10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

x Quarterly Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

for the Quarterly Period Ended June 30, 2015

or

¨ 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 No. 333-183118

FIRST PRIORITY FINANCIAL CORP.

Pennsylvania	20-8420347
(State or other jurisdiction of incorporation)	(I.R.S. Employer Identification No.)
2 West Liberty Boulevard, Suite 104 Malvern, Pennsylvania	19355
(Address of principal executive offices)	(Zip Code)

Registrant’s telephone number, including area code: (877) 533-4420

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 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and has been subject to such filing requirements for the past 90 days.    Yes  x    No   ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T 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, or a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer”, “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

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

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

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

Title of Each Class	Number of Shares Outstanding as of August 10, 2015
Common Stock, $1.00 Par Value	6,492,369 Outstanding Shares

TABLE OF CONTENTS

		Page
PART I—FINANCIAL INFORMATION
Item 1.	Financial Statements (Unaudited)	2
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	32
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	54
Item 4.	Controls and Procedures	54
PART II—OTHER INFORMATION		55
Item 1.	Legal Proceedings	55
Item 1A.	Risk Factors	55
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	55
Item 3.	Defaults Upon Senior Securities	55
Item 4.	Mine Safety Disclosures	55
Item 5.	Other Information	55
Item 6.	Exhibits	56

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains forward-looking statements, and as such, statements containing the words “believes,” “expects,” “anticipates,” “estimates,” “plans,” “projects,” “predicts,” “intends,” “seeks,” “will,” “may,” “should,” “would,” “continues,” “hope” and similar expressions, or the negative of these terms, constitute forward-looking statements that involve risks and uncertainties. Such statements are based on current expectations and are subject to risks, uncertainties and changes in condition, significance, value, and effect. Such risks, uncertainties and changes in condition, significance, value and effect could cause First Priority Financial Corp.’s actual results to differ materially from those anticipated.

Although the Company believes its plans, intentions, and expectations as reflected in or suggested by these forward-looking statements are reasonable, it can give no assurance that its plans, intentions, or expectations will be achieved. Accordingly, you should not place undue reliance on them. Listed below, and discussed elsewhere, are some important risks, uncertainties, and contingencies that could cause actual results, performances, or achievements to be materially different from the forward-looking statements made in this document. These factors, risks, uncertainties, and contingencies include, but are not limited to, the following:

· the strength of the United States economy in general and the strength of the regional and local economies in which First Priority conducts operations;

· the effects of changing economic conditions in First Priority’s market areas and nationally;

· the effects of, and changes in, trade, monetary, and fiscal policies and laws, including interest rate policies of the Board of Governors of the Federal Reserve System;

· changes in federal and state banking, insurance, and investment laws and regulations which could impact First Priority’s operations;

· inflation, interest rate, market, and monetary fluctuations;

· First Priority’s timely development of competitive new products and services in a changing environment and the acceptance of such products and services by customers;

· the impact of changes in financial services policies, laws, and regulations, including laws, regulations, policies, and practices concerning taxes, banking, capital, liquidity, proper accounting treatment, securities, and insurance, and the application thereof by regulatory bodies and the impact of changes in and interpretations of generally accepted accounting principles;

· the occurrence of adverse changes in the securities markets;

· the effects of changes in technology or in consumer spending and savings habits;

· terrorist attacks in the United States or upon United States interests abroad, or armed conflicts involving the United States military;

· regulatory or judicial proceedings;

· changes in asset quality;

· First Priority’s success in managing the risks involved in the foregoing.

The effects of these factors are difficult to predict. New factors emerge from time to time, and we are not able to assess the impact of any such factor on the business or the extent to which any factor, or combination of factors, may cause results to differ materially from those contained in any forward-looking statement. Any forward-looking statements speak only as of the date of this document.

Because these forward-looking statements are subject to assumptions and uncertainties, actual results may differ materially from those expressed or implied by these forward-looking statements. You are cautioned not to place undue reliance on these statements, which speak only as of the date of this quarterly report or the date of any document incorporated by reference in this quarterly report.

1

PART I

Item 1.  Financial Statements.

First Priority Financial Corp.

Consolidated Balance Sheets

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

	June 30, 2015			December 31, 2014
Assets
Cash and due from banks	$	4,895		$	5,038
Interest-bearing deposits in banks		13,188			2,828
Total cash and cash equivalents		18,083			7,866
Securities available for sale, at fair value (amortized cost: $61,769 and $75,643,    respectively)		61,593			75,557
Securities held to maturity, at amortized cost (fair value: $15,780 and $16,544,    respectively)		15,682			15,956
Loans receivable		391,319			375,222
Less: allowance for loan losses		2,566			2,313
Net loans		388,753			372,909
Restricted investments in bank stocks		3,347			2,984
Premises and equipment, net		2,234			2,369
Bank owned life insurance		3,135			3,093
Accrued interest receivable		1,601			1,511
Other real estate owned		1,169			1,257
Deferred tax asset, net		4,158			4,541
Goodwill		2,725			2,725
Intangible assets with finite lives, net		353			397
Other assets		1,112			1,146
Total Assets	$	503,945		$	492,311
Liabilities and Shareholders’ Equity
Liabilities
Deposits:
Non-interest bearing	$	48,229		$	49,462
Interest-bearing		329,237			328,747
Total deposits		377,466			378,209
Short-term borrowings		63,208			51,472
Long-term debt		11,000			11,000
Accrued interest payable		346			356
Other liabilities		1,134			1,063
Total Liabilities		453,154			442,100
Commitments and contingencies		—			—
Shareholders’ Equity
Preferred stock, $100 par value; authorized 10,000,000 shares; liquidation value: $1,000 per share:
Series A: 9%; 4,579 shares issued and outstanding; liquidation value: $4,579		4,579			4,579
Series B: 9%; 229 shares issued and outstanding; liquidation value: $229		229			229
Series C: 9%; 4,596 shares issued and outstanding; liquidation value: $4,596		4,596			4,596
Common stock, $1 par value; authorized 10,000,000 shares; issued and outstanding:    2015: 6,452,669; 2014: 6,447,019		6,453			6,447
Surplus		40,173			40,045
Accumulated deficit		(5,160	)		(5,679	)
Accumulated other comprehensive loss		(79	)		(6	)
Total Shareholders’ Equity		50,791			50,211
Total Liabilities and Shareholders’ Equity	$	503,945		$	492,311

See notes to unaudited consolidated financial statements.

2

First Priority Financial Corp.

Consolidated Statements of Operations

(Unaudited, in thousands, except per share data)

	For the three months ended June 30,				For the six months ended June 30,
	2015		2014		2015		2014
Interest Income
Loans receivable, including fees	$	4,302	$	4,260	$	8,489	$	8,321
Securities—taxable		372		368		720		728
Securities—exempt from federal taxes		63		27		88		54
Interest bearing deposits and other		24		31		118		57
Total Interest Income		4,761		4,686		9,415		9,160
Interest Expense
Deposits		718		644		1,444		1,320
Short-term borrowings		33		24		49		36
Long-term debt		25		25		49		49
Total Interest Expense		776		693		1,542		1,405
Net Interest Income		3,985		3,993		7,873		7,755
Provision for Loan Losses		130		255		250		360
Net Interest Income after Provision for Loan    Losses		3,855		3,738		7,623		7,395
Non-Interest Income
Wealth management fee income		174		104		264		227
Bank owned life insurance income		21		25		42		42
Other		91		87		186		166
Total Non-Interest Income		286		216		492		435
Non-Interest Expenses
Salaries and employee benefits		1,912		1,743		3,764		3,465
Occupancy and equipment		514		542		1,059		1,107
Data processing equipment and operations		218		208		438		440
Professional fees		163		209		344		426
Marketing, advertising, and business development		52		113		82		143
FDIC insurance assessments		87		80		176		156
Pennsylvania bank shares tax expense		94		80		187		158
Other real estate owned		88		45		147		87
Other		298		330		581		634
Total Non-Interest Expenses		3,426		3,350		6,778		6,616
Income before Income Tax Expense		715		604		1,337		1,214
Federal Income Tax Expense		236		7		441		16
Net Income	$	479	$	597	$	896	$	1,198
Preferred dividends, including net amortization		211		121		377		248
Income to Common Shareholders	$	268	$	476	$	519	$	950
Income per common share:
Basic	$	0.04	$	0.07	$	0.08	$	0.15
Diluted	$	0.04	$	0.07	$	0.08	$	0.15
Weighted average common shares outstanding
Basic		6,446		6,439		6,446		6,439
Diluted		6,506		6,439		6,500		6,439

See notes to unaudited consolidated financial statements.

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First Priority Financial Corp.

Consolidated Statements of Comprehensive Income

(Unaudited, in thousands)

	For the three months ended June 30,						For the six months ended June 30,
	2015			2014			2015			2014
Net income	$	479		$	597		$	896		$	1,198
Other comprehensive income:
Securities available for sale:
Change in unrealized (loss) gain on securities available for sale		(484	)		490			(90	)		1,266
Tax effect		164			-			30			-
Net unrealized (losses) gains arising during the period		(320	)		490			(60	)		1,266
Net unrealized holding losses on securities transferred    between available for sale and held to maturity:
Reclassification adjustment for net unrealized holding    losses on securities transferred		—			—			—			(137	)
Amortization of net unrealized holding losses to    income		(7	)		(11	)		(20	)		(25	)
Tax effect		3			-			7			-
Net unrealized holding losses on securities    transferred		(4	)		(11	)		(13	)		(162	)
Total other comprehensive (loss) income		(324	)		479			(73	)		1,104
Total comprehensive income	$	155		$	1,076		$	823		$	2,302

See notes to unaudited consolidated financial statements.

4

First Priority Financial Corp.

Consolidated Statements of Shareholders’ Equity

For the Six Months Ended June 30, 2015 and 2014

(Unaudited, dollars in thousands)

	Preferred Stock		Common Stock			Surplus			Accumulated Deficit			Accumulated Other Comprehensive Loss			Total
Balance – December 31, 2013	$	9,395	$	6,439		$	39,780		$	(12,025	)	$	(1,197	)	$	42,392
Preferred stock dividends		—		—			—			(240	)		—			(240	)
Net amortization on preferred stock		8		—			—			(8	)		—			—
Forfeiture of 225 shares of restricted common stock		—		—			—			—			—			—
Net Income		—		—			—			1,198			—			1,198
Other comprehensive income		—		—			—			—			1,104			1,104
Stock based compensation expense		—		—			127			—			—			127
Balance—June 30, 2014	$	9,403	$	6,439		$	39,907		$	(11,075	)	$	(93	)	$	44,581
Balance – December 31, 2014	$	9,404	$	6,447		$	40,045		$	(5,679	)	$	(6	)	$	50,211
Preferred stock dividends		—		—			—			(377	)		—			(377	)
Issuance of 11,000 shares of restricted common stock		—		11			(11	)		—			—			—
Forfeiture of 5,350 shares of restricted common stock		—		(5	)		5			—			—			—
Net income		—		—			—			896			—			896
Other comprehensive loss		—		—			—			—			(73	)		(73	)
Stock based compensation expense		—		—			134			—			—			134
Balance—June 30, 2015	$	9,404	$	6,453		$	40,173		$	(5,160	)	$	(79	)	$	50,791

See notes to unaudited consolidated financial statements.

5

First Priority Financial Corp.

Consolidated Statements of Cash Flows

(Unaudited, dollars in thousands)

	For the six months ended June 30,
	2015			2014
Cash Flows from Operating Activities
Net income	$	896		$	1,198
Adjustments to reconcile net income to net cash provided by operating activities:
Provision for loan losses		250			360
Provision for other real estate owned		137			—
Depreciation and amortization		215			229
Net amortization (accretion) of discount securities		112			(189	)
Stock based compensation expense		134			127
Net gain on sale of other real estate		(88	)		(16	)
Net (gain) loss on disposal of premises and equipment		5			(7	)
Bank owned life insurance policy income		(42	)		(42	)
Originations of loans held for sale		(1,196	)		(350	)
Proceeds from sale of loans held for sale		1,196			150
Deferred tax asset, net		383			—
(Increase) decrease in accrued interest receivable		(90	)		19
Increase in other assets		(9	)		(37	)
Decrease in accrued interest payable		(9	)		(38	)
Increase (decrease) in other liabilities		76			(263	)
Net Cash Provided by Operating Activities		1,970			1,141
Cash Flows from Investing Activities
Net originations in loans		(16,383	)		(12,345	)
Purchase of loans		—			(15,639	)
Purchases of securities available for sale		(19,839	)		(7,336	)
Redemption of restricted stock		(363	)		(519	)
Proceeds from maturities or calls of securities available for sale		33,862			31,254
Proceeds from the sale of other real estate owned and repossessed assets		313			763
Purchases of premises and equipment		(81	)		(118	)
Proceeds from the sale of premises and equipment		4			-
Net purchase of bank owned life insurance		—			(3,000	)
Net Cash Used in Investing Activities		(2,487	)		(6,940	)
Cash Flows from Financing Activities
Net decrease in deposits		(633	)		(3,510	)
Net increase in short-term borrowings		11,737			12,617
Cash dividends paid on preferred stock		(370	)		(240	)
Net Cash Provided by Financing Activities		10,734			8,867
Net Increase in Cash and Cash Equivalents		10,217			3,068
Cash and Cash Equivalents—Beginning		7,866			11,248
Cash and Cash Equivalents—Ending	$	18,083		$	14,316
Supplementary Disclosures of Cash Flows Information
Noncash activity:
Transfer of available for sale securities to held to maturity securities	$	—		$	3,840
Transfer of loans receivable to other real estate owned	$	232			694
Cash paid for interest on deposits and borrowings	$	1,662		$	1,631
Cash paid for income taxes	$	20		$	—

See notes to unaudited consolidated financial statements.

6

First Priority Financial Corp.

Notes to Unaudited Consolidated Financial Statements

Note 1—Summary of Significant Accounting Policies

Organization and Nature of Operations

First Priority Financial Corp.

First Priority Financial Corp. (“First Priority,” the “Company”) is a bank holding company incorporated under the laws of the Commonwealth of Pennsylvania on February 13, 2007. On May 11, 2007, as a result of a reorganization and merger, First Priority Bank (the “Bank”) became a wholly-owned subsidiary of First Priority.  First Priority, primarily through the Bank, serves residents and businesses in the Delaware Valley with branches in Berks, Bucks, Chester and Montgomery counties in Pennsylvania.  The Bank, which has 9 retail branch office locations as of June 30, 2015, is a locally managed community bank providing commercial banking products, primarily loans and deposits, headquartered in Malvern, PA.

First Priority provides banking services through First Priority Bank and does not engage in any activities other than banking and related activities. As of June 30, 2015, First Priority had total assets of $503.9 million and total shareholders’ equity of $50.8 million.

First Priority Bank

First Priority Bank is a state-chartered commercial banking institution which was incorporated under the laws of the Commonwealth of Pennsylvania on May 25, 2005. First Priority Bank’s deposits are insured by the FDIC up to the maximum amount permitted for all banks. As of June 30, 2015, First Priority Bank had total assets of $503.6 million, total loans of $391.3 million, total deposits of $378.1 million and total shareholder’s equity of $50.0 million.

First Priority Bank engages in a full service commercial and consumer banking business with strong private banking and individual wealth management services. First Priority Bank offers a variety of consumer, private banking and commercial loans, mortgage products and commercial real estate financing. The Company’s operations are significantly affected by prevailing economic conditions, competition, and the monetary, fiscal, and regulatory policies of governmental agencies. Lending activities are influenced by a number of factors, including the general credit needs of individuals and small and medium-sized businesses in the Company’s market area, competition, the current regulatory environment, the level of interest rates, and the availability of funds. Deposit flows and costs of funds are influenced by prevailing market rates of interest, competition, account maturities, and the level of personal income and savings in the market area.

First Priority Bank also offers certain financial planning and investment management services. These investment services are provided by First Priority Financial Services, a Division of First Priority Bank, through an agreement with a third party provider. In addition, various life insurance products are offered through First Priority Bank, and the Bank has also entered into solicitation agreements with several investment advisors to provide portfolio management services to customers of the Bank.

First Priority Bank currently seeks deposits and commercial and private banking relationships through its nine banking offices. The Bank provides deposit products that include checking, money market and savings accounts, and certificates of deposit as well as other deposit services, including cash management and electronic banking products and online account opening capabilities. The Bank obtains funding in the local community by providing excellent service and competitive rates to its customers and utilizes electronic and print media advertising to attract current and potential deposit customers. The Bank also uses brokered certificates of deposit as a cost effective funding alternative.

Basis of Presentation

The accompanying unaudited consolidated financial statements consist of the Company and the Company’s wholly owned consolidated subsidiary, the Bank.  All significant intercompany accounts and transactions have been eliminated in consolidation.

These statements are prepared in accordance with instructions to Form 10-Q, and therefore, do not include information or all footnotes necessary for a complete presentation of financial position, results of operations and cash flows in conformity with accounting principles generally accepted in the United States (“GAAP”). However, all normal recurring adjustments that, in the opinion of management, are necessary for a fair presentation of these financial statements have been included. These financial statements should be read in conjunction with the audited consolidated financial statements and the notes thereto for First Priority Financial Corp. for the year ended December 31, 2014, included in the Company’s Form 10-K filed with the Securities and Exchange Commission on

7

March 27, 2015. The results of interim periods presented are not necessarily indicative of the results that may be expected for the year ending December 31, 2015.  

Subsequent Events

The Company has evaluated subsequent events for potential recognition and/or disclosure through the date these unaudited consolidated financial statements were issued.

Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Material estimates that are particularly susceptible to significant change in the near term relate to the determination of the allowance for loan losses, stock-based compensation, impairment of goodwill, impairment of investments, the valuation of deferred tax assets and the valuation of other real estate owned.

Acquired Loans

Acquired loans are initially recorded at their acquisition date fair values. The carryover of allowance for loan losses is prohibited as any credit losses in the loans are included in the determination of the fair value of the loans at the acquisition date. Fair values for acquired loans are based on a discounted cash flow methodology that involves assumptions and judgments as to credit risk, prepayment risk, liquidity risk, default rates, loss severity, payment speeds, collateral values and discount rate.

Acquired loans that have evidence of deterioration in credit quality since origination and for which it is probable, at acquisition, that the Company will be unable to collect all contractually required payments are accounted for as impaired loans under ASC 310-30. The excess of cash flows expected at acquisition over the estimated fair value is referred to as the accretable discount and is recognized into interest income over the remaining life of the loans. The difference between contractually required payments at acquisition and the cash flows expected to be collected at acquisition is referred to as the non-accretable discount. The non-accretable discount represents estimated future credit losses expected to be incurred over the life of the loan. Subsequent decreases to the expected cash flows require the Company to evaluate the need for an allowance for loan losses on these loans. Subsequent improvements in expected cash flows result in the reversal of a corresponding amount of the non-accretable discount which the Company then reclassifies as an accretable discount that is recognized into interest income over the remaining life of the loans using the interest method.

Acquired loans that met the criteria for non-accrual of interest prior to acquisition may be considered performing upon acquisition, or in the future, regardless of whether the customer is contractually delinquent, if the Company can reasonably estimate the timing and amount of the expected cash flows on such loans and if the Company expects to fully collect the new carrying value of the loans. As such, the Company may no longer consider the loan to be non-accrual or non-performing and may accrue interest on these loans, including the impact of any accretable discount. For acquired loans that are not deemed impaired at acquisition, credit discounts representing the principal losses expected over the life of the loan are a component of the initial fair value and amortized over the life of the asset. Subsequent to the acquisition date, the methods utilized to estimate the required allowance for loan losses for these loans is similar to originated loans, however, the Company records a provision for loan losses only when the required allowance exceeds any remaining pooled discounts for loans evaluated collectively for impairment.

Allowance for Loan Losses

The allowance for credit losses consists of the allowance for loan losses and the reserve for unfunded lending commitments. The allowance for loan losses represents management’s estimate of losses inherent in the loan portfolio as of the balance sheet date and is recorded as a reduction to loans. The reserve for unfunded lending commitments, totaling $35 thousand as of both June 30, 2015 and December 31, 2014, represents management’s estimate of losses inherent in its unfunded loan commitments and is recorded in other liabilities on the consolidated balance sheet. The allowance for loan losses is increased by the provision for loan losses, and decreased by charge-offs, net of recoveries. Loans deemed to be uncollectible are charged against the allowance for loan losses, and subsequent recoveries, if any, are credited to the allowance. All, or part, of the principal balance of loans receivable are charged off to the allowance as soon as it is determined that the repayment of all, or part, of the principal balance is highly unlikely. Because all identified losses are immediately charged off, no portion of the allowance for loan losses is restricted to any individual loan or groups of loans, and the entire allowance is available to absorb any and all loan losses.

The allowance for loan losses is maintained at a level considered adequate to provide for losses that can be reasonably anticipated. Management performs a quarterly evaluation of the adequacy of the allowance. The allowance is based on the Company’s past loan loss experience, known and inherent risks in the portfolio, adverse situations that may affect the borrower’s ability to repay, the estimated value of any underlying collateral, composition of the loan portfolio, current economic conditions and other relevant factors.

8

This evaluation is inherently subjective as it requires material estimates that may be susceptible to significant revision as more information becomes available.

The allowance consists of specific, general and unallocated components. The specific component relates to loans that are classified as impaired. For loans that are classified as impaired, an allowance is established when the discounted cash flows (or collateral value or observable market price) of the impaired loan is lower than the carrying value of that loan. The general component covers pools of loans by loan class including commercial loans not considered impaired, as well as smaller balance homogeneous loans, such as residential real estate, home equity and other consumer loans. These pools of loans are evaluated for loss exposure based upon historical loss rates for each of these categories of loans, adjusted for qualitative factors. These qualitative risk factors include:

1. Lending policies and procedures, including underwriting standards and collection, charge-off, and recovery practices.

2. National, regional, and local economic and business conditions as well as the condition of various market segments, including the value of underlying collateral for collateral dependent loans.

3. Nature and volume of the portfolio and terms of loans.

4. Management team with experience, depth, and knowledge in banking and in many areas of lending. Each contributes to the sound credit culture and control within the Company.

5. Volume and severity of past due, classified and nonaccrual loans as well as other loan modifications.

6. The Company engages a third party to perform an independent review of the loan portfolio as a measure for quality and consistency in credit evaluation and credit decisions.

7. Existence and effect of any concentrations of credit and changes in the level of such concentrations.

8. Effect of external factors, such as competition and legal and regulatory requirements.

Each factor is assigned a value to reflect improving, stable or declining conditions based on management’s best judgment using relevant information available at the time of the evaluation. Adjustments to the factors are supported through documentation of changes in conditions in a narrative accompanying the allowance for loan loss calculation.

A majority of the Company’s loans are to business owners of many types. The Company makes commercial loans for real estate development and other business purposes required by our customers.

The Company’s credit policies determine advance rates against the different forms of collateral that can be pledged against commercial loans. Typically, the majority of loans will be limited to a percentage of their underlying collateral values such as real estate values, equipment, eligible accounts receivable and inventory. Individual loan advance rates may be higher or lower depending upon the financial strength of the borrower and/or term of the loan. The assets financed through commercial loans are used within the business for its ongoing operation. Repayment of these kinds of loans generally comes from the cash flow of the business or the ongoing conversions of assets. Commercial real estate loans include long-term loans financing commercial properties. Repayment of this kind of loan is dependent upon either the ongoing cash flow of the borrowing entity or the resale of or lease of the subject property. Commercial real estate loans typically require a loan to value ratio of not greater than 80% and vary in terms.

Residential mortgages and home equity loans are secured by the borrower’s residential real estate in either a first or second lien position. Residential mortgages and home equity loans have varying loan rates depending on the financial condition of the borrower and the loan to value ratio. Residential mortgages have amortizations up to 30 years and home equity loans have maturities of no more than 15 years.  Residential mortgages and home equity loans typically require a loan to value ratio of not greater than 80%.

Other consumer loans include installment loans, car loans, and overdraft lines of credit. The majority of these loans are secured.

An unallocated component is maintained to cover uncertainties that could affect management’s estimate of probable losses. The unallocated component of the allowance reflects the margin of imprecision inherent in the underlying assumptions used in the methodologies for estimating specific and general losses in the portfolio.

A loan is considered impaired when, based on current information and events, it is probable that the Company will be unable to collect the scheduled payments of principal or interest when due according to the contractual terms of the loan agreement. Factors considered by management in determining impairment include payment status, collateral value and the probability of collecting scheduled principal and interest payments when due. Loans that experience insignificant payment delays and payment shortfalls generally are not classified as impaired. Management determines the significance of payment delays and payment shortfalls on a case by case basis,

9

taking into consideration all of the circumstances surrounding the loan and the borrower, including the length of the delay, the reasons for the delay, the borrower’s prior payment record and the amount of the shortfall in relation to the principal and interest owed.

Impairment is measured on a loan by loan basis for commercial and industrial loans, commercial real estate loans and commercial construction loans by 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.

An allowance for loan losses is established for an impaired loan if its carrying value exceeds its estimated fair value. The estimated fair values of substantially all of the Company’s impaired loans are measured based on the estimated fair value of the loan’s collateral.

For commercial loans secured by real estate, estimated fair values are determined primarily through third-party appraisals. When a real estate secured loan becomes impaired, a decision is made regarding whether an updated certified appraisal of the real estate is necessary. This decision is based on various considerations, including the age of the most recent appraisal, the loan-to-value ratio based on the original appraisal and the condition of the property. Appraised values may be discounted to arrive at the estimated selling price of the collateral, which is considered to be the estimated fair value. The discounts also include estimated costs to sell the property.

For commercial and industrial loans secured by non-real estate collateral, such as accounts receivable, inventory and equipment, estimated fair values are determined based on the borrower’s financial statements, inventory reports, accounts receivable aging or equipment appraisals or invoices. Indications of value from these sources are generally discounted based on the age of the financial information or the quality of the assets.

Large groups of smaller balance homogeneous loans are collectively evaluated for impairment. Accordingly, the Company does not separately identify individual residential mortgage loans, home equity loans and other consumer loans for impairment disclosures, unless such loans are the subject of a troubled debt restructuring agreement.

Acquired loans are recorded at acquisition date at their acquisition date fair values, and therefore, are excluded from the calculation of loan loss reserves as of the acquisition date. To the extent there is a decrease in the present value of cash flows expected from the acquired impaired loans after the date of acquisition, the Company records a provision for loan losses. During the three and six months ended June 30, 2015, the Company recorded a provision for loan losses totaling $23 thousand and $65 thousand, respectively, for acquired impaired loans. During the three and six months ended June 30, 2014, the Company recorded a provision for loan losses totaling $130 thousand $250 thousand, respectively, for acquired impaired loans.

For acquired loans that are not deemed impaired at acquisition, credit discounts representing principal losses expected over the life of the loan are a component of the initial fair value. Subsequent to the acquisition date, the methods used to estimate the required allowance for loan losses for these loans is similar to originated loans, however, the Company records a provision for loan losses only when the required allowance exceeds any remaining unamortized general credit fair value adjustment for loans evaluated collectively for impairment.

The allowance calculation methodology includes further segregation of loan classes into risk rating categories. The borrower’s overall financial condition, repayment sources, guarantors and value of collateral, if appropriate, are evaluated annually for commercial loans or when credit deficiencies arise, such as delinquent loan payments, for commercial and consumer loans. Credit quality risk ratings include regulatory classifications of special mention, substandard, doubtful and loss. Loans criticized special mention have potential weaknesses that deserve management’s close attention. If uncorrected, the potential weaknesses may result in deterioration of the repayment prospects. Loans classified substandard have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt. They include loans that are inadequately protected by the current sound net worth and paying capacity of the obligor or of the collateral pledged, if any. Loans classified doubtful have all the weaknesses inherent in loans classified substandard with the added characteristic that collection or liquidation in full, on the basis of current conditions and facts, is highly improbable. Loans classified as a loss are considered uncollectible and are charged to the allowance for loan losses. Loans not classified are rated pass.

In addition, Federal regulatory agencies, as an integral part of their examination process, periodically review the Company’s allowance for loan losses and may require the Company to recognize additions to the allowance based on their judgments about information available to them at the time of their examination, which may not be currently available to management. Based on management’s comprehensive analysis of the loan portfolio, management believes the current level of the allowance for loan losses is adequate.

10

Comprehensive Income

Accounting principles generally accepted in the United States of America require that recognized revenue, expenses, gains and losses be included in net income. Although certain changes in assets and liabilities are reported as a separate component of the shareholders’ equity section of the balance sheet, such items, along with net income, are components of total comprehensive income. During the year ended December 31, 2014, the Company reversed the full valuation allowance on deferred tax assets and therefore, the Consolidated Statements of Comprehensive Income for the three and six months ended June 30, 2015 is presented net of the effect of income taxes.  The Consolidated Statements of Comprehensive Income for the three and six months ended June 30, 2014 does not include the effects of income taxes due to the full valuation allowance on net deferred tax assets.

Total reclassifications from accumulated other comprehensive losses for the periods presented are as follows:

Details about Accumulated Other Comprehensive Loss Components	Amounts Reclassified from Accumulated Other Comprehensive Loss												Affected Line Item in the Statement where Net Income is Presented
	For the three months ended June 30,						For the six months ended June 30,
	2015			2014			2015			2014
	(Dollars in thousands)						(Dollars in thousands)
Amortization of net unrealized holding losses on securities transferred from available-for-sale to held-to-maturity	$	(7	)	$	(11	)	$	(20	)	$	(25	)	Interest Income
Tax effect		3			-			7			-		Federal Income Tax Expense
Total reclassification	$	(4	)	$	(11	)	$	(13	)	$	(25	)

Accumulated other comprehensive loss as of June 30, 2015 and December 31, 2014 consisted of the following:

	June 30,			December 31,
	2015			2014
	(Dollars in thousands)
Net unrealized loss on available for sale securities	$	(116	)	$	(57	)
Net unrealized holding gains on securities transferred    between available for sale and held to maturity		37			51
Total	$	(79	)	$	(6	)

Note 2—Recently Issued Accounting Standards

In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers (Topic 606). The amendments in this Update establish a comprehensive revenue recognition standard for virtually all industries under U.S. GAAP, including those that previously followed industry specific guidance such as the real estate, construction and software industries. The revenue standard’s core principle is built on the contract between a vendor and a customer for the provision of goods and services. It attempts to depict the exchange of rights and obligations between the parties in the pattern of revenue recognition based on the consideration to which the vendor is entitled. To accomplish this objective, the standard requires five basic steps: i) identify the contract with the customer, (ii) identify the performance obligations in the contract, (iii) determine the transaction price, (iv) allocate the transaction price to the performance obligations in the contract, and (v) recognize revenue when (or as) the entity satisfies a performance obligation. The amendments are effective for annual periods, and interim reporting periods within those annual periods, beginning after December 15, 2018. Early adoption is permitted. Management does not believe the adoption of ASU 2014-09 will have a significant impact on the Company’s Consolidated Financial Statements.

In February 2015, the FASB issued ASU 2015-02, Consolidation (Topic 810) guidance which amends existing standards regarding the evaluation of certain legal entities and their consolidation in the financial statements. The amendments modify the evaluation of whether limited partnerships and similar legal entities are variable interest entities or voting interest entities and eliminate the presumption that a general partner should consolidate a limited partnership. The amendments also affect the consolidation analysis of reporting entities that are involved with variable interest entities and provide a scope exception from consolidation guidance for reporting entities with interests in legal entities that are required to comply with or operate in accordance with requirements that are similar to those in Rule 2a-7 of the Investment Company Act of 1940 for registered money market funds. The guidance becomes effective for public business entities for fiscal years, and for interim periods within those fiscal years, beginning after December 15, 2015. We are evaluating the impact of this guidance on our financial statements.

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Note 3—Earnings Per Common Share

Diluted earnings per common share take into account the potential dilution that could occur if securities or other contracts to issue common stock were exercised and converted into common stock. Proceeds assumed to have been received on such exercise or conversion, are assumed to be used to purchase shares of the Company’s common stock at the average market price during the period, as required by the “treasury stock method” of accounting for common stock equivalents. For purposes of calculating the basic and diluted earnings per share, the Company’s reported net income is adjusted for dividends on preferred stock and net accretion/amortization related to the issuance of preferred stock to determine the net income to common shareholders.

For the three and six month periods ended June 30, 2014 there were 845 thousand common stock equivalent shares, all of which were antidilutive, and therefore, excluded from earnings per share calculations.  As a result, diluted earnings per share for these periods were the same as basic earnings per share.

The calculations of basic and diluted earnings per common share are presented below for the three and six months ended June 30, 2015 and 2014:

	For the three months ended June 30,						For the six months ended June 30,
	(In thousands, except per share information)
	2015			2014			2015			2014
Net income	$	479		$	597		$	896		$	1,198
Less: preferred stock dividends		(211	)		(120	)		(377	)		(240	)
Less: net discount accretion on preferred stock		—			(1	)		—			(8	)
Income to common shareholders	$	268		$	476		$	519		$	950
Average basic common shares outstanding		6,446			6,439			6,446			6,439
Effect of dilutive stock options		60			—			54			—
Average number of common shares used to calculate    diluted earnings per common share		6,506			6,439			6,500			6,439
Basic earnings per common share	$	0.04		$	0.07		$	0.08		$	0.15
Diluted earnings per common share	$	0.04		$	0.07		$	0.08		$	0.15

The amount of preferred stock dividends and the net accretion or amortization related to each series of preferred stock are presented below for the three and six months ended June 30, 2015 and 2014:

	For the three months ended June 30,					For the six months ended June 30,
	2015		2014			2015		2014
	(Dollars in thousands)					(Dollars in thousands)
Preferred dividends:
Preferred Series A	$	103	$	57		$	206	$	114
Preferred Series B		5		5			10		10
Preferred Series C		103		58			161		116
Total preferred dividends	$	211	$	120		$	377	$	240
Net accretion (amortization) on preferred stock:
Preferred Series A	$	—	$	—		$	—	$	(9	)
Preferred Series B		—		—			—		2
Preferred Series C		—		(1	)		—		(1	)
Total net accretion (amortization) on preferred stock	$	—	$	(1	)	$	—	$	(8	)

Note 4—Securities

Management determines the appropriate classification of debt securities at the time of purchase and re-evaluates such designation as of each balance sheet date. Securities classified as available for sale are those securities that the Company intends to hold for an indefinite period of time, but not necessarily to maturity. Available for sale securities are carried at fair value.

Securities classified as held to maturity are those debt securities the Company has both the intent and ability to hold to maturity regardless of changes in market conditions, liquidity needs or changes in general economic conditions. These securities are carried at

12

cost adjusted for the amortization of premium and accretion of discount, computed by a method which approximates the interest method over the terms of the securities.

The Company previously transferred investment securities from available for sale to held to maturity securities.  Due to these transfers, securities classified as held to maturity have net unrealized holding gains, totaling $56 thousand as of June 30, 2015 and $77 thousand as of December 31, 2014, which are being amortized over the remaining life of the related securities as an adjustment of yield in a manner consistent with the accretion of discount on the same transferred debt securities. This will have no impact on the Company’s net income because the amortization of the unrealized holding loss reported in equity will offset the effect on the interest income of the accretion of the discount on these securities.

The amortized cost, unrealized gains and losses, and the fair value of the Company’s investment securities available for sale and held to maturity are as follows for the periods presented:

	June 30, 2015
	Amortized Cost		GrossUnrealized Gains		GrossUnrealized Losses			Estimated Fair Value
	(Dollars in thousands)
Available For Sale:
Obligations of U.S. government agencies and corporations	$	27,311	$	9	$	(201	)	$	27,119
Obligations of states and political subdivisions		14,697		54		(108	)		14,643
Federal agency mortgage-backed securities		18,650		142		(73	)		18,719
Federal agency collateralized mortgage obligations		429		1		—			430
Other debt securities		500		—		—			500
Money market mutual fund		182		—		—			182
Total investment securities available for sale	$	61,769	$	206	$	(382	)	$	61,593
Held To Maturity:
Obligations of states and political subdivisions	$	15,201	$	197	$	(98	)	$	15,300
Other debt securities		481		—		(1	)		480
Total investment securities held to maturity	$	15,682	$	197	$	(99	)	$	15,780

	December 31, 2014
	Amortized Cost		GrossUnrealized Gains		GrossUnrealized Losses			Estimated Fair Value
	(Dollars in thousands)
Available For Sale:
Obligations of U.S. government agencies and corporations	$	49,451	$	21	$	(196	)	$	49,276
Obligations of states and political subdivisions		4,902		8		(39	)		4,871
Federal agency mortgage-backed securities		20,233		192		(74	)		20,351
Federal agency collateralized mortgage obligations		532		2		(2	)		532
Other debt securities		500		2		—			502
Money market mutual fund		25		—		—			25
Total investment securities available for sale	$	75,643	$	225	$	(311	)	$	75,557
Held To Maturity:
Obligations of states and political subdivisions	$	15,475	$	564	$	(12	)	$	16,027
Other debt securities		481		36		—			517
Total investment securities held to maturity	$	15,956	$	600	$	(12	)	$	16,544

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Included in unrealized losses are market losses on securities that have been in a continuous unrealized loss position for twelve months or more and those securities that have been in a continuous unrealized loss position for less than twelve months. The table below details the aggregate unrealized losses and aggregate fair value of the underlying securities whose fair values are below their amortized cost at June 30, 2015 and December 31, 2014.

	As of June 30, 2015
	Less than 12 Months							12 Months or longer							Total
	Fair Value		Unrealized Losses			Count		Fair Value		Unrealized Losses			Count		Fair Value		Unrealized Losses			Count
	(Dollars in thousands)
Available for Sale:
Obligations of U.S. government    agencies and corporations	$	9,713	$	(141	)		1	$	11,908	$	(60	)		11	$	21,621	$	(201	)		12
Obligations of states and political    subdivisions		5,236		(88	)		14		2,823		(20	)		7		8,059		(108	)		21
Federal agency mortgage-backed    securities		-		-			-		7,110		(73	)		5		7,110		(73	)		5
Total Available for Sale	$	14,949	$	(229	)		15	$	21,841	$	(153	)		23	$	36,790	$	(382	)		38
Held to Maturity:
Obligations of states and political    subdivisions	$	525	$	(6	)		1	$	4,757	$	(92	)		11	$	5,282	$	(98	)		12
Other debt securities		479		(1	)		1	$	-	$	-			-		479		(1	)		1
Total Held to Maturity	$	1,004	$	(7	)		2	$	4,757	$	(92	)		11	$	5,761	$	(99	)		13

	As of December 31, 2014
	Less than 12 Months							12 Months or longer							Total
	Fair Value		Unrealized Losses			Count		Fair Value		Unrealized Losses			Count		Fair Value		Unrealized Losses			Count
	(Dollars in thousands)
Available for Sale:
Obligations of U.S. government    agencies and corporations	$	30,000	$	-			1	$	16,753	$	(196	)		15	$	46,753	$	(196	)		16
Obligations of states and political    subdivisions		576		(1	)		1		3,076		(38	)		8		3,652		(39	)		9
Federal agency mortgage-backed    securities		-		-			-		5,882		(74	)		4		5,882		(74	)		4
Federal agency collateralized    mortgage obligations		-		-			-		296		(2	)		1		296		(2	)		1
Total Available for Sale	$	30,576	$	(1	)		2	$	26,007	$	(310	)		28	$	56,583	$	(311	)		30
Held to Maturity:
Obligations of states and political    subdivisions	$	-	$	-			-	$	1,481	$	(12	)		3	$	1,481	$	(12	)		3
Total Held to Maturity	$	-	$	-			-	$	1,481	$	(12	)		3	$	1,481	$	(12	)		3

As of June 30, 2015, management believes that the estimated fair value of the securities disclosed above is primarily dependent upon the movement in market interest rates, particularly given the minimal inherent credit risk associated with the issuers of these securities and that the unrealized losses in these portfolios are not the result of deteriorating credit within any investment category.

Securities issued by states and political subdivisions are all rated investment grade. Each holding is reviewed quarterly for impairment by management and our third party investment advisor. All mortgage backed securities and collateralized mortgage obligations are issued by U.S. government sponsored agencies; there are no holdings of private label mortgage backed securities or securities backed by loans classified as “Alt-A” or “Subprime”.

Although the fair value will fluctuate as market interest rates move, management believes that these fair values will recover as the underlying portfolios mature. The Company evaluates a variety of factors in concluding whether securities are other-than-temporarily impaired. These factors include, but are not limited to, the type and purpose of the bond, the underlying rating of the bond issuer, and the presence of credit enhancements (i.e. state guarantees, municipal bond insurance, collateral requirements, etc.). The Company does

14

not intend to sell any of these securities and it is unlikely that it will be required to sell any of these securities before recovery. Management does not believe any individual unrealized loss on individual securities, as of June 30, 2015, represents other than temporary impairment.

There were no realized gains or losses for the three or six months ended June 30, 2015 and 2014.

Securities with an estimated fair value of $30.0 million and $32.6 million were pledged at June 30, 2015 and December 31, 2014, respectively, to secure public fund deposits. In addition, securities pledged to secure borrowings by the Bank totaled $75 thousand and $89 thousand as of June 30, 2015 and December 31, 2014, respectively.

The amortized cost and fair value of securities as of June 30, 2015 by contractual maturity are shown below. Certain of these investment securities have call features which allow the issuer to call the security prior to its maturity date at the issuer’s discretion.

	June 30, 2015				June 30, 2015
	Available for Sale Securities				Held to Maturity
	Amortized Cost		Fair Value		Amortized Cost		Fair Value
	(Dollars in thousands)
Due within one year	$	500	$	500	$	—	$	—
Due after one year through five years		19,272		19,225		391		390
Due after five years through ten years		12,328		12,171		1,295		1,305
Due after ten years		10,408		10,366		13,996		14,085
		42,508		42,262		15,682		15,780
Federal agency collateralized mortgage obligations		429		430		—		—
Federal agency mortgage-backed securities		18,650		18,719		—		—
Money market mutual fund		182		182		—		—
Total	$	61,769	$	61,593	$	15,682	$	15,780

Note 5—Loans Receivable and Related Allowance for Loan Losses

Loans receivable consist of the following at June 30, 2015 and December 31, 2014.

	June 30,			December 31,
	2015			2014
	(Dollars in thousands)
Commercial:
Commercial and industrial	$	79,731		$	75,412
Commercial mortgage		175,556			168,969
Commercial construction		9,193			6,497
Total commercial		264,480			250,878
Residential mortgage loans		83,986			80,134
Consumer:
Home equity lines of credit		26,646			27,902
Other consumer loans		16,385			16,378
Total consumer		43,031			44,280
Total loans		391,497			375,292
Allowance for loan losses		(2,566	)		(2,313	)
Net deferred loan cost (fees)		(178	)		(70	)
Total loans receivable, net	$	388,753		$	372,909

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First Priority acquired various loans through the acquisition of Affinity Bancorp, Inc. on February 28, 2013 for which there was, at acquisition, evidence of deterioration of credit quality since origination, and for which it was probable that all contractually required payments would not be collected.  The carrying amounts of the acquired impaired loans included in the loan balances above are summarized as follows:

	June 30,		December 31,
	2015		2014
	(Dollars in thousands)
Commercial and industrial	$	699	$	699
Commercial mortgage		281		284
Residential mortgage loans		134		186
Total unpaid principal balance	$	1,114	$	1,169
Net recorded investment	$	540	$	602

The following table presents the changes in accretable yield related to acquired credit-impaired loans for the six months ended June 30, 2014 (dollars in thousands).  There was no remaining accretable yield for the six months ended June 30, 2015:

	2014
Accretable yield balance, beginning of period	$	56
Additions resulting from acquisition		-
Accretion to interest income		(171	)
Reclassification from nonaccretable difference and disposals, net		146
Accretable yield balance, end of period	$	31

The Company’s loans consist of credits to borrowers spread over a broad range of industrial classifications. The largest concentrations of loans are to lessors of nonresidential buildings and lessors of residential buildings and dwellings. As of June 30, 2015, these loans totaled $71.9 million and $58.3 million, respectively, or 18.4% and 14.9%, respectively, of the total loans outstanding. As of December 31, 2014, these same classifications of loans totaled $69.5 million and $54.7 million, respectively, or 18.5% and 14.6%, respectively, of the total loans outstanding at that time. These credits were subject to normal underwriting standards and did not present more than the normal amount of risk assumed by the Company’s other lending activities. The Company has no other concentration of loans which exceeds 10% of total loans.

The following tables summarize the activity in the allowance for loan losses by loan class for the three and six months ended June 30, 2015 and 2014:

	For the three months ended												For the six months ended
	June 30, 2015												June 30, 2015
	Allowance for Loan Losses												Allowance for Loan Losses
	(Dollars in thousands)												(Dollars in thousands)
	Beginning Balance		Charge-offs			Recoveries		Provision for loan losses			Ending Balance		Beginning Balance		Charge-offs			Recoveries		Provision for loan losses			Ending Balance
Commercial and industrial	$	745	$	—		$	2	$	17		$	764	$	788	$	(16	)	$	7	$	(15	)	$	764
Commercial mortgage		507		(31	)		—		149			625		468		(42	)		—		199			625
Commercial construction		34		—			—		6			40		26		—			—		14			40
Residential mortgage loans		163		—			—		12			175		159		(14	)		—		30			175
Home equity lines of credit		221		—			84		(75	)		230		270		(12	)		88		(116	)		230
Other consumer loans		66		—			4		(3	)		67		87		(16	)		8		(12	)		67
Unallocated		641		—			—		24			665		515		—			—		150			665
Total loans	$	2,377	$	(31	)	$	90	$	130		$	2,566	$	2,313	$	(100	)	$	103	$	250		$	2,566

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	For the three months ended												For the six months ended
	June 30, 2014												June 30, 2014
	Allowance for Loan Losses												Allowance for Loan Losses
	(Dollars in thousands)												(Dollars in thousands)
	Beginning Balance		Charge-offs			Recoveries		Provision for loan losses			Ending Balance		Beginning Balance		Charge-offs			Recoveries		Provision for loan losses			Ending Balance
Commercial and industrial	$	421	$	(137	)	$	6	$	220		$	510	$	445	$	(137	)	$	16	$	186		$	510
Commercial mortgage		477		(1	)		—		7			483		452		(75	)		—		106			483
Commercial construction		17		—			2		3			22		12		(50	)		2		58			22
Residential  mortgage loans		150		(25	)		—		96			221		149		(25	)		—		97			221
Home equity lines of credit		123		(90	)		4		81			118		177		(90	)		8		23			118
Other consumer  loans		50		—			4		12			66		67		(52	)		7		44			66
Unallocated		981		—			—		(164	)		817		971		—			—		(154	)		817
Total loans	$	2,219	$	(253	)	$	16	$	255		$	2,237	$	2,273	$	(429	)	$	33	$	360		$	2,237

The following tables present the balance in the allowance for loan losses at June 30, 2015 and December 31, 2014 disaggregated on the basis of the Company’s impairment method by class of loans receivable along with the balance of loans receivable by class disaggregated on the basis of the Company’s impairment methodology:

	June 30, 2015
	Allowance for Loan Losses						Loans Receivables
	(Dollars in thousands)
	Ending Balance		Ending Balance Individually Evaluated for Impairment		Ending Balance Collectively Evaluated for Impairment		Ending Balance		Ending Balance Individually Evaluated for Impairment		Ending Balance Collectively Evaluated for Impairment
Commercial and industrial	$	764		134	$	630	$	79,731	$	1,524	$	78,207
Commercial mortgage		625		97		528		175,556		3,489		172,067
Commercial construction		40		—		40		9,193		—		9,193
Residential mortgage loans		175		—		175		83,986		235		83,751
Home equity lines of credit		230		—		230		26,646		99		26,547
Other consumer loans		67		—		67		16,385		346		16,039
Unallocated		665		—		665		—		—		—
Total loans	$	2,566	$	231	$	2,335	$	391,497	$	5,693	$	385,804

	December 31, 2014
	Allowance for Loan Losses						Loans Receivables
	(Dollars in thousands)
	Ending Balance		Ending Balance Individually Evaluated for Impairment		Ending Balance Collectively Evaluated for Impairment		Ending Balance		Ending Balance Individually Evaluated for Impairment		Ending Balance Collectively Evaluated for Impairment
Commercial and industrial	$	788	$	147	$	641	$	75,412	$	2,131	$	73,281
Commercial mortgage		468		5		463		168,969		3,660		165,309
Commercial construction		26		—		26		6,497		—		6,497
Residential mortgage loans		159		—		159		80,134		347		79,787
Home equity lines of credit		270		12		258		27,902		113		27,789
Other consumer loans		87		2		85		16,378		364		16,014
Unallocated		515		—		515		—		—		—
Total loans	$	2,313	$	166	$	2,147	$	375,292	$	6,615	$	368,677

17

The following tables summarize information in regard to impaired loans by loan portfolio class as of June 30, 2015 and December 31, 2014 as well as for the three and six month periods endedJune 30, 2015 and 2014, respectively:

	June 30, 2015						December 31, 2014
	Recorded Investment		Unpaid Principal Balance		Related Allowance		Recorded Investment		Unpaid Principal Balance		Related Allowance
	(Dollars in thousands)
With no related allowance    recorded:
Commercial and industrial	$	552	$	975	$	—	$	1,840	$	2,290	$	—
Commercial mortgage		1,901		2,114		—		3,618		3,928		—
Commercial construction		—		—		—		—		—		—
Residential mortgage loans		235		330		—		347		426		—
Home equity lines of credit		99		99		—		101		101		—
Other consumer loans		346		372		—		196		215		—
With an allowance recorded:
Commercial and industrial	$	972	$	1,005	$	134	$	291	$	301	$	147
Commercial mortgage		1,588		1,595		97		42		70		5
Commercial construction		—		—		—		—		—		—
Residential mortgage loans		—		—		—		—		—		—
Home equity lines of credit		—		—		—		12		12		12
Other consumer loans		—		—		—		168		168		2
Total:
Commercial and industrial	$	1,524	$	1,980	$	134	$	2,131	$	2,591	$	147
Commercial mortgage		3,489		3,709		97		3,660		3,998		5
Commercial construction		—		—		—		—		—		—
Residential mortgage loans		235		330		—		347		426		—
Home equity lines of credit		99		99		—		113		113		12
Other consumer loans		346		372		—		364		383		2
Total	$	5,693	$	6,490	$	231	$	6,615	$	7,511	$	166

18

	Three Months ended June 30,								Six Months ended June 30,
	2015				2014				2015				2014
	Average Recorded Investment		Interest Income Recognized		Average Recorded Investment		Interest Income Recognized		Average Recorded Investment		Interest Income Recognized		Average Recorded Investment		Interest Income Recognized
	(Dollars in thousands)								(Dollars in thousands)
With no related allowance    recorded:
Commercial and industrial	$	556	$	—	$	1,596	$	—	$	897	$	9	$	1,671	$	—
Commercial mortgage		1,900		11		1,014		—		2,736		26		981		—
Commercial construction		—		—		344		9		—		—		384		14
Residential mortgage loans		236		—		242		—		234		—		242		—
Home equity lines of credit		99		1		141		—		100		2		71		—
Other consumer loans		321		1		349		—		326		3		277		—
With an allowance recorded:
Commercial and industrial	$	984	$	5	$	184	$	—	$	930	$	5	$	129	$	—
Commercial mortgage		1,590		—		42		—		795		—		83		—
Commercial construction		—		—		—		—		—		—		—		—
Residential mortgage loans		—		—		—		—		—		—		—		—
Home equity lines of credit		—		—		12		—		—		—		21		—
Other consumer loans		—		—		—		—		—		—		—		—
Total:
Commercial and industrial	$	1,540	$	5	$	1,780	$	—	$	1,827	$	14	$	1,800	$	—
Commercial mortgage		3,490		11		1,056		—		3,531		26		1,064		—
Commercial construction		—		—		344		9		—		—		384		14
Residential mortgage loans		236		—		242		—		234		—		242		—
Home equity lines of credit		99		1		153		—		100		2		92		—
Other consumer loans		321		1		349		—		326		3		277		—
Total	$	5,686	$	18	$	3,924	$	9	$	6,018	$	45	$	3,859	$	14

The following table presents nonaccrual loans by classes of the loan portfolio as of June 30, 2015 and December 31, 2014:

	June 30, 2015		December 31, 2014
	(Dollars in thousands)
Commercial and industrial	$	1,324	$	1,474
Commercial mortgage		2,209		2,370
Residential mortgage loans		235		347
Home equity lines of credit		18		31
Other consumer loans		248		262
Total loans	$	4,034	$	4,484

The Company’s policy for interest income recognition on nonaccrual loans is to recognize income under the cash basis when the loans are both current and the collateral on the loan is sufficient to cover the outstanding obligation to the Company. The Company will not recognize income if these factors do not exist. Interest that would have been accrued on non-accruing loans under the original terms but was not recognized as interest income totaled $65 thousand and $125 thousand for the three and six months ended June 30, 2015 and $70 thousand and $143 thousand for the three and six months ended June 30, 2014, respectively.

19

The following tables present the classes of the loan portfolio summarized by the aggregate pass rating and the classified ratings of special mention, substandard and doubtful within the Company’s internal risk rating system as of June 30, 2015 and December 31, 2014:

	June 30, 2015
	Pass		Special Mention		Substandard		Doubtful		Total
	(Dollars in thousands)
Commercial:
Commercial and industrial	$	76,527	$	1,339	$	1,865	$	—	$	79,731
Commercial mortgage		170,699		2,005		2,852		—		175,556
Commercial construction		9,193		—		—		—		9,193
Residential mortgage loans		83,751		—		235		—		83,986
Consumer:
Home equity lines of credit		26,628		—		18		—		26,646
Other consumer loans		16,137		—		248		—		16,385
Total	$	382,935	$	3,344	$	5,218	$	—	$	391,497

	December 31, 2014
	Pass		Special Mention		Substandard		Doubtful		Total
	(Dollars in thousands)
Commercial:
Commercial and industrial	$	73,498	$	—	$	1,914	$	—	$	75,412
Commercial mortgage		163,899		745		4,325		—		168,969
Commercial construction		6,497		—		—		—		6,497
Residential mortgage loans		79,787		—		347		—		80,134
Consumer:
Home equity lines of credit		27,871		—		31		—		27,902
Other consumer loans		16,116		—		262		—		16,378
Total	$	367,668	$	745	$	6,879	$	—	$	375,292

The performance and credit quality of the loan portfolio is also monitored by analyzing the age of the loans receivable as determined by the length of time a recorded payment is past due. The following tables present the classes of the loan portfolio summarized by the past due status as of June 30, 2015 and December 31, 2014:

	June 30, 2015
	30-59 Days Past Due		60-89 Days Past Due		Greater Than 90 Days		Total Past Due		Current		Total Loans Receivables
	(Dollars in thousands)
Commercial:
Commercial and industrial	$	—	$	—	$	366	$	366	$	79,365	$	79,731
Commercial mortgage		534		48		2,209		2,791		172,765		175,556
Commercial construction		—		—		—		—		9,193		9,193
Residential mortgage loans		—		68		202		270		83,716		83,986
Consumer:
Home equity lines of credit		114		—		—		114		26,532		26,646
Other consumer loans		29		145		202		376		16,009		16,385
Total	$	677	$	261	$	2,979	$	3,917	$	387,580	$	391,497

20

	December 31, 2014
	30-59 Days Past Due		60-89 Days Past Due		Greater Than 90 Days		Total Past Due		Current		Total Loans Receivables
	(Dollars in thousands)
Commercial:
Commercial and industrial	$	70	$	102	$	1,260	$	1,432	$	73,980	$	75,412
Commercial mortgage		310		15		2,355		2,680		166,289		168,969
Commercial construction		—		—		—		—		6,497		6,497
Residential mortgage loans		478		—		312		790		79,344		80,134
Consumer:
Home equity lines of credit		—		—		12		12		27,890		27,902
Other consumer loans		31		66		214		311		16,067		16,378
Total	$	889	$	183	$	4,153	$	5,225	$	370,067	$	375,292

As of June 30, 2015, there were no loans 90 days past due and still accruing interest.  As of December 31, 2014, there was one residential mortgage loan totaling $70 thousand which was greater than 90 days past due and still accruing interest which has subsequently been paid current.

The Company may grant a concession or modification for economic or legal reasons related to a borrower’s declining financial condition that it would not otherwise consider resulting in a modified loan which is then identified as a troubled debt restructuring (“TDR”). The Company may modify loans through rate reductions, extensions of maturity, interest only payments, or payment modifications to better match the timing of cash flows due under the modified terms with the cash flows from the borrowers’ operations. Loan modifications are intended to minimize the economic loss and to avoid foreclosure or repossession of the collateral. TDRs are considered impaired loans for purposes of calculating the Company’s allowance for loan losses.

The Company identifies loans for potential restructure primarily through direct communication with the borrower and evaluation of the borrower’s financial statements, revenue projections, tax returns, and credit reports. Even if the borrower is not presently in default, management will consider the likelihood that cash flow shortages, adverse economic conditions, and negative trends may result in a payment default in the near future.

The following tables reflect information regarding troubled debt restructurings entered into by the Company for the three and six month periods ended June 30, 2015 and 2014. As of June 30, 2015, one mortgage loan, related to land, was in default and was restructured under the terms of a forbearance agreement whereby a concession was made in regards to the interest rate and the amortization period was extended.  

	For the three months ended June 30, 2015						For the six months ended June 30, 2015
	Number of Contracts		Pre- Modification Outstanding Recorded Investments		Post- Modification Outstanding Recorded Investments		Number of Contracts		Pre- Modification Outstanding Recorded Investments		Post- Modification Outstanding Recorded Investments
	(Dollars in thousands)						(Dollars in thousands)
Troubled debt restructurings:
Commercial and industrial		1	$	200	$	200		1	$	200	$	200
Residential mortgage loans		—		—		—		1		35		35
Total		—	$	—	$	—		2	$	235	$	235

21

	For the three months ended June 30, 2014						For the six months ended June 30, 2014
	Number of Contracts		Pre- Modification Outstanding Recorded Investments		Post- Modification Outstanding Recorded Investments		Number of Contracts		Pre- Modification Outstanding Recorded Investments		Post- Modification Outstanding Recorded Investments
	(Dollars in thousands)						(Dollars in thousands)
Troubled debt restructurings:
Commercial and industrial		1	$	29	$	29		1	$	29	$	29
Home equity lines of credit		1		31		20		1		31		20
Other consumer loans		2		110		108		2		110		108
Total		4	$	170	$	157		4	$	170	$	157

The following table reflects information regarding troubled debt restructuring entered into by the Bank for the year ended December 31, 2014:

	Number of Contracts		Pre-Modification Outstanding Recorded Investments		Post- Modification Outstanding Recorded Investments
	(Dollars in thousands)
Troubled debt restructurings:
Commercial and industrial		1	$	28	$	28
Commercial mortgage		1		1,292		1,292
Home equity lines of credit		2		112		102
Other consumer loans		3		170		158
Total		7	$	1,602	$	1,580

During the second quarter of 2015, a consumer installment loan, classified as non-accrual, became in default with an outstanding balance of $22 thousand as of June 30, 2015.  As of June 30, 2015 and 2014 and also December 31, 2014, a residential mortgage loan with a current balance of $76 thousand, acquired through the Affinity merger, has remained in default and is classified as non-accrual. Additionally two commercial loans classified as troubled debt restructurings with combined outstanding balances totaling $64 thousand as of March 31, 2015 were in default and remain classified as non-accrual status.

As of June 30, 2014, a commercial mortgage loan with an outstanding balance of $243 thousand was also in default.

No other TDRs were subsequently in default as of the periods stated.

The carrying amount of foreclosed residential real estate properties held was $251 thousand as of June 30, 2015.  Consumer mortgage loans collateralized by residential real estate property that are in the process of foreclosure totaled $611 thousand as of June 30, 2015.

Note 6—Deposits

The components of deposits at June 30, 2015 and December 31, 2014 are as follows:

	June 30,		December 31,
	2015		2014
	(Dollars in thousands)
Demand, non-interest bearing	$	48,229	$	49,462
Demand, interest-bearing		32,573		34,186
Money market and savings accounts		93,865		101,486
Time, $100 and over		49,825		50,948
Time, other		152,974		142,127
	$	377,466	$	378,209

Included in time, other at June 30, 2015 and December 31, 2014 are brokered deposits of $93.4 million and $74.6 million, respectively.

22

At June 30, 2015, the scheduled maturities of time deposits were as follows:

	(Dollars in thousands)
6/30/2016	$	82,125
6/30/2017		60,380
6/30/2018		48,340
6/30/2019		4,419
6/30/2020		7,535
Thereafter		—
	$	202,799

Note 7—Shareholders’ Equity

On February 20, 2009, as part of the Treasury’s TARP Capital Purchase Program, the Company issued 4,579 shares of the Company’s Fixed Rate Cumulative Perpetual Preferred Stock, Series A, $100 par value per share, having a liquidation preference of $1,000 per share (the “Series A Preferred Stock”), and a warrant (the “Warrant) to purchase, on a net basis, 229 shares of the Company’s Fixed Rate Cumulative Perpetual Preferred Stock, Series B, par value $100 per share (the “Series B Preferred Stock”), which was immediately exercised, for an aggregate purchase price of $4.58 million in cash, less $29 thousand in legal issuance costs. On December 18, 2009, the Company issued 4,596 shares of the Company’s Fixed Rate Cumulative Perpetual Preferred Stock, Series C, $100 par value per share, having a liquidation preference of $1,000 per share (the “Series C Preferred Stock”), for an aggregate purchase price of $4.60 million in cash, less $8 thousand in legal issuance costs.

On February 8, 2013, the Treasury sold its entire holdings of the Company’s preferred stock to certain qualified or accredited institutional investors.

The Series A, Series B and Series C Preferred Stock pay cumulative dividends at a rate of 9% per annum. The Series A, B and C Preferred Stock have no maturity date and rank senior to common stock with respect to dividends and upon liquidation, dissolution, or winding up. The Company may redeem the Series A or Series C Preferred Stock, in whole or in part, at its liquidation preference plus accrued and unpaid dividends. The Company may redeem the Series B Preferred Stock only after all of Series A has been redeemed.

Note 8—Stock Compensation Program

In 2005, the Company adopted the 2005 Stock Compensation Program, which was amended at the Company’s annual meeting on April 23, 2009 as the 2009 Stock Compensation Program (the “Program”) and further amended effective March 18, 2010. The Program allows equity benefits to be awarded in the form of Incentive Stock Options, Compensatory Stock Options or Restricted Stock. The Program authorizes the Board of Directors to grant options up to an aggregate maximum of 1,207,957 shares to officers, other employees and directors of the Company, including 382,957 shares which were authorized for grant under this plan as a result of the merger with Affinity. Only employees of the Company will be eligible to receive Incentive Stock Options and such grants are subject to the limitations under Section 422 of the Internal Revenue Code.

All stock options granted under the Program fully vest in four years from the date of grant (or potentially earlier upon a change of control), excluding options issued in regards to the Company’s Severance Plan which vest only upon change in control, and terminate ten years from the date of the grant. The exercise price of the options granted is the fair value of a share of common stock at the time of the grant, with a minimum exercise price of $10 per share for shares issued prior to March 18, 2010. Effective March 18, 2010, the Company’s stock compensation program was amended to eliminate the minimum exercise price.

23

A summary of the status of the Program is presented below for the six months ended June 30, 2015:

	Shares			Weighted Average Exercise Price
Outstanding at beginning of period		866,613		$	6.89
Granted during period		—			—
Forfeited/cancelled during period		(5,098	)		5.36
Expired		(34,348	)		8.97
Outstanding at end of period (1)		827,167			6.81
Exercisable at end of period (1)		424,167		$	8.24

(1) Included in options outstanding and exercisable at June 30, 2015 are 100,000 organizer options, with an exercise price of $10.00 per share, exchanged as part of the 2008 acquisition of Prestige Community Bank which were issued outside of the Program.

The weighted average remaining contractual lives of all outstanding stock options and exercisable options at June 30, 2015 and December 31, 2014 were 5.89 years and 3.60 years, respectively and 6.15 years and 2.41 years, respectively. The aggregate intrinsic value of options outstanding was $411 thousand as of June 30, 2015 while the aggregate intrinsic value of exercisable options was $87 thousand as of this same date.

As of June 30, 2015, there was $56 thousand of unrecognized compensation cost related to non-vested stock options granted after January 1, 2007, excluding those stock options issued in conjunction with the Company’s severance plan. That cost is expected to be recognized over a weighted average period of 2.84 years. There was no tax benefit recognized related to this stock-based compensation. There are 355,000 stock options issued in connection with the termination of the previously executed change in control agreements and the adoption of the severance plan with $576 thousand of unrecognized compensation cost which will only be recognized if a change in control occurs, based on the options which remain outstanding and are probable to vest at that time.

Employee Restricted Stock grants fully vest three years from the date of grant (or potentially earlier upon a change of control), subject to the recipient remaining an employee of the Company. Director Restricted Stock grants vest in one year to coincide with the required service period.  Upon issuance of the shares, resale of the shares is restricted during the vesting period, during which the shares may not be sold, pledged, or otherwise disposed of. Prior to the vesting date and in the event the recipient terminates association with Company for any reasons other than death, disability or change of control, the recipient forfeits all rights to the shares that would otherwise be issued under the grant. Compensation expense related to restricted stock awards granted under the Plan was recorded at the date of the award based on the estimated fair value of the shares. As of June 30, 2015, there was $270 thousand of unrecognized compensation cost related to restricted stock, which will be amortized through July 17, 2017.

A summary of restricted stock award activity is presented below for the six months ended June 30, 2015:

	Shares
Outstanding unvested shares at beginning of period		121,874
Shares Granted during period		11,000
Shares Forfeited/cancelled during the period		(5,350	)
Vested Shares during this period		(1,575	)
Outstanding unvested shares at end of period		125,949

Note 9—Financial Instruments with Off-Balance Sheet Risk

The Company is a party to financial instruments with off-balance sheet risk in the normal course of business to meet the financing needs of its customers. These financial instruments include commitments to extend credit. Such commitments involve, to varying degrees, elements of credit and interest rate risk in excess of the amount recognized in the consolidated balance sheet.

The Company’s exposure to credit loss in the event of nonperformance by the other party to the financial instrument for commitments to extend credit is represented by the contractual amount of those instruments. The Company uses the same credit policies in making commitments and conditional obligations as it does for on-balance sheet instruments.

At June 30, 2015 and December 31, 2014, outstanding commitments to extend credit consisting of total unfunded commitments under lines of credit were $81.9 million and $83.2 million, respectively. In addition, as of each of these dates, there were $641 thousand and $349 thousand of performance standby letters of credit outstanding, respectively, and for both periods $1.1 million of financial standby letters of credit.

24

Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established in the contract. Since many of the commitments are expected to expire without being drawn upon, the total commitment amounts do not necessarily represent future cash requirements.

Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee. The Bank evaluates each customer’s credit worthiness on a case-by-case basis. The amount of collateral obtained, if deemed necessary by the Bank upon extension of credit, is based on management’s credit evaluation. Collateral held varies but may include residential or commercial real estate, accounts receivable, inventory and equipment.

In addition, as of June 30, 2015 and December 31, 2014 the Bank pledged $214 thousand of deposit balances at a correspondent bank to support a letter of credit with a balance of $149 thousand issued by the correspondent on behalf of a customer of the Bank. This transaction is fully secured by the customer through a pledge of the customer’s deposits at the Bank.

Note 10—Regulatory Matters

The Dodd-Frank Act required the FRB to establish minimum consolidated capital requirements for bank holding companies that are as stringent as those required for insured depositary subsidiaries. The federal banking agencies approved rules that implemented the Dodd-Frank requirements and certain other regulatory capital reforms which were designed to enhance such requirements and implement the revised standards of the Basel Committee on Banking Supervision, commonly referred to as Basel III. These rules (i) introduced a new capital ratio pursuant to the prompt corrective action provisions, the common equity tier 1 capital to risk rated assets ratio, (ii) increased the adequately capitalized and well capitalized thresholds for the Tier 1 risk based capital ratios to 6% and 8% respectively, (iii) changed the treatment of certain capital components for determining Tier 1 and Tier 2 capital, and (iv) changed the risk weighting of certain assets and off balance sheet items in determining risk weighted assets. The new risk based capital rules became effective January 1, 2015.

Under the revised capital guidelines, First Priority Bank’s minimum capital to risk-adjusted assets requirements consist of a common equity tier 1 capital ratio of 4.5% (6.5% to be considered “well capitalized”) and a tier 1 capital ratio of 6.0%, increased from 4.0% (and increased from 6.0% to 8.0% to be considered “well capitalized”); the total capital ratio remains at 8.0% under the new rules (10.0% to be considered “well capitalized”).  In addition, First Priority Bank must maintain a minimum Tier 1 leverage ratio of at least 4.0% (5.0% to be considered “well capitalized”).  The new minimum capital requirements became effective on January 1, 2015.

Under the new rules, in order to avoid limitations on capital distributions (including dividend payments and certain discretionary bonus payments to executive officers), a banking organization must hold a capital conservation buffer comprised of common equity tier 1 capital above its minimum risk-based capital requirements in an amount greater than 2.5% of total risk-weighted assets. The capital contribution buffer requirements phase in over a three-year period beginning January 1, 2016.

The Bank’s capital amounts (dollars in thousands) and ratios at June 30, 2015 and December 31, 2014 are presented below:

Actual

Minimum Capital Requirement

To be Well Capitalized under Prompt Corrective Action Provisions

Amount

Ratio

Amount

Ratio

Amount

Ratio

June 30, 2015

Total capital (to risk-weighted assets)

$

46,863

12.25

%

$

30,616

>8.0

%

$

>38,271

>10.0

%

Tier 1 capital (to risk-weighted assets)

44,262

11.57

>22,962

>6.0

>30,616

>8.0

Tier 1 common equity capital (to risk-weighted assets)

44,262

11.57

>17,222

>4.5

>24,876

>6.5

Tier 1 capital (to total assets)

44,262

9.40

>18,840

>4.0

>23,550

>5.0

December 31, 2014

Total capital (to risk-weighted assets)

$

45,327

12.87

%

$

>28,177

>8.0

%

$

>35,221

>10.0

%

Tier 1 capital (to risk-weighted assets)

42,979

12.20

>14,088

>4.0

>21,132

>6.0

Tier 1 capital (to total assets)

42,979

9.34

>18,410

>4.0

>23,012

>5.0

First Priority’s ability to pay cash dividends is dependent on receiving cash in the form of dividends from First Priority Bank. However, certain restrictions exist regarding the ability of First Priority Bank to transfer funds to First Priority in the form of cash dividends. All dividends are currently subject to prior approval of the Pennsylvania Department of Banking and Securities and the FDIC and are payable only from the undivided profits of First Priority Bank, with the exception of an exemption enacted by the Pennsylvania Department of Banking and Securities which allows the Bank to pay dividends related to the preferred stock originally issued under the U.S. Department of the Treasury’s Troubled Asset Relief Program—Capital Purchase Program. Additionally, First Priority has met the requirement of obtaining prior approval from the Federal Reserve Bank on any payment of dividends, including

25

dividends on the aforementioned preferred stock, when net income for the past four quarters is not sufficient to fund the dividend payments over that same period, or when such payment would negatively impact capital adequacy of the Company.

Note 11—Fair Value Measurements and Fair Values of Financial Instruments

Management uses its best judgment in estimating the fair value of the Bank’s financial instruments; however, there are inherent weaknesses in any estimation technique. Therefore, for substantially all financial instruments, the fair value estimates herein are not necessarily indicative of the amounts the Company could have realized in a sales transaction on the dates indicated. The estimated fair value amounts have been measured as of June 30, 2015 and December 31, 2014 and have not been re-evaluated or updated for purposes of these financial statements subsequent to those respective dates. As such, the estimated fair values of these financial instruments subsequent to the respective reporting dates may be different than the amounts reported at each period-end.

The Company uses fair value measurements to record fair value adjustments to certain assets and liabilities and to determine fair value disclosures. In accordance with FASB ASC Topic 820—Fair Value Measurements, the fair value of a financial instrument is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Fair value is best determined based upon quoted market prices. However, in some instances, there are no quoted market prices for the Company’s various financial instruments. In cases where quoted market prices are not available, fair values are based on estimates using present value or other valuation techniques. Those techniques are significantly affected by the assumptions used, including the discount rate and estimates of future cash flows. Accordingly, the fair value estimates may not be realized in an immediate settlement of the instrument.

The fair value guidance provides a consistent definition of fair value, which focuses on exit price in an orderly transaction (that is, not a forced liquidation or distressed sale) between market participants at the measurement date under current market conditions. If there has been a significant decrease in the volume and level of activity for the asset or liability, a change in valuation technique or the use of multiple valuation techniques may be appropriate. In such instances, determining the price at which willing market participants would transact at the measurement date under current market conditions depends on the facts and circumstances and requires the use of significant judgment. The fair value is a reasonable point within the range that is most representative of fair value under current market conditions.

FASB ASC Topic 820 establishes a fair value hierarchy that prioritizes the inputs to valuation methods used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). The three levels of the fair value hierarchy under FASB ASC Topic 820 are as follows:

Level 1: Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities.

Level 2: Quoted prices in markets that are not active, or inputs that are observable either directly or indirectly, for substantially the full term of the asset or liability.

Level 3: Prices or valuation techniques that require inputs that are both significant to the fair value measurement and unobservable (i.e., supported with little or no market activity). Management utilizes inputs that it believes a market participant would use.

An asset’s or liability’s level within the fair value hierarchy is based on the lowest level of input that is significant to the fair value measurement.

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For financial assets measured at fair value on a recurring basis, the fair value measurements by level within the fair value hierarchy used at June 30, 2015 and December 31, 2014 are as follows:

Description	Fair Value		(Level 1) Quoted Prices in Active Markets for Identical Assets		(Level 2) Significant Other Observable Inputs		(Level 3) Significant Unobservable Inputs
	(Dollars in thousands)
As of June 30, 2015:
Investment securities available for sale:
Obligations of U.S. government agencies and    corporations	$	27,119	$	—	$	27,119	$	—
Obligations of states and political subdivisions		14,643		—		14,643		—
Federal agency mortgage-backed securities		18,719		—		18,719		—
Federal agency collateralized mortgage obligations		430		—		430		—
Other debt securities		500		—		500		—
Money market mutual fund		182		182		—		—
Total assets measured at fair value on a recurring basis	$	61,593	$	182	$	61,411	$	—
As of December 31, 2014:
Investment securities available for sale:
Obligations of U.S. government agencies and    corporations	$	49,276	$	—	$	49,276	$	—
Obligations of states and political subdivisions		4,871		—		4,871		—
Federal agency mortgage-backed securities		20,351		—		20,351		—
Federal agency collateralized mortgage obligations		532		—		532		—
Other debt securities		502		—		502		—
Money market mutual fund		25		25		—		—
Total assets measured at fair value on a recurring basis	$	75,557	$	25	$	75,532	$	—

For financial assets measured at fair value on a nonrecurring basis, the fair value measurements by level within the fair value hierarchy used at June 30, 2015 and December 31, 2014 are as follows:

Description	Fair Value		(Level 1) Quoted Prices in Active Markets for Identical Assets		(Level 2) Significant Other Observable Inputs		(Level 3) Significant Unobservable Inputs
	(Dollars in thousands)
As of June 30, 2015:
Impaired loans	$	4,567	$	—	$	—	$	4,567
Other real estate owned		977		—		—		977
Total assets measured at fair value on a    nonrecurring basis	$	5,544	$	—	$	—	$	5,544
As of December 31, 2014:
Impaired loans	$	2,205	$	—	$	—	$	2,205
Repossessed assets		42		—		—		42
Other real estate owned		105		—		—		105
Total assets measured at fair value on a    nonrecurring basis	$	2,352	$	—	$	—	$	2,352

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Management generally uses a discounted appraisal technique in valuing impaired assets, resulting in the discounting of the collateral values underlying each impaired asset. A discounted tax assessment rate has been applied for smaller assets to determine the discounted collateral value. All impaired loans are classified as Level 3 in the fair value hierarchy. Collateral may be real estate and/or business assets. Impaired loans are reviewed and evaluated on at least a quarterly basis for additional impairment.

Quantitative information about Level 3 fair value measurements at June 30, 2015 is included in the table below:

	Fair Value		Valuation Techniques	Unobservable Inputs	Estimated Ratings (Weighted Average) (3)
	(Dollars in thousands)
Impaired loans	$	4,567	Appraisal of real estate collateral (1)	Appraisal adjustments(2)	0%-50% (1.94%)
			Valuation of business assets used as collateral(1)	Valuation adjustments(2)	25%-30%
				Liquidation expenses	2%-8% (6.16%)
Other real estate owned	$	977	Appraisal of collateral(1)	Appraisal adjustments(2)	0%-27%       (4.39%)
				Liquidation expenses	7%-8.5% (8.36%)

Quantitative information about Level 3 fair value measurements at December 31, 2014 is included in the table below:

	Fair Value		Valuation Techniques	Unobservable Inputs	Estimated Ratings (Weighted Average) (3)
	(Dollars in thousands)
Impaired loans	$	2,205	Appraisal of real estate collateral (1)	Appraisal adjustments(2)	0%-5%                (0.12%)
			Valuation of business assets used as collateral(1)	Valuation adjustments(2)	25%-30%
				Liquidation expenses	8% (8.00%)
Repossessed assets	$	42	Appraisal of collateral(1)	Valuation adjustments(2)		7%
				Liquidation expenses		8%
Other real estate owned	$	105	Appraisal of collateral(1)	Appraisal adjustments(2)	None
				Liquidation expenses	7%-8% (7.79%)

(1) Fair Value is generally determined through independent appraisals of the underlying collateral, which include Level 3 inputs that are not identifiable.

(2) Appraisals are adjusted by management for qualitative factors such as economic conditions and estimated liquidation expenses.

(3) The range and weighted average of qualitative factors such as economic conditions and estimated liquidation expenses are presented as a percent of the appraised value.

Valuation of real estate collateral may be discounted based on the age of the existing appraisal. No discounts are taken for recent appraisals. Valuations related to business assets used as collateral are typically discounted more heavily due to the inherent level of uncertainty in determining the fair value of these types of assets. Liquidation costs relating to these assets are charged to expense.

Repossessed assets measured at fair value on a nonrecurring basis consist of personal property, specifically manufactured housing, that has been acquired for debts previously contracted and are included in other assets on the balance sheet. Costs relating to these

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assets are charged to expense. As of June 30, 2015 there were no repossessed assets. The Company had $42 thousand of repossessed assets as ofDecember 31, 2014.

Other real estate owned measured at fair value on a nonrecurring basis consists of properties acquired as a result of accepting a deed in lieu of foreclosure, foreclosure or through other means related to collateral on Bank loans. Costs relating to the development or improvement of assets are capitalized and costs relating to holding the property are charged to expense. At June 30, 2015 and December 31, 2014, respectively, the fair value consists of other real estate owned balances of $1.4 million and $433 thousand, net of valuation allowances of $412 thousand and $328 thousand. Fair value is generally determined based upon independent third-party appraisals of the property.

Real estate properties acquired through, or in lieu of, foreclosure are to be sold and are carried at fair value less estimated cost to sell. Fair value is based upon independent market prices or appraised value of the property. These assets are included in Level 3 fair value based upon the lowest level of input that is significant to the fair value measurement.

The following information should not be interpreted as an estimate of the fair value of the entire Company since a fair value calculation is only provided for a limited portion of the Company’s assets and liabilities. Due to a wide range of valuation techniques and the degree of subjectivity used in making the estimates, comparisons between the Company’s disclosures and those of other companies may not be meaningful.

The following methods and assumptions were used to estimate the fair values of the Company’s financial instruments at June 30, 2015 and December 31, 2014:

Cash and Cash Equivalents

The carrying amounts reported in the balance sheet for cash and short-term instruments approximate those assets’ fair values.

Securities

The fair value of securities available for sale (carried at fair value) and held to maturity (carried at amortized cost) are determined by obtaining quoted market prices on nationally recognized securities exchanges (Level 1), or matrix pricing (Level 2), which is a mathematical technique used widely in the industry to value debt securities without relying exclusively on quoted market prices for the specific securities but rather by relying on the securities’ relationship to other benchmark quoted prices.

Loans Receivable

The fair values of loans are estimated using discounted cash flow analyses, using market rates at the balance sheet date that reflect the credit and interest rate-risk inherent in the loans. Projected future cash flows are calculated based upon contractual maturity or call dates, projected repayments and prepayments of principal.

Residential Mortgage Loans Held for Sale

The fair value of loans held for sale is determined, when possible, using quoted secondary-market prices. If no such quoted prices exist, the fair value of a loan is determined using quoted prices for a similar loan or loans, adjusted for the specific attributes of that loan. The Company did not write down any loans held for sale during the six months ended June 30, 2015. There were no loans held for sale at June 30, 2015 or December 31, 2014.

Impaired Loans

Impaired loans, which are included in loans receivable, are those that are accounted for under FASB ASC Topic 310, “Receivables”, in which the Company has measured impairment generally based on the fair value of the loan’s collateral. Fair value is generally determined based upon independent third party appraisals of the properties, or discounted cash flows based upon the expected proceeds. These assets are included as Level 3 fair values, based upon the lowest level of input that is significant to the fair value measurements. The fair value of the impaired loans consists of the loan balances, net of any valuation allowance. As of June 30, 2015 the fair value of impaired loans consisted of loan balances with an allowance recorded of $2.6 million, net of valuation allowances of $231 thousand; and loan balances with no related allowance recorded of $3.2 million, net of partial charge-offs of $1.0 million. As of December 31, 2014 the fair value of impaired loans consisted of loan balances with an allowance recorded of $542 thousand, net of valuation allowances of $166 thousand and partial charge-offs of $28 thousand; and loan balances with no related allowance recorded of $2.9 million, net of partial charge-offs of $1.1 million.

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Restricted Investment in Bank Stock

The carrying amount of restricted investment in bank stock approximates fair value, and considers the limited marketability of such securities.

Accrued Interest Receivable and Payable

The carrying amount of accrued interest receivable and accrued interest payable approximates fair value.

Deposit Liabilities

The fair values disclosed for demand deposits (interest and noninterest checking), money market and savings accounts are, by definition, equal to the amount payable on demand at the reporting date (i.e., their carrying amounts). Fair values for fixed-rate certificates of deposit are estimated using a discounted cash flow calculation that applies interest rates currently being offered in the market to the maturities of the time deposits.

Short-Term Borrowings

The carrying amounts of short-term borrowings approximate their fair values.

Long-Term Debt

Fair values of FHLB advances are estimated using discounted cash flow analysis, based on quoted prices for new FHLB advances with similar credit risk characteristics, terms and remaining maturity. These prices obtained from this active market represent a market value that is deemed to represent the transfer price if the liability were assumed by a third party.

Off-Balance Sheet Financial Instruments

Fair values for the Company’s off-balance sheet financial instruments (lending commitments and letters of credit) are based on fees currently charged in the market to enter into similar agreements, taking into account, the remaining terms of the agreements and the counterparties’ credit standing.

At June 30, 2015 and December 31, 2014, the estimated fair values of the Company’s financial instruments were as follows:

	June 30, 2015
	Carrying Amount		Fair Value		Level 1		Level 2		Level 3
	(Dollars in thousands)
Assets:
Cash and cash equivalents	$	18,083	$	18,083	$	18,083	$	—	$	—
Securities available for sale		61,593		61,593		182		61,411		—
Securities held to maturity		15,682		15,780		—		15,780		—
Loans receivable, net		388,753		396,109		—		—		396,109
Restricted stock		3,347		3,347		—		3,347		—
Accrued interest receivable		1,601		1,601		—		1,601		—
Liabilities:
Deposits		377,466		378,334		—		378,334		—
Short-term borrowings		63,208		63,208		—		63,208		—
Long-term debt		11,000		10,986		—		10,986		—
Accrued interest payable		346		346		—		346		—
Off-balance sheet credit related instruments:
Commitments to extend credit		—		—		—		—		—

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	December 31, 2014
	Carrying Amount		Fair Value		Level 1		Level 2		Level 3
	(Dollars in thousands)
Assets:
Cash and cash equivalents	$	7,866	$	7,866	$	7,866	$	—	$	—
Securities available for sale		75,557		75,557		25		75,532		—
Securities held to maturity		15,956		16,544		—		16,544		—
Loans receivable, net		372,909		380,257		—		—		380,257
Restricted stock		2,984		2,984		—		2,984		—
Accrued interest receivable		1,511		1,511		—		1,511		—
Liabilities:
Deposits		378,209		379,203		—		379,203		—
Short-term borrowings		51,472		51,472		—		51,472		—
Long-term debt		11,000		10,936		—		10,936		—
Accrued interest payable		356		356		—		356		—
Off-balance sheet credit related instruments:
Commitments to extend credit		—		—		—		—		—

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

The following discussion summarizes First Priority’s results of operations and highlights material changes for the three and six months ended June 30, 2015 and 2014, and its financial condition as of June 30, 2015 and December 31, 2014. This discussion is intended to provide additional information about the significant changes in the results of operations presented in the accompanying consolidated financial statements for First Priority and its wholly owned subsidiary, First Priority Bank. First Priority’s consolidated financial condition and results of operations consist essentially of First Priority Bank’s financial condition and results of operations. Current performance does not guarantee, and may not be indicative of, similar performance in the future.

You should read this discussion and analysis in conjunction with the unaudited consolidated financial statements for the period ended June 30, 2015 included herein as well as with the audited consolidated financial statements and the accompanying footnotes for the year ended December 31, 2014, included in the Company’s Form 10-K filed with the Securities and Exchange Commission.

This discussion and analysis of financial condition and results of operations contains forward-looking statements that involve risks and uncertainties, such as First Priority’s plans, objectives, expectations and intentions. Therefore, this analysis should be read in conjunction with the “Cautionary Statement Regarding Forward-Looking Statements” presented elsewhere in this document and the “Risk Factors” described in the Company’s Form 10-K for the period ended December 31, 2014.

Overview

The following table sets forth selected measures of First Priority’s financial position or performance for the dates or periods indicated.

	As of and for the six months ended June 30,
	2015	2014
	(dollars in thousands)
Total revenue (1)	$             8,365	$        8,190
Income before income tax expense	1,337	1,214
Net income	896	1,198
Total assets	503,945	456,895
Total loans receivable	391,319	362,789
Total deposits	377,466	353,723

(1)Total revenue equals net interest income plus non-interest income

Like most financial institutions, First Priority derives the majority of its income from interest it receives on its interest-earning assets, such as loans and investments. First Priority’s primary source of funds for making these loans and investments is its deposits, on which it pays interest. Consequently, one of the key measures of First Priority’s success is its amount of net interest income, or the difference between the income on its average interest-earning assets and the expense on its average interest-bearing liabilities, such as deposits and borrowings. Another key measure is the spread between the yield First Priority earns on these average interest-earning assets and the rate it pays on its average interest-bearing liabilities, which is called its net interest spread.

There are risks inherent in all loans, and First Priority maintains an allowance for loan losses to absorb probable losses on existing loans that may become uncollectible. This allowance is maintained by charging a provision for loan losses against operating earnings. A detailed discussion of this process, as well as several tables describing the allowance for loan losses is included herein.

In addition to earning interest on its loans and investments, First Priority earns income through other sources, such as fees and other charges to its banking customers and income from providing wealth management services, as well as net gains or losses realized from the sale of assets. The various components of non-interest income, as well as non-interest expense, are described in this section.

Critical Accounting Policies, Judgements and Estimates

First Priority has adopted various accounting policies that govern the application of accounting principles generally accepted in the United States of America and that are consistent with general practices within the banking industry in the preparation of its consolidated financial statements. First Priority’s significant accounting policies are described in Note 1 of the Notes to Consolidated Financial Statements included in the Company’s Form 10-K as of December 31, 2014, filed with the Securities and Exchange Commission.

Certain accounting policies involve significant judgments and assumptions by First Priority that have a material impact on the carrying value of certain assets and liabilities. First Priority considers these accounting policies to be critical accounting estimates. The

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judgment and assumptions used are based on historical experience and other factors, which First Priority believes to be reasonable under the circumstances and have been reasonably consistent with prior results. Because of the nature of the judgments and assumptions made, actual results could differ from these estimates, which could have a material impact on the carrying values of its assets and liabilities and its results of operations. Material estimates that are particularly susceptible to significant change in the near term relate to investment securities impairment evaluation, the valuation of acquired loans, the determination of the allowance for loan losses, valuation of other real estate owned, the analysis of potential impairment of goodwill, the valuation of deferred tax assets and accounting for stock-based compensation.

Investment Securities Impairment Evaluation. In estimating other-than-temporary impairment losses, management considers (1) the length of time and the extent to which the fair value has been less than cost, (2) the financial condition and near-term prospects of the issuer, and (3) the intent and ability of the Company to retain its investment in the issuer for a period of time sufficient to allow for any anticipated recovery in fair value. When a determination is made that an other-than-temporary impairment exists but the Company does not intend to sell the debt security and it is more likely than not that it will not be required to sell the debt security prior to its anticipated recovery, the other-than-temporary impairment is separated into (a) the amount of the total other-than-temporary impairment related to a decrease in cash flows expected to be collected from the debt security (the credit loss) and (b) the amount of the total other-than-temporary impairment related to all other factors. The amount of the total other-than-temporary impairment related to the credit loss is recognized in earnings. The amount of the total other-than-temporary impairment related to all other factors is recognized in other comprehensive income. Management believes that there are no investment securities with other-than-temporary impairment for each of the reporting periods presented.

Acquired Loans. Fair values for loans acquired in business acquisitions are based on a discounted cash flow methodology that involves significant assumptions and judgments as to estimates of credit risk, prepayment risk, liquidity risk, default rates, loss severity, payment speeds, collateral values and discount rate.

Allowance for Loan Losses. The allowance for loan losses represents management’s estimate of losses inherent in the loan portfolio as of the balance sheet date and is recorded as a reduction to loans.

Pools of loans are evaluated for loss exposure based upon historical loss rates in each category of loans and adjusted for qualitative factors. Management assigned each factor a value to reflect improving, stable or declining conditions based on its best judgment using relevant information available at the time of the evaluation. Adjustments to the factors are supported through documentation of changes in conditions in a narrative accompanying the allowance for loan loss calculation.

An unallocated component is maintained to cover uncertainties that could affect management’s estimate of probable losses. The unallocated component of the allowance reflects the margin of imprecision inherent in the underlying assumptions used in the methodologies for estimating specific and general losses in the portfolio.

Impairment is measured on a loan by loan basis by 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.

See the Allowance for Loan Losses section related to Balance Sheet Review as of June 30, 2015 and December 31, 2014 for more information.

Other Real Estate Owned. Assets acquired through, or in lieu of, loan foreclosure are held for sale and are initially recorded at fair value less cost to sell at the date of foreclosure, establishing a new cost basis. Any write-down, at or prior to the dates the real estate is considered foreclosed, is charged to the allowance for loan losses. Subsequent to foreclosure, valuations are periodically performed by management and the assets are carried at the lower of carrying amount or fair value less cost to sell.

Goodwill. Goodwill represents the excess of the cost of an acquired entity over the fair value of the identifiable net assets acquired in accordance with the acquisition method of accounting. Goodwill is not amortized but is reviewed for potential impairment on an annual basis, or more often if events or circumstances indicate that there may be impairment.

Income Taxes. Deferred taxes are provided on the liability method whereby deferred tax assets (DTA) are recognized for deductible temporary differences, net operating loss carryforwards and deferred tax liabilities are recognized for taxable temporary differences. Temporary differences are the differences between the reported amounts of assets and liabilities and their tax basis. Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment. The Company files a consolidated federal income tax return with the Bank.

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If management makes a determination based on the available evidence that it is more likely than not that some portion or all of the deferred tax assets will not be realized in future periods a valuation allowance is calculated and recorded. These determinations are inherently subjective and dependent upon estimates and judgments concerning management’s evaluation of both positive and negative evidence. The weight given to the potential effect of positive and negative evidence must be commensurate with the extent to which it can be objectively verified.

When determining the need for a valuation allowance, the Company assessed the possible sources of taxable income available under tax law to realize a tax benefit for deductible temporary differences and carryforwards, as defined by Accounting Standards Codification (“ASC”) Topic 740-10-30-18. This guidance related to when a valuation allowance on the DTA should be maintained, generally provides that the valuation allowance should be reversed, when in the judgment of management, it is more likely than not that the DTA will be realized.

Stock Based Compensation. Compensation costs related to share-based payment transactions are recognized in the financial statements over the period that an employee provides service in exchange for the award. The fair value of each option grant is estimated on the date of grant using the Black-Scholes option-pricing model based on management’s assumption.

Results of Operations

Income Statement Review

First Priority’s results of operations are affected by five major elements: (1) net interest income, or the difference between interest income earned on loans and investments and interest expense accrued on deposits and borrowed funds (2) the provision for loan losses, or the amount added to the allowance for loan losses to provide reserves for inherent losses on loans; (3) non-interest income, consisting of income from wealth management services, fees and other charges to our banking customers, and net gains or losses realized from the sale of assets; (4) non-interest expense, which consists primarily of salaries, employee benefits and other operating expenses; and (5) income taxes, including deferred taxes, when applicable. Each of these major elements is reviewed in more detail in the following discussion.

Results of Operations Comparative Summary

Shown in the table below are the three and six month reported results of operations as well as the increase (decrease) for the respective periods.

	For the three months ended June 30,				Increase (decrease)			% Change			For the six months ended June 30,				Increase (decrease)			% Change
	2015		2014								2015		2014
	(Dollars in thousands)										(Dollars in thousands)
Net interest income	$	3,985	$	3,993	$	(8	)		(0.2	)%	$	7,873	$	7,755	$	118			1.5	%
Non-interest income		286		216		70			32.4	%		492		435		57			13.1	%
Total Revenue		4,271		4,209		62			1.5	%		8,365		8,190		175			2.1	%
Provision for loan losses		130		255		(125	)		(49.0	)%		250		360		(110	)		(30.6	)%
Non-interest expenses		3,426		3,350		76			2.3	%		6,778		6,616		162			2.4	%
Income before income tax expense		715		604		111			18.4	%		1,337		1,214		123			10.1	%
Federal income tax expense		236		7		229						441		16		425
Net Income	$	479	$	597	$	(118	)				$	896	$	1,198	$	(302	)
Preferred dividends, including net   warrant amortization		211		121		90						377		248		129
Income to common    shareholders	$	268	$	476	$	(208	)				$	519	$	950	$	(431	)
Income per common share:
Basic	$	0.04	$	0.07	$	(0.03	)				$	0.08	$	0.15	$	(0.07	)
Diluted	$	0.04	$	0.07	$	(0.03	)				$	0.08	$	0.15	$	(0.07	)

Net Interest Income

First Priority’s primary source of revenue is net interest income. Net interest income is determined by the average balances of interest-earning assets and interest-bearing liabilities and the interest rates earned and paid on these balances. The amount of net interest income recorded by First Priority is affected by the rate, mix and amount of growth of interest-earning assets and interest-bearing

34

liabilities, the amount of interest-earning assets as compared to the amount of interest-bearing liabilities, and by changes in interest rates earned and interest rates paid on these assets and liabilities.

The following tables set forth, for the three and six month periods ended June 30, 2015 and 2014, information related to First Priority’s average balances, yields on average assets, and costs of average liabilities. Average balances are derived from the daily balances throughout the periods indicated and yields are derived by dividing income or expense by the average balance of the corresponding assets or liabilities. Average loans are stated net of deferred costs. The net dollar amounts and percentage changes of interest income and expense are presented for comparative purposes.

	For the Three Months Ended June 30,														Net Change in Interest Income / Expenses
	2015							2014							$ Change			% Change
	Average Balance		Interest Income/  Expense		Yield/ Rate			Average Balance		Interest Income/  Expense		Yield/ Rate			2015 vs. 2014			2015 vs. 2014
	(Dollars in thousands)
Interest-earning assets:
Loans receivable	$	380,943	$	4,302		4.53	%	$	345,718	$	4,260		4.94	%	$	42			1.0	%
Taxable investment securities		64,856		372		2.31	%		63,068		368		2.34	%		4			1.1	%
Nontaxable investment securities		6,338		63		4.00	%		2,601		27		4.05	%		36			133.3	%
Total investment securities		71,194		435		2.46	%		65,669		395		2.41	%		40			10.1	%
Deposits with banks and other		4,135		24		2.30	%		6,044		31		2.09	%		(7	)		(22.6	)%
Total interest earning assets		456,272		4,761		4.19	%		417,431		4,686		4.50	%		75			1.6	%
Non-interest-earning assets		21,113							16,755
TOTAL ASSETS	$	477,385						$	434,186
Interest-bearing liabilities:
Demand, interest-bearing	$	33,104		19		0.23	%	$	42,164		26		0.25	%	$	(7	)		(26.9	)%
Money market and savings		96,652		71		0.29	%		100,058		80		0.32	%		(9	)		(11.3	)%
Time deposits		196,474		628		1.28	%		153,266		538		1.41	%		90			16.7	%
Borrowed funds		51,540		58		0.45	%		44,081		49		0.44	%		9			18.4	%
Total interest-bearing liabilities		377,770		776		0.82	%		339,569		693		0.82	%		83			12.0	%
Non interest-bearing liabilities:
Demand, non-interest bearing deposits		46,897							48,949
Other liabilities		1,688							1,464
Shareholders’ equity		51,030							44,204
TOTAL LIABILITIES AND    SHAREHOLDERS’ EQUITY	$	477,385						$	434,186
Net interest income/rate spread			$	3,985		3.37	%			$	3,993		3.68	%	$	(8	)		(0.2	)%
Net interest margin						3.50	%						3.84	%

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	For the Six Months Ended June 30,														Net Change in Interest Income / Expenses
	2015							2014							$ Change			% Change
	Average Balance		Interest Income/  Expense		Yield/ Rate			Average Balance		Interest Income/  Expense		Yield/ Rate			2015 vs. 2014			2015 vs. 2014
	(Dollars in thousands)
Interest-earning assets:
Loans receivable	$	376,127	$	8,489		4.55	%	$	340,159	$	8,321		4.93	%	$	168			2.0	%
Taxable investment securities		63,123		720		2.30	%		62,238		728		2.36	%		(8	)		(1.1	)%
Nontaxable investment securities		4,402		88		4.03	%		2,650		54		4.07	%		34			63.0	%
Total investment securities		67,525		808		2.42	%		64,888		782		2.43	%		26			3.3	%
Deposits with banks and other		4,244		118		5.61	%		6,535		57		1.77	%		61			107.0	%
Total interest earning assets		447,896		9,415		4.24	%		411,582		9,160		4.49	%		255			2.8	%
Non-interest-earning assets		20,808							16,001
TOTAL ASSETS	$	468,704						$	427,583
Interest-bearing liabilities:
Demand, interest-bearing	$	33,115		38		0.23	%	$	45,436		59		0.26	%	$	(21	)		(35.6	)%
Money market and savings		99,373		145		0.29	%		101,191		169		0.34	%		(24	)		(14.2	)%
Time deposits		195,851		1,261		1.30	%		151,090		1,092		1.46	%		169			15.5	%
Borrowed funds		41,351		98		0.48	%		37,008		85		0.46	%		13			15.3	%
Total interest-bearing liabilities		369,690		1,542		0.84	%		334,725		1,405		0.85	%		137			9.8	%
Non interest-bearing liabilities:
Demand, non-interest bearing deposits		46,562							47,519
Other liabilities		1,639							1,590
Shareholders’ equity		50,813							43,749
TOTAL LIABILITIES AND    SHAREHOLDERS’ EQUITY	$	468,704						$	427,583
Net interest income/rate spread			$	7,873		3.40	%			$	7,755		3.64	%	$	118			1.5	%
Net interest margin						3.54	%						3.80	%

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Analysis of Changes in Net Interest Income

Net interest income can also be analyzed in terms of the impact of changing interest rates and changing volume as shown in the Changes in Net Interest Income table below which sets forth the effect which varying levels of average interest-earning assets, interest-bearing liabilities and the applicable yields and rates have had on changes in net interest income for the periods presented.

	Changes in Net Interest Income									Changes in Net Interest Income
	For the Three Months Ended									For the Six Months Ended
	June 30, 2015 vs. 2014									June 30, 2015 vs. 2014
	Increase (Decrease)									Increase (Decrease)
	Due to Change In									Due to Change In
	(Dollars in thousands)									(Dollars in thousands)
	Volume			Rate			Net Change			Volume			Rate			Net Change
Interest income:
Loans receivable	$	414		$	(372	)	$	42		$	841		$	(673	)	$	168
Taxable investment securities		10			(6	)		4			9			(17	)		(8	)
Nontaxable investment securities		36			—			36			35			(1	)		34
Total investment securities		46			(6	)		40			44			(18	)		26
Deposits with banks and other		(10	)		3			(7	)		(26	)		87			61
Total interest earning assets		450			(375	)		75			859			(604	)		255
Interest expense:
Demand, interest-bearing		(6	)		(1	)		(7	)		(15	)		(6	)		(21	)
Money market and savings		(3	)		(6	)		(9	)		(3	)		(21	)		(24	)
Time deposits		142			(52	)		90			298			(129	)		169
Borrowed funds		7			2			9			10			3			13
Total interest bearing liabilities		140			(57	)		83			290			(153	)		137
Change in net interest income	$	310		$	(318	)	$	(8	)	$	569		$	(451	)	$	118

For the three months ended June 30, 2015, net interest income was relatively flat at $3.99 million compared to the same period in 2014. Net interest margin decreased 34 basis points from 3.84% for the second quarter of 2014 to 3.50% for the same period in 2015. Net interest spread, defined as the mathematical difference between the yield on average earning assets and the rate paid on average interest-bearing liabilities, decreased 31 basis points from 3.68% for the three months ended June 30, 2014 to 3.37% for the same period in 2015. When comparing these periods, incremental growth of balances accounted for an increase of $310 thousand while the change in our relative rate structure resulted in a decline in net interest income of $318 thousand.

Average interest earning assets for the current quarter of 2015 increased $38.8 million, or 9.3%, including increases in average loans of $35.2 million, or 10.2%, and an increase in average investment balances of $5.5 million, or 8.4%, when compared to the prior year quarter. This increased volume of average earning assets provided an additional $450 thousand in interest income, with $414 thousand provided from incremental loan balances. The average yield on earning assets declined 31 basis points in the current quarter compared to the prior year three month period from 4.50% to 4.19% which resulted in a rate related decline of interest income of $375 thousand between the periods. Of this decline, $372 thousand was related to lower yields on loans.

Average interest bearing liabilities increased $38.2 million, or 11.2%, when comparing the current quarter to the prior year quarter. During this time, short-term borrowed funds increased $7.5 million while overall average deposit balances increased $30.7 million, consisting of an increase in time deposits of $43.2 million, primarily from brokered time deposits, partially offset by a decrease in interest bearing demand deposits of $9.1 million and money market and savings deposits of $3.4 million. The incremental growth of interest bearing liabilities resulted in an overall increase in interest expense of $140 thousand. At the same time, due to the change in mix of balances, the average rate on interest bearing liabilities remained flat at 0.82% in both the second quarters of 2015 and 2014, however, due to the change in mix of balances, overall interest expense declined $57 thousand between the periods due to rate structures.

For the six months ended June 30, 2015, net interest income increased 1.5%, or $118 thousand, to $7.87 million compared to $7.76 million for the same period in 2014. Net interest margin decreased from 3.80% for the first six months of 2014 to 3.54% for the same period in 2015. Net interest spread decreased from 3.64% for the first six months of 2014 to 3.40% for the same period in 2015. When comparing these periods, incremental growth of balances accounted for an increase of $569 thousand while the change in our relative rate structure resulted in a decline in net interest income of $451 thousand.

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Average interest earning assets for the first six months of 2015 increased $36.3 million, or 8.8%, including increases in average loans of $36.0 million, or 10.6%, and average investment balances of $2.6 million, or 4.1%, when compared to the prior year. This increased volume of average earning assets provided an additional $859 thousand in interest income, $841 thousand provided from incremental loan balances and $44 thousand from investment securities.  The average yield on earning assets declined 25 basis points in the current year compared to the prior year six month period from 4.49% to 4.24%, which resulted in a rate related decline of interest income between the periods of $604 thousand. Of this decline, $673 was related to lower yields on loans and a decrease of $18 thousand in income resulting from investment securities partially offset by an increase of $87 thousand resulting from deposits with other banks, including a special annual dividend of $66 thousand paid by FHLB Bank of Pittsburgh based on its 2014 results.  Average interest bearing liabilities increased $35.0 million, or 10.4%, in 2015. During this time, borrowed funds increased $4.3 million while overall deposit balances increased $30.6 million, as interest bearing demand deposits decreased $12.3 million, money market and savings deposits decreased $1.8 million and time deposits increased $44.7 million. The incremental growth of interest bearing liabilities resulted in an increase of interest expense of $290 thousand. At the same time, the average rate on interest bearing liabilities declined 1 basis point from 0.85% for the first six months of 2014 to 0.84% in the current year, which along with the change in mix of balances, accounted for a decline in interest expense of $153 thousand due to the change in our relative rate structure.

Provision for Loan Losses

The allowance for loan losses is established through provisions for loan losses charged against operations. Loans deemed to be uncollectible are charged against the allowance for loan losses, and subsequent recoveries, if any, are credited to the allowance as recoveries.

The allowance for loan losses is maintained at a level considered adequate to provide for losses that can be reasonably anticipated. Management’s periodic evaluation of the adequacy of the allowance is based on known or potential risks in the portfolio, adverse situations that may affect a borrower’s ability to repay, the estimated value of any underlying collateral, the composition of the loan portfolio, current economic conditions and other relevant factors. This evaluation is inherently subjective as it requires material estimates that may be susceptible to significant revisions as more information becomes available or economic conditions change.

At the end of each quarter or more often, if necessary, First Priority analyzes the collectability of its loans and accordingly adjusts the loan loss allowance to an appropriate level. The allowance for loan losses covers estimated credit losses on individually evaluated loans that are determined to be impaired, as well as estimated credit losses inherent in the remainder of the loan portfolio. For a description of the process for determining the adequacy of the allowance for loan losses, see the “Allowance for Loan Losses” section below.

The provision for loan losses was $130 thousand for the three months ended June 30, 2015 compared to $255 thousand for the same period in 2014, and on a year to date basis was $250 thousand for the first six months of 2015 compared to $360 thousand for the same period in 2014.  The level of provision is impacted by management’s analysis of impaired and non-performing loans, as well as by the level of incremental loan volume and net charge-offs of loans. In the current quarter, the Company recorded a recovery of $80 thousand related to the sale of collateral on a previously charged-off loan which resulted in an overall net recovery of $59 thousand in the quarter and $3 thousand for the first six months of 2015.  Net charge-offs for the three months ended June 30, 2014 totaled $237 thousand and were $396 thousand for the first six months of 2014.  Total loans increased $18.9 million in the current quarter and $16.1 million for the six months ended June 30, 2015, compared to an increases of $22.7 million during the second quarter of 2014 and $27.1 million for the six months ended June 30, 2014.  The allowance for loan losses was $2.6 million at June 30, 2015 and $2.3 million at December 31, 2014 which represented 0.66% and 0.62% of total loans outstanding at each respective date.

Acquired loans are initially recorded at acquisition date at their acquisition date fair values, and therefore, are excluded from the calculation of loan loss reserves as of the acquisition date. As acquired loans are paid off or are refinanced or extended under First Priority’s credit underwriting process, they are no longer considered acquired loans, but instead are prospectively considered originated loans and therefore, are included as part of the calculation of the allowance for loan losses. To the extent there is a decrease in the present value of cash flows from acquired impaired loans after the date of acquisition, the Company records a provision for loan losses. During the three and six months ended June 30, 2015, the Company recorded a provision for loan losses totaling $23 thousand and $65 thousand related to acquired loans, of which $23 thousand and $57 thousand, respectively, related to net charge-offs on non-credit impaired purchased loans.  There were no net charge-offs related to acquired loans which were initially considered credit impaired loans as of the acquisition date for the three months ended June 30, 2015 and there were $8 thousand related to purchased credit impaired loans for the six months ended June 30, 2015.  During the three and six months ended June 30, 2014, the Company recorded a provision for loan losses totaling $130 thousand and $210 thousand, respectively, related to acquired loans. There were charge-offs recorded during these same respective periods totaling $99 thousand and $179 thousand related to loans that were initially considered credit impaired loans as of the acquisition date. Net charge-offs on non-credit impaired purchased loans totaled $31 thousand and $32 thousand for the three and six months ended June 30, 2014, respectively.

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Non-Interest Income

For the three and six months ended June 30, 2015, non-interest income totaled $286 thousand and $492 thousand, respectively, compared to $216 thousand and $435 thousand, respectively, for the same periods in 2014. Non-interest income is comprised of wealth management fees which are principally non-recurring commissions and fees related to the sale of insurance products and annuities, service charges on deposit accounts, income resulting from the investment in bank owned life insurance, and other fees which First Priority Bank collects from its banking customers.  The increase in wealth management income was due to an annuity insurance policy issued which resulted in $55 thousand in related fees.  

Components of non-interest income are shown in the table below:

	For the three months ended				Net Change			% Change				For the six months ended				Net Change			% Change
	June 30,				2015 vs.			2015 vs.				June 30,				2015 vs.			2015 vs.
	2015		2014		2014			2014				2015		2014		2014			2014
	(Dollars in thousands)											(Dollars in thousands)
Non-Interest Income
Wealth management fee    income	$	174	$	104	$	70			67.3		%	$	264	$	227	$	37			16.3		%
Service charges on deposits		36		27		9			33.3				71		53		18			34.0
Other branch fees		45		50		(5	)		(10.0	)			87		99		(12	)		(12.1	)
Loan related fees		7		9		(2	)		(22.2	)			16		13		3			23.1
Bank owned life insurance    income		21		25		(4	)		(16.0	)			42		42		—			—
Other		3		1		2			200.0				12		1		11			1,100.0
Total Non-Interest Income	$	286	$	216	$	70			32.4		%	$	492	$	435	$	57			13.1		%

Non-Interest Expenses

For the three and six months ended June 30, 2015, non-interest expenses were $3.4 million and $6.8 million, respectively, compared to $3.4 million and $6.6 million for the same periods in 2014, an increase of $76 thousand and $162 thousand, or 2.3% and 2.4%, respectively. The following table sets forth information related to the various components of non-interest expenses for each respective period.

	For the three months ended				Net Change			% Change				For the six months ended				Net Change			% Change
	June 30,				2015 vs.			2015 vs.				June 30,				2015 vs.			2015 vs.
	2015		2014		2014			2014				2015		2014		2014			2014
	(Dollars in thousands)											(Dollars in thousands)
Non-Interest Expenses
Salaries and employee benefits	$	1,912	$	1,743	$	169			9.7		%	$	3,764	$	3,465	$	299			8.6		%
Occupancy and equipment		514		542		(28	)		(5.2	)			1,059		1,107		(48	)		(4.3	)
Data processing equipment and    operations		218		208		10			4.8				438		440		(2	)		(0.5	)
Professional fees		163		209		(46	)		(22.0	)			344		426		(82	)		(19.2	)
Marketing, advertising and    business development		52		113		(61	)		(54.0	)			82		143		(61	)		(42.7	)
FDIC insurance assessments		87		80		7			8.8				176		156		20			12.8
Pennsylvania bank shares tax    expense		94		80		14			17.5				187		158		29			18.4
Other real estate owned		88		45		43			95.6				147		87		60			69.0
Other		298		330		(32	)		(9.7	)			581		634		(53	)		(8.4	)
Total Non-Interest Expenses	$	3,426	$	3,350	$	76			2.3		%	$	6,778	$	6,616	$	162			2.4		%

Highlights of significant non-interest expenses items for the second quarter, 2015 compared to the second quarter, 2014

· Salaries and employee benefits increased $169 thousand, or 9.7% in the three months ended June 30, 2015 compared to the second quarter of 2014, primarily reflecting incremental staffing costs related to enhancing business development opportunities in the Berks County market.

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· Occupancy and equipment costs declined slightly in the second quarter of 2015 compared to the prior year due to lower costs resulting from the renegotiation of a branch lease and lower equipment depreciation and maintenance costs.

· Data processing equipment and operations costs increased by $10 thousand, or 4.8% primarily due to core processing costs.

· Professional fees decreased $46 thousand primarily related to staff search fees of $17 thousand paid in 2014 to enhance overall staffing experience levels related to business development staff, while legal fees declined $30 thousand, primarily related to loan workout situations.

· Marketing, advertising and business development expenses declined $61 thousand, or 54.0% primarily due to advertising awareness campaigns initiated in the second quarter of 2014 which included both billboards and radio advertising.

· FDIC insurance assessments and Pennsylvania bank shares tax expense increased in the current quarter compared to prior year.  These expenses are primarily calculated based on asset size and equity levels of the Bank.  

· Net costs related to other real estate owned increased $43 thousand, or 95.6% for the current quarter compared to the same period in 2014.  Within the current quarter, the Company recorded $110 thousand in charges to reduce the outstanding values of existing properties based on updated market value or liquidation cost estimates.  Additionally, costs totaling $50 thousand were paid related to sheriff costs or unpaid real estate taxes in order to obtain clear title on properties to enable timely liquidation.  Partially offsetting these incremental costs was a gain on sale of one property within the current quarter totaling $85 thousand and a higher level of rental income from owned properties of $23 thousand.

· Other expenses decreased $32 thousand for the three months ended June 30, 2015 compared to the prior year.  This decrease is primarily related to a fair value adjustment of $34 thousand based on an updated appraisal of a repossessed asset.

Six months ended June 30, 2015 compared to prior year

● Non-interest expenses increased $162 thousand, or 2.4% in the six months ended June 30, 2015 compared to 2014.

● Salaries and employee benefits increased $299 thousand in the six months ended June 30, 2015 compared to 2014 due to incremental staffing costs related to enhancing business development opportunities in the Berks County market, increased bonus accrual expense and higher keyman life insurance expense.

● Occupancy and equipment costs declined $48 thousand, or 4.3%, due to the renegotiation of a branch lease and lower depreciation and equipment maintenance costs.

● Data processing equipment and operations decreased $2 thousand.

● Professional fees decreased $82 thousand, or 19.2% in the six months ended June 30, 2015 compared to the same period in 2014 related to staff search fees of $49 thousand incurred in 2014 and lower legal costs of $38 thousand between the periods.

● Marketing, advertising and business development expenses declined $61 thousand, or 42.7% primarily due to advertising awareness campaigns initiated in the second quarter of 2014 which included both billboards and radio advertising.

● FDIC insurance assessments and Pennsylvania bank shares tax expense increased in 2015 compared to the prior year. These expenses are primarily calculated based on asset size and equity levels of the Bank.

● Other real estate owned costs increased by $60 thousand, or 69.0% in 2015 compared to the prior year.  In the current year, the Company recorded $137 thousand in charges to reduce the outstanding values of existing properties based on updated market value or liquidation cost estimates.  Additionally, costs totaling $21 thousand were paid related to sheriff costs in order to obtain clear title on properties to enable timely liquidation.  Partially offsetting these incremental costs was an increase in net gains recorded on disposition of properties totaling $71 thousand and a higher level of rental income from owned properties of $38 thousand.

· Other expenses decreased $53 thousand for the six months ended June 30, 2015. This decrease is related to an insurance claim cost incurred of $25 thousand in the first quarter of 2014 and a fair value adjustment of $34 thousand based on an updated appraisal of a repossessed asset.

Provision for Income Taxes

Income tax expense recorded in the three and six months ended June 30, 2015 totaled $236 thousand and $441 thousand, respectively, compared to $7 thousand and $16 thousand for the three and six months of 2014, respectively.  This increase is primarily a result of

40

reversing the valuation allowance on net deferred tax assets (“DTA”) during the third quarter of 2014, which establishedthe net DTA positiononthebalancesheetoftheCompany. Inmakingthisjudgment,managementmadethedeterminationthatitismore likelythannotthatthe net deferredtaxassetwillberealized. Since the reversal of the valuation allowance, the Company recordscurrenttaxexpenseinits StatementofOperationsandreportearningsoftheCompanytoitsshareholdersandregulatorsonanaftertaxbasis.  The Company’s effective tax rate for the three and six months ended June 30, 2015 was 33.0% which approximates the expected effective tax rate for the year ending December 31, 2015.

The Company’s net operating loss (“NOL”) carryforwards totaled $9.4 million as of June 30, 2015, including acquired NOLs. First Priority had NOL carryforwards of $7.1 million at June 30, 2015, which expire in 2027 through 2033; such NOL carryforwards, however, are available prior to expiration to reduce future federal income taxes until such time as the entire NOL is utilized.

First Priority acquired a NOL for tax purposes related to the acquisition of Prestige Community Bank, which initially totaled $2.0 million, with a remaining balance of $1.7 million at June 30, 2015, which is subject to certain limitations and expires in 2027 through 2028 if not fully utilized. In addition, an initial NOL carryforward balance of $940 thousand was recorded resulting from the merger with Affinity, of which $656 thousand remains available to reduce future federal income taxes as of June 30, 2015. This NOL is also subject to certain limitations and expires in 2027 through 2032 if not fully utilized.

Financial Condition as of June 30, 2015 and December 31, 2014

Balance Sheet Review

			Net Change	% Change
	June 30,	December 31,	2015 vs.	2015 vs.
	2015	2014	2014	2014
	(Dollars in thousands)
Assets
Cash and cash equivalents	$           18,083	$            7,866	$     10,217	129.9%
Investment securities	77,275	91,513	(14,238)	-15.6%
Loans receivable	391,319	375,222	16,097	4.3%
Total earning assets	486,677	474,601	12,076	2.5%
Allowance for loan losses	(2,566)	(2,313)	(253)	10.9%
Restricted investments in bank stocks	3,347	2,984	363	12.2%
Premises and equipment, net	2,234	2,369	(135)	-5.7%
Bank owned life insurance	3,135	3,093	42	1.4%
Other real estate owned	1,169	1,257	(88)	-7.0%
Deferred income tax assets, net	4,158	4,541	(383)	-8.4%
Goodwill and other identifiable intangibles	3,078	3,122	(44)	-1.4%
Other assets	2,713	2,657	56	2.1%
Total assets	$         503,945	$        492,311	$      11,634	2.4%
Liabilities
Deposits	$         377,466	$        378,209	$          (743)	-0.2%
Borrowed funds	74,208	62,472	11,736	18.8%
Other liabilities	1,480	1,419	61	4.3%
Total liabilities	453,154	442,100	11,054	2.5%
Equity
Total shareholders' equity	50,791	50,211	580	1.2%
Total liabilities and shareholders' equity	$         503,945	$        492,311	$      11,634	2.4%

Total assets at June 30, 2015 were $503.9 million representing an increase of $11.6 million or 2.4% when compared to total assets of $492.3 million at December 31, 2014.  Total assets at June 30, 2015 consisted of loans outstanding of $391.3 million, investment securities of $77.3 million and cash and cash equivalents of $18.1 million. At December 31, 2014, total assets consisted primarily of loans outstanding of $375.2 million, investments securities of $91.5 million and cash and cash equivalents of $7.9 million.

Deposits totaled $377.5 million at June 30, 2015 compared to $378.2 million at December 31, 2014, a decrease of $743 thousand, or 0.2%. Of the total deposits at June 30, 2015, $174.7 million, or 46.3% of total deposits, are core deposits consisting of demand, money market and savings deposits.

Borrowings totaled $74.2 million at June 30, 2015 compared to $62.5 million at December 31, 2014, an increase of $11.7 million, or 18.8%.

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Shareholders’ equity at June 30, 2015 was $50.8 million, representing an increase of $580 thousand from $50.2 million at December 31, 2014.  

Investments

The investment portfolio totaled $77.3 million at June 30, 2015, compared to $91.5 million at December 31, 2014, a decline of $14.2 million, or 15.6%. This decline primarily relates to overnight investments of $30 million purchased at December 31, 2014 for tax planning purposes which matured in early January 2015 partially offset by investment purchases of approximately $20 million in the second quarter of 2015, split between U.S. Treasury securities and tax free municipal securities. As of June 30, 2015 and December 31, 2014, investments totaling $61.6 million and $75.5 million, respectively, were classified as available for sale while $15.7 million and $16.0 million, respectively, were classified as held to maturity. Total investments accounted for 15.3% and 18.6% of total assets at each respective date.

The Company previously transferred investment securities from available for sale to held to maturity securities.  Due to these transfers securities classified as held to maturity have net unrealized holding gains, totaling $56 thousand as of June 30, 2015, which are being amortized over the remaining life of the related securities as an adjustment of yield in a manner consistent with the accretion of discount on debt securities. This will have no impact on the Company’s net income because the amortization of the unrealized holding gains reported in equity will offset the effect on interest income of the accretion of the discount on these securities. The transfer of securities from available for sale to held to maturity was completed in order to mitigate the volatility to common equity caused by sudden market fluctuations and to lock in a predictable earnings on these related securities.

Securities classified as available for sale are accounted for at fair value, with the difference between fair value and amortized cost reflected in the capital account as other comprehensive income or loss. The Company had net unrealized losses on available for sale securities totaling $176 thousand at June 30, 2015 compared to $86 thousand at December 31, 2014. Available for sale securities are securities that management intends to hold for an indefinite period of time or securities that may be sold in response to changes in interest rates, prepayment expectations, capital management and liquidity needs.

The total investment portfolio at June 30, 2015 was comprised of federal agency securities (35%), federal agency mortgage backed securities and federal agency collateralized mortgage obligations (25%), obligations of states and political subdivisions (39%), primarily federal taxable municipal securities, and corporate and other debt securities (1%). All investment securities were either government guaranteed, issued by a government agency or investment grade. First Priority had no investment securities deemed to have other than temporary impairment (“OTTI”) at June 30, 2015 or December 31, 2014 and recorded no OTTI charges during the three and six months ended June 30, 2015 and 2014.

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The following table sets forth information about the contractual maturities and weighted average yields of investment securities at June 30, 2015. Actual maturities may differ from contractual maturities due to scheduled principal payments and unscheduled prepayments of mortgage backed securities and, where applicable, the ability of an issuer to call a security prior to the contractual maturity date.

	Securities Available for Sale
	As of June 30, 2015
	Within 1 year					After one but within five years					After five but within ten years					Over ten years					Total
	Amount		Yield			Amount		Yield			Amount		Yield			Amount		Yield			Amount		Yield
	(Dollars in thousands)
U.S. Government agency    securities	$	—	—			$	16,427		1.40	%	$	10,692		2.12	%	$	—	—			$	27,119		1.68	%
Obligations of states and    political subdivisions		—	—				2,798		1.66	%		1,479		2.57	%		10,366		4.07	%		14,643		3.46	%
Federal agency mortgage    backed securities		—	—				—	—				—	—				18,719		2.07	%		18,719		2.07	%
CMO’s		—	—				—	—				—	—				430		1.96	%		430		1.96	%
Other debt securities		500		0.88	%		—	—				—	—				—	—				500		0.88	%
Money market mutual fund		182		0.00	%		—	—				—	—				—	—				182		0.00	%
Total investments available    for sale	$	682		0.65	%	$	19,225		1.44	%	$	12,171		2.17	%	$	29,515		2.77	%	$	61,593		2.21	%
	Securities Held to Maturity
	As of June 30, 2015
	Within 1 year					After one but within five years					After five but within ten years					Over ten years					Total
	Amount		Yield			Amount		Yield			Amount		Yield			Amount		Yield			Amount		Yield
	(Dollars in thousands)
Obligations of states and    political subdivisions	$	—		—		$	391		5.80	%	$	1,295		3.80	%	$	13,515		4.43	%	$	15,201		4.41	%
Other debt securities		—	—				—	—				—	—				481		4.37	%		481		4.37	%
Total investments held to    maturity	$	—		—		$	391		5.80	%	$	1,295		3.80	%	$	13,996		4.43	%	$	15,682		4.41	%

The amortized cost and fair value of First Priority’s investments, classified as available for sale or held to maturity, at June 30, 2015 and December 31, 2014 are shown in the following table:

	June 30, 2015				December 31, 2014
	Amortized Cost		Fair Value		Amortized Cost		Fair Value
	(Dollars in thousands)				(Dollars in thousands)
Available For Sale:
Obligations of U.S. government agencies    and corporations	$	27,311	$	27,119	$	49,451	$	49,276
Obligations of states and political subdivisions		14,697		14,643		4,902		4,871
Federal agency mortgage-backed securities		18,650		18,719		20,233		20,351
Federal agency collateralized mortgage obligations		429		430		532		532
Other debt securities		500		500		500		502
Money market mutual fund		182		182		25		25
Total investment securities available for sale	$	61,769	$	61,593	$	75,643	$	75,557
Held To Maturity:
Obligations of states and political subdivisions	$	15,201	$	15,301	$	15,475	$	16,027
Other debt securities		481		479		481		517
Total held to maturity	$	15,682	$	15,780	$	15,956	$	16,544

Restricted investments in bank stocks

Restricted investments in bank stocks represent the investment in the common stock of correspondent banks required in order to transact business with those banks. Investments in restricted stock are carried at cost.

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At both June 30, 2015 and December 31, 2014, First Priority Bank held $110 thousand in common stock of Atlantic Community Bankers Bank, Camp Hill, Pennsylvania. Additionally, First Priority had investments in the common stock of the FHLB Bank of Pittsburgh totaling $3.24 million and $2.87 million as of June 30, 2015 and December 31, 2014, respectively. The increase in the investment is attributable to incremental borrowings at the FHLB during the first six months of 2015.

Loans

First Priority’s loan portfolio is the primary component of its assets. At June 30, 2015, total loans were $391.3 million, representing an increase of $16.1 million or 4.3% from total loans outstanding of $375.2 million at December 31, 2014. The increase for the six months ended June 30, 2015 resulted from new loan generation of approximately $30 million partially offset by principal payments and unscheduled prepayments or payoffs of loans totaling approximately $14 million.  The following table sets forth the classification of First Priority’s loan portfolio at June 30, 2015 and December 31, 2014.

	June 30, 2015						December 31, 2014
	Amount			Percent of total			Amount			Percent of total
Commercial & Industrial	$	79,731			21	%	$	75,412			20	%
Commercial Mortgage		175,556			45	%		168,969			45	%
Commercial Construction		9,193			2	%		6,497			2	%
Total Commercial		264,480			68	%		250,878			67	%
Residential Mortgage		83,986			21	%		80,134			21	%
Home Equity Lines		26,646			7	%		27,902			8	%
Other Consumer		16,385			4	%		16,378			4	%
Total Consumer		43,031			11	%		44,280			12	%
Total Loans		391,497			100	%		375,292			100	%
Net deferred loan (fees) or costs		(178	)		—			(70	)		—
Total	$	391,319			100	%	$	375,222			100	%

Commercial mortgage loans consist of loans originated for commercial purposes which are secured by nonfarm, nonresidential properties, multifamily residential properties, or 1-4 family residential properties. As of June 30, 2015, commercial mortgage loans totaled $175.6 million consisting of $117.5 million of loans to finance commercial business properties, of which 60% are owner occupied, $19.2 million to finance, and are secured by, multifamily properties, $35.0 million secured by 1-4 family residential dwelling properties for business purposes, and $3.9 million for other purposes. In addition, as of June 30, 2015, loans to lessors of non-residential buildings totaled $71.9 million, which is included in commercial mortgage loans; of this amount, $35.3 million, or 49% of these loans are related to owner occupied buildings.

As of December 31, 2014, commercial mortgage loans totaled $169.0 million consisting of $115.8 million of loans to finance commercial business properties, of which 60% are owner occupied, $15.4 million to finance, and are secured by, multifamily properties, $31.4 million secured by 1-4 family residential dwelling properties for business purposes, and $6.4 million for other purposes. In addition, as of December 31, 2014, loans to lessors of non-residential buildings totaled $69.5 million, which is included in commercial mortgage loans; of this amount, $33.7 million, or 48% of these loans are related to owner occupied buildings.

The payment experience of certain non-owner occupied commercial mortgage loans may be dependent upon the successful operation of the real estate project. These risks can be significantly affected by supply and demand conditions in the market for office and retail space and for apartments and, as such, may be subject to a greater extent to adverse conditions in the economy. In dealing with these risk factors, First Priority generally limits itself to a real estate market or to borrowers with which First Priority has experience. First Priority generally concentrates on originating commercial real estate loans secured by properties located within its market area, and many of First Priority’s commercial real estate loans are secured by owner-occupied property with personal guarantees of the debt.

Regulatory guidance exists whereby total construction, land development and other land loans should not exceed 100% of total risk based capital and further guidance whereby total construction, land development and other land loans combined with real estate loans secured by multifamily or nonresidential properties and loans to finance commercial real estate or construction loans (not secured by real estate) should not exceed 300% of total risk-based capital. First Priority Bank monitors these two ratios, which as of June 30, 2015, totaled 34% and 192% of total risk-based capital, respectively, both well within the regulatory suggested guidance.

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Credit Quality

First Priority Bank’s written lending policies require specified underwriting, loan documentation and credit analysis standards to be met prior to funding, with additional credit department approval for the majority of new loan balances. The Loan Committee is comprised of senior members of management who oversee the loan approval process to monitor that proper standards are maintained.

The following table summarizes non-performing assets and performing troubled debt restructurings at the dates indicated.

	June 30,	December 31,
	2015	2014
	(Dollars in thousands)
Loans past due 90 days or more and still accruing interest	$                 —	$                     70
Non-accrual loans	4,034	4,484
Total non-performing loans (1)	4,034	4,554
Other real estate owned	1,169	1,257
Repossessed assets (2)	—	42
Total non-performing assets (3)	5,203	5,853
Performing troubled debt restructurings (4)	1,659	2,132
Total non-performing assets and performing troubled debt    restructurings	$            6,862	$                7,985
Non-performing loans as a percentage of total loans	1.03%	1.21%
Non-performing assets as a percentage of total assets	1.03%	1.19%
Non-performing assets and performing troubled debt    restructurings as a percentage of total assets	1.36%	1.62%
Ratio of allowance to non-performing loans at end of period	64%	51%
Ratio of allowance to non-performing assets at end of period	49%	40%
Allowance for loan losses as a percentage of total loans	0.66%	0.62%

(1) Non-performing loans are comprised of (i) loans that have a non-accrual status; (ii) accruing loans that are 90 days or more past due and (iii) non-performing troubled debt restructured loans.

(2) Repossessed assets include personal property, consisting of manufactured housing, which has been acquired for debts previously contracted.

(3) Non-performing assets are comprised of non-performing loans, other real estate owned (assets acquired in foreclosure) and repossessed assets.

(4) Performing troubled debt restructurings are accruing loans that have been restructured in troubled debt restructurings and are in compliance with their modified terms.

Total non-performing loans were $4.0 million at June 30, 2015, a decline of $520 thousand from the $4.6 million at December 31, 2014. This decrease consisted of two loans totaling $185 thousand which were restored to performing based on improving financial positions of the borrowers while another loan of $70 thousand, previously reported as past due 90 days or more, was paid current within the quarter.  Three loan relationships totaling $239 thousand were transferred to other real estate owned, while charge-offs in the first six months of 2015 totaled $100 thousand.  Additionally, there were two new non-performing loans identified in the first six months of 2015 totaling $155 thousand. Total non-performing loans as a percentage of total loans at June 30, 2015 was 1.03%, down from 1.21% at December 31, 2014. Other real estate owned totaled $1.2 million at June 30, 2015 and December 31, 2014. As of June 30, 2015 there were no repossessed assets.  Repossessed assets totaled $42 thousand at December 31, 2014. Nonperforming assets totaled $5.2 million, or 1.03% of total assets, as of June 30, 2015, compared to $5.9 million, or 1.19% of total assets as of December 31, 2014.

While not considered non-performing, First Priority’s performing troubled debt restructurings are closely monitored as they consist of loans that have been modified where the borrower is experiencing financial difficulty. Troubled debt restructurings may be deemed to have a higher risk of loss than loans which have not been restructured. At June 30, 2015 and December 31, 2014, First Priority’s performing troubled debt restructurings totaled $1.7 million and $2.1 million, respectively.  

First Priority Bank’s management continues to monitor and explore potential options and remedial actions to recover First Priority Bank’s investment in non-performing loans. According to policy, First Priority Bank is required to maintain a specific reserve for impaired loans. See the “Allowance for Loan Losses” section below for further information.

First Priority Bank’s total delinquency amount is comprised of loans past due 30 to 89 days and still accruing plus the balance of nonperforming loans. As of June 30, 2015 and December 31, 2014, loans past due 30 to 89 days and still accruing totaled $911

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thousand and $986 thousand, respectively, which when added to the non-performing loans for each period, resulted in a total delinquency ratio of 1.26% and 1.48%, respectively, of total loans outstanding.

Allowance for Loan Losses

The allowance for loan losses represents an amount that First Priority believes will be adequate to absorb estimated credit losses on loans that may become impaired. While First Priority applies the methodology discussed below in connection with the establishment of the allowance for loan losses, the allowance is subject to critical judgments on the part of management. Risks within the loan portfolio are analyzed on a continuous basis by the management of First Priority Bank, periodically analyzed by an external independent loan review function, and are also reviewed by the audit committee. A risk system, consisting of multiple grading categories, is utilized as an analytical tool to assess risk and appropriate allowances. In addition to the risk system, management further evaluates the risk characteristics of the loan portfolio under current and anticipated economic conditions and considers such factors as the financial condition of the borrower, past and expected loss experience, and other factors which management believes deserve recognition in establishing an appropriate allowance. These estimates are reviewed at least quarterly, and, as adjustments become necessary, they are realized in the periods in which they become known.

First Priority uses a quantitative and qualitative method to allocating its allowance to the various loan categories. An unallocated component, which is maintained to cover uncertainties that could affect management’s estimate of probable losses, reflects the margin of imprecision inherent in the underlying assumptions used in the methodologies for estimating specific and general losses in the portfolio.

Additions to the allowance are made by provisions charged to expense, and the allowance is reduced by net charge-offs, which are loans judged to be uncollectible, less any recoveries on loans previously charged off. Although management attempts to maintain the allowance at an adequate level, future additions to the allowance may be required due to the growth of the loan portfolio, changes in asset quality, changes in market conditions and other factors. Additionally, various regulatory agencies periodically review the allowance for loan losses. These agencies may require additional provisions based upon their judgment about information available to them at the time of their examination. Although management uses what it believes to be the best information available, the level of the allowance for loan losses remains an estimate which is subject to significant judgment and short-term change.

Based on the information available as of June 30, 2015, management believes that the allowance for loan losses of $2.6 million is adequate as of that date.

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The following table sets forth a summary of the changes in the allowance for loan losses for the periods indicated:

	For the three months ended						For the six months ended
	June 30,						June 30,
	2015			2014			2015			2014
	(Dollars in thousands)						(Dollars in thousands)
Balance at the beginning of period	$	2,377		$	2,219		$	2,313		$	2,273
Charge-offs:
Commercial and Industrial		—			137			16			137
Commercial Mortgage		31			1			42			75
Commercial Construction		—			—			—			50
Residential Mortgage Loans		—			25			14			25
Home equity lines of credit		—			90			12			90
Other consumer loans		—			-			16			52
Total loans charged off		31			253			100			429
Recoveries:
Commercial and Industrial		2			6			7			16
Commercial Mortgage		—			—			—			—
Commercial Construction		—			2			—			2
Residential Mortgage Loans		—			—			—			-
Home equity lines of credit		84			4			88			8
Other consumer		4			4			8			7
Total recoveries		90			16			103			33
Net loans (recovered) charged off		(59	)		237			(3	)		396
Provision charged to operations		130			255			250			360
Balance at end of period	$	2,566		$	2,237		$	2,566		$	2,237
Average loans (1)	$	380,943		$	345,718		$	376,127		$	340,159
Ratio of net (recoveries) charge-offs during period to average loans outstanding during period (annualized) (1)		0.06	%		0.27	%		0.00	%		0.23	%
Allowance for loan losses as a percentage of total loans		0.66	%		0.62	%		0.66	%		0.62	%

(1) Includes non-accrual loans

The allowance for loan losses was $2.6 million and $2.3 million at June 30, 2015 and December 31, 2014, respectively, which represented 0.66% and 0.62% of total loans outstanding at each respective date. As of June 30, 2015 and December 31, 2014, the unamortized portion of the general credit fair value adjustment totaled $323 thousand and $509 thousand, respectively, and the total specific credit market valuation adjustment totaled $429 thousand as of June 30, 2015 and $443 thousand as of December 31, 2014. Additionally, as of June 30, 2015 and December 31, 2014 the combination of these remaining credit fair value adjustments related to acquired loans, totaling $752 thousand and $952 thousand, respectively, and the allowance for loan losses of $2.6 million and $2.3 million, respectively, or a total of $3.3 million for both periods, would equate to 0.85% and 0.87% of total loans outstanding as of June 30, 2015 and December 31, 2014, respectively. Net recoveries for the Company totaled $3 thousand for the first six months of 2015 compared to net charge-offs of $396 thousand for the same period in 2014.

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The following table sets forth the allocation of the allowance for loan losses by loan category. The specific allocations in any particular category may be reallocated in the future to reflect the then current conditions. Accordingly, management considers the entire allowance to be available to absorb losses in any category.

	(In thousands except percentage data)
	June 30,					December 31,
	2015					2014
	Amount		Percent of total loans  (1)			Amount		Percent of total loans  (1)
Commercial and Industrial	$	764		21	%	$	788		20	%
Commercial Mortgage		625		45	%		468		45	%
Commercial Construction		40		2	%		26		2	%
Residential Mortgage Loans		175		21	%		159		21	%
Home Equity Lines of Credit		230		7	%		270		8	%
Other Consumer Loans		67		4	%		87		4	%
Total Allocated		1,901		100	%		1,798		100	%
Unallocated		665					515
TOTAL	$	2,566				$	2,313

(1) Represents loans outstanding in each category, as of the date shown, as a percentage of total loans outstanding.

A specific allocation of the allowance for loan losses of $231 thousand has been provided on impaired loans of $5.7 million at June 30, 2015 compared to a specific allocation of $166 thousand related to $6.6 million of originated impaired loans at December 31, 2014.

The qualitative and quantitative analysis of the loan portfolio, after the effect of net charge-offs and the above mentioned specific allocation, resulted in the general portion of the allowance for loan losses totaling $1.7 million and $1.6 million as of June 30, 2015 and December 31, 2014, respectively.

Loan Concentrations

The Company’s loans consist of credits to borrowers spread over a broad range of industrial classifications. The largest concentrations of loans are to lessors of nonresidential buildings and lessors of residential buildings and dwellings. As of June 30, 2015, these loans totaled $71.9 million and $58.3 million, respectively, or 18.4% and 14.9%, respectively, of the total loans outstanding. As of December 31, 2014, these same classifications of loans totaled $69.5 million and $54.7 million, respectively, or 18.5% and 14.6%, respectively, of the total loans outstanding. These credits were subject to normal underwriting standards and did not present more than the normal amount of risk assumed by the Company’s other lending activities. Management believes this concentration does not pose abnormal risk when compared to the risk it assumes in other types of lending. The Company has no other concentration of loans which exceeds 10% of total loans.

Deposits

Deposits represent the primary source of funding for earning assets. Deposits totaled $377.5 million at June 30, 2015 compared to $378.2 million at December 31, 2014, representing a decrease of $743 thousand or 0.2%. During the first six months of 2015, an increase in brokered time deposits of $18.8 million was offset by declines of $2.8 million in demand deposits, $7.6 million in money market deposit and savings accounts and $9.1 million in retail time deposits. It has been a strategic objective of First Priority to develop its core deposit base and to supplement core deposits with cost effective alternative funding sources.

First Priority attracts deposits by offering competitive products and interest rates on a broad spectrum of deposit products to customers in its local marketplace, generally through its retail branch system, and also through its internet banking platform. First Priority Bank supplements deposits raised locally with the issuance of brokered deposits when cost effective relative to local market pricing. At June 30, 2015 and December 31, 2014, brokered deposits totaled $93.4 million and $74.6 million, respectively. The guidelines governing First Priority Bank’s participation in the brokered CD market are included in First Priority Bank’s Asset Liability Management Policy, which is reviewed, revised and approved annually by the asset liability management committee and the board of directors. The FDIC places restrictions on a depository institution’s use of brokered deposits based on the bank’s capital classification. A well-capitalized institution may accept brokered deposits without FDIC restrictions. An adequately capitalized institution must obtain a waiver from the FDIC in order to accept brokered deposits, while an undercapitalized institution is prohibited by the FDIC from accepting brokered deposits. First Priority Bank is classified as well-capitalized under prompt corrective action provisions (see Note 10 – “Regulatory Matters” of the Notes to Unaudited Consolidated Financial Statements) and, therefore, may accept brokered deposits without FDIC restrictions.

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The following table sets forth the average balance of First Priority’s deposits and the average rates paid on deposits for the periods presented.

	For the three months ended June 30,										For the six months ended June 30,
	2015					2014					2015					2014
	Average Balance		Rate			Average Balance		Rate			Average Balance		Rate			Average Balance		Rate
	(Dollars in thousands)										(Dollars in thousands)
Demand, non-interest bearing	$	46,897				$	48,949				$	46,562				$	47,519
Demand, interest-bearing		33,104		0.23	%		42,164		0.25	%		33,115		0.23	%		45,436		0.26	%
Money market and savings    deposits		96,652		0.29	%		100,058		0.32	%		99,373		0.29	%		101,191		0.34	%
Time deposits		196,474		1.28	%		153,266		1.41	%		195,851		1.30	%		151,090		1.46	%
Total interest-bearing deposits		326,230		0.88	%		295,488		0.88	%		328,339		0.89	%		297,717		0.90	%
Total deposits	$	373,127				$	344,437				$	374,901				$	345,236

The maturity distribution of time deposits of $100,000 or more as of June 30, 2015, is as follows:

	(Dollars in thousands)
Three Months or Less	$	5,056
Over Three Through Six Months		2,569
Over Six Through Twelve Months		21,622
Over Twelve Months		20,578
TOTAL	$	49,825

Short-Term Borrowed Funds

At June 30, 2015, First Priority had short-term borrowings totaling $63.2 million, compared to $51.5 million at December 31, 2014. Short-term borrowings consisted of overnight or less than 30 day advances from the FHLB as of each of these periods. The increase in short-term borrowings resulted primarily from net funding requirements of growth in earning assets while deposit balances declined slightly. Advances from the FHLB at June 30, 2015 are collateralized by our investment in the common stock of the FHLB and by a blanket lien on qualifying mortgages within First Priority Bank’s loan portfolio.

The following table outlines First Priority’s various sources of short-term borrowed funds at or for each of the six months ended June 30, 2015 and 2014. The maximum balance represents the highest indebtedness for each category of short-term borrowed funds at any month-end during each of the periods shown.

	For the six months ended June 30,
	2015			2014
	(Dollars in thousands)
Federal funds purchased:
Balance at period end	$	—		$	—
Weighted average rate at period end		—			—
Maximum month-end balance	$	—		$	609
Average daily balance during the period	$	50		$	53
Weighted average rate during the period		0.51	%		0.51	%
FHLB short-term borrowings:
Balance at period end	$	63,208		$	46,242
Weighted average rate at period end		0.32	%		0.27	%
Maximum month-end balance	$	63,208		$	46,242
Average daily balance during the period	$	30,301		$	25,955
Weighted average rate during the period		0.33	%		0.28	%

Long-Term Debt

Long-term debt totaled $11.0 million as of both June 30, 2015 and December 31, 2014, respectively. These borrowings consisted of advances from the FHLB with a weighted average interest rate of 0.88% as of each of these dates and an average remaining life of 1.7 years and 2.2 years, respectively. Advances from the FHLB are collateralized by an investment in the common stock of the FHLB, by a specific pledge of First Priority Bank’s investment assets and by a blanket lien on qualifying mortgages within First Priority Bank’s loan portfolio. Balances of FHLB long-term debt averaged $11.0 million for each of the six months ended June 30, 2015 and 2014,

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respectively, with an average rate of 0.89% for each of these respective periods. The maximum month-end balance of these borrowings was $11.0 million for the first six months of 2015 and 2014, respectively.

Capital Resources

Shareholders’ equity at June 30, 2015 was $50.8 million, representing an increase of $580 thousand from $50.2 million at December 31, 2014. The enhanced capital position is attributable to net income of $896 thousand for the six months ended June 30, 2015 and stock based compensation costs of $134 thousand.  These increases were partially offset by preferred dividends paid of $377 thousand and market volatility related to the investment securities portfolio resulting in a net change in net unrealized gains (losses) totaling $73 thousand.

On February 20, 2009, First Priority issued 4,579 shares of First Priority’s Series A preferred stock and a warrant to purchase, on a net basis, 229 shares of First Priority’s Series B preferred stock, which was immediately exercised, for an aggregate purchase price of $4.6 million under the TARP CPP. On December 18, 2009, First Priority issued 4,596 shares of Series C preferred stock, $100.00 par value per share, having a liquidation preference of $1,000 per share, for an aggregate purchase price of $4.6 million.

First Priority Bank is subject to various regulatory capital requirements administered by the federal banking agencies. Failure to meet the minimum capital requirements can initiate certain mandatory and possibly additional discretionary actions by regulators that, if undertaken, could have a direct material effect on First Priority Bank’s financial condition and results of operations. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, First Priority Bank must meet specific capital guidelines that involve quantitative measures of First Priority Bank’s assets, liabilities and certain off-balance sheet items as calculated under regulatory accounting practices. First Priority Bank’s capital amounts and classifications are also subject to qualitative judgments by the regulators about components, risk-weightings and other factors.

First Priority Bank exceeds the minimum capital requirements established by regulatory agencies. Under the capital adequacy guidelines, capital is classified into two tiers. These guidelines require an institution to maintain a certain level of Tier 1 and Tier 2 capital to risk-weighted assets. Tier 1 capital consists of common shareholders’ equity and qualifying preferred stock, excluding the unrealized gain or loss on securities available for sale, minus certain intangible assets plus trust preferred securities up to 25% of Tier 1 capital, with the excess being treated as Tier 2 capital. Tier 2 capital also consists of the allowance for loan losses, subject to certain limitations, and qualifying subordinated debt. In determining the amount of risk-weighted assets, all assets, including certain off balance sheet assets, are multiplied by a risk-weight factor of 0% to 100% based on the risks believed inherent in the type of asset.

Quantitative measures established by regulation to ensure capital adequacy require First Priority Bank to maintain minimum amounts and ratios of total and Tier 1 capital (as defined in the regulations) to risk-weighted assets and of Tier 1 capital to average assets, known as the Tier 1 leverage ratio. The following table sets forth the capital ratios for both First Priority and First Priority Bank at June 30, 2015 and December 31, 2014.  First Priority currently meets the definition of a “small bank holding company” under the FRB’s regulations, and thus is not subject to any capital requirements; however, the Company meets the holding company regulatory requirements for “well-capitalized” for each stated period.  First Priority Bank was considered “well-capitalized” and met or exceeded its applicable regulatory requirements for both periods.    

	First Priority Financial Corp.						First Priority Bank
	As of June 30, 2015			As of December 31, 2014			For Capital Adequacy Purposes			To Be Considered "Well-Capitalized"			As of June 30, 2015			As of December 31, 2014
Total risk-based capital		12.38	%		13.03	%		8.00	%		10.00	%		12.25	%		12.87	%
Tier 1 risk-based capital		11.70	%		12.36	%		6.00	%		8.00	%		11.57	%		12.20	%
Tier 1 common equity capital		9.72	%	N/A				4.50	%		6.50	%		11.57	%	N/A
Tier 1 leverage capital		9.50	%		9.46	%		4.00	%		5.00	%		9.40	%		9.34	%

The capital ratios above reflect the new capital requirements under "Basel III" effective during the six months ended June 30, 2015. As of June 30, 2015, the Bank and the Company were in compliance with the new requirements. See Note 10 - Regulatory Matters for additional discussion regarding regulatory capital requirements.

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Return on Average Equity and Assets

The following table shows the return on average assets (net income divided by total average assets), return on equity (net income divided by average equity), and the equity to assets ratio (average equity divided by total average assets) for the six months ended June 30, 2015 and 2014.

	At or for the six months ended
	June 30,
	2015	2014
Return on average assets................................	0.39%	0.57%
Return on average equity................................	3.56%	5.52%
Average equity to average assets ratio........	10.84%	10.23%

The decline between the reported periods was primarily related to federal and state income tax expense totaling $441 thousand for the six months ended June 30, 2015 compared to $16 thousand for the six months ended June 30, 2014. As of June 30, 2014, the Company had a full valuation allowance recorded against its net deferred tax assets and accordingly, reported results did not include the impact of current income tax expense as a component of operating earnings.

Effect of Inflation and Changing Prices

The effect of relative purchasing power over time due to inflation has not been taken into effect in First Priority’s consolidated financial statements. Rather, the statements have been prepared on a historical cost basis in accordance with accounting principles generally accepted in the United States of America.

Unlike most industrial companies, the assets and liabilities of financial institutions, such as First Priority and First Priority Bank, are primarily monetary in nature. Therefore, the effect of changes in interest rates will have a more significant impact on its performance than will the effect of changing prices and inflation in general. In addition, interest rates may generally increase as the rate of inflation increases, although not necessarily in the same magnitude. First Priority seeks to manage the relationships between interest-sensitive assets and liabilities in order to protect against wide interest rate fluctuations, including those resulting from inflation.

Off-Balance Sheet Arrangements

Through the operations of First Priority Bank, First Priority has made contractual commitments to extend credit, in the ordinary course of its business activities, to meet the financing needs of customers. Such commitments involve, to varying degrees, elements of credit risk and interest rate risk in excess of the amount recognized on the balance sheets. These commitments are legally binding agreements to lend money at predetermined interest rates for a specified period of time and generally have fixed expiration dates or other termination clauses. The same credit and collateral policies are used in making these commitments as for on-balance sheet instruments.

Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established in the contract. Since many of the commitments are expected to expire without being drawn upon, the total commitment amounts do not necessarily represent future cash requirements. Each customer’s creditworthiness is evaluated on a case-by-case basis and collateral is obtained, if necessary, based on the credit evaluation of the borrower. The amount of collateral obtained, if deemed necessary by First Priority Bank upon extension of credit, is based on management’s credit evaluation. Collateral held varies but may include personal or commercial real estate, accounts receivable, inventory and equipment.

At June 30, 2015 and December 31, 2014, outstanding commitments to extend credit consisting of total unfunded commitments under lines of credit were $81.9 million and $83.2 million, respectively. In addition, as of June 30, 2015 and December 31, 2014, there were $641 thousand and $349 thousand of performance standby letters of credit outstanding, respectively, and $1.1 million of financial standby letters of credit as of each respective date.

In addition, as of June 30, 2015 and December 31, 2014 the Bank pledged $214 thousand and $149 thousand, respectively of deposit balances at a correspondent bank to support a letter of credit with a balance of $149 thousand, issued by the correspondent on behalf of a customer of the Bank. This transaction is fully secured by the customer through a pledge of the customer’s deposits at the Bank.

First Priority is not involved in any other off-balance sheet contractual relationships, unconsolidated related entities that have off-balance sheet arrangements or transactions that could result in liquidity needs or other commitments that could significantly impact earnings.  First Priority believes that it has adequate sources of liquidity to fund commitments that may be drawn upon by borrowers.

51

Liquidity

The objective of liquidity management is to assure that sufficient sources of funds are available, as needed and at a reasonable cost, to meet the ongoing and unexpected operational cash needs and commitments of First Priority and to take advantage of income producing opportunities as they arise. Sufficient liquidity must be available to meet the cash requirements of depositors wanting to withdraw funds and of borrowers wanting their credit needs met. Additionally, liquidity is needed to insure that First Priority has the ability to act at those times when profitable new lending and investment opportunities arise. While the desired level of liquidity may vary depending upon a variety of factors, it is a primary goal of First Priority to maintain adequate liquidity in all economic environments through active balance sheet management.

Liquidity management is the ongoing process of monitoring and managing First Priority’s sources and uses of funds. The primary sources of funds are deposits, scheduled amortization of loans outstanding, maturities and cash flow generated from the investment portfolio and funds provided by operations. Scheduled loan payments and investment maturities are relatively predictable sources of funds; however, deposit flows and loan prepayments are far less predictable and are influenced by the level of interest rates, economic conditions, local competition and customer preferences. Liquidity is also provided by unused lines of credit with correspondent banks and First Priority’s borrowing capacity at the FHLB. First Priority measures and monitors its liquidity position on an ongoing basis in order to better understand, predict and respond to balance sheet trends, unused borrowing capacity and liquidity needs. The liquidity position is managed on a daily basis as part of the daily settlement function and on an ongoing basis through the asset liability management function.

The key elements of First Priority’s liquidity planning process involve a primary focus on the development of a stable, core funding base; utilization of wholesale funding sources to supplement core funding; maintenance of an appropriate level of asset liquidity; management of the maturity structure of funding sources and of funding concentrations; and maintenance of borrowing facilities.

Wholesale funding sources utilized by First Priority Bank include brokered certificates of deposits, secured advances from the Federal Home Loan Bank of Pittsburgh, federal funds purchased and other secured borrowing facilities. At June 30, 2015, wholesale funding sources totaled $167.6 million and were comprised of $93.4 million of brokered certificates of deposit and $74.2 million of FHLB advances. At December 31, 2014, wholesale funding sources totaled $137.1 million and were comprised of $74.6 million of brokered certificates of deposit and $62.5 million of FHLB advances. Wholesale funding is generally used in managing the daily liquidity needs and when it is the most cost effective funding source available to First Priority. Management continually evaluates all available funding sources for cost and availability.

An integral part of First Priority Bank’s balance sheet management strategy is to establish and maintain borrowing facilities with correspondent banks for access to funding. Off balance sheet borrowing capacity provides the immediate availability of funds to meet short-term financing needs without requiring the bank to maintain excess liquidity in its investment portfolio, which may have a negative impact on earnings. In today’s environment of historically low interest rates, it also provides the most effective longer term funding, in terms of the cost and structure. Long term borrowings from the FHLB cannot be called prior to maturity, which provides much greater protection against a rise in interest rates when compared to retail deposits which can be redeemed early by the depositor at lower than market rate penalties.

As of June 30, 2015 and December 31, 2014, First Priority Bank had a borrowing facility with a correspondent bank totaling $10 million, available for short-term limited purpose usage, of which $2 million is available unsecured. The remaining $8 million is a secured line of credit.

At June 30, 2015 and December 31, 2014, First Priority Bank had a total borrowing capacity with the FHLB of $150 million and $144 million, respectively, with advances outstanding against this capacity of $74.2 million and $62.5 million, respectively.

Short-term liquid assets held in interest-bearing deposit accounts with correspondent banks totaled $13.2 million at June 30, 2015 compared to $2.8 million at December 31, 2014.

Interest Rate Sensitivity

It is the responsibility of the board of directors and senior management to understand and control the interest rate risk exposures assumed by First Priority. The board has delegated authority to the asset liability management committee (“ALCO”) for the development of ALCO policies and for the management of the asset liability management function. The ALCO committee is comprised of senior management representing all primary functions of First Priority and meets monthly. ALCO has the responsibility for maintaining a level of interest rate risk exposures within board of director approved limits.

52

The primary objective of asset liability management is to optimize net interest income over time while maintaining a balance sheet mix that is prudent with respect to liquidity, capital adequacy and interest rate risk. The absolute level and volatility of interest rates can have a significant impact on the profitability of First Priority. Interest rate risk management is the process of identifying and controlling the potential adverse impact of interest rates movements on First Priority’s net interest income and on the fair value of its assets and liabilities.

One tool used to monitor interest rate risk is the measurement of its interest sensitivity “gap,” which is the positive or negative dollar difference between interest-earning assets and interest-bearing liabilities that are subject to interest rate repricing within a given period of time. Interest rate sensitivity can be managed by changing the mix, pricing and repricing characteristics of its assets and liabilities, through management of its investment portfolio, loan and deposit product offerings, and through wholesale funding. Managing the amount of assets and liabilities repricing in the same time interval helps to hedge interest rate risk and minimize the impact on net interest income of rising or falling interest rates. First Priority generally would benefit from increasing market rates of interest when it has an asset-sensitive gap position and generally would benefit from decreasing market rates of interest when First Priority is liability-sensitive.

At June 30, 2015, First Priority was liability sensitive at the one-year gap position, as it has more liabilities subject to repricing in the subsequent twelve month period than assets. It must be noted, however, that the gap analysis is not a precise indicator of First Priority’s exposure to changing interest rates. The analysis presents only a static view of the timing of maturities and repricing opportunities, without taking into consideration that changes in interest rates do not affect all assets and liabilities equally. Furthermore, the results are influenced by management assumptions concerning the repricing characteristics of deposit products with no contractual maturities, the timing of the repricing of variable rate loans with interest rates currently fixed at interest rate floors, and prepayment speeds of loans and investments subject to prepayment prior to maturity. Additionally, net interest income performance may be impacted by other significant factors in a given interest rate environment, including changes in the volume and mix of interest-earning assets and interest bearing liabilities.

53

Item 3.  Quantitative and Qualitative Disclosures about Market Risk

Risk identification and management are essential elements for the successful management of First Priority. In the normal course of business, First Priority is subject to various types of risk, including interest rate, credit, and liquidity risk. First Priority controls and monitors these risks with policies, procedures, and various levels of managerial and board oversight. First Priority’s objective is to optimize profitability while managing and controlling risk within board approved policy limits. Interest rate risk is the sensitivity of net interest income and the market value of financial instruments to the magnitude, direction, and frequency of changes in interest rates. Interest rate risk results from various repricing frequencies and the maturity structure of assets and liabilities. First Priority uses its asset liability management policy to control and manage interest rate risk.

Liquidity risk represents the inability to generate cash or otherwise obtain funds at reasonable rates to satisfy commitments to borrowers, as well as, the obligations to depositors and debt holders. First Priority uses its asset liability management policy and contingency funding plan to control and manage liquidity risk.

Credit risk represents the possibility that a customer may not perform in accordance with contractual terms. Credit risk results from extending credit to customers, purchasing securities, and entering into certain off-balance sheet loan funding commitments. First Priority’s primary credit risk occurs in the loan portfolio. First Priority uses its credit policy and disciplined approach to evaluating the adequacy of the allowance for loan losses to control and manage credit risk. First Priority’s investment policy limits the degree of the amount of credit risk that may be assumed in the investment portfolio. First Priority’s principal financial market risks are liquidity risks and exposures to interest rate movements.

Item 4.  Controls and Procedures

Under the supervision and with the participation of our management, including the Chairman and Chief Executive Officer and the Chief Financial Officer, we have evaluated the effectiveness of our disclosure controls and procedures as of the end of the period covered by this report. Based on that evaluation, the Chairman and Chief Executive Officer and the Chief Financial Officer have concluded that, as of the end of such period, these disclosure controls and procedures are effective.

Changes in Internal Control Over Financial Reporting

There have not been any changes in our internal control over financial reporting (as such term is defined in Rules 13a–15(f) and 15d–15(f) under the Securities Exchange Act of 1934, as amended) during the fiscal period to which this report relates that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

54

PART II

Item 1.  Legal Proceedings

A certain amount of litigation arises in the ordinary course of the business of First Priority and First Priority Bank. In the opinion of the management of First Priority, there are no proceedings pending to which First Priority or First Priority Bank is a party or to which their property is subject, that, if determined adversely to them, would be material in relation to First Priority’s shareholders’ equity or financial condition, nor are there any proceedings pending other than ordinary routine litigation incident to the business of First Priority and First Priority Bank. In addition, no material proceedings are pending or are known to be threatened or contemplated against First Priority or First Priority Bank by governmental authorities.

Item 1A.  Risk Factors

Not Applicable

Item 2.  Unregistered Sales of Equity Securities and Use of Proceeds

None.

Item 3.  Defaults Upon Senior Securities

None.

Item 4.  Mine Safety Disclosures

Not Applicable

Item 5.  Other Information

None.

55

Item6.Exhibits

Exhibit No.	Title
3.1	Articles of Incorporation of First Priority Financial Corp. (incorporated by reference to Exhibit 3.1 to First Priority’s Registration Statement No. 333-147950 on Form S-4 filed with the SEC on December 7, 2007)
3.2	Certificate of Designations for the “Fixed Rate Cumulative Perpetual Preferred Stock, Series A” of First Priority Financial Corp. (incorporated by reference to Exhibit 3.3 to First Priority’s Annual Report on Form 10-K for the year ended December 31, 2008, filed with the SEC on March 24, 2009)
3.3	Certificate of Designations for the “Fixed Rate Cumulative Perpetual Preferred Stock, Series B” of First Priority Financial Corp. (incorporated by reference to Exhibit 3.4 to First Priority’s Annual Report on Form 10-K for the year ended December 31, 2008, filed with the SEC on March 24, 2009)
3.4	Certificate of Designations for the “Fixed Rate Cumulative Perpetual Preferred Stock, Series C” of First Priority Financial Corp. (incorporated by reference to Exhibit 2.1 to First Priority’s Registration Statement No. 333-183118 on Form S-4 filed with the SEC on January 25, 2013)
3.5	Bylaws of First Priority Financial Corp. (incorporated by reference to Exhibit 3.2 to First Priority’s Registration Statement No. 333-147950 on Form S-4 filed with the SEC on December 7, 2007)
31.1	Certification of Chief Executive Officer in accordance with Section 302 of the Sarbanes-Oxley Act of 2002
31.2	Certification of Chief Financial Officer in accordance with Section 302 of the Sarbanes-Oxley Act of 2002
32.1	Certification of Chief Executive Officer in accordance with Section 906 of the Sarbanes-Oxley Act of 2002
32.2	Certification of Chief Financial Officer in accordance with Section 906 of the Sarbanes-Oxley Act of 2002
101	Interactive data files pursuant to Rule 405 of Regulation S-T: (i) the Consolidated Balance Sheets as of June 30, 2015 and December 31, 2014, (ii) the Consolidated Statements of Operations and Comprehensive Income for the three and six months ended June 30, 2015 and 2014, (iii) the Consolidated Statements of Changes in Equity for the six months ended June 30, 2015 and 2014, (iv) the Consolidated Statements of Cash Flows for the six months ended June 30, 2015 and 2014, and (v) the Notes to Unaudited Consolidated Financial Statements.

56

SIGNATURES

In accordance with the requirements of the Exchange Act, the Registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

		FIRST PRIORITY FINANCIAL CORP.
		(Registrant)
Dated: August 13, 2015	By	/s/ David E. Sparks
		David E. Sparks,
		Chairman and Chief Executive Officer
Dated: August 13, 2015	By	/s/ Mark J. Myers
		Mark J. Myers,
		Chief Financial Officer

Exhibit Index

Exhibit No.	Title
3.1	Articles of Incorporation of First Priority Financial Corp. (incorporated by reference to Exhibit 3.1 to First Priority’s Registration Statement No. 333-147950 on Form S-4 filed with the SEC on December 7, 2007)
3.2	Certificate of Designations for the “Fixed Rate Cumulative Perpetual Preferred Stock, Series A” of First Priority Financial Corp. (incorporated by reference to Exhibit 3.3 to First Priority’s Annual Report on Form 10-K for the year ended December 31, 2008, filed with the SEC on March 24, 2009)
3.3	Certificate of Designations for the “Fixed Rate Cumulative Perpetual Preferred Stock, Series B” of First Priority Financial Corp. (incorporated by reference to Exhibit 3.4 to First Priority’s Annual Report on Form 10-K for the year ended December 31, 2008, filed with the SEC on March 24, 2009)
3.4	Certificate of Designations for the “Fixed Rate Cumulative Perpetual Preferred Stock, Series C” of First Priority Financial Corp. (incorporated by reference to Exhibit 2.1 to First Priority’s Registration Statement No. 333-183118 on Form S-4 filed with the SEC on January 25, 2013)
3.5	Bylaws of First Priority Financial Corp. (incorporated by reference to Exhibit 3.2 to First Priority’s Registration Statement No. 333-147950 on Form S-4 filed with the SEC on December 7, 2007)
31.1	Certification of Chief Executive Officer in accordance with Section 302 of the Sarbanes-Oxley Act of 2002
31.2	Certification of Chief Financial Officer in accordance with Section 302 of the Sarbanes-Oxley Act of 2002
32.1	Certification of Chief Executive Officer in accordance with Section 906 of the Sarbanes-Oxley Act of 2002
32.2	Certification of Chief Financial Officer in accordance with Section 906 of the Sarbanes-Oxley Act of 2002
101	Interactive data files pursuant to Rule 405 of Regulation S-T: (i) the Consolidated Balance Sheets as of June 30, 2015 and December 31, 2014, (ii) the Consolidated Statements of Operations and Comprehensive Income for the three and six months ended June 30, 2015 and 2014, (iii) the Consolidated Statements of Changes in Equity for the six months ended June 30, 2015 and 2014, (iv) the Consolidated Statements of Cash Flows for the six months ended June 30, 2015 and 2014, and (v) the Notes to Unaudited Consolidated Financial Statements.

58

EX-31.1

Exhibit 31.1

Rule 13a-14(a)/15d-14(a) Certification of Chief Executive Officer

CERTIFICATION

I, David E. Sparks, Chairman and Chief Executive Officer of First Priority Financial Corp., certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of First Priority Financial Corp., Inc.;

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)) 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 GAAP;

(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.

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.

Dated: August 13, 2015	/s/ David E. Sparks
	David E. Sparks,
	Chairman and Chief Executive Officer

EX-31.2

Exhibit 31.2

Rule 13a-14(a)/15d-14(a) Certification of Chief Financial Officer

CERTIFICATION

I, Mark J. Myers, Chief Financial Officer of First Priority Financial Corp., certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of First Priority Financial Corp.;

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)) 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 GAAP;

(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.

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.

Dated: August 13, 2015	/s/ Mark J. Myers
	Mark J. Myers,
	Chief Financial Officer

EX-32.1

Exhibit 32.1

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of First Priority Financial Corp. (the “Company”) on Form 10-Q for the period ended June 30, 2015, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, David E. Sparks, Chairman and Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

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

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

Dated: August 13, 2015	/s/ David E. Sparks
	David E. Sparks,
	Chairman and Chief Executive Officer

EX-32.2

Exhibit 32.2

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of First Priority Financial Corp. (the “Company”) on Form 10-Q for the period ended June 30, 2015, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Mark J. Myers, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

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

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

Dated: August 13, 2015	/s/ Mark J. Myers
	Mark J. Myers,
	Chief Financial Officer

XML

Securities - Schedule of Aggregate Unrealized Losses and Aggregate Fair Value of Underlying Securities Held to Maturity (Detail) $ in Thousands	Jun. 30, 2015 USD ($) Positions	Dec. 31, 2014 USD ($) Positions
Schedule Of Held To Maturity Securities [Line Items]
Held to Maturity, Fair Value Less than 12 Months	$ 1,004
Held to Maturity, Unrealized Losses Less than 12 Months	$ (7)
Held to Maturity, Count Less than 12 Months | Positions	2
Held to Maturity, Fair Value More than 12 Months	$ 4,757	$ 1,481
Held to Maturity, Unrealized Losses More than 12 Months	$ (92)	$ (12)
Held to Maturity, Count More than 12 Months | Positions	11	3
Held to Maturity, Total Fair Value	$ 5,761	$ 1,481
Held to Maturity, Total Unrealized Losses	$ (99)	$ (12)
Held to Maturity, Total Count | Positions	13	3
Obligations of States and Political Subdivisions [Member]
Schedule Of Held To Maturity Securities [Line Items]
Held to Maturity, Fair Value Less than 12 Months	$ 525
Held to Maturity, Unrealized Losses Less than 12 Months	$ (6)
Held to Maturity, Count Less than 12 Months | Positions	1
Held to Maturity, Fair Value More than 12 Months	$ 4,757	$ 1,481
Held to Maturity, Unrealized Losses More than 12 Months	$ (92)	$ (12)
Held to Maturity, Count More than 12 Months | Positions	11	3
Held to Maturity, Total Fair Value	$ 5,282	$ 1,481
Held to Maturity, Total Unrealized Losses	$ (98)	$ (12)
Held to Maturity, Total Count | Positions	12	3
Other Debt Securities [Member]
Schedule Of Held To Maturity Securities [Line Items]
Held to Maturity, Fair Value Less than 12 Months	$ 479
Held to Maturity, Unrealized Losses Less than 12 Months	$ (1)
Held to Maturity, Count Less than 12 Months | Positions	1
Held to Maturity, Total Fair Value	$ 479
Held to Maturity, Total Unrealized Losses	$ (1)
Held to Maturity, Total Count | Positions	1

XML

Shareholders' Equity - Additional Information (Detail) - USD ($) $ / shares in Units, $ in Thousands			3 Months Ended	6 Months Ended
	Dec. 18, 2009	Feb. 20, 2009	Dec. 31, 2014	Jun. 30, 2015
Class Of Stock [Line Items]
Preferred stock, par value			$ 100	$ 100
Preferred stock, liquidation value per share			$ 1,000	$ 1,000
Legal issuance cost		$ 29
Series A Preferred Stock [Member]
Class Of Stock [Line Items]
Preferred stock, shares issued		4,579	4,579	4,579
Preferred stock, par value		$ 100
Preferred stock, liquidation value per share		$ 1,000
Proceeds from Series A Preferred Stock and warrants		$ 4,580
Preferred stock, dividend rate			9.00%	9.00%
Series B Preferred Stock [Member]
Class Of Stock [Line Items]
Preferred stock, shares issued			229	229
Preferred stock, par value		$ 100
Preferred stock issuable under warrants		229
Preferred stock, dividend rate			9.00%	9.00%
Series C Preferred Stock [Member]
Class Of Stock [Line Items]
Preferred stock, shares issued			4,596	4,596
Preferred stock, dividend rate			9.00%	9.00%
Series C Preferred Stock [Member] | Obligations of U.S. Government Agencies and Corporations [Member]
Class Of Stock [Line Items]
Preferred stock, shares issued	4,596
Preferred stock, par value	$ 100
Preferred stock, liquidation value per share	$ 1,000
Proceeds from Series A Preferred Stock and warrants	$ 4,600
Legal issuance cost	$ 8

XML

Loans Receivable and Related Allowance for Loan Losses - Classes of Loan Portfolio within Company's Internal Risk Rating System (Detail) - USD ($) $ in Thousands	Jun. 30, 2015	Dec. 31, 2014
Commercial:
Commercial and industrial	$ 79,731	$ 75,412
Commercial mortgage	175,556	168,969
Commercial construction	9,193	6,497
Residential mortgage loans	83,986	80,134
Consumer:
Home equity lines of credit	26,646	27,902
Other consumer loans	16,385	16,378
Total loans	391,497	375,292
Pass [Member]
Commercial:
Commercial and industrial	76,527	73,498
Commercial mortgage	170,699	163,899
Commercial construction	9,193	6,497
Residential mortgage loans	83,751	79,787
Consumer:
Home equity lines of credit	26,628	27,871
Other consumer loans	16,137	16,116
Total loans	382,935	367,668
Special Mention [Member]
Commercial:
Commercial and industrial	1,339
Commercial mortgage	2,005	745
Consumer:
Total loans	3,344	745
Substandard [Member]
Commercial:
Commercial and industrial	1,865	1,914
Commercial mortgage	2,852	4,325
Residential mortgage loans	235	347
Consumer:
Home equity lines of credit	18	31
Other consumer loans	248	262
Total loans	$ 5,218	$ 6,879

XML

Stock Compensation Program - Additional Information (Detail) - USD ($)	3 Months Ended	6 Months Ended
	Dec. 31, 2014	Jun. 30, 2015
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Stock Compensation Program, aggregate maximum number of share to grant		1,207,957
Vesting period of granted stock options		4 years
Description of termination from the date of grant		Terminate ten years from the date of the grant
Minimum exercise price per share for shares issued		$ 10
Weighted average remaining contractual life, outstanding stock options	6 years 1 month 24 days	5 years 10 months 21 days
Weighted average remaining contractual life, exercisable stock options	2 years 4 months 28 days	3 years 7 months 6 days
Options outstanding, intrinsic value		$ 411,000
Options exercisable, intrinsic value		87,000
Unrecognized compensation cost		$ 56,000
Weighted average period for cost is expected to be recognized		2 years 10 months 2 days
Tax benefit recognized related to stock-based compensation		$ 0
Stock options issued under Severance Plan		355,000
Unrecognized Compensation Cost for Shares Issued and Restricted under the Severance Plan		$ 576,000
Unrecognized compensation cost amortized period		Jul. 17, 2017
Restricted Stock [Member]
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Unrecognized compensation cost related to restricted stock		$ 270,000
Restricted Stock [Member] | Employee [Member]
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Vesting period of granted stock options		3 years
Restricted Stock [Member] | Director [Member]
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Vesting period of granted stock options		1 year
Affinity Bancorp, Inc [Member]
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Shares authorized for grant		382,957

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Loans Receivable and Related Allowance for Loan Losses - Summary of Impaired Loans by Loan Portfolio Class (Detail) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2015	Jun. 30, 2014	Jun. 30, 2015	Jun. 30, 2014	Dec. 31, 2014
Financing Receivable, Impaired [Line Items]
Total, Related Allowance	$ 231		$ 231		$ 166
Net recorded investment	5,693		5,693		6,615
Total, Unpaid Principle Balance	6,490		6,490		7,511
Total, Average Recorded Investment	5,686	$ 3,924	6,018	$ 3,859
Total, Interest Income Recognized	18	9	45	14
Commercial and Industrial [Member]
Financing Receivable, Impaired [Line Items]
With no related allowance recorded, Recorded Investment	552		552		1,840
With no related allowance recorded, Unpaid Principle Balance	975		975		2,290
Total, Related Allowance	134		134		147
With an allowance recorded, Recorded Investment	972		972		291
With an allowance recorded, Unpaid Principle Balance	1,005		1,005		301
Net recorded investment	1,524		1,524		2,131
Total, Unpaid Principle Balance	1,980		1,980		2,591
With an allowance recorded, Average Recorded Investment	984	184	930	129
With an allowance recorded, Interest Income Recognized	5		5
Total, Average Recorded Investment	1,540	1,780	1,827	1,800
Total, Interest Income Recognized	5		14
With no related allowance recorded, Average Recorded Investment	556	1,596	897	1,671
With no related allowance recorded, Interest Income Recognized			9
Commercial Mortgage [Member]
Financing Receivable, Impaired [Line Items]
With no related allowance recorded, Recorded Investment	1,901		1,901		3,618
With no related allowance recorded, Unpaid Principle Balance	2,114		2,114		3,928
Total, Related Allowance	97		97		5
With an allowance recorded, Recorded Investment	1,588		1,588		42
With an allowance recorded, Unpaid Principle Balance	1,595		1,595		70
Net recorded investment	3,489		3,489		3,660
Total, Unpaid Principle Balance	3,709		3,709		3,998
With an allowance recorded, Average Recorded Investment	1,590	42	795	83
Total, Average Recorded Investment	3,490	1,056	3,531	1,064
Total, Interest Income Recognized	11		26
With no related allowance recorded, Average Recorded Investment	1,900	1,014	2,736	981
With no related allowance recorded, Interest Income Recognized	11		26
Commercial Construction [Member]
Financing Receivable, Impaired [Line Items]
Total, Average Recorded Investment		344		384
Total, Interest Income Recognized		9		14
With no related allowance recorded, Average Recorded Investment		344		384
With no related allowance recorded, Interest Income Recognized		9		14
Other Consumer Loans [Member]
Financing Receivable, Impaired [Line Items]
With no related allowance recorded, Recorded Investment	346		346		196
With no related allowance recorded, Unpaid Principle Balance	372		372		215
Total, Related Allowance					2
With an allowance recorded, Recorded Investment					168
With an allowance recorded, Unpaid Principle Balance					168
Net recorded investment	346		346		364
Total, Unpaid Principle Balance	372		372		383
Total, Average Recorded Investment	321	349	326	277
Total, Interest Income Recognized	1		3
With no related allowance recorded, Average Recorded Investment	321	349	326	277
With no related allowance recorded, Interest Income Recognized	1		3
Residential Mortgage Loans [Member]
Financing Receivable, Impaired [Line Items]
With no related allowance recorded, Recorded Investment	235		235		347
With no related allowance recorded, Unpaid Principle Balance	330		330		426
Net recorded investment	235		235		347
Total, Unpaid Principle Balance	330		330		426
Total, Average Recorded Investment	236	242	234	242
With no related allowance recorded, Average Recorded Investment	236	242	234	242
Home Equity Lines of Credit [Member]
Financing Receivable, Impaired [Line Items]
With no related allowance recorded, Recorded Investment	99		99		101
With no related allowance recorded, Unpaid Principle Balance	99		99		101
Total, Related Allowance					12
With an allowance recorded, Recorded Investment					12
With an allowance recorded, Unpaid Principle Balance					12
Net recorded investment	99		99		113
Total, Unpaid Principle Balance	99		99		$ 113
With an allowance recorded, Average Recorded Investment		12		21
Total, Average Recorded Investment	99	153	100	92
Total, Interest Income Recognized	1		2
With no related allowance recorded, Average Recorded Investment	99	$ 141	100	$ 71
With no related allowance recorded, Interest Income Recognized	$ 1		$ 2

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Earnings Per Common Share - Schedule of Calculations of Basic and Diluted Earnings per Common Share (Detail) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2015	Jun. 30, 2014	Jun. 30, 2015	Jun. 30, 2014
Earnings Per Share [Abstract]
Net income	$ 479	$ 597	$ 896	$ 1,198
Less: preferred stock dividends	(211)	(120)	(377)	(240)
Less: net discount accretion on preferred stock		(1)		(8)
Income to Common Shareholders	$ 268	$ 476	$ 519	$ 950
Average basic common shares outstanding	6,446	6,439	6,446	6,439
Effect of dilutive stock options	60	0	54	0
Average number of common shares used to calculate diluted earnings per common share	6,506	6,439	6,500	6,439
Basic earnings per common share	$ 0.04	$ 0.07	$ 0.08	$ 0.15
Diluted earnings per common share	$ 0.04	$ 0.07	$ 0.08	$ 0.15

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Stock Compensation Program - Summary of Stock Option Activity (Parenthetical) (Detail) - $ / shares	Jun. 30, 2015	Dec. 31, 2014
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Stock options outstanding	827,167	866,613
Options, Exercisable, Shares	424,167
Options, Exercisable, Weighted Average Exercise Price	$ 8.24
Options outstanding, exercise price	$ 6.81	$ 6.89
Organizer Options [Member] | 2008 Acquisition of Prestige [Member]
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Stock options outstanding	100,000
Options, Exercisable, Shares	100,000
Options, Exercisable, Weighted Average Exercise Price	$ 10.00
Options outstanding, exercise price	$ 10.00

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Deposits (Tables)

6 Months Ended

Jun. 30, 2015

Banking And Thrift [Abstract]

Components of Deposits

The components of deposits at June 30, 2015 and December 31, 2014 are as follows:

	June 30,		December 31,
	2015		2014
	(Dollars in thousands)
Demand, non-interest bearing	$	48,229	$	49,462
Demand, interest-bearing		32,573		34,186
Money market and savings accounts		93,865		101,486
Time, $100 and over		49,825		50,948
Time, other		152,974		142,127
	$	377,466	$	378,209

Scheduled Maturities of Time Deposits

At June 30, 2015, the scheduled maturities of time deposits were as follows:

	(Dollars in thousands)
6/30/2016	$	82,125
6/30/2017		60,380
6/30/2018		48,340
6/30/2019		4,419
6/30/2020		7,535
Thereafter		—
	$	202,799

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Loans Receivable and Related Allowance for Loan Losses - Summary of Information Regarding Bank's Troubled Debt Restructurings (Detail) $ in Thousands	3 Months Ended		6 Months Ended		12 Months Ended
	Jun. 30, 2015 USD ($) Contract	Jun. 30, 2014 USD ($) Contract	Jun. 30, 2015 USD ($) Contract	Jun. 30, 2014 USD ($) Contract	Dec. 31, 2014 USD ($) Contract
Financing Receivable Modifications [Line Items]
Number of Contracts | Contract		4	2	4	7
Pre-Modification Outstanding Recorded Investments		$ 170	$ 235	$ 170	$ 1,602
Post-Modification Outstanding Recorded Investments		$ 157	$ 235	$ 157	$ 1,580
Commercial and Industrial [Member]
Financing Receivable Modifications [Line Items]
Number of Contracts | Contract	1	1	1	1	1
Pre-Modification Outstanding Recorded Investments	$ 200	$ 29	$ 200	$ 29	$ 28
Post-Modification Outstanding Recorded Investments	$ 200	$ 29	$ 200	$ 29	$ 28
Other Consumer Loans [Member]
Financing Receivable Modifications [Line Items]
Number of Contracts | Contract		2		2	3
Pre-Modification Outstanding Recorded Investments		$ 110		$ 110	$ 170
Post-Modification Outstanding Recorded Investments		$ 108		$ 108	$ 158
Commercial Mortgage [Member]
Financing Receivable Modifications [Line Items]
Number of Contracts | Contract					1
Pre-Modification Outstanding Recorded Investments					$ 1,292
Post-Modification Outstanding Recorded Investments					$ 1,292
Residential Mortgage Loans [Member]
Financing Receivable Modifications [Line Items]
Number of Contracts | Contract			1
Pre-Modification Outstanding Recorded Investments			$ 35
Post-Modification Outstanding Recorded Investments			$ 35
Home Equity Lines of Credit [Member]
Financing Receivable Modifications [Line Items]
Number of Contracts | Contract		1		1	2
Pre-Modification Outstanding Recorded Investments		$ 31		$ 31	$ 112
Post-Modification Outstanding Recorded Investments		$ 20		$ 20	$ 102

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Loans Receivable and Related Allowance for Loan Losses - Additional Information (Detail)	3 Months Ended			6 Months Ended		12 Months Ended
	Jun. 30, 2015 USD ($)	Mar. 31, 2015 USD ($)	Jun. 30, 2014 USD ($) Contract	Jun. 30, 2015 USD ($) Contract SecurityLoan	Jun. 30, 2014 USD ($) Contract SecurityLoan	Dec. 31, 2014 USD ($) Contract SecurityLoan	Dec. 31, 2013 USD ($)
Accounts Notes And Loans Receivable [Line Items]
Accretable yield balance, remaining	$ 0		$ 31,000	$ 0	$ 31,000		$ 56,000
Loans	388,753,000			$ 388,753,000		$ 372,909,000
Concentration of loans				The Company has no other concentration of loans which exceeds 10% of total loans.
Non-accruing loans interest income not yet recognized	65,000		$ 70,000	$ 125,000	$ 143,000
Loans past due 90 days or more and still accruing interest	0			$ 0		$ 70,000
Number of Contracts | Contract			4	2	4	7
Foreclosed residential real estate properties	251,000			$ 251,000
Commercial Mortgage [Member]
Accounts Notes And Loans Receivable [Line Items]
Outstanding default loans					$ 243,000
Number of Contracts | Contract						1
Consumer Installment [Member]
Accounts Notes And Loans Receivable [Line Items]
Outstanding default loans				$ 22,000
Commercial Loans [Member]
Accounts Notes And Loans Receivable [Line Items]
Outstanding default loans		$ 64,000
Number of Contracts | SecurityLoan				2	2	2
Residential Mortgage Loans [Member]
Accounts Notes And Loans Receivable [Line Items]
Number of Contracts | Contract				1
Foreclosed residential real estate properties	611,000			$ 611,000
Residential Mortgage Loans [Member] | Affinity Bancorp, Inc [Member]
Accounts Notes And Loans Receivable [Line Items]
Non-accrual loans	76,000		$ 76,000	76,000	$ 76,000	$ 76,000
Lessors of Nonresidential Buildings [Member] | Credit Concentration Risk [Member]
Accounts Notes And Loans Receivable [Line Items]
Loans	71,900,000			71,900,000		69,500,000
Lessors of Residential Buildings and Dwellings [Member] | Credit Concentration Risk [Member]
Accounts Notes And Loans Receivable [Line Items]
Loans	$ 58,300,000			$ 58,300,000		$ 54,700,000
Outstanding Loans [Member] | Lessors of Nonresidential Buildings [Member] | Credit Concentration Risk [Member] | Loans Receivable [Member]
Accounts Notes And Loans Receivable [Line Items]
Outstanding loans receivable, Percentage				18.40%		18.50%
Outstanding Loans [Member] | Lessors of Residential Buildings and Dwellings [Member] | Credit Concentration Risk [Member] | Loans Receivable [Member]
Accounts Notes And Loans Receivable [Line Items]
Outstanding loans receivable, Percentage				14.90%		14.60%

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Securities - Summary of Amortized Cost, Unrealized Gains and Losses, and Estimated Fair Value of Company's Investment Securities Held to Maturity (Detail) - USD ($) $ in Thousands	Jun. 30, 2015	Dec. 31, 2014
Schedule Of Held To Maturity Securities [Line Items]
Amortized Cost	$ 15,682	$ 15,956
Gross Unrealized Gains	197	600
Gross Unrealized Losses	(99)	(12)
Securities held to maturity, fair value	15,780	16,544
Obligations of States and Political Subdivisions [Member]
Schedule Of Held To Maturity Securities [Line Items]
Amortized Cost	15,201	15,475
Gross Unrealized Gains	197	564
Gross Unrealized Losses	(98)	(12)
Securities held to maturity, fair value	15,300	16,027
Other Debt Securities [Member]
Schedule Of Held To Maturity Securities [Line Items]
Amortized Cost	481	481
Gross Unrealized Gains		36
Gross Unrealized Losses	(1)
Securities held to maturity, fair value	$ 480	$ 517

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Deposits - Additional Information (Detail) - USD ($) $ in Millions	Jun. 30, 2015	Dec. 31, 2014
Deposits [Abstract]
Brokered deposits	$ 93.4	$ 74.6

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Regulatory Matters - Schedule of Bank's Capital Amounts and Ratios (Detail) - USD ($) $ in Thousands	Jun. 30, 2015	Dec. 31, 2014
Banking And Thrift [Abstract]
Total capital (to risk-weighted assets), Actual Amount	$ 46,863	$ 45,327
Tier 1 capital (to risk-weighted assets), Actual Amount	44,262	42,979
Tier 1 common equity capital (to risk-weighted assets), Actual Amount	44,262
Tier 1 capital (to total assets), Actual Amount	$ 44,262	$ 42,979
Total capital (to risk-weighted assets), Actual Ratio	12.25%	12.87%
Tier 1 capital (to risk-weighted assets), Actual Ratio	11.57%	12.20%
Tier 1 common equity capital (to risk-weighted assets), Actual Ratio	11.57%
Tier 1 capital (to total assets), Actual Ratio	9.40%	9.34%
Total capital (to risk-weighted assets), Minimum Capital Requirement Amount	$ 30,616	$ 28,177
Tier 1 capital (to risk-weighted assets), Minimum Capital Requirement Amount	22,962	14,088
Tier 1 common equity capital (to risk-weighted assets), Minimum Capital Requirement Amount	17,222
Tier 1 capital (to total assets), Minimum Capital Requirement Amount	$ 18,840	$ 18,410
Total capital (to risk-weighted assets), Minimum Capital Requirement Ratio	8.00%	8.00%
Tier One Risk Based Capital Required To Be Adequately Capitalized	6.00%	4.00%
Tier 1 common equity capital (to risk-weighted assets), Minimum Capital Requirement Ratio	4.50%
Tier 1 capital (to total assets), Minimum Capital Requirement Ratio	4.00%	4.00%
Total capital (to risk-weighted assets), To be Well Capitalized under Prompt Corrective Action Provisions Amount	$ 38,271	$ 35,221
Tier 1 capital (to risk-weighted assets), To be Well Capitalized under Prompt Corrective Action Provisions Amount	30,616	21,132
Tier 1 common equity capital (to risk-weighted assets), To be Well Capitalized under Prompt Corrective Action Provisions Amount	24,876
Tier 1 capital (to total assets), To be Well Capitalized under Prompt Corrective Action Provisions Amount	$ 23,550	$ 23,012
Total capital (to risk-weighted assets), To be Well Capitalized under Prompt Corrective Action Provisions Ratio	10.00%	10.00%
Tier One Risk Based Capital Required To Be Well Capitalized	8.00%	6.00%
Tier 1 common equity capital (to risk-weighted assets), To be Well Capitalized under Prompt Corrective Action Provisions Ratio	6.50%
Tier 1 capital (to total assets), To be Well Capitalized under Prompt Corrective Action Provisions Ratio	5.00%	5.00%

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Loans Receivable and Related Allowance for Loan Losses - Nonaccrual Loans by Classes of Loan Portfolio (Detail) - USD ($) $ in Thousands	Jun. 30, 2015	Dec. 31, 2014
Financing Receivable Recorded Investment Past Due [Line Items]
Nonaccrual loans	$ 4,034	$ 4,484
Commercial and Industrial [Member]
Financing Receivable Recorded Investment Past Due [Line Items]
Nonaccrual loans	1,324	1,474
Commercial Mortgage [Member]
Financing Receivable Recorded Investment Past Due [Line Items]
Nonaccrual loans	2,209	2,370
Other Consumer Loans [Member]
Financing Receivable Recorded Investment Past Due [Line Items]
Nonaccrual loans	248	262
Residential Mortgage Loans [Member]
Financing Receivable Recorded Investment Past Due [Line Items]
Nonaccrual loans	235	347
Home Equity Lines of Credit [Member]
Financing Receivable Recorded Investment Past Due [Line Items]
Nonaccrual loans	$ 18	$ 31

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Summary of Significant Accounting Policies

6 Months Ended

Jun. 30, 2015

Accounting Policies [Abstract]

Summary of Significant Accounting Policies

Note 1—Summary of Significant Accounting Policies

Organization and Nature of Operations

First Priority Financial Corp.

First Priority Financial Corp. (“First Priority,” the “Company”) is a bank holding company incorporated under the laws of the Commonwealth of Pennsylvania on February 13, 2007. On May 11, 2007, as a result of a reorganization and merger, First Priority Bank (the “Bank”) became a wholly-owned subsidiary of First Priority.  First Priority, primarily through the Bank, serves residents and businesses in the Delaware Valley with branches in Berks, Bucks, Chester and Montgomery counties in Pennsylvania.  The Bank, which has 9 retail branch office locations as of June 30, 2015, is a locally managed community bank providing commercial banking products, primarily loans and deposits, headquartered in Malvern, PA.

First Priority provides banking services through First Priority Bank and does not engage in any activities other than banking and related activities. As of June 30, 2015, First Priority had total assets of $503.9 million and total shareholders’ equity of $50.8 million.

First Priority Bank

First Priority Bank is a state-chartered commercial banking institution which was incorporated under the laws of the Commonwealth of Pennsylvania on May 25, 2005. First Priority Bank’s deposits are insured by the FDIC up to the maximum amount permitted for all banks. As of June 30, 2015, First Priority Bank had total assets of $503.6 million, total loans of $391.3 million, total deposits of $378.1 million and total shareholder’s equity of $50.0 million.

First Priority Bank engages in a full service commercial and consumer banking business with strong private banking and individual wealth management services. First Priority Bank offers a variety of consumer, private banking and commercial loans, mortgage products and commercial real estate financing. The Company’s operations are significantly affected by prevailing economic conditions, competition, and the monetary, fiscal, and regulatory policies of governmental agencies. Lending activities are influenced by a number of factors, including the general credit needs of individuals and small and medium-sized businesses in the Company’s market area, competition, the current regulatory environment, the level of interest rates, and the availability of funds. Deposit flows and costs of funds are influenced by prevailing market rates of interest, competition, account maturities, and the level of personal income and savings in the market area.

First Priority Bank also offers certain financial planning and investment management services. These investment services are provided by First Priority Financial Services, a Division of First Priority Bank, through an agreement with a third party provider. In addition, various life insurance products are offered through First Priority Bank, and the Bank has also entered into solicitation agreements with several investment advisors to provide portfolio management services to customers of the Bank.

First Priority Bank currently seeks deposits and commercial and private banking relationships through its nine banking offices. The Bank provides deposit products that include checking, money market and savings accounts, and certificates of deposit as well as other deposit services, including cash management and electronic banking products and online account opening capabilities. The Bank obtains funding in the local community by providing excellent service and competitive rates to its customers and utilizes electronic and print media advertising to attract current and potential deposit customers. The Bank also uses brokered certificates of deposit as a cost effective funding alternative.

Basis of Presentation

The accompanying unaudited consolidated financial statements consist of the Company and the Company’s wholly owned consolidated subsidiary, the Bank.  All significant intercompany accounts and transactions have been eliminated in consolidation.

These statements are prepared in accordance with instructions to Form 10-Q, and therefore, do not include information or all footnotes necessary for a complete presentation of financial position, results of operations and cash flows in conformity with accounting principles generally accepted in the United States (“GAAP”). However, all normal recurring adjustments that, in the opinion of management, are necessary for a fair presentation of these financial statements have been included. These financial statements should be read in conjunction with the audited consolidated financial statements and the notes thereto for First Priority Financial Corp. for the year ended December 31, 2014, included in the Company’s Form 10-K filed with the Securities and Exchange Commission on March 27, 2015. The results of interim periods presented are not necessarily indicative of the results that may be expected for the year ending December 31, 2015.  

Subsequent Events

The Company has evaluated subsequent events for potential recognition and/or disclosure through the date these unaudited consolidated financial statements were issued.

Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Material estimates that are particularly susceptible to significant change in the near term relate to the determination of the allowance for loan losses, stock-based compensation, impairment of goodwill, impairment of investments, the valuation of deferred tax assets and the valuation of other real estate owned.

Acquired Loans

Acquired loans are initially recorded at their acquisition date fair values. The carryover of allowance for loan losses is prohibited as any credit losses in the loans are included in the determination of the fair value of the loans at the acquisition date. Fair values for acquired loans are based on a discounted cash flow methodology that involves assumptions and judgments as to credit risk, prepayment risk, liquidity risk, default rates, loss severity, payment speeds, collateral values and discount rate.

Acquired loans that have evidence of deterioration in credit quality since origination and for which it is probable, at acquisition, that the Company will be unable to collect all contractually required payments are accounted for as impaired loans under ASC 310-30. The excess of cash flows expected at acquisition over the estimated fair value is referred to as the accretable discount and is recognized into interest income over the remaining life of the loans. The difference between contractually required payments at acquisition and the cash flows expected to be collected at acquisition is referred to as the non-accretable discount. The non-accretable discount represents estimated future credit losses expected to be incurred over the life of the loan. Subsequent decreases to the expected cash flows require the Company to evaluate the need for an allowance for loan losses on these loans. Subsequent improvements in expected cash flows result in the reversal of a corresponding amount of the non-accretable discount which the Company then reclassifies as an accretable discount that is recognized into interest income over the remaining life of the loans using the interest method.

Acquired loans that met the criteria for non-accrual of interest prior to acquisition may be considered performing upon acquisition, or in the future, regardless of whether the customer is contractually delinquent, if the Company can reasonably estimate the timing and amount of the expected cash flows on such loans and if the Company expects to fully collect the new carrying value of the loans. As such, the Company may no longer consider the loan to be non-accrual or non-performing and may accrue interest on these loans, including the impact of any accretable discount. For acquired loans that are not deemed impaired at acquisition, credit discounts representing the principal losses expected over the life of the loan are a component of the initial fair value and amortized over the life of the asset. Subsequent to the acquisition date, the methods utilized to estimate the required allowance for loan losses for these loans is similar to originated loans, however, the Company records a provision for loan losses only when the required allowance exceeds any remaining pooled discounts for loans evaluated collectively for impairment.

Allowance for Loan Losses

The allowance for credit losses consists of the allowance for loan losses and the reserve for unfunded lending commitments. The allowance for loan losses represents management’s estimate of losses inherent in the loan portfolio as of the balance sheet date and is recorded as a reduction to loans. The reserve for unfunded lending commitments, totaling $35 thousand as of both June 30, 2015 and December 31, 2014, represents management’s estimate of losses inherent in its unfunded loan commitments and is recorded in other liabilities on the consolidated balance sheet. The allowance for loan losses is increased by the provision for loan losses, and decreased by charge-offs, net of recoveries. Loans deemed to be uncollectible are charged against the allowance for loan losses, and subsequent recoveries, if any, are credited to the allowance. All, or part, of the principal balance of loans receivable are charged off to the allowance as soon as it is determined that the repayment of all, or part, of the principal balance is highly unlikely. Because all identified losses are immediately charged off, no portion of the allowance for loan losses is restricted to any individual loan or groups of loans, and the entire allowance is available to absorb any and all loan losses.

The allowance for loan losses is maintained at a level considered adequate to provide for losses that can be reasonably anticipated. Management performs a quarterly evaluation of the adequacy of the allowance. The allowance is based on the Company’s past loan loss experience, known and inherent risks in the portfolio, adverse situations that may affect the borrower’s ability to repay, the estimated value of any underlying collateral, composition of the loan portfolio, current economic conditions and other relevant factors. This evaluation is inherently subjective as it requires material estimates that may be susceptible to significant revision as more information becomes available.

The allowance consists of specific, general and unallocated components. The specific component relates to loans that are classified as impaired. For loans that are classified as impaired, an allowance is established when the discounted cash flows (or collateral value or observable market price) of the impaired loan is lower than the carrying value of that loan. The general component covers pools of loans by loan class including commercial loans not considered impaired, as well as smaller balance homogeneous loans, such as residential real estate, home equity and other consumer loans. These pools of loans are evaluated for loss exposure based upon historical loss rates for each of these categories of loans, adjusted for qualitative factors. These qualitative risk factors include:

1. Lending policies and procedures, including underwriting standards and collection, charge-off, and recovery practices.

2. National, regional, and local economic and business conditions as well as the condition of various market segments, including the value of underlying collateral for collateral dependent loans.

3. Nature and volume of the portfolio and terms of loans.

4. Management team with experience, depth, and knowledge in banking and in many areas of lending. Each contributes to the sound credit culture and control within the Company.

5. Volume and severity of past due, classified and nonaccrual loans as well as other loan modifications.

6. The Company engages a third party to perform an independent review of the loan portfolio as a measure for quality and consistency in credit evaluation and credit decisions.

7. Existence and effect of any concentrations of credit and changes in the level of such concentrations.

8. Effect of external factors, such as competition and legal and regulatory requirements.

Each factor is assigned a value to reflect improving, stable or declining conditions based on management’s best judgment using relevant information available at the time of the evaluation. Adjustments to the factors are supported through documentation of changes in conditions in a narrative accompanying the allowance for loan loss calculation.

A majority of the Company’s loans are to business owners of many types. The Company makes commercial loans for real estate development and other business purposes required by our customers.

The Company’s credit policies determine advance rates against the different forms of collateral that can be pledged against commercial loans. Typically, the majority of loans will be limited to a percentage of their underlying collateral values such as real estate values, equipment, eligible accounts receivable and inventory. Individual loan advance rates may be higher or lower depending upon the financial strength of the borrower and/or term of the loan. The assets financed through commercial loans are used within the business for its ongoing operation. Repayment of these kinds of loans generally comes from the cash flow of the business or the ongoing conversions of assets. Commercial real estate loans include long-term loans financing commercial properties. Repayment of this kind of loan is dependent upon either the ongoing cash flow of the borrowing entity or the resale of or lease of the subject property. Commercial real estate loans typically require a loan to value ratio of not greater than 80% and vary in terms.

Residential mortgages and home equity loans are secured by the borrower’s residential real estate in either a first or second lien position. Residential mortgages and home equity loans have varying loan rates depending on the financial condition of the borrower and the loan to value ratio. Residential mortgages have amortizations up to 30 years and home equity loans have maturities of no more than 15 years.  Residential mortgages and home equity loans typically require a loan to value ratio of not greater than 80%.

Other consumer loans include installment loans, car loans, and overdraft lines of credit. The majority of these loans are secured.

An unallocated component is maintained to cover uncertainties that could affect management’s estimate of probable losses. The unallocated component of the allowance reflects the margin of imprecision inherent in the underlying assumptions used in the methodologies for estimating specific and general losses in the portfolio.

A loan is considered impaired when, based on current information and events, it is probable that the Company will be unable to collect the scheduled payments of principal or interest when due according to the contractual terms of the loan agreement. Factors considered by management in determining impairment include payment status, collateral value and the probability of collecting scheduled principal and interest payments when due. Loans that experience insignificant payment delays and payment shortfalls generally are not classified as impaired. Management determines the significance of payment delays and payment shortfalls on a case by case basis, taking into consideration all of the circumstances surrounding the loan and the borrower, including the length of the delay, the reasons for the delay, the borrower’s prior payment record and the amount of the shortfall in relation to the principal and interest owed.

Impairment is measured on a loan by loan basis for commercial and industrial loans, commercial real estate loans and commercial construction loans by 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.

An allowance for loan losses is established for an impaired loan if its carrying value exceeds its estimated fair value. The estimated fair values of substantially all of the Company’s impaired loans are measured based on the estimated fair value of the loan’s collateral.

For commercial loans secured by real estate, estimated fair values are determined primarily through third-party appraisals. When a real estate secured loan becomes impaired, a decision is made regarding whether an updated certified appraisal of the real estate is necessary. This decision is based on various considerations, including the age of the most recent appraisal, the loan-to-value ratio based on the original appraisal and the condition of the property. Appraised values may be discounted to arrive at the estimated selling price of the collateral, which is considered to be the estimated fair value. The discounts also include estimated costs to sell the property.

For commercial and industrial loans secured by non-real estate collateral, such as accounts receivable, inventory and equipment, estimated fair values are determined based on the borrower’s financial statements, inventory reports, accounts receivable aging or equipment appraisals or invoices. Indications of value from these sources are generally discounted based on the age of the financial information or the quality of the assets.

Large groups of smaller balance homogeneous loans are collectively evaluated for impairment. Accordingly, the Company does not separately identify individual residential mortgage loans, home equity loans and other consumer loans for impairment disclosures, unless such loans are the subject of a troubled debt restructuring agreement.

Acquired loans are recorded at acquisition date at their acquisition date fair values, and therefore, are excluded from the calculation of loan loss reserves as of the acquisition date. To the extent there is a decrease in the present value of cash flows expected from the acquired impaired loans after the date of acquisition, the Company records a provision for loan losses. During the three and six months ended June 30, 2015, the Company recorded a provision for loan losses totaling $23 thousand and $65 thousand, respectively, for acquired impaired loans. During the three and six months ended June 30, 2014, the Company recorded a provision for loan losses totaling $130 thousand $250 thousand, respectively, for acquired impaired loans.

For acquired loans that are not deemed impaired at acquisition, credit discounts representing principal losses expected over the life of the loan are a component of the initial fair value. Subsequent to the acquisition date, the methods used to estimate the required allowance for loan losses for these loans is similar to originated loans, however, the Company records a provision for loan losses only when the required allowance exceeds any remaining unamortized general credit fair value adjustment for loans evaluated collectively for impairment.

The allowance calculation methodology includes further segregation of loan classes into risk rating categories. The borrower’s overall financial condition, repayment sources, guarantors and value of collateral, if appropriate, are evaluated annually for commercial loans or when credit deficiencies arise, such as delinquent loan payments, for commercial and consumer loans. Credit quality risk ratings include regulatory classifications of special mention, substandard, doubtful and loss. Loans criticized special mention have potential weaknesses that deserve management’s close attention. If uncorrected, the potential weaknesses may result in deterioration of the repayment prospects. Loans classified substandard have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt. They include loans that are inadequately protected by the current sound net worth and paying capacity of the obligor or of the collateral pledged, if any. Loans classified doubtful have all the weaknesses inherent in loans classified substandard with the added characteristic that collection or liquidation in full, on the basis of current conditions and facts, is highly improbable. Loans classified as a loss are considered uncollectible and are charged to the allowance for loan losses. Loans not classified are rated pass.

In addition, Federal regulatory agencies, as an integral part of their examination process, periodically review the Company’s allowance for loan losses and may require the Company to recognize additions to the allowance based on their judgments about information available to them at the time of their examination, which may not be currently available to management. Based on management’s comprehensive analysis of the loan portfolio, management believes the current level of the allowance for loan losses is adequate.

Comprehensive Income

Accounting principles generally accepted in the United States of America require that recognized revenue, expenses, gains and losses be included in net income. Although certain changes in assets and liabilities are reported as a separate component of the shareholders’ equity section of the balance sheet, such items, along with net income, are components of total comprehensive income. During the year ended December 31, 2014, the Company reversed the full valuation allowance on deferred tax assets and therefore, the Consolidated Statements of Comprehensive Income for the three and six months ended June 30, 2015 is presented net of the effect of income taxes.  The Consolidated Statements of Comprehensive Income for the three and six months ended June 30, 2014 does not include the effects of income taxes due to the full valuation allowance on net deferred tax assets.

Total reclassifications from accumulated other comprehensive losses for the periods presented are as follows:

Details about Accumulated Other Comprehensive Loss Components	Amounts Reclassified from Accumulated Other Comprehensive Loss												Affected Line Item in the Statement where Net Income is Presented
	For the three months ended June 30,						For the six months ended June 30,
	2015			2014			2015			2014
	(Dollars in thousands)						(Dollars in thousands)
Amortization of net unrealized holding losses on securities transferred from available-for-sale to held-to-maturity	$	(7	)	$	(11	)	$	(20	)	$	(25	)	Interest Income
Tax effect		3			-			7			-		Federal Income Tax Expense
Total reclassification	$	(4	)	$	(11	)	$	(13	)	$	(25	)

Accumulated other comprehensive loss as of June 30, 2015 and December 31, 2014 consisted of the following:

	June 30,			December 31,
	2015			2014
	(Dollars in thousands)
Net unrealized loss on available for sale securities	$	(116	)	$	(57	)
Net unrealized holding gains on securities transferred    between available for sale and held to maturity		37			51
Total	$	(79	)	$	(6	)

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Fair Value Measurements and Fair Values of Financial Instruments - Summary of Financial Assets Measured at Fair Value on Recurring Basis (Detail) - USD ($) $ in Thousands	Jun. 30, 2015	Dec. 31, 2014
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Total assets measured at fair value on a recurring basis	$ 61,593	$ 75,557
(Level 1) Quoted Prices in Active Markets for Identical Assets [Member]
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Total assets measured at fair value on a recurring basis	182	25
(Level 2) Significant Other Observable Inputs [Member]
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Total assets measured at fair value on a recurring basis	61,411	75,532
Obligations of U.S. Government Agencies and Corporations [Member]
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Total assets measured at fair value on a recurring basis	27,119	49,276
Obligations of U.S. Government Agencies and Corporations [Member] | (Level 2) Significant Other Observable Inputs [Member]
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Total assets measured at fair value on a recurring basis	27,119	49,276
Obligations of States and Political Subdivisions [Member]
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Total assets measured at fair value on a recurring basis	14,643	4,871
Obligations of States and Political Subdivisions [Member] | (Level 2) Significant Other Observable Inputs [Member]
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Total assets measured at fair value on a recurring basis	14,643	4,871
Federal Agency Mortgage-Backed Securities [Member]
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Total assets measured at fair value on a recurring basis	18,719	20,351
Federal Agency Mortgage-Backed Securities [Member] | (Level 2) Significant Other Observable Inputs [Member]
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Total assets measured at fair value on a recurring basis	18,719	20,351
Federal Agency Collateralized Mortgage Obligations [Member]
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Total assets measured at fair value on a recurring basis	430	532
Federal Agency Collateralized Mortgage Obligations [Member] | (Level 2) Significant Other Observable Inputs [Member]
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Total assets measured at fair value on a recurring basis	430	532
Other Debt Securities [Member]
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Total assets measured at fair value on a recurring basis	500	502
Other Debt Securities [Member] | (Level 2) Significant Other Observable Inputs [Member]
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Total assets measured at fair value on a recurring basis	500	502
Money Market Mutual Fund [Member]
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Total assets measured at fair value on a recurring basis	182	25
Money Market Mutual Fund [Member] | (Level 1) Quoted Prices in Active Markets for Identical Assets [Member]
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Total assets measured at fair value on a recurring basis	$ 182	$ 25

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Loans Receivable and Related Allowance for Loan Losses - Changes in Accretable Yield Related to Purchased-Credit-Impaired Loans (Detail) $ in Thousands	6 Months Ended
	Jun. 30, 2014 USD ($)
Receivables [Abstract]
Accretable yield balance, beginning of period	$ 56
Accretion to interest income	(171)
Reclassification from nonaccretable difference and disposals, net	146
Accretable yield balance, end of period	$ 31

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Summary of Significant Accounting Policies - Additional Information (Detail)	3 Months Ended		6 Months Ended
	Jun. 30, 2015 USD ($)	Jun. 30, 2014 USD ($)	Jun. 30, 2015 USD ($) Branch	Jun. 30, 2014 USD ($)	Dec. 31, 2014 USD ($)	Dec. 31, 2013 USD ($)
Summary Of Significant Accounting Policies [Line Items]
Entity date of formation			Feb. 13, 2007
Agreement of reorganization and merger date			May 11, 2007
Number of retail branch office locations | Branch			9
Total assets	$ 503,945,000		$ 503,945,000		$ 492,311,000
Total Shareholders' Equity	50,791,000	$ 44,581,000	50,791,000	$ 44,581,000	50,211,000	$ 42,392,000
Loans receivable	391,319,000		391,319,000		375,222,000
Deposits, Carrying Amount	377,466,000		377,466,000		378,209,000
Portion of allowance for loan losses			$ 0
Residential mortgages amortization period, description			Residential mortgages have amortizations up to 30 years
Home equity loans maturity period, description			Home equity loans have maturities of no more than 15 years.
Provision for loan losses on acquired loans	23,000	$ 130,000	$ 65,000	$ 250,000
Maximum [Member]
Summary Of Significant Accounting Policies [Line Items]
Commercial real estate percentage of loan to value ratio			80.00%
Residential mortgages amortization period			30 years
Home equity loans maturity period			15 years
Residential mortgages home equity percentage of loan to value ratio			80.00%
Reserve For Off Balance Sheet Activities [Member]
Summary Of Significant Accounting Policies [Line Items]
Reserve for unfunded lending commitments	35,000		$ 35,000		$ 35,000
First Priority Bank [Member]
Summary Of Significant Accounting Policies [Line Items]
Entity date of formation			May 25, 2005
Total assets	503,600,000		$ 503,600,000
Total Shareholders' Equity	50,000,000		50,000,000
Loans receivable	391,300,000		391,300,000
Deposits, Carrying Amount	$ 378,100,000		$ 378,100,000

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Fair Value Measurements and Fair Values of Financial Instruments (Tables)

6 Months Ended

Jun. 30, 2015

Fair Value Disclosures [Abstract]

Summary of Financial Assets Measured at Fair Value on Recurring Basis

For financial assets measured at fair value on a recurring basis, the fair value measurements by level within the fair value hierarchy used at June 30, 2015 and December 31, 2014 are as follows:

Description	Fair Value		(Level 1) Quoted Prices in Active Markets for Identical Assets		(Level 2) Significant Other Observable Inputs		(Level 3) Significant Unobservable Inputs
	(Dollars in thousands)
As of June 30, 2015:
Investment securities available for sale:
Obligations of U.S. government agencies and    corporations	$	27,119	$	—	$	27,119	$	—
Obligations of states and political subdivisions		14,643		—		14,643		—
Federal agency mortgage-backed securities		18,719		—		18,719		—
Federal agency collateralized mortgage obligations		430		—		430		—
Other debt securities		500		—		500		—
Money market mutual fund		182		182		—		—
Total assets measured at fair value on a recurring basis	$	61,593	$	182	$	61,411	$	—
As of December 31, 2014:
Investment securities available for sale:
Obligations of U.S. government agencies and    corporations	$	49,276	$	—	$	49,276	$	—
Obligations of states and political subdivisions		4,871		—		4,871		—
Federal agency mortgage-backed securities		20,351		—		20,351		—
Federal agency collateralized mortgage obligations		532		—		532		—
Other debt securities		502		—		502		—
Money market mutual fund		25		25		—		—
Total assets measured at fair value on a recurring basis	$	75,557	$	25	$	75,532	$	—

Summary of Financial Assets Measured at Fair Value on Nonrecurring Basis

For financial assets measured at fair value on a nonrecurring basis, the fair value measurements by level within the fair value hierarchy used at June 30, 2015 and December 31, 2014 are as follows:

Description	Fair Value		(Level 1) Quoted Prices in Active Markets for Identical Assets		(Level 2) Significant Other Observable Inputs		(Level 3) Significant Unobservable Inputs
	(Dollars in thousands)
As of June 30, 2015:
Impaired loans	$	4,567	$	—	$	—	$	4,567
Other real estate owned		977		—		—		977
Total assets measured at fair value on a    nonrecurring basis	$	5,544	$	—	$	—	$	5,544
As of December 31, 2014:
Impaired loans	$	2,205	$	—	$	—	$	2,205
Repossessed assets		42		—		—		42
Other real estate owned		105		—		—		105
Total assets measured at fair value on a    nonrecurring basis	$	2,352	$	—	$	—	$	2,352

Quantitative Information about Level 3 Fair Value Measurements

Quantitative information about Level 3 fair value measurements at June 30, 2015 is included in the table below:

	Fair Value		Valuation Techniques	Unobservable Inputs	Estimated Ratings (Weighted Average) (3)
	(Dollars in thousands)
Impaired loans	$	4,567	Appraisal of real estate collateral (1)	Appraisal adjustments(2)	0%-50% (1.94%)
			Valuation of business assets used as collateral(1)	Valuation adjustments(2)	25%-30%
				Liquidation expenses	2%-8% (6.16%)
Other real estate owned	$	977	Appraisal of collateral(1)	Appraisal adjustments(2)	0%-27%       (4.39%)
				Liquidation expenses	7%-8.5% (8.36%)

Quantitative information about Level 3 fair value measurements at December 31, 2014 is included in the table below:

	Fair Value		Valuation Techniques	Unobservable Inputs	Estimated Ratings (Weighted Average) (3)
	(Dollars in thousands)
Impaired loans	$	2,205	Appraisal of real estate collateral (1)	Appraisal adjustments(2)	0%-5%                (0.12%)
			Valuation of business assets used as collateral(1)	Valuation adjustments(2)	25%-30%
				Liquidation expenses	8% (8.00%)
Repossessed assets	$	42	Appraisal of collateral(1)	Valuation adjustments(2)		7%
				Liquidation expenses		8%
Other real estate owned	$	105	Appraisal of collateral(1)	Appraisal adjustments(2)	None
				Liquidation expenses	7%-8% (7.79%)

(1) Fair Value is generally determined through independent appraisals of the underlying collateral, which include Level 3 inputs that are not identifiable.

(2) Appraisals are adjusted by management for qualitative factors such as economic conditions and estimated liquidation expenses.

(3) The range and weighted average of qualitative factors such as economic conditions and estimated liquidation expenses are presented as a percent of the appraised value.

Summary of Estimated Fair Values of Company's Financial Instruments

At June 30, 2015 and December 31, 2014, the estimated fair values of the Company’s financial instruments were as follows:

	June 30, 2015
	Carrying Amount		Fair Value		Level 1		Level 2		Level 3
	(Dollars in thousands)
Assets:
Cash and cash equivalents	$	18,083	$	18,083	$	18,083	$	—	$	—
Securities available for sale		61,593		61,593		182		61,411		—
Securities held to maturity		15,682		15,780		—		15,780		—
Loans receivable, net		388,753		396,109		—		—		396,109
Restricted stock		3,347		3,347		—		3,347		—
Accrued interest receivable		1,601		1,601		—		1,601		—
Liabilities:
Deposits		377,466		378,334		—		378,334		—
Short-term borrowings		63,208		63,208		—		63,208		—
Long-term debt		11,000		10,986		—		10,986		—
Accrued interest payable		346		346		—		346		—
Off-balance sheet credit related instruments:
Commitments to extend credit		—		—		—		—		—

	December 31, 2014
	Carrying Amount		Fair Value		Level 1		Level 2		Level 3
	(Dollars in thousands)
Assets:
Cash and cash equivalents	$	7,866	$	7,866	$	7,866	$	—	$	—
Securities available for sale		75,557		75,557		25		75,532		—
Securities held to maturity		15,956		16,544		—		16,544		—
Loans receivable, net		372,909		380,257		—		—		380,257
Restricted stock		2,984		2,984		—		2,984		—
Accrued interest receivable		1,511		1,511		—		1,511		—
Liabilities:
Deposits		378,209		379,203		—		379,203		—
Short-term borrowings		51,472		51,472		—		51,472		—
Long-term debt		11,000		10,936		—		10,936		—
Accrued interest payable		356		356		—		356		—
Off-balance sheet credit related instruments:
Commitments to extend credit		—		—		—		—		—

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Stock Compensation Program - Summary of Stock Option Activity (Detail) - Jun. 30, 2015 - $ / shares	Total
Disclosure Of Compensation Related Costs Sharebased Payments [Abstract]
Options, Beginning balance, Shares	866,613
Options, Forfeited/cancelled, Shares	(5,098)
Options, expired, Shares	(34,348)
Options, Ending balance, Shares	827,167
Options, Exercisable, Shares	424,167
Options, Beginning balance, Weighted Average Exercise Price	$ 6.89
Options, Forfeited/cancelled, Weighted Average Exercise Price	5.36
Options, Expired, Weighted Average Exercise Price	8.97
Options, Ending balance, Weighted Average Exercise Price	6.81
Options, Exercisable, Weighted Average Exercise Price	$ 8.24

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Loans Receivable and Related Allowance for Loan Losses - Activity in Allowance for Loan Losses by Loan Class (Detail) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2015	Jun. 30, 2014	Jun. 30, 2015	Jun. 30, 2014
Financing Receivable Allowance For Credit Losses [Line Items]
Allowance for Loan Losses, Beginning Balance	$ 2,377	$ 2,219	$ 2,313	$ 2,273
Allowance for Loan Losses, Charge-offs	(31)	(253)	(100)	(429)
Allowance for Loan Losses, Recoveries	90	16	103	33
Allowance for Loan Losses, Provision for loan losses	130	255	250	360
Allowance for Loan Losses, Ending Balance	2,566	2,237	2,566	2,237
Residential Mortgage Loans [Member]
Financing Receivable Allowance For Credit Losses [Line Items]
Allowance for Loan Losses, Beginning Balance	163	150	159	149
Allowance for Loan Losses, Charge-offs		(25)	(14)	(25)
Allowance for Loan Losses, Provision for loan losses	12	96	30	97
Allowance for Loan Losses, Ending Balance	175	221	175	221
Home Equity Lines of Credit [Member]
Financing Receivable Allowance For Credit Losses [Line Items]
Allowance for Loan Losses, Beginning Balance	221	123	270	177
Allowance for Loan Losses, Charge-offs		(90)	(12)	(90)
Allowance for Loan Losses, Recoveries	84	4	88	8
Allowance for Loan Losses, Provision for loan losses	(75)	81	(116)	23
Allowance for Loan Losses, Ending Balance	230	118	230	118
Commercial and Industrial [Member]
Financing Receivable Allowance For Credit Losses [Line Items]
Allowance for Loan Losses, Beginning Balance	745	421	788	445
Allowance for Loan Losses, Charge-offs		(137)	(16)	(137)
Allowance for Loan Losses, Recoveries	2	6	7	16
Allowance for Loan Losses, Provision for loan losses	17	220	(15)	186
Allowance for Loan Losses, Ending Balance	764	510	764	510
Commercial Mortgage [Member]
Financing Receivable Allowance For Credit Losses [Line Items]
Allowance for Loan Losses, Beginning Balance	507	477	468	452
Allowance for Loan Losses, Charge-offs	(31)	(1)	(42)	(75)
Allowance for Loan Losses, Provision for loan losses	149	7	199	106
Allowance for Loan Losses, Ending Balance	625	483	625	483
Commercial Construction [Member]
Financing Receivable Allowance For Credit Losses [Line Items]
Allowance for Loan Losses, Beginning Balance	34	17	26	12
Allowance for Loan Losses, Charge-offs				(50)
Allowance for Loan Losses, Recoveries		2		2
Allowance for Loan Losses, Provision for loan losses	6	3	14	58
Allowance for Loan Losses, Ending Balance	40	22	40	22
Other Consumer Loans [Member]
Financing Receivable Allowance For Credit Losses [Line Items]
Allowance for Loan Losses, Beginning Balance	66	50	87	67
Allowance for Loan Losses, Charge-offs			(16)	(52)
Allowance for Loan Losses, Recoveries	4	4	8	7
Allowance for Loan Losses, Provision for loan losses	(3)	12	(12)	44
Allowance for Loan Losses, Ending Balance	67	66	67	66
Unallocated [Member]
Financing Receivable Allowance For Credit Losses [Line Items]
Allowance for Loan Losses, Beginning Balance	641	981	515	971
Allowance for Loan Losses, Provision for loan losses	24	(164)	150	(154)
Allowance for Loan Losses, Ending Balance	$ 665	$ 817	$ 665	$ 817

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Summary of Significant Accounting Policies - Schedule of Total Reclassifications from Accumulated Other Comprehensive Losses (Detail) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2015	Jun. 30, 2014	Jun. 30, 2015	Jun. 30, 2014
Reclassification Adjustment out Of Accumulated Other Comprehensive Income [Line Items]
Interest Income	$ 4,761	$ 4,686	$ 9,415	$ 9,160
Total reclassification	268	476	519	950
Reclassification out of Accumulated Other Comprehensive Income
Reclassification Adjustment out Of Accumulated Other Comprehensive Income [Line Items]
Federal income tax expenses	3		7
Total reclassification	(4)	(11)	(13)	(25)
Amortization Of Unrealized Holding Losses On Securities Transferred From Available For Sale To Held To Maturity | Reclassification out of Accumulated Other Comprehensive Income
Reclassification Adjustment out Of Accumulated Other Comprehensive Income [Line Items]
Interest Income	$ (7)	$ (11)	$ (20)	$ (25)

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Summary of Significant Accounting Policies - Schedule of Accumulated Other Comprehensive Loss (Detail) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended		12 Months Ended
	Jun. 30, 2015	Jun. 30, 2014	Jun. 30, 2015	Jun. 30, 2014	Dec. 31, 2014
Accumulated Other Comprehensive Income (Loss) [Line Items]
Net unrealized loss on available for sale securities	$ (484)	$ 490	$ (90)	$ 1,266
Net unrealized holding gains on securities transferred between available for sale and held to maturity	(4)	$ (11)	(13)	$ (162)
Total	(79)		(79)		$ (6)
Accumulated Other Comprehensive Income (Loss)
Accumulated Other Comprehensive Income (Loss) [Line Items]
Net unrealized loss on available for sale securities			(116)		(57)
Net unrealized holding gains on securities transferred between available for sale and held to maturity			37		51
Total	$ (79)		$ (79)		$ (6)

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Consolidated Statements of Cash Flows (Unaudited) - USD ($) $ in Thousands	6 Months Ended
	Jun. 30, 2015	Jun. 30, 2014
Cash Flows from Operating Activities
Net income	$ 896	$ 1,198
Adjustments to reconcile net income to net cash provided by operating activities:
Provision for Loan Losses	250	360
Provision for other real estate owned	137
Depreciation and amortization	215	229
Net amortization (accretion) of discount securities	112	(189)
Stock based compensation expense	134	127
Net gain on sale of other real estate	(88)	(16)
Net (gain) loss on disposal of premises and equipment	5	(7)
Bank owned life insurance policy income	(42)	(42)
Originations of loans held for sale	(1,196)	(350)
Proceeds from sale of loans held for sale	1,196	150
Deferred tax asset, net	383	0
(Increase) decrease in accrued interest receivable	(90)	19
Increase in other assets	(9)	(37)
Decrease in accrued interest payable	(9)	(38)
Increase (decrease) in other liabilities	76	(263)
Net Cash Provided by Operating Activities	1,970	1,141
Cash Flows from Investing Activities
Net originations in loans	(16,383)	(12,345)
Purchase of loans		(15,639)
Purchases of securities available for sale	(19,839)	(7,336)
Redemption of restricted stock	(363)	(519)
Proceeds from maturities or calls of securities available for sale	33,862	31,254
Proceeds from the sale of other real estate owned and repossessed assets	313	763
Purchases of premises and equipment	(81)	(118)
Proceeds from the sale of premises and equipment	4
Net purchase of bank owned life insurance		(3,000)
Net Cash Used in Investing Activities	(2,487)	(6,940)
Cash Flows from Financing Activities
Net decrease in deposits	(633)	(3,510)
Net increase in short-term borrowings	11,737	12,617
Cash dividends paid on preferred stock	(370)	(240)
Net Cash Provided by Financing Activities	10,734	8,867
Net Increase in Cash and Cash Equivalents	10,217	3,068
Cash and Cash Equivalents—Beginning	7,866	11,248
Cash and Cash Equivalents—Ending	18,083	14,316
Supplementary Disclosures of Cash Flows Information
Transfer of available for sale securities to held to maturity securities		3,840
Transfer of loans receivable to other real estate owned	232	694
Cash paid for interest on deposits and borrowings	1,662	$ 1,631
Cash paid for income taxes	$ 20

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Earnings Per Common Share - Additional Information (Detail) - Jun. 30, 2014 - shares shares in Thousands	Total	Total
Earnings Per Share [Abstract]
Common stock equivalent shares, excluded from earnings per share calculations	845	845

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Securities - Summary of Amortized Cost and Fair Value of Securities by Contractual Maturity (Detail) - USD ($) $ in Thousands	Jun. 30, 2015	Dec. 31, 2014
Investments Debt And Equity Securities [Line Items]
Amortized Cost, Due within one year, Available for Sale Securities	$ 500
Amortized Cost, Due after one year through five years, Available for Sale Securities	19,272
Amortized Cost, Due after five years through ten years, Available for Sale Securities	12,328
Amortized Cost, Due after ten years, Available for Sale Securities	10,408
Total Amortized Cost, Available for Sale Securities	42,508
Securities available for sale, amortized cost	61,769	$ 75,643
Fair Value, Due within one year, Available for Sale Securities	500
Fair Value, Due after one year through five years, Available for Sale Securities	19,225
Fair Value, Due after five years through ten years, Available for Sale Securities	12,171
Fair Value, Due after ten years, Available for Sale Securities	10,366
Total Fair Value, Available for Sale Securities	42,262
Fair Value	61,593	75,557
Amortized Cost, Due after one year through five years, Held to Maturity	391
Amortized Cost, Due after five years through ten years, Held to Maturity	1,295
Amortized Cost, Due after ten years, Held to Maturity	13,996
Amortized Cost	15,682	15,956
Fair Value, Due after one year through five years, Held to Maturity	390
Fair Value, Due after five years through ten years, Held to Maturity	1,305
Fair Value, Due after ten years, Held to Maturity	14,085
Total Fair Value	15,780	16,544
Federal Agency Collateralized Mortgage Obligations [Member]
Investments Debt And Equity Securities [Line Items]
Securities available for sale, amortized cost	429	532
Fair Value	430	532
Federal Agency Mortgage-Backed Securities [Member]
Investments Debt And Equity Securities [Line Items]
Securities available for sale, amortized cost	18,650	20,233
Fair Value	18,719	20,351
Money Market Mutual Fund [Member]
Investments Debt And Equity Securities [Line Items]
Securities available for sale, amortized cost	182	25
Fair Value	$ 182	$ 25

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Deposits - Scheduled Maturities of Time Deposits (Detail) $ in Thousands	Jun. 30, 2015 USD ($)
Deposits [Abstract]
6/30/2016............	$ 82,125
6/30/2017............	60,380
6/30/2018............	48,340
6/30/2019............	4,419
6/30/2020............	7,535
Total time deposits	$ 202,799

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Consolidated Balance Sheets (Unaudited) - USD ($) $ in Thousands	Jun. 30, 2015	Dec. 31, 2014
Assets
Cash and due from banks	$ 4,895	$ 5,038
Interest-bearing deposits in banks	13,188	2,828
Total cash and cash equivalents	18,083	7,866
Securities available for sale, at fair value (amortized cost: $61,769 and $75,643, respectively)	61,593	75,557
Securities held to maturity, at amortized cost (fair value: $15,780 and $16,544, respectively)	15,682	15,956
Loans receivable	391,319	375,222
Less: allowance for loan losses	2,566	2,313
Net loans	388,753	372,909
Restricted investments in bank stocks	3,347	2,984
Premises and equipment, net	2,234	2,369
Bank owned life insurance	3,135	3,093
Accrued interest receivable	1,601	1,511
Other real estate owned	1,169	1,257
Deferred tax asset, net	4,158	4,541
Goodwill	2,725	2,725
Intangible assets with finite lives, net	353	397
Other assets	1,112	1,146
Total Assets	503,945	492,311
Deposits:
Non-interest bearing	48,229	49,462
Interest-bearing	329,237	328,747
Total deposits	377,466	378,209
Short-term borrowings	63,208	51,472
Long-term debt	11,000	11,000
Accrued interest payable	346	356
Other liabilities	1,134	1,063
Total Liabilities	$ 453,154	$ 442,100
Commitments and contingencies
Shareholders’ Equity
Common stock, $1 par value; authorized 10,000,000 shares; issued and outstanding: 2015: 6,452,669; 2014: 6,447,019	$ 6,453	$ 6,447
Surplus	40,173	40,045
Accumulated deficit	(5,160)	(5,679)
Accumulated other comprehensive loss	(79)	(6)
Total Shareholders’ Equity	50,791	50,211
Total Liabilities and Shareholders’ Equity	503,945	492,311
Series A Preferred Stock [Member]
Shareholders’ Equity
Preferred stock, value	4,579	4,579
Series B Preferred Stock [Member]
Shareholders’ Equity
Preferred stock, value	229	229
Series C Preferred Stock [Member]
Shareholders’ Equity
Preferred stock, value	$ 4,596	$ 4,596

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Loans Receivable and Related Allowance for Loan Losses - Balance in Allowance for Loan Losses Disaggregated on Basis of Company's Impairment Method (Detail) - USD ($) $ in Thousands	Jun. 30, 2015	Mar. 31, 2015	Dec. 31, 2014	Jun. 30, 2014	Mar. 31, 2014	Dec. 31, 2013
Financing Receivable Allowance For Credit Losses [Line Items]
Allowance for Loan Losses, Ending Balance	$ 2,566	$ 2,377	$ 2,313	$ 2,237	$ 2,219	$ 2,273
Allowance for Loan Losses, Ending Balance: Individually Evaluated for Impairment	231		166
Allowance for Loan Losses, Ending Balance: Collectively Evaluated for Impairment	2,335		2,147
Total loans	391,497		375,292
Loans Receivables, Ending Balance: Individually Evaluated for Impairment	5,693		6,615
Loans Receivables, Ending Balance: Collectively Evaluated for Impairment	385,804		368,677
Residential Mortgage Loans [Member]
Financing Receivable Allowance For Credit Losses [Line Items]
Allowance for Loan Losses, Ending Balance	175	163	159	221	150	149
Allowance for Loan Losses, Ending Balance: Collectively Evaluated for Impairment	175		159
Total loans	83,986		80,134
Loans Receivables, Ending Balance: Individually Evaluated for Impairment	235		347
Loans Receivables, Ending Balance: Collectively Evaluated for Impairment	83,751		79,787
Home Equity Lines of Credit [Member]
Financing Receivable Allowance For Credit Losses [Line Items]
Allowance for Loan Losses, Ending Balance	230	221	270	118	123	177
Allowance for Loan Losses, Ending Balance: Individually Evaluated for Impairment			12
Allowance for Loan Losses, Ending Balance: Collectively Evaluated for Impairment	230		258
Total loans	26,646		27,902
Loans Receivables, Ending Balance: Individually Evaluated for Impairment	99		113
Loans Receivables, Ending Balance: Collectively Evaluated for Impairment	26,547		27,789
Commercial and Industrial [Member]
Financing Receivable Allowance For Credit Losses [Line Items]
Allowance for Loan Losses, Ending Balance	764	745	788	510	421	445
Allowance for Loan Losses, Ending Balance: Individually Evaluated for Impairment	134		147
Allowance for Loan Losses, Ending Balance: Collectively Evaluated for Impairment	630		641
Total loans	79,731		75,412
Loans Receivables, Ending Balance: Individually Evaluated for Impairment	1,524		2,131
Loans Receivables, Ending Balance: Collectively Evaluated for Impairment	78,207		73,281
Commercial Mortgage [Member]
Financing Receivable Allowance For Credit Losses [Line Items]
Allowance for Loan Losses, Ending Balance	625	507	468	483	477	452
Allowance for Loan Losses, Ending Balance: Individually Evaluated for Impairment	97		5
Allowance for Loan Losses, Ending Balance: Collectively Evaluated for Impairment	528		463
Total loans	175,556		168,969
Loans Receivables, Ending Balance: Individually Evaluated for Impairment	3,489		3,660
Loans Receivables, Ending Balance: Collectively Evaluated for Impairment	172,067		165,309
Commercial Construction [Member]
Financing Receivable Allowance For Credit Losses [Line Items]
Allowance for Loan Losses, Ending Balance	40	34	26	22	17	12
Allowance for Loan Losses, Ending Balance: Collectively Evaluated for Impairment	40		26
Total loans	9,193		6,497
Loans Receivables, Ending Balance: Collectively Evaluated for Impairment	9,193		6,497
Other Consumer Loans [Member]
Financing Receivable Allowance For Credit Losses [Line Items]
Allowance for Loan Losses, Ending Balance	67	66	87	66	50	67
Allowance for Loan Losses, Ending Balance: Individually Evaluated for Impairment			2
Allowance for Loan Losses, Ending Balance: Collectively Evaluated for Impairment	67		85
Total loans	16,385		16,378
Loans Receivables, Ending Balance: Individually Evaluated for Impairment	346		364
Loans Receivables, Ending Balance: Collectively Evaluated for Impairment	16,039		16,014
Unallocated [Member]
Financing Receivable Allowance For Credit Losses [Line Items]
Allowance for Loan Losses, Ending Balance	665	$ 641	515	$ 817	$ 981	$ 971
Allowance for Loan Losses, Ending Balance: Collectively Evaluated for Impairment	$ 665		$ 515

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Consolidated Statements of Shareholders' Equity (Unaudited) - USD ($) $ in Thousands	Total	Preferred Stock [Member]	Common Stock [Member]	Surplus [Member]	Accumulated Deficit [Member]	Accumulated Other Comprehensive Loss
Beginning balance at Dec. 31, 2013	$ 42,392	$ 9,395	$ 6,439	$ 39,780	$ (12,025)	$ (1,197)
Preferred stock dividends	(240)				(240)
Net amortization on preferred stock	8	8			(8)
Net income	1,198				1,198
Other comprehensive income (loss)	1,104					1,104
Stock based compensation expense	127			127
Ending balance at Jun. 30, 2014	44,581	9,403	6,439	39,907	(11,075)	(93)
Beginning balance at Dec. 31, 2014	50,211	9,404	6,447	40,045	(5,679)	(6)
Preferred stock dividends	(377)				(377)
Issuance of 11,000 shares of restricted common stock			11	(11)
Forfeiture shares of restricted common stock			(5)	5
Net income	896				896
Other comprehensive income (loss)	(73)					(73)
Stock based compensation expense	134			134
Ending balance at Jun. 30, 2015	$ 50,791	$ 9,404	$ 6,453	$ 40,173	$ (5,160)	$ (79)

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Financial Instruments with Off-Balance Sheet Risk - Additional Information (Detail) - USD ($) $ in Thousands	Jun. 30, 2015	Dec. 31, 2014
Loss Contingencies [Line Items]
Commitments issued under lines of credit
Customer deposits pledged to bank as collateral for the letter of credit	$ 214	$ 214
Financial Standby Letters of Credit [Member]
Loss Contingencies [Line Items]
Commitments issued under lines of credit	1,100	1,100
Customer Letter of Credit Issued [Member]
Loss Contingencies [Line Items]
Commitments issued under lines of credit	149	149
Lines of Credit [Member]
Loss Contingencies [Line Items]
Commitments issued under lines of credit	81,900	83,200
Performance Standby Letters of Credit [Member]
Loss Contingencies [Line Items]
Commitments issued under lines of credit	$ 641	$ 349

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Securities - Additional Information (Detail) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2015	Jun. 30, 2014	Jun. 30, 2015	Jun. 30, 2014	Dec. 31, 2014
Investments Debt And Equity Securities [Abstract]
Net unrealized holding gains amortized adjustment related to debt securities	$ 56		$ 56		$ 77
Gross gains on sale of available for sale securities	0	$ 0	0	$ 0
Securities pledged to secure public fund deposits	30,000		30,000		32,600
Securities pledged to secure borrowings	$ 75		$ 75		$ 89

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Fair Value Measurements and Fair Values of Financial Instruments - Additional Information (Detail) - USD ($)	6 Months Ended
	Jun. 30, 2015	Dec. 31, 2014
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Valuation of real estate collateral, discount	$ 0
Other real estate owned	1,169,000	$ 1,257,000
Impaired loan balances	5,693,000	6,615,000
Total, Related Allowance	231,000	166,000
Impaired Loans Fair Value with Allowance Recorded [Member]
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Impaired loan balances	2,600,000	542,000
Total, Related Allowance	231,000	166,000
Net of partial charge-offs		28,000
Impaired Loans Fair Value with no Related Allowance Recorded [Member]
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Impaired loan balances	3,200,000	2,900,000
Net of partial charge-offs	1,000,000	1,100,000
Portion at Fair Value Measurement [Member]
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Other real estate owned	1,400,000	433,000
Repossessed Assets [Member]
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Repossessed assets	0	42,000
Other Real Estate Owned [Member]
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Net of valuation allowance	$ 412,000	$ 328,000

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Earnings Per Common Share (Tables)

6 Months Ended

Jun. 30, 2015

Earnings Per Share [Abstract]

Schedule of Calculations of Basic and Diluted Earnings per Common Share

The calculations of basic and diluted earnings per common share are presented below for the three and six months ended June 30, 2015 and 2014:

	For the three months ended June 30,						For the six months ended June 30,
	(In thousands, except per share information)
	2015			2014			2015			2014
Net income	$	479		$	597		$	896		$	1,198
Less: preferred stock dividends		(211	)		(120	)		(377	)		(240	)
Less: net discount accretion on preferred stock		—			(1	)		—			(8	)
Income to common shareholders	$	268		$	476		$	519		$	950
Average basic common shares outstanding		6,446			6,439			6,446			6,439
Effect of dilutive stock options		60			—			54			—
Average number of common shares used to calculate    diluted earnings per common share		6,506			6,439			6,500			6,439
Basic earnings per common share	$	0.04		$	0.07		$	0.08		$	0.15
Diluted earnings per common share	$	0.04		$	0.07		$	0.08		$	0.15

Schedule of Amount of Preferred Stock Dividends and Net Accretion or Amortization Related to Each Series of Preferred Stock

The amount of preferred stock dividends and the net accretion or amortization related to each series of preferred stock are presented below for the three and six months ended June 30, 2015 and 2014:

	For the three months ended June 30,					For the six months ended June 30,
	2015		2014			2015		2014
	(Dollars in thousands)					(Dollars in thousands)
Preferred dividends:
Preferred Series A	$	103	$	57		$	206	$	114
Preferred Series B		5		5			10		10
Preferred Series C		103		58			161		116
Total preferred dividends	$	211	$	120		$	377	$	240
Net accretion (amortization) on preferred stock:
Preferred Series A	$	—	$	—		$	—	$	(9	)
Preferred Series B		—		—			—		2
Preferred Series C		—		(1	)		—		(1	)
Total net accretion (amortization) on preferred stock	$	—	$	(1	)	$	—	$	(8	)

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Securities - Summary of Amortized Cost, Unrealized Gains and Losses, and Estimated Fair Value of Company's Investment Securities Available for Sale (Detail) - USD ($) $ in Thousands	Jun. 30, 2015	Dec. 31, 2014
Schedule Of Available For Sale Securities [Line Items]
Amortized Cost	$ 61,769	$ 75,643
Gross Unrealized Gains	206	225
Gross Unrealized Losses	(382)	(311)
Fair Value	61,593	75,557
Obligations of U.S. Government Agencies and Corporations [Member]
Schedule Of Available For Sale Securities [Line Items]
Amortized Cost	27,311	49,451
Gross Unrealized Gains	9	21
Gross Unrealized Losses	(201)	(196)
Fair Value	27,119	49,276
Obligations of States and Political Subdivisions [Member]
Schedule Of Available For Sale Securities [Line Items]
Amortized Cost	14,697	4,902
Gross Unrealized Gains	54	8
Gross Unrealized Losses	(108)	(39)
Fair Value	14,643	4,871
Federal Agency Mortgage-Backed Securities [Member]
Schedule Of Available For Sale Securities [Line Items]
Amortized Cost	18,650	20,233
Gross Unrealized Gains	142	192
Gross Unrealized Losses	(73)	(74)
Fair Value	18,719	20,351
Federal Agency Collateralized Mortgage Obligations [Member]
Schedule Of Available For Sale Securities [Line Items]
Amortized Cost	429	532
Gross Unrealized Gains	1	2
Gross Unrealized Losses		(2)
Fair Value	430	532
Other Debt Securities [Member]
Schedule Of Available For Sale Securities [Line Items]
Amortized Cost	500	500
Gross Unrealized Gains		2
Fair Value	500	502
Money Market Mutual Fund [Member]
Schedule Of Available For Sale Securities [Line Items]
Amortized Cost	182	25
Fair Value	$ 182	$ 25

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Loans Receivable and Related Allowance for Loan Losses (Tables)

6 Months Ended

Jun. 30, 2015

Receivables [Abstract]

Summary of Loans Receivable

Loans receivable consist of the following at June 30, 2015 and December 31, 2014.

	June 30,			December 31,
	2015			2014
	(Dollars in thousands)
Commercial:
Commercial and industrial	$	79,731		$	75,412
Commercial mortgage		175,556			168,969
Commercial construction		9,193			6,497
Total commercial		264,480			250,878
Residential mortgage loans		83,986			80,134
Consumer:
Home equity lines of credit		26,646			27,902
Other consumer loans		16,385			16,378
Total consumer		43,031			44,280
Total loans		391,497			375,292
Allowance for loan losses		(2,566	)		(2,313	)
Net deferred loan cost (fees)		(178	)		(70	)
Total loans receivable, net	$	388,753		$	372,909

First Priority acquired various loans through the acquisition of Affinity Bancorp, Inc. on February 28, 2013 for which there was, at acquisition, evidence of deterioration of credit quality since origination, and for which it was probable that all contractually required payments would not be collected.  The carrying amounts of the acquired impaired loans included in the loan balances above are summarized as follows:

	June 30,		December 31,
	2015		2014
	(Dollars in thousands)
Commercial and industrial	$	699	$	699
Commercial mortgage		281		284
Residential mortgage loans		134		186
Total unpaid principal balance	$	1,114	$	1,169
Net recorded investment	$	540	$	602

Accretable Purchased Credit Impaired Loans

The following table presents the changes in accretable yield related to acquired credit-impaired loans for the six months ended June 30, 2014 (dollars in thousands).  There was no remaining accretable yield for the six months ended June 30, 2015:

	2014
Accretable yield balance, beginning of period	$	56
Additions resulting from acquisition		-
Accretion to interest income		(171	)
Reclassification from nonaccretable difference and disposals, net		146
Accretable yield balance, end of period	$	31

Activity in Allowance for Loan Losses by Loan Class

The following tables summarize the activity in the allowance for loan losses by loan class for the three and six months ended June 30, 2015 and 2014:

	For the three months ended												For the six months ended
	June 30, 2015												June 30, 2015
	Allowance for Loan Losses												Allowance for Loan Losses
	(Dollars in thousands)												(Dollars in thousands)
	Beginning Balance		Charge-offs			Recoveries		Provision for loan losses			Ending Balance		Beginning Balance		Charge-offs			Recoveries		Provision for loan losses			Ending Balance
Commercial and industrial	$	745	$	—		$	2	$	17		$	764	$	788	$	(16	)	$	7	$	(15	)	$	764
Commercial mortgage		507		(31	)		—		149			625		468		(42	)		—		199			625
Commercial construction		34		—			—		6			40		26		—			—		14			40
Residential mortgage loans		163		—			—		12			175		159		(14	)		—		30			175
Home equity lines of credit		221		—			84		(75	)		230		270		(12	)		88		(116	)		230
Other consumer loans		66		—			4		(3	)		67		87		(16	)		8		(12	)		67
Unallocated		641		—			—		24			665		515		—			—		150			665
Total loans	$	2,377	$	(31	)	$	90	$	130		$	2,566	$	2,313	$	(100	)	$	103	$	250		$	2,566

	For the three months ended												For the six months ended
	June 30, 2014												June 30, 2014
	Allowance for Loan Losses												Allowance for Loan Losses
	(Dollars in thousands)												(Dollars in thousands)
	Beginning Balance		Charge-offs			Recoveries		Provision for loan losses			Ending Balance		Beginning Balance		Charge-offs			Recoveries		Provision for loan losses			Ending Balance
Commercial and industrial	$	421	$	(137	)	$	6	$	220		$	510	$	445	$	(137	)	$	16	$	186		$	510
Commercial mortgage		477		(1	)		—		7			483		452		(75	)		—		106			483
Commercial construction		17		—			2		3			22		12		(50	)		2		58			22
Residential  mortgage loans		150		(25	)		—		96			221		149		(25	)		—		97			221
Home equity lines of credit		123		(90	)		4		81			118		177		(90	)		8		23			118
Other consumer  loans		50		—			4		12			66		67		(52	)		7		44			66
Unallocated		981		—			—		(164	)		817		971		—			—		(154	)		817
Total loans	$	2,219	$	(253	)	$	16	$	255		$	2,237	$	2,273	$	(429	)	$	33	$	360		$	2,237

Allowance For Loan Losses Impairment Method

The following tables present the balance in the allowance for loan losses at June 30, 2015 and December 31, 2014 disaggregated on the basis of the Company’s impairment method by class of loans receivable along with the balance of loans receivable by class disaggregated on the basis of the Company’s impairment methodology:

	June 30, 2015
	Allowance for Loan Losses						Loans Receivables
	(Dollars in thousands)
	Ending Balance		Ending Balance Individually Evaluated for Impairment		Ending Balance Collectively Evaluated for Impairment		Ending Balance		Ending Balance Individually Evaluated for Impairment		Ending Balance Collectively Evaluated for Impairment
Commercial and industrial	$	764		134	$	630	$	79,731	$	1,524	$	78,207
Commercial mortgage		625		97		528		175,556		3,489		172,067
Commercial construction		40		—		40		9,193		—		9,193
Residential mortgage loans		175		—		175		83,986		235		83,751
Home equity lines of credit		230		—		230		26,646		99		26,547
Other consumer loans		67		—		67		16,385		346		16,039
Unallocated		665		—		665		—		—		—
Total loans	$	2,566	$	231	$	2,335	$	391,497	$	5,693	$	385,804

	December 31, 2014
	Allowance for Loan Losses						Loans Receivables
	(Dollars in thousands)
	Ending Balance		Ending Balance Individually Evaluated for Impairment		Ending Balance Collectively Evaluated for Impairment		Ending Balance		Ending Balance Individually Evaluated for Impairment		Ending Balance Collectively Evaluated for Impairment
Commercial and industrial	$	788	$	147	$	641	$	75,412	$	2,131	$	73,281
Commercial mortgage		468		5		463		168,969		3,660		165,309
Commercial construction		26		—		26		6,497		—		6,497
Residential mortgage loans		159		—		159		80,134		347		79,787
Home equity lines of credit		270		12		258		27,902		113		27,789
Other consumer loans		87		2		85		16,378		364		16,014
Unallocated		515		—		515		—		—		—
Total loans	$	2,313	$	166	$	2,147	$	375,292	$	6,615	$	368,677

Summary of Impaired Loans by Loan Portfolio Class

The following tables summarize information in regard to impaired loans by loan portfolio class as of June 30, 2015 and December 31, 2014 as well as for the three and six month periods ended June 30, 2015 and 2014, respectively:

	June 30, 2015						December 31, 2014
	Recorded Investment		Unpaid Principal Balance		Related Allowance		Recorded Investment		Unpaid Principal Balance		Related Allowance
	(Dollars in thousands)
With no related allowance    recorded:
Commercial and industrial	$	552	$	975	$	—	$	1,840	$	2,290	$	—
Commercial mortgage		1,901		2,114		—		3,618		3,928		—
Commercial construction		—		—		—		—		—		—
Residential mortgage loans		235		330		—		347		426		—
Home equity lines of credit		99		99		—		101		101		—
Other consumer loans		346		372		—		196		215		—
With an allowance recorded:
Commercial and industrial	$	972	$	1,005	$	134	$	291	$	301	$	147
Commercial mortgage		1,588		1,595		97		42		70		5
Commercial construction		—		—		—		—		—		—
Residential mortgage loans		—		—		—		—		—		—
Home equity lines of credit		—		—		—		12		12		12
Other consumer loans		—		—		—		168		168		2
Total:
Commercial and industrial	$	1,524	$	1,980	$	134	$	2,131	$	2,591	$	147
Commercial mortgage		3,489		3,709		97		3,660		3,998		5
Commercial construction		—		—		—		—		—		—
Residential mortgage loans		235		330		—		347		426		—
Home equity lines of credit		99		99		—		113		113		12
Other consumer loans		346		372		—		364		383		2
Total	$	5,693	$	6,490	$	231	$	6,615	$	7,511	$	166

	Three Months ended June 30,								Six Months ended June 30,
	2015				2014				2015				2014
	Average Recorded Investment		Interest Income Recognized		Average Recorded Investment		Interest Income Recognized		Average Recorded Investment		Interest Income Recognized		Average Recorded Investment		Interest Income Recognized
	(Dollars in thousands)								(Dollars in thousands)
With no related allowance    recorded:
Commercial and industrial	$	556	$	—	$	1,596	$	—	$	897	$	9	$	1,671	$	—
Commercial mortgage		1,900		11		1,014		—		2,736		26		981		—
Commercial construction		—		—		344		9		—		—		384		14
Residential mortgage loans		236		—		242		—		234		—		242		—
Home equity lines of credit		99		1		141		—		100		2		71		—
Other consumer loans		321		1		349		—		326		3		277		—
With an allowance recorded:
Commercial and industrial	$	984	$	5	$	184	$	—	$	930	$	5	$	129	$	—
Commercial mortgage		1,590		—		42		—		795		—		83		—
Commercial construction		—		—		—		—		—		—		—		—
Residential mortgage loans		—		—		—		—		—		—		—		—
Home equity lines of credit		—		—		12		—		—		—		21		—
Other consumer loans		—		—		—		—		—		—		—		—
Total:
Commercial and industrial	$	1,540	$	5	$	1,780	$	—	$	1,827	$	14	$	1,800	$	—
Commercial mortgage		3,490		11		1,056		—		3,531		26		1,064		—
Commercial construction		—		—		344		9		—		—		384		14
Residential mortgage loans		236		—		242		—		234		—		242		—
Home equity lines of credit		99		1		153		—		100		2		92		—
Other consumer loans		321		1		349		—		326		3		277		—
Total	$	5,686	$	18	$	3,924	$	9	$	6,018	$	45	$	3,859	$	14

Nonaccrual Loans by Classes of Loan Portfolio

The following table presents nonaccrual loans by classes of the loan portfolio as of June 30, 2015 and December 31, 2014:

	June 30, 2015		December 31, 2014
	(Dollars in thousands)
Commercial and industrial	$	1,324	$	1,474
Commercial mortgage		2,209		2,370
Residential mortgage loans		235		347
Home equity lines of credit		18		31
Other consumer loans		248		262
Total loans	$	4,034	$	4,484

Classes of Loan Portfolio within Company's Internal Risk Rating System

The following tables present the classes of the loan portfolio summarized by the aggregate pass rating and the classified ratings of special mention, substandard and doubtful within the Company’s internal risk rating system as of June 30, 2015 and December 31, 2014:

	June 30, 2015
	Pass		Special Mention		Substandard		Doubtful		Total
	(Dollars in thousands)
Commercial:
Commercial and industrial	$	76,527	$	1,339	$	1,865	$	—	$	79,731
Commercial mortgage		170,699		2,005		2,852		—		175,556
Commercial construction		9,193		—		—		—		9,193
Residential mortgage loans		83,751		—		235		—		83,986
Consumer:
Home equity lines of credit		26,628		—		18		—		26,646
Other consumer loans		16,137		—		248		—		16,385
Total	$	382,935	$	3,344	$	5,218	$	—	$	391,497

	December 31, 2014
	Pass		Special Mention		Substandard		Doubtful		Total
	(Dollars in thousands)
Commercial:
Commercial and industrial	$	73,498	$	—	$	1,914	$	—	$	75,412
Commercial mortgage		163,899		745		4,325		—		168,969
Commercial construction		6,497		—		—		—		6,497
Residential mortgage loans		79,787		—		347		—		80,134
Consumer:
Home equity lines of credit		27,871		—		31		—		27,902
Other consumer loans		16,116		—		262		—		16,378
Total	$	367,668	$	745	$	6,879	$	—	$	375,292

Classes of Loan Portfolio Summarized by Past Due Status

The following tables present the classes of the loan portfolio summarized by the past due status as of June 30, 2015 and December 31, 2014:

	June 30, 2015
	30-59 Days Past Due		60-89 Days Past Due		Greater Than 90 Days		Total Past Due		Current		Total Loans Receivables
	(Dollars in thousands)
Commercial:
Commercial and industrial	$	—	$	—	$	366	$	366	$	79,365	$	79,731
Commercial mortgage		534		48		2,209		2,791		172,765		175,556
Commercial construction		—		—		—		—		9,193		9,193
Residential mortgage loans		—		68		202		270		83,716		83,986
Consumer:
Home equity lines of credit		114		—		—		114		26,532		26,646
Other consumer loans		29		145		202		376		16,009		16,385
Total	$	677	$	261	$	2,979	$	3,917	$	387,580	$	391,497

	December 31, 2014
	30-59 Days Past Due		60-89 Days Past Due		Greater Than 90 Days		Total Past Due		Current		Total Loans Receivables
	(Dollars in thousands)
Commercial:
Commercial and industrial	$	70	$	102	$	1,260	$	1,432	$	73,980	$	75,412
Commercial mortgage		310		15		2,355		2,680		166,289		168,969
Commercial construction		—		—		—		—		6,497		6,497
Residential mortgage loans		478		—		312		790		79,344		80,134
Consumer:
Home equity lines of credit		—		—		12		12		27,890		27,902
Other consumer loans		31		66		214		311		16,067		16,378
Total	$	889	$	183	$	4,153	$	5,225	$	370,067	$	375,292

Summary of Information Regarding Bank's Troubled Debt Restructurings

The following tables reflect information regarding troubled debt restructurings entered into by the Company for the three and six month periods ended June 30, 2015 and 2014. As of June 30, 2015, one mortgage loan, related to land, was in default and was restructured under the terms of a forbearance agreement whereby a concession was made in regards to the interest rate and the amortization period was extended.  

	For the three months ended June 30, 2015						For the six months ended June 30, 2015
	Number of Contracts		Pre- Modification Outstanding Recorded Investments		Post- Modification Outstanding Recorded Investments		Number of Contracts		Pre- Modification Outstanding Recorded Investments		Post- Modification Outstanding Recorded Investments
	(Dollars in thousands)						(Dollars in thousands)
Troubled debt restructurings:
Commercial and industrial		1	$	200	$	200		1	$	200	$	200
Residential mortgage loans		—		—		—		1		35		35
Total		—	$	—	$	—		2	$	235	$	235

	For the three months ended June 30, 2014						For the six months ended June 30, 2014
	Number of Contracts		Pre- Modification Outstanding Recorded Investments		Post- Modification Outstanding Recorded Investments		Number of Contracts		Pre- Modification Outstanding Recorded Investments		Post- Modification Outstanding Recorded Investments
	(Dollars in thousands)						(Dollars in thousands)
Troubled debt restructurings:
Commercial and industrial		1	$	29	$	29		1	$	29	$	29
Home equity lines of credit		1		31		20		1		31		20
Other consumer loans		2		110		108		2		110		108
Total		4	$	170	$	157		4	$	170	$	157

The following table reflects information regarding troubled debt restructuring entered into by the Bank for the year ended December 31, 2014:

	Number of Contracts		Pre-Modification Outstanding Recorded Investments		Post- Modification Outstanding Recorded Investments
	(Dollars in thousands)
Troubled debt restructurings:
Commercial and industrial		1	$	28	$	28
Commercial mortgage		1		1,292		1,292
Home equity lines of credit		2		112		102
Other consumer loans		3		170		158
Total		7	$	1,602	$	1,580

XML

Consolidated Statements of Shareholders' Equity (Unaudited) (Parenthetical) - shares	6 Months Ended
	Jun. 30, 2015	Jun. 30, 2014
Statement Of Stockholders Equity [Abstract]
Forfeiture of restricted common stock , shares	5,350	225
Issuance of restricted common stock, shares	11,000

XML

Consolidated Balance Sheets (Unaudited) (Parenthetical) - USD ($) $ in Thousands	3 Months Ended	6 Months Ended
	Dec. 31, 2014	Jun. 30, 2015
Securities available for sale, amortized cost	$ 75,643	$ 61,769
Securities held to maturity, fair value	$ 16,544	$ 15,780
Preferred stock, par value	$ 100	$ 100
Preferred stock, authorized shares	10,000,000	10,000,000
Preferred stock, liquidation value per share	$ 1,000	$ 1,000
Common stock, par value	$ 1	$ 1
Common stock, shares authorized	10,000,000	10,000,000
Common stock, shares issued	6,447,019	6,452,669
Common stock, shares outstanding	6,447,019	6,452,669
Series A Preferred Stock [Member]
Preferred stock, dividend rate	9.00%	9.00%
Preferred stock, shares issued	4,579	4,579
Preferred stock, shares outstanding	4,579	4,579
Preferred stock, total liquidation value	$ 4,579	$ 4,579
Series B Preferred Stock [Member]
Preferred stock, dividend rate	9.00%	9.00%
Preferred stock, shares issued	229	229
Preferred stock, shares outstanding	229	229
Preferred stock, total liquidation value	$ 229	$ 229
Series C Preferred Stock [Member]
Preferred stock, dividend rate	9.00%	9.00%
Preferred stock, shares issued	4,596	4,596
Preferred stock, shares outstanding	4,596	4,596
Preferred stock, total liquidation value	$ 4,596	$ 4,596

XML

Financial Instruments with Off-Balance Sheet Risk

6 Months Ended

Jun. 30, 2015

Commitments And Contingencies Disclosure [Abstract]

Financial Instruments with Off-Balance Sheet Risk

Note 9—Financial Instruments with Off-Balance Sheet Risk

The Company is a party to financial instruments with off-balance sheet risk in the normal course of business to meet the financing needs of its customers. These financial instruments include commitments to extend credit. Such commitments involve, to varying degrees, elements of credit and interest rate risk in excess of the amount recognized in the consolidated balance sheet.

The Company’s exposure to credit loss in the event of nonperformance by the other party to the financial instrument for commitments to extend credit is represented by the contractual amount of those instruments. The Company uses the same credit policies in making commitments and conditional obligations as it does for on-balance sheet instruments.

At June 30, 2015 and December 31, 2014, outstanding commitments to extend credit consisting of total unfunded commitments under lines of credit were $81.9 million and $83.2 million, respectively. In addition, as of each of these dates, there were $641 thousand and $349 thousand of performance standby letters of credit outstanding, respectively, and for both periods $1.1 million of financial standby letters of credit.

Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established in the contract. Since many of the commitments are expected to expire without being drawn upon, the total commitment amounts do not necessarily represent future cash requirements.

Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee. The Bank evaluates each customer’s credit worthiness on a case-by-case basis. The amount of collateral obtained, if deemed necessary by the Bank upon extension of credit, is based on management’s credit evaluation. Collateral held varies but may include residential or commercial real estate, accounts receivable, inventory and equipment.

In addition, as of June 30, 2015 and December 31, 2014 the Bank pledged $214 thousand of deposit balances at a correspondent bank to support a letter of credit with a balance of $149 thousand issued by the correspondent on behalf of a customer of the Bank. This transaction is fully secured by the customer through a pledge of the customer’s deposits at the Bank.

XML

Document and Entity Information - shares	6 Months Ended
	Jun. 30, 2015	Aug. 10, 2015
Document And Entity Information [Abstract]
Document Type	10-Q
Amendment Flag	false
Document Period End Date	Jun. 30, 2015
Document Fiscal Year Focus	2015
Document Fiscal Period Focus	Q2
Trading Symbol	FPBK
Entity Registrant Name	FIRST PRIORITY FINANCIAL CORP.
Entity Central Index Key	0001389772
Current Fiscal Year End Date	--12-31
Entity Filer Category	Smaller Reporting Company
Entity Common Stock, Shares Outstanding		6,492,369

XML

Regulatory Matters

6 Months Ended

Jun. 30, 2015

Banking And Thrift [Abstract]

Regulatory Matters

Note 10—Regulatory Matters

The Dodd-Frank Act required the FRB to establish minimum consolidated capital requirements for bank holding companies that are as stringent as those required for insured depositary subsidiaries. The federal banking agencies approved rules that implemented the Dodd-Frank requirements and certain other regulatory capital reforms which were designed to enhance such requirements and implement the revised standards of the Basel Committee on Banking Supervision, commonly referred to as Basel III. These rules (i) introduced a new capital ratio pursuant to the prompt corrective action provisions, the common equity tier 1 capital to risk rated assets ratio, (ii) increased the adequately capitalized and well capitalized thresholds for the Tier 1 risk based capital ratios to 6% and 8% respectively, (iii) changed the treatment of certain capital components for determining Tier 1 and Tier 2 capital, and (iv) changed the risk weighting of certain assets and off balance sheet items in determining risk weighted assets. The new risk based capital rules became effective January 1, 2015.

Under the revised capital guidelines, First Priority Bank’s minimum capital to risk-adjusted assets requirements consist of a common equity tier 1 capital ratio of 4.5% (6.5% to be considered “well capitalized”) and a tier 1 capital ratio of 6.0%, increased from 4.0% (and increased from 6.0% to 8.0% to be considered “well capitalized”); the total capital ratio remains at 8.0% under the new rules (10.0% to be considered “well capitalized”).  In addition, First Priority Bank must maintain a minimum Tier 1 leverage ratio of at least 4.0% (5.0% to be considered “well capitalized”).  The new minimum capital requirements became effective on January 1, 2015.

Under the new rules, in order to avoid limitations on capital distributions (including dividend payments and certain discretionary bonus payments to executive officers), a banking organization must hold a capital conservation buffer comprised of common equity tier 1 capital above its minimum risk-based capital requirements in an amount greater than 2.5% of total risk-weighted assets. The capital contribution buffer requirements phase in over a three-year period beginning January 1, 2016.

The Bank’s capital amounts (dollars in thousands) and ratios at June 30, 2015 and December 31, 2014 are presented below:

Actual

Minimum Capital Requirement

To be Well Capitalized under Prompt Corrective Action Provisions

Amount

Ratio

Amount

Ratio

Amount

Ratio

June 30, 2015

Total capital (to risk-weighted assets)

$

46,863

12.25

%

$

30,616

>8.0

%

$

>38,271

>10.0

%

Tier 1 capital (to risk-weighted assets)

44,262

11.57

>22,962

>6.0

>30,616

>8.0

Tier 1 common equity capital (to risk-weighted assets)

44,262

11.57

>17,222

>4.5

>24,876

>6.5

Tier 1 capital (to total assets)

44,262

9.40

>18,840

>4.0

>23,550

>5.0

December 31, 2014

Total capital (to risk-weighted assets)

$

45,327

12.87

%

$

>28,177

>8.0

%

$

>35,221

>10.0

%

Tier 1 capital (to risk-weighted assets)

42,979

12.20

>14,088

>4.0

>21,132

>6.0

Tier 1 capital (to total assets)

42,979

9.34

>18,410

>4.0

>23,012

>5.0

First Priority’s ability to pay cash dividends is dependent on receiving cash in the form of dividends from First Priority Bank. However, certain restrictions exist regarding the ability of First Priority Bank to transfer funds to First Priority in the form of cash dividends. All dividends are currently subject to prior approval of the Pennsylvania Department of Banking and Securities and the FDIC and are payable only from the undivided profits of First Priority Bank, with the exception of an exemption enacted by the Pennsylvania Department of Banking and Securities which allows the Bank to pay dividends related to the preferred stock originally issued under the U.S. Department of the Treasury’s Troubled Asset Relief Program—Capital Purchase Program. Additionally, First Priority has met the requirement of obtaining prior approval from the Federal Reserve Bank on any payment of dividends, including dividends on the aforementioned preferred stock, when net income for the past four quarters is not sufficient to fund the dividend payments over that same period, or when such payment would negatively impact capital adequacy of the Company.

XML

Consolidated Statements of Operations (Unaudited) - USD ($) shares in Thousands, $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2015	Jun. 30, 2014	Jun. 30, 2015	Jun. 30, 2014
Interest Income
Loans receivable, including fees	$ 4,302	$ 4,260	$ 8,489	$ 8,321
Securities—taxable	372	368	720	728
Securities—exempt from federal taxes	63	27	88	54
Interest bearing deposits and other	24	31	118	57
Total Interest Income	4,761	4,686	9,415	9,160
Interest Expense
Deposits	718	644	1,444	1,320
Short-term borrowings	33	24	49	36
Long-term debt	25	25	49	49
Total Interest Expense	776	693	1,542	1,405
Net Interest Income	3,985	3,993	7,873	7,755
Provision for Loan Losses	130	255	250	360
Net Interest Income after Provision for Loan Losses	3,855	3,738	7,623	7,395
Non-Interest Income
Wealth management fee income	174	104	264	227
Bank owned life insurance income	21	25	42	42
Other	91	87	186	166
Total Non-Interest Income	286	216	492	435
Non-Interest Expenses
Salaries and employee benefits	1,912	1,743	3,764	3,465
Occupancy and equipment	514	542	1,059	1,107
Data processing equipment and operations	218	208	438	440
Professional fees	163	209	344	426
Marketing, advertising, and business development	52	113	82	143
FDIC insurance assessments	87	80	176	156
Pennsylvania bank shares tax expense	94	80	187	158
Other real estate owned	88	45	147	87
Other	298	330	581	634
Total Non-Interest Expenses	3,426	3,350	6,778	6,616
Income before Income Tax Expense	715	604	1,337	1,214
Federal Income Tax Expense	236	7	441	16
Net Income	479	597	896	1,198
Preferred dividends, including net amortization	211	121	377	248
Income to Common Shareholders	$ 268	$ 476	$ 519	$ 950
Income per common share:
Basic	$ 0.04	$ 0.07	$ 0.08	$ 0.15
Diluted	$ 0.04	$ 0.07	$ 0.08	$ 0.15
Weighted average common shares outstanding
Basic	6,446	6,439	6,446	6,439
Diluted	6,506	6,439	6,500	6,439

XML

Securities

6 Months Ended

Jun. 30, 2015

Investments Debt And Equity Securities [Abstract]

Securities

Note 4—Securities

Management determines the appropriate classification of debt securities at the time of purchase and re-evaluates such designation as of each balance sheet date. Securities classified as available for sale are those securities that the Company intends to hold for an indefinite period of time, but not necessarily to maturity. Available for sale securities are carried at fair value.

Securities classified as held to maturity are those debt securities the Company has both the intent and ability to hold to maturity regardless of changes in market conditions, liquidity needs or changes in general economic conditions. These securities are carried at cost adjusted for the amortization of premium and accretion of discount, computed by a method which approximates the interest method over the terms of the securities.

The Company previously transferred investment securities from available for sale to held to maturity securities.  Due to these transfers, securities classified as held to maturity have net unrealized holding gains, totaling $56 thousand as of June 30, 2015 and $77 thousand as of December 31, 2014, which are being amortized over the remaining life of the related securities as an adjustment of yield in a manner consistent with the accretion of discount on the same transferred debt securities. This will have no impact on the Company’s net income because the amortization of the unrealized holding loss reported in equity will offset the effect on the interest income of the accretion of the discount on these securities.

The amortized cost, unrealized gains and losses, and the fair value of the Company’s investment securities available for sale and held to maturity are as follows for the periods presented:

	June 30, 2015
	Amortized Cost		GrossUnrealized Gains		GrossUnrealized Losses			Estimated Fair Value
	(Dollars in thousands)
Available For Sale:
Obligations of U.S. government agencies and corporations	$	27,311	$	9	$	(201	)	$	27,119
Obligations of states and political subdivisions		14,697		54		(108	)		14,643
Federal agency mortgage-backed securities		18,650		142		(73	)		18,719
Federal agency collateralized mortgage obligations		429		1		—			430
Other debt securities		500		—		—			500
Money market mutual fund		182		—		—			182
Total investment securities available for sale	$	61,769	$	206	$	(382	)	$	61,593
Held To Maturity:
Obligations of states and political subdivisions	$	15,201	$	197	$	(98	)	$	15,300
Other debt securities		481		—		(1	)		480
Total investment securities held to maturity	$	15,682	$	197	$	(99	)	$	15,780

	December 31, 2014
	Amortized Cost		GrossUnrealized Gains		GrossUnrealized Losses			Estimated Fair Value
	(Dollars in thousands)
Available For Sale:
Obligations of U.S. government agencies and corporations	$	49,451	$	21	$	(196	)	$	49,276
Obligations of states and political subdivisions		4,902		8		(39	)		4,871
Federal agency mortgage-backed securities		20,233		192		(74	)		20,351
Federal agency collateralized mortgage obligations		532		2		(2	)		532
Other debt securities		500		2		—			502
Money market mutual fund		25		—		—			25
Total investment securities available for sale	$	75,643	$	225	$	(311	)	$	75,557
Held To Maturity:
Obligations of states and political subdivisions	$	15,475	$	564	$	(12	)	$	16,027
Other debt securities		481		36		—			517
Total investment securities held to maturity	$	15,956	$	600	$	(12	)	$	16,544

Included in unrealized losses are market losses on securities that have been in a continuous unrealized loss position for twelve months or more and those securities that have been in a continuous unrealized loss position for less than twelve months. The table below details the aggregate unrealized losses and aggregate fair value of the underlying securities whose fair values are below their amortized cost at June 30, 2015 and December 31, 2014.

	As of June 30, 2015
	Less than 12 Months							12 Months or longer							Total
	Fair Value		Unrealized Losses			Count		Fair Value		Unrealized Losses			Count		Fair Value		Unrealized Losses			Count
	(Dollars in thousands)
Available for Sale:
Obligations of U.S. government    agencies and corporations	$	9,713	$	(141	)		1	$	11,908	$	(60	)		11	$	21,621	$	(201	)		12
Obligations of states and political    subdivisions		5,236		(88	)		14		2,823		(20	)		7		8,059		(108	)		21
Federal agency mortgage-backed    securities		-		-			-		7,110		(73	)		5		7,110		(73	)		5
Total Available for Sale	$	14,949	$	(229	)		15	$	21,841	$	(153	)		23	$	36,790	$	(382	)		38
Held to Maturity:
Obligations of states and political    subdivisions	$	525	$	(6	)		1	$	4,757	$	(92	)		11	$	5,282	$	(98	)		12
Other debt securities		479		(1	)		1	$	-	$	-			-		479		(1	)		1
Total Held to Maturity	$	1,004	$	(7	)		2	$	4,757	$	(92	)		11	$	5,761	$	(99	)		13

	As of December 31, 2014
	Less than 12 Months							12 Months or longer							Total
	Fair Value		Unrealized Losses			Count		Fair Value		Unrealized Losses			Count		Fair Value		Unrealized Losses			Count
	(Dollars in thousands)
Available for Sale:
Obligations of U.S. government    agencies and corporations	$	30,000	$	-			1	$	16,753	$	(196	)		15	$	46,753	$	(196	)		16
Obligations of states and political    subdivisions		576		(1	)		1		3,076		(38	)		8		3,652		(39	)		9
Federal agency mortgage-backed    securities		-		-			-		5,882		(74	)		4		5,882		(74	)		4
Federal agency collateralized    mortgage obligations		-		-			-		296		(2	)		1		296		(2	)		1
Total Available for Sale	$	30,576	$	(1	)		2	$	26,007	$	(310	)		28	$	56,583	$	(311	)		30
Held to Maturity:
Obligations of states and political    subdivisions	$	-	$	-			-	$	1,481	$	(12	)		3	$	1,481	$	(12	)		3
Total Held to Maturity	$	-	$	-			-	$	1,481	$	(12	)		3	$	1,481	$	(12	)		3

As of June 30, 2015, management believes that the estimated fair value of the securities disclosed above is primarily dependent upon the movement in market interest rates, particularly given the minimal inherent credit risk associated with the issuers of these securities and that the unrealized losses in these portfolios are not the result of deteriorating credit within any investment category.

Securities issued by states and political subdivisions are all rated investment grade. Each holding is reviewed quarterly for impairment by management and our third party investment advisor. All mortgage backed securities and collateralized mortgage obligations are issued by U.S. government sponsored agencies; there are no holdings of private label mortgage backed securities or securities backed by loans classified as “Alt-A” or “Subprime”.

Although the fair value will fluctuate as market interest rates move, management believes that these fair values will recover as the underlying portfolios mature. The Company evaluates a variety of factors in concluding whether securities are other-than-temporarily impaired. These factors include, but are not limited to, the type and purpose of the bond, the underlying rating of the bond issuer, and the presence of credit enhancements (i.e. state guarantees, municipal bond insurance, collateral requirements, etc.). The Company does not intend to sell any of these securities and it is unlikely that it will be required to sell any of these securities before recovery. Management does not believe any individual unrealized loss on individual securities, as of June 30, 2015, represents other than temporary impairment.

There were no realized gains or losses for the three or six months ended June 30, 2015 and 2014.

Securities with an estimated fair value of $30.0 million and $32.6 million were pledged at June 30, 2015 and December 31, 2014, respectively, to secure public fund deposits. In addition, securities pledged to secure borrowings by the Bank totaled $75 thousand and $89 thousand as of June 30, 2015 and December 31, 2014, respectively.

The amortized cost and fair value of securities as of June 30, 2015 by contractual maturity are shown below. Certain of these investment securities have call features which allow the issuer to call the security prior to its maturity date at the issuer’s discretion.

	June 30, 2015				June 30, 2015
	Available for Sale Securities				Held to Maturity
	Amortized Cost		Fair Value		Amortized Cost		Fair Value
	(Dollars in thousands)
Due within one year	$	500	$	500	$	—	$	—
Due after one year through five years		19,272		19,225		391		390
Due after five years through ten years		12,328		12,171		1,295		1,305
Due after ten years		10,408		10,366		13,996		14,085
		42,508		42,262		15,682		15,780
Federal agency collateralized mortgage obligations		429		430		—		—
Federal agency mortgage-backed securities		18,650		18,719		—		—
Money market mutual fund		182		182		—		—
Total	$	61,769	$	61,593	$	15,682	$	15,780

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Earnings Per Common Share

6 Months Ended

Jun. 30, 2015

Earnings Per Share [Abstract]

Earnings Per Common Share

Note 3—Earnings Per Common Share

Diluted earnings per common share take into account the potential dilution that could occur if securities or other contracts to issue common stock were exercised and converted into common stock. Proceeds assumed to have been received on such exercise or conversion, are assumed to be used to purchase shares of the Company’s common stock at the average market price during the period, as required by the “treasury stock method” of accounting for common stock equivalents. For purposes of calculating the basic and diluted earnings per share, the Company’s reported net income is adjusted for dividends on preferred stock and net accretion/amortization related to the issuance of preferred stock to determine the net income to common shareholders.

For the three and six month periods ended June 30, 2014 there were 845 thousand common stock equivalent shares, all of which were antidilutive, and therefore, excluded from earnings per share calculations.  As a result, diluted earnings per share for these periods were the same as basic earnings per share.

The calculations of basic and diluted earnings per common share are presented below for the three and six months ended June 30, 2015 and 2014:

	For the three months ended June 30,						For the six months ended June 30,
	(In thousands, except per share information)
	2015			2014			2015			2014
Net income	$	479		$	597		$	896		$	1,198
Less: preferred stock dividends		(211	)		(120	)		(377	)		(240	)
Less: net discount accretion on preferred stock		—			(1	)		—			(8	)
Income to common shareholders	$	268		$	476		$	519		$	950
Average basic common shares outstanding		6,446			6,439			6,446			6,439
Effect of dilutive stock options		60			—			54			—
Average number of common shares used to calculate    diluted earnings per common share		6,506			6,439			6,500			6,439
Basic earnings per common share	$	0.04		$	0.07		$	0.08		$	0.15
Diluted earnings per common share	$	0.04		$	0.07		$	0.08		$	0.15

The amount of preferred stock dividends and the net accretion or amortization related to each series of preferred stock are presented below for the three and six months ended June 30, 2015 and 2014:

	For the three months ended June 30,					For the six months ended June 30,
	2015		2014			2015		2014
	(Dollars in thousands)					(Dollars in thousands)
Preferred dividends:
Preferred Series A	$	103	$	57		$	206	$	114
Preferred Series B		5		5			10		10
Preferred Series C		103		58			161		116
Total preferred dividends	$	211	$	120		$	377	$	240
Net accretion (amortization) on preferred stock:
Preferred Series A	$	—	$	—		$	—	$	(9	)
Preferred Series B		—		—			—		2
Preferred Series C		—		(1	)		—		(1	)
Total net accretion (amortization) on preferred stock	$	—	$	(1	)	$	—	$	(8	)

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Securities (Tables)

6 Months Ended

Jun. 30, 2015

Investments Debt And Equity Securities [Abstract]

Summary of Amortized Cost, Unrealized Gains and Losses, and Estimated Fair Value of Company's Investment Securities Available for Sale

The amortized cost, unrealized gains and losses, and the fair value of the Company’s investment securities available for sale and held to maturity are as follows for the periods presented:

	June 30, 2015
	Amortized Cost		GrossUnrealized Gains		GrossUnrealized Losses			Estimated Fair Value
	(Dollars in thousands)
Available For Sale:
Obligations of U.S. government agencies and corporations	$	27,311	$	9	$	(201	)	$	27,119
Obligations of states and political subdivisions		14,697		54		(108	)		14,643
Federal agency mortgage-backed securities		18,650		142		(73	)		18,719
Federal agency collateralized mortgage obligations		429		1		—			430
Other debt securities		500		—		—			500
Money market mutual fund		182		—		—			182
Total investment securities available for sale	$	61,769	$	206	$	(382	)	$	61,593
Held To Maturity:
Obligations of states and political subdivisions	$	15,201	$	197	$	(98	)	$	15,300
Other debt securities		481		—		(1	)		480
Total investment securities held to maturity	$	15,682	$	197	$	(99	)	$	15,780

	December 31, 2014
	Amortized Cost		GrossUnrealized Gains		GrossUnrealized Losses			Estimated Fair Value
	(Dollars in thousands)
Available For Sale:
Obligations of U.S. government agencies and corporations	$	49,451	$	21	$	(196	)	$	49,276
Obligations of states and political subdivisions		4,902		8		(39	)		4,871
Federal agency mortgage-backed securities		20,233		192		(74	)		20,351
Federal agency collateralized mortgage obligations		532		2		(2	)		532
Other debt securities		500		2		—			502
Money market mutual fund		25		—		—			25
Total investment securities available for sale	$	75,643	$	225	$	(311	)	$	75,557
Held To Maturity:
Obligations of states and political subdivisions	$	15,475	$	564	$	(12	)	$	16,027
Other debt securities		481		36		—			517
Total investment securities held to maturity	$	15,956	$	600	$	(12	)	$	16,544

Schedule of Aggregate Unrealized Losses and Aggregate Fair Value of Underlying Securities Available for Sale

The table below details the aggregate unrealized losses and aggregate fair value of the underlying securities whose fair values are below their amortized cost at June 30, 2015 and December 31, 2014.

	As of June 30, 2015
	Less than 12 Months							12 Months or longer							Total
	Fair Value		Unrealized Losses			Count		Fair Value		Unrealized Losses			Count		Fair Value		Unrealized Losses			Count
	(Dollars in thousands)
Available for Sale:
Obligations of U.S. government    agencies and corporations	$	9,713	$	(141	)		1	$	11,908	$	(60	)		11	$	21,621	$	(201	)		12
Obligations of states and political    subdivisions		5,236		(88	)		14		2,823		(20	)		7		8,059		(108	)		21
Federal agency mortgage-backed    securities		-		-			-		7,110		(73	)		5		7,110		(73	)		5
Total Available for Sale	$	14,949	$	(229	)		15	$	21,841	$	(153	)		23	$	36,790	$	(382	)		38
Held to Maturity:
Obligations of states and political    subdivisions	$	525	$	(6	)		1	$	4,757	$	(92	)		11	$	5,282	$	(98	)		12
Other debt securities		479		(1	)		1	$	-	$	-			-		479		(1	)		1
Total Held to Maturity	$	1,004	$	(7	)		2	$	4,757	$	(92	)		11	$	5,761	$	(99	)		13

	As of December 31, 2014
	Less than 12 Months							12 Months or longer							Total
	Fair Value		Unrealized Losses			Count		Fair Value		Unrealized Losses			Count		Fair Value		Unrealized Losses			Count
	(Dollars in thousands)
Available for Sale:
Obligations of U.S. government    agencies and corporations	$	30,000	$	-			1	$	16,753	$	(196	)		15	$	46,753	$	(196	)		16
Obligations of states and political    subdivisions		576		(1	)		1		3,076		(38	)		8		3,652		(39	)		9
Federal agency mortgage-backed    securities		-		-			-		5,882		(74	)		4		5,882		(74	)		4
Federal agency collateralized    mortgage obligations		-		-			-		296		(2	)		1		296		(2	)		1
Total Available for Sale	$	30,576	$	(1	)		2	$	26,007	$	(310	)		28	$	56,583	$	(311	)		30
Held to Maturity:
Obligations of states and political    subdivisions	$	-	$	-			-	$	1,481	$	(12	)		3	$	1,481	$	(12	)		3
Total Held to Maturity	$	-	$	-			-	$	1,481	$	(12	)		3	$	1,481	$	(12	)		3

Summary of Amortized Cost and Fair Value of Securities by Contractual Maturity

The amortized cost and fair value of securities as of June 30, 2015 by contractual maturity are shown below. Certain of these investment securities have call features which allow the issuer to call the security prior to its maturity date at the issuer’s discretion.

	June 30, 2015				June 30, 2015
	Available for Sale Securities				Held to Maturity
	Amortized Cost		Fair Value		Amortized Cost		Fair Value
	(Dollars in thousands)
Due within one year	$	500	$	500	$	—	$	—
Due after one year through five years		19,272		19,225		391		390
Due after five years through ten years		12,328		12,171		1,295		1,305
Due after ten years		10,408		10,366		13,996		14,085
		42,508		42,262		15,682		15,780
Federal agency collateralized mortgage obligations		429		430		—		—
Federal agency mortgage-backed securities		18,650		18,719		—		—
Money market mutual fund		182		182		—		—
Total	$	61,769	$	61,593	$	15,682	$	15,780

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Fair Value Measurements and Fair Values of Financial Instruments

6 Months Ended

Jun. 30, 2015

Fair Value Disclosures [Abstract]

Fair Value Measurements and Fair Values of Financial Instruments

Note 11—Fair Value Measurements and Fair Values of Financial Instruments

Management uses its best judgment in estimating the fair value of the Bank’s financial instruments; however, there are inherent weaknesses in any estimation technique. Therefore, for substantially all financial instruments, the fair value estimates herein are not necessarily indicative of the amounts the Company could have realized in a sales transaction on the dates indicated. The estimated fair value amounts have been measured as of June 30, 2015 and December 31, 2014 and have not been re-evaluated or updated for purposes of these financial statements subsequent to those respective dates. As such, the estimated fair values of these financial instruments subsequent to the respective reporting dates may be different than the amounts reported at each period-end.

The Company uses fair value measurements to record fair value adjustments to certain assets and liabilities and to determine fair value disclosures. In accordance with FASB ASC Topic 820—Fair Value Measurements, the fair value of a financial instrument is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Fair value is best determined based upon quoted market prices. However, in some instances, there are no quoted market prices for the Company’s various financial instruments. In cases where quoted market prices are not available, fair values are based on estimates using present value or other valuation techniques. Those techniques are significantly affected by the assumptions used, including the discount rate and estimates of future cash flows. Accordingly, the fair value estimates may not be realized in an immediate settlement of the instrument.

The fair value guidance provides a consistent definition of fair value, which focuses on exit price in an orderly transaction (that is, not a forced liquidation or distressed sale) between market participants at the measurement date under current market conditions. If there has been a significant decrease in the volume and level of activity for the asset or liability, a change in valuation technique or the use of multiple valuation techniques may be appropriate. In such instances, determining the price at which willing market participants would transact at the measurement date under current market conditions depends on the facts and circumstances and requires the use of significant judgment. The fair value is a reasonable point within the range that is most representative of fair value under current market conditions.

FASB ASC Topic 820 establishes a fair value hierarchy that prioritizes the inputs to valuation methods used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). The three levels of the fair value hierarchy under FASB ASC Topic 820 are as follows:

Level 1: Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities.

Level 2: Quoted prices in markets that are not active, or inputs that are observable either directly or indirectly, for substantially the full term of the asset or liability.

Level 3: Prices or valuation techniques that require inputs that are both significant to the fair value measurement and unobservable (i.e., supported with little or no market activity). Management utilizes inputs that it believes a market participant would use.

An asset’s or liability’s level within the fair value hierarchy is based on the lowest level of input that is significant to the fair value measurement.

For financial assets measured at fair value on a recurring basis, the fair value measurements by level within the fair value hierarchy used at June 30, 2015 and December 31, 2014 are as follows:

Description	Fair Value		(Level 1) Quoted Prices in Active Markets for Identical Assets		(Level 2) Significant Other Observable Inputs		(Level 3) Significant Unobservable Inputs
	(Dollars in thousands)
As of June 30, 2015:
Investment securities available for sale:
Obligations of U.S. government agencies and    corporations	$	27,119	$	—	$	27,119	$	—
Obligations of states and political subdivisions		14,643		—		14,643		—
Federal agency mortgage-backed securities		18,719		—		18,719		—
Federal agency collateralized mortgage obligations		430		—		430		—
Other debt securities		500		—		500		—
Money market mutual fund		182		182		—		—
Total assets measured at fair value on a recurring basis	$	61,593	$	182	$	61,411	$	—
As of December 31, 2014:
Investment securities available for sale:
Obligations of U.S. government agencies and    corporations	$	49,276	$	—	$	49,276	$	—
Obligations of states and political subdivisions		4,871		—		4,871		—
Federal agency mortgage-backed securities		20,351		—		20,351		—
Federal agency collateralized mortgage obligations		532		—		532		—
Other debt securities		502		—		502		—
Money market mutual fund		25		25		—		—
Total assets measured at fair value on a recurring basis	$	75,557	$	25	$	75,532	$	—

For financial assets measured at fair value on a nonrecurring basis, the fair value measurements by level within the fair value hierarchy used at June 30, 2015 and December 31, 2014 are as follows:

Description	Fair Value		(Level 1) Quoted Prices in Active Markets for Identical Assets		(Level 2) Significant Other Observable Inputs		(Level 3) Significant Unobservable Inputs
	(Dollars in thousands)
As of June 30, 2015:
Impaired loans	$	4,567	$	—	$	—	$	4,567
Other real estate owned		977		—		—		977
Total assets measured at fair value on a    nonrecurring basis	$	5,544	$	—	$	—	$	5,544
As of December 31, 2014:
Impaired loans	$	2,205	$	—	$	—	$	2,205
Repossessed assets		42		—		—		42
Other real estate owned		105		—		—		105
Total assets measured at fair value on a    nonrecurring basis	$	2,352	$	—	$	—	$	2,352

Management generally uses a discounted appraisal technique in valuing impaired assets, resulting in the discounting of the collateral values underlying each impaired asset. A discounted tax assessment rate has been applied for smaller assets to determine the discounted collateral value. All impaired loans are classified as Level 3 in the fair value hierarchy. Collateral may be real estate and/or business assets. Impaired loans are reviewed and evaluated on at least a quarterly basis for additional impairment.

Quantitative information about Level 3 fair value measurements at June 30, 2015 is included in the table below:

	Fair Value		Valuation Techniques	Unobservable Inputs	Estimated Ratings (Weighted Average) (3)
	(Dollars in thousands)
Impaired loans	$	4,567	Appraisal of real estate collateral (1)	Appraisal adjustments(2)	0%-50% (1.94%)
			Valuation of business assets used as collateral(1)	Valuation adjustments(2)	25%-30%
				Liquidation expenses	2%-8% (6.16%)
Other real estate owned	$	977	Appraisal of collateral(1)	Appraisal adjustments(2)	0%-27%       (4.39%)
				Liquidation expenses	7%-8.5% (8.36%)

Quantitative information about Level 3 fair value measurements at December 31, 2014 is included in the table below:

	Fair Value		Valuation Techniques	Unobservable Inputs	Estimated Ratings (Weighted Average) (3)
	(Dollars in thousands)
Impaired loans	$	2,205	Appraisal of real estate collateral (1)	Appraisal adjustments(2)	0%-5%                (0.12%)
			Valuation of business assets used as collateral(1)	Valuation adjustments(2)	25%-30%
				Liquidation expenses	8% (8.00%)
Repossessed assets	$	42	Appraisal of collateral(1)	Valuation adjustments(2)		7%
				Liquidation expenses		8%
Other real estate owned	$	105	Appraisal of collateral(1)	Appraisal adjustments(2)	None
				Liquidation expenses	7%-8% (7.79%)

(1) Fair Value is generally determined through independent appraisals of the underlying collateral, which include Level 3 inputs that are not identifiable.

(2) Appraisals are adjusted by management for qualitative factors such as economic conditions and estimated liquidation expenses.

(3) The range and weighted average of qualitative factors such as economic conditions and estimated liquidation expenses are presented as a percent of the appraised value.

Valuation of real estate collateral may be discounted based on the age of the existing appraisal. No discounts are taken for recent appraisals. Valuations related to business assets used as collateral are typically discounted more heavily due to the inherent level of uncertainty in determining the fair value of these types of assets. Liquidation costs relating to these assets are charged to expense.

Repossessed assets measured at fair value on a nonrecurring basis consist of personal property, specifically manufactured housing, that has been acquired for debts previously contracted and are included in other assets on the balance sheet. Costs relating to these assets are charged to expense. As of June 30, 2015 there were no repossessed assets. The Company had $42 thousand of repossessed assets as of December 31, 2014.

Other real estate owned measured at fair value on a nonrecurring basis consists of properties acquired as a result of accepting a deed in lieu of foreclosure, foreclosure or through other means related to collateral on Bank loans. Costs relating to the development or improvement of assets are capitalized and costs relating to holding the property are charged to expense. At June 30, 2015 and December 31, 2014, respectively, the fair value consists of other real estate owned balances of $1.4 million and $433 thousand, net of valuation allowances of $412 thousand and $328 thousand. Fair value is generally determined based upon independent third-party appraisals of the property.

Real estate properties acquired through, or in lieu of, foreclosure are to be sold and are carried at fair value less estimated cost to sell. Fair value is based upon independent market prices or appraised value of the property. These assets are included in Level 3 fair value based upon the lowest level of input that is significant to the fair value measurement.

The following information should not be interpreted as an estimate of the fair value of the entire Company since a fair value calculation is only provided for a limited portion of the Company’s assets and liabilities. Due to a wide range of valuation techniques and the degree of subjectivity used in making the estimates, comparisons between the Company’s disclosures and those of other companies may not be meaningful.

The following methods and assumptions were used to estimate the fair values of the Company’s financial instruments at June 30, 2015 and December 31, 2014:

Cash and Cash Equivalents

The carrying amounts reported in the balance sheet for cash and short-term instruments approximate those assets’ fair values.

Securities

The fair value of securities available for sale (carried at fair value) and held to maturity (carried at amortized cost) are determined by obtaining quoted market prices on nationally recognized securities exchanges (Level 1), or matrix pricing (Level 2), which is a mathematical technique used widely in the industry to value debt securities without relying exclusively on quoted market prices for the specific securities but rather by relying on the securities’ relationship to other benchmark quoted prices.

Loans Receivable

The fair values of loans are estimated using discounted cash flow analyses, using market rates at the balance sheet date that reflect the credit and interest rate-risk inherent in the loans. Projected future cash flows are calculated based upon contractual maturity or call dates, projected repayments and prepayments of principal.

Residential Mortgage Loans Held for Sale

The fair value of loans held for sale is determined, when possible, using quoted secondary-market prices. If no such quoted prices exist, the fair value of a loan is determined using quoted prices for a similar loan or loans, adjusted for the specific attributes of that loan. The Company did not write down any loans held for sale during the six months ended June 30, 2015. There were no loans held for sale at June 30, 2015 or December 31, 2014.

Impaired Loans

Impaired loans, which are included in loans receivable, are those that are accounted for under FASB ASC Topic 310, “Receivables”, in which the Company has measured impairment generally based on the fair value of the loan’s collateral. Fair value is generally determined based upon independent third party appraisals of the properties, or discounted cash flows based upon the expected proceeds. These assets are included as Level 3 fair values, based upon the lowest level of input that is significant to the fair value measurements. The fair value of the impaired loans consists of the loan balances, net of any valuation allowance. As of June 30, 2015 the fair value of impaired loans consisted of loan balances with an allowance recorded of $2.6 million, net of valuation allowances of $231 thousand; and loan balances with no related allowance recorded of $3.2 million, net of partial charge-offs of $1.0 million. As of December 31, 2014 the fair value of impaired loans consisted of loan balances with an allowance recorded of $542 thousand, net of valuation allowances of $166 thousand and partial charge-offs of $28 thousand; and loan balances with no related allowance recorded of $2.9 million, net of partial charge-offs of $1.1 million.

Restricted Investment in Bank Stock

The carrying amount of restricted investment in bank stock approximates fair value, and considers the limited marketability of such securities.

Accrued Interest Receivable and Payable

The carrying amount of accrued interest receivable and accrued interest payable approximates fair value.

Deposit Liabilities

The fair values disclosed for demand deposits (interest and noninterest checking), money market and savings accounts are, by definition, equal to the amount payable on demand at the reporting date (i.e., their carrying amounts). Fair values for fixed-rate certificates of deposit are estimated using a discounted cash flow calculation that applies interest rates currently being offered in the market to the maturities of the time deposits.

Short-Term Borrowings

The carrying amounts of short-term borrowings approximate their fair values.

Long-Term Debt

Fair values of FHLB advances are estimated using discounted cash flow analysis, based on quoted prices for new FHLB advances with similar credit risk characteristics, terms and remaining maturity. These prices obtained from this active market represent a market value that is deemed to represent the transfer price if the liability were assumed by a third party.

Off-Balance Sheet Financial Instruments

Fair values for the Company’s off-balance sheet financial instruments (lending commitments and letters of credit) are based on fees currently charged in the market to enter into similar agreements, taking into account, the remaining terms of the agreements and the counterparties’ credit standing.

At June 30, 2015 and December 31, 2014, the estimated fair values of the Company’s financial instruments were as follows:

	June 30, 2015
	Carrying Amount		Fair Value		Level 1		Level 2		Level 3
	(Dollars in thousands)
Assets:
Cash and cash equivalents	$	18,083	$	18,083	$	18,083	$	—	$	—
Securities available for sale		61,593		61,593		182		61,411		—
Securities held to maturity		15,682		15,780		—		15,780		—
Loans receivable, net		388,753		396,109		—		—		396,109
Restricted stock		3,347		3,347		—		3,347		—
Accrued interest receivable		1,601		1,601		—		1,601		—
Liabilities:
Deposits		377,466		378,334		—		378,334		—
Short-term borrowings		63,208		63,208		—		63,208		—
Long-term debt		11,000		10,986		—		10,986		—
Accrued interest payable		346		346		—		346		—
Off-balance sheet credit related instruments:
Commitments to extend credit		—		—		—		—		—

	December 31, 2014
	Carrying Amount		Fair Value		Level 1		Level 2		Level 3
	(Dollars in thousands)
Assets:
Cash and cash equivalents	$	7,866	$	7,866	$	7,866	$	—	$	—
Securities available for sale		75,557		75,557		25		75,532		—
Securities held to maturity		15,956		16,544		—		16,544		—
Loans receivable, net		372,909		380,257		—		—		380,257
Restricted stock		2,984		2,984		—		2,984		—
Accrued interest receivable		1,511		1,511		—		1,511		—
Liabilities:
Deposits		378,209		379,203		—		379,203		—
Short-term borrowings		51,472		51,472		—		51,472		—
Long-term debt		11,000		10,936		—		10,936		—
Accrued interest payable		356		356		—		356		—
Off-balance sheet credit related instruments:
Commitments to extend credit		—		—		—		—		—

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Shareholders' Equity

6 Months Ended

Jun. 30, 2015

Equity [Abstract]

Shareholders' Equity

Note 7—Shareholders’ Equity

On February 20, 2009, as part of the Treasury’s TARP Capital Purchase Program, the Company issued 4,579 shares of the Company’s Fixed Rate Cumulative Perpetual Preferred Stock, Series A, $100 par value per share, having a liquidation preference of $1,000 per share (the “Series A Preferred Stock”), and a warrant (the “Warrant) to purchase, on a net basis, 229 shares of the Company’s Fixed Rate Cumulative Perpetual Preferred Stock, Series B, par value $100 per share (the “Series B Preferred Stock”), which was immediately exercised, for an aggregate purchase price of $4.58 million in cash, less $29 thousand in legal issuance costs. On December 18, 2009, the Company issued 4,596 shares of the Company’s Fixed Rate Cumulative Perpetual Preferred Stock, Series C, $100 par value per share, having a liquidation preference of $1,000 per share (the “Series C Preferred Stock”), for an aggregate purchase price of $4.60 million in cash, less $8 thousand in legal issuance costs.

On February 8, 2013, the Treasury sold its entire holdings of the Company’s preferred stock to certain qualified or accredited institutional investors.

The Series A, Series B and Series C Preferred Stock pay cumulative dividends at a rate of 9% per annum. The Series A, B and C Preferred Stock have no maturity date and rank senior to common stock with respect to dividends and upon liquidation, dissolution, or winding up. The Company may redeem the Series A or Series C Preferred Stock, in whole or in part, at its liquidation preference plus accrued and unpaid dividends. The Company may redeem the Series B Preferred Stock only after all of Series A has been redeemed.

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Regulatory Matters - Additional Information (Detail)	6 Months Ended
	Jun. 30, 2015	Dec. 31, 2014
Compliance With Regulatory Capital Requirements Under Banking Regulations [Line Items]
Tier One Risk Based Capital Required To Be Adequately Capitalized	6.00%	4.00%
Tier One Risk Based Capital Required To Be Well Capitalized	8.00%	6.00%
Tier 1 common equity capital (to risk-weighted assets), Minimum Capital Requirement Ratio	4.50%
Tier 1 common equity capital (to risk-weighted assets), To be Well Capitalized under Prompt Corrective Action Provisions Ratio	6.50%
Total capital (to risk-weighted assets), Minimum Capital Requirement Ratio	8.00%	8.00%
Total capital (to risk-weighted assets), To be Well Capitalized under Prompt Corrective Action Provisions Ratio	10.00%	10.00%
Tier 1 capital (to total assets), Minimum Capital Requirement Ratio	4.00%	4.00%
Tier 1 capital (to total assets), To be Well Capitalized under Prompt Corrective Action Provisions Ratio	5.00%	5.00%
Dodd Frank Act
Compliance With Regulatory Capital Requirements Under Banking Regulations [Line Items]
Tier One Risk Based Capital Required To Be Adequately Capitalized	6.00%
Tier One Risk Based Capital Required To Be Well Capitalized	8.00%
Effective date of new risk based capital rules	Jan. 01, 2015

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Loans Receivable and Related Allowance for Loan Losses

6 Months Ended

Jun. 30, 2015

Receivables [Abstract]

Loans Receivable and Related Allowance for Loan Losses

Note 5—Loans Receivable and Related Allowance for Loan Losses

Loans receivable consist of the following at June 30, 2015 and December 31, 2014.

	June 30,			December 31,
	2015			2014
	(Dollars in thousands)
Commercial:
Commercial and industrial	$	79,731		$	75,412
Commercial mortgage		175,556			168,969
Commercial construction		9,193			6,497
Total commercial		264,480			250,878
Residential mortgage loans		83,986			80,134
Consumer:
Home equity lines of credit		26,646			27,902
Other consumer loans		16,385			16,378
Total consumer		43,031			44,280
Total loans		391,497			375,292
Allowance for loan losses		(2,566	)		(2,313	)
Net deferred loan cost (fees)		(178	)		(70	)
Total loans receivable, net	$	388,753		$	372,909

First Priority acquired various loans through the acquisition of Affinity Bancorp, Inc. on February 28, 2013 for which there was, at acquisition, evidence of deterioration of credit quality since origination, and for which it was probable that all contractually required payments would not be collected.  The carrying amounts of the acquired impaired loans included in the loan balances above are summarized as follows:

	June 30,		December 31,
	2015		2014
	(Dollars in thousands)
Commercial and industrial	$	699	$	699
Commercial mortgage		281		284
Residential mortgage loans		134		186
Total unpaid principal balance	$	1,114	$	1,169
Net recorded investment	$	540	$	602

The following table presents the changes in accretable yield related to acquired credit-impaired loans for the six months ended June 30, 2014 (dollars in thousands).  There was no remaining accretable yield for the six months ended June 30, 2015:

	2014
Accretable yield balance, beginning of period	$	56
Additions resulting from acquisition		-
Accretion to interest income		(171	)
Reclassification from nonaccretable difference and disposals, net		146
Accretable yield balance, end of period	$	31

The Company’s loans consist of credits to borrowers spread over a broad range of industrial classifications. The largest concentrations of loans are to lessors of nonresidential buildings and lessors of residential buildings and dwellings. As of June 30, 2015, these loans totaled $71.9 million and $58.3 million, respectively, or 18.4% and 14.9%, respectively, of the total loans outstanding. As of December 31, 2014, these same classifications of loans totaled $69.5 million and $54.7 million, respectively, or 18.5% and 14.6%, respectively, of the total loans outstanding at that time. These credits were subject to normal underwriting standards and did not present more than the normal amount of risk assumed by the Company’s other lending activities. The Company has no other concentration of loans which exceeds 10% of total loans.

The following tables summarize the activity in the allowance for loan losses by loan class for the three and six months ended June 30, 2015 and 2014:

	For the three months ended												For the six months ended
	June 30, 2015												June 30, 2015
	Allowance for Loan Losses												Allowance for Loan Losses
	(Dollars in thousands)												(Dollars in thousands)
	Beginning Balance		Charge-offs			Recoveries		Provision for loan losses			Ending Balance		Beginning Balance		Charge-offs			Recoveries		Provision for loan losses			Ending Balance
Commercial and industrial	$	745	$	—		$	2	$	17		$	764	$	788	$	(16	)	$	7	$	(15	)	$	764
Commercial mortgage		507		(31	)		—		149			625		468		(42	)		—		199			625
Commercial construction		34		—			—		6			40		26		—			—		14			40
Residential mortgage loans		163		—			—		12			175		159		(14	)		—		30			175
Home equity lines of credit		221		—			84		(75	)		230		270		(12	)		88		(116	)		230
Other consumer loans		66		—			4		(3	)		67		87		(16	)		8		(12	)		67
Unallocated		641		—			—		24			665		515		—			—		150			665
Total loans	$	2,377	$	(31	)	$	90	$	130		$	2,566	$	2,313	$	(100	)	$	103	$	250		$	2,566

	For the three months ended												For the six months ended
	June 30, 2014												June 30, 2014
	Allowance for Loan Losses												Allowance for Loan Losses
	(Dollars in thousands)												(Dollars in thousands)
	Beginning Balance		Charge-offs			Recoveries		Provision for loan losses			Ending Balance		Beginning Balance		Charge-offs			Recoveries		Provision for loan losses			Ending Balance
Commercial and industrial	$	421	$	(137	)	$	6	$	220		$	510	$	445	$	(137	)	$	16	$	186		$	510
Commercial mortgage		477		(1	)		—		7			483		452		(75	)		—		106			483
Commercial construction		17		—			2		3			22		12		(50	)		2		58			22
Residential  mortgage loans		150		(25	)		—		96			221		149		(25	)		—		97			221
Home equity lines of credit		123		(90	)		4		81			118		177		(90	)		8		23			118
Other consumer  loans		50		—			4		12			66		67		(52	)		7		44			66
Unallocated		981		—			—		(164	)		817		971		—			—		(154	)		817
Total loans	$	2,219	$	(253	)	$	16	$	255		$	2,237	$	2,273	$	(429	)	$	33	$	360		$	2,237

The following tables present the balance in the allowance for loan losses at June 30, 2015 and December 31, 2014 disaggregated on the basis of the Company’s impairment method by class of loans receivable along with the balance of loans receivable by class disaggregated on the basis of the Company’s impairment methodology:

	June 30, 2015
	Allowance for Loan Losses						Loans Receivables
	(Dollars in thousands)
	Ending Balance		Ending Balance Individually Evaluated for Impairment		Ending Balance Collectively Evaluated for Impairment		Ending Balance		Ending Balance Individually Evaluated for Impairment		Ending Balance Collectively Evaluated for Impairment
Commercial and industrial	$	764		134	$	630	$	79,731	$	1,524	$	78,207
Commercial mortgage		625		97		528		175,556		3,489		172,067
Commercial construction		40		—		40		9,193		—		9,193
Residential mortgage loans		175		—		175		83,986		235		83,751
Home equity lines of credit		230		—		230		26,646		99		26,547
Other consumer loans		67		—		67		16,385		346		16,039
Unallocated		665		—		665		—		—		—
Total loans	$	2,566	$	231	$	2,335	$	391,497	$	5,693	$	385,804

	December 31, 2014
	Allowance for Loan Losses						Loans Receivables
	(Dollars in thousands)
	Ending Balance		Ending Balance Individually Evaluated for Impairment		Ending Balance Collectively Evaluated for Impairment		Ending Balance		Ending Balance Individually Evaluated for Impairment		Ending Balance Collectively Evaluated for Impairment
Commercial and industrial	$	788	$	147	$	641	$	75,412	$	2,131	$	73,281
Commercial mortgage		468		5		463		168,969		3,660		165,309
Commercial construction		26		—		26		6,497		—		6,497
Residential mortgage loans		159		—		159		80,134		347		79,787
Home equity lines of credit		270		12		258		27,902		113		27,789
Other consumer loans		87		2		85		16,378		364		16,014
Unallocated		515		—		515		—		—		—
Total loans	$	2,313	$	166	$	2,147	$	375,292	$	6,615	$	368,677

The following tables summarize information in regard to impaired loans by loan portfolio class as of June 30, 2015 and December 31, 2014 as well as for the three and six month periods ended June 30, 2015 and 2014, respectively:

	June 30, 2015						December 31, 2014
	Recorded Investment		Unpaid Principal Balance		Related Allowance		Recorded Investment		Unpaid Principal Balance		Related Allowance
	(Dollars in thousands)
With no related allowance    recorded:
Commercial and industrial	$	552	$	975	$	—	$	1,840	$	2,290	$	—
Commercial mortgage		1,901		2,114		—		3,618		3,928		—
Commercial construction		—		—		—		—		—		—
Residential mortgage loans		235		330		—		347		426		—
Home equity lines of credit		99		99		—		101		101		—
Other consumer loans		346		372		—		196		215		—
With an allowance recorded:
Commercial and industrial	$	972	$	1,005	$	134	$	291	$	301	$	147
Commercial mortgage		1,588		1,595		97		42		70		5
Commercial construction		—		—		—		—		—		—
Residential mortgage loans		—		—		—		—		—		—
Home equity lines of credit		—		—		—		12		12		12
Other consumer loans		—		—		—		168		168		2
Total:
Commercial and industrial	$	1,524	$	1,980	$	134	$	2,131	$	2,591	$	147
Commercial mortgage		3,489		3,709		97		3,660		3,998		5
Commercial construction		—		—		—		—		—		—
Residential mortgage loans		235		330		—		347		426		—
Home equity lines of credit		99		99		—		113		113		12
Other consumer loans		346		372		—		364		383		2
Total	$	5,693	$	6,490	$	231	$	6,615	$	7,511	$	166

	Three Months ended June 30,								Six Months ended June 30,
	2015				2014				2015				2014
	Average Recorded Investment		Interest Income Recognized		Average Recorded Investment		Interest Income Recognized		Average Recorded Investment		Interest Income Recognized		Average Recorded Investment		Interest Income Recognized
	(Dollars in thousands)								(Dollars in thousands)
With no related allowance    recorded:
Commercial and industrial	$	556	$	—	$	1,596	$	—	$	897	$	9	$	1,671	$	—
Commercial mortgage		1,900		11		1,014		—		2,736		26		981		—
Commercial construction		—		—		344		9		—		—		384		14
Residential mortgage loans		236		—		242		—		234		—		242		—
Home equity lines of credit		99		1		141		—		100		2		71		—
Other consumer loans		321		1		349		—		326		3		277		—
With an allowance recorded:
Commercial and industrial	$	984	$	5	$	184	$	—	$	930	$	5	$	129	$	—
Commercial mortgage		1,590		—		42		—		795		—		83		—
Commercial construction		—		—		—		—		—		—		—		—
Residential mortgage loans		—		—		—		—		—		—		—		—
Home equity lines of credit		—		—		12		—		—		—		21		—
Other consumer loans		—		—		—		—		—		—		—		—
Total:
Commercial and industrial	$	1,540	$	5	$	1,780	$	—	$	1,827	$	14	$	1,800	$	—
Commercial mortgage		3,490		11		1,056		—		3,531		26		1,064		—
Commercial construction		—		—		344		9		—		—		384		14
Residential mortgage loans		236		—		242		—		234		—		242		—
Home equity lines of credit		99		1		153		—		100		2		92		—
Other consumer loans		321		1		349		—		326		3		277		—
Total	$	5,686	$	18	$	3,924	$	9	$	6,018	$	45	$	3,859	$	14

The following table presents nonaccrual loans by classes of the loan portfolio as of June 30, 2015 and December 31, 2014:

	June 30, 2015		December 31, 2014
	(Dollars in thousands)
Commercial and industrial	$	1,324	$	1,474
Commercial mortgage		2,209		2,370
Residential mortgage loans		235		347
Home equity lines of credit		18		31
Other consumer loans		248		262
Total loans	$	4,034	$	4,484

The Company’s policy for interest income recognition on nonaccrual loans is to recognize income under the cash basis when the loans are both current and the collateral on the loan is sufficient to cover the outstanding obligation to the Company. The Company will not recognize income if these factors do not exist. Interest that would have been accrued on non-accruing loans under the original terms but was not recognized as interest income totaled $65 thousand and $125 thousand for the three and six months ended June 30, 2015 and $70 thousand and $143 thousand for the three and six months ended June 30, 2014, respectively.

The following tables present the classes of the loan portfolio summarized by the aggregate pass rating and the classified ratings of special mention, substandard and doubtful within the Company’s internal risk rating system as of June 30, 2015 and December 31, 2014:

	June 30, 2015
	Pass		Special Mention		Substandard		Doubtful		Total
	(Dollars in thousands)
Commercial:
Commercial and industrial	$	76,527	$	1,339	$	1,865	$	—	$	79,731
Commercial mortgage		170,699		2,005		2,852		—		175,556
Commercial construction		9,193		—		—		—		9,193
Residential mortgage loans		83,751		—		235		—		83,986
Consumer:
Home equity lines of credit		26,628		—		18		—		26,646
Other consumer loans		16,137		—		248		—		16,385
Total	$	382,935	$	3,344	$	5,218	$	—	$	391,497

	December 31, 2014
	Pass		Special Mention		Substandard		Doubtful		Total
	(Dollars in thousands)
Commercial:
Commercial and industrial	$	73,498	$	—	$	1,914	$	—	$	75,412
Commercial mortgage		163,899		745		4,325		—		168,969
Commercial construction		6,497		—		—		—		6,497
Residential mortgage loans		79,787		—		347		—		80,134
Consumer:
Home equity lines of credit		27,871		—		31		—		27,902
Other consumer loans		16,116		—		262		—		16,378
Total	$	367,668	$	745	$	6,879	$	—	$	375,292

The performance and credit quality of the loan portfolio is also monitored by analyzing the age of the loans receivable as determined by the length of time a recorded payment is past due. The following tables present the classes of the loan portfolio summarized by the past due status as of June 30, 2015 and December 31, 2014:

	June 30, 2015
	30-59 Days Past Due		60-89 Days Past Due		Greater Than 90 Days		Total Past Due		Current		Total Loans Receivables
	(Dollars in thousands)
Commercial:
Commercial and industrial	$	—	$	—	$	366	$	366	$	79,365	$	79,731
Commercial mortgage		534		48		2,209		2,791		172,765		175,556
Commercial construction		—		—		—		—		9,193		9,193
Residential mortgage loans		—		68		202		270		83,716		83,986
Consumer:
Home equity lines of credit		114		—		—		114		26,532		26,646
Other consumer loans		29		145		202		376		16,009		16,385
Total	$	677	$	261	$	2,979	$	3,917	$	387,580	$	391,497

	December 31, 2014
	30-59 Days Past Due		60-89 Days Past Due		Greater Than 90 Days		Total Past Due		Current		Total Loans Receivables
	(Dollars in thousands)
Commercial:
Commercial and industrial	$	70	$	102	$	1,260	$	1,432	$	73,980	$	75,412
Commercial mortgage		310		15		2,355		2,680		166,289		168,969
Commercial construction		—		—		—		—		6,497		6,497
Residential mortgage loans		478		—		312		790		79,344		80,134
Consumer:
Home equity lines of credit		—		—		12		12		27,890		27,902
Other consumer loans		31		66		214		311		16,067		16,378
Total	$	889	$	183	$	4,153	$	5,225	$	370,067	$	375,292

As of June 30, 2015, there were no loans 90 days past due and still accruing interest.  As of December 31, 2014, there was one residential mortgage loan totaling $70 thousand which was greater than 90 days past due and still accruing interest which has subsequently been paid current.

The Company may grant a concession or modification for economic or legal reasons related to a borrower’s declining financial condition that it would not otherwise consider resulting in a modified loan which is then identified as a troubled debt restructuring (“TDR”). The Company may modify loans through rate reductions, extensions of maturity, interest only payments, or payment modifications to better match the timing of cash flows due under the modified terms with the cash flows from the borrowers’ operations. Loan modifications are intended to minimize the economic loss and to avoid foreclosure or repossession of the collateral. TDRs are considered impaired loans for purposes of calculating the Company’s allowance for loan losses.

The Company identifies loans for potential restructure primarily through direct communication with the borrower and evaluation of the borrower’s financial statements, revenue projections, tax returns, and credit reports. Even if the borrower is not presently in default, management will consider the likelihood that cash flow shortages, adverse economic conditions, and negative trends may result in a payment default in the near future.

The following tables reflect information regarding troubled debt restructurings entered into by the Company for the three and six month periods ended June 30, 2015 and 2014. As of June 30, 2015, one mortgage loan, related to land, was in default and was restructured under the terms of a forbearance agreement whereby a concession was made in regards to the interest rate and the amortization period was extended.  

	For the three months ended June 30, 2015						For the six months ended June 30, 2015
	Number of Contracts		Pre- Modification Outstanding Recorded Investments		Post- Modification Outstanding Recorded Investments		Number of Contracts		Pre- Modification Outstanding Recorded Investments		Post- Modification Outstanding Recorded Investments
	(Dollars in thousands)						(Dollars in thousands)
Troubled debt restructurings:
Commercial and industrial		1	$	200	$	200		1	$	200	$	200
Residential mortgage loans		—		—		—		1		35		35
Total		—	$	—	$	—		2	$	235	$	235

	For the three months ended June 30, 2014						For the six months ended June 30, 2014
	Number of Contracts		Pre- Modification Outstanding Recorded Investments		Post- Modification Outstanding Recorded Investments		Number of Contracts		Pre- Modification Outstanding Recorded Investments		Post- Modification Outstanding Recorded Investments
	(Dollars in thousands)						(Dollars in thousands)
Troubled debt restructurings:
Commercial and industrial		1	$	29	$	29		1	$	29	$	29
Home equity lines of credit		1		31		20		1		31		20
Other consumer loans		2		110		108		2		110		108
Total		4	$	170	$	157		4	$	170	$	157

The following table reflects information regarding troubled debt restructuring entered into by the Bank for the year ended December 31, 2014:

	Number of Contracts		Pre-Modification Outstanding Recorded Investments		Post- Modification Outstanding Recorded Investments
	(Dollars in thousands)
Troubled debt restructurings:
Commercial and industrial		1	$	28	$	28
Commercial mortgage		1		1,292		1,292
Home equity lines of credit		2		112		102
Other consumer loans		3		170		158
Total		7	$	1,602	$	1,580

During the second quarter of 2015, a consumer installment loan, classified as non-accrual, became in default with an outstanding balance of $22 thousand as of June 30, 2015.  As of June 30, 2015 and 2014 and also December 31, 2014, a residential mortgage loan with a current balance of $76 thousand, acquired through the Affinity merger, has remained in default and is classified as non-accrual. Additionally two commercial loans classified as troubled debt restructurings with combined outstanding balances totaling $64 thousand as of March 31, 2015 were in default and remain classified as non-accrual status.

As of June 30, 2014, a commercial mortgage loan with an outstanding balance of $243 thousand was also in default.

No other TDRs were subsequently in default as of the periods stated.

The carrying amount of foreclosed residential real estate properties held was $251 thousand as of June 30, 2015.  Consumer mortgage loans collateralized by residential real estate property that are in the process of foreclosure totaled $611 thousand as of June 30, 2015.

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Deposits

6 Months Ended

Jun. 30, 2015

Banking And Thrift [Abstract]

Deposits

Note 6—Deposits

The components of deposits at June 30, 2015 and December 31, 2014 are as follows:

	June 30,		December 31,
	2015		2014
	(Dollars in thousands)
Demand, non-interest bearing	$	48,229	$	49,462
Demand, interest-bearing		32,573		34,186
Money market and savings accounts		93,865		101,486
Time, $100 and over		49,825		50,948
Time, other		152,974		142,127
	$	377,466	$	378,209

Included in time, other at June 30, 2015 and December 31, 2014 are brokered deposits of $93.4 million and $74.6 million, respectively.

At June 30, 2015, the scheduled maturities of time deposits were as follows:

	(Dollars in thousands)
6/30/2016	$	82,125
6/30/2017		60,380
6/30/2018		48,340
6/30/2019		4,419
6/30/2020		7,535
Thereafter		—
	$	202,799

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Stock Compensation Program

6 Months Ended

Jun. 30, 2015

Disclosure Of Compensation Related Costs Sharebased Payments [Abstract]

Stock Compensation Program

Note 8—Stock Compensation Program

In 2005, the Company adopted the 2005 Stock Compensation Program, which was amended at the Company’s annual meeting on April 23, 2009 as the 2009 Stock Compensation Program (the “Program”) and further amended effective March 18, 2010. The Program allows equity benefits to be awarded in the form of Incentive Stock Options, Compensatory Stock Options or Restricted Stock. The Program authorizes the Board of Directors to grant options up to an aggregate maximum of 1,207,957 shares to officers, other employees and directors of the Company, including 382,957 shares which were authorized for grant under this plan as a result of the merger with Affinity. Only employees of the Company will be eligible to receive Incentive Stock Options and such grants are subject to the limitations under Section 422 of the Internal Revenue Code.

All stock options granted under the Program fully vest in four years from the date of grant (or potentially earlier upon a change of control), excluding options issued in regards to the Company’s Severance Plan which vest only upon change in control, and terminate ten years from the date of the grant. The exercise price of the options granted is the fair value of a share of common stock at the time of the grant, with a minimum exercise price of $10 per share for shares issued prior to March 18, 2010. Effective March 18, 2010, the Company’s stock compensation program was amended to eliminate the minimum exercise price.

A summary of the status of the Program is presented below for the six months ended June 30, 2015:

	Shares			Weighted Average Exercise Price
Outstanding at beginning of period		866,613		$	6.89
Granted during period		—			—
Forfeited/cancelled during period		(5,098	)		5.36
Expired		(34,348	)		8.97
Outstanding at end of period (1)		827,167			6.81
Exercisable at end of period (1)		424,167		$	8.24

(1) Included in options outstanding and exercisable at June 30, 2015 are 100,000 organizer options, with an exercise price of $10.00 per share, exchanged as part of the 2008 acquisition of Prestige Community Bank which were issued outside of the Program.

The weighted average remaining contractual lives of all outstanding stock options and exercisable options at June 30, 2015 and December 31, 2014 were 5.89 years and 3.60 years, respectively and 6.15 years and 2.41 years, respectively. The aggregate intrinsic value of options outstanding was $411 thousand as of June 30, 2015 while the aggregate intrinsic value of exercisable options was $87 thousand as of this same date.

As of June 30, 2015, there was $56 thousand of unrecognized compensation cost related to non-vested stock options granted after January 1, 2007, excluding those stock options issued in conjunction with the Company’s severance plan. That cost is expected to be recognized over a weighted average period of 2.84 years. There was no tax benefit recognized related to this stock-based compensation. There are 355,000 stock options issued in connection with the termination of the previously executed change in control agreements and the adoption of the severance plan with $576 thousand of unrecognized compensation cost which will only be recognized if a change in control occurs, based on the options which remain outstanding and are probable to vest at that time.

Employee Restricted Stock grants fully vest three years from the date of grant (or potentially earlier upon a change of control), subject to the recipient remaining an employee of the Company. Director Restricted Stock grants vest in one year to coincide with the required service period.  Upon issuance of the shares, resale of the shares is restricted during the vesting period, during which the shares may not be sold, pledged, or otherwise disposed of. Prior to the vesting date and in the event the recipient terminates association with Company for any reasons other than death, disability or change of control, the recipient forfeits all rights to the shares that would otherwise be issued under the grant. Compensation expense related to restricted stock awards granted under the Plan was recorded at the date of the award based on the estimated fair value of the shares. As of June 30, 2015, there was $270 thousand of unrecognized compensation cost related to restricted stock, which will be amortized through July 17, 2017.

A summary of restricted stock award activity is presented below for the six months ended June 30, 2015:

	Shares
Outstanding unvested shares at beginning of period		121,874
Shares Granted during period		11,000
Shares Forfeited/cancelled during the period		(5,350	)
Vested Shares during this period		(1,575	)
Outstanding unvested shares at end of period		125,949

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Fair Value Measurements and Fair Values of Financial Instruments - Quantitative Information about Level 3 Fair Value Measurements (Detail) - USD ($) $ in Thousands	6 Months Ended	12 Months Ended	18 Months Ended
	Jun. 30, 2015	Dec. 31, 2014	Jun. 30, 2015
Impaired Loans [Member]
Fair Value Inputs Assets Quantitative Information [Line Items]
Asset at fair Value	$ 4,567	$ 2,205	$ 4,567
Impaired Loans [Member] | Unobservable Inputs Appraisal Adjustments [Member]
Fair Value Inputs Assets Quantitative Information [Line Items]
Unobservable Inputs			Appraisal adjustments
Impaired Loans [Member] | Unobservable Inputs Valuation Adjustments [Member]
Fair Value Inputs Assets Quantitative Information [Line Items]
Unobservable Inputs			Valuation adjustments
Impaired Loans [Member] | Unobservable Inputs Liquidation Expenses [Member]
Fair Value Inputs Assets Quantitative Information [Line Items]
Estimated Ratings, maximum	8.00%	8.00%
Estimated Ratings Weighted Average, Liquidation expenses	6.16%	8.00%
Unobservable Inputs			Liquidation expenses
Estimated Ratings, minimum	2.00%	8.00%
Impaired Loans [Member] | Appraisal of Real Estate Collateral [Member]
Fair Value Inputs Assets Quantitative Information [Line Items]
Valuation Techniques			Appraisal of real estate collateral
Impaired Loans [Member] | Appraisal of Real Estate Collateral [Member] | Unobservable Inputs Appraisal Adjustments [Member]
Fair Value Inputs Assets Quantitative Information [Line Items]
Estimated Ratings, maximum	50.00%	5.00%
Estimated Ratings Weighted Average, Appraisal adjustments	1.94%	0.12%
Estimated Ratings, minimum	0.00%	0.00%
Impaired Loans [Member] | Valuation of Business Assets Used as Collateral [Member]
Fair Value Inputs Assets Quantitative Information [Line Items]
Valuation Techniques			Valuation of business assets used as collateral
Impaired Loans [Member] | Valuation of Business Assets Used as Collateral [Member] | Unobservable Inputs Valuation Adjustments [Member]
Fair Value Inputs Assets Quantitative Information [Line Items]
Estimated Ratings, maximum	30.00%	30.00%
Estimated Ratings, minimum	25.00%	25.00%
Repossessed Assets [Member]
Fair Value Inputs Assets Quantitative Information [Line Items]
Asset at fair Value		$ 42
Repossessed Assets [Member] | Unobservable Inputs Liquidation Expenses [Member]
Fair Value Inputs Assets Quantitative Information [Line Items]
Estimated Ratings, maximum		8.00%
Repossessed Assets [Member] | Appraisal Of Collateral | Unobservable Inputs Valuation Adjustments [Member]
Fair Value Inputs Assets Quantitative Information [Line Items]
Estimated Ratings, maximum		7.00%
Other Real Estate Owned [Member]
Fair Value Inputs Assets Quantitative Information [Line Items]
Asset at fair Value	$ 977	$ 105	$ 977
Other Real Estate Owned [Member] | Unobservable Inputs Appraisal Adjustments [Member]
Fair Value Inputs Assets Quantitative Information [Line Items]
Unobservable Inputs			Appraisal adjustments
Estimated Ratings, minimum	0.00%	0.00%
Other Real Estate Owned [Member] | Unobservable Inputs Liquidation Expenses [Member]
Fair Value Inputs Assets Quantitative Information [Line Items]
Estimated Ratings, maximum	8.50%	8.00%
Estimated Ratings Weighted Average, Liquidation expenses	8.36%	7.79%
Unobservable Inputs			Liquidation expenses
Estimated Ratings, minimum	7.00%	7.00%
Other Real Estate Owned [Member] | Appraisal Of Collateral
Fair Value Inputs Assets Quantitative Information [Line Items]
Valuation Techniques			Appraisal of collateral
Other Real Estate Owned [Member] | Appraisal Of Collateral | Unobservable Inputs Appraisal Adjustments [Member]
Fair Value Inputs Assets Quantitative Information [Line Items]
Estimated Ratings, maximum	27.00%	0.00%
Other Real Estate Owned [Member] | Appraisal Of Collateral | Unobservable Inputs Liquidation Expenses [Member]
Fair Value Inputs Assets Quantitative Information [Line Items]
Estimated Ratings Weighted Average, Appraisal adjustments	4.39%

XML

Fair Value Measurements and Fair Values of Financial Instruments - Summary of Estimated Fair Values of Company's Financial Instruments (Detail) - USD ($) $ in Thousands	Jun. 30, 2015	Dec. 31, 2014	Jun. 30, 2014	Dec. 31, 2013
Fair Value Balance Sheet Grouping Financial Statement Captions [Line Items]
Cash and cash equivalents, Fair Value	$ 18,083	$ 7,866
Fair Value	61,593	75,557
Securities held to maturity, Fair Value	15,780	16,544
Loans receivable, net, Fair Value	396,109	380,257
Restricted stock, Fair Value	3,347	2,984
Accrued interest receivable, Fair Value	1,601	1,511
Deposits, Fair Value	378,334	379,203
Short-term borrowings, Fair Value	63,208	51,472
Long-term debt, Fair Value	10,986	10,936
Accrued interest payable, Fair Value	346	356
Cash and cash equivalents, Carrying Amount	18,083	7,866	$ 14,316	$ 11,248
Securities available for sale, Carrying amount	61,593	75,557
Securities held to maturity, Carrying Amount	15,682	15,956
Loans receivable, net, Carrying Amount	388,753	372,909
Restricted stock, Carrying Amount	3,347	2,984
Accrued interest receivable, Carrying Amount	1,601	1,511
Deposits, Carrying Amount	377,466	378,209
Balance at year end	63,208	51,472
Long-term debt, Carrying Amount	11,000	11,000
Accrued interest payable, Carrying Amount	346	356
(Level 1) Quoted Prices in Active Markets for Identical Assets [Member]
Fair Value Balance Sheet Grouping Financial Statement Captions [Line Items]
Cash and cash equivalents, Fair Value	18,083	7,866
Fair Value	182	25
(Level 2) Significant Other Observable Inputs [Member]
Fair Value Balance Sheet Grouping Financial Statement Captions [Line Items]
Fair Value	61,411	75,532
Securities held to maturity, Fair Value	15,780	16,544
Restricted stock, Fair Value	3,347	2,984
Accrued interest receivable, Fair Value	1,601	1,511
Deposits, Fair Value	378,334	379,203
Short-term borrowings, Fair Value	63,208	51,472
Long-term debt, Fair Value	10,986	10,936
Accrued interest payable, Fair Value	346	356
(Level 3) Significant Unobservable Inputs [Member]
Fair Value Balance Sheet Grouping Financial Statement Captions [Line Items]
Loans receivable, net, Fair Value	$ 396,109	$ 380,257

XML

Fair Value Measurements and Fair Values of Financial Instruments - Summary of Financial Assets Measured at Fair Value on Nonrecurring Basis (Detail) - USD ($) $ in Thousands	Jun. 30, 2015	Dec. 31, 2014
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Total assets measured at fair value on a nonrecurring basis	$ 5,544	$ 2,352
(Level 3) Significant Unobservable Inputs [Member]
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Total assets measured at fair value on a nonrecurring basis	5,544	2,352
Impaired Loans [Member]
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Total assets measured at fair value on a nonrecurring basis	4,567	2,205
Impaired Loans [Member] | (Level 3) Significant Unobservable Inputs [Member]
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Total assets measured at fair value on a nonrecurring basis	4,567	2,205
Repossessed Assets [Member]
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Total assets measured at fair value on a nonrecurring basis		42
Repossessed Assets [Member] | (Level 3) Significant Unobservable Inputs [Member]
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Total assets measured at fair value on a nonrecurring basis		42
Other Real Estate Owned [Member]
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Total assets measured at fair value on a nonrecurring basis	977	105
Other Real Estate Owned [Member] | (Level 3) Significant Unobservable Inputs [Member]
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Total assets measured at fair value on a nonrecurring basis	$ 977	$ 105

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Earnings Per Common Share - Schedule of Amount of Preferred Stock Dividends and Net Accretion or Amortization Related to Each Series of Preferred Stock (Detail) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2015	Jun. 30, 2014	Jun. 30, 2015	Jun. 30, 2014
Class Of Stock [Line Items]
Preferred dividends	$ 211	$ 120	$ 377	$ 240
Net accretion (amortization) on preferred stock		(1)		(8)
Series A Preferred Stock [Member]
Class Of Stock [Line Items]
Preferred dividends	103	57	206	114
Net accretion (amortization) on preferred stock				(9)
Series B Preferred Stock [Member]
Class Of Stock [Line Items]
Preferred dividends	5	5	10	10
Net accretion (amortization) on preferred stock				2
Series C Preferred Stock [Member]
Class Of Stock [Line Items]
Preferred dividends	$ 103	58	$ 161	116
Net accretion (amortization) on preferred stock		$ (1)		$ (1)

XML

Deposits - Components of Deposits (Detail) - USD ($) $ in Thousands	Jun. 30, 2015	Dec. 31, 2014
Deposits [Abstract]
Demand, non-interest bearing	$ 48,229	$ 49,462
Demand, interest-bearing	32,573	34,186
Money market and savings accounts	93,865	101,486
Time, $100 and over	49,825	50,948
Time, other	152,974	142,127
Total deposits	$ 377,466	$ 378,209

XML

Summary of Significant Accounting Policies (Tables)

6 Months Ended

Jun. 30, 2015

Accounting Policies [Abstract]

Schedule of Total Reclassifications from Accumulated Other Comprehensive Losses

Total reclassifications from accumulated other comprehensive losses for the periods presented are as follows:

Details about Accumulated Other Comprehensive Loss Components	Amounts Reclassified from Accumulated Other Comprehensive Loss												Affected Line Item in the Statement where Net Income is Presented
	For the three months ended June 30,						For the six months ended June 30,
	2015			2014			2015			2014
	(Dollars in thousands)						(Dollars in thousands)
Amortization of net unrealized holding losses on securities transferred from available-for-sale to held-to-maturity	$	(7	)	$	(11	)	$	(20	)	$	(25	)	Interest Income
Tax effect		3			-			7			-		Federal Income Tax Expense
Total reclassification	$	(4	)	$	(11	)	$	(13	)	$	(25	)

Schedule of Accumulated Other Comprehensive Income (Loss)

Accumulated other comprehensive loss as of June 30, 2015 and December 31, 2014 consisted of the following:

	June 30,			December 31,
	2015			2014
	(Dollars in thousands)
Net unrealized loss on available for sale securities	$	(116	)	$	(57	)
Net unrealized holding gains on securities transferred    between available for sale and held to maturity		37			51
Total	$	(79	)	$	(6	)

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Stock Compensation Program (Tables)

6 Months Ended

Jun. 30, 2015

Disclosure Of Compensation Related Costs Sharebased Payments [Abstract]

Summary of Stock Option Activity

A summary of the status of the Program is presented below for the six months ended June 30, 2015:

	Shares			Weighted Average Exercise Price
Outstanding at beginning of period		866,613		$	6.89
Granted during period		—			—
Forfeited/cancelled during period		(5,098	)		5.36
Expired		(34,348	)		8.97
Outstanding at end of period (1)		827,167			6.81
Exercisable at end of period (1)		424,167		$	8.24

(1) Included in options outstanding and exercisable at June 30, 2015 are 100,000 organizer options, with an exercise price of $10.00 per share, exchanged as part of the 2008 acquisition of Prestige Community Bank which were issued outside of the Program.

Summary of Restricted Stock Award Activity

A summary of restricted stock award activity is presented below for the six months ended June 30, 2015:

	Shares
Outstanding unvested shares at beginning of period		121,874
Shares Granted during period		11,000
Shares Forfeited/cancelled during the period		(5,350	)
Vested Shares during this period		(1,575	)
Outstanding unvested shares at end of period		125,949

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Loans Receivable and Related Allowance for Loan Losses - Classes of Loan Portfolio Summarized by Past Due Status (Detail) - USD ($) $ in Thousands	Jun. 30, 2015	Dec. 31, 2014
Financing Receivable Recorded Investment Past Due [Line Items]
Total Past Due	$ 3,917	$ 5,225
Current	387,580	370,067
Total loans	391,497	375,292
Commercial and Industrial [Member]
Financing Receivable Recorded Investment Past Due [Line Items]
Total Past Due	366	1,432
Current	79,365	73,980
Total loans	79,731	75,412
Commercial Mortgage [Member]
Financing Receivable Recorded Investment Past Due [Line Items]
Total Past Due	2,791	2,680
Current	172,765	166,289
Total loans	175,556	168,969
Commercial Construction [Member]
Financing Receivable Recorded Investment Past Due [Line Items]
Current	9,193	6,497
Total loans	9,193	6,497
Other Consumer Loans [Member]
Financing Receivable Recorded Investment Past Due [Line Items]
Total Past Due	376	311
Current	16,009	16,067
Total loans	16,385	16,378
30-59 Days Past Due [Member]
Financing Receivable Recorded Investment Past Due [Line Items]
Total Past Due	677	889
30-59 Days Past Due [Member] | Commercial and Industrial [Member]
Financing Receivable Recorded Investment Past Due [Line Items]
Total Past Due		70
30-59 Days Past Due [Member] | Commercial Mortgage [Member]
Financing Receivable Recorded Investment Past Due [Line Items]
Total Past Due	534	310
30-59 Days Past Due [Member] | Other Consumer Loans [Member]
Financing Receivable Recorded Investment Past Due [Line Items]
Total Past Due	29	31
60-89 Days Past Due [Member]
Financing Receivable Recorded Investment Past Due [Line Items]
Total Past Due	261	183
60-89 Days Past Due [Member] | Commercial and Industrial [Member]
Financing Receivable Recorded Investment Past Due [Line Items]
Total Past Due		102
60-89 Days Past Due [Member] | Commercial Mortgage [Member]
Financing Receivable Recorded Investment Past Due [Line Items]
Total Past Due	48	15
60-89 Days Past Due [Member] | Other Consumer Loans [Member]
Financing Receivable Recorded Investment Past Due [Line Items]
Total Past Due	145	66
Greater Than 90 Days [Member]
Financing Receivable Recorded Investment Past Due [Line Items]
Total Past Due	2,979	4,153
Greater Than 90 Days [Member] | Commercial and Industrial [Member]
Financing Receivable Recorded Investment Past Due [Line Items]
Total Past Due	366	1,260
Greater Than 90 Days [Member] | Commercial Mortgage [Member]
Financing Receivable Recorded Investment Past Due [Line Items]
Total Past Due	2,209	2,355
Greater Than 90 Days [Member] | Other Consumer Loans [Member]
Financing Receivable Recorded Investment Past Due [Line Items]
Total Past Due	202	214
Residential Mortgage Loans [Member]
Financing Receivable Recorded Investment Past Due [Line Items]
Total Past Due	270	790
Current	83,716	79,344
Total loans	83,986	80,134
Residential Mortgage Loans [Member] | 30-59 Days Past Due [Member]
Financing Receivable Recorded Investment Past Due [Line Items]
Total Past Due		478
Residential Mortgage Loans [Member] | 60-89 Days Past Due [Member]
Financing Receivable Recorded Investment Past Due [Line Items]
Total Past Due	68
Residential Mortgage Loans [Member] | Greater Than 90 Days [Member]
Financing Receivable Recorded Investment Past Due [Line Items]
Total Past Due	202	312
Home Equity Lines of Credit [Member]
Financing Receivable Recorded Investment Past Due [Line Items]
Total Past Due	114	12
Current	26,532	27,890
Total loans	26,646	27,902
Home Equity Lines of Credit [Member] | 30-59 Days Past Due [Member]
Financing Receivable Recorded Investment Past Due [Line Items]
Total Past Due	$ 114
Home Equity Lines of Credit [Member] | Greater Than 90 Days [Member]
Financing Receivable Recorded Investment Past Due [Line Items]
Total Past Due		$ 12

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Loans Receivable and Related Allowance for Loan Losses - Summary of Loans Receivable (Detail) - USD ($) $ in Thousands	Jun. 30, 2015	Mar. 31, 2015	Dec. 31, 2014	Jun. 30, 2014	Mar. 31, 2014	Dec. 31, 2013
Commercial:
Commercial and industrial	$ 79,731		$ 75,412
Commercial mortgage	175,556		168,969
Commercial construction	9,193		6,497
Total commercial	264,480		250,878
Residential mortgage loans	83,986		80,134
Consumer:
Home equity lines of credit	26,646		27,902
Other consumer loans	16,385		16,378
Total consumer	43,031		44,280
Total loans	391,497		375,292
Allowance for loan losses	(2,566)	$ (2,377)	(2,313)	$ (2,237)	$ (2,219)	$ (2,273)
Net deferred loan cost (fees)	(178)		(70)
Net loans	388,753		372,909
Total unpaid principal balance	6,490		7,511
Net recorded investment	5,693		6,615
Acquired Purchased Credit Impaired Loans [Member]
Commercial:
Commercial and industrial	699		699
Commercial mortgage	281		284
Residential mortgage loans	134		186
Consumer:
Total unpaid principal balance	1,114		1,169
Net recorded investment	$ 540		$ 602

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Consolidated Statements of Comprehensive Income (Unaudited) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2015	Jun. 30, 2014	Jun. 30, 2015	Jun. 30, 2014
Statement Of Income And Comprehensive Income [Abstract]
Net income	$ 479	$ 597	$ 896	$ 1,198
Securities available for sale:
Change in unrealized (loss) gain on securities available for sale	(484)	490	(90)	1,266
Tax effect	164		30
Net unrealized (losses) gains arising during the period	(320)	490	(60)	1,266
Net unrealized holding losses on securities transferred between available for sale and held to maturity:
Reclassification adjustment for net unrealized holding losses on securities transferred				(137)
Amortization of net unrealized holding losses to income	(7)	(11)	(20)	(25)
Tax effect	3		7
Net unrealized holding losses on securities transferred	(4)	(11)	(13)	(162)
Total other comprehensive (loss) income	(324)	479	(73)	1,104
Total comprehensive income	$ 155	$ 1,076	$ 823	$ 2,302

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Recently Issued Accounting Standards

6 Months Ended

Jun. 30, 2015

Accounting Changes And Error Corrections [Abstract]

Recently Issued Accounting Standards

Note 2—Recently Issued Accounting Standards

In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers (Topic 606). The amendments in this Update establish a comprehensive revenue recognition standard for virtually all industries under U.S. GAAP, including those that previously followed industry specific guidance such as the real estate, construction and software industries. The revenue standard’s core principle is built on the contract between a vendor and a customer for the provision of goods and services. It attempts to depict the exchange of rights and obligations between the parties in the pattern of revenue recognition based on the consideration to which the vendor is entitled. To accomplish this objective, the standard requires five basic steps: i) identify the contract with the customer, (ii) identify the performance obligations in the contract, (iii) determine the transaction price, (iv) allocate the transaction price to the performance obligations in the contract, and (v) recognize revenue when (or as) the entity satisfies a performance obligation. The amendments are effective for annual periods, and interim reporting periods within those annual periods, beginning after December 15, 2018. Early adoption is permitted. Management does not believe the adoption of ASU 2014-09 will have a significant impact on the Company’s Consolidated Financial Statements.

In February 2015, the FASB issued ASU 2015-02, Consolidation (Topic 810) guidance which amends existing standards regarding the evaluation of certain legal entities and their consolidation in the financial statements. The amendments modify the evaluation of whether limited partnerships and similar legal entities are variable interest entities or voting interest entities and eliminate the presumption that a general partner should consolidate a limited partnership. The amendments also affect the consolidation analysis of reporting entities that are involved with variable interest entities and provide a scope exception from consolidation guidance for reporting entities with interests in legal entities that are required to comply with or operate in accordance with requirements that are similar to those in Rule 2a-7 of the Investment Company Act of 1940 for registered money market funds. The guidance becomes effective for public business entities for fiscal years, and for interim periods within those fiscal years, beginning after December 15, 2015. We are evaluating the impact of this guidance on our financial statements.

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Stock Compensation Program - Summary of Restricted Stock Award Activity (Detail)	6 Months Ended
	Jun. 30, 2015 shares
Share Based Compensation Arrangement By Share Based Payment Award Equity Instruments Other Than Options Nonvested Roll Forward
Restricted stock award, Beginning balance, Unvested shares	121,874
Restricted stock award, Granted, Shares	11,000
Restricted stock award, Forfeited/cancelled, Shares	(5,350)
Vested Shares during this period	(1,575)
Restricted stock award, Ending balance, Unvested shares	125,949

XML

Regulatory Matters (Tables)

6 Months Ended

Jun. 30, 2015

Banking And Thrift [Abstract]

Schedule of Bank's Capital Amounts and Ratios

The Bank’s capital amounts (dollars in thousands) and ratios at June 30, 2015 and December 31, 2014 are presented below:

Actual

Minimum Capital Requirement

To be Well Capitalized under Prompt Corrective Action Provisions

Amount

Ratio

Amount

Ratio

Amount

Ratio

June 30, 2015

Total capital (to risk-weighted assets)

$

46,863

12.25

%

$

30,616

>8.0

%

$

>38,271

>10.0

%

Tier 1 capital (to risk-weighted assets)

44,262

11.57

>22,962

>6.0

>30,616

>8.0

Tier 1 common equity capital (to risk-weighted assets)

44,262

11.57

>17,222

>4.5

>24,876

>6.5

Tier 1 capital (to total assets)

44,262

9.40

>18,840

>4.0

>23,550

>5.0

December 31, 2014

Total capital (to risk-weighted assets)

$

45,327

12.87

%

$

>28,177

>8.0

%

$

>35,221

>10.0

%

Tier 1 capital (to risk-weighted assets)

42,979

12.20

>14,088

>4.0

>21,132

>6.0

Tier 1 capital (to total assets)

42,979

9.34

>18,410

>4.0

>23,012

>5.0

XML

Securities - Schedule of Aggregate Unrealized Losses and Aggregate Fair Value of Underlying Securities Available for Sale (Detail) $ in Thousands	Jun. 30, 2015 USD ($) Positions	Dec. 31, 2014 USD ($) Positions
Schedule Of Available For Sale Securities [Line Items]
Available for Sale, Fair Value Less than 12 Months	$ 14,949	$ 30,576
Available for Sale, Unrealized Losses Less than 12 Months	$ (229)	$ (1)
Available for Sale, Count Less than 12 Months | Positions	15	2
Available for Sale, Fair Value More than 12 Months	$ 21,841	$ 26,007
Available for Sale, Unrealized Losses More than 12 Months	$ (153)	$ (310)
Available for Sale, Count More than 12 Months | Positions	23	28
Available for Sale, Total Fair Value	$ 36,790	$ 56,583
Available for Sale, Total Unrealized Losses	$ (382)	$ (311)
Available for Sale, Total Count | Positions	38	30
Obligations of U.S. Government Agencies and Corporations [Member]
Schedule Of Available For Sale Securities [Line Items]
Available for Sale, Fair Value Less than 12 Months	$ 9,713	$ 30,000
Available for Sale, Unrealized Losses Less than 12 Months	$ (141)
Available for Sale, Count Less than 12 Months | Positions	1	1
Available for Sale, Fair Value More than 12 Months	$ 11,908	$ 16,753
Available for Sale, Unrealized Losses More than 12 Months	$ (60)	$ (196)
Available for Sale, Count More than 12 Months | Positions	11	15
Available for Sale, Total Fair Value	$ 21,621	$ 46,753
Available for Sale, Total Unrealized Losses	$ (201)	$ (196)
Available for Sale, Total Count | Positions	12	16
Obligations of States and Political Subdivisions [Member]
Schedule Of Available For Sale Securities [Line Items]
Available for Sale, Fair Value Less than 12 Months	$ 5,236	$ 576
Available for Sale, Unrealized Losses Less than 12 Months	$ (88)	$ (1)
Available for Sale, Count Less than 12 Months | Positions	14	1
Available for Sale, Fair Value More than 12 Months	$ 2,823	$ 3,076
Available for Sale, Unrealized Losses More than 12 Months	$ (20)	$ (38)
Available for Sale, Count More than 12 Months | Positions	7	8
Available for Sale, Total Fair Value	$ 8,059	$ 3,652
Available for Sale, Total Unrealized Losses	$ (108)	$ (39)
Available for Sale, Total Count | Positions	21	9
Federal Agency Mortgage-Backed Securities [Member]
Schedule Of Available For Sale Securities [Line Items]
Available for Sale, Fair Value More than 12 Months	$ 7,110	$ 5,882
Available for Sale, Unrealized Losses More than 12 Months	$ (73)	$ (74)
Available for Sale, Count More than 12 Months | Positions	5	4
Available for Sale, Total Fair Value	$ 7,110	$ 5,882
Available for Sale, Total Unrealized Losses	$ (73)	$ (74)
Available for Sale, Total Count | Positions	5	4
Federal Agency Collateralized Mortgage Obligations [Member]
Schedule Of Available For Sale Securities [Line Items]
Available for Sale, Fair Value More than 12 Months		$ 296
Available for Sale, Unrealized Losses More than 12 Months		$ (2)
Available for Sale, Count More than 12 Months | Positions		1
Available for Sale, Total Fair Value		$ 296
Available for Sale, Total Unrealized Losses		$ (2)
Available for Sale, Total Count | Positions		1

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Summary of Significant Accounting Policies (Policies)

6 Months Ended

Jun. 30, 2015

Accounting Policies [Abstract]

Organization and Nature of Operations

Organization and Nature of Operations

First Priority Financial Corp.

First Priority Financial Corp. (“First Priority,” the “Company”) is a bank holding company incorporated under the laws of the Commonwealth of Pennsylvania on February 13, 2007. On May 11, 2007, as a result of a reorganization and merger, First Priority Bank (the “Bank”) became a wholly-owned subsidiary of First Priority.  First Priority, primarily through the Bank, serves residents and businesses in the Delaware Valley with branches in Berks, Bucks, Chester and Montgomery counties in Pennsylvania.  The Bank, which has 9 retail branch office locations as of June 30, 2015, is a locally managed community bank providing commercial banking products, primarily loans and deposits, headquartered in Malvern, PA.

First Priority provides banking services through First Priority Bank and does not engage in any activities other than banking and related activities. As of June 30, 2015, First Priority had total assets of $503.9 million and total shareholders’ equity of $50.8 million.

First Priority Bank

First Priority Bank is a state-chartered commercial banking institution which was incorporated under the laws of the Commonwealth of Pennsylvania on May 25, 2005. First Priority Bank’s deposits are insured by the FDIC up to the maximum amount permitted for all banks. As of June 30, 2015, First Priority Bank had total assets of $503.6 million, total loans of $391.3 million, total deposits of $378.1 million and total shareholder’s equity of $50.0 million.

First Priority Bank engages in a full service commercial and consumer banking business with strong private banking and individual wealth management services. First Priority Bank offers a variety of consumer, private banking and commercial loans, mortgage products and commercial real estate financing. The Company’s operations are significantly affected by prevailing economic conditions, competition, and the monetary, fiscal, and regulatory policies of governmental agencies. Lending activities are influenced by a number of factors, including the general credit needs of individuals and small and medium-sized businesses in the Company’s market area, competition, the current regulatory environment, the level of interest rates, and the availability of funds. Deposit flows and costs of funds are influenced by prevailing market rates of interest, competition, account maturities, and the level of personal income and savings in the market area.

First Priority Bank also offers certain financial planning and investment management services. These investment services are provided by First Priority Financial Services, a Division of First Priority Bank, through an agreement with a third party provider. In addition, various life insurance products are offered through First Priority Bank, and the Bank has also entered into solicitation agreements with several investment advisors to provide portfolio management services to customers of the Bank.

First Priority Bank currently seeks deposits and commercial and private banking relationships through its nine banking offices. The Bank provides deposit products that include checking, money market and savings accounts, and certificates of deposit as well as other deposit services, including cash management and electronic banking products and online account opening capabilities. The Bank obtains funding in the local community by providing excellent service and competitive rates to its customers and utilizes electronic and print media advertising to attract current and potential deposit customers. The Bank also uses brokered certificates of deposit as a cost effective funding alternative.

Basis of Presentation

Basis of Presentation

The accompanying unaudited consolidated financial statements consist of the Company and the Company’s wholly owned consolidated subsidiary, the Bank.  All significant intercompany accounts and transactions have been eliminated in consolidation.

These statements are prepared in accordance with instructions to Form 10-Q, and therefore, do not include information or all footnotes necessary for a complete presentation of financial position, results of operations and cash flows in conformity with accounting principles generally accepted in the United States (“GAAP”). However, all normal recurring adjustments that, in the opinion of management, are necessary for a fair presentation of these financial statements have been included. These financial statements should be read in conjunction with the audited consolidated financial statements and the notes thereto for First Priority Financial Corp. for the year ended December 31, 2014, included in the Company’s Form 10-K filed with the Securities and Exchange Commission on March 27, 2015. The results of interim periods presented are not necessarily indicative of the results that may be expected for the year ending December 31, 2015.  

Subsequent Events

Subsequent Events

The Company has evaluated subsequent events for potential recognition and/or disclosure through the date these unaudited consolidated financial statements were issued.

Estimates

Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Material estimates that are particularly susceptible to significant change in the near term relate to the determination of the allowance for loan losses, stock-based compensation, impairment of goodwill, impairment of investments, the valuation of deferred tax assets and the valuation of other real estate owned.

Acquired Loans

Acquired Loans

Acquired loans are initially recorded at their acquisition date fair values. The carryover of allowance for loan losses is prohibited as any credit losses in the loans are included in the determination of the fair value of the loans at the acquisition date. Fair values for acquired loans are based on a discounted cash flow methodology that involves assumptions and judgments as to credit risk, prepayment risk, liquidity risk, default rates, loss severity, payment speeds, collateral values and discount rate.

Acquired loans that have evidence of deterioration in credit quality since origination and for which it is probable, at acquisition, that the Company will be unable to collect all contractually required payments are accounted for as impaired loans under ASC 310-30. The excess of cash flows expected at acquisition over the estimated fair value is referred to as the accretable discount and is recognized into interest income over the remaining life of the loans. The difference between contractually required payments at acquisition and the cash flows expected to be collected at acquisition is referred to as the non-accretable discount. The non-accretable discount represents estimated future credit losses expected to be incurred over the life of the loan. Subsequent decreases to the expected cash flows require the Company to evaluate the need for an allowance for loan losses on these loans. Subsequent improvements in expected cash flows result in the reversal of a corresponding amount of the non-accretable discount which the Company then reclassifies as an accretable discount that is recognized into interest income over the remaining life of the loans using the interest method.

Acquired loans that met the criteria for non-accrual of interest prior to acquisition may be considered performing upon acquisition, or in the future, regardless of whether the customer is contractually delinquent, if the Company can reasonably estimate the timing and amount of the expected cash flows on such loans and if the Company expects to fully collect the new carrying value of the loans. As such, the Company may no longer consider the loan to be non-accrual or non-performing and may accrue interest on these loans, including the impact of any accretable discount. For acquired loans that are not deemed impaired at acquisition, credit discounts representing the principal losses expected over the life of the loan are a component of the initial fair value and amortized over the life of the asset. Subsequent to the acquisition date, the methods utilized to estimate the required allowance for loan losses for these loans is similar to originated loans, however, the Company records a provision for loan losses only when the required allowance exceeds any remaining pooled discounts for loans evaluated collectively for impairment.

Allowance for Loan Losses

Allowance for Loan Losses

The allowance for credit losses consists of the allowance for loan losses and the reserve for unfunded lending commitments. The allowance for loan losses represents management’s estimate of losses inherent in the loan portfolio as of the balance sheet date and is recorded as a reduction to loans. The reserve for unfunded lending commitments, totaling $35 thousand as of both June 30, 2015 and December 31, 2014, represents management’s estimate of losses inherent in its unfunded loan commitments and is recorded in other liabilities on the consolidated balance sheet. The allowance for loan losses is increased by the provision for loan losses, and decreased by charge-offs, net of recoveries. Loans deemed to be uncollectible are charged against the allowance for loan losses, and subsequent recoveries, if any, are credited to the allowance. All, or part, of the principal balance of loans receivable are charged off to the allowance as soon as it is determined that the repayment of all, or part, of the principal balance is highly unlikely. Because all identified losses are immediately charged off, no portion of the allowance for loan losses is restricted to any individual loan or groups of loans, and the entire allowance is available to absorb any and all loan losses.

The allowance for loan losses is maintained at a level considered adequate to provide for losses that can be reasonably anticipated. Management performs a quarterly evaluation of the adequacy of the allowance. The allowance is based on the Company’s past loan loss experience, known and inherent risks in the portfolio, adverse situations that may affect the borrower’s ability to repay, the estimated value of any underlying collateral, composition of the loan portfolio, current economic conditions and other relevant factors. This evaluation is inherently subjective as it requires material estimates that may be susceptible to significant revision as more information becomes available.

The allowance consists of specific, general and unallocated components. The specific component relates to loans that are classified as impaired. For loans that are classified as impaired, an allowance is established when the discounted cash flows (or collateral value or observable market price) of the impaired loan is lower than the carrying value of that loan. The general component covers pools of loans by loan class including commercial loans not considered impaired, as well as smaller balance homogeneous loans, such as residential real estate, home equity and other consumer loans. These pools of loans are evaluated for loss exposure based upon historical loss rates for each of these categories of loans, adjusted for qualitative factors. These qualitative risk factors include:

1. Lending policies and procedures, including underwriting standards and collection, charge-off, and recovery practices.

2. National, regional, and local economic and business conditions as well as the condition of various market segments, including the value of underlying collateral for collateral dependent loans.

3. Nature and volume of the portfolio and terms of loans.

4. Management team with experience, depth, and knowledge in banking and in many areas of lending. Each contributes to the sound credit culture and control within the Company.

5. Volume and severity of past due, classified and nonaccrual loans as well as other loan modifications.

6. The Company engages a third party to perform an independent review of the loan portfolio as a measure for quality and consistency in credit evaluation and credit decisions.

7. Existence and effect of any concentrations of credit and changes in the level of such concentrations.

8. Effect of external factors, such as competition and legal and regulatory requirements.

Each factor is assigned a value to reflect improving, stable or declining conditions based on management’s best judgment using relevant information available at the time of the evaluation. Adjustments to the factors are supported through documentation of changes in conditions in a narrative accompanying the allowance for loan loss calculation.

A majority of the Company’s loans are to business owners of many types. The Company makes commercial loans for real estate development and other business purposes required by our customers.

The Company’s credit policies determine advance rates against the different forms of collateral that can be pledged against commercial loans. Typically, the majority of loans will be limited to a percentage of their underlying collateral values such as real estate values, equipment, eligible accounts receivable and inventory. Individual loan advance rates may be higher or lower depending upon the financial strength of the borrower and/or term of the loan. The assets financed through commercial loans are used within the business for its ongoing operation. Repayment of these kinds of loans generally comes from the cash flow of the business or the ongoing conversions of assets. Commercial real estate loans include long-term loans financing commercial properties. Repayment of this kind of loan is dependent upon either the ongoing cash flow of the borrowing entity or the resale of or lease of the subject property. Commercial real estate loans typically require a loan to value ratio of not greater than 80% and vary in terms.

Residential mortgages and home equity loans are secured by the borrower’s residential real estate in either a first or second lien position. Residential mortgages and home equity loans have varying loan rates depending on the financial condition of the borrower and the loan to value ratio. Residential mortgages have amortizations up to 30 years and home equity loans have maturities of no more than 15 years.  Residential mortgages and home equity loans typically require a loan to value ratio of not greater than 80%.

Other consumer loans include installment loans, car loans, and overdraft lines of credit. The majority of these loans are secured.

An unallocated component is maintained to cover uncertainties that could affect management’s estimate of probable losses. The unallocated component of the allowance reflects the margin of imprecision inherent in the underlying assumptions used in the methodologies for estimating specific and general losses in the portfolio.

A loan is considered impaired when, based on current information and events, it is probable that the Company will be unable to collect the scheduled payments of principal or interest when due according to the contractual terms of the loan agreement. Factors considered by management in determining impairment include payment status, collateral value and the probability of collecting scheduled principal and interest payments when due. Loans that experience insignificant payment delays and payment shortfalls generally are not classified as impaired. Management determines the significance of payment delays and payment shortfalls on a case by case basis, taking into consideration all of the circumstances surrounding the loan and the borrower, including the length of the delay, the reasons for the delay, the borrower’s prior payment record and the amount of the shortfall in relation to the principal and interest owed.

Impairment is measured on a loan by loan basis for commercial and industrial loans, commercial real estate loans and commercial construction loans by 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.

An allowance for loan losses is established for an impaired loan if its carrying value exceeds its estimated fair value. The estimated fair values of substantially all of the Company’s impaired loans are measured based on the estimated fair value of the loan’s collateral.

For commercial loans secured by real estate, estimated fair values are determined primarily through third-party appraisals. When a real estate secured loan becomes impaired, a decision is made regarding whether an updated certified appraisal of the real estate is necessary. This decision is based on various considerations, including the age of the most recent appraisal, the loan-to-value ratio based on the original appraisal and the condition of the property. Appraised values may be discounted to arrive at the estimated selling price of the collateral, which is considered to be the estimated fair value. The discounts also include estimated costs to sell the property.

For commercial and industrial loans secured by non-real estate collateral, such as accounts receivable, inventory and equipment, estimated fair values are determined based on the borrower’s financial statements, inventory reports, accounts receivable aging or equipment appraisals or invoices. Indications of value from these sources are generally discounted based on the age of the financial information or the quality of the assets.

Large groups of smaller balance homogeneous loans are collectively evaluated for impairment. Accordingly, the Company does not separately identify individual residential mortgage loans, home equity loans and other consumer loans for impairment disclosures, unless such loans are the subject of a troubled debt restructuring agreement.

Acquired loans are recorded at acquisition date at their acquisition date fair values, and therefore, are excluded from the calculation of loan loss reserves as of the acquisition date. To the extent there is a decrease in the present value of cash flows expected from the acquired impaired loans after the date of acquisition, the Company records a provision for loan losses. During the three and six months ended June 30, 2015, the Company recorded a provision for loan losses totaling $23 thousand and $65 thousand, respectively, for acquired impaired loans. During the three and six months ended June 30, 2014, the Company recorded a provision for loan losses totaling $130 thousand $250 thousand, respectively, for acquired impaired loans.

For acquired loans that are not deemed impaired at acquisition, credit discounts representing principal losses expected over the life of the loan are a component of the initial fair value. Subsequent to the acquisition date, the methods used to estimate the required allowance for loan losses for these loans is similar to originated loans, however, the Company records a provision for loan losses only when the required allowance exceeds any remaining unamortized general credit fair value adjustment for loans evaluated collectively for impairment.

The allowance calculation methodology includes further segregation of loan classes into risk rating categories. The borrower’s overall financial condition, repayment sources, guarantors and value of collateral, if appropriate, are evaluated annually for commercial loans or when credit deficiencies arise, such as delinquent loan payments, for commercial and consumer loans. Credit quality risk ratings include regulatory classifications of special mention, substandard, doubtful and loss. Loans criticized special mention have potential weaknesses that deserve management’s close attention. If uncorrected, the potential weaknesses may result in deterioration of the repayment prospects. Loans classified substandard have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt. They include loans that are inadequately protected by the current sound net worth and paying capacity of the obligor or of the collateral pledged, if any. Loans classified doubtful have all the weaknesses inherent in loans classified substandard with the added characteristic that collection or liquidation in full, on the basis of current conditions and facts, is highly improbable. Loans classified as a loss are considered uncollectible and are charged to the allowance for loan losses. Loans not classified are rated pass.

In addition, Federal regulatory agencies, as an integral part of their examination process, periodically review the Company’s allowance for loan losses and may require the Company to recognize additions to the allowance based on their judgments about information available to them at the time of their examination, which may not be currently available to management. Based on management’s comprehensive analysis of the loan portfolio, management believes the current level of the allowance for loan losses is adequate.

Comprehensive Income (Loss)

Comprehensive Income

Accounting principles generally accepted in the United States of America require that recognized revenue, expenses, gains and losses be included in net income. Although certain changes in assets and liabilities are reported as a separate component of the shareholders’ equity section of the balance sheet, such items, along with net income, are components of total comprehensive income. During the year ended December 31, 2014, the Company reversed the full valuation allowance on deferred tax assets and therefore, the Consolidated Statements of Comprehensive Income for the three and six months ended June 30, 2015 is presented net of the effect of income taxes.  The Consolidated Statements of Comprehensive Income for the three and six months ended June 30, 2014 does not include the effects of income taxes due to the full valuation allowance on net deferred tax assets.

Total reclassifications from accumulated other comprehensive losses for the periods presented are as follows:

Details about Accumulated Other Comprehensive Loss Components	Amounts Reclassified from Accumulated Other Comprehensive Loss												Affected Line Item in the Statement where Net Income is Presented
	For the three months ended June 30,						For the six months ended June 30,
	2015			2014			2015			2014
	(Dollars in thousands)						(Dollars in thousands)
Amortization of net unrealized holding losses on securities transferred from available-for-sale to held-to-maturity	$	(7	)	$	(11	)	$	(20	)	$	(25	)	Interest Income
Tax effect		3			-			7			-		Federal Income Tax Expense
Total reclassification	$	(4	)	$	(11	)	$	(13	)	$	(25	)

Accumulated other comprehensive loss as of June 30, 2015 and December 31, 2014 consisted of the following:

	June 30,			December 31,
	2015			2014
	(Dollars in thousands)
Net unrealized loss on available for sale securities	$	(116	)	$	(57	)
Net unrealized holding gains on securities transferred    between available for sale and held to maturity		37			51
Total	$	(79	)	$	(6	)

Recently Issued Accounting Standards

In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers (Topic 606). The amendments in this Update establish a comprehensive revenue recognition standard for virtually all industries under U.S. GAAP, including those that previously followed industry specific guidance such as the real estate, construction and software industries. The revenue standard’s core principle is built on the contract between a vendor and a customer for the provision of goods and services. It attempts to depict the exchange of rights and obligations between the parties in the pattern of revenue recognition based on the consideration to which the vendor is entitled. To accomplish this objective, the standard requires five basic steps: i) identify the contract with the customer, (ii) identify the performance obligations in the contract, (iii) determine the transaction price, (iv) allocate the transaction price to the performance obligations in the contract, and (v) recognize revenue when (or as) the entity satisfies a performance obligation. The amendments are effective for annual periods, and interim reporting periods within those annual periods, beginning after December 15, 2018. Early adoption is permitted. Management does not believe the adoption of ASU 2014-09 will have a significant impact on the Company’s Consolidated Financial Statements.

In February 2015, the FASB issued ASU 2015-02, Consolidation (Topic 810) guidance which amends existing standards regarding the evaluation of certain legal entities and their consolidation in the financial statements. The amendments modify the evaluation of whether limited partnerships and similar legal entities are variable interest entities or voting interest entities and eliminate the presumption that a general partner should consolidate a limited partnership. The amendments also affect the consolidation analysis of reporting entities that are involved with variable interest entities and provide a scope exception from consolidation guidance for reporting entities with interests in legal entities that are required to comply with or operate in accordance with requirements that are similar to those in Rule 2a-7 of the Investment Company Act of 1940 for registered money market funds. The guidance becomes effective for public business entities for fiscal years, and for interim periods within those fiscal years, beginning after December 15, 2015. We are evaluating the impact of this guidance on our financial statements.