10-Q

 UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

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

For the quarterly period ended March 31, 2013

Commission file number 001-34226

1st Century Bancshares, Inc.

(Exact name of registrant as specified in its charter)

Delaware	26-1169687
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

1875 Century Park East, Suite 1400

Los Angeles, California  90067

(Address of principal executive offices)

(Zip Code)

(310) 270-9500

(Registrant’s telephone number, including area code)

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

Indicate by check mark whether the registrant has submitted electronically and posted on its 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.  (Check one):

Large accelerated filer o	Accelerated filer o
Non-accelerated filer o	Smaller reporting company x
(Do not check if a smaller reporting company)

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

9,271,523 shares of common stock of the registrant were outstanding as of May 3, 2013.

1st Century Bancshares, Inc.

Quarterly Report on Form 10-Q

March 31, 2013

Table of Contents

		Page
PART I. FINANCIAL INFORMATION
Item 1.	Financial Statements
	Consolidated Balance Sheets — March 31, 2013 (unaudited) and December 31, 2012	4
	Unaudited Consolidated Statements of Operations and Comprehensive Income — Three months ended March 31, 2013 and 2012	5
	Unaudited Consolidated Statements of Changes in Stockholders’ Equity — Three months ended March 31, 2013 and 2012	6
	Unaudited Consolidated Statements of Cash Flows — Three months ended March 31, 2013 and 2012	7
	Notes to Unaudited Consolidated Financial Statements	8
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	29
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	40
Item 4.	Controls and Procedures	40
PART II. OTHER INFORMATION
Item 1.	Legal Proceedings	40
Item 1A.	Risk Factors	40
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	40
Item 3.	Defaults Upon Senior Securities	41
Item 4.	Mine Safety Disclosures	41
Item 5.	Other Information	41
Item 6.	Exhibits	41
Signatures		42

2

Safe Harbor Statement under the Private Securities Litigation Reform Act of 1995

This Quarterly Report on Form 10-Q may contain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended.  You can find many (but not all) of these statements by looking for words such as “approximates,” “believes,” “expects,” “anticipates,” “estimates,” “intends,” “plans,” “would,” “may” and other similar expressions in this Quarterly Report on Form 10-Q.  With respect to any such forward-looking statements, the Company claims the protection of the safe harbor provided for in the Private Securities Litigation Reform Act of 1995.  The Company cautions investors that any forward-looking statements presented in this Quarterly Report on Form 10-Q, or those that the Company may make orally or in writing from time to time, are based on the beliefs of, on assumptions made by, and information available to, management at the time such statements are first made.  Actual outcomes will be affected by known and unknown risks, trends, uncertainties and factors that are beyond the Company’s control or ability to predict.  Although the Company believes that management’s beliefs and assumptions are reasonable, they are not guarantees of future performance and some will inevitably prove to be incorrect.  As a result, the Company’s actual future results can be expected to differ from management’s expectations, and those differences may be material and adverse to the Company’s business, results of operations and financial condition.  Accordingly, investors should use caution in placing any reliance on forward-looking statements to anticipate future results or trends.

Some of the risks and uncertainties that may cause the Company’s actual results, performance or achievements to differ materially from those expressed include the following: the impact of changes in interest rates; political instability; changes in the monetary policies of the U.S. Government; a renewed decline in economic conditions; deterioration in the value of California real estate, both residential and commercial; an increase in the level of non-performing assets and charge-offs; further increased competition among financial institutions; the Company’s ability to continue to attract interest bearing deposits and quality loan customers; further government regulation and the implementation and costs associated with the same; internal and external fraud and cyber-security threats including the loss of bank or customer funds, loss of system functionality or the theft or loss of data; management’s ability to successfully manage the Company’s operations; and the other risks set forth in the Company’s reports filed with the U.S. Securities and Exchange Commission. For further discussion of these and other factors, see “Item 1A. Risk Factors” in the Company’s 2012 Annual Report on Form 10-K.

Any forward-looking statements in this Quarterly Report on Form 10-Q and all subsequent written and oral forward-looking statements attributable to the Company or any person acting on behalf of the Company are expressly qualified in their entirety by the cautionary statements contained or referred to in this section.  The Company does not undertake any obligation to release publicly any revisions to forward-looking statements to reflect events or circumstances after the date such forward looking statements are made, and hereby specifically disclaims any intention to do so, unless required by law.

3

PART I. FINANCIAL INFORMATION

Item 1 — Financial Statements

1st Century Bancshares, Inc.

Consolidated Balance Sheets

(in thousands, except share and per share data)

	March 31, 2013 (unaudited)			December 31, 2012
ASSETS
Cash and due from banks	$	8,422		$	6,967
Interest earning deposits at other financial institutions		19,086			43,588
Total cash and cash equivalents		27,508			50,555
Investment securities — Available for Sale (“AFS”), at estimated fair value		168,034			181,225
Loans, net of allowance for loan losses of $6,619 and $6,015 at March 31, 2013 and December 31, 2012, respectively		291,144			260,656
Premises and equipment, net		917			1,020
Federal Home Loan Bank (“FHLB”) and Federal Reserve Bank (“FRB”) stock		3,778			3,778
Accrued interest and other assets		2,034			1,939
Total Assets	$	493,415		$	499,173
LIABILITIES AND STOCKHOLDERS’ EQUITY
Non-interest bearing demand deposits	$	195,540		$	196,026
Interest bearing deposits:
Interest bearing checking (“NOW”)		22,930			23,233
Money market deposits and savings		151,196			152,094
Certificates of deposit less than $100		1,227			1,341
Certificates of deposit of $100 or greater		43,636			43,987
Total deposits		414,529			416,681
Other borrowings		25,000			29,475
Accrued interest and other liabilities		3,246			3,844
Total Liabilities		442,775			450,000
Commitments and contingencies (Note 9)
Stockholders’ Equity:
Preferred stock, $0.01 par value — 10,000,000 shares authorized, none issued and outstanding at March 31, 2013 and December 31, 2012, respectively		—			—
Common stock, $0.01 par value — 50,000,000 shares authorized, 10,961,560 and 10,965,560 issued at March 31, 2013 and December 31, 2012, respectively		110			110
Additional paid-in capital		65,226			65,038
Accumulated deficit		(9,457	)		(10,899	)
Accumulated other comprehensive income		2,273			2,436
Treasury stock at cost — 1,828,537 and 1,828,432 shares at March 31, 2013 and December 31, 2012, respectively		(7,512	)		(7,512	)
Total Stockholders’ Equity		50,640			49,173
Total Liabilities and Stockholders’ Equity	$	493,415		$	499,173

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

4

1st Century Bancshares, Inc.

Unaudited Consolidated Statements of Operations and Comprehensive Income

(in thousands, except per share data)

	Three Months Ended March 31,
	2013			2012
Interest and fee income on:
Loans	$	3,258		$	2,734
Investments		779			754
Other		51			53
Total interest and fee income		4,088			3,541
Interest expense on:
Deposits		130			168
Borrowings		74			74
Total interest expense		204			242
Net interest income		3,884			3,299
Provision for (reduction of) loan losses		(500	)		—
Net interest income after provision for (reduction of) loan losses		4,384			3,299
Non-interest income		359			347
Non-interest expenses:
Compensation and benefits		1,982			1,707
Occupancy		357			298
Professional fees		125			189
Technology		179			150
Marketing		63			53
FDIC assessments		88			71
Other operating expenses		469			570
Total non-interest expenses		3,263			3,038
Income before income taxes		1,480			608
Income tax provision		38			16
Net income		1,442			592
Other Comprehensive Income:
Net change in unrealized (losses) gains on AFS investments, net of tax		(163	)		93
Comprehensive Income	$	1,279		$	685
Basic earnings per share	$	0.17		$	0.07
Diluted earnings per share	$	0.16		$	0.07

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

5

1st Century Bancshares, Inc.

Unaudited Consolidated Statements of Changes in Stockholders’ Equity

(in thousands, except share data)

	Common Stock											Accumulated Other			Treasury Stock						Total
	Issued Shares			Amount		Paid-in  Capital			Accumulated Deficit			Comprehensive Income			Number of Shares			Amount			Stockholders’ Equity
Balance at December 31, 2011		10,841,033		$	108	$	64,488		$	(13,841	)	$	1,567			(1,769,248	)	$	(7,271	)	$	45,051
Compensation expense associated with restricted stock awards, net of estimated forfeitures		—			—		136			—			—			—			—			136
Common stock repurchased		—			—		—			—			—			(43,847	)		(166	)		(166	)
Net income		—			—		—			592			—			—			—			592
Other comprehensive income		—			—		—			—			93			—			—			93
Balance at March 31, 2012		10,841,033		$	108	$	64,624		$	(13,249	)	$	1,660			(1,813,095	)	$	(7,437	)	$	45,706
Balance at December 31, 2012		10,965,560		$	110	$	65,038		$	(10,899	)	$	2,436			(1,828,432	)	$	(7,512	)	$	49,173
Forfeiture of restricted stock		(4,000	)		—		(11	)		—			—			—			—			(11	)
Compensation expense associated with restricted stock awards, net of estimated forfeitures		—			—		199			—			—			—			—			199
Common stock repurchased		—			—		—			—			—			(105	)		—			—
Net income		—			—		—			1,442			—			—			—			1,442
Other comprehensive income		—			—		—			—			(163	)		—			—			(163	)
Balance at March 31, 2013		10,961,560		$	110	$	65,226		$	(9,457	)	$	2,273			(1,828,537	)	$	(7,512	)	$	50,640

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

6

1st Century Bancshares, Inc.

Unaudited Consolidated Statements of Cash Flows

(in thousands)

	Three Months Ended March 31,
	2013			2012
Cash flows from operating activities:
Net income	$	1,442		$	592
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization of premises and equipment		130			107
Amortization of premiums on investment securities, net		514			299
Provision for (reduction of) loan losses		(500	)		—
Amortization (accretion) of deferred loan fees, net of costs		12			(10	)
Non-cash stock compensation, net of forfeitures		188			136
(Increase) decrease in accrued interest and other assets		(95	)		78
Decrease in accrued interest and other liabilities		(485	)		(336	)
Net cash provided by operating activities		1,206			866
Cash flows from investing activities:
Activities in AFS investment securities:
Purchases		—			(8,303	)
Maturities and principal reductions		12,401			8,018
(Increase) decrease in loans, net		(30,000	)		3,009
Purchase of premises and equipment		(27	)		(13	)
Redemption of FRB stock and FHLB stock		—			81
Net cash (used in) provided by investing activities		(17,626	)		2,792
Cash flows from financing activities:
Net (decrease) increase in deposits		(2,152	)		27,739
Repayment of other borrowings		(4,475	)		—
Purchase of treasury stock		—			(166	)
Net cash (used in) provided by financing activities		(6,627	)		27,573
(Decrease) increase in cash and cash equivalents		(23,047	)		31,231
Cash and cash equivalents, beginning of period		50,555			41,926
Cash and cash equivalents, end of period	$	27,508		$	73,157
Supplemental cash flow information:
Cash paid during the period for:
Interest	$	182		$	233
Income taxes	$	52		$	70

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

7

1st Century Bancshares, Inc.

Notes to Unaudited Consolidated Financial Statements

(1)          Summary of Significant Accounting Policies

Nature of Operations

1st Century Bancshares, Inc., a Delaware corporation (“Bancshares”) is a bank holding company with one subsidiary, 1st Century Bank, National Association (the “Bank”).  The Bank commenced operations on March 1, 2004 in the State of California operating under the laws of a National Association (“N.A.”) regulated by the Office of the Comptroller of the Currency (the “OCC”). The Bank is a commercial bank that focuses on closely held and family owned businesses and their employees, professional service firms, real estate professionals and investors, the legal, accounting and medical professions, and small and medium-sized businesses and individuals principally in Los Angeles County. The Bank provides a wide range of banking services to meet the financial needs of the local residential community, with an orientation primarily directed toward owners and employees of the Bank’s business client base. The Bank is subject to both the regulations of and periodic examinations by the OCC, which is the Bank’s federal regulatory agency. Bancshares and the Bank are collectively referred to herein as “the Company.”

Basis of Presentation

The accompanying unaudited consolidated financial statements have been prepared in accordance with the instructions to Form 10-Q and, therefore, do not include all footnotes as would be necessary for a fair presentation of financial position, results of operations and comprehensive income, changes in stockholders’ equity and cash flows in conformity with accounting principles generally accepted in the United States of America (“GAAP”). However, these interim unaudited consolidated financial statements reflect all adjustments (consisting solely of normal recurring adjustments and accruals) which, in the opinion of management, are necessary for a fair presentation of financial position, results of operations and comprehensive income, changes in stockholders’ equity and cash flows for the interim periods presented. These unaudited consolidated financial statements have been prepared on a basis consistent with, and should be read in conjunction with, the audited consolidated financial statements as of and for the year ended December 31, 2012, and the notes thereto, included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2012 filed with the SEC, under the Securities and Exchange Act of 1934, (the “Exchange Act”).  The unaudited consolidated financial statements include the accounts of Bancshares and the Bank.  All intercompany accounts and transactions have been eliminated.

The results of operations for the three months ended March 31, 2013 are not necessarily indicative of the results of operations that may be expected for any other interim period or for the year ending December 31, 2013.

The Company’s accounting and reporting policies conform to GAAP and to general practices within the banking industry. A summary of the significant accounting and reporting policies consistently applied in the preparation of the accompanying unaudited consolidated financial statements follows:

Use of Estimates

Management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period.  Significant assumptions and estimates used by management in preparation of the consolidated financial statements include assumptions and assessments made in connection with calculating the allowance for loan losses and determining the realizability of the Company’s deferred tax assets.  It is at least reasonably possible that certain assumptions and estimates could prove to be incorrect and cause actual results to differ materially and adversely from the amounts reported in the consolidated financial statements included herewith.

Cash and Cash Equivalents

Cash and cash equivalents include cash and due from banks, interest earning deposits at other financial institutions with original maturities less than 90 days and all highly liquid investments with original maturities of less than 90 days.

Cash Flows

Cash and cash equivalents include cash, deposits with other financial institutions with maturities fewer than 90 days, and federal funds sold.  Net cash flows are reported for loan and deposit transactions, interest bearing deposits in other financial institutions and short-term borrowings.

8

Investment Securities

Investmentsecurities are classified in three categories. Debt securities that management has a positive intent and ability to hold to maturity are classified as “Held to Maturity” or “HTM” and are recorded at amortized cost. Debt and equity securities bought and held principally for the purpose of selling in the near term are classified as “Trading” securities and are measured at fair value, with unrealized gains and losses included in earnings. Debt and equity securities not classified as “Held to Maturity” or “Trading” with readily determinable fair values are classified as “Available for Sale” or “AFS” and are recorded at fair value, with unrealized gains and losses excluded from earnings and reported in other comprehensive income. The Company uses estimates from third parties in arriving at fair value determinations which are derived in accordance with fair value measurement standards.

Purchase premiums and discounts are recognized in interest income using the interest method over the terms of the securities. Declines in the fair value of investment securities below their cost that are deemed to be other-than-temporary are reflected in earnings as realized losses to the extent the impairment is related to credit losses. The amount of the impairment related to other factors is recognized in other comprehensive income provided that management does not have the intent to sell the securities and it is more likely than not that management will not have to sell the security before recovery of its cost basis.  In estimating other-than-temporary impairment losses, management considers (1) the length of time and the extent to which the fair value has been less than cost, (2) the financial condition and near-term prospects of the issuer, and (3) the intent and ability of the Company to retain its investment in the issuer for a period of time sufficient to allow for any anticipated recovery in fair value. Gains and losses on the sale of securities are recorded on the trade date and are determined using the specific identification method.

Federal Reserve Bank Stock and Federal Home Loan Bank Stock

The Bank is a member of the Federal Reserve System (“Fed” or “FRB”).  FRB stock is carried at cost and is considered a nonmarketable equity security.  Cash dividends from the FRB are reported as interest income on an accrual basis.

The Bank is a member and stockholder of the capital stock of the Federal Home Loan Bank of San Francisco (“FHLB of San Francisco” or “FHLB”).  Members are required to own a certain amount of stock based on the level of borrowings and other factors, and may invest in additional amounts.  FHLB of San Francisco stock is carried at cost and is considered a nonmarketable equity security.  Both cash and stock dividends are reported as interest income.

Loans

Loans, net, are stated at the unpaid principal balances less the allowance for loan losses and unamortized deferred fees and costs. Loan origination fees, net of related direct costs, are deferred and accreted to interest income as an adjustment to yield over the respective maturities of the loans using the effective interest method.

Interest on loans is accrued as earned on a daily basis, except where reasonable doubt exists as to the collection of interest and principal, in which case the accrual of interest is discontinued and the loan is placed on non-accrual status.  Loans are placed on non-accrual at the time principal or interest is 90 days delinquent unless well secured and in the process of collection. Interest on non-accrual loans is accounted for on a cash-basis or cost-recovery method, until qualifying for return to accrual status. In order for a loan to return to accrual status, all principal and interest amounts owed must be brought current and future payments must be reasonably assured.

A loan is charged-off at any time the loan is determined to be uncollectible.  Collateral dependent loans, which generally include commercial real estate loans, residential loans, and construction and land loans, are typically charged down to their net realizable value when a loan is impaired or on non-accrual status.  All other loans are typically charged-off when, based upon current available facts and circumstances, it’s determined that either: (1) a loan is uncollectible, (2) repayment is determined to be protracted beyond a reasonable time frame, or (3) the loan is classified as a loss determined by either the Bank’s internal review process or by external examiners.

Loans are considered impaired when, based upon current information and events, it is probable that the Company will be unable to collect all principal and interest amounts due according to the original contractual terms of the loan agreement on a timely basis. The Company evaluates impairment on a loan-by-loan basis. Once a loan is determined to be impaired, the impairment is measured based on the present value of the expected future cash flows discounted at the loan’s effective interest rate or by using the loan’s most recent market value or the fair value of the collateral if the loan is collateral dependent.  Loans that experience insignificant payment delays or payment shortfalls are generally not considered to be impaired.

When the measurement of an impaired loan is less than the recorded amount of the loan, a valuation allowance is established by recording a charge to the provision for loan losses. Subsequent increases or decreases in the valuation allowance for impaired loans are recorded by adjusting the existing valuation allowance for the impaired loan with a corresponding charge or credit to the provision for loan losses.  The Company’s policy for recognizing interest income on impaired loans is the same as that for non-accrual loans.

9

Troubled Debt Restructurings

In situations where, for economic or legal reasons related to a borrower’s financial difficulties, management may grant a concession for other than an insignificant period of time to the borrower that would not otherwise be considered, the related loan is classified as a troubled debt restructuring (“TDR”).  Management strives to identify borrowers in financial difficulty early and work with them to modify their loans to more affordable terms before their loan reaches nonaccrual status.  Concessions may include interest rate reductions or below market interest rates, principal forgiveness, restructuring amortization schedules and other actions intended to minimize potential losses.

Allowance for Loan Losses

The allowance for loan losses is established through a provision for loan losses charged to operations and represents an estimate of credit losses inherent in the Company’s loan portfolio that have been incurred as of the balance sheet date. Loan losses are charged against the allowance when management believes that principal is uncollectible. Subsequent repayments or recoveries, if any, are credited to the allowance. Management periodically assesses the adequacy of the allowance for loan losses by reference to many quantitative and qualitative factors that may be weighted differently at various times depending on prevailing conditions.  The provisions reflect management’s evaluation of the adequacy of the allowance based, in part, upon the historical loss experience of the loan portfolio, as well as estimates from historical peer group loan loss data and the loss experience of other financial institutions, augmented by management judgment.  During this process, loans are separated into the following portfolio segments: commercial loans, commercial real estate, residential, land and construction, and consumer and other loans. The relative significance of risk considerations vary by portfolio segment.  For commercial loans, commercial real estate loans and land and construction, the primary risk consideration is a borrower’s ability to generate sufficient cash flows to repay their loan.  Secondary considerations include the creditworthiness of guarantors and the valuation of collateral.  In addition to the creditworthiness of a borrower, the type and location of real estate collateral is an important risk factor for commercial real estate and land and construction loans.  The primary risk consideration for residential loans and consumer loans are a borrower’s personal cash flow and liquidity, as well as collateral value.

Loss ratios for all portfolio segments are evaluated on a quarterly basis.  Loss ratios associated with historical loss experience are determined based on a rolling migration analysis of each portfolio segment within the portfolio.  This migration analysis estimates loss factors based on the performance of each portfolio segment over a four and a half year time period.  These loss ratios are then adjusted, if determined necessary, based on other factors including, but not limited to, historical peer group loan loss data and the loss experience of other financial institutions.  Management carefully monitors changing economic conditions, the concentrations of loan categories, values of collateral, the financial condition of the borrowers, the history of the loan portfolio, and historical peer group loan loss data to determine the adequacy of the allowance for loan losses.  As a part of this process, management typically focuses on loan-to-value (“LTV”) percentages to assess the adequacy of loss ratios of collateral dependent loans within each portfolio segment discussed above, trends within each portfolio segment, as well as general economic and real estate market conditions where the collateral and borrower are located.  For loans that are not collateral dependent, which generally consist of commercial and consumer and other loans, management typically focuses on general business conditions where the borrower operates, trends within the portfolio, and other external factors to evaluate the severity of loss factors.  The allowance is based on estimates and actual losses may vary from the estimates.

In addition, regulatory agencies, as a part of their examination process, periodically review the Bank’s allowance for loan losses, and may require the Bank to make additions to the allowance based on their judgment about information available to them at the time of their examinations.  No assurance can be given that adverse future economic conditions will not lead to increased delinquent loans, and increases in the provision for loan losses and/or charge-offs. Management believes that the allowance as of March 31, 2013 and December 31, 2012 was adequate to absorb probable incurred credit losses inherent in the loan portfolio.

Other Real Estate Owned

OREO represents real estate acquired through or in lieu of foreclosure.  OREO is held for sale and is initially recorded at fair value less estimated costs of disposition at the date of foreclosure, establishing a new cost basis. Subsequent to foreclosure, valuations are periodically performed by management and the assets are carried at the lower of cost or estimated fair value less costs of disposition.  OREO is included in accrued interest and other assets within the Consolidated Balance Sheets and the net operating results, if any, from OREO are recognized as non-interest expense within the unaudited Consolidated Statements of Operations and Comprehensive Income.

Furniture, Fixtures and Equipment, net

Leasehold improvements and furniture, fixtures and equipment are carried at cost, less depreciation and amortization. Furniture, fixtures and equipment are depreciated using the straight-line method over the estimated useful life of the asset (three to five years). Leasehold improvements are depreciated using the straight-line method over the terms of the related leases or the estimated lives of the improvements, whichever is shorter.

10

Advertising Costs

Advertising costs are expensed as incurred.

Income Taxes

The Company files consolidated federal and combined state income tax returns. Income tax expense or benefit is the total of the current year income tax payable or refundable and the change in the deferred tax assets and liabilities (excluding deferred tax assets and liabilities related to components of other comprehensive income). Deferred tax assets and liabilities are the expected future tax amounts for the temporary differences between carrying amounts and tax basis of assets and liabilities, computed using enacted tax rates.

Deferred income tax assets and liabilities are determined using the liability (or balance sheet) method. Under this method, the net deferred tax asset or liability is determined based on the tax effects of the temporary differences between the book and tax bases of the various balance sheet assets and liabilities and gives current recognition to changes in the rates and laws.  A valuation allowance, if needed, reduces deferred tax assets to the amount expected to be realized. The Company records a valuation allowance if it believes, based on all available evidence, that it is “more likely than not” that the future tax assets will not be realized. This assessment requires management to evaluate the Company’s ability to generate sufficient future taxable income or use eligible tax carrybacks, if any, to determine the need for a valuation allowance.

During the year ended December 31, 2009, the Company established a full valuation allowance against the deferred tax assets due to the uncertainty regarding its realizability.  At March 31, 2013 and December 31, 2012, management reassessed the need for this valuation allowance and concluded that a full valuation allowance remained appropriate.  Management reached this conclusion as a result of the Company’s cumulative losses since inception, and the anticipated near term economic climate in which the Company will operate.  Management will continue to evaluate the potential realizability of the deferred tax assets and will continue to maintain a valuation allowance to the extent it is determined that it is more likely than not that these assets will not be realized. At March 31, 2013 and December 31, 2012, the Company maintained a deferred tax liability of $1.6 million and $1.7 million, respectively, in connection with net unrealized gains on investment securities, which is included in Accrued Interest and Other Liabilities within the accompanying Consolidated Balance Sheets.  The Company did not utilize this deferred tax liability to reduce its tax valuation allowance due to the fact that management does not currently intend to dispose of these investments and realize the associated gains.

At March 31, 2013 and December 31, 2012, the Company did not have any tax benefits disallowed under accounting standards for uncertainties in income taxes.  A tax position is recognized as a benefit only if it is “more likely than not” that the tax position would be sustained in a tax examination, with a tax examination being presumed to occur. The amount recognized is the largest amount of tax benefit that is greater than 50% likely of being realized on examination. For tax positions not meeting the “more likely than not” test, no tax benefit is recorded.  If applicable, the Company has elected to record interest accrued and penalties related to unrecognized tax benefits in tax expense.

Comprehensive Income

Accounting principles generally require that recognized revenue, expenses, gains and losses be included in net income. However, certain changes in assets and liabilities, such as unrealized gains and losses on Available for Sale securities, are reported as a separate component of the stockholders’ equity section of the Consolidated Balance Sheets and, along with net income, are components of comprehensive income.

Earnings per Share

The Company reports both basic and diluted earnings per share. Basic earnings per share is determined by dividing net income by the average number of shares of common stock outstanding, while diluted earnings per share is determined by dividing net income by the average number of shares of common stock outstanding adjusted for the dilutive effect of common stock equivalents. Potential dilutive common shares related to outstanding stock options and restricted stock are determined using the treasury stock method.  For the three months ended March 31, 2013 and 2012, there were 370,073 and 1,179,373, respectively stock options that were excluded from the diluted earnings per share calculation due to their antidilutive impact.  For the three months ended March 31, 2013 and 2012, there were no restricted shares that were excluded from the diluted earnings per share calculation due to their antidilutive impact.

11

	Three Months Ended March 31,
(dollars in thousands)	2013		2012
Net income	$	1,442	$	592
Average number of common shares outstanding		8,573,508		8,505,031
Effect of dilution of restricted stock		328,659		216,273
Effect of dilution of stock options		18,774		—
Average number of common shares outstanding used to calculate diluted earnings per common share		8,920,941		8,721,304

Fair Value of Financial Instruments

The Company is required to make certain disclosures about its use of fair value measurements in the preparation of its financial statements.  These standards establish a three-level hierarchy for disclosure of assets and liabilities recorded at fair value.  The classification of assets and liabilities within the hierarchy is based on whether the inputs to the valuation methodology used for measurement are observable or unobservable. Observable inputs reflect market-derived or market-based information obtained from independent sources, while unobservable inputs reflect management’s estimates about market data.

Level 1	Valuation is based upon quoted prices for identical instruments traded in active markets. Level 1 instruments include securities traded on active exchange markets, such as the New York Stock Exchange, as well as U.S. Treasury securities that are traded by dealers or brokers in active over-the-counter markets.
Level 2	Valuation is based upon quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active, and model-based valuation techniques for which all significant assumptions are observable in the market. Level 2 instruments include securities traded in less active dealer or broker markets.

Level 3 Valuation is generated from model-based techniques that use at least one significant assumption not observable in the market. These unobservable assumptions reflect estimates of assumptions that market participants would use in pricing the asset or liability. Valuation techniques include use of option pricing models, discounted cash flow models and similar techniques.

Stock-Based Compensation

The Company has granted restricted stock awards to directors, employees, and a vendor under the 1st Century Bancshares 2005 Amended and Restated Equity Incentive Plan (the “Equity Incentive Plan”). The restricted stock awards are considered fixed awards as the number of shares and fair value is known at the date of grant and the fair value at the grant date is amortized over the vesting and/or service period.

Recent Accounting Pronouncements

In May 2011, the Financial Accounting Standards Board (“FASB”) issued ASU 2011-04, Fair Value Measurement (“Topic 820”) – Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRSs(“ASU 11-04”).  This ASU amends Topic 820, "Fair Value Measurements and Disclosures," to converge the fair value measurement guidance in U.S. generally accepted accounting principles and International Financial Reporting Standards.  ASU 11-04 clarifies the application of existing fair value measurement requirements, changes certain principles in Topic 820 and requires additional fair value disclosures. ASU 11-04 is effective for annual periods beginning after December 15, 2011.  The adoption of this ASU did not have a material impact on the Company’s financial position, results of operations, or cash flows.

In June 2011, the FASB issued ASU 2011-05, Comprehensive Income (“Topic 220”) – Presentation of Comprehensive Income (“ASU 11-05”).  This ASU amends Topic 220, "Comprehensive Income," to require that all nonowner changes in stockholders' equity be presented in either a single continuous statement of comprehensive income or in two separate but consecutive statements. Additionally, ASU 11-05 requires entities to present, on the face of the financial statements, reclassification adjustments for items that are reclassified from other comprehensive income to net income in the statement or statements where the components of net income and the components of other comprehensive income are presented. The option to present components of other comprehensive income as part of the statement of changes in stockholders' equity was eliminated. ASU 11-05 is effective for annual periods beginning after December 15, 2011.  The adoption of this ASU did not have a material impact on the Company’s financial position, results of operations, or cash flows.

12

In December 2011, the FASB issued ASU 2011-11, Balance Sheet (“Topic 210”)– Disclosures about Offsetting Assets and Liabilities (“ASU 11-11”).  This ASU amends Topic 210, “Balance Sheet,” to require an entity to disclose both gross and net information about financial instruments, such as sales and repurchase agreements and reverse sale and repurchase agreements and securities borrowing/lending arrangements, and derivative instruments that are eligible for offset in the statement of financial position and/or subject to a master netting arrangement or similar agreement.  ASU 11-11 is effective for annual and interim periods beginning on January 1, 2013.  The adoption of this ASU did not have a significant impact on the Company’s financial position, results of operations, or cash flows.

In February 2013, the FASB issued ASU 2013-02, Comprehensive Income (“Topic 220”) – Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income (“ASU 13-02”).  This ASU requires an entity to provide information about the amounts reclassified out of accumulated other comprehensive income by component. In addition, an entity is required to present, either on the face of the statement where net income is presented or in the notes, significant amounts reclassified out of accumulated other comprehensive income by the respective line items of net income but only if the amount reclassified is required under GAAP to be reclassified to net income in its entirety in the same reporting period. For other amounts that are not required under GAAP to be reclassified in their entirety to net income, an entity is required to cross-reference to other disclosures required under GAAP that provide additional detail about those amounts.  ASU 13-02 is effective prospectively for annual and interim periods beginning after December 15, 2012.  The adoption of this ASU did not have a material impact on the Company’s financial position, results of operations, or cash flows.

(2)          Investments

The following is a summary of the investments categorized as Available for Sale at March 31, 2013 and December 31, 2012:

(in thousands)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
At March 31, 2013:
Investments — Available for Sale
U.S. Gov’t Treasuries	$	2,123	$	93	$	—		$	2,216
Corporate Notes		33,983		763		—			34,746
Residential Mortgage-Backed Securities		128,065		3,028		(21	)		131,072
Total	$	164,171	$	3,884	$	(21	)	$	168,034
At December 31, 2012:
Investments — Available for Sale
U.S. Gov’t Treasuries	$	2,136	$	71	$	—		$	2,207
Corporate Notes		34,534		741		—			35,275
Residential Mortgage-Backed Securities		140,416		3,345		(18	)		143,743
Total	$	177,086	$	4,157	$	(18	)	$	181,225

The Company did not have any investment securities categorized as “Held to Maturity” or “Trading” at March 31, 2013 or December 31, 2012.  At March 31, 2013 and December 31, 2012, there were no holdings of securities of any one issuer other than the U.S. government or its agencies, in an amount greater than 10% of shareholders’ equity.

Additionally, at March 31, 2013 and December 31, 2012, the carrying amount of securities pledged to the State of California Treasurer’s Office to secure their deposits was $43.2 million and $47.7 million, respectively.  Deposits from the State of California were $34.0 million at both March 31, 2013 and December 31, 2012.

The following table summarizes the fair value of AFS securities and the weighted average yield of investment securities by contractual maturity at March 31, 2013.  Residential mortgage-backed securities are included in maturity categories based on their stated maturity date.  Expected maturities may differ from contractual maturities because issuers may have the right to call or prepay obligations.  The weighted average life of these securities was 2.64 years at March 31, 2013.

(dollars in thousands)

Available for Sale	1 Year or Less		Weighted Average Yield			After 1 Through 5 Years		Weighted Average Yield			After 5 Through 10 Years		Weighted Average Yield			After 10 Years		Weighted Average Yield			Total		Weighted Average Yield
U.S. Government Treasuries	$	—		—	%	$	2,216		0.13	%	$	—		—	%	$	—		—	%	$	2,216		0.13	%
Corporate Notes		14,149		2.41			20,597		2.06			—		—			—		—			34,746		2.21
Residential Mortgage-Backed Securities		23		4.58			888		4.67			75,449		1.83			54,712		1.86			131,072		1.86
Total	$	14,172		2.42	%	$	23,701		1.98	%	$	75,449		1.83	%	$	54,712		1.86	%	$	168,034		1.95	%

13

A total of six and four securities had unrealized losses at March 31, 2013 and December 31, 2012, respectively.  Information pertaining to securities with gross unrealized losses aggregated by investment category and length of time that individual securities have been in a continuous loss position, follows:

	Less than Twelve Months					Twelve Months or More
(in thousands)	Gross Unrealized Losses			Fair Value		Gross Unrealized Losses		Fair Value
At March 31, 2013:
Investments-Available for Sale
Residential Mortgage-Backed Securities	$	(21	)	$	10,846	$	—	$	—
At December 31, 2012:
Investments-Available for Sale
Residential Mortgage-Backed Securities	$	(18	)	$	7,584	$	—	$	—

The Company’s assessment that it has the ability to continue to hold impaired investment securities along with its evaluation of their future performance provide the basis for it to conclude that its impaired securities are not other-than-temporarily impaired.  In assessing whether it is more likely than not that the Company will be required to sell any impaired security before its anticipated recovery, which may be at their maturity, it considers the significance of each investment, the amount of impairment, as well as the Company’s liquidity position and the impact on the Company’s capital position.  As a result of its analyses, the Company determined at March 31, 2013 and December 31, 2012 that the unrealized losses on its securities portfolio on which impairments had not been recognized are temporary.

(3)           Loans, Allowance for Loan Losses, and Non-Performing Assets

Loans

As of March 31, 2013 and December 31, 2012, total loans outstanding totaled $297.8 million and $266.7 million, respectively.  The categories of loans listed below are grouped in accordance with the primary purpose of the loans, but in the aggregate 88.1% and 84.5% of all loans are secured by real estate at March 31, 2013 and December 31, 2012, respectively.

	March 31, 2013						December 31, 2012
(dollars in thousands)	Amount Outstanding			Percent of Total			Amount Outstanding			Percent of Total
Commercial (1)	$	59,772			20.1	%	$	58,769			22.0	%
Commercial real estate		125,939			42.3	%		110,031			41.3	%
Residential		62,192			20.9	%		53,162			19.9	%
Land and construction		29,209			9.8	%		19,080			7.2	%
Consumer and other (2)		20,700			6.9	%		25,584			9.6	%
Loans, gross		297,812			100.0	%		266,626			100.0	%
Net (unearned fee income) deferred  costs		(49	)					45
Less — allowance for loan losses		(6,619	)					(6,015	)
Loans, net	$	291,144					$	260,656

(1) Unsecured commercial loan balances were $9.7 million and $10.0 million at March 31, 2013 and December 31, 2012, respectively.

(2) Unsecured consumer and other loan balances were $1.8 million and $901,000 at March 31, 2013 and December 31, 2012, respectively.

As of March 31, 2013 and December 31, 2012, substantially all of the Company’s loan customers were located in Southern California.

14

Allowance for Loan Losses and Recorded Investment in Loans

The following is a summary of activities for the allowance for loan losses and recorded investment in loans as of and for the three months ended March 31, 2013 and 2012:

(in thousands)	Commercial			Commercial Real Estate		Residential			Land and Construction			Consumer and Other			Total
Three Months Ended March 31, 2013:
Allowance for loan losses:
Beginning balance	$	2,277		$	2,450	$	508		$	411		$	369		$	6,015
Provision for (reduction of) loan losses		(1,700	)		750		190			330			(70	)		(500	)
Charge-offs		—			—		—			—			—			—
Recoveries		1,054			—		—			—			50			1,104
Ending balance	$	1,631		$	3,200	$	698		$	741		$	349		$	6,619
As of March 31, 2013:
Ending balance: individually evaluated for impairment	$	—		$	—	$	—		$	—		$	—		$	—
Ending balance: collectively evaluated for impairment		1,631			3,200		698			741			349			6,619
Total	$	1,631		$	3,200	$	698		$	741		$	349		$	6,619
Loans:
Ending balance: individually evaluated for impairment	$	843		$	—	$	—		$	—		$	345		$	1,188
Ending balance: collectively evaluated for impairment		58,929			125,939		62,192			29,209			20,355			296,624
Total	$	59,772		$	125,939	$	62,192		$	29,209		$	20,700		$	297,812
Three Months Ended March 31, 2012:
Allowance for loan losses:
Beginning balance	$	2,584		$	1,252	$	583		$	516		$	349		$	5,284
Provision for loan losses		(300	)		350		(35	)		—			(15	)		—
Charge-offs		(3	)		—		—			(5	)		—			(8	)
Recoveries		9			3		—			—			—			12
Ending balance	$	2,290		$	1,605	$	548		$	511		$	334		$	5,288
As of March 31, 2012:
Ending balance: individually evaluated for impairment	$	700		$	—	$	—		$	—		$	—		$	700
Ending balance: collectively evaluated for impairment		1,590			1,605		548			511			334			4,588
Total	$	2,290		$	1,605	$	548		$	511		$	334		$	5,288
Loans:
Ending balance: individually evaluated for impairment	$	2,229		$	3,724	$	—		$	1,325		$	345		$	7,623
Ending balance: collectively evaluated for impairment		62,503			68,812		52,796			18,402			19,787			222,300
Total	$	64,732		$	72,536	$	52,796		$	19,727		$	20,132		$	229,923

The following is a summary of the allowance for loan losses and recorded investment in loans as of December 31, 2012:

(in thousands)	Commercial		Commercial Real Estate		Residential		Land and Construction		Consumer and Other		Total
Allowance for loan losses:
Ending balance: individually evaluated for impairment	$	500	$	—	$	—	$	—	$	—	$	500
Ending balance: collectively evaluated for impairment		1,777		2,450		508		411		369		5,515
Total	$	2,277	$	2,450	$	508	$	411	$	369	$	6,015
Loans:
Ending balance: individually evaluated for impairment	$	1,799	$	—	$	—	$	—	$	345	$	2,144
Ending balance: collectively evaluated for impairment		56,970		110,031		53,162		19,080		25,239		264,482
Total	$	58,769	$	110,031	$	53,162	$	19,080	$	25,584	$	266,626

There were no loans acquired with deteriorated credit quality as of March 31, 2013 and December 31, 2012.

15

In addition to the allowance for loan losses, the Company also estimates probable losses related to unfunded lending commitments.  Unfunded lending commitments are subject to individual reviews and are analyzed and segregated by product type. These classifications, in conjunction with an analysis of historical loss experience, current economic conditions, performance trends within specific portfolio segments and any other pertinent information, result in the estimation of the reserve for unfunded lending commitments.  Provision for credit losses related to unfunded lending commitments is reported in other operating expenses in the unaudited Consolidated Statements of Operations and Comprehensive Income.  The allowance held for unfunded lending commitments is reported in accrued interest and other liabilities within the accompanying Consolidated Balance Sheets, and not as part of the allowance for loan losses in the above tables.  As of March 31, 2013 and December 31, 2012, the allowance for unfunded lending commitments was $203,000 and is primarily related to $79.2 million and $74.2 million in commitments to extend credit to customers and $2.1 million and $1.9 million in standby/commercial letters of credit at March 31, 2013 and December 31, 2012, respectively.

Non-Performing Assets

The following table presents an aging analysis of the recorded investment of past due loans as of March 31, 2013 and December 31, 2012.  Payment activity is reviewed by management on a monthly basis to determine the performance of each loan.  Loans are considered to be non-performing when a loan is greater than 90 days delinquent.  Loans that are 90 days or more past due may still accrue interest if they are well-secured and in the process of collection.  There were no additions to non-performing loans during the three months ended March 31, 2013 and 2012.  Non-performing loans represented 0.3% and 0.7% of total loans at March 31, 2013 and December 31, 2012, respectively.  There were no accruing loans past due 90 days or more at March 31, 2013.  At December 31, 2012, there was one accruing residential loan totaling $2.3 million that was past due 90 days or more. This loan continued to accrue interest because it was well secured and in the process of collection.

(in thousands)	30-59 Days Past Due		60-89 Days Past Due		> 90 Days Past Due		Total Past Due		Current		Total
As of March 31, 2013:
Commercial	$	198	$	—	$	572	$	770	$	59,002	$	59,772
Commercial real estate		—		—		—		—		125,939		125,939
Residential		—		—		—		—		62,192		62,192
Land and construction		—		—		—		—		29,209		29,209
Consumer and other		—		50		345		395		20,305		20,700
Totals	$	198	$	50	$	917	$	1,165	$	296,647	$	297,812
As of December 31, 2012:
Commercial	$	599	$	577	$	812	$	1,988	$	56,781	$	58,769
Commercial real estate		4,828		—		2,300		7,128		102,903		110,031
Residential		—		—		—		—		53,162		53,162
Land and construction		—		—		—		—		19,080		19,080
Consumer and other		—		—		345		345		25,239		25,584
Totals	$	5,427	$	577	$	3,457	$	9,461	$	257,165	$	266,626

The following table sets forth non-accrual loans and other real estate owned at March 31, 2013 and December 31, 2012:

(dollars in thousands)	March 31, 2013			December 31, 2012
Non-accrual loans:
Commercial	$	572		$	1,509
Consumer and other		345			345
Total non-accrual loans		917			1,854
OREO		90			90
Total non-performing assets	$	1,007		$	1,944
Non-performing assets to gross loans and OREO		0.34	%		0.73	%
Non-performing assets to total assets		0.20	%		0.39	%

16

Credit Quality Indicators

The following table represents the credit exposure by internally assigned grades at March 31, 2013 and December 31, 2012.  This grading analysis estimates the capability of the borrower to repay the contractual obligations of the loan agreements in accordance with the loan terms.  The Company’s internal credit risk grading system is based on management’s experiences with similarly graded loans.  Credit risk grades are reassessed each quarter based on any recent developments potentially impacting the creditworthiness of the borrower, as well as other external statistics and factors, which may affect the risk characteristics of the respective loan.

The Company’s internally assigned grades are as follows:

Pass – Strong credit with no existing or known potential weaknesses deserving of management's close attention.

Special Mention – Potential weaknesses that deserve management’s close attention.  Borrower and guarantor’s capacity to meet all financial obligations is marginally adequate or deteriorating.

Substandard – Inadequately protected by the paying capacity of the Borrower and/or collateral pledged. The borrower or guarantor is unwilling or unable to meet loan terms or loan covenants for the foreseeable future.

Doubtful – All the weakness inherent in one classified as Substandard with the added characteristic that those weaknesses in place make the collection or liquidation in full, on the basis of current conditions, highly questionable and improbable.

Loss – Considered uncollectible or no longer a bankable asset. This classification does not mean that the asset has absolutely no recoverable value. In fact, a certain salvage value is inherent in these loans. Nevertheless, it is not practical or desirable to defer writing off a portion or whole of a perceived asset even though partial recovery may be collected in the future.

(in thousands)	Commercial		Commercial Real Estate		Residential		Land and Construction		Consumer and Other
As of March 31, 2013:
Grade:
Pass	$	52,010	$	125,316	$	62,192	$	29,209	$	20,305
Special Mention		6,471		—		—		—		—
Substandard		1,291		623		—		—		395
Total	$	59,772	$	125,939	$	62,192	$	29,209	$	20,700
As of December 31, 2012:
Grade:
Pass	$	49,717	$	109,397	$	53,162	$	19,080	$	25,190
Special Mention		6,609		—		—		—		—
Substandard		2,443		634		—		—		394
Total	$	58,769	$	110,031	$	53,162	$	19,080	$	25,584

There were no loans assigned to the Doubtful or Loss grade as of March 31, 2013 and December 31, 2012.

Impaired Loans

The following table includes the recorded investment and unpaid principal balances for impaired loans with the associated allowance amount, if applicable.  Management determined the specific allowance based on the present value of expected future cash flows, discounted at the loan’s effective interest rate, except when the remaining source of repayment for the loan is the operation or liquidation of the collateral.  In those cases, the current fair value of the collateral, less selling costs was used to determine the specific allowance recorded.  Also presented in the table below are the average recorded investments in the impaired loans and the related amount of interest recognized during the time within the period that the impaired loans were impaired. When the ultimate collectability of the total principal of an impaired loan is in doubt and the loan is on nonaccrual status, all payments are applied to principal, under the cost recovery method. When the ultimate collectability of the total principal of an impaired loan is not in doubt and the loan is on non-accrual status, contractual interest is credited to interest income when received, under the cash basis method. The average balances are calculated based on the month-end balances of the loans of the period reported.

17

(in thousands)	Recorded Investment		Unpaid Principal Balance		Related Allowance		Average Recorded Investment
As of and for the three months ended March 31, 2013:
With no related allowance recorded:
Commercial	$	844	$	1,120	$	—	$	931
Commercial real estate		—		—		—		—
Residential		—		—		—		—
Land and construction		—		—		—		—
Consumer and other		345		345		—		345
With an allowance recorded:
Commercial	$	—	$	—	$	—	$	271
Commercial real estate		—		—		—		—
Residential		—		—		—		—
Land and construction		—		—		—		—
Consumer and other		—		—		—		—
Totals:
Commercial	$	844	$	1,120	$	—	$	1,202
Commercial real estate	$	—	$	—	$	—	$	—
Residential	$	—	$	—	$	—	$	—
Land and construction	$	—	$	—	$	—	$	—
Consumer and other	$	345	$	345	$	—	$	345
As of and for the year ended December 31, 2012:
With no related allowance recorded:
Commercial	$	988	$	1,303	$	—	$	1,098
Commercial real estate		—		—		—		3,113
Residential		—		—		—		—
Land and construction		—		—		—		1,155
Consumer and other		345		345		—		345
With an allowance recorded:
Commercial	$	811	$	1,990	$	500	$	1,084
Commercial real estate		—		—		—		—
Residential		—		—		—		—
Land and construction		—		—		—		—
Consumer and other		—		—		—		—
Totals:
Commercial	$	1,799	$	3,293	$	500	$	2,182
Commercial real estate	$	—	$	—	$	—	$	3,113
Residential	$	—	$	—	$	—	$	—
Land and construction	$	—	$	—	$	—	$	1,155
Consumer and other	$	345	$	345	$	—	$	345

During the three months ended March 31, 2013 and 2012, the average balance of impaired loans was $1.5 million and $7.8 million, respectively.  As of March 31, 2013 and December 31, 2012, there was $917,000 and $1.9 million, respectively, of impaired loans on non-accrual status.  During the three months ended March 31, 2013 and 2012, interest income recognized on impaired loans subsequent to their classification as impaired was $3,000 and $3,000, respectively.  The Company stops accruing interest on these loans on the date they are classified as non-accrual and reverses any uncollected interest that had been previously accrued as income.  The Company may begin recognizing interest income on these loans as cash interest payments are received, if collection of principal is reasonably assured.

18

Troubled Debt Restructurings

There were no troubled debt restructurings during the three months ended March 31, 2013.  Troubled debt restructurings for the three months ended March 31, 2012 are set forth in the following table.

	For the Three Months Ended March 31, 2012
(dollars in thousands)	Number of Loans		Pre Modification Outstanding Recorded Investment			Post Modification Outstanding Recorded Investment
Troubled Debt Restructurings:
Commercial		3		$	1,103		$	1,103

The modifications in connection with the troubled debt restructurings during the three months ended March 31, 2012 were primarily related to extending the amortization period of these loans.  The impact on the Company's determination of the allowance for loan losses related to these troubled debt restructurings was not material and resulted in no charge-offs during the three months ended March 31, 2013 and 2012.  During the three months ended March 31, 2013, there was one commercial loan, with a recorded investment of $572,000 at March 31, 2013, that defaulted within twelve months of its modification date.  As of March 31, 2012, there had been no defaults on any loans that were modified as troubled debt restructurings during the preceding twelve months.  A troubled debt restructuring is considered to be in default once it becomes 60 days or more past due following a modification.

(4)           Derivative Financial Instruments

The fair value of derivative positions outstanding is included in accrued interest receivable and other assets and accrued interest payable and other liabilities in the accompanying Consolidated Balance Sheets and in the net change in each of these financial statement line items in the accompanying unaudited Consolidated Statements of Cash Flows.

Interest Rate Derivatives. The Company utilizes interest rate swaps to facilitate the needs of its customers. The Company has entered into interest rate swaps that are not designated as hedging instruments.  These derivative contracts relate to transactions in which the Company enters into an interest rate swap with a customer while at the same time entering into an offsetting interest rate swap with another financial institution.  In connection with each swap transaction, the Company agrees to pay interest to the customer on a notional amount at a variable interest rate and receive interest from the customer on a similar notional amount at a fixed interest rate.  At the same time, the Company agrees to pay another financial institution the same fixed interest rate on the same notional amount and receive the same variable interest rate on the same notional amount.  The transaction allows the Company’s customer to effectively convert a variable rate loan to a fixed rate.  Because the Company acts as an intermediary for its customer, changes in the fair value of the underlying derivative contracts for the most part offset each other and do not significantly impact the Company’s results of operations.

The notional amounts and estimated fair values of interest rate derivative contracts outstanding at March 31, 2013 are presented in the following table. There were no derivative contracts outstanding at March 31, 2012.  The Company obtains dealer quotations to value its interest rate derivative contracts.

	March 31, 2013						December 31, 2012
(in thousands)	Notional Amount			Estimated Fair Value			Notional Amount			Estimated Fair Value
Non-hedging interest rate derivatives:
Commercial loan interest rate swaps	$	2,757		$	87		$	2,800		$	107
Commercial loan interest rate swaps	$	(2,757	)	$	(87	)	$	(2,800	)	$	(107	)

The weighted-average rates paid and received for interest rate swaps outstanding at March 31, 2013 were as follows:

	Weighted-Average
	Interest Rate Paid			Interest Rate Received
Non-hedging interest rate swaps		3.40	%		4.85	%
Non-hedging interest rate swaps		4.85	%		3.40	%

Gains, Losses and Derivative Cash Flows.  For non-hedging derivative instruments, gains and losses due to changes in fair value and all cash flows are included in other non-interest income and other non-interest expense in the accompanying unaudited Consolidated Statements of Operations and Comprehensive Income.

19

As stated above, the Company enters into non-hedge related derivative positions primarily to accommodate the business needs of its customers.  Upon the origination of a derivative contract with a customer, the Company simultaneously enters into an offsetting derivative contract with a third party.  The Company recognizes immediate income based upon the difference in the bid/ask spread of the underlying transactions with its customers and the third party.  Because the Company acts only as an intermediary for its customer, subsequent changes in the fair value of the underlying derivative contracts for the most part offset each other and do not significantly impact the Company’s results of operations.

Amounts included in the unaudited Consolidated Statements of Operations and Comprehensive Income related to non-hedging interest rate derivative instruments are presented in the table below.

(in thousands)	Three Months Ended March 31, 2013
Non-hedging interest rate derivatives:
Other non-interest income	$	(20	)
Other non-interest expense	$	(20	)

(5)           Comprehensive Income

Comprehensive income, which includes net income and the net change in unrealized gains on investment securities available for sale, is presented below:

	Three Months Ended March 31,
(in thousands)	2013			2012
Net income	$	1,442		$	592
Other comprehensive income:
(Decrease) increase in net unrealized gains on investment securities available for sale, net of tax benefit (expense) of $113 and ($66) for the three months ended March 31, 2013 and 2012, respectively		(163	)		93
Comprehensive income	$	1,279		$	685

The Company did not sell any available for sale securities during the three months ended March 31, 2013 and 2012.

(6)           Premises and Equipment

Premises and equipment are stated at cost less accumulated depreciation and amortization.  Premises and equipment at March 31, 2013 and December 31, 2012 are comprised of the following:

(in thousands)	March 31, 2013			December 31, 2012
Leasehold improvements	$	973		$	973
Furniture & equipment		2,205			2,191
Software		674			661
Total		3,852			3,825
Accumulated depreciation		(2,935	)		(2,805	)
Premises and equipment, net	$	917		$	1,020

Depreciation and amortization included in occupancy expense was $130,000 and $107,000 for the three months ended March 31, 2013 and 2012, respectively.

(7)           Deposits

The following table reflects the summary of deposit categories by dollar and percentage at March 31, 2013 and December 31, 2012:

	March 31, 2013					December 31, 2012
(dollars in thousands)	Amount		% of Total			Amount		% of Total
Non-interest bearing demand deposits	$	195,540		47.2	%	$	196,026		47.0	%
Interest bearing checking		22,930		5.5	%		23,233		5.6	%
Money market deposits and savings		151,196		36.5	%		152,094		36.5	%
Certificates of deposit		44,863		10.8	%		45,328		10.9	%
Total	$	414,529		100.0	%	$	416,681		100.0	%

20

At March 31, 2013 and December 31, 2012, the Company had three certificates of deposit with the State of California Treasurer’s Office for a total of $34.0 million, which represented 8.2% and 8.2%, respectively, of total deposits.  The deposits outstanding at March 31, 2013 are scheduled to mature in the second and third quarters of 2013.  The Company intends to renew each of these deposits at maturity.  However, there can be no assurance that the State of California Treasurer’s Office will continue to maintain deposit accounts with the Company.  The Company was required to pledge $37.4 million of agency mortgage backed securities at March 31, 2013 and December 31, 2012 in connection with these certificates of deposit.

At March 31, 2013, the Company had $5.1 million of Certificate of Deposit Accounts Registry Service (“CDARS”) reciprocal deposits, which represented 1.2% of total deposits.  At December 31, 2012, the Company had $5.2 million of CDARS reciprocal deposits, which represented 1.3% of total deposits.

The aggregate amount of certificates of deposit of $100,000 or greater at March 31, 2013 and December 31, 2012 was $43.6 million and $44.0 million, respectively.  At March 31, 2013, the maturity distribution of certificates of deposit of $100,000 or greater, including deposit accounts with the State of California Treasurer’s Office and CDARS, was as follows: $42.5 million maturing in six months or less, $1.1 million maturing in six months to one year and none maturing in more than one year.

The table below sets forth the range of interest rates, amount and remaining maturities of the certificates of deposit at March 31, 2013.

(in thousands)			Six months and less		Greater than six months through one year		Greater than one year
0.00%	to	0.99%	$	40,304	$	1,499	$	—
1.00%	to	1.99%		3,000		20		40
Total			$	43,304	$	1,519	$	40

(8)           Other Borrowings

At March 31, 2013 and December 31, 2012, the Company had a borrowing/credit facility secured by a blanket lien on eligible loans at the FHLB of $126.2 million and $105.1 million, respectively. The Company had $25.0 million of long-term borrowings outstanding under this borrowing/credit facility with the FHLB at March 31, 2013 and December 31, 2012.  The Company had no overnight borrowings outstanding under this borrowing/credit facility at March 31, 2013 and December 31, 2012.

The following table summarizes the outstanding long-term borrowings under the borrowing/credit facility secured by a blanket lien on eligible loans at the FHLB at March 31, 2013 and December 31, 2012 (dollars in thousands):

Maturity Date	Interest Rate		March 31, 2013			December 31, 2012
May 23, 2013		0.63%		$	2,500	$	2,500
May 23, 2014		1.14%			2,500		2,500
December 29, 2014		0.83%			5,000		5,000
December 30, 2014		0.74%			2,500		2,500
May 26, 2015		1.65%			2,500		2,500
May 23, 2016		2.07%			2,500		2,500
December 29, 2016		1.38%			5,000		5,000
December 30, 2016		1.25%			2,500		2,500
	Total			$	25,000	$	25,000

At March 31, 2013 and December 31, 2012, the Company also had $27.0 million in Federal fund lines of credit available with other correspondent banks that could be used to disburse loan commitments and to satisfy demands for deposit withdrawals. Each of these lines of credit is subject to conditions that the Company may not be able to meet at the time when additional liquidity is needed. At December 31, 2012, there was a $4.5 million short-term overnight borrowing outstanding under these credit facilities at an interest rate of 1.09%. This borrowing was repaid on January 2, 2013.  The Company did not incur any material interest expense charges in connection with this borrowing.  There were no further borrowings under these facilities during the three months ended March 31, 2013.  As of March 31, 2013 and December 31, 2012, the Company had pledged $5.7 million and $6.2 million, respectively, of corporate notes related to these lines of credit.

21

(9)           Commitments and Contingencies

Commitments to Extend Credit

The Company is party to financial instruments with off-balance sheet risk in the normal course of business to meet the financing needs of its customers. These financial instruments include commitments to extend credit, standby/commercial letters of credit and guarantees on revolving credit card limits. These instruments involve various levels and elements of credit and interest rate risk in excess of the amount recognized in the accompanying consolidated financial statements. The contract or notional amounts of those instruments reflect the extent of involvement the Company has in particular classes of financial instruments. The Company had $79.2 million and $74.2 million in commitments to extend credit to customers and $2.1 million and $1.9 million in standby/commercial letters of credit at March 31, 2013 and December 31, 2012, respectively.  The Company also guarantees the outstanding balance on credit cards offered at the Company, but underwritten by another financial institution.  The outstanding balances on these credit cards were $47,000 and $67,000 as of March 31, 2013 and December 31, 2012, respectively.

Lease Commitments

The Company leases office premises under two operating leases that will expire in November 2013 and June 2024, respectively. Rental expense, which is included in occupancy expense and is reduced for any sublease income earned during the period, was $168,000 and $143,000 for the three months ended March 31, 2013 and 2012, respectively. Sublease income earned during the three months ended March 31, 2013 and 2012 were $19,000 and $27,000, respectively.  On April 1, 2013, the Company ended its sublease agreement.  The Company does not expect to receive any further sublease income in connection with its leased space.

The projected minimum rental payments under the term of the leases at March 31, 2013 are as follows (in thousands):

Years ending December 31,
2013 (April – December)	$	529
2014	644
2015	655
2016	675
2017	696
Thereafter	5,057
Total	$	8,256

Litigation

The Company from time to time is party to lawsuits, which arise out of the normal course of business. At March 31, 2013 and December 31, 2012, the Company did not have any litigation that management believes will have a material impact on the Consolidated Balance Sheets or unaudited Consolidated Statements of Operations and Comprehensive Income.

Restricted Stock

The following table sets forth the Company’s future restricted stock expense, net of estimated forfeitures (in thousands).

Years ending December 31,
2013 (April – December)	$	438
2014	323
2015	150
2016	52
2017	10
Total	$	973

22

(10)         Fair Value Measurements

The following tables present information about the Company’s assets and liabilities measured at fair value on a recurring and non-recurring basis as of March 31, 2013 and December 31, 2012, and indicate the fair value hierarchy of the valuation techniques utilized by the Company to determine such fair value.  The Company’s assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment, and considers factors specific to the asset or liability.

Assets and Liabilities Measured on a Recurring Basis

Assets and liabilities measured at fair value on a recurring basis are summarized below:

			Fair Value Measurements Using
(in thousands)	Fair Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
At March 31, 2013:
Investments-Available for Sale
U.S. Gov’t treasuries	$	2,216	$	2,216	$	—	$	—
Corporate Notes		34,746		—		34,746		—
Residential Mortgage-Backed Securities		131,072		—		131,072		—
Derivative Assets - Interest Rate Swaps		87		—		87		—
Derivative Liabilities - Interest Rate Swaps		87		—		87		—
At December 31, 2012:
Investments-Available for Sale
U.S. Gov’t treasuries	$	2,207	$	2,207	$	—	$	—
Corporate Notes		35,275		—		35,275		—
Residential Mortgage-Backed Securities		143,743		—		143,743		—
Derivative Assets – Interest Rate Swaps		107		—		107		—
Derivative Liabilities – Interest Rate Swaps		107		—		107		—

AFS securities— As of March 31, 2013 and December 31, 2012, the Level 2 fair value of the Company’s residential mortgage-backed securities was $131.1 million and $143.7 million, respectively.  These securities consist primarily of agency mortgage-backed securities issued by the Federal National Mortgage Association (FNMA) and the Federal Home Loan Mortgage Corporation (FHLMC).  The underlying loans for these securities are residential mortgages that were primarily originated beginning in the year of 2003 through the current period.  These loans are geographically dispersed throughout the United States.  At March 31, 2013 and December 31, 2012, the weighted average rate and weighed average life of these securities were 1.86% and 1.95%, respectively, and 2.64 years and 2.92 years, respectively.

The valuation for investment securities utilizing Level 2 inputs were primarily determined by quotes received from an independent pricing service using matrix pricing, which is a mathematical technique widely used in the industry to value securities without relying exclusively on quoted market prices for the specific securities, but rather by relying on the securities’ relationship to other benchmark quoted securities.  There were no transfers into or out of Level 1 or 2 measurements during the three months ended March 31, 2013 and 2012.

23

Assets Measured on a Non-Recurring Basis

Assets measured at fair value on a non-recurring basis are summarized below:

			Fair Value Measurements Using
(in thousands)	Fair Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
At March 31, 2013:
Impaired loans
Commercial	$	844	$	—	$	—	$	844
OREO
Land and construction		90		—		—		90
Total	$	934	$	—	$	—	$	934
At December 31, 2012:
Impaired loans
Commercial	$	889	$	—	$	—	$	889
OREO
Land and construction		90		—		—		90
Total	$	979	$	—	$	—	$	979

Impaired loans — At the time a loan is considered impaired, it is valued at the lower of cost or fair value.  The fair value of impaired loans that are collateral dependent is determined using various valuation techniques which are not readily observable in the market place, including consideration of appraised values and other pertinent real estate market data.  These appraisals may utilize a single valuation approach or a combination of approaches including comparable sales and the income approach. Adjustments are routinely made in the appraisal process by the independent appraisers to adjust for differences between the comparable sales and income data available. Such adjustments are usually significant and typically result in a Level 3 classification of the inputs for determining fair value.  Impaired loans are evaluated on a quarterly basis for additional impairment and adjusted accordingly.  The Company recorded net recoveries of $1.1 million and $4,000 on impaired loans during the three months ended March 31, 2013 and 2012, respectively.

Other real estate owned — OREO represents real estate acquired through or in lieu of foreclosure.  OREO is held for sale and is initially recorded at fair value less estimated costs of disposition at the date of foreclosure, establishing a new cost basis. Subsequent to foreclosure, valuations are periodically performed by management and the assets are carried at the lower of cost or estimated fair value less costs of disposition.  The fair value of OREO is determined using various valuation techniques which are not readily observable in the market place, including consideration of appraised values and other pertinent real estate market data.

(11)         Estimated Fair Value Information

The fair value of a financial instrument is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Fair value is best determined based upon quoted market prices. However, in many cases, there are no quoted market prices for the Company’s various financial instruments. In cases where quoted market prices are not available, fair values are based on estimates using present value or other valuation techniques. Estimated fair value amounts have been determined by using available market information and appropriate valuation methodologies. However, considerable judgment is required to interpret market data to develop the estimates of fair value. Accordingly, the estimates presented are not necessarily indicative of the amounts the Company could realize in a current market exchange.

The methods and assumptions used to estimate the fair value of each class of financial instruments for which it is practicable to estimate the value are explained below.

Cash and cash equivalents

The carrying amounts are considered to be their estimated fair values and are classified as Level 1 because of the short-term maturity of these instruments which includes Federal funds sold and interest-earning deposits at other financial institutions.

24

Investment securities

AFS investment securities are carried at fair value, which are based on quoted prices of exact or similar securities, or on inputs that are observable, either directly or indirectly. The Company obtains quoted prices through third party brokers.  Investment securities are classified as Level 1 to the extent that they are based on quoted prices for identical instrument traded in active markets.  Investment securities are classified as Level 2 for valuations based on quotes prices for similar securities or inputs that are observable, either directly or indirectly.

FRB and FHLB stock

It is not practical to determine the fair value of FRB and FHLB stock due to restrictions placed on its transferability.

Loans, net

For loans, the fair value is estimated using market quotes for similar assets or the present value of future cash flows, discounted using the current rate at which similar loans would be made to borrowers with similar credit ratings and for the same maturities and giving consideration to estimated prepayment risk and credit risk.  The fair value of loans is determined utilizing estimates resulting in a Level 3 classification.

Impaired loans are measured for impairment based on the present value of expected future cash flows discounted at the loan’s effective interest rate, except that as a practical expedient, the Company may measure impairment based on a loan’s observable market price, or the fair value of the collateral (net of estimated costs to sell) if the loan is collateral dependent.  The fair value of impaired loans is determined utilizing estimates resulting in a Level 3 classification.

Off-balance sheet credit-related instruments

The fair values of commitments, which include standby letters of credit and commercial letters of credit, are based upon fees currently charged to enter into similar agreements, taking into account the remaining terms of the agreements and the counterparties’ credit standing. The related fees are not considered material to the Company’s financial statements as a whole and the fair market value of the Company’s off-balance sheet credit-related instruments cannot be readily determined.  The fair value of these items is determined utilizing estimates resulting in a Level 3 classification.

Derivatives

The fair value of derivatives is based on valuation models using observable market data as of the measurement date and is classified as Level 2.

Deposits

For demand deposits, the carrying amount approximates fair value. The fair values of interest bearing checking, savings, and money market deposits are estimated by discounting future cash flows using the interest rates currently offered for deposits of similar products.  Because of the short-term maturity of these deposits, the carrying amounts are considered to be their estimated fair values and are classified as Level 1.

The fair values of the certificates of deposit are estimated by discounting future cash flows based on the rates currently offered for certificates of deposit with similar interest rates and remaining maturities.  The fair value of certificates of deposit is determined utilizing estimates resulting in a Level 2 classification.

Other borrowings

The fair values of long term FHLB advances are estimated based on the rates currently offered by the FHLB for advances with similar interest rates and remaining maturities.  The fair value of other borrowings is determined utilizing estimates resulting in a Level 2 classification.

Accrued interest

The estimated fair value for both accrued interest receivable and accrued interest payable are considered to be equivalent to the carrying amounts, resulting in a Level 1 classification.

25

The estimated fair value and carrying amounts of the financial instruments at March 31, 2013 and December 31, 2012 are as follows:

			Fair Value Measurements Using:
(dollars in thousands)	Carrying Amount		Level 1		Level 2		Level 3		Total
As of March 31, 2013
Assets
Cash and cash equivalents	$	27,508	$	27,508	$	—	$	—	$	27,508
Investment securities		168,034		2,216		165,818		—		168,034
FRB and FHLB stock		3,778		—		—		—		N/A
Loans, net		291,144		—		—		292,658		292,658
Non-hedging interest rate swaps		87		—		87		—		87
Accrued interest receivable		1,411		1,411		—		—		1,411
Liabilities
Non-interest bearing deposits	$	195,540	$	195,540	$	—	$	—	$	195,540
Interest bearing deposits		218,989		174,126		44,863		—		218,989
Other borrowings		25,000		—		25,380		—		25,380
Non-hedging interest rate swaps		87		—		87		—		87
Accrued interest payable		179		179		—		—		179
As of December 31, 2012
Assets
Cash and cash equivalents	$	50,555	$	50,555	$	—	$	—	$	50,555
Investment securities		181,225		2,207		179,018		—		181,225
FRB and FHLB stock		3,778		—		—		—		N/A
Loans, net		260,656		—		—		260,482		260,482
Non-hedging interest rate swaps		107		—		107		—		107
Accrued interest receivable		1,322		1,322		—		—		1,322
Liabilities
Non-interest bearing deposits	$	196,026	$	196,026	$	—	$	—	$	196,026
Interest bearing deposits		220,655		175,327		45,328		—		220,655
Other borrowings		29,475		—		29,885		—		29,885
Non-hedging interest rate swaps		107		—		107		—		107
Accrued interest payable		157		157		—		—		157

(12)          Non-Interest Income

The following table summarizes the information regarding non-interest income for the three months ended March 31, 2013 and 2012, respectively:

	Three Months Ended March 31,
(in thousands)	2013		2012
Loan arrangement fees	$	236	$	278
Service charges and other operating income		123		69
Total non-interest income	$	359	$	347

Non-interest income primarily consists of loan arrangement fees earned in connection with our college loan funding program.  During the first quarter of 2013, the Company terminated this program and does not anticipate any further loan arrangement fee earnings subsequent to the second quarter of 2013.

(13)         Stock-Based Compensation

The Company grants restricted stock awards to directors and employees under the Equity Incentive Plan.  Restricted stock awards are considered fixed awards as the number of shares and fair value is known at the date of grant and the fair value at the grant date is amortized over the requisite service period.  No restricted stock awards were granted during the three months ended March 31, 2013 or 2012.

26

Non-cash stock compensation expense recognized in the unaudited Consolidated Statements of Operations and Comprehensive Income related to the restricted stock awards, net of estimated forfeitures, was $188,000 and $136,000 for the three months ended March 31, 2013 and 2012, respectively.  The fair value of restricted stock awards that vested during the three months ended March 31, 2013 and 2012, was $23,000 and $36,000, respectively.

The following table reflects the activities related to restricted stock awards outstanding for the three months ended March 31, 2013 and 2012, respectively.

	Three Months Ended March 31,
	2013					2012
Restricted Shares	Number of Shares			Weighted Avg Fair Value at Grant Date		Number of Shares			Weighted Avg  Fair Value at Grant Date
Beginning balance		563,516		$	4.23		536,733		$	4.03
Vested		(6,290	)		3.58		(8,790	)		4.11
Forfeited and surrendered		(4,000	)		4.04		—			—
Ending balance		553,226		$	4.23		527,943		$	4.05

The Company recognizes compensation expense for stock options by amortizing the fair value at the grant date over the service, or vesting period.

There have been no options granted, exercised or cancelled under the 2004 Founder Stock Option Plan for the three months ended March 31, 2013 or 2012.  The remaining contractual life of the 2004 Founder Stock Options outstanding was 0.90 and 1.91 years at March 31, 2013 and 2012, respectively. All options under the 2004 Founder Stock Option Plan were exercisable at March 31, 2013 and 2012.  At March 31, 2013 and 2012, the weighted average exercise price of the 133,700 shares outstanding under the 2004 Founder Stock Option Plan was $5.00.

There have been no options granted, exercised or cancelled under the Director and Employee Stock Option Plan for the three months ended March 31, 2013 or 2012.  The remaining contractual life of the Director and Employee Stock Options outstanding was 1.39 and 2.39 years at March 31, 2013 and 2012, respectively. All options under the Directors and Employee Stock Option Plan were exercisable at March 31, 2013 and 2012.  At March 31, 2013 and 2012, the weighted average exercise price of the 1,045,673 shares outstanding under the Director and Employee Stock Option Plan was $6.05.

The following tables detail the amount of shares authorized and available under all stock plans as of March 31, 2013:

	Shares Reserved		Less Shares Previously  Exercised/Vested		Less Shares  Outstanding		Total Shares  Available for  Future Issuance
2004 Founder Stock Option Plan		150,000		8,000		133,700		8,300
Director and Employee Stock Option Plan		1,434,000		216,924		1,045,673		171,403
Equity Incentive Plan		1,200,000		503,797		553,226		142,977

(14)         Regulatory Matters

Capital

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

Quantitative measures established by regulation to ensure capital adequacy require the Company and the Bank to maintain minimum amounts and ratios (set forth in the table below) of total and Tier 1 capital (as defined in the regulation) to risk-weighted assets (as defined) and of Tier 1 capital (as defined) to average assets (as defined). Management believes that as of March 31, 2013 and December 31, 2012, the Company and the Bank met all capital adequacy requirements to which they are subject.

27

At December 31, 2012, the most recent notification from the OCC categorized the Bank as well capitalized under the regulatory framework for prompt corrective action. To be categorized as well-capitalized, the Bank must maintain minimum total risk-based, Tier 1 risk-based and Tier 1 leverage ratios. There are no conditions or events since the notification that management believes have changed the Bank’s category.

The Company’s and the Bank’s capital ratios as of March 31, 2013 and December 31, 2012 are presented in the table below:

	Company					Bank					For Capital  Adequacy Purposes					For the Bank to be  Well Capitalized Under  Prompt Corrective  Measures
(dollars in thousands)	Amount		Ratio			Amount		Ratio			Amount		Ratio			Amount		Ratio
March 31, 2013:
Total Risk-Based Capital Ratio	$	52,882		14.73	%	$	51,716		14.41	%	$	28,721		8.00	%	$	35,900		10.00	%
Tier 1 Risk-Based Capital Ratio	$	48,366		13.47	%	$	47,200		13.15	%	$	14,360		4.00	%	$	21,540		6.00	%
Tier 1 Leverage Ratio	$	48,366		10.02	%	$	47,200		9.77	%	$	19,314		4.00	%	$	24,144		5.00	%
December 31, 2012:
Total Risk-Based Capital Ratio	$	50,823		15.65	%	$	49,635		15.29	%	$	25,977		8.00	%	$	32,470		10.00	%
Tier 1 Risk-Based Capital Ratio	$	46,738		14.39	%	$	45,549		14.03	%	$	12,988		4.00	%	$	19,482		6.00	%
Tier 1 Leverage Ratio	$	46,738		9.47	%	$	45,549		9.22	%	$	19,748		4.00	%	$	24,696		5.00	%

Dividends

In the ordinary course of business, Bancshares is dependent upon dividends from the Bank to provide funds for the payment of dividends to stockholders and to provide for other cash requirements. Banking regulations may limit the amount of dividends that may be paid. Approval by regulatory authorities is required if the effect of dividends declared would cause the regulatory capital of the Bank to fall below specified minimum levels. Approval is also required if dividends declared exceed the net profits for that year combined with the retained net profits for the preceding two years.  Currently, the Bank is prohibited from paying dividends to Bancshares until such time as the accumulated deficit is eliminated.

To date, Bancshares has not paid any cash dividends.  Payment of stock or cash dividends in the future will depend upon earnings and financial condition and other factors deemed relevant by Bancshares’ Board of Directors, as well as Bancshares’ legal ability to pay dividends.  Accordingly, no assurance can be given that any cash dividends will be declared in the foreseeable future.

28

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

Critical Accounting Policies and Estimates

The accounting and reporting policies followed by us conform, in all material respects, to accounting principles generally accepted in the United States, or GAAP, and to general practices within the financial services industry. The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. While we base our estimates on historical experience, current information and other factors deemed to be relevant, actual results could differ materially from those estimates.

We consider accounting estimates to be critical to reported financial results if (i) the accounting estimate requires management to make assumptions about matters that are highly uncertain and (ii) different estimates that management reasonably could have used for the accounting estimate in the current period, or changes in the accounting estimate that are reasonably likely to occur from period to period, could have a material impact on our financial statements. Accounting polices related to the allowance for loan losses (“ALL”) and income taxes are considered to be critical, as these policies involve considerable subjective judgment and estimation by management. Critical accounting policies, and our procedures related to these policies, are summarized below. There have been no changes to our critical accounting policies and estimates during the three months ended March 31, 2013.

The allowance for loan losses is established through a provision for loan losses charged to operations and represents an estimate of probable incurred losses inherent in the Company’s loan portfolio that have been incurred as of the balance sheet date. Loan losses are charged against the allowance when management believes that principal is uncollectible. Subsequent repayments or recoveries, if any, are credited to the allowance. Management periodically assesses the adequacy of the allowance for loan losses by reference to many quantitative and qualitative factors that may be weighted differently at various times depending on prevailing conditions. The provisions reflect management’s evaluation of the adequacy of the allowance based, in part, upon the historical loss experience of the loan portfolio, as well as estimates from historical peer group loan loss data and the loss experience of other financial institutions, augmented by management judgment. During this process, loans are separated into the following portfolio segments: commercial, commercial real estate, residential, land and construction, and consumer and other loans. The relative significance of risk considerations vary by portfolio segment. For commercial loans, commercial real estate loans and land and construction loans, the primary risk consideration is a borrower’s ability to generate sufficient cash flows to repay their loan. Secondary considerations include the creditworthiness of guarantors and the valuation of collateral. In addition to the creditworthiness of a borrower, the type and location of real estate collateral is an important risk factor for commercial real estate and land and construction loans. The primary risk consideration for residential loans and consumer loans are a borrower’s personal cash flow and liquidity, as well as collateral value.

Loss ratios for all portfolio segments are evaluated on a quarterly basis. Loss ratios associated with historical loss experience are determined based on a rolling migration analysis of each portfolio segment within the portfolio. This migration analysis estimates loss factors based on the performance of each portfolio segment over a four and a half year time period. These loss ratios are then adjusted, if determined necessary by management, based on other factors including, but not limited to, historical peer group loan loss data and the loss experience of other financial institutions. Management carefully monitors changing economic conditions, the concentrations of loan categories, values of collateral, the financial condition of the borrowers, the history of the loan portfolio, and historical peer group loan loss data to determine the adequacy of the allowance for loan losses. As a part of this process, management typically focuses on loan-to-value (“LTV”) percentages to assess the adequacy of loss ratios of collateral dependent loans within each portfolio segment discussed above, trends within each portfolio segment, as well as general economic and real estate market conditions where the collateral and borrower are located. For loans that are not collateral dependent, which generally consist of commercial and consumer and other loans, management typically focuses on general business conditions where the borrower operates, trends within the portfolio, and other external factors to evaluate the severity of loss factors. The allowance is based on estimates and actual losses may vary materially and adversely from the estimates.

In addition, regulatory agencies, as a part of their examination process, periodically review the Bank’s allowance for loan losses, and may require the Bank to make additions to the allowance through provisioning based on their judgment about information available to them at the time of their examinations. No assurance can be given that adverse future economic conditions will not lead to increased delinquent loans, and increases in the provision for loan losses and/or charge-offs. See Part I, Item 2. “Management’s Discussion and Analysis of Financial Condition and Results of Operations - Allowance for Loan Losses” for further details considered by management in estimating the necessary level of the allowance for loan losses.

Provision for income taxes is the amount of estimated tax due reported on our tax returns and the change in the amount of deferred tax assets and liabilities. Deferred income taxes represent the estimated net income tax expense payable (or benefits receivable) for temporary differences between the carrying amounts for financial reporting purposes and the amounts used for tax purposes. A valuation allowance is required if it is “more likely than not” that a deferred tax asset will not be realized. The determination of the realizability of deferred tax assets is highly subjective and dependent upon management’s evaluation of both positive and negative evidence, including historic financial performance, forecasts of future income, existence of feasible tax planning strategies, length of statutory carryforward periods, and assessments of current and future economic and business conditions. Management evaluates the positive and negative evidence and determines the realizability of the deferred tax asset on a quarterly basis.  See Part I, Item 2.  “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Deferred Tax Asset” for further discussion of our deferred tax asset and management’s evaluation of the same.

29

Summary of the Results of Operations and Financial Condition

For the three months ended March 31, 2013 and 2012, the Company recorded net income of $1.4 million, or $0.16 per diluted share, and $592,000, or $0.07 per diluted share, respectively.  The increase in net income for the three months ended March 31, 2013, as compared to the same period last year, is primarily related to increases in net interest income of $585,000 and a reduction of provision for loan losses of $500,000, partially offset by an increase in non-interest expenses of $225,000.

Total assets at March 31, 2013 were $493.4 million, representing a decrease of approximately $5.8 million, or 1.2%, from $499.2 million at December 31, 2012.  Cash and cash equivalents at March 31, 2013 were $27.5 million, representing a decrease of $23.0 million, or 45.6%, from $50.6 million at December 31, 2012.  The decline in cash and cash equivalents was primarily related to loan fundings during the quarter ended March 31, 2013.  Loans increased by $31.1 million during the quarter from $266.7 million at December 31, 2012 to $297.8 million at March 31, 2013.  The majority of growth within our loan portfolio related to increases of $9.0 million, $8.5 million and $7.4 million in our single-family, multi-family and commercial real estate loans, respectively.  Investment securities were $168.0 million at March 31, 2013, compared to $181.2 million at December 31, 2012, representing a decrease of $13.2 million, or 7.3%.  The weighted average life of our investment securities was 2.52 years and 2.80 years at March 31, 2013 and December 31, 2012, respectively.

Total liabilities at March 31, 2013 decreased by $7.2 million, or 1.6%, to $442.8 million compared to $450.0 million at December 31, 2012. This decrease is primarily due to the repayment during the quarter ended March 31, 2013 of a $4.5 million short-term borrowing that was outstanding at December 31, 2012.  Total core deposits, which includes non-interest bearing demand deposits, interest bearing demand deposits and money market deposits and savings, were $369.7 million and $371.4 million at March 31, 2013 and December 31, 2012, respectively, representing a decrease of $1.7 million, or 0.45%.

Average interest earning assets increased $63.5 million, from $414.4 million for the three months ended March 31, 2012 to $477.9 million for the three months ended March 31, 2013.  The weighted average interest rate on interest earning assets was 3.46% and 3.43% for the three months ended March 31, 2013 and 2012, respectively.  This improvement in weighted average interest rate was primarily attributable to $294,000 of interest income recognized during the three months ended March 31, 2013 in connection with the pay-off of non-accrual and previously charged-off loans.  Excluding the impact of these pay-offs, the weighted average interest rate on interest earning assets would have declined as compared to the same period last year.  This decrease is primarily attributable to a general decline in interest rates, as well as competitive loan pricing conditions in our market, which have continued to intensify and compress loan yields.

Average interest bearing deposits and borrowings increased $3.3 million, from $244.3 million for the three months ended March 31, 2012 to $247.5 million for the three months ended March 31, 2013.  The average cost of interest bearing deposits and borrowings was 0.33% during the three months ended March 31, 2013 compared to 0.40% for the same period last year.  The decline in our cost of interest bearing deposits and borrowings is primarily attributable to a decrease in interest rates paid on these accounts.

At March 31, 2013, stockholders' equity totaled $50.6 million, or 10.1% of total assets, as compared to $49.2 million, or 9.9% of total assets, at December 31, 2012.  The Company’s book value per share of common stock was $5.54 as of March 31, 2013, compared to $5.06 and $5.38 per share as of March 31 and December 31, 2012, respectively.

Set forth below are certain key financial performance ratios and other financial data for the periods indicated:

	Three months ended March 31,
	2013			2012
Annualized return on average assets		1.20	%		0.56	%
Annualized return on average stockholders’ equity		11.77	%		5.24	%
Average stockholders’ equity to average assets		10.20	%		10.76	%
Net interest margin		3.30	%		3.20	%

30

Results of Operations

Net Interest Income

The management of interest income and interest expense is fundamental to the performance of the Company. Net interest income, which is the difference between interest income on interest earning assets, such as loans and investment securities, and interest expense on interest bearing liabilities, such as deposits and other borrowings, is the largest component of the Company’s total revenue. Management closely monitors both net interest income and net interest margin (net interest income divided by average earning assets).

Net interest income and net interest margin are affected by several factors including (1) the level of, and the relationship between the dollar amount of interest earning assets and interest bearing liabilities; and (2) the relationship between repricing or maturity of our variable-rate and fixed-rate loans, securities, deposits and borrowings.

The majority of the Company’s loans are indexed to the national prime rate.  Movements in the national prime rate have a direct impact on the Company’s loan yield and interest income.  The national prime rate, which generally follows the targeted federal funds rate, was 3.25% at March 31, 2013 and 2012.  There was no change in the targeted federal funds rate during the three months ended March 31, 2013 and 2012, remaining at 0.00%-0.25%.

The Company, through its asset and liability management policies and practices, seeks to maximize net interest income without exposing the Company to a level of interest rate risk deemed excessive by management. Interest rate risk is managed by monitoring the pricing, maturity and re-pricing characteristics of all classes of interest bearing assets and liabilities. This is discussed in more detail in Item 2- “Management’s Discussion and Analysis of Financial Condition and Results of Operations - Liquidity and Asset/Liability Management.”

During the three months ended March 31, 2013, net interest income was $3.9 million, compared to $3.3 million for the same period last year.  The increase was primarily attributable to additional interest earned in connection with our loan portfolio as compared to the same period last year.  The average balances of our loan portfolio were $272.9 million and $229.6 million during the quarters ended March 31, 2013 and 2012, respectively.  In addition, during the quarter ended March 31, 2013, the Company recognized $294,000 of interest income in connection with the pay-off of non-accrual and previously charged off loans.

The Company’s net interest spread was 3.13% for the three months ended March 31, 2013 compared to 3.03% for the same period last year.

The Company’s net interest margin was 3.30% for the three months ended March 31, 2013, compared to 3.20% for the same period last year.  This 10 basis point improvement in net interest margin is due to the interest income recognized as a part of the pay-offs of non-accrual and previously charged off loans discussed above.  Excluding the impact of these pay-offs, our net interest margin would have declined, as compared to the same period last year.  This decline was primarily due to a decrease in the yield on our earning assets, partially offset by a decline in the cost of our interest bearing liabilities.  The decline in yield on our earning assets was caused by a general downward trend in interest rates, as well as competitive loan pricing conditions in our market, which have continued to compress loan yields.  The decline in the cost of interest bearing deposits and borrowings is primarily attributable to a decrease in interest rates paid on these accounts.  The average cost of interest bearing deposits and borrowings was 0.33% and 0.40% during the quarters ended March 31, 2013 and 2012, respectively.

31

The following table sets forth the average balances of certain assets, interest income/expense, average yields on interest earning assets, average rates paid on interest bearing liabilities, net interest margins and net interest income/spread for the three months ended March 31, 2013 and 2012, respectively.

	Three Months Ended March 31,
	2013								2012
(dollars in thousands)	Average Balance		Interest Inc/Exp			Yield			Average Balance		Interest Inc/Exp		Yield
Assets
Interest earning deposits at other financial institutions	$	26,165	$	16			0.25	%	$	52,722	$	32		0.24	%
U.S. Gov’t Treasuries		2,207		(12	)		(2.16	)%		2,154		—		—	%
Corporate notes		34,989		189			2.16	%		8,717		37		1.68	%
Residential mortgage-backed securities		137,922		602			1.75	%		118,289		717		2.42	%
Federal Reserve Bank stock		1,363		21			6.00	%		1,265		19		6.00	%
Federal Home Loan Bank stock		2,415		14			2.34	%		1,683		2		0.50	%
Loans (1) (2)		272,880		3,258			4.84	%		229,598		2,734		4.79	%
Earning assets		477,941		4,088			3.46	%		414,428		3,541		3.43	%
Other assets		8,812								8,150
Total assets	$	486,753							$	422,578
Liabilities & Equity
Interest checking (NOW)	$	23,510		9			0.16	%	$	20,074		9		0.19	%
Money market deposits and savings		153,991		90			0.24	%		152,888		127		0.33	%
CDs		44,990		31			0.28	%		46,293		32		0.27	%
Borrowings		25,051		74			1.21	%		25,001		74		1.20	%
Total interest bearing deposits and borrowings		247,542		204			0.33	%		244,256		242		0.40	%
Demand deposits		185,881								129,736
Other liabilities		3,665								3,127
Total liabilities		437,088								377,119
Equity		49,665								45,459
Total liabilities & equity	$	486,753							$	422,578
Net interest income / spread			$	3,884			3.13	%			$	3,299		3.03	%
Net interest margin							3.30	%						3.20	%

(1) Before allowance for loan losses and net deferred loan fees and costs. Included in net interest income was net loan origination (cost amortization) and fee accretion of ($12,000) and $10,000 for the three months ended March 31, 2013 and 2012, respectively.

(2) Includes average non-accrual loans of $1.2 million and $7.8 million for the three months ended March 31, 2013 and 2012, respectively.

The Volume and Rate Variances table below sets forth the dollar difference in interest earned and paid for each major category of interest earning assets and interest bearing liabilities for the noted periods, and the amount of such change attributable to changes in average balances (volume) or changes in average interest rates.  Volume variances are equal to the increase or decrease in the average balance times the prior period rate and rate variances are equal to the increase or decrease in the average rate times the prior period average balance. Variances attributable to both rate and volume changes are equal to the change in rate times the change in average balance and are included below in the average volume column.

	Three Months Ended March 31, 2013  Compared to 2012 Increase (Decrease) Due to Changes in:
(in thousands)	Volume			Rate			Total
Interest income:
Interest earning deposits at other financial institutions	$	(17	)	$	1		$	(16	)
U.S. Gov’t Treasuries		—			(12	)		(12	)
Corporate notes		139			13			152
Residential mortgage-backed securities		105			(220	)		(115	)
Federal Reserve Bank stock		2			—			2
Federal Home Loan Bank stock		1			11			12
Loans		494			30			524
Total increase (decrease) in interest income		724			(177	)		547
Interest expense:
Interest checking (NOW)		2			(2	)		—
Money market deposits and savings		1			(38	)		(37	)
CDs		(1	)		—			(1	)
Borrowings		—			—			—
Total increase (decrease) in interest expense		2			(40	)		(38	)
Net increase (decrease) in net interest income	$	722		$	(137	)	$	585

32

Provision for Loan Losses

During quarter ended March 31, 2013, we reversed $500,000 of provision for loan losses.  There was no provision for loan losses or reversal of the same recorded during the quarter ended March 31, 2012.  The reversal in provision for loan losses is primarily due to $1.1 million of loan recoveries during the three months ended March 31, 2013, as well as the continued improvement in the level of our criticized and classified loans. These declines were partially offset by additional provisions required for the $31.1 million increase in our loan portfolio during the quarter ended March 31, 2013.  Criticized and classified loans generally consist of special mention, substandard and doubtful loans. Special mention, substandard and doubtful loans were $6.5 million, $2.3 million and none, respectively, at March 31, 2013, compared to $4.1 million, $9.8 million and none, respectively, at March 31, 2012.  We had net recoveries of $1.1 million and $4,000 during the quarters ended March 31, 2013 and 2012, respectively.  Management believes that the ALL as of March 31, 2013 and December 31, 2012 was adequate to absorb known and inherent risks in the loan portfolio.  The provision for loan losses was recorded based on an analysis of the factors discussed in Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations – Financial Condition – Allowance for Loan Losses.

As a percentage of our total loan portfolio, the amount of non-performing loans was 0.31% and 0.70% at March 31, 2013 and December 31, 2012, respectively.  As a percentage of our total assets, the amount of non-performing assets was 0.20% and 0.39% at March 31, 2013 and December 31, 2012, respectively.

Non-Interest Income

Non-interest income was $359,000 for the quarter ended March 31, 2013, compared to $347,000 for the same period last year. Non-interest income primarily consists of loan arrangement fees earned in connection with our college loan funding program.  During the first quarter of 2013, the Company terminated this program and does not anticipate any further loan arrangement fee earnings subsequent to the second quarter of 2013.

Non-interest income primarily consists of loan arrangement fees, service charges and fees on deposit accounts, as well as other operating income, which mainly consists of wire transfer and other consumer related fees.  Loan arrangement fees are related to a college loan funding program the Company established with a student loan provider.  The Company initially funds student loans originated by the student loan provider in exchange for non-interest income.  All purchase commitments are supported by collateralized deposit accounts.  See Note 12 “Non-Interest Income” in Part I, Item 1. “Financial Statements” for more information regarding non-interest income for the three months ended March 31, 2013 and 2012.

Non-Interest Expense

Non-interest expense was $3.3 million for the three months ended March 31, 2013, compared to $3.0 million for the same period last year.  Compensation and benefits was $2.0 million for the three months ended March 31, 2013, compared to $1.7 million for the same period last year.  Occupancy expense was $357,000 for the three months ended March 31, 2013, compared to $298,000 for the same period last year.  These increases in non-interest expense during the quarter ended March 31, 2013 as compared to the same period last year, is primarily due to the additional costs incurred related to expanding the Bank’s business development and related operational support teams.

Income Tax Provision

During the three months ended March 31, 2013 and 2012, we recorded a tax expense of approximately $38,000 and $16,000, respectively.  The Company does not anticipate owing any substantial taxes for Federal or State purposes until the Company’s net operating losses (“NOL”) are fully utilized.

Financial Condition

Assets

Total assets at March 31, 2013 were $493.4 million, representing a decrease of approximately $5.8 million, or 1.2%, from $499.2 million at December 31, 2012.  Cash and cash equivalents at March 31, 2013 were $27.5 million, representing a decrease of $23.0 million, or 45.6%, from $50.6 million at December 31, 2012.  The decline in cash and cash equivalents is primarily related to loan fundings during the quarter ended March 31, 2013.  Loans increased by $31.1 million during the quarter from $266.7 million at December 31, 2012 to $297.8 million at March 31, 2013.  The majority of growth within our loan portfolio related to increases of $9.0 million, $8.5 million and $7.4 million in our single-family, multi-family and commercial real estate loans, respectively.  Loan originations were $66.3 million during the quarter ended March 31, 2013, compared to $25.7 million during the same period last year.  Prepayment speeds for the quarter ended March 31, 2013 were 15.2% compared to 30.1% for the same period last year.  Investment securities were $168.0 million at March 31, 2013, compared to $181.2 million at December 31, 2012, representing a decrease of $13.2 million, or 7.3%.  The weighted average life of our investment securities was 2.52 years and 2.80 years at March 31, 2013 and December 31, 2012, respectively.

33

Cash and Cash Equivalents

Cash and cash equivalents totaled $27.5 million and $50.6 million at March 31, 2013 and December 31, 2012, respectively.  The decline in cash and cash equivalents is primarily related to loan fundings during the quarter ended March 31, 2013.  Cash and cash equivalents are managed based upon liquidity needs by investing excess liquidity in higher yielding assets such as loans and investment securities.  See the section “Liquidity and Asset/Liability Management” below.

Investment Securities

The investment securities portfolio is generally the second largest component of the Company’s interest earning assets, and the structure and composition of this portfolio is important to any analysis of the financial condition of the Company. The investment portfolio serves the following purposes:  (i) it can be readily reduced in size to provide liquidity for loan balance increases or deposit balance decreases; (ii) it provides a source of pledged assets for securing certain deposits and borrowed funds, as may be required by law or by specific agreement with a depositor or lender; (iii) it can be used as an interest rate risk management tool, since it provides a large base of assets, the maturity and interest rate characteristics of which can be changed more readily than the loan portfolio to better match changes in the deposit base and other funding sources of the Company; and (iv) it is an alternative interest earning use of funds when loan demand is weak or when deposits grow more rapidly than loans.

At March 31, 2013, investment securities totaled $168.0 million compared to $181.2 million at December 31, 2012.  The Company’s investment portfolio is primarily composed of residential mortgage-backed securities issued by the Federal National Mortgage Association and the Federal Home Loan Mortgage Corporation.  The underlying loans for these securities are residential mortgages that were primarily originated beginning in 2003 through the current period.  These loans are geographically dispersed throughout the United States.  At March 31, 2013 and December 31, 2012, the weighted average rate and weighed average life of these residential-mortgage backed securities were 1.86% and 1.95%, respectively, and 2.64 years and 2.92 years, respectively.  In addition, the Company’s investment portfolio consisted of $34.7 million and $35.3 million of investment grade corporate notes at March 31, 2013 and December 31, 2012, respectively.  At March 31, 2013 and December 31, 2012, the weighted average rate and weighed average life of these corporate notes were 2.21% and 2.19%, respectively, and 2.04 years and 2.26 years, respectively.  We will continue to evaluate the Company’s investments and liquidity needs and will adjust the amount of investment securities accordingly.

Loans

Loans, net of the ALL and deferred loan origination costs/unearned fees, increased 11.7%, or $30.5 million, from $260.7 million at December 31, 2012 to $291.1 million at March 31, 2013.  As of March 31, 2013 and December 31, 2012, total loans outstanding totaled $297.8 million and $266.7 million, respectively.  The majority of growth within our loan portfolio related to increases of $9.0 million, $8.5 million and $7.4 million in our single-family, multi-family and commercial real estate loans, respectively.  Loan originations were $66.3 million during the quarter ended March 31, 2013, compared to $25.7 million during the same period last year.  Prepayment speeds for the quarter ended March 31, 2013 were 15.2%, compared to 30.1% for the same period last year.

As of March 31, 2013 and December 31, 2012, substantially all of the Company’s loan customers were located in Southern California.

Non-Performing Assets

The following table sets forth non-accrual loans and other real estate owned at March 31, 2013 and December 31, 2012:

(dollars in thousands)	March 31, 2013			December 31, 2012
Non-accrual loans:
Commercial	$	572		$	1,509
Consumer and other		345			345
Total non-accrual loans		917			1,854
Other real estate owned (“OREO”)		90			90
Total non-performing assets	$	1,007		$	1,944
Non-performing assets to gross loans and OREO		0.34	%		0.73	%
Non-performing assets to total assets		0.20	%		0.39	%

34

Non-accrual loans totaled $917,000 and $1.9 million at March 31, 2013 and December 31, 2012, respectively.  The decline in non-performing loans during the quarter ended March 31, 2013 was primarily related to the full repayment of loans that had been classified as non-performing at December 31, 2012.  At March 31, 2013, there were no loans that were over 90 days past due and accruing interest.  At December 31, 2012, there was one loan with a balance of $2.3 million that was over 90 days past due and accruing interest. This loan continued to accrue interest because it was well secured and in the process of collection. Gross interest income that would have been recorded on non-accrual loans had they been current in accordance with their original terms was $15,000 and $72,000 for the three months ended March 31, 2013 and 2012, respectively.  As a percentage of total assets, the amount of non-performing assets was 0.20% and 0.39% at March 31, 2013 and December 31, 2012, respectively.

At March 31, 2013, non-accrual loans consisted of one commercial loans totaling $572,000 and one consumer and other loan totaling $345,000.  At December 31, 2012, non-accrual loans consisted of three commercial loans totaling $1.5 million and one consumer and other loan totaling $345,000.

At March 31, 2013 and December 31, 2012, OREO consisted of one undeveloped land property totaling $90,000.  This property is located in Southern California.

At March 31, 2013 and December 31, 2012, the recorded investment in impaired loans was $1.2 million and $2.1 million, respectively.  At March 31, 2013, the Company had no specific allowance for loan losses on its impaired loans.  At December 31, 2012, the Company had a $500,000 specific allowance for loan losses on $811,000 of impaired loans.  There were $1.2 million and $1.3 million, respectively, of impaired loans with no specific allowance for loan losses at March 31, 2013 and December 31, 2012, respectively.  The average outstanding balance of impaired loans for the three months ended March 31, 2013 was $1.5 million compared to $7.8 million for the same period last year.  As of March 31, 2013 and December 31, 2012, there was $917,000 and $1.9 million, respectively, of impaired loans on non-accrual status.  During the three months ended March 31, 2013 and 2012, interest income recognized on impaired loans subsequent to their classification as impaired was $3,000 and $3,000, respectively.  The Company stops accruing interest on these loans on the date they are classified as non-accrual and reverses any uncollected interest that had been previously accrued as income.  The Company may begin recognizing interest income on these loans as cash interest payments are received, if collection of principal is reasonably assured.

Allowance for Loan Losses

The ALL is established through provisions for loan losses charged to operations and represents an estimate of credit losses inherent in the Company’s loan portfolio that have been incurred as of the balance sheet date.  Loan losses are charged against the ALL when management believes that principal is uncollectible.  Subsequent repayments or recoveries, if any, are credited to the ALL.  Management periodically assesses the adequacy of the ALL by reference to many quantitative and qualitative factors that may be weighted differently at various times depending on prevailing conditions. These factors include, among others:

• the risk characteristics of various classifications of loans;

• general portfolio trends relative to asset and portfolio size;

• asset categories;

• potential credit concentrations;

• delinquency trends within the loan portfolio;

• changes in the volume and severity of past due and other classified loans;

• historical loss experience and risks associated with changes in economic, social and business conditions; and

• the underwriting standards in effect when the loan was made.

Accordingly, the calculation of the adequacy of the ALL is not based solely on the level of non-performing assets.  The quantitative factors, included above, are utilized by our management to identify two different risk groups (1) individual loans (loans with specifically identifiable risks); and (2) homogeneous loans (groups of loan with similar characteristics).  We base the allocation for individual loans on the results of our impairment analysis, which is typically based on the present value of the expected future cash flows discounted at the loan’s effective interest rate or by using the loan’s most recent market value or the fair value of the collateral, if the loan is collateral dependent.  Homogenous groups of loans are allocated reserves based on the loss ratio assigned to the pool based on its risk grade.  The loss ratio is determined based primarily on the historical loss experience of our loan portfolio.  These loss ratios are then adjusted, if determined necessary by management, based on other factors including, but not limited to, historical peer group loan loss data and the loss experience of other financial institutions.  Loss ratios for all categories of loans are evaluated by management on a quarterly basis.  Historical loss experience is determined based on a rolling migration analysis of each loan category within our portfolio.  This migration analysis estimates loss factors based on the performance of each loan category over a four and a half year time period.  These quantitative calculations are based on estimates and actual losses may vary materially and adversely from the estimates.

35

The qualitative factors, included above, are also utilized to identify other risks inherent in the portfolio and to determine whether the estimated credit losses associated with the current portfolio might differ from historical loss trends or the loss ratios discussed above.  We estimate a range of exposure for each applicable qualitative factor and evaluate the current condition and trend of each factor.  Because of the subjective nature of these factors, the actual losses incurred may vary materially and adversely from the estimated amounts.

In addition, regulatory agencies, as a part of their examination process, periodically review the Bank’s ALL, and may require the Bank to take additional provisions to increase the ALL based on their judgment about information available to them at the time of their examinations.  No assurance can be given that adverse future economic conditions or other factors will not lead to increased delinquent loans, further provisions for loan losses and/or charge-offs. Management believes that the ALL as of March 31, 2013 and December 31, 2012 was adequate to absorb probable incurred credit losses inherent in the loan portfolio.

The following is a summary of the activity for the ALL for the three months ended March 31, 2013 and 2012:

(in thousands)	Commercial			Commercial Real Estate		Residential			Land and Construction			Consumer and Other			Total
Three Months Ended March 31, 2013:
Allowance for loan losses:
Beginning balance	$	2,277		$	2,450	$	508		$	411		$	369		$	6,015
Provision for (reduction of) loan losses		(1,700	)		750		190			330			(70	)		(500	)
Charge-offs		—			—		—			—			—			—
Recoveries		1,054			—		—			—			50			1,104
Ending balance	$	1,631		$	3,200	$	698		$	741		$	349		$	6,619
Three Months Ended March 31, 2012:
Allowance for loan losses:
Beginning balance	$	2,584		$	1,252	$	583		$	516		$	349		$	5,284
Provision for loan losses		(300	)		350		(35	)		—			(15	)		—
Charge-offs		(3	)		—		—			(5	)		—			(8	)
Recoveries		9			3		—			—			—			12
Ending balance	$	2,290		$	1,605	$	548		$	511		$	334		$	5,288

There were no loans acquired with deteriorated credit quality during the three months ended March 31, 2013 and 2012.

The ALL was $6.6 million, or 2.22% of our total loan portfolio, at March 31, 2013, compared to $6.0 million, or 2.26%, at December 31, 2012. During the three months ended March 31, 2013, our non-performing loans decreased to $917,000 from $1.9 million at December 31, 2012. The ratio of our ALL to non-performing loans was 722.16% at March 31, 2013 compared to 324.36% at December 31, 2012. In addition, our ratio of non-performing loans to total loans was 0.31% and 0.70% at March 31, 2013 and December 31, 2012, respectively. The ALL is impacted by inherent risk in the loan portfolio, including the level of our non-performing loans, as well as specific reserves and charge-off activities. The remaining portion of our ALL is allocated to our performing loans based on the quantitative and qualitative factors discussed above.

Deferred Tax Asset

A valuation allowance is required if it is “more likely than not” that a deferred tax asset will not be realized. The determination of the realizability of the deferred tax assets is highly subjective and dependent upon judgment concerning management’s evaluation of both positive and negative evidence, including historical financial performance, the forecasts of future income, existence of feasible tax planning strategies, length of statutory carryforward periods, and assessments of the current and future economic and business conditions. Management evaluates the positive and negative evidence and determines the realizability of the deferred tax asset on a quarterly basis.

During the year ended December 31, 2009, we established a full valuation allowance against the Company’s deferred tax assets after we determined that it was more likely than not” that the Company would not be able to realize the benefit of the deferred tax asset. Management reassessed the continuing need for this valuation allowance and determined that as of March 31, 2013 and December 31, 2012, it was appropriate to maintain a full valuation allowance against the Company’s deferred tax assets. Management reached this conclusion as a result of the Company’s cumulative losses since inception, and the near term economic climate in which the Company operates. Management will continue to evaluate the potential realizability of the deferred tax assets and will continue to maintain a valuation allowance to the extent it is determined that it is more likely than not that these assets will not be realized.

36

At March 31, 2013 and December 31, 2012, the Company maintained a deferred tax liability of $1.6 million and $1.7 million, respectively, in connection with net unrealized gains on investment securities, which is included in Accrued Interest and Other Liabilities within the accompanying Consolidated Balance Sheets. We did not utilize this deferred tax liability to reduce our tax valuation allowance due to the fact that we do not currently intend to dispose of these investments and realize the associated gains.

Deposits

The Company’s activities are largely based in the Los Angeles metropolitan area. The Company’s deposit base is also primarily generated from this area.

At March 31, 2013, total deposits were $414.5 million compared to $416.7 million at December 31, 2012, representing a decrease of 0.5%, or $2.2 million.  Total core deposits, which include non-interest bearing demand deposits, interest bearing demand deposits and money market deposits and savings, were $369.7 million and $371.4 million at March 31, 2013 and December 31, 2012, respectively, representing a decrease of $1.7 million, or 0.45%.

The following table reflects a summary of deposit categories by dollar and percentage at March 31, 2013 and December 31, 2012:

	March 31, 2013					December 31, 2012
(dollars in thousands)	Amount		Percent of Total			Amount		Percent of Total
Non-interest bearing demand deposits	$	195,540		47.2	%	$	196,026		47.0	%
Interest bearing checking		22,930		5.5	%		23,233		5.6	%
Money market deposits and savings		151,196		36.5	%		152,094		36.5	%
Certificates of deposit		44,863		10.8	%		45,328		10.9	%
Total	$	414,529		100.0	%	$	416,681		100.0	%

At March 31, 2013 and December 31, 2012, the Company had three certificates of deposit with the State of California Treasurer’s Office for a total of $34.0 million, which represented 8.2% and 8.2%, respectively, of total deposits.  The deposits outstanding at March 31, 2013 are scheduled to mature in the second and third quarters of 2013. The Company intends to renew each of these deposits at maturity.  However, there can be no assurance that the State of California Treasurer’s Office will continue to maintain deposit accounts with the Company.  The Company was required to pledge $37.4 million of agency mortgage backed securities at March 31, 2013 and December 31, 2012 in connection with these certificates of deposit.  For further information on the Company’s certificates of deposit with the State of California Treasurer’s Office, see Part I, Item 1.  Financial Statements - Note 7 “Deposits.”

At March 31, 2013, the Company had $5.1 million of Certificate of Deposit Accounts Registry Service (“CDARS”) reciprocal deposits, which represented 1.2% of total deposits.  At December 31, 2012, the Company had $5.2 million of CDARS deposits, which represented 1.3 % of total deposits.

The aggregate amount of certificates of deposit of $100,000 or more at March 31, 2013 and December 31, 2012 was $43.6 million and $44.0 million, respectively.

Scheduled maturities of certificates of deposit in amounts of $100,000 or more at March 31, 2013, including deposit accounts with the State of California Treasurer’s Office and CDARS were as follows:

(in thousands)
Due within 3 months or less	$	21,308
Due after 3 months and within 6 months		21,172
Due after 6 months and within 12 months		1,156
Due after 12 months		—
Total	$	43,636

Liquidity and Asset/Liability Management

Liquidity, as it relates to banking, is the ability to meet loan commitments and to honor deposit withdrawals through either the sale or maturity of existing assets or the acquisition of additional funds through deposits or borrowing.  The Company’s main sources of funds to provide liquidity are its cash and cash equivalents, paydowns and maturities of investments, loan repayments, and increases in deposits and borrowings.  The Company also maintains lines of credit with the Federal Home Loan Bank (“FHLB”), and other correspondent financial institutions.

The liquidity ratio (the sum of cash and cash equivalents and available for sale investments, excluding amounts required to be pledged and operating requirements, divided by total assets) was 30.3% at March 31, 2013 and 37.1% at December 31, 2012.

37

At March 31, 2013 and December 31, 2012, the Company had a borrowing/credit facility secured by a blanket lien on eligible loans at the FHLB of $126.2 million and $105.1 million, respectively. The Company had $25.0 million of long-term borrowings outstanding under this borrowing/credit facility with the FHLB at March 31, 2013 and December 31, 2012.  The Company had no overnight borrowings outstanding under this borrowing/credit facility at March 31, 2013 and December 31, 2012.

The following table summarizes the outstanding long-term borrowings under the borrowing/credit facility secured by a blanket lien on eligible loans at the FHLB at March 31, 2013 and December 31, 2012 (dollars in thousands):

Maturity Date	Interest Rate		March 31, 2013			December 31, 2012
May 23, 2013		0.63%		$	2,500	$	2,500
May 23, 2014		1.14%			2,500		2,500
December 29, 2014		0.83%			5,000		5,000
December 30, 2014		0.74%			2,500		2,500
May 26, 2015		1.65%			2,500		2,500
May 23, 2016		2.07%			2,500		2,500
December 29, 2016		1.38%			5,000		5,000
December 30, 2016		1.25%			2,500		2,500
	Total			$	25,000	$	25,000

At March 31, 2013 and December 31, 2012, the Company also had $27.0 million in Federal fund lines of credit available with other correspondent banks that could be used to disburse loan commitments and to satisfy demands for deposit withdrawals. Each of these lines of credit is subject to conditions that the Company may not be able to meet at the time when additional liquidity is needed. At December 31, 2012, there was a $4.5 million short-term overnight borrowing outstanding under these credit facilities at an interest rate of 1.09%. This borrowing was repaid on January 2, 2013.  The Company did not incur any material interest expense charges in connection with this borrowing.  There were no further borrowings under these facilities during the three months ended March 31, 2013.  As of March 31, 2013 and December 31, 2012, the Company had pledged $5.7 million and $6.2 million, respectively, of corporate notes related to these lines of credit.

Management believes the level of liquid assets and available credit facilities are sufficient to meet current and anticipated funding needs.  In addition, the Bank’s Asset/Liability Management Committee oversees the Company’s liquidity position by reviewing a monthly liquidity report.  Management is not aware of any trends, demands, commitments, events or uncertainties that will result or are reasonably likely to result in a material change in the Company’s liquidity.

Capital Expenditures

As of March 31, 2013, the Company was not subject to any material commitments for capital expenditures.

Capital Resources

At March 31, 2013, the Company had total stockholders’ equity of $50.6 million, which included $110,000 in common stock, $65.2 million in additional paid-in capital, $9.5 million in accumulated deficit, $2.3 million in accumulated other comprehensive income, and $7.5 million in treasury stock.

Capital

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

Quantitative measures established by regulation to ensure capital adequacy require the Company and the Bank to maintain minimum amounts and ratios (set forth in the table below) of total and Tier 1 capital (as defined in the regulation) to risk-weighted assets (as defined) and of Tier 1 capital (as defined) to average assets (as defined). Management believes that as of March 31, 2013 and December 31, 2012, the Company and the Bank met all capital adequacy requirements to which they are subject.

38

At December 31, 2012, the most recent notification from the OCC categorized the Bank as well capitalized under the regulatory framework for prompt corrective action. To be categorized as well-capitalized, the Bank must maintain minimum total risk-based, Tier 1 risk-based and Tier 1 leverage ratios. There are no conditions or events since the notification that management believes have changed the Bank’s category.

The Company’s and the Bank’s capital ratios as of March 31, 2013 and December 31, 2012 are presented in the table below:

	Company					Bank					For Capital Adequacy Purposes					For the Bank to be Well Capitalized Under Prompt Corrective Measures
(dollars in thousands)	Amount		Ratio			Amount		Ratio			Amount		Ratio			Amount		Ratio
March 31, 2013:
Total Risk-Based Capital Ratio	$	52,882		14.73	%	$	51,716		14.41	%	$	28,721		8.00	%	$	35,900		10.00	%
Tier 1 Risk-Based Capital Ratio	$	48,366		13.47	%	$	47,200		13.15	%	$	14,360		4.00	%	$	21,540		6.00	%
Tier 1 Leverage Ratio	$	48,366		10.02	%	$	47,200		9.77	%	$	19,314		4.00	%	$	24,144		5.00	%
December 31, 2012:
Total Risk-Based Capital Ratio	$	50,823		15.65	%	$	49,635		15.29	%	$	25,977		8.00	%	$	32,470		10.00	%
Tier 1 Risk-Based Capital Ratio	$	46,738		14.39	%	$	45,549		14.03	%	$	12,988		4.00	%		419,482		6.00	%
Tier 1 Leverage Ratio	$	46,738		9.47	%	$	45,549		9.22	%	$	19,748		4.00	%	$	24,696		5.00	%

Dividends

In the ordinary course of business, the Company is dependent upon dividends from the Bank to provide funds for the payment of dividends to shareholders and to provide for other cash requirements. Banking regulations may limit the amount of dividends that may be paid. Approval by regulatory authorities is required if the effect of dividends declared would cause the regulatory capital of the Bank to fall below specified minimum levels. Approval is also required if dividends declared exceed the net profits for that year combined with the retained net profits for the preceding two years.  Currently, the Bank is prohibited from paying dividends to the Company until such time as the accumulated deficit is eliminated.

To date, the Company has not paid any cash dividends.  Payment of stock or cash dividends in the future will depend upon earnings and financial condition and other factors deemed relevant by the Company’s Board of Directors, as well as the Company’s legal ability to pay dividends.  Accordingly, no assurance can be given that any cash dividends will be declared in the foreseeable future.

Off-Balance Sheet Arrangements

In the normal course of business, the Company is a party to financial instruments with off-balance sheet risk. These financial instruments include commitments to extend credit and letters of credit. To varying degrees, these instruments involve elements of credit and interest rate risk in excess of the amount recognized in the statement of financial position.

(in thousands)	March 31, 2013		December 31, 2012
Commitments to extend credit	$	79,186	$	74,230
Commitments to extend credit to directors and officers (undisbursed amount)	$	448	$	561
Standby/commercial letters of credit	$	2,067	$	1,900
Guarantees on revolving credit card limits	$	207	$	217
Outstanding credit card balances	$	47	$	67

The Company maintains an allowance for unfunded commitments, based on the level and quality of the Company’s undisbursed loan funds, which comprises the majority of the Company’s off-balance sheet risk.  As of March 31, 2013 and December 31, 2012, the allowance for unfunded commitments was unchanged at $203,000, which represented 0.25% and 0.26% of the undisbursed commitments and letters of credit, respectively.

Management is not aware of any other off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on the Company’s financial condition, changes in financial condition, and results of operations, liquidity, capital expenditures or capital resources that is material to investors.

For further information on commitments and contingencies, see Part I, Item 1.  Financial Statements - Note 9 “Commitments and Contingencies.”

39

Item 3.               Quantitative and Qualitative Disclosure About Market Risk

Not applicable.

Item 4.               Controls and Procedures

Evaluation of Disclosure Controls and Procedures

The Company maintains disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act), designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the U.S. Securities and Exchange Commission’s rules and forms and that such information is accumulated and communicated to management, including the Principal Executive Officer and the Principal Financial Officer, as appropriate, to allow for timely decisions regarding required disclosure. In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management is required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.

The Company’s management, with the participation of our Principal Executive Officer and Principal Financial Officer, has evaluated the effectiveness of our disclosure controls and procedures as of the end of the period covered by this Quarterly Report on Form 10-Q.  Based on such evaluation, our Principal Executive Officer and Principal Financial Officer have concluded that, as of the end of such period, our disclosure controls and procedures are effective in ensuring that information required to be disclosed by the Company in the reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the U.S. Securities and Exchange Commission’s rules and forms, and is accumulated and communicated to management, including the Principal Executive Officer and the Principal Financial Officer, as appropriate, to allow for timely decisions regarding required disclosure.

Changes in Internal Controls

There have not been any changes in the Company’s internal control over financial reporting that occurred during the quarter ended March 31, 2013, that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

PART II — OTHER INFORMATION

Item 1.               Legal Proceedings

At present, there are no pending or threatened proceedings against the Company which, if determined adversely, would have a material effect on the Company’s business, financial position, results of operations, cash flows or stock price. In the ordinary course of operations, the Company may be party to various legal proceedings.

Item 1A.            Risk Factors

Management is not aware of any material changes to the risk factors discussed in Part 1, Item 1A of the Annual Report on Form 10-K for the year ended December 31, 2012.  In addition to the other information set forth in this Quarterly Report on Form 10-Q, you should carefully consider the risk factors discussed in Part I, Item 1A of the Annual Report on Form 10-K for the year ended December 31, 2012, which could materially and adversely affect the Company’s business, financial condition and results of operations. The risks described in the Annual Report on Form 10-K are not the only risks facing the Company. Additional risks and uncertainties not presently known to management or that management currently believes to be immaterial may also materially and adversely affect the Company’s business, financial condition or results of operations.

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

Unregistered Sales of Equity Securities

None.

40

Purchases of Equity Securities

The table below summarizes the Company’s monthly repurchases of equity securities during the three months ended March 31, 2013.

(dollars in thousands, except per share data)

Period	Total Number of Shares Purchased		Average Price Paid Per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (1)		Approximate Dollar Value of Shares that May Yet be Purchased Under the Plans of Program (1)
January 1-31, 2013		105	$	4.57		105	$	29
February 1-28, 2013		—		—		—		29
March 1-31, 2013		—		—		—		29
Total		105	$	4.57		105	$	29

(1)           In August 2010, the Company’s Board of Directors authorized the purchase of up to $2.0 million of the Company’s common stock, which was announced by press release and Current Report on Form 8-K on August 16, 2010.  Under the Company’s stock repurchase program, the Company has been acquiring its common stock in the open market from time to time beginning in August 2010.  The Company’s stock repurchase program may be modified, suspended or terminated by the Board of Directors at any time without notice.

Item 3.               Defaults Upon Senior Securities

None.

Item 4.               Mine Safety Disclosures.

None.

Item 5.               Other Information

(a)           Additional Disclosures.None.

(b)           Stockholder Nominations.  There have been no material changes in the procedures by which stockholders may recommend nominees to the Board of Directors during the three months ended March 31, 2013.  Please see the discussion of these procedures in the most recent proxy statement on Schedule 14A filed with the SEC.

Item 6.               Exhibits

31.1 Principal Executive Officer Certification required under Section 302 of the Sarbanes—Oxley Act of 2002.

31.2 Principal Financial Officer Certification required under Section 302 of the Sarbanes—Oxley Act of 2002.

32 Principal Executive Officer andPrincipal Financial Officer Certification required under Section 906 of the Sarbanes—Oxley Act of 2002.

101.INS XBRL Instance Document.

101.SCH XBRL Taxonomy Extension Schema Document.

101.CAL XBRL Taxonomy Extension Calculation Linkbase Document.

101.DEF XBRL Taxonomy Extension Definition Linkbase Document.

101.LAB XBRL Taxonomy Extension Label Linkbase Document.

101.PRE XBRL Taxonomy Extension Presentation Linkbase Document.

41

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.

1ST CENTURY BANCSHARES, INC.
By:	/s/ Alan I. Rothenberg.
	Alan I. Rothenberg
	Chairman and Chief Executive Officer
By:	/s/ Bradley S. Satenberg.
	Bradley S. Satenberg
	Executive Vice President and Chief Financial Officer

42

EX-31.1

Exhibit 31.1

Rule 13a-14(a) Certification

of the Chairman of the Board and Chief Executive Officer

I, Alan I. Rothenberg, certify, that:

1.      I have reviewed this Quarterly Report on Form 10-Q of 1st Century Bancshares, Inc.;

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

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

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

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

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

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

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

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

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

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

Date: May 8, 2013	/s/ Alan I. Rothenberg
	Alan I. Rothenberg
	Chairman of the Board, Chief Executive Officer and Principal Executive Officer

EX-31.2

Exhibit 31.2

Rule 13a-14(a) Certification

of the Chief Financial Officer

I, Bradley S. Satenberg, certify, that:

1.      I have reviewed this Quarterly Report on Form 10-Q of 1st Century Bancshares, Inc.;

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

3.      Based on my knowledge, the consolidated 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 officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

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

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

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

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

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

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

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

Date: May 8, 2013	/s/ Bradley S. Satenberg
	Bradley S. Satenberg
	Executive Vice President, Chief Financial Officer and Principal Financial Officer

EX-32

Exhibit 32

CERTIFICATION*

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of 1st Century Bancshares, Inc. (the “Company”) on Form 10-Q for the quarter ended March 31, 2013, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), the undersigneds hereby certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, to the best of the undersigneds’ knowledge that:

(1)           The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and

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

Date: May 8, 2013	/s/ Alan I. Rothenberg
	Alan I. Rothenberg
	Chairman of the Board, Chief Executive Officer and Principal Executive Officer
Date: May 8, 2013	/s/ Bradley S. Satenberg
	Bradley S. Satenberg
	Executive Vice President, Chief Financial Officer and Principal Financial Officer

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

This certification accompanies the Report pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and shall not be deemed filed by the Company for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liability of that Section.

XML

Note 2 - Investments (Detail) - Securities with Gross Unrealized Losses Aggregated by Investment Category and Length of Time that Individual Securities Have Been in a Continuous Loss Position (Residential Mortgage Backed Securities [Member], USD $) In Thousands, unless otherwise specified	Mar. 31, 2013	Dec. 31, 2012
Residential Mortgage Backed Securities [Member]
Investments-Available for Sale
Less Than Twelve Months Gross Unrealized Losses	$ (21)	$ (18)
Less than Twelve Months Fair Value	10,846	7,584
Twelve Months or More Gross Unrealized Losses	0	0
Twelve Month or More Fair Value	$ 0	$ 0

XML

Note 6 - Premises and Equipment (Detail) - Premises and Equipment (USD $) In Thousands, unless otherwise specified	Mar. 31, 2013	Dec. 31, 2012
Leasehold improvements	$ 973	$ 973
Furniture & equipment	2,205	2,191
Software	674	661
Total	3,852	3,825
Accumulated depreciation	(2,935)	(2,805)
Premises and equipment, net	$ 917	$ 1,020

XML

Note 4 - Derivative Financial Instruments (Detail) - Interest Rate Derivative Contracts (Commercial Loan Interest Rate Swaps [Member], USD $) In Thousands, unless otherwise specified	Mar. 31, 2013	Dec. 31, 2012
Commercial Loan Interest Rate Swaps [Member]
Non-hedging interest rate derivatives:
Commercial loan interest rate swaps	$ 2,757	$ 2,800
Commercial loan interest rate swaps	87	107
Commercial loan interest rate swaps	(2,757)	(2,800)
Commercial loan interest rate swaps	$ (87)	$ (107)

XML

Note 13 - Stock-Based Compensation (Detail) - Amount of Shares Authorized and Available Under all Stock Plans	Mar. 31, 2013
Founder Stock Option Plan 2004 [Member]
Equity Incentive Plans, Shares Reserved	150,000
Equity Incentive Plans, Less Shares Previously Exercised/Vested	8,000
Equity Incentive Plans, Less Shares Outstanding	133,700
Equity Incentive Plans, Total Shares Available for Issuance	8,300
Director and Employee Stock Option Plan [Member]
Equity Incentive Plans, Shares Reserved	1,434,000
Equity Incentive Plans, Less Shares Previously Exercised/Vested	216,924
Equity Incentive Plans, Less Shares Outstanding	1,045,673
Equity Incentive Plans, Total Shares Available for Issuance	171,403
Equity Incentive Plan [Member]
Equity Incentive Plans, Shares Reserved	1,200,000
Equity Incentive Plans, Less Shares Previously Exercised/Vested	503,797
Equity Incentive Plans, Less Shares Outstanding	553,226
Equity Incentive Plans, Total Shares Available for Issuance	142,977

XML

Note 7 - Deposits (Detail) (USD $)	Mar. 31, 2013	Dec. 31, 2012
Interest-bearing Domestic Deposit, Certificates of Deposits	$ 44,863,000	$ 45,328,000
Percentage of Interest-bearing Domestic Deposits to Deposits, Certificates of Deposit	10.80%	10.90%
Time Deposits, $100,000 or More	43,636,000	43,987,000
Contractual Maturities, Time Deposits, $100,000 or More, Six Months or Less	42,500,000
Contractual Maturities, Time Deposits, $100,000 or More, Six Months Through 12 Months	1,100,000
Certificates of Deposit- State of California [Member]
Interest-bearing Domestic Deposit, Certificates of Deposits	34,000,000	34,000,000
Percentage of Interest-bearing Domestic Deposits to Deposits, Certificates of Deposit	8.20%	8.20%
Available-for-sale Securities Pledged as Collateral	37,400,000	37,400,000
CDARS Deposit [Member]
Interest-bearing Domestic Deposit, Certificates of Deposits	$ 5,100,000	$ 5,200,000
Percentage of Interest-bearing Domestic Deposits to Deposits, Brokered	1.20%	1.30%

XML

Note 3 - Loans, Allowance for Loan Losses, and Non-Performing Assets (Detail) - Impaired Loans (USD $) In Thousands, unless otherwise specified	3 Months Ended			3 Months Ended	12 Months Ended	3 Months Ended	12 Months Ended	3 Months Ended	12 Months Ended	3 Months Ended	12 Months Ended	3 Months Ended	12 Months Ended
	Mar. 31, 2013	Mar. 31, 2012	Dec. 31, 2012	Mar. 31, 2013 Commercial [Member]	Dec. 31, 2012 Commercial [Member]	Mar. 31, 2013 Commercial Real Estate [Member]	Dec. 31, 2012 Commercial Real Estate [Member]	Mar. 31, 2013 Residential [Member]	Dec. 31, 2012 Residential [Member]	Mar. 31, 2013 Land and Construction [Member]	Dec. 31, 2012 Land and Construction [Member]	Mar. 31, 2013 Consumer and Other [Member]	Dec. 31, 2012 Consumer and Other [Member]
With no related allowance recorded:
Impaired Loans No Related Allowance - Recorded Investment				$ 844	$ 988	$ 0	$ 0	$ 0	$ 0	$ 0	$ 0	$ 345	$ 345
Impaired Loans No Related Allowance - Unpaid Principal Balance				1,120	1,303	0	0	0	0	0	0	345	345
Impaired Loans No Related Allowance - Average Recorded Investment				931	1,098	0	3,113	0	0	0	1,155	345	345
With an allowance recorded:
Impaired Loans Related Allowance - Recorded Investment				0	811	0	0	0	0	0	0	0	0
Impaired Loans Related Allowance - Unpaid Principal Balance				0	1,990	0	0	0	0	0	0	0	0
Impaired Loans Related Allowance - Related Allowance				0	500	0	0	0	0	0	0	0	0
Impaired Loans Related Allowance - Average Recorded Investment				271	1,084	0	0	0	0	0	0	0	0
Totals:
Impaired Loans Total - Recorded Investment	1,007		1,944	844	1,799	0	0	0	0	0	0	345	345
Impaired Loans Total - Unpaid Principal Balance				1,120	3,293	0	0	0	0	0	0	345	345
Impaired Loans Total - Related Allowance				0	500	0	0	0	0	0	0	0	0
Impaired Loans Total - Average Recorded Investment	$ 1,500	$ 7,800		$ 1,202	$ 2,182	$ 0	$ 3,113	$ 0	$ 0	$ 0	$ 1,155	$ 345	$ 345

XML

Note 14 - Regulatory Matters (Tables)

3 Months Ended

Mar. 31, 2013

Schedule of Compliance with Regulatory Capital Requirements under Banking Regulations [Table Text Block]

	Company					Bank					For Capital  Adequacy Purposes					For the Bank to be  Well Capitalized Under  Prompt Corrective  Measures
(dollars in thousands)	Amount		Ratio			Amount		Ratio			Amount		Ratio			Amount		Ratio
March 31, 2013:
Total Risk-Based Capital Ratio	$	52,882		14.73	%	$	51,716		14.41	%	$	28,721		8.00	%	$	35,900		10.00	%
Tier 1 Risk-Based Capital Ratio	$	48,366		13.47	%	$	47,200		13.15	%	$	14,360		4.00	%	$	21,540		6.00	%
Tier 1 Leverage Ratio	$	48,366		10.02	%	$	47,200		9.77	%	$	19,314		4.00	%	$	24,144		5.00	%
December 31, 2012:
Total Risk-Based Capital Ratio	$	50,823		15.65	%	$	49,635		15.29	%	$	25,977		8.00	%	$	32,470		10.00	%
Tier 1 Risk-Based Capital Ratio	$	46,738		14.39	%	$	45,549		14.03	%	$	12,988		4.00	%	$	19,482		6.00	%
Tier 1 Leverage Ratio	$	46,738		9.47	%	$	45,549		9.22	%	$	19,748		4.00	%	$	24,696		5.00	%

XML

Note 7 - Deposits (Detail) - Certificates of Deposit by Interest Rate and Maturity (USD $) In Thousands, unless otherwise specified	Mar. 31, 2013	Dec. 31, 2012
Certificates of Deposit	$ 44,863	$ 45,328
Six Months and Less [Member] | Zero-.99 Percent [Member]
Certificates of Deposit	40,304
Six Months and Less [Member] | One-1.99 Percent [Member]
Certificates of Deposit	3,000
Six Months and Less [Member]
Certificates of Deposit	43,304
Greater Than Six Months Through One Year [Member] | Zero-.99 Percent [Member]
Certificates of Deposit	1,499
Greater Than Six Months Through One Year [Member] | One-1.99 Percent [Member]
Certificates of Deposit	20
Greater Than Six Months Through One Year [Member]
Certificates of Deposit	1,519
Greater Than One Year [Member] | One-1.99 Percent [Member]
Certificates of Deposit	40
Greater Than One Year [Member]
Certificates of Deposit	$ 40

XML

Note 14 - Regulatory Matters (Detail)	Dec. 31, 2012
Regulatory Approval Requirement To Pay Dividends Years of Retained Net Profits	2

XML

Note 5 - Comprehensive Income (Tables)

3 Months Ended

Mar. 31, 2013

Schedule of Comprehensive Income (Loss) [Table Text Block]

	Three Months Ended March 31,
(in thousands)	2013			2012
Net income	$	1,442		$	592
Other comprehensive income:
(Decrease) increase in net unrealized gains on investment securities available for sale, net of tax benefit (expense) of $113 and ($66) for the three months ended March 31, 2013 and 2012, respectively		(163	)		93
Comprehensive income	$	1,279		$	685

XML

Note 4 - Derivative Financial Instruments (Detail) - Income from Derivatives (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Mar. 31, 2013
Non-hedging interest rate derivatives:
Other non-interest income	$ (20)
Other non-interest expense	$ (20)

XML

Note 3 - Loans, Allowance for Loan Losses, and Non-Performing Assets (Detail) - Recorded Investment in Loans and Allowance for Loan Losses (USD $)	3 Months Ended
	Mar. 31, 2013		Mar. 31, 2012	Dec. 31, 2012
Allowance for loan losses:
Beginning balance	$ 6,015,000		$ 5,284,000
Allowance for loan losses ending balance	6,619,000		5,288,000
Provision for loan losses	(500,000)
Charge-offs			(8,000)
Recoveries	1,104,000		12,000
As of March 31, 2013:
Allowance for loan losses ending balance: individually evaluated for impairment			700,000	500,000
Allowance for loan losses ending balance: collectively evaluated for impairment	6,619,000		4,588,000	5,515,000
Loans:
Loan balance: individually evaluated for impairment	1,188,000		7,623,000	2,144,000
Loan balance: collectively evaluated for impairment	296,624,000		222,300,000	264,482,000
Loan balance	297,812,000		229,923,000	266,626,000
Commercial [Member]
Allowance for loan losses:
Beginning balance	2,277,000		2,584,000
Allowance for loan losses ending balance	1,631,000		2,290,000
Provision for loan losses	(1,700,000)		(300,000)
Charge-offs	0		(3,000)
Recoveries	1,054,000		9,000
As of March 31, 2013:
Allowance for loan losses ending balance: individually evaluated for impairment	0		700,000	500,000
Allowance for loan losses ending balance: collectively evaluated for impairment	1,631,000		1,590,000	1,777,000
Loans:
Loan balance: individually evaluated for impairment	843,000		2,229,000	1,799,000
Loan balance: collectively evaluated for impairment	58,929,000		62,503,000	56,970,000
Loan balance	59,772,000	[1]	64,732,000	58,769,000	[1]
Commercial Real Estate Loans [Member]
Allowance for loan losses:
Beginning balance	2,450,000		1,252,000
Allowance for loan losses ending balance	3,200,000		1,605,000
Provision for loan losses	750,000		350,000
Charge-offs	0		0
Recoveries	0		3,000
As of March 31, 2013:
Allowance for loan losses ending balance: individually evaluated for impairment	0		0	0
Allowance for loan losses ending balance: collectively evaluated for impairment	3,200,000		1,605,000	2,450,000
Loans:
Loan balance: individually evaluated for impairment	0		3,724,000
Loan balance: collectively evaluated for impairment	125,939,000		68,812,000	110,031,000
Loan balance	125,939,000		72,536,000	110,031,000
Residential [Member]
Allowance for loan losses:
Beginning balance	508,000		583,000
Allowance for loan losses ending balance	698,000		548,000
Provision for loan losses	190,000		(35,000)
Charge-offs	0		0
Recoveries	0		0
As of March 31, 2013:
Allowance for loan losses ending balance: individually evaluated for impairment	0		0	0
Allowance for loan losses ending balance: collectively evaluated for impairment	698,000		548,000	508,000
Loans:
Loan balance: individually evaluated for impairment	0		0	0
Loan balance: collectively evaluated for impairment	62,192,000		52,796,000	53,162,000
Loan balance	62,192,000		52,796,000	53,162,000
Land and Construction [Member]
Allowance for loan losses:
Beginning balance	411,000		516,000
Allowance for loan losses ending balance	741,000		511,000
Provision for loan losses	330,000		0
Charge-offs	0		(5,000)
Recoveries	0		0
As of March 31, 2013:
Allowance for loan losses ending balance: individually evaluated for impairment	0		0	0
Allowance for loan losses ending balance: collectively evaluated for impairment	741,000		511,000	411,000
Loans:
Loan balance: individually evaluated for impairment	0		1,325,000
Loan balance: collectively evaluated for impairment	29,209,000		18,402,000	19,080,000
Loan balance	29,209,000		19,727,000	19,080,000
Consumer and Other [Member]
Allowance for loan losses:
Beginning balance	369,000		349,000
Allowance for loan losses ending balance	349,000		334,000
Provision for loan losses	(70,000)		(15,000)
Charge-offs	0		0
Recoveries	50,000		0
As of March 31, 2013:
Allowance for loan losses ending balance: individually evaluated for impairment	0		0	0
Allowance for loan losses ending balance: collectively evaluated for impairment	349,000		334,000	369,000
Loans:
Loan balance: individually evaluated for impairment	345,000		345,000	345,000
Loan balance: collectively evaluated for impairment	20,355,000		19,787,000	25,239,000
Loan balance	$ 20,700,000	[2]	$ 20,132,000	$ 25,584,000	[2]

[1] Unsecured commercial loan balances were $9.7 million and $10.0 million at March 31, 2013 and December 31, 2012, respectively.

[2] Unsecured consumer and other loan balances were $1.8 million and $901,000 at March 31, 2013 and December 31, 2012, respectively.

XML

Note 2 - Investments (Detail) - Investments Categorized as Available for Sale (USD $) In Thousands, unless otherwise specified	Mar. 31, 2013	Dec. 31, 2012
Investments — Available for Sale
Amortized Cost	$ 164,171	$ 177,086
Gross Unrealized Gains	3,884	4,157
Gross Unrealized Losses	(21)	(18)
Fair Value	168,034	181,225
US Treasury Securities [Member]
Investments — Available for Sale
Amortized Cost	2,123	2,136
Gross Unrealized Gains	93	71
Gross Unrealized Losses	0	0
Fair Value	2,216	2,207
Corporate Note Securities [Member]
Investments — Available for Sale
Amortized Cost	33,983	34,534
Gross Unrealized Gains	763	741
Gross Unrealized Losses	0	0
Fair Value	34,746	35,275
Residential Mortgage Backed Securities [Member]
Investments — Available for Sale
Amortized Cost	128,065	140,416
Gross Unrealized Gains	3,028	3,345
Gross Unrealized Losses	(21)	(18)
Fair Value	$ 131,072	$ 143,743

XML

Note 5 - Comprehensive Income (Detail) - Comprehensive Income (Parentheticals) (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Mar. 31, 2013	Mar. 31, 2012
Tax on net unrealized gains on investment securities available for sale	$ 113	$ (66)

XML

Note 12 - Non-Interest Income (Detail) - Non-Interest Income (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Mar. 31, 2013	Mar. 31, 2012
Other Income	$ 359	$ 347
Loan Arrangement Fees [Member]
Other Income	236	278
Service Charges and Other Operating Income [Member]
Other Income	123	69
Total non-interest income	$ 359	$ 347

XML

Note 9 - Commitments and Contingencies (Detail) - Minimum Future Rental Payments (USD $) In Thousands, unless otherwise specified	Mar. 31, 2013
2013 (April – December)	$ 529
2014	644
2015	655
2016	675
2017	696
Thereafter	5,057
Total	$ 8,256

XML

Note 3 - Loans, Allowance for Loan Losses, and Non-Performing Assets (Detail) - Troubled Debt Restructurings (Commercial [Member], USD $) In Thousands, unless otherwise specified	Mar. 31, 2012
Commercial [Member]
Troubled Debt Restructurings:
Commercial	3
Commercial	$ 1,103
Commercial	$ 1,103

XML

Note 3 - Loans, Allowance for Loan Losses, and Non-Performing Assets

3 Months Ended

Mar. 31, 2013

Loans, Notes, Trade and Other Receivables Disclosure [Text Block]

(3)           Loans, Allowance for Loan Losses, and Non-Performing Assets

Loans

As of March 31, 2013 and December 31, 2012, total loans outstanding totaled $297.8 million and $266.7 million, respectively.  The categories of loans listed below are grouped in accordance with the primary purpose of the loans, but in the aggregate 88.1% and 84.5% of all loans are secured by real estate at March 31, 2013 and December 31, 2012, respectively.

	March 31, 2013						December 31, 2012
(dollars in thousands)	Amount Outstanding			Percent of Total			Amount Outstanding			Percent of Total
Commercial (1)	$	59,772			20.1	%	$	58,769			22.0	%
Commercial real estate		125,939			42.3	%		110,031			41.3	%
Residential		62,192			20.9	%		53,162			19.9	%
Land and construction		29,209			9.8	%		19,080			7.2	%
Consumer and other (2)		20,700			6.9	%		25,584			9.6	%
Loans, gross		297,812			100.0	%		266,626			100.0	%
Net (unearned fee income) deferred  costs		(49	)					45
Less — allowance for loan losses		(6,619	)					(6,015	)
Loans, net	$	291,144					$	260,656

(1) Unsecured commercial loan balances were $9.7 million and $10.0 million at March 31, 2013 and December 31, 2012, respectively.

(2) Unsecured consumer and other loan balances were $1.8 million and $901,000 at March 31, 2013 and December 31, 2012, respectively.

As of March 31, 2013 and December 31, 2012, substantially all of the Company’s loan customers were located in Southern California.

Allowance for Loan Losses and Recorded Investment in Loans

The following is a summary of activities for the allowance for loan losses and recorded investment in loans as of and for the three months ended March 31, 2013 and 2012:

(in thousands)	Commercial			Commercial Real Estate		Residential			Land and Construction			Consumer and Other			Total
Three Months Ended March 31, 2013:
Allowance for loan losses:
Beginning balance	$	2,277		$	2,450	$	508		$	411		$	369		$	6,015
Provision for (reduction of) loan losses		(1,700	)		750		190			330			(70	)		(500	)
Charge-offs		—			—		—			—			—			—
Recoveries		1,054			—		—			—			50			1,104
Ending balance	$	1,631		$	3,200	$	698		$	741		$	349		$	6,619
As of March 31, 2013:
Ending balance: individually evaluated for impairment	$	—		$	—	$	—		$	—		$	—		$	—
Ending balance: collectively evaluated for impairment		1,631			3,200		698			741			349			6,619
Total	$	1,631		$	3,200	$	698		$	741		$	349		$	6,619
Loans:
Ending balance: individually evaluated for impairment	$	843		$	—	$	—		$	—		$	345		$	1,188
Ending balance: collectively evaluated for impairment		58,929			125,939		62,192			29,209			20,355			296,624
Total	$	59,772		$	125,939	$	62,192		$	29,209		$	20,700		$	297,812
Three Months Ended March 31, 2012:
Allowance for loan losses:
Beginning balance	$	2,584		$	1,252	$	583		$	516		$	349		$	5,284
Provision for loan losses		(300	)		350		(35	)		—			(15	)		—
Charge-offs		(3	)		—		—			(5	)		—			(8	)
Recoveries		9			3		—			—			—			12
Ending balance	$	2,290		$	1,605	$	548		$	511		$	334		$	5,288
As of March 31, 2012:
Ending balance: individually evaluated for impairment	$	700		$	—	$	—		$	—		$	—		$	700
Ending balance: collectively evaluated for impairment		1,590			1,605		548			511			334			4,588
Total	$	2,290		$	1,605	$	548		$	511		$	334		$	5,288
Loans:
Ending balance: individually evaluated for impairment	$	2,229		$	3,724	$	—		$	1,325		$	345		$	7,623
Ending balance: collectively evaluated for impairment		62,503			68,812		52,796			18,402			19,787			222,300
Total	$	64,732		$	72,536	$	52,796		$	19,727		$	20,132		$	229,923

The following is a summary of the allowance for loan losses and recorded investment in loans as of December 31, 2012:

(in thousands)	Commercial		Commercial Real Estate		Residential		Land and Construction		Consumer and Other		Total
Allowance for loan losses:
Ending balance: individually evaluated for impairment	$	500	$	—	$	—	$	—	$	—	$	500
Ending balance: collectively evaluated for impairment		1,777		2,450		508		411		369		5,515
Total	$	2,277	$	2,450	$	508	$	411	$	369	$	6,015
Loans:
Ending balance: individually evaluated for impairment	$	1,799	$	—	$	—	$	—	$	345	$	2,144
Ending balance: collectively evaluated for impairment		56,970		110,031		53,162		19,080		25,239		264,482
Total	$	58,769	$	110,031	$	53,162	$	19,080	$	25,584	$	266,626

There were no loans acquired with deteriorated credit quality as of March 31, 2013 and December 31, 2012.

In addition to the allowance for loan losses, the Company also estimates probable losses related to unfunded lending commitments.  Unfunded lending commitments are subject to individual reviews and are analyzed and segregated by product type. These classifications, in conjunction with an analysis of historical loss experience, current economic conditions, performance trends within specific portfolio segments and any other pertinent information, result in the estimation of the reserve for unfunded lending commitments.  Provision for credit losses related to unfunded lending commitments is reported in other operating expenses in the unaudited Consolidated Statements of Operations and Comprehensive Income.  The allowance held for unfunded lending commitments is reported in accrued interest and other liabilities within the accompanying Consolidated Balance Sheets, and not as part of the allowance for loan losses in the above tables.  As of March 31, 2013 and December 31, 2012, the allowance for unfunded lending commitments was $203,000 and is primarily related to $79.2 million and $74.2 million in commitments to extend credit to customers and $2.1 million and $1.9 million in standby/commercial letters of credit at March 31, 2013 and December 31, 2012, respectively.

Non-Performing Assets

The following table presents an aging analysis of the recorded investment of past due loans as of March 31, 2013 and December 31, 2012.  Payment activity is reviewed by management on a monthly basis to determine the performance of each loan.  Loans are considered to be non-performing when a loan is greater than 90 days delinquent.  Loans that are 90 days or more past due may still accrue interest if they are well-secured and in the process of collection.  There were no additions to non-performing loans during the three months ended March 31, 2013 and 2012.  Non-performing loans represented 0.3% and 0.7% of total loans at March 31, 2013 and December 31, 2012, respectively.  There were no accruing loans past due 90 days or more at March 31, 2013.  At December 31, 2012, there was one accruing residential loan totaling $2.3 million that was past due 90 days or more. This loan continued to accrue interest because it was well secured and in the process of collection.

(in thousands)	30-59 Days Past Due		60-89 Days Past Due		> 90 Days Past Due		Total Past Due		Current		Total
As of March 31, 2013:
Commercial	$	198	$	—	$	572	$	770	$	59,002	$	59,772
Commercial real estate		—		—		—		—		125,939		125,939
Residential		—		—		—		—		62,192		62,192
Land and construction		—		—		—		—		29,209		29,209
Consumer and other		—		50		345		395		20,305		20,700
Totals	$	198	$	50	$	917	$	1,165	$	296,647	$	297,812
As of December 31, 2012:
Commercial	$	599	$	577	$	812	$	1,988	$	56,781	$	58,769
Commercial real estate		4,828		—		2,300		7,128		102,903		110,031
Residential		—		—		—		—		53,162		53,162
Land and construction		—		—		—		—		19,080		19,080
Consumer and other		—		—		345		345		25,239		25,584
Totals	$	5,427	$	577	$	3,457	$	9,461	$	257,165	$	266,626

The following table sets forth non-accrual loans and other real estate owned at March 31, 2013 and December 31, 2012:

(dollars in thousands)	March 31, 2013			December 31, 2012
Non-accrual loans:
Commercial	$	572		$	1,509
Consumer and other		345			345
Total non-accrual loans		917			1,854
OREO		90			90
Total non-performing assets	$	1,007		$	1,944
Non-performing assets to gross loans and OREO		0.34	%		0.73	%
Non-performing assets to total assets		0.20	%		0.39	%

Credit Quality Indicators

The following table represents the credit exposure by internally assigned grades at March 31, 2013 and December 31, 2012.  This grading analysis estimates the capability of the borrower to repay the contractual obligations of the loan agreements in accordance with the loan terms.  The Company’s internal credit risk grading system is based on management’s experiences with similarly graded loans.  Credit risk grades are reassessed each quarter based on any recent developments potentially impacting the creditworthiness of the borrower, as well as other external statistics and factors, which may affect the risk characteristics of the respective loan.

The Company’s internally assigned grades are as follows:

Pass – Strong credit with no existing or known potential weaknesses deserving of management's close attention.

Special Mention – Potential weaknesses that deserve management’s close attention.  Borrower and guarantor’s capacity to meet all financial obligations is marginally adequate or deteriorating.

Substandard – Inadequately protected by the paying capacity of the Borrower and/or collateral pledged. The borrower or guarantor is unwilling or unable to meet loan terms or loan covenants for the foreseeable future.

Doubtful – All the weakness inherent in one classified as Substandard with the added characteristic that those weaknesses in place make the collection or liquidation in full, on the basis of current conditions, highly questionable and improbable.

Loss – Considered uncollectible or no longer a bankable asset. This classification does not mean that the asset has absolutely no recoverable value. In fact, a certain salvage value is inherent in these loans. Nevertheless, it is not practical or desirable to defer writing off a portion or whole of a perceived asset even though partial recovery may be collected in the future.

(in thousands)	Commercial		Commercial Real Estate		Residential		Land and Construction		Consumer and Other
As of March 31, 2013:
Grade:
Pass	$	52,010	$	125,316	$	62,192	$	29,209	$	20,305
Special Mention		6,471		—		—		—		—
Substandard		1,291		623		—		—		395
Total	$	59,772	$	125,939	$	62,192	$	29,209	$	20,700
As of December 31, 2012:
Grade:
Pass	$	49,717	$	109,397	$	53,162	$	19,080	$	25,190
Special Mention		6,609		—		—		—		—
Substandard		2,443		634		—		—		394
Total	$	58,769	$	110,031	$	53,162	$	19,080	$	25,584

There were no loans assigned to the Doubtful or Loss grade as of March 31, 2013 and December 31, 2012.

Impaired Loans

The following table includes the recorded investment and unpaid principal balances for impaired loans with the associated allowance amount, if applicable.  Management determined the specific allowance based on the present value of expected future cash flows, discounted at the loan’s effective interest rate, except when the remaining source of repayment for the loan is the operation or liquidation of the collateral.  In those cases, the current fair value of the collateral, less selling costs was used to determine the specific allowance recorded.  Also presented in the table below are the average recorded investments in the impaired loans and the related amount of interest recognized during the time within the period that the impaired loans were impaired. When the ultimate collectability of the total principal of an impaired loan is in doubt and the loan is on nonaccrual status, all payments are applied to principal, under the cost recovery method. When the ultimate collectability of the total principal of an impaired loan is not in doubt and the loan is on non-accrual status, contractual interest is credited to interest income when received, under the cash basis method. The average balances are calculated based on the month-end balances of the loans of the period reported.

(in thousands)	Recorded Investment		Unpaid Principal Balance		Related Allowance		Average Recorded Investment
As of and for the three months ended March 31, 2013:
With no related allowance recorded:
Commercial	$	844	$	1,120	$	—	$	931
Commercial real estate		—		—		—		—
Residential		—		—		—		—
Land and construction		—		—		—		—
Consumer and other		345		345		—		345
With an allowance recorded:
Commercial	$	—	$	—	$	—	$	271
Commercial real estate		—		—		—		—
Residential		—		—		—		—
Land and construction		—		—		—		—
Consumer and other		—		—		—		—
Totals:
Commercial	$	844	$	1,120	$	—	$	1,202
Commercial real estate	$	—	$	—	$	—	$	—
Residential	$	—	$	—	$	—	$	—
Land and construction	$	—	$	—	$	—	$	—
Consumer and other	$	345	$	345	$	—	$	345
As of and for the year ended December 31, 2012:
With no related allowance recorded:
Commercial	$	988	$	1,303	$	—	$	1,098
Commercial real estate		—		—		—		3,113
Residential		—		—		—		—
Land and construction		—		—		—		1,155
Consumer and other		345		345		—		345
With an allowance recorded:
Commercial	$	811	$	1,990	$	500	$	1,084
Commercial real estate		—		—		—		—
Residential		—		—		—		—
Land and construction		—		—		—		—
Consumer and other		—		—		—		—
Totals:
Commercial	$	1,799	$	3,293	$	500	$	2,182
Commercial real estate	$	—	$	—	$	—	$	3,113
Residential	$	—	$	—	$	—	$	—
Land and construction	$	—	$	—	$	—	$	1,155
Consumer and other	$	345	$	345	$	—	$	345

During the three months ended March 31, 2013 and 2012, the average balance of impaired loans was $1.5 million and $7.8 million, respectively.  As of March 31, 2013 and December 31, 2012, there was $917,000 and $1.9 million, respectively, of impaired loans on non-accrual status.  During the three months ended March 31, 2013 and 2012, interest income recognized on impaired loans subsequent to their classification as impaired was $3,000 and $3,000, respectively.  The Company stops accruing interest on these loans on the date they are classified as non-accrual and reverses any uncollected interest that had been previously accrued as income.  The Company may begin recognizing interest income on these loans as cash interest payments are received, if collection of principal is reasonably assured.

Troubled Debt Restructurings

There were no troubled debt restructurings during the three months ended March 31, 2013.  Troubled debt restructurings for the three months ended March 31, 2012 are set forth in the following table.

	For the Three Months Ended March 31, 2012
(dollars in thousands)	Number of Loans		Pre Modification Outstanding Recorded Investment			Post Modification Outstanding Recorded Investment
Troubled Debt Restructurings:
Commercial		3		$	1,103		$	1,103

The modifications in connection with the troubled debt restructurings during the three months ended March 31, 2012 were primarily related to extending the amortization period of these loans.  The impact on the Company's determination of the allowance for loan losses related to these troubled debt restructurings was not material and resulted in no charge-offs during the three months ended March 31, 2013 and 2012.  During the three months ended March 31, 2013, there was one commercial loan, with a recorded investment of $572,000 at March 31, 2013, that defaulted within twelve months of its modification date.  As of March 31, 2012, there had been no defaults on any loans that were modified as troubled debt restructurings during the preceding twelve months.  A troubled debt restructuring is considered to be in default once it becomes 60 days or more past due following a modification.

XML

Note 9 - Commitments and Contingencies (Detail) - Future Restricted Stock Expense (USD $) In Thousands, unless otherwise specified	Mar. 31, 2013
2013 (April – December)	$ 438
2014	323
2015	150
2016	52
2017	10
Total	$ 973

XML

Note 3 - Loans, Allowance for Loan Losses, and Non-Performing Assets (Detail) - Aging Analysis of Past Due Loans (USD $) In Thousands, unless otherwise specified	Mar. 31, 2013	Dec. 31, 2012	Mar. 31, 2012
Total	$ 297,812	$ 266,626	$ 229,923
Commercial [Member]
30-59 Days Past Due	198	599
60-89 Days Past Due	0	577
> 90 Days Past Due	572	812
Total Past Due	770	1,988
Current	59,002	56,781
Total	59,772	58,769
Commercial Real Estate Loans [Member]
30-59 Days Past Due	0	4,828
60-89 Days Past Due	0	0
> 90 Days Past Due	0	2,300
Total Past Due	0	7,128
Current	125,939	102,903
Total	125,939	110,031
Residential [Member]
30-59 Days Past Due	0	0
60-89 Days Past Due	0	0
> 90 Days Past Due	0	0
Total Past Due	0	0
Current	62,192	53,162
Total	62,192	53,162
Land and Construction [Member]
30-59 Days Past Due	0	0
60-89 Days Past Due	0	0
> 90 Days Past Due	0	0
Total Past Due	0	0
Current	29,209	19,080
Total	29,209	19,080
Consumer and Other [Member]
30-59 Days Past Due	0	0
60-89 Days Past Due	50	0
> 90 Days Past Due	345	345
Total Past Due	395	345
Current	20,305	25,239
Total	20,700	25,584
Total [Member]
30-59 Days Past Due	198	5,427
60-89 Days Past Due	50	577
> 90 Days Past Due	917	3,457
Total Past Due	1,165	9,461
Current	296,647	257,165
Total	$ 297,812	$ 266,626

XML

Note 9 - Commitments and Contingencies (Tables)

3 Months Ended

Mar. 31, 2013

Schedule of Future Minimum Rental Payments for Operating Leases [Table Text Block]

Years ending December 31,
2013 (April – December)	$	529
2014	644
2015	655
2016	675
2017	696
Thereafter	5,057
Total	$	8,256

Schedule of Share-based Compensation Arrangement by Share-based Payment Award, Restricted Stock Units, Vested and Expected to Vest [Table Text Block]

Years ending December 31,
2013 (April – December)	$	438
2014	323
2015	150
2016	52
2017	10
Total	$	973

XML

Note 8 - Other Borrowings (Tables)

3 Months Ended

Mar. 31, 2013

Schedule of Debt [Table Text Block]

Maturity Date	Interest Rate		March 31, 2013			December 31, 2012
May 23, 2013		0.63%		$	2,500	$	2,500
May 23, 2014		1.14%			2,500		2,500
December 29, 2014		0.83%			5,000		5,000
December 30, 2014		0.74%			2,500		2,500
May 26, 2015		1.65%			2,500		2,500
May 23, 2016		2.07%			2,500		2,500
December 29, 2016		1.38%			5,000		5,000
December 30, 2016		1.25%			2,500		2,500
	Total			$	25,000	$	25,000

XML

Note 7 - Deposits (Detail) - Deposits by Category (USD $) In Thousands, unless otherwise specified	Mar. 31, 2013	Dec. 31, 2012
Non-interest bearing demand deposits (in Dollars)	$ 195,540	$ 196,026
Non-interest bearing demand deposits	47.20%	47.00%
Interest bearing checking (in Dollars)	22,930	23,233
Interest bearing checking	5.50%	5.60%
Money market deposits and savings (in Dollars)	151,196	152,094
Money market deposits and savings	36.50%	36.50%
Certificates of deposit (in Dollars)	44,863	45,328
Certificates of deposit	10.80%	10.90%
Total (in Dollars)	$ 414,529	$ 416,681
Total	100.00%	100.00%

XML

Note 3 - Loans, Allowance for Loan Losses, and Non-Performing Assets (Detail) - Nonaccrual Loans and Other Real Estate Owned (USD $)	Mar. 31, 2013	Dec. 31, 2012
Non-accrual loans:
OREO	$ 90,000	$ 90,000
Total non-performing assets	1,007,000	1,944,000
Non-performing assets to gross loans and OREO	0.34%	0.73%
Non-performing assets to total assets	0.20%	0.39%
Commercial [Member]
Non-accrual loans:
Nonaccrual loans	572,000	1,509,000
Consumer and Other [Member]
Non-accrual loans:
Nonaccrual loans	345,000	345,000
Total Nonaccrual Loans [Member]
Non-accrual loans:
Nonaccrual loans	$ 917,000	$ 1,854,000

XML

Note 10 - Fair Value Measurements (Tables)

3 Months Ended

Mar. 31, 2013

Fair Value, Assets Measured on Recurring Basis [Table Text Block]

			Fair Value Measurements Using
(in thousands)	Fair Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
At March 31, 2013:
Investments-Available for Sale
U.S. Gov’t treasuries	$	2,216	$	2,216	$	—	$	—
Corporate Notes		34,746		—		34,746		—
Residential Mortgage-Backed Securities		131,072		—		131,072		—
Derivative Assets - Interest Rate Swaps		87		—		87		—
Derivative Liabilities - Interest Rate Swaps		87		—		87		—
At December 31, 2012:
Investments-Available for Sale
U.S. Gov’t treasuries	$	2,207	$	2,207	$	—	$	—
Corporate Notes		35,275		—		35,275		—
Residential Mortgage-Backed Securities		143,743		—		143,743		—
Derivative Assets – Interest Rate Swaps		107		—		107		—
Derivative Liabilities – Interest Rate Swaps		107		—		107		—

Fair Value Measurements, Nonrecurring [Table Text Block]

			Fair Value Measurements Using
(in thousands)	Fair Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
At March 31, 2013:
Impaired loans
Commercial	$	844	$	—	$	—	$	844
OREO
Land and construction		90		—		—		90
Total	$	934	$	—	$	—	$	934
At December 31, 2012:
Impaired loans
Commercial	$	889	$	—	$	—	$	889
OREO
Land and construction		90		—		—		90
Total	$	979	$	—	$	—	$	979

Fair Value, by Balance Sheet Grouping [Table Text Block]

			Fair Value Measurements Using:
(dollars in thousands)	Carrying Amount		Level 1		Level 2		Level 3		Total
As of March 31, 2013
Assets
Cash and cash equivalents	$	27,508	$	27,508	$	—	$	—	$	27,508
Investment securities		168,034		2,216		165,818		—		168,034
FRB and FHLB stock		3,778		—		—		—		N/A
Loans, net		291,144		—		—		292,658		292,658
Non-hedging interest rate swaps		87		—		87		—		87
Accrued interest receivable		1,411		1,411		—		—		1,411
Liabilities
Non-interest bearing deposits	$	195,540	$	195,540	$	—	$	—	$	195,540
Interest bearing deposits		218,989		174,126		44,863		—		218,989
Other borrowings		25,000		—		25,380		—		25,380
Non-hedging interest rate swaps		87		—		87		—		87
Accrued interest payable		179		179		—		—		179
As of December 31, 2012
Assets
Cash and cash equivalents	$	50,555	$	50,555	$	—	$	—	$	50,555
Investment securities		181,225		2,207		179,018		—		181,225
FRB and FHLB stock		3,778		—		—		—		N/A
Loans, net		260,656		—		—		260,482		260,482
Non-hedging interest rate swaps		107		—		107		—		107
Accrued interest receivable		1,322		1,322		—		—		1,322
Liabilities
Non-interest bearing deposits	$	196,026	$	196,026	$	—	$	—	$	196,026
Interest bearing deposits		220,655		175,327		45,328		—		220,655
Other borrowings		29,475		—		29,885		—		29,885
Non-hedging interest rate swaps		107		—		107		—		107
Accrued interest payable		157		157		—		—		157

XML

Note 12 - Non-Interest Income (Tables)

3 Months Ended

Mar. 31, 2013

Schedule of Non-Interest Income Table Text Block

	Three Months Ended March 31,
(in thousands)	2013		2012
Loan arrangement fees	$	236	$	278
Service charges and other operating income		123		69
Total non-interest income	$	359	$	347

XML

Note 2 - Investments

3 Months Ended

Mar. 31, 2013

Investment [Text Block]

(2)          Investments

The following is a summary of the investments categorized as Available for Sale at March 31, 2013 and December 31, 2012:

(in thousands)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
At March 31, 2013:
Investments — Available for Sale
U.S. Gov’t Treasuries	$	2,123	$	93	$	—		$	2,216
Corporate Notes		33,983		763		—			34,746
Residential Mortgage-Backed Securities		128,065		3,028		(21	)		131,072
Total	$	164,171	$	3,884	$	(21	)	$	168,034
At December 31, 2012:
Investments — Available for Sale
U.S. Gov’t Treasuries	$	2,136	$	71	$	—		$	2,207
Corporate Notes		34,534		741		—			35,275
Residential Mortgage-Backed Securities		140,416		3,345		(18	)		143,743
Total	$	177,086	$	4,157	$	(18	)	$	181,225

The Company did not have any investment securities categorized as “Held to Maturity” or “Trading” at March 31, 2013 or December 31, 2012.  At March 31, 2013 and December 31, 2012, there were no holdings of securities of any one issuer other than the U.S. government or its agencies, in an amount greater than 10% of shareholders’ equity.

Additionally, at March 31, 2013 and December 31, 2012, the carrying amount of securities pledged to the State of California Treasurer’s Office to secure their deposits was $43.2 million and $47.7 million, respectively.  Deposits from the State of California were $34.0 million at both March 31, 2013 and December 31, 2012.

The following table summarizes the fair value of AFS securities and the weighted average yield of investment securities by contractual maturity at March 31, 2013.  Residential mortgage-backed securities are included in maturity categories based on their stated maturity date.  Expected maturities may differ from contractual maturities because issuers may have the right to call or prepay obligations.  The weighted average life of these securities was 2.64 years at March 31, 2013.

(dollars in thousands)

Available for Sale	1 Year or Less		Weighted Average Yield			After 1 Through 5 Years		Weighted Average Yield			After 5 Through 10 Years		Weighted Average Yield			After 10 Years		Weighted Average Yield			Total		Weighted Average Yield
U.S. Government Treasuries	$	—		—	%	$	2,216		0.13	%	$	—		—	%	$	—		—	%	$	2,216		0.13	%
Corporate Notes		14,149		2.41			20,597		2.06			—		—			—		—			34,746		2.21
Residential Mortgage-Backed Securities		23		4.58			888		4.67			75,449		1.83			54,712		1.86			131,072		1.86
Total	$	14,172		2.42	%	$	23,701		1.98	%	$	75,449		1.83	%	$	54,712		1.86	%	$	168,034		1.95	%

A total of six and four securities had unrealized losses at March 31, 2013 and December 31, 2012, respectively.  Information pertaining to securities with gross unrealized losses aggregated by investment category and length of time that individual securities have been in a continuous loss position, follows:

	Less than Twelve Months					Twelve Months or More
(in thousands)	Gross Unrealized Losses			Fair Value		Gross Unrealized Losses		Fair Value
At March 31, 2013:
Investments-Available for Sale
Residential Mortgage-Backed Securities	$	(21	)	$	10,846	$	—	$	—
At December 31, 2012:
Investments-Available for Sale
Residential Mortgage-Backed Securities	$	(18	)	$	7,584	$	—	$	—

The Company’s assessment that it has the ability to continue to hold impaired investment securities along with its evaluation of their future performance provide the basis for it to conclude that its impaired securities are not other-than-temporarily impaired.  In assessing whether it is more likely than not that the Company will be required to sell any impaired security before its anticipated recovery, which may be at their maturity, it considers the significance of each investment, the amount of impairment, as well as the Company’s liquidity position and the impact on the Company’s capital position.  As a result of its analyses, the Company determined at March 31, 2013 and December 31, 2012 that the unrealized losses on its securities portfolio on which impairments had not been recognized are temporary.

XML

Note 13 - Stock-Based Compensation (Tables)

3 Months Ended

Mar. 31, 2013

Schedule of Share-based Compensation, Restricted Stock Units Award Activity [Table Text Block]

	Three Months Ended March 31,
	2013					2012
Restricted Shares	Number of Shares			Weighted Avg Fair Value at Grant Date		Number of Shares			Weighted Avg  Fair Value at Grant Date
Beginning balance		563,516		$	4.23		536,733		$	4.03
Vested		(6,290	)		3.58		(8,790	)		4.11
Forfeited and surrendered		(4,000	)		4.04		—			—
Ending balance		553,226		$	4.23		527,943		$	4.05

Schedule of Share-Based Compensation, Shares Authorized Under Stock Option Plans

	Shares Reserved		Less Shares Previously  Exercised/Vested		Less Shares  Outstanding		Total Shares  Available for  Future Issuance
2004 Founder Stock Option Plan		150,000		8,000		133,700		8,300
Director and Employee Stock Option Plan		1,434,000		216,924		1,045,673		171,403
Equity Incentive Plan		1,200,000		503,797		553,226		142,977

XML

Note 3 - Loans, Allowance for Loan Losses, and Non-Performing Assets (Detail) (USD $)	3 Months Ended
	Mar. 31, 2013	Mar. 31, 2012	Dec. 31, 2012
Loans and Leases Receivable, Gross	$ 297,812,000	$ 229,923,000	$ 266,626,000
Loans and Leases Receivable Total			266,700,000
Percentage of Loan Portfolio Secured By Real Estate	88.10%		84.50%
Unsecured Commercial Loan Balances	9,700,000		10,000,000
Unsecured Consumer and Other Loan Balances	1,800,000		901,000
Nonperforming Loans to Gross Loans	0.30%		0.70%
Financing Receivable, Recorded Investment, 90 Days Past Due and Still Accruing	0
Impaired Financing Receivable, Average Recorded Investment	1,500,000	7,800,000
Impaired Financing Receivable, Interest Income, Accrual Method	3,000	3,000
Financing Receivable, Modifications, Subsequent Default, Number of Contracts	1
Financing Receivable, Modifications, Subsequent Default, Recorded Investment	572,000
Impaired Loans [Member]
Financing Receivable, Recorded Investment, Nonaccrual Status	917,000		1,900,000
Commitments to Extend Credit [Member]
Other Commitment	79,200,000		74,200,000
Standby Letters of Credit [Member]
Other Commitment	2,100,000		1,900,000
Residential [Member]
Loans and Leases Receivable, Gross	62,192,000	52,796,000	53,162,000
Financing Receivable, Recorded Investment, 90 Days Past Due and Still Accruing			2,300,000
Unfunded Lending Commitments [Member]
Unfunded Lending Commitments, Allowance	$ 203,000		$ 203,000

XML

Note 6 - Premises and Equipment (Detail) (USD $)	3 Months Ended
	Mar. 31, 2013	Mar. 31, 2012
Depreciation, Depletion and Amortization	$ 130,000	$ 107,000

XML

Note 14 - Regulatory Matters (Detail) - The Company’s and the Bank’s Capital Ratios (USD $) In Thousands, unless otherwise specified	Mar. 31, 2013	Dec. 31, 2012
For Capital Adequacy, Amount (in Dollars)	$ 28,721	$ 25,977
For Capital Adequacy, Ratio	8.00%	8.00%
To Be Well Capitalized, Amount (in Dollars)	35,900	32,470
To Be Well Capitalized	10.00%	10.00%
For Capital Adequacy, Amount (in Dollars)	14,360	12,988
For Capital Adequacy, Ratio	4.00%	4.00%
To Be Well Capitalized, Amount (in Dollars)	21,540	19,482
To Be Well Capitalized, Ratio	6.00%	6.00%
For Capital Adequacy, Amount (in Dollars)	19,314	19,748
For Capital Adequacy, Ratio	4.00%	4.00%
To Be Well Capitalized, Amount (in Dollars)	24,144	24,696
To Be Well Capitalized, Ratio	5.00%	5.00%
Company [Member]
Amount (in Dollars)	52,882	50,823
Ratio	14.73%	15.65%
Amount (in Dollars)	48,366	46,738
Ratio	13.47%	14.39%
Amount (in Dollars)	48,366	46,738
Ratio	10.02%	9.47%
Bank [Member]
Amount (in Dollars)	51,716	49,635
Ratio	14.41%	15.29%
Amount (in Dollars)	47,200	45,549
Ratio	13.15%	14.03%
Amount (in Dollars)	$ 47,200	$ 45,549
Ratio	9.77%	9.22%

XML

Consolidated Balance Sheets (Current Period Unaudited) (USD $) In Thousands, unless otherwise specified	Mar. 31, 2013	Dec. 31, 2012
ASSETS
Cash and due from banks	$ 8,422	$ 6,967
Interest earning deposits at other financial institutions	19,086	43,588
Total cash and cash equivalents	27,508	50,555
Investment securities — Available for Sale (“AFS”), at estimated fair value	168,034	181,225
Loans, net of allowance for loan losses of $6,619 and $6,015 at March 31, 2013 and December 31, 2012, respectively	291,144	260,656
Premises and equipment, net	917	1,020
Federal Home Loan Bank (“FHLB”) and Federal Reserve Bank (“FRB”) stock	3,778	3,778
Accrued interest and other assets	2,034	1,939
Total Assets	493,415	499,173
LIABILITIES AND STOCKHOLDERS’ EQUITY
Non-interest bearing demand deposits	195,540	196,026
Interest bearing deposits:
Interest bearing checking (“NOW”)	22,930	23,233
Money market deposits and savings	151,196	152,094
Certificates of deposit less than $100	1,227	1,341
Certificates of deposit of $100 or greater	43,636	43,987
Total deposits	414,529	416,681
Other borrowings	25,000	29,475
Accrued interest and other liabilities	3,246	3,844
Total Liabilities	442,775	450,000
Commitments and contingencies (Note 9)	0	0
Stockholders’ Equity:
Preferred stock, $0.01 par value — 10,000,000 shares authorized, none issued and outstanding at March 31, 2013 and December 31, 2012, respectively	0	0
Common stock, $0.01 par value — 50,000,000 shares authorized, 10,961,560 and 10,965,560 issued at March 31, 2013 and December 31, 2012, respectively	110	110
Additional paid-in capital	65,226	65,038
Accumulated deficit	(9,457)	(10,899)
Accumulated other comprehensive income	2,273	2,436
Treasury stock at cost — 1,828,537 and 1,828,432 shares at March 31, 2013 and December 31, 2012, respectively	(7,512)	(7,512)
Total Stockholders’ Equity	50,640	49,173
Total Liabilities and Stockholders’ Equity	$ 493,415	$ 499,173

XML

Note 3 - Loans, Allowance for Loan Losses, and Non-Performing Assets (Detail) - Credit Exposure by Internally Assigned Grades (USD $) In Thousands, unless otherwise specified	Mar. 31, 2013	Dec. 31, 2012	Mar. 31, 2012
Grade:
Internal Credit Grade	$ 297,812	$ 266,626	$ 229,923
Commercial [Member] | Pass [Member]
Grade:
Internal Credit Grade	52,010	49,717
Commercial [Member] | Special Mention [Member]
Grade:
Internal Credit Grade	6,471	6,609
Commercial [Member] | Substandard [Member]
Grade:
Internal Credit Grade	1,291	2,443
Commercial [Member] | Total [Member]
Grade:
Internal Credit Grade	59,772	58,769
Commercial [Member]
Grade:
Internal Credit Grade	59,772	58,769
Commercial Real Estate Loans [Member] | Pass [Member]
Grade:
Internal Credit Grade	125,316	109,397
Commercial Real Estate Loans [Member] | Special Mention [Member]
Grade:
Internal Credit Grade	0	0
Commercial Real Estate Loans [Member] | Substandard [Member]
Grade:
Internal Credit Grade	623	634
Commercial Real Estate Loans [Member] | Total [Member]
Grade:
Internal Credit Grade	125,939	110,031
Commercial Real Estate Loans [Member]
Grade:
Internal Credit Grade	125,939	110,031
Residential [Member] | Pass [Member]
Grade:
Internal Credit Grade	62,192	53,162
Residential [Member] | Special Mention [Member]
Grade:
Internal Credit Grade	0	0
Residential [Member] | Substandard [Member]
Grade:
Internal Credit Grade	0	0
Residential [Member] | Total [Member]
Grade:
Internal Credit Grade	62,192	53,162
Residential [Member]
Grade:
Internal Credit Grade	62,192	53,162
Land and Construction [Member] | Pass [Member]
Grade:
Internal Credit Grade	29,209	19,080
Land and Construction [Member] | Special Mention [Member]
Grade:
Internal Credit Grade	0	0
Land and Construction [Member] | Substandard [Member]
Grade:
Internal Credit Grade	0	0
Land and Construction [Member] | Total [Member]
Grade:
Internal Credit Grade	29,209	19,080
Land and Construction [Member]
Grade:
Internal Credit Grade	29,209	19,080
Consumer and Other [Member] | Pass [Member]
Grade:
Internal Credit Grade	20,305	25,190
Consumer and Other [Member] | Special Mention [Member]
Grade:
Internal Credit Grade	0	0
Consumer and Other [Member] | Substandard [Member]
Grade:
Internal Credit Grade	395	394
Consumer and Other [Member] | Total [Member]
Grade:
Internal Credit Grade	20,700	25,584
Consumer and Other [Member]
Grade:
Internal Credit Grade	$ 20,700	$ 25,584

XML

Consolidated Statements of Cash Flows (Unaudited) (USD $)	3 Months Ended
	Mar. 31, 2013	Mar. 31, 2012
Cash flows from operating activities:
Net income	$ 1,442,000	$ 592,000
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization of premises and equipment	130,000	107,000
Amortization of premiums on investment securities, net	514,000	299,000
Provision for (reduction of) loan losses	(500,000)
Amortization (accretion) of deferred loan fees, net of costs	12,000	(10,000)
Non-cash stock compensation, net of forfeitures	188,000	136,000
(Increase) decrease in accrued interest and other assets	(95,000)	78,000
Decrease in accrued interest and other liabilities	(485,000)	(336,000)
Net cash provided by operating activities	1,206,000	866,000
Activities in AFS investment securities:
Purchases		(8,303,000)
Maturities and principal reductions	12,401,000	8,018,000
(Increase) decrease in loans, net	(30,000,000)	3,009,000
Purchase of premises and equipment	(27,000)	(13,000)
Redemption of FRB stock and FHLB stock		81,000
Net cash (used in) provided by investing activities	(17,626,000)	2,792,000
Cash flows from financing activities:
Net (decrease) increase in deposits	(2,152,000)	27,739,000
Repayment of other borrowings	(4,475,000)
Purchase of treasury stock		(166,000)
Net cash (used in) provided by financing activities	(6,627,000)	27,573,000
(Decrease) increase in cash and cash equivalents	(23,047,000)	31,231,000
Cash and cash equivalents, beginning of period	50,555,000	41,926,000
Cash and cash equivalents, end of period	27,508,000	73,157,000
Supplemental cash flow information:
Interest	182,000	233,000
Income taxes	$ 52,000	$ 70,000

XML

Note 8 - Other Borrowings (Detail) - Long Term Borrowings (USD $) In Thousands, unless otherwise specified	Mar. 31, 2013	Dec. 31, 2012
Federal Home Loan Bank Advances	$ 25,000	$ 25,000
May 23, 2013 [Member]
Interest Rate	0.63%
Federal Home Loan Bank Advances	2,500	2,500
May 23, 2014 [Member]
Interest Rate	1.14%
Federal Home Loan Bank Advances	2,500	2,500
December 29, 2014 [Member]
Interest Rate	0.83%
Federal Home Loan Bank Advances	5,000	5,000
December 30, 2014 [Member]
Interest Rate	0.74%
Federal Home Loan Bank Advances	2,500	2,500
May 26, 2015 [Member]
Interest Rate	1.65%
Federal Home Loan Bank Advances	2,500	2,500
May 23, 2016 [Member]
Interest Rate	2.07%
Federal Home Loan Bank Advances	2,500	2,500
December 29, 2016 [Member]
Interest Rate	1.38%
Federal Home Loan Bank Advances	5,000	5,000
December 30, 2016 [Member]
Interest Rate	1.25%
Federal Home Loan Bank Advances	$ 2,500	$ 2,500

XML

Note 1 - Summary of Significant Accounting Policies (Detail) - Earnings Per Share (USD $) In Thousands, except Share data, unless otherwise specified	3 Months Ended
	Mar. 31, 2013	Mar. 31, 2012
Net income (in Dollars)	$ 1,442	$ 592
Average number of common shares outstanding	8,573,508	8,505,031
Average number of common shares outstanding used to calculate diluted earnings per common share	8,920,941	8,721,304
Restricted Stock [Member]
Effect of dilution of share based compensation	328,659	216,273
Stock Options [Member]
Effect of dilution of share based compensation	18,774

XML

Note 10 - Fair Value Measurements (Detail) - Fair Value of Assets Measured on Non-Recurring Basis (USD $) In Thousands, unless otherwise specified	Mar. 31, 2013	Dec. 31, 2012
Impaired Loans [Member] | Commercial [Member] | Total [Member]
Asset Measured on a nonrecurring basis	$ 844	$ 889
Impaired Loans [Member] | Commercial [Member] | Fair Value, Inputs, Level 3 [Member]
Asset Measured on a nonrecurring basis	844	889
Land and Construction [Member] | Other Real Estate Owned [Member] | Total [Member]
Asset Measured on a nonrecurring basis	90	90
Land and Construction [Member] | Other Real Estate Owned [Member] | Fair Value, Inputs, Level 3 [Member]
Asset Measured on a nonrecurring basis	90	90
Total [Member] | Total [Member]
Asset Measured on a nonrecurring basis	934	979
Total [Member] | Fair Value, Inputs, Level 3 [Member]
Asset Measured on a nonrecurring basis	$ 934	$ 979

XML

Note 2 - Investments (Tables)

3 Months Ended

Mar. 31, 2013

Schedule of Available-for-sale Securities Reconciliation [Table Text Block]

(in thousands)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
At March 31, 2013:
Investments — Available for Sale
U.S. Gov’t Treasuries	$	2,123	$	93	$	—		$	2,216
Corporate Notes		33,983		763		—			34,746
Residential Mortgage-Backed Securities		128,065		3,028		(21	)		131,072
Total	$	164,171	$	3,884	$	(21	)	$	168,034
At December 31, 2012:
Investments — Available for Sale
U.S. Gov’t Treasuries	$	2,136	$	71	$	—		$	2,207
Corporate Notes		34,534		741		—			35,275
Residential Mortgage-Backed Securities		140,416		3,345		(18	)		143,743
Total	$	177,086	$	4,157	$	(18	)	$	181,225

Available-for-sale Securities [Table Text Block]

Available for Sale	1 Year or Less		Weighted Average Yield			After 1 Through 5 Years		Weighted Average Yield			After 5 Through 10 Years		Weighted Average Yield			After 10 Years		Weighted Average Yield			Total		Weighted Average Yield
U.S. Government Treasuries	$	—		—	%	$	2,216		0.13	%	$	—		—	%	$	—		—	%	$	2,216		0.13	%
Corporate Notes		14,149		2.41			20,597		2.06			—		—			—		—			34,746		2.21
Residential Mortgage-Backed Securities		23		4.58			888		4.67			75,449		1.83			54,712		1.86			131,072		1.86
Total	$	14,172		2.42	%	$	23,701		1.98	%	$	75,449		1.83	%	$	54,712		1.86	%	$	168,034		1.95	%

Unrealized Gain (Loss) on Investments [Table Text Block]

	Less than Twelve Months					Twelve Months or More
(in thousands)	Gross Unrealized Losses			Fair Value		Gross Unrealized Losses		Fair Value
At March 31, 2013:
Investments-Available for Sale
Residential Mortgage-Backed Securities	$	(21	)	$	10,846	$	—	$	—
At December 31, 2012:
Investments-Available for Sale
Residential Mortgage-Backed Securities	$	(18	)	$	7,584	$	—	$	—

XML

Note 2 - Investments (Detail) (USD $)	Mar. 31, 2013	Dec. 31, 2012
Interest-bearing Domestic Deposit, Certificates of Deposits	$ 44,863,000	$ 45,328,000
Securities Weighted Average Life	2.64
Available-for-sale, Securities in Unrealized Loss Positions, Qualitative Disclosure, Number of Positions	6	4
To California Treasurer's Office [Member]
Available-for-sale Securities Pledged as Collateral	43,200,000	47,700,000
From California Treasurer's Office [Member]
Interest-bearing Domestic Deposit, Certificates of Deposits	$ 34,000,000	$ 34,000,000

XML

Note 4 - Derivative Financial Instruments (Tables)

3 Months Ended

Mar. 31, 2013

Schedule of Derivative Instruments [Table Text Block]

	March 31, 2013						December 31, 2012
(in thousands)	Notional Amount			Estimated Fair Value			Notional Amount			Estimated Fair Value
Non-hedging interest rate derivatives:
Commercial loan interest rate swaps	$	2,757		$	87		$	2,800		$	107
Commercial loan interest rate swaps	$	(2,757	)	$	(87	)	$	(2,800	)	$	(107	)

Schedule of Derivative Instruments, Effect on Other Comprehensive Income (Loss) [Table Text Block]

(in thousands)	Three Months Ended March 31, 2013
Non-hedging interest rate derivatives:
Other non-interest income	$	(20	)
Other non-interest expense	$	(20	)

Non-Hedging Interest Rate Swaps [Member]

Schedule of Derivative Instruments [Table Text Block]

	Weighted-Average
	Interest Rate Paid			Interest Rate Received
Non-hedging interest rate swaps		3.40	%		4.85	%
Non-hedging interest rate swaps		4.85	%		3.40	%

XML

Note 13 - Stock-Based Compensation (Detail) (USD $)	3 Months Ended
	Mar. 31, 2013	Mar. 31, 2012
Restricted Stock or Unit Expense (in Dollars)	$ 188,000	$ 136,000
Restricted Stock [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Grants in Period	0	0
Share-based Compensation Arrangement by Share-based Payment Award, Options, Vested in Period, Fair Value (in Dollars)	$ 23,000	$ 36,000
Founder 2004 [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Options, Grants in Period, Gross	0	0
Share-based Compensation Arrangement by Share-based Payment Award, Options, Exercises in Period	0	0
Share-based Compensation Arrangement by Share-based Payment Award, Options, Forfeitures and Expirations in Period	0	0
Director and Employee Stock Option Plan [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Options, Grants in Period, Gross	0	0
Share-based Compensation Arrangement by Share-based Payment Award, Options, Exercises in Period	0	0
Share-based Compensation Arrangement by Share-based Payment Award, Options, Forfeitures and Expirations in Period	0	0
Share-based Compensation Arrangement by Share-based Payment Award, Options, Outstanding, Number	1,045,673	1,045,673
Share-based Compensation Arrangement by Share-based Payment Award, Options, Outstanding, Weighted Average Exercise Price (in Dollars per share)	$ 6.05	$ 6.05
Founder 2004 [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Options, Outstanding, Weighted Average Remaining Contractual Term	328 days	1 year 332 days
Share-based Compensation Arrangement by Share-based Payment Award, Options, Outstanding, Number	133,700	133,700
Share-based Compensation Arrangement by Share-based Payment Award, Options, Outstanding, Weighted Average Exercise Price (in Dollars per share)	$ 5.00	$ 5.00
Director and Employee Stock Option Plan [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Options, Outstanding, Weighted Average Remaining Contractual Term	1 year 142 days	2 years 142 days

XML

Note 1 - Summary of Significant Accounting Policies

3 Months Ended

Mar. 31, 2013

Significant Accounting Policies [Text Block]

(1)          Summary of Significant Accounting Policies

Nature of Operations

1st Century Bancshares, Inc., a Delaware corporation (“Bancshares”) is a bank holding company with one subsidiary, 1st Century Bank, National Association (the “Bank”).  The Bank commenced operations on March 1, 2004 in the State of California operating under the laws of a National Association (“N.A.”) regulated by the Office of the Comptroller of the Currency (the “OCC”). The Bank is a commercial bank that focuses on closely held and family owned businesses and their employees, professional service firms, real estate professionals and investors, the legal, accounting and medical professions, and small and medium-sized businesses and individuals principally in Los Angeles County. The Bank provides a wide range of banking services to meet the financial needs of the local residential community, with an orientation primarily directed toward owners and employees of the Bank’s business client base. The Bank is subject to both the regulations of and periodic examinations by the OCC, which is the Bank’s federal regulatory agency. Bancshares and the Bank are collectively referred to herein as “the Company.”

Basis of Presentation

The accompanying unaudited consolidated financial statements have been prepared in accordance with the instructions to Form 10-Q and, therefore, do not include all footnotes as would be necessary for a fair presentation of financial position, results of operations and comprehensive income, changes in stockholders’ equity and cash flows in conformity with accounting principles generally accepted in the United States of America (“GAAP”). However, these interim unaudited consolidated financial statements reflect all adjustments (consisting solely of normal recurring adjustments and accruals) which, in the opinion of management, are necessary for a fair presentation of financial position, results of operations and comprehensive income, changes in stockholders’ equity and cash flows for the interim periods presented. These unaudited consolidated financial statements have been prepared on a basis consistent with, and should be read in conjunction with, the audited consolidated financial statements as of and for the year ended December 31, 2012, and the notes thereto, included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2012 filed with the SEC, under the Securities and Exchange Act of 1934, (the “Exchange Act”).  The unaudited consolidated financial statements include the accounts of Bancshares and the Bank.  All intercompany accounts and transactions have been eliminated.

The results of operations for the three months ended March 31, 2013 are not necessarily indicative of the results of operations that may be expected for any other interim period or for the year ending December 31, 2013.

The Company’s accounting and reporting policies conform to GAAP and to general practices within the banking industry. A summary of the significant accounting and reporting policies consistently applied in the preparation of the accompanying unaudited consolidated financial statements follows:

Use of Estimates

Management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period.  Significant assumptions and estimates used by management in preparation of the consolidated financial statements include assumptions and assessments made in connection with calculating the allowance for loan losses and determining the realizability of the Company’s deferred tax assets.  It is at least reasonably possible that certain assumptions and estimates could prove to be incorrect and cause actual results to differ materially and adversely from the amounts reported in the consolidated financial statements included herewith.

Cash and Cash Equivalents

Cash and cash equivalents include cash and due from banks, interest earning deposits at other financial institutions with original maturities less than 90 days and all highly liquid investments with original maturities of less than 90 days.

Cash Flows

Cash and cash equivalents include cash, deposits with other financial institutions with maturities fewer than 90 days, and federal funds sold.  Net cash flows are reported for loan and deposit transactions, interest bearing deposits in other financial institutions and short-term borrowings.

Investment Securities

Investmentsecurities are classified in three categories. Debt securities that management has a positive intent and ability to hold to maturity are classified as “Held to Maturity” or “HTM” and are recorded at amortized cost. Debt and equity securities bought and held principally for the purpose of selling in the near term are classified as “Trading” securities and are measured at fair value, with unrealized gains and losses included in earnings. Debt and equity securities not classified as “Held to Maturity” or “Trading” with readily determinable fair values are classified as “Available for Sale” or “AFS” and are recorded at fair value, with unrealized gains and losses excluded from earnings and reported in other comprehensive income. The Company uses estimates from third parties in arriving at fair value determinations which are derived in accordance with fair value measurement standards.

Purchase premiums and discounts are recognized in interest income using the interest method over the terms of the securities. Declines in the fair value of investment securities below their cost that are deemed to be other-than-temporary are reflected in earnings as realized losses to the extent the impairment is related to credit losses. The amount of the impairment related to other factors is recognized in other comprehensive income provided that management does not have the intent to sell the securities and it is more likely than not that management will not have to sell the security before recovery of its cost basis.  In estimating other-than-temporary impairment losses, management considers (1) the length of time and the extent to which the fair value has been less than cost, (2) the financial condition and near-term prospects of the issuer, and (3) the intent and ability of the Company to retain its investment in the issuer for a period of time sufficient to allow for any anticipated recovery in fair value. Gains and losses on the sale of securities are recorded on the trade date and are determined using the specific identification method.

Federal Reserve Bank Stock and Federal Home Loan Bank Stock

The Bank is a member of the Federal Reserve System (“Fed” or “FRB”).  FRB stock is carried at cost and is considered a nonmarketable equity security.  Cash dividends from the FRB are reported as interest income on an accrual basis.

The Bank is a member and stockholder of the capital stock of the Federal Home Loan Bank of San Francisco (“FHLB of San Francisco” or “FHLB”).  Members are required to own a certain amount of stock based on the level of borrowings and other factors, and may invest in additional amounts.  FHLB of San Francisco stock is carried at cost and is considered a nonmarketable equity security.  Both cash and stock dividends are reported as interest income.

Loans

Loans, net, are stated at the unpaid principal balances less the allowance for loan losses and unamortized deferred fees and costs. Loan origination fees, net of related direct costs, are deferred and accreted to interest income as an adjustment to yield over the respective maturities of the loans using the effective interest method.

Interest on loans is accrued as earned on a daily basis, except where reasonable doubt exists as to the collection of interest and principal, in which case the accrual of interest is discontinued and the loan is placed on non-accrual status.  Loans are placed on non-accrual at the time principal or interest is 90 days delinquent unless well secured and in the process of collection. Interest on non-accrual loans is accounted for on a cash-basis or cost-recovery method, until qualifying for return to accrual status. In order for a loan to return to accrual status, all principal and interest amounts owed must be brought current and future payments must be reasonably assured.

A loan is charged-off at any time the loan is determined to be uncollectible.  Collateral dependent loans, which generally include commercial real estate loans, residential loans, and construction and land loans, are typically charged down to their net realizable value when a loan is impaired or on non-accrual status.  All other loans are typically charged-off when, based upon current available facts and circumstances, it’s determined that either: (1) a loan is uncollectible, (2) repayment is determined to be protracted beyond a reasonable time frame, or (3) the loan is classified as a loss determined by either the Bank’s internal review process or by external examiners.

Loans are considered impaired when, based upon current information and events, it is probable that the Company will be unable to collect all principal and interest amounts due according to the original contractual terms of the loan agreement on a timely basis. The Company evaluates impairment on a loan-by-loan basis. Once a loan is determined to be impaired, the impairment is measured based on the present value of the expected future cash flows discounted at the loan’s effective interest rate or by using the loan’s most recent market value or the fair value of the collateral if the loan is collateral dependent.  Loans that experience insignificant payment delays or payment shortfalls are generally not considered to be impaired.

When the measurement of an impaired loan is less than the recorded amount of the loan, a valuation allowance is established by recording a charge to the provision for loan losses. Subsequent increases or decreases in the valuation allowance for impaired loans are recorded by adjusting the existing valuation allowance for the impaired loan with a corresponding charge or credit to the provision for loan losses.  The Company’s policy for recognizing interest income on impaired loans is the same as that for non-accrual loans.

Troubled Debt Restructurings

In situations where, for economic or legal reasons related to a borrower’s financial difficulties, management may grant a concession for other than an insignificant period of time to the borrower that would not otherwise be considered, the related loan is classified as a troubled debt restructuring (“TDR”).  Management strives to identify borrowers in financial difficulty early and work with them to modify their loans to more affordable terms before their loan reaches nonaccrual status.  Concessions may include interest rate reductions or below market interest rates, principal forgiveness, restructuring amortization schedules and other actions intended to minimize potential losses.

Allowance for Loan Losses

The allowance for loan losses is established through a provision for loan losses charged to operations and represents an estimate of credit losses inherent in the Company’s loan portfolio that have been incurred as of the balance sheet date. Loan losses are charged against the allowance when management believes that principal is uncollectible. Subsequent repayments or recoveries, if any, are credited to the allowance. Management periodically assesses the adequacy of the allowance for loan losses by reference to many quantitative and qualitative factors that may be weighted differently at various times depending on prevailing conditions.  The provisions reflect management’s evaluation of the adequacy of the allowance based, in part, upon the historical loss experience of the loan portfolio, as well as estimates from historical peer group loan loss data and the loss experience of other financial institutions, augmented by management judgment.  During this process, loans are separated into the following portfolio segments: commercial loans, commercial real estate, residential, land and construction, and consumer and other loans. The relative significance of risk considerations vary by portfolio segment.  For commercial loans, commercial real estate loans and land and construction, the primary risk consideration is a borrower’s ability to generate sufficient cash flows to repay their loan.  Secondary considerations include the creditworthiness of guarantors and the valuation of collateral.  In addition to the creditworthiness of a borrower, the type and location of real estate collateral is an important risk factor for commercial real estate and land and construction loans.  The primary risk consideration for residential loans and consumer loans are a borrower’s personal cash flow and liquidity, as well as collateral value.

Loss ratios for all portfolio segments are evaluated on a quarterly basis.  Loss ratios associated with historical loss experience are determined based on a rolling migration analysis of each portfolio segment within the portfolio.  This migration analysis estimates loss factors based on the performance of each portfolio segment over a four and a half year time period.  These loss ratios are then adjusted, if determined necessary, based on other factors including, but not limited to, historical peer group loan loss data and the loss experience of other financial institutions.  Management carefully monitors changing economic conditions, the concentrations of loan categories, values of collateral, the financial condition of the borrowers, the history of the loan portfolio, and historical peer group loan loss data to determine the adequacy of the allowance for loan losses.  As a part of this process, management typically focuses on loan-to-value (“LTV”) percentages to assess the adequacy of loss ratios of collateral dependent loans within each portfolio segment discussed above, trends within each portfolio segment, as well as general economic and real estate market conditions where the collateral and borrower are located.  For loans that are not collateral dependent, which generally consist of commercial and consumer and other loans, management typically focuses on general business conditions where the borrower operates, trends within the portfolio, and other external factors to evaluate the severity of loss factors.  The allowance is based on estimates and actual losses may vary from the estimates.

In addition, regulatory agencies, as a part of their examination process, periodically review the Bank’s allowance for loan losses, and may require the Bank to make additions to the allowance based on their judgment about information available to them at the time of their examinations.  No assurance can be given that adverse future economic conditions will not lead to increased delinquent loans, and increases in the provision for loan losses and/or charge-offs. Management believes that the allowance as of March 31, 2013 and December 31, 2012 was adequate to absorb probable incurred credit losses inherent in the loan portfolio.

Other Real Estate Owned

OREO represents real estate acquired through or in lieu of foreclosure.  OREO is held for sale and is initially recorded at fair value less estimated costs of disposition at the date of foreclosure, establishing a new cost basis. Subsequent to foreclosure, valuations are periodically performed by management and the assets are carried at the lower of cost or estimated fair value less costs of disposition.  OREO is included in accrued interest and other assets within the Consolidated Balance Sheets and the net operating results, if any, from OREO are recognized as non-interest expense within the unaudited Consolidated Statements of Operations and Comprehensive Income.

Furniture, Fixtures and Equipment, net

Leasehold improvements and furniture, fixtures and equipment are carried at cost, less depreciation and amortization. Furniture, fixtures and equipment are depreciated using the straight-line method over the estimated useful life of the asset (three to five years). Leasehold improvements are depreciated using the straight-line method over the terms of the related leases or the estimated lives of the improvements, whichever is shorter.

Advertising Costs

Advertising costs are expensed as incurred.

Income Taxes

The Company files consolidated federal and combined state income tax returns. Income tax expense or benefit is the total of the current year income tax payable or refundable and the change in the deferred tax assets and liabilities (excluding deferred tax assets and liabilities related to components of other comprehensive income). Deferred tax assets and liabilities are the expected future tax amounts for the temporary differences between carrying amounts and tax basis of assets and liabilities, computed using enacted tax rates.

Deferred income tax assets and liabilities are determined using the liability (or balance sheet) method. Under this method, the net deferred tax asset or liability is determined based on the tax effects of the temporary differences between the book and tax bases of the various balance sheet assets and liabilities and gives current recognition to changes in the rates and laws.  A valuation allowance, if needed, reduces deferred tax assets to the amount expected to be realized. The Company records a valuation allowance if it believes, based on all available evidence, that it is “more likely than not” that the future tax assets will not be realized. This assessment requires management to evaluate the Company’s ability to generate sufficient future taxable income or use eligible tax carrybacks, if any, to determine the need for a valuation allowance.

During the year ended December 31, 2009, the Company established a full valuation allowance against the deferred tax assets due to the uncertainty regarding its realizability.  At March 31, 2013 and December 31, 2012, management reassessed the need for this valuation allowance and concluded that a full valuation allowance remained appropriate.  Management reached this conclusion as a result of the Company’s cumulative losses since inception, and the anticipated near term economic climate in which the Company will operate.  Management will continue to evaluate the potential realizability of the deferred tax assets and will continue to maintain a valuation allowance to the extent it is determined that it is more likely than not that these assets will not be realized. At March 31, 2013 and December 31, 2012, the Company maintained a deferred tax liability of $1.6 million and $1.7 million, respectively, in connection with net unrealized gains on investment securities, which is included in Accrued Interest and Other Liabilities within the accompanying Consolidated Balance Sheets.  The Company did not utilize this deferred tax liability to reduce its tax valuation allowance due to the fact that management does not currently intend to dispose of these investments and realize the associated gains.

At March 31, 2013 and December 31, 2012, the Company did not have any tax benefits disallowed under accounting standards for uncertainties in income taxes.  A tax position is recognized as a benefit only if it is “more likely than not” that the tax position would be sustained in a tax examination, with a tax examination being presumed to occur. The amount recognized is the largest amount of tax benefit that is greater than 50% likely of being realized on examination. For tax positions not meeting the “more likely than not” test, no tax benefit is recorded.  If applicable, the Company has elected to record interest accrued and penalties related to unrecognized tax benefits in tax expense.

Comprehensive Income

Accounting principles generally require that recognized revenue, expenses, gains and losses be included in net income. However, certain changes in assets and liabilities, such as unrealized gains and losses on Available for Sale securities, are reported as a separate component of the stockholders’ equity section of the Consolidated Balance Sheets and, along with net income, are components of comprehensive income.

Earnings per Share

The Company reports both basic and diluted earnings per share. Basic earnings per share is determined by dividing net income by the average number of shares of common stock outstanding, while diluted earnings per share is determined by dividing net income by the average number of shares of common stock outstanding adjusted for the dilutive effect of common stock equivalents. Potential dilutive common shares related to outstanding stock options and restricted stock are determined using the treasury stock method.  For the three months ended March 31, 2013 and 2012, there were 370,073 and 1,179,373, respectively stock options that were excluded from the diluted earnings per share calculation due to their antidilutive impact.  For the three months ended March 31, 2013 and 2012, there were no restricted shares that were excluded from the diluted earnings per share calculation due to their antidilutive impact.

	Three Months Ended March 31,
(dollars in thousands)	2013		2012
Net income	$	1,442	$	592
Average number of common shares outstanding		8,573,508		8,505,031
Effect of dilution of restricted stock		328,659		216,273
Effect of dilution of stock options		18,774		—
Average number of common shares outstanding used to calculate diluted earnings per common share		8,920,941		8,721,304

Fair Value of Financial Instruments

The Company is required to make certain disclosures about its use of fair value measurements in the preparation of its financial statements.  These standards establish a three-level hierarchy for disclosure of assets and liabilities recorded at fair value.  The classification of assets and liabilities within the hierarchy is based on whether the inputs to the valuation methodology used for measurement are observable or unobservable. Observable inputs reflect market-derived or market-based information obtained from independent sources, while unobservable inputs reflect management’s estimates about market data.

Level 1	Valuation is based upon quoted prices for identical instruments traded in active markets. Level 1 instruments include securities traded on active exchange markets, such as the New York Stock Exchange, as well as U.S. Treasury securities that are traded by dealers or brokers in active over-the-counter markets.
Level 2	Valuation is based upon quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active, and model-based valuation techniques for which all significant assumptions are observable in the market. Level 2 instruments include securities traded in less active dealer or broker markets.

Level 3 Valuation is generated from model-based techniques that use at least one significant assumption not observable in the market. These unobservable assumptions reflect estimates of assumptions that market participants would use in pricing the asset or liability. Valuation techniques include use of option pricing models, discounted cash flow models and similar techniques.

Stock-Based Compensation

The Company has granted restricted stock awards to directors, employees, and a vendor under the 1st Century Bancshares 2005 Amended and Restated Equity Incentive Plan (the “Equity Incentive Plan”). The restricted stock awards are considered fixed awards as the number of shares and fair value is known at the date of grant and the fair value at the grant date is amortized over the vesting and/or service period.

Recent Accounting Pronouncements

In May 2011, the Financial Accounting Standards Board (“FASB”) issued ASU 2011-04, Fair Value Measurement (“Topic 820”) – Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRSs(“ASU 11-04”).  This ASU amends Topic 820, "Fair Value Measurements and Disclosures," to converge the fair value measurement guidance in U.S. generally accepted accounting principles and International Financial Reporting Standards.  ASU 11-04 clarifies the application of existing fair value measurement requirements, changes certain principles in Topic 820 and requires additional fair value disclosures. ASU 11-04 is effective for annual periods beginning after December 15, 2011.  The adoption of this ASU did not have a material impact on the Company’s financial position, results of operations, or cash flows.

In June 2011, the FASB issued ASU 2011-05, Comprehensive Income (“Topic 220”) – Presentation of Comprehensive Income (“ASU 11-05”).  This ASU amends Topic 220, "Comprehensive Income," to require that all nonowner changes in stockholders' equity be presented in either a single continuous statement of comprehensive income or in two separate but consecutive statements. Additionally, ASU 11-05 requires entities to present, on the face of the financial statements, reclassification adjustments for items that are reclassified from other comprehensive income to net income in the statement or statements where the components of net income and the components of other comprehensive income are presented. The option to present components of other comprehensive income as part of the statement of changes in stockholders' equity was eliminated. ASU 11-05 is effective for annual periods beginning after December 15, 2011.  The adoption of this ASU did not have a material impact on the Company’s financial position, results of operations, or cash flows.

In December 2011, the FASB issued ASU 2011-11, Balance Sheet (“Topic 210”)– Disclosures about Offsetting Assets and Liabilities (“ASU 11-11”).  This ASU amends Topic 210, “Balance Sheet,” to require an entity to disclose both gross and net information about financial instruments, such as sales and repurchase agreements and reverse sale and repurchase agreements and securities borrowing/lending arrangements, and derivative instruments that are eligible for offset in the statement of financial position and/or subject to a master netting arrangement or similar agreement.  ASU 11-11 is effective for annual and interim periods beginning on January 1, 2013.  The adoption of this ASU did not have a significant impact on the Company’s financial position, results of operations, or cash flows.

In February 2013, the FASB issued ASU 2013-02, Comprehensive Income (“Topic 220”) – Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income (“ASU 13-02”).  This ASU requires an entity to provide information about the amounts reclassified out of accumulated other comprehensive income by component. In addition, an entity is required to present, either on the face of the statement where net income is presented or in the notes, significant amounts reclassified out of accumulated other comprehensive income by the respective line items of net income but only if the amount reclassified is required under GAAP to be reclassified to net income in its entirety in the same reporting period. For other amounts that are not required under GAAP to be reclassified in their entirety to net income, an entity is required to cross-reference to other disclosures required under GAAP that provide additional detail about those amounts.  ASU 13-02 is effective prospectively for annual and interim periods beginning after December 15, 2012.  The adoption of this ASU did not have a material impact on the Company’s financial position, results of operations, or cash flows.

XML

Consolidated Balance Sheets (Current Period Unaudited) (Parentheticals) (USD $) In Thousands, except Share data, unless otherwise specified	Mar. 31, 2013	Dec. 31, 2012
Allowance for Loan Losses (in Dollars)	$ 6,619	$ 6,015
Preferred Stock, Par Value (in Dollars per share)	$ 0.01	$ 0.01
Preferred Stock, Shares Authorized	10,000,000	10,000,000
Preferred Stock, Shares Issued	0	0
Preferred Stock, Shares Outstanding	0	0
Common Stock, Par Value (in Dollars per share)	$ 0.01	$ 0.01
Common Stock, Shares Authorized	50,000,000	50,000,000
Common Stock, Shares Issued	10,961,560	10,965,560
Treasury Stock, Shares	1,828,537	1,828,432

XML

Note 12 - Non-Interest Income

3 Months Ended

Mar. 31, 2013

Other Income and Other Expense Disclosure [Text Block]

(12)          Non-Interest Income

The following table summarizes the information regarding non-interest income for the three months ended March 31, 2013 and 2012, respectively:

	Three Months Ended March 31,
(in thousands)	2013		2012
Loan arrangement fees	$	236	$	278
Service charges and other operating income		123		69
Total non-interest income	$	359	$	347

Non-interest income primarily consists of loan arrangement fees earned in connection with our college loan funding program.  During the first quarter of 2013, the Company terminated this program and does not anticipate any further loan arrangement fee earnings subsequent to the second quarter of 2013.

XML

Document And Entity Information	3 Months Ended
	Mar. 31, 2013	May 03, 2013
Document and Entity Information [Abstract]
Entity Registrant Name	1st Century Bancshares, Inc.
Document Type	10-Q
Current Fiscal Year End Date	--12-31
Entity Common Stock, Shares Outstanding		9,271,523
Amendment Flag	false
Entity Central Index Key	0001420525
Entity Current Reporting Status	Yes
Entity Voluntary Filers	No
Entity Filer Category	Smaller Reporting Company
Entity Well-known Seasoned Issuer	No
Document Period End Date	Mar. 31, 2013
Document Fiscal Year Focus	2013
Document Fiscal Period Focus	Q1

XML

Note 13 - Stock-Based Compensation

3 Months Ended

Mar. 31, 2013

Disclosure of Compensation Related Costs, Share-based Payments [Text Block]

(13)         Stock-Based Compensation

The Company grants restricted stock awards to directors and employees under the Equity Incentive Plan.  Restricted stock awards are considered fixed awards as the number of shares and fair value is known at the date of grant and the fair value at the grant date is amortized over the requisite service period.  No restricted stock awards were granted during the three months ended March 31, 2013 or 2012.

Non-cash stock compensation expense recognized in the unaudited Consolidated Statements of Operations and Comprehensive Income related to the restricted stock awards, net of estimated forfeitures, was $188,000 and $136,000 for the three months ended March 31, 2013 and 2012, respectively.  The fair value of restricted stock awards that vested during the three months ended March 31, 2013 and 2012, was $23,000 and $36,000, respectively.

The following table reflects the activities related to restricted stock awards outstanding for the three months ended March 31, 2013 and 2012, respectively.

	Three Months Ended March 31,
	2013					2012
Restricted Shares	Number of Shares			Weighted Avg Fair Value at Grant Date		Number of Shares			Weighted Avg  Fair Value at Grant Date
Beginning balance		563,516		$	4.23		536,733		$	4.03
Vested		(6,290	)		3.58		(8,790	)		4.11
Forfeited and surrendered		(4,000	)		4.04		—			—
Ending balance		553,226		$	4.23		527,943		$	4.05

The Company recognizes compensation expense for stock options by amortizing the fair value at the grant date over the service, or vesting period.

There have been no options granted, exercised or cancelled under the 2004 Founder Stock Option Plan for the three months ended March 31, 2013 or 2012.  The remaining contractual life of the 2004 Founder Stock Options outstanding was 0.90 and 1.91 years at March 31, 2013 and 2012, respectively. All options under the 2004 Founder Stock Option Plan were exercisable at March 31, 2013 and 2012.  At March 31, 2013 and 2012, the weighted average exercise price of the 133,700 shares outstanding under the 2004 Founder Stock Option Plan was $5.00.

There have been no options granted, exercised or cancelled under the Director and Employee Stock Option Plan for the three months ended March 31, 2013 or 2012.  The remaining contractual life of the Director and Employee Stock Options outstanding was 1.39 and 2.39 years at March 31, 2013 and 2012, respectively. All options under the Directors and Employee Stock Option Plan were exercisable at March 31, 2013 and 2012.  At March 31, 2013 and 2012, the weighted average exercise price of the 1,045,673 shares outstanding under the Director and Employee Stock Option Plan was $6.05.

The following tables detail the amount of shares authorized and available under all stock plans as of March 31, 2013:

	Shares Reserved		Less Shares Previously  Exercised/Vested		Less Shares  Outstanding		Total Shares  Available for  Future Issuance
2004 Founder Stock Option Plan		150,000		8,000		133,700		8,300
Director and Employee Stock Option Plan		1,434,000		216,924		1,045,673		171,403
Equity Incentive Plan		1,200,000		503,797		553,226		142,977

XML

Consolidated Statements of Operations and Comprehensive Income (Unaudited) (USD $) In Thousands, except Per Share data, unless otherwise specified	3 Months Ended
	Mar. 31, 2013	Mar. 31, 2012
Interest and fee income on:
Loans	$ 3,258	$ 2,734
Investments	779	754
Other	51	53
Total interest and fee income	4,088	3,541
Interest expense on:
Deposits	130	168
Borrowings	74	74
Total interest expense	204	242
Net interest income	3,884	3,299
Provision for (reduction of) loan losses	(500)
Net interest income after provision for (reduction of) loan losses	4,384	3,299
Non-interest income	359	347
Non-interest expenses:
Compensation and benefits	1,982	1,707
Occupancy	357	298
Professional fees	125	189
Technology	179	150
Marketing	63	53
FDIC assessments	88	71
Other operating expenses	469	570
Total non-interest expenses	3,263	3,038
Income before income taxes	1,480	608
Income tax provision	38	16
Net income	1,442	592
Other Comprehensive Income:
Net change in unrealized (losses) gains on AFS investments, net of tax	(163)	93
Comprehensive Income	$ 1,279	$ 685
Basic earnings per share (in Dollars per share)	$ 0.17	$ 0.07
Diluted earnings per share (in Dollars per share)	$ 0.16	$ 0.07

XML

Note 6 - Premises and Equipment

3 Months Ended

Mar. 31, 2013

Property, Plant and Equipment Disclosure [Text Block]

(6)           Premises and Equipment

Premises and equipment are stated at cost less accumulated depreciation and amortization.  Premises and equipment at March 31, 2013 and December 31, 2012 are comprised of the following:

(in thousands)	March 31, 2013			December 31, 2012
Leasehold improvements	$	973		$	973
Furniture & equipment		2,205			2,191
Software		674			661
Total		3,852			3,825
Accumulated depreciation		(2,935	)		(2,805	)
Premises and equipment, net	$	917		$	1,020

Depreciation and amortization included in occupancy expense was $130,000 and $107,000 for the three months ended March 31, 2013 and 2012, respectively.

XML

Note 5 - Comprehensive Income

3 Months Ended

Mar. 31, 2013

Comprehensive Income (Loss) Note [Text Block]

(5)           Comprehensive Income

Comprehensive income, which includes net income and the net change in unrealized gains on investment securities available for sale, is presented below:

	Three Months Ended March 31,
(in thousands)	2013			2012
Net income	$	1,442		$	592
Other comprehensive income:
(Decrease) increase in net unrealized gains on investment securities available for sale, net of tax benefit (expense) of $113 and ($66) for the three months ended March 31, 2013 and 2012, respectively		(163	)		93
Comprehensive income	$	1,279		$	685

The Company did not sell any available for sale securities during the three months ended March 31, 2013 and 2012.

XML

Note 3 - Loans, Allowance for Loan Losses, and Non-Performing Assets (Tables)

3 Months Ended

Mar. 31, 2013

Schedule of Accounts, Notes, Loans and Financing Receivable [Table Text Block]

	March 31, 2013						December 31, 2012
(dollars in thousands)	Amount Outstanding			Percent of Total			Amount Outstanding			Percent of Total
Commercial (1)	$	59,772			20.1	%	$	58,769			22.0	%
Commercial real estate		125,939			42.3	%		110,031			41.3	%
Residential		62,192			20.9	%		53,162			19.9	%
Land and construction		29,209			9.8	%		19,080			7.2	%
Consumer and other (2)		20,700			6.9	%		25,584			9.6	%
Loans, gross		297,812			100.0	%		266,626			100.0	%
Net (unearned fee income) deferred  costs		(49	)					45
Less — allowance for loan losses		(6,619	)					(6,015	)
Loans, net	$	291,144					$	260,656

Allowance for Credit Losses on Financing Receivables [Table Text Block]

(in thousands)	Commercial			Commercial Real Estate		Residential			Land and Construction			Consumer and Other			Total
Three Months Ended March 31, 2013:
Allowance for loan losses:
Beginning balance	$	2,277		$	2,450	$	508		$	411		$	369		$	6,015
Provision for (reduction of) loan losses		(1,700	)		750		190			330			(70	)		(500	)
Charge-offs		—			—		—			—			—			—
Recoveries		1,054			—		—			—			50			1,104
Ending balance	$	1,631		$	3,200	$	698		$	741		$	349		$	6,619
As of March 31, 2013:
Ending balance: individually evaluated for impairment	$	—		$	—	$	—		$	—		$	—		$	—
Ending balance: collectively evaluated for impairment		1,631			3,200		698			741			349			6,619
Total	$	1,631		$	3,200	$	698		$	741		$	349		$	6,619
Loans:
Ending balance: individually evaluated for impairment	$	843		$	—	$	—		$	—		$	345		$	1,188
Ending balance: collectively evaluated for impairment		58,929			125,939		62,192			29,209			20,355			296,624
Total	$	59,772		$	125,939	$	62,192		$	29,209		$	20,700		$	297,812
Three Months Ended March 31, 2012:
Allowance for loan losses:
Beginning balance	$	2,584		$	1,252	$	583		$	516		$	349		$	5,284
Provision for loan losses		(300	)		350		(35	)		—			(15	)		—
Charge-offs		(3	)		—		—			(5	)		—			(8	)
Recoveries		9			3		—			—			—			12
Ending balance	$	2,290		$	1,605	$	548		$	511		$	334		$	5,288
As of March 31, 2012:
Ending balance: individually evaluated for impairment	$	700		$	—	$	—		$	—		$	—		$	700
Ending balance: collectively evaluated for impairment		1,590			1,605		548			511			334			4,588
Total	$	2,290		$	1,605	$	548		$	511		$	334		$	5,288
Loans:
Ending balance: individually evaluated for impairment	$	2,229		$	3,724	$	—		$	1,325		$	345		$	7,623
Ending balance: collectively evaluated for impairment		62,503			68,812		52,796			18,402			19,787			222,300
Total	$	64,732		$	72,536	$	52,796		$	19,727		$	20,132		$	229,923

(in thousands)	Commercial		Commercial Real Estate		Residential		Land and Construction		Consumer and Other		Total
Allowance for loan losses:
Ending balance: individually evaluated for impairment	$	500	$	—	$	—	$	—	$	—	$	500
Ending balance: collectively evaluated for impairment		1,777		2,450		508		411		369		5,515
Total	$	2,277	$	2,450	$	508	$	411	$	369	$	6,015
Loans:
Ending balance: individually evaluated for impairment	$	1,799	$	—	$	—	$	—	$	345	$	2,144
Ending balance: collectively evaluated for impairment		56,970		110,031		53,162		19,080		25,239		264,482
Total	$	58,769	$	110,031	$	53,162	$	19,080	$	25,584	$	266,626

Past Due Financing Receivables [Table Text Block]

(in thousands)	30-59 Days Past Due		60-89 Days Past Due		> 90 Days Past Due		Total Past Due		Current		Total
As of March 31, 2013:
Commercial	$	198	$	—	$	572	$	770	$	59,002	$	59,772
Commercial real estate		—		—		—		—		125,939		125,939
Residential		—		—		—		—		62,192		62,192
Land and construction		—		—		—		—		29,209		29,209
Consumer and other		—		50		345		395		20,305		20,700
Totals	$	198	$	50	$	917	$	1,165	$	296,647	$	297,812
As of December 31, 2012:
Commercial	$	599	$	577	$	812	$	1,988	$	56,781	$	58,769
Commercial real estate		4,828		—		2,300		7,128		102,903		110,031
Residential		—		—		—		—		53,162		53,162
Land and construction		—		—		—		—		19,080		19,080
Consumer and other		—		—		345		345		25,239		25,584
Totals	$	5,427	$	577	$	3,457	$	9,461	$	257,165	$	266,626

Impaired Financing Receivables [Table Text Block]

(in thousands)	Recorded Investment		Unpaid Principal Balance		Related Allowance		Average Recorded Investment
As of and for the three months ended March 31, 2013:
With no related allowance recorded:
Commercial	$	844	$	1,120	$	—	$	931
Commercial real estate		—		—		—		—
Residential		—		—		—		—
Land and construction		—		—		—		—
Consumer and other		345		345		—		345
With an allowance recorded:
Commercial	$	—	$	—	$	—	$	271
Commercial real estate		—		—		—		—
Residential		—		—		—		—
Land and construction		—		—		—		—
Consumer and other		—		—		—		—
Totals:
Commercial	$	844	$	1,120	$	—	$	1,202
Commercial real estate	$	—	$	—	$	—	$	—
Residential	$	—	$	—	$	—	$	—
Land and construction	$	—	$	—	$	—	$	—
Consumer and other	$	345	$	345	$	—	$	345
As of and for the year ended December 31, 2012:
With no related allowance recorded:
Commercial	$	988	$	1,303	$	—	$	1,098
Commercial real estate		—		—		—		3,113
Residential		—		—		—		—
Land and construction		—		—		—		1,155
Consumer and other		345		345		—		345
With an allowance recorded:
Commercial	$	811	$	1,990	$	500	$	1,084
Commercial real estate		—		—		—		—
Residential		—		—		—		—
Land and construction		—		—		—		—
Consumer and other		—		—		—		—
Totals:
Commercial	$	1,799	$	3,293	$	500	$	2,182
Commercial real estate	$	—	$	—	$	—	$	3,113
Residential	$	—	$	—	$	—	$	—
Land and construction	$	—	$	—	$	—	$	1,155
Consumer and other	$	345	$	345	$	—	$	345

Financing Receivable Credit Quality Indicators [Table Text Block]

(in thousands)	Commercial		Commercial Real Estate		Residential		Land and Construction		Consumer and Other
As of March 31, 2013:
Grade:
Pass	$	52,010	$	125,316	$	62,192	$	29,209	$	20,305
Special Mention		6,471		—		—		—		—
Substandard		1,291		623		—		—		395
Total	$	59,772	$	125,939	$	62,192	$	29,209	$	20,700
As of December 31, 2012:
Grade:
Pass	$	49,717	$	109,397	$	53,162	$	19,080	$	25,190
Special Mention		6,609		—		—		—		—
Substandard		2,443		634		—		—		394
Total	$	58,769	$	110,031	$	53,162	$	19,080	$	25,584

Troubled Debt Restructurings on Financing Receivables [Table Text Block]

	For the Three Months Ended March 31, 2012
(dollars in thousands)	Number of Loans		Pre Modification Outstanding Recorded Investment			Post Modification Outstanding Recorded Investment
Troubled Debt Restructurings:
Commercial		3		$	1,103		$	1,103

Nonaccrual Loans [Member]

Impaired Financing Receivables [Table Text Block]

(dollars in thousands)	March 31, 2013			December 31, 2012
Non-accrual loans:
Commercial	$	572		$	1,509
Consumer and other		345			345
Total non-accrual loans		917			1,854
OREO		90			90
Total non-performing assets	$	1,007		$	1,944
Non-performing assets to gross loans and OREO		0.34	%		0.73	%
Non-performing assets to total assets		0.20	%		0.39	%

XML

Note 14 - Regulatory Matters

3 Months Ended

Mar. 31, 2013

Regulatory Capital Requirements under Banking Regulations [Text Block]

(14)         Regulatory Matters

Capital

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

Quantitative measures established by regulation to ensure capital adequacy require the Company and the Bank to maintain minimum amounts and ratios (set forth in the table below) of total and Tier 1 capital (as defined in the regulation) to risk-weighted assets (as defined) and of Tier 1 capital (as defined) to average assets (as defined). Management believes that as of March 31, 2013 and December 31, 2012, the Company and the Bank met all capital adequacy requirements to which they are subject.

At December 31, 2012, the most recent notification from the OCC categorized the Bank as well capitalized under the regulatory framework for prompt corrective action. To be categorized as well-capitalized, the Bank must maintain minimum total risk-based, Tier 1 risk-based and Tier 1 leverage ratios. There are no conditions or events since the notification that management believes have changed the Bank’s category.

The Company’s and the Bank’s capital ratios as of March 31, 2013 and December 31, 2012 are presented in the table below:

	Company					Bank					For Capital  Adequacy Purposes					For the Bank to be  Well Capitalized Under  Prompt Corrective  Measures
(dollars in thousands)	Amount		Ratio			Amount		Ratio			Amount		Ratio			Amount		Ratio
March 31, 2013:
Total Risk-Based Capital Ratio	$	52,882		14.73	%	$	51,716		14.41	%	$	28,721		8.00	%	$	35,900		10.00	%
Tier 1 Risk-Based Capital Ratio	$	48,366		13.47	%	$	47,200		13.15	%	$	14,360		4.00	%	$	21,540		6.00	%
Tier 1 Leverage Ratio	$	48,366		10.02	%	$	47,200		9.77	%	$	19,314		4.00	%	$	24,144		5.00	%
December 31, 2012:
Total Risk-Based Capital Ratio	$	50,823		15.65	%	$	49,635		15.29	%	$	25,977		8.00	%	$	32,470		10.00	%
Tier 1 Risk-Based Capital Ratio	$	46,738		14.39	%	$	45,549		14.03	%	$	12,988		4.00	%	$	19,482		6.00	%
Tier 1 Leverage Ratio	$	46,738		9.47	%	$	45,549		9.22	%	$	19,748		4.00	%	$	24,696		5.00	%

Dividends

In the ordinary course of business, Bancshares is dependent upon dividends from the Bank to provide funds for the payment of dividends to stockholders and to provide for other cash requirements. Banking regulations may limit the amount of dividends that may be paid. Approval by regulatory authorities is required if the effect of dividends declared would cause the regulatory capital of the Bank to fall below specified minimum levels. Approval is also required if dividends declared exceed the net profits for that year combined with the retained net profits for the preceding two years.  Currently, the Bank is prohibited from paying dividends to Bancshares until such time as the accumulated deficit is eliminated.

To date, Bancshares has not paid any cash dividends.  Payment of stock or cash dividends in the future will depend upon earnings and financial condition and other factors deemed relevant by Bancshares’ Board of Directors, as well as Bancshares’ legal ability to pay dividends.  Accordingly, no assurance can be given that any cash dividends will be declared in the foreseeable future.

XML

Note 9 - Commitments and Contingencies

3 Months Ended

Mar. 31, 2013

Commitments and Contingencies Disclosure [Text Block]

(9)           Commitments and Contingencies

Commitments to Extend Credit

The Company is party to financial instruments with off-balance sheet risk in the normal course of business to meet the financing needs of its customers. These financial instruments include commitments to extend credit, standby/commercial letters of credit and guarantees on revolving credit card limits. These instruments involve various levels and elements of credit and interest rate risk in excess of the amount recognized in the accompanying consolidated financial statements. The contract or notional amounts of those instruments reflect the extent of involvement the Company has in particular classes of financial instruments. The Company had $79.2 million and $74.2 million in commitments to extend credit to customers and $2.1 million and $1.9 million in standby/commercial letters of credit at March 31, 2013 and December 31, 2012, respectively.  The Company also guarantees the outstanding balance on credit cards offered at the Company, but underwritten by another financial institution.  The outstanding balances on these credit cards were $47,000 and $67,000 as of March 31, 2013 and December 31, 2012, respectively.

Lease Commitments

The Company leases office premises under two operating leases that will expire in November 2013 and June 2024, respectively. Rental expense, which is included in occupancy expense and is reduced for any sublease income earned during the period, was $168,000 and $143,000 for the three months ended March 31, 2013 and 2012, respectively. Sublease income earned during the three months ended March 31, 2013 and 2012 were $19,000 and $27,000, respectively.  On April 1, 2013, the Company ended its sublease agreement.  The Company does not expect to receive any further sublease income in connection with its leased space.

The projected minimum rental payments under the term of the leases at March 31, 2013 are as follows (in thousands):

Years ending December 31,
2013 (April – December)	$	529
2014	644
2015	655
2016	675
2017	696
Thereafter	5,057
Total	$	8,256

Litigation

The Company from time to time is party to lawsuits, which arise out of the normal course of business. At March 31, 2013 and December 31, 2012, the Company did not have any litigation that management believes will have a material impact on the Consolidated Balance Sheets or unaudited Consolidated Statements of Operations and Comprehensive Income.

Restricted Stock

The following table sets forth the Company’s future restricted stock expense, net of estimated forfeitures (in thousands).

Years ending December 31,
2013 (April – December)	$	438
2014	323
2015	150
2016	52
2017	10
Total	$	973

XML

Note 9 - Commitments and Contingencies (Detail) (USD $)	3 Months Ended
	Mar. 31, 2013	Mar. 31, 2012	Mar. 31, 2013 Commitments to Extend Credit [Member]	Dec. 31, 2012 Commitments to Extend Credit [Member]	Mar. 31, 2013 Standby Letters of Credit [Member]	Dec. 31, 2012 Standby Letters of Credit [Member]	Mar. 31, 2013 Credit Cards [Member]	Dec. 31, 2012 Credit Cards [Member]
Other Commitment			$ 79,200,000	$ 74,200,000	$ 2,100,000	$ 1,900,000	$ 47,000	$ 67,000
Operating Leases, Rent Expense	168,000	143,000
Operating Leases, Income Statement, Sublease Revenue	$ 19,000	$ 27,000

XML

Note 7 - Deposits

3 Months Ended

Mar. 31, 2013

Deposit Liabilities Disclosures [Text Block]

(7)           Deposits

The following table reflects the summary of deposit categories by dollar and percentage at March 31, 2013 and December 31, 2012:

	March 31, 2013					December 31, 2012
(dollars in thousands)	Amount		% of Total			Amount		% of Total
Non-interest bearing demand deposits	$	195,540		47.2	%	$	196,026		47.0	%
Interest bearing checking		22,930		5.5	%		23,233		5.6	%
Money market deposits and savings		151,196		36.5	%		152,094		36.5	%
Certificates of deposit		44,863		10.8	%		45,328		10.9	%
Total	$	414,529		100.0	%	$	416,681		100.0	%

At March 31, 2013 and December 31, 2012, the Company had three certificates of deposit with the State of California Treasurer’s Office for a total of $34.0 million, which represented 8.2% and 8.2%, respectively, of total deposits.  The deposits outstanding at March 31, 2013 are scheduled to mature in the second and third quarters of 2013.  The Company intends to renew each of these deposits at maturity.  However, there can be no assurance that the State of California Treasurer’s Office will continue to maintain deposit accounts with the Company.  The Company was required to pledge $37.4 million of agency mortgage backed securities at March 31, 2013 and December 31, 2012 in connection with these certificates of deposit.

At March 31, 2013, the Company had $5.1 million of Certificate of Deposit Accounts Registry Service (“CDARS”) reciprocal deposits, which represented 1.2% of total deposits.  At December 31, 2012, the Company had $5.2 million of CDARS reciprocal deposits, which represented 1.3% of total deposits.

The aggregate amount of certificates of deposit of $100,000 or greater at March 31, 2013 and December 31, 2012 was $43.6 million and $44.0 million, respectively.  At March 31, 2013, the maturity distribution of certificates of deposit of $100,000 or greater, including deposit accounts with the State of California Treasurer’s Office and CDARS, was as follows: $42.5 million maturing in six months or less, $1.1 million maturing in six months to one year and none maturing in more than one year.

The table below sets forth the range of interest rates, amount and remaining maturities of the certificates of deposit at March 31, 2013.

(in thousands)			Six months and less		Greater than six months through one year		Greater than one year
0.00%	to	0.99%	$	40,304	$	1,499	$	—
1.00%	to	1.99%		3,000		20		40
Total			$	43,304	$	1,519	$	40

XML

Note 8 - Other Borrowings

3 Months Ended

Mar. 31, 2013

Other Liabilities Disclosure [Text Block]

(8)           Other Borrowings

At March 31, 2013 and December 31, 2012, the Company had a borrowing/credit facility secured by a blanket lien on eligible loans at the FHLB of $126.2 million and $105.1 million, respectively. The Company had $25.0 million of long-term borrowings outstanding under this borrowing/credit facility with the FHLB at March 31, 2013 and December 31, 2012.  The Company had no overnight borrowings outstanding under this borrowing/credit facility at March 31, 2013 and December 31, 2012.

The following table summarizes the outstanding long-term borrowings under the borrowing/credit facility secured by a blanket lien on eligible loans at the FHLB at March 31, 2013 and December 31, 2012 (dollars in thousands):

Maturity Date	Interest Rate		March 31, 2013			December 31, 2012
May 23, 2013		0.63%		$	2,500	$	2,500
May 23, 2014		1.14%			2,500		2,500
December 29, 2014		0.83%			5,000		5,000
December 30, 2014		0.74%			2,500		2,500
May 26, 2015		1.65%			2,500		2,500
May 23, 2016		2.07%			2,500		2,500
December 29, 2016		1.38%			5,000		5,000
December 30, 2016		1.25%			2,500		2,500
	Total			$	25,000	$	25,000

At March 31, 2013 and December 31, 2012, the Company also had $27.0 million in Federal fund lines of credit available with other correspondent banks that could be used to disburse loan commitments and to satisfy demands for deposit withdrawals. Each of these lines of credit is subject to conditions that the Company may not be able to meet at the time when additional liquidity is needed. At December 31, 2012, there was a $4.5 million short-term overnight borrowing outstanding under these credit facilities at an interest rate of 1.09%. This borrowing was repaid on January 2, 2013.  The Company did not incur any material interest expense charges in connection with this borrowing.  There were no further borrowings under these facilities during the three months ended March 31, 2013.  As of March 31, 2013 and December 31, 2012, the Company had pledged $5.7 million and $6.2 million, respectively, of corporate notes related to these lines of credit.

XML

Note 10 - Fair Value Measurements

3 Months Ended

Mar. 31, 2013

Fair Value Disclosures [Text Block]

(10)         Fair Value Measurements

The following tables present information about the Company’s assets and liabilities measured at fair value on a recurring and non-recurring basis as of March 31, 2013 and December 31, 2012, and indicate the fair value hierarchy of the valuation techniques utilized by the Company to determine such fair value.  The Company’s assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment, and considers factors specific to the asset or liability.

Assets and Liabilities Measured on a Recurring Basis

Assets and liabilities measured at fair value on a recurring basis are summarized below:

			Fair Value Measurements Using
(in thousands)	Fair Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
At March 31, 2013:
Investments-Available for Sale
U.S. Gov’t treasuries	$	2,216	$	2,216	$	—	$	—
Corporate Notes		34,746		—		34,746		—
Residential Mortgage-Backed Securities		131,072		—		131,072		—
Derivative Assets - Interest Rate Swaps		87		—		87		—
Derivative Liabilities - Interest Rate Swaps		87		—		87		—
At December 31, 2012:
Investments-Available for Sale
U.S. Gov’t treasuries	$	2,207	$	2,207	$	—	$	—
Corporate Notes		35,275		—		35,275		—
Residential Mortgage-Backed Securities		143,743		—		143,743		—
Derivative Assets – Interest Rate Swaps		107		—		107		—
Derivative Liabilities – Interest Rate Swaps		107		—		107		—

AFS securities— As of March 31, 2013 and December 31, 2012, the Level 2 fair value of the Company’s residential mortgage-backed securities was $131.1 million and $143.7 million, respectively.  These securities consist primarily of agency mortgage-backed securities issued by the Federal National Mortgage Association (FNMA) and the Federal Home Loan Mortgage Corporation (FHLMC).  The underlying loans for these securities are residential mortgages that were primarily originated beginning in the year of 2003 through the current period.  These loans are geographically dispersed throughout the United States.  At March 31, 2013 and December 31, 2012, the weighted average rate and weighed average life of these securities were 1.86% and 1.95%, respectively, and 2.64 years and 2.92 years, respectively.

The valuation for investment securities utilizing Level 2 inputs were primarily determined by quotes received from an independent pricing service using matrix pricing, which is a mathematical technique widely used in the industry to value securities without relying exclusively on quoted market prices for the specific securities, but rather by relying on the securities’ relationship to other benchmark quoted securities.  There were no transfers into or out of Level 1 or 2 measurements during the three months ended March 31, 2013 and 2012.

Assets Measured on a Non-Recurring Basis

Assets measured at fair value on a non-recurring basis are summarized below:

			Fair Value Measurements Using
(in thousands)	Fair Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
At March 31, 2013:
Impaired loans
Commercial	$	844	$	—	$	—	$	844
OREO
Land and construction		90		—		—		90
Total	$	934	$	—	$	—	$	934
At December 31, 2012:
Impaired loans
Commercial	$	889	$	—	$	—	$	889
OREO
Land and construction		90		—		—		90
Total	$	979	$	—	$	—	$	979

Impaired loans — At the time a loan is considered impaired, it is valued at the lower of cost or fair value.  The fair value of impaired loans that are collateral dependent is determined using various valuation techniques which are not readily observable in the market place, including consideration of appraised values and other pertinent real estate market data.  These appraisals may utilize a single valuation approach or a combination of approaches including comparable sales and the income approach. Adjustments are routinely made in the appraisal process by the independent appraisers to adjust for differences between the comparable sales and income data available. Such adjustments are usually significant and typically result in a Level 3 classification of the inputs for determining fair value.  Impaired loans are evaluated on a quarterly basis for additional impairment and adjusted accordingly.  The Company recorded net recoveries of $1.1 million and $4,000 on impaired loans during the three months ended March 31, 2013 and 2012, respectively.

Other real estate owned — OREO represents real estate acquired through or in lieu of foreclosure.  OREO is held for sale and is initially recorded at fair value less estimated costs of disposition at the date of foreclosure, establishing a new cost basis. Subsequent to foreclosure, valuations are periodically performed by management and the assets are carried at the lower of cost or estimated fair value less costs of disposition.  The fair value of OREO is determined using various valuation techniques which are not readily observable in the market place, including consideration of appraised values and other pertinent real estate market data.

Estimate of Fair Value, Fair Value Disclosure [Member]

Fair Value Disclosures [Text Block]

(11)         Estimated Fair Value Information

The fair value of a financial instrument is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Fair value is best determined based upon quoted market prices. However, in many cases, there are no quoted market prices for the Company’s various financial instruments. In cases where quoted market prices are not available, fair values are based on estimates using present value or other valuation techniques. Estimated fair value amounts have been determined by using available market information and appropriate valuation methodologies. However, considerable judgment is required to interpret market data to develop the estimates of fair value. Accordingly, the estimates presented are not necessarily indicative of the amounts the Company could realize in a current market exchange.

The methods and assumptions used to estimate the fair value of each class of financial instruments for which it is practicable to estimate the value are explained below.

Cash and cash equivalents

The carrying amounts are considered to be their estimated fair values and are classified as Level 1 because of the short-term maturity of these instruments which includes Federal funds sold and interest-earning deposits at other financial institutions.

Investment securities

AFS investment securities are carried at fair value, which are based on quoted prices of exact or similar securities, or on inputs that are observable, either directly or indirectly. The Company obtains quoted prices through third party brokers.  Investment securities are classified as Level 1 to the extent that they are based on quoted prices for identical instrument traded in active markets.  Investment securities are classified as Level 2 for valuations based on quotes prices for similar securities or inputs that are observable, either directly or indirectly.

FRB and FHLB stock

It is not practical to determine the fair value of FRB and FHLB stock due to restrictions placed on its transferability.

Loans, net

For loans, the fair value is estimated using market quotes for similar assets or the present value of future cash flows, discounted using the current rate at which similar loans would be made to borrowers with similar credit ratings and for the same maturities and giving consideration to estimated prepayment risk and credit risk.  The fair value of loans is determined utilizing estimates resulting in a Level 3 classification.

Impaired loans are measured for impairment based on the present value of expected future cash flows discounted at the loan’s effective interest rate, except that as a practical expedient, the Company may measure impairment based on a loan’s observable market price, or the fair value of the collateral (net of estimated costs to sell) if the loan is collateral dependent.  The fair value of impaired loans is determined utilizing estimates resulting in a Level 3 classification.

Off-balance sheet credit-related instruments

The fair values of commitments, which include standby letters of credit and commercial letters of credit, are based upon fees currently charged to enter into similar agreements, taking into account the remaining terms of the agreements and the counterparties’ credit standing. The related fees are not considered material to the Company’s financial statements as a whole and the fair market value of the Company’s off-balance sheet credit-related instruments cannot be readily determined.  The fair value of these items is determined utilizing estimates resulting in a Level 3 classification.

Derivatives

The fair value of derivatives is based on valuation models using observable market data as of the measurement date and is classified as Level 2.

Deposits

For demand deposits, the carrying amount approximates fair value. The fair values of interest bearing checking, savings, and money market deposits are estimated by discounting future cash flows using the interest rates currently offered for deposits of similar products.  Because of the short-term maturity of these deposits, the carrying amounts are considered to be their estimated fair values and are classified as Level 1.

The fair values of the certificates of deposit are estimated by discounting future cash flows based on the rates currently offered for certificates of deposit with similar interest rates and remaining maturities.  The fair value of certificates of deposit is determined utilizing estimates resulting in a Level 2 classification.

Other borrowings

The fair values of long term FHLB advances are estimated based on the rates currently offered by the FHLB for advances with similar interest rates and remaining maturities.  The fair value of other borrowings is determined utilizing estimates resulting in a Level 2 classification.

Accrued interest

The estimated fair value for both accrued interest receivable and accrued interest payable are considered to be equivalent to the carrying amounts, resulting in a Level 1 classification.

The estimated fair value and carrying amounts of the financial instruments at March 31, 2013 and December 31, 2012 are as follows:

			Fair Value Measurements Using:
(dollars in thousands)	Carrying Amount		Level 1		Level 2		Level 3		Total
As of March 31, 2013
Assets
Cash and cash equivalents	$	27,508	$	27,508	$	—	$	—	$	27,508
Investment securities		168,034		2,216		165,818		—		168,034
FRB and FHLB stock		3,778		—		—		—		N/A
Loans, net		291,144		—		—		292,658		292,658
Non-hedging interest rate swaps		87		—		87		—		87
Accrued interest receivable		1,411		1,411		—		—		1,411
Liabilities
Non-interest bearing deposits	$	195,540	$	195,540	$	—	$	—	$	195,540
Interest bearing deposits		218,989		174,126		44,863		—		218,989
Other borrowings		25,000		—		25,380		—		25,380
Non-hedging interest rate swaps		87		—		87		—		87
Accrued interest payable		179		179		—		—		179
As of December 31, 2012
Assets
Cash and cash equivalents	$	50,555	$	50,555	$	—	$	—	$	50,555
Investment securities		181,225		2,207		179,018		—		181,225
FRB and FHLB stock		3,778		—		—		—		N/A
Loans, net		260,656		—		—		260,482		260,482
Non-hedging interest rate swaps		107		—		107		—		107
Accrued interest receivable		1,322		1,322		—		—		1,322
Liabilities
Non-interest bearing deposits	$	196,026	$	196,026	$	—	$	—	$	196,026
Interest bearing deposits		220,655		175,327		45,328		—		220,655
Other borrowings		29,475		—		29,885		—		29,885
Non-hedging interest rate swaps		107		—		107		—		107
Accrued interest payable		157		157		—		—		157

XML

Note 10 - Fair Value Measurements (Detail) - Fair Value of Assets Measured on Recurring Basis (USD $) In Thousands, unless otherwise specified	Mar. 31, 2013	Dec. 31, 2012
US Gov't Treasuries [Member] | Total [Member]
Investments-Available for Sale
Investments - Available for Sale	$ 2,216	$ 2,207
US Gov't Treasuries [Member] | Fair Value, Inputs, Level 1 [Member]
Investments-Available for Sale
Investments - Available for Sale	2,216	2,207
Corporate Notes [Member] | Total [Member]
Investments-Available for Sale
Investments - Available for Sale	34,746	35,275
Corporate Notes [Member] | Fair Value, Inputs, Level 2 [Member]
Investments-Available for Sale
Investments - Available for Sale	34,746	35,275
Residential Mortgage Backed Securities [Member] | Total [Member]
Investments-Available for Sale
Investments - Available for Sale	131,072	143,743
Residential Mortgage Backed Securities [Member] | Fair Value, Inputs, Level 2 [Member]
Investments-Available for Sale
Investments - Available for Sale	131,072	143,743
Total [Member]
Investments-Available for Sale
Derivative Assets - Interest Rate Swaps	87	107
Derivative Liabilities - Interest Rate Swaps	87	107
Fair Value, Inputs, Level 2 [Member]
Investments-Available for Sale
Derivative Assets - Interest Rate Swaps	87	107
Derivative Liabilities - Interest Rate Swaps	$ 87	$ 107

XML

Note 11 - Estimated Fair Value Information (Detail) - Fair Value and Carrying Amount of Financial Instruments (USD $) In Thousands, unless otherwise specified	Mar. 31, 2013	Dec. 31, 2012	Mar. 31, 2012	Dec. 31, 2011
Assets
Cash and cash equivalents	$ 27,508	$ 50,555	$ 73,157	$ 41,926
Cash and cash equivalents	27,508	50,555
Investment securities	168,034	181,225
Investment securities	168,034	181,225
FRB and FHLB stock	3,778	3,778
FRB and FHLB stock	3,778	3,778
Loans, net	291,144	260,656
Loans, net	292,658	260,482
Non-hedging interest rate swaps	87	107
Non-hedging interest rate swaps	87	107
Accrued interest receivable	1,411	1,322
Liabilities
Deposits	414,529	416,681
Other borrowings	25,000	29,475
Other borrowings	25,380	29,885
Non-hedging interest rate swaps	87	107
Non-hedging interest rate swaps	87	107
Accrued interest payable	179	157
Non-Interest Bearing Deposit Liabilities [Member] | Fair Value, Inputs, Level 1 [Member]
Liabilities
Deposits, fair value	195,540	196,026
Non-Interest Bearing Deposit Liabilities [Member]
Liabilities
Deposits	195,540	196,026
Deposits, fair value	195,540	196,026
Interest Bearing Deposit Liabilities [Member] | Fair Value, Inputs, Level 1 [Member]
Liabilities
Deposits, fair value	174,126	175,327
Interest Bearing Deposit Liabilities [Member] | Fair Value, Inputs, Level 2 [Member]
Liabilities
Deposits, fair value	44,863	45,328
Interest Bearing Deposit Liabilities [Member]
Liabilities
Deposits	218,989	220,655
Deposits, fair value	218,989	220,655
Fair Value, Inputs, Level 1 [Member]
Assets
Cash and cash equivalents	27,508	50,555
Investment securities	2,216	2,207
Accrued interest receivable	1,411	1,322
Liabilities
Accrued interest payable	179	157
Fair Value, Inputs, Level 2 [Member]
Assets
Investment securities	165,818	179,018
Non-hedging interest rate swaps	87	107
Liabilities
Other borrowings	25,380	29,885
Non-hedging interest rate swaps	87	107
Fair Value, Inputs, Level 3 [Member]
Assets
Loans, net	$ 292,658	$ 260,482

XML

Note 10 - Fair Value Measurements (Detail) (USD $)	3 Months Ended
	Mar. 31, 2013	Mar. 31, 2012	Dec. 31, 2012
Available-for-sale Securities (in Dollars)	$ 168,034,000		$ 181,225,000
Available for Sale Securities, Weighted Average Interest Rate	1.86%		1.95%
Financing Receivable, Allowance for Credit Losses, Recovery (in Dollars)	1,104,000	12,000
Financing Receivable, Allowance for Credit Losses, Write-downs (in Dollars)		(8,000)
Residential [Member]
Available-for-sale Securities (in Dollars)	131,100,000		143,700,000
Net [Member]
Financing Receivable, Allowance for Credit Losses, Recovery (in Dollars)	1,100,000
Financing Receivable, Allowance for Credit Losses, Write-downs (in Dollars)		$ 4,000
Weighted Average Life [Member]
Available for Sale Securities, Weighted Average Life	2.64		2.92

XML

Note 1 - Summary of Significant Accounting Policies (Detail) (USD $) In Millions, except Share data, unless otherwise specified			3 Months Ended
	Mar. 31, 2013	Dec. 31, 2012	Mar. 31, 2013 Minimum [Member]	Mar. 31, 2013 Maximum [Member]	Mar. 31, 2013 Stock Options [Member]	Mar. 31, 2012 Stock Options [Member]	Mar. 31, 2013 Restricted Stock [Member]	Mar. 31, 2012 Restricted Stock [Member]	Mar. 31, 2013 Days Delinquent for Nonaccrual Status [Member]
Loans and Leases Receivable, Impaired, Description									90
Property, Plant and Equipment, Estimated Useful Lives			three	five
Deferred Tax Liabilities, Unrealized Gains on Investment Securities (in Dollars)	$ 1.6	$ 1.7
Antidilutive Securities Excluded from Computation of Earnings Per Share, Amount (in Shares)					370,073	1,179,373	0	0

XML

Note 5 - Comprehensive Income (Detail) - Comprehensive Income (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Mar. 31, 2013	Mar. 31, 2012
Net income	$ 1,442	$ 592
(Decrease) increase in net unrealized gains on investment securities available for sale, net of tax benefit (expense) of $113 and ($66) for the three months ended March 31, 2013 and 2012, respectively	(163)	93
Comprehensive income	$ 1,279	$ 685

XML

Note 1 - Summary of Significant Accounting Policies (Tables)

3 Months Ended

Mar. 31, 2013

Schedule of Earnings Per Share, Basic and Diluted [Table Text Block]

	Three Months Ended March 31,
(dollars in thousands)	2013		2012
Net income	$	1,442	$	592
Average number of common shares outstanding		8,573,508		8,505,031
Effect of dilution of restricted stock		328,659		216,273
Effect of dilution of stock options		18,774		—
Average number of common shares outstanding used to calculate diluted earnings per common share		8,920,941		8,721,304

XML

Note 6 - Premises and Equipment (Tables)

3 Months Ended

Mar. 31, 2013

Property, Plant and Equipment [Table Text Block]

(in thousands)	March 31, 2013			December 31, 2012
Leasehold improvements	$	973		$	973
Furniture & equipment		2,205			2,191
Software		674			661
Total		3,852			3,825
Accumulated depreciation		(2,935	)		(2,805	)
Premises and equipment, net	$	917		$	1,020

XML

Note 4 - Derivative Financial Instruments (Detail) - Weighted Average Interest Rates on Interest Rate Swaps	Mar. 31, 2013
Non-Hedging Interest Rate Swap 1 [Member]
Derivative interest rate paid	3.40%
Derivative interest rate received	4.85%
Non-Hedging Interest Rate Swap 2 [Member]
Derivative interest rate paid	4.85%
Derivative interest rate received	3.40%

XML

Note 3 - Loans, Allowance for Loan Losses, and Non-Performing Assets (Detail) - Loans Outstanding (USD $) In Thousands, unless otherwise specified	Mar. 31, 2013		Dec. 31, 2012		Mar. 31, 2012	Dec. 31, 2011
Loan Category Amount Outstanding	$ 297,812		$ 266,626		$ 229,923
Net (unearned fee income) deferred costs	(49)		45
Less — allowance for loan losses	(6,619)		(6,015)		(5,288)	(5,284)
Loans, net	291,144		260,656
Commercial [Member]
Loan Category Amount Outstanding	59,772	[1]	58,769	[1]	64,732
Loan Category Percent	20.10%	[1]	22.00%	[1]
Less — allowance for loan losses	(1,631)		(2,277)		(2,290)	(2,584)
Commercial Real Estate Loans [Member]
Loan Category Amount Outstanding	125,939		110,031		72,536
Loan Category Percent	42.30%		41.30%
Less — allowance for loan losses	(3,200)		(2,450)		(1,605)	(1,252)
Residential [Member]
Loan Category Amount Outstanding	62,192		53,162		52,796
Loan Category Percent	20.90%		19.90%
Less — allowance for loan losses	(698)		(508)		(548)	(583)
Land and Construction [Member]
Loan Category Amount Outstanding	29,209		19,080		19,727
Loan Category Percent	9.80%		7.20%
Less — allowance for loan losses	(741)		(411)		(511)	(516)
Consumer and Other [Member]
Loan Category Amount Outstanding	20,700	[2]	25,584	[2]	20,132
Loan Category Percent	6.90%	[2]	9.60%	[2]
Less — allowance for loan losses	(349)		(369)		(334)	(349)
Loans Outstanding Total [Member]
Loan Category Amount Outstanding	$ 297,812		$ 266,626
Loan Category Percent	100.00%		100.00%

[1] Unsecured commercial loan balances were $9.7 million and $10.0 million at March 31, 2013 and December 31, 2012, respectively.

[2] Unsecured consumer and other loan balances were $1.8 million and $901,000 at March 31, 2013 and December 31, 2012, respectively.

XML

Consolidated Statements of Changes in Stockholders' Equity (Unaudited) (USD $) In Thousands, except Share data	Common Stock [Member]	Additional Paid-in Capital [Member]	Retained Earnings [Member]	Accumulated Other Comprehensive Income (Loss) [Member]	Treasury Stock [Member]	Total
Ending Balance at Dec. 31, 2011	$ 108	$ 64,488	$ (13,841)	$ 1,567	$ (7,271)	$ 45,051
Ending Balance (in Shares) at Dec. 31, 2011	10,841,033				(1,769,248)
Compensation expense associated with restricted stock awards, net		136				136
Common stock repurchased					(166)	(166)
Common stock repurchased (in Shares)					(43,847)
Net income			592			592
Other comprehensive income				93		93
Ending Balance at Mar. 31, 2012	108	64,624	(13,249)	1,660	(7,437)	45,706
Ending Balance (in Shares) at Mar. 31, 2012	10,841,033				(1,813,095)
Ending Balance at Dec. 31, 2012	110	65,038	(10,899)	2,436	(7,512)	49,173
Ending Balance (in Shares) at Dec. 31, 2012	10,965,560				(1,828,432)
Forfeiture of restricted stock (in Shares)	(4,000)
Forfeiture of restricted stock		(11)				(11)
Compensation expense associated with restricted stock awards, net		199				199
Common stock repurchased (in Shares)					(105)
Net income			1,442			1,442
Other comprehensive income				(163)		(163)
Ending Balance at Mar. 31, 2013	$ 110	$ 65,226	$ (9,457)	$ 2,273	$ (7,512)	$ 50,640
Ending Balance (in Shares) at Mar. 31, 2013	10,961,560				(1,828,537)

XML

Note 4 - Derivative Financial Instruments

3 Months Ended

Mar. 31, 2013

Derivative Instruments and Hedging Activities Disclosure [Text Block]

(4)           Derivative Financial Instruments

The fair value of derivative positions outstanding is included in accrued interest receivable and other assets and accrued interest payable and other liabilities in the accompanying Consolidated Balance Sheets and in the net change in each of these financial statement line items in the accompanying unaudited Consolidated Statements of Cash Flows.

Interest Rate Derivatives. The Company utilizes interest rate swaps to facilitate the needs of its customers. The Company has entered into interest rate swaps that are not designated as hedging instruments.  These derivative contracts relate to transactions in which the Company enters into an interest rate swap with a customer while at the same time entering into an offsetting interest rate swap with another financial institution.  In connection with each swap transaction, the Company agrees to pay interest to the customer on a notional amount at a variable interest rate and receive interest from the customer on a similar notional amount at a fixed interest rate.  At the same time, the Company agrees to pay another financial institution the same fixed interest rate on the same notional amount and receive the same variable interest rate on the same notional amount.  The transaction allows the Company’s customer to effectively convert a variable rate loan to a fixed rate.  Because the Company acts as an intermediary for its customer, changes in the fair value of the underlying derivative contracts for the most part offset each other and do not significantly impact the Company’s results of operations.

The notional amounts and estimated fair values of interest rate derivative contracts outstanding at March 31, 2013 are presented in the following table. There were no derivative contracts outstanding at March 31, 2012.  The Company obtains dealer quotations to value its interest rate derivative contracts.

	March 31, 2013						December 31, 2012
(in thousands)	Notional Amount			Estimated Fair Value			Notional Amount			Estimated Fair Value
Non-hedging interest rate derivatives:
Commercial loan interest rate swaps	$	2,757		$	87		$	2,800		$	107
Commercial loan interest rate swaps	$	(2,757	)	$	(87	)	$	(2,800	)	$	(107	)

The weighted-average rates paid and received for interest rate swaps outstanding at March 31, 2013 were as follows:

	Weighted-Average
	Interest Rate Paid			Interest Rate Received
Non-hedging interest rate swaps		3.40	%		4.85	%
Non-hedging interest rate swaps		4.85	%		3.40	%

Gains, Losses and Derivative Cash Flows.  For non-hedging derivative instruments, gains and losses due to changes in fair value and all cash flows are included in other non-interest income and other non-interest expense in the accompanying unaudited Consolidated Statements of Operations and Comprehensive Income.

As stated above, the Company enters into non-hedge related derivative positions primarily to accommodate the business needs of its customers.  Upon the origination of a derivative contract with a customer, the Company simultaneously enters into an offsetting derivative contract with a third party.  The Company recognizes immediate income based upon the difference in the bid/ask spread of the underlying transactions with its customers and the third party.  Because the Company acts only as an intermediary for its customer, subsequent changes in the fair value of the underlying derivative contracts for the most part offset each other and do not significantly impact the Company’s results of operations.

Amounts included in the unaudited Consolidated Statements of Operations and Comprehensive Income related to non-hedging interest rate derivative instruments are presented in the table below.

(in thousands)	Three Months Ended March 31, 2013
Non-hedging interest rate derivatives:
Other non-interest income	$	(20	)
Other non-interest expense	$	(20	)

XML

Note 8 - Other Borrowings (Detail) (USD $) In Millions, unless otherwise specified	12 Months Ended
	Dec. 31, 2012	Mar. 31, 2013 FHLB [Member]	Dec. 31, 2012 FHLB [Member]	Mar. 31, 2013 Federal Line of Credit [Member]	Dec. 31, 2012 Federal Line of Credit [Member]	Dec. 31, 2012 Short-Term Overnight Borrowing [Member]
Line of Credit Facility, Maximum Borrowing Capacity		$ 126.2	$ 105.1	$ 27.0	$ 27.0
Line of Credit Facility, Amount Outstanding		25.0	25.0			4.5
Line of Credit Facility, Interest Rate During Period	1.09%
Available-for-sale Securities Pledged as Collateral				$ 5.7	$ 6.2

XML

Note 13 - Stock-Based Compensation (Detail) - Activities Related to Restricted Stock Awards Outstanding (USD $)	3 Months Ended
	Mar. 31, 2013	Mar. 31, 2012
Beginning balance	563,516	536,733
Beginning balance (in Dollars per share)	$ 4.23	$ 4.03
Ending balance	553,226	527,943
Ending balance (in Dollars per share)	$ 4.23	$ 4.05
Vested	(6,290)	(8,790)
Vested (in Dollars per share)	$ 3.58	$ 4.11
Forfeited and surrendered	(4,000)
Forfeited and surrendered (in Dollars per share)	$ 4.04

XML

Note 7 - Deposits (Tables)

Mar. 31, 2013

Schedule of Deposits [Table Text Block]

	March 31, 2013					December 31, 2012
(dollars in thousands)	Amount		% of Total			Amount		% of Total
Non-interest bearing demand deposits	$	195,540		47.2	%	$	196,026		47.0	%
Interest bearing checking		22,930		5.5	%		23,233		5.6	%
Money market deposits and savings		151,196		36.5	%		152,094		36.5	%
Certificates of deposit		44,863		10.8	%		45,328		10.9	%
Total	$	414,529		100.0	%	$	416,681		100.0	%

Schedule of Certificates of Deposit [Table Text Block]

(in thousands)			Six months and less		Greater than six months through one year		Greater than one year
0.00%	to	0.99%	$	40,304	$	1,499	$	—
1.00%	to	1.99%		3,000		20		40
Total			$	43,304	$	1,519	$	40

XML

Note 2 - Investments (Detail) - Fair Value of AFS Securities and the Weighted Average Yield of Investment Securities by Contractual Maturity (USD $) In Thousands, unless otherwise specified	Mar. 31, 2013	Dec. 31, 2012
1 Year or Less (in Dollars)	$ 14,172
Weighted Average Yield	1.95%
After 1 Through 5 Years (in Dollars)	23,701
After 5 Through 10 Years (in Dollars)	75,449
After 10 Years (in Dollars)	54,712
Total (in Dollars)	168,034	181,225
US Treasury Securities [Member] | One Year or Less [Member]
Weighted Average Yield	0.00%
US Treasury Securities [Member] | After One Through Five Years [Member]
Weighted Average Yield	0.13%
US Treasury Securities [Member] | After Five Through Ten Years [Member]
Weighted Average Yield	0.00%
US Treasury Securities [Member] | After Ten Years [Member]
Weighted Average Yield	0.00%
US Treasury Securities [Member]
1 Year or Less (in Dollars)	0
Weighted Average Yield	0.13%
After 1 Through 5 Years (in Dollars)	2,216
After 5 Through 10 Years (in Dollars)	0
After 10 Years (in Dollars)	0
Total (in Dollars)	2,216	2,207
Corporate Note Securities [Member] | One Year or Less [Member]
Weighted Average Yield	2.41%
Corporate Note Securities [Member] | After One Through Five Years [Member]
Weighted Average Yield	2.06%
Corporate Note Securities [Member] | After Five Through Ten Years [Member]
Weighted Average Yield	0.00%
Corporate Note Securities [Member] | After Ten Years [Member]
Weighted Average Yield	0.00%
Corporate Note Securities [Member]
1 Year or Less (in Dollars)	14,149
Weighted Average Yield	2.21%
After 1 Through 5 Years (in Dollars)	20,597
After 5 Through 10 Years (in Dollars)	0
After 10 Years (in Dollars)	0
Total (in Dollars)	34,746	35,275
Residential Mortgage Backed Securities [Member] | One Year or Less [Member]
Weighted Average Yield	4.58%
Residential Mortgage Backed Securities [Member] | After One Through Five Years [Member]
Weighted Average Yield	4.67%
Residential Mortgage Backed Securities [Member] | After Five Through Ten Years [Member]
Weighted Average Yield	1.83%
Residential Mortgage Backed Securities [Member] | After Ten Years [Member]
Weighted Average Yield	1.86%
Residential Mortgage Backed Securities [Member]
1 Year or Less (in Dollars)	23
Weighted Average Yield	1.86%
After 1 Through 5 Years (in Dollars)	888
After 5 Through 10 Years (in Dollars)	75,449
After 10 Years (in Dollars)	54,712
Total (in Dollars)	$ 131,072	$ 143,743
One Year or Less [Member]
Weighted Average Yield	2.42%
After One Through Five Years [Member]
Weighted Average Yield	1.98%
After Five Through Ten Years [Member]
Weighted Average Yield	1.83%
After Ten Years [Member]
Weighted Average Yield	1.86%

XML

Accounting Policies, by Policy (Policies)

3 Months Ended

Mar. 31, 2013

Nature of Operations [Text Block]

Nature of Operations

1st Century Bancshares, Inc., a Delaware corporation (“Bancshares”) is a bank holding company with one subsidiary, 1st Century Bank, National Association (the “Bank”).  The Bank commenced operations on March 1, 2004 in the State of California operating under the laws of a National Association (“N.A.”) regulated by the Office of the Comptroller of the Currency (the “OCC”). The Bank is a commercial bank that focuses on closely held and family owned businesses and their employees, professional service firms, real estate professionals and investors, the legal, accounting and medical professions, and small and medium-sized businesses and individuals principally in Los Angeles County. The Bank provides a wide range of banking services to meet the financial needs of the local residential community, with an orientation primarily directed toward owners and employees of the Bank’s business client base. The Bank is subject to both the regulations of and periodic examinations by the OCC, which is the Bank’s federal regulatory agency. Bancshares and the Bank are collectively referred to herein as “the Company.”

Basis of Accounting, Policy [Policy Text Block]

Basis of Presentation

The accompanying unaudited consolidated financial statements have been prepared in accordance with the instructions to Form 10-Q and, therefore, do not include all footnotes as would be necessary for a fair presentation of financial position, results of operations and comprehensive income, changes in stockholders’ equity and cash flows in conformity with accounting principles generally accepted in the United States of America (“GAAP”). However, these interim unaudited consolidated financial statements reflect all adjustments (consisting solely of normal recurring adjustments and accruals) which, in the opinion of management, are necessary for a fair presentation of financial position, results of operations and comprehensive income, changes in stockholders’ equity and cash flows for the interim periods presented. These unaudited consolidated financial statements have been prepared on a basis consistent with, and should be read in conjunction with, the audited consolidated financial statements as of and for the year ended December 31, 2012, and the notes thereto, included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2012 filed with the SEC, under the Securities and Exchange Act of 1934, (the “Exchange Act”).  The unaudited consolidated financial statements include the accounts of Bancshares and the Bank.  All intercompany accounts and transactions have been eliminated.

The results of operations for the three months ended March 31, 2013 are not necessarily indicative of the results of operations that may be expected for any other interim period or for the year ending December 31, 2013.

The Company’s accounting and reporting policies conform to GAAP and to general practices within the banking industry. A summary of the significant accounting and reporting policies consistently applied in the preparation of the accompanying unaudited consolidated financial statements follows:

Use of Estimates, Policy [Policy Text Block]

Use of Estimates

Management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period.  Significant assumptions and estimates used by management in preparation of the consolidated financial statements include assumptions and assessments made in connection with calculating the allowance for loan losses and determining the realizability of the Company’s deferred tax assets.  It is at least reasonably possible that certain assumptions and estimates could prove to be incorrect and cause actual results to differ materially and adversely from the amounts reported in the consolidated financial statements included herewith.

Cash and Cash Equivalents, Policy [Policy Text Block]

Cash and Cash Equivalents

Cash and cash equivalents include cash and due from banks, interest earning deposits at other financial institutions with original maturities less than 90 days and all highly liquid investments with original maturities of less than 90 days.

Marketable Securities, Policy [Policy Text Block]

Investment Securities

Investmentsecurities are classified in three categories. Debt securities that management has a positive intent and ability to hold to maturity are classified as “Held to Maturity” or “HTM” and are recorded at amortized cost. Debt and equity securities bought and held principally for the purpose of selling in the near term are classified as “Trading” securities and are measured at fair value, with unrealized gains and losses included in earnings. Debt and equity securities not classified as “Held to Maturity” or “Trading” with readily determinable fair values are classified as “Available for Sale” or “AFS” and are recorded at fair value, with unrealized gains and losses excluded from earnings and reported in other comprehensive income. The Company uses estimates from third parties in arriving at fair value determinations which are derived in accordance with fair value measurement standards.

Purchase premiums and discounts are recognized in interest income using the interest method over the terms of the securities. Declines in the fair value of investment securities below their cost that are deemed to be other-than-temporary are reflected in earnings as realized losses to the extent the impairment is related to credit losses. The amount of the impairment related to other factors is recognized in other comprehensive income provided that management does not have the intent to sell the securities and it is more likely than not that management will not have to sell the security before recovery of its cost basis.  In estimating other-than-temporary impairment losses, management considers (1) the length of time and the extent to which the fair value has been less than cost, (2) the financial condition and near-term prospects of the issuer, and (3) the intent and ability of the Company to retain its investment in the issuer for a period of time sufficient to allow for any anticipated recovery in fair value. Gains and losses on the sale of securities are recorded on the trade date and are determined using the specific identification method.

Federal Reserve Bank Stock and Federal Home Loan Bank Stock [Policy Text Block]

Federal Reserve Bank Stock and Federal Home Loan Bank Stock

The Bank is a member of the Federal Reserve System (“Fed” or “FRB”).  FRB stock is carried at cost and is considered a nonmarketable equity security.  Cash dividends from the FRB are reported as interest income on an accrual basis.

The Bank is a member and stockholder of the capital stock of the Federal Home Loan Bank of San Francisco (“FHLB of San Francisco” or “FHLB”).  Members are required to own a certain amount of stock based on the level of borrowings and other factors, and may invest in additional amounts.  FHLB of San Francisco stock is carried at cost and is considered a nonmarketable equity security.  Both cash and stock dividends are reported as interest income.

Finance, Loans and Leases Receivable, Policy [Policy Text Block]

Loans

Loans, net, are stated at the unpaid principal balances less the allowance for loan losses and unamortized deferred fees and costs. Loan origination fees, net of related direct costs, are deferred and accreted to interest income as an adjustment to yield over the respective maturities of the loans using the effective interest method.

Interest on loans is accrued as earned on a daily basis, except where reasonable doubt exists as to the collection of interest and principal, in which case the accrual of interest is discontinued and the loan is placed on non-accrual status.  Loans are placed on non-accrual at the time principal or interest is 90 days delinquent unless well secured and in the process of collection. Interest on non-accrual loans is accounted for on a cash-basis or cost-recovery method, until qualifying for return to accrual status. In order for a loan to return to accrual status, all principal and interest amounts owed must be brought current and future payments must be reasonably assured.

A loan is charged-off at any time the loan is determined to be uncollectible.  Collateral dependent loans, which generally include commercial real estate loans, residential loans, and construction and land loans, are typically charged down to their net realizable value when a loan is impaired or on non-accrual status.  All other loans are typically charged-off when, based upon current available facts and circumstances, it’s determined that either: (1) a loan is uncollectible, (2) repayment is determined to be protracted beyond a reasonable time frame, or (3) the loan is classified as a loss determined by either the Bank’s internal review process or by external examiners.

Loans are considered impaired when, based upon current information and events, it is probable that the Company will be unable to collect all principal and interest amounts due according to the original contractual terms of the loan agreement on a timely basis. The Company evaluates impairment on a loan-by-loan basis. Once a loan is determined to be impaired, the impairment is measured based on the present value of the expected future cash flows discounted at the loan’s effective interest rate or by using the loan’s most recent market value or the fair value of the collateral if the loan is collateral dependent.  Loans that experience insignificant payment delays or payment shortfalls are generally not considered to be impaired.

When the measurement of an impaired loan is less than the recorded amount of the loan, a valuation allowance is established by recording a charge to the provision for loan losses. Subsequent increases or decreases in the valuation allowance for impaired loans are recorded by adjusting the existing valuation allowance for the impaired loan with a corresponding charge or credit to the provision for loan losses.  The Company’s policy for recognizing interest income on impaired loans is the same as that for non-accrual loans.

Loans and Leases Receivable, Troubled Debt Restructuring Policy [Policy Text Block]

Troubled Debt Restructurings

In situations where, for economic or legal reasons related to a borrower’s financial difficulties, management may grant a concession for other than an insignificant period of time to the borrower that would not otherwise be considered, the related loan is classified as a troubled debt restructuring (“TDR”).  Management strives to identify borrowers in financial difficulty early and work with them to modify their loans to more affordable terms before their loan reaches nonaccrual status.  Concessions may include interest rate reductions or below market interest rates, principal forgiveness, restructuring amortization schedules and other actions intended to minimize potential losses.

Loans and Leases Receivable, Allowance for Loan Losses Policy [Policy Text Block]

Allowance for Loan Losses

The allowance for loan losses is established through a provision for loan losses charged to operations and represents an estimate of credit losses inherent in the Company’s loan portfolio that have been incurred as of the balance sheet date. Loan losses are charged against the allowance when management believes that principal is uncollectible. Subsequent repayments or recoveries, if any, are credited to the allowance. Management periodically assesses the adequacy of the allowance for loan losses by reference to many quantitative and qualitative factors that may be weighted differently at various times depending on prevailing conditions.  The provisions reflect management’s evaluation of the adequacy of the allowance based, in part, upon the historical loss experience of the loan portfolio, as well as estimates from historical peer group loan loss data and the loss experience of other financial institutions, augmented by management judgment.  During this process, loans are separated into the following portfolio segments: commercial loans, commercial real estate, residential, land and construction, and consumer and other loans. The relative significance of risk considerations vary by portfolio segment.  For commercial loans, commercial real estate loans and land and construction, the primary risk consideration is a borrower’s ability to generate sufficient cash flows to repay their loan.  Secondary considerations include the creditworthiness of guarantors and the valuation of collateral.  In addition to the creditworthiness of a borrower, the type and location of real estate collateral is an important risk factor for commercial real estate and land and construction loans.  The primary risk consideration for residential loans and consumer loans are a borrower’s personal cash flow and liquidity, as well as collateral value.

Loss ratios for all portfolio segments are evaluated on a quarterly basis.  Loss ratios associated with historical loss experience are determined based on a rolling migration analysis of each portfolio segment within the portfolio.  This migration analysis estimates loss factors based on the performance of each portfolio segment over a four and a half year time period.  These loss ratios are then adjusted, if determined necessary, based on other factors including, but not limited to, historical peer group loan loss data and the loss experience of other financial institutions.  Management carefully monitors changing economic conditions, the concentrations of loan categories, values of collateral, the financial condition of the borrowers, the history of the loan portfolio, and historical peer group loan loss data to determine the adequacy of the allowance for loan losses.  As a part of this process, management typically focuses on loan-to-value (“LTV”) percentages to assess the adequacy of loss ratios of collateral dependent loans within each portfolio segment discussed above, trends within each portfolio segment, as well as general economic and real estate market conditions where the collateral and borrower are located.  For loans that are not collateral dependent, which generally consist of commercial and consumer and other loans, management typically focuses on general business conditions where the borrower operates, trends within the portfolio, and other external factors to evaluate the severity of loss factors.  The allowance is based on estimates and actual losses may vary from the estimates.

In addition, regulatory agencies, as a part of their examination process, periodically review the Bank’s allowance for loan losses, and may require the Bank to make additions to the allowance based on their judgment about information available to them at the time of their examinations.  No assurance can be given that adverse future economic conditions will not lead to increased delinquent loans, and increases in the provision for loan losses and/or charge-offs. Management believes that the allowance as of March 31, 2013 and December 31, 2012 was adequate to absorb probable incurred credit losses inherent in the loan portfolio.

Real Estate Owned, Valuation Allowance, Policy [Policy Text Block]

Other Real Estate Owned

OREO represents real estate acquired through or in lieu of foreclosure.  OREO is held for sale and is initially recorded at fair value less estimated costs of disposition at the date of foreclosure, establishing a new cost basis. Subsequent to foreclosure, valuations are periodically performed by management and the assets are carried at the lower of cost or estimated fair value less costs of disposition.  OREO is included in accrued interest and other assets within the Consolidated Balance Sheets and the net operating results, if any, from OREO are recognized as non-interest expense within the unaudited Consolidated Statements of Operations and Comprehensive Income.

Property, Plant and Equipment, Policy [Policy Text Block]

Furniture, Fixtures and Equipment, net

Leasehold improvements and furniture, fixtures and equipment are carried at cost, less depreciation and amortization. Furniture, fixtures and equipment are depreciated using the straight-line method over the estimated useful life of the asset (three to five years). Leasehold improvements are depreciated using the straight-line method over the terms of the related leases or the estimated lives of the improvements, whichever is shorter.

Advertising Cost, Policy, Expensed Advertising Cost [Policy Text Block]

Advertising Costs

Advertising costs are expensed as incurred.

Income Tax, Policy [Policy Text Block]

Income Taxes

The Company files consolidated federal and combined state income tax returns. Income tax expense or benefit is the total of the current year income tax payable or refundable and the change in the deferred tax assets and liabilities (excluding deferred tax assets and liabilities related to components of other comprehensive income). Deferred tax assets and liabilities are the expected future tax amounts for the temporary differences between carrying amounts and tax basis of assets and liabilities, computed using enacted tax rates.

Deferred income tax assets and liabilities are determined using the liability (or balance sheet) method. Under this method, the net deferred tax asset or liability is determined based on the tax effects of the temporary differences between the book and tax bases of the various balance sheet assets and liabilities and gives current recognition to changes in the rates and laws.  A valuation allowance, if needed, reduces deferred tax assets to the amount expected to be realized. The Company records a valuation allowance if it believes, based on all available evidence, that it is “more likely than not” that the future tax assets will not be realized. This assessment requires management to evaluate the Company’s ability to generate sufficient future taxable income or use eligible tax carrybacks, if any, to determine the need for a valuation allowance.

During the year ended December 31, 2009, the Company established a full valuation allowance against the deferred tax assets due to the uncertainty regarding its realizability.  At March 31, 2013 and December 31, 2012, management reassessed the need for this valuation allowance and concluded that a full valuation allowance remained appropriate.  Management reached this conclusion as a result of the Company’s cumulative losses since inception, and the anticipated near term economic climate in which the Company will operate.  Management will continue to evaluate the potential realizability of the deferred tax assets and will continue to maintain a valuation allowance to the extent it is determined that it is more likely than not that these assets will not be realized. At March 31, 2013 and December 31, 2012, the Company maintained a deferred tax liability of $1.6 million and $1.7 million, respectively, in connection with net unrealized gains on investment securities, which is included in Accrued Interest and Other Liabilities within the accompanying Consolidated Balance Sheets.  The Company did not utilize this deferred tax liability to reduce its tax valuation allowance due to the fact that management does not currently intend to dispose of these investments and realize the associated gains.

At March 31, 2013 and December 31, 2012, the Company did not have any tax benefits disallowed under accounting standards for uncertainties in income taxes.  A tax position is recognized as a benefit only if it is “more likely than not” that the tax position would be sustained in a tax examination, with a tax examination being presumed to occur. The amount recognized is the largest amount of tax benefit that is greater than 50% likely of being realized on examination. For tax positions not meeting the “more likely than not” test, no tax benefit is recorded.  If applicable, the Company has elected to record interest accrued and penalties related to unrecognized tax benefits in tax expense.

Comprehensive Income, Policy [Policy Text Block]

Comprehensive Income

Accounting principles generally require that recognized revenue, expenses, gains and losses be included in net income. However, certain changes in assets and liabilities, such as unrealized gains and losses on Available for Sale securities, are reported as a separate component of the stockholders’ equity section of the Consolidated Balance Sheets and, along with net income, are components of comprehensive income.

Earnings Per Share, Policy [Policy Text Block]

Earnings per Share

The Company reports both basic and diluted earnings per share. Basic earnings per share is determined by dividing net income by the average number of shares of common stock outstanding, while diluted earnings per share is determined by dividing net income by the average number of shares of common stock outstanding adjusted for the dilutive effect of common stock equivalents. Potential dilutive common shares related to outstanding stock options and restricted stock are determined using the treasury stock method.  For the three months ended March 31, 2013 and 2012, there were 370,073 and 1,179,373, respectively stock options that were excluded from the diluted earnings per share calculation due to their antidilutive impact.  For the three months ended March 31, 2013 and 2012, there were no restricted shares that were excluded from the diluted earnings per share calculation due to their antidilutive impact.

	Three Months Ended March 31,
(dollars in thousands)	2013		2012
Net income	$	1,442	$	592
Average number of common shares outstanding		8,573,508		8,505,031
Effect of dilution of restricted stock		328,659		216,273
Effect of dilution of stock options		18,774		—
Average number of common shares outstanding used to calculate diluted earnings per common share		8,920,941		8,721,304

Fair Value of Financial Instruments, Policy [Policy Text Block]

Fair Value of Financial Instruments

The Company is required to make certain disclosures about its use of fair value measurements in the preparation of its financial statements.  These standards establish a three-level hierarchy for disclosure of assets and liabilities recorded at fair value.  The classification of assets and liabilities within the hierarchy is based on whether the inputs to the valuation methodology used for measurement are observable or unobservable. Observable inputs reflect market-derived or market-based information obtained from independent sources, while unobservable inputs reflect management’s estimates about market data.

Level 1	Valuation is based upon quoted prices for identical instruments traded in active markets. Level 1 instruments include securities traded on active exchange markets, such as the New York Stock Exchange, as well as U.S. Treasury securities that are traded by dealers or brokers in active over-the-counter markets.
Level 2	Valuation is based upon quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active, and model-based valuation techniques for which all significant assumptions are observable in the market. Level 2 instruments include securities traded in less active dealer or broker markets.

Level 3 Valuation is generated from model-based techniques that use at least one significant assumption not observable in the market. These unobservable assumptions reflect estimates of assumptions that market participants would use in pricing the asset or liability. Valuation techniques include use of option pricing models, discounted cash flow models and similar techniques.

Share-based Compensation, Option and Incentive Plans Policy [Policy Text Block]

Stock-Based Compensation

The Company has granted restricted stock awards to directors, employees, and a vendor under the 1st Century Bancshares 2005 Amended and Restated Equity Incentive Plan (the “Equity Incentive Plan”). The restricted stock awards are considered fixed awards as the number of shares and fair value is known at the date of grant and the fair value at the grant date is amortized over the vesting and/or service period.

New Accounting Pronouncements, Policy [Policy Text Block]

Recent Accounting Pronouncements

In May 2011, the Financial Accounting Standards Board (“FASB”) issued ASU 2011-04, Fair Value Measurement (“Topic 820”) – Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRSs(“ASU 11-04”).  This ASU amends Topic 820, "Fair Value Measurements and Disclosures," to converge the fair value measurement guidance in U.S. generally accepted accounting principles and International Financial Reporting Standards.  ASU 11-04 clarifies the application of existing fair value measurement requirements, changes certain principles in Topic 820 and requires additional fair value disclosures. ASU 11-04 is effective for annual periods beginning after December 15, 2011.  The adoption of this ASU did not have a material impact on the Company’s financial position, results of operations, or cash flows.

In June 2011, the FASB issued ASU 2011-05, Comprehensive Income (“Topic 220”) – Presentation of Comprehensive Income (“ASU 11-05”).  This ASU amends Topic 220, "Comprehensive Income," to require that all nonowner changes in stockholders' equity be presented in either a single continuous statement of comprehensive income or in two separate but consecutive statements. Additionally, ASU 11-05 requires entities to present, on the face of the financial statements, reclassification adjustments for items that are reclassified from other comprehensive income to net income in the statement or statements where the components of net income and the components of other comprehensive income are presented. The option to present components of other comprehensive income as part of the statement of changes in stockholders' equity was eliminated. ASU 11-05 is effective for annual periods beginning after December 15, 2011.  The adoption of this ASU did not have a material impact on the Company’s financial position, results of operations, or cash flows.

In December 2011, the FASB issued ASU 2011-11, Balance Sheet (“Topic 210”)– Disclosures about Offsetting Assets and Liabilities (“ASU 11-11”).  This ASU amends Topic 210, “Balance Sheet,” to require an entity to disclose both gross and net information about financial instruments, such as sales and repurchase agreements and reverse sale and repurchase agreements and securities borrowing/lending arrangements, and derivative instruments that are eligible for offset in the statement of financial position and/or subject to a master netting arrangement or similar agreement.  ASU 11-11 is effective for annual and interim periods beginning on January 1, 2013.  The adoption of this ASU did not have a significant impact on the Company’s financial position, results of operations, or cash flows.

In February 2013, the FASB issued ASU 2013-02, Comprehensive Income (“Topic 220”) – Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income (“ASU 13-02”).  This ASU requires an entity to provide information about the amounts reclassified out of accumulated other comprehensive income by component. In addition, an entity is required to present, either on the face of the statement where net income is presented or in the notes, significant amounts reclassified out of accumulated other comprehensive income by the respective line items of net income but only if the amount reclassified is required under GAAP to be reclassified to net income in its entirety in the same reporting period. For other amounts that are not required under GAAP to be reclassified in their entirety to net income, an entity is required to cross-reference to other disclosures required under GAAP that provide additional detail about those amounts.  ASU 13-02 is effective prospectively for annual and interim periods beginning after December 15, 2012.  The adoption of this ASU did not have a material impact on the Company’s financial position, results of operations, or cash flows.