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 common 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.
In the fourth quarter of 2014 the Bank
launched CordiaGrad, a private student loan refinancing program aimed at high-achieving graduates with student loans. On March
1, 2016, in order for Cordia to strategically focus on its core business of community banking, the Bank transferred certain assets
and marketing arrangements related to CordiaGrad to a newly formed subsidiary and subsequently sold all of the subsidiary’s
outstanding stock to Jack C. Zoeller for nominal consideration in return for Mr. Zoeller’s resignation as Cordia’s
President and Chief Executive Officer, resignation from the board of both Cordia and the Bank and his agreement to relinquish all
of his rights under his employment agreement with Cordia, including all salary and benefits. Mr. Zoeller’s unvested restricted
stock and stock options vested in connection with the agreement. 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, 2016, Cordia announced the signing
of a definitive merger agreement with First-Citizens Bank & Trust Company (known as First Citizens Bank). The agreement has
been approved by the boards of directors of both companies and the transaction is expected to close no later than the fourth quarter
of 2016, pending the receipt of all regulatory approvals, the approval of Cordia Bancorp shareholders, and the satisfaction of
customary closing conditions. Under the terms of the agreement, cash consideration of $5.15 will be paid to the shareholders of
Cordia Bancorp for each of their shares of Cordia Bancorp common stock.
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
Cordia Bancorp
Notes to Consolidated Financial Statements
(continued)
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.
Basis of Presentation
The accounting and reporting policies of
the Company conform to accounting principles generally accepted in the United States of America (“GAAP”) and prevailing
practices within the financial services industry for interim financial information and Rule 10-01 of Regulation S-X. Accordingly,
they do not include all of the information and notes required for complete financial statements and prevailing practices within
the banking industry. Operating results for the three and six months ended June 30, 2016 are not necessarily indicative of the
results that may be expected for any future periods or for the year ending December 31, 2016. In the opinion of management, all
adjustments (comprising only normal recurring accruals) necessary for a fair presentation of the results of the interim periods
have been included.
These statements should be read in conjunction
with the financial statements and accompanying notes included in the Company’s 2015 Annual Report on Form 10-K as filed with
the Securities and Exchange Commission (“SEC”) on March 23, 2016.
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.
Summary of Significant Accounting Policies
We
provide a summary of our significant accounting policies in our 2015 Form 10-K under “Note 1 – Organization and Summary
of Significant Accounting Policies”. There have been no significant changes to these policies during 2016.
Recent Accounting Pronouncements
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.
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.
Cordia Bancorp
Notes to Consolidated Financial Statements
(continued)
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.
In March 2016, the FASB issued ASU No.
2016-03, “Intangibles-Goodwill and Other (Topic 350), Business Combinations (Topic 805), Consolidation (Topic 810) and Derivatives
and Hedging (Topic 815): Effective Date and Transition Guidance.” The amendments to this ASU make the guidance in ASUs 2014-02,
2014-03, 2014-07, and 2014-18 effective immediately by removing their effective dates. The amendments also include transition provisions
that provide that private companies are able to forgo a preferability assessment the first time they elect the accounting alternatives
within the scope of this ASU. Any subsequent change to an accounting policy election requires justification that the change is
preferable under Topic 250, Accounting Changes and Error Corrections. The amendments in this ASU also extend the transition guidance
in ASUs 2014-02, 2014-03, 2014-07, and 2014-18 indefinitely. While this ASU extends transition guidance for Updates 2014-07 and
2014-18, there is no intention to change how transition is applied for those two ASUs. The Company is currently assessing the impact
that ASU 2016-03 will have on its consolidated financial statements.
During March 2016, the FASB issued ASU
No. 2016-05, “Derivatives and Hedging (Topic 815): Effect of Derivative Contract Novations on Existing Hedge Accounting Relationships.”
The amendments in this ASU clarify that a change in the counterparty to a derivative instrument that has been designated as the
hedging instrument does not, in and of itself, require dedesignation of that hedging relationship provided that all other hedge
accounting criteria remain intact. The amendments are effective for public business entities for financial statements issued for
fiscal years beginning after December 15, 2016, and interim periods within those fiscal years. Early adoption is permitted, including
adoption in an interim period. The Company does not expect the adoption of ASU 2016-05 to have a material impact on its consolidated
financial statements.
In March 2016, the FASB issued ASU No.
2016-07, “Investments – Equity Method and Joint Ventures (Topic 323): Simplifying the Transition to the Equity Method
of Accounting.” The amendments in this ASU eliminate the requirement that when an investment qualifies for use of the equity
method as a result of an increase in the level of ownership interest or degree of influence, an investor must adjust the investment,
results of operations, and retained earnings retroactively on a step-by-step basis as if the equity method had been in effect during
all previous periods that the investment had been held. The amendments require that the equity method investor add the cost of
acquiring the additional interest in the investee to the current basis of the investor’s previously held interest and adopt
the equity method of accounting as of the date the investment becomes qualified for equity method accounting. Therefore, upon qualifying
for the equity method of accounting, no retroactive adjustment of the investment is required. In addition, the amendments in this
ASU require that an entity that has an available-for-sale equity security that becomes qualified for the equity method of accounting
recognize through earnings the unrealized holding gain or loss in accumulated other comprehensive income at the date the investment
becomes qualified for use of the equity method. The amendments are effective for all entities for fiscal years, and interim periods
within those fiscal years, beginning after December 15, 2016. The amendments should be applied prospectively upon their effective
date to increases in the level of ownership interest or degree of influence that result in the adoption of the equity method. Early
Adoption is permitted. The Company does not expect the adoption of ASU 2016-07 to have a material impact on its consolidated financial
statements.
Cordia Bancorp
Notes to Consolidated Financial Statements
(continued)
During March 2016, the FASB issued ASU
No. 2016-09, “Compensation – Stock Compensation (Topic 718): Improvements to Employee Shares-Based Payment Accounting.”
The amendments in this ASU simplify several aspects of the accounting for share-based payment award transactions including: (a)
income tax consequences; (b) classification of awards as either equity or liabilities; and (c) classification on the statement
of cash flows. The amendments are effective for public companies for annual periods beginning after December 15, 2016, and interim
periods within those annual periods. The Company is currently assessing the impact that ASU 2016-09 will have on its consolidated
financial statements.
During June 2016, the FASB issued ASU No.
2016-13, “Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments.”
The amendments in this ASU, among other things, require the measurement of all expected credit losses for financial assets held
at the reporting date based on historical experience, current conditions, and reasonable and supportable forecasts. Financial institutions
and other organizations will now use forward-looking information to better inform their credit loss estimates. Many of the loss
estimation techniques applied today will still be permitted, although the inputs to those techniques will change to reflect the
full amount of expected credit losses. In addition, the ASU amends the accounting for credit losses on available-for-sale debt
securities and purchased financial assets with credit deterioration. The amendments in this ASU are effective for SEC filers for
fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. For public companies that are not
SEC filers, the amendments in this ASU are effective for fiscal years, and interim periods within those fiscal years, beginning
after December 15, 2020. The Company is currently assessing the impact that ASU 2016-13 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.
Non-interest expense is 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.
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 purchase accounting adjustments are now recorded
in the BVA financial statements and the Cordia financial statements no longer reflect adjustments for non-controlling interests.
Cordia Bancorp
Notes to Consolidated Financial Statements
(continued)
The accretion (amortization) of the acquisition
accounting adjustments had the following impact on the financial statements:
|
|
Three Months Ended June 30,
|
|
|
Six Months Ended June 30,
|
|
(dollars in thousands)
|
|
2016
|
|
|
2015
|
|
|
2016
|
|
|
2015
|
|
Loans
|
|
$
|
7
|
|
|
$
|
54
|
|
|
$
|
18
|
|
|
$
|
75
|
|
Premises and equipment
|
|
|
2
|
|
|
|
2
|
|
|
|
4
|
|
|
|
4
|
|
Core deposit intangible
|
|
|
(9
|
)
|
|
|
(9
|
)
|
|
|
(18
|
)
|
|
|
(18
|
)
|
Building lease obligations
|
|
|
-
|
|
|
|
248
|
|
|
|
-
|
|
|
|
272
|
|
Net impact to net income (loss)
|
|
$
|
-
|
|
|
$
|
295
|
|
|
$
|
4
|
|
|
$
|
333
|
|
|
Note 3.
|
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 80 thousand shares
of the Company’s common stock (100% of the stock options outstanding) were not included in the computation of earnings per
share for the three and six months ended June 30, 2016, because the share awards exercise prices exceeded the average market price
of the Company’s common stock and, therefore, the effect would have been anti-dilutive. Options to purchase 109 thousand
shares of the Company’s common stock (100% of the options outstanding) were not included in the computation of earnings per
share for the three and six months ended June 30, 2015, because the share award exercise prices exceeded the average market price
of the Company’s common stock during all periods presented and, therefore, the effect would have been anti-dilutive. The
Company’s losses during the three and six months ended June 39, 2016 also create an anti-dilutive effect.
For the periods ended June 30, 2016 and
2015, 394,125 and 578,125 shares, respectively, of unvested restricted common stock were excluded from the computation of basic
and diluted earnings per common share as they are considered more likely-than-not to not to vest based on the performance based
thresholds within the restricted share agreements, which must be achieved by October 2016. These agreements do include a
change of control provision such that 100% of the remaining 394,125 shares would vest, and be expensed, immediately preceding
a change of control. All other vested and non-vested restricted common shares, which carry all rights and privileges of a common
share with respect to the stock, including the right to vote, were included in the basic and diluted per common share calculations.
Cordia Bancorp
Notes to Consolidated Financial Statements
(continued)
The calculation for basic and diluted earnings
per common share for the three months and six months ended June 30, 2016 and 2015 are as follows:
|
|
Three months ended June 30,
|
|
|
Six months ended June 30,
|
|
(dollars in thousands)
|
|
2016
|
|
|
2015
|
|
|
2016
|
|
|
2015
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
$
|
(73
|
)
|
|
$
|
236
|
|
|
$
|
(2,388
|
)
|
|
$
|
587
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average common shares outstanding, basic
|
|
|
6,798,170
|
|
|
|
6,583,848
|
|
|
|
6,728,573
|
|
|
|
6,571,600
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dilutive effect of stock options
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average common shares outstanding, diluted
|
|
|
6,798,170
|
|
|
|
6,583,848
|
|
|
|
6,728,573
|
|
|
|
6,571,600
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic net income (loss) per common share
|
|
$
|
(0.01
|
)
|
|
$
|
0.04
|
|
|
$
|
(0.35
|
)
|
|
$
|
0.09
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted net income (loss) per common share
|
|
$
|
(0.01
|
)
|
|
$
|
0.04
|
|
|
$
|
(0.35
|
)
|
|
$
|
0.09
|
|
Our investment portfolio consists of U.S.
agency debt and an agency guaranteed mortgage-backed security. 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 $78.8 million at June 30, 2016 as compared
to $71.7 million at December 31, 2015. At June 30, 2016, the securities portfolio consisted of $42.9 million of securities available
for sale, at fair value and $35.9 million of securities held to maturity, at amortized cost.
Cordia Bancorp
Notes to Consolidated Financial Statements
(continued)
The table below presents the amortized cost, gross unrealized
gains and losses, and fair value of securities available for sale at June 30, 2016 and December 31, 2015.
|
|
June 30, 2016
|
|
|
|
Amortized
|
|
|
Gross Unrealized
|
|
|
|
|
(dollars in thousands)
|
|
Cost
|
|
|
Gains
|
|
|
Losses
|
|
|
Fair Value
|
|
U.S. Government agencies
|
|
$
|
1,944
|
|
|
$
|
12
|
|
|
$
|
(6
|
)
|
|
$
|
1,950
|
|
Agency guaranteed mortgage-backed securities
|
|
|
40,789
|
|
|
|
222
|
|
|
|
(51
|
)
|
|
|
40,960
|
|
Total
|
|
$
|
42,733
|
|
|
$
|
234
|
|
|
$
|
(57
|
)
|
|
$
|
42,910
|
|
|
|
December 31, 2015
|
|
|
|
Amortized
|
|
|
Gross Unrealized
|
|
|
|
|
(dollars in thousands)
|
|
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
|
|
The table below presents the amortized
cost, gross unrealized gains and losses, and fair value of securities held to maturity at June 30, 2016 and December 31, 2015.
|
|
June 30, 2016
|
|
|
|
Amortized
|
|
|
Gross Unrealized
|
|
|
|
|
(dollars in thousands)
|
|
Cost
|
|
|
Gains
|
|
|
Losses
|
|
|
Fair Value
|
|
Agency guaranteed mortgage-backed securities
|
|
$
|
35,864
|
|
|
$
|
579
|
|
|
$
|
(32
|
)
|
|
$
|
36,411
|
|
Total
|
|
$
|
35,864
|
|
|
$
|
579
|
|
|
$
|
(32
|
)
|
|
$
|
36,411
|
|
|
|
December 31, 2015
|
|
|
|
Amortized
|
|
|
Gross Unrealized
|
|
|
|
|
(dollars in thousands)
|
|
Cost
|
|
|
Gains
|
|
|
Losses
|
|
|
Fair Value
|
|
Agency guaranteed mortgage-backed securities
|
|
$
|
25,500
|
|
|
$
|
230
|
|
|
$
|
(36
|
)
|
|
$
|
25,694
|
|
Total
|
|
$
|
25,500
|
|
|
$
|
230
|
|
|
$
|
(36
|
)
|
|
$
|
25,694
|
|
Cordia Bancorp
Notes to Consolidated Financial Statements
(continued)
The amortized cost and fair value of securities
available for sale as of June 30, 2016, 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
|
|
$
|
-
|
|
|
$
|
-
|
|
Over five years within ten years
|
|
|
1,944
|
|
|
|
1,950
|
|
Over ten years
|
|
|
40,789
|
|
|
|
40,960
|
|
Total
|
|
$
|
42,733
|
|
|
$
|
42,910
|
|
The carry value and fair value of securities
held to maturity as of June 30, 2016, 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 five years within ten years
|
|
$
|
3,599
|
|
|
$
|
3,815
|
|
Over ten years
|
|
|
32,265
|
|
|
|
32,596
|
|
Total
|
|
$
|
35,864
|
|
|
$
|
36,411
|
|
As of June 30, 2016, the portfolio is concentrated
in average maturities of over ten years, although all recently purchased securities have effective durations much shorter than
ten years. The portfolio is available to support liquidity needs of the Company. The Company did not sell available for sale securities
during the six months ended June 30, 2016. During the six months ended June 30, 2015, the Company sold $13.1 million of available
for sale securities, and recognized a gross gain of $114 thousand in noninterest income.
Unrealized losses on investments at June
30, 2016 and December 31, 2015 were as follows:
|
|
June 30, 2016
|
|
|
|
Less than 12 Months
|
|
|
12 Months or Longer
|
|
|
Total
|
|
(dollars in thousands)
|
|
Fair Value
|
|
|
Unrealized
Losses
|
|
|
Fair Value
|
|
|
Unrealized
Losses
|
|
|
Fair Value
|
|
|
Unrealized
Losses
|
|
U.S. Government agencies
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
1,400
|
|
|
$
|
(6
|
)
|
|
$
|
1,400
|
|
|
$
|
(6
|
)
|
Agency guaranteed mortgage-backed securities
|
|
|
9,993
|
|
|
|
(39
|
)
|
|
|
8,038
|
|
|
|
(44
|
)
|
|
|
18,031
|
|
|
|
(83
|
)
|
Total
|
|
$
|
9,993
|
|
|
$
|
(39
|
)
|
|
$
|
9,438
|
|
|
$
|
(50
|
)
|
|
$
|
19,431
|
|
|
$
|
(89
|
)
|
|
|
December 31, 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
|
)
|
Cordia Bancorp
Notes to Consolidated Financial Statements
(continued)
As of June 30, 2016, there was a U.S. Government
agency security and an agency guaranteed mortgage-backed security with unrealized losses totaling $89 thousand. As of December
31, 2015, there were U.S. Government agency securities and agency guaranteed mortgage-backed securities with unrealized losses
totaling $497 thousand. All of the unrealized losses are attributable to increases in interest rates and not to credit deterioration.
Currently, the Company believes that it is probable that it will be able 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.
Investment securities with combined market
values of $12.9 million and $13.8 million were pledged to secure public funds with the Commonwealth of Virginia at June 30, 2016
and December 31, 2015, respectively. We had $21.5 million and $16.8 million in securities pledged to secure FHLB advances at June
30, 2016 and December 31, 2015, respectively.
|
Note 5.
|
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 no residential loans held for sale as of June 30, 2016 and $220 thousand
of residential mortgage loans held for sale as December 31, 2015.
In the first quarter of 2016, the Company
transferred $29.8 million of refinanced private student loans from loans held for investment to loans held for sale. $24.0 million
of these loans were subsequently sold in the first quarter of 2016, servicing released. Those loans were carried at the lower of
cost or fair value and net unrealized losses were recognized through a valuation allowance by charges to operations. The carrying
amount of loans held for sale included principal balances, valuation allowances, and direct costs that are deferred at the time
of origination. In the second quarter of 2016, the Company transferred the remaining loan balance of $30.3 million to loans held
for investment. Included in this transfer was a valuation allowance of $409 thousand. The activity in the valuation allowance is
described in the table below:
(dollars in thousands)
|
|
2016
|
|
Balance at January 1
|
|
$
|
-
|
|
Additions
|
|
|
909
|
|
Loss on sale of loans
|
|
|
(500
|
)
|
Transfer to loans held for investment
|
|
|
(409
|
)
|
Balance at June 30
|
|
$
|
-
|
|
|
Note 6.
|
Loans, Allowance for Loan Losses and Credit Quality
|
Loans by Loan Class
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)
The following table exhibits loans by sub-segment
at June 30, 2016 and December 31, 2015:.
(dollars in thousands)
|
|
June 30, 2016
|
|
|
December 31, 2015
|
|
Commercial Real Estate:
|
|
|
|
|
|
|
|
|
Acquisition, development and construction
|
|
$
|
2,202
|
|
|
$
|
2,168
|
|
Non-owner occupied
|
|
|
64,417
|
|
|
|
58,044
|
|
Owner occupied
|
|
|
40,197
|
|
|
|
45,690
|
|
Commercial and industrial
|
|
|
34,926
|
|
|
|
34,819
|
|
Guaranteed student loans
|
|
|
49,437
|
|
|
|
53,847
|
|
Consumer:
|
|
|
|
|
|
|
|
|
Residential mortgage
|
|
|
17,184
|
|
|
|
18,140
|
|
HELOC
|
|
|
11,957
|
|
|
|
10,603
|
|
Other
|
|
|
31,133
|
|
|
|
22,722
|
|
Total loans
|
|
|
251,453
|
|
|
|
246,033
|
|
Allowance for loan losses
|
|
|
(915
|
)
|
|
|
(823
|
)
|
Total loans, net of allowance for loan losses
|
|
$
|
250,538
|
|
|
$
|
245,210
|
|
Included in the loan balances above are
net deferred loan costs of $1.9 million and $1.7 million at June 30, 2016 and December 31, 2015, respectively. Also included in
the loan balances above are premiums related to government guaranteed student loans of $775 thousand at June 30, 2016 and $827
thousand at December 31, 2015. Included in the Other Consumer category are refinanced private student loans of $30.3 million and
$21.9 million at June 30, 2016 and December 31, 2015, 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 $4.9 million and $6.9 million at June 30, 2016 and December 31, 2015, 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 “Receivables – Loans and Debt Securities
Acquired with Deteriorated Credit Quality.” Information related to these loans is as follows:
(dollars in thousands)
|
|
June 30, 2016
|
|
|
December 31, 2015
|
|
Contract principal balance
|
|
$
|
4,310
|
|
|
$
|
4,779
|
|
Accretable yield
|
|
|
-
|
|
|
|
(1
|
)
|
Carrying value of loans
|
|
$
|
4,310
|
|
|
$
|
4,778
|
|
Cordia Bancorp
Notes to Consolidated Financial Statements
(continued)
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.
In December 2010, due to the high level of uncertainty regarding the timing and amount of these cash flows, 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.
A summary of changes to the accretable
yield and nonaccretable discount during the six months ended June 30, 2016 and 2015 is as follows:
|
|
2016
|
|
|
2015
|
|
(dollars in thousands)
|
|
Accretable
Yield
|
|
|
Nonaccretable
Discount
|
|
|
Accretable
Yield
|
|
|
Nonaccretable
Discount
|
|
Beginning balance
|
|
$
|
1
|
|
|
$
|
-
|
|
|
$
|
42
|
|
|
$
|
5
|
|
Charge-offs related to loans covered by ASC 310-30
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Transfers
|
|
|
-
|
|
|
|
-
|
|
|
|
5
|
|
|
|
(5
|
)
|
Accretion
|
|
|
(1
|
)
|
|
|
|
|
|
|
(41
|
)
|
|
|
|
|
Ending balance
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
6
|
|
|
$
|
-
|
|
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;
|
|
·
|
position within industry;
|
|
·
|
earnings, liquidity and operating cash flow trends;
|
|
·
|
asset and liability values;
|
|
·
|
financial flexibility and debt capacity;
|
|
·
|
management and controls; and
|
|
·
|
quality of financial reporting
|
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 and lease losses (“ALLL”) 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 June 30, 2016 and December 31, 2015:
June 30, 2016 (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
|
|
|
-
|
|
|
|
7,689
|
|
|
|
2,505
|
|
|
|
2,437
|
|
|
|
49,437
|
|
|
|
-
|
|
|
|
1,976
|
|
|
|
286
|
|
|
|
64,330
|
|
3 Satisfactory
|
|
|
1,328
|
|
|
|
32,974
|
|
|
|
16,150
|
|
|
|
25,893
|
|
|
|
-
|
|
|
|
11,548
|
|
|
|
6,246
|
|
|
|
30,797
|
|
|
|
124,936
|
|
4 Pass
|
|
|
212
|
|
|
|
22,422
|
|
|
|
19,217
|
|
|
|
6,076
|
|
|
|
-
|
|
|
|
5,438
|
|
|
|
2,785
|
|
|
|
50
|
|
|
|
56,200
|
|
5 Special mention
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
520
|
|
|
|
-
|
|
|
|
25
|
|
|
|
360
|
|
|
|
-
|
|
|
|
905
|
|
6 Substandard
|
|
|
121
|
|
|
|
-
|
|
|
|
381
|
|
|
|
-
|
|
|
|
-
|
|
|
|
38
|
|
|
|
232
|
|
|
|
-
|
|
|
|
772
|
|
7 Doubtful
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
1,661
|
|
|
|
63,085
|
|
|
|
38,253
|
|
|
|
34,926
|
|
|
|
49,437
|
|
|
|
17,049
|
|
|
|
11,599
|
|
|
|
31,133
|
|
|
|
247,143
|
|
Loans acquired with deteriorated credit quality
|
|
|
541
|
|
|
|
1,332
|
|
|
|
1,944
|
|
|
|
-
|
|
|
|
-
|
|
|
|
135
|
|
|
|
358
|
|
|
|
-
|
|
|
|
4,310
|
|
Total loans
|
|
$
|
2,202
|
|
|
$
|
64,417
|
|
|
$
|
40,197
|
|
|
$
|
34,926
|
|
|
$
|
49,437
|
|
|
$
|
17,184
|
|
|
$
|
11,957
|
|
|
$
|
31,133
|
|
|
$
|
251,453
|
|
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
|
|
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 June 30, 2016 and December 31, 2015 is as
follows:
|
|
Commercial
Real Estate
|
|
|
|
|
|
|
|
|
Consumer
|
|
|
|
|
At June 30, 2016( in thousands)
|
|
Acq-Dev
Construction
|
|
|
Non-owner
Occupied
|
|
|
Owner
Occupied
|
|
|
Commercial
and
Industrial
|
|
|
Guaranteed
Student Loans
|
|
|
Residential
Mortgage
|
|
|
HELOC
|
|
|
Other
|
|
|
Total
|
|
30 - 59 days
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
1,856
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
1,856
|
|
60 - 89 days
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
2,203
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
2,203
|
|
> 90 days
|
|
|
121
|
|
|
|
-
|
|
|
|
878
|
|
|
|
-
|
|
|
|
6,199
|
|
|
|
-
|
|
|
|
64
|
|
|
|
-
|
|
|
|
7,262
|
|
Total past due
|
|
|
121
|
|
|
|
-
|
|
|
|
878
|
|
|
|
-
|
|
|
|
10,258
|
|
|
|
-
|
|
|
|
64
|
|
|
|
-
|
|
|
|
11,321
|
|
Current
|
|
|
2,081
|
|
|
|
64,417
|
|
|
|
39,319
|
|
|
|
34,926
|
|
|
|
39,179
|
|
|
|
17,184
|
|
|
|
11,893
|
|
|
|
31,133
|
|
|
|
240,132
|
|
Total loans
|
|
$
|
2,202
|
|
|
$
|
64,417
|
|
|
$
|
40,197
|
|
|
$
|
34,926
|
|
|
$
|
49,437
|
|
|
$
|
17,184
|
|
|
$
|
11,957
|
|
|
$
|
31,133
|
|
|
$
|
251,453
|
|
> 90 days still
accruing
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
6,199
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
6,199
|
|
|
|
Commercial
Real Estate
|
|
|
|
|
|
|
|
|
Consumer
|
|
|
|
|
At December 31, 2015 (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
|
|
Non-accrual
Loans
Loans are placed on nonaccrual status when
management believes the 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 or 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.
|
Loans placed on nonaccrual status are reported
to the Board at its next regular meeting. 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 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.
|
Cordia Bancorp
Notes to Consolidated Financial Statements
(continued)
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.
A summary of non-accrual loans by portfolio
class is as follows:
(dollars in thousands)
|
|
June 30,
2016
|
|
|
December 31,
2015
|
|
Commercial Real Estate:
|
|
|
|
|
|
|
|
|
Acquisition, development and construction
|
|
$
|
121
|
|
|
$
|
152
|
|
Owner occupied
|
|
|
1,259
|
|
|
|
1,388
|
|
Commercial and industrial
|
|
|
-
|
|
|
|
5
|
|
Consumer:
|
|
|
|
|
|
|
|
|
Residential mortgage
|
|
|
-
|
|
|
|
-
|
|
HELOC
|
|
|
284
|
|
|
|
289
|
|
Total non-accrual loans
|
|
$
|
1,664
|
|
|
$
|
1,834
|
|
|
|
|
|
|
|
|
|
|
Non-accrual troubled debt restructurings included above
|
|
$
|
381
|
|
|
$
|
-
|
|
Non-accrual purchased credit impaired loans included above
|
|
$
|
1,010
|
|
|
$
|
1,370
|
|
Impaired Loans
All loans that are rated Substandard or
worse or 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 will
not be collected when due. 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 June 30, 2016 and December 31, 2015. 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 June 30, 2016.
The results of those analyses are presented
in the following tables.
The following information is a summary
of related impaired loans, excluding loans acquired with deteriorating credit quality, presented by portfolio class as of June
30, 2016:
(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
|
|
$
|
121
|
|
|
$
|
121
|
|
|
$
|
-
|
|
|
$
|
125
|
|
|
$
|
-
|
|
Non-owner occupied
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Owner occupied
|
|
|
381
|
|
|
|
389
|
|
|
|
-
|
|
|
|
223
|
|
|
|
-
|
|
Commercial and industrial
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Consumer:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
-
|
|
|
|
|
|
Residential mortgage
|
|
|
38
|
|
|
|
38
|
|
|
|
-
|
|
|
|
39
|
|
|
|
1
|
|
HELOC
|
|
|
168
|
|
|
|
168
|
|
|
|
-
|
|
|
|
171
|
|
|
|
2
|
|
Other
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
$
|
708
|
|
|
$
|
716
|
|
|
$
|
-
|
|
|
$
|
558
|
|
|
$
|
3
|
|
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
|
|
|
|
30
|
|
|
|
66
|
|
|
|
-
|
|
Other
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
$
|
64
|
|
|
$
|
64
|
|
|
$
|
30
|
|
|
$
|
66
|
|
|
$
|
-
|
|
Total:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial Real Estate:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Acquisition, development and construction
|
|
$
|
121
|
|
|
$
|
121
|
|
|
$
|
-
|
|
|
$
|
125
|
|
|
$
|
-
|
|
Non-owner occupied
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Owner occupied
|
|
|
381
|
|
|
|
389
|
|
|
|
-
|
|
|
|
223
|
|
|
|
-
|
|
Commercial and industrial
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Consumer:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential mortgage
|
|
|
38
|
|
|
|
38
|
|
|
|
-
|
|
|
|
39
|
|
|
|
1
|
|
HELOC
|
|
|
232
|
|
|
|
232
|
|
|
|
30
|
|
|
|
237
|
|
|
|
2
|
|
Other
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Total
|
|
$
|
772
|
|
|
$
|
780
|
|
|
$
|
30
|
|
|
$
|
624
|
|
|
$
|
3
|
|
|
(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.
|
Cordia Bancorp
Notes to Consolidated Financial Statements
(continued)
The following information is a summary
of related impaired loans, excluding loans acquired with deteriorating credit quality, 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
|
|
|
(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 not included in the table above.
Cordia Bancorp
Notes to Consolidated Financial Statements
(continued)
Activity in the ALLL for the six months
ended June 30, 2016 and 2015 is summarized below:
|
|
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, 2015
|
|
$
|
89
|
|
|
$
|
157
|
|
|
$
|
82
|
|
|
$
|
112
|
|
|
$
|
47
|
|
|
$
|
59
|
|
|
$
|
61
|
|
|
$
|
216
|
|
|
$
|
823
|
|
Charge-offs
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(13
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
(71
|
)
|
|
|
(84
|
)
|
Recoveries
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
25
|
|
|
|
-
|
|
|
|
1
|
|
|
|
3
|
|
|
|
-
|
|
|
|
29
|
|
Net (charge-offs) recoveries
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
25
|
|
|
|
(13
|
)
|
|
|
1
|
|
|
|
3
|
|
|
|
(71
|
)
|
|
|
(55
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Provision (recovery)
|
|
|
(53
|
)
|
|
|
130
|
|
|
|
110
|
|
|
|
33
|
|
|
|
11
|
|
|
|
15
|
|
|
|
43
|
|
|
|
(142
|
)
|
|
|
147
|
|
Ending balance, June 30, 2016
|
|
|
36
|
|
|
|
287
|
|
|
|
192
|
|
|
|
170
|
|
|
|
45
|
|
|
|
75
|
|
|
|
107
|
|
|
|
3
|
|
|
|
915
|
|
|
|
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
|
)
|
|
|
(106
|
)
|
|
|
-
|
|
|
|
(20
|
)
|
|
|
(2
|
)
|
|
|
(364
|
)
|
Recoveries
|
|
|
-
|
|
|
|
|
|
|
|
234
|
|
|
|
302
|
|
|
|
-
|
|
|
|
3
|
|
|
|
3
|
|
|
|
-
|
|
|
|
542
|
|
Net (charge-offs) recoveries
|
|
|
(127
|
)
|
|
|
-
|
|
|
|
234
|
|
|
|
193
|
|
|
|
(106
|
)
|
|
|
3
|
|
|
|
(17
|
)
|
|
|
(2
|
)
|
|
|
178
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Provision (recovery)
|
|
|
43
|
|
|
|
219
|
|
|
|
(295
|
)
|
|
|
(295
|
)
|
|
|
70
|
|
|
|
(51
|
)
|
|
|
(1
|
)
|
|
|
33
|
|
|
|
(277
|
)
|
Ending balance, June 30, 2015
|
|
$
|
62
|
|
|
$
|
316
|
|
|
$
|
88
|
|
|
$
|
255
|
|
|
$
|
108
|
|
|
$
|
50
|
|
|
$
|
58
|
|
|
$
|
53
|
|
|
$
|
990
|
|
A summary of the ALLL by portfolio segment
and impairment evaluation methodology as of June 30, 2016 and 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
for loans
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Individually evaluated for impairment
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
30
|
|
|
$
|
-
|
|
|
$
|
30
|
|
Collectively evaluated for impairment
|
|
|
36
|
|
|
|
287
|
|
|
|
121
|
|
|
|
170
|
|
|
|
45
|
|
|
|
75
|
|
|
|
77
|
|
|
|
3
|
|
|
|
814
|
|
Loans acquired with deteriorated credit quality
|
|
|
-
|
|
|
|
-
|
|
|
|
71
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
71
|
|
Ending balance, June 30, 2016
|
|
$
|
36
|
|
|
$
|
287
|
|
|
$
|
192
|
|
|
$
|
170
|
|
|
$
|
45
|
|
|
$
|
75
|
|
|
$
|
107
|
|
|
$
|
3
|
|
|
$
|
915
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross loan balances
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Individually evaluated for impairment
|
|
$
|
121
|
|
|
$
|
-
|
|
|
$
|
381
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
38
|
|
|
$
|
232
|
|
|
$
|
-
|
|
|
$
|
772
|
|
Collectively evaluated for impairment
|
|
|
1,540
|
|
|
|
63,085
|
|
|
|
37,872
|
|
|
|
34,926
|
|
|
|
49,437
|
|
|
|
17,011
|
|
|
|
11,367
|
|
|
|
31,133
|
|
|
|
246,372
|
|
Loans acquired with deteriorated credit quality
|
|
|
541
|
|
|
|
1,332
|
|
|
|
1,944
|
|
|
|
-
|
|
|
|
-
|
|
|
|
135
|
|
|
|
358
|
|
|
|
-
|
|
|
|
4,310
|
|
Ending balance, June 30, 2016
|
|
$
|
2,202
|
|
|
$
|
64,417
|
|
|
$
|
40,197
|
|
|
$
|
34,926
|
|
|
$
|
49,437
|
|
|
$
|
17,184
|
|
|
$
|
11,957
|
|
|
$
|
31,133
|
|
|
$
|
251,453
|
|
Cordia Bancorp
Notes to Consolidated Financial Statements
(continued)
|
|
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
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
|
|
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 reductions 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 quarters ended June 30, 2016
and 2015, no loans were modified in a troubled debt restructuring. The principal balance outstanding relating to the loan at June
30, 2016, was $381 thousand. During the three months ended June 30, 2016 and 2015, no defaults occurred on loans modified as TDRs
in the preceding twelve months. During the six months ended June 30, 2016, one loan was modified in a troubled debt restructuring.
During the six months ended June 30, 2015, no loans were modified in troubled debt restructurings. During the six months ended
June 30, 2016 and 2015, no defaults occurred on loans modified as TDRs in the preceding twelve months.
Cordia Bancorp
Notes to Consolidated Financial Statements
(continued)
|
|
Three Months Ended June 30, 2016
|
|
2016 (dollars in thousands)
|
|
Number of loans
|
|
|
Rate
modification
|
|
|
Term extension
|
|
|
Pre-modification
recorded
investment
|
|
|
Post-modification
recorded
investment
|
|
Commercial real estate
|
|
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
Total
|
|
|
-
|
|
|
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
|
Six Months Ended June 30, 2016
|
|
2016 (dollars in thousands)
|
|
Number of loans
|
|
|
Rate
modification
|
|
|
Term extension
|
|
|
Pre-modification
recorded
investment
|
|
|
Post-modification
recorded
investment
|
|
Commercial real estate
|
|
|
1
|
|
|
$
|
-
|
|
|
$
|
353
|
|
|
$
|
353
|
|
|
$
|
390
|
|
Total
|
|
|
1
|
|
|
|
-
|
|
|
$
|
353
|
|
|
$
|
353
|
|
|
$
|
390
|
|
Note 7. 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 flows 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 three and six months ending June 30, 2016 activity in this account is as follows:
(dollars in thousands)
|
|
|
|
Balance at March 31, 2016
|
|
$
|
59
|
|
Amortization
|
|
|
(9
|
)
|
Balance at June 30, 2016
|
|
$
|
50
|
|
(dollars in thousands)
|
|
|
|
Balance at December 31, 2015
|
|
$
|
68
|
|
Amortization
|
|
|
(18
|
)
|
Balance at June 30, 2016
|
|
$
|
50
|
|
Amortization expense
is expected to be approximately $35 thousand in 2016 and $33 thousand in 2017.
|
Note 8.
|
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.
Cordia Bancorp
Notes to Consolidated Financial Statements
(continued)
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.
Loans Held for Sale
The residential mortgage loans’ fair
value is based on the price secondary markets are offering for similar loans using observable market data which is not materially
different than cost due to the short duration between origination and sale.
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 June 30, 2016 and December 31, 2015, 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.
Cordia Bancorp
Notes to Consolidated Financial Statements
(continued)
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 carrying value and fair values of financial
assets and liabilities are as follows:
|
|
|
|
|
Fair Value Measurements at June 30, 2016
|
|
(dollars in thousands)
|
|
Carrying
amount
|
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
|
Fair Value
|
|
Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
11,792
|
|
|
$
|
11,792
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
11,792
|
|
Securities available for sale
|
|
|
42,910
|
|
|
|
-
|
|
|
|
42,910
|
|
|
|
-
|
|
|
|
42,910
|
|
Securities held to maturity
|
|
|
35,864
|
|
|
|
-
|
|
|
|
36,411
|
|
|
|
-
|
|
|
|
36,411
|
|
Restricted securities
|
|
|
2,393
|
|
|
|
-
|
|
|
|
2,393
|
|
|
|
-
|
|
|
|
2,393
|
|
Loans held for sale
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Net loans held for investment
|
|
|
250,538
|
|
|
|
-
|
|
|
|
-
|
|
|
|
249,654
|
|
|
|
249,654
|
|
Interest receivable
|
|
|
2,090
|
|
|
|
|
|
|
|
2,090
|
|
|
|
|
|
|
|
2,090
|
|
Liabilities:
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Demand deposits
|
|
|
29,293
|
|
|
|
-
|
|
|
|
29,293
|
|
|
|
-
|
|
|
|
29,293
|
|
Savings and interest-bearing demand deposits
|
|
|
114,015
|
|
|
|
-
|
|
|
|
114,015
|
|
|
|
-
|
|
|
|
114,015
|
|
Time deposits
|
|
|
152,754
|
|
|
|
-
|
|
|
|
153,813
|
|
|
|
-
|
|
|
|
153,813
|
|
FHLB Borrowings
|
|
|
30,000
|
|
|
|
-
|
|
|
|
29,970
|
|
|
|
-
|
|
|
|
29,970
|
|
Interest payable
|
|
|
228
|
|
|
|
-
|
|
|
|
228
|
|
|
|
-
|
|
|
|
228
|
|
|
|
|
|
|
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
|
|
|
|
-
|
|
|
|
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
|
|
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:
|
|
|
|
|
Quoted Prices
in Active
Markets for
Identical
Assets
|
|
|
Significant Other
Observable Inputs
|
|
|
Significant
Unobservable
Inputs
|
|
(dollars in thousands)
|
|
Balance
|
|
|
(Level 1)
|
|
|
(Level 2)
|
|
|
(Level 3)
|
|
June 30, 2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U. S. Government Agencies
|
|
$
|
1,950
|
|
|
$
|
-
|
|
|
$
|
1,950
|
|
|
$
|
-
|
|
Agency Guaranteed Mortgage-backed securities
|
|
|
40,960
|
|
|
|
-
|
|
|
|
40,960
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2015
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U. S. Government Agencies
|
|
$
|
2,139
|
|
|
$
|
-
|
|
|
$
|
2,139
|
|
|
$
|
-
|
|
Agency Guaranteed Mortgage-backed securities
|
|
|
44,081
|
|
|
|
-
|
|
|
|
44,081
|
|
|
|
-
|
|
Loans held for sale
|
|
|
220
|
|
|
|
-
|
|
|
|
220
|
|
|
|
-
|
|
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 measured 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:
|
|
|
|
|
Quoted Prices
in Active
Markets for
Identical
Assets
|
|
|
Significant Other
Observable Inputs
|
|
|
Significant
Unobservable
Inputs
|
|
(dollars in thousands)
|
|
Balance
|
|
|
(Level 1)
|
|
|
(Level 2)
|
|
|
(Level 3)
|
|
June 30, 2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Impaired loans
|
|
|
34
|
|
|
|
-
|
|
|
|
-
|
|
|
|
34
|
|
OREO
|
|
|
1,885
|
|
|
|
-
|
|
|
|
-
|
|
|
|
1,885
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2015
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Impaired loans
|
|
$
|
48
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
48
|
|
OREO
|
|
|
1,870
|
|
|
|
-
|
|
|
|
-
|
|
|
|
1,870
|
|
There were no outstanding or in-process
residential mortgage OREO properties as of June 30, 2016 or December 31, 2015.
The following table presents qualitative
information about level 3 fair value measurements for financial instruments measured at fair value on a non-recurring basis at
June 30, 2016 and December 31, 2015:
|
|
June 30, 2016
|
|
(dollars in thousands)
|
|
Quantitative Information About Level 3 Fair Value Measurements
|
|
Description
|
|
Fair Value
|
|
|
Valuation Technique
|
|
Unobservable input
|
|
Range
(Weighted
Average)
|
|
|
|
|
|
|
|
|
|
|
|
|
Impaired loans
|
|
$
|
34
|
|
|
Appraisals
|
|
Discount to reflect current market condition and estimated selling costs
|
|
|
0-15
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other real estate owned
|
|
$
|
1,885
|
|
|
Discounted appraised value
|
|
Discount for lack of marketability
|
|
|
6-29
|
%
|
|
|
December 31, 2015
|
|
(dollars in thousands)
|
|
Quantitative Information About Level 3 Fair Value Measurements
|
|
Description
|
|
Fair Value
|
|
|
Valuation Technique
|
|
Unobservable input
|
|
Range
(Weighted
Average)
|
|
|
|
|
|
|
|
|
|
|
|
|
Impaired loans
|
|
$
|
48
|
|
|
Appraisals
|
|
Discount to reflect current market condition and estimated selling costs
|
|
|
0-10
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other real estate owned
|
|
$
|
1,870
|
|
|
Discounted appraised values
|
|
Discount for lack of marketability
|
|
|
6-29
|
%
|
Cordia Bancorp
Notes to Consolidated Financial Statements
(continued)
|
Note 9.
|
Stock-Based Compensation
|
Stock-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 Company’s 2005 annual meeting
of shareholders, 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 2005 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 2005 Plan covers employees as determined by the Bank’s Board of Directors from time to time. Options
under the 2005 Plan were granted in the form of incentive stock options.
At the Company’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 receive grants, subject to approval by the board of directors. 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 align their interests with the Bank’s shareholders. At the 2014 Annual Meeting, 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 June
30, 2016, there were 565,346 shares reserved under the 2011 Plan.
There were 20,000 Cordia stock options
granted outside of the plan prior to the share exchange in March 2013. 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.
A summary of the Company’s option
activity as of June 30, 2016 and changes during the period then ended are presented in the following table:
|
|
|
|
|
Wgt. Avg.
|
|
|
Remaining
|
|
|
Wgt. Avg.
|
|
|
Aggregate
|
|
|
|
|
|
|
Exercise
|
|
|
Contractual
|
|
|
Grant Date
|
|
|
Intrinsic
|
|
As of 12/31/2015
|
|
Stock Options
|
|
|
Price
|
|
|
Life
|
|
|
Fair Value
|
|
|
Value
|
|
Outstanding
|
|
|
124,686
|
|
|
$
|
6.59
|
|
|
|
-
|
|
|
$
|
2.25
|
|
|
$
|
-
|
|
Vested
|
|
|
63,567
|
|
|
$
|
8.71
|
|
|
|
-
|
|
|
$
|
2.94
|
|
|
$
|
-
|
|
Nonvested
|
|
|
61,119
|
|
|
$
|
4.39
|
|
|
|
-
|
|
|
$
|
1.54
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Period Activity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issued
|
|
|
-
|
|
|
$
|
-
|
|
|
|
-
|
|
|
$
|
-
|
|
|
|
-
|
|
Exercised
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Forfeited
|
|
|
44,678
|
|
|
$
|
5.14
|
|
|
|
-
|
|
|
|
1.80
|
|
|
|
-
|
|
Expired
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of 6/30/2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding
|
|
|
80,008
|
|
|
$
|
7.40
|
|
|
|
7.17
|
|
|
$
|
2.51
|
|
|
$
|
44,243
|
|
Vested
|
|
|
39,432
|
|
|
$
|
10.69
|
|
|
|
5.91
|
|
|
$
|
3.56
|
|
|
$
|
7,092
|
|
Nonvested
|
|
|
40,576
|
|
|
$
|
4.21
|
|
|
|
8.39
|
|
|
$
|
1.48
|
|
|
$
|
37,152
|
|
Cordia Bancorp
Notes to Consolidated Financial Statements
(continued)
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.
The remaining unrecognized compensation
expense for the options granted totaled $22 thousand and $54 thousand at June 30, 2016 and 2015, respectively.
|
|
|
|
|
|
|
|
|
|
|
|
Wgt. Avg.
|
|
Outstanding
as of June 30, 2016
|
|
|
|
|
|
Wgt. Avg.
|
|
|
Remaining
|
|
|
|
|
|
|
|
Stock Options
|
|
|
Exercise
|
|
|
Contractual
|
|
Range of Exercise Prices
|
|
|
Outstanding
|
|
|
Price
|
|
|
Life
|
|
$
|
3.82
|
|
|
$
|
58.73
|
|
|
|
80,008
|
|
|
$
|
7.40
|
|
|
|
7.17
|
|
Total
|
|
|
|
|
|
|
|
80,008
|
|
|
$
|
7.40
|
|
|
|
7.17
|
|
Exercisable:
|
|
|
|
|
|
Wgt. Avg.
|
|
|
|
|
|
|
|
Stock Options
|
|
|
Exercise
|
|
Range of Exercise Prices
|
|
|
Exercisable
|
|
|
Price
|
|
$
|
3.82
|
|
|
$
|
58.73
|
|
|
|
39,432
|
|
|
$
|
10.69
|
|
Total
|
|
|
|
|
|
|
|
39,432
|
|
|
$
|
10.69
|
|
Assumptions:
The fair value of each option granted is estimated on the date
of grant using the "Black-Scholes Option Pricing" method with the follwing assumptions. No options granted in 2016.
|
|
Year Ended
|
|
|
|
December 31,
2015
|
|
Expected dividend rate
|
|
|
0.00
|
%
|
Expected volatility
|
|
|
30.00
|
%
|
Expected term in years
|
|
|
7
|
|
Risk free rate
|
|
|
2.01
|
%
|
Total intrinsic value of options exercised:
|
|
$
|
-
|
|
Total fair value of shares vested during the period:
|
|
$
|
28,478
|
|
Weighted-average period over which nonvested awards are expected to be recognized:
|
|
|
0.62 years
|
|
Cordia Bancorp
Notes to Consolidated Financial Statements
(continued)
A summary of the Company’s restricted
stock activity as of June 30, 2016 and changes during the period then ended are presented in the following table:
|
|
|
|
|
Wgt. Avg.
|
|
|
|
|
|
|
Grant Date
|
|
As of 12/31/2015
|
|
Restricted Stock
|
|
|
Fair Value
|
|
Nonvested
|
|
|
107,460
|
|
|
$
|
4.05
|
|
|
|
|
|
|
|
|
|
|
Period Activity
|
|
|
|
|
|
|
|
|
Issued
|
|
|
27,419
|
|
|
$
|
3.87
|
|
Vested
|
|
|
59,567
|
|
|
$
|
4.04
|
|
Forfeited
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
As of 6/30/2016
|
|
|
|
|
|
|
|
|
Nonvested
|
|
|
75,312
|
|
|
$
|
3.99
|
|
Total fair value of shares vested during the period:
|
|
$
|
240,891
|
|
Weighted-average period over which nonvested awards are expected to be recognized:
|
|
|
1.33
years
|
|
The fair value of restricted stock granted
during the six months ended June 30, 2016 was $106 thousand.
The remaining unrecognized compensation
expense for the shares granted totaled $314 thousand and $444 thousand as of June 30, 2016 and 2015, respectively.
578,125 of restricted shares of common
stock were granted to founding investors of Cordia predominantly during 2009 and 2010. 184,000 thousand of these shares vested
in connection with the Bank’s sale of its CordiaGrad business on March 1, 2016. The remaining 341,125 shares are considered
at June 30, 2016, more likely-than-not to not to vest based on the performance based thresholds within the restricted share agreements,
which must be achieved by October 2016. These agreements do include a change of control provision such that 100% of restricted
shares would vest, and be expensed, immediately preceding a change of control.
Stock-based compensation expense for the
second quarter of 2016 and the second quarter of 2015 was as follows:
Stock Compensation
|
|
Three Months Ended June 30,
|
|
|
Six Months Ended June 30,
|
|
(in thousands)
|
|
2016
|
|
|
2015
|
|
|
2016
|
|
|
2015
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock options
|
|
$
|
43
|
|
|
$
|
12
|
|
|
$
|
61
|
|
|
$
|
24
|
|
Restricted stock
|
|
|
38
|
|
|
|
43
|
|
|
|
188
|
|
|
|
86
|
|
Founders shares
|
|
|
-
|
|
|
|
-
|
|
|
|
718
|
|
|
|
-
|
|
Total
|
|
$
|
81
|
|
|
$
|
55
|
|
|
$
|
967
|
|
|
$
|
110
|
|
For the six months ended June 30, 2016,
$800 thousand of the total $967 thousand of stock compensation is related to the vesting of Mr. Zoeller’s unvested restricted
stock and stock options in connection with the sale of the CordiaGrad business.
Cordia does not have any benefit plans
or incentive compensation plans beyond those maintained by the Bank.
Cordia Bancorp
Notes to Consolidated Financial Statements
(continued)
Note 10. Accumulated other Comprehensive
Income (Loss)
The changes in accumulated other comprehensive
income (loss) for the three and six months ended June 30, 2016 and 2015 are summarized as follows:
|
|
Three Months
Ended
|
|
|
|
June 30,
2016
|
|
|
June 30,
2015
|
|
|
|
Unrealized
Gain (Loss)
on Available-
for-Sale
Securities
|
|
|
Unrealized
losses
transferred to
Held-to-
Maturity
Securities
|
|
|
Total
|
|
|
Unrealized
Gain (Loss) on
Available-for-
Sale Securities
|
|
|
Unrealized
losses
transferred to
Held-to-
Maturity
Securities
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Beginning balance
|
|
$
|
78
|
|
|
$
|
(226
|
)
|
|
$
|
(148
|
)
|
|
$
|
122
|
|
|
$
|
(274
|
)
|
|
$
|
(152
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized holding
gains (losses) on availabe for sale securities
|
|
|
99
|
|
|
|
-
|
|
|
|
99
|
|
|
|
(470
|
)
|
|
|
-
|
|
|
|
(470
|
)
|
Amortization
of unrealized losses transferred from AFS to HTM
|
|
|
-
|
|
|
|
10
|
|
|
|
10
|
|
|
|
-
|
|
|
|
13
|
|
|
|
13
|
|
Net
current period other comprehensive income
|
|
|
99
|
|
|
|
10
|
|
|
|
109
|
|
|
|
(470
|
)
|
|
|
13
|
|
|
|
(457
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending balance
|
|
$
|
177
|
|
|
$
|
(216
|
)
|
|
$
|
(39
|
)
|
|
$
|
(348
|
)
|
|
$
|
(261
|
)
|
|
$
|
(609
|
)
|
|
|
Six Months Ended
|
|
|
|
June 30, 2016
|
|
|
June 30, 2015
|
|
|
|
Unrealized
Gain (Loss)
on Available-
for-Sale
Securities
|
|
|
Unrealized
losses
transferred to
Held-to-
Maturity
Securities
|
|
|
Total
|
|
|
Unrealized
Gain (Loss) on
Available-for-
Sale Securities
|
|
|
Unrealized
losses
transferred to
Held-to-
Maturity
Securities
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Beginning balance
|
|
$
|
(453
|
)
|
|
$
|
(237
|
)
|
|
$
|
(690
|
)
|
|
$
|
(182
|
)
|
|
$
|
(286
|
)
|
|
$
|
(468
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized holding gains (losses) on available for sale securities
|
|
|
630
|
|
|
|
-
|
|
|
|
630
|
|
|
|
(166
|
)
|
|
|
-
|
|
|
|
(166
|
)
|
Amortization of unrealized
losses transferred from AFS to HTM
|
|
|
-
|
|
|
|
21
|
|
|
|
21
|
|
|
|
-
|
|
|
|
25
|
|
|
|
25
|
|
Net current period other comprehensive income
|
|
|
630
|
|
|
|
21
|
|
|
|
651
|
|
|
|
(166
|
)
|
|
|
25
|
|
|
|
(141
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending balance
|
|
$
|
177
|
|
|
$
|
(216
|
)
|
|
$
|
(39
|
)
|
|
$
|
(348
|
)
|
|
$
|
(261
|
)
|
|
$
|
(609
|
)
|
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:
|
|
Six Months Ended June 30,
|
|
|
Affected Line Item on
|
|
|
2016
|
|
|
2015
|
|
|
Consolidated Statement of Operations
|
|
|
|
|
|
|
|
|
|
|
|
Realized gains on sales of available for sale securities
|
|
|
-
|
|
|
|
114
|
|
|
Net gain on sale of available-for-sale securities
|
Total reclassifications
|
|
$
|
-
|
|
|
$
|
114
|
|
|
|
CAUTIONARY NOTE REGARDING FORWARD-LOOKING
STATEMENTS
This report contains forward-looking statements.
Any statements about our expectations, beliefs, plans, predictions, forecasts, objectives, assumptions or future events or performance
are not historical facts and may be forward-looking. These statements are often, but not always, made through the use of words
or phrases such as “anticipate,” “believes,” “can,” “could,” “may,”
“predicts,” “potential,” “should,” “will,” “estimate,” “plans,”
“projects,” “continuing,” “ongoing,” “expects,” “intends” and similar
words or phrases. Accordingly, these statements are only predictions and involve estimates, known and unknown risks, assumptions
and uncertainties that could cause actual results to differ materially from those expressed in them. Our actual results could differ
materially from those anticipated in such forward-looking statements as a result of several factors more fully described under
the caption “Risk Factors” and elsewhere in this report.
Any or all of the forward-looking statements
in this report may turn out to be inaccurate. The inclusion of this forward-looking information should not be regarded as a representation
by us or any other person that the future plans, estimates or expectations contemplated by us will be achieved. We have based these
forward-looking statements largely on our current expectations and projections about future events and financial trends that we
believe may affect our respective financial condition, results of operations, business strategy and financial needs. There are
important factors that could cause actual results, level of activity, performance or achievements to differ materially from the
results, level of activity, performance or achievements expressed or implied by the forward-looking statements including, but not
limited to, statements regarding:
|
•
|
changes in general economic and financial market conditions;
|
|
|
|
|
•
|
changes in the regulatory environment;
|
|
|
|
|
•
|
economic conditions generally and in the financial services industry;
|
|
|
|
|
•
|
changes in the economy affecting real estate values;
|
|
|
|
|
•
|
our ability to achieve loan and deposit growth;
|
|
|
|
|
•
|
the completion of business combinations;
|
|
|
|
|
•
|
projected population and income growth in our targeted market areas; and
|
|
|
|
|
•
|
volatility and
direction of market interest rates and a weakening of the economy which could materially impact credit quality trends and
the ability to generate loans.
|
All forward-looking statements are necessarily
only estimates of future results, and actual results may differ materially from expectations. You are, therefore, cautioned not
to place undue reliance on such statements which should be read in conjunction with the other cautionary statements that are included
elsewhere in this report. Further, any forward-looking statement speaks only as of the date on which it is made and we undertake
no obligation to update or revise any forward-looking statement to reflect events or circumstances after the date on which the
statement is made or to reflect the occurrence of unanticipated events.