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

November 05, 2010 | About:
10qk

10qk

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C&F Financial Corp. (CFFI) filed Quarterly Report for the period ended 2010-09-30.

C&f Financial Corp. has a market cap of $59.9 million; its shares were traded at around $19.5 with a P/E ratio of 14.2 and P/S ratio of 0.6. The dividend yield of C&f Financial Corp. stocks is 5.3%.

Highlight of Business Operations:

Net income for the Corporation was $2.6 million for the third quarter ended September 30, 2010, compared with $1.7 million for the third quarter of 2009. Net income for the Corporation was $5.7 million for the first nine months of 2010, compared with $4.9 million for the first nine months of 2009. Net income available to common shareholders was $2.3 million, or $0.74 per common share

assuming dilution for the third quarter of 2010, compared with $1.4 million, or $0.45 per common share assuming dilution for the third quarter of 2009. Net income available to common shareholders was $4.9 million, or $1.57 per common share assuming dilution for the first nine months of 2010, compared to $4.1 million, or $1.34 per common share assuming dilution for the first nine months of 2009. The difference between reported net income and net income available to common shareholders is a result of the Series A Preferred Stock dividends and amortization of the Warrant related to the Corporations participation in the Capital Purchase Program (CPP). The financial results for the third quarter and first nine months of 2010 were affected by continued loan growth and lower net charge-offs in the Consumer Finance segment; higher net interest margin, higher provisions for loan and foreclosed properties losses, and general operating expenses associated with problem assets in the Retail Banking segment; and lower loan production and higher provision for indemnification losses in the Mortgage Banking segment.

The Banks nonperforming assets were $17.9 million at September 30, 2010, compared to $17.2 million at December 31, 2009. Nonperforming assets at September 30, 2010 included $6.8 million in nonaccrual loans and $11.1 million in foreclosed properties. Nonaccrual loans primarily consisted of four relationships totaling $4.9 million secured by residential properties and commercial loans secured by non-residential properties. Specific reserves of $1.0 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 September 30, 2010 primarily consisted of residential and non-residential properties associated with commercial relationships. These properties have been written down to their estimated fair values less selling costs.

Mortgage Banking: During the third quarter of 2010, C&F Mortgage Corporation recorded net income of $656,000 compared to net income of $755,000 for the quarter ended September 30, 2009, and recognized a net loss of $124,000 for the first nine months of 2010 compared to net income of $2.8 million for the first nine months of 2009. The net loss for the nine months ended September 30, 2010 primarily resulted from a decline in gains on sales of loans to $13.3 million for the nine months ended September 30, 2010 from $19.4 million for the first nine months of 2009 and an increase in the provision for indemnification losses of $1.8 million to $3.5 million, from $1.7 million for the nine months ended September 30, 2009. Loan origination volumes have remained lower during 2010, declining to $201.8 million for the third quarter of 2010 from $214.6 million for 2009 and declining to $545.2 million for the first nine months of 2010 from $867.0 million in 2009. For the third quarter of 2010, the amount of loan originations for refinancings and home purchases were $92.8 million and $109.0 million, respectively, compared to $51.5 million and $163.1 million, respectively, for the third quarter of 2009. For the first nine months of 2010, the amount of loan originations for refinancings and home purchases were $163.6 million and $381.6 million, respectively, compared to $442.9 million and $424.0 million, respectively, for the first nine months of 2009. The decrease in originations is a result of the challenging economic conditions, the expiration of the homebuyer tax credits during the first half of 2010 and loan officer turnover.

Consumer Finance: Third quarter net income for C&F Finance Company was $2.4 million in 2010, compared to $1.4 million in 2009. Net income for the first nine months of 2010 was $6.9 million, compared to $3.2 million for the first nine months of 2009. The Consumer Finance segment continues to benefit from loan growth, lower net charge-offs and the current low interest rate environment. Loan production has remained strong because of a higher volume of auto sales in the markets we serve, coupled with long-standing productive dealer relationships in existing markets and expansion into new markets over the past 18 months, resulting in an increase in average loans of 15.9 percent and 14.2 percent for the three and nine months ended September 30, 2010. The current 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. The annualized net charge-off ratio has declined over the last two years as a result of prudent underwriting guidelines, enhanced collection efforts and higher values received when repossessed vehicles are sold as a result of stronger demand for used vehicles. Lower delinquencies and the lower net charge-off ratio contributed to a $650,000 decrease for the third quarter of 2010 and a $2.7 million decrease for the first nine months of 2010 in the provision for loan losses compared to the same periods in 2009. The allowance for loan losses as a percentage of loans remained approximately the same, 7.90 percent at September 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 third quarter 2010 for this combined segment, together with the effects of intercompany eliminations, was $145,000, compared to a net loss of $150,000 for the third quarter of 2009. The net loss for the first nine months of 2010 was $395,000, compared to a net loss of $378,000 for the first nine 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, other general corporate expenses and the effects of intercompany eliminations.

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