NOTE 19: Business Segments

The Corporation operates in a decentralized fashion in three principal business segments: retail banking, mortgage banking and consumer finance. Revenues from retail banking operations consist primarily of interest earned on loans and investment securities and fees earned on deposit accounts and debit card interchange activity. Mortgage banking operating revenues consist principally of gains on sales of loans in the secondary market, mortgage banking fee income related to loan originations, and interest earned on mortgage loans held for sale. Revenues from consumer finance consist primarily of interest earned on purchased retail installment sales contracts.

C&F Wealth Management derives revenues from offering wealth management services and insurance products through third-party service providers. The Corporation’s revenues and expenses are comprised primarily of interest expense associated with the Corporation’s trust preferred capital notes, 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 C&F Wealth Management and the Corporation are not significant to the Corporation on a consolidated basis and are included in “Other.”


	Year Ended December 31, 2019
	Retail		Mortgage		Consumer
(Dollars in thousands)	Banking		Banking		Finance		Other		Eliminations		Consolidated
Revenues:
Interest income	$	59,465	$	2,699	$	41,389	$	4	$	(8,547)	$	95,010
Gains on sales of loans		—		10,603		—		—		—		10,603
Other noninterest income		11,392		5,103		565		4,349		—		21,409
Total operating income		70,857		18,405		41,954		4,353		(8,547)		127,022
Expenses:
Provision for loan losses		360		—		8,155		—		—		8,515
Interest expense		10,181		1,618		10,169		1,135		(8,547)		14,556
Salaries and employee benefits		28,231		5,965		8,668		4,337		—		47,201
Depreciation and amortization		3,242		246		196		182		—		3,866
Other noninterest expenses		17,091		5,467		5,338		1,056		—		28,952
Total operating expenses		59,105		13,296		32,526		6,710		(8,547)		103,090
Income (loss) before income taxes		11,752		5,109		9,428		(2,357)		—		23,932
Income tax expense (benefit)		1,837		1,336		2,560		(651)		—		5,082
Net income (loss)	$	9,915	$	3,773	$	6,868	$	(1,706)	$	—	$	18,850
Total assets	$	1,468,627	$	102,467	$	314,431	$	30,299	$	(258,392)	$	1,657,432
Goodwill	$	3,702	$	—	$	10,723	$	—	$	—	$	14,425
Capital expenditures	$	2,270	$	246	$	123	$	67	$	—	$	2,706


	Year Ended December 31, 2018
	Retail		Mortgage		Consumer
(Dollars in thousands)	Banking		Banking		Finance		Other		Eliminations		Consolidated
Revenues:
Interest income	$	55,019	$	2,018	$	42,789	$	6	$	(7,284)	$	92,548
Gains on sales of loans		—		7,841		—		—		—		7,841
Other noninterest income		11,029		4,015		738		2,135		—		17,917
Total operating income		66,048		13,874		43,527		2,141		(7,284)		118,306
Expenses:
Provision for loan losses		100		—		10,906		—		—		11,006
Interest expense		6,842		904		9,413		1,152		(7,284)		11,027
Salaries and employee benefits		26,632		5,298		8,542		1,531		—		42,003
Depreciation and amortization		3,014		269		211		177		—		3,671
Other noninterest expenses		16,869		4,803		5,303		1,083		—		28,058
Total operating expenses		53,457		11,274		34,375		3,943		(7,284)		95,765
Income (loss) before income taxes		12,591		2,600		9,152		(1,802)		—		22,541
Income tax expense (benefit)		1,958		697		2,460		(594)		—		4,521
Net income (loss)	$	10,633	$	1,903	$	6,692	$	(1,208)	$	—	$	18,020
Total assets	$	1,351,932	$	51,226	$	296,876	$	16,461	$	(195,084)	$	1,521,411
Goodwill	$	3,702	$	—	$	10,723	$	—	$	—	$	14,425
Capital expenditures	$	3,178	$	133	$	59	$	4	$	—	$	3,374


	Year Ended December 31, 2017
	Retail		Mortgage		Consumer
(Dollars in thousands)	Banking		Banking		Finance		Other		Eliminations		Consolidated
Revenues:
Interest income	$	49,564	$	1,660	$	44,745	$	1	$	(6,377)	$	89,593
Gains on sales of loans		—		8,553		—		—		—		8,553
Other noninterest income		10,501		4,095		878		3,205		—		18,679
Total operating income		60,065		14,308		45,623		3,206		(6,377)		116,825
Expenses:
Provision for loan losses		200		—		16,235		—		—		16,435
Interest expense		6,076		587		8,164		1,151		(6,377)		9,601
Salaries and employee benefits		25,132		5,945		9,272		3,248		—		43,597
Depreciation and amortization		2,818		239		212		178		—		3,447
Other noninterest expenses		15,133		4,946		5,209		491		—		25,779
Total operating expenses		49,359		11,717		39,092		5,068		(6,377)		98,859
Income (loss) before income taxes		10,706		2,591		6,531		(1,862)		—		17,966
Income tax expense (benefit)		5,727		1,606		4,198		(137)		—		11,394
Net income (loss)	$	4,979	$	985	$	2,333	$	(1,725)	$	—	$	6,572
Total assets	$	1,336,100	$	64,513	$	291,774	$	11,220	$	(194,551)	$	1,509,056
Goodwill	$	3,702	$	—	$	10,723	$	—	$	—	$	14,425
Capital expenditures	$	3,524	$	410	$	232	$	14	$	—	$	4,180

In 2019, the Corporation recorded merger related expenses of $709,000 ($653,000 after income taxes) in connection with its acquisition of Peoples, of which $236,000 ($196,000 after income taxes) was allocated to the retail banking segment and the remainder was recorded as a holding company expense.

The retail banking segment extends two warehouse lines of credit to the mortgage banking segment, providing a portion of the funds needed to originate mortgage loans. The retail 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 retail 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 LIBOR plus 200 basis points and fixed rate notes that carry interest at rates ranging from 2.0 percent to 8.0 percent. The retail 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. Certain corporate overhead costs incurred by the retail banking segment are not allocated to the mortgage banking, consumer finance and other segments.