GuruFocus Premium Membership

Serving Intelligent Investors since 2004. Only 96 cents a day.

Free Trial

Free 7-day Trial
All Articles and Columns »

C&F Financial Corp. Reports Operating Results (10-Q)

August 06, 2010 | About:
10qk

10qk

18 followers
C&F Financial Corp. (CFFI) filed Quarterly Report for the period ended 2010-06-30.

C&f Financial Corp. has a market cap of $59.3 million; its shares were traded at around $19.25 with a P/E ratio of 14 and P/S ratio of 0.6. The dividend yield of C&f Financial Corp. stocks is 5.2%.

Highlight of Business Operations:

Net income for the Corporation was $1.4 million for the second quarter ended June 30, 2010, compared with $1.8 million for the second quarter of 2009. Net income for the Corporation was $3.1 million for the first six months of 2010, compared with $3.3 million for the first six months of 2009. Net income available to common shareholders was $1.1 million, or $0.36 per common share assuming dilution for the second quarter of 2010, compared with $1.5 million, or $0.48 per common share assuming dilution for the second quarter of 2009. Net income available to common shareholders was $2.6 million, or $0.83 per common share assuming dilution for the first half of 2010, compared to $2.7 million, or $0.89 per common share assuming dilution for the first half of 2009. The difference between reported net income and net income available to common shareholders is a result of the Series A Preferred

The Banks nonperforming assets were $20.3 million at June 30, 2010, compared to $17.2 million at December 31, 2009. Nonperforming assets at June 30, 2010 included $7.8 million in nonaccrual loans and $12.5 million in foreclosed properties. Nonaccrual loans primarily consisted of six relationships totaling $6.3 million of loans secured by residential properties and commercial loans secured by non-residential properties. Specific reserves of $1.1 million have been established for these loans. Management believes it has provided adequate loan loss reserves for these loans based on the estimated fair values of the collateral. Foreclosed properties at June 30, 2010 primarily consisted of residential properties associated with seven commercial relationships and non-residential properties associated with two commercial relationships. These properties have been written down to their estimated fair values less selling costs.

Mortgage Banking: During the second quarter of 2010, C&F Mortgage Corporation recognized a net loss of $938,000 compared to net income of $1.2 million for the quarter ending June 30, 2009, and recognized a net loss of $780,000 for the first six months of 2010 compared to net income of $2.0 million for the first six months of 2009. The net loss for the three and six months ended June 30, 2010 primarily resulted from an increase in the provision for indemnification losses to $2.7 million and $3.2 million, respectively from $474,000 and $1.1 million for the three and six months ended June 30, 2009, respectively. Foreclosures and payment defaults have continued to remain elevated in the marketplace, resulting in increased demands for loan repurchases and indemnification requests. An indemnification obligation arises when a purchaser of a loan (an investor) sold by the Mortgage Banking segment incurs a loss due to demonstrated borrower misrepresentation, fraud, early default or underwriting errors. The increase in the provision for indemnification losses for both the three and six months ended June 30, 2010 was due to increased indemnifications throughout 2010 and an agreement reached with one of our investors that resolves all known and unknown indemnification obligations for loans sold to this investor prior to 2010, with the agreement being responsible for the majority of the increase. With this agreement in place, we expect a reduction in future indemnification obligations as the majority of our current indemnification issues were with loans sold to this investor.

In addition, loan origination volumes were considerably lower during 2010, declining to $208.9 million for the second quarter of 2010 from $333.4 million for 2009 and declining to $343.4 million for the first six months of 2010 from $652.3 million in 2009. For the second quarter of 2010, the amount of loan originations for refinancings and home purchases were $37.6 million and $171.3 million, respectively, compared to $171.4 million and $162.0 million, respectively, for the second quarter of 2009. For the first six months of 2010, the amount of loan originations for refinancings and home purchases were $71.2 million and $272.2 million, respectively, compared to $391.4 million and $260.9 million, respectively, for the first six months of 2009. The decrease in originations is a result of the challenging economic conditions, the expiration of the homebuyer tax credits and employee turnover. The increase in the provision for indemnification losses and decline in revenue from gains on sales of loans was partially offset by (1) a $1.1 million decrease for the second quarter of 2010 and a $2.6 million decrease for the six months ended June 30, 2010 in commission-based and

Consumer Finance: Second quarter net income for C&F Finance Company was $2.4 million in 2010, compared to $1.1 million in 2009. Net income for the first six months of 2010 was $4.5 million, compared to $1.8 million for the first six months of 2009. The Consumer Finance segment continues to benefit from loan growth, lower net charge-offs and the low interest rate environment. Loan production has been higher at our existing consumer finance offices, including new markets entered over the past 18 months, resulting in an increase in average loans of 14.4 percent and 13.3 percent for the three and six months ended June 30, 2010. The low interest rate environment has decreased borrowing costs as part of the funding costs for the segment is through a variable-rate line of credit indexed to LIBOR. Lower net charge-offs are a result of prudent underwriting guidelines, enhanced collection efforts and higher proceeds received when repossessed vehicles are sold as a result of stronger demand for used vehicles. Lower delinquencies and lower net charge-offs contributed to a $950,000 decrease for the second quarter of 2010 and a $2.0 million decrease for the first six months of 2010 in the provision for loan losses. The allowance for loan losses as a percentage of loans remained approximately the same, 7.90 percent at June 30, 2010 compared to 7.89 percent at December 31, 2009. Management believes that the current allowance for loan losses is adequate to absorb probable losses in the loan portfolio.

Other and Eliminations: The net loss for the second quarter 2010 for this combined segment was $123,000, compared to a net loss of $55,000 for the second quarter of 2009. The net loss for the first six months of 2010 was $250,000, compared to a net loss of $228,000 for the first six months of 2009. Revenue and expense of this combined segment include the results of operations of our investment, insurance and title subsidiaries, dividends received on the Corporations investment in equity securities, interest expense associated with the Corporations trust preferred capital notes and other general corporate expenses. The increase in the net loss resulted primarily from lower earnings at the title company.

Read the The complete Report

About the author:

10qk
GuruFocus - Stock Picks and Market Insight of Gurus

Rating: 3.7/5 (3 votes)

Comments

Please leave your comment:


Get WordPress Plugins for easy affiliate links on Stock Tickers and Guru Names | Earn affiliate commissions by embedding GuruFocus Charts
GuruFocus Affiliate Program: Earn up to $400 per referral. ( Learn More)
Free 7-day Trial
FEEDBACK