UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
| x | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
| For the quarterly period ended June 30, 2003 |
| ¨ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
| For the transition period from to |
Commission file number 000-23423
C&F Financial Corporation
(Exact name of registrant as specified in its charter)
| Virginia | 54-1680165 | |
| (State or other jurisdiction of | (I.R.S. Employer | |
| incorporation or organization) | Identification No.) |
| Eighth and Main Streets West Point, VA |
23181 | |
| (Address of principal executive offices) | (Zip Code) |
(804) 843-2360
(Registrant’s telephone number)
(Former name, former address and former fiscal year, if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. x Yes ¨ No
Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). ¨ Yes x No
Indicate the number of shares outstanding of each of the registrant’s classes of common stock, as of the latest practicable date: 3,602,871 as of August 6, 2003.
| Page | ||||
| Part I—Financial Information |
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| Item 1. | Financial Statements | |||
| Consolidated Balance Sheets—June 30, 2003 and December 31, 2002 | 1 | |||
| Consolidated Statements of Income—Three months and six months ended June 30, 2003 and 2002 | 2 | |||
| Consolidated Statements of Shareholders’ Equity—Six months ended June 30, 2003 and 2002 | 3 | |||
| Consolidated Statements of Cash Flows—Six months ended June 30, 2003 and 2002 | 5 | |||
| Notes to Consolidated Financial Statements | 6 | |||
| Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations | 11 | ||
| Item 3. | Quantitative and Qualitative Disclosures About Market Risk | 24 | ||
| Item 4. | Controls and Procedures | 24 | ||
| Part II—Other Information | ||||
| Item 1. | Legal Proceedings | 25 | ||
| Item 4. | Submission of Matters to a Vote of Security Holders | 25 | ||
| Item 6. | Exhibits and Reports on Form 8-K | 25 | ||
| Signatures | 26 | |||
PART I – FINANCIAL INFORMATION
| ITEM 1. | FINANCIAL STATEMENTS |
(In thousands, except for share and per share amounts)
| June 30, 2003 |
December 31, 2002 | |||||
| (Unaudited) | ||||||
| ASSETS | ||||||
| Cash and due from banks |
$ | 11,019 | $ | 13,352 | ||
| Interest-bearing deposits in other banks |
6,834 | 4,979 | ||||
| Total cash and cash equivalents |
17,853 | 18,331 | ||||
| Securities-available for sale at fair value, amortized cost of $54,979 and $57,726, respectively |
59,858 | 60,629 | ||||
| Loans held for sale, net |
99,049 | 107,227 | ||||
| Loans, net |
339,280 | 328,634 | ||||
| Federal Home Loan Bank stock |
2,072 | 2,760 | ||||
| Corporate premises and equipment, net of accumulated depreciation |
15,253 | 14,060 | ||||
| Accrued interest receivable |
2,906 | 2,270 | ||||
| Goodwill |
7,860 | 7,860 | ||||
| Other assets |
10,235 | 10,151 | ||||
| Total assets |
$ | 554,366 | $ | 551,922 | ||
| LIABILITIES AND SHAREHOLDERS’ EQUITY | ||||||
| Deposits |
||||||
| Non-interest-bearing demand deposits |
$ | 60,274 | $ | 53,402 | ||
| Savings and interest-bearing demand deposits |
161,485 | 161,002 | ||||
| Time deposits |
180,983 | 169,129 | ||||
| Total deposits |
402,742 | 383,533 | ||||
| Borrowings |
72,286 | 94,479 | ||||
| Accrued interest payable |
662 | 714 | ||||
| Other liabilities |
17,349 | 16,963 | ||||
| Total liabilities |
493,039 | 495,689 | ||||
| Commitments and contingent liabilities |
||||||
| Shareholders’ equity |
||||||
| Preferred stock ($1.00 par value, 3,000,000 shares authorized) |
— | — | ||||
| Common stock ($1.00 par value, 8,000,000 shares authorized, 3,600,159 and 3,649,859 shares issued and outstanding at June 30, 2003 and December 31, 2002, respectively) |
3,600 | 3,650 | ||||
| Additional paid-in capital |
758 | 2,506 | ||||
| Retained earnings |
53,749 | 48,161 | ||||
| Accumulated other comprehensive income net of tax of $1,659 and $987, respectively |
3,220 | 1,916 | ||||
| Total shareholders’ equity |
61,327 | 56,233 | ||||
| Total liabilities and shareholders’ equity |
$ | 554,366 | $ | 551,922 | ||
The accompanying notes are an integral part of the consolidated financial statements.
1
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
(In thousands, except for share and per share amounts)
| Three Months Ended June 30, |
Six Months Ended June 30, | |||||||||||
| 2003 |
2002 |
2003 |
2002 | |||||||||
| Interest Income |
||||||||||||
| Interest and fees on loans |
$ | 9,158 | $ | 5,451 | $ | 17,920 | $ | 11,220 | ||||
| Interest on other investments and fed funds |
43 | 148 | 79 | 217 | ||||||||
| Interest on investment securities U.S. government agencies and corporations |
12 | — | 15 | — | ||||||||
| Tax-exempt obligations of states and political subdivisions |
572 | 607 | 1,164 | 1,185 | ||||||||
| Corporate bonds and other |
131 | 199 | 276 | 335 | ||||||||
| Total interest income |
9,916 | 6,405 | 19,454 | 12,957 | ||||||||
| Interest expense |
||||||||||||
| Savings and interest-bearing deposits |
414 | 516 | 832 | 1,126 | ||||||||
| Certificates of deposit, $100 or more |
275 | 304 | 545 | 667 | ||||||||
| Other time deposits |
884 | 1,155 | 1,817 | 2,405 | ||||||||
| Short-term borrowings and other |
696 | 84 | 1,390 | 189 | ||||||||
| Total interest expense |
2,269 | 2,059 | 4,584 | 4,387 | ||||||||
| Net interest income |
7,647 | 4,346 | 14,870 | 8,570 | ||||||||
| Provision for loan losses |
843 | 125 | 1,381 | 200 | ||||||||
| Net interest income after provision for loan losses |
6,804 | 4,221 | 13,489 | 8,370 | ||||||||
| Other operating income |
||||||||||||
| Gain on sale of loans |
5,642 | 3,045 | 10,465 | 5,639 | ||||||||
| Service charges on deposit accounts |
589 | 471 | 1,169 | 884 | ||||||||
| Other service charges and fees |
1,293 | 820 | 2,334 | 1,551 | ||||||||
| Gain on maturities and calls of available for sale securities |
116 | 20 | 156 | 35 | ||||||||
| Other income |
455 | 625 | 815 | 953 | ||||||||
| Total other operating income |
8,095 | 4,981 | 14,939 | 9,062 | ||||||||
| Other operating expenses |
||||||||||||
| Salaries and employee benefits |
6,545 | 3,921 | 12,334 | 7,656 | ||||||||
| Occupancy expenses |
873 | 796 | 1,747 | 1,571 | ||||||||
| Other expenses |
2,147 | 1,352 | 4,165 | 2,562 | ||||||||
| Total other operating expenses |
9,565 | 6,069 | 18,246 | 11,789 | ||||||||
| Income before income taxes |
5,334 | 3,133 | 10,182 | 5,643 | ||||||||
| Income tax expense |
1,790 | 826 | 3,374 | 1,526 | ||||||||
| Net income |
$ | 3,544 | $ | 2,307 | $ | 6,808 | $ | 4,117 | ||||
| Per share data |
||||||||||||
| Net income—basic |
$ | .98 | $ | .65 | $ | 1.88 | $ | 1.17 | ||||
| Net income—assuming dilution |
$ | .94 | $ | .64 | $ | 1.81 | $ | 1.14 | ||||
| Cash dividends paid and declared |
$ | .18 | $ | .15 | .34 | $ | .30 | |||||
| Weighted average number of shares—basic |
3,593,805 | 3,534,200 | 3,613,992 | 3,531,734 | ||||||||
| Weighted average number of shares—assuming dilution |
3,774,989 | 3,626,289 | 3,769,428 | 3,611,056 | ||||||||
The accompanying notes are an integral part of the consolidated financial statements.
2
CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY
(In thousands)
(Unaudited)
| Common Stock |
Additional Paid-In Capital |
Comprehensive Income |
Retained Earnings |
Accumulated Other Comprehensive Income |
Total |
|||||||||||||||||
| Beginning balance December 31, 2002 |
$ | 3,650 | $ | 2,506 | $ | 48,161 | $ | 1,916 | $ | 56,233 | ||||||||||||
| Comprehensive income |
||||||||||||||||||||||
| Net income |
— | — | $ | 6,808 | 6,808 | — | 6,808 | |||||||||||||||
| Other comprehensive income, net of tax |
||||||||||||||||||||||
| Unrealized gain on securities, net of reclassification adjustment (See disclosure below) |
— | — | 1,304 | — | 1,304 | 1,304 | ||||||||||||||||
| Comprehensive income |
$ | 8,112 | ||||||||||||||||||||
| Stock options exercised |
30 | 434 | — | — | 464 | |||||||||||||||||
| Repurchase of common stock |
(80 | ) | (2,182 | ) | — | — | (2,262 | ) | ||||||||||||||
| Cash dividends |
— | — | (1,220 | ) | — | (1,220 | ) | |||||||||||||||