C&F Financial Corporation (CFFI) is a diversified financial services company that operates through three primary business segments: community banking, mortgage banking, and consumer finance. The company has demonstrated resilience and consistent performance, navigating the challenges of the current economic environment while maintaining a strong financial position.
Financial Highlights
For the full year 2023, C&F Financial Corporation reported net income of $23.6 million on revenue of $153.8 million. The company generated annual operating cash flow of $32.2 million and free cash flow of $30.8 million. These results reflect the company's ability to generate consistent earnings and cash flow, even in the face of market volatility.In the first quarter of 2024, the company reported net income of $3.4 million, a decrease from $6.5 million in the same period of 2023. This decline was primarily due to higher interest expense on deposits and borrowings, as well as an increase in the provision for credit losses in the consumer finance segment. However, the company's community banking and mortgage banking segments continued to perform well, contributing to the overall profitability.
Business Overview
Community Banking Segment
The community banking segment, which comprises C&F Bank, C&F Wealth Management, C&F Insurance, and CVB Title, is the largest contributor to C&F Financial Corporation's revenue and earnings. In the first quarter of 2024, the community banking segment reported net income of $4.0 million, down from $6.4 million in the same period of 2023. This decrease was mainly attributable to higher interest expense on deposits and borrowings, as well as higher salaries and employee benefits expenses.The community banking segment's loan portfolio grew by $67.7 million, or 21.3% annualized, during the first quarter of 2024 compared to the end of 2023. This growth was driven by increases in commercial real estate, construction, and residential mortgage loans. The segment's net interest margin decreased to 4.09% in the first quarter of 2024 from 4.52% in the same period of 2023, primarily due to the rising cost of deposits and borrowings.
Mortgage Banking Segment
The mortgage banking segment, which includes C&F Mortgage Corporation, reported net income of $294,000 in the first quarter of 2024, up from $227,000 in the same period of 2023. This improvement was largely due to a net reversal of provision for indemnification losses and lower variable expenses related to mortgage loan origination volume, such as commissions and bonuses.Mortgage loan originations for the mortgage banking segment decreased 18.5% in the first quarter of 2024 compared to the same period in 2023, reflecting the sustained elevated level of mortgage interest rates and their impact on the housing market. However, the segment's mortgage lender services fee income increased due to an increase in the number of institutional customers and the types of services provided.
Consumer Finance Segment
The consumer finance segment, which operates through C&F Finance Company, reported a net loss of $63,000 in the first quarter of 2024, compared to net income of $509,000 in the same period of 2023. This decline was primarily due to higher provision for credit losses and higher interest expense on variable-rate borrowings from the community banking segment.The consumer finance segment's net charge-offs increased to an annualized rate of 2.54% of average total loans in the first quarter of 2024, up from 1.77% in the same period of 2023. This increase was driven by an uptick in the number of delinquent loans and repossessions, coupled with a decline in wholesale values of used automobiles.
Liquidity
As of March 31, 2024, C&F Financial Corporation had total assets of $2.5 billion, an increase of $31.3 million since the end of 2023. The company's liquidity position remains strong, with liquid assets, including cash, interest-bearing deposits, and unencumbered securities, totaling $298.5 million at the end of the first quarter of 2024.The corporation's capital ratios also remain robust, with a total risk-based capital ratio of 14.5% and a tier 1 risk-based capital ratio of 12.2% as of March 31, 2024. These ratios exceed the well-capitalized thresholds set by regulatory authorities, providing the company with a solid foundation to support its growth and operations.