EXHIBIT 99.2
C&F FINANCIAL CORPORATION
Friday, January 23, 2004
| Contact: | Tom Cherry, Senior Vice President & CFO (804) 843-2360 |
C&F Financial Corporation Announces
Record Earnings for 2003
West Point, VA — C&F Financial Corporation (NASDAQ:CFFI), the one-bank holding company for Citizens and Farmers Bank (the Bank), reported record net income of $12,919,000, or $3.42 per diluted share, for the year ended December 31, 2003. For 2003, net income increased 32.3% and diluted earnings per share increased 28.1% over net income and diluted earnings per share, respectively, for the year ended December 31, 2002. The increase in net income for 2003 resulted primarily from an increase in the earnings of the Mortgage Banking segment and the full-year earnings of the Consumer Finance segment, which was acquired September 1, 2002.
Net income for the quarter ended December 31, 2003 was $2,746,000 and diluted earnings per share were $.72. For the fourth quarter of 2003, net income decreased 7.2% and diluted earnings per share decreased 8.9% as compared to the fourth quarter of 2002. The decrease in net income for the fourth quarter of 2003 resulted primarily from a decrease in the earnings of the Mortgage Banking segment.
Earnings for the Mortgage Banking segment increased approximately $1,992,000 to $5,844,000 for the year ended December 31, 2003, and decreased approximately $146,000 to $1,095,000 for the three months ended December 31, 2003. The increase in annual earnings was primarily attributable to the strong demand for mortgage loans. As mortgage rates began to increase in the third quarter, the Mortgage Banking segment experienced a decline in the number of applications for home purchase and refinance loans, which resulted in a decrease in originations and sales of loans during the fourth quarter of 2003. Management expects that future earnings for the Mortgage Banking segment will
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C&F FINANCIAL CORPORATION
Friday, January 23, 2004
| Contact: | Tom Cherry, Senior Vice President & CFO (804) 843-2360 |
be affected by changes in interest rates and new and resale home sales and loan refinancings.
On September 1, 2002, the Bank purchased Moore Loans, Inc. Moore Loans is a leading regional finance company providing automobile loans in Richmond, Roanoke and Hampton Roads, Virginia and portions of eastern Tennessee. Earnings for the Consumer Finance segment, consisting solely of Moore Loans, were $2,163,000 for the year ended December 31, 2003, compared to earnings from September 1, 2002 (the date of acquisition) through December 31, 2002 of $752,000. Earnings for the Consumer Finance segment were $550,000 for the fourth quarter of 2003, compared to $538,000 for the fourth quarter of 2002.
Earnings for the Retail Banking segment decreased approximately $234,000 to $4,623,000 for the year ended December 31, 2003 and decreased $59,000 to $1,040,000 for the fourth quarter of 2003. The decline in the Retail Banking segment’s 2003 earnings for the full year and the fourth quarter primarily resulted from the net interest margin compression that began in the second quarter of 2003, the initial costs associated with the expansion of the Retail Banking segment into the Peninsula and Hanover markets of Virginia, and an increase in operations and administrative personnel, coupled with higher employee benefits expense, which were attributable to continued growth and higher pension and health care costs, respectively. The net interest margin compression for the year and quarter ended December 31, 2003 was attributable to strong deposit growth exceeding loan demand and calls of investment securities in the low rate environment, which resulted in excess funds in lower-yielding accounts.
President and CEO, Larry Dillon stated, “2003 was an exciting year for our Company. We experienced record earnings led by the Mortgage Banking
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C&F FINANCIAL CORPORATION
Friday, January 23, 2004
| Contact: | Tom Cherry, Senior Vice President & CFO (804) 843-2360 |
segment, expansion of our Mortgage and Retail Banking operations into a number of new markets and the full integration of our Consumer Finance segment. Our dividend payout increased 25% from $.16 per share to $.20 per share.
While interest rate volatility affected our fourth quarter earnings and will likely continue to affect demand for home mortgage loans at our Mortgage Banking segment and short-term interest rate compression at our Retail Banking segment, we believe the investments we have made during 2002 and 2003 will enhance our long-term profitability and shareholder value. For 2004, we will open our branch in Newport News, Virginia next week and will be considering other branch locations in this market. Our Mortgage Banking segment continues to seek opportunities for new branch locations and has begun offering a number of new products in cooperation with the Retail Banking segment. The Consumer Finance segment will begin operations in the northern portion of Virginia in the first quarter and has begun updating its technology in order to enhance its dealer relationships and improve operational efficiencies.”
The Corporation’s return on average equity (ROE) and return on average assets (ROA) were 21.32% and 2.35%, respectively, for the year ended December 31, 2003 compared to 19.62% and 2.19%, respectively, for the year ended December 31, 2002. Annualized ROE and annualized ROA were 17.20% and 1.92%, respectively, for the quarter ended December 31, 2003 compared to 21.72% and 2.24%, respectively, for the quarter ended December 31, 2002.
C&F Financial Corporation’s stock trades on the Nasdaq Stock Market System under the symbol CFFI. The stock closed at a price of $42.11 per share on Thursday, January 22, 2004. At December 31, 2003, the book value of the stock was $18.10 per share. The Corporation paid a cash dividend of $.18 per share during the fourth quarter of 2003 and paid a cash dividend of $.20 per
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C&F FINANCIAL CORPORATION
Friday, January 23, 2004
| Contact: | Tom Cherry, Senior Vice President & CFO (804) 843-2360 |
share on January 1, 2004. The Corporation’s market makers include Advest, Inc., Davenport & Company LLC, FTN Financial Securities Corp., McKinnon & Company, Inc. and Scott & Stringfellow, Inc.
C&F Financial Corporation operates fourteen retail bank branches located throughout the Peninsula to Richmond corridor in Virginia through its Citizens and Farmers Bank subsidiary and its division, Citizens and Commerce Bank. The Corporation provides mortgage, title and appraisal services through C&F Mortgage Corporation’s eleven offices and offers full investment services through its subsidiary C&F Investment Services, Inc. Moore Loans provides automobile loans through its offices in Richmond, Roanoke and Hampton, Virginia.
The statements contained in this press release that are not historical facts constitute “forward-looking statements” as defined by the federal securities laws. These statements may address issues that involve estimates and assumptions made by management, risks and uncertainties, and actual results could differ materially from historical results or those anticipated by such statements. Factors that could have a material adverse effect on the operations and future prospects of the company include, but are not limited to, changes in: interest rates, general economic conditions, demand for residential mortgage loans, legislative/regulatory requirements, monetary and fiscal policies of the U.S. Government, including policies of the U.S. Treasury and the Board of Governors of the Federal Reserve System, the quality of the loan portfolio, competition, demand for financial services in the company’s market area and accounting principles and guidelines. These risks and uncertainties should be considered in evaluating the forward-looking statements, and readers are cautioned not to place undue reliance on such statements, which speak only as of their dates.
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C&F Financial Corporation
Selected Financial Information
(dollars in thousands, except per share data)
Balance Sheets
| 12/31/03 | 12/31/02 | 12/31/01 | |||||||
Investment securities — available for sale at fair value | $ | 103,050 | $ | 60,629 | $ | 53,953 | |||
Loans held for sale | 29,733 | 107,227 | 69,263 | ||||||
Loans, net | 350,170 | 328,634 | 246,112 | ||||||
Federal Home Loan Bank stock | 2,072 | 2,760 | 1,595 | ||||||
Total assets | 573,546 | 551,922 | 404,076 | ||||||
Deposits | 427,635 | 383,533 | 323,913 | ||||||
Borrowings | 67,734 | 94,479 | 27,204 | ||||||
Shareholders’ equity | 65,384 | 56,233 | 44,743 | ||||||
Statements of Income
For The Quarter Ended | For The Twelve Months Ended | |||||||||||
| 12/31/03 | 12/31/02 | 12/31/03 | 12/31/02 | |||||||||
Interest income | $ | 9,502 | $ | 10,021 | $ | 38,671 | $ | 30,620 | ||||
Interest expense | 2,008 | 2,553 | 8,828 | 9,184 | ||||||||
Provision for loan losses1 | 862 | 651 | 3,167 | 1,141 | ||||||||
Other operating income: | ||||||||||||
Gain on sale of loans | 4,432 | 4,562 | 20,584 | 13,929 | ||||||||
Other | 1,959 | 2,117 | 8,734 | 7,524 | ||||||||
Other operating expenses: | ||||||||||||
Salaries and employee benefits | 5,759 | 5,701 | 24,410 | 18,036 | ||||||||
Other | 3,266 | 3,469 | 12,338 | 9,810 | ||||||||
Income tax expense | 1,252 | 1,368 | 6,327 | 4,137 | ||||||||
Net income | 2,746 | 2,958 | 12,919 | 9,765 | ||||||||
Earnings per common share — assuming dilution | .72 | .79 | 3.42 | 2.67 | ||||||||
Earnings per common share — basic | .76 | .81 | 3.58 | 2.73 | ||||||||
Interest income on a taxable-equivalent basis | 9,816 | 10,374 | 39,960 | 31,991 | ||||||||
Segment Information
For The Quarter Ended | For The Twelve Months Ended | |||||||||||
| 12/31/03 | 12/31/02 | 12/31/03 | 12/31/02 | |||||||||
Net income — retail banking | $ | 1,040 | $ | 1,099 | $ | 4,623 | $ | 4,857 | ||||
Net income — mortgage banking | 1,095 | 1,241 | 5,844 | 3,852 | ||||||||
Net income — consumer finance | 550 | 538 | 2,163 | 752 | ||||||||
Net income — other | 61 | 80 | 289 | 304 | ||||||||
Mortgage loan originations — mortgage banking | 182,800 | 279,643 | 1,083,414 | 782,972 | ||||||||
Mortgage loans sold — mortgage banking | 223,492 | 248,210 | 1,160,907 | 745,008 | ||||||||
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C&F Financial Corporation
Selected Data and Ratios
For The Quarter Ended | For The Twelve Months Ended | |||||||||||||||
| 12/31/03 | 12/31/02 | 12/31/03 | 12/31/02 | |||||||||||||
Book value per share | $ | 18.10 | $ | 15.41 | $ | 18.10 | $ | 15.41 | ||||||||
Dividends per share | $ | .20 | $ | .16 | $ | .72 | $ | .62 | ||||||||
Annualized return on average assets* | 1.92 | % | 2.24 | % | 2.35 | % | 2.19 | % | ||||||||
Annualized return on average equity* | 17.20 | % | 21.72 | % | 21.32 | % | 19.62 | % | ||||||||
Net interest margin (fully taxable basis)2 | 5.94 | % | 6.38 | % | 6.14 | % | 5.50 | % | ||||||||
| * | Includes a non-recurring insurance benefit of $277,000 received in the second quarter of 2002 |
Average Balances
For The Quarter Ended | For The Twelve Months Ended | |||||||||||
| 12/31/03 | 12/31/02 | 12/31/03 | 12/31/02 | |||||||||
Securities | $ | 60,843 | $ | 60,500 | $ | 58,295 | $ | 59,653 | ||||
Loans | 398,158 | 425,920 | 422,237 | 334,336 | ||||||||
Fed funds sold/ interest bearing deposits at other banks | 65,874 | 3,646 | 26,221 | 20,492 | ||||||||
Total earning assets | 524,875 | 490,066 | 506,753 | 414,481 | ||||||||
Time, checking and savings deposits | 358,290 | 321,012 | 342,820 | 304,434 | ||||||||
Borrowings | 72,746 | 80,809 | 75,342 | 34,215 | ||||||||
Total interest bearing liabilities | 431,036 | 401,821 | 418,162 | 338,649 | ||||||||
Demand deposits | 64,118 | 52,114 | 54,920 | 45,246 | ||||||||
Shareholders’ equity | 63,872 | 54,466 | 60,592 | 49,766 | ||||||||
Capital Ratios
| 12/31/03 | 12/31/02 | 12/31/01 | |||||||
Total Capital (to Risk-Weighted Assets) | |||||||||
Corporation | 13.7 | % | 12.5 | % | 14.4 | % | |||
Bank | 12.3 | 11.8 | 12.3 | ||||||
Tier 1 Capital (to Risk-Weighted Assets) | |||||||||
Corporation | 12.4 | 10.4 | 13.3 | ||||||
Bank | 11.0 | 9.7 | 11.1 | ||||||
Tier 1 Capital (to Average Tangible Assets) | |||||||||
Corporation | 9.6 | 8.8 | 10.8 | ||||||
Bank | 8.5 | 8.3 | 9.0 |
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C&F Financial Corporation
Asset Quality
| 12/31/03 | 12/31/02 | 12/31/01 | ||||||||||
Retail and Mortgage Banking Segments* | ||||||||||||
Non-accrual loans | $ | 1,993 | $ | 1,656 | $ | 1,026 | ||||||
Real estate owned | 8 | 703 | — | |||||||||
Total non-performing assets | $ | 2,001 | $ | 2,359 | $ | 1,026 | ||||||
Accruing loans past due for 90 days or more | $ | 1,092 | $ | 69 | $ | 913 | ||||||
Allowance for loan losses | $ | 4,256 | $ | 3,765 | $ | 3,684 | ||||||
Non-performing assets to loans and real estate owned | .72 | % | .88 | % | .41 | % | ||||||
Allowance for loan losses to loans and real estate owned | 1.53 | 1.40 | 1.47 | |||||||||
Allowance for loan losses to non-performing assets | 212.69 | 159.60 | 359.06 | |||||||||
| * | Loans excludes consumer finance loans at Moore Loans. |
| 12/31/03 | 12/31/02 | 12/30/01 | |||||||||
Consumer Finance Segment | |||||||||||
Non-accrual loans | $ | 1,149 | $ | 688 | $ | — | |||||
Accruing loans past due for 90 days or more | 233 | 293 | — | ||||||||
Allowance for loan losses | 4,401 | 2,957 | — | ||||||||
Dealer reserves | 2,119 | 2,071 | — | ||||||||
Non-accrual consumer finance loans to total consumer finance loans | 1.44 | % | 1.02 | % | — | ||||||
Allowance for loan losses and dealer reserves to non-accrual consumer finance loans | 567.45 | % | 730.81 | % | — | ||||||
Allowance for loan losses to total consumer finance loans | 5.52 | % | 4.40 | % | — | ||||||
Dealer reserves to total consumer finance loans | 2.66 | 3.08 | — | ||||||||
Allowance for loan losses and dealer reserves to total consumer finance loans | 8.18 | % | 7.48 | % | — | ||||||
Other Data and Ratios
As Of And For The Twelve Months Ended | ||||||
| 12/31/03 | 12/31/02 | |||||
Shares repurchased | 80,000 | — | ||||
Average price of repurchased shares | $ | 28.13 | — | |||
Weighted average shares outstanding — diluted | 3,781,843 | 3,652,668 | ||||
Weighted average shares outstanding — basic | 3,610,531 | 3,571,057 | ||||
Market value per share at period end | $ | 39.70 | $ | 24.65 | ||
Price to book value ratio at period end | 2.19 | 1.60 | ||||
Price to earnings ratio at period end | 11.61 | 9.23 | ||||
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C&F Financial Corporation
Notes to Selected Financial Data
| 1 | Included in the provision for loan losses is $787,000 and $450,000 for the quarter ended 12/31/03 and 12/31/02, respectively, and $2,642,000 and $641,000 for the twelve months ended 12/31/03 and 12/31/02, respectively, attributable to Moore Loans. |
| 2 | The increase in net interest margin for the twelve months ended December 31, 2003 is largely a result of the purchase of Moore Loans on September 1, 2002. The average yield on loans at Moore Loans for the twelve months ended 12/31/03 was 16.63%. |
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