Cordia Bancorp Inc - FORM 10-Q

Attached files

file	filename
EX-32 - EXHIBIT 32 - Cordia Bancorp Inc	v392128_ex32.htm
EX-31.1 - EXHIBIT 31.1 - Cordia Bancorp Inc	v392128_ex31-1.htm
EX-31.2 - EXHIBIT 31.2 - Cordia Bancorp Inc	v392128_ex31-2.htm
EXCEL - IDEA: XBRL DOCUMENT - Cordia Bancorp Inc	Financial_Report.xls

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934

For the Quarterly Period Ended September 30, 2014

Commission File No. 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)

(804) 763-1333

(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

YES x NO o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

YES x NO o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definition of “large accelerated filer”, “accelerated filer” and “smaller reporting company” in Rule 12b–2 of the Exchange Act:

Large accelerated filer o Accelerated filer o Smaller reporting company x

Non-accelerated filer o (Do not check if a smaller reporting company)

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

As of November 5, 2014, there were 6,504,106 shares of common stock outstanding.

PART I

Financial Information
		Page
Item 1.	Condensed Consolidated Financial Statements (Unaudited)	1
	Condensed Consolidated Balance Sheets	1
	Condensed Consolidated Statements of Operations	2
	Condensed Consolidated Statements of Comprehensive
	Income (Loss)	3
	Condensed Consolidated Statements of Cash Flows	4
	Notes to Condensed Consolidated Financial Statements	5

Item 2.	Management’s Discussion and Analysis of Financial Condition and
	Results of Operations	33

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	52

Item 4.	Controls and Procedures	52

PART II

Other Information

Item 1.	Legal Proceedings	53
Item 1A.	Risk Factors	53
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	53
Item 3.	Defaults Upon Senior Securities	53
Item 4.	Mine Safety Disclosures	53
Item 5.	Other Information	53
Item 6.	Exhibits	54

Signatures		55

Item 1. Condensed Consolidated Financial Statements

Cordia Bancorp Inc.
Condensed Consolidated Balance Sheets

	(Unaudited)
(dollars in thousands, except per share data)	September 30, 2014	December 31, 2013
Assets
Cash and due from banks	$5,789	$5,290
Federal funds sold and interest-bearing deposits with banks	6,131	8,694
Total cash and cash equivalents	11,920	13,984
Securities available for sale, at fair market value	54,581	24,567
Securities held to maturity, at cost (fair value $21,383 and $14,597 at September 30, 2014 and December 31, 2013, respectively)	21,263	14,753
Restricted securities	1,525	1,074
Loans net of allowance for loan losses of $1,226 and $1,489, at September 30, 2014 and December 31, 2013, respectively	203,092	172,518
Premises and equipment, net	4,496	4,464
Accrued interest receivable	1,902	1,655
Other real estate owned, net of valuation allowance	1,543	1,545
Other assets	485	588
Total assets	$300,807	$235,148

Liabilities and stockholders' equity
Deposits
Non-interest bearing	$24,483	$22,845
Savings and interest-bearing demand	78,786	60,685
Time, $100,000 and over	100,446	76,231
Other time	49,233	51,053
Total deposits	252,948	210,814
Accrued expenses and other liabilities	877	1,047
FHLB borrowings	20,000	10,000
Total liabilities	273,825	221,861

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, 5,103,669 and 2,788,302 shares were outstanding as of September 30, 2014 and December 31, 2013, respectively	50	28
Nonvoting common stock, 5,000,000 shares authorized, $0.01 par value, 1,400,437 and 0 shares were outstanding as of September 30, 2014 and December 31, 2013, respectively	14	-
Undesignated — 80,000,000 authorized, none issued	-	-
Additional paid-in capital	32,896	18,648
Retained deficit	(5,477)	(5,005)
Accumulated other comprehensive loss	(501)	(384)
Total stockholders' equity	26,982	13,287
Total liabilities and stockholders' equity	$300,807	$235,148

See Notes to the Condensed Consolidated Financial Statements

Cordia Bancorp Inc.

Condensed Consolidated Statements of Operations

(Unaudited)


	Three months ended September 30,						Nine months ended September 30,
(dollars in thousands, except per share data)	2014			2013			2014			2013
Interest income
Interest and fees on loans	$	2,275		$	2,182		$	6,676		$	7,277
Investment securities		346			123			864			265
Federal funds sold and deposits with banks		4			19			19			63
Total interest income		2,625			2,324			7,559			7,605
Interest expense
Interest on deposits		443			415			1,310			1,233
Interest on FHLB borrowings		57			42			154			123
Total interest expense		500			457			1,464			1,356
Net interest income		2,125			1,867			6,095			6,249
Provision for (recovery of) loan losses		(106	)		(23	)		123			111
Net interest income after provision for (recovery of) loan losses		2,231			1,890			5,972			6,138
Non-interest income
Service charges on deposit accounts		44			31			89			93
Net gain (loss) on sale of available for sale securities		(3	)		-			61			-
Other fee income		41			51			117			122
Total non-interest income		82			82			267			215
Non-interest expense
Salaries and employee benefits		1,266			991			3,822			3,150
Professional services		92			67			323			340
Occupancy		139			137			426			427
Data processing and communications		206			140			514			409
FDIC assessment and bank fees		99			102			289			336
Bank franchise taxes		23			14			79			60
Student loan servicing fees and other loan expenses		144			81			480			198
Other real estate expenses		6			5			28			33
Gain on sale of other real estate owned		-			(36	)		-			(36	)
Supplies and equipment		82			66			240			199
Insurance		40			42			125			126
Directors fees		24			34			67			106
Marketing and business development		15			19			30			56
Other operating expenses		95			102			288			259
Total non-interest expense		2,231			1,764			6,711			5,663
Net income (loss)	$	82		$	208		$	(472	)	$	690

Basic income (loss) per share	$	0.01		$	0.07		$	(0.12	)	$	0.27
Diluted income (loss) per share	$	0.01		$	0.07		$	(0.12	)	$	0.27
Weighted average shares outstanding, basic		6,420,107			2,768,484			4,084,960			2,544,744
Weighted average shares outstanding, diluted		6,504,106			2,777,840			4,122,217			2,557,115

See Notes to the Condensed Consolidated Financial Statements

Cordia Bancorp Inc.

Condensed Consolidated Statement of Comprehensive Income (Loss)

(Unaudited)


	Three Months Ended September 30,						Nine Months Ended September 30,
(dollars in thousands)	2014			2013			2014			2013
Net income (loss)	$	82		$	208		$	(472	)	$	690

Unrealized losses on available for sale securities		(72	)		(232	)		(153	)		(512	)
Amortization of AFS to HTM reclassification adjustment		11			-			36			-
Other comprehensive loss		(61	)		(232	)		(117	)		(512	)

Comprehensive income (loss)	$	21		$	(24	)	$	(589	)	$	178

See Notes to the Condensed Consolidated Financial Statements

Cordia Bancorp Inc.
Condensed Consolidated Statements of Cash Flows
(Unaudited)


	Nine Months Ended September 30,
(dollars in thousands)	2014			2013
Cash flows from operating activities:
Net income (loss)	$	(472	)	$	690
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities
Net amortization of premium on investment securities		249			109
Net amortization of acquisition accounting adjustments		(253	)		(779	)
Depreciation		215			215
Provision for loan losses		123			111
Gain on available for securities		(61	)		-
Gain on sale of OREO		-			(36	)
OREO impairment		2			-
Stock compensation		32			57
Net change in loans held for sale		-			28,949
Changes in assets and liabilities:
Increase in accrued interest receivable		(247	)		(916	)
Increase (decrease) in other assets		103			(18	)
Decrease (increase) in accrued expenses and other liabilities		(99	)		(232	)
Net cash provided by (used in) operating activities		(408	)		28,150
Cash flows from investing activities:
Purchase of securities available for sale		(42,039	)		(18,458	)
Purchase of securities held to maturity		(7,686	)		-
(Issuance) redemptions of restricted securities, net		(451	)		85
Proceeds from sales, maturities, and paydowns of securities available for sale		11,733			3,618
Proceeds from payments/maturities of securities held to maturity		1,163			2,923
Proceeds from sale of OREO		-			259
Net increase in loans		(30,494	)		(59,838	)
Purchase of premises and equipment		(241	)		(329	)
Net cash used in investing activities		(68,015	)		(71,740	)
Cash flows from financing activities:
Proceeds from sale of stock, net		14,252			(207	)
Net increase in demand savings, interest-bearing checking and money market deposits		19,712			22,374
Net increase in time deposits		22,395			32,224
Proceeds from FHLB advances		10,000			-
Net cash provided by investing activities		66,359			54,391
Net increase (decrease) in cash and cash equivalents		(2,064	)		10,801
Cash and cash equivalents, beginning of period		13,984			11,981
Cash and cash equivalents, end of period	$	11,920		$	22,782
Supplemental disclosure of cash flow information
Cash payments for interest	$	1,453		$	1,380
Supplemental disclosure of noncash activities
Fair value adjustments for securities	$	(153	)	$	(512	)

See Notes to the Condensed Consolidated Financial Statements

Notes to Condensed 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, 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.

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.

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.

Basis of Presentation

The accounting and reporting policies of the Company conform to accounting principles generally accepted in the United States of America (“GAAP”) and prevailing practices within the financial services industry for interim financial information and Rule 10-01 of Regulation S-X. Accordingly, they do not include all of the information and notes required for complete financial statements and prevailing practices within the banking industry. Operating results for the three months and nine months ended September 30, 2014 are not necessarily indicative of the results that may be expected for any future periods or for the year ending December 31, 2014. In the opinion of management, all adjustments (comprising only normal, recurring accruals) necessary for a fair presentation of the results of the interim periods have been included. Certain reclassifications have been made to prior period amounts, as necessary, to conform to the current period presentation. The Company has evaluated subsequent events through the date of the issuance of its financial statements.

These statements should be read in conjunction with the financial statements and accompanying notes included in the Company’s 2013 Annual Report on Form 10-K as filed with the Securities and Exchange Commission (“SEC”) on March 26, 2014.

Principles of Consolidation

The accompanying condensed consolidated financial statements include all accounts of the Company and the Bank. All material intercompany balances and transactions have been eliminated in consolidation.

Summary of Significant Accounting Policies

We provide a summary of our significant accounting policies in our 2013 Form 10-K under “Note 1 – Organization and Summary of Significant Accounting Policies”. There have been no significant changes to these policies during 2014.

Recent Accounting Pronouncements

In January 2014, the FASB issued ASU 2014-01, “Investments—Equity Method and Joint Ventures (Topic 323): Accounting for Investments in Qualified Affordable Housing Projects (a consensus of the FASB Emerging Issues Task Force).” The amendments in this ASU permit reporting entities to make an accounting policy election to account for their investments in qualified affordable housing projects using the proportional amortization method if certain conditions are met. Under the proportional amortization method, an entity amortizes the initial cost of the investment in proportion to the tax credits and other tax benefits received and recognizes the net investment performance in the income statement as a component of income tax expense (benefit). The amendments in this ASU should be applied retrospectively to all periods presented. A reporting entity that uses the effective yield method to account for its investments in qualified affordable housing projects before the date of adoption may continue to apply the effective yield method for those preexisting investments. The amendments in this ASU are effective for public business entities for annual periods and interim reporting periods within those annual periods, beginning after December 15, 2014. Early adoption is permitted. The Company does not expect the adoption of ASU 2014-01 to have a material impact on its consolidated financial statements.

In January 2014, the FASB issued ASU 2014-04, “Receivables—Troubled Debt Restructurings by Creditors (Subtopic 310-40): Reclassification of Residential Real Estate Collateralized Consumer Mortgage Loans upon Foreclosure (a consensus of the FASB Emerging Issues Task Force).” The amendments in this ASU clarify that an in substance repossession or foreclosure occurs, and a creditor is considered to have received physical possession of residential real estate property collateralizing a consumer mortgage loan, upon either (1) the creditor obtaining legal title to the residential real estate property upon completion of a foreclosure or (2) the borrower conveying all interest in the residential real estate property to the creditor to satisfy that loan through completion of a deed in lieu of foreclosure or through a similar legal agreement. Additionally, the amendments require interim and annual disclosure of both (1) the amount of foreclosed residential real estate property held by the creditor and (2) the recorded investment in consumer mortgage loans collateralized by residential real estate property that are in the process of foreclosure according to local requirements of the applicable jurisdiction. The amendments in this ASU are effective for public business entities for annual periods, and interim periods within those annual periods, beginning after December 15, 2014. The Company does not expect the adoption of ASU 2014-04 to have a material impact on its consolidated financial statements.

In April 2014, the FASB issued ASU 2014-08, “Presentation of Financial Statements (Topic 205) and Property, Plant, and Equipment (Topic 360): Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity.” The amendments in this ASU change the criteria for reporting discontinued operations while enhancing disclosures in this area. Under the new guidance, only disposals representing a strategic shift in operations should be presented as discontinued operations. Those strategic shifts should have a major effect on the organization’s operations and financial results and include disposals of a major geographic area, a major line of business, or a major equity method investment. The new guidance requires expanded disclosures about discontinued operations that will provide financial statement users with more information about the assets, liabilities, income, and expenses of discontinued operations. Additionally, the new guidance requires disclosure of the pre-tax income attributable to a disposal of a significant part of an organization that does not qualify for discontinued operations reporting. The amendments in the ASU are effective for public business entities for annual periods, and interim periods within those annual periods, beginning after December 15, 2014. Early adoption is permitted. The Company does not expect the adoption of ASU 2014-08 to have a material impact on its consolidated financial statements.

In June 2014, the FASB issued ASU No. 2014-09, “Revenue from Contracts with Customers: Topic 606”. This ASU applies to any entity using U.S. GAAP that either enters into contracts with customers to transfer goods or services or enters into contracts for the transfer of nonfinancial assets unless those contracts are within the scope of other standards. The guidance supersedes the revenue recognition requirements in Topic 605, “Revenue Recognition”, most industry-specific guidance, and some cost guidance included in Subtopic 605-35, “Revenue Recognition—Construction-Type and Production-Type Contracts”. The core principle of the guidance is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. To be in alignment with the core principle, an entity must apply a five step process including: identification of the contract(s) with a customer, identification of performance obligations in the contract(s), determination of the transaction price, allocation of the transaction price to the performance obligations, and recognition of revenue when (or as) the entity satisfies a performance obligation. Additionally, the existing requirements for the recognition of a gain or loss on the transfer of nonfinancial assets that are not in a contract with a customer have also been amended to be consistent with the guidance on recognition and measurement. The amendments in this ASU are effective for annual reporting periods beginning after December 15, 2016, including interim periods within that reporting period. Early adoption is not permitted. The Company does not expect the adoption of ASU 2014-09 to have a material impact on its consolidated financial statements.

In June 2014, the FASB issued ASU No. 2014-11, “Transfers and Servicing (Topic 860): Repurchase-to-Maturity Transactions, Repurchase Financings, and Disclosures”. This ASU aligns the accounting for repurchase-to-maturity transactions and repurchase agreements executed as a repurchase financing with the accounting for other typical repurchase agreements. The new guidance eliminates sale accounting for repurchase-to-maturity transactions and supersedes the guidance under which a transfer of a financial asset and a contemporaneous repurchase financing could be accounted for on a combined basis as a forward agreement. The amendments in the ASU also require a new disclosure for transactions economically similar to repurchase agreements in which the transferor retains substantially all of the exposure to the economic return on the transferred financial assets throughout the term of the transaction. Additional disclosures will be required for the nature of collateral pledged in repurchase agreements and similar transactions accounted for as secured borrowings. The amendments in this ASU are effective for the first interim or annual period beginning after December 15, 2014; however, the disclosure for transactions accounted for as secured borrowings is required to be presented for annual periods beginning after December 15, 2014, and interim periods beginning after March 15, 2015. Early adoption is not permitted. The Company does not expect the adoption of ASU 2014-11 to have a material impact on its consolidated financial statements.

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. 2014-14, “Receivables – Troubled Debt Restructurings by Creditors (Subtopic 310-40): Classification of Certain Government-Guaranteed Mortgage Loans upon Foreclosure”. The amendments in this ASU apply to creditors that hold government-guaranteed mortgage loans and is intended to eliminate the diversity in practice related to the classification of these guaranteed loans upon foreclosure. The new guidance stipulates that a mortgage loan be derecognized and a separate other receivable be recognized upon foreclosure if (1) the loan has a government guarantee that is not separable from the loan prior to foreclosure, (2) at the time of foreclosure, the creditor has the intent to convey the real estate property to the guarantor and make a claim on the guarantee, and the creditor has the ability to recover under that claim, and (3) at the time of foreclosure, any amount of the claim that is determined on the basis of the fair value of the real estate is fixed. Upon foreclosure, the other receivable should be measured on the amount of the loan balance (principal and interest) expected to be recovered from the guarantor. The amendments in this ASU are effective for annual periods and interim periods within those annual periods beginning after December 15, 2014. Entities may adopt the amendments on a prospective basis or modified retrospective basis as of the beginning of the annual period of adoption; however, the entity must apply the same method of transition as elected under ASU 2014-04. Early adoption is permitted provided the entity has already adopted ASU 2014-04. The Company does not expect the adoption of ASU 2014-14 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.

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 is 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.

These 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 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 change in 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 investment. 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.

In previous periods, the provision for loan losses was significantly impacted by these acquisition accounting adjustments. The credit risk associated with the loan portfolio was reflected in the fair value determination as of the day of the investment by Cordia. Accordingly, on the day of the investment, there was no allowance for loan losses related to the purchased loans on the balance sheet of Cordia, while there was a significant allowance for loan losses on the balance sheet of BVA. The level of impact of these purchase accounting adjustments on the provision for loan losses and indirectly on interest income has declined considerably in recent periods.

Non-interest income is impacted by the gain or loss on the sale of investment securities. Non-interest expense is impacted by the depreciation adjustment that is the result of a fair value discount recorded on certain branch locations, rent adjustment related to certain lease commitments being above market as of the day of the investment; and amortization of the core deposit intangible.

On March 29, 2013, the minority shareholders of BVA exchanged their common shares in the Bank for common shares of Cordia. For each share of BVA exchanged, 0.664 shares of Cordia were received. In connection with the exchange, BVA became a wholly-owned subsidiary of Cordia.

In addition, the increased ownership percentage of BVA by Cordia has impacted the accounting of both entities. All of Cordia’s purchase accounting adjustments are now recorded in the BVA financial statements and the Cordia financial statements no longer reflect adjustments for non-controlling interest.

The amortization of the acquisition accounting adjustments had the following impact on the financial statements:

	Three Months Ended September 30,						Nine Months Ended September 30,
(dollars in thousands)	2014			2013			2014			2013
Loans	$	44		$	103		$	203		$	1,162
Allowance for loan losses		-			-			-			(577	)
Premises and equipment		2			2			6			6
Core deposit intangible		(9	)		(9	)		(27	)		(27	)
Time deposits		-			41			-			145
Building lease obligations		24			24			71			70
Net impact to net income	$	61		$	161		$	253		$	779

Note 3. Earnings (Loss) Per Share

Basic earnings (loss) 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 143 thousand shares of the Company’s common stock were not included in the computation of earnings per share for the three and nine months ended September 30, 2014 because the share awards exercise prices exceeded the average market price of the Company’s common stock and the effect would be anti-dilutive. The nine month loss for 2014 also creates an anti-dilutive effect for that period. Options to purchase 122 thousand shares of the Company’s common stock were not included in the computation of earnings per share for the three and nine months ended September 30, 2013 because the share awards exercise prices exceeded the average market price of the Company’s common stock and the effect would be anti-dilutive.

The calculation for basic and diluted earnings per common share for the three months and nine months ended September 30, 2014 and 2013 are as follows:

	Three months ended September 30,				Nine months ended September 30,
(dollars in thousands)	2014		2013		2014			2013

Net income (loss) attributable to Company	$	82	$	208	$	(472	)	$	690

Weighted average basic shares outstanding		6,420,107		2,768,484		4,084,960			2,544,744

Basic income (loss) per common share	$	0.01	$	0.07	$	(0.12	)	$	0.27

Weighted average dilutive shares outstanding		6,504,106		2,777,840		4,122,217			2,557,115

Diluted income (loss) per common share	$	0.01	$	0.07	$	(0.12	)	$	0.27

For the periods ended September 30, 2014 and 2013, a total of 578,125 shares of unvested Common Stock were excluded from the computation of basic and diluted earnings per common share as these are performance based, nonvoting shares deemed more unlikely, than likely, to vest. All other vested and non-vested 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 the per common share calculation.

Note 4. 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 $75.8 million at September 30, 2014 as compared to $39.3 million at December 31, 2013. At September 30, 2014, the securities portfolio consisted of $54.6 million of securities available for sale, at fair value and $21.2 million of securities held to maturity, at amortized cost.

The table below presents the amortized cost, gross unrealized gains and losses, and fair value of securities available for sale at September 30, 2014 and December 31, 2013.

	September 30, 2014

	Amortized		Gross Unrealized					Estimated
(dollars in thousands)	Cost		Gains		Losses			Fair Value
U.S. Government agencies	$	2,982	$	-	$	(25	)	$	2,957
Agency guaranteed mortgage-backed securities		51,802		44		(222	)		51,624
Total	$	54,784	$	44	$	(247	)	$	54,581

	December 31, 2013

	Amortized		Gross Unrealized					Estimated Fair Value
(dollars in thousands)	Cost		Gains		Losses			Fair Value
U.S. Government agencies	$	7,038	$	56	$	(53	)	$	7,041
Agency guaranteed mortgage-backed securities		17,578		10		(62	)		17,526
Total	$	24,616	$	66	$	(115	)	$	24,567

The table below presents the carry value, gross unrealized gains and losses, and fair value of securities held to maturity at September 30, 2014 and December 31, 2013.

	September 30, 2014

	Carry		Gross Unrealized					Estimated
(dollars in thousands)	Value		Gains		Losses			Fair Value
Agency guaranteed mortgage-backed securities	$	21,263	$	145	$	(25	)	$	21,383

	December 31, 2013

	Carry		Gross Unrealized					Estimated
(dollars in thousands)	Value			Gains		Losses		Fair Value
Agency guaranteed mortgage-backed securities	$	14,753	$	-	$	(156	)	$	14,597

The amortized cost and fair value of securities available for sale as of September 30, 2014, 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		Estimated Fair Value
Over one year within five years	$	3,040	$	3,036
Over five years within ten years		420		422
Over ten years		51,324		51,123
Total	$	54,784	$	54,581

The carrying value and fair value of securities held to maturity as of September 30, 2014, 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		Estimated Fair Value
Over five years within ten years	$	3,711	$	3,775
Over ten years		17,552		17,608
Total	$	21,263	$	21,383

As of September 30, 2014, the portfolio is concentrated in average maturities of over ten years, although a substantial majority of recently purchased securities have effective durations much shorter than ten years. The portfolio is available to support liquidity needs of the Company. The Company sold $641 thousand of available for sale securities during the three months ended September 30, 2014 and recognized a loss of $3 thousand in noninterest income. During the nine months ended September 30, 2014, the Company sold $7.7 million of available for sale securities and recognized a gain of $61 thousand in noninterest income. There were no sales of securities available for sale during the three and nine months ended September 30, 2013.

Unrealized losses on investments at September 30, 2014 and December 31, 2013 were as follows:

	September 30, 2014
	Less than 12 Months					12 Months or Longer					Total
(dollars in thousands)	Estimated Fair Value		Unrealized Losses			Estimated Fair Value		Unrealized Losses			Estimated Fair Value		Unrealized Losses
U.S. Government agencies	$	2,574	$	(3	)	$	-	$	(22	)	$	2,574	$	(25	)
Agency guaranteed mortgage-backed securities		44,351		(247	)		3,733		-			48,084		(247	)
Total	$	46,925	$	(250	)	$	3,733	$	(22	)	$	50,658	$	(272	)

	December 31, 2013
(dollars in thousands)	Estimated Fair Value		Unrealized Losses			Estimated Fair Value		Unrealized Losses			Estimated Fair Value		Unrealized Losses
U.S. Government agencies	$	3,697	$	(53	)	$	-	$	-		$	3,697	$	(53	)
Agency guaranteed mortgage-backed securities		17,336		(178	)		2,914		(40	)		20,250		(218	)
Total	$	21,033	$	(231	)	$	2,914	$	(40	)	$	23,947	$	(271	)

All of the unrealized losses are attributable to increases in interest rates and not to credit deterioration. Currently, the Company believes that it is probable that it will be able to collect all amounts due according to the contractual terms of the investments. Because the decline in market value is attributable to changes in interest rates and not to credit quality and because it is not more likely than not that the Company will be required to sell the investments before recovery of their amortized cost bases, which may be maturity, the Company does not consider these investments to be other-than-temporarily impaired at September 30, 2014.

Investment securities with a combined market value of $5.5 million and $2.1 million were pledged to secure public funds with the State of Virginia at September 30, 2014 and December 31, 2013, respectively. At December 31, 2013, the bank had $2.9 million in investment securities pledged to cover a relationship with our main correspondent bank. As of September 30, 2014, this correspondent bank relationship had been changed to an unsecured facility. We had $6.2 million of securities pledged to secure FHLB advances at September 30, 2014. There were no securities pledged to the FHLB at December 31, 2013.

Note 5. Loans, Allowance for Loan Losses and Credit Quality

Loans by Loan Class

The Bank categorizes its loan receivables into four main segments 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. 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 sub-segments are acquisition-development-construction, non-owner occupied and owner occupied. In the consumer category of the loan portfolio the sub-segments are residential real estate, home equity lines of credit and other. Management has not further divided its eight sub-segments into classes. This provides Management and the Board with sufficient information to evaluate the risks within the Bank’s portfolio.

The table below presents loans by sub-segment at September 30, 2014 and December 31, 2013.

(dollars in thousands)	September 30, 2014			December 31, 2013

Commercial Real Estate:
Acquisition, development and construction	$	2,247		$	3,475
Non-owner occupied		39,805			28,606
Owner occupied		50,248			50,500
Commercial and industrial		25,376			21,085
Guaranteed student loans		67,421			55,427
Consumer:
Residential mortgage		8,387			7,156
HELOC		10,297			7,250
Other		537			508
Total loans		204,318			174,007
Allowance for loan losses		(1,226	)		(1,489	)
Total loans, net of allowance for loan losses	$	203,092		$	172,518

Loans Acquired with Evidence of Deterioration in Credit Quality

Acquired in the acquisition of Bank of Virginia in 2010, and included in the table above, are loans acquired with evidence of deterioration in credit quality. These loans are accounted for under the guidance ASC 310-30. Information related to these loans is as follows:

(dollars in thousands)	September 30, 2014			December 31, 2013

Contract principal balance	$	7,516		$	8,689
Accretable discount		(47	)		(62	)
Nonaccretable discount		(5	)		(61	)
Book value of loans	$	7,464		$	8,566

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 a 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 discount was subsequently transferred to accretable and is amortized as a yield adjustment over the lives of the individual loans. Cash flows received on loans with a nonaccretable discount 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 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 and nonaccretable discounts during the nine months ended September 30, 2014 and 2013 is as follows:


	Nine months ended September 30,
	2014						2013
(dollars in thousands)	Accretable Discount			Nonaccretable Discount			Accretable Discount			Nonaccretable Discount
Beginning balance	$	62		$	61		$	476		$	165
Charge-offs related to loans covered by ASC 310-30		-			(56	)		-			-
Transfer to accretable discount		-			-			104			(104	)
Discount accretion		(15	)					(422	)
Ending balance	$	47		$	5		$	158		$	61

Credit Quality Indicators

Credit risk ratings reflect the current risk of default and/or loss for a given asset. The risk of loss is driven by factors intrinsic to the borrower and the unique structural characteristics of the loan. The credit risk rating begins with an analysis of the borrower’s credit history, ability to repay the debt as agreed, use of proceeds, and the value and stability of the value of the collateral securing the loan. The attributes ordinarily considered when reviewing a borrower are as follows:

industry/industry segment;

position within industry;

earnings, liquidity and operating cash flow trends;

asset and liability values;

financial flexibility/debt capacity;

management and controls; and

quality of financial reporting.

The unique structural characteristics ordinarily considered when reviewing a loan are as follows:

credit terms/loan documentation;

guaranty/third party support;

collateral; and

loan maturity.

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.

The following is the distribution of loans by credit quality and segment as of September 30, 2014 and December 31, 2013:

	September 30, 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		-		2,253		2,822		1,930		67,421		36		1,097		45		75,604
3 Satisfactory		508		20,152		27,508		13,705		-		4,076		5,877		407		72,233
4 Pass		500		15,805		16,693		7,785		-		3,968		2,286		85		47,122
5 Special mention				125		-		219		-		121		317		-		782
6 Substandard		269		-		-		573		-		-		271		-		1,113
7 Doubtful		-		-		-		-		-		-		-		-		-
		1,277		38,335		47,023		24,212		67,421		8,201		9,848		537		196,854
Loans acquired with deteriorating credit quality		970		1,470		3,225		1,164		-		186		449		-		7,464
Total loans	$	2,247	$	39,805	$	50,248	$	25,376	$	67,421	$	8,387	$	10,297	$	537	$	204,318


	December 31, 2013
(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		-		2,078		2,966		2,170		55,427		73		205		80		62,999
3 Satisfactory		325		10,563		25,264		8,290		-		3,965		3,541		350		52,298
4 Pass		1,500		12,990		14,606		8,128		-		2,710		2,243		78		42,255
5 Special mention		299		1,449		3,486		268		-		203		630		-		6,335
6 Substandard		267		-		336		759		-		15		177		-		1,554
7 Doubtful		-		-		-		-		-		-		-		-		-
		2,391		27,080		46,658		19,615		55,427		6,966		6,796		508		165,441
Loans acquired with deteriorating credit quality		1,084		1,526		3,842		1,470		-		190		454		-		8,566
Total loans	$	3,475	$	28,606	$	50,500	$	21,085	$	55,427	$	7,156	$	7,250	$	508	$	174,007

A summary of the balances of loans outstanding by days past due, including accruing and non-accruing loans by portfolio class as of September 30, 2014 and December 31, 2013 is as follows:


	September 30, 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	$	-	$	-	$	-	$	533	$	3,601	$	-	$	-	$	-	$	4,134
60 - 89 days		-		-		-		85		2,528		-		-		-		2,613
> 90 days		548		-		311		15		12,546		44		-		-		13,464
Total past due		548		-		311		633		18,675		44		-		-		20,211
Current		1,699		39,805		49,937		24,743		48,746		8,343		10,297		537		184,107
Total loans	$	2,247	$	39,805	$	50,248	$	25,376	$	67,421	$	8,387	$	10,297	$	537	$	204,318
> 90 days still accruing	$	-	$	-	$	-	$	-	$	12,546	$	-	$	-	$	-	$	12,546

	December 31, 2013
	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	$	-	$	-	$	-	$	-	$	5,044	$	54	$	-	$	-	$	5,098
60 - 89 days		-		-		-		-		2,268		15		-		-		2,283
> 90 days		633		-		2,051		632		18,387		44		-		-		21,747
Total past due		633		-		2,051		632		25,699		113		-		-		29,128
Current		2,842		28,606		48,449		20,453		29,728		7,043		7,250		508		144,879
Total loans	$	3,475	$	28,606	$	50,500	$	21,085	$	55,427	$	7,156	$	7,250	$	508	$	174,007
> 90 days still accruing	$	-	$	-	$	-	$	-	$	18,387	$	-	$	-	$	-	$	18,387

Non-accrual Loans

Loans are placed on nonaccrual status when Management believes the collection of the principal and interest is doubtful. A delinquent loan is generally placed in nonaccrual status when:

principal and/or interest is past due for 90 days or more, unless the loan is well-secured or in the process of collection;

the financial strength of the borrower or a guarantor has materially declined;

collateral value has declined; or

other facts would make the repayment in full of principal and interest unlikely.

Loans placed on nonaccrual status are reported to the Board at its next regular meeting. When a loan is placed on nonaccrual, all interest which has been accrued is charged back against current earnings as a reduction in interest income, which adversely affects the yield on loans in the period of reversal. No additional interest is accrued on the loan balance until the collection of both principal and interest becomes reasonably certain.

Loans placed on non-accrual status 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 (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.

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.

A summary of non-accrual loans by portfolio class is as follows:


(dollars in thousands)	September 30, 2014		December 31, 2014
Commercial Real Estate:
Acquisition, development and construction	$	548	$	633
Owner occupied		311		2,051
Commercial and industrial		100		858
Consumer:
Residential mortgage		44		59
HELOC		320		333
Total non-accrual loans	$	1,323	$	3,934

Non-accrual troubled debt restructurings included above	$	85	$	119

Impaired Loans

All loans that are rated Doubtful are assessed as impaired based on the expectation that the full collection of principal and interest is in doubt. All loans that are rated Substandard or are expected to be downgraded to Substandard, require additional analysis to determine if a specific reserve under ASC 310-40 is required. 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 it qualifies for a risk rating of Substandard or worse. 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.

Certain loans were identified and individually evaluated for impairment at September 30, 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 supplemental specific reserve was added. The results of those analyses are presented in the following tables.

The following information is a summary of related impaired loans, excluding loans acquired with deteriorating credit quality, presented by portfolio class as of September 30, 2014:


(dollars in thousands)	Recorded Investment		Unpaid Principal		Related Allowance		Average Recorded Investment		Interest Recorded
With no related allowance recorded:
Commercial Real Estate:
Acquisition, development and construction	$	269	$	269	$	-	$	269	$	12
Non-owner occupied		1,336		1,336		-		1,345		66
Owner occupied		-		-		-		-		-
Commercial and industrial		573		573		-		281		13
Consumer:
Residential mortgage		-		-		-		-		-
HELOC		271		271		-		273		9
Other		-		-		-				-
Total	$	2,449	$	2,449	$	-	$	2,168	$	100
With an allowance recorded:
Commercial Real Estate:
Acquisition, development and construction	$	-	$	-	$	-	$	-	$	-
Non-owner occupied		-		-		-		-		-
Owner occupied		-		-		-		-		-
Commercial and industrial		-		-		-		-		-
Consumer:
Residential mortgage		-		-		-		-		-
HELOC		-		-		-		-		-
Other		-		-		-		-		-
Total	$	-	$	-	$	-	$	-	$	-

The following information is a summary of related impaired loans, excluding loans acquired with deteriorating credit quality, presented by portfolio class as of December 31, 2013:


(dollars in thousands)	Recorded Investment		Unpaid Principal		Related Allowance		Average Recorded Investment		Interest Recorded
With no related allowance recorded:
Commercial Real Estate:
Acquisition, development and construction	$	267	$	267	$	-	$	267	$	19
Non-owner occupied		1,352		1,352		-		1,352		83
Owner occupied		259		259		-		259		-
Commercial and industrial		759		759		-		759		44
Consumer:
Residential mortgage		15		15		-		15		5
HELOC		177		177		-		177		8
Other		-		-		-		-		-
Total	$	2,829	$	2,829	$	-	$	2,829	$	159
With an allowance recorded:
Commercial Real Estate:
Acquisition, development and construction	$	-	$	-	$	-	$	-	$	-
Non-owner occupied		-		-		-		-		-
Owner occupied		-		-		-		-		-
Commercial and industrial		-		-		-		-		-
Consumer:
Residential mortgage		-		-		-		-		-
HELOC		-		-		-		-		-
Other		-		-		-		-		-
Total	$	-	$	-	$	-	$	-	$	-

Loans with deteriorated credit quality acquired as part of the Bank of Virginia acquisition are accounted for under the requirements of ASC 310-30. These loans are not considered impaired and not included in the table above.

Activity in the allowance for loan losses for the nine months ended September 30, 2014 and 2013 is summarized below:


	Commercial Real Estate															Consumer
(dollars in thousands)	Acquisition, Development, Construction			Non-owner Occupied			Owner Occupied			Commercial and Industrial			Guaranteed Student Loans			Residential Mortgage		HELOC		Other			Total
Allowance for loan losses
Beginning balance, December 31, 2013	$	300		$	39		$	322		$	377		$	268		$	120	$	20	$	43		$	1,489

Charge-offs		(6	)		(114	)		-			(55	)		(316	)		-		-		-			(491	)
Recoveries		3			49			-			27			-			4		2		20			105
Net (charge-offs) recoveries		(3	)		(65	)		-			(28	)		(316	)		4		2		20			(386	)

Provision (recovery)		(89	)		186			(151	)		(38	)		224			6		30		(45	)		123
Ending balance,September 30, 2014	$	208		$	160		$	171		$	311		$	176		$	130	$	52	$	18		$	1,226


	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, 2012	$	229		$	231	$	350		$	782		$	-		$	50	$	457		$	11		$	2,110

Charge-offs		-			-		(286	)		-			(66	)		-		(365	)		(6	)		(723	)
Recoveries		1			-		-			18			-			-		-			-			19
Net (charge-offs) recoveries		1			-		(286	)		18			(66	)		-		(365	)		(6	)		(704	)

Provision (recovery)		(121	)		10		557			(657	)		314			40		(53	)		21			111
Ending balance, September 30, 2013	$	109		$	241	$	621		$	143		$	248		$	90	$	39		$	26		$	1,517

A summary of the allowance for loan losses by portfolio segment and impairment evaluation methodology as of September 30, 2014 and December 31, 2013 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
Individually evaluated for impairment	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-
Collectively evaluated for impairment		118		160		171		311		176		130		52		18		1,136
Loans acquired with deteriorated credit quality		90		-		-		-		-		-		-		-		90
Ending balance, September 30, 2014	$	208	$	160	$	171	$	311	$	176	$	130	$	52	$	18	$	1,226

Gross loan balances
Individually evaluated for impairment	$	269	$	1,336	$	-	$	573	$	-	$	-	$	271	$	-	$	2,449
Collectively evaluated for impairment		1,008		36,999		47,023		23,639		67,421		8,201		9,577		537		194,405
Loans acquired with deteriorated credit quality		970		1,470		3,225		1,164		-		186		449		-		7,464
Ending balance, September 30, 2014	$	2,247	$	39,805	$	50,248	$	25,376	$	67,421	$	8,387	$	10,297	$	537	$	204,318


	Commercial Real Estate										Consumer
(dollars in thousands)	Acquisition, Development, Construction		Non-owner Occupied		Owner Occupied		Commercial and Industrial		Guaranteed Student Loans		Residential Mortgage		HELOC		Other		Total
Allowance for loan losses for loans
Individually evaluated for impairment	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-
Collectively evaluated for impairment		260		39		128		377		268		120		20		43		1,255
Loans acquired with deteriorated credit quality		40		-		194		-		-		-		-		-		234
Ending balance, December 31, 2013	$	300	$	39	$	322	$	377	$	268	$	120	$	20	$	43	$	1,489

Gross loan balances
Individually evaluated for impairment	$	267	$	1,352	$	259	$	759	$	-	$	15	$	177	$	-	$	2,829
Collectively evaluated for impairment		2,124		25,728		46,399		18,856		55,427		6,951		6,619		508		162,612
Loans acquired with deteriorated credit quality		1,084		1,526		3,842		1,470		-		190		454		-		8,566
Ending balance, December 31, 2013	$	3,475	$	28,606	$	50,500	$	21,085	$	55,427	$	7,156	$	7,250	$	508	$	174,007

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.

No loans were modified in troubled debt restructurings during the three months ended September 30, 2014. During the nine months ended September 30, 2014, two loans were modified in troubled debt restructurings and one previous troubled debt restructured loan was paid off. During the three and nine months ended September 30, 2013, one loan was modified in a troubled debt restructuring. At September 30, 2014 and December 31, 2013, six and five loans were classified as trouble debt restructurings, respectively. The principal balance outstanding relating to these was $2.8 million and $2.0 million at September 30, 2014 and December 31, 2013, respectively. Of these amounts, $2.7 million and $1.9 million were accruing, respectively. During the three and nine months ended September 30, 2014 and 2013, 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, including modifications of acquired impaired loans, by type of concession granted, are set forth in the following tables:


	Nine Months Ended September 30, 2014
2014 (dollars in thousands)	Number of loans		Rate modification		Term extension		Pre-modification recorded investment		Post-modification recorded investment
Commercial and industrial		1		-	$	512	$	512	$	474
Commercial real estate		1		-	$	595		595		421
Total		2		-	$	1,107	$	1,107	$	895

	Nine Months Ended September 30, 2013
2013 (dollars in thousands)	Number of loans		Rate modification		Term extension		Pre-modification recorded investment		Post-modification recorded investment
Consumer - Residential mortgage		1		-	$	126	$	126	$	153
Total		1		-	$	126	$	126	$	153

Note 6. Intangible Assets

In 2010, the Company acquired a majority interest in the Bank of Virginia. The Company recorded a core deposit intangible related to this acquisition of $249 thousand. This asset represents the estimated fair value of the core deposits and was determined based on the present value of future cash flows related to those deposits considering the industry standard “financial instrument” type present value methodology. The core deposit intangible is amortized over the estimated life of the deposits using the straight-line method. A summary of the three and nine months ending September 30, 2014 activity in this account is as follows:


(dollars in thousands)
Balance at June 30, 2014	$	121
Amortization		(9	)
Balance at September 30, 2014	$	112

(dollars in thousands)
Balance at December 31, 2013	$	139
Amortization		(27	)
Balance at September 30, 2014	$	112

Amortization expense is expected to be approximately $36 thousand per year through 2016 and $30 thousand in 2017.

Note 7. 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, 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.

Loans Held for Investment

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 September 30, 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.

The carrying value and fair values of financial assets and liabilities are as follows:


			Fair Value Measurements at September 30, 2014
(dollars in thousands)	Carrying amount		Level 1		Level 2		Level 3		Fair Value
Assets:
Cash and cash equivalents	$	11,920	$	11,920	$	-	$	-	$	11,920
Securities available for sale		54,581		-		54,581		-		54,581
Securities held to maturity		21,263		-		21,383		-		21,383
Restricted securities		1,525		-		1,525		-		1,525
Net Loans held for investment		203,092		-		-		205,727		205,727
Interest receivable		1,902		-		1,902		-		1,902
Liabilities:
Demand deposits		24,483		-		24,483		-		24,483
Savings and interest-bearing demand deposits		78,786		-		78,786		-		78,786
Time deposits		149,579		-		149,941		-		149,941
FHLB Borrowings		20,000		-		19,658		-		19,658
Interest payable		154		-		154		-		154

			Fair Value Measurements at December 31, 2013
(dollars in thousands)	Carrying amount		Level 1		Level 2		Level 3		Fair Value
Assets:
Cash and cash equivalents	$	13,984	$	13,984	$	-	$	-	$	13,984
Securities available for sale		24,567		-		24,567		-		24,567
Securities held to maturity		14,753		-		14,597		-		14,597
Restricted securities		1,074		-		1,074		-		1,074
Loans held for investment		172,518		-		-		173,444		173,444
Interest receivable		1,655		-		1,655		-		1,655
Liabilities:
Demand deposits		22,845		-		22,845		-		22,845
Savings and interest-bearing demand deposits		60,685		-		60,685		-		60,685
Time deposits		127,284		-		127,966		-		127,966
FHLB Borrowings		10,000		-		9,656		-		9,656
Interest payable		143		-		143		-		143

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:


			Quoted Prices in Active Markets for Identical Assets		Significant Other Observable Inputs		Significant Unobservable Inputs
(dollars in thousands)	Balance		(Level 1)		(Level 2)		(Level 3)
September 30, 2014

U. S. Government Agencies	$	2,957	$	-	$	2,957	$	-
Agency Guaranteed Mortgage-backed securities		51,624		-	$	51,624		-

December 31, 2013

U. S. Government Agencies	$	7,041	$	-	$	7,041	$	-
Agency Guaranteed Mortgage-backed securities		17,526	$	-		17,526	$	-

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. 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 an income or 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 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’ 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. There were no impaired loans fair valued on a nonrecurring basis at September 30, 2014 and December 31, 2013.

Other Real Estate Owned (OREO)

Other real estate owned (“OREO”) is measure at fair value less costs 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:

			Quoted Prices in Active Markets for Identical Assets		Significant Other Observable Inputs		Significant Unobservable Inputs
(dollars in thousands)	Balance		(Level 1)		(Level 2)		(Level 3)
September 30, 2014
OREO	$	1,543	$	-	$	-	$	1,543

December 31, 2013
OREO	$	1,545	$	-	$	-	$	1,545

The following table presents qualitative information about level 3 fair value measurements for financial instruments measured at fair value on a non-recurring basis at September 30, 2014 and December 31, 2013:

	September 30, 2014
(dollars in thousands)	Quantitative Information About Level 3 Fair Value Measurements
Description	Fair Value		Valuation Technique	Unobservable input	Range (Weighted Average)
Other real estate owned	$	1,543	Discounted appraised value	Discount for lack of marketability	6-29% (14%)

	December 31, 2013
(dollars in thousands)	Quantitative Information About Level 3 Fair Value Measurements
Description	Fair Value		Valuation Technique	Unobservable input	Range (Weighted Average)
Other real estate owned	$	1,545	Discounted appraised value	Discount for lack of marketability	6-29% (14%)

Note 8. Stock-Based Compensation

Stock-based compensation arrangements include stock options, restricted stock plans, performance-based awards, stock appreciation rights and employee stock purchase plans. ASC Topic 718 requires all share-based payments to employees to be valued using a fair value method on the date of grant and to be expensed based on that fair value over the applicable vesting period.

At the 2011 Annual Meeting, 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 2014 Annual Meeting, Cordia shareholders approved an amendment to the 2011 Plan to increase the number of shares authorized for issuance by an additional 800,000 shares. As of September 30, 2014, there were 712,854 shares reserved under the 2011 Plan.

There were 20,000 Cordia stock options granted outside the plan prior to the share exchange in March 2013. In addition, there were 10,000 stock options and 12,500 restricted stock shares issued in September 2013 outside the plan as an inducement grant to a newly hired officer.

A summary of the Company’s option activity as of September 30, 2014 and changes during the period then ended are presented in the following table:

					Wgt. Avg.
			Wgt. Avg.		Remaining		Wgt. Avg.		Aggregate
			Exercise		Contractual		Grant Date		Intrinsic
As of 1/1/2014	Stock Options		Price		Life		Fair Value		Value
Outstanding		115,656	$	7.68		8.44	$	2.54	$	88
Vested		28,438	$	12.80		7.36	$	4.31		-
Nonvested		87,218	$	6.01		8.80	$	1.96	$	88

Period Activity
Issued		29,150	$	4.20		-	$	1.52		-
Forfeited		1,328	$	6.40		-	$	5.59		-

As of 9/30/2014
Outstanding		143,478	$	6.98		8.11	$	2.30		-
Vested		52,294	$	9.84		7.29	$	3.21		-
Nonvested		91,184	$	5.34		8.58	$	1.78		-

The stock price as of September 30, 2014 was less than the exercise price for all of the stock options, thus the aggregate intrinsic value is zero.


Outstanding as of September 30, 2014						Wgt. Avg.		Wgt. Avg. Remaining
				Stock Options		Exercise		Contractual
Range of Exercise Prices				Outstanding		Price		Life
$	3.83	$	7.00		116,654	$	5.09		8.51
$	7.01	$	12.00		24,168	$	10.26		6.99
$	60.24	$	60.24		2,656	$	60.24		0.87
					143,478	$	6.98		8.11


Exercisable:						Wgt. Avg.
				Stock Options		Exercise
Range of Exercise Prices				Exercisable		Price
$	3.83	$	7.00		33,040	$	5.43
$	7.01	$	12.00		16,598	$	10.55
$	60.24	$	60.24		2,656	$	60.24
					52,294	$	9.84


Assumptions:
	Nine Months Ended September 30, 2014			Year Ended December 31, 2013
Expected Volatility		30.00	%		30.00	%
Weighted-Average Volatility		30.00	%		30.00	%
Expected Dividends		-			-
Expected Term (In years)		7.00			7.00
Risk-Free Rate		2.15	%		1.42	%

Total intrinsic value of options exercised:	$	-
Total fair value of shares vested:		49,026
Weighted-average period over which nonvested awards are expected to be recognized:		1.36 years

A summary of the Company’s restricted stock activity as of September 30, 2014 and changes during the period then ended are presented in the following table:

		Grant Date
As of 1/1/2014	Restricted Stock	Fair Value
Nonvested	11,700	$4.41

Period Activity
Issued	85,933	$4.20
Vested	17,098	$4.23
Forfeited	-	-

As of 9/30/2014
Nonvested	80,535	$4.22


Total fair value of shares vested:		72,304
Weighted-average period over which nonvested awards are expected to be recognized:		1.21	year(s)
Unamortized compensation expense		$268,849

A total of 578,125 of restricted shares of common stock were sold to founding investors of Cordia predominantly during 2009 and 2010 and are considered at September 30, 2014 more-likely-than-not to not vest due to significant performance based thresholds, for which the vesting time period expires in October 2016.

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 9. Other Comprehensive Income (Loss)

The changes in accumulated other comprehensive income (loss) for the nine months ended September30, 2014 and 2013 are summarized as follows:


	Accumulated Other Comprehensive Income (loss)
(dollars in thousands)	Nine Months Ended September 30,
	2014			2013

Beginning balance	$	(384	)	$	56

Unrealized holding losses on available for sale securities		(153	)		(512	)
Amortization of AFS to HTM reclassification adjustment		36			-
Net current period other comprehensive loss		(117	)		(512	)
Ending balance	$	(501	)	$	(456	)

The following table presents information on amounts reclassified out of accumulated other comprehensive income (loss), by category, during the periods indicated:

(in thousands)	Three Months Ended September 30,					Nine Months Ended September 30,				Affected Line Item on Condensed Consolidated
	2014			2013		2014		2013		Statement of Operations
Available-for-sale securities
Realized gains on sales of securities	$	(3	)	$	-	$	61	$	-	Net gain on sale of available-for-sale securities

Note 10. 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 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.

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.

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. 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.

Item 2. 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” or the “Bank). This discussion and analysis should be read in conjunction with Cordia’s consolidated financial statements and related notes thereto located elsewhere in this report.

General

Cordia was incorporated in 2009. Its founders were former bank CEOs, directors and advisors seeking to invest in undervalued or troubled community banks in the Mid-Atlantic. In March 2013, Cordia completed a share exchange with BVA shareholders resulting in BVA becoming a wholly-owned subsidiary of Cordia. Aside from the shares of BVA common stock, Cordia’s other assets totaled $1.8 million at September 30, 2014, consisting primarily of $1.8 million of cash and $22 thousand of prepaid expenses.

BVA is a state chartered bank headquartered in Midlothian, Virginia with total assets of approximately $301 million at September 30, 2014. BVA provides retail banking services to individuals and commercial customers through banking locations in Chesterfield County, Virginia and one in Henrico County, Virginia.

Executive Overview

Since the beginning of 2013, the Company has substantially increased its lending and funding activities. During this period, the Bank purchased $88.0 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 institutional certificate of deposit accounts and retail transaction accounts, while substantially reducing its cost of funds.

In March 2013, the Company completed its Plan of Share Exchange with Bank of Virginia, effectively combining the two stockholder bases. In August 2013, BVA’s Written Agreement was lifted by its banking regulators.

In the 2nd quarter of 2014, after restructuring its balance sheet, substantially completing the workout of its legacy asset quality issues, recruiting highly qualified new management, and revising the culture underlying its lending and deposit activities, the Company completed an offering of $15.4 million in equity capital and launched the second phase of its organic growth strategy.

In the 3rd quarter of 2014, BVA hired four new officers whose primary responsibilities will be to increase asset originations – including a senior vice president of residential mortgage lending, two first vice presidents of commercial lending, and a vice president of student lending.

Capital Raise

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 organic growth in BVA.

Results of Operations – Three Months Ended September 30, 2014 Compared to Three Months Ended September 30, 2013

Net Income (Loss)

Consolidated net income was $82 thousand for the three months ended September 30, 2014 (the “2014 quarter”) compared to consolidated net income of $208 thousand for the three months ended September 30, 2013 (the “2013 quarter”).

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 before the provision for (recovery of) loan losses increased 13.8% or $258 thousand from $1.9 million for the 2013 quarter to $2.1 million for the 2014 quarter. Net interest margin was 3.01% for the third quarter of 2014 compared to 3.26% for the third quarter of 2013.

Interest income increased $301 thousand to $2.6 million for the 2014 quarter. Included in the 2014 quarter was $44 thousand of purchase accounting loan accretion income compared to $103 thousand for the 2013 quarter. Excluding that component, interest income was $2.6 million for the 2014 quarter and $2.2 million the 2013 quarter.

Interest expense for the 2014 quarter was $500 thousand, compared to $457 thousand for the 2013 quarter. This increase of $43 thousand was due primarily to an increase in time deposits offset by a ten basis point reduction in the average cost of interest bearing liabilities.

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. These tables include acquisition accounting adjustments and therefore do not directly represent contractual rates paid or received.


	For the three months ended September 30,
(dollars in thousands)	2014								2013
	Average Balance			Interest		Yield/Rate			Average Balance			Interest		Yield/Rate
Earning Assets:
Loans held for investment (1)	$	201,953		$	2,275		4.47	%	$	170,969		$	2,182		5.06	%
Securities available for sale		70,848			346		1.94	%		27,509			123		1.77	%
Federal Funds and deposits with Banks		7,075			4		0.22	%		28,632			19		0.26	%
Total earning assets		279,876			2,625		3.72	%		227,110			2,324		4.06	%
Allowance for loan losses		(1,392	)							(1,554	)
Other assets		17,350								9,511
Total	$	295,834							$	235,067
Interest-bearing liabilities:
Demand deposits	$	13,538		$	11		0.32	%	$	13,821		$	11		0.32	%
Savings deposits		64,443			42		0.26	%		44,673			50		0.44	%
Time deposits		145,946			390		1.06	%		130,032			354		1.08	%
FHLB borrowings		20,000			57		1.13	%		10,000			42		1.67	%
Total interest-bearing liabilities		243,927			500		0.81	%		198,526			457		0.91	%
Demand deposits		24,160								21,869
Other liabilities		829								1,645
Stockholders' equity		26,918								13,027
Total	$	295,834							$	235,067

Net interest income				$	2,125							$	1,867
Net interest rate spread (2)							2.91	%							3.15	%
Net interest margin (3)							3.01	%							3.26	%

⁽¹⁾

Non-accrual loans are included in average balances outstanding, with no related interest income during non-accrual period.

⁽²⁾

Represents the difference between the yield on earnings assets and cost of funds.

⁽³⁾

Represents net interest income divided by average interest-earning assets.

Provision for Loan Losses

A $106 thousand recovery of the provision for loan losses was recorded for the 2014 quarter compared to a $23 thousand recovery for the 2013 quarter. Due to low charge-offs in recent quarters, the historical loss ratio declined by 25 bps between June 30, 2014 and September 30, 2014, lowering the historical reserve need. This reduction was partially offset by increases in specific reserves, qualitative factors and a provision for the guaranteed student loan portfolio.

Non-interest Income

Noninterest income was $82 thousand for both the 2014 and 2013 quarters.

The following table sets forth the principal components of non-interest income for the quarters ended September 30, 2014 and 2013:

For the three months ended September 30, (dollars in thousands)	2014			2013
Service charges on deposit accounts	$	44		$	31
Net loss on sale of "AFS" securities		(3	)		-
Other fee income, net		41			51
Total non-interest income	$	82		$	82

Non-interest Expense

Noninterest expense increased $467 thousand, or 26.5%, from $1.8 million for the 2013 quarter to $2.2 million for the 2014 quarter. The increase was due primarily to increases of $275 thousand in salaries and benefits, $63 thousand in student loan servicing expenses and $66 thousand in data processing and communications. The increase in salaries and benefits was primarily due to the cost of staff additions and stock based compensation.

The following table sets forth the primary components of non-interest expense for the quarters ended September 30, 2014 and 2013:

For the three months ended September 30, (dollars in thousands)	2014		2013
Salaries and employee benefits	$	1,266	$	991
Professional services		92		67
Occupancy		139		137
Data processing and communications		206		140
FDIC assessment and bank fees		99		102
Bank franchise taxes		23		14
Student loan servicing fees and other loan expenses		144		81
Other real estate expenses		6		5
Gain on sale of other real estate owned		-		(36	)
Supplies and equipment		82		66
Insurance		40		42
Director's fees		24		34
Marketing and business development		15		19
Other operating expenses		95		102
Total non-interest expense	$	2,231	$	1,764

Income Tax Expense

Under the provisions of the Internal Revenue Code, the Company has approximately $18.5 million of net operating loss carryforwards (net of Section 382 limitation), which will expire if unused beginning in 2024. As of September 30, 2014, deferred tax assets of $6.2 million have been fully reserved with a valuation allowance. It is estimated that $6.2 million of the valuation allowance is available to be reversed if it is more-likely-than-not that sufficient taxable income will be generated in the future. Of the net operating losses that occurred prior to the change in control of BVA in December 2010, the amount of the loss carryforward available to offset taxable income is limited to approximately $254,000 per year for twenty years.

Results of Operations – Nine Months Ended September 30, 2014 Compared to Nine Months Ended September 30, 2013

Net Income (Loss)

Consolidated net loss was $472 thousand for the nine months ended September 30, 2014 (the “2014 period”) compared to consolidated net income of $690 thousand for the nine months ended September 30, 2013 (the “2013 period”).

Net Interest Income

Net interest income before the provision for loan losses decreased 2.5% or $154 thousand from $6.2 million for the 2013 period to $6.1 million for the 2014 period. Net interest margin for the 2014 period was 3.13% compared to 3.67% for the 2013 period.

Interest income of $7.6 million for the 2014 period decreased $46 thousand from the 2013 period. Included in the 2014 period was $203 thousand of purchase accounting loan accretion income compared to $1.2 million for the 2013 period. Excluding that component, interest income increased to $7.4 million for the 2014 period from $6.4 million for the 2013 period.

Interest expense for the 2014 period was $1.5 million compared to $1.4 million for the 2013 period. This increase of $108 thousand was due primarily to an increase of $15.5 million in the average balance of time deposits offset by a five basis point reduction in the average cost of interest bearing liabilities. The Bank continues to make a concerted effort to allow higher-priced time deposits to roll off as they mature and promote transaction, money market deposit accounts and savings accounts.

Average Balances and Yields


	For the nine months ended September 30,
(dollars in thousands)	2014								2013
	Average Balance			Interest		Yield/Rate			Average Balance			Interest		Yield/Rate
Earning Assets:
Loans held for investment (1)	$	194,990		$	6,676		4.58	%	$	169,616		$	7,277		5.74	%
Securities available for sale		55,280			864		2.09	%		20,813			265		1.70	%
Federal Funds and deposits with Banks		10,272			19		0.25	%		37,384			63		0.23	%
Total earning assets		260,542			7,559		3.88	%		227,813			7,605		4.46	%
Allowance for loan losses		(1,406	)							(1,814	)
Other assets		15,735								9,133
Total	$	274,871							$	235,132
Interest-bearing liabilities:
Demand deposits	$	13,056		$	32		0.33	%	$	14,183		$	45		0.42	%
Savings deposits		58,530			128		0.29	%		50,876			149		0.39	%
Time deposits		139,766			1,150		1.10	%		124,254			1,039		1.12	%
FHLB borrowings		16,740			154		1.23	%		10,000			123		1.64	%
Total interest-bearing liabilities		228,092			1,464		0.86	%		199,313			1,356		0.91	%
Demand deposits		22,841								20,190
Other liabilities		1,896								510
Stockholders' equity		22,042								15,119
Total	$	274,871							$	235,132

Net interest income				$	6,095							$	6,249
Net interest rate spread (2)							3.02	%							3.55	%
Net interest margin (3)							3.13	%							3.67	%

(1)

Non-accrual loans are included in average balances outstanding, with no related interest income during non-accrual period.

(2)

Represents the difference between the yield on earnings assets and cost of funds.

(3)

Represents net interest income divided by average interest-earning assets.

Provision for Loan Losses

A $123 thousand provision for loan losses for the 2014 period was recorded compared to $111 thousand for the 2013 quarter. The increase is due to increased loan volume.

Non-interest Income

Noninterest income for the 2014 period was $267 thousand, compared to $215 thousand for the 2013 period. The increase was primarily the result of a net gain on the sale of available for sale securities.

The following table sets forth the principal components of non-interest income for the periods ended September 30, 2014 and 2013:

For the nine months ended September 30, (dollars in thousands)	2014		2013
Service charges on deposit accounts	$	89	$	93
Net gain on sale of "AFS" securities		61		-
Other fee income, net		117		122
Total non-interest income	$	267	$	215

Non-interest Expense

Noninterest expense increased $1.0 million, or 18.5%, from $5.7 million for the 2013 quarter to $6.7 million for the 2014 quarter. The increase was due primarily to increases of $672 thousand in salaries and benefits and $282 thousand in student loan servicing expenses. The increase in salaries and benefits was primarily due to increased incentive compensation, stock based compensation and staff additions associated with the Company’s growth strategy.

The following table sets forth the primary components of non-interest expense for the periods ended September 30, 2014 and 2013:

For the nine months ended September 30, (dollars in thousands)	2014		2013
Salaries and employee benefits	$	3,822	$	3,150
Professional services		323		340
Occupancy		426		427
Data processing and communications		514		409
FDIC assessment and bank fees		289		336
Bank franchise taxes		79		60
Student loan servicing fees and other loan expenses		480		198
Other real estate expenses		28		33
Gain on sale of other real estate owned		-		(36	)
Supplies and equipment		240		199
Insurance		125		126
Director's fees		67		106
Marketing and business development		30		56
Other operating expenses		288		259
Total non-interest expense	$	6,711	$	5,663

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 September 30, 2014, total loans held for investment (net of reserves) were $203.1 million versus $172.5 million at December 31, 2013.

The following table sets forth the composition of the loan portfolio by category at the dates indicated.

	At September 30,						At December 31,
	2014						2013
(dollars in thousands)	Amount			Percent			Amount			Percent
Commercial Real Estate:
Acquisition, development and construction	$	2,247			1.1	%	$	3,475			2.0	%
Non-owner occupied		39,805			19.5	%		28,606			16.4	%
Owner occupied		50,248			24.6	%		50,500			29.0	%
Commercial and industrial		25,376			12.4	%		21,085			12.1	%
Guaranteed Student Loans		67,421			33.0	%		55,427			31.9	%
Consumer:
Residential mortgage		8,387			4.1	%		7,156			4.1	%
HELOC		10,297			5.0	%		7,250			4.2	%
Other		537			0.3	%		508			0.3	%
Total loans		204,318			100.0	%		174,007			100.0	%
Allowance for loan losses		(1,226	)					(1,489	)
Total loans, net of allowance for loan losses	$	203,092					$	172,518

The largest component of the loan portfolio is comprised of various types of commercial real estate loans. At September 30, 2014, commercial real estate loans totaled $92.3 million or 45.2% of the total portfolio. Guaranteed student loans totaled $67.4 million, commercial and industrial loans totaled $25.4 million and consumer loans, which were comprised principally of residential mortgage and home equity loans, totaled $19.2 million. Residential mortgage loans consisted of first and second mortgages on single family residential dwellings. Other consumer loans above include consumer lines of credit and installment loans.

Allowance for Loan Losses

At September 30, 2014, our allowance for loan losses was $1.2 million, or 0.60% of total loans and 92.7% of non-performing loans. The allowance is net of $386 thousand of net charge offs taken during the nine months ended September 30, 2014 and includes a $123 thousand provision for the period. At December 31, 2013, our allowance for loan losses was $1.5 million, or .86% of total loans outstanding and 37.9% of non-performing loans.

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 allowance for loan losses. 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 or originated since the date of our initial investment are evaluated and an appropriate allowance for loan losses 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 allowance. Loans acquired with deteriorated credit quality that were re-written are treated as new loans and are included in management’s calculation of the allowance for loan losses.

The allowance 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 allowance 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. Consideration is also given to the results of regulatory examinations.

The allowance for loan losses 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 allowance consists of specific and general components. The specific component relates to loans that are classified as substandard or worse and loans classified as TDR’s. 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.

The decline in the allowance for loan losses as a percentage of total loans from December 31, 2013 to September 30, 2014 is largely due to the continued improvement in the asset quality of the portfolio and the $26.5 million of guaranteed student loan portfolios that were purchased in the first nine months of 2014. The student loans are approximately 98% guaranteed by the U.S. Department of Education (full principal and accrued interest upon default). Therefore, only the unguaranteed portion of approximately $3.5 million is considered in the Company’s allowance for loan loss methodology. Removing the guaranteed portion of the student loans from the total loans would result in an allowance for loan losses of approximately 0.87% of outstanding loans. The Company also benefits from purchase accounting discounts on loans that resulted from the acquisition of the Bank in 2010. These discounts effectively provide an additional cushion against potential loan losses. Combining the loan loss allowance and purchasing accounting discounts on loans other than guaranteed student loans, the ratio is 1.00%.

Changes affecting the allowance for loan losses for the nine months ended September 30, 2014 and the year ended December 31, 2013, are summarized in the following table.

(dollars in thousands)	Nine Months Ended September 30, 2014			Year Ended December 31, 2013

Allowance for loan losses at beginning of period	$	1,489		$	2,110

Provision for loan losses		123			19

Charge-offs:
Commercial real estate		(120	)		(289	)
Commercial and industrial		(55	)		-
Guaranteed Student Loans		(316	)		(94	)
Consumer		-			(403	)
Total charge-offs		(491	)		(786	)

Recoveries:
Commercial real estate		52			-
Commercial and industrial		27			135
Guaranteed Student Loans		-			-
Consumer		26			11
Total recoveries		105			146
Net charge-offs		(386	)		(640	)
Allowance for loan losses at end of period	$	1,226		$	1,489

Allowance for loan losses to non-performing loans		92.67	%		37.85	%
Allowance for loan losses to total loans outstanding at end of period		0.60	%		0.86	%
Allowance for loan losses to total loans outstanding less the guaranteed portion of student loans ($63.9 million and $52.4 million as of September 30,2014 and December 31, 2013, respectively).		0.87	%		1.22	%
Net charge-offs to average loans during the period		0.20	%		0.38	%

The increase in the allowance to non-performing loan ratio from December 31, 2013 is due to the continued reduction of non-accrual loans from $3.9 million at December 31, 2013 to $1.3 million at September 30, 2014.

Included in the above table is the activity related to the portion of the allowance for loan losses 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 allowance for loan losses is as follows:

(dollars in thousands)	Nine Months Ended September 30, 2014			Year Ended December 31, 2013

Allowance for loan losses at beginning of period	$	234		$	537
Provision for loan losses		(7	)		(14	)

Charge-offs:
Commercial real estate		(120	)		(289	)
Commercial and industrial		(17	)		-
Consumer					-
Total charge-offs		(137	)		(289	)

Recoveries:		-			-

Net charge-offs		(137	)		(289	)
Allowance for loan losses at end of period	$	90		$	234

The following table represents the allocation of the allowance for loan losses at the dates indicated. Notwithstanding these allocations, the entire allowance is available to absorb loan losses in any loan category.

	At September 30, 2014								At December 31, 2013
(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
Commercial real estate	$	539		44	%		45	%	$	661		45	%		47	%
Commercial and industrial		311		26	%		13	%		377		25	%		12	%
Guaranteed Student Loans		176		14	%		33	%		268		18	%		32	%
Consumer		200		16	%		9	%		183		12	%		9	%
Total allowance for loan losses	$	1,226		100	%		100	%	$	1,489		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 5 of the Notes to the Consolidated Financial Statements for more detail.

The following is the distribution of loans by credit quality and class as of September 30, 2014 and December 31, 2013:

September 30, 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		-		2,253		2,822		1,930		67,421		36		1,097		45		75,604
3 Satisfactory		508		20,152		27,508		13,705		-		4,076		5,877		407		72,233
4 Pass		500		15,805		16,693		7,785		-		3,968		2,286		85		47,122
5 Special mention				125		-		219		-		121		317		-		782
6 Substandard		269		-		-		573		-		-		271		-		1,113
7 Doubtful		-		-		-		-		-		-		-		-		-
		1,277		38,335		47,023		24,212		67,421		8,201		9,848		537		196,854
Loans acquired with deteriorating credit quality		970		1,470		3,225		1,164		-		186		449		-		7,464
Total loans	$	2,247	$	39,805	$	50,248	$	25,376	$	67,421	$	8,387	$	10,297	$	537	$	204,318


December 31, 2013 (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		-		2,078		2,966		2,170		55,427		73		205		80		62,999
3 Satisfactory		325		10,563		25,264		8,290		-		3,965		3,541		350		52,298
4 Pass		1,500		12,990		14,606		8,128		-		2,710		2,243		78		42,255
5 Special mention		299		1,449		3,486		268		-		203		630		-		6,335
6 Substandard		267		-		336		759		-		15		177		-		1,554
7 Doubtful		-		-		-		-		-		-		-		-		-
		2,391		27,080		46,658		19,615		55,427		6,966		6,796		508		165,441
Loans acquired with deteriorating credit quality		1,084		1,526		3,842		1,470		-		190		454		-		8,566
Total loans	$	3,475	$	28,606	$	50,500	$	21,085	$	55,427	$	7,156	$	7,250	$	508	$	174,007

As shown in the tables above, substandard and doubtful loans were $1.1 million at September 30, 2014, or 0.5% of the total loan portfolio. This compares to $1.6 million, or 0.9% of the total loan portfolio at December 31, 2013. Special mention loans decreased $5.6 million from $6.3 million at December 31, 2013 to $782 thousand at September 30, 2014 and loans graded “pass” or better increased $37.4 million from $157.6 million at December 31, 2013 to $195.0 million at September 30, 2014. The decrease in special mention loans is due to loans acquired with deteriorated credit quality, primarily rated substandard, that have been re-written and reclassified to satisfactory portfolio loans.

The Bank has continued to employ a third party loan review firm for annual reviews and periodic special assignments. The most recent evaluation was completed in May 2014, with another review scheduled during the second quarter of 2015. The scope of the 2014 loan file review totaled approximately 70% 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.

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 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.

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 may be returned to accrual status after:

payments are received for a reasonable period, usually 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 loan is returned to accrual status after restructuring the risk rating remains unchanged until a satisfactory payment history is re-established.

Nonperforming assets totaled $2.9 million or 1.0% of total assets at September 30, 2014 and are comprised of non-accrual loans of $1.2 million, non-accrual troubled debt restructures (“TDR’s”) of $85 thousand and other real estate owned of $1.5 million. The balance of nonperforming assets at December 31, 2013 was $5.5 million or 2.3% of total assets. The decrease at September 30, 2014 from December 31, 2013 was a result of management’s continued aggressive approach to workout and resolution of problem loans coupled with growth in total assets.

Real estate acquired through, or in lieu of, foreclosure is held for sale and is stated at the estimated fair market value of the property, less estimated disposal costs. Any excess of the principal over the estimated fair market value at the time of acquisition is charged to the allowance for loan losses. The estimated fair market value is reviewed periodically by management and any write-downs are charged against current earnings. Development and improvement costs relating to property are capitalized unless such added costs cause the properties recorded value to exceed the estimated fair market value. Net operating income or expenses of such properties are included in collection, repossession and other real estate owned expenses.

A summary of nonperforming assets, including troubled debt restructurings, as of the dates indicated follows:

(dollars in thousands)	Quarter ended September 30, 2014			Year ended December 31, 2013

Non-accrual troubled debt restructurings	$	85		$	119
Other non-accrual loans		1,238			3,815
Total non-accrual loans		1,323			3,934
Other real estate owned		1,543			1,545
Total non-performing assets	$	2,866		$	5,479

Total non-accrual loans to total loans		0.65	%		2.26	%
Total non-performing assets to total assets		0.95	%		2.33	%

Accruing troubled debt restructurings	$	2,628		$	1,837

Loans With Deteriorated Credit Quality

In the 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.

(dollars in thousands)	September 30, 2014			December 31, 2013

Contract principal balance	$	7,516		$	8,689
Accretable discount		(47	)		(62	)
Nonaccretable discount		(5	)		(61	)
Book value of loans	$	7,464		$	8,566

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 $39.3 million at December 31, 2013 as compared to $75.8 million at September 30, 2014. At September 30, 2014, the securities portfolio consisted of $54.5 million of securities available for sale, at fair value and $21.3 million of securities held to maturity, at amortized cost.

The table below presents the amortized cost, gross unrealized gains and losses, and fair value of securities available for sale at September 30, 2014 and December 31, 2013.

	September 30, 2014

	Amortized		Gross Unrealized					Estimated
(dollars in thousands)	Cost		Gains		Losses			Fair Value
U.S. Government agencies	$	2,982	$	-	$	(25	)	$	2,957
Agency guaranteed mortgage-backed securities		51,802		44		(222	)		51,624
Total	$	54,784	$	44	$	(247	)	$	54,581

	December 31, 2013

	Amortized		Gross Unrealized					Estimated
(dollars in thousands)	Cost		Gains		Losses			Fair Value
U.S. Government agencies	$	7,038	$	56	$	(53	)	$	7,041
Agency guaranteed mortgage-backed securities		17,578		10		(62	)		17,526
Total	$	24,616	$	66	$	(115	)	$	24,567

The table below presents the carry value, gross unrealized gains and losses, and fair value of securities held to maturity at September 30, 2014 and December 31, 2013.

	September 30, 2014

	Carry		Gross Unrealized					Estimated
(dollars in thousands)	Value		Gains		Losses			Fair Value
Agency guaranteed mortgage-backed securities	$	21,263	$	145	$	(25	)	$	21,383

	December 31, 2013

	Carry		Gross Unrealized					Estimated
(dollars in thousands)	Value		Gains		Losses			Fair Value
Agency guaranteed mortgage-backed securities	$	14,753	$	-	$	(156	)	$	14,597

Deposits and Other Interest-Bearing Liabilities

At September 30, 2014, total deposits were $252.9 million, compared to $210.8 million at December 31, 2013. 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 $221.9 million at September 30, 2014, or 87.7% of total deposits, compared to $194.5 million at December 31, 2013, or 92.3% of total deposits. Deposits have been the primary source of funding and have enabled us to successfully meet both our short-term and long-term liquidity needs. During the nine months ended September 30, 2014, money market deposits primarily from institutional investors increased $16.7 million. In addition, during the nine months ended September 30, 2014, institutional time deposits increased by $24.3 million. Our loan-to-deposit ratio was 80.8% at September 30, 2014 and 82.5% at December 31, 2013.

The following table sets forth our deposits by category at the dates indicated.

	September 30, 2014					December 31, 2013
(dollars in thousands)	Amount		Percent			Amount		Percent
Non-interest bearing demand accounts	$	24,483		9.7	%	$	22,845		10.8	%
NOW accounts		13,945		5.5	%		13,072		6.2	%
Savings and money market accounts		64,841		25.6	%		47,613		22.6	%
Times deposits - less than $100,000		49,233		19.5	%		51,053		24.2	%
Times deposits - $100,000 or more		100,446		39.7	%		76,231		36.2	%
Total	$	252,948		100.0	%	$	210,814		100.0	%

The maturity distribution of our time deposits of $100,000 or more and other time deposits at September 30, 2014, is set forth in the following table:

	September 30, 2014
(dollars in thousands)	Time deposits of $100K and greater		Time deposits of less than $100K		Total
Months to maturity:
Three months or less	$	9,529	$	6,281	$	15,810
Over three months to twelve months		48,223		20,749		68,972
Over twelve months to three years		37,528		18,389		55,917
Over three years		5,166		3,814		8,980
Total	$	100,446	$	49,233	$	149,679

At September 30, 2014, 57.5% 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 smaller core deposits.

Management monitors maturity trends in time deposits as part of its overall asset liability management strategy.

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‘s 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 20.0% from $210.8 million at December 31, 2013 to $252.9 million at September 30, 2014. 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 36.2% from $47.6 million at December 31, 2013 to $64.8 million at September 30, 2014. Time deposits in excess of $100,000 grew 31.6% from $76.2 million at December 31, 2013 to $100.3 million at September 30, 2014. As BVA looks to implement other loan growth initiatives for 2014, it has developed several funding strategies, including judicious use of brokered and institutional deposits, to augment core deposit growth and further reduce the cost of funds. Development of several sources of funding beyond core deposit growth ensures maximum liquidity access without dependence on higher cost sources of funds.

BVA maintains an investment portfolio of marketable securities that may be used for liquidity purposes by either pledging them through repo 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 September 30, 2014, BVA had a total of $22.5 million committed repo 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 2013 and the nine months ended September 30, 2014 and remain fully available. BVA also maintains a $2.5 million secured line of credit as well as a $2.0 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 September 30, 2014 and December 31, 2013, BVA had $20.0 million and $10.0 million, respectively, in secured borrowings outstanding with the FHLB Atlanta against pledged eligible mortgage loan collateral and investment securities, at an average interest rate of 1.12% as of September 30, 2014. As of September 30, 2014, BVA had a total credit availability of $39.1 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 September 30, 2014 and December 31, 2013, 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% for tier 1 risk-based capital ratio, and 10% for total risk-based capital ratio.

BVA exceeded all the regulatory capital requirements at the dates indicated and was considered well-capitalized, as set forth in the following table. Cordia completed a capital raise of $15.4 million on April 10, 2014. A substantial portion of the proceeds were invested in BVA, resulting in BVA having capital ratios as of September 30, 2014 that are materially higher than the capital ratios as of December 31, 2013.

	Minimum Requirements
(dollars in thousands)	Well Capitalized			Adequately Capitalized			September 30, 2014			December 31, 2013
Tier 1 capital							$	25,758		$	14,127
Tier 2 capital								1,226			1,489
Total qualifying capital							$	26,984		$	15,616
Total risk-adjusted assets							$	166,457		$	138,869

Tier 1 leverage ratio		5	%		4	%		8.71	%		6.09	%
Tier 1 risked-based capital ratio		6	%		4	%		15.47	%		10.17	%
Total risk-based capital ratio		10	%		8	%		16.21	%		11.25	%

Cordia is considered a small bank holding company, based on its asset size under $500 million. 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 an 8.6% increase in net interest income at September 30, 2014, as compared to an 11.6% increase at December 31, 2013. A 200 basis point rate increase would result in the depreciation of the Bank’s Economic Value of Equity by 8.3% at September 30, 2014, compared to 15.1% depreciation at December 31, 2013.

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 September 30, 2014, we had issued commitments to extend credit of $18.8 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.

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 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 to absorb future 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 allowance: the systematic methodology used to determine the appropriate level of the allowance to provide assurance they are maintained in accordance with accounting principles generally accepted in the United States of America; the accounting policies for loan charge-offs and recoveries; the assessment and measurement of impairment in the loan portfolio; and the loan grading system.

We evaluate loans graded substandard or worse individually for impairment. These evaluations are based upon expected discounted cash flows or collateral values. If the evaluation shows that the loan’s expected discounted cash flows or underlying collateral is not sufficient to repay the loan as agreed in accordance with the terms of the loan, then a specific reserve is established for the amount of impairment, which represents the difference between the principal amount of the loan less the expected discounted cash flows or value of the underlying collateral, net of selling costs.

For loans without individual measures of impairment which are loans graded special mention or better, we make estimates of losses for pools of loans grouped by similar characteristics, including the type of loan as well as the assigned loan classification. A loss rate reflecting the expected loss inherent in a group of loans is derived based upon estimates of default rates for a given loan grade and the predominant collateral type for the group. The resulting estimate of losses for pools of loans is adjusted for relevant environmental factors and other conditions of the portfolio of loans, including: borrower and industry concentrations; levels and trends in delinquencies, charge-offs and recoveries; changes in underwriting standards and risk selection; level of experience, ability and depth of lending management; and national and local economic conditions.

The amount of estimated impairment for individually evaluated loans and pools of loans is added together for a total estimate of loan losses. This estimate of losses is compared to our allowance for loan losses as of the evaluation date and, if the estimate of losses is greater than the allowance, 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 allowance exceeds the estimate is evaluated to determine whether the allowance falls outside a range of estimates. If the estimate of losses is below the range of reasonable estimates, the allowance 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 allowance is materially overstated. If different assumptions or conditions were to prevail and it is determined that the allowance 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 consolidated 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 3. Quantitative and Qualitative Disclosures about Market Risk

The information required by this Item 3 is incorporated by reference to information appearing in the MD&A Section of this Quarterly Report on Form 10-Q, more specifically in the sections entitled “Interest Rate Sensitivity” and “Liquidity Contingency Plan”.

Item 4. Controls and Procedures

The Company’s management, including the Company’s principal executive officer and principal accounting 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 the Company’s disclosure controls and procedures were effective as of the end of the period covered by this report to ensure that information required to be disclosed in the reports that the company files or submits under the Exchange Act are recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to management, including the Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.

Management is also responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rule 13a-15 (f) under the Exchange Act). There have been no changes in the Company’s internal control over financial reporting during the three months ended September 30, 2014 that have materially affected, or are reasonably likely to affect, the Company’s internal control over financial reporting.

Part II. Other Information

Item 1. Legal Proceedings

Periodically, there have been various claims and lawsuits against us incident to our business. We are not a party to any pending legal proceedings that we believe would have a material adverse effect on our financial condition, results of operations or cash flows.

Item 1A. Risk Factors

For information regarding the Company’s risk factors, se Part I, Item 1A “Risk Factors” in the Company’s Annual Report on Form 10-K for the year ended December 31, 2013, file with the Securities and Exchange Commission on March 26, 2014. As of September 30, 2014, the risk factors of the Company have not materially changed from those disclosed in the Annual Report on Form 10-K for the year ended December 31, 2013.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

(a)

None

(b)

None

(c)

Cordia did not repurchase any of its stock during the quarter ended September 30, 2014 and did not have any outstanding repurchase authorizations during that period.

Item 3. Defaults Upon Senior Securities

Not Applicable

Item 4. Mine Safety Disclosures

Not Applicable.

Item 5. Other Information

None.

Item 6. Exhibits

Exhibit No.	Exhibit
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 Acting Chief Financial Officer and Principal Financial Officer
32	Section 1350 Certification
101.1	The following materials from the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2014, 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.

SIGNATURES

Pursuant to the requirements 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.

November 7, 2014		/s/ Jack Zoeller
		Jack Zoeller
		President and Chief Executive Officer

November 7, 2014		/s/ Mark Severson
		Mark Severson
		Chief Financial Officer

Cordia Bancorp Inc - FORM 10-Q - November 7, 2014

Attached files

Cordia Bancorp Inc Reports