C&F Financial Corporation — Q1 2024 Form 10-Q
Business context and reporting period. This unaudited quarterly report covers the three months ended March 31, 2024. C&F is a Virginia bank holding company operating through community banking, mortgage banking, and consumer finance. Dollar amounts below are in millions unless noted.
Financial performance and position
| Metric | Q1 2024 | Comparable / reference |
|---|---|---|
| Net interest income | $23.2 | $25.0 in Q1 2023 |
| Net interest margin | 4.09% | 4.52% in Q1 2023; 4.17% in Q4 2023 |
| Noninterest income / expense | $7.5 / $23.2 | $7.6 / $22.6 in Q1 2023 |
| Provision for credit losses | $3.5 | $2.1 in Q1 2023 |
| Net income attributable to C&F | $3.4; $1.01 per diluted share | $6.4; $1.86 per share in Q1 2023 |
| Annualized ROA / ROE | 0.57% / 6.33% | 1.10% / 12.87% in Q1 2023 |
- Balance sheet at March 31: assets were $2,469.8, up $31.3 from year-end; gross loans were $1,817.4, up $75.3; deposits were $2,087.9, up $21.8. The allowance for credit losses was $40.2, or 2.21% of loans, versus $39.7, or 2.28%, at December 31.
- Cash flow: operating activities provided $0.9; investing activities used $49.6; financing activities provided $28.8. Cash and cash equivalents declined $20.0 to $55.2. These are quarterly cash-flow figures, not a measure of free cash flow.
- Funding and liquidity: short-term borrowings were $27.8, long-term borrowings $68.3, and trust preferred capital notes $25.4. Liquid assets were $298.5, and reported liquidity plus borrowing availability totaled $872.3. Estimated uninsured deposits were $560.3; excluding intercompany cash and secured municipal deposits, uninsured deposits were $408.3.
- Capital and shareholder returns: total equity was $216.9. The Corporation’s tier 1 and total risk-based capital ratios were 12.2% and 14.5%; the Bank’s were 12.6% and 13.8%. The quarterly dividend was $0.44 per share. C&F repurchased $0.516 of shares under its $10.0 repurchase authorization.
Material changes versus Q1 2023
- Net income attributable to C&F fell about 47%, and diluted EPS declined from $1.86 to $1.01. Net interest income fell about 7%, principally as funding costs rose faster than asset yields; the cost of interest-bearing liabilities increased 121 basis points while earning-asset yield increased 45 basis points.
- Interest expense rose to $9.6 from $4.3, including substantially higher time-deposit expense. Loan growth and higher loan yields lifted interest income, but did not offset higher funding costs.
- Credit-loss provision increased to $3.5 from $2.1. Consumer finance recorded a $3.0 provision and a $0.063 net loss, compared with $1.6 provision and $0.509 net income in Q1 2023.
- Mortgage originations declined 18.5% to $94.3. Mortgage banking nevertheless reported net income of $0.294, up from $0.227, helped by lower costs and a $0.140 reversal of mortgage indemnification provision.
- Loans and deposits increased from December 31, 2023, while available-for-sale securities declined $32.0 to $430.4. The quarter’s net cash decrease contrasted with a $57.6 increase in Q1 2023.
Outlook, commentary, and risks
- The filing provides no specific earnings or full-year numerical guidance. Management expects deposit costs to continue rising, though potentially at a slower rate, and says near-term borrowing may remain part of funding. The effect on margin depends on loan growth, deposit competition, borrowing needs, and market rates.
- Management says higher rates could support asset yields, but a decline in rates could pressure margin because assets may reprice downward faster than deposits and borrowings. Its twelve-month simulation estimates net interest income would fall 1.91% under a 100-basis-point rate decrease and rise 0.46% under a 100-basis-point increase, based on stated modeling assumptions.
- Consumer auto credit is a key watch item: auto delinquencies and repossessions and lower used-vehicle wholesale values contributed to higher charge-offs. Consumer finance net charge-offs were 2.54% annualized, versus 1.77% in Q1 2023; management warns further deterioration or lower vehicle values could require additional provision.
- Available-for-sale securities had $35.955 of gross unrealized losses at quarter-end, largely attributed to interest rates. Management reported no credit impairment and expects to recover the investments through principal and interest payments; accumulated other comprehensive loss on securities was $27.1.
- Other risks include deposit competition and funding concentration, commercial real estate and other credit exposure, mortgage market weakness, interest-rate sensitivity, and contingent mortgage representations-and-warranties obligations. Loan commitments were $400.6 and standby letters of credit were $9.0. Management stated disclosure controls were effective and reported no material change in risk factors from the 2023 Form 10-K.
Important facts for investors to verify
- Whether deposit pricing and time-deposit renewal costs continue to compress net interest margin, and how reliance on borrowings evolves.
- Consumer auto delinquency, repossession, charge-off, and used-vehicle recovery trends, alongside the adequacy of the $40.2 allowance.
- Commercial real estate and construction loan growth, risk ratings, and any change in criticized or nonaccrual balances.
- Liquidity composition and uninsured-deposit trends, including the availability and terms of borrowing facilities and brokered deposits.
- Mortgage origination volumes and whether the indemnification reserve remains adequate as loans sold season and borrower performance changes.
- The duration and potential capital or earnings implications of securities unrealized losses if liquidity needs or market rates change.