10-Q

Table Of Contents

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, 2016

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 ☒  No ☐

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§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  ☒  No  ☐

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

Large accelerated filer ☐	Accelerated filer ☐
Non-accelerated filer ☐	Smaller reporting company ☒
(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  ☐  No  ☒

10,336,884 shares of common stock of the registrant were outstanding as of April 29, 2016.

1st Century Bancshares, Inc.

Quarterly Report on Form 10-Q

March 31, 2016

Table of Contents

		Page
PART I. FINANCIAL INFORMATION
Item 1.	Financial Statements
	Consolidated Balance Sheets — March 31, 2016 (unaudited) and December 31, 2015	4
	Unaudited Consolidated Statements of Operations and Comprehensive Income — Three months ended March 31, 2016 and 2015	5
	Unaudited Consolidated Statements of Changes in Stockholders’ Equity — Three months ended March 31, 2016 and 2015	6
	Unaudited Consolidated Statements of Cash Flows — Three months ended March 31, 2016 and 2015	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	41
Item 4.	Controls and Procedures	41
PART II. OTHER INFORMATION
Item 1.	Legal Proceedings	42
Item 1A.	Risk Factors	42
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	44
Item 3.	Defaults Upon Senior Securities	44
Item 4.	Mine Safety Disclosures	44
Item 5.	Other Information	44
Item 6.	Exhibits	45
Signatures		46

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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, as amended. 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, 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, but are not limited to, the following: the risk that 1st Century stockholders do not approve the merger; the occurrence of any event, change or other circumstances that could give rise to the termination of the merger agreement; the response by stockholders to the merger; the failure to satisfy each of the conditions to the consummation of the merger, including but not limited to, the risk that a governmental entity may prohibit, delay or refuse to grant approval for the consummation of the merger on acceptable terms, or at all; risks related to disruption of management’s attention from 1st Century’s ongoing business operations due to the merger; the effect of the announcement of the merger on 1st Century’s relationships with its customers, suppliers, operating results and business generally; the risk that any announcements relating to the merger could have adverse effects on the market price of 1st Century’s common stock; the outcome of any legal proceedings related to the merger; risks related to employee retention as a result of the merger; the risk that the merger will not be consummated within the expected time period or at all; 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 or continued sluggish growth; 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, including regulations regarding capital requirements, 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 this Quarterly Report on Form 10-Q and the Company’s 2015 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.

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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, 2016 (unaudited)			December 31, 2015
ASSETS
Cash and due from banks	$	11,071		$	8,889
Interest earning deposits at other financial institutions		41,313			45,676
Total cash and cash equivalents		52,384			54,565
Investment securities — Available for Sale (“AFS”), at estimated fair value		72,464			74,010
Loans, net of allowance for loan losses of $9,161 and $8,961 at March 31, 2016 and December 31, 2015, respectively		600,021			589,472
Premises and equipment, net		1,690			1,627
Federal Home Loan Bank (“FHLB”) and Federal Reserve Bank (“FRB”) stock		5,022			4,915
Accrued interest and other assets		7,896			7,361
Total Assets	$	739,477		$	731,950
LIABILITIES AND STOCKHOLDERS’ EQUITY
Non-interest bearing demand deposits	$	383,486		$	362,451
Interest bearing deposits:
Interest bearing checking (“NOW”)		36,385			32,406
Money market deposits and savings		187,381			155,572
Certificates of deposit less than $250		1,199			1,243
Certificates of deposit of $250 or greater		46,506			46,505
Total deposits		654,957			598,177
Other borrowings		15,000			65,000
Accrued interest and other liabilities		3,568			3,870
Total Liabilities		673,525			667,047
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, 2016 and December 31, 2015, respectively		—			—
Common stock, $0.01 par value — 50,000,000 shares authorized, 12,673,633 and 12,655,633 issued at March 31, 2016 and December 31, 2015, respectively		127			127
Additional paid-in capital		75,668			75,396
Retained earnings		1,151			878
Accumulated other comprehensive income		515			11
Treasury stock at cost — 2,336,749 shares at both March 31, 2016 and December 31, 2015		(11,509	)		(11,509	)
Total Stockholders’ Equity		65,952			64,903
Total Liabilities and Stockholders’ Equity	$	739,477		$	731,950

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

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1st Century Bancshares, Inc.

Unaudited Consolidated Statements of Operations and Comprehensive Income

(in thousands, except per share data)

	Three Months Ended March 31,
	2016		2015
Interest and fee income on:
Loans	$	6,534	$	4,717
Investments		331		347
Other		113		114
Total interest and fee income		6,978		5,178
Interest expense on:
Deposits		139		110
Borrowings		57		48
Total interest expense		196		158
Net interest income		6,782		5,020
Provision for loan losses		200		150
Net interest income after provision for loan losses		6,582		4,870
Non-interest income:
Gain on sale of AFS investment securities		—		75
Other operating income		198		155
Total non-interest income		198		230
Non-interest expenses:
Compensation and benefits		3,038		2,695
Occupancy		460		475
Professional fees		340		178
Technology		299		230
Marketing		126		101
FDIC assessments		111		95
Merger related expenses		861		—
Form S-1 related expenses		268		—
Other operating expenses		795		765
Total non-interest expenses		6,298		4,539
Income before income taxes		482		561
Income tax provision		209		246
Net income		273		315
Other Comprehensive Income:
Net change in unrealized gains on AFS investments, net of tax		504		317
Comprehensive Income	$	777	$	632
Basic earnings per share	$	0.03	$	0.03
Diluted earnings per share	$	0.03	$	0.03

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

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1st Century Bancshares, Inc.

Unaudited Consolidated Statements of Changes in Stockholders’ Equity

(in thousands, except share data)

	Common Stock							Retained Earnings			Accumulated Other		Treasury Stock						Total
	Issued				Additional			(Accumulated			Comprehensive		Number of						Stockholders’
	Shares		Amount		Paid-in Capital			Deficit)			Income		Shares			Amount			Equity
Balance at December 31, 2014		12,129,310	$	121	$	71,736		$	(1,675	)	$	162		(1,988,869	)	$	(8,651	)	$	61,693
Restricted stock issued		26,000		1		(1	)		—			—		—			—			—
Compensation expense associated with restricted stock awards, net of estimated forfeitures		—		—		224			—			—		—			—			224
Net income		—		—		—			315			—		—			—			315
Other comprehensive income		—		—		—			—			317		—			—			317
Balance at March 31, 2015		12,155,310	$	122	$	71,959		$	(1,360	)	$	479		(1,988,869	)	$	(8,651	)	$	62,549
Balance at December 31, 2015		12,655,633	$	127	$	75,396		$	878		$	11		(2,336,749	)	$	(11,509	)	$	64,903
Restricted stock issued		18,000		—		—			—			—		—			—			—
Compensation expense associated with restricted stock awards, net of estimated forfeitures		—		—		272			—			—		—			—			272
Net income		—		—		—			273			—		—			—			273
Other comprehensive income		—		—		—			—			504		—			—			504
Balance at March 31, 2016		12,673,633	$	127	$	75,668		$	1,151		$	515		(2,336,749	)	$	(11,509	)	$	65,952

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

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1st Century Bancshares, Inc.

Unaudited Consolidated Statements of Cash Flows

(in thousands)

	Three Months Ended March 31,
	2016			2015
Cash flows from operating activities:
Net income	$	273		$	315
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization of premises and equipment		132			152
Amortization of premiums on investment securities, net		120			156
Provision for loan losses		200			150
Amortization of deferred loan fees and costs, net		17			6
Gain on sale of AFS investment securities		—			(75	)
Non-cash stock compensation, net of forfeitures		272			224
(Increase) decrease in accrued interest and other assets		(888	)		291
Decrease in accrued interest and other liabilities		(302	)		(548	)
Net cash (used in) provided by operating activities		(176	)		671
Cash flows from investing activities:
Activities in AFS investment securities:
Purchases		—			(2,010	)
Maturities and principal reductions		2,283			3,195
Proceeds from sale of securities		—			5,983
Increase in loans, net		(10,766	)		(36,992	)
Purchase of premises and equipment		(195	)		(332	)
Purchase of FRB stock		(107	)		—
Net cash used in investing activities		(8,785	)		(30,156	)
Cash flows from financing activities:
Net increase in deposits		56,780			31,124
Repayment of other short-term borrowings		(50,000	)		—
Net cash provided by financing activities		6,780			31,124
(Decrease) increase in cash and cash equivalents		(2,181	)		1,639
Cash and cash equivalents, beginning of period		54,565			58,464
Cash and cash equivalents, end of period	$	52,384		$	60,103
Supplemental cash flow information:
Cash paid during the period for:
Interest	$	183		$	170
Income taxes	$	1,700		$	140

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

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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 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.”

Proposed Merger with Midland Financial Co.

On March 10, 2016, Bancshares entered into an Agreement and Plan of Merger (the “Merger Agreement”), with Midland Financial Co., an Oklahoma corporation (“Midland”), and MC 2016 Corp., a Delaware corporation and wholly-owned subsidiary of Midland (“Merger Sub”), pursuant to which, upon the terms and subject to the conditions set forth therein, Merger Sub will merge (the “Merger”) with and into Bancshares, with Bancshares surviving the Merger as a wholly-owned subsidiary of Midland. Simultaneously with the Merger, the Bank will merge (the “Bank Merger”) with and into MidFirst Bank, a federally-chartered savings association and a wholly-owned subsidiary of Midland (“MidFirst”), with MidFirst surviving the Bank Merger. Immediately after the Merger and Bank Merger described above, Bancshares, as the surviving corporation in the Merger, will merge with and into Midland, with Midland as the surviving corporation.

Subject to the terms and conditions set forth in the Merger Agreement, upon consummation of the Merger, each outstanding share of Bancshares common stock, par value $0.01 per share, excluding shares owned by Midland, Bancshares or either of their subsidiaries (subject to certain exceptions) or shares owned by stockholders who have validly made and not effectively withdrawn a demand for appraisal rights, will be converted into the right to receive $11.22 in cash.

Completion of the Merger is subject to certain closing conditions, including approval by Bancshares’ stockholders and the receipt of certain required regulatory approvals. Midland and Bancshares currently expect that the Merger will be completed during the second half of 2016 or sooner. However, it is possible that factors outside the control of both companies, including whether or when the required regulatory approvals will be received, could result in the Merger being completed at a different time or not at all. The Company recorded $861,000 in merger-related expenses during the three months ended March 31, 2016.

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 period 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, 2015, and the notes thereto, included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2015 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, 2016 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, 2016.

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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. 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

Investment securities 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 (“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.

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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 probable 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.

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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.

Other Real Estate Owned

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 ten 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.

At March 31, 2016 and December 31, 2015, 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.

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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, 2016 and 2015, there were none and 350,073, respectively, of weighted average stock options that were excluded from the diluted earnings per share calculation due to their antidilutive impact. For the three months ended March 31, 2016 and 2015, there were 11,868 and 17,044, respectively, of weighted average 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)	2016		2015
Net income	$	273	$	315
Average number of common shares outstanding		9,662,321		9,537,677
Effect of dilution of restricted stock		300,539		266,656
Average number of common shares outstanding used to calculate diluted earnings per common share		9,962,860		9,804,333

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 Company’s 2005 Amended and Restated Equity Incentive Plan (the “Equity Incentive Plan”) and the 2013 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 August 2014, the Financial Accounting Standard Board (FASB) issued Accounting Standard Update (ASU) No. 2014-15, Presentation of Financial Statements – Going Concern (Subtopic 205-40) (ASU 2014-15). The objective of ASU 2014-15 is to define management’s responsibility to evaluate whether there is substantial doubt about an organization’s ability to continue as a going concern and provide related disclosures. Currently, GAAP does not provide guidance to evaluate whether there is substantial doubt regarding an organization’s ability to continue as a going concern. This ASU provides guidance to an organization’s management, with principles and definitions to reduce diversity in the timing and content of financial statement disclosures commonly provided by organizations. ASU 2014-15 is effective for periods ending after December 15, 2016 and interim periods within annual periods beginning after December 15, 2016.

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In August 2015, the FASB issued ASU No. 2015-14, Revenue from Contracts with Customers (Topic 606) (ASU 2015-14). On May 28, 2014, the FASB issued Accounting Standards Update No. 2014-09, Revenue from Contracts with Customers (Topic 606), with an original effective date for annual reporting periods beginning after December 15, 2016. The core principal of ASU 2014-09 is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. ASU 2015-14 deferred the effective date of ASU 2014-09 to annual periods and interim periods within those annual periods beginning after December 15, 2017. The Company is currently evaluating the effects of ASU 2015-14 on its financial statements and disclosures, if any.

Effective January 2016, the Company prospectively adopted ASU 2015-05, Intangibles-Goodwill and Other-Internal-Use Software (Subtopic 350-40): Customer’s Accounting or Fees Paid in a Cloud Computing Arrangement (ASU 2015-05). ASU 2015-05 provides guidance to customers about whether a cloud computing arrangement includes a software license. If a cloud computing arrangement includes a software license, the customer should account for the software license element of the arrangement consistent with the acquisition of other software licenses. If a cloud computing arrangement does not include a software license, the customer should account for the arrangement as a service contract. As a result, all software licenses within the scope of this guidance will be accounted for consistently with other licenses of intangible assets. The adoption of ASU 2015-05 did not have a material effect on the Company’s financial statements.

In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842) (ASU 2016-02). ASU 2016-02 is intended to increase transparency and comparability among organizations by recognizing lease assets and liabilities on the balance sheet and disclosing key information about leasing arrangements. For public business entities, this ASU is effective for annual periods and interim periods within those annual periods beginning after December 15, 2018. The Company is currently evaluating the effects of ASU 2016-02 on its financial statements and disclosures.

In March 2016, the FASB issued ASU 2016-05, Effect of Derivative Contract Novations on Existing Hedge Accounting Relationships (ASU 2016-05). ASU 2016-05 clarifies that a change in the counterparty to a derivative instrument (a novation) that has been designated as the hedging instrument does not, in and of itself, require dedesignation of that hedging relationship provided that all other hedge accounting criteria continue to be met. Public business entities have the option to apply this ASU on a prospective basis or a modified retrospective basis. It is effective for annual periods and interim periods within those annual periods beginning after December 15, 2016. The Company intends to apply this guidance prospectively and does not expect it to have a material impact on its financial statements or disclosures.

In March 2016, the FASB issued ASU 2016-06, Contingent Put and Call Options in Debt Instruments (ASU 2016-06). ASU 2016-06 clarifies the steps required to determine if an embedded derivative should be bifurcated from a host contract in order to resolve diversity in practice. For public business entities, this ASU will be applied on a modified retrospective basis for annual periods and interim periods within those annual periods beginning after December 15, 2016. The Company is currently evaluating the effects of ASU 2016-06 on its financial statements and disclosures.

In March 2016, the FASB issued ASU 2016-07, Simplifying the Transition to the Equity Method of Accounting (ASU 2016-07). ASU 2016-07 was issued as part of the FASB’s initiative to identify, evaluate and improve areas of generally accepted accounting principles for which cost and complexity can be reduced while maintaining the usefulness of the information in the financial statements. ASU 2016-07 eliminates the requirement to retroactively adopt the equity method of accounting when an investment qualifies for the use of the equity method as a result of an increase in the level of ownership or degree of influence. For public business entities, this ASU will be applied on a prospective basis for annual periods and interim periods within those annual periods beginning after December 15, 2016. The Company does not expect the adoption of ASU 2016-06 to have a material impact on its financial statements or disclosures

In March 2016, the FASB issued ASU 2016-08, Principal versus Agent Considerations (Reporting Revenue Gross versus Net) (ASU 2016-08). ASU 2016-08 clarifies the implementation guidance in ASU 2014-09, Revenue from Contracts with Customers, on principal versus agent considerations and whether an entity reports revenue on a gross or net basis. For public business entities, this ASU is effective for annual periods and interim periods within those annual periods beginning after December 15, 2017. The Company is currently evaluating the effects of ASU 2014-09 and ASU 2016-08 on its financial statements and disclosures.

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In March 2016, the FASB issued ASU 2016-09, Improvements to Employee Share-Based Payment Accounting (ASU 2016-09). ASU 2016-09 includes provisions intended to simplify various aspects related to how share-based payments are accounted for and presented in the financial statements. The areas for simplification include income tax consequences, forfeitures, classification of awards as either equity or liabilities and classification on the statement of cash flows. This ASU is effective for annual periods and interim periods within those annual periods beginning after December 15, 2016 and early adoption is permitted for financial statements that have not been previously issued.

(2) Investments

The following is a summary of the investments categorized as Available for Sale at March 31, 2016 and December 31, 2015:

			Gross		Gross
	Amortized		Unrealized		Unrealized			Fair
(in thousands)	Cost		Gains		Losses			Value
At March 31, 2016:
Investments — Available for Sale
U.S. Treasuries and Government Agencies	$	34,410	$	676	$	—		$	35,086
Residential Mortgage-Backed Securities		37,179		264		(65	)		37,378
Total	$	71,589	$	940	$	(65	)	$	72,464
At December 31, 2015:
Investments — Available for Sale
U.S Treasuries and Government Agencies	$	34,417	$	184	$	(2	)	$	34,599
Residential Mortgage-Backed Securities		39,575		116		(280	)		39,411
Total	$	73,992	$	300	$	(282	)	$	74,010

The Company did not have any investment securities categorized as “Held to Maturity” or “Trading” at March 31, 2016 or December 31, 2015. At March 31, 2016 and December 31, 2015, 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, 2016 and December 31, 2015, the fair value of securities pledged to the State of California Treasurer’s Office to secure their deposits was $54.7 million and $55.9 million, respectively. Deposits from the State of California were $46.0 million at both March 31, 2016 and December 31, 2015.

The following table summarizes the fair value of AFS securities and the weighted average yield of investment securities by contractual maturity at March 31, 2016. 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 3.26 years at March 31, 2016.

(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. Treasuries and Government Agencies	$	—		—	%	$	30,689		1.86	%	$	4,397		2.08	%	$	—		—	%	$	35,086		1.89	%
Residential Mortgage-Backed Securities		—		—			748		3.40			20,894		1.62			15,736		1.92			37,378		1.78
Total	$	—		—	%	$	31,437		1.90	%	$	25,291		1.70	%	$	15,736		1.92	%	$	72,464		1.83	%

A total of 10 and 31 securities had unrealized losses at March 31, 2016 and December 31, 2015, 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:

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	Less than Twelve Months					Twelve Months or More
(in thousands)	Gross Unrealized Losses			Fair Value		Gross Unrealized Losses			Fair Value
At March 31, 2016:
Investments-Available for Sale
Residential Mortgage-Backed Securities	$	(27	)	$	6,488	$	(38	)	$	4,018
At December 31, 2015:
Investments-Available for Sale
U.S Treasuries and Government Agencies	$	(2	)	$	3,995	$	—		$	—
Residential Mortgage-Backed Securities		(205	)		23,942		(75	)		4,221

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, 2016 and December 31, 2015 that the unrealized losses on its securities portfolio on which impairments had not been recognized are temporary.

There were no securities sold during the three months ended March 31, 2016. During the three months ended March 31, 2015, the Company sold available for sale investment securities with an amortized cost of $5.9 million resulting in realized gains of $75,000.

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

Loans

The categories of loans listed below are grouped in accordance with the primary purpose of the loans, but in the aggregate 85.0% and 83.7% of all loans are secured by real estate at March 31, 2016 and December 31, 2015, respectively.

	March 31, 2016						December 31, 2015
	Amount			Percent			Amount			Percent
(dollars in thousands)	Outstanding			of Total			Outstanding			of Total
Commercial (1)	$	113,048			18.6	%	$	112,861			18.9	%
Commercial real estate		266,037			43.7	%		259,013			43.3	%
Residential		124,199			20.4	%		127,367			21.3	%
Land and construction		65,091			10.7	%		59,808			10.0	%
Consumer and other (2)		40,513			6.6	%		39,058			6.5	%
Loans, gross		608,888			100.0	%		598,107			100.0	%
Net deferred costs		294						326
Less — allowance for loan losses		(9,161	)					(8,961	)
Loans, net	$	600,021					$	589,472

(1) Unsecured commercial loan balances were $33.4 million and $34.4 million at March 31, 2016 and December 31, 2015, respectively.

(2) Unsecured consumer and other loan balances were $10.3 million and $10.6 million at March 31, 2016 and December 31, 2015, respectively.

As of March 31, 2016 and December 31, 2015, substantially all of the Company’s loan customers were located in Southern California.

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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, 2016 and 2015:

(in thousands)	Commercial		Commercial Real Estate		Residential			Land and Construction		Consumer and Other		Total
Three Months Ended March 31, 2016:
Allowance for loan losses:
Beginning balance	$	1,807	$	4,580	$	907		$	1,146	$	521	$	8,961
Provision for loan losses		—		115		(15	)		100		—		200
Charge-offs		—		—		—			—		—		—
Recoveries		—		—		—			—		—		—
Ending balance	$	1,807	$	4,695	$	892		$	1,246	$	521	$	9,161
As of March 31, 2016:
Ending balance: individually evaluated for impairment	$	35	$	—	$	—		$	—	$	—	$	35
Ending balance: collectively evaluated for impairment		1,772		4,695		892			1,246		521		9,126
Total	$	1,807	$	4,695	$	892		$	1,246	$	521	$	9,161
Loans:
Ending balance: individually evaluated for impairment	$	712	$	—	$	—		$	—	$	46	$	758
Ending balance: collectively evaluated for impairment		112,336		266,037		124,199			65,091		40,467		608,130
Total	$	113,048	$	266,037	$	124,199		$	65,091	$	40,513	$	608,888
Three Months Ended March 31, 2015:
Allowance for loan losses:
Beginning balance	$	1,752	$	3,825	$	747		$	816	$	459	$	7,599
Provision for loan losses		—		—		10			100		40		150
Charge-offs		—		—		—			—		—		—
Recoveries		16		—		—			—		—		16
Ending balance	$	1,768	$	3,825	$	757		$	916	$	499	$	7,765
As of March 31, 2015:
Ending balance: individually evaluated for impairment	$	20	$	—	$	—		$	—	$	—	$	20
Ending balance: collectively evaluated for impairment		1,748		3,825		757			916		499		7,745
Total	$	1,768	$	3,825	$	757		$	916	$	499	$	7,765
Loans:
Ending balance: individually evaluated for impairment	$	632	$	—	$	—		$	—	$	49	$	681
Ending balance: collectively evaluated for impairment		98,347		201,375		101,303			46,116		31,989		479,130
Total	$	98,979	$	201,375	$	101,303		$	46,116	$	32,038	$	479,811

The following is a summary of the allowance for loan losses and recorded investment in loans as of December 31, 2015:

(in thousands)	Commercial		Commercial Real Estate		Residential		Land and Construction		Consumer and Other		Total
Allowance for loan losses:
Ending balance: individually evaluated for impairment	$	35	$	—	$	—	$	—	$	—	$	35
Ending balance: collectively evaluated for impairment		1,772		4,580		907		1,146		521		8,926
Total	$	1,807	$	4,580	$	907	$	1,146	$	521	$	8,961
Loans:
Ending balance: individually evaluated for impairment	$	712	$	—	$	—	$	—	$	47	$	759
Ending balance: collectively evaluated for impairment		112,149		259,013		127,367		59,808		39,011		597,348
Total	$	112,861	$	259,013	$	127,367	$	59,808	$	39,058	$	598,107

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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, 2016 and December 31, 2015, the allowance for unfunded lending commitments was $395,000 and $345,000, respectively, and is primarily related to $160.7 million and $159.9 million in commitments to extend credit to customers and $3.1 million and $3.2 million in standby/commercial letters of credit at March 31, 2016 and December 31, 2015, respectively.

Non-Performing Assets

The following table presents an aging analysis of the recorded investment of past due loans as of March 31, 2016 and December 31, 2015. 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, 2016 and 2015. Non-performing loans represented 0.12% of total loans at both March 31, 2016 and December 31, 2015. There were no accruing loans past due 90 days or more at March 31, 2016 and December 31, 2015.

(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, 2016:
Commercial	$	—	$	—	$	712	$	712	$	112,336	$	113,048
Commercial real estate		—		—		—		—		266,037		266,037
Residential		—		—		—		—		124,199		124,199
Land and construction		—		—		—		—		65,091		65,091
Consumer and other		—		—		—		—		40,513		40,513
Totals	$	—	$	—	$	712	$	712	$	608,176	$	608,888
As of December 31, 2015:
Commercial	$	—	$	—	$	712	$	712	$	112,149	$	112,861
Commercial real estate		—		—		—		—		259,013		259,013
Residential		—		—		—		—		127,367		127,367
Land and construction		—		—		—		—		59,808		59,808
Consumer and other		—		—		—		—		39,058		39,058
Totals	$	—	$	—	$	712	$	712	$	597,395	$	598,107

The following table sets forth non-accrual loans and other real estate owned at March 31, 2016 and December 31, 2015:

(dollars in thousands)	March 31, 2016			December 31, 2015
Non-accrual loans:
Commercial	$	712		$	712
Total non-accrual loans		712			712
Total non-performing assets	$	712		$	712
Non-performing assets to gross loans and OREO		0.12	%		0.12	%
Non-performing assets to total assets		0.10	%		0.10	%

Credit Quality Indicators

The following table represents the credit exposure by internally assigned grades at March 31, 2016 and December 31, 2015. 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.

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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, 2016:
Grade:
Pass	$	112,164	$	266,037	$	124,199	$	65,091	$	40,467
Special Mention		172		—		—		—		—
Substandard		712		—		—		—		46
Total	$	113,048	$	266,037	$	124,199	$	65,091	$	40,513
As of December 31, 2015:
Grade:
Pass	$	111,970	$	259,013	$	127,367	$	59,808	$	39,011
Special Mention		179		—		—		—		—
Substandard		712		—		—		—		47
Total	$	112,861	$	259,013	$	127,367	$	59,808	$	39,058

There were no loans assigned to the Doubtful or Loss grade as of March 31, 2016 and December 31, 2015.

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.

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(in thousands)	Recorded Investment		Unpaid Principal Balance		Related Allowance		Average Recorded Investment
As of and for the three months ended March 31, 2016:
With no related allowance recorded:
Commercial	$	572	$	848	$	—	$	572
Commercial real estate		—		—		—		—
Residential		—		—		—		—
Land and construction		—		—		—		—
Consumer and other		46		46		—		47
With an allowance recorded:
Commercial	$	140	$	155	$	35	$	140
Commercial real estate		—		—		—		—
Residential		—		—		—		—
Land and construction		—		—		—		—
Consumer and other		—		—		—		—
Totals:
Commercial	$	712	$	1,003	$	35	$	712
Commercial real estate	$	—	$	—	$	—	$	—
Residential	$	—	$	—	$	—	$	—
Land and construction	$	—	$	—	$	—	$	—
Consumer and other	$	46	$	46	$	—	$	47
As of and for the year ended December 31, 2015:
With no related allowance recorded:
Commercial	$	572	$	848	$	—	$	572
Commercial real estate		—		—		—		—
Residential		—		—		—		—
Land and construction		—		—		—		—
Consumer and other		47		47		—		48
With an allowance recorded:
Commercial	$	140	$	155	$	35	$	107
Commercial real estate		—		—		—		—
Residential		—		—		—		—
Land and construction		—		—		—		—
Consumer and other		—		—		—		—
Totals:
Commercial	$	712	$	1,003	$	35	$	679
Commercial real estate	$	—	$	—	$	—	$	—
Residential	$	—	$	—	$	—	$	—
Land and construction	$	—	$	—	$	—	$	—
Consumer and other	$	47	$	47	$	—	$	48

During the three months ended March 31, 2016, the average balance of impaired loans was $759,000, compared to $681,000 for the same period last year. As of both March 31, 2016 and December 31, 2015, there were $712,000 of impaired loans on non-accrual status. For both the three months ended March 31, 2016 and 2015, interest income recognized on impaired loans subsequent to their classification as impaired was $1,000. 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.

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Troubled Debt Restructurings

There were no troubled debt restructurings during the three months ended March 31, 2016 and 2015. The impact on the Company’s determination of the allowance for loan losses related to troubled debt restructurings was not material and resulted in no charge-offs during the three months ended March 31, 2016 and 2015. During the three months ended March 31, 2016 and 2015, there were no defaults recorded 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, 2016 and December 31, 2015 are presented in the following table. The Company obtains dealer quotations to value its interest rate derivative contracts.

	March 31, 2016						December 31, 2015
(in thousands)	Notional Amount			Estimated Fair Value			Notional Amount			Estimated Fair Value
Non-hedging interest rate derivatives:
Commercial loan interest rate swaps	$	2,019		$	(57	)	$	2,032		$	(30	)
Commercial loan interest rate swaps	$	(2,019	)	$	57		$	(2,032	)	$	30

The weighted-average rates paid and received for interest rate swaps outstanding at March 31, 2016 and December 31, 2015 were as follow:

	March 31, 2016 Weighted-Average						December 31, 2015 Weighted-Average
	Interest Rate Paid			Interest Rate Received			Interest Rate Paid			Interest Rate Received
Non-hedging interest rate swaps		3.68	%		4.96	%		3.68	%		4.96	%
Non-hedging interest rate swaps		4.96	%		3.68	%		4.96	%		3.68	%

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.

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(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)	2016		2015
Net income	$	273	$	315
Other comprehensive income:
Increase in net unrealized gains on investment securities available for sale, net of tax expense of $353 and $252 for the three months ended March 31, 2016 and 2015, respectively		504		361
Reclassification for net gains included in earnings, net of tax expense of none and $31 for the three months ended March 31, 2016 and 2015, respectively		—		(44	)
Comprehensive income	$	777	$	632

Reclassification adjustments of none and $75,000 for the three months ended March 31, 2016 and 2015, respectively, are included in non-interest income within the unaudited Consolidated Statements of Operations and Comprehensive Income. Income tax expense associated with these reclassification adjustments for the three months ended March 31, 2016 and 2015 were none and $31,000, respectively, and is included in income tax provision within the unaudited Consolidated Statements of Operations and Comprehensive Income.

Activity of investment securities available for sale included in accumulated other comprehensive income, net of tax, is as follows:

	Three Months Ended March 31,
(in thousands)	2016		2015
Beginning balance	$	11	$	162
Other comprehensive income before reclassifications		504		361
Amounts reclassified from accumulated other comprehensive income		—		(44	)
Net other comprehensive income		504		317
Ending balance	$	515	$	479

(6) Premises and Equipment

Premises and equipment are stated at cost less accumulated depreciation and amortization. Premises and equipment at March 31, 2016 and December 31, 2015 are comprised of the following:

(in thousands)	March 31, 2016			December 31, 2015
Leasehold improvements	$	1,901		$	1,881
Furniture & equipment		3,218			3,150
Software		978			871
Total		6,097			5,902
Accumulated depreciation		(4,407	)		(4,275	)
Premises and equipment, net	$	1,690		$	1,627

Depreciation and amortization included in occupancy expense was $132,000 and $152,000 for the three months ended March 31, 2016 and 2015, respectively.

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(7) Deposits

The following table reflects the summary of deposit categories by dollar and percentage at March 31, 2016 and December 31, 2015:

	March 31, 2016					December 31, 2015
(dollars in thousands)	Amount		% of Total			Amount		% of Total
Non-interest bearing demand deposits	$	383,486		58.6	%	$	362,451		60.6	%
Interest bearing checking		36,385		5.5	%		32,406		5.4	%
Money market deposits and savings		187,381		28.6	%		155,572		26.0	%
Certificates of deposit		47,705		7.3	%		47,748		8.0	%
Total	$	654,957		100.0	%	$	598,177		100.0	%

At March 31, 2016, the Company had two certificates of deposit with the State of California Treasurer’s Office for a total of $46.0 million, which represented 7.0% of total deposits. The deposits outstanding at March 31, 2016 are scheduled to mature in the second quarter of 2016. 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. At December 31, 2015, the Company had two certificates of deposit with the State of California Treasurer’s Office for a total of $46.0 million, which represented 7.7% of total deposits. The Company was required to pledge $50.6 million of investment securities at both March 31, 2016 and December 31, 2015, in connection with these certificates of deposit.

The aggregate amount of certificates of deposit of $250,000 or greater was $46.5 million at both March 31, 2016 and December 31, 2015. At March 31, 2016, all certificates of deposit of $250,000 or greater, including deposit accounts with the State of California Treasurer’s Office and Certificate of Deposit Account Registry System (“CDARS”), were scheduled to mature in six months or less.

The table below sets forth the range of interest rates, amount and remaining maturities of the certificates of deposit at March 31, 2016.

(in thousands)			Six months and less		Greater than six months through one year		Greater than one year
0.00%	to	0.99%	$	47,422	$	186	$	69
1.00%	to	1.99%		—		—		28
Total			$	47,422	$	186	$	97

(8) Other Borrowings

At March 31, 2016 and December 31, 2015, the Company had a borrowing/credit facility secured by a blanket lien on eligible loans at the FHLB of $183.0 million and $180.0 million, respectively. The Company had $15.0 million of long-term borrowings outstanding under this borrowing/credit facility with the FHLB at both March 31, 2016 and December 31, 2015. The Company had no overnight borrowings outstanding under this borrowing/credit facility at March 31, 2016. During the three months ended March 31, 2016, the Company had an average short-term borrowing balance of $4.0 million under this credit facility, incurring $6,000 in interest expense during this period. At December 31, 2015, the Company had a $50.0 million overnight borrowing outstanding under this borrowing/credit facility at an interest rate of 0.27%. The Company did not incur any material interest expense in connection with this borrowing and it was repaid in January 2016.

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, 2016 and December 31, 2015 (dollars in thousands):

Maturity Date	Interest Rate		March 31, 2016		December 31, 2015
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
May 2, 2018		0.93%		5,000		5,000
	Total		$	15,000	$	15,000

At March 31, 2016 and December 31, 2015, 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. As of both March 31, 2016 and December 31, 2015, the Company had pledged $2.3 million, of investments related to these lines of credit.

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(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 $160.7 million and $159.9 million in commitments to extend credit to customers and $3.1 million and $3.2 million in standby/commercial letters of credit at March 31, 2016 and December 31, 2015, 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 $105,000 and $82,000 as of March 31, 2016 and December 31, 2015, respectively.

Lease Commitments

The Company leases office premises under three operating leases that will expire in December 2018, May 2019 and June 2024, respectively. Rental expense, which is included in occupancy expense, was $265,000 and $266,000 for the three months ended March 31, 2016 and 2015, respectively.

The projected minimum rental payments under the term of the leases at March 31, 2016 are as follows (in thousands):

Years ending December 31,
2016 (April-December)	$	742
2017		1,015
2018		1,046
2019		834
2020		760
Thereafter		2,840
Total	$	7,237

Litigation

The Company from time to time is party to lawsuits, which arise out of the normal course of business. At March 31, 2016 and December 31, 2015, 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,
2016 (April-December)	$	712
2017		582
2018		351
2019		200
2020		137
Thereafter		30
Total	$	2,012

(

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, 2016 and December 31, 2015, 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.

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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, 2016:
Investments-Available for Sale
U.S. Treasuries and Government Agencies	$	35,086	$	3,973	$	31,113	$	—
Residential Mortgage-Backed Securities		37,378		—		37,378		—
Derivative Assets – Interest Rate Swaps		57		—		57		—
Derivative Liabilities – Interest Rate Swaps		57		—		57		—
At December 31, 2015:
Investments-Available for Sale
U.S. Treasuries and Government Agencies	$	34,599	$	3,910	$	30,689	$	—
Residential Mortgage-Backed Securities		39,411		—		39,411		—
Derivative Assets – Interest Rate Swaps		30		—		30		—
Derivative Liabilities – Interest Rate Swaps		30		—		30		—

AFS securities — As of March 31, 2016 and December 31, 2015, the Level 2 fair value of the Company’s residential mortgage-backed securities was $37.4 million and $39.4 million, respectively. These securities consist primarily of agency 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 the year of 2005 through 2014. These loans are geographically dispersed throughout the United States. At March 31, 2016 and December 31, 2015, the weighted average yield and weighted average life of these securities were 1.78% and 1.79%, respectively, and 3.26 years and 3.36 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, 2016 and 2015.

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, 2016:
Impaired loans
Commercial	$	677	$	—	$	—	$	677
At December 31, 2015:
Impaired loans
Commercial	$	677	$	—	$	—	$	677

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.

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(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.

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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, 2016 and December 31, 2015 are as follows:

	Carrying		Fair Value Measurements Using
(dollars in thousands)	Amount		Level 1		Level 2		Level 3		Total
As of March 31, 2016
Assets
Cash and cash equivalents	$	52,384	$	52,384	$	—	$	—	$	52,384
Investment securities		72,464		3,973		68,491		—		72,464
FRB stock		1,855		—		—		—		N/A
FHLB stock		3,167		—		—		—		N/A
Loans, net		600,021		—		—		598,690		598,690
Non-hedging interest rate swaps		57		—		57		—		57
Accrued interest receivable		1,800		1,800		—		—		1,800
Liabilities
Non-interest bearing deposits	$	383,486	$	383,486	$	—	$	—	$	383,486
Interest bearing deposits		271,471		223,766		47,705		—		271,471
Other borrowings		15,000		—		15,026		—		15,026
Non-hedging interest rate swaps		57		—		57		—		57
Accrued interest payable		36		36		—		—		36
As of December 31, 2015
Assets
Cash and cash equivalents	$	54,565	$	54,565	$	—	$	—	$	54,565
Investment securities		74,010		3,910		70,100		—		74,010
FRB stock		1,748		—		—		—		N/A
FHLB stock		3,167		—		—		—		N/A
Loans, net		589,472		—		—		587,530		587,530
Non-hedging interest rate swaps		30		—		30		—		30
Accrued interest receivable		1,692		1,692		—		—		1,692
Liabilities
Non-interest bearing deposits	$	362,451	$	362,451	$	—	$	—	$	362,451
Interest bearing deposits		235,726		187,978		47,748		—		235,726
Other borrowings		65,000		—		64,983		—		64,983
Non-hedging interest rate swaps		30		—		30		—		30
Accrued interest payable		23		23		—		—		23

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(12) Non-Interest Income

The following table summarizes the information regarding non-interest income for the three months ended March 31, 2016 and 2015, respectively:

	Three Months Ended March 31,
(in thousands)	2016		2015
Gain on sale of AFS investment securities	$	—	$	75
Service charges and other operating income		198		155
Total non-interest income	$	198	$	230

(13) Stock-Based Compensation

On May 8, 2013, the stockholders of the Company approved the Company’s 2013 Equity Incentive Plan (the “Plan”), which provides for the grant of up to 750,000 shares of Common Stock to employees, including officers and directors, non-employee directors and consultants. Stock options, stock appreciation rights, restricted stock and other stock awards, and restricted stock units are all available for grant pursuant to the terms and conditions of the Plan. The Plan was established to consolidate and replace all other previous stock plans and the remaining shares available for grant under these previous plans were cancelled.

Prior to the approval of the Plan, the Company granted restricted stock awards to directors and employees under the 2005 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.

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 $272,000 and $224,000 for the three months ended March 31, 2016 and 2015, respectively. The fair value of restricted stock awards that vested was $130,000 and $145,000 for the three months ended March 31, 2016 and 2015, respectively.

The following table reflects a combined summary of the activities related to restricted stock awards outstanding for the three months ended March 31, 2016 and 2015, respectively.

	Three Months Ended March 31,
	2016					2015
Restricted Shares	Number of Shares			Weighted Avg Fair Value at Grant Date		Number of Shares			Weighted Avg Fair Value at Grant Date
Beginning balance		669,750		$	6.56		615,875		$	5.92
Granted		18,000			7.50		26,000			6.50
Vested		(20,000	)		6.50		(20,000	)		7.24
Forfeited and surrendered		—			—		—			—
Ending balance		667,750		$	6.59		621,875		$	5.90

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 outstanding under the Director and Employee Stock Option Plan as of and for the three months ended March 31, 2016. There were no options granted or exercised under the Director and Employee Stock Option Plan for the three months ended March 31, 2015. The remaining contractual life of the Director and Employee Stock Options outstanding was 0.34 years at March 31, 2015. All options under the Directors and Employee Stock Option Plan were exercisable at March 31, 2015. At March 31, 2015, the weighted average exercise price of the 350,073 shares outstanding under the Director and Employee Stock Option Plan was $8.06. During the year ended December 31, 2015, 42,500 of unexercised option under the plan expired and were automatically cancelled. The weighted average exercise price of the cancelled options was $8.40 per share.

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The following tables detail the amount of shares authorized and available under all stock plans as of March 31, 2016:

	Shares Reserved		Less Shares Previously Exercised/Vested		Less Shares Outstanding		Total Shares Available for Future Issuance
2004 Founder Stock Option Plan		150,000		121,900		—		—
Director and Employee Stock Option Plan		1,434,000		1,220,097		—		—
2005 Equity Incentive Plan		1,200,000		944,273		243,000		—
2013 Equity Incentive Plan		750,000		40,000		424,750		285,250

(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, 2016 and December 31, 2015, the Company and the Bank met all capital adequacy requirements to which they are subject.

At December 31, 2015, the most recent notification from the OCC categorized the Bank as “well-capitalized” under the regulatory framework for prompt corrective action. To generally be categorized as a “well-capitalized” financial institution, 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 categorization.

The Company’s and the Bank’s capital ratios as of March 31, 2016 and December 31, 2015 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, 2016:
Total Risk-Based Capital Ratio	$	73,675		11.20	%	$	73,173		11.13	%	$	52,618		8.00	%	$	65,772		10.00	%
Tier 1 Risk-Based Capital Ratio	$	65,437		9.95	%	$	64,935		9.87	%	$	39,464		6.00	%	$	52,618		8.00	%
Common Equity Tier 1 Capital Ratio	$	65,437		9.95	%	$	64,935		9.87	%	$	29,598		4.50	%	$	42,752		6.50	%
Tier 1 Leverage Ratio	$	65,437		9.22	%	$	64,935		9.14	%	$	28,401		4.00	%	$	35,523		5.00	%
December 31, 2015:
Total Risk-Based Capital Ratio	$	73,029		11.24	%	$	72,520		11.16	%	$	51,992		8.00	%	$	64,989		10.00	%
Tier 1 Risk-Based Capital Ratio	$	64,891		9.98	%	$	64,381		9.91	%	$	38,994		6.00	%	$	51,991		8.00	%
Common Equity Tier 1 Capital Ratio	$	64,891		9.98	%	$	64,381		9.91	%	$	29,245		4.50	%	$	42,243		6.50	%
Tier 1 Leverage Ratio	$	64,891		9.00	%	$	64,381		8.92	%	$	28,852		4.00	%	$	36,078		5.00	%

On July 2, 2013, the Federal Reserve approved the final rules implementing the Basel Committee on Banking Supervision's (“BCBS”) capital guidelines for U.S. banks. Under the final rules, minimum requirements will increase for both the quantity and quality of capital held by the Company. The rules include a new common equity Tier 1 capital to risk-weighted assets ratio of 4.5%. The new rules also require a common equity Tier 1 capital conservation buffer of 2.5% of risk-weighted assets over each of the required capital ratios that will be phased in from 2016 to 2019 and must be met to avoid limitations the ability of the Bank to pay dividends, repurchase shares or pay discretionary bonuses. During 2016, the phased-in portion of the capital conservation buffer is 0.625%. The final rules also raise the minimum ratio of Tier 1 capital to risk-weighted assets from 4.0% to 6.0% and require a minimum leverage ratio of 4.0%. The final rules also implement strict eligibility criteria for regulatory capital instruments, excluding trust preferred securities, mortgage servicing rights and certain deferred tax assets, and including unrealized gains and losses on available for sale debt and equity securities. On July 9, 2013, the FDIC and OCC also approved, as an interim final rule, the regulatory capital requirements for U.S. banks, following the actions of the FRB. The FDIC and OCC's rules are identical in substance to the final rules issued by the FRB.

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The phase-in period for the final rules commenced for the Company and the Bank on January 1, 2015, with full compliance with all of the final rule's requirements phased in over a multi-year schedule.

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.

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

Introduction

Our profitability, like most banks, is primarily dependent on interest rate differentials. In general, the difference between the interest rates paid by us on interest bearing liabilities, such as deposits and other borrowings, and the interest rates received by us on our interest-earning assets, such as loans extended to our clients and securities held in our investment portfolio, comprises the major portion of our earnings. In addition, we may, from time to time, supplement our earnings by monetizing gains in our investment portfolio.

Proposed Merger with Midland Financial Co.

On March 10, 2016, Bancshares entered into an Agreement and Plan of Merger (the “Merger Agreement”), with Midland Financial Co., an Oklahoma corporation (“Midland”), and MC 2016 Corp., a Delaware corporation and wholly-owned subsidiary of Midland (“Merger Sub”), pursuant to which, upon the terms and subject to the conditions set forth therein, Merger Sub will merge (the “Merger”) with and into Bancshares, with Bancshares surviving the Merger as a wholly-owned subsidiary of Midland. Simultaneously with the Merger, 1st Century Bank will merge (the “Bank Merger”) with and into MidFirst Bank, a federally-chartered savings association and a wholly-owned subsidiary of Midland (“MidFirst”), with MidFirst surviving the Bank Merger. Immediately after the Merger and Bank Merger described above, Bancshares, as the surviving corporation in the Merger, will merge with and into Midland, with Midland as the surviving corporation.

Subject to the terms and conditions set forth in the Merger Agreement, upon consummation of the Merger, each outstanding share of Bancshares common stock, par value $0.01 per share, excluding shares owned by Midland, Bancshares or either of their subsidiaries (subject to certain exceptions) or shares owned by stockholders who have validly made and not effectively withdrawn a demand for appraisal rights, will be converted into the right to receive $11.22 in cash.

In addition, each share of Bancshares common stock subject to vesting, repurchase, transfer or other lapse restrictions pursuant to any of our benefit plans that is outstanding immediately prior to the effective time of the Merger will vest in full and become free of such restrictions and any repurchase right will lapse, and the holder thereof will be entitled to receive $11.22 in cash with respect to each such restricted share.

Consummation of the Merger is subject to certain closing conditions, including: (i) the adoption of the Merger Agreement by the holders of a majority of the outstanding shares of Bancshares common stock as of the applicable record date; (ii) the receipt of certain regulatory approvals required from the Federal Reserve and the OCC without the imposition of a Burdensome Condition (as defined in the Merger Agreement); and (iii) the absence of any law or order prohibiting the Merger or the other transactions contemplated by the Merger Agreement. The obligation of each party to consummate the Merger is also conditioned upon the accuracy of the other party’s representations and warranties (subject to customary materiality qualifiers) and the other party’s performance in all material respects of its obligations contained in the Merger Agreement.

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In addition, the obligation of Midland to consummate the Merger is further conditioned on (i) the absence of a Company Material Adverse Effect (as defined in the Merger Agreement) with respect to the Company and (ii) certain conditions regarding (A) the continued employment of our Chief Executive Officer and Chief Operating Officer and (B) such officers’ compliance with obligations under the employment agreements entered into with MidFirst concurrently with the execution and delivery of the Merger Agreement.

Midland and Bancshares have made customary representations, warranties and covenants in the Merger Agreement. Subject to certain exceptions, Bancshares and Midland have agreed to use their respective reasonable best efforts to obtain necessary regulatory approvals. In addition, Bancshares has agreed, among other things, to covenants relating to (i) the conduct of our business during the interim period between the execution of the Merger Agreement and the consummation of the Merger, (ii) facilitating our stockholders’ consideration of, and voting upon, the adoption of the Merger Agreement and certain related matters as applicable, (iii) the recommendation by the board of directors of Bancshares (the “Board”) in favor of the adoption by our stockholders of the Merger Agreement and certain related matters as applicable and (iv) non-solicitation obligations relating to alternative business combination transactions, subject to certain exceptions to allow the Board to exercise its fiduciary duties as set forth in the Merger Agreement.

The Merger Agreement contains certain termination rights for both Midland and Bancshares, including if (i) the necessary regulatory approvals are denied or the consummation of the Merger is legally prohibited or enjoined, (ii) the Merger is not consummated by March 10, 2017, (iii) there has been a breach by the other party that is not cured such that the applicable closing conditions are not satisfied, or (iv) the approval of our stockholders is not obtained. Subject to certain conditions, Bancshares may terminate the Merger Agreement prior to stockholder approval of the Merger to enter into a transaction which constitutes a superior proposal. Upon termination of the Merger Agreement under specified circumstances, Bancshares may be required to pay Midland a termination fee of $4,500,000 or reimburse certain of Midland’s expenses up to $1,000,000 (which reimbursement will reduce, on a dollar for dollar basis, any termination fee subsequently payable by Bancshares).

Midland and Bancshares currently expect that the Merger will be completed during the second half of 2016 or sooner. However, it is possible that factors outside the control of both companies, including whether or when the required regulatory approvals will be received, could result in the Merger being completed at a different time or not at all. The Company recorded $861,000 in merger-related expenses during the three months ended March 31, 2016.

For additional information related to the Merger and the Merger Agreement, please refer to our Current Report on Form 8-K filed with the Securities and Exchange Commission on March 11, 2016 and our preliminary proxy statement filed with the Commission on April 8, 2016. The description of the Merger Agreement and the Merger herein does not purport to be complete and is subject to, and qualified in its entirety by the full text of the Merger Agreement attached as Exhibit 2.1 to the Current Report filed on March 11, 2016.

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 by us to be relevant, actual results could differ materially and adversely 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, 2016.

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 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 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.

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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.

Income Taxes. 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 period, 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, and the corresponding need for or adequacy of a valuation allowance 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.

Summary of Financial Condition and Results of Operations

For the quarter ended March 31, 2016, the Company recorded net income of $273,000, or $0.03 per diluted share, compared to $315,000, or $0.03 per diluted share, for the same period last year. The decrease in net income during the three months ended March 31, 2016 as compared to the same period last year was primarily due to a $1.8 million increase in non-interest expenses, caused primarily by expenses of $861,000 and $268,000 incurred in connection with the proposed merger with Midland Financial Co. and the pre-effective registration statement that was filed with the U.S. Securities and Exchange Commission on September 25, 2015, respectively. The decrease in net income was partially offset by an increase in net interest income of $1.8 million, primarily resulting from an increase in the average balance of loans during the current quarter as compared to the same period last year.

Total assets at March 31, 2016 were $739.5 million, representing an increase of $7.5 million, or 1.0%, from $732.0 million at December 31, 2015. Cash and cash equivalents at March 31, 2016 were $52.4 million, representing a decrease of $2.2 million, or 4.0%, from $54.6 million at December 31, 2015. Loans increased by $10.7 million, from $598.4 million at December 31, 2015 to $609.2 million at March 31, 2016. Loan originations were $61.7 million during the quarter ended March 31, 2016, compared to $61.4 million during the same period last year. Prepayment speeds for the quarter ended March 31, 2016 were 15.9%, compared to 11.0% for the same period last year. Investment securities were $72.5 million at March 31, 2016, compared to $74.0 million at December 31, 2015, representing a decline of $1.5 million, or 2.0%. The weighted average life of our investment securities was 3.70 years and 3.85 years at March 31, 2016 and December 31, 2015, respectively.

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Total liabilities at March 31, 2016 increased by $6.5 million, or 1.0%, to $673.5 million compared to $667.0 million at December 31, 2015. This increase is primarily due to a $56.8 million increase in deposits, partially offset by the repayment of a $50.0 million in overnight borrowing with the FHLB that was outstanding at December 31, 2015. Total core deposits, which includes non-interest bearing demand deposits, interest bearing demand deposits and money market deposits and savings, were $607.3 million and $550.4 million at March 31, 2016 and December 31, 2015, respectively, representing an increase of $56.9 million, or 10.3%.

Average interest earning assets increased $113.1 million, from $587.9 million for the three months ended March 31, 2015 to $701.0 million for the three months ended March 31, 2016. The increase in average interest earning assets was primarily due to a $149.1 million increase in average loans during the three months ended March 31, 2016 as compared to the same period last year. The weighted average interest rate on interest earning assets was 4.00% and 3.57% for the three months ended March 31, 2016 and 2015, respectively. The improvement in this rate was primarily attributable to an increase in the average balance of loans relative to total average earning assets as compared to the same period last year, as well as a 14 basis point increase in our loan yield.

Average interest bearing deposits and borrowings increased $40.5 million, from $234.0 million for the three months ended March 31, 2015 to $274.6 million for the three months ended March 31, 2016. The increase in average interest bearing deposits and borrowings was primarily due to a $35.9 million increase in average interest bearing deposits during the three months ended March 31, 2016 as compared to the same period last year. The average cost of interest bearing deposits and borrowings was 0.29% during the three months ended March 31, 2016 compared to 0.27% for the same period last year.

At March 31, 2016, stockholders’ equity totaled $66.0 million, or 8.9% of total assets, as compared to $64.9 million, or 8.9% of total assets at December 31, 2015. The Company’s book value per share of common stock was $6.38 as of March 31, 2016, compared to $6.15 and $6.29 per share as of March 31, 2015 and December 31, 2015, respectively.

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

	Three Months Ended March 31,
	2016			2015
Annualized return on average assets		0.15	%		0.22	%
Annualized return on average stockholders’ equity		1.67	%		2.06	%
Average stockholders’ equity to average assets		9.25	%		10.44	%
Net interest margin		3.89	%		3.46	%

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 re-pricing 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 3.50% and 3.25% at March 31, 2016 and 2015, respectively. In December 2015, the targeted federal funds rate was increased from 0.00%-0.25% to 0.25%-0.50%. During the quarters ended March 31, 2016 and 2015, the targeted federal funds rate were 0.25%-0.50% and 0.00%-0.25%, respectively.

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.

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During the quarter ended March 31, 2016, net interest income was $6.8 million compared to $5.0 million for the same period last year. The increase in net interest income was primarily attributable to a 41 basis point improvement in our net interest spread. This increase in net interest spread was due to increases in the average balances of our loan portfolio during the quarter ended March 31, 2016 as compared to the same period last year, as well as a 14 basis point increase in our loan yield. The average balance of our loan portfolio was $603.8 million during the quarter ended March 31, 2016, compared to $454.7 million for the same period last year.

The Company’s net interest spread was 3.71% for the three months ended March 31, 2016 compared to 3.30% for the same period last year.

The Company’s net interest margin was 3.89% for the quarter ended March 31, 2016, compared to 3.46% for the same period last year. The 43 basis point increase in net interest margin is primarily due to an increase in the average balance of loans relative to total average earning assets as compared to the same period last year, as well as a 14 basis point increase in our loan yield. The percentage of average loans to total average earning assets increased to 86.1% during the quarter ended March 31, 2016, compared to 77.3% during the same period last year.

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, 2016 and 2015, respectively.

	Three Months Ended March 31,
	2016							2015
	Average		Interest					Average		Interest
(dollars in thousands)	Balance		Inc/Exp		Yield			Balance		Inc/Exp		Yield
Assets
Interest earning deposits at other financial institutions	$	18,626	$	23		0.50	%	$	49,792	$	32		0.26	%
U.S. Treasuries and Gov’t agencies		35,004		162		1.86	%		26,365		123		1.89	%
Corporate notes		—		—		—			2,295		8		1.33	%
Residential mortgage-backed securities		38,624		169		1.75	%		49,917		216		1.73	%
Federal Reserve Bank stock		1,753		26		5.98	%		1,655		25		6.00	%
Federal Home Loan Bank stock		3,167		64		8.10	%		3,167		57		7.27	%
Loans (1) (2)		603,795		6,534		4.35	%		454,663		4,717		4.21	%
Earning assets		700,969		6,978		4.00	%		587,854		5,178		3.57	%
Other assets		9,773							7,303
Total assets	$	710,742						$	595,157
Liabilities & Equity
Interest checking (NOW)	$	35,248		10		0.12	%	$	25,798		10		0.16	%
Money market deposits and savings		169,410		102		0.24	%		150,034		93		0.25	%
CDs		47,760		27		0.23	%		40,689		7		0.06	%
Borrowings		22,144		57		1.04	%		17,503		48		1.12	%
Total interest bearing deposits and borrowings		274,562		196		0.29	%		234,024		158		0.27	%
Demand deposits		366,468							296,098
Other liabilities		3,990							2,901
Total liabilities		645,020							533,023
Equity		65,722							62,134
Total liabilities & equity	$	710,742						$	595,157
Net interest income / spread			$	6,782		3.71	%			$	5,020		3.30	%
Net interest margin						3.89	%						3.46	%

(1) Before allowance for loan losses and net deferred loan fees and costs. Included in net interest income was net loan origination cost amortization of $17,000 and $6,000 for the three months ended March 31, 2016 and 2015, respectively.

(2) Includes average non-accrual loans of $712,000 and $632,000 for the three months ended March 31, 2016 and 2015, 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 period, 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.

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	Three Months Ended March 31, 2016 Compared to 2015 Increase (Decrease) Due to Changes in:
(in thousands)	Volume			Rate			Total
Interest income:
Interest earning deposits at other financial institutions	$	(27	)	$	18		$	(9	)
U.S. Treasuries and Gov’t agencies		41			(2	)		39
Corporate notes		(8	)		—			(8	)
Residential mortgage-backed securities		(49	)		2			(47	)
Federal Reserve Bank stock		1			—			1
Federal Home Loan Bank stock		—			7			7
Loans		1,644			173			1,817
Total increase in interest income		1,606			194			1,800
Interest expense:
Interest checking (NOW)		3			(3	)		—
Money market deposits and savings		12			(3	)		9
CDs		1			19			20
Borrowings		12			(3	)		9
Total increase in interest expense		28			10			38
Net increase in net interest income	$	1,578		$	184		$	1,762

Provision for Loan Losses

During the three months ended March 31, 2016, we recorded a provision for loan losses of $200,000, compared to $150,000 for the same period last year. Criticized and classified loans generally consist of special mention, substandard and doubtful loans. Special mention, substandard and doubtful loans were $172,000, $758,000 and none, respectively, at March 31, 2016, compared to $180,000, $1.3 million and none, respectively, at March 31, 2015. There were no loan charge-offs or recoveries during the quarter ended March 31, 2016, compared to $16,000 of net loan recoveries during the same period last year. At both March 31, 2016 and December 31, 2015, the ALL to total loans was 1.50%. Management will continue to closely monitor the adequacy of the ALL and will make adjustments as warranted. Management believes that the ALL as of March 31, 2016 and December 31, 2015 was adequate to absorb probable 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 0.12% at both March 31, 2016 and December 31, 2015, respectively. As a percentage of our total assets, the amount of non-performing assets was 0.10% at both March 31, 2016 and December 31, 2015, respectively.

Non-Interest Income

Non-interest income was $198,000 for the quarter ended March 31, 2016, compared to $230,000 for the same period last year. There were no investment securities sold during the quarter ended March 31, 2016. During the quarter ended March 31, 2015, the Company sold $5.9 million of investment securities, recognizing gains of $75,000. With the exception of such gains, non-interest income primarily consists of customer related fee income.

Non-Interest Expense

Non-interest expense was $6.3 million for the quarter ended March 31, 2016, compared to $4.5 million for the same period last year. The increase in non-interest expense during the quarter ended March 31, 2016 as compared to the same period last year is primarily due to expenses of $861,000 and $268,000 incurred in connection with the proposed Merger with Midland and the registration statement on Form S-1 that was filed with the U.S. Securities and Exchange Commission on September 25, 2015, respectively.

Income Tax Provision

During the quarters ended March 31, 2016 and 2015, we recorded tax provisions of $209,000 and $246,000, respectively.

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Financial Condition

Assets

Total assets at March 31, 2016 were $739.5 million, representing an increase of $7.5 million, or 1.0%, from $732.0 million at December 31, 2015. Cash and cash equivalents at March 31, 2016 were $52.4 million, representing a decrease of $2.2 million, or 4.0%, from $54.6 million at December 31, 2015. Loans increased by $10.7 million, from $598.4 million at December 31, 2015 to $609.2 million at March 31, 2016. Loan originations were $61.7 million during the quarter ended March 31, 2016, compared to $61.4 million during the same period last year. Prepayment speeds for the quarter ended March 31, 2016 were 15.9%, compared to 11.0% for the same period last year. Investment securities were $72.5 million at March 31, 2016, compared to $74.0 million at December 31, 2015, representing a decline of $1.5 million, or 2.0%. The weighted average life of our investment securities was 3.70 years and 3.85 years at March 31, 2016 and December 31, 2015, respectively.

Cash and Cash Equivalents

Cash and cash equivalents totaled $52.4 million and $54.6 million at March 31, 2016 and December 31, 2015, respectively. 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, 2016, investment securities totaled $72.5 million compared to $74.0 million at December 31, 2015. 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 and debt securities issued by Government Sponsored Agencies. The underlying loans for the mortgage-backed securities are residential mortgages that were primarily originated beginning in 2005 through the current period. These loans are geographically dispersed throughout the United States. At March 31, 2016 and December 31, 2015, the weighted average yield and weighted average life of these residential mortgage-backed securities were 1.78% and 1.79%, respectively, and 3.26 years and 3.36 years, respectively. At March 31, 2016 and December 31, 2015, the weighted average rate and weighted average life of debt securities issued by Government Sponsored Agencies were 1.88% and 1.88%, respectively, and 4.18 years and 4.43 years, respectively.

There were no securities sold during the three months ended March 31, 2016. During the quarter ended March 31, 2015, the Company sold $5.9 million, of investment securities, recognizing gains of $75,000. These gains were recorded in non-interest income within the unaudited Consolidated Statement of Operations and Comprehensive Income. In addition, the unrealized gain on investment securities increased to $875,000 at March 31, 2016, compared to $18,000 at December 31, 2015. 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 1.8%, or $10.5 million, from $589.5 million at December 31, 2015 to $600.0 million at March 31, 2016. As of March 31, 2016 and December 31, 2015, total loans outstanding totaled $609.2 million and $598.4 million, respectively. Loan originations were $61.7 million during the three months ended March 31, 2016, compared to $61.4 million during the same period last year. Prepayment speeds for the three months ended March 31, 2016 were 15.9%, compared to 11.0% for the same period last year.

As of March 31, 2016 and December 31, 2015, substantially all of the Company’s loan customers were located in Southern California.

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Non-Performing Assets

The following table sets forth non-accrual loans and other real estate owned at March 31, 2016 and December 31, 2015:

(dollars in thousands)	March 31, 2016			December 31, 2015
Non-accrual loans:
Commercial	$	712		$	712
Total non-accrual loans		712			712
Total non-performing assets	$	712		$	712
Non-performing assets to gross loans and OREO		0.12	%		0.12	%
Non-performing assets to total assets		0.10	%		0.10	%

Non-accrual loans totaled $712,000 at both March 31, 2016 and December 31, 2015. There were no accruing loans past due 90 days or more at March 31, 2016 and December 31, 2015. Gross interest income that would have been recorded on non-accrual loans had they been current in accordance with their original terms was $9,000 and $8,000 for the three months ended March 31, 2016 and 2015, respectively.

At both March 31, 2016 and December 31, 2015, non-accrual loans consisted of three commercial loans totaling $712,000.

At March 31, 2016 and December 31, 2015, the recorded investment in impaired loans was $758,000 and $759,000, respectively. At both March 31, 2016 and December 31, 2015, the Company had a specific allowance for loan losses of $35,000 on impaired loans of $140,000. There were $618,000 and $619,000 of impaired loans with no specific allowance for loan losses at March 31, 2016 and December 31, 2015, respectively. The average outstanding balance of impaired loans for the three months ended March 31, 2016 was $759,000, compared to $681,000 for the same period last year. At both March 31, 2016 and December 31, 2015, there were $712,000 of impaired loans on non-accrual status. During both the three months ended March 31, 2016 and 2015, interest income recognized on impaired loans subsequent to their classification as impaired was to $1,000. 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 probable incurred credit losses 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.

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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.

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. Alternatively, no assurance can be given that future economic conditions or other factors will not lead to a decline in delinquent loans, which could result in a reversal of provision for loan losses and/or loan recoveries. Management believes that the ALL as of March 31, 2016 and December 31, 2015 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, 2016 and 2015:

(in thousands)	Commercial		Commercial Real Estate		Residential			Land and Construction		Consumer and Other		Total
Three Months Ended March 31, 2016:
Allowance for loan losses:
Beginning balance	$	1,807	$	4,580	$	907		$	1,146	$	521	$	8,961
Provision for loan losses		—		115		(15	)		100		—		200
Charge-offs		—		—		—			—		—		—
Recoveries		—		—		—			—		—		—
Ending balance	$	1,807	$	4,695	$	892		$	1,246	$	521	$	9,161
Three Months Ended March 31, 2015:
Allowance for loan losses:
Beginning balance	$	1,752	$	3,825	$	747		$	816	$	459	$	7,599
Provision for loan losses		—		—		10			100		40		150
Charge-offs		—		—		—			—		—		—
Recoveries		16		—		—			—		—		16
Ending balance	$	1,768	$	3,825	$	757		$	916	$	499	$	7,765

There were no loans acquired with deteriorated credit quality during the three months ended March 31, 2016 and 2015.

The ALL was $9.2 million, or 1.50% of our total loan portfolio, at March 31, 2016, compared to $9.0 million, or 1.50% of our total loan portfolio, at December 31, 2015. At both March 31, 2016 and December 31, 2015, our non-performing loans were $712,000, respectively. The ratio of our ALL to non-performing loans was 1,287.28% and 1,259.18% at March 31, 2016 and December 31, 2015, respectively. In addition, our ratio of non-performing loans to total loans was 0.12% at both March 31, 2016 and December 31, 2015, 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

At March 31, 2016 and December 31, 2015, we had a net deferred tax asset of $4.2 million and $4.6 million, respectively. Our net deferred tax asset primarily consists of deferred tax assets related to the allowance for loan losses and equity compensation.

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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 period, 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. Management may reestablish a valuation allowances in the future to the extent that it is determined that it is more likely than not that these assets will not be realized.

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, 2016, total deposits were $655.0 million compared to $598.2 million at December 31, 2015, representing an increase of 9.5%, or $56.8 million. Total core deposits, which include non-interest bearing demand deposits, interest bearing demand deposits, and money market deposits and savings, were $607.3 million and $550.4 million at March 31, 2016 and December 31, 2015, respectively. Non-interest bearing deposits represent 58.6% of total deposits at March 31, 2016, compared to 60.6% at December 31, 2015.

The following table reflects a summary of deposit categories by dollar and percentage at March 31, 2016 and December 31, 2015:

	March 31, 2016					December 31, 2015
(dollars in thousands)	Amount		Percent of Total			Amount		Percent of Total
Non-interest bearing demand deposits	$	383,486		58.6	%	$	362,451		60.6	%
Interest bearing checking		36,385		5.5	%		32,406		5.4	%
Money market deposits and savings		187,381		28.6	%		155,572		26.0	%
Certificates of deposit		47,705		7.3	%		47,748		8.0	%
Total	$	654,957		100.0	%	$	598,177		100.0	%

At March 31, 2016, the Company had two certificates of deposit with the State of California Treasurer’s Office for a total of $46.0 million, which represented 7.0% of total deposits. The deposits outstanding at March 31, 2016 are scheduled to mature in the second quarter of 2016. 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. At December 31, 2015, the Company had two certificates of deposit with the State of California Treasurer’s Office for a total of $46.0 million, which represented 7.7% of total deposits. The Company was required to pledge $50.6 million of investment securities at both March 31, 2016 and December 31, 2015, 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.”

The aggregate amount of certificates of deposit of $100,000 or more was $47.1 million at both March 31, 2016 and December 31, 2015.

Scheduled maturities of certificates of deposit in amounts of $100,000 or more at March 31, 2016, including deposit accounts with the State of California Treasurer’s Office and CDARS were as follows:

(in thousands)
Due within 3 months or less	$	47,013
Due after 3 months and within 6 months		—
Due after 6 months and within 12 months		125
Due after 12 months		—
Total	$	47,138

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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 10.1% at both March 31, 2016 and December 31, 2015.

At March 31, 2016 and December 31, 2015, the Company had a borrowing/credit facility secured by a blanket lien on eligible loans at the FHLB of $183.0 million and $180.0 million, respectively. The Company had $15.0 million of long-term borrowings outstanding under this borrowing/credit facility with the FHLB at both March 31, 2016 and December 31, 2015. The Company had no overnight borrowings outstanding under this borrowing/credit facility at March 31, 2016. During the three months ended March 31, 2016, the Company had an average short-term borrowing balance of $4.0 million under this credit facility, incurring $6,000 in interest expense during this period. At December 31, 2015, the Company had a $50.0 million overnight borrowing outstanding under this borrowing/credit facility at an interest rate of 0.27%. The Company did not incur any material interest expense in connection with this borrowing and it was repaid in January 2016.

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, 2016 and December 31, 2015 (dollars in thousands):

Maturity Date	Interest Rate			March 31, 2016		December 31, 2015
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
May 2, 2018		0.93	%		5,000		5,000
	Total			$	15,000	$	15,000

At March 31, 2016 and December 31, 2015, 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. As of both March 31, 2016 and December 31, 2015, the Company had pledged $2.3 million, of investments 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, 2016, the Company was not subject to any material commitments for capital expenditures.

Capital Resources

At March 31, 2016, the Company had total stockholders’ equity of $66.0 million, which included $127,000 in common stock, $75.7 million in additional paid-in capital, $1.2 million in retained earnings, $515,000 in accumulated other comprehensive income, and $11.5 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 material and adverse effect on the business, results of operations and financial condition of the Company.

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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 Tier 1 and common equity 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, 2016 and December 31, 2015, the Company and the Bank met all capital adequacy requirements to which they are subject.

At December 31, 2015, the most recent notification from the OCC categorized the Bank as “well-capitalized” under the regulatory framework for prompt corrective action. To generally be categorized as a “well-capitalized” financial institution, the Bank must maintain minimum total risk-based, Tier 1 risk-based, common equity Tier 1 capital and Tier 1 leverage ratios. There are no conditions or events since the notification that management believes have changed the Bank’s categorization.

The Company’s and the Bank’s capital ratios as of March 31, 2016 and December 31, 2015 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, 2016:
Total Risk-Based Capital Ratio	$	73,675		11.20	%	$	73,173		11.13	%	$	52,618		8.00	%	$	65,772		10.00	%
Tier 1 Risk-Based Capital Ratio	$	65,437		9.95	%	$	64,935		9.87	%	$	39,464		6.00	%	$	52,618		8.00	%
Common Equity Tier 1 Capital Ratio	$	65,437		9.95	%	$	64,935		9.87	%	$	29,598		4.50	%	$	42,752		6.50	%
Tier 1 Leverage Ratio	$	65,437		9.22	%	$	64,935		9.14	%	$	28,401		4.00	%	$	35,523		5.00	%
December 31, 2015:
Total Risk-Based Capital Ratio	$	73,029		11.24	%	$	72,520		11.16	%	$	51,992		8.00	%	$	64,989		10.00	%
Tier 1 Risk-Based Capital Ratio	$	64,891		9.98	%	$	64,381		9.91	%	$	38,994		6.00	%	$	51,991		8.00	%
Common Equity Tier 1 Capital Ratio	$	64,891		9.98	%	$	64,381		9.91	%	$	29,245		4.50	%	$	42,243		6.50	%
Tier 1 Leverage Ratio	$	64,891		9.00	%	$	64,381		8.92	%	$	28,852		4.00	%	$	36,078		5.00	%

On July 2, 2013, the Federal Reserve approved the final rules implementing the Basel Committee on Banking Supervision's (“BCBS”) capital guidelines for U.S. banks. Under the final rules, minimum requirements will increase for both the quantity and quality of capital held by the Company. The rules include a new common equity Tier 1 capital to risk-weighted assets ratio of 4.5%. The new rules also require a common equity Tier 1 capital conservation buffer of 2.5% of risk-weighted assets over each of the required capital ratios that will be phased in from 2016 to 2019 and must be met to avoid limitations the ability of the Bank to pay dividends, repurchase shares or pay discretionary bonuses. During 2016, the phased-in portion of the capital conservation buffer is 0.625%. The final rules also raise the minimum ratio of Tier 1 capital to risk-weighted assets from 4.0% to 6.0% and require a minimum leverage ratio of 4.0%. The final rules also implement strict eligibility criteria for regulatory capital instruments, excluding trust preferred securities, mortgage servicing rights and certain deferred tax assets, and including unrealized gains and losses on available for sale debt and equity securities. On July 9, 2013, the FDIC and OCC also approved, as an interim final rule, the regulatory capital requirements for U.S. banks, following the actions of the FRB. The FDIC and OCC's rules are identical in substance to the final rules issued by the FRB.

The phase-in period for the final rules commenced for the Company and the Bank on January 1, 2015, with full compliance with all of the final rule's requirements phased in over a multi-year schedule. For capital adequacy purposes, the capital ratios of the Company and the Bank would currently be in compliance with the capital conservation buffer discussed above assuming the 2.5% capital conservation buffer was fully phased in as of March 31, 2016. Management will continue to closely monitor these ratios throughout the phase in period and beyond, and intends to take appropriate action, if necessary, to ensure that as the additional requirements are phased in that the BCBS capital guidelines are satisfied. Appropriate actions may include accessing capital markets, the disposition of assets, as well as other actions deemed necessary at that time.

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.

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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, 2016		December 31, 2015
Commitments to extend credit	$	160,674	$	159,855
Commitments to extend credit to directors and officers (undisbursed amount)	$	662	$	380
Standby/commercial letters of credit	$	3,090	$	3,245
Guarantees on revolving credit card limits	$	731	$	671
Outstanding credit card balances	$	105	$	82

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, 2016 and December 31, 2015, the allowance for unfunded commitments was $395,000 and $345,000, respectively, which represented 0.24% and 0.21% 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.”

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 period 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 period 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, 2016, that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

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PART II — OTHER INFORMATION

Item 1. Legal Proceedings

On May 3, 2016, a putative stockholder class action lawsuit, captioned Dean Drulias v. 1st Century Bancshares, Inc. et. al, Case No. 16CV294673, was filed in the Superior Court of the State of California in and for the County of Santa Clara in connection with the proposed Merger between the Company and Midland (the “Drulias Action”). The Drulias Action alleges, among other things, that the members of the Company’s board of directors breached their fiduciary duties by causing the Company to agree to the Merger based on the individual interests of such directors as opposed to the best interests of the Company’s stockholders. The Drulias Action also alleges that the Company and the Company’s board of directors failed to disclose material information in the preliminary proxy statement filed with the Securities and Exchange Commission in connection with the Merger. The plaintiff in this action seeks, among other things, declaratory and injunctive relief, compensatory and/or rescissory damages, interest, attorney’s fees, expert fees and other costs, and other relief. At this stage, it is not possible to predict the outcome of the proceedings or their impact on the Company or the Merger.

In the ordinary course of operations, the Company may be party to various other legal proceedings.

Item 1A. Risk Factors

Other than the additional risk factors set forth below related to the Merger with Midland, 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, 2015. 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, 2015, which could materially and adversely affect the Company’s business, financial condition and results of operations. The risks described below and 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.

The proposed Merger is subject to a number of conditions precedent, including stockholder approval, the receipt of certain regulatory approvals required from the Federal Reserve and the OCC without the imposition of a Burdensome Condition (as defined in the Merger Agreement) and certain conditions regarding the continued employment of and compliance with obligations under the employment agreements entered into with MidFirst by the Company’s Chief Executive Officer and Chief Operating Officer, that, if not satisfied or not satisfied in a timely manner, could delay or prevent the consummation of the proposed Merger.

Among other things, the Merger Agreement must be adopted by the affirmative vote by the holders of a majority of the outstanding shares entitled to vote on the proposal at a stockholders’ meeting duly called and held for such purpose. Although we intend to call a special meeting of stockholders to consider and vote on the adoption of the Merger Agreement, stockholders could seek to enjoin the meeting. Even if such stockholder meeting is ultimately held, there is no guarantee that our stockholders will adopt the Merger Agreement by the requisite vote at such meeting, or at all.

In addition, before the proposed Merger may be consummated, certain regulatory approvals required from the Federal Reserve and the OCC must be obtained and all statutory waiting periods in respect thereof must have expired without the imposition of a Burdensome Condition (as defined in the Merger Agreement). There can be no assurance that these regulatory approvals, or any other regulatory approvals that might be required to consummate the proposed Merger, will be obtained and, if obtained, there can be no assurance as to the timing of any approvals or the ability to obtain the approvals on satisfactory terms. If the proposed Merger does not receive, or timely receive, the required regulatory approvals, or if another event occurs delaying or preventing the proposed Merger, such delay or failure to complete the proposed Merger may create uncertainty or otherwise have negative consequences that may materially and adversely affect our financial condition and results of operations, as well as the price per share for our common stock.

In addition, the obligation of Midland to consummate the proposed Merger is further subject to the satisfaction or waiver of certain conditions regarding the continued employment of the Company’s Chief Executive Officer and Chief Operating Officer and such officers’ compliance with obligations under the employment agreements entered into with MidFirst concurrently with the execution and delivery of the Merger Agreement. If these employees cease to be employed by the Company for any reason, including for reasons that are not within our control, or if these employees fail to comply with the obligations under the employment agreements, the consummation of the proposed Merger may be prevented, materially delayed or materially impaired.

Under the terms of the Merger Agreement, the consummation of the Merger is also subject to other customary conditions. Satisfaction of certain of the conditions is not within our control, and difficulties in otherwise satisfying the conditions may prevent, materially delay or materially impair the consummation of the proposed Merger. It is also possible that a fact, circumstance, event, change, effect, development or occurrence since the date of the Merger Agreement may result in a Company Material Adverse Effect (as defined in the Merger Agreement) with respect to the Company, the non-occurrence of which is a condition to the consummation of the proposed Merger. We cannot predict with certainty whether and when any of the required conditions will be satisfied.

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The consideration to be paid under the Merger Agreement will not be adjusted for changes in our business, assets, liabilities, prospects, outlook, financial condition or results of operations, or in the event of any change in our stock price.

The consideration to be paid to holders of our common stock under the Merger Agreement will not be adjusted for changes in our business, assets, liabilities, prospects, outlook, financial condition or results of operations, or changes in the market price of, analyst estimates of, or projections relating to, our common stock. For example, if we experienced an improvement in our business, assets, liabilities, prospects, outlook, financial condition or results of operations prior to the consummation of the proposed Merger, there would be no adjustment to the amount of the consideration to be paid to holders of our common stock under the Merger Agreement.

Termination of the Merger Agreement could negatively impact us.

If the proposed Merger is not consummated for any reason, we may be adversely affected and would be subject to a number of risks, including the following:

● We may experience negative reactions from the financial markets, including negative impacts on our stock price;

● We may experience negative reactions from our stockholders, employees, customers, lenders, suppliers, borrowers and other business partners; and

● We may be required to pay certain fees and/or costs relating to the proposed Merger, whether or not the proposed Merger is consummated, including, in some cases, a termination fee.

While the proposed Merger is pending, we are subject to business uncertainties and contractual restrictions that could disrupt our business.

Whether or not the proposed Merger is consummated, the proposed Merger may disrupt our current plans and operations, which could have an adverse effect on our business and financial results. The pendency of the Merger may also divert management's attention and our resources from ongoing business and operations and our employees and other key personnel may have uncertainties about the effect of the pending Merger, and these uncertainties may impact our ability to retain, recruit and hire key personnel while the Merger is pending or if it fails to close. We may incur unexpected costs, charges or expenses resulting from the proposed Merger. Furthermore, we cannot predict how our customers, lenders, suppliers, borrowers and other business partners will view or react to the proposed Merger. If we are unable to reassure our customers, lenders, suppliers, borrowers and other business partners to continue transacting business with us, our financial condition and results of operations may be adversely affected.

The preparations for integration between Midland and the Company have occupied and we expect will occupy a significant time commitment from many of our employees and on our internal resources. If, despite our efforts, key personnel depart because of these or other reasons, our business and results of operations may be adversely affected. In addition, whether or not the proposed Merger is consummated, while it is pending we will continue to incur costs, fees, expenses and charges related to the proposed Merger, which may materially and adversely affect our financial condition and results of operations.

In addition, the Merger Agreement generally requires us to operate in the ordinary course of business consistent with past practice, pending consummation of the proposed Merger and also restricts us from taking certain actions with respect to our business without Midland’s consent. Such restrictions will be in place until either the proposed Merger is consummated or the Merger Agreement is terminated. These restrictions could restrict our ability to, or prevent us from, pursuing attractive business opportunities (if any) that arise prior to the consummation of the proposed Merger. For these and other reasons, the pendency of the Merger could adversely affect our business and results of operations.

43

Table Of Contents

In the event that the proposed Merger is not consummated, the trading price of our common stock and our future business and results of operations may be negatively affected.

The conditions to the consummation of the proposed Merger may not be satisfied, as described above. If the proposed Merger is not consummated, we would remain liable for significant transaction costs, and the focus of our management would have been diverted from seeking other potential strategic opportunities, in each case without realizing any benefits of the proposed Merger. For these and other reasons, not consummating the proposed Merger could adversely affect our financial condition and results of operations. Furthermore, if we do not consummate the proposed Merger, the price of our common stock may decline significantly from the current market price, which we believe reflects a market assumption that the proposed Merger will be consummated. Certain costs associated with the proposed Merger have already been incurred or may be payable even if the proposed Merger is not consummated. Further, a failed transaction may result in negative publicity and a negative impression of us in the investment community. Finally, any disruptions to our business resulting from the announcement and pendency of the proposed Merger, including any adverse changes in our relationships with our customers, lenders, suppliers, borrowers and employees or recruiting and retention efforts, could occur in the event of a failed Merger.

Our directors and officers have interests in the merger different from the interests of other stockholders.

Our executive officers and directors have interests in the proposed Merger that are different from, or in addition to, the interests of our stockholders generally. These interests include (i) the accelerated vesting and payment of Bancshares restricted shares; (ii) certain severance and other separation benefits that may be payable upon termination of employment following the consummation of the proposed Merger pursuant to new employment arrangements that certain executive officers have entered into with MidFirst in connection with the Merger; and (iii) entitlement to continued indemnification, expense advancement and insurance coverage under the Merger Agreement.

The Merger Agreement contains provisions that may discourage other companies from trying to acquire 1st Century.

The Merger Agreement contains provisions that may discourage a third party from submitting a business combination proposal to Bancshares that might result in greater value to our stockholders than the proposed Merger. These provisions include a general prohibition on soliciting, or, subject to certain exceptions, entering into discussions with any third party regarding any acquisition proposal or offers for competing transactions. In addition, upon termination of the Merger Agreement in certain circumstances, we may be required to pay Midland a termination fee of $4,500,000. Furthermore, certain directors and executive officers of Bancshares, who collectively own approximately 21.5% of the outstanding shares, have entered into a voting agreement with Midland. The voting agreement, among other things, requires such stockholders to vote all of their shares in favor of adoption of the Merger Agreement and against alternative transactions, as long as the Merger Agreement has not been terminated.

Stockholder litigation could prevent or delay the closing of the proposed Merger or otherwise negatively impact our business and operations.

We may incur additional costs in connection with the defense or settlement of the currently pending or any future stockholder litigation in connection with the proposed Merger. Such litigation may adversely affect our ability to complete the proposed Merger. Such litigation could also have an adverse effect on our financial condition and results of operations.

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

None.

Item 3. Defaults Upon Senior Securities

None.

Item 4. Mine Safety Disclosures.

None.

Item 5. Other Information

None.

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Table Of Contents

Item 6. Exhibits

2.1 Agreement and Plan of Merger, dated March 10, 2016, by and among Midland Financial Co., MC 2016 Corp., and 1st Century Bancshares, Inc. (incorporated by reference to Exhibit 2.1 to 1st Century Bancshares, Inc.’s Current Report on Form 8-K filed on March 11, 2016).*

3.1 Bylaws of 1st Century Bancshares, Inc., as amended on March 10, 2016 (incorporated by reference to Exhibit 3.1 to 1st Century Bancshares, Inc.’s Current Report on Form 8-K filed on March 11, 2016).

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 and Principal 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.

* Schedules and exhibits omitted pursuant to Item 601(b)(2) of Regulation S-K.  Bancshares agrees to furnish supplementally a copy of any omitted schedules or exhibits to the SEC upon request; provided, however, that Bancshares may request confidential treatment pursuant to Rule 24b-2 of the Exchange Act for any schedule or exhibit so furnished.

45

Table Of Contents

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.
Date: May 5, 2016	By:	/s/ Alan I. Rothenberg.
		Alan I. Rothenberg
		Chairman and Chief Executive Officer
Date: May 5, 2016	By:	/s/ Bradley S. Satenberg.
		Bradley S. Satenberg
		Executive Vice President and Chief Financial Officer

46

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 5, 2016	/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 5, 2016	/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, 2016, 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 5, 2016	/s/ Alan I. Rothenberg
	Alan I. Rothenberg
	Chairman of the Board, Chief Executive Officer and Principal Executive Officer
Date: May 5, 2016	/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

Document And Entity Information - shares	3 Months Ended
	Mar. 31, 2016	Apr. 29, 2016
Entity Registrant Name	1st Century Bancshares, Inc.
Entity Central Index Key	0001420525
Trading Symbol	fcty
Current Fiscal Year End Date	--12-31
Entity Filer Category	Smaller Reporting Company
Entity Current Reporting Status	Yes
Entity Voluntary Filers	No
Entity Well-known Seasoned Issuer	No
Entity Common Stock, Shares Outstanding (in shares)		10,336,884
Document Type	10-Q
Document Period End Date	Mar. 31, 2016
Document Fiscal Year Focus	2016
Document Fiscal Period Focus	Q1
Amendment Flag	false

XML

Consolidated Balance Sheets (Current Period Unaudited) - USD ($)	Mar. 31, 2016	Dec. 31, 2015
ASSETS
Cash and due from banks	$ 11,071,000	$ 8,889,000
Interest earning deposits at other financial institutions	41,313,000	45,676,000
Total cash and cash equivalents	52,384,000	54,565,000
Investment securities — Available for Sale (“AFS”), at estimated fair value	72,464,000	74,010,000
Loans, net of allowance for loan losses of $9,161 and $8,961 at March 31, 2016 and December 31, 2015, respectively	600,021,000	589,472,000
Premises and equipment, net	1,690,000	1,627,000
Federal Home Loan Bank (“FHLB”) and Federal Reserve Bank (“FRB”) stock	5,022,000	4,915,000
Accrued interest and other assets	7,896,000	7,361,000
Total Assets	739,477,000	731,950,000
LIABILITIES AND STOCKHOLDERS’ EQUITY
Non-interest bearing demand deposits	383,486,000	362,451,000
Interest bearing deposits:
Interest bearing checking (“NOW”)	36,385,000	32,406,000
Money market deposits and savings	187,381,000	155,572,000
Certificates of deposit less than $250	1,199,000	1,243,000
Certificates of deposit of $250 or greater	46,506,000	46,505,000
Total deposits	654,957,000	598,177,000
Other borrowings	15,000,000	65,000,000
Accrued interest and other liabilities	3,568,000	3,870,000
Total Liabilities	673,525,000	667,047,000
Stockholders’ Equity:
Preferred stock, $0.01 par value — 10,000,000 shares authorized, none issued and outstanding at March 31, 2016 and December 31, 2015, respectively	0	0
Common stock, $0.01 par value — 50,000,000 shares authorized, 12,673,633 and 12,655,633 issued at March 31, 2016 and December 31, 2015, respectively	127,000	127,000
Additional paid-in capital	75,668,000	75,396,000
Retained earnings	1,151,000	878,000
Accumulated other comprehensive income	515,000	11,000
Treasury stock at cost — 2,336,749 shares at both March 31, 2016 and December 31, 2015	(11,509,000)	(11,509,000)
Total Stockholders’ Equity	65,952,000	64,903,000
Total Liabilities and Stockholders’ Equity	$ 739,477,000	$ 731,950,000

XML

Consolidated Balance Sheets (Current Period Unaudited) (Parentheticals) - USD ($) $ in Thousands	Mar. 31, 2016	Dec. 31, 2015
Allowance for loan losses	$ 9,161	$ 8,961
Preferred stock, par value (in dollars per share)	$ 0.01	$ 0.01
Preferred stock, shares authorized (in shares)	10,000,000	10,000,000
Preferred stock, shares issued (in shares)	0	0
Preferred stock, shares outstanding (in shares)	0	0
Common stock, par value (in dollars per share)	$ 0.01	$ 0.01
Common stock, shares authorized (in shares)	50,000,000	50,000,000
Common stock, shares issued (in shares)	12,673,633	12,655,633
Treasury stock, shares (in shares)	2,336,749	2,336,749

XML

Unaudited Consolidated Statements of Operations and Comprehensive Income - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2016	Mar. 31, 2015
Interest and fee income on:
Loans	$ 6,534	$ 4,717
Investments	331	347
Other	113	114
Total interest and fee income	6,978	5,178
Interest expense on:
Deposits	139	110
Borrowings	57	48
Total interest expense	196	158
Net interest income	6,782	5,020
Provision for loan losses	200	150
Net interest income after provision for loan losses	$ 6,582	4,870
Non-interest income:
Gain on sale of AFS investment securities		75
Other operating income	$ 198	155
Total non-interest income	198	230
Non-interest expenses:
Compensation and benefits	3,038	2,695
Occupancy	460	475
Professional fees	340	178
Technology	299	230
Marketing	126	101
FDIC assessments	111	$ 95
Merger related expenses	861
Form S-1 related expenses	268
Other operating expenses	795	$ 765
Total non-interest expenses	6,298	4,539
Income before income taxes	482	561
Income tax provision	209	246
Net income	273	315
Other Comprehensive Income:
Net change in unrealized gains on AFS investments, net of tax	504	317
Comprehensive Income	$ 777	$ 632
Basic earnings per share (in dollars per share)	$ 0.03	$ 0.03
Diluted earnings per share (in dollars per share)	$ 0.03	$ 0.03

XML

Unaudited Consolidated Statements of Changes in Stockholders' Equity - USD ($)	Common Stock [Member]	Additional Paid-in Capital [Member]	Retained Earnings [Member]	AOCI Attributable to Parent [Member]	Treasury Stock [Member]	Total
Balance (in shares) at Dec. 31, 2014	12,129,310				(1,988,869)
Balance at Dec. 31, 2014	$ 121,000	$ 71,736,000	$ (1,675,000)	$ 162,000	$ (8,651,000)	$ 61,693,000
Restricted stock issued (in shares)	26,000
Restricted stock issued	$ 1,000	(1,000)
Compensation expense associated with restricted stock awards, net of estimated forfeitures		$ 224,000				$ 224,000
Net income			$ 315,000			315,000
Other comprehensive income (loss)				$ 317,000		317,000
Balance (in shares) at Mar. 31, 2015	12,155,310				(1,988,869)
Balance at Mar. 31, 2015	$ 122,000	$ 71,959,000	$ (1,360,000)	479,000	$ (8,651,000)	62,549,000
Balance (in shares) at Dec. 31, 2015	12,655,633				(2,336,749)
Balance at Dec. 31, 2015	$ 127,000	$ 75,396,000	$ 878,000	$ 11,000	$ (11,509,000)	$ 64,903,000
Restricted stock issued (in shares)	18,000
Restricted stock issued
Compensation expense associated with restricted stock awards, net of estimated forfeitures		$ 272,000				$ 272,000
Net income			$ 273,000			273,000
Other comprehensive income (loss)				$ 504,000		504,000
Balance (in shares) at Mar. 31, 2016	12,673,633				(2,336,749)
Balance at Mar. 31, 2016	$ 127,000	$ 75,668,000	$ 1,151,000	$ 515,000	$ (11,509,000)	$ 65,952,000

XML

Unaudited Consolidated Statements of Cash Flows - USD ($)	3 Months Ended
	Mar. 31, 2016	Mar. 31, 2015
Cash flows from operating activities:
Net income	$ 273,000	$ 315,000
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization of premises and equipment	132,000	152,000
Amortization of premiums on investment securities, net	120,000	156,000
Provision for loan losses	200,000	150,000
Amortization of deferred loan fees and costs, net	$ 17,000	6,000
Gain on sale of AFS investment securities		(75,000)
Non-cash stock compensation, net of forfeitures	$ 272,000	224,000
(Increase) decrease in accrued interest and other assets	(888,000)	291,000
Decrease in accrued interest and other liabilities	302,000	548,000
Net cash (used in) provided by operating activities	$ (176,000)	671,000
Cash flows from investing activities:
Purchases		(2,010,000)
Maturities and principal reductions	$ 2,283,000	3,195,000
Proceeds from sale of securities		5,983,000
Increase in loans, net	$ (10,766,000)	(36,992,000)
Purchase of premises and equipment	(195,000)	$ (332,000)
Purchase of FRB stock	(107,000)
Net cash used in investing activities	(8,785,000)	$ (30,156,000)
Cash flows from financing activities:
Net increase in deposits	56,780,000	$ 31,124,000
Repayment of other short-term borrowings	(50,000,000)
Net cash provided by financing activities	6,780,000	$ 31,124,000
(Decrease) increase in cash and cash equivalents	(2,181,000)	1,639,000
Cash and cash equivalents, beginning of period	54,565,000	58,464,000
Cash and cash equivalents, end of period	52,384,000	60,103,000
Supplemental cash flow information:
Interest	183,000	170,000
Income taxes	$ 1,700,000	$ 140,000

XML

Note 1 - Summary of Significant Accounting Policies

3 Months Ended

Mar. 31, 2016

Notes to Financial Statements

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 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.”

Proposed Merger with Midland Financial Co.

On March 10, 2016, Bancshares entered into an Agreement and Plan of Merger (the “Merger Agreement”), with Midland Financial Co., an Oklahoma corporation (“Midland”), and MC 2016 Corp., a Delaware corporation and wholly-owned subsidiary of Midland (“Merger Sub”), pursuant to which, upon the terms and subject to the conditions set forth therein, Merger Sub will merge (the “Merger”) with and into Bancshares, with Bancshares surviving the Merger as a wholly-owned subsidiary of Midland. Simultaneously with the Merger, the Bank will merge (the “Bank Merger”) with and into MidFirst Bank, a federally-chartered savings association and a wholly-owned subsidiary of Midland (“MidFirst”), with MidFirst surviving the Bank Merger. Immediately after the Merger and Bank Merger described above, Bancshares, as the surviving corporation in the Merger, will merge with and into Midland, with Midland as the surviving corporation.

Subject to the terms and conditions set forth in the Merger Agreement, upon consummation of the Merger, each outstanding share of Bancshares common stock, par value $0.01 per share, excluding shares owned by Midland, Bancshares or either of their subsidiaries (subject to certain exceptions) or shares owned by stockholders who have validly made and not effectively withdrawn a demand for appraisal rights, will be converted into the right to receive $11.22 in cash.

Completion of the Merger is subject to certain closing conditions, including approval by Bancshares’ stockholders and the receipt of certain required regulatory approvals. Midland and Bancshares currently expect that the Merger will be completed during the second half of 2016 or sooner. However, it is possible that factors outside the control of both companies, including whether or when the required regulatory approvals will be received, could result in the Merger being completed at a different time or not at all. The Company recorded $861,000 in merger-related expenses during the three months ended March 31, 2016.

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 period 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, 2015, and the notes thereto, included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2015 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, 2016 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, 2016.

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. 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 (“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 probable 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.

Other Real Estate Owned

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 ten 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.

At March 31, 2016 and December 31, 2015, 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, 2016 and 2015, there were none and 350,073, respectively, of weighted average stock options that were excluded from the diluted earnings per share calculation due to their antidilutive impact

. For the three months ended March 31, 2016 and 2015, there were 11,868 and 17,044, respectively, of weighted average 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)	20 16		20 15
Net income	$	273	$	315
Average number of common shares outstanding		9,662,321		9,537,677
Effect of dilution of restricted stock		300,539		266,656
Average number of common shares outstanding used to calculate diluted earnings per common share		9,962,860		9,804,333

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 Company’s 2005 Amended and Restated Equity Incentive Plan (the “Equity Incentive Plan”) and the 2013 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 August 2014, the Financial Accounting Standard Board (FASB) issued Accounting Standard Update (ASU) No. 2014-15, Presentation of Financial Statements – Going Concern (Subtopic 205-40) (ASU 2014-15). The objective of ASU 2014-15 is to define management’s responsibility to evaluate whether there is substantial doubt about an organization’s ability to continue as a going concern and provide related disclosures. Currently, GAAP does not provide guidance to evaluate whether there is substantial doubt regarding an organization’s ability to continue as a going concern. This ASU provides guidance to an organization’s management, with principles and definitions to reduce diversity in the timing and content of financial statement disclosures commonly provided by organizations. ASU 2014-15 is effective for periods ending after December 15, 2016 and interim periods within annual periods beginning after December 15, 2016.

In August 2015, the FASB issued ASU No. 2015-14, Revenue from Contracts with Customers (Topic 606) (ASU 2015-14). On May 28, 2014, the FASB issued Accounting Standards Update No. 2014-09, Revenue from Contracts with Customers (Topic 606), with an original effective date for annual reporting periods beginning after December 15, 2016. The core principal of ASU 2014-09 is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. ASU 2015-14 deferred the effective date of ASU 2014-09 to annual periods and interim periods within those annual periods beginning after December 15, 2017. The Company is currently evaluating the effects of ASU 2015-14 on its financial statements and disclosures, if any.

Effective January 2016, the Company prospectively adopted ASU 2015-05, Intangibles-Goodwill and Other-Internal-Use Software (Subtopic 350-40): Customer’s Accounting or Fees Paid in a Cloud Computing Arrangement (ASU 2015-05). ASU 2015-05 provides guidance to customers about whether a cloud computing arrangement includes a software license. If a cloud computing arrangement includes a software license, the customer should account for the software license element of the arrangement consistent with the acquisition of other software licenses. If a cloud computing arrangement does not include a software license, the customer should account for the arrangement as a service contract. As a result, all software licenses within the scope of this guidance will be accounted for consistently with other licenses of intangible assets. The adoption of ASU 2015-05 did not have a material effect on the Company’s financial statements.

In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842) (ASU 2016-02). ASU 2016-02 is intended to increase transparency and comparability among organizations by recognizing lease assets and liabilities on the balance sheet and disclosing key information about leasing arrangements. For public business entities, this ASU is effective for annual periods and interim periods within those annual periods beginning after December 15, 2018. The Company is currently evaluating the effects of ASU 2016-02 on its financial statements and disclosures.

In March 2016, the FASB issued ASU 2016-05, Effect of Derivative Contract Novations on Existing Hedge Accounting Relationships (ASU 2016-05). ASU 2016-05 clarifies that a change in the counterparty to a derivative instrument (a novation) that has been designated as the hedging instrument does not, in and of itself, require dedesignation of that hedging relationship provided that all other hedge accounting criteria continue to be met. Public business entities have the option to apply this ASU on a prospective basis or a modified retrospective basis. It is effective for annual periods and interim periods within those annual periods beginning after December 15, 2016. The Company intends to apply this guidance prospectively and does not expect it to have a material impact on its financial statements or disclosures.

In March 2016, the FASB issued ASU 2016-06, Contingent Put and Call Options in Debt Instruments (ASU 2016-06). ASU 2016-06 clarifies the steps required to determine if an embedded derivative should be bifurcated from a host contract in order to resolve diversity in practice. For public business entities, this ASU will be applied on a modified retrospective basis for annual periods and interim periods within those annual periods beginning after December 15, 2016. The Company is currently evaluating the effects of ASU 2016-06 on its financial statements and disclosures.

In March 2016, the FASB issued ASU 2016-07, Simplifying the Transition to the Equity Method of Accounting (ASU 2016-07). ASU 2016-07 was issued as part of the FASB’s initiative to identify, evaluate and improve areas of generally accepted accounting principles for which cost and complexity can be reduced while maintaining the usefulness of the information in the financial statements. ASU 2016-07 eliminates the requirement to retroactively adopt the equity method of accounting when an investment qualifies for the use of the equity method as a result of an increase in the level of ownership or degree of influence. For public business entities, this ASU will be applied on a prospective basis for annual periods and interim periods within those annual periods beginning after December 15, 2016. The Company does not expect the adoption of ASU 2016-06 to have a material impact on its financial statements or disclosures

In March 2016, the FASB issued ASU 2016-08, Principal versus Agent Considerations (Reporting Revenue Gross versus Net) (ASU 2016-08). ASU 2016-08 clarifies the implementation guidance in ASU 2014-09, Revenue from Contracts with Customers, on principal versus agent considerations and whether an entity reports revenue on a gross or net basis. For public business entities, this ASU is effective for annual periods and interim periods within those annual periods beginning after December 15, 2017. The Company is currently evaluating the effects of ASU 2014-09 and ASU 2016-08 on its financial statements and disclosures.

In March 2016, the FASB issued ASU 2016-09, Improvements to Employee Share-Based Payment Accounting (ASU 2016-09). ASU 2016-09 includes provisions intended to simplify various aspects related to how share-based payments are accounted for and presented in the financial statements. The areas for simplification include income tax consequences, forfeitures, classification of awards as either equity or liabilities and classification on the statement of cash flows. This ASU is effective for annual periods and interim periods within those annual periods beginning after December 15, 2016 and early adoption is permitted for financial statements that have not been previously issued.

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Note 2 - Investments

3 Months Ended

Mar. 31, 2016

Notes to Financial Statements

Investment [Text Block]

( 2 ) Investments

The following is a summary of the investments categorized as Available for Sale at March 31, 2016 and December 31, 2015:

			Gross		Gross
	Amortized		Unrealized		Unrealized			Fair
(in thousands)	Cost		Gains		Losses			Value
At March 31, 2016 :
Investments — Available for Sale
U.S. Treasuries and Government Agencies	$	34,410	$	676	$	—		$	35,086
Residential Mortgage-Backed Securities		37,179		264		(65	)		37,378
Total	$	71,589	$	940	$	(65	)	$	72,464
At December 31, 2015 :
Investments — Available for Sale
U.S Treasuries and Government Agencies	$	34,417	$	184	$	(2	)	$	34,599
Residential Mortgage-Backed Securities		39,575		116		(280	)		39,411
Total	$	73,992	$	300	$	(282	)	$	74,010

The Company did not have any investment securities categorized as “Held to Maturity” or “Trading” at March 31, 2016 or December 31, 2015. At March 31, 2016 and December 31, 2015, 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, 2016 and December 31, 2015, the fair value of securities pledged to the State of California Treasurer’s Office to secure their deposits was $54.7 million and $55.9 million, respectively. Deposits from the State of California were $46.0 million at both March 31, 2016 and December 31, 2015.

The following table summarizes the fair value of AFS securities and the weighted average yield of investment securities by contractual maturity at March 31, 2016. 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 3.26 years at March 31, 2016.

(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. Treasuries and Government Agencies	$	—		—	%	$	30,689		1.86	%	$	4,397		2.08	%	$	—		—	%	$	35,086		1.89	%
Residential Mortgage-Backed Securities		—		—			748		3.40			20,894		1.62			15,736		1.92			37,378		1.78
Total	$	—		—	%	$	31,437		1.90	%	$	25,291		1.70	%	$	15,736		1.92	%	$	72,464		1.83	%

A total of 10 and 31 securities had unrealized losses at March 31, 2016 and December 31, 2015, 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, 2016 :
Investments-Available for Sale
Residential Mortgage-Backed Securities	$	(27	)	$	6,488	$	(38	)	$	4,018
At December 31, 201 5 :
Investments-Available for Sale
U.S Treasuries and Government Agencies	$	(2	)	$	3,995	$	—		$	—
Residential Mortgage-Backed Securities		(205	)		23,942		(75	)		4,221

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, 2016 and December 31, 2015 that the unrealized losses on its securities portfolio on which impairments had not been recognized are temporary.

There were no securities sold during the three months ended March 31, 2016.

During the three months ended March 31, 2015, the Company sold available for sale investment securities with an amortized cost of $5.9 million resulting in realized gains of $75,000.

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

3 Months Ended

Mar. 31, 2016

Notes to Financial Statements

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

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

Loans

The categories of loans listed below are grouped in accordance with the primary purpose of the loans, but in the aggregate 85.0% and 83.7% of all loans are secured by real estate at March 31, 2016 and December 31, 2015, respectively.

	March 31, 2016						December 31, 2015
	Amount			Percent			Amount			Percent
(dollars in thousands)	Outstanding			of Total			Outstanding			of Total
Commercial (1)	$	113,048			18.6	%	$	112,861			18.9	%
Commercial real estate		266,037			43.7	%		259,013			43.3	%
Residential		124,199			20.4	%		127,367			21.3	%
Land and construction		65,091			10.7	%		59,808			10.0	%
Consumer and other (2)		40,513			6.6	%		39,058			6.5	%
Loans, gross		608,888			100.0	%		598,107			100.0	%
Net deferred costs		294						326
Less — allowance for loan losses		(9,161	)					(8,961	)
Loans, net	$	600,021					$	589,472

(1) Unsecured commercial loan balances were $33.4 million and $34.4 million at March 31, 2016 and December 31, 2015, respectively.

(2) Unsecured consumer and other loan balances were $10.3 million and $10.6 million at March 31, 2016 and December 31, 2015, respectively.

As of March 31, 2016 and December 31, 2015, 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, 2016 and 2015:

(in thousands)	Commercial		Commercial Real Estate		Residential			Land and Construction		Consumer and Other		Total
Three Months Ended March 31, 2016 :
Allowance for loan losses:
Beginning balance	$	1,807	$	4,580	$	907		$	1,146	$	521	$	8,961
Provision for loan losses		—		115		(15	)		100		—		200
Charge-offs		—		—		—			—		—		—
Recoveries		—		—		—			—		—		—
Ending balance	$	1,807	$	4,695	$	892		$	1,246	$	521	$	9,161
As of March 31, 2016 :
Ending balance: individually evaluated for impairment	$	35	$	—	$	—		$	—	$	—	$	35
Ending balance: collectively evaluated for impairment		1,772		4,695		892			1,246		521		9,126
Total	$	1,807	$	4,695	$	892		$	1,246	$	521	$	9,161
Loans:
Ending balance: individually evaluated for impairment	$	712	$	—	$	—		$	—	$	46	$	758
Ending balance: collectively evaluated for impairment		112,336		266,037		124,199			65,091		40,467		608,130
Total	$	113,048	$	266,037	$	124,199		$	65,091	$	40,513	$	608,888
Three Months Ended March 31, 2015 :
Allowance for loan losses:
Beginning balance	$	1,752	$	3,825	$	747		$	816	$	459	$	7,599
Provision for loan losses		—		—		10			100		40		150
Charge-offs		—		—		—			—		—		—
Recoveries		16		—		—			—		—		16
Ending balance	$	1,768	$	3,825	$	757		$	916	$	499	$	7,765
As of March 31, 2015 :
Ending balance: individually evaluated for impairment	$	20	$	—	$	—		$	—	$	—	$	20
Ending balance: collectively evaluated for impairment		1,748		3,825		757			916		499		7,745
Total	$	1,768	$	3,825	$	757		$	916	$	499	$	7,765
Loans:
Ending balance: individually evaluated for impairment	$	632	$	—	$	—		$	—	$	49	$	681
Ending balance: collectively evaluated for impairment		98,347		201,375		101,303			46,116		31,989		479,130
Total	$	98,979	$	201,375	$	101,303		$	46,116	$	32,038	$	479,811

The following is a summary of the allowance for loan losses and recorded investment in loans as of December 31, 2015:

(in thousands)	Commercial		Commercial Real Estate		Residential		Land and Construction		Consumer and Other		Total
Allowance for loan losses:
Ending balance: individually evaluated for impairment	$	35	$	—	$	—	$	—	$	—	$	35
Ending balance: collectively evaluated for impairment		1,772		4,580		907		1,146		521		8,926
Total	$	1,807	$	4,580	$	907	$	1,146	$	521	$	8,961
Loans:
Ending balance: individually evaluated for impairment	$	712	$	—	$	—	$	—	$	47	$	759
Ending balance: collectively evaluated for impairment		112,149		259,013		127,367		59,808		39,011		597,348
Total	$	112,861	$	259,013	$	127,367	$	59,808	$	39,058	$	598,107

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, 2016 and December 31, 2015, the allowance for unfunded lending commitments was $395,000 and $345,000

, respectively,

and is primarily related to $160.7 million and $159.9 million in commitments to extend credit to customers and $3.1 million and $3.2 million in standby/commercial letters of credit at March 31, 2016 and December 31, 2015, respectively.

Non-Performing Assets

The following table presents an aging analysis of the recorded investment of past due loans as of March 31, 2016 and December 31, 2015

. 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, 2016 and 2015

. Non-performing loans represented 0.12% of total loans at both March 31, 2016 and December 31, 2015. There were no accruing loans past due 90 days or more at March 31, 2016 and December 31, 2015

.

(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, 2016 :
Commercial	$	—	$	—	$	712	$	712	$	112,336	$	113,048
Commercial real estate		—		—		—		—		266,037		266,037
Residential		—		—		—		—		124,199		124,199
Land and construction		—		—		—		—		65,091		65,091
Consumer and other		—		—		—		—		40,513		40,513
Totals	$	—	$	—	$	712	$	712	$	608,176	$	608,888
As of December 31, 2015 :
Commercial	$	—	$	—	$	712	$	712	$	112,149	$	112,861
Commercial real estate		—		—		—		—		259,013		259,013
Residential		—		—		—		—		127,367		127,367
Land and construction		—		—		—		—		59,808		59,808
Consumer and other		—		—		—		—		39,058		39,058
Totals	$	—	$	—	$	712	$	712	$	597,395	$	598,107

The following table sets forth non-accrual loans and other real estate owned at March 31, 2016 and December 31, 2015:

(dollars in thousands)	March 31, 2016			December 31, 2015
Non-accrual loans:
Commercial	$	712		$	712
Total non-accrual loans		712			712
Total non-performing assets	$	712		$	712
Non-performing assets to gross loans and OREO		0.12	%		0.12	%
Non-performing assets to total assets		0.10	%		0.10	%

Credit Quality Indicators

The following table represents the credit exposure by internally assigned grades at March 31, 2016 and December 31, 2015. 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, 2016 :
Grade:
Pass	$	112,164	$	266,037	$	124,199	$	65,091	$	40,467
Special Mention		172		—		—		—		—
Substandard		712		—		—		—		46
Total	$	113,048	$	266,037	$	124,199	$	65,091	$	40,513
As of December 31, 2015 :
Grade:
Pass	$	111,970	$	259,013	$	127,367	$	59,808	$	39,011
Special Mention		179		—		—		—		—
Substandard		712		—		—		—		47
Total	$	112,861	$	259,013	$	127,367	$	59,808	$	39,058

There were no loans assigned to the Doubtful or Loss grade as of March 31, 2016 and December 31, 2015.

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, 2016 :
With no related allowance recorded:
Commercial	$	572	$	848	$	—	$	572
Commercial real estate		—		—		—		—
Residential		—		—		—		—
Land and construction		—		—		—		—
Consumer and other		46		46		—		47
With an allowance recorded:
Commercial	$	140	$	155	$	35	$	140
Commercial real estate		—		—		—		—
Residential		—		—		—		—
Land and construction		—		—		—		—
Consumer and other		—		—		—		—
Totals:
Commercial	$	712	$	1,003	$	35	$	712
Commercial real estate	$	—	$	—	$	—	$	—
Residential	$	—	$	—	$	—	$	—
Land and construction	$	—	$	—	$	—	$	—
Consumer and other	$	46	$	46	$	—	$	47
As of and for the year ended December 31, 2015 :
With no related allowance recorded:
Commercial	$	572	$	848	$	—	$	572
Commercial real estate		—		—		—		—
Residential		—		—		—		—
Land and construction		—		—		—		—
Consumer and other		47		47		—		48
With an allowance recorded:
Commercial	$	140	$	155	$	35	$	107
Commercial real estate		—		—		—		—
Residential		—		—		—		—
Land and construction		—		—		—		—
Consumer and other		—		—		—		—
Totals:
Commercial	$	712	$	1,003	$	35	$	679
Commercial real estate	$	—	$	—	$	—	$	—
Residential	$	—	$	—	$	—	$	—
Land and construction	$	—	$	—	$	—	$	—
Consumer and other	$	47	$	47	$	—	$	48

During the three months ended March 31, 2016, the average balance of impaired loans was $759,000, compared to $681,000 for the same period last year. As of both March 31, 2016 and December 31, 2015, there were $712,000 of impaired loans on non-accrual status. For both the three months ended March 31, 2016 and 2015, interest income recognized on impaired loans subsequent to their classification as impaired was $1,000. 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, 2016 and 2015. The impact on the Company’s determination of the allowance for loan losses related to troubled debt restructurings was not material and resulted in no charge-offs during the three months ended March 31, 2016 and 2015. During the three months ended March 31, 2016 and 2015, there were no defaults recorded 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.

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Note 4 - Derivative Financial Instruments

3 Months Ended

Mar. 31, 2016

Notes to Financial Statements

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, 2016 and December 31, 2015 are presented in the following table. The Company obtains dealer quotations to value its interest rate derivative contracts.

	March 31, 2016						December 31, 2015
(in thousands)	Notional Amount			Estimated Fair Value			Notional Amount			Estimated Fair Value
Non-hedging interest rate derivatives:
Commercial loan interest rate swaps	$	2,019		$	(57	)	$	2,032		$	(30	)
Commercial loan interest rate swaps	$	(2,019	)	$	57		$	(2,032	)	$	30

The weighted-average rates paid and received for interest rate swaps outstanding at March 31, 2016 and December 31, 2015 were as follow:

	March 31, 2016 Weighted-Average						December 31, 201 5 Weighted-Average
	Interest Rate Paid			Interest Rate Received			Interest Rate Paid			Interest Rate Received
Non-hedging interest rate swaps		3.68	%		4.96	%		3.68	%		4.96	%
Non-hedging interest rate swaps		4.96	%		3.68	%		4.96	%		3.68	%

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.

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Note 5 - Comprehensive Income

3 Months Ended

Mar. 31, 2016

Notes to Financial Statements

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)	20 16		20 15
Net income	$	273	$	315
Other comprehensive income:
Increase in net unrealized gains on investment securities available for sale, net of tax expense of $353 and $252 for the three months ended March 31, 2016 and 2015, respectively		504		361
Reclassification for net gains included in earnings, net of tax expense of none and $31 for the three months ended March 31, 2016 and 2015, respectively		—		(44	)
Comprehensive income	$	777	$	632

Reclassification adjustments of none and $75,000 for the three months ended March 31, 2016 and 2015, respectively, are included in non-interest income within the unaudited Consolidated Statements of Operations and Comprehensive Income. Income tax expense associated with these reclassification adjustments for the three months ended March 31, 2016 and 2015 were none and $31,000, respectively, and is included in income tax provision within the unaudited Consolidated Statements of Operations and Comprehensive Income.

Activity of investment securities available for sale included in accumulated other comprehensive income, net of tax, is as follows:

	Three Months Ended March 31 ,
(in thousands)	201 6		201 5
Beginning balance	$	11	$	162
Other comprehensive income before reclassifications		504		361
Amounts reclassified from accumulated other comprehensive income		—		(44	)
Net other comprehensive income		504		317
Ending balance	$	515	$	479

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Note 6 - Premises and Equipment

3 Months Ended

Mar. 31, 2016

Notes to Financial Statements

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, 2016 and December 31, 2015 are comprised of the following:

(in thousands)	March 31, 2016			December 31, 2015
Leasehold improvements	$	1,901		$	1,881
Furniture & equipment		3,218			3,150
Software		978			871
Total		6,097			5,902
Accumulated depreciation		(4,407	)		(4,275	)
Premises and equipment, net	$	1,690		$	1,627

Depreciation and amortization included in occupancy expense was $132,000 and $152,000 for the three months ended March 31, 2016 and 2015, respectively.

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Note 7 - Deposits

3 Months Ended

Mar. 31, 2016

Notes to Financial Statements

Deposit Liabilities Disclosures [Text Block]

( 7 ) Deposits

The following table reflects the summary of deposit categories by dollar and percentage at March 31, 2016 and December 31, 2015:

	March 31, 2016					December 31, 2015
(dollars in thousands)	Amount		% of Total			Amount		% of Total
Non-interest bearing demand deposits	$	383,486		58.6	%	$	362,451		60.6	%
Interest bearing checking		36,385		5.5	%		32,406		5.4	%
Money market deposits and savings		187,381		28.6	%		155,572		26.0	%
Certificates of deposit		47,705		7.3	%		47,748		8.0	%
Total	$	654,957		100.0	%	$	598,177		100.0	%

At March 31, 2016, the Company had two certificates of deposit with the State of California Treasurer’s Office for a total of $46.0 million, which represented 7.0% of total deposits. The deposits outstanding at March 31, 2016 are scheduled to mature in the second quarter of 2016. 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. At December 31, 2015, the Company had two certificates of deposit with the State of California Treasurer’s Office for a total of $46.0 million, which represented 7.7% of total deposits. The Company was required to pledge $50.6 million of investment securities at both March 31, 2016 and December 31, 2015, in connection with these certificates of deposit.

The aggregate amount of certificates of deposit of $250,000 or greater was $46.5 million at both March 31, 2016 and December 31, 2015. At March 31, 2016, all certificates of deposit of $250,000 or greater, including deposit accounts with the State of California Treasurer’s Office and Certificate of Deposit Account Registry System (“CDARS”), were scheduled to mature in six months or less.

The table below sets forth the range of interest rates, amount and remaining maturities of the certificates of deposit at March 31, 2016.

(in thousands)			Six months and less		Greater than six months through one year		Greater than one year
0.00%	to	0.99%	$	47,422	$	186	$	69
1.00%	to	1.99%		—		—		28
Total			$	47,422	$	186	$	97

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Note 8 - Other Borrowings

3 Months Ended

Mar. 31, 2016

Notes to Financial Statements

Other Liabilities Disclosure [Text Block]

( 8 ) Other Borrowings

At March 31, 2016 and December 31, 2015, the Company had a borrowing/credit facility secured by a blanket lien on eligible loans at the FHLB of $183.0 million and $180.0 million, respectively. The Company had $15.0 million of long-term borrowings outstanding under this borrowing/credit facility with the FHLB at both March 31, 2016 and December 31, 2015. The Company had no overnight borrowings outstanding under this borrowing/credit facility at March 31, 2016. During the three months ended March 31, 2016, the Company had an average short-term borrowing balance of $4.0 million under this credit facility, incurring $6,000 in interest expense during this period. At December 31, 2015, the Company had a $50.0 million overnight borrowing outstanding under this borrowing/credit facility at an interest rate of 0.27%. The Company did not incur any material interest expense in connection with this borrowing and it was repaid in January 2016.

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, 2016 and December 31, 2015 (dollars in thousands):

Maturity Date	Interest Rate		March 31, 2016		December 31, 2015
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
May 2, 2018		0.93%		5,000		5,000
	Total		$	15,000	$	15,000

At March 31, 2016 and December 31, 2015, 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. As of both March 31, 2016 and December 31, 2015, the Company had pledged $2.3 million, of investments related to these lines of credit.

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Note 9 - Commitments and Contingencies

3 Months Ended

Mar. 31, 2016

Notes to Financial Statements

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 $160.7 million and $159.9 million in commitments to extend credit to customers and $3.1 million and $3.2 million in standby/commercial letters of credit at March 31, 2016 and December 31, 2015, 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 $105,000 and $82,000 as of March 31, 2016 and December 31, 2015, respectively.

Lease Commitments

The Company leases office premises under three operating leases that will expire in December 2018, May 2019 and June 2024, respectively. Rental expense, which is included in occupancy expense, was $265,000 and $266,000 for the three months ended March 31, 2016 and 2015, respectively.

The projected minimum rental payments under the term of the leases at March 31, 2016 are as follows (in thousands):

Years ending December 31,
2016 (April-December)	$	742
2017		1,015
2018		1,046
2019		834
2020		760
Thereafter		2,840
Total	$	7,237

Litigation

The Company from time to time is party to lawsuits, which arise out of the normal course of business. At March 31, 2016 and December 31, 2015, 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,
2016 (April-December)	$	712
2017		582
2018		351
2019		200
2020		137
Thereafter		30
Total	$	2,012

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Note 10 - Fair Value Measurements

3 Months Ended

Mar. 31, 2016

Notes to Financial Statements

Fair Value, Measurement Inputs, Disclosure [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, 2016 and December 31, 2015, 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, 2016:
Investments-Available for Sale
U.S. Treasuries and Government Agencies	$	35,086	$	3,973	$	31,113	$	—
Residential Mortgage-Backed Securities		37,378		—		37,378		—
Derivative Assets – Interest Rate Swaps		57		—		57		—
Derivative Liabilities – Interest Rate Swaps		57		—		57		—
At December 31, 2015:
Investments-Available for Sale
U.S. Treasuries and Government Agencies	$	34,599	$	3,910	$	30,689	$	—
Residential Mortgage-Backed Securities		39,411		—		39,411		—
Derivative Assets – Interest Rate Swaps		30		—		30		—
Derivative Liabilities – Interest Rate Swaps		30		—		30		—

AFS securities

— As of March 31, 2016 and December 31, 2015, the Level 2 fair value of the Company’s residential mortgage-backed securities was $37.4 million and $39.4 million, respectively. These securities consist primarily of agency 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 the year of 2005 through 2014. These loans are geographically dispersed throughout the United States. At March 31, 2016 and December 31, 2015, the weighted average yield and weighted average life of these securities were 1.78% and 1.79%, respectively, and 3.26 years and 3.36 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, 2016 and 2015.

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, 2016 :
Impaired loans
Commercial	$	677	$	—	$	—	$	677
At December 31, 2015 :
Impaired loans
Commercial	$	677	$	—	$	—	$	677

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.

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Note 11 - Estimated Fair Value Information

3 Months Ended

Mar. 31, 2016

Notes to Financial Statements

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, 2016 and December 31, 2015 are as follows:

	Carrying		Fair Value Measurements Using
(dollars in thousands)	Amount		Level 1		Level 2		Level 3		Total
As of March 31, 2016
Assets
Cash and cash equivalents	$	52,384	$	52,384	$	—	$	—	$	52,384
Investment securities		72,464		3,973		68,491		—		72,464
FRB stock		1,855		—		—		—		N/A
FHLB stock		3,167		—		—		—		N/A
Loans, net		600,021		—		—		598,690		598,690
Non-hedging interest rate swaps		57		—		57		—		57
Accrued interest receivable		1,800		1,800		—		—		1,800
Liabilities
Non-interest bearing deposits	$	383,486	$	383,486	$	—	$	—	$	383,486
Interest bearing deposits		271,471		223,766		47,705		—		271,471
Other borrowings		15,000		—		15,026		—		15,026
Non-hedging interest rate swaps		57		—		57		—		57
Accrued interest payable		36		36		—		—		36
As of December 31, 2015
Assets
Cash and cash equivalents	$	54,565	$	54,565	$	—	$	—	$	54,565
Investment securities		74,010		3,910		70,100		—		74,010
FRB stock		1,748		—		—		—		N/A
FHLB stock		3,167		—		—		—		N/A
Loans, net		589,472		—		—		587,530		587,530
Non-hedging interest rate swaps		30		—		30		—		30
Accrued interest receivable		1,692		1,692		—		—		1,692
Liabilities
Non-interest bearing deposits	$	362,451	$	362,451	$	—	$	—	$	362,451
Interest bearing deposits		235,726		187,978		47,748		—		235,726
Other borrowings		65,000		—		64,983		—		64,983
Non-hedging interest rate swaps		30		—		30		—		30
Accrued interest payable		23		23		—		—		23

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Note 12 - Non-Interest Income

3 Months Ended

Mar. 31, 2016

Notes to Financial Statements

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, 2016 and 2015, respectively:

	Three Months Ended March 31 ,
(in thousands)	201 6		201 5
Gain on sale of AFS investment securities	$	—	$	75
Service charges and other operating income		198		155
Total non-interest income	$	198	$	230

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Note 13 - Stock-based Compensation

3 Months Ended

Mar. 31, 2016

Notes to Financial Statements

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

( 13 ) Stock-Based Compensation

On May 8, 2013, the stockholders of the Company approved the Company’s 2013 Equity Incentive Plan (the “Plan”), which provides for the grant of up to 750,000 shares of Common Stock to employees, including officers and directors, non-employee directors and consultants. Stock options, stock appreciation rights, restricted stock and other stock awards, and restricted stock units are all available for grant pursuant to the terms and conditions of the Plan. The Plan was established to consolidate and replace all other previous stock plans and the remaining shares available for grant under these previous plans were cancelled.

Prior to the approval of the Plan, the Company granted restricted stock awards to directors and employees under the 2005 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.

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 $272,000 and $224,000 for the three months ended March 31, 2016 and 2015, respectively. The fair value of restricted stock awards that vested was $130,000 and $145,000 for the three months ended March 31, 2016 and 2015, respectively.

The following table reflects a combined summary of the activities related to restricted stock awards outstanding for the three months ended March 31, 2016 and 2015, respectively.

	Three Months Ended March 31,
	2016					2015
Restricted Shares	Number of Shares			Weighted Avg Fair Value at Grant Date		Number of Shares			Weighted Avg Fair Value at Grant Date
Beginning balance		669,750		$	6.56		615,875		$	5.92
Granted		18,000			7.50		26,000			6.50
Vested		(20,000	)		6.50		(20,000	)		7.24
Forfeited and surrendered		—			—		—			—
Ending balance		667,750		$	6.59		621,875		$	5.90

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 outstanding under the Director and Employee Stock Option Plan as of and for the three months ended March 31, 2016. There were no options granted or exercised under the Director and Employee Stock Option Plan for the three months ended March 31, 2015. The remaining contractual life of the Director and Employee Stock Options outstanding was 0.34 years at March 31, 2015. All options under the Directors and Employee Stock Option Plan were exercisable at March 31, 2015. At March 31, 2015, the weighted average exercise price of the 350,073 shares outstanding under the Director and Employee Stock Option Plan was $8.06. During the year ended December 31, 2015, 42,500 of unexercised option under the plan expired and were automatically cancelled. The weighted average exercise price of the cancelled options was $8.40 per share.

The following tables detail the amount of shares authorized and available under all stock plans as of March 31, 2016:

	Shares Reserved		Less Shares Previously Exercised/Vested		Less Shares Outstanding		Total Shares Available for Future Issuance
2004 Founder Stock Option Plan		150,000		121,900		—		—
Director and Employee Stock Option Plan		1,434,000		1,220,097		—		—
2005 Equity Incentive Plan		1,200,000		944,273		243,000		—
2013 Equity Incentive Plan		750,000		40,000		424,750		285,250

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Note 14 - Regulatory Matters

3 Months Ended

Mar. 31, 2016

Notes to Financial Statements

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, 2016 and December 31, 2015, the Company and the Bank met all capital adequacy requirements to which they are subject.

At December 31, 2015, the most recent notification from the OCC categorized the Bank as “well-capitalized” under the regulatory framework for prompt corrective action. To generally be categorized as a “well-capitalized” financial institution, 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 categorization.

The Company’s and the Bank’s capital ratios as of March 31, 2016 and December 31, 2015 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, 2016 :
Total Risk-Based Capital Ratio	$	73,675		11.20	%	$	73,173		11.13	%	$	52,618		8.00	%	$	65,772		10.00	%
Tier 1 Risk-Based Capital Ratio	$	65,437		9.95	%	$	64,935		9.87	%	$	39,464		6.00	%	$	52,618		8.00	%
Common Equity Tier 1 Capital Ratio	$	65,437		9.95	%	$	64,935		9.87	%	$	29,598		4.50	%	$	42,752		6.50	%
Tier 1 Leverage Ratio	$	65,437		9.22	%	$	64,935		9.14	%	$	28,401		4.00	%	$	35,523		5.00	%
December 31, 201 5 :
Total Risk-Based Capital Ratio	$	73,029		11.24	%	$	72,520		11.16	%	$	51,992		8.00	%	$	64,989		10.00	%
Tier 1 Risk-Based Capital Ratio	$	64,891		9.98	%	$	64,381		9.91	%	$	38,994		6.00	%	$	51,991		8.00	%
Common Equity Tier 1 Capital Ratio	$	64,891		9.98	%	$	64,381		9.91	%	$	29,245		4.50	%	$	42,243		6.50	%
Tier 1 Leverage Ratio	$	64,891		9.00	%	$	64,381		8.92	%	$	28,852		4.00	%	$	36,078		5.00	%

On July 2, 2013, the Federal Reserve approved the final rules implementing the Basel Committee on Banking Supervision's (“BCBS”) capital guidelines for U.S. banks. Under the final rules, minimum requirements will increase for both the quantity and quality of capital held by the Company. The rules include a new common equity Tier 1 capital to risk-weighted assets ratio of 4.5%. The new rules also require a common equity Tier 1 capital conservation buffer of 2.5% of risk-weighted assets over each of the required capital ratios that will be phased in from 2016 to 2019 and must be met to avoid limitations the ability of the Bank to pay dividends, repurchase shares or pay discretionary bonuses. During 2016, the phased-in portion of the capital conservation buffer is 0.625%. The final rules also raise the minimum ratio of Tier 1 capital to risk-weighted assets from 4.0% to 6.0% and require a minimum leverage ratio of 4.0%. The final rules also implement strict eligibility criteria for regulatory capital instruments, excluding trust preferred securities, mortgage servicing rights and certain deferred tax assets, and including unrealized gains and losses on available for sale debt and equity securities. On July 9, 2013, the FDIC and OCC also approved, as an interim final rule, the regulatory capital requirements for U.S. banks, following the actions of the FRB. The FDIC and OCC's rules are identical in substance to the final rules issued by the FRB.

The phase-in period for the final rules commenced for the Company and the Bank on January 1, 2015, with full compliance with all of the final rule's requirements phased in over a multi-year schedule.

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.

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Significant Accounting Policies (Policies)

3 Months Ended

Mar. 31, 2016

Accounting Policies [Abstract]

Business Combinations Policy [Policy Text Block]

Proposed Merger with Midland Financial Co.

On March 10, 2016, Bancshares entered into an Agreement and Plan of Merger (the “Merger Agreement”), with Midland Financial Co., an Oklahoma corporation (“Midland”), and MC 2016 Corp., a Delaware corporation and wholly-owned subsidiary of Midland (“Merger Sub”), pursuant to which, upon the terms and subject to the conditions set forth therein, Merger Sub will merge (the “Merger”) with and into Bancshares, with Bancshares surviving the Merger as a wholly-owned subsidiary of Midland. Simultaneously with the Merger, the Bank will merge (the “Bank Merger”) with and into MidFirst Bank, a federally-chartered savings association and a wholly-owned subsidiary of Midland (“MidFirst”), with MidFirst surviving the Bank Merger. Immediately after the Merger and Bank Merger described above, Bancshares, as the surviving corporation in the Merger, will merge with and into Midland, with Midland as the surviving corporation.

Subject to the terms and conditions set forth in the Merger Agreement, upon consummation of the Merger, each outstanding share of Bancshares common stock, par value $0.01 per share, excluding shares owned by Midland, Bancshares or either of their subsidiaries (subject to certain exceptions) or shares owned by stockholders who have validly made and not effectively withdrawn a demand for appraisal rights, will be converted into the right to receive $11.22 in cash.

Completion of the Merger is subject to certain closing conditions, including approval by Bancshares’ stockholders and the receipt of certain required regulatory approvals. Midland and Bancshares currently expect that the Merger will be completed during the second half of 2016 or sooner. However, it is possible that factors outside the control of both companies, including whether or when the required regulatory approvals will be received, could result in the Merger being completed at a different time or not at all. The Company recorded $861,000 in merger-related expenses during the three months ended March 31, 2016.

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 period 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, 2015, and the notes thereto, included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2015 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, 2016 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, 2016.

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. 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.

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.

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 (“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 probable 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.

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

Other Real Estate Owned

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 ten 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.

At March 31, 2016 and December 31, 2015, 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, 2016 and 2015, there were none and 350,073, respectively, of weighted average stock options that were excluded from the diluted earnings per share calculation due to their antidilutive impact

. For the three months ended March 31, 2016 and 2015, there were 11,868 and 17,044, respectively, of weighted average 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)	20 16		20 15
Net income	$	273	$	315
Average number of common shares outstanding		9,662,321		9,537,677
Effect of dilution of restricted stock		300,539		266,656
Average number of common shares outstanding used to calculate diluted earnings per common share		9,962,860		9,804,333

Fair Value Measurement, 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 Company’s 2005 Amended and Restated Equity Incentive Plan (the “Equity Incentive Plan”) and the 2013 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 August 2014, the Financial Accounting Standard Board (FASB) issued Accounting Standard Update (ASU) No. 2014-15, Presentation of Financial Statements – Going Concern (Subtopic 205-40) (ASU 2014-15). The objective of ASU 2014-15 is to define management’s responsibility to evaluate whether there is substantial doubt about an organization’s ability to continue as a going concern and provide related disclosures. Currently, GAAP does not provide guidance to evaluate whether there is substantial doubt regarding an organization’s ability to continue as a going concern. This ASU provides guidance to an organization’s management, with principles and definitions to reduce diversity in the timing and content of financial statement disclosures commonly provided by organizations. ASU 2014-15 is effective for periods ending after December 15, 2016 and interim periods within annual periods beginning after December 15, 2016.

In August 2015, the FASB issued ASU No. 2015-14, Revenue from Contracts with Customers (Topic 606) (ASU 2015-14). On May 28, 2014, the FASB issued Accounting Standards Update No. 2014-09, Revenue from Contracts with Customers (Topic 606), with an original effective date for annual reporting periods beginning after December 15, 2016. The core principal of ASU 2014-09 is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. ASU 2015-14 deferred the effective date of ASU 2014-09 to annual periods and interim periods within those annual periods beginning after December 15, 2017. The Company is currently evaluating the effects of ASU 2015-14 on its financial statements and disclosures, if any.

Effective January 2016, the Company prospectively adopted ASU 2015-05, Intangibles-Goodwill and Other-Internal-Use Software (Subtopic 350-40): Customer’s Accounting or Fees Paid in a Cloud Computing Arrangement (ASU 2015-05). ASU 2015-05 provides guidance to customers about whether a cloud computing arrangement includes a software license. If a cloud computing arrangement includes a software license, the customer should account for the software license element of the arrangement consistent with the acquisition of other software licenses. If a cloud computing arrangement does not include a software license, the customer should account for the arrangement as a service contract. As a result, all software licenses within the scope of this guidance will be accounted for consistently with other licenses of intangible assets. The adoption of ASU 2015-05 did not have a material effect on the Company’s financial statements.

In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842) (ASU 2016-02). ASU 2016-02 is intended to increase transparency and comparability among organizations by recognizing lease assets and liabilities on the balance sheet and disclosing key information about leasing arrangements. For public business entities, this ASU is effective for annual periods and interim periods within those annual periods beginning after December 15, 2018. The Company is currently evaluating the effects of ASU 2016-02 on its financial statements and disclosures.

In March 2016, the FASB issued ASU 2016-05, Effect of Derivative Contract Novations on Existing Hedge Accounting Relationships (ASU 2016-05). ASU 2016-05 clarifies that a change in the counterparty to a derivative instrument (a novation) that has been designated as the hedging instrument does not, in and of itself, require dedesignation of that hedging relationship provided that all other hedge accounting criteria continue to be met. Public business entities have the option to apply this ASU on a prospective basis or a modified retrospective basis. It is effective for annual periods and interim periods within those annual periods beginning after December 15, 2016. The Company intends to apply this guidance prospectively and does not expect it to have a material impact on its financial statements or disclosures.

In March 2016, the FASB issued ASU 2016-06, Contingent Put and Call Options in Debt Instruments (ASU 2016-06). ASU 2016-06 clarifies the steps required to determine if an embedded derivative should be bifurcated from a host contract in order to resolve diversity in practice. For public business entities, this ASU will be applied on a modified retrospective basis for annual periods and interim periods within those annual periods beginning after December 15, 2016. The Company is currently evaluating the effects of ASU 2016-06 on its financial statements and disclosures.

In March 2016, the FASB issued ASU 2016-07, Simplifying the Transition to the Equity Method of Accounting (ASU 2016-07). ASU 2016-07 was issued as part of the FASB’s initiative to identify, evaluate and improve areas of generally accepted accounting principles for which cost and complexity can be reduced while maintaining the usefulness of the information in the financial statements. ASU 2016-07 eliminates the requirement to retroactively adopt the equity method of accounting when an investment qualifies for the use of the equity method as a result of an increase in the level of ownership or degree of influence. For public business entities, this ASU will be applied on a prospective basis for annual periods and interim periods within those annual periods beginning after December 15, 2016. The Company does not expect the adoption of ASU 2016-06 to have a material impact on its financial statements or disclosures

In March 2016, the FASB issued ASU 2016-08, Principal versus Agent Considerations (Reporting Revenue Gross versus Net) (ASU 2016-08). ASU 2016-08 clarifies the implementation guidance in ASU 2014-09, Revenue from Contracts with Customers, on principal versus agent considerations and whether an entity reports revenue on a gross or net basis. For public business entities, this ASU is effective for annual periods and interim periods within those annual periods beginning after December 15, 2017. The Company is currently evaluating the effects of ASU 2014-09 and ASU 2016-08 on its financial statements and disclosures.

In March 2016, the FASB issued ASU 2016-09, Improvements to Employee Share-Based Payment Accounting (ASU 2016-09). ASU 2016-09 includes provisions intended to simplify various aspects related to how share-based payments are accounted for and presented in the financial statements. The areas for simplification include income tax consequences, forfeitures, classification of awards as either equity or liabilities and classification on the statement of cash flows. This ASU is effective for annual periods and interim periods within those annual periods beginning after December 15, 2016 and early adoption is permitted for financial statements that have not been previously issued.

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Note 1 - Summary of Significant Accounting Policies (Tables)

3 Months Ended

Mar. 31, 2016

Notes Tables

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

	Three Months Ended March 31 ,
(dollars in thousands)	20 16		20 15
Net income	$	273	$	315
Average number of common shares outstanding		9,662,321		9,537,677
Effect of dilution of restricted stock		300,539		266,656
Average number of common shares outstanding used to calculate diluted earnings per common share		9,962,860		9,804,333

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Note 2 - Investments (Tables)

3 Months Ended

Mar. 31, 2016

Notes Tables

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

			Gross		Gross
	Amortized		Unrealized		Unrealized			Fair
(in thousands)	Cost		Gains		Losses			Value
At March 31, 2016 :
Investments — Available for Sale
U.S. Treasuries and Government Agencies	$	34,410	$	676	$	—		$	35,086
Residential Mortgage-Backed Securities		37,179		264		(65	)		37,378
Total	$	71,589	$	940	$	(65	)	$	72,464
At December 31, 2015 :
Investments — Available for Sale
U.S Treasuries and Government Agencies	$	34,417	$	184	$	(2	)	$	34,599
Residential Mortgage-Backed Securities		39,575		116		(280	)		39,411
Total	$	73,992	$	300	$	(282	)	$	74,010

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. Treasuries and Government Agencies	$	—		—	%	$	30,689		1.86	%	$	4,397		2.08	%	$	—		—	%	$	35,086		1.89	%
Residential Mortgage-Backed Securities		—		—			748		3.40			20,894		1.62			15,736		1.92			37,378		1.78
Total	$	—		—	%	$	31,437		1.90	%	$	25,291		1.70	%	$	15,736		1.92	%	$	72,464		1.83	%

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, 2016 :
Investments-Available for Sale
Residential Mortgage-Backed Securities	$	(27	)	$	6,488	$	(38	)	$	4,018
At December 31, 201 5 :
Investments-Available for Sale
U.S Treasuries and Government Agencies	$	(2	)	$	3,995	$	—		$	—
Residential Mortgage-Backed Securities		(205	)		23,942		(75	)		4,221

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

3 Months Ended

Mar. 31, 2016

Nonaccrual Loans [Member]

Notes Tables

Impaired Financing Receivables [Table Text Block]

(dollars in thousands)	March 31, 2016			December 31, 2015
Non-accrual loans:
Commercial	$	712		$	712
Total non-accrual loans		712			712
Total non-performing assets	$	712		$	712
Non-performing assets to gross loans and OREO		0.12	%		0.12	%
Non-performing assets to total assets		0.10	%		0.10	%

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

	March 31, 2016						December 31, 2015
	Amount			Percent			Amount			Percent
(dollars in thousands)	Outstanding			of Total			Outstanding			of Total
Commercial (1)	$	113,048			18.6	%	$	112,861			18.9	%
Commercial real estate		266,037			43.7	%		259,013			43.3	%
Residential		124,199			20.4	%		127,367			21.3	%
Land and construction		65,091			10.7	%		59,808			10.0	%
Consumer and other (2)		40,513			6.6	%		39,058			6.5	%
Loans, gross		608,888			100.0	%		598,107			100.0	%
Net deferred costs		294						326
Less — allowance for loan losses		(9,161	)					(8,961	)
Loans, net	$	600,021					$	589,472

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, 2016 :
Allowance for loan losses:
Beginning balance	$	1,807	$	4,580	$	907		$	1,146	$	521	$	8,961
Provision for loan losses		—		115		(15	)		100		—		200
Charge-offs		—		—		—			—		—		—
Recoveries		—		—		—			—		—		—
Ending balance	$	1,807	$	4,695	$	892		$	1,246	$	521	$	9,161
As of March 31, 2016 :
Ending balance: individually evaluated for impairment	$	35	$	—	$	—		$	—	$	—	$	35
Ending balance: collectively evaluated for impairment		1,772		4,695		892			1,246		521		9,126
Total	$	1,807	$	4,695	$	892		$	1,246	$	521	$	9,161
Loans:
Ending balance: individually evaluated for impairment	$	712	$	—	$	—		$	—	$	46	$	758
Ending balance: collectively evaluated for impairment		112,336		266,037		124,199			65,091		40,467		608,130
Total	$	113,048	$	266,037	$	124,199		$	65,091	$	40,513	$	608,888
Three Months Ended March 31, 2015 :
Allowance for loan losses:
Beginning balance	$	1,752	$	3,825	$	747		$	816	$	459	$	7,599
Provision for loan losses		—		—		10			100		40		150
Charge-offs		—		—		—			—		—		—
Recoveries		16		—		—			—		—		16
Ending balance	$	1,768	$	3,825	$	757		$	916	$	499	$	7,765
As of March 31, 2015 :
Ending balance: individually evaluated for impairment	$	20	$	—	$	—		$	—	$	—	$	20
Ending balance: collectively evaluated for impairment		1,748		3,825		757			916		499		7,745
Total	$	1,768	$	3,825	$	757		$	916	$	499	$	7,765
Loans:
Ending balance: individually evaluated for impairment	$	632	$	—	$	—		$	—	$	49	$	681
Ending balance: collectively evaluated for impairment		98,347		201,375		101,303			46,116		31,989		479,130
Total	$	98,979	$	201,375	$	101,303		$	46,116	$	32,038	$	479,811

(in thousands)	Commercial		Commercial Real Estate		Residential		Land and Construction		Consumer and Other		Total
Allowance for loan losses:
Ending balance: individually evaluated for impairment	$	35	$	—	$	—	$	—	$	—	$	35
Ending balance: collectively evaluated for impairment		1,772		4,580		907		1,146		521		8,926
Total	$	1,807	$	4,580	$	907	$	1,146	$	521	$	8,961
Loans:
Ending balance: individually evaluated for impairment	$	712	$	—	$	—	$	—	$	47	$	759
Ending balance: collectively evaluated for impairment		112,149		259,013		127,367		59,808		39,011		597,348
Total	$	112,861	$	259,013	$	127,367	$	59,808	$	39,058	$	598,107

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, 2016 :
Commercial	$	—	$	—	$	712	$	712	$	112,336	$	113,048
Commercial real estate		—		—		—		—		266,037		266,037
Residential		—		—		—		—		124,199		124,199
Land and construction		—		—		—		—		65,091		65,091
Consumer and other		—		—		—		—		40,513		40,513
Totals	$	—	$	—	$	712	$	712	$	608,176	$	608,888
As of December 31, 2015 :
Commercial	$	—	$	—	$	712	$	712	$	112,149	$	112,861
Commercial real estate		—		—		—		—		259,013		259,013
Residential		—		—		—		—		127,367		127,367
Land and construction		—		—		—		—		59,808		59,808
Consumer and other		—		—		—		—		39,058		39,058
Totals	$	—	$	—	$	712	$	712	$	597,395	$	598,107

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, 2016 :
With no related allowance recorded:
Commercial	$	572	$	848	$	—	$	572
Commercial real estate		—		—		—		—
Residential		—		—		—		—
Land and construction		—		—		—		—
Consumer and other		46		46		—		47
With an allowance recorded:
Commercial	$	140	$	155	$	35	$	140
Commercial real estate		—		—		—		—
Residential		—		—		—		—
Land and construction		—		—		—		—
Consumer and other		—		—		—		—
Totals:
Commercial	$	712	$	1,003	$	35	$	712
Commercial real estate	$	—	$	—	$	—	$	—
Residential	$	—	$	—	$	—	$	—
Land and construction	$	—	$	—	$	—	$	—
Consumer and other	$	46	$	46	$	—	$	47
As of and for the year ended December 31, 2015 :
With no related allowance recorded:
Commercial	$	572	$	848	$	—	$	572
Commercial real estate		—		—		—		—
Residential		—		—		—		—
Land and construction		—		—		—		—
Consumer and other		47		47		—		48
With an allowance recorded:
Commercial	$	140	$	155	$	35	$	107
Commercial real estate		—		—		—		—
Residential		—		—		—		—
Land and construction		—		—		—		—
Consumer and other		—		—		—		—
Totals:
Commercial	$	712	$	1,003	$	35	$	679
Commercial real estate	$	—	$	—	$	—	$	—
Residential	$	—	$	—	$	—	$	—
Land and construction	$	—	$	—	$	—	$	—
Consumer and other	$	47	$	47	$	—	$	48

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, 2016 :
Grade:
Pass	$	112,164	$	266,037	$	124,199	$	65,091	$	40,467
Special Mention		172		—		—		—		—
Substandard		712		—		—		—		46
Total	$	113,048	$	266,037	$	124,199	$	65,091	$	40,513
As of December 31, 2015 :
Grade:
Pass	$	111,970	$	259,013	$	127,367	$	59,808	$	39,011
Special Mention		179		—		—		—		—
Substandard		712		—		—		—		47
Total	$	112,861	$	259,013	$	127,367	$	59,808	$	39,058

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Note 4 - Derivative Financial Instruments (Tables)

3 Months Ended

Mar. 31, 2016

Non-Hedging Interest Rate Swaps [Member]

Notes Tables

Schedule of Derivative Instruments [Table Text Block]

	March 31, 2016 Weighted-Average						December 31, 201 5 Weighted-Average
	Interest Rate Paid			Interest Rate Received			Interest Rate Paid			Interest Rate Received
Non-hedging interest rate swaps		3.68	%		4.96	%		3.68	%		4.96	%
Non-hedging interest rate swaps		4.96	%		3.68	%		4.96	%		3.68	%

Schedule of Derivative Instruments [Table Text Block]

	March 31, 2016						December 31, 2015
(in thousands)	Notional Amount			Estimated Fair Value			Notional Amount			Estimated Fair Value
Non-hedging interest rate derivatives:
Commercial loan interest rate swaps	$	2,019		$	(57	)	$	2,032		$	(30	)
Commercial loan interest rate swaps	$	(2,019	)	$	57		$	(2,032	)	$	30

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Note 5 - Comprehensive Income (Tables)

3 Months Ended

Mar. 31, 2016

Notes Tables

Comprehensive Income (Loss) [Table Text Block]

	Three Months Ended March 31,
(in thousands)	20 16		20 15
Net income	$	273	$	315
Other comprehensive income:
Increase in net unrealized gains on investment securities available for sale, net of tax expense of $353 and $252 for the three months ended March 31, 2016 and 2015, respectively		504		361
Reclassification for net gains included in earnings, net of tax expense of none and $31 for the three months ended March 31, 2016 and 2015, respectively		—		(44	)
Comprehensive income	$	777	$	632

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

	Three Months Ended March 31 ,
(in thousands)	201 6		201 5
Beginning balance	$	11	$	162
Other comprehensive income before reclassifications		504		361
Amounts reclassified from accumulated other comprehensive income		—		(44	)
Net other comprehensive income		504		317
Ending balance	$	515	$	479

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Note 6 - Premises and Equipment (Tables)

3 Months Ended

Mar. 31, 2016

Notes Tables

Property, Plant and Equipment [Table Text Block]

(in thousands)	March 31, 2016			December 31, 2015
Leasehold improvements	$	1,901		$	1,881
Furniture & equipment		3,218			3,150
Software		978			871
Total		6,097			5,902
Accumulated depreciation		(4,407	)		(4,275	)
Premises and equipment, net	$	1,690		$	1,627

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Note 7 - Deposits (Tables)

3 Months Ended

Mar. 31, 2016

Notes Tables

Schedule of Deposits [Table Text Block]

	March 31, 2016					December 31, 2015
(dollars in thousands)	Amount		% of Total			Amount		% of Total
Non-interest bearing demand deposits	$	383,486		58.6	%	$	362,451		60.6	%
Interest bearing checking		36,385		5.5	%		32,406		5.4	%
Money market deposits and savings		187,381		28.6	%		155,572		26.0	%
Certificates of deposit		47,705		7.3	%		47,748		8.0	%
Total	$	654,957		100.0	%	$	598,177		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%	$	47,422	$	186	$	69
1.00%	to	1.99%		—		—		28
Total			$	47,422	$	186	$	97

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Note 8 - Other Borrowings (Tables)

3 Months Ended

Mar. 31, 2016

Notes Tables

Schedule of Debt [Table Text Block]

Maturity Date	Interest Rate		March 31, 2016		December 31, 2015
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
May 2, 2018		0.93%		5,000		5,000
	Total		$	15,000	$	15,000

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Note 9 - Commitments and Contingencies (Tables)

3 Months Ended

Mar. 31, 2016

Notes Tables

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

Years ending December 31,
2016 (April-December)	$	742
2017		1,015
2018		1,046
2019		834
2020		760
Thereafter		2,840
Total	$	7,237

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,
2016 (April-December)	$	712
2017		582
2018		351
2019		200
2020		137
Thereafter		30
Total	$	2,012

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Note 10 - Fair Value Measurements (Tables)

3 Months Ended

Mar. 31, 2016

Notes Tables

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, 2016:
Investments-Available for Sale
U.S. Treasuries and Government Agencies	$	35,086	$	3,973	$	31,113	$	—
Residential Mortgage-Backed Securities		37,378		—		37,378		—
Derivative Assets – Interest Rate Swaps		57		—		57		—
Derivative Liabilities – Interest Rate Swaps		57		—		57		—
At December 31, 2015:
Investments-Available for Sale
U.S. Treasuries and Government Agencies	$	34,599	$	3,910	$	30,689	$	—
Residential Mortgage-Backed Securities		39,411		—		39,411		—
Derivative Assets – Interest Rate Swaps		30		—		30		—
Derivative Liabilities – Interest Rate Swaps		30		—		30		—

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, 2016 :
Impaired loans
Commercial	$	677	$	—	$	—	$	677
At December 31, 2015 :
Impaired loans
Commercial	$	677	$	—	$	—	$	677

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Note 11 - Estimated Fair Value Information (Tables)

3 Months Ended

Mar. 31, 2016

Notes Tables

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

	Carrying		Fair Value Measurements Using
(dollars in thousands)	Amount		Level 1		Level 2		Level 3		Total
As of March 31, 2016
Assets
Cash and cash equivalents	$	52,384	$	52,384	$	—	$	—	$	52,384
Investment securities		72,464		3,973		68,491		—		72,464
FRB stock		1,855		—		—		—		N/A
FHLB stock		3,167		—		—		—		N/A
Loans, net		600,021		—		—		598,690		598,690
Non-hedging interest rate swaps		57		—		57		—		57
Accrued interest receivable		1,800		1,800		—		—		1,800
Liabilities
Non-interest bearing deposits	$	383,486	$	383,486	$	—	$	—	$	383,486
Interest bearing deposits		271,471		223,766		47,705		—		271,471
Other borrowings		15,000		—		15,026		—		15,026
Non-hedging interest rate swaps		57		—		57		—		57
Accrued interest payable		36		36		—		—		36
As of December 31, 2015
Assets
Cash and cash equivalents	$	54,565	$	54,565	$	—	$	—	$	54,565
Investment securities		74,010		3,910		70,100		—		74,010
FRB stock		1,748		—		—		—		N/A
FHLB stock		3,167		—		—		—		N/A
Loans, net		589,472		—		—		587,530		587,530
Non-hedging interest rate swaps		30		—		30		—		30
Accrued interest receivable		1,692		1,692		—		—		1,692
Liabilities
Non-interest bearing deposits	$	362,451	$	362,451	$	—	$	—	$	362,451
Interest bearing deposits		235,726		187,978		47,748		—		235,726
Other borrowings		65,000		—		64,983		—		64,983
Non-hedging interest rate swaps		30		—		30		—		30
Accrued interest payable		23		23		—		—		23

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Note 12 - Non-Interest Income (Tables)

3 Months Ended

Mar. 31, 2016

Notes Tables

Schedule of Non-Interest Income [Table Text Block]

	Three Months Ended March 31 ,
(in thousands)	201 6		201 5
Gain on sale of AFS investment securities	$	—	$	75
Service charges and other operating income		198		155
Total non-interest income	$	198	$	230

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Note 13 - Stock-based Compensation (Tables)

3 Months Ended

Mar. 31, 2016

Notes Tables

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

	Three Months Ended March 31,
	2016					2015
Restricted Shares	Number of Shares			Weighted Avg Fair Value at Grant Date		Number of Shares			Weighted Avg Fair Value at Grant Date
Beginning balance		669,750		$	6.56		615,875		$	5.92
Granted		18,000			7.50		26,000			6.50
Vested		(20,000	)		6.50		(20,000	)		7.24
Forfeited and surrendered		—			—		—			—
Ending balance		667,750		$	6.59		621,875		$	5.90

Schedule of Share-based Compensation, Shares Authorized Under Stock Option Plans [Table Text Block]

	Shares Reserved		Less Shares Previously Exercised/Vested		Less Shares Outstanding		Total Shares Available for Future Issuance
2004 Founder Stock Option Plan		150,000		121,900		—		—
Director and Employee Stock Option Plan		1,434,000		1,220,097		—		—
2005 Equity Incentive Plan		1,200,000		944,273		243,000		—
2013 Equity Incentive Plan		750,000		40,000		424,750		285,250

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Note 14 - Regulatory Matters (Tables)

3 Months Ended

Mar. 31, 2016

Notes Tables

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, 2016 :
Total Risk-Based Capital Ratio	$	73,675		11.20	%	$	73,173		11.13	%	$	52,618		8.00	%	$	65,772		10.00	%
Tier 1 Risk-Based Capital Ratio	$	65,437		9.95	%	$	64,935		9.87	%	$	39,464		6.00	%	$	52,618		8.00	%
Common Equity Tier 1 Capital Ratio	$	65,437		9.95	%	$	64,935		9.87	%	$	29,598		4.50	%	$	42,752		6.50	%
Tier 1 Leverage Ratio	$	65,437		9.22	%	$	64,935		9.14	%	$	28,401		4.00	%	$	35,523		5.00	%
December 31, 201 5 :
Total Risk-Based Capital Ratio	$	73,029		11.24	%	$	72,520		11.16	%	$	51,992		8.00	%	$	64,989		10.00	%
Tier 1 Risk-Based Capital Ratio	$	64,891		9.98	%	$	64,381		9.91	%	$	38,994		6.00	%	$	51,991		8.00	%
Common Equity Tier 1 Capital Ratio	$	64,891		9.98	%	$	64,381		9.91	%	$	29,245		4.50	%	$	42,243		6.50	%
Tier 1 Leverage Ratio	$	64,891		9.00	%	$	64,381		8.92	%	$	28,852		4.00	%	$	36,078		5.00	%

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Note 1 - Summary of Significant Accounting Policies (Details Textual) - USD ($)	3 Months Ended
	Mar. 31, 2016	Mar. 31, 2015	Dec. 31, 2015
The Merger Agreement [Member]
Common Stock, Par or Stated Value Per Share	$ 0.01
Business Combination, Outstanding Common Stock Cash Conversion, Per Share	$ 11.22
Business Combination, Acquisition Related Costs	$ 861,000
Furniture and Fixtures [Member] | Minimum [Member]
Property, Plant and Equipment, Useful Life	3 years
Furniture and Fixtures [Member] | Maximum [Member]
Property, Plant and Equipment, Useful Life	10 years
Employee Stock Option [Member]
Antidilutive Securities Excluded from Computation of Earnings Per Share, Amount	350,073	350,073
Restricted Stock [Member]
Antidilutive Securities Excluded from Computation of Earnings Per Share, Amount	11,868	17,044
Common Stock, Par or Stated Value Per Share	$ 0.01		$ 0.01
Business Combination, Acquisition Related Costs	$ 861,000
Unrecognized Tax Benefits	$ 0		$ 0

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Note 1 - Summary of Significant Accounting Policies - Earnings Per Share (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2016	Mar. 31, 2015
Restricted Stock [Member]
Effect of dilution of stock (in shares)	300,539	266,656
Net income	$ 273	$ 315
Average number of common shares outstanding (in shares)	9,662,321	9,537,677
Average number of common shares outstanding used to calculate diluted earnings per common share (in shares)	9,962,860	9,804,333

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Note 2 - Investments (Details Textual)	3 Months Ended
	Mar. 31, 2016 USD ($)	Mar. 31, 2015 USD ($)	Dec. 31, 2015 USD ($)
To California Treasurer's Office [Member]
Available-for-sale Securities Pledged as Collateral	$ 54,700,000		$ 55,900,000
From California Treasurer's Office [Member]
Available-for-sale Securities Pledged as Collateral	50,600,000		50,600,000
Interest-bearing Domestic Deposit, Certificates of Deposits	46,000,000		46,000,000
Held-to-maturity Securities	0		0
Trading Securities	0		0
Interest-bearing Domestic Deposit, Certificates of Deposits	$ 47,705,000		$ 47,748,000
Available-for-sale Securities, Weighted Average Life	3 years 94 days
Available-for-sale, Securities in Unrealized Loss Positions, Qualitative Disclosure, Number of Positions	10		31
Available-for-sale Securities, Sold During Period, Amortized Cost	$ 0	$ 5,900,000
Available-for-sale Securities, Gross Realized Gains		$ 75,000

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Note 2 - Investments - Available-for-sale Securities (Details) - USD ($)	Mar. 31, 2016	Dec. 31, 2015
US Treasury and Government [Member]
Investments-Available for Sale
Available for sale investments, amortized cost	$ 34,410,000	$ 34,417,000
Available for sale investments, gross unrealized gains	$ 676,000	184,000
Available for sale investments, gross unrealized losses		(2,000)
Available-for-sale Securities	$ 35,086,000	34,599,000
Residential Mortgage Backed Securities [Member]
Investments-Available for Sale
Available for sale investments, amortized cost	37,179,000	39,575,000
Available for sale investments, gross unrealized gains	264,000	116,000
Available for sale investments, gross unrealized losses	(65,000)	(280,000)
Available-for-sale Securities	37,378,000	39,411,000
Available for sale investments, amortized cost	71,589,000	73,992,000
Available for sale investments, gross unrealized gains	940,000	300,000
Available for sale investments, gross unrealized losses	(65,000)	(282,000)
Available-for-sale Securities	$ 72,464,000	$ 74,010,000

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Note 2 - Investments - Available-for-sale Securities by Contractual Maturity (Details) - USD ($)	Mar. 31, 2016	Dec. 31, 2015
US Treasury and Government [Member] | One Year or Less [Member]
Available for sale investments, weighted average yield
US Treasury and Government [Member] | After One Through Five Years [Member]
Available for sale investments, weighted average yield	1.86%
US Treasury and Government [Member] | After Five Through Ten Years [Member]
Available for sale investments, weighted average yield	2.08%
US Treasury and Government [Member] | After Ten Years [Member]
Available for sale investments, weighted average yield
US Treasury and Government [Member]
Available for sale investments, 1 year or less
Available for sale investments, weighted average yield	1.89%
Available for sale investments, after 1 through 5 years	$ 30,689,000
Available for sale investments, after 5 through 10 years	$ 4,397,000
Available for sale investments, after 10 years
Available-for-sale Securities	$ 35,086,000	$ 34,599,000
Residential Mortgage Backed Securities [Member] | One Year or Less [Member]
Available for sale investments, weighted average yield
Residential Mortgage Backed Securities [Member] | After One Through Five Years [Member]
Available for sale investments, weighted average yield	3.40%
Residential Mortgage Backed Securities [Member] | After Five Through Ten Years [Member]
Available for sale investments, weighted average yield	1.62%
Residential Mortgage Backed Securities [Member] | After Ten Years [Member]
Available for sale investments, weighted average yield	1.92%
Residential Mortgage Backed Securities [Member]
Available for sale investments, 1 year or less
Available for sale investments, weighted average yield	1.78%
Available for sale investments, after 1 through 5 years	$ 748,000
Available for sale investments, after 5 through 10 years	20,894,000
Available for sale investments, after 10 years	15,736,000
Available-for-sale Securities	$ 37,378,000	39,411,000
One Year or Less [Member]
Available for sale investments, weighted average yield
After One Through Five Years [Member]
Available for sale investments, weighted average yield	1.90%
After Five Through Ten Years [Member]
Available for sale investments, weighted average yield	1.70%
After Ten Years [Member]
Available for sale investments, weighted average yield	1.92%
Available for sale investments, 1 year or less
Available for sale investments, weighted average yield	1.83%
Available for sale investments, after 1 through 5 years	$ 31,437,000
Available for sale investments, after 5 through 10 years	25,291,000
Available for sale investments, after 10 years	15,736,000
Available-for-sale Securities	$ 72,464,000	$ 74,010,000

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Note 2 - Investments - Securities in a Continuous Loss Position (Details) - USD ($) $ in Thousands	Mar. 31, 2016	Dec. 31, 2015
Residential Mortgage Backed Securities [Member]
Investments-Available for Sale
Available for sale investments, less than twelve months, gross unrealized losses	$ (27)	$ (205)
Available for sale investments, less than twelve months, fair value	6,488	23,942
Available for sale investments, twelve months or more, gross unrealized losses	(38)	(75)
Available for sale investments, twelve months or more, fair value	$ 4,018	4,221
US Treasury and Government [Member]
Investments-Available for Sale
Available for sale investments, less than twelve months, gross unrealized losses		(2)
Available for sale investments, less than twelve months, fair value		$ 3,995
Available for sale investments, twelve months or more, gross unrealized losses
Available for sale investments, twelve months or more, fair value

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Note 3 - Loans, Allowance for Loan Losses, and Non-performing Assets (Details Textual)	3 Months Ended
	Mar. 31, 2016 USD ($)	Mar. 31, 2015 USD ($)	Dec. 31, 2015 USD ($)
Doubtful [Member]
Loans and Leases Receivable, Gross	$ 0		$ 0
Unlikely to be Collected Financing Receivable [Member]
Loans and Leases Receivable, Gross	0		0
Impaired Loans [Member]
Financing Receivable, Recorded Investment, Nonaccrual Status	712,000		712,000
Unfunded Lending Commitments [Member]
Unfunded Lending Commitments, Allowance	395,000		345,000
Commitments to Extend Credit [Member]
Other Commitment	160,700,000		159,900,000
Standby Letters of Credit [Member]
Other Commitment	$ 3,100,000		$ 3,200,000
Percentage of Loan Portfolio Secured by Real Estate	85.00%		83.70%
Additions to Non-performing Loans	$ 0	$ 0
Nonperforming Loans to Gross Loans	0.12%		0.12%
Financing Receivable, Recorded Investment, 90 Days Past Due and Still Accruing	$ 0		$ 0
Loans and Leases Receivable, Gross	$ 608,888,000	$ 479,811,000	598,107,000
Financing Receivable, Modifications, Number of Contracts	0	0
Financing Receivable, Modifications, Subsequent Default, Number of Contracts	0	0
Financing Receivables, Impaired, Troubled Debt Restructuring, Write-down	$ 0	$ 0
Impaired Financing Receivable, Interest Income, Accrual Method	1,000	1,000
Financing Receivable, Recorded Investment, Nonaccrual Status	712,000		712,000
Unsecured Commercial Loan Balances	33,400,000		34,400,000
Unsecured Consumer and Other Loan Balances	10,300,000		$ 10,600,000
Impaired Financing Receivable, Average Recorded Investment	$ 759,000	$ 681,000

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Note 3 - Loans, Allowance for Loan Losses, and Non-Performing Assets - Loans Outstanding (Details) - USD ($) $ in Thousands		Mar. 31, 2016	Dec. 31, 2015	Mar. 31, 2015	Dec. 31, 2014
Commercial Portfolio Segment [Member]
Loans, gross	[1]	$ 113,048	$ 112,861
Loans, gross, percent of total	[1]	18.60%	18.90%
Less — allowance for loan losses		$ (1,807)	$ (1,807)	$ (1,768)	$ (1,752)
Commercial Real Estate Portfolio Segment [Member]
Loans, gross		$ 266,037	$ 259,013
Loans, gross, percent of total		43.70%	43.30%
Less — allowance for loan losses		$ (4,695)	$ (4,580)	(3,825)	(3,825)
Residential Portfolio Segment [Member]
Loans, gross		$ 124,199	$ 127,367
Loans, gross, percent of total		20.40%	21.30%
Less — allowance for loan losses		$ (892)	$ (907)	(757)	(747)
Land and Construction Portfolio Segment[Member]
Loans, gross		$ 65,091	$ 59,808
Loans, gross, percent of total		10.70%	10.00%
Less — allowance for loan losses		$ (1,246)	$ (1,146)	(916)	(816)
Consumer and Other Portfolio Segment [Member]
Loans, gross	[2]	$ 40,513	$ 39,058
Loans, gross, percent of total	[2]	6.60%	6.50%
Less — allowance for loan losses		$ (521)	$ (521)	(499)	(459)
Loans, gross		$ 608,888	$ 598,107
Loans, gross, percent of total		100.00%	100.00%
Net deferred costs		$ 294	$ 326
Less — allowance for loan losses		(9,161)	(8,961)	$ (7,765)	$ (7,599)
Loans, net		$ 600,021	$ 589,472

[1] Unsecured commercial loan balances were $33.4 million and $34.4 million at March 31, 2016 and December 31, 2015, respectively.

[2] Unsecured consumer and other loan balances were $10.3 million and $10.6 million at March 31, 2016 and December 31, 2015, respectively.

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Note 3 - Loans, Allowance for Loan Losses, and Non-Performing Assets - Activities in Allowance for Loan Losses and Recorded Investment in Loans (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2016	Mar. 31, 2015	Mar. 31, 2016	Dec. 31, 2015	Mar. 31, 2015
Commercial Portfolio Segment [Member]
Allowance for loan losses:
Beginning balance	$ 1,807	$ 1,752
Provision for loan losses
Charge-offs
Recoveries		$ 16
Ending balance	$ 1,807	1,768
Allowance for loan losses: individually evaluated for impairment			$ 35	$ 35	$ 20
Allowance for loan losses: collectively evaluated for impairment			1,772	1,772	1,748
Allowance for loan losses	1,807	1,752	1,807	1,807	1,768
Loans:
Loans: individually evaluated for impairment			712	712	632
Loans: collectively evaluated for impairment			112,336	112,149	98,347
Loans			113,048	112,861	98,979
Allowance for loan losses: individually evaluated for impairment			35	35	20
Allowance for loan losses: collectively evaluated for impairment			1,772	1,772	1,748
Allowance for loan losses	1,807	1,752	$ 1,807	$ 1,807	$ 1,768
Commercial Real Estate Portfolio Segment [Member]
Allowance for loan losses:
Beginning balance	4,580	$ 3,825
Provision for loan losses	$ 115
Charge-offs
Recoveries
Ending balance	$ 4,695	$ 3,825
Allowance for loan losses: individually evaluated for impairment
Allowance for loan losses: collectively evaluated for impairment			$ 4,695	$ 4,580	$ 3,825
Allowance for loan losses	4,580	3,825	$ 4,695	$ 4,580	$ 3,825
Loans:
Loans: individually evaluated for impairment
Loans: collectively evaluated for impairment			$ 266,037	$ 259,013	$ 201,375
Loans			$ 266,037	$ 259,013	$ 201,375
Allowance for loan losses: individually evaluated for impairment
Allowance for loan losses: collectively evaluated for impairment			$ 4,695	$ 4,580	$ 3,825
Allowance for loan losses	4,580	3,825	$ 4,695	$ 4,580	$ 3,825
Residential Portfolio Segment [Member]
Allowance for loan losses:
Beginning balance	907	747
Provision for loan losses	$ (15)	$ 10
Charge-offs
Recoveries
Ending balance	$ 892	$ 757
Allowance for loan losses: individually evaluated for impairment
Allowance for loan losses: collectively evaluated for impairment			$ 892	$ 907	$ 757
Allowance for loan losses	907	747	$ 892	$ 907	$ 757
Loans:
Loans: individually evaluated for impairment
Loans: collectively evaluated for impairment			$ 124,199	$ 127,367	$ 101,303
Loans			$ 124,199	$ 127,367	$ 101,303
Allowance for loan losses: individually evaluated for impairment
Allowance for loan losses: collectively evaluated for impairment			$ 892	$ 907	$ 757
Allowance for loan losses	907	747	$ 892	$ 907	$ 757
Land and Construction Portfolio Segment[Member]
Allowance for loan losses:
Beginning balance	1,146	816
Provision for loan losses	$ 100	$ 100
Charge-offs
Recoveries
Ending balance	$ 1,246	$ 916
Allowance for loan losses: individually evaluated for impairment
Allowance for loan losses: collectively evaluated for impairment			$ 1,246	$ 1,146	$ 916
Allowance for loan losses	1,146	816	$ 1,246	$ 1,146	$ 916
Loans:
Loans: individually evaluated for impairment
Loans: collectively evaluated for impairment			$ 65,091	$ 59,808	$ 46,116
Loans			$ 65,091	$ 59,808	$ 46,116
Allowance for loan losses: individually evaluated for impairment
Allowance for loan losses: collectively evaluated for impairment			$ 1,246	$ 1,146	$ 916
Allowance for loan losses	1,146	816	$ 1,246	$ 1,146	$ 916
Consumer and Other Portfolio Segment [Member]
Allowance for loan losses:
Beginning balance	$ 521	459
Provision for loan losses		$ 40
Charge-offs
Recoveries
Ending balance	$ 521	$ 499
Allowance for loan losses: individually evaluated for impairment
Allowance for loan losses: collectively evaluated for impairment			$ 521	$ 521	$ 499
Allowance for loan losses	521	459	521	521	499
Loans:
Loans: individually evaluated for impairment			46	47	49
Loans: collectively evaluated for impairment			40,467	39,011	31,989
Loans			$ 40,513	$ 39,058	$ 32,038
Allowance for loan losses: individually evaluated for impairment
Allowance for loan losses: collectively evaluated for impairment			$ 521	$ 521	$ 499
Allowance for loan losses	521	459	521	521	499
Beginning balance	8,961	7,599
Provision for loan losses	$ 200	$ 150
Charge-offs
Recoveries		$ 16
Ending balance	$ 9,161	7,765
Allowance for loan losses: individually evaluated for impairment			35	35	20
Allowance for loan losses: collectively evaluated for impairment			9,126	8,926	7,745
Allowance for loan losses	9,161	7,599	9,161	8,961	7,765
Loans: individually evaluated for impairment			758	759	681
Loans: collectively evaluated for impairment			608,130	597,348	479,130
Loans			608,888	598,107	479,811
Allowance for loan losses: individually evaluated for impairment			35	35	20
Allowance for loan losses: collectively evaluated for impairment			9,126	8,926	7,745
Allowance for loan losses	$ 9,161	$ 7,599	$ 9,161	$ 8,961	$ 7,765

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Note 3 - Loans, Allowance for Loan Losses, and Non-Performing Assets - Aging Analysis of Past Due Loans (Details) - USD ($) $ in Thousands	Mar. 31, 2016	Dec. 31, 2015	Mar. 31, 2015
Commercial Portfolio Segment [Member] | Financing Receivables, 30 to 59 Days Past Due [Member]
Financing Receivable-Past Due
Commercial Portfolio Segment [Member] | Financing Receivables, 60 to 89 Days Past Due [Member]
Financing Receivable-Past Due
Commercial Portfolio Segment [Member] | Financing Receivables, Equal to Greater than 90 Days Past Due [Member]
Financing Receivable-Past Due	$ 712	$ 712
Commercial Portfolio Segment [Member]
Financing Receivable-Past Due	712	712
Financing Receivable-Current	112,336	112,149
Financing Receivable-Total	$ 113,048	$ 112,861	$ 98,979
Commercial Real Estate Portfolio Segment [Member] | Financing Receivables, 30 to 59 Days Past Due [Member]
Financing Receivable-Past Due
Commercial Real Estate Portfolio Segment [Member] | Financing Receivables, 60 to 89 Days Past Due [Member]
Financing Receivable-Past Due
Commercial Real Estate Portfolio Segment [Member] | Financing Receivables, Equal to Greater than 90 Days Past Due [Member]
Financing Receivable-Past Due
Commercial Real Estate Portfolio Segment [Member]
Financing Receivable-Past Due
Financing Receivable-Current	$ 266,037	$ 259,013
Financing Receivable-Total	$ 266,037	$ 259,013	201,375
Residential Portfolio Segment [Member] | Financing Receivables, 30 to 59 Days Past Due [Member]
Financing Receivable-Past Due
Residential Portfolio Segment [Member] | Financing Receivables, 60 to 89 Days Past Due [Member]
Financing Receivable-Past Due
Residential Portfolio Segment [Member] | Financing Receivables, Equal to Greater than 90 Days Past Due [Member]
Financing Receivable-Past Due
Residential Portfolio Segment [Member]
Financing Receivable-Past Due
Financing Receivable-Current	$ 124,199	$ 127,367
Financing Receivable-Total	$ 124,199	$ 127,367	101,303
Land and Construction Portfolio Segment[Member] | Financing Receivables, 30 to 59 Days Past Due [Member]
Financing Receivable-Past Due
Land and Construction Portfolio Segment[Member] | Financing Receivables, 60 to 89 Days Past Due [Member]
Financing Receivable-Past Due
Land and Construction Portfolio Segment[Member] | Financing Receivables, Equal to Greater than 90 Days Past Due [Member]
Financing Receivable-Past Due
Land and Construction Portfolio Segment[Member]
Financing Receivable-Past Due
Financing Receivable-Current	$ 65,091	$ 59,808
Financing Receivable-Total	$ 65,091	$ 59,808	46,116
Consumer and Other Portfolio Segment [Member] | Financing Receivables, 30 to 59 Days Past Due [Member]
Financing Receivable-Past Due
Consumer and Other Portfolio Segment [Member] | Financing Receivables, 60 to 89 Days Past Due [Member]
Financing Receivable-Past Due
Consumer and Other Portfolio Segment [Member] | Financing Receivables, Equal to Greater than 90 Days Past Due [Member]
Financing Receivable-Past Due
Consumer and Other Portfolio Segment [Member]
Financing Receivable-Past Due
Financing Receivable-Current	$ 40,513	$ 39,058
Financing Receivable-Total	$ 40,513	$ 39,058	32,038
Financing Receivables, 30 to 59 Days Past Due [Member]
Financing Receivable-Past Due
Financing Receivables, 60 to 89 Days Past Due [Member]
Financing Receivable-Past Due
Financing Receivables, Equal to Greater than 90 Days Past Due [Member]
Financing Receivable-Past Due	$ 712	$ 712
Financing Receivable-Past Due	712	712
Financing Receivable-Current	608,176	597,395
Financing Receivable-Total	$ 608,888	$ 598,107	$ 479,811

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Note 3 - Loans, Allowance for Loan Losses, and Non-Performing Assets - Nonaccrual Loans and Other Real Estate Owned (Details) - USD ($) $ in Thousands	Mar. 31, 2016	Dec. 31, 2015
Commercial Portfolio Segment [Member]
Non-accrual loans:
Non-accrual loans	$ 712	$ 712
Non-accrual loans	712	712
Total non-performing assets	$ 712	$ 712
Non-performing assets to gross loans and OREO	0.12%	0.12%
Non-performing assets to total assets	0.10%	0.10%

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Note 3 - Loans, Allowance for Loan Losses, and Non-Performing Assets - Credit Exposure by Internally Assigned Grades (Details) - USD ($) $ in Thousands	Mar. 31, 2016	Dec. 31, 2015	Mar. 31, 2015
Commercial Portfolio Segment [Member] | Pass [Member]
Grade:
Loans	$ 112,164	$ 111,970
Commercial Portfolio Segment [Member] | Special Mention [Member]
Grade:
Loans	172	179
Commercial Portfolio Segment [Member] | Substandard [Member]
Grade:
Loans	712	712
Commercial Portfolio Segment [Member]
Grade:
Loans	113,048	112,861	$ 98,979
Commercial Real Estate Portfolio Segment [Member] | Pass [Member]
Grade:
Loans	$ 266,037	$ 259,013
Commercial Real Estate Portfolio Segment [Member] | Special Mention [Member]
Grade:
Loans
Commercial Real Estate Portfolio Segment [Member] | Substandard [Member]
Grade:
Loans
Commercial Real Estate Portfolio Segment [Member]
Grade:
Loans	$ 266,037	$ 259,013	201,375
Residential Portfolio Segment [Member] | Pass [Member]
Grade:
Loans	$ 124,199	$ 127,367
Residential Portfolio Segment [Member] | Special Mention [Member]
Grade:
Loans
Residential Portfolio Segment [Member] | Substandard [Member]
Grade:
Loans
Residential Portfolio Segment [Member]
Grade:
Loans	$ 124,199	$ 127,367	101,303
Land and Construction Portfolio Segment[Member] | Pass [Member]
Grade:
Loans	$ 65,091	$ 59,808
Land and Construction Portfolio Segment[Member] | Special Mention [Member]
Grade:
Loans
Land and Construction Portfolio Segment[Member] | Substandard [Member]
Grade:
Loans
Land and Construction Portfolio Segment[Member]
Grade:
Loans	$ 65,091	$ 59,808	46,116
Consumer and Other Portfolio Segment [Member] | Pass [Member]
Grade:
Loans	$ 40,467	$ 39,011
Consumer and Other Portfolio Segment [Member] | Special Mention [Member]
Grade:
Loans
Consumer and Other Portfolio Segment [Member] | Substandard [Member]
Grade:
Loans	$ 46	$ 47
Consumer and Other Portfolio Segment [Member]
Grade:
Loans	40,513	39,058	32,038
Loans	$ 608,888	$ 598,107	$ 479,811

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Note 3 - Loans, Allowance for Loan Losses, and Non-Performing Assets - Impaired Loans (Details) - USD ($)	3 Months Ended		12 Months Ended
	Mar. 31, 2016	Mar. 31, 2015	Dec. 31, 2015
Commercial Portfolio Segment [Member]
With no related allowance recorded:
Impaired loans no related allowance - recorded investment	$ 572,000		$ 572,000
Impaired loans no related allowance - unpaid principal balance	848,000		848,000
Impaired loans no related allowance - average recorded investment	572,000		572,000
With an allowance recorded:
Impaired loans with related allowance - recorded investment	140,000		140,000
Impaired loans with related allowance - unpaid principal balance	155,000		155,000
Impaired loans - related allowance	35,000		35,000
Impaired loans with related allowance - average recorded investment	140,000		107,000
Totals:
Impaired loans - recorded investment	712,000		712,000
Impaired loans - unpaid principal balance	1,003,000		1,003,000
Impaired loans - related allowance	35,000		35,000
Impaired loans - average recorded investment	$ 712,000		$ 679,000
Commercial Real Estate Portfolio Segment [Member]
With no related allowance recorded:
Impaired loans no related allowance - recorded investment
Impaired loans no related allowance - unpaid principal balance
Impaired loans no related allowance - average recorded investment
With an allowance recorded:
Impaired loans with related allowance - recorded investment
Impaired loans with related allowance - unpaid principal balance
Impaired loans - related allowance
Impaired loans with related allowance - average recorded investment
Totals:
Impaired loans - recorded investment
Impaired loans - unpaid principal balance
Impaired loans - related allowance
Impaired loans - average recorded investment
Residential Portfolio Segment [Member]
With no related allowance recorded:
Impaired loans no related allowance - recorded investment
Impaired loans no related allowance - unpaid principal balance
Impaired loans no related allowance - average recorded investment
With an allowance recorded:
Impaired loans with related allowance - recorded investment
Impaired loans with related allowance - unpaid principal balance
Impaired loans - related allowance
Impaired loans with related allowance - average recorded investment
Totals:
Impaired loans - recorded investment
Impaired loans - unpaid principal balance
Impaired loans - related allowance
Impaired loans - average recorded investment
Land and Construction Portfolio Segment[Member]
With no related allowance recorded:
Impaired loans no related allowance - recorded investment
Impaired loans no related allowance - unpaid principal balance
Impaired loans no related allowance - average recorded investment
With an allowance recorded:
Impaired loans with related allowance - recorded investment
Impaired loans with related allowance - unpaid principal balance
Impaired loans - related allowance
Impaired loans with related allowance - average recorded investment
Totals:
Impaired loans - recorded investment
Impaired loans - unpaid principal balance
Impaired loans - related allowance
Impaired loans - average recorded investment
Consumer and Other Portfolio Segment [Member]
With no related allowance recorded:
Impaired loans no related allowance - recorded investment	$ 46,000		$ 47,000
Impaired loans no related allowance - unpaid principal balance	46,000		47,000
Impaired loans no related allowance - average recorded investment	$ 47,000		$ 48,000
With an allowance recorded:
Impaired loans with related allowance - recorded investment
Impaired loans with related allowance - unpaid principal balance
Impaired loans - related allowance
Impaired loans with related allowance - average recorded investment
Totals:
Impaired loans - recorded investment	$ 46,000		$ 47,000
Impaired loans - unpaid principal balance	$ 46,000		$ 47,000
Impaired loans - related allowance
Impaired loans - average recorded investment	$ 47,000		$ 48,000
Impaired loans - average recorded investment	$ 759,000	$ 681,000

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Note 4 - Derivative Financial Instruments - Interest Rate Derivative Contracts (Details) - Commercial Loan Interest Rate Swaps [Member] - USD ($) $ in Thousands	Mar. 31, 2016	Dec. 31, 2015
Non-hedging interest rate derivatives:
Commercial loan interest rate swaps	$ 2,019	$ 2,032
Commercial loan interest rate swaps	(57)	(30)
Commercial loan interest rate swaps	(2,019)	(2,032)
Commercial loan interest rate swaps	$ 57	$ 30

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Note 4 - Derivative Financial Instruments - Weighted Average Interest Rates on Interest Rate Swaps (Details)	Mar. 31, 2016	Dec. 31, 2015
Non-Hedging Interest Rate Swap 1 [Member]
Derivative interest rate paid	3.68%	3.68%
Derivative interest rate received	4.96%	4.96%
Non-Hedging Interest Rate Swap 2 [Member]
Derivative interest rate paid	4.96%	4.96%
Derivative interest rate received	3.68%	3.68%

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Note 5 - Comprehensive Income (Details Textual) - USD ($)	3 Months Ended
	Mar. 31, 2016	Mar. 31, 2015
Non Interest Income [Member]
Reclassification from Accumulated Other Comprehensive Income, Current Period, before Tax	$ 0	$ 75,000
Income Tax Provision [Member]
Other Comprehensive Income (Loss), Tax	$ 0	$ 31,000

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Note 5 - Comprehensive Income - Comprehensive Income (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2016	Mar. 31, 2015
Net income	$ 273	$ 315
Other Comprehensive Income:
Increase in net unrealized gains on investment securities available for sale, net of tax expense of $353 and $252 for the three months ended March 31, 2016 and 2015, respectively	$ 504	361
Reclassification for net gains included in earnings, net of tax expense of none and $31 for the three months ended March 31, 2016 and 2015, respectively		(44)
Comprehensive income	$ 777	$ 632

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Note 5 - Comprehensive Income - Comprehensive Income (Details) (Parentheticals) - USD ($)	3 Months Ended
	Mar. 31, 2016	Mar. 31, 2015
Net unrealized gains on investment securities available for sale, tax benefit (expense)	$ 353,000	$ 252,000
Reclassification for net gains included in earnings, tax	$ 0	$ 31,000

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Note 5 - Comprehensive Income - Accumulated Other Comprehensive Income (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2016	Mar. 31, 2015
Beginning balance	$ 11	$ 162
Other comprehensive income before reclassifications	$ 504	361
Reclassification for net gains included in earnings, net of tax expense of none and $31 for the three months ended March 31, 2016 and 2015, respectively		(44)
Net other comprehensive income	$ 504	317
Ending balance	$ 515	$ 479

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Note 6 - Premises and Equipment (Details Textual) - USD ($)	3 Months Ended
	Mar. 31, 2016	Mar. 31, 2015
Depreciation, Depletion and Amortization	$ 132,000	$ 152,000

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Note 6 - Premises and Equipment - Premises and Equipment (Details) - USD ($)	Mar. 31, 2016	Dec. 31, 2015
Leasehold Improvements [Member]
Premises and equipment	$ 1,901,000	$ 1,881,000
Furniture and Fixtures [Member]
Premises and equipment	3,218,000	3,150,000
Software and Software Development Costs [Member]
Premises and equipment	978,000	871,000
Premises and equipment	6,097,000	5,902,000
Accumulated depreciation	(4,407,000)	(4,275,000)
Premises and equipment, net	$ 1,690,000	$ 1,627,000

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Note 7 - Deposits (Details Textual)	Mar. 31, 2016 USD ($)	Dec. 31, 2015 USD ($)
From California Treasurer's Office [Member]
Number of Deposits	2	2
Interest-bearing Domestic Deposit, Certificates of Deposits	$ 46,000,000	$ 46,000,000
Percentage of Interest-bearing Domestic Deposits to Deposits, Certificates of Deposit	7.00%	7.70%
Available-for-sale Securities Pledged as Collateral	$ 50,600,000	$ 50,600,000
Interest-bearing Domestic Deposit, Certificates of Deposits	$ 47,705,000	$ 47,748,000
Percentage of Interest-bearing Domestic Deposits to Deposits, Certificates of Deposit	7.30%	8.00%
Time Deposit of $250,000 Or Greater	$ 46,506,000	$ 46,505,000

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Note 7 - Deposits - Deposits by Category (Details) - USD ($)	Mar. 31, 2016	Dec. 31, 2015
Non-interest bearing demand deposits	$ 383,486,000	$ 362,451,000
Non-interest bearing demand deposits	58.60%	60.60%
Interest bearing checking (“NOW”)	$ 36,385,000	$ 32,406,000
Interest bearing checking	5.50%	5.40%
Money market deposits and savings	$ 187,381,000	$ 155,572,000
Money market deposits and savings	28.60%	26.00%
Certificates of deposit	$ 47,705,000	$ 47,748,000
Percentage of Interest-bearing Domestic Deposits to Deposits, Certificates of Deposit	7.30%	8.00%
Total	$ 654,957,000	$ 598,177,000
Total	100.00%	100.00%

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Note 7 - Deposits - Certificates of Deposit by Interest Rate and Maturity (Details) - USD ($) $ in Thousands	Mar. 31, 2016	Dec. 31, 2015
Minimum [Member] | Range 1 [Member]
Interest rates	0.00%
Minimum [Member] | Range 2 [Member]
Interest rates	1.00%
Maximum [Member] | Range 1 [Member]
Interest rates	0.99%
Maximum [Member] | Range 2 [Member]
Interest rates	1.99%
Six Months and Less [Member] | Range 1 [Member]
Certificates of deposit	$ 47,422
Six Months and Less [Member] | Range 2 [Member]
Certificates of deposit
Six Months and Less [Member]
Certificates of deposit	$ 47,422
Greater Than Six Months Through One Year [Member] | Range 1 [Member]
Certificates of deposit	$ 186
Greater Than Six Months Through One Year [Member] | Range 2 [Member]
Certificates of deposit
Greater Than Six Months Through One Year [Member]
Certificates of deposit	$ 186
Greater Than One Year [Member] | Range 1 [Member]
Certificates of deposit	69
Greater Than One Year [Member] | Range 2 [Member]
Certificates of deposit	28
Greater Than One Year [Member]
Certificates of deposit	97
Certificates of deposit	$ 47,705	$ 47,748

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Note 8 - Other Borrowings (Details Textual) - USD ($)	3 Months Ended
	Mar. 31, 2016	Mar. 31, 2015	Dec. 31, 2015
FHLB [Member]
Line of Credit Facility, Maximum Borrowing Capacity	$ 183,000,000		$ 180,000,000
Long-term Federal Home Loan Bank Advances, Noncurrent	15,000,000		15,000,000
Short-term Debt, Average Outstanding Amount	4,000,000
Interest Expense	6,000
Short-Term Overnight Borrowing [Member]
Long-term Line of Credit	0		$ 50,000,000
Debt Instrument, Interest Rate, Stated Percentage			0.27%
Federal Line of Credit [Member] | Corporate Note Securities [Member]
Available-for-sale Securities Pledged as Collateral	2,300,000		$ 2,300,000
Federal Line of Credit [Member]
Line of Credit Facility, Maximum Borrowing Capacity	27,000,000		$ 27,000,000
Interest Expense	$ 196,000	$ 158,000

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Note 8 - Other Borrowings - Long-term Borrowings (Details) - USD ($) $ in Millions	Mar. 31, 2016	Dec. 31, 2015
May 23, 2016 Maturity Date [Member]
FHLB interest rate	2.07%
FHLB outstanding balance	$ 2.5	$ 2.5
December 29, 2016 Maturity Date [Member]
FHLB interest rate	1.38%
FHLB outstanding balance	$ 5.0	5.0
December 30, 2016 Maturity Date [Member]
FHLB interest rate	1.25%
FHLB outstanding balance	$ 2.5	2.5
May 2, 2018 Maturity Date [Member]
FHLB interest rate	0.93%
FHLB outstanding balance	$ 5.0	5.0
FHLB outstanding balance	$ 15.0	$ 15.0

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Note 9 - Commitments and Contingencies (Details Textual) - USD ($)	3 Months Ended
	Mar. 31, 2016	Mar. 31, 2015	Dec. 31, 2015
Commitments to Extend Credit [Member]
Other Commitment	$ 160,700,000		$ 159,900,000
Standby Letters of Credit [Member]
Other Commitment	3,100,000		3,200,000
Credit Cards [Member]
Other Commitment	105,000		82,000
Operating Leases, Rent Expense	265,000	$ 266,000
Estimated Litigation Liability	$ 0		$ 0

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Note 9 - Commitments and Contingencies - Minimum Future Rental Payments (Details) $ in Thousands	Mar. 31, 2016 USD ($)
2016 (April-December)	$ 742
2017	1,015
2018	1,046
2019	834
2020	760
Thereafter	2,840
Total	$ 7,237

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Note 9 - Commitments and Contingencies - Future Restricted Stock Expense (Details) $ in Thousands	Mar. 31, 2016 USD ($)
2016 (April-December)	$ 712
2017	582
2018	351
2019	200
2020	137
Thereafter	30
Total	$ 2,012

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Note 10 - Fair Value Measurements (Details Textual) - USD ($)	3 Months Ended	12 Months Ended
	Mar. 31, 2016	Dec. 31, 2015
Fair Value, Inputs, Level 2 [Member] | Residential Mortgage Backed Securities [Member]
Available-for-sale Securities	$ 37,400,000	$ 39,400,000
Fair Value, Inputs, Level 2 [Member]
Available-for-sale Securities	$ 68,491,000	$ 70,100,000
Residential Mortgage Backed Securities [Member]
Available-for-sale Securities Weighted Average Interest Rate	1.78%	1.79%
Available-for-sale Securities, Weighted Average Life	3 years 94 days	3 years 131 days
Available-for-sale Securities	$ 72,464,000	$ 74,010,000
Available-for-sale Securities, Weighted Average Life	3 years 94 days

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Note 10 - Fair Value Measurements - Assets and Liabilities Measured on Recurring Basis (Details) - USD ($) $ in Thousands	Mar. 31, 2016	Dec. 31, 2015
US Government Agencies Debt Securities [Member] | Fair Value, Inputs, Level 1 [Member]
Available for sale investments	$ 3,973	$ 3,910
US Government Agencies Debt Securities [Member] | Fair Value, Inputs, Level 2 [Member]
Available for sale investments	$ 31,113	$ 30,689
US Government Agencies Debt Securities [Member] | Fair Value, Inputs, Level 3 [Member]
Available for sale investments
US Government Agencies Debt Securities [Member]
Available for sale investments	$ 35,086	$ 34,599
Residential Mortgage Backed Securities [Member] | Fair Value, Inputs, Level 1 [Member]
Available for sale investments
Residential Mortgage Backed Securities [Member] | Fair Value, Inputs, Level 2 [Member]
Available for sale investments	$ 37,378	$ 39,411
Residential Mortgage Backed Securities [Member] | Fair Value, Inputs, Level 3 [Member]
Available for sale investments
Residential Mortgage Backed Securities [Member]
Available for sale investments	$ 37,378	$ 39,411
Fair Value, Inputs, Level 1 [Member]
Derivative Assets – Interest Rate Swaps
Derivative Liabilities – Interest Rate Swaps
Fair Value, Inputs, Level 2 [Member]
Derivative Assets – Interest Rate Swaps	$ 57	$ 30
Derivative Liabilities – Interest Rate Swaps	$ 57	$ 30
Fair Value, Inputs, Level 3 [Member]
Derivative Assets – Interest Rate Swaps
Derivative Liabilities – Interest Rate Swaps
Derivative Assets – Interest Rate Swaps	$ 57	$ 30
Derivative Liabilities – Interest Rate Swaps	$ 57	$ 30

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Note 10 - Fair Value Measurements - Assets Measured on Non-recurring Basis (Details) - Impaired Loans [Member] - USD ($) $ in Thousands	Mar. 31, 2016	Dec. 31, 2015
Fair Value, Inputs, Level 1 [Member]
Asset measured on a nonrecurring basis
Fair Value, Inputs, Level 2 [Member]
Asset measured on a nonrecurring basis
Fair Value, Inputs, Level 3 [Member]
Asset measured on a nonrecurring basis	$ 677	$ 677
Asset measured on a nonrecurring basis	$ 677	$ 677

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Note 11 - Estimated Fair Value Information - Financial Instruments (Details) - USD ($)	Mar. 31, 2016	Dec. 31, 2015	Mar. 31, 2015	Dec. 31, 2014
Fair Value, Inputs, Level 1 [Member] | Non-Interest Bearing Deposit Liabilities [Member]
Liabilities
Deposits	$ 383,486,000	$ 362,451,000
Fair Value, Inputs, Level 1 [Member] | Interest Bearing Deposit Liabilities [Member]
Liabilities
Deposits	223,766,000	187,978,000
Fair Value, Inputs, Level 1 [Member]
Assets
Cash and cash equivalents	52,384,000	54,565,000
Investment securities	$ 3,973,000	$ 3,910,000
FRB stock
FHLB stock
Loans, net
Non-hedging interest rate swaps
Accrued interest receivable	$ 1,800,000	$ 1,692,000
Accrued interest receivable	1,800,000	1,692,000
Available-for-sale Securities	$ 3,973,000	$ 3,910,000
Liabilities
Other borrowings
Non-hedging interest rate swaps
Accrued interest payable	$ 36,000	$ 23,000
Accrued interest payable	$ 36,000	$ 23,000
Fair Value, Inputs, Level 2 [Member] | Non-Interest Bearing Deposit Liabilities [Member]
Liabilities
Deposits
Fair Value, Inputs, Level 2 [Member] | Interest Bearing Deposit Liabilities [Member]
Liabilities
Deposits	$ 47,705,000	$ 47,748,000
Fair Value, Inputs, Level 2 [Member]
Assets
Cash and cash equivalents
Investment securities	$ 68,491,000	$ 70,100,000
FRB stock
FHLB stock
Loans, net
Non-hedging interest rate swaps	$ 57,000	$ 30,000
Accrued interest receivable
Accrued interest receivable
Available-for-sale Securities	$ 68,491,000	$ 70,100,000
Liabilities
Other borrowings	15,026,000	64,983,000
Non-hedging interest rate swaps	$ 57,000	$ 30,000
Accrued interest payable
Accrued interest payable
Fair Value, Inputs, Level 3 [Member] | Non-Interest Bearing Deposit Liabilities [Member]
Liabilities
Deposits
Fair Value, Inputs, Level 3 [Member] | Interest Bearing Deposit Liabilities [Member]
Liabilities
Deposits
Fair Value, Inputs, Level 3 [Member]
Assets
Cash and cash equivalents
Investment securities
FRB stock
FHLB stock
Loans, net	$ 598,690,000	$ 587,530,000
Non-hedging interest rate swaps
Accrued interest receivable
Accrued interest receivable
Available-for-sale Securities
Liabilities
Other borrowings
Non-hedging interest rate swaps
Accrued interest payable
Accrued interest payable
Non-Interest Bearing Deposit Liabilities [Member]
Liabilities
Deposits	$ 383,486,000	$ 362,451,000
Deposits	383,486,000	362,451,000
Interest Bearing Deposit Liabilities [Member]
Liabilities
Deposits	271,471,000	235,726,000
Deposits	271,471,000	235,726,000
Cash and cash equivalents	52,384,000	54,565,000	$ 60,103,000	$ 58,464,000
Cash and cash equivalents	52,384,000	54,565,000
Investment securities	72,464,000	74,010,000
FRB stock	1,855,000	1,748,000
FHLB stock	3,167,000	3,167,000
Loans, net	600,021,000	589,472,000
Loans, net	598,690,000	587,530,000
Non-hedging interest rate swaps	57,000	30,000
Non-hedging interest rate swaps	57,000	30,000
Accrued interest receivable	1,800,000	1,692,000
Accrued interest receivable	1,800,000	1,692,000
Available-for-sale Securities	72,464,000	74,010,000
Deposits	654,957,000	598,177,000
Other borrowings	15,000,000	65,000,000
Other borrowings	15,026,000	64,983,000
Non-hedging interest rate swaps	57,000	30,000
Non-hedging interest rate swaps	57,000	30,000
Accrued interest payable	36,000	23,000
Accrued interest payable	$ 36,000	$ 23,000

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Note 12 - Non-Interest Income - Non-Interest Income (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2016	Mar. 31, 2015
Service Charges and Other Operating Income [Member]
Other operating income	$ 198	$ 155
Gain on sale of AFS investment securities		75
Other operating income	$ 198	155
Total non-interest income	$ 198	$ 230

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Note 13 - Stock-based Compensation (Details Textual) - USD ($)	3 Months Ended		12 Months Ended
	Mar. 31, 2016	Mar. 31, 2015	Dec. 31, 2015	May. 08, 2013
2013 Equity Incentive Plan [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Number of Shares Authorized	750,000			750,000
Share-based Compensation Arrangement by Share-based Payment Award, Options, Outstanding, Number	424,750
Director and Employee Stock Option Plan [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Number of Shares Authorized	1,434,000
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, Outstanding, Number	0	350,073
Share-based Compensation Arrangement by Share-based Payment Award, Options, Outstanding, Weighted Average Remaining Contractual Term		124 days
Share-based Compensation Arrangement by Share-based Payment Award, Options, Outstanding, Weighted Average Exercise Price		$ 8.06
Share-based Compensation Arrangement by Share-based Payment Award, Options, Forfeitures and Expirations in Period			42,500
Share-based Compensation Arrangement by Share-based Payment Award, Options, Forfeitures and Expirations in Period, Weighted Average Exercise Price			$ 8.40
Restricted Stock [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Vested in Period, Fair Value	$ 130,000	$ 145,000
Restricted Stock or Unit Expense	$ 272,000	$ 224,000

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Note 13 - Stock-Based Compensation - Restricted Stock (Details) - Restricted Stock [Member] - $ / shares	3 Months Ended
	Mar. 31, 2016	Mar. 31, 2015
Beginning balance (in shares)	669,750	615,875
Beginning balance (in dollars per share)	$ 6.56	$ 5.92
Granted (in shares)	18,000	26,000
Granted (in dollars per share)	$ 7.50	$ 6.50
Vested (in shares)	(20,000)	(20,000)
Vested (in dollars per share)	$ 6.50	$ 7.24
Ending balance (in shares)	667,750	621,875
Ending balance (in dollars per share)	$ 6.59	$ 5.90

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Note 13 - Stock-based Compensation - Shares Authorized and Available under all Stock Plans (Details) - shares	Mar. 31, 2016	Mar. 31, 2015	May. 08, 2013
2004 Founder Stock Option Plan [Member]
Equity incentive plans, shares reserved (in shares)	150,000
Equity incentive plans, less shares previously exercised/vested (in shares)	121,900
Equity incentive plans, less shares outstanding (in shares)
Equity incentive plans, total shares available for issuance (in shares)
Director and Employee Stock Option Plan [Member]
Equity incentive plans, shares reserved (in shares)	1,434,000
Equity incentive plans, less shares previously exercised/vested (in shares)	1,220,097
Equity incentive plans, less shares outstanding (in shares)	0	350,073
Equity incentive plans, total shares available for issuance (in shares)
2005 Equity Incentive Plan [Member]
Equity incentive plans, shares reserved (in shares)	1,200,000
Equity incentive plans, less shares previously exercised/vested (in shares)	944,273
Equity incentive plans, less shares outstanding (in shares)	243,000
Equity incentive plans, total shares available for issuance (in shares)
2013 Equity Incentive Plan [Member]
Equity incentive plans, shares reserved (in shares)	750,000		750,000
Equity incentive plans, less shares previously exercised/vested (in shares)	40,000
Equity incentive plans, less shares outstanding (in shares)	424,750
Equity incentive plans, total shares available for issuance (in shares)	285,250

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Note 14 - Regulatory Matters (Details Textual)	3 Months Ended
	Mar. 31, 2016	Dec. 31, 2015	Dec. 31, 2014	Jul. 02, 2013
Common Equity Tier 1 Capital Required for Capital Adequacy to Risk Weighted Assets				4.50%
Common Equity Tier 1 Capital Conservation Buffer				2.50%
Capital Conservation Buffer, Phased-in	0.625%
Tier One Risk Based Capital Required for Capital Adequacy to Risk Weighted Assets	6.00%	6.00%	4.00%
Tier One Leverage Capital Required for Capital Adequacy to Average Assets	4.00%	4.00%

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Note 14 - Regulatory Matters - Capital Ratios (Details) - USD ($) $ in Thousands	Mar. 31, 2016	Dec. 31, 2015	Dec. 31, 2014
Company [Member]
Total Risk-Based Capital Ratio, amount	$ 73,675	$ 73,029
Total Risk-Based Capital Ratio, ratio	11.20%	11.24%
Tier 1 Risk-Based Capital Ratio, amount	$ 65,437	$ 64,891
Tier 1 Risk-Based Capital Ratio, ratio	9.95%	9.98%
Common Equity Tier 1 Capital Ratio, amount	$ 65,437	$ 64,891
Common Equity Tier 1 Capital Ratio, ratio	9.95%	9.98%
Tier 1 Leverage Ratio, amount	$ 65,437	$ 64,891
Tier 1 Leverage Ratio, ratio	9.22%	9.00%
Bank [Member]
Total Risk-Based Capital Ratio, amount	$ 73,173	$ 72,520
Total Risk-Based Capital Ratio, ratio	11.13%	11.16%
Tier 1 Risk-Based Capital Ratio, amount	$ 64,935	$ 64,381
Tier 1 Risk-Based Capital Ratio, ratio	9.87%	9.91%
Common Equity Tier 1 Capital Ratio, amount	$ 64,935	$ 64,381
Common Equity Tier 1 Capital Ratio, ratio	9.87%	9.91%
Tier 1 Leverage Ratio, amount	$ 64,935	$ 64,381
Tier 1 Leverage Ratio, ratio	9.14%	8.92%
Total Risk-Based Capital Ratio, amount for capital adequacy purposes	$ 52,618	$ 51,992
Total Risk-Based Capital Ratio, ratio for capital adequacy purposes	8.00%	8.00%
Total Risk-Based Capital Ratio, amount for the bank to be well capitalized under prompt corrective measures	$ 65,772	$ 64,989
Total Risk-Based Capital Ratio, ratio for the bank to be well capitalized under prompt corrective measures	10.00%	10.00%
Tier 1 Risk-Based Capital Ratio, amount for capital adequacy purposes	$ 39,464	$ 38,994
Tier 1 Risk-Based Capital Ratio, ratio for capital adequacy purposes	6.00%	6.00%	4.00%
Tier 1 Risk-Based Capital Ratio, amount for the bank to be well capitalized under prompt corrective measures	$ 52,618	$ 51,991
Tier 1 Risk-Based Capital Ratio, ratio for the bank to be well capitalized under prompt corrective measures	8.00%	8.00%
Common Equity Tier 1 Capital Ratio, amount for capital adequacy purposes	$ 29,598	$ 29,245
Common Equity Tier 1 Capital Ratio, ratio for capital adequacy purposes	4.50%	4.50%
Common Equity Tier 1 Capital Ratio, amount for the bank to be well capitalized under prompt corrective measures	$ 42,752	$ 42,243
Common Equity Tier 1 Capital Ratio, ratio for the bank to be well capitalized under prompt corrective measures	6.50%	6.50%
Tier 1 Leverage Ratio, amount for capital adequacy purposes	$ 28,401	$ 28,852
Tier 1 Leverage Ratio, ratio for capital adequacy purposes	4.00%	4.00%
Tier 1 Leverage Ratio, amount for the bank to be well capitalized under prompt corrective measures	$ 35,523	$ 36,078
Tier 1 Leverage Ratio, ratio for the bank to be well capitalized under prompt corrective measures	5.00%	5.00%