares issued and outstanding at June 30, 2013 and December 31, 2012, respectively	128,168	112,790
Retained (deficit) earnings	(5,687)	624
Accumulated other comprehensive loss	(2,188)	(565)
Total shareholders' equity	130,320	122,876
Total liabilities and shareholders' equity	952,113	1,053,941
Series B Convertible 8.4% Noncumulative Preferred Stock
Preferred stock, no par value, 2,000,000 shares authorized:
Preferred Stock	8,747	8,747
Series C Convertible 8.4% Noncumulative Preferred Stock
Preferred stock, no par value, 2,000,000 shares authorized:
Preferred Stock	$ 1,280	$ 1,280

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Summary of Delinquency Status of Loans by Portfolio Type (Detail) (USD $) In Thousands, unless otherwise specified	Jun. 30, 2013	Dec. 31, 2012	Jun. 30, 2012
Financing Receivable, Recorded Investment, Past Due [Line Items]
30-59 Days Past Due	$ 103	$ 1,580
60-89 Days Past Due	9,281	1,156
90 Days and Greater	2,873	10,799
Total Past Due	12,257	13,535
Current	716,959	717,064
Total Loans Outstanding	729,216	730,599	708,398
Loans >90 Days still Accruing Interest
Commercial loans
Financing Receivable, Recorded Investment, Past Due [Line Items]
30-59 Days Past Due	103	1,321
60-89 Days Past Due	4,489	778
90 Days and Greater	756	4,295
Total Past Due	5,348	6,394
Current	190,091	164,398
Total Loans Outstanding	195,439	170,792	173,637
Loans >90 Days still Accruing Interest
Consumer loans
Financing Receivable, Recorded Investment, Past Due [Line Items]
Current	27,106	27,296
Total Loans Outstanding	27,106	27,296
Loans >90 Days still Accruing Interest
Commercial real estate | Owner occupied
Financing Receivable, Recorded Investment, Past Due [Line Items]
90 Days and Greater		3,232
Total Past Due		3,232
Current	156,215	162,690
Total Loans Outstanding	156,215	165,922
Loans >90 Days still Accruing Interest
Commercial real estate | All other
Financing Receivable, Recorded Investment, Past Due [Line Items]
60-89 Days Past Due	4,792
90 Days and Greater	2,117	2,599
Total Past Due	6,909	2,599
Current	151,270	147,590
Total Loans Outstanding	158,179	150,189
Loans >90 Days still Accruing Interest
Residential mortgage loans | Multi-family
Financing Receivable, Recorded Investment, Past Due [Line Items]
Current	97,383	105,119
Total Loans Outstanding	97,383	105,119
Loans >90 Days still Accruing Interest
Residential mortgage loans | Single-family
Financing Receivable, Recorded Investment, Past Due [Line Items]
30-59 Days Past Due		259
60-89 Days Past Due		378
90 Days and Greater		359
Total Past Due		996
Current	75,241	86,267
Total Loans Outstanding	75,241	87,263
Loans >90 Days still Accruing Interest
Land development loans
Financing Receivable, Recorded Investment, Past Due [Line Items]
90 Days and Greater		314
Total Past Due		314
Current	19,653	23,704
Total Loans Outstanding	19,653	24,018
Loans >90 Days still Accruing Interest

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Changes in Level Three Assets Measured at Fair Value on Recurring Basis (Detail) (USD $) In Thousands, unless otherwise specified	6 Months Ended
	Jun. 30, 2013
Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation [Line Items]
Recurring Level 3 Instruments, Beginning Balance	$ 4,943
Total gains or losses (realized/unrealized):
Included in earnings-realized
Included in other comprehensive income	(1,413)
Purchases
Sales
Issuances
Settlements	1,689
Transfers in and/or out of Level 3
Recurring Level 3 Instruments, Ending Balance	5,219
Other Income
Total gains or losses (realized/unrealized):
Included in earnings-unrealized

XML

Loans and Allowance for Loan Losses (Tables)

6 Months Ended

Jun. 30, 2013

Receivables [Abstract]

Composition of Loan Portfolio

The composition of the Company’s loan portfolio as of June 30, 2013 and December 31, 2012 was as follows:

	June 30, 2013						December 31, 2012
(Dollars in thousands)	Amount			Percent			Amount			Percent
Commercial loans	$	195,439			26.8	%	$	170,792			23.4	%
Commercial real estate loans – owner occupied		156,215			21.4	%		165,922			22.7	%
Commercial real estate loans – all other		158,179			21.7	%		150,189			20.6	%
Residential mortgage loans – multi-family		97,383			13.4	%		105,119			14.4	%
Residential mortgage loans – single family		75,241			10.3	%		87,263			11.9	%
Land development loans		19,653			2.7	%		24,018			3.3	%
Consumer loans		27,106			3.7	%		27,296			3.7	%
Gross loans		729,216			100.0	%		730,599			100.0	%
Deferred fee (income) costs, net		(275	)					(461	)
Allowance for loan losses		(11,123	)					(10,881	)
Loans, net	$	717,818					$	719,257

Activity in Allowance for Loan Losses

Set forth below is a summary of the activity in the ALL during the following periods:

	Three Months Ended June 30, 2013			Six Months Ended June 30, 2013			Year Ended December 31, 2012
(Dollars in thousands)
Balance, beginning of period	$	11,018			10,881		$	15,627
Charged off loans		(1,433	)		(2,918	)		(8,574	)
Recoveries on loans previously charged off		1,538			2,010			1,878
Provision for loan losses		—			1,150			1,950
Balance, end of period	$	11,123			11,123		$	10,881

Loan Balances and Related Allowance for Loan Losses, by Portfolio Type

Set forth below is information regarding loan balances and the related allowance for loan losses, by portfolio type, for the six months ended June 30, 2013, June 30, 2012, and the year ended December 31, 2012 (excluding mortgage loans held for sale).

(Dollars in thousands)	Commercial			Real  Estate(1)			Land Development			Consumer and Single Family Mortgages			Total
Allowance for Loan Losses:
Six months ended June 30, 2013
Balance at beginning of period	$	6,340		$	3,487		$	248		$	806		$	10,881
Charge offs		(2,603	)		(308	)		(5	)		(2	)		(2,918	)
Recoveries		1,932			2			54			22			2,010
Provision		1,284			(327	)		—			193			1,150
Balance at end of period	$	6,953		$	2,854		$	297		$	1,019		$	11,123
Three months ended June 30, 2013
Balance at beginning of period	$	6,850		$	3,053		$	216		$	899		$	11,018
Charge offs		(1,433	)		—			—			—			(1,433	)
Recoveries		1,532			1			—			5			1,538
Provision		4			(200	)		81			115			—
Balance at end of period	$	6,953		$	2,854		$	297		$	1,019		$	11,123
ALL balance at end of period related to:
Loans individually evaluated for impairment	$	2,158		$	—		$	—		$	—		$	2,158
Loans collectively evaluated for impairment	$	4,795		$	2,854		$	297		$	1,019		$	8,965
Loans balance at end of period:
Loans individually evaluated for impairment	$	11,867		$	18,016		$	414		$	788		$	31,085
Loans collectively evaluated for impairment		183,572			393,761			19,239			101,559			698,131
Ending Balance	$	195,439		$	411,777		$	19,653		$	102,347		$	729,216
ALL for the six months ended June 30, 2012:
Balance at beginning of quarter	$	8,908		$	5,777		$	316		$	626		$	15,627
Charge offs		(1,668	)		(655	)		(80	)		(258	)		(2,661	)
Recoveries		221			1			0			10			232
Provision		947			(219	)		490			232			1,450
Balance at end of quarter	$	8,408		$	4,904		$	726		$	610		$	14,648
ALL balance at June 30, 2012 related to:
Loans individually evaluated for impairment	$	4,049		$	189		$	—		$	—		$	4,238
Loans collectively evaluated for impairment	$	4,359		$	4,715		$	726		$	610		$	10,410
Loans balance at June 30, 2012:
Loans individually evaluated for impairment	$	18,761		$	16,921		$	528		$	733		$	36,943
Loans collectively evaluated for impairment		154,876			371,166			26,960			118,453			671,455
Ending Balance	$	173,637		$	388,087		$	27,488		$	119,186		$	708,398
ALL for the year ended December 31, 2012:
Balance at beginning of year	$	8,908		$	5,777		$	316		$	626		$	15,627
Charge offs		(6,664	)		(1,184	)		(158	)		(568	)		(8,574	)
Recoveries		1,657			198			—			23			1,878
Provision		2,439			(1,304	)		90			725			1,950
Balance at end of year	$	6,340		$	3,487		$	248		$	806		$	10,881
ALL balance at end of year related to:
Loans individually evaluated for impairment	$	2,428		$	—		$	—		$	—		$	2,428
Loans collectively evaluated for impairment	$	3,912		$	3,487		$	248		$	806		$	8,453
Loans balance at end of year:
Loans individually evaluated for impairment	$	16,180		$	21,918		$	314		$	839		$	39,251
Loans collectively evaluated for impairment		154,612			399,312			23,704			113,720			691,348
Ending Balance	$	170,792		$	421,230		$	24,018		$	114,559		$	730,599

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, 2013 and December 31, 2012:

(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 still Accruing Interest
June 30, 2013
Commercial loans	$	103	$	4,489	$	756	$	5,348	$	190,091	$	195,439	$	—
Commercial real estate loans – owner-occupied		—		—		—		—		156,215		156,215		—
Commercial real estate loans – all other		—		4,792		2,117		6,909		151,270		158,179		—
Residential mortgage loans – multi-family		—		—		—		—		97,383		97,383		—
Residential mortgage loans – single family		—		—		—		—		75,241		75,241		—
Land development loans		—		—		—		—		19,653		19,653		—
Consumer loans		—		—		—		—		27,106		27,106		—
Total	$	103	$	9,281	$	2,873	$	12,257	$	716,959	$	729,216	$	—
December 31, 2012
Commercial loans	$	1,321	$	778	$	4,295	$	6,394	$	164,398	$	170,792	$	—
Commercial real estate loans – owner occupied		—		—		3,232		3,232		162,690		165,922		—
Commercial real estate loans – all other		—		—		2,599		2,599		147,590		150,189		—
Residential mortgage loans – multi-family		—		—		—		—		105,119		105,119		—
Residential mortgage loans – single family		259		378		359		996		86,267		87,263		—
Land development loans		—		—		314		314		23,704		24,018		—
Consumer loans		—		—		—		—		27,296		27,296		—
Total	$	1,580	$	1,156	$	10,799	$	13,535	$	717,064	$	730,599	$	—

Loans on Nonaccrual Status by Portfolio Type

The following table provides information, as of June 30, 2013 and December 31, 2012, with respect to loans on nonaccrual status, by portfolio type:

	June 30, 2013		December 31, 2012
	(Dollars in thousands)
Nonaccrual loans:
Commercial loans	$	3,595	$	6,846
Commercial real estate loans – owner occupied		1,811		3,232
Commercial real estate loans – all other		2,117		6,424
Residential mortgage loans – single family		788		839
Land development loans		414		314
Total	$	8,725	$	17,655

Summary of Loans by Portfolio Type and Internal Credit Quality Ratings

The following table provides a summary of loans by portfolio type and our internal credit quality ratings as of June 30, 2013 and December 31, 2012, respectively.

(Dollars in thousands)	June 30, 2013		December 31, 2012		Increase (Decrease)
Pass:
Commercial loans	$	173,199	$	146,952	$	26,247
Commercial real estate loans – owner occupied		152,691		162,689		(9,998	)
Commercial real estate loans – all other		140,186		135,274		4,912
Residential mortgage loans – multi family		97,383		104,747		(7,364	)
Residential mortgage loans – single family		73,264		84,237		(10,973	)
Land development loans		11,106		12,461		(1,355	)
Consumer loans		26,544		27,296		(752	)
Total pass loans	$	674,373	$	673,656	$	717
Special Mention:
Commercial loans	$	217	$	2,381	$	(2,164	)
Commercial real estate loans – owner occupied		—		—		—
Commercial real estate loans – all other		4,523		3,859		664
Residential mortgage loans – multi family		—		373		(373	)
Residential mortgage loans – single family		—		990		(990	)
Land development loans		—		8,201		(8,201	)
Consumer loans		562		—		562
Total special mention loans	$	5,302	$	15,804	$	(10,502	)
Substandard:
Commercial loans	$	21,047	$	21,347	$	(300	)
Commercial real estate loans – owner occupied		3,523		3,232		291
Commercial real estate loans – all other		13,470		11,057		2,413
Residential mortgage loans – multi family		—		—		—
Residential mortgage loans – single family		1,978		2,036		(58	)
Land development loans		8,547		3,355		5,192
Consumer loans		—		—		—
Total substandard loans	$	48,565	$	41,027	$	7,538
Doubtful:
Commercial loans	$	976	$	112	$	864
Commercial real estate loans – owner occupied		—		—		—
Commercial real estate loans – all other		—		—		—
Residential mortgage loans – multi family		—		—		—
Residential mortgage loans – single family		—		—		—
Land development loans		—		—		—
Consumer loans		—		—		—
Total doubtful loans	$	976	$	112	$	864
Total Outstanding Loans, gross:	$	729,216	$	730,599	$	(1,383	)

Impaired Loans

The following table sets forth information regarding impaired loans, at June 30, 2013 and December 31, 2012:

(Dollars in thousands)	June 30, 2013		December 31, 2012
Impaired loans:
Nonaccruing loans	$	3,846	$	12,018
Nonaccruing restructured loans		4,879		5,637
Accruing restructured loans(1)		22,360		21,596
Accruing impaired loans		—		—
Total impaired loans	$	31,085	$	39,251
Impaired loans less than 90 days delinquent and included in total impaired loans	$	30,328	$	28,452

⁽¹⁾  See “Trouble Debt Restructurings” below for a description of accruing restructured loans at June 30, 2013 and December 31, 2012.

Additional Information with Respect to Impaired Loans, by Portfolio Type

The following tables contain additional information with respect to impaired loans, by portfolio type, at June 30, 2013 and December 31, 2012:

(Dollars in thousands)	Recorded Investment		Unpaid Principal Balance		Related Allowance  (1)		Average Recorded Investment		Interest Income Recognized
2013 Loans with no specific reserves established:
Commercial loans	$	7,555	$	9,678	$	—	$	8,699	$	104
Commercial real estate loans – owner occupied		3,205		3,266		—		4,365		28
Commercial real estate loans – all other		14,811		15,420		—		17,373		290
Residential mortgage loans – multi-family		—		—		—		—		—
Residential mortgage loans – single family		788		1,017		—		812		—
Land development loans		414		417		—		261		15
Consumer loans		—		—		—		—		—
2013 Loans with specific reserves established:
Commercial loans	$	4,312	$	4,325	$	2,158	$	5,125	$	64
Commercial real estate loans – owner occupied		—		—		—		—		—
Commercial real estate loans – all other		—		—		—		—		—
Residential mortgage loans – multi-family		—		—		—		—		—
Residential mortgage loans – single family		—		—		—		—		—
Land development loans		—		—		—		—		—
Consumer loans		—		—		—		—		—
2013 Total:
Commercial loans	$	11,867	$	14,003	$	2,158	$	13,824	$	168
Commercial real estate loans – owner occupied		3,205		3,266		—		4,365		28
Commercial real estate loans – all other		14,811		15,420		—		17,373		290
Residential mortgage loans – multi-family		—		—		—		—		—
Residential mortgage loans – single family		788		1,017		—		812		—
Land development loans		414		417		—		261		15
Consumer loans		—		—		—		—		—
2012 Loans with no specific reserves established:
Commercial loans	$	11,782	$	12,770	$	—	$	7,733	$	377
Commercial real estate loans – owner occupied		4,644		4,649		—		5,584		92
Commercial real estate loans – all other		17,274		17,317		—		10,893		703
Residential mortgage loans – multi-family		—		—		—		45		—
Residential mortgage loans – single family		839		1,033		—		1,050		41
Land development loans		314		318		—		424		33
Consumer loans		—		—		—		—		—
2012 Loans with specific reserves established:
Commercial loans	$	4,398	$	4,398	$	2,428	$	6,976	$	221
Commercial real estate loans – owner occupied		—		—		—		—		—
Commercial real estate loans – all other		—		—		—		2,053		—
Residential mortgage loans – multi-family		—		—		—		—		—
Residential mortgage loans – single family		—		—		—		—		—
Land development loans		—		—		—		—		—
Consumer loans		—		—		—		—		—
2012 Total:
Commercial loans	$	16,180	$	17,168	$	2,428	$	14,709	$	598
Commercial real estate loans – owner occupied		4,644		4,649		—		5,584		92
Commercial real estate loans – all other		17,274		17,317		—		12,946		703
Residential mortgage loans – multi-family		—		—		—		45		—
Residential mortgage loans – single family		839		1,033		—		1,050		41
Land development loans		314		318		—		424		33
Consumer loans		—		—		—		—		—

⁽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 ALL. 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.

Troubled Debt Restructurings

	June 30, 2013
(Dollars in thousands)	Number of  Loans		Pre- Modification Outstanding Recorded Investment		Post Modification Outstanding Recorded Investment		End of Period Balance
Performing
Commercial loans		2	$	8,310	$	8,310	$	8,273
Commercial real estate – all other		6		16,451		16,451		12,693
Land development loans		1		1,429		1,429		1,394
		9		26,190		26,190		22,360
Nonperforming
Commercial loans		6		4,944		3,830		2,599
Commercial real estate – owner occupied		1		1,872		1,867		1,811
Land development loans		1		439		439		414
Residential mortgage loans – single family		1		171		64		55
		9		7,426		6,200		4,879
Total Troubled Debt Restructurings		18	$	33,616	$	32,390	$	27,239

	December 31, 2012
(Dollars in thousands)	Number of Loans		Pre- Modification Outstanding Recorded Investment		Post- Modification Outstanding Recorded Investment		End of Period Balance
Performing
Commercial loans		4	$	9,754	$	9,754	$	9,334
Commercial real estate – all other		4		10,897		10,897		10,849
Land development loans		1		1,429		1,429		1,412
		9		22,080		22,080		21,595
Nonperforming
Commercial loans		3		1,943		1,855		1,753
Commercial real estate – all other		2		6,814		6,685		3,825
Residential mortgage loans – single family		1		171		64		59
		6		8,928		8,604		5,637
Total Troubled Debt Restructurings		15	$	31,008	$	30,684	$	27,232

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Repurchase Reserves for Previously Sold Loans (Detail) (USD $) In Thousands, unless otherwise specified	6 Months Ended	12 Months Ended
	Jun. 30, 2013	Dec. 31, 2012
Mortgage Banking [Abstract]
Beginning balance	$ 906	$ 115
Provision for repurchases	83	791
Settlements
Total repurchases reserve	$ 989	$ 906

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Impaired Loans (Detail) (USD $) In Thousands, unless otherwise specified	Jun. 30, 2013		Dec. 31, 2012
Impaired loans:
Nonaccruing loans	$ 3,846		$ 12,018
Nonaccruing restructured loans	4,879		5,637
Accruing restructured loans	22,360	[1]	21,596	[1]
Accruing impaired loans
Total impaired loans	31,085		39,251
Impaired loans less than 90 days delinquent
Impaired loans:
Total impaired loans	$ 30,328		$ 28,452

[1] See "Trouble Debt Restructurings" below for a description of accruing restructured loans at June 30, 2013 and December 31, 2012.

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Compensation Expense Expected to be Recognized in Respect of Nov-Vested Stock Options Outstanding (Detail) (USD $) In Thousands, unless otherwise specified	6 Months Ended
	Jun. 30, 2013
Disclosure Of Compensation Related Costs Sharebased Payments [Abstract]
Estimated Stock Based Compensation Expense for year 2013	$ 237
Estimated Stock Based Compensation Expense for year 2014	458
Estimated Stock Based Compensation Expense for year 2015	247
Estimated Stock Based Compensation Expense for year 2016	32
Estimated Stock Based Compensation Expense for year 2017	12
Estimated Stock Based Compensation Expense	$ 986

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Gross Unrealized Losses and Fair Values of Investments (Detail) (USD $) In Thousands, unless otherwise specified	Jun. 30, 2013
Schedule of Available-for-sale Securities [Line Items]
Less than 12 months, Fair Value	$ 61,183
Less than 12 months, Unrealized Loss	(2,270)
12 months or more, Fair Value	1,878
12 months or more, Unrealized Loss	(1,534)
Total, Fair Value	63,061
Total, Unrealized Loss	(3,804)
Mortgage backed securities issued by U.S. Agencies
Schedule of Available-for-sale Securities [Line Items]
Less than 12 months, Fair Value	61,183
Less than 12 months, Unrealized Loss	(2,270)
12 months or more, Fair Value	38
12 months or more, Unrealized Loss	(1)
Total, Fair Value	61,221
Total, Unrealized Loss	(2,271)
Collateralized mortgage obligations issued by non agencies
Schedule of Available-for-sale Securities [Line Items]
12 months or more, Fair Value	1,065
12 months or more, Unrealized Loss	(61)
Total, Fair Value	1,065
Total, Unrealized Loss	(61)
Asset backed security
Schedule of Available-for-sale Securities [Line Items]
12 months or more, Fair Value	775
12 months or more, Unrealized Loss	(1,472)
Total, Fair Value	775
Total, Unrealized Loss	$ (1,472)

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Derivative Assets and Liabilities (Detail) (USD $) In Thousands, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2013	Jun. 30, 2012	Jun. 30, 2013	Jun. 30, 2012
Derivative Financial Instruments, Assets | Interest Rate Lock Commitments
Derivative [Line Items]
Notional Balance	$ 8,712	$ 80,836	$ 8,712	$ 80,836
Gains (losses) on derivative	(238)	1,581	(427)	2,600
Derivative Financial Instruments, Liabilities | To Be Announced
Derivative [Line Items]
Notional Balance	15,500	132,719	15,500	132,719
Gains (losses) on derivative	$ 628	$ (1,029)	$ 698	$ (1,005)

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Major Components of Securities Available for Sale and Comparison of Amortized Cost, Estimated Fair Market Values, and Gross Unrealized Gains and Losses (Detail) (USD $) In Thousands, unless otherwise specified	Jun. 30, 2013		Dec. 31, 2012
Schedule of Available-for-sale Securities [Line Items]
Amortized Cost	$ 73,672		$ 87,306
Gross Unrealized Gain	82		640
Gross Unrealized Loss	(3,804)		(1,568)
Estimated Fair Value	69,950		86,378
Mortgage backed securities issued by U.S. Agencies
Schedule of Available-for-sale Securities [Line Items]
Amortized Cost	64,883	[1]	78,053	[1]
Gross Unrealized Gain	22	[1]	553	[1]
Gross Unrealized Loss	(2,271)	[1]	(160)	[1]
Estimated Fair Value	62,634	[1]	78,446	[1]
Collateralized mortgage obligations issued by non agencies
Schedule of Available-for-sale Securities [Line Items]
Amortized Cost	2,309	[1]	2,599	[1]
Gross Unrealized Gain	60	[1]	87	[1]
Gross Unrealized Loss	(61)	[1]	(61)	[1]
Estimated Fair Value	2,308	[1]	2,625	[1]
Asset backed security
Schedule of Available-for-sale Securities [Line Items]
Amortized Cost	2,247	[2]	2,247	[2]
Gross Unrealized Loss	(1,472)	[2]	(1,347)	[2]
Estimated Fair Value	775	[2]	900	[2]
Mutual funds
Schedule of Available-for-sale Securities [Line Items]
Amortized Cost	4,233	[3]	4,407	[3]
Estimated Fair Value	$ 4,233	[3]	$ 4,407	[3]

[1] Secured by closed-end first lien 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.

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Loans and Allowance for Loan Losses

6 Months Ended

Jun. 30, 2013

Receivables [Abstract]

Loans and Allowance for Loan Losses

6. Loans and Allowance for Loan Losses

The composition of the Company’s loan portfolio as of June 30, 2013 and December 31, 2012 was as follows:

	June 30, 2013						December 31, 2012
(Dollars in thousands)	Amount			Percent			Amount			Percent
Commercial loans	$	195,439			26.8	%	$	170,792			23.4	%
Commercial real estate loans – owner occupied		156,215			21.4	%		165,922			22.7	%
Commercial real estate loans – all other		158,179			21.7	%		150,189			20.6	%
Residential mortgage loans – multi-family		97,383			13.4	%		105,119			14.4	%
Residential mortgage loans – single family		75,241			10.3	%		87,263			11.9	%
Land development loans		19,653			2.7	%		24,018			3.3	%
Consumer loans		27,106			3.7	%		27,296			3.7	%
Gross loans		729,216			100.0	%		730,599			100.0	%
Deferred fee (income) costs, net		(275	)					(461	)
Allowance for loan losses		(11,123	)					(10,881	)
Loans, net	$	717,818					$	719,257

At June 30, 2013 and December 31, 2012, real estate loans of approximately $216 million and $162 million, respectively, were pledged to secure borrowings obtained from the Federal Home Loan Bank.

Allowance for Loan Losses

The allowance for loan losses (“ALL”) represents our estimate of credit losses inherent in the loan portfolio 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 ALL and the amount of the provisions that are required to be made for potential loan losses to increase or replenish the ALL.

The ALL is first determined by (i) analyzing all classified loans (graded as “Substandard” or “Doubtful” under our internal credit quality grading parameters—see below) 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 a specific reserve established for any “shortfall” amount. 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.

On a quarterly basis, we utilize a classification migration model and individual loan review analytical tools as starting points for determining the adequacy of the ALL 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 a 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 credit quality grading parameters, we grade the loans as “Pass,” “Special Mention,” “Substandard” or “Doubtful”. We also conduct individual loan review analysis, as part of the ALL allocation process, applying specific monitoring policies and procedures in analyzing the existing loan portfolios. Set forth below is a summary of the activity in the ALL during the following periods:

	Three Months Ended June 30, 2013			Six Months Ended June 30, 2013			Year Ended December 31, 2012
(Dollars in thousands)
Balance, beginning of period	$	11,018			10,881		$	15,627
Charged off loans		(1,433	)		(2,918	)		(8,574	)
Recoveries on loans previously charged off		1,538			2,010			1,878
Provision for loan losses		—			1,150			1,950
Balance, end of period	$	11,123			11,123		$	10,881

Set forth below is information regarding loan balances and the related allowance for loan losses, by portfolio type, for the six months ended June 30, 2013, June 30, 2012, and the year ended December 31, 2012 (excluding mortgage loans held for sale).

(Dollars in thousands)	Commercial			Real  Estate(1)			Land Development			Consumer and Single Family Mortgages			Total
Allowance for Loan Losses:
Six months ended June 30, 2013
Balance at beginning of period	$	6,340		$	3,487		$	248		$	806		$	10,881
Charge offs		(2,603	)		(308	)		(5	)		(2	)		(2,918	)
Recoveries		1,932			2			54			22			2,010
Provision		1,284			(327	)		—			193			1,150
Balance at end of period	$	6,953		$	2,854		$	297		$	1,019		$	11,123
Three months ended June 30, 2013
Balance at beginning of period	$	6,850		$	3,053		$	216		$	899		$	11,018
Charge offs		(1,433	)		—			—			—			(1,433	)
Recoveries		1,532			1			—			5			1,538
Provision		4			(200	)		81			115			—
Balance at end of period	$	6,953		$	2,854		$	297		$	1,019		$	11,123
ALL balance at end of period related to:
Loans individually evaluated for impairment	$	2,158		$	—		$	—		$	—		$	2,158
Loans collectively evaluated for impairment	$	4,795		$	2,854		$	297		$	1,019		$	8,965
Loans balance at end of period:
Loans individually evaluated for impairment	$	11,867		$	18,016		$	414		$	788		$	31,085
Loans collectively evaluated for impairment		183,572			393,761			19,239			101,559			698,131
Ending Balance	$	195,439		$	411,777		$	19,653		$	102,347		$	729,216
ALL for the six months ended June 30, 2012:
Balance at beginning of quarter	$	8,908		$	5,777		$	316		$	626		$	15,627
Charge offs		(1,668	)		(655	)		(80	)		(258	)		(2,661	)
Recoveries		221			1			0			10			232
Provision		947			(219	)		490			232			1,450
Balance at end of quarter	$	8,408		$	4,904		$	726		$	610		$	14,648
ALL balance at June 30, 2012 related to:
Loans individually evaluated for impairment	$	4,049		$	189		$	—		$	—		$	4,238
Loans collectively evaluated for impairment	$	4,359		$	4,715		$	726		$	610		$	10,410
Loans balance at June 30, 2012:
Loans individually evaluated for impairment	$	18,761		$	16,921		$	528		$	733		$	36,943
Loans collectively evaluated for impairment		154,876			371,166			26,960			118,453			671,455
Ending Balance	$	173,637		$	388,087		$	27,488		$	119,186		$	708,398
ALL for the year ended December 31, 2012:
Balance at beginning of year	$	8,908		$	5,777		$	316		$	626		$	15,627
Charge offs		(6,664	)		(1,184	)		(158	)		(568	)		(8,574	)
Recoveries		1,657			198			—			23			1,878
Provision		2,439			(1,304	)		90			725			1,950
Balance at end of year	$	6,340		$	3,487		$	248		$	806		$	10,881
ALL balance at end of year related to:
Loans individually evaluated for impairment	$	2,428		$	—		$	—		$	—		$	2,428
Loans collectively evaluated for impairment	$	3,912		$	3,487		$	248		$	806		$	8,453
Loans balance at end of year:
Loans individually evaluated for impairment	$	16,180		$	21,918		$	314		$	839		$	39,251
Loans collectively evaluated for impairment		154,612			399,312			23,704			113,720			691,348
Ending Balance	$	170,792		$	421,230		$	24,018		$	114,559		$	730,599

Credit Quality

The amounts of nonperforming assets and delinquencies that occur within our loan portfolio factors in our evaluation of the adequacy of the ALL.

The following table provides a summary of the delinquency status of loans by portfolio type at June 30, 2013 and December 31, 2012:

(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 still Accruing Interest
June 30, 2013
Commercial loans	$	103	$	4,489	$	756	$	5,348	$	190,091	$	195,439	$	—
Commercial real estate loans – owner-occupied		—		—		—		—		156,215		156,215		—
Commercial real estate loans – all other		—		4,792		2,117		6,909		151,270		158,179		—
Residential mortgage loans – multi-family		—		—		—		—		97,383		97,383		—
Residential mortgage loans – single family		—		—		—		—		75,241		75,241		—
Land development loans		—		—		—		—		19,653		19,653		—
Consumer loans		—		—		—		—		27,106		27,106		—
Total	$	103	$	9,281	$	2,873	$	12,257	$	716,959	$	729,216	$	—
December 31, 2012
Commercial loans	$	1,321	$	778	$	4,295	$	6,394	$	164,398	$	170,792	$	—
Commercial real estate loans – owner occupied		—		—		3,232		3,232		162,690		165,922		—
Commercial real estate loans – all other		—		—		2,599		2,599		147,590		150,189		—
Residential mortgage loans – multi-family		—		—		—		—		105,119		105,119		—
Residential mortgage loans – single family		259		378		359		996		86,267		87,263		—
Land development loans		—		—		314		314		23,704		24,018		—
Consumer loans		—		—		—		—		27,296		27,296		—
Total	$	1,580	$	1,156	$	10,799	$	13,535	$	717,064	$	730,599	$	—

As the above table indicates, total past due loans decreased by $1.2 million, to $12.3 million at June 30, 2013 from $13.5 million at December 31, 2012. Loans past due 90 days or more decreased by $7.9 million, to $2.9 million at June 30, 2013, from $10.8 million at December 31, 2012, primarily due to the foreclosure, and transfers of $5.6 million of real estate loans to OREO and $1.5 million in loan charge offs during the six months ended June 30, 2013.

Loans 30-89 days past due increased by $6.6 million to $9.4 million at June 30, 2013, from $2.7 million at December 31, 2012, primarily due to bankruptcy filings on a $4.8 million commercial real estate loan and a $4.3 million commercial loan relationship.

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, 2013 or December 31, 2012. 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, 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. 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, as of June 30, 2013 and December 31, 2012, with respect to loans on nonaccrual status, by portfolio type:

	June 30, 2013		December 31, 2012
	(Dollars in thousands)
Nonaccrual loans:
Commercial loans	$	3,595	$	6,846
Commercial real estate loans – owner occupied		1,811		3,232
Commercial real estate loans – all other		2,117		6,424
Residential mortgage loans – single family		788		839
Land development loans		414		314
Total	$	8,725	$	17,655

At June 30, 2013 nonaccrual loans totaled to $8.7 million, down from $17.7 million at December 31, 2012, primarily due to (i) the restoration to accrual status of a $2.0 million commercial real estate-all other loan as a result of the receipt from the borrower of loan payments in accordance with the modified terms over a period of time, (ii) the foreclosure of $5.6 million of loans collateralized primarily by commercial real estate, and (iii) impairment write-downs of $1.8 million, based on our loan impairment analysis.

We classify our loan portfolio using internal credit quality ratings. The following table provides a summary of loans by portfolio type and our internal credit quality ratings as of June 30, 2013 and December 31, 2012, respectively.

(Dollars in thousands)	June 30, 2013		December 31, 2012		Increase (Decrease)
Pass:
Commercial loans	$	173,199	$	146,952	$	26,247
Commercial real estate loans – owner occupied		152,691		162,689		(9,998	)
Commercial real estate loans – all other		140,186		135,274		4,912
Residential mortgage loans – multi family		97,383		104,747		(7,364	)
Residential mortgage loans – single family		73,264		84,237		(10,973	)
Land development loans		11,106		12,461		(1,355	)
Consumer loans		26,544		27,296		(752	)
Total pass loans	$	674,373	$	673,656	$	717
Special Mention:
Commercial loans	$	217	$	2,381	$	(2,164	)
Commercial real estate loans – owner occupied		—		—		—
Commercial real estate loans – all other		4,523		3,859		664
Residential mortgage loans – multi family		—		373		(373	)
Residential mortgage loans – single family		—		990		(990	)
Land development loans		—		8,201		(8,201	)
Consumer loans		562		—		562
Total special mention loans	$	5,302	$	15,804	$	(10,502	)
Substandard:
Commercial loans	$	21,047	$	21,347	$	(300	)
Commercial real estate loans – owner occupied		3,523		3,232		291
Commercial real estate loans – all other		13,470		11,057		2,413
Residential mortgage loans – multi family		—		—		—
Residential mortgage loans – single family		1,978		2,036		(58	)
Land development loans		8,547		3,355		5,192
Consumer loans		—		—		—
Total substandard loans	$	48,565	$	41,027	$	7,538
Doubtful:
Commercial loans	$	976	$	112	$	864
Commercial real estate loans – owner occupied		—		—		—
Commercial real estate loans – all other		—		—		—
Residential mortgage loans – multi family		—		—		—
Residential mortgage loans – single family		—		—		—
Land development loans		—		—		—
Consumer loans		—		—		—
Total doubtful loans	$	976	$	112	$	864
Total Outstanding Loans, gross:	$	729,216	$	730,599	$	(1,383	)

As the above table indicates, loans totaled approximately $729 million at June 30, 2013, a decrease of $1.4 million from $731 million at December 31, 2012. The disaggregation of the loan portfolio by risk rating in the table above reflects the following changes between December 31, 2012 and June 30, 2013:

• Loans rated “pass” totaled $674 million, approximately the same as December 31, 2012. The composition of the loan portfolio has changed due primarily to a $26 million increase in commercial loans between December 31, 2012 and June 30, 2013, offset by decreases of $11 million in residential mortgage single-family loans, $10 million in commercial real estate owner-occupied real estate loans and a $7 million in residential mortgage multi-family loans.

• Loans rated “special mention” decreased by $10.5 million to $5.3 million at June 30, 2013 from $15.8 million at year-end 2012. The decrease was primarily the result of the downgrade of a $10.7 million loan relationship, comprised of $9.5 million in commercial real estate loans-all other and a $1.1 million commercial loan. Those real estate loans are collateralized and through June 30, 2013 borrower payments had been current.

• Loans rated “substandard” increased by $7.6 million to $48.6 million at June 30, 2013, from $41.0 million at year-end 2012. The increase was comprised of $11.5 million of loans transferred from “special mention” and $5.1 million of loans from “pass” to substandard, partially offset by $2.3 million of loan charge offs and the foreclosure and transfer to OREO of $5.6 million of real estate loans during the six months ended June 30, 2013.

Impaired Loans

A loan is generally classified as impaired and placed on nonaccrual status when, in our judgment, principal or interest is not likely to be collected in accordance with the contractual terms of the loan agreement. We measure for impairment 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, 2013 and December 31, 2012:

(Dollars in thousands)	June 30, 2013		December 31, 2012
Impaired loans:
Nonaccruing loans	$	3,846	$	12,018
Nonaccruing restructured loans		4,879		5,637
Accruing restructured loans(1)		22,360		21,596
Accruing impaired loans		—		—
Total impaired loans	$	31,085	$	39,251
Impaired loans less than 90 days delinquent and included in total impaired loans	$	30,328	$	28,452

⁽¹⁾  See “Trouble Debt Restructurings” below for a description of accruing restructured loans at June 30, 2013 and December 31, 2012.

The $8.2 million decrease in impaired loans to $31.1 million at June 30, 2013, from $39.3 million at December 31, 2012, was primarily attributable to the foreclosure and transfer to OREO of $5.6 million of nonaccrual loans and $2.9 million in write downs to impaired loans. Accruing restructured loans were comprised of a number of loans performing in accordance with modified terms, which included a 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, 2013, $2.2 million of specific reserves were required on a $4.3 million troubled debt restructured (“TDR”) loan relationship and that the other impaired loans were well secured and adequately collateralized.

The following tables contain additional information with respect to impaired loans, by portfolio type, at June 30, 2013 and December 31, 2012:

(Dollars in thousands)	Recorded Investment		Unpaid Principal Balance		Related Allowance  (1)		Average Recorded Investment		Interest Income Recognized
2013 Loans with no specific reserves established:
Commercial loans	$	7,555	$	9,678	$	—	$	8,699	$	104
Commercial real estate loans – owner occupied		3,205		3,266		—		4,365		28
Commercial real estate loans – all other		14,811		15,420		—		17,373		290
Residential mortgage loans – multi-family		—		—		—		—		—
Residential mortgage loans – single family		788		1,017		—		812		—
Land development loans		414		417		—		261		15
Consumer loans		—		—		—		—		—
2013 Loans with specific reserves established:
Commercial loans	$	4,312	$	4,325	$	2,158	$	5,125	$	64
Commercial real estate loans – owner occupied		—		—		—		—		—
Commercial real estate loans – all other		—		—		—		—		—
Residential mortgage loans – multi-family		—		—		—		—		—
Residential mortgage loans – single family		—		—		—		—		—
Land development loans		—		—		—		—		—
Consumer loans		—		—		—		—		—
2013 Total:
Commercial loans	$	11,867	$	14,003	$	2,158	$	13,824	$	168
Commercial real estate loans – owner occupied		3,205		3,266		—		4,365		28
Commercial real estate loans – all other		14,811		15,420		—		17,373		290
Residential mortgage loans – multi-family		—		—		—		—		—
Residential mortgage loans – single family		788		1,017		—		812		—
Land development loans		414		417		—		261		15
Consumer loans		—		—		—		—		—
2012 Loans with no specific reserves established:
Commercial loans	$	11,782	$	12,770	$	—	$	7,733	$	377
Commercial real estate loans – owner occupied		4,644		4,649		—		5,584		92
Commercial real estate loans – all other		17,274		17,317		—		10,893		703
Residential mortgage loans – multi-family		—		—		—		45		—
Residential mortgage loans – single family		839		1,033		—		1,050		41
Land development loans		314		318		—		424		33
Consumer loans		—		—		—		—		—
2012 Loans with specific reserves established:
Commercial loans	$	4,398	$	4,398	$	2,428	$	6,976	$	221
Commercial real estate loans – owner occupied		—		—		—		—		—
Commercial real estate loans – all other		—		—		—		2,053		—
Residential mortgage loans – multi-family		—		—		—		—		—
Residential mortgage loans – single family		—		—		—		—		—
Land development loans		—		—		—		—		—
Consumer loans		—		—		—		—		—
2012 Total:
Commercial loans	$	16,180	$	17,168	$	2,428	$	14,709	$	598
Commercial real estate loans – owner occupied		4,644		4,649		—		5,584		92
Commercial real estate loans – all other		17,274		17,317		—		12,946		703
Residential mortgage loans – multi-family		—		—		—		45		—
Residential mortgage loans – single family		839		1,033		—		1,050		41
Land development loans		314		318		—		424		33
Consumer loans		—		—		—		—		—

⁽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 ALL. 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, 2013 and December 31, 2012 there were $26.8 million and $34.9 million, respectively, of impaired loans to which no specific reserves had been allocated because these loans, in our judgment, were sufficiently collateralized. Of the impaired loans at June 30, 2013 for which no specific reserves were allocated, $30.7 million had been deemed impaired in prior quarters and the deficiencies were charged off during the periods in which the loans were determined to have become impaired.

We had average investments in impaired loans of $36.6 million and $34.8 million for the six months ended June 30, 2013 and the 12 months ended December 31, 2012, respectively. The interest that would have been earned, in the second quarter of 2013, had the impaired loans remained current in accordance with their original terms was approximately $325,000.

Troubled Debt Restructurings

Pursuant to the FASB’s Accounting Standard Update No. 2011-02, A Creditor’s Determination of Whether a Restructuring is a Troubled Debt Restructuring (“ASU No. 2011-02”), the Bank’s troubled debt restructured loans (“TDRs”) totaled $27.2 million at both June 30, 2013 and December 31, 2012. TDRs consist of loans to which modifications have been made for the purpose of alleviating temporary impairments of the borrowers’ 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 borrowers that are designed to provide a bridge for the borrowers’ 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 $27.2 million of TDRs outstanding at June 30, 2013, $22.4 million were performing in accordance with their terms and accruing interest; and $4.9 million were not. We carried $2.2 million of specific reserves for $4.3 million of TDRs, of which $1.0 million were nonperforming and $3.3 million were performing at June 30, 2013. The TDR totals have remained relatively unchanged between June 30, 2013 and December 31, 2012.

	June 30, 2013
(Dollars in thousands)	Number of  Loans		Pre- Modification Outstanding Recorded Investment		Post Modification Outstanding Recorded Investment		End of Period Balance
Performing
Commercial loans		2	$	8,310	$	8,310	$	8,273
Commercial real estate – all other		6		16,451		16,451		12,693
Land development loans		1		1,429		1,429		1,394
		9		26,190		26,190		22,360
Nonperforming
Commercial loans		6		4,944		3,830		2,599
Commercial real estate – owner occupied		1		1,872		1,867		1,811
Land development loans		1		439		439		414
Residential mortgage loans – single family		1		171		64		55
		9		7,426		6,200		4,879
Total Troubled Debt Restructurings		18	$	33,616	$	32,390	$	27,239

	December 31, 2012
(Dollars in thousands)	Number of Loans		Pre- Modification Outstanding Recorded Investment		Post- Modification Outstanding Recorded Investment		End of Period Balance
Performing
Commercial loans		4	$	9,754	$	9,754	$	9,334
Commercial real estate – all other		4		10,897		10,897		10,849
Land development loans		1		1,429		1,429		1,412
		9		22,080		22,080		21,595
Nonperforming
Commercial loans		3		1,943		1,855		1,753
Commercial real estate – all other		2		6,814		6,685		3,825
Residential mortgage loans – single family		1		171		64		59
		6		8,928		8,604		5,637
Total Troubled Debt Restructurings		15	$	31,008	$	30,684	$	27,232

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Additional Information Regarding Vested and Unvested Options Outstanding (Detail) (USD $)	6 Months Ended
	Jun. 30, 2013		Dec. 31, 2012	Jun. 30, 2012	Dec. 31, 2011
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Options outstanding, vested	980,789
Options outstanding, unvested	549,276		635,706
Options outstanding, weighted average exercise price	$ 6.84		$ 6.90	$ 6.74	$ 7.35
Options outstanding, weighted average remaining contractual life (years)	6 years 3 months 29 days
Options exercisable, shares	980,789	[1]		828,899
Options exercisable, weighted average exercise price	$ 7.52	[1]		$ 8.55
$2.97 - $5.99
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Option outstanding, exercise price, lower limit	$ 2.97
Option outstanding, exercise price, upper limit	$ 5.99
Options outstanding, vested	569,246
Options outstanding, unvested	233,876
Options outstanding, weighted average exercise price	$ 4.06
Options outstanding, weighted average remaining contractual life (years)	7 years 8 months 9 days
Options exercisable, shares	569,246	[1]
Options exercisable, weighted average exercise price	$ 3.90	[1]
$6.00 - $9.99
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Option outstanding, exercise price, lower limit	$ 6.00
Option outstanding, exercise price, upper limit	$ 9.99
Options outstanding, vested	11,100
Options outstanding, unvested	315,400
Options outstanding, weighted average exercise price	$ 6.53
Options outstanding, weighted average remaining contractual life (years)	9 years 4 months 6 days
Options exercisable, shares	11,100	[1]
Options exercisable, weighted average exercise price	$ 7.19	[1]
$10.00 - $12.99
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Option outstanding, exercise price, lower limit	$ 10.00
Option outstanding, exercise price, upper limit	$ 12.99
Options outstanding, vested	265,100
Options outstanding, weighted average exercise price	$ 11.21
Options outstanding, weighted average remaining contractual life (years)	7 months 17 days
Options exercisable, shares	265,100	[1]
Options exercisable, weighted average exercise price	$ 11.21	[1]
$13.00 - $17.99
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Option outstanding, exercise price, lower limit	$ 13.00
Option outstanding, exercise price, upper limit	$ 17.99
Options outstanding, vested	115,843
Options outstanding, weighted average exercise price	$ 15.12
Options outstanding, weighted average remaining contractual life (years)	2 years 1 month 17 days
Options exercisable, shares	115,843	[1]
Options exercisable, weighted average exercise price	$ 15.21	[1]
$18.00 - $18.84
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Option outstanding, exercise price, lower limit	$ 18.00
Option outstanding, exercise price, upper limit	$ 18.84
Options outstanding, vested	19,500
Options outstanding, weighted average exercise price	$ 18.06
Options outstanding, weighted average remaining contractual life (years)	2 years 7 months 2 days
Options exercisable, shares	19,500	[1]
Options exercisable, weighted average exercise price	$ 18.06	[1]

[1] The weighted average remaining contractual life of the options that were exercisable as of June 30, 2013 was 4.82 years.

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Fair Value Measurements - Additional Information (Detail) (Level 3)	6 Months Ended
	Jun. 30, 2013
Investment Securities Available for Sale
Fair Value Measurements, Recurring and Nonrecurring, Valuation Techniques [Line Items]
Fair value measurements, valuation technique	Discounted cash flow
Asset backed security
Fair Value Measurements, Recurring and Nonrecurring, Valuation Techniques [Line Items]
Fair value measurements, valuation technique	An option adjusted discounted cash flow model
Fair value inputs, discount rate	6.50%
Fair value inputs, constant default rate	2.00%
Fair value inputs, loss severity	90.00%
Mortgage Servicing Rights
Fair Value Measurements, Recurring and Nonrecurring, Valuation Techniques [Line Items]
Fair value measurements, valuation technique	Based upon market prices for similar instruments and an internal discounted cash flow model
Fair value inputs, discount rate	12.00%
Mortgage Servicing Rights | Minimum
Fair Value Measurements, Recurring and Nonrecurring, Valuation Techniques [Line Items]
Prepayment speeds	10.00%
Mortgage Servicing Rights | Maximum
Fair Value Measurements, Recurring and Nonrecurring, Valuation Techniques [Line Items]
Prepayment speeds	15.00%

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Unpaid Principal Balance of Mortgage Loans Held-for-Sale for Which Fair Value Option Elected by Type (Detail) (USD $) In Thousands, unless otherwise specified	Jun. 30, 2013	Dec. 31, 2012
Mortgage Loans on Real Estate [Line Items]
Mortgage loans held-for-sale at fair value	$ 10,672	$ 50,490
Government
Mortgage Loans on Real Estate [Line Items]
Mortgage loans held-for-sale at fair value	5,798	16,902
Conventional Mortgage Loan
Mortgage Loans on Real Estate [Line Items]
Mortgage loans held-for-sale at fair value	3,040	10,805
Jumbo
Mortgage Loans on Real Estate [Line Items]
Mortgage loans held-for-sale at fair value	1,757	20,514
Fair Value Adjustment
Mortgage Loans on Real Estate [Line Items]
Mortgage loans held-for-sale at fair value	$ 77	$ 2,269

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Stock-Based and Other Employee Compensation

6 Months Ended

Jun. 30, 2013

Disclosure Of Compensation Related Costs Sharebased Payments [Abstract]

Stock-Based and Other Employee Compensation

9. Stock-Based and Other Employee Compensation

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. At the 2013 Annual Shareholders Meeting, our shareholders approved an 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. As a result, as of June 30, 2013, the maximum number of shares that were available for the grant of options or other equity incentives under the 2010 Incentive Plan totaled 2,475,959 shares, or approximately 13% 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 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 restricted shares or any SARs.

Under 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, 2013 under the 2010 Plan were estimated as of their respective dates of grant using the Black-Scholes option-pricing model. For additional information regarding the Company’s stock based compensation plans, refer to Note 14—“Stock-Based Employee Compensation Plans” in the Notes to the Company’s Consolidated Financial Statements included in its Form 10-K for the year ended December 31, 2012.

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:	2013			2012			2013			2012
Expected volatility		43	%		40	%		43	%		40	%
Risk-free interest rate		1.77	%		1.54	%		1.77	%		1.54	%
Expected dividends		0.57	%		0.26	%		0.57	%		0.26	%
Expected term (years)		2.0–6.9			6.6–8.2			2.0–6.9			6.6–8.2
Weighted average fair value of options granted during period	$	1.91		$	1.54		$	1.91		$	1.54

The following table summarizes the stock option activity under the Company’s equity incentive plans during the six months ended June 30, 2013 and 2012, respectively.

	Number of Shares			Weighted- Average Exercise Price Per Share		Number of Shares			Weighted- Average Exercise Price Per Share
	2013					2012
Outstanding – January 1,		1,565,965		$	6.90		1,153,741		$	7.35
Granted		214,000			6.05		421,300			4.88
Exercised		(6,300	)		3.52		(5,328	)		3.16
Forfeited/Canceled		(243,600	)		6.60		(100,066	)		7.50
Outstanding – June 30,		1,530,065			6.84		1,469,847			6.74
Options Exercisable – June 30,		980,789		$	7.52		828,899		$	8.55

Options to purchase 6,100 shares and 200 shares of our common stock were exercised during the three and six months ended June 30, 2013, respectively. Options to purchase 128 and 5,328 shares of our common stock were exercised during the three and six months ended June 30, 2012, respectively. The fair values of options vested during the six months ended June 30, 2013 and 2012 were $270,629 and $158,300, respectively.

The following table provides additional information regarding the vested and unvested options that were outstanding at June 30, 2013.

	Options Outstanding as of June 30, 2013								Options Exercisable as of June 30, 2013 (1)
	Vested		Unvested		Weighted Average Exercise Price		Weighted Average Remaining Contractual Life (Years)		Shares		Weighted Average Exercise Price
$2.97 – $5.99		569,246		233,876	$	4.06		7.69		569,246	$	3.90
$6.00 – $9.99		11,100		315,400		6.53		9.35		11,100		7.19
$10.00 – $12.99		265,100		—		11.21		0.63		265,100		11.21
$13.00 – $17.99		115,843		—		15.12		2.13		115,843		15.21
$18.00 – $18.84		19,500		—		18.06		2.59		19,500		18.06
		980,789		549,276	$	6.84		6.33		980,789	$	7.52

⁽¹⁾  The weighted average remaining contractual life of the options that were exercisable as of June 30, 2013 was 4.82 years.

The aggregate intrinsic values of options that were outstanding and exercisable under the Company’s equity incentive plans at June 30, 2013 and 2012 were $1.1 million and $1.2 million, respectively.

A summary of the status of the unvested options at June 30, 2013, and changes in the number of shares subject to and in the weighted average grant date fair values of the unvested options during the six months ended June 30, 2013, are set forth in the following table.

	Number of Shares Subject to Options			Weighted Average Grant Date Fair Value
Unvested at December 31, 2012		635,706		$	2.30
Granted		214,000			1.91
Vested		(135,831	)		1.99
Forfeited/Cancelled		(164,599	)		2.56
Unvested at June 30, 2013		549,276		$	2.15

The aggregate amounts of stock based compensation expense recognized in our consolidated statements of operations for the six months ended June 30, 2013 and 2012, were $354,000 and $216,000, respectively, net of taxes. At June 30, 2013, the weighted average period over which unvested options were expected to be recognized was 1.15 years.

We expect that the compensation expense that will be recognized during the periods presented below in respect of unvested stock options outstanding at June 30, 2013, will be as follows:

	Estimated Stock Based Compensation Expense
(Dollars in thousands)
For the period and years ending December 31,
Remainder 2013	$	237
2014		458
2015		247
2016		32
2017		12
	$	986

In 1999, we established a Supplemental Retirement Plan (“SERP”) for our Chief Executive Officer, who retired from that position in April 2013. The components of net periodic benefit cost for the SERP are set forth in the table below:

	Three Months Ended June 30,				Six Months Ended June 30,
	2013		2012		2013		2012
	(Dollars in thousands)
Service cost	$	—	$	50	$	18	$	99
Interest cost		44		36		89		71
Expected return on plan assets		—		—		—		—
Amortization of prior service cost		—		4		1		8
Amortization of net actuarial loss		—		2		29		3
Net periodic SERP cost	$	44	$	92	$	137	$	181

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Mortgage Banking

6 Months Ended

Jun. 30, 2013

Text Block [Abstract]

Mortgage Banking

5. Mortgage Banking

Mortgage Loans Held for Sale (LHFS), at fair value

A summary of the unpaid principal balances of mortgage loans held-for-sale (“LHFS”) for which the fair value option has been elected, by type, is presented below:

(Dollars in thousands)	At June 30, 2013		At December 31, 2012
Government	$	5,798	$	16,902
Conventional		3,040		10,805
Jumbo		1,757		20,514
Fair value adjustment		77		2,269
Total mortgage loans held-for-sale at fair value	$	10,672	$	50,490

We did not have any delinquent or nonaccrual LHFS as of June 30, 2013.

Gains on LHFS for the six months ended June 30, 2013 and 2012 are as follows:

	Three Months Ended						Six Months Ended
(Dollars in thousands)	June 30, 2013			June 30, 2012			June 30, 2013			June 30, 2012
Gain on sale of mortgage loans	$	1,424		$	9,290		$	5,333		$	13,995
Net loan servicing		296			(13	)		494			(17	)
Unrealized gains (losses) from derivative financial statements		584			461			393			1,513
Realized gains (losses) derivative financial instruments		367			(255	)		519			(291	)
Mark-to-market (loss) gain on LHFS		(610	)		4,726			(2,192	)		6,418
Direct origination (expenses) fees, net		(964	)		(5,948	)		(1,943	)		(8,830	)
Provision for repurchases		(32	)		(411	)		(83	)		(438	)
Total gain on LHFS	$	1,065		$	7,850		$	2,521		$	12,350

Repurchase Reserves

We maintain reserves for possible repurchases that we may be required to make of certain of the mortgage loans which we sell due to deficiencies or defects that may be found to exist in such loans. The following table sets forth information, at June 30, 2013 and December 31, 2012, with respect to such reserves:

(Dollars in thousands)	At June 30, 2013		At December 31, 2012
Beginning balance	$	906	$	115
Provision for repurchases		83		791
Settlements		—		—
Total repurchases reserve	$	989	$	906

We did not repurchase any loans in the six months ended June 30, 2013 or six months ended June 30, 2012. We review the repurchase reserves throughout the year for adequacy.

Mortgage Servicing Rights

We sometimes retain mortgage servicing rights on mortgage loans that we sell. Such rights represent the net positive cash flows generated from the servicing of such mortgage loans and we recognize such rights as assets on our statements of financial condition based on their estimated fair values. We receive servicing fees, less any subservicing costs, on the unpaid principal balances of such mortgage loans. Those fees are collected from the monthly payments made by the mortgagors or from the proceeds of the sale or foreclosure and liquidation of the underlying real property collateralizing the loans. We also generally receive various mortgagor-contracted fees, such as late charges, collateral reconveyance charges and nonsufficient fund fees. In addition, we generally are entitled to retain interest earned on funds held pending remittance (or float) related to the collection of principal, interest, taxes and insurance payments on the mortgage loans which we service. At June 30, 2013 and December 31, 2012, mortgage servicing rights totaled $3.8 million and $2.8 million, respectively, and are included in other assets in the accompanying consolidated statement of financial condition.

The following table sets forth the principal amounts of the mortgage loans we were servicing, categorized by type of loan, at June 30, 2013 and December 31, 2012, we were servicing approximately $488 million, and $456 million, respectively, in principal amount of mortgage loans with the following characteristics:

	Unpaid Principal Balance
(Dollars in thousands)	At June 30, 2013		At December 31, 2012
Government	$	401,509	$	396,951
Conventional		86,401		58,867
Total loans serviced	$	487,910	$	455,818

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CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY (USD $) In Thousands, except Share data	Total	Series B and C Preferred Stock	Common Stock	Retained Earnings (Deficit)	Accumulated Other Comprehensive Loss
Beginning Balance at Dec. 31, 2012	$ 122,876	$ 10,027	$ 112,790	$ 624	$ (565)
Beginning Balance (in shares) at Dec. 31, 2012		125,000	16,677,000
Issuance of common Stock	15,000		15,000
Issuance of common Stock (in shares)			2,222,000
Common stock based compensation expense	355		355
Common stock options exercised	23		23
Common stock options exercised (in shares)	6,300		6,000
Net loss	(6,311)			(6,311)
Change in accumulated other comprehensive loss	(1,623)				(1,623)
Ending Balance at Jun. 30, 2013	$ 130,320	$ 10,027	$ 128,168	$ (5,687)	$ (2,188)
Ending Balance (in shares) at Jun. 30, 2013		125,000	18,905,000

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Loans on Nonaccrual Status by Portfolio Type (Detail) (USD $) In Thousands, unless otherwise specified	Jun. 30, 2013	Dec. 31, 2012
Financing Receivable, Recorded Investment, Past Due [Line Items]
Nonaccrual loans	$ 8,725	$ 17,655
Commercial loans
Financing Receivable, Recorded Investment, Past Due [Line Items]
Nonaccrual loans	3,595	6,846
Commercial real estate | Owner occupied
Financing Receivable, Recorded Investment, Past Due [Line Items]
Nonaccrual loans	1,811	3,232
Commercial real estate | All other
Financing Receivable, Recorded Investment, Past Due [Line Items]
Nonaccrual loans	2,117	6,424
Residential mortgage loans | Single-family
Financing Receivable, Recorded Investment, Past Due [Line Items]
Nonaccrual loans	788	839
Land development loans
Financing Receivable, Recorded Investment, Past Due [Line Items]
Nonaccrual loans	$ 414	$ 314

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Components of Loan Portfolio (Detail) (USD $) In Thousands, unless otherwise specified	Jun. 30, 2013	Mar. 31, 2013	Dec. 31, 2012	Jun. 30, 2012	Dec. 31, 2011
Accounts, Notes, Loans and Financing Receivable [Line Items]
Gross loans	$ 729,216		$ 730,599	$ 708,398
Deferred fee (income) costs, net	(275)		(461)
Percentage of loan portfolio	100.00%		100.00%
Allowance for loan losses	(11,123)	(11,018)	(10,881)	(14,648)	(15,627)
Loans, net	717,818		719,257
Commercial loans
Accounts, Notes, Loans and Financing Receivable [Line Items]
Gross loans	195,439		170,792	173,637
Percentage of loan portfolio	26.80%		23.40%
Allowance for loan losses	(6,953)	(6,850)	(6,340)	(8,408)	(8,908)
Consumer loans
Accounts, Notes, Loans and Financing Receivable [Line Items]
Gross loans	27,106		27,296
Percentage of loan portfolio	3.70%		3.70%
Commercial real estate | Owner occupied
Accounts, Notes, Loans and Financing Receivable [Line Items]
Gross loans	156,215		165,922
Percentage of loan portfolio	21.40%		22.70%
Commercial real estate | All other
Accounts, Notes, Loans and Financing Receivable [Line Items]
Gross loans	158,179		150,189
Percentage of loan portfolio	21.70%		20.60%
Residential mortgage loans | Multi-family
Accounts, Notes, Loans and Financing Receivable [Line Items]
Gross loans	97,383		105,119
Percentage of loan portfolio	13.40%		14.40%
Residential mortgage loans | Single-family
Accounts, Notes, Loans and Financing Receivable [Line Items]
Gross loans	75,241		87,263
Percentage of loan portfolio	10.30%		11.90%
Land development loans
Accounts, Notes, Loans and Financing Receivable [Line Items]
Gross loans	$ 19,653		$ 24,018
Percentage of loan portfolio	2.70%		3.30%

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Changes in Fair Value Related to Initial Measurement and Subsequent Changes in Fair Value Included in Earnings for Assets Measured at Fair Value, by Income Statement Line Item (Detail) (USD $) In Thousands, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2013	Jun. 30, 2012	Jun. 30, 2013	Jun. 30, 2012
Changes in fair value included in net income:
Mortgage banking noninterest income (loss)	$ (610)	$ 4,901	$ (2,192)	$ 6,352

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Components of Net Periodic Benefit Cost for SERP (Detail) (USD $) In Thousands, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2013	Jun. 30, 2012	Jun. 30, 2013	Jun. 30, 2012
Compensation And Retirement Disclosure [Abstract]
Service cost		$ 50	$ 18	$ 99
Interest cost	44	36	89	71
Expected return on plan assets
Amortization of prior service cost		4	1	8
Amortization of net actuarial loss		2	29	3
Net periodic SERP cost	$ 44	$ 92	$ 137	$ 181

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Stock-Based and Other Employee Compensation - Additional Information (Detail) (USD $)	3 Months Ended		6 Months Ended
	Jun. 30, 2013	Jun. 30, 2012	Jun. 30, 2013	Jun. 30, 2012
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Fair value of options vested			$ 270,629	$ 158,300
Share-based compensation arrangement by share-based payment award, options, exercises in period	6,100	128	6,300	5,328
Aggregate intrinsic values of options outstanding and exercisable	1.1	1.2	1.1	1.2
Aggregate amounts of stock based compensation expense, net of taxes			$ 354,000	$ 216,000
Unvested options, expected weighted average recognition period			1 year 1 month 24 days
Minimum
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
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
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Number of shares available for grant or awarding of equity incentives	400,000		400,000
Shares ceased to be issuable under Previously Approved Plans and become available for grant or awarding of equity incentives under current plan			800,000
Total shares available for grant or awarding of equity incentives			2,475,959
Percentage of total shares available for grant or awarding of equity incentives	13.00%		13.00%

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Significant Accounting Policies, Recent Accounting Pronouncements, Commitments and Contingencies (Policies)

6 Months Ended

Jun. 30, 2013

Accounting Policies [Abstract]

Use of Estimates

Use of Estimates

The preparation of 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 losses, the fair values of securities available for sale and mortgage loans held for sale, repurchase reserves on mortgage loans held for sale, and the determination of reserves 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.

Recently Adopted Accounting Pronouncements

Recently Adopted Accounting Pronouncements

In February 2013, the FASB issued Accounting Standards Update (“ASU”) 2013-02, “Reporting of Amounts Reclassified out of Accumulated Other Comprehensive Income”, ASU No. 2013-02, which requires an entity to report the effect of significant reclassifications out of accumulated other comprehensive income on the respective lines in the entity’s net income if the amount being reclassified is required under GAAP to be reclassified in its entirety to net income. The ASU is effective for fiscal years, and interim periods within those years, beginning after December 15, 2012. The adoption of ASU No. 2013-02 did not have a material impact on our consolidated financial condition or results of operations.

Commitments and Contingencies

Commitments and Contingencies

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, 2013, loan commitments and letters of credit totaled $118 million and $2 million, respectively. The contractual amount of a credit-related financial instrument such as a commitment to extend credit, a credit-card arrangement or a letter of credit represents the amounts 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.

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 credit worthiness of the customer. Collateral held varies, but may include accounts receivable, inventory, property, plant and equipment, real estate and income-producing commercial properties.

During the first quarter of 2012, we began selling a portion of our mortgage loan production directly to secondary market investors on a “mandatory commitment” basis, agreeing to sell a specified dollar amount of mortgage loans at an agreed-upon price within a specified timeframe in order to avail ourselves of more favorable pricing on mortgage loan sales to investors. In order to mitigate interest rate risk on loans subject to such mandatory commitments, when we locked the interest rate for the borrowers on those loans prior to funding, we locked the price to sell the loans to investors in a mandatory commitment and entered into a mortgage backed to-be-announced (“TBA”) security. The mandatory commitment and the TBA security act as a hedge against market interest rate movements between the time the interest rate is locked and the loan is funded and sold in the secondary market. TBA securities are deemed to be derivatives and involve off-balance sheet financial risk. The contractual or notional amounts of the TBA securities are tied to the Bank’s loan origination volume and we bear a financial risk from such securities. The unrealized gains from the interest rate contracts and TBA security hedges were $584,000 and $393,000 for the three and six months ended June 30, 2013, respectively. These gains or losses depend upon the value of the underlying financial instruments and are affected by market changes in interest rates.

TBA securities pose credit risk for us if and to the extent that the institutional counterparties are unable to meet the terms of the agreements. We control counterparty credit risk by using multiple counterparties and limiting them to major financial institutions with investment grade credit ratings. In addition, we regularly monitor the potential risk of loss with any one party resulting from this type of credit risk.

Legal Proceedings

Mark Zigner vs. Pacific Mercantile Bank, et al., filed in January, 2010, in the California Superior Court for the County of Orange (Case No.0337433). This lawsuit was filed by plaintiff asserting that a set-off by the Bank of funds in plaintiff’s deposit accounts in the Bank’s efforts to recover borrowings owed to it by plaintiff was wrongful.

As previously reported, at the conclusion of a jury trial in February 2012, the plaintiff was awarded $250,000 of compensatory damages and $950,000 in punitive damages against the Bank. In addition, the trial court entered an award to plaintiff of his attorney’s fees and costs, in the amount of $762,000. Promptly thereafter, the Bank filed an appeal of the trial court’s rulings and the jury verdict, asserting that those rulings and the jury’s verdict were erroneous.

Due to the inherent uncertainties with respect to the ultimate outcome of appeals and the opportunity to put an end to what was becoming a lengthy and costly appellate process, on May 13, 2013, we entered into a settlement with the plaintiff pursuant to which plaintiff released all claims that he had or might have had against the Bank in exchange for the payment by the Bank to plaintiff of $1,316,377, and to plaintiff’s lien claimant of $33,623, totaling $1,350,000, which was less than the contingency reserve previously established by the Bank for this suit. As a result, the settlement had no material effect on the Company’s results of operations for the three or the six months ended June 30, 2013.

Other Claims. We also are subject to legal actions that arise from time to time in the ordinary course of our business. Currently there are no such pending legal proceedings that we believe their resolution will be material to our financial condition or results of operations.

Regulatory Matters

On August 31, 2010, the Company and the Bank entered into a Written Agreement (the “FRBSF Agreement”) with FRBSF. On the same date, the Bank consented to the issuance of a regulatory order by the DFI (“DFI Order”). The principal purposes of the FRBSF Written Agreement and DFI Order, which constitute formal supervisory actions by the FRBSF and the DFI, were to require us to adopt and implement formal plans and take certain actions, as well as to continue to implement other measures that we previously adopted, to address the adverse consequences that the economic recession has had on the performance of our loan portfolio and our operating results, to improve our operating results, and to increase our capital to strengthen our ability to weather any further adverse economic conditions that might arise in the future.

The FRBSF Agreement and DFI Order contain substantially similar provisions. They required the Boards of Directors of the Company and the Bank to prepare and submit written plans to the FRBSF and the DFI to address the following matters: (i) strengthening board oversight of the management operations of the Bank; (ii) strengthening credit risk management practices; (iii) improving credit administration policies and procedures; (iv) improving the Bank’s position with respect to problem assets; (v) maintaining adequate reserves for loan losses in accordance with applicable supervisory guidelines; (vi) improving the capital position of the Bank and, in the case of the FRBSF Agreement, the capital position of the Company; (vii) improving the Bank’s earnings through the formulation, adoption and implementation of a new strategic plan, and (viii) submitting a satisfactory funding contingency plan for the Bank that would identify available sources of liquidity and a plan for dealing with possible future adverse economic and market conditions. The Bank is also prohibited from paying dividends to the Company without the prior approval of the DFI, and the Company may not declare or pay cash dividends, repurchase any of its shares, make payments on its trust preferred securities or incur or guarantee any debt, without the prior approval of the FRBSF.

The Company and the Bank already have made substantial progress with respect to several of these requirements, including a requirement, achieved in August 2011, that the Bank raise additional capital to increase its ratio of adjusted tangible shareholders’ equity to its tangible assets to 9.0%. Additionally, both the Board and management are committed to achieving all of the requirements on a timely basis. However, a failure by the Company or the Bank to meet any of those remaining requirements could be deemed, by the FRBSF or the DFI, to be conducting business in an unsafe manner which could subject the Company or the Bank to further regulatory enforcement action.

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Sale of Common Stock

6 Months Ended

Jun. 30, 2013

Equity [Abstract]

Sale of Common Stock

8. Sale of Common Stock

Effective as of March 30, 2013, we sold and issued a total of 2,222,222 shares of our common stock to Carpenter Community Bancfund L.P. and Carpenter Community Bancfund-A, L.P. (the “Carpenter Funds”), at a price of $6.75 per share in cash, generating gross proceeds to us of $15 million. The purchase price of $6.75 per share of common stock was equal to the Company’s tangible book value per share of common stock as of December 31, 2012, which exceeded the closing price per share of our common stock on NASDAQ on March 29, 2013. As a result of this sale of shares, the Carpenter Funds, which are the Company’s largest shareholder, own approximately 34% of our outstanding voting shares, as compared to the 28% which they had owned prior to this sale of shares.

The proceeds from the sale of those shares were contributed by the Company to capitalize a new wholly-owned asset management subsidiary, which has used those proceeds to fund the purchase of $15.8 million of nonperforming loans and foreclosed real properties from the Bank and is engaged in the business of collecting those nonperforming loans and disposing of the foreclosed properties.

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Computation of Basic and Diluted Earnings Per Share (Detail) (USD $) In Thousands, except Share data, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2013	Jun. 30, 2012	Jun. 30, 2013	Jun. 30, 2012
Schedule of Earnings Per Share, Basic and Diluted, by Common Class [Line Items]
Net (loss) income	$ (3,142)	$ 5,796	$ (6,311)	$ 7,178
Net (loss) income allocable to common shareholders (A)	(3,404)	5,562	(6,835)	6,710
Weighted average outstanding shares of common stock (B)	18,905,842	15,778,678	17,825,311	14,087,522
Dilutive effect of convertible preferred stock, employee stock options and warrants		199		118
Common stock and common stock equivalents (C)	18,905,842	15,977,939	17,825,311	14,205,583
(Loss) income per common share:
Basic (A/B)	$ (0.18)	$ 0.35	$ (0.38)	$ 0.48
Diluted (A/C)	$ (0.18)	$ 0.35	$ (0.38)	$ 0.47
Dividend Undeclared
Schedule of Earnings Per Share, Basic and Diluted, by Common Class [Line Items]
Accumulated undeclared dividends on preferred stock	$ (262)	$ (234)	$ (524)	$ (468)

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Mortgage Banking (Tables)

6 Months Ended

Jun. 30, 2013

Text Block [Abstract]

Summary of Unpaid Principal Balance of Mortgage Loans Held-for-Sale for Which Fair Value Option Elected by Type

A summary of the unpaid principal balances of mortgage loans held-for-sale (“LHFS”) for which the fair value option has been elected, by type, is presented below:

(Dollars in thousands)	At June 30, 2013		At December 31, 2012
Government	$	5,798	$	16,902
Conventional		3,040		10,805
Jumbo		1,757		20,514
Fair value adjustment		77		2,269
Total mortgage loans held-for-sale at fair value	$	10,672	$	50,490

Gain on Loan Held for Sale

Gains on LHFS for the six months ended June 30, 2013 and 2012 are as follows:

	Three Months Ended						Six Months Ended
(Dollars in thousands)	June 30, 2013			June 30, 2012			June 30, 2013			June 30, 2012
Gain on sale of mortgage loans	$	1,424		$	9,290		$	5,333		$	13,995
Net loan servicing		296			(13	)		494			(17	)
Unrealized gains (losses) from derivative financial statements		584			461			393			1,513
Realized gains (losses) derivative financial instruments		367			(255	)		519			(291	)
Mark-to-market (loss) gain on LHFS		(610	)		4,726			(2,192	)		6,418
Direct origination (expenses) fees, net		(964	)		(5,948	)		(1,943	)		(8,830	)
Provision for repurchases		(32	)		(411	)		(83	)		(438	)
Total gain on LHFS	$	1,065		$	7,850		$	2,521		$	12,350

Activity Related Repurchase Reserves For Previously Sold Loans

The following table sets forth information, at June 30, 2013 and December 31, 2012, with respect to such reserves:

(Dollars in thousands)	At June 30, 2013		At December 31, 2012
Beginning balance	$	906	$	115
Provision for repurchases		83		791
Settlements		—		—
Total repurchases reserve	$	989	$	906

Loans Held For Sale Unpaid Principal Balance

The following table sets forth the principal amounts of the mortgage loans we were servicing, categorized by type of loan, at June 30, 2013 and December 31, 2012, we were servicing approximately $488 million, and $456 million, respectively, in principal amount of mortgage loans with the following characteristics:

	Unpaid Principal Balance
(Dollars in thousands)	At June 30, 2013		At December 31, 2012
Government	$	401,509	$	396,951
Conventional		86,401		58,867
Total loans serviced	$	487,910	$	455,818

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Fair Value Measurements (Tables)

6 Months Ended

Jun. 30, 2013

Fair Value Disclosures [Abstract]

Assets and Liabilities Measured at Fair Value on Recurring Basis

The following tables shows the recorded amounts of assets and liabilities measured at fair value on a recurring basis at June 30, 2013 and December 31, 2012:

	At June 30, 2013
(Dollars in thousands)	Total			Level 1		Level 2			Level 3
Investment securities available for sale
Mortgage backed securities issued by U.S. agencies	$	62,634		$	—	$	62,634		$	—
Collateralized mortgage obligations issued by non-agency		2,308			—		2,308			—
Asset backed securities		775			—		—			775
Mutual funds		4,233			4,233		—			—
Total securities available for sale at fair value		69,950			4,233		64,942			775
Loans held for sale		10,672			—		10,672			—
Other assets – Mortgage servicing rights		3,823			—		—			3,823
Derivative assets – IRLC’s		81			—		—			81
Derivative assets – TBA securities		540			—		—			540
Total assets measured at fair value on a recurring basis	$	85,066		$	4,233	$	75,614		$	5,219
	At December 31, 2012
(Dollars in thousands)	Total			Level 1		Level 2			Level 3
Investment securities available for sale
Mortgage backed securities issued by U.S. agencies	$	78,446		$	—	$	78,446		$	—
Collateralized mortgage obligations issued by non agency		2,625			—		1,963			662
Asset back securities		900			—		—			900
Mutual funds		4,407			4,407		—			—
Total securities available for sale at fair value		86,378			4,407		80,409			1,562
Loans held for sale		55,809			—		55,809			—
Other assets – Mortgage servicing rights		2,801			—		—			2,801
Derivative assets – IRLC’s		580			—		—			580
Total assets measured at fair value on a recurring basis	$	145,568		$	4,407	$	136,218		$	4,943
Derivative liabilities – TBA securities	$	(158	)	$	—	$	(158	)	$	—
Total liabilities measured at fair value on a recurring basis	$	(158	)	$	—	$	(158	)	$	—

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

The changes in Level 3 assets measured at fair value on a recurring basis are summarized in the following table:

(Dollars in thousands)	Investment Securities Available for Sale
Balance of recurring Level 3 instruments at January 1, 2013	$	4,943
Total gains or losses (realized/unrealized):
Included in earnings-realized		—
Included in earnings-unrealized		—
Included in other comprehensive income		(1,413	)
Purchases		—
Sales		—
Issuances		—
Settlements		1,689
Transfers in and/or out of Level 3		—
Balance of Level 3 assets at June 30, 2013	$	5,219

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, 2013
(Dollars in thousands)	Total		Level 1		Level 2		Level 3
Assets at Fair Value:
Impaired loans	$	31,085	$	—	$	6,743	$	24,342
Loans held for sale		10,672		—		10,672		—
Other assets(1)		17,331		—		17,331		—
Total	$	59,088	$	—	$	34,746	$	24,342

⁽¹⁾  Includes foreclosed assets.

Estimated Fair Values and Amounts of Financial Instruments

The estimated fair values and related carrying amounts of all of the Company’s financial instruments are as follows:

	At June 30, 2013
(Dollars in thousands)	Total			Level 1			Level 2			Level 3
Cash and cash equivalents	$	89,362		$	89,362		$	—		$	—
Interest-bearing deposits with financial institutions		2,423			2,423			—			—
Federal Reserve Bank and Federal Home Loan Bank Stock		8,918			8,918			—			—
Investment securities available for sale:
Mortgage backed securities issued by U.S. agencies		62,634			—			62,634			—
Collateralized mortgage obligations issued by non-agency		2,308			—			2,308			—
Asset backed securities		775			—			—			775
Mutual funds		4,233			4,233			—			—
Loans held for sale		10,672			—			10,672			—
Loans, net		717,818			—			717,818			—
Other assets – Mortgage servicing rights		3,823			—			—			3,823
Derivative assets – IRLC’s		81			—			—			81
Derivative assets – TBA securities		540			—			540			—
Total assets measured at fair value on a recurring basis	$	903,587		$	104,936		$	793,972		$	4,679
Noninterest bearing deposits	$	(188,149	)	$	(188,149	)	$	—		$	—
Interest-bearing deposits		(560,831	)		(560,831	)		—			—
Borrowings		(45,000	)		(45,000	)		—			—
Junior subordinated debentures		(17,527	)		(17,527	)		—			—
Total liabilities measured at fair value on a recurring basis	$	(811,507	)	$	(811,507	)	$	—		$	—
	At December 31, 2012
(Dollars in thousands)	Total			Level 1			Level 2			Level 3
Cash and cash equivalents	$	128,208		$	128,208		$	—		$	—
Interest-bearing deposits with financial institutions		2,423			2,423			—			—
Federal Reserve Bank and Federal Home Loan Bank Stock		10,284			10,284			—			—
Investment securities available for sale:
Mortgage backed securities issued by U.S. agencies		78,446			—			78,446			—
Collateralized mortgage obligations issued by non agency		2,625			—			1,963			662
Asset back securities		900			—			—			900
Mutual funds		4,407			4,407			—			—
Loans held for sale		55,809			—			55,809			—
Loans, net		719,257			—			719,257			—
Other assets – Mortgage servicing rights		2,801			—			—			2,801
Derivative assets – IRLC’s		580			—			—			580
Total assets measured at fair value on a recurring basis	$	1,005,740		$	145,322		$	855,475		$	4,943
Noninterest bearing deposits	$	(170,259	)	$	(170,259	)	$	—		$	—
Interest-bearing deposits		(675,136	)		(675,136	)		—			—
Borrowings		(45,000	)		(45,000	)		—			—
Junior subordinated debentures		(17,527	)		(17,527	)		—			—
Derivative liabilities – TBA securities		(158	)		—			(158	)		—
Total liabilities measured at fair value on a recurring basis	$	(908,080	)	$	(907,922	)	$	(158	)	$	—

Differences Between Fair Value Carrying Amount of Loans Held for Sale Measured at Fair Value and Aggregate Unpaid Principal Amount Entitled to Receive at Maturity

Fair Value Option. The following table reflects the differences between the fair value carrying amount of LHFS measured at fair value under ASU 825 and the aggregate unpaid principal amount we are contractually entitled to receive at maturity.

	June 30, 2013
(Dollars in thousands)	Fair Value Carrying Amount		Aggregate Unpaid Principal		Fair Value Carrying Amount Less Aggregate Unpaid Principal
Loans held for sale reported at fair value:
Total loans	$	10,672	$	10,595	$	77
Nonaccrual loans		—		—		—
Loans 90 days or more past due and still accruing interest		—		—		—

Changes in Fair Value Related to Initial Measurement and Subsequent Changes in Fair Value Included in Earnings for Assets Measured at Fair Value, by Income Statement Line Item

The changes in fair value related to initial measurement and subsequent changes in fair value included in earnings for these assets measured at fair value are shown, by income statement line item, below.

Loans Held for Sale at Fair Value	Three Months Ended June 30,					Six Months Ended June 30,
(Dollars in thousands)	2013			2012		2013			2012
Changes in fair value included in net income:
Mortgage banking noninterest income (loss)	$	(610	)	$	4,901	$	(2,192	)	$	6,352

Derivative Assets and Liabilities

Information Regarding Derivative Financial Instruments. The following table includes information for the derivative assets and liabilities for the periods presented:

					Total Gains (Losses)
	Notional Balance				Three Months Ended June 30						Six Months Ended June 30
(Dollars in thousands)	June 30, 2013		June 30, 2012		2013			2012			2013			2012
Derivative assets – IRLC’s	$	8,712	$	80,836	$	(238	)	$	1,581		$	(427	)	$	2,600
Derivative liabilities – TBAs	$	15,500	$	132,719	$	628		$	(1,029	)	$	698		$	(1,005	)

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Document and Entity Information	6 Months Ended
	Jun. 30, 2013	Aug. 05, 2013
Document Document And Entity Information [Abstract]
Document Type	10-Q
Amendment Flag	false
Document Period End Date	Jun. 30, 2013
Document Fiscal Year Focus	2013
Document Fiscal Period Focus	Q2
Trading Symbol	PMBC
Entity Registrant Name	PACIFIC MERCANTILE BANCORP
Entity Central Index Key	0001109546
Current Fiscal Year End Date	--12-31
Entity Filer Category	Smaller Reporting Company
Entity Common Stock, Shares Outstanding		18,905,941

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Investment Securities Available For Sale (Tables)

6 Months Ended

Jun. 30, 2013

Investments Schedule [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, 2013 and December 31, 2012:

(Dollars in thousands)	Amortized Cost		Gross Unrealized Gain		Gross Unrealized Loss			Estimated Fair Value
Securities available for sale at June 30, 2013:
Mortgage backed securities issued by U.S. agencies(1)	$	64,883	$	22	$	(2,271	)	$	62,634
Collateralized mortgage obligations issued by non-agency(1)		2,309		60		(61	)		2,308
Asset backed securities(2)		2,247		—		(1,472	)		775
Mutual funds(3)		4,233		—		—			4,233
Total securities available for sale	$	73,672	$	82	$	(3,804	)	$	69,950
Securities available for sale at December 31, 2012:
Mortgage-backed securities issued by U.S. agencies(1)	$	78,053	$	553	$	(160	)	$	78,446
Collateralized mortgage obligations issued by non-agency(1)		2,599		87		(61	)		2,625
Asset backed securities(2)		2,247		—		(1,347	)		900
Mutual funds(3)		4,407		—		—			4,407
Total securities available for sale	$	87,306	$	640	$	(1,568	)	$	86,378

⁽¹⁾  Secured by closed-end first lien 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 Costs and Estimated Fair Values of Securities Available for Sale by Contractual Maturities and Historical Prepayments based on 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, 2013 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	$	11,443		$	32,600		$	17,803		$	11,826		$	73,672
Securities available for sale, estimated fair value		11,113			31,723			17,096			10,018			69,950
Weighted average yield		1.28	%		1.51	%		1.49	%		1.36	%		1.45	%
	At December 31, 2012 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	$	11,679		$	35,038		$	24,738		$	15,851		$	87,306
Securities available for sale, estimated fair value		11,788			35,264			24,747			14,579			86,378
Weighted average yield		1.59	%		1.62	%		1.62	%		1.43	%		1.58	%

Gross Unrealized Losses and Fair Values of Investments

The table below indicates, as of June 30, 2013, 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, 2013
	Less than 12 months					12 months or more					Total
Dollars in thousands	Fair Value		Unrealized Loss			Fair Value		Unrealized Loss			Fair Value		Unrealized Loss
Mortgage backed securities issued by U.S. agencies	$	61,183		(2,270	)		38		(1	)		61,221		(2,271	)
Collateralized mortgage obligations issued by non-agency		—		—			1,065		(61	)		1,065		(61	)
Asset backed securities		—		—			775		(1,472	)		775		(1,472	)
Total temporarily impaired securities	$	61,183	$	(2,270	)	$	1,878	$	(1,534	)	$	63,061	$	(3,804	)

OtherThanTemporaryImpairmentCreditLossesRecognizedInEarningsTableTextBlock

The table below presents a roll-forward of OTTI where a portion attributable to non-credit related factors was recognized in other comprehensive loss for the six months ended June 30, 2013:

(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, 2012	$	(1,995	)	$	(1,264	)	$	(731	)
Additions for credit losses on securities for which an OTTI was not previously recognized		(44	)		(44	)		—
Balance – March 31, 2013	$	(2,039	)	$	(1,308	)	$	(731	)
Additions for credit losses on securities for which an OTTI was not previously recognized		(105	)		(105	)		—
Balance – June 30, 2013	$	(2,144	)	$	(1,413	)	$	(731	)

Impairment Losses on Other-Than-Temporary Impairments Securities

Set forth below is additional information regarding impairment losses that we recognized in earnings for the six months ended June 30, 2013 and 2012:

Impairment Losses on OTTI Securities	For the Three Months Ended June 30,				For the Six Months Ended June 30,
(Dollars in thousands)	2013		2012		2013		2012
Asset backed securities	$	0	$	—	$	0	$	77
Total impairment loss recognized in earnings	$	0	$	—	$	0	$	77

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Stock Option Activity under Plans (Detail) (USD $)	3 Months Ended			6 Months Ended
	Jun. 30, 2013		Jun. 30, 2012	Jun. 30, 2013		Jun. 30, 2012
Number of Shares
Outstanding, beginning of period				1,565,965		1,153,741
Granted				214,000		421,300
Exercised	(6,100)		(128)	(6,300)		(5,328)
Forfeited/Canceled				(243,600)		(100,066)
Outstanding, end of period	1,530,065		1,469,847	1,530,065		1,469,847
Option Exercisable, end of period	980,789	[1]	828,899	980,789	[1]	828,899
Weighted Average Exercise Price Per Share
Weighted Average Exercise Price, beginning of period				$ 6.90		$ 7.35
Granted				$ 6.05		$ 4.88
Exercised				$ 3.52		$ 3.16
Forfeited/Canceled				$ 6.60		$ 7.50
Weighted Average Exercise Price, end of period	$ 6.84		$ 6.74	$ 6.84		$ 6.74
Options Exercisable, end of period	$ 7.52	[1]	$ 8.55	$ 7.52	[1]	$ 8.55

[1] The weighted average remaining contractual life of the options that were exercisable as of June 30, 2013 was 4.82 years.

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Weighted Average Assumptions used to Determine Fair Values of Options Granted (Detail) (USD $)	3 Months Ended		6 Months Ended
	Jun. 30, 2013	Jun. 30, 2012	Jun. 30, 2013	Jun. 30, 2012
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Expected volatility	43.00%	40.00%	43.00%	40.00%
Risk-free interest rate	1.77%	1.54%	1.77%	1.54%
Expected dividends	0.57%	0.26%	0.57%	0.26%
Weighted average fair value of options granted during period	$ 1.91	$ 1.54	$ 1.91	$ 1.54
Minimum
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Expected term (years)	2 years	6 years 7 months 6 days	2 years	6 years 7 months 6 days
Maximum
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Expected term (years)	6 years 10 months 24 days	8 years 2 months 12 days	6 years 10 months 24 days	8 years 2 months 12 days