EXHIBIT 99.1
C&F FINANCIAL CORPORATION
Wednesday, July 21, 2004
Contact: Tom Cherry, Senior Vice President & CFO
(804) 843-2360
C&F Financial Corporation Announces
Second Quarter Earnings
West Point, Va., July 21, 2004 — C&F Financial Corporation (NASDAQ:CFFI), the one-bank holding company for Citizens and Farmers Bank, today reported quarterly net income of $2.89 million, or 77 cents per diluted share, for its second quarter ended June 30, 2004, compared with $3.54 million, or 94 cents per diluted share, for the second quarter ended June 30, 2003.
C&F’s net income for the first six months of 2004 is $5.24 million, or $1.40 per diluted share, compared with $6.81 million, or $1.81 per diluted share, for the first six months of 2003.
The decrease in net income and net earnings per share for the second quarter of 2004 is primarily attributable to a decrease in the earnings of the Mortgage Banking segment, partly offset by increased earnings from the Retail Banking and the Consumer Finance segments. The decrease in this year’s second quarter earnings follows a record second quarter in 2003, driven by growth in the Mortgage Banking segment.
The corporation’s annualized return on average equity was 17.80 percent for the second quarter and 16.09 percent for the first six months ended June 30, 2004, compared with 23.92 percent for the second quarter and 23.37 percent for the first half of last year. The annualized return on average assets was 1.99 percent for the second quarter and 1.83 percent for the first six months of this year, compared with 2.64 percent for the second quarter and 2.56 percent for the first half of last year.
C&F FINANCIAL CORPORATION
Wednesday, July 21, 2004
Contact: Tom Cherry, Senior Vice President & CFO
(804) 843-2360
“As expected, earnings of our Mortgage Banking segment have been negatively impacted by the comparatively lower loan demand in the second quarter of 2004 as a result of a significant decrease in refinancings,” said Larry Dillon, president and chief executive officer of C&F Financial Corporation. “While loan demand recently has improved, we anticipate that mortgage loan originations in the third and fourth quarters of 2004 also will be lower than in the same periods of 2003.”
“Mortgage loan demand has decreased as we anticipated,” said Dillon, “ but we remain excited by the progress of the initiatives we have underway in all segments of the corporation. At the Mortgage Banking segment, we continue to seek new mortgage loan origination offices and opened our fifteenth branch in Waldorf, Md. during this year’s first half. Results of this branch have exceeded expectations and the branch has become profitable sooner than expected. At the Retail Banking segment, we are reviewing final plans and expect to begin construction in the last half of 2004 for two new branches on the Virginia Peninsula. In addition, we continue to add commercial loan officers both in the Newport News and Richmond, Va. markets. At the Consumer Finance segment, we continue to invest in both technology and people to create efficiencies and serve new markets.”
“At the end of June, the corporation’s common stock was removed from the Russell 3000 index, which is reconstituted annually,” Dillon said. “The Russell index is widely used by managers of index funds and as a benchmark for both passive and active business strategies. The overall resurgence in the capital markets over the past 18 months lifted the threshold level for inclusion in 2004.”
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C&F FINANCIAL CORPORATION
Wednesday, July 21, 2004
Contact: Tom Cherry, Senior Vice President & CFO
(804) 843-2360
“We continue to actively manage our capital through growth in our core businesses, dividends to our shareholders and an active stock repurchase program,” Dillon said. “We are pursuing growth through the opening of new locations, entry into new markets and technology initiatives, which we are confident will enhance shareholder value over the long-term. During the second quarter, the board of directors declared a quarterly dividend of 22 cents per share. Over the past two years, the corporation has increased its quarterly dividend per share by more than 30 percent. Also, the corporation continues to repurchase its stock in accordance with a board-approved stock repurchase program previously announced.”
Mortgage Banking Segment. Second quarter net income for the Mortgage Banking segment decreased from $1.74 million in 2003 to $881,000 in 2004. This decrease resulted from a decline in the gain on sales of loans, which was offset in part by a corresponding reduction in production-based compensation. As mortgage rates began to increase in the third quarter of 2003, the Mortgage Banking segment began experiencing a decline in the number of applications for home purchase and refinance loans, resulting in a decrease in originations and sales of loans. The volume of mortgage loan applications and the level of the mortgage loan pipeline are following a more normal seasonal pattern this year, and so C&F expects that the second and third quarters will be this year’s peak earnings periods for the Mortgage Banking segment. However, future earnings for the Mortgage Banking segment would be affected by any changes in interest rates, new and resale home sales and loan refinancings.
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C&F FINANCIAL CORPORATION
Wednesday, July 21, 2004
Contact: Tom Cherry, Senior Vice President & CFO
(804) 843-2360
Retail Banking Segment. Net income for the Retail Banking segment increased approximately $136,000 to $1.34 million for the quarter ended June 30, 2004. The improvement in the performance of the Retail Banking segment resulted from a higher level of earning assets, offset in part by 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 to support growth.
The Retail Banking segment’s nonaccrual loans increased to $3.85 million as of June 30, 2004, compared with $1.99 million as of December 31, 2003. This increase resulted from one commercial real estate relationship that became more than 90 days delinquent after December 31, 2003. Management is monitoring this relationship very closely and believes that current reserves are adequate to cover potential losses. The Retail Banking segment’s accruing loans past due 90 days or more increased to $3.07 million as of June 30, 2004, compared to $1.09 million as of December 31, 2003. This increase resulted from the return to accrual status of a commercial loan relationship approximating $976,000, which had been non-accruing at December 31, 2003. While this relationship is contractually past due, management has determined that a return to accrual status is appropriate based on an overall evaluation of the credit quality. Accruing loans past due 90 days or more at June 30, 2004 also included two loans approximating $1.3 million that are no longer delinquent after quarter-end.
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C&F FINANCIAL CORPORATION
Wednesday, July 21, 2004
Contact: Tom Cherry, Senior Vice President & CFO
(804) 843-2360
Consumer Finance Segment. Net income for the Consumer Finance segment increased approximately $88,000 to $622,000 for the quarter ended June 30, 2004. A 15.2 percent increase in average loans outstanding favorably impacted net earnings. However, the second quarter of 2004 also included an increase in operating expenses to support growth and technology investments.
About C&F Financial Corporation. C&F Financial Corporation’s stock trades on the Nasdaq Stock Market System under the symbol CFFI. The stock closed at a price of $35.22 per share on Tuesday, July 20, 2004. At June 30, 2004, the book value of the stock was $18.42 per share, and the corporation declared a dividend of 22 cents per share during the second quarter of 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 14 retail bank branches located throughout the Newport News to Richmond corridor in Virginia through its Citizens and Farmers Bank subsidiary and its division, Citizens and Commerce Bank. The corporation provides mortgage and title services through C&F Mortgage Corporation’s 15 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, Va.
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C&F FINANCIAL CORPORATION
Wednesday, July 21, 2004
Contact: Tom Cherry, Senior Vice President & CFO
(804) 843-2360
Additional information regarding the corporation’s products and services, as well as access to its filings with the Securities and Exchange Commission, are available on the corporation’s web site at http://www.cffc.com.
Forward-Looking Statements.The statements contained in this press release that are not historical facts may 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 corporation include, but are not limited to, changes in: (1) interest rates, (2) general economic conditions, (3) demand for loan products, (4) the legislative/regulatory climate, (5) monetary and fiscal policies of the U.S. Government, including policies of the U.S. Treasury and the Federal Reserve Board, (6) the quality or composition of the loan or investment portfolios, (7) deposit flows, (8) competition, (9) demand for financial services in the corporation’s market area and (10) accounting principles, policies and guidelines. These risks and uncertainties should be considered in evaluating the forward-looking statements contained herein, 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
| 6/30/04 | 12/31/03 | 6/30/03 | |||||||
Investment securities - available for sale at fair value | $ | 70,258 | $ | 103,050 | $ | 59,858 | |||
Loans held for sale | 57,858 | 29,733 | 99,049 | ||||||
Loans, net | 366,027 | 350,170 | 339,280 | ||||||
Federal Home Loan Bank stock | 1,392 | 2,072 | 2,072 | ||||||
Total assets | 594,465 | 573,546 | 554,366 | ||||||
Deposits | 442,154 | 427,635 | 402,742 | ||||||
Borrowings | 75,922 | 67,733 | 72,286 | ||||||
Shareholders’ equity | 65,678 | 65,384 | 61,327 | ||||||
Statements of Income
For The Quarter Ended | For The Six Months Ended | |||||||||||
| 6/30/04 | 6/30/03 | 6/30/04 | 6/30/03 | |||||||||
Interest income | $ | 9,956 | $ | 9,916 | $ | 19,541 | $ | 19,454 | ||||
Interest expense | 1,801 | 2,269 | 3,621 | 4,584 | ||||||||
Provision for loan losses1 | 802 | 843 | 1,697 | 1,381 | ||||||||
Other operating income: | ||||||||||||
Gain on sale of loans | 4,541 | 5,642 | 7,607 | 10,465 | ||||||||
Other | 2,110 | 2,453 | 3,906 | 4,474 | ||||||||
Other operating expenses: | ||||||||||||
Salaries and employee benefits | 6,642 | 6,545 | 12,275 | 12,334 | ||||||||
Other | 3,173 | 3,020 | 5,959 | 5,912 | ||||||||
Income tax expense | 1,300 | 1,790 | 2,266 | 3,374 | ||||||||
Net income | 2,889 | 3,544 | 5,236 | 6,808 | ||||||||
Earnings per common share – assuming dilution | .77 | .94 | 1.40 | 1.81 | ||||||||
Earnings per common share – basic | .80 | .98 | 1.46 | 1.88 | ||||||||
Interest income on a taxable-equivalent basis | 10,292 | 10,216 | 19,988 | 20,064 | ||||||||
Segment Information
For The Quarter Ended | For The Six Months Ended | |||||||||||
| 6/30/04 | 6/30/03 | 6/30/04 | 6/30/03 | |||||||||
Net income – retail banking | $ | 1,338 | $ | 1,202 | $ | 2,672 | $ | 2,494 | ||||
Net income – mortgage banking | 881 | 1,739 | 1,258 | 3,084 | ||||||||
Net income – consumer finance | 622 | 534 | 1,195 | 1,105 | ||||||||
Net income – other | 48 | 69 | 111 | 125 | ||||||||
Mortgage loan originations – mortgage banking | 266,244 | 320,691 | 436,648 | 562,734 | ||||||||
Mortgage loans sold – mortgage banking | 255,973 | 310,976 | 408,523 | 570,912 | ||||||||
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C&F FINANCIAL CORPORATION
Selected Data and Ratios
For The Quarter Ended | For The Six Months Ended | |||||||||||||||
| 6/30/04 | 6/30/03 | 6/30/04 | 6/30/03 | |||||||||||||
Book value per share | $ | 18.42 | $ | 17.03 | $ | 18.42 | $ | 17.03 | ||||||||
Dividends per share | $ | .22 | $ | .18 | $ | .44 | $ | .34 | ||||||||
Annualized return on average assets | 1.99 | % | 2.64 | % | 1.83 | % | 2.56 | % | ||||||||
Annualized return on average equity | 17.80 | % | 23.92 | % | 16.09 | % | 23.37 | % | ||||||||
Net interest margin (fully taxable basis) | 6.35 | % | 6.43 | % | 6.22 | % | 6.38 | % | ||||||||
Average Balances
For The Quarter Ended | For The Six Months Ended | |||||||||||
| 6/30/04 | 6/30/03 | 6/30/04 | 6/30/03 | |||||||||
Securities | $ | 70,309 | $ | 58,733 | $ | 70,707 | $ | 58,882 | ||||
Loans held for sale | 52,041 | 75,885 | 41,753 | 75,999 | ||||||||
Loans | 368,995 | 345,845 | 363,155 | 341,998 | ||||||||
Fed funds sold/ interest bearing deposits at other banks | 42,956 | 15,054 | 50,438 | 13,940 | ||||||||
Total earning assets | 534,301 | 495,517 | 526,053 | 490,819 | ||||||||
Time, checking and savings deposits | 362,466 | 335,995 | 360,472 | 333,157 | ||||||||
Borrowings | 73,127 | 73,494 | 70,865 | 73,904 | ||||||||
Total interest bearing liabilities | 435,593 | 409,489 | 431,337 | 407,061 | ||||||||
Demand deposits | 66,183 | 49,739 | 63,116 | 48,718 | ||||||||
Shareholders’ equity | 64,926 | 59,277 | 65,091 | 58,258 | ||||||||
Capital Ratios
| 6/30/04 | 12/31/03 | 6/30/03 | |||||||
Total Capital (to Risk-Weighted Assets) | |||||||||
Corporation | 13.6 | % | 13.7 | % | 13.0 | % | |||
Bank | 12.4 | 12.3 | 12.5 | ||||||
Tier 1 Capital (to Risk-Weighted Assets) | |||||||||
Corporation | 12.3 | 12.4 | 11.0 | ||||||
Bank | 11.2 | 11.0 | 10.4 | ||||||
Tier 1 Capital (to Average Tangible Assets) | |||||||||
Corporation | 9.7 | 9.6 | 9.5 | ||||||
Bank | 8.8 | 8.5 | 9.0 |
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C&F FINANCIAL CORPORATION
Asset Quality
Retail and Mortgage Banking Segments | 6/30/04 | 12/31/03 | 6/30/03 | |||||||||
Non-accrual loans | $ | 3,852 | $ | 1,993 | $ | 2,053 | ||||||
Real estate owned | — | 8 | 702 | |||||||||
Total non-performing assets | $ | 3,852 | $ | 2,001 | $ | 2,755 | ||||||
Accruing loans past due for 90 days or more | $ | 3,070 | $ | 1,092 | $ | 3,093 | ||||||
Allowance for loan losses | $ | 4,286 | $ | 4,256 | $ | 4,068 | ||||||
Non-performing assets to loans* and real estate owned | 1.34 | % | .72 | % | 1.01 | % | ||||||
Allowance for loan losses to loans* and real estate owned | 1.49 | % | 1.52 | % | 1.50 | % | ||||||
Allowance for loan losses to non-performing assets | 111.27 | % | 212.69 | % | 147.66 | % | ||||||
| * | Loans exclude consumer finance loans at Moore Loans. |
Consumer Finance Segment | 6/30/04 | 12/31/03 | 6/30/03 | |||||||||
Non-accrual loans | $ | 715 | $ | 1,149 | $ | 872 | ||||||
Accruing loans past due for 90 days or more | 310 | 233 | 293 | |||||||||
Allowance for loan losses | 5,419 | 4,401 | 3,394 | |||||||||
Dealer reserves | 1,584 | 2,119 | 2,212 | |||||||||
Non-accrual consumer finance loans to total consumer finance loans | .82 | % | 1.44 | % | 1.15 | % | ||||||
Allowance for loan losses and dealer reserves to non-accrual consumer finance loans | 979.44 | % | 567.45 | % | 642.89 | % | ||||||
Allowance for loan losses to total consumer finance loans | 6.20 | % | 5.52 | % | 4.49 | % | ||||||
Dealer reserves to total consumer finance loans | 1.81 | % | 2.66 | % | 2.92 | % | ||||||
Allowance for loan losses and dealer reserves to total consumer finance loans | 8.01 | % | 8.18 | % | 7.41 | % | ||||||
Other Data and Ratios
As Of and For the Six Months Ended | ||||||
| 6/30/04 | 6/30/03 | |||||
Shares repurchased | 49,750 | 80,000 | ||||
Average price of repurchased shares | $39.52 | $28.13 | ||||
Weighted average shares outstanding – diluted | 3,752,786 | 3,769,428 | ||||
Weighted average shares outstanding – basic | 3,585,750 | 3,613,992 | ||||
Price per share at period end | $33.23 | $39.00 | ||||
Price to book value ratio at period end | 1.80 | 2.29 | ||||
Price to earnings ratio at period end2 | 11.87 | 11.14 | ||||
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C&F FINANCIAL CORPORATION
Notes to Selected Financial Data
| 1 | Included in the provision for loan losses is $802,000 and $618,000 for the quarters ended 6/30/04 and 6/30/03, respectively, and $1,697,000 and $1,081,000 for the six months ended 6/30/04 and 6/30/03, respectively, attributable to Moore Loans. |
| 2 | The price to earnings ratio is calculated using annualized diluted earnings per share. |
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