Note 2 - Business Combinations

6 Months Ended

Jun. 30, 2014

Business Combinations [Abstract]

Business Combination Disclosure [Text Block]

NOTE 2: Business Combinations

On October 1, 2013, the Corporation completed its acquisition of CVBK, the one-bank holding company for CVB. Pursuant to the Agreement and Plan of Merger dated June 10, 2013, CVBK's shareholders received $0.32 for each share of CVBK common stock they owned, or approximately $846,000 in the aggregate. In addition, the Corporation purchased from the U.S. Treasury for $3.35 million all of CVBK's preferred stock and warrants issued to the U.S Treasury under the Capital Purchase Program, including accrued and unpaid dividends on the preferred stock. CVB had seven retail bank branches located in the Virginia counties of Powhatan, Cumberland, Chesterfield and Henrico.

The Corporation accounted for the acquisition using the acquisition method of accounting in accordance with Accounting Standards Codification (ASC) 805, Business Combinations. Under the acquisition method of accounting, the assets and liabilities of CVBK were recorded at their respective acquisition date fair values. Determining the fair value of assets and liabilities, particularly related to the loan portfolio, is a complicated process involving significant judgment regarding methods and assumptions used to calculate the estimated fair values. The fair values are preliminary and subject to refinement for up to one year after the acquisition date as additional information relative to the acquisition date fair values becomes available. The Corporation has not made any such adjustments since the acquisition date. The following table details the total consideration paid by the Corporation on October 1, 2013 in connection with the acquisition of CVBK, the fair values of the assets acquired and liabilities assumed, and the resulting goodwill.

(Dollars in thousands)	As Recorded by CVBK		Fair Value Adjustments			As Recorded by the Corporation
Consideration paid:
CVBK common stock						$	846
CVBK preferred stock and warrants							3,350
Total consideration paid							4,196
Identifiable assets acquired:
Cash and cash equivalents	$	59,775	$	—		$	59,775
Securities available for sale, at fair value		119,916		181			120,097
Loans, net of allowance and unearned income		164,814		(17,748	)		147,066
Corporate premises and equipment, net		7,448		3,500			10,948
Other real estate owned, net		895		(500	)		395
Core deposit intangibles		41		4,066			4,107
Other assets		16,623		6,030			22,653
Total identifiable assets acquired		369,512		(4,471	)		365,041
Identifiable liabilities assumed:
Deposits		313,711		1,710			315,421
Borrowings		40,000		2,124			42,124
Trust preferred capital notes		5,155		(716	)		4,439
Other liabilities		4,684		84			4,768
Total identifiable liabilities assumed		363,550		3,202			366,752
Net identifiable assets (liabilities) assumed	$	5,962	$	(7,673	)		(1,711	)
Goodwill resulting from acquisition						$	5,907

The following table illustrates the unaudited pro forma revenue and net income of the combined entities had the acquisition taken place on January 1, 2013. The unaudited combined pro forma revenue and net income combines the historical results of CVBK with the Corporation's consolidated statement of income for the three and six months ended June 30, 2013 and, while certain adjustments were made for the estimated effect of certain fair value adjustments and other acquisition-related activity, they are not indicative of what would have occurred had the acquisition actually taken place on January 1, 2013. Expenses related to systems conversions and other integration related expenses were incurred during the first six months of 2014 in connection with merging CVBK into the Corporation and CVB into C&F Bank. Additionally, the Corporation expects to achieve further operational cost savings and other efficiencies as a result of the acquisition which are not reflected in the unaudited pro forma amounts below.

(Dollars in thousands)	Unaudited Pro Forma Three Months Ended June 30, 2013		Unaudited Pro Forma Six Months Ended June 30, 2013
Total revenues, net of interest expense	$	28,044	$	54,159
Net income		4,205		9,037