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What changed in C & F FINANCIAL CORP's 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of C & F FINANCIAL CORP's 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+421 added−421 removedSource: 10-K (2024-02-27) vs 10-K (2023-02-28)

Top changes in C & F FINANCIAL CORP's 2023 10-K

421 paragraphs added · 421 removed · 291 edited across 8 sections

Item 1. Business

Business — how the company describes what it does

66 edited+16 added−4 removed125 unchanged
Biggest changeThe Corporation expects that its trust preferred securities will be included in the Corporation’s regulatory capital as Tier 1 capital instruments until their maturity. ​ As of December 31, 2022, the Bank met all capital adequacy requirements under the Basel III Final Rules, including the capital conservation buffer. ​ Community Bank Leverage Ratio.
Biggest changeThe Corporation expects that its trust preferred securities will be included in the Corporation’s regulatory capital as Tier 1 capital instruments until their maturity. ​ As of December 31, 2023, the Bank met all capital adequacy requirements under the Basel III Final Rules, including the capital conservation buffer. ​ In July 2023, the Federal Reserve Board and the FDIC issued proposed rules to implement the final components of the Basel III agreement, often known as the “Basel III endgame.” These proposed rules contain provisions that apply to banks with $100 billion or more in total assets and that will significantly alter how those banks calculate risk-based assets.
Although the proposed rules would apply only to bank holding companies and banks with $50 billion or more in total consolidated assets, these rules could influence the federal banking agencies’ expectations and supervisory requirements for information security standards and cybersecurity programs of smaller financial institutions, such as the Corporation and the Bank. ​ On November 18, 2021, the federal bank regulatory agencies issued a final rule to improve the sharing of information about cyber incidents that may affect the U.S. banking system.
Although the proposed rules would apply only to bank holding companies and banks with $50 billion or more in total consolidated assets, these rules could influence the federal banking agencies’ expectations and supervisory requirements for information security standards and cybersecurity programs of smaller financial institutions, such as the Corporation and the Bank. ​ On November 18, 2021, the federal bank regulatory agencies issued a final rule to improve the sharing of information about cybersecurity incidents that may affect the U.S. banking system.
In June 2019, consistent with the provisions of the EGRRCPA, the federal banking agencies issued a final rule to permit insured depository institutions with total assets of less than $5 billion that do not engage in certain complex or international activities to file the most streamlined version of the quarterly call report, and to reduce data reportable on certain streamlined call report submissions. ​ In December 2018, consistent with the provisions of the EGRRCPA, the federal banking agencies jointly adopted final rules that permit banks with up to $3 billion in total assets, that received a composite CAMELS rating of “1” or “2,” and that meet certain other criteria (including not having undergone any change in control during the previous 12-month period, and not being subject to a formal enforcement proceeding or order), to qualify for an 18-month on-site examination cycle. ​ Effect of Governmental Monetary Policies.
In June 2019, consistent with the provisions of the EGRRCPA, the federal banking agencies issued a final rule to permit insured depository institutions with total assets of less than $5 billion that do not engage in certain complex or international activities to file the most streamlined version of the quarterly call report, and to reduce data reportable on certain streamlined call report submissions. ​ In December 2018, consistent with the provisions of the EGRRCPA, the federal banking agencies jointly adopted final rules that permit banks with up to $3 billion in total assets, that received a composite CAMELS rating of “1” or “2,” and that meet certain other criteria (including not having undergone any change in control during the previous 12-month period, and not being subject to a formal enforcement proceeding or order), to qualify for an 18-month on-site examination cycle. ​ 19 Table of Contents Effect of Governmental Monetary Policies.
C&F Finance is also subject to extensive federal statutes and regulations, including but not limited to: TILA, which requires C&F Finance and the dealers it does business with to make certain disclosures to customers, including the terms of repayment, the total finance charge and the annual percentage rate charged on automobile finance installment contracts; ECOA, which prohibits creditors from discrimination against loan applicants on the basis of race, color, sex, age or marital status and, pursuant to Regulation B promulgated thereunder, requires creditors to make certain disclosures regarding consumer rights and advise consumers of the reasons for the rejection of their credit applications; the Fair Credit and Reporting Act (FCRA), which requires C&F Finance to provide certain information to consumers whose credit applications are not approved on the basis of a report obtained from a consumer reporting agency and ensure the accuracy and integrity of consumer information reported to credit reporting agencies; the Electronic Funds Transfer Act (EFTA), which prohibits C&F Finance from requiring its customers to repay a loan or other credit by electronic funds transfer (EFT), except in limited situations, and requires C&F Finance to provide certain documentation and notifications to customers when an EFT is initiated; and federal bankruptcy and related state laws that may interfere with or affect C&F Finance’s ability to recover collateral or enforce a deficiency judgment.
C&F Finance is also subject to extensive federal statutes and regulations, including but not limited to: TILA, which requires C&F Finance and the dealers it does business with to make certain disclosures to customers, including the terms of repayment, the total finance charge and the annual percentage rate charged on automobile finance installment contracts; ECOA, which prohibits creditors from discrimination against loan applicants on the basis of race, color, sex, age or marital status and, pursuant to Regulation B promulgated thereunder, requires creditors to make certain disclosures regarding consumer rights and advise consumers of the reasons for the rejection of their credit applications; the FCRA, which requires C&F Finance to provide certain information to consumers whose credit applications are not approved on the basis of a report obtained from a consumer reporting agency and ensure the accuracy and integrity of consumer information reported to credit reporting agencies; the EFTA, which prohibits C&F Finance from requiring its customers to repay a loan or other credit by electronic funds transfer (EFT), except in limited situations, and requires C&F Finance to provide certain documentation and notifications to customers when an EFT is initiated; and federal bankruptcy and related state laws that may limit or affect C&F Finance’s ability to recover collateral or enforce a deficiency judgment.
C&F Finance is a regional finance company purchasing automobile, marine and recreational vehicle (RV) loans throughout Virginia and in portions of Alabama, Colorado, Florida, Georgia, Illinois, Indiana, Iowa, Kansas, Kentucky, Maryland, Minnesota, Missouri, New Jersey, North Carolina, Ohio, Pennsylvania, South Carolina, Tennessee, Texas and West Virginia through its office in Henrico, Virginia.
C&F Finance is a regional finance company purchasing automobile, marine and recreational vehicle (RV) loans throughout Virginia and in portions of Alabama, Colorado, Florida, Georgia, Illinois, Indiana, Iowa, Kansas, Kentucky, Maryland, Minnesota, Missouri, New Jersey, North Carolina, Ohio, Pennsylvania, South Carolina, Tennessee, Texas and West Virginia through its headquarters in Henrico, Virginia.
For the purposes of these capital rules, (i) common equity tier 1 capital (CET1) consists principally of common stock (including surplus) and retained earnings; (ii) Tier 1 capital consists principally of CET1 plus non-cumulative preferred stock and related surplus, and certain grandfathered cumulative preferred stocks and trust preferred securities; and (iii) Tier 2 capital consists of other capital instruments, principally qualifying subordinated debt and preferred stock, and limited amounts of an institution’s allowance for loan losses.
For the purposes of these capital rules, (i) common equity tier 1 capital (CET1) consists principally of common stock (including surplus) and retained earnings; (ii) Tier 1 capital consists principally of CET1 plus non-cumulative preferred stock and related surplus, and certain grandfathered cumulative preferred stocks and trust preferred securities; and (iii) Tier 2 capital consists of other capital instruments, principally qualifying subordinated debt and preferred stock, and limited amounts of an institution’s allowance for credit losses.
An insured depository institution which is less than adequately capitalized must adopt an acceptable capital restoration plan, is subject to increased regulatory oversight and is increasingly restricted in the scope of its permissible activities. As of December 31, 2022, the Bank was considered “well capitalized.” ​ Incentive Compensation.
An insured depository institution which is less than adequately capitalized must adopt an acceptable capital restoration plan, is subject to increased regulatory oversight and is increasingly restricted in the scope of its permissible activities. As of December 31, 2023, the Bank was considered “well capitalized.” ​ Incentive Compensation.
Among the advantages such large banks have are their ability to finance wide-ranging advertising campaigns, to make larger investments in technological advancements and new products 7 Table of Contents and services, to maximize efficiencies through economies of scale and, by virtue of their greater total capitalization, to have substantially higher lending limits than the Bank. ​ Factors such as interest rates offered, the number and location of branches, digital services and the types of products offered, as well as the reputation of the institution, affect competition for deposits and loans.
Among the advantages such large banks have are their ability to finance wide-ranging advertising campaigns, to make larger investments in technological advancements and new products and services, to maximize efficiencies through economies of scale and, by virtue of their greater total capitalization, to have substantially higher lending limits than the Bank. ​ Factors such as interest rates offered, the number and location of branches, digital services and the types of products offered, as well as the reputation of the institution, affect competition for deposits and loans.
Many of these competitors also have long-standing relationships with automobile dealerships and may offer dealerships or their customers other forms of financing, including dealer floor plan financing and leasing, which we do not. ​ 8 Table of Contents Over the past several years, a number of financial institutions and other lenders have increased focus on operations in the non-prime automobile finance markets resulting in intensified competition for loans and qualified personnel.
Many of these competitors also have long-standing relationships with automobile dealerships and may offer dealerships or their customers other forms of financing, including dealer floor plan financing and leasing, which we do not. ​ Over the past several years, a number of financial institutions and other lenders have increased focus on operations in the non-prime automobile finance markets resulting in intensified competition for loans and qualified personnel.
Increased competition has come from out-of-state banks through their acquisition of Virginia-based banks and interstate branching, and expansion of community and regional banks into our service areas. ​ The banking business in Virginia, and specifically in the Bank’s primary service areas of eastern and central Virginia, is highly competitive for both loans and deposits, and is dominated by a relatively small number of large banks with many offices operating over a wide geographic area.
Increased competition has come from out-of-state banks through their acquisition of Virginia-based banks and interstate branching, and expansion of community and regional banks into our service areas. ​ 7 Table of Contents The banking business in Virginia, and specifically in the Bank’s primary service areas of eastern and central Virginia, is highly competitive for both loans and deposits, and is dominated by a relatively small number of large banks with many offices operating over a wide geographic area.
Certain covered transactions are also subject to collateral security requirements. ​ Covered transactions as well as other types of transactions between a bank and a bank holding company must be on market terms, which means that the transaction must be conducted on terms and under circumstances that are substantially the same, or at least as favorable to the bank, as those prevailing at the time for comparable transactions with or involving 13 Table of Contents nonaffiliates or, in the absence of comparable transactions, that in good faith would be offered to or would apply to nonaffiliates.
Certain covered transactions are also subject to collateral security requirements. ​ Covered transactions as well as other types of transactions between a bank and a bank holding company must be on market terms, which means that the transaction must be conducted on terms and under circumstances that are substantially the same, or at least as favorable to the bank, as those prevailing at the time for comparable transactions with or involving nonaffiliates or, in the absence of comparable transactions, that in good faith would be offered to or would apply to nonaffiliates.
C&F Finance also generally adheres to the principles of the Fair Debt Collection Practices Act (FDCPA), which prohibits certain debt collectors from contacting borrowers during certain times and at certain places, from using threatening practices and from making false implications when attempting to collect a debt. ​ The CFPB has the authority to issue and enforce regulations under many federal consumer protection laws, including (subject to certain statutory limitations) TILA, ECOA, FDCPA, FCRA and EFTA.
C&F Finance also generally adheres to the principles of the FDCPA, which prohibits certain debt collectors from contacting borrowers during certain times and at certain places, from using threatening practices and from making false implications when attempting to collect a debt. ​ The CFPB has the authority to issue and enforce regulations under many federal consumer protection laws, including (subject to certain statutory limitations) TILA, ECOA, FDCPA, FCRA and EFTA.
Certain exceptions may apply to the requirement to deliver an annual privacy notice based on how a financial institution limits sharing of nonpublic personal information and whether the institution’s disclosure practices or policies have changed in certain ways since the last privacy notice that was delivered. ​ The Corporation is also subject to various laws and regulations that attempt to combat money laundering and terrorist financing.
Certain exceptions may apply to the requirement to deliver an annual privacy notice based on how a financial institution limits sharing of nonpublic personal information and whether the institution’s disclosure practices or policies have changed in certain ways since the last privacy notice that was delivered. ​ 17 Table of Contents The Corporation is also subject to various laws and regulations that attempt to combat money laundering and terrorist financing.
At December 31, 2022, 23 percent of our employees have been employed by the Corporation or its subsidiaries for at least 15 years. ​ Competition ​ Community Banking ​ In the Bank’s market area, we compete with large national and regional financial institutions, savings associations and other independent community banks, as well as credit unions, mutual funds, brokerage firms, insurance companies and other lending and deposit platforms offered by non-bank financial technology firms, including those that only operate digitally.
At December 31, 2023, 26 percent of our employees have been employed by the Corporation or its subsidiaries for at least 15 years. ​ Competition ​ Community Banking ​ In the Bank’s market area, we compete with large national and regional financial institutions, savings associations and other independent community banks, as well as credit unions, mutual funds, brokerage firms, insurance companies and other lending and deposit platforms offered by non-bank financial technology firms, including those that only operate digitally.
Under the EGRRCPA, most residential mortgage loans originated and held in portfolio by a bank with less than $10 billion in assets will be 14 Table of Contents designated as “qualified mortgages.” Higher-priced qualified mortgages (e.g., sub-prime loans) receive a rebuttable presumption of compliance with ability-to-repay rules, and other qualified mortgages (e.g., prime loans) are deemed to comply with the ability-to-repay rules.
Under the EGRRCPA, most residential mortgage loans originated and held in portfolio by a bank with less than $10 billion in assets will be designated as “qualified mortgages.” Higher-priced qualified mortgages (e.g., sub-prime loans) receive a rebuttable presumption of compliance with ability-to-repay rules, and other qualified mortgages (e.g., prime loans) are deemed to comply with the ability-to-repay rules.
The rule requires a banking organization to notify its primary federal regulator of any significant computer-security incident as soon as possible and no later than 36 hours after the banking organization determines that a cyber incident has occurred.
The rule requires a banking organization to notify its primary federal regulator of any significant computer-security incident as soon as possible and no later than 36 hours after the banking organization determines that a cybersecurity incident has occurred.
In addition, all federal and state banking agencies continue to increase focus on cybersecurity programs and risks as part of regular supervisory exams. ​ In October 2016, the federal banking agencies issued proposed rules on enhanced cybersecurity risk-management and resilience standards that would apply to very large financial institutions and to services provided by third parties to 17 Table of Contents these institutions.
In addition, all federal and state banking agencies continue to increase focus on cybersecurity programs and risks as part of regular supervisory exams. ​ In October 2016, the federal banking agencies issued proposed rules on enhanced cybersecurity risk-management and resilience standards that would apply to very large financial institutions and to services provided by third parties to these institutions.
C&F Finance generally purchases automobile retail installment sales contracts from manufacturer-franchised dealerships with used-car operations and through selected independent dealerships. C&F Finance selects these dealers based on the types of vehicles sold. Specifically, C&F Finance prefers to finance later model, low mileage used vehicles because the value of new vehicles typically depreciates rapidly.
C&F Finance generally purchases automobile retail installment sales contracts from manufacturer-franchised dealerships with used-car operations and 6 Table of Contents through selected independent dealerships. C&F Finance selects these dealers based on the types of vehicles sold. Specifically, C&F Finance prefers to finance later model, low mileage used vehicles because the value of new vehicles typically depreciates rapidly.
“Covered transactions” are defined to include a loan or extension of credit to an affiliate, a purchase of or investment in securities issued by an affiliate, a purchase of assets from an affiliate, the acceptance of securities issued by an affiliate as collateral for a loan or extension of credit to any person or company, the issuance of a guarantee, acceptance or letter of credit on behalf of an affiliate, securities borrowing or lending transactions with an affiliate that creates a credit exposure to such affiliate, or a derivatives transaction with an affiliate that creates a credit exposure to such affiliate.
“Covered transactions” are defined to include a loan or extension of credit to an affiliate, a purchase of or investment in securities issued by an affiliate, a purchase of assets from an affiliate, the acceptance of securities issued by an affiliate as collateral for a loan or extension of credit to any person or company, 13 Table of Contents the issuance of a guarantee, acceptance or letter of credit on behalf of an affiliate, securities borrowing or lending transactions with an affiliate that creates a credit exposure to such affiliate, or a derivatives transaction with an affiliate that creates a credit exposure to such affiliate.
In addition, regulatory positions taken by the CFPB and administrative and legal precedents established by CFPB enforcement activities, including in connection with supervision of larger bank holding companies and banks, could influence how the Federal Reserve Board and FDIC apply consumer protection laws and regulations to financial institutions that are not directly supervised by the CFPB.
In addition, regulatory positions taken by the CFPB and administrative and legal precedents established by CFPB 14 Table of Contents enforcement activities, including in connection with supervision of larger bank holding companies and banks, could influence how the Federal Reserve Board and FDIC apply consumer protection laws and regulations to financial institutions that are not directly supervised by the CFPB.
An institution's assessment rate is based on a statistical analysis of financial ratios that estimates the likelihood of failure over a three-year period, which considers the institution’s weighted average CAMELS composite rating, and is subject to further adjustments including those related to levels of unsecured debt and brokered deposits.
An institution's assessment rate is based on a 12 Table of Contents statistical analysis of financial ratios that estimates the likelihood of failure over a three-year period, which considers the institution’s weighted average CAMELS composite rating, and is subject to further adjustments including those related to levels of unsecured debt and brokered deposits.
The automobile finance market is highly fragmented and is served by a variety of financial entities, including the captive finance affiliates of major automotive manufacturers, banks, savings associations, credit unions and independent finance companies. Many of these competitors have substantially greater financial resources and lower costs of funds than our finance subsidiary.
The automobile finance market is highly fragmented and is served by a variety of financial entities, including the captive finance affiliates of major automotive manufacturers, banks, savings associations, credit unions and independent finance companies. Many of these competitors have substantially 8 Table of Contents greater financial resources and lower costs of funds than our finance subsidiary.
Those rules and regulations, among other things, establish standards for loan origination, prohibit discrimination, provide for inspections and appraisals of property, require credit reports on prospective borrowers and, in some cases, restrict certain loan features and fix maximum interest rates and fees. ​ Consumer Financing Regulation .
Those rules and regulations, among other things, establish standards for loan origination, prohibit discrimination, provide for inspections and appraisals of property, require credit reports on prospective borrowers and, in some cases, restrict certain loan features and fix maximum interest rates and fees. ​ 15 Table of Contents Consumer Financing Regulation .
At December 31, 2022, total base assessment rates for institutions that 12 Table of Contents have been insured for at least five years range from 1.5 to 30 basis points applying to banks with less than $10 billion in assets. ​ The Dodd-Frank Act transferred to the FDIC increased discretion with regard to managing the required amount of reserves for the DIF, or the “designated reserve ratio.” The FDIA requires that the FDIC consider the appropriate level for the designated reserve ratio on at least an annual basis.
At December 31, 2023, total base assessment rates for institutions that have been insured for at least five years range from 1.5 to 30 basis points applying to banks with less than $10 billion in assets. ​ The Dodd-Frank Act transferred to the FDIC increased discretion with regard to managing the required amount of reserves for the DIF, or the “designated reserve ratio.” The FDIA requires that the FDIC consider the appropriate level for the designated reserve ratio on at least an annual basis.
In addition, because C&F Finance provides financing in a relatively higher- 6 Table of Contents risk market compared to that of C&F Bank or other traditional financial institutions, it expects to experience a higher level of credit losses than financing sources that lend primarily to more credit-worthy borrowers.
In addition, because C&F Finance provides financing in a relatively higher-risk market compared to that of C&F Bank or other traditional financial institutions, it expects to experience a higher level of credit losses than financing sources that lend primarily to more credit-worthy borrowers.
The Bank also offers ATMs, internet and mobile banking, peer-to-peer payment capabilities and debit cards, as well as safe deposit box rentals, notary public, electronic transfer and other customary bank services to its customers. C&F Bank manages its commercial lending portfolio primarily through commercial lending offices located in Charlottesville, Fredericksburg, Richmond and Williamsburg, Virginia.
The Bank also offers ATMs, internet and mobile banking, peer-to-peer payment capabilities and debit cards, as well as safe 5 Table of Contents deposit box rentals, notary public, electronic transfer and other customary bank services to its customers. C&F Bank manages its commercial lending portfolio primarily through commercial lending offices located in Charlottesville, Fredericksburg, Richmond and Williamsburg, Virginia.
C&F Wealth Management, which was organized in April 1995, is a full-service brokerage firm offering a comprehensive range of wealth management services and insurance products 5 Table of Contents through third-party service providers primarily at C&F Bank branch locations.
C&F Wealth Management, which was organized in April 1995, is a full-service brokerage firm offering a comprehensive range of wealth management services and insurance products through third-party service providers primarily at C&F Bank branch locations.
The FDIC also may impose capital requirements in excess of these standards on a case-by-case basis for various reasons, including financial condition or actual or anticipated growth. ​ 10 Table of Contents Basel III Capital Framework.
The FDIC also may impose capital requirements in excess of these standards on a case-by-case basis for various reasons, including financial condition or actual or anticipated growth. ​ Basel III Capital Framework.
The Bank Secrecy Act (the BSA) requires all financial institutions to, among other things, create a 16 Table of Contents system of controls designed to prevent money laundering and the financing of terrorism, and imposes recordkeeping and reporting requirements.
The Bank Secrecy Act (the BSA) requires all financial institutions to, among other things, create a system of controls designed to prevent money laundering and the financing of terrorism, and imposes recordkeeping and reporting requirements.
If the Corporation or the Bank fails to meet the expectations set forth in this regulatory guidance, the Corporation or the Bank could be subject to various regulatory actions and any remediation efforts may require significant resources of the Corporation or the Bank.
If the Corporation or the Bank fails to meet the expectations 18 Table of Contents set forth in this regulatory guidance, the Corporation or the Bank could be subject to various regulatory actions and any remediation efforts may require significant resources of the Corporation or the Bank.
C&F Bank has the following five wholly-owned subsidiaries, all incorporated under the laws of the Commonwealth of Virginia: ​ ● C&F Mortgage Corporation ​ ● C&F Finance Company ​ ● C&F Wealth Management Corporation ​ ● C&F Insurance Services, Inc. ​ ● CVB Title Services, Inc. ​ The Corporation operates in a decentralized manner in three principal business segments: (1) community banking through C&F Bank, C&F Wealth Management Corporation (C&F Wealth Management), C&F Insurance Services, Inc.
C&F Bank has the following five wholly-owned subsidiaries, all incorporated under the laws of the Commonwealth of Virginia: ​ ● C&F Mortgage Corporation ​ ● C&F Finance Company ​ ● C&F Wealth Management Corporation ​ ● C&F Insurance Services, Inc. ​ ● CVB Title Services, Inc. ​ The Corporation operates three principal business segments: (1) community banking through C&F Bank, C&F Wealth Management Corporation (C&F Wealth Management), C&F Insurance Services, Inc.
The Federal Reserve Board and the FDIC have adopted rules to implement the Basel III capital framework as outlined by the Basel Committee on Banking Supervision and standards for calculating risk-weighted assets and risk-based capital measurements (collectively, the Basel III Final Rules) that apply to banking institutions they supervise.
The Federal Reserve Board and the FDIC have adopted rules to implement the Basel III capital framework as outlined by the Basel Committee on Banking Supervision and standards for calculating risk- 10 Table of Contents weighted assets and risk-based capital measurements (collectively, the Basel III Final Rules) that apply to banking institutions they supervise.
As of December 31, 2022, the Corporation and C&F Finance were not subject to supervision by the CFPB. ​ Certain federal regulatory agencies, and in particular, the CFPB, the Federal Trade Commission, and the Federal Reserve Board, as well as certain state agencies, have recently become more active in investigating the products, services 15 Table of Contents and operations of banks and other finance companies engaged in auto finance activities.
As of December 31, 2023, the Corporation and C&F Finance were not subject to supervision by the CFPB. ​ Certain federal regulatory agencies, and in particular, the CFPB, the Federal Trade Commission, and the Federal Reserve Board, as well as certain state agencies, have recently become more active in investigating the products, services and operations of banks and other finance companies engaged in auto finance activities.
The mortgage banking segment also has a division, Lender Solutions, that provides certain mortgage loan origination functions as a service to third party mortgage lenders and a subsidiary, Certified Appraisals LLC, which provides ancillary mortgage loan production services to third parties for residential appraisals.
The mortgage banking segment also has a division, Lender Solutions, that provides certain mortgage loan origination functions as a service to third party mortgage lenders, including other community banks, and a subsidiary, Certified Appraisals LLC, which provides ancillary mortgage loan production services to third parties for residential appraisals.
Community banking revenues and operations are not materially affected by seasonal factors; however, public deposits tend to increase with tax collections primarily in the fourth quarter of each year and decline with spending thereafter. At December 31, 2022, assets of the community banking segment totaled $2.2 billion.
Community banking revenues and operations are not materially affected by seasonal factors; however, municipal deposits tend to increase with tax collections primarily in the fourth quarter of each year and decline with spending thereafter. At December 31, 2023, assets of the community banking segment totaled $2.3 billion.
Changes in monetary policy, including changes in interest rates, will influence 18 Table of Contents the origination of loans, the purchase of investments, the generation of deposits, and rates received on loans and investment securities and paid on deposits.
Changes in monetary policy, including changes in interest rates, will influence the origination of loans, the purchase of investments, the generation of deposits, and rates received on loans and investment securities and paid on deposits.
Each FHLB makes loans to members in accordance with policies and procedures established by the Board of Directors of the FHLB. As a member, the Bank must purchase and maintain stock in the FHLB. At December 31, 2022, the Bank owned $1.1 million of FHLB stock. ​ Consumer Protection.
Each FHLB makes loans to members in accordance with policies and procedures established by the Board of Directors of the FHLB. As a member, the Bank must purchase and maintain stock in the FHLB. At December 31, 2023, the Bank owned $2.9 million of FHLB stock. ​ Consumer Protection.
At December 31, 2022, women represented 67 percent of our employees, and racial and ethnic minorities represented 20 percent of our employees. We also aim for our employees to develop their careers in our businesses.
At December 31, 2023, women represented 69 percent of our employees, and racial and ethnic minorities represented 20 percent of our employees. We also aim for our employees to develop their careers in our businesses.
As of December 31, 2022, the Bank has not elected to apply the CBLRF, but the Bank continues to assess the potential impact of opting in to CBLRF as part of its ongoing capital management and planning processes. ​ Small Bank Holding Company.
As of December 31, 2023, the Bank has not elected to apply the CBLRF, 11 Table of Contents but the Bank continues to assess the potential impact of opting in to CBLRF as part of its ongoing capital management and planning processes. ​ Small Bank Holding Company.
For the year ended December 31, 2022, net income for this segment totaled $24.4 million. ​ Mortgage Banking ​ We conduct mortgage banking activities through C&F Mortgage, which was organized in September 1995, and its 51%-owned subsidiary, C&F Select LLC, which was organized in January 2019.
For the year ended December 31, 2023, net income for this segment totaled $22.9 million. ​ Mortgage Banking ​ We conduct mortgage banking activities through C&F Mortgage, which was organized in September 1995, and its 51%-owned subsidiary, C&F Select LLC, which was organized in January 2019.
However, seasonal trends may be disrupted by cyclical and other economic factors that affect the residential real estate market. At December 31, 2022, assets of the mortgage banking segment totaled $24.5 million. For the year ended December 31, 2022, net income for this segment totaled $1.2 million. ​ Consumer Finance ​ We conduct consumer finance activities through C&F Finance.
However, seasonal trends may be disrupted by cyclical and other economic factors that affect the residential real estate market. At December 31, 2023, assets of the mortgage banking segment totaled $22.2 million. For the year ended December 31, 2023, net income for this segment totaled $465,000. ​ Consumer Finance ​ We conduct consumer finance activities through C&F Finance.
We target individual customers, small-to-medium size business customers and acquisition, development and construction loan customers in our markets. ​ No material part of the Bank’s business is dependent upon a single or a few customers, and the loss of any single customer would not have a materially adverse effect upon the Bank’s business. ​ Mortgage Banking ​ C&F Mortgage competes with large national and regional banks, credit unions, smaller regional mortgage lenders, small local broker operations and internet lending platforms.
We target individual customers, small-to-medium size business customers and commercial and residential real estate investors and developers in our markets. ​ No material part of the Bank’s business is dependent upon a single or a few customers, and the loss of any single customer would not have a materially adverse effect upon the Bank’s business. ​ Mortgage Banking ​ C&F Mortgage competes with large national and regional banks, credit unions, smaller regional mortgage lenders, small local broker operations and internet lending platforms.
C&F Mortgage provides mortgage loan origination services through 14 locations in Virginia and one each in Maryland, North Carolina, South Carolina, and West Virginia. The Virginia offices are located one each in Charlottesville, Chesapeake, Fishersville, Fredericksburg, Glen Allen, Harrisonburg, Mechanicsville, Richmond, Virginia Beach, Waynesboro, Williamsburg, and Yorktown, and two in Midlothian. The North Carolina office is located in Gastonia.
C&F Mortgage provides mortgage loan origination services through 11 locations in Virginia and one each in Maryland, North Carolina, and West Virginia. The Virginia offices are located one each in Charlottesville, Chesapeake, Fredericksburg, Glen Allen, Mechanicsville, Midlothian, Richmond, Virginia Beach, Waynesboro, Williamsburg, and Yorktown. The North Carolina office is located in Gastonia. The Maryland office is located in Clarksville.
We have created career paths for specific positions that are designed to encourage an employee’s advancement and growth within our organization, and we aim to provide employees with the skills and opportunities they need to achieve their career goals and become leaders in our businesses. ​ At December 31, 2022, we employed 613 full-time equivalent employees.
We have created career paths for specific positions that are designed to encourage an employee’s advancement and growth within our organization, and we aim to provide employees with the skills and opportunities they need to achieve their career goals and become leaders in our businesses. ​ At December 31, 2023, we employed 594 total employees.
Reporting companies subject to the CTA will be required to provide specific information with respect to beneficial owner(s) (as defined in the CTA) as well as satisfy initial filing obligations (for newly-formed reporting companies) and submit on-going periodic reports.
Reporting companies subject to the CTA will be required to provide specific information with respect to beneficial owner(s) (as defined in the CTA) as well as satisfy initial filing obligations (for newly-formed reporting companies) and submit subsequent reports when updates are required.
Our people are critical to the Corporation’s performance and the achievement of our strategic goals, and they represent a key element of how the Corporation’s businesses compete and succeed. ​ Acquiring and retaining strong talent is a top strategic priority for each of the Corporation’s businesses.
We believe that our officers and employees are our most important assets. Our people are critical to the Corporation’s performance and the achievement of our strategic goals, and they represent a key element of how the Corporation’s businesses compete and succeed. ​ Acquiring and retaining strong talent is a top strategic priority for each of the Corporation’s businesses.
The mortgage banking segment originates conventional mortgage loans, mortgage loans insured by the Federal Housing Administration (the FHA), and mortgage loans guaranteed by the United States Department of Agriculture (the USDA) and the Veterans Administration (the VA).
C&F Bank also purchases mortgage loans from the mortgage banking segment. The mortgage banking segment originates conventional mortgage loans, mortgage loans insured by the Federal Housing Administration (the FHA), and mortgage loans guaranteed by the United States Department of Agriculture (the USDA) and the Veterans Administration (the VA).
As required by the EGRRCPA, the federal banking agencies issued a rule in September 2019 that permits qualifying banks with less than $10 billion in consolidated assets to elect to be subject to a 9% leverage ratio applied using less complex leverage calculations (the Community Bank Leverage Ratio Framework or CBLRF).
As required by the EGRRCPA, qualifying banks with less than $10 billion in consolidated assets to elect to be subject to a 9% leverage ratio applied using less complex leverage calculations (the Community Bank Leverage Ratio Framework or CBLRF).
These challenges may be compounded by sustained lower mortgage industry volume as a result of rising interest rates. ​ To operate profitably in this high interest rate and competitive and regulatory environment, mortgage companies must have a high level of operational and risk management skills and be able to attract and retain top mortgage origination talent.
These challenges may be compounded by sustained lower mortgage industry volume as a result of interest rates having risen substantially compared to periods prior to 2022, and decreased inventory of homes for sale. ​ To operate profitably in this high interest rate and competitive and regulatory environment, mortgage companies must have a high level of operational and risk management skills and be able to attract and retain top mortgage origination talent.
Subsequent rulemakings are expected (i) to implement the CTA’s protocols for access to and disclosure of beneficial ownership information, and (ii) to revise the existing customer due diligence requirements that apply to the Corporation, the Bank and many other financial institutions, to ensure consistency between these requirements and the beneficial ownership reporting rules. ​ The Corporation will continue to monitor regulatory developments related to the CTA, including future FinCEN rulemakings, and will continue to assess the ultimate impact of the CTA on the Corporation and the Bank. ​ Cybersecurity.
Subsequent rulemaking is expected to revise the existing customer due diligence requirements that apply to the Bank and its subsidiaries and many other financial institutions, to ensure consistency between these requirements and the beneficial ownership reporting rules. ​ The Corporation will continue to monitor regulatory developments related to the CTA, including future FinCEN rulemakings, and will continue to assess the ultimate impact of the CTA on the Corporation and the Bank. ​ Cybersecurity.
The CFPB supervises and regulates providers of consumer financial products and services, and has rulemaking authority in connection with numerous federal consumer financial protection laws (for example, but not limited to, the Truth-in-Lending Act (TILA) and the Real Estate Settlement Procedures Act (RESPA)). ​ Because the Corporation and the Bank are smaller institutions (i.e., with assets of $10 billion or less), most consumer protection aspects of the Dodd-Frank Act will continue to be applied to the Corporation by the Federal Reserve Board and to the Bank by the FDIC.
The CFPB supervises and regulates providers of consumer financial products and services, and has rulemaking authority in connection with numerous federal consumer financial protection laws (for example, but not limited to, the Truth-in-Lending Act (TILA), the Real Estate Settlement Procedures Act (RESPA), the Electronic Funds Transfer Act (EFTA), the Equal Credit Opportunity Act (ECOA), the Home Ownership and Equity Protection Act (HOEPA), the Fair Credit and Reporting Act (FCRA), the Fair Debt Collection Practices Act (FDCPA) and the Home Mortgage Disclosure Act (HMDA)). ​ Because the Corporation and the Bank are smaller institutions (i.e., with assets of $10 billion or less), most consumer protection aspects of the Dodd-Frank Act will continue to be applied to the Corporation by the Federal Reserve Board and to the Bank by the FDIC.
The Bank’s mortgage origination activities are subject to the Equal Credit Opportunity Act (ECOA), TILA, Home Mortgage Disclosure Act, RESPA, and Home Ownership Equity Protection Act, and the regulations promulgated under these acts, among other additional state and federal laws, regulations and rules. ​ The Bank’s mortgage origination activities are also subject to Regulation Z, which implements TILA.
The Bank’s mortgage origination activities are subject to ECOA, TILA, HMDA, RESPA and HOEPA, and the regulations promulgated under these acts, among other additional state and federal laws, regulations and rules. ​ The Bank’s mortgage origination activities are also subject to Regulation Z, which implements TILA.
These contracts are also purchased on an indirect basis through a referral program administered by a third party and are for prime loans made to individuals with higher credit scores and therefore typically priced at rates lower than C&F Finance’s automobile loans. Revenues from consumer finance operations consist principally of interest earned on automobile, marine and RV loans.
These contracts are also purchased on an indirect basis through a referral program administered by a third party and are for prime loans made to individuals with higher credit scores and therefore typically priced at rates lower than C&F Finance’s automobile loans, and average less than $50,000.
While the consumer finance segment’s loans outstanding and interest income are not materially affected by seasonal factors, delinquencies on automobile loans are generally highest in the period from November through January, related in part to seasonal trends affecting borrowers, including consumer spending. At December 31, 2022, assets of the consumer finance segment totaled $479.9 million.
Revenues from consumer finance operations consist principally of interest earned on automobile, marine and RV loans. While the consumer finance segment’s loans outstanding and interest income are not materially affected by seasonal factors, delinquencies on automobile loans are generally highest in the period from November through January, related in part to seasonal trends affecting borrowers, including consumer spending.
The specific implications of the Dodd-Frank Act, the EGRRCPA, and other potential regulatory reforms cannot yet be fully predicted and will depend to a large extent on the specific regulations that are to be adopted in the future. ​ Regulation of the Corporation ​ As a bank holding company, the Corporation is subject to the Bank Holding Company Act of 1956 (the BHCA) and regulation and supervision by the Federal Reserve Board.
The specific impacts of regulatory reforms, including but not limited to the Dodd-Frank Wall Street Reform and Consumer Protection Act (the Dodd-Frank Act), which was enacted in 2010, or 9 Table of Contents the Economic Growth, Regulatory Relief and Consumer Protection Act (the EGRRCPA), which was enacted in 2018, cannot yet be fully predicted and will depend to a large extent on the specific regulations that are likely to be adopted in the future. ​ Regulation of the Corporation ​ As a bank holding company, the Corporation is subject to the Bank Holding Company Act of 1956 (the BHCA) and regulation and supervision by the Federal Reserve Board.
The rules became effective on April 1, 2021 and, to date, there has been no material impact to either the Corporation or the Bank from the rules. ​ Other Regulations ​ Prompt Corrective Action. The federal banking agencies have broad powers under current federal law to take prompt corrective action to resolve problems of insured depository institutions.
The rules became effective on April 1, 2021 and, to date, there has been no material impact to either the Corporation or the Bank from the rules. 16 Table of Contents ​ Other Regulations ​ Prompt Corrective Action.
For the year ended December 31, 2022, net income for this segment totaled $6.8 million. ​ Human Capital Resources ​ The Corporation and its subsidiaries foster a culture of respect, teamwork, ownership, responsibility, initiative, integrity, and service. We believe that our officers and employees are our most important assets.
At December 31, 2023, assets of the consumer finance segment totaled $476.7 million. For the year ended December 31, 2023, net income for this segment totaled $2.9 million. ​ Human Capital Resources ​ The Corporation and its subsidiaries foster a culture of respect, teamwork, ownership, responsibility, initiative, integrity, and service.
Thereafter, on September 29, 2022, FinCEN issued the final rule to implement the beneficial ownership reporting requirements of the CTA, which will be effective January 1, 2024. This rule does not apply to the Corporation or the Bank.
Thereafter, on September 29, 2022, FinCEN issued the final rule (the Reporting Rule) to implement the beneficial ownership reporting requirements of the CTA, which was effective January 1, 2024. The Corporation and its subsidiaries are exempt from reporting requirements under the Reporting Rule.
The mortgage banking segment offers a wide variety of residential mortgage loans, which are originated for sale to investors in the secondary mortgage market. The mortgage banking segment does not securitize loans. C&F Bank also purchases mortgage loans from the mortgage banking segment.
The West Virginia office is located in Keyser. C&F Select LLC provides mortgage loan origination services through two locations in Richmond, Virginia. The mortgage banking segment offers a wide variety of residential mortgage loans, which are originated for sale to investors in the secondary mortgage market. The mortgage banking segment does not securitize loans.
These factors also are considered in evaluating mergers, acquisitions and applications to open a branch or facility. In 2020, the last time that the Bank's CRA activities were evaluated by the FDIC, the Bank received a “Satisfactory” CRA rating. ​ Federal Home Loan Bank of Atlanta.
These factors also are considered in evaluating mergers, acquisitions and applications to open a branch or facility.
See “Risks Related to the Regulation of the Corporation” below in Item 1A of Part I of Annual Report on Form 10-K for further discussion. ​ Regulatory Reform ​ The financial crisis of 2008, including the downturn of global economic, financial and money markets and the threat of collapse of numerous financial institutions, and other events led to the adoption of numerous laws and regulations that apply to, and focus on, financial institutions.
See “Risks Related to the Regulation of the Corporation” below in Item 1A of Part I of Annual Report on Form 10-K for further discussion. ​ Regulatory Environment ​ Banking and other financial services statutes, regulations and policies are continually under review by the U.S. Congress, state legislatures and federal and state regulatory agencies.
The EGRRCPA also expanded the category of bank holding companies that may rely on the Federal Reserve Board’s Small Bank Holding Company Policy Statement by raising the maximum amount of 11 Table of Contents assets a qualifying bank holding company may have from $1 billion to $3 billion.
Bank holding companies with less than $3 billion in assets may rely on the Federal Reserve Board’s Small Bank Holding Company Policy Statement.
Progressively lower assessment rate schedules will take effect when the reserve ratio reaches 2 percent, and again when it reaches 2.5 percent. ​ Regulation and Supervision of the Bank and Other Subsidiaries ​ The Bank is subject to supervision, regulation and examination by the VBFI and its primary federal regulator, the FDIC.
Banks with less than $5 billion of uninsured deposits, such as the Bank, are exempt from this special assessment. ​ Regulation and Supervision of the Bank and Other Subsidiaries ​ The Bank is subject to supervision, regulation and examination by the VBFI and its primary federal regulator, the FDIC.
If the rules are adopted as proposed, they will restrict the manner in which executive compensation is structured. ​ Confidentiality and Required Disclosures of Customer Information. The Corporation is subject to various laws and regulations that address the privacy of nonpublic personal financial information of consumers.
The Corporation updated its previous compensation recovery policy to comply with the new Nasdaq listing standards and the policy is included as Exhibit 97 to this Annual Report on Form 10-K. ​ Confidentiality and Required Disclosures of Customer Information. The Corporation is subject to various laws and regulations that address the privacy of nonpublic personal financial information of consumers.
Certain provisions of the Dodd-Frank Act and changes thereto resulting from the enactment of EGRRCPA that may affect the Corporation and the Bank are discussed below in more detail. 9 Table of Contents ​ The Corporation continues to experience ongoing regulatory reform. These regulatory changes could have a significant effect on how we conduct business.
Regulatory enforcement and fines have also increased across the banking and financial services sector. ​ The Corporation continues to experience ongoing regulatory reform and these regulatory changes could have a significant effect on how we conduct business.
The precise effect of the CFPB’s consumer protection activities on the Corporation and the Bank cannot be determined with certainty. ​ Mortgage Banking Regulation.
The precise effect of the CFPB’s consumer protection activities on the Corporation and the Bank cannot be determined with certainty. ​ On March 30, 2023, the CFPB issued a final rule amending Regulation B to implement Section 1071 of the Dodd-Frank Act, which amended ECOA to require the collection of certain small business lending data.
Removed
The Maryland office is located in Clarksville. The South Carolina office is located in Fort Mill. The West Virginia office is located in Keyser. C&F Select LLC provides mortgage loan origination services through two locations in Richmond, Virginia.
Added
The scope of the laws and regulations, and the intensity of the supervision to which the Corporation and its subsidiaries are subject, have increased in recent years, initially in response to the 2008 financial crisis, and more recently in light of other factors, including continued turmoil and stress in the financial markets, technological factors, market changes, increased scrutiny of proposed bank mergers and acquisitions by federal and state bank regulators, and regulatory initiatives related to social policy goals, including the elimination of certain fees charged by financial insitutions.
Removed
The most significant of these laws is the Dodd-Frank Wall Street Reform and Consumer Protection Act (the Dodd-Frank Act), which was enacted on July 21, 2010 and, in part, was intended to implement significant structural reforms to the financial services industry. ​ The Dodd-Frank Act implemented far-reaching changes across the financial regulatory landscape, including changes that have significantly affected the business of all bank holding companies and banks, including the Corporation and the Bank.
Added
These proposed rules do not apply to holding companies or banks with less than $100 billion in assets, such as the Corporation and the Bank, but the final impacts of these rules cannot yet be predicted. The comment window for these proposed rules closed on January 16, 2024. ​ Community Bank Leverage Ratio.
Removed
Some of the rules that have been proposed and, in some cases, adopted to comply with the Dodd-Frank Act's mandates are discussed further below. ​ In May 2018, the Economic Growth, Regulatory Relief and Consumer Protection Act (the EGRRCPA) was enacted to reduce the regulatory burden on certain banking organizations, including community banks, by modifying or eliminating certain federal regulatory requirements.
Added
Progressively lower assessment rate schedules will take effect when the reserve ratio reaches 2 percent, and again when it reaches 2.5 percent. ​ In November 2023, the FDIC issued a final rule to implement a special DIF assessment following the FDIC’s use of the “systemic risk” exception to the least-cost resolution test in connection with the failures and resolutions of Silicon Valley Bank and Signature Bank.
Removed
In particular, the EGRRCPA amended certain provisions of the Dodd-Frank Act as well as statutes administered by the Federal Reserve and the FDIC.
Added
In 2023, the last time that the Bank’s CRA activities were evaluated by the FDIC, the Bank received a “Satisfactory” CRA rating. ​ On October 24, 2023, the federal banking regulatory agencies jointly issued a final rule to modernize CRA regulations consistent with the following key goals: (1) to encourage banks to expand access to credit, investment, and banking services in low- and moderate-income communities; (2) to adapt to changes in the banking industry, including internet and mobile banking and the growth of non-branch delivery systems; (3) to provide greater clarity and consistency in the application of the CRA regulations, including adoption of a new metrics-based approach to evaluating bank retail lending and community development financing; and (4) to tailor CRA evaluations and data collection to bank size and type, recognizing that differences in bank size and business models may impact CRA evaluations and qualifying activities.
Added
Most of the final CRA rule’s requirements will be applicable beginning January 1, 2026, with certain requirements, including the data reporting requirements, applicable as of January 1, 2027.
Added
The Bank is evaluating the expected impact of the modernized CRA regulations, but currently does not anticipate any material impact to its business, operations or financial condition due to the modified CRA regulations. ​ Federal Home Loan Bank of Atlanta.
Added
As a result of ongoing litigation, all deadlines for compliance with the amendments to Regulation B are currently stayed. If implemented as issued, the final rule would require the Bank to compile, maintain, and submit to the bureau certain small business lending data, including data on applications for credit by women-owned, minority-owned, and small businesses.
Added
The Bank is unable to determine the date that the Section 1071 final rule will become effective or the date that the Bank will be required to comply with its requirements.
Added
The Bank is evaluating the expected impact of the Section 1071 final rule, but currently does not anticipate any material impact to its business, operations or financial condition due to this final rule. ​ On January 17, 2024, the CFPB proposed amendments to Regulation E and Regulation Z that would impose the disclosure requirements of TILA on extensions of overdraft credit, with certain exemptions, for financial institutions with greater than $10 billion in assets.
Added
While this proposed rule, if implemented, would not apply to banks with less than $10 billion in assets, including the Bank, the Bank cannot determine the ultimate impact such a regulatory change would have on the broader market for overdraft products and services, which may include a downward pressure on the interest and fees that a bank is able to charge for consumer transactions that overdraw deposit accounts.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeAlternatively, an expansion of the money supply could make it easier for a borrower to obtain a loan from another financial institution at a lower interest rate, resulting in a payoff of that borrower’s higher rate loan with us, and which could have an adverse effect on our financial condition and results of operations. ​ Compliance with laws, regulations and supervisory guidance, both new and existing, may adversely affect our business, financial condition and results of operations. ​ We are subject to numerous laws, regulations and supervision from both federal and state agencies.
Biggest changeAlternatively, an expansion of the money supply could make it easier for a borrower to obtain a loan from another financial institution at a lower interest rate, resulting in a payoff of that borrower’s higher rate loan with us, and which could have an adverse effect on our financial condition and results of operations. ​ Adverse changes in economic conditions in our market areas or adverse conditions in an industry on which a local market in which we do business is dependent could adversely affect our results of operations and financial condition. ​ We provide full-service banking and other financial services throughout eastern and central Virginia, mortgage banking in Virginia, Maryland, North Carolina, and West Virginia, and consumer finance activities throughout 21 states.
Any such required additional provisions for loan losses or charge-offs could have a material adverse effect on our financial condition and results of operations. ​ On January 1, 2023, we adopted Accounting Standards Codification (ASC) Topic 326, “Financial Instruments—Credit Losses” (ASC 326), which replaces existing accounting principles for the recognition of loan losses based on losses that have been incurred with a requirement to record an allowance for credit losses that represents expected credit losses over the lifetime of all loans in the Corporation’s portfolio.
Any such required additional provisions for credit losses or charge-offs could have a material adverse effect on our financial condition and results of operations. ​ On January 1, 2023, we adopted Accounting Standards Codification (ASC) Topic 326, “Financial Instruments—Credit Losses” (ASC 326), which replaces existing accounting principles for the recognition of loan losses based on losses that have been incurred with a requirement to record an allowance for credit losses that represents expected credit losses over the lifetime of all loans in the Corporation’s portfolio.
If our risk management program has flaws or gaps, or if our risk management controls do not function effectively, our results of operations, financial condition or business may be adversely affected. ​ We are subject to security and operational risks, including cybersecurity risks and cyber attacks, relating to our use of technology that could damage our reputation and our business. ​ In the ordinary course of business, the Corporation collects and stores sensitive data, including proprietary business information and personally identifiable information of our customers and employees, in systems and on networks, including those hosted by third-party vendors.
If our risk management program has flaws or gaps, or if our risk management controls do not function effectively, our results of operations, financial condition or business may be adversely affected. ​ We are subject to security and operational risks, including cybersecurity risks and cybersecurity attacks, relating to our use of technology that could damage our reputation and our business. ​ In the ordinary course of business, the Corporation collects and stores sensitive data, including proprietary business information and personally identifiable information of our customers and employees, in systems and on networks, including those hosted by third-party vendors.
Although we believe our allowance for loan losses is adequate to absorb losses that are inherent in our loan portfolio, we cannot predict the timing or severity of such losses nor give any assurance that our allowance will be adequate in the future. ​ Our banking regulators, as an integral part of their examination process, periodically review the allowance for loan losses and may require us to increase our allowance by recognizing additional provision for loan losses charged to expense, or to decrease the allowance by recognizing loan charge-offs.
Although we believe our allowance for credit losses is adequate to absorb losses that are inherent in our loan portfolio, we cannot predict the timing or severity of such losses nor give any assurance that our allowance will be adequate in the future. ​ Our banking regulators, as an integral part of their examination process, periodically review the allowance for credit losses and may require us to increase our allowance by recognizing additional provision for credit losses charged to expense, or to decrease the allowance by recognizing loan charge-offs.
ITEM 1A. RISK FACTOR S ​ Investments in the Company’s common stock involve risk. In addition to the other information set forth in this Report on Form 10-K, including the information addressed under “Cautionary Statement Regarding Forward-Looking Statements,” investors in the Company’s common stock should carefully consider the risk factors discussed below.
ITEM 1A. RISK FACTOR S ​ Investments in the Company’s common stock involve risk. In addition to the other information set forth in this Annual Report on Form 10-K, including the information addressed under “Cautionary Statement Regarding Forward-Looking Statements,” investors in the Company’s common stock should carefully consider the risk factors discussed below.
Although we seek to mitigate risks inherent in lending by adhering to specific underwriting practices, our loans may not be repaid. We attempt to maintain an appropriate allowance for loan losses to provide for losses in our loan portfolio.
Although we seek to mitigate risks inherent in lending by adhering to specific underwriting practices, our loans may not be repaid. We attempt to maintain an appropriate allowance for credit losses to provide for losses in our loan portfolio.
These systems and procedures include but are not limited to (i) regular penetration testing of our network, (ii) regular employee training programs on sound security practices and awareness of security threats, (iii) deployment of tools to monitor our network including intrusion prevention and detection systems, electronic mail spam filters, anti-virus, anti-malware, anti-ransomware, resource logging and patch management, (iv) multifactor authentication for customers using treasury management tools and employees who access our network from outside of our premises, and (v) enforcement of security policies and procedures for the additions and maintenance of user access and rights to resources.
These systems and procedures include but are not limited to (i) regular penetration testing of our network, (ii) regular employee training programs on sound security practices and awareness of security threats, (iii) deployment of tools to monitor our network including intrusion prevention and detection systems, electronic mail spam filters, anti-virus, anti-malware, anti-ransomware, resource logging and patch management, (iv) multifactor authentication for customers 26 Table of Contents using treasury management tools and employees who access our network from outside of our premises, and (v) enforcement of security policies and procedures for the additions and maintenance of user access and rights to resources.
These factors could materially and adversely affect the Company’s business, financial condition, liquidity, results of operations, and capital position, and could cause the Company’s actual results to differ materially from its historical results or the results contemplated by the forward-looking statements contained in this Annual Report on Form 10-K, in which case the trading price of the Company’s common stock could decline. ​ Risk Factors Related to our Lending Activities and Economic Conditions ​ Our business is subject to various lending and other economic risks that could adversely affect our results of operations and financial condition. ​ Deterioration in economic conditions could adversely affect our business.
These factors could materially and adversely affect the Company’s business, financial condition, liquidity, results of operations, and capital position, and could cause the Company’s actual results to differ materially from its historical results or the results contemplated by the forward-looking statements contained in this Annual Report on Form 10-K, in which case the trading price of the Company’s common stock could decline. 20 Table of Contents ​ Risk Factors Related to our Lending Activities and Economic Conditions ​ Our business is subject to various lending and other economic risks that could adversely affect our results of operations and financial condition. ​ Deterioration in economic conditions could adversely affect our business.
During periods of reduced loan demand, our results of operations are adversely affected as we are unable to reduce expenses commensurate with the decline in mortgage loan origination activity. ​ If our allowance for loan losses becomes inadequate, our results of operations may be adversely affected. ​ Making loans is an essential element of our business.
During periods of reduced loan demand, our results of operations may be adversely affected if we are unable to reduce expenses commensurate with the decline in mortgage loan origination activity. ​ If our allowance for credit losses becomes inadequate, our results of operations may be adversely affected. ​ Making loans is an essential element of our business.
Our inability to identify, recruit and retain talented personnel to manage our operations effectively and in a timely manner could limit our growth or impair our ability to implement our business strategy effectively and efficiently, which could materially adversely affect our business. ​ The Corporation or any of its subsidiaries is a defendant from time to time in a variety of litigation and other actions. ​ The Corporation or any of its subsidiaries may be involved from time to time in a variety of litigation arising out of its business, and the Corporation operates in a legal and regulatory environment that exposes it to potential significant litigation risk.
Our inability to identify, recruit and retain talented personnel to manage our operations effectively and in a timely manner could limit our growth or impair our ability to implement our business strategy effectively and efficiently, which could materially adversely affect our business. ​ 29 Table of Contents The Corporation or any of its subsidiaries is a defendant from time to time in a variety of litigation and other actions. ​ The Corporation or any of its subsidiaries may be involved from time to time in a variety of litigation arising out of its business, and the Corporation operates in a legal and regulatory environment that exposes it to potential significant litigation risk.
The loss of the services of one or more of these officers could disrupt our operations and impair our ability to implement our business strategy, which could adversely affect our business, financial condition and results of operations. ​ 25 Table of Contents The success of our business strategies depends on our ability to identify, recruit and retain individuals with experience and relationships in our primary markets. ​ The successful implementation of our business strategy will require us to continue to attract, hire, motivate and retain skilled personnel to develop new customer relationships as well as new financial products and services.
The loss of the services of one or more of these officers could disrupt our operations and impair our ability to implement our business strategy, which could adversely affect our business, financial condition and results of operations. ​ The success of our business strategies depends on our ability to identify, recruit and retain individuals with experience and relationships in our primary markets. ​ The successful implementation of our business strategy will require us to continue to attract, hire, motivate and retain skilled personnel to develop new customer relationships as well as new financial products and services.
Increased competition could require us to increase the rates we pay on deposits or lower the rates we offer on loans, which could adversely affect our profitability. ​ 23 Table of Contents Accounting for business combinations may expose us to intangible asset risk, which could affect our results of operations. ​ In connection with accounting for prior acquisitions, we recorded assets acquired and liabilities assumed at their fair value, which resulted in the recognition of certain intangible assets, including goodwill.
Increased competition could require us to increase the rates we pay on deposits or lower the rates we offer on loans, which could adversely affect our profitability. ​ Accounting for business combinations may expose us to intangible asset risk, which could affect our results of operations. ​ In connection with accounting for prior acquisitions, we recorded assets acquired and liabilities assumed at their fair value, which resulted in the recognition of certain intangible assets, including goodwill.
It is possible that significant or unexpected changes in interest rates may take place in the future, and we cannot always accurately predict the nature or magnitude of such changes or how such changes may affect our business or results of operations. ​ The Corporation’s investment portfolio consists of fixed income debt securities, classified as available for sale, whose market values fluctuate with changes in interest rates.
It is possible that significant or unexpected changes in interest rates may take place in the future, and we cannot always accurately predict the nature or magnitude of such changes or how such changes may affect our business or results of operations. ​ 24 Table of Contents The Corporation’s investment portfolio consists of fixed income debt securities, classified as available for sale, whose market values fluctuate with changes in interest rates.
Our success depends on our ability to maintain compliance with both existing and new laws and regulations. ​ 26 Table of Contents Future legislation, regulation and government policy, particularly following changes in political leadership and policymakers in the federal government, could affect the banking industry as a whole, including the Corporation’s business and results of operations, in ways that are difficult to predict.
Our success depends on our ability to maintain compliance with both existing and new laws and regulations. ​ Future legislation, regulation and government policy, particularly following changes in political leadership and policymakers in the federal government, could affect the banking industry as a whole, including the Corporation’s business and results of operations, in ways that are difficult to predict.
While the Corporation does not intend to sell any of its securities, the portfolio serves as a source of liquidity and consists of 22 Table of Contents securities available for sale, which may be sold in response to changes in market interest rates, changes in prepayment risk, increases in loan demand, general liquidity needs and other similar factors.
While the Corporation does not intend to sell any of its securities, the portfolio serves as a source of liquidity and consists of securities available for sale, which may be sold in response to changes in market interest rates, changes in prepayment risk, increases in loan demand, general liquidity needs and other similar factors.
Additionally, banks and other financial institutions with larger capitalization and financial intermediaries not subject to bank regulatory restrictions have larger lending limits and are thereby able to serve the credit needs of larger clients. These institutions may be able to offer the same loan products and services that we offer at more competitive rates and prices.
Additionally, banks and other financial institutions with larger capitalization and financial intermediaries not subject to bank regulatory restrictions have larger 25 Table of Contents lending limits and are thereby able to serve the credit needs of larger clients. These institutions may be able to offer the same loan products and services that we offer at more competitive rates and prices.
Additionally, the majority of the debt securities in which we have invested are in an unrealized loss position as of December 31, 2022, due primarily to increases in interest rates after we purchased those debt securities.
Additionally, the majority of the debt securities in which we have invested are in an unrealized loss position as of December 31, 2023, due primarily to increases in interest rates after we purchased those debt securities.
Security breaches, including cyber incidents, identity theft and hacking events, have been experienced by several of the world’s largest financial institutions that utilize sophisticated security tools to prevent such breaches, incidents and events.
Security breaches, including cybersecurity incidents, identity theft and hacking events, have been experienced by several of the world’s largest financial institutions that utilize sophisticated security tools to prevent such breaches, incidents and events.
Our loan and deposit activities are directly affected by, and our financial success depends on, economic conditions within these markets, as well as conditions in the industries on which those markets are economically dependent.
Our lending and deposit activities are directly affected by, and our financial success depends on, economic conditions within these markets, as well as conditions in the industries on which those markets are economically dependent.
Because any estimate of loan losses is necessarily subjective and the accuracy of any estimate depends on the outcome of future events that are not within our control, we face the risk that charge-offs in future periods will exceed our 20 Table of Contents allowance for loan losses and that additional provision for loan losses will be required, which would have an adverse effect on the Corporation’s net income.
Because any estimate of credit losses is necessarily subjective and the accuracy of any estimate depends on the outcome of future events that are not within our control, we face the risk that charge-offs in future periods will exceed our allowance for credit losses and that additional provision for credit losses will be required, which would have an adverse effect on the Corporation’s net income.
As a result of increases in market interest rates during 2022, the market value of the Corporation’s investment portfolio declined significantly.
As a result of increases in market interest rates during 2022 and 2023, the market value of the Corporation’s investment portfolio declined significantly.
Under ASC 326, the Corporation’s estimate of expected credit losses will be based on reasonable and supportable forecasts of future economic conditions and loan performance.
Under ASC 326, the Corporation’s estimate of expected credit losses is based on reasonable and supportable forecasts of future economic conditions and loan performance.
If the Corporation is forced to sell debt securities in an unrealized loss position for liquidity or other needs or determines that there is credit loss with respect to any of the corporation’s debt securities, the corporation may be forced to recognize those losses or an impairment charge in net income. ​ Weakness in the secondary residential mortgage loan markets or demand for mortgage loans may adversely affect income from C&F Mortgage. ​ Our mortgage banking segment provides a significant portion of our noninterest income.
If the Corporation is forced to sell debt securities in an unrealized loss position for liquidity or other needs or determines that there is credit loss with respect to any of the corporation’s debt securities, the corporation may be forced to recognize those losses or an impairment charge in net income. ​ Weakness in the secondary residential mortgage loan markets or demand for mortgage loans may adversely affect income from C&F Mortgage. ​ Our mortgage banking segment has historically provided a significant portion of our noninterest income by generating gains on sales of mortgage loans that we originate.
We generate gains on sales of mortgage loans primarily from sales of mortgage loans that we originate. Interest rates, housing inventory, housing demand, inflation, cash buyers, new mortgage lending regulations and other market conditions, such as the number of third-party investors and their demand to purchase mortgage loans, have a direct effect on loan originations across the industry.
Interest rates, housing inventory, housing demand, inflation, cash buyers, new mortgage lending regulations and other market conditions, such as the number of third-party investors and their demand to purchase mortgage loans, have a direct effect on loan originations across the industry.
If market rates continue to rise, to combat inflation or otherwise, we may experience more competitive pressures to increase the rates we pay on deposits, which may decrease our net interest income, a change in the mix of noninterest and interest-bearing accounts, reduced demand for loans or increases in the rate of default on existing loans.
If market rates continue to rise, or remain elevated for an extended period of time, we may experience more competitive pressures to increase the rates we pay on deposits, which may result in a decrease in our net interest income, a change in the mix of noninterest and interest-bearing accounts, reduced demand for loans or increases in the rate of default on existing loans.
However, because the techniques used to obtain unauthorized access, or to disable or degrade systems change frequently and are often not recognized until launched against a target, even with all reasonable security efforts, the Corporation may be unable to anticipate these techniques or to implement adequate protective measures. ​ 24 Table of Contents While most of our core data processing is conducted internally, certain key applications are outsourced to third party providers.
However, because the techniques used to obtain unauthorized access, or to disable or degrade systems change frequently and are often not recognized until launched against a target, even with all reasonable security efforts, the Corporation may be unable to anticipate these techniques or to implement adequate protective measures. ​ Certain key applications, including our core data processing beginning in 2024, are outsourced to third party providers.
While the adoption of ASC 326 will not affect ultimate loan performance or cash flows of the Corporation from making loans, the period in which expected credit losses affect net income of the Corporation may not be similar to the recognition of loan losses under current accounting guidance, and recognizing an allowance based on expected credit losses may create more volatility in the level of our allowance for credit losses and our results of operations, including based on volatility in economic forecasts and our expectations of loan performance in future periods, as actual results may differ materially from our estimates.
While the adoption of ASC 326 does not affect ultimate loan performance or cash flows of the Corporation from making loans, recognizing an 22 Table of Contents allowance based on expected credit losses may create volatility in the level of our allowance for credit losses and our results of operations, including based on volatility in economic forecasts and our expectations of loan performance in future periods, as actual results may differ materially from our estimates.
We may also look to federal funds purchased and brokered deposits, although the use of brokered deposits may be limited or discouraged by our banking regulators. We may also seek to raise funds through the issuance of shares of our common stock, or other equity or equity-related securities, or debt securities including subordinated notes as additional sources of liquidity.
We may also seek to raise funds through the issuance of shares of our common stock, or other equity or equity-related securities, or debt securities including subordinated notes as additional sources of liquidity.
Additional provision for indemnification losses or additional obligations arising from prepayments would have an adverse effect on the Corporation’s net income. ​ Our level of credit risk is higher due to the concentration of our loan portfolio in commercial loans and in consumer finance loans. ​ At December 31, 2022, 47.9 percent of our loan portfolio consisted of commercial, financial and agricultural loans, which include loans secured by real estate for builder lines, acquisition and development and commercial development, as well as commercial loans secured by personal property.
Additional provision for indemnification losses or additional obligations arising from prepayments would have an adverse effect on the Corporation’s net income. ​ Our level of credit risk is higher due to the concentration of our loan portfolio in commercial real estate loans and in consumer finance automobile loans. ​ At December 31, 2023, 38.4 percent of our loan portfolio consisted of commercial real estate loans, which includes loans secured by apartment complexes, retail properties, and office and warehouse properties.
A deterioration in economic conditions, in particular a prolonged economic slowdown within our geographic region or a broader disruption in the economy, possibly as a result of a pandemic or other widespread public 19 Table of Contents health emergency, acts of terrorism or outbreak of domestic or international hostilities (including the ongoing military conflict between Russia and Ukraine), could result in the following consequences, any of which could hurt our business materially: an increase in loan delinquencies; an increase in problem assets and foreclosures; a decline in demand for our products and services; a deterioration in the value of collateral for loans made by our various business segments; and changes in the fair value of financial instruments held by the Corporation or its subsidiaries. ​ Adverse changes in economic conditions in our market areas or adverse conditions in an industry on which a local market in which we do business is dependent could adversely affect our results of operations and financial condition. ​ We provide full service banking and other financial services throughout eastern and central Virginia.
A deterioration in economic conditions, in particular a prolonged economic slowdown within our geographic region or a broader disruption in the economy, possibly as a result of a pandemic or other widespread public health emergency, acts of terrorism or outbreak of domestic or international hostilities (including the ongoing military conflicts between Russia and Ukraine and in the Middle East), could result in the following consequences, any of which could hurt our business materially: an increase in loan delinquencies; an increase in problem assets and foreclosures; a decline in demand for our products and services; a deterioration in the value of collateral for loans made by our various business segments; and changes in the fair value of financial instruments held by the Corporation or its subsidiaries. ​ Our earnings are significantly affected by the fiscal and monetary policies of the federal government and its agencies. ​ The policies of the Federal Reserve affect us significantly.
The increased financial and credit risk associated with these types of loans is a result of several factors, including the concentration of principal in a limited 21 Table of Contents number of loans and to borrowers in similar lines of business, the size of loan balances, the effects of general economic conditions on income-producing properties and the increased difficulty of evaluating and monitoring these types of loans. ​ At December 31, 2022, 25.1 percent of our loan portfolio consisted of automobile consumer finance loans, primarily for customers who have limited access to traditional automobile financing due to increased credit risk.
The increased financial and credit risk associated with these types of loans is a result of several factors, including the concentration of principal in a limited number of loans and to borrowers in similar lines of business, the size of loan balances, the effects of general economic conditions on income-producing properties and the increased difficulty of evaluating and monitoring these types of loans.
We believe that our current interest rate exposure is manageable and does not indicate any significant exposure to interest rate changes. To combat rising inflation, beginning in March 2022, the Federal Reserve has raised its benchmark federal funds interest rate at the fastest pace in over 40 years, increasing 425 basis points during 2022.
To combat rising inflation, beginning in March 2022, the Federal Reserve has raised its benchmark federal funds interest rate at the fastest pace in over 40 years, increasing 425 basis points during 2022 and an additional 100 basis points in 2023.
If local customer deposits are not sufficient to fund our normal operations and growth, we will look to outside sources, such as borrowings from the FHLB, which is a secured funding source. Our ability to access borrowings from the FHLB will be dependent upon whether and the extent to which we can provide collateral to secure FHLB borrowings.
If local customer deposits are not sufficient to fund our normal operations and growth, or if we lose a significant portion of our local customer deposits or a significant deposit relationship, we will look to outside sources, such as borrowings from the FHLB, which is a secured funding source, and our liquidity and/or profitability could be adversely impacted.
General market declines or market volatility in the future, especially in the financial institutions sector, could adversely affect the price of our common stock, and the current market price may not be indicative of future market prices. ​ The trading volume of our common stock may not provide adequate volume for investors, and future sales of our common stock by shareholders or the perception that those sales could occur may cause our common stock price to decline. ​ Although our common stock is listed for trading on NASDAQ Global Select Market, the trading volume in our common stock may be lower than that of other larger financial institutions.
ESG-related costs, including with respect to compliance with any additional regulatory or disclosure requirements or expectations, could adversely impact our results of operations. 28 Table of Contents ​ Risks Related to Owning the Corporation’s Common Stock ​ The trading volume of our common stock may not provide adequate volume for investors, and future sales of our common stock by shareholders or the perception that those sales could occur may cause our common stock price to decline. ​ Although our common stock is listed for trading on NASDAQ Global Select Market, the trading volume in our common stock may be lower than that of other larger financial institutions.
Any of these events may, in turn, have a material adverse impact our business, results of operations and financial condition. ​ ​ Risks Related to Owning the Corporation’s Common Stock ​ Our common stock price may be volatile, which could result in losses to our investors. ​ Our common stock price has been volatile in the past, and several factors could cause the price to fluctuate in the future.
Should the ultimate judgments or settlements and/or costs incurred in any litigation exceed any applicable insurance coverage, they could have a material adverse effect on the Corporation’s financial condition and results of operation for any period. ​ Our common stock price may be volatile, which could result in losses to our investors. ​ Our common stock price has been volatile in the past, and several factors could cause the price to fluctuate in the future.
Adverse developments in any of these factors could result in among other things, a decline in loan demand, a reduction in the number of credit-worthy borrowers seeking loans, an increase in delinquencies, defaults and foreclosures, an increase in classified and nonaccrual loans, a decrease in the value of loan collateral, and a decline in the financial condition of borrowers and guarantors, any of which could adversely affect our financial condition or business. ​ The Corporation also invests in the debt securities of corporate issuers, primarily financial institutions, that the Corporation views as having a strong financial position and earnings potential.
Adverse developments in any of these factors could result in among other things, a decline in loan demand, a reduction in the number of credit-worthy borrowers seeking loans, an increase in delinquencies, defaults and foreclosures, an increase in classified and nonaccrual loans, a decrease in the value of loan collateral, and a decline in the financial condition of borrowers and guarantors, any of which could adversely affect our financial condition or business. ​ The level of the Corporation’s allowance for credit losses is particularly sensitive to changes in the actual and forecasted national unemployment rate and changes in current conditions or reasonably expected future conditions affecting the collectability of loans.
If the Bank is unable to pay dividends to the Corporation, the Corporation may not be able to service its outstanding borrowings and other debt, pay its other obligations or pay a cash dividend to the holders of the Corporation’s common stock, and the Corporation’s business, financial condition and results of operations may be materially adversely affected. ​ 28 Table of Contents Future issuances of our common stock could adversely affect the market price of our common stock and could be dilutive. ​ We may issue additional shares of common stock or securities that are convertible into or exchangeable for, or that represent the right to receive, shares of our common stock.
If the Bank is unable to pay dividends to the Corporation, the Corporation may not be able to service its outstanding borrowings and other debt, pay its other obligations or pay a cash dividend to the holders of the Corporation’s common stock, and the Corporation’s business, financial condition and results of operations may be materially adversely affected. ​ ​ General Risk Factors ​ We rely heavily on our management team and the unexpected loss of key officers may adversely affect our operations. ​ We believe that our growth and future success will depend in large part on the skills of our executive officers.
Although further increases to the target federal funds rate by the Federal Reserve are expected in 2023 to combat recent inflationary trends, if interest rates do not rise, or if the Federal Reserve lowers the target federal funds rate, such lower rates could limit our interest rate spread and may adversely affect our business forecasts.
Conversely, if market interest rates decline, or if the Federal Reserve lowers the target federal funds rate, such lower rates could limit our interest rate spread and may adversely affect our business forecasts. If market interest rates were to fall, yields on loans and investments may fall.
While we manage the higher risk inherent in loans made to these borrowers through our underwriting criteria for installment sales contracts we purchase and collection methods, we cannot guarantee that these criteria or methods will ultimately provide adequate protection against these risks. ​ ​ Risk Factors Related to our Industry ​ We are subject to interest rate risk and fluctuations in interest rates may negatively affect our financial performance. ​ Our profitability depends in substantial part on our net interest margin, which is the difference between the interest earned on loans, securities and other interest-earning assets, and interest paid on deposits and borrowings divided by total interest-earning assets.
As a result of this uncertainty, we face the potential for deposit outflows, increased borrowing and funding costs, and increased competition for liquidity, any of which could have a material adverse impact on our financial performance or financial condition. ​ We are subject to interest rate risk and fluctuations in interest rates may negatively affect our financial performance. ​ Our profitability depends in substantial part on our net interest margin, which is the difference between the interest earned on loans, securities and other interest-earning assets, and interest paid on deposits and borrowings divided by total interest-earning assets.
Removed
Rising delinquencies and declining wholesale automobile values have contributed to higher net charge-offs during the second half of 2022, and we expect those trends to continue in 2023, as government stimulus measures in response to the pandemic that benefitted borrowers had a decreased effect in 2022, the wholesale value of used automobiles declined from a recent peak during the COVID-19 pandemic, and challenges in repossessing automobiles increased due to a decline in the number of repossession agencies.
Added
The allowance for credit losses is inherently subjective because it requires estimates that are susceptible to significant revision as more information becomes available.
Removed
Additionally, the Federal Reserve raised the federal funds benchmark rate by 25 basis points in February of 2023.
Added
In evaluating the level of the allowance 21 Table of Contents for credit losses, we consider a range of possible assumptions and outcomes, however, current economic conditions and forecasts can change and future events are inherently difficult to predict.
Removed
If interest rates were to fall, yields on loans and investments may fall.
Added
The anticipated amount of estimated credit losses on loans, and therefore the appropriateness of the allowance for credit losses and related provision for credit losses charged against earnings, could change significantly and adversely affect our financial condition and results of operations. ​ The Corporation also invests in the debt securities of corporate issuers, primarily financial institutions, that the Corporation views as having a strong financial position and earnings potential.
Removed
Either of these outcomes could have a material adverse impact on our financial condition and results of operations. ​ We rely heavily on our management team and the unexpected loss of key officers may adversely affect our operations. ​ We believe that our growth and future success will depend in large part on the skills of our executive officers.
Added
In addition to other risks associated with the ownership of real estate, the repayment of these loans may be dependent upon the profitability and cash flows of the business or project.
Removed
Should the ultimate judgments or settlements and/or costs incurred in any litigation exceed any applicable insurance coverage, they could have a material adverse effect on the Corporation’s financial condition and results of operation for any period. ​ ​ Risks Related to the Regulation of the Corporation ​ Our earnings are significantly affected by the fiscal and monetary policies of the federal government and its agencies. ​ The policies of the Federal Reserve affect us significantly.
Added
As a result, events beyond our control, such as a downturn in the local economy, could adversely affect the performance of the commercial real estate loan portfolio. ​ At December 31, 2023, 23.0 percent of our loan portfolio consisted of consumer finance automobile loans, primarily for customers who have limited access to traditional automobile financing due to increased credit risk.
Removed
ESG-related costs, including with respect to compliance with any additional regulatory or disclosure requirements or expectations, could adversely impact our results of operations. ​ Risks Related to the COVID-19 Pandemic ​ The Corporation’s results of operations and financial condition may be adversely affected by the COVID-19 pandemic. ​ The outbreak of the COVID-19 pandemic, the widespread government response and the impact on consumers and businesses caused significant disruption in the United States and international economies and financial markets and have had a significant impact on consumers and businesses in our market area and the operations and financial performance of the Corporation.
Added
The number of delinquent loans, fluctuations in wholesale values of used automobiles and the availability of repossession agencies may impact the amount of net charge-offs experienced within the consumer finance automobile portfolio.
Removed
Although conditions regarding the spread of the illness are improving, new variants emerge that could cause further outbreaks or more severe outbreaks in the future, resulting in additional lockdowns, economic disruptions, or other unknown impacts. ​ Consequences of the pandemic have included and may include further market volatility, interest rate fluctuations, disrupted trade and supply chains, increased unemployment, rising prices, inflation and reduced economic activity.
Added
While we manage the higher risk inherent in loans made to these borrowers through our underwriting criteria for installment sales contracts we purchase and collection methods, we cannot guarantee that these criteria or methods will ultimately provide adequate protection against these risks. 23 Table of Contents ​ ​ Risk Factors Related to our Industry and Financial Markets ​ Our business, financial condition, and results of operations could be adversely affected by developments impacting the financial services industry, such as bank failures or concerns involving liquidity.
Removed
The period of recovery from the negative economic effects of the pandemic cannot be predicted and may be protracted.
Added
Events in the financial services industry, including bank closures, cause general uncertainty and concern regarding the adequacy of liquidity of the financial services industry generally.
Removed
As loan payment deferral programs and government stimulus or relief efforts, such as the Paycheck Protection Program (PPP), have largely ended, signs of credit deterioration that were masked or obscured may emerge, and the Corporation can give no assurance that loan performance or net charge-offs will continue at the levels experienced in 2022, 2021 and 2020. ​ 27 Table of Contents The extent to which the COVID-19 pandemic impacts our business, results of operations and financial condition will depend on future developments, which are highly uncertain and cannot be predicted, including, but not limited to the duration and severity of the COVID-19 pandemic, the acceptance and continued effectiveness of vaccines and treatments for COVID-19, the effects of the pandemic on our customers and vendors, and the short- and long-term health impacts of the pandemic.
Added
While we rely on different sources of funding to meet potential liquidity needs, our business strategies are largely based on access to funding from customer deposits and supplemental funding provided by wholesale or other secondary liquidity sources.
Removed
There can be no assurance that any efforts by the Corporation to address the adverse impacts of the COVID-19 pandemic will be effective. Even after the COVID-19 pandemic has subsided, we may continue to experience adverse impacts to our business as a result of changes in the behavior of customers, businesses and their employees.
Added
Deposit levels may be affected by various industry factors, including interest rates paid by competitors, general interest rate levels, returns available to customers on alternative investments, conditions in the financial services industry specifically and general economic conditions that impact the amount of liquidity in the economy and savings levels, and also by factors that impact customers’ perception of our financial condition and capital and liquidity levels.
Removed
Furthermore, the financial condition of our customers and vendors may be adversely impacted, which may result in an elevated level of loan losses, a decrease in demand for our products and services, or reduced availability of services provided by third parties on which we rely.
Added
Events involving limited liquidity, defaults, non-performance or other adverse developments that affect financial institutions, transactional counterparties or other companies in the financial services industry, or the financial services industry generally, or concerns or rumors about any events of these kinds or other similar events, have in the past and may in the future lead to erosion of customer confidence in the banking system, deposit volatility, liquidity issues, stock price volatility, and other adverse developments.
Added
The bank closures in the first half of 2023 led to such disruption and volatility in the financial services industry generally, including deposit outflows and increasing liquidity needs at many regional banks, which led banking regulators to take extraordinary actions to insure otherwise uninsured deposit accounts at the closed banks and to permit such banks’ depositors to promptly access all funds on deposit.
Added
The response to bank closures by the U.S. Government, including the U.S. Department of the Treasury, the FDIC, and the Federal Reserve, cannot be predicted and the policies and regulations implemented in response to past bank closures cannot be expected to be extended or repeated in response to a future bank closure.
Added
The Corporation cannot predict to what extent any such steps taken by the banking regulators will be effective in calming the financial markets and financial services industry generally, preventing further bank closures, or reducing the risk of deposit outflows, and particularly sudden deposit outflows, from banks.
Added
We believe that our current interest rate exposure is manageable and does not indicate any significant exposure to interest rate changes.
Added
Our ability to access borrowings from the FHLB will be dependent upon whether and the extent to which we can provide collateral to secure FHLB borrowings. We may also look to federal funds purchased and brokered deposits, although the use of brokered deposits may be limited or discouraged by our banking regulators.
Added
Either of these outcomes could have a material adverse impact on our financial condition and results of operations. ​ ​ 27 Table of Contents Risks Related to the Regulation of the Corporation ​ Compliance with laws, regulations and supervisory guidance, both new and existing, may adversely affect our business, financial condition and results of operations. ​ We are subject to numerous laws, regulations and supervision from both federal and state agencies.
Added
In particular, the CFPB’s interpretation of the Dodd-Frank Act’s prohibitions against unfair, deceptive and abusive consumer finance products or practices and the application of those prohibitions to so-called “junk fees” may ultimately affect products or services currently offered by the Corporation and its subsidiaries and may affect the amount of revenue that may be derived from these products and services in the future, especially revenue from overdraft products offered by the Bank.
Added
General market declines or market volatility in the future, especially in the financial institutions sector, could adversely affect the price of our common stock, and the current market price may not be indicative of future market prices. ​ Future issuances of our common stock could adversely affect the market price of our common stock and could be dilutive. ​ We may issue additional shares of common stock or securities that are convertible into or exchangeable for, or that represent the right to receive, shares of our common stock.

Item 2. Properties

Properties — owned and leased real estate

2 edited+0 added−0 removed2 unchanged
Biggest changeIn addition, the mortgage banking segment has 20 loan production offices, of which 4 in Virginia are located in C&F Bank branches and 16 are leased from nonaffiliates, including: 12 in Virginia, 1 in Maryland, 1 in North Carolina, 1 in South Carolina and 1 in West Virginia. ​ The consumer finance segment’s headquarters and its loan and administrative functions and staff are located in Henrico, Virginia, in offices that are owned. ​ All of the Corporation’s properties are in good operating condition and are adequate for the Corporation’s present and anticipated future needs. ​
Biggest changeIn addition, the mortgage banking segment has 16 loan production offices, of which four in Virginia are located in C&F Bank branches and 12 are leased from nonaffiliates, including nine in Virginia, one in Maryland, one in North Carolina, and one in West Virginia. 31 Table of Contents ​ The consumer finance segment’s headquarters and its loan and administrative functions and staff are located in Henrico, Virginia, in offices that are owned by C&F Finance. ​ All of the Corporation’s properties are in good operating condition and are adequate for the Corporation’s present and anticipated future needs. ​
Of the 32 locations used as bank branches or commercial lending offices, 26 are owned by the community banking segment and 6 are leased from nonaffiliates. ​ The mortgage banking segment’s main administrative office and a loan production office are located in Midlothian, Virginia, in a building owned by C&F Bank that also houses a branch of C&F Bank.
Of the 32 locations used as bank branches or commercial lending offices, 26 are owned by the community banking segment and six are leased from nonaffiliates. ​ The mortgage banking segment’s main administrative office and a loan production office are located in Midlothian, Virginia, in a building owned by C&F Bank that also houses a branch of C&F Bank.

Item 4. Mine Safety Disclosures

Mine Safety Disclosures — required of mining issuers

6 edited+0 added−0 removed0 unchanged
Biggest changeSeaman, III (65) Executive Vice President and Chief Credit Officer, C&F Bank ​ Executive Vice President and Chief Credit Officer of C&F Bank since 2011 ​ ​ PART I I ​
Biggest changeSeaman, III (66) Executive Vice President and Chief Credit Officer, C&F Bank ​ Executive Vice President and Chief Credit Officer of C&F Bank since 2011 ​ ​ 32 Table of Contents PART I I ​
Cherry (54) President and Chief Executive Officer ​ Chief Executive Officer of the Corporation and C&F Bank since 2019; President of the Corporation and C&F Bank since 2014; Director of the Corporation and C&F Bank since 2015; Secretary of the Corporation and C&F Bank from 2002 to 2018; Chief Financial Officer of the Corporation and C&F Bank from 2004 to 2016 ​ Larry G.
Cherry (55) President and Chief Executive Officer ​ Chief Executive Officer of the Corporation and C&F Bank since 2019; President of the Corporation and C&F Bank since 2014; Director of the Corporation and C&F Bank since 2015; Secretary of the Corporation and C&F Bank from 2002 to 2018; Chief Financial Officer of the Corporation and C&F Bank from 2004 to 2016 ​ Larry G.
Long (43) Executive Vice President, Chief Financial Officer and Secretary ​ Executive Vice President and Chief Financial Officer of the Corporation and C&F Bank since 2020; Senior Vice President and Chief Financial Officer of the Corporation and C&F Bank from 2016 to 2020; Secretary of the Corporation and C&F Bank since 2019 ​ ​ ​ Bryan E.
Long (44) Executive Vice President, Chief Financial Officer and Secretary ​ Executive Vice President and Chief Financial Officer of the Corporation and C&F Bank since 2020; Senior Vice President and Chief Financial Officer of the Corporation and C&F Bank from 2016 to 2020; Secretary of the Corporation and C&F Bank since 2019 ​ ​ ​ Bryan E.
Dillon (70) Executive Chairman ​ Chairman of the Board of Directors of the Corporation and C&F Bank since 1989; Chief Executive Officer of the Corporation and C&F Bank from 1989 to 2018; President of the Corporation and C&F Bank from 1989 to 2014 ​ Jason E.
Dillon (71) Executive Chairman ​ Chairman of the Board of Directors of the Corporation and C&F Bank since 1989; Chief Executive Officer of the Corporation and C&F Bank from 1989 to 2018; President of the Corporation and C&F Bank from 1989 to 2014 ​ Jason E.
ITEM 4. MINE SAFETY DISCLOSURE S ​ None. ​ 29 Table of Contents INFORMATION ABOUT OUR EXECUTIVE OFFICERS ​ ​ ​ ​ ​ Name (Age) Present Position Business Experience During Past Five Years ​ Thomas F.
ITEM 4. MINE SAFETY DISCLOSURE S ​ None. ​ INFORMATION ABOUT OUR EXECUTIVE OFFICERS ​ ​ ​ ​ ​ Name (Age) Present Position Business Experience During Past Five Years ​ Thomas F.
McKernon (66) President and Chief Executive Officer, C&F Mortgage ​ President and Chief Executive Officer of C&F Mortgage since 1995; Director of C&F Bank since 1998 ​ ​ ​ S. Dustin Crone (54) President and Chief Executive Officer, C&F Finance ​ Chief Executive Officer of C&F Finance since 2020; President of C&F Finance since 2010 ​ ​ ​ John A.
McKernon (67) President and Chief Executive Officer, C&F Mortgage ​ President and Chief Executive Officer of C&F Mortgage since 1995; Director of C&F Bank since 1998 ​ ​ ​ S. Dustin Crone (55) President and Chief Executive Officer, C&F Finance ​ Chief Executive Officer of C&F Finance since 2020; President of C&F Finance since 2010 ​ ​ ​ John A.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

12 edited+11 added−3 removed0 unchanged
Biggest changeAs of December 31, 2022, the Corporation has made aggregate common stock repurchases of 7,963 shares at an aggregate cost of $454,000 under the 2022 Repurchase Program. ​ The following table summarizes repurchases of the Corporation’s common stock that occurred during the three months ended December 31, 2022. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Maximum Number ​ ​ ​ ​ ​ ​ ​ ​ ​ (or Approximate ​ ​ ​ ​ ​ ​ ​ Total Number of ​ Dollar Value) of ​ ​ ​ ​ ​ ​ ​ Shares Purchased as ​ Shares that May Yet ​ ​ ​ ​ ​ ​ ​ Part of Publicly ​ Be Purchased ​ ​ Total Number of ​ Average Price Paid ​ Announced Plans or ​ Under the Plans or ​ ​ Shares Purchased 1 ​ per Share ​ Programs ​ Programs October 1, 2022 - October 31, 2022 ​ 12,100 ​ $ 54.86 ​ 12,100 ​ $ 5,974,993 ​ November 1, 2022 - November 30, 2022 ​ 10,024 ​ $ 53.86 ​ 10,024 ​ $ — ​ December 1, 2022 - December 31, 2022 ​ 11,156 ​ $ 56.61 ​ 7,963 ​ $ 9,545,816 ​ Total 33,280 ​ $ 55.14 30,087 ​ ​ ​ ​ 1 During the three months ended December 31, 2022, 3,193 shares were withheld upon the vesting of restricted shares granted to employees of the Corporation and its subsidiaries in order to satisfy tax withholding obligations. ​ The following graph compares the yearly cumulative total shareholder return on the common stock of the Corporation with the yearly cumulative total shareholder return on stock included in (1) the NASDAQ Composite Index and (2) a group of peer commercial financial institutions identified by the Corporation (the Peer Group).
Biggest changeThe timing, number and purchase price of shares repurchased under repurchase programs, if any, will be determined by management in its discretion and will depend on a number of factors, including the market price of the shares, general market and economic conditions, applicable legal requirements and other conditions, and there is no assurance that the Corporation will purchase any shares under repurchase programs. ​ The following table summarizes repurchases of the Corporation’s common stock that occurred during the three months ended December 31, 2023. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Maximum Number ​ ​ ​ ​ ​ ​ ​ ​ ​ (or Approximate ​ ​ ​ ​ ​ ​ ​ Total Number of ​ Dollar Value) of ​ ​ ​ ​ ​ ​ ​ Shares Purchased as ​ Shares that May Yet ​ ​ ​ ​ ​ ​ ​ Part of Publicly ​ Be Purchased ​ ​ Total Number of ​ Average Price Paid ​ Announced Plans or ​ Under the Plans or ​ ​ Shares Purchased 1 ​ per Share ​ Programs ​ Programs October 1, 2023 - October 31, 2023 ​ 10,500 ​ $ 55.19 ​ 10,500 ​ $ 3,116,078 ​ November 1, 2023 - November 30, 2023 ​ 9,000 ​ $ 56.24 ​ 9,000 ​ $ 2,609,899 ​ December 1, 2023 - December 31, 2023 ​ 5,274 ​ $ 58.78 ​ 1,000 ​ $ — ​ Total 24,774 ​ $ 56.34 20,500 ​ ​ ​ ​ 1 During the three months ended December 31, 2023, 4,274 shares were withheld upon the vesting of restricted shares granted to employees of the Corporation and its subsidiaries in order to satisfy tax withholding obligations. ​ 33 Table of Contents The following graph compares the yearly cumulative total shareholder return on the common stock of the Corporation with the yearly cumulative total shareholder return on stock included in (1) the NASDAQ Composite Index and (2) a group of peer commercial financial institutions identified by the Corporation for 2023 (the 2023 Peer Group) and for 2022 (the 2022 Peer Group).
Repurchases under the 2022 Repurchase Program may be made through privately negotiated transactions or open market transactions, including pursuant to a trading plan in accordance with Rule 10b5-1 and/or Rule 10b-18 under the Securities Exchange Act of 1934, as amended, and shares repurchased will be returned to the status of authorized and unissued shares of common stock.
Repurchases under the 2024 Repurchase Program may be made through privately negotiated transactions or open market transactions, including pursuant to a trading plan in accordance with Rule 10b5-1 and/or Rule 10b-18 under the Securities Exchange Act of 1934, as amended, and shares repurchased will be returned to the status of authorized and unissued shares of common stock.
As of that date, the closing price of our common stock on the NASDAQ Global Select Stock Market was $58.55. ​ ​ Payment of dividends is at the discretion of the Corporation’s Board of Directors and is subject to various federal and state regulatory limitations. For further information regarding payment of dividends refer to Item 1.
As of that date, the closing price of our common stock on the NASDAQ Global Select Stock Market was $54.00. ​ ​ Payment of dividends is at the discretion of the Corporation’s Board of Directors and is subject to various federal and state regulatory limitations. For further information regarding payment of dividends refer to Item 1.
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES ​ The Corporation’s common stock is listed for trading on the NASDAQ Global Select Market of the NASDAQ Stock Market under the symbol “CFFI.” As of February 27, 2023 there were approximately 3,000 shareholders of our common stock.
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES ​ The Corporation’s common stock is listed for trading on the NASDAQ Global Select Market of the NASDAQ Stock Market under the symbol “CFFI.” As of February 26, 2024 there were approximately 3,000 shareholders of our common stock.
The Peer Group consists of entities that meet the following criteria: (i) publicly-traded commercial financial institution headquartered in Virginia, Kentucky, Maryland, North Carolina, South Carolina, Tennessee and West Virginia and (ii) total assets as of December 31, 2021 of between $1 billion and $4.5 billion.
The 2022 Peer Group consisted of entities that met the following criteria: (i) publicly-traded commercial financial institution headquartered in Virginia, Kentucky, Maryland, North Carolina, South Carolina, Tennessee and West Virginia and (ii) total assets as of December 31, 2021 of between $1.0 billion and $4.5 billion.
“Business,” under the heading “Limits on Dividends.” In making its decision on the payment of dividends on the Corporation’s common stock, the Corporation’s Board of Directors considers operating results, financial condition, capital adequacy, regulatory requirements, shareholder returns, and other factors. ​ 30 Table of Contents Issuer Purchases of Equity Securities ​ The Corporation’s Board of Directors authorized a program, effective December 1, 2021, to repurchase up to $10.0 million of the Corporation’s common stock through November 30, 2022 (the 2021 Repurchase Program).
“Business,” under the heading “Regulation and Supervision–­­Limits on Dividends.” In making its decision on the payment of dividends on the Corporation’s common stock, the Corporation’s Board of Directors considers operating results, financial condition, capital adequacy, regulatory requirements, shareholder returns, and other factors. ​ Issuer Purchases of Equity Securities ​ The Corporation’s Board of Directors authorized a program, effective December 1, 2022, to repurchase up to $10.0 million of the Corporation’s common stock through December 31, 2023 (the 2022 Repurchase Program).
As of November 30, 2022, the Corporation made aggregate common stock repurchases of 89,373 shares for an aggregate cost of $4.6 million under the 2021 Repurchase Program. ​ The Corporation’s Board of Directors authorized a program, effective December 1, 2022, to repurchase up to $10.0 million of the Corporation’s common stock through December 31, 2023 (the 2022 Repurchase Program).
As of December 31, 2023, the Corporation made aggregate common stock repurchases of 135,327 shares for an aggregate amount repurchased of $7.5 million under the 2022 Repurchase Program. ​ The Corporation’s Board of Directors authorized a program, effective January 1, 2024, to repurchase up to $10.0 million of the Corporation’s common stock through December 31, 2024 (the 2024 Repurchase Program).
For 2022, the Peer Group consisted of 23 publicly-traded commercial financial institutions with a median asset size of $2.2 billion based on total assets as of December 31, 2021. The following financial institutions were included in the Peer Group: American National Bankshares Inc. (VA), Blue Ridge Bankshares, Inc. (VA), CapStar Financial Holdings, Inc. (TN), Carter Bankshares, Inc.
The 2022 Peer Group consisted of 23 publicly-traded commercial financial institutions with a median asset size of $2.2 billion based on total assets as of December 31, 2021.
(VA), Eagle Financial Services, Inc. (VA), F&M Bank Corporation (VA), First Community Bancshares, Inc. (VA), First Community Corporation (SC), First National Corporation (VA), First United Corporation (MD), FVCBankcorp, Inc. (VA), HomeTrust Bancshares, Inc. (NC), Limestone Bancorp, Inc. (KY), MainStreet Bancshares, Inc. (VA), National Bankshares, Inc. (VA), Old Point Financial Corporation (VA), Peoples Bancorp of North Carolina, Inc.
Blue Ridge Bankshares, Inc. ​ MainStreet Bancshares, Inc. CapStar Financial Holdings, Inc. ​ National Bankshares, Inc. Carter Bankshares, Inc. ​ Old Point Financial Corporation Eagle Financial Services, Inc. ​ Peoples Bancorp of North Carolina, Inc. F & M Bank Corp. ​ Primis Financial Corp. First Community Bankshares, Inc. ​ Shore Bancshares, Inc. First Community Corporation ​ Southern First Bancshares, Inc.
Performance of the Peer Group is presented on a weighted basis according to each peer financial institution’s market capitalization as of December 31, 2017. ​ 31 Table of Contents The graph below assumes $100 invested on December 31, 2017 in the Corporation, the NASDAQ Composite Index and the Peer Group, and shows the total return on such an investment as of December 31, 2022, assuming reinvestment of dividends.
First United Corporation ​ The Community Financial Corporation FVCBankcorp, Inc. ​ Virginia National Bankshares Corporation HomeTrust Bancshares, Inc. ​ ​ ​ The graph below assumes $100 invested on December 31, 2018 in the Corporation, the NASDAQ Composite Index and the Peer Group, and shows the total return on such an investment as of December 31, 2023, assuming reinvestment of dividends.
The 2021 Repurchase Program expired on November 30, 2022.
The 2022 Repurchase Program expired on December 31, 2023.
There can be no assurance that the Corporation’s stock performance in the future will continue with the same or similar trends depicted in the graph below. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Period Ending Index 12/31/2017 12/31/2018 12/31/2019 12/31/2020 ​ 12/31/2021 12/31/2022 C&F Financial Corporation ​ ​ 100.00 ​ ​ 94.15 ​ ​ 100.76 ​ ​ 70.65 ​ ​ 100.50 ​ ​ 118.06 NASDAQ Composite Index ​ ​ 100.00 ​ ​ 97.16 ​ ​ 132.81 ​ ​ 192.47 ​ ​ 235.15 ​ ​ 158.65 Peer Group ​ ​ 100.00 ​ ​ 89.12 ​ ​ 109.73 ​ ​ 81.48 ​ ​ 116.71 ​ ​ 110.53 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ITEM 6.
There can be no assurance that the Corporation’s stock performance in the future will continue with the same or similar trends depicted in the graph below. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Period Ending Index 12/31/2018 12/31/2019 12/31/2020 12/31/2021 ​ 12/31/2022 12/31/2023 C&F Financial Corporation ​ ​ 100.00 ​ ​ 107.02 ​ ​ 75.04 ​ ​ 106.74 ​ ​ 125.40 ​ ​ 151.34 NASDAQ Composite Index ​ ​ 100.00 ​ ​ 136.69 ​ ​ 198.10 ​ ​ 242.03 ​ ​ 163.28 ​ ​ 236.17 2023 Peer Group ​ ​ 100.00 ​ ​ 117.55 ​ ​ 91.59 ​ ​ 122.05 ​ ​ 123.28 ​ ​ 122.19 2022 Peer Group ​ ​ 100.00 ​ ​ 123.12 ​ ​ 91.42 ​ ​ 130.95 ​ ​ 124.01 ​ ​ 124.34 ​ ​ ​ ​ ​ ​ ITEM 6.
Removed
The timing, number and purchase price of shares repurchased under the 2022 Repurchase Program, if any, will be determined by management in its discretion and will depend on a number of factors, including the market price of the shares, general market and economic conditions, applicable legal requirements and other conditions, and there is no assurance that the Corporation will purchase any shares under the 2022 Repurchase Program.
Added
The 2023 Peer Group consists of entities that meet the following criteria: (i) publicly-traded commercial financial institution headquartered in Virginia, Maryland, North Carolina, West Virginia, South Carolina, Tennessee, Pennsylvania, New Jersey, Ohio, Indiana, Georgia, Florida, and Alabama (excluding certain large metropolitan areas that are not similar to the economic markets served by the Corporation) and (ii) total assets as of December 31, 2022 of between $1.2 billion and $5.0 billion.
Removed
(NC), Primis Financial Corporation (VA), Shore Bancshares, Inc. (MD), Southern First Bancshares, Inc. (SC), Summit Financial Group, Inc. (WV), The Community Financial Corporation (MD), and Virginia National Bankshares Corporation (VA).
Added
The 2023 Peer Group consisted of 53 publicly-traded commercial financial institutions with a median asset size of $2.2 billion based on total assets as of December 31, 2022. Performance of the 2023 Peer Group is presented on a weighted basis according to each peer financial institution’s market capitalization as of December 31, 2018.
Removed
RESERVED ​ 32 Table of Contents ​ ​
Added
The following financial institutions were included in the 2023 Peer Group: ​ ​ ​ ​ ​ ​ ACNB Corporation ​ Fidelity D & D Bancorp, Inc. ​ Ohio Valley Banc Corp. American National Bankshares Inc. ​ First Community Bankshares, Inc. ​ Old Point Financial Corporation AmeriServ Financial, Inc. ​ First Community Corporation ​ Orrstown Financial Services, Inc.
Added
Blue Ridge Bankshares, Inc. ​ First Financial Corporation ​ Penns Woods Bancorp, Inc. Burke & Herbert Financial Services Corp. ​ First National Corporation ​ Peoples Bancorp of North Carolina, Inc. Capital City Bank Group, Inc. ​ First Savings Financial Group, Inc. ​ Peoples Financial Services Corp. CapStar Financial Holdings, Inc. ​ First United Corporation ​ Primis Financial Corp.
Added
Carter Bankshares, Inc. ​ FNCB Bancorp, Inc. ​ Princeton Bancorp, Inc. CB Financial Services, Inc. ​ Franklin Financial Services Corporation ​ Richmond Mutual Bancorporation, Inc. CF Bankshares Inc. ​ FVCBankcorp, Inc. ​ River Financial Corporation Citizens & Northern Corporation ​ HomeTrust Bancshares, Inc. ​ SB Financial Group, Inc.
Added
Citizens Financial Services, Inc. ​ John Marshall Bancorp, Inc. ​ Security Federal Corporation Civista Bancshares, Inc. ​ LCNB Corp. ​ SmartFinancial, Inc. Codorus Valley Bancorp, Inc. ​ MainStreet Bancshares, Inc. ​ Southern First Bancshares, Inc. Colony Bankcorp, Inc. ​ Mid Penn Bancorp, Inc. ​ Southern States Bancshares, Inc.
Added
Eagle Financial Services, Inc. ​ Middlefield Banc Corp. ​ Summit Financial Group, Inc. F & M Bank Corp. ​ National Bankshares, Inc. ​ Virginia National Bankshares Corporation Farmers & Merchants Bancorp, Inc. ​ Norwood Financial Corp. ​ ​ ​ Previously, the Corporation reported a different group of peer companies.
Added
In 2023, the Corporation changed the composition of the peer group used to evaluate financial performance of the Corporation primarily by expanding the geography included in the peer group.
Added
The expansion of the geography of the peer group was based on a determination that the primary factors affecting competition, financial performance, and access to capital for the Corporation and its peers are generally not unique to the state(s) or local area in which they operate, and the quality of comparisons of the Corporation’s financial performance are improved by including a broader set of companies in the peer group.
Added
Performance of the 2022 Peer Group is presented on a weighted basis according to each peer financial institution’s market capitalization as of December 31, 2018. ​ 34 Table of Contents The following financial institutions were included in the 2022 Peer Group: ​ ​ ​ ​ American National Bankshares Inc. ​ Limestone Bancorp, Inc.
Added
First National Corporation ​ Summit Financial Group, Inc.

Item 6. [Reserved]

Selected Financial Data — reserved (removed by SEC in 2021)

1 edited+0 added−0 removed0 unchanged
Biggest changeITEM 6. RESERVED ​ 32 ​ ​ ​ ​ ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS ​ 33 ​ ​ ​ ​ ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK ​ 77 ​ ​ ​ ​ ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA ​ 80 ​ ​ ​ ​
Biggest changeITEM 6. RESERVED ​ 35 ​ ​ ​ ​ ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS ​ 36 ​ ​ ​ ​ ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK ​ 76 ​ ​ ​ ​ ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA ​ 79 ​ ​ ​ ​

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

159 edited+78 added−107 removed91 unchanged
Biggest changeThe following table presents the Corporation’s loan loss experience for the periods indicated: TABLE 10: Allowance for Loan Losses ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Real Estate ​ ​ Commercial, ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Residential ​ Real Estate ​ Financial & ​ Equity ​ ​ ​ ​ Consumer ​ ​ ​ ​ (Dollars in thousands) ​ Mortgage ​ Construction ​ Agricultural ​ Lines ​ Consumer 1 ​ Finance ​ Total ​ For the year ended December 31, 2020: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Balance at beginning of year ​ $ 2,080 ​ $ 681 ​ $ 7,121 ​ $ 733 ​ $ 465 ​ $ 21,793 ​ $ 32,873 ​ Provision charged to operations ​ 808 ​ ​ 294 ​ ​ 3,589 ​ ​ (47) ​ ​ (34) ​ ​ 6,470 ​ ​ 11,080 ​ Loans charged off ​ (62) ​ ​ — ​ ​ (18) ​ ​ — ​ ​ (231) ​ ​ (9,331) ​ ​ (9,642) ​ Recoveries of loans previously charged off ​ 88 ​ ​ — ​ ​ 4 ​ ​ 1 ​ ​ 171 ​ ​ 4,581 ​ ​ 4,845 ​ Balance at end of year ​ $ 2,914 ​ $ 975 ​ $ 10,696 ​ $ 687 ​ $ 371 ​ $ 23,513 ​ $ 39,156 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Average loans ​ $ 211,179 ​ $ 62,572 ​ $ 658,768 ​ $ 52,617 ​ $ 15,559 ​ $ 307,991 ​ $ 1,308,686 ​ Ratio of net charge-offs (recoveries) to average loans ​ ​ (0.01) % ​ — % ​ 0.01 % ​ (0.01) % ​ 0.39 % ​ 1.54 % ​ 0.37 % ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ For the year ended December 31, 2021: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Balance at beginning of year ​ $ 2,914 ​ $ 975 ​ $ 10,696 ​ $ 687 ​ $ 371 ​ $ 23,513 ​ $ 39,156 ​ Provision charged to operations ​ (279) ​ ​ (119) ​ ​ 385 ​ ​ (95) ​ ​ (137) ​ ​ 820 ​ ​ 575 ​ Loans charged off ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ (184) ​ ​ (4,381) ​ ​ (4,565) ​ Recoveries of loans previously charged off ​ 25 ​ ​ — ​ ​ 4 ​ ​ 1 ​ ​ 122 ​ ​ 4,839 ​ ​ 4,991 ​ Balance at end of year ​ $ 2,660 ​ $ 856 ​ $ 11,085 ​ $ 593 ​ $ 172 ​ $ 24,791 ​ $ 40,157 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Average loans ​ $ 215,745 ​ $ 60,951 ​ $ 717,717 ​ $ 44,320 ​ $ 8,842 ​ $ 334,565 ​ $ 1,382,140 ​ Ratio of net charge-offs (recoveries) to average loans ​ ​ (0.01) % ​ — % ​ (0.01) % ​ (0.01) % ​ 0.70 % ​ (0.14) % ​ (0.03) % ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ For the year ended December 31, 2022: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Balance at beginning of year ​ $ 2,660 ​ $ 856 ​ $ 11,085 ​ $ 593 ​ $ 172 ​ $ 24,791 ​ $ 40,157 ​ Provision charged to operations ​ (54) ​ ​ (68) ​ ​ (534) ​ ​ (98) ​ ​ 186 ​ ​ 3,740 ​ ​ 3,172 ​ Loans charged off ​ (2) ​ ​ — ​ ​ (140) ​ ​ — ​ ​ (260) ​ ​ (7,016) ​ ​ (7,418) ​ Recoveries of loans previously charged off ​ 18 ​ ​ — ​ ​ 20 ​ ​ 2 ​ ​ 113 ​ ​ 4,454 ​ ​ 4,607 ​ Balance at end of year ​ $ 2,622 ​ $ 788 ​ $ 10,431 ​ $ 497 ​ $ 211 ​ $ 25,969 ​ $ 40,518 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Average loans ​ $ 230,895 ​ $ 75,605 ​ $ 730,291 ​ $ 41,299 ​ $ 8,207 ​ $ 431,470 ​ $ 1,517,767 ​ Ratio of net charge-offs (recoveries) to average loans ​ ​ (0.01) % ​ — % ​ 0.02 % ​ — % ​ 1.79 % ​ 0.59 % ​ 0.19 % 1 Consumer loans includes provision, charge-offs and recoveries related to demand deposit overdrafts. ​ For further information regarding the adequacy of our allowance for loan losses, refer to “Nonperforming Assets” and the accompanying disclosure below within this Item 7. ​ 52 Table of Contents The allocation of the allowance for loan losses at December 31 for the years indicated and the ratio of corresponding outstanding loan balances to total loans are as follows: ​ TABLE 11: Allocation of Allowance for Loan Losses ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, ​ ​ December 31, (Dollars in thousands) 2022 2021 Allocation of allowance for loan losses: ​ ​ ​ ​ ​ ​ ​ ​ Real estate—residential mortgage ​ $ 2,622 ​ ​ $ 2,660 ​ Real estate—construction 1 ​ 788 ​ ​ 856 ​ Commercial, financial and agricultural 2 ​ 10,431 ​ ​ 11,085 ​ Equity lines ​ 497 ​ ​ 593 ​ Consumer ​ 211 ​ ​ 172 ​ Consumer finance 3 ​ 25,969 ​ ​ 24,791 ​ Total allowance for loan losses ​ $ 40,518 ​ ​ $ 40,157 ​ Ratio of loans to total period-end loans: ​ ​ ​ ​ ​ ​ ​ ​ Real estate—residential mortgage ​ 16 % ​ 15 % Real estate—construction 1 ​ 4 ​ ​ 4 ​ Commercial, financial and agricultural 2 ​ 48 ​ ​ 51 ​ Equity lines ​ 2 ​ ​ 3 ​ Consumer ​ 1 ​ ​ 1 ​ Consumer finance 3 ​ 29 ​ ​ 26 ​ ​ ​ 100 % ​ 100 % 1 Includes the Corporation’s real estate construction lending and consumer real estate lot lending. 2 Includes the Corporation’s commercial real estate lending, land acquisition and development lending, builder line lending and commercial business lending. 3 Includes the Corporation’s automobile lending and marine and recreational vehicle lending. ​ Loans by credit quality indicators as of December 31, 2022 were as follows: ​ TABLE 12: Credit Quality Indicators ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Special ​ ​ Substandard ​ ​ (Dollars in thousands) ​ Pass ​ Mention ​ Substandard ​ Nonaccrual ​ Total 1 Real estate – residential mortgage ​ $ 264,891 ​ $ 518 ​ $ 702 ​ $ 156 ​ $ 266,267 ​ Real estate – construction 2 ​ 59,675 ​ — ​ — ​ — ​ 59,675 ​ Commercial, financial and agricultural 3 ​ 776,387 ​ 738 ​ 5,856 ​ — ​ 782,981 ​ Equity lines ​ 43,147 ​ 40 ​ 5 ​ 108 ​ 43,300 ​ Consumer ​ 8,747 ​ 191 ​ — ​ — ​ 8,938 ​ ​ ​ $ 1,152,847 ​ $ 1,487 ​ $ 6,563 ​ $ 264 ​ $ 1,161,161 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Non- ​ ​ ​ (Dollars in thousands) Performing Performing Total Consumer finance 4 ​ $ 473,632 ​ $ 925 ​ $ 474,557 ​ 1 At December 31, 2022, the Corporation did not have any loans classified as Doubtful or Loss. 2 Includes the Corporation’s real estate construction lending and consumer real estate lot lending. 3 Includes the Corporation’s commercial real estate lending, land acquisition and development lending, builder line lending and commercial business lending. 4 Includes the Corporation’s automobile lending and marine and recreational vehicle lending. 53 Table of Contents Loans by credit quality indicators as of December 31, 2021 were as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Special ​ ​ Substandard ​ ​ (Dollars in thousands) ​ Pass ​ Mention ​ Substandard ​ Nonaccrual ​ Total 1 Real estate – residential mortgage ​ $ 215,432 ​ $ 664 ​ $ 605 ​ $ 315 ​ $ 217,016 ​ Real estate – construction 2 ​ 57,495 ​ — ​ — ​ — ​ 57,495 ​ Commercial, financial and agricultural 3 ​ 707,633 ​ 1,989 ​ 5,986 ​ 2,122 ​ 717,730 ​ Equity lines ​ 41,013 ​ 47 ​ 181 ​ 104 ​ 41,345 ​ Consumer ​ 8,276 ​ — ​ 1 ​ 3 ​ 8,280 ​ ​ ​ $ 1,029,849 ​ $ 2,700 ​ $ 6,773 ​ $ 2,544 ​ $ 1,041,866 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Non- ​ ​ ​ (Dollars in thousands) Performing Performing Total Consumer finance 4 ​ $ 367,814 ​ $ 380 ​ $ 368,194 ​ 1 At December 31, 2021, the Corporation did not have any loans classified as Doubtful or Loss. 2 Includes the Corporation’s real estate construction lending and consumer real estate lot lending. 3 Includes the Corporation’s commercial real estate lending, land acquisition and development lending, builder line lending and commercial business lending. 4 Includes the Corporation’s automobile lending and marine and recreational vehicle lending. ​ The decrease in non-pass rated loans at December 31, 2022 compared to December 31, 2021 were due primarily to the resolution of certain impaired loans. ​ Nonperforming Assets ​ A loan’s past due status is based on the contractual due date of the most delinquent payment due.
Biggest changeTABLE 10: Allowance for Credit Losses ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Consumer ​ ​ ​ ​ (Dollars in thousands) ​ Commercial ​ Consumer 1 ​ Finance ​ Total ​ Balance at December 31, 2022 ​ $ 11,219 ​ $ 3,330 ​ $ 25,969 ​ $ 40,518 ​ Impact of ASC 326 adoption on non-PCD loans ​ ​ (617) ​ ​ 98 ​ ​ 406 ​ ​ (113) ​ Impact of ASC 326 adoption on PCD loans ​ ​ 595 ​ ​ 9 ​ ​ — ​ ​ 604 ​ Provision charged to operations ​ ​ 978 ​ ​ 498 ​ ​ 6,650 ​ ​ 8,126 ​ Loans charged off ​ ​ (16) ​ ​ (356) ​ ​ (13,743) ​ ​ (14,115) ​ Recoveries of loans previously charged off ​ ​ 156 ​ ​ 179 ​ ​ 4,296 ​ ​ 4,631 ​ Balance at December 31, 2023 ​ $ 12,315 ​ $ 3,758 ​ $ 23,578 ​ $ 39,651 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Average loans ​ $ 879,608 ​ $ 336,727 ​ $ 473,885 ​ $ 1,690,220 ​ Ratio of net (recoveries) charge-offs to average loans ​ ​ (0.02) % ​ 0.05 % ​ 1.99 % ​ 0.56 % 1 Consumer loans includes provision, charge-offs and recoveries related to demand deposit overdrafts. 53 Table of Contents ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Real Estate ​ ​ Commercial, ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Residential ​ Real Estate ​ Financial & ​ Equity ​ ​ ​ ​ Consumer ​ ​ ​ ​ (Dollars in thousands) ​ Mortgage ​ Construction ​ Agricultural ​ Lines ​ Consumer 1 ​ Finance ​ Total ​ For the year ended December 31, 2021: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Balance at beginning of period ​ $ 2,914 ​ $ 975 ​ $ 10,696 ​ $ 687 ​ $ 371 ​ $ 23,513 ​ $ 39,156 ​ Provision charged to operations ​ (279) ​ ​ (119) ​ ​ 385 ​ ​ (95) ​ ​ (137) ​ ​ 820 ​ ​ 575 ​ Loans charged off ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ (184) ​ ​ (4,381) ​ ​ (4,565) ​ Recoveries of loans previously charged off ​ 25 ​ ​ — ​ ​ 4 ​ ​ 1 ​ ​ 122 ​ ​ 4,839 ​ ​ 4,991 ​ Balance at end of period ​ $ 2,660 ​ $ 856 ​ $ 11,085 ​ $ 593 ​ $ 172 ​ $ 24,791 ​ $ 40,157 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Average loans ​ $ 215,745 ​ $ 60,951 ​ $ 717,717 ​ $ 44,320 ​ $ 8,842 ​ $ 334,565 ​ $ 1,382,140 ​ Ratio of net (recoveries) charge-offs to average loans ​ ​ (0.01) % ​ — % ​ (0.01) % ​ (0.01) % ​ 0.70 % ​ (0.14) % ​ (0.03) % ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ For the year ended December 31, 2022: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Balance at beginning of period ​ $ 2,660 ​ $ 856 ​ $ 11,085 ​ $ 593 ​ $ 172 ​ $ 24,791 ​ $ 40,157 ​ Provision charged to operations ​ (54) ​ ​ (68) ​ ​ (534) ​ ​ (98) ​ ​ 186 ​ ​ 3,740 ​ ​ 3,172 ​ Loans charged off ​ (2) ​ ​ — ​ ​ (140) ​ ​ — ​ ​ (260) ​ ​ (7,016) ​ ​ (7,418) ​ Recoveries of loans previously charged off ​ 18 ​ ​ — ​ ​ 20 ​ ​ 2 ​ ​ 113 ​ ​ 4,454 ​ ​ 4,607 ​ Balance at end of period ​ $ 2,622 ​ $ 788 ​ $ 10,431 ​ $ 497 ​ $ 211 ​ $ 25,969 ​ $ 40,518 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Average loans ​ $ 230,895 ​ $ 75,605 ​ $ 730,291 ​ $ 41,299 ​ $ 8,207 ​ $ 431,470 ​ $ 1,517,767 ​ Ratio of net (recoveries) charge-offs to average loans ​ ​ (0.01) % ​ — % ​ 0.02 % ​ — % ​ 1.79 % ​ 0.59 % ​ 0.19 % 1 Consumer loans includes provision, charge-offs and recoveries related to demand deposit overdrafts. ​ For further information regarding the adequacy of our allowance for credit losses, refer to “Nonperforming Assets” and the accompanying disclosure below within this Item 7. ​ The allocation of the allowance for credit losses and the ratio of corresponding outstanding loan balances to total loans are as follows as of the dates indicated.
In general, these credit facilities carry the unconditional guaranty of the owners and/or stockholders. ​ Revolving and operating lines of credit are typically secured by all current assets of the borrower, provide for the acceleration of repayment upon any event of default, are monitored to ensure compliance with loan covenants, and are re-underwritten or renewed annually.
In general, these credit facilities carry the unconditional guaranty of the owners and/or stockholders. ​ Revolving and operating lines of credit are typically secured by all current assets of the borrower, provide for the acceleration of repayment upon any event of default, are monitored to ensure compliance with loan covenants, and are typically re-underwritten or renewed annually.
Loans secured by non-owner-occupied properties are made when: (1) the borrower is in strong financial condition and presents a substantial business opportunity for the Corporation and (2) the borrower has substantially pre-leased the property to high-caliber tenants. ​ Our commercial real estate loans are usually amortized over a period of time ranging from 15 years to 30 years and usually have a term to maturity ranging from 5 years to 15 years, with fixed rates of interest typically for periods of up to ten years.
Loans secured by non-owner-occupied properties are made when: (1) the borrower is in strong financial condition and presents a substantial business opportunity for the Corporation and (2) the borrower often has substantially pre-leased the property to high-caliber tenants. ​ Our commercial real estate loans are usually amortized over a period of time ranging from 15 years to 30 years and usually have a term to maturity ranging from 5 years to 15 years, with fixed rates of interest typically for periods of up to ten years.
The overall goal of the Corporation’s credit policy is to ensure that loan growth is accompanied by acceptable asset quality with uniform and consistently applied approval, administration, and documentation practices and standards. ​ Residential Mortgage Lending – Held for Sale ​ The mortgage banking segment’s guidelines for underwriting conventional conforming loans comply with the underwriting criteria established by Fannie Mae, Freddie Mac and/or the applicable third party investor.
The overall goal of the Corporation’s credit policy is to ensure that loan growth is accompanied by acceptable asset quality with uniform and consistently applied approval, administration, and documentation practices and standards. ​ Residential Mortgage – Held for Sale ​ The mortgage banking segment’s guidelines for underwriting conventional conforming loans comply with the underwriting criteria established by Fannie Mae, Freddie Mac and/or the applicable third party investor.
The difference between the carrying amount of each loan and the fair value of the vehicle (i.e. the deficiency) is charged against the allowance for loan losses. Accounts still in process of collection or for which the Corporation does not have the legal right to sell continue to be classified as loans until such legal authority is obtained.
The difference between the carrying amount of each loan and the fair value of the vehicle (i.e. the deficiency) is charged against the allowance for credit losses. Accounts still in process of collection or for which the Corporation does not have the legal right to sell continue to be classified as loans until such legal authority is obtained.
Prior to the reclassification from loans to repossessed vehicles, the difference between the carrying amount of each loan and the fair value of each vehicle (i.e. the deficiency) is charged against the allowance for loan losses.
Prior to the reclassification from loans to repossessed vehicles, the difference between the carrying amount of each loan and the fair value of each vehicle (i.e. the deficiency) is charged against the allowance for credit losses.
“Financial Statements and Supplementary Data” under the heading “Note 1: Summary of Significant Accounting Policies.” ​ RESULTS OF OPERATIONS ​ NET INTEREST INCOME ​ The following table shows the average balance sheets, the amounts of interest earned on earning assets, with related yields, and interest expense on interest-bearing liabilities, with related rates, for each of the years ended December 31, 2022, 2021 and 2020.
“Financial Statements and Supplementary Data” under the heading “Note 1: Summary of Significant Accounting Policies.” ​ RESULTS OF OPERATIONS ​ NET INTEREST INCOME ​ The following table shows the average balance sheets, the amounts of interest earned on earning assets, with related yields, and interest expense on interest-bearing liabilities, with related rates, for each of the years ended December 31, 2023, 2022 and 2021.
The mortgage banking segment has procedures in place to evaluate the credit risk of investors and does not expect any counterparty to fail to meet its obligations. ​ The Corporation’s derivative financial instruments include (1) interest rate swaps that qualify and are designated as cash flow hedges on the Corporation’s trust preferred capital notes, (2) interest rate swaps with certain qualifying commercial loan customers and dealer counterparties and (3) interest rate contracts arising from mortgage banking activities, including interest rate lock commitments (IRLCs) on mortgage loans and related forward sales of mortgage loans and mortgage backed securities.
The mortgage banking segment has procedures in place to evaluate the credit risk of investors and does not expect any counterparty to fail to meet its obligations. ​ The Corporation’s derivative financial instruments include (1) interest rate swaps that qualify and are designated as cash flow hedges on the Corporation’s trust preferred capital notes, (2) interest rate swaps with certain qualifying 69 Table of Contents commercial loan customers and dealer counterparties and (3) interest rate contracts arising from mortgage banking activities, including interest rate lock commitments (IRLCs) on mortgage loans and related forward sales of mortgage loans and mortgage backed securities.
Additionally, all applicable regulatory capital ratios of C&F Bank were in excess of mandated minimum requirements at December 31, 2022 and 2021. ​ In addition to the regulatory risk-based capital requirements, the Bank must maintain a capital conservation buffer of additional capital of 2.5 percent of risk-weighted assets as required by the Basel III Final Rule.
Additionally, all applicable regulatory capital ratios of C&F Bank were in excess of mandated minimum requirements at December 31, 2023 and 2022. ​ In addition to the regulatory risk-based capital requirements, the Bank must maintain a capital conservation buffer of additional capital of 2.5 percent of risk-weighted assets as required by the Basel III Final Rule.
In the last evaluation of goodwill at the community banking segment and the consumer finance segment, which was the annual evaluation in the fourth quarter of 2022, the Corporation concluded that no impairment existed based on an assessment of qualitative factors. ​ For further information concerning accounting policies, refer to Item 8.
In the last evaluation of goodwill at the community banking segment and the consumer finance segment, which was the annual evaluation in the fourth quarter of 2023, the Corporation concluded that no impairment existed based on an assessment of qualitative factors. ​ For further information concerning accounting policies, refer to Item 8.
All of the Corporation’s mortgage-backed securities are direct issues of United States government agencies or government-sponsored enterprises. Collectively, these entities provide a guarantee, which is either explicitly or implicitly 67 Table of Contents supported by the full faith and credit of the U.S. government, that investors in such mortgage-backed securities will receive timely principal and interest payments.
All of the Corporation’s mortgage-backed securities are direct issues of United States government agencies or government-sponsored enterprises. Collectively, these entities provide a guarantee, which is either explicitly or implicitly supported by the full faith and credit of the U.S. government, that investors in such mortgage-backed securities will receive timely principal and interest payments.
“Financial Statements and Supplementary Data” under the heading “Note 11: Borrowings.” ​ OFF-BALANCE-SHEET ARRANGEMENTS ​ To meet the financing needs of customers, the Corporation is a party, in the normal course of business, to financial instruments with off-balance-sheet risk. These financial instruments include commitments to extend credit, commitments to sell loans and standby letters of credit.
“Financial Statements and Supplementary Data” under the heading “Note 11: Borrowings.” ​ 68 Table of Contents OFF-BALANCE-SHEET ARRANGEMENTS ​ To meet the financing needs of customers, the Corporation is a party, in the normal course of business, to financial instruments with off-balance-sheet risk. These financial instruments include commitments to extend credit, commitments to sell loans and standby letters of credit.
For land acquisition and development loans, we use lower loan-to- 64 Table of Contents value ratios, which are a maximum of 65 percent for raw land, 75 percent for land development and improved lots and 80 percent of the discounted appraised value of the property as determined in accordance with the appraisal policies for developed lots for single-family or townhouse construction.
For land acquisition and development loans, we use lower loan-to-value ratios, which are a maximum of 65 percent for raw land, 75 percent for land development and improved lots and 80 percent of the discounted appraised value of the property as determined in accordance with the appraisal policies for developed lots for single-family or townhouse construction.
Interest rates generally will float at a spread tied to the Bank’s prime lending rate.
Interest rates generally will float at a spread tied to the prime lending rate.
The estimated net liquidation value of the collateral pledged and/or ability of the personal guarantor(s) to pay the loan may not adequately protect the Corporation. There is a distinct possibility that the Corporation will sustain some loss if the deficiencies 50 Table of Contents associated with the loan are not corrected in the near term.
The estimated net liquidation value of the collateral pledged and/or ability of the personal guarantor(s) to pay the loan may not adequately protect the Corporation. There is a distinct possibility that the Corporation will sustain some loss if the deficiencies associated with the loan are not corrected in the near term.
Interest on tax-exempt loans and securities is presented on a taxable-equivalent basis (which converts the income on loans and investments for which no income taxes are paid to the equivalent yield as if income taxes were 37 Table of Contents paid) using the federal corporate income tax rate of 21 percent that was applicable for all periods presented.
Interest on tax-exempt loans and securities is presented on a taxable-equivalent basis (which converts the income on loans and investments for which no income taxes are paid to the equivalent yield as if income taxes were paid) using the federal corporate income tax rate of 21 percent that was applicable for all periods presented.
If loan performance deteriorates resulting in elevated delinquencies or net charge-offs, provision for loan losses may increase in future periods. ​ Discussion of the consumer finance segment for the year ended December 31, 2020 has been omitted as such discussion was provided in Part II, Item 7.
If loan performance deteriorates resulting in elevated delinquencies or net charge-offs, the provision for credit losses may increase in future periods. ​ Discussion of the consumer finance segment for the year ended December 31, 2021 has been omitted as such discussion was provided in Part II, Item 7.
Long-term borrowings consist of subordinated notes which rank junior to all future senior indebtedness of the Corporation and are structurally subordinated to all existing and future debt and liabilities of the Corporation and its subsidiaries. ​ 69 Table of Contents Trust I, Trust II and CVBK Trust I are wholly-owned non-operating subsidiaries of the Corporation, formed for the purpose of issuing trust preferred capital securities.
Long-term borrowings consist of subordinated notes which rank junior to all future senior indebtedness of the Corporation and are structurally subordinated to all existing and future debt and liabilities of the Corporation and its subsidiaries. ​ Trust I, Trust II and CVBK Trust I are wholly-owned non-operating subsidiaries of the Corporation, formed for the purpose of issuing trust preferred capital securities.
Including the capital conservation buffer, the minimum ratios are a common equity Tier I risk-based capital ratio of 7.0 percent, a Tier I risk-based capital ratio of 8.5 percent and a total risk-based capital ratio of 10.5 percent.
Including the capital conservation buffer, the minimum ratios are a common equity Tier 1 risk-based capital ratio of 7.0 percent, a Tier 1 risk-based capital ratio of 8.5 percent and a total risk-based capital ratio of 10.5 percent.
We can waive the maximum loan-to-value ratio for particularly strong borrowers on an exception basis. The term of land acquisition and development loans ranges from a maximum of two years for loans relating to the acquisition of unimproved land to, generally, a maximum of three years for other types of projects.
We can waive the maximum loan-to-value ratio for particularly strong borrowers on an exception basis. The term of land acquisition and development loans typically range from a maximum of two years for loans relating to the acquisition of unimproved land to, generally, a maximum of three years for other types of projects.
The Bank offers various types of residential first mortgage loans in addition to traditional long-term, fixed-rate loans. The majority of such loans include 10, 15 and 30 year amortizing mortgage loans with fixed rates of interest. Second mortgage loans are offered with fixed and adjustable rates.
The Bank offers various types of residential first mortgage loans in addition to traditional long-term, fixed-rate loans. The majority of such loans include 10, 15 and 30 year amortizing mortgage loans with fixed rates of interest. Second mortgage loans are offered with fixed and adjustable 64 Table of Contents rates.
Consumer lot loans are made only to individual borrowers. These loans typically have a maximum term of either three or five years with a balloon payment of the entire balance of the loan being due in full at the end of the initial term.
These loans are made only to individual borrowers and typically have a maximum term of either three or five years with a balloon payment of the entire balance of the loan being due in full at the end of the initial term.
At the expiration of the 2021 Repurchase Program, the Corporation had made aggregate common stock repurchases of 89,373 shares for an aggregate cost of $4.6 million under that program. ​ On November 15, 2022, the Board of Directors of the Corporation authorized a new program, effective December 1, 2022, to repurchase up to $10.0 million of the Corporation’s common stock through December 31, 2023 (the 2022 Repurchase Program).
At the expiration of the 2021 Repurchase Program, the Corporation had made aggregate common stock repurchases of 89,373 shares for an aggregate cost of $4.6 million under that program. ​ In November 2022, the Board of Directors of the Corporation authorized a program, effective December 1, 2022, to repurchase up to $10.0 million of the Corporation’s common stock through December 31, 2023 (the 2022 Repurchase Program).
Nonaccrual consumer finance loans remain low relative to the allowance for loan losses and the total consumer finance loan portfolio as the consumer finance segment generally initiates repossession of loan collateral once a loan becomes more than 60 days delinquent.
Nonaccrual consumer finance loans remain low relative to the allowance for credit losses and the total consumer finance loan portfolio because the consumer finance segment generally initiates repossession of loan collateral once a loan becomes more than 60 days delinquent.
The Corporation also invests in the debt securities of corporate issuers, primarily financial institutions, that the Corporation views as having a strong financial position and earnings potential. Table 23 presents additional information pertaining to the composition of the securities portfolio at amortized cost, by the earlier of contractual maturity or expected maturity.
The Corporation also invests in the debt securities of corporate issuers, primarily financial institutions, that the Corporation views as having a strong financial position and earnings potential. 66 Table of Contents Table 22 presents additional information pertaining to the composition of the securities portfolio at amortized cost, by the earlier of contractual maturity or expected maturity.
“Financial Statements and Supplementary Data” under the headings “Note 9: Leases,” “Note 11: Borrowings,” and “Note 18 Commitments and Contingent Liabilities.” ​ As a result of the Corporation’s management of liquid assets and the ability to generate liquidity through liability funding, management believes that the Corporation maintains overall liquidity sufficient to satisfy its operational requirements and contractual obligations. ​ CAPITAL RESOURCES ​ Total equity was $196.2 million as of December 31, 2022, compared with $211.0 million as of December 31, 2021.
“Financial Statements and Supplementary Data” under the headings “Note 9: Leases,” “Note 11: Borrowings,” and “Note 18: Commitments and Contingent Liabilities.” ​ As a result of the Corporation’s management of liquid assets and the ability to generate liquidity through liability funding, management believes that the Corporation maintains overall liquidity sufficient to satisfy its operational requirements and contractual obligations. ​ CAPITAL RESOURCES ​ Total equity was $217.5 million as of December 31, 2023, compared with $196.2 million as of December 31, 2022.
Those accounting policies with the greatest uncertainty and that require management’s most difficult, subjective or complex judgments affecting the application of these policies, and the greatest likelihood that materially different amounts would be reported under different conditions, or using different assumptions, are described below. ​ 36 Table of Contents Allowance for Loan Losses: We establish the allowance for loan losses through charges to earnings in the form of a provision for loan losses.
Those accounting policies with the greatest uncertainty and that require management’s most difficult, subjective or complex judgments affecting the application of these policies, and the greatest likelihood that materially different amounts would be reported under different conditions, or using different assumptions, are described below. ​ Allowance for Credit Losses: We establish the allowance for credit losses through charges to earnings in the form of a provision for credit losses.
At December 31, 2022 and 2021, all securities in the Corporation’s investment portfolio were classified as available for sale. ​ Table 22 sets forth the composition of the Corporation’s securities available for sale in dollar amounts at fair value and as a percentage of the Corporation’s total securities available for sale at the dates indicated. ​ TABLE 22: Securities Available for Sale ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, 2022 ​ December 31, 2021 (Dollars in thousands) Amount Percent Amount Percent U.S.
At December 31, 2023 and 2022, all securities in the Corporation’s investment portfolio were classified as available for sale. ​ Table 21 sets forth the composition of the Corporation’s securities available for sale in dollar amounts at fair value and as a percentage of the Corporation’s total securities available for sale at the dates indicated. ​ TABLE 21: Securities Available for Sale ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, 2023 ​ December 31, 2022 (Dollars in thousands) Amount Percent Amount Percent U.S.
Expected maturities will differ from contractual maturities because borrowers may have the right to prepay obligations with or without call or prepayment penalties. ​ TABLE 23: Maturity of Securities ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, 2022 ​ ​ ​ ​ Weighted ​ ​ Amortized ​ Average ​ (Dollars in thousands) ​ Cost ​ Yield 1 ​ U.S.
Expected maturities will differ from contractual maturities because borrowers may have the right to prepay obligations with or without call or prepayment penalties. ​ TABLE 22: Maturity of Securities ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, 2023 ​ ​ ​ ​ Weighted ​ ​ Amortized ​ Average ​ (Dollars in thousands) ​ Cost ​ Yield 1 ​ U.S.
GAAP. ​ The Corporation uses adjusted net income, which is a non-GAAP measure of financial performance, to provide meaningful information about operating performance by excluding the effects of certain items that management does not expect to have an ongoing impact on consolidated net income.
Generally Accepted Accounting Principles (GAAP). ​ The Corporation uses adjusted net income, which is a non-GAAP measure of financial performance, to provide meaningful information about operating performance by excluding the effects of certain items that management does not expect to have an ongoing impact on consolidated net income.
Effective management of these sources and uses of funds is essential in attaining a financial institution’s maximum profitability while maintaining an acceptable level of risk. ​ At December 31, 2022, the Corporation had total assets of $2.33 billion compared to $2.26 billion at December 31, 2021.
Effective management of these sources and uses of funds is essential in attaining a financial institution’s maximum profitability while maintaining an acceptable level of risk. ​ At December 31, 2023, the Corporation had total assets of $2.44 billion compared to $2.33 billion at December 31, 2022.
During 2022, the Corporation declared common stock dividends of $1.64 per share, compared to $1.58 per share declared in 2021 and $1.52 per share declared in 2020. ​ The assessment of capital adequacy depends on such factors as asset quality, liquidity, earnings performance, and changing competitive conditions and economic forces.
During 2023, the Corporation declared common stock dividends of $1.76 per share, compared to $1.64 per share declared in 2022 and $1.58 per share declared in 2021. ​ The assessment of capital adequacy depends on such factors as asset quality, liquidity, earnings performance, and changing competitive conditions and economic forces.
For further information concerning the Corporation’s expected timing of such payments as of December 31, 2021, refer to Item 8.
For further information concerning the Corporation’s expected timing of such payments as of December 31, 2023, refer to Item 8.
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION S ​ The following discussion supplements and provides information about the major components of the results of operations, financial condition, liquidity and capital resources of the Corporation. This discussion and analysis should be read in conjunction with the accompanying consolidated financial statements.
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPER ATIONS ​ The following discussion supplements and provides information about the major components of the results of operations, financial condition, liquidity and capital resources of the Corporation. This discussion and analysis should be read in conjunction with the accompanying consolidated financial statements.
The following additional factors could influence our financial performance in 2023: ​ ● Community Banking: Growing our loan portfolio has been our primary strategic goal over the past several years and will continue to be our primary focus at the Bank during 2023.
The following additional factors could influence our financial performance in 2024: ​ ● Community Banking: Growing our loan portfolio has been our primary strategic goal over the past several years and will continue to be our primary focus at C&F Bank during 2024.
Subsequent to foreclosure, management periodically performs valuations of the foreclosed assets based on updated appraisals, general market conditions, recent sales of like properties, length of time the properties have been held, and our ability and intention with regard to continued ownership of the properties.
Subsequent to foreclosure, management periodically performs valuations of the foreclosed assets based on updated appraisals, general market conditions, recent sales of similar properties, length of time the properties have been held, and our ability and intent with regard to continued ownership of the properties.
Additional loans and securities are available that can be pledged as collateral for future borrowings from the Federal Home Loan Bank of Atlanta (FHLB) above the current lendable collateral value. Our ability to maintain sufficient liquidity may be affected by numerous factors, including economic conditions nationally and in our markets.
Additional loans and securities are available that can be pledged as collateral for future borrowings from the FHLB and Federal Reserve Bank above the current lendable collateral value. Our ability to maintain sufficient liquidity may be affected by numerous factors, including economic conditions nationally and in our markets.
Additional sources of liquidity available to the Corporation include cash flows from operations, loan payments and payoffs, deposit growth, maturities, calls and sales of securities, the issuance of brokered certificates of deposit and the capacity to borrow additional funds. ​ Liquid assets, which include cash and due from banks, interest-bearing deposits at other banks, federal funds sold and nonpledged securities available for sale, totaled $325.7 million at December 31, 2022.
Additional sources of liquidity available to the Corporation include cash flows from operations, loan payments and payoffs, deposit growth, maturities, calls and sales of securities, the issuance of brokered certificates of deposit and the capacity to borrow additional funds. ​ Liquid assets, which include cash and due from banks, interest-bearing deposits at other banks, federal funds sold and nonpledged securities available for sale, totaled $338.8 million at December 31, 2023.
Thereafter, such an account is aged based on the timely payment of future installments in the same 51 Table of Contents manner as any other account.
Thereafter, such an account is aged based on the timely payment of future installments in the same manner as any other account.
Beginning in 2016 with the consumer finance segment’s implementation of a scorecard model for purchasing loan contracts, the credit-worthiness of borrowers at origination has improved for automobile loans purchased and the level of credit losses experienced has decreased. We cannot provide any assurance that the consumer finance segment’s net charge-off ratio will not increase in future periods.
With the consumer finance segment’s implementation of a scorecard model for purchasing loan contracts, the credit-worthiness of borrowers at origination has improved for automobile loans purchased and the level of credit losses experienced has decreased relative to long-term historical averages. We cannot provide any assurance that the consumer finance segment’s net charge-off ratio will not increase in future periods.
The consumer finance segment’s automobile customers may have experienced prior credit difficulties. Because the consumer finance segment serves customers who are unable to meet the credit standards imposed by most traditional automobile financing sources, we expect the consumer finance segment to sustain a higher level of credit losses in the automobile portfolio than traditional financing sources.
Because the consumer finance segment serves customers who are unable to meet the credit standards imposed by most traditional automobile financing sources, we expect the consumer finance segment to sustain a higher level of credit losses in the automobile portfolio than traditional financing sources.
At December 31, 2022, repossessed vehicles at fair value less estimated costs to sell included in other assets totaled $352,000, compared to $190,000 at December 31, 2021.
At December 31, 2023, repossessed vehicles at fair value less estimated costs to sell included in other assets totaled $646,000, compared to $352,000 at December 31, 2022.
The disclosure below reflects the Corporation’s consolidated capital as determined under regulations that apply to bank holding companies that are not small bank holding companies and minimum capital requirements that would apply to the Corporation if it were not a small bank holding company. ​ At December 31, 2022 and 2021, the Corporation’s CET1 to total risk-weighted assets ratio was 11.4 percent and 11.5 percent, respectively; the Corporation’s Tier 1 capital to risk-weighted assets ratio was 12.8 percent and 13.0 percent, respectively; the Corporation’s total capital to risk-weighted assets ratio was 15.4 percent and 15.8 percent, respectively; and the Corporation’s Tier 1 leverage ratio was 9.9 percent and 9.7 percent, respectively.
The disclosure below reflects the Corporation’s consolidated capital as determined under regulations that apply to bank holding companies that are not small bank holding companies and minimum capital requirements that would apply to the Corporation if it were not a small bank holding company. ​ At December 31, 2023 and 2022, the Corporation’s CET1 to total risk-weighted assets ratio was 11.3 percent and 11.4 percent, respectively; the Corporation’s Tier 1 capital to risk-weighted assets ratio was 12.6 percent and 12.8 percent, respectively; the Corporation’s total capital to risk-weighted assets ratio was 14.8 percent and 15.4 percent, respectively; and the Corporation’s Tier 1 leverage ratio was 10.1 percent and 9.9 percent, respectively.
The release of indemnification reserves in 2022 was due primarily to improvement in the mortgage banking segment’s assessment of borrower payment performance and other factors affecting expected losses on mortgage loans sold in the secondary market.
The release of indemnification reserves in 2022 and 2023 was due primarily to improvement in the mortgage banking segment’s assessment of borrower payment performance and other factors affecting expected losses on mortgage loans sold in the secondary market, such as time since origination.
The decline in market value of securities available for sale during 2022 was primarily a result of increases in market interest rates. ​ The Corporation seeks to diversify its portfolio to minimize risk, including by purchasing (1) shorter-duration mortgage-backed securities to reduce interest rate risk and for cash flow and reinvestment opportunities and (2) securities issued by states and political subdivisions due to the tax benefits and the higher tax-adjusted yield obtained from these securities.
The increase in market value of securities available for sale during 2023 was primarily a result of decreases in market interest rates. ​ The Corporation seeks to diversify its portfolio to minimize risk, including by purchasing shorter-duration mortgage-backed securities to reduce interest rate risk and for cash flow and reinvestment opportunities and obligations of states and political subdivisions due to the tax benefits and the higher tax-adjusted yield obtained from these securities.
The following table presents selected financial performance highlights for the periods indicated: ​ TABLE 1: Financial Performance Highlights ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ (Dollars in thousands, except for per share data) ​ Year Ended December 31, ​ ​ 2022 2021 ​ 2020 ​ Net Income (Loss): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Community Banking ​ $ 24,374 ​ $ 14,085 ​ $ 6,147 ​ Mortgage Banking ​ ​ 1,210 ​ ​ 7,683 ​ ​ 10,736 ​ Consumer Finance ​ ​ 6,831 ​ ​ 9,960 ​ ​ 7,612 ​ Other ​ ​ (3,046) ​ ​ (2,605) ​ ​ (2,071) ​ Consolidated net income ​ $ 29,369 ​ $ 29,123 ​ $ 22,424 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Adjusted net income 1 ​ $ 26,990 ​ $ 30,011 ​ $ 22,431 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Earnings per share - basic and diluted ​ $ 8.29 ​ $ 7.95 ​ $ 6.06 ​ Adjusted earnings per share - basic and diluted 1 ​ $ 7.61 ​ $ 8.20 ​ $ 6.06 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Return on average equity ​ ​ 14.84 % ​ 14.77 % ​ 12.54 % Adjusted return on average equity 1 ​ ​ 13.64 % ​ 15.22 % ​ 12.54 % Return on average assets ​ ​ 1.27 % ​ 1.34 % ​ 1.14 % Adjusted return on average assets 1 ​ ​ 1.16 % ​ 1.38 % ​ 1.14 % Return on average tangible common equity (ROTCE) 1 ​ ​ 17.31 % ​ 17.15 % ​ 14.91 % Adjusted ROTCE 1 ​ ​ 15.92 % ​ 17.68 % ​ 14.91 % 1 Refer to “Use of Certain Non-GAAP Financial Measures,” below, for information about these non-GAAP financial measures, including a reconciliation to the most directly comparable financial measures calculated in accordance with U.S.
The following table presents selected financial performance highlights for the periods indicated: ​ TABLE 1: Financial Performance Highlights ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ (Dollars in thousands, except for per share data) ​ Year Ended December 31, ​ ​ 2023 2022 ​ 2021 ​ Net Income (Loss): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Community Banking ​ $ 22,928 ​ $ 24,374 ​ $ 14,085 ​ Mortgage Banking ​ ​ 465 ​ ​ 1,210 ​ ​ 7,683 ​ Consumer Finance ​ ​ 2,879 ​ ​ 6,831 ​ ​ 9,960 ​ Other ​ ​ (2,526) ​ ​ (3,046) ​ ​ (2,605) ​ Consolidated net income ​ $ 23,746 ​ $ 29,369 ​ $ 29,123 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Adjusted net income 1 ​ $ 23,746 ​ $ 26,990 ​ $ 30,011 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Earnings per share - basic and diluted ​ $ 6.92 ​ $ 8.29 ​ $ 7.95 ​ Adjusted earnings per share - basic and diluted 1 ​ $ 6.92 ​ $ 7.61 ​ $ 8.20 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Return on average equity ​ ​ 11.68 % ​ 14.84 % ​ 14.77 % Adjusted return on average equity 1 ​ ​ 11.68 % ​ 13.64 % ​ 15.22 % Return on average assets ​ ​ 0.99 % ​ 1.27 % ​ 1.34 % Adjusted return on average assets 1 ​ ​ 0.99 % ​ 1.16 % ​ 1.38 % Return on average tangible common equity (ROTCE) 1 ​ ​ 13.58 % ​ 17.31 % ​ 17.15 % Adjusted ROTCE 1 ​ ​ 13.58 % ​ 15.92 % ​ 17.68 % 1 Refer to “Use of Certain Non-GAAP Financial Measures,” below, for information about these non-GAAP financial measures, including a reconciliation to the most directly comparable financial measures calculated in accordance with U.S.
The Corporation can give no assurance as to the timing or extent of further increases in market interest rates or the impact of rising interest rates or any other factor on the Corporation's net interest margin.
The Corporation can give no assurance as to the timing or extent of changes in market interest rates or the impact of those changes or any other factor on the Corporation's net interest margin.
“Management’s Discussion and Analysis,” under the heading “Income Taxes” in the Corporation’s Annual Report on Form 10-K for the year ended December 31, 2021, which was filed with the SEC on March 1, 2022 , and is incorporated herein by reference. ​ BUSINESS SEGMENTS ​ The Corporation operates in a decentralized manner in three business segments: community banking, mortgage banking and consumer finance.
“Management’s Discussion and Analysis of Financial Condition and Results of Operations,” under the heading “Income Taxes” in the Corporation’s Annual Report on Form 10-K for the year ended December 31, 2022 , which was filed with the SEC on February 28, 2023, and is incorporated herein by reference. ​ BUSINESS SEGMENTS ​ The Corporation operates in a decentralized manner in three business segments: community banking, mortgage banking and consumer finance.
Locked loan commitments were $42.3 million at December 31, 2022, compared to $83.4 million at December 31, 2021 and $198.6 million at December 31, 2020. ​ The mortgage banking segment recorded a net reversal of provision for indemnification losses of $858,000 for the year ended December 31, 2022 and a net reversal of provision for indemnification losses of $104,000 for the year ended December 31, 2021.
Locked loan commitments were $26.2 million at December 31, 2023, compared to $42.3 million at December 31, 2022 and $83.4 million at December 31, 2021. ​ The mortgage banking segment recorded a net reversal of provision for indemnification losses of $585,000 for the year ended December 31, 2023 compared to a net reversal of provision for indemnification losses of $858,000 for the year ended December 31, 2022.
The Corporation and the Bank exceeded these ratios at December 31, 2022 and 2021. ​ The Corporation's capital resources are impacted by its share repurchase programs. During the year ended December 31, 2022, the Corporation repurchased $4.5 million of its common stock under the 2021 Repurchase Program, which expired November 30, 2022.
The Corporation and the Bank exceeded these ratios at December 31, 2023 and 2022. ​ The Corporation's capital resources are impacted by its share repurchase programs. During the year ended December 31, 2023, the Corporation repurchased $7.1 million of its common stock under the 2022 Repurchase Program, which expired December 31, 2023.
These non-GAAP financial measures should not be considered an alternative to GAAP-basis financial statements, and other bank holding companies may define or calculate these or similar measures differently. ​ A reconciliation of the non-GAAP financial measures used by the Corporation to evaluate and measure the Corporation’s performance to the most directly comparable GAAP financial measures is presented below. ​ 73 Table of Contents TABLE 27: Non-GAAP Table ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ For The Year Ended ​ ​ ​ ​ December 31, ​ (Dollars in thousands, except per share amounts) ​ ​ 2022 ​ 2021 ​ 2020 Adjusted Net Income and Adjusted Earnings Per Share ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Net income, as reported ​ ​ $ 29,369 ​ $ 29,123 ​ $ 22,424 ​ Change in accounting policy election 1 ​ ​ ​ (2,151) ​ ​ - ​ ​ - ​ Branch consolidation 2 ​ ​ ​ (228) ​ ​ (107) ​ ​ 222 ​ Sale of PCI loans 3 ​ ​ ​ - ​ ​ - ​ ​ (2,756) ​ Early repayment charges 4 ​ ​ ​ - ​ ​ - ​ ​ 1,735 ​ Pension settlement accounting 5 ​ ​ ​ - ​ ​ 995 ​ ​ - ​ Merger related expenses 6 ​ ​ ​ - ​ ​ - ​ ​ 1,132 ​ Change in tax law ​ ​ ​ - ​ ​ - ​ ​ (326) ​ Adjusted net income ​ ​ $ 26,990 ​ $ 30,011 ​ $ 22,431 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Weighted average shares - basic and diluted ​ ​ ​ 3,517,114 ​ ​ 3,604,119 ​ ​ 3,648,696 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Earnings per share - basic and diluted, as reported ​ ​ $ 8.29 ​ $ 7.95 ​ $ 6.06 ​ Change in accounting policy election ​ ​ ​ (0.61) ​ ​ - ​ ​ - ​ Branch consolidation ​ ​ ​ (0.07) ​ ​ (0.03) ​ ​ 0.06 ​ Sale of PCI loans ​ ​ ​ - ​ ​ - ​ ​ (0.76) ​ Early repayment charges ​ ​ ​ - ​ ​ - ​ ​ 0.48 ​ Pension settlement accounting ​ ​ ​ - ​ ​ 0.28 ​ ​ - ​ Merger related expenses ​ ​ ​ - ​ ​ - ​ ​ 0.31 ​ Change in tax law ​ ​ ​ - ​ ​ - ​ ​ (0.09) ​ Adjusted earnings per share - basic and diluted ​ ​ $ 7.61 ​ $ 8.20 ​ $ 6.06 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Adjusted Net Income, Community Banking Segment ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Net income, community banking segment, as reported ​ ​ $ 24,374 ​ $ 14,085 ​ $ 6,147 ​ Change in accounting policy election 1 ​ ​ ​ (2,151) ​ ​ - ​ ​ - ​ Branch consolidation 2 ​ ​ ​ (228) ​ ​ (107) ​ ​ 222 ​ Sale of PCI loans 3 ​ ​ ​ - ​ ​ - ​ ​ (2,756) ​ Early repayment charges 4 ​ ​ ​ - ​ ​ - ​ ​ 1,735 ​ Pension settlement accounting 5 ​ ​ ​ - ​ ​ 995 ​ ​ - ​ Merger related expenses 6 ​ ​ ​ - ​ ​ - ​ ​ 1,032 ​ Change in tax law ​ ​ ​ - ​ ​ - ​ ​ (326) ​ Adjusted net income, community banking segment ​ ​ $ 21,995 ​ $ 14,973 ​ $ 6,054 ​ ​ ________________________ 1 A change in accounting policy election for certain equity investments, primarily consisting of equity interests in an independent insurance agency and a full service title and settlement agency, resulted in fair value adjustments in the fourth quarter of 2022, which resulted in the one-time recognition of additional other income of $2.2 million, net of related income taxes of $572,000. 2 Branch consolidation are gains recognized on the sale of former bank branch locations subsequent to consolidation into nearby branches and are net of related income taxes of $61,000 for the year ended December 31, 2022.
These non-GAAP financial measures should not be considered an alternative to GAAP-basis financial statements, and other bank holding companies may define or calculate these or similar measures differently. ​ A reconciliation of the non-GAAP financial measures used by the Corporation to evaluate and measure the Corporation’s performance to the most directly comparable GAAP financial measures is presented below. ​ 72 Table of Contents TABLE 25: Non-GAAP Table ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ For The Year Ended ​ ​ ​ ​ December 31, ​ (Dollars in thousands, except per share amounts) ​ ​ 2023 ​ 2022 ​ 2021 Adjusted Net Income and Adjusted Earnings Per Share ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Net income, as reported ​ ​ $ 23,746 ​ $ 29,369 ​ $ 29,123 ​ Change in accounting policy election 1 ​ ​ ​ - ​ ​ (2,151) ​ ​ - ​ Branch consolidation 2 ​ ​ ​ - ​ ​ (228) ​ ​ (107) ​ Pension settlement accounting 3 ​ ​ ​ - ​ ​ - ​ ​ 995 ​ Adjusted net income ​ ​ $ 23,746 ​ $ 26,990 ​ $ 30,011 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Weighted average shares - basic and diluted ​ ​ ​ 3,411,995 ​ ​ 3,517,114 ​ ​ 3,604,119 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Earnings per share - basic and diluted, as reported ​ ​ $ 6.92 ​ $ 8.29 ​ $ 7.95 ​ Change in accounting policy election ​ ​ ​ - ​ ​ (0.61) ​ ​ - ​ Branch consolidation ​ ​ ​ - ​ ​ (0.07) ​ ​ (0.03) ​ Pension settlement accounting ​ ​ ​ - ​ ​ - ​ ​ 0.28 ​ Adjusted earnings per share - basic and diluted ​ ​ $ 6.92 ​ $ 7.61 ​ $ 8.20 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Adjusted Net Income, Community Banking Segment ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Net income, community banking segment, as reported ​ ​ $ 22,928 ​ $ 24,374 ​ $ 14,085 ​ Change in accounting policy election 1 ​ ​ ​ - ​ ​ (2,151) ​ ​ - ​ Branch consolidation 2 ​ ​ ​ - ​ ​ (228) ​ ​ (107) ​ Pension settlement accounting 3 ​ ​ ​ - ​ ​ - ​ ​ 995 ​ Adjusted net income, community banking segment ​ ​ $ 22,928 ​ $ 21,995 ​ $ 14,973 ​ ​ ________________________ 1 A change in accounting policy election for certain equity investments, primarily consisting of equity interests in an independent insurance agency and a full service title and settlement agency, resulted in fair value adjustments in the fourth quarter of 2022, which resulted in the one-time recognition of additional other income of $2.2 million, net of related income taxes of $572,000. 2 Branch consolidation are gains recognized on the sale of former bank branch locations subsequent to consolidation into nearby branches and are net of related income taxes of $61,000 for the year ended December 31, 2022.
The increase was attributable primarily to increases in loans held for investment and available for sale securities, partially offset by a decrease in interest-bearing deposits in other banks and loans held for sale and was funded by growth in money market, savings and demand deposits.
The increase was attributable primarily to increases in loans held for investment and interest-bearing deposits in other banks, partially offset by a decrease in available for sale securities and was funded by growth in deposits and short-term borrowings.
The timing, number and purchase price of shares repurchased under the program will be determined by management in its discretion and will depend on a number of factors, including the market price of the shares, general market and economic conditions, applicable legal requirements and other conditions, and there is no assurance that the Corporation will purchase any additional shares under the 2022 Repurchase Program.
The timing, number and purchase price of shares repurchased under the program will be determined by management in its discretion and will depend on a number of factors, including the market price of the shares, general market and economic conditions, applicable legal requirements and other conditions, and there is no assurance that the Corporation will purchase any shares under the 2024 Repurchase Program. ​ On January 1, 2023, we adopted ASC 326.
The total amount of unused loan commitments at the Bank was $394.8 million at December 31, 2022, and $305.4 million at December 31, 2021. ​ Standby letters of credit are written conditional commitments issued by the Bank to guarantee the performance of a customer to a third party.
The total amount of unused loan commitments at the Bank was $413.9 million at December 31, 2023, compared to $394.8 million at December 31, 2022. ​ Standby letters of credit are written conditional commitments issued by the Bank to guarantee the performance of a customer to a third party.
Unrealized gains and losses in the Corporation’s nonqualified deferred compensation plan are offset by changes in deferred compensation, recorded in salaries and employee benefits expense. ​ Discussion of noninterest income for the year ended December 31, 2020 has been omitted as such discussion was provided in Part II, Item 7.
Unrealized gains and losses on investments held in the Corporation’s rabbi trust are offset by changes in deferred compensation liabilities, recorded in salaries and employee benefits expense. ​ Discussion of noninterest income for the year ended December 31, 2021 has been omitted as such discussion was provided in Part II, Item 7.
C&F Bank expects not to take the phase-in but rather to reduce its regulatory capital in the first quarter of 2023 for the day-one effects of adopting ASC 326 in the reasonable range of $1 million to $3 million. ​ RECENT ACCOUNTING PRONOUNCEMENTS ​ Recent accounting pronouncements affecting the Corporation are described in Item 8.
C&F Bank elected not to take the phase-in but rather to reduce its regulatory capital in the first quarter of 2023 for the day-one effects of adopting ASC 326 in the amount of $1.1 million, net of related income taxes. ​ RECENT ACCOUNTING PRONOUNCEMENTS ​ Recent accounting pronouncements affecting the Corporation are described in Item 8.
For the year ended December 31, 2022, the Corporation declared dividends of $1.64 per share. Annual dividends per share increased 3.8 percent over dividends of $1.58 per share declared in 2021.
For the year ended December 31, 2023, the Corporation declared dividends of $1.76 per share. Annual dividends per share increased 6.8 percent over dividends of $1.64 per share declared in 2022.
Loans greater than 90 days past due may remain on accrual status if management determines it has adequate collateral to cover the principal and interest. For those loans that are carried on nonaccrual status, payments are first applied to principal outstanding.
Any accrued interest receivable on loans placed on nonaccrual status is reversed by an adjustment to interest income. Loans greater than 90 days past due may remain on accrual status if management determines it has adequate collateral to cover the principal and interest. For those loans that are carried on nonaccrual status, payments are first applied to principal outstanding.
These include adjusted net income for the Corporation and for the community banking segment, net tangible income attributable to the Corporation, adjusted net tangible income attributable to the Corporation, adjusted earnings per share, adjusted ROE, adjusted ROA, ROTCE, adjusted ROTCE, tangible book value per share and the following fully-taxable equivalent (FTE) measures: interest income on loans-FTE, interest income on securities-FTE, total interest income-FTE and net interest income-FTE.
These include adjusted net income, adjusted earnings per share, adjusted ROE, adjusted ROA, ROTCE, adjusted ROTCE, tangible book value per share, price to tangible book value ratio and the following fully-taxable equivalent (FTE) measures: interest income on loans-FTE, interest income on securities-FTE, total interest income-FTE and net interest income-FTE.
“Management’s Discussion and Analysis,” under the heading “Noninterest Expense” in the Corporation’s Annual Report on Form 10-K for the year ended December 31, 2021, which was filed with the SEC on March 1, 2022 , and is incorporated herein by reference. ​ INCOME TAXES ​ Income tax expense on 2022 earnings was $7.6 million, resulting in an effective tax rate of 20.6 percent, compared with $9.0 million, or 23.5 percent, in 2021.
“Management’s Discussion and Analysis of Financial Condition and Results of Operations,” under the heading “Noninterest Expense” in the Corporation’s Annual Report on Form 10-K for the year ended December 31, 2022 , which was filed with the SEC on February 28, 2023, and is incorporated herein by reference. ​ INCOME TAXES ​ Income tax expense on 2023 earnings was $5.4 million, resulting in an effective tax rate of 18.6 percent, compared with $7.6 million, or 20.6 percent, in 2022.
The interest payments by the Corporation on the notes will be used by the trusts to pay the quarterly distributions on the trust preferred capital securities. ​ Borrowings increased to $92.1 million at December 31, 2022 from $90.5 million at December 31, 2021 due primarily to short-term borrowings from the Federal Reserve Bank. ​ For further information concerning the Corporation’s borrowings, refer to Item 8.
The interest payments by the Corporation on the notes will be used by the trusts to pay the quarterly distributions on the trust preferred capital securities. ​ Borrowings increased to $109.5 million at December 31, 2023 from $92.1 million at December 31, 2022 due primarily to short-term borrowings from the FHLB to support lending activities and securities purchases. ​ For further information concerning the Corporation’s borrowings, refer to Item 8.
Because these loans are usually larger in amount and involve more risk than consumer lot loans, we carefully evaluate the borrower’s assumptions and projections about market conditions and absorption rates in the community in which the property is located and the borrower’s ability to carry the loan if the borrower’s assumptions prove inaccurate. ​ Loans associated with land acquisition and development lending are included in the commercial, financial and agricultural category in Table 18: Summary of Loans Held for Investment. ​ Builder Line Lending ​ The community banking segment offers builder lines of credit to residential home builders to support their land and lot inventory needs.
Because these loans are usually larger in amount and involve more risk than consumer lot loans, we carefully evaluate the borrower’s assumptions and projections about market conditions and absorption rates in the community in which the property is located and the borrower’s ability to carry the loan if the borrower’s assumptions prove inaccurate. ​ Builder Lines ​ The community banking segment offers builder lines of credit to residential home builders to support their land and lot inventory needs.
Refer to “Use of Certain Non-GAAP Financial Measures,” below, for information about non-GAAP financial measures, including a reconciliation to the most directly comparable financial measures calculated in accordance with U.S.
Refer to “Use of Certain Non-GAAP Financial Measures,” below, for information about non-GAAP financial measures, including a reconciliation to the most directly comparable financial measures calculated in accordance with GAAP. ​ 2024 Outlook ​ Management is cautious in its outlook for 2024.
The Corporation expects to recover its investments in debt securities through scheduled payments of principal and interest, and unrealized losses are not expected to affect the earnings or regulatory capital of the Corporation or the Bank. ​ The Corporation’s Board of Directors continued its historical practice of paying dividends in 2022.
The Corporation expects to recover its investments in debt securities through scheduled payments of principal and interest, and unrealized losses are not expected to affect the earnings or regulatory capital of the Corporation or the Bank.
The allowance for loan losses includes an estimate of losses 66 Table of Contents incurred on loans subject to these credit enhancements, but does not include the portion of the loss that would be borne by C&F Finance's credit protection counterparty ​ Loans associated with indirect automobile lending are included in the consumer finance category in Table 18: Summary of Loans Held for Investment. ​ Indirect Marine and Recreational Vehicle Lending ​ In addition to purchasing automobile contracts through a dealer network, the consumer finance segment began purchasing marine and RV contracts, also on an indirect basis, through a third party provider in 2018.
The allowance for credit losses includes an estimate of losses incurred on loans subject to these credit enhancements, but does not include the portion of the loss that would be borne by C&F Finance's credit protection counterparty ​ Indirect Marine and Recreational Vehicles ​ In addition to purchasing automobile contracts through a dealer network, the consumer finance segment purchases marine and RV contracts, also on an indirect basis, through a third party provider in 2018.
To date, the mortgage banking segment has not made any payments for indemnification losses since the onset of the COVID-19 pandemic, and management believes that the indemnification reserve is sufficient to absorb losses related to loans that have been sold in the secondary market. ​ Discussion of the mortgage banking segment for the year ended December 31, 2020 has been omitted as such discussion was provided in Part II, Item 7.
Management believes that the indemnification reserve is sufficient to absorb losses related to loans that have been sold in the secondary market. ​ Discussion of the mortgage banking segment for the year ended December 31, 2021 has been omitted as such discussion was provided in Part II, Item 7.
The possibility of loss is extremely high. ​ ● Loss rated loans are not considered collectible under normal circumstances and there is no realistic expectation for any future payment on the loan.
The possibility of loss is extremely high. ​ ● Loss rated loans are not considered collectible under normal circumstances and there is no realistic expectation for any future payment on the loan. Loss rated loans are fully charged off. ​ Allowance for Credit Losses Methodology – Consumer Finance.
Increased use of deferrals may result in a lengthening of the loss confirmation period, which would increase expectations of credit losses inherent in the portfolio and therefore increase the allowance for loan losses and related provision for loan losses. ​ The allowance for loan losses represents an amount that, in our judgment, will be adequate to absorb probable losses inherent in the loan portfolio.
Increased use of deferrals may result in a lengthening of the loss confirmation period, which would increase expectations of credit losses inherent in the portfolio and therefore increase the allowance for credit losses and related provision for credit losses. ​ The allowance for credit losses represents an amount that, in our judgment, reduces the recorded investment in loans to the net amount expected to be collected.
Lock-adjusted originations for the mortgage banking segment decreased by 51.3 percent for the year ended December 31, 2022 compared to the year ended December 31, 2021. Locked loan commitments decreased by $41.1 million in the year ended December 31, 2022 and decreased by $115.2 million in the year ended December 31, 2021.
Lock-adjusted originations for the mortgage banking segment decreased by 26.7 percent for the year ended December 31, 2023 compared to the year ended December 31, 2022. Locked loan commitments decreased by $16.1 million in the year ended December 31, 2023 and decreased by $41.1 million in the year ended December 31, 2022.
The significant components of the Corporation’s Consolidated Balance Sheets are discussed below. ​ 59 Table of Contents LOAN PORTFOLIO ​ General ​ Through the community banking segment, we engage in a wide range of lending activities, which include the origination, primarily in the community banking segment’s market area, of (1) one-to-four family and multi-family residential mortgage loans, (2) commercial real estate loans, (3) construction loans, (4) land acquisition and development loans, (5) consumer loans and (6) commercial business loans.
The significant components of the Corporation’s Consolidated Balance Sheets are discussed below. ​ 60 Table of Contents LOAN PORTFOLIO ​ General ​ Through the community banking segment, we engage in a wide range of lending activities, primarily in the community banking segment’s market area, which include the origination of commercial real estate loans, commercial business loans, commercial and consumer real estate construction loans, land acquisition and development loans, builder lines, residential mortgage loans, equity lines, and other consumer loans.
Currently, home equity lines of credit are offered with adjustable rates of interest that are generally priced at a spread to the prime lending rate. Home equity lines of credit are made on an open-end, revolving basis.
Currently, home equity lines of credit are offered with adjustable rates of interest that are generally priced at a spread to the prime lending rate. Home equity lines of credit are made on an open-end, revolving basis. Home equity lines of credit generally do not present as much risk to the Bank as other types of consumer loans.
Alternatively, if market interest rates begin to decline, the Corporation’s net interest 41 Table of Contents margin would be adversely affected as the Corporation generally expects its assets to reprice more quickly than its deposits and borrowings. ​ Discussion of net interest income for the year ended December 31, 2020 has been omitted as such discussion was provided in Part II, Item 7.
Alternatively, if market interest rates were to continue to rise further, net interest margin would be positively impacted as the Corporation generally expects its assets to reprice more quickly than its deposits and borrowings. ​ Discussion of net interest income for the year ended December 31, 2021 has been omitted as such discussion was provided in Part II, Item 7.
Mortgage loan originations for the mortgage banking segment decreased 52.2 percent for the year ended December 31, 2022, compared to the year ended December 31, 2021.
Mortgage loan originations for the mortgage banking segment decreased 28.5 percent for the year ended December 31, 2023, compared to the year ended December 31, 2022.
“Management’s Discussion and Analysis,” under the heading “Overview” in the Corporation’s Annual Report on Form 10-K for the year ended December 31, 2021 , which was filed with the SEC on March 1, 2022, and is incorporated herein by reference. ​ 34 Table of Contents Capital Management and Dividends ​ Total equity was $196.2 million at December 31, 2022, compared to $211.0 million at December 31, 2021.
“Management’s Discussion and Analysis of Financial Condition and Results of Operations,” under the heading “Overview” in the Corporation’s Annual Report on Form 10-K for the year ended December 31, 2022 , which was filed with the SEC on February 28, 2023, and is incorporated herein by reference. ​ Capital Management and Dividends ​ Total equity was $217.5 million at December 31, 2023, compared to $196.2 million at December 31, 2022.
The average yield on the securities portfolio on a taxable-equivalent basis increased 25 basis points for 2022, compared to 2021, due primarily to rising interest rates during 2022, which allowed for purchases of securities at higher yields. ​ Average interest-bearing deposits in other banks, consisting primarily of excess cash reserves maintained at the Federal Reserve Bank, decreased $19.7 million during 2022, compared to 2021, due primarily to utilizing cash to fund growth in higher yielding loans and securities.
The average yield on the securities portfolio on a taxable-equivalent basis increased 41 basis points to 2.37 percent for 2023, compared to 1.96 percent for 2022, due primarily to rising interest rates and the maturity of lower-yielding securities during the year, which allowed for purchases of securities at higher yields. ​ Average interest-bearing deposits in other banks, consisting primarily of excess cash reserves maintained at the Federal Reserve Bank, decreased $118.0 million to $35.4 million for 2023, compared to $153.4 million for 2022, due primarily to utilizing cash to fund growth in loans and securities purchases.
Our income from mortgage lender services offered through C&F Mortgage’s Lender Solutions division continued to generate incremental income as it gained new institutional customers during 2022 and anticipates adding more clients in 2023.
Our income from mortgage lender services offered through C&F Mortgage’s Lender Solutions division continued to generate incremental income as it gained new institutional customers during 2023 and anticipates adding more clients in 2024. ​ ● Consumer Finance: C&F Finance provides indirect financing for automobile, marine and recreational vehicles.
The total contract amount of standby letters of credit was $16.3 million at December 31, 2022 and $15.1 million at December 31, 2021. ​ The mortgage banking segment sells substantially all of the residential mortgage loans it originates to third-party investors.
The total contract amount of standby letters of credit was $7.9 million at December 31, 2023, compared to $16.3 million at December 31, 2022. ​ The mortgage banking segment sells the majority of the residential mortgage loans it originates to third-party investors.
Consumer loans are more likely than real estate loans to be immediately adversely affected by job loss, divorce, illness or personal bankruptcy. 49 Table of Contents ​ The review process generally begins with loan officers or management identifying problem loans to be reviewed on an individual basis for impairment.
Consumer finance loans are more likely than real estate loans to be immediately adversely affected by job loss, divorce, illness or personal bankruptcy. Allowance for Credit Losses Methodology – Commercial and Consumer. The review process generally begins with management assigning loan ratings to individual loans and identifying problem loans to be reviewed on an individual basis.
Generally, our maximum loan-to-value ratio for non-residential projects and multi-unit residential projects is 80 percent; however, this maximum can be waived for particularly strong borrowers on an exception basis. ​ Loans associated with construction lending are included in the real estate—construction category in Table 18: Summary of Loans Held for Investment. ​ Consumer Lot Lending ​ The community banking segment’s consumer lot loans are made to individuals for the purpose of acquiring an unimproved building site for the construction of a residence that generally will be occupied by the borrower.
Generally, our maximum loan-to-value ratio for non- 63 Table of Contents residential projects and multi-unit residential projects is 80 percent; however, this maximum can be waived for particularly strong borrowers on an exception basis. ​ The community banking segment makes loans to individuals for the purpose of acquiring an unimproved building site for the construction of a residence that generally will be occupied by the borrower.
The Corporation’s deposits are principally provided by individuals and businesses located within the communities served. ​ 68 Table of Contents During the year ended December 31, 2022, deposits increased $89.2 million to $2.00 billion at December 31, 2022, compared to $1.91 billion at December 31, 2021.
The Corporation’s deposits are principally provided by individuals and businesses located within the communities served. ​ During the year ended December 31, 2023, deposits increased $62.3 million to $2.07 billion at December 31, 2023, compared to $2.00 billion at December 31, 2022.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

6 edited+6 added−5 removed17 unchanged
Biggest changeThese results, based on a measurement date balance sheet as of December 31, 2022, indicate that the Corporation would expect net interest income to decrease over the next twelve months 5.31 percent assuming an immediate downward shift in market interest rates of 200 basis points (BP) and to increase 2.37 percent if rates shifted upward to the same degree. ​ One-Year Net Interest Income Simulation (dollars in thousands) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Hypothetical Change in Net ​ ​ ​ Interest Income ​ ​ ​ Over the Next Twelve Months ​ ​ ​ as of December 31, ​ ​ ​ 2022 ​ ​ 2021 ​ Assumed Market Interest Rate Shift Dollars Percentage ​ ​ Dollars Percentage -200 BP shock ​ $ (6,143) ​ (5.31) % ​ ​ $ (4,355) ​ (5.79) % +200 BP shock ​ $ 2,747 ​ 2.37 % ​ ​ $ 5,635 ​ 7.50 % ​ The EVE analysis provides information on the risk inherent in the balance sheet that might not be taken into account in the simulation analysis due to the shorter time horizon used in that analysis.
Biggest changeThese assumptions include loan prepayments, time deposit 76 Table of Contents early withdrawals, the sensitivity of deposit repricing to changes in market rates, withdrawal behavior of non-maturing deposits, and other factors that management deems significant. ​ The simulation analysis results, based on a measurement date balance sheet as of December 31, 2023 and December 31, 2022 for hypothetical changes in net interest income over the next twelve months are presented in the table below. ​ One-Year Net Interest Income Simulation (dollars in thousands) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Hypothetical Change in Net ​ ​ ​ Interest Income ​ ​ ​ Over the Next Twelve Months ​ ​ ​ as of ​ ​ ​ December 31, 2023 ​ ​ December 31, 2022 ​ Assumed Market Interest Rate Shift Dollars Percentage ​ ​ Dollars Percentage -300 BP shock ​ $ (8,372) ​ (8.22) % ​ ​ $ (10,597) ​ (9.16) % -200 BP shock ​ ​ (5,137) ​ (5.04) ​ ​ ​ ​ (6,143) ​ (5.31) ​ -100 BP shock ​ ​ (2,352) ​ (2.31) ​ ​ ​ ​ (2,864) ​ (2.48) ​ +100 BP shock ​ ​ 1,081 ​ 1.06 ​ ​ ​ ​ 1,403 ​ 1.21 ​ +200 BP shock ​ ​ 2,094 ​ 2.06 ​ ​ ​ ​ 2,747 ​ 2.37 ​ +300 BP shock ​ ​ 3,013 ​ 2.96 ​ ​ ​ ​ 4,021 ​ 3.48 ​ ​ ​ These results indicate that the Corporation would expect net interest income to decrease over the next twelve months assuming an immediate downward shift in market interest rates of 100 BP to 300 BP and to increase if rates shifted upward to the same degree.
IRLCs, forward sales of loans and forward sales of TBA securities are derivative financial instruments. ​ We believe that our current interest rate exposure is manageable and does not indicate any significant exposure to interest rate changes. ​ 79 Table of Contents
IRLCs, forward sales of loans and forward sales of TBA securities are derivative financial instruments. ​ We believe that our current interest rate exposure is manageable and does not indicate any significant exposure to interest rate changes. ​ 78 Table of Contents
Management recognizes that a certain amount of interest rate risk is inherent and appropriate. Thus the goal of interest rate risk management is to maintain a balance between risk and reward such that net interest income is maximized while risk is maintained at an acceptable level. ​ The Corporation assumes interest rate risk in the normal course of operations.
Management recognizes that a certain amount of interest rate risk is inherent and appropriate. Thus the goal of interest rate risk management is to maintain a balance between risk and reward such that net interest income is maximized while risk is maintained at an acceptable level.
In a falling rate environment, the analyses assume that rate-sensitive assets are repriced downward, subject to floors on certain loans, while certain deposit rates are not allowed to decrease below zero. ​ Certain shortcomings are inherent in the methodology used in the above interest rate risk analyses.
In a falling rate environment, the analyses assume that rate-sensitive assets are repriced downward, subject to floors on certain loans, while certain deposit rates are not allowed to decrease below zero. ​ The Corporation uses interest rate swaps to manage select exposures to interest rate risk.
The Corporation does not subject itself to foreign currency exchange rate risk or commodity price risk due to the current nature of its operations. ​ The primary objective of the Corporation’s asset/liability management process is to maximize current and future net interest income within acceptable levels of interest rate risk while satisfying liquidity and capital requirements.
The Corporation does not subject itself to foreign currency exchange rate risk or commodity price risk due to the current nature of its operations.
These results as of December 31, 2022 indicate that the EVE would decrease 9.79 percent assuming an immediate downward shift in market interest rates of 200 BP and would increase 4.19 percent if rates shifted upward to the same degree. ​ Static EVE Change (dollars in thousands) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Hypothetical Change in EVE ​ ​ ​ as of December 31, ​ ​ ​ 2022 ​ ​ ​ 2021 ​ Assumed Market Interest Rate Shift Dollars Percentage ​ ​ Dollars ​ Percentage ​ -200 BP shock ​ $ (42,156) ​ (9.79) % ​ ​ $ (11,645) ​ (4.10) % +200 BP shock ​ $ 18,038 ​ 4.19 % ​ ​ $ 1,921 ​ 0.68 % ​ As of December 31, 2022 and 2021, in both the simulation analysis and the EVE analysis, net interest income over the next twelve months and EVE, respectively, increase in the event of an immediate upward shift in interest rates, and decrease in the event of an immediate downward shift in interest rates.
The resulting percentage change in net present value in various rate scenarios is an indication of the longer term repricing risk and options embedded in the balance sheet. ​ The EVE analysis results are presented in the table below. ​ Static EVE Change (dollars in thousands) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Hypothetical Change in EVE ​ ​ ​ as of ​ ​ ​ December 31, 2023 ​ ​ ​ December 31, 2022 ​ Assumed Market Interest Rate Shift Dollars Percentage ​ ​ Dollars ​ Percentage ​ -300 BP shock ​ $ (28,719) ​ (7.51) % ​ ​ $ (76,481) ​ (17.76) % -200 BP shock ​ ​ (10,881) ​ (2.85) ​ ​ ​ ​ (42,156) ​ (9.79) ​ -100 BP shock ​ ​ (1,397) ​ (0.37) ​ ​ ​ ​ (17,553) ​ (4.08) ​ +100 BP shock ​ ​ (1,945) ​ (0.51) ​ ​ ​ ​ 10,547 ​ 2.45 ​ +200 BP shock ​ ​ (5,012) ​ (1.31) ​ ​ ​ ​ 18,038 ​ 4.19 ​ +300 BP shock ​ ​ (11,062) ​ (2.89) ​ ​ ​ ​ 22,632 ​ 5.25 ​ ​ 77 Table of Contents These results as of December 31, 2023 indicate that the EVE would decrease assuming an immediate downward shift in market interest rates of 100 BP to 300 BP, and would decrease if rates immediately shifted upward 100 BP to 300 BP.
Removed
Additional assumptions are applied to modify volumes and pricing under the various rate scenarios. These assumptions include loan prepayments, time deposit early withdrawals, the sensitivity of deposit repricing to changes in market rates, withdrawal behavior of non-maturing deposits, and other factors that management deems significant. ​ 77 Table of Contents The simulation analysis results are presented in the table below.
Added
The Corporation has established a comprehensive enterprise risk management program to monitor risks related to its operations, including market risk, and the Corporation’s Chief Risk Officer has primary responsibility for the enterprise risk management program. ​ The Corporation’s Asset/Liability Committee meets at least quarterly with the primary objective of maximizing current and future net interest income within acceptable levels of interest rate risk while satisfying liquidity and capital requirements.
Removed
The resulting percentage change in net present value in various rate scenarios is an indication of the longer term repricing risk and options embedded in the balance sheet. ​ The EVE analysis results are presented in the table below.
Added
The objective of the Corporation’s liquidity management is to meet the Corporation’s liquidity requirements by ensuring the continuous availability of funds to satisfy the credit needs of our customers and the demands of our depositors, creditors and investors. Stable core deposits and a strong capital position are the components of a solid foundation for the Corporation’s liquidity position.
Removed
As a result of modeled changes in interest rates, the Corporation’s assets would reprice more quickly than the Corporation’s borrowings and deposits primarily due to the shorter maturity or repricing dates of its interest-bearing deposits in other banks and its loan portfolio.
Added
Management continuously monitors cash flows, including deposit flows, loan fundings and draws, securities payments and borrowing maturities, and the impact of changes in interest rates on these cash flows. Additionally, management tracks uninsured deposits, unpledged securities and unpledged loans among other liquidity metrics. ​ The Corporation assumes interest rate risk in the normal course of operations.
Removed
The Corporation was less asset sensitive in both the simulation analysis and the EVE analysis as of December 31, 2022, as compared to December 31, 2021, due primarily to utilizing lower yielding cash to fund growth in higher yielding loans and securities.
Added
Additional assumptions are applied to modify volumes and pricing under the various rate scenarios.
Removed
In particular, due to low market interest rates at December 31, 2021, it was not possible to calculate a market rate decrease of 200 BP for all financial instruments, because many market interest rates would fall below zero in that scenario, which is effectively not allowed in our methodology due to modeling constraints. 78 Table of Contents ​ The Corporation uses interest rate swaps to manage select exposures to interest rate risk.
Added
The simulation analysis results show the Corporation is less asset sensitive as of December 31, 2023 compared to the results as of December 31, 2022 due primarily to shifts in the mix of earnings assets and in the mix of deposit. ​ The EVE analysis provides information on the risk inherent in the balance sheet that might not be taken into account in the simulation analysis due to the shorter time horizon used in that analysis.
Added
As of December 31, 2023, the Corporation’s EVE is less asset sensitive compared to its position as of December 31, 2022 due primarily to the composition of its Consolidated Balance Sheets and the characteristics and assumptions of certain loans and deposit accounts. ​ Certain shortcomings are inherent in the methodology used in the above interest rate risk analyses.

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