EXHIBIT 99.1
C&F FINANCIAL CORPORATION
Wednesday, October 26, 2005
Contact: Tom Cherry, Executive Vice President & CFO
(804) 843-2360
C&F Financial Corporation Announces
Record Third Quarter Earnings
West Point, Va., October 26, 2005—C&F Financial Corporation (NASDAQ: CFFI), the one-bank holding company for C&F Bank, today reported net income of $3.41 million, or $1.01 per diluted share, for its third quarter ended September 30, 2005, compared with $3.10 million, or 84 cents per diluted share, for the third quarter of 2004. C&F’s net income for the first nine months of 2005 was $9.03 million, or $2.52 per diluted share, compared with $8.34 million, or $2.23 per diluted share, for the first nine months of 2004.
“Earnings improvement in the corporation’s Retail Banking segment and Mortgage Banking segment more than offset a slight decline in the Consumer Finance segment,” said Larry Dillon, president and chief executive officer of C&F Financial Corporation. “Factors influencing third quarter earnings included rising interest rates, which contributed to improvement in the earnings at the Retail Banking segment; utilization of the corporation’s liquidity to fund higher loan demand; strong seasonal production at the Mortgage Banking segment; and, higher operating expenses to support growth.”
The corporation’s annualized return on average equity was 21.49 percent for the third quarter and 17.41 percent for the first nine months of 2005, compared with 18.48 percent for the third quarter and 16.83 percent for the first nine months of last year. The annualized return on average assets was 2.01 percent for the third quarter and 1.88 percent for the first nine months of this year, compared with 2.09 percent for the third quarter and 1.91 percent for the first nine months of last year.
C&F FINANCIAL CORPORATION
Wednesday, October 26, 2005
Contact: Tom Cherry, Executive Vice President & CFO
(804) 843-2360
“In addition to the earnings increase for the third quarter, we completed our repurchase of approximately 427,000 shares of the corporation’s common stock for approximately $17.6 million,” said Dillon. “The repurchase transaction is accretive to earnings per share and return on equity, thus increasing value to our remaining shareholders. We also increased our quarterly dividend rate 4.2 percent from 24 cents per share to 25 cents per share.”
“The Consumer Finance segment completed the relocation and consolidation of its operations center during the third quarter of this year and we will be moving the operations center for our Retail Banking segment to a new location before the end of the year. We expect to open two new retail banking branches in the Peninsula region in the first quarter of 2006.”
Retail Banking Segment. Third quarter net income for the Retail Banking segment increased to $1.67 million in 2005 compared to $1.57 million in 2004. Net income for the first nine months of 2005 increased to $4.71 million compared to $4.24 million in 2004. The improvements in the performance of the Retail Banking segment resulted from an increase in both the amount and yield of earning assets. These improvements were offset in part by an increase in the provision for loan losses and an increase in operational and administrative expenses to support growth. The net interest margin of the Retail Banking segment has benefited in the short term as prime-based loans have repriced as the prime rate has increased, and deposits have repriced at a more gradual pace. The favorable impact of the deposit repricing lag will neutralize in the longer term as short-term interest rates rise.
2
C&F FINANCIAL CORPORATION
Wednesday, October 26, 2005
Contact: Tom Cherry, Executive Vice President & CFO
(804) 843-2360
Mortgage Banking Segment. Third quarter net income for the Mortgage Banking segment increased to $1.15 million in 2005 compared to $851,000 in 2004. Net income for the first nine months of 2005 increased to $2.48 million compared to $2.11 million in 2004. The volume of the mortgage loan applications and the level of the mortgage loan pipeline have followed a typical seasonal pattern in 2005, as reflected in earnings growth in the third quarter. The volume of loans sold in the third quarter and the first nine months of 2005 increased by 40.4 percent and 22.8 percent, respectively, compared to the same periods in 2004, which more than offset the lower profit margins on loans sold caused by product mix and more competitive pricing. Future earnings of the Mortgage Banking segment may be negatively affected if the upward trend in interest rates continues and there are fewer new and resale home sales and loan refinancings.
Consumer Finance Segment. Third quarter net income for the Consumer Finance segment decreased to $555,000 in 2005 compared to $611,000 in 2004. Net income for the first nine months of 2005 decreased to $1.78 million compared to $1.81 million in 2004. The decreases in 2005 were attributable to net interest margin compression resulting from increased variable-rate borrowings in a rising rate environment, a higher provision for loan losses attributable to loan growth, and higher operating expenses to support growth and technology investments, offset in part by loan growth in excess of 19 percent. During the third quarter of 2005, the Consumer Finance segment changed third-party lenders for its secured revolving line of credit with financing terms that substantially increase the line of credit over time and provide for a rate reduction from the prior terms, as well as lower loan administration fees.
3
C&F FINANCIAL CORPORATION
Wednesday, October 26, 2005
Contact: Tom Cherry, Executive Vice President & CFO
(804) 843-2360
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 $37.75 per share on Tuesday, October 25, 2005. At September 30, 2005, the book value of the corporation was $18.71 per share, and the corporation declared a dividend of 25 cents per share during the third quarter of 2005. The corporation’s market makers include Advest, Inc., Davenport & Company LLC, FTN Midwest Securities Corp., McKinnon & Company and Scott & Stringfellow, Inc.
C&F Financial Corporation operates 14 retail bank branches located throughout the Newport News to Richmond corridor in Virginia through C&F Bank and offers full investment services through its subsidiary C&F Investment Services, Inc. The corporation provides mortgage services through C&F Mortgage Corporation’s 21 offices. C&F Finance Company provides automobile loans through its offices in Richmond, Roanoke and Hampton, Va.
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 athttp://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
4
C&F FINANCIAL CORPORATION
Wednesday, October 26, 2005
Contact: Tom Cherry, Executive Vice President & CFO
(804) 843-2360
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, (10) technology and (11) 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.
5
C&F FINANCIAL CORPORATION
Selected Financial Information
(dollars in thousands, except per share data)
Balance Sheets
| 9/30/05 | 12/31/04 | 9/30/04 | ||||||||||
Investment securities – available for sale at fair value | $ | 68,133 | $ | 72,787 | $ | 71,829 | ||||||
Loans held for sale | 66,753 | 48,566 | 53,652 | |||||||||
Loans, net | 454,516 | 394,471 | 383,361 | |||||||||
Federal Home Loan Bank stock | 1,876 | 2,030 | 1,392 | |||||||||
Total assets | 672,119 | 609,122 | 602,163 | |||||||||
Deposits | 489,786 | 447,134 | 444,169 | |||||||||
Borrowings | 106,564 | 78,285 | 76,956 | |||||||||
Shareholders’ equity1 | 58,660 | 69,899 | 68,613 | |||||||||
| Statements of Income | ||||||||||||
For the Quarter Ended | For the Nine Months Ended | |||||||||||
| 9/30/05 | 9/30/04 | 9/30/05 | 9/30/04 | |||||||||
Interest income | $ | 12,968 | $ | 10,504 | $ | 35,673 | $ | 30,045 | ||||
Interest expense | 3,454 | 1,892 | 8,390 | 5,513 | ||||||||
Provision for loan losses2 | 1,497 | 996 | 3,770 | 2,693 | ||||||||
Other operating income: | ||||||||||||
Gain on sale of loans | 5,760 | 4,518 | 14,009 | 12,125 | ||||||||
Other | 2,415 | 2,072 | 6,808 | 5,978 | ||||||||
Other operating expenses: | ||||||||||||
Salaries and employee benefits | 7,750 | 6,541 | 21,289 | 18,816 | ||||||||
Other | 3,536 | 3,094 | 9,990 | 9,053 | ||||||||
Income tax expense | 1,493 | 1,469 | 4,023 | 3,735 | ||||||||
Net income | 3,413 | 3,102 | 9,028 | 8,338 | ||||||||
Earnings per common share – assuming dilution3 | 1.01 | .84 | 2.52 | 2.23 | ||||||||
Earnings per common share – basic3 | 1.05 | .87 | 2.61 | 2.33 | ||||||||
| Segment Information | ||||||||||||
For The Quarter Ended | For The Nine Months Ended | |||||||||||
| 9/30/05 | 9/30/04 | 9/30/05 | 9/30/04 | |||||||||
Net income – Retail Banking | $ | 1,672 | $ | 1,568 | $ | 4,711 | $ | 4,240 | ||||
Net income – Mortgage Banking | 1,149 | 851 | 2,481 | 2,109 | ||||||||
Net income – Consumer Finance | 555 | 611 | 1,777 | 1,806 | ||||||||
Net income – Other | 37 | 72 | 59 | 183 | ||||||||
Mortgage loan originations – Mortgage Banking | 319,728 | 243,723 | 824,376 | 680,371 | ||||||||
Mortgage loans sold – Mortgage Banking | 348,162 | 247,929 | 806,189 | 656,452 | ||||||||
6
C&F FINANCIAL CORPORATION
Average Balances
For the Quarter Ended | For the Nine Months Ended | ||||||||||||||
| 9/30/05 | 9/30/04 | 9/30/05 | 9/30/04 | ||||||||||||
Securities | $ | 69,016 | $ | 70,720 | $ | 69,676 | $ | 70,711 | |||||||
Loans held for sale | 82,688 | 50,516 | 61,921 | 44,978 | |||||||||||
Loans | 463,100 | 384,752 | 439,885 | 370,406 | |||||||||||
Fed funds sold/ interest bearing deposits at other banks | 10,845 | 39,981 | 16,284 | 46,927 | |||||||||||
Total earning assets | 625,649 | 545,969 | 587,766 | 533,022 | |||||||||||
Time, checking and savings deposits | 395,286 | 365,901 | 380,547 | 362,295 | |||||||||||
Borrowings | 122,472 | 75,544 | 99,713 | 72,436 | |||||||||||
Total interest bearing liabilities | 517,758 | 441,445 | 480,260 | 434,731 | |||||||||||
Demand deposits | 80,539 | 72,960 | 74,709 | 66,421 | |||||||||||
Shareholders’ equity3 | 63,526 | 67,126 | 69,124 | 66,056 | |||||||||||
Asset Quality | |||||||||||||||
| Retail and Mortgage Banking Segments | 9/30/05 | 12/31/04 | 9/30/04 | ||||||||||||
Nonaccrual loans* | $ | 4,130 | $ | 4,336 | $ | 3,794 | |||||||||
Accruing loans past due for 90 days or more | $ | 2,765 | $ | 1,580 | $ | 2,178 | |||||||||
Allowance for loan losses | $ | 4,684 | $ | 4,460 | $ | 4,282 | |||||||||
Nonperforming assets to loans** | 1.16 | % | 1.39 | % | 1.25 | % | |||||||||
Allowance for loan losses to loans** | 1.31 | % | 1.43 | % | 1.42 | % | |||||||||
Allowance for loan losses to nonperforming assets | 113.41 | % | 102.88 | % | 112.86 | % | |||||||||
| * | Nonperforming assets consist solely of nonaccrual loans for each period presented. |
| ** | Loans exclude Consumer Finance segment loans presented below. |
| Consumer Finance Segment | 9/30/05 | 12/31/04 | 9/30/04 | |||||||||
Nonaccrual loans | $ | 1,980 | $ | 1,330 | $ | 942 | ||||||
Accruing loans past due for 90 days or more | 153 | 481 | 412 | |||||||||
Allowance for loan losses | 8,217 | 6,684 | 6,139 | |||||||||
Dealer reserves | 689 | 1,076 | 1,282 | |||||||||
Nonaccrual consumer finance loans to total consumer finance loans | 1.78 | % | 1.42 | % | 1.03 | % | ||||||
Total nonaccrual and accruing loans past due for 90 days or more to total consumer finance loans | 1.92 | % | 1.94 | % | 1.48 | % | ||||||
Allowance for loan losses to total consumer finance loans4 | 7.40 | % | 7.15 | % | 6.72 | % | ||||||
Dealer reserves to total consumer finance loans4 | .62 | % | 1.15 | % | 1.40 | % | ||||||
Allowance for loan losses and dealer reserves to total consumer finance loans4 | 8.02 | % | 8.30 | % | 8.12 | % | ||||||
7
C&F FINANCIAL CORPORATION
Other Data and Ratios
As of and for the Quarter Ended | As of and for the Nine Months Ended | |||||||||||||||
| 9/30/05 | 9/30/04 | 9/30/05 | 9/30/04 | |||||||||||||
Annualized return on average assets | 2.01 | % | 2.09 | % | 1.88 | % | 1.91 | % | ||||||||
Annualized return on average equity3 | 21.49 | % | 18.48 | % | 17.41 | % | 16.83 | % | ||||||||
Dividends declared per share | $ | .25 | $ | .22 | $ | .73 | $ | .66 | ||||||||
Shares repurchased | 427,186 | 22,800 | 427,186 | 72,550 | ||||||||||||
Average price of repurchased shares | $ | 41.00 | $ | 35.51 | $ | 41.00 | $ | 38.26 | ||||||||
Weighted average shares – diluted3 | 3,391,324 | 3,708,549 | 3,588,107 | 3,738,040 | ||||||||||||
Weighted average shares – basic3 | 3,255,443 | 3,555,883 | 3,454,683 | 3,575,794 | ||||||||||||
Market value per share at period end | $ | 39.13 | $ | 38.00 | $ | 39.13 | $ | 38.00 | ||||||||
Book value per share at period end1 | $ | 18.71 | $ | 19.33 | $ | 18.71 | $ | 19.33 | ||||||||
Price to book value ratio at period end | 2.09 | 1.97 | 2.09 | 1.97 | ||||||||||||
Price to earnings ratio at period end (ttm) | 11.89 | 12.88 | 11.89 | 12.88 | ||||||||||||
Notes to Selected Financial Data
| 1 | Shareholders’ equity at 9/30/05 reflects the corporation’s repurchase of 427,186 shares of its common stock at $41 net per share pursuant to the corporation’s offer to repurchase up to 450,000 shares. This offer expired on July 22, 2005 and the corporation accepted the tendered shares on July 27, 2005. |
| 2 | Included in the provision for loan losses is $1,372,000 and $971,000 for the quarters ended 9/30/05 and 9/30/04, respectively, and $3,445,000 and $2,668,000 for the nine months ended 9/30/05 and 9/30/04, respectively, attributable to C&F Finance Company. |
| 3 | Earnings per share, annualized return on average equity and average weighted shares outstanding calculations for the three months and nine months ended 9/30/05 reflect the corporation’s repurchase of 427,186 shares of its common stock at $41 net per share effective July 27, 2005. |
| 4 | C&F Finance Company no longer originates loans with a dealer bad debt reserve provision. Therefore, the ratio of dealer bad debt reserves to total consumer finance loans declined from 1.15 percent at 12/31/04 to .62 percent at 9/30/05. The decline in the dealer bad debt reserves was offset in part by a higher provision for loan losses that resulted in an increase in the ratio of the allowance for loan losses to total consumer finance loans from 7.15 percent at 12/31/04 to 7.40 percent at 9/30/05. |
8
