Item 7.
|
Management’s
Discussion and Analysis of Financial Condition and Results of Operations
|
The following discussion is intended to assist the reader in
understanding and evaluating the financial condition and results of operations of Cordia and its wholly owned subsidiary, Bank
of Virginia (“BVA”). This discussion and analysis should be read in conjunction with Cordia’s consolidated financial
statements and related notes thereto located elsewhere in this report.
In preparing financial statements in conformity
with accounting principles generally accepted in the United States of America, management is required to make estimates and assumptions
that affect the reported amounts of assets and liabilities as of the date of the balance sheet and reported amounts of revenues
and expenses during the reporting period. Actual results could differ from those estimates. Material estimates that are particularly
susceptible to significant change in the near term relate to the determination of the allowance for loan losses, the valuation
of deferred tax assets, the valuation of other real estate owned, intangible assets, acquired loans with specific credit-related
deterioration and fair value measurements.
Executive Overview
During the past four years, the Company
has spent much time restructuring the balance sheet as we worked through asset quality issues, recruited new staff, and reorganized
our lending and deposit activities while addressing the requirements of BVA’s prior written agreement with the Federal Reserve
and VBFL, which was terminated by the regulators in August 2013.. In March 2013, the Company completed its Plan of Share Exchange
with Bank of Virginia, effectively combining the two stockholder bases.
Since the beginning of 2013, the Company
has substantially increased its lending and funding activities. During this period, the Bank purchased $85.6 million of rehabilitated
student loans that are 98% guaranteed by the U.S. Government and serviced by Xerox Education Services. The Bank also significantly
expanded its deposit base, primarily involving direct certificate of deposit accounts and retail transaction accounts, while substantially
reducing its cost of funds.
In 2014, BVA hired five new officers whose
primary responsibilities are to increase asset originations – including a senior vice president of residential mortgage
lending, two first vice presidents of commercial lending, a vice president of student lending and a residential mortgage loan
officer.
On April 10, 2014, Cordia completed the
sale of approximately 363 shares of Mandatorily Convertible, Noncumulative, Nonvoting, Perpetual Preferred Stock, Series A, $0.01
par value per share, to accredited investors at a purchase price of $42,500 per share for total gross proceeds of $15.4 million.
The capital raise included investments by 100% of Cordia’s directors. The net proceeds of the offering are being used primarily
to support the second phase of its organic growth strategy in BVA.
On June 25, 2014, upon stockholder approval,
each share of Series A Preferred Stock mandatorily converted into 10,000 shares of Cordia’s common stock at an initial conversion
price of $4.25 per share, for a total issuance of approximately 3,629,871 new shares of common stock, of which 2,229,434 are voting
and 1,400,437 are nonvoting. The holders of the Series A Preferred Stock did not receive any dividends under the provisions of
the stock purchase agreements.
In the fourth quarter of 2014 the Bank
launched CordiaGrad, a private student loan refinancing program aimed at high-achieving graduates with student loans. During the
first quarter of 2015, CordiaGrad opened a new location in Washington DC. Beginning in April 2014 the Bank ceased purchasing rehabilitated,
federally guaranteed student loans. On March 1, 2016, the Bank transferred certain marketing arrangements, internet domains and
intellectual property related to CordiaGrad to a newly formed subsidiary, which it then sold to Jack C. Zoeller, who resigned
as Cordia’s President and Chief Executive Officer in connection with the transaction. No loans were sold as part of the
transaction and, as part of the transaction, the Bank agreed to provide certain transition and loan origination services to the
new entity acquired by Mr. Zoeller through June 30, 2016.
On May 20, 2015, Cordia announced that
it had authorized a stock repurchase program to acquire up to $500,000 of the Company’s outstanding common stock. Repurchases
will be conducted through open market purchases or through privately negotiated transactions and will be made from time to time
depending on market conditions and other factors. As of December 31, 2015, the Company had repurchased 21,200 shares.
On August 5, 2015, Cordia announced the
hiring of O.R. (Ed) Barham, Jr. as President and Chief Executive Officer of the Bank of Virginia. Mr. Barham manages the Bank’s
operations and is based in Richmond, Virginia. In connection with his hiring, Mr. Burham was also appointed to the Bank’s
board of directors. Effective March 1, 2016, following Jack C. Zoeller’s resignation as President and Chief Executive Office
of Cordia, Mr. Barham was appointed as a director and President and Chief Executive Officer of Cordia and as Chairman of the Board
of Directors of the Bank.
In November 2015, Cordia announced the
hiring of Steve Lewis as Chief Information Officer of the Bank of Virginia. Mr. Lewis has been designated as a member of the Senior
Management Team and will be responsible for the information technology function. He is based in Richmond, Virginia and reports
to Mark Severson, Executive Vice President and Chief Financial Officer of Cordia and Bank of Virginia.
Results of Operations
Net Income (Loss)
Consolidated net income was $590 thousand for the year ended
December 31, 2015 compared to consolidated net loss of $412 thousand for the year ended December 31, 2014. The 2015 results include
a recovery of loan losses of $293 million compared to a provision for loan losses of $305 million in in 2014. Noninterest expense
for 2015 included the favorable reversal of the fair value discount related to the purchase of a bank property and the termination
of the related lease. This fair value discount was established when Cordia purchased BVA as a result of an existing lease being
deemed unfavorable when compared to market rates for commercial real estate at that time. This $400 thousand fair value discount
was allocated based on relative fair values of the purchased property and the remaining portion of the unfavorable portion of
the lease, with $225 thousand recorded as a reduction to noninterest expense and $175 thousand recorded as a reduction to the
basis of the bank property purchased.
Net Interest Income
Net interest income is the largest component
of our income, and is affected by the interest rate environment and the volume and the composition of interest-earning assets
and interest-bearing liabilities. Our interest-earning assets include loans, investment securities, interest-bearing deposits
in other banks, and federal funds sold. Our interest-bearing liabilities include deposits and advances from the FHLB.
Net interest income increased $284 thousand
from $8.2 million for the year ended December 31, 2014 to $8.5 million for the year ended December 31, 2015. Interest income increased
$624 thousand to $10.8 million in 2015 from $10.2 million in 2014. The increase in net interest income in 2015 was primarily due
to an increase in average interest-earning assets of $47.6 million or 17.6% for the year ended December 31, 2015 offset by a significant
reduction in interest margin of 36 basis points. The significant reduction in net interest margin was due in part to the decrease
in the accretion of acquisition accounting adjustments. The yield on loans held for investment includes the annualized impact
of accretion on purchased loans.
Interest expense for the year ended December
31, 2015 was $2.3 million, compared to $2.0 million for the year ended December 31, 2014. The increase of $340 thousand was due
to increased loan volume. In addition, interest expense on FHLB borrowings increased by $142 thousand from $230 thousand for the
year ended December 31, 2014 to $372 thousand for the year ended December 31, 2015. This increase was due to an increase in average
FHLB borrowings from $18.6 million in 2014 to $30.0 million in 2015. In addition, the cost of deposits increased $198 thousand
due to a higher average balance of deposits in 2015 of $31.5 million. The cost of total deposits was 0.78% for the year ended
December 31, 2015 compared to 0.81% for the year ended December 31, 2014, primarily due to shifting the retail deposit mix away
from time deposits into transaction accounts and lower cost direct certificates of deposits. The Company’s balance sheet
is in an asset sensitive position as of December 31, 2015.
Net interest margin was 2.68% and 3.04% for the years ended
December 31, 2015 and 2014, respectively. The decrease in net interest margin was primarily the result of a decrease in the yield
on loans held for investment. Excluding acquisition accounting adjustments, the net interest margin was 2.64% and 2.96% for the
years ended December 31, 2015 and 2014, respectively.
Average Balances and Yields
The following tables present information
regarding average balances of assets and liabilities, the total dollar amounts of interest income and dividends from average interest-earning
assets, the total dollar amounts of interest expense on average interest-bearing liabilities, and the resulting yields and costs.
The yields and costs for the periods indicated are derived by dividing income or expense by the average balances of assets or
liabilities, respectively, for the periods presented.
For the years ended
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, (dollars
in thousands)
|
|
2015
|
|
|
2014
|
|
|
2013
|
|
|
|
Average
Balance
|
|
|
Interest
|
|
|
Yield/
Rate
|
|
|
Average
Balance
|
|
|
Interest
|
|
|
Yield/
Rate
|
|
|
Average
Balance
|
|
|
Interest
|
|
|
Yield/
Rate
|
|
Earning Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans held
for investment
|
|
$
|
223,823
|
|
|
$
|
9,203
|
|
|
|
4.11
|
%
|
|
$
|
198,227
|
|
|
$
|
8,923
|
|
|
|
4.50
|
%
|
|
$
|
170,200
|
|
|
$
|
9,366
|
|
|
|
5.50
|
%
|
Loans held for sale
|
|
|
121
|
|
|
|
5
|
|
|
|
4.13
|
%
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Securities
|
|
|
76,454
|
|
|
|
1,604
|
|
|
|
2.10
|
%
|
|
|
61,156
|
|
|
|
1,269
|
|
|
|
2.08
|
%
|
|
|
23,159
|
|
|
|
426
|
|
|
|
1.84
|
%
|
Federal
Funds and deposits with banks
|
|
|
17,371
|
|
|
|
29
|
|
|
|
0.17
|
%
|
|
|
10,780
|
|
|
|
25
|
|
|
|
0.23
|
%
|
|
|
28,089
|
|
|
|
73
|
|
|
|
0.26
|
%
|
Total earning assets
|
|
|
317,769
|
|
|
|
10,841
|
|
|
|
3.41
|
%
|
|
|
270,163
|
|
|
|
10,217
|
|
|
|
3.78
|
%
|
|
|
221,448
|
|
|
|
9,865
|
|
|
|
4.45
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allowance for loan losses
|
|
|
(1,005
|
)
|
|
|
|
|
|
|
|
|
|
|
(1,369
|
)
|
|
|
|
|
|
|
|
|
|
|
(2,788
|
)
|
|
|
|
|
|
|
|
|
Other
assets
|
|
|
20,025
|
|
|
|
|
|
|
|
|
|
|
|
16,234
|
|
|
|
|
|
|
|
|
|
|
|
14,480
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
336,789
|
|
|
|
|
|
|
|
|
|
|
$
|
285,028
|
|
|
|
|
|
|
|
|
|
|
$
|
233,140
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest-bearing liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Demand deposits
|
|
$
|
14,333
|
|
|
|
39
|
|
|
|
0.27
|
%
|
|
$
|
13,832
|
|
|
|
42
|
|
|
|
0.30
|
%
|
|
$
|
14,463
|
|
|
|
56
|
|
|
|
0.39
|
%
|
Savings deposits
|
|
|
80,187
|
|
|
|
263
|
|
|
|
0.33
|
%
|
|
|
61,818
|
|
|
|
179
|
|
|
|
0.29
|
%
|
|
|
49,376
|
|
|
|
196
|
|
|
|
0.40
|
%
|
Time deposits
|
|
|
155,020
|
|
|
|
1,657
|
|
|
|
1.07
|
%
|
|
|
142,095
|
|
|
|
1,540
|
|
|
|
1.08
|
%
|
|
|
124,911
|
|
|
|
1,392
|
|
|
|
1.11
|
%
|
FHLB
borrowings
|
|
|
30,034
|
|
|
|
372
|
|
|
|
1.24
|
%
|
|
|
18,616
|
|
|
|
230
|
|
|
|
1.24
|
%
|
|
|
10,000
|
|
|
|
164
|
|
|
|
1.64
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total interest-bearing
liabilities
|
|
|
279,574
|
|
|
|
2,331
|
|
|
|
0.83
|
%
|
|
|
236,361
|
|
|
|
1,991
|
|
|
|
0.84
|
%
|
|
|
198,750
|
|
|
|
1,808
|
|
|
|
0.91
|
%
|
Non-interest bearing demand
deposits
|
|
|
28,640
|
|
|
|
|
|
|
|
|
|
|
|
23,696
|
|
|
|
|
|
|
|
|
|
|
|
20,118
|
|
|
|
|
|
|
|
|
|
Other liabilities
|
|
|
765
|
|
|
|
|
|
|
|
|
|
|
|
1,629
|
|
|
|
|
|
|
|
|
|
|
|
681
|
|
|
|
|
|
|
|
|
|
Stockholders'
equity
|
|
|
27,810
|
|
|
|
|
|
|
|
|
|
|
|
23,342
|
|
|
|
|
|
|
|
|
|
|
|
13,591
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
336,789
|
|
|
|
|
|
|
|
|
|
|
$
|
285,028
|
|
|
|
|
|
|
|
|
|
|
$
|
233,140
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
interest income
|
|
|
|
|
|
$
|
8,510
|
|
|
|
|
|
|
|
|
|
|
$
|
8,226
|
|
|
|
|
|
|
|
|
|
|
$
|
8,057
|
|
|
|
|
|
Net
interest rate spread
|
|
|
|
|
|
|
|
|
|
|
2.58
|
%
|
|
|
|
|
|
|
|
|
|
|
2.94
|
%
|
|
|
|
|
|
|
|
|
|
|
3.55
|
%
|
Net
interest margin
|
|
|
|
|
|
|
|
|
|
|
2.68
|
%
|
|
|
|
|
|
|
|
|
|
|
3.04
|
%
|
|
|
|
|
|
|
|
|
|
|
3.64
|
%
|
The table below analyzes interest income,
interest expense, and net interest income for the year ended December 31, 2015 compared to the year ended December 31, 2014 and
the year ended December 31, 2014 compared to the year ended December 31, 2013
|
|
2015
|
|
|
2014
|
|
|
|
Increase
(decrease) due to changes in:
|
|
|
Increase
(decrease) due to changes in:
|
|
(dollars in thousands)
|
|
Average
Volume
|
|
|
Average
Rate
|
|
|
Increase
(Decrease)
|
|
|
Average
Volume
|
|
|
Average
Rate
|
|
|
Increase
(Decrease)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest Income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans
|
|
$
|
1,152
|
|
|
$
|
(867
|
)
|
|
$
|
285
|
|
|
$
|
1,812
|
|
|
$
|
(2,255
|
)
|
|
$
|
(443
|
)
|
Securities
|
|
|
317
|
|
|
|
18
|
|
|
|
335
|
|
|
|
699
|
|
|
|
144
|
|
|
|
843
|
|
Federal Funds and deposits with banks
|
|
|
15
|
|
|
|
(11
|
)
|
|
|
4
|
|
|
|
(45
|
)
|
|
|
(3
|
)
|
|
|
(48
|
)
|
Total interest income
|
|
|
1,484
|
|
|
|
(860
|
)
|
|
|
624
|
|
|
|
2,466
|
|
|
|
(2,114
|
)
|
|
|
352
|
|
Interest Expense:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Demand deposits
|
|
|
2
|
|
|
|
(5
|
)
|
|
|
(3
|
)
|
|
|
(2
|
)
|
|
|
(12
|
)
|
|
|
(14
|
)
|
Savings deposits
|
|
|
53
|
|
|
|
31
|
|
|
|
84
|
|
|
|
49
|
|
|
|
(66
|
)
|
|
|
(17
|
)
|
Time deposits
|
|
|
140
|
|
|
|
(23
|
)
|
|
|
117
|
|
|
|
191
|
|
|
|
(43
|
)
|
|
|
148
|
|
FHLB borrowings
|
|
|
141
|
|
|
|
1
|
|
|
|
142
|
|
|
|
141
|
|
|
|
(75
|
)
|
|
|
66
|
|
Total interest expense
|
|
|
336
|
|
|
|
4
|
|
|
|
340
|
|
|
|
379
|
|
|
|
(196
|
)
|
|
|
183
|
|
Change in net interest
income
|
|
$
|
1,148
|
|
|
$
|
(864
|
)
|
|
$
|
284
|
|
|
$
|
2,087
|
|
|
$
|
(1,918
|
)
|
|
$
|
169
|
|
(Recovery of) Provision for Loan Losses
Recovery of loan losses was $293 thousand
for year ended December 31, 2015 as compared to a provision of $305 thousand during the year ended December 31, 2014. This amount
reflects our emphasis on highly accurate risk rating processes, early detection of problem loans, accurate assessment of the extent
of losses, declining historical loss experience and aggressive management of problem loans through restructures, refinancing to
other institutions, or other means of mitigating potential losses. The allowance for loan losses was $823 thousand at December
31, 2015, compared to $1.1 million at December 31, 2014.
An analysis of the changes in the allowance for loan losses
is presented under the caption
“—Allowance for Loan Losses” on page 26.
Non-interest Income
Non-interest income for the year ended
December 31, 2015 was $534 thousand, compared to $467 thousand for the year ended December 31, 2014. The improvement was primarily
the result of a $43 thousand higher net gain on the sale of loans held for sale and an increase in other fee income, net of $57
thousand,.
The following table sets forth the principal
components of non-interest income:
For the years ended December 31, (dollars in thousands)
|
|
2015
|
|
|
2014
|
|
Service charges on deposit accounts
|
|
$
|
134
|
|
|
$
|
123
|
|
Net gain on sale of "AFS" securities
|
|
|
133
|
|
|
|
177
|
|
Net gain(loss) on sale of loans held for sale
|
|
|
47
|
|
|
|
4
|
|
Other fee income, net
|
|
|
220
|
|
|
|
163
|
|
Total non-interest income
|
|
$
|
534
|
|
|
$
|
467
|
|
Non-interest Expense
Non-interest expense decreased $53 thousand
to $8.7 million for the year ended December 31, 2015 from $8.8 million for the year ended December 31, 2014. The decrease was
due to a favorable reversal in the 2015 period of the fair value discount related to the purchase of a bank property and the termination
of the related lease. The fair value discount was established when Cordia purchased BVA as a result of an existing lease being
deemed unfavorable when compared to market rates for commercial real estate at that time. The $400 thousand fair value discount
was allocated based on relative fair values of the purchased property and the remaining portion of the unfavorable portion of
the lease, with $225 thousand recorded as a reduction to the noninterest expense and $175 thousand recorded as a reduction to
the basis of the bank property purchased. In addition, salaries and employee benefits decreased $393 thousand, offset in part
by an increase of $196 thousand in data processing and communications. The increase in marketing and business development was
due primarily to increased efforts to promote our former CordiaGrad student loan refinancing program. The following table sets
forth the primary components of non-interest expense:
For the years ended December 31, (dollars in thousands)
|
|
2015
|
|
|
2014
|
|
Salaries and employee benefits
|
|
$
|
4,453
|
|
|
$
|
4,846
|
|
Professional services
|
|
|
439
|
|
|
|
427
|
|
Occupancy
|
|
|
600
|
|
|
|
565
|
|
Reversal of occupancy fair value discount
|
|
|
(225
|
)
|
|
|
-
|
|
Data processing and communications
|
|
|
894
|
|
|
|
698
|
|
FDIC assessment and bank fees
|
|
|
465
|
|
|
|
385
|
|
Bank franchise taxes
|
|
|
196
|
|
|
|
102
|
|
Student loan servicing fees and other loan expenses
|
|
|
755
|
|
|
|
671
|
|
Other real estate expenses, net
|
|
|
90
|
|
|
|
46
|
|
Supplies and equipment
|
|
|
286
|
|
|
|
318
|
|
Insurance
|
|
|
78
|
|
|
|
167
|
|
Directors fees
|
|
|
179
|
|
|
|
187
|
|
Marketing and business development
|
|
|
231
|
|
|
|
51
|
|
Other operating expenses
|
|
|
306
|
|
|
|
337
|
|
Total non-interest expense
|
|
$
|
8,747
|
|
|
$
|
8,800
|
|
Income Tax Expense
Under the provisions of the Internal Revenue Code, the Company
has approximately $18.7 million of net operating loss carryforwards, which will expire if unused beginning in 2024 through 2034.
As of December 31, 2015, net deferred tax assets (“DTA”) of $6.1 million have been fully reserved with a valuation
allowance. It is estimated that all of the valuation allowance is available to be reversed if and when it is deemed to be more-likely-than-not
that all of the deferred tax asset will be realized. Of the net operating losses that occurred prior to the change in control
of BVA in December 2010 and Cordia in April 2014, the amount of the loss carryforward available to offset taxable income is limited
to approximately $254,000 per year for twenty years for BVA and zero for Cordia. DTAs related to net operating losses in excess
of the amount realizable during the 20 year carryforward period have been written off.
Financial Condition
Loans
Loans represent the largest category of
earning assets and typically provide higher yields than the other types of earning assets. Loans carry inherent credit and liquidity
risks associated with the creditworthiness of our borrowers and general economic conditions. At December 31, 2015, total loans
held for investment (net of allowance for loan losses) were $245.2 million versus $211.9 million at December 31, 2014. Loans held
for sale were $220 thousand at December 31, 2015. There were no loans held for sale at December 31, 2014.
The following table sets forth the composition
of the loan portfolio by category at the dates indicated and highlights our general emphasis on commercial and commercial real-estate
lending.
|
|
At
December 31,
|
|
|
|
2015
|
|
|
2014
|
|
|
2013
|
|
|
2012
|
|
|
2011
|
|
(dollars in thousands)
|
|
Amount
|
|
|
Percent
|
|
|
Amount
|
|
|
Percent
|
|
|
Amount
|
|
|
Percent
|
|
|
Amount
|
|
|
Percent
|
|
|
Amount
|
|
|
Percent
|
|
Commercial Real Estate:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Acquisition, development and construction
|
|
$
|
2,168
|
|
|
|
0.9
|
%
|
|
$
|
2,159
|
|
|
|
1.0
|
%
|
|
$
|
3,475
|
|
|
|
2.0
|
%
|
|
$
|
3,313
|
|
|
|
2.9
|
%
|
|
$
|
6,065
|
|
|
|
5.7
|
%
|
Non-owner occupied
|
|
|
58,044
|
|
|
|
23.6
|
%
|
|
|
51,512
|
|
|
|
24.2
|
%
|
|
|
28,606
|
|
|
|
16.4
|
%
|
|
|
30,747
|
|
|
|
27.2
|
%
|
|
|
30,644
|
|
|
|
28.7
|
%
|
Owner occupied
|
|
|
45,690
|
|
|
|
18.6
|
%
|
|
|
49,582
|
|
|
|
23.3
|
%
|
|
|
50,500
|
|
|
|
29.0
|
%
|
|
|
39,570
|
|
|
|
35.0
|
%
|
|
|
31,790
|
|
|
|
29.7
|
%
|
Commercial and industrial
|
|
|
34,819
|
|
|
|
14.1
|
%
|
|
|
24,153
|
|
|
|
11.3
|
%
|
|
|
21,085
|
|
|
|
12.1
|
%
|
|
|
23,488
|
|
|
|
20.8
|
%
|
|
|
19,492
|
|
|
|
18.2
|
%
|
Guaranteed studentloans
|
|
|
53,847
|
|
|
|
21.9
|
%
|
|
|
64,870
|
|
|
|
30.5
|
%
|
|
|
55,427
|
|
|
|
31.9
|
%
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Consumer:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential mortgage
|
|
|
18,140
|
|
|
|
7.4
|
%
|
|
|
8,377
|
|
|
|
3.9
|
%
|
|
|
7,156
|
|
|
|
4.1
|
%
|
|
|
7,260
|
|
|
|
6.4
|
%
|
|
|
8,003
|
|
|
|
7.5
|
%
|
HELOC
|
|
|
10,603
|
|
|
|
4.3
|
%
|
|
|
11,074
|
|
|
|
5.2
|
%
|
|
|
7,250
|
|
|
|
4.2
|
%
|
|
|
8,395
|
|
|
|
7.4
|
%
|
|
|
10,298
|
|
|
|
9.6
|
%
|
Other
|
|
|
22,722
|
|
|
|
9.2
|
%
|
|
|
1,232
|
|
|
|
0.6
|
%
|
|
|
508
|
|
|
|
0.3
|
%
|
|
|
297
|
|
|
|
0.3
|
%
|
|
|
655
|
|
|
|
0.6
|
%
|
Total loans
|
|
|
246,033
|
|
|
|
100.0
|
%
|
|
|
212,959
|
|
|
|
100.0
|
%
|
|
|
174,007
|
|
|
|
100.0
|
%
|
|
|
113,070
|
|
|
|
100.0
|
%
|
|
|
106,947
|
|
|
|
100.0
|
%
|
Allowance for loan losses
|
|
|
(823
|
)
|
|
|
|
|
|
|
(1,089
|
)
|
|
|
|
|
|
|
(1,489
|
)
|
|
|
|
|
|
|
(2,110
|
)
|
|
|
|
|
|
|
(2,285
|
)
|
|
|
|
|
Total loans, net of
allowance for loan losses
|
|
$
|
245,210
|
|
|
|
|
|
|
$
|
211,870
|
|
|
|
|
|
|
$
|
172,518
|
|
|
|
|
|
|
$
|
110,960
|
|
|
|
|
|
|
$
|
104,662
|
|
|
|
|
|
The largest component of the loan portfolio
is comprised of investment commercial real estate loans and owner occupied commercial real estate loans. At December 31, 2015,
commercial real estate loans totaled $105.9 million or 43.1% of the total portfolio. Guaranteed student loans totaled $53.8 million,
commercial and industrial loans, totaled $34.8 million and consumer loans, which were comprised principally of residential mortgage,
home equity loans and private student loan refinancings, totaled $51.5 million.
At December 31, 2015, single family residential
mortgage loans totaled $18.1 million while home equity lines totaled $10.6 million. Residential real estate loans consisted of
first and second mortgages on single or multi-family residential dwellings. Private student loan refinancings totaled 21.6 million
at the end of 2015. Our loan portfolio also includes consumer lines of credit and installment loans. At December 31, 2015, those
consumer loans totaled $1.1 million and represented 0.5% of the total loan portfolio.
The repayment of maturing loans in the
loan portfolio is also a source of liquidity for Cordia. The following tables set forth our loans maturing within specified intervals
after the dates indicated. These tables were prepared based on the contractually outstanding balance and the contractual maturity
date. These balances differ from the general ledger balances because of certain acquisition accounting adjustments.
Loan Maturity Schedule
At December 31, 2015
(dollars in thousands)
|
|
Within One
Year
|
|
|
Over One Year
Within Five
Years
|
|
|
Over Five
Years
|
|
|
Total
|
|
Commercial Real Estate:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Acquisition, development and construction
|
|
$
|
652
|
|
|
$
|
1,116
|
|
|
$
|
400
|
|
|
$
|
2,168
|
|
Other Commercial Real Estate
|
|
|
6,273
|
|
|
|
40,028
|
|
|
|
11,746
|
|
|
|
58,047
|
|
Owner occupied
|
|
|
2,970
|
|
|
|
33,476
|
|
|
|
9,244
|
|
|
|
45,690
|
|
Commercial and industrial
|
|
|
9,995
|
|
|
|
20,216
|
|
|
|
4,608
|
|
|
|
34,819
|
|
Guaranteed student loans
|
|
|
56
|
|
|
|
1,419
|
|
|
|
52,372
|
|
|
|
53,847
|
|
Consumer
|
|
|
5,886
|
|
|
|
15,832
|
|
|
|
29,791
|
|
|
|
51,509
|
|
Totals
|
|
$
|
25,832
|
|
|
$
|
112,087
|
|
|
$
|
108,161
|
|
|
$
|
246,080
|
|
Loans maturing after one year with:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fixed interest rates
|
|
$
|
128,804
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Floating interest rates
|
|
|
91,444
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
220,248
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The information presented in the above
table is based on the contractual maturities of the individual loans, including loans which may be subject to renewal at their
maturities. Renewal of such loans is subject to review and credit approval as well as modification of terms. Consequently, we
believe the treatment in the above table presents fairly the maturity and repricing structure of the loan portfolio as shown in
the above table.
Allowance for Loan Losses
At December 31, 2015, our allowance for
loan losses (“ALLL”) was $823 thousand, or 0.33% of total loans outstanding and 44.9% of non-performing loans. ALLL
was 0.45% of total loans outstanding less guaranteed student loans, purchased credit impaired loans and purchased portfolio. At
December 31, 2014, our ALLL was $1.1 million, or 0.51% of total loans outstanding and 49.0% of non-performing loans. ALLL was
0.81% of total loans outstanding less guaranteed student loans, purchased credit impaired loans and purchased portfolio. The reduction
in the ALLL reflects our emphasis on highly accurate risk rating processes, early detection of problem loans, accurate assessment
of the extent of losses, declining historical loss experience and aggressive management of problem loans through restructures,
refinancing to other institutions, or other means of mitigating potential losses.
Management has developed policies and
procedures for evaluating the overall quality of the loan portfolio, the timely identification of potential problem credits and
impaired loans and the establishment of an appropriate ALLL. The acquired loan portfolio was originally recorded at fair value,
which includes a credit mark-to-market, based on the acquisition method of accounting. Loans renewed (performing loans acquired)
or originated since the date of our initial investment are evaluated and an appropriate ALLL is established. Any worsening of
acquired impaired loans since the date of Cordia’s investment in BVA is evaluated for further impairment. Additional impairment
on acquired impaired loans is recorded through the provision for loan losses. Any improvement in cash flows of acquired impaired
loans is amortized as a yield adjustment over the remaining life of the loans. A fuller explanation may be found in the table
under the caption “
Loans With Deteriorated Credit Quality”
regarding accretable and nonaccretable discount.
Loan losses are charged against the allowance when management believes the uncollectability of a loan is confirmed, which decreases
the balance of the allowance. Subsequent recoveries, if any, are credited back to the ALLL.
The ALLL consists of a specific component
allocated to impaired loans and a general component allocated to the aggregate of all unimpaired loans. The amount of the ALLL
is established through the application of a standardized model, the components of which are: an impairment analysis of identified
loans to determine the level of any specific reserves needed on impaired loans, and a broad analysis of historical loss experience,
economic factors and portfolio-related environmental factors to determine the level of general reserves needed. The model inputs
include an evaluation of historical charge-offs, the current trends in delinquencies, and adverse credit migration and trends
in the size and composition of the loan portfolio, including concentrations in higher risk loan types. Results from regulatory
exams are also reflected in these assessments.
The ALLL is evaluated quarterly by management
and is based upon management’s periodic review of the collectability of the loans in light of historical experience, the
nature and volume of the loan portfolio, adverse situations that may affect the specific borrowers’ ability to repay, estimated
value of any underlying collateral and prevailing economic conditions. This evaluation is inherently subjective as it requires
estimates that are susceptible to significant revision as more information becomes available. The use of various estimates and
judgments in our ongoing evaluation of the required level of allowance can significantly affect our results of operations and
financial condition and may result in either greater provisions to increase the allowance or reduced provisions based upon management’s
current view of portfolio and economic conditions and the application of revised estimates and assumptions. The ALLL consists
of specific and general components. The specific component relates to loans that are classified as substandard or worse. For such
loans that are also classified as impaired, a specific allowance is established. The general component covers loans graded special
mention or better and is based on an analysis of historical loss experience, national and local economic factors, and environmental
factors specific to the loan portfolio composition.
Changes affecting the ALLL are summarized
in the following table.
For the years ended December 31, (dollars in thousands)
|
|
2015
|
|
|
2014
|
|
|
2013
|
|
|
2012
|
|
|
2011
|
|
Allowance for loan losses at beginning of period
|
|
$
|
1,089
|
|
|
$
|
1,489
|
|
|
$
|
2,110
|
|
|
$
|
2,285
|
|
|
$
|
50
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Provision for loan losses
|
|
|
(293
|
)
|
|
|
305
|
|
|
|
19
|
|
|
|
588
|
|
|
|
2,763
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Charge-offs:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial real estate
|
|
|
(127
|
)
|
|
|
(120
|
)
|
|
|
(289
|
)
|
|
|
(635
|
)
|
|
|
(528
|
)
|
Commercial and industrial
|
|
|
(109
|
)
|
|
|
(485
|
)
|
|
|
-
|
|
|
|
(286
|
)
|
|
|
-
|
|
Guaranteed Student Loans
|
|
|
(331
|
)
|
|
|
(359
|
)
|
|
|
(94
|
)
|
|
|
-
|
|
|
|
-
|
|
Consumer
|
|
|
(22
|
)
|
|
|
-
|
|
|
|
(403
|
)
|
|
|
(223
|
)
|
|
|
-
|
|
Total charge-offs
|
|
|
(589
|
)
|
|
|
(964
|
)
|
|
|
(786
|
)
|
|
|
(1,144
|
)
|
|
|
(528
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Recoveries:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial real estate
|
|
|
241
|
|
|
|
139
|
|
|
|
-
|
|
|
|
346
|
|
|
|
-
|
|
Commercial and industrial
|
|
|
361
|
|
|
|
91
|
|
|
|
135
|
|
|
|
16
|
|
|
|
-
|
|
Guaranteed Student Loans
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Consumer
|
|
|
14
|
|
|
|
29
|
|
|
|
11
|
|
|
|
19
|
|
|
|
-
|
|
Total recoveries (charge-offs)
|
|
|
616
|
|
|
|
259
|
|
|
|
146
|
|
|
|
381
|
|
|
|
-
|
|
Net charge-offs
|
|
|
27
|
|
|
|
(705
|
)
|
|
|
(640
|
)
|
|
|
(763
|
)
|
|
|
(528
|
)
|
Allowance for loan losses at end of period
|
|
$
|
823
|
|
|
$
|
1,089
|
|
|
$
|
1,489
|
|
|
$
|
2,110
|
|
|
$
|
2,285
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allowance for loan losses to non-performing loans
|
|
|
44.9
|
%
|
|
|
49.03
|
%
|
|
|
37.80
|
%
|
|
|
36.80
|
%
|
|
|
28.70
|
%
|
Allowance for loan losses to total loans outstanding at end of period
|
|
|
0.33
|
%
|
|
|
0.51
|
%
|
|
|
0.86
|
%
|
|
|
1.87
|
%
|
|
|
2.14
|
%
|
Net recoveries (charge-offs) to average loans during the period
|
|
|
0.01
|
%
|
|
|
-0.36
|
%
|
|
|
-0.38
|
%
|
|
|
-0.70
|
%
|
|
|
-0.43
|
%
|
Allowance for loan losses to total loans less guaranteed student loans, purchased credit impaired loans and purchased portfolio end of period
|
|
|
0.45
|
%
|
|
|
0.81
|
%
|
|
|
1.57
|
%
|
|
|
2.18
|
%
|
|
|
2.72
|
%
|
Included in the above table is the activity
related to the portion of ALLL for loans acquired with deteriorated credit quality. Because of the nature and limited number of
these loans, they are individually evaluated for additional impairment on a quarterly basis. Activity related only to that portion
of the ALLL is as follows:
Years ended December 31, (dollars in thousands)
|
|
2015
|
|
|
2014
|
|
|
2013
|
|
|
2012
|
|
|
2011
|
|
Allowance for loan losses at beginning of period
|
|
$
|
90
|
|
|
$
|
234
|
|
|
$
|
537
|
|
|
$
|
387
|
|
|
$
|
910
|
|
(Recovery of) provision for loan losses
|
|
|
(438
|
)
|
|
|
(7
|
)
|
|
|
(14
|
)
|
|
|
406
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Charge-offs:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial real estate
|
|
|
(127
|
)
|
|
|
(120
|
)
|
|
|
(289
|
)
|
|
|
(229
|
)
|
|
|
(523
|
)
|
Commercial and industrial
|
|
|
-
|
|
|
|
(17
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Consumer
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(27
|
)
|
|
|
-
|
|
Total charge-offs
|
|
|
(127
|
)
|
|
|
(137
|
)
|
|
|
(289
|
)
|
|
|
(256
|
)
|
|
|
(523
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Recoveries:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial real estate
|
|
|
232
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Commercial and industrial
|
|
|
243
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Consumer
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Total recoveries
|
|
|
475
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Net charge-offs
|
|
|
348
|
|
|
|
(137
|
)
|
|
|
(289
|
)
|
|
|
(256
|
)
|
|
|
(523
|
)
|
Allowance for loan losses at end of period
|
|
$
|
-
|
|
|
$
|
90
|
|
|
$
|
234
|
|
|
$
|
537
|
|
|
$
|
387
|
|
The table below provides the breakout of the allowance for
loan losses by portfolio class.
|
|
At
December 31, 2015
|
|
|
At December 31, 2014
|
|
|
At
December 31, 2013
|
|
|
At
December 31, 2012
|
|
|
At
December 31, 2011
|
|
(dollars
in
thousands)
|
|
Amount
|
|
|
%
of
Allowance
to
total
allowance
|
|
|
%
of
Loans
in
category
to
total
loans
|
|
|
Amount
|
|
|
%
of
Allowance
to
total
allowance
|
|
|
%
of
Loans
in
category
to
total
loans
|
|
|
Amount
|
|
|
%
of
Allowance
to
total
allowance
|
|
|
%
of
Loans
in
category
to
total
loans
|
|
|
Amount
|
|
|
%
of
Allowance
to
total
allowance
|
|
|
%
of
Loans
in
category
to
total
loans
|
|
|
Amount
|
|
|
%
of
Allowance
to
total
allowance
|
|
|
%
of
Loans
in
category
to
total
loans
|
|
Commercial real estate
|
|
$
|
328
|
|
|
|
40
|
%
|
|
|
43
|
%
|
|
$
|
392
|
|
|
|
36
|
%
|
|
|
49
|
%
|
|
$
|
661
|
|
|
|
45
|
%
|
|
|
48
|
%
|
|
$
|
810
|
|
|
|
38
|
%
|
|
|
65
|
%
|
|
$
|
1,016
|
|
|
|
44
|
%
|
|
|
64
|
%
|
Commercial and industrial
|
|
|
112
|
|
|
|
13
|
%
|
|
|
14
|
%
|
|
|
357
|
|
|
|
33
|
%
|
|
|
11
|
%
|
|
|
377
|
|
|
|
25
|
%
|
|
|
12
|
%
|
|
|
782
|
|
|
|
37
|
%
|
|
|
21
|
%
|
|
|
685
|
|
|
|
30
|
%
|
|
|
18
|
%
|
Guaranteed Student Loans
|
|
|
47
|
|
|
|
6
|
%
|
|
|
22
|
%
|
|
|
144
|
|
|
|
13
|
%
|
|
|
30
|
%
|
|
|
268
|
|
|
|
18
|
%
|
|
|
32
|
%
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Consumer
|
|
|
336
|
|
|
|
41
|
%
|
|
|
21
|
%
|
|
|
196
|
|
|
|
18
|
%
|
|
|
10
|
%
|
|
|
183
|
|
|
|
12
|
%
|
|
|
8
|
%
|
|
|
518
|
|
|
|
25
|
%
|
|
|
14
|
%
|
|
|
584
|
|
|
|
26
|
%
|
|
|
18
|
%
|
Total allowance for loan losses
|
|
$
|
823
|
|
|
|
100
|
%
|
|
|
100
|
%
|
|
$
|
1,089
|
|
|
|
100
|
%
|
|
|
100
|
%
|
|
$
|
1,489
|
|
|
|
100
|
%
|
|
|
100
|
%
|
|
$
|
2,110
|
|
|
|
100
|
%
|
|
|
100
|
%
|
|
$
|
2,285
|
|
|
|
100
|
%
|
|
|
100
|
%
|
Asset Quality
Risk Rating Process
On a quarterly basis, the process of estimating
the allowance for loan losses begins with review of the risk rating assigned to individual loans. Through this process, loans
graded substandard or worse are evaluated for impairment in accordance with ASC Topic 310 “
Accounting by Creditors for
Impairment of a Loan
.” Refer to Note 4 of the Notes to the Consolidated Financial Statements for more detail.
The following is the distribution of loans by credit quality
and class as of:
December 31, 2015 (dollars in thousands)
|
|
Commercial
Real Estate
|
|
|
|
|
|
|
|
|
Consumer
|
|
|
|
|
Credit quality class
|
|
Acq-Dev
Construction
|
|
|
Non-owner
Occupied
|
|
|
Owner
Occupied
|
|
|
Commercial
and
Industrial
|
|
|
Guaranteed
Student
Loans
|
|
|
Residential
Mortgage
|
|
|
HELOC
|
|
|
Other
|
|
|
Total
|
|
1 Highest quality
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
2 Above average quality
|
|
|
-
|
|
|
|
7,772
|
|
|
|
3,285
|
|
|
|
1,876
|
|
|
|
53,847
|
|
|
|
-
|
|
|
|
1,063
|
|
|
|
396
|
|
|
|
68,239
|
|
3 Satisfactory
|
|
|
989
|
|
|
|
27,397
|
|
|
|
20,355
|
|
|
|
26,289
|
|
|
|
-
|
|
|
|
11,959
|
|
|
|
5,893
|
|
|
|
22,258
|
|
|
|
115,140
|
|
4 Pass
|
|
|
472
|
|
|
|
19,988
|
|
|
|
19,550
|
|
|
|
6,102
|
|
|
|
-
|
|
|
|
5,976
|
|
|
|
2,779
|
|
|
|
68
|
|
|
|
54,935
|
|
5 Special mention
|
|
|
-
|
|
|
|
1,510
|
|
|
|
-
|
|
|
|
547
|
|
|
|
-
|
|
|
|
27
|
|
|
|
269
|
|
|
|
-
|
|
|
|
2,353
|
|
6 Substandard
|
|
|
152
|
|
|
|
-
|
|
|
|
151
|
|
|
|
5
|
|
|
|
-
|
|
|
|
41
|
|
|
|
239
|
|
|
|
-
|
|
|
|
588
|
|
7 Doubtful
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
1,613
|
|
|
|
56,667
|
|
|
|
43,341
|
|
|
|
34,819
|
|
|
|
53,847
|
|
|
|
18,003
|
|
|
|
10,243
|
|
|
|
22,722
|
|
|
|
241,255
|
|
Loans acquired with deteriorating credit quality
|
|
|
555
|
|
|
|
1,377
|
|
|
|
2,349
|
|
|
|
-
|
|
|
|
-
|
|
|
|
137
|
|
|
|
360
|
|
|
|
-
|
|
|
|
4,778
|
|
Total loans
|
|
$
|
2,168
|
|
|
$
|
58,044
|
|
|
$
|
45,690
|
|
|
$
|
34,819
|
|
|
$
|
53,847
|
|
|
$
|
18,140
|
|
|
$
|
10,603
|
|
|
$
|
22,722
|
|
|
$
|
246,033
|
|
December 31, 2014 (dollars in thousands)
|
|
Commercial
Real Estate
|
|
|
|
|
|
|
|
|
Consumer
|
|
|
|
|
Credit quality class
|
|
Acq-Dev
Construction
|
|
|
Non-owner
Occupied
|
|
|
Owner
Occupied
|
|
|
Commercial
and
Industrial
|
|
|
Guaranteed
Student
Loans
|
|
|
Residential
Mortgage
|
|
|
HELOC
|
|
|
Other
|
|
|
Total
|
|
1 Highest quality
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
2 Above average quality
|
|
|
-
|
|
|
|
2,225
|
|
|
|
2,788
|
|
|
|
2,498
|
|
|
|
64,870
|
|
|
|
24
|
|
|
|
1,394
|
|
|
|
719
|
|
|
|
74,518
|
|
3 Satisfactory
|
|
|
458
|
|
|
|
30,473
|
|
|
|
26,608
|
|
|
|
14,883
|
|
|
|
-
|
|
|
|
3,325
|
|
|
|
6,140
|
|
|
|
425
|
|
|
|
82,312
|
|
4 Pass
|
|
|
476
|
|
|
|
17,236
|
|
|
|
16,986
|
|
|
|
5,593
|
|
|
|
-
|
|
|
|
4,768
|
|
|
|
2,589
|
|
|
|
88
|
|
|
|
47,736
|
|
5 Special mention
|
|
|
-
|
|
|
|
123
|
|
|
|
-
|
|
|
|
68
|
|
|
|
-
|
|
|
|
75
|
|
|
|
319
|
|
|
|
-
|
|
|
|
585
|
|
6 Substandard
|
|
|
267
|
|
|
|
-
|
|
|
|
-
|
|
|
|
142
|
|
|
|
-
|
|
|
|
-
|
|
|
|
268
|
|
|
|
-
|
|
|
|
677
|
|
7 Doubtful
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
1,201
|
|
|
|
50,057
|
|
|
|
46,382
|
|
|
|
23,184
|
|
|
|
64,870
|
|
|
|
8,192
|
|
|
|
10,710
|
|
|
|
1,232
|
|
|
|
205,828
|
|
Loans acquired with deteriorating credit quality
|
|
|
958
|
|
|
|
1,455
|
|
|
|
3,200
|
|
|
|
969
|
|
|
|
-
|
|
|
|
185
|
|
|
|
364
|
|
|
|
-
|
|
|
|
7,131
|
|
Total loans
|
|
$
|
2,159
|
|
|
$
|
51,512
|
|
|
$
|
49,582
|
|
|
$
|
24,153
|
|
|
$
|
64,870
|
|
|
$
|
8,377
|
|
|
$
|
11,074
|
|
|
$
|
1,232
|
|
|
$
|
212,959
|
|
As shown in the tables above,
substandard and worse loans were $588 thousand at December 31, 2015, or 0.2% of the total loan portfolio. This compares to
$677 thousand or 0.3% at December 31, 2014. Special mention loans increased $1.8 million from $585 thousand at December 31,
2014 to $2.4 million at December 31, 2015 and loans graded “pass” or better increased $33.7 million to $238.3
million at December 31, 2015 as compared to $204.6 million at December 31, 2014. Loans acquired by Cordia in December 2010
with deteriorating credit quality have declined $2.4 million from $7.1 million at December 31, 2014 to $4.8 million at
December 31, 2015. The majority of these loans are now pass rated performing credits.
The Bank has continued to employ a third
party loan review firm for annual reviews and periodic special assignments. The most recent review was completed in May
2015, with another review scheduled during the second quarter of 2016. The scope of the 2015 loan file review totaled approximately
75% of the Bank’s exposure and included the following:
|
●
|
All
classified loans or total relationship exposure over $250,000;
|
|
●
|
All special mention loans or total relationship exposures
over $500,000;
|
|
●
|
A random sample of pass-rated loans determined by the
loan review firm under $500,000;
|
|
●
|
All loans past due as of the review date;
|
|
●
|
All insider loans, including loans to directors, significant
shareholders, and executive management granted since the last review;
|
|
●
|
Any loans that management or the board of directors requested
be reviewed;
|
|
●
|
Annual review of the allowance for loan and lease loss
reserve and methodology.
|
Nonperforming Assets
The past due status of a loan is based
on the contractual due date of the most delinquent payment due. Loans, including impaired loans, are generally classified as nonaccrual
if they are past due as to maturity or payment of principal or interest for a period of more than 90 days, unless such loans are
well-secured and in the process of collection. Loans greater than 90 days past due may remain on an accrual status if management
determines it has adequate collateral and cash flow to cover the principal and interest or the borrower is in the process of refinancing.
If a loan or a portion of a loan that is delinquent more than 90 days is adversely classified, or is partially charged off, the
loan is generally classified as nonaccrual. Additionally, whenever management becomes aware of facts or circumstances that may
adversely impact the full collectability of principal and interest of a loan, it is placed on nonaccrual status immediately, rather
than delaying such action until the loans become 90 days past due.
Government Guaranteed Student loans with
a past due balance greater than 90 days are not placed on non-accrual and are not included in the balance of non-performing assets.
When a loan reaches 120 days past due, the non-guaranteed portion of the loan is charged-off. A claim is filed with the guarantor
when the loan becomes 270 days past due. Interest continues to accrue until charge-off. The guarantor’s
payment covers approximately 98% of principal and accrued interest.
When a loan is placed on nonaccrual status,
previously accrued and uncollected interest is reversed, and the amortization of related deferred loan fees or costs is suspended.
While a loan is classified as nonaccrual and the future collectability of the recorded loan balance is doubtful, collections of
interest and principal are generally applied as a reduction to principal outstanding. When the future collectability of the recorded
loan balance is expected, interest income may be recognized on a cash basis. In the case where a nonaccrual loan has been partially
charged off, recognition of interest on a cash basis is limited to that which would have been recognized on the recorded loan
balance at the contractual interest rate. Cash interest receipts in excess of that amount are recorded as recoveries to the allowance
for loan losses until prior charge-offs have been fully recovered.
Loans placed on non-accrual status generally
may be returned to accrual status after:
|
·
|
payments
are received for approximately six (6) consecutive months in accordance with the loan documents, and any doubt as to the loan's
full collectability has been removed; or
|
|
·
|
the
loan is restructured and supported by a well-documented credit evaluation of the borrower's financial condition and the prospects
for full payment.
|
When a restructured loan is returned to
accrual status after restructuring, the risk rating remains unchanged until a satisfactory payment history is re-established,
typically for approximately six months, at which time it is returned to accrual status.
Nonperforming assets totaled $3.7 million,
or 1.1% of total assets, at December 31, 2015 and are comprised of non-accrual loans of $1.8 million and real estate owned of
$1.9 million. The balance of nonperforming assets at December 31, 2014 was $3.9 million or 1.2% of total assets. The decrease
in nonperforming loans at December 31, 2015 from December 31, 2014 was a result of management’s workout and resolution of
problem loans coupled with growth in total assets.
Real estate acquired through, or in lieu
of, foreclosure is held for sale and is stated at the estimated fair market value of the property, less estimated disposal costs.
Any excess of the principal over the estimated fair market value at the time of acquisition is charged to the allowance for loan
losses. The estimated fair market value is reviewed periodically by management and any write-downs are charged against current
earnings. Development and improvement costs relating to property are capitalized unless such added costs cause the properties
recorded value to exceed the estimated fair market value. Net operating income or expenses of such properties are included in
collection, repossession and other real estate owned expenses.
A summary of nonperforming assets, including troubled debt
restructurings, as of the dates indicated follows:
|
|
Years
ended December 31,
|
|
(dollars in thousands)
|
|
2015
|
|
|
2014
|
|
|
2013
|
|
|
2012
|
|
|
2011
|
|
Non-accrual troubled debt restructurings
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
119
|
|
|
$
|
-
|
|
|
$
|
446
|
|
Other non-accrual loans
|
|
|
1,834
|
|
|
|
2,221
|
|
|
|
3,815
|
|
|
|
5,471
|
|
|
|
7,503
|
|
Total non-accrual loans
|
|
|
1,834
|
|
|
|
2,221
|
|
|
|
3,934
|
|
|
|
5,471
|
|
|
|
7,949
|
|
Real estate owned
|
|
|
1,870
|
|
|
|
1,641
|
|
|
|
1,545
|
|
|
|
1,768
|
|
|
|
1,262
|
|
Total non-performing assets
|
|
$
|
3,704
|
|
|
$
|
3,862
|
|
|
$
|
5,479
|
|
|
$
|
7,239
|
|
|
$
|
9,211
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total non-accrual loans to total loans
|
|
|
0.75
|
%
|
|
|
1.04
|
%
|
|
|
2.26
|
%
|
|
|
4.84
|
%
|
|
|
7.43
|
%
|
Total non-accrual loans to total assets
|
|
|
0.53
|
%
|
|
|
0.70
|
%
|
|
|
1.67
|
%
|
|
|
3.06
|
%
|
|
|
4.80
|
%
|
Total non-performing assets to total assets
|
|
|
1.06
|
%
|
|
|
1.21
|
%
|
|
|
2.33
|
%
|
|
|
4.05
|
%
|
|
|
5.56
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accruing troubled debt restructurings
|
|
$
|
-
|
|
|
$
|
1,260
|
|
|
$
|
1,837
|
|
|
$
|
2,060
|
|
|
$
|
2,530
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total loans
|
|
$
|
246,033
|
|
|
$
|
212,959
|
|
|
$
|
174,007
|
|
|
$
|
113,070
|
|
|
$
|
106,947
|
|
Total assets
|
|
$
|
348,490
|
|
|
$
|
318,600
|
|
|
$
|
235,148
|
|
|
$
|
178,696
|
|
|
$
|
165,551
|
|
Loans With Deteriorated Credit Quality
In connection with Cordia’s acquisition
of BVA certain loans were acquired which showed evidence of deterioration in credit quality. These loans are accounted for under
the guidance of ASC 310-30. Information related to these loans as of the dates indicated is provided in the following table.
At December 31, (dollars in thousands)
|
|
2015
|
|
|
2014
|
|
Contract principal balance
|
|
$
|
4,779
|
|
|
$
|
7,178
|
|
Accretable yield
|
|
|
(1
|
)
|
|
|
(42
|
)
|
Nonaccretable difference
|
|
|
-
|
|
|
|
(5
|
)
|
Book value of loans
|
|
$
|
4,778
|
|
|
$
|
7,131
|
|
Investment Securities
Our investment portfolio consists of U.S. agency debt and agency
guaranteed mortgage-backed securities. Our investment security portfolio includes securities classified as available for sale
as well as securities classified as held to maturity. The total securities portfolio (excluding restricted securities) was $71.7
million at December 31, 2015 as compared to $74.2 million at December 31, 2014. At December 31, 2015, the securities portfolio
consisted of $46.2 million of securities available for sale and $25.5 million of securities held to maturity.
Amortized cost and fair values of securities available for
sale are as follows:
|
|
Years
end December 31,
|
|
|
|
2015
|
|
|
2014
|
|
|
2013
|
|
(dollars in thousands)
|
|
Amortized
Cost
|
|
|
Fair
Value
|
|
|
Amortized
Cost
|
|
|
Fair
Value
|
|
|
Amortized
Cost
|
|
|
Fair
Value
|
|
U.S. Government agencies
|
|
$
|
2,144
|
|
|
$
|
2,139
|
|
|
$
|
3,735
|
|
|
$
|
3,719
|
|
|
$
|
7,038
|
|
|
$
|
7,041
|
|
Agency guaranteed mortgage-backed securities
|
|
|
44,529
|
|
|
|
44,081
|
|
|
|
49,930
|
|
|
|
49,764
|
|
|
|
17,578
|
|
|
|
17,526
|
|
Total
|
|
$
|
46,673
|
|
|
$
|
46,220
|
|
|
$
|
53,665
|
|
|
$
|
53,483
|
|
|
$
|
24,616
|
|
|
$
|
24,567
|
|
Carrying value and fair value of securities held to maturity are
as follows:
|
|
Years end December 31,
|
|
|
|
2015
|
|
|
2014
|
|
|
2013
|
|
(dollars in thousands)
|
|
Carry Value
|
|
|
Fair Value
|
|
|
Carry Value
|
|
|
Fair Value
|
|
|
Carry Value
|
|
|
Fair Value
|
|
Agency guaranteed mortgage-backed securities
|
|
$
|
25,500
|
|
|
$
|
25,694
|
|
|
$
|
20,716
|
|
|
$
|
21,047
|
|
|
$
|
14,753
|
|
|
$
|
14,597
|
|
Total
|
|
$
|
25,500
|
|
|
$
|
25,694
|
|
|
$
|
20,716
|
|
|
$
|
21,047
|
|
|
$
|
14,753
|
|
|
$
|
14,597
|
|
The portfolio is available to support liquidity
needs of BVA as well as to serve as a source of interest income. During 2015, the Company sold $19.8 million of available for
sale securities and recognized a gain of $133 thousand in noninterest income. During 2014, the Company sold $23.4 million of available
for sale securities and recognized a gain of $177 thousand in noninterest income.
As of December 31, 2015, we had gross unrealized
losses of $461 thousand and $36 thousand on our available for sale and held to maturity securities portfolios, respectively. As
of December 31, 2015, we had $68 thousand of unrealized losses greater than 12 months on our available for sale portfolio and
had no material unrealized losses greater than 12 months on our held to maturity portfolio. All of the unrealized losses are attributable
to increases in interest rates and not to credit deterioration. Currently, we do not believe that it is probable that we will
be unable to collect all amounts due according to the contractual terms of the investments. Because the decline in market value
is attributable to changes in interest rates and not to credit quality and because it is not likely we will be required to sell
the investments before recovery of their amortized cost bases, we do not consider these investments to be other-than-temporarily
impaired at December 31, 2015. See Note 3.
Securities
for more information on unrealized losses on the securities portfolio.
The following tables set forth the scheduled maturities and average
yields of securities available for sale at December 31, 2015.
|
|
After one year
within five years
|
|
|
After five years within
ten years
|
|
|
After ten years
|
|
|
|
|
(dollars in thousands)
|
|
Amount
|
|
|
Yield
|
|
|
Amount
|
|
|
Yield
|
|
|
Amount
|
|
|
Yield
|
|
|
Total
|
|
U.S. Government agencies
|
|
$
|
-
|
|
|
|
-
|
|
|
$
|
2,139
|
|
|
|
1.51
|
%
|
|
$
|
-
|
|
|
|
-
|
|
|
$
|
2,139
|
|
Agency guaranteed mortgage-backed securities
|
|
|
43
|
|
|
|
2.02
|
%
|
|
|
-
|
|
|
|
-
|
|
|
|
44,038
|
|
|
|
1.95
|
%
|
|
|
44,081
|
|
Total
|
|
$
|
43
|
|
|
|
2.02
|
%
|
|
$
|
2,139
|
|
|
|
1.51
|
%
|
|
$
|
44,038
|
|
|
|
1.95
|
%
|
|
$
|
46,220
|
|
The following tables set forth the scheduled maturities and average
yields of securities held to maturity at December 31, 2014.
|
|
After one year
within five years
|
|
|
After five years within
ten years
|
|
|
After ten years
|
|
|
|
|
(dollars in thousands)
|
|
Amount
|
|
|
Yield
|
|
|
Amount
|
|
|
Yield
|
|
|
Amount
|
|
|
Yield
|
|
|
Total
|
|
U.S. Government agencies
|
|
$
|
-
|
|
|
|
-
|
|
|
$
|
-
|
|
|
|
-
|
|
|
$
|
2,689
|
|
|
|
1.47
|
%
|
|
$
|
2,689
|
|
Agency guaranteed mortgage-backed securities
|
|
|
1,030
|
|
|
|
1.15
|
%
|
|
|
335
|
|
|
|
1.38
|
%
|
|
|
49,429
|
|
|
|
1.99
|
%
|
|
|
50,794
|
|
Total
|
|
$
|
1,030
|
|
|
|
1.15
|
%
|
|
$
|
335
|
|
|
|
1.38
|
%
|
|
$
|
52,118
|
|
|
|
1.96
|
%
|
|
$
|
53,483
|
|
Deposits and Other Interest-Bearing Liabilities
At December 31, 2015, total deposits were
$290.0 million, compared to $265.6 million at December 31, 2014. Core deposits, which by FDIC guidelines exclude certificates
of deposit of $250,000 or more and insured brokered deposits, provide a relatively stable funding source for our loan portfolio
and other earning assets. Our core deposits were $201.8 million at December 31, 2015, or 69.6% of total deposits, compared to
$199.0 million at December 31, 2014, or 74.9% of total deposits. Deposits, including core deposits, have been the primary source
of funding and have enabled us to successfully meet both our short-term and long-term liquidity needs. The primary driver of growth
was in transaction accounts which increased $4.0 million, or 9%, while money market and savings deposits increased $17.9 million.
In addition, during the year ended December 31, 2015, time deposits increased by $2.5 million. Our loan-to-deposit ratio was 84.8%
at December 31, 2015 and 80.2% at December 31, 2014.
The following table sets forth our deposits by category at the
dates indicated.
|
|
At December 31,
|
|
|
|
2015
|
|
|
2014
|
|
|
2013
|
|
(dollars in thousands)
|
|
Amount
|
|
|
Percent
|
|
|
Amount
|
|
|
Percent
|
|
|
Amount
|
|
|
Percent
|
|
Non-interest bearing demand accounts
|
|
$
|
28,969
|
|
|
|
11
|
%
|
|
$
|
29,795
|
|
|
|
11
|
%
|
|
$
|
22,044
|
|
|
|
11
|
%
|
NOW accounts
|
|
|
19,012
|
|
|
|
7
|
%
|
|
|
14,154
|
|
|
|
6
|
%
|
|
|
13,880
|
|
|
|
6
|
%
|
Savings and money market accounts
|
|
|
88,045
|
|
|
|
30
|
%
|
|
|
70,104
|
|
|
|
26
|
%
|
|
|
48,062
|
|
|
|
23
|
%
|
Time deposits - less than $100,000
|
|
|
48,032
|
|
|
|
16
|
%
|
|
|
49,552
|
|
|
|
19
|
%
|
|
|
50,957
|
|
|
|
24
|
%
|
Time deposits - $100,000 or more
|
|
|
105,986
|
|
|
|
36
|
%
|
|
|
101,998
|
|
|
|
38
|
%
|
|
|
75,871
|
|
|
|
36
|
%
|
Total
|
|
$
|
290,044
|
|
|
|
100
|
%
|
|
$
|
265,603
|
|
|
|
100
|
%
|
|
$
|
210,814
|
|
|
|
100
|
%
|
At December 31, 2015, 55.3% of our time deposits
over $100,000 had maturities within twelve months. Large certificate of deposit customers tend to be more sensitive to interest
rate levels, making these deposits less reliable sources of funding for liquidity planning purposes in comparison to core deposits.
The maturity distribution of our time deposits
of $100,000 or more and other time deposits at December 31, 2015, is set forth in the following table:
(dollars in thousands)
|
|
Time Deposits
less than
$100,000
|
|
|
Time
Deposits
$100,000 or
more
|
|
|
Total
|
|
Months to maturity:
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months or less
|
|
$
|
7,863
|
|
|
$
|
26,258
|
|
|
$
|
34,121
|
|
Over three months to twelve months
|
|
|
15,237
|
|
|
|
32,341
|
|
|
|
47,578
|
|
Over twelve months to three years
|
|
|
17,770
|
|
|
|
35,549
|
|
|
|
53,319
|
|
Over three years
|
|
|
7,162
|
|
|
|
11,838
|
|
|
|
19,000
|
|
Total
|
|
$
|
48,032
|
|
|
$
|
105,986
|
|
|
$
|
154,018
|
|
Management monitors maturity trends in time deposits as part of
its overall asset liability management and retail pricing strategies.
Liquidity and Capital Resources
Liquidity
Liquidity management involves monitoring our
sources and uses of funds in order to meet our short-term and long-term cash flow requirements while optimizing profits. Liquidity
represents an institution’s ability to meet present and future financial obligations, including through the sale of existing
assets or the acquisition of additional funds through short-term borrowings. BVA’s primary access to liquidity comes from
several sources: operating cash flows from payments received on loans and mortgage-backed securities, increased deposits, and
cash reserves. BVA’s secondary sources of liquidity are Federal Funds sold, unpledged securities available for sale, and
borrowings from correspondent banks, the FHLB and the Federal Reserve Bank Discount Window. Liquidity strategies are implemented
and monitored by the Asset/Liability Committee (“ALCO”) of our BVA Board of Directors.
BVA’s deposit base grew by 9.2% from
$265.6 million at December 31, 2014 to $290.0 million at December 31, 2015. The growth in deposits was primarily driven by growth
in savings and money market accounts and time deposits in excess of $100,000. Savings and money market accounts grew 25.6% from
$70.1 million at December 31, 2014 to $88.0 million at December 31, 2015. Time deposits in excess of $100,000 grew 3.9% from $102.0
million at December 31, 2014 to $106.0 million at December 31, 2015. As BVA looks to implement other loan growth initiatives,
it has developed several funding strategies, including judicious use of brokered and direct certificates of deposits, to augment
core deposit growth and further reduce the cost of funds. Development of several sources of funding beyond core deposit growth
ensures maximum liquidity access without dependence on higher cost sources of funds.
BVA maintains an investment portfolio of available
for sale marketable securities that may be used for liquidity purposes by either pledging them through repurchase transactions
against borrowings from the FHLB or a correspondent bank or by selling them on the open market. Those securities consist primarily
of U.S. Government agency debt securities. To the extent any securities are pledged against borrowing from one credit facility,
the borrowing ability of other secured borrowing facilities would be reduced by a like amount.
Borrowings
As of December 31, 2015, BVA had a total of
$22.5 million committed repurchase lines with correspondent banks through which borrowings could be made against the pledge of
marketable securities subject to mark-to-market valuations and standard collateral borrowing ratios. These lines were unused during
2014 and 2015 and remain fully available. BVA also maintains a $4.5 million unsecured lines of credit with other correspondent
banks that were available for direct borrowings or Federal Funds purchased.
BVA is a member of the Federal Home Loan Bank
of Atlanta (FHLB), which provides access to additional lines of credit and other products offered by the FHLB. These borrowings
are largely secured by BVA’s loan portfolio. The FHLB maintains a blanket security agreement on qualifying collateral. As
of December 31, 2015 and 2014, BVA had $30.0 million and $25.0 million, respectively, in secured borrowings outstanding with the
FHLB Atlanta against pledged eligible mortgage loan collateral and investment securities, at a stated average interest rate of
1.24% and 1.25%, respectively. As of December 31, 2015, BVA had a total credit availability of $39.7 million at the FHLB which
could be accessed through pledging a combination of eligible mortgage loan collateral and investment securities. The FHLB offers
a variety of floating and fixed rate loans at terms ranging from overnight to 20 years; therefore, BVA can match borrowings mitigating
interest rate risk.
Liquidity Contingency Plan
Historically BVA has maintained both a retail
branch-based and an asset-based liquidity strategy and has not depended materially on brokered deposits or utilized securitization
as sources of liquidity. BVA strives to follow regulatory guidance in the management of liquidity risk and has established a Board-approved
Contingency Funding Plan (CFP) that prescribes liquidity risk limits and guidelines and includes
pro forma
cash flow analyses
of BVA’s sources and uses of funds under various liquidity scenarios. BVA’s CFP includes funding alternatives that
can be implemented if access to normal funding sources is reduced.
We are not aware of any trends, events or
uncertainties that are reasonably likely to have a material adverse effect on our short term or long term liquidity. Based on
the current and expected liquidity needs, including any liquidity needs associated with loan growth or generated by off-balance
sheet transactions such as commitments to extend credit, commitments to purchase securities and standby letters of credit, we
expect to be able to meet our obligations for the next twelve months.
Capital
BVA is subject to various regulatory capital
requirements administered by the federal and state banking agencies. Failure to meet minimum capital requirements can trigger
certain mandatory and possibly additional discretionary actions by regulators that, if undertaken, could have a material effect
on our financial statements. Under the regulatory capital adequacy guidelines BVA must meet specific capital guidelines that are
based on quantitative measures of assets, liabilities, and certain off-balance-sheet items as calculated under regulatory accounting
practices. Our capital amounts and classifications are also subject to qualitative judgments by the regulators.
Quantitative measures established by regulation
to ensure capital adequacy require financial institutions to maintain minimum amounts and ratios (set forth in the table below)
of total and Tier 1 capital (as defined in the regulations) to risk-weighted assets (as defined), and of Tier 1 capital (as
defined) to average assets (as defined). At December 31, 2015 and 2014, BVA met all capital adequacy requirements to which it
was subject. BVA is also required to maintain capital at a minimum level as a proportion of quarterly average assets, which is
known as the leverage ratio. The minimum levels to be considered well-capitalized are 5% for tier 1 leverage ratio, 6.5% for common
equity tier 1 capital ratio, 8% for tier 1 risk-based capital ratio, and 10% for total risk-based capital ratio.
|
|
Minumum Requirements
|
|
|
|
|
|
|
|
At December 31, (dollars in thousands)
|
|
Well
Capitalized
|
|
|
Adequately
Capitalized
|
|
|
2015
|
|
|
2014
|
|
Tier 1 capital
|
|
|
|
|
|
|
|
|
|
$
|
27,457
|
|
|
$
|
25,985
|
|
Tier 2 capital
|
|
|
|
|
|
|
|
|
|
|
823
|
|
|
|
1,089
|
|
Total qualifying capital
|
|
|
|
|
|
|
|
|
|
$
|
28,280
|
|
|
$
|
27,074
|
|
Total risk-adjusted assets
|
|
|
|
|
|
|
|
|
|
$
|
210,519
|
|
|
$
|
174,476
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Tier 1 leverage ratio
|
|
|
5.0
|
%
|
|
|
4.0
|
%
|
|
|
7.82
|
%
|
|
|
8.24
|
%
|
Common equity tier 1 capital ratio
|
|
|
6.5
|
%
|
|
|
4.5
|
%
|
|
|
13.04
|
%
|
|
|
N/A
|
|
Tier 1 risked-based capital ratio
|
|
|
8.0
|
%
|
|
|
6.0
|
%
|
|
|
13.04
|
%
|
|
|
14.89
|
%
|
Total risk-based capital ratio
|
|
|
10.0
|
%
|
|
|
8.0
|
%
|
|
|
13.43
|
%
|
|
|
15.52
|
%
|
Cordia is considered a small bank holding company, based on its
asset size under $1 billion. Accordingly it is exempt from Federal regulatory guidelines related to leverage ratios and risk-based
capital.
Interest Rate Sensitivity
The pricing and maturity of assets and liabilities
are monitored and managed in order to diminish the potential adverse impact that changes in rates could have on net interest income.
The principal monitoring techniques employed by BVA are the Economic Value of Equity (“EVE”) and Net Interest Income
or Earnings at Risk (“NII” or “EaR”). EVE and NII are cash flow and earnings simulation modeling techniques
which predict likely economic outcomes given various interest rate scenarios.
Interest rate sensitivity can be managed by
closely matching the interest rate repricing periods of assets or liabilities at the time they are acquired and by adjusting that
match as the balance sheet grows or the mix of asset and liability characteristics or interest rates change. That adjustment can
be accomplished by selling securities available for sale, replacing an asset or liability at maturity with those of different
characteristics, or adjusting the interest rate during the life of an asset or liability. Managing the amount of different assets
and liabilities that reprice in a given time interval may help to hedge the risk and minimize the impact on net interest income
of rising or falling interest rates.
Application of a 200 basis point rate increase
would result in a 2.6% increase in net interest income at December 31, 2015, as compared to a 11.1% increase at December 31, 2014.
A 200 basis point rate increase would result in the depreciation of the Bank’s equity value by 9.2% at December 31, 2015
compared to a depreciation of 5.9% at December 31, 2014.
Off-Balance Sheet Risk/Commitments and Contingencies
Through our operations, we have made contractual
commitments to extend credit in the ordinary course of our business activities. These commitments are legally binding agreements
to lend money to our customers at predetermined interest rates for a specified period of time. At December 31, 2015, we had issued
commitments to extend credit of $16.6 million through various types of commercial lending arrangements. The majority of these
commitments to extend credit had variable rates.
We evaluate each customer’s credit worthiness
for such commitments on a case-by-case basis in the same manner as for the approval of a direct loan. The amount of collateral
obtained, if deemed necessary by us upon extension of credit, is based on our credit evaluation of the borrower. Collateral varies
but may include accounts receivable, inventory, property, plant and equipment, commercial and residential real estate.
Contractual obligations as of December 31,
2015 are summarized in the following table.
|
|
Payments due by period
|
|
|
|
|
(Dollars in thousands)
|
|
Within one year
|
|
|
After one year
within three years
|
|
|
After three year
within five
years
|
|
|
After five
years
|
|
|
Total
|
|
Time deposits
|
|
$
|
81,699
|
|
|
$
|
53,319
|
|
|
$
|
19,000
|
|
|
$
|
-
|
|
|
$
|
154,018
|
|
Operating lease obligations
|
|
|
101
|
|
|
|
195
|
|
|
|
8
|
|
|
|
-
|
|
|
|
304
|
|
Total
|
|
$
|
81,800
|
|
|
$
|
53,514
|
|
|
$
|
19,008
|
|
|
$
|
-
|
|
|
$
|
154,322
|
|
Critical Accounting Policies
Cordia’s financial statements are prepared
in accordance with accounting principles generally accepted in the United States of America and conform to general practices within
the banking industry. Cordia’s financial position and results of operations are affected by management’s application
of accounting policies, including judgments made to arrive at the carrying value of assets and liabilities and amounts reported
for revenues, expenses and related disclosures. Different assumptions in the application of these policies could result in material
changes in our financial position and/or results of operations.
Estimates, assumptions, and judgments are
necessary principally when assets and liabilities are required to be recorded at estimated fair value, when a decline in the value
of an asset carried on the financial statements at fair value warrants an impairment write-down or valuation reserve to be established,
or when an asset or liability needs to be recorded based upon the probability of occurrence of a future event. Carrying assets
and liabilities at fair value inherently results in more financial statement volatility. The fair values and the information used
to record valuation adjustments for certain assets and liabilities are either based on quoted market prices or provided by third
party sources, when available. When third party information is not available, valuation adjustments are estimated in good faith
by management primarily through the use of internal or third party modeling techniques and/or appraisal estimates.
Cordia’s accounting policies are fundamental
to understanding Management’s Discussion and Analysis. The following is a summary of Cordia’s “critical accounting
policies.” In addition, the disclosures presented in the Notes to the Consolidated Financial Statements and in this section
provide information on how significant assets and liabilities are valued in the financial statements and how those values are
determined.
Business Combinations
Cordia accounts for its business combinations
under the acquisition method of accounting, a cost allocation process which requires the cost of an acquisition to be allocated
to the individual assets acquired and liabilities assumed based on their estimated fair values. The acquisition method of accounting
requires an acquirer to recognize the assets acquired and the liabilities assumed at the acquisition date measured at their fair
values as of that date. To determine the fair values, Cordia relies on third party valuations, such as appraisals, or internal
valuations based on discounted cash flow analyses or other valuation techniques.
Acquired Loans with Specific Credit-Related
Deterioration.
Acquired loans with specific credit deterioration
are accounted for by Cordia in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards
Codification 310-30. Certain acquired loans, those for which specific credit-related deterioration, since origination, is identified,
are recorded at fair value reflecting the present value of the amounts expected to be collected. Income recognition on these loans
is based on a reasonable expectation about the timing and amount of cash flows to be collected. Acquired loans deemed impaired
and considered collateral dependent, with the timing of the sale of loan collateral indeterminate, remain on non-accrual status
and have no accretable yield.
Allowance for Loan Losses
We monitor and maintain an allowance for loan
losses (“ALLL”) to absorb losses inherent in the loan portfolio. We maintain policies and procedures that address
the systems of controls over the following areas of maintenance of the ALLL: the systematic methodology used to determine the
appropriate level of the ALLL to provide assurance they are maintained in accordance with accounting principles generally accepted
in the United States of America; the accounting policies for loan charge-offs and recoveries; the assessment and measurement of
impairment in the loan portfolio; and the loan grading system.
We evaluate loans graded substandard or worse
individually for impairment. These evaluations are based upon expected discounted cash flows or collateral values. If the evaluation
shows that the loan’s expected discounted cash flows or underlying collateral is not sufficient to repay the loan as agreed
in accordance with the terms of the loan, then a specific reserve is established for the amount of impairment, which represents
the difference between the principal amount of the loan less the expected discounted cash flows or value of the underlying collateral,
net of selling costs.
For loans without individual measures of impairment
which are loans graded Special Mention or better, we make estimates of losses for pools of loans grouped by similar characteristics,
including the type of loan as well as the assigned loan classification. A loss rate reflecting the expected loss inherent in a
group of loans is derived based upon estimates of default rates for a given loan grade and the predominant collateral type for
the group. The resulting estimate of losses for pools of loans is adjusted for relevant environmental factors and other conditions
of the portfolio of loans, including: borrower and industry concentrations; levels and trends in delinquencies, charge-offs and
recoveries; changes in underwriting standards and risk selection; level of experience, ability and depth of lending management;
and national and local economic conditions.
The amount of estimated impairment for individually
evaluated loans and pools of loans is added together for a total estimate of loan losses. This estimate of losses is compared
to our ALLL as of the evaluation date and, if the estimate of losses is greater than the ALLL, an additional provision to the
allowance would be made through a charge to the income statement. If the estimate of losses is less than the existing allowance,
the degree to which the ALLL exceeds the estimate is evaluated to determine whether the ALLL falls outside a range of estimates.
If the estimate of losses is below the range of reasonable estimates, the ALLL is reduced by way of a credit to the provision
for loan losses. We recognize the inherent imprecision in estimates of losses due to various uncertainties and variability related
to the factors used, and therefore a reasonable range around the estimate of losses is derived and used to ascertain whether the
ALLL is materially overstated. If different assumptions or conditions were to prevail and it is determined that the ALLL is not
adequate to absorb the new estimate of probable losses, an additional provision for loan losses would be made in future periods.
These additional provisions may be material to the Financial Statements.
Impact of Inflation
Since the assets and liabilities of financial
institutions such as BVA are primarily monetary in nature, interest rates have a more significant effect on BVA’s performance
than do the effects of changes in the general rate of inflation and changes in prices of goods and services. In addition, interest
rates do not necessarily move in the same direction or in the same magnitude as the prices of goods and services. As discussed
previously, we seek to manage the relationships between interest sensitive assets and liabilities in order to protect against
wide interest rate fluctuations, including those resulting from inflation.
Item
8.
|
Financial
Statements and Supplementary Data
|
Cordia Bancorp
Consolidated Balance Sheets
(dollars in thousands, except per share
data)
|
|
December 31,
2015
|
|
|
December 31,
2014
|
|
Assets
|
|
|
|
|
|
|
|
|
Cash and due from banks
|
|
$
|
6,135
|
|
|
$
|
5,477
|
|
Federal funds sold and interest-bearing deposits with banks
|
|
|
12,325
|
|
|
|
16,363
|
|
Total cash and cash equivalents
|
|
|
18,460
|
|
|
|
21,840
|
|
Securities available for sale, at fair market value
|
|
|
46,220
|
|
|
|
53,483
|
|
Securities held to maturity, at cost (fair value $25,694 and $21,047 at December 31, 2015 and 2014, respectively)
|
|
|
25,500
|
|
|
|
20,716
|
|
Restricted securities
|
|
|
2,355
|
|
|
|
2,092
|
|
Loan held for sale
|
|
|
220
|
|
|
|
-
|
|
Loans net of allowance for loan losses of $823 and $1,089 at December 31, 2015 and 2014, respectively
|
|
|
245,210
|
|
|
|
211,870
|
|
Premises and equipment, net
|
|
|
5,980
|
|
|
|
4,432
|
|
Accrued interest receivable
|
|
|
2,085
|
|
|
|
2,040
|
|
Other real estate owned, net of valuation allowance
|
|
|
1,870
|
|
|
|
1,641
|
|
Other assets
|
|
|
590
|
|
|
|
486
|
|
Total assets
|
|
$
|
348,490
|
|
|
$
|
318,600
|
|
|
|
|
|
|
|
|
|
|
Liabilities and stockholders' equity
|
|
|
|
|
|
|
|
|
Deposits
|
|
|
|
|
|
|
|
|
Non-interest bearing
|
|
$
|
28,969
|
|
|
$
|
29,795
|
|
Savings and interest-bearing demand
|
|
|
107,057
|
|
|
|
84,258
|
|
Time deposits
|
|
|
154,018
|
|
|
|
151,550
|
|
Total deposits
|
|
|
290,044
|
|
|
|
265,603
|
|
Accrued expenses and other liabilities
|
|
|
707
|
|
|
|
861
|
|
FHLB borrowings
|
|
|
30,000
|
|
|
|
25,000
|
|
Total liabilities
|
|
|
320,751
|
|
|
|
291,464
|
|
|
|
|
|
|
|
|
|
|
Commitments and contingencies
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Stockholders' equity
|
|
|
|
|
|
|
|
|
Preferred stock, 2,000 shares authorized, $0.01 par value, none issued and outstanding
|
|
|
-
|
|
|
|
-
|
|
Common stock:
|
|
|
|
|
|
|
|
|
Common stock - 120,000,000 shares authorized, $0.01 par value, 5,186,349 and 5,103,669 shares were outstanding (includes 107,460 and 52,580 of nonvested shares of restricted stock) at December 31, 2015 and 2014, respectively
|
|
|
51
|
|
|
|
51
|
|
Nonvoting common stock - 5,000,000 shares authorized, $0.01 par value, 1,400,437 shares were outstanding at December 31, 2015 and 2014, respectively
|
|
|
14
|
|
|
|
14
|
|
Additional paid-in capital
|
|
|
33,191
|
|
|
|
32,956
|
|
Retained deficit
|
|
|
(4,827
|
)
|
|
|
(5,417
|
)
|
Accumulated other comprehensive loss
|
|
|
(690
|
)
|
|
|
(468
|
)
|
Total stockholders' equity
|
|
|
27,739
|
|
|
|
27,136
|
|
Total liabilities and stockholders' equity
|
|
$
|
348,490
|
|
|
$
|
318,600
|
|
See Notes to the Consolidated Financial Statements
Cordia Bancorp
Consolidated Statements of Operations
For the years ended December 31, (dollars
in thousands, except per share data)
|
|
2015
|
|
|
2014
|
|
Interest income
|
|
|
|
|
|
|
|
|
Interest and fees on loans
|
|
$
|
9,208
|
|
|
$
|
8,923
|
|
Investment securities
|
|
|
1,604
|
|
|
|
1,269
|
|
Federal funds sold and deposits with banks
|
|
|
29
|
|
|
|
25
|
|
Total interest income
|
|
|
10,841
|
|
|
|
10,217
|
|
Interest expense
|
|
|
|
|
|
|
|
|
Interest on deposits
|
|
|
1,959
|
|
|
|
1,761
|
|
Interest on FHLB borrowings
|
|
|
372
|
|
|
|
230
|
|
Total interest expense
|
|
|
2,331
|
|
|
|
1,991
|
|
Net interest income
|
|
|
8,510
|
|
|
|
8,226
|
|
(Recovery of) provision for loan losses
|
|
|
(293
|
)
|
|
|
305
|
|
Net interest income after (recovery of) provision for loan losses
|
|
|
8,803
|
|
|
|
7,921
|
|
Non-interest income
|
|
|
|
|
|
|
|
|
Service charges on deposit accounts
|
|
|
134
|
|
|
|
123
|
|
Net gain on sale of available for sale securities
|
|
|
133
|
|
|
|
177
|
|
Net gain (loss) on sale of loans held for sale
|
|
|
47
|
|
|
|
4
|
|
Other fee income
|
|
|
220
|
|
|
|
163
|
|
Total non-interest income
|
|
|
534
|
|
|
|
467
|
|
Non-interest expense
|
|
|
|
|
|
|
|
|
Salaries and employee benefits
|
|
|
4,453
|
|
|
|
4,846
|
|
Professional services
|
|
|
439
|
|
|
|
427
|
|
Occupancy
|
|
|
600
|
|
|
|
565
|
|
Reversal of occupancy fair value discount
|
|
|
(225
|
)
|
|
|
-
|
|
Data processing and communications
|
|
|
894
|
|
|
|
698
|
|
FDIC assessment and bank fees
|
|
|
465
|
|
|
|
385
|
|
Bank franchise taxes
|
|
|
196
|
|
|
|
102
|
|
Student loan servicing fees and other loan expenses
|
|
|
755
|
|
|
|
671
|
|
Other real estate expenses, net
|
|
|
90
|
|
|
|
46
|
|
Supplies and equipment
|
|
|
286
|
|
|
|
318
|
|
Insurance
|
|
|
78
|
|
|
|
167
|
|
Director's fees
|
|
|
179
|
|
|
|
187
|
|
Marketing and business development
|
|
|
231
|
|
|
|
51
|
|
Other operating expenses
|
|
|
306
|
|
|
|
337
|
|
Total non-interest expense
|
|
|
8,747
|
|
|
|
8,800
|
|
Net income (loss) before income taxes
|
|
|
590
|
|
|
|
(412
|
)
|
Income taxes
|
|
|
-
|
|
|
|
-
|
|
Net income (loss)
|
|
$
|
590
|
|
|
$
|
(412
|
)
|
Basic net income (loss) per common share
|
|
$
|
0.09
|
|
|
$
|
(0.09
|
)
|
Diluted net income (loss) per common share
|
|
$
|
0.09
|
|
|
$
|
(0.09
|
)
|
Weighted average shares outstanding, basic
|
|
|
6,572,097
|
|
|
|
4,722,556
|
|
Weighted average shares outstanding, diluted
|
|
|
6,572,097
|
|
|
|
4,722,556
|
|
See Notes to the Consolidatd Financial Statements
Cordia Bancorp
Consolidated Statement of Comprenhensive
Income (Loss)
For the years ended December 31, (dollars
in thousands)
|
|
2015
|
|
|
2014
|
|
Net income (loss)
|
|
$
|
590
|
|
|
$
|
(412
|
)
|
|
|
|
|
|
|
|
|
|
Other comprehensive income (loss)
|
|
|
|
|
|
|
|
|
Unrealized securities losses arising during the period
|
|
|
(404
|
)
|
|
|
(309
|
)
|
Less: Reclassification adjustment for net secuirties gains included in net income (loss)
|
|
|
133
|
|
|
|
177
|
|
Add: Amortization of unrealized losses for securities transferred from available for sale to held to maturity
|
|
|
49
|
|
|
|
48
|
|
Total other comprehensive loss
|
|
|
(222
|
)
|
|
|
(84
|
)
|
|
|
|
|
|
|
|
|
|
Comprehensive income (loss)
|
|
$
|
368
|
|
|
$
|
(496
|
)
|
See Notes to the Consolidated Financial Statements
Consolidated Statements of Changes in Stockholders'
Equity
For the years ended December 31, 2015
and 2014 (dollars in thousands)
|
|
Preferred
Stock
|
|
|
Common
Stock -
Voting
|
|
|
Common
Stock -
Nonvoting
|
|
|
Additional
Paid-in
Capital
|
|
|
Retained
Deficit
|
|
|
Accumulated Other
Comprehensive
Income (Loss)
|
|
|
Total
|
|
Balance, December 31, 2013
|
|
$
|
-
|
|
|
$
|
28
|
|
|
$
|
-
|
|
|
$
|
18,648
|
|
|
$
|
(5,005
|
)
|
|
$
|
(384
|
)
|
|
$
|
13,287
|
|
Net loss
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(412
|
)
|
|
|
-
|
|
|
|
(412
|
)
|
Other comprehensive loss
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(84
|
)
|
|
|
(84
|
)
|
Issuance of preferred stock
|
|
|
14,135
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
14,135
|
|
Redemption of preferred stock
|
|
|
(14,135
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(14,135
|
)
|
Issuance of common stock
|
|
|
-
|
|
|
|
23
|
|
|
|
14
|
|
|
|
14,038
|
|
|
|
|
|
|
|
-
|
|
|
|
14,075
|
|
Stock-based compensation
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
270
|
|
|
|
-
|
|
|
|
-
|
|
|
|
270
|
|
Balance, December 31, 2014
|
|
$
|
-
|
|
|
$
|
51
|
|
|
$
|
14
|
|
|
$
|
32,956
|
|
|
$
|
(5,417
|
)
|
|
$
|
(468
|
)
|
|
$
|
27,136
|
|
Net income
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
590
|
|
|
|
-
|
|
|
|
590
|
|
Other comprehensive loss
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(222
|
)
|
|
|
(222
|
)
|
Repurchase of common stock
|
|
|
-
|
|
|
|
(1
|
)
|
|
|
-
|
|
|
|
(82
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
(83
|
)
|
Stock-based compensation
|
|
|
-
|
|
|
|
1
|
|
|
|
-
|
|
|
|
317
|
|
|
|
-
|
|
|
|
-
|
|
|
|
318
|
|
Balance, December 31, 2015
|
|
$
|
-
|
|
|
$
|
51
|
|
|
$
|
14
|
|
|
$
|
33,191
|
|
|
$
|
(4,827
|
)
|
|
$
|
(690
|
)
|
|
$
|
27,739
|
|
See Notes to the Consolidated Financial Statements
Cordia Bancorp
Consolidated Statements of Cash Flows
For the years ended December 31, 2015
and 2014 (dollars in thousands)
|
|
2015
|
|
|
2014
|
|
Cash flows from operating activities:
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
$
|
590
|
|
|
$
|
(412
|
)
|
Adjustments to reconcile net income/(loss) to net cash provided by (used in) operating activities
|
|
|
|
|
|
|
|
|
Net amortization of premium on investment securities
|
|
|
472
|
|
|
|
366
|
|
Purchase accounting accretion, net
|
|
|
(359
|
)
|
|
|
(291
|
)
|
Depreciation
|
|
|
306
|
|
|
|
294
|
|
Amortization of deferred loan costs and fees
|
|
|
464
|
|
|
|
163
|
|
(Recovery of) provision for loan losses
|
|
|
(293
|
)
|
|
|
305
|
|
Net gain on sale of available for sale securities
|
|
|
(133
|
)
|
|
|
(177
|
)
|
Gain on sale of other real estate owned
|
|
|
(21
|
)
|
|
|
-
|
|
Other real estate owned valuation adjustment
|
|
|
65
|
|
|
|
(13
|
)
|
Stock based compensation
|
|
|
318
|
|
|
|
270
|
|
Loans held for sale
|
|
|
|
|
|
|
|
|
Originations
|
|
|
(2,957
|
)
|
|
|
-
|
|
Proceeds
|
|
|
2,784
|
|
|
|
-
|
|
Net gain on sale
|
|
|
(47
|
)
|
|
|
-
|
|
Changes in assets and liabilities:
|
|
|
|
|
|
|
|
|
Increase in accrued interest receivable
|
|
|
(45
|
)
|
|
|
(385
|
)
|
Increase in other assets
|
|
|
(140
|
)
|
|
|
|
|
(Increase) decrease in accrued expenses and other liabilities
|
|
|
118
|
|
|
|
(92
|
)
|
Net cash provided by (used in) operating activities
|
|
|
1,122
|
|
|
|
28
|
|
Cash flows from investing activities:
|
|
|
|
|
|
|
|
|
Purchase of securities available for sale
|
|
|
(23,427
|
)
|
|
|
(58,624
|
)
|
Purchase of securities held to maturity
|
|
|
(7,677
|
)
|
|
|
(7,686
|
)
|
Purchases of restricted securities, net
|
|
|
(263
|
)
|
|
|
(1,018
|
)
|
Proceeds from sales, maturities, and paydowns of securities available for sale
|
|
|
30,202
|
|
|
|
29,458
|
|
Proceeds from payments/maturities of securities held to maturity
|
|
|
2,820
|
|
|
|
1,700
|
|
Proceeds from sale of other real estate owned
|
|
|
367
|
|
|
|
-
|
|
Net increase in commercial and consumer loans
|
|
|
(45,054
|
)
|
|
|
(29,713
|
)
|
Net decrease (increase) in purchased guaranteed student loans
|
|
|
11,023
|
|
|
|
(9,802
|
)
|
Improvements to other real estate owned
|
|
|
(6
|
)
|
|
|
(97
|
)
|
Purchase of premises and equipment
|
|
|
(1,845
|
)
|
|
|
(254
|
)
|
Net cash used in investing activities
|
|
|
(33,860
|
)
|
|
|
(76,036
|
)
|
Cash flows from financing activities:
|
|
|
|
|
|
|
|
|
Proceeds from sale of stock, net of stock issuance costs
|
|
|
-
|
|
|
|
14,075
|
|
Repurchase of common stock
|
|
|
(83
|
)
|
|
|
-
|
|
Net increase in demand savings, interest-bearing checking and money market deposits
|
|
|
21,973
|
|
|
|
30,067
|
|
Net increase in time deposits
|
|
|
2,468
|
|
|
|
24,722
|
|
Proceeds from FHLB advances
|
|
|
5,000
|
|
|
|
15,000
|
|
Net cash provided by investing activities
|
|
|
29,358
|
|
|
|
83,864
|
|
Net increase (decrease) in cash and cash equivalents
|
|
|
(3,380
|
)
|
|
|
7,856
|
|
Cash and cash equivalents, beginning of period
|
|
|
21,840
|
|
|
|
13,984
|
|
Cash and cash equivalents, end of period
|
|
$
|
18,460
|
|
|
$
|
21,840
|
|
Supplemental disclosure of cash flow information
|
|
|
|
|
|
|
|
|
Cash payments for interest
|
|
$
|
2,295
|
|
|
$
|
1,973
|
|
Supplemental disclosure of noninvesting activities
|
|
|
|
|
|
|
|
|
Unrealized gains (losses) on securities available for sale
|
|
$
|
(271
|
)
|
|
$
|
(132
|
)
|
Amortization of unrealized losses transferred from available for sale to held to maturity
|
|
$
|
49
|
|
|
$
|
48
|
|
Loans transferred to other real estate owned
|
|
$
|
634
|
|
|
$
|
83
|
|
See Notes to the Consolidated Financial Statements
Cordia Bancorp
Notes to Consolidated Financial Statements
Note 1. Organization and Summary of Significant Accounting Policies
Organization
Cordia Bancorp Inc. (“Company”
or “Cordia”) was incorporated in 2009 by a team of former bank CEOs, directors and advisors seeking to invest in undervalued
community banks in the Mid-Atlantic and Southeast. The Company was approved as a bank holding company by the Board of Governors
of the Federal Reserve in November 2010 and granted the authority to purchase a majority interest in Bank of Virginia (“Bank”
or “BVA”) at that time.
On December 10, 2010, Cordia purchased $10.3
million of BVA’s common stock at a price of $7.60 per Bank share, resulting in the ownership of 59.8% of the outstanding
shares. On August 28, 2012, Cordia purchased an additional $3.0 million of BVA common stock at a price of $3.60 per share.
On March 29, 2013, the Company completed a
share exchange with the Bank resulting in the Bank becoming a wholly owned subsidiary of the Company. Under the terms of the Agreement
and Plan of Share Exchange between the Company and the Bank, each outstanding share of the Bank’s common stock owned by
persons other than the Company were exchanged for 0.664 of a share of the Company’s common stock. Shares of the Company’s
stock are listed on the Nasdaq Stock Market under the symbol “BVA”. The Company has owned 100.0% of the Bank’s
shares since the completion of the exchange.
On April 10, 2014, Cordia completed the sale
of approximately 363 shares of Mandatorily Convertible, Noncumulative, Nonvoting, Perpetual Preferred Stock, Series A, $0.01 par
value per share, to accredited investors at a purchase price of $42,500 per share for total gross proceeds of $15.4 million. The
capital raise included investments by 100% of Cordia’s directors. The net proceeds of the offering are being used primarily
to support the second phase of its organic growth strategy in BVA.
On June 25, 2014, upon stockholder approval,
each share of Series A Preferred Stock mandatorily converted into 10,000 shares of Cordia’s common stock at a conversion
price of $4.25 per share, for a total issuance of approximately 3,629,871 new shares of common stock, of which 2,229,434 are voting
and 1,400,437 are nonvoting. The holders of the Series A Preferred Stock did not receive any dividends under the provisions of
the stock purchase agreements.
On May 20, 2015, Cordia announced that it
had authorized a stock repurchase program to acquire up to $500,000 of the Company’s outstanding common stock. Repurchase
will be conducted through open market purchases or through privately negotiated transactions and will be made from time to time
depending on market conditions and other factors. As of December 31, 2015, the Company had repurchased 21,200 shares.
Cordia’s principal business is the ownership
of BVA. Because Cordia does not have any business activities separate from the operations of BVA, the information in this document
regarding the business of Cordia reflects the activities of Cordia and BVA on a consolidated basis. References to “we”
and “our” in this document refer to Cordia and BVA, collectively.
The Bank was organized under the laws of the
Commonwealth of Virginia to engage in a general banking business serving the communities in and around the Richmond, Virginia
metropolitan area. The Bank commenced regular operations on January 12, 2004, and is a member of the Federal Reserve System, Federal
Deposit Insurance Corporation and the Federal Home Loan Bank of Atlanta. The Bank is subject to the regulations of the Federal
Reserve System and the State Corporation Commission of Virginia. Consequently, it undergoes periodic examinations by these regulatory
authorities.
Principles of Consolidation
The accompanying consolidated financial statements
include all accounts of the Company and the Bank. All material intercompany balances and transactions have been eliminated in
consolidation.
Prior to the completion of the share exchange
in March 2013, the non-controlling interest reflected the ownership interest of the minority shareholders of the Bank. Items of
income and other comprehensive income applicable to Bank operations were allocated to the non-controlling interest account based
on the ownership percentage of the minority shareholders. Subsequent to the exchange, the non-controlling interest is no longer
reflected in the consolidated financial statements of the Company, as the Bank is a wholly-owned subsidiary.
Cordia Bancorp
Notes to Consolidated Financial Statements
(continued)
Summary of Significant Accounting Policies
The accounting and reporting policies of the
Company are in accordance with accounting principles generally accepted in the United States of America and conform to general
practices within the banking industry. The more significant of these policies are summarized below.
(a) Use of Estimates
In preparing financial statements in conformity
with accounting principles generally accepted in the United States of America, management is required to make estimates and assumptions
that affect the reported amounts of assets and liabilities as of the date of the balance sheet and reported amounts of revenues
and expenses during the reporting period. Actual results could differ from those estimates. Material estimates that are particularly
susceptible to significant change in the near term relate to the determination of the allowance for loan losses, the valuation
of deferred tax assets, the valuation of other real estate owned, intangible assets, acquired loans with specific credit-related
deterioration and fair value measurements.
(b) Cash and Cash Equivalents
For purposes of the statement of cash flows,
cash and cash equivalents include cash on hand, amounts due from banks and federal funds sold. Generally, federal funds are purchased
and sold for one day periods.
(c) Securities
Debt securities that management has the positive
intent and ability to hold to maturity are classified as “held to maturity” and recorded at amortized cost. Securities
not classified as held to maturity, including equity securities with readily determinable fair values, are classified as “available
for sale” and recorded at estimated fair value. Other securities, such as Federal Reserve Bank stock and Federal Home Loan
Bank stock, are carried at cost and are listed on the balance sheet as restricted securities.
In estimating other than temporary impairment
losses management considers, (1) the length of time and extent to which the fair value has been less than cost, (2) the financial
condition and near term prospects of the issuer, and (3) our ability to retain our investment for a period of time sufficient
to allow for any anticipated recovery in fair value.
Impairment of securities occurs when the fair
value of a security is less than its amortized cost. For debt securities, impairment is considered other-than-temporary and recognized
in its entirety in net income if either (1) the Company intends to sell the security or (2) it is more likely than not that the
Company will be required to sell the security before recovery of its amortized cost basis. If, however, the Company does not intend
to sell the security and it is not more-than-likely that the Company will be required to sell the security before recovery, management
must determine what portion of the impairment is attributable to a credit loss, which occurs when the amortized cost of the security
exceeds the present value of the cash flows expected to be collected from the security. If there is no credit loss, there is no
other-than-temporary impairment. If there is a credit loss, other-than-temporary impairment exists, and the credit loss must be
recognized in net income and the remaining portion of impairment must be recognized in other comprehensive income.
For equity securities carried at cost as restricted
securities, impairment is considered to be other-than-temporary based on our ability and intent to hold the investment until a
recovery of value. Other-than-temporary impairment of an equity security results in a write-down that must be included in income.
The Company regularly reviews each security for other-than-temporary impairment based on criteria that include the extent to which
costs exceed market price, the duration of that market decline, the financial health of and specific prospects for the issuer,
management’s best estimate of the present value of cash flows expected to be collected on these debt securities, the Company’s
intention with regard to holding the security to maturity and the likelihood that the Company would be required to sell the security
before recovery. The Company adjusts amortization or accretion on each bond on a level yield basis monthly.
Cordia Bancorp
Notes to Consolidated Financial Statements
(continued)
(d) Loans Held For Sale
Secondary market mortgage loans are
designated as held for sale at the time of their origination. These loans are pre-sold with servicing released and the
Company does not retain any interest after the loans are sold. These loans consist primarily of fixed-rate, single-family
residential mortgage loans which meet the underwriting characteristics of certain government–sponsored enterprises
(conforming loans). In addition, the Company requires a firm purchase commitment from a permanent investor before a loan can
be committed, thus limiting interest rate risk. Loans held for sale are carried at the lower of cost or fair value. Gains on
sales of loans are recognized at the loan closing date and are included in noninterest income. The company had $220 thousand
of loans held for sale as of December 31, 2015 and no loans classified as held for sale as of December 31, 2014.
(e) Loans
The Company grants commercial and consumer
loans to customers. A substantial portion of the loan portfolio is represented by commercial loans throughout the greater Richmond,
Virginia metropolitan area. The ability of the Bank’s debtors to honor their contracts is dependent upon numerous factors
including the collateral performance, general economic conditions, as well as the underlying strength of borrowers and guarantors.
Loans that management has the intent and ability
to hold for the foreseeable future or until maturity or pay-off are generally reported at their outstanding unpaid principal balances
adjusted for the allowance for loan losses and net deferred fees and costs. Interest income is accrued on the unpaid principal
balance. Loan origination and commitment fees and certain direct costs are deferred and the net amount is amortized as an adjustment
of the related loan’s yield. The Bank is amortizing these amounts on an effective interest method over the loan’s
contractual life or to the pay-off date if the balance is repaid prior to maturity. Loans are recorded based on purpose, collateral
and repayment period. Interest is calculated on a 365/360 for commercial loans and 365/365 for consumer loans. Interest is accrued
on a daily basis.
The Company was licensed by the U.S. Department
of Education as a rehabilitated student lender effective November 2012. In the first quarter of 2013, the Company began purchasing
rehabilitated student loans guaranteed by the U.S. Department of Education. The guarantee covers approximately 98% of principal
and accrued interest. The unguaranteed principal balance of these loans was approximately $1.1 million at December 31, 2015 and
$1.3 million at December 31, 2014. The company ceased purchasing rehabilitated, federally guaranteed student loans in April 2014.
The past due status of a loan is based on
the contractual due date of the most delinquent payment due. Each loan will be placed in one of the following categories: current,
1-29 days past due, 30-59 days past due, 60-89 days past due and 90 days and over past due. Generally, the accrual of interest
on a loan is discontinued at the time the loan becomes 90 days delinquent unless the credit is well-secured and in process of
collection or refinancing. Due to the guaranty by the U.S. Department of Education, Guaranteed Student Loans continue to accrue
interest up until charged-off.
Loans are placed on nonaccrual status when
management believes the full collection of the principal and interest is doubtful. A delinquent loan is generally placed in nonaccrual
status when:
|
·
|
principal
and/or interest is past due for 90 days or more, unless the loan is well-secured and
in the process of collection;
|
|
·
|
the
financial strength of the borrower or a guarantor has materially declined;
|
|
·
|
collateral
value has declined; or
|
|
·
|
other
facts would make the repayment in full of principal and interest unlikely.
|
When a loan is placed on nonaccrual, all interest
which has been accrued is charged back against current earnings as a reduction in interest income, which adversely affects the
yield on loans in the period of reversal. No additional interest is accrued on the loan balance until the collection of both principal
and interest becomes reasonably certain.
Loans placed on non-accrual status may, at
the lenders discretion, be returned to accrual status after:
|
·
|
payments
are received for a reasonable period in accordance with the loan documents (typically for six (6) months), and any doubt as to
the loan's full collectability has been removed; or
|
|
·
|
the
troubled loan is restructured and, evidenced by a credit evaluation of the borrower's financial condition and the prospects for
full payment are good.
|
Government Guaranteed Student loans with a
past due balance greater than 90 days are not placed on non-accrual. When a loan reaches 120 days past due, the non-guaranteed
portion of the loan is charged-off. A claim is filed with the guarantor when the loan becomes 270 days past due. Interest
continues to accrue until charge-off. The guarantor’s payment covers approximately 98% of principal and accrued interest.
Cordia Bancorp
Notes to Consolidated Financial Statements
(continued)
When a loan is returned to accrual status
after restructuring, the pre-restructuring risk rating is maintained until a satisfactory payment history is re-established. Returning
non-accrual loans to an accrual status requires the prior written approval of the Chief Credit Officer.
In situations where, for economic or legal
reasons related to a borrower’s financial condition, management may grant a concession to the borrower that it would not
otherwise consider, the related loan is classified as a troubled debt restructuring (TDR). Management strives to identify borrowers
in financial difficulty early and work with them to modify their loan to more affordable terms before their loan reaches nonaccrual
status. These modified terms may include rate reductions, principal forgiveness, payment forbearance, re-amortization, and other
actions intended to minimize the economic loss and to avoid foreclosure or repossession of the collateral. In cases where borrowers
are granted new terms that provide for a reduction of either interest or principal, management measures any impairment on the
restructuring as noted below for impaired loans. There were no loans classified as a TDR as of December 3l, 2015. There were four
loans with an aggregate principal balance of $1.3 million classified as TDRs as of December 31, 2014.
Acquired loans with specific credit deterioration
are accounted for by Cordia in accordance with FASB Accounting Standards Codification 310-30. Certain acquired loans, those for
which specific credit-related deterioration, since origination, is identified, are recorded at fair value reflecting the present
value of the amounts expected to be collected. Income recognition on these loans is based on a reasonable expectation about the
timing and amount of cash flows to be collected. Acquired loans deemed impaired and considered collateral dependent, with the
timing of the sale of loan collateral indeterminate, remain on non-accrual status and have no accretable yield.
The difference between contractually required
payments at acquisition and the cash flows expected to be collected at acquisition is referred to as the “nonaccretable
difference,” and is not recorded. Any excess of cash flows expected at acquisition over the estimated fair value is referred
to as the accretable yield and is recognized as interest income over the remaining life of the loan when there is a reasonable
expectation about the amount and timing of such cash flows. Subsequent decreases to the expected cash flows will generally result
in a provision for loan losses, while subsequent increases in cash flows may result in a reversal of post-acquisition provision
for loan losses, or a transfer from nonaccretable difference to accretable yield.
(f) Allowance for Loan Losses
The allowance for loan losses (“ALLL”)
is increased by charges to income and decreased by charge-offs, net of recoveries. The ALLL is established and maintained at a
level management deems adequate to cover probable losses inherent in the portfolio as of the balance sheet date and is based on
management’s evaluation of the risks in the loan portfolio and changes in the nature and volume of loan activity. There
are risks inherent in all loans, so an ALLL is maintained for loans to absorb probable losses on existing loans that may become
uncollectible. The ALLL is established and maintained as losses are estimated to have occurred through a provision for loan losses
charged to earnings, which increases the balance of the ALLL. Loan losses for all segments are charged against the ALLL when management
believes the uncollectability of a loan is confirmed, which decreases the balance of the ALLL. Subsequent recoveries, if any,
are credited back to the ALLL.
The amount of the ALLL is established through
the application of a standardized model, the components of which are: an impairment analysis of specific loans to determine the
level of any specific reserves needed and an estimate of the general reserves needed which consists of a weighted average of historical
loss experience and adjustments for economic and environmental factors.
The allowance for loan losses is evaluated
on a regular basis by management and is based upon management’s periodic review of the collectability of the loans in light
of historical experience, the nature and volume of the loan portfolio, adverse situations that may affect the borrower’s
ability to repay, estimated value of any underlying collateral and prevailing economic conditions. This evaluation is inherently
subjective as it requires estimates that are susceptible to significant revision as more information becomes available.
In order for the ALLL methodology to be considered
valid and for Management to make the determination if any deficiencies exist in the process, the Bank at a minimum requires:
Cordia Bancorp
Notes to Consolidated Financial Statements
(continued)
|
-
|
A review
of trends in loan volume, delinquencies, restructurings and concentrations;
|
|
-
|
Tests of source
documents and underlying assumptions to determine that the established methodology develops reasonable loss estimates; and
|
|
-
|
An evaluation of
the appraisal process of the underlying collateral which may be accomplished by periodically comparing the appraised value
to the actual sales price on selected properties sold.
|
|
-
|
Accurate loan risk
ratings
|
Note 4 includes an additional discussion of
how the ALLL is quantified. The use of various estimates and judgments in the Bank’s ongoing evaluation of the required
level of ALLL can significantly affect the Bank’s results of operations and financial condition and may result in either
greater provisions against earnings to increase the ALLL or reduced provisions based upon management’s current view of portfolio
and economic conditions and the application of revised estimates and assumptions.
The specific component of the ALLL relates
to loans that are classified as either doubtful, substandard or TDR. For such loans that are also classified as impaired, a loan
level allowance is established. The evaluation of the need for a specific reserve involves the identification of impaired loans
and an analysis of those loans’ repayment capacity from both primary (cash flow) and secondary (real estate and non-real
estate collateral or guarantors) sources and making specific reserve allocations to impaired loans that exhibit inherent weaknesses
and various other elevated credit risk factors. All available collateral is analyzed and valued, with discounts applied according
to the age of any real estate appraisals or the liquidity of other asset classes. The analysis is compared to the aggregate Bank
loan exposure, giving consideration to the Bank’s lien preference and other actual and contingent obligations of the borrower.
Any loan guarantors are rated and their value weighted based on an analysis of the guarantor’s net worth, including liabilities,
liquid assets, and annual cash flows and total contingent liabilities.
A loan is considered impaired when it is probable
that the Bank will be unable to collect all amounts when due according to the contractual terms of the loan agreement. We do not
consider a loan impaired during a period of insignificant delay in payment if we expect the ultimate collection of all amounts
due. Impairment is measured as the difference between the recorded investment in the loan and the evaluation of the present value
of expected future cash flows or the observable market price of the loan or collateral value of the impaired loan when that cash
flow or collateral value is lower than the carrying value of that loan. Loans that are collateral dependent, that is, loans where
repayment is expected to be provided solely by the underlying collateral, and for which management has determined foreclosure
is probable, are measured for impairment based on the fair value of the collateral as described above.
The general component covers pass rated loans
and special mention loans and is based on historical loss experience adjusted for qualitative factors.
The model estimates probable loan losses by
analyzing historical loss experience and other trends within the portfolio, including trends in delinquencies and charge-offs,
the opinions of regulators, changes in the growth rate, size and composition of the loan portfolio, particularly the level of
Special Mention rated loans, the level of past due loans, the level of home equity loans and commercial real estate loans in aggregate
and as a percentage of capital, and industry information.
A component of the general reserve for unimpaired
loans is established based on a weighted average historical loss factor for the prior twelve quarters (with more weight given
to the more recent quarters) and the level of unimpaired loans. Management applies a 45% weighting to the most recent four quarters,
a 35% weighting to the next four quarters and a 20% weighting to the most distant four of the prior twelve quarters when calculating
this component of the general reserve.
Also included in management’s estimates
for loan losses are considerations with respect to the impact of local and national economic trends, the outcomes of which are
uncertain. These events may include, but are not limited to, a general slowdown in the national or local economy, national and
local unemployment rates, local real estate values, fluctuations in overall lending rates, political conditions, legislation that
may directly or indirectly affect the banking industry and economic conditions affecting the specific geographic area in which
the Bank conducts business.
Cordia Bancorp
Notes to Consolidated Financial Statements
(continued)
(g) Premises and Equipment
Premises and equipment are stated at cost
less accumulated depreciation. Depreciation is computed using the straight-line method over the assets' estimated useful lives.
Estimated useful lives range from 10 to 30 years for buildings and 3 to 10 years for autos, furniture, fixtures and equipment.
The value of land is carried at cost.
(h) Other Real Estate Owned
Assets acquired through loan foreclosure are
held for sale. They are initially recorded at fair value at the date of foreclosure, less estimated selling costs thus establishing
a new cost basis. Subsequent to foreclosure, valuations of the assets are periodically performed by management. Adjustments are
made to the lower of the carrying amount or fair value of the assets less selling costs. Revenue and expenses from operations
and sales are included in other real estate expenses, net in the statement of operations. The Bank’s investment in foreclosed
assets totaled $1.9 million and $1.6 million at December 31, 2015 and 2014, respectively.
(i) Goodwill and Other Intangibles
FASB ASC 805, Business Combinations, requires
that the acquisition method of accounting be used for all business combinations. With acquisitions, the Company is required to
record assets acquired, including any intangible assets, and liabilities assumed at fair value, which involves relying on estimates
based on third party valuations, such as appraisals, or internal valuations based on discounted cash flow analysis or other valuation
methods. The Company records goodwill per ASC 350, Intangibles-Goodwill and Others. Accordingly, goodwill is no longer subject
to amortization over its estimated useful life, but is subject to at least an annual assessment for impairment by applying a fair
value-based test. Additionally, under ASC 350, acquired intangible assets (such as core deposit intangibles) are separately recognized
if the benefit of the assets can be sold, transferred, licensed, rented, or exchanged, and amortized over their useful lives.
Goodwill was determined to be impaired in December 2011 at the annual impairment evaluation and was written off in its entirely
at that time. Core deposit intangibles of $68 thousand and $104 thousand are included in other assets at December 31, 2015 and
2014, respectively.
(j) Income Taxes
Deferred taxes are provided on a liability
method whereby deferred tax assets are recognized for deductible temporary differences, operating loss carryforwards, and tax
credit carryforwards. Deferred tax liabilities are recognized for taxable temporary differences.
Temporary differences are the differences
between the reported amounts of assets and liabilities and their tax bases. Deferred tax assets and liabilities are adjusted for
the effects of changes in tax laws and rates on the date of enactment. Deferred tax assets are reduced by a valuation allowance
when, in the opinion of management, the recognition of the asset is less than probable. A valuation allowance has been recorded
against the Company’s entire net deferred tax asset.
When tax returns are filed, it is highly certain
that some positions taken would be sustained upon examination by the taxing authorities, while others are subject to uncertainty
about the merits of the positions taken or the amount of the position that would be ultimately sustained. The benefit of a tax
position is recognized in the financial statements in the period during which, based on all available evidence, management believes
it is more likely than not that the position will be sustained upon examination, including the resolution of appeals or litigation
processes, if any. Tax positions taken are not offset or aggregated with other positions. Tax positions that meet the more-likely-than-not
recognition threshold are measured as the largest amount of tax benefit that is more than 50 percent likely of being realized
upon settlement with the applicable taxing authority. The portion of the benefits associated with tax positions taken that exceeds
the amount measured as described above is recognized as a liability for unrecognized tax benefits in the accompanying balance
sheets along with any associated interest and penalties that would be payable to the taxing authorities upon examination. As of
December 31, 2015 and 2014, the Company had recorded no such liability.
Banks operating in Virginia are not subject
to Virginia State Income Tax, but are subjected to Virginia Bank Franchise Taxes.
Cordia Bancorp
Notes to Consolidated Financial Statements
(continued)
(k) Marketing Costs
The Company follows the policy of charging
the production costs of marketing/advertising to expense as incurred unless the advertising campaign extends for a significant
time period, in which case, such costs will be amortized to expense over the duration of the advertising campaign.
(l) Comprehensive Income (Loss)
Accounting principles generally require that
recognized revenue, expenses, gains and losses be included in net income (loss). Although certain changes in assets and liabilities,
such as unrealized gains and losses on available for sale securities, are reported as a separate component of the equity section
of the balance sheet, such items, along with net income (loss), are components of comprehensive income (loss).
(m) Earnings Per Share
Basic earnings per share represents income
available to common shareholders divided by the weighted-average number of common shares outstanding during the period.
Diluted earnings per share reflect additional common shares that would have been outstanding if dilutive potential common shares
had been issued, as well as any adjustment to income that would result from the assumed issuance.
Options to purchase 125 thousand and 145 thousand
shares of the Company’s common stock were not included in the computation of earnings per share in 2015 or 2014, respectively,
because the share award prices exceeded the average market price of the Company’s common stock and therefore, the effect
would have been anti-dilutive. The effect would also have been anti-dilutive in 2014 due to the loss.
For the years ended December 31, 2015 and
2014, 578,125 shares of unvested common stock were excluded from the computation of basic and diluted earnings per common share
as they are performance based and deemed unlikely to vest. All other vested and nonvested restricted common shares, which carry
all rights and privilege of a stockholder with respect to the stock, including the right to vote, were included in both the basic
and diluted earnings per common share calculations.
The calculation for basic and diluted earnings
per common share for the years ended December 31, are as follows:
(dollars in thousands)
|
|
2015
|
|
|
2014
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
$
|
590
|
|
|
$
|
(412
|
)
|
|
|
|
|
|
|
|
|
|
Weighted average common shares outstanding, basic
|
|
|
6,572,097
|
|
|
|
4,722,556
|
|
|
|
|
|
|
|
|
|
|
Dilutive effect of stock options
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Weighted average common shares outstanding, diluted
|
|
|
6,572,097
|
|
|
|
4,722,556
|
|
|
|
|
|
|
|
|
|
|
Basic income (loss) per common share
|
|
$
|
0.09
|
|
|
$
|
(0.09
|
)
|
|
|
|
|
|
|
|
|
|
Diluted income (loss) per common share
|
|
$
|
0.09
|
|
|
$
|
(0.09
|
)
|
(n) Stock Option Plan
Authoritative accounting guidance requires
the costs resulting from all share-based payments to employees be recognized in the financial statements. For stock option grants,
stock-based compensation is estimated at the date of grant, using the Black-Scholes option valuation model for determining fair
value. Restricted stock grants are expensed based on the grant date fair value of the Company’s common stock. The Company
recognized stock-based compensation expense of $318 thousand and $270 thousand in 2015 and 2014, respectively.
Cordia Bancorp
Notes to Consolidated Financial Statements
(continued)
(o) Fair Value Measurements
Fair values of financial instruments are estimated
using relevant market information and other assumptions as more fully disclosed in Note 14. Fair value estimates involve uncertainties
and matters of significant judgment. Changes in assumptions or market conditions could significantly affect the estimates.
(p) Transfer of Assets
Transfers of financial assets are accounted
for as sales when control over the assets has been surrendered. Control over transferred assets is deemed to be surrendered when
1) the assets have been isolated from the Company – put presumptively beyond the reach of the transferor and its creditors,
even in bankruptcy or other receivership; 2) the transferee obtains the right (free of conditions that constrain it from taking
advantage of that right) to pledge or exchange the transferred assets; and 3) the Company does not maintain effective control
over the transferred assets through an agreement to repurchase them before their maturity of the ability to unilaterally cause
the holder to return specified assets.
(q) Reclassification
In certain circumstances, reclassifications
have been made to prior period information to conform to the 2015 presentation. Such reclassifications had no effect on previously
reported stockholders’ equity or net income or loss.
Recent Accounting Pronouncements
In June 2014, the FASB issued ASU No. 2014-12,
“Compensation – Stock Compensation (Topic 718): Accounting for Share-Based Payments When the Terms of an Award Provide
That a Performance Target Could Be Achieved after the Requisite Service Period.” The new guidance applies to reporting entities
that grant employees share-based payments in which the terms of the award allow a performance target to be achieved after the
requisite service period. The amendments in the ASU require that a performance target that affects vesting and that could be achieved
after the requisite service period be treated as a performance condition. Existing guidance in “Compensation – Stock
Compensation (Topic 718),” should be applied to account for these types of awards. The amendments in this ASU are effective
for annual periods and interim periods within those annual periods beginning after December 15, 2015. Early adoption is permitted
and reporting entities may choose to apply the amendments in the ASU either on a prospective or retrospective basis. The Company
does not expect the adoption of ASU 2014-12 to have a material impact on its consolidated financial statements.
In August 2014, the FASB issued ASU No. 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 is intended to provide guidance about management’s responsibility
to evaluate whether there is substantial doubt about an entity’s ability to continue as a going concern and to provide related
footnote disclosures. Management is required under the new guidance to evaluate whether there are conditions or events, considered
in the aggregate, that raise substantial doubt about the entity’s ability to continue as a going concern within one year
after the date the financial statements are issued when preparing financial statements for each interim and annual reporting period.
If conditions or events are identified, the ASU specifies the process that must be followed by management and also clarifies the
timing and content of going concern footnote disclosures in order to reduce diversity in practice. The amendments in this ASU
are effective for annual periods and interim periods within those annual periods beginning after December 15, 2016. Early adoption
is permitted. The Company does not expect the adoption of ASU 2014-15 to have a material impact on its consolidated financial
statements.
Cordia Bancorp
Notes to Consolidated Financial Statements
(continued)
In November 2014, the FASB issued ASU No.
2014-16, “Derivatives and Hedging (Topic 815): Determining Whether the Host Contract in a Hybrid Financial Instrument Issued
in the Form of a Share Is More Akin to Debt or to Equity.” The amendments in ASU do not change the current criteria in U.S.
GAAP for determining when separation of certain embedded derivative features in a hybrid financial instrument is required. The
amendments clarify how current U.S. GAAP should be interpreted in evaluating the economic characteristics and risks of a host
contract in a hybrid financial instrument that is issued in the form of a share. Specifically, the amendments clarify that an
entity should consider all relevant terms and features, including the embedded derivative feature being evaluated for bifurcation,
in evaluating the nature of the host contract. Furthermore, the amendments clarify that no single term or feature would necessarily
determine the economic characteristics and risks of the host contract. Rather, the nature of the host contract depends upon the
economic characteristics and risks of the entire hybrid financial instrument. The amendments in this ASU also clarify that, in
evaluating the nature of a host contract, an entity should assess the substance of the relevant terms and features (i.e., the
relative strength of the debt-like or equity-like terms and features given the facts and circumstances) when considering how to
weight those terms and features. The amendments in this ASU are effective for public business entities for fiscal years, and interim
periods within those fiscal years, beginning after December 15, 2015. Early adoption, including adoption in an interim period,
is permitted. The Company does not expect the adoption of ASU 2014-16 to have a material impact on its consolidated financial
statements.
In January 2015, the FASB issued ASU No. 2015-01,
“Income Statement—Extraordinary and Unusual Items (Subtopic 225-20): Simplifying Income Statement Presentation by
Eliminating the Concept of Extraordinary Items.” The amendments in this ASU eliminate from U.S. GAAP the concept of extraordinary
items. Subtopic 225-20, Income Statement - Extraordinary and Unusual Items, required that an entity separately classify, present,
and disclose extraordinary events and transactions. Presently, an event or transaction is presumed to be an ordinary and usual
activity of the reporting entity unless evidence clearly supports its classification as an extraordinary item. If an event or
transaction meets the criteria for extraordinary classification, an entity is required to segregate the extraordinary item from
the results of ordinary operations and show the item separately in the income statement, net of tax, after income from continuing
operations. The entity also is required to disclose applicable income taxes and either present or disclose earnings-per-share
data applicable to the extraordinary item. The amendments in this ASU are effective for fiscal years, and interim periods within
those fiscal years, beginning after December 15, 2015. A reporting entity may apply the amendments prospectively. A reporting
entity also may apply the amendments retrospectively to all prior periods presented in the financial statements. Early adoption
is permitted provided that the guidance is applied from the beginning of the fiscal year of adoption. The Company does not expect
the adoption of ASU 2015-01 to have a material impact on its consolidated financial statements.
In February 2015, the FASB issued ASU No.
2015-02, “Consolidation (Topic 810): Amendments to the Consolidation Analysis.” The amendments in this ASU are intended
to improve targeted areas of consolidation guidance for legal entities such as limited partnerships, limited liability corporations,
and securitization structures (collateralized debt obligations, collateralized loan obligations, and mortgage-backed security
transactions). In addition to reducing the number of consolidation models from four to two, the new standard simplifies the FASB
Accounting Standards Codification™ and improves current GAAP by placing more emphasis on risk of loss when determining a
controlling financial interest, reducing the frequency of the application of related-party guidance when determining a controlling
financial interest in a variable interest entity (VIE), and changing consolidation conclusions for public and private companies
in several industries that typically make use of limited partnerships or VIEs. The amendments in this ASU are effective for public
business entities 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. ASU 2015-02 may be applied retrospectively in previously issued financial
statements for one or more years with a cumulative-effect adjustment to retained earnings as of the beginning of the first year
restated. The Company does not expect the adoption of ASU 2015-02 to have a material impact on its consolidated financial statements.
In April 2015, the FASB issued ASU No. 2015-03,
“Interest – Imputation of Interest (Subtopic 835-30): Simplifying the Presentation of Debt Issuance Costs.”
The amendments in this ASU are intended to simplify the presentation of debt issuance costs. These amendments require that debt
issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from the carrying
amount of that debt liability, consistent with debt discounts. The recognition and measurement guidance for debt issuance costs
are not affected by the amendments in this ASU. The amendments in this ASU are effective for public business entities for financial
statements issued for fiscal years beginning after December 15, 2015, and interim periods within those fiscal years. Early adoption
is permitted for financial statements that have not been previously issued. The Company does not expect the adoption of ASU 2015-03
to have a material impact on its consolidated financial statements.
Cordia Bancorp
Notes to Consolidated Financial Statements
(continued)
In April 2015, the FASB issued ASU No. 2015-05,
“Intangibles - Goodwill and Other - Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Fees Paid in
a Cloud Computing Arrangement.” The amendments in this ASU provide guidance to customers about whether a cloud computing
arrangement includes a software license. If a cloud computing arrangement includes a software license, then the customer should
account for the software license element of the arrangement consistent with the acquisition of other software licenses. If a cloud
computing arrangement does not include a software license, the customer should account for the arrangement as a service contract.
The amendments do not change the accounting for a customer’s accounting for service contracts. As a result of the amendments,
all software licenses within the scope of Subtopic 350-40 will be accounted for consistent with other licenses of intangible assets.
The amendments in this ASU are effective for public business entities for annual periods, including interim periods within those
annual periods, beginning after December 15, 2015. Early adoption is permitted. An entity can elect to adopt the amendments either:
(1) prospectively to all arrangements entered into or materially modified after the effective date; or (2) retrospectively. The
Company does not expect the adoption of ASU 2015-05 to have a material impact on its consolidated financial statements.
In May 2015, the FASB issued ASU No. 2015-08,
“Business Combinations (Topic 805): Pushdown Accounting – Amendments to SEC Paragraphs Pursuant to Staff Accounting
Bulletin No. 115.” The amendments in ASU 2015-08 amend various SEC paragraphs pursuant to the issuance of Staff Accounting
Bulletin No. 115, Topic 5: Miscellaneous Accounting, regarding various pushdown accounting issues, and did not have a material
impact on the Company’s consolidated financial statements.
In August 2015, the FASB issued ASU No. 2015-14,
“Revenue from Contracts with Customers (Topic 606): Deferral of Effective Date.” The amendments in ASU 2015-14 defer
the effective date of ASU 2014-09 for all entities by one year. Public business entities, certain not-for-profit entities, and
certain employee benefit plans should apply the guidance in ASU 2014-09 to annual reporting periods beginning after December 15,
2017, including interim reporting periods within that reporting period. Earlier application is permitted only as of annual reporting
periods beginning after December 15, 2016, including interim reporting periods within that reporting period. All other entities
should apply the guidance in ASU 2014-09 to annual reporting periods beginning after December 15, 2018, and interim reporting
periods within annual reporting periods beginning after December 15, 2019. All other entities may apply the guidance in ASU 2014-09
earlier as of an annual reporting period beginning after December 15, 2016, including interim reporting periods within that reporting
period. All other entities also may apply the guidance in ASU 2014-09 earlier as of an annual reporting period beginning after
December 15, 2016, and interim reporting periods within annual reporting periods beginning one year after the annual reporting
period in which the entity first applies the guidance in ASU 2014-09. The Company does not expect the adoption of ASU 2015-14
(or ASU 2014-09) to have a material impact on its consolidated financial statements.
In August 2015, the FASB issued ASU 2015-15,
“Interest – Imputation of Interest (Subtopic 835-30) – Presentation and Subsequent Measurement of Debt Issuance
Costs Associated with Line-of-Credit Arrangements (Amendments to SEC Paragraphs Pursuant to Staff Announcement at June 18, 2015
EITF Meeting).” On April 7, 2015, the FASB issued ASU 2015-03, Interest—Imputation of Interest (Subtopic 835-30):
Simplifying the Presentation of Debt Issuance Costs, which requires entities to present debt issuance costs related to a recognized
debt liability as a direct deduction from the carrying amount of that debt liability. The guidance in ASU 2015-03 (see paragraph
835-30-45-1A) does not address presentation or subsequent measurement of debt issuance costs related to line-of-credit arrangements.
Given the absence of authoritative guidance within ASU 2015-03 for debt issuance costs related to line-of-credit arrangements,
the SEC staff stated that they would not object to an entity deferring and presenting debt issuance costs as an asset and subsequently
amortizing the deferred debt issuance costs ratably over the term of the line-of-credit arrangement, regardless of whether there
are any outstanding borrowings on the line-of-credit arrangement. ASU 2015-15 adds these SEC comments to the "S" section
of the Codification. The adoption of ASU 2015-15 did not have a material impact on the Company’s consolidated financial
statements.
In September 2015, the FASB issued ASU 2015-16,
“Business Combinations (Topic 805): Simplifying the Accounting for Measurement-Period Adjustments.” The amendments
in ASU 2015-16 require that an acquirer recognize adjustments to estimated amounts that are identified during the measurement
period in the reporting period in which the adjustment amounts are determined. The amendments require that the acquirer record,
in the same period’s financial statements, the effect on earnings of changes in depreciation, amortization, or other income
effects, if any, as a result of the change to the estimated amounts, calculated as if the accounting had been completed at the
acquisition date. The amendments also require an entity to present separately on the face of the income statement or disclose
in the notes the portion of the amount recorded in current-period earnings by line item that would have been recorded in previous
reporting periods if the adjustment to the estimated amounts had been recognized as of the acquisition date. The amendments in
this ASU are effective for public business entities for fiscal years beginning after December 15, 2015, including interim periods
within those fiscal years. For all other entities, the amendments are effective for fiscal years beginning after December 15,
2016, and interim periods within fiscal years beginning after December 15, 2017. The amendments should be applied prospectively
to adjustments to provisional amounts that occur after the effective date with earlier application permitted for financial statements
that have not been issued. The Company does not expect the adoption of ASU 2015-16 to have a material impact on its consolidated
financial statements.
Cordia Bancorp
Notes to Consolidated Financial Statements
(continued)
In January 2016, the FASB issued ASU 2016-01,
“Financial Instruments – Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial
Liabilities.” The amendments in ASU 2016-01, among other things: 1) Requires equity investments (except those accounted
for under the equity method of accounting, or those that result in consolidation of the investee) to be measured at fair value
with changes in fair value recognized in net income. 2) Requires public business entities to use the exit price notion when measuring
the fair value of financial instruments for disclosure purposes. 3) Requires separate presentation of financial assets and financial
liabilities by measurement category and form of financial asset (i.e., securities or loans and receivables). 4) Eliminates the
requirement for public business entities to disclose the method(s) and significant assumptions used to estimate the fair value
that is required to be disclosed for financial instruments measured at amortized cost. The amendments in this ASU are effective
for public companies for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years.
The Company is currently assessing the impact that ASU 2016-01 will have on its consolidated financial statements.
In February 2016, the FASB issued ASU No.
2016-02, “Leases (Topic 842).” Among other things, in the amendments in ASU 2016-02, lessees will be required to recognize
the following for all leases (with the exception of short-term leases) at the commencement date: (1) A lease liability, which
is a lessee‘s obligation to make lease payments arising from a lease, measured on a discounted basis; and (2) A right-of-use
asset, which is an asset that represents the lessee’s right to use, or control the use of, a specified asset for the lease
term. Under the new guidance, lessor accounting is largely unchanged. Certain targeted improvements were made to align, where
necessary, lessor accounting with the lessee accounting model and Topic 606, Revenue from Contracts with Customers. The amendments
in this ASU are effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years.
Early application is permitted upon issuance. Lessees (for capital and operating leases) and lessors (for sales-type, direct financing,
and operating leases) must apply a modified retrospective transition approach for leases existing at, or entered into after, the
beginning of the earliest comparative period presented in the financial statements. The modified retrospective approach would
not require any transition accounting for leases that expired before the earliest comparative period presented. Lessees and lessors
may not apply a full retrospective transition approach. The Company is currently assessing the impact that ASU 2016-02 will have
on its (consolidated) financial statements.
Note 2. Business Combination
On December 10, 2010, the Company purchased
1,355,263 newly issued shares of the common stock of the Bank of Virginia (“BVA”), which gave it a 59.8% ownership
interest. In accordance with ASC 805-10, this transaction was considered a business combination. Under the acquisition method
of accounting, the assets and liabilities of the Bank were marked to fair value and goodwill was recorded for the excess of consideration
paid over net fair value received. Based on the consideration paid and the fair value of the assets received and the liabilities
assumed, goodwill of $5.9 million was recorded. Goodwill was determined to be impaired in its entirety during the fourth quarter
of 2011. In addition to goodwill, other assets and liabilities of the Bank of Virginia were marked to their respective fair value
as of December 10, 2010.
Estimated fair values differed substantially
in some cases from the carrying amounts of the assets and liabilities reflected in the financial statements of BVA which, in most
cases were valued at historical cost. Subsequent to that date, the fair value adjustments were amortized over the expected life
of the related asset or liability or otherwise adjusted as required by generally accepted accounting principles (“GAAP”).
Interest income is impacted by the accretion
of the fair value discount on the loan portfolio as well as the accretion of the accretable discount on loans acquired with deteriorated
credit quality. Interest income is also impacted by the accretion on the investment securities that is the result of the reset
of the amortized book value amount to the fair value as of the day of the acquisition. Interest expense is impacted by the amortization
of the premiums on time deposits and the FHLB advances. Net interest income is impacted by the combination of all of these items.
Non-interest expense was impacted by a rent
adjustment related to certain lease commitments being above market as of the day of the investment; and amortization of the core
deposit intangible. During the second quarter of 2015, this property was purchased and the related lease was terminated resulting
in a favorable reversal of the fair value discount of $225 thousand.
Cordia Bancorp
Notes to Consolidated Financial Statements
(continued)
On March 29, 2013, the minority shareholders
of BVA exchanged their common shares in the Bank for common shares of Cordia. For each share of BVA exchanged, 0.664 shares of
Cordia were received. In connection with the exchange, BVA became a wholly-owned subsidiary of Cordia.
In addition, the increased ownership percentage
of BVA by Cordia has impacted the accounting of both entities. All of Cordia’s acquisition accounting adjustments are now
recorded in the BVA financial statements and the Cordia financial statements no longer reflect adjustments for non-controlling
interests.
The accretion (amortization) of the acquisition
accounting adjustments had the following impact on the financial statements:
|
|
Income (Expense)
|
|
|
|
December 31,
|
|
(dollars in thousands)
|
|
2015
|
|
|
2014
|
|
Loans
|
|
$
|
114
|
|
|
$
|
225
|
|
Premises and equipment
|
|
|
9
|
|
|
|
8
|
|
Core deposit intangible
|
|
|
(36
|
)
|
|
|
(36
|
)
|
Building lease obligations
|
|
|
272
|
|
|
|
94
|
|
Net impact to net income
|
|
$
|
359
|
|
|
$
|
291
|
|
Note 3. Securities
Our investment portfolio consists of U.S.
agency debt and agency guaranteed mortgage-backed securities. Our investment security portfolio includes securities classified
as available for sale as well as securities classified as held to maturity. We classify securities as available for sale or held
to maturity based on our investment strategy and management’s assessment of our intent and ability to hold the securities
until maturity. The total securities portfolio (excluding restricted securities) was $71.7 million at December 31, 2015 as compared
to $74.2 million at December 31, 2014. At December 31, 2015, the securities portfolio consisted of $46.2 million of securities
available for sale and $25.5 million of securities held to maturity.
The table below presents the amortized cost,
gross unrealized gains and losses, and fair value of securities available for sale at December 31, 2015 and 2014.
|
|
|
|
|
Gross Unrealized
|
|
|
|
|
2015 (dollars in thousands)
|
|
Amortized
Cost
|
|
|
Gains
|
|
|
Losses
|
|
|
Fair Value
|
|
U.S. Government agencies
|
|
$
|
2,144
|
|
|
$
|
5
|
|
|
$
|
(10
|
)
|
|
$
|
2,139
|
|
Agency guaranteed mortgage-backed securities
|
|
|
44,529
|
|
|
|
3
|
|
|
|
(451
|
)
|
|
|
44,081
|
|
Total
|
|
$
|
46,673
|
|
|
$
|
8
|
|
|
$
|
(461
|
)
|
|
$
|
46,220
|
|
|
|
|
|
|
Gross Unrealized
|
|
|
|
|
2014 (dollars in thousands)
|
|
Amortized
Cost
|
|
|
Gains
|
|
|
Losses
|
|
|
Fair Value
|
|
U.S. Government agencies
|
|
$
|
3,735
|
|
|
$
|
1
|
|
|
$
|
(17
|
)
|
|
$
|
3,719
|
|
Agency guaranteed mortgage-backed securities
|
|
|
49,930
|
|
|
|
21
|
|
|
|
(187
|
)
|
|
|
49,764
|
|
Total
|
|
$
|
53,665
|
|
|
$
|
22
|
|
|
$
|
(204
|
)
|
|
$
|
53,483
|
|
Cordia Bancorp
Notes to Consolidated Financial Statements
(continued)
The table below presents the carry value,
gross unrealized gains and losses, and fair value of securities held to maturity at December 31, 2015 and 2014.
|
|
|
|
|
Gross Unrealized
|
|
|
|
|
2015 (dollars in thousands)
|
|
Carry
Value
|
|
|
Gains
|
|
|
Losses
|
|
|
Fair Value
|
|
Agency guaranteed mortgage-backed securities
|
|
$
|
25,500
|
|
|
$
|
230
|
|
|
$
|
(36
|
)
|
|
$
|
25,694
|
|
Total
|
|
$
|
25,500
|
|
|
$
|
230
|
|
|
$
|
(36
|
)
|
|
$
|
25,694
|
|
|
|
|
|
|
Gross Unrealized
|
|
|
|
|
2014 (dollars in thousands)
|
|
Carry
Value
|
|
|
Gains
|
|
|
Losses
|
|
|
Fair Value
|
|
Agency guaranteed mortgage-backed securities
|
|
$
|
20,716
|
|
|
$
|
333
|
|
|
$
|
(2
|
)
|
|
$
|
21,047
|
|
Total
|
|
$
|
20,716
|
|
|
$
|
333
|
|
|
$
|
(2
|
)
|
|
$
|
21,047
|
|
The amortized cost and fair value of securities
available for sale as of December 31, 2015, by contractual maturity are shown below. Expected maturities may differ from contractual
maturities because issuers may have the right to call or prepay obligations without penalties. They are as follows:
(Dollars in thousands)
|
|
Amortized
Cost
|
|
|
Fair Value
|
|
Over one year within five years
|
|
$
|
43
|
|
|
$
|
43
|
|
Over five years within ten years
|
|
|
2,144
|
|
|
|
2,139
|
|
Over ten years
|
|
|
44,486
|
|
|
|
44,038
|
|
Total
|
|
$
|
46,673
|
|
|
$
|
46,220
|
|
The carry value and fair value of securities
held to maturity as of December 31, 2015, by contractual maturity are shown below. Expected maturities may differ from contractual
maturities because issuers may have the right to call or prepay obligations without penalties. They are as follows:
(Dollars in thousands)
|
|
Carry Value
|
|
|
Fair Value
|
|
Over five years within ten years
|
|
$
|
3,633
|
|
|
$
|
3,729
|
|
Over ten years
|
|
|
21,867
|
|
|
|
21,965
|
|
Total
|
|
$
|
25,500
|
|
|
$
|
25,694
|
|
As of December 31, 2015, the portfolio is
concentrated in average maturities of over ten years, although a substantial majority of recently purchased securities have effective
duration much shorter than ten years. The portfolio is available to support liquidity needs of the Company. During 2015, the Company
sold $19.8 million of available for sale securities and recognized gains of $133 thousand in noninterest income. During 2014,
the Company sold $23.4 million of available for sale securities and recognized gains of $181 thousand and losses of $4 thousand
in noninterest income.
Cordia Bancorp
Notes to Consolidated Financial Statements
(continued)
Unrealized losses on investments at December
31, 2015 and 2014 were as follows:
Unrealized Losses on Securities
|
|
|
Less than 12 Months
|
|
|
12 Months or Longer
|
|
|
Total
|
|
2015 (dollars in thousands)
|
|
Fair Value
|
|
|
Unrealized
Losses
|
|
|
Fair Value
|
|
|
Unrealized
Losses
|
|
|
Fair Value
|
|
|
Unrealized
Losses
|
|
U.S. Government agencies
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
1,521
|
|
|
$
|
(10
|
)
|
|
$
|
1,521
|
|
|
$
|
(10
|
)
|
Agency guaranteed mortgage-backed securities
|
|
|
43,021
|
|
|
|
(429
|
)
|
|
|
3,315
|
|
|
|
(58
|
)
|
|
|
46,336
|
|
|
|
(487
|
)
|
Total
|
|
$
|
43,021
|
|
|
$
|
(429
|
)
|
|
$
|
4,836
|
|
|
$
|
(68
|
)
|
|
$
|
47,857
|
|
|
$
|
(497
|
)
|
2014 (dollars in thousands)
|
|
Fair Value
|
|
|
Unrealized
Losses
|
|
|
Fair Value
|
|
|
Unrealized
Losses
|
|
|
Fair Value
|
|
|
Unrealized
Losses
|
|
U.S. Government agencies
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
2,689
|
|
|
$
|
(17
|
)
|
|
$
|
2,689
|
|
|
$
|
(17
|
)
|
Agency guaranteed mortgage-backed securities
|
|
|
43,406
|
|
|
|
(161
|
)
|
|
|
1,904
|
|
|
|
(28
|
)
|
|
|
45,310
|
|
|
|
(189
|
)
|
Total
|
|
$
|
43,406
|
|
|
$
|
(161
|
)
|
|
$
|
4,593
|
|
|
$
|
(45
|
)
|
|
$
|
47,999
|
|
|
$
|
(206
|
)
|
For the year ended December 31, 2015, there
were U.S. Government agency securities and agency guaranteed mortgage-backed securities with unrealized losses totaling $497 thousand.
For the year ended December 31, 2014, there were U.S. Government agency securities and agency guaranteed mortgage-backed securities
with unrealized losses totaling $206 thousand. All of the unrealized losses are attributable to increases in interest rates and
not to credit deterioration. Currently, the Company does not believe that it is probable that it will be unable to collect all
amounts due according to the contractual terms of the investments. Because the decline in market value is attributable to changes
in interest rates and not to credit quality and because it is not more likely than not that the Company will be required to sell
the investments before recovery of their amortized cost bases, which may be maturity, the Company does not consider these investments
to be other-than-temporarily impaired at December 31, 2015.
Investment securities with combined fair values
of $13.8 million and $7.8 million were pledged to secure public funds with the State of Virginia at December 31, 2015 and 2014,
respectively. We had $16.8 million and $9.6 million in securities pledged to secure FHLB advances at December 31, 2015 and 2014,
respectively.
Note 4.
Loans, Allowance for Loan Losses and Credit Quality
The Bank categorizes its loan receivables
into four main categories which are commercial real estate loans, commercial and industrial loans, guaranteed student loans, and
consumer loans. Each category of loan has a different level of credit risk. Real estate loans are generally safer than loans secured
by other assets because the value of the underlying collateral is generally ascertainable and does not fluctuate as much as other
assets. Owner occupied commercial real estate loans are generally the least risky type of commercial real estate loan. Non owner
occupied commercial real estate loans and construction and development loans contain more risk. Commercial loans, which can be
secured by real estate or other assets, or which can be unsecured, are generally more risky than commercial real estate loans.
Guaranteed student loans are guaranteed by the U.S. Department of Education for approximately 98% of the principal and interest.
Consumer loans may be secured by residential real estate, automobiles or other assets or may be unsecured. Those secured by residential
real estate are the least risky and those that are unsecured are the most risky type of consumer loans. Any type of loan which
is unsecured is generally more risky than a secured loan due to the higher risk of loss in the event of a default. These levels
of risk are general in nature, and many factors including the creditworthiness of the borrower or the particular nature of the
secured asset may cause any type of loan to be more or less risky than another. In the commercial real estate category of the
loan portfolio the segments are acquisition-development-construction, non-owner occupied and owner occupied. In the consumer category
of the loan portfolio the segments are residential real estate, home equity lines of credit and other. Management has not further
divided its eight segments into classes. This provides management and the Board with sufficient information to evaluate the risks
within the Bank’s portfolio.
Cordia Bancorp
Notes to Consolidated Financial Statements
(continued)
Below is a table that exhibits the loans by
segment at December 31, 2015 and 2014.
(dollars in thousands)
|
|
2015
|
|
|
2014
|
|
Commercial Real Estate:
|
|
|
|
|
|
|
|
|
Acquisition, development and construction
|
|
$
|
2,168
|
|
|
$
|
2,159
|
|
Non-owner occupied
|
|
|
58,044
|
|
|
|
51,512
|
|
Owner occupied
|
|
|
45,690
|
|
|
|
49,582
|
|
Commercial and industrial
|
|
|
34,819
|
|
|
|
24,153
|
|
Guaranteed student loans
|
|
|
53,847
|
|
|
|
64,870
|
|
Consumer:
|
|
|
|
|
|
|
|
|
Residential mortgage
|
|
|
18,140
|
|
|
|
8,377
|
|
HELOC
|
|
|
10,603
|
|
|
|
11,074
|
|
Other
|
|
|
22,722
|
|
|
|
1,232
|
|
Total loans
|
|
|
246,033
|
|
|
|
212,959
|
|
Allowance for loan losses
|
|
|
(823
|
)
|
|
|
(1,089
|
)
|
Total loans, net of allowance for loan losses
|
|
$
|
245,210
|
|
|
$
|
211,870
|
|
Included in the loan balances above are net
deferred loan costs of $1.7 million and $1.2 million at December 31, 2015 and 2014, respectively. Also included in the loan balances
above are premiums related to guaranteed student loans of $827 thousand and $931 thousand at December 31, 2015 and 2014, respectively.
Loans Acquired with Evidence of Deterioration
in Credit Quality
Acquired in
the acquisition of Bank of Virginia, and included in the table above,
are purchased performing loans and
loans
acquired with evidence of deterioration in credit quality. The purchased performing loans are $6.9 million and $9.0 million, at
December 31, 2015 and December 31, 2014, respectively. As these loans are re-underwritten, they are removed from the “purchase”
classification. The loans acquired with evidence of deterioration in credit quality are accounted for under the guidance ASC 310-30.
Information related to these loans is as follows:
At December 31, (dollars in thousands)
|
|
2015
|
|
|
2014
|
|
Contract principal balance
|
|
$
|
4,779
|
|
|
$
|
7,178
|
|
Accretable yield
|
|
|
(1
|
)
|
|
|
(42
|
)
|
Nonaccretable difference
|
|
|
-
|
|
|
|
(5
|
)
|
Carrying value of loans
|
|
$
|
4,778
|
|
|
$
|
7,131
|
|
A discount is applied to these loans such
that the carrying amount approximates the cash flows expected to be received from the borrower or from the liquidation of collateral.
Due to the high level of uncertainty regarding the timing and amount of these cash flows in December 2010, Management initially
considered the entire discount to be nonaccretable. However, due to improvement in the status of some credits, the majority of
the nonaccretable difference was subsequently transferred to accretable yield and is being amortized as a yield adjustment over
the lives of the individual loans. Cash flows received on loans with a nonaccretable difference are applied on a cost recovery
method, whereby payments are applied first to the loan balance. When the loan balance is fully recovered, payments are then being
applied to income. Any future reductions in carrying value as a result of deteriorating credit quality require an allowance for
loan losses related to these loans.
Cordia Bancorp
Notes to Consolidated Financial Statements
(continued)
A summary of changes to the accretable yield
and nonaccretable difference during 2015 and 2014 are as follows:
(dollars in thousands)
|
|
Accretable
Yield
|
|
|
Nonaccretable
Difference
|
|
Balance at December 31, 2013
|
|
$
|
62
|
|
|
$
|
61
|
|
Charge-offs related to loss covered by ASC 310-30
|
|
|
-
|
|
|
|
(56
|
)
|
Transfers
|
|
|
-
|
|
|
|
-
|
|
Accretion
|
|
|
(20
|
)
|
|
|
-
|
|
Balance at December 31, 2014
|
|
|
42
|
|
|
|
5
|
|
Transfers
|
|
|
5
|
|
|
|
(5
|
)
|
Accretion
|
|
|
(46
|
)
|
|
|
-
|
|
Balance at December 31, 2015
|
|
$
|
1
|
|
|
$
|
-
|
|
Credit Quality Indicators
Credit risk ratings reflect the current risk
of default and/or loss for a given asset. The risk of loss is driven by factors intrinsic to the borrower and the unique structural
characteristics of the loan. The credit risk rating begins with an analysis of the borrower’s credit history, ability to
repay the debt as agreed, use of proceeds, and the value and stability of the value of the collateral securing the loan. The attributes
ordinarily considered when reviewing a borrower are as follows:
·
|
industry/industry segment;
|
·
|
financial flexibility/debt
capacity;
|
·
|
position within industry;
|
·
|
management and controls; and
|
·
|
earnings, liquidity and operating cash flow
trends;
|
·
|
quality of financial reporting.
|
·
|
asset and liability values;
|
|
|
The unique structural characteristics ordinarily considered when
reviewing a loan are as follows:
|
·
|
credit
terms/loan documentation;
|
|
·
|
guaranty/third
party support;
|
Cordia Bancorp
Notes to Consolidated Financial Statements
(continued)
On a quarterly basis, the process of estimating
the allowance for loan loss begins with management’s review of the risk rating assigned to individual credits. Through this
process, loans adversely risk rated are evaluated for impairment based on ASC 310-40. The following is a summary of the risk rating
definitions the Company uses to assign a risk grade to each loan within the portfolio:
Grade
1 - Highest Quality
|
Loans to persons and businesses with
unquestionable financial strength and character that carry extremely low probabilities of default. Balance sheets and
cash flow are extremely strong relative to the magnitude of debt. This rating would be analogous to the highest investment
grade ratings.
|
Grade 2 - Above
Average Quality
|
Loans to persons
and business entities with unquestioned character that carry low probabilities of default. Borrowers have strong, stable earnings
and financial condition.
|
|
|
Grade 3 - Satisfactory
|
Loans to persons
and businesses with acceptable financial condition that carry average probabilities of default. Borrower’s exhibit adequate
cash flow to service debt and have acceptable levels of leverage.
|
|
|
Grade 4 - Pass
|
Loans to persons and businesses with a lack of stability
in the primary source of repayment or temporary weakness in their balance sheet or earnings. These loans carry above average
probabilities of default. These borrowers generally have higher leverage and less liquidity than loans rated 3-Satisfactory.
|
Grade 5- Special Mention
|
Loans to borrowers that exhibit potential
credit weakness or a downward trend that warrant additional supervision. While potentially weak, the loan is currently
marginally acceptable and no loss of principal or interest is envisioned.
|
Grade 6 –
Substandard
|
Borrowers with one
or more well defined weaknesses that jeopardize the orderly liquidation of the debt. Normal repayment from the borrower is
in jeopardy, although no loss of principal is envisioned. Possibility of loss or protracted workout exists if immediate corrective
action is not taken.
|
|
|
Grade
7 – Doubtful
|
Loans with all the weaknesses inherent
in a Substandard classification, with the added provision that the weaknesses make collection of debt in full highly questionable
and improbable, based on currently existing facts, conditions, and values. Serious problems exist to the point where a
partial loss of principal is likely.
|
Grade
8 – Loss
|
Borrower is deemed
incapable of repayment of the entire principal. A charge off is required for the portion of principal management has deemed
it will not be repaid.
|
Cordia Bancorp
Notes to Consolidated Financial Statements
(continued)
The following is the distribution of loans
by credit quality and segment as of December 31, 2015 and 2014:
|
|
December
31, 2015
|
|
(dollars in
thousands)
|
|
Commercial
Real Estate
|
|
|
|
|
|
|
|
|
Consumer
|
|
|
|
|
Credit quality class
|
|
Acq-Dev
Construction
|
|
|
Non-owner
Occupied
|
|
|
Owner
Occupied
|
|
|
Commercial
and
Industrial
|
|
|
Guaranteed
Student
Loans
|
|
|
Residential
Mortgage
|
|
|
HELOC
|
|
|
Other
|
|
|
Total
|
|
1 Highest quality
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
2 Above average quality
|
|
|
-
|
|
|
|
7,772
|
|
|
|
3,285
|
|
|
|
1,876
|
|
|
|
53,847
|
|
|
|
-
|
|
|
|
1,063
|
|
|
|
396
|
|
|
|
68,239
|
|
3 Satisfactory
|
|
|
989
|
|
|
|
27,397
|
|
|
|
20,355
|
|
|
|
26,289
|
|
|
|
-
|
|
|
|
11,959
|
|
|
|
5,893
|
|
|
|
22,258
|
|
|
|
115,140
|
|
4 Pass
|
|
|
472
|
|
|
|
19,988
|
|
|
|
19,550
|
|
|
|
6,102
|
|
|
|
-
|
|
|
|
5,976
|
|
|
|
2,779
|
|
|
|
68
|
|
|
|
54,935
|
|
5 Special mention
|
|
|
-
|
|
|
|
1,510
|
|
|
|
-
|
|
|
|
547
|
|
|
|
-
|
|
|
|
27
|
|
|
|
269
|
|
|
|
-
|
|
|
|
2,353
|
|
6 Substandard
|
|
|
152
|
|
|
|
-
|
|
|
|
151
|
|
|
|
5
|
|
|
|
-
|
|
|
|
41
|
|
|
|
239
|
|
|
|
-
|
|
|
|
588
|
|
7 Doubtful
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
1,613
|
|
|
|
56,667
|
|
|
|
43,341
|
|
|
|
34,819
|
|
|
|
53,847
|
|
|
|
18,003
|
|
|
|
10,243
|
|
|
|
22,722
|
|
|
|
241,255
|
|
Loans
acquired with deteriorated credit quality
|
|
|
555
|
|
|
|
1,377
|
|
|
|
2,349
|
|
|
|
-
|
|
|
|
-
|
|
|
|
137
|
|
|
|
360
|
|
|
|
-
|
|
|
|
4,778
|
|
Total loans
|
|
$
|
2,168
|
|
|
$
|
58,044
|
|
|
$
|
45,690
|
|
|
$
|
34,819
|
|
|
$
|
53,847
|
|
|
$
|
18,140
|
|
|
$
|
10,603
|
|
|
$
|
22,722
|
|
|
$
|
246,033
|
|
|
|
December
31, 2014
|
|
(dollars in
thousands)
|
|
Commercial
Real Estate
|
|
|
|
|
|
|
|
|
Consumer
|
|
|
|
|
Credit quality class
|
|
Acq-Dev
Construction
|
|
|
Non-owner
Occupied
|
|
|
Owner
Occupied
|
|
|
Commercial
and
Industrial
|
|
|
Guaranteed
Student
Loans
|
|
|
Residential
Mortgage
|
|
|
HELOC
|
|
|
Other
|
|
|
Total
|
|
1 Highest quality
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
2 Above average quality
|
|
|
-
|
|
|
|
2,225
|
|
|
|
2,788
|
|
|
|
2,498
|
|
|
|
64,870
|
|
|
|
24
|
|
|
|
1,394
|
|
|
|
719
|
|
|
|
74,518
|
|
3 Satisfactory
|
|
|
458
|
|
|
|
30,473
|
|
|
|
26,608
|
|
|
|
14,883
|
|
|
|
-
|
|
|
|
3,325
|
|
|
|
6,140
|
|
|
|
425
|
|
|
|
82,312
|
|
4 Pass
|
|
|
476
|
|
|
|
17,236
|
|
|
|
16,986
|
|
|
|
5,593
|
|
|
|
-
|
|
|
|
4,768
|
|
|
|
2,589
|
|
|
|
88
|
|
|
|
47,736
|
|
5 Special mention
|
|
|
-
|
|
|
|
123
|
|
|
|
-
|
|
|
|
68
|
|
|
|
-
|
|
|
|
75
|
|
|
|
319
|
|
|
|
-
|
|
|
|
585
|
|
6 Substandard
|
|
|
267
|
|
|
|
-
|
|
|
|
-
|
|
|
|
142
|
|
|
|
-
|
|
|
|
-
|
|
|
|
268
|
|
|
|
-
|
|
|
|
677
|
|
7 Doubtful
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
1,201
|
|
|
|
50,057
|
|
|
|
46,382
|
|
|
|
23,184
|
|
|
|
64,870
|
|
|
|
8,192
|
|
|
|
10,710
|
|
|
|
1,232
|
|
|
|
205,828
|
|
Loans
acquired with deterioraed credit quality
|
|
|
958
|
|
|
|
1,455
|
|
|
|
3,200
|
|
|
|
969
|
|
|
|
-
|
|
|
|
185
|
|
|
|
364
|
|
|
|
-
|
|
|
|
7,131
|
|
Total loans
|
|
$
|
2,159
|
|
|
$
|
51,512
|
|
|
$
|
49,582
|
|
|
$
|
24,153
|
|
|
$
|
64,870
|
|
|
$
|
8,377
|
|
|
$
|
11,074
|
|
|
$
|
1,232
|
|
|
$
|
212,959
|
|
Cordia Bancorp
Notes to Consolidated Financial Statements
(continued)
A summary of the balances of loans outstanding
by days past due, including accruing and non-accruing loans by portfolio class as of December 31, 2015 and 2014 were as follows:
|
|
December
31, 2015
|
|
|
|
Commercial
Real Estate
|
|
|
|
|
|
|
|
|
Consumer
|
|
|
|
|
(dollars in thousands)
|
|
Acq-Dev
Construction
|
|
|
Non-owner
Occupied
|
|
|
Owner
Occupied
|
|
|
Commercial
and
Industrial
|
|
|
Guaranteed
Student
Loans
|
|
|
Residential
Mortgage
|
|
|
HELOC
|
|
|
Other
|
|
|
Total
|
|
30 - 59 days
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
3,178
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
73
|
|
|
$
|
3,251
|
|
60 - 89 days
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
2,413
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
2,413
|
|
> 90 days
|
|
|
152
|
|
|
|
-
|
|
|
|
1,388
|
|
|
|
-
|
|
|
|
9,645
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
11,185
|
|
Total past due
|
|
|
152
|
|
|
|
-
|
|
|
|
1,388
|
|
|
|
-
|
|
|
|
15,236
|
|
|
|
-
|
|
|
|
-
|
|
|
|
73
|
|
|
|
16,849
|
|
Current
|
|
|
2,016
|
|
|
|
58,044
|
|
|
|
44,302
|
|
|
|
34,819
|
|
|
|
38,611
|
|
|
|
18,140
|
|
|
|
10,603
|
|
|
|
22,649
|
|
|
|
229,184
|
|
Total loans
|
|
$
|
2,168
|
|
|
$
|
58,044
|
|
|
$
|
45,690
|
|
|
$
|
34,819
|
|
|
$
|
53,847
|
|
|
$
|
18,140
|
|
|
$
|
10,603
|
|
|
$
|
22,722
|
|
|
$
|
246,033
|
|
> 90 days still accruing
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
9,645
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
9,645
|
|
|
|
December
31, 2014
|
|
|
|
Commercial
Real Estate
|
|
|
|
|
|
|
|
|
Consumer
|
|
|
|
|
(dollars in thousands)
|
|
Acq-Dev
Construction
|
|
|
Non-owner
Occupied
|
|
|
Owner
Occupied
|
|
|
Commercial
and
Industrial
|
|
|
Guaranteed
Student
Loans
|
|
|
Residential
Mortgage
|
|
|
HELOC
|
|
|
Other
|
|
|
Total
|
|
30 - 59 days
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
4,029
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
4,029
|
|
60 - 89 days
|
|
|
-
|
|
|
|
-
|
|
|
|
885
|
|
|
|
-
|
|
|
|
1,989
|
|
|
|
-
|
|
|
|
75
|
|
|
|
-
|
|
|
|
2,949
|
|
> 90 days
|
|
|
548
|
|
|
|
-
|
|
|
|
314
|
|
|
|
121
|
|
|
|
11,378
|
|
|
|
44
|
|
|
|
-
|
|
|
|
-
|
|
|
|
12,405
|
|
Total past due
|
|
|
548
|
|
|
|
-
|
|
|
|
1,199
|
|
|
|
121
|
|
|
|
17,396
|
|
|
|
44
|
|
|
|
75
|
|
|
|
-
|
|
|
|
19,383
|
|
Current
|
|
|
1,611
|
|
|
|
51,512
|
|
|
|
48,383
|
|
|
|
24,032
|
|
|
|
47,474
|
|
|
|
8,333
|
|
|
|
10,999
|
|
|
|
1,232
|
|
|
|
193,576
|
|
Total loans
|
|
$
|
2,159
|
|
|
$
|
51,512
|
|
|
$
|
49,582
|
|
|
$
|
24,153
|
|
|
$
|
64,870
|
|
|
$
|
8,377
|
|
|
$
|
11,074
|
|
|
$
|
1,232
|
|
|
$
|
212,959
|
|
> 90 days still accruing
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
11,378
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
11,378
|
|
A summary of non-accrual loans by portfolio
class as of December 31, 2015 and 2014 are as follows:
(dollars in thousands)
|
|
2015
|
|
|
2014
|
|
Commercial Real Estate:
|
|
|
|
|
|
|
|
|
Acquisition, development and construction
|
|
$
|
152
|
|
|
$
|
548
|
|
Non-owner occupied
|
|
|
|
|
|
|
-
|
|
Owner occupied
|
|
|
1,388
|
|
|
|
1,198
|
|
Commercial and industrial
|
|
|
5
|
|
|
|
121
|
|
Guaranteed Student Loans
|
|
|
-
|
|
|
|
-
|
|
Consumer:
|
|
|
|
|
|
|
|
|
Residential mortgage
|
|
|
-
|
|
|
|
44
|
|
HELOC
|
|
|
289
|
|
|
|
310
|
|
Other
|
|
|
-
|
|
|
|
-
|
|
Total loans
|
|
$
|
1,834
|
|
|
$
|
2,221
|
|
|
|
|
|
|
|
|
|
|
Non-accrual troubled debt restructurings included above
|
|
$
|
-
|
|
|
$
|
-
|
|
Non-accrual purchased credit impaired loans included above
|
|
$
|
1,370
|
|
|
$
|
1,741
|
|
Cordia Bancorp
Notes to Consolidated Financial Statements
(continued)
Impaired Loans
All loans that are rated Substandard or worse
are assessed as impaired based on the expectation that the full collection of principal and interest is in doubt. All loans that
are expected to be downgraded to Substandard, require additional analysis to determine if the loan is impaired. All loans that
are rated Special Mention are presumed not to be impaired. However, Special Mention rated loans are typically evaluated for the
following adverse characteristics that may indicate further analysis is warranted before completing an assessment of impairment:
|
·
|
a
loan is 60 days or more delinquent on scheduled principal or interest;
|
|
·
|
a
loan is presently in an unapproved over-advanced position;
|
|
·
|
a
loan is newly modified; or
|
|
·
|
a
loan is expected to be modified.
|
The following information is a summary of
the Company’s policies pertaining to impaired loans:
A loan is deemed impaired when, based on current
information and events, it is probable that all amounts due according to the contractual terms of the loan agreement. Factors
impairing repayment might include: inadequate repayment capacity, severe erosion of equity, likely reliance on non-primary source
of repayment, guarantors with limited resources, and obvious material deterioration in borrower’s financial condition. The
possibility of loss or protracted workout exists if immediate corrective action is not taken.
Once deemed impaired, the loan is then analyzed
for the extent of the impairment. Impairment is the difference between the principal balance of the loan and (i) the discounted
cash flows of the borrower or (ii) the fair market value of the collateral less the costs involved with liquidation (i.e., real
estate commissions, attorney costs, etc.). This difference is then reflected as a component in the allowance for loan loss as
a specific reserve.
Government Guaranteed Student loans with a
past due balance greater than 90 days are not placed on non-accrual and are not considered impaired. When a loan reaches
120 days past due, the non-guaranteed portion of the loan is charged-off. The guarantor’s payment covers approximately 98%
of principal and accrued interest. A component of the general loan loss reserve covers potential losses within the 2% of
the non-guaranteed portion of the loans that are less than 120 days past due.
Cordia Bancorp
Notes to Consolidated Financial Statements
(continued)
Certain loans were identified and individually
evaluated for impairment at December 31, 2015 and 2014. A number of these impaired loans were not charged with a valuation allowance
due to Management’s judgment that the cash flows from the underlying collateral or equity available from guarantors was
sufficient to recover the Company’s entire investment, while one loan experienced collateral deterioration and a supplemental
specific reserve was added. There were no consumer mortgage loans collateralized by residential real estate in the process of
foreclosure as of December 31, 2015.
The results of those analyses are presented
in the following tables.
The following is a summary of impaired loans, excluding acquired
impaired loans, presented by portfolio class as of December 31, 2015:
(dollars in thousands)
|
|
Recorded
Investment
(1)
|
|
|
Unpaid
Principal
(2)
|
|
|
Related
Allowance
|
|
|
Average
Recorded
Investment
|
|
|
Interest
Recorded
|
|
With no related allowance recorded:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial Real Estate:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Acquisition, development and construction
|
|
$
|
152
|
|
|
$
|
152
|
|
|
$
|
-
|
|
|
$
|
188
|
|
|
$
|
-
|
|
Non-owner occupied
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Owner occupied
|
|
|
151
|
|
|
|
152
|
|
|
|
-
|
|
|
|
156
|
|
|
|
-
|
|
Commercial and industrial
|
|
|
5
|
|
|
|
5
|
|
|
|
-
|
|
|
|
13
|
|
|
|
-
|
|
Consumer:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
-
|
|
|
|
-
|
|
Residential mortgage
|
|
|
41
|
|
|
|
41
|
|
|
|
-
|
|
|
|
44
|
|
|
|
3
|
|
HELOC
|
|
|
175
|
|
|
|
175
|
|
|
|
-
|
|
|
|
185
|
|
|
|
3
|
|
Other
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
-
|
|
|
|
$
|
524
|
|
|
$
|
525
|
|
|
$
|
-
|
|
|
$
|
586
|
|
|
$
|
6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
With an allowance recorded:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial Real Estate:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Acquisition, development and construction
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
Non-owner occupied
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Owner occupied
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Commercial and industrial
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Consumer:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential mortgage
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
HELOC
|
|
|
64
|
|
|
|
64
|
|
|
|
16
|
|
|
|
66
|
|
|
|
-
|
|
Other
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
$
|
64
|
|
|
$
|
64
|
|
|
$
|
16
|
|
|
$
|
66
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial Real Estate:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Acquisition, development and construction
|
|
$
|
152
|
|
|
$
|
152
|
|
|
$
|
-
|
|
|
$
|
188
|
|
|
$
|
-
|
|
Non-owner occupied
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Owner occupied
|
|
|
151
|
|
|
|
152
|
|
|
|
-
|
|
|
|
156
|
|
|
|
-
|
|
Commercial and industrial
|
|
|
5
|
|
|
|
5
|
|
|
|
-
|
|
|
|
13
|
|
|
|
-
|
|
Consumer:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
-
|
|
|
|
|
|
Residential mortgage
|
|
|
41
|
|
|
|
41
|
|
|
|
-
|
|
|
|
44
|
|
|
|
3
|
|
HELOC
|
|
|
239
|
|
|
|
239
|
|
|
|
16
|
|
|
|
251
|
|
|
|
3
|
|
Other
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Total
|
|
$
|
588
|
|
|
$
|
589
|
|
|
$
|
16
|
|
|
$
|
652
|
|
|
$
|
6
|
|
Cordia Bancorp
Notes to Consolidated Financial Statements
(continued)
The following is a summary of impaired loans, excluding acquired
impaired loans, presented by portfolio class as of December 31, 2014:
(dollars in thousands)
|
|
Recorded
Investment
(1)
|
|
|
Unpaid
Principal
(2)
|
|
|
Related
Allowance
|
|
|
Average
Recorded
Investment
|
|
|
Interest
Recorded
|
|
With no related allowance recorded:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial Real Estate:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Acquisition, development and construction
|
|
$
|
267
|
|
|
$
|
267
|
|
|
$
|
-
|
|
|
$
|
269
|
|
|
$
|
6
|
|
Non-owner occupied
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Owner occupied
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Commercial and industrial
|
|
|
32
|
|
|
|
34
|
|
|
|
-
|
|
|
|
46
|
|
|
|
2
|
|
Consumer:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
-
|
|
|
|
|
|
Residential mortgage
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
HELOC
|
|
|
193
|
|
|
|
193
|
|
|
|
-
|
|
|
|
197
|
|
|
|
3
|
|
Other
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
$
|
492
|
|
|
$
|
494
|
|
|
$
|
-
|
|
|
$
|
512
|
|
|
$
|
11
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
With an allowance recorded:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial Real Estate:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Acquisition, development and construction
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
Non-owner occupied
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Owner occupied
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Commercial and industrial
|
|
|
110
|
|
|
|
540
|
|
|
|
110
|
|
|
|
309
|
|
|
|
7
|
|
Consumer:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential mortgage
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
HELOC
|
|
|
75
|
|
|
|
75
|
|
|
|
33
|
|
|
|
75
|
|
|
|
-
|
|
Other
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
$
|
185
|
|
|
$
|
615
|
|
|
$
|
143
|
|
|
$
|
384
|
|
|
$
|
7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial Real Estate:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Acquisition, development and construction
|
|
$
|
267
|
|
|
$
|
267
|
|
|
$
|
-
|
|
|
$
|
269
|
|
|
$
|
6
|
|
Non-owner occupied
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Owner occupied
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Commercial and industrial
|
|
|
142
|
|
|
|
574
|
|
|
|
110
|
|
|
|
355
|
|
|
|
9
|
|
Consumer:
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
-
|
|
|
|
|
|
Residential mortgage
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
HELOC
|
|
|
268
|
|
|
|
268
|
|
|
|
33
|
|
|
|
272
|
|
|
|
3
|
|
Other
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Total
|
|
$
|
677
|
|
|
$
|
1,109
|
|
|
$
|
143
|
|
|
$
|
896
|
|
|
$
|
18
|
|
|
(1)
|
The amount of the investment
in a loan, which is not net of a valuation allowance, but which does reflect any direct
write-down of the investment.
|
|
(2)
|
The contractual amount
due, which reflects paydowns applied in accordance with loan documents, but which does
not reflect any direct write-downs.
|
Loans with deteriorated credit quality acquired
as part of the Bank of Virginia acquisition are accounted for under the requirements of ASC 310-30. These loans are not considered
impaired and are not included in the table above.
Cordia Bancorp
Notes to Consolidated Financial Statements
(continued)
Troubled Debt Restructurings
A modification is classified as a troubled
debt restructuring (“TDR”) if both of the following exist: (1) the borrower is experiencing financial difficulty and
(2) the Company has granted a concession to the borrower. The Company determines that a borrower may be experiencing
financial difficulty if the borrower is currently delinquent on any of its debt, or if the Company is concerned that the borrower
may not be able to perform in accordance with the current terms of the loan agreement in the foreseeable future. Many
aspects of the borrower’s financial situation are assessed when determining whether they are experiencing financial difficulty,
particularly as it relates to commercial borrowers due to the complex nature of the loan structure, business/industry risk and
borrower/guarantor structures. Concessions may include the reduction of an interest rate at a rate lower than current
market rate for a new loan with similar risk, extension of the maturity date, reduction of accrued interest, or principal forgiveness. When
evaluating whether a concession has been granted, the Company also considers whether the borrower has provided additional collateral
or guarantors and whether such additions adequately compensate the Company for the restructured terms, or if the revised terms
are consistent with those currently being offered to new loan customers. The assessments of whether a borrower is experiencing
(or is likely to experience) financial difficulty and whether a concession has been granted is subjective in nature and management’s
judgment is required when determining whether a modification is a TDR.
Although each occurrence is unique to the
borrower and is evaluated separately, for all portfolio segments, TDRs are typically modified through reduction in interest rates,
reductions in payments, changing the payment terms from principal and interest to interest only, and/or extensions in term maturity.
During the year ended December 31, 2015,
no loans were modified in trouble debt restructurings and two previous troubled debt restructurings were paid off. During the year
ended December 31, 2014, two loans were modified in trouble debt restructurings and three previous troubled debt restructurings
were paid off. At December 31, 2015 and 2014, no loans and four loans, respectively, were classified as TDRs. The principal balance
outstanding relating to these loans was $1.3 million at December 31, 2014. Of this amount, $1.3 million was accruing. During the
years ended December 31, 2015 and 2014, no defaults occurred on loans modified as TDR’s in the preceding twelve months.
The number and outstanding recorded investment
of loans entered into under the terms of a TDR during the years ended December 31, 2014, including modifications of acquired impaired
loans, by type of concession granted, are set forth in the following table. There were no TDRs as of December 31, 2015.
2014 (dollars in thousands)
|
|
Number of
loans
|
|
|
Rate
modification
|
|
|
Term
extension
|
|
|
Pre-modification
recorded
investment
|
|
|
Post-modification
recorded
investment
(1)
|
|
Commercial and industrial
|
|
|
1
|
|
|
$
|
-
|
|
|
$
|
512
|
|
|
$
|
512
|
|
|
$
|
457
|
|
Commercial real estate - non-owner occupied
|
|
|
1
|
|
|
|
-
|
|
|
|
595
|
|
|
|
595
|
|
|
|
417
|
|
Total
|
|
|
2
|
|
|
$
|
-
|
|
|
$
|
1,107
|
|
|
$
|
1,107
|
|
|
$
|
874
|
|
(1)
The period end balances
are inclusive of all partial paydowns and charge-offs since the modification date. Loans modified as TDRs that were fully paid
down, charged-off, or foreclosed upon by period end are not reported.
TDRs are considered to be in default if
the borrower fails to make timely payments under the terms of the restructure and repayment possibilities have been exhausted.
There were no troubled debt restructurings that defaulted within one year during the years ended December 31, 2015 or 2014 whereby
all repayment possibilities had been exhausted.
Cordia Bancorp
Notes to Consolidated Financial Statements
(continued)
A summary of the allowance for loan losses
by portfolio segment as of December 31, 2015 is as follows:
|
|
Commercial
Real Estate
|
|
|
|
|
|
|
|
|
Consumer
|
|
|
|
|
(dollars in thousands)
|
|
Acquisition,
Development,
Construction
|
|
|
Non-owner
occupied
|
|
|
Owner
occupied
|
|
|
Commercial
and
Industrial
|
|
|
Guaranteed
Student
Loans
|
|
|
Residential
mortgage
|
|
|
HELOC
|
|
|
Other
|
|
|
Total
|
|
Allowance for loan losses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Beginning balance, December 31, 2014
|
|
$
|
146
|
|
|
$
|
97
|
|
|
$
|
149
|
|
|
$
|
357
|
|
|
$
|
144
|
|
|
$
|
98
|
|
|
$
|
76
|
|
|
$
|
22
|
|
|
$
|
1,089
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Charge-offs
|
|
|
(127
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
(109
|
)
|
|
|
(331
|
)
|
|
|
-
|
|
|
|
(20
|
)
|
|
|
(2
|
)
|
|
|
(589
|
)
|
Recoveries
|
|
|
-
|
|
|
|
|
|
|
|
241
|
|
|
|
361
|
|
|
|
-
|
|
|
|
5
|
|
|
|
9
|
|
|
|
-
|
|
|
|
616
|
|
(Charge-offs) recoveries
|
|
|
(127
|
)
|
|
|
-
|
|
|
|
241
|
|
|
|
252
|
|
|
|
(331
|
)
|
|
|
5
|
|
|
|
(11
|
)
|
|
|
(2
|
)
|
|
|
27
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Provision (recovery)
|
|
|
70
|
|
|
|
60
|
|
|
|
(308
|
)
|
|
|
(497
|
)
|
|
|
234
|
|
|
|
(44
|
)
|
|
|
(4
|
)
|
|
|
196
|
|
|
|
(293
|
)
|
Ending balance, December 31, 2015
|
|
$
|
89
|
|
|
$
|
157
|
|
|
$
|
82
|
|
|
$
|
112
|
|
|
$
|
47
|
|
|
$
|
59
|
|
|
$
|
61
|
|
|
$
|
216
|
|
|
$
|
823
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allowance for loan losses
for loans
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Individually evaluated for impairment
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
16
|
|
|
$
|
-
|
|
|
$
|
16
|
|
Collectively evaluated for impairment
|
|
|
89
|
|
|
|
157
|
|
|
|
82
|
|
|
|
112
|
|
|
|
47
|
|
|
|
59
|
|
|
|
45
|
|
|
|
216
|
|
|
|
807
|
|
Loans acquired with deteriorated credit quality
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Ending balance, December 31, 2015
|
|
$
|
89
|
|
|
$
|
157
|
|
|
$
|
82
|
|
|
$
|
112
|
|
|
$
|
47
|
|
|
$
|
59
|
|
|
$
|
61
|
|
|
$
|
216
|
|
|
$
|
823
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross loan balances
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Individually evaluated for impairment
|
|
$
|
152
|
|
|
$
|
-
|
|
|
$
|
151
|
|
|
$
|
5
|
|
|
$
|
-
|
|
|
$
|
41
|
|
|
$
|
239
|
|
|
$
|
-
|
|
|
$
|
588
|
|
Collectively evaluated for impairment
|
|
|
1,461
|
|
|
|
56,667
|
|
|
|
43,190
|
|
|
|
34,814
|
|
|
|
53,847
|
|
|
|
17,962
|
|
|
|
10,004
|
|
|
|
22,722
|
|
|
|
240,667
|
|
Loans acquired with deteriorated credit quality
|
|
|
555
|
|
|
|
1,377
|
|
|
|
2,349
|
|
|
|
-
|
|
|
|
-
|
|
|
|
137
|
|
|
|
360
|
|
|
|
-
|
|
|
|
4,778
|
|
Ending balance, December 31, 2015
|
|
$
|
2,168
|
|
|
$
|
58,044
|
|
|
$
|
45,690
|
|
|
$
|
34,819
|
|
|
$
|
53,847
|
|
|
$
|
18,140
|
|
|
$
|
10,603
|
|
|
$
|
22,722
|
|
|
$
|
246,033
|
|
Cordia Bancorp
Notes to Consolidated Financial Statements
(continued)
A summary of the allowance for loan losses by portfolio segment
as of December 31, 2014 is as follows:
|
|
Commercial
Real Estate
|
|
|
|
|
|
|
|
|
Consumer
|
|
|
|
|
(dollars in thousands)
|
|
Acquisition,
Development,
Construction
|
|
|
Non-owner
Occupied
|
|
|
Owner
Occupied
|
|
|
Commercial
and
Industrial
|
|
|
Guaranteed
Student
Loans
|
|
|
Residential
Mortgage
|
|
|
HELOC
|
|
|
Other
|
|
|
Total
|
|
Allowance for loan losses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Beginning balance, December 31, 2013
|
|
$
|
300
|
|
|
$
|
39
|
|
|
$
|
322
|
|
|
$
|
377
|
|
|
$
|
268
|
|
|
$
|
120
|
|
|
$
|
20
|
|
|
$
|
43
|
|
|
$
|
1,489
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Charge-offs
|
|
|
(6
|
)
|
|
|
(114
|
)
|
|
|
-
|
|
|
|
(485
|
)
|
|
|
(359
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(964
|
)
|
Recoveries
|
|
|
33
|
|
|
|
57
|
|
|
|
49
|
|
|
|
91
|
|
|
|
-
|
|
|
|
4
|
|
|
|
4
|
|
|
|
21
|
|
|
|
259
|
|
(Charge-offs) recoveries
|
|
|
27
|
|
|
|
(57
|
)
|
|
|
49
|
|
|
|
(394
|
)
|
|
|
(359
|
)
|
|
|
4
|
|
|
|
4
|
|
|
|
21
|
|
|
|
(705
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Provision (recovery)
|
|
|
(181
|
)
|
|
|
115
|
|
|
|
(222
|
)
|
|
|
374
|
|
|
|
235
|
|
|
|
(26
|
)
|
|
|
52
|
|
|
|
(42
|
)
|
|
|
305
|
|
Ending balance, December 31, 2014
|
|
$
|
146
|
|
|
$
|
97
|
|
|
$
|
149
|
|
|
$
|
357
|
|
|
$
|
144
|
|
|
$
|
98
|
|
|
$
|
76
|
|
|
$
|
22
|
|
|
$
|
1,089
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allowance for loan losses
for loans
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Individually evaluated for impairment
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
110
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
33
|
|
|
$
|
-
|
|
|
$
|
143
|
|
Collectively evaluated for impairment
|
|
|
56
|
|
|
|
97
|
|
|
|
149
|
|
|
|
247
|
|
|
|
144
|
|
|
|
98
|
|
|
|
43
|
|
|
|
22
|
|
|
|
856
|
|
Loans acquired with deteriorated credit quality
|
|
|
90
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
90
|
|
Ending balance, December 31, 2014
|
|
$
|
146
|
|
|
$
|
97
|
|
|
$
|
149
|
|
|
$
|
357
|
|
|
$
|
144
|
|
|
$
|
98
|
|
|
$
|
76
|
|
|
$
|
22
|
|
|
$
|
1,089
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross loan balances
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Individually evaluated for impairment
|
|
$
|
267
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
142
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
268
|
|
|
$
|
-
|
|
|
$
|
677
|
|
Collectively evaluated for impairment
|
|
|
934
|
|
|
|
50,057
|
|
|
|
46,382
|
|
|
|
23,042
|
|
|
|
64,870
|
|
|
|
8,192
|
|
|
|
10,442
|
|
|
|
1,232
|
|
|
|
205,151
|
|
Loans acquired with deteriorated credit quality
|
|
|
958
|
|
|
|
1,455
|
|
|
|
3,200
|
|
|
|
969
|
|
|
|
-
|
|
|
|
185
|
|
|
|
364
|
|
|
|
-
|
|
|
|
7,131
|
|
Ending balance, December 31, 2014
|
|
$
|
2,159
|
|
|
$
|
51,512
|
|
|
$
|
49,582
|
|
|
$
|
24,153
|
|
|
$
|
64,870
|
|
|
$
|
8,377
|
|
|
$
|
11,074
|
|
|
$
|
1,232
|
|
|
$
|
212,959
|
|
Cordia Bancorp
Notes to Consolidated Financial Statements
(continued)
Note 5. Intangible Assets
In 2010, the Company acquired a majority
interest in the Bank of Virginia. The Company recorded a core deposit intangible related to this acquisition of $249 thousand.
This asset represents the estimated fair value of the core deposits and was determined based on the present value of future cash
flow related to those deposits considering the industry standard “financial instrument” type present value methodology.
The core deposit intangible is amortized over the estimated life of the deposits using the straight-line method. A summary of the
activity in this account is as follows:
(dollars in thousands)
|
|
|
|
Balance at December 31, 2013
|
|
$
|
139
|
|
Amortization
|
|
|
(35
|
)
|
Balance at December 31, 2014
|
|
$
|
104
|
|
Amortization
|
|
|
(36
|
)
|
Balance at December 31, 2015
|
|
$
|
68
|
|
Amortization expense is expected to be
approximately $35 thousand per year in 2016 and $33 thousand in 2017.
Note 6. Premises and Equipment
A summary of the cost and accumulated depreciation of premises
and equipment is as follows:
At December 31, (dollars in thousands)
|
|
2015
|
|
|
2014
|
|
Land
|
|
$
|
2,305
|
|
|
$
|
1,568
|
|
Buildings and improvements
|
|
|
3,656
|
|
|
|
2,640
|
|
Furniture, fixtures and equipment
|
|
|
1,174
|
|
|
|
1,082
|
|
Leasehold improvements
|
|
|
369
|
|
|
|
369
|
|
Automobiles
|
|
|
34
|
|
|
|
34
|
|
Total premises and equipment
|
|
$
|
7,538
|
|
|
$
|
5,693
|
|
Less: accumulated depreciation and amortization
|
|
|
(1,558
|
)
|
|
|
(1,261
|
)
|
Total premises and equipment, net
|
|
$
|
5,980
|
|
|
$
|
4,432
|
|
For the years ended December 31, 2015 and 2014, depreciation
expense totaled $306 thousand and $294 thousand, respectively.
At the beginning of 2015, the Company leased two branches and
an operations office under operating leases that were acquired as part of a business combination. Management determined that one
of these leases required lease payments that were above market as of the date of the acquisition. A liability was established for
$822 thousand at acquisition, the amount the contractual payments exceeded fair value. This liability was being accreted into income
as a reduction of lease expense over the life of the lease. During the second quarter of 2015, this property was purchased and
the related lease was terminated resulting in a favorable reversal of the fair value discount. This accretion adjustment reduced
non-interest expense by $225 thousand. Accordingly, total rent expense net of accretion, for the years ended December 31, 2015
and 2014, respectively, amounted to $17 thousand and $227 thousand. Future lease expenses will no longer be reduced by accretion.
Cordia Bancorp
Notes to Consolidated Financial Statements
(continued)
Following is a schedule by year of future minimum rental payments
required under operating leases that have initial or remaining non-cancelable lease terms in excess of one year as of December
31, 2015.
(dollars in thousands)
|
|
|
|
By year ended December 31,
|
|
Rent
|
|
2016
|
|
$
|
101
|
|
2017
|
|
|
96
|
|
2018
|
|
|
99
|
|
2019
|
|
|
8
|
|
Total minimum payments required
|
|
$
|
304
|
|
The Chester branch lease, set to expire at the end of February
2016, was renegotiated after December 31, 2015, thus future minimum rental payments are only included for the first two months
of 2016 in the above table for this branch (see Note 18 – Subsequent Events).
Note 7. Borrowings
The Bank is a member of the Federal Home
Loan Bank of Atlanta (FHLB) which provides for short-term and long-term advances, typically collateralized by various mortgage
products. The FHLB maintains a blanket security agreement on qualifying collateral. Detail related to FHLB advances at December
31, 2015 and 2014 is as follows:
(dollars in thousands)
|
|
Maturity date
|
|
2015
|
|
|
2014
|
|
FHLB Advance — 1.62%
|
|
December 2019
|
|
$
|
10,000
|
|
|
$
|
10,000
|
|
FHLB Advance — 0.615%
|
|
March 2016
|
|
|
10,000
|
|
|
|
10,000
|
|
FHLB Advance — 1.63%
|
|
October 2018
|
|
|
2,500
|
|
|
|
2,500
|
|
FHLB Advance — 1.92%
|
|
October 2019
|
|
|
2,500
|
|
|
|
2,500
|
|
FHLB Advance — 1.158%
|
|
January 2018
|
|
|
5,000
|
|
|
|
-
|
|
Total
|
|
|
|
$
|
30,000
|
|
|
$
|
25,000
|
|
Should the FHLB borrowing be repaid prior
to maturity, the Bank may have to pay a mark-to-market termination fee to unwind on certain FHLB obligations. On the remaining
advances, the Bank also has the option of converting and extending the borrowing term, subject to the inclusion of any mark-to-market
fees. As of December 31, 2015, the Bank had approximately $14.1 million of remaining eligible loan collateral available for additional
FHLB borrowings and remaining additional credit availability of $39.7 million based on the amount of other balance sheet investment
securities held, excluding securities otherwise already pledged.
BVA maintains $4.5 million of unsecured
lines of credit with other correspondent banks that were available for direct borrowings or Federal Funds purchased. The lines
were undrawn at December 31, 2015.
Cordia Bancorp
Notes to Consolidated Financial Statements
(continued)
Note 8. Related Party Transactions
Executive officers, directors and their
affiliates had borrowings of $5.2 million and $4.7 million and unfunded commitments of $539 thousand and $523 thousand with the
Bank at December 31, 2015 and 2014.
Related Party Borrowings at December 31, 2013
|
|
$
|
1,227
|
|
New loans/advances
|
|
|
4,355
|
|
Repayments
|
|
|
(882
|
)
|
Related Party Borrowings at December 31, 2014
|
|
|
4,700
|
|
New loans/advances
|
|
|
1,285
|
|
Repayments
|
|
|
(745
|
)
|
Related Party Borrowings at December 31, 2015
|
|
$
|
5,240
|
|
In addition, executive officers, directors
and their affiliates maintained deposits of $2.6 million at December 31, 2015 and $2.9 million at December 31, 2014.
Note 9. Time Deposits
Remaining maturities on time deposits are
as follows:
(dollars in thousands)
|
|
|
|
By year ended December 31,
|
|
|
|
2016
|
|
$
|
81,699
|
|
2017
|
|
|
27,963
|
|
2018
|
|
|
25,356
|
|
2019
|
|
|
4,413
|
|
2020
|
|
|
14,587
|
|
Balance at December 31, 2015
|
|
$
|
154,018
|
|
The aggregate amount of time deposits of
$250,000 or more at December 31, 2015 and 2014 were $13.7 million and $9.7 million, respectively. The Bank maintained brokered
time deposits of $35.2 million and $35.8 million at December 31, 2015 and 2014, respectively.
Cordia Bancorp
Notes to Consolidated Financial Statements
(continued)
Note 10. Income Taxes
The Company and Bank file income tax returns
in the U.S. federal jurisdiction. With few exceptions, the Bank is no longer subject to U.S. federal income tax examinations by
tax authorities for years prior to 2012.
The tax effects of temporary differences
that give rise to significant portions of the deferred tax assets and deferred tax liabilities at December 31, 2015 and 2014, are
presented below:
(dollars in thousands)
|
|
2015
|
|
|
2014
|
|
Deferred tax assets
|
|
|
|
|
|
|
|
|
Unrealized securites losses
|
|
$
|
235
|
|
|
$
|
159
|
|
Acquistion accounting adjustments
|
|
|
90
|
|
|
|
271
|
|
Other real estate owned
|
|
|
96
|
|
|
|
97
|
|
Net operating loss carryforward
|
|
|
6,385
|
|
|
|
6,372
|
|
Accrued vacation
|
|
|
26
|
|
|
|
22
|
|
Non-accrual loan interest
|
|
|
89
|
|
|
|
92
|
|
Bank premises and equipment
|
|
|
8
|
|
|
|
-
|
|
Stock compensation
|
|
|
52
|
|
|
|
34
|
|
Other
|
|
|
1
|
|
|
|
2
|
|
Total deferred tax assets
|
|
$
|
6,982
|
|
|
$
|
7,049
|
|
|
|
|
|
|
|
|
|
|
Deferred tax liabilities
|
|
|
|
|
|
|
|
|
Allowance for loan losses
|
|
$
|
(903
|
)
|
|
$
|
(804
|
)
|
Bank premises and equipment
|
|
|
-
|
|
|
|
(32
|
)
|
Total deferred tax liabilities
|
|
$
|
(903
|
)
|
|
$
|
(836
|
)
|
Net deferred tax asset
|
|
$
|
6,079
|
|
|
$
|
6,213
|
|
Less: valuation allowance
|
|
|
(6,079
|
)
|
|
|
(6,213
|
)
|
|
|
$
|
-
|
|
|
$
|
-
|
|
The provision for income taxes charged to operations as of December
31, 2015 and 2014 consists of the following:
(dollars in thousands)
|
|
2015
|
|
|
2014
|
|
Current tax expense
|
|
$
|
-
|
|
|
$
|
-
|
|
Deferred tax (benefit)
|
|
|
210
|
|
|
|
662
|
|
Less change in valuation allowance allocable to securities
|
|
|
(76
|
)
|
|
|
(17
|
)
|
Deferred tax (benefit)
|
|
|
134
|
|
|
|
645
|
|
Change in valuation allowance
|
|
|
(134
|
)
|
|
|
(645
|
)
|
Total tax expense
|
|
$
|
-
|
|
|
$
|
-
|
|
Under the provisions of the Internal Revenue
Code, the Company has approximately $18.7 million of net operating loss carryforwards, which will expire if unused beginning in
2024 through 2034. As of December 31, 2015, net deferred tax assets (DTA) of $6.1 million have been fully reserved with a valuation
allowance. It is estimated that all of the valuation allowance is available to be reversed if it is deemed more-likely-than-not
that all of the deferred tax asset will be realized. Of the net operating losses that occurred prior to the change in control of
BVA in December 2010 and of Cordia in April 2014, the amount of the loss carryforward available to offset taxable income is limited
to approximately $254 thousand per year for twenty years for BVA and zero for Cordia. DTAs related to net operating losses in excess
of the amount realizable during the 20 year carryforward period have been written off.
Cordia Bancorp
Notes to Consolidated Financial Statements
(continued)
Note 11. Financial Instruments with
Off-Balance Sheet Risk
The Bank is party to credit-related financial
instruments with off-balance sheet risk in the normal course of business to meet the financing needs of its customers. These financial
instruments include commitments to extend credit and standby letters of credit. Such commitments involve, to varying degrees, elements
of credit and interest rate risk in excess of the amount recognized in the consolidated Balance Sheet.
The Bank’s exposure to credit loss
is represented by the contractual amount of these commitments. The Bank follows the same credit policies in making commitments
as it does for on-balance sheet instruments.
At December 31, 2015 and 2014, the following
financial instruments were outstanding whose contractual amounts represent credit risk:
(dollars in thousands)
|
|
2015
|
|
|
2014
|
|
Unused commitments and commitments to fund
|
|
$
|
16,133
|
|
|
$
|
15,110
|
|
Commercial and standy letters of credit
|
|
|
445
|
|
|
|
535
|
|
|
|
$
|
16,578
|
|
|
$
|
15,645
|
|
Commitments to extend credit are agreements
to lend to a customer as long as there is no violation of any condition established in the contract. Commitments generally have
fixed expiration dates or other termination clauses and may require payment of a fee. The commitments for equity lines of credit
may expire without being drawn upon. Therefore, the total commitment amounts do not necessarily represent future cash requirements.
The amount of collateral obtained, if it is deemed necessary by the Bank, is based on management’s credit evaluation of the
customer.
Unfunded commitments under commercial lines
of credit, revolving credit lines and overdraft protection agreements are commitments for possible future extensions of credit
to existing customers. These lines of credit usually contain a specified maturity date and may not be fully drawn upon to the total
extent to which the Bank is committed. The amount of collateral obtained, if it is deemed necessary by the Bank, is based on management’s
credit evaluation of the customer.
Standby letters of credit are conditional
commitments issued by the Bank to guarantee the performance of a customer to a third party. Those letters of credit are primarily
issued to support public and private borrowing arrangements. Letters of credit issued generally have expiration dates within one
year, except for those originally issued as two year commitments, however, upon automatic renewal, the letters of credit will then
have expiration dates that expire within one year. The credit risk involved in issuing letters of credit is essentially the same
as that involved in normal extensions of credit. The Bank generally holds collateral supporting those commitments, if deemed necessary.
The Bank maintains its primary cash accounts
in correspondent banks. Capital ratios of correspondents are reviewed periodically to ensure that their capital ratios are maintained
at acceptable levels. There were uninsured balances held with these institutions of $10.6 million and $6.0 million at December
31, 2015 and 2014, respectively.
Note 12. Minimum Regulatory Capital
Requirements and Dividend Limitations
The Bank is subject to various regulatory
capital requirements administered by the federal banking agencies. Failure to meet minimum capital requirements can initiate certain
mandatory, possibly additional discretionary, actions by regulators that could have a direct material effect on the Bank’s
consolidated financial statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective action,
financial institutions must meet specific capital guidelines that involve quantitative measures of assets, liabilities, and certain
off-balance-sheet items as calculated under regulatory accounting practices. A financial institution’s capital amounts and
classification are also subject to qualitative judgments by the regulators about components, risk weightings, and other factors.
Because total assets on a consolidated basis are less than $500,000,000, the Company is not subject to the consolidated capital
requirements imposed by the Bank Holding Company Act. Consequently, the Company is not required to calculate its capital ratios
on a consolidated basis.
The final rules implementing Basel Committee on Banking Supervision's
capital guidelines for U.S. banks (Basel III rules) became effective on January 1, 2015, with full compliance with all of the requirements
being phased in over a multi-year schedule, and fully phased in by January 1, 2019. As part of the new requirements, the
Common Equity Tier I Capital ratio is calculated and utilized in the assessment of capital for all institutions. Capital
amounts and ratios for December 31, 2014 were calculated using the Basel I rules, which were effective until January 1, 2015. Quantitative
measures established by regulation to ensure capital adequacy require financial institutions to maintain minimum amounts and ratios
(set forth in the table below) of total, Tier 1 capital and common equity Tier 1 capital (as defined in the regulations) to
risk-weighted assets (as defined), and of Tier 1 capital (as defined) to average assets (as defined). As of December 31, 2015,
the Bank meets all capital adequacy requirements to which it is subject.
Cordia Bancorp
Notes to Consolidated Financial Statements
(continued)
As of December 31, 2015, the Bank was considered
as well capitalized under the Federal Reserve Bank’s regulatory framework for prompt corrective action. To be categorized
as well capitalized, the Bank must maintain minimum total risk-based, Tier 1 risk-based, and Tier 1 leverage ratios as set forth
in the following table. There are no conditions or events since that notification that management believes have changed the Bank's
category.
The Bank's actual capital amounts and ratios
as of December 31, 2015 and 2014, are presented in the following table:
|
|
Actual Capital
|
|
|
Minimum Capital
Requirement
|
|
|
Minimum To Be Well
Capitalized Under
Prompt Corrective
Action
|
|
Provisions (dollars in thousands)
|
|
Amount
|
|
|
Ratio
|
|
|
Amount
|
|
|
Ratio
|
|
|
Amount
|
|
|
Ratio
|
|
2015
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total capital
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(To risk-weighted assets)
|
|
$
|
28,280
|
|
|
|
13.43
|
%
|
|
$
|
16,842
|
|
|
|
8.00
|
%
|
|
$
|
21,052
|
|
|
|
10.00
|
%
|
Tier 1 capital
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(To risk-weighted assets)
|
|
$
|
27,457
|
|
|
|
13.04
|
%
|
|
$
|
12,631
|
|
|
|
6.00
|
%
|
|
$
|
16,842
|
|
|
|
8.00
|
%
|
Comon equity tier 1 capital*
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(To risk-weighted assets)
|
|
$
|
27,457
|
|
|
|
13.04
|
%
|
|
$
|
9,473
|
|
|
|
4.50
|
%
|
|
$
|
13,684
|
|
|
|
6.50
|
%
|
Tier 1 capital
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(To average assets)
|
|
$
|
27,457
|
|
|
|
7.82
|
%
|
|
$
|
14,049
|
|
|
|
4.00
|
%
|
|
$
|
17,561
|
|
|
|
5.00
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2014
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total capital
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(To risk-weighted assets)
|
|
$
|
27,074
|
|
|
|
15.52
|
%
|
|
$
|
13,958
|
|
|
|
8.00
|
%
|
|
$
|
17,448
|
|
|
|
10.00
|
%
|
Tier 1 capital
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(To risk-weighted assets)
|
|
$
|
25,985
|
|
|
|
14.89
|
%
|
|
$
|
6,979
|
|
|
|
4.00
|
%
|
|
$
|
10,469
|
|
|
|
6.00
|
%
|
Tier 1 capital
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(To average assets)
|
|
$
|
25,985
|
|
|
|
8.24
|
%
|
|
$
|
12,610
|
|
|
|
4.00
|
%
|
|
$
|
15,763
|
|
|
|
5.00
|
%
|
* Common equity tier 1 capital became applicable in 2015.
Dividend Limitations
As a result of regulatory restrictions
due to losses realized by the Bank during 2014 and 2012 and the provisions of the Bank’s previous written agreement with
the Federal Reserve Bank of Richmond, which terminated on August 13, 2013, we are not presently able to pay dividends without prior
approval. Accordingly, the Bank paid no dividends during 2015 or 2014.
Note 13. Employee Benefit Plans
Employee 401(k) Savings Plan
The Company provides a 401(k) Plan that
is available to employees meeting minimum eligibility requirements. The Company did not make any matching contributions to the
plan in 2015 or 2014. The employee participants have various investment alternatives available in the 401(k) Plan; however, Company
stock is currently not permitted as an investment alternative.
Employee Welfare Plan
The Company provides benefit programs to
eligible full-time and part-time employees who elect coverage under the plan. Each plan has its own eligibility requirement. During
an annual enrollment period each year, employees have the opportunity to change their coverage or, in certain circumstances, more
frequently due to certain life-changing events. Generally, amounts paid by employees for benefit coverage are deducted from their
pay on a before-tax basis. Certain benefits are deducted on an after-tax basis.
Cordia Bancorp
Notes to Consolidated Financial Statements
(continued)
Various insurance benefits offered to employees
consist of medical, dental, vision, life, accidental death and dismemberment, long term disability, short term disability, medical
spending account, dependent care spending account, long term care and supplemental insurance. The health and welfare plans are
administered through Multiple Employer Welfare Association (“MEWA”). Monthly employer and employee contributions are
remitted to a tax-exempt employer benefits trust managed by the Virginia Bankers Association, against which the MEWA processes
and pays claims.
Deferred Compensation Plan
The Bank had a deferred compensation agreement
with its Former Chief Executive Officer and Vice Chairman of the board entered into in January 2005, providing for benefit payments
commencing January 1, 2010, for a period of five years. The final payout was made in December 2014. The annual payment for 2014
was $60 thousand. The obligation was based upon the present value of the expected payments over the expected payout and accrual
period. There was no remaining liability as of December 31, 2015 or 2014.
Stock Options and Restricted Stock
Share-based compensation arrangements include
stock options, restricted stock plans, performance-based awards, stock appreciation rights and employee stock purchase plans. ASC
Topic 718 requires all share-based payments to employees to be valued using a fair value method on the date of grant and to be
expensed based on that fair value over the applicable vesting period.
At the Bank’s 2005 annual meeting
of shareholders, the Bank’s shareholders ratified approval of the Bank of Virginia 2005 Stock Option Plan (the “2005
Plan”) which made available up to 26,560 shares for potential grants of stock options. The Plan was instituted to encourage
and facilitate investment in the common stock of the Bank by key employees and executives and to assist in the long-term retention
of service by those executives. The Plan covers employees as determined by the Bank’s Board of Directors from time to time.
Options under the Plan were granted in the form of incentive stock options.
At the Bank’s 2011 annual meeting
of shareholders, the Bank’s shareholders approved a new share-based compensation plan (Bank of Virginia 2011 Stock Incentive
Plan or the “2011 Plan”). Under this plan, employees, officers and directors of the Bank or its affiliates are eligible
to participate. The plan’s intent was to reward employees, officers and directors of the Bank or its affiliates for their
efforts, to assist in the long-term retention of service for those who were awarded, as well as further align their interests with
the Bank’s shareholders. At the Company’s 2014 annual meeting of shareholders, Cordia shareholders approved an amendment
to the 2011 Plan to increase the number of shares authorized for issuance by an additional 800,000 shares. As of December 31, 2015,
there were 592,765 shares available for issuance under the 2011 Plan.
There were 20,000 Cordia stock options
granted outside the plan prior to the share exchange in March 2013. These stock options were forfeited during 2015. In addition,
there were 10,000 stock options and 12,500 restricted stock issued in September 2013 outside the plan as an inducement grant to
a newly hired officer.
Effective upon Cordia’s acquisition
of the Bank on March 29, 2013, the 2005 and 2011 Plans were assumed by Cordia.
Cordia Bancorp
Notes to Consolidated Financial Statements
(continued)
A summary of the Company’s option
activity as of December 31, 2015 and 2014 and changes during the years then ended are presented in the following table:
|
|
Option
shares
|
|
|
Weighted-
Average Exercise
Price
|
|
|
Weighted-
Average
Remaining
Contractual Term
(Years)
|
|
Outstanding at January 1, 2014
|
|
|
115,656
|
|
|
$
|
7.68
|
|
|
|
8.44
|
|
Granted
|
|
|
31,150
|
|
|
|
4.16
|
|
|
|
-
|
|
Forfeited
|
|
|
(1,328
|
)
|
|
|
6.40
|
|
|
|
-
|
|
Outstanding at December 31, 2014
|
|
|
145,478
|
|
|
$
|
6.94
|
|
|
|
7.88
|
|
Granted
|
|
|
23,600
|
|
|
|
3.86
|
|
|
|
-
|
|
Forfeited
|
|
|
(44,392
|
)
|
|
|
6.28
|
|
|
|
-
|
|
Outstanding at December 31, 2015
|
|
|
124,686
|
|
|
$
|
6.59
|
|
|
|
7.54
|
|
Exercisable at December 31, 2015
|
|
|
63,567
|
|
|
$
|
8.71
|
|
|
|
-
|
|
Aggregate intrinsic value is calculated
as the difference between the quoted price and the award exercise price of the stock. To the extent that the quoted price is less
than the exercise price, there is no value to the underlying option awards, which was the case at both December 31, 2015 and 2014.
The weighted average fair value of options
granted during 2015 and 2014 was $1.38 and $1.50, respectively. The remaining unrecognized compensation expense for the options
granted totaled $58 thousand as of December 31, 2015 and will be recognized over the next 46 months, or 3.83 years.
The fair value of each option granted is
estimated on the date of grant using the “Black-Scholes Option Pricing” method with the following assumptions for the
year ended December 31, 2015 and 2014:
|
|
2015
|
|
|
2014
|
|
Expected dividend rate
|
|
|
0.00
|
%
|
|
|
0.00
|
%
|
|
|
|
|
|
|
|
|
|
Expected volatility
|
|
|
30.00
|
%
|
|
|
30.00
|
%
|
|
|
|
|
|
|
|
|
|
Expected term in years
|
|
|
7
|
|
|
|
7
|
|
|
|
|
|
|
|
|
|
|
Risk free rate
|
|
|
2.01
|
%
|
|
|
2.15
|
%
|
Options totaling 23,600 and 31,150 were
granted during the years ended December 31, 2015 and 2014, respectively, under the 2011 plan. The expected term of options granted
under both the 2011 Plan and 2005 Plan were estimated based upon anticipated behavior patterns given the contractual terms of the
options granted. The risk free rate for periods within the contractual life of the option has been based on the U.S. Treasury yield
curve in effect at the time of the grant. Expected volatility has been based on the historical volatility of the Company’s
stock.
During 2015, each non-executive director
was granted 2,278 restricted shares, two executive officers were each granted 40,000 restricted shares and the new President and
CEO of BVA was granted 3,378 restricted shares for a total of 103,880 restricted shares granted to directors and officers. The
2015 grants equaled $411 thousand in value. The non-executive director shares vested pro rata monthly over the course of 2015,
and were fully vested by the end of 2015. During 2014, each non-executive director was granted 2,300 restricted shares, or a time
of service prorated amount and the CEO was granted 66,000 restricted shares for a total of 85,933 restricted shares granted to
directors and officers. The 2014 grants equaled $361 thousand in value. The non-executive director shares vested pro rata monthly
over the course of 2014, and were fully vested by the end of 2014.
A summary of the status of the Company’s
nonvested shares in relation to the Company’s restricted stock awards as of December 31, 2015 and 2014, and changes during
the years ended December 31, 2015 and 2014 is presented below. The weighted average price is the weighted average fair value at
the date of grant.
Cordia Bancorp
Notes to Consolidated Financial Statements
(continued)
|
|
Shares
|
|
|
Weighted
Average Price
|
|
Nonvested as of January 1, 2014
|
|
|
11,700
|
|
|
$
|
4.41
|
|
Granted
|
|
|
85,933
|
|
|
|
4.20
|
|
Vested
|
|
|
45,053
|
|
|
|
4.21
|
|
Forfeited
|
|
|
-
|
|
|
|
-
|
|
Nonvested as of December 31, 2014
|
|
|
52,580
|
|
|
$
|
4.23
|
|
Granted
|
|
|
103,880
|
|
|
|
3.96
|
|
Vested
|
|
|
49,000
|
|
|
|
4.05
|
|
Forfeited
|
|
|
-
|
|
|
|
-
|
|
Nonvested as of December 31, 2015
|
|
|
107,460
|
|
|
$
|
4.05
|
|
The weighted average fair value of restricted
stock granted during the year was $3.96. The remaining unrecognized compensation expense for the shares granted totaled $372 thousand
as of December 31, 2015 and will be recognized over the next 36 months, or 3 years.
A total of 578,125 shares of restricted
shares of common stock were granted to founding investors of Cordia predominantly during 2009 and 2010 and are considered at December
31, 2014 more-likely-than-not to not vest due to significant performance based thresholds, for which the vesting time period expires
in October 2016.
Stock-based compensation expense was $318
thousand in 2015 and $270 thousand in 2014.
Cordia does not have any benefit plans
or incentive compensation plans beyond those maintained by the Bank. Cordia does provide a life insurance benefit to the President
and Chief Executive Officer under the terms of his employment agreement.
Note 14.
Fair Value Measurements
Fair value information about financial
instruments, whether or not recognized in the balance sheet, for which it is practical to estimate the value is based upon the
characteristics of the instruments and relevant market information. Financial instruments include cash, evidence of ownership in
an entity, or contracts that convey or impose on an entity that contractual right or obligation to either receive or deliver cash
for another financial instrument. Fair value is the amount at which a financial instrument could be exchanged in a current transaction
between willing parties, other than in a forced sale or liquidation, and is best evidenced by a quoted market price if one exists.
The following presents the methodologies
and assumptions used to estimate the fair value of the Company’s financial instruments. The information used to determine
fair value is highly subjective and judgmental in nature and, therefore, the results may not be precise. Subjective factors include,
among other things, estimates of cash flows, risk characteristics, credit quality, and interest rates, all of which are subject
to change. Since the fair value is estimated as of the balance sheet date, the amounts that will actually be realized or paid upon
settlement or maturity on these various instruments could be significantly different.
Financial Instruments with Book Value
Equal to Fair Value
The book values of cash and due from banks,
federal funds sold and purchased, loans held for sale, interest receivable, and interest payable are considered to be equal to
fair value as a result of the short-term nature of these items.
Securities
The fair value for securities
available for sale and securities held to maturity is based on current market quotations, where available. If quoted market prices
are not available, fair value has been based on the quoted price of similar instruments. Restricted securities are valued at cost
which is also the stated redemption value of the shares.
Restricted Securities
Restricted securities are valued at cost
which is also the stated redemption value of the shares.
Cordia Bancorp
Notes to Consolidated Financial Statements
(continued)
Loans Held for Investments
The estimated value of loans held for investment
is measured based upon discounted future cash flows using the current rates for similar loans, as well as assumptions related to
credit risk.
Deposits
Deposits without a stated maturity, including
demand, interest-bearing demand, and savings accounts, are reported at their carrying value in accordance with authoritative accounting
guidance. No value has been assigned to the franchise value of these deposits. For other types of deposits with fixed maturities,
fair value has been estimated by discounting future cash flows based on interest rates currently being offered on deposits with
similar characteristics and maturities.
Borrowings and Other Indebtedness
Fair value has been estimated based on
interest rates currently available to the Company for borrowings with similar characteristics and maturities.
Commitments to Extend Credit, Standby
Letters of Credit, and Financial Guarantees
Fair values for off-balance-sheet, credit-related
financial instruments are based on fees currently charged to enter into similar agreements, taking into account the remaining terms
of the agreements and the counterparties’ credit standing. At December 31, 2015 and 2014, the fair value of loan commitments
and standby letters of credit was deemed to be immaterial and therefore is not included.
Determination of Fair Value
The Company uses fair value measurements
to record fair value adjustments to certain assets and liabilities and to determine fair value disclosures. In accordance with
the Fair Value Measurements and Disclosure topic of FASB ASC, the fair value of a financial instrument is the price that would
be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement
date. Fair value is best determined based upon quoted market prices. However, in many instances, there are no quoted market prices
for the Company’s various financial instruments. In cases where quoted market prices are not available, fair values are based
on estimates using present value or other valuation techniques. Those techniques are significantly affected by the assumptions
used, including the discount rate and estimate of future cash flows. Accordingly, the fair value estimates may not be realized
in an immediate settlement of the instrument.
The fair value guidance provides a consistent
definition of fair value, which focuses on exit price in an orderly transaction (that is, not a forced liquidation or distressed
sale) between market participants at the measurement date under market conditions. If there has been a significant decrease in
the volume and level of activity for the asset or liability, a change in valuation technique or the use of multiple valuation techniques
may be appropriate. In such instances, determining the price at which willing market participants would transact at the measurement
date under market conditions depends on the facts and circumstances and requires the use of significant judgment.
Authoritative accounting literature specifies
a hierarchy of valuation techniques based on whether the inputs to those valuation techniques are observable or unobservable. Observable
inputs reflect market data obtained from independent sources, while unobservable inputs reflect the Company’s market assumptions.
The three levels of the fair value hierarchy based on these two types of inputs are as follows:
|
Level 1
|
Valuation is based upon quoted prices for identical instruments traded in active markets.
|
|
Level 2
|
Valuation is based upon quoted prices for similar instruments in active markets, quoted prices
for identical or similar instruments in markets that are not active, and model-based valuation techniques for which all significant
assumptions are observable in the market.
|
|
Level 3
|
Valuation is generated from model-based techniques that use at least one significant assumption
not observable in the market. These unobservable assumptions reflect estimates of assumptions that market participants would use
in pricing the asset or liability. Valuation techniques include use of option pricing models, discounted cash flow models and similar
techniques.
|
Cordia Bancorp
Notes to Consolidated Financial Statements
(continued)
The following table presents estimated
fair values of the Company’s financial statements in accordance with authoritative accounting guidance:
|
|
|
|
|
Fair Value Measurements at December 31, 2015
|
|
(dollars in thousands)
|
|
Carrying
amount
|
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
|
Fair Value
|
|
Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
18,460
|
|
|
$
|
18,460
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
18,460
|
|
Securities available for sale
|
|
|
46,220
|
|
|
|
-
|
|
|
|
46,220
|
|
|
|
-
|
|
|
|
46,220
|
|
Securities held to maturity
|
|
|
25,500
|
|
|
|
-
|
|
|
|
25,694
|
|
|
|
-
|
|
|
|
25,694
|
|
Restricted securities
|
|
|
2,355
|
|
|
|
-
|
|
|
|
2,355
|
|
|
|
-
|
|
|
|
2,355
|
|
Loans held for sale
|
|
|
220
|
|
|
|
|
|
|
|
220
|
|
|
|
|
|
|
|
|
|
Net Loans held for investment
|
|
|
245,210
|
|
|
|
-
|
|
|
|
-
|
|
|
|
244,776
|
|
|
|
244,776
|
|
Interest receivable
|
|
|
2,085
|
|
|
|
-
|
|
|
|
2,085
|
|
|
|
-
|
|
|
|
2,085
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Demand deposits
|
|
|
28,969
|
|
|
|
-
|
|
|
|
28,969
|
|
|
|
-
|
|
|
|
28,969
|
|
Savings and interest-bearing demand deposits
|
|
|
107,057
|
|
|
|
-
|
|
|
|
107,057
|
|
|
|
-
|
|
|
|
107,057
|
|
Time deposits
|
|
|
154,018
|
|
|
|
-
|
|
|
|
154,027
|
|
|
|
-
|
|
|
|
154,027
|
|
FHLB Borrowings
|
|
|
30,000
|
|
|
|
-
|
|
|
|
29,878
|
|
|
|
-
|
|
|
|
29,878
|
|
Interest payable
|
|
|
197
|
|
|
|
-
|
|
|
|
197
|
|
|
|
-
|
|
|
|
197
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair Value Measurements at December 31, 2014
|
|
(dollars in thousands)
|
|
Carrying
amount
|
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
|
Fair Value
|
|
Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
21,847
|
|
|
$
|
21,847
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
21,847
|
|
Securities available for sale
|
|
|
53,483
|
|
|
|
-
|
|
|
|
53,483
|
|
|
|
-
|
|
|
|
53,483
|
|
Securities held to maturity
|
|
|
20,716
|
|
|
|
-
|
|
|
|
21,047
|
|
|
|
-
|
|
|
|
21,047
|
|
Restricted securities
|
|
|
2,092
|
|
|
|
-
|
|
|
|
2,092
|
|
|
|
-
|
|
|
|
2,092
|
|
Loans held for investment
|
|
|
211,870
|
|
|
|
-
|
|
|
|
-
|
|
|
|
213,861
|
|
|
|
213,861
|
|
Interest receivable
|
|
|
2,040
|
|
|
|
-
|
|
|
|
2,040
|
|
|
|
-
|
|
|
|
2,040
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Demand deposits
|
|
|
29,795
|
|
|
|
-
|
|
|
|
29,795
|
|
|
|
-
|
|
|
|
29,795
|
|
Savings and interest-bearing demand deposits
|
|
|
84,258
|
|
|
|
-
|
|
|
|
82,258
|
|
|
|
-
|
|
|
|
82,258
|
|
Time deposits
|
|
|
151,550
|
|
|
|
-
|
|
|
|
152,179
|
|
|
|
-
|
|
|
|
152,179
|
|
FHLB Borrowings
|
|
|
25,000
|
|
|
|
-
|
|
|
|
24,753
|
|
|
|
-
|
|
|
|
24,753
|
|
Interest payable
|
|
|
161
|
|
|
|
-
|
|
|
|
161
|
|
|
|
-
|
|
|
|
161
|
|
The following describes the valuation techniques
used by the Company to measure certain financial assets and liabilities recorded at fair value on a recurring basis in the financial
statements:
Securities available for sale
Securities available for sale are recorded
at fair value on a recurring basis. Fair value measurement is based upon quoted market prices, when available (Level 1). If quoted
market prices are not available, fair values are measured utilizing independent valuation techniques of identical or similar securities
for which significant assumptions are derived primarily from or corroborated by observable market data. Third party vendors compile
prices from various sources and may determine the fair value of identical or similar securities by using pricing models that consider
observable market data (Level 2).
Cordia Bancorp
Notes to Consolidated Financial Statements
(continued)
The following table presents the balances
of financial assets measured at fair value on a recurring basis at December 31, 2015 and 2014:
|
|
|
|
|
Quoted Prices
in Active
Markets for
Identical
Assets
|
|
|
Significant Other
Observable Inputs
|
|
|
Significant
Unobservable
Inputs
|
|
(dollars in thousands)
|
|
Balance at
December 31,
|
|
|
(Level 1)
|
|
|
(Level 2)
|
|
|
(Level 3)
|
|
2015
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U. S. Government Agencies
|
|
$
|
2,139
|
|
|
$
|
-
|
|
|
$
|
2,139
|
|
|
$
|
-
|
|
Agency Guaranteed Mortgage-backed securities
|
|
|
44,081
|
|
|
|
-
|
|
|
|
44,081
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2014
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U. S. Government Agencies
|
|
$
|
3,719
|
|
|
$
|
-
|
|
|
$
|
3,719
|
|
|
$
|
-
|
|
Agency Guaranteed Mortgage-backed securities
|
|
|
49,764
|
|
|
|
-
|
|
|
|
49,764
|
|
|
|
-
|
|
Certain assets are measured at fair value
on a nonrecurring basis in accordance with GAAP. Adjustments to the fair value of these assets usually result from the application
of lower-of-cost-or-market accounting or write-downs of individual assets.
The following describes the valuation techniques
used by the Company to measure certain assets recorded at fair value on a nonrecurring basis in the financial statements:
Impaired Loans
Loans are designated as impaired when,
in the judgment of management based on current information and events, it is probable that all amounts due according to the contractual
terms of the loan agreement will not be collected when due. The measurement of loss associated with impaired loans can be based
on either the observable market price of the loan or the fair value of the collateral. Collateral may be in the form of real estate
or business assets including equipment, inventory, and accounts receivable. The vast majority of the collateral is real estate.
The value of real estate collateral is determined utilizing a market valuation approach based on an appraisal conducted by an independent,
licensed appraiser outside of the Company using observable market data (Level 2). However, if the collateral value based on income
valuation approach is significantly adjusted due to differences in the comparable properties, or is discounted by the Company because
of marketability, then the fair value is considered Level 3. The value of business equipment is based upon an outside appraisal
if deemed significant, or the net book value on the applicable business’s financial statements if not considered significant.
Likewise, values for inventory and accounts receivables collateral are based on financial statement balances or aging reports (Level
3). Impaired loans allocated to the Allowance for Loan Losses are measured at fair value on a nonrecurring basis. Any fair value
adjustments are recorded in the period incurred as provision for loan losses on the Consolidated Statements of Operations.
Other Real Estate Owned (OREO)
Other real estate owned (“OREO”)
is measure at fair value less cost to sell, based on an appraisal conducted by an independent, licensed appraiser outside of the
Company. If the collateral value is significantly adjusted due to differences in the comparable properties, or is discounted by
the Company because of marketability, then the fair value is considered Level 3. OREO is measured at fair value on a nonrecurring
basis. Any initial fair value adjustment is charged against the Allowance for Loan Losses. Subsequent fair value adjustments are
recorded in the period incurred and included in other noninterest expense on the Consolidated Statements of Operations.
Cordia Bancorp
Notes to Consolidated Financial Statements
(continued)
The following tables summarize the Company’s
assets that were measured at fair value on a nonrecurring basis at December 31, 2015 and 2014.
|
|
|
|
|
Quoted Prices
in Active
Markets for
Identical
Assets
|
|
|
Significant Other
Observable Inputs
|
|
|
Significant
Unobservable
Inputs
|
|
(dollars in thousands)
|
|
Balance at
December 31,
|
|
|
(Level 1)
|
|
|
(Level 2)
|
|
|
(Level 3)
|
|
2015
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Impaired loans
|
|
$
|
48
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
48
|
|
Other real estate owned
|
|
|
1,870
|
|
|
|
-
|
|
|
|
-
|
|
|
|
1,870
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2014
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Impaired loans
|
|
$
|
42
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
42
|
|
Other real estate owned
|
|
|
1,641
|
|
|
|
-
|
|
|
|
-
|
|
|
|
1,641
|
|
The following table displays quantitative
information about level 3 fair value measurements for financial instruments measured at fair value on a non-recurring basis at
December 31, 2015 and 2014.
|
|
December 31, 2015
|
(dollars in thousands)
|
|
Quantitative Information About Level 3 Fair Value Measurements
|
Description
|
|
Fair Value
|
|
|
Valuation Technique
|
|
Unobservable input
|
|
Range
|
|
|
|
|
|
|
|
|
|
|
Impaired loans
|
|
$
|
48
|
|
|
-
|
|
-
|
|
0-10%
|
Other real estate owned
|
|
$
|
1,870
|
|
|
Discounted appraised value
|
|
Discount for lack of marketability
|
|
6-29%
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2014
|
(dollars in thousands)
|
|
Quantitative Information About Level 3 Fair Value Measurements
|
Description
|
|
Fair Value
|
|
|
Valuation Technique
|
|
Unobservable input
|
|
Range
|
|
|
|
|
|
|
|
|
|
|
Impaired loans
|
|
$
|
42
|
|
|
-
|
|
-
|
|
0-10%
|
Other real estate owned
|
|
$
|
1,641
|
|
|
Discounted appraised value
|
|
Discount for lack of marketability
|
|
6-29%
|
Cordia Bancorp
Notes to Consolidated Financial Statements
(continued)
Note 15. Other Real Estate Owned
The table below presents a summary of the
activity related to other real estate owned:
(dollars in thousands)
|
|
2015
|
|
|
2014
|
|
Beginning balance, January 1
|
|
$
|
1,641
|
|
|
$
|
1,545
|
|
Additions
|
|
|
634
|
|
|
|
83
|
|
Improvements
|
|
|
6
|
|
|
|
-
|
|
Valuation adjustments
|
|
|
(65
|
)
|
|
|
13
|
|
Sales
|
|
|
(346
|
)
|
|
|
-
|
|
Ending balance, December 31
|
|
$
|
1,870
|
|
|
$
|
1,641
|
|
|
|
|
|
|
|
|
|
|
Residential real estate included in ending balance, December 31
|
|
$
|
1,184
|
|
|
$
|
1,192
|
|
The Company aggressively attempts to dispose
of its other real estate and has contracted with a third-party vendor to aid in expediting the sales process. The Company recorded
a gain of $21 thousand in 2015 on the sale of other real estate owned during 2015 as compared to no gain in 2014. The Company recorded
an expense of $90 thousand and $46 thousand related to other real estate owned for the years ended December, 31, 2015 and 2014,
respectively.
Note 16. Accumulated Other Comprehensive
(Loss)
The changes in accumulated other comprehensive
loss for years ended December 31, 2015 and 2014 are summarized as follows:
(dollars in thousands)
|
|
Unrealized Gain
(Loss) on
Available-for-Sale
Securities
|
|
|
Unrealized Gain
(Loss) on Held-to-
Maturity
Securities
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
Balance December 31, 2013
|
|
$
|
(50
|
)
|
|
$
|
(334
|
)
|
|
$
|
(384
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized holding losses on available for sale securities
|
|
|
(132
|
)
|
|
|
-
|
|
|
|
(132
|
)
|
Amortization of AFS to HTM reclassification adjustment
|
|
|
-
|
|
|
|
48
|
|
|
|
48
|
|
Net current period other comprehensive income
|
|
|
(132
|
)
|
|
|
48
|
|
|
|
(84
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance December 31, 2014
|
|
$
|
(182
|
)
|
|
$
|
(286
|
)
|
|
$
|
(468
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized holding losses on available for sale securities
|
|
|
(271
|
)
|
|
|
-
|
|
|
|
(271
|
)
|
Amortization of AFS to HTM reclassification adjustment
|
|
|
-
|
|
|
|
49
|
|
|
|
49
|
|
Net current period other comprehensive income
|
|
|
(271
|
)
|
|
|
49
|
|
|
|
(222
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance December 31, 2015
|
|
$
|
(453
|
)
|
|
$
|
(237
|
)
|
|
$
|
(690
|
)
|
Cordia Bancorp
Notes to Consolidated Financial Statements
(continued)
The following table presents information
on amounts reclassified out of accumulated other comprehensive income (loss), by category, during the periods indicated:
(in thousands)
|
|
2015
|
|
|
2014
|
|
|
Affected Line
Item on
Condensed
Consolidated
Statement of
Operations
|
Available-for-sale securities
|
|
|
|
|
|
|
|
|
|
|
Realized gains on sales of securities
|
|
$
|
133
|
|
|
$
|
177
|
|
|
Net gain on sale of available-for-sale securities
|
Note 17. Preferred Stock Issuance and
Conversion
On April 10, 2014, Cordia completed the
sale of approximately 363 shares of Mandatorily Convertible, Noncumulative, Nonvoting, Perpetual Preferred Stock, Series A, $0.01
par value per share, to accredited investors at a purchase price of $42,500 per share for total gross proceeds of $15.4 million.
The capital raise included investments by 100% of Cordia directors. The net proceeds of the offering are being used primarily to
support organic growth in BVA.
On June 25, 2014, upon stockholder approval, each share of Series
A Preferred Stock mandatorily converted into 10,000 shares of Cordia’s common stock at a conversion price of $4.25 per share,
for a total issuance of approximately 3,629,871 new shares of common stock, of which 2,229,434 are voting and 1,400,437 are nonvoting.
The holders of the Series A Preferred Stock did not receive any dividends under the provisions of the stock purchase agreements.
Other than voting rights, the nonvoting
common stock has the same rights and privileges as the common stock, including sharing ratably in all assets of the Company upon
its liquidation, dissolution or winding-up, and entitlement to receive dividends in the same amount per share and at the same time
when, as and if declared by the Board, and is identical to the common stock in all other respects as to all other matters (other
than voting). Holders of nonvoting common stock have no cumulative voting rights or preemptive rights (other than the limited contractual
preemptive rights of certain investors in the private placement offering) to purchase or subscribe for any additional shares of
common stock or nonvoting common stock or other securities, and there are no conversion rights or redemption or sinking fund provisions
with respect to the nonvoting common stock.
Authorized Shares. 5,000,000 shares of
nonvoting common stock, par value of $0.01 per share, are authorized and 1,400,437 shares of nonvoting common stock are outstanding.
Voting Rights. Holders of nonvoting common
stock are not entitled to vote except as required by the Virginia Stock Corporation Act. Where the shares of nonvoting common stock
are entitled to vote under Virginia law, each holder of nonvoting common stock will have one vote for each share of nonvoting common
stock held of record solely on the matters to which such shares are entitled to vote, and subject to the rights and limitations
specified by the Virginia Stock Corporation Act.
Automatic Conversion Upon Permitted Transfer.
Each share of nonvoting common stock will automatically convert into one share of common stock in the event of a “permitted
transfer” to a transferee. A “permitted transfer” is a transfer of nonvoting common stock (i) in a widespread
public distribution, (ii) in which no transferee (or group of associated transferees) would receive 2% or more of any class of
voting securities of the Company, or (iii) to a transferee that would control more than 50% of the voting securities of the Company
without any transfer from such holder of nonvoting common stock.
Dividends. Subject to the prior rights
of the holders of shares of preferred stock that may be issued and outstanding, the holders of nonvoting common stock are entitled
to receive dividends when, as and if declared by the Company’s Board of Directors out of funds lawfully available for the
payment of dividends.
Cordia Bancorp
Notes to Consolidated Financial Statements
(continued)
Note 18. Parent Company – Condensed Financial Statements
Cordia Bancorp, Inc. owns 100.0% of the
outstanding shares of the Bank of Virginia at December 31, 2015. Condensed financial statements of Cordia Bancorp, Inc. follow:
Condensed Balance Sheets
December 31, 2015 and 2014
(dollars in thousands)
|
|
2015
|
|
|
2014
|
|
Assets:
|
|
|
|
|
|
|
|
|
Cash and due from banks
|
|
$
|
940
|
|
|
$
|
1,779
|
|
Investment in Bank of Virginia
|
|
|
26,796
|
|
|
|
25,621
|
|
Other assets
|
|
|
7
|
|
|
|
11
|
|
Total assets
|
|
$
|
27,743
|
|
|
$
|
27,411
|
|
|
|
|
|
|
|
|
|
|
Liabilities and capital:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities
|
|
$
|
4
|
|
|
$
|
275
|
|
|
|
|
|
|
|
|
|
|
Equity
|
|
|
|
|
|
|
|
|
Common stock
|
|
|
65
|
|
|
|
65
|
|
Additional paid-in capital
|
|
|
33,191
|
|
|
|
32,956
|
|
Retained deficit
|
|
|
(4,827
|
)
|
|
|
(5,417
|
)
|
Accumulated other comprehensive loss
|
|
|
(690
|
)
|
|
|
(468
|
)
|
Total equity
|
|
|
27,739
|
|
|
|
27,136
|
|
Total liabilities and equity
|
|
$
|
27,743
|
|
|
$
|
27,411
|
|
Cordia Bancorp
Notes to Consolidated Financial Statements
(continued)
Condensed Statements of Operations
For the years ended December 31, 2015 and
2014
(dollars in thousands)
|
|
2015
|
|
|
2014
|
|
Income:
|
|
|
|
|
|
|
|
|
Equity in undistributed income of subsidiary
|
|
$
|
1,397
|
|
|
$
|
323
|
|
Interest income
|
|
|
-
|
|
|
|
1
|
|
Total income
|
|
$
|
1,397
|
|
|
$
|
324
|
|
|
|
|
|
|
|
|
|
|
Expenses:
|
|
|
|
|
|
|
|
|
Other expense
|
|
|
807
|
|
|
|
736
|
|
Total expense
|
|
|
807
|
|
|
|
736
|
|
Net income (loss)
|
|
$
|
590
|
|
|
$
|
(412
|
)
|
Cordia Bancorp
Notes to Consolidated Financial Statements
(continued)
Condensed Statements of Cash Flows
For the years ended December 31, 2015 and
2014
(dollars in thousands)
|
|
2015
|
|
|
2014
|
|
Cash flows from operating activities:
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
$
|
590
|
|
|
$
|
(412
|
)
|
Adjustments to reconcile net income (loss) to net cash used in operating activities:
|
|
|
|
|
|
|
|
|
Equity in undistributed income of subsidiary
|
|
|
(1,397
|
)
|
|
|
(323
|
)
|
Stock-based compensation
|
|
|
318
|
|
|
|
270
|
|
Net decrease in other assets
|
|
|
4
|
|
|
|
218
|
|
Net decrease in other liabilities
|
|
|
(271
|
)
|
|
|
(760
|
)
|
Net cash used in operating activities
|
|
|
(756
|
)
|
|
|
(1,007
|
)
|
|
|
|
|
|
|
|
|
|
Cash flows from investing activities:
|
|
|
|
|
|
|
|
|
Investment in Bank of Virginia, net of costs
|
|
|
-
|
|
|
|
(11,500
|
)
|
Net cash used in investing activities
|
|
|
-
|
|
|
|
(11,500
|
)
|
|
|
|
|
|
|
|
|
|
Cash flows from financing activities:
|
|
|
|
|
|
|
|
|
Repurchase of common stock
|
|
|
(83
|
)
|
|
|
-
|
|
Issuance of Common Stock, net of costs
|
|
|
-
|
|
|
|
14,075
|
|
Net cash (used in) provided by investing activities
|
|
|
(83
|
)
|
|
|
14,075
|
|
Net increase (decrease) in cash and due from banks
|
|
|
(839
|
)
|
|
|
1,568
|
|
Cash and due from banks, beginning of period
|
|
|
1,779
|
|
|
|
211
|
|
Cash and due from banks, end of period
|
|
$
|
940
|
|
|
$
|
1,779
|
|
Cordia Bancorp
Notes to Consolidated Financial Statements
(continued)
Note 19. Subsequent Events
In February 2016, the Chester branch lease was renewed for an
additional five years. Future minimum rental payments required under this renewal are as follows:
(dollars in thousands)
|
|
|
|
By year ended December 31,
|
|
Rent
|
|
2016
|
|
$
|
49
|
|
2017
|
|
|
50
|
|
2018
|
|
|
51
|
|
2019
|
|
|
52
|
|
2020
|
|
|
53
|
|
Total minimum payments required under renewal
|
|
$
|
255
|
|
On March 1, 2016, the Bank transferred
certain marketing arrangements, internet domains and intellectual property related to CordiaGrad to a newly formed subsidiary,
which it then sold to Jack C. Zoeller, who resigned as Cordia’s President and Chief Executive Officer in connection with
the transaction. No loans were sold as part of the transaction and, as part of the transaction, the Bank agreed to provide certain
transition and loan origination services to the new entity acquired by Mr. Zoeller through June 30, 2016. Cordia anticipates recording
charges totaling $1.6 million in the first quarter of 2016 relating to the loss on the sale of the CordiaGrad business and the
vesting of equity awards held by Mr. Zoeller. The reduction to book value is expected to be approximately $740 thousand due to
the capital contribution resulting from the vesting of equity awards held by Mr. Zoeller.
Effective March 1, 2016, following Jack
Zoeller’s resignation, O.R. (Ed) Barham, Jr. was appointed as a director and as President and Chief Executive Officer of
Cordia and as Chairman of the Board of Directors of the Bank.
REPORT OF INDEPENDENT REGISTERED PUBLIC
ACCOUNTING FIRM
To the Board of Directors and Stockholders
Cordia Bancorp Inc.
Midlothian, Virginia
We have audited the accompanying consolidated balance sheets
of Cordia Bancorp Inc. and subsidiary (the “Company”) as of December 31, 2015 and 2014, and the related consolidated
statements of operations, comprehensive income (loss), changes in stockholders' equity, and cash flows for the years then ended.
These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion
on these financial statements based on our audits.
We conducted our audits in accordance with the standards of
the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have,
nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits included consideration of
internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances,
but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting.
Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management,
as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the consolidated financial statements referred
to above present fairly, in all material respects, the financial position of Cordia Bancorp Inc. and subsidiary as of December
31, 2015 and 2014 and the results of their operations and their cash flows for the years then ended, in conformity with U.S. generally
accepted accounting principles.
/s/ Yount, Hyde & Barbour, P.C.
|
|
|
|
Winchester, Virginia
|
|
March 23, 2016
|
|