10-K: C&F Financial Corporation Reports Full-Year 2024 Results: Net Income Declines Amidst Economic Headwinds

C&F Financial Corporation's 2024 annual report reveals a decrease in net income compared to the previous year, driven by challenges in the community banking and consumer finance segments, despite growth in the mortgage banking sector.

Summary

• C&F Financial Corporation reported a consolidated net income of $19.9 million for the year ended December 31, 2024, a decrease from $23.7 million in 2023.
• Earnings per share also decreased to $6.01 from $6.92 in the previous year.
• The community banking segment's net income decreased to $20.3 million from $22.9 million.
• The mortgage banking segment saw an increase in net income, rising to $1.1 million from $465,000.
• The consumer finance segment experienced a decline in net income, falling to $1.4 million from $2.9 million.
• The consolidated net interest margin decreased to 4.12% from 4.31% in the previous year.
• Community banking segment loans grew by $180.0 million, or 14.1 percent.
• Consumer finance segment loans decreased slightly by $1.7 million, less than one percent.
• Deposits increased by $104.7 million, or 5.1 percent.
• The consumer finance segment's net charge-offs increased to 2.62 percent from 1.99 percent.
• Mortgage banking segment loan originations increased by $29.0 million, or 5.8 percent.
• The Corporation's Board of Directors authorized a share repurchase program of up to $5.0 million for 2025.
• The Corporation's tier 1 risk-based capital and total risk-based capital ratios were 11.9 percent and 14.1 percent, respectively, as of December 31, 2024.

Sentiment

Score: 5

Explanation: The document presents a mixed sentiment. While there are positive aspects like loan growth in certain segments and a share repurchase program, the overall tone is cautious due to declining net income and increased credit losses. The future outlook acknowledges uncertainties, contributing to a neutral sentiment.

Positives

• The mortgage banking segment's net income increased, indicating a positive trend in that sector.
• Community banking segment loans grew by 14.1%, indicating strong performance in that sector.
• Deposits increased by $104.7 million, or 5.1 percent.
• The Board authorized a $5.0 million share repurchase program for 2025, signaling confidence in the company's value.

Negatives

• C&F Financial Corporation's net income decreased to $19.9 million in 2024 from $23.7 million in 2023.
• The community banking segment's net income decreased to $20.3 million from $22.9 million.
• The consumer finance segment experienced a decline in net income, falling to $1.4 million from $2.9 million.
• The consolidated net interest margin decreased to 4.12% from 4.31% in the previous year.
• The consumer finance segment saw net charge-offs increase to 2.62%, reflecting higher credit losses.

Risks

• Changes in interest rates could negatively affect financial performance.
• Deterioration in economic conditions in the company's market areas could adversely affect financial condition.
• Weakness in the secondary residential mortgage loan markets or demand for mortgage loans may adversely affect income from C&F Mortgage.
• If the allowance for credit losses becomes inadequate, the results of operations may be adversely affected.
• The company is subject to security and operational risks, including cybersecurity risks and cybersecurity attacks, relating to the use of technology that could damage the reputation and the business.
• Compliance with laws, regulations and supervisory guidance, both new and existing, may adversely affect the business, financial condition and results of operations.

Future Outlook

The company anticipates continued economic and regulatory uncertainties in 2025 and is preparing for multiple scenarios, focusing on maintaining a strong balance sheet, managing margins, and pursuing disciplined growth.

Management Comments

• The Corporation believes the Corporations diversified business model, including community banking, mortgage banking, and consumer finance, provides a strong foundation in times of volatility.

Industry Context

The report acknowledges increased competition in the banking sector from both traditional and non-traditional players, including fintech firms. It also notes the impact of regulatory reforms and initiatives, particularly in consumer protection and mortgage lending.

Comparison to Industry Standards

• The 2024 Peer Group consists of entities that meet the following criteria: (i) publicly-traded commercial financial institution headquartered in Virginia, Maryland, North Carolina, South Carolina, Tennessee, Pennsylvania, New Jersey, Ohio, Indiana, Georgia, Florida, and Alabama (excluding certain large metropolitan areas that are not similar to the economic markets served by the Corporation) and (ii) total assets as of December 31, 2023 of between $1.2 billion and $5.0 billion.
• The 2024 Peer Group consisted of 48 publicly-traded commercial financial institutions with a median asset size of $2.2 billion based on total assets as of December 31, 2023.
• The 2024 Peer Group includes ACNB Corporation, First Bank, Norwood Financial Corp., AmeriServ Financial, Inc., First Community Bankshares, Inc., Ohio Valley Banc Corp., Blue Ridge Bankshares, Inc., First Community Corporation, Old Point Financial Corporation, Capital City Bank Group, Inc., First National Corporation, Penns Woods Bancorp, Inc., Carter Bankshares, Inc., First Savings Financial Group, Inc., Peoples Bancorp of North Carolina, Inc., CB Financial Services, Inc., First United Corporation, Peoples Financial Services Corp., CF Bankshares Inc., Franklin Financial Services Corporation, Primis Financial Corp., Citizens & Northern Corp., FVCBankcorp, Inc., Princeton Bancorp, Inc., Citizens Financial Services, Inc., HomeTrust Bancshares, Inc., Richmond Mutual Bancorporation, Inc., Civista Bancshares, Inc., John Marshall Bancorp, Inc., River Financial Corporation, Colony Bankcorp, Inc., LCNB Corp., SB Financial Group, Inc., Eagle Financial Services, Inc., LINKBANCORP Inc., Security Federal Corporation, ESSA Bancorp Inc., MainStreet Bancshares, Inc., SmartFinancial, Inc., F & M Bank Corp., MetroCity Bankshares, Inc., Southern First Bancshares, Inc., Farmers & Merchants Bancorp, Inc., Middlefield Banc Corp., Southern States Bancshares, Inc., Fidelity D & D Bancorp, Inc., National Bankshares, Inc., and Virginia National Bankshares Corporation.

Management Changes

Legal Proceedings

• The Corporation and its subsidiaries may be involved in certain litigation matters arising in the ordinary course of business.

Related Party Transactions

• Loans outstanding to the Corporation's management, including directors and senior officers and certain of their affiliates, totaled $1.22 million and $1.21 million at December 31, 2024 and 2023, respectively.
• Total deposits of directors and senior officers and their related interests were $6.22 million and $4.91 million at December 31, 2024 and 2023, respectively.

Stakeholder Impact

• Shareholders may be impacted by the decrease in net income and earnings per share.
• Employees may be impacted by the company's efforts to improve operating efficiencies and manage expenses.
• Customers may be impacted by changes in product offerings and service delivery as the company adapts to market conditions.

Next Steps

• The company will focus on marketing and brand recognition to increase visibility in metro markets.
• The company will enhance cross-selling efforts and leverage expertise across subsidiaries.
• The company will continue to recruit, retain, and grow a committed workforce.
• The company will invest in technology to enhance customer experiences and operational efficiency.
• The company will maintain strong credit discipline and mitigate cybersecurity risks.

Key Dates