10-Q

SECURITIES AND EXCHANGE COMMISSION

Washington D.C. 20549

FORM 10-Q

Quarterly Report

Pursuant to Section 13 or 15(d) of

the Securities Exchange Act of 1934

For the Quarterly Period Ended March 31, 2015

FNB BANCORP

(Exact name of registrant as specified in its charter)

California

(State or other jurisdiction of incorporation)

000-49693	91-2115369
(Commission File Number)	(IRS Employer Identification No.)

975 El Camino Real, South San Francisco, California	94080
(Address of principal executive offices)	(Zip Code)

Registrant’s telephone number, including area code:          (650) 588-6800

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

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

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

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

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

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date: Common Stock as of March 31, 2015: 4,284,918 shares.

FNB BANCORP

QUARTERLY REPORT ON FORM 10-Q

TABLE OF CONTENTS

		Page No
PART I. FINANCIAL INFORMATION
Item 1.	Consolidated Financial Statements (unaudited):
	Consolidated Balance Sheets	3
	Consolidated Statements of Earnings	4
	Consolidated Statements of Comprehensive Earnings (Loss)	5
	Consolidated Statements of Cash Flows	6
	Notes to Consolidated Financial Statements	8
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	33
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	42
Item 4.	Controls and Procedures	43
PART II. OTHER INFORMATION		44
Item 1.	Legal Proceedings	44
Item 1 A.	Risk Factors	44
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	44
Item 3.	Defaults Upon Senior Securities	44
Item 4.	Mine Safety Disclosures	44
Item 5.	Other Information	44
Item 6.	Exhibits	44
SIGNATURES		46

2

PART I—FINANCIAL INFORMATION

Item 1. Financial Statements.

FNB BANCORP AND SUBSIDIARY

Consolidated Balance Sheets

(Unaudited)

Assets	March 31,		December 31,
(Dollar amounts in thousands)	2015		2014
Cash and due from banks	$	30,640	$	14,978
Interest-bearing time deposits with financial institutions		2,783		2,784
Securities available-for-sale, at fair value		264,499		264,881
Loans, net of allowance for loan losses of $9,744 and $9,700 on March 31, 2015 and December 31, 2014		575,606		583,715
Bank premises, equipment, and leasehold improvements, net		10,685		10,951
Bank-owned life insurance, net		12,594		12,510
Other equity securities		5,773		5,769
Accrued interest receivable		3,744		3,725
Other real estate owned, net		770		763
Goodwill		1,841		1,841
Prepaid expenses		1,016		1,045
Other assets		12,402		14,202
Total assets	$	922,353	$	917,164
Liabilities and Stockholders’ Equity
Deposits
Demand, noninterest bearing	$	222,400	$	202,811
Demand, interest bearing		90,914		89,548
Savings and money market		384,799		394,676
Time		106,511		105,159
Total deposits		804,624		792,194
Federal Home Loan Bank advances		—		9,000
Note Payable		5,400		5,550
Accrued expenses and other liabilities		12,292		13,332
Total liabilities		822,316		820,076
Stockholders’ equity
Common stock, no par value, authorized 10,000,000 shares; issued and outstanding 4,284,918 shares at March 31, 2015 and 4,259,306 shares at December 31, 2014		67,242		66,791
Retained earnings		29,944		28,729
Accumulated other comprehensive income, net of tax		2,851		1,568
Total stockholders’ equity		100,037		97,088
Total liabilities and stockholders’ equity	$	922,353	$	917,164

See accompanying notes to consolidated financial statements.

3

FNB BANCORP AND SUBSIDIARY

Consolidated Statements of Earnings

(Unaudited)

	Three months ended
	March 31,
(Dollar amounts in thousands, except per share amounts)	2015		2014
Interest income
Interest and fees on loans	$	7,710	$	7,627
Interest on taxable securities		830		843
Interest on tax-exempt securities		514		488
Interest on time deposits with other financial institutions		14		25
Total interest income		9,068		8,983
Interest expense:
Interest on deposits		454		461
Interest on FHLB advances		1		8
Interest on note payable		59		—
Total interest expense		514		469
Net interest income		8,554		8,514
Provision for loan losses		75		75
Net interest income after provision for loan losses		8,479		8,439
Noninterest income
Service charges		611		637
Gain on sale of available-for-sale securities		69		11
Bank-owned life insurance policy earnings		84		96
Other income		314		296
Total noninterest income		1,078		1,040
Noninterest expense
Salaries and employee benefits		4,302		4,218
Occupancy expense		668		680
Equipment expense		405		391
Professional fees		387		531
FDIC assessment		150		180
Telephone, postage and supplies		289		286
Advertising		99		85
Data processing expense		134		145
Low income housing expense		71		110
Surety insurance		88		67
Directors expense		72		63
Gain on sale of other real estate owned, net		—		(280	)
Other real estate owned expense		—		77
Other expense		278		289
Total noninterest expense		6,943		6,842
Earnings before provision for income taxes		2,614		2,637
Provision for income taxes		815		803
Net earnings		1,799		1,834
Dividends and discount accretion on preferred stock		—		(170	)
Net earnings available to common stockholders	$	1,799	$	1,664
Earnings per share data:
Basic	$	0.42	$	0.40
Diluted	$	0.41	$	0.38
Weighted average shares outstanding:
Basic		4,273,000		4,187,000
Diluted		4,403,000		4,335,000

4

FNB BANCORP AND SUBSIDIARY

Consolidated Statements of Comprehensive Earnings

(Unaudited)

(Dollar amounts in thousands)	Three months ended
	March 31,
	2015			2014
Net earnings	$	1,799		$	1,834
Unrealized holding gain on available-for-sale securities, net of tax benefit of ($920) and ($720)		1,324			1,034
Reclassification adjustment for gain recognized on available-for-sale securities sold, net of tax of ($28) and ($5) for the three months ended March 31, 2015 and 2014, respectively		(41	)		(6	)
Other Comprehensive Earnings		1,283			1,028
Total comprehensive earnings	$	3,082		$	2,862

See accompanying notes to consolidated financial statements.

5

FNB BANCORP AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

(Dollar amounts in thousands)	Three months ended
	March 31
	2015			2014
Cash flow from operating activities:
Net earnings	$	1,799		$	1,834
Adjustments to reconcile net earnings to net cash provided by operating activities:
Net gain on sale of securities available-for-sale		(69	)		(11	)
Gain on sale of other real estate owned, net		—			(280	)
Depreciation, amortization and accretion		823			856
Stock-based compensation expense		61			69
Earnings on bank owned life insurance		(84	)		(96	)
Provision for loan losses		75			75
(Decrease) increase in net deferred loan fees		(54	)		53
(Increase) decrease in accrued interest receivable		(19	)		50
Decrease in prepaid expense		29			70
Decrease in other assets		1,800			950
Decrease in accrued expenses and other liabilities		(2,487	)		(1,202	)
Net cash provided by operating activities		1,874			2,368
Cash flows from investing activities
Purchase of securities available-for-sale		(16,232	)		(516	)
Proceeds from matured/called/sold securities available-for-sale		18,321			7,523
Investment, net of redemption, in other equity securities		(4	)		(7	)
Redemption of time deposits of other banks		1			738
Proceeds from sale of other real estate owned		—			1,050
Net investment in other real estate owned		(7	)		(30	)
Net decrease (increase) in loans		8,088			(12,546	)
Purchases of bank premises, equipment, leasehold improvements		(20	)		(327	)
Net cash provided by (used in) investing activities		10,147			(4,115	)

See accompanying notes to consolidated financial statements.

6

FNB BANCORP AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

	Three months ended
	March 31
	2015			2014
Cash flows from financing activities
Net increase in demand and savings deposits		11,078			12,130
Net increase (decrease) in time deposits		1,352			(11,800	)
(Decrease) increase in FHLB advances		(9,000	)		10,000
Proceeds from note payable		—			6,000
Principal reduction on note payable		(150	)		—
Dividends paid on common stock		(29	)		—
Exercise of stock options		390			274
Redemption on preferred stock series C		—			(9,450	)
Dividends paid on preferred stock series C		—			(170	)
Net cash provided by financing activities		3,641			6,984
NET INCREASE IN CASH AND CASH EQUIVALENTS		15,662			5,237
Cash and cash equivalents at beginning of period		14,978			14,007
Cash and cash equivalents at end of period	$	30,640		$	19,244
Additional cash flow information:
Interest paid		531			455
Income taxes paid		865			1
Non-cash investing and financing activities:
Accrued dividends		555			399
Change in unrealized gain in available for-sale securities, net of tax		1,283			1,028
OREO sale funded by loan origination		—			2,100

See accompanying notes to consolidated financial statements.

7

FNB BANCORP AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2015

(UNAUDITED)

NOTE A – BASIS OF PRESENTATION

FNB Bancorp (the “Company”) is a bank holding company registered under the Bank Holding Company Act of 1956, as amended. The Company was incorporated under the laws of the State of California on February 28, 2001. The consolidated financial statements include the accounts of FNB Bancorp and its wholly-owned subsidiary, First National Bank of Northern California (the “Bank”). The Bank provides traditional banking services in San Mateo and San Francisco counties.

All intercompany transactions and balances have been eliminated in consolidation. The financial statements include all adjustments of a normal and recurring nature, which are, in the opinion of management, necessary for a fair presentation of the financial position and results of operations for the periods presented.

The accompanying unaudited consolidated financial statements have been prepared in accordance with the instructions to Form 10-Q and, therefore, do not include all information and footnotes normally included in annual financial statements prepared in conformity with accounting principles generally accepted in the United States of America. Accordingly, these consolidated financial statements should be read in conjunction with the consolidated audited financial statements and notes thereto for the year ended December 31, 2014. Results of operations for interim periods are not necessarily indicative of results for the full year. Certain prior year information has been reclassified to conform to current year presentation. The reclassifications had no impact on consolidated net earnings or stockholders’ equity.

NOTE B – STOCK OPTION PLANS

Stock option expense is recorded based on the fair value of option contracts issued. The fair value is determined using an option pricing model that considers the expected contract term, the risk free interest rate, the volatility of the Company’s stock price and the level of dividends the Company is expected to pay.

The expected term of options granted is derived from historical plan behavior and represents the period of time that options granted are expected to be outstanding. The risk-free rate for periods approximating the expected option terms is based on the U. S. Treasury yield curve in effect at the time of the grant.

The amount of compensation expense for options recorded in the quarters ended March 31, 2015 and 2014 was $61,000 and $69,000, respectively. There was no income tax benefit recognized in the consolidated statements of earnings for these amounts for the quarters ended March 31, 2015 and 2014, respectively.

8

The intrinsic value for options exercised during the quarters ended March 31, 2015 March 31, 2014 was $314,000 and $126,000, respectively. The intrinsic value of options exercisable during the quarter ended March 31, 2015 and March 31, 2014 was $3,463,000 and $2,234,000, respectively.

The amount of total unrecognized compensation expense related to non-vested options at March 31, 2015 was $682,000, and the weighted average period over which it will be amortized is 3.4 years.

NOTE C – EARNINGS PER SHARE CALCULATION

Earnings per common share (EPS) are computed based on the weighted average number of common shares outstanding during the period. Basic EPS excludes dilution and is computed by dividing net earnings available to common stockholders (after deducting dividends and related accretion on preferred stock) by the weighted average of common shares outstanding. Diluted EPS reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock. The number of potential common shares included in the quarterly diluted EPS is computed using the average market price during the three months included in the reporting period under the treasury stock method. The number of potential common shares included in year-to-date diluted EPS is a year-to-date weighted average of potential shares included in each quarterly diluted EPS computation. All common stock equivalents are anti-dilutive when a net loss occurs. A 5% stock dividend was declared in the fourth quarter of 2014, and prior per share amounts have been adjusted to reflect the 5% stock dividend.

Earnings per share have been computed based on the following:

(Dollar amounts in thousands)	Three months ended
	March 31,
	2015		2014
Net earnings	$	1,799	$	1,834
Dividends and discount accretion on preferred stock		—		(170	)
Net earnings available to common stockholders	$	1,799	$	1,664
Average number of shares outstanding		4,273,000		4,187,000
Effect of dilutive options		130,000		148,000
Average number of shares outstanding used to calculate diluted earnings per share		4,403,000		4,335,000

Anti dilutive options that were excluded from the calculation of diluted EPS totaled 96,000 and 64,000 in 2015 and 2014, respectively.

9

NOTE D – SECURITIES AVAILABLE FOR SALE

The amortized cost and carrying values of securities available-for-sale are as follows:

(Dollar amounts in thousands)	Amortized		Unrealized		Unrealized			Fair
	cost		gains		losses			value
March 31, 2015
U.S. Treasury securities	$	3,975	$	37	$	(5	)	$	4,007
Obligations of U.S. government agencies		57,937		426		(50	)		58,313
Mortgage-backed securities		72,926		1,406		(254	)		74,078
Obligations of states and political subdivisions		91,877		3,040		(41	)		94,876
Corporate debt		32,951		296		(22	)		33,225
	$	259,666	$	5,205	$	(372	)	$	264,499
December 31, 2014
U.S. Treasury securities	$	3,975	$	12	$	(29	)	$	3,958
Obligations of U.S. government agencies		63,090		270		(298	)		63,062
Mortgage-backed securities		78,076		1,002		(661	)		78,417
Obligations of states and political subdivisions		82,151		2,534		(143	)		84,542
Corporate debt		34,931		176		(205	)		34,902
	$	262,223	$	3,994	$	(1,336	)	$	264,881

An analysis of gross unrealized losses of the available-for-sale investment securities portfolio as of March 31, 2015 and December 31, 2014, respectively, is as follows:

(Dollar amounts in thousands)			Less than					12 Months
	Total		12 Months			Total		or Longer			Total		Total
	Fair		Unrealized			Fair		Unrealized			Fair		Unrealized
	Value		Losses			Value		Losses			Value		Losses
March 31, 2015
U.S. Treasury securities	$	—	$	—		$	2,036	$	(5	)	$	2,036	$	(5	)
Obligations of U.S. government agencies		7,284		(8	)		8,007		(42	)		15,291		(50	)
Mortgage-backed securities		10,871		(55	)		15,421		(199	)		26,292		(254	)
Obligations of states and political subdivisions		5,029		(24	)		930		(17	)		5,959		(41	)
Corporate debt		1,999		(5	)		4,982		(17	)		6,981		(22	)
Total	$	25,183	$	(92	)	$	31,376	$	(280	)	$	56,559	$	(372	)

10

(Dollar amounts in thousands)			Less than					12 months
	Total		12 months			Total		or Longer			Total		Total
	Fair		Unrealized			Fair		Unrealized			Fair		Unrealized
December 31, 2014:	Value		Losses			Value		Losses			Value		Losses
U. S. Treasury securities	$	—	$	—		$	2,015	$	(29	)	$	2,015	$	(29	)
Obligations of U.S. government agencies		13,178		(43	)		19,116		(255	)		32,294		(298	)
Mortgage-backed securities		5,056		(10	)		36,382		(651	)		41,438		(661	)
Obligations of states and political subdivisions		8,678		(49	)		5,696		(94	)		14,374		(143	)
Corporate debt		18,065		(125	)		4,919		(80	)		22,984		(205	)
Total	$	44,977	$	(227	)	$	68,128	$	(1,109	)	$	113,105	$	(1,336	)

At March 31, 2015, there were twenty-three securities in an unrealized loss position for greater than 12 consecutive months. There were twenty-two securities in an unrealized loss position for less than 12 consecutive months. Management periodically evaluates each security in an unrealized loss position to determine if the impairment is temporary or other-than-temporary. The unrealized losses are due solely to interest rate changes and the Company does not intend to sell nor expects it will be required to sell investment securities identified with impairments prior to the earliest of forecasted recovery or the maturity of the underlying investment security. Management has determined that no investment security was other-than-temporarily impaired at March 31, 2015.

The amortized cost and carrying value of available-for-sale debt securities as of March 31, 2015 by contractual maturity, are shown below. Expected maturities may differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.

March 31, 2015:

(Dollar amounts in thousands)	Amortized		Fair
	Cost		Value
Available-for-sale:
Due in one year or less	$	12,605	$	12,698
Due after one through five years		104,944		106,188
Due after five years through ten years		115,012		117,988
Due after ten years		27,105		27,625
	$	259,666	$	264,499

For the three months ended March 31, 2015 and March 31, 2014, respectively, gross realized gains amounted to $69,000 and $11,000, on gross securities sold or called of $12,272,000 and $1,023,000, respectively. For the three months ended March 31, 2015 and 2014, respectively, there were no gross realized losses.

11

At March 31, 2015, securities with an amortized cost of $102,549,000 and fair value of $104,078,000 were pledged as collateral for public deposits and for other purposes required by law.

NOTE E - LOANS

Loans are summarized as follows at March 31, 2015 and December 31, 2014:

								Total
	FNB							Balance
	Bancorp							March 31,
(Dollar amounts in thousands)	Originated			PNCI		PCI		2015
Commercial real estate	$	290,117		$	30,975	$	1,322	$	322,414
Real estate construction		32,313			1,924		—		34,237
Real estate multi-family		43,633			10,070		—		53,703
Real estate 1 to 4 family		123,780			4,325		—		128,105
Commercial & industrial		36,545			9,044		—		45,589
Consumer loans		1,697			—		—		1,697
Gross loans		528,085			56,338		1,322		585,745
Net deferred loan fees		(395	)		—		—		(395	)
Allowance for loan losses		(9,744	)		—		—		(9,744	)
Net loans	$	517,946		$	56,338	$	1,322	$	575,606

								Total
	FNB							Balance
	Bancorp							December 31,
(Dollar amounts in thousands)	Originated			PNCI		PCI		2014
Commercial real estate	$	285,252		$	31,852	$	1,323	$	318,427
Real estate construction		37,827			1,944		—		39,771
Real estate multi-family		43,379			10,445		—		53,824
Real estate 1 to 4 family		123,522			5,210		—		128,732
Commercial & industrial		42,551			9,111		—		51,662
Consumer loans		1,448			—		—		1,448
Gross loans		533,979			58,562		1,323		593,864
Net deferred loan fees		(449	)		—		—		(449	)
Allowance for loan losses		(9,700	)		—		—		(9,700	)
Net loans	$	523,830		$	58,562	$	1,323	$	583,715

12

Note: PNCI means Purchased, Not Credit Impaired. PCI means Purchased, Credit Impaired. These designations are assigned to the purchased loans on their date of purchase. Once the loan designation has been made, each loan will retain its designation for the life of the loan.

	Allowance for Credit Losses
	For the Three Months Ended March 31, 2015
(Dollar amounts in thousands)
						Real			Real
						Estate			Estate
	Commercial			Real Estate		Multi			1 to			Commercial
	Real estate			Construction		family			4 family			& industrial			Consumer			Total
Allowance for credit losses
Beginning balance	$	5,549		$	849	$	206		$	1,965		$	1,073		$	58		$	9,700
Charge-offs		—			—		—			(45	)		—			(6	)		(51	)
Recoveries		6			—		—			—			14			—			20
Provision		(250	)		571		(54	)		(75	)		(126	)		9			75
Ending balance	$	5,305		$	1,420	$	152		$	1,845		$	961		$	61		$	9,744
Ending balance: individually evaluated for impairment	$	131		$	—	$	—		$	510		$	279		$	8		$	928
Ending balance: collectively evaluated for impairment	$	5,174		$	1,420	$	152		$	1,335		$	682		$	53		$	8,816

	Recorded Investment in Loans at March 31, 2015
(Dollar amounts in thousands)
					Real		Real
					Estate		Estate
	Commercial		Real Estate		Multi		1 to		Commercial
	Real Estate		Construction		family		4 family		& industrial		Consumer		Total
Loans:
Ending balance	$	322,414	$	34,237	$	53,703	$	128,105	$	45,589	$	1,697	$	585,745
Ending balance: individually evaluated for impairment	$	9,460	$	2,368	$	—	$	4,673	$	2,226	$	60	$	18,787
Ending balance collectively evaluated for impairment	$	312,954	$	31,869	$	53,703	$	123,432	$	43,363	$	1,637	$	566,958

13

	Allowance for Credit Losses
	As of and For the Year Ended December 31, 2014
(Dollar amounts in thousands)							Real			Real
							Estate			Estate
	Commercial			Real Estate			Multi			1 to 4			Commercial
	Real estate			Construction			family			family			& industrial			Consumer			Total
Allowance for credit losses
Beginning balance	$	5,763		$	734		$	293		$	1,788		$	1,237		$	64		$	9,879
Charge-offs		(83	)		(183	)		—			(62	)		(28	)		(26	)		(382	)
Recoveries		1,062			—			—			3			154			4			1,223
(Recovery of) provision		(1,193	)		298			(87	)		236			(290	)		16			(1,020	)
Ending balance	$	5,549		$	849		$	206		$	1,965		$	1,073		$	58		$	9,700
Ending balance: individually evaluated for impairment	$	101		$	—		$	—		$	432		$	225		$	8		$	766
Ending balance: collectively evaluated for impairment	$	5,448		$	849		$	206		$	1,533		$	848		$	50		$	8,934

	Recorded Investment in Loans at December 31, 2014
(Dollar amounts in thousands)
					Real		Real
					Estate		Estate
	Commercial		Real Estate		Multi		1 to		Commercial
	Real Estate		Construction		family		4 family		& industrial		Consumer		Total
Loans:
Ending balance	$	318,427	$	39,771	$	53,824	$	128,732	$	51,662	$	1,448	$	593,864
Ending balance: individually evaluated for impairment	$	9,530	$	2,373	$	—	$	4,333	$	2,315	$	64	$	18,615
Ending balance: collectively evaluated for impairment	$	308,897	$	37,398	$	53,824	$	124,399	$	49,347	$	1,384	$	575,249

14

	Allowance for Credit Losses
	For the Three Months Ended March 31, 2014
(Dollar amounts in thousands)
						Real		Real
						Estate		Estate
	Commercial			Real Estate		Multi		1 to			Commercial
	Real estate			Construction		family		4 family			& industrial			Consumer		Total
Allowance for credit losses
Beginning balance	$	5,763		$	734	$	293	$	1,788		$	1,237		$	64	$	9,879
Charge-offs		—			—		—		(62	)		(11	)		—		(73	)
Recoveries		1			—		—		1			14			—		16
(Recovery of) provision		(140	)		1		76		108			28			2		75
Ending balance	$	5,624		$	735	$	369	$	1,835		$	1,268		$	66	$	9,897
Ending balance: individually evaluated for impairment	$	150		$	—	$	—	$	428		$	156		$	9	$	743
Ending balance: collectively evaluated for impairment	$	5,474		$	735	$	369	$	1,407		$	1,112		$	57	$	9,154

15

	Recorded Investment in Loans at March 31, 2014
(Dollar amounts in thousands)
					Real		Real
					Estate		Estate
	Commercial		Real Estate		Multi		1 to		Commercial
	Real Estate		Construction		family		4 family		& industrial		Consumer		Total
Loans:
Ending balance	$	328,862	$	37,444	$	51,304	$	109,365	$	48,799	$	1,532	$	577,306
Ending balance: individually evaluated for impairment	$	14,426	$	1,319	$	—	$	3,856	$	4,893	$	30	$	24,524
Ending balance: collectively evaluated for impairment	$	314,436	$	36,125	$	51,304	$	105,509	$	43,906	$	1,502	$	552,782

16

The following tables provide information pertaining to impaired loans originated and PNCI loans as of and for the periods to the quarter ended March 31, 2015 and the year ended December 31, 2014.

	Impaired Loans
	As of and for the quarter ended March 31, 2015
			Unpaid				Average
(Dollar amounts in thousands)	Recorded		Principal		Related		Recorded		Income
	Investment		Balance		Allowance		Investment		Recognized
With no related allowance recorded
Commercial real estate	$	4,432	$	5,315	$	—	$	4,447	$	63
Commercial real estate construction		2,368		2,551		—		2,371		33
Residential- 1 to 4 family		1,483		1,484		—		1,485		14
Commercial & industrial		564		801		—		573		10
Consumer		—		—		—		—		—
Total		8,847		10,151		—		8,876		120
With an allowance recorded
Commercial real estate	$	5,028	$	5,031	$	131	$	5,048	$	67
Commercial real estate construction		—		—		—		—		—
Residential- 1 to 4 family		3,190		2,773		510		3,218		31
Commercial & industrial		1,662		2,014		279		1,698		4
Consumer		60		60		8		62		3
Total		9,940		9,878		928		10,026		105
Total
Commercial real estate	$	9,460	$	10,346	$	131	$	9,495	$	130
Commercial real estate construction		2,368		2,551		—		2,371		33
Residential- 1 to 4 family		4,673		4,257		510		4,703		45
Commercial & industrial		2,226		2,815		279		2,271		14
Consumer		60		60		8		62		3
	$	18,787	$	20,029	$	928	$	18,902	$	225

17

	Impaired Loans
	As of and for the year ended December 31, 2014
			Unpaid				Average
(Dollar amounts in thousands)	Recorded		Principal		Related		Recorded		Income
	Investment		Balance		Allowance		Investment		Recognized
With no related allowance recorded
Commercial real estate	$	4,462	$	5,333	$	—	$	4,473	$	304
Commercial real estate construction		2,373		2,556		—		1,846		150
Residential- 1 to 4 family		1,594		1,737		—		1,379		67
Commercial and industrial		582		939		—		788		54
Consumer		—		—		—		—		—
Total		9,011		10,565		—		8,486		575
With an allowance recorded
Commercial real estate	$	5,068	$	5,071	$	101	$	5,127	$	258
Residential- 1 to 4 family		2,739		2,754		432		2,759		111
Commercial and industrial		1,733		2,100		225		1,907		33
Consumer		64		64		8		67		5
Total		9,604		9,989		766		9,860		407
Total
Commercial real estate	$	9,530	$	10,404	$	101	$	9,600	$	562
Commercial real estate construction		2,373		2,556		—		1,846		150
Residential- 1 to 4 family		4,333		4,491		432		4,138		178
Commercial and industrial		2,315		3,039		225		2,695		87
Consumer		64		64		8		67		5
Grand total	$	18,615	$	20,554	$	766	$	18,346	$	982

18

	Impaired Loans
	As of and for the quarter ended March 31, 2014
			Unpaid				Average
(Dollar amounts in thousands)	Recorded		Principal		Related		Recorded		Income
	Investment		Balance		Allowance		Investment		Recognized
With no related allowance recorded
Commercial real estate	$	8,881		9,143	$	—	$	8,900	$	115
Commercial real estate construction		1,319		1,319		—		1,319		25
Residential- 1 to 4 family		695		695		—		665		8
Commercial & industrial		3,510	$	4,554		—		3,552		22
Consumer		10		10		—		5		—
Total		14,415		15,721		—		14,441		170
With an allowance recorded
Commercial real estate	$	5,545	$	5,546	$	150	$	5,594	$	68
Commercial real estate construction		—		—		—		—		—
Residential- 1 to 4 family		3,161		3,300		428		3,266		31
Commercial & industrial		1,383		1,801		156		1,452		1
Consumer		20		20		9		10		1
Total		10,109		10,667		743		10,322		101
Total
Commercial real estate	$	14,426	$	14,689	$	150	$	14,494	$	183
Commercial real estate construction		1,319		1,319		—		1,319		25
Residential - 1 to 4 family		3,856		3,995		428		3,931		39
Commercial & industrial		4,893		6,355		156		5,004		23
Consumer		30		30		9		15		1
Grand total	$	24,524	$	26,388	$	743	$	24,763	$	271

Nonaccrual loans totaled $5,923,000 and $5,648,000 as of March 31, 2015 and December 31, 2014. Impaired loans not on nonaccrual are loans that have been restructured and performing under modified loan agreements, and where principal and interest is considered to be collectible. Nonaccrual loans are loans where principal and interest are not considered to be completely collectible.

	Loans on Nonaccrual Status as of
(Dollar amounts in thousands)	March 31,		December 31,
	2015		2014
Commercial real estate	$	2107	$	2,111
Real estate - construction		—		—
Real estate - 1 to 4 family		1,532		1,181
Commercial & industrial		2,224		2,292
Consumer		60		64
Total	$	5,923	$	5,648

Interest income on impaired loans of $225,000 and $982,000 was recognized for cash payments received during the quarter ended March 31, 2015 and the year ended December 31, 2014, respectively. Interest income on impaired loans recognized for cash payments received for the three months ended March 31, 2014 was $271,000.

19

The amount of interest on impaired loans not collected for the quarter ended March 31, 2015 was $106,000, and the quarter ended March 31, 2014 was $85,000. The cumulative amount of unpaid interest on impaired loans was $3,050,000 and $3,580,000 as of March 31, 2015 and March 31, 2014, respectively.

Total outstanding principal of all troubled debt restructured loans as of March 31, 2015 was $16,374,000, of which $1,999,000 was commercial and industrial loans, $3,622,000 was real estate 1 to 4 family residential loans, $1,300,000 real estate construction loans, and $9,453,000 commercial real estate loans. Total outstanding principal of troubled debt restructured loans at December 31, 2014 was $16,517,000, of which $2,054,000 was commercial and industrial loans, $1,304,000 was real estate construction loans, $3,661,000 was real estate 1 to 4 family loans, and $9,498,000 was commercial real estate loans.

Troubled Debt Restructurings

	Total troubled debt restructured loans outstanding at
(Dollars in thousands)	March 31, 2015						December 31, 2014
			Non-						Non-
	Accrual		accrual		Total		Accrual		accrual		Total
	status		status		modifications		status		status		modifications
Commercial real estate	$	7,364	$	2,089	$	9,453	$	7,407	$	2,091	$	9,498
Real Estate construction		1,300		—		1,300		1,304		—		1,304
Real estate 1 to 4 family		3,143		479		3,622		3,153		508		3,661
Commercial & industrial		—		1,999		1,999		294		1,760		2,054
Total	$	11,807	$	4,567	$	16,374	$	12,158	$	4,359	$	16,517

Modification Categories

The Company offers a variety of modifications to borrowers. The modification categories offered can generally be described in the following categories.

Rate Modification – A modification in which the interest rate is changed.

Term modification – A modification in which the maturity date, timing of payments, or frequency of payments is changed.

Interest Only Modification – A modification in which the loan is converted to interest only payments for a period of time.

Payment Modification – A modification in which the dollar amount of the payment is changed, other than an interest only modification described above.

20

As of March 31, 2015, there were no commitments for additional funding of troubled debt restructured loans.

There were no new modifications during the quarter ended March 31, 2015.

As of March 31, 2015, there were no loans modified within the previous 12 months and for which there was a payment default during the period. All restructurings were a modification of interest rate and/or payment. There were no principal reductions granted.

The following table details modifications to loan agreements for the quarter ended March 31, 2014:

	Modifications
	For the Quarter Ended March 31, 2014
			Pre-		Post-
			Modification		Modification
			Outstanding		Outstanding
	Number of		Recorded		Recorded
	Contracts		Investment		Investment
(Dollar amounts in thousands)
Real estate 1 to 4 family		1	$	574	$	574
Total		1	$	574	$	574

As of March 31, 2014, there were no loans modified within the previous 12 months and for which there was a payment default during the period. All restructurings were a modification of interest rate and/or payment. There were no principal reductions granted.

Risk rating system

Loans to borrowers graded as pass or pooled loans represent loans to borrowers of acceptable or better credit quality. They demonstrate sound financial positions, repayment capacity and credit history. They have an identifiable and stable source of repayment.

Special mention loans have potential weaknesses that deserve management’s attention. If left uncorrected these potential weaknesses may result in a deterioration of the repayment prospects for the asset or in the Bank’s credit position at some future date. These assets are “not adversely classified” and do not expose the Bank to sufficient risk to warrant adverse classification.

Substandard loans are inadequately protected by current sound net worth, paying capacity of the borrower, or pledged collateral. Loans are normally classified as Substandard when there are unsatisfactory characteristics causing more than acceptable levels of risk. A substandard loan normally has one or more well-defined weaknesses that could jeopardize the repayment of the debt. For example, a) cash flow deficiency, which may jeopardize future payments; b) sale of non-collateral assets has become primary source of repayment; c) the borrower is bankrupt; or d) for any other reason, future repayment is dependent on court action.

21

Doubtful loans represent credits with weakness inherent in the Substandard classification and where collection or liquidation in full is highly questionable. To be classified Doubtful, there must be specific pending factors which prevent the Loan Review Officer from determining the amount of loss contained in the credit. When the amount of loss can be reasonably estimated, that amount is classified as Loss and the remainder is classified as Substandard.

Real Estate – Multi-Family

Our multi-family commercial real estate loans are secured by multi-family properties located primarily in San Mateo and San Francisco counties. These loans are made to investors where our primary source of repayment is from cash flows generated by the properties, through rent collections. The borrowers’ promissory notes are secured with recorded liens on the underlying properties. The borrowers would normally also be required to personally guarantee repayment of the loans. The Bank uses conservative underwriting standards in reviewing applications for credit. Generally, our borrowers have multiple sources of income, so if cash flow generated from the property declines, at least in the short term, the borrowers can normally cover these short term cash flow deficiencies from their available cash reserves. Risk of loss to the Bank is increased when there are cash flow decreases sufficiently large and for such a prolonged period of time that loan payments can no longer be made by the borrowers.

Commercial Real Estate Loans

Commercial real estate loans consist of loans secured by non-farm, non-residential properties, including, but not limited to industrial, hotel, assisted care, retail, office and mixed use buildings. Our commercial real estate loans are made primarily to investors or small businesses where our primary source of repayment is from cash flows generated by the properties, either through rent collection or business profits. The borrower’s promissory notes are secured with recorded liens on the underlying property. The borrowers would normally also be required to personally guarantee repayment of the loan. The Bank uses conservative underwriting standards in reviewing applications for credit. Generally, our borrowers have multiple sources of income, so if cash flow generated from the property declines, at least in the short term, the borrowers can normally cover these short term cash flow deficiencies from their available cash reserves. Risk of loss to the Bank is increased when there are cash flow decreases sufficiently large and for such a prolonged period of time that loan payments can no longer be made by the borrowers.

Real Estate Construction Loans

Our real estate construction loans are generally made to borrowers who are rehabilitating a building, converting a building use from one type of use to another, or developing land and building residential or commercial structures for sale or lease. The borrower’s promissory notes are secured with recorded liens on the underlying property. The borrowers would normally also be required to personally guarantee repayment of the loan.

The Bank uses conservative underwriting standards in reviewing applications for credit. Generally, our borrowers have sufficient resources to make the required construction loan payments during the construction and absorption or lease-up period. After construction is complete, the loans are normally paid off from proceeds from the sale of the building or through a refinance to a commercial real estate loan. Risk of loss to the Bank is increased when there are material construction cost overruns, significant delays in the time to complete the project and/or there has been a material drop in the value of the projects in the marketplace since the inception of the loan.

22

Real Estate-1 to 4 Family Loans

Our residential real estate loans are generally made to borrowers who are buying or refinancing their primary personal residence or a rental property of 1-4 single family residential units. The Bank uses conservative underwriting standards in reviewing applications for credit. Risk of loss to the Bank is increased when borrowers lose their primary source of income and/or property values decline significantly.

Commercial and Industrial Loans

Our commercial and industrial loans are generally made to small businesses to provide them with at least some of the working capital necessary to fund their daily business operations. These loans are generally either unsecured or secured by fixed assets, accounts receivable and/or inventory. The borrowers would normally also be required to personally guarantee repayment of the loan. The Bank uses conservative underwriting standards in reviewing applications for credit. Risk of loss to the Bank is increased when our small business customers experience a significant business downturn, incur significant financial losses, or file for relief from creditors through bankruptcy proceedings.

Consumer Loans

Our consumer and installment loans generally consist of personal loans, credit card loans, automobile loans or other loans secured by personal property. The Bank uses conservative underwriting standards in reviewing applications for credit. Risk of loss to the Bank is increased when borrowers lose their primary source of income, or file for relief from creditors through bankruptcy proceedings.

23

	Age Analysis of Past Due Loans
	As of March 31, 2015
(Dollar amounts in thousands)
	30-59		60-89
	Days		Days		Over		Total
	Past		Past		90		Past				Total
Originated	Due		Due		Days		Due		Current		Loans
Commercial real estate	$	75	$	—	$	—	$	75	$	290,042	$	290,117
Real estate construction		—		—		—		—		32,313		32,313
Real estate multi family		—		—		—		—		43,633		43,633
Real estate-1 to 4 family		581		—		511		1,092		122,688		123,780
Commercial & industrial		170		—		2,056		2,226		34,319		36,545
Consumer		—		—		—		—		1,697		1,697
Total	$	826	$	—	$	2,567	$	3,393	$	524,692	$	528,085
Purchased
Not credit impaired
Commercial real estate	$	—	$	—	$	—	$	—	$	30,975	$	30,975
Real estate construction		—		—		—		—		1,924		1,924
Real estate multi-family		—		—		—		—		10,070		10,070
Real estate-1 to 4 family		—		—		400		400		3,925		4,325
Commercial & industrial		—		—		—		—		9,044		9,044
Total	$	—	$	—	$	400	$	400	$	55,938	$	56,338
Purchased
Credit impaired
Commercial real estate	$	—	$	—	$	—	$	—	$	1,322	$	1,322
Real estate construction		—		—		—		—		—		—
Real estate multi-family		—		—		—		—		—		—
Real estate-1 to 4 family		—		—		—		—		—		—
Commercial & industrial		—		—		—		—		—		—
Total	$	—	$	—	$	—	$	—	$	1,322	$	1,322

At March 31, 2015, there were no loans that were 90 days or more past due where interest was still accruing.

The over 90 days column includes nonaccrual loans that were over 90 days, but does not include loans that are in nonaccrual status for reasons other than past due.

24

	Age Analysis of Past Due Loans
	As of December 31, 2014
(Dollar amounts in thousands)
	30-59		60-89
	Days		Days		Over		Total
	Past		Past		90		Past				Total
Originated	Due		Due		Days		Due		Current		Loans
Commercial real estate	$	8	$	879	$	—	$	887	$	284,365	$	285,252
Real estate construction		—		708		—		708		37,119		37,827
Real estate multi family		3,575		—		—		3,575		39,804		43,379
Real estate 1 to 4 family		330		200		1,112		1,642		121,880		123,522
Commercial & industrial		775		73		1,710		2,558		39,993		42,551
Consumer		—		—		64		64		1,384		1,448
Total	$	4,688	$	1,860	$	2,886	$	9,434	$	524,545	$	533,979
Purchased
Not credit impaired
Commercial real estate	$	—	$	—	$	—		—	$	31,852	$	31,852
Real estate construction		—		—		—		—		1,944		1,944
Real estate multi-family		—		—		—		—		10,445		10,445
Real estate 1 to 4 family		—		400		—		400		4,810		5,210
Commercial & industrial		—		—		—		—		9,111		9,111
Total	$	—	$	400	$	—	$	400	$	58,162	$	58,562
Purchased
Credit impaired
Commercial real estate	$	—	$	—	$	—	$	—	$	1,323	$	1,323
Real estate construction		—		—		—		—		—		—
Real estate multi-family		—		—		—		—		—		—
Real estate 1 to 4 family		—		—		—		—		—		—
Commercial & industrial		—		—		—		—		—		—
Total	$	—	$	—	$	—	$	—	$	1,323	$	1,323

At December 31, 2014, there were no loans that were 90 days or more past due where interest was still accruing.

The over 90 days column includes nonaccrual loans that were over 90 days, but does not include loans that are in nonaccrual status for reasons other than past due.

25

	Credit Quality Indicators
	As of March 31, 2015
(Dollar amounts in thousands)
			Special		Sub-				Total
Originated	Pass		mention		standard		Doubtful		loans
Commercial real estate	$	286,211	$	1,896	$	2,010	$	—	$	290,117
Real estate construction		24,532		—		7,781		—		32,313
Real estate multi-family		43,633		—		—		—		43,633
Real estate-1 to 4 family		122,697		—		1,083		—		123,780
Commercial & industrial		35,436		—		1,091		18		36,545
Consumer loans		1,637		—		60		—		1,697
Totals	$	514,146	$	1,896	$	12,025	$	18	$	528,085
Purchased
Not credit impaired
Commercial real estate	$	25,157	$	—	$	5,818	$	—	$	30,975
Real estate construction		1,924		—		—		—		1,924
Real estate multi-family		10,070		—		—		—		10,070
Real estate-1 to 4 family		3,925		—		400		—		4,325
Commercial & industrial		9,044		—		—		—		9,044
Total	$	50,120	$	—	$	6,218	$	—	$	56,338
Purchased
Credit impaired
Commercial real estate									$	1,322
Total									$	1,322

26

	Credit Quality Indicators
	As of December 31, 2014
(Dollar amounts in thousands)
			Special		Sub-				Total
Originated	Pass		mention		standard		Doubtful		loans
Commercial real estate	$	281,308	$	1,913	$	2,031	$	—	$	285,252
Real estate construction		36,692		—		1,135		—		37,827
Real estate multi-family		43,379		—		—		—		43,379
Real estate 1 to 4 family		122,499		—		1,023		—		123,522
Commercial & industrial		41,394		—		1,157		—		42,551
Consumer loans		1,384		—		64		—		1,448
Totals	$	526,656	$	1,913	$	5,410	$	—	$	533,979
Purchased
Not credit impaired
Commercial real estate	$	26,009	$	—	$	5,843	$	—	$	31,852
Real estate construction		1,944		—		—		—		1,944
Real estate multi-family		10,445		—		—		—		10,445
Real estate 1 to 4 family		4,810		—		—		400		5,210
Commercial & industrial		9,111		—		—		—		9,111
Total	$	52,305	$	—	$	5,843	$	400	$	58,562
Purchased
Credit impaired
Commercial real estate									$	1,323
Total									$	1,323

NOTE F - BORROWINGS

Federal Home Loan Bank advances

There were no outstanding advances at March 31, 2015.

Corporate loan

On March 27, 2014, FNB Bancorp received funding under a $6,000,000 term loan credit facility. This loan carries a variable rate of interest that fluctuates on a monthly basis. The interest rate is based on the 3 month LIBOR rate plus 4%. Payments of $50,000 in principal plus accrued interest are payable monthly. The first loan payment is due May 1, 2014. The maturity date on this credit facility is March 26, 2019. On the maturity date, all outstanding principal plus accrued interest shall become due and payable. FNB Bancorp has pledged it stock ownership in First National Bank of Northern California as collateral subject to the terms and conditions contained in the Loan Agreement and the Pledge and Security Agreement. FNB Bancorp retains the right to prepay this debt at any time upon not less than 7 days’ prior written notice to Lender. The proceeds from this loan were contributed to the Bank as an additional capital contribution. This capital contribution qualified as Tier 1 capital for the Bank under regulatory capital guidelines.

27

NOTE G – FAIR VALUE MEASUREMENT

The following table presents information about the Company’s assets and liabilities measured at fair value as of March 31, 2015 and December 31, 2014, and indicates the fair value techniques used by the Company to determine such fair value. In general, fair values determined by Level 1 inputs utilize quoted prices (unadjusted) in active markets for identical assets or liabilities that the Company has the ability to access. Level 2 inputs include quoted prices for similar assets and liabilities in active markets, and inputs other than quoted prices that are observable for the asset or liability, such as interest rates and yield curves that are observable at commonly quoted intervals. Level 3 inputs are unobservable inputs for the asset or liability, and include situations where there is little, if any, market activity for the asset or liability. In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, the level in the fair value hierarchy within which the fair value measurement in its entirety falls has been determined based on the lowest level input that is significant to the fair value measurement in its entirety. The Company’s assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment, and considers factors specific to the asset or liability. Transfers between levels of the fair hierarchy are recognized on the actual date of the event or circumstance that caused the transfer, which generally corresponds with the Company’s quarterly valuation process. During the first three months of 2015 and 2014, there were no transfers of assets or liabilities between hierarchy levels.

The following tables present the recorded amounts of assets measured at fair value on a recurring basis:

			Fair Value Measurements
(Dollar amounts in thousands)			at March 31, 2015, Using
			Quoted Prices
			in Active
			Markets		Other		Significant
			for Identical		Observable		Unobservable
	Fair Value		Assets		Inputs		Inputs
Description	3/31/2015		(Level 1)		(Level 2)		(Level 3)
U. S. Treasury securities	$	4,007	$	4,007	$	—	$	—
Obligations of U.S. Government agencies		58,313		—		58,313		—
Mortgage-backed securities		74,078		—		74,078		—
Obligations of states and political subdivisions		94,876		—		94,876		—
Corporate debt		33,225		—		33,225		—
Total assets measured at fair value	$	264,499	$	4,007	$	260,492	$	—

28

			Fair Value Measurements
(Dollar amounts in thousands)			at December 31, 2014, Using
			Quoted Prices
			in Active
			Markets		Other		Significant
			for Identical		Observable		Unobservable
	Fair Value		Assets		Inputs		Inputs
Description	12/31/2014		(Level 1)		(Level 2)		(Level 3)
U. S. Treasury securities	$	3,958	$	3,958	$	—	$	—
Obligations of U.S. Government agencies		63,062		—		63,062		—
Mortgage-backed securities		78,417		—		78,417		—
Obligations of states and political subdivisions		84,542		—		84,542		—
Corporate debt		34,902		—		34,902		—
Total assets measured at fair value	$	264,881	$	3,958	$	260,923	$	—

The following tables present the recorded amounts of assets measured at fair value on a non-recurring basis:

			Fair Value Measurements
(Dollar amounts in thousands)			at March 31, 2015, Using
			Quoted Prices in
			Active Markets		Other		Significant
			for Identical		Observable		Unobservable
	Fair Value		Assets		Inputs		Inputs
Description	3/31/2015		(Level 1)		(Level 2)		(Level 3)
Impaired loans:
Commercial real estate	$	15	$	—	$	—	$	15
Residential-1 to 4 family		114		—		—		114
Commercial and industrial		1,126		—		—		1,126
Consumer		52		—		—		52
Total impaired assets measured at fair value	$	1,307	$	—	$	—	$	1,307
			Fair Value Measurements
(Dollar amounts in thousands)			at December 31, 2014, Using
			Quoted Prices in
			Active Markets		Other		Significant
			for Identical		Observable		Unobservable
	Fair Value		Assets		Inputs		Inputs
Description	12/31/2014		(Level 1)		(Level 2)		(Level 3)
Impaired loans:
Commercial real estate	$	381	$	—	$	—	$	381
Residential-1 to 4 family		323		—		—		323
Commercial and industrial		1,472		—		—		1,472
Consumer		56		—		—		56
Total impaired assets measured at fair value	$	2,232	$	—	$	—	$	2,232

29

The Bank does not record loans at fair value. However, from time to time, if a loan is considered impaired, a specific allocation within the allowance for loan losses may be required. Loans for which it is probable that payment of interest and principal will not be made in accordance with the contractual terms of the loan agreement are considered impaired. The fair value of impaired loans is estimated using one of several methods, including collateral value, market value of similar debt, enterprise value, liquidation value and cash flows. Those impaired loans not requiring an allowance represent loans for which the value of the expected repayments or collateral exceed the recorded investments in such loans.

Impaired loans where an allowance is established based on the fair value of collateral or when the impaired loan has been written down to fair value require classification in the fair value hierarchy. If the fair value of the collateral is based on a non-observable market price or a current appraised value, the Bank records the impaired loans as nonrecurring Level 3. When an appraised value is not available, or management determines the fair value of the collateral is further impaired below the appraised value and there is no observable market price, the Bank also records the impaired loans as nonrecurring Level 3.

Other real estate owned is carried at the lower of historical cost or fair value less costs to sell. An appraisal (a Level 3 valuation) is obtained at the time the Bank acquires property through the foreclosure process. Any loan balance outstanding that exceeds the appraised value of the property is charged off against the allowance for loan loss at the time the property is acquired. Subsequent to acquisition, the Bank updates the property’s appraised value on at least an annual basis. If the value of the property has declined during the year, a loss due to valuation impairment charge is recorded along with a corresponding reduction in the book carrying value of the property.

The Company obtains third party appraisals on its impaired loans held-for-investment and foreclosed assets to determine fair value. When the appraisals are received, Management reviews the assumptions and methodology utilized in the appraisal, as well as the overall resulting value in conjunction with independent data sources such as recent market data and industry-wide statistics. We generally use a 6% discount for selling costs which is applied to all properties, regardless of size. Generally, the third party appraisals apply the “market approach,” which is a valuation technique that uses prices and other relevant information generated by market transactions involving identical or comparable (that is, similar) assets, liabilities, or a group of assets and liabilities, such as a business. Adjustments are then made based on the type of property, age of appraisal, current status of property and other related factors to estimate the current value of collateral. The value of OREO is determined based on independent appraisals, similar to the process used for impaired loans, discussed above, and is generally classified as Level 3.

Fair Values of Financial Instruments.

The following methods and assumptions were used by the Company in estimating the fair value disclosures for financial instruments.

Cash and Cash Equivalents, including interest-bearing time deposits with financial institutions.

The carrying amounts reported in the balance sheet for cash and short-term instruments are a reasonable estimate of fair value, which will approximate their historical cost.

30

Securities Available-for-Sale.

Fair values for investment securities are based on quoted market prices, where available. If quoted market prices are not available, fair values are based on quoted market prices of comparable instruments.

Loans Receivable.

For variable-rate loans that reprice frequently and with no significant change in credit risk, fair values are based on carrying values and credit risk factors. For fixed rate loans, fair values are based on discounted cash flows, credit risk factors, and liquidity factors.

Other equity securities.

These are mostly Federal Reserve Bank stock and Federal Home Loan Bank stock, carried in Other Assets. They are not traded, and not available for sale, and have no fair market value.

Deposit liabilities.

The fair values disclosed for demand deposits (e.g., interest and non-interest checking, savings, and money market accounts) are, by definition, equal to the amount payable on demand at the reporting date (i.e., their carrying amounts). The fair values for fixed-rate certificates of deposit are based on discounted cash flows.

Federal Home Loan Bank Advances.

The fair values of Federal Home Loan Bank Advances are based on discounted cash flows. The discount rate is equal to the market rate currently offered on similar products.

Notes payable.

Fair value is equal to the current balance. They represent a corporate loan with a monthly variable rate, based on the 3-month LIBOR rate plus 4%.

Accrued Interest Receivable and Payable.

The interest receivable and payable balances approximate their fair value due to the short-term nature of their settlement dates.

Undisbursed loan commitments, lines of credit, Mastercard line and standby letters of credit.

The fair value of these off-balance sheet items are based on discounted cash flows of expected fundings.

The Bank has excluded non-financial assets and non-financial liabilities defined by the Codification (ASC 820-10-15-A), such as Bank premises and equipment, deferred taxes and other liabilities. In addition, the Bank has not disclosed the fair value of financial instruments specifically excluded from disclosure requirements of the Financial Instruments Topic of the Codification (ASC 825-10-50-8), such as Bank-owned life insurance policies.

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The following table provides summary information on the estimated fair value of financial instruments at March 31, 2015:

March 31, 2015	Carrying		Fair		Fair value measurements
(Dollar amounts in thousands)	amount		value		Level 1		Level 2		Level 3
Financial assets:
Cash and cash equivalents	$	30,640	$	30,640	$	30,640
Interest-bearing time deposits with financial institutions		2,783		2,783				2,783
Securities available for sale		264,499		264,499		4,007		260,492
Loans		585,745		577,169						577,169
Other equity securities		5,773		5,773						5,773
Accrued interest receivable		3,744		3,744				3,744
Financial liabilities:
Deposits		804,624		804,995				804,995
Accrued interest payable		165		165				165
Off-balance-sheet liabilities:
Undisbursed loan commitments, lines of credit, standby letters of credit and Mastercard lines of credit		—		1,373						1,373

The carrying amount of loans include $5,923,000 of nonaccrual loans (loans that are not accruing interest) as of March 31, 2015. The fair value of nonaccrual loans is based on the collateral values that secure the loans or the cash flows expected to be received.

The following table provides summary information on the estimated fair value of financial instruments at December 31, 2014:

December 31, 2014	Carrying		Fair		Fair value measurements
(Dollar amounts in thousands)	amount		value		Level 1		Level 2		Level 3
Financial assets:
Cash and cash equivalents	$	14,978	$	14,978	$	14,978
Interest-bearing time deposits with financial institutions		2,784		2,813				2,813
Securities available for sale		264,881		264,881		3,958		260,923
Loans		593,864		594,524						594,524
Other equity securities		5,769		5,769						5,769
Accrued interest receivable		3,725		3,725				3,725
Financial liabilities:
Deposits		792,194		792,552				792,552
Federal Home Loan Bank advances		9,000		9,000				9,000
Note payable		5,550		5,550				5,550
Accrued interest payable		182		182				182
Off-balance-sheet liabilities:
Undisbursed loan commitments, lines of credit, standby letters of credit and Mastercard lines of credit		—		1,449						1,449

32

The carrying amounts of loans include $5,648,000 of nonaccrual loans (loans that are not accruing interest) as of December 31, 2014. The fair value of nonaccrual loans is based on the collateral values that secure the loans or the cash flows expected to be received.

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

Forward-Looking Information and Uncertainties Regarding Future Financial Performance.

This report, including management’s discussion below, concerning earnings and financial condition, contains “forward-looking statements”. Forward-looking statements are estimates of or statements about expectations or beliefs regarding the Company’s future financial performance or anticipated future financial condition that are based on current information and that are subject to a number of risks and uncertainties that could cause actual operating results in the future to differ significantly from those expected at the current time. Those risks and uncertainties include, although they are not limited to, the following:

Increased Competition. Increased competition from other banks and financial service businesses, mutual funds and securities brokerage and investment banking firms that offer competitive loan and investment products and competitive market pricing, which could require us to reduce interest rates and loan fees to attract new loans or to increase interest rates that we offer on time deposits, either or both of which could, in turn, reduce interest income and net interest margins. These factors could reduce our ability to attract new deposits and loans and leases.

Liquidity Risk. The stability of funding sources and continued availability of borrowings; our ability to raise capital or incur debt on reasonable terms.

Possible Adverse Changes in Economic Conditions. Adverse changes in national or local economic conditions over an extended period of time could (i) reduce loan demand which could, in turn, reduce interest income and net interest margins; (ii) adversely affect the financial capability of borrowers to meet their loan obligations, which, in turn, could result in increases in loan losses and require increases in provisions for possible loan losses, thereby adversely affecting operating results; and (iii) lead to reductions in real property values that, due to the Company’s reliance on real property to secure many of its loans, could make it more difficult to prevent losses from being incurred on non-performing loans through the sale of such real properties.

Possible Adverse Changes in National Economic Conditions and Federal Reserve Board Monetary Policies. Changes in national economic policies and conditions, such as increases in inflation or declines in economic output often prompt changes in Federal Open Market Committee (“FOMC”) monetary policies that could reduce interest income or increase the cost of funds to the Company, either of which could result in reduced earnings. In addition, deterioration in economic conditions that could result in increased loan and lease losses.

Changes in Regulatory Policies. Changes in federal and national bank regulatory policies, such as increases in capital requirements or in loan loss reserve or asset/liability ratio requirements, liquidity requirements, and the risks associated with concentration in real estate related loans could adversely affect earnings by reducing yields on earning assets or increasing operating costs.

33

Due to these and other possible uncertainties and risks, readers are cautioned not to place undue reliance on the forward-looking statements contained in this report, which speak only as of the date of this report, or to make predictions based solely on historical financial performance. The Company also disclaims any obligation to update forward-looking statements contained in this report.

Critical Accounting Policies And Estimates

Management’s discussion and analysis of its financial condition and results of operations are based upon the Company’s consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of these consolidated financial statements requires the Company to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. On an on-going basis, the Company evaluates its estimates, including those related to its loans and allowance for loan losses. The Company bases its estimates on current market conditions, historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. All adjustments that, in the opinion of management, are necessary for a fair presentation for the periods presented have been reflected as required by Regulation S-X, Rule 10-01. The Company believes the following critical accounting policy requires significant judgments and estimates used in the preparation of the consolidated financial statements.

Allowance for Loan Losses

The allowance for loan losses is periodically evaluated for adequacy by management. Factors considered include the Company’s loan loss experience, known and inherent risks in the portfolio, current economic conditions, known adverse situations that may affect the borrower’s ability to repay, regulatory policies, and the estimated value of underlying collateral. The evaluation of the adequacy of the allowance is based on the above factors along with prevailing and anticipated economic conditions that may impact our borrowers’ ability to repay their loans. Determination of the allowance is based upon objective and subjective judgments by management from the information currently available. Adverse changes in information could result in higher than expected charge-offs and loan loss provisions.

Goodwill

Goodwill arises when the Company’s purchase price exceeds the fair value of the net assets of an acquired business. Goodwill represents the value attributable to intangible elements acquired. The value of goodwill is supported ultimately by profit from the acquired business. A decline in earnings could lead to impairment, which would be recorded as a write-down in the Company’s consolidated statements of earnings. Events that may indicate goodwill impairment include significant or adverse changes in results of operations of the acquired business or asset, economic or political climate; an adverse action or assessment by a regulator; unanticipated competition; and a more-likely-than-not expectation that a reporting unit will be sold or disposed of at a loss.

34

Other Than Temporary Impairment

Other than temporary impairment (“OTTI”) is triggered if the Company has the intent to sell the security, it is likely that it will be required to sell the security before recovery, or if the Company does not expect to recover the entire amortized cost basis of the security. If the Company intends to sell the security or it is likely it will be required to sell the security before recovering its cost basis, the entire impairment loss would be recognized in earnings as an OTTI. If the Company does not intend to sell the security and it is not likely that the Company will be required to sell the security but the Company does not expect to recover the entire amortized cost basis of the security, only the portion of the impairment loss representing credit losses would be recognized in earnings as an OTTI. The credit loss is measured as the difference between the amortized cost basis and the present value of the cash flows expected to be collected of a security. Projected cash flows are discounted by the original or current effective interest rate depending on the nature of the security being measured for potential OTTI. The remaining impairment loss related to all other factors, the difference between the present value of the cash flows expected to be collected and fair value, would be recognized as a charge to other comprehensive income (“OCI”). Impairment losses related to all other factors are to be presented as a separate category within OCI.

For investment securities held to maturity, this amount is accreted over the remaining life of the debt security prospectively based on the amount and timing of future estimated cash flows. The accretion of the OTTI amount recorded in OCI will increase the carrying value of the investment, and would not affect earnings. If there is an indication of additional credit losses the security is re-evaluated accordingly based on the procedures described above.

Provision for and Deferred Income Taxes

The Company is subject to income tax laws of the United States, its states, and the municipalities in which it operates. The Company considers its income tax provision methodology to be critical, as the determination of current and deferred taxes based on complex analyses of many factors including interpretation of federal and state laws, the difference between tax and financial reporting bases of assets and liabilities (temporary differences), estimates of amounts due or owed, the timing of reversals of temporary differences and current financial standards. Actual results could differ significantly from the estimates due to tax law interpretations used in determining the current and deferred income tax liabilities. Additionally, there can be no assurances that estimates and interpretations used in determining income tax liabilities may not be challenged by federal and state tax authorities.

Recent Accounting Pronouncements

In January 2014, the FASB issued ASU No. 2014-04, Reclassification of Residential Real Estate Collateralized Consumer Mortgage Loans upon foreclosure. ASU 2014-04 clarifies that an in substance repossession or foreclosure occurs, and a creditor is considered to have received physical possession of residential real estate property collateralizing a consumer mortgage loan, upon either (1) the creditor obtaining legal title to the residential real estate property upon completion of a foreclosure or (2) the borrower conveying all interest in the residential real estate property to the creditor to satisfy that loan through completion of a deed in lieu of foreclosure or through a similar legal agreement. Additionally, the amendments require interim and annual disclosure of both (1) the amount of foreclosed residential real estate property held by the creditor and (2) the recorded investment in consumer mortgage loans collateralized by residential real estate property that are in the process of foreclosure according to local requirements of the applicable jurisdiction. The amendments are effective for annual and interim reports beginning on or after December 15, 2014 and can be applied with a modified retrospective transition method or prospectively. The adoption of ASU 2014-04 is not expected to have a material impact on the Company’s consolidated financial statement.

Earnings Analysis

Net interest income for the quarter ended March 31, 2015 was $8,554,000, compared to $8,514,000 for the quarter ended March 31, 2014, an increase of $40,000, or under 1%. Yields on interest earning assets declined 6 basis points in the quarter ended March 31, 2015 when compared to the same quarter in 2014. Net interest income is the primary determinant in our ability to generate sustainable earnings.

35

The following table presents an analysis of net interest income and average earning assets and liabilities for the three-month period ended March 31, 2015 compared to the three-month period ended March 31, 2014.

TABLE 1	NET INTEREST INCOME AND AVERAGE BALANCES
	FNB BANCORP AND SUBSIDIARY
	Three months ended March 31,
	2015							2014
(Dollar amounts In thousands)					Annualized							Annualized
	Average				Average			Average				Average
	Balance		Interest		Yield			Balance		Interest		Yield
INTEREST EARNING ASSETS
Loans, gross (1) (2)	$	587,903	$	7,710		5.32	%	$	563,440	$	7,627		5.49	%
Taxable securities (3)		176,781		830		1.90	%		188,294		843		1.82	%
Nontaxable securities (3)		81,458		686		3.42	%		72,469		651		3.64	%
Federal funds sold		—		—		n/a			27		—		n/a
Interest time deposits-other fin institutions		2,783		14		2.04	%		5,309		25		1.91	%
Total interest earning assets		848,925		9,240		4.41	%		829,539		9,146		4.47	%
NONINTEREST EARNING ASSETS:
Cash and due from banks		30,995							15,621
Premises and equipment		10,842							12,521
Other assets		28,551							31,872
Total noninterest earning assets		70,388							60,014
TOTAL ASSETS	$	919,313						$	889,553
INTEREST BEARING LIABILITIES:
Demand, interest bearing	$	88,778		18		0.08	%	$	76,278		16		0.09	%
Money market		320,916		289		0.37	%		312,261		284		0.37	%
Savings		69,539		17		0.10	%		65,100		17		0.11	%
Time deposits		104,269		130		0.51	%		120,096		144		0.49	%
FHLB advances		1,000		1		0.41	%		22,300		8		0.15	%
Note payable		5,489		59		4.36	%		—		—		—
Total interest bearing liabilities		589,991		514		0.35	%		596,035		469		0.32	%
NONINTEREST BEARING LIABILITIES:
Demand deposits		218,216							195,326
Other liabilities		12,966							9,197
Total noninterest bearing liabilities		231,182							204,523
TOTAL LIABILITIES		821,173							800,558
Stockholders’ equity		98,140							88,995
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$	919,313						$	889,553
NET INTEREST INCOME AND MARGIN ON TOTAL EARNING ASSETS (4)			$	8,726		4.17	%			$	8,677		4.24	%

1) Interest on non-accrual loans is recognized into income on a cash received basis if the loan has demonstrated performance and full collection is considered probable.

2) Amounts of interest earned included loan fees of $395,000 and $296,000 for the quarters ended March 31, 2015 and 2014, respectively.

3) Tax equivalent adjustments recorded at the statutory rate of 34% that are included in the nontaxable securities portfolio are $172,000 and $163,000 for the quarters ended March 31, 2015 and 2014, respectively, and were derived from nontaxable municipal interest income.

4) The annualized net interest margin is computed by dividing net interest income by total average interest earning assets and multiplied by an annualization factor.

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The Net Interest Income and Average Balances table, above, shows the various components that contributed to changes in net interest income for the three months ended March 31, 2015 and 2014. The principal interest earning assets are loans, from a volume, as well as, from an earnings rate perspective. Yields on loans have declined through the first quarter of 2015.

For the quarter ended March 31, 2015, average gross loans outstanding represented 69% of average earning assets. For the quarter ended March 31, 2014, they represented 68% of average earning assets.

Interest earning assets consist primarily of loans that are originated by or purchased by the Bank and investment securities that are purchased from broker dealers. Investments in loans is the Bank’s most valuable earning asset. Deposit liabilities are obtained through the Bank’s branch offices. Demand deposits are the Bank’s most profitable deposit account.

TABLE 2	FNB BANCORP AND SUBSIDIARY
	RATE/VOLUME VARIANCE ANALYSIS
(Dollar amounts in thousands)	Three months ended March 31,
	2015 compared to 2014
	Increase(decrease) (2)
	Interest			Variance
	Income/expense			Attributable to
	Variance			Rate			Volume
INTEREST EARNING ASSETS
Loans	$	83		$	(238	)	$	321
Taxable securities		(13	)		41			(54	)
Nontaxable securities (1)		35			(41	)		76
Int time deposits-other financial institutions		(11	)		2			(13	)
Total		94			(236	)		330
INTEREST BEARING LIABILITIES
Demand deposits		(2	)		1			(3	)
Money market		(5	)		3			(8	)
Savings		0			1			(1	)
Time deposits		14			(5	)		19
FHLB advances		7			(14	)		21
Note payable		(59	)		—			(59	)
Total		(45	)		(14	)		(31	)
NET INTEREST INCOME	$	49		$	(250	)	$	299

(1) Includes tax equivalent adjustments of $172,000 and $163,000 in the three months ended March 31, 2015, and March 31, 2014, respectively.

(2) Increases (decreases) shown are in relation to their effect on net interest income.

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Noninterest income

The following table shows the principal components of noninterest income for the periods indicated.

TABLE 3	NONINTEREST INCOME
(Dollar amounts in thousands)	Three months
	ended March 31,				Variance
	2015		2014		Amount			Percent
Service charges	$	611	$	637	$	(26	)		-4.1	%
Gain on available-for-sale securities		69		11		58			527.3	%
Bank owned life insurance policy earnings		84		96		(12	)		-12.5	%
Other income		314		296		18			6.1	%
Total noninterest income	$	1,078		1,040	$	38			3.7	%

Noninterest income consists mainly of service charges on deposits, and earnings on bank owned life insurance policies. During the first quarter of 2015, the Bank sold approximately $12,272,000 in investment securities for a pre-tax gain of $69,000. During the first quarter of 2014, the Bank sold $1,023,000 in investment securities for a pre-tax gain of $11,000.

Noninterest expense

The following table shows the principal components of noninterest expense for the periods indicated.

TABLE 4	NONINTEREST EXPENSE
(Dollar amounts in thousands)	Three months
	ended March 31,					Variance
	2015		2014			Amount			Percent
Salaries and employee benefits	$	4,302	$	4,218		$	84			2.0	%
Occupancy expense		668		680			(12	)		-1.8	%
Equipment expense		405		391			14			3.6	%
Professional fees		387		531			(144	)		-27.1	%
FDIC assessment		150		180			(30	)		-16.7	%
Telephone, postage & supplies		289		286			3			1.0	%
Advertising expense		99		85			14			16.5	%
Data processing expense		134		145			(11	)		-7.6	%
Low income housing expense		71		110			(39	)		-35.5	%
Surety insurance		88		67			21			31.3	%
Directors expense		72		63			9			14.3	%
Gain on sale of other real estate owned, net		—		(280	)		280			-100.0	%
Other real estate owned expense, net		—		77			(77	)		-100.0	%
Other expense		278		289			(11	)		-3.8	%
Total noninterest expense	$	6,943	$	6,842		$	101			1.5	%

Increased salary and employee benefits expenses in the first quarter of 2015 compared to the same period one year ago were the result of normal salary progression. The decrease in professional fees was the result of an overall reduction in legal related expenses.

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Provision for Loan Losses

There was a provision for loan losses of $75,000 for the three-month periods ended March 31, 2015 and March 31, 2014, respectively. The allowance for loan losses was $9,744,000 or 1.66% of total gross loans at March 31, 2015, compared to $9,700,000 or 1.63% of total gross loans at December 31, 2014. During the first quarter of 2015 $51,000 in loans were charged off, compared to $73,000 in the same period in 2014. The overall quality of the remaining portfolio did not warrant a larger provision for loan losses during the quarter. The allowance for loan losses is maintained at a level considered adequate for management to provide for probable loan losses inherent in the loan portfolio.

Income Taxes

The effective tax rate for the quarter ended March 31, 2015 was 31.2%compared to 30.5% for the quarter ended March 31, 2014. Tax preference items which usually lowered our effective tax rate during the first quarter of 2015 and 2014 included non-taxable interest income derived from municipal loans and investment securities and available Low Income Housing tax credits.

Asset and Liability Management

Ongoing management of the Company’s interest rate sensitivity limits interest rate risk through monitoring the mix and maturity of loans, investments and deposits. Management regularly reviews the Company’s position and evaluates alternative sources and uses of funds as well as changes in external factors. Various methods are used to achieve and maintain the desired interest rate sensitivity position including the sale or purchase of assets and product pricing.

In order to ensure that sufficient funds are available for loan growth and deposit withdrawals, as well as to provide for general needs, the Company must maintain an adequate level of liquidity. Asset liquidity comes from the Company’s ability to convert short-term investments into cash and from the maturity and repayment of loans and investment securities. Liability liquidity comes from the Company’s customer base, which provides core deposit growth. The overall liquidity position of the Company is closely monitored and evaluated regularly. Management believes the Company’s liquidity sources at March 31, 2015, are adequate to meet its operating needs in 2014 and our liquidity positions are sufficient to meet our liquidity needs in the near term.

Financial Condition

Assets. Total assets increased to $922,353,000 at March 31, 2015 from $917,164,000 at December 31, 2014, an increase of $5,189,000. The principal source of this increase was a $15,662,000 increase in cash and due from banks, partially offset by a $8,109,000 decrease in net loans.

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Loans. Gross loans (before net loan fees) at March 31, 2015 were $585,745,000, a decrease of $8,119,000 or 1.37% from December 31, 2014. Gross commercial real estate loans increased $3,987,000, real estate construction loans decreased $5,534,000, real estate multi- family loans decreased $121,000, real estate loans secured by 1 to 4 family residences decreased $627,000, commercial and industrial loans decreased $6,073,000, and consumer loans increased by $249,000. The loan portfolio breakdown was as follows:

TABLE 5	LOAN PORTFOLIO
(Dollar amounts in thousands)	March 31 2015			Percent			December 31 2014			Percent
Commercial real estate	$	322,414			55	%	$	318,427			54	%
Real estate construction		34,237			6	%		39,771			7	%
Real estate multi family		53,703			9	%		53,824			9	%
Real estate 1 to 4 family		128,105			22	%		128,732			22	%
Commercial & industrial		45,589			8	%		51,662			9	%
Consumer loans		1,697			0	%		1,448			0	%
Gross loans		585,745			100	%		593,864			100	%
Net deferred loan fees		(395	)		0	%		(449	)		0	%
Total	$	585,350			100	%	$	593,415			100	%

Allowance for loan losses. Management of the Company is responsible for assessing the overall risks within the Bank’s loan portfolio, assessing the specific loss expectancy, and determining the adequacy of the allowance for loan losses. The level of the allowance is determined by internally generating credit quality ratings, reviewing economic conditions in the Company’s market area, and considering the Company’s historical loan loss experience. The Company’s management considers changes in national and local economic conditions, as well as the condition of various market segments. It also reviews any changes in the nature and volume of the portfolio. Management watches for the existence and effect of any concentrations of credit, and changes in the level of such concentrations. It also reviews the effect of external factors, such as competition and legal and regulatory requirements. Finally, the Company is committed to maintaining an adequate allowance, identifying credit weaknesses by consistent review of loans, and maintaining the ratings and changing those ratings in a timely manner as circumstances change.

A summary of transactions in the allowance for loan losses for the three months ended March 31, 2015, and March 31, 2014, respectively is as follows:

TABLE 6	ALLOWANCE FOR LOAN LOSSES
	Three months ended			Three months ended
(Dollar amounts in thousands)	March 31, 2015			March 31, 2014
Balance, beginning of period	$	9,700		$	9,879
Provision for loan losses		75			75
Recoveries		20			16
Amounts charged off		(51	)		(73	)
Balance, end of period	$	9,744		$	9,897

During the first quarter of 2015 and 2014, respectively there were provisions of $75,000. The provision level was considered appropriate given the declining risk levels within the Bank’s loan portfolio.

40

In management’s judgment, the allowance is adequate to absorb probable losses currently inherent in the loan portfolio at March 31, 2015. However, changes in prevailing economic conditions in the Company’s markets or in the financial condition of its customers could result in changes in the level of nonperforming assets and charge-offs in the future and, accordingly, changes in the allowance.

The allowance is affected by a number of factors, and does not necessarily move in tandem with the level of gross loans outstanding. Management continues to monitor the factors that affect the allowance, and is prepared to make adjustments as they become necessary.

Nonperforming assets. Nonperforming assets consist of nonaccrual loans, loans that are 90 days or more past due but are still accruing interest and other real estate owned. At March 31, 2015, there was $6,693,000 in nonperforming assets, compared to $6,411,000 at December 31, 2014. Nonaccrual loans were $5,923,000 at March 31, 2015, compared to $5,648,000 at December 31, 2014. There were no loans past due 90 days and still accruing at either date.

There was $770,000 in other real estate owned at March 31, 2015, and $763,000 at December 31, 2014. During the first quarter of 2014, the Bank was able to dispose of two properties for a net gain of $280,000. Management intends to aggressively market these properties. While management believes these properties will sell, there can be no assurance that these properties will sell quickly given the current real estate market, nor can the expected sales price be accurately predicted.

Deposits. Total deposits at March 31, 2015, were $804,624,000 compared to $792,194,000 on December 31, 2014. Of these totals, noninterest-bearing demand deposits were $222,400,000 or 27.6% of the total on March 31, 2015, and $202,811,000 or 25.6% on December 31, 2014. Time deposits were $106,511,000 on March 31, 2015, and $105,159,000 on December 31, 2014.

The following table sets forth the maturity schedule of the time certificates of deposit on March 31, 2015:

TABLE 7
(Dollar amounts in thousands)	Under		$100,000
Maturities	$100,000		or more		Total
Three months or less	$	8,841	$	28,592	$	37,433
Over three through six months		6,009		6,465		12,474
Over six through twelve months		7,925		20,448		28,373
Over twelve months		10,291		17,940		28,231
Total	$	33,066	$	73,445	$	106,511

Regulatory Capital. The following table shows the risk-based capital ratios and leverage ratios at March 31, 2015 and December 31, 2014 for the Bank:

41

TABLE 8								Minimum “Well
	March 31,			December 31,				Capitalized”
Regulatory Capital Ratios	2015			2014				Requirements
Total Regulatory Capital Ratio		13.40	%		15.24	%	≥		10.00	%
Tier 1 Capital Ratio		12.19	%		13.99	%	≥		6.00	%
Leverage Ratios		N/A			10.79	%	≥		5.00	%
Common equity Tier 1 Capital Ratio		12.19	%		N/A		≥		4.50	%

Liquidity. Liquidity is a measure of the Company’s ability to convert assets into cash with minimal loss. As of March 31, 2015, liquid assets were $297,922,000, or 32.3% of total assets. As of December 31, 2014, liquid assets were $282,643,000, or 30.8% of total assets. Liquidity consists of cash and due from banks, federal funds sold, and securities available-for-sale. The Company’s primary uses of funds are loans, and the primary sources of funds are deposits. The Company also has federal funds borrowing facilities totaling $30,000,000, a Federal Home Loan Bank line up to 30% of total eligible assets, and a Federal Reserve Bank borrowing facility.

The relationship between total net loans and total deposits is a useful additional measure of liquidity. A higher loan to deposit ratio may lead to a loss of liquid assets in the future. This must be balanced against the fact that loans represent the highest interest earning assets. A lower loan to deposit ratio means lower potential income. On March 31, 2015, and December 31, 2014, respectively, net loans were at 72% and 74% of deposits. See the consolidated statements of Cash Flows under Item I for further information on the Company’s cash flows.

Off-Balance Sheet Items

The Company has certain ongoing commitments under operating leases. These commitments do not significantly impact operating results. As of March 31, 2015 and December 31, 2014, commitments to extend credit and letters of credit were the only financial instruments with off-balance sheet risk. The Company has not entered into any contracts for financial derivative instruments such as futures, swaps, options or similar instruments. Loan commitments and letters of credit were $137,308,000 and $142,221,000 at March 31, 2015 and December 31, 2014, respectively. As a percentage of net loans, these off-balance sheet items represent 23.85% and 24.36% respectively. The Company does not expect all commitments are expected to be funded.

Item 3. Quantitative and Qualitative Disclosures about Market Risk.

Market risk is the risk of loss to future earnings, to fair values of assets or to future cash flows that may result from changes in the price or value of a financial instrument. The value of a financial instrument may change as a result of changes in interest rates and other market conditions. Market risk is attributed to all market risk sensitive financial instruments, including loans, investment securities, deposits and borrowings. The Company does not engage in trading activities or participate in foreign currency transactions for its own account. Accordingly, exposure to market risk is primarily a function of asset and liability management activities and of changes in market rates of interest. Changes in rates can cause or require increases in the rates paid on deposits that may take effect more rapidly or may be greater than the increases in the interest rates that the Company is able to charge on loans and the yields that it can realize on its investments. The extent of that market risk depends on a number of variables including the sensitivity to changes in market interest rates and the maturities of the Company’s interest earning assets and deposits.

42

Item 4. Controls and Procedures.

Disclosure Controls and Procedures: An evaluation of the Company’s disclosure controls and procedures based on criteria established in “Internal Control-Integrated Framework” issued in 2013 by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) was carried out under the supervision and with the participation of the Company’s Chief Executive Officer, (principal executive officer) Chief Financial Officer (principal financial and accounting officer) and other members of the Company’s senior management as of the end of the Company’s fiscal quarter ended March 31, 2015. The Company’s Chief Executive Officer (principal executive officer) and Chief Financial Officer (principal financial and accounting officer) concluded that the Company’s disclosure controls and procedures are effective in ensuring that material information required to be disclosed by the Company in the reports it files and submits under the Exchange Act is recorded, processed, summarized and reported as and when required and that such information is communicated to the Company’s management, including the principal executive officer and the principal financial officer, to allow timely decisions regarding required disclosures. The evaluation did not identify any change in the Company’s internal control over financial reporting that occurred during the quarter ended March 31, 2015 that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

Management of FNB Bancorp (the “Company”) is responsible for establishing and maintaining adequate internal control over financial reporting, and for performing an assessment of the effectiveness of internal control over financial reporting as of March 31, 2015. Internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. The Company’s system of internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transaction and dispositions of the assets of the Company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the Company are being made only in accordance with authorizations of Management and Directors of the Company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company’s assets that could have a material effect on the financial statements.

43

PART II—OTHER INFORMATION

Item 1. Legal Proceedings

There are no material legal proceedings adverse to the Company or First National Bank to which any director, officer, affiliate of the Company, or 5% stockholder of the Company, or any associate of any such director, officer, affiliate or 5% stockholder of the Company are a party, and none of the foregoing persons has a material interest adverse to the Company or First National Bank.

From time to time, the Company and/or First National Bank are a party to claims and legal proceedings arising in the ordinary course of business. The Company’s management is not aware of any material pending legal proceedings to which either it or First National Bank may be a party or has recently been a party, which will have a material adverse effect on the financial condition or results of operations of the Company and First National Bank, taken as a whole.

Item 1A. Risk Factors

During the course of normal operations, the Bank and the Company manage a variety of risks including, but not limited to, credit risk, operational risk, interest rate risk and regulatory compliance risk. For a more complete discussion of the risk factors facing the Bank and the Company, please refer to the section entitled “Item 1A – Risk Factors” in the Company’s December 31, 2014 Form 10K.

On July 21, 2010, the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Act”) was signed into law. The purpose of this legislation was to bring about regulatory changes and oversight that would help stop past abuses from recurring in the future. This legislation gives new powers to the FDIC and the Federal Reserve Bank that they may use in the execution of their duties as regulators and overseers of the banking industry. It also created a new federal consumer protection agency named the Consumer Financial Protection Bureau (“CFPB”). All existing consumer laws and regulations will be transferred to the CFPB. This Act is expected to enable regulators to issue numerous new banking regulations and requirements that have not yet been fully developed or promulgated. The ultimate effect the Act has on the Company’s operations will ultimately be determined by the significance of the new banking regulations that are issued as a result of the Act.

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

c) ISSUER PURCHASES OF EQUITY SECURITIES

None.

Item 3. Defaults Upon Senior Securities

None.

Item 4. Mine Safety Disclosures

Not Applicable.

Item 5. Other Information

None.

Item 6. Exhibits

Exhibits

     31:   Rule 13a-14(a)/15d-14(a) Certifications

     32:   Section 1350 Certifications

44

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

	FNB BANCORP
		(Registrant)
Dated:
May 6, 2015.	By:	/s/ Thomas C. McGraw
		Thomas C. McGraw
		Chief Executive Officer
		(Principal Executive Officer)
	By:	/s/ David A. Curtis
		David A. Curtis
		Senior Vice President
		Chief Financial Officer
		(Principal Financial and Accounting Officer)

45

EX-31.1

Exhibit 31.1

Rule 13a-14(a)/15d-14(a) Certifications

                 I, Thomas C. McGraw, certify that:

1.              I have reviewed this quarterly report on Form 10-Q of FNB Bancorp;

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

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

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

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

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

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

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

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

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

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

Date: May 6, 2015.	/s/ Thomas C. McGraw
	Thomas C. McGraw
	Chief Executive Officer

46

EX-31.2

Exhibit 31.2

Rule 13a-14(a)/15d-14(a) Certifications

                 I, David A. Curtis, certify that:

1.              I have reviewed this quarterly report on Form 10-Q of FNB Bancorp;

2.              Based on my knowledge, this quarterly 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-15e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

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

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

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

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

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

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

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

Date: May 6, 2015.	/s/ David A. Curtis
	David A. Curtis
	Senior Vice President and Chief Financial Officer

47

EX-32

Exhibit 32

Section 1350 Certifications

Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (subsections (a) and (b) of section 1350, chapter 63 of title 18, United States Code), each of the undersigned officers of FNB Bancorp, a California corporation (the “Company”), does hereby certify that:

1. The Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2015 (the “Form 10-Q”) fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and

2. Information contained in the Form 10-Q fairly presents, in all material respects, the financial condition and results of operations of the Company.

Dated: May 6, 2015.	/s/ Thomas C. McGraw
	Thomas C. McGraw
	Chief Executive Officer
Dated: May 6, 2015.	/s/ David A. Curtis
	David A. Curtis
	Senior Vice President and Chief Financial Officer

A signed original of this statement required by Section 906 has been provided to FNB Bancorp and will be retained by FNB Bancorp and furnished to the Securities and Exchange Commission or its staff upon request.

48

XML

E. LOANS, Credit Quality Indicators Loans (Details) (USD $) In Thousands, unless otherwise specified	Mar. 31, 2015	Dec. 31, 2014
Pass
Originated
Commercial real estate	$ 286,211	$ 281,308
Real estate construction	24,532	36,692
Real estate multi-family	43,633	43,379
Real estate 1 to 4 family	122,697	122,499
Commercial & industrial	35,436	41,394
Consumer loans	1,637	1,384
Totals	514,146	526,656
Purchased Not credit impaired
Commercial real estate	25,157	26,009
Real estate construction	1,924	1,944
Real estate multi-family	10,070	10,445
Real estate 1 to 4 family	3,925	4,810
Commercial & industrial	9,044	9,111
Total	50,120	52,305
Special mention
Originated
Commercial real estate	1,896	1,913
Real estate construction	0	0
Real estate multi-family	0	0
Real estate 1 to 4 family	0	0
Commercial & industrial	0	0
Consumer loans	0	0
Totals	1,896	1,913
Purchased Not credit impaired
Commercial real estate	0	0
Real estate construction	0	0
Real estate multi-family	0	0
Real estate 1 to 4 family	0	0
Commercial & industrial	0	0
Total	0	0
Sub Standard
Originated
Commercial real estate	2,010	2,031
Real estate construction	7,781	1,135
Real estate multi-family	0	0
Real estate 1 to 4 family	1,083	1,023
Commercial & industrial	1,091	1,157
Consumer loans	60	64
Totals	12,025	5,410
Purchased Not credit impaired
Commercial real estate	5,818	5,843
Real estate construction	0	0
Real estate multi-family	0	0
Real estate 1 to 4 family	400	0
Commercial & industrial	0	0
Total	6,218	5,843
Doubtful
Originated
Commercial real estate	0	0
Real estate construction	0	0
Real estate multi-family	0	0
Real estate 1 to 4 family	0	0
Commercial & industrial	18	0
Consumer loans	0	0
Totals	18	0
Purchased Not credit impaired
Commercial real estate	0	0
Real estate construction	0	0
Real estate multi-family	0	0
Real estate 1 to 4 family	0	400
Commercial & industrial	0	0
Total	0	400
Total loans
Originated
Commercial real estate	290,117	285,252
Real estate construction	32,313	37,827
Real estate multi-family	43,633	43,379
Real estate 1 to 4 family	123,780	123,522
Commercial & industrial	36,545	42,551
Consumer loans	1,697	1,448
Totals	528,085	533,979
Purchased Not credit impaired
Commercial real estate	30,975	31,852
Real estate construction	1,924	1,944
Real estate multi-family	10,070	10,445
Real estate 1 to 4 family	4,325	5,210
Commercial & industrial	9,044	9,111
Total	56,338	58,562
Purchased Credit Impaired
Commercial real estate	1,322	1,323
Total	$ 1,322	$ 1,323

XML

E. LOANS, Summary of Loan as follows (Details) (USD $) In Thousands, unless otherwise specified	Mar. 31, 2015	Dec. 31, 2014
Gross loans	$ 585,745	$ 593,864
Net deferred loan fees	(395)	(449)
Allowance for loan losses	(9,744)	(9,700)
Net loans	575,606	583,715
Commercial real estate
Gross loans	322,414	318,427
Real estate construction
Gross loans	34,237	39,771
Real Estate Multi family
Gross loans	53,703	53,824
Real Estate 1 to 4 family
Gross loans	128,105	128,732
Commercial and industrial
Gross loans	45,589	51,662
Consumer
Gross loans	1,697	1,448
FNB Bancorp Originated
Gross loans	528,085	533,979
Net deferred loan fees	(395)	(449)
Allowance for loan losses	(9,744)	(9,700)
Net loans	517,946	523,830
FNB Bancorp Originated | Commercial real estate
Gross loans	290,117	285,252
FNB Bancorp Originated | Real estate construction
Gross loans	32,313	37,827
FNB Bancorp Originated | Real Estate Multi family
Gross loans	43,633	43,379
FNB Bancorp Originated | Real Estate 1 to 4 family
Gross loans	123,780	123,522
FNB Bancorp Originated | Commercial and industrial
Gross loans	36,545	42,551
FNB Bancorp Originated | Consumer
Gross loans	1,697	1,448
PNCI
Gross loans	56,338	58,562
Net deferred loan fees	0	0
Allowance for loan losses	0	0
Net loans	56,338	58,562
PNCI | Commercial real estate
Gross loans	30,975	31,852
PNCI | Real estate construction
Gross loans	1,924	1,944
PNCI | Real Estate Multi family
Gross loans	10,070	10,445
PNCI | Real Estate 1 to 4 family
Gross loans	4,325	5,210
PNCI | Commercial and industrial
Gross loans	9,044	9,111
PNCI | Consumer
Gross loans	0	0
PCI
Gross loans	1,322	1,323
Net deferred loan fees	0	0
Allowance for loan losses	0	0
Net loans	1,322	1,323
PCI | Commercial real estate
Gross loans	1,322	1,323
PCI | Real estate construction
Gross loans	0	0
PCI | Real Estate Multi family
Gross loans	0	0
PCI | Real Estate 1 to 4 family
Gross loans	0	0
PCI | Commercial and industrial
Gross loans	0	0
PCI | Consumer
Gross loans	$ 0	$ 0

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G. FAIR VALUE MEASUREMENT, Financial instruments (Details) (USD $) In Thousands, unless otherwise specified	Mar. 31, 2015	Dec. 31, 2014	Mar. 31, 2014	Dec. 31, 2013
Financial assets:
Cash and cash equivalents	$ 30,640	$ 14,978	$ 19,244	$ 14,007
Interest-bearing time deposits with financial Institutions	2,783	2,784
Other Equity Securities	264,499
Accrued interest receivable	3,744	3,725
Financial liabilities:
Deposits	804,624	792,194
Notes payable	5,400	5,550
Carrying Amount
Financial assets:
Cash and cash equivalents	30,640	14,978
Interest-bearing time deposits with financial Institutions	2,783	2,784
Securities available for sale	264,499	264,881
Loans	585,745	593,864
Other Equity Securities	5,773	5,769
Accrued interest receivable	3,744	3,725
Financial liabilities:
Deposits	804,624	792,194
Federal Home Loan Bank advances	0	9,000
Notes payable	5,400	5,550
Accrued interest payable	165	182
Off-balance-sheet liabilities:
Undisbursed loan commitments, lines of credit, standby letters of credit and Mastercard lines of credit	0	0
Fair Value
Financial assets:
Cash and cash equivalents	30,640	14,978
Interest-bearing time deposits with financial Institutions	2,783	2,813
Securities available for sale	264,499	264,881
Loans	577,169	594,524
Other Equity Securities	5,773	5,769
Accrued interest receivable	3,744	3,725
Financial liabilities:
Deposits	804,995	792,552
Federal Home Loan Bank advances	0	9,000
Notes payable	5,400	5,550
Accrued interest payable	165	182
Off-balance-sheet liabilities:
Undisbursed loan commitments, lines of credit, standby letters of credit and Mastercard lines of credit	1,373	1,449
Level 1
Financial assets:
Cash and cash equivalents	30,640	14,978
Interest-bearing time deposits with financial Institutions	0	0
Securities available for sale	4,007	3,958
Loans	0	0
Other Equity Securities	0	0
Accrued interest receivable	0	0
Financial liabilities:
Deposits	0	0
Federal Home Loan Bank advances	0	0
Notes payable	0	0
Accrued interest payable	0	0
Off-balance-sheet liabilities:
Undisbursed loan commitments, lines of credit, standby letters of credit and Mastercard lines of credit	0	0
Level 2
Financial assets:
Cash and cash equivalents	0	0
Interest-bearing time deposits with financial Institutions	2,783	2,813
Securities available for sale	260,492	260,923
Loans	0	0
Other Equity Securities	0	0
Accrued interest receivable	3,744	3,725
Financial liabilities:
Deposits	804,995	792,552
Federal Home Loan Bank advances	0	9,000
Notes payable	5,400	5,550
Accrued interest payable	165	182
Off-balance-sheet liabilities:
Undisbursed loan commitments, lines of credit, standby letters of credit and Mastercard lines of credit	0	0
Level 3
Financial assets:
Cash and cash equivalents	0	0
Interest-bearing time deposits with financial Institutions	0	0
Securities available for sale	0
Loans	577,169	594,524
Other Equity Securities	5,773	5,769
Accrued interest receivable	0	0
Financial liabilities:
Deposits	0	0
Federal Home Loan Bank advances	0	0
Notes payable	0	0
Accrued interest payable	0	0
Off-balance-sheet liabilities:
Undisbursed loan commitments, lines of credit, standby letters of credit and Mastercard lines of credit	$ 1,373	$ 1,449

XML

B. STOCK OPTION PLANS

3 Months Ended

Mar. 31, 2015

STOCK OPTION PLANS

STOCK OPTION PLANS

Stock option expense is recorded based on the fair value of option contracts issued. The fair value is determined using an option pricing model that considers the expected contract term, the risk free interest rate, the volatility of the Company’s stock price and the level of dividends the Company is expected to pay.

The expected term of options granted is derived from historical plan behavior and represents the period of time that options granted are expected to be outstanding. The risk-free rate for periods approximating the expected option terms is based on the U. S. Treasury yield curve in effect at the time of the grant.

The amount of compensation expense for options recorded in the quarters ended March 31, 2015 and 2014 was $61,000 and $69,000, respectively. There was no income tax benefit recognized in the consolidated statements of earnings for these amounts for the quarters ended March 31, 2015 and 2014, respectively.

The intrinsic value for options exercised during the quarters ended March 31, 2015 March 31, 2014 was $314,000 and $126,000, respectively. The intrinsic value of options exercisable during the quarter ended March 31, 2015 and March 31, 2014 was $3,463,000 and $2,234,000, respectively.

The amount of total unrecognized compensation expense related to non-vested options at March 31, 2015 was $682,000, and the weighted average period over which it will be amortized is 3.4 years.

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E. LOANS, Nonaccrual (Details) (USD $) In Thousands, unless otherwise specified	Mar. 31, 2015	Dec. 31, 2014
Loans, Nonaccrual Status	$ 5,923	$ 5,648
Commercial real estate
Loans, Nonaccrual Status	2,107	2,111
Real Estate Construction
Loans, Nonaccrual Status	0	0
Real Estate 1 to 4 family
Loans, Nonaccrual Status	1,532	1,181
Commercial and industrial
Loans, Nonaccrual Status	2,224	2,292
Consumer
Loans, Nonaccrual Status	$ 60	$ 64

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E. LOANS, Impaired Loans Allowance (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended		12 Months Ended
	Mar. 31, 2015	Mar. 31, 2014	Dec. 31, 2014
With no related allowance, Recorded Investment	$ 8,847	$ 14,415	$ 9,011
With no related allowance, Unpaid Principal Balance	10,151	15,721	10,565
With no related allowance recorded, Related Allowance	0	0	0
With no related allowance, Average Recorded Investment	8,876	14,441	8,486
With no related allowance, Income Recognized	120	170	575
With an allowance recorded, Recorded Investment	9,940	10,109	9,604
With an allowance recorded, Unpaid Principal Balance	9,878	10,667	9,989
With an allowance recorded, Related Allowance	928	743	766
With an allowance recorded, Average Impaired Balance	10,026	10,322	9,860
With an allowance recorded, Income Recognized	105	101	407
Recorded Investment	18,787	24,524	18,615
Unpaid Principal Balance	20,029	26,388	20,554
Related Allowance	928	743	766
Average Recorded Investment	18,902	24,763	18,346
Income Recognized	225	271	982
Commercial real estate
With no related allowance, Recorded Investment	4,432	8,881	4,462
With no related allowance, Unpaid Principal Balance	5,315	9,143	5,333
With no related allowance recorded, Related Allowance	0	0	0
With no related allowance, Average Recorded Investment	4,447	8,900	4,473
With no related allowance, Income Recognized	63	115	304
With an allowance recorded, Recorded Investment	5,028	5,545	5,068
With an allowance recorded, Unpaid Principal Balance	5,031	5,546	5,071
With an allowance recorded, Related Allowance	131	150	101
With an allowance recorded, Average Impaired Balance	5,048	5,594	5,127
With an allowance recorded, Income Recognized	67	68	258
Recorded Investment	9,460	14,426	9,530
Unpaid Principal Balance	10,346	14,689	10,404
Related Allowance	131	150	101
Average Recorded Investment	9,495	14,494	9,600
Income Recognized	130	183	562
Commercial real estate construction
With no related allowance, Recorded Investment	2,368	1,319	2,373
With no related allowance, Unpaid Principal Balance	2,551	1,319	2,556
With no related allowance recorded, Related Allowance	0	0	0
With no related allowance, Average Recorded Investment	2,371	1,319	1,846
With no related allowance, Income Recognized	33	25	150
With an allowance recorded, Recorded Investment	0	0	0
With an allowance recorded, Unpaid Principal Balance	0	0	0
With an allowance recorded, Related Allowance	0	0	0
With an allowance recorded, Average Impaired Balance	0	0	0
With an allowance recorded, Income Recognized	0	0	0
Recorded Investment	2,368	1,319	2,373
Unpaid Principal Balance	2,551	1,319	2,556
Related Allowance	0	0	0
Average Recorded Investment	2,371	1,319	1,846
Income Recognized	33	25	150
Real Estate 1 to 4 family
With no related allowance, Recorded Investment	1,483	695	1,594
With no related allowance, Unpaid Principal Balance	1,484	695	1,737
With no related allowance recorded, Related Allowance	0	0	0
With no related allowance, Average Recorded Investment	1,485	665	1,379
With no related allowance, Income Recognized	14	8	67
With an allowance recorded, Recorded Investment	3,190	3,161	2,739
With an allowance recorded, Unpaid Principal Balance	2,773	3,300	2,754
With an allowance recorded, Related Allowance	510	428	432
With an allowance recorded, Average Impaired Balance	3,218	3,266	2,759
With an allowance recorded, Income Recognized	31	31	111
Recorded Investment	4,673	3,856	4,333
Unpaid Principal Balance	4,257	3,995	4,491
Related Allowance	510	428	432
Average Recorded Investment	4,703	3,931	4,138
Income Recognized	45	39	178
Commercial and industrial
With no related allowance, Recorded Investment	564	3,510	582
With no related allowance, Unpaid Principal Balance	801	4,554	939
With no related allowance recorded, Related Allowance	0	0	0
With no related allowance, Average Recorded Investment	573	3,552	788
With no related allowance, Income Recognized	10	22	54
With an allowance recorded, Recorded Investment	1,662	1,383	1,733
With an allowance recorded, Unpaid Principal Balance	2,014	1,801	2,100
With an allowance recorded, Related Allowance	279	156	225
With an allowance recorded, Average Impaired Balance	1,698	1,452	1,907
With an allowance recorded, Income Recognized	4	1	33
Recorded Investment	2,226	4,893	2,315
Unpaid Principal Balance	2,815	6,355	3,039
Related Allowance	279	156	225
Average Recorded Investment	2,271	5,004	2,695
Income Recognized	14	23	87
Consumer
With no related allowance, Recorded Investment	0	10	0
With no related allowance, Unpaid Principal Balance	0	10	0
With no related allowance recorded, Related Allowance	0	0	0
With no related allowance, Average Recorded Investment	0	5	0
With no related allowance, Income Recognized	0	0	0
With an allowance recorded, Recorded Investment	60	20	64
With an allowance recorded, Unpaid Principal Balance	60	20	64
With an allowance recorded, Related Allowance	8	9	8
With an allowance recorded, Average Impaired Balance	62	10	67
With an allowance recorded, Income Recognized	3	1	5
Recorded Investment	60	30	64
Unpaid Principal Balance	60	30	64
Related Allowance	8	9	8
Average Recorded Investment	62	15	67
Income Recognized	$ 3	$ 1	$ 5

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E. LOANS, Troubled Debt Restructurings (Details) (USD $) In Thousands, unless otherwise specified	Mar. 31, 2015	Dec. 31, 2014
Troubled debt restructured loans outstanding, accrual status	$ 11,807	$ 12,158
Troubled debt restructured loans outstanding, nonaccrual status	4,567	4,359
Total modifications	16,374	16,517
Commercial real estate
Troubled debt restructured loans outstanding, accrual status	7,364	7,407
Troubled debt restructured loans outstanding, nonaccrual status	2,089	2,091
Total modifications	9,453	9,498
Real Estate Construction
Troubled debt restructured loans outstanding, accrual status	1,300	1,304
Troubled debt restructured loans outstanding, nonaccrual status	0	0
Total modifications	1,300	1,304
Real Estate 1 to 4 family
Troubled debt restructured loans outstanding, accrual status	3,143	3,153
Troubled debt restructured loans outstanding, nonaccrual status	479	508
Total modifications	3,622	3,661
Commercial and industrial
Troubled debt restructured loans outstanding, accrual status	0	294
Troubled debt restructured loans outstanding, nonaccrual status	1,999	1,760
Total modifications	$ 1,999	$ 2,054

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E. LOANS, Payment Modification (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Mar. 31, 2014
Number of Modifications	1
Pre-modification Recorded Investment	$ 575
Post-modification Recorded Investment	574
Real Estate 1 to 4 family
Number of Modifications	1
Pre-modification Recorded Investment	575
Post-modification Recorded Investment	$ 574

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A. BASIS OF PRESENTATION

3 Months Ended

Mar. 31, 2015

BASIS OF PRESENTATION

BASIS OF PRESENTATION

FNB Bancorp (the “Company”) is a bank holding company registered under the Bank Holding Company Act of 1956, as amended. The Company was incorporated under the laws of the State of California on February 28, 2001. The consolidated financial statements include the accounts of FNB Bancorp and its wholly-owned subsidiary, First National Bank of Northern California (the “Bank”). The Bank provides traditional banking services in San Mateo and San Francisco counties.

All intercompany transactions and balances have been eliminated in consolidation. The financial statements include all adjustments of a normal and recurring nature, which are, in the opinion of management, necessary for a fair presentation of the financial position and results of operations for the periods presented.

The accompanying unaudited consolidated financial statements have been prepared in accordance with the instructions to Form 10-Q and, therefore, do not include all information and footnotes normally included in annual financial statements prepared in conformity with accounting principles generally accepted in the United States of America. Accordingly, these consolidated financial statements should be read in conjunction with the consolidated audited financial statements and notes thereto for the year ended December 31, 2014. Results of operations for interim periods are not necessarily indicative of results for the full year. Certain prior year information has been reclassified to conform to current year presentation. The reclassifications had no impact on consolidated net earnings or stockholders’ equity.

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E. LOANS, Past due loans (Details) (USD $) In Thousands, unless otherwise specified	Mar. 31, 2015	Dec. 31, 2014
Originated
Past Due, 30-59 days	$ 826	$ 4,688
Past Due, 60-89 days	0	1,860
Past Due, > 90 days	2,567	2,886
Past Due, Total	3,393	9,434
Current	524,692	524,545
Total Loans	528,085	533,979
Originated | Commercial real estate
Past Due, 30-59 days	75	8
Past Due, 60-89 days	0	879
Past Due, > 90 days	0	0
Past Due, Total	75	887
Current	290,042	284,365
Total Loans	290,117	285,252
Originated | Real Estate Construction
Past Due, 30-59 days	0	0
Past Due, 60-89 days	0	708
Past Due, > 90 days	0	0
Past Due, Total	0	708
Current	32,313	37,119
Total Loans	32,313	37,827
Originated | Real Estate Multi family
Past Due, 30-59 days	0	3,575
Past Due, 60-89 days	0	0
Past Due, > 90 days	0	0
Past Due, Total	0	3,575
Current	43,633	39,804
Total Loans	43,633	43,379
Originated | Real Estate 1 to 4 family
Past Due, 30-59 days	581	330
Past Due, 60-89 days	0	200
Past Due, > 90 days	511	1,112
Past Due, Total	1,092	1,642
Current	122,688	121,880
Total Loans	123,780	123,522
Originated | Commercial and industrial
Past Due, 30-59 days	170	775
Past Due, 60-89 days	0	73
Past Due, > 90 days	2,056	1,710
Past Due, Total	2,226	2,558
Current	34,319	39,993
Total Loans	36,545	42,551
Originated | Consumer
Past Due, 30-59 days	0	0
Past Due, 60-89 days	0	0
Past Due, > 90 days	0	64
Past Due, Total	0	64
Current	1,697	1,384
Total Loans	1,697	1,448
Purchased Not credit impaired
Past Due, 30-59 days	0	0
Past Due, 60-89 days	0	400
Past Due, > 90 days	400	0
Past Due, Total	400	400
Current	55,938	58,162
Total Loans	56,338	58,562
Purchased Not credit impaired | Commercial real estate
Past Due, 30-59 days	0	0
Past Due, 60-89 days	0	0
Past Due, > 90 days	0	0
Past Due, Total	0	0
Current	30,975	31,852
Total Loans	30,975	31,852
Purchased Not credit impaired | Real Estate Construction
Past Due, 30-59 days	0	0
Past Due, 60-89 days	0	0
Past Due, > 90 days	0	0
Past Due, Total	0	0
Current	1,924	1,944
Total Loans	1,924	1,944
Purchased Not credit impaired | Real Estate Multi family
Past Due, 30-59 days	0	0
Past Due, 60-89 days	0	0
Past Due, > 90 days	0	0
Past Due, Total	0	0
Current	10,070	10,445
Total Loans	10,070	10,445
Purchased Not credit impaired | Real Estate 1 to 4 family
Past Due, 30-59 days	0	0
Past Due, 60-89 days	0	400
Past Due, > 90 days	400	0
Past Due, Total	400	400
Current	3,925	4,810
Total Loans	4,325	5,210
Purchased Not credit impaired | Commercial and industrial
Past Due, 30-59 days	0	0
Past Due, 60-89 days	0	0
Past Due, > 90 days	0	0
Past Due, Total	0	0
Current	9,044	9,111
Total Loans	9,044	9,111
Purchased Credit impaired
Past Due, 30-59 days	0	0
Past Due, 60-89 days	0	0
Past Due, > 90 days	0	0
Past Due, Total	0	0
Current	1,322	1,323
Total Loans	1,322	1,323
Purchased Credit impaired | Commercial real estate
Past Due, 30-59 days	0	0
Past Due, 60-89 days	0	0
Past Due, > 90 days	0	0
Past Due, Total	0	0
Current	1,322	1,323
Total Loans	$ 1,322	$ 1,323

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CONSOLIDATED BALANCE SHEETS (Unaudited) (Dollar amounts in thousands) (USD $) In Thousands, unless otherwise specified	Mar. 31, 2015	Dec. 31, 2014
Assets
Cash and due from banks	$ 30,640	$ 14,978
Interest-bearing time deposits with financial institutions	2,783	2,784
Securities available-for-sale, at fair value	264,499	264,881
Loans, net of allowance for loan losses of $9,744 and $9,700 on March 31, 2015 and December 31, 2014	575,606	583,715
Bank premises, equipment, and leasehold improvements, net	10,685	10,951
Bank owned life insurance	12,594	12,510
Other equity securities	5,773	5,769
Accrued interest receivable	3,744	3,725
Other real estate owned, net	770	763
Goodwill	1,841	1,841
Prepaid expenses	1,016	1,045
Other assets	12,402	14,202
Total assets	922,353	917,164
Deposits
Demand, noninterest bearing	222,400	202,811
Demand, interest bearing	90,914	89,548
Savings and money market	384,799	394,676
Time	106,511	105,159
Total deposits	804,624	792,194
Federal Home Loan Bank advances	0	9,000
Note Payable	5,400	5,550
Accrued expenses and other liabilities	12,292	13,332
Total liabilities	822,316	820,076
Stockholders' equity
Common stock, no par value, authorized 10,000,000 shares; issued and outstanding 4,284,918 shares at March 31, 2015 and 4,259,306 shares at December 31, 2014	67,242	66,791
Retained earnings	29,944	28,729
Accumulated other comprehensive income, net of tax	2,851	1,568
Total stockholders' equity	100,037	97,088
Total liabilities and stockholders' equity	$ 922,353	$ 917,164

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CONSOLIDATED STATEMENTS OF COMPREHENSIVE EARNINGS (Parentheticals) (Dollar amounts in thousands) (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Mar. 31, 2015	Mar. 31, 2014
Other Comprehensive Earnings Parentheticals
Tax on unrealized holding gain on available-for-sale securities	$ 920	$ 720
Tax on reclassification adjustment for gain on available-for-sale	$ 28	$ 5

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G. FAIR VALUE MEASUREMENT, Assets (Details) (USD $) In Thousands, unless otherwise specified	Mar. 31, 2015	Dec. 31, 2014
U. S. Treasury securities	$ 4,007	$ 3,958
Obligations of U.S. Government agencies	58,313	63,062
Mortgage-backed securities	74,078	78,417
Obligations of states and political subdivisions	94,876	84,542
Corporate debt	33,225	34,902
Total assets measured at fair value	264,499	264,881
Level 1
U. S. Treasury securities	4,007	3,958
Obligations of U.S. Government agencies	0	0
Mortgage-backed securities	0	0
Obligations of states and political subdivisions	0	0
Corporate debt	0	0
Total assets measured at fair value	4,007	3,958
Level 2
U. S. Treasury securities	0	0
Obligations of U.S. Government agencies	58,313	63,062
Mortgage-backed securities	74,078	78,417
Obligations of states and political subdivisions	94,876	84,542
Corporate debt	33,225	34,902
Total assets measured at fair value	260,492	260,923
Level 3
U. S. Treasury securities	0	0
Obligations of U.S. Government agencies	0	0
Mortgage-backed securities	0	0
Obligations of states and political subdivisions	0	0
Corporate debt	0	0
Total assets measured at fair value	$ 0	$ 0

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D. SECURITIES AVAILABLE FOR SALE, Analysis of gross unrealized losses (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended	12 Months Ended
	Mar. 31, 2015	Dec. 31, 2014
Less than 12 months, Total Fair Value	$ 25,183	$ 44,977
Less than 12 months, Unrealized Loss	(92)	(227)
12 months or more, Total Fair Value	31,376	68,128
12 months or more, Unrealized Loss	(280)	(1,109)
Total Fair Value	56,559	113,105
Total Unrealized Loss	(372)	(1,336)
U.S. Treasury securities
Less than 12 months, Total Fair Value	0	0
Less than 12 months, Unrealized Loss	0	0
12 months or more, Total Fair Value	2,036	2,015
12 months or more, Unrealized Loss	(5)	(29)
Total Fair Value	2,036	2,015
Total Unrealized Loss	(5)	(29)
Obligations of U.S. government agencies
Less than 12 months, Total Fair Value	7,284	13,178
Less than 12 months, Unrealized Loss	(8)	(43)
12 months or more, Total Fair Value	8,007	19,116
12 months or more, Unrealized Loss	(42)	(255)
Total Fair Value	15,291	32,294
Total Unrealized Loss	(50)	(298)
Mortgage-backed securities
Less than 12 months, Total Fair Value	10,871	5,056
Less than 12 months, Unrealized Loss	(55)	(10)
12 months or more, Total Fair Value	15,421	36,382
12 months or more, Unrealized Loss	(199)	(651)
Total Fair Value	26,292	41,438
Total Unrealized Loss	(254)	(661)
Obligations of states and political subdivisions
Less than 12 months, Total Fair Value	5,029	8,678
Less than 12 months, Unrealized Loss	(24)	(49)
12 months or more, Total Fair Value	930	5,696
12 months or more, Unrealized Loss	(17)	(94)
Total Fair Value	5,959	14,374
Total Unrealized Loss	(41)	(143)
Corporate debt
Less than 12 months, Total Fair Value	1,999	18,065
Less than 12 months, Unrealized Loss	(5)	(125)
12 months or more, Total Fair Value	4,982	4,919
12 months or more, Unrealized Loss	(17)	(80)
Total Fair Value	6,981	22,984
Total Unrealized Loss	$ (22)	$ (205)

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G. FAIR VALUE MEASUREMENT, Nonrecurring basis (Details) (USD $) In Thousands, unless otherwise specified	Mar. 31, 2015	Dec. 31, 2014
Fair Value
Commercial real estate	$ 15	$ 381
Residential- 1 to 4 family	114	323
Commercial and Industrial	1,126	1,472
Consumer	52	56
Total impaired assets measured at fair value	1,307	2,232
Level 1
Commercial real estate	0	0
Residential- 1 to 4 family	0	0
Commercial and Industrial	0	0
Consumer	0	0
Total impaired assets measured at fair value	0	0
Level 2
Commercial real estate	0	0
Residential- 1 to 4 family	0	0
Commercial and Industrial	0	0
Consumer	0	0
Total impaired assets measured at fair value	0	0
Level 3
Commercial real estate	15	381
Residential- 1 to 4 family	114	323
Commercial and Industrial	1,126	1,472
Consumer	52	56
Total impaired assets measured at fair value	$ 1,307	$ 2,232

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D. SECURITIES AVAILABLE FOR SALE (Details Narrative) (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Mar. 31, 2015	Mar. 31, 2014
D. Securities Available For Sale Details Narrative
Gross realized gains	$ 69	$ 11
Sell of securities	12,272	1,023
Gross realized losses	0	0
Amortized cost	102,549
Fair value of pledged as collateral for public deposits	$ 104,078

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CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) (Dollar amounts in thousands) (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Mar. 31, 2015	Mar. 31, 2014
Cash flow from operating activities:
Net earnings	$ 1,799	$ 1,834
Adjustments to reconcile net earnings to net cash provided by operating activities:
Net gain on sale of securities available-for-sale	(69)	(11)
Gain on sale of other real estate owned, net	0	(280)
Depreciation, amortization and accretion	823	856
Stock-based compensation expense	61	69
Earnings on bank owned life insurance	(84)	(96)
Provision for loan losses	75	75
(Decrease) increase in net deferred loan fees	(54)	53
(Increase) decrease in accrued interest receivable	(19)	50
Decrease in prepaid expense	29	70
Decrease in other assets	1,800	950
Decrease in accrued expenses and other liabilities	(2,487)	(1,202)
Net cash provided by operating activities	1,874	2,368
Cash flows from investing activities
Purchase of securities available-for-sale	(16,232)	(516)
Proceeds from matured/called/sold securities available-for-sale	18,321	7,523
Investment, net of redemption, in other equity securities	(4)	(7)
Redemption of time deposits of other banks	1	738
Proceeds from sale of other real estate owned	0	1,050
Net investment in other real estate owned	(7)	(30)
Net decrease (increase) in loans	8,088	(12,546)
Purchases of bank premises, equipment, leasehold improvements	(20)	(327)
Net cash provided by (used in) investing activities	10,147	(4,115)
Cash flows from financing activities
Net increase in demand and savings deposits	11,078	12,130
Net increase (decrease) in time deposits	1,352	(11,800)
(Decrease) increase in FHLB advances	(9,000)	10,000
Proceeds from notes payable	0	6,000
Principal reduction on note payable	(150)	0
Dividends paid on common stock	(29)	0
Exercise of stock options	390	274
Redemption of preferred stock series C	0	(9,450)
Dividends paid on preferred stock series C	0	(170)
Net cash provided by financing activities	3,641	6,984
NET INCREASE IN CASH AND CASH EQUIVALENTS	15,662	5,237
Cash and cash equivalents at beginning of period	14,978	14,007
Cash and cash equivalents at end of period	30,640	19,244
Additional cash flow information:
Interest paid	531	455
Income taxes paid	865	1
Non-cash investing and financing activities:
Accrued dividends	555	399
Change in unrealized gain in available for-sale securities, net of tax	1,283	1,028
OREO sales funded by loan origination	$ 0	$ 2,100

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CONSOLIDATED BALANCE SHEETS (Dollar amounts in thousands) (Parenthetical) (USD $) In Thousands, except Share data, unless otherwise specified	Mar. 31, 2015	Dec. 31, 2014
Assets:
Allowance for loan losses	$ 9,744	$ 9,700
Common Stock, shares authorized	10,000,000	10,000,000
Common Stock, shares issued	4,284,918	4,259,306
Common Stock, shares outstanding	4,284,918	4,259,306

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E. LOANS (Tables)

3 Months Ended

Mar. 31, 2015

LOANS TABLES

Schedule Of Loans Outstanding

								Total
	FNB							Balance
	Bancorp							March 31,
(Dollar amounts in thousands)	Originated			PNCI		PCI		2015
Commercial real estate	$	290,117		$	30,975	$	1,322	$	322,414
Real estate construction		32,313			1,924		—		34,237
Real estate multi-family		43,633			10,070		—		53,703
Real estate 1 to 4 family		123,780			4,325		—		128,105
Commercial & industrial		36,545			9,044		—		45,589
Consumer loans		1,697			—		—		1,697
Gross loans		528,085			56,338		1,322		585,745
Net deferred loan fees		(395	)		—		—		(395	)
Allowance for loan losses		(9,744	)		—		—		(9,744	)
Net loans	$	517,946		$	56,338	$	1,322	$	575,606

								Total
	FNB							Balance
	Bancorp							December 31,
(Dollar amounts in thousands)	Originated			PNCI		PCI		2014
Commercial real estate	$	285,252		$	31,852	$	1,323	$	318,427
Real estate construction		37,827			1,944		—		39,771
Real estate multi-family		43,379			10,445		—		53,824
Real estate 1 to 4 family		123,522			5,210		—		128,732
Commercial & industrial		42,551			9,111		—		51,662
Consumer loans		1,448			—		—		1,448
Gross loans		533,979			58,562		1,323		593,864
Net deferred loan fees		(449	)		—		—		(449	)
Allowance for loan losses		(9,700	)		—		—		(9,700	)
Net loans	$	523,830		$	58,562	$	1,323	$	583,715

Schedule of Allowance for Credit Losses

	Allowance for Credit Losses
	For the Three Months Ended March 31, 2015
(Dollar amounts in thousands)
						Real			Real
						Estate			Estate
	Commercial			Real Estate		Multi			1 to			Commercial
	Real estate			Construction		family			4 family			& industrial			Consumer			Total
Allowance for credit losses
Beginning balance	$	5,549		$	849	$	206		$	1,965		$	1,073		$	58		$	9,700
Charge-offs		—			—		—			(45	)		—			(6	)		(51	)
Recoveries		6			—		—			—			14			—			20
Provision		(250	)		571		(54	)		(75	)		(126	)		9			75
Ending balance	$	5,305		$	1,420	$	152		$	1,845		$	961		$	61		$	9,744
Ending balance: individually evaluated for impairment	$	131		$	—	$	—		$	510		$	279		$	8		$	928
Ending balance: collectively evaluated for impairment	$	5,174		$	1,420	$	152		$	1,335		$	682		$	53		$	8,816

	Allowance for Credit Losses
	As of and For the Year Ended December 31, 2014
(Dollar amounts in thousands)							Real			Real
							Estate			Estate
	Commercial			Real Estate			Multi			1 to 4			Commercial
	Real estate			Construction			family			family			& industrial			Consumer			Total
Allowance for credit losses
Beginning balance	$	5,763		$	734		$	293		$	1,788		$	1,237		$	64		$	9,879
Charge-offs		(83	)		(183	)		—			(62	)		(28	)		(26	)		(382	)
Recoveries		1,062			—			—			3			154			4			1,223
(Recovery of) provision		(1,193	)		298			(87	)		236			(290	)		16			(1,020	)
Ending balance	$	5,549		$	849		$	206		$	1,965		$	1,073		$	58		$	9,700
Ending balance: individually evaluated for impairment	$	101		$	—		$	—		$	432		$	225		$	8		$	766
Ending balance: collectively evaluated for impairment	$	5,448		$	849		$	206		$	1,533		$	848		$	50		$	8,934

	Allowance for Credit Losses
	For the Three Months Ended March 31, 2014
(Dollar amounts in thousands)
						Real		Real
						Estate		Estate
	Commercial			Real Estate		Multi		1 to			Commercial
	Real estate			Construction		family		4 family			& industrial			Consumer		Total
Allowance for credit losses
Beginning balance	$	5,763		$	734	$	293	$	1,788		$	1,237		$	64	$	9,879
Charge-offs		—			—		—		(62	)		(11	)		—		(73	)
Recoveries		1			—		—		1			14			—		16
(Recovery of) provision		(140	)		1		76		108			28			2		75
Ending balance	$	5,624		$	735	$	369	$	1,835		$	1,268		$	66	$	9,897
Ending balance: individually evaluated for impairment	$	150		$	—	$	—	$	428		$	156		$	9	$	743
Ending balance: collectively evaluated for impairment	$	5,474		$	735	$	369	$	1,407		$	1,112		$	57	$	9,154

Schedule of Recorded Investment in Loans

	Recorded Investment in Loans at March 31, 2015
(Dollar amounts in thousands)
					Real		Real
					Estate		Estate
	Commercial		Real Estate		Multi		1 to		Commercial
	Real Estate		Construction		family		4 family		& industrial		Consumer		Total
Loans:
Ending balance	$	322,414	$	34,237	$	53,703	$	128,105	$	45,589	$	1,697	$	585,745
Ending balance: individually evaluated for impairment	$	9,460	$	2,368	$	—	$	4,673	$	2,226	$	60	$	18,787
Ending balance collectively evaluated for impairment	$	312,954	$	31,869	$	53,703	$	123,432	$	43,363	$	1,637	$	566,958

	Recorded Investment in Loans at December 31, 2014
(Dollar amounts in thousands)
					Real		Real
					Estate		Estate
	Commercial		Real Estate		Multi		1 to		Commercial
	Real Estate		Construction		family		4 family		& industrial		Consumer		Total
Loans:
Ending balance	$	318,427	$	39,771	$	53,824	$	128,732	$	51,662	$	1,448	$	593,864
Ending balance: individually evaluated for impairment	$	9,530	$	2,373	$	—	$	4,333	$	2,315	$	64	$	18,615
Ending balance: collectively evaluated for impairment	$	308,897	$	37,398	$	53,824	$	124,399	$	49,347	$	1,384	$	575,249

	Recorded Investment in Loans at March 31, 2014
(Dollar amounts in thousands)
					Real		Real
					Estate		Estate
	Commercial		Real Estate		Multi		1 to		Commercial
	Real Estate		Construction		family		4 family		& industrial		Consumer		Total
Loans:
Ending balance	$	328,862	$	37,444	$	51,304	$	109,365	$	48,799	$	1,532	$	577,306
Ending balance: individually evaluated for impairment	$	14,426	$	1,319	$	—	$	3,856	$	4,893	$	30	$	24,524
Ending balance: collectively evaluated for impairment	$	314,436	$	36,125	$	51,304	$	105,509	$	43,906	$	1,502	$	552,782

Schedule of Impaired Loans Allowance

	Impaired Loans
	As of and for the quarter ended March 31, 2015
			Unpaid				Average
(Dollar amounts in thousands)	Recorded		Principal		Related		Recorded		Income
	Investment		Balance		Allowance		Investment		Recognized
With no related allowance recorded
Commercial real estate	$	4,432	$	5,315	$	—	$	4,447	$	63
Commercial real estate construction		2,368		2,551		—		2,371		33
Residential- 1 to 4 family		1,483		1,484		—		1,485		14
Commercial & industrial		564		801		—		573		10
Consumer		—		—		—		—		—
Total		8,847		10,151		—		8,876		120
With an allowance recorded
Commercial real estate	$	5,028	$	5,031	$	131	$	5,048	$	67
Commercial real estate construction		—		—		—		—		—
Residential- 1 to 4 family		3,190		2,773		510		3,218		31
Commercial & industrial		1,662		2,014		279		1,698		4
Consumer		60		60		8		62		3
Total		9,940		9,878		928		10,026		105
Total
Commercial real estate	$	9,460	$	10,346	$	131	$	9,495	$	130
Commercial real estate construction		2,368		2,551		—		2,371		33
Residential- 1 to 4 family		4,673		4,257		510		4,703		45
Commercial & industrial		2,226		2,815		279		2,271		14
Consumer		60		60		8		62		3
	$	18,787	$	20,029	$	928	$	18,902	$	225

	Impaired Loans
	As of and for the year ended December 31, 2014
			Unpaid				Average
(Dollar amounts in thousands)	Recorded		Principal		Related		Recorded		Income
	Investment		Balance		Allowance		Investment		Recognized
With no related allowance recorded
Commercial real estate	$	4,462	$	5,333	$	—	$	4,473	$	304
Commercial real estate construction		2,373		2,556		—		1,846		150
Residential- 1 to 4 family		1,594		1,737		—		1,379		67
Commercial and industrial		582		939		—		788		54
Consumer		—		—		—		—		—
Total		9,011		10,565		—		8,486		575
With an allowance recorded
Commercial real estate	$	5,068	$	5,071	$	101	$	5,127	$	258
Residential- 1 to 4 family		2,739		2,754		432		2,759		111
Commercial and industrial		1,733		2,100		225		1,907		33
Consumer		64		64		8		67		5
Total		9,604		9,989		766		9,860		407
Total
Commercial real estate	$	9,530	$	10,404	$	101	$	9,600	$	562
Commercial real estate construction		2,373		2,556		—		1,846		150
Residential- 1 to 4 family		4,333		4,491		432		4,138		178
Commercial and industrial		2,315		3,039		225		2,695		87
Consumer		64		64		8		67		5
Grand total	$	18,615	$	20,554	$	766	$	18,346	$	982

	Impaired Loans
	As of and for the quarter ended March 31, 2014
			Unpaid				Average
(Dollar amounts in thousands)	Recorded		Principal		Related		Recorded		Income
	Investment		Balance		Allowance		Investment		Recognized
With no related allowance recorded
Commercial real estate	$	8,881		9,143	$	—	$	8,900	$	115
Commercial real estate construction		1,319		1,319		—		1,319		25
Residential- 1 to 4 family		695		695		—		665		8
Commercial & industrial		3,510	$	4,554		—		3,552		22
Consumer		10		10		—		5		—
Total		14,415		15,721		—		14,441		170
With an allowance recorded
Commercial real estate	$	5,545	$	5,546	$	150	$	5,594	$	68
Commercial real estate construction		—		—		—		—		—
Residential- 1 to 4 family		3,161		3,300		428		3,266		31
Commercial & industrial		1,383		1,801		156		1,452		1
Consumer		20		20		9		10		1
Total		10,109		10,667		743		10,322		101
Total
Commercial real estate	$	14,426	$	14,689	$	150	$	14,494	$	183
Commercial real estate construction		1,319		1,319		—		1,319		25
Residential - 1 to 4 family		3,856		3,995		428		3,931		39
Commercial & industrial		4,893		6,355		156		5,004		23
Consumer		30		30		9		15		1
Grand total	$	24,524	$	26,388	$	743	$	24,763	$	271

Schedule of Loans On Nonaccrual Status

	Loans on Nonaccrual Status as of
(Dollar amounts in thousands)	March 31,		December 31,
	2015		2014
Commercial real estate	$	2107	$	2,111
Real estate - construction		—		—
Real estate - 1 to 4 family		1,532		1,181
Commercial & industrial		2,224		2,292
Consumer		60		64
Total	$	5,923	$	5,648

Troubled Debt Restructurings

	Total troubled debt restructured loans outstanding at
(Dollars in thousands)	March 31, 2015						December 31, 2014
			Non-						Non-
	Accrual		accrual		Total		Accrual		accrual		Total
	status		status		modifications		status		status		modifications
Commercial real estate	$	7,364	$	2,089	$	9,453	$	7,407	$	2,091	$	9,498
Real Estate construction		1,300		—		1,300		1,304		—		1,304
Real estate 1 to 4 family		3,143		479		3,622		3,153		508		3,661
Commercial & industrial		—		1,999		1,999		294		1,760		2,054
Total	$	11,807	$	4,567	$	16,374	$	12,158	$	4,359	$	16,517

Schedule of Short-term Debt Modifications

	Modifications
	For the Quarter Ended March 31, 2014
			Pre-		Post-
			Modification		Modification
			Outstanding		Outstanding
	Number of		Recorded		Recorded
	Contracts		Investment		Investment
(Dollar amounts in thousands)
Real estate 1 to 4 family		1	$	574	$	574
Total		1	$	574	$	574

Schedule Age Analysis Of Past Due Loans

	Age Analysis of Past Due Loans
	As of March 31, 2015
(Dollar amounts in thousands)
	30-59		60-89
	Days		Days		Over		Total
	Past		Past		90		Past				Total
Originated	Due		Due		Days		Due		Current		Loans
Commercial real estate	$	75	$	—	$	—	$	75	$	290,042	$	290,117
Real estate construction		—		—		—		—		32,313		32,313
Real estate multi family		—		—		—		—		43,633		43,633
Real estate-1 to 4 family		581		—		511		1,092		122,688		123,780
Commercial & industrial		170		—		2,056		2,226		34,319		36,545
Consumer		—		—		—		—		1,697		1,697
Total	$	826	$	—	$	2,567	$	3,393	$	524,692	$	528,085
Purchased
Not credit impaired
Commercial real estate	$	—	$	—	$	—	$	—	$	30,975	$	30,975
Real estate construction		—		—		—		—		1,924		1,924
Real estate multi-family		—		—		—		—		10,070		10,070
Real estate-1 to 4 family		—		—		400		400		3,925		4,325
Commercial & industrial		—		—		—		—		9,044		9,044
Total	$	—	$	—	$	400	$	400	$	55,938	$	56,338
Purchased
Credit impaired
Commercial real estate	$	—	$	—	$	—	$	—	$	1,322	$	1,322
Real estate construction		—		—		—		—		—		—
Real estate multi-family		—		—		—		—		—		—
Real estate-1 to 4 family		—		—		—		—		—		—
Commercial & industrial		—		—		—		—		—		—
Total	$	—	$	—	$	—	$	—	$	1,322	$	1,322

	Age Analysis of Past Due Loans
	As of December 31, 2014
(Dollar amounts in thousands)
	30-59		60-89
	Days		Days		Over		Total
	Past		Past		90		Past				Total
Originated	Due		Due		Days		Due		Current		Loans
Commercial real estate	$	8	$	879	$	—	$	887	$	284,365	$	285,252
Real estate construction		—		708		—		708		37,119		37,827
Real estate multi family		3,575		—		—		3,575		39,804		43,379
Real estate 1 to 4 family		330		200		1,112		1,642		121,880		123,522
Commercial & industrial		775		73		1,710		2,558		39,993		42,551
Consumer		—		—		64		64		1,384		1,448
Total	$	4,688	$	1,860	$	2,886	$	9,434	$	524,545	$	533,979
Purchased
Not credit impaired
Commercial real estate	$	—	$	—	$	—		—	$	31,852	$	31,852
Real estate construction		—		—		—		—		1,944		1,944
Real estate multi-family		—		—		—		—		10,445		10,445
Real estate 1 to 4 family		—		400		—		400		4,810		5,210
Commercial & industrial		—		—		—		—		9,111		9,111
Total	$	—	$	400	$	—	$	400	$	58,162	$	58,562
Purchased
Credit impaired
Commercial real estate	$	—	$	—	$	—	$	—	$	1,323	$	1,323
Real estate construction		—		—		—		—		—		—
Real estate multi-family		—		—		—		—		—		—
Real estate 1 to 4 family		—		—		—		—		—		—
Commercial & industrial		—		—		—		—		—		—
Total	$	—	$	—	$	—	$	—	$	1,323	$	1,323

Schedule Credit Quality Indicators

	Credit Quality Indicators
	As of March 31, 2015
(Dollar amounts in thousands)
			Special		Sub-				Total
Originated	Pass		mention		standard		Doubtful		loans
Commercial real estate	$	286,211	$	1,896	$	2,010	$	—	$	290,117
Real estate construction		24,532		—		7,781		—		32,313
Real estate multi-family		43,633		—		—		—		43,633
Real estate-1 to 4 family		122,697		—		1,083		—		123,780
Commercial & industrial		35,436		—		1,091		18		36,545
Consumer loans		1,637		—		60		—		1,697
Totals	$	514,146	$	1,896	$	12,025	$	18	$	528,085
Purchased
Not credit impaired
Commercial real estate	$	25,157	$	—	$	5,818	$	—	$	30,975
Real estate construction		1,924		—		—		—		1,924
Real estate multi-family		10,070		—		—		—		10,070
Real estate-1 to 4 family		3,925		—		400		—		4,325
Commercial & industrial		9,044		—		—		—		9,044
Total	$	50,120	$	—	$	6,218	$	—	$	56,338
Purchased
Credit impaired
Commercial real estate									$	1,322
Total									$	1,322

	Credit Quality Indicators
	As of December 31, 2014
(Dollar amounts in thousands)
			Special		Sub-				Total
Originated	Pass		mention		standard		Doubtful		loans
Commercial real estate	$	281,308	$	1,913	$	2,031	$	—	$	285,252
Real estate construction		36,692		—		1,135		—		37,827
Real estate multi-family		43,379		—		—		—		43,379
Real estate 1 to 4 family		122,499		—		1,023		—		123,522
Commercial & industrial		41,394		—		1,157		—		42,551
Consumer loans		1,384		—		64		—		1,448
Totals	$	526,656	$	1,913	$	5,410	$	—	$	533,979
Purchased
Not credit impaired
Commercial real estate	$	26,009	$	—	$	5,843	$	—	$	31,852
Real estate construction		1,944		—		—		—		1,944
Real estate multi-family		10,445		—		—		—		10,445
Real estate 1 to 4 family		4,810		—		—		400		5,210
Commercial & industrial		9,111		—		—		—		9,111
Total	$	52,305	$	—	$	5,843	$	400	$	58,562
Purchased
Credit impaired
Commercial real estate									$	1,323
Total									$	1,323

XML

Document and Entity Information	3 Months Ended
	Mar. 31, 2015
Document and Entity Information:
Entity Registrant Name	FNB BANCORP/CA/
Document Type	10-Q
Document Period End Date	Mar. 31, 2015
Amendment Flag	false
Entity Central Index Key	0001163199
Current Fiscal Year End Date	--12-31
Entity Common Stock, Shares Outstanding	4,284,918
Entity Filer Category	Non-accelerated Filer
Entity Current Reporting Status	Yes
Entity Voluntary Filers	No
Entity Well-known Seasoned Issuer	No
Document Fiscal Year Focus	2015
Document Fiscal Period Focus	Q1

XML

G. FAIR VALUE MEASUREMENT (Tables)

3 Months Ended

Mar. 31, 2015

FAIR VALUE MEASUREMENT TABLES {1}

Schedule of assets measured at fair value on a recurring basis

			Fair Value Measurements
(Dollar amounts in thousands)			at March 31, 2015, Using
			Quoted Prices
			in Active
			Markets		Other		Significant
			for Identical		Observable		Unobservable
	Fair Value		Assets		Inputs		Inputs
Description	3/31/2015		(Level 1)		(Level 2)		(Level 3)
U. S. Treasury securities	$	4,007	$	4,007	$	—	$	—
Obligations of U.S. Government agencies		58,313		—		58,313		—
Mortgage-backed securities		74,078		—		74,078		—
Obligations of states and political subdivisions		94,876		—		94,876		—
Corporate debt		33,225		—		33,225		—
Total assets measured at fair value	$	264,499	$	4,007	$	260,492	$	—

			Fair Value Measurements
(Dollar amounts in thousands)			at December 31, 2014, Using
			Quoted Prices
			in Active
			Markets		Other		Significant
			for Identical		Observable		Unobservable
	Fair Value		Assets		Inputs		Inputs
Description	12/31/2014		(Level 1)		(Level 2)		(Level 3)
U. S. Treasury securities	$	3,958	$	3,958	$	—	$	—
Obligations of U.S. Government agencies		63,062		—		63,062		—
Mortgage-backed securities		78,417		—		78,417		—
Obligations of states and political subdivisions		84,542		—		84,542		—
Corporate debt		34,902		—		34,902		—
Total assets measured at fair value	$	264,881	$	3,958	$	260,923	$	—

Schedule of assets measured at fair value on a non-recurring basis

			Fair Value Measurements
(Dollar amounts in thousands)			at March 31, 2015, Using
			Quoted Prices in
			Active Markets		Other		Significant
			for Identical		Observable		Unobservable
	Fair Value		Assets		Inputs		Inputs
Description	3/31/2015		(Level 1)		(Level 2)		(Level 3)
Impaired loans:
Commercial real estate	$	15	$	—	$	—	$	15
Residential-1 to 4 family		114		—		—		114
Commercial and industrial		1,126		—		—		1,126
Consumer		52		—		—		52
Total impaired assets measured at fair value	$	1,307	$	—	$	—	$	1,307
			Fair Value Measurements
(Dollar amounts in thousands)			at December 31, 2014, Using
			Quoted Prices in
			Active Markets		Other		Significant
			for Identical		Observable		Unobservable
	Fair Value		Assets		Inputs		Inputs
Description	12/31/2014		(Level 1)		(Level 2)		(Level 3)
Impaired loans:
Commercial real estate	$	381	$	—	$	—	$	381
Residential-1 to 4 family		323		—		—		323
Commercial and industrial		1,472		—		—		1,472
Consumer		56		—		—		56
Total impaired assets measured at fair value	$	2,232	$	—	$	—	$	2,232

Schedule of estimated fair value of financial instruments

March 31, 2015	Carrying		Fair		Fair value measurements
(Dollar amounts in thousands)	amount		value		Level 1		Level 2		Level 3
Financial assets:
Cash and cash equivalents	$	30,640	$	30,640	$	30,640
Interest-bearing time deposits with financial institutions		2,783		2,783				2,783
Securities available for sale		264,499		264,499		4,007		260,492
Loans		585,745		577,169						577,169
Other equity securities		5,773		5,773						5,773
Accrued interest receivable		3,744		3,744				3,744
Financial liabilities:
Deposits		804,624		804,995				804,995
Note payable		5,400		5,400				5,400
Accrued interest payable		165		165				165
Off-balance-sheet liabilities:
Undisbursed loan commitments, lines of credit, standby letters of credit and Mastercard lines of credit		—		1,373						1,373

December 31, 2014	Carrying		Fair		Fair value measurements
(Dollar amounts in thousands)	amount		value		Level 1		Level 2		Level 3
Financial assets:
Cash and cash equivalents	$	14,978	$	14,978	$	14,978
Interest-bearing time deposits with financial institutions		2,784		2,813				2,813
Securities available for sale		264,881		264,881		3,958		260,923
Loans		593,864		594,524						594,524
Other equity securities		5,769		5,769						5,769
Accrued interest receivable		3,725		3,725				3,725
Financial liabilities:
Deposits		792,194		792,552				792,552
Federal Home Loan Bank advances		9,000		9,000				9,000
Note payable		5,550		5,550				5,550
Accrued interest payable		182		182				182
Off-balance-sheet liabilities:
Undisbursed loan commitments, lines of credit, standby letters of credit and Mastercard lines of credit		—		1,449						1,449

XML

CONSOLIDATED STATEMENTS OF EARNINGS (Unaudited) (Dollar amounts in thousands) (USD $) In Thousands, except Share data, unless otherwise specified	3 Months Ended
	Mar. 31, 2015	Mar. 31, 2014
Interest income:
Interest and fees on loans	$ 7,710	$ 7,627
Interest on taxable securities	830	843
Interest on tax-exempt securities	514	488
Interest time deposits with other financial institutions	14	25
Total interest income	9,068	8,983
Interest expense:
Interest on deposits	454	461
Interest on Federal Home Loan Bank advances	1	8
Interest on note payable	59	0
Total interest expense	514	469
Net interest income	8,554	8,514
Provision for loan losses	75	75
Net interest income after provision for loan losses	8,479	8,439
Noninterest income:
Service charges	611	637
Gain on sale of available-for-sale securities	69	11
Bank-owned life insurance earnings	84	96
Other income	314	296
Total noninterest income	1,078	1,040
Noninterest expense:
Salaries and employee benefits	4,302	4,218
Occupancy expense	668	680
Equipment expense	405	391
Professional fees	387	531
FDIC assessment	150	180
Telephone, postage and supplies	289	286
Advertising	99	85
Data processing expense	134	145
Low income housing expense	71	110
Surety insurance	88	67
Directors expense	72	63
Gain on sale of other real estate owned, net	0	(280)
Other real estate owned expense, net	0	77
Other expense	278	289
Total noninterest expense	6,943	6,842
Earnings before provision for income taxes	2,614	2,637
Provision for income taxes	815	803
Net earnings	1,799	1,834
Dividends and discount accretion on preferred stock	0	(170)
Net earnings available to common stockholders	$ 1,799	$ 1,664
Earnings per share data:
Basic	$ 0.42	$ 0.40
Diluted	$ 0.41	$ 0.38
Weighted average shares outstanding:
Basic	4,273,000	4,187,000
Diluted	4,403,000	4,335,000

XML

E. LOANS

3 Months Ended

Mar. 31, 2015

LOANS

LOANS

Loans are summarized as follows at March 31, 2015 and December 31, 2014:

								Total
	FNB							Balance
	Bancorp							March 31,
(Dollar amounts in thousands)	Originated			PNCI		PCI		2015
Commercial real estate	$	290,117		$	30,975	$	1,322	$	322,414
Real estate construction		32,313			1,924		—		34,237
Real estate multi-family		43,633			10,070		—		53,703
Real estate 1 to 4 family		123,780			4,325		—		128,105
Commercial & industrial		36,545			9,044		—		45,589
Consumer loans		1,697			—		—		1,697
Gross loans		528,085			56,338		1,322		585,745
Net deferred loan fees		(395	)		—		—		(395	)
Allowance for loan losses		(9,744	)		—		—		(9,744	)
Net loans	$	517,946		$	56,338	$	1,322	$	575,606

								Total
	FNB							Balance
	Bancorp							December 31,
(Dollar amounts in thousands)	Originated			PNCI		PCI		2014
Commercial real estate	$	285,252		$	31,852	$	1,323	$	318,427
Real estate construction		37,827			1,944		—		39,771
Real estate multi-family		43,379			10,445		—		53,824
Real estate 1 to 4 family		123,522			5,210		—		128,732
Commercial & industrial		42,551			9,111		—		51,662
Consumer loans		1,448			—		—		1,448
Gross loans		533,979			58,562		1,323		593,864
Net deferred loan fees		(449	)		—		—		(449	)
Allowance for loan losses		(9,700	)		—		—		(9,700	)
Net loans	$	523,830		$	58,562	$	1,323	$	583,715

Note: PNCI means Purchased, Not Credit Impaired. PCI means Purchased, Credit Impaired. These designations are assigned to the purchased loans on their date of purchase. Once the loan designation has been made, each loan will retain its designation for the life of the loan.

	Allowance for Credit Losses
	For the Three Months Ended March 31, 2015
(Dollar amounts in thousands)
						Real			Real
						Estate			Estate
	Commercial			Real Estate		Multi			1 to			Commercial
	Real estate			Construction		family			4 family			& industrial			Consumer			Total
Allowance for credit losses
Beginning balance	$	5,549		$	849	$	206		$	1,965		$	1,073		$	58		$	9,700
Charge-offs		—			—		—			(45	)		—			(6	)		(51	)
Recoveries		6			—		—			—			14			—			20
Provision		(250	)		571		(54	)		(75	)		(126	)		9			75
Ending balance	$	5,305		$	1,420	$	152		$	1,845		$	961		$	61		$	9,744
Ending balance: individually evaluated for impairment	$	131		$	—	$	—		$	510		$	279		$	8		$	928
Ending balance: collectively evaluated for impairment	$	5,174		$	1,420	$	152		$	1,335		$	682		$	53		$	8,816

	Recorded Investment in Loans at March 31, 2015
(Dollar amounts in thousands)
					Real		Real
					Estate		Estate
	Commercial		Real Estate		Multi		1 to		Commercial
	Real Estate		Construction		family		4 family		& industrial		Consumer		Total
Loans:
Ending balance	$	322,414	$	34,237	$	53,703	$	128,105	$	45,589	$	1,697	$	585,745
Ending balance: individually evaluated for impairment	$	9,460	$	2,368	$	—	$	4,673	$	2,226	$	60	$	18,787
Ending balance collectively evaluated for impairment	$	312,954	$	31,869	$	53,703	$	123,432	$	43,363	$	1,637	$	566,958

	Allowance for Credit Losses
	As of and For the Year Ended December 31, 2014
(Dollar amounts in thousands)							Real			Real
							Estate			Estate
	Commercial			Real Estate			Multi			1 to 4			Commercial
	Real estate			Construction			family			family			& industrial			Consumer			Total
Allowance for credit losses
Beginning balance	$	5,763		$	734		$	293		$	1,788		$	1,237		$	64		$	9,879
Charge-offs		(83	)		(183	)		—			(62	)		(28	)		(26	)		(382	)
Recoveries		1,062			—			—			3			154			4			1,223
(Recovery of) provision		(1,193	)		298			(87	)		236			(290	)		16			(1,020	)
Ending balance	$	5,549		$	849		$	206		$	1,965		$	1,073		$	58		$	9,700
Ending balance: individually evaluated for impairment	$	101		$	—		$	—		$	432		$	225		$	8		$	766
Ending balance: collectively evaluated for impairment	$	5,448		$	849		$	206		$	1,533		$	848		$	50		$	8,934

	Recorded Investment in Loans at December 31, 2014
(Dollar amounts in thousands)
					Real		Real
					Estate		Estate
	Commercial		Real Estate		Multi		1 to		Commercial
	Real Estate		Construction		family		4 family		& industrial		Consumer		Total
Loans:
Ending balance	$	318,427	$	39,771	$	53,824	$	128,732	$	51,662	$	1,448	$	593,864
Ending balance: individually evaluated for impairment	$	9,530	$	2,373	$	—	$	4,333	$	2,315	$	64	$	18,615
Ending balance: collectively evaluated for impairment	$	308,897	$	37,398	$	53,824	$	124,399	$	49,347	$	1,384	$	575,249

	Allowance for Credit Losses
	For the Three Months Ended March 31, 2014
(Dollar amounts in thousands)
						Real		Real
						Estate		Estate
	Commercial			Real Estate		Multi		1 to			Commercial
	Real estate			Construction		family		4 family			& industrial			Consumer		Total
Allowance for credit losses
Beginning balance	$	5,763		$	734	$	293	$	1,788		$	1,237		$	64	$	9,879
Charge-offs		—			—		—		(62	)		(11	)		—		(73	)
Recoveries		1			—		—		1			14			—		16
(Recovery of) provision		(140	)		1		76		108			28			2		75
Ending balance	$	5,624		$	735	$	369	$	1,835		$	1,268		$	66	$	9,897
Ending balance: individually evaluated for impairment	$	150		$	—	$	—	$	428		$	156		$	9	$	743
Ending balance: collectively evaluated for impairment	$	5,474		$	735	$	369	$	1,407		$	1,112		$	57	$	9,154

	Recorded Investment in Loans at March 31, 2014
(Dollar amounts in thousands)
					Real		Real
					Estate		Estate
	Commercial		Real Estate		Multi		1 to		Commercial
	Real Estate		Construction		family		4 family		& industrial		Consumer		Total
Loans:
Ending balance	$	328,862	$	37,444	$	51,304	$	109,365	$	48,799	$	1,532	$	577,306
Ending balance: individually evaluated for impairment	$	14,426	$	1,319	$	—	$	3,856	$	4,893	$	30	$	24,524
Ending balance: collectively evaluated for impairment	$	314,436	$	36,125	$	51,304	$	105,509	$	43,906	$	1,502	$	552,782

The following tables provide information pertaining to impaired loans originated and PNCI loans as of and for the periods to the quarter ended March 31, 2015 and the year ended December 31, 2014.

	Impaired Loans
	As of and for the quarter ended March 31, 2015
			Unpaid				Average
(Dollar amounts in thousands)	Recorded		Principal		Related		Recorded		Income
	Investment		Balance		Allowance		Investment		Recognized
With no related allowance recorded
Commercial real estate	$	4,432	$	5,315	$	—	$	4,447	$	63
Commercial real estate construction		2,368		2,551		—		2,371		33
Residential- 1 to 4 family		1,483		1,484		—		1,485		14
Commercial & industrial		564		801		—		573		10
Consumer		—		—		—		—		—
Total		8,847		10,151		—		8,876		120
With an allowance recorded
Commercial real estate	$	5,028	$	5,031	$	131	$	5,048	$	67
Commercial real estate construction		—		—		—		—		—
Residential- 1 to 4 family		3,190		2,773		510		3,218		31
Commercial & industrial		1,662		2,014		279		1,698		4
Consumer		60		60		8		62		3
Total		9,940		9,878		928		10,026		105
Total
Commercial real estate	$	9,460	$	10,346	$	131	$	9,495	$	130
Commercial real estate construction		2,368		2,551		—		2,371		33
Residential- 1 to 4 family		4,673		4,257		510		4,703		45
Commercial & industrial		2,226		2,815		279		2,271		14
Consumer		60		60		8		62		3
	$	18,787	$	20,029	$	928	$	18,902	$	225

	Impaired Loans
	As of and for the year ended December 31, 2014
			Unpaid				Average
(Dollar amounts in thousands)	Recorded		Principal		Related		Recorded		Income
	Investment		Balance		Allowance		Investment		Recognized
With no related allowance recorded
Commercial real estate	$	4,462	$	5,333	$	—	$	4,473	$	304
Commercial real estate construction		2,373		2,556		—		1,846		150
Residential- 1 to 4 family		1,594		1,737		—		1,379		67
Commercial and industrial		582		939		—		788		54
Consumer		—		—		—		—		—
Total		9,011		10,565		—		8,486		575
With an allowance recorded
Commercial real estate	$	5,068	$	5,071	$	101	$	5,127	$	258
Residential- 1 to 4 family		2,739		2,754		432		2,759		111
Commercial and industrial		1,733		2,100		225		1,907		33
Consumer		64		64		8		67		5
Total		9,604		9,989		766		9,860		407
Total
Commercial real estate	$	9,530	$	10,404	$	101	$	9,600	$	562
Commercial real estate construction		2,373		2,556		—		1,846		150
Residential- 1 to 4 family		4,333		4,491		432		4,138		178
Commercial and industrial		2,315		3,039		225		2,695		87
Consumer		64		64		8		67		5
Grand total	$	18,615	$	20,554	$	766	$	18,346	$	982

	Impaired Loans
	As of and for the quarter ended March 31, 2014
			Unpaid				Average
(Dollar amounts in thousands)	Recorded		Principal		Related		Recorded		Income
	Investment		Balance		Allowance		Investment		Recognized
With no related allowance recorded
Commercial real estate	$	8,881		9,143	$	—	$	8,900	$	115
Commercial real estate construction		1,319		1,319		—		1,319		25
Residential- 1 to 4 family		695		695		—		665		8
Commercial & industrial		3,510	$	4,554		—		3,552		22
Consumer		10		10		—		5		—
Total		14,415		15,721		—		14,441		170
With an allowance recorded
Commercial real estate	$	5,545	$	5,546	$	150	$	5,594	$	68
Commercial real estate construction		—		—		—		—		—
Residential- 1 to 4 family		3,161		3,300		428		3,266		31
Commercial & industrial		1,383		1,801		156		1,452		1
Consumer		20		20		9		10		1
Total		10,109		10,667		743		10,322		101
Total
Commercial real estate	$	14,426	$	14,689	$	150	$	14,494	$	183
Commercial real estate construction		1,319		1,319		—		1,319		25
Residential - 1 to 4 family		3,856		3,995		428		3,931		39
Commercial & industrial		4,893		6,355		156		5,004		23
Consumer		30		30		9		15		1
Grand total	$	24,524	$	26,388	$	743	$	24,763	$	271

Nonaccrual loans totaled $5,923,000 and $5,648,000 as of March 31, 2015 and December 31, 2014. Impaired loans not on nonaccrual are loans that have been restructured and performing under modified loan agreements, and where principal and interest is considered to be collectible. Nonaccrual loans are loans where principal and interest are not considered to be completely collectible.

	Loans on Nonaccrual Status as of
(Dollar amounts in thousands)	March 31,		December 31,
	2015		2014
Commercial real estate	$	2107	$	2,111
Real estate - construction		—		—
Real estate - 1 to 4 family		1,532		1,181
Commercial & industrial		2,224		2,292
Consumer		60		64
Total	$	5,923	$	5,648

Interest income on impaired loans of $225,000 and $982,000 was recognized for cash payments received during the quarter ended March 31, 2015 and the year ended December 31, 2014, respectively. Interest income on impaired loans recognized for cash payments received for the three months ended March 31, 2014 was $271,000.

The amount of interest on impaired loans not collected for the quarter ended March 31, 2015 was $106,000, and the quarter ended March 31, 2014 was $85,000. The cumulative amount of unpaid interest on impaired loans was $3,050,000 and $3,580,000 as of March 31, 2015 and March 31, 2014, respectively.

Total outstanding principal of all troubled debt restructured loans as of March 31, 2015 was $16,374,000, of which $1,999,000 was commercial and industrial loans, $3,622,000 was real estate 1 to 4 family residential loans, $1,300,000 real estate construction loans, and $9,453,000 commercial real estate loans. Total outstanding principal of troubled debt restructured loans at December 31, 2014 was $16,517,000, of which $2,054,000 was commercial and industrial loans, $1,304,000 was real estate construction loans, $3,661,000 was real estate 1 to 4 family loans, and $9,498,000 was commercial real estate loans.

Troubled Debt Restructurings

	Total troubled debt restructured loans outstanding at
(Dollars in thousands)	March 31, 2015						December 31, 2014
			Non-						Non-
	Accrual		accrual		Total		Accrual		accrual		Total
	status		status		modifications		status		status		modifications
Commercial real estate	$	7,364	$	2,089	$	9,453	$	7,407	$	2,091	$	9,498
Real Estate construction		1,300		—		1,300		1,304		—		1,304
Real estate 1 to 4 family		3,143		479		3,622		3,153		508		3,661
Commercial & industrial		—		1,999		1,999		294		1,760		2,054
Total	$	11,807	$	4,567	$	16,374	$	12,158	$	4,359	$	16,517

Modification Categories

The Company offers a variety of modifications to borrowers. The modification categories offered can generally be described in the following categories.

Rate Modification – A modification in which the interest rate is changed.

Term modification – A modification in which the maturity date, timing of payments, or frequency of payments is changed.

Interest Only Modification – A modification in which the loan is converted to interest only payments for a period of time.

Payment Modification – A modification in which the dollar amount of the payment is changed, other than an interest only modification described above.

As of March 31, 2015, there were no commitments for additional funding of troubled debt restructured loans.

There were no new modifications during the quarter ended March 31, 2015.

As of March 31, 2015, there were no loans modified within the previous 12 months and for which there was a payment default during the period. All restructurings were a modification of interest rate and/or payment. There were no principal reductions granted.

The following table details modifications to loan agreements for the quarter ended March 31, 2014:

	Modifications
	For the Quarter Ended March 31, 2014
			Pre-		Post-
			Modification		Modification
			Outstanding		Outstanding
	Number of		Recorded		Recorded
	Contracts		Investment		Investment
(Dollar amounts in thousands)
Real estate 1 to 4 family		1	$	574	$	574
Total		1	$	574	$	574

As of March 31, 2014, there were no loans modified within the previous 12 months and for which there was a payment default during the period. All restructurings were a modification of interest rate and/or payment. There were no principal reductions granted.

Risk rating system

Loans to borrowers graded as pass or pooled loans represent loans to borrowers of acceptable or better credit quality. They demonstrate sound financial positions, repayment capacity and credit history. They have an identifiable and stable source of repayment.

Special mention loans have potential weaknesses that deserve management’s attention. If left uncorrected these potential weaknesses may result in a deterioration of the repayment prospects for the asset or in the Bank’s credit position at some future date. These assets are “not adversely classified” and do not expose the Bank to sufficient risk to warrant adverse classification.

Substandard loans are inadequately protected by current sound net worth, paying capacity of the borrower, or pledged collateral. Loans are normally classified as Substandard when there are unsatisfactory characteristics causing more than acceptable levels of risk. A substandard loan normally has one or more well-defined weaknesses that could jeopardize the repayment of the debt. For example, a) cash flow deficiency, which may jeopardize future payments; b) sale of non-collateral assets has become primary source of repayment; c) the borrower is bankrupt; or d) for any other reason, future repayment is dependent on court action.

Doubtful loans represent credits with weakness inherent in the Substandard classification and where collection or liquidation in full is highly questionable. To be classified Doubtful, there must be specific pending factors which prevent the Loan Review Officer from determining the amount of loss contained in the credit. When the amount of loss can be reasonably estimated, that amount is classified as Loss and the remainder is classified as Substandard.

Real Estate – Multi-Family

Our multi-family commercial real estate loans are secured by multi-family properties located primarily in San Mateo and San Francisco counties. These loans are made to investors where our primary source of repayment is from cash flows generated by the properties, through rent collections. The borrowers’ promissory notes are secured with recorded liens on the underlying properties. The borrowers would normally also be required to personally guarantee repayment of the loans. The Bank uses conservative underwriting standards in reviewing applications for credit. Generally, our borrowers have multiple sources of income, so if cash flow generated from the property declines, at least in the short term, the borrowers can normally cover these short term cash flow deficiencies from their available cash reserves. Risk of loss to the Bank is increased when there are cash flow decreases sufficiently large and for such a prolonged period of time that loan payments can no longer be made by the borrowers.

Commercial Real Estate Loans

Commercial real estate loans consist of loans secured by non-farm, non-residential properties, including, but not limited to industrial, hotel, assisted care, retail, office and mixed use buildings. Our commercial real estate loans are made primarily to investors or small businesses where our primary source of repayment is from cash flows generated by the properties, either through rent collection or business profits. The borrower’s promissory notes are secured with recorded liens on the underlying property. The borrowers would normally also be required to personally guarantee repayment of the loan. The Bank uses conservative underwriting standards in reviewing applications for credit. Generally, our borrowers have multiple sources of income, so if cash flow generated from the property declines, at least in the short term, the borrowers can normally cover these short term cash flow deficiencies from their available cash reserves. Risk of loss to the Bank is increased when there are cash flow decreases sufficiently large and for such a prolonged period of time that loan payments can no longer be made by the borrowers.

Real Estate Construction Loans

Our real estate construction loans are generally made to borrowers who are rehabilitating a building, converting a building use from one type of use to another, or developing land and building residential or commercial structures for sale or lease. The borrower’s promissory notes are secured with recorded liens on the underlying property. The borrowers would normally also be required to personally guarantee repayment of the loan.

The Bank uses conservative underwriting standards in reviewing applications for credit. Generally, our borrowers have sufficient resources to make the required construction loan payments during the construction and absorption or lease-up period. After construction is complete, the loans are normally paid off from proceeds from the sale of the building or through a refinance to a commercial real estate loan. Risk of loss to the Bank is increased when there are material construction cost overruns, significant delays in the time to complete the project and/or there has been a material drop in the value of the projects in the marketplace since the inception of the loan.

Real Estate-1 to 4 Family Loans

Our residential real estate loans are generally made to borrowers who are buying or refinancing their primary personal residence or a rental property of 1-4 single family residential units. The Bank uses conservative underwriting standards in reviewing applications for credit. Risk of loss to the Bank is increased when borrowers lose their primary source of income and/or property values decline significantly.

Commercial and Industrial Loans

Our commercial and industrial loans are generally made to small businesses to provide them with at least some of the working capital necessary to fund their daily business operations. These loans are generally either unsecured or secured by fixed assets, accounts receivable and/or inventory. The borrowers would normally also be required to personally guarantee repayment of the loan. The Bank uses conservative underwriting standards in reviewing applications for credit. Risk of loss to the Bank is increased when our small business customers experience a significant business downturn, incur significant financial losses, or file for relief from creditors through bankruptcy proceedings.

Consumer Loans

Our consumer and installment loans generally consist of personal loans, credit card loans, automobile loans or other loans secured by personal property. The Bank uses conservative underwriting standards in reviewing applications for credit. Risk of loss to the Bank is increased when borrowers lose their primary source of income, or file for relief from creditors through bankruptcy proceedings.

	Age Analysis of Past Due Loans
	As of March 31, 2015
(Dollar amounts in thousands)
	30-59		60-89
	Days		Days		Over		Total
	Past		Past		90		Past				Total
Originated	Due		Due		Days		Due		Current		Loans
Commercial real estate	$	75	$	—	$	—	$	75	$	290,042	$	290,117
Real estate construction		—		—		—		—		32,313		32,313
Real estate multi family		—		—		—		—		43,633		43,633
Real estate-1 to 4 family		581		—		511		1,092		122,688		123,780
Commercial & industrial		170		—		2,056		2,226		34,319		36,545
Consumer		—		—		—		—		1,697		1,697
Total	$	826	$	—	$	2,567	$	3,393	$	524,692	$	528,085
Purchased
Not credit impaired
Commercial real estate	$	—	$	—	$	—	$	—	$	30,975	$	30,975
Real estate construction		—		—		—		—		1,924		1,924
Real estate multi-family		—		—		—		—		10,070		10,070
Real estate-1 to 4 family		—		—		400		400		3,925		4,325
Commercial & industrial		—		—		—		—		9,044		9,044
Total	$	—	$	—	$	400	$	400	$	55,938	$	56,338
Purchased
Credit impaired
Commercial real estate	$	—	$	—	$	—	$	—	$	1,322	$	1,322
Real estate construction		—		—		—		—		—		—
Real estate multi-family		—		—		—		—		—		—
Real estate-1 to 4 family		—		—		—		—		—		—
Commercial & industrial		—		—		—		—		—		—
Total	$	—	$	—	$	—	$	—	$	1,322	$	1,322

At March 31, 2015, there were no loans that were 90 days or more past due where interest was still accruing.

The over 90 days column includes nonaccrual that were over 90 days, but does not include loans that are in nonaccrual status for reasons other than past due.

	Age Analysis of Past Due Loans
	As of December 31, 2014
(Dollar amounts in thousands)
	30-59		60-89
	Days		Days		Over		Total
	Past		Past		90		Past				Total
Originated	Due		Due		Days		Due		Current		Loans
Commercial real estate	$	8	$	879	$	—	$	887	$	284,365	$	285,252
Real estate construction		—		708		—		708		37,119		37,827
Real estate multi family		3,575		—		—		3,575		39,804		43,379
Real estate 1 to 4 family		330		200		1,112		1,642		121,880		123,522
Commercial & industrial		775		73		1,710		2,558		39,993		42,551
Consumer		—		—		64		64		1,384		1,448
Total	$	4,688	$	1,860	$	2,886	$	9,434	$	524,545	$	533,979
Purchased
Not credit impaired
Commercial real estate	$	—	$	—	$	—		—	$	31,852	$	31,852
Real estate construction		—		—		—		—		1,944		1,944
Real estate multi-family		—		—		—		—		10,445		10,445
Real estate 1 to 4 family		—		400		—		400		4,810		5,210
Commercial & industrial		—		—		—		—		9,111		9,111
Total	$	—	$	400	$	—	$	400	$	58,162	$	58,562
Purchased
Credit impaired
Commercial real estate	$	—	$	—	$	—	$	—	$	1,323	$	1,323
Real estate construction		—		—		—		—		—		—
Real estate multi-family		—		—		—		—		—		—
Real estate 1 to 4 family		—		—		—		—		—		—
Commercial & industrial		—		—		—		—		—		—
Total	$	—	$	—	$	—	$	—	$	1,323	$	1,323

At December 31, 2014, there were no loans that were 90 days or more past due where interest was still accruing.

The over 90 days column includes nonaccrual loans that were over 90 days, but does not include loans that are in nonaccrual status for reasons other than past due.

	Credit Quality Indicators
	As of March 31, 2015
(Dollar amounts in thousands)
			Special		Sub-				Total
Originated	Pass		mention		standard		Doubtful		loans
Commercial real estate	$	286,211	$	1,896	$	2,010	$	—	$	290,117
Real estate construction		24,532		—		7,781		—		32,313
Real estate multi-family		43,633		—		—		—		43,633
Real estate-1 to 4 family		122,697		—		1,083		—		123,780
Commercial & industrial		35,436		—		1,091		18		36,545
Consumer loans		1,637		—		60		—		1,697
Totals	$	514,146	$	1,896	$	12,025	$	18	$	528,085
Purchased
Not credit impaired
Commercial real estate	$	25,157	$	—	$	5,818	$	—	$	30,975
Real estate construction		1,924		—		—		—		1,924
Real estate multi-family		10,070		—		—		—		10,070
Real estate-1 to 4 family		3,925		—		400		—		4,325
Commercial & industrial		9,044		—		—		—		9,044
Total	$	50,120	$	—	$	6,218	$	—	$	56,338
Purchased
Credit impaired
Commercial real estate									$	1,322
Total									$	1,322

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D. SECURITIES AVAILABLE FOR SALE

3 Months Ended

Mar. 31, 2015

SECURITIES AVAILABLE FOR SALE

SECURITIES AVAILABLE FOR SALE

The amortized cost and carrying values of securities available-for-sale are as follows:

(Dollar amounts in thousands)	Amortized		Unrealized		Unrealized			Fair
	cost		gains		losses			value
March 31, 2015
U.S. Treasury securities	$	3,975	$	37	$	(5	)	$	4,007
Obligations of U.S. government agencies		57,937		426		(50	)		58,313
Mortgage-backed securities		72,926		1,406		(254	)		74,078
Obligations of states and political subdivisions		91,877		3,040		(41	)		94,876
Corporate debt		32,951		296		(22	)		33,225
	$	259,666	$	5,205	$	(372	)	$	264,499
December 31, 2014
U.S. Treasury securities	$	3,975	$	12	$	(29	)	$	3,958
Obligations of U.S. government agencies		63,090		270		(298	)		63,062
Mortgage-backed securities		78,076		1,002		(661	)		78,417
Obligations of states and political subdivisions		82,151		2,534		(143	)		84,542
Corporate debt		34,931		176		(205	)		34,902
	$	262,223	$	3,994	$	(1,336	)	$	264,881

An analysis of gross unrealized losses of the available-for-sale investment securities portfolio as of March 31, 2015 and December 31, 2014, respectively, is as follows:

(Dollar amounts in thousands)			Less than					12 Months
	Total		12 Months			Total		or Longer			Total		Total
	Fair		Unrealized			Fair		Unrealized			Fair		Unrealized
	Value		Losses			Value		Losses			Value		Losses
March 31, 2015
U.S. Treasury securities	$	—	$	—		$	2,036	$	(5	)	$	2,036	$	(5	)
Obligations of U.S. government agencies		7,284		(8	)		8,007		(42	)		15,291		(50	)
Mortgage-backed securities		10,871		(55	)		15,421		(199	)		26,292		(254	)
Obligations of states and political subdivisions		5,029		(24	)		930		(17	)		5,959		(41	)
Corporate debt		1,999		(5	)		4,982		(17	)		6,981		(22	)
Total	$	25,183	$	(92	)	$	31,376	$	(280	)	$	56,559	$	(372	)

(Dollar amounts in thousands)			Less than					12 months
	Total		12 months			Total		or Longer			Total		Total
	Fair		Unrealized			Fair		Unrealized			Fair		Unrealized
December 31, 2014:	Value		Losses			Value		Losses			Value		Losses
U. S. Treasury securities	$	—	$	—		$	2,015	$	(29	)	$	2,015	$	(29	)
Obligations of U.S. government agencies		13,178		(43	)		19,116		(255	)		32,294		(298	)
Mortgage-backed securities		5,056		(10	)		36,382		(651	)		41,438		(661	)
Obligations of states and political subdivisions		8,678		(49	)		5,696		(94	)		14,374		(143	)
Corporate debt		18,065		(125	)		4,919		(80	)		22,984		(205	)
Total	$	44,977	$	(227	)	$	68,128	$	(1,109	)	$	113,105	$	(1,336	)

At March 31, 2015, there were twenty-three securities in an unrealized loss position for greater than 12 consecutive months. There were twenty-two securities in an unrealized loss position for less than 12 consecutive months. Management periodically evaluates each security in an unrealized loss position to determine if the impairment is temporary or other-than-temporary. The unrealized losses are due solely to interest rate changes and the Company does not intend to sell nor expects it will be required to sell investment securities identified with impairments prior to the earliest of forecasted recovery or the maturity of the underlying investment security. Management has determined that no investment security was other-than-temporarily impaired at March 31, 2015.

The amortized cost and carrying value of available-for-sale debt securities as of March 31, 2015 by contractual maturity, are shown below. Expected maturities may differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.

March 31, 2015:

(Dollar amounts in thousands)	Amortized		Fair
	Cost		Value
Available-for-sale:
Due in one year or less	$	12,605	$	12,698
Due after one through five years		104,944		106,188
Due after five years through ten years		115,012		117,988
Due after ten years		27,105		27,625
	$	259,666	$	264,499

For the three months ended March 31, 2015 and March 31, 2014, respectively, gross realized gains amounted to $69,000 and $11,000, on gross securities sold or called of $12,272,000 and $1,023,000, respectively. For the three months ended March 31, 2015 and 2014, respectively, there were no gross realized losses.

At March 31, 2015, securities with an amortized cost of $102,549,000 and fair value of $104,078,000 were pledged as collateral for public deposits and for other purposes required by law.

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D. SECURITIES AVAILABLE FOR SALE, Amortized Cost and Carrying Value (Details) (USD $) In Thousands, unless otherwise specified	Mar. 31, 2015
SECURITIES AVAILABLE FOR SALE - Summary of Investments Amortized Cost and Carrying Value
Due in one year or less, Amortized Cost	$ 12,605
Due after one through five years, Amortized Cost	104,944
Due after five through ten years, Amortized Cost	115,012
Due after ten years, Amortized Cost	27,105
Equity securities, Amortized Cost	259,666
Due in one year or less, Estimated Fair Value	12,698
Due after one through five years, Estimated Fair Value	106,188
Due after five through ten years, Estimated Fair Value	117,988
Due after ten years, Estimated Fair Value	27,625
Equity securities, Estimated Fair Value	$ 264,499

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B. STOCK OPTION PLANS (Detail Narratives) (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Mar. 31, 2015	Mar. 31, 2014
STOCK OPTION PLANS DETAILS
Compensation expense for options	$ 61,000	$ 69,000
Intrinsic Value Options Exercised	314,000	126,000
Intrinsic Value Options Exercisable	3,463,000	2,234,000
Unrecognized Compensation Expense Nonvested Options	$ 682,000
Non-vested options weighted average period	3 years 4 months 24 days

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C. EARNINGS PER SHARE CALCULATION (Tables)

3 Months Ended

Mar. 31, 2015

Earnings per share computed

Earnings per common share (EPS) computed

(Dollar amounts in thousands)	Three months ended
	March 31,
	2015		2014
Net earnings	$	1,799	$	1,834
Dividends and discount accretion on preferred stock		—		(170	)
Net earnings available to common stockholders	$	1,799	$	1,664
Average number of shares outstanding		4,273,000		4,187,000
Effect of dilutive options		130,000		148,000
Average number of shares outstanding used to calculate diluted earnings per share		4,403,000		4,335,000

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F. BORROWINGS

3 Months Ended

Mar. 31, 2015

BORROWINGS

BORROWINGS

Federal Home Loan Bank advances

There were no outstanding advances at March 31, 2015.

Corporate loan

On March 27, 2014, FNB Bancorp received funding under a $6,000,000 term loan credit facility. This loan carries a variable rate of interest that fluctuates on a monthly basis. The interest rate is based on the 3 month LIBOR rate plus 4%. Payments of $50,000 in principal plus accrued interest are payable monthly. The first loan payment is due May 1, 2014. The maturity date on this credit facility is March 26, 2019. On the maturity date, all outstanding principal plus accrued interest shall become due and payable. FNB Bancorp has pledged it stock ownership in First National Bank of Northern California as collateral subject to the terms and conditions contained in the Loan Agreement and the Pledge and Security Agreement. FNB Bancorp retains the right to prepay this debt at any time upon not less than 7 days’ prior written notice to Lender. The proceeds from this loan were contributed to the Bank as an additional capital contribution. This capital contribution qualified as Tier 1 capital for the Bank under regulatory capital guidelines.

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G. FAIR VALUE MEASUREMENT

3 Months Ended

Mar. 31, 2015

FAIR VALUE MEASUREMENT TABLES

FAIR VALUE MEASUREMENT

The following table presents information about the Company’s assets and liabilities measured at fair value as of March 31, 2015 and December 31, 2014, and indicates the fair value techniques used by the Company to determine such fair value. In general, fair values determined by Level 1 inputs utilize quoted prices (unadjusted) in active markets for identical assets or liabilities that the Company has the ability to access. Level 2 inputs include quoted prices for similar assets and liabilities in active markets, and inputs other than quoted prices that are observable for the asset or liability, such as interest rates and yield curves that are observable at commonly quoted intervals. Level 3 inputs are unobservable inputs for the asset or liability, and include situations where there is little, if any, market activity for the asset or liability. In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, the level in the fair value hierarchy within which the fair value measurement in its entirety falls has been determined based on the lowest level input that is significant to the fair value measurement in its entirety. The Company’s assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment, and considers factors specific to the asset or liability. Transfers between levels of the fair hierarchy are recognized on the actual date of the event or circumstance that caused the transfer, which generally corresponds with the Company’s quarterly valuation process. During the first three months of 2015 and 2014, there were no transfers of assets or liabilities between hierarchy levels.

The following tables present the recorded amounts of assets measured at fair value on a recurring basis:

			Fair Value Measurements
(Dollar amounts in thousands)			at March 31, 2015, Using
			Quoted Prices
			in Active
			Markets		Other		Significant
			for Identical		Observable		Unobservable
	Fair Value		Assets		Inputs		Inputs
Description	3/31/2015		(Level 1)		(Level 2)		(Level 3)
U. S. Treasury securities	$	4,007	$	4,007	$	—	$	—
Obligations of U.S. Government agencies		58,313		—		58,313		—
Mortgage-backed securities		74,078		—		74,078		—
Obligations of states and political subdivisions		94,876		—		94,876		—
Corporate debt		33,225		—		33,225		—
Total assets measured at fair value	$	264,499	$	4,007	$	260,492	$	—

			Fair Value Measurements
(Dollar amounts in thousands)			at December 31, 2014, Using
			Quoted Prices
			in Active
			Markets		Other		Significant
			for Identical		Observable		Unobservable
	Fair Value		Assets		Inputs		Inputs
Description	12/31/2014		(Level 1)		(Level 2)		(Level 3)
U. S. Treasury securities	$	3,958	$	3,958	$	—	$	—
Obligations of U.S. Government agencies		63,062		—		63,062		—
Mortgage-backed securities		78,417		—		78,417		—
Obligations of states and political subdivisions		84,542		—		84,542		—
Corporate debt		34,902		—		34,902		—
Total assets measured at fair value	$	264,881	$	3,958	$	260,923	$	—

The following tables present the recorded amounts of assets measured at fair value on a non-recurring basis:

			Fair Value Measurements
(Dollar amounts in thousands)			at March 31, 2015, Using
			Quoted Prices in
			Active Markets		Other		Significant
			for Identical		Observable		Unobservable
	Fair Value		Assets		Inputs		Inputs
Description	3/31/2015		(Level 1)		(Level 2)		(Level 3)
Impaired loans:
Commercial real estate	$	15	$	—	$	—	$	15
Residential-1 to 4 family		114		—		—		114
Commercial and industrial		1,126		—		—		1,126
Consumer		52		—		—		52
Total impaired assets measured at fair value	$	1,307	$	—	$	—	$	1,307
			Fair Value Measurements
(Dollar amounts in thousands)			at December 31, 2014, Using
			Quoted Prices in
			Active Markets		Other		Significant
			for Identical		Observable		Unobservable
	Fair Value		Assets		Inputs		Inputs
Description	12/31/2014		(Level 1)		(Level 2)		(Level 3)
Impaired loans:
Commercial real estate	$	381	$	—	$	—	$	381
Residential-1 to 4 family		323		—		—		323
Commercial and industrial		1,472		—		—		1,472
Consumer		56		—		—		56
Total impaired assets measured at fair value	$	2,232	$	—	$	—	$	2,232

The Bank does not record loans at fair value. However, from time to time, if a loan is considered impaired, a specific allocation within the allowance for loan losses may be required. Loans for which it is probable that payment of interest and principal will not be made in accordance with the contractual terms of the loan agreement are considered impaired. The fair value of impaired loans is estimated using one of several methods, including collateral value, market value of similar debt, enterprise value, liquidation value and cash flows. Those impaired loans not requiring an allowance represent loans for which the value of the expected repayments or collateral exceed the recorded investments in such loans.

Impaired loans where an allowance is established based on the fair value of collateral or when the impaired loan has been written down to fair value require classification in the fair value hierarchy. If the fair value of the collateral is based on a non-observable market price or a current appraised value, the Bank records the impaired loans as nonrecurring Level 3. When an appraised value is not available, or management determines the fair value of the collateral is further impaired below the appraised value and there is no observable market price, the Bank also records the impaired loans as nonrecurring Level 3.

Other real estate owned is carried at the lower of historical cost or fair value less costs to sell. An appraisal (a Level 3 valuation) is obtained at the time the Bank acquires property through the foreclosure process. Any loan balance outstanding that exceeds the appraised value of the property is charged off against the allowance for loan loss at the time the property is acquired. Subsequent to acquisition, the Bank updates the property’s appraised value on at least an annual basis. If the value of the property has declined during the year, a loss due to valuation impairment charge is recorded along with a corresponding reduction in the book carrying value of the property.

The Company obtains third party appraisals on its impaired loans held-for-investment and foreclosed assets to determine fair value. When the appraisals are received, Management reviews the assumptions and methodology utilized in the appraisal, as well as the overall resulting value in conjunction with independent data sources such as recent market data and industry-wide statistics. We generally use a 6% discount for selling costs which is applied to all properties, regardless of size. Generally, the third party appraisals apply the “market approach,” which is a valuation technique that uses prices and other relevant information generated by market transactions involving identical or comparable (that is, similar) assets, liabilities, or a group of assets and liabilities, such as a business. Adjustments are then made based on the type of property, age of appraisal, current status of property and other related factors to estimate the current value of collateral. The value of OREO is determined based on independent appraisals, similar to the process used for impaired loans, discussed above, and is generally classified as Level 3.

Fair Values of Financial Instruments.

The following methods and assumptions were used by the Company in estimating the fair value disclosures for financial instruments.

Cash and Cash Equivalents, including interest-bearing time deposits with financial institutions.

The carrying amounts reported in the balance sheet for cash and short-term instruments are a reasonable estimate of fair value, which will approximate their historical cost.

Securities Available-for-Sale.

Fair values for investment securities are based on quoted market prices, where available. If quoted market prices are not available, fair values are based on quoted market prices of comparable instruments.

Loans Receivable.

For variable-rate loans that reprice frequently and with no significant change in credit risk, fair values are based on carrying values and credit risk factors. For fixed rate loans, fair values are based on discounted cash flows, credit risk factors, and liquidity factors.

Other equity securities.

These are mostly Federal Reserve Bank stock and Federal Home Loan Bank stock, carried in Other Assets. They are not traded, and not available for sale, and have no fair market value.

Deposit liabilities.

The fair values disclosed for demand deposits (e.g., interest and non-interest checking, savings, and money market accounts) are, by definition, equal to the amount payable on demand at the reporting date (i.e., their carrying amounts). The fair values for fixed-rate certificates of deposit are based on discounted cash flows.

Federal Home Loan Bank Advances.

The fair values of Federal Home Loan Bank Advances are based on discounted cash flows. The discount rate is equal to the market rate currently offered on similar products.

Notes payable.

Fair value is equal to the current balance. They represent a corporate loan with a monthly variable rate, based on the 3-month LIBOR rate plus 4%.

Accrued Interest Receivable and Payable.

The interest receivable and payable balances approximate their fair value due to the short-term nature of their settlement dates.

Undisbursed loan commitments, lines of credit, Mastercard line and standby letters of credit.

The fair value of these off-balance sheet items are based on discounted cash flows of expected fundings.

The Bank has excluded non-financial assets and non-financial liabilities defined by the Codification (ASC 820-10-15-A), such as Bank premises and equipment, deferred taxes and other liabilities. In addition, the Bank has not disclosed the fair value of financial instruments specifically excluded from disclosure requirements of the Financial Instruments Topic of the Codification (ASC 825-10-50-8), such as Bank-owned life insurance policies.

The following table provides summary information on the estimated fair value of financial instruments at March 31, 2015:

March 31, 2015	Carrying		Fair		Fair value measurements
(Dollar amounts in thousands)	amount		value		Level 1		Level 2		Level 3
Financial assets:
Cash and cash equivalents	$	30,640	$	30,640	$	30,640
Interest-bearing time deposits with financial institutions		2,783		2,783				2,783
Securities available for sale		264,499		264,499		4,007		260,492
Loans		585,745		577,169						577,169
Other equity securities		5,773		5,773						5,773
Accrued interest receivable		3,744		3,744				3,744
Financial liabilities:
Deposits		804,624		804,995				804,995
Note payable		5,400		5,400				5,400
Accrued interest payable		165		165				165
Off-balance-sheet liabilities:
Undisbursed loan commitments, lines of credit, standby letters of credit and Mastercard lines of credit		—		1,373						1,373

The carrying amount of loans include $5,923,000 of nonaccrual loans (loans that are not accruing interest) as of March 31, 2015. The fair value of nonaccrual loans is based on the collateral values that secure the loans or the cash flows expected to be received.

The following table provides summary information on the estimated fair value of financial instruments at December 31, 2014:

December 31, 2014	Carrying		Fair		Fair value measurements
(Dollar amounts in thousands)	amount		value		Level 1		Level 2		Level 3
Financial assets:
Cash and cash equivalents	$	14,978	$	14,978	$	14,978
Interest-bearing time deposits with financial institutions		2,784		2,813				2,813
Securities available for sale		264,881		264,881		3,958		260,923
Loans		593,864		594,524						594,524
Other equity securities		5,769		5,769						5,769
Accrued interest receivable		3,725		3,725				3,725
Financial liabilities:
Deposits		792,194		792,552				792,552
Federal Home Loan Bank advances		9,000		9,000				9,000
Note payable		5,550		5,550				5,550
Accrued interest payable		182		182				182
Off-balance-sheet liabilities:
Undisbursed loan commitments, lines of credit, standby letters of credit and Mastercard lines of credit		—		1,449						1,449

The carrying amounts of loans include $5,648,000 of nonaccrual loans (loans that are not accruing interest) as of December 31, 2014. The fair value of nonaccrual loans is based on the collateral values that secure the loans or the cash flows expected to be received.

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D. SECURITIES AVAILABLE FOR SALE (Tables)

3 Months Ended

Mar. 31, 2015

SECURITIES AVAILABLE FOR SALE TABLES

Schedule of amortized cost and carrying values of securities available-for-sale

(Dollar amounts in thousands)	Amortized		Unrealized		Unrealized			Fair
	cost		gains		losses			value
March 31, 2015
U.S. Treasury securities	$	3,975	$	37	$	(5	)	$	4,007
Obligations of U.S. government agencies		57,937		426		(50	)		58,313
Mortgage-backed securities		72,926		1,406		(254	)		74,078
Obligations of states and political subdivisions		91,877		3,040		(41	)		94,876
Corporate debt		32,951		296		(22	)		33,225
	$	259,666	$	5,205	$	(372	)	$	264,499
December 31, 2014
U.S. Treasury securities	$	3,975	$	12	$	(29	)	$	3,958
Obligations of U.S. government agencies		63,090		270		(298	)		63,062
Mortgage-backed securities		78,076		1,002		(661	)		78,417
Obligations of states and political subdivisions		82,151		2,534		(143	)		84,542
Corporate debt		34,931		176		(205	)		34,902
	$	262,223	$	3,994	$	(1,336	)	$	264,881

Schedule analysis of gross unrealized losses of the available-for-sale investment securities

(Dollar amounts in thousands)			Less than					12 Months
	Total		12 Months			Total		or Longer			Total		Total
	Fair		Unrealized			Fair		Unrealized			Fair		Unrealized
	Value		Losses			Value		Losses			Value		Losses
March 31, 2015
U.S. Treasury securities	$	—	$	—		$	2,036	$	(5	)	$	2,036	$	(5	)
Obligations of U.S. government agencies		7,284		(8	)		8,007		(42	)		15,291		(50	)
Mortgage-backed securities		10,871		(55	)		15,421		(199	)		26,292		(254	)
Obligations of states and political subdivisions		5,029		(24	)		930		(17	)		5,959		(41	)
Corporate debt		1,999		(5	)		4,982		(17	)		6,981		(22	)
Total	$	25,183	$	(92	)	$	31,376	$	(280	)	$	56,559	$	(372	)

(Dollar amounts in thousands)			Less than					12 months
	Total		12 months			Total		or Longer			Total		Total
	Fair		Unrealized			Fair		Unrealized			Fair		Unrealized
December 31, 2014:	Value		Losses			Value		Losses			Value		Losses
U. S. Treasury securities	$	—	$	—		$	2,015	$	(29	)	$	2,015	$	(29	)
Obligations of U.S. government agencies		13,178		(43	)		19,116		(255	)		32,294		(298	)
Mortgage-backed securities		5,056		(10	)		36,382		(651	)		41,438		(661	)
Obligations of states and political subdivisions		8,678		(49	)		5,696		(94	)		14,374		(143	)
Corporate debt		18,065		(125	)		4,919		(80	)		22,984		(205	)
Total	$	44,977	$	(227	)	$	68,128	$	(1,109	)	$	113,105	$	(1,336	)

Schedule of amortized cost and carrying value of available-for-sale debt securities by contractual maturity

(Dollar amounts in thousands)	Amortized		Fair
	Cost		Value
Available-for-sale:
Due in one year or less	$	12,605	$	12,698
Due after one through five years		104,944		106,188
Due after five years through ten years		115,012		117,988
Due after ten years		27,105		27,625
	$	259,666	$	264,499

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E. LOANS, (Details Narrative) (USD $) In Thousands, unless otherwise specified	3 Months Ended		12 Months Ended
	Mar. 31, 2015	Mar. 31, 2014	Dec. 31, 2014
E. Loans Details Narrative
Interest income on impaired loans recognized	$ 225	$ 271	$ 982
Interest on impaired loans not collected	106	85
Cumulative amount of unpaid interest on impaired loans	3,050	3,580
Nonaccrual loans	$ 5,923		$ 5,648

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D. SECURITIES AVAILABLE FOR SALE, Amortized cost and carrying values (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended	12 Months Ended
	Mar. 31, 2015	Dec. 31, 2014
Available for sale securities, Amortized Cost	$ 259,666	$ 262,223
Available for sale securities, Unrealized Gains	5,205	3,994
Available for sale securities, Unrealized Losses	(372)	(1,336)
Available for sale securities, Estimated Fair Value	264,499	264,881
U.S. Treasury securities
Available for sale securities, Amortized Cost	3,975	3,975
Available for sale securities, Unrealized Gains	37	12
Available for sale securities, Unrealized Losses	(5)	(29)
Available for sale securities, Estimated Fair Value	4,007	3,958
Obligations of U.S. government agencies
Available for sale securities, Amortized Cost	57,937	63,090
Available for sale securities, Unrealized Gains	426	270
Available for sale securities, Unrealized Losses	(50)	(298)
Available for sale securities, Estimated Fair Value	58,313	63,062
Mortgage-backed securities
Available for sale securities, Amortized Cost	72,926	78,076
Available for sale securities, Unrealized Gains	1,406	1,002
Available for sale securities, Unrealized Losses	(254)	(661)
Available for sale securities, Estimated Fair Value	74,078	78,417
Obligations of states and political subdivisions
Available for sale securities, Amortized Cost	91,877	82,151
Available for sale securities, Unrealized Gains	3,040	2,534
Available for sale securities, Unrealized Losses	(41)	(143)
Available for sale securities, Estimated Fair Value	94,876	84,542
Corporate debt
Available for sale securities, Amortized Cost	32,951	34,931
Available for sale securities, Unrealized Gains	296	176
Available for sale securities, Unrealized Losses	(22)	(205)
Available for sale securities, Estimated Fair Value	$ 33,225	$ 34,902

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E. LOANS, Allowance for Credit Losses (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended		12 Months Ended
	Mar. 31, 2015	Mar. 31, 2014	Dec. 31, 2014
Commercial and Real estate
Allowance for credit losses
Beginning balance	$ 5,549	$ 5,763	$ 5,763
Charge-offs	0	0	(83)
Recoveries	6	1	1,062
Provision	(250)	(140)	(1,193)
Ending balance	5,305	5,624	5,549
Ending balance: individually evaluated for impairment	131	150	101
Ending balance: collectively evaluated for impairment	5,174	5,474	5,448
Real Estate Construction
Allowance for credit losses
Beginning balance	849	734	734
Charge-offs	0	0	(183)
Recoveries	0	0	0
Provision	571	1	298
Ending balance	1,420	735	849
Ending balance: individually evaluated for impairment	0	0	0
Ending balance: collectively evaluated for impairment	1,420	735	849
Real Estate Multi family
Allowance for credit losses
Beginning balance	206	293	293
Charge-offs	0	0	0
Recoveries	0	0	0
Provision	(54)	76	(87)
Ending balance	152	369	206
Ending balance: individually evaluated for impairment	0	0	0
Ending balance: collectively evaluated for impairment	152	369	206
Real Estate 1 to 4 family
Allowance for credit losses
Beginning balance	1,965	1,788	1,788
Charge-offs	(45)	(62)	(62)
Recoveries	0	1	3
Provision	(75)	108	236
Ending balance	1,845	1,835	1,965
Ending balance: individually evaluated for impairment	510	428	432
Ending balance: collectively evaluated for impairment	1,335	1,407	1,533
Commercial and industrial
Allowance for credit losses
Beginning balance	1,073	1,237
Charge-offs	0	(11)
Recoveries	14	14
Provision	(126)	28
Ending balance	961	1,268
Ending balance: individually evaluated for impairment	279	156
Ending balance: collectively evaluated for impairment	682	1,112
Consumer
Allowance for credit losses
Beginning balance	58	64
Charge-offs	(6)	0
Recoveries	0	0
Provision	9	2
Ending balance	61	66
Ending balance: individually evaluated for impairment	8	9
Ending balance: collectively evaluated for impairment	53	57
Total
Allowance for credit losses
Beginning balance	9,700	9,879	9,879
Charge-offs	(51)	(73)	(382)
Recoveries	20	16	1,223
Provision	75	75	(1,020)
Ending balance	9,744	9,897	9,700
Ending balance: individually evaluated for impairment	928	743	766
Ending balance: collectively evaluated for impairment	8,816	9,154	8,934
Commercial and industrial
Allowance for credit losses
Beginning balance			1,237
Charge-offs			(28)
Recoveries			154
Provision			(290)
Ending balance			1,073
Ending balance: individually evaluated for impairment			225
Ending balance: collectively evaluated for impairment			848
Consumer
Allowance for credit losses
Beginning balance			64
Charge-offs			(26)
Recoveries			4
Provision			16
Ending balance			58
Ending balance: individually evaluated for impairment			8
Ending balance: collectively evaluated for impairment			$ 50

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CONSOLIDATED STATEMENTS OF EARNINGS (Dollar amounts in thousands) (Parenthetical) (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Mar. 31, 2015	Mar. 31, 2014
Revenues [Abstract]
Net earnings	$ 1,799	$ 1,834
Unrealized holding gain on available-for-sale securities, net of tax benefit of ($920) and ($720)	1,324	1,034
Reclassification adjustment for gain recognized on available-for-sale securities sold, net of tax of ($28) and ($5) for the three months ended March 31, 2015 and 2014, respectively	(41)	(6)
Other comprehensive Earnings	1,283	1,028
Total comprehensive earnings	$ 3,082	$ 2,862

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C. EARNINGS PER SHARE CALCULATION

3 Months Ended

Mar. 31, 2015

EARNINGS PER SHARE CALCULATION

EARNINGS PER SHARE CALCULATION

Earnings per common share (EPS) are computed based on the weighted average number of common shares outstanding during the period. Basic EPS excludes dilution and is computed by dividing net earnings available to common stockholders (after deducting dividends and related accretion on preferred stock) by the weighted average of common shares outstanding. Diluted EPS reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock. The number of potential common shares included in the quarterly diluted EPS is computed using the average market price during the three months included in the reporting period under the treasury stock method. The number of potential common shares included in year-to-date diluted EPS is a year-to-date weighted average of potential shares included in each quarterly diluted EPS computation. All common stock equivalents are anti-dilutive when a net loss occurs. A 5% stock dividend was declared in the fourth quarter of 2014, and prior per share amounts have been adjusted to reflect the 5% stock dividend.

Earnings per share have been computed based on the following:

(Dollar amounts in thousands)	Three months ended
	March 31,
	2015		2014
Net earnings	$	1,799	$	1,834
Dividends and discount accretion on preferred stock		—		(170	)
Net earnings available to common stockholders	$	1,799	$	1,664
Average number of shares outstanding		4,273,000		4,187,000
Effect of dilutive options		130,000		148,000
Average number of shares outstanding used to calculate diluted earnings per share		4,403,000		4,335,000

Anti dilutive options that were excluded from the calculation of diluted EPS totaled 96,000 and 64,000 in 2015 and 2014, respectively.

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E. LOANS, Recorded Investment in Loans (Details) (USD $) In Thousands, unless otherwise specified	Mar. 31, 2015	Dec. 31, 2014	Mar. 31, 2014
Real Estate Construction
Loans:
Ending balance	$ 34,237	$ 39,771	$ 37,444
Ending balance: individually evaluated for impairment	2,368	2,373	1,319
Ending balance: collectively evaluated for impairment	31,869	37,398	36,125
Real Estate Multi family
Loans:
Ending balance	53,703	53,824	51,304
Ending balance: individually evaluated for impairment	0	0	0
Ending balance: collectively evaluated for impairment	53,703	53,824	51,304
Commercial and Real estate
Loans:
Ending balance	322,414	318,427	328,862
Ending balance: individually evaluated for impairment	9,460	9,530	14,426
Ending balance: collectively evaluated for impairment	312,954	308,897	314,436
Real Estate 1 to 4 family
Loans:
Ending balance	128,105	128,732	109,365
Ending balance: individually evaluated for impairment	4,673	4,333	3,856
Ending balance: collectively evaluated for impairment	123,432	124,399	105,509
Commercial and industrial
Loans:
Ending balance	45,589	51,662	48,799
Ending balance: individually evaluated for impairment	2,226	2,315	4,893
Ending balance: collectively evaluated for impairment	43,363	49,347	43,906
Consumer
Loans:
Ending balance	1,697	1,448	1,532
Ending balance: individually evaluated for impairment	60	64	30
Ending balance: collectively evaluated for impairment	1,637	1,384	1,502
Total
Loans:
Ending balance	585,745	593,864	577,306
Ending balance: individually evaluated for impairment	18,787	18,615	24,524
Ending balance: collectively evaluated for impairment	$ 566,958	$ 575,249	$ 552,782

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G. FAIR VALUE MEASUREMENT (Details Narrative) (USD $) In Thousands, unless otherwise specified	Mar. 31, 2015	Dec. 31, 2014
FAIR VALUE MEASUREMENT TABLES
Nonaccrual loans	$ 5,923	$ 5,648

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C. EARNINGS PER SHARE CALCULATION (Dollar amounts in thousands) (Details) (USD $) In Thousands, except Share data, unless otherwise specified	3 Months Ended
	Mar. 31, 2015	Mar. 31, 2014
Summary Earnings per share calculation
Net earnings	$ 1,799	$ 1,834
Dividends and discount accretion on preferred stock	0	170
Net earnings available to common shareholders	1,799	1,664
Average number of shares outstanding	4,273,000	4,187,000
Effect of dilutive options	$ 130,000	$ 148,000
Average number of shares outstanding used to calculate diluted earnings per share	4,403,000	4,335,000
Anti-dilutive options not included	96,000	64,000