CFFI C and F Financial Corporation

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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

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SCHEDULE 14A

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Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934

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Dear Fellow Shareholders:

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You are cordially invited to attend the 2024 Annual Meeting of Shareholders of C&F Financial Corporation, the holding company for Citizens and Farmers Bank.  The meeting will be held on Tuesday, April 16, 2024, at 3:30 p.m. Eastern Time at C&F Financial Corporation, 3600 LaGrange Parkway, Toano, Virginia.  The accompanying Notice and Proxy Statement describe the matters to be presented at the Annual Meeting.  Enclosed is our Annual Report to Shareholders that will be reviewed at the Annual Meeting.

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Whether or not you plan to attend the Annual Meeting, your vote is important, and we encourage you to vote promptly.  You have a choice of voting your shares by proxy over the Internet, by telephone or by signing, dating and mailing the enclosed proxy card.  Please take the time to vote by proxy now so that your shares are represented at the meeting.  If you decide to attend the Annual Meeting and vote in person, you can revoke your proxy at any time before it is voted at the Annual Meeting (provided that, if you hold your shares through a bank, broker or other holder of record and you wish to vote at the Annual Meeting, you must obtain a legal proxy or broker’s proxy and provide proof of your legal proxy as authority to vote the shares at the Annual Meeting).

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We appreciate your continuing loyalty and support of C&F Financial Corporation.

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Sincerely,

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Toano, Virginia

March 8, 2024

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C&F FINANCIAL CORPORATION

3600 La Grange Parkway

Toano, Virginia 23168

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NOTICE OF 2024 ANNUAL MEETING OF SHAREHOLDERS

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TO BE HELD APRIL 16, 2024

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The 2024 Annual Meeting of Shareholders of C&F Financial Corporation (the “Corporation”) will be held at C&F Financial Corporation, 3600 LaGrange Parkway, Toano, Virginia, on Tuesday, April 16, 2024, at 3:30 p.m. Eastern Time for the following purposes:

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Shareholders of record at the close of business on February 15, 2024, are entitled to notice of and to vote at the Annual Meeting or any adjournment thereof.

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March 8, 2024

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IMPORTANT NOTICE

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Your vote is important. You have a choice of voting by proxy over the Internet, by telephone or by signing, dating and mailing the enclosed proxy card.  Please take the time to vote by proxy now so that your shares are represented at the Annual Meeting.

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If you decide to attend the Annual Meeting and vote in person, you can revoke your proxy at any time before it is voted at the Annual Meeting (provided that, if you hold your shares through a bank, broker or other holder of record and you wish to vote in person, you must obtain a legal proxy or broker’s proxy card and bring it to the Annual Meeting as proof of your authority to vote the shares).

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C&F FINANCIAL CORPORATION

PROXY STATEMENT

2024 ANNUAL MEETING OF SHAREHOLDERS

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Overview of C&F Financial Corporation

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C&F Financial Corporation (the “Corporation”) is a financial institution that has been focused on serving our customers and communities for over 95 years. We employ a diversified business strategy through our three business segments:

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Proxy Summary

The 2024 Annual Meeting of Shareholders (the “Annual Meeting”) of the Corporation will be held on Tuesday, April 16, 2024, at 3:30 p.m. Eastern Time at C&F Financial Corporation, 3600 LaGrange Parkway, Toano, Virginia. The approximate mailing date of this Proxy Statement and accompanying proxy is March 8, 2024. The following matters will be considered at the Annual Meeting. Please refer to the information contained in this Proxy Statement related to each of these matters in considering your vote.

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2023 Financial Results

The Corporation reported consolidated net income and earnings per share of $23.7 million and $6.92, respectively, for 2023, compared to $29.4 million and $8.29, respectively, for 2022. The Corporation reported return on average equity (“ROE”) and return on average assets (“ROA”) of 11.68 percent and 0.99 percent, respectively, for 2023, compared to 14.84 percent and 1.27 percent, respectively, for 2022.

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* Adjusted net income, adjusted earnings per share, adjusted ROE and adjusted ROA are financial measures that are not consistent with U.S. generally accepted accounting principles (“GAAP”) that are considered by the Corporation as part of its executive compensation program.  Refer to Appendix A for information regarding these non-GAAP financial measures, including a reconciliation to the most directly comparable U.S. GAAP financial measures.

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Pay for Performance

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The compensation of our executive officers includes incentive compensation and is structured to pay for performance, in order to align our compensation program with the interests of shareholders. In 2023, 49 percent of the total direct compensation of our Chief Executive Officer was incentive compensation, and was based in part on the Corporation’s performance relative to a peer group of 53 other banks.  The Corporation’s performance relative to this peer group improved in 2023 compared to 2022, as measured by the performance measures established by the Compensation Committee and used to determine incentive compensation for the Chief Executive Officer. The results of the performance measures used to determine the amounts of the short-term cash incentive compensation award and the long-term equity incentive compensation award for the Chief Executive Officer for 2023 are shown below. These awards are discussed in further detail in the Compensation Discussion and Analysis.

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Our Board of Directors

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We believe that our Board of Directors possesses the skills, expertise, character, judgment and other qualities necessary to provide meaningful, independent leadership and oversight of the Corporation’s business operations and strategy.  Each of our directors and director nominees has the requisite skills, qualifications and personal traits sought by the Nominating Committee in a highly qualified director.  Our Board of Directors, including the director nominees, collectively offer a variety of valuable skills and experience, and a diversity of backgrounds and perspectives, as summarized below. Our Board of Directors includes two members of management and ten independent directors.

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Composition of Board of Directors

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Corporate Responsibility

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We are committed to fulfilling our responsibilities to a variety of stakeholders as a community financial institution: our customers, our communities, our employees and our shareholders.  We have identified the following priorities related to our corporate responsibility and have taken steps to advance these priorities through our business and investment decisions:

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GENERAL INFORMATION

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2024 Annual Meeting of Shareholders and Proxy Information

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The following information is furnished in connection with the solicitation by and on behalf of the Board of Directors of the Corporation (the “Board”) of the enclosed proxy to be used at the Annual Meeting, to be held Tuesday, April 16, 2024, at 3:30 p.m. Eastern Time at C&F Financial Corporation, 3600 LaGrange Parkway, Toano, Virginia.  You will be able to attend the Annual Meeting, vote your shares and submit your questions in accordance with the rules of conduct for the meeting. The approximate mailing date of this Proxy Statement and accompanying proxy is March 8, 2024.

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Additional information regarding the rules and procedures for participating in the Annual Meeting will be provided in our meeting rules of conduct, which shareholders can view on the website provided below.

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Important Notice Regarding the Availability of Proxy Materials for the Shareholder Meeting to Be Held on April 16, 2024

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The Notice of 2024 Annual Meeting of Shareholders, this Proxy Statement, form of proxy and the 2023 Annual Report to Shareholders are available on the Internet at the following website:

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http://www.astproxyportal.com/ast/08723/

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Voting in Person at the Annual Meeting or by Proxy

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You will receive multiple printed copies of the Proxy Statement and accompanying proxy if you hold your shares in different ways (such as, joint tenancy, through a trust, in a custodial account, etc.) or in more than one account. You should vote the shares represented by each proxy card you receive to ensure that all of your shares are voted.

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Shareholders of record can vote in person at the Annual Meeting or by proxy. There are three ways for shareholders of record to vote by proxy:

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If you hold your shares through a bank, broker or other holder of record, you will receive voting instructions from the holder of record. You must follow the instructions of the holder of record in order for your shares to be voted. Telephone and Internet voting may also be offered to shareholders owning shares through certain banks and brokers.

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If you vote by proxy in time for the Annual Meeting, the individuals named on the proxy card (the “proxies”) will vote your shares in accordance with your instructions.  If you properly submit a proxy without specifying how to vote your shares with respect to a proposal, such proxy will be voted according to the recommendation of the Board.

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Proxies will extend to, and will be voted at, any properly adjourned session of the Annual Meeting.  

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Voting by proxy over the Internet, by telephone or by mailing a proxy card will not affect your right to attend or to vote in person at the Annual Meeting.  

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If you hold your shares through a bank, broker or other holder of record, and you plan to vote in person at the Annual Meeting, you should contact the holder of record (that is, your bank, broker or other nominee) to obtain a legal proxy or broker’s proxy card and bring it to the meeting as proof of your authority to vote the shares.

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Questions During the Annual Meeting

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During the Annual Meeting, we intend to answer questions that are pertinent to shareholders generally and the matters to be considered at the meeting, subject to time constraints. We may group and answer together questions that are substantially similar to avoid repetition.

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Revocation of Proxies

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Submission of a proxy will not affect a shareholder’s right to attend or vote in person at the Annual Meeting.  Any shareholder who has properly submitted a proxy may revoke it by attending the Annual Meeting and voting in person.  

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If you are a shareholder of record, you may change or revoke your proxy at any time before your shares are voted at the Annual Meeting, by any of the following methods:

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The last Internet vote, telephone vote or proxy card vote that you submit in accordance with all instructions, including the timing deadlines set forth above, with respect to the same shares is the one that will be counted.

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Directions to Annual Meeting

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To obtain directions to attend the Annual Meeting and vote in person, please contact the Secretary of the Corporation at (804) 843-2360.

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Voting Rights of Shareholders

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Only those common shareholders of record at the close of business on February 15, 2024 are entitled to notice of and to vote at the Annual Meeting, or any adjournments thereof.  The number of shares of Corporation common stock outstanding and entitled to vote at the Annual Meeting is 3,365,283.  The Corporation has no other class of voting stock outstanding.  A majority of the votes entitled to be cast, represented in person or by proxy, will constitute a quorum for the transaction of business.

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Each share of Corporation common stock entitles the record holder thereof to one vote for each matter to be voted upon at the Annual Meeting.  Shares for which the holder has elected to abstain or to withhold the proxies’ authority to vote (including broker non-votes) on a matter will count toward a quorum, but will not be included in determining the number of votes cast with respect to such matter.

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With regard to the election of directors, votes may be cast in favor or withheld.  If a quorum is present, the four nominees receiving the greatest number of affirmative votes cast at the Annual Meeting, even if less than a majority, will be elected directors; therefore, votes withheld and broker non-votes will have no effect.

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For all other proposals, votes may be cast in favor or against, or shareholders may abstain from voting. Approval of these other proposals (i.e., the non-binding advisory vote to approve executive compensation and the ratification of the appointment of the Corporation’s independent registered public accounting firm) requires an affirmative vote of a majority of the votes cast on the matter.  Thus, although abstentions and broker non-votes are counted for purposes of determining the presence or absence of a quorum, they generally do not count as votes cast and, therefore, will have no effect for purposes of determining whether such a matter is approved.

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Routine and Non-Routine Proposals

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Applicable rules determine whether proposals presented at shareholder meetings are routine or non-routine.  If a proposal is routine, a broker or other entity holding shares for an owner in street name generally may vote on the proposal without receiving voting instructions from the owner.  If a proposal is non-routine, the broker or other entity generally may vote on the proposal only if the owner has provided voting instructions.  A “broker non-vote” occurs when a broker or other entity returns a signed proxy card but does not vote shares on a particular proposal because the proposal is not a routine matter and the broker or other entity has not received voting instructions from the beneficial owner of the shares.  The ratification of the appointment of Yount, Hyde & Barbour, P.C. as the Corporation’s independent registered public accounting firm for the fiscal year ending December 31, 2024 is considered a routine matter, while the election of directors and the non-binding advisory vote to approve executive compensation are considered to be non-routine matters.  

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Solicitation of Proxies

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The cost of solicitation of proxies will be borne by the Corporation.  Solicitations will be made only by the use of the mail, except that officers and regular employees of the Corporation and Citizens and Farmers Bank (the “Bank”) may make solicitations of proxies in person, by telephone or by mail, acting without compensation other than their regular compensation.  We anticipate that brokerage houses and other nominees, custodians and fiduciaries will be requested to forward the proxy soliciting material to the beneficial owners of the stock held of record by such persons, and the Corporation will reimburse them for their reasonable expenses in forwarding these proxy materials to such beneficial owners.  The Corporation has engaged D. F. King & Co., Inc. to assist in the solicitation of proxies for the Annual Meeting for a fee of approximately $5,000 plus expenses.

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BOARD AND GOVERNANCE MATTERS

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PROPOSAL ONE

ELECTION OF DIRECTORS

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The Corporation’s Board is divided into three classes (I, II and III) of directors.  The term of office for Class I directors will expire at the Annual Meeting.  Based on the recommendation of the Nominating Committee, each of Larry G. Dillon, C. Elis Olsson, D. Anthony Peay and Dr. Jeffery O. Smith has been nominated by the Board to serve as a Class I director.  If elected, the Class I nominees will serve until the 2027 Annual Meeting of Shareholders.  All director nominees currently serve as directors of the Corporation.  

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The Corporation’s Board believes that the nominees will be available and able to serve as directors, but if any of these persons should not be available or able to serve, the proxies may exercise discretionary authority to vote for a substitute proposed by the Nominating Committee.  

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The Board is not aware of any family relationship among any director, director nominee or executive officer; nor is the Board aware of any involvement of any director, director nominee or executive officer, currently or in the past ten years, in any legal proceedings that would be material to an evaluation of the ability or integrity of any director, director nominee or executive officer.  None of the directors or director nominees serves, nor in the past five years has any director or director nominee served, as a director of any other public company with a class of securities registered pursuant to Section 12 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”).  

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THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT SHAREHOLDERS VOTE “FOR” THE FOUR NOMINEES NOMINATED TO SERVE AS CLASS I DIRECTORS.

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Director Nominees and Directors Continuing to Serve

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Certain information concerning the nominees for election at the Annual Meeting as Class I directors is set forth below, as well as certain information about the remaining Class II and III directors who will continue in office until the 2025 and 2026 Annual Meetings of Shareholders, respectively, including the qualifications, skills and experience that the Board believes make the director or director nominee a good fit for service on the Board.  The Board of Directors of the Bank (the “Bank Board”) consists of the twelve current members of the Corporation’s Board listed below and Bryan E. McKernon, President and CEO of C&F Mortgage Corporation.

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Composition of the Board

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The Nominating Committee seeks a diverse group of candidates who possess the background, skills and expertise to make significant contributions to the Board, the Corporation and its shareholders.  The Board believes that it is better able to fulfill its responsibility to shareholders when it benefits from a variety of experiences, backgrounds and perspectives.  Consideration is given to assuring that the Board, as a whole, adequately reflects the diversity of our constituencies and the communities in which we conduct our business. The following table contains certain demographic information about the Board.

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Qualifications for consideration as a director nominee may vary according to the particular areas of expertise being sought as a complement to the existing Board composition.  However, minimum qualifications include high level leadership experience in business activities, breadth of knowledge about issues affecting the Corporation and time available for meetings and consultation on Corporation matters.  Further, all director nominees must possess the aptitude or experience to understand fully the legal responsibilities of a director and the governance processes of a public company, as well as the personal qualities to be able to make an active and substantial contribution to Board deliberations, including, but not limited to, intelligence and wisdom, self-assuredness, interpersonal and communication skills, courage and inquisitiveness.  Consideration will also be given to financial management, reporting and control expertise or other experiences that would qualify the individual as an “audit committee financial expert” under established standards.  

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The Board has concluded that each director and director nominee possesses the personal traits described above.  In considering the directors’ and the director nominees’ individual experience, qualifications, attributes and skills, the Board has concluded that the appropriate experience, qualifications, attributes and skills are represented for the Board as a whole and for each of the Board’s committees.  In addition, each director and director nominee possesses characteristics that led the Board to conclude that such person should serve as a director.  The specific experience, qualifications, attributes and skills that the Board believes each director and director nominee possesses are discussed in the tables beginning on page 8.

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Board Leadership Structure and Risk Oversight

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Prior to January 1, 2019, the Corporation operated using the traditional U.S. board leadership structure, under which our CEO also served as Chairman of the Board.  Upon the appointment of Mr. Cherry as CEO, effective January 1, 2019, the Board decided to separate the roles of CEO and Chairman of the Board. Mr. Dillon, who served as CEO and Chairman of the Board prior to January 1, 2019, has continued to serve in the role of Chairman based on the Board’s determination that the Corporation benefits from such continuity and from Mr. Dillon’s decades of experience in management and on the Boards of the Corporation and the Bank.  

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Mr. Olsson serves as the Board’s lead independent director and chair of the Nominating Committee.  Mr. Olsson presides over executive sessions of the Board and meetings of the Nominating Committee, each of which are attended solely by independent directors.  Mr. Olsson also refers to the appropriate Board committee any issue brought to his attention by shareholders, directors and others.  Mr. Olsson is the primary communicator between the independent directors and the CEO, although individual Board members may

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communicate directly with the CEO and vice versa and may freely discuss their views with other Board members at any time.

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The Corporation believes that its leadership structure allows the directors to provide effective oversight of its risk management function.  The Audit Committee oversees the accounting and financial reporting processes of the Corporation, as well as legal and compliance matters and risk management.  As described in the Audit Committee Charter, the Board has delegated to the Audit Committee the responsibility of overseeing the internal controls of the Corporation along with its compliance with legal and regulatory requirements. On at least a quarterly basis, the Corporation’s Chief Risk Officer and Director of Internal Audit provide a comprehensive report to the Audit Committee regarding the Corporation’s key risks, including operational, financial, credit quality, cyber and other risks. While the Audit Committee has primary responsibility for overseeing risk management, our entire Board is actively involved in overseeing this function for the Corporation. On a routine basis, the Board receives reports from the Audit Committee Chair and discusses risks that the Corporation is facing. The Audit Committee and the full Board also engage in periodic discussions with the President and CEO, Chief Financial Officer (“CFO”), Chief Risk Officer, Chief Information Officer and other corporate officers as the Committee or Board may deem appropriate. The Board and management of the Corporation are actively engaged in particular in managing and responding to the growing risks posed by cybersecurity threats. Our Information Security Program includes ongoing monitoring of our networks, incident response capabilities, formal security awareness training for all employees and the Board, and regular review of threat evolution and industry trends, and the Board receives regular reporting from management on these efforts as part of its oversight of cyber risk management. In addition to the roles performed by the Audit Committee and the Board, the Compensation Committee considers the risks that may arise through our compensation programs.  The Compensation Committee Chair also reports to the Board on a routine basis.  The Corporation believes that its leadership structure promotes effective Board oversight of risk management, because Board committees comprised solely of independent directors actively monitor the Corporation’s risk management, and are provided with the information necessary to evaluate the specific risks relevant to each committee’s areas of accountability.

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As described below, on an annual basis, the Nominating Committee evaluates our Board leadership structure to ensure that it remains the optimal structure for our Corporation and our shareholders.  

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Director Independence

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The Board has determined that all non-employee directors, who comprise a majority of the Corporation’s Board, satisfy the independence requirements of the NASDAQ Stock Market (“NASDAQ”) listing standards.  The Board has affirmatively determined that directors Agnew, Causey, Holmes, Kelley, Napier, Olsson, Peay, Robinson, Sisson and Smith are, and during 2023 were, independent within the meaning of the NASDAQ listing standards. The Board also has affirmatively determined that director James H. Hudson III, who served on the Board until his death in July 2023 was independent within the meaning of the NASDAQ listing standards during 2023.  In conjunction with this determination, the Board considered the Corporation’s relationship with Mr. Hudson.  The firm of Hudson Law, PLC, of which Mr. Hudson was a member, was retained to perform legal services for the Corporation during fiscal years 2021, 2022 and 2023, for fees of approximately $79,000, $87,000 and $39,000, respectively.  The Board determined that the relationship did not interfere with Mr. Hudson’s ability to exercise independent judgment as a director of the Corporation.  During 2023, the Board held three regularly-scheduled executive session meetings attended solely by its independent directors.

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Board Evaluation Process

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The Board believes in a robust self-evaluation process.  Each year, all members of the Board complete a detailed questionnaire regarding the Board’s performance and Board governance and processes.  In connection with the evaluation process, the qualifications and performance of all Board members are reviewed

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prior to their re-nomination to the Board.  Annually, the Audit Committee, Compensation Committee and Nominating Committee each conducts a self-evaluation of its performance and procedures, including the adequacy of its charter, and reports the results to the Board.  

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Board Committees and Attendance

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During 2023, there were 13 meetings of the Board.  Each current director attended at least 75 percent of all meetings of the Board and Board committees on which he or she served.

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The Corporation has not adopted a formal policy on Board members’ attendance at its annual meeting of shareholders, although all Board members are encouraged to attend and historically most have done so.  All then-serving Board members attended the Corporation’s 2023 Annual Meeting of Shareholders.

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The Board has three standing committees, which are the Audit, Compensation and Nominating Committees.  Each of these committees is comprised solely of independent directors.  The duties of the committees are set forth in their respective committee charters.  Each of the committee chairs is responsible for directing the work of the committee in fulfilling its responsibilities.  In addition to these standing committees, all of the directors participate in the Corporation’s annual strategic planning process.

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The following table sets forth the current committee membership of the Board.

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¹    All members of the Audit, Compensation, and Nominating Committees are, and during 2023 were, non-employee directors and are, and during 2023 were, independent for such purpose according to NASDAQ listing standards and SEC regulations.

²    Mr. Peay qualifies as an “audit committee financial expert” under SEC regulations.

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Audit Committee

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The Audit Committee engages the Corporation’s independent registered public accounting firm, approves the scope of the independent registered public accounting firm’s audit, reviews the reports of examination by the regulatory agencies, the independent registered public accounting firm and the internal auditor, and regularly provides updates to the Board as to the Audit Committee’s activities.  The Board has adopted a charter for the Audit Committee which is posted on the Corporation’s website at www.cffc.com

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under “Investor Relations/Corporate Overview/Corporate Governance.”  See “Audit Committee Report” on pages 57 and 58.

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Compensation Committee

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The Compensation Committee recommends the level of compensation to be paid to the directors of the Corporation and the Bank, executive officers of the Corporation and certain key officers of the Bank and its subsidiaries, administers all incentive and equity compensation plans for the benefit of such officers, directors and employees and consultants eligible to participate in such plans, and regularly provides updates to the Board as to the Compensation Committee’s activities.  The Compensation Committee also oversees the Corporation’s management resources, including succession planning and management development activities.  The Board has adopted a charter for the Compensation Committee which is posted on the Corporation’s website at www.cffc.com under “Investor Relations/Corporate Overview/Corporate Governance.”  See “Compensation Committee Report” on page 42.

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Nominating Committee

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The Nominating Committee’s primary responsibility is to identify individuals who have the desired experience, qualifications, attributes and/or skills to serve on the Board and to recommend to the Board for selection, candidates for all directorships to be filled by the Board or by the Corporation’s shareholders. As noted above, the Nominating Committee considers diversity in its evaluation of candidates for Board membership, seeking to ensure that the Board is diverse and consists of individuals with various and relevant career experience and backgrounds. The Board has adopted a charter for the Nominating Committee which is posted on the Corporation’s website at www.cffc.com under “Investor Relations/Corporate Overview/Corporate Governance.”  

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While there are no formal procedures for shareholders to submit director recommendations, the Nominating Committee will consider candidates recommended by shareholders in writing.  Such written submissions should include the name, address and telephone number of the recommended candidate, along with a brief statement of the candidate’s qualifications to serve as a director.  All such shareholder recommendations should be submitted to the attention of the Corporation’s Secretary, 3600 La Grange Parkway, Toano, Virginia 23168, and must be received no later than January 1, 2025 in order to be considered by the Nominating Committee for the annual election of directors in 2025.  Any candidates recommended by a shareholder will be reviewed and considered in the same manner as all other director candidates considered by the Nominating Committee.

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The Nominating Committee evaluates potential nominees, whether proposed by shareholders or otherwise, by reviewing their qualifications, reviewing results of personal and reference interviews and reviewing other relevant information.  Candidates whose evaluations are favorable are then chosen by majority vote of the Nominating Committee to be recommended for nomination by the full Board.  The full Board then selects and nominates candidates for election as directors by the shareholders at the Annual Meeting.  The Nominating Committee follows the same process to identify new candidates for recommendation to the full Board in the event of a vacancy on the Board.  No director is eligible to serve on the Board after the Annual Meeting following his or her 75^th birthday.  This provision does not apply to any person serving as a director of the Bank on December 31, 1984.

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In accordance with the Corporation’s bylaws, any shareholder entitled to vote in the election of directors generally may nominate one or more persons for election as director(s) at an Annual Meeting, if the shareholder gives written notice of his or her intent to make such nomination.  A shareholder nomination must include the nominee’s written consent to serve as a director of the Corporation if elected; sufficient background information with respect to the nominee including, but not limited to, the nominee’s name and address, the amount and nature of the nominee’s beneficial ownership of the Corporation’s securities, his or her principal

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occupation for the past five years, his or her age, and a discussion of the specific experience, qualifications, attributes or skills that led to the conclusion that the nominee should serve as director; sufficient identification of the nominating shareholder, including the shareholder’s name and address; a description of any arrangements or understandings between the shareholder and the nominee pursuant to which the nomination is to be made by the shareholder; and a representation by the shareholder that he or she is the owner of stock of the Corporation entitled to vote at the Annual Meeting and that he or she intends to appear at the Annual Meeting (in person or by proxy) to nominate the individual specified in the notice.  No such nomination was made for the annual election of directors in 2024. Nominations must be received by the Corporation’s Secretary at the Corporation’s principal office in Toano, Virginia, no later than February 6, 2025 for the annual election of directors in 2025.  These requirements are more fully described in Article III, Section 16 of the Corporation’s bylaws, a copy of which will be provided, without charge, to any shareholder upon written request to the Corporation’s Secretary.

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In addition to satisfying the foregoing requirements under the Corporation’s bylaws, to comply with the universal proxy rules, shareholders who intend to solicit proxies for the annual election of directors in 2025 in support of director nominees other than the Corporation’s nominees must provide notice that sets forth the information required by Rule 14a-19 under the Exchange Act no later than February 15, 2025.

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Director Compensation

The following table provides compensation information for the year ended December 31, 2023 for each non-employee director of the Board.

Director Compensation for 2023

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The Compensation Committee, appointed by the Board, annually reviews and evaluates the compensation of the Board, including the appropriate mix of cash and equity compensation.  The Compensation Committee recommends changes in compensation to the Board for approval.  In June 2021, the Compensation Committee engaged Pearl Meyer & Partners LLC (“Pearl Meyer”), an independent compensation consultant, to update the review of director compensation that was performed in June 2019.  The peer group used for the director compensation review was the same peer group used for the 2021 review of President and CEO and CFO compensation, which is described on page 24 under “Compensation Benchmarking and Peer Group Analysis.”  The review found that total director compensation, which includes cash and equity, was at the 67^th percentile of the peer group.  The cash component of director compensation was at the 61^st percentile of the peer group.  In addition, the review found that the total Board cost was at the 76^th percentile.  As a result of this review, upon the recommendation of the Compensation Committee, the Board approved certain increases to the Board’s compensation, effective January 1, 2022, January 1, 2023 and January 1, 2024, as discussed further below.

During 2023, non-employee members of the Corporation’s Board each received an annual retainer of $13,125.  In addition, Ms. Kelley, as Chair of the Corporation’s Compensation Committee, received an additional retainer of $5,800, Mr. Peay, as Chair of the Corporation’s Audit Committee, received an additional annual retainer of $7,200 and Mr. Olsson, as Chair of the Nominating Committee, received an additional annual retainer of $4,200. The retainers are payable in quarterly installments.  Each non-employee member of the Corporation’s Board also earned a single fee of $1,260 for attendance at monthly Board, Bank Board, Bank subsidiary board, and Nominating Committee meetings, as applicable.  Additionally, each member of the Audit or Compensation Committee earned a fee of $600 for attendance at each meeting of the Audit or Compensation Committee.

In addition to cash compensation, non-employee members of the Board were eligible to participate in the 2022 Stock and Incentive Compensation Plan.  Under the 2022 Stock and Incentive Compensation Plan, directors were eligible to receive awards of restricted stock units, stock options, stock appreciation rights, restricted stock and other stock-based awards.  On April 18, 2023, each non-employee director was granted 500 shares of restricted stock, and the fair value of the restricted stock on the grant date was $55.13 per share.  Subject to accelerated vesting under certain circumstances, these shares of restricted stock vest in their entirety on April 16, 2024.

Compensation of the non-employee members of the Board for 2024 remains generally the same as it was in 2023, except that the annual retainer for Board service increased to $13,650 from $13,125, the annual retainer for the Chair of the Audit Committee increased to $7,500 from $7,200, the annual retainer for the Chair of the Compensation Committee increased to $6,050 from $5,800, the annual retainer for the Chair of the Nominating Committee increased to $4,400 from $4,200, the monthly attendance fee for Board, Bank Board, Bank subsidiary board and Nominating Committee meetings increased to $1,300 from $1,260, and the attendance fee for Audit or Compensation Committee meetings increased to $625 from $600 per meeting.

 Holding Period/Stock Ownership Guidelines. Once restricted stock awards vest, non-employee members of the Board may not sell more than 50 percent of the award until a minimum level of stock ownership is achieved.  Each non-employee director is required to own shares of the Corporation’s stock having an aggregate value at least equal to three times the amount of the annual Board of Directors retainer paid for regular service on the Board. At January 2, 2024, each non-employee director held an amount of the Corporation’s stock (including restricted stock) that exceeded the minimum level of stock ownership.‌ 

Shareholder Communications with the Board

The Corporation provides a process for shareholders to send communications to the Board.  Shareholders who wish to contact the Board or any of its members may do so by addressing their written correspondence to C&F Financial Corporation, Board of Directors, c/o Secretary, 3600 La Grange Parkway,

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Toano, Virginia 23168.  Correspondence directed to an individual Board member will be referred, unopened, to that member.  Correspondence not directed to a particular Board member will be referred, unopened, to the Chairman of the Board.

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EXECUTIVE COMPENSATION

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PROPOSAL TWO

ADVISORY VOTE TO APPROVE EXECUTIVE COMPENSATION

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As part of implementing the “say-on-pay” requirements of Section 14A of the Exchange Act, the SEC requires an advisory, non-binding shareholder vote to approve the compensation of the named executive officers disclosed in this Proxy Statement. Such a proposal, commonly known as a “say-on-pay” proposal, gives shareholders the opportunity to endorse or not to endorse the Corporation’s executive pay program.  Accordingly, our shareholders are hereby given the opportunity to cast an advisory vote on the Corporation’s executive compensation as described below in this Proxy Statement under the heading “Compensation Discussion and Analysis” and the tabular disclosure of named executive officer compensation and the related material.

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The Corporation has in place comprehensive executive compensation plans.  This Proxy Statement fully and fairly discloses all material information regarding the compensation of the Corporation’s named executive officers, so that shareholders can evaluate the Corporation’s approach to compensating its executives.  The Corporation believes that its executive compensation is competitive, is focused on pay for performance principles, is strongly aligned with the long-term interests of our shareholders and is necessary to attract and retain experienced, highly qualified executives critical to the Corporation’s long-term success and the enhancement of shareholder value within the Corporation’s risk profile.  The Board believes the Corporation’s executive compensation achieves these objectives, and, therefore, unanimously recommends that shareholders vote “for” the proposal.

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Because this vote is advisory, it will not be binding on the Board and will not be construed as overruling any decision made by the Board. The Compensation Committee and the Board will take into account the outcome of this advisory vote when considering future executive compensation arrangements, but they are not required to do so.

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The Corporation anticipates that the next “say-on-pay” vote will occur at the 2025 Annual Meeting of Shareholders.

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THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT SHAREHOLDERS VOTE “FOR” THIS PROPOSAL TO PROVIDE ADVISORY, NON-BINDING APPROVAL OF THE COMPENSATION OF THE CORPORATION’S NAMED EXECUTIVE OFFICERS.

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COMPENSATION DISCUSSION AND ANALYSIS

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The Compensation Committee of the Board (for purposes of this discussion, the “Committee”) has responsibility for establishing, implementing and continually monitoring adherence to the Corporation’s compensation philosophy. This discussion provides a description of the Corporation’s compensation of its named executive officers (also referred to as “NEOs”), listed below, including the philosophy, objectives, process and rationale for making decisions about compensation and specific decisions made related to the compensation of these NEOs during 2023.

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Executive Summary

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Performance Highlights.

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Additional highlights of the Corporation’s performance in 2023 are as follows:

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Compensation Highlights. The Committee makes decisions about executive compensation with the objective of aligning the interests of executives with the interests of shareholders by rewarding achievement with a balance of short-term and long-term incentives.  The Committee primarily focuses its decisions about executive compensation on total direct compensation, which comprises base salary, short-term cash incentive compensation, and long-term equity incentive compensation.

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Total direct compensation as shown above reflects the Committee’s decisions about compensation based on performance for the years indicated.  As such, restricted stock grants are included in the year of the performance used in determining the amount of the grant and are shown based on the dollar value of the actual award approved by the Committee.  This differs from the Summary Compensation Table on page 43, which includes restricted stock grants in the year in which they are granted based on the grant date closing stock price, which is not always the same as the dollar value of the actual award approved by the Committee. Total direct compensation above for 2023 and 2022 includes restricted stock granted in 2024 based on 2023 performance and restricted stock granted in 2023 based on 2022 performance, respectively, whereas the Summary Compensation Table includes in 2023 and 2022 restricted stock granted in 2023, which was awarded by the Committee based on 2022 performance, and restricted stock granted in 2022, which was awarded by the Committee based on 2021 performance, respectively. Total direct compensation as shown above also excludes perquisites such as personal use of Corporation-owned automobiles and matching charitable contributions and excludes indirect compensation such as compensation related to dividends on unvested stock awards, defined contribution plans or defined benefit plans, whether amounts are accrued or distributed in the current year. Refer to the Summary Compensation Table for further details.

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Short-Term Cash Incentive. Based on the Corporation’s adjusted ROA and ROE, as defined by the Committee, which excludes the effect on ROE of accumulated other comprehensive income, in 2023 compared to the 2023 Incentive Compensation Peer Group (as defined below) and Mr. Cherry’s recommendation to the Committee that his award be less than the amount allowed, the Committee awarded Mr. Cherry a short-term cash incentive compensation award of $250,000, or 46 percent of his annual base salary and 79 percent of what was allowed to be granted, and awarded Mr. Long a short-term cash incentive compensation award of $128,244, or 45 percent of his annual base salary. The Committee awarded short-term cash incentive compensation awards to Messrs. Dillon, Crone and Seaman of $50,000, $117,415 and $86,000, respectively.  The award granted to Mr. Dillon was based on an evaluation of his individual involvement and performance in matters of corporate strategy and governance.  The award granted to Mr. Crone was based on the performance of C&F Finance Company (“C&F Finance”) and achievement of strategic objectives.  The award granted to Mr. Seaman was based primarily on the net income and asset quality of the Bank. The Committee also awarded an additional discretionary bonus of $31,585 to Mr. Crone for achievement of certain strategic priorities during 2023. See pages 30 to 33 for further details on the 2023 short-term cash incentive compensation awards.

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Long-Term Equity Incentive. For each NEO except Mr. Dillon, the long-term equity incentive compensation award was in the form of restricted stock, which included an annual component and a performance component and was subject to graded vesting over a period of three years from the date of grant, with one third of the award vesting after each year, with earlier vesting on the later of the date the executive attains age 65 or one year from the grant date for an executive attaining age 65 during the vesting period.  The amount of the annual component of the restricted stock award is a fixed value based on a percentage of the target total award value for each NEO.  The amount of the performance component was determined by reference to the Corporation’s three-year return on tangible common equity, as defined by the Committee (“ROTCE”), excluding the effect of accumulated other comprehensive income, for the three-year period ending September 30, 2023 compared to the 2023 Incentive Compensation Peer Group (as defined below) and, in the case of Messrs. Crone and Seaman, on their respective business unit performance. The portion of the 2023 long-term equity incentive compensation award granted to each NEO that was attributable to corporate performance was based on 150 percent of the target award value for that component.  Based on the performance of the Corporation in 2023 and the incentive-based compensation awards established by the Committee, the Committee could have awarded Mr. Cherry a long-term equity incentive compensation award of up to 56 percent of his annual base salary.  Mr. Cherry recommended to the Committee that his award be less than that amount, and the Committee ultimately awarded a long-term equity incentive compensation award to Mr. Cherry of 48 percent of his annual base salary, or 85 percent of what was allowed to be granted.  The award granted to Mr. Dillon was based on an evaluation of his involvement and performance in matters of corporate strategy and governance and was subject to cliff vesting one year from the date of grant because Mr. Dillon has attained the age of 65.  Long-term equity incentive compensation awards included in 2023 total direct compensation above were granted on February 20, 2024 and are not included in the Summary Compensation Table for 2023. See pages 33 to 36 for further details on the 2023 long-term equity incentive compensation awards.

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Base Salary. The Committee increased Mr. Cherry’s base salary by 5.0 percent to $546,000 effective January 1, 2023 based on the results of the independent executive compensation review performed in 2021 and in line with market increases for executive compensation. The Committee increased the other NEOs’ base salaries by a range of zero to 5.2 percent effective January 1, 2023, commensurate with broader salary increases in our market, those provided to non-officer employees of the Corporation, changes in individual executives’ responsibilities, and the results of the independent executive compensation review performed in 2021.

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Compensation Philosophy and Process

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The Committee is responsible for ensuring that the total compensation paid to executives is fair, reasonable and competitive.  The Committee may, consistent with applicable law, regulations, NASDAQ requirements or plan provisions, delegate certain of its authority to the CEO, a designee, or other appropriate

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members of management, including matters relating to the compensation or election as officers of employees of the Corporation or its subsidiaries, other than the Corporation’s executive officers.

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Overall Philosophy.  Our executive compensation program is designed to reward the achievement of specific goals consistent with the overall strategy of the Corporation, and to align executives’ interests with those of our shareholders by rewarding performance that exceeds established goals within the Corporation’s risk profile, with the ultimate objective of generating and sustaining long-term shareholder value.

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Our overall compensation strategy is based on the following four principles:

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The Corporation is committed to promoting the longevity of its key employees who are critical to its continued competitiveness and long-term success.  In addition to providing for ongoing development and opportunities for advancement for our employees, the Corporation promotes retention and the long-term commitment of key employees through our overall compensation program in the following ways:

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The following key governance highlights illustrate some of the ways we execute our executive compensation program in keeping with our overall philosophy.

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Role of the Compensation Committee

The Committee, which is comprised solely of independent directors, approves all compensation of the Corporation’s executive officers other than the CEO and certain other senior officers of the Corporation and its subsidiaries.  The Committee also makes a recommendation of the compensation of the CEO to the Board for approval. In connection with the determination of executive compensation, the Committee considers feedback received from shareholders on the executive compensation program, including the results of advisory, non-binding votes to approve the compensation of the NEOs.  The Corporation also evaluates both performance and compensation to ensure that the Corporation maintains its ability to attract and retain top talent in key positions and that compensation provided to key employees remains competitive relative to the compensation paid to similarly situated executives of the Corporation’s peer companies.

The Committee selects the corporate, business unit, and individual performance goals and metrics used in determining the short-term cash incentive compensation and long-term equity incentive compensation awards that are consistent with the Corporation’s overall compensation philosophy and the long-term interests of its shareholders.  The Committee reviews the performance of the Corporation, business units, and individual executive officers relative to these incentive compensation goals and determines the amount of each incentive compensation award.  The Committee considers input from the CEO with respect to the compensation of senior

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officers other than himself.  From time to time, as it deems appropriate, the Committee engages an independent compensation consultant to advise the Committee on such matters as benchmarking of executive compensation, the form and structure of the components of executive compensation, and the mix of the components of executive compensation elements.  The Committee also reviews and approves, as appropriate, any new incentive compensation plans, including equity-based plans, and, as may be deemed necessary, any amendments to existing plans relating to executive officers and other senior officers.

The Committee also administers the Corporation’s equity-based plans and recommends awards to the Board for approval including stock options, restricted stock awards, performance stock awards, restricted stock units or other similar awards as provided in the 2022 Stock and Incentive Compensation Plan.

Role of Management

The Committee obtains input from the CEO regarding the compensation of executive officers other than himself and certain other senior officers of the Corporation and its subsidiaries.  In particular, the CEO provides the Committee with a review of the performance of each of these senior officers and makes a recommendation to the Committee for changes in base salary.  The CEO does not participate in discussions or decisions related to his own compensation.

Role of Independent Compensation Consultant

During 2021 and again during 2023, the Committee engaged Pearl Meyer to perform an updated executive compensation review (the “2021 Review” and the “2023 Review”, respectively).  The 2021 Review was completed and presented to the Committee in September 2021, and the 2023 Review was completed and presented to the Committee in October 2023.  Both reviews were performed to assess the reasonableness of the overall compensation of the President and CEO, the CFO, and certain other senior officers of the Bank.  The 2021 Review and the 2023 Review used a peer group analysis and a market analysis.  The peer group analysis reviewed base salary, total cash compensation and total compensation.  Total compensation for purposes of the peer group analysis included total cash compensation plus equity and retirement compensation.  The market analysis reviewed base salary and total cash compensation.

During 2021 and 2023, Pearl Meyer did not provide any consulting services to the Corporation other than in connection with non-employee director and executive compensation, and during 2022, Pearl Meyer did not provide any services to the Corporation. Pearl Meyer maintains no other economic relationship with the Corporation.  The Committee assessed the independence of Pearl Meyer in 2021 and 2023 pursuant to SEC and NASDAQ rules and concluded that the advice it receives from Pearl Meyer is objective and not influenced by other relationships that could be viewed as conflicts of interest.

Compensation Benchmarking and Peer Group Analysis

2021 Executive Compensation Review.  The 2021 Review comprised an analysis of publicly available and proprietary market data for the purpose of developing an indication of the level of compensation that is competitive for the President and CEO, the CFO, and certain other senior officers of the Bank, relative to the Corporation’s industry and asset size. The 2021 Review was based on the following sources of market data:

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The analysis of market data concluded that actual total cash compensation for the President and CEO, CFO, and Chief Credit Officer of the Bank (“CCO”) were approximately at the 44^th, 38^th and 52^nd percentile, respectively, of the composite market data for their respective positions.

The market data analysis described above included, as a component, a review of proxy data of a group of peer companies (the “2021 Compensation Benchmarking Peer Group”) consisting of 24 publicly-traded commercial financial institutions headquartered in Virginia, Kentucky, Maryland, North Carolina, South Carolina, Tennessee and West Virginia, ranging in asset size from approximately $1.3 billion to $3.4 billion.  The median asset size of the financial institutions in this peer group as of December 31, 2020 was $1.8 billion compared to the Corporation’s consolidated total assets at December 31, 2020 of $2.1 billion.  Based on these criteria, the following financial institutions were included in the 2021 Compensation Benchmarking Peer Group:

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The peer group analysis indicated that total cash compensation of Mr. Cherry, CEO, and Mr. Long, CFO, were at the 38^th and 42^nd percentile, respectively, of the 2021 Compensation Benchmarking Peer Group. Total direct compensation, which includes cash compensation and long-term incentive compensation, was analyzed based on the target level of incentive award opportunities.  Based on the target level of incentive award opportunities, total direct compensation of Messrs. Cherry and Long were at the 51^st and 43^rd percentile, respectively, of the 2021 Compensation Benchmarking Peer Group. The peer group analysis also included proxy data on Chief Credit Officers, however a majority of institutions in the 2021 Compensation Benchmarking Peer Group did not report compensation of a Chief Credit Officer.

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In evaluating the results of the 2021 Review, the Committee considered roles and responsibilities, experience, tenure, performance and other factors with respect to each executive’s pay positioning compared to these results.  In consideration of these factors, the results of the 2021 Review concluded that base salary for our President and CEO was below the median in our market and that overall executive compensation for our executive officers was competitive with the market.  The Committee considered these results when making 2023 executive compensation decisions, including in particular regarding the salary levels of Messrs. Cherry, Long and Seaman relative to the observed median salary for each respective position from the peer group analysis and market analysis of the 2021 Review.

2023 Executive Compensation Review.  The 2023 Review comprised an analysis of publicly available and proprietary market data for the purpose of developing an indication of the level of compensation that is

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competitive for the President and CEO, the CFO, and certain other senior officers of the Bank, relative to the Corporation’s industry and asset size. The 2023 Review was based on the following sources of market data:

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The analysis of market data concluded that actual total cash compensation for the President and CEO, and the CFO were approximately at the 50^th percentile and that actual total cash compensation for the CCO was approximately at the 55^th percentile of the composite market data for their respective positions.  Total direct compensation, which includes cash compensation and long-term incentive compensation, was analyzed based on the target level of incentive award opportunities. Based on the target level of incentive award opportunities, total direct compensation of the President and CEO, the CFO, and the CCO were at the 65^th, 55^th and 35^th percentiles, respectively, of the composite market data for their respective positions.

The market data analysis described above included, as a component, a review of proxy data of a group of peer companies (the “2023 Compensation Benchmarking Peer Group”) consisting of 26 publicly-traded commercial financial institutions headquartered in Virginia, Maryland, North Carolina, Pennsylvania, South Carolina, Tennessee and West Virginia, ranging in asset size from approximately 50 percent to 200 percent of the Corporation’s size and having similar loan portfolio composition to the Corporation.  The median asset size of the financial institutions in this peer group as of December 31, 2022 was $2.7 billion compared to the Corporation’s consolidated total assets at December 31, 2022 of $2.3 billion.  Based on these criteria, the following financial institutions were included in the 2023 Compensation Benchmarking Peer Group:

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The peer group analysis indicated that total cash compensation of Mr. Cherry, CEO, and Mr. Long, CFO, were at the 51^st and 41^st percentile, respectively, of the 2023 Compensation Benchmarking Peer Group. Total direct compensation, which includes cash compensation and long-term incentive compensation, was analyzed based on the target level of incentive award opportunities.  Based on the target level of incentive award opportunities, total direct compensation of Messrs. Cherry and Long were at the 54^th and 44^th percentile, respectively, of the 2023 Compensation Benchmarking Peer Group. The peer group analysis also included proxy data on Chief Credit Officers, however a majority of institutions in the 2023 Compensation Benchmarking Peer Group did not report compensation of a Chief Credit Officer.

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In evaluating the results of the 2023 Review, the Committee considered roles and responsibilities, experience, tenure, performance and other factors with respect to each executive’s pay positioning compared to these results.  In consideration of these factors, the results of the 2023 Review concluded that overall executive compensation for our executive officers was competitive with the market.

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Performance Relative to Peers. The Committee believes that in order to properly align executive compensation with performance and to reward achievement in accordance with the Corporation’s compensation philosophy, an evaluation of the Corporation’s performance must include a relative assessment of the performance of the Corporation and the performance of similarly situated peer companies. As such, the Committee uses a group of peer companies for assessing relative performance of the Corporation in determining incentive compensation awards.  Similar criteria as the 2023 Compensation Benchmarking Peer Group, described above, were used to determine the relative performance peer group for 2023, except that the geographic bounds of the relative performance peer group was expanded to include Virginia, Alabama, Florida, Georgia, Indiana, Maryland, New Jersey, North Carolina, Ohio, Pennsylvania, South Carolina, Tennessee and West Virginia, and excluded certain large metropolitan areas that do not reflect the economic markets served by the Corporation. From year to year, the Corporation updates the companies meeting the criteria of the relative performance peer group, with the companies included subject to change as the peer group is updated to account for changes in asset size due to mergers, acquisitions or growth.  In 2023, the peer group used for assessing relative performance of the Corporation for incentive compensation awards (the “2023 Incentive Compensation Peer Group”) consisted of 53 publicly-traded commercial financial institutions which were still in existence and reported financial performance as of December 31, 2023. Total assets for this peer group were between $1.2 billion and $5.0 billion, with a median asset size of $2.3 billion based on total assets as of December 31, 2022, compared to the Corporation’s consolidated total assets at December 31, 2022 of $2.3 billion.  Based on these criteria, the following financial institutions were included in the 2023 Incentive Compensation Peer Group:

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Results of Say-on-Pay Votes  

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The Committee values the input of the Corporation’s shareholders regarding the design and effectiveness of its executive compensation program.  Moreover, although the advisory shareholder vote to approve executive compensation is non-binding, the Committee considers the outcome of this vote each year when making compensation decisions for our CEO and other NEOs.  At our 2023 Annual Meeting of Shareholders, the votes cast in favor of our executive compensation program in the “say-on-pay” vote were approximately 98 percent, which represents an increase from 97 percent of votes cast in favor at the 2022 Annual Meeting of Shareholders.  Nonetheless, because market practice and our business needs continue to evolve, the Committee continually evaluates our compensation program and makes changes when warranted.

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Equity Ownership Guidelines  

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The executive compensation program includes awards of equity incentive compensation in the form of restricted stock, as discussed further below.  Upon vesting of restricted stock awards, executive officers remain subject to equity ownership guidelines in order to promote ownership of the Corporation’s stock among the executive officers and to further align their interests with those of shareholders.  Until an executive officer has met the minimum stock ownership level, the executive officer must retain and hold at least 50 percent of any vested stock award.  Minimum stock ownership levels are defined for each executive officer as a multiple of base salary as shown in the following table. At January 2, 2024, each NEO held an amount of the Corporation’s stock (including restricted stock) that exceeded his minimum stock ownership level.

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Elements of Executive Compensation

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The Corporation’s executive compensation program consists of fixed and variable compensation in the form of cash and equity, as well as compensation through tax-qualified and nonqualified retirement and other deferred compensation plans and certain reasonable perquisites.  The Committee uses these elements in combination, guided by the four principles of our compensation strategy identified in “Overall Philosophy” on page 22, to provide compensation to our executives that is consistent with our compensation philosophy.  Each element of executive compensation, including the purpose of each element and how the Committee determines the amount of each element, is discussed in further detail below.

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Base Salary.  We provide base salaries to compensate NEOs for services rendered during the fiscal year and to attract and retain talented executives.  Base salaries for the CEO, CFO and CCO are determined based on their positions and responsibilities by using market data.  Salary levels are considered annually as part of the Committee’s performance review process as well as upon a promotion or other change in job responsibilities.  The Committee targets base salaries for executives at the median of the Corporation’s peer financial institutions in the 2021 Compensation Benchmarking Peer Group, while providing a competitive total compensation package through other elements of the executive compensation program.  During its review of base salaries for executives for 2023, the Committee primarily considered:

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Mr. Dillon’s base salary is established based on his individual contributions in matters of corporate governance and strategy and was unchanged from 2022. Mr. Crone’s base salary is established based on recommendations from the CEO, which are based on the overall performance of C&F Finance.  Performance of C&F Finance is evaluated based on net income, asset quality measures and earning asset growth as well as achievement of other strategic goals as evaluated by the CEO and the Committee.

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The Committee adjusted the base salaries of NEOs in 2023 as shown in the table below.  All salary changes took effect January 1, 2023.  

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Short-Term Cash Incentive Compensation Award.  The primary form of variable cash compensation for executives, except Mr. Dillon, is the short-term cash incentive compensation award under the MIP.  The Committee awards short-term cash incentive compensation awards to reward executives for achievement of specific goals selected by the Committee in order to generate and sustain long-term shareholder value.  Under the MIP, at the beginning of 2023, the Committee established the performance criteria and the award formula or matrix by which short-term cash incentive compensation awards under the MIP were to be determined.  The Committee selects performance criteria and grants short-term cash incentive compensation awards based on the Corporation’s long-term strategy and competitive priorities.  The Committee selected corporate, business unit, and individual performance criteria, which may be measured in some cases using objective performance metrics compared to a peer group and a formula or matrix to calculate a short-term cash incentive compensation award amount, and in other cases using qualitative performance outcomes.  Under the Corporation’s MIP, performance criteria for incentive compensation awards vary based on the position and responsibilities of each executive officer.  The Committee may use discretion to adjust any short-term cash incentive compensation award if it determines such an adjustment would be in the best interests of the Corporation and its shareholders.  The Committee also set a target award amount as a percentage of annual base salary for each executive officer other than Mr. Crone, whose award is calculated by reference to the performance criteria for such award.

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Mr. Dillon’s short-term cash incentive compensation opportunity is not covered by the MIP.  Mr. Dillon’s short-term cash incentive compensation award is based on the Committee’s evaluation of his individual involvement and performance in matters of corporate strategy and governance.  The Committee may determine an award amount that is up to 20 percent of Mr. Dillon’s base salary.

During the Committee’s review of performance criteria in connection with 2023 short-term cash incentive compensation awards, the Committee approved changes in the short-term cash incentive compensation awards for the President and CEO and the CFO effective in 2023. The changes updated the performance measure used for determining achievement of the awards’ goals. The performance measure is a composite ranking of the Corporation’s ROE and ROA performance compared to a peer group. Beginning in 2023, ROE is defined by the Committee to exclude the effect of accumulated other comprehensive income as a component of equity, based on the wide range of effects on ROE of unrealized losses on available for sale securities due to rising interest rates within the peer group used in 2022. The Committee determined that for purposes of measuring performance under the short-term cash incentive compensation award, comparisons of ROE between the Corporation and the financial institutions of the peer group should not be affected to such a significant degree by changes in the fair value of an investment portfolio that do not affect net income, and particularly not in a manner that rewards institutions with greater unrealized losses. The Committee believes that defining ROE to exclude the effect of accumulated other comprehensive income as a component of equity better aligns the incentives of the President and CEO and the CFO with the objectives of the Corporation and the long-term interests of shareholders.

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The following table shows the targets, outcomes of calculated performance measures, and actual awards granted under the 2023 short-term cash incentive compensation award.

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President/CEO and CFO.  For Mr. Cherry and Mr. Long, the short-term cash incentive compensation award is designed to reward overall corporate performance.  Performance is evaluated by determining a composite ranking of the Corporation’s ROE and ROA performance, as defined by the Committee, among the financial institutions of the 2023 Incentive Compensation Peer Group.  ROE and ROA have been defined by the Committee, for purposes of the short-term cash incentive compensation award, as net income divided by average equity excluding any average accumulated other comprehensive income, and average assets, respectively, in each case as may be adjusted by the Committee to exclude the effects of nonrecurring items of income or expense or other similar items.

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The Committee established threshold, target and maximum performance levels for the composite ranking, expressed as a percentile, and corresponding award amounts as a percentage of the target award amount as shown in the table below.  Performance outcomes between the threshold and target levels and between the target and maximum levels result in a calculated award amount determined using a straight-line interpolation.

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The composite ranking is based on the rankings of each financial institution based on ROE and ROA, as defined by the Committee, which excludes the effect on ROE of accumulated other comprehensive income.  The Committee may adjust the ROE and ROA of the Corporation and the financial institutions in the peer group for nonrecurring items of income or expense or other similar items.  For 2023, the Committee considered the effects on ROE and ROA for the Corporation and its peers related to various nonrecurring and other similar items, and included adjustments for one peer company’s gains and related activity arising from a significant divestiture in order to better reflect the ongoing profitability of each institution in the peer group. In the composite ranking, the ROE ranking is weighted two-thirds and the ROA ranking is weighted one-third as shown in the table below.  Based on the adjusted ROE and adjusted ROA for 2023, as defined by the Committee, of the Corporation and the financial institutions of the 2023 Incentive Compensation Peer Group, the Corporation achieved results at the 72^nd percentile.

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2023 Performance Relative to 2023 Incentive Compensation Peer Group

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The Corporation’s ROE/ROA composite ranking resulted in a calculated award amount of $317,556 for Mr. Cherry and $128,244 for Mr. Long.  The calculated award amount may be adjusted by the Committee.  In particular, the Committee considers asset quality at the Bank, C&F Mortgage and C&F Finance in evaluating whether the full calculated award amount has been earned, and may use other factors in its discretion to adjust the award amount.  Based on its consideration of the calculated award amount, asset quality and other factors, including the recommendation from Mr. Cherry to the Committee that his award be less than the calculated award amount, the Committee awarded Mr. Cherry a short-term cash incentive compensation award of $250,000, or 46 percent of his annual base salary and awarded Mr. Long a short-term cash incentive compensation award of $128,244, or 45 percent of his annual base salary.

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Other NEOs.  Mr. Dillon’s short-term cash incentive compensation award, which is not under the MIP, is based on an evaluation of his individual involvement and performance in matters of corporate strategy and governance.  The Committee may determine an award amount that is up to 20 percent of Mr. Dillon’s base salary. Based on the outcomes of these performance criteria, the Committee awarded Mr. Dillon a short-term cash incentive compensation award equal to 20 percent of his annual base salary.  

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Mr. Crone’s short-term cash incentive compensation award amount is determined based on the sum of two components.  The first component is the product of an award percentage and the net income of C&F Finance.  The maximum award percentage for the first component is determined on a sliding scale based on the ROA of C&F Finance and can be at most 1.35 percent.  Based on the 2023 ROA of C&F Finance, the maximum award percentage was 0.90 percent.  In determining an award percentage within the award percentage range, the Committee considers the following indicators of performance:

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The second component is based on achievement of individual strategic objectives included in the Corporation’s strategic plan, whereby the Committee can award Mr. Crone a short-term cash incentive up to 30 percent of his base salary.

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Based on the outcomes of these performance criteria, the Committee awarded Mr. Crone a short-term cash incentive compensation award equal to 0.9 percent of the net income of C&F Finance for the first component and 30 percent of his base salary for the second component.  The sum of both components represents a total short-term cash incentive award of 38 percent of Mr. Crone’s base salary.  The Committee also awarded Mr. Crone an additional discretionary bonus of $31,585 for achievement of key strategic priorities during 2023.

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Mr. Seaman’s short-term cash incentive compensation award is based primarily on the net income and asset quality of C&F Bank, evaluated relative to historical trends and relative to the 2023 Incentive Compensation Peer Group, along with other department and individual performance criteria. The Committee may determine an award amount for Mr. Seaman of up to 200 percent of the target award amount based on an evaluation of these performance criteria. For 2023, the Committee awarded Mr. Seaman a short-term cash incentive compensation award equal to 140 percent of the target award amount, which represents 35 percent of Mr. Seaman’s base salary.

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Long-Term Equity Incentive Compensation Award.  The Corporation grants equity compensation to executives in order to provide long-term incentives to achieve corporate objectives and generate and sustain shareholder value without exposing the Corporation or its subsidiaries to imprudent risks, and to align their personal interests with the long-term financial success of the Corporation.  Long-term equity incentive compensation awards are established under the MIP, except for Mr. Dillon, and equity securities are issued pursuant to the 2022 Stock and Incentive Compensation Plan in the form of restricted stock, restricted stock units, stock options, stock appreciation rights or other stock-based awards.

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The primary form of equity awards granted by the Committee is restricted stock.  All awards of restricted stock to executive officers are subject to graded vesting over a period of three years, with one third of the award vesting after each year, on condition of continuous employment with the Corporation or its subsidiaries, and any unvested shares are forfeited upon termination prior to vesting, with earlier vesting on the later of the date the executive attains age 65 or one year from the grant date for an executive attaining age 65 during the vesting period.  Vesting also may be accelerated in certain circumstances, including retirement.  Unvested restricted stock cannot be sold or transferred by the executive officer but entitles the executive officer to voting rights and non-forfeitable dividends equivalent to common stock.  The Committee believes that this time-based vesting of restricted stock is consistent with the objectives of retaining talented executives and promoting long-term tenure of its key employees, as unvested restricted stock provides an incentive to remain with the Corporation and its subsidiaries in order to fulfill the vesting condition and realize the full award value.

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The long-term equity incentive compensation award under the MIP includes an annual component and a performance component.  The annual component, which is a fixed value based on a percentage of the target total award value for each NEO, serves to provide each NEO with a consistent element of his annual compensation that promotes tenure with the Corporation and aligns his long-term interests with those of our shareholders.  The annual component is earned through continued employment and consistent individual performance during the year and until the grant date of the award.  The performance component serves to compensate executives based on the financial performance of the Corporation and its subsidiaries compared to our peers.  The performance component is variable and is earned based on a corporate performance measure, which reflects consolidated performance, and, in the case of Messrs. Crone and Seaman, business unit performance measures.

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At the beginning of 2023, for each NEO, except for Mr. Dillon, the Committee set a target total award value as a percentage of annual base salary and established allocations of the target award value to the annual award and each performance measure as shown in the following table.

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2023 Long-Term Equity Incentive Compensation Awards

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In determining the award amount for the performance component, the Committee assigns a performance score to each corporate and business unit performance measure based on the results of the performance measure during the relevant period.  The total award value of the long-term equity incentive compensation award for each NEO is determined using the target total award value, the allocations to the annual award and each performance measure, and the performance scores for each performance measure, as shown below.

Corporate performance was measured by reference to the Corporation’s three-year ROTCE, as defined by the Committee, which excludes the effect of accumulated other comprehensive income, relative to the 2023 Incentive Compensation Peer Group.  The Committee believes that basing a portion of the equity awards under the MIP on the three-year annual return on ROTCE generally aligns the MIP with current market practices for long-term equity incentive compensation awards for executive officers, and aligns the interests of executive officers with those of the Corporation’s common shareholders by rewarding executive officers for long-term corporate performance in order to generate and sustain long-term shareholder value. ROTCE is a non-GAAP measure defined by the Committee for purposes of measuring performance as the ratio of net income to common equity excluding accumulated other comprehensive income or loss, less goodwill and intangible assets. Corporate performance for purposes of the 2023 long-term equity incentive compensation award was determined using a performance period of the three years ending September 30, 2023.  For purposes of the corporate performance measure, the Committee may adjust the ROTCE of the Corporation or any financial institution in the 2023 Incentive Compensation Peer Group for nonrecurring items of income or expense or other similar items.  For the 2023 performance period, the Committee considered the effects on ROTCE for the Corporation and its peers related to various nonrecurring items, which included pension settlement accounting, merger related expenses, certain gains and losses related to balance sheet restructuring, gains and losses related to certain business divestitures and the effects of resolving certain disputes or litigation, and included adjustments related to merger related expenses, changes in accounting policies that affected net income, bargain purchase gains, and the resolution of certain disputes or litigation, in order to better reflect the ongoing

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profitability of each institution in the peer group. The Committee established threshold, target and maximum performance levels for the corporate performance measure, expressed as a percentile relative to the 2023 Incentive Compensation Peer Group, and corresponding performance scores as a percentage of the target award value allocated to the corporate performance measure as shown in the table below.  Performance outcomes between the threshold and target levels and between the target and maximum levels result in a calculated performance score determined using a straight-line interpolation.  Based on the outcome of the corporate performance measure, the Committee determined the corporate performance score for the 2023 long-term equity incentive compensation award to be 150 percent for purposes of the 2023 long-term equity incentive compensation awards granted to each NEO.

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For the business unit performance measures, the Committee evaluates the performance, primarily in regards to earnings, asset quality and achievement of strategic objectives for C&F Finance and C&F Bank, and determines a business unit performance score for each business unit between zero and 150 percent.  Business unit performance for purposes of the 2023 long-term equity incentive compensation award was determined using the performance period of the year ended December 31, 2023.  Based on the performance of C&F Finance and C&F Bank, the Committee determined the business unit performance score for each business to be 45 percent and 135 percent, respectively, for purposes of the 2023 long-term equity incentive compensation awards granted to Messrs. Crone and Seaman.

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Mr. Dillon’s long-term equity incentive compensation opportunity is not covered by the MIP.  Mr. Dillon’s long-term equity incentive compensation award is based on the Committee’s evaluation of his individual involvement and performance in matters of corporate strategy and governance.  The Committee may determine an award amount of a number of shares with a value of up to 20 percent of Mr. Dillon’s base salary.  Based on the Committee’s evaluation of these performance criteria, the Committee awarded Mr. Dillon a long-term equity incentive compensation award equal to 20 percent of his annual base salary, which based on the average closing stock price of the Corporation for the 20 business days preceding the award date, rounded to the next greater multiple of 25 shares, was equivalent to 925 shares of restricted stock.

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The 2023 long-term equity incentive compensation target, calculated and actual award values for each component and performance measure are shown in the table below for each of the NEOs, except for Mr. Dillon.  Awards of restricted stock under the long-term equity incentive compensation award were granted to NEOs on February 20, 2024.  The number of shares awarded was determined based on the average closing stock price of the Corporation for the 20 business days preceding the award date, which was $55.36 per share, rounded to the next greater multiple of 25 shares. Based on the calculated award amount and the recommendation from Mr. Cherry to the Committee that his award be less than the calculated award amount, the Committee awarded a long-term equity incentive compensation award to Mr. Cherry of $260,000 or 85 percent of the calculated award amount.

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Retirement and Deferred Compensation Plans.  The Corporation’s subsidiaries sponsor several tax-qualified benefit plans, including both a defined benefit retirement plan and defined contribution plans, which are available to most employees of either the Bank, C&F Finance or C&F Mortgage, and in which our NEOs are participants.  Additionally, the Corporation sponsors a nonqualified deferred compensation plan for the benefit of certain senior officers and its non-employee directors.  Our tax-qualified plans are offered in order to assist our employees in attaining financial security for retirement and for employee retention.  Our nonqualified plan is offered to provide flexibility to our senior officers and directors by providing deferral opportunities otherwise restricted by qualified plan limits and to establish a long-term retention incentive for our executives.

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Retirement Plan.  The Bank offers the Virginia Bankers Association Cash Balance Pension Plan for Citizens & Farmers Bank (the “Retirement Plan”) as a tax-qualified cash balance pension plan for employees hired prior to January 1, 2022.  Under the Retirement Plan, participants’ accounts are credited each year based on a percentage of each participant’s annual compensation including salary and bonus, subject to limitations under the plan and the requirements of the Internal Revenue Code (the “Code”).  Participants’ accounts are also credited for interest upon each participant’s accumulated balance.  The applicable compensation credit percentage ranges between 1 percent and 12 percent, increasing with a participant’s age and years of credited service at the end of each plan year.  Interest credits are based on the 30-year Treasury rate plus 150 basis points, but may not be less than 3 percent or more than the IRS third segment rate.  Messrs. Cherry, Long, Dillon and Seaman are participants in the Retirement Plan.

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Upon having completed at least three years of service or reaching age 65, participants become vested in the Retirement Plan.  Upon termination from the Bank or after reaching age 62 while employed, vested participants may receive the amount then credited to the participant’s cash balance account in a lump sum or may defer benefits until age 65.  Participants who defer benefits after termination continue to receive interest credits until age 65 and then may receive an actuarially equivalent joint and survivor annuity (if married) or single life annuity (if not married).  The participant may also choose from other optional forms of benefit, including a lump sum payment in the amount of the cash balance account paid in one installment or in three annual installments. In 2021, Mr. Dillon received a lump sum distribution of his accrued benefits under the Retirement Plan. He will continue to accrue benefits under the Retirement Plan as an active participant in the plan from the time of his in-service distribution until his separation from service as an employee.

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Prior to 2009, the Bank offered the Virginia Bankers Association Master Defined Benefit Pension Plan for Citizens & Farmers Bank, which was a traditional pension plan and was converted to the current cash balance pension plan effective December 31, 2008.  Participants with balances in the Retirement Plan that were converted from the traditional pension plan, including Mr. Cherry, may be entitled to benefits greater than the interest credits calculated under the Retirement Plan, pursuant to IRS rules for tax-qualified retirement plans.  Benefits pursuant to such rules may fluctuate from year to year, due in part to changes in interest rates.  

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401(k) Plan.  The Bank offers the State Bankers Association Master Defined Contribution Plan for Citizens and Farmers Bank (the “401(k) Plan”) as a tax qualified defined contribution plan for employees of C&F Bank and C&F Finance. During 2023, the State Bankers Association Master Defined Contribution Plan for C&F Finance Company, formerly offered by C&F Finance for its employees, was merged into the 401(k) Plan. The merger of the plans did not substantially modify the benefits offered to employees of C&F Bank or C&F Finance. A separate defined contribution plan is offered by C&F Mortgage for its employees. Our NEOs are participants in the 401(k) Plan. Under the 401(k) Plan, the Corporation makes matching contributions on voluntary deferrals by NEOs of up to five percent of each participant’s covered compensation, subject to limitations under the plan and the requirements of the Code.  The 401(k) Plan also provides for discretionary employer contributions.  Investments under the 401(k) Plan are directed by participants’ elections from among various investment options available under the plan, and participants’ accounts earn a return based on the actual return of those investment elections.

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Nonqualified Plan.  The Corporation offers the C&F Financial Corporation Non-Qualified Deferred Compensation Plan for Directors and Executives (the “Nonqualified Plan”) for senior officers and directors of the Corporation and its subsidiaries.  The plan allows executive officers to make deferrals of salary or cash incentive compensation.  The Corporation makes discretionary supplemental retirement (“SERP”) contributions into executive officers’ accounts under the Nonqualified Plan.  Participants’ accounts under the Nonqualified Plan earn a return based on investment elections made by participants among various investment options available under the plan.

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For Messrs. Cherry and Dillon, the Corporation’s discretionary SERP contributions are vested immediately in recognition of their performance and service over their careers.  For Messrs. Long, Crone and Seaman, the Corporation’s discretionary SERP contributions vest generally five years from the time of each contribution, subject to earlier vesting under certain conditions, including death, disability, retirement at or after attaining age 65 or a change in control.  For 2023, the Corporation made discretionary SERP contributions to the Nonqualified Plan totaling $111,065, $33,700, $25,000, $37,250 and $12,400 for Messrs. Cherry, Long, Dillon, Crone and Seaman, respectively.  These contributions were made in 2024 and are reported as earned in 2023 in the Summary Compensation Table on page 43.

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Perquisites and Other Benefits.  The Corporation provides our NEOs with benefits that we believe are reasonable and consistent with our overall compensation program as part of a competitive compensation package for attracting and retaining talented executives.  Perquisites offered to NEOs, which may include personal use of Corporation-owned automobiles, matching charitable contributions, an executive physical exam every two years, club dues, financial advisory services, and tax preparation services, are common among the Corporation’s peer financial institutions.  Effective January 1, 2015, the Committee approved an additional perquisite for Mr. Dillon that provides for post-retirement medical, prescription and dental benefits for Mr. Dillon and his spouse for life.  Mr. Dillon is eligible to begin receiving this perquisite upon retirement from employment.  Perquisites to any individual NEO that exceeded $10,000 in a particular year are included in the Summary Compensation Table on page 43.

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NEOs also participate in other benefit plans that are available to our employees generally.  These plans include medical, dental, life, and disability insurance.

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Compensation Policies and Practices as They Relate to Risk Management.  The Corporation, under the guidance of the Committee, has reviewed the compensation policies and practices of the Corporation as they relate to risk management.  This review included both executive officer and non-executive officer compensation policies and practices and factors in place to mitigate any excess risk.  In conducting the review, management focused on the risks associated with the Corporation's compensation policies and practices and evaluated those risks in light of the Corporation's operations and the internal compensation approval and compliance systems developed by the Corporation.  The Corporation has determined that its policies and practices, including mitigating factors, are not reasonably likely to have a material adverse effect on the Corporation.

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The Committee utilizes the position of senior compensation risk officer and meets with the Corporation’s senior compensation risk officer to discuss, evaluate and review senior executive officer (“SEO”) compensation plans and other employee compensation plans and the risks these plans pose to the Corporation.  In connection with this risk review, the Committee’s goal is to identify and limit or mitigate features in SEO and other employee compensation plans that could encourage SEOs or other employees to take unnecessary and excessive risks that threaten the Corporation’s value (including behavior focused on short-term results rather than long-term shareholder value).  In addition, the Committee will discuss, evaluate and review employee compensation plans and eliminate or mitigate features that could encourage the manipulation of reported earnings to enhance an employee’s compensation.  These reviews are completed at least once per year.

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For the review conducted during October 2023, the Committee evaluated each of the plans included in this discussion with the senior compensation risk officer, as well as several additional employee compensation arrangements that provide for variable cash compensation, bonus, commission or incentive payments to employees other than SEOs. As a result of the risk and manipulation review, the Committee concluded that these plans do not encourage unnecessary and excessive risks that threaten the value of the Corporation or promote the manipulation of reported earnings to enhance the compensation of any employee and determined that the potential risks arising from these plans are not reasonably likely to have a material adverse effect on the Corporation.

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Role of Discretion in the Compensation Process.  In fulfilling its responsibilities over the executive compensation program, the Committee must make decisions that are inherently subjective.  The Committee has established compensation plans and arrangements that place limits on the Committee’s ability to exercise discretion in compensation decisions, including the MIP, which does not allow the Committee to increase the amount of any long-term equity incentive compensation award under the plan above the maximum amount calculated for any such award under the terms of the plan.  The Committee retains the discretion to reduce the amount of any award determined under the terms of the MIP, including the short-term cash incentive compensation award and the long-term equity incentive compensation award.  In compensation decisions for 2023, the Committee used discretion to grant less than the calculated short-term cash incentive compensation award and long-term equity incentive compensation award for Mr. Cherry, to adjust measures of ROE and ROA under the short-term cash incentive compensation award and ROTCE under the long-term equity incentive compensation award for the Corporation and its peers as described on pages 32 and 36, and to award an additional discretionary bonus to Mr. Crone as described on page 33.

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Clawback Policies.  On October 17, 2023, the Corporation adopted the Dodd-Frank Clawback Policy (the “Dodd-Frank Clawback Policy”) to provide for the recoupment of certain incentive compensation pursuant to the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, in the manner required by Section 10D of the Exchange Act, Rule 10D-1 promulgated thereunder, and Nasdaq Listing Rule 5608. On December 19, 2023, the Corporation adopted the Supplemental Clawback Policy (the “Supplemental Clawback Policy” and together with the Dodd-Frank Clawback Policy, the “Clawback Policies”) to provide for the recoupment of certain incentive compensation not covered by the Dodd-Frank Clawback Policy. The Clawback Policies replace the Corporation’s Executive Incentive Compensation Clawback Policy adopted by the Board on December 20, 2022. Taken together, the Clawback Policies provide for the clawback of certain excess incentive

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