[PHOTO]
[C&F LOGO]
C&F FINANCIAL CORPORATION
2001 ANNUAL REPORT
[LOGO GRAPHIC]
OUR MISSION
It is the mission of the directors, officers, and staff to maximize the
long-term wealth of the shareholders of C&F Financial Corporation through
Citizens and Farmers Bank and its other subsidiaries.
We believe we provide a superior value when we balance long-term and
short-term objectives to achieve both a competitive return on investment and a
consistent increase in the market value of the Corporation's stock.
This must be achieved while maintaining adequate liquidity and safety
standards for the protection of all of the Corporation's interested parties,
especially its depositors and shareholders.
This mission will be accomplished by providing our customers with distinctive
service and quality financial products which are responsive to their needs,
fairly priced, and delivered promptly and efficiently with the highest degree of
accuracy and professionalism.
OUR VALUES
We believe that excellence is the standard for all we do, achieved by
encouraging and nourishing: respect for others; honest, open communication;
individual development and satisfaction; a sense of ownership and responsibility
for the Corporation's success; participation, cooperation, and teamwork;
creativity, innovation, and initiative; prudent risk-taking; and recognition and
rewards for achievement.
We believe that we must conduct ourselves morally and ethically at all times
and in all relationships.
We believe that we have an obligation to the well-being of all the
communities we serve.
We believe that our officers and staff are our most important assets, making
the critical difference in how the Corporation performs and, through their work
and effort, separate us from all competitors.
2001 FINANCIAL HIGHLIGHTS
C&F Financial Corporation (the "Corporation") is a one-bank holding company
with administrative offices in West Point, Virginia. Its wholly-owned
subsidiary, Citizens and Farmers Bank, offers quality banking services to
individuals, professionals, and small businesses through ten branch offices
serving the surrounding towns and counties. Citizens & Commerce Bank, which
operates as a division of Citizens and Farmers Bank, offers quality banking
services in the Richmond market and has two branch offices. Citizens and Farmers
Bank has four wholly-owned subsidiaries. C&F Mortgage Corporation originates and
sells residential mortgages. These mortgage services are provided through seven
offices in Virginia and three offices in Maryland. Brokerage services are
offered through C&F Investment Services, Inc. C&F Title Agency, Inc., offers
title insurance services. Insurance services are offered through C&F Insurance
Services, Inc. Trust services are provided in association with The Trust Company
of Virginia.
Return on Average Equity Return on Average Assets
[GRAPH] [GRAPH]
16.08% 17.81% 19.22% 15.99% 18.93% 1.90% 2.03% 2.19% 1.76% 2.09%
1997 1998 1999 2000 2001 1997 1998 1999 2000 2001
Net Income Earnings Per Share
dollars in thousands
[GRAPH] [GRAPH]
$4,937 $6,134 $6,756 $5,836 $7,989 $1.25 $1.56 $1.81 $1.60 $2.23
1997 1998 1999 2000 2001 1997 1998 1999 2000 2001
[PHOTO]
[PHOTO GRAPHIC]
LETTER FROM THE PRESIDENT
[PHOTO]
Larry G. Dillon
Chairman, President and
Chief Executive Officer
Dear Fellow Shareholders
On behalf of the Board of Directors, I am pleased to present the Annual
Report of C&F Financial Corporation for the year 2001, another year in which we
achieved record growth and earnings. It was a year where unmatched drops in
interest rates stagnated the earnings at Citizens and Farmers Bank, yet
precipitated record production and earnings at C&F Mortgage Corporation. It was
also a year in which our country experienced unbelievable acts of terrorism,
which in turn played havoc on our economy. These acts brought back both
patriotic and spiritual values and served to unite us as a country. The
record-breaking results of our company are pale compared to what has happened to
us as a country. The year 2001 will be one none of us will ever forget.
Net income in 2001 totaled just under $7.2 million (excluding the $776,000
after-tax gain on the sale of the Tappahannock Office to Northern Neck State
Bank, which occurred in the 4th quarter), up 24% from $5.8 million earned in
2000. This resulted in a return on average assets of 1.89% and a return on
average equity of 17.09%, up from 1.76% and 15.99%, respectively, in 2000. Our
earnings also compare favorably with those of our peers who, as of September
2001, showed average annualized returns on average assets of 1.03% and average
equity of 11.15%. Earnings per share jumped from $1.60 to $2.01.
Earnings for the Corporation are up primarily due to the superb results of
C&F Mortgage Corporation. You will note as you review this report that the
unprecedented eleven drops of the federal funds rate drastically affected the
Bank's interest spread, which dropped by 34 basis points during the year. This
drop negated the Bank's asset growth for the year and, as mentioned above, was
primarily responsible for the flat earnings of the Bank. Also impacting the Bank
was the increase in overhead costs associated with opening two new branches and
the new technology implemented over the last eighteen months.
The significant drop in interest rates, on the other hand, tremendously
helped the Mortgage Corporation. With interest rates down, C&F Mortgage saw its
loan production more than double, increasing from $294 million in 2000 to $627
million in 2001, which resulted in more than a 400% growth in earnings. Also
affecting earnings in 2001 was the growth in revenues and earnings of both C&F
Title Agency, Inc. and C&F Investment Services, Inc., both of which saw their
earnings more than double. The sale of the Tappahannock Office resulted in a
one-time $776,000 after-tax gain. This sale to Northern Neck State Bank was the
result of an unsolicited offer from them that made economic sense to us; in
addition, Tappahannock is far removed from the rest of our branch network.
We saw many exciting changes for the Corporation in 2001. The most notable
was the opening of our new 25,000 sq. ft. facility in Midlothian, which is now
the headquarters for C&F Mortgage
2 C & F Financial Corporation
[PHOTO]
The unique lobby design provides a warm atmosphere to welcome customers
into the Citizens & Commerce Bank branch on Alverser Drive in Midlothian.
Corporation and Citizens & Commerce Bank, a division of Citizens and Farmers
Bank. This facility, located in a new commercial development appropriately named
the "C&F Center," offers the Mortgage Corporation greatly expanded facilities at
a strategically located site and allows us room for future expansion.
The bank portion of this facility offers Citizens & Commerce Bank not only
a new and strategically important location, but has been designed and built as
one of the most unique banking lobbies in the country. In addition to the
typical offices, teller line and new account desks, it offers the customers two
large television screens to watch continuously running news and two Internet
workstations to be able to "surf the net." In addition, there is a coffee bar,
from which the net proceeds of coffee sales will be given to various local
charities. These combined amenities provide for an inviting setting to the
customer, which is what we want. This philosophy is very different from some of
our larger competitors who are doing all they can to keep the customers out of
their branches.
Also located within this facility are the headquarters of C&F Title Agency,
Inc. and an office of C&F Investment Services, Inc. We can now offer all of our
customers and potential customers in the Midlothian market full banking
services, brokerage services and mortgage banking services. It truly is a
financial "center."
In December of 2001, we also opened our twelfth banking office, in
Sandston. This freestanding office offers all of the same inviting amenities as
our Midlothian office. Given the overwhelming volume of new accounts being
opened, this office may become one of our busiest locations.
We saw many exciting changes for the Corporation in 2001.
The most notable was the opening of our new 25,000 sq. ft. facility
in Midlothian, which is now the headquarters for C&F Mortgage
Corporation and Citizens & Commerce Bank, a division of Citizens and
Farmers Bank.
2001 Annual Report 3
[PHOTO]
Employees and customers enjoy the spacious coffee bar, television and
Internet area at the Citizens & Commerce Bank branch on Alverser Drive.
In January of 2001, we began offering our customers
"imaged" monthly statements. This service allows us to offer
our customers condensed images of their cleared checks in a
manner that allows them to better organize their home
record keeping.
[75 YRS. LOGO]
We make every effort to provide our customers with the best products and
services possible, therefore, we must constantly be improving our training and
technology. The year 2001 was no exception, as we made several enhancements to
both our technology and offerings. Unseen to the customer, and possibly most
important to our speed of delivery, was a replacement of our mainframe computer
system during 2001. Not only will this change increase our computing speed and
capacity, it will also keep us at the forefront of computing hardware.
In January of 2001, we began offering our customers "imaged" monthly
statements. This service allows us to offer our customers condensed images of
their cleared checks in a manner that allows them to better organize their home
record keeping. This system also offers two other important services. First, it
allows our internal research, either for our own purposes or that of the
customer, to be almost instantaneous. Secondly, after initiating our Internet
banking service in the spring of 2001, our customers now have the ability to see
the image of any cleared check online.
Not only do our Internet banking customers have the ability to "see" their
cleared items, they are now able to perform just about any banking transaction
online in the privacy of their own homes and at their own convenience. With our
system being "real time," no matter whether the customer is performing the
transaction or inquiry within the branch, on our telephone banking system, or
over the Internet, the customer will always receive the same information.
The Board of Directors was sad to receive the recent resignation of P. Loy
Harrell from the Board of Citizens and Farmers Bank, where he
4 C & F Financial Corporation
[PHOTO GRAPHIC]
had served as a Board member since 1966. The entire Board will sorely miss Mr.
Harrell's experience, depth of knowledge and guidance.
During 2001, the Board appointed Audrey D. Holmes to the Board of Citizens
and Farmers Bank. Ms. Holmes is a local attorney in the Sandston market and not
only provides knowledge of that market but also of the Charles City County
market where she has been a lifelong resident. Her knowledge of and respect in
both markets as well as her expertise will be a great benefit to the Board.
At its meeting in January 2002, the Board appointed Barry R. Chernack, who
has served as a member of the Board of Directors of Citizens and Farmers Bank
since 2000, to the Board of C&F Financial Corporation. Mr. Chernack, a past
managing partner of PriceWaterhouseCoopers LLP, will bring considerable
accounting and business knowledge to both the Board and its Audit Committee.
The directors, officers, and staff of C&F Financial Corporation are
committed to supporting the communities in which we are located and demonstrate
that support in many fashions. Most of our staff are very active in various
civic groups, often giving many hours of their personal time. These activities
range from overseeing various "walk-a-thons," to coaching at the local high
school, to serving on local community boards. We are very appreciative of the
communities we serve and try to give back in ways that keep us involved in these
communities.
Our philosophy at C&F is that in order for us to be successful on a
long-term basis, which is our primary goal, we have to look out for the
interests of three constituencies: our staff, who provide the backbone of what
we do; the communities we serve, who provide our customers and without which we
would not exist; and our stockholders, who provide us the financial support. To
look out for one above the others would lead to failure. The interests of all
have to be well served. We look out for our staff members by trying to assure
fair compensation and benefits packages to provide for them and their families;
we provide them with growth and educational opportunities; and, we are
constantly challenging them with the changes both within the organization as
well as the industry. We care for our communities by providing the best in
products and services we possibly can and we give back both personally and
financially in as many ways as possible. And finally, we look out for you, our
stockholders, by striving to provide the best returns possible. We are ever
cognizant that to remain a viable long-term organization we must provide you
with a solid return on your investment. We are not perfect, however we do strive
for perfection in all we do.
Our thanks and appreciation go out to all of our constituencies for helping
to make this organization what it is - a truly fine financial services
corporation. We thank you for your support and ask for your continued patronage
as we celebrate our 75th year of providing financial services.
/s/ Larry G. Dillon
Larry G. Dillon
Chairman, President and Chief Executive Officer
[PHOTO]
Kitty Buckner-Branch Manager and Alice Robbins-Assistant Branch Manager
discuss new customer opportunities at our Citizens and Farmers Bank
branch in Sandston.
2001 Annual Report 5
DIRECTORS AND ADVISORS
[PHOTO]
Citizens and Farmers Bank (back left to right)-- Bryan E. McKernon, Reginald H.
Nelson IV, Paul C. Robinson, J. P. Causey Jr., James H. Hudson III, Joshua H.
Lawson, and Thomas B. Whitmore Jr. (front left to right) Barry R. Chernack,
Larry G. Dillon, Audrey D. Holmes, and William E. O'Connell Jr.
C&F Financial Corporation/Citizens and Farmers Bank
J. P. Causey Jr.*+
Senior Vice President, Secretary &
General Counsel
Chesapeake Corporation
Barry R. Chernack*+
Retired Partner
PriceWaterhouseCoopers LLP
Larry G. Dillon *+
Chairman, President & CEO
C&F Financial Corporation
Citizens and Farmers Bank
P. L. Harrell+
President
Old Dominion Grain, Inc.
Audrey D. Holmes+
Attorney-at-Law
Audrey D. Holmes, Attorney-at-Law
James H. Hudson III*+
Attorney-at-Law
Hudson & Bondurant, P.C.
Joshua H. Lawson*+
President
Thrift Insurance Corporation
Bryan E. McKernon+
President & CEO
C&F Mortgage Corporation
Reginald H. Nelson IV+
Retired Partner
Colonial Acres Farm
William E. O'Connell Jr.*+
Chessie Professor of Business
The College of William and Mary
Paul C. Robinson*+
Owner & President
Francisco, Robinson & Associates, Realtors
Thomas B. Whitmore Jr.+
Retired President
Whitmore Chevrolet, Oldsmobile, Pontiac Co., Inc.
Citizens & Commerce Bank
Frank Bell III
President
Citizens & Commerce Bank
Jeffery W. Jones
Chairman & Chief Executive Officer
WFofR, Incorporated
S. Craig Lane
President
Lane & Hamner, P.C.
William E. O'Connell Jr.
Chairman of the Board
Chessie Professor of Business
The College of William and Mary
Meade A. Spotts
President
Spotts, Fain, Chappell & Anderson, P.C.
Scott E. Strickler
Treasurer
Robins Insurance Agency, Inc.
Katherine K. Wagner
Senior Vice President
Commercial Lending
Citizens & Commerce Bank
C&F Mortgage Corporation
J. P. Causey Jr.
Senior Vice President, Secretary &
General Counsel
Chesapeake Corporation
Larry G. Dillon
Chairman of the Board
James H. Hudson III
Attorney-at-Law
Hudson & Bondurant, P.C.
Bryan E. McKernon
President & CEO
C&F Mortgage Corporation
William E. O'Connell Jr.
Chessie Professor of Business
The College of William and Mary
Paul C. Robinson
Owner & President
Francisco, Robinson & Associates, Realtors
C&F Investment Services, Inc.
Larry G. Dillon
President
Eric F. Nost
Vice President
Thomas F. Cherry
Treasurer
Gari B. Sullivan
Secretary
* C&F Financial Corporation Board Member
+ Citizens and Farmers Bank Board Member
Citizens & Commerce Bank Board (back left to right)-- Scott E.
Strickler, S. Craig Lane, Katherine K. Wagner, Frank Bell III,
and William E. O'Connell Jr. (front left to right) Jeffery W.
Jones and Meade A. Spotts
[PHOTO]
6 C & F Financial Corporation
OFFICERS AND LOCATIONS
[GRAPHIC]
Independent Public Accountants
Yount, Hyde & Barbour, P.C.
Winchester, VA
Corporate Counsel
Hudson & Bondurant, P.C.
West Point, VA
Varina Advisory Board
Robert A. Canfield
Attorney-at-Law
Canfield, Shapiro, Baer, Heller & Johnston
Robert F. Nelson Jr.
Professional Engineer
Engineering Design Associates
Phil T. Rutledge Jr.
Retired Deputy County Manager
County of Henrico
Sandra W. Seelmann
Real Estate Broker/Owner
Varina & Seelmann Realty
Citizens and Farmers Bank
ADMINISTRATIVE OFFICE
802 Main Street
West Point, Virginia 23181
(804) 843-2360
Larry G. Dillon *
Chairman, President & CEO
Maria E. Campbell
Senior Vice President, Retail
Thomas F. Cherry *
Senior Vice President & CFO
Gari B. Sullivan *
Senior Vice President & Secretary
Leslie A. Campbell
Vice President, Loan Operations
Sandra S. Fryer
Vice President, Operations
William B. Littreal
Vice President, Information Systems
Deborah R. Nichols
Vice President, Quality Control
Laura H. Shreaves
Vice President & Director of Human Resources
* Officers of C&F Financial Corporation
WEST POINT -- MAIN OFFICE
Thomas W. Stephenson Jr.
Branch Manager
802 Main Street
West Point, Virginia 23181
(804) 843-2360
JAMESTOWN ROAD
Alec J. Nuttall
Assistant Vice President
& Branch Manager
1167 Jamestown Road
Williamsburg, Virginia 23185
(757) 220-3293
LONGHILL ROAD
Sandra C. St. Clair
Assistant Vice President
& Branch Manager
4780 Longhill Road
Williamsburg, Virginia 23188
(757) 565-0593
MIDDLESEX
N. Susan Gordon
Assistant Vice President
& Branch Manager
Route 33 at Route 641
Saluda, Virginia 23149
(804) 758-3641
NORGE
Robert J. Unangst
Branch Manager
7534 Richmond Road
Norge, Virginia 23127
(757) 564-8114
PROVIDENCE FORGE
James D. W. King
Vice President & Branch Manager
3501 N. Courthouse Road
Providence Forge, Virginia 23140
(804) 966-2264
QUINTON
Mary T. "Joy" Whitley
Assistant Vice President
& Branch Manager
2580 New Kent Highway
Quinton, Virginia 23141
(804) 932-4383
SANDSTON
Katherine P. Buckner
Assistant Vice President
& Branch Manager
100 East Williamsburg Road
Sandston, Virginia 23150
(804) 737-7005
VARINA
Susan M. Terry
Branch Manager
Route 5 at Strath Road
Richmond, Virginia 23231
(804) 795-7000
Tracy E. Pendleton
Vice President & Area Credit Manager
(804) 795-7706
WEST POINT -- 14TH STREET
Karen T. Richardson
Assistant Vice President & Branch Manager
415 Fourteenth Street
West Point, Virginia 23181
(804) 843-2708
CONSTRUCTION LENDING OFFICE
Terrence C. Gates
Vice President, Real Estate Construction
C&F Center
1400 Alverser Drive
Midlothian, Virginia 23113
(804) 858-8351
Citizens & Commerce Bank
ADMINISTRATIVE OFFICE
C&F Center
1400 Alverser Drive
Midlothian, Virginia 23113
(804) 378-0332
Frank Bell III
President
Katherine K. Wagner
Senior Vice President
Commercial Lending
MIDLOTHIAN
Sandra R. Gee
Branch Manager
C&F Center
1400 Alverser Drive
Midlothian, Virginia 23113
(804) 378-0332
RICHMOND
Michele Hottle
Branch Manager
8001 West Broad Street
Richmond, Virginia 23294
(804) 290-0402
2001 Annual Report 7
OFFICERS AND LOCATIONS
[GRAPHIC]
C&F Mortgage Corporation
ADMINISTRATIVE OFFICE
1400 Alverser Drive
Midlothian, VA 23113
(804) 858-8300
Bryan E. McKernon
President & Chief Executive Officer
Mark A. Fox
Executive Vice President &
Chief Financial Officer
Donna G. Jarratt
Senior Vice President & Project Manager
Kevin A. McCann
Vice President & Controller
Tracy L. Bishop
Vice President & Human Resources Manager
M. Kathy Burley
Vice President & Closing Manager
James A. Ryan, III
Vice President & Underwriting Manager
RICHMOND, VIRGINIA
1400 Alverser Drive
Midlothian, VA 23113
(804) 858-8300
Donald R. Jordan
Vice President & Branch Manager
Daniel J. Murphy
Vice President & Production Manager
Susan P. Burkett
Vice President & Operations Manager
RICHMOND, VIRGINIA
7231 Forest Avenue, Suite 202
Richmond, Virginia 23226
(804) 673-3453
Page C. Yonce
Vice President & Branch Manager
Constance Bachman-Hamilton
Vice President & Production Manager
CHESTER, VIRGINIA
4517 West Hundred Road
Chester, Virginia 23831
(804) 748-2900
Stephen L. Fuller
Vice President & Branch Manager
CHARLOTTESVILLE, VIRGINIA
1420 Greenbrier Place
Charlottesville, Virginia 22901
(434) 974-1450
William E. Hamrick
Vice President & Branch Manager
Philip N. Mahone
Vice President & Branch Manager
NEWPORT NEWS, VIRGINIA
703 Thimble Shoals Boulevard, Suite C4
Newport News, Virginia 23606
(757) 873-8200
Linda H. Gaskins
Vice President & Branch Manager
WILLIAMSBURG, VIRGINIA
1167-A Jamestown Road
Williamsburg, Virginia 23185
(757) 259-1200
Irving E. "Ed" Jenkins
Vice President & Branch Manager
LYNCHBURG, VIRGINIA
17835 Forest Road, Suite B
Forest, Virginia 24551
(434) 385-0700
J. Garnett Atkins
Vice President & Branch Manager
CROFTON, MARYLAND
2191 Defense Highway, Suite 200
Crofton, Maryland 21114
(410) 721-6770
Michael J. Mazzola
Senior Vice President & Maryland Area
Manager
ANNAPOLIS, MARYLAND
20 Ridgely Avenue, Suite 302
Annapolis, Maryland 21401
(410) 263-9229
William J. Regan
Vice President & Branch Manager
ELLICOTT CITY, MARYLAND
5052 Dorsey Hall Drive
Suite 202
Ellicott City , MD 21042
(410) 964-9223
Scott B. Segrist
Branch Manager
Robert G. Menton
Branch Manager
APPRAISAL SERVICES
1400 Alverser Drive
Midlothian, VA 23113
(804) 858-8300
H. Daniel Salomonsky
Vice President & Appraisal Manager
C&F Title Agency, Inc.
1400 Alverser Drive
Midlothian, VA 23113
(804) 858-8399
Eileen A. Cherry
Vice President & Title Insurance Underwriter
C&F Investment Services, Inc.
Eric F. Nost
Vice President & Manager
417 Fourteenth Street
West Point, Virginia 23181
(804) 843-4584
(800) 583-3863
Douglas L. Hartz
Assistant Vice President
1400 Alverser Drive
Midlothian, Virginia 23113
(804) 378-7296
(888) 435-2033
Douglas L. Cash, Jr.
Branch Manager
1167 Jamestown Road
Williamsburg, Virginia 23185
(757) 229-5629
8 C & F Financial Corporation
[C&F LOGO]
[LOGO] C F F I
-------
NASDAQ
LISTED
Stock Listing
Current market quotations for the common stock of C&F Financial Corporation are
available under the symbol CFFI.
Stock Transfer Agent
American Stock Transfer & Trust Company serves as transfer agent for the
Corporation. You may write them at 40 Wall Street, New York, NY 10005, or
telephone them toll-free at 1-800-937-5449.
Investor Relations & Financial Statements
A copy of Form 10-K and quarterly reports on Form 10-Q, as filed with the
Securities and Exchange Commission, are available without charge to stockholders
upon written request. Requests for this or other financial information about C&F
Financial Corporation should be directed to:
Thomas Cherry
Senior Vice President and Chief Financial Officer
C&F Financial Corporation
P.O. Box 391
West Point, VA 23181
[C&F LOGO]
C&F Financial Corporation
802 Main Street o PO Box 391
West Point, Virginia 23181
(804) 843-2360
www.cffc.com