10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C.  20549

FORM 10-Q

(Mark One)

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

For the quarterly period ended June 30, 2016

OR

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

For the transition period from __________________ to __________________

Commission File Number  001-33572

Bank of Marin Bancorp

(Exact name of Registrant as specified in its charter)

California	20-8859754
(State or other jurisdiction of incorporation)	(IRS Employer Identification No.)
504 Redwood Blvd., Suite 100, Novato, CA	94947
(Address of principal executive office)	(Zip Code)

Registrant’s telephone number, including area code:  (415) 763-4520

Indicate by check mark whether the registrant (1) has filed all reports 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 corporate web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

Yes x                   No o

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.

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

Indicate by check mark if the registrant is a shell company, as defined in Rule 12b-2 of the Exchange Act.

Yes   o     No  x

As of July 31, 2016, there were 6,122,987 shares of common stock outstanding.

TABLE OF CONTENTS

PART I	FINANCIAL INFORMATION	Page-3
ITEM 1.	Financial Statements	Page-3
	Consolidated Statements of Condition	Page-3
	Consolidated Statements of Comprehensive Income	Page-4
	Consolidated Statements of Changes in Stockholders' Equity	Page-5
	Consolidated Statements of Cash Flows	Page-6
	Notes to Consolidated Financial Statements	Page-7
ITEM 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	Page-30
ITEM 3.	Quantitative and Qualitative Disclosure about Market Risk	Page-45
ITEM 4.	Controls and Procedures	Page-45
PART II	OTHER INFORMATION	Page-47
ITEM 1.	Legal Proceedings	Page-47
ITEM 1A.	Risk Factors	Page-47
ITEM 2.	Unregistered Sales of Equity Securities and Use of Proceeds	Page-47
ITEM 3.	Defaults Upon Senior Securities	Page-47
ITEM 4.	Mine Safety Disclosures	Page-47
ITEM 5.	Other Information	Page-47
ITEM 6.	Exhibits	Page-48
SIGNATURES		Page-50

Page-2

PART I       FINANCIAL INFORMATION

ITEM 1.  Financial Statements

BANK OF MARIN BANCORP

CONSOLIDATEDSTATEMENTS OFCONDITION

at June 30, 2016 and December 31, 2015

(in thousands, except share data; unaudited)	June 30, 2016		December 31, 2015
Assets
Cash and due from banks	$	55,438	$	26,343
Investment securities
Held-to-maturity, at amortized cost	58,491		69,637
Available-for-sale, at fair value	323,361		417,787
Total investment securities	381,852		487,424
Loans, net of allowance for loan losses of $15,087 and $14,999 at June 30, 2016 and December 31, 2015, respectively	1,433,312		1,436,229
Bank premises and equipment, net	8,650		9,305
Goodwill	6,436		6,436
Core deposit intangible	2,846		3,113
Interest receivable and other assets	61,918		62,284
Total assets	$	1,950,452	$	2,031,134
Liabilities and Stockholders' Equity
Liabilities
Deposits
Non-interest-bearing	$	804,447	$	770,087
Interest-bearing
Transaction accounts	88,365		114,277
Savings accounts	149,745		141,316
Money market accounts	502,476		541,089
Time accounts	160,582		161,457
Total deposits	1,705,615		1,728,226
Federal Home Loan Bank ("FHLB") and other borrowings	—		67,000
Subordinated debentures	5,493		5,395
Interest payable and other liabilities	12,892		16,040
Total liabilities	1,724,000		1,816,661
Stockholders' Equity
Preferred stock, no par value Authorized - 5,000,000 shares, none issued	—		—
Common stock, no par value Authorized - 15,000,000 shares; Issued and outstanding - 6,120,684 and 6,068,543 at     June 30, 2016 and December 31, 2015, respectively	86,569		84,727
Retained earnings	136,992		129,553
Accumulated other comprehensive income, net	2,891		193
Total stockholders' equity	226,452		214,473
Total liabilities and stockholders' equity	$	1,950,452	$	2,031,134

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

Page-3

BANK OF MARIN BANCORP

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

	Three months ended						Six months ended
(in thousands, except per share amounts; unaudited)	June 30, 2016			June 30, 2015			June 30, 2016			June 30, 2015
Interest income
Interest and fees on loans	$	16,097		$	15,287		$	33,238		$	30,666
Interest on investment securities
Securities of U.S. government agencies	1,191			990			2,543			2,025
Obligations of state and political subdivisions	588			511			1,174			1,051
Corporate debt securities and other	77			179			182			384
Interest on Federal funds sold and short-term investments	40			51			51			72
Total interest income	17,993			17,018			37,188			34,198
Interest expense
Interest on interest-bearing transaction accounts	28			30			55			60
Interest on savings accounts	14			13			28			25
Interest on money market accounts	107			123			218			250
Interest on time accounts	193			215			389			437
Interest on FHLB and other borrowings	378			78			478			156
Interest on subordinated debentures	107			105			216			209
Total interest expense	827			564			1,384			1,137
Net interest income	17,166			16,454			35,804			33,061
Provision for loan losses	—			—			—			—
Net interest income after provision for loan losses	17,166			16,454			35,804			33,061
Non-interest income
Service charges on deposit accounts	441			504			897			1,029
Wealth Management and Trust Services	527			603			1,093			1,241
Debit card interchange fees	381			368			719			715
Merchant interchange fees	128			129			241			259
Earnings on bank-owned life insurance	209			203			410			406
Dividends on FHLB stock	185			461			354			608
Gains on investment securities, net	284			—			394			8
Other income	266			340			476			531
Total non-interest income	2,421			2,608			4,584			4,797
Non-interest expense
Salaries and related benefits	6,724			6,672			13,472			13,462
Occupancy and equipment	1,175			1,493			2,456			2,835
Depreciation and amortization	441			650			894			1,071
Federal Deposit Insurance Corporation insurance	246			253			507			489
Data processing	916			792			1,772			1,578
Professional services	554			515			1,052			1,079
Directors' expense	116			247			305			438
Information technology	165			216			358			368
Provision for (reversal of) losses on off-balance sheet commitments	150			(109		)	150			(310		)
Other expense	1,530			1,590			3,061			3,166
Total non-interest expense	12,017			12,319			24,027			24,176
Income before provision for income taxes	7,570			6,743			16,361			13,682
Provision for income taxes	2,733			2,457			5,878			4,939
Net income	$	4,837		$	4,286		$	10,483		$	8,743
Net income per common share:
Basic	$	0.80		$	0.72		$	1.73		$	1.47
Diluted	$	0.79		$	0.71		$	1.72		$	1.44
Weighted average shares used to compute net income per common share:
Basic	6,078			5,945			6,063			5,933
Diluted	6,109			6,062			6,100			6,055
Dividends declared per common share	$	0.25		$	0.22		$	0.50		$	0.44
Comprehensive income:
Net income	$	4,837		$	4,286		$	10,483		$	8,743
Other comprehensive income
Change in net unrealized gain (loss) on available-for-sale securities	2,119			(1,803		)	5,042			(486		)
Reclassification adjustment for gain on available-for-sale securities     included in net income	(284		)	—			(394		)	(8		)
Net change in unrealized gain (loss) on available-for-sale securities,             before tax	1,835			(1,803		)	4,648			(494		)
Deferred tax expense (benefit)	776			(691		)	1,950			(137		)
Other comprehensive income (loss), net of tax	1,059			(1,112		)	2,698			(357		)
Comprehensive income	$	5,896		$	3,174		$	13,181		$	8,386

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

Page-4

BANK OF MARIN BANCORP

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY

for the year ended December 31, 2015 and the six months ended June 30, 2016

(in thousands, except share data; unaudited)	Common Stock				Retained Earnings			Accumulated Other Comprehensive Income (Loss), Net of Taxes			Total
	Shares		Amount
Balance at December 31, 2014	5,939,482		$	82,436	$	116,502		$	1,088		$	200,026
Net income	—		—		18,441			—			18,441
Other comprehensive loss	—		—		—			(895		)	(895		)
Stock options exercised	37,071		1,139		—			—			1,139
Excess tax benefit - stock-based compensation	—		212		—			—			212
Stock issued under employee stock purchase plan	339		17		—			—			17
Restricted stock granted	15,970		—		—			—			—
Restricted stock forfeited / cancelled	(450	)	—		—			—			—
Stock-based compensation - stock options	—		252		—			—			252
Stock-based compensation - restricted stock	—		384		—			—			384
Cash dividends paid on common stock	—		—		(5,390		)	—			(5,390		)
Stock purchased by directors under director stock plan	245		12		—			—			12
Stock issued in payment of director fees	5,295		275		—			—			275
Stock issued from exercise of warrants	70,591		—		—			—			—
Balance at December 31, 2015	6,068,543		$	84,727	$	129,553		$	193		$	214,473
Net income	—		—		10,483			—			10,483
Other comprehensive income	—		—		—			2,698			2,698
Stock options exercised	32,117		1,087		—			—			1,087
Excess tax benefit - stock-based compensation	—		113		—			—			113
Stock issued under employee stock purchase plan	294		13		—			—			13
Restricted stock granted	16,910		—		—			—			—
Stock-based compensation - stock options	—		181		—			—			181
Stock-based compensation - restricted stock	—		297		—			—			297
Cash dividends paid on common stock	—		—		(3,044		)	—			(3,044		)
Stock purchased by directors under director stock plan	260		14		—			—			14
Stock issued in payment of director fees	2,560		137		—			—			137
Balance at June 30, 2016	6,120,684		$	86,569	$	136,992		$	2,891		$	226,452

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

Page-5

BANK OF MARIN BANCORP

CONSOLIDATED STATEMENTS OF CASH FLOWS

for the six months ended June 30, 2016 and 2015

(in thousands; unaudited)	June 30, 2016			June 30, 2015
Cash Flows from Operating Activities:
Net income	$	10,483		$	8,743
Adjustments to reconcile net income to net cash provided by operating activities:
Provision for (reversal of) losses on off-balance sheet commitments	150			(310		)
Compensation expense via common stock for director fees	97			138
Stock-based compensation expense	478			308
Excess tax benefits from exercised or vesting of stock based-awards	(113		)	(141		)
Amortization of core deposit intangible	267			309
Amortization of investment security premiums, net of accretion of discounts	1,466			1,217
Accretion of discount on acquired loans	(832		)	(1,076		)
Accretion of discount on subordinated debentures	98			106
Net amortization of deferred loan origination costs/fees	43			(294		)
Write-down of other real estate owned	13			40
Gain on sale of investment securities	(394		)	(8		)
Depreciation and amortization	894			1,071
Loss on disposal of premises and equipment	—			4
Earnings on bank-owned life insurance policies	(410		)	(406		)
Net change in operating assets and liabilities:
Interest receivable	676			109
Interest payable	(50		)	(4		)
Deferred rent and other rent-related expenses	(262		)	86
Other assets	1,763			1,504
Other liabilities	(3,872		)	(2,271		)
Total adjustments	12			382
Net cash provided by operating activities	10,495			9,125
Cash Flows from Investing Activities:
Purchase of held-to-maturity securities	(2,424		)	(2,375		)
Purchase of available-for-sale securities	(19,916		)	(76,708		)
Proceeds from sale of available-for-sale securities	68,673			1,559
Purchase of bank owned life insurance policies	(1,864		)	—
Proceeds from paydowns/maturity of held-to-maturity securities	13,243			23,723
Proceeds from paydowns/maturity of available-for-sale securities	49,576			20,814
Proceeds from the sale of loan	—			1,502
Loans originated and principal collected, net	4,996			22,818
Purchase of FHLB stock	(1,792		)	(136		)
Purchase of premises and equipment	(239		)	(889		)
Cash paid for low income housing tax credit investment	(225		)	(434		)
Net cash provided by (used in) investing activities	110,028			(10,126		)
Cash Flows from Financing Activities:
Net (decrease) increase in deposits	(22,611		)	78,864
Proceeds from stock options exercised	1,087			774
Proceeds from stock issued under employee and director stock purchase plans	27			8
Repayment of Federal Home Loan Bank borrowings	(67,000		)	—
Cash dividends paid on common stock	(3,044		)	(2,620		)
Excess tax benefits from exercised or vesting of stock based-awards	113			141
Net cash (used in) provided by financing activities	(91,428		)	77,167
Net increase in cash and cash equivalents	29,095			76,166
Cash and cash equivalents at beginning of period	26,343			41,367
Cash and cash equivalents at end of period	$	55,438		$	117,533
Supplemental disclosure of cash flow information:
Cash paid for interest	$	1,336		$	1,035
Cash paid for income taxes	$	7,095		$	5,270
Supplemental disclosure of non-cash investing and financing activities:
Change in unrealized gain on available-for-sale securities	$	4,648		$	(494	)
Subscription in low income housing tax credit investment	$	—		$	1,023
Stock issued in payment of director fees	$	137		$	138

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

Page-6

NOTES TO CONSOLIDATEDFINANCIAL STATEMENTS (Unaudited)

Note 1:  Basis of Presentation

The consolidated financial statements include the accounts of Bank of Marin Bancorp (“Bancorp”), a bank holding company, and its wholly-owned bank subsidiary, Bank of Marin (the “Bank”), a California state-chartered commercial bank. References to “we,” “our,” “us” mean the holding company and the Bank that are consolidated for financial reporting purposes. The accompanying unaudited consolidated interim financial statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission ("SEC"). Certain information and note disclosures normally included in annual financial statements prepared in accordance with generally accepted accounting principles ("GAAP") have been condensed or omitted pursuant to those rules and regulations. Although we believe that the disclosures are adequate and the information presented is not misleading, we suggest that these interim financial statements be read in conjunction with the annual financial statements and the notes thereto included in our 2015 Annual Report on Form 10-K.  In the opinion of Management, the unaudited consolidated financial statements reflect all adjustments which are necessary for a fair presentation of the consolidated financial position, the results of operations, changes in comprehensive income, changes in stockholders’ equity, and cash flows for the periods presented. All material intercompany transactions have been eliminated. The results of these interim periods may not be indicative of the results for the full year or for any other period. We have evaluated subsequent events through the date of filing with the SEC and have determined that there are no subsequent events that require additional recognition or disclosure.

The NorCal Community Bancorp Trusts I and II, respectively (the "Trusts") were formed for the sole purpose of issuing trust preferred securities. Bancorp is not considered the primary beneficiary of the Trusts (variable interest entities), therefore the Trusts are not consolidated in our consolidated financial statements, but rather the subordinated debentures are shown as a liability on our consolidated statements of condition (See Note 6, Borrowings). Bancorp's investment in the securities of the Trusts is accounted for under the equity method and is included in interest receivable and other assets on the consolidated statements of condition.

The following table shows: 1) weighted average basic shares, 2) potentially dilutive weighted average common shares related to stock options, unvested restricted stock awards and stock warrant, and 3) weighted average diluted shares. Basic earnings per share (“EPS”) are calculated by dividing net income by the weighted average number of common shares outstanding during each period, excluding unvested restricted stock awards. Diluted EPS are calculated using the weighted average number of potentially dilutive common shares, which is based on average market prices during the three months of the reporting period, under the treasury stock method. The number of potentially dilutive common shares included in year-to-date diluted EPS is a year-to-date weighted average of potentially dilutive common shares included in each quarterly diluted EPS computation. We have two forms of our outstanding common stock: common stock and unvested restricted stock awards. Holders of unvested restricted stock awards receive non-forfeitable dividends at the same rate as common shareholders and they both share equally in undistributed earnings. Therefore, under the two-class method, the difference in EPS is not significant for these participating securities.

	Three months ended				Six months ended
(in thousands, except per share data)	June 30, 2016		June 30, 2015		June 30, 2016		June 30, 2015
Weighted average basic shares outstanding	6,078		5,945		6,063		5,933
Potentially dilutive common shares related to:
Stock options	27		41		31		44
Unvested restricted stock awards	4		3		6		4
Warrant	—		73		—		74
Weighted average diluted shares outstanding	6,109		6,062		6,100		6,055
Net income	$	4,837	$	4,286	$	10,483	$	8,743
Basic EPS	$	0.80	$	0.72	$	1.73	$	1.47
Diluted EPS	$	0.79	$	0.71	$	1.72	$	1.44
Weighted average anti-dilutive shares not included in the calculation of diluted EPS	70		41		60		34

Page-7

Note 2: Recently Issued Accounting Standards

In May 2014, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2014-09, Revenue from Contracts with Customers (Topic 606). The ASU is a converged standard involving FASB and International Financial Reporting Standards that provides a single comprehensive revenue recognition model for all contracts with customers across transactions and industries. The core principal of the guidance is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount and at a time that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. Subsequent updates related to Revenue from Contracts with Customers (Topic 606) are as follows:

• August 2015 ASU No. 2015-14 - Deferral of the Effective Date, institutes a one-year deferral of the effective date of this amendment to annual reporting periods beginning after December 15, 2017. Early application is permitted only as of annual periods beginning after December 15, 2016, including interim reporting periods within that reporting period.

• March 2016 ASU No. 2016-08 - Principal versus Agent Considerations (Reporting Revenue Gross versus Net), clarifies the implementation guidance on principal versus agent considerations and on the use of indicators that assist an entity in determining whether it controls a specified good or service before it is transferred to the customer.

• April 2016 ASU No. 2016-10 - Identifying Performance Obligations and Licensing, provides guidance in determining performance obligations in a contract with a customer and clarifies whether a promise to grant a license provides a right to access or the right to use intellectual property.

• May 2016 ASU No. 2016-12 - Narrow Scope Improvements and Practical Expedients, gives further guidance on assessing collectability, presentation of sales taxes, noncash consideration, and completed contracts and contract modifications at transition.

We are currently evaluating the provisions of these updates and will be monitoring developments and additional guidance to determine the potential impact the new standards will have on our financial condition and results of operations.

In January 2016, the FASB issued ASU No. 2016-01, Financial Instruments - Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities. The amendments in this ASU make improvements to GAAP related to financial instruments that include the following as applicable to us.

• Equity investments, except for those accounted for under the equity method of accounting or those that result in consolidation of the investee, are required to be measured at fair value with changes in fair value recognized in net income. However, an entity may choose to measure equity investments that do not have readily determinable fair values at cost minus impairment, if any, plus or minus changes resulting from observable price changes in orderly transactions for the identical or a similar investment of the same issuer.

• Simplifies the impairment assessment of equity investments without readily determinable fair values by requiring a qualitative assessment to identify impairment - if impairment exists, this requires measuring the investment at fair value.

• Eliminates the requirement for public companies to disclose the method(s) and significant assumptions used to estimate the fair value that is currently required to be disclosed for financial instruments measured at amortized cost on the balance sheet.

• Public companies will be required to use the exit price notion when measuring the fair value of financial instruments for disclosure purposes.

• Requires separate presentation of financial assets and financial liabilities by measurement category and form of financial asset on the balance sheet or the accompanying notes to the financial statements.

• The reporting entity should evaluate the need for a valuation allowance on a deferred tax asset related to available-for-sale securities in combination with the entity's other deferred tax assets.

ASU 2016-01 is effective for public business entities for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. This ASU will impact our financial statement disclosures, however, we do not expect it to have a material impact on our financial condition or results of operations.

Page-8

In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842). This ASU was issued to increase transparency and comparability among organizations by recognizing lease assets and lease liabilities, including leases classified as operating leases under previous GAAP, on the balance sheet and requiring additional disclosures of key information about leasing arrangements. This ASU applies to leasing arrangements exceeding a twelve month term. ASU 2016-02 is effective for annual periods, including interim periods within those annual periods beginning after December 15, 2018 and requires a modified retrospective method upon adoption. Early application of the amendments is permitted. We are currently evaluating the provisions of this ASU and will be monitoring developments and additional guidance to determine the timing of our adoption and the potential outcome the amendments will have on our financial condition and results of operations.

In March 2016, the FASB issued ASU No. 2016-05, Derivatives and Hedging (Topic 815): Effect of Derivative Contract Novations on Existing Hedge Accounting Relationships. A contract novation refers to replacing one of the parties to a derivative instrument with a new party. This ASU clarifies that a change in counterparty in a derivative instrument does not, in and of itself, require dedesignation of that hedging relationship and therefore discontinue the application of hedge accounting. ASU 2016-05 is effective for financial statements issued for fiscal years beginning after December 15, 2016, and interim periods within those fiscal years. Early adoption is permitted in any interim or annual period. We do not expect this ASU to have a material impact on our financial condition or results of operations.

In March 2016, the FASB issued ASU No. 2016-09, Compensation - Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting. This ASU identifies areas for simplification involving several aspects of accounting for share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities, forfeiture accounting, and classifications on the statement of cash flows. ASU 2016-09 is effective for annual periods beginning after December 15, 2016, and interim periods within those annual periods. Early adoption is permitted in any interim or annual period. We are currently evaluating the the provisions of this ASU and will be monitoring developments and additional guidance to determine the potential outcome the amendments will have on our financial condition and results of operations.

In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. This ASU replaces the incurred loss impairment methodology in current GAAP with a methodology that reflects expected credit losses, requiring a financial asset measured at amortized cost basis to be presented at the net amount expected to be collected. Under the new guidance, an entity recognizes as an allowance its estimate of expected credit losses, which is likely to result in more timely recognition of such losses. In addition, the accounting for purchased credit impaired financial assets will make the allowance for credit losses more comparable between originated assets and purchased financial assets, as well as reduce complexity with the accounting for interest income. ASU 2016-13 is effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. Early adoption is permitted for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. We are currently evaluating the provisions of this ASU and will be monitoring developments and additional guidance to determine the timing of our adoption and the potential outcome the amendments will have on our financial condition and results of operations.

Note 3:  Fair Value of Assets and Liabilities

Fair Value Hierarchy and Fair Value Measurement

We group our assets and liabilities that are measured at fair value into three levels within the fair value hierarchy, based on the markets in which the assets and liabilities are traded and the reliability of the assumptions used to determine fair value. These levels are:

Level 1: Valuations are based on unadjusted quoted prices in active markets for identical assets or liabilities.

Level 2: Valuations are based on quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active and model-based valuations for which all significant assumptions are observable or can be corroborated by observable market data.

Level 3: Valuations are based on unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. Values are determined using pricing models and discounted cash flow models and may include significant Management judgment and estimation.

Page-9

Transfers between levels of the fair value hierarchy are recognized through our monthly and/or quarterly valuation process in the reporting period during which the event or circumstances that caused the transfer occurred.

The following table summarizes our assets and liabilities that were required to be recorded at fair value on a recurring basis.

(in thousands)   Description of Financial Instruments	Carrying Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
June 30, 2016
Securities available-for-sale:
Mortgage-backed securities and collateralized mortgage obligations issued by U.S. government-sponsored agencies	$	167,407	$	—	$	166,750	$	657
Debentures of government-sponsored agencies	83,758		—		83,758		—
Privately-issued collateralized mortgage obligations	768		—		768		—
Obligations of state and political subdivisions	66,452		—		66,452		—
Corporate bonds	4,976		—		4,976		—
Derivative financial liabilities (interest rate contracts)	2,721		—		2,721		—
December 31, 2015
Securities available-for-sale:
Mortgage-backed securities and collateralized mortgage obligations issued by U.S. government-sponsored agencies	$	190,093	$	—	$	188,381	$	1,712
Debentures of government-sponsored agencies	160,892		—		160,892		—
Privately-issued collateralized mortgage obligations	4,150		—		4,150		—
Obligations of state and political subdivisions	57,673		—		57,673		—
Corporate bonds	4,979		—		4,979		—
Derivative financial assets (interest rate contracts)	3		—		3		—
Derivative financial liabilities (interest rate contracts)	1,658		—		1,658		—

Securities available-for-sale are recorded at fair value on a recurring basis. When available, quoted market prices (Level 1) are used to determine the fair value of securities available-for-sale. If quoted market prices are not available, we obtain pricing information from a reputable third-party service provider, who may utilize valuation techniques that use current market-based or independently sourced parameters, such as bid/ask prices, dealer-quoted prices, interest rates, benchmark yield curves, prepayment speeds, probability of default, loss severity and credit spreads (Level 2).   Level 2 securities include obligations of state and political subdivisions, U.S. agencies or government sponsored agencies' debt securities, mortgage-backed securities, government agency-issued and privately-issued collateralized mortgage obligations. As of June 30, 2016 and December 31, 2015, there were no securities that were considered Level 1 securities. As of June 30, 2016, we had one available-for-sale security that was considered a Level 3 security. The security is a U.S. government agency obligation collateralized by a small number of business equipment loans guaranteed by the Small Business Administration ("SBA") program. This security is not actively traded and is owned only by a few investors. The significant unobservable data that is reflected in the fair value measurement include dealer quotes, projected prepayment speeds/average life and credit information, among other things. The decrease in fair value during 2016 was due to the payoff of one of the larger loans in the pool collateralizing the security. The unrealized gain on this SBA-guaranteed security decreased by $2 thousand in the same period recorded as part of other comprehensive income.

Securities held-to-maturity may be written down to fair value (determined using the same techniques discussed above for securities available-for-sale) as a result of an other-than-temporary impairment, if any.

On a recurring basis, derivative financial instruments are recorded at fair value, which is based on the income approach using observable Level 2 market inputs, reflecting market expectations of future interest rates as of the measurement date.  Standard valuation techniques are used to calculate the present value of the future expected cash flows assuming an orderly transaction.  Valuation adjustments may be made to reflect both our own credit risk and the counterparties’ credit risk in determining the fair value of the derivatives. Level 2 inputs for the valuations are limited to observable

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market prices for London Interbank Offered Rate ("LIBOR") and Overnight Index Swap ("OIS") rates (for the very short term), quoted prices for LIBOR futures contracts, observable market prices for LIBOR and OIS swap rates, and one-month and three-month LIBOR basis spreads at commonly quoted intervals.  Mid-market pricing of the inputs is used as a practical expedient in the fair value measurements.  We project spot rates at reset days specified by each swap contract to determine future cash flows, then discount to present value using either LIBOR or OIS curves depending on whether the swap positions are fully collateralized as of the measurement date.  When the value of any collateral placed with counterparties is less than the interest rate derivative liability, a credit valuation adjustment ("CVA") is applied to reflect the credit risk we pose to counterparties.  We have used the spread between the Standard & Poor's BBB rated U.S. Bank Composite rate and LIBOR for the closest maturity term corresponding to the duration of the swaps to derive the CVA. A similar credit risk adjustment, correlated to the credit standing of the counterparty, is made when collateral posted by the counterparty does not fully cover their liability to Bank of Marin. For further discussion on our methodology in valuing our derivative financial instruments, refer to Note 9.

Certain financial assets may be measured at fair value on a non-recurring basis. These assets are subject to fair value adjustments that result from the application of the lower of cost or fair value accounting or write-downs of individual assets, such as impaired loans and other real estate owned ("OREO").

The following table presents the carrying value of assets and liabilities measured at fair value on a non-recurring basis and that were held in the consolidated statements of condition at each respective period end, by level within the fair value hierarchy as of June 30, 2016 and December 31, 2015.

(in thousands)	Carrying Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs  (Level 3)
June 30, 2016
Impaired loans 1	$	171	$	—	$	—	$	171
Other real estate owned	408		—		—		408
December 31, 2015
Impaired loans	$	—	$	—	$	—	$	—
Other real estate owned	421		—		—		421

¹Represents collateral-dependent loan principal balances that had been generally written down to the values of the underlying collateral and reflected net of specific valuation allowances. At June 30, 2016, the $171 thousand carrying value of a consumer loan was net of a $5 thousand specific valuation allowance. The carrying value of loans fully charged-off, which includes unsecured lines of credit, overdrafts and all other loans, is zero.

When a loan is identified as impaired, it is reported at the lower of cost or fair value, measured based on the loan's observable market price (Level 1) or the current net realizable value of the underlying collateral securing the loan, if the loan is collateral dependent (Level 3).  Net realizable value of the underlying collateral is the fair value of the collateral less estimated selling costs and any prior liens. Appraisals, recent comparable sales, offers and listing prices are factored in when valuing the collateral. We review and verify the qualifications and licenses of the certified general appraisers used for appraising commercial properties or certified residential appraisers for residential properties. Real estate appraisals may utilize a combination of approaches including replacement cost, sales comparison and the income approach. Comparable sales and income data are analyzed by the appraisers and adjusted to reflect differences between them and the subject property such as property characteristics, leasing status and physical condition. When appraisals are received, Management reviews the underlying assumptions and methodology utilized, 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. Appraised values may be adjusted to reflect changes in market conditions that have occurred subsequent to the appraisal date, or for revised estimates regarding the timing or cost of the property sale. These adjustments are based on qualitative judgments made by Management on a case-by-case basis and are generally unobservable valuation inputs as they are specific to the underlying collateral. There have been no significant changes in the valuation techniques during 2016.

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OREO represents collateral acquired through foreclosure and is initially recorded at fair value as established by a current appraisal, adjusted for disposition costs. Subsequently, OREO is measured at lower of cost or fair value. OREO values are reviewed on an ongoing basis and any subsequent decline in fair value is recorded as a foreclosed asset expense in the current period. The value of OREO is determined based on independent appraisals, similar to the process used for impaired loans, discussed above, and is classified as Level 3. All OREO resulted from an acquisition. Decreases in the estimated fair value of OREO totaled $13 thousand and $40 thousand during the first six months of 2016 and 2015, respectively.

Disclosures about Fair Value of Financial Instruments

The table below is a summary of fair value estimates for financial instruments as of June 30, 2016 and December 31, 2015, excluding financial instruments recorded at fair value on a recurring basis (summarized in the first table in this note). The carrying amounts in the following table are recorded in the consolidated statements of condition under the indicated captions. We have excluded non-financial assets and non-financial liabilities defined by the Codification (ASC 820-10-15-1A), such as Bank premises and equipment, deferred taxes and other liabilities.  In addition, we have 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.

	June 30, 2016					December 31, 2015
(in thousands)	Carrying Amounts		Fair Value		Fair Value Hierarchy	Carrying Amounts		Fair Value		Fair Value Hierarchy
Financial assets
Cash and cash equivalents	$	55,438	$	55,438	Level 1	$	26,343	$	26,343	Level 1
Investment securities held-to-maturity	58,491		60,160		Level 2	69,637		71,054		Level 2
Loans, net	1,433,312		1,453,254		Level 3	1,436,229		1,470,380		Level 3
Interest receivable	5,968		5,968		Level 2	6,643		6,643		Level 2
Financial liabilities
Deposits	1,705,615		1,705,937		Level 2	1,728,226		1,728,717		Level 2
Federal Home Loan Bank and other borrowings	—		—		Level 2	67,000		67,279		Level 2
Subordinated debentures	5,493		5,108		Level 3	5,395		5,132		Level 3
Interest payable	137		137		Level 2	187		187		Level 2

Following is a description of methods and assumptions used to estimate the fair value of each class of financial instrument not recorded at fair value but required for disclosure purposes:

Cash and Cash Equivalents - The carrying amounts of cash and cash equivalents approximate their fair value because of the short-term nature of these instruments.

Held-to-maturity Securities - Held-to-maturity securities, which generally consist of obligations of state and political subdivisions and corporate bonds, are recorded at their amortized cost. The fair value for disclosure purposes is determined using methodologies similar to those described above for available-for-sale securities using Level 2 inputs. If Level 2 inputs are not available, we may utilize pricing models that incorporate unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities (Level 3).  As of June 30, 2016 and December 31, 2015, we did not hold any held-to-maturity securities whose fair value was measured using significant unobservable inputs.

Loans - The fair value of loans with variable interest rates approximates their current carrying value, because their rates are regularly adjusted to current market rates. The fair value of fixed rate loans or variable loans at negotiated interest rate floors or ceilings with remaining maturities in excess of one year is estimated by discounting the future cash flows using current market rates at which similar loans would be made to borrowers with similar creditworthiness and similar remaining maturities. The allowance for loan losses (“ALLL”) is considered to be a reasonable estimate of the portion of loan discount attributable to credit risks.

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

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Deposits - The fair value of deposits without stated maturity, such as transaction accounts, savings accounts and money market accounts, is the amount payable on demand at the reporting date. The fair value of time deposits is estimated by discounting the future cash flows using current rates offered for deposits of similar remaining maturities.

Federal Home Loan Bank Borrowings - The fair value is estimated by discounting the future cash flows using current rates offered by the Federal Home Loan Bank of San Francisco ("FHLB") for similar credit advances corresponding to the remaining term of our fixed-rate credit advances.

Subordinated Debentures - The fair values of the subordinated debentures were estimated by discounting the future cash flows (interest payment at a rate of three-month LIBOR plus 3.05% and 1.40%) to their present values using current market rates at which similar bonds would be issued with similar credit ratings as ours and similar remaining maturities. Each interest payment was discounted at the spot rate for the corresponding term, determined based on the yields and terms of comparable trust preferred securities, plus a liquidity premium. In July 2010, the Dodd-Frank Act was signed into law and limits the ability of certain bank holding companies to treat trust preferred security debt issuances as Tier 1 capital. This law effectively closed the trust-preferred securities markets for new issuances and led to the absence of observable or comparable transactions in the market place. Due to the use of unobservable inputs of trust preferred securities, we consider the fair value to be a Level 3 measurement. See Note 6 for further information.

Commitments - The value of unrecognized financial instruments is estimated based on the fee income associated with the commitments which, in the absence of credit exposure, is considered to approximate their settlement value. The fair value of commitment fees was not material at June 30, 2016 and December 31, 2015, respectively.

Note 4:  Investment Securities

Our investment securities portfolio consists of obligations of state and political subdivisions, corporate bonds, U.S. government agency securities, including mortgage-backed securities (“MBS”) and collateralized mortgage obligations (“CMOs”) issued or guaranteed by Federal National Mortgage Association ("FNMA"), Federal Home Loan Mortgage Corporation ("FHLMC"), or Government National Mortgage Association ("GNMA"), debentures issued by government-sponsored agencies such as FNMA, Federal Farm Credit Bureau, FHLB and FHLMC, as well as privately issued CMOs, as reflected in the table below:

	June 30, 2016									December 31, 2015
	Amortized		Fair		Gross Unrealized					Amortized		Fair		Gross Unrealized
(in thousands)	Cost		Value		Gains		(Losses)			Cost		Value		Gains		(Losses)
Held-to-maturity:
Obligations of state and   political subdivisions	$	39,009	$	40,337	$	1,336	$	(8	)	$	42,919	$	44,146	$	1,246	$	(19	)
Corporate bonds	8,529		8,534		6		(1		)	15,072		15,098		42		(16		)
MBS pass-through securities issued by FHLMC and FNMA	10,953		11,289		336		—			11,646		11,810		171		(7		)
Total held-to-maturity	58,491		60,160		1,678		(9		)	69,637		71,054		1,459		(42		)
Available-for-sale:
Securities of U.S. government or government-sponsored agencies:
MBS pass-through securities issued by FHLMC and FNMA	111,682		113,877		2,195		—			138,222		138,462		694		(454		)
CMOs issued by FNMA	23,061		23,387		331		(5		)	18,266		18,219		97		(144		)
CMOs issued by FHLMC	21,110		21,451		341		—			22,889		22,932		82		(39		)
CMOs issued by GNMA	8,470		8,692		222		—			10,326		10,480		169		(15		)
Debentures of government- sponsored agencies	83,566		83,758		193		(1		)	161,690		160,892		28		(826		)
Privately issued CMOs	768		768		1		(1		)	3,960		4,150		190		—
Obligations of state and political subdivisions	64,725		66,452		1,729		(2		)	57,110		57,673		580		(17		)
Corporate bonds	4,954		4,976		25		(3		)	4,947		4,979		43		(11		)
Total available-for-sale	318,336		323,361		5,037		(12		)	417,410		417,787		1,883		(1,506		)
Total investment securities	$	376,827	$	383,521	$	6,715	$	(21	)	$	487,047	$	488,841	$	3,342	$	(1,548	)

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The amortized cost and fair value of investment debt securities by contractual maturity at June 30, 2016 are shown below. Expected maturities will differ from contractual maturities because the issuers of the securities may have the right to call or prepay obligations with or without call or prepayment penalties.

	June 30, 2016								December 31, 2015
	Held-to-Maturity				Available-for-Sale				Held-to-Maturity				Available-for-Sale
(in thousands)	Amortized Cost		Fair Value		Amortized Cost		Fair Value		Amortized Cost		Fair Value		Amortized Cost		Fair Value
Within one year	$	19,481	$	19,545	$	2,412	$	2,416	$	18,853	$	18,920	$	12,135	$	12,176
After one year but within five years	21,203		21,929		114,702		115,207		31,677		32,360		188,007		187,326
After five years through ten years	5,646		6,068		65,766		67,170		8,580		8,969		64,899		64,999
After ten years	12,161		12,618		135,456		138,568		10,527		10,805		152,369		153,286
Total	$	58,491	$	60,160	$	318,336	$	323,361	$	69,637	$	71,054	$	417,410	$	417,787

Sales of investment securities and gross realized gains and losses are shown in the following table.

	Three months ended				Six months ended
(in thousands)	June 30, 2016		June 30, 2015		June 30, 2016			June 30, 2015
Available-for-sale:
Sales proceeds	$	13,688	$	1,559	$	68,673		$	1,559
Gross realized gains	284		8		458			8
Gross realized losses	—		—		(64		)	—

Investment securities carried at $96.7 million and $87.9 million at June 30, 2016 and December 31, 2015, respectively, were pledged to the State of California: $95.9 million and $87.1 million to secure public deposits in compliance with the Local Agency Security Program at June 30, 2016 and December 31, 2015, respectively, and $831 thousand and $840 thousand to provide collateral for trust deposits at June 30, 2016 and December 31, 2015, respectively. In addition, investment securities carried at $2.1 million and $1.1 million were pledged to collateralize a Wealth Management and Trust Services (“WMTS”) checking account at June 30, 2016 and December 31, 2015, respectively.

Other-Than-Temporarily Impaired Debt Securities

We have evaluated the credit of our investment securities and their issuers and/or insurers. Based on our evaluation, Management has determined that no investment security in our investment portfolio is other-than-temporarily impaired as of June 30, 2016. We do not have the intent and it is more likely than not that we will not have to sell securities temporarily impaired at June 30, 2016 before recovery of the cost basis.

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Ten and fifty-four investment securities were in unrealized loss positions at June 30, 2016 and December 31, 2015, respectively. Those securities are summarized and classified according to the duration of the loss period in the tables below:

June 30, 2016	< 12 continuous months					≥ 12 continuous months					Total securities  in a loss position
(in thousands)	Fair value		Unrealized loss			Fair value		Unrealized loss			Fair value		Unrealized loss
Held-to-maturity:
Obligations of state and political subdivisions	$	1,058	$	(8	)	$	—	$	—		$	1,058	$	(8	)
Corporate bonds	5,000		(1		)	—		—			5,000		(1		)
MBS pass-through securities issued by FHLMC and FNMA	—		—			—		—			—		—
Total held-to-maturity	6,058		(9		)	—		—			6,058		(9		)
Available-for-sale:
MBS pass-through securities issued by FHLMC and FNMA	—		—			—		—			—		—
CMOs issued by FNMA	—		—			2,811		(5		)	2,811		(5		)
CMOs issued by FHLMC	—		—			—		—			—		—
CMOs issued by GNMA	—		—			—		—			—		—
Debentures of government- sponsored agencies	9,997		(1		)	—		—			9,997		(1		)
Privately issued CMOs	182		(1		)	—		—			182		(1		)
Obligations of state & political subdivisions	1,918		(2		)	—		—			1,918		(2		)
Corporate bonds	1,990		(3		)	—		—			1,990		(3		)
Total available-for-sale	14,087		(7		)	2,811		(5		)	16,898		(12		)
Total temporarily impaired securities	$	20,145	$	(16	)	$	2,811	$	(5	)	$	22,956	$	(21	)

December 31, 2015	< 12 continuous months					≥ 12 continuous months					Total securities  in a loss position
(in thousands)	Fair value		Unrealized loss			Fair value		Unrealized loss			Fair value		Unrealized loss
Held-to-maturity:
Obligations of state and political subdivisions	$	8,297	$	(19	)	$	—	$	—		$	8,297	$	(19	)
Corporate bonds	3,523		(15		)	1,999		(1		)	5,522		(16		)
MBS pass-through securities issued by FHLMC and FNMA	2,332		(7		)	—		—			2,332		(7		)
Total held-to-maturity	14,152		(41		)	1,999		(1		)	16,151		(42		)
Available-for-sale:
MBS pass-through securities issued by FHLMC and FNMA	68,809		(454		)	—		—			68,809		(454		)
CMOs issued by FNMA	9,277		(80		)	3,158		(64		)	12,435		(144		)
CMOs issued by FHLMC	—		—			1,989		(39		)	1,989		(39		)
CMOs issued by GNMA	164		—			2,374		(15		)	2,538		(15		)
Debentures of government- sponsored agencies	136,064		(713		)	9,887		(113		)	145,951		(826		)
Obligations of state & political subdivisions	4,557		(15		)	579		(2		)	5,136		(17		)
Corporate bonds	2,986		(11		)	—		—			2,986		(11		)
Total available-for-sale	221,857		(1,273		)	17,987		(233		)	239,844		(1,506		)
Total temporarily impaired securities	$	236,009	$	(1,314	)	$	19,986	$	(234	)	$	255,995	$	(1,548	)

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As of June 30, 2016, there was one CMO issued by FNMA that had been in a continuous loss position for twelve months or more. We have evaluated it and believe that the decline in fair value is primarily driven by factors other than credit. It is probable that we will be able to collect all amounts due according to the contractual terms as it is supported by the U.S. Federal Government, which protects us from credit losses. Based upon our assessment of the credit fundamentals, we concluded that this security was not other-than-temporarily impaired at June 30, 2016.

Nine investment securities in our portfolio were in a temporary loss position for less than twelve months as of June 30, 2016. They consisted of one debenture of U.S. government-sponsored agency, three obligations of U.S. state and political subdivisions, one privately issued CMO and four corporate bonds. The government-sponsored agency debenture is supported by the U.S. Federal Government, which protects us from credit losses. Other temporarily impaired securities are deemed creditworthy after internal analysis of the issuers' latest financial information and credit enhancement. Additionally, all are rated as investment grade by at least one major rating agency. As a result of this impairment analysis, we have concluded that these securities were not other-than-temporarily impaired at June 30, 2016.

Non-Marketable Securities

As a member of the FHLB, we are required to maintain a minimum investment in the FHLB capital stock determined by the Board of Directors of the FHLB. The minimum investment requirements can increase in the event we increase our total asset size or borrowings with the FHLB. Shares cannot be purchased or sold except between the FHLB and its members at the $100 per share par value. We held $10.2 million and $8.4 million of FHLB stock recorded at cost in other assets on the consolidated statements of condition at June 30, 2016 and December 31, 2015, respectively. The carrying amounts of these investments are reasonable estimates of fair value because the securities are restricted to member banks and they do not have a readily determinable market value. Management does not believe that the FHLB stock is other-than-temporarily-impaired, as we expect to be able to redeem this stock at cost. On July 28, 2016, FHLB announced a cash dividend for the second quarter of 2016 at an annualized dividend rate of 9.17% to be distributed in mid August 2016. Cash dividends paid on FHLB capital stock are recorded as non-interest income.

As a member bank of Visa U.S.A., we hold 16,939 shares of Visa Inc. Class B common stock with a carrying value of zero, which is equal to our cost basis. These shares are restricted from resale until their conversion into Class A (voting) shares upon the termination of Visa Inc.'s covered litigation escrow account. As a result of the restriction, these shares are not considered available-for-sale and are not carried at fair value. When converting this Class B common stock to Class A common stock under the current conversion rate of 1.6483 and the closing stock price of Class A shares, the value of our shares of Class B common stock would have been $2.1 million at June 30, 2016 and $2.2 million at December 31, 2015. The conversion rate is subject to further reduction upon the final settlement of the covered litigation against Visa Inc. and its member banks. See Note 8 herein.

We invest in low income housing tax credit funds as a limited partner, which totaled $2.6 million and $2.7 million recorded in other assets as of June 30, 2016 and December 31, 2015, respectively. In the first half of 2016, we recognized $164 thousand of low income housing tax credits and other tax benefits, net of $127 thousand of amortization expense of low income housing tax credit investment, as a component of income tax expense. As of June 30, 2016, our unfunded commitments for these low income housing tax credit funds totaled $1.5 million. We did not recognize any impairment losses on these low income housing tax credit investments during the first half of 2016 or 2015.

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Note 5:  Loans and Allowance for Loan Losses

Credit Quality of Loans

Outstanding loans by class and payment aging as of June 30, 2016 and December 31, 2015 were as follows:

Loan Aging Analysis by Loan Class
(in thousands)	Commercial and industrial		Commercial real estate, owner-occupied		Commercial real estate, investor		Construction		Home equity		Other residential 1		Installment and other consumer		Total
June 30, 2016
30-59 days past due	$	44	$	—	$	—	$	—	$	780	$	—	$	—	$	824
60-89 days past due	—		—		1,676		—		—		—		63		1,739
90 days or more past due	21		176		—		—		99		—		—		296
Total past due	65		176		1,676		—		879		—		63		2,859
Current	215,192		241,927		701,782		77,024		111,361		73,761		24,493		1,445,540
Total loans 3	$	215,257	$	242,103	$	703,458	$	77,024	$	112,240	$	73,761	$	24,556	$	1,448,399
Non-accrual 2	$	21	$	176	$	1,676	$	—	$	789	$	—	$	63	$	2,725
December 31, 2015
30-59 days past due	$	36	$	—	$	1,096	$	1	$	—	$	—	$	249	$	1,382
60-89 days past due	—		—		—		—		633		—		89		722
90 days or more past due	21		—		—		—		99		—		—		120
Total past due	57		—		1,096		1		732		—		338		2,224
Current	219,395		242,309		714,783		65,494		111,568		73,154		22,301		1,449,004
Total loans 3	$	219,452	$	242,309	$	715,879	$	65,495	$	112,300	$	73,154	$	22,639	$	1,451,228
Non-accrual 2	$	21	$	—	$	1,903	$	1	$	171	$	—	$	83	$	2,179

¹ Our residential loan portfolio does not include sub-prime loans, nor is it our practice to underwrite loans commonly referred to as "Alt-A mortgages", the characteristics of which are loans lacking full documentation, borrowers having low FICO scores or higher loan-to-value ratios.

² Amounts include $1 thousand of Purchased Credit Impaired ("PCI") loans that had stopped accreting interest at December 31, 2015. Amounts exclude accreting PCI loans of $2.9 million and $3.7 million at June 30, 2016 and December 31, 2015, respectively, as we have a reasonable expectation about future cash flows to be collected and we continue to recognize accretable yield on these loans in interest income. These accreting PCI loans are included in current loans. There were no accruing past due loans more than ninety days at June 30, 2016 or December 31, 2015.

³ Amounts include net deferred loan costs of $726 thousand and $768 thousand at June 30, 2016 and December 31, 2015, respectively. Amounts are also net of unaccreted purchase discounts on non-PCI loans of $2.5 million and $3.2 million at June 30, 2016 and December 31, 2015, respectively.

Our commercial loans are generally made to established small and mid-sized businesses to provide financing for their growth and working capital needs, equipment purchases and/or acquisitions.  Management examines historical, current, and projected cash flows to determine the ability of the borrower to repay obligations as agreed. Commercial loans are made based primarily on the identified cash flows of the borrower and secondarily on the underlying collateral and/or guarantor support. The cash flows of borrowers, however, may not occur as expected, and the collateral securing these loans may fluctuate in value. Most commercial and industrial loans are secured by the assets being financed, such as accounts receivable and/or inventory, and typically include a personal guarantee. We target stable businesses with guarantors that have proven to be resilient in periods of economic stress.  Typically, the guarantors provide an additional source of repayment for most of our credit extensions.

Commercial real estate loans are subject to underwriting standards and processes similar to commercial loans discussed above. We underwrite these loans to be repaid from cash flow and to be supported by real property collateral. Underwriting standards for commercial real estate loans include, but are not limited to, debt coverage and loan-to-value ratios. Furthermore, the vast majority of our loans are guaranteed by the owners of the properties.  Commercial real estate loans may be adversely affected by conditions in the real estate markets or in the general economy. In the event of a vacancy, guarantors are expected to carry the loans until a replacement tenant can be found.  Regardless of the guaranty status, the owner's equity investment provides a strong economic incentive to continue to support the commercial real estate projects. As such, we have generally experienced a relatively low level of loss and delinquencies in this portfolio.

Construction loans are generally made to developers and builders to finance construction, renovation and occasionally land acquisitions in anticipation of near-term development. These loans are underwritten after evaluation of the borrower's financial strength, reputation, prior track record, and independent appraisals. The construction industry can be affected by significant events, including: the inherent volatility of real estate markets and vulnerability to delays due to weather, change orders, inability to obtain construction permits, labor or material shortages, and price changes.

Page-17

Estimates of construction costs and value associated with the completed project may be inaccurate. Repayment of construction loans is largely dependent on the ultimate success of the project.

Consumer loans primarily consist of home equity lines of credit, other residential (tenancy-in-common, or “TIC”) loans, and installment and other consumer loans. We originate consumer loans utilizing credit score information, debt-to-income ratio and loan-to-value ratio analysis. Diversification, coupled with relatively small loan amounts that are spread across many individual borrowers, mitigates risk. Additionally, trend reports are reviewed by Management on a regular basis. Our residential loan portfolio includes TIC units almost entirely in San Francisco. These loans tend to have more equity in their properties than conventional residential mortgages, which mitigates risk. Installment and other consumer loans include mostly loans for floating homes and mobile homes along with a small number of installment loans.

We use a risk rating system to evaluate asset quality, and to identify and monitor credit risk in individual loans, and ultimately in the portfolio. Definitions of loans that are risk graded “Special Mention” or worse are consistent with those used by the Federal Deposit Insurance Corporation ("FDIC").  Our internally assigned grades are as follows:

Pass: Loans to borrowers of acceptable or better credit quality. Borrowers in this category demonstrate fundamentally sound financial positions, repayment capacity, credit history and management expertise.  Loans in this category must have an identifiable and stable source of repayment and meet the Bank’s policy regarding debt service coverage ratios.  These borrowers are capable of sustaining normal economic, market or operational setbacks without significant financial consequences.  Negative external industry factors are generally not present.  The loan may be secured, unsecured or supported by non-real estate collateral for which the value is more difficult to determine and/or marketability is more uncertain. This category also includes “Watch” loans, where the primary source of repayment has been delayed. “Watch” is intended to be a transitional grade, with either an upgrade or downgrade within a reasonable period.

Special Mention: Potential weaknesses that deserve close attention. If left uncorrected, those potential weaknesses may result in deterioration of the payment prospects for the asset. Special Mention assets do not present sufficient risk to warrant adverse classification.

Substandard: Inadequately protected by either the current sound worth and paying capacity of the obligor or the collateral pledged, if any. A Substandard asset has a well-defined weakness or weaknesses that jeopardize(s) the liquidation of the debt. Substandard assets are characterized by the distinct possibility that we will sustain some loss if such weaknesses or deficiencies are not corrected. Well-defined weaknesses include adverse trends or developments in the borrower’s financial condition, managerial weaknesses and/or significant collateral deficiencies.

Doubtful: Critical weaknesses that make collection or liquidation in full improbable. There may be specific pending events that work to strengthen the asset; however, the amount or timing of the loss may not be determinable. Pending events generally occur within one year of the asset being classified as Doubtful. Examples include: merger, acquisition, or liquidation; capital injection; guarantee; perfecting liens on additional collateral; and refinancing. Such loans are placed on non-accrual status and usually are collateral-dependent.

We regularly review our credits for accuracy of risk grades whenever new information is received. Borrowers are required to submit financial information at regular intervals:

• Generally, commercial borrowers with lines of credit are required to submit financial information with reporting intervals ranging from monthly to annually depending on credit size, risk and complexity.

• Investor commercial real estate borrowers are generally required to submit rent rolls or property income statements annually.

• Construction loans are monitored monthly, and reviewed on an ongoing basis.

• Home equity and other consumer loans are reviewed based on delinquency.

• Loans graded “Watch” or more severe, regardless of loan type, are reviewed no less than quarterly.

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The following table represents an analysis of loans by internally assigned grades, including the PCI loans, at June 30, 2016 and December 31, 2015:

Credit Risk Profile by Internally Assigned Grade
(in thousands)	Commercial and industrial		Commercial real estate, owner-occupied		Commercial real estate, investor		Construction		Home equity		Other residential		Installment and other consumer		Purchased credit-impaired		Total
June 30, 2016
Pass	$	199,923	$	230,799	$	697,897	$	73,786	$	109,408	$	73,761	$	24,162	$	2,863	$	1,412,599
Special Mention	11,818		2,101		362		—		1,120		—		—		—		15,401
Substandard	3,477		8,165		3,484		3,238		1,641		—		394		—		20,399
Total loans	$	215,218	$	241,065	$	701,743	$	77,024	$	112,169	$	73,761	$	24,556	$	2,863	$	1,448,399
December 31, 2015
Pass	$	192,560	$	219,060	$	710,042	$	62,255	$	109,959	$	73,154	$	22,307	$	3,260	$	1,392,597
Special Mention	22,457		12,371		372		—		1,100		—		—		—		36,300
Substandard	4,260		9,167		3,739		3,239		1,173		—		332		421		22,331
Total loans	$	219,277	$	240,598	$	714,153	$	65,494	$	112,232	$	73,154	$	22,639	$	3,681	$	1,451,228

Troubled Debt Restructuring

Our loan portfolio includes certain loans that have been modified in a troubled debt restructuring (“TDR”), where economic concessions have been granted to borrowers experiencing financial difficulties. These concessions typically result from our loss mitigation activities and could include reductions in the interest rate, payment extensions, forgiveness of principal, forbearance or other actions. TDRs on nonaccrual status at the time of restructure may be returned to accruing status after Management considers the borrower’s sustained repayment performance for a reasonable period, generally six months, and obtains reasonable assurance of repayment and performance.

A loan may no longer be reported as a TDR if all of the following conditions are met:

• The loan is subsequently refinanced or restructured at current market interest rates and the new terms are consistent with the treatment of creditworthy borrowers under regular underwriting standards;

• The borrower is no longer considered to be in financial difficulty;

• Performance on the loan is reasonably assured; and;

• Existing loan did not have any forgiveness of principal or interest.

The removal of TDR status must be approved by the same management level that approved the upgrading of the loan classification.

There were no loans removed from TDR designation during 2016. During the first six months of 2015, three loans with a recorded investment totaling $396 thousand were removed from TDR designation.

The table below summarizes outstanding TDR loans by loan class as of June 30, 2016 and December 31, 2015. The summary includes both TDRs that are on non-accrual status and those that continue to accrue interest.

(in thousands)
Recorded investment in Troubled Debt Restructurings 1	June 30, 2016		December 31, 2015
Commercial and industrial	$	3,676	$	4,698
Commercial real estate, owner-occupied	6,992		6,993
Commercial real estate, investor	2,317		514
Construction 2	3,238		3,238
Home equity	677		460
Other residential	1,987		2,010
Installment and other consumer	1,079		1,168
Total	$	19,966	$	19,081

¹ Includes $19.9 million and $19.0 million of TDR loans that were accruing interest as of June 30, 2016 and December 31, 2015, respectively. Includes $618 thousand and $137 thousand of acquired loans at June 30, 2016 and December 31, 2015, respectively.

² In June 2015, one TDR loan was transferred to loans held-for-sale at fair value totaling $1.5 million, net of an $839 thousand charge-off to the allowance for loan losses. The loan was subsequently sold in June 2015 for no additional gain or loss.

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The table below presents the following information for loans modified in a TDR during the presented periods: number of contracts modified, the recorded investment in the loans prior to modification, and the recorded investment in the loans after being restructured. The table below excludes fully charged-off TDR loans and loans modified in a TDR and subsequently paid-off during the years presented.

(dollars in thousands)	Number of Contracts Modified	Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment at period end
Troubled Debt Restructurings during the three months ended June 30, 2016:
Commercial real estate, investor	1	$	281	$	281	$	281
Home equity 1	1	87		222		222
Total	2	$	368	$	503	$	503
Troubled Debt Restructurings during the three months ended June 30, 2015:
Commercial and industrial	4	$	782	$	882	$	882
Commercial real estate, investor	1	222		221		221
Total	5	$	1,004	$	1,103	$	1,103

Troubled Debt Restructurings during the six months ended June 30, 2016:
Commercial real estate, investor	2	$	1,830	$	1,826	$	1,808
Home equity 1	1	87		222		222
Total	3	$	1,917	$	2,048	$	2,030
Troubled Debt Restructurings during the six months ended June 30, 2015:
Commercial and industrial	4	$	782	$	882	$	882
Commercial real estate, investor	1	222		221		221
Total	5	$	1,004	$	1,103	$	1,103

¹ The home equity TDR modification during the second quarter of 2016 included debt consolidation which increased the post-modification balance.

Modifications during the six months endedJune 30, 2016 primarily involved interest rate concessions, renewals, and other changes to loan terms. Modifications during the six months ended June 30, 2015 primarily involved maturity extensions and renewals. During the first six months of 2016 and 2015, there were no defaults on loans that had been modified in a TDR within the prior twelve-month period. We report defaulted TDRs based on a payment default definition of more than ninety days past due.

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Impaired Loan Balances and Their Related Allowance by Major Classes of Loans

The tables below summarize information on impaired loans and their related allowance. Total impaired loans include non-accrual loans, accruing TDR loans and accreting PCI loans that have experienced post-acquisition declines in cash flows expected to be collected.

(in thousands)	Commercial and industrial		Commercial real estate, owner-occupied		Commercial real estate, investor		Construction		Home equity		Other residential		Installment and other consumer		Total
June 30, 2016
Recorded investment in impaired loans:
With no specific allowance recorded	$	1,059	$	—	$	1,676	$	2,688	$	789	$	1,198	$	159	$	7,569
With a specific allowance recorded	2,637		7,169		2,317		550		606		789		982		15,050
Total recorded investment in impaired loans	$	3,696	$	7,169	$	3,993	$	3,238	$	1,395	$	1,987	$	1,141	$	22,619
Unpaid principal balance of impaired loans	$	3,697	$	7,169	$	5,984	$	3,238	$	1,411	$	1,987	$	1,142	$	24,628
Specific allowance	671		98		472		5		12		64		99		1,421
Average recorded investment in impaired loans during the quarter ended June 30, 2016	3,771		7,081		3,917		3,238		1,286		1,993		1,184		22,470
Interest income recognized on impaired loans during the quarter ended June 30, 2016	44		66		22		32		6		23		12		205
Average recorded investment in impaired loans during the six months ended June 30, 2016	4,027		7,037		3,523		3,238		1,077		1,998		1,211		22,111
Interest income recognized on impaired loans during the six months ended June 30, 2016	98		133		38		70		11		45		25		420
Average recorded investment in impaired loans during the quarter ended June 30, 2015	4,173		8,412		2,947		4,475		610		2,033		1,557		24,207
Interest income recognized on impaired loans during the quarter ended June 30, 2015	56		78		8		9		4		23		17		195
Average recorded investment in impaired loans during the six months ended June 30, 2015	3,946		8,427		2,931		5,078		618		2,037		1,650		24,687
Interest income recognized on impaired loans during the six months ended June 30, 2015	118		144		14		18		9		46		36		385

(in thousands)	Commercial and industrial		Commercial real estate, owner-occupied		Commercial real estate, investor		Construction		Home equity		Other residential		Installment and other consumer		Total
December 31, 2015
Recorded investment in impaired loans:
With no specific allowance recorded	$	2,198	$	4,111	$	2,416	$	2,687	$	171	$	1,214	$	131	$	12,928
With a specific allowance recorded	2,522		2,882		—		551		388		797		1,120		8,260
Total recorded investment in impaired loans	$	4,720	$	6,993	$	2,416	$	3,238	$	559	$	2,011	$	1,251	$	21,188
Unpaid principal balance of impaired loans	$	4,763	$	6,993	$	4,408	$	3,424	$	559	$	2,011	$	1,251	$	23,409
Specific allowance	$	912	$	70	$	—	$	1	$	3	$	67	$	116	$	1,169

Management monitors delinquent loans continuously and identifies problem loans, generally loans graded substandard or worse, to be evaluated individually for impairment testing. Generally, the recorded investment in impaired loans is net of any charge-offs from estimated losses related to specifically-identified impaired loans when they are deemed uncollectible. The charged-off portion of impaired loans outstanding at June 30, 2016 and December 31, 2015 totaled approximately $2.0 million and $2.1 million, respectively.  In addition, the recorded investment in impaired loans is net of purchase discounts or premiums on acquired loans. At June 30, 2016 and December 31, 2015, unused commitments to extend credit on impaired loans, including loans to borrowers whose terms have been modified in TDRs, totaled $944 thousand and $1.3 million, respectively.

Page-21

The following tables disclose loans by major portfolio category and activity in the ALLL, as well as the related ALLL disaggregated by impairment evaluation method.

Allowance for Loan Losses Rollforward for the Period
(in thousands)	Commercial and industrial			Commercial real estate, owner-occupied			Commercial real estate, investor			Construction			Home equity			Other residential			Installment and other consumer			Unallocated		Total
Three months ended June 30, 2016
Allowance for loan losses:
Beginning balance	$	2,799		$	1,619		$	6,571		$	822		$	1,044		$	430		$	434		$	1,309	$	15,028
Provision (reversal)	(192		)	12			19			9			31			(4		)	(20		)	145		—
Charge-offs	—			—			—			—			—			—			(4		)	—		(4		)
Recoveries	30			—			5			—			1			—			27			—		63
Ending balance	$	2,637		$	1,631		$	6,595		$	831		$	1,076		$	426		$	437		$	1,454	$	15,087
Three months ended June 30, 2015
Allowance for loan losses:
Beginning balance	$	2,620		$	2,094		$	6,292		$	778		$	923		$	430		$	462		$	1,557	$	15,156
Provision (reversal)	(117		)	(42		)	(351		)	596			(81		)	5			(14		)	4		—
Charge-offs	(1		)	—			—			(839		)	—			—			(5		)	—		(845		)
Recoveries	38			—			3			—			1			—			1			—		43
Ending balance	$	2,540		$	2,052		$	5,944		$	535		$	843		$	435		$	444		$	1,561	$	14,354

Allowance for Loan Losses Rollforward for the Period
(in thousands)	Commercial and industrial			Commercial real estate, owner-occupied			Commercial real estate, investor			Construction			Home equity			Other residential		Installment and other consumer			Unallocated		Total
Six months ended June 30, 2016
Allowance for loan losses:
Beginning balance	$	3,023		$	2,249		$	6,178		$	724		$	910		$	394	$	425		$	1,096	$	14,999
Provision (reversal)	(440		)	(618		)	407			107			165			32		(11		)	358		—
Charge-offs	(9		)	—			—			—			—			—		(4		)	—		(13		)
Recoveries	63			—			10			—			1			—		27			—		101
Ending balance	$	2,637		$	1,631		$	6,595		$	831		$	1,076		$	426	$	437		$	1,454	$	15,087
Six months ended June 30, 2015
Allowance for loan losses:
Beginning balance	$	2,837		$	1,924		$	6,672		$	839		$	859		$	433	$	566		$	969	$	15,099
Provision (reversal)	(392		)	128			(734		)	535			(18		)	2		(113		)	592		—
Charge-offs	(3		)	—			—			(839		)	—			—		(11		)	—		(853		)
Recoveries	98			—			6			—			2			—		2			—		108
Ending balance	$	2,540		$	2,052		$	5,944		$	535		$	843		$	435	$	444		$	1,561	$	14,354

Page-22

Allowance for Loan Losses and Recorded Investment in Loans
(dollars in thousands)	Commercial and industrial			Commercial real estate, owner-occupied			Commercial real estate, investor			Construction			Home equity			Other residential			Installment and other consumer			Unallocated		Total
June 30, 2016
Ending ALLL related to loans collectively evaluated for impairment	$	1,966		$	1,533		$	6,123		$	826		$	1,064		$	362		$	338		$	1,454	$	13,666
Ending ALLL related to loans individually evaluated for impairment	671			98			472			5			12			64			99			—		1,421
Ending ALLL related to purchased credit-impaired loans	—			—			—			—			—			—			—			—		—
Total	$	2,637		$	1,631		$	6,595		$	831		$	1,076		$	426		$	437		$	1,454	$	15,087
Loans outstanding:
Collectively evaluated for impairment	$	211,522		$	233,896		$	697,750		$	73,786		$	110,774		$	71,774		$	23,415		$	—	$	1,422,917
Individually evaluated for impairment	3,696			7,169			3,993			3,238			1,395			1,987			1,141			—		22,619
Purchased credit-impaired	39			1,038			1,715			—			71			—			—			—		2,863
Total	$	215,257		$	242,103		$	703,458		$	77,024		$	112,240		$	73,761		$	24,556		$	—	$	1,448,399
Ratio of allowance for loan losses to total loans	1.23		%	0.67		%	0.94		%	1.08		%	0.96		%	0.58		%	1.78		%	NM		1.04		%
Allowance for loan losses to non-accrual loans	12,557		%	927		%	393		%	NM			136		%	NM			694		%	NM		554		%

NM - Not Meaningful

Allowance for Loan Losses and Recorded Investment in Loans
(dollars in thousands)	Commercial and industrial			Commercial real estate, owner-occupied			Commercial real estate, investor			Construction			Home equity			Other residential			Installment and other consumer			Unallocated		Total
December 31, 2015
Ending ALLL related to loans collectively evaluated for impairment	$	2,111		$	2,179		$	6,178		$	723		$	907		$	327		$	309		$	1,096	$	13,830
Ending ALLL related to loans individually evaluated for impairment	904			70			—			—			3			67			116			—		1,160
Ending ALLL related to purchased  credit-impaired loans	8			—			—			1			—			—			—			—		9
Total	$	3,023		$	2,249		$	6,178		$	724		$	910		$	394		$	425		$	1,096	$	14,999
Loans outstanding:
Collectively evaluated for impairment	$	214,695		$	233,605		$	711,737		$	62,256		$	111,673		$	71,143		$	21,388		$	—	$	1,426,497
Individually evaluated for impairment1	4,582			6,993			2,416			3,238			559			2,011			1,251			—		21,050
Purchased credit-impaired	175			1,711			1,726			1			68			—			—			—		3,681
Total	$	219,452		$	242,309		$	715,879		$	65,495		$	112,300		$	73,154		$	22,639		$	—	$	1,451,228
Ratio of allowance for loan losses to total loans	1.38		%	0.93		%	0.86		%	1.11		%	0.81		%	0.54		%	1.88		%	NM		1.03		%
Allowance for loan losses to non-accrual loans	14,395		%	NM			325		%	72,400		%	532		%	NM			512		%	NM		688		%

¹ Total excludes $138 thousand PCI loans as of December 31, 2015 that have experienced credit deterioration post-acquisition declines in cash flows expected to be collected. These loans are included in the "purchased credit-impaired" amount in the next line below.

NM - Not Meaningful

Purchased Credit-Impaired Loans

We evaluated loans purchased in acquisitions in accordance with accounting guidance in ASC 310-30 related to loans acquired with deteriorated credit quality. Acquired loans are considered credit-impaired if there is evidence of significant deterioration of credit quality since origination and it is probable, at the acquisition date, that we will be unable to collect all contractually required payments receivable. Management has determined certain loans purchased in our two acquisitions to be PCI loans based on credit indicators such as nonaccrual status, past due status, loan risk grade, loan-to-value ratio, etc. Revolving credit agreements (e.g., home equity lines of credit and revolving commercial loans) are not considered PCI loans as cash flows cannot be reasonably estimated.

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For acquired loans not considered credit-impaired, the difference between the contractual amounts due (principal amount) and the fair value is accounted for subsequently through accretion. We recognize discount accretion based on the acquired loan’s contractual cash flows using an effective interest rate method. The accretion is recognized through the net interest margin.

The following table presents the outstanding balances and related carrying values of PCI loans as of June 30, 2016andDecember 31, 2015.

	June 30, 2016				December 31, 2015
PCI Loans (in thousands)	Unpaid principal balance		Carrying value		Unpaid principal balance		Carrying value
Commercial and industrial	$	50	$	39	$	237	$	175
Commercial real estate	3,104		2,753		4,329		3,437
Construction	—		—		187		1
Home equity	221		71		224		68
Total purchased credit-impaired loans	$	3,375	$	2,863	$	4,977	$	3,681

The activities in the accretable yield, or income expected to be earned, for PCI loans were as follows:

Accretable Yield	Three months ended						Six months ended
(in thousands)	June 30, 2016			June 30, 2015			June 30, 2016			June 30, 2015
Balance at beginning of period	$	1,742		$	3,831		$	2,618		$	4,027
Removals 1	—			—			(778		)	(77		)
Accretion	(87		)	(120		)	(185		)	(239		)
Reclassifications from nonaccretable difference 2	—			—			—			—
Balance at end of period	$	1,655		$	3,711		$	1,655		$	3,711

¹ Represents the accretable difference that is relieved when a loan exits the PCI population due to pay-off, full charge-off, or transfer to repossessed assets, etc.

² Primarily relates to changes in expected credit performance and changes in expected timing of cash flows.

Pledged Loans

Our FHLB line of credit is secured under terms of a blanket collateral agreement by a pledge of certain qualifying loans with an unpaid principal balance of $861.9 million and $833.8 million at June 30, 2016 and December 31, 2015, respectively. In addition, we pledge a certain residential loan portfolio, which totaled $48.4 million and $45.2 million at June 30, 2016 and December 31, 2015, respectively, to secure our borrowing capacity with the Federal Reserve Bank (“FRB”). Also see Note 6, Borrowings.

Note 6: Borrowings

Federal Funds Purchased – The Bank had unsecured lines of credit totaling $92.0 million with correspondent banks for overnight borrowings at June 30, 2016 and December 31, 2015.  In general, interest rates on these lines approximate the federal funds target rate. We had no overnight borrowings under these credit facilities at June 30, 2016 and December 31, 2015.

Federal Home Loan Bank Borrowings – As of June 30, 2016 and December 31, 2015, the Bank had lines of credit with the FHLB totaling $485.9 million and $470.6 million, respectively, based on eligible collateral of certain loans.  At June 30, 2016, we had no FHLB overnight borrowings and at December 31, 2015, we had $52.0 million in FHLB overnight borrowings. On February 5, 2008, the Bank entered into a ten-year borrowing agreement under the same FHLB line of credit for $15.0 million at a fixed rate of 2.07%. On June 15, 2016, the Bank repaid the $15.0 million early and incurred a prepayment fee of $312 thousand recorded in interest expense. At June 30, 2016 and December 31, 2015, $485.9 million and $403.4 million, respectively, were remaining as available for borrowing from the FHLB, net of the overnight borrowings and term borrowings.

Federal Reserve Line of Credit – The Bank has a line of credit with the FRB secured by certain residential loans.  At June 30, 2016 and December 31, 2015, the Bank had borrowing capacity under this line totaling $40.1 million and $37.8 million, respectively, and had no outstanding borrowings with the FRB.

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As part of an acquisition, Bancorp assumed two subordinated debentures due to NorCal Community Bancorp Trusts I and II (the "Trusts"), established for the sole purpose of issuing trust preferred securities on September 22, 2003 and December 29, 2005, respectively. The subordinated debentures were recorded at fair values totaling $4.95 million at acquisition date with contractual values totaling $8.2 million. The difference between the contractual balance and the fair value at acquisition date is accreted into interest expense over the lives of the debentures. Accretion on the subordinated debentures totaled $98 thousand in the first six months of 2016 and $106 thousand in the first six months of 2015. Bancorp has the option to defer payment of the interest on the subordinated debentures for a period of up to five years, as long as there is no default on the subordinated debentures. In the event of interest deferral, dividends to Bancorp common stockholders are prohibited. The trust preferred securities were sold and issued in private transactions pursuant to an exemption from registration under the Securities Act of 1933, as amended. Bancorp has guaranteed, on a subordinated basis, distributions and other payments due on trust preferred securities totaling $8.0 million issued by the Trusts which have identical maturity, repricing and payment terms as the subordinated debentures.

The following is a summary of the contractual terms of the subordinated debentures due to the Trusts as of June 30, 2016:

(in thousands)
Subordinated debentures due to NorCal Community Bancorp Trust I on October 7, 2033 with interest payable quarterly, based on 3-month LIBOR plus 3.05%, repricing quarterly (3.68% as of June 30, 2016), redeemable, in whole or in part, on any interest payment date	$	4,124
Subordinated debentures due to NorCal Community Bancorp Trust II on March 15, 2036 with interest payable quarterly, based on 3-month LIBOR plus 1.40%, repricing quarterly (2.05% as of June 30, 2016), redeemable, in whole or in part, on any interest payment date	4,124
Total	$	8,248

Note 7:  Stockholders' Equity

Warrant

Under the United States Department of the Treasury Capital Purchase Program (the “TCPP”), Bancorp issued to the U.S. Treasury a warrant to purchase 154,242 shares of common stock at a per share exercise price of $27.23. The warrant was immediately exercisable and had an expiration date of December 5, 2018. The warrant was subsequently auctioned to two institutional investors in November 2011 and was exercised in September 2015. The warrant represented the right to purchase 157,711 shares of common stock at $26.63 per share. The cashless exercise resulted in the net issuance of 70,591 shares of common stock in September 2015.

Dividends

Presented below is a summary of cash dividends paid to common shareholders, recorded as a reduction of retained earnings.

	Three months ended				Six months ended
(in thousands, except per share data)	June 30, 2016		June 30, 2015		June 30, 2016		June 30, 2015
Cash dividends to common stockholders	$	1,526	$	1,313	$	3,044	$	2,620
Cash dividends per common share	$	0.25	$	0.22	$	0.50	$	0.44

The Board of Directors declared a cash dividend of $0.25 per share on July 22, 2016 payable on August 12, 2016 to shareholders of record at the close of business on August 5, 2016.

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Share-Based Payments

The fair value of stock options as of the grant date is recorded as stock-based compensation expense in the consolidated statements of comprehensive income over the requisite service period with a corresponding increase in common stock. Stock-based compensation also includes compensation expense related to the issuance of unvested restricted stock awards and performance-based stock awards pursuant to the 2007 Equity Plan. The grant-date fair value of the restricted stock awards and performance-based stock awards, which is equal to the intrinsic value on that date, is being recorded as compensation expense over the requisite service period with a corresponding increase in common stock as the shares vest.

Beginning in 2015, performance-based stock awards were issued to a selected group of employees. Stock award vesting is contingent upon the achievement of pre-established long-term performance goals set by the Compensation Committee of the Board of Directors. Performance is measured over a three-year period and cliff vested. These performance-based stock awards were granted at a maximum opportunity level, and based on the achievement of the pre-established goals, the actual payouts can range from 0% to 200% of the target award. For performance-based stock awards, an estimate is made of the number of shares expected to vest based on the probability that the performance criteria will be achieved to determine the amount of compensation expense to be recognized. The estimate is re-evaluated quarterly and total compensation expense is adjusted for any change in the current period.

In addition, we record excess tax benefits on the exercise of non-qualified stock options, the disqualifying disposition of incentive stock options and vesting of restricted stock awards as an addition to common stock with a corresponding decrease in current taxes payable.

The holders of unvested restricted stock awards and performance-based stock awards are entitled to dividends on the same per-share ratio as holders of common stock. Dividends paid on the portion of share-based awards not expected to vest are also included in stock-based compensation expense. Tax benefits on dividends paid on the portion of share-based awards expected to vest are recorded as an increase to common stock with a corresponding decrease in current taxes payable.

Note 8:  Commitments and Contingencies

Financial Instruments with Off-Balance Sheet Risk

We make commitments to extend credit in the normal course of business to meet the financing needs of our customers. These financial instruments include commitments to extend credit in the form of loans or through standby letters of credit. Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established in the contract. Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee. Because various commitments will expire without being fully drawn upon, the total commitment amount does not necessarily represent future cash requirements.

We are exposed to credit loss equal to the contractual amount of the commitment in the event of nonperformance by the borrower. We use the same credit underwriting criteria for all credit exposure. The amount of collateral obtained, if deemed necessary by us, is based on Management's credit evaluation of the borrower. Collateral types pledged may include accounts receivable, inventory, other personal property and real property.

The contractual amount of undrawn loan commitments and standby letters of credit not reflected on the consolidated statements of condition was $418.2 million and $376.6 million at June 30, 2016 and December 31, 2015, respectively. Commitments at June 30, 2016 included $213.3 million under commercial lines of credit (these commitments are generally contingent upon customers maintaining specific credit standards), $143.7 million under revolving home equity lines, $46.8 million under construction loans, $3.6 million under standby letters of credit, and a remaining $10.8 million under personal and other lines of credit. We record an allowance for losses on these off-balance sheet commitments based on an estimate of probabilities of these commitments being drawn upon according to our historical utilization experience on different types of commitments and expected loss severity. We set aside an allowance for losses on off-balance sheet commitments in the amount of $899 thousand and $749 thousand as of June 30, 2016 and December 31, 2015, respectively, which is recorded in interest payable and other liabilities on the consolidated statements of condition. The increase in the reserve for off-balance sheet commitments for the first six months of 2016 was primarily due to an increase in commitments and a decrease in utilization.

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Operating Leases

We rent certain premises and equipment under long-term, non-cancelable operating leases expiring at various dates through the year 2032. Most of the leases contain certain renewal options and escalation clauses. At June 30, 2016, the approximate minimum future commitments payable under non-cancelable contracts for leased premises are as follows:

(in thousands)	2016		2017		2018		2019		2020		Thereafter		Total
Operating leases1	$	1,773	$	3,576	$	3,594	$	3,567	$	3,328	$	5,895	$	21,733

¹ Minimum payments have not been reduced by minimum sublease rentals of $200 thousand due in the future under non-cancelable subleases.

Rent expense included in occupancy expense totaled $1.9 million and $2.2 million for the six months ended June 30, 2016 and 2015, respectively.

Litigation Matters

We may be party to legal actions which arise from time to time as part of the normal course of our business.  We believe, after consultation with legal counsel, that we have meritorious defenses in these actions, and that litigation contingent liability, if any, will not have a material adverse effect on our financial position, results of operations, or cash flows.

We are responsible for our proportionate share of certain litigation indemnifications provided to Visa U.S.A. ("Visa") by its member banks in connection with lawsuits related to anti-trust charges and interchange fees ("Covered Litigation"). Visa maintains an escrow account from which settlements of, or judgments in, the Covered Litigation are paid. While the accrual related to the Covered Litigation could be higher or lower than the litigation escrow account balance, Visa did not record an additional accrual for the Covered Litigation during 2016. At June 30, 2016, the balance of the escrow account was $1.0 billion. Visa had reached a $4.0 billion interchange multidistrict litigation class settlement agreement. However, a number of objectors have appealed and on June 30, 2016, an appellate court reversed the approval of the settlement by the lower court. Until the appeal process is complete, Visa is uncertain whether it will resolve the claims as contemplated by the settlement agreement and additional lawsuits may arise. The conversion rate of Visa Class B common stock held by us to Class A common stock (as discussed in Note 4, Investment Securities) may decrease if Visa makes more Covered Litigation settlement payments in the future, and the full effect on member banks is still uncertain. However, we are not aware of significant future cash settlement payments required by us on the Covered Litigation.

Note 9: Derivative Financial Instruments and Hedging Activities

We have entered into interest rate swap agreements, primarily as an asset/liability management strategy, in order to mitigate the changes in the fair value of specified long-term fixed-rate loans (or firm commitments to enter into long-term fixed-rate loans) caused by changes in interest rates. These hedges allow us to offer long-term fixed rate loans to customers without assuming the interest rate risk of a long-term asset. Converting our fixed-rate interest payments to floating-rate interest payments, generally benchmarked to the one-month U.S. dollar LIBOR index, protects us against changes in the fair value of our loans associated with fluctuating interest rates.

The fixed-rate payment features of the interest rate swap agreements are generally structured at inception to mirror substantially all of the provisions of the hedged loan agreements. These interest rate swaps, designated and qualified as fair value hedges, are carried on the consolidated statements of condition at their fair value in other assets (when the fair value is positive) or in other liabilities (when the fair value is negative). The unrealized gain or loss in fair value of the hedged fixed-rate loan due to LIBOR interest rate movements is recorded as an adjustment to the hedged loan.

From time to time, we make firm commitments to enter into long-term fixed-rate loans with borrowers backed by yield maintenance agreements and simultaneously enter into forward interest rate swap agreements with correspondent banks to mitigate the change in fair value of the yield maintenance agreement. Prior to loan funding, yield maintenance agreements with net settlement features that meet the definition of a derivative are considered as non-designated hedges and are carried on the consolidated statements of condition at their fair value in other assets (when the fair value is positive) or in other liabilities (when the fair value is negative). The offsetting changes in the fair value of the forward swap and the yield maintenance agreement are recorded in interest income. When the fixed-rate loans are originated, the forward swaps are designated to offset the change in fair value in the loans. Subsequent to the point

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of the swap designations, the related yield maintenance agreements are no longer considered derivatives. Their fair value at the designation date is recorded in other assets and is amortized using the effective yield method over the life of the respective designated loans.

The net effect of the change in fair value of interest rate swaps, the amortization of the yield maintenance agreements and the change in the fair value of the hedged loans result in an insignificant amount of hedge ineffectiveness recognized in interest income.

Our credit exposure, if any, on interest rate swaps is limited to the favorable value (net of any collateral pledged to us) and interest payments of all swaps by each counterparty. Conversely, when an interest rate swap is in a liability position exceeding a certain threshold, we may be required to post collateral to the counterparty in an amount determined by the agreements. Collateral levels are monitored and adjusted on a regular basis for changes in interest rate swap values.

As of June 30, 2016, we had six interest rate swap agreements, which are scheduled to mature in August 2020, June 2031, October 2031, July 2032, August 2037 and October 2037. All of our derivatives are accounted for as fair value hedges. In April 2016, one interest rate swap scheduled to mature in June 2020 was terminated as the hedged loan was paid off. A prepayment fee was collected from the borrower to settle our interest rate swap liability, resulting in no net gain or loss on the termination of the swap and loan payoff. Our interest rate swaps are settled monthly with counterparties. Accrued interest on the swaps totaled $16 thousand and $28 thousand as of June 30, 2016 and December 31, 2015, respectively. Information on our derivatives follows:

	Asset derivatives				Liability derivatives
(in thousands)	June 30, 2016		December 31, 2015		June 30, 2016		December 31, 2015
Fair value hedges:
Interest rate contracts notional amount	$	—	$	4,407	$	22,527	$	22,187
Interest rate contracts fair value1	$	—	$	3	$	2,721	$	1,658

	Three months ended
(in thousands)	June 30, 2016			June 30, 2015
(Decrease) increase in value of designated interest rate swaps recognized in interest income	$	(190	)	$	966
Payment on interest rate swaps recorded in interest income	(138		)	(233		)
Increase (decrease) in value of hedged loans recognized in interest income	240			(1,023		)
Decrease in value of yield maintenance agreement recognized against interest income	(11		)	(13		)
Net loss on derivatives recognized against interest income 2	$	(99	)	$	(303	)

	Six months ended
(in thousands)	June 30, 2016			June 30, 2015
(Decrease) increase in value of designated interest rate swaps recognized in interest income	$	(1,066	)	$	420
Payment on interest rate swaps recorded in interest income	(313		)	(469		)
Increase (decrease) in value of hedged loans recognized in interest income	1,290			(451		)
Decrease in value of yield maintenance agreement recognized against interest income	(23		)	(27		)
Net loss on derivatives recognized against interest income 2	$	(112	)	$	(527	)

¹ See Note 3 for valuation methodology.

² Includes hedge ineffectiveness gain of $39 thousand and loss of $70 thousand for the quarters ended June 30, 2016 and June 30, 2015, respectively. Ineffectiveness gain of $201 thousand and loss of $58 thousand was recorded in interest income during the six months ended June 30, 2016 and June 30, 2015, respectively. Changes in value of swaps were included in the assessment of hedge effectiveness. Hedge ineffectiveness is the measure of the extent to which the change in the fair value of the hedging instruments does not exactly offset the change in the fair value of the hedged items from period to period.

Our derivative transactions with counterparties are under International Swaps and Derivative Association (“ISDA”) master agreements that include “right of set-off” provisions. “Right of set-off” provisions are legally enforceable rights to offset recognized amounts and there may be an intention to settle such amounts on a net basis. We do not offset such financial instruments for financial reporting purposes.

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Information on financial instruments that are eligible for offset in the consolidated statements of condition follows:

Offsetting of Financial Assets and Derivative Assets
			Gross Amounts		Net Amounts of		Gross Amounts Not Offset in
	Gross Amounts		Offset in the		Assets Presented		the Statements of Condition
	of Recognized		Statements of		in the Statements		Financial			Cash Collateral
(in thousands)	Assets1		Condition		of Condition1		Instruments			Received		Net Amount
June 30, 2016
Derivatives by Counterparty:
None	$	—	$	—	$	—	$	—		$	—	$	—
December 31, 2015
Derivatives by Counterparty:
Counterparty A	$	3	$	—	$	3	$	(3	)	$	—	$	—

¹Amounts exclude accrued interest totaling zero and $1 thousand at June 30, 2016 and December 31, 2015, respectively.

Offsetting of Financial Liabilities and Derivative Liabilities
			Gross Amounts		Net Amounts of		Gross Amounts Not Offset in
	Gross Amounts		Offset in the		Liabilities Presented		the Statements of Condition
	of Recognized		Statements of		in the Statements		Financial			Cash Collateral
(in thousands)	Liabilities2		Condition		of Condition2		Instruments			Pledged			Net Amount
June 30, 2016
Derivatives by Counterparty:
Counterparty A	$	2,721	$	—	$	2,721	$	—		$	(2,390	)	$	331	3
December 31, 2015
Derivatives by Counterparty:
Counterparty A	$	1,390	$	—	$	1,390	$	(3	)	$	(1,387	)	$	—
Counterparty B	268		—		268		—			(268		)	—
Total	$	1,658	$	—	$	1,658	$	(3	)	$	(1,655	)	$	—

² Amounts exclude accrued interest totaling $16 thousand and $27 thousand at June 30, 2016 and December 31, 2015, respectively.

³ The under-collateralized position was covered subsequent to June 30, 2016.

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

Management's discussion of the financial condition and results of operations, which is unaudited, should be read in conjunction with the related consolidated financial statements in this Form 10-Q and with the audited consolidated financial statements and accompanying notes included in our 2015 Annual Report on Form 10-K. Average balances, including balances used in calculating certain financial ratios, are generally comprised of average daily balances.

Forward-Looking Statements

This discussion of financial results includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, (the "1933 Act") and Section 21E of the Securities Exchange Act of 1934, as amended, (the "1934 Act"). Those sections of the 1933 Act and 1934 Act provide a "safe harbor" for forward-looking statements to encourage companies to provide prospective information about their financial performance so long as they provide meaningful, cautionary statements identifying important factors that could cause actual results to differ significantly from projected results.

Our forward-looking statements include descriptions of plans or objectives of Management for future operations, products or services, and forecasts of revenues, earnings or other measures of economic performance. Forward-looking statements can be identified by the fact that they do not relate strictly to historical or current facts. They often include the words "believe," "expect," "intend," "estimate" or words of similar meaning, or future or conditional verbs preceded by "will," "would," "should," "could" or "may."

Forward-looking statements are based on Management's current expectations regarding economic, legislative, and regulatory issues that may affect our earnings in future periods. A number of factors, many of which are beyond Management’s control, could cause future results to vary materially from current Management expectations. Such factors include, but are not limited to, general economic conditions and the economic uncertainty in the United States and abroad, including changes in interest rates, deposit flows, real estate values, and expected future cash flows on loans and securities; integration of acquisitions and competition; changes in accounting principles, policies or guidelines; changes in legislation or regulation; adverse weather conditions, including droughts in California; and other economic, competitive, governmental, regulatory and technological factors affecting our operations, pricing, products and services.

Important factors that could cause results or performance to materially differ from those expressed in our prior forward-looking statements are detailed in Item 1A. Risk Factors section of our 2015 Form 10-K as filed with the SEC, copies of which are available from us at no charge. Forward-looking statements speak only as of the date they are made. We do not undertake to update forward-looking statements to reflect circumstances or events that occur after the date the forward-looking statements are made or to reflect the occurrence of unanticipated events.

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RESULTS OF OPERATIONS

Highlights of the financial results are presented in the following tables:

	At June 30,			At December 31,
(dollars in thousands)	2016			2015
Selected financial condition data:
Total assets	$	1,950,452		$	2,031,134
Loans, net	1,433,312			1,436,229
Deposits	1,705,615			1,728,226
Borrowings	5,493			72,395
Stockholders' equity	226,452			214,473
Asset quality ratios:
Allowance for loan losses to total loans	1.04		%	1.03		%
Allowance for loan losses to non-performing loans 1	5.54		x	6.88		x
Non-performing loans to total loans 1	0.19		%	0.15		%
Capital ratios:
Equity to total assets ratio	11.61		%	10.60		%
Total capital (to risk-weighted assets)	14.05		%	13.37		%
Tier 1 capital (to risk-weighted assets)	13.10		%	12.44		%
Tier 1 capital (to average assets)	11.28		%	10.67		%
Common equity Tier 1 capital (to risk weighted assets)	12.80		%	12.16		%

¹ Non-performing loans include loans on non-accrual status and loans past due 90 days or more and still accruing interest.

	Three months ended June 30,				Six months ended June 30,
(dollars in thousands, except per share data)	2016		2015		2016		2015
Selected operating data:
Net interest income	$	17,166	$	16,454	$	35,804	$	33,061
Provision for loan losses	—		—		—		—
Non-interest income	2,421		2,608		4,584		4,797
Non-interest expense	12,017		12,319		24,027		24,176
Net income	4,837		4,286		10,483		8,743
Net income per common share:
Basic	$	0.80	$	0.72	$	1.73	$	1.47
Diluted	$	0.79	$	0.71	$	1.72	$	1.44
Performance and other financial ratios:
Return on average assets	0.99%		0.93%		1.07%		0.96%
Return on average equity	8.68%		8.33%		9.52%		8.62%
Tax-equivalent net interest margin	3.77%		3.86%		3.90%		3.93%
Efficiency ratio	61.35%		64.62%		59.49%		63.86%

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Executive Summary

Earnings in the second quarter of 2016 totaled $4.8 million, compared to $5.6 million in the first quarter of 2016 and $4.3 million in the second quarter of 2015. Diluted earnings per share were $0.79 in the second quarter of 2016, compared to $0.93 in the prior quarter and $0.71 in the same quarter last year.

The following are highlights of our operating and financial performance:

• Loans totaled $1,448.4 million at June 30, 2016, compared to $1,451.2 million at December 31, 2015. New loan originations of approximately $73.6 million in the first half of 2016 were offset by payoffs of approximately $77.4 million.

• Non-interest bearing deposits comprised 47.2% of total deposits at June 30, 2016, and the cost of total deposits for the quarter was 0.08%.

• Credit quality remains strong with non-accrual loans representing 0.19% of total loans at June 30, 2016. There was no provision for loan losses recorded in 2016.

• The net interest margin decreased 27 basis points to 3.77% for the second quarter of 2016 from 4.04% for the first quarter of 2016. A decline in gains on payoffs of acquired loans of $740 thousand and a prepayment fee of $312 thousand paid on the retirement of a FHLB fixed rate advance negatively impacted the net interest margin in the second quarter of 2016. The prepayment of the FHLB advance and concurrent sale of investment securities are expected to have a positive 4 basis point impact on our net interest margin.

• Return on assets ("ROA") was 0.99% for the quarter ended June 30, 2016, compared to 1.15% last quarter and 0.93% for the second quarter last year. Return on equity ("ROE") was 8.68% for the quarter ended June 30, 2016, compared to 10.38% last quarter and 8.33% for the second quarter of 2015.

• All capital ratios are above regulatory requirements for a well-capitalized institution. The total risk-based capital ratio for Bancorp was 14.1% at June 30, 2016 compared to 13.4% at December 31, 2015.

Net interest income totaled $17.2 million in the second quarter of 2016, compared to $18.6 million in the prior quarter and $16.5 million in the same quarter a year ago. The tax-equivalent net interest margin was 3.77%, 4.04% and 3.86%, for those respective periods. The decrease in tax-equivalent net interest margin from the prior quarter includes 16 basis points decline related to the absence of gains on payoffs of acquired loans and 7 basis points due to the prepayment fee on the retirement of a FHLB fixed rate advance.

Non-interest income in the second quarter of 2016 totaled $2.4 million, compared to $2.2 million in the prior quarter and $2.6 million in the same quarter a year ago. The increase compared to the prior quarter primarily relates to an increase in the net gains on the sale of securities in the second quarter.

Non-interest expense totaled $12.0 million in the second quarter of 2016, unchanged from the prior quarter and $12.3 million in the same quarter a year ago. Our efficiency ratio (the ratio of non-interest expense divided by the sum of net interest income and non-interest income) was 61.35%, 57.74% and 64.62% for the quarters ended June 30, 2016, March 31, 2016 and June 30, 2015, respectively.

Assets totaled $1,950.5 million at June 30, 2016, a decrease of $80.6 million, or 4.0% from $2,031.1 million at December 31, 2015. Refer to the Financial Condition Summary section for further discussion on the change in total assets.

The investment securities portfolio totaled $381.9 million at June 30, 2016, a decline of $105.6 million from December 31, 2015. In addition to paydowns and maturities in the portfolio, $68.7 million in securities were sold in 2016 at net gains totaling $394 thousand.

Loans totaled $1,448.4 million at June 30, 2016, a decrease of $2.8 million from $1,451.2 million at December 31, 2015. Loan originations in the first six months of 2016 of approximately $73.6 million were spread throughout our markets with the majority originated in Marin County, Sonoma County and San Francisco. Investor commercial real estate, and commercial and industrial accounted for the bulk of the new loan volume in the first half of 2016. Payoffs

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of approximately $77.4 million offset the new loan volume, and combined with changes in utilization of lines of credit and amortization on existing loans resulted in the decrease in loan balances since December 31, 2015.

Credit quality remains strong with non-accrual loans totaling $2.7 million at June 30, 2016, compared to $2.2 million at December 31, 2015, and representing 0.19% of total loans compared to 0.15% at year end. Classified loans totaled $20.4 million at June 30, 2016, down from $22.3 million at December 31, 2015. Accruing loans past due 30 to 89 days totaled $135 thousand at June 30, 2016, compared to $2.1 million at December 31, 2015.

There was no provision for loan losses recorded in the second quarter of 2016 as the loan portfolio did not increase and the portfolio's credit quality continued to improve. No provision for loan losses was recorded in the prior quarter or the same quarter a year ago. The ratio of allowance for loan losses to total loans increased to 1.04% at June 30, 2016, compared to 1.03% at December 31, 2015.

Deposits totaled $1,705.6 million at June 30, 2016, compared to $1,728.2 million at December 31, 2015. The $22.6 million decline was primarily due to normal business activity for new and existing commercial customers and the nature of their businesses. Non-interest bearing deposits totaled $804.4 million, or 47.2% of total deposits at June 30, 2016, compared to 44.6% at December 31, 2015. FHLB and other borrowings also declined $67.0 million. We retired a $15 million fixed rate FHLB advance in the second quarter and there were no overnight borrowings at June 30, 2016.

The total risk-based capital ratio for Bancorp was 14.1% at June 30, 2016, compared to 13.4% at December 31, 2015. The common equity tier one ratio, a regulatory ratio under Basel III (Basel Committee on Bank Supervision guidelines for determining regulatory capital), was 12.8% at June 30, 2016, compared to 12.2% at December 31, 2015. As reported in the Capital Adequacy section of this document, all four of our capital ratios exceed adequately capitalized levels under the Basel III requirements that took effect January 1, 2015.

Going forward:

• We have ample liquidity and capital to support both organic growth and acquisitions in the coming quarters.

• Acquisitions remain a component of our strategic plan. The Bay Area is an economically attractive area and we intend to expand our footprint through organic growth and strategic acquisitions.

• Credit quality and expense control remain key priorities.

• Our net interest margin in 2016 could continue to compress if current market interest rates do not increase.

• We cannot predict the timing of early payoffs of acquired loans and their effect on our future net interest margin.

Critical Accounting Policies and Estimates

Critical accounting policies are those that are both very important to the portrayal of our financial condition and results of operations and require Management's most difficult, subjective, or complex judgments, often as a result of the need to make estimates about the effect of matters that are inherently uncertain and imprecise.

Except for the Allowance for Loan Losses, as described below, there have been no material changes to our critical accounting policies, which are described in Item 7, Management's Discussion and Analysis of Financial Condition and Results of Operations and Note 1 to the Consolidated Financial Statements included in our 2015 Form 10-K filed with the SEC on March 11, 2016.

Allowance for Loan Losses

The overall allowance consists of 1) specific allowances for individually identified impaired loans ("ASC 310-10") and 2) general allowances for pools of loans ("ASC 450-20"), which incorporate quantitative (e.g., loan loss rates) and qualitative risk factors (e.g., portfolio growth and trends, credit concentrations, economic and regulatory factors, etc.).

The first component, specific allowances, results from the analysis of identified problem credits and the evaluation of sources of repayment including collateral, as applicable. Through Management's ongoing loan grading and credit monitoring process, individual loans are identified that have conditions indicating the borrower may be unable to pay

Page-33

all amounts due in accordance with the contractual terms. These loans are evaluated for impairment individually by Management. Management considers an originated loan to be impaired when it is probable we will be unable to collect all amounts due according to the contractual terms of the loan agreement. When the fair value of the impaired loan is less than the recorded investment in the loan, the difference is recorded as an impairment through the establishment of a specific allowance. For loans determined to be impaired, the extent of the impairment is measured based on the present value of expected future cash flows discounted at the loan's effective interest rate at origination (for originated loans), based on the loan's observable market price, or based on the fair value of the collateral if the loan is collateral dependent or if foreclosure is imminent. Generally with problem credits that are collateral dependent, we obtain appraisals of the collateral at least annually. We may obtain appraisals more frequently if we believe the collateral value is subject to market volatility, if a specific event has occurred to the collateral, or if we believe foreclosure is imminent.

The second component is an estimate of the probable inherent losses in each loan pool with similar characteristics. This analysis encompasses the entire loan portfolio, excluding individually identified impaired loans and acquired loans whose purchase discount has not been fully accreted. Under our allowance model, loans are evaluated on a pool basis by Federal regulatory reporting codes ("CALL codes" or "segments"), which are further delineated by assigned credit risk ratings, as described in Note 5 to the Consolidated Financial Statements of this Form 10-Q. Segments include the following:

• Loans secured by real estate:

-     1-4 family residential construction loans

-     Other construction loans and all land development and other land loans

-     Secured by farmland (including residential and other improvements)

-     Revolving, open-end loans secured by 1-4 family residential properties and extended under lines of credit

-     Closed-end loans secured by 1-4 family residential properties, secured by first liens

-     Closed-end loans secured by 1-4 family residential properties, secured by junior liens

-     Secured by multifamily (5 or more) residential properties

-     Loans secured by owner-occupied non-farm nonresidential properties

-     Loans secured by other non-farm nonresidential properties

• Loans to finance agricultural production and other loans to farmers

• Commercial and industrial loans

• Loans to individuals for household, family and other personal expenditures (i.e., consumer loans)

• Other loans

The model determines general allowances by loan segment based on quantitative (loss history) and qualitative risk factors. Qualitative internal and external risk factors include, but are not limited to, the following:

• Changes in the nature and volume of the loan portfolio.

• Changes in the volume and severity of past due loans, the volume of non-accruals loans, and the volume and severity of adversely classified or graded loans.

• The existence and effect of any credit concentrations (when the credit segment exceeds a certain percentage of our capital), and changes in the levels of such concentrations.

• Changes in lending policies and procedures, including changes in underwriting standards and collection, charge-off, and recovery practices not considered elsewhere.

• Changes in the experience, ability, and depth of lending management and other relevant staff.

• Changes in the quality of our systematic loan review processes.

• Changes in economic and business conditions, and developments that affect the collectability of the portfolio.

• Changes in the value of underlying collateral, where applicable.

• The effect of other external factors such as legal and regulatory requirements on the level of estimated credit losses in the portfolio.

• The effect of acquisitions of other loan portfolios on our infrastructure, including risk associated with entering new geographic areas as a result of such acquisitions.

• The presence of specialized lending segments in the portfolio.

Beginning with the quarter ended March 31, 2016, Management enhanced its methodology for determining the quantitative and qualitative risk factors assigned to unimpaired loans in order to capture historical loss information at the loan level, track loss migration through risk grade deterioration, increase efficiencies related to performing the calculations, and refine how we incorporate environmental and other unique risk elements into our estimation of credit losses. The changes in methodology did not result in a material difference in general allowances. Prior to March 31,

Page-34

2016, under the Bank's allowance model, each segment was assigned a quantitative loss factor that was primarily based on a rolling twenty-quarter look-back at our historical losses for that particular segment, as well as a number of other assumptions. As of March 31, 2016, the quantitative risk factor for each segment utilizes historical loss or migration analysis loss methods based on loss history beginning March 2010.

Under the historical loss method, quarterly loss rates are calculated for each segment by dividing annualized net charge-offs during each quarter by the quarter's average segment balances. The quarterly loss rates are averaged over the entire loss history period. Under the migration analysis method, loss rates are calculated at the risk grade and segment levels by dividing the net charge-off amount by the total segment balance at the beginning of each migration period where the charged-off loan in question was present. Migration loss rates are averaged for each risk grade and segment for the entire loss history period. For each segment, the larger of the migration loss reserves or segment historical loss reserves is applied to the current loan balance. Qualitative factors are combined with these quantitative factors to arrive at the overall general allowances.

While we believe we use the best information available to determine the allowance for loan losses, our results of operations could be significantly affected if circumstances differ substantially from the assumptions used in determining the allowance. A decline in local and national economic conditions, or significant changes in other assumptions, could result in a material increase in the allowance for loan losses and may adversely affect our financial condition and results of operations. In addition, the determination of the amount of the allowance for loan losses is subject to review by bank regulators, as part of their routine examination process, which may result in the establishment of additional allowance for loan losses based upon their judgment of information available to them at the time of their examination.

For further information regarding the allowance for loan losses, see Note 5 - Loans and Allowance for Loan Losses in the Consolidated Financial Statements of this Form 10-Q.

Net Interest Income

Net interest income is the difference between the interest earned on loans, investments and other interest-earning assets and the interest expense incurred on deposits and other interest-bearing liabilities. Net interest income is impacted by changes in general market interest rates and by changes in the amounts and composition of interest-earning assets and interest-bearing liabilities. Interest rate changes can create fluctuations in the net interest income due to an imbalance in the timing of repricing or maturity of assets and liabilities. We manage interest rate risk exposure with the goal of minimizing the impact of interest rate volatility on net interest income.

Net interest margin is expressed as net interest income divided by average interest-earning assets. Net interest rate spread is the difference between the average rate earned on total interest-earning assets and the average rate incurred on total interest-bearing liabilities. Both of these measures are reported on a taxable-equivalent basis. Net interest margin is the higher of the two because it reflects interest income earned on assets funded with non-interest-bearing sources of funds, which include demand deposits and stockholders’ equity.

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The following table, Average Statements of Condition and Analysis of Net Interest Income, compares interest income and average interest-earning assets with interest expense and average interest-bearing liabilities for the periods presented. The table also presents net interest income, net interest margin and net interest rate spread for each period reported.

	Average Statements of Condition and Analysis of Net Interest Income
		Three months ended						Three months ended
		June 30, 2016						June 30, 2015
				Interest						Interest
		Average		Income/		Yield/		Average		Income/		Yield/
(dollars in thousands)		Balance		Expense		Rate		Balance		Expense		Rate
Assets
	Interest-bearing due from banks 1	$	28,766	$	39	0.54	%	$	76,710	$	52	0.27	%
	Investment securities 2, 3	389,023		2,080		2.14	%	319,032		1,842		2.31	%
	Loans 1, 3, 4	1,440,847		16,416		4.51	%	1,336,249		15,587		4.61	%
	Total interest-earning assets 1	1,858,636		18,535		3.95	%	1,731,991		17,481		3.99	%
	Cash and non-interest-bearing due from banks	40,540						48,955
	Bank premises and equipment, net	8,827						9,841
	Interest receivable and other assets, net	60,205						58,744
Total assets		$	1,968,208					$	1,849,531
Liabilities and Stockholders' Equity
	Interest-bearing transaction accounts	$	93,355	$	28	0.12	%	$	94,960	$	30	0.13	%
	Savings accounts	149,234		14		0.04	%	131,564		12		0.04	%
	Money market accounts	510,727		107		0.08	%	488,422		123		0.10	%
	Time accounts	160,031		192		0.48	%	157,982		215		0.55	%
	Overnight borrowings1	1,082		1		0.40	%	—		—		—	%
	FHLB fixed rate advances 1	12,363		377		12.07	%	15,000		79		2.07	%
	Subordinated debenture 1	5,471		108		7.78	%	5,259		105		7.90	%
	Total interest-bearing liabilities	932,263		827		0.36	%	893,187		564		0.25	%
	Demand accounts	797,935						735,481
	Interest payable and other liabilities	13,853						14,358
	Stockholders' equity	224,157						206,505
Total liabilities & stockholders' equity		$	1,968,208					$	1,849,531
Tax-equivalent net interest income/margin 1				$	17,708	3.77	%			$	16,917	3.86	%
Reported net interest income/margin 1				$	17,166	3.65	%			$	16,454	3.76	%
Tax-equivalent net interest rate spread						3.59	%					3.74	%

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		Six months ended						Six months ended
		June 30, 2016						June 30, 2015
				Interest						Interest
		Average		Income/		Yield/		Average		Income/		Yield/
(dollars in thousands)		Balance		Expense		Rate		Balance		Expense		Rate
Assets
	Interest-bearing due from banks 1	$	18,881	$	51	0.53	%	$	57,608	$	72	0.25	%
	Investment securities 2, 3	408,539		4,344		2.13	%	315,525		3,770		2.39	%
	Loans 1, 3, 4	1,441,724		33,872		4.65	%	1,343,977		31,263		4.63	%
	Total interest-earning assets 1	1,869,144		38,267		4.05	%	1,717,110		35,105		4.07	%
	Cash and non-interest-bearing due from banks	35,182						45,036
	Bank premises and equipment, net	8,985						9,840
	Interest receivable and other assets, net	59,200						58,440
Total assets		$	1,972,511					$	1,830,426
Liabilities and Stockholders' Equity
	Interest-bearing transaction accounts	$	97,173	$	55	0.11	%	$	93,676	$	60	0.13	%
	Savings accounts	145,866		28		0.04	%	132,714		25		0.04	%
	Money market accounts	519,856		218		0.08	%	487,630		250		0.10	%
	Time accounts	160,486		389		0.49	%	156,055		437		0.56	%
	Overnight borrowings1	10,825		23		0.42	%	197		—		—	%
	FHLB fixed rate advances 1	13,681		456		6.59	%	15,000		156		2.07	%
	Subordinated debenture 1	5,445		216		7.86	%	5,233		209		8.05	%
	Total interest-bearing liabilities	953,332		1,385		0.29	%	890,505		1,137		0.26	%
	Demand accounts	782,757						720,342
	Interest payable and other liabilities	14,917						14,973
	Stockholders' equity	221,505						204,606
Total liabilities & stockholders' equity		$	1,972,511					$	1,830,426
Tax-equivalent net interest income/margin 1				$	36,882	3.90	%			$	33,968	3.93	%
Reported net interest income/margin 1				$	35,804	3.79	%			$	33,061	3.83	%
Tax-equivalent net interest rate spread						3.76	%					3.81	%
1 Interest income/expense is divided by actual number of days in the period times 360 days to correspond to stated interest rate terms, where applicable.
2 Yields on available-for-sale securities are calculated based on amortized cost balances rather than fair value, as changes in fair value are reflected as a component of stockholders' equity. Investment security interest is earned on 30/360 day basis monthly.
3 Yields and interest income on tax-exempt securities and loans are presented on a taxable-equivalent basis using the Federal statutory rate of 35 percent.
4 Average balances on loans outstanding include non-performing loans. The amortized portion of net loan origination fees is included in interest income on loans, representing an adjustment to the yield.

Second Quarter of 2016 Compared to Second Quarter of 2015

The tax-equivalent net interest margin was 3.77% in the second quarter of 2016, compared to 3.86% in the same quarter in the previous year.  The nine basis point decrease is primarily comprised of a seven basis point decrease from an FHLB advance prepayment fee and lower yields on investment securities and new loans resulting from the continued low interest rate environment, partially offset by higher loan and investment balances. The net interest spread also decreased 15 basis points over the same period for the same reasons.

The yield on average interest-earning assets decreased four basis points in the second quarter of 2016 compared to the second quarter of 2015 due to lower accretion on acquired loans and lower yields on newly purchased investment securities. Average loans as a percentage of average interest-earning assets were 77.5% and 77.2% for the three months ended June 30, 2016 and 2015, respectively. Total average interest-earning assets increased $126.6 million, or 7.3%, in the second quarter of 2016, compared to the second quarter of 2015, due to an increase in average securities of $70.0 million and average loans of $104.6 million, partially offset by a decrease of $47.9 million in average interest-bearing due from banks.

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First Six Months of 2016 Compared to First Six Months of 2015

The tax-equivalent net interest margin was 3.90% in the first six months of 2016, compared to 3.93% in the same period in the previous year.  The three basis point decrease is primarily comprised of a four basis point decrease from the FHLB advance prepayment fee and lower yields on investment securities, partially offset by higher gains on the payoff of PCI loans, which added eight basis points during the first half of 2016 as seen in the table below. The net interest spread also decreased five basis points over the same period for the same reasons.

The yield on average interest-earning assets decreased two basis points in the first six months of 2016 compared to the same period in 2015 due to the reasons listed above. Average loans as a percentage of average interest-earning assets were 77.1% and 78.3% for the six months ended June 30, 2016 and 2015, respectively. Total average interest-earning assets increased $152.0 million, or 8.9%, in the first six months of 2016, compared to the same period in 2015, due to an increase in average loans of $97.7 million and average securities of $93.0 million, partially offset by a decrease of $38.7 million in average interest-bearing due from banks.

Market interest rates are, in part, based on the target federal funds interest rate (the interest rate banks charge each other for short-term borrowings) implemented by the Federal Reserve Open Market Committee ("FOMC"). In December 2015, the FOMC raised the target federal funds rate by 25 basis points to a range of 0.25% to 0.50% from the historic low of 0.00% to 0.25% that had not changed during the previous seven years. The prolonged low interest rate environment, especially the low long-term interest rates, has resulted in downward pricing pressure on our interest-earning assets. We have experienced significant net interest margin compression over the last several years and our net interest margin in 2016 may continue to compress if current market interest rates do not increase.

Early payoffs or prepayments of our acquired loans with significant unamortized purchase discount/premium could result in volatility in our net interest margin and cannot be predicted. As our acquired loans continue to pay off, we expect the accretion on acquired loans to continue to decline. Accretion and gains on payoffs of purchased loans recorded to interest income were as follows:

	Three months ended						Six months ended
	June 30, 2016			June 30, 2015			June 30, 2016			June 30, 2015
(dollars in thousands)	Dollar Amount		Basis point impact to net interest margin	Dollar Amount		Basis point impact to net interest margin	Dollar Amount		Basis point impact to net interest margin	Dollar Amount		Basis point impact to net interest margin
Accretion on PCI loans	$	87	2 bps	$	120	3 bps	$	185	2 bps	$	239	3 bps
Accretion on non-PCI loans	$	317	7 bps	$	465	11 bps	$	647	7 bps	$	837	10 bps
Gains on pay-offs of PCI loans	$	—	0 bps	$	—	0 bps	$	740	8 bps	$	43	0 bps

Provision for Loan Losses

Management assesses the adequacy of the allowance for loan losses on a quarterly basis based on several factors including growth of the loan portfolio, analysis of probable losses in the portfolio, historical loss experience and the current economic climate.  Actual losses on loans are charged against the allowance, and the allowance is increased by loss recoveries and provisions for loan losses charged to expense.  

There was no provision for loan losses recorded in the second quarter of 2016 as the loan portfolio did not increase and the portfolio's credit quality continued to improve. No provision for loan losses was recorded in the prior quarter or the same quarter a year ago. Net recoveries in the second quarter of 2016 totaled $59 thousand, compared to $802 thousand of net charge-offs in the same quarter a year ago. A protracted problem land development loan was sold in the second quarter of 2015 resulting in an $839 thousand charge-off.

No provision for loan losses was recorded in the first half of 2016 or 2015. Net recoveries were $89 thousand in the first half of 2016, compared to net charge-offs of $745 thousand in the first half of 2015.

The allowance for loan losses totaled 1.04% of loans at June 30, 2016, compared to 1.03% at December 31, 2015. Non-accrual loans totaled $2.7 million, or 0.19% of Bancorp's loan portfolio at June 30, 2016, compared to $2.2 million, or 0.15% at December 31, 2015.

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Impaired loan balances totaled $22.6 million at June 30, 2016, compared to $21.2 million at December 31, 2015, with specific valuation allowances of $1.4 million and $1.2 million for the same respective dates. The increase in both impaired loan balances and the related specific valuation allowance primarily relates to the addition of two performing commercial real estate loans modified in a Troubled Debt Restructuring (“TDR”), and a home equity loan and commercial real estate loan that were transfered to non-accrual status. Loans with "substandard" risk grades decreased to $20.4 million at June 30, 2016, from $22.3 million atDecember 31, 2015. There were no loans with "doubtful" risk grades at June 30, 2016 or December 31, 2015.

Non-interest Income

The table below details the components of non-interest income.

	Three months ended				Amount			Percent
(dollars in thousands)	June 30, 2016		June 30, 2015		Increase (Decrease)			Increase (Decrease)
Service charges on deposit accounts	$	441	$	504	$	(63	)	(12.5	)%
Wealth Management and Trust Services	527		603		(76		)	(12.6	)%
Debit card interchange fees	381		368		13			3.5	%
Merchant interchange fees	128		129		(1		)	(0.8	)%
Earnings on bank-owned life insurance	209		203		6			3.0	%
Dividends on FHLB stock	185		461		(276		)	(59.9	)%
Gains on investment securities, net	284		—		284			NM
Other income	266		340		(74		)	(21.8	)%
Total non-interest income	$	2,421	$	2,608	$	(187	)	(7.2	)%
	Six months ended				Amount			Percent
(dollars in thousands)	June 30, 2016		June 30, 2015		Increase (Decrease)			Increase (Decrease)
Service charges on deposit accounts	$	897	$	1,029	$	(132	)	(12.8	)%
Wealth Management and Trust Services	1,093		1,241		(148		)	(11.9	)%
Debit card interchange fees	719		715		4			0.6	%
Merchant interchange fees	241		259		(18		)	(6.9	)%
Earnings on bank-owned life insurance	410		406		4			1.0	%
Dividends on FHLB stock	354		608		(254		)	(41.8	)%
Gains on investment securities, net	394		8		386			4,825.0	%
Other income	476		531		(55		)	(10.4	)%
Total non-interest income	$	4,584	$	4,797	$	(213	)	(4.4	)%

NM - Not Meaningful

Non-interest income decreased $187 thousand from the second quarter of 2015 to $2.4 million. The decrease relates predominantly to a $305 thousand special cash dividend on FHLB stock, and $147 thousand one-time settlement recorded in other income, both received in the second quarter of 2015. These decreases were partially offset by the $284 thousand gain on the sale of four available-for-sale securities in the second quarter of 2016.

Non-interest income decreased $213 thousand to $4.6 million for the first six months of 2016 compared to $4.8 million for the first six months of 2015. The decrease resulted from lower dividends on FHLB stock, lower wealth management-related fees, and lower service charges on deposit accounts, partially offset by gains on the sale of investment securities.

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Non-interest Expense

The table below details the components of non-interest expense.

	Three months ended					Amount			Percent
(dollars in thousands)	June 30, 2016		June 30, 2015			Increase (Decrease)			Increase (Decrease)
Salaries and related benefits	$	6,724	$	6,672		$	52		0.8	%
Occupancy and equipment	1,175		1,493			(318		)	(21.3	)%
Depreciation and amortization	441		650			(209		)	(32.2	)%
Federal Deposit Insurance Corporation insurance	246		253			(7		)	(2.8	)%
Data processing	916		792			124			15.7	%
Professional services	554		515			39			7.6	%
Directors' expense	116		247			(131		)	(53.0	)%
Information technology	165		216			(51		)	(23.6	)%
Provision for (reversal of) losses on off-balance sheet commitments	150		(109		)	259			NM
Other non-interest expense
Advertising	98		46			52			113.0	%
Other expense	1,432		1,544			(112		)	(7.3	)%
Total other non-interest expense	1,530		1,590			(60		)	(3.8	)%
Total non-interest expense	$	12,017	$	12,319		$	(302	)	(2.5	)%
	Six months ended					Amount			Percent
(dollars in thousands)	June 30, 2016		June 30, 2015			Increase (Decrease)			Increase (Decrease)
Salaries and related benefits	$	13,472	$	13,462		$	10		0.1	%
Occupancy and equipment	2,456		2,835			(379		)	(13.4	)%
Depreciation and amortization	894		1,071			(177		)	(16.5	)%
Federal Deposit Insurance Corporation insurance	507		489			18			3.7	%
Data processing	1,772		1,578			194			12.3	%
Professional services	1,052		1,079			(27		)	(2.5	)%
Directors' expense	305		438			(133		)	(30.4	)%
Information technology	358		368			(10		)	(2.7	)%
Provision for (reversal of) losses on off-balance sheet commitments	150		(310		)	460			NM
Other non-interest expense
Advertising	201		122			79			64.8	%
Other expense	2,860		3,044			(184		)	(6.0	)%
Total other non-interest expense	3,061		3,166			(105		)	(3.3	)%
Total non-interest expense	$	24,027	$	24,176		$	(149	)	(0.6	)%

NM - Not Meaningful

Non-interest expense decreased $302 thousand to $12.0 million in the second quarter of 2016 compared to $12.3 million in the second quarter of 2015. The decrease was primarily due to a reduction in rent expense related to the relocation of offices in 2016, and one-time lease accounting adjustments in 2015 as well as higher director expenses incurred in 2015 related to education costs and strategic matters. These decreases were partially offset by a $150 thousand provision for off-balance sheet commitments in the second quarter of 2016, compared to a reversal of $109 thousand last year, and higher data processing expense mainly due to enhancing security features of our Visa debit cards and consulting services related to compliance systems.

Non-interest expense decreased $149 thousand to $24.0 million for the first six months of 2016 compared to $24.2 million for the first six months of 2015. The decrease resulted from the same reasons described above and higher expenses related to OREO included in other non-interest expense for the first six months of 2015.

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Provision for Income Taxes

The provision for income taxes for the second quarter of 2016 totaled $2.7 million at an effective tax rate of 36.1%, compared to $2.5 million at an effective tax rate of 36.4% in the same quarter last year. The provision for income taxes for the first half of 2016 totaled $5.9 million at an effective tax rate of 35.9%, compared to $4.9 million at an effective tax rate of 36.1% for the first half of 2015. These provisions reflect accruals for taxes at the applicable rates for federal income tax and California franchise tax based upon reported pre-tax income, and adjusted for the effects of all permanent differences between income for tax and financial reporting purposes (such as earnings on qualified municipal securities, BOLI, and certain tax-exempt loans). We forecast annual pre-tax income and these permanent differences to project our effective tax rates. As a result, there are fluctuations in the effective rate from period to period based on the relationship of net permanent differences to income before tax.

We file a consolidated return in the U.S. Federal tax jurisdiction and a combined return in the State of California tax jurisdiction. There were no ongoing federal or state income tax examinations at the issuance of this report. At June 30, 2016, neither the Bank nor Bancorp had accruals for interest and penalties related to unrecognized tax benefits.

FINANCIAL CONDITION SUMMARY

At June 30, 2016, assets totaled $1,950.5 million, a decrease of $80.6 million when compared to $2,031.1 million at December 31, 2015, primarily due to a decrease in investment securities of $105.6 million with corresponding reductions in borrowings and deposits totaling $67.0 million and $22.6 million, respectively. New loan volume of approximately $73.6 million in the first half of 2016 was offset by pay-offs of approximately $77.4 million, and combined with scheduled payments and advances on existing loan commitments, produced a net decrease of $2.8 million from December 31, 2015. We believe our loan and deposit pipelines are presently robust, reflecting growth prospects in all of our markets. We have replenished our loan pipeline which is now at its highest level since the end of the year after funding $114 million in loans during the fourth quarter of 2015.

Investment Securities

Investment securities in our portfolio that may be backed by mortgages having sub-prime or Alt-A features (certain privately issued CMOs) represent 0.2% of our total investment portfolio at both June 30, 2016 and December 31, 2015.

We sold eight available-for-sale securities in 2016 at net gains of $393.9 thousand with total proceeds of $68.7 millionto pay down our borrowings.

The table below summarizes our investment in obligations of state and political subdivisions at June 30, 2016 and December 31, 2015.

		June 30, 2016						December 31, 2015
(dollars in thousands)		Amortized Cost		Fair Value		% of Total State and Political Subdivisions		Amortized Cost		Fair Value		% of Total State and Political Subdivisions
Within California:
	General obligation bonds	$	17,985	$	18,379	17.3	%	$	18,642	$	18,830	18.6	%
	Revenue bonds	13,726		14,160		13.2		15,453		15,767		15.5
	Tax allocation bonds	5,361		5,570		5.2		5,411		5,603		5.4
Total within California		37,072		38,109		35.7		39,506		40,200		39.5
Outside California:
	General obligation bonds	58,174		60,039		56.1		51,920		52,990		51.9
	Revenue bonds	8,488		8,640		8.2		8,603		8,629		8.6
Total outside California		66,662		68,679		64.3		60,523		61,619		60.5
Total obligations of state and political subdivisions		$	103,734	$	106,788	100.0	%	$	100,029	$	101,819	100.0	%

The portion of the portfolio outside the state of California is distributed among nineteen states. The largest concentrations are in Washington (12.2%), Minnesota (7.4%), and Wisconsin (6.4%). Revenue bonds, both within

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and outside California, primarily consisted of bonds relating to essential services (such as public improvements and utilities) and school district bonds.

Investments in states, municipalities and political subdivisions are subject to an initial pre-purchase credit assessment and ongoing monitoring. Key considerations include:

• The soundness of a municipality’s budgetary position and stability of its tax revenues

• Debt profile and level of unfunded liabilities, diversity of revenue sources, taxing authority of the issuer

• Local demographics/economics including unemployment data, largest taxpayers and local employers, income indices and home values

• For revenue bonds, the source and strength of revenue for municipal authorities including the obligor’s financial condition and reserve levels, annual debt service and debt coverage ratio, and credit enhancement (such as insurer’s strength)

• Credit ratings by major credit rating agencies

Loans

New loan originations were strong at approximately $73.6 million in the first six months of 2016. Investor commercial real estate and commercial and industrial, including related owner-occupied commercial real estate, accounted for the majority of the new loan volume for the first half of 2016. Loan originations were offset by pay-offs of approximately $77.4 million. Two investor commercial real estate loans totaling $22 million accounted for approximately 29% of pay-offs. One of these was a $13 million credit for which the Bank chose not to match a competitor's highly aggressive loan terms as they were not consistent with our credit policy. The remaining $9 million loan was a planned payoff, which facilitated new financing on a related property.

Our residential loan portfolio does not include sub-prime loans, nor is it our practice to underwrite loans commonly referred to as "Alt-A mortgages," the characteristics of which are loans lacking full documentation, borrowers having low FICO scores, or collateral compositions reflecting high loan-to-value ratios. Refer to Note 5 for the composition of outstanding loans by class.

Liabilities

During the first six months of 2016, total liabilities decreased $92.7 million to $1,724.0 million. At June 30, 2016, deposits totaled $1,705.6 million, a decrease of $22.6 million from December 31, 2015. Fluctuation in deposits was primarily due to normal business activity for new and existing commercial customers and the nature of their businesses. We paid off $67.0 million of borrowings from December 31, 2015, including a $15 million fixed rate Federal Home Loan Bank advance to reduce our cost of funds going forward.

Capital Adequacy

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

Quantitative measures established by regulation to ensure capital adequacy require Bancorp and the Bank to maintain minimum amounts and ratios (set forth in the table below) of total and Tier 1 capital to risk-weighted assets and of Tier 1 capital to quarterly average assets.

Capital ratios are reviewed by Management on a regular basis to ensure that capital exceeds the prescribed regulatory minimums and is adequate to meet our anticipated future needs.  For all periods presented, the Bank’s ratios exceed the regulatory definition of “well capitalized” under the regulatory framework for prompt corrective action and Bancorp’s ratios exceed the required minimum ratios for capital adequacy purposes.

In July 2013, the Board of Governors of the Federal Reserve, the FDIC and the Office of the Comptroller of the Currency, finalized regulatory capital rules known as "Basel III". The rules became effective beginning January 2015, and will

Page-42

be phased-in and become fully implemented by January 2019. The guidelines, among other things, changed the minimum capital requirements of bank holding companies, by increasing the Tier 1 capital to risk-weighted assets ratio to 6%, and introducing a new requirement to maintain a minimum ratio of common equity Tier 1 capital to risk-weighted assets of 4.5%. By 2019, when fully phased in, the rules will require further increases to certain minimum capital requirements and a capital conservation buffer of an additional 2.5% of risk-weighted assets. Basel III permits certain banks such as us to exclude accumulated other comprehensive income or loss from regulatory capital through a one-time election in the first quarter of 2015. As it was consistent with our existing treatment, there were no changes to our capital ratios as a result of making this election. The changes that affected us most significantly include:

• shifting off-balance sheet items with an original maturity of one year or less from 0% to 20% risk weight,

• moving past due loan balances from 100% to 150% risk weight,

• deducting deferred tax assets associated with NOLs and tax credits from common equity Tier 1 capital, and

• subjecting deferred tax assets related to temporary timing differences that exceed certain thresholds to 250% risk-weighting, beginning in 2018.

We have modeled our ratios under the fully phased-in Basel III rules and, based on present facts, we do not expect that we will be required to raise additional capital as a result of the fully phased-in rules.

To be categorized as well capitalized the Bank must maintain minimum total risk-based, Tier 1 risk-based, Tier 1 leverage, and common equity Tier 1 ratios as set forth in the second table below. The most recent notification from the FDIC categorized the Bank as well capitalized under the regulatory framework for prompt corrective action as of March 31, 2016. There are no conditions or events since that notification that Management believes have changed the Bank’s categories, and we expect the Bank to remain well capitalized for prompt corrective action purposes.

The Bancorp’s and Bank’s capital adequacy ratios as of June 30, 2016 and December 31, 2015 are presented in the following tables. Bancorp's Tier 1 capital includes the subordinated debentures, which are not included at the Bank level. We continued to build capital in 2016 through the accumulation of net income.

Capital Ratios for Bancorp (dollars in thousands)	Actual Ratio				Adequately Capitalized Threshold1
June 30, 2016	Amount		Ratio		Amount	Ratio
Total Capital (to risk-weighted assets)	$	236,625	14.05	%	≥ $145,236	≥ 8.625%
Tier 1 Capital (to risk-weighted assets)	$	220,638	13.10	%	≥ $111,558	≥ 6.625%
Tier 1 Capital (to average assets)	$	220,638	11.28	%	≥ $ 78,246	≥ 4.000%
Common Equity Tier 1 (to risk-weighted assets)	$	215,541	12.80	%	≥ $ 86,300	≥ 5.125%
December 31, 2015
Total Capital (to risk-weighted assets)	$	227,269	13.37	%	≥ $135,996	≥ 8.00%
Tier 1 Capital (to risk-weighted assets)	$	211,521	12.44	%	≥ $101,997	≥ 6.00%
Tier 1 Capital (to average assets)	$	211,521	10.67	%	≥ $ 79,296	≥ 4.00%
Common Equity Tier 1 (to risk-weighted assets)	$	206,724	12.16	%	≥ $ 76,498	≥ 4.50%

¹ The 2016 adequately capitalized threshold includes the capital conservation buffer that was effective January 1, 2016. These ratios are not reflected on a fully phased-in basis, which will occur in January 2019.

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Capital Ratios for the Bank (dollars in thousands)	Actual Ratio				Adequately Capitalized Threshold1		Ratio to be Well Capitalized under Prompt Corrective Action Provisions
June 30, 2016	Amount		Ratio		Amount	Ratio	Amount	Ratio
Total Capital (to risk-weighted assets)	$	232,612	13.82	%	≥ $145,205	≥ 8.625%	≥ $168,354	≥10.00%
Tier 1 Capital (to risk-weighted assets)	$	216,625	12.87	%	≥ $111,535	≥ 6.625%	≥ $134,683	≥ 8.00%
Tier 1 Capital (to average assets)	$	216,625	11.08	%	≥ $ 78,232	≥ 4.000%	≥ $ 97,789	≥ 5.00%
Common Equity Tier 1 (to risk-weighted assets)	$	216,625	12.87	%	≥ $ 86,281	≥ 5.125%	≥ $109,430	≥ 6.50%
December 31, 2015
Total Capital (to risk-weighted assets)	$	222,830	13.11	%	≥ $135,968	≥ 8.00%	≥ $169,960	≥10.00%
Tier 1 Capital (to risk-weighted assets)	$	207,082	12.18	%	≥ $101,976	≥ 6.00%	≥ $135,968	≥ 8.00%
Tier 1 Capital (to average assets)	$	207,082	10.45	%	≥ $ 79,268	≥ 4.00%	≥ $ 99,085	≥ 5.00%
Common Equity Tier 1 (to risk-weighted assets)	$	207,082	12.18	%	≥ $ 76,482	≥ 4.50%	≥ $110,474	≥ 6.50%

¹ The 2016 adequately capitalized threshold includes the capital conservation buffer that was effective January 1, 2016. These ratios are not reflected on a fully phased-in basis, which will occur in January 2019.

Liquidity

The goal of liquidity management is to provide adequate funds to meet loan demand and fund operating activities and deposit withdrawals. We accomplish this goal by maintaining an appropriate level of liquid assets and formal lines of credit with the FHLB, FRBSF and correspondent banks that enable us to borrow funds as needed. Our ALCO, which is comprised of certain directors of the Bank, is responsible for approving and monitoring our liquidity targets and strategies. ALCO has adopted a contingency funding plan that provides early detection of a potential shortfall in liquidity below internal requirements and institutes prompt responses that may prevent or alleviate a potential liquidity crisis.

We obtain funds from the repayment and maturity of loans as well as deposit inflows, investment security maturities and paydowns, federal funds purchases, FHLB advances, and other borrowings.  Our primary uses of funds are the origination of loans, the purchase of investment securities, withdrawals of deposits, maturity of certificate of deposits, repayment of borrowings and dividends to common stockholders.

Management monitors our liquidity position daily. Our liquid assets totaled$287.5 million atJune 30, 2016which included unencumbered available-for-sale securities (after applying valuation haircut) and cash. We attract and retain new deposits, which depends upon the variety and effectiveness of our customer account products, service and convenience, and rates paid to customers, as well as our financial strength. Any long-term decline in retail deposit funding would adversely affect our liquidity. We repaid $67 million of borrowings from the FHLB during the first six months of 2016 to lower our cost of funds going forward. In addition,we had an influx of deposits from several large commercial depositors in late 2015 that were withdrawn in early 2016 due to their business operation models. As a result, our liquid assets declined $87.5 million from December 31, 2015 to June 30, 2016. Management regularly adjusts our investments inliquid assets based upon our assessment of expected loan demand and payoff activities, expected deposit flows, desired mix and yields on interest-earning assets, and the objectives of our asset/liability management program. In addition, we have secured borrowing capacity through the FHLB and FRBSF that can be drawn upon. Management anticipates our current strong liquidity position and core deposit base will provide adequate liquidity to fund our operations.

As presented in the accompanying unaudited consolidated statements of cash flows, the sources of liquidity vary between periods. Our cash and cash equivalents at June 30, 2016 totaled $55.4 million, an increase of $29.1 million from December 31, 2015. The primary sources of funds during the first six months of 2016 included $109.2 million in proceeds from sales, pay-downs and maturities of investment securities, net of purchases, $5.0 million in loan principal collections (net of loan originations), and $10.5 million net cash provided by operating activities. The primary uses of liquidity during the first six months of 2016 were the repayment of $67.0 million in borrowings and a decline in net deposits of $22.6 million.

In addition to cash and cash equivalents, we have substantial additional borrowing capacity as discussed in Note 6 to the consolidated financial statements.

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Undrawn credit commitments, as discussed in Note 8 to the consolidated financial statements, totaled $418.2 million at June 30, 2016. These commitments, to the extent used, are expected to be funded primarily through the repayment of existing loans, deposit growth and liquid assets. Over the next twelve months, $115.7 million of time deposits will mature. We expect these funds to be replaced with new deposits. Our emphasis on local deposits combined with our well capitalized equity position, provides a very stable funding base.

Since Bancorp is a holding company and does not conduct regular banking operations, its primary sources of liquidity are dividends from the Bank. Under the California Financial Code, payment of a dividend from the Bank to Bancorp without advance regulatory approval is restricted to the lesser of the Bank’s retained earnings or the amount of the Bank’s net profits from the previous three fiscal years less the amount of dividends paid during that period. The primary uses of funds for Bancorp are shareholder dividends and ordinary operating expenses.  Bancorp held $3.6 million of cash at June 30, 2016. Bancorp obtained dividend distributions from the Bank in the amount of $3.0 million in January 2016. The Board of Directors approved an additional $3.4 million dividend from the Bank to Bancorp in July 2016 to cover Bancorp's operational needs and cash dividends to shareholders through the end of 2016. Management anticipates that there will be sufficient earnings at the Bank to provide dividends to Bancorp to meet its funding requirements for the foreseeable future.

ITEM 3.     Quantitative and Qualitative Disclosure about MarketRisk

Market risk is defined as the risk of loss arising from an adverse change in the market value (or prices) of financial instruments. A significant form of market risk is interest rate risk, which is inherent in our investment, borrowing, lending and deposit gathering activities. The Bank manages interest rate sensitivity to minimize the exposure of our net interest margin, earnings, and capital to changes in interest rates. Interest rate changes can create fluctuations in the net interest margin due to an imbalance in the timing of repricing or maturity of assets or liabilities.

To mitigate interest rate risk, the structure of the Consolidated Statement of Condition is managed with the objective of correlating the effects of interest rate changes on loans and investments with those of deposits and borrowings. The asset liability management policy sets limits on the acceptable amount of change to net interest income and economic value of equity in different interest rate environments.

From time to time, we enter into interest rate swap contracts to mitigate the changes in the fair value of specified long-term fixed-rate loans and firm commitments to enter into long-term fixed-rate loans caused by changes in interest rates. See Note 9 to the Consolidated Financial Statements in this Form 10-Q.

Exposure to interest rate risk is reviewed at least quarterly by ALCO and the Board of Directors. Simulation models are used to measure interest rate risk and to evaluate strategies to improve profitability. A simplified statement of condition is prepared on a quarterly basis as a starting point, using instrument level data of our actual loans, investments, borrowings and deposits as inputs. If potential changes to net equity value and net interest income resulting from hypothetical interest rate changes are not within the limits established by the Board of Directors, Management may adjust the asset and liability mix to bring the risk position within approved limits.

In December 2015, the FOMC raised the target federal funds rate by 25 basis points to a range of 0.25% to 0.50%, from the historic low of 0.00% to 0.25%, which had been maintained since December 2008. The Bank currently has low interest rate risk. Net interest margin is expected to increase after interest rates go up, but there may be a lag between repricing of certain floating rate loans at their floors and increases in rates.

Based on our most recent simulation, net interest income is projected to decrease by approximately 0.1% in year one given an immediate 200 basis point increase in interest rates and increase by approximately 5% in year two. The interest rate risk is within policy guidelines established by ALCO and the Board of Directors.

ITEM 4.       Controlsand Procedures

Bank of Marin Bancorp and its subsidiary (the "Company") conducted an evaluation under the supervision and with the participation of our Management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rule 13a-15(e) or 15d-15(e) under the Exchange Act of 1934 (the “Act”)) as of the end of the period covered by this report. The term disclosure controls and procedures means controls and other procedures that are designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Act (15 U.S.C. 78a etseq.) is recorded, processed, summarized and reported, within the time periods specified in the Commission's rules and forms. Disclosure

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controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Act is accumulated and communicated to our Management, including our principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure. Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective as of the end of the period covered by this report.

During the last fiscal quarter there were no significant changes that materially affected, or are reasonably likely to affect, our internal control over financial reporting.

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PART II       OTHER INFORMATION

ITEM 1         Legal Proceedings

We may be party to legal actions which arise from time to time as part of the normal course of our business.  We believe, after consultation with legal counsel, that we have meritorious defenses in these actions, and that litigation contingency liability, if any, will not have a material adverse effect on our financial position, results of operations, or cash flows.

We are responsible for our proportionate share of certain litigation indemnifications provided to Visa U.S.A. by its member banks in connection with lawsuits related to anti-trust charges and interchange fees. For further details, see Note 13 to the Consolidated Financial Statements in Item 8 of our 2015 Form 10-K and Note 8 to the Consolidated Financial Statements in this Form 10-Q herein.

ITEM 1A      Risk Factors

There have been no material changes from the risk factors previously disclosed in our 2015 Form 10-K. Refer to “Risk Factors” in Item 1A of our 2015 Form 10-K, pages 11 through 20.

ITEM 2       Unregistered Sales of Equity Securities and Use ofProceeds

We did not have any unregistered sales or repurchases of our equity securities during the three months ended June 30, 2016.

ITEM 3       Defaults Upon Senior Securities

None.

ITEM 4      Mine Safety Disclosures

Not applicable.

ITEM 5      Other Information

None.

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ITEM 6       Exhibits

The following exhibits are filed as part of this report or hereby incorporated by references to filings previously made with the SEC.

		Incorporated by Reference
Exhibit Number	Exhibit Description	Form	File No.	Exhibit	Filing Date	Herewith
2.01	Modified Whole Bank Purchase and Assumption Agreement dated February 18, 2011 among Federal Deposit Insurance Corporation, Receiver of Charter Oak Bank, Napa, California, Federal Deposit Insurance Corporation, and Bank of Marin	8-K	001-33572	99.2	February 28, 2011
2.02	Agreement and Plan of Merger with NorCal Community Bancorp, dated July 1, 2013	8-K	001-33572	2.1	July 5, 2013
3.01	Articles of Incorporation, as amended	10-Q	001-33572	3.01	November 7, 2007
3.02	Bylaws	10-Q	001-33572	3.02	May 9, 2011
3.02a	Bylaw Amendment	8-K	001-33572	3.03	July 6, 2015
4.01	Rights Agreement dated as of July 2, 2007	8-A12B	001-33572	4.1	July 2, 2007
4.01a	Rights Agreement, Amendment No. 1, dated June 17, 2016	8-K	001-33572	4.2	June 22, 2016
10.01	2007 Employee Stock Purchase Plan	S-8	333-144810	4.1	July 24, 2007
10.02	1989 Stock Option Plan	S-8	333-144807	4.1	July 24, 2007
10.03	1999 Stock Option Plan	S-8	333-144808	4.1	July 24, 2007
10.04	2007 Equity Plan	S-8	333-144809	4.1	July 24, 2007
10.05	2010 Director Stock Plan	S-8	333-167639	4.1	June 21, 2010
10.06	Form of Indemnification Agreement for Directors and Executive Officers dated August 9, 2007	10-Q	001-33572	10.06	November 7, 2007
10.07	Form of Employment Agreement dated January 23, 2009	8-K	001-33572	10.1	January 26, 2009
10.08	Intentionally left blank
10.09	2010 Annual Individual Incentive Compensation Plan	8-K	001-33572	99.1	October 21, 2010
10.10a	Salary Continuation Agreements with executive officers, Russell Colombo, Chief Executive Officer and Peter Pelham, Director of Retail Banking, dated January 1, 2011	8-K	001-33572	10.1 10.4	January 6, 2011
10.10b	Salary Continuation Agreements with executive officers, Tani Girton, Chief Financial Officer, dated October 18, 2013 and Elizabeth Reizman, Chief Credit Officer, dated July 20, 2014	8-K	001-33572	10.2 10.3	November 4, 2014
10.10c	Salary Continuation Agreements for executive officer Timothy Myers, Executive Vice President and Commercial Banking Manager, dated May 28, 2015	8-K	001-33572	10.4	June 2, 2015
10.11	2007 Form of Change in Control Agreement	8-K	001-33572	10.1	October 31, 2007
10.12	Information Technology Services Agreement with Fidelity Information Services, LLC, dated July 11, 2012	8-K	001-33572	10.1	July 17, 2012

11.01	Earnings Per Share Computation - included in Note 1 to the Consolidated Financial Statements					Filed
14.02	Code of Ethical Conduct, dated October 17, 2014	10-K	001-33572	14.02	March 12, 2015
31.01	Certification of Principal Executive Officer pursuant to Rule 13a-14(a)/15d-14(a) as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002					Filed
31.02	Certification of Principal Financial Officer pursuant to Rule 13a-14(a)/15d-14(a) as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002					Filed
32.01	Certification pursuant to 18 U.S.C. §1350 as adopted pursuant to §906 of the Sarbanes-Oxley Act of 2002					Filed
101.01*	XBRL Interactive Data File					Furnished

* As provided in Rule 406T of Regulation S-T, this information is furnished and not filed for purposes of Sections 11 and 12 of the Securities Act of 1933 and Section 18 of the Securities Exchange Act of 1934.

SIGNATURES

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

	Bank of Marin Bancorp
	(registrant)
August 5, 2016	/s/ Russell A. Colombo
Date	Russell A. Colombo
	President &
	Chief Executive Officer
	(Principal Executive Officer)
August 5, 2016	/s/ Tani Girton
Date	Tani Girton
	Executive Vice President &
	Chief Financial Officer
	(Principal Financial Officer)
August 5, 2016	/s/ Cecilia Situ
Date	Cecilia Situ
	First Vice President &
	Manager of Finance & Treasury
	(Principal Accounting Officer)

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EX-31.01

EXHIBIT 31.01

Certification of Principal Executive Officer pursuant to Rule 13a-14(a)/15d-14(a) as adopted pursuant to §302 of the Sarbanes-Oxley Act of 2002

I, Russell A. Colombo, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Bank of Marin Bancorp (the Registrant);

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

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

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

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

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

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

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

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

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

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

August 5, 2016	/s/ Russell A. Colombo
Date	Russell A. Colombo
	President &
	Chief Executive Officer

EX-31.02

EXHIBIT 31.02

Certification of Principal Financial Officer pursuant to Rule 13a-14(a)/15d-14(a)as adopted pursuant to §302 of the Sarbanes-Oxley Act of 2002

I, Tani Girton, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Bank of Marin Bancorp (the Registrant);

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

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

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

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

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

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

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

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

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

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

August 5, 2016	/s/ Tani Girton
Date	Tani Girton
	Chief Financial Officer

EX-32.01

EXHIBIT 32.01

Certification pursuant to 18 U.S.C. §1350 as adopted pursuant to §906

of the Sarbanes-Oxley Act of 2002

In connection with the quarterly report on Form 10-Q of Bank of Marin Bancorp (the Registrant) for the quarter ended June 30, 2016, as filed with the Securities and Exchange Commission, the undersigned hereby certify pursuant to 18 U.S.C. §1350, as adopted pursuant to §906 of the Sarbanes-Oxley Act of 2002, that:

1) such Form 10-Q fully complies with the requirements of Section 13(a) or 15(d)

of the Securities Exchange Act of 1934; and

2) the information contained in such Form 10-Q fairly presents, in all material

respects, the financial condition and results of operations of the Registrant.

August 5, 2016	/s/ Russell A. Colombo
Date	Russell A. Colombo
	President &
	Chief Executive Officer

August 5, 2016	/s/ Tani Girton
Date	Tani Girton
	Executive Vice President &
	Chief Financial Officer

This certification accompanies each report pursuant to §906 of the Sarbanes-Oxley Act of 2002 and shall not, except to the extent required by the Sarbanes-Oxley Act of 2002, be deemed filed by the Registrant for purposes of §18 of the Securities Exchange Act of 1934, as amended.

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Document And Entity Information - shares	6 Months Ended
	Jun. 30, 2016	Jul. 31, 2016
Document and Entity Information [Abstract]
Entity Registrant Name	Bank of Marin Bancorp
Entity Central Index Key	0001403475
Current Fiscal Year End Date	--12-31
Entity Filer Category	Accelerated Filer
Document Type	10-Q
Document Period End Date	Jun. 30, 2016
Document Fiscal Year Focus	2016
Document Fiscal Period Focus	Q2
Amendment Flag	false
Entity Common Stock, Shares Outstanding		6,122,987

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CONSOLIDATED STATEMENTS OF CONDITION - USD ($) $ in Thousands	Jun. 30, 2016	Dec. 31, 2015
Assets
Cash and due from banks	$ 55,438	$ 26,343
Investment securities
Held-to-maturity, at amortized cost	58,491	69,637
Available-for-sale, at fair value	323,361	417,787
Total investment securities	381,852	487,424
Loans, net of allowance for loan losses of $15,087 and $14,999 at June 30, 2016 and December 31, 2015, respectively	1,433,312	1,436,229
Bank premises and equipment, net	8,650	9,305
Goodwill	6,436	6,436
Core deposit intangible	2,846	3,113
Interest receivable and other assets	61,918	62,284
Total assets	1,950,452	2,031,134
Deposits
Non-interest-bearing	804,447	770,087
Interest-bearing
Transaction accounts	88,365	114,277
Savings accounts	149,745	141,316
Money market accounts	502,476	541,089
Time accounts	160,582	161,457
Total deposits	1,705,615	1,728,226
Federal Home Loan Bank (FHLB) and other borrowings	0	67,000
Subordinated debentures	5,493	5,395
Interest payable and other liabilities	12,892	16,040
Total liabilities	1,724,000	1,816,661
Stockholders' Equity
Preferred stock, no par value Authorized - 5,000,000 shares, none issued	0	0
Common stock, no par value Authorized - 15,000,000 shares; Issued and outstanding - 6,120,684 and 6,068,543 at June 30, 2016 and December 31, 2015, respectively	86,569	84,727
Retained earnings	136,992	129,553
Accumulated other comprehensive income, net	2,891	193
Total stockholders' equity	226,452	214,473
Total liabilities and stockholders' equity	$ 1,950,452	$ 2,031,134

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CONSOLIDATED STATEMENTS OF CONDITION (Parenthetical) - USD ($) $ in Thousands	Jun. 30, 2016	Dec. 31, 2015
Loans and Leases Receivable, Net Amount
Loans, allowance for loan losses	$ 15,087	$ 14,999
Stockholders' Equity
Preferred stock, no par value (in dollars per share)	$ 0	$ 0
Preferred stock, authorized (in shares)	5,000,000	5,000,000
Preferred stock, issued (in shares)	0	0
Common stock, no par value (in dollars per share)	$ 0	$ 0
Common stock, authorized (in shares)	15,000,000	15,000,000
Common stock, issued (in shares)	6,120,684	6,068,543
Common stock, outstanding (in shares)	6,120,684	6,068,543

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CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME - USD ($) shares in Thousands, $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2016	Jun. 30, 2015	Jun. 30, 2016	Jun. 30, 2015
Interest income
Interest and fees on loans	$ 16,097	$ 15,287	$ 33,238	$ 30,666
Interest on investment securities
Securities of U.S. government agencies	1,191	990	2,543	2,025
Obligations of state and political subdivisions	588	511	1,174	1,051
Corporate debt securities and other	77	179	182	384
Interest on Federal funds sold and short-term investments	40	51	51	72
Total interest income	17,993	17,018	37,188	34,198
Interest expense
Interest on interest-bearing transaction accounts	28	30	55	60
Interest on savings accounts	14	13	28	25
Interest on money market accounts	107	123	218	250
Interest on time accounts	193	215	389	437
Interest on FHLB and other borrowings	378	78	478	156
Interest on subordinated debentures	107	105	216	209
Total interest expense	827	564	1,384	1,137
Net interest income	17,166	16,454	35,804	33,061
Provision for loan losses	0	0	0	0
Net interest income after provision for loan losses	17,166	16,454	35,804	33,061
Non-interest income
Service charges on deposit accounts	441	504	897	1,029
Wealth Management and Trust Services	527	603	1,093	1,241
Debit card interchange fees	381	368	719	715
Merchant interchange fees	128	129	241	259
Earnings on bank-owned life insurance	209	203	410	406
Dividends on FHLB stock	185	461	354	608
Gains on investment securities, net	284	0	394	8
Other income	266	340	476	531
Total non-interest income	2,421	2,608	4,584	4,797
Non-interest expense
Salaries and related benefits	6,724	6,672	13,472	13,462
Occupancy and equipment	1,175	1,493	2,456	2,835
Depreciation and amortization	441	650	894	1,071
Federal Deposit Insurance Corporation insurance	246	253	507	489
Data processing	916	792	1,772	1,578
Professional services	554	515	1,052	1,079
Directors' expense	116	247	305	438
Information technology	165	216	358	368
Reversal of losses on off-balance sheet commitments	150	(109)	150	(310)
Other expense	1,530	1,590	3,061	3,166
Total non-interest expense	12,017	12,319	24,027	24,176
Income before provision for income taxes	7,570	6,743	16,361	13,682
Provision for income taxes	2,733	2,457	5,878	4,939
Net income	$ 4,837	$ 4,286	$ 10,483	$ 8,743
Net income per common share:
Basic (usd per share)	$ 0.80	$ 0.72	$ 1.73	$ 1.47
Diluted (usd per share)	$ 0.79	$ 0.71	$ 1.72	$ 1.44
Weighted average shares used to compute net income per common share:
Basic (shares)	6,078	5,945	6,063	5,933
Diluted (shares)	6,109	6,062	6,100	6,055
Dividends declared per common share	$ 0.25	$ 0.22	$ 0.50	$ 0.44
Comprehensive income:
Net income	$ 4,837	$ 4,286	$ 10,483	$ 8,743
Other comprehensive income
Change in net unrealized gain (loss) on available-for-sale securities	2,119	(1,803)	5,042	(486)
Reclassification adjustment for gain on available-for-sale securities included in net income	(284)	0	(394)	(8)
Net change in unrealized gain (loss) on available-for-sale securities, before tax	1,835	(1,803)	4,648	(494)
Deferred tax expense (benefit)	776	(691)	1,950	(137)
Other comprehensive income (loss), net of tax	1,059	(1,112)	2,698	(357)
Comprehensive income	$ 5,896	$ 3,174	$ 13,181	$ 8,386

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CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY - USD ($) $ in Thousands	Total	Common Stock	Retained Earnings	Accumulated Other Comprehensive Income (Loss), Net of Taxes
Balance (in shares) at Dec. 31, 2014		5,939,482
Balance at Dec. 31, 2014	$ 200,026	$ 82,436	$ 116,502	$ 1,088
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net income	18,441		18,441
Other comprehensive income (loss)	(895)			(895)
Stock options exercised (in shares)		37,071
Stock options exercised	1,139	$ 1,139
Excess tax benefit - stock-based compensation	212	$ 212
Stock issued under employee stock purchase plan (in shares)		339
Stock issued under employee stock purchase plan	17	$ 17
Restricted stock granted (in shares)		15,970
Restricted stock granted	0	$ 0
Restricted stock forfeited/cancelled (in shares)		(450)
Restricted stock forfeited/cancelled	0	$ 0
Stock-based compensation - stock options	252	252
Stock-based compensation - restricted stock	384	$ 384
Cash dividends paid on common stock	(5,390)		(5,390)
Stock purchased by directors under director stock plan (in shares)		245
Stock purchased by directors under director stock plan	12	$ 12
Stock issued in payment of director fees (in shares)		5,295
Stock issued in payment of director fees	$ 275	$ 275
Stock issued from exercise of warrants		70,591
Balance (in shares) at Dec. 31, 2015	6,068,543	6,068,543
Balance at Dec. 31, 2015	$ 214,473	$ 84,727	129,553	193
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Stock Issued During Period, Value, New Issues	0	$ 0
Net income	10,483		10,483
Other comprehensive income (loss)	2,698			2,698
Stock options exercised (in shares)		32,117
Stock options exercised	1,087	$ 1,087
Excess tax benefit - stock-based compensation	113	$ 113
Stock issued under employee stock purchase plan (in shares)		294
Stock issued under employee stock purchase plan	13	$ 13
Restricted stock granted (in shares)		16,910
Restricted stock granted	0	$ 0
Stock-based compensation - stock options	181	181
Stock-based compensation - restricted stock	297	$ 297
Cash dividends paid on common stock	(3,044)		(3,044)
Stock purchased by directors under director stock plan (in shares)		260
Stock purchased by directors under director stock plan	14	$ 14
Stock issued in payment of director fees (in shares)		2,560
Stock issued in payment of director fees	$ 137	$ 137
Balance (in shares) at Jun. 30, 2016	6,120,684	6,120,684
Balance at Jun. 30, 2016	$ 226,452	$ 86,569	$ 136,992	$ 2,891

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CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) $ in Thousands	3 Months Ended		6 Months Ended		12 Months Ended
	Jun. 30, 2016	Jun. 30, 2015	Jun. 30, 2016	Jun. 30, 2015	Dec. 31, 2015
Cash Flows from Operating Activities:
Net income	$ 4,837	$ 4,286	$ 10,483	$ 8,743	$ 18,441
Adjustments to reconcile net income to net cash provided by operating activities:
Provision for (reversal of) losses on off-balance sheet commitments	150	(109)	150	(310)
Compensation expense via common stock for director fees			97	138
Stock-based compensation expense			478	308
Excess tax benefits from exercised or vesting of stock based-awards			(113)	(141)
Amortization of core deposit intangible			267	309
Amortization of investment security premiums, net of accretion of discounts			1,466	1,217
Accretion of discount on acquired loans			(832)	(1,076)
Accretion of discount on subordinated debentures			98	106
Net amortization of deferred loan origination costs/fees			43	(294)
Write-down of other real estate owned			13	40
Gain on sale of investment securities			(394)	(8)
Depreciation and amortization	441	650	894	1,071
Loss on disposal of premises and equipment			0	4
Earnings on bank-owned life insurance policies	(209)	(203)	(410)	(406)
Net change in operating assets and liabilities:
Interest receivable			676	109
Interest payable			(50)	(4)
Deferred rent and other rent-related expenses			(262)	86
Other assets			1,763	1,504
Other liabilities			(3,872)	(2,271)
Total adjustments			12	382
Net cash provided by operating activities			10,495	9,125
Cash Flows from Investing Activities:
Purchase of held-to-maturity securities			(2,424)	(2,375)
Purchase of available-for-sale securities			(19,916)	(76,708)
Proceeds from sale of available-for-sale securities	13,688	1,559	68,673	1,559
Purchase of bank owned life insurance policies			(1,864)	0
Proceeds from paydowns/maturity of held-to-maturity securities			13,243	23,723
Proceeds from paydowns/maturity of available-for-sale securities			49,576	20,814
Proceeds from the sale of loan			0	1,502
Loans originated and principal collected, net			4,996	22,818
Purchase of FHLB stock			(1,792)	(136)
Purchase of premises and equipment			(239)	(889)
Cash paid for low income housing tax credit investment			(225)	(434)
Net cash provided by (used in) investing activities			110,028	(10,126)
Cash Flows from Financing Activities:
Net (decrease) increase in deposits			(22,611)	78,864
Proceeds from stock options exercised			1,087	774
Proceeds from stock issued under employee and director stock purchase plans			27	8
Repayment of Federal Home Loan Bank borrowings			(67,000)	0
Cash dividends paid on common stock			(3,044)	(2,620)
Excess tax benefits from exercised or vesting of stock based-awards			113	141
Net cash (used in) provided by financing activities			(91,428)	77,167
Net increase in cash and cash equivalents			29,095	76,166
Cash and cash equivalents at beginning of period			26,343	41,367	41,367
Cash and cash equivalents at end of period	$ 55,438	$ 117,533	55,438	117,533	$ 26,343
Supplemental disclosure of cash flow information:
Cash paid for interest			1,336	1,035
Cash paid for income taxes			7,095	5,270
Supplemental disclosure of non-cash investing and financing activities:
Change in unrealized gain on available-for-sale securities			4,648	(494)
Subscription in low income housing tax credit investment			0	1,023
Stock issued in payment of director fees			$ 137	$ 138

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Basis of Presentation

6 Months Ended

Jun. 30, 2016

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Basis of Presentation

 Basis of Presentation

The consolidated financial statements include the accounts of Bank of Marin Bancorp (“Bancorp”), a bank holding company, and its wholly-owned bank subsidiary, Bank of Marin (the “Bank”), a California state-chartered commercial bank. References to “we,” “our,” “us” mean the holding company and the Bank that are consolidated for financial reporting purposes. The accompanying unaudited consolidated interim financial statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission ("SEC"). Certain information and note disclosures normally included in annual financial statements prepared in accordance with generally accepted accounting principles ("GAAP") have been condensed or omitted pursuant to those rules and regulations. Although we believe that the disclosures are adequate and the information presented is not misleading, we suggest that these interim financial statements be read in conjunction with the annual financial statements and the notes thereto included in our 2015 Annual Report on Form 10-K.  In the opinion of Management, the unaudited consolidated financial statements reflect all adjustments which are necessary for a fair presentation of the consolidated financial position, the results of operations, changes in comprehensive income, changes in stockholders’ equity, and cash flows for the periods presented. All material intercompany transactions have been eliminated. The results of these interim periods may not be indicative of the results for the full year or for any other period. We have evaluated subsequent events through the date of filing with the SEC and have determined that there are no subsequent events that require additional recognition or disclosure.

The NorCal Community Bancorp Trusts I and II, respectively (the "Trusts") were formed for the sole purpose of issuing trust preferred securities. Bancorp is not considered the primary beneficiary of the Trusts (variable interest entities), therefore the Trusts are not consolidated in our consolidated financial statements, but rather the subordinated debentures are shown as a liability on our consolidated statements of condition (See Note 6, Borrowings). Bancorp's investment in the securities of the Trusts is accounted for under the equity method and is included in interest receivable and other assets on the consolidated statements of condition.

The following table shows: 1) weighted average basic shares, 2) potentially dilutive weighted average common shares related to stock options, unvested restricted stock awards and stock warrant, and 3) weighted average diluted shares. Basic earnings per share (“EPS”) are calculated by dividing net income by the weighted average number of common shares outstanding during each period, excluding unvested restricted stock awards. Diluted EPS are calculated using the weighted average number of potentially dilutive common shares, which is based on average market prices during the three months of the reporting period, under the treasury stock method. The number of potentially dilutive common shares included in year-to-date diluted EPS is a year-to-date weighted average of potentially dilutive common shares included in each quarterly diluted EPS computation. We have two forms of our outstanding common stock: common stock and unvested restricted stock awards. Holders of unvested restricted stock awards receive non-forfeitable dividends at the same rate as common shareholders and they both share equally in undistributed earnings. Therefore, under the two-class method, the difference in EPS is not significant for these participating securities.

	Three months ended				Six months ended
(in thousands, except per share data)	June 30, 2016		June 30, 2015		June 30, 2016		June 30, 2015
Weighted average basic shares outstanding	6,078		5,945		6,063		5,933
Potentially dilutive common shares related to:
Stock options	27		41		31		44
Unvested restricted stock awards	4		3		6		4
Warrant	—		73		—		74
Weighted average diluted shares outstanding	6,109		6,062		6,100		6,055
Net income	$	4,837	$	4,286	$	10,483	$	8,743
Basic EPS	$	0.80	$	0.72	$	1.73	$	1.47
Diluted EPS	$	0.79	$	0.71	$	1.72	$	1.44
Weighted average anti-dilutive shares not included in the calculation of diluted EPS	70		41		60		34

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Recently Issued Accounting Standards

6 Months Ended

Jun. 30, 2016

New Accounting Pronouncements and Changes in Accounting Principles [Abstract]

Recently Issued Accounting Standards

Recently Issued Accounting Standards

In May 2014, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2014-09, Revenue from Contracts with Customers (Topic 606). The ASU is a converged standard involving FASB and International Financial Reporting Standards that provides a single comprehensive revenue recognition model for all contracts with customers across transactions and industries. The core principal of the guidance is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount and at a time that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. Subsequent updates related to Revenue from Contracts with Customers (Topic 606) are as follows:

• August 2015 ASU No. 2015-14 - Deferral of the Effective Date, institutes a one-year deferral of the effective date of this amendment to annual reporting periods beginning after December 15, 2017. Early application is permitted only as of annual periods beginning after December 15, 2016, including interim reporting periods within that reporting period.

• March 2016 ASU No. 2016-08 - Principal versus Agent Considerations (Reporting Revenue Gross versus Net), clarifies the implementation guidance on principal versus agent considerations and on the use of indicators that assist an entity in determining whether it controls a specified good or service before it is transferred to the customer.

• April 2016 ASU No. 2016-10 - Identifying Performance Obligations and Licensing, provides guidance in determining performance obligations in a contract with a customer and clarifies whether a promise to grant a license provides a right to access or the right to use intellectual property.

• May 2016 ASU No. 2016-12 - Narrow Scope Improvements and Practical Expedients, gives further guidance on assessing collectability, presentation of sales taxes, noncash consideration, and completed contracts and contract modifications at transition.

We are currently evaluating the provisions of these updates and will be monitoring developments and additional guidance to determine the potential impact the new standards will have on our financial condition and results of operations.

In January 2016, the FASB issued ASU No. 2016-01, Financial Instruments - Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities. The amendments in this ASU make improvements to GAAP related to financial instruments that include the following as applicable to us.

• Equity investments, except for those accounted for under the equity method of accounting or those that result in consolidation of the investee, are required to be measured at fair value with changes in fair value recognized in net income. However, an entity may choose to measure equity investments that do not have readily determinable fair values at cost minus impairment, if any, plus or minus changes resulting from observable price changes in orderly transactions for the identical or a similar investment of the same issuer.

• Simplifies the impairment assessment of equity investments without readily determinable fair values by requiring a qualitative assessment to identify impairment - if impairment exists, this requires measuring the investment at fair value.

• Eliminates the requirement for public companies to disclose the method(s) and significant assumptions used to estimate the fair value that is currently required to be disclosed for financial instruments measured at amortized cost on the balance sheet.

• Public companies will be required to use the exit price notion when measuring the fair value of financial instruments for disclosure purposes.

• Requires separate presentation of financial assets and financial liabilities by measurement category and form of financial asset on the balance sheet or the accompanying notes to the financial statements.

• The reporting entity should evaluate the need for a valuation allowance on a deferred tax asset related to available-for-sale securities in combination with the entity's other deferred tax assets.

ASU 2016-01 is effective for public business entities for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. This ASU will impact our financial statement disclosures, however, we do not expect it to have a material impact on our financial condition or results of operations.

In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842). This ASU was issued to increase transparency and comparability among organizations by recognizing lease assets and lease liabilities, including leases classified as operating leases under previous GAAP, on the balance sheet and requiring additional disclosures of key information about leasing arrangements. This ASU applies to leasing arrangements exceeding a twelve month term. ASU 2016-02 is effective for annual periods, including interim periods within those annual periods beginning after December 15, 2018 and requires a modified retrospective method upon adoption. Early application of the amendments is permitted. We are currently evaluating the provisions of this ASU and will be monitoring developments and additional guidance to determine the timing of our adoption and the potential outcome the amendments will have on our financial condition and results of operations.

In March 2016, the FASB issued ASU No. 2016-05, Derivatives and Hedging (Topic 815): Effect of Derivative Contract Novations on Existing Hedge Accounting Relationships. A contract novation refers to replacing one of the parties to a derivative instrument with a new party. This ASU clarifies that a change in counterparty in a derivative instrument does not, in and of itself, require dedesignation of that hedging relationship and therefore discontinue the application of hedge accounting. ASU 2016-05 is effective for financial statements issued for fiscal years beginning after December 15, 2016, and interim periods within those fiscal years. Early adoption is permitted in any interim or annual period. We do not expect this ASU to have a material impact on our financial condition or results of operations.

In March 2016, the FASB issued ASU No. 2016-09, Compensation - Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting. This ASU identifies areas for simplification involving several aspects of accounting for share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities, forfeiture accounting, and classifications on the statement of cash flows. ASU 2016-09 is effective for annual periods beginning after December 15, 2016, and interim periods within those annual periods. Early adoption is permitted in any interim or annual period. We are currently evaluating the the provisions of this ASU and will be monitoring developments and additional guidance to determine the potential outcome the amendments will have on our financial condition and results of operations.

In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. This ASU replaces the incurred loss impairment methodology in current GAAP with a methodology that reflects expected credit losses, requiring a financial asset measured at amortized cost basis to be presented at the net amount expected to be collected. Under the new guidance, an entity recognizes as an allowance its estimate of expected credit losses, which is likely to result in more timely recognition of such losses. In addition, the accounting for purchased credit impaired financial assets will make the allowance for credit losses more comparable between originated assets and purchased financial assets, as well as reduce complexity with the accounting for interest income. ASU 2016-13 is effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. Early adoption is permitted for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. We are currently evaluating the provisions of this ASU and will be monitoring developments and additional guidance to determine the timing of our adoption and the potential outcome the amendments will have on our financial condition and results of operations.

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Fair Value of Assets and Liabilities

6 Months Ended

Jun. 30, 2016

Fair Value Disclosures [Abstract]

Fair Value of Assets and Liabilities

Fair Value of Assets and Liabilities

Fair Value Hierarchy and Fair Value Measurement

We group our assets and liabilities that are measured at fair value into three levels within the fair value hierarchy, based on the markets in which the assets and liabilities are traded and the reliability of the assumptions used to determine fair value. These levels are:

Level 1: Valuations are based on unadjusted quoted prices in active markets for identical assets or liabilities.

Level 2: Valuations are based on quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active and model-based valuations for which all significant assumptions are observable or can be corroborated by observable market data.

Level 3: Valuations are based on unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. Values are determined using pricing models and discounted cash flow models and may include significant Management judgment and estimation.

Transfers between levels of the fair value hierarchy are recognized through our monthly and/or quarterly valuation process in the reporting period during which the event or circumstances that caused the transfer occurred.

The following table summarizes our assets and liabilities that were required to be recorded at fair value on a recurring basis.

(in thousands)   Description of Financial Instruments	Carrying Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
June 30, 2016
Securities available-for-sale:
Mortgage-backed securities and collateralized mortgage obligations issued by U.S. government-sponsored agencies	$	167,407	$	—	$	166,750	$	657
Debentures of government-sponsored agencies	83,758		—		83,758		—
Privately-issued collateralized mortgage obligations	768		—		768		—
Obligations of state and political subdivisions	66,452		—		66,452		—
Corporate bonds	4,976		—		4,976		—
Derivative financial liabilities (interest rate contracts)	2,721		—		2,721		—
December 31, 2015
Securities available-for-sale:
Mortgage-backed securities and collateralized mortgage obligations issued by U.S. government-sponsored agencies	$	190,093	$	—	$	188,381	$	1,712
Debentures of government-sponsored agencies	160,892		—		160,892		—
Privately-issued collateralized mortgage obligations	4,150		—		4,150		—
Obligations of state and political subdivisions	57,673		—		57,673		—
Corporate bonds	4,979		—		4,979		—
Derivative financial assets (interest rate contracts)	3		—		3		—
Derivative financial liabilities (interest rate contracts)	1,658		—		1,658		—

Securities available-for-sale are recorded at fair value on a recurring basis. When available, quoted market prices (Level 1) are used to determine the fair value of securities available-for-sale. If quoted market prices are not available, we obtain pricing information from a reputable third-party service provider, who may utilize valuation techniques that use current market-based or independently sourced parameters, such as bid/ask prices, dealer-quoted prices, interest rates, benchmark yield curves, prepayment speeds, probability of default, loss severity and credit spreads (Level 2).   Level 2 securities include obligations of state and political subdivisions, U.S. agencies or government sponsored agencies' debt securities, mortgage-backed securities, government agency-issued and privately-issued collateralized mortgage obligations. As of June 30, 2016 and December 31, 2015, there were no securities that were considered Level 1 securities. As of June 30, 2016, we had one available-for-sale security that was considered a Level 3 security. The security is a U.S. government agency obligation collateralized by a small number of business equipment loans guaranteed by the Small Business Administration ("SBA") program. This security is not actively traded and is owned only by a few investors. The significant unobservable data that is reflected in the fair value measurement include dealer quotes, projected prepayment speeds/average life and credit information, among other things. The decrease in fair value during 2016 was due to the payoff of one of the larger loans in the pool collateralizing the security. The unrealized gain on this SBA-guaranteed security decreased by $2 thousand in the same period recorded as part of other comprehensive income.

Securities held-to-maturity may be written down to fair value (determined using the same techniques discussed above for securities available-for-sale) as a result of an other-than-temporary impairment, if any.

On a recurring basis, derivative financial instruments are recorded at fair value, which is based on the income approach using observable Level 2 market inputs, reflecting market expectations of future interest rates as of the measurement date.  Standard valuation techniques are used to calculate the present value of the future expected cash flows assuming an orderly transaction.  Valuation adjustments may be made to reflect both our own credit risk and the counterparties’ credit risk in determining the fair value of the derivatives. Level 2 inputs for the valuations are limited to observable market prices for London Interbank Offered Rate ("LIBOR") and Overnight Index Swap ("OIS") rates (for the very short term), quoted prices for LIBOR futures contracts, observable market prices for LIBOR and OIS swap rates, and one-month and three-month LIBOR basis spreads at commonly quoted intervals.  Mid-market pricing of the inputs is used as a practical expedient in the fair value measurements.  We project spot rates at reset days specified by each swap contract to determine future cash flows, then discount to present value using either LIBOR or OIS curves depending on whether the swap positions are fully collateralized as of the measurement date.  When the value of any collateral placed with counterparties is less than the interest rate derivative liability, a credit valuation adjustment ("CVA") is applied to reflect the credit risk we pose to counterparties.  We have used the spread between the Standard & Poor's BBB rated U.S. Bank Composite rate and LIBOR for the closest maturity term corresponding to the duration of the swaps to derive the CVA. A similar credit risk adjustment, correlated to the credit standing of the counterparty, is made when collateral posted by the counterparty does not fully cover their liability to Bank of Marin. For further discussion on our methodology in valuing our derivative financial instruments, refer to Note 9.

Certain financial assets may be measured at fair value on a non-recurring basis. These assets are subject to fair value adjustments that result from the application of the lower of cost or fair value accounting or write-downs of individual assets, such as impaired loans and other real estate owned ("OREO").

The following table presents the carrying value of assets and liabilities measured at fair value on a non-recurring basis and that were held in the consolidated statements of condition at each respective period end, by level within the fair value hierarchy as of June 30, 2016 and December 31, 2015.

(in thousands)	Carrying Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs  (Level 3)
June 30, 2016
Impaired loans 1	$	171	$	—	$	—	$	171
Other real estate owned	408		—		—		408
December 31, 2015
Impaired loans	$	—	$	—	$	—	$	—
Other real estate owned	421		—		—		421

¹Represents collateral-dependent loan principal balances that had been generally written down to the values of the underlying collateral and reflected net of specific valuation allowances. At June 30, 2016, the $171 thousand carrying value of a consumer loan was net of a $5 thousand specific valuation allowance. The carrying value of loans fully charged-off, which includes unsecured lines of credit, overdrafts and all other loans, is zero.

When a loan is identified as impaired, it is reported at the lower of cost or fair value, measured based on the loan's observable market price (Level 1) or the current net realizable value of the underlying collateral securing the loan, if the loan is collateral dependent (Level 3).  Net realizable value of the underlying collateral is the fair value of the collateral less estimated selling costs and any prior liens. Appraisals, recent comparable sales, offers and listing prices are factored in when valuing the collateral. We review and verify the qualifications and licenses of the certified general appraisers used for appraising commercial properties or certified residential appraisers for residential properties. Real estate appraisals may utilize a combination of approaches including replacement cost, sales comparison and the income approach. Comparable sales and income data are analyzed by the appraisers and adjusted to reflect differences between them and the subject property such as property characteristics, leasing status and physical condition. When appraisals are received, Management reviews the underlying assumptions and methodology utilized, 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. Appraised values may be adjusted to reflect changes in market conditions that have occurred subsequent to the appraisal date, or for revised estimates regarding the timing or cost of the property sale. These adjustments are based on qualitative judgments made by Management on a case-by-case basis and are generally unobservable valuation inputs as they are specific to the underlying collateral. There have been no significant changes in the valuation techniques during 2016.

OREO represents collateral acquired through foreclosure and is initially recorded at fair value as established by a current appraisal, adjusted for disposition costs. Subsequently, OREO is measured at lower of cost or fair value. OREO values are reviewed on an ongoing basis and any subsequent decline in fair value is recorded as a foreclosed asset expense in the current period. The value of OREO is determined based on independent appraisals, similar to the process used for impaired loans, discussed above, and is classified as Level 3. All OREO resulted from an acquisition. Decreases in the estimated fair value of OREO totaled $13 thousand and $40 thousand during the first six months of 2016 and 2015, respectively.

Disclosures about Fair Value of Financial Instruments

The table below is a summary of fair value estimates for financial instruments as of June 30, 2016 and December 31, 2015, excluding financial instruments recorded at fair value on a recurring basis (summarized in the first table in this note). The carrying amounts in the following table are recorded in the consolidated statements of condition under the indicated captions. We have excluded non-financial assets and non-financial liabilities defined by the Codification (ASC 820-10-15-1A), such as Bank premises and equipment, deferred taxes and other liabilities.  In addition, we have 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.

	June 30, 2016					December 31, 2015
(in thousands)	Carrying Amounts		Fair Value		Fair Value Hierarchy	Carrying Amounts		Fair Value		Fair Value Hierarchy
Financial assets
Cash and cash equivalents	$	55,438	$	55,438	Level 1	$	26,343	$	26,343	Level 1
Investment securities held-to-maturity	58,491		60,160		Level 2	69,637		71,054		Level 2
Loans, net	1,433,312		1,453,254		Level 3	1,436,229		1,470,380		Level 3
Interest receivable	5,968		5,968		Level 2	6,643		6,643		Level 2
Financial liabilities
Deposits	1,705,615		1,705,937		Level 2	1,728,226		1,728,717		Level 2
Federal Home Loan Bank and other borrowings	—		—		Level 2	67,000		67,279		Level 2
Subordinated debentures	5,493		5,108		Level 3	5,395		5,132		Level 3
Interest payable	137		137		Level 2	187		187		Level 2

Following is a description of methods and assumptions used to estimate the fair value of each class of financial instrument not recorded at fair value but required for disclosure purposes:

Cash and Cash Equivalents - The carrying amounts of cash and cash equivalents approximate their fair value because of the short-term nature of these instruments.

Held-to-maturity Securities - Held-to-maturity securities, which generally consist of obligations of state and political subdivisions and corporate bonds, are recorded at their amortized cost. The fair value for disclosure purposes is determined using methodologies similar to those described above for available-for-sale securities using Level 2 inputs. If Level 2 inputs are not available, we may utilize pricing models that incorporate unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities (Level 3).  As of June 30, 2016 and December 31, 2015, we did not hold any held-to-maturity securities whose fair value was measured using significant unobservable inputs.

Loans - The fair value of loans with variable interest rates approximates their current carrying value, because their rates are regularly adjusted to current market rates. The fair value of fixed rate loans or variable loans at negotiated interest rate floors or ceilings with remaining maturities in excess of one year is estimated by discounting the future cash flows using current market rates at which similar loans would be made to borrowers with similar creditworthiness and similar remaining maturities. The allowance for loan losses (“ALLL”) is considered to be a reasonable estimate of the portion of loan discount attributable to credit risks.

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

Deposits - The fair value of deposits without stated maturity, such as transaction accounts, savings accounts and money market accounts, is the amount payable on demand at the reporting date. The fair value of time deposits is estimated by discounting the future cash flows using current rates offered for deposits of similar remaining maturities.

Federal Home Loan Bank Borrowings - The fair value is estimated by discounting the future cash flows using current rates offered by the Federal Home Loan Bank of San Francisco ("FHLB") for similar credit advances corresponding to the remaining term of our fixed-rate credit advances.

Subordinated Debentures - The fair values of the subordinated debentures were estimated by discounting the future cash flows (interest payment at a rate of three-month LIBOR plus 3.05% and 1.40%) to their present values using current market rates at which similar bonds would be issued with similar credit ratings as ours and similar remaining maturities. Each interest payment was discounted at the spot rate for the corresponding term, determined based on the yields and terms of comparable trust preferred securities, plus a liquidity premium. In July 2010, the Dodd-Frank Act was signed into law and limits the ability of certain bank holding companies to treat trust preferred security debt issuances as Tier 1 capital. This law effectively closed the trust-preferred securities markets for new issuances and led to the absence of observable or comparable transactions in the market place. Due to the use of unobservable inputs of trust preferred securities, we consider the fair value to be a Level 3 measurement. See Note 6 for further information.

Commitments - The value of unrecognized financial instruments is estimated based on the fee income associated with the commitments which, in the absence of credit exposure, is considered to approximate their settlement value. The fair value of commitment fees was not material at June 30, 2016 and December 31, 2015, respectively.

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Investment Securities

6 Months Ended

Jun. 30, 2016

Investments, Debt and Equity Securities [Abstract]

Investment Securities

Investment Securities

Our investment securities portfolio consists of obligations of state and political subdivisions, corporate bonds, U.S. government agency securities, including mortgage-backed securities (“MBS”) and collateralized mortgage obligations (“CMOs”) issued or guaranteed by Federal National Mortgage Association ("FNMA"), Federal Home Loan Mortgage Corporation ("FHLMC"), or Government National Mortgage Association ("GNMA"), debentures issued by government-sponsored agencies such as FNMA, Federal Farm Credit Bureau, FHLB and FHLMC, as well as privately issued CMOs, as reflected in the table below:

	June 30, 2016									December 31, 2015
	Amortized		Fair		Gross Unrealized					Amortized		Fair		Gross Unrealized
(in thousands)	Cost		Value		Gains		(Losses)			Cost		Value		Gains		(Losses)
Held-to-maturity:
Obligations of state and   political subdivisions	$	39,009	$	40,337	$	1,336	$	(8	)	$	42,919	$	44,146	$	1,246	$	(19	)
Corporate bonds	8,529		8,534		6		(1		)	15,072		15,098		42		(16		)
MBS pass-through securities issued by FHLMC and FNMA	10,953		11,289		336		—			11,646		11,810		171		(7		)
Total held-to-maturity	58,491		60,160		1,678		(9		)	69,637		71,054		1,459		(42		)
Available-for-sale:
Securities of U.S. government or government-sponsored agencies:
MBS pass-through securities issued by FHLMC and FNMA	111,682		113,877		2,195		—			138,222		138,462		694		(454		)
CMOs issued by FNMA	23,061		23,387		331		(5		)	18,266		18,219		97		(144		)
CMOs issued by FHLMC	21,110		21,451		341		—			22,889		22,932		82		(39		)
CMOs issued by GNMA	8,470		8,692		222		—			10,326		10,480		169		(15		)
Debentures of government- sponsored agencies	83,566		83,758		193		(1		)	161,690		160,892		28		(826		)
Privately issued CMOs	768		768		1		(1		)	3,960		4,150		190		—
Obligations of state and political subdivisions	64,725		66,452		1,729		(2		)	57,110		57,673		580		(17		)
Corporate bonds	4,954		4,976		25		(3		)	4,947		4,979		43		(11		)
Total available-for-sale	318,336		323,361		5,037		(12		)	417,410		417,787		1,883		(1,506		)
Total investment securities	$	376,827	$	383,521	$	6,715	$	(21	)	$	487,047	$	488,841	$	3,342	$	(1,548	)

The amortized cost and fair value of investment debt securities by contractual maturity at June 30, 2016 are shown below. Expected maturities will differ from contractual maturities because the issuers of the securities may have the right to call or prepay obligations with or without call or prepayment penalties.

	June 30, 2016								December 31, 2015
	Held-to-Maturity				Available-for-Sale				Held-to-Maturity				Available-for-Sale
(in thousands)	Amortized Cost		Fair Value		Amortized Cost		Fair Value		Amortized Cost		Fair Value		Amortized Cost		Fair Value
Within one year	$	19,481	$	19,545	$	2,412	$	2,416	$	18,853	$	18,920	$	12,135	$	12,176
After one year but within five years	21,203		21,929		114,702		115,207		31,677		32,360		188,007		187,326
After five years through ten years	5,646		6,068		65,766		67,170		8,580		8,969		64,899		64,999
After ten years	12,161		12,618		135,456		138,568		10,527		10,805		152,369		153,286
Total	$	58,491	$	60,160	$	318,336	$	323,361	$	69,637	$	71,054	$	417,410	$	417,787

Sales of investment securities and gross realized gains and losses are shown in the following table.

	Three months ended				Six months ended
(in thousands)	June 30, 2016		June 30, 2015		June 30, 2016			June 30, 2015
Available-for-sale:
Sales proceeds	$	13,688	$	1,559	$	68,673		$	1,559
Gross realized gains	284		8		458			8
Gross realized losses	—		—		(64		)	—

Investment securities carried at $96.7 million and $87.9 million at June 30, 2016 and December 31, 2015, respectively, were pledged to the State of California: $95.9 million and $87.1 million to secure public deposits in compliance with the Local Agency Security Program at June 30, 2016 and December 31, 2015, respectively, and $831 thousand and $840 thousand to provide collateral for trust deposits at June 30, 2016 and December 31, 2015, respectively. In addition, investment securities carried at $2.1 million and $1.1 million were pledged to collateralize a Wealth Management and Trust Services (“WMTS”) checking account at June 30, 2016 and December 31, 2015, respectively.

Other-Than-Temporarily Impaired Debt Securities

We have evaluated the credit of our investment securities and their issuers and/or insurers. Based on our evaluation, Management has determined that no investment security in our investment portfolio is other-than-temporarily impaired as of June 30, 2016. We do not have the intent and it is more likely than not that we will not have to sell securities temporarily impaired at June 30, 2016 before recovery of the cost basis.

Ten and fifty-four investment securities were in unrealized loss positions at June 30, 2016 and December 31, 2015, respectively. Those securities are summarized and classified according to the duration of the loss period in the tables below:

June 30, 2016	< 12 continuous months					≥ 12 continuous months					Total securities  in a loss position
(in thousands)	Fair value		Unrealized loss			Fair value		Unrealized loss			Fair value		Unrealized loss
Held-to-maturity:
Obligations of state and political subdivisions	$	1,058	$	(8	)	$	—	$	—		$	1,058	$	(8	)
Corporate bonds	5,000		(1		)	—		—			5,000		(1		)
MBS pass-through securities issued by FHLMC and FNMA	—		—			—		—			—		—
Total held-to-maturity	6,058		(9		)	—		—			6,058		(9		)
Available-for-sale:
MBS pass-through securities issued by FHLMC and FNMA	—		—			—		—			—		—
CMOs issued by FNMA	—		—			2,811		(5		)	2,811		(5		)
CMOs issued by FHLMC	—		—			—		—			—		—
CMOs issued by GNMA	—		—			—		—			—		—
Debentures of government- sponsored agencies	9,997		(1		)	—		—			9,997		(1		)
Privately issued CMOs	182		(1		)	—		—			182		(1		)
Obligations of state & political subdivisions	1,918		(2		)	—		—			1,918		(2		)
Corporate bonds	1,990		(3		)	—		—			1,990		(3		)
Total available-for-sale	14,087		(7		)	2,811		(5		)	16,898		(12		)
Total temporarily impaired securities	$	20,145	$	(16	)	$	2,811	$	(5	)	$	22,956	$	(21	)

December 31, 2015	< 12 continuous months					≥ 12 continuous months					Total securities  in a loss position
(in thousands)	Fair value		Unrealized loss			Fair value		Unrealized loss			Fair value		Unrealized loss
Held-to-maturity:
Obligations of state and political subdivisions	$	8,297	$	(19	)	$	—	$	—		$	8,297	$	(19	)
Corporate bonds	3,523		(15		)	1,999		(1		)	5,522		(16		)
MBS pass-through securities issued by FHLMC and FNMA	2,332		(7		)	—		—			2,332		(7		)
Total held-to-maturity	14,152		(41		)	1,999		(1		)	16,151		(42		)
Available-for-sale:
MBS pass-through securities issued by FHLMC and FNMA	68,809		(454		)	—		—			68,809		(454		)
CMOs issued by FNMA	9,277		(80		)	3,158		(64		)	12,435		(144		)
CMOs issued by FHLMC	—		—			1,989		(39		)	1,989		(39		)
CMOs issued by GNMA	164		—			2,374		(15		)	2,538		(15		)
Debentures of government- sponsored agencies	136,064		(713		)	9,887		(113		)	145,951		(826		)
Obligations of state & political subdivisions	4,557		(15		)	579		(2		)	5,136		(17		)
Corporate bonds	2,986		(11		)	—		—			2,986		(11		)
Total available-for-sale	221,857		(1,273		)	17,987		(233		)	239,844		(1,506		)
Total temporarily impaired securities	$	236,009	$	(1,314	)	$	19,986	$	(234	)	$	255,995	$	(1,548	)

As of June 30, 2016, there was one CMO issued by FNMA that had been in a continuous loss position for twelve months or more. We have evaluated it and believe that the decline in fair value is primarily driven by factors other than credit. It is probable that we will be able to collect all amounts due according to the contractual terms as it is supported by the U.S. Federal Government, which protects us from credit losses. Based upon our assessment of the credit fundamentals, we concluded that this security was not other-than-temporarily impaired at June 30, 2016.

Nine investment securities in our portfolio were in a temporary loss position for less than twelve months as of June 30, 2016. They consisted of one debenture of U.S. government-sponsored agency, three obligations of U.S. state and political subdivisions, one privately issued CMO and four corporate bonds. The government-sponsored agency debenture is supported by the U.S. Federal Government, which protects us from credit losses. Other temporarily impaired securities are deemed creditworthy after internal analysis of the issuers' latest financial information and credit enhancement. Additionally, all are rated as investment grade by at least one major rating agency. As a result of this impairment analysis, we have concluded that these securities were not other-than-temporarily impaired at June 30, 2016.

Non-Marketable Securities

As a member of the FHLB, we are required to maintain a minimum investment in the FHLB capital stock determined by the Board of Directors of the FHLB. The minimum investment requirements can increase in the event we increase our total asset size or borrowings with the FHLB. Shares cannot be purchased or sold except between the FHLB and its members at the $100 per share par value. We held $10.2 million and $8.4 million of FHLB stock recorded at cost in other assets on the consolidated statements of condition at June 30, 2016 and December 31, 2015, respectively. The carrying amounts of these investments are reasonable estimates of fair value because the securities are restricted to member banks and they do not have a readily determinable market value. Management does not believe that the FHLB stock is other-than-temporarily-impaired, as we expect to be able to redeem this stock at cost. On July 28, 2016, FHLB announced a cash dividend for the second quarter of 2016 at an annualized dividend rate of 9.17% to be distributed in mid August 2016. Cash dividends paid on FHLB capital stock are recorded as non-interest income.

As a member bank of Visa U.S.A., we hold 16,939 shares of Visa Inc. Class B common stock with a carrying value of zero, which is equal to our cost basis. These shares are restricted from resale until their conversion into Class A (voting) shares upon the termination of Visa Inc.'s covered litigation escrow account. As a result of the restriction, these shares are not considered available-for-sale and are not carried at fair value. When converting this Class B common stock to Class A common stock under the current conversion rate of 1.6483 and the closing stock price of Class A shares, the value of our shares of Class B common stock would have been $2.1 million at June 30, 2016 and $2.2 million at December 31, 2015. The conversion rate is subject to further reduction upon the final settlement of the covered litigation against Visa Inc. and its member banks. See Note 8 herein.

We invest in low income housing tax credit funds as a limited partner, which totaled $2.6 million and $2.7 million recorded in other assets as of June 30, 2016 and December 31, 2015, respectively. In the first half of 2016, we recognized $164 thousand of low income housing tax credits and other tax benefits, net of $127 thousand of amortization expense of low income housing tax credit investment, as a component of income tax expense. As of June 30, 2016, our unfunded commitments for these low income housing tax credit funds totaled $1.5 million. We did not recognize any impairment losses on these low income housing tax credit investments during the first half of 2016 or 2015.

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Loans and Allowance for Loan Losses

6 Months Ended

Jun. 30, 2016

Receivables [Abstract]

Loans and Allowance for Loan Losses

Loans and Allowance for Loan Losses

Credit Quality of Loans

Outstanding loans by class and payment aging as of June 30, 2016 and December 31, 2015 were as follows:

Loan Aging Analysis by Loan Class
(in thousands)	Commercial and industrial		Commercial real estate, owner-occupied		Commercial real estate, investor		Construction		Home equity		Other residential 1		Installment and other consumer		Total
June 30, 2016
30-59 days past due	$	44	$	—	$	—	$	—	$	780	$	—	$	—	$	824
60-89 days past due	—		—		1,676		—		—		—		63		1,739
90 days or more past due	21		176		—		—		99		—		—		296
Total past due	65		176		1,676		—		879		—		63		2,859
Current	215,192		241,927		701,782		77,024		111,361		73,761		24,493		1,445,540
Total loans 3	$	215,257	$	242,103	$	703,458	$	77,024	$	112,240	$	73,761	$	24,556	$	1,448,399
Non-accrual 2	$	21	$	176	$	1,676	$	—	$	789	$	—	$	63	$	2,725
December 31, 2015
30-59 days past due	$	36	$	—	$	1,096	$	1	$	—	$	—	$	249	$	1,382
60-89 days past due	—		—		—		—		633		—		89		722
90 days or more past due	21		—		—		—		99		—		—		120
Total past due	57		—		1,096		1		732		—		338		2,224
Current	219,395		242,309		714,783		65,494		111,568		73,154		22,301		1,449,004
Total loans 3	$	219,452	$	242,309	$	715,879	$	65,495	$	112,300	$	73,154	$	22,639	$	1,451,228
Non-accrual 2	$	21	$	—	$	1,903	$	1	$	171	$	—	$	83	$	2,179

¹ Our residential loan portfolio does not include sub-prime loans, nor is it our practice to underwrite loans commonly referred to as "Alt-A mortgages", the characteristics of which are loans lacking full documentation, borrowers having low FICO scores or higher loan-to-value ratios.

² Amounts include $1 thousand of Purchased Credit Impaired ("PCI") loans that had stopped accreting interest at December 31, 2015. Amounts exclude accreting PCI loans of $2.9 million and $3.7 million at June 30, 2016 and December 31, 2015, respectively, as we have a reasonable expectation about future cash flows to be collected and we continue to recognize accretable yield on these loans in interest income. These accreting PCI loans are included in current loans. There were no accruing past due loans more than ninety days at June 30, 2016 or December 31, 2015.

³ Amounts include net deferred loan costs of $726 thousand and $768 thousand at June 30, 2016 and December 31, 2015, respectively. Amounts are also net of unaccreted purchase discounts on non-PCI loans of $2.5 million and $3.2 million at June 30, 2016 and December 31, 2015, respectively.

Our commercial loans are generally made to established small and mid-sized businesses to provide financing for their growth and working capital needs, equipment purchases and/or acquisitions.  Management examines historical, current, and projected cash flows to determine the ability of the borrower to repay obligations as agreed. Commercial loans are made based primarily on the identified cash flows of the borrower and secondarily on the underlying collateral and/or guarantor support. The cash flows of borrowers, however, may not occur as expected, and the collateral securing these loans may fluctuate in value. Most commercial and industrial loans are secured by the assets being financed, such as accounts receivable and/or inventory, and typically include a personal guarantee. We target stable businesses with guarantors that have proven to be resilient in periods of economic stress.  Typically, the guarantors provide an additional source of repayment for most of our credit extensions.

Commercial real estate loans are subject to underwriting standards and processes similar to commercial loans discussed above. We underwrite these loans to be repaid from cash flow and to be supported by real property collateral. Underwriting standards for commercial real estate loans include, but are not limited to, debt coverage and loan-to-value ratios. Furthermore, the vast majority of our loans are guaranteed by the owners of the properties.  Commercial real estate loans may be adversely affected by conditions in the real estate markets or in the general economy. In the event of a vacancy, guarantors are expected to carry the loans until a replacement tenant can be found.  Regardless of the guaranty status, the owner's equity investment provides a strong economic incentive to continue to support the commercial real estate projects. As such, we have generally experienced a relatively low level of loss and delinquencies in this portfolio.

Construction loans are generally made to developers and builders to finance construction, renovation and occasionally land acquisitions in anticipation of near-term development. These loans are underwritten after evaluation of the borrower's financial strength, reputation, prior track record, and independent appraisals. The construction industry can be affected by significant events, including: the inherent volatility of real estate markets and vulnerability to delays due to weather, change orders, inability to obtain construction permits, labor or material shortages, and price changes. Estimates of construction costs and value associated with the completed project may be inaccurate. Repayment of construction loans is largely dependent on the ultimate success of the project.

Consumer loans primarily consist of home equity lines of credit, other residential (tenancy-in-common, or “TIC”) loans, and installment and other consumer loans. We originate consumer loans utilizing credit score information, debt-to-income ratio and loan-to-value ratio analysis. Diversification, coupled with relatively small loan amounts that are spread across many individual borrowers, mitigates risk. Additionally, trend reports are reviewed by Management on a regular basis. Our residential loan portfolio includes TIC units almost entirely in San Francisco. These loans tend to have more equity in their properties than conventional residential mortgages, which mitigates risk. Installment and other consumer loans include mostly loans for floating homes and mobile homes along with a small number of installment loans.

We use a risk rating system to evaluate asset quality, and to identify and monitor credit risk in individual loans, and ultimately in the portfolio. Definitions of loans that are risk graded “Special Mention” or worse are consistent with those used by the Federal Deposit Insurance Corporation ("FDIC").  Our internally assigned grades are as follows:

Pass: Loans to borrowers of acceptable or better credit quality. Borrowers in this category demonstrate fundamentally sound financial positions, repayment capacity, credit history and management expertise.  Loans in this category must have an identifiable and stable source of repayment and meet the Bank’s policy regarding debt service coverage ratios.  These borrowers are capable of sustaining normal economic, market or operational setbacks without significant financial consequences.  Negative external industry factors are generally not present.  The loan may be secured, unsecured or supported by non-real estate collateral for which the value is more difficult to determine and/or marketability is more uncertain. This category also includes “Watch” loans, where the primary source of repayment has been delayed. “Watch” is intended to be a transitional grade, with either an upgrade or downgrade within a reasonable period.

Special Mention: Potential weaknesses that deserve close attention. If left uncorrected, those potential weaknesses may result in deterioration of the payment prospects for the asset. Special Mention assets do not present sufficient risk to warrant adverse classification.

Substandard: Inadequately protected by either the current sound worth and paying capacity of the obligor or the collateral pledged, if any. A Substandard asset has a well-defined weakness or weaknesses that jeopardize(s) the liquidation of the debt. Substandard assets are characterized by the distinct possibility that we will sustain some loss if such weaknesses or deficiencies are not corrected. Well-defined weaknesses include adverse trends or developments in the borrower’s financial condition, managerial weaknesses and/or significant collateral deficiencies.

Doubtful: Critical weaknesses that make collection or liquidation in full improbable. There may be specific pending events that work to strengthen the asset; however, the amount or timing of the loss may not be determinable. Pending events generally occur within one year of the asset being classified as Doubtful. Examples include: merger, acquisition, or liquidation; capital injection; guarantee; perfecting liens on additional collateral; and refinancing. Such loans are placed on non-accrual status and usually are collateral-dependent.

We regularly review our credits for accuracy of risk grades whenever new information is received. Borrowers are required to submit financial information at regular intervals:

• Generally, commercial borrowers with lines of credit are required to submit financial information with reporting intervals ranging from monthly to annually depending on credit size, risk and complexity.

• Investor commercial real estate borrowers are generally required to submit rent rolls or property income statements annually.

• Construction loans are monitored monthly, and reviewed on an ongoing basis.

• Home equity and other consumer loans are reviewed based on delinquency.

• Loans graded “Watch” or more severe, regardless of loan type, are reviewed no less than quarterly.

The following table represents an analysis of loans by internally assigned grades, including the PCI loans, at June 30, 2016 and December 31, 2015:

Credit Risk Profile by Internally Assigned Grade
(in thousands)	Commercial and industrial		Commercial real estate, owner-occupied		Commercial real estate, investor		Construction		Home equity		Other residential		Installment and other consumer		Purchased credit-impaired		Total
June 30, 2016
Pass	$	199,923	$	230,799	$	697,897	$	73,786	$	109,408	$	73,761	$	24,162	$	2,863	$	1,412,599
Special Mention	11,818		2,101		362		—		1,120		—		—		—		15,401
Substandard	3,477		8,165		3,484		3,238		1,641		—		394		—		20,399
Total loans	$	215,218	$	241,065	$	701,743	$	77,024	$	112,169	$	73,761	$	24,556	$	2,863	$	1,448,399
December 31, 2015
Pass	$	192,560	$	219,060	$	710,042	$	62,255	$	109,959	$	73,154	$	22,307	$	3,260	$	1,392,597
Special Mention	22,457		12,371		372		—		1,100		—		—		—		36,300
Substandard	4,260		9,167		3,739		3,239		1,173		—		332		421		22,331
Total loans	$	219,277	$	240,598	$	714,153	$	65,494	$	112,232	$	73,154	$	22,639	$	3,681	$	1,451,228

Troubled Debt Restructuring

Our loan portfolio includes certain loans that have been modified in a troubled debt restructuring (“TDR”), where economic concessions have been granted to borrowers experiencing financial difficulties. These concessions typically result from our loss mitigation activities and could include reductions in the interest rate, payment extensions, forgiveness of principal, forbearance or other actions. TDRs on nonaccrual status at the time of restructure may be returned to accruing status after Management considers the borrower’s sustained repayment performance for a reasonable period, generally six months, and obtains reasonable assurance of repayment and performance.

A loan may no longer be reported as a TDR if all of the following conditions are met:

• The loan is subsequently refinanced or restructured at current market interest rates and the new terms are consistent with the treatment of creditworthy borrowers under regular underwriting standards;

• The borrower is no longer considered to be in financial difficulty;

• Performance on the loan is reasonably assured; and;

• Existing loan did not have any forgiveness of principal or interest.

The removal of TDR status must be approved by the same management level that approved the upgrading of the loan classification.

There were no loans removed from TDR designation during 2016. During the first six months of 2015, three loans with a recorded investment totaling $396 thousand were removed from TDR designation.

The table below summarizes outstanding TDR loans by loan class as of June 30, 2016 and December 31, 2015. The summary includes both TDRs that are on non-accrual status and those that continue to accrue interest.

(in thousands)
Recorded investment in Troubled Debt Restructurings 1	June 30, 2016		December 31, 2015
Commercial and industrial	$	3,676	$	4,698
Commercial real estate, owner-occupied	6,992		6,993
Commercial real estate, investor	2,317		514
Construction 2	3,238		3,238
Home equity	677		460
Other residential	1,987		2,010
Installment and other consumer	1,079		1,168
Total	$	19,966	$	19,081

¹ Includes $19.9 million and $19.0 million of TDR loans that were accruing interest as of June 30, 2016 and December 31, 2015, respectively. Includes $618 thousand and $137 thousand of acquired loans at June 30, 2016 and December 31, 2015, respectively.

² In June 2015, one TDR loan was transferred to loans held-for-sale at fair value totaling $1.5 million, net of an $839 thousand charge-off to the allowance for loan losses. The loan was subsequently sold in June 2015 for no additional gain or loss.

The table below presents the following information for loans modified in a TDR during the presented periods: number of contracts modified, the recorded investment in the loans prior to modification, and the recorded investment in the loans after being restructured. The table below excludes fully charged-off TDR loans and loans modified in a TDR and subsequently paid-off during the years presented.

(dollars in thousands)	Number of Contracts Modified	Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment at period end
Troubled Debt Restructurings during the three months ended June 30, 2016:
Commercial real estate, investor	1	$	281	$	281	$	281
Home equity 1	1	87		222		222
Total	2	$	368	$	503	$	503
Troubled Debt Restructurings during the three months ended June 30, 2015:
Commercial and industrial	4	$	782	$	882	$	882
Commercial real estate, investor	1	222		221		221
Total	5	$	1,004	$	1,103	$	1,103

Troubled Debt Restructurings during the six months ended June 30, 2016:
Commercial real estate, investor	2	$	1,830	$	1,826	$	1,808
Home equity 1	1	87		222		222
Total	3	$	1,917	$	2,048	$	2,030
Troubled Debt Restructurings during the six months ended June 30, 2015:
Commercial and industrial	4	$	782	$	882	$	882
Commercial real estate, investor	1	222		221		221
Total	5	$	1,004	$	1,103	$	1,103

¹ The home equity TDR modification during the second quarter of 2016 included debt consolidation which increased the post-modification balance.

Modifications during the six months endedJune 30, 2016 primarily involved interest rate concessions, renewals, and other changes to loan terms. Modifications during the six months ended June 30, 2015 primarily involved maturity extensions and renewals. During the first six months of 2016 and 2015, there were no defaults on loans that had been modified in a TDR within the prior twelve-month period. We report defaulted TDRs based on a payment default definition of more than ninety days past due.

Impaired Loan Balances and Their Related Allowance by Major Classes of Loans

The tables below summarize information on impaired loans and their related allowance. Total impaired loans include non-accrual loans, accruing TDR loans and accreting PCI loans that have experienced post-acquisition declines in cash flows expected to be collected.

(in thousands)	Commercial and industrial		Commercial real estate, owner-occupied		Commercial real estate, investor		Construction		Home equity		Other residential		Installment and other consumer		Total
June 30, 2016
Recorded investment in impaired loans:
With no specific allowance recorded	$	1,059	$	—	$	1,676	$	2,688	$	789	$	1,198	$	159	$	7,569
With a specific allowance recorded	2,637		7,169		2,317		550		606		789		982		15,050
Total recorded investment in impaired loans	$	3,696	$	7,169	$	3,993	$	3,238	$	1,395	$	1,987	$	1,141	$	22,619
Unpaid principal balance of impaired loans	$	3,697	$	7,169	$	5,984	$	3,238	$	1,411	$	1,987	$	1,142	$	24,628
Specific allowance	671		98		472		5		12		64		99		1,421
Average recorded investment in impaired loans during the quarter ended June 30, 2016	3,771		7,081		3,917		3,238		1,286		1,993		1,184		22,470
Interest income recognized on impaired loans during the quarter ended June 30, 2016	44		66		22		32		6		23		12		205
Average recorded investment in impaired loans during the six months ended June 30, 2016	4,027		7,037		3,523		3,238		1,077		1,998		1,211		22,111
Interest income recognized on impaired loans during the six months ended June 30, 2016	98		133		38		70		11		45		25		420
Average recorded investment in impaired loans during the quarter ended June 30, 2015	4,173		8,412		2,947		4,475		610		2,033		1,557		24,207
Interest income recognized on impaired loans during the quarter ended June 30, 2015	56		78		8		9		4		23		17		195
Average recorded investment in impaired loans during the six months ended June 30, 2015	3,946		8,427		2,931		5,078		618		2,037		1,650		24,687
Interest income recognized on impaired loans during the six months ended June 30, 2015	118		144		14		18		9		46		36		385

(in thousands)	Commercial and industrial		Commercial real estate, owner-occupied		Commercial real estate, investor		Construction		Home equity		Other residential		Installment and other consumer		Total
December 31, 2015
Recorded investment in impaired loans:
With no specific allowance recorded	$	2,198	$	4,111	$	2,416	$	2,687	$	171	$	1,214	$	131	$	12,928
With a specific allowance recorded	2,522		2,882		—		551		388		797		1,120		8,260
Total recorded investment in impaired loans	$	4,720	$	6,993	$	2,416	$	3,238	$	559	$	2,011	$	1,251	$	21,188
Unpaid principal balance of impaired loans	$	4,763	$	6,993	$	4,408	$	3,424	$	559	$	2,011	$	1,251	$	23,409
Specific allowance	$	912	$	70	$	—	$	1	$	3	$	67	$	116	$	1,169

Management monitors delinquent loans continuously and identifies problem loans, generally loans graded substandard or worse, to be evaluated individually for impairment testing. Generally, the recorded investment in impaired loans is net of any charge-offs from estimated losses related to specifically-identified impaired loans when they are deemed uncollectible. The charged-off portion of impaired loans outstanding at June 30, 2016 and December 31, 2015 totaled approximately $2.0 million and $2.1 million, respectively.  In addition, the recorded investment in impaired loans is net of purchase discounts or premiums on acquired loans. At June 30, 2016 and December 31, 2015, unused commitments to extend credit on impaired loans, including loans to borrowers whose terms have been modified in TDRs, totaled $944 thousand and $1.3 million, respectively.

The following tables disclose loans by major portfolio category and activity in the ALLL, as well as the related ALLL disaggregated by impairment evaluation method.

Allowance for Loan Losses Rollforward for the Period
(in thousands)	Commercial and industrial			Commercial real estate, owner-occupied			Commercial real estate, investor			Construction			Home equity			Other residential			Installment and other consumer			Unallocated		Total
Three months ended June 30, 2016
Allowance for loan losses:
Beginning balance	$	2,799		$	1,619		$	6,571		$	822		$	1,044		$	430		$	434		$	1,309	$	15,028
Provision (reversal)	(192		)	12			19			9			31			(4		)	(20		)	145		—
Charge-offs	—			—			—			—			—			—			(4		)	—		(4		)
Recoveries	30			—			5			—			1			—			27			—		63
Ending balance	$	2,637		$	1,631		$	6,595		$	831		$	1,076		$	426		$	437		$	1,454	$	15,087
Three months ended June 30, 2015
Allowance for loan losses:
Beginning balance	$	2,620		$	2,094		$	6,292		$	778		$	923		$	430		$	462		$	1,557	$	15,156
Provision (reversal)	(117		)	(42		)	(351		)	596			(81		)	5			(14		)	4		—
Charge-offs	(1		)	—			—			(839		)	—			—			(5		)	—		(845		)
Recoveries	38			—			3			—			1			—			1			—		43
Ending balance	$	2,540		$	2,052		$	5,944		$	535		$	843		$	435		$	444		$	1,561	$	14,354

Allowance for Loan Losses Rollforward for the Period
(in thousands)	Commercial and industrial			Commercial real estate, owner-occupied			Commercial real estate, investor			Construction			Home equity			Other residential		Installment and other consumer			Unallocated		Total
Six months ended June 30, 2016
Allowance for loan losses:
Beginning balance	$	3,023		$	2,249		$	6,178		$	724		$	910		$	394	$	425		$	1,096	$	14,999
Provision (reversal)	(440		)	(618		)	407			107			165			32		(11		)	358		—
Charge-offs	(9		)	—			—			—			—			—		(4		)	—		(13		)
Recoveries	63			—			10			—			1			—		27			—		101
Ending balance	$	2,637		$	1,631		$	6,595		$	831		$	1,076		$	426	$	437		$	1,454	$	15,087
Six months ended June 30, 2015
Allowance for loan losses:
Beginning balance	$	2,837		$	1,924		$	6,672		$	839		$	859		$	433	$	566		$	969	$	15,099
Provision (reversal)	(392		)	128			(734		)	535			(18		)	2		(113		)	592		—
Charge-offs	(3		)	—			—			(839		)	—			—		(11		)	—		(853		)
Recoveries	98			—			6			—			2			—		2			—		108
Ending balance	$	2,540		$	2,052		$	5,944		$	535		$	843		$	435	$	444		$	1,561	$	14,354

Allowance for Loan Losses and Recorded Investment in Loans
(dollars in thousands)	Commercial and industrial			Commercial real estate, owner-occupied			Commercial real estate, investor			Construction			Home equity			Other residential			Installment and other consumer			Unallocated		Total
June 30, 2016
Ending ALLL related to loans collectively evaluated for impairment	$	1,966		$	1,533		$	6,123		$	826		$	1,064		$	362		$	338		$	1,454	$	13,666
Ending ALLL related to loans individually evaluated for impairment	671			98			472			5			12			64			99			—		1,421
Ending ALLL related to purchased credit-impaired loans	—			—			—			—			—			—			—			—		—
Total	$	2,637		$	1,631		$	6,595		$	831		$	1,076		$	426		$	437		$	1,454	$	15,087
Loans outstanding:
Collectively evaluated for impairment	$	211,522		$	233,896		$	697,750		$	73,786		$	110,774		$	71,774		$	23,415		$	—	$	1,422,917
Individually evaluated for impairment	3,696			7,169			3,993			3,238			1,395			1,987			1,141			—		22,619
Purchased credit-impaired	39			1,038			1,715			—			71			—			—			—		2,863
Total	$	215,257		$	242,103		$	703,458		$	77,024		$	112,240		$	73,761		$	24,556		$	—	$	1,448,399
Ratio of allowance for loan losses to total loans	1.23		%	0.67		%	0.94		%	1.08		%	0.96		%	0.58		%	1.78		%	NM		1.04		%
Allowance for loan losses to non-accrual loans	12,557		%	927		%	393		%	NM			136		%	NM			694		%	NM		554		%

NM - Not Meaningful

Allowance for Loan Losses and Recorded Investment in Loans
(dollars in thousands)	Commercial and industrial			Commercial real estate, owner-occupied			Commercial real estate, investor			Construction			Home equity			Other residential			Installment and other consumer			Unallocated		Total
December 31, 2015
Ending ALLL related to loans collectively evaluated for impairment	$	2,111		$	2,179		$	6,178		$	723		$	907		$	327		$	309		$	1,096	$	13,830
Ending ALLL related to loans individually evaluated for impairment	904			70			—			—			3			67			116			—		1,160
Ending ALLL related to purchased  credit-impaired loans	8			—			—			1			—			—			—			—		9
Total	$	3,023		$	2,249		$	6,178		$	724		$	910		$	394		$	425		$	1,096	$	14,999
Loans outstanding:
Collectively evaluated for impairment	$	214,695		$	233,605		$	711,737		$	62,256		$	111,673		$	71,143		$	21,388		$	—	$	1,426,497
Individually evaluated for impairment1	4,582			6,993			2,416			3,238			559			2,011			1,251			—		21,050
Purchased credit-impaired	175			1,711			1,726			1			68			—			—			—		3,681
Total	$	219,452		$	242,309		$	715,879		$	65,495		$	112,300		$	73,154		$	22,639		$	—	$	1,451,228
Ratio of allowance for loan losses to total loans	1.38		%	0.93		%	0.86		%	1.11		%	0.81		%	0.54		%	1.88		%	NM		1.03		%
Allowance for loan losses to non-accrual loans	14,395		%	NM			325		%	72,400		%	532		%	NM			512		%	NM		688		%

¹ Total excludes $138 thousand PCI loans as of December 31, 2015 that have experienced credit deterioration post-acquisition declines in cash flows expected to be collected. These loans are included in the "purchased credit-impaired" amount in the next line below.

NM - Not Meaningful

Purchased Credit-Impaired Loans

We evaluated loans purchased in acquisitions in accordance with accounting guidance in ASC 310-30 related to loans acquired with deteriorated credit quality. Acquired loans are considered credit-impaired if there is evidence of significant deterioration of credit quality since origination and it is probable, at the acquisition date, that we will be unable to collect all contractually required payments receivable. Management has determined certain loans purchased in our two acquisitions to be PCI loans based on credit indicators such as nonaccrual status, past due status, loan risk grade, loan-to-value ratio, etc. Revolving credit agreements (e.g., home equity lines of credit and revolving commercial loans) are not considered PCI loans as cash flows cannot be reasonably estimated.

For acquired loans not considered credit-impaired, the difference between the contractual amounts due (principal amount) and the fair value is accounted for subsequently through accretion. We recognize discount accretion based on the acquired loan’s contractual cash flows using an effective interest rate method. The accretion is recognized through the net interest margin.

The following table presents the outstanding balances and related carrying values of PCI loans as of June 30, 2016andDecember 31, 2015.

	June 30, 2016				December 31, 2015
PCI Loans (in thousands)	Unpaid principal balance		Carrying value		Unpaid principal balance		Carrying value
Commercial and industrial	$	50	$	39	$	237	$	175
Commercial real estate	3,104		2,753		4,329		3,437
Construction	—		—		187		1
Home equity	221		71		224		68
Total purchased credit-impaired loans	$	3,375	$	2,863	$	4,977	$	3,681

The activities in the accretable yield, or income expected to be earned, for PCI loans were as follows:

Accretable Yield	Three months ended						Six months ended
(in thousands)	June 30, 2016			June 30, 2015			June 30, 2016			June 30, 2015
Balance at beginning of period	$	1,742		$	3,831		$	2,618		$	4,027
Removals 1	—			—			(778		)	(77		)
Accretion	(87		)	(120		)	(185		)	(239		)
Reclassifications from nonaccretable difference 2	—			—			—			—
Balance at end of period	$	1,655		$	3,711		$	1,655		$	3,711

¹ Represents the accretable difference that is relieved when a loan exits the PCI population due to pay-off, full charge-off, or transfer to repossessed assets, etc.

² Primarily relates to changes in expected credit performance and changes in expected timing of cash flows.

Pledged Loans

Our FHLB line of credit is secured under terms of a blanket collateral agreement by a pledge of certain qualifying loans with an unpaid principal balance of $861.9 million and $833.8 million at June 30, 2016 and December 31, 2015, respectively. In addition, we pledge a certain residential loan portfolio, which totaled $48.4 million and $45.2 million at June 30, 2016 and December 31, 2015, respectively, to secure our borrowing capacity with the Federal Reserve Bank (“FRB”). Also see Note 6, Borrowings.

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Borrowings

6 Months Ended

Jun. 30, 2016

Debt Disclosure [Abstract]

Borrowings

Borrowings

Federal Funds Purchased – The Bank had unsecured lines of credit totaling $92.0 million with correspondent banks for overnight borrowings at June 30, 2016 and December 31, 2015.  In general, interest rates on these lines approximate the federal funds target rate. We had no overnight borrowings under these credit facilities at June 30, 2016 and December 31, 2015.

Federal Home Loan Bank Borrowings – As of June 30, 2016 and December 31, 2015, the Bank had lines of credit with the FHLB totaling $485.9 million and $470.6 million, respectively, based on eligible collateral of certain loans.  At June 30, 2016, we had no FHLB overnight borrowings and at December 31, 2015, we had $52.0 million in FHLB overnight borrowings. On February 5, 2008, the Bank entered into a ten-year borrowing agreement under the same FHLB line of credit for $15.0 million at a fixed rate of 2.07%. On June 15, 2016, the Bank repaid the $15.0 million early and incurred a prepayment fee of $312 thousand recorded in interest expense. At June 30, 2016 and December 31, 2015, $485.9 million and $403.4 million, respectively, were remaining as available for borrowing from the FHLB, net of the overnight borrowings and term borrowings.

Federal Reserve Line of Credit – The Bank has a line of credit with the FRB secured by certain residential loans.  At June 30, 2016 and December 31, 2015, the Bank had borrowing capacity under this line totaling $40.1 million and $37.8 million, respectively, and had no outstanding borrowings with the FRB.

As part of an acquisition, Bancorp assumed two subordinated debentures due to NorCal Community Bancorp Trusts I and II (the "Trusts"), established for the sole purpose of issuing trust preferred securities on September 22, 2003 and December 29, 2005, respectively. The subordinated debentures were recorded at fair values totaling $4.95 million at acquisition date with contractual values totaling $8.2 million. The difference between the contractual balance and the fair value at acquisition date is accreted into interest expense over the lives of the debentures. Accretion on the subordinated debentures totaled $98 thousand in the first six months of 2016 and $106 thousand in the first six months of 2015. Bancorp has the option to defer payment of the interest on the subordinated debentures for a period of up to five years, as long as there is no default on the subordinated debentures. In the event of interest deferral, dividends to Bancorp common stockholders are prohibited. The trust preferred securities were sold and issued in private transactions pursuant to an exemption from registration under the Securities Act of 1933, as amended. Bancorp has guaranteed, on a subordinated basis, distributions and other payments due on trust preferred securities totaling $8.0 million issued by the Trusts which have identical maturity, repricing and payment terms as the subordinated debentures.

The following is a summary of the contractual terms of the subordinated debentures due to the Trusts as of June 30, 2016:

(in thousands)
Subordinated debentures due to NorCal Community Bancorp Trust I on October 7, 2033 with interest payable quarterly, based on 3-month LIBOR plus 3.05%, repricing quarterly (3.68% as of June 30, 2016), redeemable, in whole or in part, on any interest payment date	$	4,124
Subordinated debentures due to NorCal Community Bancorp Trust II on March 15, 2036 with interest payable quarterly, based on 3-month LIBOR plus 1.40%, repricing quarterly (2.05% as of June 30, 2016), redeemable, in whole or in part, on any interest payment date	4,124
Total	$	8,248

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Stockholders' Equity

6 Months Ended

Jun. 30, 2016

Equity [Abstract]

Stockholders' Equity

Stockholders' Equity

Warrant

Under the United States Department of the Treasury Capital Purchase Program (the “TCPP”), Bancorp issued to the U.S. Treasury a warrant to purchase 154,242 shares of common stock at a per share exercise price of $27.23. The warrant was immediately exercisable and had an expiration date of December 5, 2018. The warrant was subsequently auctioned to two institutional investors in November 2011 and was exercised in September 2015. The warrant represented the right to purchase 157,711 shares of common stock at $26.63 per share. The cashless exercise resulted in the net issuance of 70,591 shares of common stock in September 2015.

Dividends

Presented below is a summary of cash dividends paid to common shareholders, recorded as a reduction of retained earnings.

	Three months ended				Six months ended
(in thousands, except per share data)	June 30, 2016		June 30, 2015		June 30, 2016		June 30, 2015
Cash dividends to common stockholders	$	1,526	$	1,313	$	3,044	$	2,620
Cash dividends per common share	$	0.25	$	0.22	$	0.50	$	0.44

The Board of Directors declared a cash dividend of $0.25 per share on July 22, 2016 payable on August 12, 2016 to shareholders of record at the close of business on August 5, 2016.

Share-Based Payments

The fair value of stock options as of the grant date is recorded as stock-based compensation expense in the consolidated statements of comprehensive income over the requisite service period with a corresponding increase in common stock. Stock-based compensation also includes compensation expense related to the issuance of unvested restricted stock awards and performance-based stock awards pursuant to the 2007 Equity Plan. The grant-date fair value of the restricted stock awards and performance-based stock awards, which is equal to the intrinsic value on that date, is being recorded as compensation expense over the requisite service period with a corresponding increase in common stock as the shares vest.

Beginning in 2015, performance-based stock awards were issued to a selected group of employees. Stock award vesting is contingent upon the achievement of pre-established long-term performance goals set by the Compensation Committee of the Board of Directors. Performance is measured over a three-year period and cliff vested. These performance-based stock awards were granted at a maximum opportunity level, and based on the achievement of the pre-established goals, the actual payouts can range from 0% to 200% of the target award. For performance-based stock awards, an estimate is made of the number of shares expected to vest based on the probability that the performance criteria will be achieved to determine the amount of compensation expense to be recognized. The estimate is re-evaluated quarterly and total compensation expense is adjusted for any change in the current period.

In addition, we record excess tax benefits on the exercise of non-qualified stock options, the disqualifying disposition of incentive stock options and vesting of restricted stock awards as an addition to common stock with a corresponding decrease in current taxes payable.

The holders of unvested restricted stock awards and performance-based stock awards are entitled to dividends on the same per-share ratio as holders of common stock. Dividends paid on the portion of share-based awards not expected to vest are also included in stock-based compensation expense. Tax benefits on dividends paid on the portion of share-based awards expected to vest are recorded as an increase to common stock with a corresponding decrease in current taxes payable.

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Commitments and Contingencies

6 Months Ended

Jun. 30, 2016

Commitments and Contingencies Disclosure [Abstract]

Commitments and Contingencies

Commitments and Contingencies

Financial Instruments with Off-Balance Sheet Risk

We make commitments to extend credit in the normal course of business to meet the financing needs of our customers. These financial instruments include commitments to extend credit in the form of loans or through standby letters of credit. Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established in the contract. Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee. Because various commitments will expire without being fully drawn upon, the total commitment amount does not necessarily represent future cash requirements.

We are exposed to credit loss equal to the contractual amount of the commitment in the event of nonperformance by the borrower. We use the same credit underwriting criteria for all credit exposure. The amount of collateral obtained, if deemed necessary by us, is based on Management's credit evaluation of the borrower. Collateral types pledged may include accounts receivable, inventory, other personal property and real property.

The contractual amount of undrawn loan commitments and standby letters of credit not reflected on the consolidated statements of condition was $418.2 million and $376.6 million at June 30, 2016 and December 31, 2015, respectively. Commitments at June 30, 2016 included $213.3 million under commercial lines of credit (these commitments are generally contingent upon customers maintaining specific credit standards), $143.7 million under revolving home equity lines, $46.8 million under construction loans, $3.6 million under standby letters of credit, and a remaining $10.8 million under personal and other lines of credit. We record an allowance for losses on these off-balance sheet commitments based on an estimate of probabilities of these commitments being drawn upon according to our historical utilization experience on different types of commitments and expected loss severity. We set aside an allowance for losses on off-balance sheet commitments in the amount of $899 thousand and $749 thousand as of June 30, 2016 and December 31, 2015, respectively, which is recorded in interest payable and other liabilities on the consolidated statements of condition. The increase in the reserve for off-balance sheet commitments for the first six months of 2016 was primarily due to an increase in commitments and a decrease in utilization.

Operating Leases

We rent certain premises and equipment under long-term, non-cancelable operating leases expiring at various dates through the year 2032. Most of the leases contain certain renewal options and escalation clauses. At June 30, 2016, the approximate minimum future commitments payable under non-cancelable contracts for leased premises are as follows:

(in thousands)	2016		2017		2018		2019		2020		Thereafter		Total
Operating leases1	$	1,773	$	3,576	$	3,594	$	3,567	$	3,328	$	5,895	$	21,733

¹ Minimum payments have not been reduced by minimum sublease rentals of $200 thousand due in the future under non-cancelable subleases.

Rent expense included in occupancy expense totaled $1.9 million and $2.2 million for the six months ended June 30, 2016 and 2015, respectively.

Litigation Matters

We may be party to legal actions which arise from time to time as part of the normal course of our business.  We believe, after consultation with legal counsel, that we have meritorious defenses in these actions, and that litigation contingent liability, if any, will not have a material adverse effect on our financial position, results of operations, or cash flows.

We are responsible for our proportionate share of certain litigation indemnifications provided to Visa U.S.A. ("Visa") by its member banks in connection with lawsuits related to anti-trust charges and interchange fees ("Covered Litigation"). Visa maintains an escrow account from which settlements of, or judgments in, the Covered Litigation are paid. While the accrual related to the Covered Litigation could be higher or lower than the litigation escrow account balance, Visa did not record an additional accrual for the Covered Litigation during 2016. At June 30, 2016, the balance of the escrow account was $1.0 billion. Visa had reached a $4.0 billion interchange multidistrict litigation class settlement agreement. However, a number of objectors have appealed and on June 30, 2016, an appellate court reversed the approval of the settlement by the lower court. Until the appeal process is complete, Visa is uncertain whether it will resolve the claims as contemplated by the settlement agreement and additional lawsuits may arise. The conversion rate of Visa Class B common stock held by us to Class A common stock (as discussed in Note 4, Investment Securities) may decrease if Visa makes more Covered Litigation settlement payments in the future, and the full effect on member banks is still uncertain. However, we are not aware of significant future cash settlement payments required by us on the Covered Litigation.

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Derivative Financial Instruments and Hedging Activities

6 Months Ended

Jun. 30, 2016

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Derivative Financial Instruments and Hedging Activities

Derivative Financial Instruments and Hedging Activities

We have entered into interest rate swap agreements, primarily as an asset/liability management strategy, in order to mitigate the changes in the fair value of specified long-term fixed-rate loans (or firm commitments to enter into long-term fixed-rate loans) caused by changes in interest rates. These hedges allow us to offer long-term fixed rate loans to customers without assuming the interest rate risk of a long-term asset. Converting our fixed-rate interest payments to floating-rate interest payments, generally benchmarked to the one-month U.S. dollar LIBOR index, protects us against changes in the fair value of our loans associated with fluctuating interest rates.

The fixed-rate payment features of the interest rate swap agreements are generally structured at inception to mirror substantially all of the provisions of the hedged loan agreements. These interest rate swaps, designated and qualified as fair value hedges, are carried on the consolidated statements of condition at their fair value in other assets (when the fair value is positive) or in other liabilities (when the fair value is negative). The unrealized gain or loss in fair value of the hedged fixed-rate loan due to LIBOR interest rate movements is recorded as an adjustment to the hedged loan.

From time to time, we make firm commitments to enter into long-term fixed-rate loans with borrowers backed by yield maintenance agreements and simultaneously enter into forward interest rate swap agreements with correspondent banks to mitigate the change in fair value of the yield maintenance agreement. Prior to loan funding, yield maintenance agreements with net settlement features that meet the definition of a derivative are considered as non-designated hedges and are carried on the consolidated statements of condition at their fair value in other assets (when the fair value is positive) or in other liabilities (when the fair value is negative). The offsetting changes in the fair value of the forward swap and the yield maintenance agreement are recorded in interest income. When the fixed-rate loans are originated, the forward swaps are designated to offset the change in fair value in the loans. Subsequent to the point of the swap designations, the related yield maintenance agreements are no longer considered derivatives. Their fair value at the designation date is recorded in other assets and is amortized using the effective yield method over the life of the respective designated loans.

The net effect of the change in fair value of interest rate swaps, the amortization of the yield maintenance agreements and the change in the fair value of the hedged loans result in an insignificant amount of hedge ineffectiveness recognized in interest income.

Our credit exposure, if any, on interest rate swaps is limited to the favorable value (net of any collateral pledged to us) and interest payments of all swaps by each counterparty. Conversely, when an interest rate swap is in a liability position exceeding a certain threshold, we may be required to post collateral to the counterparty in an amount determined by the agreements. Collateral levels are monitored and adjusted on a regular basis for changes in interest rate swap values.

As of June 30, 2016, we had six interest rate swap agreements, which are scheduled to mature in August 2020, June 2031, October 2031, July 2032, August 2037 and October 2037. All of our derivatives are accounted for as fair value hedges. In April 2016, one interest rate swap scheduled to mature in June 2020 was terminated as the hedged loan was paid off. A prepayment fee was collected from the borrower to settle our interest rate swap liability, resulting in no net gain or loss on the termination of the swap and loan payoff. Our interest rate swaps are settled monthly with counterparties. Accrued interest on the swaps totaled $16 thousand and $28 thousand as of June 30, 2016 and December 31, 2015, respectively. Information on our derivatives follows:

	Asset derivatives				Liability derivatives
(in thousands)	June 30, 2016		December 31, 2015		June 30, 2016		December 31, 2015
Fair value hedges:
Interest rate contracts notional amount	$	—	$	4,407	$	22,527	$	22,187
Interest rate contracts fair value1	$	—	$	3	$	2,721	$	1,658

	Three months ended
(in thousands)	June 30, 2016			June 30, 2015
(Decrease) increase in value of designated interest rate swaps recognized in interest income	$	(190	)	$	966
Payment on interest rate swaps recorded in interest income	(138		)	(233		)
Increase (decrease) in value of hedged loans recognized in interest income	240			(1,023		)
Decrease in value of yield maintenance agreement recognized against interest income	(11		)	(13		)
Net loss on derivatives recognized against interest income 2	$	(99	)	$	(303	)

	Six months ended
(in thousands)	June 30, 2016			June 30, 2015
(Decrease) increase in value of designated interest rate swaps recognized in interest income	$	(1,066	)	$	420
Payment on interest rate swaps recorded in interest income	(313		)	(469		)
Increase (decrease) in value of hedged loans recognized in interest income	1,290			(451		)
Decrease in value of yield maintenance agreement recognized against interest income	(23		)	(27		)
Net loss on derivatives recognized against interest income 2	$	(112	)	$	(527	)

¹ See Note 3 for valuation methodology.

² Includes hedge ineffectiveness gain of $39 thousand and loss of $70 thousand for the quarters ended June 30, 2016 and June 30, 2015, respectively. Ineffectiveness gain of $201 thousand and loss of $58 thousand was recorded in interest income during the six months ended June 30, 2016 and June 30, 2015, respectively. Changes in value of swaps were included in the assessment of hedge effectiveness. Hedge ineffectiveness is the measure of the extent to which the change in the fair value of the hedging instruments does not exactly offset the change in the fair value of the hedged items from period to period.

Our derivative transactions with counterparties are under International Swaps and Derivative Association (“ISDA”) master agreements that include “right of set-off” provisions. “Right of set-off” provisions are legally enforceable rights to offset recognized amounts and there may be an intention to settle such amounts on a net basis. We do not offset such financial instruments for financial reporting purposes.

Information on financial instruments that are eligible for offset in the consolidated statements of condition follows:

Offsetting of Financial Assets and Derivative Assets
			Gross Amounts		Net Amounts of		Gross Amounts Not Offset in
	Gross Amounts		Offset in the		Assets Presented		the Statements of Condition
	of Recognized		Statements of		in the Statements		Financial			Cash Collateral
(in thousands)	Assets1		Condition		of Condition1		Instruments			Received		Net Amount
June 30, 2016
Derivatives by Counterparty:
None	$	—	$	—	$	—	$	—		$	—	$	—
December 31, 2015
Derivatives by Counterparty:
Counterparty A	$	3	$	—	$	3	$	(3	)	$	—	$	—

¹Amounts exclude accrued interest totaling zero and $1 thousand at June 30, 2016 and December 31, 2015, respectively.

Offsetting of Financial Liabilities and Derivative Liabilities
			Gross Amounts		Net Amounts of		Gross Amounts Not Offset in
	Gross Amounts		Offset in the		Liabilities Presented		the Statements of Condition
	of Recognized		Statements of		in the Statements		Financial			Cash Collateral
(in thousands)	Liabilities2		Condition		of Condition2		Instruments			Pledged			Net Amount
June 30, 2016
Derivatives by Counterparty:
Counterparty A	$	2,721	$	—	$	2,721	$	—		$	(2,390	)	$	331	3
December 31, 2015
Derivatives by Counterparty:
Counterparty A	$	1,390	$	—	$	1,390	$	(3	)	$	(1,387	)	$	—
Counterparty B	268		—		268		—			(268		)	—
Total	$	1,658	$	—	$	1,658	$	(3	)	$	(1,655	)	$	—

² Amounts exclude accrued interest totaling $16 thousand and $27 thousand at June 30, 2016 and December 31, 2015, respectively.

³ The under-collateralized position was covered subsequent to June 30, 2016.

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Basis of Presentation (Policies)

6 Months Ended

Jun. 30, 2016

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Basis of Presentation

The consolidated financial statements include the accounts of Bank of Marin Bancorp (“Bancorp”), a bank holding company, and its wholly-owned bank subsidiary, Bank of Marin (the “Bank”), a California state-chartered commercial bank. References to “we,” “our,” “us” mean the holding company and the Bank that are consolidated for financial reporting purposes. The accompanying unaudited consolidated interim financial statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission ("SEC"). Certain information and note disclosures normally included in annual financial statements prepared in accordance with generally accepted accounting principles ("GAAP") have been condensed or omitted pursuant to those rules and regulations. Although we believe that the disclosures are adequate and the information presented is not misleading, we suggest that these interim financial statements be read in conjunction with the annual financial statements and the notes thereto included in our 2015 Annual Report on Form 10-K.  In the opinion of Management, the unaudited consolidated financial statements reflect all adjustments which are necessary for a fair presentation of the consolidated financial position, the results of operations, changes in comprehensive income, changes in stockholders’ equity, and cash flows for the periods presented. All material intercompany transactions have been eliminated. The results of these interim periods may not be indicative of the results for the full year or for any other period. We have evaluated subsequent events through the date of filing with the SEC and have determined that there are no subsequent events that require additional recognition or disclosure.

The NorCal Community Bancorp Trusts I and II, respectively (the "Trusts") were formed for the sole purpose of issuing trust preferred securities. Bancorp is not considered the primary beneficiary of the Trusts (variable interest entities), therefore the Trusts are not consolidated in our consolidated financial statements, but rather the subordinated debentures are shown as a liability on our consolidated statements of condition (See Note 6, Borrowings). Bancorp's investment in the securities of the Trusts is accounted for under the equity method and is included in interest receivable and other assets on the consolidated statements of condition.

Earnings Per Share

Basic earnings per share (“EPS”) are calculated by dividing net income by the weighted average number of common shares outstanding during each period, excluding unvested restricted stock awards. Diluted EPS are calculated using the weighted average number of potentially dilutive common shares, which is based on average market prices during the three months of the reporting period, under the treasury stock method. The number of potentially dilutive common shares included in year-to-date diluted EPS is a year-to-date weighted average of potentially dilutive common shares included in each quarterly diluted EPS computation. We have two forms of our outstanding common stock: common stock and unvested restricted stock awards. Holders of unvested restricted stock awards receive non-forfeitable dividends at the same rate as common shareholders and they both share equally in undistributed earnings. Therefore, under the two-class method, the difference in EPS is not significant for these participating securities.

Recently Issued Accounting Standards

In May 2014, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2014-09, Revenue from Contracts with Customers (Topic 606). The ASU is a converged standard involving FASB and International Financial Reporting Standards that provides a single comprehensive revenue recognition model for all contracts with customers across transactions and industries. The core principal of the guidance is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount and at a time that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. Subsequent updates related to Revenue from Contracts with Customers (Topic 606) are as follows:

• August 2015 ASU No. 2015-14 - Deferral of the Effective Date, institutes a one-year deferral of the effective date of this amendment to annual reporting periods beginning after December 15, 2017. Early application is permitted only as of annual periods beginning after December 15, 2016, including interim reporting periods within that reporting period.

• March 2016 ASU No. 2016-08 - Principal versus Agent Considerations (Reporting Revenue Gross versus Net), clarifies the implementation guidance on principal versus agent considerations and on the use of indicators that assist an entity in determining whether it controls a specified good or service before it is transferred to the customer.

• April 2016 ASU No. 2016-10 - Identifying Performance Obligations and Licensing, provides guidance in determining performance obligations in a contract with a customer and clarifies whether a promise to grant a license provides a right to access or the right to use intellectual property.

• May 2016 ASU No. 2016-12 - Narrow Scope Improvements and Practical Expedients, gives further guidance on assessing collectability, presentation of sales taxes, noncash consideration, and completed contracts and contract modifications at transition.

We are currently evaluating the provisions of these updates and will be monitoring developments and additional guidance to determine the potential impact the new standards will have on our financial condition and results of operations.

In January 2016, the FASB issued ASU No. 2016-01, Financial Instruments - Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities. The amendments in this ASU make improvements to GAAP related to financial instruments that include the following as applicable to us.

• Equity investments, except for those accounted for under the equity method of accounting or those that result in consolidation of the investee, are required to be measured at fair value with changes in fair value recognized in net income. However, an entity may choose to measure equity investments that do not have readily determinable fair values at cost minus impairment, if any, plus or minus changes resulting from observable price changes in orderly transactions for the identical or a similar investment of the same issuer.

• Simplifies the impairment assessment of equity investments without readily determinable fair values by requiring a qualitative assessment to identify impairment - if impairment exists, this requires measuring the investment at fair value.

• Eliminates the requirement for public companies to disclose the method(s) and significant assumptions used to estimate the fair value that is currently required to be disclosed for financial instruments measured at amortized cost on the balance sheet.

• Public companies will be required to use the exit price notion when measuring the fair value of financial instruments for disclosure purposes.

• Requires separate presentation of financial assets and financial liabilities by measurement category and form of financial asset on the balance sheet or the accompanying notes to the financial statements.

• The reporting entity should evaluate the need for a valuation allowance on a deferred tax asset related to available-for-sale securities in combination with the entity's other deferred tax assets.

ASU 2016-01 is effective for public business entities for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. This ASU will impact our financial statement disclosures, however, we do not expect it to have a material impact on our financial condition or results of operations.

In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842). This ASU was issued to increase transparency and comparability among organizations by recognizing lease assets and lease liabilities, including leases classified as operating leases under previous GAAP, on the balance sheet and requiring additional disclosures of key information about leasing arrangements. This ASU applies to leasing arrangements exceeding a twelve month term. ASU 2016-02 is effective for annual periods, including interim periods within those annual periods beginning after December 15, 2018 and requires a modified retrospective method upon adoption. Early application of the amendments is permitted. We are currently evaluating the provisions of this ASU and will be monitoring developments and additional guidance to determine the timing of our adoption and the potential outcome the amendments will have on our financial condition and results of operations.

In March 2016, the FASB issued ASU No. 2016-05, Derivatives and Hedging (Topic 815): Effect of Derivative Contract Novations on Existing Hedge Accounting Relationships. A contract novation refers to replacing one of the parties to a derivative instrument with a new party. This ASU clarifies that a change in counterparty in a derivative instrument does not, in and of itself, require dedesignation of that hedging relationship and therefore discontinue the application of hedge accounting. ASU 2016-05 is effective for financial statements issued for fiscal years beginning after December 15, 2016, and interim periods within those fiscal years. Early adoption is permitted in any interim or annual period. We do not expect this ASU to have a material impact on our financial condition or results of operations.

In March 2016, the FASB issued ASU No. 2016-09, Compensation - Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting. This ASU identifies areas for simplification involving several aspects of accounting for share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities, forfeiture accounting, and classifications on the statement of cash flows. ASU 2016-09 is effective for annual periods beginning after December 15, 2016, and interim periods within those annual periods. Early adoption is permitted in any interim or annual period. We are currently evaluating the the provisions of this ASU and will be monitoring developments and additional guidance to determine the potential outcome the amendments will have on our financial condition and results of operations.

In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. This ASU replaces the incurred loss impairment methodology in current GAAP with a methodology that reflects expected credit losses, requiring a financial asset measured at amortized cost basis to be presented at the net amount expected to be collected. Under the new guidance, an entity recognizes as an allowance its estimate of expected credit losses, which is likely to result in more timely recognition of such losses. In addition, the accounting for purchased credit impaired financial assets will make the allowance for credit losses more comparable between originated assets and purchased financial assets, as well as reduce complexity with the accounting for interest income. ASU 2016-13 is effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. Early adoption is permitted for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. We are currently evaluating the provisions of this ASU and will be monitoring developments and additional guidance to determine the timing of our adoption and the potential outcome the amendments will have on our financial condition and results of operations.

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Basis of Presentation (Tables)

6 Months Ended

Jun. 30, 2016

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Schedule of Earnings Per Share Reconciliation

The following table shows: 1) weighted average basic shares, 2) potentially dilutive weighted average common shares related to stock options, unvested restricted stock awards and stock warrant, and 3) weighted average diluted shares. Basic earnings per share (“EPS”) are calculated by dividing net income by the weighted average number of common shares outstanding during each period, excluding unvested restricted stock awards. Diluted EPS are calculated using the weighted average number of potentially dilutive common shares, which is based on average market prices during the three months of the reporting period, under the treasury stock method. The number of potentially dilutive common shares included in year-to-date diluted EPS is a year-to-date weighted average of potentially dilutive common shares included in each quarterly diluted EPS computation. We have two forms of our outstanding common stock: common stock and unvested restricted stock awards. Holders of unvested restricted stock awards receive non-forfeitable dividends at the same rate as common shareholders and they both share equally in undistributed earnings. Therefore, under the two-class method, the difference in EPS is not significant for these participating securities.

	Three months ended				Six months ended
(in thousands, except per share data)	June 30, 2016		June 30, 2015		June 30, 2016		June 30, 2015
Weighted average basic shares outstanding	6,078		5,945		6,063		5,933
Potentially dilutive common shares related to:
Stock options	27		41		31		44
Unvested restricted stock awards	4		3		6		4
Warrant	—		73		—		74
Weighted average diluted shares outstanding	6,109		6,062		6,100		6,055
Net income	$	4,837	$	4,286	$	10,483	$	8,743
Basic EPS	$	0.80	$	0.72	$	1.73	$	1.47
Diluted EPS	$	0.79	$	0.71	$	1.72	$	1.44
Weighted average anti-dilutive shares not included in the calculation of diluted EPS	70		41		60		34

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Fair Value of Assets and Liabilities (Tables)

6 Months Ended

Jun. 30, 2016

Fair Value Disclosures [Abstract]

Schedule of Fair Value, Assets and Liabilities Measured on Recurring Basis

The following table summarizes our assets and liabilities that were required to be recorded at fair value on a recurring basis.

(in thousands)   Description of Financial Instruments	Carrying Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
June 30, 2016
Securities available-for-sale:
Mortgage-backed securities and collateralized mortgage obligations issued by U.S. government-sponsored agencies	$	167,407	$	—	$	166,750	$	657
Debentures of government-sponsored agencies	83,758		—		83,758		—
Privately-issued collateralized mortgage obligations	768		—		768		—
Obligations of state and political subdivisions	66,452		—		66,452		—
Corporate bonds	4,976		—		4,976		—
Derivative financial liabilities (interest rate contracts)	2,721		—		2,721		—
December 31, 2015
Securities available-for-sale:
Mortgage-backed securities and collateralized mortgage obligations issued by U.S. government-sponsored agencies	$	190,093	$	—	$	188,381	$	1,712
Debentures of government-sponsored agencies	160,892		—		160,892		—
Privately-issued collateralized mortgage obligations	4,150		—		4,150		—
Obligations of state and political subdivisions	57,673		—		57,673		—
Corporate bonds	4,979		—		4,979		—
Derivative financial assets (interest rate contracts)	3		—		3		—
Derivative financial liabilities (interest rate contracts)	1,658		—		1,658		—

Fair Value Measurements, Nonrecurring

The following table presents the carrying value of assets and liabilities measured at fair value on a non-recurring basis and that were held in the consolidated statements of condition at each respective period end, by level within the fair value hierarchy as of June 30, 2016 and December 31, 2015.

(in thousands)	Carrying Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs  (Level 3)
June 30, 2016
Impaired loans 1	$	171	$	—	$	—	$	171
Other real estate owned	408		—		—		408
December 31, 2015
Impaired loans	$	—	$	—	$	—	$	—
Other real estate owned	421		—		—		421

¹Represents collateral-dependent loan principal balances that had been generally written down to the values of the underlying collateral and reflected net of specific valuation allowances. At June 30, 2016, the $171 thousand carrying value of a consumer loan was net of a $5 thousand specific valuation allowance. The carrying value of loans fully charged-off, which includes unsecured lines of credit, overdrafts and all other loans, is zero.

Fair Value, by Balance Sheet Grouping

The table below is a summary of fair value estimates for financial instruments as of June 30, 2016 and December 31, 2015, excluding financial instruments recorded at fair value on a recurring basis (summarized in the first table in this note). The carrying amounts in the following table are recorded in the consolidated statements of condition under the indicated captions. We have excluded non-financial assets and non-financial liabilities defined by the Codification (ASC 820-10-15-1A), such as Bank premises and equipment, deferred taxes and other liabilities.  In addition, we have 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.

	June 30, 2016					December 31, 2015
(in thousands)	Carrying Amounts		Fair Value		Fair Value Hierarchy	Carrying Amounts		Fair Value		Fair Value Hierarchy
Financial assets
Cash and cash equivalents	$	55,438	$	55,438	Level 1	$	26,343	$	26,343	Level 1
Investment securities held-to-maturity	58,491		60,160		Level 2	69,637		71,054		Level 2
Loans, net	1,433,312		1,453,254		Level 3	1,436,229		1,470,380		Level 3
Interest receivable	5,968		5,968		Level 2	6,643		6,643		Level 2
Financial liabilities
Deposits	1,705,615		1,705,937		Level 2	1,728,226		1,728,717		Level 2
Federal Home Loan Bank and other borrowings	—		—		Level 2	67,000		67,279		Level 2
Subordinated debentures	5,493		5,108		Level 3	5,395		5,132		Level 3
Interest payable	137		137		Level 2	187		187		Level 2

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Investment Securities (Tables)

6 Months Ended

Jun. 30, 2016

Investments, Debt and Equity Securities [Abstract]

Schedule of Available-for-sale Securities and Held-to-maturity Securities Reconciliation

Our investment securities portfolio consists of obligations of state and political subdivisions, corporate bonds, U.S. government agency securities, including mortgage-backed securities (“MBS”) and collateralized mortgage obligations (“CMOs”) issued or guaranteed by Federal National Mortgage Association ("FNMA"), Federal Home Loan Mortgage Corporation ("FHLMC"), or Government National Mortgage Association ("GNMA"), debentures issued by government-sponsored agencies such as FNMA, Federal Farm Credit Bureau, FHLB and FHLMC, as well as privately issued CMOs, as reflected in the table below:

	June 30, 2016									December 31, 2015
	Amortized		Fair		Gross Unrealized					Amortized		Fair		Gross Unrealized
(in thousands)	Cost		Value		Gains		(Losses)			Cost		Value		Gains		(Losses)
Held-to-maturity:
Obligations of state and   political subdivisions	$	39,009	$	40,337	$	1,336	$	(8	)	$	42,919	$	44,146	$	1,246	$	(19	)
Corporate bonds	8,529		8,534		6		(1		)	15,072		15,098		42		(16		)
MBS pass-through securities issued by FHLMC and FNMA	10,953		11,289		336		—			11,646		11,810		171		(7		)
Total held-to-maturity	58,491		60,160		1,678		(9		)	69,637		71,054		1,459		(42		)
Available-for-sale:
Securities of U.S. government or government-sponsored agencies:
MBS pass-through securities issued by FHLMC and FNMA	111,682		113,877		2,195		—			138,222		138,462		694		(454		)
CMOs issued by FNMA	23,061		23,387		331		(5		)	18,266		18,219		97		(144		)
CMOs issued by FHLMC	21,110		21,451		341		—			22,889		22,932		82		(39		)
CMOs issued by GNMA	8,470		8,692		222		—			10,326		10,480		169		(15		)
Debentures of government- sponsored agencies	83,566		83,758		193		(1		)	161,690		160,892		28		(826		)
Privately issued CMOs	768		768		1		(1		)	3,960		4,150		190		—
Obligations of state and political subdivisions	64,725		66,452		1,729		(2		)	57,110		57,673		580		(17		)
Corporate bonds	4,954		4,976		25		(3		)	4,947		4,979		43		(11		)
Total available-for-sale	318,336		323,361		5,037		(12		)	417,410		417,787		1,883		(1,506		)
Total investment securities	$	376,827	$	383,521	$	6,715	$	(21	)	$	487,047	$	488,841	$	3,342	$	(1,548	)

Investments Classified by Contractual Maturity Date

The amortized cost and fair value of investment debt securities by contractual maturity at June 30, 2016 are shown below. Expected maturities will differ from contractual maturities because the issuers of the securities may have the right to call or prepay obligations with or without call or prepayment penalties.

	June 30, 2016								December 31, 2015
	Held-to-Maturity				Available-for-Sale				Held-to-Maturity				Available-for-Sale
(in thousands)	Amortized Cost		Fair Value		Amortized Cost		Fair Value		Amortized Cost		Fair Value		Amortized Cost		Fair Value
Within one year	$	19,481	$	19,545	$	2,412	$	2,416	$	18,853	$	18,920	$	12,135	$	12,176
After one year but within five years	21,203		21,929		114,702		115,207		31,677		32,360		188,007		187,326
After five years through ten years	5,646		6,068		65,766		67,170		8,580		8,969		64,899		64,999
After ten years	12,161		12,618		135,456		138,568		10,527		10,805		152,369		153,286
Total	$	58,491	$	60,160	$	318,336	$	323,361	$	69,637	$	71,054	$	417,410	$	417,787

Schedule of Realized Gain (Loss)

Sales of investment securities and gross realized gains and losses are shown in the following table.

	Three months ended				Six months ended
(in thousands)	June 30, 2016		June 30, 2015		June 30, 2016			June 30, 2015
Available-for-sale:
Sales proceeds	$	13,688	$	1,559	$	68,673		$	1,559
Gross realized gains	284		8		458			8
Gross realized losses	—		—		(64		)	—

Schedule of Unrealized Loss on Investments

Those securities are summarized and classified according to the duration of the loss period in the tables below:

June 30, 2016	< 12 continuous months					≥ 12 continuous months					Total securities  in a loss position
(in thousands)	Fair value		Unrealized loss			Fair value		Unrealized loss			Fair value		Unrealized loss
Held-to-maturity:
Obligations of state and political subdivisions	$	1,058	$	(8	)	$	—	$	—		$	1,058	$	(8	)
Corporate bonds	5,000		(1		)	—		—			5,000		(1		)
MBS pass-through securities issued by FHLMC and FNMA	—		—			—		—			—		—
Total held-to-maturity	6,058		(9		)	—		—			6,058		(9		)
Available-for-sale:
MBS pass-through securities issued by FHLMC and FNMA	—		—			—		—			—		—
CMOs issued by FNMA	—		—			2,811		(5		)	2,811		(5		)
CMOs issued by FHLMC	—		—			—		—			—		—
CMOs issued by GNMA	—		—			—		—			—		—
Debentures of government- sponsored agencies	9,997		(1		)	—		—			9,997		(1		)
Privately issued CMOs	182		(1		)	—		—			182		(1		)
Obligations of state & political subdivisions	1,918		(2		)	—		—			1,918		(2		)
Corporate bonds	1,990		(3		)	—		—			1,990		(3		)
Total available-for-sale	14,087		(7		)	2,811		(5		)	16,898		(12		)
Total temporarily impaired securities	$	20,145	$	(16	)	$	2,811	$	(5	)	$	22,956	$	(21	)

December 31, 2015	< 12 continuous months					≥ 12 continuous months					Total securities  in a loss position
(in thousands)	Fair value		Unrealized loss			Fair value		Unrealized loss			Fair value		Unrealized loss
Held-to-maturity:
Obligations of state and political subdivisions	$	8,297	$	(19	)	$	—	$	—		$	8,297	$	(19	)
Corporate bonds	3,523		(15		)	1,999		(1		)	5,522		(16		)
MBS pass-through securities issued by FHLMC and FNMA	2,332		(7		)	—		—			2,332		(7		)
Total held-to-maturity	14,152		(41		)	1,999		(1		)	16,151		(42		)
Available-for-sale:
MBS pass-through securities issued by FHLMC and FNMA	68,809		(454		)	—		—			68,809		(454		)
CMOs issued by FNMA	9,277		(80		)	3,158		(64		)	12,435		(144		)
CMOs issued by FHLMC	—		—			1,989		(39		)	1,989		(39		)
CMOs issued by GNMA	164		—			2,374		(15		)	2,538		(15		)
Debentures of government- sponsored agencies	136,064		(713		)	9,887		(113		)	145,951		(826		)
Obligations of state & political subdivisions	4,557		(15		)	579		(2		)	5,136		(17		)
Corporate bonds	2,986		(11		)	—		—			2,986		(11		)
Total available-for-sale	221,857		(1,273		)	17,987		(233		)	239,844		(1,506		)
Total temporarily impaired securities	$	236,009	$	(1,314	)	$	19,986	$	(234	)	$	255,995	$	(1,548	)

XML

Loans and Allowance for Loan Losses (Tables)

6 Months Ended

Jun. 30, 2016

Receivables [Abstract]

Past Due Financing Receivables

Outstanding loans by class and payment aging as of June 30, 2016 and December 31, 2015 were as follows:

Loan Aging Analysis by Loan Class
(in thousands)	Commercial and industrial		Commercial real estate, owner-occupied		Commercial real estate, investor		Construction		Home equity		Other residential 1		Installment and other consumer		Total
June 30, 2016
30-59 days past due	$	44	$	—	$	—	$	—	$	780	$	—	$	—	$	824
60-89 days past due	—		—		1,676		—		—		—		63		1,739
90 days or more past due	21		176		—		—		99		—		—		296
Total past due	65		176		1,676		—		879		—		63		2,859
Current	215,192		241,927		701,782		77,024		111,361		73,761		24,493		1,445,540
Total loans 3	$	215,257	$	242,103	$	703,458	$	77,024	$	112,240	$	73,761	$	24,556	$	1,448,399
Non-accrual 2	$	21	$	176	$	1,676	$	—	$	789	$	—	$	63	$	2,725
December 31, 2015
30-59 days past due	$	36	$	—	$	1,096	$	1	$	—	$	—	$	249	$	1,382
60-89 days past due	—		—		—		—		633		—		89		722
90 days or more past due	21		—		—		—		99		—		—		120
Total past due	57		—		1,096		1		732		—		338		2,224
Current	219,395		242,309		714,783		65,494		111,568		73,154		22,301		1,449,004
Total loans 3	$	219,452	$	242,309	$	715,879	$	65,495	$	112,300	$	73,154	$	22,639	$	1,451,228
Non-accrual 2	$	21	$	—	$	1,903	$	1	$	171	$	—	$	83	$	2,179

¹ Our residential loan portfolio does not include sub-prime loans, nor is it our practice to underwrite loans commonly referred to as "Alt-A mortgages", the characteristics of which are loans lacking full documentation, borrowers having low FICO scores or higher loan-to-value ratios.

² Amounts include $1 thousand of Purchased Credit Impaired ("PCI") loans that had stopped accreting interest at December 31, 2015. Amounts exclude accreting PCI loans of $2.9 million and $3.7 million at June 30, 2016 and December 31, 2015, respectively, as we have a reasonable expectation about future cash flows to be collected and we continue to recognize accretable yield on these loans in interest income. These accreting PCI loans are included in current loans. There were no accruing past due loans more than ninety days at June 30, 2016 or December 31, 2015.

³ Amounts include net deferred loan costs of $726 thousand and $768 thousand at June 30, 2016 and December 31, 2015, respectively. Amounts are also net of unaccreted purchase discounts on non-PCI loans of $2.5 million and $3.2 million at June 30, 2016 and December 31, 2015, respectively.

Financing Receivable Credit Quality Indicators

The following table represents an analysis of loans by internally assigned grades, including the PCI loans, at June 30, 2016 and December 31, 2015:

Credit Risk Profile by Internally Assigned Grade
(in thousands)	Commercial and industrial		Commercial real estate, owner-occupied		Commercial real estate, investor		Construction		Home equity		Other residential		Installment and other consumer		Purchased credit-impaired		Total
June 30, 2016
Pass	$	199,923	$	230,799	$	697,897	$	73,786	$	109,408	$	73,761	$	24,162	$	2,863	$	1,412,599
Special Mention	11,818		2,101		362		—		1,120		—		—		—		15,401
Substandard	3,477		8,165		3,484		3,238		1,641		—		394		—		20,399
Total loans	$	215,218	$	241,065	$	701,743	$	77,024	$	112,169	$	73,761	$	24,556	$	2,863	$	1,448,399
December 31, 2015
Pass	$	192,560	$	219,060	$	710,042	$	62,255	$	109,959	$	73,154	$	22,307	$	3,260	$	1,392,597
Special Mention	22,457		12,371		372		—		1,100		—		—		—		36,300
Substandard	4,260		9,167		3,739		3,239		1,173		—		332		421		22,331
Total loans	$	219,277	$	240,598	$	714,153	$	65,494	$	112,232	$	73,154	$	22,639	$	3,681	$	1,451,228

Troubled Debt Restructurings on Financing Receivables

The table below summarizes outstanding TDR loans by loan class as of June 30, 2016 and December 31, 2015. The summary includes both TDRs that are on non-accrual status and those that continue to accrue interest.

(in thousands)
Recorded investment in Troubled Debt Restructurings 1	June 30, 2016		December 31, 2015
Commercial and industrial	$	3,676	$	4,698
Commercial real estate, owner-occupied	6,992		6,993
Commercial real estate, investor	2,317		514
Construction 2	3,238		3,238
Home equity	677		460
Other residential	1,987		2,010
Installment and other consumer	1,079		1,168
Total	$	19,966	$	19,081

¹ Includes $19.9 million and $19.0 million of TDR loans that were accruing interest as of June 30, 2016 and December 31, 2015, respectively. Includes $618 thousand and $137 thousand of acquired loans at June 30, 2016 and December 31, 2015, respectively.

² In June 2015, one TDR loan was transferred to loans held-for-sale at fair value totaling $1.5 million, net of an $839 thousand charge-off to the allowance for loan losses. The loan was subsequently sold in June 2015 for no additional gain or loss.

The table below presents the following information for loans modified in a TDR during the presented periods: number of contracts modified, the recorded investment in the loans prior to modification, and the recorded investment in the loans after being restructured. The table below excludes fully charged-off TDR loans and loans modified in a TDR and subsequently paid-off during the years presented.

(dollars in thousands)	Number of Contracts Modified	Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment at period end
Troubled Debt Restructurings during the three months ended June 30, 2016:
Commercial real estate, investor	1	$	281	$	281	$	281
Home equity 1	1	87		222		222
Total	2	$	368	$	503	$	503
Troubled Debt Restructurings during the three months ended June 30, 2015:
Commercial and industrial	4	$	782	$	882	$	882
Commercial real estate, investor	1	222		221		221
Total	5	$	1,004	$	1,103	$	1,103

Troubled Debt Restructurings during the six months ended June 30, 2016:
Commercial real estate, investor	2	$	1,830	$	1,826	$	1,808
Home equity 1	1	87		222		222
Total	3	$	1,917	$	2,048	$	2,030
Troubled Debt Restructurings during the six months ended June 30, 2015:
Commercial and industrial	4	$	782	$	882	$	882
Commercial real estate, investor	1	222		221		221
Total	5	$	1,004	$	1,103	$	1,103

¹ The home equity TDR modification during the second quarter of 2016 included debt consolidation which increased the post-modification balance.

Impaired Financing Receivables

The tables below summarize information on impaired loans and their related allowance. Total impaired loans include non-accrual loans, accruing TDR loans and accreting PCI loans that have experienced post-acquisition declines in cash flows expected to be collected.

(in thousands)	Commercial and industrial		Commercial real estate, owner-occupied		Commercial real estate, investor		Construction		Home equity		Other residential		Installment and other consumer		Total
June 30, 2016
Recorded investment in impaired loans:
With no specific allowance recorded	$	1,059	$	—	$	1,676	$	2,688	$	789	$	1,198	$	159	$	7,569
With a specific allowance recorded	2,637		7,169		2,317		550		606		789		982		15,050
Total recorded investment in impaired loans	$	3,696	$	7,169	$	3,993	$	3,238	$	1,395	$	1,987	$	1,141	$	22,619
Unpaid principal balance of impaired loans	$	3,697	$	7,169	$	5,984	$	3,238	$	1,411	$	1,987	$	1,142	$	24,628
Specific allowance	671		98		472		5		12		64		99		1,421
Average recorded investment in impaired loans during the quarter ended June 30, 2016	3,771		7,081		3,917		3,238		1,286		1,993		1,184		22,470
Interest income recognized on impaired loans during the quarter ended June 30, 2016	44		66		22		32		6		23		12		205
Average recorded investment in impaired loans during the six months ended June 30, 2016	4,027		7,037		3,523		3,238		1,077		1,998		1,211		22,111
Interest income recognized on impaired loans during the six months ended June 30, 2016	98		133		38		70		11		45		25		420
Average recorded investment in impaired loans during the quarter ended June 30, 2015	4,173		8,412		2,947		4,475		610		2,033		1,557		24,207
Interest income recognized on impaired loans during the quarter ended June 30, 2015	56		78		8		9		4		23		17		195
Average recorded investment in impaired loans during the six months ended June 30, 2015	3,946		8,427		2,931		5,078		618		2,037		1,650		24,687
Interest income recognized on impaired loans during the six months ended June 30, 2015	118		144		14		18		9		46		36		385

(in thousands)	Commercial and industrial		Commercial real estate, owner-occupied		Commercial real estate, investor		Construction		Home equity		Other residential		Installment and other consumer		Total
December 31, 2015
Recorded investment in impaired loans:
With no specific allowance recorded	$	2,198	$	4,111	$	2,416	$	2,687	$	171	$	1,214	$	131	$	12,928
With a specific allowance recorded	2,522		2,882		—		551		388		797		1,120		8,260
Total recorded investment in impaired loans	$	4,720	$	6,993	$	2,416	$	3,238	$	559	$	2,011	$	1,251	$	21,188
Unpaid principal balance of impaired loans	$	4,763	$	6,993	$	4,408	$	3,424	$	559	$	2,011	$	1,251	$	23,409
Specific allowance	$	912	$	70	$	—	$	1	$	3	$	67	$	116	$	1,169

Allowance for Credit Losses on Financing Receivables

The following tables disclose loans by major portfolio category and activity in the ALLL, as well as the related ALLL disaggregated by impairment evaluation method.

Allowance for Loan Losses Rollforward for the Period
(in thousands)	Commercial and industrial			Commercial real estate, owner-occupied			Commercial real estate, investor			Construction			Home equity			Other residential			Installment and other consumer			Unallocated		Total
Three months ended June 30, 2016
Allowance for loan losses:
Beginning balance	$	2,799		$	1,619		$	6,571		$	822		$	1,044		$	430		$	434		$	1,309	$	15,028
Provision (reversal)	(192		)	12			19			9			31			(4		)	(20		)	145		—
Charge-offs	—			—			—			—			—			—			(4		)	—		(4		)
Recoveries	30			—			5			—			1			—			27			—		63
Ending balance	$	2,637		$	1,631		$	6,595		$	831		$	1,076		$	426		$	437		$	1,454	$	15,087
Three months ended June 30, 2015
Allowance for loan losses:
Beginning balance	$	2,620		$	2,094		$	6,292		$	778		$	923		$	430		$	462		$	1,557	$	15,156
Provision (reversal)	(117		)	(42		)	(351		)	596			(81		)	5			(14		)	4		—
Charge-offs	(1		)	—			—			(839		)	—			—			(5		)	—		(845		)
Recoveries	38			—			3			—			1			—			1			—		43
Ending balance	$	2,540		$	2,052		$	5,944		$	535		$	843		$	435		$	444		$	1,561	$	14,354

Allowance for Loan Losses Rollforward for the Period
(in thousands)	Commercial and industrial			Commercial real estate, owner-occupied			Commercial real estate, investor			Construction			Home equity			Other residential		Installment and other consumer			Unallocated		Total
Six months ended June 30, 2016
Allowance for loan losses:
Beginning balance	$	3,023		$	2,249		$	6,178		$	724		$	910		$	394	$	425		$	1,096	$	14,999
Provision (reversal)	(440		)	(618		)	407			107			165			32		(11		)	358		—
Charge-offs	(9		)	—			—			—			—			—		(4		)	—		(13		)
Recoveries	63			—			10			—			1			—		27			—		101
Ending balance	$	2,637		$	1,631		$	6,595		$	831		$	1,076		$	426	$	437		$	1,454	$	15,087
Six months ended June 30, 2015
Allowance for loan losses:
Beginning balance	$	2,837		$	1,924		$	6,672		$	839		$	859		$	433	$	566		$	969	$	15,099
Provision (reversal)	(392		)	128			(734		)	535			(18		)	2		(113		)	592		—
Charge-offs	(3		)	—			—			(839		)	—			—		(11		)	—		(853		)
Recoveries	98			—			6			—			2			—		2			—		108
Ending balance	$	2,540		$	2,052		$	5,944		$	535		$	843		$	435	$	444		$	1,561	$	14,354

Allowance for Loan Losses and Recorded Investment in Loans
(dollars in thousands)	Commercial and industrial			Commercial real estate, owner-occupied			Commercial real estate, investor			Construction			Home equity			Other residential			Installment and other consumer			Unallocated		Total
June 30, 2016
Ending ALLL related to loans collectively evaluated for impairment	$	1,966		$	1,533		$	6,123		$	826		$	1,064		$	362		$	338		$	1,454	$	13,666
Ending ALLL related to loans individually evaluated for impairment	671			98			472			5			12			64			99			—		1,421
Ending ALLL related to purchased credit-impaired loans	—			—			—			—			—			—			—			—		—
Total	$	2,637		$	1,631		$	6,595		$	831		$	1,076		$	426		$	437		$	1,454	$	15,087
Loans outstanding:
Collectively evaluated for impairment	$	211,522		$	233,896		$	697,750		$	73,786		$	110,774		$	71,774		$	23,415		$	—	$	1,422,917
Individually evaluated for impairment	3,696			7,169			3,993			3,238			1,395			1,987			1,141			—		22,619
Purchased credit-impaired	39			1,038			1,715			—			71			—			—			—		2,863
Total	$	215,257		$	242,103		$	703,458		$	77,024		$	112,240		$	73,761		$	24,556		$	—	$	1,448,399
Ratio of allowance for loan losses to total loans	1.23		%	0.67		%	0.94		%	1.08		%	0.96		%	0.58		%	1.78		%	NM		1.04		%
Allowance for loan losses to non-accrual loans	12,557		%	927		%	393		%	NM			136		%	NM			694		%	NM		554		%

NM - Not Meaningful

Allowance for Loan Losses and Recorded Investment in Loans
(dollars in thousands)	Commercial and industrial			Commercial real estate, owner-occupied			Commercial real estate, investor			Construction			Home equity			Other residential			Installment and other consumer			Unallocated		Total
December 31, 2015
Ending ALLL related to loans collectively evaluated for impairment	$	2,111		$	2,179		$	6,178		$	723		$	907		$	327		$	309		$	1,096	$	13,830
Ending ALLL related to loans individually evaluated for impairment	904			70			—			—			3			67			116			—		1,160
Ending ALLL related to purchased  credit-impaired loans	8			—			—			1			—			—			—			—		9
Total	$	3,023		$	2,249		$	6,178		$	724		$	910		$	394		$	425		$	1,096	$	14,999
Loans outstanding:
Collectively evaluated for impairment	$	214,695		$	233,605		$	711,737		$	62,256		$	111,673		$	71,143		$	21,388		$	—	$	1,426,497
Individually evaluated for impairment1	4,582			6,993			2,416			3,238			559			2,011			1,251			—		21,050
Purchased credit-impaired	175			1,711			1,726			1			68			—			—			—		3,681
Total	$	219,452		$	242,309		$	715,879		$	65,495		$	112,300		$	73,154		$	22,639		$	—	$	1,451,228
Ratio of allowance for loan losses to total loans	1.38		%	0.93		%	0.86		%	1.11		%	0.81		%	0.54		%	1.88		%	NM		1.03		%
Allowance for loan losses to non-accrual loans	14,395		%	NM			325		%	72,400		%	532		%	NM			512		%	NM		688		%

¹ Total excludes $138 thousand PCI loans as of December 31, 2015 that have experienced credit deterioration post-acquisition declines in cash flows expected to be collected. These loans are included in the "purchased credit-impaired" amount in the next line below.

NM - Not Meaningful

Certain Loans Acquired in Transfer Not Accounted for as Debt Securities Acquired During Period

The following table presents the outstanding balances and related carrying values of PCI loans as of June 30, 2016andDecember 31, 2015.

	June 30, 2016				December 31, 2015
PCI Loans (in thousands)	Unpaid principal balance		Carrying value		Unpaid principal balance		Carrying value
Commercial and industrial	$	50	$	39	$	237	$	175
Commercial real estate	3,104		2,753		4,329		3,437
Construction	—		—		187		1
Home equity	221		71		224		68
Total purchased credit-impaired loans	$	3,375	$	2,863	$	4,977	$	3,681

Accretable Yield Activity

The activities in the accretable yield, or income expected to be earned, for PCI loans were as follows:

Accretable Yield	Three months ended						Six months ended
(in thousands)	June 30, 2016			June 30, 2015			June 30, 2016			June 30, 2015
Balance at beginning of period	$	1,742		$	3,831		$	2,618		$	4,027
Removals 1	—			—			(778		)	(77		)
Accretion	(87		)	(120		)	(185		)	(239		)
Reclassifications from nonaccretable difference 2	—			—			—			—
Balance at end of period	$	1,655		$	3,711		$	1,655		$	3,711

¹ Represents the accretable difference that is relieved when a loan exits the PCI population due to pay-off, full charge-off, or transfer to repossessed assets, etc.

² Primarily relates to changes in expected credit performance and changes in expected timing of cash flows.

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Borrowings (Tables)

6 Months Ended

Jun. 30, 2016

Debt Disclosure [Abstract]

Schedule of Long-term Debt Instruments

The following is a summary of the contractual terms of the subordinated debentures due to the Trusts as of June 30, 2016:

(in thousands)
Subordinated debentures due to NorCal Community Bancorp Trust I on October 7, 2033 with interest payable quarterly, based on 3-month LIBOR plus 3.05%, repricing quarterly (3.68% as of June 30, 2016), redeemable, in whole or in part, on any interest payment date	$	4,124
Subordinated debentures due to NorCal Community Bancorp Trust II on March 15, 2036 with interest payable quarterly, based on 3-month LIBOR plus 1.40%, repricing quarterly (2.05% as of June 30, 2016), redeemable, in whole or in part, on any interest payment date	4,124
Total	$	8,248

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Stockholders' Equity (Tables)

6 Months Ended

Jun. 30, 2016

Equity [Abstract]

Dividends Declared

Presented below is a summary of cash dividends paid to common shareholders, recorded as a reduction of retained earnings.

	Three months ended				Six months ended
(in thousands, except per share data)	June 30, 2016		June 30, 2015		June 30, 2016		June 30, 2015
Cash dividends to common stockholders	$	1,526	$	1,313	$	3,044	$	2,620
Cash dividends per common share	$	0.25	$	0.22	$	0.50	$	0.44

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Commitments and Contingencies (Tables)

6 Months Ended

Jun. 30, 2016

Commitments and Contingencies Disclosure [Abstract]

Schedule of Future Minimum Rental Payments for Operating Leases

At June 30, 2016, the approximate minimum future commitments payable under non-cancelable contracts for leased premises are as follows:

(in thousands)	2016		2017		2018		2019		2020		Thereafter		Total
Operating leases1	$	1,773	$	3,576	$	3,594	$	3,567	$	3,328	$	5,895	$	21,733

¹ Minimum payments have not been reduced by minimum sublease rentals of $200 thousand due in the future under non-cancelable subleases.

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Derivative Financial Instruments and Hedging Activities (Tables)

6 Months Ended

Jun. 30, 2016

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Schedule of Derivative Instruments in Statement of Financial Position, Fair Value

Information on our derivatives follows:

	Asset derivatives				Liability derivatives
(in thousands)	June 30, 2016		December 31, 2015		June 30, 2016		December 31, 2015
Fair value hedges:
Interest rate contracts notional amount	$	—	$	4,407	$	22,527	$	22,187
Interest rate contracts fair value1	$	—	$	3	$	2,721	$	1,658

Schedule of Derivative Instruments, Gain (Loss) in Statement of Financial Performance

	Three months ended
(in thousands)	June 30, 2016			June 30, 2015
(Decrease) increase in value of designated interest rate swaps recognized in interest income	$	(190	)	$	966
Payment on interest rate swaps recorded in interest income	(138		)	(233		)
Increase (decrease) in value of hedged loans recognized in interest income	240			(1,023		)
Decrease in value of yield maintenance agreement recognized against interest income	(11		)	(13		)
Net loss on derivatives recognized against interest income 2	$	(99	)	$	(303	)

	Six months ended
(in thousands)	June 30, 2016			June 30, 2015
(Decrease) increase in value of designated interest rate swaps recognized in interest income	$	(1,066	)	$	420
Payment on interest rate swaps recorded in interest income	(313		)	(469		)
Increase (decrease) in value of hedged loans recognized in interest income	1,290			(451		)
Decrease in value of yield maintenance agreement recognized against interest income	(23		)	(27		)
Net loss on derivatives recognized against interest income 2	$	(112	)	$	(527	)

¹ See Note 3 for valuation methodology.

² Includes hedge ineffectiveness gain of $39 thousand and loss of $70 thousand for the quarters ended June 30, 2016 and June 30, 2015, respectively. Ineffectiveness gain of $201 thousand and loss of $58 thousand was recorded in interest income during the six months ended June 30, 2016 and June 30, 2015, respectively. Changes in value of swaps were included in the assessment of hedge effectiveness. Hedge ineffectiveness is the measure of the extent to which the change in the fair value of the hedging instruments does not exactly offset the change in the fair value of the hedged items from period to period.

Offsetting Assets

Information on financial instruments that are eligible for offset in the consolidated statements of condition follows:

Offsetting of Financial Assets and Derivative Assets
			Gross Amounts		Net Amounts of		Gross Amounts Not Offset in
	Gross Amounts		Offset in the		Assets Presented		the Statements of Condition
	of Recognized		Statements of		in the Statements		Financial			Cash Collateral
(in thousands)	Assets1		Condition		of Condition1		Instruments			Received		Net Amount
June 30, 2016
Derivatives by Counterparty:
None	$	—	$	—	$	—	$	—		$	—	$	—
December 31, 2015
Derivatives by Counterparty:
Counterparty A	$	3	$	—	$	3	$	(3	)	$	—	$	—

¹Amounts exclude accrued interest totaling zero and $1 thousand at June 30, 2016 and December 31, 2015, respectively.

Offsetting Liabilities

Offsetting of Financial Liabilities and Derivative Liabilities
			Gross Amounts		Net Amounts of		Gross Amounts Not Offset in
	Gross Amounts		Offset in the		Liabilities Presented		the Statements of Condition
	of Recognized		Statements of		in the Statements		Financial			Cash Collateral
(in thousands)	Liabilities2		Condition		of Condition2		Instruments			Pledged			Net Amount
June 30, 2016
Derivatives by Counterparty:
Counterparty A	$	2,721	$	—	$	2,721	$	—		$	(2,390	)	$	331	3
December 31, 2015
Derivatives by Counterparty:
Counterparty A	$	1,390	$	—	$	1,390	$	(3	)	$	(1,387	)	$	—
Counterparty B	268		—		268		—			(268		)	—
Total	$	1,658	$	—	$	1,658	$	(3	)	$	(1,655	)	$	—

² Amounts exclude accrued interest totaling $16 thousand and $27 thousand at June 30, 2016 and December 31, 2015, respectively.

³ The under-collateralized position was covered subsequent to June 30, 2016.

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Basis of Presentation (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands	3 Months Ended		6 Months Ended		12 Months Ended
	Jun. 30, 2016	Jun. 30, 2015	Jun. 30, 2016	Jun. 30, 2015	Dec. 31, 2015
Organization, Consolidation and Presentation of Financial Statements [Abstract]
Weighted average basic shares outstanding (shares)	6,078	5,945	6,063	5,933
Add: Potentially dilutive common shares related to stock options (shares)	27	41	31	44
Potential common shares related to unvested restricted stock (shares)	4	3	6	4
Potential common shares related to warrants (shares)	0	73	0	74
Weighted average diluted shares outstanding (shares)	6,109	6,062	6,100	6,055
Net income	$ 4,837	$ 4,286	$ 10,483	$ 8,743	$ 18,441
Basic EPS (usd per share)	$ 0.80	$ 0.72	$ 1.73	$ 1.47
Diluted EPS (usd per share)	$ 0.79	$ 0.71	$ 1.72	$ 1.44
Weighted average anti-dilutive shares not included in the calculation of diluted EPS	70	41	60	34

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Fair Value of Assets and Liabilities - Recorded on a Recurring Basis (Details) $ in Thousands	6 Months Ended
	Jun. 30, 2016 USD ($) security	Dec. 31, 2015 USD ($) security
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-sale, Fair Value	$ 323,361	$ 417,787
Quoted Prices in Active Markets for Identical Assets (Level 1)
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Number of securities | security	0	0
Significant Unobservable Inputs (Level 3)
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Number of securities | security	1
Mortgage-backed securities and collateralized mortgage obligations issued by U.S. government-sponsored agencies
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Decrease in unrealized gain due to transfers to Level 3	$ 2
Debentures of government sponsored agencies
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-sale, Fair Value	83,758	$ 160,892
Privately-issued collateralized mortgage obligations
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-sale, Fair Value	768	4,150
Obligations of state and political subdivisions
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-sale, Fair Value	66,452	57,673
Corporate bonds
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-sale, Fair Value	4,976	4,979
Assets and liabilities at fair value measured on a recurring basis | Carrying Value | Interest rate contract
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Derivative financial assets (interest rate contracts)		3
Derivative financial liabilities (interest rate contracts)	2,721	1,658
Assets and liabilities at fair value measured on a recurring basis | Quoted Prices in Active Markets for Identical Assets (Level 1) | Interest rate contract
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Derivative financial assets (interest rate contracts)		0
Derivative financial liabilities (interest rate contracts)	0	0
Assets and liabilities at fair value measured on a recurring basis | Significant Other Observable Inputs (Level 2) | Interest rate contract
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Derivative financial assets (interest rate contracts)		3
Derivative financial liabilities (interest rate contracts)	2,721	1,658
Assets and liabilities at fair value measured on a recurring basis | Significant Unobservable Inputs (Level 3) | Interest rate contract
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Derivative financial assets (interest rate contracts)		0
Derivative financial liabilities (interest rate contracts)	0	0
Assets and liabilities at fair value measured on a recurring basis | Mortgage-backed securities and collateralized mortgage obligations issued by U.S. government-sponsored agencies | Carrying Value
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-sale, Fair Value	167,407	190,093
Assets and liabilities at fair value measured on a recurring basis | Mortgage-backed securities and collateralized mortgage obligations issued by U.S. government-sponsored agencies | Quoted Prices in Active Markets for Identical Assets (Level 1)
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-sale, Fair Value	0	0
Assets and liabilities at fair value measured on a recurring basis | Mortgage-backed securities and collateralized mortgage obligations issued by U.S. government-sponsored agencies | Significant Other Observable Inputs (Level 2)
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-sale, Fair Value	166,750	188,381
Assets and liabilities at fair value measured on a recurring basis | Mortgage-backed securities and collateralized mortgage obligations issued by U.S. government-sponsored agencies | Significant Unobservable Inputs (Level 3)
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-sale, Fair Value	657	1,712
Assets and liabilities at fair value measured on a recurring basis | Debentures of government sponsored agencies | Carrying Value
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-sale, Fair Value	83,758	160,892
Assets and liabilities at fair value measured on a recurring basis | Debentures of government sponsored agencies | Quoted Prices in Active Markets for Identical Assets (Level 1)
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-sale, Fair Value	0	0
Assets and liabilities at fair value measured on a recurring basis | Debentures of government sponsored agencies | Significant Other Observable Inputs (Level 2)
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-sale, Fair Value	83,758	160,892
Assets and liabilities at fair value measured on a recurring basis | Debentures of government sponsored agencies | Significant Unobservable Inputs (Level 3)
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-sale, Fair Value	0	0
Assets and liabilities at fair value measured on a recurring basis | Privately-issued collateralized mortgage obligations | Carrying Value
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-sale, Fair Value	768	4,150
Assets and liabilities at fair value measured on a recurring basis | Privately-issued collateralized mortgage obligations | Quoted Prices in Active Markets for Identical Assets (Level 1)
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-sale, Fair Value	0	0
Assets and liabilities at fair value measured on a recurring basis | Privately-issued collateralized mortgage obligations | Significant Other Observable Inputs (Level 2)
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-sale, Fair Value	768	4,150
Assets and liabilities at fair value measured on a recurring basis | Privately-issued collateralized mortgage obligations | Significant Unobservable Inputs (Level 3)
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-sale, Fair Value	0	0
Assets and liabilities at fair value measured on a recurring basis | Obligations of state and political subdivisions | Carrying Value
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-sale, Fair Value	66,452	57,673
Assets and liabilities at fair value measured on a recurring basis | Obligations of state and political subdivisions | Quoted Prices in Active Markets for Identical Assets (Level 1)
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-sale, Fair Value	0	0
Assets and liabilities at fair value measured on a recurring basis | Obligations of state and political subdivisions | Significant Other Observable Inputs (Level 2)
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-sale, Fair Value	66,452	57,673
Assets and liabilities at fair value measured on a recurring basis | Obligations of state and political subdivisions | Significant Unobservable Inputs (Level 3)
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-sale, Fair Value	0	0
Assets and liabilities at fair value measured on a recurring basis | Corporate bonds | Carrying Value
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-sale, Fair Value	4,976	4,979
Assets and liabilities at fair value measured on a recurring basis | Corporate bonds | Quoted Prices in Active Markets for Identical Assets (Level 1)
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-sale, Fair Value	0	0
Assets and liabilities at fair value measured on a recurring basis | Corporate bonds | Significant Other Observable Inputs (Level 2)
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-sale, Fair Value	4,976	4,979
Assets and liabilities at fair value measured on a recurring basis | Corporate bonds | Significant Unobservable Inputs (Level 3)
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-sale, Fair Value	$ 0	$ 0

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Fair Value of Assets and Liabilities - Recorded on Nonrecurring Basis (Details) - USD ($) $ in Thousands	6 Months Ended
	Jun. 30, 2016	Jun. 30, 2015	Dec. 31, 2015
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Impaired loans	$ 22,619		$ 21,188
Specific valuation allowance for impaired loan	$ 1,421		1,169
Discount rate for selling costs applied to all properties	6.00%
Changed in estimated value of OREO	$ 13	$ 40
Financial instruments at fair value measured on a nonrecurring basis | Quoted Prices in Active Markets for Identical Assets (Level 1)
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Impaired loans	0		0
Other real estate owned	0		0
Financial instruments at fair value measured on a nonrecurring basis | Significant Other Observable Inputs (Level 2)
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Impaired loans	0		0
Other real estate owned	0		0
Financial instruments at fair value measured on a nonrecurring basis | Significant Unobservable Inputs (Level 3)
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Impaired loans	171		0
Other real estate owned	408		421
Financial instruments at fair value measured on a nonrecurring basis | Carrying Value
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Impaired loans	171		0
Other real estate owned	408		$ 421
Consumer Loan [Member] | Consumer loans
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Impaired loans	171
Specific valuation allowance for impaired loan	$ 5

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Fair Value of Assets and Liabilities - Fair Value of Financial Instruments (Details) $ in Thousands	6 Months Ended
	Jun. 30, 2016 USD ($) debenture	Dec. 31, 2015 USD ($)
Financial Instruments, Financial Assets, Balance Sheet Groupings [Abstract]
Investment securities held to maturity	$ 60,160	$ 71,054
Subordinated debenture
Financial Instruments, Financial Liabilities, Balance Sheet Groupings [Abstract]
Subordinated debentures	$ 4,950
Subordinated Debt [Abstract]
Number of subordinated debentures acquired | debenture	2
NorCal Community Bancorp Trust I | Subordinated debenture
Subordinated Debt [Abstract]
Basis spread on subordinated debentures	3.05%
NorCal Community Bancorp Trust II | Subordinated debenture
Subordinated Debt [Abstract]
Basis spread on subordinated debentures	1.40%
Carrying Value | Fair Value Hierarchy, Level 1
Financial Instruments, Financial Assets, Balance Sheet Groupings [Abstract]
Cash and cash equivalents	$ 55,438	26,343
Carrying Value | Fair Value Hierarchy, Level 2
Financial Instruments, Financial Assets, Balance Sheet Groupings [Abstract]
Investment securities held to maturity	58,491	69,637
Interest receivable	5,968	6,643
Financial Instruments, Financial Liabilities, Balance Sheet Groupings [Abstract]
Deposits	1,705,615	1,728,226
Federal Home Loan Bank borrowings	0	67,000
Interest payable	137	187
Carrying Value | Fair Value Hierarchy, Level 3
Financial Instruments, Financial Assets, Balance Sheet Groupings [Abstract]
Loans, net	1,433,312	1,436,229
Financial Instruments, Financial Liabilities, Balance Sheet Groupings [Abstract]
Subordinated debentures	5,493	5,395
Fair Value | Fair Value Hierarchy, Level 1
Financial Instruments, Financial Assets, Balance Sheet Groupings [Abstract]
Cash and cash equivalents	55,438	26,343
Fair Value | Fair Value Hierarchy, Level 2
Financial Instruments, Financial Assets, Balance Sheet Groupings [Abstract]
Investment securities held to maturity	60,160	71,054
Interest receivable	5,968	6,643
Financial Instruments, Financial Liabilities, Balance Sheet Groupings [Abstract]
Deposits	1,705,937	1,728,717
Federal Home Loan Bank borrowings	0	67,279
Interest payable	137	187
Fair Value | Fair Value Hierarchy, Level 3
Financial Instruments, Financial Assets, Balance Sheet Groupings [Abstract]
Loans, net	1,453,254	1,470,380
Financial Instruments, Financial Liabilities, Balance Sheet Groupings [Abstract]
Subordinated debentures	$ 5,108	$ 5,132

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Investment Securities - Amortized Cost and Fair Value (Details) - USD ($) $ in Thousands	Jun. 30, 2016	Dec. 31, 2015
Schedule of Available-for-sale Securities and Held-to-maturity Securities [Line Items]
Held to maturity, Amortized Cost	$ 58,491	$ 69,637
Held to maturity, Fair Value	60,160	71,054
Held-to-maturity, Gross Unrealized Gains	1,678	1,459
Held-to-maturity, Gross Unrealized Losses	(9)	(42)
Available-for-sale, Amortized Cost	318,336	417,410
Available-for-sale, Fair Value	323,361	417,787
Available-for-sale, Gross Unrealized Gains	5,037	1,883
Available-for-sale, Gross Unrealized Losses	(12)	(1,506)
Total investment securities, Amortized Cost	376,827	487,047
Total investment securities, Fair Value	383,521	488,841
Total investment securities, Gross Unrealized Gains	6,715	3,342
Total investment securities, Gross Unrealized Losses	(21)	(1,548)
Mortgage-backed Securities, Issued by FHLMC and FNMA
Schedule of Available-for-sale Securities and Held-to-maturity Securities [Line Items]
Available-for-sale, Amortized Cost	111,682	138,222
Available-for-sale, Fair Value	113,877	138,462
Available-for-sale, Gross Unrealized Gains	2,195	694
Available-for-sale, Gross Unrealized Losses	0	(454)
CMOs issued by FNMA
Schedule of Available-for-sale Securities and Held-to-maturity Securities [Line Items]
Available-for-sale, Amortized Cost	23,061	18,266
Available-for-sale, Fair Value	23,387	18,219
Available-for-sale, Gross Unrealized Gains	331	97
Available-for-sale, Gross Unrealized Losses	(5)	(144)
CMOs issued by FHLMC
Schedule of Available-for-sale Securities and Held-to-maturity Securities [Line Items]
Available-for-sale, Amortized Cost	21,110	22,889
Available-for-sale, Fair Value	21,451	22,932
Available-for-sale, Gross Unrealized Gains	341	82
Available-for-sale, Gross Unrealized Losses	0	(39)
CMOs issued by GNMA
Schedule of Available-for-sale Securities and Held-to-maturity Securities [Line Items]
Available-for-sale, Amortized Cost	8,470	10,326
Available-for-sale, Fair Value	8,692	10,480
Available-for-sale, Gross Unrealized Gains	222	169
Available-for-sale, Gross Unrealized Losses	0	(15)
Debentures of government sponsored agencies
Schedule of Available-for-sale Securities and Held-to-maturity Securities [Line Items]
Available-for-sale, Amortized Cost	83,566	161,690
Available-for-sale, Fair Value	83,758	160,892
Available-for-sale, Gross Unrealized Gains	193	28
Available-for-sale, Gross Unrealized Losses	(1)	(826)
Privately issued CMOs
Schedule of Available-for-sale Securities and Held-to-maturity Securities [Line Items]
Available-for-sale, Amortized Cost	768	3,960
Available-for-sale, Fair Value	768	4,150
Available-for-sale, Gross Unrealized Gains	1	190
Available-for-sale, Gross Unrealized Losses	(1)	0
Obligations of state and political subdivisions
Schedule of Available-for-sale Securities and Held-to-maturity Securities [Line Items]
Available-for-sale, Amortized Cost	64,725	57,110
Available-for-sale, Fair Value	66,452	57,673
Available-for-sale, Gross Unrealized Gains	1,729	580
Available-for-sale, Gross Unrealized Losses	(2)	(17)
Corporate bonds
Schedule of Available-for-sale Securities and Held-to-maturity Securities [Line Items]
Available-for-sale, Amortized Cost	4,954	4,947
Available-for-sale, Fair Value	4,976	4,979
Available-for-sale, Gross Unrealized Gains	25	43
Available-for-sale, Gross Unrealized Losses	(3)	(11)
Obligations of state and political subdivisions
Schedule of Available-for-sale Securities and Held-to-maturity Securities [Line Items]
Held to maturity, Amortized Cost	39,009	42,919
Held to maturity, Fair Value	40,337	44,146
Held-to-maturity, Gross Unrealized Gains	1,336	1,246
Held-to-maturity, Gross Unrealized Losses	(8)	(19)
Corporate bonds
Schedule of Available-for-sale Securities and Held-to-maturity Securities [Line Items]
Held to maturity, Amortized Cost	8,529	15,072
Held to maturity, Fair Value	8,534	15,098
Held-to-maturity, Gross Unrealized Gains	6	42
Held-to-maturity, Gross Unrealized Losses	(1)	(16)
MBS pass-through securities issued by FHLMC and FNMA
Schedule of Available-for-sale Securities and Held-to-maturity Securities [Line Items]
Held to maturity, Amortized Cost	10,953	11,646
Held to maturity, Fair Value	11,289	11,810
Held-to-maturity, Gross Unrealized Gains	336	171
Held-to-maturity, Gross Unrealized Losses	$ 0	$ (7)

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Investment Securities - Maturities (Details) - USD ($) $ in Thousands	Jun. 30, 2016	Dec. 31, 2015
Investments, Debt and Equity Securities [Abstract]
Held to Maturity, Amortized Cost, Within one year	$ 19,481	$ 18,853
Held to Maturity, Amortized Cost, After one but within five years	21,203	31,677
Held to Maturity, Amortized Cost, After five years through ten years	5,646	8,580
Held to Maturity, Amortized Cost, After ten years	12,161	10,527
Held to Maturity, Amortized Cost, Total	58,491	69,637
Available for Sale Securities, Amortized Cost, Within one year	2,412	12,135
Available for Sale, Amortized Cost, After one but within five years	114,702	188,007
Available for Sale, Amortized Cost, After five years through ten years	65,766	64,899
Available for Sale, Amortized Cost, After ten years	135,456	152,369
Available for Sale, Amortized Cost, Total	318,336	417,410
Held to Maturity, Fair Value, Within one year	19,545	18,920
Held to Maturity, Fair Value, After one but within five years	21,929	32,360
Held to Maturity, Fair Value, After five years through ten years	6,068	8,969
Held to Maturity, Fair Value, After ten years	12,618	10,805
Held to maturity, Fair Value	60,160	71,054
Available for Sale, Fair Value, Within one year	2,416	12,176
Available for Sale, Fair Value, After one but within five years	115,207	187,326
Available for Sale, Fair Value, After five years through ten years	67,170	64,999
Available for Sale, Fair Value, After ten years	138,568	153,286
Available for Sale, Fair Value, Total	$ 323,361	$ 417,787

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Investment Securities - Securities Sold and Pledged as Collateral (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2016	Jun. 30, 2015	Jun. 30, 2016	Jun. 30, 2015	Dec. 31, 2015
Available-for-sale:
Sales proceeds	$ 13,688	$ 1,559	$ 68,673	$ 1,559
Gross realized gains	284	8	458	8
Gross realized losses	0	$ 0	(64)	$ 0
State of California
Available-for-sale:
Available-for-sale securities pledged as collateral	96,700		96,700		$ 87,900
Public Deposits
Available-for-sale:
Available-for-sale securities pledged as collateral	95,900		95,900		87,100
Trust Deposits
Available-for-sale:
Available-for-sale securities pledged as collateral	831		831		840
Internal checking account
Available-for-sale:
Available-for-sale securities pledged as collateral	$ 2,100		$ 2,100		$ 1,100

XML

Investment Securities - Investment Securities in Unrealized Loss Positions (Details) $ in Thousands	Jun. 30, 2016 USD ($) security	Dec. 31, 2015 USD ($) security
Schedule of Available-for-sale Securities and Held-to-maturity Securities [Line Items]
Number of investment securities other-than-temporarily impaired | security	0
Number of investment securities in unrealized loss position | security	10	54
Held-to-maturity, less than 12 continuous months, Fair value	$ 6,058	$ 14,152
Held-to-maturity, less than 12 continuous months, Unrealized loss	(9)	(41)
Held-to-maturity, greater than 12 continuous months, Fair value	0	1,999
Held-to-maturity, greater than 12 continuous months, Unrealized loss	0	(1)
Held-to-maturity, Total Securities in a loss position, Fair value	6,058	16,151
Held-to-maturity, Gross Unrealized Losses	(9)	(42)
Available-for-sale, less than 12 continuous months, Fair value	14,087	221,857
Available-for-sale, less than 12 continuous months, Unrealized loss	(7)	(1,273)
Available-for-sale, greater than 12 continuous months, Fair value	2,811	17,987
Available-for-sale, greater than 12 continuous months, Unrealized loss	(5)	(233)
Available-for-sale, Total Securities in a loss position, Fair Value	16,898	239,844
Available-for-sale, Total Securities in a loss position, Unrealized loss	(12)	(1,506)
Marketable securities, less than 12 continuous months, Fair value	20,145	236,009
Marketable securities, less than 12 continuous months, Unrealized loss	(16)	(1,314)
Marketable securities, greater than 12 continuous months, Fair value	2,811	19,986
Marketable securities, greater than 12 continuous months, Unrealized loss	(5)	(234)
Marketable securities, Total Securities in a loss position, Fair value	22,956	255,995
Marketable securities, Total Securities in a loss position, Unrealized loss	$ (21)	(1,548)
Number of investment securities in unrealized loss position longer than 12 months | security	1
Number of investment securities in unrealized loss position less than 12 months | security	9
Mortgage-backed Securities, Issued by FHLMC and FNMA
Schedule of Available-for-sale Securities and Held-to-maturity Securities [Line Items]
Available-for-sale, less than 12 continuous months, Fair value	$ 0	68,809
Available-for-sale, less than 12 continuous months, Unrealized loss	0	(454)
Available-for-sale, greater than 12 continuous months, Fair value	0	0
Available-for-sale, greater than 12 continuous months, Unrealized loss	0	0
Available-for-sale, Total Securities in a loss position, Fair Value	0	68,809
Available-for-sale, Total Securities in a loss position, Unrealized loss	0	(454)
CMOs issued by FNMA
Schedule of Available-for-sale Securities and Held-to-maturity Securities [Line Items]
Available-for-sale, less than 12 continuous months, Fair value	0	9,277
Available-for-sale, less than 12 continuous months, Unrealized loss	0	(80)
Available-for-sale, greater than 12 continuous months, Fair value	2,811	3,158
Available-for-sale, greater than 12 continuous months, Unrealized loss	(5)	(64)
Available-for-sale, Total Securities in a loss position, Fair Value	2,811	12,435
Available-for-sale, Total Securities in a loss position, Unrealized loss	(5)	(144)
CMOs issued by FHLMC
Schedule of Available-for-sale Securities and Held-to-maturity Securities [Line Items]
Available-for-sale, less than 12 continuous months, Fair value	0	0
Available-for-sale, less than 12 continuous months, Unrealized loss	0	0
Available-for-sale, greater than 12 continuous months, Fair value	0	1,989
Available-for-sale, greater than 12 continuous months, Unrealized loss	0	(39)
Available-for-sale, Total Securities in a loss position, Fair Value	0	1,989
Available-for-sale, Total Securities in a loss position, Unrealized loss	0	(39)
CMOs issued by GNMA
Schedule of Available-for-sale Securities and Held-to-maturity Securities [Line Items]
Available-for-sale, less than 12 continuous months, Fair value	0	164
Available-for-sale, less than 12 continuous months, Unrealized loss	0	0
Available-for-sale, greater than 12 continuous months, Fair value	0	2,374
Available-for-sale, greater than 12 continuous months, Unrealized loss	0	(15)
Available-for-sale, Total Securities in a loss position, Fair Value	0	2,538
Available-for-sale, Total Securities in a loss position, Unrealized loss	0	(15)
Debentures of government- sponsored agencies
Schedule of Available-for-sale Securities and Held-to-maturity Securities [Line Items]
Available-for-sale, less than 12 continuous months, Fair value	9,997	136,064
Available-for-sale, less than 12 continuous months, Unrealized loss	(1)	(713)
Available-for-sale, greater than 12 continuous months, Fair value	0	9,887
Available-for-sale, greater than 12 continuous months, Unrealized loss	0	(113)
Available-for-sale, Total Securities in a loss position, Fair Value	9,997	145,951
Available-for-sale, Total Securities in a loss position, Unrealized loss	(1)	(826)
Privately issued CMOs
Schedule of Available-for-sale Securities and Held-to-maturity Securities [Line Items]
Available-for-sale, less than 12 continuous months, Fair value	182
Available-for-sale, less than 12 continuous months, Unrealized loss	(1)
Available-for-sale, greater than 12 continuous months, Fair value	0
Available-for-sale, greater than 12 continuous months, Unrealized loss	0
Available-for-sale, Total Securities in a loss position, Fair Value	182
Available-for-sale, Total Securities in a loss position, Unrealized loss	(1)
Obligations of state and political subdivisions
Schedule of Available-for-sale Securities and Held-to-maturity Securities [Line Items]
Available-for-sale, less than 12 continuous months, Fair value	1,918
Available-for-sale, less than 12 continuous months, Unrealized loss	(2)
Available-for-sale, greater than 12 continuous months, Fair value	0
Available-for-sale, greater than 12 continuous months, Unrealized loss	0
Available-for-sale, Total Securities in a loss position, Fair Value	1,918
Available-for-sale, Total Securities in a loss position, Unrealized loss	(2)
Corporate bonds
Schedule of Available-for-sale Securities and Held-to-maturity Securities [Line Items]
Available-for-sale, less than 12 continuous months, Fair value	1,990
Available-for-sale, less than 12 continuous months, Unrealized loss	(3)
Available-for-sale, greater than 12 continuous months, Fair value	0
Available-for-sale, greater than 12 continuous months, Unrealized loss	0
Available-for-sale, Total Securities in a loss position, Fair Value	1,990
Available-for-sale, Total Securities in a loss position, Unrealized loss	(3)
Obligations of state and political subdivisions
Schedule of Available-for-sale Securities and Held-to-maturity Securities [Line Items]
Held-to-maturity, less than 12 continuous months, Fair value	1,058	8,297
Held-to-maturity, less than 12 continuous months, Unrealized loss	(8)	(19)
Held-to-maturity, greater than 12 continuous months, Fair value	0	0
Held-to-maturity, greater than 12 continuous months, Unrealized loss	0	0
Held-to-maturity, Total Securities in a loss position, Fair value	1,058	8,297
Held-to-maturity, Gross Unrealized Losses	(8)	(19)
Available-for-sale, less than 12 continuous months, Fair value		4,557
Available-for-sale, less than 12 continuous months, Unrealized loss		(15)
Available-for-sale, greater than 12 continuous months, Fair value		579
Available-for-sale, greater than 12 continuous months, Unrealized loss		(2)
Available-for-sale, Total Securities in a loss position, Fair Value		5,136
Available-for-sale, Total Securities in a loss position, Unrealized loss		(17)
Corporate bonds
Schedule of Available-for-sale Securities and Held-to-maturity Securities [Line Items]
Held-to-maturity, less than 12 continuous months, Fair value	5,000	3,523
Held-to-maturity, less than 12 continuous months, Unrealized loss	(1)	(15)
Held-to-maturity, greater than 12 continuous months, Fair value	0	1,999
Held-to-maturity, greater than 12 continuous months, Unrealized loss	0	(1)
Held-to-maturity, Total Securities in a loss position, Fair value	5,000	5,522
Held-to-maturity, Gross Unrealized Losses	(1)	(16)
Available-for-sale, less than 12 continuous months, Fair value		2,986
Available-for-sale, less than 12 continuous months, Unrealized loss		(11)
Available-for-sale, greater than 12 continuous months, Fair value		0
Available-for-sale, greater than 12 continuous months, Unrealized loss		0
Available-for-sale, Total Securities in a loss position, Fair Value		2,986
Available-for-sale, Total Securities in a loss position, Unrealized loss		(11)
MBS pass-through securities issued by FHLMC and FNMA
Schedule of Available-for-sale Securities and Held-to-maturity Securities [Line Items]
Held-to-maturity, less than 12 continuous months, Fair value	0	2,332
Held-to-maturity, less than 12 continuous months, Unrealized loss	0	(7)
Held-to-maturity, greater than 12 continuous months, Fair value	0	0
Held-to-maturity, greater than 12 continuous months, Unrealized loss	0	0
Held-to-maturity, Total Securities in a loss position, Fair value	0	2,332
Held-to-maturity, Gross Unrealized Losses	$ 0	$ (7)

XML

Investment Securities - Non-Marketable Securities (Details)	6 Months Ended
	Jun. 30, 2016 USD ($) $ / shares shares	Jul. 28, 2016	Dec. 31, 2015 USD ($)
Schedule of Cost-method Investments [Line Items]
Federal Home Loan Bank stock, par value | $ / shares	$ 100
Investments in low income housing tax credit funds	$ 2,600,000		$ 2,700,000
Low income housing tax credits and other tax benefits	164,000
Low income housing amortization expense	127,000
Unfunded commitments for low income housing tax credit funds	$ 1,500,000
Visa Inc. | Visa Inc. Class B common stock
Schedule of Cost-method Investments [Line Items]
Stockholders' Equity Note, Stock Split, Conversion Ratio	1.6483
Visa Inc. Class B common stock
Schedule of Cost-method Investments [Line Items]
Number of shares of securities carried at cost | shares	16,939
Carrying value of securities carried at cost	$ 0
Fair value of Class B common stock	2,100,000		2,200,000
Other assets
Schedule of Cost-method Investments [Line Items]
Federal Home Loan Bank stock	$ 10,200,000		$ 8,400,000
Subsequent event
Schedule of Cost-method Investments [Line Items]
Federal Home Loan Bank, dividend rate percentage		9.17%

XML

Loans and Allowance for Loan Losses - Loans Outstanding and Aging Analysis (Details) - USD ($)	Jun. 30, 2016	Dec. 31, 2015
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans past due	$ 2,859,000	$ 2,224,000
Current	1,445,540,000	1,449,004,000
Total loans	1,448,399,000	1,451,228,000
Purchased Credit Impaired (PCI) loans no longer accreting interest		1,000
Purchased Credit-impaired (PCI) loans accreting interest	2,900,000	3,700,000
Loans past due more than 90 days still accruing	0	0
Deferred loan fees	726,000	768,000
Unaccreted purchase discounts on non-PCI loans	2,500,000	3,200,000
Non-accrual	2,725,000	2,179,000
30-59 days past due
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans past due	824,000	1,382,000
60-89 days past due
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans past due	1,739,000	722,000
90 days or more past due
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans past due	296,000	120,000
Commercial loans | Commercial and industrial
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans past due	65,000	57,000
Current	215,192,000	219,395,000
Total loans	215,257,000	219,452,000
Non-accrual	21,000	21,000
Commercial loans | Commercial and industrial | 30-59 days past due
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans past due	44,000	36,000
Commercial loans | Commercial and industrial | 60-89 days past due
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans past due	0	0
Commercial loans | Commercial and industrial | 90 days or more past due
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans past due	21,000	21,000
Commercial real estate loans | Commercial real estate, owner-occupied
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans past due	176,000	0
Current	241,927,000	242,309,000
Total loans	242,103,000	242,309,000
Non-accrual	176,000	0
Commercial real estate loans | Commercial real estate, owner-occupied | 30-59 days past due
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans past due	0	0
Commercial real estate loans | Commercial real estate, owner-occupied | 60-89 days past due
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans past due	0	0
Commercial real estate loans | Commercial real estate, owner-occupied | 90 days or more past due
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans past due	176,000	0
Commercial real estate loans | Commercial real estate, investor
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans past due	1,676,000	1,096,000
Current	701,782,000	714,783,000
Total loans	703,458,000	715,879,000
Non-accrual	1,676,000	1,903,000
Commercial real estate loans | Commercial real estate, investor | 30-59 days past due
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans past due	0	1,096,000
Commercial real estate loans | Commercial real estate, investor | 60-89 days past due
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans past due	1,676,000	0
Commercial real estate loans | Commercial real estate, investor | 90 days or more past due
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans past due	0	0
Commercial real estate loans | Construction
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans past due	0	1,000
Current	77,024,000	65,494,000
Total loans	77,024,000	65,495,000
Non-accrual	0	1,000
Commercial real estate loans | Construction | 30-59 days past due
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans past due	0	1,000
Commercial real estate loans | Construction | 60-89 days past due
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans past due	0	0
Commercial real estate loans | Construction | 90 days or more past due
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans past due	0	0
Residential loans | Home equity
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans past due	879,000	732,000
Current	111,361,000	111,568,000
Total loans	112,240,000	112,300,000
Non-accrual	789,000	171,000
Residential loans | Home equity | 30-59 days past due
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans past due	780,000	0
Residential loans | Home equity | 60-89 days past due
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans past due	0	633,000
Residential loans | Home equity | 90 days or more past due
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans past due	99,000	99,000
Residential loans | Other residential
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans past due	0	0
Current	73,761,000	73,154,000
Total loans	73,761,000	73,154,000
Non-accrual	0	0
Residential loans | Other residential | 30-59 days past due
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans past due	0	0
Residential loans | Other residential | 60-89 days past due
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans past due	0	0
Residential loans | Other residential | 90 days or more past due
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans past due	0	0
Consumer loans | Installment and other consumer
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans past due	63,000	338,000
Current	24,493,000	22,301,000
Total loans	24,556,000	22,639,000
Non-accrual	63,000	83,000
Consumer loans | Installment and other consumer | 30-59 days past due
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans past due	0	249,000
Consumer loans | Installment and other consumer | 60-89 days past due
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans past due	63,000	89,000
Consumer loans | Installment and other consumer | 90 days or more past due
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans past due	$ 0	$ 0

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Loans and Allowance for Loan Losses - Credit Quality of Loans (Details) - USD ($) $ in Thousands	Jun. 30, 2016	Dec. 31, 2015
Financing Receivable, Recorded Investment [Line Items]
Total loans	$ 1,448,399	$ 1,451,228
Purchase credit-impaired
Financing Receivable, Recorded Investment [Line Items]
Purchase credit-impaired	2,863	3,681
Pass
Financing Receivable, Recorded Investment [Line Items]
Total loans	1,412,599	1,392,597
Pass | Purchase credit-impaired
Financing Receivable, Recorded Investment [Line Items]
Purchase credit-impaired	2,863	3,260
Special Mention
Financing Receivable, Recorded Investment [Line Items]
Total loans	15,401	36,300
Special Mention | Purchase credit-impaired
Financing Receivable, Recorded Investment [Line Items]
Purchase credit-impaired	0	0
Substandard
Financing Receivable, Recorded Investment [Line Items]
Total loans	20,399	22,331
Substandard | Purchase credit-impaired
Financing Receivable, Recorded Investment [Line Items]
Purchase credit-impaired	0	421
Commercial loans | Commercial and industrial
Financing Receivable, Recorded Investment [Line Items]
Loans excluding purchased credit-impaired loans	215,218	219,277
Total loans	215,257	219,452
Commercial loans | Commercial and industrial | Purchase credit-impaired
Financing Receivable, Recorded Investment [Line Items]
Purchase credit-impaired	39	175
Commercial loans | Commercial and industrial | Pass
Financing Receivable, Recorded Investment [Line Items]
Loans excluding purchased credit-impaired loans	199,923	192,560
Commercial loans | Commercial and industrial | Special Mention
Financing Receivable, Recorded Investment [Line Items]
Loans excluding purchased credit-impaired loans	11,818	22,457
Commercial loans | Commercial and industrial | Substandard
Financing Receivable, Recorded Investment [Line Items]
Loans excluding purchased credit-impaired loans	3,477	4,260
Commercial real estate loans | Commercial real estate, owner-occupied
Financing Receivable, Recorded Investment [Line Items]
Loans excluding purchased credit-impaired loans	241,065	240,598
Total loans	242,103	242,309
Commercial real estate loans | Commercial real estate, owner-occupied | Purchase credit-impaired
Financing Receivable, Recorded Investment [Line Items]
Purchase credit-impaired	1,038	1,711
Commercial real estate loans | Commercial real estate, owner-occupied | Pass
Financing Receivable, Recorded Investment [Line Items]
Loans excluding purchased credit-impaired loans	230,799	219,060
Commercial real estate loans | Commercial real estate, owner-occupied | Special Mention
Financing Receivable, Recorded Investment [Line Items]
Loans excluding purchased credit-impaired loans	2,101	12,371
Commercial real estate loans | Commercial real estate, owner-occupied | Substandard
Financing Receivable, Recorded Investment [Line Items]
Loans excluding purchased credit-impaired loans	8,165	9,167
Commercial real estate loans | Commercial real estate, investor
Financing Receivable, Recorded Investment [Line Items]
Loans excluding purchased credit-impaired loans	701,743	714,153
Total loans	703,458	715,879
Commercial real estate loans | Commercial real estate, investor | Purchase credit-impaired
Financing Receivable, Recorded Investment [Line Items]
Purchase credit-impaired	1,715	1,726
Commercial real estate loans | Commercial real estate, investor | Pass
Financing Receivable, Recorded Investment [Line Items]
Loans excluding purchased credit-impaired loans	697,897	710,042
Commercial real estate loans | Commercial real estate, investor | Special Mention
Financing Receivable, Recorded Investment [Line Items]
Loans excluding purchased credit-impaired loans	362	372
Commercial real estate loans | Commercial real estate, investor | Substandard
Financing Receivable, Recorded Investment [Line Items]
Loans excluding purchased credit-impaired loans	3,484	3,739
Commercial real estate loans | Construction
Financing Receivable, Recorded Investment [Line Items]
Loans excluding purchased credit-impaired loans	77,024	65,494
Total loans	77,024	65,495
Commercial real estate loans | Construction | Purchase credit-impaired
Financing Receivable, Recorded Investment [Line Items]
Purchase credit-impaired	0	1
Commercial real estate loans | Construction | Pass
Financing Receivable, Recorded Investment [Line Items]
Loans excluding purchased credit-impaired loans	73,786	62,255
Commercial real estate loans | Construction | Special Mention
Financing Receivable, Recorded Investment [Line Items]
Loans excluding purchased credit-impaired loans	0	0
Commercial real estate loans | Construction | Substandard
Financing Receivable, Recorded Investment [Line Items]
Loans excluding purchased credit-impaired loans	3,238	3,239
Residential loans | Home equity
Financing Receivable, Recorded Investment [Line Items]
Loans excluding purchased credit-impaired loans	112,169	112,232
Total loans	112,240	112,300
Residential loans | Home equity | Purchase credit-impaired
Financing Receivable, Recorded Investment [Line Items]
Purchase credit-impaired	71	68
Residential loans | Home equity | Pass
Financing Receivable, Recorded Investment [Line Items]
Loans excluding purchased credit-impaired loans	109,408	109,959
Residential loans | Home equity | Special Mention
Financing Receivable, Recorded Investment [Line Items]
Loans excluding purchased credit-impaired loans	1,120	1,100
Residential loans | Home equity | Substandard
Financing Receivable, Recorded Investment [Line Items]
Loans excluding purchased credit-impaired loans	1,641	1,173
Residential loans | Other residential
Financing Receivable, Recorded Investment [Line Items]
Total loans	73,761	73,154
Residential loans | Other residential | Purchase credit-impaired
Financing Receivable, Recorded Investment [Line Items]
Purchase credit-impaired	0	0
Residential loans | Other residential | Pass
Financing Receivable, Recorded Investment [Line Items]
Total loans	73,761	73,154
Residential loans | Other residential | Special Mention
Financing Receivable, Recorded Investment [Line Items]
Total loans	0	0
Residential loans | Other residential | Substandard
Financing Receivable, Recorded Investment [Line Items]
Total loans	0	0
Consumer loans | Installment and other consumer
Financing Receivable, Recorded Investment [Line Items]
Total loans	24,556	22,639
Consumer loans | Installment and other consumer | Purchase credit-impaired
Financing Receivable, Recorded Investment [Line Items]
Purchase credit-impaired	0	0
Consumer loans | Installment and other consumer | Pass
Financing Receivable, Recorded Investment [Line Items]
Total loans	24,162	22,307
Consumer loans | Installment and other consumer | Special Mention
Financing Receivable, Recorded Investment [Line Items]
Total loans	0	0
Consumer loans | Installment and other consumer | Substandard
Financing Receivable, Recorded Investment [Line Items]
Total loans	$ 394	$ 332

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Loans and Allowance for Loan Losses - Troubled Debt Restructuring by Class (Details)	1 Months Ended	3 Months Ended		6 Months Ended
	Jun. 30, 2015 USD ($) loans	Jun. 30, 2016 USD ($)	Jun. 30, 2015 USD ($)	Jun. 30, 2016 USD ($) loans	Jun. 30, 2015 USD ($) loans	Dec. 31, 2015 USD ($)
Accounts, Notes, Loans and Financing Receivable [Line Items]
Number of loans removed from TDR designation | loans				0	3
Loans removed from TDR designation, recorded investment				$ 396,000
Recorded investment in Troubled Debt Restructurings		$ 19,966,000		19,966,000		$ 19,081,000
TDR loans accruing interest as of period end		19,900,000		19,900,000		19,000,000
TDR loans acquired		618,000		618,000		137,000
Number of loans transferred to loans held-for-sale | loans	1
Charge-off on loan transferred to held-for-sale		4,000	$ 845,000	13,000	$ 853,000
Gain (loss) on transfer of loans to held-for-sale	$ 0
Commercial loans | Commercial and industrial
Accounts, Notes, Loans and Financing Receivable [Line Items]
Recorded investment in Troubled Debt Restructurings		3,676,000		3,676,000		4,698,000
Charge-off on loan transferred to held-for-sale		0	1,000	9,000	3,000
Commercial real estate loans | Commercial real estate, owner-occupied
Accounts, Notes, Loans and Financing Receivable [Line Items]
Recorded investment in Troubled Debt Restructurings		6,992,000		6,992,000		6,993,000
Charge-off on loan transferred to held-for-sale		0	0	0	0
Commercial real estate loans | Commercial real estate, investor
Accounts, Notes, Loans and Financing Receivable [Line Items]
Recorded investment in Troubled Debt Restructurings		2,317,000		2,317,000		514,000
Charge-off on loan transferred to held-for-sale		0	0	0	0
Commercial real estate loans | Construction
Accounts, Notes, Loans and Financing Receivable [Line Items]
Recorded investment in Troubled Debt Restructurings		3,238,000		3,238,000		3,238,000
Loans reclassified to held-for-sale	1,500,000
Charge-off on loan transferred to held-for-sale	$ 839,000	0	839,000	0	839,000
Residential loans | Home equity
Accounts, Notes, Loans and Financing Receivable [Line Items]
Recorded investment in Troubled Debt Restructurings		677,000		677,000		460,000
Charge-off on loan transferred to held-for-sale		0	0	0	0
Residential loans | Other residential
Accounts, Notes, Loans and Financing Receivable [Line Items]
Recorded investment in Troubled Debt Restructurings		1,987,000		1,987,000		2,010,000
Charge-off on loan transferred to held-for-sale		0	0	0	0
Consumer loans | Installment and other consumer
Accounts, Notes, Loans and Financing Receivable [Line Items]
Recorded investment in Troubled Debt Restructurings		1,079,000		1,079,000		$ 1,168,000
Charge-off on loan transferred to held-for-sale		$ 4,000	$ 5,000	$ 4,000	$ 11,000

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Loans and Allowance for Loan Losses - Troubled Debt Restructuring Modifications (Details) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2016 USD ($) contract	Jun. 30, 2015 USD ($) contract	Jun. 30, 2016 USD ($) loans contract	Jun. 30, 2015 USD ($) loans contract
Financing Receivable, Modifications [Line Items]
Number of Contracts Modified | contract	2	5	3	5
Pre-Modification Outstanding Recorded Investment	$ 368	$ 1,004	$ 1,917	$ 1,004
Post-Modification Outstanding Recorded Investment	503	1,103	2,048	1,103
Post-Modification Outstanding Recorded Investment at period end	$ 503	$ 1,103	$ 2,030	$ 1,103
Number of modified TDR loans that defaulted | loans			0	0
Commercial loans | Commercial and industrial
Financing Receivable, Modifications [Line Items]
Number of Contracts Modified | contract		4		4
Pre-Modification Outstanding Recorded Investment		$ 782		$ 782
Post-Modification Outstanding Recorded Investment		882		882
Post-Modification Outstanding Recorded Investment at period end		$ 882		$ 882
Commercial real estate loans | Commercial real estate, investor
Financing Receivable, Modifications [Line Items]
Number of Contracts Modified | contract	1	1	2	1
Pre-Modification Outstanding Recorded Investment	$ 281	$ 222	$ 1,830	$ 222
Post-Modification Outstanding Recorded Investment	281	221	1,826	221
Post-Modification Outstanding Recorded Investment at period end	$ 281	$ 221	$ 1,808	$ 221
Residential loans | Home equity
Financing Receivable, Modifications [Line Items]
Number of Contracts Modified | contract	1		1
Pre-Modification Outstanding Recorded Investment	$ 87		$ 87
Post-Modification Outstanding Recorded Investment	222		222
Post-Modification Outstanding Recorded Investment at period end	$ 222		$ 222

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Loans and Allowance for Loan Losses - Impaired Loans and Related Allowance (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2016	Jun. 30, 2015	Jun. 30, 2016	Jun. 30, 2015	Dec. 31, 2015
Recorded investment in impaired loans:
With no specific allowance recorded	$ 7,569		$ 7,569		$ 12,928
With a specific allowance recorded	15,050		15,050		8,260
Total recorded investment in impaired loans	22,619		22,619		21,188
Unpaid principal balance of impaired loans:
Total unpaid principal balance of impaired loans	24,628		24,628		23,409
Specific valuation	1,421		1,421		1,169
Average recorded investment in impaired loans during the period	22,470	$ 24,207	22,111	$ 24,687
Interest income recognized on impaired loans during the period ended	205	195	420	385
Charged-off portion of impaired loans	2,000		2,000		2,100
Outstanding commitments to extend credit on impaired loans	944		944		1,300
Commercial loans | Commercial and industrial
Recorded investment in impaired loans:
With no specific allowance recorded	1,059		1,059		2,198
With a specific allowance recorded	2,637		2,637		2,522
Total recorded investment in impaired loans	3,696		3,696		4,720
Unpaid principal balance of impaired loans:
Total unpaid principal balance of impaired loans	3,697		3,697		4,763
Specific valuation	671		671		912
Average recorded investment in impaired loans during the period	3,771	4,173	4,027	3,946
Interest income recognized on impaired loans during the period ended	44	56	98	118
Commercial real estate loans | Commercial real estate, owner-occupied
Recorded investment in impaired loans:
With no specific allowance recorded	0		0		4,111
With a specific allowance recorded	7,169		7,169		2,882
Total recorded investment in impaired loans	7,169		7,169		6,993
Unpaid principal balance of impaired loans:
Total unpaid principal balance of impaired loans	7,169		7,169		6,993
Specific valuation	98		98		70
Average recorded investment in impaired loans during the period	7,081	8,412	7,037	8,427
Interest income recognized on impaired loans during the period ended	66	78	133	144
Commercial real estate loans | Commercial real estate, investor
Recorded investment in impaired loans:
With no specific allowance recorded	1,676		1,676		2,416
With a specific allowance recorded	2,317		2,317		0
Total recorded investment in impaired loans	3,993		3,993		2,416
Unpaid principal balance of impaired loans:
Total unpaid principal balance of impaired loans	5,984		5,984		4,408
Specific valuation	472		472		0
Average recorded investment in impaired loans during the period	3,917	2,947	3,523	2,931
Interest income recognized on impaired loans during the period ended	22	8	38	14
Commercial real estate loans | Construction
Recorded investment in impaired loans:
With no specific allowance recorded	2,688		2,688		2,687
With a specific allowance recorded	550		550		551
Total recorded investment in impaired loans	3,238		3,238		3,238
Unpaid principal balance of impaired loans:
Total unpaid principal balance of impaired loans	3,238		3,238		3,424
Specific valuation	5		5		1
Average recorded investment in impaired loans during the period	3,238	4,475	3,238	5,078
Interest income recognized on impaired loans during the period ended	32	9	70	18
Residential loans | Home equity
Recorded investment in impaired loans:
With no specific allowance recorded	789		789		171
With a specific allowance recorded	606		606		388
Total recorded investment in impaired loans	1,395		1,395		559
Unpaid principal balance of impaired loans:
Total unpaid principal balance of impaired loans	1,411		1,411		559
Specific valuation	12		12		3
Average recorded investment in impaired loans during the period	1,286	610	1,077	618
Interest income recognized on impaired loans during the period ended	6	4	11	9
Residential loans | Other residential
Recorded investment in impaired loans:
With no specific allowance recorded	1,198		1,198		1,214
With a specific allowance recorded	789		789		797
Total recorded investment in impaired loans	1,987		1,987		2,011
Unpaid principal balance of impaired loans:
Total unpaid principal balance of impaired loans	1,987		1,987		2,011
Specific valuation	64		64		67
Average recorded investment in impaired loans during the period	1,993	2,033	1,998	2,037
Interest income recognized on impaired loans during the period ended	23	23	45	46
Consumer loans | Installment and other consumer
Recorded investment in impaired loans:
With no specific allowance recorded	159		159		131
With a specific allowance recorded	982		982		1,120
Total recorded investment in impaired loans	1,141		1,141		1,251
Unpaid principal balance of impaired loans:
Total unpaid principal balance of impaired loans	1,142		1,142		1,251
Specific valuation	99		99		$ 116
Average recorded investment in impaired loans during the period	1,184	1,557	1,211	1,650
Interest income recognized on impaired loans during the period ended	$ 12	$ 17	$ 25	$ 36

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Loans and Allowance for Loan Losses - Allowance for Loan Losses (Details) - USD ($) $ in Thousands	1 Months Ended	3 Months Ended		6 Months Ended
	Jun. 30, 2015	Jun. 30, 2016	Jun. 30, 2015	Jun. 30, 2016	Jun. 30, 2015	Dec. 31, 2015
Allowance for Loan and Lease Losses [Roll Forward]
Beginning balance		$ 15,028	$ 15,156	$ 14,999	$ 15,099
Provision for loan losses		0	0	0	0
Charge-offs		(4)	(845)	(13)	(853)
Recoveries		63	43	101	108
Ending balance	$ 14,354	15,087	14,354	15,087	14,354
Ending ALLL related to loans collectively evaluated for impairment		13,666		13,666		$ 13,830
Ending ALLL related to loans individually evaluated for impairment		1,421		1,421		1,160
Ending ALLL related to purchased credit-impaired loans		15,087		15,087		14,999
Collectively evaluated for impairment		1,422,917		1,422,917		1,426,497
Individually evaluated for impairment		22,619		22,619		21,050
Total loans		$ 1,448,399		$ 1,448,399		$ 1,451,228
Ratio of allowance for loan losses to total loans		1.04%		1.04%		1.03%
Allowance for loan losses to non-accrual loans		554.00%		554.00%		688.00%
PCI loans impaired post-acquisition						$ 138
Purchase credit-impaired
Allowance for Loan and Lease Losses [Roll Forward]
Ending ALLL related to purchased credit-impaired loans		$ 0		$ 0		9
Purchase credit-impaired		2,863		2,863		3,681
Commercial loans | Commercial and industrial
Allowance for Loan and Lease Losses [Roll Forward]
Beginning balance		2,799	2,620	3,023	2,837
Provision for loan losses		(192)	(117)	(440)	(392)
Charge-offs		0	(1)	(9)	(3)
Recoveries		30	38	63	98
Ending balance	2,540	2,637	2,540	2,637	2,540
Ending ALLL related to loans collectively evaluated for impairment		1,966		1,966		2,111
Ending ALLL related to loans individually evaluated for impairment		671		671		904
Ending ALLL related to purchased credit-impaired loans		2,637		2,637		3,023
Collectively evaluated for impairment		211,522		211,522		214,695
Individually evaluated for impairment		3,696		3,696		4,582
Total loans		$ 215,257		$ 215,257		$ 219,452
Ratio of allowance for loan losses to total loans		1.23%		1.23%		1.38%
Allowance for loan losses to non-accrual loans		12557.00%		12557.00%		14395.00%
Commercial loans | Commercial and industrial | Purchase credit-impaired
Allowance for Loan and Lease Losses [Roll Forward]
Ending ALLL related to purchased credit-impaired loans		$ 0		$ 0		$ 8
Purchase credit-impaired		39		39		175
Commercial real estate loans | Commercial real estate, owner-occupied
Allowance for Loan and Lease Losses [Roll Forward]
Beginning balance		1,619	2,094	2,249	1,924
Provision for loan losses		12	(42)	(618)	128
Charge-offs		0	0	0	0
Recoveries		0	0	0	0
Ending balance	2,052	1,631	2,052	1,631	2,052
Ending ALLL related to loans collectively evaluated for impairment		1,533		1,533		2,179
Ending ALLL related to loans individually evaluated for impairment		98		98		70
Ending ALLL related to purchased credit-impaired loans		1,631		1,631		2,249
Collectively evaluated for impairment		233,896		233,896		233,605
Individually evaluated for impairment		7,169		7,169		6,993
Total loans		$ 242,103		$ 242,103		$ 242,309
Ratio of allowance for loan losses to total loans		0.67%		0.67%		0.93%
Allowance for loan losses to non-accrual loans		927.00%		927.00%
Commercial real estate loans | Commercial real estate, owner-occupied | Purchase credit-impaired
Allowance for Loan and Lease Losses [Roll Forward]
Ending ALLL related to purchased credit-impaired loans		$ 0		$ 0		$ 0
Purchase credit-impaired		1,038		1,038		1,711
Commercial real estate loans | Commercial real estate, investor
Allowance for Loan and Lease Losses [Roll Forward]
Beginning balance		6,571	6,292	6,178	6,672
Provision for loan losses		19	(351)	407	(734)
Charge-offs		0	0	0	0
Recoveries		5	3	10	6
Ending balance	5,944	6,595	5,944	6,595	5,944
Ending ALLL related to loans collectively evaluated for impairment		6,123		6,123		6,178
Ending ALLL related to loans individually evaluated for impairment		472		472		0
Ending ALLL related to purchased credit-impaired loans		6,595		6,595		6,178
Collectively evaluated for impairment		697,750		697,750		711,737
Individually evaluated for impairment		3,993		3,993		2,416
Total loans		$ 703,458		$ 703,458		$ 715,879
Ratio of allowance for loan losses to total loans		0.94%		0.94%		0.86%
Allowance for loan losses to non-accrual loans		393.00%		393.00%		325.00%
Commercial real estate loans | Commercial real estate, investor | Purchase credit-impaired
Allowance for Loan and Lease Losses [Roll Forward]
Ending ALLL related to purchased credit-impaired loans		$ 0		$ 0		$ 0
Purchase credit-impaired		1,715		1,715		1,726
Commercial real estate loans | Construction
Allowance for Loan and Lease Losses [Roll Forward]
Beginning balance		822	778	724	839
Provision for loan losses		9	596	107	535
Charge-offs	(839)	0	(839)	0	(839)
Recoveries		0	0	0	0
Ending balance	535	831	535	831	535
Ending ALLL related to loans collectively evaluated for impairment		826		826		723
Ending ALLL related to loans individually evaluated for impairment		5		5		0
Ending ALLL related to purchased credit-impaired loans		831		831		724
Collectively evaluated for impairment		73,786		73,786		62,256
Individually evaluated for impairment		3,238		3,238		3,238
Total loans		$ 77,024		$ 77,024		$ 65,495
Ratio of allowance for loan losses to total loans		1.08%		1.08%		1.11%
Allowance for loan losses to non-accrual loans						72400.00%
Commercial real estate loans | Construction | Purchase credit-impaired
Allowance for Loan and Lease Losses [Roll Forward]
Ending ALLL related to purchased credit-impaired loans		$ 0		$ 0		$ 1
Purchase credit-impaired		0		0		1
Residential loans | Home equity
Allowance for Loan and Lease Losses [Roll Forward]
Beginning balance		1,044	923	910	859
Provision for loan losses		31	(81)	165	(18)
Charge-offs		0	0	0	0
Recoveries		1	1	1	2
Ending balance	843	1,076	843	1,076	843
Ending ALLL related to loans collectively evaluated for impairment		1,064		1,064		907
Ending ALLL related to loans individually evaluated for impairment		12		12		3
Ending ALLL related to purchased credit-impaired loans		1,076		1,076		910
Collectively evaluated for impairment		110,774		110,774		111,673
Individually evaluated for impairment		1,395		1,395		559
Total loans		$ 112,240		$ 112,240		$ 112,300
Ratio of allowance for loan losses to total loans		0.96%		0.96%		0.81%
Allowance for loan losses to non-accrual loans		136.00%		136.00%		532.00%
Residential loans | Home equity | Purchase credit-impaired
Allowance for Loan and Lease Losses [Roll Forward]
Ending ALLL related to purchased credit-impaired loans		$ 0		$ 0		$ 0
Purchase credit-impaired		71		71		68
Residential loans | Other residential
Allowance for Loan and Lease Losses [Roll Forward]
Beginning balance		430	430	394	433
Provision for loan losses		(4)	5	32	2
Charge-offs		0	0	0	0
Recoveries		0	0	0	0
Ending balance	435	426	435	426	435
Ending ALLL related to loans collectively evaluated for impairment		362		362		327
Ending ALLL related to loans individually evaluated for impairment		64		64		67
Ending ALLL related to purchased credit-impaired loans		426		426		394
Collectively evaluated for impairment		71,774		71,774		71,143
Individually evaluated for impairment		1,987		1,987		2,011
Total loans		$ 73,761		$ 73,761		$ 73,154
Ratio of allowance for loan losses to total loans		0.58%		0.58%		0.54%
Residential loans | Other residential | Purchase credit-impaired
Allowance for Loan and Lease Losses [Roll Forward]
Ending ALLL related to purchased credit-impaired loans		$ 0		$ 0		$ 0
Purchase credit-impaired		0		0		0
Consumer loans | Installment and other consumer
Allowance for Loan and Lease Losses [Roll Forward]
Beginning balance		434	462	425	566
Provision for loan losses		(20)	(14)	(11)	(113)
Charge-offs		(4)	(5)	(4)	(11)
Recoveries		27	1	27	2
Ending balance	444	437	444	437	444
Ending ALLL related to loans collectively evaluated for impairment		338		338		309
Ending ALLL related to loans individually evaluated for impairment		99		99		116
Ending ALLL related to purchased credit-impaired loans		437		437		425
Collectively evaluated for impairment		23,415		23,415		21,388
Individually evaluated for impairment		1,141		1,141		1,251
Total loans		$ 24,556		$ 24,556		$ 22,639
Ratio of allowance for loan losses to total loans		1.78%		1.78%		1.88%
Allowance for loan losses to non-accrual loans		694.00%		694.00%		512.00%
Consumer loans | Installment and other consumer | Purchase credit-impaired
Allowance for Loan and Lease Losses [Roll Forward]
Ending ALLL related to purchased credit-impaired loans		$ 0		$ 0		$ 0
Purchase credit-impaired		0		0		0
Unallocated
Allowance for Loan and Lease Losses [Roll Forward]
Beginning balance		1,309	1,557	1,096	969
Provision for loan losses		145	4	358	592
Charge-offs		0	0	0	0
Recoveries		0	0	0	0
Ending balance	$ 1,561	1,454	$ 1,561	1,454	$ 1,561
Ending ALLL related to loans collectively evaluated for impairment		1,454		1,454		1,096
Ending ALLL related to loans individually evaluated for impairment		0		0		0
Ending ALLL related to purchased credit-impaired loans		1,454		1,454		1,096
Collectively evaluated for impairment		0		0		0
Individually evaluated for impairment		0		0		0
Total loans		0		0		0
Unallocated | Purchase credit-impaired
Allowance for Loan and Lease Losses [Roll Forward]
Ending ALLL related to purchased credit-impaired loans		0		0		0
Purchase credit-impaired		$ 0		$ 0		$ 0

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Loans and Allowance for Loan Losses - Purchased Credit-Impaired Loans (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2016	Jun. 30, 2015	Jun. 30, 2016	Jun. 30, 2015	Dec. 31, 2015
PCI Loans, Carrying Value [Abstract]
Unpaid principal balance	$ 3,375		$ 3,375		$ 4,977
Carrying value	2,863		2,863		3,681
Accretable Yield [Roll Forward]
Balance at beginning of period	1,742	$ 3,831	2,618	$ 4,027
Removals	0	0	(778)	(77)
Accretion	(87)	(120)	(185)	(239)
Reclassifications from nonaccretable difference	0	0	0	0
Balance at end of period	1,655	$ 3,711	1,655	$ 3,711
Commercial loans | Commercial and industrial
PCI Loans, Carrying Value [Abstract]
Unpaid principal balance	50		50		237
Carrying value	39		39		175
Commercial real estate loans
PCI Loans, Carrying Value [Abstract]
Unpaid principal balance	3,104		3,104		4,329
Carrying value	2,753		2,753		3,437
Commercial real estate loans | Construction
PCI Loans, Carrying Value [Abstract]
Unpaid principal balance	0		0		187
Carrying value	0		0		1
Residential loans | Home equity
PCI Loans, Carrying Value [Abstract]
Unpaid principal balance	221		221		224
Carrying value	$ 71		$ 71		$ 68

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Loans and Allowance for Loan Losses - Pledged Loans (Details) - USD ($) $ in Millions	Jun. 30, 2016	Dec. 31, 2015
Financial Instruments Owned and Pledged as Collateral [Line Items]
Residential loans pledged for FRB borrowings	$ 861.9	$ 833.8
Other residential
Financial Instruments Owned and Pledged as Collateral [Line Items]
Pledged residential loan portfolio to secure borrowing with FRB	$ 48.4	$ 45.2

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Borrowings - Lines of Credit (Details) - Line of credit - USD ($)	Jun. 15, 2016	Feb. 05, 2008	Jun. 30, 2016	Dec. 31, 2015
Federal Funds Purchased
Line of Credit Facility [Line Items]
Amount of borrowings outstanding			$ 0	$ 0
Federal Home Loan Bank Borrowings
Line of Credit Facility [Line Items]
Lines of credit			485,900,000	470,600,000
Term of FHLB borrowing agreements		10 years
Principal amount of borrowing agreements with FHLB		$ 15,000,000
Fixed interest rate of FHLB borrowing agreement		2.07%
Amount of debt repaid early	$ 15,000,000
Prepayment fee	$ 312,000
Remaining available line of credit from FHLB			485,900,000	403,400,000
Federal Home Loan Bank Overnight Borrowings
Line of Credit Facility [Line Items]
Amount of borrowings outstanding			0	52,000,000
Federal Reserve Line of Credit
Line of Credit Facility [Line Items]
Lines of credit			40,100,000	37,800,000
Amount of borrowings outstanding			0	0
Unsecured Debt | Federal Funds Purchased
Line of Credit Facility [Line Items]
Lines of credit			$ 92,000,000	$ 92,000,000

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Borrowings - Subordinated Debt (Details) $ in Thousands	6 Months Ended
	Jun. 30, 2016 USD ($) debenture	Jun. 30, 2015 USD ($)
Debt Instrument [Line Items]
Accretion of discount on subordinated debentures	$ 98	$ 106
Amount guaranteed, on subordinated basis, distributions and other payments on trust preferred securities	$ 8,000
Subordinated debenture
Debt Instrument [Line Items]
Number of subordinated debentures acquired | debenture	2
Subordinated debentures	$ 4,950
Contractual value of subordinated debt	8,248
Accretion of discount on subordinated debentures	$ 98	$ 106
Debenture distribution deferral period (up to number of years)	5 years
Subordinated debenture | NorCal Community Bancorp Trust I
Debt Instrument [Line Items]
Contractual value of subordinated debt	$ 4,124
Effective interest rate	3.68%
Basis spread on subordinated debentures	3.05%
Subordinated debenture | NorCal Community Bancorp Trust II
Debt Instrument [Line Items]
Contractual value of subordinated debt	$ 4,124
Effective interest rate	2.05%
Basis spread on subordinated debentures	1.40%

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Stockholders' Equity (Details) $ / shares in Units, $ in Thousands		1 Months Ended		3 Months Ended		6 Months Ended		12 Months Ended
	Jul. 22, 2016 $ / shares	Sep. 30, 2015 shares	Nov. 30, 2011 investor	Jun. 30, 2016 USD ($) $ / shares shares	Jun. 30, 2015 USD ($) $ / shares	Jun. 30, 2016 USD ($) $ / shares shares	Jun. 30, 2015 USD ($) $ / shares	Dec. 31, 2015 USD ($)
Class of Stock [Line Items]
Number of institutional investors that purchased warrant | investor			2
Cash dividends to common stockholders | $				$ 1,526	$ 1,313	$ 3,044	$ 2,620	$ 5,390
Cash dividends paid per common share (usd per share)				$ 0.25	$ 0.22	$ 0.50	$ 0.44
Performance-based stock awards
Class of Stock [Line Items]
Vesting period of performance-based stock awards						3 years
Performance-based stock awards | Minimum
Class of Stock [Line Items]
Vesting percentage of performance-based awards						0.00%
Performance-based stock awards | Maximum
Class of Stock [Line Items]
Vesting percentage of performance-based awards						200.00%
Common stock
Class of Stock [Line Items]
Number of common stock shares authorized to be purchased by warrant (in shares) | shares				157,711		157,711
Exercise price of warrant to purchase common stock (usd per share)				$ 26.63		$ 26.63
Net issuance of shares of common stock from cashless exercise | shares		70,591
U.S. Treasury Capital Purchase Program (TCPP) | Common stock
Class of Stock [Line Items]
Number of common stock shares authorized to be purchased by warrant (in shares) | shares				154,242		154,242
Exercise price of warrant to purchase common stock (usd per share)				$ 27.23		$ 27.23
Subsequent event
Class of Stock [Line Items]
Dividends declared per common share (usd per share)	$ 0.25

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Commitments and Contingencies (Details) - USD ($) $ in Thousands	6 Months Ended
	Jun. 30, 2016	Jun. 30, 2015	Mar. 31, 2016	Dec. 31, 2015
Operating Leases
2016	$ 1,773
2017	3,576
2018	3,594
2019	3,567
2020	3,328
Thereafter	5,895
Total	21,733
Minimum payments due on minimum sublease rentals under non-cancelable subleases	200
Rent expense	1,900	$ 2,200
Visa Inc.
Litigation Matters
Balance of escrow account for legal settlements			$ 1,000,000
Visa Inc. | Pending due to reversal
Litigation Matters
Class settlement agreement amount, reversed by appellate court	4,000,000
Loan commitments and standby letters of credit, unused
Loss Contingencies [Line Items]
Loan commitments and standby letters of credit, off-balance sheet	418,200			$ 376,600
Loan commitments and standby letters of credit, unused | Interest payable and other liabilities
Loss Contingencies [Line Items]
Allowance for off balance sheet commitments	899			$ 749
Commercial lines of credit
Loss Contingencies [Line Items]
Loan commitments and standby letters of credit, off-balance sheet	213,300
Revolving home equity lines
Loss Contingencies [Line Items]
Loan commitments and standby letters of credit, off-balance sheet	143,700
Undisbursed construction loans
Loss Contingencies [Line Items]
Loan commitments and standby letters of credit, off-balance sheet	46,800
Standby letters of credit
Loss Contingencies [Line Items]
Loan commitments and standby letters of credit, off-balance sheet	3,600
Personal and other lines of credit
Loss Contingencies [Line Items]
Loan commitments and standby letters of credit, off-balance sheet	$ 10,800

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Derivative Financial Instruments and Hedging Activities - Narrative (Details) $ in Thousands	1 Months Ended	3 Months Ended		6 Months Ended
	Apr. 30, 2016 derivative	Jun. 30, 2016 USD ($) derivative	Jun. 30, 2015 USD ($)	Jun. 30, 2016 USD ($) derivative	Jun. 30, 2015 USD ($)	Dec. 31, 2015 USD ($)
Derivatives, Fair Value [Line Items]
Number of derivative instruments terminated | derivative	1
Fair value hedge
Derivatives, Fair Value [Line Items]
Net hedge ineffectiveness, derivatives		$ 39	$ 70	$ 201	$ 58
Fair value hedge | Interest income
Derivatives, Fair Value [Line Items]
(Decrease) increase in value of designated interest rate swaps recognized in interest income		(190)	966	(1,066)	420
Payment on interest rate swaps recorded in interest income		(138)	(233)	(313)	(469)
Increase (decrease) in value of hedged loans recognized in interest income		240	(1,023)	1,290	(451)
Decrease in value of yield maintenance agreement recognized against interest income		(11)	(13)	(23)	(27)
Net loss on derivatives recognized against interest income		(99)	$ (303)	(112)	$ (527)
Designated as hedging instrument | Fair value hedge
Derivatives, Fair Value [Line Items]
Accrued interest on swaps		$ 16		$ 16		$ 28
Interest rate swap | Designated as hedging instrument | Fair value hedge
Derivatives, Fair Value [Line Items]
Number of derivative instruments | derivative		6		6
Interest rate swap | Designated as hedging instrument | Fair value hedge | Other assets
Derivatives, Fair Value [Line Items]
Interest rate contracts notional amount, Asset derivatives		$ 0		$ 0		4,407
Interest rate swap | Designated as hedging instrument | Fair value hedge | Other liabilities
Derivatives, Fair Value [Line Items]
Interest rate contracts notional amount, Liability derivatives		22,527		22,527		22,187
Interest rate contract | Designated as hedging instrument | Fair value hedge | Other assets
Derivatives, Fair Value [Line Items]
Interest rate contracts fair value, Asset derivatives		0		0		3
Interest rate contract | Designated as hedging instrument | Fair value hedge | Other liabilities
Derivatives, Fair Value [Line Items]
Interest rate contracts fair value, Liability derivatives		$ 2,721		$ 2,721		$ 1,658

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Derivative Financial Instruments and Hedging Activities - Offsetting of Assets (Details) - USD ($)	Jun. 30, 2016	Dec. 31, 2015
Offsetting Assets [Line Items]
Gross Amounts of Recognized Assets	$ 0
Gross Amounts Offset in the Statements of Condition	0
Net Amounts of Assets Presented in the Statements of Condition	0
Gross Amounts Not Offset in the Statements of Condition, Financial Instruments	0
Gross Amounts Not Offset in the Statements of Condition, Cash Collateral Received	0
Net Amount	0
Interest rate swap | Other assets
Offsetting Assets [Line Items]
Accrued interest on derivative asset interest rate swaps	$ 0	$ 1,000
Counterparty A
Offsetting Assets [Line Items]
Gross Amounts of Recognized Assets		3,000
Gross Amounts Offset in the Statements of Condition		0
Net Amounts of Assets Presented in the Statements of Condition		3,000
Gross Amounts Not Offset in the Statements of Condition, Financial Instruments		(3,000)
Gross Amounts Not Offset in the Statements of Condition, Cash Collateral Received		0
Net Amount		$ 0

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Derivative Financial Instruments and Hedging Activities - Offsetting of Liabilities (Details) - USD ($) $ in Thousands	Jun. 30, 2016	Dec. 31, 2015
Offsetting Liabilities [Line Items]
Gross Amounts of Recognized Liabilities		$ 1,658
Gross Amounts Offset in the Statements of Condition		0
Net Amounts of Liabilities Presented in the Statements of Condition		1,658
Gross Amounts Not Offset in the Statements of Condition, Financial Instruments		(3)
Gross Amounts Not Offset in the Statements of Condition, Cash Collateral Pledged		(1,655)
Net Amount		0
Interest rate swap | Other liabilities
Offsetting Liabilities [Line Items]
Accrued interest on derivative liability interest swaps	$ 16	27
Counterparty A
Offsetting Liabilities [Line Items]
Gross Amounts of Recognized Liabilities	2,721	1,390
Gross Amounts Offset in the Statements of Condition	0	0
Net Amounts of Liabilities Presented in the Statements of Condition	2,721	1,390
Gross Amounts Not Offset in the Statements of Condition, Financial Instruments	0	(3)
Gross Amounts Not Offset in the Statements of Condition, Cash Collateral Pledged	(2,390)	(1,387)
Net Amount	$ 331	0
Counterparty B
Offsetting Liabilities [Line Items]
Gross Amounts of Recognized Liabilities		268
Gross Amounts Offset in the Statements of Condition		0
Net Amounts of Liabilities Presented in the Statements of Condition		268
Gross Amounts Not Offset in the Statements of Condition, Financial Instruments		0
Gross Amounts Not Offset in the Statements of Condition, Cash Collateral Pledged		(268)
Net Amount		$ 0