Loans and Allowance for Loan Losses (Tables)

12 Months Ended

Dec. 31, 2015

Outstanding loans by class and payment aging as of December 31, 2015 and 2014 are as follows:



Loan Aging Analysis by Class as of December 31, 2015 and 2014
(dollars in thousands)	Commercial and industrial		Commercial real estate, owner-occupied		Commercial real estate, investor		Construction		Home equity		Other residential ¹		Installment and other consumer		Total
December 31, 2015
30-59 days past due	$	36	$	—	$	1,096	$	1	$	—	$	—	$	249	$	1,382
60-89 days past due	—		—		—		—		633		—		89		722
90 days or more past due	21		—		—		—		99		—		—		120
Total past due	57		—		1,096		1		732		—		338		2,224
Current	219,395		242,309		714,783		65,494		111,568		73,154		22,301		1,449,004
Total loans ³	$	219,452	$	242,309	$	715,879	$	65,495	$	112,300	$	73,154	$	22,639	$	1,451,228
Non-accrual loans²	$	21	$	—	$	1,903	$	1	$	171	$	—	$	83	$	2,179
December 31, 2014
30-59 days past due	$	183	$	—	$	—	$	—	$	646	$	—	$	180	$	1,009
Non-accrual loans²	—		1,403		2,429		5,134		280		—		104		9,350
Total past due	183		1,403		2,429		5,134		926		—		284		10,359
Current	210,040		229,202		671,070		43,279		109,862		73,035		16,504		1,352,992
Total loans ³	$	210,223	$	230,605	$	673,499	$	48,413	$	110,788	$	73,035	$	16,788	$	1,363,351

¹ Our residential loan portfolio includes no sub-prime loans, nor is it our normal practice to underwrite loans commonly referred to as "Alt-A mortgages," the characteristics of which are loans lacking full documentation, borrowers having low FICO scores or higher loan-to-value ratios.

² Amounts include $1 thousand and $1.4 million of Purchased Credit Impaired ("PCI") loans that have stopped accreting interest at December 31, 2015 and 2014, respectively. Amounts exclude accreting PCI loans of $3.7 million and $3.8 million at December 31, 2015 and 2014, respectively, as we have a reasonable expectation about future cash flows to be collected and we continue to recognize accretable yield on these loans in interest income. There were no accruing loans past due more than ninety days at December 31, 2015 or 2014.

³ Amounts included deferred loan origination costs, net of deferred loan origination fees, of $768 thousand and $487 thousand at December 31, 2015 and 2014, respectively. Amounts were also net of unaccreted purchase discounts on non-PCI loans of $3.2 million and $4.4 million at December 31, 2015 and 2014, respectively.

Financing Receivable Credit Quality Indicators

The following table represents an analysis of loans by internally assigned grades, including PCI loans, at December 31, 2015 and 2014:



(in thousands)	Commercial and industrial		Commercial real estate, owner-occupied		Commercial real estate, investor		Construction		Home equity		Other residential		Installment and other consumer		Purchased credit-impaired		Total
Credit Risk Profile by Internally Assigned Grade:
December 31, 2015
Pass	$	192,560	$	219,060	$	710,042	$	62,255	$	109,959	$	73,154	$	22,307	$	3,260	$	1,392,597
Special Mention	22,457		12,371		372		—		1,100		—		—		—		36,300
Substandard	4,260		9,167		3,739		3,239		1,173		—		332		421		22,331
Total loans	$	219,277	$	240,598	$	714,153	$	65,494	$	112,232	$	73,154	$	22,639	$	3,681	$	1,451,228

December 31, 2014
Pass	$	197,659	$	205,820	$	651,548	$	41,710	$	107,933	$	70,987	$	16,101	$	2,210	$	1,293,968
Special Mention	6,776		10,406		13,304		1,008		322		—		190		1,140		33,146
Substandard	5,464		11,763		6,473		5,684		2,466		2,048		497		1,842		36,237
Total loans	$	209,899	$	227,989	$	671,325	$	48,402	$	110,721	$	73,035	$	16,788	$	5,192	$	1,363,351

Troubled Debt Restructurings on Financing Receivables



(dollars in thousands)	Number of Contracts Modified	Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment at period end
Troubled Debt Restructurings during the year ended December 31, 2015:
Commercial and industrial	7	$	3,271	$	3,251	$	2,811
Total	7	$	3,271	$	3,251	$	2,811
Troubled Debt Restructurings during the year ended December 31, 2014:
Commercial and industrial	6	$	1,039	$	1,258	$	1,251
Commercial real estate, owner occupied	1	4,226		4,216		4,175
Commercial real estate, investor	2	224		224		220
Construction	2	964		1,312		1,309
Installment and other consumer	6	281		278		268
Total	17	$	6,734	$	7,288	$	7,223

Troubled Debt Restructurings during the year ended December 31, 2013:
Commercial and industrial	8	$	1,176	$	1,377	$	1,274
Construction	1	2,961		2,956		2,930
Home Equity	1	539		538		534
Other residential	3	7,135		7,156		5,368
Installment and other consumer	2	11		9		7
Total	15	$	11,822	$	12,036	$	10,113

The table below summarizes outstanding TDR loans by loan class as of December 31, 2015 and December 31, 2014. The summary includes both TDRs that are on non-accrual status and those that continue to accrue interest.



(in thousands)	As of
Recorded investment in Troubled Debt Restructurings ¹	December 31, 2015		December 31, 2014
Commercial and industrial	$	4,698	$	3,584
Commercial real estate, owner-occupied	6,993		8,459
Commercial real estate, investor	514		524
Construction²	3,238		5,684
Home equity	460		694
Other residential	2,010		2,045
Installment and other consumer	1,168		1,713
Total	$	19,081	$	22,703

¹Includes $19.0 million and $15.9 million of TDR loans that were accruing interest as of December 31, 2015 and December 31, 2014 respectively. Includes $137 thousand and $1.8 million of acquired loans at December 31, 2015 and December 31, 2014, respectively.

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

Impaired Financing Receivables

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



(in thousands)	Commercial and industrial		Commercial real estate, owner-occupied		Commercial real estate, investor		Construction		Home equity		Other residential		Installment and other consumer		Total
December 31, 2015
Recorded investment in impaired loans:
With no specific allowance recorded	$	2,198	$	4,111	$	2,416	$	2,687	$	171	$	1,214	$	131	$	12,928
With a specific allowance recorded	2,522		2,882		—		551		388		797		1,120		8,260
Total recorded investment in impaired loans	$	4,720	$	6,993	$	2,416	$	3,238	$	559	$	2,011	$	1,251	$	21,188
Unpaid principal balance of impaired loans:
With no specific allowance recorded	$	2,198	$	4,111	$	4,408	$	2,687	$	171	$	1,214	$	131	$	14,920
With a specific allowance recorded	2,565		2,882		—		737		388		797		1,120		8,489
Total unpaid principal balance of impaired loans	$	4,763	$	6,993	$	4,408	$	3,424	$	559	$	2,011	$	1,251	$	23,409
Specific allowance	$	912	$	70	$	—	$	1	$	3	$	67	$	116	$	1,169
Average recorded investment in impaired loans during 2015	$	4,237	$	7,886	$	2,833	$	4,164	$	602	$	2,028	$	1,523	$	23,273
Interest income recognized on impaired loans during 2015	$	238	$	295	$	33	$	86	$	18	$	92	$	64	$	826

December 31, 2014
Recorded investment in impaired loans:
With no specific allowance recorded	$	1,141	$	5,577	$	2,954	$	5,134	$	393	$	1,026	$	239	$	16,464
With a specific allowance recorded	2,443		2,882		—		561		300		1,019		1,554		8,759
Total recorded investment in impaired loans	$	3,584	$	8,459	$	2,954	$	5,695	$	693	$	2,045	$	1,793	$	25,223
Unpaid principal balance of impaired loans:
With no specific allowance recorded	$	1,186	$	6,577	$	4,945	$	7,824	$	880	$	1,026	$	239	$	22,677
With a specific allowance recorded	2,524		2,882		—		749		300		1,019		1,554		9,028
Total recorded investment in impaired loans	$	3,710	$	9,459	$	4,945	$	8,573	$	1,180	$	2,045	$	1,793	$	31,705
Specific allowance	$	694	$	65	$	—	$	3	$	—	$	92	$	284	$	1,138
Average recorded investment in impaired loans during 2014	$	5,354	$	6,604	$	3,138	$	6,471	$	741	$	1,744	$	1,857	$	25,909
Interest income recognized on impaired loans during 2014	$	378	$	288	$	28	$	85	$	19	$	74	$	76	$	948
Average recorded investment in impaired loans during 2013	$	7,168	$	3,519	$	5,847	$	7,200	$	909	$	2,632	$	1,872	$	29,147
Interest income recognized on impaired loans during 2013	$	476	$	253	$	14	$	249	$	29	$	89	$	71	$	1,181

Allowance for Credit Losses on Financing Receivables

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



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

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

NM - Not Meaningful



Allowance for Loan Losses and Recorded Investment In Loans
(dollars in thousands)	Commercial and industrial			Commercial real estate, owner-occupied			Commercial real estate, investor			Construction			Home equity			Other residential			Installment and other consumer			Unallocated		Total
As of December 31, 2014:
Ending ALLL related to loans collectively evaluated for impairment	$	2,143		$	1,859		$	6,672		$	836		$	859		$	341		$	282		$	969	$	13,961
Ending ALLL related to loans individually evaluated for impairment	690			65			—			—			—			92			284			—		1,131
Ending ALLL related to purchased credit-impaired loans	4			—			—			3			—			—			—			—		7
Ending balance	$	2,837		$	1,924		$	6,672		$	839		$	859		$	433		$	566		$	969	$	15,099
Loans outstanding:
Collectively evaluated for impairment	$	206,603		$	220,933		$	668,371		$	42,718		$	110,028		$	70,990		$	14,995		$	—	$	1,334,638
Individually evaluated for impairment¹	3,296			7,056			2,954			5,684			693			2,045			1,793			—		23,521
Purchased credit-impaired	324			2,616			2,174			11			67			—			—			—		5,192
Total	$	210,223		$	230,605		$	673,499		$	48,413		$	110,788		$	73,035		$	16,788		$	—	$	1,363,351
Ratio of allowance for loan losses to total loans	1.35		%	0.83		%	0.99		%	1.73		%	0.78		%	0.59		%	3.37		%	NM		1.11		%
Allowance for loan losses to non-accrual loans	NM			137		%	275		%	16		%	307		%	NM			544		%	NM		161		%

¹ Total excludes $1.7 million PCI loans that have experienced credit deterioration post-acquisition, which are included in the "purchased credit-impaired" amount in the next line below.

NM - Not Meaningful



Allowance for Loan Losses Rollforward for the Period
(in thousands)	Commercial and industrial			Commercial real estate, owner-occupied			Commercial real estate, investor			Construction			Home equity			Other residential			Installment and other consumer			Unallocated		Total
Year ended December 31, 2015:
Allowance for loan losses:
Beginning balance	2,837			1,924			6,672			839			859			433			566			969		15,099
Provision (reversal)	(45		)	325			(517		)	724			48			(39		)	(123		)	127		500
Charge-offs	(5		)	—			—			(839		)	—			—			(20		)	—		(864		)
Recoveries	$	236		$	—		$	23		$	—		$	3		$	—		$	2		$	—	$	264
Ending balance	$	3,023		$	2,249		$	6,178		$	724		$	910		$	394		$	425		$	1,096	$	14,999

Year ended December 31, 2014:
Allowance for loan losses:
Beginning balance	$	3,056		$	2,012		$	6,196		$	633		$	875		$	317		$	629		$	506	$	14,224
Provision (reversal)	(321		)	(93		)	431			314			(19		)	116			(141		)	463		750
Charge-offs	(66		)	—			—			(204		)	—			—			(7		)	—		(277		)
Recoveries	168			5			45			96			3			—			85			—		402
Ending balance	$	2,837		$	1,924		$	6,672		$	839		$	859		$	433		$	566		$	969	$	15,099

Year ended December 31, 2013:
Allowance for loan losses:
Beginning balance	$	4,100		$	1,313		$	4,372		$	611		$	1,264		$	551		$	1,231		$	219	$	13,661
Provision (reversal)	(1,393		)	615			1,940			83			(223		)	(234		)	(535		)	287		540
Charge-offs	(672		)	—			(156		)	(62		)	(176		)	—			(88		)	—		(1,154		)
Recoveries	1,021			84			40			1			10			—			21			—		1,177
Ending balance	$	3,056		$	2,012		$	6,196		$	633		$	875		$	317		$	629		$	506	$	14,224

Certain Loans Acquired in Transfer Not Accounted for as Debt Securities Acquired During Period [Table Text Block]

The following table presents the fair value of purchased credit-impaired and other loans acquired from Bank of Alameda as of the acquisition date:



	November 29, 2013
(in thousands)	Purchased credit-impaired loans			Other purchased loans			Total
Contractually required payments including interest	$	5,706		$	211,769		$	217,475
Less: nonaccretable difference	(1,183		)	—			(1,183		)
Cash flows expected to be collected (undiscounted)	4,523			211,769			216,292
Accretable yield	(707		)	(41,826		)	(42,533		)
Fair value of purchased loans	$	3,816		$	169,943		$	173,759

¹ $6.6 million of the $41.8 million represents the difference between the contractual principal amounts due and the fair value. This discount is to be accreted to interest income over the remaining lives of the loans. The remaining $35.2 million is the contractual interest to be earned over the life of the loans.

The following table reflects the outstanding balance and related carrying value of PCI loans as of the acquisition date:



	November 29, 2013
PCI Loans (in thousands)	Unpaid principal balance		Fair value
Commercial and industrial	$	847	$	369
Commercial real estate	3,757		3,362
Construction	150		16
Home equity	239		69
Total purchased credit-impaired loans	$	4,993	$	3,816

The following table reflects the outstanding balance and related carrying value of PCI loans related to the 2013 NorCal acquisition and the 2011 Charter Oak acquisition as of December 31, 2015 and 2014:



	December 31, 2015				December 31, 2014
PCI Loans (dollars in thousands)	Unpaid principal balance		Carrying value		Unpaid principal balance		Carrying value
Commercial and industrial	$	237	$	175	$	479	$	324
Commercial real estate	4,329		3,437		6,831		4,790
Construction	187		1		136		11
Home equity	224		68		232		67
Total purchased credit-impaired loans	$	4,977	$	3,681	$	7,678	$	5,192

Accretable Yield Activity

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



Accretable Yield	Years ended
(dollars in thousands)	December 31, 2015			December 31, 2014			December 31, 2013
Balance at beginning of period	$	4,027		$	3,649		$	3,960
Additions	—			—			707
Removals ¹	(914		)	(273		)	(793		)
Accretion	(495		)	(613		)	(725		)
Reclassifications from nonaccretable difference ²	—			1,264			500
Balance at end of period	$	2,618		$	4,027		$	3,649

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

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

Schedule of Related Party Transactions

An analysis of net loans to related parties for each of the three years ended December 31, 2015, 2014 and 2013 is as follows:



(in thousands)	2015			2014			2013
Balance at beginning of year	$	3,329		$	3,749		$	3,425
Additions	—			—			550
Advances	165			—			569
Repayments	(390		)	(420		)	—
Reclassified as unrelated-party loan due to a change in borrower status	(542		)	—			(795		)
Balance at end of year	$	2,562		$	3,329		$	3,749