WEST POINT, Va., Oct. 30 /PRNewswire-FirstCall/ --C&F Financial Corporation , the one-bank holding company for C&F Bank, today reported net income of $1.66 million for the third quarter of 2009, compared with $299,000 for the third quarter of 2008 ($1.82 million, adjusted to exclude the impairment charge taken in the third quarter of 2008 related to the corporation's investments in perpetual preferred stock of the Federal National Mortgage Association (Fannie Mae) and the Federal Home Loan Mortgage Corporation (Freddie Mac)). Net income available to common shareholders for the third quarter of 2009 was $1.37 million, or 45 cents per common share assuming dilution, compared with $299,000, or 10 cents per common share assuming dilution, ($1.82 million, or 60 cents per common share assuming dilution, adjusted to exclude the effect of the impairment charge) for the third quarter of 2008.

The corporation's net income was $4.92 million for the first nine months of 2009, compared with $3.14 million for the first nine months of 2008 ($4.67 million, adjusted to exclude the effect of the impairment charge). Net income available to common shareholders for the first nine months of 2009 was $4.08 million, or $1.34 per common share assuming dilution, compared with $3.14 million, or $1.03 per common share assuming dilution, ($4.67 million, or $1.52 per common share assuming dilution, adjusted to exclude the effect of the impairment charge) for the first nine months of 2008.

The difference between reported net income and net income available to common shareholders in 2009 is a result of the preferred stock dividends and amortization of the warrant, related to the corporation's participation in the Department of Treasury's Capital Purchase Program. The preferred stock and warrant were issued in the first quarter of 2009 and, therefore, did not impact net income available to common shareholders for 2008.

For the third quarter of 2009, the corporation's return on average common equity and return on average assets, on an annualized basis, were 8.14 percent and 0.63 percent, respectively, compared to 1.82 percent and 0.14 percent (11.07 percent and 0.87 percent, adjusted to exclude the effect of the impairment charge) for the third quarter of 2008. For the first nine months of 2009, the corporation's return on average common equity and return on average assets, on an annualized basis, was 8.21 percent and 0.62 percent, respectively, compared to 6.38 percent and 0.52 percent (9.47 percent and 0.77 percent, adjusted to exclude the effect of the impairment charge) for the first nine months of 2008. In 2009, these ratios reflect the effects of preferred stock dividends and amortization of the common stock warrant on net income available to common shareholders, as well as asset growth since the end of the third quarter of 2008.

"The corporation's earnings in 2009 continue to reflect the effects of the current economic environment resulting in higher provisions for loan, foreclosed properties and indemnification losses," said Larry Dillon, president and chief executive officer of C&F Financial Corporation. "The sustained deterioration of the commercial and residential real estate markets and credit quality throughout 2009 is driving these increases. Despite these higher loss provisions, both our mortgage company and our finance company reported higher net income in 2009, primarily as a result of the lower interest rate environment and strong demand for their products. Gains on loans sold by the mortgage company increased as a result of the 47 percent increase in loan origination volume, and the finance company's net interest margin for the first nine months of 2009 increased over last year. However, our retail banking segment reported a loss for both the third quarter and the first nine months of 2009, which principally resulted from the effect of nonperforming loans on interest income and the provision for loan losses, lower overdraft charges on deposit accounts, higher expenses associated with nonaccrual loans and foreclosed properties for which loan loss provisions or write downs to fair market value were necessary, and higher assessments for FDIC deposit insurance, including the special assessment recognized in the second quarter of this year to help replenish the Deposit Insurance Fund."

"The capital and liquidity positions of the corporation remain strong," continued Dillon. "The Bank continues to be well-capitalized under all regulatory guidelines. The corporation's board of directors maintained the corporation's quarterly dividend for the third quarter of 2009 at 25 cents per common share. The board of directors will continue to evaluate the corporation's dividends in light of changes in economic conditions, the corporation's capital levels and its future levels of earnings."

Retail Banking Segment. C&F Bank reported a net loss of $347,000 for the third quarter of 2009, compared to net income of $787,000 for the third quarter of 2008. C&F Bank's net loss was $655,000 for the first nine months of 2009, compared to net income of $1.58 million for the first nine months of 2008. The decline in 2009 earnings included the effects of (1) nonperforming loans on interest income, (2) a higher provision for loan losses attributable to the continued slow down in the economy and an increase in nonperforming assets, (3) lower overdraft charges on deposit accounts resulting from economic conditions over the past year, which have caused a decrease in the use of the Bank's overdraft protection product, (4) higher assessments for deposit insurance principally resulting from the FDIC's special assessment in the second quarter of 2009 to help restore the Deposit Insurance Fund, coupled with the effects of the FDIC's increased insurance assessments for all banks, and (5) higher expenses related to nonaccrual loans and foreclosed properties.

The Bank's nonperforming assets increased since December 31, 2008 to $20.35 million at September 30, 2009 and consist of $8.23 million of nonaccrual loans and $12.12 million of foreclosed properties. The largest components of the Bank's nonaccrual loans are three commercial relationships aggregating $5.84 million, which are secured by residential real estate. Management actively monitors the credit risks within the Bank's loan portfolio and evaluates the loss allowance level. The ratio of the Bank's allowance for loan losses to total loans increased to 1.85 percent at September 30, 2009, compared to 1.36 percent at December 31, 2008. The largest component of the Bank's foreclosed properties is $12.00 million of residential properties associated with three commercial relationships. These properties have been written down to their estimated fair value based upon current appraisals less selling costs.

Mortgage Banking Segment. Third quarter net income for C&F Mortgage Corporation was $755,000 in 2009, compared to $401,000 in 2008. Net income for the first nine months of 2009 was $2.75 million, compared to $1.14 million for the first nine months of 2008. Earnings in 2009 included the effects of lower interest rates on loan origination volume, which increased 8.40 percent and 46.90 percent for the third quarter and first nine months of 2009, respectively, resulting in gains on sales of loans of $5.46 million and $19.38 million for the third quarter and first nine months of 2009, respectively, compared to $4.54 million and $12.92 million for the third quarter and first nine months of 2008, respectively. This revenue growth was offset in part by (1) an increase of $224,000 and $1.07 million in the combined provisions for indemnification and foreclosed properties losses in the third quarter and first nine months of 2009, respectively, and (2) increases in personnel costs of $406,000 and $3.99 million in the third quarter and first nine months of 2009, respectively, principally for variable compensation associated with the increase in loan production and net income. The increases in the provisions for indemnification and foreclosed properties losses resulted from increased nonperforming loans due to recourse resulting from borrower fraud and the continued deterioration of the U.S. economy, especially in the housing markets and higher unemployment.

Consumer Finance Segment. Third quarter net income for C&F Finance Company was $1.40 million in 2009, compared to $826,000 in 2008. Net income for the first nine months of 2009 was $3.20 million, compared to $2.46 million for the first nine months of 2008. The consumer finance segment has benefited from growth in average consumer finance loans outstanding since the end of the third quarter of 2008, as well as the decline in its cost of borrowings throughout 2009 compared to 2008. However, C&F Finance Company has experienced higher loan charge-offs in 2009 compared to 2008, which, in combination with loan growth, has resulted in increases in the provision for loan losses of $330,000 in the third quarter of 2009 and $1.83 million in the first nine months of 2009, compared to the same periods in 2008. The higher provision for loan losses resulted in a $1.51 million increase in the allowance for loan losses since December 31, 2008, which increased the ratio of the allowance for loan losses to total loans to 7.68 percent at September 30, 2009, compared to 7.31 percent at December 31, 2008.

Other and Eliminations Segment. The third quarter net loss of this segment was $150,000 in 2009, compared to a net loss of $1.72 million in the third quarter of 2008. The net loss for the first nine months of 2009 was $378,000, compared to a net loss of $2.03 million for the first nine months of 2008. Revenue and expenses of this segment include dividends received on the corporation's investment in equity securities and interest expense associated with the corporation's trust preferred capital notes. The net loss in 2008 included the $1.52 million impairment charge related to the corporation's investments in perpetual preferred stock of Fannie Mae and Freddie Mac, as previously discussed, as well as higher interest expense associated with the corporation's trust preferred capital notes.

About C&F Financial Corporation. C&F Financial Corporation's common stock is listed for trading on The Nasdaq Stock Market under the symbol CFFI. The common stock closed at a price of $18.03 per share on Thursday, October 29, 2009. At September 30, 2009, the book value of the corporation was $22.83 per common share, and the corporation declared a dividend of 25 cents per common share during the third quarter of 2009. The corporation's market makers include Davenport & Company LLC, FTN Financial Securities Corporation, McKinnon & Company, Inc. and Scott & Stringfellow, LLC.

C&F Bank operates 18 retail bank branches located throughout the Hampton to Richmond corridor in Virginia and offers full investment services through its subsidiary C&F Investment Services, Inc. C&F Mortgage Corporation provides mortgage, title and appraisal services through 23 offices located in Virginia, Maryland, North Carolina, South Carolina, Pennsylvania, Delaware and New Jersey. C&F Finance Company provides automobile loans in Virginia, Tennessee, Maryland, North Carolina, Georgia, Ohio, Kentucky, Indiana and West Virginia through its offices in Richmond and Hampton, Virginia, in Nashville, Tennessee and in Towson, Maryland.

Additional information regarding the corporation's products and services, as well as access to its filings with the Securities and Exchange Commission, are available on the corporation's web site at http://www.cffc.com.

Use of Certain Non-GAAP Financial Measures. In addition to results presented in accordance with United States generally accepted accounting principles (GAAP), this earnings release includes certain non-GAAP financial measures for the three and nine months ended September 30, 2008, which are reconciled to their equivalent GAAP financial measures below. Management believes these non-GAAP financial measures provide information useful to investors in understanding the corporation's performance trends and facilitate comparisons with its peers. Specifically, management believes the exclusion from net income of a significant one-time impairment charge recognized in a single accounting period in 2008 permits a comparison of results for ongoing business operations, and it is on this basis that management internally assesses the corporation's performance and establishes goals for future periods. Although the corporation's management believes the non-GAAP measures presented in this earnings release enhance investors' understandings of its performance, these non-GAAP financial measures should not be considered an alternative to GAAP-basis financial statements.

Forward-Looking Statements. Statements in this press release which express "belief," "intention," "expectation," and similar expressions, identify forward-looking statements. These forward-looking statements are based on the beliefs of the corporation's management, as well as assumptions made by, and information currently available to, the corporation's management. These statements are inherently uncertain, and there can be no assurance that the underlying assumptions will prove to be accurate. Actual results could differ materially from those anticipated by such statements. Factors that could have a material adverse effect on the operations and future prospects of the corporation include, but are not limited to, changes in: (1) interest rates, (2) general economic and business conditions, including unemployment levels, (3) demand for loan products, (4) the legislative/regulatory climate, (5) monetary and fiscal policies of the U.S. Government, including policies of the U.S. Treasury and the Federal Reserve Board, (6) the quality or composition of the loan or investment portfolios, (7) the level of net charge-offs on loans, (8) deposit flows, (9) competition, (10) demand for financial services in the corporation's market area, (11) technology, (12) reliance on third parties for key services, (13) the real estate market, (14) the corporation's expansion and technology initiatives, and (15) accounting principles, policies and guidelines. Further, there can be no assurance that the actions taken by the U.S. Treasury and the Federal Reserve Bank will stabilize the U.S. financial system or alleviate the industry or economic factors that may adversely affect the corporation's business and financial performance. These risks and uncertainties should be considered in evaluating the forward-looking statements contained herein, and readers are cautioned not to place undue reliance on such statements, which speak only as of date of this release.

C&F Financial Corporation Selected Financial Information (in thousands, except for share and per share data) Balance Sheets 9/30/09 12/31/08 9/30/08 ------- -------- ------- (unaudited) (unaudited) Interest-bearing deposits with other banks and federal funds sold $1,800 $161 $1,230 Investment securities - available for sale at fair value 119,774 100,603 87,556 Loans held for sale, net 48,763 37,042 40,273 Loans, net: Retail Banking segment 445,523 469,700 468,268 Mortgage Banking segment 2,371 3,540 4,312 Consumer Finance segment 169,679 159,777 161,995 Federal Home Loan Bank stock 3,887 5,284 4,011 Total assets 874,936 855,657 846,474 Deposits 575,405 550,725 551,858 Borrowings 192,333 219,460 214,169 Shareholders' equity 89,539 64,857 64,385 For The For The Quarter Ended Nine Months Ended Statements of Income 9/30/09 9/30/08 9/30/09 9/30/08 ------- ------- ------- ------- (unaudited) (unaudited) Interest income $16,625 $16,386 $48,187 $48,198 Interest expense 3,727 5,319 11,900 16,380 Provision for loan losses: Retail Banking segment 1,400 500 3,500 1,160 Mortgage Banking segment 63 75 563 587 Consumer Finance segment 2,900 2,570 8,800 6,970 Other operating income: Gains on sales of loans 5,464 4,524 19,381 12,915 Gains (losses) on available for sale securities (22) (1,354) 8 (1,301) Other 3,118 2,653 8,370 7,459 Other operating expenses: Salaries and employee benefits 8,357 7,823 26,668 23,031 Other 6,364 4,989 17,844 14,557 Income tax expense 716 634 1,755 1,442 Net income 1,658 299 4,916 3,144 Net income available to common shareholders 1,367 299 4,077 3,144 Earnings per common share - assuming dilution 0.45 0.10 1.34 1.03 Earnings per common share - basic 0.45 0.10 1.34 1.04 For The For The Quarter Ended Nine Months Ended Segment Information 9/30/09 9/30/08 9/30/09 9/30/08 ------- ------- ------- ------- (unaudited) (unaudited) Net (loss) income - Retail Banking $(347) $787 $(655) $1,575 Net income - Mortgage Banking 755 401 2,746 1,139 Net income - Consumer Finance 1,400 826 3,203 2,462 Net loss - Other and Eliminations (150) (1,715) (378) (2,032) Mortgage loan originations - Mortgage Banking 214,621 197,983 866,952 590,168 Mortgage loans sold - Mortgage Banking 227,973 192,425 855,231 583,978 For The For The Quarter Ended Nine Months Ended Average Balances 9/30/09 9/30/08 9/30/09 9/30/08 ------- ------- ------- ------- (unaudited) (unaudited) Interest-bearing deposits in other banks and federal funds sold $2,345 $1,369 $1,097 $1,406 Investment securities - available for sale at fair value 117,678 94,282 112,507 91,482 Loans held for sale 41,436 29,129 55,925 30,843 Loans: Retail Banking segment 457,708 475,716 465,699 454,385 Mortgage Banking segment 2,859 4,739 3,532 4,904 Consumer Finance segment 181,164 174,068 176,386 168,445 Total earning assets 803,190 779,303 815,146 751,465 Time, checking and savings deposits 488,761 463,413 486,577 457,684 Borrowings 182,432 206,402 196,266 188,960 Total interest-bearing liabilities 671,193 669,815 682,843 646,644 Demand deposits 88,425 86,983 84,996 83,663 Shareholders' equity 87,624 65,819 85,494 65,701 Asset Quality 9/30/09 12/31/08 9/30/08 ------- -------- ------- (unaudited) (unaudited) Retail and Mortgage Banking Segments Nonaccrual loans* -Retail Banking $8,232 $17,222 $12,133 Nonaccrual loans* -Mortgage Banking 253 1,460 1,663 Real estate owned**-Retail Banking 12,116 1,370 1,972 Real estate owned**-Mortgage Banking 719 596 623 --- --- --- Total nonperforming assets $21,320 $20,648 $16,391 Accruing loans* past due for 90 days or more $231 $3,517 $912 Total loans* $456,691 $480,438 $478,477 Allowance for loan losses $8,797 $7,198 $5,897 Nonperforming assets to loans* and real estate owned 4.54% 4.28% 3.41% Allowance for loan losses to loans* 1.93% 1.50% 1.23% Allowance for loan losses to nonaccrual loans* 103.68% 38.53% 42.74% * Loans exclude Consumer Finance segment loans presented below. ** Real estate owned is recorded at its fair market value less cost to sell. Consumer Finance Segment Nonaccrual loans $386 $798 $990 Accruing loans past due for 90 days or more $- $- $- Total loans $183,798 $172,385 $174,184 Allowance for loan losses $14,119 $12,608 $12,189 Nonaccrual consumer finance loans to total consumer finance loans 0.21% 0.46% 0.57% Allowance for loan losses to total consumer finance loans 7.68% 7.31% 7.00% As Of and For The As Of and For The Quarter Ended Nine Months Ended Other Data and Ratios 9/30/09 9/30/08 9/30/09 9/30/08 ------- ------- ------- ------- (unaudited) (unaudited) Annualized return on average assets 0.63% 0.14% 0.62% 0.52% Annualized return on average common equity 8.14% 1.82% 8.21% 6.38% Dividends declared per common share $0.25 $0.31 $0.81 $0.93 Common shares purchased - 1,000 - 1,600 Average price of purchased common shares - $21.56 - $24.67 Weighted average common shares outstanding - assuming dilution 3,047,263 3,048,760 3,042,757 3,065,891 Weighted average common shares outstanding - basic 3,044,110 3,030,972 3,041,706 3,026,400 Market value per common share at period end $17.00 $20.50 $17.00 $20.50 Book value per common share at period end $22.83 $21.24 $22.83 $21.24 Price to book value ratio at period end 0.74 0.97 0.74 0.97 Price to earnings ratio at period end (ttm) 10.12 12.97 10.12 12.97 C&F Financial Corporation Reconciliation of Certain Non-GAAP Financial Measures (in thousands, except for per share data For The For The Quarter Ended Nine Months Ended (1) 9/30/09 9/30/08 9/30/09 9/30/08 ---- ------- ------- ------- ------- (unaudited) (unaudited) Net Income and Earnings Per Common Share Net income (GAAP) $1,658 $299 $4,916 $3,144 Effective dividends on Treasury preferred stock (291) - (839) - ---- -- ---- -- Net income available to common shareholders (GAAP) A 1,367 299 4,077 3,144 Other-than-temporary impairment on Fannie Mae and Freddie Mac preferred stock (GAAP) - 1,522 - 1,522 -- ----- -- ----- Net income available to common shareholders excluding other-than-temporary impairment on Fannie Mae and Freddie Mac preferred stock B $1,367 $1,821 $4,077 $4,666 Weighted average common shares - assuming dilution (GAAP) C 3,047 3,049 3,043 3,066 Weighted average common shares - basic (GAAP) D 3,044 3,031 3,042 3,026 Earnings per common share - assuming dilution GAAP A/C $0.45 $0.10 $1.34 $1.03 Excluding other-than- temporary impairment on Fannie Mae and Freddie Mac preferred stock B/C $0.45 $0.60 $1.34 $1.52 Earnings per common share - basic GAAP A/D $0.45 $0.10 $1.34 $1.04 Excluding other-than- temporary impairment on Fannie Mae and Freddie Mac preferred stock B/D $0.45 $0.60 $1.34 $1.54 Annualized Return on Average Assets Average assets (GAAP) E $867,654 $838,458 $877,958 $812,499 Annualized return on average assets GAAP (A/E)*4 0.63% 0.14% GAAP (A/E)/.75 0.62% 0.52% Excluding other-than- temporary impairment on Fannie Mae and Freddie Mac preferred stock (B/E)*4 0.63% 0.87% Excluding other-than- temporary impairment on Fannie Mae and Freddie Mac preferred stock (B/E)/.75 0.62% 0.77% Annualized Return on Average Common Equity Average common equity (GAAP) F $67,625 $65,819 $66,080 $65,701 Annualized return on average common equity GAAP (A/F)*4 8.14% 1.82% GAAP (A/F)/.75 8.21% 6.38% Excluding other-than- temporary impairment on Fannie Mae and Freddie Mac preferred stock (B/F)*4 8.14% 11.07% Excluding other-than- temporary impairment on Fannie Mae and Freddie Mac preferred stock (B/F)/.75 8.21% 9.47% (1) The letters included in this column are provided to show how the various ratios presented in the Reconciliation of Certain Non-GAAP Financial Measures are calculated.

C&F Financial Corporation

CONTACT: Tom Cherry, Executive Vice President & CFO, +1-804-843-2360