UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

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Form 10-Q

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☒    QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2015

☐    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from _______ to _______

FIRST CAPITAL BANCORP, INC.

(Exact name of registrant as specified in its charter)

 

4222 Cox Road, Glen Allen, Virginia 23060

(Address of principal executive offices)

804-273-1160

(Registrant’s telephone number, including area code)

N/A

(Former name, former address and former fiscal year, if changed since last report)

Indicate by check 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  ☒  No  ☐

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  ☒  No  ☐

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 definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes  ☐  No  ☒

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date:

12,950,267 shares of Common Stock, par value $.01 per share, were outstanding at May 11, 2015.

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PART I – FINANCIAL INFORMATION

Item 1 – Financial Statements

 

First Capital Bancorp, Inc. and Subsidiary

Consolidated Statements of Financial Condition

 

 

 

See notes to consolidated financial statements.

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First Capital Bancorp, Inc. and Subsidiary

Consolidated Statements of Operations

 

 

See notes to consolidated financial statements

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First Capital Bancorp, Inc. and Subsidiary

Consolidated Statements of Comprehensive Income

 

See notes to consolidated financial statements

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First Capital Bancorp, Inc. and Subsidiary

Consolidated Statements of Stockholders’ Equity

Three Months Ended March 31, 2015 and 2014

(Unaudited)

(Dollars in thousands)

 

 

See notes to consolidated financial statements

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First Capital Bancorp, Inc. and Subsidiary

Consolidated Statements of Cash Flows

For the Three Months Ended March 31, 2015 and 2014

 

 

 

 

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First Capital Bancorp, Inc. and Subsidiary

Consolidated Statements of Cash Flows

For the Three Months March 31, 2015 and 2014

(Continued)

 

 

 

 

See notes to consolidated financial statements

 

 

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Note 1 – Basis of Presentation

First Capital Bancorp, Inc. (the Company) is the holding company of and successor to First Capital Bank (the Bank).  In 2006, the Company acquired all of the outstanding stock of the Bank in a statutory share exchange transaction pursuant to an Agreement and Plan of Reorganization dated September 5, 2006, between the Company and the Bank (the Agreement).  Under the terms of the Agreement, the shares of the Bank’s common stock were exchanged for shares of the Company’s common stock on a one-for-one basis.  As a result, the Bank became a wholly owned subsidiary of the Company, the Company became the holding company of the Bank and the stockholders of the Bank became stockholders of the Company. 

The Company conducts all of its business activities through the branch offices of its wholly owned subsidiary bank, First Capital Bank.  First Capital Bank created RE1, LLC, and RE2, LLC, wholly owned Virginia limited liability companies for the sole purpose of taking title to property acquired in lieu of foreclosure.  RE1, LLC, and RE2, LLC have been consolidated with First Capital Bank.  The Company exists primarily for the purpose of holding the stock of its subsidiary, the Bank, and such other subsidiaries that it may acquire or establish.

The Company has one other wholly owned subsidiary, FCRV Statutory Trust 1 (the Trust), a Delaware Business Trust that was formed in connection with the issuance of trust preferred debt in 2006.  Pursuant to current accounting standards, the Company does not consolidate the Trust.

The consolidated financial statements include the accounts of First Capital Bancorp, Inc. and its wholly owned subsidiary, First Capital Bank.  All material intercompany balances and transactions have been eliminated.

In management’s opinion the accompanying unaudited consolidated financial statements, reflect all adjustments, consisting solely of normal recurring accruals, necessary for a fair presentation of the financial information as of March 31, 2015, and December 31, 2014, and for the three months ended March 31, 2015 and 2014, in conformity with accounting principles generally accepted in the United States of America (GAAP).  Results for the three-month period ended March 31, 2015, are not necessarily indicative of the results that may be expected for the full year ending December 31, 2015.  

The organization and business of the Company, accounting policies followed, and other related information are contained in the notes to the consolidated financial statements of the Company as of and for the year ended December 31, 2014, filed as part of the Company’s annual report on Form 10-K.  These interim consolidated financial statements should be read in conjunction with the annual consolidated financial statements.

Certain reclassifications have been made to amounts presented in the Consolidated Statements of Financial Condition as of December 31, 2014 to conform to the current period presentation.

 

Note 2 – Use of Estimates

To prepare financial statements in conformity with GAAP management makes estimates and assumptions based on available information.  These estimates and assumptions affect the amounts reported in the consolidated financial statements and the disclosures provided, and actual results may be different.  In particular, the allowance for loan losses, valuation of other real estate owned, income taxes, and fair values of financial instruments are subject to change.

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Note 3 – Earnings per common share

Basic earnings per share (EPS) excludes potential dilution and is computed by dividing net income available to common shareholders by the weighted average number of common shares outstanding for the period.  Diluted EPS reflects the potential dilution that could occur if securities or other contracts to issue common stock that have a dilutive impact on shares outstanding were exercised or converted into common stock, or resulted in the issuance of common stock that then shared in the earnings of the Company.  

The basic and diluted EPS calculations are as follows:

 

 

The Company has excluded options convertible into 30 thousand shares of common stock for the three months ended March 31, 2015, from the calculation of diluted earnings per share because they were anti-dilutive.

The Company excluded options convertible into 33 thousand shares of common stock for the three months ended March 31, 2014, from the calculation of diluted earnings per share because they were anti-dilutive. 

 

 

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Note 4 – Stock-Based Compensation

 

Accounting standards require the Company to measure compensation cost for the type of stock-based awards the Company issues at fair value on the date of grant and recognize compensation expense in the consolidated statements of operations over the service period that the awards are expected to vest.

Stock-based compensation expense during the three months ended March 31, 2015 and 2014, was $85 thousand and $84 thousand, respectively.   Stock-based compensation is included in salaries and employee benefits in the accompanying consolidated statements of operations.

 

 

Note 5 – Investment Securities

The amortized costs, gross unrealized gains, gross unrealized losses, and fair values for securities are as follows:

 

 

 

 

 

 

 

 

 

 

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The following table summarizes securities with unrealized losses at March 31, 2015, and December 31, 2014, aggregated by major security type and length of time in a continuous unrealized loss position. The unrealized losses are largely due to changes in interest rates and other market conditions.  At March 31, 2015,  18 out of 101 securities the Company held had fair values less than amortized cost, primarily in municipal securities.  At December 31, 2014,  55 out of 111 securities the Company held had fair values less than amortized cost, primarily in municipal and mortgage-backed securities.  All unrealized losses are considered by management to be temporary given investment security credit ratings, the intent and ability to retain these securities for a period of time sufficient to recover all unrealized losses, and because it is unlikely that the Company will be required to sell the impaired securities before their anticipated recovery.  As such, management’s assessment of other than temporary impairment (OTTI) for the quarter ended March 31, 2015, resulted in no recognition of an impairment loss.

 

 

 

 

 

 

Restricted investment securities consist primarily of Federal Home Loan Bank of Atlanta (FHLB) stock in the amount of $2.2 million and $2.5 million as of March 31, 2015, and December 31, 2014, respectively, and Federal Reserve Bank stock in the amount of $1.6 million at March 31, 2015, and December 31, 2014.  Restricted equity securities are carried at cost because there is no ability to resell these securities.  The FHLB requires the Bank to maintain stock in an amount equal to 4.5% of outstanding borrowings and a specific percentage of the Company’s total assets.  The Federal Reserve Bank of Richmond requires the Company to maintain stock with a par value equal to 3% of the Company’s outstanding capital.

Securities with a carrying value of approximately $763 thousand and $1.8 million were pledged as collateral at March 31, 2015,  and December 31, 2014, respectively, to secure repurchase agreements.

 

 

Note 6 – Loans

Major classifications of loans are as follows:

 

A summary of risk characteristics by loan portfolio classification follows:

Real Estate – Residential – This portfolio primarily consists of investor loans secured by properties in the Bank’s normal lending area.  These investor loans are typically five year rate adjustment loans and they

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generally have an original loan-to-value (LTV) of 80% or less.  This category also includes home equity lines of credit (HELOC).  The HELOCs generally have an adjustable rate tied to prime rate and a term of 10 years.  Multifamily residential real estate is moderately seasoned and is generally secured by properties in the Bank’s normal lending area.

Real Estate – Commercial – This portfolio consists of nonresidential improved real estate, which includes shopping centers and office buildings.  These properties are generally located in the Bank’s normal lending area.  This category of loans has a higher than average level of risk because its performance is impacted by market forces over a longer time horizon.  

Real Estate – Residential Construction – These loans are located in the Bank’s normal lending area. While it has represented a growth area for the portfolio, this category also has a higher level of risk due to inherent market change and construction risks.

Real Estate – Other Construction, Land Development and Other Land Loans – This portfolio includes developed residential and commercial lots held by developers as well as non-residential construction projects.  This category has a higher level of risk due to inherent risks associated with market changes and construction.

Commercial – These loans include loans to businesses that are not secured by real estate.  These loans are typically secured by accounts receivable, inventory, equipment, and other business assets.  Commercial loans are typically granted to local businesses that have a strong track record of profitability and performance.

Consumer – Loans in this portfolio are either unsecured or secured by automobiles, marketable securities, etc.  They are generally granted to local customers that have a banking relationship with the Bank.

Activity in the allowance for loan losses for the three months ended is as follows:

 

The following table presents activity in the allowance for loan losses by portfolio segment:

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The charge off of uncollectible loans is determined on a case-by-case basis.  Determination of a collateral shortfall, prospects for recovery, delinquency, and the financial resources of the borrower and any guarantor are all considered in determining whether to charge-off a loan.  Closed-end retail loans that become past due 120 cumulative days and open-end retail loans that become past due 180 cumulative days from the contractual due date will generally be charged off.

The following table presents the aging of unpaid principal in loans as of March 31, 2015, and December 31, 2014:  

 

 

 

 

 

Loans are determined past due or delinquent based on the contractual terms of the loan.  Payments past due 30 days or more are considered delinquent.  The accrual of interest is generally discontinued at the time the loan is 90 days delinquent, unless the credit is well-secured and in process of collection.  In all cases, loans are placed on nonaccrual at an earlier date if collection of principal or interest is considered doubtful or charged-off if a loss is considered imminent.

All interest accrued but not collected for loans that are placed on nonaccrual is reversed against interest income when the loan is placed on nonaccrual status.  Because of the uncertainty of the expected cash flows, the Company accounts for nonaccrual loans under the cost recovery method, under which all cash payments are applied to principal.  Loans are returned to accrual status when all the principal and interest amounts contractually due are brought current and future collection of principal and interest are reasonably assured.  The number of payments needed to meet this criteria varies from loan to loan.  However, as a general rule, this criteria will be considered to have been met with the timely payment of six consecutive regularly scheduled monthly payments.

The following table provides details of the Company’s loan portfolio by internally assigned grade at March 31, 2015, and December 31, 2014:  

 

 

These credit quality grades are defined as follows:

Pass – A “pass” rated asset is not adversely classified because it does not display any of the characteristics for adverse classification.

Special Mention – A “special mention” asset has potential weaknesses that deserve management’s close attention. If left uncorrected, such potential weaknesses may result in deterioration of the repayment prospects or collateral position at some future date. Special mention assets are not adversely classified and do not warrant adverse classification.

Substandard – A “substandard” asset is inadequately protected by the current net worth and paying capacity of the obligor or of the collateral pledged, if any. Assets classified as substandard generally have a well-defined weakness, or weaknesses, that jeopardize the liquidation of the debt. These assets are characterized by the distinct possibility of loss if the deficiencies are not corrected.

Doubtful – An asset classified “doubtful” has all the weaknesses inherent in an asset classified substandard with the added characteristic that the weaknesses make collection or liquidation in full highly questionable and improbable, on the basis of currently existing facts, conditions, and values.

Loss – Assets classified “loss” are considered uncollectible and of such little value that their continuing to be carried as an asset is not warranted. This classification is not necessarily equivalent to no potential for recovery or salvage value, but rather that it is not appropriate to defer a full write-off even though partial recovery may be effected in the future.

The loan risk rankings were updated for the quarter ended March 31, 2015 on April 15, 2015.  The loan risk rankings were updated for the year ended December 31, 2014 on December 16 and 17, 2014.  

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The following table provides details regarding impaired loans by segment and class:  

 

 

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The following table provides details of the balance of the allowance for loan losses and the recorded investment in financing receivables by impairment method for each loan portfolio segment: 

 

 

A loan is considered impaired when, based on current information and events, it is probable that the Company will be unable to collect the scheduled payments of principal and interest when due according to the contractual terms of the loan agreement.  Factors considered by management in determining whether a loan is impaired include payment status, collateral value, and the probability of collecting scheduled principal and interest payments when due.  Additionally, management’s policy is generally to evaluate only those substandard loans greater than $250 thousand for impairment as these are considered to be individually significant in relation to the size of the loan portfolio.  Management determines the significance of payment delays and payment shortfalls on a case-by-case basis, taking into consideration all of the circumstances surrounding the loan and the borrower, including the length of delay, the reasons for the delay, the borrower’s prior payment record, and the amount of the shortfall in relation to the principal and interest owed.  Impairment is measured on a loan-by-loan basis by either the present value of expected future cash flows discounted at the loan’s effective interest rate, the loan’s obtainable market price, or the fair value of the collateral if the loan is collateral dependent.  The following tables present interest income recognized and the average recorded investment of impaired loans.

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Cash payments received on nonaccrual, impaired loans are applied on a cash basis with all cash receipts applied first to principal and any payments received in excess of the unpaid principal balance being applied to interest. Cash payments received on active, impaired loans are applied to both interest and principal.

Troubled Debt Restructurings

Accounting Standards Codification (ASC) 310 defines a troubled debt restructuring as a restructuring of a debt where a creditor for economic or legal reasons related to a debtor’s financial difficulties grants a concession to the debtor that it would not otherwise render.  The concession is granted by the creditor in an attempt to protect as much of its investment as possible.  The concession either stems from an agreement between the creditor and the debtor or is imposed by law or a court.  Troubled debt restructurings include modification of the terms of a

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debt, such as a reduction of the stated interest rate to a new rate that is lower than the current market rate for new debt with similar risk, a reduction of the face amount or maturity amount of the debt as stated in the instrument or other agreement, or a reduction of accrued interest owed.

Management reviews all modifications that occur during the year for identification as troubled debt restructurings.  Management identified as troubled debt restructurings certain loans for which the allowance for loan losses had previously been measured under a general allowance for loan losses methodology (ASC 450).  Upon identifying the reviewed loans as troubled debt restructurings, management also identified them as impaired under the guidance in ASC 310.

Modification Categories

The Company offers a variety of modifications to borrowers. The modification alternatives offered can generally be described in the following categories:

Rate Modification - A modification in which the interest rate is changed.

Term Modification - A modification in which the maturity date, timing of payments, or frequency of payments is changed.

Interest Only Modification – A modification in which the loan is converted to interest only payments for a period of time.

Payment Modification – A modification in which the dollar amount of the payment is changed, other than an interest only modification described above.

Combination Modification – Any other type of modification, including the use of multiple categories above.

As of March 31, 2015, and December 31, 2014, there were no available commitments outstanding for troubled debt restructurings.

The following tables present troubled debt restructurings as of March 31, 2015, and December 31, 2014:  

 

 

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Loans reviewed for consideration of modification are reviewed for potential impairment at the time of the restructuring.  Any identified impairment is recognized as a reduction in the allowance.

There were no newly restructured loans that occurred during the three months ended March 31, 2015.  The following table presents troubled debt restructurings that occurred during the three months ended March 31, 2014:

 

 

 

 

 

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There were no financing receivables modified as troubled debt restructurings and with a payment default, with the payment default occurring within 12 months of the restructure date, and the payment default occurring during the three-month periods ended March 31, 2015, or 2014.

 

Note 7 – Other Real Estate Owned

Changes in other real estate owned were as follows for the periods indicated:

 

 

 

Note 8 – Fair Value

The fair value of an asset or liability is the price that would be received to sell that asset or paid to transfer that liability in an orderly transaction between market participants.  A fair value measurement assumes that the transaction to sell the asset or transfer the liability occurs in the principal market for the asset or liability or, in the absence of a principal market, the most advantageous market for the asset or liability.  The price in the principal (or most advantageous) market used to measure the fair value of the asset or liability shall not be adjusted for transaction costs.  An orderly transaction is a transaction that assumes exposure to the market for a period prior to the measurement date to allow for marketing activities that are usual and customary for transactions involving such assets and liabilities; it is not a forced transaction.  Market participants are buyers and sellers in the principal market that are independent, knowledgeable, able to transact, and willing to transact.

Financial Accounting Standards Board (FASB) Codification Topic 820:  Fair Value Measurements and Disclosures establishes a hierarchy for valuation inputs that gives the highest priority to quoted prices in active markets for identical assets or liabilities and the lowest priority to unobservable inputs.  The fair values hierarchy is as follows:

Level 1 Inputs – Quoted prices (unadjusted) for identical assets or liabilities in active markets that the entity has the ability to access as of the measurement date. 

Level 2 Inputs – Significant other observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data.

Level 3 Inputs – Significant unobservable inputs that reflect a company’s own assumptions about the assumptions that market participants would use in pricing an asset or liability. 

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Investment Securities:  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 Company obtains a single quote for all securities.  Quotes for all of the securities are provided by the securities accounting and safekeeping correspondent bank, which performs a review of pricing data by comparing prices received from third party vendors to the previous month’s quote for the same security and evaluates any substantial changes.

The following tables present the balances of financial assets measured at fair value on a recurring basis as of March 31, 2015, and December 31, 2014.   See Note 5 for a detail listing of the fair values of available-for-sale securities.

 

 

 

The following describes the valuation techniques used to measure certain assets recorded at fair value on a nonrecurring basis in the financial statements.

Impaired Loans:  The fair values of impaired loans are measured based on the value of the collateral securing the loans.  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 external appraiser using observable market data (Level 2).  However, if the collateral is a house or building in the process of construction or if an appraisal of the real estate property is over two years old, then the fair value measurement is considered Level 3.  The value of business equipment is based upon an outside appraisal if deemed significant using observable market data.  Likewise, fair values for inventory and accounts receivable collateral are based on financial statement balances or aging reports (Level 3).  Any fair value adjustments are recorded in the period incurred as provision for loan losses in the consolidated statements of operations.

Level 3 fair value measurements of impaired loans generally include discounts for unobservable input such as estimated selling costs, lack of marketability or practical life, and age of appraisal.  Such discounts ranged from 0% to 30% for each of the respective periods presented.   

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Other Real Estate Owned:  OREO assets are adjusted to fair value upon transfer of the loan collateral to the Company through or instead of foreclosure.  Subsequently, OREO assets are carried at net realizable value.  Fair value is based upon independent market prices, appraised values of the collateral or management’s estimation of the value of the collateral.  When the fair value of the collateral is based on an observable market price or a current appraised value, the Company records the OREO asset as nonrecurring Level 2.  When an appraised value is not available or management determines the fair value of the collateral is further impaired below the appraised value and there is no observable market price, the Company records the OREO asset as nonrecurring Level 3.

Level 3 fair value measurements of OREO assets generally include discounts for unobservable input such as estimated selling costs, lack of marketability, and age of appraisal.  Such discounts ranged from 0% to 30% for each of the respective periods presented.

The following tables summarize the Company’s financial assets that were measured at fair value on a nonrecurring basis during the periods noted.

 

 

The methods and assumptions, not previously presented, used by the Company in estimating fair values are as follows:

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In general, fair value of securities is based upon quoted market prices, where available. If such quoted market prices are not available, fair value is based upon market prices determined by an outside, independent entity that primarily uses as inputs, observable market-based parameters.  Valuation adjustments may be made to ensure that financial instruments are recorded at fair value. These adjustments may include amounts to reflect counterparty credit quality, among other things, as well as unobservable parameters. Any such valuation adjustments are applied consistently over time. The Company’s valuation methodologies may produce a fair value calculation that may not be indicative of net realizable value or reflective of future fair values. While management believes the Company’s valuation methodologies are appropriate and consistent with other market participants, the use of different methodologies or assumptions to determine the fair value of certain financial instruments could result in a different estimate of fair value at the reporting date. Transfers between levels of the fair value hierarchy are recognized on the actual date of the event or circumstances that caused the transfer, which generally coincides with the Company’s monthly and or quarter valuation process.

Cash and cash equivalents  – The carrying amounts of cash and cash equivalents approximate fair value.

Time Deposits in Other Banks – The fair values of time deposits are estimated based on bid quotations received from independent pricing services for similar assets.  

Loans  – For variable rate loans that reprice frequently and have no significant change in credit risk, fair values are based on carrying values.  For all other loans, fair values are calculated by discounting the contractual cash flows using estimated market discount rates which reflect the credit and interest rate risk inherent in the loans, or by using current rates at which similar loans would be made to borrowers with similar credit ratings and for the same remaining maturities. 

Deposits  – The fair values disclosed for demand deposits are, by definition, equal to the amount payable on demand at the reporting date (that is, their carrying amounts).  The carrying amounts of variable-rate, fixed-term money market accounts approximate their fair values at the reporting date.  Fair values of certificates of deposit are based on the discounted value of contractual cash flows using the rates currently offered for deposits of similar remaining maturities.  

Accrued interest  – The carrying amounts of accrued interest receivable and payable approximate fair value.

FHLB Advances –  The carrying value of advances from the FHLB due within 90 days from the balance sheet date approximate fair value.  Fair values for convertible advances are estimated using a discounted cash flow calculation that applies interest rates currently being offered on convertible advances with similar remaining maturities.

Repurchase agreements – The carrying value of repurchase agreements due within 90 days from the balance sheet date approximate fair value.

Subordinated Debt and Trust Preferred – The Company’s subordinated debt consists of variable rate instruments that reprice on a periodic basis, therefore, carrying value is adjusted for the repricing lag in order to approximate fair value.

Bank Owned Life Insurance – The carrying value of life insurance approximates fair value because this investment is carried at cash surrender value, as determined by the insurer.

The estimated fair values of the Company’s financial instruments, which are all Level 2 in fair values hierarchy, as of March 31, 2015, and December 31, 2014, are as follows:

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Note 9 – Recently Issued Accounting Pronouncements

In January 2014, the FASB issued Accounting Standards Update (ASU) No. 2014-04, Receivables – Troubled Debt Restructurings by Creditors (Subtopic 310-40) – Reclassification of Residential Real Estate Collateralized Consumer Mortgage Loans upon Foreclosure.  The amendments are intended to clarify when a creditor should be considered to have received physical possession of residential real estate property collateralizing a consumer mortgage loan such that the loan should be derecognized and the real estate recognized.  These amendments clarify that an in substance repossession for foreclosure occurs, and a creditor is considered to have received physical possession of residential real estate property collateralizing a consumer mortgage loan, upon either: (a) the creditor obtaining legal title to the residential real estate property upon completion of a foreclosure; or (b) 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.  Additional disclosures are required.  The amendments are effective for public business entities for annual periods and interim periods within those annual periods beginning after December 15, 2014.  The adoption of this ASU did not have a material impact on the Company’s consolidated financial statements.

In May of 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606).  The guidance in this ASU superseded the revenue recognition requirements in Topic 605, Revenue Recognition, and most industry-specific guidance throughout the Industry Topics of Codification.  The guidance in this ASU affects any entity that either enters into contracts with customers to transfer goods or services or enters into contracts for the transfer of non-financial assets.  This amendment is intended to clarify that an entity recognizes 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. The amendments are effective for public business entities for annual reporting periods beginning after December 15, 2016, including interim periods within that reporting period. Early application is not permitted.   The adoption of this ASU is not expected to have a material impact on the Company’s consolidated financial statements.

 

In June of 2014, the FASB issued ASU No. 2014-11, Repurchase-to-Maturity Transactions, Repurchase Financings, and Disclosures.  The amendments in this ASU require that repurchase-to-maturity transactions be accounted for as secured borrowings consistent with the accounting for other repurchase agreements. In addition, the amendments require separate accounting for a transfer of a financial asset executed contemporaneously with a repurchase agreement with the same counterparty (a repurchase financing), which will result in secured borrowing accounting for the repurchase agreement. The amendments require an entity to disclose information about transfers accounted for as sales in transactions that are economically similar to repurchase agreements, in which the transferor retains substantially all of the exposure to the economic return on the transferred financial asset throughout the term of the transaction. In addition, the amendments require disclosure of the types of collateral pledged in repurchase agreements, securities lending transactions, and repurchase-to-maturity transactions and the tenor of those transactions. The amendments are effective for public business entities for the first interim or annual period beginning after December 15, 2014, and for all other entities, the accounting changes are effective for annual periods beginning after December 15, 2014, and interim periods beginning after December 15, 2015.  The adoption of this ASU did not have a material impact on the Company’s consolidated financial statements.

 

In June of 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 amendments in this ASU require that a performance target that affects vesting and that could be achieved after the requisite service period be treated as a performance

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condition.  The amendments apply to reporting entities that grant their employees share-based payments in which the terms of the award provide that a performance target can be achieved after the requisite service period. For all entities, 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.  The adoption of this ASU is not expected to have a material impact on the Company’s consolidated financial statements. 

 

Note 10 – Preferred Stock

The Company’s Preferred Stock has a $4.00 par value with $1,000 liquidation preference.  With 2,000,000 preferred shares authorized, there were no shares outstanding at March 31, 2015, or December 31, 2014. 

 

Note 11—Common Stock

In June 2014, the Board of Directors approved a change to the par value of the Company’s Common Stock from $4.00 per share to $.01 per share.  With 30,000,000 shares of Common Stock authorized, at March 31, 2015, and at December 31, 2014, there were 12,958,267 and 12,864,542 shares outstanding, respectively.