Company Quick10K Filing
Quick10K
C & F Financial
Closing Price ($) Shares Out (MM) Market Cap ($MM)
$47.72 3 $166
10-Q 2019-03-31 Quarter: 2019-03-31
10-K 2018-12-31 Annual: 2018-12-31
10-Q 2018-09-30 Quarter: 2018-09-30
10-Q 2018-06-30 Quarter: 2018-06-30
10-Q 2018-03-31 Quarter: 2018-03-31
10-K 2017-12-31 Annual: 2017-12-31
10-Q 2017-09-30 Quarter: 2017-09-30
10-Q 2017-06-30 Quarter: 2017-06-30
10-Q 2017-03-31 Quarter: 2017-03-31
10-K 2016-12-31 Annual: 2016-12-31
10-Q 2016-09-30 Quarter: 2016-09-30
10-Q 2016-06-30 Quarter: 2016-06-30
10-Q 2016-03-31 Quarter: 2016-03-31
10-K 2015-12-31 Annual: 2015-12-31
10-Q 2015-09-30 Quarter: 2015-09-30
10-Q 2015-06-30 Quarter: 2015-06-30
10-Q 2015-03-31 Quarter: 2015-03-31
10-K 2014-12-31 Annual: 2014-12-31
10-Q 2014-09-30 Quarter: 2014-09-30
10-Q 2014-06-30 Quarter: 2014-06-30
10-Q 2014-03-31 Quarter: 2014-03-31
10-K 2013-12-31 Annual: 2013-12-31
8-K 2019-04-23 Earnings, Exhibits
8-K 2019-04-16 Shareholder Vote
8-K 2019-02-20 Regulation FD, Exhibits
8-K 2019-01-24 Earnings, Exhibits
8-K 2019-01-24 Earnings, Exhibits
8-K 2018-12-18 Officers, Regulation FD, Exhibits
8-K 2018-11-28 Other Events, Exhibits
8-K 2018-10-25 Earnings, Exhibits
8-K 2018-08-22 Other Events, Exhibits
8-K 2018-07-24 Earnings, Exhibits
8-K 2018-05-23 Other Events, Exhibits
8-K 2018-04-17 Officers, Exhibits
8-K 2018-02-21 Other Events, Exhibits
8-K 2018-02-20 Officers, Exhibits
8-K 2018-01-25 Earnings, Exhibits
BRKR Bruker 6,630
CSWI CSW Industrials 929
BHB Bar Harbor Bankshares 422
OMI Owens & Minor 249
CLUB Town Sports International 108
CJJD China Jo-Jo Drugstores 39
ONTX Onconova Therapeutics 24
TCON Tracon Pharmaceuticals 21
UUP Invesco DB US Dollar Index Bullish Fund 0
IMAGE Image International Group 0
CFFI 2019-03-31
Part I – Financial Information
Item 1.Financial Statements
Note 1: Summary of Significant Accounting Policies
Note 2: Securities
Note 3: Loans
Note 4: Allowance for Loan Losses
Note 5: Leases
Note 6: Equity, Other Comprehensive Income and Earnings per Share
Note 7: Employee Benefit Plans
Note 8: Fair Value of Assets and Liabilities
Note 9: Business Segments
Note 10: Commitments and Contingent Liabilities
Note 11: Derivative Financial Instruments
Note 12: Other Noninterest Expenses
Item 2.Management’S Discussion and Analysis of Financial Condition and Results of Operations
Item 3.Quantitative and Qualitative Disclosures About Market Risk
Item 4.Controls and Procedures
Part II – Other Information
Item 1A.Risk Factors
Item 2.Unregistered Sales of Equity Securities and Use of Proceeds
Item 6.Exhibits
EX-10.19.8 cffi-20190331ex101986528.htm
EX-31.1 cffi-20190331ex311cee66f.htm
EX-31.2 cffi-20190331ex31228743f.htm
EX-32 cffi-20190331xex32.htm

C & F Financial Earnings 2019-03-31

CFFI 10Q Quarterly Report

Balance SheetIncome StatementCash Flow

10-Q 1 cffi-20190331x10q.htm 10-Q cffi_Current Folio_10Q_Taxonomy2018

 


UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 


 

FORM 10-Q

 


(Mark One)

 

 

 

Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

 

For the quarterly period ended March 31, 2019

 

or

 

 

 

Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

 

For the transition period from _________ to _________

 

Commission File Number 000-23423

 


 

C&F FINANCIAL CORPORATION

(Exact name of registrant as specified in its charter)

 


 

 

 

Virginia

54-1680165

(State or other jurisdiction of incorporation or organization)

(I.R.S. Employer Identification No.)

 

 

802 Main Street West Point, VA

23181

(Address of principal executive offices)

(Zip Code)

 

(804) 843-2360

(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 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      No  

 

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted 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 such files).    Yes      No  

 

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

 

 

 

 

 

 

 

 

 

 

Large accelerated filer

Accelerated filer

 

 

Non-accelerated filer

Smaller reporting company

Emerging growth company

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) 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   

 

Securities registered pursuant to Section 12(b) of the Act:

 

 

 

 

 

 

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common Stock, $1.00 par value per share

CFFI

The NASDAQ Stock Market LLC

 

At May 7, 2019, the latest practicable date for determination, 3,469,827 shares of common stock, $1.00 par value, of the registrant were outstanding.

 

 


 

 


 

TABLE OF CONTENTS

 

 

 

 

 

 

 

PART I - Financial Information 

    

Page

 

 

 

 

 

 

Item 1. 

   Financial Statements

 

 3

 

 

 

 

 

 

 

   Consolidated Balance Sheets –  March 31, 2019 (unaudited) and December 31, 2018

 

 3

 

 

 

 

 

 

 

   Consolidated Statements of Income (unaudited) – Three months ended March  31, 2019 and 2018

 

 4

 

 

 

 

 

 

 

   Consolidated Statements of Comprehensive Income (unaudited) – Three months ended March 31, 2019 and 2018

 

 5

 

 

 

 

 

 

 

   Consolidated Statements of Equity (unaudited) – Three months ended March 31, 2019 and 2018

 

6

 

 

 

 

 

 

 

   Consolidated Statements of Cash Flows (unaudited) – Three months ended March 31, 2019 and 2018

 

7

 

 

 

 

 

 

 

   Notes to Consolidated Financial Statements (unaudited)

 

8

 

 

 

 

 

 

Item 2. 

   Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

 30

 

 

 

 

 

 

Item 3. 

   Quantitative and Qualitative Disclosures About Market Risk

 

 51

 

 

 

 

 

 

Item 4. 

   Controls and Procedures

 

 51

 

 

 

 

 

 

PART II - Other Information 

 

 

 

 

 

 

 

 

Item 1A. 

   Risk Factors

 

52

 

 

 

 

 

 

Item 2. 

   Unregistered Sales of Equity Securities and Use of Proceeds

 

 52

 

 

 

 

 

 

Item 6. 

   Exhibits

 

53

 

 

 

 

 

 

 

   Signatures

 

 54

 

 

2


 

Part I – FINANCIAL INFORMATION

 

ITEM 1.FINANCIAL STATEMENTS

 

CONSOLIDATED BALANCE SHEETS

(Dollars in thousands, except for per share amounts)

 

 

 

 

 

 

 

 

 

 

 

   March 31,    

 

December 31, 

 

 

    

2019

    

2018

  

Assets

 

 

(unaudited)

 

 

*

 

Cash and due from banks

 

$

11,777

 

$

14,138

 

Interest-bearing deposits in other banks

 

 

125,674

 

 

100,875

 

Total cash and cash equivalents

 

 

137,451

 

 

115,013

 

Securities—available for sale at fair value, amortized cost of
$208,925 and $216,650, respectively

 

 

209,007

 

 

214,910

 

Loans held for sale, at fair value

 

 

36,035

 

 

41,895

 

Loans, net of allowance for loan losses of $33,589 and $34,023, respectively

 

 

1,042,052

 

 

1,028,097

 

Restricted stock, at cost

 

 

3,257

 

 

3,247

 

Corporate premises and equipment, net

 

 

36,934

 

 

37,100

 

Other real estate owned, net of valuation allowance of $57 and $57, respectively

 

 

246

 

 

246

 

Accrued interest receivable

 

 

7,267

 

 

7,436

 

Goodwill

 

 

14,425

 

 

14,425

 

Core deposit and other amortizable intangible assets, net

 

 

1,065

 

 

1,142

 

Bank-owned life insurance

 

 

16,162

 

 

16,065

 

Net deferred tax asset

 

 

11,838

 

 

12,193

 

Other assets

 

 

33,621

 

 

29,642

 

Total assets

 

$

1,549,360

 

$

1,521,411

 

 

 

 

 

 

 

 

 

Liabilities

 

 

 

 

 

 

 

Deposits

 

 

 

 

 

 

 

Noninterest-bearing demand deposits

 

$

276,275

 

$

271,360

 

Savings and interest-bearing demand deposits

 

 

547,769

 

 

563,741

 

Time deposits

 

 

378,150

 

 

346,560

 

Total deposits

 

 

1,202,194

 

 

1,181,661

 

Short-term borrowings

 

 

17,024

 

 

14,917

 

Long-term borrowings

 

 

119,529

 

 

119,529

 

Trust preferred capital notes

 

 

25,254

 

 

25,245

 

Accrued interest payable

 

 

1,166

 

 

920

 

Other liabilities

 

 

29,293

 

 

27,181

 

Total liabilities

 

 

1,394,460

 

 

1,369,453

 

 

 

 

 

 

 

 

 

Commitments and contingent liabilities (Note 10)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Equity

 

 

 

 

 

 

 

Common stock ($1.00 par value, 8,000,000 shares authorized, 3,476,799 and 3,497,122 shares issued and outstanding, respectively, includes 139,995 and 139,455 of unvested shares, respectively)

 

 

3,337

 

 

3,358

 

Additional paid-in capital

 

 

11,362

 

 

12,752

 

Retained earnings

 

 

143,003

 

 

140,520

 

Accumulated other comprehensive loss, net

 

 

(3,292)

 

 

(4,672)

 

Equity attributable to C&F Financial Corporation

 

 

154,410

 

 

151,958

 

Noncontrolling interest

 

 

490

 

 

 —

 

Total equity

 

 

154,900

 

 

151,958

 

Total liabilities and equity

 

$

1,549,360

 

$

1,521,411

 


*     Derived from audited consolidated financial statements.

See notes to consolidated financial statements.

3


 

CONSOLIDATED STATEMENTS OF INCOME

(Unaudited)

(Dollars in thousands, except for per share amounts)

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended March 31, 

 

 

 

    

2019

    

2018

  

 

Interest income

 

 

 

 

 

 

 

 

Interest and fees on loans

 

$

20,920

 

$

20,817

 

 

Interest on interest-bearing deposits and federal funds sold

 

 

589

 

 

464

 

 

Interest and dividends on securities

 

 

 

 

 

 

 

 

U.S. government agencies and corporations

 

 

101

 

 

87

 

 

Mortgage-backed securities

 

 

611

 

 

546

 

 

Tax-exempt obligations of states and political subdivisions

 

 

583

 

 

715

 

 

Taxable obligations of states and political subdivisions

 

 

93

 

 

71

 

 

Other

 

 

54

 

 

44

 

 

Total interest income

 

 

22,951

 

 

22,744

 

 

Interest expense

 

 

 

 

 

 

 

 

Savings and interest-bearing deposits

 

 

602

 

 

364

 

 

Time deposits

 

 

1,306

 

 

956

 

 

Borrowings

 

 

1,111

 

 

973

 

 

Trust preferred capital notes

 

 

285

 

 

283

 

 

Total interest expense

 

 

3,304

 

 

2,576

 

 

Net interest income

 

 

19,647

 

 

20,168

 

 

Provision for loan losses

 

 

2,395

 

 

3,300

 

 

Net interest income after provision for loan losses

 

 

17,252

 

 

16,868

 

 

Noninterest income

 

 

 

 

 

 

 

 

Gains on sales of loans

 

 

2,136

 

 

2,239

 

 

Service charges on deposit accounts

 

 

918

 

 

1,049

 

 

Other service charges and fees

 

 

1,068

 

 

1,060

 

 

Net gains on maturities and calls of available for sale securities

 

 

 4

 

 

 5

 

 

Wealth management services income, net

 

 

449

 

 

425

 

 

Interchange income

 

 

958

 

 

906

 

 

Other

 

 

1,570

 

 

762

 

 

Total noninterest income

 

 

7,103

 

 

6,446

 

 

Noninterest expenses

 

 

 

 

 

 

 

 

Salaries and employee benefits

 

 

11,907

 

 

10,733

 

 

Occupancy

 

 

2,190

 

 

2,031

 

 

Other

 

 

5,580

 

 

5,775

 

 

Total noninterest expenses

 

 

19,677

 

 

18,539

 

 

Income before income taxes

 

 

4,678

 

 

4,775

 

 

Income tax expense

 

 

907

 

 

883

 

 

Net income

 

 

3,771

 

 

3,892

 

 

Less net income attributable to noncontrolling interest

 

 

 —

 

 

 —

 

 

Net income attributable to C&F Financial Corporation

 

$

3,771

 

$

3,892

 

 

Net income per share - basic and diluted

 

$

1.08

 

$

1.11

 

 

 

See notes to consolidated financial statements.

4


 

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited)

(Dollars in thousands)

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended March 31, 

 

 

    

2019

    

2018

  

Net income

 

$

3,771

 

$

3,892

 

Other comprehensive income (loss):

 

 

 

 

 

 

 

Defined benefit plan:

 

 

 

 

 

 

 

Reclassification of recognized net actuarial losses into net income1

 

 

42

 

 

29

 

Related income tax effects

 

 

(9)

 

 

(6)

 

Amortization of prior service credit into net income1

 

 

(17)

 

 

(15)

 

Related income tax effects

 

 

 4

 

 

 3

 

Defined benefit plan, net of tax

 

 

20

 

 

11

 

 

 

 

 

 

 

 

 

Cash flow hedges:

 

 

 

 

 

 

 

Unrealized holding (losses) gains arising during the period

 

 

(108)

 

 

212

 

Related income tax effects

 

 

28

 

 

(55)

 

Cash flow hedges, net of tax

 

 

(80)

 

 

157

 

 

 

 

 

 

 

 

 

Securities available for sale:

 

 

 

 

 

 

 

Unrealized holding gains (losses) arising during the period

 

 

1,826

 

 

(2,538)

 

Related income tax effects

 

 

(383)

 

 

533

 

Reclassification of net realized gains into net income2

 

 

(4)

 

 

(5)

 

Related income tax effects

 

 

 1

 

 

 1

 

Securities available for sale, net of tax

 

 

1,440

 

 

(2,009)

 

Other comprehensive income (loss), net of tax

 

 

1,380

 

 

(1,841)

 

Comprehensive income

 

 

5,151

 

 

2,051

 

Less comprehensive income attributable to noncontrolling interest

 

 

 —

 

 

 —

 

Comprehensive income attributable to C&F Financial Corporation

 

$

5,151

 

$

2,051

 


1

These items are included in the computation of net periodic benefit cost and are included in “Noninterest income-Other” on the Consolidated Statements of Income. See “Note 7: Employee Benefit Plans,” for additional information.

2

These items are included in “Net gains on maturities and calls of available for sale securities” on the Consolidated Statements of Income.

 

See notes to consolidated financial statements.

5


 

CONSOLIDATED STATEMENTS OF EQUITY

(Unaudited)

(Dollars in thousands, except for per share amounts)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Attributable to C&F Financial Corporation

 

 

 

 

 

 

 

 

   

 

 

   

 

 

   

 

 

   

Accumulated

   

 

 

 

 

 

 

 

 

 

 

 

Additional

 

 

 

 

Other

 

 

 

 

 

 

 

 

Common

 

Paid - In

 

Retained

 

Comprehensive

 

Noncontrolling

 

Total

 

 

 

Stock

 

Capital

 

Earnings

 

Income (Loss)

 

Interest

 

Equity

 

Balance December 31, 2018

 

$

3,358

 

$

12,752

 

$

140,520

 

$

(4,672)

 

$

 —

 

$

151,958

 

Comprehensive income:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income

 

 

 —

 

 

 —

 

 

3,771

 

 

 —

 

 

 —

 

 

3,771

 

Other comprehensive income

 

 

 —

 

 

 —

 

 

 —

 

 

1,380

 

 

 —

 

 

1,380

 

Issuance of noncontrolling interest

 

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

490

 

 

490

 

Share-based compensation

 

 

 —

 

 

457

 

 

 —

 

 

 —

 

 

 —

 

 

457

 

Restricted stock vested

 

 

15

 

 

(15)

 

 

 —

 

 

 —

 

 

 —

 

 

 —

 

Common stock issued

 

 

 1

 

 

35

 

 

 —

 

 

 —

 

 

 —

 

 

36

 

Common stock purchased

 

 

(37)

 

 

(1,867)

 

 

 —

 

 

 —

 

 

 —

 

 

(1,904)

 

Cash dividends declared ($0.37 per share)

 

 

 —

 

 

 —

 

 

(1,288)

 

 

 —

 

 

 —

 

 

(1,288)

 

Balance March 31, 2019

 

$

3,337

 

$

11,362

 

$

143,003

 

$

(3,292)

 

$

490

 

$

154,900

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Attributable to C&F Financial Corporation

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accumulated

 

 

 

 

 

 

 

 

   

 

 

   

Additional

   

 

 

   

Other

   

 

 

 

 

 

 

 

Common

 

Paid - In

 

Retained

 

Comprehensive

 

Noncontrolling

 

Total

 

 

 

Stock

 

Capital

 

Earnings

 

Loss

 

Interest

 

Equity

 

Balance December 31, 2017

 

$

3,358

 

$

12,800

 

$

127,431

 

$

(1,887)

 

$

 —

 

$

141,702

 

Comprehensive income:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income

 

 

 —

 

 

 —

 

 

3,892

 

 

 —

 

 

 —

 

 

3,892

 

Other comprehensive loss

 

 

 —

 

 

 —

 

 

 —

 

 

(1,841)

 

 

 —

 

 

(1,841)

 

Share-based compensation

 

 

 —

 

 

319

 

 

 —

 

 

 —

 

 

 —

 

 

319

 

Restricted stock vested

 

 

14

 

 

(14)

 

 

 —

 

 

 —

 

 

 —

 

 

 —

 

Common stock issued

 

 

 1

 

 

35

 

 

 —

 

 

 —

 

 

 —

 

 

36

 

Common stock purchased

 

 

(4)

 

 

(215)

 

 

 —

 

 

 —

 

 

 —

 

 

(219)

 

Cash dividends declared ($0.34 per share)

 

 

 —

 

 

 —

 

 

(1,190)

 

 

 —

 

 

 —

 

 

(1,190)

 

Balance March 31, 2018

 

$

3,369

 

$

12,925

 

$

130,133

 

$

(3,728)

 

$

 —

 

$

142,699

 

 

See notes to consolidated financial statements.

 

6


 

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

(Dollars in thousands)

 

 

 

 

 

 

 

 

 

 

Three Months Ended March 31, 

 

 

    

2019

    

2018

  

Operating activities:

 

 

 

 

 

 

 

Net income

 

$

3,771

 

$

3,892

 

Adjustments to reconcile net income to net cash provided by operating activities:

 

 

 

 

 

 

 

Depreciation

 

 

916

 

 

750

 

Provision for loan losses

 

 

2,395

 

 

3,300

 

Provision for indemnifications

 

 

 —

 

 

36

 

Share-based compensation

 

 

457

 

 

319

 

Pension expense

 

 

141

 

 

135

 

Pension contribution

 

 

 —

 

 

(3,000)

 

Net accretion of certain acquisition-related discounts

 

 

(365)

 

 

(894)

 

Accretion of discounts and amortization of premiums on securities, net

 

 

410

 

 

445

 

Amortization of intangible assets

 

 

78

 

 

134

 

Net realized gains on maturities and calls of securities available for sale

 

 

(4)

 

 

(5)

 

Net realized gains on sale of corporate premises and equipment

 

 

(10)

 

 

(27)

 

Income from bank-owned life insurance

 

 

(83)

 

 

(81)

 

Origination of loans held for sale

 

 

(138,705)

 

 

(143,903)

 

Proceeds from sales of loans held for sale

 

 

146,701

 

 

161,872

 

Gains on sales of loans held for sale

 

 

(2,136)

 

 

(2,239)

 

Change in other assets and liabilities:

 

 

 

 

 

 

 

Accrued interest receivable

 

 

169

 

 

400

 

Other assets

 

 

1,138

 

 

173

 

Accrued interest payable

 

 

246

 

 

 7

 

Other liabilities

 

 

(3,322)

 

 

795

 

Net cash provided by operating activities

 

 

11,797

 

 

22,109

 

Investing activities:

 

 

 

 

 

 

 

Proceeds from maturities and calls of securities available for sale and payments on mortgage-backed securities

 

 

15,657

 

 

12,735

 

Purchases of securities available for sale

 

 

(8,338)

 

 

(15,150)

 

Net purchases of restricted stock

 

 

(10)

 

 

(55)

 

Purchases of loans held for investment by non-bank affiliates

 

 

(36,854)

 

 

(31,886)

 

Repayments on loans held for investment by non-bank affiliates

 

 

30,599

 

 

28,121

 

Net (increase) decrease in retail banking loans held for investment

 

 

(9,740)

 

 

886

 

Purchases of corporate premises and equipment

 

 

(753)

 

 

(621)

 

Proceeds from sales of corporate premises and equipment

 

 

13

 

 

 —

 

Net cash used in investing activities

 

 

(9,426)

 

 

(5,970)

 

Financing activities:

 

 

 

 

 

 

 

Net (decrease) increase in demand and savings deposits

 

 

(11,057)

 

 

8,260

 

Net increase in time deposits

 

 

31,590

 

 

6,404

 

Net increase (decrease) in short-term borrowings

 

 

2,107

 

 

(880)

 

Issuance of common stock

 

 

36

 

 

36

 

Purchase of common stock, excluding shares withheld to pay taxes

 

 

(1,667)

 

 

 —

 

Issuance of noncontrolling interest

 

 

490

 

 

 —

 

Cash dividends paid

 

 

(1,288)

 

 

(1,190)

 

Other financing activities

 

 

(144)

 

 

(144)

 

Net cash  provided by financing activities

 

 

20,067

 

 

12,486

 

Net increase in cash and cash equivalents

 

 

22,438

 

 

28,625

 

Cash and cash equivalents at beginning of period

 

 

115,013

 

 

119,423

 

Cash and cash equivalents at end of period

 

$

137,451

 

$

148,048

 

Supplemental cash flow disclosures:

 

 

 

 

 

 

 

Interest paid

 

$

3,049

 

$

2,560

 

Income taxes paid

 

 

 8

 

 

 8

 

Supplemental disclosure of noncash investing and financing activities:

 

 

 

 

 

 

 

Value of shares withheld at vesting for employee taxes

 

$

237

 

$

219

 

 

See notes to consolidated financial statements.

7


 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

 

NOTE 1: Summary of Significant Accounting Policies

 

Principles of Consolidation: The accompanying unaudited consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (U.S. GAAP) for interim financial reporting and with applicable quarterly reporting regulations of the Securities and Exchange Commission (the SEC). They do not include all of the information and notes required by U.S. GAAP for complete financial statements. Therefore, these consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the C&F Financial Corporation Annual Report on Form 10-K for the year ended December 31, 2018.

 

The unaudited consolidated financial statements include the accounts of C&F Financial Corporation (the Corporation) and its wholly-owned subsidiary, Citizens and Farmers Bank (the Bank or C&F Bank). All significant intercompany accounts and transactions have been eliminated in consolidation. In addition, the Corporation owns C&F Financial Statutory Trust I, C&F Financial Statutory Trust II and Central Virginia Bankshares Statutory Trust I, all of which are unconsolidated subsidiaries. The subordinated debt owed to these trusts is reported as liabilities of the Corporation.  The accounting and reporting policies of C&F Financial Corporation and Subsidiary conform to U.S. GAAP and to predominant practices within the banking industry.

 

Nature of Operations: The Corporation is a bank holding company incorporated under the laws of the Commonwealth of Virginia. The Corporation owns all of the stock of its subsidiary, C&F Bank, which is an independent commercial bank chartered under the laws of the Commonwealth of Virginia.

 

C&F Bank has five wholly-owned subsidiaries: C&F Mortgage Corporation (C&F Mortgage), C&F Finance Company (C&F Finance), C&F Wealth Management Corporation (C&F Wealth Management), C&F Insurance Services, Inc. and CVB Title Services, Inc., all incorporated under the laws of the Commonwealth of Virginia. C&F Mortgage, organized in September 1995, was formed to originate and sell residential mortgages and through its subsidiary, Certified Appraisals LLC, provides ancillary mortgage loan production services for residential appraisals. C&F Mortgage owns a 51 percent interest in C&F Select LLC, which was organized in January 2019 and is also engaged in the business of originating and selling residential mortgages. C&F Finance, acquired in September 2002, is a finance company purchasing automobile, marine and recreational vehicle (RV) loans through indirect lending programs. C&F Wealth Management, organized in April 1995, is a full-service brokerage firm offering a comprehensive range of wealth management services and insurance products through third-party service providers. C&F Insurance Services, Inc., was organized in July 1999, for the primary purpose of owning an equity interest in an independent insurance agency that operates in Virginia and North Carolina. CVB Title Services, Inc. was organized for the primary purpose of owning an equity interest in a full service title and settlement agency. Business segment data is presented in Note 9.

 

Basis of Presentation: The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Material estimates that are particularly susceptible to significant change in the near term relate to the determination of the allowance for loan losses, the allowance for indemnifications, impairment of loans, impairment of securities, the valuation of other real estate owned (OREO), the projected benefit obligation under the defined benefit pension plan, the valuation of deferred taxes and goodwill impairment. In the opinion of management, all adjustments, consisting only of normal recurring adjustments, which are necessary for a fair presentation of the results of operations in these financial statements, have been made.

 

Reclassification: Certain reclassifications have been made to the prior period financial statements to conform to the current period presentation.  None of these reclassifications are considered material.

 

Derivative Financial Instruments: The Corporation recognizes derivative financial instruments at fair value as either an other asset or other liability in the Consolidated Balance Sheets. The Corporation’s derivative financial instruments include

8


 

(1) interest rate lock commitments (IRLCs) on mortgage loans that will be sold in the secondary market on a best efforts basis and the related forward commitments to sell mortgage loans, (2) interest rate swaps with certain qualifying commercial loan customers and dealer counterparties and (3) interest rate swaps that qualify and are designated as cash flow hedges on the Corporation’s trust preferred capital notes. Because the IRLCs, forward sales commitments and interest rate swaps with loan customers and dealer counterparties are not designated as hedging instruments, adjustments to reflect unrealized gains and losses resulting from changes in the fair value of these instruments are reported as noninterest income or noninterest expense, as applicable. The gain or loss on the Corporation’s cash flow hedges is reported as a component of other comprehensive income, net of deferred income taxes, and reclassified into earnings in the same period(s) during which the hedged transactions affect earnings. The Corporation’s derivative financial instruments are described more fully in Note 11.

 

Leases: The Corporation recognizes a lease liability and a right-of-use asset in connection with leases in which it is a lessee, except for leases with a term of twelve months or less.  A lease liability represents the Corporation’s obligation to make future payments under lease contracts, and a right-of-use asset represents the Corporation’s right to control the use of the underlying property during the lease term.  Lease liabilities and right-of-use assets are recognized upon commencement of a lease and measured as the present value of lease payments over the lease term, discounted at the incremental borrowing rate of the lessee.  The Corporation has elected not to separate lease and nonlease components within the same contract and instead to account for the entire contract as a lease.

 

Share-Based Compensation: Share-based compensation expense, net of forfeitures, for the first quarter of 2019 was $457,000  ($290,000 after tax) for restricted stock granted during 2014 through 2019. As of March 31, 2019, there was $3.30 million of total unrecognized compensation expense related to unvested restricted stock that will be recognized over the remaining requisite service periods.

 

A summary of activity for restricted stock awards during the first three months of 2019 and 2018 is presented below:

 

 

 

 

 

 

 

 

 

 

2019

 

 

    

 

    

Weighted-

 

 

 

 

 

Average

 

 

 

 

 

Grant Date

 

 

 

Shares

 

Fair Value

 

Unvested, December 31, 2018

 

139,455

 

$

45.75

 

Granted

 

16,100

 

 

51.73

 

Vested

 

(15,490)

 

 

41.31

 

Forfeited

 

(70)

 

 

60.95

 

Unvested, March 31, 2019

 

139,995

 

 

46.92

 

 

 

 

 

 

 

 

 

 

 

 

2018

 

 

    

 

    

Weighted-

 

 

 

 

 

Average

 

 

 

 

 

Grant Date

 

 

 

Shares

 

Fair Value

 

Unvested, December 31, 2017

 

137,880

 

$

43.52

 

Granted

 

11,210

 

 

58.40

 

Vested

 

(14,125)

 

 

40.05

 

Forfeited

 

(1,615)

 

 

42.78

 

Unvested, March 31, 2018

 

133,350

 

 

45.14

 

 

Recently Adopted Accounting Pronouncements:

 

On January 1, 2019, the Corporation adopted Accounting Standards Update (ASU) 2016-02, “Leases (Topic 842)” and related amendments (collectively, ASC 842), which resulted in recognition of a lease liability and right-of-use asset in connection with leases in which the Corporation is the lessee.  Under ASC 842, lessor accounting is largely unchanged.  The Corporation elected an optional transition method to apply ASC 842 as of the adoption date on a modified retrospective basis.  Periods prior to January 1, 2019 have not been restated.  Upon adoption, the Corporation recorded a lease liability

9


 

of approximately $3.14 million for its remaining payment obligations as of January 1, 2019 for leases in effect at that time, excluding leases with an original term of twelve months or less, and a corresponding right-of-use asset.  All of the Corporation’s existing leases upon adoption of ASC 842 were classified as operating leases based on the classification of each lease under previous GAAP; classification of these leases was not reconsidered upon adoption of ASC 842.  Refer to Note 5 for further information about the Corporation’s leases.

 

Recent Significant Accounting Pronouncements:

 

In June 2016, the Financial Accounting Standards Board (FASB) issued ASU 2016-13, “Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments,” as part of its project on financial instruments. Subsequently, this ASU was amended when the FASB issued ASU 2018-19, “Codification Improvements to Topic 326, Financial Instruments – Credit Losses” (collectively, ASC 326).  ASC 326 introduces an approach based on expected losses to estimate credit losses on certain types of financial instruments. It also modifies the impairment model for available-for-sale debt securities and provides for a simplified accounting model for purchased financial assets with credit deterioration since their origination.  For public business entities that are SEC filers, the new standard is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019.  Early adoption will be permitted for all organizations for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018.  The amendments will be applied on a modified retrospective basis, with the cumulative effect of adopting the new standard being recorded as an adjustment to opening retained earnings in the period of adoption. The Corporation has established a working group to prepare for and implement changes related to ASC 326 and has gathered historical loan loss data for purposes of evaluating appropriate portfolio segmentation and modeling methods under the standard.  The Corporation has performed procedures to validate the historical loan loss data to ensure its suitability and reliability for purposes of developing an estimate of expected credit losses under ASC 326. The Corporation has engaged a vendor to assist in modeling expected lifetime losses under ASC 326, and expects to develop and refine an approach to estimating the allowance for credit losses during 2019. The adoption of ASC 326 will result in significant changes to the Corporation’s consolidated financial statements, which may include changes in the level of the allowance for credit losses that will be considered adequate, a reduction in shareholders’ equity and regulatory capital of C&F Bank, differences in the timing of recognizing changes to the allowance for credit losses and expanded disclosures about the allowance for credit losses. The Corporation has not yet determined an estimate of the effect of these changes. The adoption of the standard will also result in significant changes in the Corporation’s internal control over financial reporting related to the allowance for credit losses.

 

In January 2017, the FASB issued ASU 2017-04, “Intangibles – Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment,” which removes the requirement to compare the implied fair value of goodwill with its carrying amount as part of step 2 of the goodwill impairment test. As a result, under ASU 2017-04, an entity should perform its annual, or interim, goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount and should recognize an impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value; however, the loss recognized should not exceed the total amount of goodwill allocated to that reporting unit.  ASU 2017-04 is effective for public business entities that are SEC filers for annual and interim periods beginning after December 15, 2019.  Early adoption is permitted. The Corporation does not expect the adoption of ASU 2017-04 to have a material effect on its consolidated financial statements.

 

In August 2018, the FASB issued ASU 2018-13, “Fair Value Measurement (Topic 820): Disclosure Framework—Changes to the Disclosure Requirements for Fair Value Measurement.” These amendments modify the disclosure requirements in Topic 820 to add disclosures regarding changes in unrealized gains and losses, the range and weighted average of significant unobservable inputs used to develop Level 3 fair value measurements and the narrative description of measurement uncertainty. Certain disclosure requirements in Topic 820 are also removed or modified. The amendments are effective for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years.  Certain of the amendments are to be applied prospectively while others are to be applied retrospectively. Early adoption is permitted.  The Corporation does not expect the adoption of ASU 2018-13 to have a material effect on its consolidated financial statements.

 

In August 2018, the FASB issued ASU 2018-14, “Compensation-Retirement Benefits-Defined Benefit Plans-General (Subtopic 715-20): Disclosure Framework—Changes to the Disclosure Requirements for Defined Benefit Plans.” These

10


 

amendments modify the disclosure requirements for employers that sponsor defined benefit pension or other postretirement plans. Certain disclosure requirements have been deleted while the following disclosure requirements have been added: the weighted-average interest crediting rates for cash balance plans and other plans with promised interest crediting rates and an explanation of the reasons for significant gains and losses related to changes in the benefit obligation for the period. The amendments also clarify the disclosure requirements regarding the projected benefit obligation (PBO) and fair value of plan assets for plans with PBOs in excess of plan assets and the accumulated benefit obligation (ABO) and fair value of plan assets for plans with ABOs in excess of plan assets. The amendments are effective for fiscal years ending after December 15, 2020. Early adoption is permitted.  The Corporation does not expect the adoption of ASU 2018-14 to have a material effect on its consolidated financial statements.

 

Other accounting standards that have been issued by the FASB or other standards-setting bodies are not currently expected to have a material effect on the Corporation’s financial position, results of operations or cash flows.

 

 

NOTE 2: Securities

 

The Corporation’s debt securities, all of which are classified as available for sale, are summarized as follows:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

March 31, 2019

 

 

    

 

 

    

Gross

    

Gross

    

 

 

 

 

 

Amortized