10-Q 1 cffi-20190630x10q.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 June 30, 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)

 


 

 

 

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

 

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   

 

At August 2, 2019, the latest practicable date for determination, 3,432,322 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 –  June 30, 2019 (unaudited) and December 31, 2018

 

 3

 

 

 

 

 

 

 

   Consolidated Statements of Income (unaudited) – Three and six months ended June  30, 2019 and 2018

 

 4

 

 

 

 

 

 

 

   Consolidated Statements of Comprehensive Income (unaudited) – Three and six months ended June 30, 2019 and 2018

 

 5

 

 

 

 

 

 

 

   Consolidated Statements of Equity (unaudited) – Three months ended June 30, 2019 and 2018

 

6

 

 

 

 

 

 

 

   Consolidated Statements of Equity (unaudited) – Six months ended June 30, 2019 and 2018

 

7

 

 

 

 

 

 

 

   Consolidated Statements of Cash Flows (unaudited) – Six months ended June 30, 2019 and 2018

 

8

 

 

 

 

 

 

 

   Notes to Consolidated Financial Statements (unaudited)

 

9

 

 

 

 

 

 

Item 2. 

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

 

 32

 

 

 

 

 

 

Item 3. 

   Quantitative and Qualitative Disclosures About Market Risk

 

 57

 

 

 

 

 

 

Item 4. 

   Controls and Procedures

 

 57

 

 

 

 

 

 

PART II - Other Information 

 

 

 

 

 

 

 

 

Item 1A. 

   Risk Factors

 

58

 

 

 

 

 

 

Item 2. 

   Unregistered Sales of Equity Securities and Use of Proceeds

 

 58

 

 

 

 

 

 

Item 6. 

   Exhibits

 

59

 

 

 

 

 

 

 

   Signatures

 

 60

 

 

2

Part I – FINANCIAL INFORMATION

 

ITEM 1.FINANCIAL STATEMENTS

 

CONSOLIDATED BALANCE SHEETS

(Dollars in thousands, except for per share amounts)

 

 

 

 

 

 

 

 

 

 

 

   June 30,    

 

December 31, 

 

 

    

2019

    

2018

  

Assets

 

 

(unaudited)

 

 

*

 

Cash and due from banks

 

$

10,418

 

$

14,138

 

Interest-bearing deposits in other banks

 

 

84,237

 

 

100,875

 

Total cash and cash equivalents

 

 

94,655

 

 

115,013

 

Securities—available for sale at fair value, amortized cost of
$198,799 and $216,650, respectively

 

 

200,427

 

 

214,910

 

Loans held for sale, at fair value

 

 

89,185

 

 

41,895

 

Loans, net of allowance for loan losses of $33,401 and $34,023, respectively

 

 

1,056,934

 

 

1,028,097

 

Restricted stock, at cost

 

 

3,257

 

 

3,247

 

Corporate premises and equipment, net

 

 

36,716

 

 

37,100

 

Other real estate owned, net of valuation allowance of $88 and $57, respectively

 

 

268

 

 

246

 

Accrued interest receivable

 

 

7,229

 

 

7,436

 

Goodwill

 

 

14,425

 

 

14,425

 

Core deposit and other amortizable intangible assets, net

 

 

1,001

 

 

1,142

 

Bank-owned life insurance

 

 

16,256

 

 

16,065

 

Net deferred tax asset

 

 

11,540

 

 

12,193

 

Other assets

 

 

36,103

 

 

29,642

 

Total assets

 

$

1,567,996

 

$

1,521,411

 

 

 

 

 

 

 

 

 

Liabilities

 

 

 

 

 

 

 

Deposits

 

 

 

 

 

 

 

Noninterest-bearing demand deposits

 

$

282,663

 

$

271,360

 

Savings and interest-bearing demand deposits

 

 

531,029

 

 

563,741

 

Time deposits

 

 

396,517

 

 

346,560

 

Total deposits

 

 

1,210,209

 

 

1,181,661

 

Short-term borrowings

 

 

16,844

 

 

14,917

 

Long-term borrowings

 

 

119,529

 

 

119,529

 

Trust preferred capital notes

 

 

25,263

 

 

25,245

 

Accrued interest payable

 

 

1,276

 

 

920

 

Other liabilities

 

 

35,524

 

 

27,181

 

Total liabilities

 

 

1,408,645

 

 

1,369,453

 

 

 

 

 

 

 

 

 

Commitments and contingent liabilities (Note 10)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Equity

 

 

 

 

 

 

 

Common stock ($1.00 par value, 8,000,000 shares authorized, 3,444,172 and 3,497,122 shares issued and outstanding, respectively, includes 138,855 and 139,455 of unvested shares, respectively)

 

 

3,305

 

 

3,358

 

Additional paid-in capital

 

 

10,107

 

 

12,752

 

Retained earnings

 

 

147,570

 

 

140,520

 

Accumulated other comprehensive loss, net

 

 

(2,120)

 

 

(4,672)

 

Equity attributable to C&F Financial Corporation

 

 

158,862

 

 

151,958

 

Noncontrolling interest

 

 

489

 

 

 —

 

Total equity

 

 

159,351

 

 

151,958

 

Total liabilities and equity

 

$

1,567,996

 

$

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 June 30, 

 

Six Months Ended June 30, 

 

    

2019

    

2018

  

2019

    

2018

    

Interest income

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest and fees on loans

 

$

22,323

 

$

20,626

 

$

43,243

 

$

41,443

 

Interest on interest-bearing deposits and federal funds sold

 

 

582

 

 

553

 

 

1,171

 

 

1,017

 

Interest and dividends on securities

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S. government agencies and corporations

 

 

101

 

 

88

 

 

202

 

 

175

 

Mortgage-backed securities

 

 

567

 

 

566

 

 

1,178

 

 

1,111

 

Tax-exempt obligations of states and political subdivisions

 

 

556

 

 

696

 

 

1,139

 

 

1,411

 

Taxable obligations of states and political subdivisions

 

 

93

 

 

74

 

 

186

 

 

145

 

Other

 

 

54

 

 

48

 

 

108

 

 

93

 

Total interest income

 

 

24,276

 

 

22,651

 

 

47,227

 

 

45,395

 

Interest expense

 

 

 

 

 

 

 

 

 

 

 

 

 

Savings and interest-bearing deposits

 

 

597

 

 

348

 

 

1,199

 

 

712

 

Time deposits

 

 

1,624

 

 

981

 

 

2,930

 

 

1,937

 

Borrowings

 

 

1,120

 

 

1,048

 

 

2,231

 

 

2,021

 

Trust preferred capital notes

 

 

310

 

 

287

 

 

595

 

 

570

 

Total interest expense

 

 

3,651

 

 

2,664

 

 

6,955

 

 

5,240

 

Net interest income

 

 

20,625

 

 

19,987

 

 

40,272

 

 

40,155

 

Provision for loan losses

 

 

1,810

 

 

2,000

 

 

4,205

 

 

5,300

 

Net interest income after provision for loan losses

 

 

18,815

 

 

17,987

 

 

36,067

 

 

34,855

 

Noninterest income

 

 

 

 

 

 

 

 

 

 

 

 

 

Gains on sales of loans

 

 

2,955

 

 

2,408

 

 

5,091

 

 

4,647

 

Service charges on deposit accounts

 

 

944

 

 

1,041

 

 

1,862

 

 

2,090

 

Other service charges and fees

 

 

1,684

 

 

1,544

 

 

2,752

 

 

2,604

 

Net gains (losses) on maturities and calls of available for sale securities

 

 

 1

 

 

(1)

 

 

 5

 

 

 4

 

Wealth management services income, net

 

 

475

 

 

459

 

 

924

 

 

884

 

Interchange income

 

 

1,071

 

 

981

 

 

2,029

 

 

1,887

 

Other

 

 

1,072

 

 

809

 

 

2,642

 

 

1,571

 

Total noninterest income

 

 

8,202

 

 

7,241

 

 

15,305

 

 

13,687

 

Noninterest expenses

 

 

 

 

 

 

 

 

 

 

 

 

 

Salaries and employee benefits

 

 

11,495

 

 

11,073

 

 

23,402

 

 

21,806

 

Occupancy

 

 

2,148

 

 

2,024

 

 

4,338

 

 

4,055

 

Other

 

 

5,906

 

 

5,664

 

 

11,486

 

 

11,439

 

Total noninterest expenses

 

 

19,549

 

 

18,761

 

 

39,226

 

 

37,300

 

Income before income taxes

 

 

7,468

 

 

6,467

 

 

12,146

 

 

11,242

 

Income tax expense

 

 

1,626

 

 

1,397

 

 

2,533

 

 

2,280

 

Net income

 

 

5,842

 

 

5,070

 

 

9,613

 

 

8,962

 

Less net income (loss) attributable to noncontrolling interest

 

 

(1)

 

 

 —

 

 

(1)

 

 

 —

 

Net income attributable to C&F Financial Corporation

 

$

5,843

 

$

5,070

 

$

9,614

 

$

8,962

 

Net income per share - basic and diluted

 

$

1.69

 

$

1.45

 

$

2.77

 

$

2.56

 

 

See notes to consolidated financial statements.

4

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited)

(Dollars in thousands)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended June 30, 

 

Six Months Ended June 30, 

 

    

2019

    

2018

    

2019

    

2018

    

Net income

 

$

5,842

 

$

5,070

 

$

9,613

 

$

8,962

 

Other comprehensive income (loss):

 

 

 

 

 

 

 

 

 

 

 

 

 

Defined benefit plan:

 

 

 

 

 

 

 

 

 

 

 

 

 

Reclassification of recognized net actuarial losses into net income1

 

 

52

 

 

31

 

 

94

 

 

60

 

Related income tax effects

 

 

(11)

 

 

(6)

 

 

(20)

 

 

(12)

 

Amortization of prior service credit into net income1

 

 

(17)

 

 

(15)

 

 

(34)

 

 

(30)

 

Related income tax effects

 

 

 3

 

 

 3

 

 

 7

 

 

 6

 

Defined benefit plan, net of tax

 

 

27

 

 

13

 

 

47

 

 

24

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash flow hedges:

 

 

 

 

 

 

 

 

 

 

 

 

 

Unrealized holding (losses) gains arising during the period

 

 

(102)

 

 

38

 

 

(210)

 

 

250

 

Related income tax effects

 

 

26

 

 

(9)

 

 

54

 

 

(64)

 

Cash flow hedges, net of tax

 

 

(76)

 

 

29

 

 

(156)

 

 

186

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Securities available for sale:

 

 

 

 

 

 

 

 

 

 

 

 

 

Unrealized holding gains (losses) arising during the period

 

 

1,547

 

 

(648)

 

 

3,373

 

 

(3,186)

 

Related income tax effects

 

 

(325)

 

 

136

 

 

(708)

 

 

669

 

Reclassification of net realized (gains) losses into net income2

 

 

(1)

 

 

 1

 

 

(5)

 

 

(4)

 

Related income tax effects

 

 

 —

 

 

 —

 

 

 1

 

 

 1

 

Securities available for sale, net of tax

 

 

1,221

 

 

(511)

 

 

2,661

 

 

(2,520)

 

Other comprehensive income (loss), net of tax

 

 

1,172

 

 

(469)

 

 

2,552

 

 

(2,310)

 

Comprehensive income

 

 

7,014

 

 

4,601

 

 

12,165

 

 

6,652

 

Less comprehensive income (loss) attributable to noncontrolling interest

 

 

(1)

 

 

 —

 

 

(1)

 

 

 —

 

Comprehensive income attributable to C&F Financial Corporation

 

$

7,015

 

$

4,601

 

$

12,166

 

$

6,652

 


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

FOR THE THREE MONTHS ENDED JUNE 30, 2019 AND 2018

(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 March 31, 2019

 

$

3,337

 

$

11,362

 

$

143,003

 

$

(3,292)

 

$

490

 

$

154,900

 

Comprehensive income:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income (loss)

 

 

 —

 

 

 —

 

 

5,843

 

 

 —

 

 

(1)

 

 

5,842

 

Other comprehensive income

 

 

 —

 

 

 —

 

 

 —

 

 

1,172

 

 

 —

 

 

1,172

 

Share-based compensation

 

 

 —

 

 

310

 

 

 —

 

 

 —

 

 

 —

 

 

310

 

Restricted stock vested

 

 

 1

 

 

(1)

 

 

 —

 

 

 —

 

 

 —

 

 

 —

 

Common stock issued

 

 

 —

 

 

34

 

 

 —

 

 

 —

 

 

 —

 

 

34

 

Common stock purchased

 

 

(33)

 

 

(1,598)

 

 

 —

 

 

 —

 

 

 —

 

 

(1,631)

 

Cash dividends declared ($0.37 per share)

 

 

 —

 

 

 —

 

 

(1,276)

 

 

 —

 

 

 —

 

 

(1,276)

 

Balance June 30, 2019

 

$

3,305

 

$

10,107

 

$

147,570

 

$

(2,120)

 

$

489

 

$

159,351

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Attributable to C&F Financial Corporation

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accumulated

 

 

 

 

 

 

 

 

   

 

 

   

Additional

   

 

 

   

Other

   

 

 

 

 

 

 

 

Common

 

Paid - In

 

Retained

 

Comprehensive

 

Noncontrolling

 

Total

 

 

 

Stock

 

Capital

 

Earnings

 

Loss

 

Interest

 

Equity

 

Balance March 31, 2018

 

$

3,369

 

$

12,925

 

$

130,133

 

$

(3,728)

 

$

 —

 

$

142,699

 

Comprehensive income:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income

 

 

 —

 

 

 —

 

 

5,070

 

 

 —

 

 

 —

 

 

5,070

 

Other comprehensive loss

 

 

 —

 

 

 —

 

 

 —

 

 

(469)

 

 

 —

 

 

(469)

 

Share-based compensation

 

 

 —

 

 

321

 

 

 —

 

 

 —

 

 

 —

 

 

321

 

Restricted stock vested

 

 

 1

 

 

(1)

 

 

 —

 

 

 —

 

 

 —

 

 

 —

 

Common stock issued

 

 

 —

 

 

36

 

 

 —

 

 

 —

 

 

 —

 

 

36

 

Common stock purchased

 

 

 —

 

 

(13)

 

 

 —

 

 

 —

 

 

 —

 

 

(13)

 

Cash dividends declared ($0.34 per share)

 

 

 —

 

 

 —

 

 

(1,191)

 

 

 —

 

 

 —

 

 

(1,191)

 

Balance June 30, 2018

 

$

3,370

 

$

13,268

 

$

134,012

 

$

(4,197)

 

$

 —

 

$

146,453

 

 

See notes to consolidated financial statements.

 

6

CONSOLIDATED STATEMENTS OF EQUITY

FOR THE SIX MONTHS ENDED JUNE 30, 2019 AND 2018

(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 (loss)

 

 

 —

 

 

 —

 

 

9,614

 

 

 —

 

 

(1)

 

 

9,613

 

Other comprehensive income

 

 

 —

 

 

 —

 

 

 —

 

 

2,552

 

 

 —

 

 

2,552

 

Issuance of noncontrolling interest

 

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

490

 

 

490

 

Share-based compensation

 

 

 —

 

 

767

 

 

 —

 

 

 —

 

 

 —

 

 

767

 

Restricted stock vested

 

 

16

 

 

(16)

 

 

 —

 

 

 —

 

 

 —

 

 

 —

 

Common stock issued

 

 

 1

 

 

69

 

 

 —

 

 

 —

 

 

 —

 

 

70

 

Common stock purchased

 

 

(70)

 

 

(3,465)

 

 

 —

 

 

 —

 

 

 —

 

 

(3,535)

 

Cash dividends declared ($0.74 per share)

 

 

 —

 

 

 —

 

 

(2,564)

 

 

 —

 

 

 —

 

 

(2,564)

 

Balance June 30, 2019

 

$

3,305

 

$

10,107

 

$

147,570

 

$

(2,120)

 

$

489

 

$

159,351

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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: