Allowance for Loan Losses

12 Months Ended

Dec. 31, 2015

Provision for Loan and Lease Losses [Abstract]

The Company’s ALLL 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. The ALLL is prepared using the information provided by the Company’s credit and investment review process along with data from peer institutions and economic information gathered from published sources.

The loan portfolio is segmented into groups of loans with similar risk characteristics. Each segment possesses varying degrees of risk based on, among other things, the type of loan, the type of collateral, and the sensitivity of the borrower or industry to changes in external factors such as economic conditions. An estimated loss rate calculated using the Company’s actual historical loss rates adjusted for current portfolio trends, economic conditions, and other relevant internal and external factors, is applied to each group’s aggregate loan balances.

The Company's base ALLL factors are determined by management using the Bank's annualized actual trailing charge-off data over intervals ranging from 84 72, 36, 24, 12 and 6 months. Adjustments to those base factors are made for relevant internal and external factors. Those factors may include:


•	Changes in national, regional and local economic conditions, including trends in real estate values and the interest rate environment,


•	Changes in the nature and volume of the loan portfolio, including new types of lending,


•	Changes in volume and severity of past due loans, the volume of nonaccrual loans, and the volume and severity of adversely classified or graded loans, and


•	The existence and effect of concentrations of credit, and changes in the level of such concentrations.

The resulting total ALLL factor is compared for reasonableness against the 10-year average, 15-year average, and trailing 12 month total charge-off data for all Federal Deposit Insurance Corporation (“FDIC”) insured commercial banks and savings institutions based in California. These factors are applied to balances graded pass-1through pass-5. For loans risk graded as watch or worse, progressively higher potential loss factors are applied based on management’s judgment, taking into consideration the specific characteristics of the Bank’s portfolio and analysis of results from a select group of the Company’s peers.

The following tables summarize the allocation of the allowance as well as the activity in the allowance attributed to various segments in the loan portfolio as of and for the periods indicated:



	Commercial and Industrial			Franchise			Commercial Owner Occupied			SBA			Warehouse Facilities			Commercial Non-owner Occupied			Multi-family			One-to-four Family			Construction			Land			Other Loans			Total
	(dollars in thousands)
Balance, December 31, 2014	$	2,646		$	1,554		$	1,757		$	568		$	546		$	2,007		$	1,060		$	842		$	1,088		$	108		$	24		$	12,200
Charge-offs	(484		)	(764		)	—			—			—			(116		)	—			(16		)	—			—			—			(1,380		)
Recoveries	47			—			—			8			—			3			—			13			—			—			1			72
Provisions for (reduction in) loan losses	1,240			2,334			113			924			213			154			523			(141		)	942			125			(2		)	6,425
Balance, December 31, 2015	$	3,449		$	3,124		$	1,870		$	1,500		$	759		$	2,048		$	1,583		$	698		$	2,030		$	233		$	23		$	17,317
Amount of allowance attributed to:
Specifically evaluated impaired loans	$	—		$	731		$	—		$	—		$	—		$	—		$	—		$	—		$	—		$	—		$	—		$	731
General portfolio allocation	3,449			2,393			1,870			1,500			759			2,048			1,583			698			2,030			233			23			16,586
Loans individually evaluated for impairment	313			1,630			536			—			—			214			—			70			—			21			—			2,784
Specific reserves to total loans individually evaluated for impairment	—		%	30.53		%	—		%	—		%	—		%	—		%	—		%	—		%	—		%	—		%	—		%	16.93		%
Loans collectively evaluated for impairment	$	309,428		$	327,295		$	294,190		$	62,256		$	143,200		$	421,369		$	429,003		$	79,980		$	169,748		$	18,319		$	5,111		$	2,259,899
General reserves to total loans collectively evaluated for impairment	1.11		%	0.73		%	0.64		%	2.41		%	0.53		%	0.49		%	0.37		%	0.87		%	1.20		%	1.27		%	0.45		%	0.73		%
Total gross loans	$	309,741		$	328,925		$	294,726		$	62,256		$	143,200		$	421,583		$	429,003		$	80,050		$	169,748		$	18,340		$	5,111		$	2,262,683
Total allowance to gross loans	1.11		%	0.95		%	0.63		%	2.41		%	0.53		%	0.49		%	0.37		%	0.87		%	1.20		%	1.27		%	0.45		%	0.77		%



	Commercial and Industrial			Franchise			Commercial Owner Occupied			SBA			Warehouse Facilities			Commercial Non-owner Occupied			Multi-family			One-to-four Family			Construction			Land			Other Loans			Total
	(dollars in thousands)
Balance, December 31, 2013	$	1,968		$	—		$	1,818		$	151		$	392		$	1,658		$	817		$	1,099		$	136		$	127		$	34		$	8,200
Charge-offs	(223		)	—			—			—			—			(365		)	—			(195		)	—			—			—			(783		)
Recoveries	42			—			—			4			—			—			—			34			—			—			19			99
Provisions for (reduction in) loan losses	859			1,554			(61		)	413			154			714			243			(96		)	952			(19		)	(29		)	4,684
Balance, December 31, 2014	$	2,646		$	1,554		$	1,757		$	568		$	546		$	2,007		$	1,060		$	842		$	1,088		$	108		$	24		$	12,200
Amount of allowance attributed to:
Specifically evaluated impaired loans	$	—		$	—		$	—		$	—		$	—		$	—		$	—		$	—		$	—		$	—		$	—		$	—
General portfolio allocation	$	2,646		$	1,554		$	1,757		$	568		$	546		$	2,007		$	1,060		$	842		$	1,088		$	108		$	24		$	12,200
Loans individually evaluated for impairment	$	—		$	—		$	388		$	—		$	—		$	848		$	—		$	236		$	—		$	—		$	—		$	1,472
Specific reserves to total loans individually evaluated for impairment	—		%	—		%	—		%	—		%	—		%	—		%	—		%	—		%	—		%	—		%	—		%	—		%
Loans collectively evaluated for impairment	$	228,979		$	199,228		$	210,607		$	28,404		$	113,798		$	358,365		$	262,965		$	122,559		$	89,682		$	9,088		$	3,298		$	1,626,973
General reserves to total loans collectively evaluated for impairment	1.16		%	0.78		%	0.83		%	2.00		%	0.48		%	0.56		%	0.40		%	0.69		%	1.21		%	1.19		%	0.73		%	0.75		%
Total gross loans	$	228,979		$	199,228		$	210,995		$	28,404		$	113,798		$	359,213		$	262,965		$	122,795		$	89,682		$	9,088		$	3,298		$	1,628,445
Total allowance to gross loans	1.16		%	0.78		%	0.83		%	2.00		%	0.48		%	0.56		%	0.40		%	0.69		%	1.21		%	1.19		%	0.73		%	0.75		%
Balance, December 31, 2012	$	1,310		$	—		$	1,512		$	79		$	1,544		$	1,459		$	1,145		$	862		$	—		$	31		$	52		$	7,994
Charge-offs	(509		)	—			(232		)	(143		)	—			(756		)	(101		)	(272		)	—			—			(18		)	(2,031		)
Recoveries	138			—			—			50			—			—			—			47			—			—			142			377
Provisions for (reduction in) loan losses	1,029			—			538			165			(1,152		)	955			(227		)	462			136			96			(142		)	1,860



	Commercial and Industrial			Franchise			Commercial Owner Occupied			SBA			Warehouse Facilities			Commercial Non-owner Occupied			Multi-family			One-to-four Family			Construction			Land			Other Loans			Total
	(dollars in thousands)
Balance, December 31, 2013	$	1,968		$	—		$	1,818		$	151		$	392		$	1,658		$	817		$	1,099		$	136		$	127		$	34		$	8,200
Amount of allowance attributed to:
Specifically evaluated impaired loans	$	—		$	—		$	—		$	—		$	—		$	1		$	—		$	104		$	—		$	—		$	—		$	105
General portfolio allocation	$	1,968		$	—		$	1,818		$	151		$	392		$	1,657		$	817		$	995		$	136		$	127		$	34		$	8,095
Loans individually evaluated for impairment	$	—		$	—		$	747		$	14		$	—		$	983		$	—		$	683		$	—		$	—		$	—		$	2,427
Specific reserves to total loans individually evaluated for impairment	—		%	—		%	—		%	—		%	—		%	0.10		%	—		%	15.23		%	—		%	—		%	—		%	4.33		%
Loans collectively evaluated for impairment	$	187,035		$	—		$	220,342		$	10,645		$	87,517		$	332,561		$	233,689		$	144,552		$	13,040		$	7,605		$	3,839		$	1,240,825
General reserves to total loans collectively evaluated for impairment	1.05		%	—		%	0.83		%	1.42		%	0.45		%	0.50		%	0.35		%	0.69		%	1.04		%	1.67		%	0.89		%	0.65		%
Total gross loans	$	187,035		$	—		$	221,089		$	10,659		$	87,517		$	333,544		$	233,689		$	145,235		$	13,040		$	7,605		$	3,839		$	1,243,252
Total allowance to gross loans	1.05		%	—		%	0.82		%	1.42		%	0.45		%	0.50		%	0.35		%	0.76		%	1.04		%	1.67		%	0.89		%	0.66		%