C&F Financial (CFFI) - 2025 Q2 - Quarterly Results

Executive Summary and Financial Highlights Overall Performance Consolidated net income for Q2 and 6M 2025 significantly increased, driven by community and mortgage banking segments Consolidated Net Income and Earnings Per Share | Metric | Q2 2025 | Q2 2024 | YoY Change (%) | 6M 2025 | 6M 2024 | YoY Change (%) | | :--------------------------------- | :------ | :------ | :------------- | :------ | :------ | :------------- | | Consolidated net income (Millions USD) | $7.767 | $5.034 | 54.3% | $13.162 | $8.469 | 55.4% | | Earnings per share - basic and diluted | $2.37 | $1.50 | 58.0% | $4.03 | $2.50 | 61.2% | | Annualized return on average assets | 1.18% | 0.82% | 0.36 pp | 1.01% | 0.69% | 0.32 pp | | Annualized return on average equity | 13.06% | 9.31% | 3.75 pp | 11.23% | 7.82% | 3.41 pp | | Annualized return on average tangible common equity | 14.70% | 10.72% | 3.98 pp | 12.72% | 9.01% | 3.71 pp | - President and CEO Tom Cherry highlighted impressive loan and deposit growth in community banking, increased loan originations in mortgage banking, and progress in operational efficiency and technology investments in the consumer finance segment[2] - The Corporation is optimistic about the second half of the year, anticipating continued organic loan and deposit growth and benefiting from recent strategic expansion into Southwest Virginia, including key markets like Roanoke, Lynchburg, Danville, Martinsville, and Blacksburg[3] Key Operational Highlights Operational highlights include strong community banking loan and deposit growth, increased mortgage originations, and improved net interest margin - Community banking segment loans grew $76.7 million, or 10.6% annualized, compared to December 31, 2024, and $143.4 million, or 10.3%, compared to June 30, 2024[4] - Consumer finance segment loans decreased $5.4 million, or 2.3% annualized, compared to December 31, 2024, and $17.0 million, or 3.5%, compared to June 30, 2024[4] - Deposits increased $85.5 million, or 7.9% annualized, compared to December 31, 2024, and $150.3 million, or 7.1%, compared to June 30, 2024[4] - Consolidated annualized net interest margin was 4.27% for the second quarter of 2025, compared to 4.12% for the second quarter of 2024 and 4.16% in the first quarter of 2025[4] - Mortgage banking segment loan originations increased $67.5 million, or 46.2%, to $213.5 million for the second quarter of 2025 compared to the second quarter of 2024, and increased $99.8 million, or 87.7%, compared to the first quarter of 2025[8] Segment Performance Review Community Banking Segment The community banking segment saw substantial net income growth, driven by increased average loans and deposits, higher interest-earning asset yields, and a net reversal of provision for credit losses Community Banking Segment Performance (Millions USD) | Metric | Q2 2025 | Q2 2024 | 6M 2025 | 6M 2024 | | :--------------------------------- | :------ | :------ | :------ | :------ | | Net income | $7.1 | $4.6 | $12.6 | $8.6 | | Provision for credit losses | ($0.3) | $0.45 | ($0.2) | $0.95 | - Average loans increased $139.6 million (10.3%) for Q2 2025 and $152.5 million (11.5%) for 6M 2025 compared to the same periods in 2024, primarily due to growth in construction, construction real estate, and land acquisition and development[5] - Average deposits increased $156.9 million (7.6%) for Q2 2025 and $144.4 million (7.0%) for 6M 2025 compared to the same periods in 2024, mainly due to higher balances of time deposits, noninterest-bearing demand deposits, and saving and money market accounts[5] - Nonaccrual loans were $1.1 million at June 30, 2025, up from $0.333 million at December 31, 2024, primarily due to the downgrade of one residential mortgage relationship. The allowance for credit losses decreased to 1.12% of total loans from 1.20%[7][9] Mortgage Banking Segment The mortgage banking segment reported significant net income and loan origination increases, despite sustained elevated mortgage interest rates, higher home prices, and low inventory Mortgage Banking Segment Performance (Millions USD) | Metric | Q2 2025 | Q2 2024 | 6M 2025 | 6M 2024 | | :--------------------------------- | :------ | :------ | :------ | :------ | | Net income | $0.985 | $0.376 | $1.4 | $0.67 | - Mortgage loan originations increased 46.2% for Q2 2025 and 36.2% for 6M 2025 compared to the same periods in 2024, reaching $213.5 million in Q2 2025 (comprised of $197.2 million home purchases and $16.3 million refinancings)[10] - The segment recorded a reversal of provision for indemnification losses of $35,000 for Q2 2025 and $60,000 for 6M 2025, compared to $135,000 and $275,000 in the same periods of 2024, with the decrease in reversals attributed to increased mortgage loan originations in 2025[11] Consumer Finance Segment The consumer finance segment experienced a decrease in net income, primarily due to lower average loan balances and higher provision for credit losses driven by increased net charge-offs Consumer Finance Segment Performance (Millions USD) | Metric | Q2 2025 | Q2 2024 | 6M 2025 | 6M 2024 | | :--------------------------------- | :------ | :------ | :------ | :------ | | Net income | $0.539 | $0.894 | $0.765 | $0.831 | | Provision for credit losses | $2.4 | $2.1 | $5.3 | $5.1 | - Average loans decreased $14.1 million (2.9%) for Q2 2025 and $11.2 million (2.4%) for 6M 2025 compared to the same periods in 2024[12] - Net charge-offs at an annualized rate were 2.42% of average total loans for 6M 2025, up from 2.21% for 6M 2024, primarily due to an increase in delinquent loans, repossessions, and the average amount charged-off[15] - Total delinquent loans as a percentage of total loans was 3.81% at June 30, 2025, compared to 3.90% at December 31, 2024, and 3.51% at June 30, 2024. Average payment deferrals of automobile loans increased to 1.73% for Q2 2025 from 1.58% in Q2 2024[15][16] Financial Management and Corporate Information Liquidity The Corporation maintains strong liquidity, with liquid assets and borrowing availability exceeding uninsured deposits - Uninsured deposits were approximately $677.7 million (30.0% of total deposits) at June 30, 2025. Excluding intercompany cash holdings and secured municipal deposits, uninsured amounts were $536.1 million (23.8% of total deposits)[17] - Liquid assets ($373.7 million) and borrowing availability ($576.4 million) at June 30, 2025, together exceeded uninsured deposits (excluding certain items) by $414.0 million[17](index=17&