CF BANKSHARES INC
For the period ended Jun 30, 2024. Filed Aug 14, 2024.
View on SEC.govAbout this filing
A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Jun 30, 2024 · Filed Aug 14, 2024
CFBK$34.99+1.2%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-Q
Period ended 2024-03-31; filed 2024-05-14.
0001070680-24-000017
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-Q
Period ended 2024-06-30; filed 2024-08-14.
0001070680-24-000027
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 84 previous paragraphs and 100 current paragraphs.
49 unchanged; 33 reworded; 9 added; 2 removed; 0 previous and 9 current paragraphs rearranged.
Tables are not compared: 4 previous and 6 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (9)
Current report
During the six months ended June 30, 2024, the Company modified one commercial loan, totaling $4.4 million, where the borrower was experiencing financial difficulty. The loan was modified to defer principal and interest payments, increase the interest rate, extend the maturity date and institute a minimum EBITDA covenant. During the six months ended June 30, 2023, the Company did not modify any loans.
Current report
Noninterest income. Noninterest income for the quarter ended June 30, 2024 totaled $1.2 million and increased $240,000, or 24.5%, compared to $978,000 for the quarter ended June 30, 2023. The increase was primarily due to a $244,000 increase in service charges on deposit accounts.
Current report
Noninterest expense. Noninterest expense for the quarter ended June 30, 2024 totaled $7.1 million and decreased $81,000, or 1.1%, compared to $7.2 million for the quarter ended June 30, 2023. The decrease in noninterest expense was primarily due to a $208,000 decrease in salaries and employee benefits, partially offset by a $162,000 increase in data processing expense. The decrease in salaries and employee benefits was primarily related to a $62,000 reduction in payroll related taxes, due to a one-time tax rate adjustment payment of approximately $54,000 that occurred in the second quarter of 2023. In addition, there was also a $50,000 decrease in incentive expense and a $36,000 decrease in the deferred compensation plan expense. The increase in data processing expense was primarily due to an increase in our average monthly core processing charges of approximately $26,000 per month coupled with a $37,000 one-time implementation fee.
Current report
Net interest income totaled $22.7 million for the six months ended June 30, 2024 and decreased$1.5 million, or 6.5%, compared to net interest income of $24.2 million for the six months ended June 30, 2023. The decrease was primarily due to a $9.5 million, or 36.5%, increase in interest expense, partially offset by an $8.0 million, or 15.9%, increase in interest income. The increase in interest expense was attributed to a 96bps increase in the average cost of funds on interest-bearing liabilities, coupled with a $111.2 million, or 7.6%, increase in average interest-bearing liabilities. The increase in interest income was primarily attributed to a 46bps increase in the average yield on interest-earning assets, coupled with a $130.1 million, or 7.3%, increase in average interest-earning assets outstanding. The net interest margin of 2.37% for the six months ended June 30, 2024 decreased 35bps compared to the net interest margin of 2.72% for the six months ended June 30, 2023.
Current report
Interest income totaled $58.4 million for the six months ended June 30, 2024, and increased $8.0 million, or 15.9%, compared to $50.4 million for the six months ended June 30, 2023. The increase in interest income was primarily attributed to a 46bps increase in the average yield on loans and leases and loans held for sale, coupled with an $84.0 million, or 5.2%, increase in average loans and leases outstanding and loans held for sale.
Current report
Interest expense totaled $35.7 million for the six months ended June 30, 2024, and increased $9.5 million, or 36.5%, compared to $26.2 million for the six months ended June 30, 2023. The increase in interest expense was primarily attributed to a 102bps increase in the average rate of interest-bearing deposits, coupled with a $109.9 million, or 8.2%, increase in average interest-bearing deposits.
Current report
Provision for credit losses. There was $4.8 million in provision for credit losses expense for the six months ended June 30, 2024, which reflected an increase of $4.5 million compared to a $249,000 provision for the six months ended June 30, 2023. The increase in the provision for credit losses during the six months ended June 30, 2024 was primarily driven by a reserves placed on individually evaluated commercial participations purchased loans, totaling $3.1 million. Net charge-offs for the six months ended June 30, 2024 totaled $2.1 million, compared to net recoveries of $103,000 for the six months ended June 30, 2023.
Current report
Noninterest expense. Noninterest expense for the six months ended June 30, 2024 totaled $14.3 million and decreased $585,000, or 3.9%, compared to $14.9 million for the six months ended June 30, 2023. The decrease in noninterest expense was primarily due to a $686,000 decrease in salaries and employee benefits, partially offset by $228,000 increase in data processing expense. The decrease in salaries and employee benefits was primarily related to a $476,000 decrease in salaries, a $101,000 decrease in employee health insurance and other benefits, a $55,000 decrease in incentive expense, and a $49,000 decrease in payroll related taxes, due to a one-time tax rate adjustment payment of approximately $54,000 that occurred in the second quarter of 2023. The increase in data processing expense was primarily due to an increase in our average monthly core processing charges of approximately $26,000 per month coupled with a $37,000 one-time implementation fee.
Current report
Income tax expense. Income tax expense was $932,000 for the six months ended June 30, 2024, a decrease of $1.2 million compared to $2.1 million for the six months ended June 30, 2023. The effective tax rate for the six months ended June 30, 2024 was approximately 16.4%, as compared to approximately 19.7% for the six months ended June 30, 2023. The reduction in the effective tax rate for the six months ended June 30, 2024 was a result of a decrease in pre-tax net income combined with an increase in the benefits received from tax-credit investments.
Removed paragraphs (2)
Previous report
The Company adopted ASU 2022-02, Financial Instruments- Credit Losses (Topic 326): Troubled Debt Restructuring and Vintage Disclosures, during the first quarter of 2023. This amendment eliminated the Troubled Debt Restructuring (“TDR”) recognition and measurement guidance and, instead, required that an entity evaluate (consistent with the accounting for other loan modifications) whether the modification represents a new loan or a continuation of an existing loans. The amendments also enhanced existing disclosure requirements and introduced new requirements related to certain modifications of receivables made to borrowers experiencing financial difficulty. During the three months ended March 31, 2024 and March 31, 2023, the Company did not modify any loans.
Previous report
Noninterest expense. Noninterest expense for the quarter ended March 31, 2024 totaled $7.2 million and decreased $504,000, or 7.0%, compared to $7.7 million for the quarter ended March 31, 2023. The decrease in noninterest expense was primarily due to a $478,000 decrease in salaries and employee benefits. The decrease in salaries and employee benefits was primarily due to a decrease in the number of employees coupled with lower payroll taxes.
Reworded paragraphs (33)
Previous wording
The Holding Company is a financial holding company that owns 100% of the stock of CFBank, which was formed in Ohio in 1892 and converted from a federal savings association to a national bank on December 1, 2016. Prior to December 1, 2016, the Holding Company was a registered savings and loan holding company. Effective as of December 1, 2016 and in conjunction with the conversion of CFBank to a national bank, the Holding Company became a registered bank holding company and elected financial holding status with the Federal Reserve Board (the “Federal Reserve”). Effective as of July 27, 2020, the Company changed its name from Central Federal Corporation to CF Bankshares Inc.
Current wording
The Holding Company is a financial holding company that owns 100% of the stock of CFBank, which was formed in Ohio in 1892 and converted from a federal savings association to a national bank on December 1, 2016. Prior to December 1, 2016, the Holding Company was a registered savings and loan holding company. Effective as of December 1, 2016 and in conjunction with the conversion of CFBank to a national bank, the Holding Company became a registered bank holding company and elected financial holding company status with the Federal Reserve Board (the “Federal Reserve”). Effective as of July 27, 2020, the Company changed its name from Central Federal Corporation to CF Bankshares Inc.
Previous wording
Recent Regulatory Developments. In March 2024, CFBank’s primary federal regulator, the OCC, publicly released its Community Reinvestment Act (CRA) rating of “Needs to Improve” for CFBank as a result of the OCC’s regularly scheduled evaluation covering 2020 through 2022. The Company believes that the “Needs to Improve” rating was primarily attributable to CFBank’s legacy direct-to-consumer residential mortgage business. Beginning in 2021, CFBank strategically scaled down its residential mortgage business and exited the direct-to-consumer mortgage business in favor of lending in our regional markets. The Company believes that this change in our residential mortgage business and focus, together with changes in our branch network and other actions taken since 2021, have remediated these legacy issues. While CFBank’s CRA rating remains “Needs to Improve,” the Company is subject to additional requirements and conditions with respect to certain activities, including acquisitions of and mergers with other financial institutions and commencement of new activities. CFBank’s next CRA evaluation is expected to commence in 2026.
Current wording
Recent Regulatory Developments. In March 2024, CFBank’s primary federal regulator, the Office of the Comptroller of the Currency (the “OCC”), publicly released its Community Reinvestment Act (CRA) rating of “Needs to Improve” for CFBank as a result of the OCC’s regularly scheduled evaluation covering 2020 through 2022. The Company believes that the “Needs to Improve” rating was primarily attributable to CFBank’s legacy direct-to-consumer residential mortgage business. Beginning in 2021, CFBank strategically scaled down its residential mortgage business and exited the direct-to-consumer mortgage business in favor of lending in our regional markets. The Company believes that this change in our residential mortgage business and focus, together with changes in our branch network and other actions taken since 2021, have remediated these legacy issues. While CFBank’s CRA rating remains “Needs to Improve,” the Company is subject to additional requirements and conditions with respect to certain activities, including acquisitions of and mergers with other financial institutions and commencement of new activities. CFBank’s next CRA evaluation is expected to commence in 2026.
Previous wording
General. Assets totaled $2.0 billion at March 31, 2024 and decreased $19.1 million, or 0.9%, from $2.1 billion at December 31, 2023. The decrease was primarily due to a $24.7 million decrease in cash and cash equivalents.
Current wording
General. Assets totaled $2.0 billion at June 30, 2024 and decreased $18.0 million, or 0.9%, from $2.1 billion at December 31, 2023. The decrease was primarily due to a $19.8 million decrease in cash and cash equivalents.
Previous wording
Cash and cash equivalents. Cash and cash equivalents totaled $236.9 million at March 31, 2024, and decreased $24.7 million, or 9.4%, from $261.6 million at December 31, 2023. The decrease in cash and cash equivalents was primarily attributed to a decrease in net deposit balances, partially offset by increases in net loan balances.
Current wording
Cash and cash equivalents. Cash and cash equivalents totaled $241.8 million at June 30, 2024, and decreased $19.8 million, or 7.6%, from $261.6 million at December 31, 2023. The decrease in cash and cash equivalents was primarily attributed to a decrease in net deposit balances, partially offset by an increase in FHLB advances and other debt.
Previous wording
Securities. Securities available for sale totaled $7.6 million at March 31, 2024, and decreased $495,000, or 6.1%, compared to $8.1 million at December 31, 2023. The decrease was due to principal maturities.
Current wording
Securities. Securities available for sale totaled $8.3 million at June 30, 2024, and increased $231,000, or 2.9%, compared to $8.1 million at December 31, 2023. The increase was due to the purchases of new securities, partially offset by principal maturities.
Previous wording
Loans held for sale. Loans held for sale totaled $2.2 million at March 31, 2024, and increased $392,000, or 21.2%, from $1.8 million at December 31, 2023.
Current wording
Loans held for sale. Loans held for sale totaled $3.2 million at June 30, 2024, and increased $1.4 million, or 72.4%, from $1.8 million at December 31, 2023.
Previous wording
Loans and Leases. Net loans and leases totaled $1.7 billion at March 31, 2024, and increased $1.6 million, or 0.1%, from $1.7 billion at December 31, 2023. The increase in net loans and leases from December 31, 2023 was primarily due to a $28.8 million increase in commercial real estate loan balances, partially offset by a $12.3 million decrease in construction loan balances, a $9.3 million decrease in commercial loan balances, a $3.0 million decrease in single-family residential loan balances, and a $2.0 million decrease in multi-family loan balances. The increases in the aforementioned loan balances were primarily related to increased sales activity and new relationships. The decrease in construction loan balances was primarily related to loans that were converted to permanent loans upon the completion of construction.
Current wording
Loans and Leases. Net loans and leases totaled $1.7 billion at June 30, 2024, and decreased $6.4 million, or 0.4%, from $1.7 billion at December 31, 2023. The decrease in net loans and leases from December 31, 2023, was primarily due to $4.0 million decrease in loans and leases balances coupled with a $2.4 million increase in the allowance for credit losses. The decrease in loans and leases balances was primarily due to a $17.9 million decrease in commercial loan balances, a $10.4 million decrease in single-family residential loan balances, a $5.8 million decrease in construction loan balances, and a $2.4 million decrease in multi-family loan balances, partially offset by a $26.8 million increase in commercial real estate loan balances and a $4.9 million increase in home equity lines of credit. The increase in the allowance for credit losses was primarily driven by the provision for credit losses of $4.5 million, partially offset by net charge-offs of $2.1 million.
Previous wording
Allowance for Credit Losses on Loans. The allowance for credit losses on loans (“ACL – Loans”) totaled $18.2 million at March 31, 2024, and increased $1.3 million, or 7.9%, from $16.9 million at December 31, 2023. The increase in the ACL - Loans is due to $1.3 million in loan provision expense coupled with $16,000 in recoveries on charged off loans during the three months ended March 31, 2024. The increase in the ACL – Loans was primarily driven by reserves placed on an individually evaluated loan, which was also placed on nonaccrual status during the quarter ended March 31, 2024. The ratio of the ACL - Loans to total loans was 1.06% at March 31, 2024, compared to 0.99% at December 31, 2023.
Current wording
Allowance for Credit Losses on Loans. The allowance for credit losses on loans (“ACL – Loans”) totaled $19.3 million at June 30, 2024, and increased $2.4 million, or 14.3%, from $16.9 million at December 31, 2023. The increase in the ACL - Loans was primarily driven by additional reserves placed on two individually-evaluated commercial loan participations, which were acquired from regional banks, partially offset by charge-offs of $2.1 million. The ratio of the ACL - Loans to total loans was 1.13% at June 30, 2024, compared to 0.99% at December 31, 2023.
Previous wording
Individually evaluated loans totaled $6.4 million at March 31, 2024, and increased $2.9 million, or 85.0%, from $3.5 million at December 31, 2023. The increase was primarily due to two newly identified commercial loans during the first quarter 2024 totaling $3.0 million, partially offset by principal payments. The amount of the ACL - Loans specifically calculated for individually evaluated loans totaled $2.7 million at March 31, 2024 and $697,000 at December 31, 2023.
Current wording
Individually evaluated loans totaled $9.2 million at June 30, 2024, and increased $5.7 million, or 163.9%, from $3.5 million at December 31, 2023. The increase was primarily due to newly identified commercial loans during the six months ended June 30, 2024, totaling $6.2 million, partially offset by charge-offs and principal payments. The amount of the ACL - Loans specifically calculated for individually evaluated loans totaled $4.3 million at June 30, 2024 and $697,000 at December 31, 2023.
Previous wording
Nonperforming loans, which include nonaccrual loans and loans at least 90 days past due but still accruing interest, totaled $7.9 million at March 31, 2024, and increased $2.2 million from $5.7 million at December 31, 2023. The increase in nonaccrual loans was primarily driven one commercial loan, totaling $1.5 million, a commercial equipment lease, totaling $62,000, a single-family residential loan, totaling $372,000, and a consumer loan totaling $251,000, becoming nonaccrual during the first quarter of 2024. The ratio of nonperforming loans to total loans was 0.46% at March 31, 2024 compared to 0.33% at December 31, 2023.
Current wording
Nonperforming loans, which include nonaccrual loans and loans at least 90 days past due but still accruing interest, totaled $10.9 million at June 30, 2024, and increased $5.2 million from $5.7 million at December 31, 2023. The increase in nonaccrual loans was primarily driven by two commercial loans, totaling $4.7 million, three commercial equipment leases, totaling $183,000, and two single-family residential loans, totaling $919,000, becoming nonaccrual during the six months ended June 30, 2024, partially offset by paydowns and approximately $373,000 in charge-offs. The ratio of nonperforming loans to total loans was 0.64% at June 30, 2024 compared to 0.33% at December 31, 2023.
Previous wording
The level of total criticized and classified loans increased by $2.1 million, or 16.2%, during the three months ended March 31, 2024. Loans designated as special mention decreased $7,000, or 0.2%, and totaled $4.1 million at March 31, 2024, compared to $4.1 million at December 31, 2023. Loans classified as substandard increased $2.1 million, or 24.8%, and totaled $10.8 million at March 31, 2024, compared to $8.6 million at December 31, 2023. Loans designated as doubtful totaled $448,000 at March 31, 2024 and December 31, 2023. See Note 4 to our Consolidated Financial Statements included in this Quarterly Report on Form 10-Q for additional information regarding risk classification of loans.
Current wording
The level of total criticized and classified loans increased by $4.9 million, or 37.3%, during the six months ended June 30, 2024. Loans designated as special mention increased $4.2 million, or 102.8%, and totaled $8.3 million at June 30, 2024, compared to $4.1 million at December 31, 2023. Loans classified as substandard increased $1.2 million, or 13.5%, and totaled $9.8 million at June 30, 2024, compared to $8.6 million at December 31, 2023. Loans designated as doubtful declined $448,000 and totaled $0 at June 30, 2024, compared to $448,000 and December 31, 2023. See Note 4 to our Consolidated Financial Statements included in this Quarterly Report on Form 10-Q for additional information regarding risk classification of loans.
Previous wording
Total past due loans increased $3.4 million and totaled $5.4 million at March 31, 2024, compared to $2.0 million at December 31, 2023. Past due loans totaled 0.3% of the loan portfolio at March 31, 2024, compared to 0.1% at December 31, 2023. See Note 4 to our Consolidated Financial Statements included in this Quarterly Report on Form 10-Q for additional information regarding loan delinquencies.
Current wording
Total past due loans increased $5.6 million and totaled $7.6 million at June 30, 2024, compared to $2.0 million at December 31, 2023. Past due loans totaled 0.4% of the loan portfolio at June 30, 2024, compared to 0.1% at December 31, 2023. See Note 4 to our Consolidated Financial Statements included in this Quarterly Report on Form 10-Q for additional information regarding loan delinquencies.
Previous wording
Loans that contain interest only payments may present a higher risk than those loans with an amortizing payment that includes periodic principal reductions. Interest only loans are primarily commercial lines of credit secured by business assets and inventory, and consumer home equity lines of credit secured by the borrower’s primary residence. Due to the fluctuations in business assets and inventory of our commercial borrowers, CFBank has increased risk due to a potential decline in collateral values without a corresponding decrease in the outstanding principal. Interest only commercial lines of credit totaled $110.7 million, or 25.7%, of CFBank’s commercial portfolio at March 31, 2024, compared to $147.5 million, or 33.5%, at December 31, 2023. Interest only home equity lines of credit totaled $33.4 million, or 92.5%, of the total home equity lines of credit at March 31, 2024, compared to $33.6 million, or 93.4%, at December 31, 2023.
Current wording
Loans that contain interest only payments may present a higher risk than those loans with an amortizing payment that includes periodic principal reductions. Interest only loans are primarily commercial lines of credit secured by business assets and inventory, and consumer home equity lines of credit secured by the borrower’s primary residence. Due to the fluctuations in business assets and inventory of our commercial borrowers, CFBank has increased risk due to a potential decline in collateral values without a corresponding decrease in the outstanding principal. Interest only commercial lines of credit totaled $134.5 million, or 31.9%, of CFBank’s commercial portfolio at June 30, 2024, compared to $147.5 million, or 33.5%, at December 31, 2023. Interest only home equity lines of credit totaled $39.3 million, or 96.1%, of the total home equity lines of credit at June 30, 2024, compared to $33.6 million, or 93.4%, at December 31, 2023.
Previous wording
Deposits. Deposits totaled $1.7 billion at March 31, 2024, a decrease of $21.0 million, or 1.2%, when compared to $1.7 billion at December 31, 2023. The decrease when compared to December 31, 2023, is primarily due to a $21.9 million decrease in interest-bearing account balances, partially offset by a $925,000 increase in noninterest-bearing account balances. The decrease in interest-bearing account balances was primarily due to a $51.1 million decrease in brokered account balances, partially offset by an increase of $28.5 million in core deposit balances.
Current wording
Deposits. Deposits totaled $1.7 billion at June 30, 2024, a decrease of $47.6 million, or 2.7%, when compared to $1.7 billion at December 31, 2023. The decrease when compared to December 31, 2023, is primarily due to a $29.4 million decrease in interest-bearing account balances, coupled with an $18.2 million decrease in noninterest-bearing account balances. The decrease in interest-bearing account balances, when compared to December 31, 2023, included a $14.2 million reduction in brokered deposits.
Previous wording
At March 31, 2024, approximately 29.8% of our deposit balances exceeded the FDIC insurance limit of $250,000, as compared to approximately 29.2% at December 31, 2023.
Current wording
At June 30, 2024, approximately 28.6% of our deposit balances exceeded the FDIC insurance limit of $250,000, as compared to approximately 29.2% at December 31, 2023.
Previous wording
CFBank is a participant in the Certificate of Deposit Account Registry Service® (CDARS) and Insured Cash Sweep (ICS) programs offered through IntraFi. IntraFi works with a network of banks to offer products that can provide FDIC insurance coverage in excess of $250,000 through these innovative products. Brokered deposits, including CDARS and ICS deposits that qualify as brokered, totaled $389.3 million at March 31, 2024, and decreased $51.1 million, or 11.6%, from $440.4 million at December 31, 2023. Customer balances in the CDARS reciprocal and ICS reciprocal programs, which do not qualify as brokered, totaled $272.6 million at March 31, 2024, and increased $34.8 million, or 14.7%, from $237.8 million at December 31, 2023.
Current wording
CFBank is a participant in the Certificate of Deposit Account Registry Service® (CDARS) and Insured Cash Sweep (ICS) programs offered through IntraFi. IntraFi works with a network of banks to offer products that can provide FDIC insurance coverage in excess of $250,000 through these innovative products. Brokered deposits, including CDARS and ICS deposits that qualify as brokered, totaled $426.2 million at June 30, 2024, and decreased $14.2 million, or 3.2%, from $440.4 million at December 31, 2023. Customer balances in the CDARS reciprocal and ICS reciprocal programs, which do not qualify as brokered, totaled $263.9 million at June 30, 2024, and increased $26.1 million, or 11.0%, from $237.8 million at December 31, 2023.
Previous wording
FHLB advances and other debt. FHLB advances and other debt totaled $111.0 million at March 31, 2024, an increase of $1.0 million, or 0.9%, when compared to $110.0 million at December 31, 2023. The increase was dueto a $1.0 million increase on the Company’s line of credit with a third party financial institution.
Current wording
FHLB advances and other debt. FHLB advances and other debt totaled $137.2 million at June 30, 2024, an increase of $27.2 million, or 24.7%, when compared to $110.0 million at December 31, 2023. The increase was primarily due to a $26.0 million short-term FHLB advance.
Previous wording
The Holding Company has a $35.0 million credit facility. The credit facility is revolving until May 21, 2024, at which time any then-outstanding balance will be converted to a 10-year term note on a graduated 10-year amortization. Borrowings on the credit facility bear interest at a fixed rate of 3.85% until May 21, 2026, and the interest rate then converts to a floating rate equal to PRIME with a floor of 3.25%. The purpose of the credit facility is to provide an additional source of liquidity for the Holding Company and to provide funds for the Holding Company to downstream as additional capital to CFBank to support growth. As of March 31, 2024, the Company had an outstanding balance of $34.5 million on the facility.
Current wording
The Holding Company has a $35.0 million credit facility. The credit facility was revolving until May 21, 2024, at which time the outstanding balance was converted to a 10-year term note on a graduated 10-year amortization. Borrowings on the credit facility bear interest at a fixed rate of 3.85% until May 21, 2026, and the interest rate then converts to a floating rate equal to PRIME with a floor of 3.25%. As of June 30, 2024, the Company had an outstanding balance, net of unamortized issuance costs, of $34.7 million on the facility.
Previous wording
Stockholders’ equity. Stockholders’ equity totaled $158.0 million at March 31, 2024, an increase of $2.6 million, or 1.7%, from $155.4 million at December 31, 2023. The increase in total stockholders’ equity during the three months ended March 31, 2024 was primarily attributed to net income, partially offset by $386,000 in dividend payments.
Current wording
Stockholders’ equity. Stockholders’ equity totaled $159.6 million at June 30, 2024, an increase of $4.2 million, or 2.7%, from $155.4 million at December 31, 2023. The increase in stockholders’ equity during the six months ended June 30, 2024 was primarily attributed to net income, partially offset by $773,000 in dividend payments.
Previous wording
Management continues to proactively monitor capital levels and ratios in its on-going capital planning process. CFBank has leveraged its capital to support balance sheet growth and drive increased net interest income. Management remains focused on growing capital though earnings; however, should the need arise, CFBank has additional sources of capital and alternatives it could utilize as further discussedin the “Liquidity and Capital Resources” section in this Quarterly Report on Form 10-Q.
Current wording
Management continues to proactively monitor capital levels and ratios in its on-going capital planning process. CFBank has leveraged its capital to support balance sheet growth and drive increased net interest income. Management remains focused on growing capital through earnings; however, should the need arise, CFBank has additional sources of capital and alternatives it could utilize as further discussedin the “Liquidity and Capital Resources” section in this Quarterly Report on Form 10-Q.
Previous wording
General. Net income for the three months ended March 31, 2024 totaled $3.1 million (or $0.47 per diluted common share)compared to net income of $4.4 million (or $0.68 per diluted common share) for the three months ended March 31, 2023. The decrease in net income was primarily the result of a decrease in net interest income and an increase in provision for credit losses expense, partially offset by a decrease in noninterest expense and an increase in noninterest income.
Current wording
General. Net income for the three months ended June 30, 2024 totaled $1.7 million (or $0.26 per diluted common share)compared to net income of $4.2 million (or $0.66 per diluted common share) for the three months ended June 30, 2023. The decrease in net income was primarily the result of an increase in provision for credit losses expense and a decrease in net interest income, partially offset by an increase in noninterest income and a decrease in noninterest expense.
Previous wording
Net interest income totaled $11.3 million for the quarter ended March 31, 2024 and decreased$1.4 million, or 11.4%, compared to net interest income of $12.7 million for the quarter ended March 31, 2023. The decrease was primarily due to a $6.4 million, or 55.6%, increase in interest expense, partially offset by a $4.9 million, or 20.3%, increase in interest income. The increase in interest expense was attributed to a 127bps increase in the average cost of funds on interest-bearing liabilities, coupled with a $166.4 million, or 11.8%, increase in average interest-bearing liabilities. The increase in interest income was primarily attributed to a $176.3 million, or 10.2%, increase in average interest-earning assets outstanding, coupled with a 51bps increase in the average yield on interest-earning assets. The net interest margin of 2.36% for the quarter ended March 31, 2024 decreased 57bps compared to the net interest margin of 2.93% for the first quarter of 2023.
Current wording
Net interest income totaled $11.4 million for the quarter ended June 30, 2024 and decreased$119,000, or 1.0%, compared to net interest income of $11.5 million for the quarter ended June 30, 2023. The decrease was primarily due to a $3.2 million, or 21.8%, increase in interest expense, partially offset by a $3.1 million, or 11.8%, increase in interest income. The increase in interest expense was attributed to a 68bps increase in the average cost of funds on interest-bearing liabilities, coupled with a $56.6 million, or 3.7%, increase in average interest-bearing liabilities. The increase in interest income was primarily attributed to a 40bps increase in the average yield on interest-earning assets, coupled with an $84.4 million, or 4.6%, increase in average interest-earning assets outstanding. The net interest margin of 2.39% for the quarter ended June 30, 2024 decreased 13bps compared to the net interest margin of 2.52% for the second quarter of 2023.
Previous wording
Interest income totaled $29.1 million for the quarter ended March 31, 2024, and increased $4.9 million, or 20.3%, compared to $24.2 million for the quarter ended March 31, 2023. The increase in interest income was primarily attributed to a 51bps increase in the average yield on loans and leases and loans held for sale, coupled with a $107.2 million, or 6.8%, increase in average loans and leases outstanding and loans held for sale.
Current wording
Interest income totaled $29.3 million for the quarter ended June 30, 2024, and increased $3.1 million, or 11.8%, compared to $26.2 million for the quarter ended June 30, 2023. The increase in interest income was primarily attributed to a 42bps increase in the average yield on loans and leases and loans held for sale, coupled with a $61.0 million, or 3.7%, increase in average loans and leases outstanding and loans held for sale.
Previous wording
Interest expense totaled $17.8 million for the quarter ended March 31, 2024, and increased $6.4 million, or 55.6%, compared to $11.5 million for the quarter ended March 31, 2023. The increase in interest expense was primarily attributed to a 134bps increase in the average rate of interest-bearing deposits, coupled with a $165.2 million, or 12.8%, increase in average interest-bearing deposits.
Current wording
Interest expense totaled $17.9 million for the quarter ended June 30, 2024, and increased $3.2 million, or 21.8%, compared to $14.7 million for the quarter ended June 30, 2023. The increase in interest expense was primarily attributed to a 72bps increase in the average rate of interest-bearing deposits, coupled with a $55.2 million, or 4.0%, increase in average interest-bearing deposits.
Previous wording
Provision for credit losses. There was $1.2 million in provision for credit losses expense for the quarter ended March 31, 2024, which reflected an increase of $1.0 million, or 421.9%, compared to a $237,000 provision for the quarter ended March 31, 2023. The increase in the provision for credit losses during the quarter ended March 31, 2024 was primarily driven by a reserve placed on an individually evaluated loan, which was also placed on nonaccrual status during the quarter ended March 31, 2024. Net recoveries for the quarter ended March 31, 2024 totaled $16,000, compared to net-charge offs of $5,000 for the quarter ended March 31, 2023.
Current wording
Provision for credit losses. There was $3.6 million in provision for credit losses expense for the quarter ended June 30, 2024, which reflected an increase of $3.6 million, compared to a $12,000 provision for the quarter ended June 30, 2023. The increase in the provision for credit losses was primarily driven by reserves placed on two individually-evaluated commercial loan participations previously purchased by CFBank, totaling $3.1 million. Net charge-offs for the quarter ended June 30, 2024 totaled $2.1 million compared to net recoveries of $16,000 for the prior quarter and net recoveries of $108,000 for the quarter ended June 30, 2023.
Previous wording
Income tax expense. Income tax expense was $695,000 for the quarter ended March 31, 2024, a decrease of $381,000 compared to $1.1 million for the quarter ended March 31, 2023. The effective tax rate for the quarter ended March 31, 2024 was approximately 18.5%, as compared to approximately 19.5% for the quarter ended March 31, 2023.
Current wording
Income tax expense. Income tax expense was $237,000 for the quarter ended June 30, 2024, a decrease of $819,000 compared to $1.1 million for the quarter ended June 30, 2023. The effective tax rate for the quarter ended June 30, 2024 was approximately 12.3%, as compared to approximately 20.0% for the quarter ended June 30, 2023. The reduction in the effective tax rate for the quarter ended June 30, 2024 was a result of a decrease in pre-tax net income combined with an increase in the benefits received from tax-credit investments.
Previous wording
Noninterest income. Noninterest income for the quarter ended March 31, 2024 totaled $905,000 and increased $186,000, or 25.9%, compared to $719,000 for the quarter ended March 31, 2023. The increase was primarily due to a $255,000 increase in service charges on deposit accounts, a $167,000 increase in the net gain on sales of commercial loans, partially offset by a $299,000 decrease in other noninterest income.
Current wording
Noninterest income. Noninterest income for the six months ended June 30, 2024 totaled $2.1 million and increased $426,000, or 25.1%, compared to $1.7 million for the six months ended June 30, 2023. The increase was primarily due to a $499,000 increase in service charges on deposit accounts and increases of $167,000 and $140,000 in net gains on sales of commercial loans and residential mortgage loans, respectively, partially offset by a $208,000 decrease in other noninterest income.
Previous wording
We believe there have been no significant changes during the three months ended March 31, 2024 to the items that we disclosed as our critical accounting policies and estimates in Management's Discussion and Analysis of Financial Condition and Results of Operations in our Annual Report on Form 10-K for the year ended December 31, 2023.
Current wording
We believe there have been no significant changes during the six months ended June 30, 2024 to the items that we disclosed as our critical accounting policies and estimates in Management's Discussion and Analysis of Financial Condition and Results of Operations in our Annual Report on Form 10-K for the year ended December 31, 2023.
Previous wording
Cash, unpledged securities and deposits in other financial institutions decreased $24.7 million, or 9.4%, to $237.3 million at March 31, 2024, compared to $262.0 million at December 31, 2023. The decrease is primarily attributed to a decrease in deposits, partially offset by an increase in loans and leases.
Current wording
Cash, unpledged securities and deposits in other financial institutions decreased $19.3 million, or 7.4%, to $242.7 million at June 30, 2024, compared to $262.0 million at December 31, 2023. The decrease is primarily attributed to a decrease in deposits, partially offset by an increase in short-term borrowings.
Previous wording
CFBank’s additional borrowing capacity with the FHLB increased $8.0 million, or 4.4%, to $191.7 million at March 31, 2024, compared to $183.7 million at December 31, 2023.
Current wording
CFBank’s additional borrowing capacity with the FHLB decreased $19.2 million, or 10.4%, to $164.5 million at June 30, 2024, compared to $183.7 million at December 31, 2023. The decrease was primarily related to a $26.0 million short-term borrowing.
Previous wording
CFBank’s additional borrowing capacity at the FRB increased $8.3 million, or 6.0%, to $144.5 million at March 31, 2024 from $136.2 million at December 31, 2023. CFBank is eligible to participate in the FRB’s primary credit program, providing CFBank access to short-term funds at any time, for any reason, based on the collateral pledged.
Current wording
CFBank’s additional borrowing capacity at the FRB increased $5.6 million, or 4.1%, to $141.8 million at June 30, 2024 from $136.2 million at December 31, 2023. CFBank is eligible to participate in the FRB’s primary credit program, providing CFBank access to short-term funds at any time, for any reason, based on the collateral pledged.
Previous wording
Currently, the annual debt service on the Company’s $10 million of fixed-to-floating rate subordinated notes is $970,000. The subordinated notes initially bore a fixed rate of 7.00% until December 2023, and now the interest rate resets quarterly to a rate equal to the current three-month SOFR plus 4.402%, which was 9.70% at March 31, 2024.
Current wording
Currently, the annual debt service on the Company’s $10 million of fixed-to-floating rate subordinated notes is $970,000. The subordinated notes initially bore a fixed rate of 7.00% until December 2023, and now the interest rate resets quarterly to a rate equal to the current three-month SOFR plus 4.402%, which was 9.73% at June 30, 2024.
Previous wording
The Holding Company has a $35.0 million credit facility with a third-party bank. The credit facility is revolving until May 21, 2024, at which time any then-outstanding balance will be converted to a 10-year term note on a graduated 10-year amortization. Borrowings on the credit facility bear interest at a fixed rate of 3.85% until May 21, 2026, and the interest rate then converts to a floating rate equal to PRIME with a floor of 3.75%. The purpose of the credit facility is to provide an additional source of liquidity for the Holding Company and to provide funds for the Holding Company to downstream as additional capital to CFBank to support growth. At March 31, 2024, the Company had an outstanding balance, net of unamortized debt issuance costs, of $34.5 million on the facility.
Current wording
The Holding Company has a $35.0 million credit facility with a third-party bank. The credit facility was revolving until May 21, 2024, at which time the outstanding balance was converted to a 10-year term note on a graduated 10-year amortization. Borrowings on the credit facility bear interest at a fixed rate of 3.85% until May 21, 2026, and the interest rate then converts to a floating rate equal to PRIME with a floor of 3.75%. At June 30, 2024, the Company had an outstanding balance, net of unamortized debt issuance costs, of $34.7 million on the facility.
Rearranged current paragraphs (9)
Current report — wording carried from elsewhere
The Company records income tax expense based on the federal statutory rate adjusted for the effect of other items such as low income housing tax credits, bank owned life insurance and other miscellaneous items.
Current report — wording carried from elsewhere
Comparison of the Results of Operations for the Six Months Ended June 30, 2024 and 2023.
Current report — wording carried from elsewhere
General. Net income for the six months ended June 30, 2024 totaled $4.8 million (or $0.74 per diluted common share)compared to net income of $8.7 million (or $1.35 per diluted common share) for the six months ended June 30, 2023. The decrease in net income was primarily the result of an increase in provision for credit losses expense, and a decrease in net interest income partially offset by a decrease in noninterest expense and an increase in noninterest income.
Current report — wording carried from elsewhere
Net interest income. Net interest income is a significant component of net income, and consists of the difference between interest income generated on interest-earning assets and interest expense incurred on interest-bearing liabilities. Net interest income is primarily affected by the volumes, interest rates and composition of interest-earning assets and interest-bearing liabilities. The tables in the sections below titled“Average Balances, Interest Rates and Yields” and“Rate/Volume Analysis of Net Interest Income” provide important information on factors impacting net interest income and should be read in conjunction with this discussion of net interest income.
Current report — wording carried from elsewhere
The following table presents information regarding net charge-offs (recoveries) for the six months ended June 30, 2024 and 2023.
Current report — wording carried from elsewhere
Our deferred tax assets are composed of U.S. net operating losses (“NOLs”), and other temporary book to tax differences. When determining the amount of deferred tax assets that are more-likely-than-not to be realized, and therefore recorded as a benefit, the Company conducts a regular assessment of all available information. This information includes, but is not limited to, taxable income in prior periods, projected future income and projected future reversals of deferred tax items. Based on these criteria, the Company determined as of June 30, 2024 that no valuation allowance was required against the net deferred tax asset.
Current report — wording carried from elsewhere
(1)Average balance is computed using the carrying value of securities. Average yield is computed using the historical amortized cost average balance for available for sale securities.
Current report — wording carried from elsewhere
(2)Average yields and interest earned are stated on a fully taxable equivalent basis.
Current report — wording carried from elsewhere
(3)Average balance is computed using the recorded investment in loans net of the ACL - Loans and includes nonperforming loans.