C & F FINANCIAL CORP (CFFI)

ITEM 2.MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

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The following discussion supplements and provides information about the major components of the results of operations, financial condition, liquidity and capital resources of the Corporation. This discussion and analysis should be read in conjunction with the accompanying consolidated financial statements. In addition to current and historical information, the following discussion and analysis contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements relate to our future business, financial condition or results of operations. For a description of certain factors that may have a significant impact on our future business, financial condition or results of operations, see “Cautionary Statement About Forward-Looking Statements” at the end of this discussion and analysis.

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OVERVIEW

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Our primary financial goals are to maximize the Corporation’s earnings and to deploy capital in profitable growth initiatives that will enhance long-term shareholder value. We track three primary financial performance measures in order to assess the level of success in achieving these goals: (1) return on average assets (ROA), (2) return on average equity (ROE), and (3) growth in earnings.  In addition to these financial performance measures, we track the performance of the Corporation’s three business segments:  community banking, mortgage banking, and consumer finance.  We balance these financial measures with acceptable levels of interest rate risk, while satisfying liquidity and capital requirements and monitoring asset quality.  We also actively manage our capital through growth, dividends and share repurchases, while considering the need to maintain a strong capital position. The following table presents selected financial performance highlights for the periods indicated:

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TABLE 1: Financial Performance Highlights

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Consolidated net income increased $859,000 and $2.3 million for the second quarter and first six months of 2026 compared to the same periods in 2025 due primarily to higher net income at the community banking and mortgage banking segments, partially offset by lower net income at the standalone Corporation, included in “Other” in the table above, and consumer finance segment. A discussion of the performance of our business segments is included under the heading “Business Segments” in the “Results of Operations” section of this discussion and analysis.

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Included in net income for the second quarter and first six months of 2026 were the effects of the sale of an equity interest in Bearing Insurance Group, LLC (the Bearing equity interest), resulting in an after-tax gain of $6.4 million, and a strategic restructuring of a portion of the Corporation’s securities portfolio restructuring (the Portfolio Restructuring), which resulted in an after-tax loss of $5.6 million.  No such effects impacted the Corporation’s financial results for the three and six months ended June 30, 2025. Excluding the effects of these items, adjusted net income was $7.9 million, or $2.40 per share, for the second quarter of 2026 compared to $7.8 million, or $2.37 per share, for the second quarter of 2025 and adjusted net income was $14.7 million, or $4.48 per share, for the first six months of 2026 compared to $13.2 million, or $4.03 per share, for the first six months of 2025.

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The Corporation uses non-GAAP measures of financial performance, including adjusted net income, adjusted earnings per share, annualized adjusted ROA, annualized adjusted ROE, annualized ROTCE and annualized adjusted ROTCE, to provide meaningful information about operating performance by excluding the effects of certain items that management does not expect to have an ongoing impact on consolidated net income. Each of the non-GAAP measures listed in the prior sentence, for the three and six months ended June 30, 2026, exclude the effects of the sale of the Bearing equity interest and the Portfolio Restructuring. For further information regarding non-GAAP measures, including the impact of the above items on each year, refer to “Use of Certain Non-GAAP Financial Measures” and the accompanying disclosure below within this Item 2.

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Key factors affecting comparison for the second quarter and first six months of 2026 are as follows.

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Capital Management and Dividends

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Under regulatory capital standards, the Corporation’s tier 1 risk-based capital and total risk-based capital ratios at June 30, 2026 were 12.3 percent and 15.3 percent, respectively, compared to 12.2 percent and 15.2 percent, respectively, at December 31, 2025. At June 30, 2026, the book value per share of the Corporation’s common stock was $85.46 and tangible book value per share, which is a non-GAAP financial measure, was $77.45, compared to $80.64 and $72.60, respectively, at December 31, 2025.

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Total consolidated equity increased $16.1 million to $278.4 million at June 30, 2026 compared to $262.3 million at December 31, 2025 due primarily to net income and lower unrealized losses in the market value of securities available for

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sale, which are recognized as a component of other comprehensive income, partially offset by dividends paid on the Corporation’s common stock. The Corporation’s securities available for sale are fixed income debt securities and their net unrealized loss position is a result of increased market interest rates since they were purchased. The Corporation expects to recover its investments in debt securities through scheduled payments of principal and interest. Unrealized losses are not expected to affect the earnings or regulatory capital of the Corporation or C&F Bank. The accumulated other comprehensive loss related to the Corporation’s securities available for sale, net of deferred income taxes, decreased to $6.7 million at June 30, 2026 compared to $10.2 million at December 31, 2025 due primarily to the Portfolio Restructuring in the second quarter of 2026.

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The Corporation’s Board of Directors declared a quarterly cash dividend of 48 cents per share during the second quarter of 2026, which was paid on July 1, 202

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ITEM 7.MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

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The following discussion supplements and provides information about the major components of the results of operations, financial condition, liquidity and capital resources of the Corporation. This discussion and analysis should be read in conjunction with the accompanying consolidated financial statements. In addition to current and historical information, the following discussion and analysis contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements relate to our future business, financial condition or results of operations. For a description of certain factors that may have a significant impact on our future business, financial condition or results of operations, see “Cautionary Statement Regarding Forward-Looking Statements” prior to Part I, Item 1. “Business.”

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OVERVIEW

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Our primary financial goals are to maximize the Corporation’s earnings and to deploy capital in profitable growth initiatives that will enhance long-term shareholder value. We track three primary financial performance measures in order to assess the level of success in achieving these goals: (1) return on average assets (ROA), (2) return on average equity (ROE), and (3) growth in earnings.  In addition to these financial performance measures, we track the performance of the Corporation’s three business segments: community banking, mortgage banking, and consumer finance.  We balance these financial measures with acceptable levels of interest rate risk, while satisfying liquidity and capital requirements and monitoring asset quality.  We also actively manage our capital through growth, dividends and share repurchases, while considering the need to maintain a strong capital position. The following table presents selected financial performance highlights for the periods indicated:

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TABLE 1: Financial Performance Highlights

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Consolidated net income and earnings per share were $27.0 million and $8.29, respectively, for the year ended December 31, 2025, compared to $19.9 million and $6.01, respectively, for the year ended December 31, 2024.  The increase in consolidated net income for 2025 compared to 2024 was due primarily to higher net income at the community banking and mortgage banking segments, partially offset by a decrease in net income at the consumer finance segment.

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A discussion of the performance of our business segments is included under the heading “Business Segments” in the “Results of Operations” section of this discussion and analysis.

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Key factors affecting comparisons for the years ended December 31, 2025 and 2024 are as follows.

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Discussion of consolidated net income and earnings per share for the year ended December 31, 2023 has been omitted as such discussion was provided in Part II, Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” under the heading “Overview” in the Corporation’s Annual Report on Form 10-K for the year ended December 31, 2024, which was filed with the SEC on February 27, 2025, and is incorporated herein by reference.

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Capital Management and Dividends

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Total equity was $262.3 million at December 31, 2025, compared to $227.0 million at December 31, 2024.   Under regulatory capital standards, the Corporation’s tier 1 risk-based capital and total risk-based capital ratios at December 31, 2025 were 12.2 percent and 15.2 percent, respectively, compared to 11.9 percent and 14.1 percent, respectively, at December 31, 2024.

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Total consolidated equity increased $35.4 million at December 31, 2025 compared to December 31, 2024, due primarily to net income and lower unrealized losses in the market value of securities available for sale, which are recognized as a component of other comprehensive income, partially offset by dividends paid on the Corporation’s common stock. The Corporation’s securities available for sale are fixed income debt securities and their unrealized loss position is a result of increased market interest rates since they were purchased. The Corporation expects to recover its investments in debt securities through scheduled payments of principal and interest. Unrealized losses are not expected to affect the earnings or regulatory capital of the Corporation or C&F Bank. The accumulated other comprehensive loss related to the Corporation’s securities available for sale, net of deferred income taxes, decreased to $10.2 million at December 31, 2025, compared to $23.7 million at December 31, 2024 due primarily to fluctuations in debt security market interest rates and a decrease in the balance of securities available for sale in an unrealized loss position as a result of maturities, calls and paydowns.

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The Corporation’s Board of Directors continued its historical practice of paying dividends in 2025. For the year ended December 31, 2025, the Corporation declared dividends totaling $1.84 per share, compared to $1.76 per share for the year ended December 31, 2024. The Board of Directors of the Corporation continually reviews the amount of cash dividends per share and the resulting dividend payout ratio in light of changes in economic conditions, current and future capital levels and requirements and expected future earnings. In making its decision on the payment of dividends on the Corporation’s common stock, the Corporation’s Board of Directors considers operating results, financial condition, capital adequacy, regulatory requirements, shareholder returns, growth expectations and other factors.

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In December 2023, the Board of Directors authorized a program, effective January 1, 2024 through December 31, 2024, to repurchase up to $10.0 million of the Corporation’s common stock (the 2024 Repurchase Program). During the year ended December 31, 2024, the Corporation repurchased 160,694 shares, or $7.9 million, of its common stock under the 2024 Repurchase Program.

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In December 2024, the Board of Directors authorized a program, effective January 1, 2025 through December 31, 2025, to repurchase up to $5.0 million of the Corporation’s common stock (the 2025 Repurchase Program). During the year ended December 31, 2025, the Corporation did not make any repurchases of its common stock under the 2025 Repurchase Program.

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In December 2025, the Board of Directors authorized a new program, effective January 1, 2026 through December 31, 2026, to repurchase up to $5.0 million of the Corporation’s common stock (the 2026 Repurchase Program). Repurchases under the 2026 Repurchase Program may be made through privately negotiated transactions or open market transactions, including pursuant to a trading plan in accordance with Rule 10b5-1 and/or Rule 10b-18 under the Securities Exchange Act of 1934, as amended, and shares repurchased will be returned to the status of authorized and unissued shares of common stock.

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At December 31, 2025, the book value per share of the Corporation’s common stock was $80.64, and tangible book value per share, a non-GAAP measure, was $72.60, compared to $70.00 and $61.86 respectively, at December 31, 2024.  Refer to “Use of Certain Non-GAAP Financial Measures,” below, for information about non-GAAP financial measures, including a reconciliation to the most directly comparable financial measures calculated in accordance with GAAP.

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2026 Outlook

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The current economic environment is challenging across all levels, market conditions are shifting quickly, and competition is intensifying; however, we believe our strong capital position, history of profitability, and diverse income stream sources position us well for the challenging times ahead. We remain focused on maintaining our strong balance sheet, managing margins, maintaining strong liquidity and capital positions, and pursuing disciplined growth by focusing on the following:

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