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EX-32 - EXHIBIT 32 - PACIFIC PREMIER BANCORP INCppbi-09302015xex32.htm
EX-31.1 - EXHIBIT 31.1 - PACIFIC PREMIER BANCORP INCppbi-09302015xex311.htm
EX-31.2 - EXHIBIT 31.2 - PACIFIC PREMIER BANCORP INCppbi-09302015xex312.htm


UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549 
FORM 10-Q 
(Mark One)
(X)    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2015
OR 
( )    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 
For the transition period from _______ to _______ 
Commission File Number 0-22193
 
(Exact name of registrant as specified in its charter) 
DELAWARE
33-0743196
(State or other jurisdiction of incorporation or organization)
(I.R.S Employer Identification No.)
 

17901 VON KARMAN AVENUE, SUITE 1200, IRVINE, CALIFORNIA 92614
(Address of principal executive offices and zip code)

(949) 864-8000
(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [ X ] No [_]
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).  Yes [X] No [_]
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 definition of “accelerated filer”, “large accelerated filer”, and “smaller reporting company” in Rule 12b-2 of the Exchange Act).
Large accelerated filer
[ ]
Accelerated filer
[X]
Non-accelerated filer
(Do not check if a smaller
 reporting company)
[ ]
Smaller reporting company
[  ]
 
Indicate by check mark whether the registrant is a shell company (as defined in Exchange Act Rule 12b-2).  Yes [ ] No [X]
The number of shares outstanding of the registrant's common stock as of November 6, 2015 was 21,510,678.

1


PACIFIC PREMIER BANCORP, INC. AND SUBSIDIARIES
FORM 10-Q
INDEX
FOR THE QUARTER ENDED SEPTEMBER 30, 2015

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

2


PART I - FINANCIAL INFORMATION

Item 1.  Financial Statements
 
PACIFIC PREMIER BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(dollars in thousands)

ASSETS
 
September 30,
2015
 
December 31,
2014
 
September 30,
2014
 
 
(Unaudited)
 
(Audited)
 
(Unaudited)
Cash and due from banks
 
$
102,235

 
$
110,650

 
$
103,356

Federal funds sold
 
526

 
275

 
275

Cash and cash equivalents
 
102,761

 
110,925

 
103,631

Investment securities available for sale
 
291,147

 
201,638

 
282,202

FHLB and other stock, at cost
 
22,490

 
17,067

 
18,643

Loans held for investment
 
2,167,856

 
1,628,622

 
1,548,004

Allowance for loan losses
 
(16,145
)
 
(12,200
)
 
(10,767
)
Loans held for investment, net
 
2,151,711

 
1,616,422

 
1,537,237

Accrued interest receivable
 
9,083

 
7,131

 
6,762

Other real estate owned
 
711

 
1,037

 
752

Premises and equipment
 
9,044

 
9,165

 
9,402

Deferred income taxes
 
13,059

 
9,383

 
10,721

Bank owned life insurance
 
38,953

 
26,822

 
26,642

Intangible assets
 
7,514

 
5,614

 
5,867

Goodwill
 
50,832

 
22,950

 
22,950

Other assets
 
17,993

 
10,743

 
9,439

TOTAL ASSETS
 
$
2,715,298

 
$
2,038,897

 
$
2,034,248

LIABILITIES AND STOCKHOLDERS’ EQUITY
 
 

 
 

 
 

LIABILITIES:
 
 

 
 

 
 

Deposit accounts:
 
 

 
 

 
 

Noninterest bearing checking
 
$
680,937

 
$
456,754

 
$
425,166

Interest-bearing:
 
 

 
 

 
 

Checking
 
130,671

 
131,635

 
130,221

Money market/savings
 
822,876

 
600,764

 
564,050

Retail certificates of deposit
 
383,481

 
365,168

 
369,534

Wholesale/brokered certificates of deposit
 
121,242

 
76,505

 
54,495

Total interest-bearing
 
1,458,270

 
1,174,072

 
1,118,300

Total deposits
 
2,139,207

 
1,630,826

 
1,543,466

FHLB advances and other borrowings
 
191,483

 
116,643

 
195,561

Subordinated debentures
 
70,310

 
70,310

 
70,310

Accrued expenses and other liabilities
 
23,531

 
21,526

 
27,054

TOTAL LIABILITIES
 
2,424,531

 
1,839,305

 
1,836,391

STOCKHOLDERS’ EQUITY:
 
 

 
 

 
 

Common stock, $.01 par value; 50,000,000 shares authorized; 21,510,678 shares at September 30, 2015, 16,903,884 shares at December 31, 2014, and 17,069,216 shares at September 30, 2014 issued and outstanding
 
215

 
169

 
171

Additional paid-in capital
 
220,992

 
147,474

 
150,062

Retained earnings
 
68,881

 
51,431

 
47,540

Accumulated other comprehensive income, net of tax
 
679

 
518

 
84

TOTAL STOCKHOLDERS’ EQUITY
 
290,767

 
199,592

 
197,857

TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY
 
$
2,715,298

 
$
2,038,897

 
$
2,034,248

 
 
 
 
 
 
 

Accompanying notes are an integral part of these consolidated financial statements.

3


PACIFIC PREMIER BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(dollars in thousands, except per share data)
(unaudited)
 
 
Three Months Ended
 
Nine Months Ended
 
 
September 30, 2015
 
June 30,
2015
 
September 30, 2014
 
September 30, 2015
 
September 30, 2014
INTEREST INCOME
 
 
 
 
 
 
 
 
 
 
Loans
 
$
27,288

 
$
27,581

 
$
19,550

 
$
79,382

 
$
54,057

Investment securities and other interest-earning assets
 
1,812

 
2,158

 
1,484

 
5,527

 
4,230

Total interest income
 
29,100

 
29,739

 
21,034

 
84,909

 
58,287

INTEREST EXPENSE
 
 
 
 
 
 
 
 

 
 

Deposits
 
1,719

 
1,589

 
1,317

 
4,914

 
3,589

FHLB advances and other borrowings
 
339

 
407

 
294

 
1,121

 
792

Subordinated debentures
 
993

 
982

 
403

 
2,946

 
553

Total interest expense
 
3,051

 
2,978

 
2,014

 
8,981

 
4,934

NET INTEREST INCOME BEFORE PROVISION FOR LOAN LOSSES
 
26,049

 
26,761

 
19,020

 
75,928

 
53,353

PROVISION FOR LOAN LOSSES
 
1,062

 
1,833

 
1,284

 
4,725

 
3,263

NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES
 
24,987

 
24,928

 
17,736

 
71,203

 
50,090

NONINTEREST INCOME
 
 
 
 
 
 
 
 

 
 

Loan servicing fees
 
1,022

 
724

 
547

 
2,647

 
1,685

Deposit fees
 
629

 
634

 
412

 
1,845

 
1,329

Net gain from sales of loans
 
2,544

 
2,721

 
1,775

 
5,265

 
3,621

Net gain from sales of investment securities
 
38

 
139

 
363

 
293

 
523

Other income
 
792

 
494

 
1,370

 
1,713

 
1,832

Total noninterest income
 
5,025

 
4,712

 
4,467

 
11,763

 
8,990

NONINTEREST EXPENSE
 
 
 
 
 
 
 
 

 
 

Compensation and benefits
 
9,418

 
9,486

 
7,490

 
28,426

 
20,866

Premises and occupancy
 
2,151

 
2,082

 
1,723

 
6,062

 
4,877

Data processing and communications
 
681

 
716

 
420

 
2,099

 
2,036

Other real estate owned operations, net
 
9

 
56

 
11

 
113

 
65

FDIC insurance premiums
 
355

 
363

 
257

 
1,032

 
760

Legal, audit and professional expense
 
505

 
661

 
625

 
1,687

 
1,603

Marketing expense
 
567

 
615

 
318

 
1,785

 
736

Office and postage expense
 
525

 
505

 
441

 
1,529

 
1,155

Loan expense
 
370

 
263

 
258

 
826

 
633

Deposit expense
 
917

 
982

 
747

 
2,704

 
2,255

Merger-related expense
 
400

 

 

 
4,392

 
626

CDI amortization
 
344

 
344

 
254

 
1,002

 
761

Other expense
 
1,132

 
1,141

 
799

 
3,400

 
2,152

Total noninterest expense
 
17,374

 
17,214

 
13,343

 
55,057

 
38,525

NET INCOME BEFORE INCOME TAX
 
12,638

 
12,426

 
8,860

 
27,909

 
20,555

INCOME TAX
 
4,801

 
4,601

 
3,410

 
10,459

 
7,830

NET INCOME
 
$
7,837

 
$
7,825

 
$
5,450

 
$
17,450

 
$
12,725

EARNINGS PER SHARE
 
 
 
 
 
 
 
 

 
 

Basic
 
$
0.36

 
$
0.36

 
$
0.32

 
$
0.83

 
$
0.75

Diluted
 
0.36

 
0.36

 
0.31

 
0.82

 
0.73

WEIGHTED AVERAGE SHARES OUTSTANDING
 
 
 
 
 
 
 
 

 
 

Basic
 
21,510,678

 
21,493,641

 
17,069,216

 
21,037,345

 
17,078,945

Diluted
 
21,866,840

 
21,828,876

 
17,342,882

 
21,342,204

 
17,385,835

 
 
 
 
 
 
 
 
 
 
 

Accompanying notes are an integral part of these consolidated financial statements.

4


PACIFIC PREMIER BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(dollars in thousands)
(unaudited)

 
Three Months Ended
 
Nine Months Ended
 
September 30,
 
June 30,
 
September 30,
 
September 30,
 
2015
 
2015
 
2014
 
2015
 
2014
Net income
$
7,837

 
$
7,825

 
$
5,450

 
$
17,450

 
$
12,725

Other comprehensive income (loss), net of tax (benefit):
 
 
 
 
 
 
 
 
 
Unrealized holding gains (losses) on securities arising during the period, net of income taxes (benefits) (1)
1,126

 
(1,628
)
 
320

 
333

 
3,469

Reclassification adjustment for net gain on sale of securities included in net income, net of income taxes (2)
(22
)
 
(82
)
 
(214
)
 
(172
)
 
(308
)
Net unrealized gain (loss) on securities, net of income taxes
1,104

 
(1,710
)
 
106

 
161

 
3,161

Comprehensive income
$
8,941

 
$
6,115

 
$
5,556

 
$
17,611

 
$
15,886

______________________________
(1) Income tax (benefit) on the unrealized gains (losses) on securities was $790,000 for the three months ended September 30, 2015, $(1.1) million for the three months ended June 30, 2015, $75,000 for the three months ended September 30, 2014, $234,000 for the nine months ended September 30, 2015 and $2.2 million for the nine months ended September 30, 2014.
(2) Income taxes on the reclassification adjustment for net gain on sale of securities included in net income was $16,000 for the three months ended September 30, 2015, $57,000 for the three months ended June 30, 2015, $149,000 for the three months ended September 30, 2014, $121,000 for the nine months ended September 30, 2015 and $215,000 for the nine months ended September 30, 2014.

Accompanying notes are an integral part of these consolidated financial statements.


5


PACIFIC PREMIER BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2015 AND 2014
(dollars in thousands)
(unaudited)

 
Common Stock
Shares
 
Common Stock
 
Additional Paid-in Capital
 
Accumulated Retained
Earnings
 
Accumulated Other Comprehensive Income
 
Total Stockholders’ Equity
Balance at December 31, 2014
16,903,884

 
$
169

 
$
147,474

 
$
51,431

 
$
518

 
$
199,592

Net income

 

 

 
17,450

 

 
17,450

Other comprehensive income

 

 

 

 
161

 
161

Share-based compensation expense

 

 
670

 

 

 
670

Common stock issued
4,480,645

 
45

 
72,207

 

 

 
72,252

Warrants exercised
125,316

 
1

 
688

 

 

 
689

Repurchase of common stock
(7,165
)
 

 
(116
)
 

 

 
(116
)
Exercise of stock options
7,998

 

 
69

 

 

 
69

Balance at September 30, 2015
21,510,678

 
$
215

 
$
220,992

 
$
68,881

 
$
679

 
$
290,767

 
 
 
 
 
 
 
 
 
 
 
 
Balance at December 31, 2013
16,656,279

 
$
166

 
$
143,322

 
$
34,815

 
$
(3,077
)
 
$
175,226

Net income

 

 

 
12,725

 

 
12,725

Other comprehensive income

 

 

 

 
3,161

 
3,161

Share-based compensation expense

 

 
377

 

 

 
377

Common stock repurchased and retired
(262,897
)
 
(2
)
 
(2,755
)
 

 

 
(2,757
)
Common stock issued
562,469

 
6

 
9,006

 

 

 
9,012

Stock options exercised
113,365

 
1

 
112

 

 

 
113

Balance at September 30, 2014
17,069,216

 
$
171

 
$
150,062

 
$
47,540

 
$
84

 
$
197,857


Accompanying notes are an integral part of these consolidated financial statements.


6


PACIFIC PREMIER BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
 
 
Nine Months Ended
 
 
September 30,
 
 
2015
 
2014
CASH FLOWS FROM OPERATING ACTIVITIES
 
 
 
 
Net income
 
$
17,450

 
$
12,725

Adjustments to net income:
 
 

 
 

Depreciation and amortization expense
 
1,849

 
1,636

Amortization of Loan Fees and Discounts
 
(131
)
 
(75
)
Provision for loan losses
 
4,725

 
3,263

Share-based compensation expense
 
670

 
377

(Gain) loss on sale and disposal of premises and equipment
 
(15
)
 
23

Loss on sale of other real estate owned
 
51

 
17

Write down of other real estate owned
 
41

 

Amortization of premium/discounts on securities held for sale, net
 
2,804

 
1,958

Accretion of loan mark-to-market discount from acquisitions
 
(1,964
)
 
(1,632
)
Gain on sale of investment securities available for sale
 
(293
)
 
(523
)
Other-than-temporary impairment recovery on investment securities, net
 

 
(28
)
Gain on sale of loans held for investment
 
(5,265
)
 
(3,621
)
Recoveries on loans
 
56

 
87

Principal payments from loans held for sale
 

 
31

Loss from fair market value adjustment to loans held for sale
 

 
180

Deferred income tax benefit (provision)
 
1,006

 
(2,244
)
Change in accrued expenses and other liabilities, net
 
209

 
2,310

Income from bank owned life insurance, net
 
(855
)
 
(591
)
Amortization of core deposit intangible
 
1,003

 
761

Change in accrued interest receivable and other assets, net
 
(6,905
)
 
(3,756
)
Net cash provided by operating activities
 
14,436

 
10,898

CASH FLOWS FROM INVESTING ACTIVITIES
 
 

 
 

Proceeds from sale of loans
 
120,335

 
51,213

Increase in loans, net
 
(320,152
)
 
(272,960
)
Proceeds from sale of other real estate owned
 
234

 
777

Principal payments on securities available for sale
 
25,517

 
21,535

Purchase of securities available for sale
 
(90,032
)
 
(129,636
)
Proceeds from sale or maturity of securities available for sale
 
26,520

 
91,907

Investment in bank owned life insurance
 

 
(2,000
)
Proceeds from the sale of premises and equipment
 
1,623

 

Purchases of premises and equipment
 
(1,097
)
 
(1,123
)
Purchase of Federal Reserve Bank stock
 
(1,904
)
 
(1,520
)
Purchase of FHLB stock
 
(1,150
)
 
(1,673
)
Cash acquired (disbursed) in acquisitions, net
 
2,961

 
(7,793
)
Net cash used in investing activities
 
(237,145
)
 
(251,273
)
CASH FLOWS FROM FINANCING ACTIVITIES
 
 

 
 

Net increase in deposit accounts
 
172,363

 
237,180

Proceeds from issuance of subordinated debt
 

 
58,804

Change in FHLB advances and other borrowings, net
 
41,540

 
(76,147
)
Proceeds from exercise of stock options
 
69

 
113

Warrants exercised
 
689

 

Repurchase of common stock
 
(116
)
 
(2,757
)
Net cash provided by financing activities
 
214,545

 
217,193

NET DECREASE IN CASH AND CASH EQUIVALENTS
 
(8,164
)
 
(23,182
)
CASH AND CASH EQUIVALENTS, beginning of period
 
110,925

 
126,813

CASH AND CASH EQUIVALENTS, end of period
 
$
102,761

 
$
103,631

 
 
 
 
 
 
 
 
 
 
SUPPLEMENTAL CASH FLOW DISCLOSURES
 
 

 
 

Interest paid
 
$
9,877

 
$
4,615

Income taxes paid
 
11,962

 
11,450

Assets acquired (liabilities assumed and capital created) in acquisitions (See Note 4):
 
 

 
 

Investment securities
 
53,752

 

FHLB and Other Stock
 
2,369

 

Loans
 
332,893

 
78,833

Core deposit intangible
 
2,903

 

Deferred income tax
 
4,794

 

Bank owned life insurance
 
11,276

 

Goodwill
 
27,882

 
5,522

Fixed assets
 
2,134

 
74

Other assets
 
2,402

 
702

Deposits
 
(336,018
)
 

Other borrowings
 
(33,300
)
 
(67,617
)
Other liabilities
 
(1,796
)
 
(709
)
Common stock and additional paid-in capital
 
(72,252
)
 
(9,012
)
 
 
 
 
 
NONCASH INVESTING ACTIVITIES DURING THE PERIOD
 
 

 
 

Transfers from loans to other real estate owned
 
$

 
$
360

Investment securities available for sale purchased and not settled
 

 
5,982

Loans held for sale transfered to loans held for investment
 

 
2,936


Accompanying notes are an integral part of these consolidated financial statements.

7


PACIFIC PREMIER BANCORP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2015
(UNAUDITED)
Note 1 - Basis of Presentation
 
The consolidated financial statements include the accounts of Pacific Premier Bancorp, Inc. (the “Corporation”) and its wholly owned subsidiaries, including Pacific Premier Bank (the “Bank”) (collectively, the “Company,” “we,” “our” or “us”). All significant intercompany accounts and transactions have been eliminated in consolidation.
 
In the opinion of management, the consolidated financial statements contain all adjustments (consisting of normal recurring accruals) necessary to present fairly the Company’s financial position as of September 30, 2015, December 31, 2014 and September 30, 2014, the results of its operations and comprehensive income for the three months ended September 30, 2015, June 30, 2015 and September 30, 2014 and the nine months ended September 30, 2015 and 2014 and the changes in stockholders’ equity and cash flows for the nine months ended September 30, 2015 and 2014. Operating results or comprehensive income for the nine months ended September 30, 2015 are not necessarily indicative of the results or comprehensive income that may be expected for any other interim period or the full year ending December 31, 2015.
 
Certain information and note disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) have been condensed or omitted pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). The unaudited consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2014 (the “2014 Annual Report”).
 
The Company accounts for its investments in its wholly owned special purpose entity, PPBI Trust I, under the equity method whereby the subsidiary’s net earnings are recognized in the Company’s statement of operations.
 
Note 2 – Recently Issued Accounting Pronouncements
 
Accounting Standards Adopted in 2015

In June 2015, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") No. 2015-10, Technical Corrections and Improvements, to clarify the Accounting Standards Codification ("ASC"), correct unintended application of guidance, and make minor improvements to the ASC that are not expected to have a significant effect on current accounting practice or create significant administrative cost to most entities. The amendments were effective upon issuance (June 12, 2015) for amendments that do not have transition guidance. Amendments that are subject to transition guidance will be effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2015. Early adoption is permitted, including adoption in an interim period. The Company does not expect these amendments to have a material effect on its financial statements.

In January 2014, the FASB issued ASU No. 2014-01, Investments-Equity Method and Joint Ventures (Topic 323): "Accounting for Investments in Qualified Affordable Housing Projects." This Update permits reporting entities to make an accounting policy election to account for their investments in qualified affordable housing projects using the proportional amortization method if certain conditions are met. Under the proportional amortization method, an entity amortizes the initial cost of the investment in proportion to the tax credits and other tax benefits received and recognizes the net investment performance in the income statement as a component of income tax expense. This new guidance also requires new disclosures for all investors in these projects. ASU No. 2014-01 is effective for interim and annual reporting periods beginning after December 15, 2014 for public business entities and after December 15, 2015 for non public business entities. Upon adoption, the guidance must be applied

8


retrospectively to all periods presented. However, entities that used the effective yield method to account for investments in these projects before adoption may continue to do so for these pre-existing investments. The Company adopted the provisions of ASU No. 2014-01 effective January 1, 2015. As the Company accounts for such investments using the cost method, the adoption had no impact on the Company’s Consolidated Financial Statements.
 
In January 2014, the FASB issued ASU No. 2014-04, Receivables-Troubled Debt Restructuring By Creditors (Subtopic 310-40): “Reclassification of Residential Real Estate Collateralized Consumer Mortgage Loans upon Foreclosure." The objective of this guidance is to clarify when an in substance repossession or foreclosure occurs, that is, when a creditor should be considered to have received physical possession of residential real estate property collateralizing a consumer mortgage loan such that the loan receivable should be derecognized and the real estate property recognized. ASU No. 2014-04 states that an in substance repossession or foreclosure occurs, and a creditor is considered to have received physical possession of residential real estate property collateralizing a consumer mortgage loan, upon either (1) the creditor obtaining legal title to the residential real estate property upon completion of a foreclosure or (2) the borrower conveying all interest in the residential real estate property to the creditor to satisfy that loan through completion of a deed in lieu of foreclosure or through a similar legal agreement. Additionally, ASU No. 2014-04 requires interim and annual disclosure of both (1) the amount of foreclosed residential real estate property held by the creditor and (2) the recorded investment in consumer mortgage loans collateralized by residential real estate property that are in the process of foreclosure according to local requirements of the applicable jurisdiction. ASU No. 2014-04 is effective for interim and annual reporting periods beginning after December 15, 2014. The Company adopted the provisions of ASU No. 2014-04 effective January 1, 2015. The adoption had no impact on the Company’s Consolidated Financial Statements.
 
In June 2014, the FASB issued ASU No. 2014-11, Transfers and Servicing (Topic 860):"Repurchase-to-Maturity Transactions, Repurchase Financings, and Disclosures." This Update aligns the accounting for repurchase-to-maturity transactions and repurchase agreements executed as repurchase financings with the accounting for other typical repurchase agreements. Going forward, these transactions would all be accounted for as secured borrowings. The guidance eliminates sale accounting for repurchase-to-maturity transactions and supersedes the guidance under which a transfer of a financial asset and a contemporaneous repurchase financing could be accounted for on a combined basis as a forward agreement, which has resulted in outcomes referred to as off-balance-sheet accounting. The Update requires a new disclosure for transactions economically similar to repurchase agreements in which the transferor retains substantially all of the exposure to the economic return on the transferred financial assets throughout the term of the transaction. The Update also requires expanded disclosures about the nature of collateral pledged in repurchase agreements and similar transactions accounted for as secured borrowings. The Update is effective for interim or annual period beginning after December 15, 2014. All of the Company's repurchase agreements are typical in nature (i.e., not repurchase-to-maturity transactions or repurchase agreements executed as a repurchase financing) and are accounted for as secured borrowings. The Company adopted the provisions of ASU No. 2014-11 effective January 1, 2015. The adoption had no impact on the Company’s Consolidated Financial Statements.
 
In August 2014, the FASB issued ASU No. 2014-14, Receivables – Troubled Debt Restructurings by Creditors (Subtopic 310-40): “Classification of Certain Government-Guaranteed Mortgage Loans upon Foreclosure”. This Update addresses classification of government-guaranteed mortgage loans, including those where guarantees are offered by the Federal Housing Administration (“FHA”), the U.S. Department of Housing and Urban Development (“HUD”), and the U.S. Department of Veterans Affairs (“VA”). Although current accounting guidance stipulates proper measurement and classification in situations where a creditor obtains from a debtor, assets in satisfaction of a receivable (such as through foreclosure), current guidance does not specify how to measure and classify foreclosed mortgage loans that are government-guaranteed. Under the provisions of this Update, a creditor would derecognize a mortgage loan that has been foreclosed upon, and recognize a separate receivable if the following conditions are met: (1) the loan has a government guarantee that is not separable from the loan before foreclosure, (2) At the time of foreclosure, the creditor has the intent to convey the real estate property to the guarantor and make a claim on the guarantee, and the creditor has the ability to recover under that claim, (3) At the time of foreclosure, any amount of the claim that is determined on the basis of the fair value of the

9


real estate is fixed. This Update is effective for interim and annual periods beginning after December 15, 2014 for public business entities and after December 15, 2015 for non public business entities. The Company adopted the provisions of ASU No. 2014-14 effective January 1, 2015. The adoption had no impact on the Company’s Consolidated Financial Statements.
 
Accounting Standards Pending Adoption

In August 2015, the FASB deferred the effective date of ASU 2014-09, Revenue from Contracts with Customers (Topic 606). As a result of the deferral, the guidance in ASU 2014-09 will be effective for the Company for reporting periods beginning after December 15, 2017. The Update modifies the guidance companies use to recognize revenue from contracts with customers for transfers of goods or services and transfers of nonfinancial assets, unless those contracts are within the scope of other standards. The guidance also requires new qualitative and quantitative disclosures, including information about contract balances and performance obligations. The Company does not expect these amendments to have a material effect on its financial statements.

In April 2015, the FASB issued ASU 2015-03, Interest-Imputation of Interest (Subtopic 835-30): Simplifying the Presentation of Debt Issuance Costs. The Update changes the balance sheet presentation for debt issuance costs. Under the new guidance, debt issuance costs should be reported as a deduction from debt liabilities rather than as a deferred charge classified as an asset. The Update is effective for us in first quarter 2016 with retrospective application. Early adoption is permitted. The adoption of this guidance is not expected to have a material impact on the Company's Consolidated Financial Statements.

In August 2014, the FASB issued guidance within ASU 2014-15, Presentation of Financial Statements - Going Concern (Subtopic 205-40): “Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern. This Update provides guidance about management's responsibility to evaluate whether there is substantial doubt about an entity's ability to continue as a going concern. The amendments require management to assess an entity's ability to continue as a going concern by incorporating and expanding upon certain principles that are currently in U.S. auditing standards. This Update is effective for interim and annual periods ending after December 15, 2016. The adoption of this guidance is not expected to have a material impact on the Company's Consolidated Financial Statements.
 
Note 3 – Significant Accounting Policies
 
Certain Acquired Loans:  As part of business acquisitions, the Bank acquires certain loans that have shown evidence of credit deterioration since origination. These acquired loans are recorded at the allocated fair value, such that there is no carryover of the seller’s allowance for loan losses. Such acquired loans are accounted for individually. The Bank estimates the amount and timing of expected cash flows for each purchased loan, and the expected cash flows in excess of the allocated fair value is recorded as interest income over the remaining life of the loan (accretable yield). The excess of the loan’s contractual principal and interest over expected cash flows is not recorded (non-accretable difference). Over the life of the loan, expected cash flows continue to be estimated. If the present value of expected cash flows is less than the carrying amount, a loss is recorded through the allowance for loan losses. If the present value of expected cash flows is greater than the carrying amount, it is recognized as part of future interest income.
 
Goodwill and Core Deposit Intangible: Goodwill is generally determined as the excess of the fair value of the consideration transferred, plus the fair value of any noncontrolling interests in the acquiree, over the fair value of the net assets acquired and liabilities assumed as of the acquisition date. Goodwill and intangible assets acquired in a purchase business combination and determined to have an indefinite useful life are not amortized, but tested for impairment at least annually or more frequently if events and circumstances exist that indicate the necessity for such impairment tests to be performed. The Company has selected December 31 as the date to perform the annual impairment test. Intangible assets with definite useful lives are amortized over their estimated useful lives to their estimated residual values. Goodwill is the only intangible asset with an indefinite life on our balance sheet.
 

10


Core deposit intangible assets arising from whole bank acquisitions are amortized on a straight-line amortization method over their estimated useful lives, which range from 6 to 10 years
 
Use of Estimates:  The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management 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 financial statements. Actual results could differ from those estimates. The allowance for loan losses, the fair value of stock-based compensation awards, the fair values of financial instruments and the status of contingencies are particularly subject to change.
 

11


Note 4 –  Acquisitions
 
The Company accounted for the following transactions under the acquisition method of accounting which requires purchased assets and liabilities assumed to be recorded at their respective fair values at the date of acquisition. The Company determined the fair value of the core deposit intangible, securities and deposits with the assistance of third party valuations. The fair value of other real estate owned (“OREO”) was based on recent appraisals of the properties.
 
The estimated fair values in these acquisitions are subject to refinement as additional information relative to the closing date fair values become available through the measurement period, which can extend for up to one year after the closing date of the transaction. While additional significant changes to the closing date fair values are not expected, any information relative to the changes in these fair values will be evaluated to determine if such changes are due to events and circumstances that existed as of the acquisition date. During the measurement period, any such changes will be recorded as part of the closing date fair value.
 
Independence Bank Acquisition
 
On January 26, 2015, the Company completed its acquisition of Independence Bank (“IDPK”) in exchange for consideration valued at $79.8 million, which consisted of $6.1 million of cash consideration for IDPK common stockholders, $1.5 million of aggregate cash consideration to the holders of IDPK stock options and warrants, $1.3 million fair market value of warrants assumed and the issuance of 4,480,645 shares of the Corporation’s common stock, which was valued at $70.9 million based on the closing stock price of the Company’s common stock on January 26, 2015 of $15.83 per share.
 
IDPK was a Newport Beach, California based state-chartered bank. The acquisition was an opportunity for the Company to strengthen its competitive position as one of the premier community banks headquartered in Southern California. Additionally, the IDPK acquisition enhanced and connected the Company’s footprint in Southern California. 
 
Goodwill in the amount of $27.9 million was recognized in the IDPK acquisition. Goodwill represents the future economic benefits arising from net assets acquired that are not individually identified and separately recognized and is attributable to synergies expected to be derived from the combination of the two entities. Goodwill recognized in this transaction is not deductible for income tax purposes.
 

12



The following table represents the assets acquired and liabilities assumed of IDPK as of January 26, 2015 and the provisional fair value adjustments and amounts recorded by the Company in 2015 under the acquisition method of accounting: 
 
IDPK
Book Value
 
Fair Value
Adjustments
 
Fair
Value
 
(dollars in thousands)
ASSETS ACQUIRED
 
 
 
 
 
Cash and cash equivalents
$
10,486

 
$

 
$
10,486

Investment securities
56,503

 
(382
)
 
56,121

Loans, gross
339,502

 
(6,609
)
 
332,893

Allowance for loan losses
(3,301
)
 
3,301

 

Deferred income taxes
3,252

 
1,542

 
4,794

Bank owned life insurance
11,276

 

 
11,276

Core deposit intangible
904

 
1,999

 
2,903

Other assets
3,756

 
780

 
4,536

Total assets acquired
$
422,378

 
$
631

 
$
423,009

 
 
 
 
 
 
LIABILITIES ASSUMED
 

 
 

 
 

Deposits
$
335,685

 
$
333

 
$
336,018

FHLB advances
33,300

 

 
33,300

Other liabilities
1,916

 
(120
)
 
1,796

Total liabilities assumed
370,901

 
213

 
371,114

Excess of assets acquired over liabilities assumed
$
51,477

 
$
418

 
51,895

Consideration paid
 

 
 

 
79,777

Goodwill recognized
 

 
 

 
$
27,882


Infinity Franchise Holdings Acquisition
 
On January 30, 2014, the Company completed its acquisition of Infinity Franchise Holdings, LLC (“Infinity Holdings”) and its wholly owned operating subsidiary Infinity Franchise Capital, LLC (“IFC” and together with Infinity Holdings, “IFH”), a national lender to franchisees in the quick service restaurant (“QSR”) industry, and other direct and indirect subsidiaries utilized in its business. The value of the total consideration paid for the IFH acquisition was $17.4 million, which consisted of $8.3 million paid in cash and the issuance of 562,469 shares of the Corporation’s stock, which was valued at $16.02 per share as measured by the 10-day average closing price immediately prior to closing of the transaction.
 
The acquisition of IFH further diversified our loan portfolio with commercial and industrial and owner-occupied commercial real estate loans, deployed excess liquidity into higher yielding assets, to positively impact our net interest margin and further leveraged our strong capital base. The QSR franchisee lending business is a niche market that we believe provides attractive growth opportunities for the Company in the future. IFH had no delinquent loans or adversely classified assets as of the acquisition date; and the acquisition was accretive to our 2014 earnings per share.
 
Goodwill in the amount of $5.5 million was recognized in the IFH acquisition. Goodwill represents the future economic benefits arising from net assets acquired that are not individually identified and separately recognized and is attributable to synergies expected to be derived from the combination of the two entities. Goodwill recognized in this transaction is not deductible for income tax purposes.
 

13


The following table represents the assets acquired and liabilities assumed of IFH as of January 30, 2014 and the provisional fair value adjustments and amounts recorded by the Company in 2014 under the acquisition method of accounting: 

 
IFH
Book Value
 
Fair Value
Adjustments
 
Fair
Value
 
(dollars in thousands)
ASSETS ACQUIRED
 
 
 
 
 
Cash and cash equivalents
$
555

 
$

 
$
555

Loans, gross
78,833

 

 
78,833

Deferred loan costs
1,082

 
(1,082
)
 

Allowance for loan losses
(268
)
 
268

 

Other assets
776

 

 
776

Total assets acquired
$
80,978

 
$
(814
)
 
$
80,164

 
 
 
 
 
 
LIABILITIES ASSUMED
 

 
 

 
 

Bank loan
$
67,617

 
$

 
$
67,617

Accrued compensation
495

 

 
495

Other liabilities
214

 

 
214

Total liabilities assumed
68,326

 

 
68,326

Excess of assets acquired over liabilities assumed
$
12,652

 
$
(814
)
 
11,838

Consideration paid
 

 
 

 
17,360

Goodwill recognized
 

 
 

 
$
5,522


There were no purchased credit impaired loans acquired from IFH.  For loans acquired from IFH and IDPK, the contractual amounts due, expected cash flows to be collected, interest component and fair value as of the respective acquisition dates were as follows:

 
Acquired Loans
 
IFH
 
IDPK
 
(dollars in thousands)
Contractual amounts due
$
98,320

 
$
453,987

Cash flows not expected to be collected

 
3,795

Expected cash flows
98,320

 
450,192

Interest component of expected cash flows
19,487

 
117,299

Fair value of acquired loans
$
78,833

 
$
332,893


In accordance with generally accepted accounting principles, there was no carryover of the allowance for loan losses that had been previously recorded by IFH or IDPK.








 

14


The operating results of the Company for the nine months ending September 30, 2015 include the operating results of IDPK and IFH since the acquisition date. The operating results of the Company for the nine months ending September 30, 2014 include the operating results of IFH since the acquisition date. The following table presents the net interest and other income, net income and earnings per share as if the acquisitions of IFH and IDPK were effective as of January 1, 2014. There were no material, nonrecurring adjustments to the pro forma net interest and other income, net income and earnings per share presented below:

 
Nine Months Ended September 30,
 
2015
 
2014
Net interest and other income
$
84,339

 
$
75,289

Net income
16,463

 
14,911

Basic earnings per share
0.74

 
0.69

Diluted earnings per share
0.71

 
0.68


Note 5 – Investment Securities
 
The amortized cost and estimated fair value of securities were as follows:
 
 
 
September 30, 2015
 
 
Amortized
 Cost
 
Unrealized
Gain
 
Unrealized
Loss
 
Estimated
Fair Value
 
 
(in thousands)
Investment securities available for sale:
 
 

 
 
 
 
 
 
Municipal bonds
 
$
129,064

 
$
1,266

 
$
(326
)
 
$
130,004

Mortgage-backed securities
 
160,929

 
700

 
(486
)
 
161,143

Total securities available for sale
 
$
289,993

 
$
1,966

 
$
(812
)
 
$
291,147


 
 
December 31, 2014
 
 
Amortized
Cost
 
Unrealized
Gain
 
Unrealized
Loss
 
Estimated
Fair Value
 
 
(in thousands)
Investment securities available for sale:
 
 

 
 

 
 

 
 

Municipal bonds
 
$
88,599

 
$
1,235

 
$
(173
)
 
$
89,661

Mortgage-backed securities
 
112,159

 
432

 
(614
)
 
111,977

Total securities available for sale
 
$
200,758

 
$
1,667

 
$
(787
)
 
$
201,638


 
 
September 30, 2014
 
 
Amortized
 Cost
 
Unrealized
Gain
 
Unrealized
Loss
 
Estimated
Fair Value
 
 
(in thousands)
Investment securities available for sale:
 
 

 
 

 
 

 
 

Municipal bonds
 
$
97,358

 
$
1,495

 
$
(268
)
 
98,585

Mortgage-backed securities
 
184,701

 
180

 
(1,264
)
 
183,617

Total securities available for sale
 
$
282,059

 
$
1,675

 
$
(1,532
)
 
$
282,202


At September 30, 2015, the Company had $11.4 million in Federal Home Loan Bank (“FHLB”) stock, $7.5 million in Federal Reserve Bank (“FRB”) stock, and $3.6 million in other stock, all carried at cost.
 

15


At September 30, 2015, mortgage-backed securities (“MBS”) with an estimated par value of $63.3 million and a fair value of $65.4 million were pledged as collateral for the Bank’s three reverse repurchase agreements which totaled $28.5 million and Homeowner's Association ("HOA") reverse repurchase agreements which totaled $19.0 million.
 
The table below shows the number, fair value and gross unrealized holding losses of the Company’s investment securities by investment category and length of time that the securities have been in a continuous loss position.
 
 
September 30, 2015
 
Less than 12 months
 
12 months or Longer
 
Total
 
Number
 
Fair
Value
 
Gross
Unrealized
Holding
Losses
 
Number
 
Fair
Value
 
Gross
Unrealized
Holding
Losses
 
Number
 
Fair
Value
 
Gross
Unrealized
Holding
Losses
 
(dollars in thousands)
Municipal bonds
64

 
$
37,405

 
$
(248
)
 
7

 
$
3,612

 
$
(78
)
 
71

 
$
41,017

 
$
(326
)
Mortgage-backed securities
17

 
57,803

 
(139
)
 
3

 
13,613

 
(347
)
 
20

 
71,416

 
(486
)
Total
81

 
$
95,208

 
$
(387
)
 
10

 
$
17,225

 
$
(425
)
 
91

 
$
112,433

 
$
(812
)

 
December 31, 2014
 
Less than 12 months
 
12 months or Longer
 
Total
 
Number
 
Fair
Value
 
Gross
Unrealized
Holding
Losses
 
Number
 
Fair
Value
 
Gross
Unrealized
Holding
Losses
 
Number
 
Fair
Value
 
Gross
Unrealized
Holding
Losses
 
(dollars in thousands)
Municipal bonds
35

 
$
18,129

 
$
(117
)
 
16

 
$
6,510

 
$
(56
)
 
51

 
$
24,639

 
$
(173
)
Mortgage-backed securities
7

 
24,353

 
(105
)
 
4

 
18,842

 
(509
)
 
11

 
43,195

 
(614
)
Total
42

 
$
42,482

 
$
(222
)
 
20

 
$
25,352

 
$
(565
)
 
62

 
$
67,834

 
$
(787
)
 
September 30, 2014
 
Less than 12 months
 
12 months or Longer
 
Total
 
Number
 
Fair
Value
 
Gross
Unrealized
Holding
Losses
 
Number
 
Fair
Value
 
Gross
Unrealized
Holding
Losses
 
Number
 
Fair
Value
 
Gross
Unrealized
Holding
Losses
 
(dollars in thousands)
Municipal bonds
29

 
$
16,804

 
$
(183
)
 
26

 
$
10,459

 
$
(85
)
 
55

 
$
27,263

 
$
(268
)
Mortgage-backed securities
22

 
85,248

 
(256
)
 
9

 
42,516

 
(1,008
)
 
31

 
127,764

 
(1,264
)
Total
51

 
$
102,052

 
$
(439
)
 
35

 
$
52,975

 
$
(1,093
)
 
86

 
$
155,027

 
$
(1,532
)

Any temporary impairment is a result of the change in market interest rates and not the underlying issuers’ ability to repay. The Company has the intent and ability to hold these securities until the temporary impairment is eliminated. Accordingly, the Company has not recognized the temporary impairment in earnings.






16



The amortized cost and estimated fair value of investment securities available for sale at September 30, 2015, by contractual maturity are shown in the table below.

 
 
One Year
or Less
 
More than One
Year to Five Years
 
More than Five Years
to Ten Years
 
More than
Ten Years
 
Total
 
 
Amortized
Cost
 
Fair
Value
 
Amortized
Cost
 
Fair
Value
 
Amortized
Cost
 
Fair
Value
 
Amortized
Cost
 
Fair
Value
 
Amortized
Cost
 
Fair
Value
 
 
(dollars in thousands)
Investment securities available for sale:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Municipal bonds
 
$
840

 
$
843

 
$
25,480

 
$
25,605

 
$
45,233

 
$
45,628

 
$
57,511

 
$
57,928

 
$
129,064

 
$
130,004

Mortgage-backed securities
 

 

 

 

 
25,566

 
25,744

 
135,363

 
135,399

 
160,929

 
161,143

Total investment securities available for sale
 
$
840

 
$
843

 
$
25,480

 
$
25,605

 
$
70,799

 
$
71,372

 
$
192,874

 
$
193,327

 
$
289,993

 
$
291,147


Unrealized gains and losses on investment securities available for sale are recognized in stockholders’ equity as accumulated other comprehensive income or loss. At September 30, 2015, the Company had accumulated other comprehensive income of $1,154,000, or $679,000 net of benefit, compared to accumulated other comprehensive income of $880,000, or $518,000 net of tax, at December 31, 2014.
 

17


Note 6 – Loans Held for Investment
 
The following table sets forth the composition of our loan portfolio in dollar amounts at the dates indicated:
 
September 30, 2015
 
December 31, 2014
 
September 30, 2014
 
(in thousands)
Business loans:
 
 
 
 
 
Commercial and industrial
$
288,982

 
$
228,979

 
$
218,871

Franchise
295,965

 
199,228

 
163,887

Commercial owner occupied (1)
302,556

 
210,995

 
215,938

SBA
70,191

 
28,404

 
20,482

Warehouse facilities
144,274

 
113,798

 
108,093

Real estate loans:
 

 
 

 
 

Commercial non-owner occupied
406,490

 
359,213

 
355,984

Multi-family
421,240

 
262,965

 
262,588

One-to-four family (2)
78,781

 
122,795

 
125,326

Construction
141,293

 
89,682

 
67,118

Land
12,758

 
9,088

 
6,103

Other loans
5,017

 
3,298

 
3,521

Total gross loans held for investment (3)
2,167,547

 
1,628,445

 
1,547,911

Deferred loan origination costs and premiums, net
309

 
177

 
93

Allowance for loan losses
(16,145
)
 
(12,200
)
 
(10,767
)
Loans held for investment, net
$
2,151,711

 
$
1,616,422

 
$
1,537,237

______________________________
(1) Majority secured by real estate.
(2) Includes second trust deeds.
(3) Total gross loans for September 30, 2015 are net of (i) the unaccreted mark-to-market discounts on Canyon National Bank ("Canyon National") loans of $0.6 million, on Palm Desert National Bank ("Palm Desert National") loans of $1.0 million, on San Diego Trust Bank ("SDTB") loans of $135,000, and on IDPK loans of $5.8 million and (ii) the mark-to-market premium on First Associations Bank ("FAB") loans of $5,000.

From time to time, we may purchase or sell loans in order to manage concentrations, maximize interest income, change risk profiles, improve returns and generate liquidity.
 
The Company makes residential and commercial loans held for investment to customers located primarily in California. Consequently, the underlying collateral for our loans and a borrower’s ability to repay may be impacted unfavorably by adverse changes in the economy and real estate market in the region.
 
Under applicable laws and regulations, the Bank may not make secured loans to one borrower in excess of 25% of the Bank’s unimpaired capital plus surplus and likewise in excess of 15% for unsecured loans. These loans-to-one borrower limitations result in a dollar limitation of $91.6 million for secured loans and $55.0 million for unsecured loans at September 30, 2015. At September 30, 2015, the Bank’s largest aggregate outstanding balance of loans to one borrower was $36.6 million of secured credit.
 

18


Purchased Credit Impaired
 
The following table provides a summary of the Company’s investment in purchased credit impaired loans, acquired from Canyon National, Palm Desert National and IDPK, as of the period indicated: 

 
September 30, 2015
 
Canyon National
 
Palm Desert National
 
IDPK
 
Total
 
(in thousands)
Business loans:
 
 
 
 
 
 
 
Commercial and industrial
$
93

 
$

 
$
237

 
$
330

Commercial owner occupied
534

 

 
2,311

 
2,845

Real estate loans:
 

 
 

 
 

 


Commercial non-owner occupied
926

 

 
1,203

 
2,129

One-to-four family

 

 
88

 
88

Total purchase credit impaired
$
1,553

 
$

 
$
3,839

 
$
5,392


On the acquisition date, the amount by which the undiscounted expected cash flows of the purchased credit impaired loans exceed the estimated fair value of the loan is the “accretable yield.” The accretable yield is measured at each financial reporting date and represents the difference between the remaining undiscounted expected cash flows and the current carrying value of the purchased credit impaired loan. At September 30, 2015, the Company had $5.4 million of purchased credit impaired loans, of which $1.3 million were placed on nonaccrual status.

The following table summarizes the accretable yield on the purchased credit impaired loans for the nine months ended September 30, 2015:

 
Nine Months Ended
 
September 30, 2015
 
Canyon National
 
Palm Desert National
 
IDPK
 
Total
 
(in thousands)
Balance at the beginning of period
$
1,351

 
$
52

 
$

 
$
1,403

Accretable yield at acquisition

 

 
602

 
602

Accretion
(164
)
 

 
(120
)
 
(284
)
Disposals and other

 
(52
)
 
(58
)
 
(110
)
Change in accretable yield

 

 
149

 
149

Balance at the end of period
$
1,187

 
$

 
$
573

 
$
1,760

 

19


Impaired Loans
 
The following tables provide a summary of the Company’s investment in impaired loans as of the period indicated:

 
 
 
 
 
 
Impaired Loans
 
 
 
 
 
 
 
 
Contractual
Unpaid Principal Balance
 
Recorded Investment
 
With Specific Allowance
 
Without Specific Allowance
 
Specific Allowance for Impaired Loans
 
Average Recorded Investment
 
Interest Income Recognized
 
 
(in thousands)
September 30, 2015
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Business loans:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Franchise
 
$
2,394

 
$
1,630

 
$

 
$
1,630

 

 
$
1,647

 
$

Commercial owner occupied
 
436

 
361

 

 
361

 

 
364

 
23

Real estate loans:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Commercial non-owner occupied
 
693

 
443

 

 
443

 

 
443

 
21

One-to-four family
 
203

 
203

 

 
203

 

 
221

 
13

Land
 
37

 
22

 

 
22

 

 
23

 
3

Totals
 
$
3,763

 
$
2,659

 
$

 
$
2,659

 
$

 
$
2,698

 
$
60

  

 
 
 

 
 

 
Impaired Loans
 
 

 
 

 
 

 
 
Con