UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
x ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2015
¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ____________________ to ____________________
Commission file number: 001-35852
Cordia Bancorp Inc.
(Exact name of registrant as specified in its charter)
| Virginia | 26-4700031 | |
| (State or other
jurisdiction of incorporation or organization) |
(I.R.S. Employer Identification No.) |
| 11730 Hull Street Road, Midlothian, Virginia | 23112 | |
| (Address of principal executive offices) | (Zip Code) |
Registrant’s telephone number, including area code (804) 763-1336
Securities registered under Section 12(b) of the Act:
| Title of each class | Name of each exchange on which registered | |
| Common Stock, $0.01 par value | The NASDAQ Stock Market, LLC |
Securities registered under Section 12(g) of the Act: None
Indicate by check mark if the issuer is a well-known seasoned issuer, as defined by rule 405 of the Securities Act. Yes ¨ No x
Indicate by check mark if the issuer is not required to file reports pursuant to Section 13 or 15(d) of the Exchange Act. Yes ¨ No x
Indicate by check mark if the issuer (1) has filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No ¨
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T ( § 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No ¨
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K ( § 229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See definition of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer ¨ |
Accelerated filer ¨ |
Non-accelerated filer ¨ (Do not check if a smaller reporting company) |
Smaller reporting company x |
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No x
The aggregate market value of the common stock held by non-affiliates as of June 30, 2015 was $20,050,180 based on a closing price of $3.83.
The number of shares of common stock outstanding as of March 15, 2016 was 6,791,711.
Documents Incorporated by Reference
Portions of the Proxy Statement for the 2016 Annual Meeting of Shareholders are incorporated in Part III of this Form 10-K.
Table of Contents
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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 future acquisitions or business combinations and our ability to integrate the acquired business into our business model; | |
| • | 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. In particular, you should consider the numerous risks described in the “Risk Factors” section of 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.
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| Item 1. | Business |
General
Cordia Bancorp Inc. (“Cordia” or the “Company”) was incorporated in Virginia in 2009 by a team of former bank CEOs, directors and advisors seeking to invest in undervalued or troubled community banks in the Mid-Atlantic and Southeast. On December 10, 2010, Cordia purchased $10,300,000 of the common stock of Bank of Virginia (“BVA” or the “Bank”) at a price of $7.60 per share, resulting in the ownership of 59.8% of the outstanding shares. On August 28, 2012, Cordia purchased an additional $3,000,000 of BVA common stock at a price of $3.60 per share. Cordia’s principal business activity is the ownership of the outstanding shares of common stock of BVA. On March 29, 2013, Cordia and BVA completed a share exchange pursuant to which each outstanding share of BVA common stock held by persons other than Cordia was exchanged for 0.664 of a share of Cordia common stock. As a result of the share exchange, BVA became a wholly-owned subsidiary of Cordia. In April 2014, Cordia completed a private placement offering totaling $15.4 million, the proceeds of which have been used primarily to support organic growth in BVA. Aside from the shares of BVA common stock, Cordia’s other assets totaled $947 thousand at December 31, 2015, consisting primarily of $940 thousand of cash and $7 thousand of prepaid expenses.
Cordia does not own or lease any property, but instead uses the premises, equipment and other property 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.
BVA was incorporated in the Commonwealth of Virginia in September 2002 and commenced business on January 12, 2004. BVA is a state chartered bank headquartered in Midlothian, Virginia with total assets of $348.5 million at December 31, 2015 and is a member of the Federal Reserve System. We provide retail banking services to individuals and commercial customers through five banking locations serving Chesterfield County and the City of Colonial Heights, Virginia and one in Henrico County, Virginia.
Marketing Focus and Business Strategy
BVA is organized to serve consumers and small- to mid-size businesses and professional concerns. We believe that we can be successful by offering a superior level of customer service with a management team more focused on the needs of our borrowers than many of our competitors. We believe that this approach is enthusiastically supported by many members of the community. BVA competes directly with a number of institutions in the local area, including larger regional and super-regional banks, as well as international institutions that tend to have less emphasis on interaction with the customers than the community banks in our target market. BVA offers traditional loan and deposit products for commercial and consumer purposes.
Our banking strategy includes these primary elements:
| • | provide personalized relationship banking to all of our customers at a higher level of service than that provided by nationwide and regional banks, which are among our primary competitors; | |
| • | staff BVA with executive and lending officers who have extensive experience, relationships, and visibility in the Richmond commercial banking market; | |
| • | offer an array of products and services and innovative banking technologies on a competitive basis; | |
| • | focus on reliable and profitable market niches, such as small and medium size businesses; | |
| • | enhance income through a fair but profitable schedule of fees for all bank products and services; | |
| • | add additional branches or loan offices throughout our market area as regulatory and economic conditions may allow; and | |
| • | raise additional capital to support organic growth as well as acquisitions of other depository institutions. |
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Location and Service Area
BVA’s primary market area is the Commonwealth of Virginia, with a focus on Central Virginia. We also lend selectively to borrowers in the states of North Carolina, Maryland and in Washington D.C. In addition, the Bank is receptive to opportunities afforded through prior relationships its board of directors and senior managers may have with individuals or organizations in other states.
BVA provides retail banking services through six full-service banking locations in the greater Richmond, Virginia market, including Chesterfield and Henrico Counties and Colonial Heights, Virginia.
Richmond, the state capital of Virginia, is a city with historic significance and charm, as well as close proximity to recreational attractions such as the Atlantic Ocean, the Blue Ridge Mountains and the Shenandoah Valley, well known theme parks, major educational institutions, historical attractions and many other amenities. Additionally, the Richmond area is in close proximity to other large metropolitan areas, including Norfolk, Virginia and Washington, D.C., and lies at the intersection of two growth corridors coming south along Interstate 95 from Washington, DC and Northern Virginia and coming west along Interstate 64 from the Tidewater area.
BVA’s locations in Chesterfield and Henrico County and the city of Colonial Heights, Virginia, are generally south and west of Downtown Richmond. They offer BVA business and growth opportunities as a result of through their commercial and industrial enterprises, an educated work force, well-designed and developed infrastructure and a competitive tax structure. These advantages are reflected by the area’s major commercial employers such as Altria, Genworth Financial, Markel Corporation, Pfizer Pharmaceuticals, Hewlett Packard, Kraft Foods, WellPoint, United Parcel Service, Verizon, Philip Morris, Dupont and others. This economic environment has historically offered a wealth of job opportunities for the residents of the Richmond area.
Lending Services
BVA offers a full range of short-to-medium term commercial and personal loans, in addition to its core lending in owner occupied and non-owner occupied commercial real estate loans. Commercial loans include both secured and unsecured loans for working capital (including inventory and receivables), business expansion (including acquisition of real estate and improvements), and purchase of equipment and machinery. Consumer loans and lines of credit include secured and unsecured loans for financing automobiles, home improvements, refinanced student loans, education and personal investments. The Bank does not currently provide new loans for land acquisition, development and construction. Historically, the Bank has not originated significant volume of one-to-four family residential loans.
In 2013 the Bank launched a new initiative partnering with GradCapital, LLC to purchase rehabilitated student loans that are 98% guaranteed by the US Government and serviced by Xerox Education Service. During 2014 and 2013 the Bank purchased an aggregate of $87.4 million of such loans. In April 2014 the Bank ceased purchasing rehabilitated, federally guaranteed student loans.
In the fourth quarter of 2014 the Bank launched CordiaGrad, a student loan refinancing program aimed at high-achieving graduates with student loans. During the first quarter of 2015, CordiaGrad opened a new location in Washington DC. On March 1, 2016, the Bank transferred certain marketing arrangements, internet domains and intellectual property related to CordiaGrad to a newly formed subsidiary, which it then sold to Jack C. Zoeller, our former President and Chief Executive Officer. No loans were sold as a part of the transaction and, in connection with 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.
Banking Services
BVA offers a full range of deposit services that include interest-bearing and non-interest-bearing checking accounts, commercial accounts, savings and money market accounts, as well as certificates of deposit and individual retirement accounts (IRAs). We solicit these accounts from individuals, businesses, and other organizations. These accounts are tailored to our principal market area at rates competitive to those offered in our market area. All deposit accounts are insured by the Federal Deposit Insurance Corporation (‘‘FDIC’’) up to the maximum amount allowed by law (subject to aggregation rules).
Other Deposit Banking Services
BVA offers online banking, remote deposit capture, mobile banking, text banking, safe deposit boxes, cashier’s checks, banking by mail, and direct deposit. BVA is associated with a worldwide Automated Teller Machines (‘‘ATMs’’) network that is convenient for and offered free to our customers. BVA also offers debit card and credit card services through a correspondent bank, as well as 24-hour telephone banking. BVA is committed to monitoring developments in technology and providing its customers with the latest technological bank products.
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Market Share and Competition
Excluding Capital One Bank, which gathers deposits nationwide over the Internet, as of June 30, 2015, there were 349 banking offices, representing 32 financial institutions, operating in the Richmond, Virginia metropolitan statistical area (‘‘MSA’’) and holding $35.8 billion in deposits including $284.6 million held by Bank of Virginia or 0.80% of the MSA. Within the MSA, our primary market is Chesterfield County, where we had $242.5 million, or 5.9% of a $4.1 billion market base. In addition, our remaining deposits come from our small but growing presence in Henrico County. We believe that our management team and the economic and demographic dynamics of our service area combined with our business strategy will allow us to gain a larger share of both areas’ deposits.
The financial services industry is highly competitive and changes in the competitive landscape continue to affect all aspects of BVA’s business. Our competitors include large national, super regional and regional banks like Wells Fargo, Bank of America, SunTrust and BB&T, as well as numerous community banks competing for the same customer base.
Broadly, competition among providers of financial products and services continues to increase, with consumers having the opportunity to select from a growing variety of traditional and nontraditional alternatives. The industry continues to consolidate, which affects competition by eliminating some regional and community institutions, while strengthening the franchises of acquirers. The ability of non-bank financial entities to provide services previously reserved for commercial banks has also intensified competition.
In the two Virginia counties in which BVA operates, the strongest competition is other local community banks, savings and loan associations, credit unions, mortgage companies, finance companies, and insurance companies and others providing financial services. Many competitors have greater capital resources than us and more access to long-term, lower cost sources of funding. They may have extensive advertising campaigns, larger branch networks, and offer a broader selection of services and products. Some competitors have other advantages, such as tax exemption in the case of credit unions, and lesser regulation in the case of mortgage companies and specialty finance companies. These various factors make deposit competition strong among institutions in our primary market area.
Funding Activities
Deposits are the primary source of funds for BVA’s lending and investing activities and their cost is the largest category of interest expense. Scheduled payments, as well as prepayments, and maturities from portfolios of loans and investment securities also provide a stable source of funds. Federal Home Loan Bank (‘‘FHLB’’) advances and other secured and unsecured borrowings all provide supplemental liquidity sources. BVA’s funding activities are monitored and governed through BVA’s overall asset-liability management process. BVA conducts its funding activities in compliance with all applicable laws and regulations. The following is a brief description of the various sources of funds used by BVA.
Deposits. Deposits, BVA’s most attractive source of funding because of their stability and relative cost, are attracted principally from clients within BVA’s branch and borrower network and our general market area. We offer a broad selection of deposit instruments to individuals and businesses, including noninterest-bearing checking accounts, interest-bearing checking accounts, savings accounts, money market deposit accounts, certificates of deposit and individual retirement accounts. Deposit account terms vary with respect to the minimum balance required; the time period the funds must remain on deposit and service charge schedules. Interest rates paid on specific deposit types are determined based on (i) the interest rates offered by competitors, (ii) the anticipated amount and timing of funding needs, (iii) the availability and cost of alternative sources of funding, and (iv) the anticipated future economic and interest rate conditions. BVA has also obtained a portion of its deposit base through wholesale funding products.
Federal Home Loan Bank (‘‘FHLB’’) Borrowings and Other Borrowings. BVA’s ability to borrow funds from non-deposit sources provides additional flexibility in meeting its liquidity needs as well as managing its cost of funds. Non-deposit funding options include Federal Funds purchased, securities sold under repurchase agreements, and short-term and long-term FHLB borrowings.
Investment Activities
BVA invests in securities that comply with all applicable regulations and that meet with Board approval. Permissible securities are U.S. government and agency debt obligations; agency guaranteed mortgage-backed securities; state, county, and municipal securities; money market instruments; mutual funds; corporate bonds and trust preferred securities. A balanced maturity distribution is sought in order to minimize the market exposure of investments in any one year. BVA’s investment activities are governed internally by a written, Board-approved policy. The investment policy is carried out by BVA’s Chief Executive Officer and Chief Financial Officer in conjunction with the Asset-Liability Committee (‘‘ALCO’’).
Investment strategies are reviewed by the Board’s ALCO based on the interest rate environment, balance sheet mix, actual and anticipated loan demand, funding opportunities and the overall interest rate sensitivity of BVA. In general, the investment portfolio is managed in a manner appropriate to the attainment of the following goals: (i) to provide a sufficient balance of liquid securities to meet unanticipated deposit and loan fluctuations and overall funds management objectives; (ii) to provide eligible securities to secure public funds, trust deposits as prescribed by law and other borrowings; and (iii) to earn an appropriate return on funds invested that is commensurate with policy objectives.
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Employees
As of December 31, 2015, BVA had 55 full-time equivalent employees. Management of BVA considers its relations with employees to be excellent. No employees are represented by a union or any similar group, and BVA has never experienced any strike or labor dispute.
SUPERVISION AND REGULATION
The regulatory framework applicable to Cordia and BVA is designed to protect depositors, federal deposit insurance funds and the banking system as a whole, and not to protect security holders. Such statutes, regulations and policies are continually under review by Congress, state legislatures, and federal and state regulators. A change in statutes, regulations or regulatory policies, including changes in interpretation or implementation thereof, could have a material effect on our business.
General
As a bank holding company, Cordia is subject to regulation, examination and supervision by the Board of Governors of the Federal Reserve under the Bank Holding Company Act of 1956, as amended (the “BHCA”), and by the Virginia Bureau of Financial Institutions (“VBFI”). BVA is a Virginia state-chartered commercial bank and a member of the Federal Reserve Bank of Richmond, and its deposits are insured by the FDIC. It is subject to regulation, examination and supervision by the Federal Reserve and the VBFI. Numerous federal and state laws, as well as regulations promulgated by the Federal Reserve, the FDIC and state banking regulators, govern almost all aspects of the operation of BVA.
Bank Holding Company Regulation
The BHCA limits a bank holding company’s business to owning or controlling banks and engaging in other banking-related activities. Bank holding companies must obtain the Federal Reserve’s approval before they: (1) acquire direct or indirect ownership or control of any voting shares of any bank that results in total ownership or control, directly or indirectly, of more than 5% of the voting shares of such bank; (2) merge or consolidate with another bank holding company; or (3) acquire substantially all of the assets of any additional banks. Subject to certain state laws, such as age and contingency restrictions, a bank holding company that is adequately capitalized and adequately managed may acquire the assets of both in-state banks and out-of-state banks. With certain exceptions, the BHCA prohibits bank holding companies from acquiring direct or indirect ownership or control of voting shares in any company that is not a bank or a bank holding company unless the Federal Reserve determines that the activities of such company are incidental or closely related to the business of banking. If a bank holding company is well-capitalized and meets certain criteria specified by the Federal Reserve, it may engage de novo in certain permissible non-banking activities without prior Federal Reserve approval.
A number of provisions of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (the “Dodd-Frank Act”) affect the regulation and operations of banks and bank holding companies. Pursuant to the Dodd-Frank Act, the FDIC is given back-up supervisory authority over bank holding companies engaging in conduct that poses a foreseeable and material risk to the Deposit Insurance Fund (“DIF”), and the Federal Reserve gains heightened authority to examine, prescribe regulations and take action with respect to all of a bank holding company’s subsidiaries. A newly created agency, the Office of Financial Research, has authority to collect data from all financial institutions for the purpose of studying threats to U.S. financial stability.
Holding companies of banks chartered under Virginia law are subject to applicable provisions of Virginia’s banking laws and to the examination, supervision and enforcement powers of the VBFI. Among other powers, the VBFI has the authority to issue and enforce cease and desist orders on such holding companies.
Change in Control
Subject to certain exceptions, the BHCA and the Change in Bank Control Act, together with regulations promulgated thereunder, require Federal Reserve approval prior to any person or company acquiring “control” of a bank or bank holding company. Control is conclusively presumed to exist if an individual or company acquires 25% or more of any class of voting securities. Control is rebuttably presumed to exist if a person acquires 10% or more, but less than 25%, of any class of an institution’s voting securities and either that institution has registered securities under Section 12 of the Securities Exchange Act of 1934 or no other person owns a greater percentage of that class of voting securities immediately after the transaction. In certain cases, a company may also be presumed to have control under the BHCA if it acquires 5% or more of any class of voting securities.
Pursuant to the Dodd-Frank Act, a bank holding company may acquire control of an out-of-state bank only if the bank holding company is well-capitalized and well-managed, and interstate merger transactions are prohibited unless the resulting bank would be well-capitalized and well-managed following the transaction. Virginia state law requires that the VBFI approve in advance any proposed change of control of a Virginia state-chartered bank. Under Virginia law, a person is deemed to control another entity if (1) it owns 25% or more of the voting shares of the entity, (2) the person is presumed to control the entity under the BHCA, or (3) the VBFI determines that the person exercises a controlling influence over the management and policies of the entity.
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Capital Requirements
The Federal Reserve has adopted guidelines pursuant to which it assesses the adequacy of capital in examining and supervising state-chartered member banks such as BVA. These guidelines include quantitative measures that assign risk weightings to assets and off-balance sheet items and that define and set minimum regulatory capital requirements. Bank holding companies with consolidated assets of less than $1 billion that are not engaged in significant nonbanking activities, do not conduct significant off-balance sheet activities, and do not have a material amount of debt or equity securities outstanding that are registered with the SEC are not subject to the Federal Reserve’s capital adequacy guidelines for bank holding companies.
Federal banking regulations provide five classifications: well capitalized, adequately capitalized, undercapitalized, significantly undercapitalized and critically undercapitalized, although these terms are not used to represent overall financial condition.
As of December 31, 2015, BOVA’s capital levels were above those currently required to be deemed “well-capitalized.”
On July 9, 2013, the federal bank regulatory agencies issued a final rule that revised their risk-based capital requirements and the method for calculating risk-weighted assets to make them consistent with agreements that were reached by the Basel Committee on Banking Supervision (“Basel III”) and certain provisions of the Dodd-Frank Act. The final rule, which became effective on January 1, 2015, applies to all depository institutions, top-tier bank holding companies with total consolidated assets of $1 billion or more and top-tier savings and loan holding companies.
The rule established a new common equity Tier 1 minimum capital requirement (4.5% of risk-weighted assets), increased the minimum Tier 1 capital to risk-based assets requirement (from 4.0% to 6.0% of risk-weighted assets) and assigned a higher risk weight (150%) to exposures that are more than 90 days past due or are on nonaccrual status and to certain commercial real estate facilities that finance the acquisition, development or construction of real property.
The rule also included changes in what constitutes regulatory capital, some of which are subject to a two-year transition period. These changes include the phasing-out of certain instruments as qualifying capital. In addition, Tier 2 capital is no longer limited to the amount of Tier 1 capital included in total capital. Mortgage servicing rights, certain deferred tax assets and investments in unconsolidated subsidiaries over designated percentages of common stock will be required to be deducted from capital, subject to a two-year transition period. Finally, Tier 1 capital includes accumulated other comprehensive income (which includes all unrealized gains and losses on available for sale debt and equity securities), subject to a two-year transition period.
The new capital requirements also include changes in the risk-weights of assets to better reflect credit risk and other risk exposures. These include a 150% risk weight (up from 100%) for certain high volatility commercial real estate acquisition, development and construction loans and non-residential mortgage loans that are 90 days past due or otherwise on nonaccrual status; a 20% (up from 0%) credit conversion factor for the unused portion of a commitment with an original maturity of one year or less that is not unconditionally cancellable; a 250% risk weight (up from 100%) for mortgage servicing rights and deferred tax assets that are not deducted from capital; and increased risk-weights (from 0% to up to 600%) for equity exposures.
Finally, the rule limits capital distributions and certain discretionary bonus payments if the banking organization does not hold a “capital conservation buffer” consisting of 2.5% of common equity Tier 1 capital to risk-weighted assets in addition to the amount necessary to meet its minimum risk-based capital requirements.
The capital conservation buffer requirement being phased in beginning January 1, 2016, at 0.625% of risk-weighted assets, increasing each year until fully implemented at 2.5% on January 1, 2019.
Bank Holding Companies as a Source of Strength
Federal Reserve regulations require that a bank holding company serve as a source of financial and managerial strength to each bank that it controls and, under appropriate circumstances, to commit resources to support each such controlled bank. This support may be required at times when the bank holding company may not have the resources to provide the support.
Under the prompt corrective action provisions, if a controlled bank is undercapitalized, then the regulators could require the bank holding company to guarantee the bank’s capital restoration plan. In addition, if the Federal Reserve believes that a bank holding company’s activities, assets or affiliates represent a significant risk to the financial safety, soundness or stability of a controlled bank, then the Federal Reserve could require the bank holding company to terminate the activities, liquidate the assets or divest the affiliates. The regulators may require these and other actions in support of controlled banks even if such actions are not in the best interests of the bank holding company or its stockholders. Because Cordia is a bank holding company, Cordia is viewed as a source of financial and managerial strength for any controlled depository institutions, like BVA.
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The Dodd-Frank Act also directs federal bank regulators to require that all companies that directly or indirectly control an insured depository institution serve as sources of financial strength for the institution. The term “source of financial strength” is defined under the Dodd-Frank Act as the ability of a company to provide financial assistance to its insured depository institution subsidiaries in the event of financial distress. The appropriate federal banking agency for such a depository institution may require reports from companies that control the insured depository institution to assess their abilities to serve as sources of strength and to enforce compliance with the source-of-strength requirements. The appropriate federal banking agency may also require a holding company to provide financial assistance to a bank with impaired capital. Under this requirement, in the future we could be required to provide additional financial assistance to BVA should it experience financial distress.
In addition, any capital loans by Cordia to BVA will be subordinate in right of payment to deposits and certain other indebtedness of BVA. In the event of our bankruptcy, any commitment by us to a federal bank regulatory agency to maintain the capital of BVA will be assumed by the bankruptcy trustee and entitled to a priority of payment.
FDICIA Prompt Corrective Action
The Federal Deposit Insurance Corporation Improvement Act of 1991 (“FDICIA”) established a system of prompt corrective action to resolve the problems of undercapitalized insured depository institutions. Under this system, the federal banking regulators are required to rate insured depository institutions on the basis of five capital categories as described above under “Capital Requirements.” The federal banking regulators are also required to take mandatory supervisory actions and are authorized to take other discretionary actions with respect to insured depository institutions in the three undercapitalized categories, the severity of which will depend upon the capital category in which the insured depository institution is assigned. Generally, subject to a narrow exception, FDICIA requires the banking regulators to appoint a receiver or conservator for an insured depository institution that is critically undercapitalized. The federal banking regulations specify the relevant capital level for each category.
The FDICIA generally prohibits a depository institution from making any capital distribution, including payment of a dividend, or paying any management fee to its holding company if the depository institution would thereafter be undercapitalized. See “Dividends.” “Undercapitalized” depository institutions are also subject to restrictions on borrowing from the Federal Reserve System, may not accept brokered deposits absent a waiver from the FDIC, and are subject to growth limitations. In addition, a depository institution’s holding company must guarantee a capital plan, up to an amount equal to the lesser of 5% of the depository institution’s assets at the time it becomes undercapitalized or the amount of the capital deficiency when the institution fails to comply with the plan. Federal banking regulators may not accept a capital plan without determining, among other things, that the plan is based on realistic assumptions and is likely to succeed in restoring the depository institution’s capital. If a depository institution fails to submit an acceptable plan, it is treated as if it is significantly undercapitalized.
“Significantly undercapitalized” depository institutions may be subject to a number of requirements and restrictions, including orders to sell sufficient voting stock to become adequately capitalized, requirements to reduce total assets, and cessation of receipt of deposits from correspondent banks. “Critically undercapitalized” institutions are subject to the appointment of a receiver or conservator.
Virginia law gives the VBFI powers similar to those granted to the FDIC under the prompt corrective action provisions of the FDICIA.
Dividends
Cordia is a legal entity separate and distinct from BVA and its subsidiaries. The principal source of funds for Cordia’s payment of any future dividends on its capital stock and principal and interest on its debt is dividends from BVA. Various federal and state statutory provisions and regulations limit the amount of dividends, if any, Cordia and BVA may pay without regulatory approval.
The Federal Reserve has authority to prohibit a bank holding company from paying dividends or making other distributions. The Federal Reserve has issued a policy statement that a bank holding company should not pay cash dividends unless its net income available to common stockholders has been sufficient to fully fund the dividends and the prospective rate of earnings retention appears to be consistent with the holding company’s capital needs, asset quality and overall financial condition. Accordingly, a bank holding company should not pay cash dividends that exceed its net income or that can only be funded in ways that weaken the bank holding company’s financial health, such as by borrowing. The Dodd-Frank Act and Basel III impose additional restrictions on the ability of banking institutions to pay dividends.
Dividends that may be paid by a member bank without the express approval of the Federal Reserve are limited to that bank’s retained net profits for the preceding two calendar years plus retained net profits up to the date of any dividend declaration in the current calendar year. Retained net profits, as defined by the Federal Reserve, consist of net income less dividends declared during the period.
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Federal bank regulators have the authority to prohibit BVA from engaging in unsafe or unsound practices in conducting its business, and the payment of dividends, depending on the bank’s financial condition, could be deemed an unsafe or unsound practice. The ability of BVA to pay dividends in the future is subject to regulatory approval.
Deposit Insurance and Assessments
Deposits held by BVA are insured by the DIF as administered by the FDIC up to the maximum amount deposit insurance amount of $250,000 per depositor, per insured depository institution for each account ownership category.
The FDIC maintains the DIF by assessing each depository institution an insurance premium. The amount of the FDIC assessments paid by a DIF member institution is based on its relative risk of default as measured by the company’s FDIC supervisory rating, and other various measures, such as the level of brokered deposits, secured debt and debt issuer ratings.
The DIF assessment base rate currently ranges from 2.5 to 45 basis points for institutions that do not trigger factors for brokered deposits and unsecured debt, and higher rates for those that do trigger those risk factors.
All FDIC-insured depository institutions must pay a quarterly assessment to provide funds for the payment of interest on bonds issued by the Financing Corporation, a federal corporation chartered under the authority of the Federal Housing Finance Board. The bonds, which are referred to as FICO bonds, were issued to capitalize the Federal Savings and Loan Insurance Corporation.
Transactions with Affiliates and Insiders
A variety of legal limitations restrict BVA from lending or otherwise supplying funds or in some cases transacting business with Cordia or its nonbank subsidiaries. BVA is subject to Sections 23A and 23B of the Federal Reserve Act and Federal Reserve Regulation W. Section 23A places limits on the amount of covered transactions which include loans or extensions of credit to, investments in or certain other transactions with, affiliates as well as the amount of advances to third parties collateralized by the securities or obligations of affiliates. The aggregate of all covered transactions is limited to 10% of the bank’s capital and surplus for any one affiliate and 20% for all affiliates. Furthermore, within the foregoing limitations as to amount, each covered transaction must meet specified collateral requirements ranging from 100% to 130%. Also, banks are prohibited from purchasing low quality assets from an affiliate.
Section 23B, among other things, prohibits an institution from engaging in certain transactions with affiliates unless the transactions are on terms substantially the same, or at least as favorable to the bank, as those prevailing at the time for comparable transactions with nonaffiliated companies. Except for limitations on low quality asset purchases and transactions that are deemed to be unsafe or unsound, Regulation W generally excludes affiliated depository institutions from treatment as affiliates. Transactions between a bank and any of its subsidiaries that are engaged in certain financial activities may be subject to the affiliated transaction limits. The Federal Reserve also may designate bank subsidiaries as affiliates.
Banks are also subject to quantitative restrictions on extensions of credit to executive officers, directors, principal shareholders, and their related interests. In general, such extensions of credit (1) may not exceed certain dollar limitations, (2) must be made on substantially the same terms, including interest rates and collateral, as those prevailing at the time for comparable transactions with third parties and (3) must not involve more than the normal risk of repayment or present other unfavorable features. Certain extensions of credit also require the approval of a bank’s board of directors.
The Dodd-Frank Act expands the Section 23A and 23B affiliate transaction rules. Among other things, upon the statutory changes’ effective date, the scope of the definition of “covered transaction” under Section 23A will expand, collateral requirements will increase and certain exemptions will be eliminated.
Standards for Safety and Soundness
The Federal Deposit Insurance Act requires the federal bank regulators to prescribe the operational and managerial standards for all insured depository institutions relating to: (1) internal controls; (2) information systems and audit systems; (3) loan documentation; (4) credit underwriting; (5) interest rate risk exposure; and (6) asset quality.
The regulators also must prescribe standards for earnings, and stock valuation, as well as standards for compensation, fees and benefits. The Interagency Guidelines Prescribing Standards for Safety and Soundness set forth the safety and soundness standards used to identify and address problems at insured depository institutions before capital becomes impaired. Under the rules, if a regulator determines that a bank fails to meet any standards prescribed by the guidelines, the regulator may require the bank to submit an acceptable plan to achieve compliance, consistent with deadlines for the submission and review of such safety and soundness compliance plans.
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Regulatory Examination
Cordia and BVA must undergo regular on-site examinations by the appropriate banking agencies. A bank regulator conducting an examination has complete access to the books and records of the examined institution. The results of the examination are confidential. The cost of examinations may be assessed against the examined institution as the agency deems necessary or appropriate.
State Law and Regulation
BVA, as a Virginia state-chartered institution, is subject to regulation by the VBFI, which conducts regular examinations to ensure that its operations and policies conform with applicable law and safe and sound banking practices. Among other things, state law regulates the amount of credit that can be extended to any one borrower and the amount of money that can be invested in various types of assets. BVA generally cannot extend credit to any one borrower in an amount greater than 15% of the sum of BVA’s capital, surplus and loan loss reserve. Direct, indirect and related debt are including in the calculation of the exposure to one borrower or obligor. State law also regulates the types of loans BVA can make.
Community Reinvestment Act
The Community Reinvestment Act (the “CRA”) requires that the appropriate federal bank regulator evaluate the record of our banking subsidiary in meeting the credit needs of its local community, including low and moderate income neighborhoods. These evaluations are considered in evaluating mergers, acquisitions, and applications to open a branch or facility. Failure to adequately meet these criteria could result in additional requirements and limitations on the bank. As of its last CRA regulatory exam, completed on April 1, 2013, BVA received a rating of “satisfactory.”
Consumer Protection Regulations
Retail activities of banks are subject to a variety of statutes and regulations designed to protect consumers. The Dodd-Frank Act established the Consumer Financial Protection Bureau (the “CFPB”) that, together with the statute’s changes to consumer protection laws such as limits on debit card interchange fees and provisions on mortgage-related matters, will likely increase the compliance costs of consumer banking operations. Interest and other charges collected or contracted for by banks are subject to state usury laws and federal laws concerning interest rates. The CFPB has exclusive authority to require reports and conduct examinations, for purposes of ensuring compliance with federal consumer financial laws and related matters, of insured depository institutions with more than $10 billion of assets. For insured depository institutions with assets of $10 billion or less, such as BVA, the CFPB can require reports and conduct examinations on a sample basis.
Loan operations are also subject to federal laws applicable to credit transactions, such as:
| • | the federal Truth-In-Lending Act and Regulation Z issued by the Federal Reserve, governing disclosures of credit terms to consumer borrowers; | |
| • | the Home Mortgage Disclosure Act and Regulation C issued by the Federal Reserve, requiring financial institutions to provide information to enable the public and public officials to determine whether a financial institution is fulfilling its obligation to help meet the housing needs of the community it serves; | |
| • | the Equal Credit Opportunity Act and Regulation B issued by the Federal Reserve, prohibiting discrimination on the basis of race, creed or other prohibited factors in extending credit; | |
| • | the Fair Credit Reporting Act and Regulation V issued by the Federal Reserve, governing the use and provision of information to consumer reporting agencies; | |
| • | the Fair Debt Collection Act, governing the manner in which consumer debts may be collected by collection agencies; and | |
| • | the guidance of the various federal agencies charged with the responsibility of implementing such federal laws. |
Deposit operations also are subject to:
| • | the Truth in Savings Act and Regulation DD issued by the Federal Reserve, which requires disclosure of deposit terms to consumers; | |
| • | Regulation CC issued by the Federal Reserve, which relates to the availability of deposit funds to consumers; | |
| • | the Right to Financial Privacy Act, which imposes a duty to maintain the confidentiality of consumer financial records and prescribes procedures for complying with administrative subpoenas of financial records; and | |
| • | the Electronic Funds Transfer Act and Regulation E issued by the Federal Reserve, which govern automatic deposits to and withdrawals from deposit accounts and customers’ rights and liabilities arising from the use of ATMs and other electronic banking services. |
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Commercial Real Estate Lending
Lending operations that involve concentrations of commercial real estate loans are subject to enhanced scrutiny by federal banking regulators. The regulators have advised financial institutions of the risks posed by commercial real estate lending concentrations. Such loans generally include land development, construction loans and loans secured by multifamily property, and nonfarm, nonresidential real property where the primary source of repayment is derived from rental income associated with the property. The guidance identifies institutions with the following characteristics as potentially being exposed to excessive risk concentrations and that may warrant greater supervisory scrutiny:
| • | total construction and land development loans represent 100% or more of the institution’s total risk-based capital, or | |
| • | total commercial real estate loans, as defined, represent 300% or more of the institution’s total risk-based capital, and the outstanding balance of the institution’s commercial real estate loan portfolio has increased by 50% or more during the prior 36 months. |
The Dodd-Frank Act contains provisions on credit risk retention that require federal banking regulators to adopt regulations mandating the retention of 5% of the credit risk of certain assets transferred, sold or conveyed through issuances of asset-backed securities. Regulations being implemented will provide for the allocation of the risk retention obligation between securitizers and originators of loans.
Branching
The Riegle-Neal Interstate Banking and Branching Efficiency Act of 1994 (the “Interstate Act”) permits nationwide interstate banking and branching under certain circumstances. This legislation generally authorizes interstate branching and relaxes federal law restrictions on interstate banking. Currently, bank holding companies may purchase banks in any state, and states may not prohibit these purchases. Additionally, banks are permitted to merge with banks in other states, as long as the home state of neither merging bank has opted out under the legislation. The Interstate Act requires regulators to consult with community organizations before permitting an interstate institution to close a branch in a low-income area.
Virginia enacted “opting in” legislation in accordance with the Interstate Act, allowing banks to engage in interstate merger transactions, subject to certain “aging” requirements. Once an out-of-state bank has acquired a bank within the state, either through merger or acquisition of all or substantially all of the bank’s assets, the out-of-state bank may open additional branches within the state. In addition, an out-of-state bank may establish a de novo branch in Virginia or acquire a branch in Virginia if the out-of-state bank’s home state gives Virginia banks substantially the same or more favorable rights to establish and maintain branches in that state.
Anti-Tying Restriction
In general, a bank may not extend credit, lease, sell property, or furnish any services or fix or vary the consideration for products and services on the condition that (1) the customer obtain or provide some additional credit, property, or services from or to the bank or bank holding company or their subsidiaries, or (2) the customer not obtain some other credit, property, or services from a competitor, except to the extent reasonable conditions are imposed to assure the soundness of the credit extended. A bank may, however, offer combined-balance products and may otherwise offer more favorable terms if a customer obtains two or more traditional bank products. Also, certain foreign transactions are exempt from the general rule.
Anti-Money Laundering
Financial institutions must maintain anti-money laundering programs that include established internal policies, procedures, and controls; a designated compliance officer; an ongoing employee training program; and the periodic testing of the program. BVA is prohibited from entering into specified financial transactions and account relationships and must meet enhanced standards for due diligence in dealings with foreign financial institutions and foreign customers. We also must take reasonable steps to conduct enhanced scrutiny of account relationships to guard against money laundering and to report any suspicious transactions. Recent laws provide law enforcement authorities with increased access to financial information maintained by banks. Anti-money requirements have been substantially strengthened as a result of the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001 (the “USA Patriot Act”), enacted in 2001 and renewed in 2006 and extended, in part, in 2011. Bank regulators routinely examine institutions for compliance with these requirements and must consider compliance in connection with the regulatory review of applications.
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The USA Patriot Act amended, in part, the Bank Secrecy Act and provides for the facilitation of information sharing among governmental entities and financial institutions for the purpose of combating terrorism and money laundering. The statute also creates enhanced information collection tools and enforcement mechanics for the U.S. government, including: (1) requiring standards for verifying customer identification at account opening; (2) promulgating rules to promote cooperation among financial institutions, regulators, and law enforcement entities in identifying parties that may be involved in terrorism or money laundering; (3) requiring reports by nonfinancial trades and businesses filed with the Treasury’s Financial Crimes Enforcement Network for transactions exceeding $10,000; and (4) mandating the filing of suspicious activities reports if a bank believes a customer may be violating U.S. laws and regulations. The statute also requires enhanced due diligence requirements for financial institutions that administer, maintain, or manage private bank accounts or correspondent accounts for non-U.S. persons.
The Federal Bureau of Investigation may send bank regulators lists of the names of persons suspected of involvement in terrorist activities. Cordia may be subject to a request for a search of its records for any relationships or transactions with persons on those lists and may be required to report any identified relationships or transactions. Furthermore, the Office of Foreign Assets Control (“OFAC”) is responsible for helping to ensure that U.S. entities do not engage in transactions with certain prohibited parties, as defined by various Executive Orders and Acts of Congress. OFAC has sent, and will send, bank regulators lists of names of persons and organizations suspected of aiding, harboring or engaging in terrorist acts, known as Specially Designated Nationals and Blocked Persons. If we find a name on any transaction, account or wire transfer that is on an OFAC list, we must freeze such account, file a suspicious activity report and notify the appropriate authorities.
Privacy and Credit Reporting
Financial institutions are required to disclose their policies for collecting and protecting confidential customer information. Customers generally may prevent financial institutions from sharing nonpublic personal financial information with nonaffiliated third parties, with some exceptions, such as the processing of transactions requested by the consumer. Financial institutions generally may not disclose certain consumer or account information to any nonaffiliated third party for use in telemarketing, direct mail marketing or other marketing. Federal and state bank regulators have prescribed standards for maintaining the security and confidentiality of consumer information, and we are subject to such standards, as well as certain federal and state laws or standards for notifying consumers in the event of a security breach.
Enforcement Powers
Banks and their “institution-affiliated parties,” including directors, management, employees, agents, independent contractors and consultants, such as attorneys and accountants, and others who participate in the conduct of the institution’s affairs, are subject to potential civil and criminal penalties for violations of law, regulations or written orders of a government agency. Violations can include failure to timely file required reports, filing false or misleading information or submitting inaccurate reports. Civil penalties may be as much as $1 million a day for such violations and criminal penalties for some financial institution crimes may include imprisonment for 20 years. Regulators have flexibility to commence enforcement actions against institutions and institution-affiliated parties, and the FDIC has the authority to terminate deposit insurance. When issued by a banking regulator, cease-and-desist orders or other regulatory agreements may, among other things, require affirmative action to correct any harm resulting from a violation or practice, including restitution, reimbursement, indemnifications or guarantees against loss. A financial institution may also be ordered to restrict its growth, dispose of certain assets, rescind agreements or contracts, or take other actions determined to be appropriate by the ordering agency. Federal and state banking regulators also may remove a director or officer from an insured depository institution (or bar them from the industry) if a violation is willful or reckless.
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EXECUTIVE OFFICERS
The following individuals currently serve as executive officers of Cordia and BVA.
| Name | Position | |
| O.R. (Ed) Barham, Jr. | President and Chief Executive Officer of Cordia and BVA; Chairman of the Board of BVA | |
| Mark Severson | Executive Vice President and Chief Financial Officer of Cordia and BVA | |
| Don Andree | Executive Vice President and Chief Lending Officer, BVA | |
| Roy Barzel | Executive Vice President and Chief Credit Officer, BVA | |
| Robert Sims | Senior Vice President, Retail Banking of BVA | |
| Steve Lewis | Senior Vice President and Chief Information Officer, BVA |
Below is information about our executive officers who are not also directors. Ages presented are as of December 31, 2015.
Mark Severson joined BVA as Executive Vice President – Chief Financial Officer of Cordia and BVA in September 2013. Prior to Bank of Virginia, Mr. Severson had over 37 years of banking experience and had been Chief Financial Officer of several large financial institutions, including as Executive Vice President and Chief Financial Officer of Chemung Financial Corporation in Elmira, NY, from 2012-13 and prior to that as Executive Vice President and Chief Financial Officer of FNB United in Asheboro, NC, from 2007-2011. Age 61.
Don Andree has served as Executive Vice President and Chief Lending Officer of BVA since February 2015. He joined BVA as Senior Vice President — Special Assets in May 2011 and was promoted to Executive Vice President in September 2013. Prior to BVA, Mr. Andree spent 14 years at SunTrust Bank where his most recent position was Senior Vice President and Regional Manager for the Special Assets/Residential Builder group in the Mid-Atlantic Region. Formerly he served as Regional Credit Officer for greater Richmond and western Virginia. Age 62.
Roy Barzel joined BVA as Executive Vice President and Chief Credit Officer in April 2011. Prior to joining BVA, Mr. Barzel spent 25 years at SunTrust Bank in Richmond where his most recent position was Senior Vice President and Regional Credit Officer for commercial real estate in the Mid-Atlantic region. Formerly he served as the Senior Credit Officer for residential builders and land developers for all of SunTrust. Age 64.
Robert Sims joined BVA as Senior Vice President — Retail Banking in September 2012. Prior to joining BVA, Mr. Sims was President/Founder of Sims Development Group in Stuart, FL from 2011 to 2012. Prior to that, he served 24 years in senior retail, marketing and treasury positions in three banking institutions, including most recently as Senior Vice President of NBT Bancorp in Norwich, NY. Age 50.
Steve Lewis joined BVA as Senior Vice President and Chief Information Officer in November 2015. Prior to that, Mr. Lewis spent seven years as Director of IT at First Capital Bank in Richmond. In total, his IT background spans roughly 17 years in increasingly responsible roles at several other notable companies. Age 43.
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| Item 1A. | Risk Factors |
RISK FACTORS
Further decline or deterioration in economic conditions could adversely affect our financial condition and results of operations.
Our success depends to a large degree on the general economic conditions in Central Virginia, which is our primary market. Our market is recovering from a significant downturn in which we saw falling home prices, rising foreclosures and an increased level of commercial and consumer delinquencies. If economic conditions were to deteriorate again, we could experience any of the following consequences, each of which could further adversely affect our business:
| • | demand for our products and services could decline; | |
| • | problem assets and foreclosures may increase; and | |
| • | loan losses may increase. |
We could experience further adverse consequences in the event of a prolonged economic downturn in our market due to our exposure to commercial loans across various lines of business. A prolonged economic downturn could adversely affect collateral values or cash flows of the borrowing businesses, and as a result our primary source of repayment could be insufficient to service the debt. Another adverse consequence in the event of a prolonged economic downturn in our market could be the loss of collateral value on commercial and real estate loans that are secured by real estate located in our market area. A further significant decline in real estate values in our market would mean that the collateral for many of our loans would provide less security. As a result, we would be more likely to suffer losses on defaulted loans because our ability to fully recover on defaulted loans by selling the real estate collateral would be diminished.
Future economic conditions in our market will also depend on factors outside of our control such as political and market conditions, broad trends in industry and finance, legislative and regulatory changes, changes in government, military and fiscal policies and inflation.
An inability to maintain our regulatory capital position could adversely affect our operations.
At December 31, 2015, BVA was classified as ‘‘well capitalized’’ for regulatory capital purposes. However, impairments to BVA’s loan or securities portfolio, declines in BVA’s earnings or a combination of these or other factors could change BVA’s capital position in a relatively short period of time. If we are unable to remain ‘‘well capitalized,’’ we will not be able to renew or accept brokered deposits without prior regulatory approval or offer interest rates on our deposit accounts that are significantly higher than the average rates in our market area. As a result, it could be more difficult for us to attract new deposits as our existing brokered and other deposits mature and do not rollover and to retain or increase non-brokered deposits. If we are not able to attract new deposits, our ability to fund our loan portfolio may be adversely affected. In addition, we would pay higher insurance premiums to the FDIC, which will reduce our earnings. Another adverse consequence of a decline in regulatory capital is that additional capital would be harder to raise.
Cordia may be unsuccessful in raising additional capital as needed, and a successful capital raise would dilute existing shareholders and possibly cause our stock price to decline.
At December 31, 2015, BVA was classified as ‘‘well capitalized’’ for regulatory capital purposes. However, Cordia may have a need to raise additional capital to support growth and may be unsuccessful in raising additional capital if the market is not receptive to offerings by small community banks. Furthermore, if we are successful in raising additional capital, the issuance of additional equity securities could be dilutive to holders of our common stock and the market price of our common stock could decline as a result of any such sales. Management cannot predict or estimate the amount, timing or nature of any future equity offerings. Thus, our shareholders bear the risk of our future offerings reducing the market price of our common stock and diluting their stock holdings. There is no assurance that any such offering or issuance of equity securities may be able to be completed.
Our allowance for loan losses may not be adequate to cover actual losses.
Like all financial institutions, we maintain an allowance for loan losses (“ALL”) to provide for probable losses. Our ALL may not be adequate to cover actual loan losses and future provisions for loan losses could materially and adversely affect our operating results. The determination of the appropriate level of the ALL inherently involves a high degree of subjectivity and requires us to make significant estimates of current credit risks and future trends, all of which may undergo material changes. Our ALL is determined by analyzing historical loan losses, current trends in delinquencies and charge-offs, plans for problem loan resolution, changes in the size and composition of the loan portfolio, and industry information. Also included in management’s estimates for loan losses are considerations with respect to the impact of economic events, the outcome of which are uncertain.
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The application of the acquisition method of accounting impacted Cordia’s and, subsequently, BVA’s ALL. Under the acquisition method of accounting, all loans were recorded in Cordia’s financial statements at their fair value at the time of acquisition and the related ALL was eliminated because the fair value at the time was determined by the net present value of the expected cash flows taking into account estimated credit quality. We may in the future determine that our estimates of fair value are too high, in which case we would provide for additional loan losses associated with acquired loans.
The amount of future losses is susceptible to changes in economic, operating and other conditions, including changes in interest rates, which may be beyond our control, and these losses may exceed current estimates. Federal regulatory agencies, as an integral part of their examination process, review our loans and ALL. Although management believes that our ALL is adequate to provide for probable losses, there are no assurances that future increases in the ALL will not be needed or that regulators will not require us to increase our allowance. Either of these occurrences could materially and adversely affect our earnings and profitability.
BVA’s small-to-medium sized business clientele may have limited financial resources to weather a prolonged downturn or continued stress period in the economy.
We target our commercial development and marketing strategy primarily to serve the banking and financial services needs of small and medium sized businesses. These businesses generally have less capital or borrowing capacity than larger entities. If general economic conditions negatively impact this major economic sector in the markets in which we operate, our results of operations and financial condition may be adversely affected.
Changes in the fair value of our securities may reduce our stockholders’ equity and net income.
At December 31, 2015, we had securities classified as available for sale totaling $46.2 million and securities classified as held to maturity totaling $25.5 million. At such date, the aggregate net unrealized loss on available-for-sale securities totaled $461 thousand. We increase or decrease stockholders’ equity by the amount of the change in the unrealized gain or loss (the difference between the estimated fair value and the amortized cost) of the available-for-sale securities portfolio, under the category of accumulated other comprehensive income. Therefore, a decline in the estimated fair value of this portfolio will result in a decline in reported stockholders’ equity, as well as book value per common share and tangible book value per common share. This decrease will occur even though the securities are not sold. In the case of debt securities, if these securities are never sold and there are no credit impairments, the decrease will be recovered at the maturity of the securities. In the case of equity securities that have no stated maturity, the declines in fair value may or may not be recovered over time.
We conduct periodic reviews and evaluations of our entire securities portfolio to determine if the decline in the fair value of any security below its cost basis is other-than-temporary. Factors that we considered in our analysis of debt securities include, but are not limited to, intent to sell the security, evidence available to determine if it is more likely than not that we will have to sell the securities before recovery of the amortized cost, and probable credit losses. Probable credit losses are evaluated based upon, but are not limited to: the present value of future cash flows, the severity and duration of the decline in fair value of the security below its amortized cost, the financial condition and near-term prospects of the issuer, whether the decline appears to be related to issuer conditions or general market or industry conditions, the payment structure of the security, failure of the security to make scheduled interest or principal payments, and changes to the rating of the security by rating agencies. We generally view changes in fair value for debt securities caused by changes in interest rates as temporary, which is consistent with our experience. If we deem such decline to be other-than-temporary, the security is written down to a new cost basis and the resulting loss is charged to earnings as a component of noninterest income. For the year ended December 31, 2015, we did not have any other-than-temporary impairment (“OTTI”) in our securities portfolio.
BVA is subject to interest rate risk that may negatively affect its financial performance.
BVA’s earnings and cash flows are largely dependent upon its net interest income. Net interest income is the difference between interest income earned on interest-earning assets, such as loans and securities, and interest expense paid on interest-bearing liabilities, such as deposits and borrowed funds. Interest rates are highly sensitive to many factors that are beyond BVA’s control, including general economic conditions and policies of various governmental and regulatory agencies and, in particular, the Federal Reserve Board. Changes in monetary policy, including changes in interest rates, could influence not only the interest BVA receives on loans and securities and the amount of interest it pays on deposits and borrowings, but such changes could also affect (i) BVA’s ability to originate loans and obtain deposits, and (ii) the fair value of BVA’s financial assets and liabilities. If the interest rates paid on deposits and other borrowings increase at a faster rate than the interest rates received on loans and other investments, BVA’s net interest income, and therefore earnings, could be adversely affected. Earnings could also be adversely affected if the interest rates received on loans and other investments fall more quickly than the interest rates paid on deposits and other borrowings.
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BVA may lose members of its management team and have difficulty attracting skilled personnel.
BVA’s success depends, in large part, on its ability to attract and retain key people. Competition for the best people can be intense and BVA may not be able to hire such people or to retain them. The unexpected loss of services of key personnel of BVA could have a material adverse impact on its business because of their skills, knowledge of BVA’s market, years of industry experience and the difficulty of promptly finding qualified replacement personnel. In addition, recent regulatory proposals and guidance relating to compensation may negatively impact BVA’s ability to retain and attract skilled personnel.
The financial soundness of other financial institutions could adversely affect us.
Our ability to engage in routine funding transactions could be affected adversely by the actions and commercial soundness of other financial institutions. We have exposure to many different industries and counterparties, and we routinely execute transactions with counterparties in the financial industry. As a result, defaults by, or even rumors or questions about, one or more financial services institutions, or the financial services industry generally, may lead to market-wide liquidity problems and could lead to losses or defaults by us or by other institutions. Many of these transactions expose us to credit risk in the event of default of our counterparty or client. In addition, our credit risk may be exacerbated when the collateral held by us is liquidated at prices insufficient to recover the full amount of our financial exposure. There is no assurance that any such losses would not materially and adversely affect our results of operations.
New capital rules generally require insured depository institutions to hold more capital. The impact of the new rules on our financial condition and operations is uncertain but could be materially adverse.
In July 2013, the Federal Reserve Board adopted final rules for the Basel III capital framework. These rules substantially amended the regulatory risk-based capital rules applicable to BVA. The rules phase in over time beginning in 2015 and becomes fully effective in 2019. Beginning in 2015, BVA's minimum capital requirements were (i) a common Tier 1 equity ratio of 4.5%, (ii) a Tier 1 capital (common Tier 1 capital plus additional Tier 1 capital) of 6% (up from 4%) and (iii) a total capital ratio of 8% (the current requirement). BVA's leverage ratio requirement will remain at the 4% level now required. Beginning in 2016, a capital conservation buffer will phase in over three years, ultimately resulting in a requirement of 2.5% on top of the common Tier 1, Tier 1 and total capital requirements, resulting in a required common Tier 1 equity ratio of 7%, a Tier 1 ratio of 8.5%, and a total capital ratio of 10.5%. Failure to satisfy any of these three capital requirements will result in limits on paying dividends, engaging in share repurchases and paying discretionary bonuses. These limitations will establish a maximum percentage of eligible retained income that could be utilized for such actions. As of December 31, 2015, BVA exceeds all capital adequacy requirements under Basel III to be considered well capitalized on a fully phased-in basis if such requirements were currently effective.
Our profitability may suffer because of rapid and unpredictable changes in the highly regulated environment in which we operate.
The banking industry is subject to extensive regulation by state and federal banking authorities. Many of the banking regulations that govern us are intended to protect depositors, the public or the insurance fund maintained by the FDIC rather than our shareholders. Banking regulations affect our lending practices, capital structure, investment practices, dividend policy and many other aspects of our business. These requirements may constrain our rate of growth, and changes in regulations could adversely affect it. The burden imposed by these federal and state regulations may place banks at a competitive disadvantage compared to less regulated competitors.
Regulation of the financial services industry is undergoing major changes, and future legislation could increase our cost of doing business or harm our competitive position.
In 2010 and 2011, in response to the financial crisis and recession that began in 2008, significant regulatory and legislative laws were enacted resulting in broader reform and increased regulation impacting financial institutions. The Dodd-Frank Act has created a significant shift in the way financial institutions operate. The agencies most affected by the enactment were the FDIC, the Federal Reserve and the Securities and Exchange Commission and the way the agencies oversee the financial system. Any future legislative changes could have a material impact on the profitability of Cordia, the value of assets held for investment or collateral for loans. They could require changes to business practices or force us to discontinue businesses and potentially expose us to additional costs, liabilities, enforcement action and reputational risk.
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Our future success will depend on our ability to compete effectively in the highly competitive financial services industry.
We face substantial competition in all phases of our operations from a variety of different competitors that include other banks, both large and small and numerous less regulated financial services businesses. In particular, there is very strong competition for financial services in the market areas in which we conduct our business. Our future growth and success will depend on our ability to compete effectively in this highly competitive environment. Many of our competitors offer products and services that we do not offer, and many have substantially greater resources, such as greater capital resources and more access to longer term, lower costs funding sources. Many also have greater name recognition and market presence that benefit them in attracting business. In addition, larger competitors may be able to price loans and deposits more aggressively than we do. Our larger competitors generally have easier access to capital, and often on better terms. Some of the financial services organizations with which we compete are not subject to the same degree of regulation as is imposed on bank holding companies and federally insured state-chartered Banks, national banks and federal savings institutions. As a result, these non-bank competitors have certain advantages over us in accessing funding and in providing various services.
Other competitors are subject to similar regulation but have the advantages of larger established customer bases, higher lending limits, extensive branch networks, numerous automated teller machines, greater advertising-marketing budgets or other factors. Some of our competitors have other advantages, such as tax exemption in the case of credit unions, and lesser regulation in the case of mortgage companies and specialty finance companies. Deposit competition is strong among institutions in our primary market area.
We have operational risk that could impact our ability to provide services to our customers.
We have potential operational risk exposure throughout our organization. Integral to our performance is the continued effectiveness and efficiency of our technical systems, operational infrastructure, relationships with third parties and key individuals involved in our ongoing activities. Failure by any or all of these resources subjects us to risks that may vary in size, scale and scope. This includes but is not limited to operational or technical failures, unlawful tampering with our information technology infrastructure, terrorist activities, ineffectiveness or exposure due to interruption in third party support, as well as the loss of key individuals or failure of key individuals to perform properly.
In addition, we provide our customers with the ability to bank remotely, including over the Internet and over the telephone. The secure transmission of confidential information over the Internet and other remote channels is a critical element of remote banking. Our network could be vulnerable to unauthorized access, computer viruses, phishing schemes and other security breaches. We may be required to spend significant capital and other resources to protect against the threat of security breaches and computer viruses, or to alleviate problems caused by security breaches or viruses. To the extent that our activities or the activities of our customers involve the storage and transmission of confidential information, security breaches and viruses could expose us to claims, regulatory scrutiny, litigation and other possible liabilities. Any inability to prevent security breaches or computer viruses could also cause existing customers to lose confidence in our systems and could materially and adversely affect us.
Additionally, financial products and services have become increasingly technology-driven. Our ability to meet the needs of our customers competitively, and in a cost-efficient manner, is dependent on the ability to keep pace with technological advances and to invest in new technology as it becomes available. Many of our competitors have greater resources to invest in technology than we do and may be better equipped to market new technology-driven products and services. The ability to keep pace with technological change is important, and the failure to do so could have a material adverse impact on our business and therefore on our financial condition and results of operations.
We do not plan to pay cash dividends in the foreseeable future.
We do not expect to pay cash dividends on our common stock in the foreseeable future. Our ability to declare and pay cash dividends will depend, among other things, upon restrictions imposed by the reserve and capital requirements of Virginia law and federal banking regulations, our income and financial condition, tax considerations, and general business conditions. The payment of dividends is subject to prior regulatory approval.
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We are dependent on our information technology and telecommunications systems and third-party service providers; systems failures, interruptions and security breaches could have a material adverse effect on us.
Our business is dependent on the successful and uninterrupted functioning of our information technology and telecommunications systems and third-party service providers. The failure of these systems, or the termination of a third-party software license or service agreement on which any of these systems is based, could interrupt our operations. Because our information technology and telecommunications systems interface with and depend on third-party systems, we could experience service denials if demand for such services exceeds capacity or such third-party systems fail or experience interruptions. If significant, sustained or repeated, a system failure or service denial could compromise our ability to operate effectively, damage our reputation, result in a loss of customer business, and/or subject us to additional regulatory scrutiny and possible financial liability, any of which could have a material adverse effect on us.
Our third-party service providers may be vulnerable to unauthorized access, computer viruses, phishing schemes and other security breaches. We may be required to expend significant additional resources to protect against the threat of such security breaches and computer viruses, or to alleviate problems caused by such security breaches or viruses. To the extent that the activities of our third-party service providers or the activities of our customers involve the storage and transmission of confidential information, security breaches and viruses could expose us to claims, regulatory scrutiny, litigation and other possible liabilities.
Security breaches and other disruptions could compromise our information and expose us to liability, which would cause our business and reputation to suffer.
In the ordinary course of our business, we collect and store sensitive data, including our proprietary business information and that of our customers, suppliers and business partners; and personally identifiable information of our customers and employees. The secure processing, maintenance and transmission of this information is critical to our operations and business strategy. We, our customers, and other financial institutions with which we interact, are subject to ongoing, continuous attempts to penetrate key systems by individual hackers, organized criminals, and in some cases, state-sponsored organizations. Despite our security measures, our information technology and infrastructure may be vulnerable to attacks by hackers or breached due to employee error, malfeasance or other disruptions. Any such breach could compromise our networks and the information stored there could be accessed, publicly disclosed, lost or stolen. Any such unauthorized access, disclosure or other loss of information could result in legal claims or proceedings, liability under laws that protect the privacy of personal information, and regulatory penalties; disrupt our operations and the services we provide to customers; damage our reputation; and cause a loss of confidence in our products and services, all of which could adversely affect our business, revenues and competitive position. We may be required to spend significant capital and other resources to protect against the threat of security breaches and computer viruses, or to alleviate problems caused by security breaches or viruses.
To remain competitive, we must keep pace with technological change.
Financial products and services have become increasingly technology-driven. Our ability to meet the needs of our customers competitively, and in a cost-efficient manner, is dependent on the ability to keep pace with technological advances and to invest in new technology as it becomes available. Many of our competitors have greater resources to invest in technology than we do and may be better equipped to market new technology-driven products and services. The ability to keep pace with technological change is important, and the failure to do so could have a material adverse impact on our business and therefore on our financial condition and results of operations.
| Item 1B. | Unresolved Staff Comments |
None
| Item 2. | Properties |
BVA owns four branch locations. The main office located at 11730 Hull Street Rd., Midlothian, Virginia 23112 is approximately 9,000 square feet and also houses most support operations. The Patterson branch is at 10501 Patterson Road, Richmond, Virginia. The Woodlake branch is at 15001 Dogwood Villas Drive, Chesterfield, Virginia. The fourth branch location is at 200 Snead Avenue, Colonial Heights, Virginia. BVA’s other facilities presently in operation are leased. Our two leased branch facilities, (906 Branchway Road, Richmond, Virginia, and 4023 West Hundred Road, Chester, Virginia) are full service branches and include drive-up access and safe deposit boxes. All of BVA’s properties are in good operating condition and are adequate for BVA’s present needs.
| 17 |
| Item 3. | Legal Proceedings |
Neither the Company nor the Bank is a party to, nor is any of their property the subject of, any material legal proceedings other than ordinary routine litigation incident to their businesses.
| Item 4. | Mine Safety Disclosures |
Not applicable
| Item 5. | Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities |
Shares of Cordia common stock are listed and trade on the Nasdaq Capital Market under the symbol “BVA.” As of March 15, 2015, there were approximately 261 holders of record of Cordia common stock.
Cordia has not paid any dividends on its common stock since its formation. See Item 1 – Business – Supervision and Regulation – Dividends for more information relating to restrictions on dividends.
The following table sets forth the high and low sales prices of the common stock as reported on the NASDAQ Capital Market for the four quarters of 2015 and 2014. .
| 2015 | 2014 | |||||||||||||||
| Quarter | High | Low | High | Low | ||||||||||||
| First quarter | $ | 4.19 | $ | 3.70 | $ | 4.93 | $ | 4.01 | ||||||||
| Second quarter | 4.09 | 3.55 | 4.57 | 4.12 | ||||||||||||
| Third quarter | 4.14 | 3.51 | 4.69 | 3.42 | ||||||||||||
| Fourth quarter | 4.09 | 3.53 | 4.14 | 3.32 | ||||||||||||
On May 20, 2015, Cordia announced that it had authorized a stock repurchase program to acquire up to $500,000 of the Company’s outstanding common stock. Repurchases will be conducted through open market purchases or through privately negotiated transactions and will be made from time to time depending on market conditions and other factors. As of December 31, 2015, the Company had repurchased 21,200 shares.
Cordia did not repurchase any shares of its common stock during the fourth quarter of 2015.
| 18 |
| Item 6. | Selected Financial Data |
| Summarized Balance Sheet Data at | ||||||||||||
| December 31, (dollars in thousands, except per share amounts) | 2015 | 2014 | 2013 | |||||||||
| Loans, net of unearned income | $ | 246,033 | $ | 212,959 | $ | 174,007 | ||||||
| Allowance for loan losses | 823 | 1,089 | 1,489 | |||||||||
| Securities | 71,720 | 74,199 | 39,320 | |||||||||
| Total assets | 348,490 | 318,600 | 235,148 | |||||||||
| Deposits | 290,044 | 265,603 | 210,814 | |||||||||
| FHLB borrowings | 30,000 | 25,000 | 10,000 | |||||||||
| Stockholders' equity | 27,739 | 27,136 | 13,287 | |||||||||
| Book value per share | $ | 4.21 | $ | 4.17 | $ | 4.78 | ||||||
| Summarized Earnings Data for the | ||||||||||||
| Years ended December 31, (dollars in thousands) | 2015 | 2014 | 2013 | |||||||||
| Total interest income | $ | 10,841 | $ | 10,217 | $ | 9,865 | ||||||
| Total interest expense | 2,331 | 1,991 | 1,808 | |||||||||
| Net interest income before provision for loan losses | 8,510 | 8,226 | 8,057 | |||||||||
| (Recoverry of) provision for loan losses | (293 | ) | 305 | 19 | ||||||||
| Net interest income after provision for loan losses | 8,803 | 7,921 | 8,038 | |||||||||
| Non-interest income | 534 | 467 | 300 | |||||||||
| Non-interest expense | 8,747 | 8,800 | 7,642 | |||||||||
| Net income (loss) | 590 | (412 | ) | 696 | ||||||||
| Selected Per Share Data | ||||||||||||
| At or for the years ended December 31, | 2015 | 2014 | 2013 | |||||||||
| Weighted average shares outstanding, basic | 6,572,097 | 4,722,556 | 2,602,357 | |||||||||
| Basic net income (loss) per share | $ | 0.09 | $ | (0.09 | ) | $ | 0.27 | |||||
| Weighted average shares outstanding, diluted | 6,572,097 | 4,722,556 | 2,615,387 | |||||||||
| Diluted net income (loss) per share | $ | 0.09 | $ | (0.09 | ) | $ | 0.27 | |||||
| Selected Ratios | ||||||||||||
| At or for the years ended December 31, | 2015 | 2014 | 2013 | |||||||||
| Return on average assets | 0.18 | % | (0.14 | )% | 0.30 | % | ||||||
| Return on average equity | 2.12 | % | (1.77 | )% | 5.07 | % | ||||||
| Average equity to average assets | 8.26 | % | 8.19 | % | 5.86 | % | ||||||
| Leverage ratio (1) | 7.82 | % | 8.24 | % | 6.09 | % | ||||||
| Total risk-based capital (1) | 13.43 | % | 15.52 | % | 11.25 | % | ||||||
| Net interest margin | 2.68 | % | 3.04 | % | 3.64 | % | ||||||
(1) Ratios are for Bank of Virginia
| 19 |
| Item 7. | Management’s Discussion and Analysis of Financial Condition and Results of Operations |
The following discussion is intended to assist the reader in understanding and evaluating the financial condition and results of operations of Cordia and its wholly owned subsidiary, Bank of Virginia (“BVA”). This discussion and analysis should be read in conjunction with Cordia’s consolidated financial statements and related notes thereto located elsewhere in this report.
In preparing financial statements in conformity with accounting principles generally accepted in the United States of America, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities as of the date of the balance sheet and reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Material estimates that are particularly susceptible to significant change in the near term relate to the determination of the allowance for loan losses, the valuation of deferred tax assets, the valuation of other real estate owned, intangible assets, acquired loans with specific credit-related deterioration and fair value measurements.
Executive Overview
During the past four years, the Company has spent much time restructuring the balance sheet as we worked through asset quality issues, recruited new staff, and reorganized our lending and deposit activities while addressing the requirements of BVA’s prior written agreement with the Federal Reserve and VBFL, which was terminated by the regulators in August 2013.. In March 2013, the Company completed its Plan of Share Exchange with Bank of Virginia, effectively combining the two stockholder bases.
Since the beginning of 2013, the Company has substantially increased its lending and funding activities. During this period, the Bank purchased $85.6 million of rehabilitated student loans that are 98% guaranteed by the U.S. Government and serviced by Xerox Education Services. The Bank also significantly expanded its deposit base, primarily involving direct certificate of deposit accounts and retail transaction accounts, while substantially reducing its cost of funds.
In 2014, BVA hired five new officers whose primary responsibilities are to increase asset originations – including a senior vice president of residential mortgage lending, two first vice presidents of commercial lending, a vice president of student lending and a residential mortgage loan officer.
On April 10, 2014, Cordia completed the sale of approximately 363 shares of Mandatorily Convertible, Noncumulative, Nonvoting, Perpetual Preferred Stock, Series A, $0.01 par value per share, to accredited investors at a purchase price of $42,500 per share for total gross proceeds of $15.4 million. The capital raise included investments by 100% of Cordia’s directors. The net proceeds of the offering are being used primarily to support the second phase of its organic growth strategy in BVA.
On June 25, 2014, upon stockholder approval, each share of Series A Preferred Stock mandatorily converted into 10,000 shares of Cordia’s common stock at an initial conversion price of $4.25 per share, for a total issuance of approximately 3,629,871 new shares of common stock, of which 2,229,434 are voting and 1,400,437 are nonvoting. The holders of the Series A Preferred Stock did not receive any dividends under the provisions of the stock purchase agreements.
In the fourth quarter of 2014 the Bank launched CordiaGrad, a private student loan refinancing program aimed at high-achieving graduates with student loans. During the first quarter of 2015, CordiaGrad opened a new location in Washington DC. Beginning in April 2014 the Bank ceased purchasing rehabilitated, federally guaranteed student loans. On March 1, 2016, the Bank transferred certain marketing arrangements, internet domains and intellectual property related to CordiaGrad to a newly formed subsidiary, which it then sold to Jack C. Zoeller, who resigned as Cordia’s President and Chief Executive Officer in connection with the transaction. No loans were sold as part of the transaction and, as part of the transaction, the Bank agreed to provide certain transition and loan origination services to the new entity acquired by Mr. Zoeller through June 30, 2016.
On May 20, 2015, Cordia announced that it had authorized a stock repurchase program to acquire up to $500,000 of the Company’s outstanding common stock. Repurchases will be conducted through open market purchases or through privately negotiated transactions and will be made from time to time depending on market conditions and other factors. As of December 31, 2015, the Company had repurchased 21,200 shares.
On August 5, 2015, Cordia announced the hiring of O.R. (Ed) Barham, Jr. as President and Chief Executive Officer of the Bank of Virginia. Mr. Barham manages the Bank’s operations and is based in Richmond, Virginia. In connection with his hiring, Mr. Burham was also appointed to the Bank’s board of directors. Effective March 1, 2016, following Jack C. Zoeller’s resignation as President and Chief Executive Office of Cordia, Mr. Barham was appointed as a director and President and Chief Executive Officer of Cordia and as Chairman of the Board of Directors of the Bank.
In November 2015, Cordia announced the hiring of Steve Lewis as Chief Information Officer of the Bank of Virginia. Mr. Lewis has been designated as a member of the Senior Management Team and will be responsible for the information technology function. He is based in Richmond, Virginia and reports to Mark Severson, Executive Vice President and Chief Financial Officer of Cordia and Bank of Virginia.
| 20 |
Results of Operations
Net Income (Loss)
Consolidated net income was $590 thousand for the year ended December 31, 2015 compared to consolidated net loss of $412 thousand for the year ended December 31, 2014. The 2015 results include a recovery of loan losses of $293 million compared to a provision for loan losses of $305 million in in 2014. Noninterest expense for 2015 included the favorable reversal of the fair value discount related to the purchase of a bank property and the termination of the related lease. This fair value discount was established when Cordia purchased BVA as a result of an existing lease being deemed unfavorable when compared to market rates for commercial real estate at that time. This $400 thousand fair value discount was allocated based on relative fair values of the purchased property and the remaining portion of the unfavorable portion of the lease, with $225 thousand recorded as a reduction to noninterest expense and $175 thousand recorded as a reduction to the basis of the bank property purchased.
Net Interest Income
Net interest income is the largest component of our income, and is affected by the interest rate environment and the volume and the composition of interest-earning assets and interest-bearing liabilities. Our interest-earning assets include loans, investment securities, interest-bearing deposits in other banks, and federal funds sold. Our interest-bearing liabilities include deposits and advances from the FHLB.
Net interest income increased $284 thousand from $8.2 million for the year ended December 31, 2014 to $8.5 million for the year ended December 31, 2015. Interest income increased $624 thousand to $10.8 million in 2015 from $10.2 million in 2014. The increase in net interest income in 2015 was primarily due to an increase in average interest-earning assets of $47.6 million or 17.6% for the year ended December 31, 2015 offset by a significant reduction in interest margin of 36 basis points. The significant reduction in net interest margin was due in part to the decrease in the accretion of acquisition accounting adjustments. The yield on loans held for investment includes the annualized impact of accretion on purchased loans.
Interest expense for the year ended December 31, 2015 was $2.3 million, compared to $2.0 million for the year ended December 31, 2014. The increase of $340 thousand was due to increased loan volume. In addition, interest expense on FHLB borrowings increased by $142 thousand from $230 thousand for the year ended December 31, 2014 to $372 thousand for the year ended December 31, 2015. This increase was due to an increase in average FHLB borrowings from $18.6 million in 2014 to $30.0 million in 2015. In addition, the cost of deposits increased $198 thousand due to a higher average balance of deposits in 2015 of $31.5 million. The cost of total deposits was 0.78% for the year ended December 31, 2015 compared to 0.81% for the year ended December 31, 2014, primarily due to shifting the retail deposit mix away from time deposits into transaction accounts and lower cost direct certificates of deposits. The Company’s balance sheet is in an asset sensitive position as of December 31, 2015.
Net interest margin was 2.68% and 3.04% for the years ended December 31, 2015 and 2014, respectively. The decrease in net interest margin was primarily the result of a decrease in the yield on loans held for investment. Excluding acquisition accounting adjustments, the net interest margin was 2.64% and 2.96% for the years ended December 31, 2015 and 2014, respectively.
| 21 |
Average Balances and Yields
The following tables present information regarding average balances of assets and liabilities, the total dollar amounts of interest income and dividends from average interest-earning assets, the total dollar amounts of interest expense on average interest-bearing liabilities, and the resulting yields and costs. The yields and costs for the periods indicated are derived by dividing income or expense by the average balances of assets or liabilities, respectively, for the periods presented.
| For the years ended | ||||||||||||||||||||||||||||||||||||
| December 31, (dollars in thousands) | 2015 | 2014 | 2013 | |||||||||||||||||||||||||||||||||
| Average Balance | Interest | Yield/ Rate | Average Balance | Interest | Yield/ Rate | Average Balance | Interest | Yield/ Rate | ||||||||||||||||||||||||||||
| Earning Assets: | ||||||||||||||||||||||||||||||||||||
| Loans held for investment | $ | 223,823 | $ | 9,203 | 4.11 | % | $ | 198,227 | $ | 8,923 | 4.50 | % | $ | 170,200 | $ | 9,366 | 5.50 | % | ||||||||||||||||||
| Loans held for sale | 121 | 5 | 4.13 | % | - | - | - | - | - | - | ||||||||||||||||||||||||||
| Securities | 76,454 | 1,604 | 2.10 | % | 61,156 | 1,269 | 2.08 | % | 23,159 | 426 | 1.84 | % | ||||||||||||||||||||||||
| Federal Funds and deposits with banks | 17,371 | 29 | 0.17 | % | 10,780 | 25 | 0.23 | % | 28,089 | 73 | 0.26 | % | ||||||||||||||||||||||||
| Total earning assets | 317,769 | 10,841 | 3.41 | % | 270,163 | 10,217 | 3.78 | % | 221,448 | 9,865 | 4.45 | % | ||||||||||||||||||||||||
| Allowance for loan losses | (1,005 | ) | (1,369 | ) | (2,788 | ) | ||||||||||||||||||||||||||||||
| Other assets | 20,025 | 16,234 | 14,480 | |||||||||||||||||||||||||||||||||
| Total | $ | 336,789 | $ | 285,028 | $ | 233,140 | ||||||||||||||||||||||||||||||
| Interest-bearing liabilities: | ||||||||||||||||||||||||||||||||||||
| Demand deposits | $ | 14,333 | 39 | 0.27 | % | $ | 13,832 | 42 | 0.30 | % | $ | 14,463 | 56 | 0.39 | % | |||||||||||||||||||||
| Savings deposits | 80,187 | 263 | 0.33 | % | 61,818 | 179 | 0.29 | % | 49,376 | 196 | 0.40 | % | ||||||||||||||||||||||||
| Time deposits | 155,020 | 1,657 | 1.07 | % | 142,095 | 1,540 | 1.08 | % | 124,911 | 1,392 | 1.11 | % | ||||||||||||||||||||||||
| FHLB borrowings | 30,034 | 372 | 1.24 | % | 18,616 | 230 | 1.24 | % | 10,000 | 164 | 1.64 | % | ||||||||||||||||||||||||
| Total interest-bearing liabilities | 279,574 | 2,331 | 0.83 | % | 236,361 | 1,991 | 0.84 | % | 198,750 | 1,808 | 0.91 | % | ||||||||||||||||||||||||
| Non-interest bearing demand deposits | 28,640 | 23,696 | 20,118 | |||||||||||||||||||||||||||||||||
| Other liabilities | 765 | 1,629 | 681 | |||||||||||||||||||||||||||||||||
| Stockholders' equity | 27,810 | 23,342 | 13,591 | |||||||||||||||||||||||||||||||||
| Total | $ | 336,789 | $ | 285,028 | $ | 233,140 | ||||||||||||||||||||||||||||||
| Net interest income | $ | 8,510 | $ | 8,226 | $ | 8,057 | ||||||||||||||||||||||||||||||
| Net interest rate spread | 2.58 | % | 2.94 | % | 3.55 | % | ||||||||||||||||||||||||||||||
| Net interest margin | 2.68 | % | 3.04 | % | 3.64 | % | ||||||||||||||||||||||||||||||
| 22 |
The table below analyzes interest income, interest expense, and net interest income for the year ended December 31, 2015 compared to the year ended December 31, 2014 and the year ended December 31, 2014 compared to the year ended December 31, 2013
| 2015 | 2014 | |||||||||||||||||||||||
| Increase (decrease) due to changes in: | Increase (decrease) due to changes in: | |||||||||||||||||||||||
| (dollars in thousands) | Average Volume | Average Rate | Increase (Decrease) | Average Volume | Average Rate | Increase (Decrease) | ||||||||||||||||||
| Interest Income: | ||||||||||||||||||||||||
| Loans | $ | 1,152 | $ | (867 | ) | $ | 285 | $ | 1,812 | $ | (2,255 | ) | $ | (443 | ) | |||||||||
| Securities | 317 | 18 | 335 | 699 | 144 | 843 | ||||||||||||||||||
| Federal Funds and deposits with banks | 15 | (11 | ) | 4 | (45 | ) | (3 | ) | (48 | ) | ||||||||||||||
| Total interest income | 1,484 | (860 | ) | 624 | 2,466 | (2,114 | ) | 352 | ||||||||||||||||
| Interest Expense: | ||||||||||||||||||||||||
| Demand deposits | 2 | (5 | ) | (3 | ) | (2 | ) | (12 | ) | (14 | ) | |||||||||||||
| Savings deposits | 53 | 31 | 84 | 49 | (66 | ) | (17 | ) | ||||||||||||||||
| Time deposits | 140 | (23 | ) | 117 | 191 | (43 | ) | 148 | ||||||||||||||||
| FHLB borrowings | 141 | 1 | 142 | 141 | (75 | ) | 66 | |||||||||||||||||
| Total interest expense | 336 | 4 | 340 | 379 | (196 | ) | 183 | |||||||||||||||||
| Change in net interest income | $ | 1,148 | $ | (864 | ) | $ | 284 | $ | 2,087 | $ | (1,918 | ) | $ | 169 | ||||||||||
(Recovery of) Provision for Loan Losses
Recovery of loan losses was $293 thousand for year ended December 31, 2015 as compared to a provision of $305 thousand during the year ended December 31, 2014. This amount reflects our emphasis on highly accurate risk rating processes, early detection of problem loans, accurate assessment of the extent of losses, declining historical loss experience and aggressive management of problem loans through restructures, refinancing to other institutions, or other means of mitigating potential losses. The allowance for loan losses was $823 thousand at December 31, 2015, compared to $1.1 million at December 31, 2014.
An analysis of the changes in the allowance for loan losses is presented under the caption “—Allowance for Loan Losses” on page 26.
Non-interest Income
Non-interest income for the year ended December 31, 2015 was $534 thousand, compared to $467 thousand for the year ended December 31, 2014. The improvement was primarily the result of a $43 thousand higher net gain on the sale of loans held for sale and an increase in other fee income, net of $57 thousand,.
The following table sets forth the principal components of non-interest income:
| For the years ended December 31, (dollars in thousands) | 2015 | 2014 | ||||||
| Service charges on deposit accounts | $ | 134 | $ | 123 | ||||
| Net gain on sale of "AFS" securities | 133 | 177 | ||||||
| Net gain(loss) on sale of loans held for sale | 47 | 4 | ||||||
| Other fee income, net | 220 | 163 | ||||||
| Total non-interest income | $ | 534 | $ | 467 | ||||
| 23 |
Non-interest Expense
Non-interest expense decreased $53 thousand to $8.7 million for the year ended December 31, 2015 from $8.8 million for the year ended December 31, 2014. The decrease was due to a favorable reversal in the 2015 period of the fair value discount related to the purchase of a bank property and the termination of the related lease. The fair value discount was established when Cordia purchased BVA as a result of an existing lease being deemed unfavorable when compared to market rates for commercial real estate at that time. The $400 thousand fair value discount was allocated based on relative fair values of the purchased property and the remaining portion of the unfavorable portion of the lease, with $225 thousand recorded as a reduction to the noninterest expense and $175 thousand recorded as a reduction to the basis of the bank property purchased. In addition, salaries and employee benefits decreased $393 thousand, offset in part by an increase of $196 thousand in data processing and communications. The increase in marketing and business development was due primarily to increased efforts to promote our former CordiaGrad student loan refinancing program. The following table sets forth the primary components of non-interest expense:
| For the years ended December 31, (dollars in thousands) | 2015 | 2014 | ||||||
| Salaries and employee benefits | $ | 4,453 | $ | 4,846 | ||||
| Professional services | 439 | 427 | ||||||
| Occupancy | 600 | 565 | ||||||
| Reversal of occupancy fair value discount | (225 | ) | - | |||||
| Data processing and communications | 894 | 698 | ||||||
| FDIC assessment and bank fees | 465 | 385 | ||||||
| Bank franchise taxes | 196 | 102 | ||||||
| Student loan servicing fees and other loan expenses | 755 | 671 | ||||||
| Other real estate expenses, net | 90 | 46 | ||||||
| Supplies and equipment | 286 | 318 | ||||||
| Insurance | 78 | 167 | ||||||
| Directors fees | 179 | 187 | ||||||
| Marketing and business development | 231 | 51 | ||||||
| Other operating expenses | 306 | 337 | ||||||
| Total non-interest expense | $ | 8,747 | $ | 8,800 | ||||
Income Tax Expense
Under the provisions of the Internal Revenue Code, the Company has approximately $18.7 million of net operating loss carryforwards, which will expire if unused beginning in 2024 through 2034. As of December 31, 2015, net deferred tax assets (“DTA”) of $6.1 million have been fully reserved with a valuation allowance. It is estimated that all of the valuation allowance is available to be reversed if and when it is deemed to be more-likely-than-not that all of the deferred tax asset will be realized. Of the net operating losses that occurred prior to the change in control of BVA in December 2010 and Cordia in April 2014, the amount of the loss carryforward available to offset taxable income is limited to approximately $254,000 per year for twenty years for BVA and zero for Cordia. DTAs related to net operating losses in excess of the amount realizable during the 20 year carryforward period have been written off.
Financial Condition
Loans
Loans represent the largest category of earning assets and typically provide higher yields than the other types of earning assets. Loans carry inherent credit and liquidity risks associated with the creditworthiness of our borrowers and general economic conditions. At December 31, 2015, total loans held for investment (net of allowance for loan losses) were $245.2 million versus $211.9 million at December 31, 2014. Loans held for sale were $220 thousand at December 31, 2015. There were no loans held for sale at December 31, 2014.
| 24 |
The following table sets forth the composition of the loan portfolio by category at the dates indicated and highlights our general emphasis on commercial and commercial real-estate lending.
| At December 31, | ||||||||||||||||||||||||||||||||||||||||
| 2015 | 2014 | 2013 | 2012 | 2011 | ||||||||||||||||||||||||||||||||||||
| (dollars in thousands) | Amount | Percent | Amount | Percent | Amount | Percent | Amount | Percent | Amount | Percent | ||||||||||||||||||||||||||||||
| Commercial Real Estate: | ||||||||||||||||||||||||||||||||||||||||
| Acquisition, development and construction | $ | 2,168 | 0.9 | % | $ | 2,159 | 1.0 | % | $ | 3,475 | 2.0 | % | $ | 3,313 | 2.9 | % | $ | 6,065 | 5.7 | % | ||||||||||||||||||||
| Non-owner occupied | 58,044 | 23.6 | % | 51,512 | 24.2 | % | 28,606 | 16.4 | % | 30,747 | 27.2 | % | 30,644 | 28.7 | % | |||||||||||||||||||||||||
| Owner occupied | 45,690 | 18.6 | % | 49,582 | 23.3 | % | 50,500 | 29.0 | % | 39,570 | 35.0 | % | 31,790 | 29.7 | % | |||||||||||||||||||||||||
| Commercial and industrial | 34,819 | 14.1 | % | 24,153 | 11.3 | % | 21,085 | 12.1 | % | 23,488 | 20.8 | % | 19,492 | 18.2 | % | |||||||||||||||||||||||||
| Guaranteed studentloans | 53,847 | 21.9 | % | 64,870 | 30.5 | % | 55,427 | 31.9 | % | - | - | - | - | |||||||||||||||||||||||||||
| Consumer: | ||||||||||||||||||||||||||||||||||||||||
| Residential mortgage | 18,140 | 7.4 | % | 8,377 | 3.9 | % | 7,156 | 4.1 | % | 7,260 | 6.4 | % | 8,003 | 7.5 | % | |||||||||||||||||||||||||
| HELOC | 10,603 | 4.3 | % | 11,074 | 5.2 | % | 7,250 | 4.2 | % | 8,395 | 7.4 | % | 10,298 | 9.6 | % | |||||||||||||||||||||||||
| Other | 22,722 | 9.2 | % | 1,232 | 0.6 | % | 508 | 0.3 | % | 297 | 0.3 | % | 655 | 0.6 | % | |||||||||||||||||||||||||
| Total loans | 246,033 | 100.0 | % | 212,959 | 100.0 | % | 174,007 | 100.0 | % | 113,070 | 100.0 | % | 106,947 | 100.0 | % | |||||||||||||||||||||||||
| Allowance for loan losses | (823 | ) | (1,089 | ) | (1,489 | ) | (2,110 | ) | (2,285 | ) | ||||||||||||||||||||||||||||||
| Total loans, net of allowance for loan losses | $ | 245,210 | $ | 211,870 | $ | 172,518 | $ | 110,960 | $ | 104,662 | ||||||||||||||||||||||||||||||
The largest component of the loan portfolio is comprised of investment commercial real estate loans and owner occupied commercial real estate loans. At December 31, 2015, commercial real estate loans totaled $105.9 million or 43.1% of the total portfolio. Guaranteed student loans totaled $53.8 million, commercial and industrial loans, totaled $34.8 million and consumer loans, which were comprised principally of residential mortgage, home equity loans and private student loan refinancings, totaled $51.5 million.
At December 31, 2015, single family residential mortgage loans totaled $18.1 million while home equity lines totaled $10.6 million. Residential real estate loans consisted of first and second mortgages on single or multi-family residential dwellings. Private student loan refinancings totaled 21.6 million at the end of 2015. Our loan portfolio also includes consumer lines of credit and installment loans. At December 31, 2015, those consumer loans totaled $1.1 million and represented 0.5% of the total loan portfolio.
| 25 |
The repayment of maturing loans in the loan portfolio is also a source of liquidity for Cordia. The following tables set forth our loans maturing within specified intervals after the dates indicated. These tables were prepared based on the contractually outstanding balance and the contractual maturity date. These balances differ from the general ledger balances because of certain acquisition accounting adjustments.
Loan Maturity Schedule
At December 31, 2015
| (dollars in thousands) | Within One Year | Over One Year Within Five Years | Over Five Years | Total | ||||||||||||
| Commercial Real Estate: | ||||||||||||||||
| Acquisition, development and construction | $ | 652 | $ | 1,116 | $ | 400 | $ | 2,168 | ||||||||
| Other Commercial Real Estate | 6,273 | 40,028 | 11,746 | 58,047 | ||||||||||||
| Owner occupied | 2,970 | 33,476 | 9,244 | 45,690 | ||||||||||||
| Commercial and industrial | 9,995 | 20,216 | 4,608 | 34,819 | ||||||||||||
| Guaranteed student loans | 56 | 1,419 | 52,372 | 53,847 | ||||||||||||
| Consumer | 5,886 | 15,832 | 29,791 | 51,509 | ||||||||||||
| Totals | $ | 25,832 | $ | 112,087 | $ | 108,161 | $ | 246,080 | ||||||||
| Loans maturing after one year with: | ||||||||||||||||
| Fixed interest rates | $ | 128,804 | ||||||||||||||
| Floating interest rates | 91,444 | |||||||||||||||
| Total | $ | 220,248 | ||||||||||||||
The information presented in the above table is based on the contractual maturities of the individual loans, including loans which may be subject to renewal at their maturities. Renewal of such loans is subject to review and credit approval as well as modification of terms. Consequently, we believe the treatment in the above table presents fairly the maturity and repricing structure of the loan portfolio as shown in the above table.
Allowance for Loan Losses
At December 31, 2015, our allowance for loan losses (“ALLL”) was $823 thousand, or 0.33% of total loans outstanding and 44.9% of non-performing loans. ALLL was 0.45% of total loans outstanding less guaranteed student loans, purchased credit impaired loans and purchased portfolio. At December 31, 2014, our ALLL was $1.1 million, or 0.51% of total loans outstanding and 49.0% of non-performing loans. ALLL was 0.81% of total loans outstanding less guaranteed student loans, purchased credit impaired loans and purchased portfolio. The reduction in the ALLL reflects our emphasis on highly accurate risk rating processes, early detection of problem loans, accurate assessment of the extent of losses, declining historical loss experience and aggressive management of problem loans through restructures, refinancing to other institutions, or other means of mitigating potential losses.
Management has developed policies and procedures for evaluating the overall quality of the loan portfolio, the timely identification of potential problem credits and impaired loans and the establishment of an appropriate ALLL. The acquired loan portfolio was originally recorded at fair value, which includes a credit mark-to-market, based on the acquisition method of accounting. Loans renewed (performing loans acquired) or originated since the date of our initial investment are evaluated and an appropriate ALLL is established. Any worsening of acquired impaired loans since the date of Cordia’s investment in BVA is evaluated for further impairment. Additional impairment on acquired impaired loans is recorded through the provision for loan losses. Any improvement in cash flows of acquired impaired loans is amortized as a yield adjustment over the remaining life of the loans. A fuller explanation may be found in the table under the caption “Loans With Deteriorated Credit Quality” regarding accretable and nonaccretable discount. Loan losses are charged against the allowance when management believes the uncollectability of a loan is confirmed, which decreases the balance of the allowance. Subsequent recoveries, if any, are credited back to the ALLL.
The ALLL consists of a specific component allocated to impaired loans and a general component allocated to the aggregate of all unimpaired loans. The amount of the ALLL is established through the application of a standardized model, the components of which are: an impairment analysis of identified loans to determine the level of any specific reserves needed on impaired loans, and a broad analysis of historical loss experience, economic factors and portfolio-related environmental factors to determine the level of general reserves needed. The model inputs include an evaluation of historical charge-offs, the current trends in delinquencies, and adverse credit migration and trends in the size and composition of the loan portfolio, including concentrations in higher risk loan types. Results from regulatory exams are also reflected in these assessments.
| 26 |
The ALLL is evaluated quarterly by management and is based upon management’s periodic review of the collectability of the loans in light of historical experience, the nature and volume of the loan portfolio, adverse situations that may affect the specific borrowers’ ability to repay, estimated value of any underlying collateral and prevailing economic conditions. This evaluation is inherently subjective as it requires estimates that are susceptible to significant revision as more information becomes available. The use of various estimates and judgments in our ongoing evaluation of the required level of allowance can significantly affect our results of operations and financial condition and may result in either greater provisions to increase the allowance or reduced provisions based upon management’s current view of portfolio and economic conditions and the application of revised estimates and assumptions. The ALLL consists of specific and general components. The specific component relates to loans that are classified as substandard or worse. For such loans that are also classified as impaired, a specific allowance is established. The general component covers loans graded special mention or better and is based on an analysis of historical loss experience, national and local economic factors, and environmental factors specific to the loan portfolio composition.
Changes affecting the ALLL are summarized in the following table.
| For the years ended December 31, (dollars in thousands) | 2015 | 2014 | 2013 | 2012 | 2011 | |||||||||||||||
| Allowance for loan losses at beginning of period | $ | 1,089 | $ | 1,489 | $ | 2,110 | $ | 2,285 | $ | 50 | ||||||||||
| Provision for loan losses | (293 | ) | 305 | 19 | 588 | 2,763 | ||||||||||||||
| Charge-offs: | ||||||||||||||||||||
| Commercial real estate | (127 | ) | (120 | ) | (289 | ) | (635 | ) | (528 | ) | ||||||||||
| Commercial and industrial | (109 | ) | (485 | ) | - | (286 | ) | - | ||||||||||||
| Guaranteed Student Loans | (331 | ) | (359 | ) | (94 | ) | - | - | ||||||||||||
| Consumer | (22 | ) | - | (403 | ) | (223 | ) | - | ||||||||||||
| Total charge-offs | (589 | ) | (964 | ) | (786 | ) | (1,144 | ) | (528 | ) | ||||||||||
| Recoveries: | ||||||||||||||||||||
| Commercial real estate | 241 | 139 | - | 346 | - | |||||||||||||||
| Commercial and industrial | 361 | 91 | 135 | 16 | - | |||||||||||||||
| Guaranteed Student Loans | - | - | - | - | - | |||||||||||||||
| Consumer | 14 | 29 | 11 | 19 | - | |||||||||||||||
| Total recoveries (charge-offs) | 616 | 259 | 146 | 381 | - | |||||||||||||||
| Net charge-offs | 27 | (705 | ) | (640 | ) | (763 | ) | (528 | ) | |||||||||||
| Allowance for loan losses at end of period | $ | 823 | $ | 1,089 | $ | 1,489 | $ | 2,110 | $ | 2,285 | ||||||||||
| Allowance for loan losses to non-performing loans | 44.9 | % | 49.03 | % | 37.80 | % | 36.80 | % | 28.70 | % | ||||||||||
| Allowance for loan losses to total loans outstanding at end of period | 0.33 | % | 0.51 | % | 0.86 | % | 1.87 | % | 2.14 | % | ||||||||||
| Net recoveries (charge-offs) to average loans during the period | 0.01 | % | -0.36 | % | -0.38 | % | -0.70 | % | -0.43 | % | ||||||||||
| Allowance for loan losses to total loans less guaranteed student loans, purchased credit impaired loans and purchased portfolio end of period | 0.45 | % | 0.81 | % | 1.57 | % | 2.18 | % | 2.72 | % | ||||||||||
| 27 |
Included in the above table is the activity related to the portion of ALLL for loans acquired with deteriorated credit quality. Because of the nature and limited number of these loans, they are individually evaluated for additional impairment on a quarterly basis. Activity related only to that portion of the ALLL is as follows:
| Years ended December 31, (dollars in thousands) | 2015 | 2014 | 2013 | 2012 | 2011 | |||||||||||||||
| Allowance for loan losses at beginning of period | $ | 90 | $ | 234 | $ | 537 | $ | 387 | $ | 910 | ||||||||||
| (Recovery of) provision for loan losses | (438 | ) | (7 | ) | (14 | ) | 406 | - | ||||||||||||
| Charge-offs: | ||||||||||||||||||||
| Commercial real estate | (127 | ) | (120 | ) | (289 | ) | (229 | ) | (523 | ) | ||||||||||
| Commercial and industrial | - | (17 | ) | - | - | - | ||||||||||||||
| Consumer | - | - | - | (27 | ) | - | ||||||||||||||
| Total charge-offs | (127 | ) | (137 | ) | (289 | ) | (256 | ) | (523 | ) | ||||||||||
| Recoveries: | ||||||||||||||||||||
| Commercial real estate | 232 | - | - | - | - | |||||||||||||||
| Commercial and industrial | 243 | - | - | - | - | |||||||||||||||
| Consumer | - | - | - | - | - | |||||||||||||||
| Total recoveries | 475 | - | - | - | - | |||||||||||||||
| Net charge-offs | 348 | (137 | ) | (289 | ) | (256 | ) | (523 | ) | |||||||||||
| Allowance for loan losses at end of period | $ | - | $ | 90 | $ | 234 | $ | 537 | $ | 387 | ||||||||||
The table below provides the breakout of the allowance for loan losses by portfolio class.
| At December 31, 2015 | At December 31, 2014 | At December 31, 2013 | At December 31, 2012 | At December 31, 2011 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
(dollars in thousands) | Amount | % of Allowance to total allowance | % of Loans in category to total loans | Amount | % of Allowance to total allowance | % of Loans in category to total loans | Amount | % of Allowance to total allowance | % of Loans in category to total loans | Amount | % of Allowance to total allowance | % of Loans in category to total loans | Amount | % of Allowance to total allowance | % of Loans in category to total loans | |||||||||||||||||||||||||||||||||||||||||||||
| Commercial real estate | $ | 328 | 40 | % | 43 | % | $ | 392 | 36 | % | 49 | % | $ | 661 | 45 | % | 48 | % | $ | 810 | 38 | % | 65 | % | $ | 1,016 | 44 | % | 64 | % | ||||||||||||||||||||||||||||||
| Commercial and industrial | 112 | 13 | % | 14 | % | 357 | 33 | % | 11 | % | 377 | 25 | % | 12 | % | 782 | 37 | % | 21 | % | 685 | 30 | % | 18 | % | |||||||||||||||||||||||||||||||||||
| Guaranteed Student Loans | 47 | 6 | % | 22 | % | 144 | 13 | % | 30 | % | 268 | 18 | % | 32 | % | - | - | - | - | - | - | |||||||||||||||||||||||||||||||||||||||
| Consumer | 336 | 41 | % | 21 | % | 196 | 18 | % | 10 | % | 183 | 12 | % | 8 | % | 518 | 25 | % | 14 | % | 584 | 26 | % | 18 | % | |||||||||||||||||||||||||||||||||||
| Total allowance for loan losses | $ | 823 | 100 | % | 100 | % | $ | 1,089 | 100 | % | 100 | % | $ | 1,489 | 100 | % | 100 | % | $ | 2,110 | 100 | % | 100 | % | $ | 2,285 | 100 | % | 100 | % | ||||||||||||||||||||||||||||||
Asset Quality
Risk Rating Process
On a quarterly basis, the process of estimating the allowance for loan losses begins with review of the risk rating assigned to individual loans. Through this process, loans graded substandard or worse are evaluated for impairment in accordance with ASC Topic 310 “Accounting by Creditors for Impairment of a Loan.” Refer to Note 4 of the Notes to the Consolidated Financial Statements for more detail.
| 28 |
The following is the distribution of loans by credit quality and class as of:
| December 31, 2015 (dollars in thousands) | Commercial Real Estate | Consumer | ||||||||||||||||||||||||||||||||||
| Credit quality class | Acq-Dev Construction | Non-owner Occupied | Owner Occupied | Commercial and Industrial | Guaranteed Student Loans | Residential Mortgage | HELOC | Other | Total | |||||||||||||||||||||||||||
| 1 Highest quality | $ | - | $ | - | $ | - | $ | - | $ | - | $ | - | $ | - | $ | - | $ | - | ||||||||||||||||||
| 2 Above average quality | - | 7,772 | 3,285 | 1,876 | 53,847 | - | 1,063 | 396 | 68,239 | |||||||||||||||||||||||||||
| 3 Satisfactory | 989 | 27,397 | 20,355 | 26,289 | - | 11,959 | 5,893 | 22,258 | 115,140 | |||||||||||||||||||||||||||
| 4 Pass | 472 | 19,988 | 19,550 | 6,102 | - | 5,976 | 2,779 | 68 | 54,935 | |||||||||||||||||||||||||||
| 5 Special mention | - | 1,510 | - | 547 | - | 27 | 269 | - | 2,353 | |||||||||||||||||||||||||||
| 6 Substandard | 152 | - | 151 | 5 | - | 41 | 239 | - | 588 | |||||||||||||||||||||||||||
| 7 Doubtful | - | - | - | - | - | - | - | - | - | |||||||||||||||||||||||||||
| 1,613 | 56,667 | 43,341 | 34,819 | 53,847 | 18,003 | 10,243 | 22,722 | 241,255 | ||||||||||||||||||||||||||||
| Loans acquired with deteriorating credit quality | 555 | 1,377 | 2,349 | - | - | 137 | 360 | - | 4,778 | |||||||||||||||||||||||||||
| Total loans | $ | 2,168 | $ | 58,044 | $ | 45,690 | $ | 34,819 | $ | 53,847 | $ | 18,140 | $ | 10,603 | $ | 22,722 | $ | 246,033 | ||||||||||||||||||
| December 31, 2014 (dollars in thousands) | Commercial Real Estate | Consumer | ||||||||||||||||||||||||||||||||||
| Credit quality class | Acq-Dev Construction | Non-owner Occupied | Owner Occupied | Commercial and Industrial | Guaranteed Student Loans | Residential Mortgage | HELOC | Other | Total | |||||||||||||||||||||||||||
| 1 Highest quality | $ | - | $ | - | $ | - | $ | - | $ | - | $ | - | $ | - | $ | - | $ | - | ||||||||||||||||||
| 2 Above average quality | - | 2,225 | 2,788 | 2,498 | 64,870 | 24 | 1,394 | 719 | 74,518 | |||||||||||||||||||||||||||
| 3 Satisfactory | 458 | 30,473 | 26,608 | 14,883 | - | 3,325 | 6,140 | 425 | 82,312 | |||||||||||||||||||||||||||
| 4 Pass | 476 | 17,236 | 16,986 | 5,593 | - | 4,768 | 2,589 | 88 | 47,736 | |||||||||||||||||||||||||||
| 5 Special mention | - | 123 | - | 68 | - | 75 | 319 | - | 585 | |||||||||||||||||||||||||||
| 6 Substandard | 267 | - | - | 142 | - | - | 268 | - | 677 | |||||||||||||||||||||||||||
| 7 Doubtful | - | - | - | - | - | - | - | - | - | |||||||||||||||||||||||||||
| 1,201 | 50,057 | 46,382 | 23,184 | 64,870 | 8,192 | 10,710 | 1,232 | 205,828 | ||||||||||||||||||||||||||||
| Loans acquired with deteriorating credit quality | 958 | 1,455 | 3,200 | 969 | - | 185 | 364 | - | 7,131 | |||||||||||||||||||||||||||
| Total loans | $ | 2,159 | $ | 51,512 | $ | 49,582 | $ | 24,153 | $ | 64,870 | $ | 8,377 | $ | 11,074 | $ | 1,232 | $ | 212,959 | ||||||||||||||||||
As shown in the tables above, substandard and worse loans were $588 thousand at December 31, 2015, or 0.2% of the total loan portfolio. This compares to $677 thousand or 0.3% at December 31, 2014. Special mention loans increased $1.8 million from $585 thousand at December 31, 2014 to $2.4 million at December 31, 2015 and loans graded “pass” or better increased $33.7 million to $238.3 million at December 31, 2015 as compared to $204.6 million at December 31, 2014. Loans acquired by Cordia in December 2010 with deteriorating credit quality have declined $2.4 million from $7.1 million at December 31, 2014 to $4.8 million at December 31, 2015. The majority of these loans are now pass rated performing credits.
The Bank has continued to employ a third party loan review firm for annual reviews and periodic special assignments. The most recent review was completed in May 2015, with another review scheduled during the second quarter of 2016. The scope of the 2015 loan file review totaled approximately 75% of the Bank’s exposure and included the following:
| ● | All classified loans or total relationship exposure over $250,000; |
| ● | All special mention loans or total relationship exposures over $500,000; |
| ● | A random sample of pass-rated loans determined by the loan review firm under $500,000; |
| ● | All loans past due as of the review date; |
| ● | All OREO properties; |
| ● | All insider loans, including loans to directors, significant shareholders, and executive management granted since the last review; |
| ● | Any loans that management or the board of directors requested be reviewed; |
| ● | Annual review of the allowance for loan and lease loss reserve and methodology. |
| 29 |
Nonperforming Assets
The past due status of a loan is based on the contractual due date of the most delinquent payment due. Loans, including impaired loans, are generally classified as nonaccrual if they are past due as to maturity or payment of principal or interest for a period of more than 90 days, unless such loans are well-secured and in the process of collection. Loans greater than 90 days past due may remain on an accrual status if management determines it has adequate collateral and cash flow to cover the principal and interest or the borrower is in the process of refinancing. If a loan or a portion of a loan that is delinquent more than 90 days is adversely classified, or is partially charged off, the loan is generally classified as nonaccrual. Additionally, whenever management becomes aware of facts or circumstances that may adversely impact the full collectability of principal and interest of a loan, it is placed on nonaccrual status immediately, rather than delaying such action until the loans become 90 days past due.
Government Guaranteed Student loans with a past due balance greater than 90 days are not placed on non-accrual and are not included in the balance of non-performing assets. When a loan reaches 120 days past due, the non-guaranteed portion of the loan is charged-off. A claim is filed with the guarantor when the loan becomes 270 days past due. Interest continues to accrue until charge-off. The guarantor’s payment covers approximately 98% of principal and accrued interest.
When a loan is placed on nonaccrual status, previously accrued and uncollected interest is reversed, and the amortization of related deferred loan fees or costs is suspended. While a loan is classified as nonaccrual and the future collectability of the recorded loan balance is doubtful, collections of interest and principal are generally applied as a reduction to principal outstanding. When the future collectability of the recorded loan balance is expected, interest income may be recognized on a cash basis. In the case where a nonaccrual loan has been partially charged off, recognition of interest on a cash basis is limited to that which would have been recognized on the recorded loan balance at the contractual interest rate. Cash interest receipts in excess of that amount are recorded as recoveries to the allowance for loan losses until prior charge-offs have been fully recovered.
Loans placed on non-accrual status generally may be returned to accrual status after:
| · | payments are received for approximately six (6) consecutive months in accordance with the loan documents, and any doubt as to the loan's full collectability has been removed; or |
| · | the loan is restructured and supported by a well-documented credit evaluation of the borrower's financial condition and the prospects for full payment. |
When a restructured loan is returned to accrual status after restructuring, the risk rating remains unchanged until a satisfactory payment history is re-established, typically for approximately six months, at which time it is returned to accrual status.
Nonperforming assets totaled $3.7 million, or 1.1% of total assets, at December 31, 2015 and are comprised of non-accrual loans of $1.8 million and real estate owned of $1.9 million. The balance of nonperforming assets at December 31, 2014 was $3.9 million or 1.2% of total assets. The decrease in nonperforming loans at December 31, 2015 from December 31, 2014 was a result of management’s workout and resolution of problem loans coupled with growth in total assets.
Real estate acquired through, or in lieu of, foreclosure is held for sale and is stated at the estimated fair market value of the property, less estimated disposal costs. Any excess of the principal over the estimated fair market value at the time of acquisition is charged to the allowance for loan losses. The estimated fair market value is reviewed periodically by management and any write-downs are charged against current earnings. Development and improvement costs relating to property are capitalized unless such added costs cause the properties recorded value to exceed the estimated fair market value. Net operating income or expenses of such properties are included in collection, repossession and other real estate owned expenses.
| 30 |
A summary of nonperforming assets, including troubled debt restructurings, as of the dates indicated follows:
| Years ended December 31, | ||||||||||||||||||||
| (dollars in thousands) | 2015 | 2014 | 2013 | 2012 | 2011 | |||||||||||||||
| Non-accrual troubled debt restructurings | $ | - | $ | - | $ | 119 | $ | - | $ | 446 | ||||||||||
| Other non-accrual loans | 1,834 | 2,221 | 3,815 | 5,471 | 7,503 | |||||||||||||||
| Total non-accrual loans | 1,834 | 2,221 | 3,934 | 5,471 | 7,949 | |||||||||||||||
| Real estate owned | 1,870 | 1,641 | 1,545 | 1,768 | 1,262 | |||||||||||||||
| Total non-performing assets | $ | 3,704 | $ | 3,862 | $ | 5,479 | $ | 7,239 | $ | 9,211 | ||||||||||
| Total non-accrual loans to total loans | 0.75 | % | 1.04 | % | 2.26 | % | 4.84 | % | 7.43 | % | ||||||||||
| Total non-accrual loans to total assets | 0.53 | % | 0.70 | % | 1.67 | % | 3.06 | % | 4.80 | % | ||||||||||
| Total non-performing assets to total assets | 1.06 | % | 1.21 | % | 2.33 | % | 4.05 | % | 5.56 | % | ||||||||||
| Accruing troubled debt restructurings | $ | - | $ | 1,260 | $ | 1,837 | $ | 2,060 | $ | 2,530 | ||||||||||
| Total loans | $ | 246,033 | $ | 212,959 | $ | 174,007 | $ | 113,070 | $ | 106,947 | ||||||||||
| Total assets | $ | 348,490 | $ | 318,600 | $ | 235,148 | $ | 178,696 | $ | 165,551 | ||||||||||
Loans With Deteriorated Credit Quality
In connection with Cordia’s acquisition of BVA certain loans were acquired which showed evidence of deterioration in credit quality. These loans are accounted for under the guidance of ASC 310-30. Information related to these loans as of the dates indicated is provided in the following table.
| At December 31, (dollars in thousands) | 2015 | 2014 | ||||||
| Contract principal balance | $ | 4,779 | $ | 7,178 | ||||
| Accretable yield | (1 | ) | (42 | ) | ||||
| Nonaccretable difference | - | (5 | ) | |||||
| Book value of loans | $ | 4,778 | $ | 7,131 | ||||
Investment Securities
Our investment portfolio consists of U.S. agency debt and agency guaranteed mortgage-backed securities. Our investment security portfolio includes securities classified as available for sale as well as securities classified as held to maturity. The total securities portfolio (excluding restricted securities) was $71.7 million at December 31, 2015 as compared to $74.2 million at December 31, 2014. At December 31, 2015, the securities portfolio consisted of $46.2 million of securities available for sale and $25.5 million of securities held to maturity.
Amortized cost and fair values of securities available for sale are as follows:
| Years end December 31, | ||||||||||||||||||||||||
| 2015 | 2014 | 2013 | ||||||||||||||||||||||
| (dollars in thousands) | Amortized Cost | Fair Value | Amortized Cost | Fair Value | Amortized Cost | Fair Value | ||||||||||||||||||
| U.S. Government agencies | $ | 2,144 | $ | 2,139 | $ | 3,735 | $ | 3,719 | $ | 7,038 | $ | 7,041 | ||||||||||||
| Agency guaranteed mortgage-backed securities | 44,529 | 44,081 | 49,930 | 49,764 | 17,578 | 17,526 | ||||||||||||||||||
| Total | $ | 46,673 | $ | 46,220 | $ | 53,665 | $ | 53,483 | $ | 24,616 | $ | 24,567 | ||||||||||||
| 31 |
Carrying value and fair value of securities held to maturity are as follows:
| Years end December 31, | ||||||||||||||||||||||||
| 2015 | 2014 | 2013 | ||||||||||||||||||||||
| (dollars in thousands) | Carry Value | Fair Value | Carry Value | Fair Value | Carry Value | Fair Value | ||||||||||||||||||
| Agency guaranteed mortgage-backed securities | $ | 25,500 | $ | 25,694 | $ | 20,716 | $ | 21,047 | $ | 14,753 | $ | 14,597 | ||||||||||||
| Total | $ | 25,500 | $ | 25,694 | $ | 20,716 | $ | 21,047 | $ | 14,753 | $ | 14,597 | ||||||||||||
The portfolio is available to support liquidity needs of BVA as well as to serve as a source of interest income. During 2015, the Company sold $19.8 million of available for sale securities and recognized a gain of $133 thousand in noninterest income. During 2014, the Company sold $23.4 million of available for sale securities and recognized a gain of $177 thousand in noninterest income.
As of December 31, 2015, we had gross unrealized losses of $461 thousand and $36 thousand on our available for sale and held to maturity securities portfolios, respectively. As of December 31, 2015, we had $68 thousand of unrealized losses greater than 12 months on our available for sale portfolio and had no material unrealized losses greater than 12 months on our held to maturity portfolio. All of the unrealized losses are attributable to increases in interest rates and not to credit deterioration. Currently, we do not believe that it is probable that we will be unable to collect all amounts due according to the contractual terms of the investments. Because the decline in market value is attributable to changes in interest rates and not to credit quality and because it is not likely we will be required to sell the investments before recovery of their amortized cost bases, we do not consider these investments to be other-than-temporarily impaired at December 31, 2015. See Note 3. Securities for more information on unrealized losses on the securities portfolio.
The following tables set forth the scheduled maturities and average yields of securities available for sale at December 31, 2015.
After one year within five years | After five years within ten years | After ten years | ||||||||||||||||||||||||||
| (dollars in thousands) | Amount | Yield | Amount | Yield | Amount | Yield | Total | |||||||||||||||||||||
| U.S. Government agencies | $ | - | - | $ | 2,139 | 1.51 | % | $ | - | - | $ | 2,139 | ||||||||||||||||
| Agency guaranteed mortgage-backed securities | 43 | 2.02 | % | - | - | 44,038 | 1.95 | % | 44,081 | |||||||||||||||||||
| Total | $ | 43 | 2.02 | % | $ | 2,139 | 1.51 | % | $ | 44,038 | 1.95 | % | $ | 46,220 | ||||||||||||||
The following tables set forth the scheduled maturities and average yields of securities held to maturity at December 31, 2014.
After one year within five years | After five years within ten years | After ten years | ||||||||||||||||||||||||||
| (dollars in thousands) | Amount | Yield | Amount | Yield | Amount | Yield | Total | |||||||||||||||||||||
| U.S. Government agencies | $ | - | - | $ | - | - | $ | 2,689 | 1.47 | % | $ | 2,689 | ||||||||||||||||
| Agency guaranteed mortgage-backed securities | 1,030 | 1.15 | % | 335 | 1.38 | % | 49,429 | 1.99 | % | 50,794 | ||||||||||||||||||
| Total | $ | 1,030 | 1.15 | % | $ | 335 | 1.38 | % | $ | 52,118 | 1.96 | % | $ | 53,483 | ||||||||||||||
Deposits and Other Interest-Bearing Liabilities
At December 31, 2015, total deposits were $290.0 million, compared to $265.6 million at December 31, 2014. Core deposits, which by FDIC guidelines exclude certificates of deposit of $250,000 or more and insured brokered deposits, provide a relatively stable funding source for our loan portfolio and other earning assets. Our core deposits were $201.8 million at December 31, 2015, or 69.6% of total deposits, compared to $199.0 million at December 31, 2014, or 74.9% of total deposits. Deposits, including core deposits, have been the primary source of funding and have enabled us to successfully meet both our short-term and long-term liquidity needs. The primary driver of growth was in transaction accounts which increased $4.0 million, or 9%, while money market and savings deposits increased $17.9 million. In addition, during the year ended December 31, 2015, time deposits increased by $2.5 million. Our loan-to-deposit ratio was 84.8% at December 31, 2015 and 80.2% at December 31, 2014.
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The following table sets forth our deposits by category at the dates indicated.
| At December 31, | ||||||||||||||||||||||||
| 2015 | 2014 | 2013 | ||||||||||||||||||||||
| (dollars in thousands) | Amount | Percent | Amount | Percent | Amount | Percent | ||||||||||||||||||
| Non-interest bearing demand accounts | $ | 28,969 | 11 | % | $ | 29,795 | 11 | % | $ | 22,044 | 11 | % | ||||||||||||
| NOW accounts | 19,012 | 7 | % | 14,154 | 6 | % | 13,880 | 6 | % | |||||||||||||||
| Savings and money market accounts | 88,045 | 30 | % | 70,104 | 26 | % | 48,062 | 23 | % | |||||||||||||||
| Time deposits - less than $100,000 | 48,032 | 16 | % | 49,552 | 19 | % | 50,957 | 24 | % | |||||||||||||||
| Time deposits - $100,000 or more | 105,986 | 36 | % | 101,998 | 38 | % | 75,871 | 36 | % | |||||||||||||||
| Total | $ | 290,044 | 100 | % | $ | 265,603 | 100 | % | $ | 210,814 | 100 | % | ||||||||||||
At December 31, 2015, 55.3% of our time deposits over $100,000 had maturities within twelve months. Large certificate of deposit customers tend to be more sensitive to interest rate levels, making these deposits less reliable sources of funding for liquidity planning purposes in comparison to core deposits.
The maturity distribution of our time deposits of $100,000 or more and other time deposits at December 31, 2015, is set forth in the following table:
| (dollars in thousands) | Time Deposits less than $100,000 | Time Deposits $100,000 or more | Total | |||||||||
| Months to maturity: | ||||||||||||
| Three months or less | $ | 7,863 | $ | 26,258 | $ | 34,121 | ||||||
| Over three months to twelve months | 15,237 | 32,341 | 47,578 | |||||||||
| Over twelve months to three years | 17,770 | 35,549 | 53,319 | |||||||||
| Over three years | 7,162 | 11,838 | 19,000 | |||||||||
| Total | $ | 48,032 | $ | 105,986 | $ | 154,018 | ||||||
Management monitors maturity trends in time deposits as part of its overall asset liability management and retail pricing strategies.
Liquidity and Capital Resources
Liquidity
Liquidity management involves monitoring our sources and uses of funds in order to meet our short-term and long-term cash flow requirements while optimizing profits. Liquidity represents an institution’s ability to meet present and future financial obligations, including through the sale of existing assets or the acquisition of additional funds through short-term borrowings. BVA’s primary access to liquidity comes from several sources: operating cash flows from payments received on loans and mortgage-backed securities, increased deposits, and cash reserves. BVA’s secondary sources of liquidity are Federal Funds sold, unpledged securities available for sale, and borrowings from correspondent banks, the FHLB and the Federal Reserve Bank Discount Window. Liquidity strategies are implemented and monitored by the Asset/Liability Committee (“ALCO”) of our BVA Board of Directors.
BVA’s deposit base grew by 9.2% from $265.6 million at December 31, 2014 to $290.0 million at December 31, 2015. The growth in deposits was primarily driven by growth in savings and money market accounts and time deposits in excess of $100,000. Savings and money market accounts grew 25.6% from $70.1 million at December 31, 2014 to $88.0 million at December 31, 2015. Time deposits in excess of $100,000 grew 3.9% from $102.0 million at December 31, 2014 to $106.0 million at December 31, 2015. As BVA looks to implement other loan growth initiatives, it has developed several funding strategies, including judicious use of brokered and direct certificates of deposits, to augment core deposit growth and further reduce the cost of funds. Development of several sources of funding beyond core deposit growth ensures maximum liquidity access without dependence on higher cost sources of funds.
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BVA maintains an investment portfolio of available for sale marketable securities that may be used for liquidity purposes by either pledging them through repurchase transactions against borrowings from the FHLB or a correspondent bank or by selling them on the open market. Those securities consist primarily of U.S. Government agency debt securities. To the extent any securities are pledged against borrowing from one credit facility, the borrowing ability of other secured borrowing facilities would be reduced by a like amount.
Borrowings
As of December 31, 2015, BVA had a total of $22.5 million committed repurchase lines with correspondent banks through which borrowings could be made against the pledge of marketable securities subject to mark-to-market valuations and standard collateral borrowing ratios. These lines were unused during 2014 and 2015 and remain fully available. BVA also maintains a $4.5 million unsecured lines of credit with other correspondent banks that were available for direct borrowings or Federal Funds purchased.
BVA is a member of the Federal Home Loan Bank of Atlanta (FHLB), which provides access to additional lines of credit and other products offered by the FHLB. These borrowings are largely secured by BVA’s loan portfolio. The FHLB maintains a blanket security agreement on qualifying collateral. As of December 31, 2015 and 2014, BVA had $30.0 million and $25.0 million, respectively, in secured borrowings outstanding with the FHLB Atlanta against pledged eligible mortgage loan collateral and investment securities, at a stated average interest rate of 1.24% and 1.25%, respectively. As of December 31, 2015, BVA had a total credit availability of $39.7 million at the FHLB which could be accessed through pledging a combination of eligible mortgage loan collateral and investment securities. The FHLB offers a variety of floating and fixed rate loans at terms ranging from overnight to 20 years; therefore, BVA can match borrowings mitigating interest rate risk.
Liquidity Contingency Plan
Historically BVA has maintained both a retail branch-based and an asset-based liquidity strategy and has not depended materially on brokered deposits or utilized securitization as sources of liquidity. BVA strives to follow regulatory guidance in the management of liquidity risk and has established a Board-approved Contingency Funding Plan (CFP) that prescribes liquidity risk limits and guidelines and includes pro forma cash flow analyses of BVA’s sources and uses of funds under various liquidity scenarios. BVA’s CFP includes funding alternatives that can be implemented if access to normal funding sources is reduced.
We are not aware of any trends, events or uncertainties that are reasonably likely to have a material adverse effect on our short term or long term liquidity. Based on the current and expected liquidity needs, including any liquidity needs associated with loan growth or generated by off-balance sheet transactions such as commitments to extend credit, commitments to purchase securities and standby letters of credit, we expect to be able to meet our obligations for the next twelve months.
Capital
BVA is subject to various regulatory capital requirements administered by the federal and state banking agencies. Failure to meet minimum capital requirements can trigger certain mandatory and possibly additional discretionary actions by regulators that, if undertaken, could have a material effect on our financial statements. Under the regulatory capital adequacy guidelines BVA must meet specific capital guidelines that are based on quantitative measures of assets, liabilities, and certain off-balance-sheet items as calculated under regulatory accounting practices. Our capital amounts and classifications are also subject to qualitative judgments by the regulators.
Quantitative measures established by regulation to ensure capital adequacy require financial institutions to maintain minimum amounts and ratios (set forth in the table below) of total and Tier 1 capital (as defined in the regulations) to risk-weighted assets (as defined), and of Tier 1 capital (as defined) to average assets (as defined). At December 31, 2015 and 2014, BVA met all capital adequacy requirements to which it was subject. BVA is also required to maintain capital at a minimum level as a proportion of quarterly average assets, which is known as the leverage ratio. The minimum levels to be considered well-capitalized are 5% for tier 1 leverage ratio, 6.5% for common equity tier 1 capital ratio, 8% for tier 1 risk-based capital ratio, and 10% for total risk-based capital ratio.
| 34 |
| Minumum Requirements | ||||||||||||||||
| At December 31, (dollars in thousands) | Well Capitalized | Adequately Capitalized | 2015 | 2014 | ||||||||||||
| Tier 1 capital | $ | 27,457 | $ | 25,985 | ||||||||||||
| Tier 2 capital | 823 | 1,089 | ||||||||||||||
| Total qualifying capital | $ | 28,280 | $ | 27,074 | ||||||||||||
| Total risk-adjusted assets | $ | 210,519 | $ | 174,476 | ||||||||||||
| Tier 1 leverage ratio | 5.0 | % | 4.0 | % | 7.82 | % | 8.24 | % | ||||||||
| Common equity tier 1 capital ratio | 6.5 | % | 4.5 | % | 13.04 | % | N/A | |||||||||
| Tier 1 risked-based capital ratio | 8.0 | % | 6.0 | % | 13.04 | % | 14.89 | % | ||||||||
| Total risk-based capital ratio | 10.0 | % | 8.0 | % | 13.43 | % | 15.52 | % | ||||||||
Cordia is considered a small bank holding company, based on its asset size under $1 billion. Accordingly it is exempt from Federal regulatory guidelines related to leverage ratios and risk-based capital.
Interest Rate Sensitivity
The pricing and maturity of assets and liabilities are monitored and managed in order to diminish the potential adverse impact that changes in rates could have on net interest income. The principal monitoring techniques employed by BVA are the Economic Value of Equity (“EVE”) and Net Interest Income or Earnings at Risk (“NII” or “EaR”). EVE and NII are cash flow and earnings simulation modeling techniques which predict likely economic outcomes given various interest rate scenarios.
Interest rate sensitivity can be managed by closely matching the interest rate repricing periods of assets or liabilities at the time they are acquired and by adjusting that match as the balance sheet grows or the mix of asset and liability characteristics or interest rates change. That adjustment can be accomplished by selling securities available for sale, replacing an asset or liability at maturity with those of different characteristics, or adjusting the interest rate during the life of an asset or liability. Managing the amount of different assets and liabilities that reprice in a given time interval may help to hedge the risk and minimize the impact on net interest income of rising or falling interest rates.
Application of a 200 basis point rate increase would result in a 2.6% increase in net interest income at December 31, 2015, as compared to a 11.1% increase at December 31, 2014. A 200 basis point rate increase would result in the depreciation of the Bank’s equity value by 9.2% at December 31, 2015 compared to a depreciation of 5.9% at December 31, 2014.
Off-Balance Sheet Risk/Commitments and Contingencies
Through our operations, we have made contractual commitments to extend credit in the ordinary course of our business activities. These commitments are legally binding agreements to lend money to our customers at predetermined interest rates for a specified period of time. At December 31, 2015, we had issued commitments to extend credit of $16.6 million through various types of commercial lending arrangements. The majority of these commitments to extend credit had variable rates.
We evaluate each customer’s credit worthiness for such commitments on a case-by-case basis in the same manner as for the approval of a direct loan. The amount of collateral obtained, if deemed necessary by us upon extension of credit, is based on our credit evaluation of the borrower. Collateral varies but may include accounts receivable, inventory, property, plant and equipment, commercial and residential real estate.
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Contractual obligations as of December 31, 2015 are summarized in the following table.
| Payments due by period | ||||||||||||||||||||
| (Dollars in thousands) | Within one year | After one year within three years | After three year | After five years | Total | |||||||||||||||
| Time deposits | $ | 81,699 | $ | 53,319 | $ | 19,000 | $ | - | $ | 154,018 | ||||||||||
| Operating lease obligations | 101 | 195 | 8 | - | 304 | |||||||||||||||
| Total | $ | 81,800 | $ | 53,514 | $ | 19,008 | $ | - | $ | 154,322 | ||||||||||
Critical Accounting Policies
Cordia’s financial statements are prepared in accordance with accounting principles generally accepted in the United States of America and conform to general practices within the banking industry. Cordia’s financial position and results of operations are affected by management’s application of accounting policies, including judgments made to arrive at the carrying value of assets and liabilities and amounts reported for revenues, expenses and related disclosures. Different assumptions in the application of these policies could result in material changes in our financial position and/or results of operations.
Estimates, assumptions, and judgments are necessary principally when assets and liabilities are required to be recorded at estimated fair value, when a decline in the value of an asset carried on the financial statements at fair value warrants an impairment write-down or valuation reserve to be established, or when an asset or liability needs to be recorded based upon the probability of occurrence of a future event. Carrying assets and liabilities at fair value inherently results in more financial statement volatility. The fair values and the information used to record valuation adjustments for certain assets and liabilities are either based on quoted market prices or provided by third party sources, when available. When third party information is not available, valuation adjustments are estimated in good faith by management primarily through the use of internal or third party modeling techniques and/or appraisal estimates.
Cordia’s accounting policies are fundamental to understanding Management’s Discussion and Analysis. The following is a summary of Cordia’s “critical accounting policies.” In addition, the disclosures presented in the Notes to the Consolidated Financial Statements and in this section provide information on how significant assets and liabilities are valued in the financial statements and how those values are determined.
Business Combinations
Cordia accounts for its business combinations under the acquisition method of accounting, a cost allocation process which requires the cost of an acquisition to be allocated to the individual assets acquired and liabilities assumed based on their estimated fair values. The acquisition method of accounting requires an acquirer to recognize the assets acquired and the liabilities assumed at the acquisition date measured at their fair values as of that date. To determine the fair values, Cordia relies on third party valuations, such as appraisals, or internal valuations based on discounted cash flow analyses or other valuation techniques.
Acquired Loans with Specific Credit-Related Deterioration.
Acquired loans with specific credit deterioration are accounted for by Cordia in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification 310-30. Certain acquired loans, those for which specific credit-related deterioration, since origination, is identified, are recorded at fair value reflecting the present value of the amounts expected to be collected. Income recognition on these loans is based on a reasonable expectation about the timing and amount of cash flows to be collected. Acquired loans deemed impaired and considered collateral dependent, with the timing of the sale of loan collateral indeterminate, remain on non-accrual status and have no accretable yield.
Allowance for Loan Losses
We monitor and maintain an allowance for loan losses (“ALLL”) to absorb losses inherent in the loan portfolio. We maintain policies and procedures that address the systems of controls over the following areas of maintenance of the ALLL: the systematic methodology used to determine the appropriate level of the ALLL to provide assurance they are maintained in accordance with accounting principles generally accepted in the United States of America; the accounting policies for loan charge-offs and recoveries; the assessment and measurement of impairment in the loan portfolio; and the loan grading system.
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We evaluate loans graded substandard or worse individually for impairment. These evaluations are based upon expected discounted cash flows or collateral values. If the evaluation shows that the loan’s expected discounted cash flows or underlying collateral is not sufficient to repay the loan as agreed in accordance with the terms of the loan, then a specific reserve is established for the amount of impairment, which represents the difference between the principal amount of the loan less the expected discounted cash flows or value of the underlying collateral, net of selling costs.
For loans without individual measures of impairment which are loans graded Special Mention or better, we make estimates of losses for pools of loans grouped by similar characteristics, including the type of loan as well as the assigned loan classification. A loss rate reflecting the expected loss inherent in a group of loans is derived based upon estimates of default rates for a given loan grade and the predominant collateral type for the group. The resulting estimate of losses for pools of loans is adjusted for relevant environmental factors and other conditions of the portfolio of loans, including: borrower and industry concentrations; levels and trends in delinquencies, charge-offs and recoveries; changes in underwriting standards and risk selection; level of experience, ability and depth of lending management; and national and local economic conditions.
The amount of estimated impairment for individually evaluated loans and pools of loans is added together for a total estimate of loan losses. This estimate of losses is compared to our ALLL as of the evaluation date and, if the estimate of losses is greater than the ALLL, an additional provision to the allowance would be made through a charge to the income statement. If the estimate of losses is less than the existing allowance, the degree to which the ALLL exceeds the estimate is evaluated to determine whether the ALLL falls outside a range of estimates. If the estimate of losses is below the range of reasonable estimates, the ALLL is reduced by way of a credit to the provision for loan losses. We recognize the inherent imprecision in estimates of losses due to various uncertainties and variability related to the factors used, and therefore a reasonable range around the estimate of losses is derived and used to ascertain whether the ALLL is materially overstated. If different assumptions or conditions were to prevail and it is determined that the ALLL is not adequate to absorb the new estimate of probable losses, an additional provision for loan losses would be made in future periods. These additional provisions may be material to the Financial Statements.
Impact of Inflation
Since the assets and liabilities of financial institutions such as BVA are primarily monetary in nature, interest rates have a more significant effect on BVA’s performance than do the effects of changes in the general rate of inflation and changes in prices of goods and services. In addition, interest rates do not necessarily move in the same direction or in the same magnitude as the prices of goods and services. As discussed previously, we seek to manage the relationships between interest sensitive assets and liabilities in order to protect against wide interest rate fluctuations, including those resulting from inflation.
| Item 7A. | Quantitative and Qualitative Disclosures about Market Risk |
The information required by this Item 7A is incorporated by reference to information appearing in the MD&A Section of this Annual Report on Form 10-K, more specifically in the sections entitled “Interest Rate Sensitivity” and “Liquidity Contingency Plan”.
| 37 |
| Item 8. | Financial Statements and Supplementary Data |
Cordia Bancorp
Consolidated Balance Sheets
(dollars in thousands, except per share data)
December 31, 2015 | December 31, 2014 | |||||||
| Assets | ||||||||
| Cash and due from banks | $ | 6,135 | $ | 5,477 | ||||
| Federal funds sold and interest-bearing deposits with banks | 12,325 | 16,363 | ||||||
| Total cash and cash equivalents | 18,460 | 21,840 | ||||||
| Securities available for sale, at fair market value | 46,220 | 53,483 | ||||||
| Securities held to maturity, at cost (fair value $25,694 and $21,047 at December 31, 2015 and 2014, respectively) | 25,500 | 20,716 | ||||||
| Restricted securities | 2,355 | 2,092 | ||||||
| Loan held for sale | 220 | - | ||||||
| Loans net of allowance for loan losses of $823 and $1,089 at December 31, 2015 and 2014, respectively | 245,210 | 211,870 | ||||||
| Premises and equipment, net | 5,980 | 4,432 | ||||||
| Accrued interest receivable | 2,085 | 2,040 | ||||||
| Other real estate owned, net of valuation allowance | 1,870 | 1,641 | ||||||
| Other assets | 590 | 486 | ||||||
| Total assets | $ | 348,490 | $ | 318,600 | ||||
| Liabilities and stockholders' equity | ||||||||
| Deposits | ||||||||
| Non-interest bearing | $ | 28,969 | $ | 29,795 | ||||
| Savings and interest-bearing demand | 107,057 | 84,258 | ||||||
| Time deposits | 154,018 | 151,550 | ||||||
| Total deposits | 290,044 | 265,603 | ||||||
| Accrued expenses and other liabilities | 707 | 861 | ||||||
| FHLB borrowings | 30,000 | 25,000 | ||||||
| Total liabilities | 320,751 | 291,464 | ||||||
| Commitments and contingencies | - | - | ||||||
| Stockholders' equity | ||||||||
| Preferred stock, 2,000 shares authorized, $0.01 par value, none issued and outstanding | - | - | ||||||
| Common stock: | ||||||||
| Common stock - 120,000,000 shares authorized, $0.01 par value, 5,186,349 and 5,103,669 shares were outstanding (includes 107,460 and 52,580 of nonvested shares of restricted stock) at December 31, 2015 and 2014, respectively | 51 | 51 | ||||||
| Nonvoting common stock - 5,000,000 shares authorized, $0.01 par value, 1,400,437 shares were outstanding at December 31, 2015 and 2014, respectively | 14 | 14 | ||||||
| Additional paid-in capital | 33,191 | 32,956 | ||||||
| Retained deficit | (4,827 | ) | (5,417 | ) | ||||
| Accumulated other comprehensive loss | (690 | ) | (468 | ) | ||||
| Total stockholders' equity | 27,739 | 27,136 | ||||||
| Total liabilities and stockholders' equity | $ | 348,490 | $ | 318,600 | ||||
See Notes to the Consolidated Financial Statements
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Cordia Bancorp
Consolidated Statements of Operations
For the years ended December 31, (dollars in thousands, except per share data)
| 2015 | 2014 | |||||||
| Interest income | ||||||||
| Interest and fees on loans | $ | 9,208 | $ | 8,923 | ||||
| Investment securities | 1,604 | 1,269 | ||||||
| Federal funds sold and deposits with banks | 29 | 25 | ||||||
| Total interest income | 10,841 | 10,217 | ||||||
| Interest expense | ||||||||
| Interest on deposits | 1,959 | 1,761 | ||||||
| Interest on FHLB borrowings | 372 | 230 | ||||||
| Total interest expense | 2,331 | 1,991 | ||||||
| Net interest income | 8,510 | 8,226 | ||||||
| (Recovery of) provision for loan losses | (293 | ) | 305 | |||||
| Net interest income after (recovery of) provision for loan losses | 8,803 | 7,921 | ||||||
| Non-interest income | ||||||||
| Service charges on deposit accounts | 134 | 123 | ||||||
| Net gain on sale of available for sale securities | 133 | 177 | ||||||
| Net gain (loss) on sale of loans held for sale | 47 | 4 | ||||||
| Other fee income | 220 | 163 | ||||||
| Total non-interest income | 534 | 467 | ||||||
| Non-interest expense | ||||||||
| Salaries and employee benefits | 4,453 | 4,846 | ||||||
| Professional services | 439 | 427 | ||||||
| Occupancy | 600 | 565 | ||||||
| Reversal of occupancy fair value discount | (225 | ) | - | |||||
| Data processing and communications | 894 | 698 | ||||||
| FDIC assessment and bank fees | 465 | 385 | ||||||
| Bank franchise taxes | 196 | 102 | ||||||
| Student loan servicing fees and other loan expenses | 755 | 671 | ||||||
| Other real estate expenses, net | 90 | 46 | ||||||
| Supplies and equipment | 286 | 318 | ||||||
| Insurance | 78 | 167 | ||||||
| Director's fees | 179 | 187 | ||||||
| Marketing and business development | 231 | 51 | ||||||
| Other operating expenses | 306 | 337 | ||||||
| Total non-interest expense | 8,747 | 8,800 | ||||||
| Net income (loss) before income taxes | 590 | (412 | ) | |||||
| Income taxes | - | - | ||||||
| Net income (loss) | $ | 590 | $ | (412 | ) | |||
| Basic net income (loss) per common share | $ | 0.09 | $ | (0.09 | ) | |||
| Diluted net income (loss) per common share | $ | 0.09 | $ | (0.09 | ) | |||
| Weighted average shares outstanding, basic | 6,572,097 | 4,722,556 | ||||||
| Weighted average shares outstanding, diluted | 6,572,097 | 4,722,556 | ||||||
See Notes to the Consolidatd Financial Statements
| 39 |
Cordia Bancorp
Consolidated Statement of Comprenhensive Income (Loss)
For the years ended December 31, (dollars in thousands)
| 2015 | 2014 | |||||||
| Net income (loss) | $ | 590 | $ | (412 | ) | |||
| Other comprehensive income (loss) | ||||||||
| Unrealized securities losses arising during the period | (404 | ) | (309 | ) | ||||
| Less: Reclassification adjustment for net secuirties gains included in net income (loss) | 133 | 177 | ||||||
| Add: Amortization of unrealized losses for securities transferred from available for sale to held to maturity | 49 | 48 | ||||||
| Total other comprehensive loss | (222 | ) | (84 | ) | ||||
| Comprehensive income (loss) | $ | 368 | $ | (496 | ) | |||
See Notes to the Consolidated Financial Statements
| 40 |
Consolidated Statements of Changes in Stockholders' Equity
For the years ended December 31, 2015 and 2014 (dollars in thousands)
| Preferred Stock | Common Stock - Voting | Common Stock - Nonvoting | Additional Paid-in Capital | Retained Deficit | Accumulated Other Comprehensive Income (Loss) | Total | ||||||||||||||||||||||
| Balance, December 31, 2013 | $ | - | $ | 28 | $ | - | $ | 18,648 | $ | (5,005 | ) | $ | (384 | ) | $ | 13,287 | ||||||||||||
| Net loss | - | - | - | - | (412 | ) | - | (412 | ) | |||||||||||||||||||
| Other comprehensive loss | - | - | - | - | - | (84 | ) | (84 | ) | |||||||||||||||||||
| Issuance of preferred stock | 14,135 | - | - | - | - | - | 14,135 | |||||||||||||||||||||
| Redemption of preferred stock | (14,135 | ) | - | - | - | - | - | (14,135 | ) | |||||||||||||||||||
| Issuance of common stock | - | 23 | 14 | 14,038 | - | 14,075 | ||||||||||||||||||||||
| Stock-based compensation | - | - | - | 270 | - | - | 270 | |||||||||||||||||||||
| Balance, December 31, 2014 | $ | - | $ | 51 | $ | 14 | $ | 32,956 | $ | (5,417 | ) | $ | (468 | ) | $ | 27,136 | ||||||||||||
| Net income | - | - | - | - | 590 | - | 590 | |||||||||||||||||||||
| Other comprehensive loss | - | - | - | - | - | (222 | ) | (222 | ) | |||||||||||||||||||
| Repurchase of common stock | - | (1 | ) | - | (82 | ) | - | - | (83 | ) | ||||||||||||||||||
| Stock-based compensation | - | 1 | - | 317 | - | - | 318 | |||||||||||||||||||||
| Balance, December 31, 2015 | $ | - | $ | 51 | $ | 14 | $ | 33,191 | $ | (4,827 | ) | $ | (690 | ) | $ | 27,739 | ||||||||||||
See Notes to the Consolidated Financial Statements
| 41 |
Cordia Bancorp
Consolidated Statements of Cash Flows
For the years ended December 31, 2015 and 2014 (dollars in thousands)
| 2015 | 2014 | |||||||
| Cash flows from operating activities: | ||||||||
| Net income (loss) | $ | 590 | $ | (412 | ) | |||
| Adjustments to reconcile net income/(loss) to net cash provided by (used in) operating activities | ||||||||
| Net amortization of premium on investment securities | 472 | 366 | ||||||
| Purchase accounting accretion, net | (359 | ) | (291 | ) | ||||
| Depreciation | 306 | 294 | ||||||
| Amortization of deferred loan costs and fees | 464 | 163 | ||||||
| (Recovery of) provision for loan losses | (293 | ) | 305 | |||||
| Net gain on sale of available for sale securities | (133 | ) | (177 | ) | ||||
| Gain on sale of other real estate owned | (21 | ) | - | |||||
| Other real estate owned valuation adjustment | 65 | (13 | ) | |||||
| Stock based compensation | 318 | 270 | ||||||
| Loans held for sale | ||||||||
| Originations | (2,957 | ) | - | |||||
| Proceeds | 2,784 | - | ||||||
| Net gain on sale | (47 | ) | - | |||||
| Changes in assets and liabilities: | ||||||||
| Increase in accrued interest receivable | (45 | ) | (385 | ) | ||||
| Increase in other assets | (140 | ) | ||||||
| (Increase) decrease in accrued expenses and other liabilities | 118 | (92 | ) | |||||
| Net cash provided by (used in) operating activities | 1,122 | 28 | ||||||
| Cash flows from investing activities: | ||||||||
| Purchase of securities available for sale | (23,427 | ) | (58,624 | ) | ||||
| Purchase of securities held to maturity | (7,677 | ) | (7,686 | ) | ||||
| Purchases of restricted securities, net | (263 | ) | (1,018 | ) | ||||
| Proceeds from sales, maturities, and paydowns of securities available for sale | 30,202 | 29,458 | ||||||
| Proceeds from payments/maturities of securities held to maturity | 2,820 | 1,700 | ||||||
| Proceeds from sale of other real estate owned | 367 | - | ||||||
| Net increase in commercial and consumer loans | (45,054 | ) | (29,713 | ) | ||||
| Net decrease (increase) in purchased guaranteed student loans | 11,023 | (9,802 | ) | |||||
| Improvements to other real estate owned | (6 | ) | (97 | ) | ||||
| Purchase of premises and equipment | (1,845 | ) | (254 | ) | ||||
| Net cash used in investing activities | (33,860 | ) | (76,036 | ) | ||||
| Cash flows from financing activities: | ||||||||
| Proceeds from sale of stock, net of stock issuance costs | - | 14,075 | ||||||
| Repurchase of common stock | (83 | ) | - | |||||
| Net increase in demand savings, interest-bearing checking and money market deposits | 21,973 | 30,067 | ||||||
| Net increase in time deposits | 2,468 | 24,722 | ||||||
| Proceeds from FHLB advances | 5,000 | 15,000 | ||||||
| Net cash provided by investing activities | 29,358 | 83,864 | ||||||
| Net increase (decrease) in cash and cash equivalents | (3,380 | ) | 7,856 | |||||
| Cash and cash equivalents, beginning of period | 21,840 | 13,984 | ||||||
| Cash and cash equivalents, end of period | $ | 18,460 | $ | 21,840 | ||||
| Supplemental disclosure of cash flow information | ||||||||
| Cash payments for interest | $ | 2,295 | $ | 1,973 | ||||
| Supplemental disclosure of noninvesting activities | ||||||||
| Unrealized gains (losses) on securities available for sale | $ | (271 | ) | $ | (132 | ) | ||
| Amortization of unrealized losses transferred from available for sale to held to maturity | $ | 49 | $ | 48 | ||||
| Loans transferred to other real estate owned | $ | 634 | $ | 83 | ||||
See Notes to the Consolidated Financial Statements
| 42 |
Cordia Bancorp
Notes to Consolidated Financial Statements
Note 1. Organization and Summary of Significant Accounting Policies
Organization
Cordia Bancorp Inc. (“Company” or “Cordia”) was incorporated in 2009 by a team of former bank CEOs, directors and advisors seeking to invest in undervalued community banks in the Mid-Atlantic and Southeast. The Company was approved as a bank holding company by the Board of Governors of the Federal Reserve in November 2010 and granted the authority to purchase a majority interest in Bank of Virginia (“Bank” or “BVA”) at that time.
On December 10, 2010, Cordia purchased $10.3 million of BVA’s common stock at a price of $7.60 per Bank share, resulting in the ownership of 59.8% of the outstanding shares. On August 28, 2012, Cordia purchased an additional $3.0 million of BVA common stock at a price of $3.60 per share.
On March 29, 2013, the Company completed a share exchange with the Bank resulting in the Bank becoming a wholly owned subsidiary of the Company. Under the terms of the Agreement and Plan of Share Exchange between the Company and the Bank, each outstanding share of the Bank’s common stock owned by persons other than the Company were exchanged for 0.664 of a share of the Company’s common stock. Shares of the Company’s stock are listed on the Nasdaq Stock Market under the symbol “BVA”. The Company has owned 100.0% of the Bank’s shares since the completion of the exchange.
On April 10, 2014, Cordia completed the sale of approximately 363 shares of Mandatorily Convertible, Noncumulative, Nonvoting, Perpetual Preferred Stock, Series A, $0.01 par value per share, to accredited investors at a purchase price of $42,500 per share for total gross proceeds of $15.4 million. The capital raise included investments by 100% of Cordia’s directors. The net proceeds of the offering are being used primarily to support the second phase of its organic growth strategy in BVA.
On June 25, 2014, upon stockholder approval, each share of Series A Preferred Stock mandatorily converted into 10,000 shares of Cordia’s common stock at a conversion price of $4.25 per share, for a total issuance of approximately 3,629,871 new shares of common stock, of which 2,229,434 are voting and 1,400,437 are nonvoting. The holders of the Series A Preferred Stock did not receive any dividends under the provisions of the stock purchase agreements.
On May 20, 2015, Cordia announced that it had authorized a stock repurchase program to acquire up to $500,000 of the Company’s outstanding common stock. Repurchase will be conducted through open market purchases or through privately negotiated transactions and will be made from time to time depending on market conditions and other factors. As of December 31, 2015, the Company had repurchased 21,200 shares.
Cordia’s principal business is the ownership of BVA. Because Cordia does not have any business activities separate from the operations of BVA, the information in this document regarding the business of Cordia reflects the activities of Cordia and BVA on a consolidated basis. References to “we” and “our” in this document refer to Cordia and BVA, collectively.
The Bank was organized under the laws of the Commonwealth of Virginia to engage in a general banking business serving the communities in and around the Richmond, Virginia metropolitan area. The Bank commenced regular operations on January 12, 2004, and is a member of the Federal Reserve System, Federal Deposit Insurance Corporation and the Federal Home Loan Bank of Atlanta. The Bank is subject to the regulations of the Federal Reserve System and the State Corporation Commission of Virginia. Consequently, it undergoes periodic examinations by these regulatory authorities.
Principles of Consolidation
The accompanying consolidated financial statements include all accounts of the Company and the Bank. All material intercompany balances and transactions have been eliminated in consolidation.
Prior to the completion of the share exchange in March 2013, the non-controlling interest reflected the ownership interest of the minority shareholders of the Bank. Items of income and other comprehensive income applicable to Bank operations were allocated to the non-controlling interest account based on the ownership percentage of the minority shareholders. Subsequent to the exchange, the non-controlling interest is no longer reflected in the consolidated financial statements of the Company, as the Bank is a wholly-owned subsidiary.
| 43 |
Cordia Bancorp
Notes to Consolidated Financial Statements (continued)
Summary of Significant Accounting Policies
The accounting and reporting policies of the Company are in accordance with accounting principles generally accepted in the United States of America and conform to general practices within the banking industry. The more significant of these policies are summarized below.
(a) Use of Estimates
In preparing financial statements in conformity with accounting principles generally accepted in the United States of America, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities as of the date of the balance sheet and reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Material estimates that are particularly susceptible to significant change in the near term relate to the determination of the allowance for loan losses, the valuation of deferred tax assets, the valuation of other real estate owned, intangible assets, acquired loans with specific credit-related deterioration and fair value measurements.
(b) Cash and Cash Equivalents
For purposes of the statement of cash flows, cash and cash equivalents include cash on hand, amounts due from banks and federal funds sold. Generally, federal funds are purchased and sold for one day periods.
(c) Securities
Debt securities that management has the positive intent and ability to hold to maturity are classified as “held to maturity” and recorded at amortized cost. Securities not classified as held to maturity, including equity securities with readily determinable fair values, are classified as “available for sale” and recorded at estimated fair value. Other securities, such as Federal Reserve Bank stock and Federal Home Loan Bank stock, are carried at cost and are listed on the balance sheet as restricted securities.
In estimating other than temporary impairment losses management considers, (1) the length of time and extent to which the fair value has been less than cost, (2) the financial condition and near term prospects of the issuer, and (3) our ability to retain our investment for a period of time sufficient to allow for any anticipated recovery in fair value.
Impairment of securities occurs when the fair value of a security is less than its amortized cost. For debt securities, impairment is considered other-than-temporary and recognized in its entirety in net income if either (1) the Company intends to sell the security or (2) it is more likely than not that the Company will be required to sell the security before recovery of its amortized cost basis. If, however, the Company does not intend to sell the security and it is not more-than-likely that the Company will be required to sell the security before recovery, management must determine what portion of the impairment is attributable to a credit loss, which occurs when the amortized cost of the security exceeds the present value of the cash flows expected to be collected from the security. If there is no credit loss, there is no other-than-temporary impairment. If there is a credit loss, other-than-temporary impairment exists, and the credit loss must be recognized in net income and the remaining portion of impairment must be recognized in other comprehensive income.
For equity securities carried at cost as restricted securities, impairment is considered to be other-than-temporary based on our ability and intent to hold the investment until a recovery of value. Other-than-temporary impairment of an equity security results in a write-down that must be included in income. The Company regularly reviews each security for other-than-temporary impairment based on criteria that include the extent to which costs exceed market price, the duration of that market decline, the financial health of and specific prospects for the issuer, management’s best estimate of the present value of cash flows expected to be collected on these debt securities, the Company’s intention with regard to holding the security to maturity and the likelihood that the Company would be required to sell the security before recovery. The Company adjusts amortization or accretion on each bond on a level yield basis monthly.
| 44 |
Cordia Bancorp
Notes to Consolidated Financial Statements (continued)
(d) Loans Held For Sale
Secondary market mortgage loans are designated as held for sale at the time of their origination. These loans are pre-sold with servicing released and the Company does not retain any interest after the loans are sold. These loans consist primarily of fixed-rate, single-family residential mortgage loans which meet the underwriting characteristics of certain government–sponsored enterprises (conforming loans). In addition, the Company requires a firm purchase commitment from a permanent investor before a loan can be committed, thus limiting interest rate risk. Loans held for sale are carried at the lower of cost or fair value. Gains on sales of loans are recognized at the loan closing date and are included in noninterest income. The company had $220 thousand of loans held for sale as of December 31, 2015 and no loans classified as held for sale as of December 31, 2014.
(e) Loans
The Company grants commercial and consumer loans to customers. A substantial portion of the loan portfolio is represented by commercial loans throughout the greater Richmond, Virginia metropolitan area. The ability of the Bank’s debtors to honor their contracts is dependent upon numerous factors including the collateral performance, general economic conditions, as well as the underlying strength of borrowers and guarantors.
Loans that management has the intent and ability to hold for the foreseeable future or until maturity or pay-off are generally reported at their outstanding unpaid principal balances adjusted for the allowance for loan losses and net deferred fees and costs. Interest income is accrued on the unpaid principal balance. Loan origination and commitment fees and certain direct costs are deferred and the net amount is amortized as an adjustment of the related loan’s yield. The Bank is amortizing these amounts on an effective interest method over the loan’s contractual life or to the pay-off date if the balance is repaid prior to maturity. Loans are recorded based on purpose, collateral and repayment period. Interest is calculated on a 365/360 for commercial loans and 365/365 for consumer loans. Interest is accrued on a daily basis.
The Company was licensed by the U.S. Department of Education as a rehabilitated student lender effective November 2012. In the first quarter of 2013, the Company began purchasing rehabilitated student loans guaranteed by the U.S. Department of Education. The guarantee covers approximately 98% of principal and accrued interest. The unguaranteed principal balance of these loans was approximately $1.1 million at December 31, 2015 and $1.3 million at December 31, 2014. The company ceased purchasing rehabilitated, federally guaranteed student loans in April 2014.
The past due status of a loan is based on the contractual due date of the most delinquent payment due. Each loan will be placed in one of the following categories: current, 1-29 days past due, 30-59 days past due, 60-89 days past due and 90 days and over past due. Generally, the accrual of interest on a loan is discontinued at the time the loan becomes 90 days delinquent unless the credit is well-secured and in process of collection or refinancing. Due to the guaranty by the U.S. Department of Education, Guaranteed Student Loans continue to accrue interest up until charged-off.
Loans are placed on nonaccrual status when management believes the full collection of the principal and interest is doubtful. A delinquent loan is generally placed in nonaccrual status when:
| · | principal and/or interest is past due for 90 days or more, unless the loan is well-secured and in the process of collection; |
| · | the financial strength of the borrower or a guarantor has materially declined; |
| · | collateral value has declined; or |
| · | other facts would make the repayment in full of principal and interest unlikely. |
When a loan is placed on nonaccrual, all interest which has been accrued is charged back against current earnings as a reduction in interest income, which adversely affects the yield on loans in the period of reversal. No additional interest is accrued on the loan balance until the collection of both principal and interest becomes reasonably certain.
Loans placed on non-accrual status may, at the lenders discretion, be returned to accrual status after:
| · | payments are received for a reasonable period in accordance with the loan documents (typically for six (6) months), and any doubt as to the loan's full collectability has been removed; or |
| · | the troubled loan is restructured and, evidenced by a credit evaluation of the borrower's financial condition and the prospects for full payment are good. |
Government Guaranteed Student loans with a past due balance greater than 90 days are not placed on non-accrual. When a loan reaches 120 days past due, the non-guaranteed portion of the loan is charged-off. A claim is filed with the guarantor when the loan becomes 270 days past due. Interest continues to accrue until charge-off. The guarantor’s payment covers approximately 98% of principal and accrued interest.
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Cordia Bancorp
Notes to Consolidated Financial Statements (continued)
When a loan is returned to accrual status after restructuring, the pre-restructuring risk rating is maintained until a satisfactory payment history is re-established. Returning non-accrual loans to an accrual status requires the prior written approval of the Chief Credit Officer.
In situations where, for economic or legal reasons related to a borrower’s financial condition, management may grant a concession to the borrower that it would not otherwise consider, the related loan is classified as a troubled debt restructuring (TDR). Management strives to identify borrowers in financial difficulty early and work with them to modify their loan to more affordable terms before their loan reaches nonaccrual status. These modified terms may include rate reductions, principal forgiveness, payment forbearance, re-amortization, and other actions intended to minimize the economic loss and to avoid foreclosure or repossession of the collateral. In cases where borrowers are granted new terms that provide for a reduction of either interest or principal, management measures any impairment on the restructuring as noted below for impaired loans. There were no loans classified as a TDR as of December 3l, 2015. There were four loans with an aggregate principal balance of $1.3 million classified as TDRs as of December 31, 2014.
Acquired loans with specific credit deterioration are accounted for by Cordia in accordance with FASB Accounting Standards Codification 310-30. Certain acquired loans, those for which specific credit-related deterioration, since origination, is identified, are recorded at fair value reflecting the present value of the amounts expected to be collected. Income recognition on these loans is based on a reasonable expectation about the timing and amount of cash flows to be collected. Acquired loans deemed impaired and considered collateral dependent, with the timing of the sale of loan collateral indeterminate, remain on non-accrual status and have no accretable yield.
The difference between contractually required payments at acquisition and the cash flows expected to be collected at acquisition is referred to as the “nonaccretable difference,” and is not recorded. Any excess of cash flows expected at acquisition over the estimated fair value is referred to as the accretable yield and is recognized as interest income over the remaining life of the loan when there is a reasonable expectation about the amount and timing of such cash flows. Subsequent decreases to the expected cash flows will generally result in a provision for loan losses, while subsequent increases in cash flows may result in a reversal of post-acquisition provision for loan losses, or a transfer from nonaccretable difference to accretable yield.
(f) Allowance for Loan Losses
The allowance for loan losses (“ALLL”) is increased by charges to income and decreased by charge-offs, net of recoveries. The ALLL is established and maintained at a level management deems adequate to cover probable losses inherent in the portfolio as of the balance sheet date and is based on management’s evaluation of the risks in the loan portfolio and changes in the nature and volume of loan activity. There are risks inherent in all loans, so an ALLL is maintained for loans to absorb probable losses on existing loans that may become uncollectible. The ALLL is established and maintained as losses are estimated to have occurred through a provision for loan losses charged to earnings, which increases the balance of the ALLL. Loan losses for all segments are charged against the ALLL when management believes the uncollectability of a loan is confirmed, which decreases the balance of the ALLL. Subsequent recoveries, if any, are credited back to the ALLL.
The amount of the ALLL is established through the application of a standardized model, the components of which are: an impairment analysis of specific loans to determine the level of any specific reserves needed and an estimate of the general reserves needed which consists of a weighted average of historical loss experience and adjustments for economic and environmental factors.
The allowance for loan losses is evaluated on a regular basis by management and is based upon management’s periodic review of the collectability of the loans in light of historical experience, the nature and volume of the loan portfolio, adverse situations that may affect the borrower’s ability to repay, estimated value of any underlying collateral and prevailing economic conditions. This evaluation is inherently subjective as it requires estimates that are susceptible to significant revision as more information becomes available.
In order for the ALLL methodology to be considered valid and for Management to make the determination if any deficiencies exist in the process, the Bank at a minimum requires:
| 46 |
Cordia Bancorp
Notes to Consolidated Financial Statements (continued)
| - | A review of trends in loan volume, delinquencies, restructurings and concentrations; | |
| - | Tests of source documents and underlying assumptions to determine that the established methodology develops reasonable loss estimates; and | |
| - | An evaluation of the appraisal process of the underlying collateral which may be accomplished by periodically comparing the appraised value to the actual sales price on selected properties sold. | |
| - | Accurate loan risk ratings |
Note 4 includes an additional discussion of how the ALLL is quantified. The use of various estimates and judgments in the Bank’s ongoing evaluation of the required level of ALLL can significantly affect the Bank’s results of operations and financial condition and may result in either greater provisions against earnings to increase the ALLL or reduced provisions based upon management’s current view of portfolio and economic conditions and the application of revised estimates and assumptions.
The specific component of the ALLL relates to loans that are classified as either doubtful, substandard or TDR. For such loans that are also classified as impaired, a loan level allowance is established. The evaluation of the need for a specific reserve involves the identification of impaired loans and an analysis of those loans’ repayment capacity from both primary (cash flow) and secondary (real estate and non-real estate collateral or guarantors) sources and making specific reserve allocations to impaired loans that exhibit inherent weaknesses and various other elevated credit risk factors. All available collateral is analyzed and valued, with discounts applied according to the age of any real estate appraisals or the liquidity of other asset classes. The analysis is compared to the aggregate Bank loan exposure, giving consideration to the Bank’s lien preference and other actual and contingent obligations of the borrower. Any loan guarantors are rated and their value weighted based on an analysis of the guarantor’s net worth, including liabilities, liquid assets, and annual cash flows and total contingent liabilities.
A loan is considered impaired when it is probable that the Bank will be unable to collect all amounts when due according to the contractual terms of the loan agreement. We do not consider a loan impaired during a period of insignificant delay in payment if we expect the ultimate collection of all amounts due. Impairment is measured as the difference between the recorded investment in the loan and the evaluation of the present value of expected future cash flows or the observable market price of the loan or collateral value of the impaired loan when that cash flow or collateral value is lower than the carrying value of that loan. Loans that are collateral dependent, that is, loans where repayment is expected to be provided solely by the underlying collateral, and for which management has determined foreclosure is probable, are measured for impairment based on the fair value of the collateral as described above.
The general component covers pass rated loans and special mention loans and is based on historical loss experience adjusted for qualitative factors.
The model estimates probable loan losses by analyzing historical loss experience and other trends within the portfolio, including trends in delinquencies and charge-offs, the opinions of regulators, changes in the growth rate, size and composition of the loan portfolio, particularly the level of Special Mention rated loans, the level of past due loans, the level of home equity loans and commercial real estate loans in aggregate and as a percentage of capital, and industry information.
A component of the general reserve for unimpaired loans is established based on a weighted average historical loss factor for the prior twelve quarters (with more weight given to the more recent quarters) and the level of unimpaired loans. Management applies a 45% weighting to the most recent four quarters, a 35% weighting to the next four quarters and a 20% weighting to the most distant four of the prior twelve quarters when calculating this component of the general reserve.
Also included in management’s estimates for loan losses are considerations with respect to the impact of local and national economic trends, the outcomes of which are uncertain. These events may include, but are not limited to, a general slowdown in the national or local economy, national and local unemployment rates, local real estate values, fluctuations in overall lending rates, political conditions, legislation that may directly or indirectly affect the banking industry and economic conditions affecting the specific geographic area in which the Bank conducts business.
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Cordia Bancorp
Notes to Consolidated Financial Statements (continued)
(g) Premises and Equipment
Premises and equipment are stated at cost less accumulated depreciation. Depreciation is computed using the straight-line method over the assets' estimated useful lives. Estimated useful lives range from 10 to 30 years for buildings and 3 to 10 years for autos, furniture, fixtures and equipment. The value of land is carried at cost.
(h) Other Real Estate Owned
Assets acquired through loan foreclosure are held for sale. They are initially recorded at fair value at the date of foreclosure, less estimated selling costs thus establishing a new cost basis. Subsequent to foreclosure, valuations of the assets are periodically performed by management. Adjustments are made to the lower of the carrying amount or fair value of the assets less selling costs. Revenue and expenses from operations and sales are included in other real estate expenses, net in the statement of operations. The Bank’s investment in foreclosed assets totaled $1.9 million and $1.6 million at December 31, 2015 and 2014, respectively.
(i) Goodwill and Other Intangibles
FASB ASC 805, Business Combinations, requires that the acquisition method of accounting be used for all business combinations. With acquisitions, the Company is required to record assets acquired, including any intangible assets, and liabilities assumed at fair value, which involves relying on estimates based on third party valuations, such as appraisals, or internal valuations based on discounted cash flow analysis or other valuation methods. The Company records goodwill per ASC 350, Intangibles-Goodwill and Others. Accordingly, goodwill is no longer subject to amortization over its estimated useful life, but is subject to at least an annual assessment for impairment by applying a fair value-based test. Additionally, under ASC 350, acquired intangible assets (such as core deposit intangibles) are separately recognized if the benefit of the assets can be sold, transferred, licensed, rented, or exchanged, and amortized over their useful lives. Goodwill was determined to be impaired in December 2011 at the annual impairment evaluation and was written off in its entirely at that time. Core deposit intangibles of $68 thousand and $104 thousand are included in other assets at December 31, 2015 and 2014, respectively.
(j) Income Taxes
Deferred taxes are provided on a liability method whereby deferred tax assets are recognized for deductible temporary differences, operating loss carryforwards, and tax credit carryforwards. Deferred tax liabilities are recognized for taxable temporary differences.
Temporary differences are the differences between the reported amounts of assets and liabilities and their tax bases. Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, the recognition of the asset is less than probable. A valuation allowance has been recorded against the Company’s entire net deferred tax asset.
When tax returns are filed, it is highly certain that some positions taken would be sustained upon examination by the taxing authorities, while others are subject to uncertainty about the merits of the positions taken or the amount of the position that would be ultimately sustained. The benefit of a tax position is recognized in the financial statements in the period during which, based on all available evidence, management believes it is more likely than not that the position will be sustained upon examination, including the resolution of appeals or litigation processes, if any. Tax positions taken are not offset or aggregated with other positions. Tax positions that meet the more-likely-than-not recognition threshold are measured as the largest amount of tax benefit that is more than 50 percent likely of being realized upon settlement with the applicable taxing authority. The portion of the benefits associated with tax positions taken that exceeds the amount measured as described above is recognized as a liability for unrecognized tax benefits in the accompanying balance sheets along with any associated interest and penalties that would be payable to the taxing authorities upon examination. As of December 31, 2015 and 2014, the Company had recorded no such liability.
Banks operating in Virginia are not subject to Virginia State Income Tax, but are subjected to Virginia Bank Franchise Taxes.
| 48 |
Cordia Bancorp
Notes to Consolidated Financial Statements (continued)
(k) Marketing Costs
The Company follows the policy of charging the production costs of marketing/advertising to expense as incurred unless the advertising campaign extends for a significant time period, in which case, such costs will be amortized to expense over the duration of the advertising campaign.
(l) Comprehensive Income (Loss)
Accounting principles generally require that recognized revenue, expenses, gains and losses be included in net income (loss). Although certain changes in assets and liabilities, such as unrealized gains and losses on available for sale securities, are reported as a separate component of the equity section of the balance sheet, such items, along with net income (loss), are components of comprehensive income (loss).
(m) Earnings Per Share
Basic earnings per share represents income available to common shareholders divided by the weighted-average number of common shares outstanding during the period. Diluted earnings per share reflect additional common shares that would have been outstanding if dilutive potential common shares had been issued, as well as any adjustment to income that would result from the assumed issuance.
Options to purchase 125 thousand and 145 thousand shares of the Company’s common stock were not included in the computation of earnings per share in 2015 or 2014, respectively, because the share award prices exceeded the average market price of the Company’s common stock and therefore, the effect would have been anti-dilutive. The effect would also have been anti-dilutive in 2014 due to the loss.
For the years ended December 31, 2015 and 2014, 578,125 shares of unvested common stock were excluded from the computation of basic and diluted earnings per common share as they are performance based and deemed unlikely to vest. All other vested and nonvested restricted common shares, which carry all rights and privilege of a stockholder with respect to the stock, including the right to vote, were included in both the basic and diluted earnings per common share calculations.
The calculation for basic and diluted earnings per common share for the years ended December 31, are as follows:
| (dollars in thousands) | 2015 | 2014 | ||||||
| Net income (loss) | $ | 590 | $ | (412 | ) | |||
| Weighted average common shares outstanding, basic | 6,572,097 | 4,722,556 | ||||||
| Dilutive effect of stock options | - | - | ||||||
| Weighted average common shares outstanding, diluted | 6,572,097 | 4,722,556 | ||||||
| Basic income (loss) per common share | $ | 0.09 | $ | (0.09 | ) | |||
| Diluted income (loss) per common share | $ | 0.09 | $ | (0.09 | ) | |||
(n) Stock Option Plan
Authoritative accounting guidance requires the costs resulting from all share-based payments to employees be recognized in the financial statements. For stock option grants, stock-based compensation is estimated at the date of grant, using the Black-Scholes option valuation model for determining fair value. Restricted stock grants are expensed based on the grant date fair value of the Company’s common stock. The Company recognized stock-based compensation expense of $318 thousand and $270 thousand in 2015 and 2014, respectively.
| 49 |
Cordia Bancorp
Notes to Consolidated Financial Statements (continued)
(o) Fair Value Measurements
Fair values of financial instruments are estimated using relevant market information and other assumptions as more fully disclosed in Note 14. Fair value estimates involve uncertainties and matters of significant judgment. Changes in assumptions or market conditions could significantly affect the estimates.
(p) Transfer of Assets
Transfers of financial assets are accounted for as sales when control over the assets has been surrendered. Control over transferred assets is deemed to be surrendered when 1) the assets have been isolated from the Company – put presumptively beyond the reach of the transferor and its creditors, even in bankruptcy or other receivership; 2) the transferee obtains the right (free of conditions that constrain it from taking advantage of that right) to pledge or exchange the transferred assets; and 3) the Company does not maintain effective control over the transferred assets through an agreement to repurchase them before their maturity of the ability to unilaterally cause the holder to return specified assets.
(q) Reclassification
In certain circumstances, reclassifications have been made to prior period information to conform to the 2015 presentation. Such reclassifications had no effect on previously reported stockholders’ equity or net income or loss.
Recent Accounting Pronouncements
In June 2014, the FASB issued ASU No. 2014-12, “Compensation – Stock Compensation (Topic 718): Accounting for Share-Based Payments When the Terms of an Award Provide That a Performance Target Could Be Achieved after the Requisite Service Period.” The new guidance applies to reporting entities that grant employees share-based payments in which the terms of the award allow a performance target to be achieved after the requisite service period. The amendments in the ASU require that a performance target that affects vesting and that could be achieved after the requisite service period be treated as a performance condition. Existing guidance in “Compensation – Stock Compensation (Topic 718),” should be applied to account for these types of awards. The amendments in this ASU are effective for annual periods and interim periods within those annual periods beginning after December 15, 2015. Early adoption is permitted and reporting entities may choose to apply the amendments in the ASU either on a prospective or retrospective basis. The Company does not expect the adoption of ASU 2014-12 to have a material impact on its consolidated financial statements.
In August 2014, the FASB issued ASU No. 2014-15, “Presentation of Financial Statements – Going Concern (Subtopic 205-40): Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern.” This update is intended to provide guidance about management’s responsibility to evaluate whether there is substantial doubt about an entity’s ability to continue as a going concern and to provide related footnote disclosures. Management is required under the new guidance to evaluate whether there are conditions or events, considered in the aggregate, that raise substantial doubt about the entity’s ability to continue as a going concern within one year after the date the financial statements are issued when preparing financial statements for each interim and annual reporting period. If conditions or events are identified, the ASU specifies the process that must be followed by management and also clarifies the timing and content of going concern footnote disclosures in order to reduce diversity in practice. The amendments in this ASU are effective for annual periods and interim periods within those annual periods beginning after December 15, 2016. Early adoption is permitted. The Company does not expect the adoption of ASU 2014-15 to have a material impact on its consolidated financial statements.
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Cordia Bancorp
Notes to Consolidated Financial Statements (continued)
In November 2014, the FASB issued ASU No. 2014-16, “Derivatives and Hedging (Topic 815): Determining Whether the Host Contract in a Hybrid Financial Instrument Issued in the Form of a Share Is More Akin to Debt or to Equity.” The amendments in ASU do not change the current criteria in U.S. GAAP for determining when separation of certain embedded derivative features in a hybrid financial instrument is required. The amendments clarify how current U.S. GAAP should be interpreted in evaluating the economic characteristics and risks of a host contract in a hybrid financial instrument that is issued in the form of a share. Specifically, the amendments clarify that an entity should consider all relevant terms and features, including the embedded derivative feature being evaluated for bifurcation, in evaluating the nature of the host contract. Furthermore, the amendments clarify that no single term or feature would necessarily determine the economic characteristics and risks of the host contract. Rather, the nature of the host contract depends upon the economic characteristics and risks of the entire hybrid financial instrument. The amendments in this ASU also clarify that, in evaluating the nature of a host contract, an entity should assess the substance of the relevant terms and features (i.e., the relative strength of the debt-like or equity-like terms and features given the facts and circumstances) when considering how to weight those terms and features. The amendments in this ASU are effective for public business entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2015. Early adoption, including adoption in an interim period, is permitted. The Company does not expect the adoption of ASU 2014-16 to have a material impact on its consolidated financial statements.
In January 2015, the FASB issued ASU No. 2015-01, “Income Statement—Extraordinary and Unusual Items (Subtopic 225-20): Simplifying Income Statement Presentation by Eliminating the Concept of Extraordinary Items.” The amendments in this ASU eliminate from U.S. GAAP the concept of extraordinary items. Subtopic 225-20, Income Statement - Extraordinary and Unusual Items, required that an entity separately classify, present, and disclose extraordinary events and transactions. Presently, an event or transaction is presumed to be an ordinary and usual activity of the reporting entity unless evidence clearly supports its classification as an extraordinary item. If an event or transaction meets the criteria for extraordinary classification, an entity is required to segregate the extraordinary item from the results of ordinary operations and show the item separately in the income statement, net of tax, after income from continuing operations. The entity also is required to disclose applicable income taxes and either present or disclose earnings-per-share data applicable to the extraordinary item. The amendments in this ASU are effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2015. A reporting entity may apply the amendments prospectively. A reporting entity also may apply the amendments retrospectively to all prior periods presented in the financial statements. Early adoption is permitted provided that the guidance is applied from the beginning of the fiscal year of adoption. The Company does not expect the adoption of ASU 2015-01 to have a material impact on its consolidated financial statements.
In February 2015, the FASB issued ASU No. 2015-02, “Consolidation (Topic 810): Amendments to the Consolidation Analysis.” The amendments in this ASU are intended to improve targeted areas of consolidation guidance for legal entities such as limited partnerships, limited liability corporations, and securitization structures (collateralized debt obligations, collateralized loan obligations, and mortgage-backed security transactions). In addition to reducing the number of consolidation models from four to two, the new standard simplifies the FASB Accounting Standards Codification™ and improves current GAAP by placing more emphasis on risk of loss when determining a controlling financial interest, reducing the frequency of the application of related-party guidance when determining a controlling financial interest in a variable interest entity (VIE), and changing consolidation conclusions for public and private companies in several industries that typically make use of limited partnerships or VIEs. The amendments in this ASU are effective for public business entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2015. Early adoption is permitted, including adoption in an interim period. ASU 2015-02 may be applied retrospectively in previously issued financial statements for one or more years with a cumulative-effect adjustment to retained earnings as of the beginning of the first year restated. The Company does not expect the adoption of ASU 2015-02 to have a material impact on its consolidated financial statements.
In April 2015, the FASB issued ASU No. 2015-03, “Interest – Imputation of Interest (Subtopic 835-30): Simplifying the Presentation of Debt Issuance Costs.” The amendments in this ASU are intended to simplify the presentation of debt issuance costs. These amendments require that debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability, consistent with debt discounts. The recognition and measurement guidance for debt issuance costs are not affected by the amendments in this ASU. The amendments in this ASU are effective for public business entities for financial statements issued for fiscal years beginning after December 15, 2015, and interim periods within those fiscal years. Early adoption is permitted for financial statements that have not been previously issued. The Company does not expect the adoption of ASU 2015-03 to have a material impact on its consolidated financial statements.
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Cordia Bancorp
Notes to Consolidated Financial Statements (continued)
In April 2015, the FASB issued ASU No. 2015-05, “Intangibles - Goodwill and Other - Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Fees Paid in a Cloud Computing Arrangement.” The amendments in this ASU provide guidance to customers about whether a cloud computing arrangement includes a software license. If a cloud computing arrangement includes a software license, then the customer should account for the software license element of the arrangement consistent with the acquisition of other software licenses. If a cloud computing arrangement does not include a software license, the customer should account for the arrangement as a service contract. The amendments do not change the accounting for a customer’s accounting for service contracts. As a result of the amendments, all software licenses within the scope of Subtopic 350-40 will be accounted for consistent with other licenses of intangible assets. The amendments in this ASU are effective for public business entities for annual periods, including interim periods within those annual periods, beginning after December 15, 2015. Early adoption is permitted. An entity can elect to adopt the amendments either: (1) prospectively to all arrangements entered into or materially modified after the effective date; or (2) retrospectively. The Company does not expect the adoption of ASU 2015-05 to have a material impact on its consolidated financial statements.
In May 2015, the FASB issued ASU No. 2015-08, “Business Combinations (Topic 805): Pushdown Accounting – Amendments to SEC Paragraphs Pursuant to Staff Accounting Bulletin No. 115.” The amendments in ASU 2015-08 amend various SEC paragraphs pursuant to the issuance of Staff Accounting Bulletin No. 115, Topic 5: Miscellaneous Accounting, regarding various pushdown accounting issues, and did not have a material impact on the Company’s consolidated financial statements.
In August 2015, the FASB issued ASU No. 2015-14, “Revenue from Contracts with Customers (Topic 606): Deferral of Effective Date.” The amendments in ASU 2015-14 defer the effective date of ASU 2014-09 for all entities by one year. Public business entities, certain not-for-profit entities, and certain employee benefit plans should apply the guidance in ASU 2014-09 to annual reporting periods beginning after December 15, 2017, including interim reporting periods within that reporting period. Earlier application is permitted only as of annual reporting periods beginning after December 15, 2016, including interim reporting periods within that reporting period. All other entities should apply the guidance in ASU 2014-09 to annual reporting periods beginning after December 15, 2018, and interim reporting periods within annual reporting periods beginning after December 15, 2019. All other entities may apply the guidance in ASU 2014-09 earlier as of an annual reporting period beginning after December 15, 2016, including interim reporting periods within that reporting period. All other entities also may apply the guidance in ASU 2014-09 earlier as of an annual reporting period beginning after December 15, 2016, and interim reporting periods within annual reporting periods beginning one year after the annual reporting period in which the entity first applies the guidance in ASU 2014-09. The Company does not expect the adoption of ASU 2015-14 (or ASU 2014-09) to have a material impact on its consolidated financial statements.
In August 2015, the FASB issued ASU 2015-15, “Interest – Imputation of Interest (Subtopic 835-30) – Presentation and Subsequent Measurement of Debt Issuance Costs Associated with Line-of-Credit Arrangements (Amendments to SEC Paragraphs Pursuant to Staff Announcement at June 18, 2015 EITF Meeting).” On April 7, 2015, the FASB issued ASU 2015-03, Interest—Imputation of Interest (Subtopic 835-30): Simplifying the Presentation of Debt Issuance Costs, which requires entities to present debt issuance costs related to a recognized debt liability as a direct deduction from the carrying amount of that debt liability. The guidance in ASU 2015-03 (see paragraph 835-30-45-1A) does not address presentation or subsequent measurement of debt issuance costs related to line-of-credit arrangements. Given the absence of authoritative guidance within ASU 2015-03 for debt issuance costs related to line-of-credit arrangements, the SEC staff stated that they would not object to an entity deferring and presenting debt issuance costs as an asset and subsequently amortizing the deferred debt issuance costs ratably over the term of the line-of-credit arrangement, regardless of whether there are any outstanding borrowings on the line-of-credit arrangement. ASU 2015-15 adds these SEC comments to the "S" section of the Codification. The adoption of ASU 2015-15 did not have a material impact on the Company’s consolidated financial statements.
In September 2015, the FASB issued ASU 2015-16, “Business Combinations (Topic 805): Simplifying the Accounting for Measurement-Period Adjustments.” The amendments in ASU 2015-16 require that an acquirer recognize adjustments to estimated amounts that are identified during the measurement period in the reporting period in which the adjustment amounts are determined. The amendments require that the acquirer record, in the same period’s financial statements, the effect on earnings of changes in depreciation, amortization, or other income effects, if any, as a result of the change to the estimated amounts, calculated as if the accounting had been completed at the acquisition date. The amendments also require an entity to present separately on the face of the income statement or disclose in the notes the portion of the amount recorded in current-period earnings by line item that would have been recorded in previous reporting periods if the adjustment to the estimated amounts had been recognized as of the acquisition date. The amendments in this ASU are effective for public business entities for fiscal years beginning after December 15, 2015, including interim periods within those fiscal years. For all other entities, the amendments are effective for fiscal years beginning after December 15, 2016, and interim periods within fiscal years beginning after December 15, 2017. The amendments should be applied prospectively to adjustments to provisional amounts that occur after the effective date with earlier application permitted for financial statements that have not been issued. The Company does not expect the adoption of ASU 2015-16 to have a material impact on its consolidated financial statements.
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Cordia Bancorp
Notes to Consolidated Financial Statements (continued)
In January 2016, the FASB issued ASU 2016-01, “Financial Instruments – Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities.” The amendments in ASU 2016-01, among other things: 1) Requires equity investments (except those accounted for under the equity method of accounting, or those that result in consolidation of the investee) to be measured at fair value with changes in fair value recognized in net income. 2) Requires public business entities to use the exit price notion when measuring the fair value of financial instruments for disclosure purposes. 3) Requires separate presentation of financial assets and financial liabilities by measurement category and form of financial asset (i.e., securities or loans and receivables). 4) Eliminates the requirement for public business entities to disclose the method(s) and significant assumptions used to estimate the fair value that is required to be disclosed for financial instruments measured at amortized cost. The amendments in this ASU are effective for public companies for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. The Company is currently assessing the impact that ASU 2016-01 will have on its consolidated financial statements.
In February 2016, the FASB issued ASU No. 2016-02, “Leases (Topic 842).” Among other things, in the amendments in ASU 2016-02, lessees will be required to recognize the following for all leases (with the exception of short-term leases) at the commencement date: (1) A lease liability, which is a lessee‘s obligation to make lease payments arising from a lease, measured on a discounted basis; and (2) A right-of-use asset, which is an asset that represents the lessee’s right to use, or control the use of, a specified asset for the lease term. Under the new guidance, lessor accounting is largely unchanged. Certain targeted improvements were made to align, where necessary, lessor accounting with the lessee accounting model and Topic 606, Revenue from Contracts with Customers. The amendments in this ASU are effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. Early application is permitted upon issuance. Lessees (for capital and operating leases) and lessors (for sales-type, direct financing, and operating leases) must apply a modified retrospective transition approach for leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements. The modified retrospective approach would not require any transition accounting for leases that expired before the earliest comparative period presented. Lessees and lessors may not apply a full retrospective transition approach. The Company is currently assessing the impact that ASU 2016-02 will have on its (consolidated) financial statements.
Note 2. Business Combination
On December 10, 2010, the Company purchased 1,355,263 newly issued shares of the common stock of the Bank of Virginia (“BVA”), which gave it a 59.8% ownership interest. In accordance with ASC 805-10, this transaction was considered a business combination. Under the acquisition method of accounting, the assets and liabilities of the Bank were marked to fair value and goodwill was recorded for the excess of consideration paid over net fair value received. Based on the consideration paid and the fair value of the assets received and the liabilities assumed, goodwill of $5.9 million was recorded. Goodwill was determined to be impaired in its entirety during the fourth quarter of 2011. In addition to goodwill, other assets and liabilities of the Bank of Virginia were marked to their respective fair value as of December 10, 2010.
Estimated fair values differed substantially in some cases from the carrying amounts of the assets and liabilities reflected in the financial statements of BVA which, in most cases were valued at historical cost. Subsequent to that date, the fair value adjustments were amortized over the expected life of the related asset or liability or otherwise adjusted as required by generally accepted accounting principles (“GAAP”).
Interest income is impacted by the accretion of the fair value discount on the loan portfolio as well as the accretion of the accretable discount on loans acquired with deteriorated credit quality. Interest income is also impacted by the accretion on the investment securities that is the result of the reset of the amortized book value amount to the fair value as of the day of the acquisition. Interest expense is impacted by the amortization of the premiums on time deposits and the FHLB advances. Net interest income is impacted by the combination of all of these items.
Non-interest expense was impacted by a rent adjustment related to certain lease commitments being above market as of the day of the investment; and amortization of the core deposit intangible. During the second quarter of 2015, this property was purchased and the related lease was terminated resulting in a favorable reversal of the fair value discount of $225 thousand.
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Cordia Bancorp
Notes to Consolidated Financial Statements (continued)
On March 29, 2013, the minority shareholders of BVA exchanged their common shares in the Bank for common shares of Cordia. For each share of BVA exchanged, 0.664 shares of Cordia were received. In connection with the exchange, BVA became a wholly-owned subsidiary of Cordia.
In addition, the increased ownership percentage of BVA by Cordia has impacted the accounting of both entities. All of Cordia’s acquisition accounting adjustments are now recorded in the BVA financial statements and the Cordia financial statements no longer reflect adjustments for non-controlling interests.
The accretion (amortization) of the acquisition accounting adjustments had the following impact on the financial statements:
| Income (Expense) | ||||||||
| December 31, | ||||||||
| (dollars in thousands) | 2015 | 2014 | ||||||
| Loans | $ | 114 | $ | 225 | ||||
| Premises and equipment | 9 | 8 | ||||||
| Core deposit intangible | (36 | ) | (36 | ) | ||||
| Building lease obligations | 272 | 94 | ||||||
| Net impact to net income | $ | 359 | $ | 291 | ||||
Note 3. Securities
Our investment portfolio consists of U.S. agency debt and agency guaranteed mortgage-backed securities. Our investment security portfolio includes securities classified as available for sale as well as securities classified as held to maturity. We classify securities as available for sale or held to maturity based on our investment strategy and management’s assessment of our intent and ability to hold the securities until maturity. The total securities portfolio (excluding restricted securities) was $71.7 million at December 31, 2015 as compared to $74.2 million at December 31, 2014. At December 31, 2015, the securities portfolio consisted of $46.2 million of securities available for sale and $25.5 million of securities held to maturity.
The table below presents the amortized cost, gross unrealized gains and losses, and fair value of securities available for sale at December 31, 2015 and 2014.
| Gross Unrealized | ||||||||||||||||
| 2015 (dollars in thousands) | Amortized Cost | Gains | Losses | Fair Value | ||||||||||||
| U.S. Government agencies | $ | 2,144 | $ | 5 | $ | (10 | ) | $ | 2,139 | |||||||
| Agency guaranteed mortgage-backed securities | 44,529 | 3 | (451 | ) | 44,081 | |||||||||||
| Total | $ | 46,673 | $ | 8 | $ | (461 | ) | $ | 46,220 | |||||||
| Gross Unrealized | ||||||||||||||||
| 2014 (dollars in thousands) | Amortized Cost | Gains | Losses | Fair Value | ||||||||||||
| U.S. Government agencies | $ | 3,735 | $ | 1 | $ | (17 | ) | $ | 3,719 | |||||||
| Agency guaranteed mortgage-backed securities | 49,930 | 21 | (187 | ) | 49,764 | |||||||||||
| Total | $ | 53,665 | $ | 22 | $ | (204 | ) | $ | 53,483 | |||||||
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Cordia Bancorp
Notes to Consolidated Financial Statements (continued)
The table below presents the carry value, gross unrealized gains and losses, and fair value of securities held to maturity at December 31, 2015 and 2014.
| Gross Unrealized | ||||||||||||||||
| 2015 (dollars in thousands) | Carry Value | Gains | Losses | Fair Value | ||||||||||||
| Agency guaranteed mortgage-backed securities | $ | 25,500 | $ | 230 | $ | (36 | ) | $ | 25,694 | |||||||
| Total | $ | 25,500 | $ | 230 | $ | (36 | ) | $ | 25,694 | |||||||
| Gross Unrealized | ||||||||||||||||
| 2014 (dollars in thousands) | Carry Value | Gains | Losses | Fair Value | ||||||||||||
| Agency guaranteed mortgage-backed securities | $ | 20,716 | $ | 333 | $ | (2 | ) | $ | 21,047 | |||||||
| Total | $ | 20,716 | $ | 333 | $ | (2 | ) | $ | 21,047 | |||||||
The amortized cost and fair value of securities available for sale as of December 31, 2015, by contractual maturity are shown below. Expected maturities may differ from contractual maturities because issuers may have the right to call or prepay obligations without penalties. They are as follows:
| (Dollars in thousands) | Amortized Cost | Fair Value | ||||||
| Over one year within five years | $ | 43 | $ | 43 | ||||
| Over five years within ten years | 2,144 | 2,139 | ||||||
| Over ten years | 44,486 | 44,038 | ||||||
| Total | $ | 46,673 | $ | 46,220 | ||||
The carry value and fair value of securities held to maturity as of December 31, 2015, by contractual maturity are shown below. Expected maturities may differ from contractual maturities because issuers may have the right to call or prepay obligations without penalties. They are as follows:
| (Dollars in thousands) | Carry Value | Fair Value | ||||||
| Over five years within ten years | $ | 3,633 | $ | 3,729 | ||||
| Over ten years | 21,867 | 21,965 | ||||||
| Total | $ | 25,500 | $ | 25,694 | ||||
As of December 31, 2015, the portfolio is concentrated in average maturities of over ten years, although a substantial majority of recently purchased securities have effective duration much shorter than ten years. The portfolio is available to support liquidity needs of the Company. During 2015, the Company sold $19.8 million of available for sale securities and recognized gains of $133 thousand in noninterest income. During 2014, the Company sold $23.4 million of available for sale securities and recognized gains of $181 thousand and losses of $4 thousand in noninterest income.
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Cordia Bancorp
Notes to Consolidated Financial Statements (continued)
Unrealized losses on investments at December 31, 2015 and 2014 were as follows:
| Unrealized Losses on Securities | ||||||||||||||||||||||||
| Less than 12 Months | 12 Months or Longer | Total | ||||||||||||||||||||||
| 2015 (dollars in thousands) | Fair Value | Unrealized Losses | Fair Value | Unrealized Losses | Fair Value | Unrealized Losses | ||||||||||||||||||
| U.S. Government agencies | $ | - | $ | - | $ | 1,521 | $ | (10 | ) | $ | 1,521 | $ | (10 | ) | ||||||||||
| Agency guaranteed mortgage-backed securities | 43,021 | (429 | ) | 3,315 | (58 | ) | 46,336 | (487 | ) | |||||||||||||||
| Total | $ | 43,021 | $ | (429 | ) | $ | 4,836 | $ | (68 | ) | $ | 47,857 | $ | (497 | ) | |||||||||
| 2014 (dollars in thousands) | Fair Value | Unrealized Losses | Fair Value | Unrealized Losses | Fair Value | Unrealized Losses | ||||||||||||||||||
| U.S. Government agencies | $ | - | $ | - | $ | 2,689 | $ | (17 | ) | $ | 2,689 | $ | (17 | ) | ||||||||||
| Agency guaranteed mortgage-backed securities | 43,406 | (161 | ) | 1,904 | (28 | ) | 45,310 | (189 | ) | |||||||||||||||
| Total | $ | 43,406 | $ | (161 | ) | $ | 4,593 | $ | (45 | ) | $ | 47,999 | $ | (206 | ) | |||||||||
For the year ended December 31, 2015, there were U.S. Government agency securities and agency guaranteed mortgage-backed securities with unrealized losses totaling $497 thousand. For the year ended December 31, 2014, there were U.S. Government agency securities and agency guaranteed mortgage-backed securities with unrealized losses totaling $206 thousand. All of the unrealized losses are attributable to increases in interest rates and not to credit deterioration. Currently, the Company does not believe that it is probable that it will be unable to collect all amounts due according to the contractual terms of the investments. Because the decline in market value is attributable to changes in interest rates and not to credit quality and because it is not more likely than not that the Company will be required to sell the investments before recovery of their amortized cost bases, which may be maturity, the Company does not consider these investments to be other-than-temporarily impaired at December 31, 2015.
Investment securities with combined fair values of $13.8 million and $7.8 million were pledged to secure public funds with the State of Virginia at December 31, 2015 and 2014, respectively. We had $16.8 million and $9.6 million in securities pledged to secure FHLB advances at December 31, 2015 and 2014, respectively.
Note 4. Loans, Allowance for Loan Losses and Credit Quality
The Bank categorizes its loan receivables into four main categories which are commercial real estate loans, commercial and industrial loans, guaranteed student loans, and consumer loans. Each category of loan has a different level of credit risk. Real estate loans are generally safer than loans secured by other assets because the value of the underlying collateral is generally ascertainable and does not fluctuate as much as other assets. Owner occupied commercial real estate loans are generally the least risky type of commercial real estate loan. Non owner occupied commercial real estate loans and construction and development loans contain more risk. Commercial loans, which can be secured by real estate or other assets, or which can be unsecured, are generally more risky than commercial real estate loans. Guaranteed student loans are guaranteed by the U.S. Department of Education for approximately 98% of the principal and interest. Consumer loans may be secured by residential real estate, automobiles or other assets or may be unsecured. Those secured by residential real estate are the least risky and those that are unsecured are the most risky type of consumer loans. Any type of loan which is unsecured is generally more risky than a secured loan due to the higher risk of loss in the event of a default. These levels of risk are general in nature, and many factors including the creditworthiness of the borrower or the particular nature of the secured asset may cause any type of loan to be more or less risky than another. In the commercial real estate category of the loan portfolio the segments are acquisition-development-construction, non-owner occupied and owner occupied. In the consumer category of the loan portfolio the segments are residential real estate, home equity lines of credit and other. Management has not further divided its eight segments into classes. This provides management and the Board with sufficient information to evaluate the risks within the Bank’s portfolio.
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Cordia Bancorp
Notes to Consolidated Financial Statements (continued)
Below is a table that exhibits the loans by segment at December 31, 2015 and 2014.
| (dollars in thousands) | 2015 | 2014 | ||||||
| Commercial Real Estate: | ||||||||
| Acquisition, development and construction | $ | 2,168 | $ | 2,159 | ||||
| Non-owner occupied | 58,044 | 51,512 | ||||||
| Owner occupied | 45,690 | 49,582 | ||||||
| Commercial and industrial | 34,819 | 24,153 | ||||||
| Guaranteed student loans | 53,847 | 64,870 | ||||||
| Consumer: | ||||||||
| Residential mortgage | 18,140 | 8,377 | ||||||
| HELOC | 10,603 | 11,074 | ||||||
| Other | 22,722 | 1,232 | ||||||
| Total loans | 246,033 | 212,959 | ||||||
| Allowance for loan losses | (823 | ) | (1,089 | ) | ||||
| Total loans, net of allowance for loan losses | $ | 245,210 | $ | 211,870 | ||||
Included in the loan balances above are net deferred loan costs of $1.7 million and $1.2 million at December 31, 2015 and 2014, respectively. Also included in the loan balances above are premiums related to guaranteed student loans of $827 thousand and $931 thousand at December 31, 2015 and 2014, respectively.
Loans Acquired with Evidence of Deterioration in Credit Quality
Acquired in the acquisition of Bank of Virginia, and included in the table above, are purchased performing loans and loans acquired with evidence of deterioration in credit quality. The purchased performing loans are $6.9 million and $9.0 million, at December 31, 2015 and December 31, 2014, respectively. As these loans are re-underwritten, they are removed from the “purchase” classification. The loans acquired with evidence of deterioration in credit quality are accounted for under the guidance ASC 310-30. Information related to these loans is as follows:
| At December 31, (dollars in thousands) | 2015 | 2014 | ||||||
| Contract principal balance | $ | 4,779 | $ | 7,178 | ||||
| Accretable yield | (1 | ) | (42 | ) | ||||
| Nonaccretable difference | - | (5 | ) | |||||
| Carrying value of loans | $ | 4,778 | $ | 7,131 | ||||
A discount is applied to these loans such that the carrying amount approximates the cash flows expected to be received from the borrower or from the liquidation of collateral. Due to the high level of uncertainty regarding the timing and amount of these cash flows in December 2010, Management initially considered the entire discount to be nonaccretable. However, due to improvement in the status of some credits, the majority of the nonaccretable difference was subsequently transferred to accretable yield and is being amortized as a yield adjustment over the lives of the individual loans. Cash flows received on loans with a nonaccretable difference are applied on a cost recovery method, whereby payments are applied first to the loan balance. When the loan balance is fully recovered, payments are then being applied to income. Any future reductions in carrying value as a result of deteriorating credit quality require an allowance for loan losses related to these loans.
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Cordia Bancorp
Notes to Consolidated Financial Statements (continued)
A summary of changes to the accretable yield and nonaccretable difference during 2015 and 2014 are as follows:
| (dollars in thousands) | Accretable Yield | Nonaccretable Difference | ||||||
| Balance at December 31, 2013 | $ | 62 | $ | 61 | ||||
| Charge-offs related to loss covered by ASC 310-30 | - | (56 | ) | |||||
| Transfers | - | - | ||||||
| Accretion | (20 | ) | - | |||||
| Balance at December 31, 2014 | 42 | 5 | ||||||
| Transfers | 5 | (5 | ) | |||||
| Accretion | (46 | ) | - | |||||
| Balance at December 31, 2015 | $ | 1 | $ | - | ||||
Credit Quality Indicators
Credit risk ratings reflect the current risk of default and/or loss for a given asset. The risk of loss is driven by factors intrinsic to the borrower and the unique structural characteristics of the loan. The credit risk rating begins with an analysis of the borrower’s credit history, ability to repay the debt as agreed, use of proceeds, and the value and stability of the value of the collateral securing the loan. The attributes ordinarily considered when reviewing a borrower are as follows:
| · | industry/industry segment; | · | financial flexibility/debt capacity; |
| · | position within industry; | · | management and controls; and |
| · | earnings, liquidity and operating cash flow trends; | · | quality of financial reporting. |
| · | asset and liability values; |
The unique structural characteristics ordinarily considered when reviewing a loan are as follows:
| · | credit terms/loan documentation; |
| · | guaranty/third party support; |
| · | collateral; and |
| · | loan maturity. |
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Cordia Bancorp
Notes to Consolidated Financial Statements (continued)
On a quarterly basis, the process of estimating the allowance for loan loss begins with management’s review of the risk rating assigned to individual credits. Through this process, loans adversely risk rated are evaluated for impairment based on ASC 310-40. The following is a summary of the risk rating definitions the Company uses to assign a risk grade to each loan within the portfolio:
| Grade 1 - Highest Quality | Loans to persons and businesses with unquestionable financial strength and character that carry extremely low probabilities of default. Balance sheets and cash flow are extremely strong relative to the magnitude of debt. This rating would be analogous to the highest investment grade ratings.
|
| Grade 2 - Above Average Quality | Loans to persons and business entities with unquestioned character that carry low probabilities of default. Borrowers have strong, stable earnings and financial condition. |
| Grade 3 - Satisfactory | Loans to persons and businesses with acceptable financial condition that carry average probabilities of default. Borrower’s exhibit adequate cash flow to service debt and have acceptable levels of leverage. |
| Grade 4 - Pass | Loans to persons and businesses with a lack of stability in the primary source of repayment or temporary weakness in their balance sheet or earnings. These loans carry above average probabilities of default. These borrowers generally have higher leverage and less liquidity than loans rated 3-Satisfactory.
|
| Grade 5- Special Mention | Loans to borrowers that exhibit potential credit weakness or a downward trend that warrant additional supervision. While potentially weak, the loan is currently marginally acceptable and no loss of principal or interest is envisioned.
|
| Grade 6 – Substandard | Borrowers with one or more well defined weaknesses that jeopardize the orderly liquidation of the debt. Normal repayment from the borrower is in jeopardy, although no loss of principal is envisioned. Possibility of loss or protracted workout exists if immediate corrective action is not taken. |
| Grade 7 – Doubtful | Loans with all the weaknesses inherent in a Substandard classification, with the added provision that the weaknesses make collection of debt in full highly questionable and improbable, based on currently existing facts, conditions, and values. Serious problems exist to the point where a partial loss of principal is likely.
|
| Grade 8 – Loss | Borrower is deemed incapable of repayment of the entire principal. A charge off is required for the portion of principal management has deemed it will not be repaid. |
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Cordia Bancorp
Notes to Consolidated Financial Statements (continued)
The following is the distribution of loans by credit quality and segment as of December 31, 2015 and 2014:
| December 31, 2015 | ||||||||||||||||||||||||||||||||||||
| (dollars in thousands) | Commercial Real Estate | Consumer | ||||||||||||||||||||||||||||||||||
| Credit quality class | Acq-Dev Construction | Non-owner Occupied | Owner Occupied | Commercial and Industrial | Guaranteed Student Loans | Residential Mortgage | HELOC | Other | Total | |||||||||||||||||||||||||||
| 1 Highest quality | $ | - | $ | - | $ | - | $ | - | $ | - | $ | - | $ | - | $ | - | $ | - | ||||||||||||||||||
| 2 Above average quality | - | 7,772 | 3,285 | 1,876 | 53,847 | - | 1,063 | 396 | 68,239 | |||||||||||||||||||||||||||
| 3 Satisfactory | 989 | 27,397 | 20,355 | 26,289 | - | 11,959 | 5,893 | 22,258 | 115,140 | |||||||||||||||||||||||||||
| 4 Pass | 472 | 19,988 | 19,550 | 6,102 | - | 5,976 | 2,779 | 68 | 54,935 | |||||||||||||||||||||||||||
| 5 Special mention | - | 1,510 | - | 547 | - | 27 | 269 | - | 2,353 | |||||||||||||||||||||||||||
| 6 Substandard | 152 | - | 151 | 5 | - | 41 | 239 | - | 588 | |||||||||||||||||||||||||||
| 7 Doubtful | - | - | - | - | - | - | - | - | - | |||||||||||||||||||||||||||
| 1,613 | 56,667 | 43,341 | 34,819 | 53,847 | 18,003 | 10,243 | 22,722 | 241,255 | ||||||||||||||||||||||||||||
| Loans acquired with deteriorated credit quality | 555 | 1,377 | 2,349 | - | - | 137 | 360 | - | 4,778 | |||||||||||||||||||||||||||
| Total loans | $ | 2,168 | $ | 58,044 | $ | 45,690 | $ | 34,819 | $ | 53,847 | $ | 18,140 | $ | 10,603 | $ | 22,722 | $ | 246,033 | ||||||||||||||||||
| December 31, 2014 | ||||||||||||||||||||||||||||||||||||
| (dollars in thousands) | Commercial Real Estate | Consumer | ||||||||||||||||||||||||||||||||||
| Credit quality class | Acq-Dev Construction | Non-owner Occupied | Owner Occupied | Commercial and Industrial | Guaranteed Student Loans | Residential Mortgage | HELOC | Other | Total | |||||||||||||||||||||||||||
| 1 Highest quality | $ | - | $ | - | $ | - | $ | - | $ | - | $ | - | $ | - | $ | - | $ | - | ||||||||||||||||||
| 2 Above average quality | - | 2,225 | 2,788 | 2,498 | 64,870 | 24 | 1,394 | 719 | 74,518 | |||||||||||||||||||||||||||
| 3 Satisfactory | 458 | 30,473 | 26,608 | 14,883 | - | 3,325 | 6,140 | 425 | 82,312 | |||||||||||||||||||||||||||
| 4 Pass | 476 | 17,236 | 16,986 | 5,593 | - | 4,768 | 2,589 | 88 | 47,736 | |||||||||||||||||||||||||||
| 5 Special mention | - | 123 | - | 68 | - | 75 | 319 | - | 585 | |||||||||||||||||||||||||||
| 6 Substandard | 267 | - | - | 142 | - | - | 268 | - | 677 | |||||||||||||||||||||||||||
| 7 Doubtful | - | - | - | - | - | - | - | - | - | |||||||||||||||||||||||||||
| 1,201 | 50,057 | 46,382 | 23,184 | 64,870 | 8,192 | 10,710 | 1,232 | 205,828 | ||||||||||||||||||||||||||||
| Loans acquired with deterioraed credit quality | 958 | 1,455 | 3,200 | 969 | - | 185 | 364 | - | 7,131 | |||||||||||||||||||||||||||
| Total loans | $ | 2,159 | $ | 51,512 | $ | 49,582 | $ | 24,153 | $ | 64,870 | $ | 8,377 | $ | 11,074 | $ | 1,232 | $ | 212,959 | ||||||||||||||||||
| 60 |
Cordia Bancorp
Notes to Consolidated Financial Statements (continued)
A summary of the balances of loans outstanding by days past due, including accruing and non-accruing loans by portfolio class as of December 31, 2015 and 2014 were as follows:
| December 31, 2015 | ||||||||||||||||||||||||||||||||||||
| Commercial Real Estate | Consumer | |||||||||||||||||||||||||||||||||||
| (dollars in thousands) | Acq-Dev Construction | Non-owner Occupied | Owner Occupied | Commercial and Industrial | Guaranteed Student Loans | Residential Mortgage | HELOC | Other | Total | |||||||||||||||||||||||||||
| 30 - 59 days | $ | - | $ | - | $ | - | $ | - | $ | 3,178 | $ | - | $ | - | $ | 73 | $ | 3,251 | ||||||||||||||||||
| 60 - 89 days | - | - | - | - | 2,413 | - | - | - | 2,413 | |||||||||||||||||||||||||||
| > 90 days | 152 | - | 1,388 | - | 9,645 | - | - | - | 11,185 | |||||||||||||||||||||||||||
| Total past due | 152 | - | 1,388 | - | 15,236 | - | - | 73 | 16,849 | |||||||||||||||||||||||||||
| Current | 2,016 | 58,044 | 44,302 | 34,819 | 38,611 | 18,140 | 10,603 | 22,649 | 229,184 | |||||||||||||||||||||||||||
| Total loans | $ | 2,168 | $ | 58,044 | $ | 45,690 | $ | 34,819 | $ | 53,847 | $ | 18,140 | $ | 10,603 | $ | 22,722 | $ | 246,033 | ||||||||||||||||||
| > 90 days still accruing | $ | - | $ | - | $ | - | $ | - | $ | 9,645 | $ | - | $ | - | $ | - | $ | 9,645 | ||||||||||||||||||
| December 31, 2014 | ||||||||||||||||||||||||||||||||||||
| Commercial Real Estate | Consumer | |||||||||||||||||||||||||||||||||||
| (dollars in thousands) | Acq-Dev Construction | Non-owner Occupied | Owner Occupied | Commercial and Industrial | Guaranteed Student Loans | Residential Mortgage | HELOC | Other | Total | |||||||||||||||||||||||||||
| 30 - 59 days | $ | - | $ | - | $ | - | $ | - | $ | 4,029 | $ | - | $ | - | $ | - | $ | 4,029 | ||||||||||||||||||
| 60 - 89 days | - | - | 885 | - | 1,989 | - | 75 | - | 2,949 | |||||||||||||||||||||||||||
| > 90 days | 548 | - | 314 | 121 | 11,378 | 44 | - | - | 12,405 | |||||||||||||||||||||||||||
| Total past due | 548 | - | 1,199 | 121 | 17,396 | 44 | 75 | - | 19,383 | |||||||||||||||||||||||||||
| Current | 1,611 | 51,512 | 48,383 | 24,032 | 47,474 | 8,333 | 10,999 | 1,232 | 193,576 | |||||||||||||||||||||||||||
| Total loans | $ | 2,159 | $ | 51,512 | $ | 49,582 | $ | 24,153 | $ | 64,870 | $ | 8,377 | $ | 11,074 | $ | 1,232 | $ | 212,959 | ||||||||||||||||||
| > 90 days still accruing | $ | - | $ | - | $ | - | $ | - | $ | 11,378 | $ | - | $ | - | $ | - | $ | 11,378 | ||||||||||||||||||
A summary of non-accrual loans by portfolio class as of December 31, 2015 and 2014 are as follows:
| (dollars in thousands) | 2015 | 2014 | ||||||
| Commercial Real Estate: | ||||||||
| Acquisition, development and construction | $ | 152 | $ | 548 | ||||
| Non-owner occupied | - | |||||||
| Owner occupied | 1,388 | 1,198 | ||||||
| Commercial and industrial | 5 | 121 | ||||||
| Guaranteed Student Loans | - | - | ||||||
| Consumer: | ||||||||
| Residential mortgage | - | 44 | ||||||
| HELOC | 289 | 310 | ||||||
| Other | - | - | ||||||
| Total loans | $ | 1,834 | $ | 2,221 | ||||
| Non-accrual troubled debt restructurings included above | $ | - | $ | - | ||||
| Non-accrual purchased credit impaired loans included above | $ | 1,370 | $ | 1,741 | ||||
| 61 |
Cordia Bancorp
Notes to Consolidated Financial Statements (continued)
Impaired Loans
All loans that are rated Substandard or worse are assessed as impaired based on the expectation that the full collection of principal and interest is in doubt. All loans that are expected to be downgraded to Substandard, require additional analysis to determine if the loan is impaired. All loans that are rated Special Mention are presumed not to be impaired. However, Special Mention rated loans are typically evaluated for the following adverse characteristics that may indicate further analysis is warranted before completing an assessment of impairment:
| · | a loan is 60 days or more delinquent on scheduled principal or interest; |
| · | a loan is presently in an unapproved over-advanced position; |
| · | a loan is newly modified; or |
| · | a loan is expected to be modified. |
The following information is a summary of the Company’s policies pertaining to impaired loans:
A loan is deemed impaired when, based on current information and events, it is probable that all amounts due according to the contractual terms of the loan agreement. Factors impairing repayment might include: inadequate repayment capacity, severe erosion of equity, likely reliance on non-primary source of repayment, guarantors with limited resources, and obvious material deterioration in borrower’s financial condition. The possibility of loss or protracted workout exists if immediate corrective action is not taken.
Once deemed impaired, the loan is then analyzed for the extent of the impairment. Impairment is the difference between the principal balance of the loan and (i) the discounted cash flows of the borrower or (ii) the fair market value of the collateral less the costs involved with liquidation (i.e., real estate commissions, attorney costs, etc.). This difference is then reflected as a component in the allowance for loan loss as a specific reserve.
Government Guaranteed Student loans with a past due balance greater than 90 days are not placed on non-accrual and are not considered impaired. When a loan reaches 120 days past due, the non-guaranteed portion of the loan is charged-off. The guarantor’s payment covers approximately 98% of principal and accrued interest. A component of the general loan loss reserve covers potential losses within the 2% of the non-guaranteed portion of the loans that are less than 120 days past due.
| 62 |
Cordia Bancorp
Notes to Consolidated Financial Statements (continued)
Certain loans were identified and individually evaluated for impairment at December 31, 2015 and 2014. A number of these impaired loans were not charged with a valuation allowance due to Management’s judgment that the cash flows from the underlying collateral or equity available from guarantors was sufficient to recover the Company’s entire investment, while one loan experienced collateral deterioration and a supplemental specific reserve was added. There were no consumer mortgage loans collateralized by residential real estate in the process of foreclosure as of December 31, 2015.
The results of those analyses are presented in the following tables.
The following is a summary of impaired loans, excluding acquired impaired loans, presented by portfolio class as of December 31, 2015:
| (dollars in thousands) | Recorded Investment(1) | Unpaid Principal(2) | Related Allowance | Average Recorded Investment | Interest Recorded | |||||||||||||||
| With no related allowance recorded: | ||||||||||||||||||||
| Commercial Real Estate: | ||||||||||||||||||||
| Acquisition, development and construction | $ | 152 | $ | 152 | $ | - | $ | 188 | $ | - | ||||||||||
| Non-owner occupied | - | - | - | - | - | |||||||||||||||
| Owner occupied | 151 | 152 | - | 156 | - | |||||||||||||||
| Commercial and industrial | 5 | 5 | - | 13 | - | |||||||||||||||
| Consumer: | - | - | ||||||||||||||||||
| Residential mortgage | 41 | 41 | - | 44 | 3 | |||||||||||||||
| HELOC | 175 | 175 | - | 185 | 3 | |||||||||||||||
| Other | - | - | - | - | ||||||||||||||||
| $ | 524 | $ | 525 | $ | - | $ | 586 | $ | 6 | |||||||||||
| With an allowance recorded: | ||||||||||||||||||||
| Commercial Real Estate: | ||||||||||||||||||||
| Acquisition, development and construction | $ | - | $ | - | $ | - | $ | - | $ | - | ||||||||||
| Non-owner occupied | - | - | - | - | - | |||||||||||||||
| Owner occupied | - | - | - | - | - | |||||||||||||||
| Commercial and industrial | - | - | - | - | - | |||||||||||||||
| Consumer: | ||||||||||||||||||||
| Residential mortgage | - | - | - | - | - | |||||||||||||||
| HELOC | 64 | 64 | 16 | 66 | - | |||||||||||||||
| Other | - | - | - | - | - | |||||||||||||||
| $ | 64 | $ | 64 | $ | 16 | $ | 66 | $ | - | |||||||||||
| Total: | ||||||||||||||||||||
| Commercial Real Estate: | ||||||||||||||||||||
| Acquisition, development and construction | $ | 152 | $ | 152 | $ | - | $ | 188 | $ | - | ||||||||||
| Non-owner occupied | - | - | - | - | - | |||||||||||||||
| Owner occupied | 151 | 152 | - | 156 | - | |||||||||||||||
| Commercial and industrial | 5 | 5 | - | 13 | - | |||||||||||||||
| Consumer: | - | |||||||||||||||||||
| Residential mortgage | 41 | 41 | - | 44 | 3 | |||||||||||||||
| HELOC | 239 | 239 | 16 | 251 | 3 | |||||||||||||||
| Other | - | - | - | - | - | |||||||||||||||
| Total | $ | 588 | $ | 589 | $ | 16 | $ | 652 | $ | 6 | ||||||||||
| 63 |
Cordia Bancorp
Notes to Consolidated Financial Statements (continued)
The following is a summary of impaired loans, excluding acquired impaired loans, presented by portfolio class as of December 31, 2014:
| (dollars in thousands) | Recorded Investment(1) | Unpaid Principal(2) | Related Allowance | Average Recorded Investment | Interest Recorded | |||||||||||||||
| With no related allowance recorded: | ||||||||||||||||||||
| Commercial Real Estate: | ||||||||||||||||||||
| Acquisition, development and construction | $ | 267 | $ | 267 | $ | - | $ | 269 | $ | 6 | ||||||||||
| Non-owner occupied | - | - | - | - | - | |||||||||||||||
| Owner occupied | - | - | - | - | - | |||||||||||||||
| Commercial and industrial | 32 | 34 | - | 46 | 2 | |||||||||||||||
| Consumer: | - | |||||||||||||||||||
| Residential mortgage | - | - | - | - | - | |||||||||||||||
| HELOC | 193 | 193 | - | 197 | 3 | |||||||||||||||
| Other | - | - | - | - | - | |||||||||||||||
| $ | 492 | $ | 494 | $ | - | $ | 512 | $ | 11 | |||||||||||
| With an allowance recorded: | ||||||||||||||||||||
| Commercial Real Estate: | ||||||||||||||||||||
| Acquisition, development and construction | $ | - | $ | - | $ | - | $ | - | $ | - | ||||||||||
| Non-owner occupied | - | - | - | - | - | |||||||||||||||
| Owner occupied | - | - | - | - | - | |||||||||||||||
| Commercial and industrial | 110 | 540 | 110 | 309 | 7 | |||||||||||||||
| Consumer: | ||||||||||||||||||||
| Residential mortgage | - | - | - | - | - | |||||||||||||||
| HELOC | 75 | 75 | 33 | 75 | - | |||||||||||||||
| Other | - | - | - | - | - | |||||||||||||||
| $ | 185 | $ | 615 | $ | 143 | $ | 384 | $ | 7 | |||||||||||
| Total: | ||||||||||||||||||||
| Commercial Real Estate: | ||||||||||||||||||||
| Acquisition, development and construction | $ | 267 | $ | 267 | $ | - | $ | 269 | $ | 6 | ||||||||||
| Non-owner occupied | - | - | - | - | - | |||||||||||||||
| Owner occupied | - | - | - | - | - | |||||||||||||||
| Commercial and industrial | 142 | 574 | 110 | 355 | 9 | |||||||||||||||
| Consumer: | - | - | - | |||||||||||||||||
| Residential mortgage | - | - | - | - | - | |||||||||||||||
| HELOC | 268 | 268 | 33 | 272 | 3 | |||||||||||||||
| Other | - | - | - | - | - | |||||||||||||||
| Total | $ | 677 | $ | 1,109 | $ | 143 | $ | 896 | $ | 18 | ||||||||||
| (1) | The amount of the investment in a loan, which is not net of a valuation allowance, but which does reflect any direct write-down of the investment. |
| (2) | The contractual amount due, which reflects paydowns applied in accordance with loan documents, but which does not reflect any direct write-downs. |
Loans with deteriorated credit quality acquired as part of the Bank of Virginia acquisition are accounted for under the requirements of ASC 310-30. These loans are not considered impaired and are not included in the table above.
| 64 |
Cordia Bancorp
Notes to Consolidated Financial Statements (continued)
Troubled Debt Restructurings
A modification is classified as a troubled debt restructuring (“TDR”) if both of the following exist: (1) the borrower is experiencing financial difficulty and (2) the Company has granted a concession to the borrower. The Company determines that a borrower may be experiencing financial difficulty if the borrower is currently delinquent on any of its debt, or if the Company is concerned that the borrower may not be able to perform in accordance with the current terms of the loan agreement in the foreseeable future. Many aspects of the borrower’s financial situation are assessed when determining whether they are experiencing financial difficulty, particularly as it relates to commercial borrowers due to the complex nature of the loan structure, business/industry risk and borrower/guarantor structures. Concessions may include the reduction of an interest rate at a rate lower than current market rate for a new loan with similar risk, extension of the maturity date, reduction of accrued interest, or principal forgiveness. When evaluating whether a concession has been granted, the Company also considers whether the borrower has provided additional collateral or guarantors and whether such additions adequately compensate the Company for the restructured terms, or if the revised terms are consistent with those currently being offered to new loan customers. The assessments of whether a borrower is experiencing (or is likely to experience) financial difficulty and whether a concession has been granted is subjective in nature and management’s judgment is required when determining whether a modification is a TDR.
Although each occurrence is unique to the borrower and is evaluated separately, for all portfolio segments, TDRs are typically modified through reduction in interest rates, reductions in payments, changing the payment terms from principal and interest to interest only, and/or extensions in term maturity.
During the year ended December 31, 2015, no loans were modified in trouble debt restructurings and two previous troubled debt restructurings were paid off. During the year ended December 31, 2014, two loans were modified in trouble debt restructurings and three previous troubled debt restructurings were paid off. At December 31, 2015 and 2014, no loans and four loans, respectively, were classified as TDRs. The principal balance outstanding relating to these loans was $1.3 million at December 31, 2014. Of this amount, $1.3 million was accruing. During the years ended December 31, 2015 and 2014, no defaults occurred on loans modified as TDR’s in the preceding twelve months.
The number and outstanding recorded investment of loans entered into under the terms of a TDR during the years ended December 31, 2014, including modifications of acquired impaired loans, by type of concession granted, are set forth in the following table. There were no TDRs as of December 31, 2015.
| 2014 (dollars in thousands) | Number of loans | Rate modification | Term extension | Pre-modification recorded investment | Post-modification recorded investment (1) | |||||||||||||||
| Commercial and industrial | 1 | $ | - | $ | 512 | $ | 512 | $ | 457 | |||||||||||
| Commercial real estate - non-owner occupied | 1 | - | 595 | 595 | 417 | |||||||||||||||
| Total | 2 | $ | - | $ | 1,107 | $ | 1,107 | $ | 874 | |||||||||||
(1) The period end balances are inclusive of all partial paydowns and charge-offs since the modification date. Loans modified as TDRs that were fully paid down, charged-off, or foreclosed upon by period end are not reported.
TDRs are considered to be in default if the borrower fails to make timely payments under the terms of the restructure and repayment possibilities have been exhausted. There were no troubled debt restructurings that defaulted within one year during the years ended December 31, 2015 or 2014 whereby all repayment possibilities had been exhausted.
| 65 |
Cordia Bancorp
Notes to Consolidated Financial Statements (continued)
A summary of the allowance for loan losses by portfolio segment as of December 31, 2015 is as follows:
| Commercial Real Estate | Consumer | |||||||||||||||||||||||||||||||||||
| (dollars in thousands) | Acquisition, Development, Construction | Non-owner occupied | Owner occupied | Commercial and Industrial | Guaranteed Student Loans | Residential mortgage | HELOC | Other | Total | |||||||||||||||||||||||||||
| Allowance for loan losses | ||||||||||||||||||||||||||||||||||||
| Beginning balance, December 31, 2014 | $ | 146 | $ | 97 | $ | 149 | $ | 357 | $ | 144 | $ | 98 | $ | 76 | $ | 22 | $ | 1,089 | ||||||||||||||||||
| Charge-offs | (127 | ) | - | - | (109 | ) | (331 | ) | - | (20 | ) | (2 | ) | (589 | ) | |||||||||||||||||||||
| Recoveries | - | 241 | 361 | - | 5 | 9 | - | 616 | ||||||||||||||||||||||||||||
| (Charge-offs) recoveries | (127 | ) | - | 241 | 252 | (331 | ) | 5 | (11 | ) | (2 | ) | 27 | |||||||||||||||||||||||
| Provision (recovery) | 70 | 60 | (308 | ) | (497 | ) | 234 | (44 | ) | (4 | ) | 196 | (293 | ) | ||||||||||||||||||||||
| Ending balance, December 31, 2015 | $ | 89 | $ | 157 | $ | 82 | $ | 112 | $ | 47 | $ | 59 | $ | 61 | $ | 216 | $ | 823 | ||||||||||||||||||
| Allowance for loan losses for loans | ||||||||||||||||||||||||||||||||||||
| Individually evaluated for impairment | $ | - | $ | - | $ | - | $ | - | $ | - | $ | - | $ | 16 | $ | - | $ | 16 | ||||||||||||||||||
| Collectively evaluated for impairment | 89 | 157 | 82 | 112 | 47 | 59 | 45 | 216 | 807 | |||||||||||||||||||||||||||
| Loans acquired with deteriorated credit quality | - | - | - | - | - | - | - | - | - | |||||||||||||||||||||||||||
| Ending balance, December 31, 2015 | $ | 89 | $ | 157 | $ | 82 | $ | 112 | $ | 47 | $ | 59 | $ | 61 | $ | 216 | $ | 823 | ||||||||||||||||||
| Gross loan balances | ||||||||||||||||||||||||||||||||||||
| Individually evaluated for impairment | $ | 152 | $ | - | $ | 151 | $ | 5 | $ | - | $ | 41 | $ | 239 | $ | - | $ | 588 | ||||||||||||||||||
| Collectively evaluated for impairment | 1,461 | 56,667 | 43,190 | 34,814 | 53,847 | 17,962 | 10,004 | 22,722 | 240,667 | |||||||||||||||||||||||||||
| Loans acquired with deteriorated credit quality | 555 | 1,377 | 2,349 | - | - | 137 | 360 | - | 4,778 | |||||||||||||||||||||||||||
| Ending balance, December 31, 2015 | $ | 2,168 | $ | 58,044 | $ | 45,690 | $ | 34,819 | $ | 53,847 | $ | 18,140 | $ | 10,603 | $ | 22,722 | $ | 246,033 | ||||||||||||||||||
| 66 |
Cordia Bancorp
Notes to Consolidated Financial Statements (continued)
A summary of the allowance for loan losses by portfolio segment as of December 31, 2014 is as follows:
| Commercial Real Estate | Consumer | |||||||||||||||||||||||||||||||||||
| (dollars in thousands) | Acquisition, Development, Construction | Non-owner Occupied | Owner Occupied | Commercial and Industrial | Guaranteed Student Loans | Residential Mortgage | HELOC | Other | Total | |||||||||||||||||||||||||||
| Allowance for loan losses | ||||||||||||||||||||||||||||||||||||
| Beginning balance, December 31, 2013 | $ | 300 | $ | 39 | $ | 322 | $ | 377 | $ | 268 | $ | 120 | $ | 20 | $ | 43 | $ | 1,489 | ||||||||||||||||||
| Charge-offs | (6 | ) | (114 | ) | - | (485 | ) | (359 | ) | - | - | - | (964 | ) | ||||||||||||||||||||||
| Recoveries | 33 | 57 | 49 | 91 | - | 4 | 4 | 21 | 259 | |||||||||||||||||||||||||||
| (Charge-offs) recoveries | 27 | (57 | ) | 49 | (394 | ) | (359 | ) | 4 | 4 | 21 | (705 | ) | |||||||||||||||||||||||
| Provision (recovery) | (181 | ) | 115 | (222 | ) | 374 | 235 | (26 | ) | 52 | (42 | ) | 305 | |||||||||||||||||||||||
| Ending balance, December 31, 2014 | $ | 146 | $ | 97 | $ | 149 | $ | 357 | $ | 144 | $ | 98 | $ | 76 | $ | 22 | $ | 1,089 | ||||||||||||||||||
| Allowance for loan losses for loans | ||||||||||||||||||||||||||||||||||||
| Individually evaluated for impairment | $ | - | $ | - | $ | - | $ | 110 | $ | - | $ | - | $ | 33 | $ | - | $ | 143 | ||||||||||||||||||
| Collectively evaluated for impairment | 56 | 97 | 149 | 247 | 144 | 98 | 43 | 22 | 856 | |||||||||||||||||||||||||||
| Loans acquired with deteriorated credit quality | 90 | - | - | - | - | - | - | - | 90 | |||||||||||||||||||||||||||
| Ending balance, December 31, 2014 | $ | 146 | $ | 97 | $ | 149 | $ | 357 | $ | 144 | $ | 98 | $ | 76 | $ | 22 | $ | 1,089 | ||||||||||||||||||
| Gross loan balances | ||||||||||||||||||||||||||||||||||||
| Individually evaluated for impairment | $ | 267 | $ | - | $ | - | $ | 142 | $ | - | $ | - | $ | 268 | $ | - | $ | 677 | ||||||||||||||||||
| Collectively evaluated for impairment | 934 | 50,057 | 46,382 | 23,042 | 64,870 | 8,192 | 10,442 | 1,232 | 205,151 | |||||||||||||||||||||||||||
| Loans acquired with deteriorated credit quality | 958 | 1,455 | 3,200 | 969 | - | 185 | 364 | - | 7,131 | |||||||||||||||||||||||||||
| Ending balance, December 31, 2014 | $ | 2,159 | $ | 51,512 | $ | 49,582 | $ | 24,153 | $ | 64,870 | $ | 8,377 | $ | 11,074 | $ | 1,232 | $ | 212,959 | ||||||||||||||||||
| 67 |
Cordia Bancorp
Notes to Consolidated Financial Statements (continued)
Note 5. Intangible Assets
In 2010, the Company acquired a majority interest in the Bank of Virginia. The Company recorded a core deposit intangible related to this acquisition of $249 thousand. This asset represents the estimated fair value of the core deposits and was determined based on the present value of future cash flow related to those deposits considering the industry standard “financial instrument” type present value methodology. The core deposit intangible is amortized over the estimated life of the deposits using the straight-line method. A summary of the activity in this account is as follows:
| (dollars in thousands) | ||||
| Balance at December 31, 2013 | $ | 139 | ||
| Amortization | (35 | ) | ||
| Balance at December 31, 2014 | $ | 104 | ||
| Amortization | (36 | ) | ||
| Balance at December 31, 2015 | $ | 68 | ||
Amortization expense is expected to be approximately $35 thousand per year in 2016 and $33 thousand in 2017.
Note 6. Premises and Equipment
A summary of the cost and accumulated depreciation of premises and equipment is as follows:
| At December 31, (dollars in thousands) | 2015 | 2014 | ||||||
| Land | $ | 2,305 | $ | 1,568 | ||||
| Buildings and improvements | 3,656 | 2,640 | ||||||
| Furniture, fixtures and equipment | 1,174 | 1,082 | ||||||
| Leasehold improvements | 369 | 369 | ||||||
| Automobiles | 34 | 34 | ||||||
| Total premises and equipment | $ | 7,538 | $ | 5,693 | ||||
| Less: accumulated depreciation and amortization | (1,558 | ) | (1,261 | ) | ||||
| Total premises and equipment, net | $ | 5,980 | $ | 4,432 | ||||
For the years ended December 31, 2015 and 2014, depreciation expense totaled $306 thousand and $294 thousand, respectively.
At the beginning of 2015, the Company leased two branches and an operations office under operating leases that were acquired as part of a business combination. Management determined that one of these leases required lease payments that were above market as of the date of the acquisition. A liability was established for $822 thousand at acquisition, the amount the contractual payments exceeded fair value. This liability was being accreted into income as a reduction of lease expense over the life of the lease. During the second quarter of 2015, this property was purchased and the related lease was terminated resulting in a favorable reversal of the fair value discount. This accretion adjustment reduced non-interest expense by $225 thousand. Accordingly, total rent expense net of accretion, for the years ended December 31, 2015 and 2014, respectively, amounted to $17 thousand and $227 thousand. Future lease expenses will no longer be reduced by accretion.
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Cordia Bancorp
Notes to Consolidated Financial Statements (continued)
Following is a schedule by year of future minimum rental payments required under operating leases that have initial or remaining non-cancelable lease terms in excess of one year as of December 31, 2015.
| (dollars in thousands) | ||||
| By year ended December 31, | Rent | |||
| 2016 | $ | 101 | ||
| 2017 | 96 | |||
| 2018 | 99 | |||
| 2019 | 8 | |||
| Total minimum payments required | $ | 304 | ||
The Chester branch lease, set to expire at the end of February 2016, was renegotiated after December 31, 2015, thus future minimum rental payments are only included for the first two months of 2016 in the above table for this branch (see Note 18 – Subsequent Events).
Note 7. Borrowings
The Bank is a member of the Federal Home Loan Bank of Atlanta (FHLB) which provides for short-term and long-term advances, typically collateralized by various mortgage products. The FHLB maintains a blanket security agreement on qualifying collateral. Detail related to FHLB advances at December 31, 2015 and 2014 is as follows:
| (dollars in thousands) | Maturity date | 2015 | 2014 | |||||||
| FHLB Advance — 1.62% | December 2019 | $ | 10,000 | $ | 10,000 | |||||
| FHLB Advance — 0.615% | March 2016 | 10,000 | 10,000 | |||||||
| FHLB Advance — 1.63% | October 2018 | 2,500 | 2,500 | |||||||
| FHLB Advance — 1.92% | October 2019 | 2,500 | 2,500 | |||||||
| FHLB Advance — 1.158% | January 2018 | 5,000 | - | |||||||
| Total | $ | 30,000 | $ | 25,000 | ||||||
Should the FHLB borrowing be repaid prior to maturity, the Bank may have to pay a mark-to-market termination fee to unwind on certain FHLB obligations. On the remaining advances, the Bank also has the option of converting and extending the borrowing term, subject to the inclusion of any mark-to-market fees. As of December 31, 2015, the Bank had approximately $14.1 million of remaining eligible loan collateral available for additional FHLB borrowings and remaining additional credit availability of $39.7 million based on the amount of other balance sheet investment securities held, excluding securities otherwise already pledged.
BVA maintains $4.5 million of unsecured lines of credit with other correspondent banks that were available for direct borrowings or Federal Funds purchased. The lines were undrawn at December 31, 2015.
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Cordia Bancorp
Notes to Consolidated Financial Statements (continued)
Note 8. Related Party Transactions
Executive officers, directors and their affiliates had borrowings of $5.2 million and $4.7 million and unfunded commitments of $539 thousand and $523 thousand with the Bank at December 31, 2015 and 2014.
| Related Party Borrowings at December 31, 2013 | $ | 1,227 | ||
| New loans/advances | 4,355 | |||
| Repayments | (882 | ) | ||
| Related Party Borrowings at December 31, 2014 | 4,700 | |||
| New loans/advances | 1,285 | |||
| Repayments | (745 | ) | ||
| Related Party Borrowings at December 31, 2015 | $ | 5,240 |
In addition, executive officers, directors and their affiliates maintained deposits of $2.6 million at December 31, 2015 and $2.9 million at December 31, 2014.
Note 9. Time Deposits
Remaining maturities on time deposits are as follows:
| (dollars in thousands) | ||||
| By year ended December 31, | ||||
| 2016 | $ | 81,699 | ||
| 2017 | 27,963 | |||
| 2018 | 25,356 | |||
| 2019 | 4,413 | |||
| 2020 | 14,587 | |||
| Balance at December 31, 2015 | $ | 154,018 | ||
The aggregate amount of time deposits of $250,000 or more at December 31, 2015 and 2014 were $13.7 million and $9.7 million, respectively. The Bank maintained brokered time deposits of $35.2 million and $35.8 million at December 31, 2015 and 2014, respectively.
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Cordia Bancorp
Notes to Consolidated Financial Statements (continued)
Note 10. Income Taxes
The Company and Bank file income tax returns in the U.S. federal jurisdiction. With few exceptions, the Bank is no longer subject to U.S. federal income tax examinations by tax authorities for years prior to 2012.
The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and deferred tax liabilities at December 31, 2015 and 2014, are presented below:
| (dollars in thousands) | 2015 | 2014 | ||||||
| Deferred tax assets | ||||||||
| Unrealized securites losses | $ | 235 | $ | 159 | ||||
| Acquistion accounting adjustments | 90 | 271 | ||||||
| Other real estate owned | 96 | 97 | ||||||
| Net operating loss carryforward | 6,385 | 6,372 | ||||||
| Accrued vacation | 26 | 22 | ||||||
| Non-accrual loan interest | 89 | 92 | ||||||
| Bank premises and equipment | 8 | - | ||||||
| Stock compensation | 52 | 34 | ||||||
| Other | 1 | 2 | ||||||
| Total deferred tax assets | $ | 6,982 | $ | 7,049 | ||||
| Deferred tax liabilities | ||||||||
| Allowance for loan losses | $ | (903 | ) | $ | (804 | ) | ||
| Bank premises and equipment | - | (32 | ) | |||||
| Total deferred tax liabilities | $ | (903 | ) | $ | (836 | ) | ||
| Net deferred tax asset | $ | 6,079 | $ | 6,213 | ||||
| Less: valuation allowance | (6,079 | ) | (6,213 | ) | ||||
| $ | - | $ | - | |||||
The provision for income taxes charged to operations as of December 31, 2015 and 2014 consists of the following:
| (dollars in thousands) | 2015 | 2014 | ||||||
| Current tax expense | $ | - | $ | - | ||||
| Deferred tax (benefit) | 210 | 662 | ||||||
| Less change in valuation allowance allocable to securities | (76 | ) | (17 | ) | ||||
| Deferred tax (benefit) | 134 | 645 | ||||||
| Change in valuation allowance | (134 | ) | (645 | ) | ||||
| Total tax expense | $ | - | $ | - | ||||
Under the provisions of the Internal Revenue Code, the Company has approximately $18.7 million of net operating loss carryforwards, which will expire if unused beginning in 2024 through 2034. As of December 31, 2015, net deferred tax assets (DTA) of $6.1 million have been fully reserved with a valuation allowance. It is estimated that all of the valuation allowance is available to be reversed if it is deemed more-likely-than-not that all of the deferred tax asset will be realized. Of the net operating losses that occurred prior to the change in control of BVA in December 2010 and of Cordia in April 2014, the amount of the loss carryforward available to offset taxable income is limited to approximately $254 thousand per year for twenty years for BVA and zero for Cordia. DTAs related to net operating losses in excess of the amount realizable during the 20 year carryforward period have been written off.
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Cordia Bancorp
Notes to Consolidated Financial Statements (continued)
Note 11. Financial Instruments with Off-Balance Sheet Risk
The Bank is party to credit-related financial instruments with off-balance sheet risk in the normal course of business to meet the financing needs of its customers. These financial instruments include commitments to extend credit and standby letters of credit. Such commitments involve, to varying degrees, elements of credit and interest rate risk in excess of the amount recognized in the consolidated Balance Sheet.
The Bank’s exposure to credit loss is represented by the contractual amount of these commitments. The Bank follows the same credit policies in making commitments as it does for on-balance sheet instruments.
At December 31, 2015 and 2014, the following financial instruments were outstanding whose contractual amounts represent credit risk:
| (dollars in thousands) | 2015 | 2014 | ||||||
| Unused commitments and commitments to fund | $ | 16,133 | $ | 15,110 | ||||
| Commercial and standy letters of credit | 445 | 535 | ||||||
| $ | 16,578 | $ | 15,645 | |||||
Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established in the contract. Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee. The commitments for equity lines of credit may expire without being drawn upon. Therefore, the total commitment amounts do not necessarily represent future cash requirements. The amount of collateral obtained, if it is deemed necessary by the Bank, is based on management’s credit evaluation of the customer.
Unfunded commitments under commercial lines of credit, revolving credit lines and overdraft protection agreements are commitments for possible future extensions of credit to existing customers. These lines of credit usually contain a specified maturity date and may not be fully drawn upon to the total extent to which the Bank is committed. The amount of collateral obtained, if it is deemed necessary by the Bank, is based on management’s credit evaluation of the customer.
Standby letters of credit are conditional commitments issued by the Bank to guarantee the performance of a customer to a third party. Those letters of credit are primarily issued to support public and private borrowing arrangements. Letters of credit issued generally have expiration dates within one year, except for those originally issued as two year commitments, however, upon automatic renewal, the letters of credit will then have expiration dates that expire within one year. The credit risk involved in issuing letters of credit is essentially the same as that involved in normal extensions of credit. The Bank generally holds collateral supporting those commitments, if deemed necessary.
The Bank maintains its primary cash accounts in correspondent banks. Capital ratios of correspondents are reviewed periodically to ensure that their capital ratios are maintained at acceptable levels. There were uninsured balances held with these institutions of $10.6 million and $6.0 million at December 31, 2015 and 2014, respectively.
Note 12. Minimum Regulatory Capital Requirements and Dividend Limitations
The Bank is subject to various regulatory capital requirements administered by the federal banking agencies. Failure to meet minimum capital requirements can initiate certain mandatory, possibly additional discretionary, actions by regulators that could have a direct material effect on the Bank’s consolidated financial statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, financial institutions must meet specific capital guidelines that involve quantitative measures of assets, liabilities, and certain off-balance-sheet items as calculated under regulatory accounting practices. A financial institution’s capital amounts and classification are also subject to qualitative judgments by the regulators about components, risk weightings, and other factors. Because total assets on a consolidated basis are less than $500,000,000, the Company is not subject to the consolidated capital requirements imposed by the Bank Holding Company Act. Consequently, the Company is not required to calculate its capital ratios on a consolidated basis.
The final rules implementing Basel Committee on Banking Supervision's capital guidelines for U.S. banks (Basel III rules) became effective on January 1, 2015, with full compliance with all of the requirements being phased in over a multi-year schedule, and fully phased in by January 1, 2019. As part of the new requirements, the Common Equity Tier I Capital ratio is calculated and utilized in the assessment of capital for all institutions. Capital amounts and ratios for December 31, 2014 were calculated using the Basel I rules, which were effective until January 1, 2015. Quantitative measures established by regulation to ensure capital adequacy require financial institutions to maintain minimum amounts and ratios (set forth in the table below) of total, Tier 1 capital and common equity Tier 1 capital (as defined in the regulations) to risk-weighted assets (as defined), and of Tier 1 capital (as defined) to average assets (as defined). As of December 31, 2015, the Bank meets all capital adequacy requirements to which it is subject.
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Cordia Bancorp
Notes to Consolidated Financial Statements (continued)
As of December 31, 2015, the Bank was considered as well capitalized under the Federal Reserve Bank’s regulatory framework for prompt corrective action. To be categorized as well capitalized, the Bank must maintain minimum total risk-based, Tier 1 risk-based, and Tier 1 leverage ratios as set forth in the following table. There are no conditions or events since that notification that management believes have changed the Bank's category.
The Bank's actual capital amounts and ratios as of December 31, 2015 and 2014, are presented in the following table:
| Actual Capital | Minimum Capital Requirement | Minimum To Be Well Capitalized Under Prompt Corrective Action | ||||||||||||||||||||||
| Provisions (dollars in thousands) | Amount | Ratio | Amount | Ratio | Amount | Ratio | ||||||||||||||||||
| 2015 | ||||||||||||||||||||||||
| Total capital | ||||||||||||||||||||||||
| (To risk-weighted assets) | $ | 28,280 | 13.43 | % | $ | 16,842 | 8.00 | % | $ | 21,052 | 10.00 | % | ||||||||||||
| Tier 1 capital | ||||||||||||||||||||||||
| (To risk-weighted assets) | $ | 27,457 | 13.04 | % | $ | 12,631 | 6.00 | % | $ | 16,842 | 8.00 | % | ||||||||||||
| Comon equity tier 1 capital* | ||||||||||||||||||||||||
| (To risk-weighted assets) | $ | 27,457 | 13.04 | % | $ | 9,473 | 4.50 | % | $ | 13,684 | 6.50 | % | ||||||||||||
| Tier 1 capital | ||||||||||||||||||||||||
| (To average assets) | $ | 27,457 | 7.82 | % | $ | 14,049 | 4.00 | % | $ | 17,561 | 5.00 | % | ||||||||||||
| 2014 | ||||||||||||||||||||||||
| Total capital | ||||||||||||||||||||||||
| (To risk-weighted assets) | $ | 27,074 | 15.52 | % | $ | 13,958 | 8.00 | % | $ | 17,448 | 10.00 | % | ||||||||||||
| Tier 1 capital | ||||||||||||||||||||||||
| (To risk-weighted assets) | $ | 25,985 | 14.89 | % | $ | 6,979 | 4.00 | % | $ | 10,469 | 6.00 | % | ||||||||||||
| Tier 1 capital | ||||||||||||||||||||||||
| (To average assets) | $ | 25,985 | 8.24 | % | $ | 12,610 | 4.00 | % | $ | 15,763 | 5.00 | % | ||||||||||||
* Common equity tier 1 capital became applicable in 2015.
Dividend Limitations
As a result of regulatory restrictions due to losses realized by the Bank during 2014 and 2012 and the provisions of the Bank’s previous written agreement with the Federal Reserve Bank of Richmond, which terminated on August 13, 2013, we are not presently able to pay dividends without prior approval. Accordingly, the Bank paid no dividends during 2015 or 2014.
Note 13. Employee Benefit Plans
Employee 401(k) Savings Plan
The Company provides a 401(k) Plan that is available to employees meeting minimum eligibility requirements. The Company did not make any matching contributions to the plan in 2015 or 2014. The employee participants have various investment alternatives available in the 401(k) Plan; however, Company stock is currently not permitted as an investment alternative.
Employee Welfare Plan
The Company provides benefit programs to eligible full-time and part-time employees who elect coverage under the plan. Each plan has its own eligibility requirement. During an annual enrollment period each year, employees have the opportunity to change their coverage or, in certain circumstances, more frequently due to certain life-changing events. Generally, amounts paid by employees for benefit coverage are deducted from their pay on a before-tax basis. Certain benefits are deducted on an after-tax basis.
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Cordia Bancorp
Notes to Consolidated Financial Statements (continued)
Various insurance benefits offered to employees consist of medical, dental, vision, life, accidental death and dismemberment, long term disability, short term disability, medical spending account, dependent care spending account, long term care and supplemental insurance. The health and welfare plans are administered through Multiple Employer Welfare Association (“MEWA”). Monthly employer and employee contributions are remitted to a tax-exempt employer benefits trust managed by the Virginia Bankers Association, against which the MEWA processes and pays claims.
Deferred Compensation Plan
The Bank had a deferred compensation agreement with its Former Chief Executive Officer and Vice Chairman of the board entered into in January 2005, providing for benefit payments commencing January 1, 2010, for a period of five years. The final payout was made in December 2014. The annual payment for 2014 was $60 thousand. The obligation was based upon the present value of the expected payments over the expected payout and accrual period. There was no remaining liability as of December 31, 2015 or 2014.
Stock Options and Restricted Stock
Share-based compensation arrangements include stock options, restricted stock plans, performance-based awards, stock appreciation rights and employee stock purchase plans. ASC Topic 718 requires all share-based payments to employees to be valued using a fair value method on the date of grant and to be expensed based on that fair value over the applicable vesting period.
At the Bank’s 2005 annual meeting of shareholders, the Bank’s shareholders ratified approval of the Bank of Virginia 2005 Stock Option Plan (the “2005 Plan”) which made available up to 26,560 shares for potential grants of stock options. The Plan was instituted to encourage and facilitate investment in the common stock of the Bank by key employees and executives and to assist in the long-term retention of service by those executives. The Plan covers employees as determined by the Bank’s Board of Directors from time to time. Options under the Plan were granted in the form of incentive stock options.
At the Bank’s 2011 annual meeting of shareholders, the Bank’s shareholders approved a new share-based compensation plan (Bank of Virginia 2011 Stock Incentive Plan or the “2011 Plan”). Under this plan, employees, officers and directors of the Bank or its affiliates are eligible to participate. The plan’s intent was to reward employees, officers and directors of the Bank or its affiliates for their efforts, to assist in the long-term retention of service for those who were awarded, as well as further align their interests with the Bank’s shareholders. At the Company’s 2014 annual meeting of shareholders, Cordia shareholders approved an amendment to the 2011 Plan to increase the number of shares authorized for issuance by an additional 800,000 shares. As of December 31, 2015, there were 592,765 shares available for issuance under the 2011 Plan.
There were 20,000 Cordia stock options granted outside the plan prior to the share exchange in March 2013. These stock options were forfeited during 2015. In addition, there were 10,000 stock options and 12,500 restricted stock issued in September 2013 outside the plan as an inducement grant to a newly hired officer.
Effective upon Cordia’s acquisition of the Bank on March 29, 2013, the 2005 and 2011 Plans were assumed by Cordia.
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Cordia Bancorp
Notes to Consolidated Financial Statements (continued)
A summary of the Company’s option activity as of December 31, 2015 and 2014 and changes during the years then ended are presented in the following table:
| Option shares | Weighted- Average Exercise Price | Weighted- Average Remaining Contractual Term (Years) | ||||||||||
| Outstanding at January 1, 2014 | 115,656 | $ | 7.68 | 8.44 | ||||||||
| Granted | 31,150 | 4.16 | - | |||||||||
| Forfeited | (1,328 | ) | 6.40 | - | ||||||||
| Outstanding at December 31, 2014 | 145,478 | $ | 6.94 | 7.88 | ||||||||
| Granted | 23,600 | 3.86 | - | |||||||||
| Forfeited | (44,392 | ) | 6.28 | - | ||||||||
| Outstanding at December 31, 2015 | 124,686 | $ | 6.59 | 7.54 | ||||||||
| Exercisable at December 31, 2015 | 63,567 | $ | 8.71 | - | ||||||||
Aggregate intrinsic value is calculated as the difference between the quoted price and the award exercise price of the stock. To the extent that the quoted price is less than the exercise price, there is no value to the underlying option awards, which was the case at both December 31, 2015 and 2014.
The weighted average fair value of options granted during 2015 and 2014 was $1.38 and $1.50, respectively. The remaining unrecognized compensation expense for the options granted totaled $58 thousand as of December 31, 2015 and will be recognized over the next 46 months, or 3.83 years.
The fair value of each option granted is estimated on the date of grant using the “Black-Scholes Option Pricing” method with the following assumptions for the year ended December 31, 2015 and 2014:
| 2015 | 2014 | |||||||
| Expected dividend rate | 0.00 | % | 0.00 | % | ||||
| Expected volatility | 30.00 | % | 30.00 | % | ||||
| Expected term in years | 7 | 7 | ||||||
| Risk free rate | 2.01 | % | 2.15 | % | ||||
Options totaling 23,600 and 31,150 were granted during the years ended December 31, 2015 and 2014, respectively, under the 2011 plan. The expected term of options granted under both the 2011 Plan and 2005 Plan were estimated based upon anticipated behavior patterns given the contractual terms of the options granted. The risk free rate for periods within the contractual life of the option has been based on the U.S. Treasury yield curve in effect at the time of the grant. Expected volatility has been based on the historical volatility of the Company’s stock.
During 2015, each non-executive director was granted 2,278 restricted shares, two executive officers were each granted 40,000 restricted shares and the new President and CEO of BVA was granted 3,378 restricted shares for a total of 103,880 restricted shares granted to directors and officers. The 2015 grants equaled $411 thousand in value. The non-executive director shares vested pro rata monthly over the course of 2015, and were fully vested by the end of 2015. During 2014, each non-executive director was granted 2,300 restricted shares, or a time of service prorated amount and the CEO was granted 66,000 restricted shares for a total of 85,933 restricted shares granted to directors and officers. The 2014 grants equaled $361 thousand in value. The non-executive director shares vested pro rata monthly over the course of 2014, and were fully vested by the end of 2014.
A summary of the status of the Company’s nonvested shares in relation to the Company’s restricted stock awards as of December 31, 2015 and 2014, and changes during the years ended December 31, 2015 and 2014 is presented below. The weighted average price is the weighted average fair value at the date of grant.
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Cordia Bancorp
Notes to Consolidated Financial Statements (continued)
| Shares | Weighted Average Price | |||||||
| Nonvested as of January 1, 2014 | 11,700 | $ | 4.41 | |||||
| Granted | 85,933 | 4.20 | ||||||
| Vested | 45,053 | 4.21 | ||||||
| Forfeited | - | - | ||||||
| Nonvested as of December 31, 2014 | 52,580 | $ | 4.23 | |||||
| Granted | 103,880 | 3.96 | ||||||
| Vested | 49,000 | 4.05 | ||||||
| Forfeited | - | - | ||||||
| Nonvested as of December 31, 2015 | 107,460 | $ | 4.05 | |||||
The weighted average fair value of restricted stock granted during the year was $3.96. The remaining unrecognized compensation expense for the shares granted totaled $372 thousand as of December 31, 2015 and will be recognized over the next 36 months, or 3 years.
A total of 578,125 shares of restricted shares of common stock were granted to founding investors of Cordia predominantly during 2009 and 2010 and are considered at December 31, 2014 more-likely-than-not to not vest due to significant performance based thresholds, for which the vesting time period expires in October 2016.
Stock-based compensation expense was $318 thousand in 2015 and $270 thousand in 2014.
Cordia does not have any benefit plans or incentive compensation plans beyond those maintained by the Bank. Cordia does provide a life insurance benefit to the President and Chief Executive Officer under the terms of his employment agreement.
Note 14. Fair Value Measurements
Fair value information about financial instruments, whether or not recognized in the balance sheet, for which it is practical to estimate the value is based upon the characteristics of the instruments and relevant market information. Financial instruments include cash, evidence of ownership in an entity, or contracts that convey or impose on an entity that contractual right or obligation to either receive or deliver cash for another financial instrument. Fair value is the amount at which a financial instrument could be exchanged in a current transaction between willing parties, other than in a forced sale or liquidation, and is best evidenced by a quoted market price if one exists.
The following presents the methodologies and assumptions used to estimate the fair value of the Company’s financial instruments. The information used to determine fair value is highly subjective and judgmental in nature and, therefore, the results may not be precise. Subjective factors include, among other things, estimates of cash flows, risk characteristics, credit quality, and interest rates, all of which are subject to change. Since the fair value is estimated as of the balance sheet date, the amounts that will actually be realized or paid upon settlement or maturity on these various instruments could be significantly different.
Financial Instruments with Book Value Equal to Fair Value
The book values of cash and due from banks, federal funds sold and purchased, loans held for sale, interest receivable, and interest payable are considered to be equal to fair value as a result of the short-term nature of these items.
Securities
The fair value for securities available for sale and securities held to maturity is based on current market quotations, where available. If quoted market prices are not available, fair value has been based on the quoted price of similar instruments. Restricted securities are valued at cost which is also the stated redemption value of the shares.
Restricted Securities
Restricted securities are valued at cost which is also the stated redemption value of the shares.
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Cordia Bancorp
Notes to Consolidated Financial Statements (continued)
Loans Held for Investments
The estimated value of loans held for investment is measured based upon discounted future cash flows using the current rates for similar loans, as well as assumptions related to credit risk.
Deposits
Deposits without a stated maturity, including demand, interest-bearing demand, and savings accounts, are reported at their carrying value in accordance with authoritative accounting guidance. No value has been assigned to the franchise value of these deposits. For other types of deposits with fixed maturities, fair value has been estimated by discounting future cash flows based on interest rates currently being offered on deposits with similar characteristics and maturities.
Borrowings and Other Indebtedness
Fair value has been estimated based on interest rates currently available to the Company for borrowings with similar characteristics and maturities.
Commitments to Extend Credit, Standby Letters of Credit, and Financial Guarantees
Fair values for off-balance-sheet, credit-related financial instruments are based on fees currently charged to enter into similar agreements, taking into account the remaining terms of the agreements and the counterparties’ credit standing. At December 31, 2015 and 2014, the fair value of loan commitments and standby letters of credit was deemed to be immaterial and therefore is not included.
Determination of Fair Value
The Company uses fair value measurements to record fair value adjustments to certain assets and liabilities and to determine fair value disclosures. In accordance with the Fair Value Measurements and Disclosure topic of FASB ASC, the fair value of a financial instrument is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Fair value is best determined based upon quoted market prices. However, in many instances, there are no quoted market prices for the Company’s various financial instruments. In cases where quoted market prices are not available, fair values are based on estimates using present value or other valuation techniques. Those techniques are significantly affected by the assumptions used, including the discount rate and estimate of future cash flows. Accordingly, the fair value estimates may not be realized in an immediate settlement of the instrument.
The fair value guidance provides a consistent definition of fair value, which focuses on exit price in an orderly transaction (that is, not a forced liquidation or distressed sale) between market participants at the measurement date under market conditions. If there has been a significant decrease in the volume and level of activity for the asset or liability, a change in valuation technique or the use of multiple valuation techniques may be appropriate. In such instances, determining the price at which willing market participants would transact at the measurement date under market conditions depends on the facts and circumstances and requires the use of significant judgment.
Authoritative accounting literature specifies a hierarchy of valuation techniques based on whether the inputs to those valuation techniques are observable or unobservable. Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect the Company’s market assumptions. The three levels of the fair value hierarchy based on these two types of inputs are as follows:
| Level 1 | Valuation is based upon quoted prices for identical instruments traded in active markets. |
| Level 2 | Valuation is based upon quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active, and model-based valuation techniques for which all significant assumptions are observable in the market. |
| Level 3 | Valuation is generated from model-based techniques that use at least one significant assumption not observable in the market. These unobservable assumptions reflect estimates of assumptions that market participants would use in pricing the asset or liability. Valuation techniques include use of option pricing models, discounted cash flow models and similar techniques. |
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Cordia Bancorp
Notes to Consolidated Financial Statements (continued)
The following table presents estimated fair values of the Company’s financial statements in accordance with authoritative accounting guidance:
| Fair Value Measurements at December 31, 2015 | ||||||||||||||||||||
| (dollars in thousands) | Carrying amount | Level 1 | Level 2 | Level 3 | Fair Value | |||||||||||||||
| Assets: | ||||||||||||||||||||
| Cash and cash equivalents | $ | 18,460 | $ | 18,460 | $ | - | $ | - | $ | 18,460 | ||||||||||
| Securities available for sale | 46,220 | - | 46,220 | - | 46,220 | |||||||||||||||
| Securities held to maturity | 25,500 | - | 25,694 | - | 25,694 | |||||||||||||||
| Restricted securities | 2,355 | - | 2,355 | - | 2,355 | |||||||||||||||
| Loans held for sale | 220 | 220 | ||||||||||||||||||
| Net Loans held for investment | 245,210 | - | - | 244,776 | 244,776 | |||||||||||||||
| Interest receivable | 2,085 | - | 2,085 | - | 2,085 | |||||||||||||||
| Liabilities: | ||||||||||||||||||||
| Demand deposits | 28,969 | - | 28,969 | - | 28,969 | |||||||||||||||
| Savings and interest-bearing demand deposits | 107,057 | - | 107,057 | - | 107,057 | |||||||||||||||
| Time deposits | 154,018 | - | 154,027 | - | 154,027 | |||||||||||||||
| FHLB Borrowings | 30,000 | - | 29,878 | - | 29,878 | |||||||||||||||
| Interest payable | 197 | - | 197 | - | 197 | |||||||||||||||
| Fair Value Measurements at December 31, 2014 | ||||||||||||||||||||
| (dollars in thousands) | Carrying amount | Level 1 | Level 2 | Level 3 | Fair Value | |||||||||||||||
| Assets: | ||||||||||||||||||||
| Cash and cash equivalents | $ | 21,847 | $ | 21,847 | $ | - | $ | - | $ | 21,847 | ||||||||||
| Securities available for sale | 53,483 | - | 53,483 | - | 53,483 | |||||||||||||||
| Securities held to maturity | 20,716 | - | 21,047 | - | 21,047 | |||||||||||||||
| Restricted securities | 2,092 | - | 2,092 | - | 2,092 | |||||||||||||||
| Loans held for investment | 211,870 | - | - | 213,861 | 213,861 | |||||||||||||||
| Interest receivable | 2,040 | - | 2,040 | - | 2,040 | |||||||||||||||
| Liabilities: | ||||||||||||||||||||
| Demand deposits | 29,795 | - | 29,795 | - | 29,795 | |||||||||||||||
| Savings and interest-bearing demand deposits | 84,258 | - | 82,258 | - | 82,258 | |||||||||||||||
| Time deposits | 151,550 | - | 152,179 | - | 152,179 | |||||||||||||||
| FHLB Borrowings | 25,000 | - | 24,753 | - | 24,753 | |||||||||||||||
| Interest payable | 161 | - | 161 | - | 161 | |||||||||||||||
The following describes the valuation techniques used by the Company to measure certain financial assets and liabilities recorded at fair value on a recurring basis in the financial statements:
Securities available for sale
Securities available for sale are recorded at fair value on a recurring basis. Fair value measurement is based upon quoted market prices, when available (Level 1). If quoted market prices are not available, fair values are measured utilizing independent valuation techniques of identical or similar securities for which significant assumptions are derived primarily from or corroborated by observable market data. Third party vendors compile prices from various sources and may determine the fair value of identical or similar securities by using pricing models that consider observable market data (Level 2).
| 78 |
Cordia Bancorp
Notes to Consolidated Financial Statements (continued)
The following table presents the balances of financial assets measured at fair value on a recurring basis at December 31, 2015 and 2014:
| Quoted Prices in Active Markets for Identical Assets | Significant Other Observable Inputs | Significant Unobservable Inputs | ||||||||||||||
| (dollars in thousands) | Balance at December 31, | (Level 1) | (Level 2) | (Level 3) | ||||||||||||
| 2015 | ||||||||||||||||
| U. S. Government Agencies | $ | 2,139 | $ | - | $ | 2,139 | $ | - | ||||||||
| Agency Guaranteed Mortgage-backed securities | 44,081 | - | 44,081 | - | ||||||||||||
| 2014 | ||||||||||||||||
| U. S. Government Agencies | $ | 3,719 | $ | - | $ | 3,719 | $ | - | ||||||||
| Agency Guaranteed Mortgage-backed securities | 49,764 | - | 49,764 | - | ||||||||||||
Certain assets are measured at fair value on a nonrecurring basis in accordance with GAAP. Adjustments to the fair value of these assets usually result from the application of lower-of-cost-or-market accounting or write-downs of individual assets.
The following describes the valuation techniques used by the Company to measure certain assets recorded at fair value on a nonrecurring basis in the financial statements:
Impaired Loans
Loans are designated as impaired when, in the judgment of management based on current information and events, it is probable that all amounts due according to the contractual terms of the loan agreement will not be collected when due. The measurement of loss associated with impaired loans can be based on either the observable market price of the loan or the fair value of the collateral. Collateral may be in the form of real estate or business assets including equipment, inventory, and accounts receivable. The vast majority of the collateral is real estate. The value of real estate collateral is determined utilizing a market valuation approach based on an appraisal conducted by an independent, licensed appraiser outside of the Company using observable market data (Level 2). However, if the collateral value based on income valuation approach is significantly adjusted due to differences in the comparable properties, or is discounted by the Company because of marketability, then the fair value is considered Level 3. The value of business equipment is based upon an outside appraisal if deemed significant, or the net book value on the applicable business’s financial statements if not considered significant. Likewise, values for inventory and accounts receivables collateral are based on financial statement balances or aging reports (Level 3). Impaired loans allocated to the Allowance for Loan Losses are measured at fair value on a nonrecurring basis. Any fair value adjustments are recorded in the period incurred as provision for loan losses on the Consolidated Statements of Operations.
Other Real Estate Owned (OREO)
Other real estate owned (“OREO”) is measure at fair value less cost to sell, based on an appraisal conducted by an independent, licensed appraiser outside of the Company. If the collateral value is significantly adjusted due to differences in the comparable properties, or is discounted by the Company because of marketability, then the fair value is considered Level 3. OREO is measured at fair value on a nonrecurring basis. Any initial fair value adjustment is charged against the Allowance for Loan Losses. Subsequent fair value adjustments are recorded in the period incurred and included in other noninterest expense on the Consolidated Statements of Operations.
| 79 |
Cordia Bancorp
Notes to Consolidated Financial Statements (continued)
The following tables summarize the Company’s assets that were measured at fair value on a nonrecurring basis at December 31, 2015 and 2014.
| Quoted Prices in Active Markets for Identical Assets | Significant Other Observable Inputs | Significant Unobservable Inputs | ||||||||||||||
| (dollars in thousands) | Balance at December 31, | (Level 1) | (Level 2) | (Level 3) | ||||||||||||
| 2015 | ||||||||||||||||
| Impaired loans | $ | 48 | $ | - | $ | - | $ | 48 | ||||||||
| Other real estate owned | 1,870 | - | - | 1,870 | ||||||||||||
| 2014 | ||||||||||||||||
| Impaired loans | $ | 42 | $ | - | $ | - | $ | 42 | ||||||||
| Other real estate owned | 1,641 | - | - | 1,641 | ||||||||||||
The following table displays quantitative information about level 3 fair value measurements for financial instruments measured at fair value on a non-recurring basis at December 31, 2015 and 2014.
| December 31, 2015 | ||||||||||
| (dollars in thousands) | Quantitative Information About Level 3 Fair Value Measurements | |||||||||
| Description | Fair Value | Valuation Technique | Unobservable input | Range | ||||||
| Impaired loans | $ | 48 | - | - | 0-10% | |||||
| Other real estate owned | $ | 1,870 | Discounted appraised value | Discount for lack of marketability | 6-29% | |||||
| December 31, 2014 | ||||||||||
| (dollars in thousands) | Quantitative Information About Level 3 Fair Value Measurements | |||||||||
| Description | Fair Value | Valuation Technique | Unobservable input | Range | ||||||
| Impaired loans | $ | 42 | - | - | 0-10% | |||||
| Other real estate owned | $ | 1,641 | Discounted appraised value | Discount for lack of marketability | 6-29% | |||||
| 80 |
Cordia Bancorp
Notes to Consolidated Financial Statements (continued)
Note 15. Other Real Estate Owned
The table below presents a summary of the activity related to other real estate owned:
| (dollars in thousands) | 2015 | 2014 | ||||||
| Beginning balance, January 1 | $ | 1,641 | $ | 1,545 | ||||
| Additions | 634 | 83 | ||||||
| Improvements | 6 | - | ||||||
| Valuation adjustments | (65 | ) | 13 | |||||
| Sales | (346 | ) | - | |||||
| Ending balance, December 31 | $ | 1,870 | $ | 1,641 | ||||
| Residential real estate included in ending balance, December 31 | $ | 1,184 | $ | 1,192 | ||||
The Company aggressively attempts to dispose of its other real estate and has contracted with a third-party vendor to aid in expediting the sales process. The Company recorded a gain of $21 thousand in 2015 on the sale of other real estate owned during 2015 as compared to no gain in 2014. The Company recorded an expense of $90 thousand and $46 thousand related to other real estate owned for the years ended December, 31, 2015 and 2014, respectively.
Note 16. Accumulated Other Comprehensive (Loss)
The changes in accumulated other comprehensive loss for years ended December 31, 2015 and 2014 are summarized as follows:
| (dollars in thousands) | Unrealized Gain (Loss) on Available-for-Sale Securities | Unrealized Gain (Loss) on Held-to- Maturity Securities | Total | |||||||||
| Balance December 31, 2013 | $ | (50 | ) | $ | (334 | ) | $ | (384 | ) | |||
| Unrealized holding losses on available for sale securities | (132 | ) | - | (132 | ) | |||||||
| Amortization of AFS to HTM reclassification adjustment | - | 48 | 48 | |||||||||
| Net current period other comprehensive income | (132 | ) | 48 | (84 | ) | |||||||
| Balance December 31, 2014 | $ | (182 | ) | $ | (286 | ) | $ | (468 | ) | |||
| Unrealized holding losses on available for sale securities | (271 | ) | - | (271 | ) | |||||||
| Amortization of AFS to HTM reclassification adjustment | - | 49 | 49 | |||||||||
| Net current period other comprehensive income | (271 | ) | 49 | (222 | ) | |||||||
| Balance December 31, 2015 | $ | (453 | ) | $ | (237 | ) | $ | (690 | ) | |||
| 81 |
Cordia Bancorp
Notes to Consolidated Financial Statements (continued)
The following table presents information on amounts reclassified out of accumulated other comprehensive income (loss), by category, during the periods indicated:
| (in thousands) | 2015 | 2014 | Affected Line Item on Condensed Consolidated Statement of Operations | |||||||
| Available-for-sale securities | ||||||||||
| Realized gains on sales of securities | $ | 133 | $ | 177 | Net gain on sale of available-for-sale securities | |||||
Note 17. Preferred Stock Issuance and Conversion
On April 10, 2014, Cordia completed the sale of approximately 363 shares of Mandatorily Convertible, Noncumulative, Nonvoting, Perpetual Preferred Stock, Series A, $0.01 par value per share, to accredited investors at a purchase price of $42,500 per share for total gross proceeds of $15.4 million. The capital raise included investments by 100% of Cordia directors. The net proceeds of the offering are being used primarily to support organic growth in BVA.
On June 25, 2014, upon stockholder approval, each share of Series A Preferred Stock mandatorily converted into 10,000 shares of Cordia’s common stock at a conversion price of $4.25 per share, for a total issuance of approximately 3,629,871 new shares of common stock, of which 2,229,434 are voting and 1,400,437 are nonvoting. The holders of the Series A Preferred Stock did not receive any dividends under the provisions of the stock purchase agreements.
Other than voting rights, the nonvoting common stock has the same rights and privileges as the common stock, including sharing ratably in all assets of the Company upon its liquidation, dissolution or winding-up, and entitlement to receive dividends in the same amount per share and at the same time when, as and if declared by the Board, and is identical to the common stock in all other respects as to all other matters (other than voting). Holders of nonvoting common stock have no cumulative voting rights or preemptive rights (other than the limited contractual preemptive rights of certain investors in the private placement offering) to purchase or subscribe for any additional shares of common stock or nonvoting common stock or other securities, and there are no conversion rights or redemption or sinking fund provisions with respect to the nonvoting common stock.
Authorized Shares. 5,000,000 shares of nonvoting common stock, par value of $0.01 per share, are authorized and 1,400,437 shares of nonvoting common stock are outstanding.
Voting Rights. Holders of nonvoting common stock are not entitled to vote except as required by the Virginia Stock Corporation Act. Where the shares of nonvoting common stock are entitled to vote under Virginia law, each holder of nonvoting common stock will have one vote for each share of nonvoting common stock held of record solely on the matters to which such shares are entitled to vote, and subject to the rights and limitations specified by the Virginia Stock Corporation Act.
Automatic Conversion Upon Permitted Transfer. Each share of nonvoting common stock will automatically convert into one share of common stock in the event of a “permitted transfer” to a transferee. A “permitted transfer” is a transfer of nonvoting common stock (i) in a widespread public distribution, (ii) in which no transferee (or group of associated transferees) would receive 2% or more of any class of voting securities of the Company, or (iii) to a transferee that would control more than 50% of the voting securities of the Company without any transfer from such holder of nonvoting common stock.
Dividends. Subject to the prior rights of the holders of shares of preferred stock that may be issued and outstanding, the holders of nonvoting common stock are entitled to receive dividends when, as and if declared by the Company’s Board of Directors out of funds lawfully available for the payment of dividends.
| 82 |
Cordia Bancorp
Notes to Consolidated Financial Statements (continued)
Note 18. Parent Company – Condensed Financial Statements
Cordia Bancorp, Inc. owns 100.0% of the outstanding shares of the Bank of Virginia at December 31, 2015. Condensed financial statements of Cordia Bancorp, Inc. follow:
Condensed Balance Sheets
December 31, 2015 and 2014
| (dollars in thousands) | 2015 | 2014 | ||||||
| Assets: | ||||||||
| Cash and due from banks | $ | 940 | $ | 1,779 | ||||
| Investment in Bank of Virginia | 26,796 | 25,621 | ||||||
| Other assets | 7 | 11 | ||||||
| Total assets | $ | 27,743 | $ | 27,411 | ||||
| Liabilities and capital: | ||||||||
| Liabilities | $ | 4 | $ | 275 | ||||
| Equity | ||||||||
| Common stock | 65 | 65 | ||||||
| Additional paid-in capital | 33,191 | 32,956 | ||||||
| Retained deficit | (4,827 | ) | (5,417 | ) | ||||
| Accumulated other comprehensive loss | (690 | ) | (468 | ) | ||||
| Total equity | 27,739 | 27,136 | ||||||
| Total liabilities and equity | $ | 27,743 | $ | 27,411 | ||||
| 83 |
Cordia Bancorp
Notes to Consolidated Financial Statements (continued)
Condensed Statements of Operations
For the years ended December 31, 2015 and 2014
| (dollars in thousands) | 2015 | 2014 | ||||||
| Income: | ||||||||
| Equity in undistributed income of subsidiary | $ | 1,397 | $ | 323 | ||||
| Interest income | - | 1 | ||||||
| Total income | $ | 1,397 | $ | 324 | ||||
| Expenses: | ||||||||
| Other expense | 807 | 736 | ||||||
| Total expense | 807 | 736 | ||||||
| Net income (loss) | $ | 590 | $ | (412 | ) | |||
| 84 |
Cordia Bancorp
Notes to Consolidated Financial Statements (continued)
Condensed Statements of Cash Flows
For the years ended December 31, 2015 and 2014
| (dollars in thousands) | 2015 | 2014 | ||||||
| Cash flows from operating activities: | ||||||||
| Net income (loss) | $ | 590 | $ | (412 | ) | |||
| Adjustments to reconcile net income (loss) to net cash used in operating activities: | ||||||||
| Equity in undistributed income of subsidiary | (1,397 | ) | (323 | ) | ||||
| Stock-based compensation | 318 | 270 | ||||||
| Net decrease in other assets | 4 | 218 | ||||||
| Net decrease in other liabilities | (271 | ) | (760 | ) | ||||
| Net cash used in operating activities | (756 | ) | (1,007 | ) | ||||
| Cash flows from investing activities: | ||||||||
| Investment in Bank of Virginia, net of costs | - | (11,500 | ) | |||||
| Net cash used in investing activities | - | (11,500 | ) | |||||
| Cash flows from financing activities: | ||||||||
| Repurchase of common stock | (83 | ) | - | |||||
| Issuance of Common Stock, net of costs | - | 14,075 | ||||||
| Net cash (used in) provided by investing activities | (83 | ) | 14,075 | |||||
| Net increase (decrease) in cash and due from banks | (839 | ) | 1,568 | |||||
| Cash and due from banks, beginning of period | 1,779 | 211 | ||||||
| Cash and due from banks, end of period | $ | 940 | $ | 1,779 | ||||
| 85 |
Cordia Bancorp
Notes to Consolidated Financial Statements (continued)
Note 19. Subsequent Events
In February 2016, the Chester branch lease was renewed for an additional five years. Future minimum rental payments required under this renewal are as follows:
| (dollars in thousands) | ||||
| By year ended December 31, | Rent | |||
| 2016 | $ | 49 | ||
| 2017 | 50 | |||
| 2018 | 51 | |||
| 2019 | 52 | |||
| 2020 | 53 | |||
| Total minimum payments required under renewal | $ | 255 | ||
On March 1, 2016, the Bank transferred certain marketing arrangements, internet domains and intellectual property related to CordiaGrad to a newly formed subsidiary, which it then sold to Jack C. Zoeller, who resigned as Cordia’s President and Chief Executive Officer in connection with the transaction. No loans were sold as part of the transaction and, as part of the transaction, the Bank agreed to provide certain transition and loan origination services to the new entity acquired by Mr. Zoeller through June 30, 2016. Cordia anticipates recording charges totaling $1.6 million in the first quarter of 2016 relating to the loss on the sale of the CordiaGrad business and the vesting of equity awards held by Mr. Zoeller. The reduction to book value is expected to be approximately $740 thousand due to the capital contribution resulting from the vesting of equity awards held by Mr. Zoeller.
Effective March 1, 2016, following Jack Zoeller’s resignation, O.R. (Ed) Barham, Jr. was appointed as a director and as President and Chief Executive Officer of Cordia and as Chairman of the Board of Directors of the Bank.
| 86 |
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Stockholders
Cordia Bancorp Inc.
Midlothian, Virginia
We have audited the accompanying consolidated balance sheets of Cordia Bancorp Inc. and subsidiary (the “Company”) as of December 31, 2015 and 2014, and the related consolidated statements of operations, comprehensive income (loss), changes in stockholders' equity, and cash flows for the years then ended. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Cordia Bancorp Inc. and subsidiary as of December 31, 2015 and 2014 and the results of their operations and their cash flows for the years then ended, in conformity with U.S. generally accepted accounting principles.
| /s/ Yount, Hyde & Barbour, P.C. | |
| Winchester, Virginia | |
| March 23, 2016 |
| 87 |
| Item 9. | Changes In and Disagreements with Accountants on Accounting and Financial Disclosure |
None
| Item 9A. | Controls and Procedures |
| (a) | Disclosure Controls and Procedures |
The Company’s management, including the Company’s principal executive officer and principal financial officer, have evaluated the effectiveness of the Company’s “disclosure controls and procedures,” as such term is defined in Rule 13a-15(e) promulgated under the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Based upon their evaluation, the principal executive officer and principal financial officer concluded that, as of December 31, 2015, the Company’s disclosure controls and procedures were effective.
| (b) | Internal Controls over Financial Reporting |
Cordia's management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rules 13a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934. Management assessed the effectiveness of Cordia's internal control over financial reporting as of December 31, 2015 based upon the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission in a report entitled Internal Control — Integrated Framework (1992). Based on its assessment, management has concluded that Cordia maintained effective internal control over financial reporting as of the quarter ended December 31, 2015.
This annual report does not include an attestation report of the Company’s registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by the Company’s registered public accounting firm pursuant to rules of the Securities and Exchange Commission that permit the Company to provide only Management’s report in this annual report.
| (c) | Changes to Internal Control Over Financial Reporting |
There have been no changes in the Company’s internal control over financial reporting during the quarter ended December 31, 2015 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.
| Item 9B. | Other Information |
None
| 88 |
| Item 10. | Directors, Executive Officers and Corporate Governance |
The information regarding the directors and officers of Cordia and compliance with Section 16(a) of the Exchange Act is incorporated herein by reference to the section captioned : ”Items of Business to be Voted on by Shareholders – Item 1 – Election of Directors” in Cordia’s Proxy Statement for the 2016 Annual Meeting of Shareholders and to Part I, Item 1 “Business – Executive Officers of the Registrant” to this Annual Report on Form 10-K.
Code of Ethics
Cordia has adopted a code of ethics that applies to its principal executive officer, the principal financial officer and principal accounting officer. A copy of the Company’s code of business conduct and ethics is available on the Corporate portion of the Bank’s website at www.bankofva.com.
| Item 11. | Executive Compensation |
The information regarding executive compensation is incorporated herein by reference to the section captioned “Executive Compensation” in Cordia’s Proxy Statement for the 2016 Annual Meeting of Shareholders.
| Item 12. | Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters |
Security Ownership of Certain Beneficial Owners
The information relating to certain relationships and related transactions is incorporated herein by reference to the section captioned “Stock Ownership” in Cordia’s Proxy Statement for the 2016 Annual Meeting of Shareholders.
Security Ownership of Management
The information required by this item is incorporated herein by reference to the section captioned “Stock Ownership” in Cordia’s Proxy Statement for the 2016 Annual Meeting of Shareholders.
Changes in Control
Management of Cordia knows of no arrangements, including any pledge by any person or securities of Cordia, the operation of which may at a subsequent date result in a change in control of the registrant.
Equity Compensation Plan Information
The following table sets forth information about Cordia common stock that may be issued upon exercise of options, warrants and rights under all of Cordia’s equity compensation plans as of December 31, 2015.
| Plan Category | Number of securities to be issued upon the exercise of outstanding options, warrants and rights | Weighted-average exercise price of outstanding options, warrants and rights | Number of securities remaining available for future issuarance under equity compensation plans (excluding securities reflected in the first column) | |||||||||
| Equity compensation plans approved by security holders | 114,686 | $ | 6.78 | 592,765 | ||||||||
| Equity compensation plans not approved by security holders | 10,000 | 4.41 | - | |||||||||
| Total | 124,686 | $ | 6.59 | 592,765 | ||||||||
| 89 |
| Item 13. | Certain Relationships, and Related Transactions, and Director Independence |
The information relating to certain relationships and related transactions is incorporated herein by reference to the sections captioned “Items of Business to be Voted on by Shareholders – Item 1 – Election of Directors” and “Other Information Relating to Directors and Executive Officers – Certain Relationships and Related Transactions” in Cordia’s Proxy Statement for the 2016 Annual Meeting of Shareholders.
| Item 14. | Principal Accounting Fees and Services |
The information relating to principal accounting fees and expenses is incorporated herein by reference to the section captioned “Audit Related Matters” in Cordia’s Proxy Statement for the 2016 Annual Meeting of Shareholders.
| 90 |
| Item 15. | Exhibits, Financial Statement Schedules |
| Exhibit No. | Description | Incorporated by Reference to | ||
| 3.1 | Second Amended and Restated Articles of Incorporation of Cordia Bancorp Inc. | Exhibit 3 to Form 10-Q for the quarter ended June 30, 2014. | ||
| 3.3 | Bylaws of Cordia Bancorp Inc. | Exhibit 3.2 to Registration Statement on Form S-4 (File No. 333-186087), as amended, initially filed on January 18, 2013. | ||
| 10.1* | Bank of Virginia 2005 Stock Option Plan | Exhibit 10.1 to Registration Statement on Form S-4 (File No. 333-186087), as amended, initially filed on January 18, 2013. | ||
| 10.2* | Form of Employee Stock Option Agreement | Exhibit 10.1 to Registration Statement on Form S-4 (File No. 333-186087), as amended, initially filed on January 18, 2013. | ||
| 10.3* | Form of Director Stock Option Agreement | Exhibit 10.3 to Registration Statement on Form S-4 (File No. 333-186087), as amended, initially filed on January 18, 2013. | ||
| 10.4* | Bank of Virginia 2011 Stock Incentive Plan | Exhibit 10.5 to Registration Statement on Form S-4 (File No. 333-186087), as amended, initially filed on January 18, 2013. | ||
| 10.5* | Amended and Restated Series A Stock Purchase Agreement between Cordia Bancorp Inc. and David C. Bushnell | Exhibit 10.8 to Registration Statement on Form S-4 (File No. 333-186087), as amended, initially filed on January 18, 2013. | ||
| 10.6* | Second Amended and Restated Founder Stock Purchase Agreement between Cordia Bancorp Inc. and Peter W. Grieve | Exhibit 10.9 to Registration Statement on Form S-4 (File No. 333-186087), as amended, initially filed on January 18, 2013. | ||
| 10.7* | Amended and Restated Founder Stock Purchase Agreement between Cordia Bancorp Inc. and Raymond H. Smith, Jr. | Exhibit 10.10 to Registration Statement on Form S-4 (File No. 333-186087), as amended, initially filed on January 18, 2013. | ||
| 10.8* | Amended and Restated Founder Stock Purchase Agreement between Cordia Bancorp Inc. and Todd S. Thomson | Exhibit 10.11 to Registration Statement on Form S-4 (File No. 333-186087), as amended, initially filed on January 18, 2013. | ||
| 10.9* | Second Amended and Restated Founder Stock Purchase Agreement between Cordia Bancorp Inc. and John P. Wright | Exhibit 10.12 to Registration Statement on Form S-4 (File No. 333-186087), as amended, initially filed on January 18, 2013. | ||
| 10.10* | Form of Incentive Stock Option Award | Exhibit 10.14 to Registration Statement on Form S-4 (File No. 333-186087), as amended, initially filed on January 18, 2013. | ||
| 10.11* | Form of Non-Statutory Stock Option Award | Exhibit 10.15 to Registration Statement on Form S-4 (File No. 333-186087), as amended, initially filed on January 18, 2013. |
| 91 |
| 10.12* | Nonqualified Inducement Stock Option Grant Notice and Stock Option Agreement with Mark A. Severson | Exhibit 99.1 to Registration Statement on Form S-8 (File No. 333-192340) filed on November 14, 2013 | ||
| 10.13* | Inducement Restricted Stock Award Notice and Award Agreement with Mark A. Severson | Exhibit 99.2 to Registration Statement on Form S-8 (File No. 333-192340) filed on November 14, 2013 | ||
| 10.14 | Stock Purchase Agreement, dated March 1, 2016, by and between Jack C. Zoeller, Bank of Virginia, and, with respect to certain provisions, Cordia Bancorp, Inc.** | |||
| 21 | Subsidiaries | |||
| 23 | Consent of Yount, Hyde, Barbour, P.C. | |||
| 31.1 | Rule 13a-14(a)/15d-14(a) Certification of Chief Executive Officer | |||
| 31.2 | Rule 13a-14(a)/15d-14(a) Certification of Chief Financial Officer and Principal Financial Officer | |||
| 32.1 | Section 1350 Certification | |||
| 101.1 | The following materials from the Company’s Annual Report on Form 10-K for the year ended December 31, 2015, formatted in XBRL (Extensible Business Reporting Language): (i) the Consolidated Balance Sheets, (ii) the consolidated Statements of Operations (iii) the Consolidated Statements of Comprehensive Income (iv) the Consolidated Statements of Changes in Stockholders’ Equity, (v) the Consolidated Statements of Cash Flows and (vi) the Notes to the Consolidated Financial Statements, tagged as blocks of text. |
*Management contract or compensatory plan, contract or arrangement.
** Confidential treatment has been requested with respect to portions of this exhibit pursuant to Rule 24b-2 of the Exchange Act and these confidential portions have been redacted from the document filed as an exhibit to this report. A complete copy of this agreement, including the redacted terms, has been separately filed with the SEC.
| 92 |
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| CORDIA BANCORP INC. | ||
| By: | /s/.O.R. (Ed) Barham, Jr. | |
| O.R. (Ed) Barham, Jr. | ||
| President and Chief Executive Officer | ||
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
| /s/ O.R. (Ed) Barham, Jr | March 23, 2016 | |
| O.R. (Ed) Barham, Jr. | ||
| President, Chief Executive Officer and Director | ||
| (Principal Executive Officer) | ||
| /s/ Mark A. Severson | March 23, 2016 | |
| Mark A. Severson | ||
| Executive Vice President and Chief Financial Officer | ||
| (Principal Accounting Officer) | ||
| /s/ David C. Bushnell | March 23, 2016 | |
| David C. Bushnell | ||
| Director | ||
| /s/ G. Waddy Garrett | March 23, 2016 | |
| G. Waddy Garrett | ||
| Director | ||
| /s/ Thomas L. Gordon | March 23, 2016 | |
| Thomas L. Gordon | ||
| Director | ||
| /s/ Peter W. Grieve | March 23, 2016 | |
| Peter W. Grieve | ||
| Director | ||
| /s/ Hunter R. Hollar | March 23, 2016 | |
| Hunter R. Hollar | ||
| Director | ||
| /s/ Michael Rosinus | March 23, 2016 | |
| Michael Rosinus | ||
| Director | ||
| /s/Raymond Smith | March 23, 2016 | |
| Raymond Smith | ||
| Director | ||
| March 23, 2016 | ||
| Todd S. Thomson | ||
| Director | ||
| /s/ John P. Wright | March 23, 2016 | |
| John P. Wright | ||
| Director | ||
| /s/ David Zlatin | March 23, 2016 | |
| David Zlatin | ||
| Director |
| 93 |
Exhibit 10.14
Certain confidential portions of this exhibit, including schedules and exhibits, have been filed separately with the Securities and Exchange Commission (the “SEC”) pursuant to a confidential treatment request filed in accordance with Rule 24b-2 of the Securities Exchange Act of 1934 and these confidential portions have been omitted from this exhibit. The location of each omitted portion is indicated by a series of four asterisks in brackets (“[****]”).
STOCK PURCHASE AGREEMENT
This STOCK PURCHASE AGREEMENT (this “Agreement”) is entered into as of this 1st day of March 2016, by and between Bank of Virginia, a commercial bank chartered under the laws of the Commonwealth of Virginia (the “Bank”), Jack C. Zoeller (the “Purchaser”) and, solely for purposes of Sections 3.01, 3.02, 3.03, 5.04, 5.06 and 5.07, Cordia Bancorp Inc., a Virginia corporation and the parent holding company of the Bank (“Cordia”)
RECITALS:
WHEREAS, the Bank owns 12,000 shares of common stock, par value $0.01 per share, of Purefy Inc., a Delaware corporation (the “Company”), which represents all of the issued and outstanding shares of the Company’s common stock (the “Shares”); and
WHEREAS, the Bank desires to sell to Purchaser, and Purchaser desires to purchase from the Bank, the Shares; and
WHEREAS, the parties hereto desire to enter into this Agreement to govern certain of their rights, duties and obligations.
NOW, THEREFORE, in consideration of the mutual covenants contained in this Agreement, and for other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, the Bank and Purchaser hereby agree as follows:
ARTICLE
I
Definitions
Section 1.01. Definitions. The following terms, as used herein, have the following meanings:
“Affiliate” means, with respect to any Person, any other Person directly or indirectly controlling, controlled by or under common control with such Person. For the purpose of this definition, the term “control” (including, with correlative meanings, the terms “controlling”, “controlled by” and “under common control with”), as used with respect to any Person, shall mean the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of such Person, whether through the ownership of voting securities, by contract or otherwise.
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“Agreement” means, collectively, this Agreement and the schedules and exhibits attached hereto.
“Applicable Law” has the meaning set forth in Section 3.07.
“Board of Directors” means the board of directors of the Bank.
“Closing” means the closing of the transactions contemplated by Section 2.02.
“Closing Date” has the meaning set forth in Section 2.02.
“Company Confidential Information” shall mean any and all information of or relating to the Company or its business (including the CordiaGrad student loan refinancing business previously undertaken by the Bank) that is confidential or proprietary information within the meaning of applicable Law, including proprietary data, know-how, customer lists, trade secrets, pricing policies, operational methods and marketing plans or strategies. Notwithstanding the foregoing, Company Confidential Information shall not include any information that is or becomes generally known to the public.
“Contribution Agreement” means the Contribution Agreement dated March 1, 2016, between the Bank and the Company.
“Employment Agreement” means the Employment agreement, dated as of December 1, 2010, as amended as of February 26, 2014, by and between Cordia and Purchaser.
“Founder Stock Agreement” means the Second Amended and Restated Founder Stock Purchase Agreement dated as of May 22, 2013, between Cordia and Purchaser.
“GAAP” means generally accepted accounting principles in the United States as in effect from time to time.
“Governmental Authority” means any transnational, domestic or foreign federal, state or local, governmental authority, department, court, agency or official, including any political subdivision thereof, and any applicable industry self-regulatory organization.
“Lien” means, with respect to any property or asset, any mortgage, lien, pledge, charge, security interest, community property right, claim, option or other restriction (including any restriction on the right to vote, sell or otherwise dispose of such property or asset), encumbrance or other similar adverse claim of any kind in respect of such property or asset.
“Material Adverse Effect” means a material adverse effect upon the business, operations, assets, liabilities, results of operations or condition (financial or otherwise) of the Company, taken as a whole, or on the transactions contemplated hereby, other than any such effect to the extent resulting from (A) changes in general economic conditions in the United States that do not impact the Company in any manner materially disproportionately to other businesses similarly situated or (B) an outbreak or escalation of war, armed hostilities, acts of terrorism, political instability or other national or international calamity, crisis or emergency, or any response to any of the foregoing, in each case, whether occurring within or outside the United States.
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“Material Contracts” has the meaning set forth in Section 3.11.
“Person” means an individual, corporation, partnership, limited liability company, association, trust or other entity or organization, including a Governmental Authority.
“Purchase Price” has the meaning set forth in Section 2.01.
“Subsidiary” means, with respect to any Person, any entity of which securities or other ownership interests having ordinary voting power to elect a majority of the board of directors or other persons performing similar functions are at the time directly or indirectly owned by such Person.
“Transaction Documents” means collectively this Agreement, the Contribution Agreement, the Transition Services Agreement, the Loan Program Agreement and the License Agreement.
ARTICLE
II
Purchase and Sale of the Securities
Section 2.01. Purchase and Sale of the Shares. On the terms and subject to the conditions contained in this Agreement, and in reliance upon the representations, warranties and covenants set forth in this Agreement, at the Closing, Purchaser hereby agrees to purchase the Shares from the Bank, and the Bank hereby agrees to sell the Shares to Purchaser free and clear of all Liens. In consideration for the sale of the Shares, at the Closing, Purchaser agrees to: (i) make a cash payment to the Bank of $1.00 (the “Purchase Price”), and (ii) as more fully set forth in Section 5.06, (x) voluntarily terminate his employment with the Bank and Cordia, resign as a director of Cordia and all of its subsidiaries (other than the Company), in each case effective as of the Closing Date, and (y) irrevocably waive his rights under the Employment Agreement, with respect to the time period that follows the Closing Date, for any salary, severance or change in control payment, housing, travel or automobile allowance or reimbursement for expenses incurred after the Closing Date or any other benefit provided for pursuant to the Employment Agreement. At the Closing, Purchaser shall pay the Purchase Price and the Bank shall deliver to Purchaser a certificate representing the Shares.
Section 2.02. Closing. Subject to Section 2.03, payment of the Purchase Price for and delivery of the Shares (the “Closing”) shall be made at 10:00 a.m. on March 1, 2016, or at such time and date as soon as practicable thereafter, and at such place or in such other manner, as the Bank and Purchaser may mutually determine (such date and time of payment and delivery being herein called the “Closing Date”).
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Section 2.03. Conditions to Closing.
(a) The obligation of Purchaser hereunder to purchase the Shares at the Closing is subject to the satisfaction, at or before the Closing Date, of each of the following conditions, provided that these conditions are for Purchaser’s sole benefit and may be waived by Purchaser at any time in his sole discretion:
(i) (A) all of the representations and warranties made by the Bank in this Agreement shall be true and correct in all material respects (other than such representations and warranties which are qualified by materiality or Material Adverse Effect which shall be true and correct in all respects) on and as of the date of this Agreement and as of the Closing Date as if made on such date, and (B) the Bank shall have performed and complied with all of the obligations and agreements required to be performed by the Bank on or before the Closing Date under this Agreement.
(ii) The Bank shall have delivered to Purchaser a certificate of the President of the Bank, dated as of the Closing Date, pursuant to which the Bank will certify that the conditions set forth in Sections 2.03(a)(i), 2.03(a)(iii), 2.03(a)(iv), 2.03(a)(ix) and 2.03(a)(x) shall have been satisfied;
(iii) The Bank shall have obtained any required third party consents and approvals necessary for the sale of the Shares to Purchaser in accordance with this Agreement;
(iv) The net working capital of the Company shall not be less than $625,000;
(v) The Bank shall have delivered to Purchaser such other documents relating to the transactions contemplated by this Agreement as Purchaser or his counsel may reasonably request;
(vi) The Bank and the Company have entered into the Transition Services Agreement in the form attached as Exhibit A hereto (the “Transition Services Agreement”);
(vii) The Bank and the Company have entered into the Loan Program Agreement in the form attached as Exhibit B hereto (the “Loan Program Agreement”);
(viii) Cordia and the Company have entered into the Trademark License Agreement in the form attached as Exhibit C hereto (the “License Agreement”);
(ix) All required actions by or in respect of, or filing with, any Governmental Authority, if any, shall have been performed; and
(x) The Board of Directors of Cordia shall have taken all action necessary such that all unvested shares of Cordia restricted stock, performance shares and stock options held by Purchaser as of the Closing Date shall vest on the Closing Date and all necessary instructions and legal opinions have been provided to Cordia’s transfer agent to support the timely and accurate recording of Purchaser’s unrestricted and restricted shares of Cordia common stock.
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(b) The obligation of the Bank hereunder to issue and sell the Shares to Purchaser at the Closing is subject to the satisfaction, at or before the Closing Date, of each of the following conditions, provided that these conditions are for the Bank’s sole benefit and may be waived by the Bank at any time in its sole discretion:
(i) (A) all of the representations and warranties made by Purchaser in this Agreement shall be true and correct in all material respects (other than such representations and warranties which are qualified by materiality which shall be true and correct in all respects) on and as of the date of this Agreement and as of the Closing Date as if made on such date, and (B) Purchaser shall have performed and complied with all of the obligations and agreements required to be performed by Purchaser on or before the Closing Date under this Agreement; and
(ii) Purchaser shall have delivered to the Bank a certificate of Purchaser, dated as of the Closing Date, pursuant to which Purchaser will certify that the conditions set forth in Section 2.03(b)(i) shall have been satisfied.
ARTICLE
III
Representations and Warranties of THE BANK
The Bank (and Cordia with respect to itself and Sections 3.01, 3.02 and 3.03 only) hereby represents and warrants to the Purchaser as of the date hereof and as of the Closing Date as follows:
Section 3.01. Existence and Power.
(a) The Bank is duly organized as a Virginia commercial bank and is validly existing and in good standing under the laws of the Commonwealth of Virginia and has all requisite power and authority required to enter into this Agreement and the other Transaction Documents. Cordia is duly organized as a Virginia corporation and is validly existing and in good standing under the laws of the Commonwealth of Virginia and has all requisite power and authority required to enter into this Agreement.
(b) The Company is duly organized as a Delaware corporation and is validly existing and in good standing under the laws of the State of Delaware and has all requisite power and authority and to own, lease and operate its property and assets and to carry on its business as now being conducted.
Section 3.02. Authorization. The execution, delivery and performance by the Bank of this Agreement and the other Transaction Documents and the consummation of the transactions contemplated hereby and thereby are within the powers of the Bank and have been duly authorized by all necessary action on the part of the Board of Directors, and no further filing, consent, or authorization is required by the Bank, the Board of Directors, Cordia, the board of directors of Cordia, or any stockholders of the Bank or Cordia. The execution, delivery and performance by Cordia of this Agreement and the consummation of the transactions contemplated hereby are within the powers of Cordia and have been duly authorized by all necessary action on the part of Cordia.
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Section 3.03. Enforceability. This Agreement and the Contribution Agreement have been duly executed and delivered by the Bank, and each of the other Transaction Documents at the Closing will be duly executed and delivered by the Bank, and this Agreement and the Contribution Agreement constitute, and such other Transaction Documents when executed by the Bank will constitute, a valid and binding agreement of the Bank enforceable against the Bank in accordance with its terms, except as may be limited by bankruptcy, insolvency, reorganization, moratorium and similar laws from time to time in effect and subject to the limitations imposed by general equitable principles (the “Enforceability Exceptions”). This Agreement has been duly executed and delivered by Cordia and constitutes a valid and binding agreement of Cordia enforceable against Cordia in accordance with its terms, subject to the Enforceability Exceptions.
Section 3.04. Governmental Authorization. The execution, delivery and performance by the Bank of this Agreement and the other Transaction Documents and the consummation of the transactions contemplated hereby and thereby do not and will not require any action by or in respect of, or filing with, any Governmental Authority.
Section 3.05. Noncontravention. The execution, delivery and performance by the Bank of this Agreement and the other Transaction Documents and the consummation of the transactions contemplated hereby and thereby do not and will not (a) violate the articles of incorporation or bylaws of the Bank, (b) violate any Applicable Law, (c) require any consent, notice or other action by any Person under, constitute a default under, or give rise to any right of termination, cancellation or acceleration of any right or obligation of the Bank or the Company or to a loss of any benefit to which the Bank or the Company is entitled under any provision of any Material Contract or other instrument binding upon the Bank or the Company, (d) conflict with, or constitute a default (or an event which with notice or lapse of time or both would become a default) in any respect under, or give to others any rights of termination, amendment, acceleration or cancellation of, any Material Contract to which the Bank or the Company is a party, or (e) result in the creation or imposition of any Lien on the Shares or any assets of the Company.
Section 3.06. Capital Stock. The authorized capital stock of the Company consists of (i) 24,000 shares of common stock, $0.01 par value per share, of which 12,000 shares are outstanding as of the date of this Agreement and (ii) 1,000 shares of preferred stock, $0.01 par value per share, of which no shares are outstanding as of the date of this Agreement. The Bank has good and marketable title to the Shares, free and clear of any and all Liens, and the Bank has the corporate authority and power to sell, assign and transfer the Shares to Purchaser. Except for the Shares, (x) there are no issued or outstanding shares or equity securities or similar ownership interests of any class in the Company, (y) there are no outstanding or authorized options, warrants, purchase rights, subscription rights, conversion rights, exchange rights, or other contracts or commitments that could require the Company to issue, sell, or otherwise cause to become outstanding any of its capital stock, and (z) there are no voting trusts, proxies, shareholder agreements or other contracts or understandings with respect to the voting of the capital stock of the Company.
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Section 3.07. Compliance with Law. The Company is and has been in compliance in all material respects with all applicable laws, rules, regulations, orders, decrees and judgments applicable to it, including, without limitation, all applicable local, state and federal environmental laws and regulations (the “Applicable Laws”).
Section 3.08. No Undisclosed Events, Liabilities, Developments or Circumstances. Except as previously disclosed to Purchaser, the Company does not have any debt, obligation or liability (whether accrued, absolute, contingent, liquidated or otherwise, whether due or to become due, whether or not known to the Company) arising out of (i) any transaction entered into by the Company at or prior to the Closing, (ii) any act or omission at or prior to the Closing, or (iii) any state of facts existing at or prior to the Closing, which (individually or in the aggregate) would reasonably be expected to have a Material Adverse Effect.
Section 3.09. Financial Information. As of the Closing, (i) the Company will have no accounts payable or other financial liabilities or obligations that accrued on or prior to the Closing Date, (ii) the net working capital (as defined under GAAP) of the Company will not be less than $625,000; and (iii) the Company will hold in a bank account owned by the Company not less than $625,000 in cash.
Section 3.10. Absence of Litigation. There is no action, suit, proceeding, inquiry or investigation before or by any securities market or exchange, any court, public board, government agency, self-regulatory organization or body pending or, to the knowledge of the Bank, threatened against or affecting the Company, or the Company’s officers or directors.
Section 3.11. Title. The Company has good and marketable title to all personal property owned by the Company that is material to the business of the Company, in each case free and clear of all Liens, except such as do not materially impair the value of such property and do not interfere with the current use of such property by the Company. Any personal property held under lease (whether a capital or true lease) by the Company is held by such party under a valid, subsisting and enforceable lease with such exceptions as are not material and do not interfere with the current use of such property by the Company.
Section 3.12. Contracts. With respect to each contract, agreement, lease, license, commitment, arrangement, or other instrument, whether written or oral, that is material to the business of the Company (the “Material Contracts”), except as set forth on Schedule 3.12 attached hereto: (A) the agreement is legal, valid, binding, enforceable on and against the Company and, to the knowledge of the Bank, each other party thereto, and is in full force and effect in accordance with its terms; (B) the agreement will continue to be legal, valid, binding, enforceable and in full force and effect on identical terms following the consummation of the transactions contemplated hereby; (C) the Company is not in breach or default in any material respect under the agreement, and no event has occurred which with notice or lapse of time would constitute a breach or default by the Company or permit termination, modification or acceleration by the other party under the agreement; (D) to the knowledge of the Bank, no other party is in breach or default, and to the to the knowledge of the Bank, no event has occurred which with notice or lapse of time would constitute a breach or default by the other party, or permit termination, modification or acceleration by the Company under the agreement, except for a breach or default that would not have a Material Adverse Effect. All Material Contracts have been disclosed or identified to Purchaser. Except for the Transaction Documents, the Company is not a party to any agreement or contract with the Bank or Cordia.
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ARTICLE
IV
Representations and Warranties of PURCHASER
The Purchaser hereby represents and warrants to the Bank as of the date hereof as follows:
Section 4.01. Authority. This Agreement has been duly executed and delivered by Purchaser and constitutes the valid and legally binding agreement of Purchaser, enforceable against Purchaser in accordance with its terms, subject to the Enforceability Exceptions.
Section 4.02. Access to Information. Purchaser acknowledges that he has been afforded access to information about the Company and its financial condition, results of operations, business, properties, management and prospects sufficient to enable it to evaluate its investment and Purchaser has sought such accounting, legal and tax advice as it has considered necessary to make an informed decision with respect to its acquisition of the Shares.
Section 4.03. Investment Intent. Purchaser is purchasing the Shares for his own account for investment and not with a view to, or for sale in connection with, any distribution of any of the Shares. Purchaser acknowledges that the sale of the Shares has not been registered under the Securities Act of 1933, as amended, or any applicable state securities laws and that such Shares may only be sold or otherwise disposed of under an effective registration statement under the Securities Act of 1933, as amended, or under an exemption therefrom.
ARTICLE V
CERTAIN COVENANTS
Section 5.01. Conduct of Business. From the date hereof until the earlier of the Closing Date and the termination of this Agreement in accordance with its terms, except as contemplated by this Agreement, the Bank shall cause the Company to (i) operate its business in the ordinary course consistent with past practice, (ii) preserve intact the current business organization of the Company, (iii) use commercially reasonable efforts to retain the services of its employees, consultants and agents except as mutually agreed to by the Bank and Purchaser, (iv) preserve the current relationships of the Company with material customers and other Persons with whom the Company has and intends to maintain significant relations and (v) maintain all of its operating assets in their current condition (normal wear and tear excepted). The Bank shall cause the Company to refrain from taking any action and shall cause its subsidiaries to refrain from taking any action that would render any representation or warranty contained in Article III of this Agreement inaccurate as of the Closing Date. The Bank will promptly notify Purchaser of any event or circumstance which has or is likely to have a Material Adverse Effect.
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Section 5.02. Satisfaction of Conditions. Each party shall use its commercially reasonable efforts timely to satisfy each of the conditions to be satisfied by it as provided in Sections 2.03(a) and (b) of this Agreement.
Section 5.03. Public Announcements. The parties agree to consult with each other before issuing any press release or making any public statement with respect to this Agreement or the transactions contemplated hereby and will not issue any such press release or make any such public statement without the consent of the other party hereto; provided, however, that Purchaser shall not be required to consult with the Bank, or to obtain the Bank’s prior consent, prior to including in any Company marketing or other materials any statements describing the history and rebranding of the Bank’s on-line student loan refinancing program, currently operating as CordiaGrad, or the fact that the Purchaser has acquired the Company from the Bank.
Section 5.04. Purchaser Stock Ownership Matters.
(a) The parties acknowledge that Purchaser shall retain all shares of Cordia common stock, as well as all options to acquire shares of Cordia common stock, that Purchaser owns as of the date of this Agreement following the Closing Date and that the transactions contemplated by this Agreement shall in no way affect or result in the termination, waiver, diminution or forfeiture of any of Purchaser’s rights or interests with respect to such Cordia shares or stock options.
(b) Cordia and Purchaser hereby agree that the 184,000 unvested shares of Cordia common stock (formerly shares of Cordia Series A common stock issued to, and currently held by, Purchaser pursuant to the Founder Stock Agreement shall fully vest effective as of the Closing; and that after the Closing, all of the 289,560 shares of Cordia common stock issued to Purchaser pursuant to the Founder Stock Agreement (the “Founder Shares”), and currently held by, Purchaser shall all be Vested Shares (as defined in the Founder Stock Agreement) and shall no longer be subject to the Unvested Share Repurchase Option (as defined in the Founder Stock Agreement). In addition, Cordia and Purchaser hereby agree that the Founder Stock Agreement and all obligations of Purchaser thereunder shall terminate immediately following the Closing. As soon as practicable after the Closing, Cordia shall cause the Escrow Agent (as defined in the Founder Stock Agreement) and/or Cordia’s transfer agent (as applicable) to deliver all of the Founder Shares and all certificates evidencing the same, without legend or restriction on transfer, to Purchaser free and clear of all Liens (except for restrictions applicable to affiliates of Cordia under Securities and Exchange Commission Rule 144 (“Rule 144”), which will apply to the Founder Shares for a period of three months following the Closing Date).
(c) Cordia, the Bank and Purchaser hereby agree that the 66,000 restricted shares of Cordia common stock (the “Restricted Shares”) and the options to purchase 39,478 shares of Cordia common stock (the “Options”) awarded to Purchaser under Cordia’s 2011 Stock Incentive Plan (the “Cordia Stock Plan”) shall vest (if not already vested) and be fully vested effective as of the Closing; provided, however, that the Options shall otherwise be subject to the provisions of the existing award agreements between Cordia and Purchaser with respect to the grants of the Options under the Cordia Stock Plan; and provided, further, that after the Closing, the Restricted Shares shall no longer be subject to any transfer or holding period restrictions, repurchase rights or other restrictions on transfer under the Cordia Stock Plan or under the existing award agreement between Cordia and Purchaser with respect to the Restricted Shares (except for restrictions applicable to affiliates of Cordia under Rule 144, which will apply to the Restricted Shares for a period of three months following the Closing Date). As soon as practicable after the Closing, Cordia shall cause its transfer agent to deliver all of the Restricted Shares and all certificates evidencing the same, without legend or restriction, to Purchaser free and clear of all Liens (except for restrictions applicable to affiliates of Cordia under Rule 144, which will apply to the Restricted Shares for a period of three months following the Closing Date).
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(d) Cordia, the Bank and Purchaser hereby further agree that all other shares of Cordia common stock (including shares of Cordia common stock that were issued in connection with the conversion of former shares of Cordia Series B and Series C common stock and Series A preferred stock (collectively, the “Other Cordia Shares”) issued to, and currently held by Purchaser, shall no longer be subject to any restrictions on transfer or legends (except for restrictions applicable to affiliates of Cordia under Rule 144, which will apply to the Other Cordia Shares for a period of three months following the Closing Date).
(e) Cordia shall cause its counsel to provide a letter to Purchaser at the Closing confirming there are no restrictions on transfer or legends associated with the Founder Shares, Restricted Shares or Other Cordia Shares (except for restrictions applicable to affiliates of Cordia under Rule 144, which will apply to the Founder Shares, Restricted Shares and Other Cordia Shares for a period of three months following the Closing Date). In addition, promptly after the expiration of such three month period under Rule 144, Cordia shall cause its counsel to provide a letter to Purchaser confirming there are no restrictions on transfer or legends associated with the Founder Shares, Restricted Shares or Other Cordia Shares. In addition, prior to or at the Closing Cordia shall provide Purchaser with a fully executed copy of all agreements and grant documentation that evidence the options granted to Purchaser under the Cordia Stock Plan.
Section 5.05. Company Financial Statements. On the Closing Date, the Bank shall provide Purchaser with unaudited financial statements as of December 31, 2015 and as of January 31, 2016 and related work papers of the Company as of December 31, 2015 that provide sufficient support to produce audited financial statements under GAAP for the Company (including the CordiaGrad student loan refinancing business engaged in by the Bank) for the year ended December 31, 2015.
Section 5.06. Employment Agreement Matters.
(a) Effective as of the Closing, Cordia and Purchaser agree that the Employment Agreement and Purchaser’s employment thereunder shall terminate. Upon the termination of his Employment Agreement and employment thereunder, Purchaser irrevocably waives his rights under the Employment Agreement, with respect to the time period that follows the Closing Date, for any salary, severance or change in control payment, housing, travel or automobile allowance or reimbursement for expenses incurred after the Closing Date or any other benefit provided for pursuant to the Employment Agreement. As provided in the Employment Agreement, Sections 8(a), 9, 10, 11 and 12 of the Employment Agreement shall remain operative after such termination in accordance with their terms; except, however, that it is expressly agreed that (i) Section 9 of the Employment Agreement shall not apply to any Company Confidential Information or any other information that primarily relates to or derives from the CordiaGrad student loan refinancing business engaged in by the Bank or the Company, (ii) Section 10 of the Employment Agreement shall not, directly or indirectly, restrict or prohibit Purchaser or the Company from engaging or participating in the student loan business engaged in by the Bank or the Company or any similar, related or ancillary business from any location, and (iii) Section 11 of the Employment Agreement shall not, directly or indirectly, restrict or prohibit Purchaser or the Company from soliciting any customers of the CordiaGrad student loan refinancing business engaged in by the Bank or the Company.
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(b) At or as soon as practicable after the Closing, (i) Cordia shall cause the two key man life insurance policies purchased by Cordia on the life of Purchaser pursuant to Section 6 of the Employment Agreement to be assigned to the Company, and (ii) Cordia shall cause the $1 million life insurance policy on the life of Purchaser provided by Cordia pursuant to Section 7 of the Employment Agreement to be assigned to Purchaser (unless such assignment has already occurred).
(c) Effective as of the Closing Date, Purchaser shall be deemed, without any further action, to have resigned as a director of Cordia and all of its subsidiaries.
Section 5.07. Confidentiality. The Bank and Cordia agree that all Company Confidential Information is the property of the Company. Therefore, from and after the Closing Date, the Bank and Cordia each agrees that it shall not, and shall cause its Affiliates not to, directly or indirectly, disclose, reveal, divulge or communicate to any Person other than authorized officers and employees of the Company, or use or cause to be used for his or its own account or for the benefit of any third party, any Company Confidential Information at any time without the prior written consent of the Company or Purchaser.
ARTICLE
VI
TERMINATION
Section 6.01. Termination. This Agreement may be terminated at any time prior to the Closing:
(a) by mutual written consent of the parties;
(b) by the Bank, if there has been a material violation or breach by Purchaser of any covenant, representation or warranty contained in this Agreement that has prevented the satisfaction of any condition to the obligations of the Bank at the Closing and such violation or breach has not been waived by the Bank or, in the case of a covenant breach, cured by Purchaser within ten (10) days after written notice thereof to Purchaser by the Bank; and
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(c) by Purchaser, if there has been a material violation or breach by the Bank of any covenant, representation or warranty contained in this Agreement that has prevented the satisfaction of any condition to the obligations of Purchaser at the Closing and such violation or breach has not been waived by Purchaser or, in the case of a covenant breach, cured by the Bank within ten (10) days after written notice thereof to the Bank by Purchaser.
Section 6.02. Effect of Termination. In the event of termination by any party hereto pursuant to this Article VI, written notice thereof shall forthwith be given to the other party, the transactions contemplated by this Agreement shall be terminated, without further action by any party, this Agreement shall become void and there shall be no liability on the part of one party hereto against the other party hereto, or their respective directors, officers or agents, except that (i) any such termination shall be without prejudice to the rights of one party hereto arising out of the breach by the other party of any covenant or agreement contained in this Agreement and (ii) Sections 5.03, 7.03, 7.04, 7.06 and 7.07 shall continue in full force and effect notwithstanding such termination.
ARTICLE
VII
Miscellaneous
Section 7.01. Survival. Unless this Agreement is terminated in accordance with Article VI, the representations and warranties of the parties hereto contained in this Agreement or in any certificate or other writing delivered pursuant hereto or in connection herewith shall survive the Closing for a period of one year; except, however, that the representations and warranties set forth in Sections 3.01, 3.02, 3.03 and 3.06 shall survive indefinitely.
Section 7.02. Notices. All notices, requests and other communications to any party hereunder shall be in writing (including express delivery and electronic mail (“e-mail”) transmission, so long as a receipt of such e-mail is requested and received) and shall be given,
if to Purchaser, to:
Jack C. Zoeller
2810 31st Street, NW
Washington, DC 20008
E-mail: jackzoeller@yahoo.com
with a copy to:
Crowell & Moring LLP
1001 Pennsylvania Avenue NW
Washington, DC 20004-2595
Attention: James R. Stuart, III, Esq.
E-mail: jstuart@crowell.com
if to the Bank, to:
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Bank of Virginia
11730 Hull Street Road
Richmond, Virginia 23112
Attention: O.R. (Ed) Barham, Jr.
E-mail: ebarham@bankofva.com
with a copy to:
Kilpatrick Townsend & Stockton LLP
607 14th Street, NW, Suite 900
Washington, DC 20005
Attention: Aaron M. Kaslow, Esq.
Facsimile No.: (202) 204-5600
E-mail: akaslow@kilpatricktownsend.com
or such other address or facsimile number as such party may hereafter specify for the purpose by notice to the other parties hereto. All such notices, requests and other communications shall be deemed delivered: (i) upon receipt, when delivered personally; (ii) upon receipt, when sent by e-mail or facsimile (provided confirmation of transmission is mechanically or electronically generated and kept on file by the sending party); or (iii) one business day after deposit with an overnight courier service, in each case properly addressed to the party to receive the same.
Section 7.03. Amendments and Waivers.
(a) Any provision of this Agreement may be amended or waived if, but only if, such amendment or waiver is in writing and is signed, in the case of an amendment, by each party to this Agreement, or in the case of a waiver, by the party against whom the waiver is to be effective.
(b) No failure or delay by any party in exercising any right, power or privilege hereunder shall operate as a waiver thereof nor shall any single or partial exercise thereof preclude any other or further exercise thereof or the exercise of any other right, power or privilege. The rights and remedies herein provided shall be cumulative and not exclusive of any rights or remedies provided by law.
Section 7.04. Expenses. Each party hereto shall pay its own costs and expenses relating to this Agreement, the negotiations leading up to this Agreement and the transactions contemplated by this Agreement.
Section 7.05. Successors and Assigns. The provisions of this Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns; provided that no party may assign, delegate or otherwise transfer any of its rights or obligations under this Agreement without the consent of the other party (which such consent may not be unreasonably withheld, conditioned or delayed).
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Section 7.06. Governing Law. This Agreement shall be governed by and construed in accordance with the law of the Commonwealth of Virginia, without giving effect to any conflicts of law rule or principle that might require the application of the laws of another jurisdiction.
Section 7.07. WAIVER OF JURY TRIAL. EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATED TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY.
Section 7.08. Counterparts; Effectiveness; Third Party Beneficiaries. This Agreement may be signed in any number of counterparts, each of which shall be an original, with the same effect as if the signatures thereto and hereto were upon the same instrument. This Agreement shall become effective when each party hereto shall have received a counterpart hereof signed by the other party hereto. Until and unless each party has received a counterpart hereof signed by the other party hereto, this Agreement shall have no effect and no party shall have any right or obligation hereunder (whether by virtue of any other oral or written agreement or other communication). No provision of this Agreement is intended to confer any rights, benefits, remedies, obligations, or liabilities hereunder upon any Person other than the parties hereto and their respective successors and assigns.
Section 7.09. Entire Agreement. This Agreement constitutes the entire agreement between the parties with respect to the subject matter hereof and thereof and supersedes all prior agreements and understandings, both oral and written, between the parties with respect to such subject matter.
Section 7.10. Severability. If any term, provision, covenant or restriction of this Agreement is held by a court of competent jurisdiction or other Governmental Authority to be invalid, void or unenforceable, the remainder of the terms, provisions, covenants and restrictions of this Agreement shall remain in full force and effect and shall in no way be affected, impaired or invalidated so long as the economic or legal substance of the transactions contemplated hereby is not affected in any manner materially adverse to any party. Upon such a determination, the parties shall negotiate in good faith to modify this Agreement so as to effect the original intent of the parties as closely as possible in an acceptable manner in order that the transactions contemplated hereby be consummated as originally contemplated to the fullest extent possible.
[Remainder of page intentionally blank]
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed by their respective authorized officers as of the day and year first above written.
| BANK OF VIRGINIA | ||
| By: | /s/ O.R. (Ed) Barham, Jr. | |
| O.R. (Ed) Barham, Jr. | ||
| President and Chief Executive Officer | ||
| CORDIA BANCORP INC. | ||
| (solely for purposes of Sections 3.01, 3.02, 3.03, 5.04, 5.06 and 5.07) | ||
| By: | /s/ Mark A. Severson | |
| Mark A. Severson | ||
| Executive Vice President and Chief Financial Officer | ||
| PURCHASER | ||
| /s/ Jack C. Zoeller | ||
| Jack C. Zoeller |
| 15 |
EXHIBIT A
FORM OF TRANSITION SERVICES AGREEMENT
TRANSITION SERVICES AGREEMENT
This TRANSITION SERVICES AGREEMENT (this “Agreement”) is entered into as of this 1st day of March 2016, by and between Bank of Virginia, a commercial bank chartered under the laws of the Commonwealth of Virginia (the “Bank”) and Purefy Inc., a Delaware corporation (the “Company”).
RECITALS
WHEREAS, pursuant to that certain Stock Purchase Agreement, dated as of the date of this Agreement (the “Stock Purchase Agreement”), among the Bank, Cordia Bancorp, Inc. and Jack C. Zoeller (the “Purchaser”), Purchaser has purchased all of the outstanding shares of common stock, par value $0.01 per share, of the Company from the Bank (the “Stock Sale”); and
WHEREAS, the CordiaGrad student loan refinancing business of the Company (the “CordiaGrad Business”) formerly operated as a unit of the Bank, and the Company and the Bank desire to provide for an orderly transfer of certain services currently provided to or for the CordiaGrad Business by the Bank in the conduct of its business.
NOW, THEREFORE, in consideration of the mutual covenants contained in this Agreement, and for other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, the Bank and the Company hereby agree as follows:
ARTICLE I
TRANSITION SERVICES
Section 1.1. Transition Services. Subject to the terms and conditions set forth herein, during the term of this Agreement and in consideration of Purchaser’s completion of the Stock Sale, the Bank will perform for and make available to the Company the transition services detailed in Exhibit A hereto (the “Transition Services”) commensurate with the levels of such services provided by the Bank to the CordiaGrad Business during the year ended December 31, 2015. In exchange for the Transition Services, the Company will pay the Bank an aggregate monthly fee of $4,912 no later than the fifteenth day of the month immediately following the provision of such services; provided, however, that, upon the mutual agreement of the Company and the Bank (such agreement not to be unreasonably withheld), this monthly fee shall be equitably reduced or, if applicable, eliminated in the event that the Company elects to no longer utilize some or all of the Transaction Services during the term of this Agreement. The parties agree that it is their intention that the description of the Transition Services contained in this Agreement (including the exhibits hereto) contain such level of detail as is reasonably necessary to describe the extent and scope of the Transition Services and to eliminate any disputes between the parties. Without prejudice to the preceding sentence, if the Company makes a request for a modification of a Transition Service or requests an additional Transition Service, the parties shall (i) meet promptly to discuss and negotiate in good faith the proposed modification or additional Transition Service (and any fees payable by the Company to the Bank therefor) and (ii) cooperate in connection with the implementation of any understanding resulting from such discussions. Modifications of and additions to such Transition Services, if any, shall be set forth in a supplement to an exhibit or the exhibits hereto, as appropriate.
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Section 1.2. Employee Transition Services. From the date of this Agreement through the pay period that ends on March 15, 2016 (or such shorter period as the Company may request in writing), the Bank will provide (or cause to be provided through its applicable third-party service providers) payroll and human resource services relating to the employees of the Company (the “Employees”) including, but not limited to, the payment of all salary, commission, bonus and employee benefit plan amounts due to such Employees for services performed for the benefit of the Company. The Bank agrees to provide routine human resources services and related support, and to take such actions as shall be necessary and to cooperate with the Company, in order to assist the Employees in enrolling to receive continued employee benefits through the Consolidated Omnibus Budget Reconciliation Act. The Company agrees to remit all amounts payable to all Employees, and all amounts necessary to cover any related taxes and expenses under this Section 1.2 (including for participation in Bank employee benefit plans), directly to the Bank for direct debit by the Bank or the Bank’s third-party payroll provider by the tenth and, if the Bank provides the Company with payroll services after February 29, 2016, the twenty-fifth day of March 2016, which amounts will be paid by the Bank to the Employees and to the appropriate governmental agencies for employer payroll taxes and expenses for the Employees.
Section 1.3 Standard of Care. In providing the Transition Services pursuant to this Agreement, the Bank agrees to act with reasonable care, using the degree of skill and care that the Bank used when such services were provided by the Bank to the CordiaGrad Business during the year immediately preceding the completion of the Stock Sale.
ARTICLE II
COOPERATION
Section 2.1. Cooperation. The Bank agrees that it will make appropriate personnel of the Bank available at reasonable times during the term of this Agreement to consult with the Company in connection with the Transition Services to be provided by the Bank to the Company.
ARTICLE III
BOOKS AND RECORDS
Section 3.1. Audit and Access to Information. The Bank shall keep complete records pertaining to the Transition Services performed hereunder. The Bank shall provide the Company and its authorized representatives reasonable access to such records upon reasonable advance notice, and permit the Company to make such inspections and inquiries thereof as the Company may reasonable request during normal business hours; provided, however, that such inspection or inquiries shall be conducted in such a manner as not to unreasonably interfere with the Bank’s business.
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Section 3.2. Transfer of Books and Records. All books, records, documents, files and other information and data in the Bank’s possession and pertaining to the Company or the CordiaGrad Business are and from and after the consummation of the Stock Sale are and shall at all times remain the property of the Company. Upon termination of this Agreement, the Bank shall transfer control of such books, records, documents, files and other information and data held by it to the Company.
ARTICLE IV
LIMITATION ON LIABILITY
Section 4.1. Losses. The Company shall be responsible for all liabilities, obligations, losses, damages, payments, costs or expenses of any kind whatsoever (the “Losses”) associated with the operations of its business from and after the consummation of the Stock Sale, except (i) that the Bank shall be responsible for all or any portion of such Losses resulting from the breach by the Bank of its obligations under this Agreement or the failure of the Bank to conform to the standard of care set forth in Section 1.3 hereof with respect to the provision of Transition Services hereunder, and (ii) as otherwise provided in Section 2 of the Contribution Agreement (as defined in the Stock Purchase Agreement). The Bank shall be responsible for the costs and expenses of providing the Transition Services to the Company in accordance with the terms of this Agreement.
Section 4.2 Limit of Liability. Notwithstanding anything else to the contrary contained herein, neither party shall have any liability whatsoever for any indirect, special or consequential damages, however arising, which result from, or pertain to, the delivery of Transition Services hereunder.
ARTICLE V
TERM AND TERMINATION
Section 5.1. Term. This Agreement shall be effective as of the date hereof and continue in full force and effect until June 30, 2016, unless earlier terminated pursuant to Section 5.2 or Section 5.3 hereof.
Section 5.2. Termination by the Company. Upon 30 days prior written notice to the Bank, the Company may terminate this Agreement. In addition, the Company may immediately terminate its right to receive any of the Transition Services, in whole or in part, upon written notice to the Bank.
Section 5.3. Termination for Breach. Either party may terminate this Agreement by written notice to the other party in the event of a material breach by any party (the “Defaulting Party”) as to any obligation under this Agreement, provided that the terminating party (the “Terminating Party”) promptly serves prior written notice on the Defaulting Party specifying the terminable breach and that the Terminating Party considers such breach to be a terminable breach, and provided further that the Defaulting Party has not remedied the terminable breach within 30 days of such notice.
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Section 5.4. Effect of Termination. The termination of this Agreement shall not affect (i) the liability of a party for a material breach of this Agreement or (ii) the provisions contained in this Article V or in Articles IV or VI hereof, which provisions shall survive the termination of Agreement.
ARTICLE VI
MISCELLANEOUS
Section 6.1. Relationship of the Parties. The Bank and the Company are independent contractors with regard to this Agreement and all actions and services performed under this Agreement. Neither the Bank nor the Company shall be construed to be the other party’s agent or authorized, expressly or implicitly, to commit any other party to any obligation. Nothing in this Agreement shall create or be construed as creating a joint venture, partnership, agency or any other relationship between the parties other than one of independent contractor. All employees of the Bank providing Transition Services shall at all times remain employees of the Bank, and the Bank shall at all times coordinate and supervise the activities of such employees.
Section 6.2. Successors and Assigns. All terms and provisions of this Agreement shall be binding upon and shall inure to the benefit of the Bank and the Company (and their respective successors by operation of law); provided that the Bank may not assign any of its rights or obligations under this Agreement, other than pursuant to an assignment to an affiliate of the Bank, without the consent of the Company (which shall not be unreasonably withheld or delayed).
Section 6.3. Counterparts. This Agreement may be executed in counterparts (including by facsimile signature), each of which shall be deemed an original for all purposes and all of which shall be deemed, collectively, one agreement, but in making proof hereof it shall not be necessary to exhibit more than one such counterpart.
Section 6.4. Captions. The captions, headings and arrangements used in this Agreement are for convenience only and do not in any way affect, limit or amplify the terms and provisions hereof.
Section 6.5. Entire Agreement; Amendments. The making, execution and delivery of this Agreement by the parties have been induced by no representations, statements, warranties or agreements other than those expressed herein or in the other Transaction Documents (as defined in the Stock Purchase Agreement). This Agreement embodies the entire understanding of the parties, and there are no further or other agreements or understandings, written or oral, in effect between the parties relating to the subject matter hereof except for the other Transaction Documents. This Agreement may be amended or modified only by a written instrument signed by each of the parties or their duly authorized agents. None of the parties hereto shall be deemed to have waived any of its rights, powers or remedies under this Agreement unless such waiver is approved in writing by an authorized representative of the waiving party.
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Section 6.6. Severability. Whenever possible, each provision of this Agreement will be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Agreement is held to be prohibited by or invalid under applicable law, such provision will be ineffective only to the extent of such prohibition or invalidity, without invalidating the remainder of such provision or the remaining provisions of this Agreement.
Section 6.7. Governing Law. This Agreement shall be governed by and construed in accordance with the domestic laws of the Commonwealth of Virginia without giving effect to any choice or conflict of law provision or rule (whether of the Commonwealth of Virginia or any other jurisdiction) that would cause the application of the laws of any jurisdiction other than the Commonwealth of Virginia.
Section 6.8. Notices. All notices, requests and other communications to any party hereunder shall be in writing (including express delivery and electronic mail (“e-mail”) transmission, so long as a receipt of such e-mail is requested and received) and shall be given,
if to the Company, to:
Purefy Inc.
2810 31st Street, NW
Washington, DC 20008
Attention: Jack C. Zoeller
E-mail: jackzoeller@yahoo.com
with a copy to:
Crowell & Moring LLP
1001 Pennsylvania Avenue NW
Washington, DC 20004-2595
Attention: James R. Stuart, III, Esq.
E-mail: jstuart@crowell.com
if to the Bank, to:
Bank of Virginia
11730 Hull Street Road
Richmond, Virginia 23112
Attention: O.R. (Ed) Barham, Jr.
E-mail: ebarham@bankofva.com
with a copy to:
Kilpatrick Townsend & Stockton LLP
607 14th Street, NW, Suite 900
Washington, DC 20005
Attention: Aaron M. Kaslow, Esq.
E-mail: akaslow@kilpatricktownsend.com
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or such other address as such party may hereafter specify for the purpose by notice to the other parties hereto. All such notices, requests and other communications shall be deemed delivered: (i) upon receipt, when delivered personally; (ii) upon receipt, when sent by e-mail (provided confirmation of transmission is mechanically or electronically generated and kept on file by the sending party); or (iii) one business day after deposit with an overnight courier service, in each case properly addressed to the party to receive the same.
[Remainder of page intentionally blank]
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed by their respective authorized officers as of the day and year first above written.
| BANK OF VIRGINIA | ||
| By: | ||
| O.R. (Ed) Barham, Jr. | ||
| President and Chief Executive Officer | ||
| PUREFY INC. | ||
| By: | ||
| Jack C. Zoeller | ||
| President |
| A-7 |
Exhibit A
Transition Services
| I. | Accounting and Payroll Services |
The following list summarizes the accounting and payroll services to be provided by the Bank to the Company during the term of the Agreement:
| · | Prepare and issue monthly loan accounting inputs to the preparer of the Company’s financial statements sufficient to complete its balance sheet and income statement in a time frame comparable to the Bank’s financial statements |
| · | Payroll and human resources services for Company employees comparable to those provided by the Bank to Bank employees as of the date of this Agreement through the pay period that ends on March 15, 2016 (or such shorter period as the Company may request in writing) |
| · | Loan accounting services for the Company, through June 30, 2016, comparable to those performed by the Bank with respect to the CordiaGrad Business during the year ended December 31, 2015 |
| II. | Facilities Services |
The following list summarizes the facilities services to be provided by the Bank to the Company during the term of the Agreement:
| · | Use and occupancy of physical office space (in the same locations utilized by the Bank employees responsible for the CordiaGrad Business prior to the date of this Agreement) by and for the Company and its employees to conduct the Company’s business within the Bank’s main office located at 11730 Hull Street Road, Richmond, Virginia 23122 |
| · | Access to Bank printers, telephone, file space and telecommunications services sufficient for the Company and its employees to conduct the Company’s business |
| III. | Information Technology Services |
The following list summarizes the information technology services to be provided by the Bank to the Company during the term of the Agreement:
| · | Access to the Bank’s software applications and computer programs (or their replacements and upgrades, if applicable) utilized in the CordiaGrad Business or by the Bank employees responsible for the CordiaGrad Business prior to the date of this Agreement, sufficient for the Company and its employees to conduct the Company’s business |
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| · | Access to the Bank’s server-based services, helpdesk services, network platform services and technical support services as made available to the CordiaGrad Business or to the Bank employees responsible for the CordiaGrad Business prior to the date of this Agreement, sufficient for the Company and its employees to conduct the Company’s business |
| · | Assistance with the migration of all data relating to or arising from the CordiaGrad Business from the Bank’s network to the Company’s network, sufficient for the Company and its employees to complete such migration in a commercially reasonable manner. |
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EXHIBIT B
FORM OF LOAN PROGRAM AGREEMENT
LOAN PROGRAM AGREEMENT
This LOAN PROGRAM AGREEMENT (this “Agreement”) is entered into as of this 1st day of March 2016, by and between Bank of Virginia, a commercial bank chartered under the laws of the Commonwealth of Virginia (the “Bank”) and Purefy Inc., a Delaware corporation (the “Company”).
RECITALS
WHEREAS, the Bank is a Virginia state-chartered bank authorized to engage in the business of making loans throughout the United States;
WHEREAS, the Bank desires to have the Company perform, on the Bank’s behalf, certain marketing and administrative services in connection with the Bank’s origination of certain loans;
WHEREAS, the Company desires to perform certain marketing and other administrative services in connection with the Bank’s origination of certain loans, and the Company desires for the Bank to provide certain services to the Company in support of its loan marketing and administration activities; and
WHEREAS, the Parties desire to enter into this Agreement for the purpose of setting forth the terms and conditions that will govern the marketing and administrative services to be provided by the Company in connection with the Loans (as defined below), the related support services to be provided by the Bank to the Company and compensation payable from the Bank to the Company in exchange for such services;
AGREEMENT
NOW, THEREFORE, in consideration of the foregoing and the terms, conditions, representations and warranties, and mutual covenants and agreements herein contained, and for good and valuable consideration, the receipt and sufficiency of which are hereby conclusively acknowledged, the Bank and the Company mutually agree as follows:
ARTICLE I
DEFINITIONS AND CONSTRUCTION
Section 1.1 Definitions. In addition to definitions provided for other terms elsewhere in this Agreement and except as otherwise specifically indicated, the following terms shall have the indicated meanings.
“ACH” means automated clearing house.
“Advertising Materials” means all materials and methods used by the Company in the performance of its marketing services under this Agreement, including advertisements, direct mail pieces, brochures, website materials and any other similar materials.
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“Affiliate” of a person means a person in Control of that person, a person Controlled by that person or a person under common Control with that person.
“Applicant” means a prospective Borrower.
“Application” means the paper document or electronic application by which an Applicant applies for a Loan.
“Bank Program Expenses” means the reasonable third-party, out-of-pocket costs and expenses (except with respect to any fees and expenses incurred in connection with Section 10.1 hereof) incurred by the Bank in connection with the Bank’s performance under this Agreement, including legal fees and expenses; provided that (i) any such fees and expenses are (x) of the same type and extent as incurred by the Bank in 2015 in connection with the CordiaGrad Business, (y) are reasonably required by Regulatory Authorities or (z) of a type and approved in advance by the Company; (ii) the Bank has provided no less than five (5) Business Days prior written notice of the intended incurrence of such costs and/or expenses; and (iii) the Company has approved such fees and expenses in writing, such approval not to be unreasonably withheld.
“Borrowers” mean those Applicants and other Persons who are obligors with respect to the Loans.
“Business Day” means any day, other than: (i) a Saturday or Sunday, (ii) a day on which banking institutions in the Commonwealth of Virginia are authorized or obligated by law or executive order to be closed, or (iii) any other day on which commercial banking or Federal institutions in New York, New York are authorized or obligated by law or executive order to be closed.
“Company Platform” means the technology, including all computer software, proprietary system information, know-how, and other technology and information, together with all related documentation owned or licensed by the Company in connection with the Program, including the website administered by the Company, and any and all future versions thereof, and any and all enhancements, upgrades, modifications and improvements thereto and derivative works thereof and all Intellectual Property Rights therein. For avoidance of doubt, the Company Platform does not include the specific duties performed by the Company on behalf of the Bank and as its agent.
“Control” means the ownership or power to vote fifty percent (50%) or more of the outstanding ownership or voting interests of a person.
“CordiaGrad Business” means the CordiaGrad student loan refinancing business of the Company that was formerly operated as a unit of the Bank.
“Early Termination Date” means the date that is 90 days after the date of this Agreement.
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“Eligible Loan” means a Loan originated and funded by the Bank that meets all of the eligibility criteria set forth on Schedule 1 hereto.
“Existing Bank Loan” has the meaning given to such term in Section 3.2(f) of this Agreement.
“FDIC” means the Federal Deposit Insurance Corporation.
“Federal Reserve Board” means the Board of Governors of the Federal Reserve System.
“Funding Limit” means, on any given day, the lesser of (a) the sum of (i) $[****]1 and (ii) the amount of refinanced student loans held by the Bank that the Bank has designated as “held to maturity” and (b) $[****]2; provided, however, that if the Funding Limit shall cause the Bank’s Loan-to-Deposit Ratio to exceed 100%, the Funding Limit shall be reduced to such an amount that would result in a Loan-to-Deposit Ratio of 100% for the Bank.
“Intellectual Property Rights” shall mean any invention, whether patentable or otherwise, copyright, Marks, trade secret or patent rights and any United States or foreign registrations or letters patent or applications for any of the foregoing including any renewals, extensions, divisionals, continuations, continuations-in-part or reissues thereof and any reexamination certificates relating thereto. It is understood that Intellectual Property Rights belonging to or held by the Company shall not include any Marks of the Bank, except for those Marks contributed or licensed to the Company by the Bank pursuant to the Contribution Agreement dated March 1, 2016 between the Company and the Bank or the Trademark License Agreement dated March 1, 2016 (the “Contribution Agreement”), among the Company, the Bank and Cordia Bancorp Inc. (the “License Agreement”)
“Loan Documents” mean, collectively, with respect to any Loan, the Promissory Note, Application and any other documents signed by a Borrower in connection with a Loan.
“Loan” means a loan made by the Bank to a Borrower pursuant to this Agreement.
“Loan Funding Date” means the date on which the Bank funds a Loan to a Borrower in accordance with terms of this Agreement.
“Loan Products” means the Bank’s closed-end, unsecured loan products that meet the Program Terms and are made available to Applicants by the Bank under the Program.
1 **** Certain confidential information has been omitted and filed separately with the SEC. Confidential treatment has been requested with respect to the omitted portions.
2 **** Certain confidential information has been omitted and filed separately with the SEC. Confidential treatment has been requested with respect to the omitted portions.
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“Loan Sale Agreement” means any agreement with respect to the sale of Loans and/or refinanced student loans originated by the Bank prior to the date of this Agreement between the Bank and an applicable Purchaser and collectively all such agreements are referred to herein as the “Loan Sale Agreements.”
“Loan-to-Deposit Ratio” means the Bank’s loans held for investment, before reserves, as a percent of the Bank’s total deposits.
“Marks” means the trademarks including registered and common law trademarks, trade names, service marks, logos, domain names and designations.
“Origination Fee” means any applicable origination fee charged to each Borrower for a Loan, as set forth in Exhibit A.
“Party” means either the Company or the Bank and “Parties” means both the Company and the Bank.
“Person” means any legal person, including any individual, corporation, limited liability company, partnership, joint venture, association, joint-stock company, trust, unincorporated organization, governmental entity, or other entity of similar nature.
“Program” means the lending program for which the Company provides marketing and administrative services to the Bank in connection with the Loans and the Bank originates and funds such Loans pursuant to this Agreement, the Program Guidelines and the Program Terms.
“Program Guidelines” means those guidelines established by the Bank for the administration of the Program, as they may be modified from time to time by the Bank in its reasonable discretion, as provided in Section 2.3. The Program Guidelines include the Program Terms, as set forth on Exhibit A attached hereto, and the Underwriting Requirements, as set forth on Exhibit B attached hereto.
“Program Materials” means all Loan Documents and all other documents, materials and methods used in connection with the performance of the Parties’ obligations under this Agreement, including the promissory notes, Applications, disclosures required by the Rules applicable to an FDIC-insured, Virginia state-chartered commercial bank, collection materials, and the like, but excluding Advertising Materials.
“Program Start Date” means the first day upon which the Bank funds a Loan under this Agreement.
“Program Terms” has the meaning given to such term in Section 2.2 of this Agreement.
“Promissory Note” means the document containing the terms and conditions of a Loan including all disclosures required by Applicable Laws.
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“Purchaser” means the applicable Person that is a purchaser of Loans under any Loan Sale Agreement.
“Reconstitution Date” has the meaning given to such term in Section 10.20 of this Agreement.
“Regulation AB” means Subpart 229.1100 - Asset Backed Securities (Regulation AB), 17 C.F.R. Sections 229.1100 through 229.1123, as such may be amended from time to time, and subject to such clarification and interpretation as have been provided by the Securities and Exchange Commission in the adopting release (Asset-Backed Securities, Securities Act Release Nos. 33–9638; 34–72982; File No. S7–08–10, Fed. Reg. Vol. 79, No.185 (September 24, 2014) or by the staff of the Securities and Exchange Commission, or as may be provided by the Securities and Exchange Commission or its staff from time to time.
“Regulatory Authorities” means the Virginia Bureau of Financial Institutions, the Federal Reserve Board, the FDIC, the Consumer Financial Protection Bureau, and any local, state or federal regulatory authority that currently has, or may in the future have, jurisdiction or exercising regulatory or similar oversight with respect to the Bank, the Company or Third Party Service Providers (except that nothing herein shall be deemed to constitute an acknowledgement by the Bank that any Regulatory Authority other than the Virginia Bureau of Financial Institutions and the Federal Reserve Board has jurisdiction or exercises regulatory or similar oversight with respect to the Bank).
“Rules” means all local, state, and federal statutes or ordinances applicable to the acts of, as applicable, the Bank, the Company, or a Third Party Service Provider as they relate to the Program or a Party’s performance of its obligations under this Agreement; any order, decision, injunction or similar pronouncement of any court, tribunal, or arbitration panel issued with respect to, as applicable, the Bank, the Company or a Third Party Service Provider in connection with this Agreement; and any regulations, policy statements, and any similar pronouncement of a Regulatory Authority pertaining to, as applicable, the acts of the Bank, the Company or a Third Party Service Provider as they relate to the Program or a Party’s performance of its obligations under this Agreement.
“Securitization Transaction” has the meaning given to such term in Section 10.20 of this Agreement.
“Third Party Service Provider” means any contractor or service provider retained by the Bank or the Company, or retained by any party directly or indirectly retained by the Bank or the Company, that provides or renders services in connection with the Program.
“Underwriting Requirements” means the underwriting requirements of the Bank as set forth in the Program Guidelines to be applied by the Company in reviewing all Applications on behalf of the Bank.
“Unpaid Bank Program Fees” means any Bank Program Fees that the Bank has not received from a Purchaser in connection with the sale of a Loan under any Loan Sale Agreement.
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“Whole Loan Transfers” has the meaning given to such term in Section 10.20 of this Agreement.
Section 1.2 Construction. Unless the context otherwise clearly indicates:
(a) Words used in the singular include the plural and words in the plural include the singular;
(b) All references to the masculine gender shall include the feminine gender (and vice versa);
(c) All references to “include,” “includes,” or “including” shall be deemed to be followed by the words “without limitation”;
(d) References to any law or regulation refer to that law or regulation as amended from time to time and include any successor law or regulation;
(e) References to “dollars” or “$” shall be to United States dollars unless otherwise specified herein; and
(f) Unless otherwise specified, all references to days, months, or years shall be deemed to be proceeded by the word “calendar”.
ARTICLE II
GENERAL PROGRAM DESCRIPTION
Section 2.1 General Description; Appointment of the Company. The Parties agree that, in accordance with the Program Guidelines and Program Terms, the Program shall consist of the marketing and administrative services provided by the Company, on the Bank’s behalf, the related support services provided by the Bank to the Company and the origination and funding of Loans by the Bank. The duties of the Parties in connection with the Program shall be as set forth in the terms of this Agreement. The Bank hereby appoints the Company as its agent, and the Company accepts such appointment, to discharge the Bank’s duties and obligations with respect to each Application and Loan concerning applicable consumer, credit reporting, anti-money laundering and terrorist financing, and loan servicing laws with full power and authority to do and perform each and every act and thing requisite and necessary to be done in connection with such appointment, including the power and authority to do or cause to be done any and all things that the Company may reasonably deem necessary or desirable in connection with the rendering of such duties and obligations hereunder. This appointment as agent will expire automatically upon the termination of this Agreement.
Section 2.2 Program Terms. The Bank’s pricing schedule and certain other loan terms and conditions (collectively, “Program Terms”) are set forth on Exhibit A and shall apply to all Loans.
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Section 2.3 Program Modifications. The Bank may change the Program Terms or the Program Guidelines in its reasonable discretion, upon not less than 20 days prior written notice to the Company, provided that the foregoing prior notice shall not be required in the event such modification is: (i) the result of a change in the Rules or by request of a Regulatory Authority; and (ii) the Rules or the Regulatory Authority requires the modification to occur prior to the expiration of the 20-day notice period. In addition, the Company may recommend modifications to the Program Terms and/or Program Guidelines for the improvement of the Program for the Bank’s approval, such approval not to be unreasonably withheld or delayed. Notwithstanding the foregoing, in the event the Bank requires any modification to the Program Terms or Program Guidelines that requires modifications to the Company Platform, the Company agrees to complete such modifications within the shortest period of time reasonably necessary to arrange with its vendors to implement such modifications, and will use commercially reasonable efforts to complete such modifications within 20 days of receiving notice provided that the relevant Company vendors are the same vendors as were utilized by the Bank when it operated the CordiaGrad Business.
Section 2.4 Non-exclusivity. This Agreement does not prohibit the Company, or any Affiliate thereof, from entering into a contract with any Person that establishes and/or provides for the implementation of a program to originate loans that are substantially similar to the Loans, including in a manner that is substantially similar to and/or competitive with the Program (a “Competing Program”). During the twelve months following the date of this Agreement, the Bank shall not establish or enter into a Competing Program with any third party.
ARTICLE III
DUTIES OF THE COMPANY AND THE BANK
Section 3.1 Duties and Responsibilities of the Company. The Company shall perform and discharge the following duties and responsibilities in connection with the Program. In so doing, the Company may employ the same or similar designated agents previously employed by the Bank in connection with the CordiaGrad Business and shall provide sufficient oversight and direction to such designated agents as to reasonably ensure and maintain their compliance with the requirements of this Section 3.1.
(a) The Company, or its designated agent, shall be responsible for the marketing of the Bank’s Loan Products on behalf of the Bank to consumers through use of the approved Advertising Materials and Program Materials. The Bank agrees that the Company’s marketing efforts may include the use of radio, television, internet and print advertising. In marketing the Bank’s Loan Products, the Company shall at all times and in all material respects comply with applicable Rules.
(b) The Company, or its designated agent, shall comply with the Underwriting Requirements and shall comply in all material respects with the other Program Guidelines in connection with its duties hereunder. The Company shall ensure that each Loan originated and funded by the Bank is an Eligible Loan.
| B-7 |
(c) The Company shall process Applications on the Bank’s behalf from Applicants submitted to the Bank on an Application form that is provided by or otherwise approved by the Bank. The Company shall provide reasonable assistance to each prospective Applicant in completing an Application. The Company shall forward all completed Applications that satisfy the Bank’s Underwriting Requirements as set forth in the Program Guidelines to the Bank (or its designated loan processing agent) electronically, by telephone, or by other appropriate means agreeable to both Parties. No Application shall be approved unless it complies with the Program Guidelines and all Applications shall be deemed not approved to the extent that they do not comply with the Program Guidelines; it being understood that compliance with the Program Guidelines shall be the duty of the Company. The Bank shall have the option to approve exceptions to the Program Guidelines, in writing, in its sole discretion from time to time. Any Application that complies with the terms of a written exception received from the Bank and complies with all other applicable Program Guidelines shall be considered to be in compliance with the Program Guidelines. The Bank shall have the right to review and audit Applications to ensure compliance with the Program Guidelines.
(d) The Company, or its designated agent, shall take, on the Bank’s behalf, appropriate measures to verify the identity of all Applicants consistent with the Rules and any policies or procedures of the Bank provided to the Company, as they may be modified from time to time. The Company shall take such further steps as may be deemed reasonably necessary by the Bank to prevent fraud in connection with the Program.
(e) The Company, or its designated agent, shall provide, on the Bank’s behalf, an appropriate completed adverse action notice to any Applicant whose Application for a Loan is rejected by the Bank.
(f) The Company, or its designated agent, shall, on the Bank’s behalf, (A) electronically or otherwise deliver a copy of the Promissory Note to the Borrower; (B) obtain from the Borrower the executed Promissory Note; and (C) deliver a copy of the Bank’s privacy policy, as provided to the Company by the Bank, to the Borrower.
(g) The Company shall maintain and retain on behalf of the Bank all original Applications and copies of all adverse action notices and other documents relating to rejected Applications for the period required by the Rules. The Company shall further maintain originals or copies, as applicable, of all Loan Documents and any other documents provided to or received from Borrowers for the period required by the Rules.
(h) The Company, or its designated agent, shall perform for the Bank all post-funding servicing of the Loans held by the Bank, including customer service and collection functions in accordance with the Company’s or its designated agent’s ordinary and customary practices and the applicable Rules, including, as applicable, the federal Fair Debt Collections Practices Act and any similar applicable state statutes.
(i) The Company shall provide to the Bank data submissions and reports reasonably required by the Bank to maintain effective internal controls and monitor results under this Agreement or to comply with any applicable Rules.
| B-8 |
(j) The Company shall provide the Bank and Regulatory Authorities with reasonable access to the Company’s offices, to the books and records of the Company (to the extent such books and records pertain to the Loans), to the officers, employees and accountants of the Company, and to all computer files containing the Loan Documents, all for the same purposes of ensuring that the Company is following all Program Guidelines and is adhering to all applicable Rules. Such access shall include permission to maintain employees or agents of the Bank, at the Bank’s expense, on the premises of the Company during regular business hours to audit the Company’s books and records pertaining to the Program.
Section 3.2 Duties and Responsibilities of the Bank. The Bank shall perform and discharge the following duties and responsibilities in connection with the Program:
(a) The Bank shall establish and deliver the initial Program Guidelines to the Company and the Bank shall provide the Company with any modifications to the Program Guidelines that the Bank may make from time to time in accordance with Section 2.3.
(b) The Bank shall establish such controls as may be reasonably necessary, but not less than those controls required by any Regulatory Authorities and the Rules, to adequately control, monitor and supervise the operation of the Program and those duties performed by the Company on the Bank’s behalf, including the approval of each Application. The Bank and Company agree that the controls in place for the CordiaGrad Business prior to the date of this Agreement are necessary and sufficient to reasonably meet the Bank’s control requirements and standards.
(c) The Bank shall manage the Program in a good faith effort, employing the same degree of care, skill and attention that the Bank devotes to the management of its other programs and assets and at least the same degree of care, skill and attention that was devoted by the Bank to the CordiaGrad Business in 2015; provided, however, that the Bank’s management of the Program must meet or exceed the standards required by any Regulatory Authorities and the applicable Rules. The Bank shall perform and provide compliance and closing services in the same or similar manner as the Bank performed and provided in connection with the CordiaGrad Business in 2015, and consistent with such standard, the Bank shall:
(i) Timely review and issue approval or non-approval of a low volume of requested exceptions to the Underwriting Exceptions from the Company from time to time;
(ii) Timely review and issue approval or non-approval of the Company’s manual DTI recalculations weekly;
(iii) Timely review occasional product or pricing changes beyond those previously approved by the Bank, as may be requested by the Company from time to time;
(iv) Perform compliance review services, including the timely review of the product materials in the Company’s website or in print, digital and direct mail advertising, in the same manner and generally to the same extent as provided to the CordiaGrad Business by the Bank during 2015, as such product materials may be developed or modified from time to time by the Company; and
| B-9 |
(v) Provide Loan closing services, including timely review and funding of Company-generated Loans scheduled to be closed, in coordination with the Company and its loan application and closing vendor, in the same or similar manner as performed by the Bank for the CordiaGrad Business during 2015.
(d) The Bank hereby approves each Loan that, based upon the information provided by Applicants to the Bank through the Company and such other information as obtained by the Company at the direction of the Bank, meets the criteria, including the Underwriting Requirements, set forth in the Program Guidelines.
(e) Commencing on the Program Start Date, the Bank shall fund all Loans in the manner set out in the Program Guidelines. With respect to each Loan that is funded by the Bank in accordance with the terms of the Agreement following the Program Start Date, the Bank will pay the Company an origination fee equal to [****]3 basis points of the principal amount of the Loan, which the parties acknowledge reflects the approximate direct origination costs of the Company as of the date hereof.
(f) The Bank hereby grants the Company an exclusive right to purchase or direct the sale to a third party of any Loan, as well as all refinanced student loans held by the Bank as of the date of this Agreement (each, an “Existing Bank Loan”), in whole or in part in one or more transactions, subject to the right of the Bank, in its reasonable discretion, to accept or reject any proposed transaction. The Company further agrees that it will cooperate and use its reasonable commercial efforts to assist the Bank to enter into Loan Sale Agreements that will have the effect of reducing the total amount of refinanced student loans held by the Bank in its loan portfolio to no more than $20 million by April 30, 2016 and to $0 by June 30, 2016. The Company and Bank agree to employ their best efforts to effect such loan sales and the Bank shall be entitled to all interest income with respect to an applicable loan up and until the date of sale. In connection with any sale of a Loan or an Existing Bank Loan (excluding a sale to the Company) in accordance with the provisions of this Section 3.2(f), the Bank shall pay the Company a fee equal to (i) [****]4 basis points of the principal amount of each Loan or (ii) [****]5 basis points of the principal amount of each Existing Bank Loan.
Section 3.3 Conditions Precedent to the Obligations of the Bank and the Company.
(a) The obligations of the Bank in this Agreement are subject to the satisfaction of the following conditions precedent on or prior to the Bank’s funding of a Loan:
3 **** Certain confidential information has been omitted and filed separately with the SEC. Confidential treatment has been requested with respect to the omitted portions.
4 **** Certain confidential information has been omitted and filed separately with the SEC. Confidential treatment has been requested with respect to the omitted portions.
5 **** Certain confidential information has been omitted and filed separately with the SEC. Confidential treatment has been requested with respect to the omitted portions.
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(i) The Application for the Loan shall meet the standards set forth in the approved Program Guidelines then in effect;
(ii) No action or proceeding shall have been instituted or threatened against the Company or the Bank to prevent or restrain the consummation of the funding of the Loan and there shall be no injunction, decree, or similar restraint preventing or restraining such funding;
(iii) The representations and warranties of the Company set forth in this Agreement shall be true and correct in all material respects as though made on and as of such date;
(iv) The obligations of the Company set forth in this Agreement to be performed on or before each date that the Loan is funded shall have been performed in all material respects as of such date by the Company; and
(v) From and after the Early Termination Date there shall be a Loan Sale Agreement in effect with respect to the sale of the Loan and there is no default continuing after any applicable notice and grace period under such Loan Sale Agreement.
Notwithstanding the foregoing, on any given day, the Bank shall have no obligation to fund any Loans if the total amount of refinanced student loans held on such day by the Bank (including refinanced student loans designated as “held for sale”) is in excess of the Funding Limit.
(b) The obligations of the Company in this Agreement are subject to the satisfaction of the following conditions precedent:
| (i) | No action or proceeding shall have been instituted or threatened against the Company or the Bank to prevent or restrain the consummation of the transactions contemplated hereby and there shall be no injunction, decree, or similar restraint preventing or restraining such consummation; |
| (ii) | The representations and warranties of the Bank set forth in this Agreement shall be true and correct in all material respects as though made on and as of such date; |
| (iii) | The obligations of the Bank set forth in this Agreement to be performed on or before each date that a Loan is funded shall have been performed in all material respects as of such date by the Bank; and |
| (iv) | There is no default continuing after any applicable notice and grace period under any applicable Loan Sale Agreement and such Loan Sale Agreement has not been terminated by the parties thereto. |
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ARTICLE IV
TRADE NAMES, ACCOUNTING SYSTEM; ADVERTISING AND PROGRAM MATERIALS; COMPANY INTELLECTUAL PROPERTY; PROGRAM MANAGERS
Section 4.1 Trade Names and Trademarks. The Company shall have no authority to use any Marks, including trade names, trademarks or service marks, of the Bank except by means of approved Program Materials or Advertising Materials, except as permitted under the License Agreement or except as otherwise approved hereunder or in writing by the Bank. The Bank acknowledges that approved Program Materials or Advertising Materials may contain Marks, including trade names, trademarks or service marks, of the Company, and the Bank shall have no authority to use any such Marks, including trade names or marks separate and apart from their use in connection with the Program, including the Program Materials or Advertising Materials or as otherwise approved hereunder or in writing by the Company. The Parties shall use Program Materials and Advertising Materials only for the purpose of implementing the provisions of this Agreement and shall not use Program Materials or Advertising Materials in any manner that would violate the Rules applicable to an FDIC-insured, Virginia state-chartered commercial bank or any provision of the Program Guidelines. Each Party’s right to use the Marks of the other Party shall immediately and automatically terminate upon termination of this Agreement.
Section 4.2 Accounting System. The Company shall establish and maintain, at its sole cost and expense, a comprehensive accounting and tracking system (or systems) to accurately and immediately reflect all Applications, Loans and related information regarding the Program to satisfy the information requirements of the Regulatory Authorities or the reasonable information requirements of the Bank and the Bank’s internal and external auditors, each as communicated to the Company by the Bank in writing. Such system (or systems) shall provide the Bank with access to copies of all documentation received from Applicants and Borrowers, including the information needed for the Bank to underwrite and approve Loans pursuant to the Program Guidelines. The Company further agrees that the information reporting features, integrity and security of the system (or systems) shall operate to the reasonable satisfaction of the Bank, Regulatory Authorities and the Bank’s internal and external auditors, each as communicated to the Company by the Bank in writing. The Company further agrees that such system (or systems) shall provide such daily settlement reports, including reports noting the Applications ready for underwriting and a summary report of Applications to be funded by the Bank. For purposes of this Section 4.2, the accounting systems employed by the Company on the date hereof or by the CordiaGrad Business in 2015 are deemed to meet the requirements of this Section 4.2.
Section 4.3 Advertising and Program Materials.
(a) The Company shall prepare the Advertising Materials and the Program Materials to be used in connection with the Program, which shall comply in all material respects with the Rules applicable to an FDIC-insured, Virginia state-chartered commercial bank and the Program Guidelines.
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(b) The Company shall make available for the Bank’s prior review and approval (such approval not to be unreasonably withheld or delayed) all new or modified Advertising Materials and Program Materials proposed by the Company. The Bank shall have the option, within three (3) Business Days of receipt, to review and approve or reject any new or modified materials. New or modified materials will be considered approved and authorized by the Bank once such approval and authorization is communicated by the Bank in writing.
(c) The Bank may, at any time with written notice to the Company, retract or modify any approval previously given by it with respect to any Advertising Materials and Program Materials if the Bank reasonably determines that such action is required to remain in compliance with the Rules or upon request of a Regulatory Authority for the safe and sound operation of the Program.
(d) After approval and subject to the Bank’s right to retract or modify any approval previously given as described in Section 4.3(d), the Company may use any Advertising Materials and Program Materials, and need not seek further approval for use of such materials unless there is a substantive change in the materials. In the event of a substantive change, the Company shall submit such materials to the Bank for review and approval in accordance with Section 4.3(c).
(e) The Bank hereby provides the Company with a non-exclusive right and non-assignable license to use and reproduce the Bank’s Marks as necessary to perform its obligations under this Agreement; provided, however, that (i) the Company shall obtain the Bank’s prior written approval for the use of the Bank’s Marks and such use shall at all times comply with written instructions provided by the Bank regarding the use of its Marks; and (ii) the Company acknowledges that it shall acquire no interest in the Bank’s Marks, except as provided in Section 4.1, this Section 4.3(e) or the License Agreement. Upon termination of this Agreement, the Company shall cease using the Bank’s Marks except to the extent authorized under the License Agreement. Except as permitted in the License Agreement, neither Party may use the other Party’s Marks in any press release without the prior written consent of the other Party.
(f) The Bank shall be responsible for any costs incurred by the Bank in connection with the satisfaction of its obligations under this Section 4.3.
Section 4.4 Company Intellectual Property. The Company shall retain sole and exclusive right, title, and interest to all Intellectual Property Rights of the Company, all, Company Marks, its website(s), the Company Platform, the technology related thereto, including all aspects of the website(s)’ content, the Advertising Materials (except for the Bank Marks contained therein), and the services and processes performed by the Company under the Program. This Agreement does not transfer any Intellectual Property Rights between the Company and the Bank.
Section 4.5 Program Managers. The Company and the Bank shall each designate a respective principal contact (a “Program Manager”) to facilitate day-to-day operations and resolve issues that may arise with respect to the Program. If the Program Managers are unable to reach agreement, then the dispute will be referred to the President of the Bank and the President of the Company who will work together in good faith to resolution. If the Parties are unable to resolve the dispute, a Party may, upon the written notice to the other Party resolve the dispute in accordance with Section 10.3.
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ARTICLE V
EXPENSES
Section 5.1 Expenses. The Company shall pay all costs and expenses it incurs in connection with its fulfillment of the duties in Section 3.1, including the costs of obtaining credit reports and delivering adverse action notices, and the Bank Program Expenses. The Bank shall pay all costs and expenses it incurs in connection with its fulfillment of the duties in Section 3.2, other than the Bank Program Expenses.
Section 5.2 ACH and Wire Costs. Without limiting the generality of Section 6.1, the Company is responsible for reimbursing the Bank the costs associated with ACH transfers of $0.15 per ACH transfer or wires of $15.00 per domestic wire or $45.00 per international wire executed in connection with the Program, including in connection with the loan servicing hereunder or any transfers required under any applicable Loan Sale Agreement.
Section 5.3 Taxes. Each Party shall be responsible for payment of any federal, state, or local taxes or assessments associated with the performance of its obligations under this Agreement and for compliance with all filing, registration and other requirements with regard thereto.
Section 5.4 Other Expenses. Except as otherwise expressly set forth in this Article V, each Party shall bear the costs and expenses of performing its obligations and duties under this Agreement.
ARTICLE VI
TERM
Section 6.1 Term. This Agreement shall terminate on June 30, 2016, unless otherwise earlier terminated as provided herein. The termination of this Agreement shall not terminate, effect or impair any rights, obligations or liabilities of either Party that may accrue prior to such termination or that, under the terms of this Agreement, continue after the termination.
ARTICLE VII
TERMINATION
Section 7.1 Termination.
(a) Termination by Either Party. Either Party to this Agreement may terminate the Agreement as follows:
(i) Event of Default. Upon occurrence of an event of default by the Company or the Bank, the other Party may terminate this Agreement following the provision of written notice identifying the default and the defaulting Party’s failure to cure the same within thirty (30) days of such notice.
(ii) Bankruptcy. Either Party may terminate this Agreement at any time upon notice to the other Party after the filing by the other Party of any petition in bankruptcy or for reorganization or for debt consolidation under the federal bankruptcy laws or under any comparable law.
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(iii) Illegality. Either Party has the right to terminate this Agreement immediately upon written notice to the other Party if the Party determines in its reasonable discretion that the activities of the Parties under this Agreement or the Program are illegal under or prohibited by any of the Rules, provided, however, that if the illegality or prohibition is a state or local rule, either Party may in its discretion immediately discontinue the Program in those states or localities affected by the Rule without terminating this Agreement in its entirety for such reason.
(iv) Regulatory Direction. Either Party has the right to terminate this Agreement upon thirty (30) days written notice to the other, or earlier if otherwise required by any Regulatory Authority, upon written notice to the other Party, if any Regulatory Authority having jurisdiction over the terminating Party requires that such Party terminate this Agreement.
(v) Material Adverse Effect. Either Party has the right to terminate this Agreement upon thirty (30) days written notice to the other Party, or earlier if necessary to avoid the potential for material loss to the terminating Party, if the terminating Party determines in its reasonable discretions that the continuing operation of the Program may, in the case of the Bank, materially adversely affect the safety and soundness of the Bank or, in the case of the Company, have a material adverse effect on the business or operations of the Company.
(b) Termination by the Company. The Company may terminate its marketing of the Program or its origination of new Applications under this Agreement at any time upon written notice to the Bank.
Section 7.2 Loan Sale Agreements. This Agreement shall automatically be terminated (i) on the Early Termination Date if no Loan Sale Agreement shall be then be in effect and (ii) immediately, at any time after the Early Termination Date, upon the termination of all Loan Sale Agreements.
Section 7.3 Effect of Upon Termination. Upon the termination of this Agreement, (i) the Bank shall terminate the origination of any new Applications, (ii) the Company shall cease marketing the Program, (iii) each Party shall immediately discontinue the use of the other Party’s Marks (except as otherwise provided in the License Agreement), (iv) all amounts due and payable hereunder shall become due and payable, including any amounts due under Section 5.1 and (v) the Parties shall cooperate in order to ensure a smooth and orderly termination of this Agreement. Notwithstanding any termination hereof, the terms and conditions of this Agreement shall remain in place and effective to govern the duties of the Parties solely for the purposes of administering any Loans held by the Bank on the termination date until such time as those Loans are no longer owned by the Bank and paying any compensation or expenses incurred prior to the termination date under Sections 4 and 5.
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ARTICLE VIII
REPRESENTATIONS AND WARRANTIES
Section 8.1 Representations and Warranties of the Company. The Company makes the following warranties and representations to the Bank, all of which shall only survive until the end of the term of this Agreement, including all extensions:
(a) This Agreement is valid, binding and enforceable against the Company in accordance with its terms, except (a) to the extent that such enforceability may be limited by applicable insolvency, bankruptcy reorganization, receivership, moratorium, conservatorship or other similar laws now or hereafter in effect, including the rights and obligations of receivers and conservators pursuant to 12 U.S.C. §§ 1821 (d) and (e), which may affect the enforcement of creditors’ rights in general, and (b) to the extent that such enforceability may be limited by general principles of equity (whether considered in a suit in law or in equity), and the Company has received all required approvals for such purposes.
(b) The Company is duly organized, validly existing, and in good standing under the laws of the State of Delaware and is authorized, registered and licensed to do business in each state in which its activities makes such authorization, registration or licensing necessary or required.
(c) The Company has the full power and authority to execute and deliver this Agreement and perform all of its obligations hereunder. The execution, delivery and performance of this Agreement have been duly authorized by the Company.
(d) The execution of this Agreement and the completion of all actions required or contemplated to be taken by the Company hereunder are within the ordinary course of the Company’s business and not prohibited by the applicable Rules.
(e) The provisions of this Agreement and the performance of each of its obligations hereunder do not conflict with any agreement, contract, lease, order or obligation to which the Company is a party or by which the Company is bound, including any exclusivity or other provisions of any other agreement to which the Company or any related entity is a party, and including any non-compete agreement or similar agreement limiting the right of the Company to engage in activities competitive with the business of any other party nor any regulatory or governmental authority that the Company is subject to.
(f) Except as licensed or otherwise permitted, the Company has not, and will not, use the intellectual property, trade secrets or other confidential business information of any third party in connection with the development of the Program Materials and Advertising Materials.
(g) Except as previously disclosed to the Bank, neither the Company nor any principal thereof has been or is the subject of any of the following:
| (i) | An enforcement agreement, memorandum of understanding, cease desist order, administrative penalty or similar agreement that would prevent the consummation of any of the transactions contemplated by the Bank pursuant to this Agreement, including the duties to be performed on behalf of the Bank as set forth in Section 3.1, or that prohibits any principal’s participation in the affairs of a financial institution; |
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| (ii) | Administrative or enforcement proceeding or investigation commenced by the Securities Exchange Commission, state securities regulatory authority, Federal Trade Commission, any banking regulator or any other state or federal Regulatory Authority, with the exception of routine communications from a Regulatory Authority concerning a consumer complaint and routine examinations of the Company conducted by a Regulatory Authority in the ordinary course of the Company’s business; or |
| (iii) | Restraining order, decree, injunction or judgment in any proceeding or lawsuit alleging fraud or deceptive practices on the part of the Company or any principal thereof. |
For purposes of this subsection the word “principal” of the Company shall include (i) any person owning or controlling 10% or more of the voting power of the Company, (ii) any officer or director of the Company and (iii) any person actively participating in the Control of the Company’s business.
(h) There are no investigations or proceedings pending or, to the best knowledge of the Company, threatened against the Company (i) seeking to prevent the completion of any of the transactions contemplated by the Company pursuant to this Agreement (ii) asserting the invalidity or enforceability of this Agreement, (iii) seeking any determination or ruling that, in the reasonable judgment of the Company, would adversely and materially affect the performance by the Company of its obligations under this Agreement, (iv) seeking any determination or ruling that would adversely and materially affect the validity or enforceability of this Agreement or (v) would have a materially adverse financial effect on the Company or its operations if resolved adversely to it.
(i) The Company has filed when due federal and state tax returns which are required to be filed and paid all taxes, including any assessments received by it, to the extent that such taxes have become due (other than taxes, the amount or validity of which are currently being contested in good faith by appropriate proceedings and with respect to which reserves in conformity with generally accepted accounting principles have been provided on its books).
(j) The Company will implement a compliance management system for consumer complaints filed with the Consumer Financial Protection Bureau that will provide the Company with the ability to track and respond to consumer complaints and update the Consumer Financial Protection Bureau company portal within the required time period.
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(k) The Company, or its designated agents, have, and covenant to maintain, a disaster recovery and contingency plan consisting of policies and procedures, as well as ancillary backup capabilities and facilities (collectively, “DRP”), designed to enable the Company to render the services contemplated under this Agreement with minimal disruptions or delays in the event of any natural disaster or other unplanned interruption of services. Not less than once each calendar year, the Company shall test the operability of the DRP. The Company shall, upon the Bank’s request, provide the Bank with a summary of the results of such testing. The Company shall not amend the DRP in a manner that knowingly materially increases the risks of disruptions and delays of its services without the consent of the Bank (not to be unreasonably withheld or delayed). Reinstating the services contemplated under this Agreement shall receive as high a priority as reinstating the similar services provided to the Company’s affiliates and other customers. For purposes of this paragraph, any portion of the Company’s recovery and contingency plans which rely on the Bank shall be deemed to be in compliance with the requirements of this paragraph to the extent of such reliance.
(l) All information heretofore or hereafter furnished by or on behalf of the Company to the Bank in connection with a Loan (other than information provided by an Applicant or Borrower) is true and correct in all material respects. The Company shall promptly correct any incorrect or inaccurate information furnished by it.
(m) The Company shall furnish to the Bank any reasonable information, documents, records or reports with respect to the Loans as the Bank may from time to time request, in each case promptly in consideration of the scope of such request.
(n) The Company has in full force and effect insurance in such amounts and with such terms, as follows:
(i) comprehensive general liability with limits not less than $1,000,000 and $2,000,000 annual aggregate;
(ii) statutorily required worker’s compensation;
(iii) employer’s liability of $1,000,000 per employee/occurrence;
(iv) dishonest employee liability of not less than $100,000;
(v) umbrella liability with limits not less than $3,000,000 per occurrence and aggregate; and
(vi) professional liability/errors & omissions of not less than $1,000,000 per occurrence and $2,000,000 annual aggregate.
The Company will not reduce the amount of any insurance set forth above maintained by the Company prior to the termination of this Agreement.
Section 8.2 Representations and Warranties of the Bank. The Bank makes the following warranties and representations to the Company as of the Effective Date and on each date the Bank funds a Loan under the Program, all of which shall only survive until the end of the term of this Agreement, including all extensions:
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(a) This Agreement is valid, binding and enforceable against the Bank in accordance with its terms, except (a) to the extent that such enforceability may be limited by applicable insolvency, bankruptcy reorganization, receivership, moratorium, conservatorship or other similar laws now or hereafter in effect, including the rights and obligations of receivers and conservators pursuant to 12 U.S.C. §§ 1821 (d) and (e), which may affect the enforcement of creditors’ rights in general, and (b) to the extent that such enforceability may be limited by general principles of equity (whether considered in a suit in law or in equity), and the Bank has received all necessary approvals for such purposes or is not required to obtain the approval of any Regulatory Authority or other Person to enter into this Agreement or perform its obligations hereunder.
(b) The Bank is an FDIC-insured, Virginia state-chartered bank, validly existing, and in good standing under the laws of the Commonwealth of Virginia and applicable federal law and is authorized to do business in each state in which its activities makes such authorizations necessary or required.
(c) The Bank has the full power and authority to execute and deliver this Agreement and perform all of its obligations hereunder.
(d) The execution of this Agreement and the completion of all actions required or contemplated to be taken by the Bank hereunder are within the ordinary course of the Bank’s business and not prohibited by the Rules.
(e) The provisions of this Agreement and the performance of each of its obligations hereunder do not conflict with any agreement, contract, lease or obligation to which the Bank is a party or by which the Bank is bound, including any exclusivity or other provisions of any other agreement to which the Bank or any related entity is a party, and including any non-compete agreement or similar agreement limiting the right of the Bank to engage in activities competitive with the business of any other party.
(f) The Bank has the authority to originate the Loans on the Program Terms to the Borrowers who meet the Underwriting Requirements established in the Program Guidelines, as contemplated in this Agreement. The Loans will be originated and funded by the Bank and will conform with the Rules applicable to an FDIC-insured, Virginia state-chartered commercial bank.
(g) Except as previously disclosed to the Company, neither the Bank nor any principal thereof has been or is the subject of any of the following:
(i) An enforcement agreement, memorandum of understanding, cease and desist order, administrative penalty or similar agreement concerning lending matters, or participation in the affairs of a financial institution;
(ii) An administrative or enforcement proceeding or investigation commenced by the Securities Exchange Commission, state securities regulatory authority, Federal Trade Commission, any banking regulator or any other state or federal Regulatory Authority; or
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(iii) A restraining order, decree, injunction or judgment in any proceeding or lawsuit alleging fraud or deceptive practices on the part of the Bank or any principal thereof.
For purposes of this subsection the word “principal” of the Bank shall include (i) any person owning or controlling 10% or more of the voting power of the Bank, (ii) any officer or director of the Bank and (iii) any person actively participating in the control of the Bank’s business.
(h) Following the date of this Agreement, the Bank shall furnish to the Company any information with respect to the underwriting, pricing or credit decisions related to the Loans as the Company may reasonably request from time to time.
ARTICLE IX
INDEMNIFICATION AND MISCELLANEOUS
Section 9.1 Indemnification.
(a) Indemnification by the Company. Except to the extent of any Losses (as herein defined) which arise from the direct acts or omissions of the Bank or an Affiliate of the Bank or from the negligence, bad faith or willful misconduct on the part of the Bank, the Company shall be liable to and shall indemnify, defend, and hold harmless the Bank and its respective directors, officers, employees, agents and Affiliates and permitted assigns, from and against any and all Losses arising out of (i) any failure of the Company to comply with any of the terms and conditions of this Agreement, (ii) the inaccuracy of any representation or warranty made by the Company herein, (iii) any infringement or alleged infringement by the Company of any Marks of the Bank, or the use thereof hereunder by the Company, (iv) a failure of the Company to comply, in respect of its obligations in connection with the Program hereunder, with any applicable Rules whether immaterial or material, regardless of whether such failure to comply would constitute a breach of a representation, warranty or covenant of the Company hereunder, or (v) any violation of any Rule applicable to an FDIC-insured, Virginia state-chartered commercial bank, claim arising from any Loan Document, the Program Materials or the Advertising Materials or any other aspect of the Program within the Company’s control.
(b) Indemnification by the Bank. Except to the extent of any Losses which arise from the direct acts or omissions of the Company or an Affiliate of the Company, the Bank shall be liable to and shall indemnify, defend, and hold harmless the Company and its respective officers, directors, employees, agents and Affiliates and permitted assigns, from and against any Losses arising out of (i) the failure of the Bank to comply with any of the terms and conditions of this Agreement, (ii) the inaccuracy of any representation or warranty made by the Bank herein, (iii) any infringement or alleged infringement by the Bank of any Marks of the Company, or the use thereof hereunder by the Bank, or (iv) a failure of the Bank to comply, in respect of its obligations in connection with the Program hereunder, with any applicable Rules whether immaterial or material, regardless of whether such failure to comply would constitute a breach of a representation, warranty or covenant of the Bank hereunder.
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(c) Losses Defined. For the purposes of this Agreement, the term “Losses” shall mean all out-of-pocket costs, damages, losses, fines, penalties, judgments, settlements and expenses whatsoever, including outside attorneys’ fees and disbursements and court costs reasonably incurred by the Indemnified Party, in connection with any judicial, administrative, or other proceeding or claim made by a third party; provided, however, that the Bank shall not be liable to the Company, and the Company shall not be liable to the Bank, for any claim for indemnification pursuant to Section 9.1(a) or 9.1(b) (or for any Loss for which such a claim may be asserted under Section 9.1(a) or 9.1(b)) unless and until the aggregate amount of indemnifiable Losses that may be recovered from the Bank or the Company, as applicable, exceeds $25,000, in which case the Bank or the Company, as applicable, shall be liable only for the Losses in excess of $25,000.
(d) Notice of Claims. In the event any claim is made, any suit or action is commenced or any knowledge of a state of facts that, if not corrected, would give rise to a right of indemnification of a Party (“Indemnified Party”) by the other Party (“Indemnifying Party”) is received, the Indemnified Party will give notice to the Indemnifying Party as promptly as practicable, but, in the case of lawsuit, in no event later than the time necessary to enable the Indemnifying Party to file a timely answer to the complaint. The Indemnified Party shall make available to the Indemnifying Party and its counsel and accountants at reasonable times and for reasonable periods, during normal business hours, all books and records of the Indemnified Party relating to any such possible claim for indemnification, and each party hereunder will render to the other such assistance as it may reasonably require of the other (at the expenses of the party requesting assistance) in order to insure prompt and adequate defense of any suit, claim or proceeding based upon a state of facts which may give rise to a right of indemnification hereunder.
(e) Defense and Counsel. Subject to the terms hereof, the Indemnifying Party shall have the right to defend any suit, claim or proceeding. The Indemnifying Party shall notify the Indemnified Party via email, with a copy by mail, within ten (10) days of having been notified of a claim for indemnification pursuant to this Section 9.1 that the Indemnifying Party elects to employ counsel and assume the defense of any such claim, suit or action. The Indemnifying Party shall institute and maintain any such defense diligently and reasonably and shall keep the Indemnified Party fully advised of the status thereof. The Indemnified Party shall have the right to employ its own counsel if the Indemnified Party so elects to assume such defense, but the fees and expense of such counsel shall be at the Indemnified Party’s expense, unless (i) the employment of such counsel shall have been authorized in writing by the Indemnifying Party; (ii) such Indemnified Party shall have reasonably concluded that the interests of the Parties are conflicting such that it would be inappropriate for the same counsel to represent both Parties or shall have reasonably concluded that the ability of the Parties to prevail in the defense of any claim are improved if separate counsel represents the Indemnified Party (in which case the Indemnifying Party shall not have the right to direct the defense of such action on behalf of the Indemnified Party), and in either of such events such reasonable fees and expenses shall be borne by the Indemnifying Party; (iii) the Indemnified Party shall have reasonably concluded that it is necessary to institute separate litigation, whether in the same or another court, in order to defend the claims asserted against it; (iv) the Indemnified Party reasonably concludes that the ability of the Parties to prevail in the defense of any claim is materially improved if separate counsel represents the Indemnified Party; and (v) the Indemnifying Party shall not have employed counsel reasonably acceptable to the Indemnified Party to take charge of the defense of such action after electing to assume the defense thereof.
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(f) Settlement of Claims. The Indemnifying Party shall have the right to compromise and settle any suit, claim or proceeding in the name of the Indemnified Party; provided, however, that the Indemnifying Party shall not compromise or settle a suit, claim or proceeding (i) unless it indemnifies the Indemnified Party for all Losses arising out of or relating thereto and (ii) with respect to any suit, claim or proceeding which seeks any non-monetary relief, without the consent of the Indemnified Party, which consent shall not unreasonably be withheld or delayed. The Indemnifying Party shall be subrogated to any claims or rights of the Indemnified Party as against any other Persons with respect to any amount paid by the Indemnifying Party under this Section 9.1(f).
(g) Indemnification Payments. Amounts owing under this Section 9.1 shall be paid promptly upon written demand for indemnification containing in reasonable detail the facts giving rise to such Losses, provided, however, that if the Indemnifying Party notifies the Indemnified Party within thirty (30) days of receipt of such demand that it disputes its obligation to indemnify, or the Losses being claimed, and the Parties are not otherwise able to reach agreement, the controversy shall be settled by the courts of the Commonwealth of Virginia.
Section 9.2 Limitation of Liability. NEITHER PARTY SHALL BE LIABLE TO THE OTHER PARTY FOR INDIRECT, SPECIAL, INCIDENTAL, PUNITIVE, CONSEQUENTIAL, OR EXEMPLARY DAMAGES OR LOST PROFITS (EVEN IF SUCH PARTY HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES) ARISING OUT OF OR IN CONNECTION WITH THIS AGREEMENT.
Section 9.3 Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the Commonwealth of Virginia without regard to its conflict of laws rules.
Section 9.4 Confidential Information. In performing their obligations pursuant to this Agreement, each Party may have access to and receive disclosure of certain confidential information about the other Party, including the names and addresses of a Party’s customers, marketing plans and objectives, research and test results, and other information that is confidential and the property of the party disclosing the information (“Confidential Information”). The Parties agree that the term Confidential Information shall include the terms and conditions of this Agreement, the Loan Sale Agreements, the Program Guidelines and the Program Materials, as the same may be amended and modified from time to time. Confidential Information shall not include (a) information in the public domain or which is independently developed by the other Party or (b) any information required to be disclosed to a Regulatory Authority, pursuant to the Rules or pursuant to a valid subpoena or court order. The Bank and the Company agree that Confidential Information shall be used by each Party solely in the performance of its obligations hereunder. Each Party shall receive Confidential Information in confidence and shall not disclose Confidential Information to any third party, except as may be necessary to perform its obligations hereunder, to the Regulatory Authorities, as may be otherwise agreed in writing by the Party furnishing the information, or as required by the Rules.
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Upon request or upon any expiration or termination of this Agreement, to the extent permitted by applicable law, each Party shall return to the other Party or destroy (as the latter may instruct) all of the latter’s Confidential Information in the former’s possession that is in any written or other recorded form, including data stored in any computer medium; provided, however, that a Party may retain the Confidential Information of the other Party (but subject to the requirements of the preceding paragraph) to the extent that such Party needs access to such information to continue to perform any of its obligations hereunder or to service or administer Loans or otherwise perform obligations owed by such Party to another Person or pursuant to any document retention policies, or pursuant to any of the Rules.
Section 9.5 Privacy Law Compliance; Security Breach Disclosure. Each Party agrees that it shall obtain, use, retain and share information concerning Borrowers and Applicants, including nonpublic personal information as defined under the Gramm-Leach-Bliley Act of 1999 (“Customer Information”), in strict compliance with all applicable state and federal laws and regulations concerning the privacy and confidentiality of such information, including the requirements of the federal Gramm-Leach-Bliley Act of 1999, its implementing regulations and the Bank’s privacy policy, in connection with this Agreement. Neither Party shall disclose or use information concerning Borrowers or Applicants other than to carry out the purposes for which such information has been disclosed to it hereunder. Further, each Party shall require any Third Party Service Providers to maintain the confidentiality of said information in a similar fashion by requiring that any Third Party Service Providers enter into written confidentiality with terms and conditions protecting the confidentiality of the Customer Information that are at least as stringent as those set forth in this Agreement. Each Party shall promptly disclose to the other Party any breaches in security affecting its operations, the identity or information regarding any Borrower or Applicant, or any breach relating to such Party’s databases or to information maintained by such Party with respect to Loans, Borrowers or Applicants. Each Party shall report to the other Party when any such material intrusion has occurred, the estimated effect of the intrusion on such Party, any Borrowers and any Applicants, and the specific corrective actions taken or planned to be taken. In addition, each Party agrees that it will not make any material changes to its security procedures and requirements affecting the performance of its obligations hereunder which would materially lessen the security of its operations or materially reduce the confidentiality of any databases and information maintained with respect to the other Party, Borrowers, and Applicants without the prior written consent of such Party.
Section 9.6 Force Majeure. In the event that either Party fails to perform its obligations under this Agreement in whole or in part as a consequence of events beyond its reasonable control (including acts of God, fire, explosion, public utility failure, accident, floods, embargoes, epidemics, war, terrorist acts, nuclear disaster or riot), such failure to perform shall not be considered a breach of this Agreement during the period of such disability. In the event of any force majeure occurrence as set forth in this Section 9.6, the disabled Party shall use its best efforts to meet its obligations as set forth in this Agreement. The disabled Party shall promptly and in writing advise the other Party if it is unable to perform due to a force majeure event, the expected duration of such inability to perform and of any developments (or changes therein) that appear likely to affect the ability of that Party to perform any of its obligations hereunder in whole or in part.
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Section 9.7 Regulatory Examinations and Financial Information. Each Party agrees to submit to any examination that may be required by any Regulatory Authority with audit and examination authority over the other Party, to the fullest extent that such Regulatory Authority may require, including examination by the Federal Reserve Board to the same extent as the Bank.
The Company also agrees that the Bank (either directly or by the use of accountants or other agents or representatives) may audit, inspect and review the Company’s files, records and books that pertain to the duties and obligations of the Company hereunder or to the creditworthiness of the Company or which the Bank may reasonably require in order to respond to any examination by or request from a Regulatory Authority, provided that such audit shall be during regular business hours and provided further with respect to any audit by the Bank that is not in response to an examination or request of a Regulatory Authority such audit shall occur no more than once per year, and only upon at least 30 days prior written notice. The Company agrees to submit to the Bank such information as the Bank may from time to time reasonably request in order to ascertain the Company’s compliance with the requirements of this Agreement and compliance of the Program, the Company, and Third Party Service Providers retained by the Company with the Rules.
The Bank also agrees that the Company (either directly or by the use of accountants or other agents or representatives) may audit, inspect and review the Bank’s files, records and books that pertain to the duties and obligations of the Bank hereunder or which the Company may reasonably require in order to respond to any examination by or request from a Regulatory Authority, provided that such audit shall be during regular business hours and provided further with respect to any audit by the Company that is not in response to an examination or request of a Regulatory Authority such audit shall occur no more than once per year, and only upon at least 30 days prior written notice. The Bank agrees to submit to the Company such information as the Company may from time to time reasonably request in order to ascertain the Bank’s compliance with the requirements of this Agreement and the Rules.
Section 9.8 Relationship of Parties; No Authority to Bind. Except as expressly provided in this Agreement, the Bank and the Company agree they are independent contractors to each other in performing their respective obligations hereunder. Nothing in this Agreement or in the working relationship established and developed hereunder shall be deemed or is intended to be deemed, nor shall it cause, the Bank and the Company to be treated as partners, joint ventures or otherwise as joint associates for profit. The Company understands and agrees that the Company’s name shall not appear on any Loan Document as a maker of a Loan and that the Bank shall be responsible for all decisions to make or provide a Loan. The Company shall refer to the Bank any Borrower inquiries concerning the accuracy, interpretation or legal effect of any Loan Document during the period that the Bank owns the related Loan. The Bank shall be deemed to have received and reviewed the Loan Documents and supporting materials only after the Loan Documents and materials have been received at the Bank’s offices, at which time and place the Bank shall decide whether to make the Loan. The Company shall not represent to anyone that the Company has the authority or power to do any of the foregoing and shall make no representations concerning the Bank’s transactions except as the Bank shall expressly authorize in writing. The Bank shall not have any authority or control over any of the property interests or employees of the Company. Without limitation of the foregoing, the Bank and the Company intend, and they agree to undertake such action as may be necessary or advisable to ensure, that: (a) the Program complies with federal-law guidelines regarding outsourcing of bank-related activities, installment loans, bank supervision and control and safety and soundness procedures; (b) the Bank is the lender under applicable federal-law standards and is authorized to export its home-state interest rates and matters material to the rate under 12 U.S.C.A. §1831d; and (c) all activities related to the marketing and origination of a Loan are made by or on behalf of the Bank as disclosed principal for any relevant regulatory, agency law and contract-law purposes.
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Section 9.9 Severability. In the event that any part of this Agreement is ruled by a court, Regulatory Authority or other public or private tribunal of competent jurisdiction to be invalid or unenforceable, such provision shall be deemed to have been omitted from this Agreement. The remainder of this Agreement shall remain in full force and effect, and shall be modified to any extent necessary to give such force and effect to the remaining provisions, but only to such extent. In addition, if the operation of the Program or the compliance by a Party with its obligations set forth herein causes or results in a violation of a Rule, the Parties agree to negotiate in good faith to modify the Program or this Agreement as necessary in order to permit the parties to continue the Program in full compliance with all Rules.
Section 9.10 Successors and Third Parties. This Agreement and the rights and obligations hereunder shall bind and inure to the benefit of the Parties and their permitted successors and assigns. The rights and benefits hereunder are specific to the Parties and shall not be delegated or assigned without the prior written consent of the other Party, which shall not be unreasonably withheld, delayed, or conditioned. Except as set forth above, nothing in this Agreement is intended to create or grant any right, privilege or other benefit to or for any person or entity other than the Parties hereto. Notwithstanding the foregoing, the Bank may assign this Agreement and its rights hereunder without the Company’s consent to any purchaser or acquirer of the Bank or any successor to the Bank by reason of any merger, consolidation or sale of assets, and the Bank may delegate its responsibilities and assign its rights hereunder in its discretion to an Affiliate (as defined in 12 U.S.C. § 371c) of the Bank provided in each case such Party or delegate assumes all of the Bank’s duties and obligations hereunder.
Section 9.11 Notices. All notices, requests and approvals required or permitted by this Agreement shall be in writing and addressed/directed to the other Party at the address/electronic mail (email) address below or at such other address/email address of which the notifying Party hereafter receives notice in conformity with this Section 10.11. All such notices, requests and approvals shall be deemed given either (i) when personally delivered, (ii), if sent by mail which event it shall be sent postage prepaid, upon delivery thereof to the addressee, (iii), if sent by email, upon confirming delivery or (iv) nationally recognized overnight delivery, upon delivery thereof to the addressee. The addresses and email addresses of the Parties are as follows:
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| To the Bank: | Bank of Virginia |
| 11730 Hull Street Road | |
| Richmond, Virginia 23112 | |
| Attention: O.R. (Ed) Barham, Jr. | |
| E-mail: ebarham@bankofva.com |
| To the Company: | Purefy Inc. |
| 2810 31st Street, NW | |
| Washington, DC 20008 | |
| Attention: Jack C. Zoeller | |
| E-mail: jackzoeller@yahoo.com |
Section 9.12 Waiver; Amendments. Neither Party shall be deemed to have waived any of its rights, powers or remedies hereunder except in an express writing signed by an authorized agent or representative of the Party to be charged. This Agreement may only be amended by written document executed by both Parties.
Section 9.13 Counterparts. This Agreement may be executed and delivered by the Parties in any number of counterparts, each of which shall be deemed an original and all of which together shall constitute one and the same instrument.
Section 9.14 Specific Performance. Certain rights which are subject to this Agreement are unique and are of such a nature as to be inherently difficult or impossible to value monetarily. In the event of a breach of this Agreement by either Party, an action at law for damages or other remedies at law would be inadequate to protect the unique rights and interests of the Parties. Accordingly, the terms of this Agreement shall be enforceable in a court of equity by a decree of specific performance or injunction. Such remedies shall, however, be cumulative and not be exclusive and shall be in addition to any other remedy which the Parties may have.
Section 9.15 Further Assurances. From time to time, the Parties will execute and deliver to the other such additional documents and will provide such additional information as either may reasonably require to carry out the terms of this Agreement.
Section 9.16 Entire Agreement. This Agreement, and the documents executed and delivered pursuant hereto, constitute the entire agreement between the Parties, and may be amended or modified only by a writing signed by duly authorized representatives of each Party and dated subsequent to the date hereof. This Agreement shall supersede and merge all prior communications, representations or agreements, either oral or written, between the Parties with respect to the subject matter hereof, except where survival of prior written agreements is expressly provided for herein.
Section 9.17 Restriction on Use of Certain Information. The Bank hereby agrees not to use, sell or transfer any list of Borrowers or Applicants derived from the Program, without the prior written consent of the Company, except as required by the Bank to comply with the Rules.
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Section 9.18 Survival. The terms of Sections 8.1 (Representations and Warranties of the Company), 8.2 (Representations and Warranties of the Bank), 7.3 (Effect of Termination) and this Section 9.18 shall survive the termination or expiration of this Agreement.
Section 9.19 Agreement Subject to the Rules. If (a) either Party has been advised by legal counsel of a change in the Rules or any judicial decision of a court having jurisdiction over a Party or any interpretation of a Regulatory Authority that, in the good faith view of such legal counsel, would have a materially adverse effect on the rights or obligations of such Party under this Agreement or the financial condition of such Party, (b) either Party shall receive a request of any Regulatory Authority having jurisdiction over such Party, including any letter or directive of any kind from any such Regulatory Authority, that prohibits or restricts such Party from carrying out its obligations under this Agreement, or (c) either Party has been advised in good faith by legal counsel that such Party’s or the other Party’s continued performance under this Agreement would violate the Rules, then the affected Party shall provide written notice to the other Party of such advisement or request and the Parties shall meet and consider in good faith any modifications, changes or additions to the Program or this Agreement that may be necessary to eliminate such result. Notwithstanding any other provision of this Agreement, including Article VIII hereof, if the Parties are unable to reach agreement regarding such modifications, changes or additions to the Program or this Agreement within thirty (30) days after the Parties initially meet, either Party may terminate this Agreement upon thirty (30) days’ prior written notice to the other Party. A Party shall be able to suspend performance of its obligations under this Agreement, or require the other Party to suspend its performance of its obligations under this Agreement, upon providing the other Party with advance written notice, if any event described in subsection 10.19(a), (b) or (c) above occurs and is continuing.
Section 9.20 Reconstitution and Cooperation. The Company and the Bank each acknowledge and agree that with respect to some or all of the Loans, the Bank, the Company or a Purchaser may effect one or more sales of the Loans as whole loan transfers (“Whole Loan Transfers”) or in connection with a securitization of all or a portion of the Loans purchased by a Purchaser (a “Securitization Transaction”). With respect to each Whole Loan Transfer or Securitization Transaction, the Company and the Bank each agree:
(a) to cooperate in good faith with each other or a Purchaser and any prospective purchaser with respect to all commercially reasonable requests in connection with any Whole Loan Transfer or Securitization Transaction;
(b) to execute all agreements reasonably required to be executed by it or a Purchaser in connection with such Whole Loan Transfer or Securitization Transaction provided that any such agreements are consistent with the terms hereof and do not impose any greater duties, liabilities or obligations upon it than those set forth herein and provided that it is given an opportunity to review and reasonably negotiate in good faith the content of such agreements not specifically referenced or provided for herein;
(c) to deliver to a Purchaser (for inclusion in any prospectus or other offering material) such information as may be required to be contained therein under Regulation AB (even if such Whole Loan Transfer of Securitization Transaction is not subject to the requirements of Regulation AB) and such other publicly available information regarding it, its respective financial condition, and any additional information reasonably requested by a Purchaser and any rating agencies, bond insurers and such other parties as a Purchaser shall designate;
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(d) to make the representations and warranties set forth in Section 9.1 as of the date of the Whole Loan Transfer or Securitization Transaction (each such date referred to herein as a “Reconstitution Date”), with such changes to such representations and warranties as reflect occurrences between the date as of which they are given in this Agreement and the applicable Reconstitution Date and to represent and warrant that the Loans were serviced in accordance with the terms of Section 3.1(i) of this Agreement between the Loan Funding Date for the applicable Loan and the applicable Reconstitution Date.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed by their respective authorized officers as of the day and year first above written.
| BANK OF VIRGINIA | ||
| By: | ||
| O.R. (Ed) Barham, Jr. | ||
| President and Chief Executive Officer | ||
| PUREFY INC. | ||
| By: | ||
| Jack C. Zoeller | ||
| President |
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SCHEDULE 1
Eligibility Criteria
Each Loan originated and funded by the Bank under the Program shall comply in all material respects with the eligibility criteria set forth in Exhibit A.
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Exhibit A
Program Terms
[****]6
6 **** Certain confidential information has been omitted and filed separately with the SEC. Confidential treatment has been requested with respect to the omitted portions.
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Exhibit B
Bank Underwriting Requirements
[****]7
7 **** Certain confidential information has been omitted and filed separately with the SEC. Confidential treatment has been requested with respect to the omitted portions.
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EXHIBIT C
FORM OF TRADEMARK LICENSE AGREEMENT
Trademark License Agreement
This Trademark License Agreement (this “Agreement”) is entered into as of this 1st day of March 2016 (the “Effective Date”), by and among Bank of Virginia, a commercial bank chartered under the laws of the Commonwealth of Virginia (the “Bank of Virginia”), and Cordia Bancorp Inc., a Virginia corporation (“Cordia”), on the one hand (the Bank of Virginia and Cordia, collectively, the “Bank”), and Purefy Inc., a Delaware corporation (“Company”), on the other hand.
RECITALS
WHEREAS, pursuant to that certain Stock Purchase Agreement, dated as of the Effective Date (the “Stock Purchase Agreement”), among the Bank and Jack C. Zoeller (“Purchaser”), Purchaser has agreed to purchase all of the outstanding shares of capital stock of the Company from the Bank of Virginia; and
WHEREAS, the CordiaGrad student loan refinancing business of the Company (the “CordiaGrad Business”) formerly operated as a unit of the Bank, and prior to the Effective Date, the Bank contributed the CordiaGrad Business to the Company; and
WHEREAS, in order to facilitate the Company’s conduct of the CordiaGrad Business and to satisfy a condition to closing under the Stock Purchase Agreement, the Bank has agreed to grant a license to the Company, as set forth in this Agreement.
NOW, THEREFORE, in consideration of the mutual covenants contained in this Agreement, and for other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, the Bank and the Company hereby agree as follows:
1. Licensed Mark. The Bank is the owner of all rights, title and interest, including all common law rights, in and to the service mark CORDIAGRAD, which is the subject of U.S Service Mark Application No. 86585589, filed April 2, 2015 (the “Licensed Mark”). The application covers use of the Licensed Mark with various loan and banking services.
2. Background. As part of its business, the Bank has marketed its on-line student loan refinancing business and related services under the Licensed Mark. The Bank is now transferring certain assets and liabilities associated with its on-line student loan refinancing business to the Company. The Bank therefore desires to grant to the Company, and the Company wishes to obtain, an exlusive, limited right and license to use the Licensed Mark for on-line student loan refinancing services for a set period of time, while the Company transitions to a new name and mark.
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3. Grant of License. Subject to the limitations set forth in this Agreement, the Bank hereby grants to the Company an exclusive, non-assignable, royalty-free license to use the Licensed Mark on and in connection with the advertising, marketing, and provision of on-line student loan refinancing services (the “Licensed Services”), during the Term (as defined in Section 7) and only in the United States; provided, however, that commencing not later than May 1, 2016, the Company’s use of the Licensed Mark in connection with such activities shall be limited to purposes related to the transition of the branding used with the Company’s on-line student loan refinancing business from the Licensed Mark to a new trade name and service mark to be selected by the Company (the “New Mark”). In addition, subject to the limitations set forth in this Agreement, the Bank hereby grants to the Company an exclusive, perpetual, non-assignable, royalty-free license to use the domain name cordiagrad.com (which domain is owned by the Company); provided, however, that after the Term, the Company’s use of such domain shall be limited to auto-forwarding to other domains utilized by the Company.
4. Exclusivity. As provided in this Section 4, the Bank hereby agrees that the license granted to the Company in Section 3 shall be exclusive. During and at all times following the Term, (a) the Bank shall not, and shall cause its Affiliates (as defined in the Stock Purchase Agreement) not to, directly or indirectly, utilize the Licensed Mark in any manner; and (b) the Bank shall not sell, assign, transfer, license, pledge or grant any rights or interests in or to the Licensed Mark to any Person (as defined in the Stock Purchase Agreement) other than the Company.
5. Use of the Licensed Mark. Commencing not later than May 1, 2016, all uses of the Licensed Mark by the Company as permitted under this Agreement shall also refer to the New Mark and shall accurately indicate that the Licensed Mark is the mark formerly associated with the Licensed Services (e.g., “<New Mark>, formerly known as CORDIAGRAD” or “CORDIAGRAD is now <New Mark>”). Apart from its use of the Licensed Mark in accordance with the provisions of this Agreement, the Company shall not adopt, use, register or attempt to register any name or mark consisting of or containing “Cordia” or any mark that is confusingly similar to the Licensed Mark. The question of whether a mark is confusingly similar shall be a matter of the Bank’s sole discretion. The Company shall not take any action contrary to the Bank’s rights in the Licensed Mark, challenge the Bank’s rights in the Licensed Mark, or assist or encourage any other person or entity in such a challenge.
6. Quality Standards. The Company acknowledges the importance to the Bank of maintaining the reputation and goodwill associated with the Licensed Mark and high standards of quality for all services provided in connection with the Licensed Mark. The Company agrees that the nature and quality of the Licensed Services offered by the Company under or in connection with the Licensed Mark shall: (a) at no time be any less than the quality of the services provided by the Bank in connection with the Licensed Mark as of the Effective Date; (b) not injure or mislead the public or violate any applicable law or regulation; and (c) not tarnish, dilute or discredit the goodwill or reputation of the Bank or the Licensed Mark. The Company will provide samples of the Company’s usage of the Licensed Mark promptly upon the Bank’s request as necessary to enable the Bank to review the Company’s compliance with the terms and conditions of this Agreement.
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7. Acknowledgement of Rights; Possible Sale of Licensed Mark. The Company agrees that the Bank owns all right, title, and interest in and to the Licensed Mark. The Company further acknowledges that nothing in this Agreement confers upon the Company any right of ownership in or to the Licensed Mark, other than the right to use the Licensed Mark in accordance with the provisions of this Agreement and other than as provided in the following sentence. If in the future “Cordia” no longer is utilized by the Bank or any of its Affiliates as part of any corporate or trade name, then the Bank (or its successor) shall sell all of its right, title and interest in and to the Licensed Mark to the Company, and the Company shall purchase the same, for a total purchase price equal to $1.00.
8. Term. The term of this Agreement shall begin on the Effective Date and expire on the eighteen (18) month anniversary of the Effective Date (the “Term”), unless terminated earlier as provided in paragraph 8.
9. Termination. This Agreement shall automatically terminate before the end of the Term if:
a. the Company ceases all use of the Licensed Mark with the Licensed Services for a period of thirty (30) consecutive days;
b. the Company is acquired by a third-party or sells all or substantially all of the Company’s assets; or
c. the Company materially breaches any provision of this Agreement and fails to cure such breach within fifteen (15) days after receiving written notice from the Bank of such breach.
10. Effect of Termination. Upon termination of this Agreement, the Company shall immediately discontinue all use of the Licensed Mark and shall take all steps necessary to do so; provided, however, that the last sentence of Section 3, Section 4 and Section 7 shall survive any termination of this Agreement.
11. No Damages for Termination. The Bank shall not be liable to the Company or any other person or entity for damages of any kind, including incidental or consequential damages, that relate in any manner to the termination of this Agreement in accordance with its terms.
12. Indemnity. The Company will defend, indemnify and hold harmless the Bank, and all of its directors, officers, agents, and employees, from and against any and all liability, claims, causes of action, suits, losses, damages, costs, and expenses (including reasonable attorneys’ fees) for which the Bank is or becomes liable, or which may incur, as a result of or relating to the Company’s use or misuse of the Licensed Mark after the Effective Date.
13. Limitation and Disclaimer. THE LICENSED MARK IS PROVIDED “AS IS” AND WITHOUT WARRANTIES OF ANY KIND, AND THE BANK DISCLAIMS ALL WARRANTIES WITH RESPECT TO THE LICENSED MARK, WHETHER EXPRESS OR IMPLIED, AND EXPRESSLY DISCLAIMS AND EXCLUDES ANY WARRANTY OF NON-INFRINGEMENT OR FITNESS FOR A PARTICULAR PURPOSE. THE COMPANY ASSUMES FULL RESPONSIBILITY FOR DECISIONS MADE OR ACTIONS TAKEN RELATING TO USE OF THE LICENSED MARK. UNDER NO CIRCUMSTANCES SHALL THE BANK OR THE COMPANY BE RESPONSIBLE FOR INCIDENTAL, SPECIAL OR CONSEQUENTIAL DAMAGES RELATING TO THE COMPANY’S USE OF THE LICENSED MARK, EVEN IF EITHER PARTY HAS BEEN APPRISED OF THE LIKELIHOOD OF SUCH DAMAGES OCCURRING.
| C-3 |
14. Notices. Any notice required or permitted to be given in connection with this Agreement shall be in writing and shall be delivered either in person or by a nationally recognized overnight courier, to the applicable notification addresses set forth in the Stock Purchase Agreement or such other address(es) as may be designated in writing by the Bank or the Company from time to time during the Term. Notice shall be deemed to have been given upon receipt if delivered in person or one (1) business day after it is sent by a recognized overnight courier service.
15. Force and Effect of Agreement. This Agreement shall be binding upon and inure to the benefit of the Bank and the Company and each of their respective owners, directors, officers, agents, employees, stockholders and representatives.
16. Severability. The invalidity or unenforceability of any paragraph or provision of this Agreement shall not affect the validity or enforceability of the remainder of this Agreement or the remainder of any paragraph or provision. This Agreement shall be construed in all respects as if any invalid or unenforceable paragraph or provision were omitted.
17. Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the Commonwealth of Virginia, without regard to its conflict of law provisions. All disputes arising out of this Agreement shall be subject to the exclusive jurisdiction and venue of the Virginia state courts of Chesterfield County (or, if there is exclusive federal jurisdiction, the United States District Court for such county), and the parties consent to the personal and exclusive jurisdiction and venue of such courts.
18. Waiver. Neither the Bank nor the Company shall be deemed to have waived any breach of any term of this Agreement, except as expressly set forth in writing. The waiver of any breach of any term of this Agreement by the Bank or the Company shall not be deemed a waiver of any subsequent or prior breach. No waiver shall be binding unless it is executed by the party making the waiver.
19. Assignment. Neither this Agreement, nor any of the rights granted under this Agreement, may be assigned by the Company to any third party without the Bank’s prior written consent, which consent shall not be unreasonably withheld.
20. Entire Agreement and Modification. This Agreement represents the entire agreement between the Bank and the Company with respect to the Company’s use of the Licensed Mark and supersedes all prior agreements between the Bank and the Company with respect to the Company’s use of the Licensed Mark. The Agreement may not be modified or amended, except in a writing signed by all parties and specifically referring to this Agreement.
| C-4 |
21. Counterparts. This Agreement may be executed in counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. Signed electronic counterparts of this Agreement transmitted via facsimile or email shall be deemed equivalent to the signed original of this Agreement.
[Remainder of page intentionally blank]
| C-5 |
In Witness Whereof, the parties have caused this Trademark License Agreement to be duly executed by their respective authorized officers effective as of the Effective Date.
| Bank of Virginia | ||
| By: | ||
| O.R. (Ed) Barham, Jr. | ||
| President and Chief Executive Officer | ||
| Cordia Bancorp Inc. | ||
| By: | ||
| Mark A. Severson | ||
| Executive Vice President and Chief Financial Officer | ||
| Purefy Inc. | ||
| By: | ||
| Jack C. Zoeller | ||
| President | ||
| C-6 |
Exhibit 21.1
List of Subsidiaries
Registrant: Cordia Bancorp Inc.
| Subsidiary | Percentage of Ownership | Jurisdiction or State of Incorporation | ||
| Bank of Virginia | 100% | Virginia |
Exhibit 23.1
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
We hereby consent to the incorporation by reference in the Registration Statements on Form S-3 (No. 333-197263) and Form S-8 (No. 333-197260, No. 333-188301 and No. 333-192340) of Cordia Bancorp Inc. of our report, dated March 23, 2016, relating to the consolidated financial statements, which appear in this Annual Report on Form 10-K, for the year ended December 31, 2015.
| /s/ Yount, Hyde & Barbour, P.C. | |
| Winchester, Virginia | |
| March 23, 2016 |
Exhibit 31.1
CERTIFICATION
I, O.R. (Ed) Barham, Jr., certify that:
1. I have reviewed this Annual Report on Form 10-K of Cordia Bancorp Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
| Date: March 23, 2016 | /s/ O.R. (Ed) Barham, Jr. |
| O.R. (Ed) Barham, Jr. | |
| President and Chief Executive Officer | |
| (principal executive officer) |
Exhibit 31.2
CERTIFICATION
I, Mark A. Severson, certify that:
1. I have reviewed this Annual Report on Form 10-K of Cordia Bancorp Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
| Date: March 23, 2016 | /s/ Mark A. Severson |
| Mark A. Severson | |
| Chief Financial Officer | |
| (principal financial officer) |
Exhibit 32.1
CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO SECTION 906 OF THE
SARBANES-OXLEY ACT OF 2002
The undersigned executive officers of Cordia Bancorp Inc. (the “Company”) hereby certify that this Annual Report on Form 10-K for the year ended December 31, 2015 (the “Report”) fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, and the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company as of and for the period covered by the Report.
| Date: March 23, 2016 | By: | /s/ O.R. (Ed) Barham, Jr. |
| O.R. (Ed) Barham, Jr. | ||
| President and Chief Executive Officer | ||
| (principal executive officer) | ||
| By: | /s/ Mark A. Severson | |
| Mark A. Severson | ||
| Chief Financial Officer | ||
| (principal financial officer) |
Document And Entity Information - USD ($) |
12 Months Ended | ||
|---|---|---|---|
Dec. 31, 2015 |
Mar. 15, 2016 |
Jun. 30, 2015 |
|
| Document Information [Line Items] | |||
| Document Type | 10-K | ||
| Amendment Flag | false | ||
| Document Period End Date | Dec. 31, 2015 | ||
| Document Fiscal Year Focus | 2015 | ||
| Document Fiscal Period Focus | FY | ||
| Entity Registrant Name | Cordia Bancorp Inc | ||
| Entity Central Index Key | 0001466292 | ||
| Current Fiscal Year End Date | --12-31 | ||
| Entity Well-known Seasoned Issuer | No | ||
| Entity Voluntary Filers | No | ||
| Entity Current Reporting Status | Yes | ||
| Entity Filer Category | Smaller Reporting Company | ||
| Entity Public Float | $ 20,050,180 | ||
| Trading Symbol | BVA | ||
| Entity Common Stock, Shares Outstanding | 6,791,711 |
Consolidated Balance Sheets (Parenthetical) - USD ($) $ in Thousands |
Dec. 31, 2015 |
Dec. 31, 2014 |
|---|---|---|
| Held-to-maturity Securities, Fair Value | $ 25,694 | $ 21,047 |
| Allowance for loan losses | $ 823 | $ 1,089 |
| Preferred Stock, Shares Authorized | 2,000 | 2,000 |
| Preferred Stock, Par or Stated Value Per Share | $ 0.01 | $ 0.01 |
| Preferred Stock, Shares Issued | 0 | 0 |
| Preferred Stock, Shares Outstanding | 0 | 0 |
| Common Stock, Shares Authorized | 120,000,000 | 120,000,000 |
| Common Stock, Par or Stated Value Per Share | $ 0.01 | $ 0.01 |
| Common Stock, Shares, Outstanding | 5,186,349 | 5,103,669 |
| Restricted Stock [Member] | ||
| Common Stock, Shares, Outstanding | 107,460 | 52,580 |
| NonVoting [Member] | ||
| Common Stock, Shares Authorized | 5,000,000 | 5,000,000 |
| Common Stock, Par or Stated Value Per Share | $ 0.01 | $ 0.01 |
| Common Stock, Shares, Outstanding | 1,400,437 | 1,400,437 |
Consolidated Statement of Comprehensive Income (Loss) - USD ($) $ in Thousands |
12 Months Ended | |
|---|---|---|
Dec. 31, 2015 |
Dec. 31, 2014 |
|
| Net income (loss) | $ 590 | $ (412) |
| Other comprehensive income (loss) | ||
| Unrealized securities losses arising during the period | (404) | (309) |
| Less: Reclassification adjustment for net secuirties gains included in net income (loss) | 133 | 177 |
| Add: Amortization of unrealized losses for securities transferred from available for sale to held to maturity | 49 | 48 |
| Total other comprehensive loss | (222) | (84) |
| Comprehensive income (loss) | $ 368 | $ (496) |
Consolidated Statements of Changes in Stockholders' Equity - USD ($) $ in Thousands |
Total |
Nonvoting Common Stock [Member] |
Preferred Stock [Member] |
Common Stock [Member] |
Additional Paid-in Capital [Member] |
Retained Earnings [Member] |
Accumulated Other Comprehensive Income (Loss) [Member] |
|---|---|---|---|---|---|---|---|
| Balance at Dec. 31, 2013 | $ 13,287 | $ 0 | $ 0 | $ 28 | $ 18,648 | $ (5,005) | $ (384) |
| Net income (loss) | (412) | 0 | 0 | 0 | 0 | (412) | 0 |
| Other comprehensive loss | (84) | 0 | 0 | 0 | 0 | 0 | (84) |
| Issuance of preferred stock | 14,135 | 0 | 14,135 | 0 | 0 | 0 | 0 |
| Redemption of preferred stock | (14,135) | 0 | (14,135) | 0 | 0 | 0 | 0 |
| Issuance of common stock | 14,075 | 14 | 0 | 23 | 14,038 | 0 | |
| Stock-based compensation | 270 | 0 | 0 | 0 | 270 | 0 | 0 |
| Balance at Dec. 31, 2014 | 27,136 | 14 | 0 | 51 | 32,956 | (5,417) | (468) |
| Net income (loss) | 590 | 0 | 0 | 0 | 0 | 590 | 0 |
| Other comprehensive loss | (222) | 0 | 0 | 0 | 0 | 0 | (222) |
| Repurchase of common stock | (83) | 0 | 0 | (1) | (82) | 0 | 0 |
| Stock-based compensation | 318 | 0 | 0 | 1 | 317 | 0 | 0 |
| Balance at Dec. 31, 2015 | $ 27,739 | $ 14 | $ 0 | $ 51 | $ 33,191 | $ (4,827) | $ (690) |
Organization and Summary of Significant Accounting Policies |
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| Organization, Consolidation and Presentation of Financial Statements [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Organization, Consolidation and Presentation of Financial Statements Disclosure and Significant Accounting Policies [Text Block] | Note 1. Organization and Summary of Significant Accounting Policies Organization Cordia Bancorp Inc. (“Company” or “Cordia”) was incorporated in 2009 by a team of former bank CEOs, directors and advisors seeking to invest in undervalued community banks in the Mid-Atlantic and Southeast. The Company was approved as a bank holding company by the Board of Governors of the Federal Reserve in November 2010 and granted the authority to purchase a majority interest in Bank of Virginia (“Bank” or “BVA”) at that time. On December 10, 2010, Cordia purchased $10.3 million of BVA’s common stock at a price of $7.60 per Bank share, resulting in the ownership of 59.8% of the outstanding shares. On August 28, 2012, Cordia purchased an additional $3.0 million of BVA common stock at a price of $3.60 per share. On March 29, 2013, the Company completed a share exchange with the Bank resulting in the Bank becoming a wholly owned subsidiary of the Company. Under the terms of the Agreement and Plan of Share Exchange between the Company and the Bank, each outstanding share of the Bank’s common stock owned by persons other than the Company were exchanged for 0.664 of a share of the Company’s common stock. Shares of the Company’s stock are listed on the Nasdaq Stock Market under the symbol “BVA”. The Company has owned 100.0% of the Bank’s shares since the completion of the exchange. On April 10, 2014, Cordia completed the sale of approximately 363 shares of Mandatorily Convertible, Noncumulative, Nonvoting, Perpetual Preferred Stock, Series A, $0.01 par value per share, to accredited investors at a purchase price of $42,500 per share for total gross proceeds of $15.4 million. The capital raise included investments by 100% of Cordia’s directors. The net proceeds of the offering are being used primarily to support the second phase of its organic growth strategy in BVA. On June 25, 2014, upon stockholder approval, each share of Series A Preferred Stock mandatorily converted into 10,000 shares of Cordia’s common stock at a conversion price of $4.25 per share, for a total issuance of approximately 3,629,871 new shares of common stock, of which 2,229,434 are voting and 1,400,437 are nonvoting. The holders of the Series A Preferred Stock did not receive any dividends under the provisions of the stock purchase agreements. On May 20, 2015, Cordia announced that it had authorized a stock repurchase program to acquire up to $500,000 of the Company’s outstanding common stock. Repurchase will be conducted through open market purchases or through privately negotiated transactions and will be made from time to time depending on market conditions and other factors. As of December 31, 2015, the Company had repurchased 21,200 shares. Cordia’s principal business is the ownership of BVA. Because Cordia does not have any business activities separate from the operations of BVA, the information in this document regarding the business of Cordia reflects the activities of Cordia and BVA on a consolidated basis. References to “we” and “our” in this document refer to Cordia and BVA, collectively. The Bank was organized under the laws of the Commonwealth of Virginia to engage in a general banking business serving the communities in and around the Richmond, Virginia metropolitan area. The Bank commenced regular operations on January 12, 2004, and is a member of the Federal Reserve System, Federal Deposit Insurance Corporation and the Federal Home Loan Bank of Atlanta. The Bank is subject to the regulations of the Federal Reserve System and the State Corporation Commission of Virginia. Consequently, it undergoes periodic examinations by these regulatory authorities. Principles of Consolidation The accompanying consolidated financial statements include all accounts of the Company and the Bank. All material intercompany balances and transactions have been eliminated in consolidation. Prior to the completion of the share exchange in March 2013, the non-controlling interest reflected the ownership interest of the minority shareholders of the Bank. Items of income and other comprehensive income applicable to Bank operations were allocated to the non-controlling interest account based on the ownership percentage of the minority shareholders. Subsequent to the exchange, the non-controlling interest is no longer reflected in the consolidated financial statements of the Company, as the Bank is a wholly-owned subsidiary. Summary of Significant Accounting Policies The accounting and reporting policies of the Company are in accordance with accounting principles generally accepted in the United States of America and conform to general practices within the banking industry. The more significant of these policies are summarized below. (a) Use of Estimates In preparing financial statements in conformity with accounting principles generally accepted in the United States of America, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities as of the date of the balance sheet and reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Material estimates that are particularly susceptible to significant change in the near term relate to the determination of the allowance for loan losses, the valuation of deferred tax assets, the valuation of other real estate owned, intangible assets, acquired loans with specific credit-related deterioration and fair value measurements. (b) Cash and Cash Equivalents For purposes of the statement of cash flows, cash and cash equivalents include cash on hand, amounts due from banks and federal funds sold. Generally, federal funds are purchased and sold for one day periods. (c) Securities Debt securities that management has the positive intent and ability to hold to maturity are classified as “held to maturity” and recorded at amortized cost. Securities not classified as held to maturity, including equity securities with readily determinable fair values, are classified as “available for sale” and recorded at estimated fair value. Other securities, such as Federal Reserve Bank stock and Federal Home Loan Bank stock, are carried at cost and are listed on the balance sheet as restricted securities. In estimating other than temporary impairment losses management considers, (1) the length of time and extent to which the fair value has been less than cost, (2) the financial condition and near term prospects of the issuer, and (3) our ability to retain our investment for a period of time sufficient to allow for any anticipated recovery in fair value. Impairment of securities occurs when the fair value of a security is less than its amortized cost. For debt securities, impairment is considered other-than-temporary and recognized in its entirety in net income if either (1) the Company intends to sell the security or (2) it is more likely than not that the Company will be required to sell the security before recovery of its amortized cost basis. If, however, the Company does not intend to sell the security and it is not more-than-likely that the Company will be required to sell the security before recovery, management must determine what portion of the impairment is attributable to a credit loss, which occurs when the amortized cost of the security exceeds the present value of the cash flows expected to be collected from the security. If there is no credit loss, there is no other-than-temporary impairment. If there is a credit loss, other-than-temporary impairment exists, and the credit loss must be recognized in net income and the remaining portion of impairment must be recognized in other comprehensive income. For equity securities carried at cost as restricted securities, impairment is considered to be other-than-temporary based on our ability and intent to hold the investment until a recovery of value. Other-than-temporary impairment of an equity security results in a write-down that must be included in income. The Company regularly reviews each security for other-than-temporary impairment based on criteria that include the extent to which costs exceed market price, the duration of that market decline, the financial health of and specific prospects for the issuer, management’s best estimate of the present value of cash flows expected to be collected on these debt securities, the Company’s intention with regard to holding the security to maturity and the likelihood that the Company would be required to sell the security before recovery. The Company adjusts amortization or accretion on each bond on a level yield basis monthly. (d) Loans Held For Sale Secondary market mortgage loans are designated as held for sale at the time of their origination. These loans are pre-sold with servicing released and the Company does not retain any interest after the loans are sold. These loans consist primarily of fixed-rate, single-family residential mortgage loans which meet the underwriting characteristics of certain government–sponsored enterprises (conforming loans). In addition, the Company requires a firm purchase commitment from a permanent investor before a loan can be committed, thus limiting interest rate risk. Loans held for sale are carried at the lower of cost or fair value. Gains on sales of loans are recognized at the loan closing date and are included in noninterest income. The company had $220 thousand of loans held for sale as of December 31, 2015 and no loans classified as held for sale as of December 31, 2014. (e) Loans The Company grants commercial and consumer loans to customers. A substantial portion of the loan portfolio is represented by commercial loans throughout the greater Richmond, Virginia metropolitan area. The ability of the Bank’s debtors to honor their contracts is dependent upon numerous factors including the collateral performance, general economic conditions, as well as the underlying strength of borrowers and guarantors. Loans that management has the intent and ability to hold for the foreseeable future or until maturity or pay-off are generally reported at their outstanding unpaid principal balances adjusted for the allowance for loan losses and net deferred fees and costs. Interest income is accrued on the unpaid principal balance. Loan origination and commitment fees and certain direct costs are deferred and the net amount is amortized as an adjustment of the related loan’s yield. The Bank is amortizing these amounts on an effective interest method over the loan’s contractual life or to the pay-off date if the balance is repaid prior to maturity. Loans are recorded based on purpose, collateral and repayment period. Interest is calculated on a 365/360 for commercial loans and 365/365 for consumer loans. Interest is accrued on a daily basis. The Company was licensed by the U.S. Department of Education as a rehabilitated student lender effective November 2012. In the first quarter of 2013, the Company began purchasing rehabilitated student loans guaranteed by the U.S. Department of Education. The guarantee covers approximately 98% of principal and accrued interest. The unguaranteed principal balance of these loans was approximately $1.1 million at December 31, 2015 and $1.3 million at December 31, 2014. The company ceased purchasing rehabilitated, federally guaranteed student loans in April 2014. The past due status of a loan is based on the contractual due date of the most delinquent payment due. Each loan will be placed in one of the following categories: current, 1-29 days past due, 30-59 days past due, 60-89 days past due and 90 days and over past due. Generally, the accrual of interest on a loan is discontinued at the time the loan becomes 90 days delinquent unless the credit is well-secured and in process of collection or refinancing. Due to the guaranty by the U.S. Department of Education, Guaranteed Student Loans continue to accrue interest up until charged-off. Loans are placed on nonaccrual status when management believes the full collection of the principal and interest is doubtful. A delinquent loan is generally placed in nonaccrual status when:
When a loan is placed on nonaccrual, all interest which has been accrued is charged back against current earnings as a reduction in interest income, which adversely affects the yield on loans in the period of reversal. No additional interest is accrued on the loan balance until the collection of both principal and interest becomes reasonably certain. Loans placed on non-accrual status may, at the lenders discretion, be returned to accrual status after:
Government Guaranteed Student loans with a past due balance greater than 90 days are not placed on non-accrual. When a loan reaches 120 days past due, the non-guaranteed portion of the loan is charged-off. A claim is filed with the guarantor when the loan becomes 270 days past due. Interest continues to accrue until charge-off. The guarantor’s payment covers approximately 98% of principal and accrued interest. When a loan is returned to accrual status after restructuring, the pre-restructuring risk rating is maintained until a satisfactory payment history is re-established. Returning non-accrual loans to an accrual status requires the prior written approval of the Chief Credit Officer. In situations where, for economic or legal reasons related to a borrower’s financial condition, management may grant a concession to the borrower that it would not otherwise consider, the related loan is classified as a troubled debt restructuring (TDR). Management strives to identify borrowers in financial difficulty early and work with them to modify their loan to more affordable terms before their loan reaches nonaccrual status. These modified terms may include rate reductions, principal forgiveness, payment forbearance, re-amortization, and other actions intended to minimize the economic loss and to avoid foreclosure or repossession of the collateral. In cases where borrowers are granted new terms that provide for a reduction of either interest or principal, management measures any impairment on the restructuring as noted below for impaired loans. There were no loans classified as a TDR as of December 3l, 2015. There were four loans with an aggregate principal balance of $1.3 million classified as TDRs as of December 31, 2014. Acquired loans with specific credit deterioration are accounted for by Cordia in accordance with FASB Accounting Standards Codification 310-30. Certain acquired loans, those for which specific credit-related deterioration, since origination, is identified, are recorded at fair value reflecting the present value of the amounts expected to be collected. Income recognition on these loans is based on a reasonable expectation about the timing and amount of cash flows to be collected. Acquired loans deemed impaired and considered collateral dependent, with the timing of the sale of loan collateral indeterminate, remain on non-accrual status and have no accretable yield. The difference between contractually required payments at acquisition and the cash flows expected to be collected at acquisition is referred to as the “nonaccretable difference,” and is not recorded. Any excess of cash flows expected at acquisition over the estimated fair value is referred to as the accretable yield and is recognized as interest income over the remaining life of the loan when there is a reasonable expectation about the amount and timing of such cash flows. Subsequent decreases to the expected cash flows will generally result in a provision for loan losses, while subsequent increases in cash flows may result in a reversal of post-acquisition provision for loan losses, or a transfer from nonaccretable difference to accretable yield. (f) Allowance for Loan Losses The allowance for loan losses (“ALLL”) is increased by charges to income and decreased by charge-offs, net of recoveries. The ALLL is established and maintained at a level management deems adequate to cover probable losses inherent in the portfolio as of the balance sheet date and is based on management’s evaluation of the risks in the loan portfolio and changes in the nature and volume of loan activity. There are risks inherent in all loans, so an ALLL is maintained for loans to absorb probable losses on existing loans that may become uncollectible. The ALLL is established and maintained as losses are estimated to have occurred through a provision for loan losses charged to earnings, which increases the balance of the ALLL. Loan losses for all segments are charged against the ALLL when management believes the uncollectability of a loan is confirmed, which decreases the balance of the ALLL. Subsequent recoveries, if any, are credited back to the ALLL. The amount of the ALLL is established through the application of a standardized model, the components of which are: an impairment analysis of specific loans to determine the level of any specific reserves needed and an estimate of the general reserves needed which consists of a weighted average of historical loss experience and adjustments for economic and environmental factors. The allowance for loan losses is evaluated on a regular basis by management and is based upon management’s periodic review of the collectability of the loans in light of historical experience, the nature and volume of the loan portfolio, adverse situations that may affect the borrower’s ability to repay, estimated value of any underlying collateral and prevailing economic conditions. This evaluation is inherently subjective as it requires estimates that are susceptible to significant revision as more information becomes available. In order for the ALLL methodology to be considered valid and for Management to make the determination if any deficiencies exist in the process, the Bank at a minimum requires:
Note 4 includes an additional discussion of how the ALLL is quantified. The use of various estimates and judgments in the Bank’s ongoing evaluation of the required level of ALLL can significantly affect the Bank’s results of operations and financial condition and may result in either greater provisions against earnings to increase the ALLL or reduced provisions based upon management’s current view of portfolio and economic conditions and the application of revised estimates and assumptions. The specific component of the ALLL relates to loans that are classified as either doubtful, substandard or TDR. For such loans that are also classified as impaired, a loan level allowance is established. The evaluation of the need for a specific reserve involves the identification of impaired loans and an analysis of those loans’ repayment capacity from both primary (cash flow) and secondary (real estate and non-real estate collateral or guarantors) sources and making specific reserve allocations to impaired loans that exhibit inherent weaknesses and various other elevated credit risk factors. All available collateral is analyzed and valued, with discounts applied according to the age of any real estate appraisals or the liquidity of other asset classes. The analysis is compared to the aggregate Bank loan exposure, giving consideration to the Bank’s lien preference and other actual and contingent obligations of the borrower. Any loan guarantors are rated and their value weighted based on an analysis of the guarantor’s net worth, including liabilities, liquid assets, and annual cash flows and total contingent liabilities. A loan is considered impaired when it is probable that the Bank will be unable to collect all amounts when due according to the contractual terms of the loan agreement. We do not consider a loan impaired during a period of insignificant delay in payment if we expect the ultimate collection of all amounts due. Impairment is measured as the difference between the recorded investment in the loan and the evaluation of the present value of expected future cash flows or the observable market price of the loan or collateral value of the impaired loan when that cash flow or collateral value is lower than the carrying value of that loan. Loans that are collateral dependent, that is, loans where repayment is expected to be provided solely by the underlying collateral, and for which management has determined foreclosure is probable, are measured for impairment based on the fair value of the collateral as described above. The general component covers pass rated loans and special mention loans and is based on historical loss experience adjusted for qualitative factors. The model estimates probable loan losses by analyzing historical loss experience and other trends within the portfolio, including trends in delinquencies and charge-offs, the opinions of regulators, changes in the growth rate, size and composition of the loan portfolio, particularly the level of Special Mention rated loans, the level of past due loans, the level of home equity loans and commercial real estate loans in aggregate and as a percentage of capital, and industry information. A component of the general reserve for unimpaired loans is established based on a weighted average historical loss factor for the prior twelve quarters (with more weight given to the more recent quarters) and the level of unimpaired loans. Management applies a 45% weighting to the most recent four quarters, a 35% weighting to the next four quarters and a 20% weighting to the most distant four of the prior twelve quarters when calculating this component of the general reserve. Also included in management’s estimates for loan losses are considerations with respect to the impact of local and national economic trends, the outcomes of which are uncertain. These events may include, but are not limited to, a general slowdown in the national or local economy, national and local unemployment rates, local real estate values, fluctuations in overall lending rates, political conditions, legislation that may directly or indirectly affect the banking industry and economic conditions affecting the specific geographic area in which the Bank conducts business. (g) Premises and Equipment Premises and equipment are stated at cost less accumulated depreciation. Depreciation is computed using the straight-line method over the assets' estimated useful lives. Estimated useful lives range from 10 to 30 years for buildings and 3 to 10 years for autos, furniture, fixtures and equipment. The value of land is carried at cost. (h) Other Real Estate Owned Assets acquired through loan foreclosure are held for sale. They are initially recorded at fair value at the date of foreclosure, less estimated selling costs thus establishing a new cost basis. Subsequent to foreclosure, valuations of the assets are periodically performed by management. Adjustments are made to the lower of the carrying amount or fair value of the assets less selling costs. Revenue and expenses from operations and sales are included in other real estate expenses, net in the statement of operations. The Bank’s investment in foreclosed assets totaled $1.9 million and $1.6 million at December 31, 2015 and 2014, respectively. (i) Goodwill and Other Intangibles FASB ASC 805, Business Combinations, requires that the acquisition method of accounting be used for all business combinations. With acquisitions, the Company is required to record assets acquired, including any intangible assets, and liabilities assumed at fair value, which involves relying on estimates based on third party valuations, such as appraisals, or internal valuations based on discounted cash flow analysis or other valuation methods. The Company records goodwill per ASC 350, Intangibles-Goodwill and Others. Accordingly, goodwill is no longer subject to amortization over its estimated useful life, but is subject to at least an annual assessment for impairment by applying a fair value-based test. Additionally, under ASC 350, acquired intangible assets (such as core deposit intangibles) are separately recognized if the benefit of the assets can be sold, transferred, licensed, rented, or exchanged, and amortized over their useful lives. Goodwill was determined to be impaired in December 2011 at the annual impairment evaluation and was written off in its entirely at that time. Core deposit intangibles of $68 thousand and $104 thousand are included in other assets at December 31, 2015 and 2014, respectively. (j) Income Taxes Deferred taxes are provided on a liability method whereby deferred tax assets are recognized for deductible temporary differences, operating loss carryforwards, and tax credit carryforwards. Deferred tax liabilities are recognized for taxable temporary differences. Temporary differences are the differences between the reported amounts of assets and liabilities and their tax bases. Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, the recognition of the asset is less than probable. A valuation allowance has been recorded against the Company’s entire net deferred tax asset. When tax returns are filed, it is highly certain that some positions taken would be sustained upon examination by the taxing authorities, while others are subject to uncertainty about the merits of the positions taken or the amount of the position that would be ultimately sustained. The benefit of a tax position is recognized in the financial statements in the period during which, based on all available evidence, management believes it is more likely than not that the position will be sustained upon examination, including the resolution of appeals or litigation processes, if any. Tax positions taken are not offset or aggregated with other positions. Tax positions that meet the more-likely-than-not recognition threshold are measured as the largest amount of tax benefit that is more than 50 percent likely of being realized upon settlement with the applicable taxing authority. The portion of the benefits associated with tax positions taken that exceeds the amount measured as described above is recognized as a liability for unrecognized tax benefits in the accompanying balance sheets along with any associated interest and penalties that would be payable to the taxing authorities upon examination. As of December 31, 2015 and 2014, the Company had recorded no such liability. Banks operating in Virginia are not subject to Virginia State Income Tax, but are subjected to Virginia Bank Franchise Taxes. (k) Marketing Costs The Company follows the policy of charging the production costs of marketing/advertising to expense as incurred unless the advertising campaign extends for a significant time period, in which case, such costs will be amortized to expense over the duration of the advertising campaign. (l) Comprehensive Income (Loss) Accounting principles generally require that recognized revenue, expenses, gains and losses be included in net income (loss). Although certain changes in assets and liabilities, such as unrealized gains and losses on available for sale securities, are reported as a separate component of the equity section of the balance sheet, such items, along with net income (loss), are components of comprehensive income (loss). (m) Earnings Per Share Basic earnings per share represents income available to common shareholders divided by the weighted-average number of common shares outstanding during the period. Diluted earnings per share reflect additional common shares that would have been outstanding if dilutive potential common shares had been issued, as well as any adjustment to income that would result from the assumed issuance. Options to purchase 125 thousand and 145 thousand shares of the Company’s common stock were not included in the computation of earnings per share in 2015 or 2014, respectively, because the share award prices exceeded the average market price of the Company’s common stock and therefore, the effect would have been anti-dilutive. The effect would also have been anti-dilutive in 2014 due to the loss. For the years ended December 31, 2015 and 2014, 578,125 shares of unvested common stock were excluded from the computation of basic and diluted earnings per common share as they are performance based and deemed unlikely to vest. All other vested and nonvested restricted common shares, which carry all rights and privilege of a stockholder with respect to the stock, including the right to vote, were included in both the basic and diluted earnings per common share calculations. The calculation for basic and diluted earnings per common share for the years ended December 31, are as follows:
(n) Stock Option Plan Authoritative accounting guidance requires the costs resulting from all share-based payments to employees be recognized in the financial statements. For stock option grants, stock-based compensation is estimated at the date of grant, using the Black-Scholes option valuation model for determining fair value. Restricted stock grants are expensed based on the grant date fair value of the Company’s common stock. The Company recognized stock-based compensation expense of $318 thousand and $270 thousand in 2015 and 2014, respectively. (o) Fair Value Measurements Fair values of financial instruments are estimated using relevant market information and other assumptions as more fully disclosed in Note 14. Fair value estimates involve uncertainties and matters of significant judgment. Changes in assumptions or market conditions could significantly affect the estimates. (p) Transfer of Assets Transfers of financial assets are accounted for as sales when control over the assets has been surrendered. Control over transferred assets is deemed to be surrendered when 1) the assets have been isolated from the Company – put presumptively beyond the reach of the transferor and its creditors, even in bankruptcy or other receivership; 2) the transferee obtains the right (free of conditions that constrain it from taking advantage of that right) to pledge or exchange the transferred assets; and 3) the Company does not maintain effective control over the transferred assets through an agreement to repurchase them before their maturity of the ability to unilaterally cause the holder to return specified assets. (q) Reclassification In certain circumstances, reclassifications have been made to prior period information to conform to the 2015 presentation. Such reclassifications had no effect on previously reported stockholders’ equity or net income or loss. Recent Accounting Pronouncements In June 2014, the FASB issued ASU No. 2014-12, “Compensation – Stock Compensation (Topic 718): Accounting for Share-Based Payments When the Terms of an Award Provide That a Performance Target Could Be Achieved after the Requisite Service Period.” The new guidance applies to reporting entities that grant employees share-based payments in which the terms of the award allow a performance target to be achieved after the requisite service period. The amendments in the ASU require that a performance target that affects vesting and that could be achieved after the requisite service period be treated as a performance condition. Existing guidance in “Compensation – Stock Compensation (Topic 718),” should be applied to account for these types of awards. The amendments in this ASU are effective for annual periods and interim periods within those annual periods beginning after December 15, 2015. Early adoption is permitted and reporting entities may choose to apply the amendments in the ASU either on a prospective or retrospective basis. The Company does not expect the adoption of ASU 2014-12 to have a material impact on its consolidated financial statements. In August 2014, the FASB issued ASU No. 2014-15, “Presentation of Financial Statements – Going Concern (Subtopic 205-40): Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern.” This update is intended to provide guidance about management’s responsibility to evaluate whether there is substantial doubt about an entity’s ability to continue as a going concern and to provide related footnote disclosures. Management is required under the new guidance to evaluate whether there are conditions or events, considered in the aggregate, that raise substantial doubt about the entity’s ability to continue as a going concern within one year after the date the financial statements are issued when preparing financial statements for each interim and annual reporting period. If conditions or events are identified, the ASU specifies the process that must be followed by management and also clarifies the timing and content of going concern footnote disclosures in order to reduce diversity in practice. The amendments in this ASU are effective for annual periods and interim periods within those annual periods beginning after December 15, 2016. Early adoption is permitted. The Company does not expect the adoption of ASU 2014-15 to have a material impact on its consolidated financial statements. In November 2014, the FASB issued ASU No. 2014-16, “Derivatives and Hedging (Topic 815): Determining Whether the Host Contract in a Hybrid Financial Instrument Issued in the Form of a Share Is More Akin to Debt or to Equity.” The amendments in ASU do not change the current criteria in U.S. GAAP for determining when separation of certain embedded derivative features in a hybrid financial instrument is required. The amendments clarify how current U.S. GAAP should be interpreted in evaluating the economic characteristics and risks of a host contract in a hybrid financial instrument that is issued in the form of a share. Specifically, the amendments clarify that an entity should consider all relevant terms and features, including the embedded derivative feature being evaluated for bifurcation, in evaluating the nature of the host contract. Furthermore, the amendments clarify that no single term or feature would necessarily determine the economic characteristics and risks of the host contract. Rather, the nature of the host contract depends upon the economic characteristics and risks of the entire hybrid financial instrument. The amendments in this ASU also clarify that, in evaluating the nature of a host contract, an entity should assess the substance of the relevant terms and features (i.e., the relative strength of the debt-like or equity-like terms and features given the facts and circumstances) when considering how to weight those terms and features. The amendments in this ASU are effective for public business entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2015. Early adoption, including adoption in an interim period, is permitted. The Company does not expect the adoption of ASU 2014-16 to have a material impact on its consolidated financial statements. In January 2015, the FASB issued ASU No. 2015-01, “Income Statement—Extraordinary and Unusual Items (Subtopic 225-20): Simplifying Income Statement Presentation by Eliminating the Concept of Extraordinary Items.” The amendments in this ASU eliminate from U.S. GAAP the concept of extraordinary items. Subtopic 225-20, Income Statement - Extraordinary and Unusual Items, required that an entity separately classify, present, and disclose extraordinary events and transactions. Presently, an event or transaction is presumed to be an ordinary and usual activity of the reporting entity unless evidence clearly supports its classification as an extraordinary item. If an event or transaction meets the criteria for extraordinary classification, an entity is required to segregate the extraordinary item from the results of ordinary operations and show the item separately in the income statement, net of tax, after income from continuing operations. The entity also is required to disclose applicable income taxes and either present or disclose earnings-per-share data applicable to the extraordinary item. The amendments in this ASU are effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2015. A reporting entity may apply the amendments prospectively. A reporting entity also may apply the amendments retrospectively to all prior periods presented in the financial statements. Early adoption is permitted provided that the guidance is applied from the beginning of the fiscal year of adoption. The Company does not expect the adoption of ASU 2015-01 to have a material impact on its consolidated financial statements. In February 2015, the FASB issued ASU No. 2015-02, “Consolidation (Topic 810): Amendments to the Consolidation Analysis.” The amendments in this ASU are intended to improve targeted areas of consolidation guidance for legal entities such as limited partnerships, limited liability corporations, and securitization structures (collateralized debt obligations, collateralized loan obligations, and mortgage-backed security transactions). In addition to reducing the number of consolidation models from four to two, the new standard simplifies the FASB Accounting Standards Codification™ and improves current GAAP by placing more emphasis on risk of loss when determining a controlling financial interest, reducing the frequency of the application of related-party guidance when determining a controlling financial interest in a variable interest entity (VIE), and changing consolidation conclusions for public and private companies in several industries that typically make use of limited partnerships or VIEs. The amendments in this ASU are effective for public business entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2015. Early adoption is permitted, including adoption in an interim period. ASU 2015-02 may be applied retrospectively in previously issued financial statements for one or more years with a cumulative-effect adjustment to retained earnings as of the beginning of the first year restated. The Company does not expect the adoption of ASU 2015-02 to have a material impact on its consolidated financial statements. In April 2015, the FASB issued ASU No. 2015-03, “Interest – Imputation of Interest (Subtopic 835-30): Simplifying the Presentation of Debt Issuance Costs.” The amendments in this ASU are intended to simplify the presentation of debt issuance costs. These amendments require that debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability, consistent with debt discounts. The recognition and measurement guidance for debt issuance costs are not affected by the amendments in this ASU. The amendments in this ASU are effective for public business entities for financial statements issued for fiscal years beginning after December 15, 2015, and interim periods within those fiscal years. Early adoption is permitted for financial statements that have not been previously issued. The Company does not expect the adoption of ASU 2015-03 to have a material impact on its consolidated financial statements. In April 2015, the FASB issued ASU No. 2015-05, “Intangibles - Goodwill and Other - Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Fees Paid in a Cloud Computing Arrangement.” The amendments in this ASU provide guidance to customers about whether a cloud computing arrangement includes a software license. If a cloud computing arrangement includes a software license, then the customer should account for the software license element of the arrangement consistent with the acquisition of other software licenses. If a cloud computing arrangement does not include a software license, the customer should account for the arrangement as a service contract. The amendments do not change the accounting for a customer’s accounting for service contracts. As a result of the amendments, all software licenses within the scope of Subtopic 350-40 will be accounted for consistent with other licenses of intangible assets. The amendments in this ASU are effective for public business entities for annual periods, including interim periods within those annual periods, beginning after December 15, 2015. Early adoption is permitted. An entity can elect to adopt the amendments either: (1) prospectively to all arrangements entered into or materially modified after the effective date; or (2) retrospectively. The Company does not expect the adoption of ASU 2015-05 to have a material impact on its consolidated financial statements. In May 2015, the FASB issued ASU No. 2015-08, “Business Combinations (Topic 805): Pushdown Accounting – Amendments to SEC Paragraphs Pursuant to Staff Accounting Bulletin No. 115.” The amendments in ASU 2015-08 amend various SEC paragraphs pursuant to the issuance of Staff Accounting Bulletin No. 115, Topic 5: Miscellaneous Accounting, regarding various pushdown accounting issues, and did not have a material impact on the Company’s consolidated financial statements. In August 2015, the FASB issued ASU No. 2015-14, “Revenue from Contracts with Customers (Topic 606): Deferral of Effective Date.” The amendments in ASU 2015-14 defer the effective date of ASU 2014-09 for all entities by one year. Public business entities, certain not-for-profit entities, and certain employee benefit plans should apply the guidance in ASU 2014-09 to annual reporting periods beginning after December 15, 2017, including interim reporting periods within that reporting period. Earlier application is permitted only as of annual reporting periods beginning after December 15, 2016, including interim reporting periods within that reporting period. All other entities should apply the guidance in ASU 2014-09 to annual reporting periods beginning after December 15, 2018, and interim reporting periods within annual reporting periods beginning after December 15, 2019. All other entities may apply the guidance in ASU 2014-09 earlier as of an annual reporting period beginning after December 15, 2016, including interim reporting periods within that reporting period. All other entities also may apply the guidance in ASU 2014-09 earlier as of an annual reporting period beginning after December 15, 2016, and interim reporting periods within annual reporting periods beginning one year after the annual reporting period in which the entity first applies the guidance in ASU 2014-09. The Company does not expect the adoption of ASU 2015-14 (or ASU 2014-09) to have a material impact on its consolidated financial statements. In August 2015, the FASB issued ASU 2015-15, “Interest – Imputation of Interest (Subtopic 835-30) – Presentation and Subsequent Measurement of Debt Issuance Costs Associated with Line-of-Credit Arrangements (Amendments to SEC Paragraphs Pursuant to Staff Announcement at June 18, 2015 EITF Meeting).” On April 7, 2015, the FASB issued ASU 2015-03, Interest—Imputation of Interest (Subtopic 835-30): Simplifying the Presentation of Debt Issuance Costs, which requires entities to present debt issuance costs related to a recognized debt liability as a direct deduction from the carrying amount of that debt liability. The guidance in ASU 2015-03 (see paragraph 835-30-45-1A) does not address presentation or subsequent measurement of debt issuance costs related to line-of-credit arrangements. Given the absence of authoritative guidance within ASU 2015-03 for debt issuance costs related to line-of-credit arrangements, the SEC staff stated that they would not object to an entity deferring and presenting debt issuance costs as an asset and subsequently amortizing the deferred debt issuance costs ratably over the term of the line-of-credit arrangement, regardless of whether there are any outstanding borrowings on the line-of-credit arrangement. ASU 2015-15 adds these SEC comments to the "S" section of the Codification. The adoption of ASU 2015-15 did not have a material impact on the Company’s consolidated financial statements. In September 2015, the FASB issued ASU 2015-16, “Business Combinations (Topic 805): Simplifying the Accounting for Measurement-Period Adjustments.” The amendments in ASU 2015-16 require that an acquirer recognize adjustments to estimated amounts that are identified during the measurement period in the reporting period in which the adjustment amounts are determined. The amendments require that the acquirer record, in the same period’s financial statements, the effect on earnings of changes in depreciation, amortization, or other income effects, if any, as a result of the change to the estimated amounts, calculated as if the accounting had been completed at the acquisition date. The amendments also require an entity to present separately on the face of the income statement or disclose in the notes the portion of the amount recorded in current-period earnings by line item that would have been recorded in previous reporting periods if the adjustment to the estimated amounts had been recognized as of the acquisition date. The amendments in this ASU are effective for public business entities for fiscal years beginning after December 15, 2015, including interim periods within those fiscal years. For all other entities, the amendments are effective for fiscal years beginning after December 15, 2016, and interim periods within fiscal years beginning after December 15, 2017. The amendments should be applied prospectively to adjustments to provisional amounts that occur after the effective date with earlier application permitted for financial statements that have not been issued. The Company does not expect the adoption of ASU 2015-16 to have a material impact on its consolidated financial statements. In January 2016, the FASB issued ASU 2016-01, “Financial Instruments – Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities.” The amendments in ASU 2016-01, among other things: 1) Requires equity investments (except those accounted for under the equity method of accounting, or those that result in consolidation of the investee) to be measured at fair value with changes in fair value recognized in net income. 2) Requires public business entities to use the exit price notion when measuring the fair value of financial instruments for disclosure purposes. 3) Requires separate presentation of financial assets and financial liabilities by measurement category and form of financial asset (i.e., securities or loans and receivables). 4) Eliminates the requirement for public business entities to disclose the method(s) and significant assumptions used to estimate the fair value that is required to be disclosed for financial instruments measured at amortized cost. The amendments in this ASU are effective for public companies for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. The Company is currently assessing the impact that ASU 2016-01 will have on its consolidated financial statements. In February 2016, the FASB issued ASU No. 2016-02, “Leases (Topic 842).” Among other things, in the amendments in ASU 2016-02, lessees will be required to recognize the following for all leases (with the exception of short-term leases) at the commencement date: (1) A lease liability, which is a lessee‘s obligation to make lease payments arising from a lease, measured on a discounted basis; and (2) A right-of-use asset, which is an asset that represents the lessee’s right to use, or control the use of, a specified asset for the lease term. Under the new guidance, lessor accounting is largely unchanged. Certain targeted improvements were made to align, where necessary, lessor accounting with the lessee accounting model and Topic 606, Revenue from Contracts with Customers. The amendments in this ASU are effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. Early application is permitted upon issuance. Lessees (for capital and operating leases) and lessors (for sales-type, direct financing, and operating leases) must apply a modified retrospective transition approach for leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements. The modified retrospective approach would not require any transition accounting for leases that expired before the earliest comparative period presented. Lessees and lessors may not apply a full retrospective transition approach. The Company is currently assessing the impact that ASU 2016-02 will have on its (consolidated) financial statements. |
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Business Combination |
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| Business Combination Disclosure [Text Block] | Note 2. Business Combination On December 10, 2010, the Company purchased 1,355,263 newly issued shares of the common stock of the Bank of Virginia (“BVA”), which gave it a 59.8% ownership interest. In accordance with ASC 805-10, this transaction was considered a business combination. Under the acquisition method of accounting, the assets and liabilities of the Bank were marked to fair value and goodwill was recorded for the excess of consideration paid over net fair value received. Based on the consideration paid and the fair value of the assets received and the liabilities assumed, goodwill of $5.9 million was recorded. Goodwill was determined to be impaired in its entirety during the fourth quarter of 2011. In addition to goodwill, other assets and liabilities of the Bank of Virginia were marked to their respective fair value as of December 10, 2010. Estimated fair values differed substantially in some cases from the carrying amounts of the assets and liabilities reflected in the financial statements of BVA which, in most cases were valued at historical cost. Subsequent to that date, the fair value adjustments were amortized over the expected life of the related asset or liability or otherwise adjusted as required by generally accepted accounting principles (“GAAP”). Interest income is impacted by the accretion of the fair value discount on the loan portfolio as well as the accretion of the accretable discount on loans acquired with deteriorated credit quality. Interest income is also impacted by the accretion on the investment securities that is the result of the reset of the amortized book value amount to the fair value as of the day of the acquisition. Interest expense is impacted by the amortization of the premiums on time deposits and the FHLB advances. Net interest income is impacted by the combination of all of these items. Non-interest expense was impacted by a rent adjustment related to certain lease commitments being above market as of the day of the investment; and amortization of the core deposit intangible. During the second quarter of 2015, this property was purchased and the related lease was terminated resulting in a favorable reversal of the fair value discount of $225 thousand. On March 29, 2013, the minority shareholders of BVA exchanged their common shares in the Bank for common shares of Cordia. For each share of BVA exchanged, 0.664 shares of Cordia were received. In connection with the exchange, BVA became a wholly-owned subsidiary of Cordia. In addition, the increased ownership percentage of BVA by Cordia has impacted the accounting of both entities. All of Cordia’s acquisition accounting adjustments are now recorded in the BVA financial statements and the Cordia financial statements no longer reflect adjustments for non-controlling interests. The accretion (amortization) of the acquisition accounting adjustments had the following impact on the financial statements:
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Securities |
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| Marketable Securities [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Cash, Cash Equivalents, and Marketable Securities [Text Block] | Note 3. Securities Our investment portfolio consists of U.S. agency debt and agency guaranteed mortgage-backed securities. Our investment security portfolio includes securities classified as available for sale as well as securities classified as held to maturity. We classify securities as available for sale or held to maturity based on our investment strategy and management’s assessment of our intent and ability to hold the securities until maturity. The total securities portfolio (excluding restricted securities) was $71.7 million at December 31, 2015 as compared to $74.2 million at December 31, 2014. At December 31, 2015, the securities portfolio consisted of $46.2 million of securities available for sale and $25.5 million of securities held to maturity. The table below presents the amortized cost, gross unrealized gains and losses, and fair value of securities available for sale at December 31, 2015 and 2014.
The table below presents the carry value, gross unrealized gains and losses, and fair value of securities held to maturity at December 31, 2015 and 2014.
The amortized cost and fair value of securities available for sale as of December 31, 2015, by contractual maturity are shown below. Expected maturities may differ from contractual maturities because issuers may have the right to call or prepay obligations without penalties. They are as follows:
The carry value and fair value of securities held to maturity as of December 31, 2015, by contractual maturity are shown below. Expected maturities may differ from contractual maturities because issuers may have the right to call or prepay obligations without penalties. They are as follows:
As of December 31, 2015, the portfolio is concentrated in average maturities of over ten years, although a substantial majority of recently purchased securities have effective duration much shorter than ten years. The portfolio is available to support liquidity needs of the Company. During 2015, the Company sold $19.8 million of available for sale securities and recognized gains of $133 thousand in noninterest income. During 2014, the Company sold $23.4 million of available for sale securities and recognized gains of $181 thousand and losses of $4 thousand in noninterest income. Unrealized losses on investments at December 31, 2015 and 2014 were as follows:
For the year ended December 31, 2015, there were U.S. Government agency securities and agency guaranteed mortgage-backed securities with unrealized losses totaling $497 thousand. For the year ended December 31, 2014, there were U.S. Government agency securities and agency guaranteed mortgage-backed securities with unrealized losses totaling $206 thousand. All of the unrealized losses are attributable to increases in interest rates and not to credit deterioration. Currently, the Company does not believe that it is probable that it will be unable to collect all amounts due according to the contractual terms of the investments. Because the decline in market value is attributable to changes in interest rates and not to credit quality and because it is not more likely than not that the Company will be required to sell the investments before recovery of their amortized cost bases, which may be maturity, the Company does not consider these investments to be other-than-temporarily impaired at December 31, 2015. Investment securities with combined fair values of $13.8 million and $7.8 million were pledged to secure public funds with the State of Virginia at December 31, 2015 and 2014, respectively. We had $16.8 million and $9.6 million in securities pledged to secure FHLB advances at December 31, 2015 and 2014, respectively. |
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Loans, Allowance for Loan Losses and Credit Quality |
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| Allowance For Loan And Lease Losses Provision For Net Loss [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Allowance for Credit Losses [Text Block] |
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. Below is a table that exhibits the loans by segment at December 31, 2015 and 2014.
Included in the loan balances above are net deferred loan costs of $1.7 million and $1.2 million at December 31, 2015 and 2014, respectively. Also included in the loan balances above are premiums related to guaranteed student loans of $827 thousand and $931 thousand at December 31, 2015 and 2014, respectively. Loans Acquired with Evidence of Deterioration in Credit Quality Acquired in the acquisition of Bank of Virginia, and included in the table above, are purchased performing loans and loans acquired with evidence of deterioration in credit quality. The purchased performing loans are $6.9 million and $9.0 million, at December 31, 2015 and December 31, 2014, respectively. As these loans are re-underwritten, they are removed from the “purchase” classification. The loans acquired with evidence of deterioration in credit quality are accounted for under the guidance ASC 310-30. Information related to these loans is as follows:
A discount is applied to these loans such that the carrying amount approximates the cash flows expected to be received from the borrower or from the liquidation of collateral. Due to the high level of uncertainty regarding the timing and amount of these cash flows in December 2010, Management initially considered the entire discount to be nonaccretable. However, due to improvement in the status of some credits, the majority of the nonaccretable difference was subsequently transferred to accretable yield and is being amortized as a yield adjustment over the lives of the individual loans. Cash flows received on loans with a nonaccretable difference are applied on a cost recovery method, whereby payments are applied first to the loan balance. When the loan balance is fully recovered, payments are then being applied to income. Any future reductions in carrying value as a result of deteriorating credit quality require an allowance for loan losses related to these loans. A summary of changes to the accretable yield and nonaccretable difference during 2015 and 2014 are as follows:
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:
The unique structural characteristics ordinarily considered when reviewing a loan are as follows:
On a quarterly basis, the process of estimating the allowance for loan loss begins with management’s review of the risk rating assigned to individual credits. Through this process, loans adversely risk rated are evaluated for impairment based on ASC 310-40. The following is a summary of the risk rating definitions the Company uses to assign a risk grade to each loan within the portfolio:
The following is the distribution of loans by credit quality and segment as of December 31, 2015 and 2014:
A summary of the balances of loans outstanding by days past due, including accruing and non-accruing loans by portfolio class as of December 31, 2015 and 2014 were as follows:
A summary of non-accrual loans by portfolio class as of December 31, 2015 and 2014 are as follows:
Impaired Loans All loans that are rated Substandard or worse are assessed as impaired based on the expectation that the full collection of principal and interest is in doubt. All loans that are expected to be downgraded to Substandard, require additional analysis to determine if the loan is impaired. All loans that are rated Special Mention are presumed not to be impaired. However, Special Mention rated loans are typically evaluated for the following adverse characteristics that may indicate further analysis is warranted before completing an assessment of impairment:
The following information is a summary of the Company’s policies pertaining to impaired loans: A loan is deemed impaired when, based on current information and events, it is probable that all amounts due according to the contractual terms of the loan agreement. Factors impairing repayment might include: inadequate repayment capacity, severe erosion of equity, likely reliance on non-primary source of repayment, guarantors with limited resources, and obvious material deterioration in borrower’s financial condition. The possibility of loss or protracted workout exists if immediate corrective action is not taken. Once deemed impaired, the loan is then analyzed for the extent of the impairment. Impairment is the difference between the principal balance of the loan and (i) the discounted cash flows of the borrower or (ii) the fair market value of the collateral less the costs involved with liquidation (i.e., real estate commissions, attorney costs, etc.). This difference is then reflected as a component in the allowance for loan loss as a specific reserve. Government Guaranteed Student loans with a past due balance greater than 90 days are not placed on non-accrual and are not considered impaired. When a loan reaches 120 days past due, the non-guaranteed portion of the loan is charged-off. The guarantor’s payment covers approximately 98% of principal and accrued interest. A component of the general loan loss reserve covers potential losses within the 2% of the non-guaranteed portion of the loans that are less than 120 days past due. Certain loans were identified and individually evaluated for impairment at December 31, 2015 and 2014. A number of these impaired loans were not charged with a valuation allowance due to Management’s judgment that the cash flows from the underlying collateral or equity available from guarantors was sufficient to recover the Company’s entire investment, while one loan experienced collateral deterioration and a supplemental specific reserve was added. There were no consumer mortgage loans collateralized by residential real estate in the process of foreclosure as of December 31, 2015. The results of those analyses are presented in the following tables. The following is a summary of impaired loans, excluding acquired impaired loans, presented by portfolio class as of December 31, 2015:
The following is a summary of impaired loans, excluding acquired impaired loans, presented by portfolio class as of December 31, 2014:
Loans with deteriorated credit quality acquired as part of the Bank of Virginia acquisition are accounted for under the requirements of ASC 310-30. These loans are not considered impaired and are not included in the table above. Troubled Debt Restructurings A modification is classified as a troubled debt restructuring (“TDR”) if both of the following exist: (1) the borrower is experiencing financial difficulty and (2) the Company has granted a concession to the borrower. The Company determines that a borrower may be experiencing financial difficulty if the borrower is currently delinquent on any of its debt, or if the Company is concerned that the borrower may not be able to perform in accordance with the current terms of the loan agreement in the foreseeable future. Many aspects of the borrower’s financial situation are assessed when determining whether they are experiencing financial difficulty, particularly as it relates to commercial borrowers due to the complex nature of the loan structure, business/industry risk and borrower/guarantor structures. Concessions may include the reduction of an interest rate at a rate lower than current market rate for a new loan with similar risk, extension of the maturity date, reduction of accrued interest, or principal forgiveness. When evaluating whether a concession has been granted, the Company also considers whether the borrower has provided additional collateral or guarantors and whether such additions adequately compensate the Company for the restructured terms, or if the revised terms are consistent with those currently being offered to new loan customers. The assessments of whether a borrower is experiencing (or is likely to experience) financial difficulty and whether a concession has been granted is subjective in nature and management’s judgment is required when determining whether a modification is a TDR. Although each occurrence is unique to the borrower and is evaluated separately, for all portfolio segments, TDRs are typically modified through reduction in interest rates, reductions in payments, changing the payment terms from principal and interest to interest only, and/or extensions in term maturity. During the year ended December 31, 2015, no loans were modified in trouble debt restructurings and two previous troubled debt restructurings were paid off. During the year ended December 31, 2014, two loans were modified in trouble debt restructurings and three previous troubled debt restructurings were paid off. At December 31, 2015 and 2014, no loans and four loans, respectively, were classified as TDRs. The principal balance outstanding relating to these loans was $1.3 million at December 31, 2014. Of this amount, $1.3 million was accruing. During the years ended December 31, 2015 and 2014, no defaults occurred on loans modified as TDR’s in the preceding twelve months. The number and outstanding recorded investment of loans entered into under the terms of a TDR during the years ended December 31, 2014, including modifications of acquired impaired loans, by type of concession granted, are set forth in the following table. There were no TDRs as of December 31, 2015.
(1) The period end balances are inclusive of all partial paydowns and charge-offs since the modification date. Loans modified as TDRs that were fully paid down, charged-off, or foreclosed upon by period end are not reported. TDRs are considered to be in default if the borrower fails to make timely payments under the terms of the restructure and repayment possibilities have been exhausted. There were no troubled debt restructurings that defaulted within one year during the years ended December 31, 2015 or 2014 whereby all repayment possibilities had been exhausted. A summary of the allowance for loan losses by portfolio segment as of December 31, 2015 is as follows:
A summary of the allowance for loan losses by portfolio segment as of December 31, 2014 is as follows:
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Intangible Assets |
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| Goodwill and Intangible Assets Disclosure [Abstract] | ||||||||||||||||||||||||||||||||
| Intangible Assets Disclosure [Text Block] | Note 5. Intangible Assets In 2010, the Company acquired a majority interest in the Bank of Virginia. The Company recorded a core deposit intangible related to this acquisition of $249 thousand. This asset represents the estimated fair value of the core deposits and was determined based on the present value of future cash flow related to those deposits considering the industry standard “financial instrument” type present value methodology. The core deposit intangible is amortized over the estimated life of the deposits using the straight-line method. A summary of the activity in this account is as follows:
Amortization expense is expected to be approximately $35 thousand per year in 2016 and $33 thousand in 2017. |
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Premises and Equipment |
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| Property, Plant and Equipment [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Property, Plant and Equipment Disclosure [Text Block] | Note 6. Premises and Equipment A summary of the cost and accumulated depreciation of premises and equipment is as follows:
For the years ended December 31, 2015 and 2014, depreciation expense totaled $306 thousand and $294 thousand, respectively. At the beginning of 2015, the Company leased two branches and an operations office under operating leases that were acquired as part of a business combination. Management determined that one of these leases required lease payments that were above market as of the date of the acquisition. A liability was established for $822 thousand at acquisition, the amount the contractual payments exceeded fair value. This liability was being accreted into income as a reduction of lease expense over the life of the lease. During the second quarter of 2015, this property was purchased and the related lease was terminated resulting in a favorable reversal of the fair value discount. This accretion adjustment reduced non-interest expense by $225 thousand. Accordingly, total rent expense net of accretion, for the years ended December 31, 2015 and 2014, respectively, amounted to $17 thousand and $227 thousand. Future lease expenses will no longer be reduced by accretion. Following is a schedule by year of future minimum rental payments required under operating leases that have initial or remaining non-cancelable lease terms in excess of one year as of December 31, 2015.
The Chester branch lease, set to expire at the end of February 2016, was renegotiated after December 31, 2015, thus future minimum rental payments are only included for the first two months of 2016 in the above table for this branch (see Note 18 – Subsequent Events). |
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Borrowings |
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| Advances from Federal Home Loan Banks [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Federal Home Loan Bank Advances, Disclosure [Text Block] | Note 7. Borrowings The Bank is a member of the Federal Home Loan Bank of Atlanta (FHLB) which provides for short-term and long-term advances, typically collateralized by various mortgage products. The FHLB maintains a blanket security agreement on qualifying collateral. Detail related to FHLB advances at December 31, 2015 and 2014 is as follows:
Should the FHLB borrowing be repaid prior to maturity, the Bank may have to pay a mark-to-market termination fee to unwind on certain FHLB obligations. On the remaining advances, the Bank also has the option of converting and extending the borrowing term, subject to the inclusion of any mark-to-market fees. As of December 31, 2015, the Bank had approximately $14.1 million of remaining eligible loan collateral available for additional FHLB borrowings and remaining additional credit availability of $39.7 million based on the amount of other balance sheet investment securities held, excluding securities otherwise already pledged. BVA maintains $4.5 million of unsecured lines of credit with other correspondent banks that were available for direct borrowings or Federal Funds purchased. The lines were undrawn at December 31, 2015. |
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Related Party Transactions |
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| Related Party Transactions [Abstract] | |||||||||||||||||||||||||||||||||||||
| Related Party Transactions Disclosure [Text Block] | Note 8. Related Party Transactions Executive officers, directors and their affiliates had borrowings of $5.2 million and $4.7 million and unfunded commitments of $539 thousand and $523 thousand with the Bank at December 31, 2015 and 2014.
In addition, executive officers, directors and their affiliates maintained deposits of $2.6 million at December 31, 2015 and $2.9 million at December 31, 2014. |
Time Deposits |
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Dec. 31, 2015 | ||||||||||||||||||||||||||||||||||||||||||
| Time Deposits [Abstract] | ||||||||||||||||||||||||||||||||||||||||||
| Time Deposits Disclosure [Text Block] | Note 9. Time Deposits Remaining maturities on time deposits are as follows:
The aggregate amount of time deposits of $250,000 or more at December 31, 2015 and 2014 were $13.7 million and $9.7 million, respectively. The Bank maintained brokered time deposits of $35.2 million and $35.8 million at December 31, 2015 and 2014, respectively. |
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Income Taxes |
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| Income Tax Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Income Tax Disclosure [Text Block] | Note 10. Income Taxes The Company and Bank file income tax returns in the U.S. federal jurisdiction. With few exceptions, the Bank is no longer subject to U.S. federal income tax examinations by tax authorities for years prior to 2012. The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and deferred tax liabilities at December 31, 2015 and 2014, are presented below:
The provision for income taxes charged to operations as of December 31, 2015 and 2014 consists of the following:
Under the provisions of the Internal Revenue Code, the Company has approximately $18.7 million of net operating loss carryforwards, which will expire if unused beginning in 2024 through 2034. As of December 31, 2015, net deferred tax assets (DTA) of $6.1 million have been fully reserved with a valuation allowance. It is estimated that all of the valuation allowance is available to be reversed if it is deemed more-likely-than-not that all of the deferred tax asset will be realized. Of the net operating losses that occurred prior to the change in control of BVA in December 2010 and of Cordia in April 2014, the amount of the loss carryforward available to offset taxable income is limited to approximately $254 thousand per year for twenty years for BVA and zero for Cordia. DTAs related to net operating losses in excess of the amount realizable during the 20 year carryforward period have been written off. |
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Financial Instruments with Off-Balance Sheet Risk |
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Dec. 31, 2015 | ||||||||||||||||||||||||||||||||||
| Fair Value Disclosures [Abstract] | ||||||||||||||||||||||||||||||||||
| Fair Value Of Off Balance Sheet Risks Disclosure [Text Block] | Note 11. Financial Instruments with Off-Balance Sheet Risk The Bank is party to credit-related financial instruments with off-balance sheet risk in the normal course of business to meet the financing needs of its customers. These financial instruments include commitments to extend credit and standby letters of credit. Such commitments involve, to varying degrees, elements of credit and interest rate risk in excess of the amount recognized in the consolidated Balance Sheet. The Bank’s exposure to credit loss is represented by the contractual amount of these commitments. The Bank follows the same credit policies in making commitments as it does for on-balance sheet instruments. At December 31, 2015 and 2014, the following financial instruments were outstanding whose contractual amounts represent credit risk:
Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established in the contract. Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee. The commitments for equity lines of credit may expire without being drawn upon. Therefore, the total commitment amounts do not necessarily represent future cash requirements. The amount of collateral obtained, if it is deemed necessary by the Bank, is based on management’s credit evaluation of the customer. Unfunded commitments under commercial lines of credit, revolving credit lines and overdraft protection agreements are commitments for possible future extensions of credit to existing customers. These lines of credit usually contain a specified maturity date and may not be fully drawn upon to the total extent to which the Bank is committed. The amount of collateral obtained, if it is deemed necessary by the Bank, is based on management’s credit evaluation of the customer. Standby letters of credit are conditional commitments issued by the Bank to guarantee the performance of a customer to a third party. Those letters of credit are primarily issued to support public and private borrowing arrangements. Letters of credit issued generally have expiration dates within one year, except for those originally issued as two year commitments, however, upon automatic renewal, the letters of credit will then have expiration dates that expire within one year. The credit risk involved in issuing letters of credit is essentially the same as that involved in normal extensions of credit. The Bank generally holds collateral supporting those commitments, if deemed necessary. The Bank maintains its primary cash accounts in correspondent banks. Capital ratios of correspondents are reviewed periodically to ensure that their capital ratios are maintained at acceptable levels. There were uninsured balances held with these institutions of $10.6 million and $6.0 million at December 31, 2015 and 2014, respectively. |
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Minimum Regulatory Capital Requirements and Dividend Limitations |
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| Minimum Regulatory Capital Requirements and Dividend Limitations [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Regulatory Capital Requirements under Banking Regulations [Text Block] | Note 12. Minimum Regulatory Capital Requirements and Dividend Limitations The Bank is subject to various regulatory capital requirements administered by the federal banking agencies. Failure to meet minimum capital requirements can initiate certain mandatory, possibly additional discretionary, actions by regulators that could have a direct material effect on the Bank’s consolidated financial statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, financial institutions must meet specific capital guidelines that involve quantitative measures of assets, liabilities, and certain off-balance-sheet items as calculated under regulatory accounting practices. A financial institution’s capital amounts and classification are also subject to qualitative judgments by the regulators about components, risk weightings, and other factors. Because total assets on a consolidated basis are less than $500,000,000, the Company is not subject to the consolidated capital requirements imposed by the Bank Holding Company Act. Consequently, the Company is not required to calculate its capital ratios on a consolidated basis. The final rules implementing Basel Committee on Banking Supervision's capital guidelines for U.S. banks (Basel III rules) became effective on January 1, 2015, with full compliance with all of the requirements being phased in over a multi-year schedule, and fully phased in by January 1, 2019. As part of the new requirements, the Common Equity Tier I Capital ratio is calculated and utilized in the assessment of capital for all institutions. Capital amounts and ratios for December 31, 2014 were calculated using the Basel I rules, which were effective until January 1, 2015. Quantitative measures established by regulation to ensure capital adequacy require financial institutions to maintain minimum amounts and ratios (set forth in the table below) of total, Tier 1 capital and common equity Tier 1 capital (as defined in the regulations) to risk-weighted assets (as defined), and of Tier 1 capital (as defined) to average assets (as defined). As of December 31, 2015, the Bank meets all capital adequacy requirements to which it is subject. As of December 31, 2015, the Bank was considered as well capitalized under the Federal Reserve Bank’s regulatory framework for prompt corrective action. To be categorized as well capitalized, the Bank must maintain minimum total risk-based, Tier 1 risk-based, and Tier 1 leverage ratios as set forth in the following table. There are no conditions or events since that notification that management believes have changed the Bank's category. The Bank's actual capital amounts and ratios as of December 31, 2015 and 2014, are presented in the following table:
* Common equity tier 1 capital became applicable in 2015. Dividend Limitations As a result of regulatory restrictions due to losses realized by the Bank during 2014 and 2012 and the provisions of the Bank’s previous written agreement with the Federal Reserve Bank of Richmond, which terminated on August 13, 2013, we are not presently able to pay dividends without prior approval. Accordingly, the Bank paid no dividends during 2015 or 2014. |
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Employee Benefit Plans |
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| Employee Benefits and Share-based Compensation [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Compensation and Employee Benefit Plans [Text Block] | Note 13. Employee Benefit Plans Employee 401(k) Savings Plan The Company provides a 401(k) Plan that is available to employees meeting minimum eligibility requirements. The Company did not make any matching contributions to the plan in 2015 or 2014. The employee participants have various investment alternatives available in the 401(k) Plan; however, Company stock is currently not permitted as an investment alternative. Employee Welfare Plan The Company provides benefit programs to eligible full-time and part-time employees who elect coverage under the plan. Each plan has its own eligibility requirement. During an annual enrollment period each year, employees have the opportunity to change their coverage or, in certain circumstances, more frequently due to certain life-changing events. Generally, amounts paid by employees for benefit coverage are deducted from their pay on a before-tax basis. Certain benefits are deducted on an after-tax basis. Various insurance benefits offered to employees consist of medical, dental, vision, life, accidental death and dismemberment, long term disability, short term disability, medical spending account, dependent care spending account, long term care and supplemental insurance. The health and welfare plans are administered through Multiple Employer Welfare Association (“MEWA”). Monthly employer and employee contributions are remitted to a tax-exempt employer benefits trust managed by the Virginia Bankers Association, against which the MEWA processes and pays claims. Deferred Compensation Plan The Bank had a deferred compensation agreement with its Former Chief Executive Officer and Vice Chairman of the board entered into in January 2005, providing for benefit payments commencing January 1, 2010, for a period of five years. The final payout was made in December 2014. The annual payment for 2014 was $60 thousand. The obligation was based upon the present value of the expected payments over the expected payout and accrual period. There was no remaining liability as of December 31, 2015 or 2014. Stock Options and Restricted Stock Share-based compensation arrangements include stock options, restricted stock plans, performance-based awards, stock appreciation rights and employee stock purchase plans. ASC Topic 718 requires all share-based payments to employees to be valued using a fair value method on the date of grant and to be expensed based on that fair value over the applicable vesting period. At the Bank’s 2005 annual meeting of shareholders, the Bank’s shareholders ratified approval of the Bank of Virginia 2005 Stock Option Plan (the “2005 Plan”) which made available up to 26,560 shares for potential grants of stock options. The Plan was instituted to encourage and facilitate investment in the common stock of the Bank by key employees and executives and to assist in the long-term retention of service by those executives. The Plan covers employees as determined by the Bank’s Board of Directors from time to time. Options under the Plan were granted in the form of incentive stock options. At the Bank’s 2011 annual meeting of shareholders, the Bank’s shareholders approved a new share-based compensation plan (Bank of Virginia 2011 Stock Incentive Plan or the “2011 Plan”). Under this plan, employees, officers and directors of the Bank or its affiliates are eligible to participate. The plan’s intent was to reward employees, officers and directors of the Bank or its affiliates for their efforts, to assist in the long-term retention of service for those who were awarded, as well as further align their interests with the Bank’s shareholders. At the Company’s 2014 annual meeting of shareholders, Cordia shareholders approved an amendment to the 2011 Plan to increase the number of shares authorized for issuance by an additional 800,000 shares. As of December 31, 2015, there were 592,765 shares available for issuance under the 2011 Plan. There were 20,000 Cordia stock options granted outside the plan prior to the share exchange in March 2013. These stock options were forfeited during 2015. In addition, there were 10,000 stock options and 12,500 restricted stock issued in September 2013 outside the plan as an inducement grant to a newly hired officer. Effective upon Cordia’s acquisition of the Bank on March 29, 2013, the 2005 and 2011 Plans were assumed by Cordia. A summary of the Company’s option activity as of December 31, 2015 and 2014 and changes during the years then ended are presented in the following table:
Aggregate intrinsic value is calculated as the difference between the quoted price and the award exercise price of the stock. To the extent that the quoted price is less than the exercise price, there is no value to the underlying option awards, which was the case at both December 31, 2015 and 2014. The weighted average fair value of options granted during 2015 and 2014 was $1.38 and $1.50, respectively. The remaining unrecognized compensation expense for the options granted totaled $58 thousand as of December 31, 2015 and will be recognized over the next 46 months, or 3.83 years. The fair value of each option granted is estimated on the date of grant using the “Black-Scholes Option Pricing” method with the following assumptions for the year ended December 31, 2015 and 2014:
Options totaling 23,600 and 31,150 were granted during the years ended December 31, 2015 and 2014, respectively, under the 2011 plan. The expected term of options granted under both the 2011 Plan and 2005 Plan were estimated based upon anticipated behavior patterns given the contractual terms of the options granted. The risk free rate for periods within the contractual life of the option has been based on the U.S. Treasury yield curve in effect at the time of the grant. Expected volatility has been based on the historical volatility of the Company’s stock. During 2015, each non-executive director was granted 2,278 restricted shares, two executive officers were each granted 40,000 restricted shares and the new President and CEO of BVA was granted 3,378 restricted shares for a total of 103,880 restricted shares granted to directors and officers. The 2015 grants equaled $411 thousand in value. The non-executive director shares vested pro rata monthly over the course of 2015, and were fully vested by the end of 2015. During 2014, each non-executive director was granted 2,300 restricted shares, or a time of service prorated amount and the CEO was granted 66,000 restricted shares for a total of 85,933 restricted shares granted to directors and officers. The 2014 grants equaled $361 thousand in value. The non-executive director shares vested pro rata monthly over the course of 2014, and were fully vested by the end of 2014. A summary of the status of the Company’s nonvested shares in relation to the Company’s restricted stock awards as of December 31, 2015 and 2014, and changes during the years ended December 31, 2015 and 2014 is presented below. The weighted average price is the weighted average fair value at the date of grant.
The weighted average fair value of restricted stock granted during the year was $3.96. The remaining unrecognized compensation expense for the shares granted totaled $372 thousand as of December 31, 2015 and will be recognized over the next 36 months, or 3 years. A total of 578,125 shares of restricted shares of common stock were granted to founding investors of Cordia predominantly during 2009 and 2010 and are considered at December 31, 2014 more-likely-than-not to not vest due to significant performance based thresholds, for which the vesting time period expires in October 2016. Stock-based compensation expense was $318 thousand in 2015 and $270 thousand in 2014. Cordia does not have any benefit plans or incentive compensation plans beyond those maintained by the Bank. Cordia does provide a life insurance benefit to the President and Chief Executive Officer under the terms of his employment agreement. |
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Fair Value Measurements |
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| Fair Value Disclosures [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Fair Value, Measurement Inputs, Disclosure [Text Block] | Note 14. Fair Value Measurements Fair value information about financial instruments, whether or not recognized in the balance sheet, for which it is practical to estimate the value is based upon the characteristics of the instruments and relevant market information. Financial instruments include cash, evidence of ownership in an entity, or contracts that convey or impose on an entity that contractual right or obligation to either receive or deliver cash for another financial instrument. Fair value is the amount at which a financial instrument could be exchanged in a current transaction between willing parties, other than in a forced sale or liquidation, and is best evidenced by a quoted market price if one exists. The following presents the methodologies and assumptions used to estimate the fair value of the Company’s financial instruments. The information used to determine fair value is highly subjective and judgmental in nature and, therefore, the results may not be precise. Subjective factors include, among other things, estimates of cash flows, risk characteristics, credit quality, and interest rates, all of which are subject to change. Since the fair value is estimated as of the balance sheet date, the amounts that will actually be realized or paid upon settlement or maturity on these various instruments could be significantly different. Financial Instruments with Book Value Equal to Fair Value The book values of cash and due from banks, federal funds sold and purchased, loans held for sale, interest receivable, and interest payable are considered to be equal to fair value as a result of the short-term nature of these items. Securities The fair value for securities available for sale and securities held to maturity is based on current market quotations, where available. If quoted market prices are not available, fair value has been based on the quoted price of similar instruments. Restricted securities are valued at cost which is also the stated redemption value of the shares. Restricted Securities Restricted securities are valued at cost which is also the stated redemption value of the shares. Loans Held for Investments The estimated value of loans held for investment is measured based upon discounted future cash flows using the current rates for similar loans, as well as assumptions related to credit risk. Deposits Deposits without a stated maturity, including demand, interest-bearing demand, and savings accounts, are reported at their carrying value in accordance with authoritative accounting guidance. No value has been assigned to the franchise value of these deposits. For other types of deposits with fixed maturities, fair value has been estimated by discounting future cash flows based on interest rates currently being offered on deposits with similar characteristics and maturities. Borrowings and Other Indebtedness Fair value has been estimated based on interest rates currently available to the Company for borrowings with similar characteristics and maturities. Commitments to Extend Credit, Standby Letters of Credit, and Financial Guarantees Fair values for off-balance-sheet, credit-related financial instruments are based on fees currently charged to enter into similar agreements, taking into account the remaining terms of the agreements and the counterparties’ credit standing. At December 31, 2015 and 2014, the fair value of loan commitments and standby letters of credit was deemed to be immaterial and therefore is not included. Determination of Fair Value The Company uses fair value measurements to record fair value adjustments to certain assets and liabilities and to determine fair value disclosures. In accordance with the Fair Value Measurements and Disclosure topic of FASB ASC, the fair value of a financial instrument is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Fair value is best determined based upon quoted market prices. However, in many instances, there are no quoted market prices for the Company’s various financial instruments. In cases where quoted market prices are not available, fair values are based on estimates using present value or other valuation techniques. Those techniques are significantly affected by the assumptions used, including the discount rate and estimate of future cash flows. Accordingly, the fair value estimates may not be realized in an immediate settlement of the instrument. The fair value guidance provides a consistent definition of fair value, which focuses on exit price in an orderly transaction (that is, not a forced liquidation or distressed sale) between market participants at the measurement date under market conditions. If there has been a significant decrease in the volume and level of activity for the asset or liability, a change in valuation technique or the use of multiple valuation techniques may be appropriate. In such instances, determining the price at which willing market participants would transact at the measurement date under market conditions depends on the facts and circumstances and requires the use of significant judgment. Authoritative accounting literature specifies a hierarchy of valuation techniques based on whether the inputs to those valuation techniques are observable or unobservable. Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect the Company’s market assumptions. The three levels of the fair value hierarchy based on these two types of inputs are as follows:
The following table presents estimated fair values of the Company’s financial statements in accordance with authoritative accounting guidance:
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). The following table presents the balances of financial assets measured at fair value on a recurring basis at December 31, 2015 and 2014:
Certain assets are measured at fair value on a nonrecurring basis in accordance with GAAP. Adjustments to the fair value of these assets usually result from the application of lower-of-cost-or-market accounting or write-downs of individual assets. The following describes the valuation techniques used by the Company to measure certain assets recorded at fair value on a nonrecurring basis in the financial statements: Impaired Loans Loans are designated as impaired when, in the judgment of management based on current information and events, it is probable that all amounts due according to the contractual terms of the loan agreement will not be collected when due. The measurement of loss associated with impaired loans can be based on either the observable market price of the loan or the fair value of the collateral. Collateral may be in the form of real estate or business assets including equipment, inventory, and accounts receivable. The vast majority of the collateral is real estate. The value of real estate collateral is determined utilizing a market valuation approach based on an appraisal conducted by an independent, licensed appraiser outside of the Company using observable market data (Level 2). However, if the collateral value based on income valuation approach is significantly adjusted due to differences in the comparable properties, or is discounted by the Company because of marketability, then the fair value is considered Level 3. The value of business equipment is based upon an outside appraisal if deemed significant, or the net book value on the applicable business’s financial statements if not considered significant. Likewise, values for inventory and accounts receivables collateral are based on financial statement balances or aging reports (Level 3). Impaired loans allocated to the Allowance for Loan Losses are measured at fair value on a nonrecurring basis. Any fair value adjustments are recorded in the period incurred as provision for loan losses on the Consolidated Statements of Operations. Other Real Estate Owned (OREO) Other real estate owned (“OREO”) is measure at fair value less cost to sell, based on an appraisal conducted by an independent, licensed appraiser outside of the Company. If the collateral value is significantly adjusted due to differences in the comparable properties, or is discounted by the Company because of marketability, then the fair value is considered Level 3. OREO is measured at fair value on a nonrecurring basis. Any initial fair value adjustment is charged against the Allowance for Loan Losses. Subsequent fair value adjustments are recorded in the period incurred and included in other noninterest expense on the Consolidated Statements of Operations. The following tables summarize the Company’s assets that were measured at fair value on a nonrecurring basis at December 31, 2015 and 2014.
The following table displays quantitative information about level 3 fair value measurements for financial instruments measured at fair value on a non-recurring basis at December 31, 2015 and 2014.
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Other Real Estate Owned |
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| Other Real Estate Owned [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Real Estate Owned [Text Block] | Note 15. Other Real Estate Owned The table below presents a summary of the activity related to other real estate owned:
The Company aggressively attempts to dispose of its other real estate and has contracted with a third-party vendor to aid in expediting the sales process. The Company recorded a gain of $21 thousand in 2015 on the sale of other real estate owned during 2015 as compared to no gain in 2014. The Company recorded an expense of $90 thousand and $46 thousand related to other real estate owned for the years ended December, 31, 2015 and 2014, respectively. |
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Accumulated Other Comprehensive (Loss) |
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| Statement of Comprehensive Income [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Other Comprehensive Income, Noncontrolling Interest [Text Block] | Note 16. Accumulated Other Comprehensive (Loss) The changes in accumulated other comprehensive loss for years ended December 31, 2015 and 2014 are summarized as follows:
The following table presents information on amounts reclassified out of accumulated other comprehensive income (loss), by category, during the periods indicated:
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Preferred Stock Issuance and Conversion |
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| Preferred Stock Issuance And Conversion [Abstract] | ||
| Preferred Stock Issuance And Conversion [Text Block] | Note 17. Preferred Stock Issuance and Conversion On April 10, 2014, Cordia completed the sale of approximately 363 shares of Mandatorily Convertible, Noncumulative, Nonvoting, Perpetual Preferred Stock, Series A, $0.01 par value per share, to accredited investors at a purchase price of $42,500 per share for total gross proceeds of $15.4 million. The capital raise included investments by 100% of Cordia directors. The net proceeds of the offering are being used primarily to support organic growth in BVA. On June 25, 2014, upon stockholder approval, each share of Series A Preferred Stock mandatorily converted into 10,000 shares of Cordia’s common stock at a conversion price of $4.25 per share, for a total issuance of approximately 3,629,871 new shares of common stock, of which 2,229,434 are voting and 1,400,437 are nonvoting. The holders of the Series A Preferred Stock did not receive any dividends under the provisions of the stock purchase agreements. Other than voting rights, the nonvoting common stock has the same rights and privileges as the common stock, including sharing ratably in all assets of the Company upon its liquidation, dissolution or winding-up, and entitlement to receive dividends in the same amount per share and at the same time when, as and if declared by the Board, and is identical to the common stock in all other respects as to all other matters (other than voting). Holders of nonvoting common stock have no cumulative voting rights or preemptive rights (other than the limited contractual preemptive rights of certain investors in the private placement offering) to purchase or subscribe for any additional shares of common stock or nonvoting common stock or other securities, and there are no conversion rights or redemption or sinking fund provisions with respect to the nonvoting common stock. Authorized Shares. 5,000,000 shares of nonvoting common stock, par value of $0.01 per share, are authorized and 1,400,437 shares of nonvoting common stock are outstanding. Voting Rights. Holders of nonvoting common stock are not entitled to vote except as required by the Virginia Stock Corporation Act. Where the shares of nonvoting common stock are entitled to vote under Virginia law, each holder of nonvoting common stock will have one vote for each share of nonvoting common stock held of record solely on the matters to which such shares are entitled to vote, and subject to the rights and limitations specified by the Virginia Stock Corporation Act. Automatic Conversion Upon Permitted Transfer. Each share of nonvoting common stock will automatically convert into one share of common stock in the event of a “permitted transfer” to a transferee. A “permitted transfer” is a transfer of nonvoting common stock (i) in a widespread public distribution, (ii) in which no transferee (or group of associated transferees) would receive 2% or more of any class of voting securities of the Company, or (iii) to a transferee that would control more than 50% of the voting securities of the Company without any transfer from such holder of nonvoting common stock. Dividends. Subject to the prior rights of the holders of shares of preferred stock that may be issued and outstanding, the holders of nonvoting common stock are entitled to receive dividends when, as and if declared by the Company’s Board of Directors out of funds lawfully available for the payment of dividends. |
Parent Company - Condensed Financial Statements |
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| Cash Dividends Paid to Parent Company [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Condensed Financial Information of Parent Company Only Disclosure [Text Block] | Note 18. Parent Company – Condensed Financial Statements Cordia Bancorp, Inc. owns 100.0% of the outstanding shares of the Bank of Virginia at December 31, 2015. Condensed financial statements of Cordia Bancorp, Inc. follow: Condensed Balance Sheets December 31, 2015 and 2014
Condensed Statements of Operations For the years ended December 31, 2015 and 2014
Condensed Statements of Cash Flows For the years ended December 31, 2015 and 2014
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| Subsequent Events [Abstract] | ||||||||||||||||||||||||||||||||||||||||||
| Subsequent Events [Text Block] | Note 19. Subsequent Events In February 2016, the Chester branch lease was renewed for an additional five years. Future minimum rental payments required under this renewal are as follows:
On March 1, 2016, the Bank transferred certain marketing arrangements, internet domains and intellectual property related to CordiaGrad to a newly formed subsidiary, which it then sold to Jack C. Zoeller, who resigned as Cordia’s President and Chief Executive Officer in connection with the transaction. No loans were sold as part of the transaction and, as part of the transaction, the Bank agreed to provide certain transition and loan origination services to the new entity acquired by Mr. Zoeller through June 30, 2016. Cordia anticipates recording charges totaling $1.6 million in the first quarter of 2016 relating to the loss on the sale of the CordiaGrad business and the vesting of equity awards held by Mr. Zoeller. The reduction to book value is expected to be approximately $740 thousand due to the capital contribution resulting from the vesting of equity awards held by Mr. Zoeller. Effective March 1, 2016, following Jack Zoeller’s resignation, O.R. (Ed) Barham, Jr. was appointed as a director and as President and Chief Executive Officer of Cordia and as Chairman of the Board of Directors of the Bank. |
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Organization and Summary of Significant Accounting Policies (Policies) |
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| Organization, Consolidation and Presentation of Financial Statements [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Use of Estimates, Policy [Policy Text Block] | (a) Use of Estimates In preparing financial statements in conformity with accounting principles generally accepted in the United States of America, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities as of the date of the balance sheet and reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Material estimates that are particularly susceptible to significant change in the near term relate to the determination of the allowance for loan losses, the valuation of deferred tax assets, the valuation of other real estate owned, intangible assets, acquired loans with specific credit-related deterioration and fair value measurements. |
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| Cash and Cash Equivalents, Policy [Policy Text Block] | (b) Cash and Cash Equivalents For purposes of the statement of cash flows, cash and cash equivalents include cash on hand, amounts due from banks and federal funds sold. Generally, federal funds are purchased and sold for one day periods. |
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| Marketable Securities, Policy [Policy Text Block] | (c) Securities Debt securities that management has the positive intent and ability to hold to maturity are classified as “held to maturity” and recorded at amortized cost. Securities not classified as held to maturity, including equity securities with readily determinable fair values, are classified as “available for sale” and recorded at estimated fair value. Other securities, such as Federal Reserve Bank stock and Federal Home Loan Bank stock, are carried at cost and are listed on the balance sheet as restricted securities. In estimating other than temporary impairment losses management considers, (1) the length of time and extent to which the fair value has been less than cost, (2) the financial condition and near term prospects of the issuer, and (3) our ability to retain our investment for a period of time sufficient to allow for any anticipated recovery in fair value. Impairment of securities occurs when the fair value of a security is less than its amortized cost. For debt securities, impairment is considered other-than-temporary and recognized in its entirety in net income if either (1) the Company intends to sell the security or (2) it is more likely than not that the Company will be required to sell the security before recovery of its amortized cost basis. If, however, the Company does not intend to sell the security and it is not more-than-likely that the Company will be required to sell the security before recovery, management must determine what portion of the impairment is attributable to a credit loss, which occurs when the amortized cost of the security exceeds the present value of the cash flows expected to be collected from the security. If there is no credit loss, there is no other-than-temporary impairment. If there is a credit loss, other-than-temporary impairment exists, and the credit loss must be recognized in net income and the remaining portion of impairment must be recognized in other comprehensive income. For equity securities carried at cost as restricted securities, impairment is considered to be other-than-temporary based on our ability and intent to hold the investment until a recovery of value. Other-than-temporary impairment of an equity security results in a write-down that must be included in income. The Company regularly reviews each security for other-than-temporary impairment based on criteria that include the extent to which costs exceed market price, the duration of that market decline, the financial health of and specific prospects for the issuer, management’s best estimate of the present value of cash flows expected to be collected on these debt securities, the Company’s intention with regard to holding the security to maturity and the likelihood that the Company would be required to sell the security before recovery. The Company adjusts amortization or accretion on each bond on a level yield basis monthly. |
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| Trade and Loan Receivables, Nonmortgage Loans Held-for-sale, Policy [Policy Text Block] | (d) Loans Held For Sale Secondary market mortgage loans are designated as held for sale at the time of their origination. These loans are pre-sold with servicing released and the Company does not retain any interest after the loans are sold. These loans consist primarily of fixed-rate, single-family residential mortgage loans which meet the underwriting characteristics of certain government–sponsored enterprises (conforming loans). In addition, the Company requires a firm purchase commitment from a permanent investor before a loan can be committed, thus limiting interest rate risk. Loans held for sale are carried at the lower of cost or fair value. Gains on sales of loans are recognized at the loan closing date and are included in noninterest income. The company had $220 thousand of loans held for sale as of December 31, 2015 and no loans classified as held for sale as of December 31, 2014. |
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| Loan Commitments, Policy [Policy Text Block] | (e) Loans The Company grants commercial and consumer loans to customers. A substantial portion of the loan portfolio is represented by commercial loans throughout the greater Richmond, Virginia metropolitan area. The ability of the Bank’s debtors to honor their contracts is dependent upon numerous factors including the collateral performance, general economic conditions, as well as the underlying strength of borrowers and guarantors. Loans that management has the intent and ability to hold for the foreseeable future or until maturity or pay-off are generally reported at their outstanding unpaid principal balances adjusted for the allowance for loan losses and net deferred fees and costs. Interest income is accrued on the unpaid principal balance. Loan origination and commitment fees and certain direct costs are deferred and the net amount is amortized as an adjustment of the related loan’s yield. The Bank is amortizing these amounts on an effective interest method over the loan’s contractual life or to the pay-off date if the balance is repaid prior to maturity. Loans are recorded based on purpose, collateral and repayment period. Interest is calculated on a 365/360 for commercial loans and 365/365 for consumer loans. Interest is accrued on a daily basis. The Company was licensed by the U.S. Department of Education as a rehabilitated student lender effective November 2012. In the first quarter of 2013, the Company began purchasing rehabilitated student loans guaranteed by the U.S. Department of Education. The guarantee covers approximately 98% of principal and accrued interest. The unguaranteed principal balance of these loans was approximately $1.1 million at December 31, 2015 and $1.3 million at December 31, 2014. The company ceased purchasing rehabilitated, federally guaranteed student loans in April 2014. The past due status of a loan is based on the contractual due date of the most delinquent payment due. Each loan will be placed in one of the following categories: current, 1-29 days past due, 30-59 days past due, 60-89 days past due and 90 days and over past due. Generally, the accrual of interest on a loan is discontinued at the time the loan becomes 90 days delinquent unless the credit is well-secured and in process of collection or refinancing. Due to the guaranty by the U.S. Department of Education, Guaranteed Student Loans continue to accrue interest up until charged-off. Loans are placed on nonaccrual status when management believes the full collection of the principal and interest is doubtful. A delinquent loan is generally placed in nonaccrual status when:
When a loan is placed on nonaccrual, all interest which has been accrued is charged back against current earnings as a reduction in interest income, which adversely affects the yield on loans in the period of reversal. No additional interest is accrued on the loan balance until the collection of both principal and interest becomes reasonably certain. Loans placed on non-accrual status may, at the lenders discretion, be returned to accrual status after:
Government Guaranteed Student loans with a past due balance greater than 90 days are not placed on non-accrual. When a loan reaches 120 days past due, the non-guaranteed portion of the loan is charged-off. A claim is filed with the guarantor when the loan becomes 270 days past due. Interest continues to accrue until charge-off. The guarantor’s payment covers approximately 98% of principal and accrued interest. When a loan is returned to accrual status after restructuring, the pre-restructuring risk rating is maintained until a satisfactory payment history is re-established. Returning non-accrual loans to an accrual status requires the prior written approval of the Chief Credit Officer. In situations where, for economic or legal reasons related to a borrower’s financial condition, management may grant a concession to the borrower that it would not otherwise consider, the related loan is classified as a troubled debt restructuring (TDR). Management strives to identify borrowers in financial difficulty early and work with them to modify their loan to more affordable terms before their loan reaches nonaccrual status. These modified terms may include rate reductions, principal forgiveness, payment forbearance, re-amortization, and other actions intended to minimize the economic loss and to avoid foreclosure or repossession of the collateral. In cases where borrowers are granted new terms that provide for a reduction of either interest or principal, management measures any impairment on the restructuring as noted below for impaired loans. There were no loans classified as a TDR as of December 3l, 2015. There were four loans with an aggregate principal balance of $1.3 million classified as TDRs as of December 31, 2014. Acquired loans with specific credit deterioration are accounted for by Cordia in accordance with FASB Accounting Standards Codification 310-30. Certain acquired loans, those for which specific credit-related deterioration, since origination, is identified, are recorded at fair value reflecting the present value of the amounts expected to be collected. Income recognition on these loans is based on a reasonable expectation about the timing and amount of cash flows to be collected. Acquired loans deemed impaired and considered collateral dependent, with the timing of the sale of loan collateral indeterminate, remain on non-accrual status and have no accretable yield. The difference between contractually required payments at acquisition and the cash flows expected to be collected at acquisition is referred to as the “nonaccretable difference,” and is not recorded. Any excess of cash flows expected at acquisition over the estimated fair value is referred to as the accretable yield and is recognized as interest income over the remaining life of the loan when there is a reasonable expectation about the amount and timing of such cash flows. Subsequent decreases to the expected cash flows will generally result in a provision for loan losses, while subsequent increases in cash flows may result in a reversal of post-acquisition provision for loan losses, or a transfer from nonaccretable difference to accretable yield. |
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| Loans and Leases Receivable, Allowance for Loan Losses Policy [Policy Text Block] | (f) Allowance for Loan Losses The allowance for loan losses (“ALLL”) is increased by charges to income and decreased by charge-offs, net of recoveries. The ALLL is established and maintained at a level management deems adequate to cover probable losses inherent in the portfolio as of the balance sheet date and is based on management’s evaluation of the risks in the loan portfolio and changes in the nature and volume of loan activity. There are risks inherent in all loans, so an ALLL is maintained for loans to absorb probable losses on existing loans that may become uncollectible. The ALLL is established and maintained as losses are estimated to have occurred through a provision for loan losses charged to earnings, which increases the balance of the ALLL. Loan losses for all segments are charged against the ALLL when management believes the uncollectability of a loan is confirmed, which decreases the balance of the ALLL. Subsequent recoveries, if any, are credited back to the ALLL. The amount of the ALLL is established through the application of a standardized model, the components of which are: an impairment analysis of specific loans to determine the level of any specific reserves needed and an estimate of the general reserves needed which consists of a weighted average of historical loss experience and adjustments for economic and environmental factors. The allowance for loan losses is evaluated on a regular basis by management and is based upon management’s periodic review of the collectability of the loans in light of historical experience, the nature and volume of the loan portfolio, adverse situations that may affect the borrower’s ability to repay, estimated value of any underlying collateral and prevailing economic conditions. This evaluation is inherently subjective as it requires estimates that are susceptible to significant revision as more information becomes available. In order for the ALLL methodology to be considered valid and for Management to make the determination if any deficiencies exist in the process, the Bank at a minimum requires:
Note 4 includes an additional discussion of how the ALLL is quantified. The use of various estimates and judgments in the Bank’s ongoing evaluation of the required level of ALLL can significantly affect the Bank’s results of operations and financial condition and may result in either greater provisions against earnings to increase the ALLL or reduced provisions based upon management’s current view of portfolio and economic conditions and the application of revised estimates and assumptions. The specific component of the ALLL relates to loans that are classified as either doubtful, substandard or TDR. For such loans that are also classified as impaired, a loan level allowance is established. The evaluation of the need for a specific reserve involves the identification of impaired loans and an analysis of those loans’ repayment capacity from both primary (cash flow) and secondary (real estate and non-real estate collateral or guarantors) sources and making specific reserve allocations to impaired loans that exhibit inherent weaknesses and various other elevated credit risk factors. All available collateral is analyzed and valued, with discounts applied according to the age of any real estate appraisals or the liquidity of other asset classes. The analysis is compared to the aggregate Bank loan exposure, giving consideration to the Bank’s lien preference and other actual and contingent obligations of the borrower. Any loan guarantors are rated and their value weighted based on an analysis of the guarantor’s net worth, including liabilities, liquid assets, and annual cash flows and total contingent liabilities. A loan is considered impaired when it is probable that the Bank will be unable to collect all amounts when due according to the contractual terms of the loan agreement. We do not consider a loan impaired during a period of insignificant delay in payment if we expect the ultimate collection of all amounts due. Impairment is measured as the difference between the recorded investment in the loan and the evaluation of the present value of expected future cash flows or the observable market price of the loan or collateral value of the impaired loan when that cash flow or collateral value is lower than the carrying value of that loan. Loans that are collateral dependent, that is, loans where repayment is expected to be provided solely by the underlying collateral, and for which management has determined foreclosure is probable, are measured for impairment based on the fair value of the collateral as described above. The general component covers pass rated loans and special mention loans and is based on historical loss experience adjusted for qualitative factors. The model estimates probable loan losses by analyzing historical loss experience and other trends within the portfolio, including trends in delinquencies and charge-offs, the opinions of regulators, changes in the growth rate, size and composition of the loan portfolio, particularly the level of Special Mention rated loans, the level of past due loans, the level of home equity loans and commercial real estate loans in aggregate and as a percentage of capital, and industry information. A component of the general reserve for unimpaired loans is established based on a weighted average historical loss factor for the prior twelve quarters (with more weight given to the more recent quarters) and the level of unimpaired loans. Management applies a 45% weighting to the most recent four quarters, a 35% weighting to the next four quarters and a 20% weighting to the most distant four of the prior twelve quarters when calculating this component of the general reserve. Also included in management’s estimates for loan losses are considerations with respect to the impact of local and national economic trends, the outcomes of which are uncertain. These events may include, but are not limited to, a general slowdown in the national or local economy, national and local unemployment rates, local real estate values, fluctuations in overall lending rates, political conditions, legislation that may directly or indirectly affect the banking industry and economic conditions affecting the specific geographic area in which the Bank conducts business. |
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| Property, Plant and Equipment, Policy [Policy Text Block] | (g) Premises and Equipment Premises and equipment are stated at cost less accumulated depreciation. Depreciation is computed using the straight-line method over the assets' estimated useful lives. Estimated useful lives range from 10 to 30 years for buildings and 3 to 10 years for autos, furniture, fixtures and equipment. The value of land is carried at cost. |
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| Real Estate Owned, Valuation Allowance, Policy [Policy Text Block] | (h) Other Real Estate Owned Assets acquired through loan foreclosure are held for sale. They are initially recorded at fair value at the date of foreclosure, less estimated selling costs thus establishing a new cost basis. Subsequent to foreclosure, valuations of the assets are periodically performed by management. Adjustments are made to the lower of the carrying amount or fair value of the assets less selling costs. Revenue and expenses from operations and sales are included in other real estate expenses, net in the statement of operations. The Bank’s investment in foreclosed assets totaled $1.9 million and $1.6 million at December 31, 2015 and 2014, respectively. |
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| Goodwill and Intangible Assets, Policy [Policy Text Block] | (i) Goodwill and Other Intangibles FASB ASC 805, Business Combinations, requires that the acquisition method of accounting be used for all business combinations. With acquisitions, the Company is required to record assets acquired, including any intangible assets, and liabilities assumed at fair value, which involves relying on estimates based on third party valuations, such as appraisals, or internal valuations based on discounted cash flow analysis or other valuation methods. The Company records goodwill per ASC 350, Intangibles-Goodwill and Others. Accordingly, goodwill is no longer subject to amortization over its estimated useful life, but is subject to at least an annual assessment for impairment by applying a fair value-based test. Additionally, under ASC 350, acquired intangible assets (such as core deposit intangibles) are separately recognized if the benefit of the assets can be sold, transferred, licensed, rented, or exchanged, and amortized over their useful lives. Goodwill was determined to be impaired in December 2011 at the annual impairment evaluation and was written off in its entirely at that time. Core deposit intangibles of $68 thousand and $104 thousand are included in other assets at December 31, 2015 and 2014, respectively. |
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| Income Tax, Policy [Policy Text Block] | (j) Income Taxes Deferred taxes are provided on a liability method whereby deferred tax assets are recognized for deductible temporary differences, operating loss carryforwards, and tax credit carryforwards. Deferred tax liabilities are recognized for taxable temporary differences. Temporary differences are the differences between the reported amounts of assets and liabilities and their tax bases. Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, the recognition of the asset is less than probable. A valuation allowance has been recorded against the Company’s entire net deferred tax asset. When tax returns are filed, it is highly certain that some positions taken would be sustained upon examination by the taxing authorities, while others are subject to uncertainty about the merits of the positions taken or the amount of the position that would be ultimately sustained. The benefit of a tax position is recognized in the financial statements in the period during which, based on all available evidence, management believes it is more likely than not that the position will be sustained upon examination, including the resolution of appeals or litigation processes, if any. Tax positions taken are not offset or aggregated with other positions. Tax positions that meet the more-likely-than-not recognition threshold are measured as the largest amount of tax benefit that is more than 50 percent likely of being realized upon settlement with the applicable taxing authority. The portion of the benefits associated with tax positions taken that exceeds the amount measured as described above is recognized as a liability for unrecognized tax benefits in the accompanying balance sheets along with any associated interest and penalties that would be payable to the taxing authorities upon examination. As of December 31, 2015 and 2014, the Company had recorded no such liability. Banks operating in Virginia are not subject to Virginia State Income Tax, but are subjected to Virginia Bank Franchise Taxes. |
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| Advertising Cost, Policy, Expensed Advertising Cost [Policy Text Block] | (k) Marketing Costs The Company follows the policy of charging the production costs of marketing/advertising to expense as incurred unless the advertising campaign extends for a significant time period, in which case, such costs will be amortized to expense over the duration of the advertising campaign. |
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| Comprehensive Income, Policy [Policy Text Block] | (l) Comprehensive Income (Loss) Accounting principles generally require that recognized revenue, expenses, gains and losses be included in net income (loss). Although certain changes in assets and liabilities, such as unrealized gains and losses on available for sale securities, are reported as a separate component of the equity section of the balance sheet, such items, along with net income (loss), are components of comprehensive income (loss). |
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| Earnings Per Share, Policy [Policy Text Block] | (m) Earnings Per Share Basic earnings per share represents income available to common shareholders divided by the weighted-average number of common shares outstanding during the period. Diluted earnings per share reflect additional common shares that would have been outstanding if dilutive potential common shares had been issued, as well as any adjustment to income that would result from the assumed issuance. Options to purchase 125 thousand and 145 thousand shares of the Company’s common stock were not included in the computation of earnings per share in 2015 or 2014, respectively, because the share award prices exceeded the average market price of the Company’s common stock and therefore, the effect would have been anti-dilutive. The effect would also have been anti-dilutive in 2014 due to the loss. For the years ended December 31, 2015 and 2014, 578,125 shares of unvested common stock were excluded from the computation of basic and diluted earnings per common share as they are performance based and deemed unlikely to vest. All other vested and nonvested restricted common shares, which carry all rights and privilege of a stockholder with respect to the stock, including the right to vote, were included in both the basic and diluted earnings per common share calculations. The calculation for basic and diluted earnings per common share for the years ended December 31, are as follows:
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| Share-based Compensation, Option and Incentive Plans Policy [Policy Text Block] | (n) Stock Option Plan Authoritative accounting guidance requires the costs resulting from all share-based payments to employees be recognized in the financial statements. For stock option grants, stock-based compensation is estimated at the date of grant, using the Black-Scholes option valuation model for determining fair value. Restricted stock grants are expensed based on the grant date fair value of the Company’s common stock. The Company recognized stock-based compensation expense of $318 thousand and $270 thousand in 2015 and 2014, respectively. |
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| Fair Value Measurement, Policy [Policy Text Block] | (o) Fair Value Measurements Fair values of financial instruments are estimated using relevant market information and other assumptions as more fully disclosed in Note 14. Fair value estimates involve uncertainties and matters of significant judgment. Changes in assumptions or market conditions could significantly affect the estimates. |
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| Transfers and Servicing of Financial Assets, Policy [Policy Text Block] | (p) Transfer of Assets Transfers of financial assets are accounted for as sales when control over the assets has been surrendered. Control over transferred assets is deemed to be surrendered when 1) the assets have been isolated from the Company – put presumptively beyond the reach of the transferor and its creditors, even in bankruptcy or other receivership; 2) the transferee obtains the right (free of conditions that constrain it from taking advantage of that right) to pledge or exchange the transferred assets; and 3) the Company does not maintain effective control over the transferred assets through an agreement to repurchase them before their maturity of the ability to unilaterally cause the holder to return specified assets. |
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| Reclassification, Policy [Policy Text Block] | (q) Reclassification In certain circumstances, reclassifications have been made to prior period information to conform to the 2015 presentation. Such reclassifications had no effect on previously reported stockholders’ equity or net income or loss. |
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| New Accounting Pronouncements, Policy [Policy Text Block] | Recent Accounting Pronouncements In June 2014, the FASB issued ASU No. 2014-12, “Compensation – Stock Compensation (Topic 718): Accounting for Share-Based Payments When the Terms of an Award Provide That a Performance Target Could Be Achieved after the Requisite Service Period.” The new guidance applies to reporting entities that grant employees share-based payments in which the terms of the award allow a performance target to be achieved after the requisite service period. The amendments in the ASU require that a performance target that affects vesting and that could be achieved after the requisite service period be treated as a performance condition. Existing guidance in “Compensation – Stock Compensation (Topic 718),” should be applied to account for these types of awards. The amendments in this ASU are effective for annual periods and interim periods within those annual periods beginning after December 15, 2015. Early adoption is permitted and reporting entities may choose to apply the amendments in the ASU either on a prospective or retrospective basis. The Company does not expect the adoption of ASU 2014-12 to have a material impact on its consolidated financial statements. In August 2014, the FASB issued ASU No. 2014-15, “Presentation of Financial Statements – Going Concern (Subtopic 205-40): Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern.” This update is intended to provide guidance about management’s responsibility to evaluate whether there is substantial doubt about an entity’s ability to continue as a going concern and to provide related footnote disclosures. Management is required under the new guidance to evaluate whether there are conditions or events, considered in the aggregate, that raise substantial doubt about the entity’s ability to continue as a going concern within one year after the date the financial statements are issued when preparing financial statements for each interim and annual reporting period. If conditions or events are identified, the ASU specifies the process that must be followed by management and also clarifies the timing and content of going concern footnote disclosures in order to reduce diversity in practice. The amendments in this ASU are effective for annual periods and interim periods within those annual periods beginning after December 15, 2016. Early adoption is permitted. The Company does not expect the adoption of ASU 2014-15 to have a material impact on its consolidated financial statements. In November 2014, the FASB issued ASU No. 2014-16, “Derivatives and Hedging (Topic 815): Determining Whether the Host Contract in a Hybrid Financial Instrument Issued in the Form of a Share Is More Akin to Debt or to Equity.” The amendments in ASU do not change the current criteria in U.S. GAAP for determining when separation of certain embedded derivative features in a hybrid financial instrument is required. The amendments clarify how current U.S. GAAP should be interpreted in evaluating the economic characteristics and risks of a host contract in a hybrid financial instrument that is issued in the form of a share. Specifically, the amendments clarify that an entity should consider all relevant terms and features, including the embedded derivative feature being evaluated for bifurcation, in evaluating the nature of the host contract. Furthermore, the amendments clarify that no single term or feature would necessarily determine the economic characteristics and risks of the host contract. Rather, the nature of the host contract depends upon the economic characteristics and risks of the entire hybrid financial instrument. The amendments in this ASU also clarify that, in evaluating the nature of a host contract, an entity should assess the substance of the relevant terms and features (i.e., the relative strength of the debt-like or equity-like terms and features given the facts and circumstances) when considering how to weight those terms and features. The amendments in this ASU are effective for public business entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2015. Early adoption, including adoption in an interim period, is permitted. The Company does not expect the adoption of ASU 2014-16 to have a material impact on its consolidated financial statements. In January 2015, the FASB issued ASU No. 2015-01, “Income Statement—Extraordinary and Unusual Items (Subtopic 225-20): Simplifying Income Statement Presentation by Eliminating the Concept of Extraordinary Items.” The amendments in this ASU eliminate from U.S. GAAP the concept of extraordinary items. Subtopic 225-20, Income Statement - Extraordinary and Unusual Items, required that an entity separately classify, present, and disclose extraordinary events and transactions. Presently, an event or transaction is presumed to be an ordinary and usual activity of the reporting entity unless evidence clearly supports its classification as an extraordinary item. If an event or transaction meets the criteria for extraordinary classification, an entity is required to segregate the extraordinary item from the results of ordinary operations and show the item separately in the income statement, net of tax, after income from continuing operations. The entity also is required to disclose applicable income taxes and either present or disclose earnings-per-share data applicable to the extraordinary item. The amendments in this ASU are effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2015. A reporting entity may apply the amendments prospectively. A reporting entity also may apply the amendments retrospectively to all prior periods presented in the financial statements. Early adoption is permitted provided that the guidance is applied from the beginning of the fiscal year of adoption. The Company does not expect the adoption of ASU 2015-01 to have a material impact on its consolidated financial statements. In February 2015, the FASB issued ASU No. 2015-02, “Consolidation (Topic 810): Amendments to the Consolidation Analysis.” The amendments in this ASU are intended to improve targeted areas of consolidation guidance for legal entities such as limited partnerships, limited liability corporations, and securitization structures (collateralized debt obligations, collateralized loan obligations, and mortgage-backed security transactions). In addition to reducing the number of consolidation models from four to two, the new standard simplifies the FASB Accounting Standards Codification™ and improves current GAAP by placing more emphasis on risk of loss when determining a controlling financial interest, reducing the frequency of the application of related-party guidance when determining a controlling financial interest in a variable interest entity (VIE), and changing consolidation conclusions for public and private companies in several industries that typically make use of limited partnerships or VIEs. The amendments in this ASU are effective for public business entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2015. Early adoption is permitted, including adoption in an interim period. ASU 2015-02 may be applied retrospectively in previously issued financial statements for one or more years with a cumulative-effect adjustment to retained earnings as of the beginning of the first year restated. The Company does not expect the adoption of ASU 2015-02 to have a material impact on its consolidated financial statements. In April 2015, the FASB issued ASU No. 2015-03, “Interest – Imputation of Interest (Subtopic 835-30): Simplifying the Presentation of Debt Issuance Costs.” The amendments in this ASU are intended to simplify the presentation of debt issuance costs. These amendments require that debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability, consistent with debt discounts. The recognition and measurement guidance for debt issuance costs are not affected by the amendments in this ASU. The amendments in this ASU are effective for public business entities for financial statements issued for fiscal years beginning after December 15, 2015, and interim periods within those fiscal years. Early adoption is permitted for financial statements that have not been previously issued. The Company does not expect the adoption of ASU 2015-03 to have a material impact on its consolidated financial statements. In April 2015, the FASB issued ASU No. 2015-05, “Intangibles - Goodwill and Other - Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Fees Paid in a Cloud Computing Arrangement.” The amendments in this ASU provide guidance to customers about whether a cloud computing arrangement includes a software license. If a cloud computing arrangement includes a software license, then the customer should account for the software license element of the arrangement consistent with the acquisition of other software licenses. If a cloud computing arrangement does not include a software license, the customer should account for the arrangement as a service contract. The amendments do not change the accounting for a customer’s accounting for service contracts. As a result of the amendments, all software licenses within the scope of Subtopic 350-40 will be accounted for consistent with other licenses of intangible assets. The amendments in this ASU are effective for public business entities for annual periods, including interim periods within those annual periods, beginning after December 15, 2015. Early adoption is permitted. An entity can elect to adopt the amendments either: (1) prospectively to all arrangements entered into or materially modified after the effective date; or (2) retrospectively. The Company does not expect the adoption of ASU 2015-05 to have a material impact on its consolidated financial statements. In May 2015, the FASB issued ASU No. 2015-08, “Business Combinations (Topic 805): Pushdown Accounting – Amendments to SEC Paragraphs Pursuant to Staff Accounting Bulletin No. 115.” The amendments in ASU 2015-08 amend various SEC paragraphs pursuant to the issuance of Staff Accounting Bulletin No. 115, Topic 5: Miscellaneous Accounting, regarding various pushdown accounting issues, and did not have a material impact on the Company’s consolidated financial statements. In August 2015, the FASB issued ASU No. 2015-14, “Revenue from Contracts with Customers (Topic 606): Deferral of Effective Date.” The amendments in ASU 2015-14 defer the effective date of ASU 2014-09 for all entities by one year. Public business entities, certain not-for-profit entities, and certain employee benefit plans should apply the guidance in ASU 2014-09 to annual reporting periods beginning after December 15, 2017, including interim reporting periods within that reporting period. Earlier application is permitted only as of annual reporting periods beginning after December 15, 2016, including interim reporting periods within that reporting period. All other entities should apply the guidance in ASU 2014-09 to annual reporting periods beginning after December 15, 2018, and interim reporting periods within annual reporting periods beginning after December 15, 2019. All other entities may apply the guidance in ASU 2014-09 earlier as of an annual reporting period beginning after December 15, 2016, including interim reporting periods within that reporting period. All other entities also may apply the guidance in ASU 2014-09 earlier as of an annual reporting period beginning after December 15, 2016, and interim reporting periods within annual reporting periods beginning one year after the annual reporting period in which the entity first applies the guidance in ASU 2014-09. The Company does not expect the adoption of ASU 2015-14 (or ASU 2014-09) to have a material impact on its consolidated financial statements. In August 2015, the FASB issued ASU 2015-15, “Interest – Imputation of Interest (Subtopic 835-30) – Presentation and Subsequent Measurement of Debt Issuance Costs Associated with Line-of-Credit Arrangements (Amendments to SEC Paragraphs Pursuant to Staff Announcement at June 18, 2015 EITF Meeting).” On April 7, 2015, the FASB issued ASU 2015-03, Interest—Imputation of Interest (Subtopic 835-30): Simplifying the Presentation of Debt Issuance Costs, which requires entities to present debt issuance costs related to a recognized debt liability as a direct deduction from the carrying amount of that debt liability. The guidance in ASU 2015-03 (see paragraph 835-30-45-1A) does not address presentation or subsequent measurement of debt issuance costs related to line-of-credit arrangements. Given the absence of authoritative guidance within ASU 2015-03 for debt issuance costs related to line-of-credit arrangements, the SEC staff stated that they would not object to an entity deferring and presenting debt issuance costs as an asset and subsequently amortizing the deferred debt issuance costs ratably over the term of the line-of-credit arrangement, regardless of whether there are any outstanding borrowings on the line-of-credit arrangement. ASU 2015-15 adds these SEC comments to the "S" section of the Codification. The adoption of ASU 2015-15 did not have a material impact on the Company’s consolidated financial statements. In September 2015, the FASB issued ASU 2015-16, “Business Combinations (Topic 805): Simplifying the Accounting for Measurement-Period Adjustments.” The amendments in ASU 2015-16 require that an acquirer recognize adjustments to estimated amounts that are identified during the measurement period in the reporting period in which the adjustment amounts are determined. The amendments require that the acquirer record, in the same period’s financial statements, the effect on earnings of changes in depreciation, amortization, or other income effects, if any, as a result of the change to the estimated amounts, calculated as if the accounting had been completed at the acquisition date. The amendments also require an entity to present separately on the face of the income statement or disclose in the notes the portion of the amount recorded in current-period earnings by line item that would have been recorded in previous reporting periods if the adjustment to the estimated amounts had been recognized as of the acquisition date. The amendments in this ASU are effective for public business entities for fiscal years beginning after December 15, 2015, including interim periods within those fiscal years. For all other entities, the amendments are effective for fiscal years beginning after December 15, 2016, and interim periods within fiscal years beginning after December 15, 2017. The amendments should be applied prospectively to adjustments to provisional amounts that occur after the effective date with earlier application permitted for financial statements that have not been issued. The Company does not expect the adoption of ASU 2015-16 to have a material impact on its consolidated financial statements. In January 2016, the FASB issued ASU 2016-01, “Financial Instruments – Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities.” The amendments in ASU 2016-01, among other things: 1) Requires equity investments (except those accounted for under the equity method of accounting, or those that result in consolidation of the investee) to be measured at fair value with changes in fair value recognized in net income. 2) Requires public business entities to use the exit price notion when measuring the fair value of financial instruments for disclosure purposes. 3) Requires separate presentation of financial assets and financial liabilities by measurement category and form of financial asset (i.e., securities or loans and receivables). 4) Eliminates the requirement for public business entities to disclose the method(s) and significant assumptions used to estimate the fair value that is required to be disclosed for financial instruments measured at amortized cost. The amendments in this ASU are effective for public companies for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. The Company is currently assessing the impact that ASU 2016-01 will have on its consolidated financial statements. In February 2016, the FASB issued ASU No. 2016-02, “Leases (Topic 842).” Among other things, in the amendments in ASU 2016-02, lessees will be required to recognize the following for all leases (with the exception of short-term leases) at the commencement date: (1) A lease liability, which is a lessee‘s obligation to make lease payments arising from a lease, measured on a discounted basis; and (2) A right-of-use asset, which is an asset that represents the lessee’s right to use, or control the use of, a specified asset for the lease term. Under the new guidance, lessor accounting is largely unchanged. Certain targeted improvements were made to align, where necessary, lessor accounting with the lessee accounting model and Topic 606, Revenue from Contracts with Customers. The amendments in this ASU are effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. Early application is permitted upon issuance. Lessees (for capital and operating leases) and lessors (for sales-type, direct financing, and operating leases) must apply a modified retrospective transition approach for leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements. The modified retrospective approach would not require any transition accounting for leases that expired before the earliest comparative period presented. Lessees and lessors may not apply a full retrospective transition approach. The Company is currently assessing the impact that ASU 2016-02 will have on its (consolidated) financial statements. |
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Organization and Summary of Significant Accounting Policies (Tables) |
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| Organization, Consolidation and Presentation of Financial Statements [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of Earnings Per Share, Basic and Diluted [Table Text Block] | The calculation for basic and diluted earnings per common share for the years ended December 31, are as follows:
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Business Combination (Tables) |
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| Business Combination, Description [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of Recognized Identified Assets Acquired and Liabilities Assumed [Table Text Block] | The accretion (amortization) of the acquisition accounting adjustments had the following impact on the financial statements:
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Securities (Tables) |
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| Marketable Securities [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Available-for-sale Securities [Table Text Block] | The table below presents the amortized cost, gross unrealized gains and losses, and fair value of securities available for sale at December 31, 2015 and 2014.
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| Held-to-maturity Securities [Table Text Block] | The table below presents the carry value, gross unrealized gains and losses, and fair value of securities held to maturity at December 31, 2015 and 2014.
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| Fair Value, by Balance Sheet Grouping [Table Text Block] | The amortized cost and fair value of securities available for sale as of December 31, 2015, by contractual maturity are shown below. Expected maturities may differ from contractual maturities because issuers may have the right to call or prepay obligations without penalties. They are as follows:
The carry value and fair value of securities held to maturity as of December 31, 2015, by contractual maturity are shown below. Expected maturities may differ from contractual maturities because issuers may have the right to call or prepay obligations without penalties. They are as follows:
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| Schedule of Unrealized Loss on Investments [Table Text Block] | Unrealized losses on investments at December 31, 2015 and 2014 were as follows:
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Loans, Allowance for Loan Losses and Credit Quality (Tables) |
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| Allowance For Loan And Lease Losses Provision For Net Loss [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of Accounts, Notes, Loans and Financing Receivable [Table Text Block] | Below is a table that exhibits the loans by segment at December 31, 2015 and 2014.
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| Schedule Of Loans Acquired In Business Combination [Table Text Block] | The loans acquired with evidence of deterioration in credit quality are accounted for under the guidance ASC 310-30. Information related to these loans is as follows:
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| Summary Of Changes To Accretable and Non Accretable Discounts [Table Text Block] | A summary of changes to the accretable yield and nonaccretable difference during 2015 and 2014 are as follows:
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| Financing Receivable Credit Quality Indicators [Table Text Block] | The following is the distribution of loans by credit quality and segment as of December 31, 2015 and 2014:
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| Past Due Financing Receivables [Table Text Block] | A summary of the balances of loans outstanding by days past due, including accruing and non-accruing loans by portfolio class as of December 31, 2015 and 2014 were as follows:
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| Schedule of Financing Receivables, Non Accrual Status [Table Text Block] | A summary of non-accrual loans by portfolio class as of December 31, 2015 and 2014 are as follows:
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| Impaired Financing Receivables [Table Text Block] | The following is a summary of impaired loans, excluding acquired impaired loans, presented by portfolio class as of December 31, 2015:
The following is a summary of impaired loans, excluding acquired impaired loans, presented by portfolio class as of December 31, 2014:
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| Troubled Debt Restructurings on Financing Receivables [Table Text Block] | The number and outstanding recorded investment of loans entered into under the terms of a TDR during the years ended December 31, 2014, including modifications of acquired impaired loans, by type of concession granted, are set forth in the following table. There were no TDRs as of December 31, 2015.
(1) The period end balances are inclusive of all partial paydowns and charge-offs since the modification date. Loans modified as TDRs that were fully paid down, charged-off, or foreclosed upon by period end are not reported. |
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| Summary Of Allowance For Loan Losses By Portfolio Segment [Table Text Block] | A summary of the allowance for loan losses by portfolio segment as of December 31, 2015 is as follows:
A summary of the allowance for loan losses by portfolio segment as of December 31, 2014 is as follows:
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Intangible Assets (Tables) |
12 Months Ended | |||||||||||||||||||||||||||||||
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Dec. 31, 2015 | ||||||||||||||||||||||||||||||||
| Goodwill and Intangible Assets Disclosure [Abstract] | ||||||||||||||||||||||||||||||||
| Schedule of Finite-Lived Intangible Assets [Table Text Block] | The core deposit intangible is amortized over the estimated life of the deposits using the straight-line method. A summary of the activity in this account is as follows:
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Premises and Equipment (Tables) |
12 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Dec. 31, 2015 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Property, Plant and Equipment [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Property, Plant and Equipment [Table Text Block] | A summary of the cost and accumulated depreciation of premises and equipment is as follows:
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| Schedule of Future Minimum Rental Payments for Operating Leases [Table Text Block] | Following is a schedule by year of future minimum rental payments required under operating leases that have initial or remaining non-cancelable lease terms in excess of one year as of December 31, 2015.
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Borrowings (Tables) |
12 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Dec. 31, 2015 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Advances from Federal Home Loan Banks [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of Federal Home Loan Bank, Advances, by Branch of FHLB Bank [Table Text Block] | Detail related to FHLB advances at December 31, 2015 and 2014 is as follows:
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Related Party Transactions(Tables) |
12 Months Ended | ||||||||||||||||||||||||||||||||||||
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Dec. 31, 2015 | |||||||||||||||||||||||||||||||||||||
| Related Party Transactions [Abstract] | |||||||||||||||||||||||||||||||||||||
| Schedule of Related Party Transactions [Table Text Block] | Executive officers, directors and their affiliates had borrowings of $5.2 million and $4.7 million and unfunded commitments of $539 thousand and $523 thousand with the Bank at December 31, 2015 and 2014.
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Time Deposits (Tables) |
12 Months Ended | |||||||||||||||||||||||||||||||||||||||||
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Dec. 31, 2015 | ||||||||||||||||||||||||||||||||||||||||||
| Time Deposits [Abstract] | ||||||||||||||||||||||||||||||||||||||||||
| Schedule Of Maturities Of Time Deposits [Table Text Block] | Remaining maturities on time deposits are as follows:
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Income Taxes (Tables) |
12 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Dec. 31, 2015 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Income Tax Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of Deferred Tax Assets and Liabilities [Table Text Block] | The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and deferred tax liabilities at December 31, 2015 and 2014, are presented below:
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| Schedule of Components of Income Tax Expense (Benefit) [Table Text Block] | The provision for income taxes charged to operations as of December 31, 2015 and 2014 consists of the following:
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Financial Instruments with Off-Balance Sheet Risk (Tables) |
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Dec. 31, 2015 | ||||||||||||||||||||||||||||||||||
| Fair Value Disclosures [Abstract] | ||||||||||||||||||||||||||||||||||
| Schedule of Fair Value, Off-balance Sheet Risks [Table Text Block] | At December 31, 2015 and 2014, the following financial instruments were outstanding whose contractual amounts represent credit risk:
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Minimum Regulatory Capital Requirements and Dividend Limitations (Tables) |
12 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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| Minimum Regulatory Capital Requirements and Dividend Limitations [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Minimum Regulatory Capital Requirements and Dividend Limitations [Table Text Block] | The Bank's actual capital amounts and ratios as of December 31, 2015 and 2014, are presented in the following table:
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Employee Benefit Plans (Tables) |
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| Employee Benefits and Share-based Compensation [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of Share-based Compensation, Stock Options, Activity [Table Text Block] | A summary of the Company’s option activity as of December 31, 2015 and 2014 and changes during the years then ended are presented in the following table:
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| Schedule of Share-based Payment Award, Stock Options, Valuation Assumptions [Table Text Block] | The fair value of each option granted is estimated on the date of grant using the “Black-Scholes Option Pricing” method with the following assumptions for the year ended December 31, 2015 and 2014:
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| Schedule of Nonvested Restricted Stock Units Activity [Table Text Block] | A summary of the status of the Company’s nonvested shares in relation to the Company’s restricted stock awards as of December 31, 2015 and 2014, and changes during the years ended December 31, 2015 and 2014 is presented below. The weighted average price is the weighted average fair value at the date of grant.
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Fair Value Measurements (Tables) |
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| Fair Value Disclosures [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of Carrying Values and Estimated Fair Values of Debt Instruments [Table Text Block] | The following table presents estimated fair values of the Company’s financial statements in accordance with authoritative accounting guidance:
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| Fair Value, Assets Measured on Recurring Basis [Table Text Block] | The following table presents the balances of financial assets measured at fair value on a recurring basis at December 31, 2015 and 2014:
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| Fair Value Measurements, Nonrecurring [Table Text Block] | The following tables summarize the Company’s assets that were measured at fair value on a nonrecurring basis at December 31, 2015 and 2014.
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| Fair Value Inputs, Assets, Quantitative Information [Table Text Block] | The following table displays quantitative information about level 3 fair value measurements for financial instruments measured at fair value on a non-recurring basis at December 31, 2015 and 2014.
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Other Real Estate Owned (Tables) |
12 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Dec. 31, 2015 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Other Real Estate Owned [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Other Real Estate, Roll Forward [Table Text Block] | The table below presents a summary of the activity related to other real estate owned:
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Accumulated Other Comprehensive (Loss) (Tables) |
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Dec. 31, 2015 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Statement of Comprehensive Income [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Comprehensive Income (Loss) [Table Text Block] | The changes in accumulated other comprehensive loss for years ended December 31, 2015 and 2014 are summarized as follows:
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| Schedule Of Amounts Reclassified From Accumulated Other Comprehensive Income Loss [Table Text Block] | The following table presents information on amounts reclassified out of accumulated other comprehensive income (loss), by category, during the periods indicated:
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Parent Company - Condensed Financial Statements (Tables) |
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Dec. 31, 2015 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Cash Dividends Paid to Parent Company [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Condensed Balance Sheet [Table Text Block] | Cordia Bancorp, Inc. owns 100.0% of the outstanding shares of the Bank of Virginia at December 31, 2015. Condensed financial statements of Cordia Bancorp, Inc. follow: Condensed Balance Sheets December 31, 2015 and 2014
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| Condensed Income Statement [Table Text Block] | Condensed Statements of Operations For the years ended December 31, 2015 and 2014
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| Condensed Cash Flow Statement [Table Text Block] | Condensed Statements of Cash Flows For the years ended December 31, 2015 and 2014
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Subsequent Events (Tables) |
12 Months Ended | |||||||||||||||||||||||||||||||||||||||||
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Dec. 31, 2015 | ||||||||||||||||||||||||||||||||||||||||||
| Subsequent Events [Abstract] | ||||||||||||||||||||||||||||||||||||||||||
| Schedule Of Future Minimum Rental Payments Under Renewal For Operating Leases [Table Text Block] | In February 2016, the Chester branch lease was renewed for an additional five years. Future minimum rental payments required under this renewal are as follows:
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Organization and Summary of Significant Accounting Policies (Details) - USD ($) $ / shares in Units, $ in Thousands |
12 Months Ended | |
|---|---|---|
Dec. 31, 2015 |
Dec. 31, 2014 |
|
| Net income (loss) | $ 590 | $ (412) |
| Weighted average common shares outstanding, basic | 6,572,097 | 4,722,556 |
| Dilutive effect of stock options | 0 | 0 |
| Weighted average common shares outstanding, diluted | 6,572,097 | 4,722,556 |
| Basic income net (loss) per common share | $ 0.09 | $ (0.09) |
| Diluted income (loss) per common share | $ 0.09 | $ (0.09) |
Business Combination (Details) - USD ($) $ in Thousands |
12 Months Ended | |
|---|---|---|
Dec. 31, 2015 |
Dec. 31, 2014 |
|
| Net impact to net income | $ 359 | $ 291 |
| Loans [Member] | ||
| Net impact to net income | 114 | 225 |
| Premises and equipment [Member] | ||
| Net impact to net income | 9 | 8 |
| Core Deposit Intangible [Member] | ||
| Net impact to net income | (36) | (36) |
| Building Lease Obligations [Member] | ||
| Net impact to net income | $ 272 | $ 94 |
Business Combination (Details Textual) - USD ($) $ in Thousands |
3 Months Ended | |||
|---|---|---|---|---|
Dec. 10, 2010 |
Jun. 30, 2015 |
Dec. 31, 2015 |
Mar. 29, 2013 |
|
| Goodwill | $ 5,900 | |||
| Acquisition of Leased Property, Gains due to Reversal of Fair Value Discount | $ 225 | |||
| Bank Of Virginia [Member] | ||||
| Equity Method Investment, Ownership Percentage | 59.80% | 100.00% | ||
| Stock Issued During Period, Shares, New Issues | 1,355,263 | |||
| Business Acquisition Share Issued Per Share Of Minority Share Of Acquiree | 0.664 |
Securities (Details) - USD ($) $ in Thousands |
12 Months Ended | |
|---|---|---|
Dec. 31, 2015 |
Dec. 31, 2014 |
|
| Schedule of Available-for-sale Securities [Line Items] | ||
| Amortized Cost | $ 46,673 | $ 53,665 |
| Gross Unrealized Gains | 8 | 22 |
| Gross Unrealized Losses | (461) | (204) |
| Fair Value | 46,220 | 53,483 |
| U.S. Government Agencies [Member] | ||
| Schedule of Available-for-sale Securities [Line Items] | ||
| Amortized Cost | 2,144 | 3,735 |
| Gross Unrealized Gains | 5 | 1 |
| Gross Unrealized Losses | (10) | (17) |
| Fair Value | 2,139 | 3,719 |
| Agency Guaranteed Mortgage- Backed Securities [Member] | ||
| Schedule of Available-for-sale Securities [Line Items] | ||
| Amortized Cost | 44,529 | 49,930 |
| Gross Unrealized Gains | 3 | 21 |
| Gross Unrealized Losses | (451) | (187) |
| Fair Value | $ 44,081 | $ 49,764 |
Securities (Details 1) - USD ($) $ in Thousands |
12 Months Ended | |
|---|---|---|
Dec. 31, 2015 |
Dec. 31, 2014 |
|
| Carry Value | $ 25,500 | $ 20,716 |
| Gross Unrealized Gains | 230 | 333 |
| Gross Unrealized Losses | (36) | (2) |
| Fair Value | 25,694 | 21,047 |
| Agency Guaranteed Mortgage- Backed Securities [Member] | ||
| Carry Value | 25,500 | 20,716 |
| Gross Unrealized Gains | 230 | 333 |
| Gross Unrealized Losses | (36) | (2) |
| Fair Value | $ 25,694 | $ 21,047 |
Securities (Details 2) - USD ($) $ in Thousands |
Dec. 31, 2015 |
Dec. 31, 2014 |
|---|---|---|
| Available For Sale Securities, Amortized Cost | ||
| Over one year within five years | $ 43 | |
| Over five years within ten years | 2,144 | |
| Over ten years | 44,486 | |
| Total | 46,673 | |
| Available For Sale Securities, Fair Value | ||
| Over one year within five years | 43 | |
| Over five years within ten years | 2,139 | |
| Over ten years | 44,038 | |
| Total | 46,220 | $ 53,483 |
| Held-to-maturity Securities, Carry Value | ||
| Over five years within ten years | 3,633 | |
| Over ten years | 21,867 | |
| Total | 25,500 | 20,716 |
| Held-to-maturity Securities, Fair Value | ||
| Over five years within ten years | 3,729 | |
| Over ten years | 21,965 | |
| Total | $ 25,694 | $ 21,047 |
Securities (Details Textual) - USD ($) $ in Thousands |
12 Months Ended | |
|---|---|---|
Dec. 31, 2015 |
Dec. 31, 2014 |
|
| Pledged Financial Instruments, Not Separately Reported, Mortgage-Related Securities Available-for-sale or Held-for-investment | $ 13,800 | $ 7,800 |
| Available-for-sale Securities, Gross Realized Gains | 133 | 181 |
| Available-for-sale Securities, Gross Realized Losses | 4 | |
| Held-to-maturity Securities | 25,500 | 20,716 |
| Marketable Securities, Current, Total | 71,700 | 74,200 |
| Available-for-sale Securities | 46,220 | 53,483 |
| Proceeds from Sale of Available-for-sale Securities, Debt | 19,800 | 23,400 |
| Federal Home Loan Bank Advances | 16,800 | 9,600 |
| Available-for-sale Securities, Continuous Unrealized Loss Position, Aggregate Loss, Total | $ 497 | $ 206 |
Loans, Allowance for Loan Losses and Credit Quality (Details 1) - USD ($) $ in Thousands |
Dec. 31, 2015 |
Dec. 31, 2014 |
Dec. 31, 2013 |
|---|---|---|---|
| Contract principal balance | $ 4,779 | $ 7,178 | |
| Accretable yield | (1) | (42) | |
| Nonaccretable difference | 0 | (5) | $ (61) |
| Carrying value of loans | $ 4,778 | $ 7,131 |
Loans, Allowance for Loan Losses and Credit Quality (Details 2) - USD ($) $ in Thousands |
12 Months Ended | |
|---|---|---|
Dec. 31, 2015 |
Dec. 31, 2014 |
|
| Accretable Yield Beginning balance | $ 42 | $ 62 |
| Accretable Yield Charge-offs related to loans covered by ASC 310-30 | 0 | |
| Accretable Yield Transfers | 5 | 0 |
| Accretable Yield Accretion | (46) | (20) |
| Accretable Yield Ending balance | 1 | 42 |
| Nonaccretable Discount Beginning balance | 5 | 61 |
| Nonaccretable Discount Charge-offs related to loans covered by ASC 310-30 | (56) | |
| Nonaccretable Discount Transfers | (5) | 0 |
| Nonaccretable Discount Accretion | 0 | 0 |
| Nonaccretable Discount Ending balance | $ 0 | $ 5 |
Loans, Allowance for Loan Losses and Credit Quality (Details 5) - USD ($) $ in Thousands |
Dec. 31, 2015 |
Dec. 31, 2014 |
|---|---|---|
| Total non-accrual loans | $ 1,834 | $ 2,221 |
| Other [Member] | ||
| Total non-accrual loans | 0 | 0 |
| Non-accrual troubled debt restructurings included above [Member] | ||
| Total non-accrual loans | 0 | 0 |
| Non-accrual purchased credit impaired loans included above [Member] | ||
| Total non-accrual loans | 1,370 | 1,741 |
| Commercial Real Estate [Member] | Acquisition, Development, and Construction [Member] | ||
| Total non-accrual loans | 152 | 548 |
| Commercial Real Estate [Member] | Non-Owner Occupied [Member] | ||
| Total non-accrual loans | 0 | |
| Commercial Real Estate [Member] | Owner Occupied [Member] | ||
| Total non-accrual loans | 1,388 | 1,198 |
| Commercial and Industrial [Member] | ||
| Total non-accrual loans | 5 | 121 |
| Guaranteed Student Loans [Member] | ||
| Total non-accrual loans | 0 | 0 |
| Consumer [Member] | Residential Mortgage [Member] | ||
| Total non-accrual loans | 0 | 44 |
| Consumer [Member] | Home Equity Lines of Credit [Member] | ||
| Total non-accrual loans | $ 289 | $ 310 |
Loans, Allowance for Loan Losses and Credit Quality (Details 7) $ in Thousands |
12 Months Ended | |||
|---|---|---|---|---|
|
Dec. 31, 2014
USD ($)
| ||||
| Number of loans | 2 | |||
| Rate modification | $ 0 | |||
| Term extension | 1,107 | |||
| Pre-modification recorded investment | 1,107 | |||
| Post-modification recorded investment | $ 874 | [1] | ||
| Commercial Real Estate [Member] | Non Owner Occupied [Member] | ||||
| Number of loans | 1 | |||
| Rate modification | $ 0 | |||
| Term extension | 595 | |||
| Pre-modification recorded investment | 595 | |||
| Post-modification recorded investment | $ 417 | [1] | ||
| Commercial and Industrial [Member] | ||||
| Number of loans | 1 | |||
| Rate modification | $ 0 | |||
| Term extension | 512 | |||
| Pre-modification recorded investment | 512 | |||
| Post-modification recorded investment | $ 457 | [1] | ||
| ||||
Loans, Allowance for Loan Losses and Credit Quality (Details 8) - USD ($) $ in Thousands |
12 Months Ended | |||
|---|---|---|---|---|
Dec. 31, 2015 |
Dec. 31, 2014 |
Dec. 31, 2015 |
Dec. 31, 2014 |
|
| Beginning balance | $ 1,089 | $ 1,489 | ||
| Charge-offs | (589) | (964) | ||
| Recoveries | 616 | 259 | ||
| (Charge-offs) recoveries | 27 | (705) | ||
| Provision (recovery) | (293) | 305 | ||
| Ending balance | 823 | 1,089 | ||
| Allowance for loan losses for loans | ||||
| Individually evaluated for impairment | $ 16 | $ 143 | ||
| Collectively evaluated for impairment | 807 | 856 | ||
| Ending balance | 1,089 | 1,089 | 823 | 1,089 |
| Gross loan balances | ||||
| Individually evaluated for impairment | 588 | 677 | ||
| Collectively evaluated for impairment | 240,667 | 205,151 | ||
| Loans acquired with deteriorated credit quality | 246,033 | 212,959 | ||
| Ending balance | 246,033 | 212,959 | ||
| Receivables Acquired with Deteriorated Credit Quality [Member] | ||||
| Allowance for loan losses for loans | ||||
| Loans acquired with deteriorated credit quality | 0 | 90 | ||
| Gross loan balances | ||||
| Loans acquired with deteriorated credit quality | 4,778 | 7,131 | ||
| Commercial Real Estate [Member] | Acquisition, Development, and Construction [Member] | ||||
| Beginning balance | 146 | 300 | ||
| Charge-offs | (127) | (6) | ||
| Recoveries | 0 | 33 | ||
| (Charge-offs) recoveries | (127) | 27 | ||
| Provision (recovery) | 70 | (181) | ||
| Ending balance | 89 | 146 | ||
| Allowance for loan losses for loans | ||||
| Individually evaluated for impairment | 0 | 0 | ||
| Collectively evaluated for impairment | 89 | 56 | ||
| Ending balance | 146 | 146 | 89 | 146 |
| Gross loan balances | ||||
| Individually evaluated for impairment | 152 | 267 | ||
| Collectively evaluated for impairment | 1,461 | 934 | ||
| Loans acquired with deteriorated credit quality | 2,168 | 2,159 | ||
| Ending balance | 2,168 | 2,159 | ||
| Commercial Real Estate [Member] | Acquisition, Development, and Construction [Member] | Receivables Acquired with Deteriorated Credit Quality [Member] | ||||
| Allowance for loan losses for loans | ||||
| Loans acquired with deteriorated credit quality | 0 | 90 | ||
| Gross loan balances | ||||
| Loans acquired with deteriorated credit quality | 555 | 958 | ||
| Commercial Real Estate [Member] | Non-Owner Occupied [Member] | ||||
| Beginning balance | 97 | 39 | ||
| Charge-offs | 0 | (114) | ||
| Recoveries | 57 | |||
| (Charge-offs) recoveries | 0 | (57) | ||
| Provision (recovery) | 60 | 115 | ||
| Ending balance | 157 | 97 | ||
| Allowance for loan losses for loans | ||||
| Individually evaluated for impairment | 0 | 0 | ||
| Collectively evaluated for impairment | 157 | 97 | ||
| Ending balance | 97 | 97 | 157 | 97 |
| Gross loan balances | ||||
| Individually evaluated for impairment | 0 | 0 | ||
| Collectively evaluated for impairment | 56,667 | 50,057 | ||
| Loans acquired with deteriorated credit quality | 58,044 | 51,512 | ||
| Ending balance | 58,044 | 51,512 | ||
| Commercial Real Estate [Member] | Non-Owner Occupied [Member] | Receivables Acquired with Deteriorated Credit Quality [Member] | ||||
| Allowance for loan losses for loans | ||||
| Loans acquired with deteriorated credit quality | 0 | 0 | ||
| Gross loan balances | ||||
| Loans acquired with deteriorated credit quality | 1,377 | 1,455 | ||
| Commercial Real Estate [Member] | Owner Occupied [Member] | ||||
| Beginning balance | 149 | 322 | ||
| Charge-offs | 0 | 0 | ||
| Recoveries | 241 | 49 | ||
| (Charge-offs) recoveries | 241 | 49 | ||
| Provision (recovery) | (308) | (222) | ||
| Ending balance | 82 | 149 | ||
| Allowance for loan losses for loans | ||||
| Individually evaluated for impairment | 0 | 0 | ||
| Collectively evaluated for impairment | 82 | 149 | ||
| Ending balance | 149 | 149 | 82 | 149 |
| Gross loan balances | ||||
| Individually evaluated for impairment | 151 | 0 | ||
| Collectively evaluated for impairment | 43,190 | 46,382 | ||
| Loans acquired with deteriorated credit quality | 45,690 | 49,582 | ||
| Ending balance | 45,690 | 49,582 | ||
| Commercial Real Estate [Member] | Owner Occupied [Member] | Receivables Acquired with Deteriorated Credit Quality [Member] | ||||
| Allowance for loan losses for loans | ||||
| Loans acquired with deteriorated credit quality | 0 | 0 | ||
| Gross loan balances | ||||
| Loans acquired with deteriorated credit quality | 2,349 | 3,200 | ||
| Commercial and Industrial [Member] | ||||
| Beginning balance | 357 | 377 | ||
| Charge-offs | (109) | (485) | ||
| Recoveries | 361 | 91 | ||
| (Charge-offs) recoveries | 252 | (394) | ||
| Provision (recovery) | (497) | 374 | ||
| Ending balance | 112 | 357 | ||
| Allowance for loan losses for loans | ||||
| Individually evaluated for impairment | 0 | 110 | ||
| Collectively evaluated for impairment | 112 | 247 | ||
| Ending balance | 357 | 357 | 112 | 357 |
| Gross loan balances | ||||
| Individually evaluated for impairment | 5 | 142 | ||
| Collectively evaluated for impairment | 34,814 | 23,042 | ||
| Loans acquired with deteriorated credit quality | 34,819 | 24,153 | ||
| Ending balance | 34,819 | 24,153 | ||
| Commercial and Industrial [Member] | Receivables Acquired with Deteriorated Credit Quality [Member] | ||||
| Allowance for loan losses for loans | ||||
| Loans acquired with deteriorated credit quality | 0 | 0 | ||
| Gross loan balances | ||||
| Loans acquired with deteriorated credit quality | 0 | 969 | ||
| Guaranteed Student Loans [Member] | ||||
| Beginning balance | 144 | 268 | ||
| Charge-offs | (331) | (359) | ||
| Recoveries | 0 | 0 | ||
| (Charge-offs) recoveries | (331) | (359) | ||
| Provision (recovery) | 234 | 235 | ||
| Ending balance | 47 | 144 | ||
| Allowance for loan losses for loans | ||||
| Individually evaluated for impairment | 0 | 0 | ||
| Collectively evaluated for impairment | 47 | 144 | ||
| Ending balance | 144 | 144 | 47 | 144 |
| Gross loan balances | ||||
| Individually evaluated for impairment | 0 | 0 | ||
| Collectively evaluated for impairment | 53,847 | 64,870 | ||
| Loans acquired with deteriorated credit quality | 53,847 | 64,870 | ||
| Ending balance | 53,847 | 64,870 | ||
| Guaranteed Student Loans [Member] | Receivables Acquired with Deteriorated Credit Quality [Member] | ||||
| Allowance for loan losses for loans | ||||
| Loans acquired with deteriorated credit quality | 0 | 0 | ||
| Gross loan balances | ||||
| Loans acquired with deteriorated credit quality | 0 | 0 | ||
| Consumer [Member] | Residential Mortgage [Member] | ||||
| Beginning balance | 98 | 120 | ||
| Charge-offs | 0 | 0 | ||
| Recoveries | 5 | 4 | ||
| (Charge-offs) recoveries | 5 | 4 | ||
| Provision (recovery) | (44) | (26) | ||
| Ending balance | 59 | 98 | ||
| Allowance for loan losses for loans | ||||
| Individually evaluated for impairment | 0 | 0 | ||
| Collectively evaluated for impairment | 59 | 98 | ||
| Ending balance | 98 | 98 | 59 | 98 |
| Gross loan balances | ||||
| Individually evaluated for impairment | 41 | 0 | ||
| Collectively evaluated for impairment | 17,962 | 8,192 | ||
| Loans acquired with deteriorated credit quality | 18,140 | 8,377 | ||
| Ending balance | 18,140 | 8,377 | ||
| Consumer [Member] | Residential Mortgage [Member] | Receivables Acquired with Deteriorated Credit Quality [Member] | ||||
| Allowance for loan losses for loans | ||||
| Loans acquired with deteriorated credit quality | 0 | 0 | ||
| Gross loan balances | ||||
| Loans acquired with deteriorated credit quality | 137 | 185 | ||
| Consumer [Member] | Home Equity Lines of Credit [Member] | ||||
| Beginning balance | 76 | 20 | ||
| Charge-offs | (20) | 0 | ||
| Recoveries | 9 | 4 | ||
| (Charge-offs) recoveries | (11) | 4 | ||
| Provision (recovery) | (4) | 52 | ||
| Ending balance | 61 | 76 | ||
| Allowance for loan losses for loans | ||||
| Individually evaluated for impairment | 16 | 33 | ||
| Collectively evaluated for impairment | 45 | 43 | ||
| Ending balance | 76 | 76 | 61 | 76 |
| Gross loan balances | ||||
| Individually evaluated for impairment | 239 | 268 | ||
| Collectively evaluated for impairment | 10,004 | 10,442 | ||
| Loans acquired with deteriorated credit quality | 10,603 | 11,074 | ||
| Ending balance | 10,603 | 11,074 | ||
| Consumer [Member] | Home Equity Lines of Credit [Member] | Receivables Acquired with Deteriorated Credit Quality [Member] | ||||
| Allowance for loan losses for loans | ||||
| Loans acquired with deteriorated credit quality | 0 | 0 | ||
| Gross loan balances | ||||
| Loans acquired with deteriorated credit quality | 360 | 364 | ||
| Consumer [Member] | Other Credit Derivatives [Member] | ||||
| Beginning balance | 22 | 43 | ||
| Charge-offs | (2) | 0 | ||
| Recoveries | 0 | 21 | ||
| (Charge-offs) recoveries | (2) | 21 | ||
| Provision (recovery) | 196 | (42) | ||
| Ending balance | 216 | 22 | ||
| Allowance for loan losses for loans | ||||
| Individually evaluated for impairment | 0 | 0 | ||
| Collectively evaluated for impairment | 216 | 22 | ||
| Ending balance | $ 22 | $ 22 | 216 | 22 |
| Gross loan balances | ||||
| Individually evaluated for impairment | 0 | 0 | ||
| Collectively evaluated for impairment | 22,722 | 1,232 | ||
| Loans acquired with deteriorated credit quality | 22,722 | 1,232 | ||
| Ending balance | 22,722 | 1,232 | ||
| Consumer [Member] | Other Credit Derivatives [Member] | Receivables Acquired with Deteriorated Credit Quality [Member] | ||||
| Allowance for loan losses for loans | ||||
| Loans acquired with deteriorated credit quality | 0 | 0 | ||
| Gross loan balances | ||||
| Loans acquired with deteriorated credit quality | $ 0 | $ 0 | ||
Loans, Allowance for Loan Losses and Credit Quality (Details Textual) - USD ($) $ in Thousands |
12 Months Ended | |
|---|---|---|
Dec. 31, 2015 |
Dec. 31, 2014 |
|
| Financing Receivable, Modifications, Recorded Investment | $ 1,300 | |
| Percentage Of Principal And Interest On Guaranteed Student Loans | 98.00% | |
| Loans Receivable Accruing Troubled Debt Restructured Loans | 1,300 | |
| Deferred Loan Costs, Net | $ 1,700 | 1,200 |
| Purchased Performing Loans | $ 6,900 | 9,000 |
| Percentage Of Principal And Interest Non Guaranteed Student Loans | 2.00% | |
| Guaranteed Student Loans [Member] | ||
| Loan Premiums | $ 827 | $ 931 |
Intangible Assets (Details) - USD ($) $ in Thousands |
12 Months Ended | |
|---|---|---|
Dec. 31, 2015 |
Dec. 31, 2014 |
|
| Beginning Balance | $ 104 | $ 139 |
| Amortization | (36) | (35) |
| Ending Balance | $ 68 | $ 104 |
Intangible Assets (Details Textual) $ in Thousands |
12 Months Ended |
|---|---|
|
Dec. 31, 2015
USD ($)
| |
| Finite-lived Intangible Assets Acquired | $ 249 |
| Finite-Lived Intangible Assets, Amortization Expense, Next Twelve Months | 35 |
| Finite-Lived Intangible Assets, Amortization Expense, Year Two | $ 33 |
Premises and Equipment (Details) - USD ($) $ in Thousands |
Dec. 31, 2015 |
Dec. 31, 2014 |
|---|---|---|
| Property, Plant and Equipment [Line Items] | ||
| Total premises and equipment | $ 7,538 | $ 5,693 |
| Less: accumulated depreciation and amortization | (1,558) | (1,261) |
| Total premises and equipment, net | 5,980 | 4,432 |
| Land | ||
| Property, Plant and Equipment [Line Items] | ||
| Total premises and equipment | 2,305 | 1,568 |
| Buildings and improvements | ||
| Property, Plant and Equipment [Line Items] | ||
| Total premises and equipment | 3,656 | 2,640 |
| Furniture, fixtures and equipment | ||
| Property, Plant and Equipment [Line Items] | ||
| Total premises and equipment | 1,174 | 1,082 |
| Leasehold improvements | ||
| Property, Plant and Equipment [Line Items] | ||
| Total premises and equipment | 369 | 369 |
| Automobiles | ||
| Property, Plant and Equipment [Line Items] | ||
| Total premises and equipment | $ 34 | $ 34 |
Premises and Equipment (Details 1) $ in Thousands |
Dec. 31, 2015
USD ($)
|
|---|---|
| Property, Plant and Equipment [Line Items] | |
| 2016 | $ 101 |
| 2017 | 96 |
| 2018 | 99 |
| 2019 | 8 |
| Total minimum payments required | $ 304 |
Premises and Equipment (Details Textual) - USD ($) $ in Thousands |
12 Months Ended | |
|---|---|---|
Dec. 31, 2015 |
Dec. 31, 2014 |
|
| Property, Plant and Equipment [Line Items] | ||
| Business Combination, Contingent Consideration, Liability | $ 822 | |
| Operating Leases, Rent Expense, Net, Total | 17 | $ 227 |
| Depreciation | $ 306 | $ 294 |
Borrowings (Details) - USD ($) $ in Thousands |
Dec. 31, 2015 |
Dec. 31, 2014 |
|---|---|---|
| FHLB Advance | $ 30,000 | $ 25,000 |
| Federal Home Loan Bank Advances [Member] | ||
| FHLB Advance | $ 10,000 | 10,000 |
| Maturity date | 2019 | |
| Federal Home Loan Bank Advances Two [Member] | ||
| FHLB Advance | $ 10,000 | 10,000 |
| Maturity date | 2016 | |
| Federal Home Loan Bank Advances Three [Member] | ||
| FHLB Advance | $ 2,500 | 2,500 |
| Maturity date | 2018 | |
| Federal Home Loan Bank Advances Four [Member] | ||
| FHLB Advance | $ 2,500 | 2,500 |
| Maturity date | 2019 | |
| Federal Home Loan Bank Advances Five [Member] | ||
| FHLB Advance | $ 5,000 | $ 0 |
| Maturity date | 2018 |
Borrowings (Details Textual) $ in Millions |
Dec. 31, 2015
USD ($)
|
|---|---|
| FederalHomeLoanBankAdvancesGeneralDebtObligationsDisclosuresAmountOfAvailableUnusedFunds | $ 14.1 |
| Federal Home Loan Bank, Advances, General Debt Obligations, Disclosures, Collateral Pledged | $ 39.7 |
| Federal Home Loan Bank Advances [Member] | |
| Federal Home Loan Bank, Advances, Branch of FHLB Bank, Interest Rate | 1.62% |
| Federal Home Loan Bank Advances Two [Member] | |
| Federal Home Loan Bank, Advances, Branch of FHLB Bank, Interest Rate | 0.615% |
| Federal Home Loan Bank Advances Three [Member] | |
| Federal Home Loan Bank, Advances, Branch of FHLB Bank, Interest Rate | 1.63% |
| Federal Home Loan Bank Advances Four [Member] | |
| Federal Home Loan Bank, Advances, Branch of FHLB Bank, Interest Rate | 1.92% |
| Federal Home Loan Bank Advances Five [Member] | |
| Federal Home Loan Bank, Advances, Branch of FHLB Bank, Interest Rate | 1.158% |
| Unsecured Line Of Credit [Member] | |
| Line of Credit Facility, Amount Outstanding | $ 4.5 |
Related Party Transactions (Details) - USD ($) $ in Thousands |
12 Months Ended | |
|---|---|---|
Dec. 31, 2015 |
Dec. 31, 2014 |
|
| Related Party Transaction [Line Items] | ||
| Related Party Borrowings at Beginning Balance | $ 4,700 | $ 1,227 |
| New loans/advances | 1,285 | 4,355 |
| Repayments | (745) | (882) |
| Related Party Borrowings at Ending Balance | $ 5,240 | $ 4,700 |
Related Party Transactions (Details Textual) - USD ($) $ in Thousands |
Dec. 31, 2015 |
Dec. 31, 2014 |
Dec. 31, 2013 |
|---|---|---|---|
| Related Party Transactions [Line Items] | |||
| Due from Related Parties | $ 5,240 | $ 4,700 | $ 1,227 |
| Deposits, Total | 290,044 | 265,603 | |
| Unfunded Commitments [Member] | |||
| Related Party Transactions [Line Items] | |||
| Due from Related Parties | 539 | 523 | |
| Cheif Executive Officers, Directors And Their Affiliates [Member] | |||
| Related Party Transactions [Line Items] | |||
| Due from Related Parties | 5,200 | 4,700 | |
| Deposits, Total | $ 2,600 | $ 2,900 |
Time Deposits (Details) - USD ($) $ in Thousands |
Dec. 31, 2015 |
Dec. 31, 2014 |
|---|---|---|
| 2016 | $ 81,699 | |
| 2017 | 27,963 | |
| 2018 | 25,356 | |
| 2019 | 4,413 | |
| 2020 | 14,587 | |
| Balance at December 31, 2015 | $ 154,018 | $ 151,550 |
Time Deposits (Details Textual) - USD ($) $ in Millions |
Dec. 31, 2015 |
Dec. 31, 2014 |
|---|---|---|
| Time Deposits, $250,000 or More, Total | $ 13.7 | $ 9.7 |
| Interest-bearing Domestic Deposit, Brokered | $ 35.2 | $ 35.8 |
Income Taxes (Details) - USD ($) $ in Thousands |
Dec. 31, 2015 |
Dec. 31, 2014 |
|---|---|---|
| Deferred tax assets | ||
| Unrealized securites losses | $ 235 | $ 159 |
| Acquistion accounting adjustments | 90 | 271 |
| Other real estate owned | 96 | 97 |
| Net operating loss carryforward | 6,385 | 6,372 |
| Accrued vacation | 26 | 22 |
| Non-accrual loan interest | 89 | 92 |
| Bank premises and equipment | 8 | 0 |
| Stock compensation | 52 | 34 |
| Other | 1 | 2 |
| Total deferred tax assets | 6,982 | 7,049 |
| Deferred tax liabilities | ||
| Allowance for loan losses | (903) | (804) |
| Bank premises and equipment | 0 | (32) |
| Total deferred tax liabilities | (903) | (836) |
| Net deferred tax asset | 6,079 | 6,213 |
| Less: valuation allowance | (6,079) | (6,213) |
| Deferred Tax Assets, Net of Valuation Allowance, Total | $ 0 | $ 0 |
Income Taxes (Details 1) - USD ($) $ in Thousands |
12 Months Ended | |
|---|---|---|
Dec. 31, 2015 |
Dec. 31, 2014 |
|
| Current tax expense | $ 0 | $ 0 |
| Deferred tax (benefit) | 210 | 662 |
| Less change in valuation allowance allocable to securities | (76) | (17) |
| Deferred tax (benefit) | 134 | 645 |
| Change in valuation allowance | (134) | (645) |
| Total tax expense | $ 0 | $ 0 |
Income Taxes (Details Textual) - USD ($) $ in Thousands |
Dec. 31, 2015 |
Dec. 31, 2014 |
|---|---|---|
| Operating Loss Carryforwards | $ 18,700 | $ 254 |
| Deferred Tax Assets Reserve Valuation Allowance | $ 6,100 |
Financial Instruments with Off-Balance Sheet Risk (Details) - USD ($) $ in Thousands |
Dec. 31, 2015 |
Dec. 31, 2014 |
|---|---|---|
| Fair Value, Off-balance Sheet Risks, Disclosure Information [Line Items] | ||
| Fair Value Disclosure, Off-balance Sheet Risks, Face Amount, Liability | $ 16,578 | $ 15,645 |
| Unused Commitments And Commitments To Fund [Member] | ||
| Fair Value, Off-balance Sheet Risks, Disclosure Information [Line Items] | ||
| Fair Value Disclosure, Off-balance Sheet Risks, Face Amount, Liability | 16,133 | 15,110 |
| Commercial And Standby Letters Of Credit | ||
| Fair Value, Off-balance Sheet Risks, Disclosure Information [Line Items] | ||
| Fair Value Disclosure, Off-balance Sheet Risks, Face Amount, Liability | $ 445 | $ 535 |
Financial Instruments with Off-Balance Sheet Risk (Details Textual) - USD ($) $ in Millions |
Dec. 31, 2015 |
Dec. 31, 2014 |
|---|---|---|
| Cash, Uninsured Amount | $ 10.6 | $ 6.0 |
Minimum Regulatory Capital Requirements and Dividend Limitations (Details) - USD ($) $ in Thousands |
Dec. 31, 2015 |
Dec. 31, 2014 |
|||
|---|---|---|---|---|---|
| Minimum Regulatory Capital Requirements And Dividend Limitations [Line Items] | |||||
| Capital To Risk Weighted Assets, Actual Capital, Ratio | 13.43% | 15.52% | |||
| Tier One Capital To Risk Weighted Assets, Actual Capital, Ratio | 13.04% | 14.89% | |||
| Common Equity Tier One Capital To Risk Weighted Assets, Actual Capital, Ratio | [1] | 13.04% | |||
| Tier One Capital To Risk Average Assets, Actual Capital, Ratio | 7.82% | 8.24% | |||
| Capital To Risk Weighted Assets, Minimum Capital Requirement, Ratio | 8.00% | 8.00% | |||
| Tier One Capital To Risk Weighted Assets, Minimum Capital Requirement, Ratio | 6.00% | 4.00% | |||
| Common Equity Tier One Capital To Risk Weighted Assets, Minimum Capital Requirement, Ratio | [1] | 4.50% | |||
| Tier One Capital To Risk Average Assets, Minimum Capital Requirement, Ratio | 4.00% | 4.00% | |||
| Capital To Risk Weighted Assets, Minimum To Be Well Capitalized Under Prompt Corrective Action, Ratio | 10.00% | 10.00% | |||
| Tier One Capital To Risk Weighted Assets, Minimum To Be Well Capitalized Under Prompt Corrective Action, Ratio | 8.00% | 6.00% | |||
| Common Equity Tier One Capital To Risk Weighted Assets, Minimum To Be Well Capitalized Under Prompt Corrective Action, Ratio | [1] | 6.50% | |||
| Tier One Capital To Risk Average Assets, Minimum To Be Well Capitalized Under Prompt Corrective Action, Ratio | 5.00% | 5.00% | |||
| Capital To Risk Weighted Assets, Actual Capital, Amount | $ 28,280 | $ 27,074 | |||
| Tier One Capital To Risk Weighted Assets, Actual Capital, Amount | 27,457 | 25,985 | |||
| Common Equity Tier One Capital To Risk Weighted Assets, Actual Capital, Amount | [1] | 27,457 | |||
| Tier One Capital To Risk Average Assets, Actual Capital, Amount | 27,457 | 25,985 | |||
| Capital To Risk Weighted Assets, Minimum Capital Requirement, Amount | 16,842 | 13,958 | |||
| Tier One Capital To Risk Weighted Assets, Minimum Capital Requirement, Amount | 12,631 | 6,979 | |||
| Common Equity Tier One Capital To Risk Weighted Assets, Minimum Capital Requirement, Amount | [1] | 9,473 | |||
| Tier One Capital To Risk Average Assets, Minimum Capital Requirement, Amount | 14,049 | 12,610 | |||
| Capital To Risk Weighted Assets, Minimum To Be Well Capitalized Under Prompt Corrective Action, Amount | 21,052 | 17,448 | |||
| Tier One Capital To Risk Weighted Assets, Minimum To Be Well Capitalized Under Prompt Corrective Action, Amount | 16,842 | 10,469 | |||
| Common Equity Tier One Capital To Risk Weighted Assets, Minimum To Be Well Capitalized Under Prompt Corrective Action, Amount | [1] | 13,684 | |||
| Tier One Capital To Risk Average Assets, Minimum To Be Well Capitalized Under Prompt Corrective Action, Amount | $ 17,561 | $ 15,763 | |||
| |||||
Minimum Regulatory Capital Requirements and Dividend Limitations (Details Textual) |
12 Months Ended |
|---|---|
|
Dec. 31, 2015
USD ($)
| |
| Minimum Regulatory Capital Requirements And Dividend Limitations [Line Items] | |
| Description of Regulatory Requirements, Capital Adequacy Purposes | Because total assets on a consolidated basis are less than $500,000,000, the Company is not subject to the consolidated capital requirements imposed by the Bank Holding Company Act. Consequently, the Company is not required to calculate its capital ratios on a consolidated basis. |
| Minimum Total Assets Required For Applicability Of Capital Adequacy Requirements | $ 500,000,000 |
Employee Benefit Plans (Details) - $ / shares |
12 Months Ended | ||
|---|---|---|---|
Dec. 31, 2015 |
Dec. 31, 2014 |
Dec. 31, 2013 |
|
| Option shares | |||
| Stock Options Outstanding, Beginning Balance | 145,478 | 115,656 | |
| Granted | 23,600 | 31,150 | |
| Forfeited | (44,392) | (1,328) | |
| Stock Options Outstanding, Ending Balance | 124,686 | 145,478 | 115,656 |
| Exercisable at December 31, 2015 | 63,567 | ||
| Weighted- Average Exercise Price | |||
| Weighted Average Exercise Price Outstanding, Beginning balance | $ 6.94 | $ 7.68 | |
| Granted | 3.86 | 4.16 | |
| Forfeited | 6.28 | 6.40 | |
| Weighted Average Exercise Price Outstanding, Ending Balance | 6.59 | $ 6.94 | $ 7.68 |
| Exercisable at December 31, 2015 | $ 8.71 | ||
| Weighted- Average Remaining Contractual Term (Years) | |||
| Weighted Average Remaining Contractual Life, Outstanding | 7 years 6 months 14 days | 7 years 10 months 17 days | 8 years 5 months 8 days |
| Exercisable at December 31, 2015 | 0 years | ||
Employee Benefit Plans (Details 1) |
12 Months Ended | |
|---|---|---|
Dec. 31, 2015 |
Dec. 31, 2014 |
|
| Expected dividend rate | 0.00% | 0.00% |
| Expected volatility | 30.00% | 30.00% |
| Expected term in years | 7 years | 7 years |
| Risk free rate | 2.01% | 2.15% |
Employee Benefit Plans (Details 2) - Restricted Stock [Member] - $ / shares |
12 Months Ended | |
|---|---|---|
Dec. 31, 2015 |
Dec. 31, 2014 |
|
| Nonvested, Number, Beginning Balance | 52,580 | 11,700 |
| Granted | 103,880 | 85,933 |
| Vested | 49,000 | 45,053 |
| Forfeited | 0 | 0 |
| Nonvested, Number, Ending Balance | 107,460 | 52,580 |
| Nonvested, Number,Weighted Average Price Beginning Balance | $ 4.23 | $ 4.41 |
| Granted | 3.96 | 4.20 |
| Vested | 4.05 | 4.21 |
| Forfeited | 0 | 0 |
| Nonvested, Number,Weighted Average Price Ending Balance | $ 4.05 | $ 4.23 |
Employee Benefit Plans (Details Textual) - USD ($) $ / shares in Units, $ in Thousands |
12 Months Ended | |
|---|---|---|
Dec. 31, 2015 |
Dec. 31, 2014 |
|
| Deferred Compensation Arrangement with Individual, Compensation Expense | $ 60 | |
| Share-based Compensation Arrangement by Share-based Payment Award, Options, Grants in Period, Weighted Average Grant Date Fair Value | $ 1.38 | $ 1.50 |
| Employee Service Share-based Compensation, Nonvested Awards, Compensation Not yet Recognized, Stock Options | $ 58 | |
| Employee Service Share-based Compensation, Nonvested Awards, Compensation Cost Not yet Recognized, Period for Recognition | 3 years 9 months 29 days | |
| Share-based Compensation Arrangement by Share-based Payment Award, Options, Grants in Period, Gross | 23,600 | 31,150 |
| Employee Service Share-based Compensation, Nonvested Awards, Compensation Not yet Recognized, Share-based Awards Other than Options | $ 372 | |
| Share-based Compensation, Total | 318 | $ 270 |
| Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Aggregate Intrinsic Value, Outstanding | $ 411 | $ 361 |
| Restricted Stock [Member] | ||
| Share-based Compensation Arrangement by Share-based Payment Award, Options, Grants in Period, Weighted Average Grant Date Fair Value | $ 3.96 | |
| Employee Service Share-based Compensation, Nonvested Awards, Compensation Cost Not yet Recognized, Period for Recognition | 3 years | |
| Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Grants in Period | 103,880 | 85,933 |
| Non Executive Director [Member] | ||
| Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Grants in Period | 2,278 | 2,300 |
| Founding Investors Of Cordia [Member] | ||
| Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Grants in Period | 578,125 | |
| Chief Executive Officer [Member] | ||
| Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Grants in Period | 66,000 | |
| Two Executive Officers [Member] | ||
| Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Grants in Period | 40,000 | |
| New President and CEO of BVA [Member] | ||
| Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Grants in Period | 3,378 | |
| 2005 Plan [Member] | ||
| Share-based Compensation Arrangement by Share-based Payment Award, Number of Shares Available for Grant | 26,560 | |
| 2011 Plan [Member] | ||
| Share-based Compensation Arrangement by Share-based Payment Award, Number of Shares Available for Grant | 592,765 | |
| Share-based Compensation Arrangement by Share-based Payment Award, Options, Grants in Period, Gross | 23,600 | 31,150 |
| Share-based Compensation Arrangement by Share-based Payment Award, Options, Other Increases (Decreases) in Period | 800,000 | |
| Outside Plan Prior To Merger In March 2013 [Member] | ||
| Share-based Compensation Arrangement by Share-based Payment Award, Options, Grants in Period, Gross | 20,000 | |
| September 2013 [Member] | ||
| Share-based Compensation Arrangement by Share-based Payment Award, Options, Grants in Period, Gross | 10,000 | |
| September 2013 [Member] | Restricted Stock [Member] | ||
| Share-based Compensation Arrangement by Share-based Payment Award, Options, Grants in Period, Gross | 12,500 | |
Fair Value Measurements (Details) - USD ($) $ in Thousands |
Dec. 31, 2015 |
Dec. 31, 2014 |
Dec. 31, 2013 |
|---|---|---|---|
| Assets: | |||
| Cash and cash equivalents | $ 18,460 | $ 21,840 | $ 13,984 |
| Securities available for sale | 46,220 | 53,483 | |
| Securities held to maturity | 25,500 | 20,716 | |
| Interest receivable | 2,085 | 2,040 | |
| Liabilities: | |||
| Demand deposits | 28,969 | 29,795 | |
| Savings and interest-bearing demand deposits | 107,057 | 84,258 | |
| Time deposits | 154,018 | 151,550 | |
| FHLB Borrowings | 30,000 | 25,000 | |
| Fair Value, Inputs, Level 1 [Member] | |||
| Assets: | |||
| Cash and cash equivalents | 18,460 | 21,847 | |
| Securities available for sale | 0 | 0 | |
| Securities held to maturity | 0 | 0 | |
| Restricted securities | 0 | 0 | |
| Net Loans held for investment | 0 | 0 | |
| Interest receivable | 0 | 0 | |
| Liabilities: | |||
| Demand deposits | 0 | 0 | |
| Savings and interest-bearing demand deposits | 0 | 0 | |
| Time deposits | 0 | 0 | |
| FHLB Borrowings | 0 | 0 | |
| Interest payable | 0 | 0 | |
| Fair Value, Inputs, Level 2 [Member] | |||
| Assets: | |||
| Cash and cash equivalents | 0 | 0 | |
| Securities available for sale | 46,220 | 53,483 | |
| Securities held to maturity | 25,694 | 21,047 | |
| Restricted securities | 2,355 | 2,092 | |
| Loans held for sale | 220 | ||
| Net Loans held for investment | 0 | 0 | |
| Interest receivable | 2,085 | 2,040 | |
| Liabilities: | |||
| Demand deposits | 28,969 | 29,795 | |
| Savings and interest-bearing demand deposits | 107,057 | 82,258 | |
| Time deposits | 154,027 | 152,179 | |
| FHLB Borrowings | 29,878 | 24,753 | |
| Interest payable | 197 | 161 | |
| Fair Value, Inputs, Level 3 [Member] | |||
| Assets: | |||
| Cash and cash equivalents | 0 | 0 | |
| Securities available for sale | 0 | 0 | |
| Securities held to maturity | 0 | 0 | |
| Restricted securities | 0 | 0 | |
| Net Loans held for investment | 244,776 | 213,861 | |
| Interest receivable | 0 | 0 | |
| Liabilities: | |||
| Demand deposits | 0 | 0 | |
| Savings and interest-bearing demand deposits | 0 | 0 | |
| Time deposits | 0 | 0 | |
| FHLB Borrowings | 0 | 0 | |
| Interest payable | 0 | 0 | |
| Fair Value [Member] | |||
| Assets: | |||
| Cash and cash equivalents | 18,460 | 21,847 | |
| Securities available for sale | 46,220 | 53,483 | |
| Securities held to maturity | 25,694 | 21,047 | |
| Restricted securities | 2,355 | 2,092 | |
| Net Loans held for investment | 244,776 | 213,861 | |
| Interest receivable | 2,085 | 2,040 | |
| Liabilities: | |||
| Demand deposits | 28,969 | 29,795 | |
| Savings and interest-bearing demand deposits | 107,057 | 82,258 | |
| Time deposits | 154,027 | 152,179 | |
| FHLB Borrowings | 29,878 | 24,753 | |
| Interest payable | 197 | 161 | |
| Carrying Amount [Member] | |||
| Assets: | |||
| Cash and cash equivalents | 18,460 | 21,847 | |
| Securities available for sale | 46,220 | 53,483 | |
| Securities held to maturity | 25,500 | 20,716 | |
| Restricted securities | 2,355 | 2,092 | |
| Loans held for sale | 220 | ||
| Net Loans held for investment | 245,210 | 211,870 | |
| Interest receivable | 2,085 | 2,040 | |
| Liabilities: | |||
| Demand deposits | 28,969 | 29,795 | |
| Savings and interest-bearing demand deposits | 107,057 | 84,258 | |
| Time deposits | 154,018 | 151,550 | |
| FHLB Borrowings | 30,000 | 25,000 | |
| Interest payable | $ 197 | $ 161 |
Fair Value Measurements (Details 1) - USD ($) $ in Thousands |
Dec. 31, 2015 |
Dec. 31, 2014 |
|---|---|---|
| U.S. Government Agencies [Member] | ||
| Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
| Assets, Fair Value Disclosure, Recurring | $ 2,139 | $ 3,719 |
| U.S. Government Agencies [Member] | Fair Value, Inputs, Level 1 [Member] | ||
| Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
| Assets, Fair Value Disclosure, Recurring | 0 | 0 |
| U.S. Government Agencies [Member] | Fair Value, Inputs, Level 2 [Member] | ||
| Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
| Assets, Fair Value Disclosure, Recurring | 2,139 | 3,719 |
| U.S. Government Agencies [Member] | Fair Value, Inputs, Level 3 [Member] | ||
| Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
| Assets, Fair Value Disclosure, Recurring | 0 | 0 |
| Agency Guaranteed Mortgage- Backed Securities [Member] | ||
| Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
| Assets, Fair Value Disclosure, Recurring | 44,081 | 49,764 |
| Agency Guaranteed Mortgage- Backed Securities [Member] | Fair Value, Inputs, Level 1 [Member] | ||
| Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
| Assets, Fair Value Disclosure, Recurring | 0 | 0 |
| Agency Guaranteed Mortgage- Backed Securities [Member] | Fair Value, Inputs, Level 2 [Member] | ||
| Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
| Assets, Fair Value Disclosure, Recurring | 44,081 | 49,764 |
| Agency Guaranteed Mortgage- Backed Securities [Member] | Fair Value, Inputs, Level 3 [Member] | ||
| Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
| Assets, Fair Value Disclosure, Recurring | $ 0 | $ 0 |
Fair Value Measurements (Details 2) - USD ($) $ in Thousands |
Dec. 31, 2015 |
Dec. 31, 2014 |
Dec. 31, 2013 |
|---|---|---|---|
| Fair Value Measurements [Line Items] | |||
| Impaired loans | $ 48 | $ 42 | |
| Other real estate owned | 1,870 | 1,641 | $ 1,545 |
| Fair Value, Inputs, Level 1 [Member] | |||
| Fair Value Measurements [Line Items] | |||
| Impaired loans | 0 | 0 | |
| Other real estate owned | 0 | 0 | |
| Fair Value, Inputs, Level 2 [Member] | |||
| Fair Value Measurements [Line Items] | |||
| Impaired loans | 0 | 0 | |
| Other real estate owned | 0 | 0 | |
| Fair Value, Inputs, Level 3 [Member] | |||
| Fair Value Measurements [Line Items] | |||
| Impaired loans | 48 | 42 | |
| Other real estate owned | $ 1,870 | $ 1,641 |
Fair Value Measurements (Details 3) - USD ($) $ in Thousands |
12 Months Ended | |
|---|---|---|
Dec. 31, 2015 |
Dec. 31, 2014 |
|
| Other Real Estate Owned [Member] | ||
| Fair Value Inputs, Assets, Quantitative Information [Line Items] | ||
| Fair Value | $ 1,870 | $ 1,641 |
| Valuation Technique | Discounted appraised value | Discounted appraised value |
| Unobservable Input | Discount for lack of marketability | Discount for lack of marketability |
| Impaired Loan [Member] | ||
| Fair Value Inputs, Assets, Quantitative Information [Line Items] | ||
| Fair Value | $ 48 | $ 42 |
| Valuation Technique | - | - |
| Unobservable Input | - | - |
| Minimum [Member] | Other Real Estate Owned [Member] | ||
| Fair Value Inputs, Assets, Quantitative Information [Line Items] | ||
| Range | 6.00% | 6.00% |
| Minimum [Member] | Impaired Loan [Member] | ||
| Fair Value Inputs, Assets, Quantitative Information [Line Items] | ||
| Range | 0.00% | 0.00% |
| Maximum [Member] | Other Real Estate Owned [Member] | ||
| Fair Value Inputs, Assets, Quantitative Information [Line Items] | ||
| Range | 29.00% | 29.00% |
| Maximum [Member] | Impaired Loan [Member] | ||
| Fair Value Inputs, Assets, Quantitative Information [Line Items] | ||
| Range | 10.00% | 10.00% |
Other Real Estate Owned (Details) - USD ($) $ in Thousands |
12 Months Ended | |
|---|---|---|
Dec. 31, 2015 |
Dec. 31, 2014 |
|
| Other Real Estate Owned [Line Items] | ||
| Beginning balance, January 1 | $ 1,641 | $ 1,545 |
| Additions | 634 | 83 |
| Improvements | 6 | 0 |
| Valuation adjustments | (65) | 13 |
| Sales | (346) | 0 |
| Ending balance, December 31 | 1,870 | 1,641 |
| Residential Real Estate [Member] | ||
| Other Real Estate Owned [Line Items] | ||
| Beginning balance, January 1 | 1,192 | |
| Ending balance, December 31 | $ 1,184 | $ 1,192 |
Other Real Estate Owned (Details Textual) - USD ($) $ in Thousands |
12 Months Ended | |
|---|---|---|
Dec. 31, 2015 |
Dec. 31, 2014 |
|
| Other Real Estate Owned [Line Items] | ||
| Other Revenue (Expense) from Real Estate Operations | $ 21 | $ 0 |
| Other Expense from Real Estate Partnership Operations | $ 90 | $ 46 |
Accumulated Other Comprehensive (Loss) (Details) - USD ($) $ in Thousands |
12 Months Ended | |
|---|---|---|
Dec. 31, 2015 |
Dec. 31, 2014 |
|
| Accumulated Other Comprehensive Income (Loss) [Line Items] | ||
| Beginning balance | $ (468) | $ (384) |
| Unrealized holding losses on available for sale securities | (271) | (132) |
| Amortization of AFS to HTM reclassification adjustment | 49 | 48 |
| Net current period other comprehensive income | (222) | (84) |
| Ending balance | (690) | (468) |
| Unrealized Gain (Loss) on Available-for-Sale Securities [Member] | ||
| Accumulated Other Comprehensive Income (Loss) [Line Items] | ||
| Beginning balance | (182) | (50) |
| Unrealized holding losses on available for sale securities | (271) | (132) |
| Amortization of AFS to HTM reclassification adjustment | 0 | 0 |
| Net current period other comprehensive income | (271) | (132) |
| Ending balance | (453) | (182) |
| Unrealized Gain (Loss) on Held-to-Maturity Securities [Member] | ||
| Accumulated Other Comprehensive Income (Loss) [Line Items] | ||
| Beginning balance | (286) | (334) |
| Unrealized holding losses on available for sale securities | 0 | 0 |
| Amortization of AFS to HTM reclassification adjustment | 49 | 48 |
| Net current period other comprehensive income | 49 | 48 |
| Ending balance | $ (237) | $ (286) |
Accumulated Other Comprehensive (Loss) (Details 1) - USD ($) $ in Thousands |
12 Months Ended | |
|---|---|---|
Dec. 31, 2015 |
Dec. 31, 2014 |
|
| Accumulated Other Comprehensive Income (Loss) [Line Items] | ||
| Realized gains on sales of securities | $ 133 | $ 177 |
| Net gain on sale of available-for-sale securities [Member] | ||
| Accumulated Other Comprehensive Income (Loss) [Line Items] | ||
| Realized gains on sales of securities | $ 133 | $ 177 |
Preferred Stock Issuance and Conversion (Details Textual) - USD ($) |
1 Months Ended | 12 Months Ended | ||
|---|---|---|---|---|
Apr. 10, 2014 |
Jun. 25, 2014 |
Dec. 31, 2014 |
Dec. 31, 2015 |
|
| Preferred Stock Issuance And Conversion [Line Items] | ||||
| Proceeds from Issuance of Preferred Stock and Preference Stock | $ 14,135,000 | |||
| Common Stock, Shares Authorized | 120,000,000 | 120,000,000 | ||
| Common Stock, Par or Stated Value Per Share | $ 0.01 | $ 0.01 | ||
| Common Stock, Shares, Outstanding | 5,103,669 | 5,186,349 | ||
| Percentage Of Capital Investments | 100.00% | 100.00% | ||
| Non-Voting [Member] | ||||
| Preferred Stock Issuance And Conversion [Line Items] | ||||
| Convertible Preferred Stock, Shares Issued upon Conversion | 363 | |||
| Sale Of Stock, Price Per Share | $ 0.01 | |||
| Common Stock, Shares Authorized | 5,000,000 | |||
| Common Stock, Par or Stated Value Per Share | $ 0.01 | |||
| Common Stock, Shares, Outstanding | 1,400,437 | |||
| Stock Issued During Period, Shares, New Issues | 1,400,437 | |||
| Voting [Member] | ||||
| Preferred Stock Issuance And Conversion [Line Items] | ||||
| Stock Issued During Period, Shares, New Issues | 2,229,434 | |||
| Redeemable Convertible Preferred Stock [Member] | ||||
| Preferred Stock Issuance And Conversion [Line Items] | ||||
| Purchase Price Of Convertible Preferred Stock | $ 42,500 | |||
| Proceeds from Issuance of Preferred Stock and Preference Stock | $ 15,400,000 | |||
| Series A Preferred Stock [Member] | ||||
| Preferred Stock Issuance And Conversion [Line Items] | ||||
| Convertible Preferred Stock, Shares Issued upon Conversion | 3,629,871 | |||
| Convertible Preferred Stock, Terms of Conversion | A Preferred Stock mandatorily converted into 10,000 shares of Cordia’s common stock at a conversion price of $4.25 per share |
Parent Company - Condensed Financial Statements (Details) - USD ($) $ in Thousands |
Dec. 31, 2015 |
Dec. 31, 2014 |
Dec. 31, 2013 |
|---|---|---|---|
| Assets: | |||
| Cash and due from banks | $ 6,135 | $ 5,477 | |
| Other assets | 590 | 486 | |
| Total assets | 348,490 | 318,600 | |
| Liabilities and capital: | |||
| Liabilities | 320,751 | 291,464 | |
| Equity | |||
| Common stock | 51 | 51 | |
| Additional paid-in capital | 33,191 | 32,956 | |
| Retained deficit | (4,827) | (5,417) | |
| Accumulated other comprehensive loss | (690) | (468) | |
| Total liabilities and equity | 348,490 | 318,600 | |
| Parent Company [Member] | |||
| Assets: | |||
| Cash and due from banks | 940 | 1,779 | $ 211 |
| Investment in Bank of Virginia | 26,796 | 25,621 | |
| Other assets | 7 | 11 | |
| Total assets | 27,743 | 27,411 | |
| Liabilities and capital: | |||
| Liabilities | 4 | 275 | |
| Equity | |||
| Common stock | 65 | 65 | |
| Additional paid-in capital | 33,191 | 32,956 | |
| Retained deficit | (4,827) | (5,417) | |
| Accumulated other comprehensive loss | (690) | (468) | |
| Total equity | 27,739 | 27,136 | |
| Total liabilities and equity | $ 27,743 | $ 27,411 |
Parent Company - Condensed Financial Statements (Details 1) - USD ($) $ in Thousands |
12 Months Ended | |
|---|---|---|
Dec. 31, 2015 |
Dec. 31, 2014 |
|
| Income: | ||
| Interest income | $ 10,841 | $ 10,217 |
| Expenses: | ||
| Net income (loss) | 590 | (412) |
| Parent Company [Member] | ||
| Income: | ||
| Equity in undistributed income of subsidiary | 1,397 | 323 |
| Interest income | 0 | 1 |
| Total income | 1,397 | 324 |
| Expenses: | ||
| Other expense | 807 | 736 |
| Total expense | 807 | 736 |
| Net income (loss) | $ 590 | $ (412) |
Parent Company - Condensed Financial Statements (Details 2) - USD ($) $ in Thousands |
12 Months Ended | |
|---|---|---|
Dec. 31, 2015 |
Dec. 31, 2014 |
|
| Cash flows from operating activities: | ||
| Net income (loss) | $ 590 | $ (412) |
| Adjustments to reconcile net income (loss) to net cash used in operating activities: | ||
| Stock-based compensation | 318 | 270 |
| Cash flows from financing activities: | ||
| Repurchase of common stock | (83) | 0 |
| Issuance of Common Stock, net of costs | 0 | 14,075 |
| Net increase (decrease) in cash and due from banks | 2,468 | 24,722 |
| Cash and due from banks, beginning of period | 5,477 | |
| Cash and due from banks, end of period | 6,135 | 5,477 |
| Parent Company [Member] | ||
| Cash flows from operating activities: | ||
| Net income (loss) | 590 | (412) |
| Adjustments to reconcile net income (loss) to net cash used in operating activities: | ||
| Equity in undistributed income of subsidiary | (1,397) | (323) |
| Stock-based compensation | 318 | 270 |
| Net decrease in other assets | 4 | 218 |
| Net decrease in other liabilities | (271) | (760) |
| Net cash used in operating activities | (756) | (1,007) |
| Cash flows from investing activities: | ||
| Investment in Bank of Virginia, net of costs | 0 | (11,500) |
| Net cash used in investing activities | 0 | (11,500) |
| Cash flows from financing activities: | ||
| Repurchase of common stock | (83) | 0 |
| Issuance of Common Stock, net of costs | 0 | 14,075 |
| Net cash (used in) provided by investing activities | (83) | 14,075 |
| Net increase (decrease) in cash and due from banks | (839) | 1,568 |
| Cash and due from banks, beginning of period | 1,779 | 211 |
| Cash and due from banks, end of period | $ 940 | $ 1,779 |
Parent Company - Condensed Financial Statements (Details Textual) |
Dec. 31, 2015 |
Dec. 10, 2010 |
|---|---|---|
| Bank Of Virginia [Member] | ||
| Schedule of Equity Method Investments [Line Items] | ||
| Equity Method Investment, Ownership Percentage | 100.00% | 59.80% |
Subsequent Events (Details) - USD ($) $ in Thousands |
Feb. 29, 2016 |
Dec. 31, 2015 |
|---|---|---|
| Subsequent Event [Line Items] | ||
| 2016 | $ 101 | |
| 2017 | 96 | |
| 2018 | 99 | |
| 2019 | 8 | |
| Total minimum payments required under renewal | $ 304 | |
| Subsequent Event [Member] | ||
| Subsequent Event [Line Items] | ||
| 2016 | $ 49 | |
| 2017 | 50 | |
| 2018 | 51 | |
| 2019 | 52 | |
| 2020 | 53 | |
| Total minimum payments required under renewal | $ 255 |
Subsequent Events (Details Textual) - USD ($) $ in Thousands |
1 Months Ended | 12 Months Ended |
|---|---|---|
Mar. 31, 2016 |
Dec. 31, 2015 |
|
| Subsequent Event [Line Items] | ||
| Increase (Decrease) in Other Operating Assets, Total | $ 140 | |
| Subsequent Event [Member] | Equity Awards [Member] | ||
| Subsequent Event [Line Items] | ||
| Increase (Decrease) in Other Operating Assets, Total | $ 740 | |
| CordiaGrad [Member] | Subsequent Event [Member] | ||
| Subsequent Event [Line Items] | ||
| Gain (Loss) on Disposition of Business | $ 1,600 |