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Fair Value of Assets and Liabilities (Tables)

12 Months Ended

Dec. 31, 2015

Fair Value Disclosures [Abstract]

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

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

(in thousands) Description of Financial Instruments	Carrying Value			Quoted Prices in Active Markets for Identical Assets (Level 1)			Significant Other Observable Inputs (Level 2)			Significant Unobservable Inputs (Level 3)
December 31, 2015
Securities available-for-sale:
Mortgage-backed securities and collateralized mortgage obligations issued by U.S. government-sponsored agencies	$	190,093		$	—		$	188,381		$	1,712
Debentures of government-sponsored agencies	$	160,892		$	—		$	160,892		$	—
Privately-issued collateralized mortgage obligations	$	4,150		$	—		$	4,150		$	—
Obligations of state and political subdivisions	$	57,673		$	—		$	57,673		$	—
Corporate bonds	$	4,979		$	—		$	4,979		$	—
Derivative financial assets (interest rate contracts)	$	3		$	—		$	3		$	—
Derivative financial liabilities (interest rate contracts)	$	1,658		$	—		$	1,658		$	—
December 31, 2014
Securities available-for-sale:
Mortgage-backed securities and collateralized mortgage obligations issued by U.S. government-sponsored agencies	$	158,119		$	—		$	155,421		$	2,698
Debentures of government-sponsored agencies	$	14,557		$	—		$	14,557		$	—
Privately-issued collateralized mortgage obligations	$	7,294		$	—		$	7,294		$	—
Obligations of state and political subdivisions	$	15,880		$	—		$	15,771		$	—
Corporate bonds	$	4,998		$	—		$	5,437		$	—
Derivative financial assets (interest rate contracts)	$	61		$	—		$	61		$	—
Derivative financial liabilities (interest rate contracts)	$	1,996		$	—		$	1,996		$	—

Fair Value Measurements, Nonrecurring

The following table presents the carrying value of financial instruments that were measured at fair value on a non-recurring basis and were still held in the consolidated statements of condition at each respective period end, by level within the fair value hierarchy as of December 31, 2015 and 2014.

(in thousands) Description of Financial Instruments	Carrying Value1				Quoted Prices in Active Markets for Identical Assets (Level 1)				Significant Other Observable Inputs (Level 2)				Significant Unobservable Inputs  (Level 3) 1
December 31, 2015
Other real estate	$	421			$	—			$	—			$	421
December 31, 2014
Impaired loans carried at fair value:
Installment and other consumer1	$	77			$	—			$	—			$	77
Other real estate	$	461			$	—			$	—			$	461

¹Represents collateral-dependent loan principal balances that had been generally written down to the values of the underlying collateral, net of specific valuation allowances. At December 31, 2014, the $77 thousand carrying value of a consumer loan was net of a $26 thousand specific valuation allowance. The carrying value of loans fully charged-off, which includes unsecured lines of credit, overdrafts and all other loans, is zero.

When a loan is identified as impaired, it is reported at the lower of cost or fair value, measured based on the loan's observable market price (Level 1) or the current net realizable value of the underlying collateral securing the loan, if the loan is collateral dependent (Level 3).  Net realizable value of the underlying collateral is the fair value of the collateral less estimated selling costs and any prior liens. Appraisals, recent comparable sales, offers and listing prices are factored in when valuing the collateral. We review and verify the qualifications and licenses of the certified general appraisers used for appraising commercial properties or certified residential appraisers for residential properties. Real estate appraisals may utilize a combination of approaches including replacement cost, sales comparison and the income approach. Comparable sales and income data are analyzed by the appraisers and adjusted to reflect differences between them and the subject property such as type, leasing status and physical condition. When appraisals are received, Management reviews the assumptions and methodology utilized in the appraisal as well as the overall resulting value in conjunction with independent data sources such as recent market data and industry-wide statistics. We generally use a 6% discount for selling costs which is applied to all properties, regardless of size. Appraised values may be adjusted to reflect changes in market conditions that have occurred subsequent to the appraisal date, or for revised estimates regarding the timing or cost of the property sale. These adjustments are based on qualitative judgments made by Management on a case-by-case basis and are generally unobservable valuation inputs as they are specific to each underlying collateral. There have been no significant changes in the valuation techniques during the period ended December 31, 2015.

OREO represents collateral acquired through foreclosure and is initially recorded at fair value as established by a current appraisal, adjusted for disposition costs. Subsequently, OREO is measured at lower of cost or fair value. OREO values are reviewed on an ongoing basis and any subsequent decline in fair value is recorded as a foreclosed asset expense in the current period. The value of OREO is determined based on independent appraisals, similar to the process used for impaired loans, discussed above, and is classified as Level 3. There was a $40 thousand decline in the estimated fair value of the OREO during the year ended December 31, 2015. The OREO was acquired from Bank of Alameda as part of the NorCal Acquisition.

Fair Value, by Balance Sheet Grouping

The table below is a summary of fair value estimates for financial instruments as of December 31, 2015 and 2014, excluding financial instruments recorded at fair value on a recurring basis (summarized in the first table in this note). The carrying amounts in the following table are recorded in the consolidated statements of condition under the indicated captions. We have excluded non-financial assets and non-financial liabilities defined by the Codification (ASC 820-10-15-1A), such as Bank premises and equipment, deferred taxes and other liabilities.  In addition, we have not disclosed the fair value of financial instruments specifically excluded from disclosure requirements of the Financial Instruments Topic of the Codification (ASC 825-10-50-8), such as Bank-owned life insurance policies.

	December 31, 2015								December 31, 2014
(in thousands)	Carrying Amounts			Fair Value			Fair Value Hierarchy		Carrying Amounts			Fair Value			Fair Value Hierarchy
Financial assets:
Cash and cash equivalents	$	26,343		$	26,343		Level 1		$	41,367		$	41,367		Level 1
Investment securities held-to-maturity	69,637			71,054			Level 2		116,437			118,643			Level 2
Loans, net	1,436,229			1,470,380			Level 3		1,348,252			1,361,244			Level 3
Interest receivable	6,643			6,643			Level 2		5,909			5,909			Level 2
Financial liabilities:
Deposits	1,728,226			1,728,717			Level 2		1,551,619			1,552,446			Level 2
Federal Home Loan Bank borrowing	67,000			67,279			Level 2		15,000			15,484			Level 2
Subordinated debentures	5,395			5,132			Level 3		5,185			5,290			Level 3
Interest payable	187			187			Level 2		213			213			Level 2

X

- Definition

Tabular disclosure of assets and liabilities by class, including financial instruments measured at fair value that are classified in shareholders' equity, if any, that are measured at fair value on a nonrecurring basis in periods after initial recognition (for example, impaired assets). Disclosures may include, but are not limited to: (a) the fair value measurements recorded and the reasons for the measurements and (b) the level within the fair value hierarchy in which the fair value measurements are categorized in their entirety (levels 1, 2, 3).

+ References

Reference 1: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
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-SubTopic 10
-Section 50
-Paragraph 5
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Tabular disclosure of the fair value of financial instruments, including financial assets and financial liabilities, and the measurements of those instruments, assets, and liabilities.

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Tabular disclosure of assets and liabilities, including [financial] instruments measured at fair value that are classified in stockholders' equity, if any, that are measured at fair value on a recurring basis. The disclosures contemplated herein include the fair value measurements at the reporting date by the level within the fair value hierarchy in which the fair value measurements in their entirety fall, segregating fair value measurements using quoted prices in active markets for identical assets (Level 1), significant other observable inputs (Level 2), and significant unobservable inputs (Level 3).

+ References

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