UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One) FORM 10-Q
[ X ] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934.
For the quarterly period ended June 30, 1998
-------------------------------------------------
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT
For the transition period from___________________ to_______________
Commission file number 000-23423
---------------------------------
C&F Financial Corporation
(Exact name of small business issuer as
specified in its charter)
Virginia 54-1680165
(State or other jurisdiction of (I.R.S. Employer
incorporation of organization) Identification No.)
Eighth and Main Streets West Point VA 23181
- ------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
(Issuer's telephone number) (804) 843-2360
- -----------------------------------------------------------------------------
(Former name, former address and former fiscal year, if changed since last
report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. [x] Yes [ ] No
APPLICABLE ONLY TO CORPORATE ISSUERS
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable
date: 3,863,588 as of July 31, 1998.
<PAGE>
TABLE OF CONTENTS
Part I - Financial Information Page
Item 1. Financial Statements
Consolidated Balance Sheets -
June 30, 1998 and December 31, 1997...............................1
Consolidated Statements of Income -
Three months and six months ended June 30, 1998 and 1997..........2
Consolidated Statements of Shareholders' Equity
Six months ended June 30, 1998 ...................................3
Consolidated Statements of Cash Flows -
Six months ended June 30, 1998 and 1997...........................4
Notes to Consolidated Financial Statements...........................5
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operation .........................................6
Item 3. Quantitative and Qualitative Disclosures About Market Risk..........11
Part II - Other Information
Item 1. Legal Proceedings ..................................................11
Item 2. Changes in Securities ..............................................11
Item 3. Defaults Upon Senior Securities.....................................11
Item 4. Submission of Matters to a Vote of Security Holders ................11
Item 5. Other Information ..................................................11
Item 6. Exhibits and Reports on Form 8-K....................................11
Signatures...................................................................12
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
ASSETS June 30, 1998 December 31, 1997
- ------ ------------- -------------------
(Unaudited)
Cash and due from banks $ 6,180 $ 7,844
Interest -bearing deposits in other banks 3,577 1,027
------- --------
Total cash and cash equivalents 9,757 8,871
Investment securities
Available for sale securities at fair value,
amortized cost of $37,043 and $29,498,
respectively 37,449 29,793
Held to maturity at amortized cost,
fair value of $43,761 and $47,686,
respectively 42,128 45,927
Loans held for sale, net 50,984 24,479
Loans, net 163,068 154,745
Federal Home Loan Bank stock 2,370 1,062
Corporate premises and equipment,
net of accumulated depreciation 6,429 6,581
Accrued interest receivable 2,661 2,196
Other assets 4,110 4,452
------- --------
Total assets $318,956 $278,106
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits
Non-interest-bearing demand deposits $42,511 $ 35,295
Savings and interest-bearing demand
deposits 91,071 95,105
Time deposits 103,023 101,113
------- --------
Total deposits 236,605 231,513
Other borrowings 42,739 9,336
Accrued interest payable 600 592
Other liabilities 4,635 4,865
------- --------
Total liabilities 284,579 246,306
------- --------
Shareholders' Equity
Preferred stock ($1.00 par value,
3,000,000 shares authorized) -- --
Common stock ($1.00 par value, 8,000,000
shares authorized, 3,863,388 and
1,916,190 shares issued and outstanding
at June 30, 1998 and December 31, 1997,
respectively) 3,863 1,916
Additional paid-in capital 384 118
Retained earnings 29,546 29,236
Accumulated other comprehensive
income, net of tax of
$300 and $273, respectively 584 530
------- --------
Total shareholders' equity 34,377 31,800
------- --------
Total liabilities and
shareholders' equity $318,956 $278,106
======== ========
The Company's notes are an integral part of the consolidated financial
statements.
1
<PAGE>
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
(In thousands of dollars, except for per share amounts)
Three Months Ended Six Months Ended
June 30, June 30,
Interest Income 1998 1997 1998 1997
---- ---- ---- ----
Interest and fees on loans $ 4,570 $ 3,534 $ 8,575 $ 6,892
Interest on other market investments 7 18 17 46
Interest on investment securities
U.S. Treasury Securities 49 50 99 99
U.S. Government agencies and
corporations620 620 613 1,257 1,297
Tax-exempt obligations of states and
political subdivisions 525 517 1,033 1,046
Corporate bonds and other 94 112 197 214
-------- -------- -------- --------
Total interest income 5,865 4,844 11,178 9,594
Interest Expense
Savings and interest-bearing deposits 675 653 1,358 1,320
Certificates of deposit, $100,000 or
more 186 105 386 217
Other time deposits 1,141 1,107 2,251 2,162
Short-term borrowings and other 544 135 739 179
-------- -------- -------- --------
Total interest expense 2,546 2,000 4,734 3,878
Net interest income 3,319 2,844 6,444 5,716
Provision for loan losses 175 60 250 90
-------- -------- -------- --------
Net interest income after provision for
loan losses 3,144 2,784 6,194 5,626
Other Operating Income
Gain on sale of loans 1,865 771 3,143 1,371
Service charges on deposit accounts 256 263 518 500
Other service charges and fees 461 234 825 424
Other income 259 152 494 270
-------- -------- -------- --------
Total other operating income 2,841 1,420 4,980 2,565
Other Operating Expenses
Salaries and employee benefits 1,987 1,421 3,783 2,825
Occupancy expenses 515 420 1,005 841
Goodwill amortization 69 69 138 138
Other expenses 1,201 725 2,081 1,336
-------- -------- -------- --------
Total other operating expenses 3,772 2,635 7,007 5,140
Income before income taxes 2,213 1,569 4,167 3,051
Income tax expense 596 346 1,115 654
-------- -------- -------- --------
Net Income $ 1,617 $ 1,223 $ 3,052 $ 2.397
======== ======== ======== ========
Per Share Data
Net Income - Assuming Dilution $ .41 $ .32 $ .78 $ .59
Cash Dividends Paid and Declared $ .11 $ .09 $ .21 .17
Weighted average number of shares and
common stock equivalents
outstanding 3,929,502 3,876,546 3,912,197 4,056,056
The Company's notes are an integral part of the consolidated financial
statements.
2
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CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
(Unaudited)
(Amounts in thousands of dollars)
<TABLE>
<CAPTION>
Accumulated
Additional Other
Common Pain-In Comprehensive Retained Comprehensive
Stock Capital Income Earnings Income Total
------- ---------- ------------- --------- -------------- ------
<S> <C>
Balance January 1, 1998 $ 1,916 $ 118 $ 29,236 $ 530 $ 31,800
Comprehensive Income
Net income $3,052 3,052 3,052
Other comprehensive
income, net of tax
Unrealized gain on
securities, net of
reclassification
adjustment1 54 54 54
------
Comprehensive income $3,106
======
Stock options exercised 15 266 281
Stock dividends 1,932 (1,932)
Cash dividends (810) (810)
------ ------- --------- -------- ---------
Balance June 30, 199 $ 3,863 $ 384 $ 29,546 $ 584 $ 34,377
======== ======== ========= ======= =========
</TABLE>
---------------------------
1 There were no reclassification adjustments for the six months ended June 30,
1998.
The Company's notes are an integral part of the consolidated financial
statements.
3
<PAGE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(Amounts in thousands of dollars)
Six Months Ended June 30,
1998 1997
Cash flows from operating activities:
Net income $ 3,052 $ 2,397
Adjustments to reconcile net income to
net cash provided by (used in) operating
activities:
Depreciation 505 389
Amortization of goodwill 137 138
Provision for loan losses 250 90
Accretion of discounts and amortization of
premiums on investment securities, net (25) (39)
Net realized (gain) loss on securities -- 7
Proceeds from sale of loans 210,258 104,575
Origination of loans held for sale (236,763) (113,627)
Change in other assets and liabilities:
Accrued interest receivable (465) 77
Other assets 206 (214)
Accrued interest payable 7 19
Other liabilities (258) (236)
------- -------
Net cash (used in) operating activities (23,096) (6,424)
-------- -------
Cash flows from investing activities:
Proceeds from maturities of investments
held to maturity 6,363 8,857
Proceeds from sales and maturities of
investments available for sale 4,036 4,077
Purchase of investment securities (2,573) (2,000)
Purchase of investments available for sale (11,577) (753)
Net decrease (increase) in customer loans (8,574) (7,815)
Purchase of corporate premises and equipment (352) (398)
Purchase of Federal Home Loan Bank stock (1,308) (205)
------- ------
Net cash (used in) provided by
investing activities (13,985) 1,763
Cash flows from financing activities:
Net increase (decrease) in demand,
interest-bearing demand and savings
deposits 3,181 2,056
Net increase in time deposits 1,911 3,502
Net increase in other borrowings 33,404 4,242
Proceeds from exercise of stock options 281 --
Repurchase of common stock -- (4,331)
Cash dividends (810) (682)
Net cash provided by financing activities 37,967 4,787
------ ------
Net increase (decrease) in cash and cash
equivalents 886 126
Cash and cash equivalents at beginning of
period 8,871 8,799
------- ------
Cash and cash equivalents at end of period $9,757 $8,925
====== ======
Supplemental disclosure
Interest paid $4,727 $3,859
Income taxes paid $1,221 $ 686
The Company's notes are an integral part of the consolidated financial
statements.
4
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1
The accompanying unaudited consolidated financial statements have been
prepared in accordance with the instructions to Form 10-Q and, therefore, do not
include all of the disclosures and notes required by generally accepted
accounting principles. In the opinion of C&F Financial Corporation's management,
all adjustments, consisting only of normal recurring accruals, necessary to
present fairly the financial position as of June 30, 1998, the results of
operations for the three and six months ended June 30, 1998 and 1997, and cash
flows for the six months ended June 30, 1998 and 1997 have been made. The
results of operations for the interim periods are not necessarily indicative of
the results to be expected for the full year.
These consolidated financial statements should be read in conjunction with
the consolidated financial statements and notes thereto included in the C&F
Financial Annual Report on Form 10-K for the year ended December 31, 1997.
Certain previously reported amounts have been reclassified to agree with the
current presentation.
The consolidated financial statements include the accounts of the Company
and its subsidiary, with all significant intercompany transactions and accounts
being eliminated in consolidation.
Note 2
On June 16, 1998, the Company declared a 100% stock dividend in the form of
a two-for-one stock split. All the financial data included in this Form 10-Q
reflects the effect of the stock split.
Net income per share assuming dilution has been calculated on the basis of
the weighted average number of shares of common stock and common stock
equivalents outstanding for the applicable periods. Weighted average number of
shares of common stock and common stock equivalents was 3,929,502 and 3,876,546
for the three months ended June 30, 1998 and 1997, respectively, and 3,912,197
and 4,056,056 for the six months ended June 30, 1998 and 1997, respectively.
Note 3
During the first quarter of 1998, the Company adopted Financial Accounting
Standards ("FAS") 130, "Reporting Comprehensive Income." Adoption of this
standard did not impact the Company's consolidated financial position, results
of operations or cash flow. The consolidated statement of shareholders' equity
has been changed to include columns for comprehensive income and accumulated
other comprehensive income. Comprehensive income for the Company includes net
income plus the change in the unrealized gain or loss on securities available
for sale. Accumulated other comprehensive income includes the cumulative changes
in unrealized gain or loss on securities available for sale.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATION
The following discussion supplements and provides information about the
major components of the results of operations and financial condition, liquidity
and capital resources of C&F Financial Corporation (the "Company"). This
discussion and analysis should be read in conjunction with the Consolidated
Financial Statements, and supplemental financial data.
5
<PAGE>
Overview
Net income increased 32% to $1,617,000 for the three months ended June 30,
1998 compared to $1,223,000 for the same period of 1997. Earnings per share were
$.41 for the three month period, up 28% from $.32 per share for the three months
ended June 30, 1997. Net income for the first six months ended June 30, 1998
increased 27% to $3,052,000 compared to $2,397,000 for the same period of 1997.
Earnings per share were $.78 for the six month period, up 32% from $.59 per
share for the six months ended June 30, 1997.
Profitability as measured by the Company's annualized return on average
assets (ROA) increased to 2.08% for the three months ended June 30, 1998, up
from 1.92% for the same period of 1997. For the first six months of 1998, ROA
increased to 2.06%, up from 1.89% for the first six months of 1997. Another key
indicator of performance, the annualized return on average equity (ROE) for the
three months ended June 30, 1998 was 19.12%, compared to 16.26% for the three
months ended June 30, 1997. For the first six months of 1998, ROE was 18.40%
compared to 15.32% for the first six months of 1997.
RESULTS OF OPERATIONS
Net Interest Income
Net interest income for the three months ended June 30, 1998 was $3.3
million, an increase of $475,000, or 17%, from $2.8 million for the three months
ended June 30, 1997. Net interest income for the six months ended June 30, 1998
was $6.4 million, an increase of $728,000, or 13%, from $5.7 million for the six
months ended June 30, 1997. The increase in net interest income is a result of
an increase in the average balance of interest earning assets. For the three
months ended June 30, 1998 the average balance of interest earning assets
increased to $292.4 million from $237.9 million for the same period in 1997. For
the six months ended June 30, 1998 the average balance of interest earning
assets increased to $278.4 million from $236.4 million for the same period in
1997. The increase in average earning assets is a result of an increase in the
average balance of loans held in Citizens and Farmers Bank's ("the Bank") loan
portfolio and an increase in the average balance of loans held for sale by C&F
Mortgage Corporation (a wholly owned subsidiary of Citizens and Farmers Bank).
For the three months ended June 30, 1998 loans held in the Bank's loan portfolio
increased 15% from the comparable period in 1997 and the average balance of
loans held for sale by C&F Mortgage Corporation increased 154% from the
comparable period in 1997. For the six months ended June 30, 1998 loans held in
the Bank's loan portfolio increased 14% from the comparable period of 1997 while
the balance of loans held for sale by C&F Mortgage Corporation increased 148%
from the comparable period in 1997. The increase in loans at the Bank is a
result of increased loan demand and management's effort to redirect maturing
investments into higher yielding loans. The increase in loans held for sale is a
result of increased production at C&F Mortgage Corporation. Loan closings at C&F
Mortgage Corporation increased to $132,671,000 and $236,763,000 for the three
and six months ended June 30, 1998, respectively, compared to $70,439,000 and
$113,627,000 for the three and six months ended June 30, 1997, respectively. The
increase in production at C&F Mortgage is a result of overall growth and an
increase in refinancings attributed to the lower interest rate environment. The
increase in the average balance of interest earning assets was offset by a
decrease in the Company's interest rate spread on a taxable equivalent basis to
4.08% for the three months ended June 30, 1998 from 4.44% for the same period in
1997, and a decrease in the Company's net interest margin on a taxable
equivalent basis to 4.94% for the three months ended June 30, 1998 from 5.23%
for the same period in 1997. The interest rate spread on a taxable equivalent
basis for the six months ended June 30, 1998 decreased to 4.19% from 4.51% for
the same period in 1997 and the net interest margin on a
6
<PAGE>
taxable equivalent basis decreased to 5.05% from 5.29% for the six month period
ended June 30, 1998 compared to the same period in 1997. The decrease in the net
interest margin is a result of a decrease in the yield on interest earning
assets to 8.43% for the second quarter of 1998 from 8.59% for the same period in
1997 and an increase in the cost of funds to 4.35% for the three months ended
June 30, 1998 compared to 4.15% for the same period in 1997. For the six months
ended June 30, 1998, the yield on interest earning assets decreased to 8.45%
from 8.57% for the same period in 1997 and the cost of funds increased to 4.26%
for the six months ended June 30, 1998 from 4.07% for the same period in 1997.
The decrease in the yield on interest earning assets is a result of the overall
lower interest rate environment and the increase in the average balance of loans
held for sale which has a lower yield than the Bank's loan portfolio. The
increase in the cost of funds is mainly attributed to increased borrowings from
the Federal Home Loan Bank ("FHLB"). Borrrowings from the FLHB are used to fund
loans originated and subsequently sold by C&F Mortgage.
Non-Interest Income
Other operating income increased $1,421,000, or 100%, to $2,841,000 for
the second quarter of 1998 from $1,420,000 for the second quarter of 1997. Other
operating income increased $2,415,000, or 94%, to $4,980,000 for the first six
months of 1998 from $2,565,000 for the first six months of 1997. The increase in
other income is mainly attributed to an increase in gain on sale of loans
resulting from increased production at C&F Mortgage Corporation.
Non-Interest Expense
Other operating expenses increased $1,137,000, or 43%, to $3,772,000 for
the second quarter of 1998 from $2,635,000 for the second quarter of 1997. Other
operating expenses increased $1,867,000, or 36%, to $7,007,000 for the first six
months of 1998 from $5,140,000 for the first six months of 1997. The increase in
other expenses is mainly attributed to increases in salaries and employee
benefits due to increased production at C&F Mortgage Corporation.
Year 2000 Issue
The Bank utilizes and is dependent upon data processing systems and
software to conduct its business. The mainframe processing systems and related
communication networks include various software packages licensed to the Bank by
outside vendors. All of these systems are vulnerable to the Year 2000 issue.
In 1997 the Bank initiated a review and assessment of all hardware and
software to confirm that it will function properly in the year 2000. Based on
this assessment, the Bank's mainframe hardware and banking software are
currently Year 2000 compliant. However, testing is scheduled for the third and
fourth quarters of 1998 to confirm this compliance. For certain other systems,
the Company has determined that it will have to replace or modify certain pieces
of hardware and/or software so that the systems will properly function in the
year 2000. For systems that the Company relies on third party vendors, these
vendors have been contacted and have indicated that the hardware and/or software
will be Year 2000 compliant.
The Company has also initiated formal communications with all significant
loan and deposit customers to determine the extent to which the Company is
vulnerable to those third parties' failure to remedy their own Year 2000 issue.
The Company believes that exposure to customers not being Year 2000 compliant is
minimal.
The Company plans to complete the majority of the Year 2000 project by
December 31, 1998. To date, the Company has expensed $150,000 related to the
assessment of and efforts in connection
7
<PAGE>
with the Year 2000 issue. Remaining expenditures are not expected to have a
material effect on the Company's consolidated financial statements.
The costs of the project and the date on which the Company plans to
complete the Year 2000 modifications are based on management's best estimates,
which were derived utilizing numerous assumptions of future events including the
continued availability of certain resources, third party modification plans and
other factors. However, there can be no guarantee that these estimates will be
achieved and actual results could differ materially from those plans. Specific
factors that might cause such material differences include, but are not limited
to, the availability of personnel trained in this area, the ability of third
party vendors to correct their software and hardware, the ability of significant
customers to remedy their Year 2000 issues, and similar uncertainties.
Income Taxes
Income tax expense for the three months ended June 30, 1998 amounted to
$596,000, resulting in an effective tax rate of 26.9% compared to $346,000, or
22.1%, for the three months ended June 30, 1997. Income tax expense for the six
months ended June 30, 1998 amounted to $1,115,000, resulting in an effective tax
rate of 26.7% compared to $654,000, or 21.4%, for the six months ended June 30,
1997. The increase in the effective tax rate for the quarter and for the year is
a result of the increase in earnings subject to a 34% tax rate versus earnings
subject to no taxes such as certain loans to municipalities or investment
obligations of state and political subdivisions.
Asset Quality-Allowance /Provision For Loan Losses
The Company had $250,000 in provision expense for the first six months of
1998 compared to $90,000 for the same period in 1997. Loans charged off amounted
to $46,000 and $10,000 for the six months ended June 30, 1998 and 1997.
Recoveries amounted to $25,000 and $4,000 for the six months ended June 30, 1998
and 1997, respectively. The ratio of net charge-offs to average outstanding
loans was .01% for the six months ended June 30, 1998. The allowance for loan
losses was $2.5 million at June 30, 1998 and $2.2 million at December 31, 1997.
The allowance approximates 1.5% and 1.4% of total loans outstanding at June 30,
1998 and December 31, 1997, respectively. Management feels that the reserve is
adequate to absorb any losses on existing loans which may become uncollectible.
Nonperforming Assets
Total non-performing assets, which consist of the Company's non-accrual
loans and other real estate owned was $455,000 at June 30, 1998, a decrease of
$486,000 from December 31, 1997. This decrease is mainly a result of a decrease
in the balance of other real estate owned. The balance in other real estate
owned consisted of one piece of property which was sold in the second quarter of
1998.
FINANCIAL CONDITION
Summary
At June 30, 1998, the Company had total assets of $319.0 million
compared to $278.1 million at December 31, 1997.
Loan Portfolio
8
<PAGE>
At June 30, 1998, loans held for sale amounted to $51.0 million, an
increase over the $24.5 million held at December 31, 1997. This increase is a
result of increased loan production at C&F Mortgage Corporation. At June 30,
1998, the Bank's loans net of unearned income and reserve for loan losses,
totals $163.1 million, an increase of 5.4% over the 1997 year-end total of
$154.7 million.
The following table sets forth the composition of the Company's loans in
dollar amounts and as a percentage of the Company's total gross loans held for
investment at the dates indicated:
June 30, 1998 December 31, 1997
(Dollars in Thousands)
Amount Percent Amount Percent
Real estate - mortgage $ 89,034 53.8% $ 88,974 56.7%
Real estate - construction 4,092 2.5 4,454 2.8
Commercial, financial and
agricultural 55,618 33.6 48,737 31.1
Equity lines 7,873 4.7 7,131 4.5
Consumer 8,915 5.4 7,683 4.9
-------- ---- -------- ------
Total loans 165,532 100.0% 156,979 100.0%
====== ======
Less unearned discount (1) (1)
Less allowance for possible
loan losses (2,463) (2,233)
---------- ---------
Total loans, net $ 163,068 $ 154,745
========= ==========
Investment Securities
At June 30, 1998, total investment securities were $79.6 million compared
to $75.7 for December 31, 1997. Securities of U.S. Government agencies and
corporations represent 41.5% of the total securities portfolio, obligations of
state and political subdivisions were 48.6%, U.S. Treasury securities were 3.8%,
and preferred stocks were 6.1% at June 30, 1998.
Deposits
Deposits totaled $236.7 million at June 30, 1998 compared to $231.5 at
December 31, 1997. Non-interest bearing deposits totaled $42.5 million at June
30, 1998 compared to $35.3 million at December 31, 1997.
Liquidity
At June 30, 1998, cash, securities classified as available for sale and
interest-bearing deposits were 15.8% of total earning assets. Asset liquidity is
also provided by managing the investment maturities.
Additional sources of liquidity available to the Company include its
subsidiary bank's capacity to borrow additional funds through an established
federal funds line with a regional correspondent bank and through an established
line with the Federal Home Loan Bank.
Capital Resources
9
<PAGE>
The Company's capital position continues to exceed regulatory requirements.
The Company's Tier I capital ratio was 13.1% at June 30, 1998 compared to 14.1%
at December 31, 1997. The total risk-based capital ratio was 14.1% at June 30,
1998 compared to 15.2% at December 31, 1997. These ratios are in excess of the
mandated minimum requirements.
Shareholders' equity was $34.4 million at the end of the second quarter of
1998 compared to $31.8 million at December 31, 1997. The leverage ratio consists
of Tier I capital divided by average assets. At June 30, 1998, the Company's
leverage ratio was 10.8% compared to 11.4% at December 31, 1997. Each of these
exceeds the required minimum leverage ratio of 3%.
New Accounting Pronouncements
In June 1997, the Financial Accounting Standards Board ("FASB") issued
Financial Accounting Standards ("FAS") 131, "Disclosures about Segments of an
Enterprise and Related Information". FAS 131 requires that a public business
enterprise report financial and descriptive information about its reportable
operating segments. It also requires that a public business enterprise report a
measure of segment profit or loss, certain specific revenue and expense items,
and segment assets. FAS 131 is effective for fiscal years beginning after
December 15, 1997. Adoption of this statement will not impact the Corporation's
consolidated financial position, results of operations or cash flow, and any
effect will be limited to the form and content of its disclosures.
In February 1998, the FASB issued FAS 132, "Employers' Disclosures about
Pensions and Other Post-retirement Benefits." FAS 132 revises employers'
disclosures about pension and other post-retirement benefits. It does not change
the measurement or recognition of those plans. FAS 132 is effective for fiscal
years beginning after December 15, 1997. Adoption of this statement will not
impact the Corporation's consolidated financial position, results of operations
or cash flow, and any effect will be limited to the form and content of its
disclosures.
In June 1998, FASB issued FAS 133, "Accounting for Derivative Instruments
and Hedging Activities." FAS 133 establishes accounting and reporting standards
for derivative financial instruments and other similar financial instruments and
for hedging activities. The standard also allows securities classified as
held-to-maturity to be transferred to the available-for-sale category at the
date of initial application of this standard. FAS 133 is effective for all
fiscal quarters of years beginning after June 15, 1999. Management is currently
reviewing this statement to determine the impact it will have on the Company.
Effects of Inflation
The effect of changing prices on financial institutions is typically
different from other industries as the Company's assets and liabilities are
monetary in nature. Interest rates are significantly impacted by inflation, but
neither the timing nor the magnitude of the changes are directly related to
price level indices. Impacts of inflation on interest rates, loan demands, and
deposits are reflected in the consolidated financial statements.
Safe Harbor Statement Under the Private Securities Litigation Reform Act of
1995
The statements contained in this report that are not historical facts may be
forward looking statements. The forward-looking statements are subject to
certain risks and uncertainties which could cause actual results to differ
materially from historical results or those anticipated. Readers are cautioned
not to place undue reliance on these forward-looking statements, which speak
only as of their dates.
10
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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
There have been no significant changes from the quantitative and qualitative
disclosures made in the December 31, 1997 Form 10K.
PART II - OTHER INFORMATION
ITEM 1 - LEGAL PROCEEDINGS
There are no material pending legal proceedings to which the Company is a
party of or which property of the Company is subject.
ITEM 2 - CHANGES IN SECURITIES - Inapplicable
ITEM 3 - DEFAULTS UPON SENIOR SECURITIES - Inapplicable
ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS - None
ITEM 5 - OTHER INFORMATION - Inapplicable
ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
Exhibit 27 - Financial Data Schedule
(b) Reports on Form 8-K
The Company filed a Form 8-K on June 26, 1998 to announce a 100% stock
dividend in the form of a two-for-one stock split.
11
<PAGE>
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
C&F FINANCIAL CORPORATION
(Registrant)
Date July 31, 1998 /s/ Larry G. Dillon
------------------------------ --------------------
Larry G. Dillon,
President and Chief
Executive Officer
Date July 31, 1998 /s/ Thomas F. Cherry
------------------------------ --------------------
Thomas F. Cherry,
Chief Accounting
Officer
<TABLE> <S> <C>
<ARTICLE> 9
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> JUN-30-1998
<CASH> 6,180
<INT-BEARING-DEPOSITS> 3,577
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 37,449
<INVESTMENTS-CARRYING> 42,128
<INVESTMENTS-MARKET> 43,761
<LOANS> 165,531
<ALLOWANCE> 2,463
<TOTAL-ASSETS> 318,956
<DEPOSITS> 236,605
<SHORT-TERM> 42,739
<LIABILITIES-OTHER> 4,935
<LONG-TERM> 0
0
0
<COMMON> 3,863
<OTHER-SE> 0
<TOTAL-LIABILITIES-AND-EQUITY> 318,956
<INTEREST-LOAN> 8,575
<INTEREST-INVEST> 2,603
<INTEREST-OTHER> 0
<INTEREST-TOTAL> 11,178
<INTEREST-DEPOSIT> 3,995
<INTEREST-EXPENSE> 4,734
<INTEREST-INCOME-NET> 644
<LOAN-LOSSES> 250
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 7,007
<INCOME-PRETAX> 4,167
<INCOME-PRE-EXTRAORDINARY> 4,167
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,052
<EPS-PRIMARY> 0.79
<EPS-DILUTED> 0.78
<YIELD-ACTUAL> 8.43
<LOANS-NON> 455
<LOANS-PAST> 650
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 2,234
<CHARGE-OFFS> 46
<RECOVERIES> 25
<ALLOWANCE-CLOSE> 2,463
<ALLOWANCE-DOMESTIC> 2,463
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
