U.S. SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

x Quarterly report under Section 13 or 15(d) of the Securities Exchange Act of 1934

for the quarterly period ended March 31, 2012

o Transition report under Section 13 or 15(d) of the Securities Exchange Act of 1934

(No fee required) for the period from to

Commission File Number 0-27666

NORTHERN CALIFORNIA BANCORP, INC.

(Name of Small Business Issuer in its Charter)

Incorporated in the State of California

IRS Employer Identification Number 77-0421107

Address: 601 Munras Avenue, Monterey, CA 93940

Telephone: (831) 649-4600

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

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No o

Indicate by check mark whether the registrant is an accelerated filer, a non-accelerated filer, or a smaller reporting company (as defined in Rule 12b-2 of the Act).

Large accelerated filer o		Accelerated filer o

Non-accelerated filer o		Smaller reporting company x

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

As of May 11, 2011, the Corporation had 1,785,891 shares of common stock outstanding.

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TABLE OF CONTENTS

Facing Page		1
Table of Contents		2
PART I	Financial Information	3-6
Item 1	Financial Statements
	Consolidated Balance Sheets	3
	Consolidated Statements of Operations	4
	Consolidated Statements of Comprehensive Income	5
	Consolidated Statements of Changes in Shareholders’ Equity	6
	Consolidated Statements of Cash Flows	7
	Notes to Consolidated Financial Statements	8-29
Item 2	Management’s Discussion and Analysis of Financial Condition and Results of Operations	30-53
Item 3	Quantitative Disclosures About Market Risk	54
Item 4	Controls and Procedures	54

PART II	Other Information
Item 1	Legal Proceedings	55
Item 2	Unregistered Sales of Equity Securities and Use of Proceeds	55
Item 3	Defaults Upon Senior Securities	55
Item 4	Mine Safety Disclosures	55
Item 5	Other Information	55
Item 6	Exhibits	56
Signatures		56
Certifications		57-60

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PART I-FINANCIAL INFORMATION

Item 1. FINANCIAL STATEMENTS

NORTHERN CALIFORNIA BANCORP, INC.

AND SUBSIDIARY

CONSOLIDATED BALANCE SHEETS

	MARCH 31			DECEMBER 31
(Dollars in thousands, except share data)	2012			2011
	(Unaudited)			(Audited)
ASSETS:
Cash and Due From Banks	$	30,014		$	10,536
Trading Assets	18			17
Investment Securities, available for sale (Note 6)	24,363			41,793
Other Investments	3,108			3,227
Loans Held for Sale, at lower of cost or market	1,775			1,471
Loans, net of allowance for loan losses of $4,323 in 2012; $4,320 in 2011 (Note 7)	140,257			148,027
Bank Premises and Equipment, Net	4,358			4,427
Cash Surrender Value of Life Insurance	4,385			4,354
Foreclosed assets	28,722			28,722
Interest Receivable and Other Assets	2,527			3,103
Total Assets	$	239,527		$	245,677

LIABILITIES AND SHAREHOLDERS’ EQUITY:

Non interest-bearing demand	$	36,846		$	31,331
Interest-bearing demand	21,041			19,358
Savings	14,202			14,405
Time less than $100,000	79,197			90,040
Time in denominations of $100,000 or more	46,388			48,479
Total Deposits	197,674			203,613

Federal Home Loan Bank borrowed funds	23,000			23,000
Revolving line of credit	2,700			2,700
Junior Subordinated Debt Securities	8,248			8,248
Payable for Investment Securities Purchased	427			—
Interest Payable and Other Liabilities	3,384			4,520
Total Liabilities	235,433			242,081

Shareholders’ Equity:
Common Stock - No Par Value
Authorized 50,000,000 shares
Outstanding:1,785,891 in 2012 and 2011	5,094			5,094
Accumulated Deficit	(2,198		)	(3,265		)
Accumulated Other Comprehensive Income	1,198			1,767
Total Shareholders’ Equity	4,094			3,596
Total Liabilities & Shareholders’ Equity	$	239,527		$	245,677

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

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NORTHERN CALIFORNIA BANCORP, INC.

AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)

	THREE-MONTH
	PERIOD ENDING
	March 31
(Dollars in thousands except share data)	2012			2011
INTEREST INCOME:
Loans	$	2,111		$	2,205
Time deposits with other financial institutions	6			6
Investment securities	449			592
Total Interest Income	2,566			2,803

INTEREST EXPENSE:
Interest-bearing transaction accounts	5			5
Savings and time deposit accounts	284			366
Time deposits in denominations of $100,000 or more	197			301
Notes payable and other	339			410
Total Interest Expense	825			1,082

Net Interest Income	1,741			1,721
Provision for loan losses	—			1,100
Net interest income, after provision for loan losses	1,741			621

NON-INTEREST INCOME:
Service charges on deposit accounts	76			85
Income from sales and servicing of Small Business Administration Loans	111			50
Gain on sales of investment securities	800			8
Other income	171			1,087
Total non-interest income	1,158			1,230

NON-INTEREST EXPENSE:
Salaries and Employee Benefits	874			912
Occupancy and Equipment Expense	238			263
Foreclosed assets, net	(138		)	326
Professional Fees	332			461
Data Processing	56			56
FDIC and State Assessments	161			222
Other general and administrative	307			1,009
Total non-interest expenses	1,830			3,249

Income (loss) before tax provision	1,069			(1,398		)
Income tax provision	1			59
Net income (loss)	$	1,068		$	(1,457	)

Earnings (loss) per common share
Basic	$	0.60		$	(0.82	)
Diluted	$	0.60		$	(0.82	)

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

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NORTHERN CALIFORNIA BANCORP, INC.

AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(UNAUDITED)

	For the three months ended March 31
	2012			2011

Net income (loss)	$	1,068		$	(1,457	)

Other comprehensive income (loss)
Net unrealized holding gain on securities available for sale	231			232
Reclassification adjustment for gains realized inincome	(800		)	(8		)
Net unrealized gain (loss)	(569		)	224
Tax effect	—			—
Other comprehensive income (loss)	(569		)	224
Total Comprehensive income (loss)	$	499		$	(1,233	)

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

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NORTHERN CALIFORNIA BANCORP, INC.

AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY

(UNAUDITED)

							Accumulated
							Other Comprehensive
	Number of	Common		Retained			Income
(in thousands except share data)	Shares	Stock		Earnings			(Loss)			Total

Balance at December 31, 2009	1,783,230	$	5,088	$	11,092		$	(30	)	$	16,150

Comprehensive loss:
Net loss for the year	—	—		(706		)	—			(706		)
Change in net unrealized loss on AFS securities and other assets, net of recalssification adjustment and tax effect	—	—		—			(1,144		)	(1,144		)
Total comprehensive loss										(1,850		)
Exercise of stock options	2,661	6		—			—			6

Balance at December 31, 2010 (Audited)	1,785,891	5,094		10,386			(1,174		)	14,306

Comprehensive loss:
Net loss for the year	—	—		(13,652		)	—			(13,652		)
Change in net unrealized loss on AFS securities and other assets, net of recalssification adjustment and tax effect	—	—		—			2,941			2,941
Total comprehensive loss										(10,711		)
Balance at December 31, 2011 (Audited)	1,785,891	5,094		(3,266		)	1,767			3,595

Comprehensive income:
Net income for the year	—	—		1,068			—			1,068
Change in net unrealized loss on AFS securities and other assets net of tax recalssification adjustment	—	—		—			(569		)	(569		)
Total comprehensive income										499

Balance at March 31, 2012 (Unaudited)	1,785,891	$	5,094	$	(2,198	)	$	1,198		$	4,094

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

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NORTHERN CALIFORNIA BANCORP, INC.

AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

	THREE MONTH PERIOD ENDED
	MARCH 31,
	2012			2011
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss)	$	1,068		$	(1,457	)
Adjustments to reconcile net income (loss) to net cash provided (used) by operating activities:
Depreciation and amortization expense	70			84
Provision for loan losses	—			1,100
Provision for foreclosed asset losses	—			83
Realized gain on sales of available-for-sale securities, net	(800		)	(8		)
Amortization of deferred loan (fees), net	26			17
Net amortization (accretion) of discounts and premiums on investment securities, net	(15		)	(28		)
Deferred income tax provision (benefit)	—			373
Increase in cash surrender value of life insurance	(31		)	(32		)
(Increase) decrease in assets:
Trading assets	(1		)	2
Loans held for sale	(304		)	772
Interest receivable	369			194
Other assets	206			679
Increase (decrease) in liabilities:
Interest payable	(35		)	(157		)
Other liabilities	(1,101		)	(635		)
Net cash provided (used) by operating activities	(548		)	987

CASH FLOWS FROM INVESTING ACTIVITIES
Activity in available-for sale securities
Sales	17,997			514
Maturities, prepayments, and calls	105			38
Purchases	—			(3,445		)
Redemption of stock investments, restricted	119			119
Net (increase) decrease in loans	7,745			(6,439		)
Proceeds from sale of equipment	—			144
Additions to bank premises and equipment	(1		)	(24		)
Net cash provided (used) by investing activities	25,965			(9,093		)

CASH FLOWS FROM FINANCING ACTIVITIES
Net decrease in deposits	(5,939		)	(4,950		)
Proceeds from borrowings	—			5,245
Net cash provided (used) by financing activities	(5,939		)	295

Net increase (decrease) in cash and cash equivalents	19,478			(7,811		)

CASH AND CASH EQUIVALENTS, BEGINNING	10,536			16,400

CASH AND CASH EQUIVALENTS, ENDING	$	30,014		$	8,589

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

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(NOTE 1) NATURE OF BUSINESS AND BASIS OF PRESENTATION

Nature of Business

Northern California Bancorp, Inc. (the “Corporation”) was incorporated on August 29, 1995, as a for-profit corporation under the California Corporate laws for the principal purpose of engaging in banking and non-banking activities as allowed for a bank holding company. The Corporation’s sources of revenues at this time are dividends on investments, gains on securities transactions and potential dividends, management fees and tax equalization payments, if any, from its wholly-owned bank subsidiary, Monterey County Bank (the “Bank”).

The Corporation owns 100% of the Bank which operates four full service branches in Monterey County, California. The Corporation owns 100% of the common stock of two unconsolidated special purpose business trusts, “Northern California Bancorp, Inc. Trust I” and “Northern California Bancorp, Inc. Trust II.”

Basis of Presentation

The interim condensed consolidated financial statements of the Corporation and the Bank are unaudited and reflect all adjustments (consisting only of normal recurring adjustments), which are, in the opinion of Management, necessary for a fair presentation, in all material respects, of the consolidated financial position and operating results of the Corporation for the interim periods. The results of operations for the three months ended March 31, 2012 are not necessarily indicative of the results to be expected for the entire fiscal year ending December 31, 2012. The year-end consolidated balance sheet data at December 31, 2011 was derived from the Corporation’s consolidated audited financial statements. All material intercompany balances and transactions have been eliminated in consolidation.

This financial information should be read in conjunction with the consolidated audited financial statements and the notes thereto included in the Corporation’s Form 10-K for the fiscal year ended December 31, 2011.

(NOTE 2) CRITICAL ACCOUNTING POLICIES

The preparation of financial statements in accordance with accounting principles generally accepted in the United States of America requires Management to make a number of judgments, estimates and assumptions that affect the reported amount of assets, liabilities, income and expenses in the Corporation’s financial statements and accompanying notes. Management believes that the judgments, estimates and assumptions used in preparation of the Corporation’s financial statements are appropriate given the factual circumstances as of March 31, 2012.

Various elements of the Corporation’s accounting policies, by their nature, are inherently subject to estimation techniques, valuation assumptions and other subjective assessments. Critical accounting policies are those that involve the most complex and subjective decisions and assessments and have the greatest potential impact on the Corporation’s results of operation. In particular, Management has identified one accounting policy that, due to judgments, estimates and assumptions inherent in this policy and the sensitivity of the Corporation’s financial statements to those judgments, estimates and assumptions, is critical to an understanding of the Corporation’s financial statements.

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This policy relates to the methodology that determines the Corporation’s allowance for loan losses. Management has discussed the development and selection of this critical accounting policy with the Corporation’s Audit Committee of the Board of Directors. Although Management believes the level of the allowance at March 31, 2012 is adequate to absorb losses inherent in the loan portfolio, a decline in the regional economy may result in increasing losses that cannot reasonably be predicted at this time. For further information regarding the allowance for loan losses see “Provision and Allowance for Loan Losses” included elsewhere herein.

Due to the credit concentration of the Corporation’s loan portfolio in real estate secured loans, the value of collateral is heavily dependent upon real estate values in the Monterey region. Therefore, a decrease in real estate values in this region could have a negative impact on the allowance for loan losses. In addition, regulatory agencies, as an integral part of their examination process, periodically review the Corporation’s allowance for loan losses and may require the Corporation to make additions to the allowance based on their judgment about information available to them at the time of their examinations.

Another critical accounting policy relates to the valuation of other real estate owned (OREO). Assets acquired through, or in lieu of, loan foreclosure are held for sale and are initially recorded at fair value less cost to sell 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 carrying amount or fair value less estimated cost to sell. Any write-down to fair value at the time of transfer to OREO is charged to the allowance for loan losses. Property is evaluated regularly to ensure that the recorded amount is supported by its current fair value and that valuation allowances to reduce the carrying amount to fair value less estimated costs to dispose are recorded as necessary. Revenue and expenses from operations of OREO and changes in the valuation allowance are included in net expenses from OREO.

A third critical accounting policy relates to the valuation of deferred tax assets. The Corporation is permitted to recognize deferred tax assets only to the extent that they are expected to be used to reduce amounts that have been paid or will be paid to tax authorities. Management reviews this each quarter by comparing the amount of the deferred tax assets with amounts paid in the past that might be recovered by carryback provisions in the tax code and with anticipated taxable income expected to be generated from operations in the future. If it does not appear that the deferred tax assets are usable, a valuation allowance would be established to acknowledge their uncertain benefit.

(NOTE 3) RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

In May 2011, the Financial Accounting Standards Board (FASB) issued an accounting standards update to improve the comparability between U.S. GAAP fair value accounting and reporting requirements and International Financial Reporting Standards (IFRS) fair value accounting and reporting requirements. Additional disclosures required by the update include: (i) disclosure of quantitative information regarding the unobservable inputs used in any fair value measurement classified as Level 3 in the fair value hierarchy in addition to an explanation of the valuation techniques used in valuing Level 3 items and information regarding the sensitivity in the valuation of Level 3 items to changes in the values assigned to unobservable inputs; (ii) categorization by level within the fair value hierarchy of items not recognized on the balance sheet at fair value but for which fair values are required to be disclosed; and (iii) instances where the fair values disclosed for non-financial assets were based on a highest and best use assumption when in fact the assets are not being utilized in that capacity.

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The amendments in the update are effective for interim and annual periods beginning on or after December 15, 2011. The required disclosures became effective for the Corporation on January 1, 2012, and are reflected in Note 9. The provisions of this update had no impact on the Corporation’s financial position, results of operations or cash flows.

In June 2011, the FASB issued an accounting standards update to increase the prominence of items included in Other Comprehensive Income and facilitate the convergence of U.S. GAAP with IFRS. The update prohibits continued presentation of Other Comprehensive Income in the Statement of Shareholders’ Equity. The update requires that all non-owner changes in shareholders’ equity be presented in either a single continuous statement of comprehensive income or in two separate but continuous statements. The amendments in the update are effective for interim and annual periods beginning on or after December 15, 2011. The Corporation adopted the provisions of this update on January 1, 2012 and therefore has presented other comprehensive income in conformity with the new reporting requirements as of March 31, 2012. The provisions of this update had no impact on the Corporation’s financial position, results of operation or cash flows.

(NOTE 4) STOCK BASED COMPENSATION

The Corporation’s compensation cost relating to share-based payment transactions is recognized in the financial statements based upon the fair value of the equity or liability instruments issued. Based on the stock-based compensation awards outstanding for the three months ended March 31, 2012 and 2011, there was no stock-based compensation expense.

Under the Corporation’s 1998 Stock Option Plan, the Corporation may grant incentive stock options and non-qualified stock options to directors, officers, and employees of the Corporation and its subsidiary, so long as the Corporation owns a majority of the equity interest of such subsidiary. Incentive stock options are granted at fair value of the common stock on the date of grant. However, an incentive stock option granted to an individual owning 10% or more of the Corporation’s stock after such grant must have an exercise price of at least 110% of such fair market value and an exercise period of not more than five years. Non-qualified stock options may be granted at prices not lower than 85% of the fair market value of the common stock on the date of grant. The Board of Directors (the “Board”) is authorized to determine when options become exercisable within a period not exceeding 10 years from the date of grant. Under the 1998 Stock Option Plan, 12,500 shares of common stock have been reserved for the granting of these options. At March 31, 2012, 12,500 options were outstanding. During 2012, no options were granted and no options were exercised by officers, employees, or Board members. As of March 31, 2012, all options have vested.

No further options may be granted under the 1998 Stock Option Plan. The plan provided that options could be granted for a period of ten years from the date the Plan was adopted by the Board. The Board adopted the Plan on April 16, 1998. The Plan remains in effect until all options granted under the Plan have been exercised or have expired.

Under the Corporation’s 2007 Stock Option Plan, the Corporation may grant incentive stock options and non-qualified stock options to directors, officers, and employees of the Corporation and its subsidiary, so long as the Corporation owns a majority of the equity interest of such subsidiary. Incentive stock options are granted at fair value of the common stock on the date of grant.

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However, an incentive stock option granted to an individual owning 10% or more of the Corporation’s stock after such grant must have an exercise price of at least 110% of such fair market value and an exercise period of not more than five years. The Board is authorized to determine when options become exercisable within a period not exceeding 10 years from the date of grant. Under the Plan, 300,000 shares of common stock have been reserved for the granting of these options. As of March 31, 2012, no options have been granted under the 2007 Stock Option Plan.

(NOTE 5) EARNINGS PER SHARE

Basic earnings (loss) per share represents income (loss) available to common stockholders divided by the weighted-average number of common shares outstanding during the period. Diluted earnings (loss) per share reflects additional common shares that would have been outstanding, if potential dilutive common shares had been issued, as well as any adjustment to income that would result from the assumed issuance. Potential common shares that may be issued by the Corporation relate to outstanding stock options and are determined using the treasury stock method.

The weighted-average number of shares used in computing basic and diluted earnings (loss) per share is as follows:

	Earnings (Loss) per share Calculation
	For the three months ended March 31
	2012					2011
			Weighted						Weighted
	Net		Average	Per Share		Net			Average	Per Share
	Income		Shares	Amount		Income			Shares	Amount
Basic earnings (loss) per share	$	1,068	1,785,891	$	0.60	$	(1,457	)	1,785,891	$	(0.82	)

Effect of dilutive shares assumed exercise of outstanding options	—		—	—		—			—	—

Diluted earnings (loss) per share	$	1,068	1,785,891	$	0.60	$	(1,457	)	1,785,891	$	(0.82	)

(NOTE 6) INVESTMENT SECURITIES

The following table presents investment securities available for sale at March 31, 2012 and December 31, 2011:

	March 31, 2012
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Loss		Fair Value
	(Dollars in thousands)
Securities Available for Sale
Mortgage Backed Securities	$	520	$	25	$	—	$	545
State/Local Agency Securities	22,685		1,133		—		23,818

Total securities available for sale	$	23,205	$	1,158	$	—	$	24,363

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	December 31, 2011
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Loss			Fair Value
	(Dollars in thousands)
Securities Available for Sale
Mortgage Backed Securities	$	525	$	—	$	(1	)	$	524
State/Local Agency Securities	39,539		1,798		(68		)	41,269

Total securities available for sale	$	40,064	$	1,798	$	(69	)	$	41,793

In addition, the Corporation maintains a trading account, at fair value, consisting of marketable securities. At March 31, 2012 and December 31, 2011 the account value was $18,000 and $17,000, respectively.

The amortized cost and fair value of debt securities by contractual maturity date at March 31, 2012 are as follows:

	Available for Sale
	Amortized Cost		Fair Value
	(Dollars in thousands)

Due between five and ten years	$	360	$	363
Due after ten years	22,845		24,000
Total securities available for sale	$	23,205	$	24,363

Proceeds from calls, maturity, payments and sales of investment securities for the three months ended March 31, 2012 and 2011 were $18,102,000 and $552,000, respectively. Realized gains for the three months ended March 31, 2012 and 2011 were $800,000, and $8,000, respectively.

At December 31, 2011, mortgage-backed obligations with a carrying value of $524,000 were pledged to secure advances from the Federal Home Loan Bank “FHLB”. No securities were pledged to secure advances from the FHLB at March 31, 2012.

At March 31, 2012 and December 31, 2011, state/local agency obligations with a carrying value of $7,835,000 and $9,137,000, respectively, were pledged to secure a discount window line with the Federal Reserve Bank.

At March 31, 2012, no securities had a gross unrealized loss.

Information pertaining to securities with gross unrealized losses at December 31, 2011, 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 12 Months					12 Months or More					Total
	Fair		Unrealized			Fair		Unrealized			Fair		Unrealized
	Value		Loss			Value		Loss			Value		Loss
	(Dollars in thousands)
Securities Available for Sale:
State/Local Agency Securities	$	524	$	(1	)	$	2,231	$	(68	)	$	2,755	$	(69	)

At a minimum, Management evaluates securities for other-than-temporary impairment on a quarterly basis, and more frequently when economic or market concerns warrant such evaluation. Consideration is given to: (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; (3) the Bank’s intention not to sell the security; and (4) the lack of any need to sell the security before recovery of its cost basis.

On December 31, 2011, 5 securities had an unrealized loss with aggregate depreciation of 0.17% from the Bank’s amortized cost basis. The unrealized losses relate to securities issued by state and local government agencies. All such securities are deemed to be investment grade as determined either by Moody or Standard and Poor’s or, for unrated securities, by an independent consultant. Based on this and the factors stated in the previous paragraph, no decline is deemed to be other-than-temporary.

(NOTE 7) LOANS AND ALLOWANCE FOR LOAN LOSSES

The following table presents information on loans and the allowance for loan losses at March 31, 2012 and December 31, 2011:

	March 31			December 31
	2012			2011
	(Dollars in thousands)
Commercial and industrial	$	22,369		$	22,630
Construction and land	10,497			9,064
Real Estate - commercial	63,395			69,824
Real Estate - residential	40,332			43,630
Consumer	193			223
SBA - unguaranteed portion held for investment	4,291			4,088
SBA - guaranteed portion	4,365			3,586
Other	993			880
Total	146,435			153,925
Allowance for loan losses	(4,323		)	(4,320		)
Deferred origination fees, net	(80		)	(107		)
Loans, net	$	142,032		$	149,498

Loans held for sale totaled $1,775,000 and $1,471,000 at March 31, 2012 and December 31, 2011, respectively, and are included in the SBA guaranteed portion above.

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The following tables present an analysis of credit quality indicators by loan class at March 31, 2012 and December 31, 2011. Information has been updated for each credit quality indicator as of these dates.

	March 31, 2012
	Grade
	Pass		Special Mention		Substandard		Doubtful		Total

Construction and land:
Land	$	6,480	$	—	$	4,017	$	—	$	10,497

One to four residential:
First liens	31,127		—		3,876		—		35,003
Junior liens	4,287		—		1,042		—		5,329

Commercial real estate:
Owner occupied	20,395		—		5,415		—		25,810
Non-owner occupied	35,202		—		2,383		—		37,585

Commercial and industrial:
Secured	10,216		—		1,160		—		11,376
Unsecured	9,364		1,045		239		345		10,993

Consumer	193		—		—		—		193

SBA:
SBA, unguaranteed portion held for investment	4,127		—		164		—		4,291
SBA, guaranteed portion	2,794		—		—		1,571		4,365

Other	993		—		—		—		993

Total	$	125,178	$	1,045	$	18,296	$	1,916	$	146,435

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	December 31, 2011
	Grade
	Pass		Special Mention		Substandard		Doubtful		Total

Construction and land:
Land	$	7,668	$	—	$	1,396	$	—	$	9,064

One to four residential:
First liens	34,049		—		3,749		—		37,798
Junior liens	4,788		163		881		—		5,832

Commercial real estate:
Owner occupied	25,138		—		5,436		—		30,574
Non-owner occupied	36,865		—		2,385		—		39,250

Commercial and industrial:
Secured	10,702		—		1,337		—		12,039
Unsecured	10,192		—		50		349		10,591

Consumer	189		—		34		—		223

SBA:
SBA, unguaranteed portion held for investment	3,917		—		171		—		4,088
SBA, guaranteed portion	2,337		—		85		1,164		3,586

Other	880		—		—		—		880

Total	$	136,725	$	163	$	15,524	$	1,513	$	153,925

The Corporation’s policies, consistent with regulatory guidelines, provide for the classification of loans and other assets that are considered to be of lesser quality as substandard, doubtful, or loss assets. An asset is considered substandard if it is inadequately protected by the current net worth and paying capacity of the obligor or of the collateral pledged, if any. Substandard assets include those assets characterized by the distinct possibility that the Bank will sustain some loss if the deficiencies are not corrected. Assets classified as doubtful have all of the weaknesses inherent in those classified substandard with the added characteristic that the weaknesses make collection or liquidation in full highly questionable or improbable, based on currently existing facts, conditions and values. Assets (or portions of assets) classified as loss are those considered uncollectible and of such little value that their continuance as assets is not warranted. Assets that do not expose the Bank to risk sufficient to warrant classification in one of the aforementioned categories, but which possess potential weaknesses that deserve close attention, are required to be designated as special mention.

When assets are classified as substandard or doubtful, the Corporation allocates a portion of the related general loss allowances to such assets as the Corporation deems prudent. Determinations as to the classification of assets and the amount of loss allowances are subject to review by regulatory agencies, who can require that we establish additional loss allowances. The Bank regularly reviews its asset portfolio to determine whether any assets require classification in accordance with applicable regulations.

Table of Contents

The following tables set forth an aging analysis of past due loans by loan class at March 31, 2012 and December 31, 2011:

	March 31, 2012
													Recorded
					90 Days								Investment
	30-59 Days		60-89 Days		or More		Total				Total		90 Days or more
	Past Due		Past Due		Past Due		Past Due		Current		Loans		and Accruing

Construction and land:
Land	$	—	$	—	$	2,817	$	2,817	$	7,680	$	10,497	$	—

One to four residential:
First liens	492		115		54		661		34,342		35,003		—
Junior liens	—		—		—		—		5,329		5,329		—

Commercial real estate:
Owner occupied	—		—		—		—		25,810		25,810		—
Non-owner occupied	—		—		851		851		36,734		37,585		—

Commercial and industrial:
Secured	—		—		—		—		11,376		11,376		—
Unsecured	—		345		—		345		10,648		10,993		—

Consumer	—		—		—		—		193		193		—

SBA:
SBA, unguaranteed portion held for investment	266		—		—		266		4,025		4,291		—

SBA, guaranteed portion	—		—		1,571		1,571		2,794		4,365

Other	—		—		—		—		993		993		—

Total	$	758	$	460	$	5,293	$	6,511	$	139,924	$	146,435	$	—

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	December 31, 2011
													Recorded
					90 Days								Investment
	30-59 Days		60-89 Days		or More		Total				Total		90 Days or more
	Past Due		Past Due		Past Due		Past Due		Current		Loans		and Accruing

Construction and land:
Land	$	2,498	$	—	$	196	$	2,694	$	6,370	$	9,064	$	—

One to four residential:
First liens	415		192		—		607		37,191		37,798		—
Junior liens	—		163		—		163		5,669		5,832		—

Commercial real estate:
Owner occupied	—		—		—		—		31,918		31,918		—
Non-owner occupied	—		—		851		851		37,055		37,906		—

Commercial and industrial:
Secured	69		—		—		69		11,969		12,038		—
Unsecured	—		—		—		—		10,592		10,592		—

Consumer	—		—		—		—		223		223		—

SBA:
SBA, unguaranteed portion held for investment	15		—		—		15		4,073		4,088		—

SBA, guaranteed portion	—		—		1,249		1,249		2,337		3,586

Other	—		—		—		—		880		880		—

Total	$	2,997	$	355	$	2,296	$	5,648	$	148,277	$	153,925	$	—

Table of Contents

Loans by portfolio segment, and the related allowance for loan loss for each segment, are presented below as of March 31, 2012 and December 31, 2011. Loans and the allowance for loan losses are further segregated by impairment methodology.

	March 31, 2012
	Loan Balance						Allowance for Loan & Lease Losses:
	Individually evaluated for impairment		Collectively evaluated for impairment		Balance		Individually evaluated for impairment		Collectively evaluated for impairment		Balance

Construction and Land	$	4,017	$	6,480	$	10,497	$	14	$	144	$	158

One to Four Residential:

First lien	3,822		31,181		35,003		400		521		921

Junior lien	1,095		4,234		5,329		93		359		452

Commercial real estate	7,798		55,597		63,395		320		502		822

Commercial and Industrial	1,744		20,625		22,369		322		1,101		1,423

Consumer	—		193		193		—		2		2

SBA - unguaranteed portion	164		4,127		4,291		44		386		430

SBA - guaranteed portion	1,572		2,793		4,365		—		—		—

Other	—		993		993		—		14		14

Unallocated	—		—		—		—		101		101

Total	$	20,212	$	126,223	$	146,435	$	1,193	$	3,130	$	4,323

	December 31, 2011
	Loan Balance						Allowance for Loan & Lease Losses:
	Individually evaluated for impairment		Collectively evaluated for impairment		Balance		Individually evaluated for impairment		Collectively evaluated for impairment		Balance

Construction and Land	$	3,894	$	5,170	$	9,064	$	14	$	130	$	144

One to Four Residential:

First lien	3,749		34,049		37,798		392		558		950

Junior lien	1,044		4,788		5,832		88		409		497

Commercial real estate	8,208		61,616		69,824		352		385		737

Commercial and Industrial	1,736		20,894		22,630		386		1,104		1,490

Consumer	34		189		223		26		2		28

SBA - unguaranteed portion	171		3,917		4,088		78		368		446

SBA - guaranteed portion	1,249		2,337		3,586		—		—		—

Other	—		880		880		—		13		13

Unallocated	—		—		—		—		15		15

Total	$	20,085	$	133,840	$	153,925	$	1,336	$	2,984	$	4,320

Table of Contents

Management segregates the loan portfolio into portfolio segments for purposes of estimating the allowance for loan losses. A portfolio segment is defined as the level at which the Bank develops and documents a systematic method for determining its allowance for loan losses. The portfolio segments are segregated based on loan types and the underlying risk factors present in each loan type. Such risk factors are periodically reviewed by Management and revised as deemed appropriate.

The Bank’s loan portfolio is segregated into the following portfolio segments:

Construction and Land Loan. This portfolio segment consists of the origination of one-to-four residential construction loans, commercial real estate construction loans, loans for the development of building lots and loans secured by vacant land.

One-to Four-Residential First Lien. This portfolio segment consists of the origination of first mortgage loans secured by one-to-four family owner occupied residential properties located in the Bank’s market area.

One-to Four-Residential Junior Lien. This portfolio segment consists of loans secured by junior liens on one-to-four residential properties. Such lending involves additional risks, since the lien position is junior to higher priority liens.

Commercial Real Estate Loans. This portfolio segment includes loans secured by commercial real estate, including multi-family dwellings. Loans secured by commercial real estate generally have larger loan balances and more credit risk than one-to-four residential mortgage loans. The increased risk is the result of several factors, including the concentration of principal in a limited number of loans and borrowers, the impact of local and general economic conditions on the borrower’s ability to repay the loan, and the increased difficulty of evaluating and monitoring these types of loans.

Commercial and Industrial Loans. This portfolio segment includes commercial business loans secured by assignments of corporate assets and personal guarantees of the business owners. Commercial business loans generally have higher interest rates and shorter terms than one- to four-residential loans, but they also may involve higher average balances, increased difficulty of loan monitoring and a higher risk of default since their repayment generally depends on the successful operation of the borrower’s business.

Consumer Loans. This portfolio segment includes loans to individuals for personal lines of credit, life insurance premium financing, automobiles, and overdraft protection.

Small Business Administration (“SBA”) Guaranteed Loans. This portfolio segment includes loans to small businesses which qualify for the SBA’s loan guarantee program. Borrowers must meet certain SBA guidelines in order to qualify for the program. SBA loans generally have a higher risk factor than traditional commercial and industrial loans.

Loans evaluated individually for impairment have been classified as substandard or doubtful at March 31, 2012 and December 31, 2011, respectively. Loans evaluated collectively for impairment consist of all loans in the portfolio which are not impaired.

Table of Contents

The following table summarizes the activity in the allowance for loan loss by loan class for the three months ended March 31, 2012 and the year ended December 31, 2012.

	March 31, 2012
	Beginning Balance		Loan Charged Offs		Recoveries		Provision for Losses			Ending Balance
	(Dollars in thousands)
Construction and Land	$	144	$	—	$	—	$	14		$	158

One to Four Residential:

First lien	950		—		—		(29		)	921

Junior lien	497		—		2		(47		)	452

Commercial real estate	737		—		—		85			822

Commercial and Industrial	1,490		—		—		(67		)	1,423

Consumer	28		—		—		(26		)	2

SBA - unguaranteed portion	446		—		—		(16		)	430

Other	13		—		1		—			14

Unallocated	15		—		—		86			101

Total	$	4,320	$	—	$	3	$	—		$	4,323

	December 31, 2011
	Beginning Balance		Loan Charged Offs		Recoveries		Provision for Losses			Ending Balance
	(Dollars in thousands)
Construction and Land	$	371	$	1,333	$	—	$	1,106		$	144

One to Four Residential:

First lien	482		781		—		1,249			950

Junior lien	419		1,226		1		1,303			497

Commercial real estate	985		38		—		(210		)	737

Commercial and Industrial	310		2,711		—		3,891			1,490

Consumer	6		113		1		134			28

SBA - unguaranteed portion	469		496		2		471			446

Other	8		5		—		10			13

Unallocated	109		—		—		(94		)	15

Total	$	3,159	$	6,703	$	4	$	7,860		$	4,320

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The following table summarizes loans on nonaccrual status by loan class at March 31, 2012 and December 31, 2011:

	March 31, 2012		December 31, 2011
	(Dollars in thousands)
Construction and land:
Land	$	2,817	$	2,695

One to four residential:
First liens	54		—
Junior liens	—		634

Commercial real estate:
Owner occupied	—		851
Non-owner occupied	851		—

Commercial and industrial:
Unsecured	345		349

SBA guaranteed protion	1,572		1,249

Total	$	5,639	$	5,778

Loans past due greater than 90 days totaled $5,293,000 compared to total nonaccrual loans of $5,639,000 at March 31, 2012. The difference of $345,000 was due to a loan which was past due less than 90 days but was classified as nonaccrual.

Loans past due greater than 90 days totaled $2,296,000 compared to total nonaccrual loans of $5,778,000 at December 31, 2011. The difference of $3,482,000 was due to three loans which were past due less than 90 days but were classified as nonaccrual.

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The following tables summarize the Bank’s investment in loans for which impairment has been recognized as of and for the three months ended March 31, 2012 and as of and for the twelve months ended December 31, 2011.

	March 31, 2012
	Recorded Investment		Unpaid Principal Balance		Related Allowance		Average Recorded Investment		Interest Income Recognized

With no related allowance recorded:
Construction and land:
Land	$	2,621	$	2,621	$	—	$	2,544	$	—
Commercial Real Estate:
Non-owner occupied	1,147		1,147		—		1,151		11
One to four residential:
Junior Liens	626		626		—		631		—
Commercial and industrial:
Secured	121		124		—		123		2
SBA:
SBA. guaranteed portion	1,572		1,572		—		1,292		—

With an allowance recorded:
Construction and land:
Land	1,396		1,415		14		1,396		10
One to four residential:
First Liens	3,822		4,519		400		3,813		27
Junior Liens	469		469		93		576		6
Commercial Real Estate:
Owner occupied	933		933		158		934		13
Non-owner occupied	5,718		5,811		162		5,727		53
Commercial and industrial:
Secured	1,623		1,622		322		1,628		11
SBA:
SBA, unguaranteed portion held for investment	164		164		44		165		8

Total:
Construction and land	$	4,017	$	4,036	$	14	$	3,940	$	10
One to four residential First Lien	3,822		4,519		400		3,813		27
One to four residential Junior Lien	1,095		1,095		93		1,207		6
Commercial real estate - owner occupied	933		933		158		934		13
Commercial real estate non-owner occupied	6,865		6,958		162		6,878		64
Commercial and industrial - secured	1,744		1,746		322		1,751		13
Commercial and industrial - unsecured	—		—		—		—		—
Consumer	—		—		—		—		—
SBA Unguaranteed portion	164		164		44		165		8
SBA Guaranteed portion	1,572		1,572		—		1,292		—
	$	20,212	$	21,023	$	1,193	$	19,980	$	141

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	December 31, 2011
	Recorded Investment		Unpaid Principal Balance		Related Allowance		Average Recorded Investment		Interest Income Recognized

With no related allowance recorded:
Construction and land:
Land	$	3,698	$	4,435	$	—	$	2,838	$	89
Commercial Real Estate:
Non-owner occupied	1,534		2,178		—		1,704		66
One to four residential:
First Liens	—		—		—		1,372		4
Junior Liens	634		1,025		—		582		33
Commercial and industrial:
Secured	124		2,785		—		2,734		—
Consumer	—		13		—		2		—
SBA:
SBA, unguaranteed portion held for investment	—		391		—		195		—

SBA. guaranteed portion	1,249		1,366		—		1,397		—

With an allowance recorded:
Construction and land:
Land	196		215		14		201		—
One to four residential:
First Liens	3,749		4,446		392		1,716		200
Junior Liens	410		522		88		71		23
Commercial Real Estate:
Owner occupied	934		934		168		3		57
Non-owner occupied	5,740		5,832		184		3,486		245
Commercial and industrial:

NORTHERN CALIFORNIA BANCORP INC 10-Q