C & F FINANCIAL CORP (CFFI) stock intrinsic value fair value estimate & owner earnings analysis

C&F Financial is a Virginia bank holding company with three businesses: C&F Bank, a community bank centered on the Richmond and Hampton Roads/Williamsburg areas that opened a loan production office in Roanoke in the third quarter of 2025; C&F Mortgage, which originates home loans and sells nearly all of them to investors; and C&F Finance, which buys used-car loan contracts from dealers, largely made to borrowers with weaker credit, across the Mid-Atlantic, Midwest and South. The bank's deposits, about $2.35 billion at the end of 2025, pay for the lending of all three businesses. How we measure earnings. Reported operating cash flow here mostly tracks how many mortgages are waiting to be sold, so we strip out that pipeline and other short-term timing items. We made two accounting judgements that matter. First, we keep the profit the mortgage business makes when it sells loans. Our previous analysis removed that profit along with the pipeline, and that is why it showed near-zero earnings for the 2020-2021 refinancing boom. Second, the cash flow statement adds back the provision for loan losses, which would treat bad loans as costless. For a lender that is not right, so we charge the losses actually written off each year (net of recoveries), much as a manufacturer is charged for replacing worn equipment. At C&F Finance those write-offs ran about $12 million a year in 2024 and 2025 (2.6% of that segment's loans). On this basis, owner earnings per share were $3.75, $3.65 and $3.66 in 2016-2018, when consumer-loan losses were $13-18 million a year on a much smaller company. They were $5.20 in 2019 and $5.40 in 2020, $8.80 in 2021 (a refinancing boom plus almost no loan losses), then $7.44, $7.75, $6.20 and $8.18 in 2022-2025. Since 2019 each year is within about 12% of reported net income, which is a good check. We anchor on the 2022-2025 median of $7.60 a share, about $24.7 million. Those years reflect today's larger balance sheet after the 2020 purchase of Peoples Bankshares and today's interest rates. We leave out 2020-2021 because stimulus and the refinancing boom distorted them. Recent results. Owner earnings rose 32% in 2025 (from $6.20 to $8.18), and the first half of 2026 is running at about $8 a share annualized. Our base case starts from the lower $7.60 anchor and grows only 2.5% in year one. We treat the better recent level as something that still has to prove it lasts through a credit cycle. Growth we credit. C&F has grown deposits organically at roughly 5% a year, both in 2015-2019 and in 2021-2025, straight through the 2020 shock and the 2022-2023 rate spike. The base case credits 2.5% a year for ten years and the bull case 4%. A bank must keep adding capital to grow its loans, so in both cases we deduct the earnings that have to be retained to hold today's capital level. That cuts distributable cash by roughly a quarter in the base case. We give no credit to a payoff from the Roanoke expansion, to wider lending margins, or to a mortgage-volume recovery. These are not yet secured. Debt. For a bank, deposits and borrowings are the raw material of the business and interest is an operating cost. Owner earnings are therefore measured after all interest, and no debt is subtracted separately. Doing so would count it twice. At the holding company, C&F owes $40 million of subordinated notes due 2035, fixed at 7.50% until June 2030 and then floating at SOFR plus 3.885%. It also owes about $25.5 million of trust preferred capital notes. The subordinated notes were issued in June 2025 and replaced $20 million of 4.875% notes due 2030. Together these holding-company obligations carry roughly $4.5 million of yearly interest, which is already charged in every case below. Even the bear case's worst year covers it more than three times over. In each case, the figure below is what the business is worth to shareholders after depositors and lenders, with nothing further owed on top. We treated debt the same way before, so the change in our estimate comes from the corrected earnings history and the rebuilt cases, not from debt. Bear case, about $103 a share (roughly $335 million). Consumer-loan losses return toward C&F Finance's own 2016-2018 levels. The community bank's credit costs move up from today's very low level, and mortgage volumes stay near their 2023 lows. Owner earnings fall to about $5.50 a share in year one and $4.50 in years two and three. They recover to $6.50 by year five and stay there with no growth. Base case, about $137 a share (roughly $444 million). Earnings start at the $7.60 anchor and grow 2.5% a year for ten years, less the capital retained to support that growth, then hold flat. Bull case, about $157 a share (roughly $511 million). Earnings hold at the 2025 level of $8.18, which the business has already reached. They grow 4% a year for ten years, less the retained capital, then hold flat. Consumer-loan losses stay near 2.6%. Our earlier estimates were about $60, $202 and $331 a share. The bear case rises because the corrected history shows the business earning well above $3 a share even in weak years. The base and bull cases fall because we now charge loan losses and the capital needed to grow, and we no longer assume growth to about $21 a share by year ten. Beyond year ten, all three cases assume flat earnings with no growth. What keeps the franchise going is the deposit base, which has grown every year from 2015 to 2025. All figures are discounted at 6%. The range is fairly narrow because the business earns only modestly more than a 6% return on its capital, about 9-10% on roughly $278 million of equity (about $85 a share of book value). Faster growth therefore adds little value. Margin-of-safety price. The margin-of-safety price is about $85, roughly book value, 18% below the bear case and 38% below the base case. That is a wide margin for a bank. It reflects the non-prime auto-lending unit, whose losses have been far higher before. What would make this wrong: consumer-loan write-offs well above 4% of that portfolio for several years, a loss of low-cost deposits, or community-bank credit losses far beyond anything in the last decade. A few small non-cash items did not tie out exactly to earnings in some years: accretion of discounts on acquired loans, pension costs and bank-owned life insurance income. They do not change the picture.