C&F Financial (CFFI) - 2020 Q3 - Quarterly Report

Financial Performance - Consolidated net income for Q3 2020 was $6.9 million, or $1.86 per share, a 41.6% increase compared to $4.9 million, or $1.42 per share in Q3 2019 [182]. - Adjusted net income for Q3 2020 was $6.9 million, or $1.85 per share, up 30.7% from $5.3 million, or $1.54 per share in Q3 2019 [183]. - Reported net income for the quarter ended September 30, 2020, was $6,918,000, compared to $4,885,000 for the same period in 2019, representing a 41.5% increase [357]. - Adjusted earnings per share for the quarter was $1.85, up from $1.54 in the same quarter of the previous year, reflecting a 20.1% increase [357]. - The average total equity reported was $178,843,000, up from $159,106,000 in the previous year, indicating a growth of 12.4% [357]. Return on Equity and Assets - Annualized ROE and ROA for Q3 2020 were 15.47% and 1.39%, respectively, compared to 12.28% and 1.25% in Q3 2019 [182]. - The annualized return on average equity (ROE) for the quarter was 15.47%, compared to 12.28% in the same quarter of the previous year, indicating a significant improvement [357]. Loan Performance - Average loans increased by $243.7 million, or 31.3%, in Q3 2020 compared to the same period in 2019, including $94.0 million from the acquisition of Peoples [201]. - The community banking segment reported a net income of $1.1 million for Q3 2020, down from $2.4 million in Q3 2019, primarily due to higher provision for loan losses [197]. - The Corporation recorded an additional provision for loan losses of approximately $2.5 million in Q3 2020 due to asset quality deterioration from the COVID-19 pandemic [190]. - The community banking segment recorded a provision for loan losses of $1.5 million in Q3 2020, compared to zero in Q3 2019, primarily due to the COVID-19 pandemic [202]. - The annualized net charge-off ratio for the first nine months of 2020 decreased to 1.56% from 2.91% in the same period of 2019, reflecting improved loan performance [210]. Asset and Liability Management - Total assets of the Corporation as of September 30, 2020, were $1,992,244 thousand, an increase from $1,566,302 thousand as of September 30, 2019 [235]. - Total liabilities increased to $1,754,338 thousand, compared to $1,386,801 thousand in the previous year [238]. - The Corporation's total capital increased by $37.481 million during the first nine months of 2020, primarily due to the acquisition of Peoples and current period earnings [352]. - The Corporation has the capacity for unsecured federal funds agreements totaling $95 million and repurchase lines of credit totaling $50 million, both fully available as of September 30, 2020 [343]. Interest Income and Margin - The Corporation's net interest income for the three months ended September 30, 2020, was $21,009 thousand, compared to $20,363 thousand for the same period in 2019 [235]. - The yield on total loans for the third quarter of 2020 was 5.81%, down from 7.51% in the third quarter of 2019 [235]. - The net interest margin (annualized) for the third quarter of 2020 was 4.54%, compared to 5.50% for the same period in 2019 [235]. - Total interest income for the quarter was $23,986,000, slightly down from $24,132,000 in the same quarter of 2019, showing a decrease of 0.6% [357]. - Net interest income for the quarter was $20,845,000, an increase from $20,223,000 in the same quarter of the previous year, representing a 3.1% growth [357]. Noninterest Income and Expenses - Total noninterest income increased by $8.7 million, or 105.8%, in Q3 2020 compared to Q3 2019, and increased by $12.0 million, or 50.9%, in the first nine months of 2020 compared to the first nine months of 2019 [256]. - Total noninterest expenses increased by $5.0 million, or 24.8%, in Q3 2020 compared to Q3 2019, and by $9.7 million, or 16.3%, in the first nine months of 2020 compared to the same period in 2019 [260]. - The increase in noninterest expenses was primarily due to higher mortgage loan production volume, increased merger-related expenses, and higher data processing expenses associated with technology investments [260]. COVID-19 Impact - The Corporation's response to the COVID-19 pandemic included adapting technology for remote work and implementing safety practices in branches [196]. - The Corporation granted short-term payment deferrals with an aggregate balance of $28.3 million to borrowers affected by the COVID-19 pandemic [304]. - The company anticipates potential impacts from the COVID-19 pandemic on asset quality and loan loss provisions, which may affect future financial performance [360]. - The increase in loans rated Special Mention and Substandard was primarily due to three commercial real estate loans affected by the COVID-19 pandemic [284]. Capital and Liquidity - Total capital to risk-weighted assets ratio for the Corporation was 14.7% as of September 30, 2020, exceeding the minimum requirement of 8.0% [348]. - Tier 1 capital to risk-weighted assets ratio for the Corporation was 11.9% as of September 30, 2020, above the minimum requirement of 6.0% [348]. - The Corporation's management believes it maintains sufficient liquidity to satisfy operational requirements and contractual obligations [346].