C & F FINANCIAL CORP

For the period ended Sep 30, 2024. Filed Nov 4, 2024.

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A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.

Sep 30, 2024 · Filed Nov 4, 2024

CFFI$107.70+2.5%Stored close · as of Nov 9, 2026

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Contents

Notes to Consolidated Interim Financial Statements (Unaudited)

NOTE****S TO CONSOLIDATED INTERIM FINANCIAL STATEMENTS

(Unaudited)

NOTE 1: Summary of Significant Accounting Policies

Principles of Consolidation: The accompanying unaudited consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (GAAP) for interim financial reporting and with applicable quarterly reporting regulations of the Securities and Exchange Commission (the SEC). They do not include all of the information and notes required by GAAP for complete financial statements. Therefore, these consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the C&F Financial Corporation Annual Report on Form 10-K for the year ended December 31, 2023 (2023 Annual Report). The accounting and reporting policies of the Corporation conform to GAAP and to predominant practices within the banking industry and are primarily disclosed in the 2023 Annual Report.

The unaudited consolidated financial statements include the accounts of C&F Financial Corporation (the Corporation), its direct wholly-owned subsidiary, Citizens and Farmers Bank (the Bank or C&F Bank) and indirect subsidiaries that are wholly-owned or controlled. Subsidiaries that are less than wholly owned are fully consolidated if they are controlled by the Corporation or one of its subsidiaries, and the portion of any subsidiary not owned by the Corporation is reported as noncontrolling interest. All significant intercompany accounts and transactions have been eliminated in consolidation. In addition, the Corporation owns all of the common stock of C&F Financial Statutory Trust I, C&F Financial Statutory Trust II and Central Virginia Bankshares Statutory Trust I, all of which are unconsolidated subsidiaries. The subordinated debt owed to these trusts is reported as liabilities of the Corporation.

Nature of Operations: The Corporation is a bank holding company incorporated under the laws of the Commonwealth of Virginia. The Corporation owns all of the stock of its subsidiary, C&F Bank, which is an independent commercial bank chartered under the laws of the Commonwealth of Virginia.

C&F Bank hasfive wholly-owned subsidiaries: C&F Mortgage Corporation (C&F Mortgage), C&F Finance Company (C&F Finance), C&F Wealth Management Corporation (C&F Wealth Management), C&F Insurance Services, Inc. (C&F Insurance) and CVB Title Services, Inc. (CVB Title), all incorporated under the laws of the Commonwealth of Virginia. C&F Mortgage, organized in September 1995, originates and sells residential mortgages, provides mortgage loan origination services to third-party lenders and, through its subsidiary Certified Appraisals LLC, provides ancillary mortgage loan production services for residential appraisals. C&F Mortgage owns a 51 percent interest in C&F Select LLC, which was organized in January 2019 and is also engaged in the business of originating and selling residential mortgages. C&F Finance, acquired in September 2002, is a finance company purchasing automobile, marine and recreational vehicle (RV) loans through indirect lending programs. C&F Wealth Management, 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. C&F Insurance and CVB Title were organized for the primary purpose of owning equity interests in an independent insurance agency and a full service title and settlement agency, respectively. Business segment data is presented in Note 10.

Basis of Presentation: The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Material estimates that are particularly susceptible to significant change in the near term relate to the determination of the allowance for credit losses and evaluation of goodwill for impairment. In the opinion of management, all adjustments, consisting only of normal recurring adjustments, which are necessary for a fair presentation of the results of operations in these financial statements, have been made.

Reclassification: Certain reclassifications have been made to the prior period financial statements to conform to the current period presentation. None of these reclassifications are considered material and did not affect net income or total equity.

Derivative Financial Instruments: The Corporation recognizes derivative financial instruments at fair value as either another asset orother liability in the Consolidated Balance Sheets. 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. The gain or loss on the Corporation’s cash flow hedges is reported as a component of other comprehensive income (loss), net of deferred income taxes, and reclassified into earnings in the same period(s) during which the hedged transactions affect earnings. IRLCs and interest rate swaps with loan customers and dealer counterparties are not designated as hedging instruments, and therefore changes in the fair value of these instruments are reported as noninterest income. The Corporation’s derivative financial instruments are described more fully in Note 12.

**Recent Significant Accounting Pronouncements:**In November 2023, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2023-07, “Segment Reporting (Topic 280) – Improvements to Reportable Segment Disclosures.” The amendments in ASU 2023-07 require that a public entity disclose, on an annual and interim basis, significant segment expenses that are regularly provided to the chief operating decision maker and included within each reported measure of segment profit or loss, require other segment items by reportable segment to be disclosed and a description of their composition, and require disclosure of the title and position of the chief operating decision maker and an explanation of how they use the reported measure of segment profit or loss in assessing segment performance and deciding how to allocate resources. The amendments apply to all public entities that are required to report segment information in accordance with Topic 280, “Segment Reporting,” and are effective for fiscal years beginning after December 15, 2023, and interim periods with fiscal years beginning after December 15, 2024. Early adoption is permitted. The amendments are to be applied retrospectively to all prior periods presented. The Corporation does not expect the adoption of ASU 2023-07 to have a material effect on its consolidated financial statements.

In November 2023, FASB issued ASU 2023-09, “Income Taxes (Topic 740) – Improvements to Income Tax Disclosures.” The amendments in ASU 2023-09 require that a public entity disclose, on an annual basis, specific categories in the rate reconciliation and provide additional information for reconciling items that meet a quantitative threshold, the amount of income taxes paid disaggregated by federal, state and foreign taxes, and the amount of income taxes paid disaggregated by individual jurisdictions in which income taxes paid is equal to or granter than five percent of total income taxes paid. The amendments also require that entities disclose income from continuing operations before income tax expense disaggregated between domestic and foreign, as well as income tax expense from continuing operations disaggregated by federal, state and foreign. The amendments apply to all public entities that are subject to Topic 740, “Income Taxes,” and are effective for annual periods beginning after December 15, 2024. Early adoption is permitted. The amendments are to be applied on a prospective basis; however, retrospective application is permitted. The Corporation does not expect the adoption of ASU 2023-09 to have a material effect on its consolidated financial statements.

Other accounting standards that have been issued by the FASB or other standards-setting bodies are not currently expected to have a material effect on the Corporation’s financial position, results of operations or cash flows.

NOTE 2: Securities

The Corporation’s debt securities, all of which are classified as available for sale, are summarized as follows:


· · September 30, 2024
· · · Gross · Gross · ·
· · Amortized · · Unrealized · · Unrealized · ·
(Dollars in thousands) · · Cost · · Gains · · Losses · · Fair Value
U.S. Treasury securities	$10,977	$—	$(293)	$10,684
U.S. government agencies and corporations	70,396	—	(6,727)	63,669
Mortgage-backed securities	177,376	1,022	(11,421)	166,977
Obligations of states and political subdivisions	148,636	1,830	(3,290)	147,176
Corporate and other debt securities	23,408	4	(2,873)	20,539
	$430,793	$2,856	$(24,604)	$409,045


· · December 31, 2023
· · · Gross · Gross · ·
· · Amortized · · Unrealized · · Unrealized · ·
(Dollars in thousands) · · Cost · · Gains · · Losses · · Fair Value
U.S. Treasury securities	$45,883	$—	$(780)	$45,103
U.S. government agencies and corporations	96,407	—	(9,313)	87,094
Mortgage-backed securities	177,734	185	(16,223)	161,696
Obligations of states and political subdivisions	148,875	2,280	(4,044)	147,111
Corporate and other debt securities	25,193	—	(3,753)	21,440
	$494,092	$2,465	$(34,113)	$462,444

The amortized cost and estimated fair value of securities at September 30, 2024, by the earlier of contractual maturity or expected maturity, are shown below. The Corporation has elected to exclude accrued interest receivable, totaling $2.27 million at September 30, 2024, from the amortized cost basis of securities. Expected maturities will differ from contractual maturities because borrowers may have the right to prepay obligations with or without call or prepayment penalties.

· · · · · · ·
· · September 30, 2024
· Amortized ·
(Dollars in thousands) · · Cost · · Fair Value
Due in one year or less	$71,087	$69,053
Due after one year through five years	175,996	164,747
Due after five years through ten years	117,701	110,577
Due after ten years	66,009	64,668
	$430,793	$409,045

The following table presents the gross realized gains and losses on and the proceeds from the sales, maturities and calls of securities. During the three and nine months ended September 30, 2024 and 2023 there wereno sales of securities.

· · · · · · · · · · · ·
· · Three Months Ended September 30, · · Nine Months Ended September 30,
(Dollars in thousands) · 2024 · 2023 · 2024 · · 2023
Realized gains from sales, maturities and calls of securities: · · · · · · · · · · · ·
Gross realized gains	$—	$—	$—	$—
Gross realized losses	—	—	—	(5)
Net realized losses	$—	$—	$—	$(5)
Proceeds from sales, maturities, calls and paydowns of securities	$16,344	$30,719	$89,240	$75,560

The Corporation pledges securities primarily to secure municipal deposits, repurchase agreements and lines of credit that provide liquidity to the Corporation and C&F Bank. Securities with an aggregate amortized cost of $183.10 million and an aggregate fair value of $170.80 million were pledged at September 30, 2024. Securities with an aggregate amortized cost of $215.97 million and an aggregate fair value of $198.85 million were pledged at December 31, 2023.

Securities in an unrealized loss position at September 30, 2024, by duration of the period of the unrealized loss, are shown below.


· · Less Than 12 Months · · 12 Months or More · · Total
· Fair · Unrealized · Fair · Unrealized · Fair · Unrealized
(Dollars in thousands) · · Value · · Loss · · Value · · Loss · · Value · · Loss
U.S. Treasury securities	$—	$—	$10,684	$293	$10,684	$293
U.S. government agencies and corporations	—	—	63,669	6,727	63,669	6,727
Mortgage-backed securities	2,615	27	132,043	11,394	134,658	11,421
Obligations of states and political subdivisions	9,484	60	62,583	3,230	72,067	3,290
Corporate and other debt securities	484	16	19,051	2,857	19,535	2,873
Total	$12,583	$103	$288,030	$24,501	$300,613	$24,604

There were 465 debt securities with a fair value below the amortized cost basis, totaling $300.61 million of aggregate fair value as of September 30, 2024. The Corporation concluded that a credit loss did not exist in its securities portfolio at September 30, 2024, andno impairment loss has been recognized based on the fact that (1) changes in fair value were caused primarily by fluctuations in interest rates, (2) securities with unrealized losses had generally high credit quality, (3) the Corporation intends to hold these investments in debt securities to maturity and it is more-likely-than-not that the Corporation will not be required to sell these investments before a recovery of its investment, and (4) issuers have continued to make timely payments of principal and interest. Additionally, the Corporation’s mortgage-backed securities are entirely issued by either U.S. government agencies or U.S. 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.

Securities in an unrealized loss position at December 31, 2023, by duration of the period of the unrealized loss, are shown below.


· · Less Than 12 Months · · 12 Months or More · · Total
· Fair · Unrealized · Fair · Unrealized · Fair · Unrealized
(Dollars in thousands) · · Value · · Loss · · Value · · Loss · · Value · · Loss
U.S. Treasury securities	$—	$—	$45,103	$780	$45,103	$780
U.S. government agencies and corporations	—	—	87,094	9,313	87,094	9,313
Mortgage-backed securities	5,528	68	150,023	16,155	155,551	16,223
Obligations of states and political subdivisions	4,659	72	65,630	3,972	70,289	4,044
Corporate and other debt securities	3,386	364	18,054	3,389	21,440	3,753
Total	$13,573	$504	$365,904	$33,609	$379,477	$34,113

The Corporation’s investment in restricted stock totaled $4.54 million at September 30, 2024 and $2.93 million at December 31, 2023 and consisted of Federal Home Loan Bank of Atlanta (FHLB) stock. Restricted stock is generally viewed as a long-term investment, which is carried at cost because there is no market for the stock other than to be redeemed or repurchased by the FHLB. Therefore, when evaluating restricted stock for impairment, its value is based on the ultimate recoverability of the par value rather than by recognizing any temporary decline in value. The Corporation did not consider its investment in restricted stock to be impaired at September 30, 2024 andno impairment has been recognized.

NOTE 3: Loans

The Corporation’s loans are stated at their face amount, net of deferred fees and costs and discounts, and consist of the classes of loans included in the table below. The Corporation has elected to exclude accrued interest receivable, totaling $7.93 million and $7.65 million at September 30, 2024 and December 31, 2023, respectively, from the recorded balance of loans.


· · September 30, · · December 31,
(Dollars in thousands) · 2024 · 2023
Commercial real estate	$701,647	$668,122
Commercial business	115,410	115,348
Construction - commercial real estate	155,072	69,768
Land acquisition and development	33,774	29,064
Builder lines	29,664	24,668
Construction - consumer real estate	16,874	11,223
Residential mortgage	310,595	293,256
Equity lines	59,406	51,592
Other consumer	9,667	10,588
Consumer finance – automobiles	406,385	401,276
Consumer finance - marine and recreational vehicles	70,915	67,234
Subtotal	1,909,409	1,742,139
Less allowance for credit losses	(40,771)	(39,651)
Loans, net	$1,868,638	$1,702,488

Other consumer loans included $210,000 and $228,000 of demand deposit overdrafts at September 30, 2024 and December 31, 2023, respectively.

The following table shows the aging of the Corporation’s loan portfolio, by class, at September 30, 2024:


	30-59		60-89	90+								90+ Days
	Days		Days	Days	Total						Past Due and
(Dollars in thousands)	Past Due		Past Due	Past Due	Past Due		Current1	Total Loans	Accruing
Commercial real estate		$89		$429		$—		$518		$701,129			$701,647	$—
Commercial business		—		—		—		—		115,410			115,410	—
Construction - commercial real estate		—		—		—		—		155,072			155,072	—
Land acquisition and development		—		—		—		—		33,774			33,774	—
Builder lines		—		—		—		—		29,664			29,664	—
Construction - consumer real estate		—		—		—		—		16,874			16,874	—
Residential mortgage		2,042		132		231		2,405		308,190			310,595	115
Equity lines		—		174		89		263		59,143			59,406	89
Other consumer		—		—		—		—		9,667			9,667	—
Consumer finance - automobiles		12,826		2,408		1,008		16,242		390,143			406,385	—
Consumer finance - marine and recreational vehicles		228		107		93		428		70,487			70,915	—
Total		$15,185		$3,250		$1,421		$19,856		$1,889,553			$1,909,409	$204

1	For the purposes of the table above, “Current” includes loans that are 1-29 days past due.

The table above includes nonaccrual loans that are current of $240,000, 30-59 days past due of $156,000, 60-89 days past due of $115,000, and 90+ days past due of $1.22 million.

The following table shows the aging of the Corporation’s loan portfolio, by class, at December 31, 2023:


	30-59		60-89	90+								90+ Days
	Days		Days	Days	Total						Past Due and
(Dollars in thousands)	Past Due		Past Due	Past Due	Past Due		Current1	Total Loans	Accruing
Commercial real estate		$92		$—		$—		$92		$668,030			$668,122	$—
Commercial business		—		—		1		1		115,347			115,348	1
Construction - commercial real estate		—		—		—		—		69,768			69,768	—
Land acquisition and development		—		—		—		—		29,064			29,064	—
Builder lines		—		—		—		—		24,668			24,668	—
Construction - consumer real estate		—		—		—		—		11,223			11,223	—
Residential mortgage		1,643		387		273		2,303		290,953			293,256	89
Equity lines		215		103		115		433		51,159			51,592	38
Other consumer		3		—		9		12		10,576			10,588	—
Consumer finance - automobiles		15,263		2,628		892		18,783		382,493			401,276	—
Consumer finance - marine and recreational vehicles		282		115		—		397		66,837			67,234	—
Total		$17,498		$3,233		$1,290		$22,021		$1,720,118			$1,742,139	$128

1 For the purposes of the table above, “Current” includes loans that are 1-29 days past due.

The table above includes nonaccrual loans that are current of $113,000, 60-89 days past due of $22,000 and 90+ days past due of $1.16 million.

The following table shows the Corporation’s recorded balance of loans on nonaccrual status as of September 30, 2024 and December 31, 2023. The Corporation recognized $10,000 in interest income on loans on nonaccrual status as of September 30, 2024 and had $1,000 and $9,000 in reversals of interest income upon placing commercial loans on nonaccrual status during the three and nine months ended September 30, 2024, respectively. All nonaccrual loans at September 30, 2024 had an allowance for credit losses.


· · September 30, · · December 31,
(Dollars in thousands) · 2024 · · 2023
Commercial business	$92	$—
Residential mortgage	516	320
Equity lines	20	77
Other consumer	—	9
Consumer finance - automobiles	1,008	892
Consumer finance - marine and recreational vehicles	93	—
Total	$1,729	$1,298

Occasionally, the Corporation modifies loans to borrowers experiencing financial difficulties by providing principal forgiveness, term extensions, interest rate reductions or other-than-insignificant payment delays. As the effect of most modifications is already included in the allowance for credit losses due to the measurement methodologies used in its estimate, the allowance for credit losses is typically not adjusted upon modification. When principal forgiveness is provided at modification, the amount forgiven is charged against the allowance for credit losses. In some cases, the Corporation may provide multiple types of modifications on one loan and when multiple types of modifications occur within the same period, the combination of modifications is separately reported.

The following tables present the amortized cost basis of loans as of September 30, 2024 and 2023 that were both experiencing financial difficulty and modified during the three and nine months ended September 30, 2024 and 2023.


· · Three Months Ended September 30, 2024 · · · · Nine Months Ended September 30, 2024 ·
· · · % of Total · · · · · % of Total ·
· · · Class of · · · · · Class of ·
· · Amortized · Financing · · · · Amortized · Financing ·
(Dollars in thousands) · Cost · Receivable · · · · Cost · Receivable ·
Term Extension
Commercial real estate	$96	0.0%	$96	0.0%
Residential mortgage	$—	—	$336	0.1
Total Term Extension	$96		$432

Combination Term Extension and Interest Rate Reduction
Residential mortgage	$—	—%	$18	0.0%
Total Combination Term Extension and Interest Rate Reduction	$—		$18
Total	$96	0.0%	$450	0.0%


· · Three Months Ended September 30, 2023 · · · · Nine Months Ended September 30, 2023 ·
· · · % of Total · · · · · % of Total ·
· · · Class of · · · · · Class of ·
· · Amortized · Financing · · · · Amortized · Financing ·
(Dollars in thousands) · Cost · Receivable · · · · Cost · Receivable ·
Term Extension
Commercial real estate	$969	0.2%	$969	0.2%
Residential mortgage	71	0.0	71	0.0
Total Term Extension	$1,040		$1,040

Combination Term Extension and Interest Rate Reduction
Commercial real estate	$—	—%	$45	0.0%
Total Combination Term Extension and Interest Rate Reduction	$—		$45
Total	$1,040	0.1%	$1,085	0.1%

The following table presents the financial effects of the loan modifications presented above to borrowers experiencing financial difficulty for the three and nine months ended September 30, 2024 and 2023.


· Three Months Ended September 30, 2024 · · · Nine Months Ended September 30, 2024
· Weighted- · · Weighted- · · · Weighted- · · Weighted-
· Average · · Average · · · Average · · Average
· Interest Rate · · Term Extension · · · Interest Rate · · Term Extension
(Dollars in thousands) · Reduction · · (in years) · · · Reduction · · (in years)
Commercial real estate	—%	1.0	—%	1.0
Residential mortgage	—	—	1.51	6.9
Total	—%	1.0	1.51%	5.7


· Three Months Ended September 30, 2023 · · · Nine Months Ended September 30, 2023
· Weighted- · · Weighted- · · · Weighted- · · Weighted-
· Average · · Average · · · Average · · Average
· Interest Rate · · Term Extension · · · Interest Rate · · Term Extension
(Dollars in thousands) · Reduction · · (in years) · · · Reduction · · (in years)
Commercial real estate	—%	2.0	0.75%	2.1
Residential mortgage	—	10.0	—	10.0
Total	—%	2.5	0.75%	2.6

The Corporation closely monitors the performance of modified loans to understand the effectiveness of its modification efforts. Upon the determination that all or a portion of a modified loan is uncollectible, that amount is charged against the allowance for credit losses. There wereno payment defaults during the three and nine months ended September 30, 2024 and 2023 of modified loans that were modified during the previous twelve months and all were current as of September 30, 2024.

NOTE 4: Allowance for Credit Losses

The Corporation conducts an analysis of the collectability of the loan portfolio on a regular basis and uses this analysis to assess the sufficiency of the allowance for credit losses on loans and to determine the necessary provision for credit losses. The Corporation segmented the loan portfolio into three loan portfolios based on common risk characteristics. The Commercial portfolio consists of commercial real estate loans, commercial business loans, commercial and consumer real estate construction loans, land acquisition and development loans, and builder lines. The Consumer portfolio consists of residential mortgage loans, equity lines, and other consumer loans. The Consumer Finance portfolio consists of automobile and marine and RV loans.

The following table shows the allowance for credit losses activity by loan portfolio for the nine months ended September 30, 2024 and 2023:


· · · · · · · Consumer · · ·
(Dollars in thousands) · · Commercial · · Consumer · · Finance · · Total
Allowance for credit losses:
Balance at December 31, 2023	$12,315	$3,758	$23,578	$39,651
Provision charged to operations	1,160	440	8,100	9,700
Loans charged off	—	(293)	(11,707)	(12,000)
Recoveries of loans previously charged off	28	125	3,267	3,420
Balance at September 30, 2024	$13,503	$4,030	$23,238	$40,771


· · · · · · · Consumer · · ·
(Dollars in thousands) · · Commercial · · Consumer · · Finance · · Total
Allowance for credit losses:
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	839	362	4,250	5,451
Loans charged off	(16)	(240)	(9,306)	(9,562)
Recoveries of loans previously charged off	144	136	3,070	3,350
Balance at September 30, 2023	$12,164	$3,695	$24,389	$40,248

The following table presents a breakdown of the provision for credit losses for the periods indicated.

· · · · · · · · · · · ·
· · Three Months Ended September 30, · · Nine Months Ended September 30,
(Dollars in thousands) · 2024 · 2023 · · 2024 · 2023
Provision for credit losses: · · · · · · · · · · · ·
Provision for loans	$3,700	$2,100	$9,700	$5,451
Provision for unfunded commitments	—	(50)	50	349
Total	$3,700	$2,050	$9,750	$5,800

The table below details the recorded balance of the classes of loans within the commercial and consumer loan portfolios by loan rating, which is reviewed on a quarterly basis, and year of origination as of September 30, 2024:


· · · · · · · · · · · · · · · · · · · · Revolving · · Revolving · ·
· · Term Loans Recorded Balance by Origination Year · · Loans · · Loans · ·
· · · · · · · · · · · · · · · · · · · · Recorded · · Converted · ·
(Dollars in thousands) · 2024 · · 2023 · · 2022 · · 2021 · · 2020 · · Prior · · Balance · · to Term1 · · Total
Commercial real estate:
Loan Rating
Pass	$71,877	$80,522	$123,080	$143,969	$112,031	$163,489	$—	$112	$695,080
Special Mention	—	—	—	5,624	—	943	—	—	6,567
Total	$71,877	$80,522	$123,080	$149,593	$112,031	$164,432	$—	$112	$701,647

Commercial business:
Loan Rating
Pass	$6,189	$14,223	$19,158	$14,247	$10,710	$25,128	$25,587	$—	$115,242
Special Mention	24	52	—	—	—	—	—	—	76
Substandard Nonaccrual	—	—	—	—	—	—	—	92	92
Total	$6,213	$14,275	$19,158	$14,247	$10,710	$25,128	$25,587	$92	$115,410

Construction - commercial real estate:
Loan Rating
Pass	$38,479	$50,213	$61,410	$—	$4,970	$—	$—	$—	$155,072
Total	$38,479	$50,213	$61,410	$—	$4,970	$—	$—	$—	$155,072

Land acquisition and development:
Loan Rating
Pass	$19,073	$2,114	$2,662	$1,324	$8,601	$—	$—	$—	$33,774
Total	$19,073	$2,114	$2,662	$1,324	$8,601	$—	$—	$—	$33,774

Builder lines:
Loan Rating
Pass	$23,913	$3,436	$1,430	$481	$—	$404	$—	$—	$29,664
Total	$23,913	$3,436	$1,430	$481	$—	$404	$—	$—	$29,664

Construction - consumer real estate:
Loan Rating
Pass	$11,329	$5,099	$358	$—	$—	$—	$88	$—	$16,874
Total	$11,329	$5,099	$358	$—	$—	$—	$88	$—	$16,874

Residential mortgage:
Loan Rating
Pass	$39,210	$58,659	$84,733	$40,701	$36,323	$49,080	$—	$—	$308,706
Special Mention	—	869	—	—	—	223	—	—	1,092
Substandard	—	—	—	—	102	179	—	—	281
Substandard Nonaccrual	128	—	—	—	—	388	—	—	516
Total	$39,338	$59,528	$84,733	$40,701	$36,425	$49,870	$—	$—	$310,595

Equity lines:
Loan Rating
Pass	$23	$—	$—	$—	$70	$839	$58,050	$239	$59,221
Special Mention	—	—	—	—	—	—	—	76	76
Substandard	—	—	—	—	—	—	—	89	89
Substandard Nonaccrual	—	—	—	—	—	—	—	20	20
Total	$23	$—	$—	$—	$70	$839	$58,050	$424	$59,406

Other consumer:
Loan Rating
Pass	$3,842	$2,841	$1,828	$336	$163	$611	$46	$—	$9,667
Total	$3,842	$2,841	$1,828	$336	$163	$611	$46	$—	$9,667

Total:
Loan Rating
Pass	$213,935	$217,107	$294,659	$201,058	$172,868	$239,551	$83,771	$351	$1,423,300
Special Mention	24	921	—	5,624	—	1,166	—	76	7,811
Substandard	—	—	—	—	102	179	—	89	370
Substandard Nonaccrual	128	—	—	—	—	388	—	112	628
Total	$214,087	$218,028	$294,659	$206,682	$172,970	$241,284	$83,771	$628	$1,432,109

1	Equity lines include $154,000 of revolving loans converted to term during the nine months ended September 30, 2024.


· · · · · · · · · · · · · · · · · · · · Revolving · · Revolving · ·
· · Term Loans Recorded Balance by Origination Year · · Loans · · Loans · ·
· · · · · · · · · · · · · · · · · · · · Recorded · · Converted · ·
(Dollars in thousands) · 2023 · · 2022 · · 2021 · · 2020 · · 2019 · · Prior · · Balance · · to Term1 · · Total
Commercial real estate:
Loan Rating
Pass	$81,324	$125,278	$155,805	$121,365	$37,383	$140,158	$—	$119	$661,432
Special Mention	—	—	5,731	—	—	959	—	—	6,690
Total	$81,324	$125,278	$161,536	$121,365	$37,383	$141,117	$—	$119	$668,122

Commercial business:
Loan Rating
Pass	$18,682	$18,190	$17,219	$12,062	$14,847	$15,339	$18,686	$261	$115,286
Special Mention	62	—	—	—	—	—	—	—	62
Total	$18,744	$18,190	$17,219	$12,062	$14,847	$15,339	$18,686	$261	$115,348

Construction - commercial real estate:
Loan Rating
Pass	$29,346	$36,907	$—	$3,515	$—	$—	$—	$—	$69,768
Total	$29,346	$36,907	$—	$3,515	$—	$—	$—	$—	$69,768

Land acquisition and development:
Loan Rating
Pass	$4,562	$4,665	$9,844	$9,993	$—	$—	$—	$—	$29,064
Total	$4,562	$4,665	$9,844	$9,993	$—	$—	$—	$—	$29,064

Builder lines:
Loan Rating
Pass	$17,919	$5,124	$1,221	$—	$404	$—	$—	$—	$24,668
Total	$17,919	$5,124	$1,221	$—	$404	$—	$—	$—	$24,668

Construction - consumer real estate:
Loan Rating
Pass	$7,889	$3,240	$—	$—	$—	$—	$94	$—	$11,223
Total	$7,889	$3,240	$—	$—	$—	$—	$94	$—	$11,223

Residential mortgage:
Loan Rating
Pass	$59,441	$91,086	$44,292	$40,089	$11,524	$46,192	$—	$—	$292,624
Special Mention	—	—	—	—	—	44	—	—	44
Substandard	—	—	—	103	—	165	—	—	268
Substandard Nonaccrual	—	—	—	—	62	258	—	—	320
Total	$59,441	$91,086	$44,292	$40,192	$11,586	$46,659	$—	$—	$293,256

Equity lines:
Loan Rating
Pass	$—	$—	$34	$70	$—	$857	$50,120	$344	$51,425
Special Mention	—	—	—	—	—	—	—	85	85
Substandard	—	—	—	—	5	—	—	—	5
Substandard Nonaccrual	—	—	—	—	—	9	—	68	77
Total	$—	$—	$34	$70	$5	$866	$50,120	$497	$51,592

Other consumer:
Loan Rating
Pass	$6,263	$2,762	$606	$282	$101	$519	$46	$—	$10,579
Substandard Nonaccrual	—	—	—	—	9	—	—	—	9
Total	$6,263	$2,762	$606	$282	$110	$519	$46	$—	$10,588

Total:
Loan Rating
Pass	$225,426	$287,252	$229,021	$187,376	$64,259	$203,065	$68,946	$724	$1,266,069
Special Mention	62	—	5,731	—	—	1,003	—	85	6,881
Substandard	—	—	—	103	5	165	—	—	273
Substandard Nonaccrual	—	—	—	—	71	267	—	68	406
Total	$225,488	$287,252	$234,752	$187,479	$64,335	$204,500	$68,946	$877	$1,273,629

1	All balances shown in this column were converted to term during the year ended December 31, 2023.

The table below details the recorded balance of the classes of loans within the consumer finance loan portfolio by credit rating at the time of origination and year of origination as of September 30, 2024:


· · · · · · · · · · · · · · · · · · · · · · Revolving · ·
· · Term Loans Recorded Balance by Origination Year · · · · Loans · ·
· · · · · · · · · · · · · · · · · · · · Revolving · · Converted · ·
(Dollars in thousands) · 2024 · · 2023 · · 2022 · · 2021 · · 2020 · · Prior · · Loans · · to Term · · Total
Consumer finance - automobiles:
Credit rating1
Very good	$19,654	$11,317	$8,863	$2,796	$550	$125	$—	$—	$43,305
Good	32,490	28,443	32,578	10,822	1,948	514	—	—	106,795
Fairly good	34,183	36,945	41,542	19,129	3,878	2,274	—	—	137,951
Fair	19,812	23,501	27,507	15,261	4,392	2,988	—	—	93,461
Marginal	3,940	4,875	6,473	5,571	2,056	1,958	—	—	24,873
Total	$110,079	$105,081	$116,963	$53,579	$12,824	$7,859	$—	$—	$406,385

Consumer finance - marine and recreational vehicles:
Credit rating1
Very good	$8,523	$6,487	$13,137	$8,397	$8,277	$4,003	$—	$—	$48,824
Good	4,589	6,593	7,135	1,395	1,208	684	—	—	21,604
Fairly good	—	203	186	35	28	35	—	—	487
Total	$13,112	$13,283	$20,458	$9,827	$9,513	$4,722	$—	$—	$70,915

Total:
Credit rating1
Very good	$28,177	$17,804	$22,000	$11,193	$8,827	$4,128	$—	$—	$92,129
Good	37,079	35,036	39,713	12,217	3,156	1,198	—	—	128,399
Fairly good	34,183	37,148	41,728	19,164	3,906	2,309	—	—	138,438
Fair	19,812	23,501	27,507	15,261	4,392	2,988	—	—	93,461
Marginal	3,940	4,875	6,473	5,571	2,056	1,958	—	—	24,873
Total	$123,191	$118,364	$137,421	$63,406	$22,337	$12,581	$—	$—	$477,300

1	Credit ratings with a FICO score greater than 739 are considered Very Good, FICO scores ranging from 670-739 are considered Good, FICO scores ranging from 625-669 are considered Fairly Good, FICO scores ranging from 580-624 are considered Fair and FICO scores less than 580 are considered Marginal.


· · · · · · · · · · · · · · · · · · · · · · Revolving · ·
· · Term Loans Recorded Balance by Origination Year · · · · Loans · ·
· · · · · · · · · · · · · · · · · · · · Revolving · · Converted · ·
(Dollars in thousands) · 2023 · · 2022 · · 2021 · · 2020 · · 2019 · · Prior · · Loans · · to Term · · Total
Consumer finance - automobiles:
Credit rating1
Very good	$14,916	$12,395	$4,291	$1,012	$277	$22	$—	$—	$32,913
Good	35,203	42,800	15,530	3,338	1,090	325	—	—	98,286
Fairly good	44,227	54,968	26,645	6,186	3,984	1,470	—	—	137,480
Fair	28,779	36,794	22,266	7,014	4,808	1,908	—	—	101,569
Marginal	6,359	8,956	7,715	3,322	2,832	1,844	—	—	31,028
Total	$129,484	$155,913	$76,447	$20,872	$12,991	$5,569	$—	$—	$401,276

Consumer finance - marine and recreational vehicles:
Credit rating1
Very good	$7,481	$15,000	$9,857	$9,952	$2,518	$2,438	$—	$—	$47,246
Good	7,419	8,130	1,602	1,384	410	453	—	—	19,398
Fairly good	265	221	37	30	—	37	—	—	590
Total	$15,165	$23,351	$11,496	$11,366	$2,928	$2,928	$—	$—	$67,234

Total:
Credit rating1
Very good	$22,397	$27,395	$14,148	$10,964	$2,795	$2,460	$—	$—	$80,159
Good	42,622	50,930	17,132	4,722	1,500	778	—	—	117,684
Fairly good	44,492	55,189	26,682	6,216	3,984	1,507	—	—	138,070
Fair	28,779	36,794	22,266	7,014	4,808	1,908	—	—	101,569
Marginal	6,359	8,956	7,715	3,322	2,832	1,844	—	—	31,028
Total	$144,649	$179,264	$87,943	$32,238	$15,919	$8,497	$—	$—	$468,510

1	Credit ratings with a FICO score greater than 739 are considered Very Good, FICO scores ranging from 670-739 are considered Good, FICO scores ranging from 625-669 are considered Fairly Good, FICO scores ranging from 580-624 are considered Fair and FICO scores less than 580 are considered Marginal.

The following table details the current period gross charge-offs of loans by year of origination for the nine months ended September 30, 2024:


· · · · · · · · · · · · · · · · · · · · · · Revolving · ·
· · Current Period Gross Charge-offs by Origination Year · · · · Loans · ·
· · · · · · · · · · · · · · · · · · · · Revolving · · Converted · ·
(Dollars in thousands) · 2024 · · 2023 · · 2022 · · 2021 · · 2020 · · Prior · · Loans · · to Term · · Total
Residential mortgage	$3	$—	$—	$—	$—	$—	$—	$—	$3
Other consumer1	204	19	5	—	—	62	—	—	290
Consumer finance - automobiles	367	2,275	5,053	2,691	457	573	—	—	11,416
Consumer finance - marine and recreational vehicles	—	56	160	34	27	14	—	—	291
Total	$574	$2,350	$5,218	$2,725	$484	$649	$—	$—	$12,000

1	Gross charge-offs of other consumer loans for the nine months ended September 30, 2024 included $193,000 of demand deposit overdrafts that originated in 2024.

The following table details the current period gross charge-offs of loans by year of origination for the nine months ended September 30, 2023:


· · · · · · · · · · · · · · · · · · · · · · Revolving · ·
· · Current Period Gross Charge-offs by Origination Year · · · · Loans · ·
· · · · · · · · · · · · · · · · · · · · Revolving · · Converted · ·
(Dollars in thousands) · 2023 · · 2022 · · 2021 · · 2020 · · 2019 · · Prior · · Loans · · to Term · · Total
Commercial business	$—	$16	$—	$—	$—	$—	$—	$—	$16
Equity lines	—	—	—	—	—	8	—	—	8
Other consumer1	199	25	—	3	2	3	—	—	232
Consumer finance - automobiles	490	4,396	2,628	583	477	567	—	—	9,141
Consumer finance - marine and recreational vehicles	—	82	—	40	6	37	—	—	165
Total	$689	$4,519	$2,628	$626	$485	$615	$—	$—	$9,562

1	Gross charge-offs of other consumer loans for the nine months ended September 30, 2023 included $199,000 of demand deposit overdrafts that originated in 2023.

Gross charge-offs increased for the nine months ended September 30, 2024 compared to the same period in 2023 due primarily to higher charge-offs within the consumer finance-automobile portfolio segment as a result of an increase in the number of delinquent loans and repossessions and a higher average charge-off per unit as a result of larger loan amounts due to higher automobile values during 2020 and 2021 and a decline in wholesale values of used automobiles since then.

As of September 30, 2024 and December 31, 2023, the Corporation hadno collateral dependent loans for which repayment was expected to be derived substantially through the operation or sale of the collateral and where the borrower is experiencing financial difficulty.

NOTE 5: Goodwill and Other Intangible Assets

The carrying amount of goodwill was $25.19 million at September 30, 2024 and December 31, 2023. There wereno changes in the recorded balance of goodwill during the three and nine months ended September 30, 2024 or 2023.

The Corporation had $1.21 million and $1.41 million of other intangible assets as of September 30, 2024 and December 31, 2023, respectively. Other intangible assets were recognized in connection with the core deposits acquired from Peoples Bankshares, Incorporated in 2020 and customer relationships acquired by C&F Wealth Management in 2016. The following table summarizes the gross carrying amounts and accumulated amortization of other intangible assets:

· · · · · · · · · · · ·
· · · September 30, · · · December 31,
· · · 2024 · · · 2023
		Gross		Gross
· · · Carrying · · Accumulated · · · Carrying · · Accumulated
(Dollars in thousands) · · · Amount · · Amortization · · · Amount · · Amortization
Amortizable intangible assets: · · · · · · · · · · · ·
Core deposit intangibles	$1,711		$(673)	$1,711	$(588)
Other amortizable intangibles	1,405		(1,232)	1,405	(1,121)
Total	$3,116		$(1,905)	$3,116	$(1,709)

Amortization expense was $66,000 and $68,000 for the three months ended September 30, 2024 and 2023, respectively, and $196,000 and $204,000 for the nine months ended September 30, 2024 and 2023, respectively.

NOTE 6: Equity, Other Comprehensive Income (Loss) and Earnings Per Share

Equity and Noncontrolling Interest

The Board of Directors authorized a program, effective January 1, 2024, to repurchase up to $10.00 million of the Corporation’s common stock through December 31, 2024 (the 2024 Repurchase Program). During the three and nine months ended September 30, 2024, the Corporation repurchased $3.24 million and $7.27 million, respectively, of its common stock under the 2024 Repurchase Program. As of September 30, 2024, there was $2.73 million remaining available for repurchases of the Corporation’s common stock under the 2024 Repurchase Program. The Corporation’s previous share repurchase program, which was authorized by the Board of Directors in December 2022, expired on December 31, 2023. The Corporation repurchased $1.31 million and $5.85 million, respectively, under the previous share repurchase program during the three and nine months ended September 30, 2023.

Additionally during the nine months ended September 30, 2024 and 2023, the Corporation withheld 9,316 shares and 7,765 shares of its common stock, respectively, from employees to satisfy tax withholding obligations upon vesting of restricted stock.

Noncontrolling interest represents an ownership interest in C&F Select LLC, a subsidiary of C&F Mortgage, held by an unrelated investor.

Accumulated Other Comprehensive Income (Loss), Net

Changes in each component of accumulated other comprehensive loss were as follows for the three months ended September 30, 2024 and 2023:


· Securities · Defined · Cash · ·
· · Available · · Benefit · · Flow · ·
(Dollars in thousands) · · For Sale · · Plan · · Hedges · · Total
Accumulated other comprehensive (loss) income at June 30, 2024	$(25,439)	$(2,736)	$1,076	$(27,099)

Other comprehensive income (loss) arising during the period	10,453	—	(864)	9,589
Related income tax effects	(2,195)	—	222	(1,973)
	8,258	—	(642)	7,616

Reclassifications into net income	—	20	—	20
Related income tax effects	—	(4)	—	(4)
	—	16	—	16

Other comprehensive income (loss), net of tax	8,258	16	(642)	7,632

Accumulated other comprehensive (loss) income at September 30, 2024	$(17,181)	$(2,720)	$434	$(19,467)


· Securities · Defined · Cash · ·
· · Available · · Benefit · · Flow · ·
(Dollars in thousands) · · For Sale · · Plan · · Hedges · · Total
Accumulated other comprehensive (loss) income at June 30, 2023	$(33,635)	$(3,195)	$1,424	$(35,406)

Other comprehensive (loss) income arising during the period	(7,369)	—	179	(7,190)
Related income tax effects	1,548	—	(45)	1,503
	(5,821)	—	134	(5,687)

Reclassifications into net income	—	25	(1)	24
Related income tax effects	—	(5)	—	(5)
	—	20	(1)	19

Other comprehensive (loss) income, net of tax	(5,821)	20	133	(5,668)

Accumulated other comprehensive (loss) income at September 30, 2023	$(39,456)	$(3,175)	$1,557	$(41,074)

Changes in each component of accumulated other comprehensive loss were as follows for the nine months ended September 30, 2024 and 2023:


· Securities · Defined · Cash · ·
· · Available · · Benefit · · Flow · ·
(Dollars in thousands) · · For Sale · · Plan · · Hedges · · Total
Accumulated other comprehensive (loss) income at December 31, 2023	$(25,002)	$(2,752)	$1,067	$(26,687)

Other comprehensive income (loss) arising during the period	9,900	—	(847)	9,053
Related income tax effects	(2,079)	—	218	(1,861)
	7,821	—	(629)	7,192

Reclassifications into net income	—	40	(5)	35
Related income tax effects	—	(8)	1	(7)
	—	32	(4)	28

Other comprehensive income (loss), net of tax	7,821	32	(633)	7,220

Accumulated other comprehensive (loss) income at September 30, 2024	$(17,181)	$(2,720)	$434	$(19,467)


· Securities · Defined · Cash · ·
· · Available · · Benefit · · Flow · ·
(Dollars in thousands) · · For Sale · · Plan · · Hedges · · Total
Accumulated other comprehensive (loss) income at December 31, 2022	$(35,184)	$(3,236)	$1,462	$(36,958)

Other comprehensive income (loss) arising during the period	(5,413)	—	131	(5,282)
Related income tax effects	1,137	—	(32)	1,105
	(4,276)	—	99	(4,177)

Reclassifications into net income	5	77	(5)	77
Related income tax effects	(1)	(16)	1	(16)
	4	61	(4)	61

Other comprehensive income (loss), net of tax	(4,272)	61	95	(4,116)

Accumulated other comprehensive (loss) income at September 30, 2023	$(39,456)	$(3,175)	$1,557	$(41,074)

The following table provides information regarding reclassifications from accumulated other comprehensive loss into net income for the three and nine months ended September 30, 2024 and 2023:


· · Three Months Ended September 30, · · · Nine Months Ended September 30, · · Line Item In the Consolidated
(Dollars in thousands) · 2024 · 2023 · · 2024 · 2023 · · Statements of Income
Securities available for sale:
Reclassification of net realized losses into net income	$—	$—	$—	$(5)	Net losses on sales, maturities and calls of available for sale securities
Related income tax effects	—	—	—	1	Income tax expense
	—	—	—	(4)	Net of tax

Defined benefit plan:1
Reclassification of recognized net actuarial losses into net income	(38)	(42)	(92)	(128)	Noninterest expenses - Other
Amortization of prior service credit into net income	18	17	52	51	Noninterest expenses - Other
Related income tax effects	4	5	8	16	Income tax expense
	(16)	(20)	(32)	(61)	Net of tax

Cash flow hedges:
Amortization of hedging gains into net income	—	1	5	5	Interest expense - Trust preferred capital notes
Related income tax effects	—	—	(1)	(1)	Income tax expense
	—	1	4	4	Net of tax

Total reclassifications into net income	$(16)	$(19)	$(28)	$(61)

1	See “Note 8: Employee Benefit Plans,” for additional information.

Earnings Per Share (EPS)

The components of the Corporation’s EPS calculations are as follows:

· · · · · · ·
· · Three Months Ended September 30,
(Dollars in thousands) · 2024 · 2023
Net income attributable to C&F Financial Corporation	$5,389	$5,789
Weighted average shares outstanding—basic and diluted	3,258,420	3,391,624

· · · · · · ·
· · Nine Months Ended September 30,
(Dollars in thousands) · 2024 · 2023
Net income attributable to C&F Financial Corporation	$13,797	$18,536
Weighted average shares outstanding—basic and diluted	3,323,942	3,426,845

The Corporation has applied the two-class method of computing basic and diluted EPS for each period presented because the Corporation’s unvested restricted shares outstanding contain rights to nonforfeitable dividends equal to dividends on the Corporation’s common stock. Accordingly, the weighted average number of shares used in the calculation of basic and diluted EPS includes both vested and unvested shares outstanding.

NOTE 7: Share-Based Plans

As permitted under the 2022 Stock and Incentive Compensation Plan, and previously under the 2013 Stock and Incentive Compensation Plan until April 19, 2022, the Corporation awards shares of restricted stock to certain key employees, non-employee directors and consultants. Restricted shares awarded to employees generally vest over periods up tofive years, and restricted shares awarded to non-employee directors generally vest over periods up tothree years. A summary of the activity for restricted stock awards for the periods indicated is presented below:


· · 2024
· · Weighted-
· · · · Average
· · · · Grant Date
· · Shares · · Fair Value
Unvested, December 31, 2023	135,694	$52.13
Granted	17,975	46.81
Vested	(32,061)	49.13
Forfeited	(1,435)	53.69
Unvested, September 30, 2024	120,173	52.12

· · · · · ·
· · 2023 ·
· · Weighted- ·
			Average
			Grant Date
		Shares	Fair Value
Unvested, December 31, 2022	145,677		$48.88
Granted	18,540		57.32
Vested	(30,043)		51.53
Forfeited	(3,545)		49.37
Unvested, September 30, 2023	130,629		55.36

The fair value of shares that vested during the three and nine months ended September 30, 2024 was $19,000 and $1.68 million, respectively. The fair value of shares that vested during the three and nine months ended September 30, 2023 was $232,000 and $1.73 million, respectively. Share-based compensation expense, net of forfeitures, for the three and nine months ended September 30, 2024 was $485,000 ($347,000 after tax) and $1.46 million ($1.01 million after tax), respectively, for restricted stock granted during 2019 through 2024. Share-based compensation expense, net of forfeitures, for the three and nine months ended September 30, 2023 was $581,000 ($412,000 after tax) and $1.51 million ($1.02 million after tax), respectively, for restricted stock granted during 2018 through 2023. As of September 30, 2024, there was $2.98 million of total unrecognized compensation expense related to unvested restricted stock that will be recognized over the remaining requisite service periods.

NOTE 8: Employee Benefit Plans

The following table summarizes the components of net periodic benefit cost for the Bank’s non-contributory cash balance pension plan.


· · Three Months Ended September 30, · · Nine Months Ended September 30,
(Dollars in thousands) · 2024 · 2023 · 2024 · 2023
Components of net periodic benefit cost:
Service cost, included in salaries and employee benefits	$339	$344	$1,076	$1,032

Other components of net periodic benefit cost:
Interest cost	203	182	582	546
Expected return on plan assets	(346)	(321)	(1,031)	(963)
Amortization of prior service credit	(18)	(17)	(52)	(51)
Recognized net actuarial losses	38	42	92	128
Other components of net periodic benefit cost, included in other noninterest expense	(123)	(114)	(409)	(340)

Net periodic benefit cost	$216	$230	$667	$692

NOTE 9: Fair Value of Assets and Liabilities

Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. GAAP requires that valuation techniques maximize the use of observable inputs and minimize the use of unobservable inputs. GAAP also establishes a fair value hierarchy which prioritizes the valuation inputs into three broad levels. Based on the underlying inputs, each fair value measurement in its entirety is reported in one of the three levels. These levels are:

●	Level 1—Valuation is based upon quoted prices for identical instruments traded in active markets. Level 1 assets and liabilities include debt securities traded in an active exchange market, as well as U.S. Treasury securities.

●

Level 2—Valuation is based upon quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active, and model based valuation techniques for which all significant assumptions are observable in the market or can be corroborated by observable market data for substantially the full term of the assets or liabilities.

●

Level 3—Valuation is determined using model-based techniques that use at least one significant assumption not observable in the market. These unobservable assumptions reflect the Corporation’s estimates of assumptions that market participants would use in pricing the respective asset or liability. Valuation techniques may include the use of pricing models, discounted cash flow models and similar techniques.

GAAP allows an entity the irrevocable option to elect fair value (the fair value option) for the initial and subsequent measurement for certain financial assets and liabilities on a contract-by-contract basis. The Corporation has elected to use fair value accounting for its entire portfolio of loans held for sale (LHFS).

Assets and Liabilities Measured at Fair Value on a Recurring Basis

The following describes the valuation techniques and inputs used by the Corporation in determining the fair value of certain assets recorded at fair value on a recurring basis in the financial statements.

Securities available for sale. The Corporation primarily values its investment portfolio using Level 2 fair value measurements, but may also use Level 1 or Level 3 measurements if required by the composition of the portfolio. At September 30, 2024 and December 31, 2023, the Corporation’s entire securities portfolio was comprised of investments in debt securities classified as available for sale, which were valued using Level 2 fair value measurements. The Corporation has contracted with third party portfolio accounting service vendors for valuation of its securities portfolio. The vendors’ sources for security valuation are ICE Data Services (ICE), Refinitiv, and Bloomberg Valuation Service (BVAL). Each source provides opinions, known as evaluated prices, as to the value of individual securities based on model-based pricing techniques that are partially based on available market data, including prices for similar instruments in active markets and prices for identical assets in markets that are not active. ICE provides evaluated prices for the Corporation’s obligations of states and political subdivisions category of securities. ICE uses proprietary pricing models and pricing systems, mathematical tools and judgment to determine an evaluated price for a security based upon a hierarchy of market information regarding that security or securities with similar characteristics. Refinitiv and BVAL provide evaluated prices for the Corporation’s U.S. treasury, government agencies and corporations, mortgage-backed, and corporate categories of securities. U.S. treasury securities and fixed-rate callable securities of U.S. government agencies and corporations are individually evaluated on an option adjusted spread basis for callable issues or on a nominal spread basis incorporating the term structure of agency market spreads and the appropriate risk free benchmark curve for non-callable issues. Pass-through mortgage-backed securities (MBS) in the mortgage-backed category are grouped into aggregate categories defined by issuer program, weighted average coupon, and weighted average maturity. Each aggregate is benchmarked to relative to-be-announced mortgage-backed securities (TBA securities) or other benchmark prices. TBA securities prices are obtained from market makers and live trading systems. Collateralized mortgage obligations in the mortgage-backed category are individually evaluated based upon a hierarchy of security specific information and market data regarding that security or securities with similar characteristics. Each evaluation is determined using an option adjusted spread and prepayment model based on volatility-driven, multi-dimensional spread tables. Fixed-rate securities issued by the Small Business Association in the mortgage backed category are individually evaluated based upon a hierarchy of security specific information and market data regarding that security or securities with similar characteristics.

Other investments. The Corporation holds equity investments in funds that provide debt and equity financing to small businesses. These investments are recorded at fair value and included in other assets in the Consolidated Balance Sheets. Changes in fair value are recognized in net income. The funds are managed by investment companies, and the net asset value of each fund is reported regularly by the investment companies. At September 30, 2024 and December 31, 2023, the combined fair value of these investments was $1.63 million and $1.93 million, respectively. These investments, measured at net asset value, are not presented in the tables below related to fair value measurements. Changes in fair value of these investments resulted in the recognition of unrealized gains of $140,000 and $238,000 for the three and nine months ended September 30, 2024, respectively, and unrealized gains of $72,000 and $270,000 for the same periods in 2023.

The Corporation also holds certain equity investments consisting of equity interests in an independent insurance agency and a full service title and settlement agency (collectively, the agencies). These investments are subject to contractual sale restrictions that only permit the sale of the investments back to the agencies themselves. These investments are recorded at fair value and included in other assets in the Consolidated Balance Sheets. At September 30, 2024 and December 31, 2023, the fair value of these investments was $3.92 million and $3.75 million, respectively. These investments are recorded at fair value based on the contractual redemption value of the Corporation’s proportionate share of the agencies’ equity. Changes in fair value are recognized in net income and resulted in the recognition of unrealized gains of $194,000 and $433,000 for the three and nine months ended September 30, 2024, respectively, and unrealized gains of $137,000 and $210,000 for the same periods in 2023. The Corporation’s investments in these agencies are classified as Level 2.

**Loans held for sale.**Fair value of the Corporation’s LHFS is based on observable market prices for similar instruments traded in the secondary mortgage loan markets in which the Corporation conducts business. The Corporation’s portfolio of LHFS is classified as Level 2.

Derivative asset - IRLCs. The Corporation recognizes IRLCs at fair value. Fair value of IRLCs is based on either (i) the price of the underlying loans obtained from an investor for loans that will be delivered on a best efforts basis or (ii) the observable price for individual loans traded in the secondary market for loans that will be delivered on a mandatory basis. All of the Corporation’s IRLCs are classified as Level 2.

Derivative asset/liability – interest rate swaps on loans. The Corporation recognizes interest rate swaps at fair value. The Corporation has contracted with a third party vendor to provide valuations for these interest rate swaps using the discounted cash flow method. All of the Corporation’s interest rate swaps on loans are classified as Level 2.

Derivative asset/liability – cash flow hedges. The Corporation recognizes cash flow hedges at fair value. The Corporation has contracted with a third party vendor to provide valuations for these cash flow hedges using the discounted cash flow method. All of the Corporation’s cash flow hedges are classified as Level 2.

The following table presents the balances of financial assets and liabilities measured at fair value on a recurring basis. The fair value of forward sales of mortgage loans were not material to the consolidated financial statements of the Corporation at September 30, 2024 or December 31, 2023.


· · September 30, 2024
· · Fair Value Measurements Classified as · · Assets/Liabilities at
(Dollars in thousands) · Level 1 · Level 2 · Level 3 · Fair Value
Assets:
Securities available for sale
U.S. Treasury securities	$—	$10,684	$—	$10,684
U.S. government agencies and corporations	—	63,669	—	63,669
Mortgage-backed securities	—	166,977	—	166,977
Obligations of states and political subdivisions	—	147,176	—	147,176
Corporate and other debt securities	—	20,539	—	20,539
Total securities available for sale	—	409,045	—	409,045
Loans held for sale	—	44,677	—	44,677
Other investments	—	3,919	—	3,919
Derivatives
IRLC	—	714	—	714
Interest rate swaps on loans	—	4,900	—	4,900
Cash flow hedges	—	865	—	865
Total assets	$—	$464,120	$—	$464,120

Liabilities:
Derivatives
Interest rate swaps on loans	$—	$4,900	$—	$4,900
Cash flow hedges	—	305	—	305
Total liabilities	$—	$5,205	$—	$5,205


· · December 31, 2023
· · Fair Value Measurements Classified as · · Assets/Liabilities at
(Dollars in thousands) · Level 1 · Level 2 · Level 3 · Fair Value
Assets:
Securities available for sale
U.S. Treasury securities	$—	$45,103	$—	$45,103
U.S. government agencies and corporations	—	87,094	—	87,094
Mortgage-backed securities	—	161,696	—	161,696
Obligations of states and political subdivisions	—	147,111	—	147,111
Corporate and other debt securities	—	21,440	—	21,440
Total securities available for sale	—	462,444	—	462,444
Loans held for sale	—	14,176	—	14,176
Other investments	—	3,751	—	3,751
Derivatives
IRLC	—	335	—	335
Interest rate swaps on loans	—	6,110	—	6,110
Cash flow hedges	—	1,415	—	1,415
Total assets	$—	$488,231	$—	$488,231

Liabilities:
Derivatives
Interest rate swaps on loans	$—	$6,110	$—	$6,110
Total liabilities	$—	$6,110	$—	$6,110

Assets and Liabilities Measured at Fair Value on a Nonrecurring Basis

The Corporation may be required, from time to time, to measure and recognize certain assets at fair value on a nonrecurring basis in accordance with GAAP. As of September 30, 2024 and December 31, 2023, the Corporation had no assets or liabilities recorded at fair value on a nonrecurring basis.

Fair Value of Financial Instruments

FASB ASC 825,* Financial Instruments*, requires disclosure about fair value of financial instruments, including those financial assets and financial liabilities that are not required to be measured and reported at fair value on a recurring or nonrecurring basis. ASC 825 excludes certain financial instruments and all nonfinancial instruments from its disclosure requirements. Accordingly, the aggregate fair value amounts presented may not necessarily represent the underlying fair value of the Corporation. The Corporation uses the exit price notion in calculating the fair values of financial instruments not measured at fair value on a recurring basis.

The following tables reflect the carrying amounts and estimated fair values of the Corporation’s financial instruments whether or not recognized on the Consolidated Balance Sheets at fair value.


· Carrying · Fair Value Measurements at September 30, 2024 Classified as · Total Fair
(Dollars in thousands) · · Value · · Level 1 · · Level 2 · · Level 3 · · Value
Financial assets:
Cash and short-term investments	$50,703	$49,193	$1,510	$—	$50,703
Securities available for sale	409,045	—	409,045	—	409,045
Loans, net	1,868,638	—	—	1,823,821	1,823,821
Loans held for sale	44,677	—	44,677	—	44,677
Other investments	3,919	—	3,919	—	3,919
Derivatives
IRLC	714	—	714	—	714
Interest rate swaps on loans	4,900	—	4,900	—	4,900
Cash flow hedges	865	—	865	—	865
Bank-owned life insurance	21,827	—	21,827	—	21,827
Accrued interest receivable	10,198	10,198	—	—	10,198
Financial liabilities:
Demand and savings deposits	1,325,040	1,325,040	—	—	1,325,040
Time deposits	810,851	—	807,686	—	807,686
Borrowings	134,076	—	125,192	—	125,192
Derivatives
Interest rate swaps on loans	4,900	—	4,900	—	4,900
Cash flow hedges	305	—	305	—	305
Accrued interest payable	3,967	3,967	—	—	3,967


· Carrying · Fair Value Measurements at December 31, 2023 Classified as · Total Fair
(Dollars in thousands) · · Value · · Level 1 · · Level 2 · · Level 3 · · Value
Financial assets:
Cash and short-term investments	$77,403	$75,159	$2,244	$—	$77,403
Securities available for sale	462,444	—	462,444	—	462,444
Loans, net	1,702,488	—	—	1,643,462	1,643,462
Loans held for sale	14,176	—	14,176	—	14,176
Other investments	3,751	—	3,751	—	3,751
Derivatives
IRLC	335	—	335	—	335
Interest rate swaps on loans	6,110	—	6,110	—	6,110
Cash flow hedges	1,415	—	1,415	—	1,415
Bank-owned life insurance	21,464	—	21,464	—	21,464
Accrued interest receivable	10,398	10,398	—	—	10,398
Financial liabilities:
Demand and savings deposits	1,392,931	1,392,931	—	—	1,392,931
Time deposits	673,199	—	668,965	—	668,965
Borrowings	103,618	—	90,120	—	90,120
Derivatives
Interest rate swaps on loans	6,110	—	6,110	—	6,110
Accrued interest payable	3,493	3,493	—	—	3,493

NOTE 10: Business Segments

The Corporation operates in a decentralized fashion inthree business segments: community banking, mortgage banking and consumer finance. The community banking segment comprises C&F Bank, C&F Wealth Management, C&F Insurance and CVB Title. Revenues from community banking operations consist primarily of net interest income related to investments in loans and securities and outstanding deposits and borrowings, fees earned on deposit accounts, debit card interchange activity, and net revenues from offering wealth management services and insurance products through third-party service providers. Through C&F Mortgage, mortgage banking operating revenues consist principally of gains on sales of loans in the secondary market, mortgage banking fee income related to loan originations, fees earned by providing mortgage loan origination functions to third-party lenders, and net interest income on mortgage loans held for sale. Revenues from consumer finance operations through C&F Finance consist primarily of net interest income earned on purchased retail installment sales contracts.

The standalone Corporation’s revenues and expenses are comprised primarily of interest expense associated with the Corporation’s trust preferred capital notes and subordinated debt, general corporate expenses, and changes in the value of the rabbi trust and deferred compensation liability related to its nonqualified deferred compensation plan. The results of the Corporation, which includes funding and operating costs that are not allocated to the business segments, are included in the column labeled “Other” in the tables below.


· · Three Months Ended September 30, 2024
· Community · Mortgage · Consumer · · · · · ·
(Dollars in thousands) · · Banking · · Banking · · Finance · · Other · · Eliminations · · Consolidated
Interest income	$29,087	$597	$12,676	$—	$(6,229)	$36,131
Interest expense	10,822	307	6,025	621	(6,333)	11,442
Net interest income	18,265	290	6,651	(621)	104	24,689
Gain on sales of loans	—	1,704	—	—	121	1,825
Other noninterest income	4,599	1,203	197	1,020	(72)	6,947
Net revenue	22,864	3,197	6,848	399	153	33,461

Provision for credit losses	700	—	3,000	—	—	3,700
Noninterest expense	15,587	2,725	3,418	1,378	(17)	23,091
Income (loss) before taxes	6,577	472	430	(979)	170	6,670
Income tax expense (benefit)	1,240	121	119	(265)	35	1,250
Net income (loss)	$5,337	$351	$311	$(714)	$135	$5,420

Other data:
Capital expenditures	$2,026	$6	$—	$—	$—	$2,032
Depreciation and amortization	$843	$18	$84	$—	$—	$945


· · Three Months Ended September 30, 2023
· Community · Mortgage · Consumer · · · · · ·
(Dollars in thousands) · · Banking · · Banking · · Finance · · Other · · Eliminations · · Consolidated
Interest income	$25,066	$517	$12,020	$—	$(5,917)	$31,686
Interest expense	6,675	232	5,748	548	(5,979)	7,224
Net interest income	18,391	285	6,272	(548)	62	24,462
Gain on sales of loans	—	1,198	—	—	22	1,220
Other noninterest income	4,415	1,144	(19)	(496)	(50)	4,994
Net revenue	22,806	2,627	6,253	(1,044)	34	30,676

Provision for loan losses	500	—	1,550	—	—	2,050
Noninterest expense	15,323	2,631	3,761	(172)	(17)	21,526
Income (loss) before taxes	6,983	(4)	942	(872)	51	7,100
Income tax expense (benefit)	1,298	1	260	(246)	10	1,323
Net income (loss)	$5,685	$(5)	$682	$(626)	$41	$5,777

Other data:
Capital expenditures	$251	$12	$146	$—	$—	$409
Depreciation and amortization	$838	$18	$100	$—	$—	$956


· · Nine Months Ended September 30, 2024
· Community · Mortgage · Consumer · · · · · ·
(Dollars in thousands) · · Banking · · Banking · · Finance · · Other · · Eliminations · · Consolidated
Interest income	$82,691	$1,411	$37,084	$—	$(18,035)	$103,151
Interest expense	29,768	595	17,722	1,708	(18,317)	31,476
Net interest income	52,923	816	19,362	(1,708)	282	71,675
Gain on sales of loans	—	5,048	—	—	(234)	4,814
Other noninterest income	12,874	3,443	678	1,979	(200)	18,774
Net revenue	65,797	9,307	20,040	271	(152)	95,263

Provision for loan losses	1,650	—	8,100	—	—	9,750
Noninterest expense	47,153	7,938	10,363	3,208	(48)	68,614
Income (loss) before taxes	16,994	1,369	1,577	(2,937)	(104)	16,899
Income tax expense (benefit)	3,074	348	435	(825)	(22)	3,010
Net income (loss)	$13,920	$1,021	$1,142	$(2,112)	$(82)	$13,889

Other data:
Capital expenditures	$2,842	$103	$111	$—	$—	$3,056
Depreciation and amortization	$2,536	$52	$253	$—	$—	$2,841


· · Nine Months Ended September 30, 2023
· Community · Mortgage · Consumer · · · · · ·
(Dollars in thousands) · · Banking · · Banking · · Finance · · Other · · Eliminations · · Consolidated
Interest income	$72,531	$1,312	$35,313	$—	$(17,427)	$91,729
Interest expense	16,268	513	17,060	1,696	(17,573)	17,964
Net interest income	56,263	799	18,253	(1,696)	146	73,765
Gain on sales of loans	—	4,983	—	—	(53)	4,930
Other noninterest income	12,759	3,413	25	840	(155)	16,882
Net revenue	69,022	9,195	18,278	(856)	(62)	95,577

Provision for loan losses	1,550	—	4,250	—	—	5,800
Noninterest expense	45,649	8,459	10,909	1,839	(46)	66,810
Income (loss) before taxes	21,823	736	3,119	(2,695)	(16)	22,967
Income tax expense (benefit)	4,081	168	858	(790)	(8)	4,309
Net income (loss)	$17,742	$568	$2,261	$(1,905)	$(8)	$18,658

Other data:
Capital expenditures	$861	$12	$146	$—	$—	$1,019
Depreciation and amortization	$2,558	$61	$300	$—	$—	$2,919

· · · · · · · · · · · · · · · · · · ·
· · Community · Mortgage · Consumer · · · · · · ·
(Dollars in thousands)	Banking	Banking	Finance	Other	Eliminations	Consolidated
Total assets at September 30, 2024	$2,435,009	$52,431	$485,201	$31,078	$(452,815)	$2,550,904
Total assets at December 31, 2023	$2,319,810	$22,177	$476,671	$35,581	$(415,741)	$2,438,498

The community banking segment extendstwo warehouse lines of credit to the mortgage banking segment, providing a portion of the funds needed to originate mortgage loans. The community banking segment charges the mortgage banking segment interest at the daily FHLB advance rate plus a spread ranging from 50 basis points to 175 basis points. The community banking segment also provides the consumer finance segment with a portion of the funds needed to purchase loan contracts by means of variable rate notes that carry interest at one-month term SOFR plus 211.5 basis points, with a floor of 3.5 percent and a ceiling of 6.0 percent, and fixed rate notes that carry interest at rates ranging from 3.8 percent to 4.0 percent. The community banking segment acquires certain residential real estate loans from the mortgage banking segment at prices similar to those paid by third-party investors. These transactions are eliminated to reach consolidated totals. In addition to unallocated expenses recorded by the holding company, certain overhead costs are incurred by the community banking segment and are not allocated to the mortgage banking and consumer finance segments.

NOTE 11: Commitments and Contingent Liabilities

The Corporation enters into commitments to extend credit in the normal course of business to meet the financing needs of its customers, including loan commitments and standby letters of credit. These instruments involve elements of credit and interest rate risk in excess of the amounts recorded on the Consolidated Balance Sheets. The Corporation’s exposure to credit loss in the event of nonperformance by the other party to the financial instrument for commitments to extend credit and standby letters of credit written is represented by the contractual amount of these instruments. The Corporation uses the same credit policies in making commitments and conditional obligations as it does for on-balance-sheet instruments. Collateral is obtained based on management’s credit assessment of the customer.

Loan commitments are agreements to extend credit to a customer provided that there are no violations of the terms of the contract prior to funding. Commitments have fixed expiration dates or other termination clauses and may require payment of a fee by the customer. Because many of the commitments may expire without being completely drawn upon, the total commitment amounts do not necessarily represent future cash requirements. The Bank evaluates each customer’s creditworthiness on a case-by-case basis. The amount of loan commitments at the Bank was $447.94 million at September 30, 2024 and $413.53 million at December 31, 2023, which does not include IRLCs at the mortgage banking segment, which are discussed in Note 12.

Standby letters of credit are written conditional commitments issued by the Bank to guarantee the performance of a customer to a third party. The credit risk involved in issuing letters of credit is essentially the same as that involved in extending loans to customers. The total contract amount of standby letters of credit, whose contract amounts represent credit risk, was $18.41 million at September 30, 2024 and $7.91 million at December 31, 2023.

The mortgage banking segment sells the majority of the residential mortgage loans it originates to third-party investors. Additionally, the community banking segment purchases residential mortgage loans from the mortgage banking segment under terms and conditions similar to third-party investors. As is customary in the industry, the agreements with these investors require the mortgage banking segment to extend representations and warranties with respect to program compliance, borrower misrepresentation, fraud, and early payment performance. Under the agreements, the investors are entitled to make loss claims and repurchase requests of the mortgage banking segment for loans that contain covered deficiencies. The mortgage banking segment has obtained early payment default recourse waivers for a portion of its business. Recourse periods for early payment default for the remaining investors vary from 90 days up toone year. Recourse periods for borrower misrepresentation or fraud, or underwriting error do not have a stated time limit. The mortgage banking segment maintains an allowance for indemnifications that represents management’s estimate of losses that are probable of arising under these recourse provisions. As performance data for loans that have been sold is not made available to the mortgage banking segment by the investors, the estimate of potential losses is inherently subjective and is based on historical indemnification payments and management’s assessment of current conditions that may contribute to indemnified losses on mortgage loans that have been sold in the secondary market. For the three and nine months ended September 30, 2024, the Corporation recorded a net reversal of provision for indemnifications of $100,000 and $375,000, respectively, and recorded a net reversal of provision for indemnifications of $200,000 and $435,000 for the three and nine months ended September 30, 2023, respectively, which is included in “Noninterest Expenses – Other” on the Consolidated Statements of Income. No indemnification payments were made during the three and nine months ended September 30, 2024 and 2023. The allowance for indemnifications was $1.43 million and $1.81 million at September 30, 2024 and December 31, 2023, respectively.

NOTE 12: Derivative Financial Instruments

The Corporation uses derivative financial instruments primarily to manage risks to the Corporation associated with changing interest rates, and to assist customers with their risk management objectives. The Corporation designates certain interest rate swaps as hedging instruments in qualifying cash flow hedges. The changes in fair value of these designated hedging instruments is reported as a component of other comprehensive income (loss). Derivative contracts that are not designated in a qualifying hedging relationship include customer accommodation loan swaps and contracts related to mortgage banking activities.

Cash flow hedges. The Corporation designates interest rate swaps as cash flow hedges when they are used to manage exposure to variability in cash flows on variable rate borrowings such as the Corporation’s trust preferred capital notes. These interest rate swaps are derivative financial instruments that manage the risk of variability in cash flows by exchanging variable-rate interest payments on a notional amount of the Corporation’s borrowings for fixed-rate interest payments. Interest rate swaps designated as cash flow hedges are expected to be highly effective in offsetting the effect of changes in interest rates on the amount of variable-rate interest payments, and the Corporation assesses the effectiveness of each hedging relationship quarterly. If the Corporation determines that a cash flow hedge is no longer highly effective, future changes in the fair value of the hedging instrument would be reported in earnings. As of September 30, 2024, the Corporation has designated cash flow hedges to manage its exposure to variability in cash flows on certain variable rate borrowings for periods that end between June 2026 and June 2029.

All interest rate swaps were entered into with counterparties that met the Corporation’s credit standards and the agreements contain collateral provisions protecting the at-risk party. The Corporation believes that the credit risk inherent in these derivative contracts is not significant.

Unrealized gains or losses recorded in other comprehensive income (loss) related to cash flow hedges are reclassified into earnings in the same period(s) during which the hedged interest payments affect earnings. When a designated hedging instrument is terminated and the hedged interest payments remain probable of occurring, any remaining unrecognized gain or loss in other comprehensive income (loss) is reclassified into earnings in the period(s) during which the forecasted

interest payments affect earnings. Amounts reclassified into earnings and interest receivable or payable under designated interest rate swaps are reported in interest expense. The Corporation does not expect any unrealized losses related to cash flow hedges to be reclassified into earnings in the next twelve months.

Loan swaps. The Bank also enters into interest rate swaps with certain qualifying commercial loan customers to meet their interest rate risk management needs. The Bank simultaneously enters into interest rate swaps with dealer counterparties, with identical notional amounts and offsetting terms. The net result of these interest rate swaps is that the customer pays a fixed rate of interest and the Corporation receives a floating rate. These back-to-back loan swaps are derivative financial instruments and are reported at fair value in “other assets” and “other liabilities” in the Consolidated Balance Sheets. Changes in the fair value of loan swaps are recorded in other noninterest income and sum tozero because of the offsetting terms of swaps with borrowers and swaps with dealer counterparties.

Mortgage banking. The mortgage banking segment enters into IRLCs with customers to originate loans for which the interest rates are determined (or “locked”) prior to funding. The mortgage banking segment is exposed to interest rate risk through fixed-rate IRLCs and mortgage loans from the time that interest rates are locked until the loans are sold in the secondary market. The mortgage banking segment mitigates this interest rate risk by entering into forward sales contracts with investors, which at times includes the community banking segment, at the time that interest rates are locked for mortgage loans to be delivered on a best efforts basis. IRLCs are derivative financial instruments and are reported at fair value in other assets and other liabilities in the Consolidated Balance Sheets, along with the changes in fair value of the related forward sales of loans. Changes in the fair value of mortgage banking derivatives are recorded as a component of gains on sales of loans.

At September 30, 2024, the mortgage banking segment had $45.58 million of IRLCs and $44.68 million of mortgage loans held for sale for which it managed interest rate risk using best-efforts forward sales contracts for $90.26 million in mortgage loans.

At December 31, 2023, the mortgage banking segment had $26.15 million of IRLCs and $14.18 million of mortgage loans held for sale for which it managed interest rate risk using best-efforts forward sales contracts for $40.33 million in mortgage loans.

The following tables summarize key elements of the Corporation’s derivative instruments.


· · September 30, 2024
· Notional · ·
(Dollars in thousands) · · Amount · · Assets · · Liabilities ·
Cash flow hedges:
Interest rate swap contracts	$25,000	$865	$305
Not designated as hedges:
Customer-related interest rate swap contracts:
Matched interest rate swaps with borrower	115,837	1,727	3,173
Matched interest rate swaps with counterparty	115,837	3,173	1,727
Mortgage banking contracts:
IRLCs	45,582	714	—


· · December 31, 2023 ·
· Notional · · ·
(Dollars in thousands) · · Amount · · Assets · · Liabilities · ·
Cash flow hedges:
Interest rate swap contracts	$25,000	$1,415	$—
Not designated as hedges:
Customer-related interest rate swap contracts:
Matched interest rate swaps with borrower	109,638	1,611	4,499
Matched interest rate swaps with counterparty	109,638	4,499	1,611
Mortgage banking contracts:
IRLCs	26,152	335	—

The Corporation and the Bank are required to maintain cash collateral with dealer counterparties for interest rate swap relationships in a loss position. At both September 30, 2024 and December 31, 2023, there wasno cash collateral maintained with dealer counterparties.

NOTE 13: Other Noninterest Expenses

The following table presents the significant components in the Consolidated Statements of Income line “Noninterest Expenses-Other.”


· · Three Months Ended September 30, · · · Nine Months Ended September 30,
(Dollars in thousands) · 2024 · 2023 · · · 2024 · 2023
Loan expenses	$474	$614	$1,343	$1,760
Telecommunication expenses	372	344	1,142	970
Travel and educational expenses	221	305	747	959
Postage and courier expenses	232	250	777	744
Licenses and taxes expense	243	238	729	658
Finance payment processing expense	210	199	627	602
Provision for indemnifications	(100)	(200)	(375)	(435)
Other components of net periodic pension cost	(123)	(114)	(409)	(340)
All other noninterest expenses	670	704	1,918	1,888
Total other noninterest expenses	$2,199	$2,340	$6,499	$6,806

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