CF BANKSHARES INC

Previous wording

Most of our deposits and loans come from our market area. Our principal market area for deposits and loans includes the following counties in Ohio and Indiana: Franklin County, Ohio through our offices in Columbus, Ohio; Delaware County, Ohio through our Polaris office in Columbus, Ohio; Cuyahoga County, Ohio through our office in Woodmere, Ohio and our Ohio City office in Cleveland, Ohio; Summit County, Ohio through our office in Fairlawn, Ohio; Hamilton County, Ohio through our offices in Blue Ash, Ohio and our Red Bank office in Cincinnati, Ohio; and Marion County, Indiana through our office in Indianapolis. Because of CFBank’s concentration of business activities in Ohio, the Company’s financial condition and results of operations depend in large part upon economic conditions in Ohio.

Current wording

Most of our deposits and loans come from our market area. Our principal market area for deposits and loans includes the following counties in Ohio and Indiana: Franklin County, Ohio through our offices in Columbus, Ohio; Delaware County, Ohio through our Polaris office in Columbus, Ohio; Cuyahoga County, Ohio through our office in Orange Village, Ohio and our Ohio City office in Cleveland, Ohio; Summit County, Ohio through our office in Fairlawn, Ohio; Hamilton County, Ohio through our offices in Blue Ash, Ohio and our Red Bank office in Cincinnati, Ohio; and Marion County, Indiana through our office in Indianapolis. Because of CFBank’s concentration of business activities in Ohio, the Company’s financial condition and results of operations depend in large part upon economic conditions in Ohio.

Previous wording

Management’s discussion and analysis represents a review of our consolidated financial condition and results of operations for the periods presented. This review should be read in conjunction with our Consolidated Financial Statements and related Notes included in this Quarterly Report on Form 10-Q.

Current wording

Management’s discussion and analysis represents a review of our unaudited consolidated financial condition and results of operations for the periods presented. This review should be read in conjunction with our Consolidated Financial Statements and related Notes included in this Quarterly Report on Form 10-Q.

Previous 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.

Current wording

Cash and cash equivalents. Cash and cash equivalents totaled $233.5 million at September 30, 2024, and decreased $28.1 million, or 10.7%, from $261.6 million at December 31, 2023. The decrease in cash and cash equivalents was primarily attributed to an increase in loans and leases.

Previous 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.

Current wording

Securities. Securities available for sale totaled $8.7 million at September 30, 2024, and increased $598,000, or 7.4%, 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 $3.2 million at June 30, 2024, and increased $1.4 million, or 72.4%, from $1.8 million at December 31, 2023.

Current wording

Loans held for sale. Loans held for sale totaled $5.2 million at September 30, 2024, and increased $3.4 million, or 183.4%, from $1.8 million at December 31, 2023. The increase in loans held for sale was the result of increases in the volume of loans to be sold.

Previous 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.

Current wording

Loans and Leases. Net loans and leases totaled $1.72 billion at September 30, 2024, and increased $22.9 million, or 1.4%, from $1.69 billion at December 31, 2023. The increase in net loans and leases from December 31, 2023, was primarily due to a $45.8 million increase in multi-family loan balances, a $14.8 million increase in commercial real estate loan balances, and a $5.0 million increase in home equity lines of credit, partially offset by a $19.2 million decrease in construction loan balances, a $17.1 million decrease in single-family residential loan balances, and a $7.0 million decrease in commercial and industrial (C&I) loan balances.

Previous 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.

Current wording

Allowance for Credit Losses on Loans. The allowance for credit losses on loans (“ACL – Loans”) totaled $16.8 million at September 30, 2024, and decreased $85,000, or 0.5%, from $16.9 million at December 31, 2023. The decrease in the ACL-Loans was driven by net charge-offs of $5.4 million, partially offset by the provision for credit losses on loans of $5.3 million. The ratio of the ACL - Loans to total loans was 0.97% at September 30, 2024, compared to 0.99% at December 31, 2023.

Previous 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.

Current wording

Individually evaluated loans totaled $12.9 million at September 30, 2024, and increased $9.4 million, or 270.9%, from $3.5 million at December 31, 2023. The increase was primarily due to newly identified commercial loans during the nine months ended September 30, 2024, totaling $12.8 million, partially offset by charge-offs and principal payments. The amount of the ACL - Loans specifically calculated for individually evaluated loans totaled $1.2 million at September 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 $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.

Current wording

Nonperforming loans, which include nonaccrual loans and loans at least 90 days past due but still accruing interest, totaled $14.6 million at September 30, 2024, and increased $8.9 million from $5.7 million at December 31, 2023. The increase in nonaccrual loans was primarily driven by three commercial loans, totaling $11.3 million, three commercial equipment leases, totaling $182,000, and two single-family residential loans, totaling $918,000, becoming nonaccrual during the nine months ended September 30, 2024, partially offset by paydowns and approximately $3.3 million in charge-offs on loans that were in nonaccrual at December 31, 2023. The ratio of nonperforming loans to total loans was 0.84% at September 30, 2024 compared to 0.33% at December 31, 2023.

Previous wording

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 wording

During the three months ended September 30, 2024, the Company did not modify any loans where the borrower was experiencing financial difficulty. During the nine months ended September 30, 2024, the Company modified one commercial loan, with an amortized cost basis of $4.3 million at September 30, 2024, 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 three and nine months ended September 30, 2023, the Company modified one commercial loan, totaling $2.9 million, where the borrower was experiencing financial difficulty. The loan was modified to defer principal and interest payments for up to one year. For any period where the payments are deferred, the note will accrue at a higher rate of interest.

Previous 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.

Current wording

The level of total criticized and classified loans increased by $6.2 million, or 46.9%, during the nine months ended September 30, 2024. Loans designated as special mention increased $595,000, or 14.6%, and totaled $4.7 million at September 30, 2024, compared to $4.1 million at December 31, 2023. Loans classified as substandard increased $6.0 million, or 69.8%, and totaled $14.7 million at September 30, 2024, compared to $8.6 million at December 31, 2023. Loans designated as doubtful declined $448,000 and totaled $0 at September 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 $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.

Current wording

Total past due loans increased $5.7 million and totaled $7.7 million at September 30, 2024, compared to $2.0 million at December 31, 2023. Past due loans totaled 0.4% of the loan portfolio at September 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 $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.

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 $154.5 million, or 35.7%, of CFBank’s commercial portfolio at September 30, 2024, compared to $147.5 million, or 33.5%, at December 31, 2023. Interest only home equity lines of credit totaled $38.3 million, or 93.6%, of the total home equity lines of credit at September 30, 2024, compared to $33.6 million, or 93.4%, at December 31, 2023.

Previous 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.

Current wording

Deposits. Deposits totaled $1.75 billion at September 30, 2024, an increase of $1.5 million, or 0.1%, when compared to $1.74 billion at December 31, 2023. The increase when compared to December 31, 2023, is primarily due to a $21.8 million increase in noninterest-bearing account balances, partially offset by a $20.3 million decrease in interest-bearing account balances. The decrease in interest-bearing account balances, when compared to December 31, 2023, included a $14.7 million reduction in brokered deposits.

Previous 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.

Current wording

At September 30, 2024, approximately 30.2% 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 $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.

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 $425.7 million at September 30, 2024, and decreased $14.7 million, or 3.3%, 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 $254.4 million at September 30, 2024, and increased $16.6 million, or 7.0%, from $237.8 million at December 31, 2023.

Previous 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.

Current wording

FHLB advances and other debt. FHLB advances and other debt totaled $108.7 million at September 30, 2024, a decrease of $1.3 million, or 1.2%, when compared to $110.0 million at December 31, 2023. The decrease was primarily due to FHLB fixed rate advance maturities.

Previous 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.

Current wording

Stockholders’ equity. Stockholders’ equity totaled $164.0 million at September 30, 2024, an increase of $8.6 million, or 5.6%, from $155.4 million at December 31, 2023. The increase in stockholders’ equity during the nine months ended September 30, 2024 was primarily attributed to net income, partially offset by $1.2 million in dividend payments.

Previous 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.

Current wording

General. Net income for the three months ended September 30, 2024 totaled $4.2 million (or $0.65 per diluted common share)compared to net income of $4.0 million (or $0.62 per diluted common share) for the three months ended September 30, 2023. The increase in net income was primarily the result of a decrease in provision for credit losses expense and an increase in noninterest income, partially offset by an increase in noninterest expense and a decrease in net interest income.

Previous 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.

Current wording

Net interest income totaled $11.5 million for the quarter ended September 30, 2024 and decreased$207,000, or 1.8%, compared to net interest income of $11.7 million for the quarter ended September 30, 2023. The decrease was primarily due to a $2.0 million, or 12.3%, increase in interest expense, partially offset by a $1.8 million, or 6.5%, increase in interest income. The increase in interest expense was attributed to a 46bps increase in the average cost of funds on interest-bearing liabilities, coupled with a $22.8 million, or 1.5%, increase in average interest-bearing liabilities. The increase in interest income was primarily attributed to a 26bps increase in the average yield on interest-earning assets, coupled with a $40.9 million, or 2.2%, increase in average interest-earning assets outstanding. The net interest margin of 2.41% for the quarter ended September 30, 2024 decreased 9bps compared to the net interest margin of 2.50% for the third quarter of 2023.

Previous 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.

Current wording

Interest income totaled $30.0 million for the quarter ended September 30, 2024, and increased $1.8 million, or 6.5%, compared to $28.2 million for the quarter ended September 30, 2023. The increase in interest income was primarily attributed to a 27bps increase in the average yield on loans and leases and loans held for sale, coupled with a $60.5 million, or 3.7%, increase in average loans and leases outstanding and loans held for sale.

Previous 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.

Current wording

Interest expense totaled $18.5 million for the quarter ended September 30, 2024, and increased $2.0 million, or 12.3%, compared to $16.5 million for the quarter ended September 30, 2023. The increase in interest expense was primarily attributed to a 47bps increase in the average rate of interest-bearing deposits, coupled with a $23.9 million, or 1.7%, increase in average interest-bearing deposits.

Previous 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.

Current wording

Provision for credit losses. There was $558,000 million in provision for credit losses expense for the quarter ended September 30, 2024, which reflected a decrease of $635,000, compared to a $1.2 million provision for the quarter ended September 30, 2023. Net charge-offs for the quarter ended September 30, 2024 totaled $3.3 million compared to net charge-offs of $126,000 for the quarter ended September 30, 2023. During the quarter ended September 30, 2024, an individually evaluated loan, totaling $2.9 million, was charged off.

Previous wording

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 wording

Noninterest income. Noninterest income for the quarter ended September 30, 2024 totaled $1.6 million and increased $305,000, or 23.4%, compared to $1.3 million for the quarter ended September 30, 2023. The increase was primarily due to a $259,000 increase in service charges on deposit accounts and a $188,000 increase on other noninterest income, partially offset by a $192,000 decrease in swap fee income.

Previous wording

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 wording

Noninterest expense. Noninterest expense for the quarter ended September 30, 2024 totaled $7.2 million and increased $466,000, or 6.9%, compared to $6.8 million for the quarter ended September 30, 2023. The increase in noninterest expense was primarily due to a $194,000 increase in other noninterest expense, a $119,000 increase in salaries and employee benefits, and a $91,000 increase in data processing expense. The increase in other noninterest expense was primarily due to a $135,000 increase in fraud losses on customer accounts, coupled with a $53,000 increase in charitable contributions. The increase in salaries and employee benefits was primarily related to an increase in the number of employees, partially offset by lower deferred compensation incentive plan expense.

Previous 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.

Current wording

Income tax expense. Income tax expense was $1.1 million for the quarter ended September 30, 2024, an increase of $93,000, or 9.5%, compared to $984,000 for the quarter ended September 30, 2023. The effective tax rate for the quarter ended September 30, 2024 was approximately 20.4%, as compared to approximately 19.6% for the quarter ended September 30, 2023.

Previous wording

Comparison of the Results of Operations for the Six Months Ended June 30, 2024 and 2023.

Current wording

Comparison of the Results of Operations for the Nine Months Ended September 30, 2024 and 2023.

Previous wording

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 wording

General. Net income for the nine months ended September 30, 2024 totaled $9.0 million (or $1.38 per diluted common share)compared to net income of $12.7 million (or $1.97 per diluted common share) for the nine months ended September 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 $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 wording

Net interest income totaled $34.1 million for the nine months ended September 30, 2024 and decreased$1.8 million, or 4.9%, compared to net interest income of $35.9 million for the nine months ended September 30, 2023. The decrease was primarily due to an $11.6 million, or 27.2%, increase in interest expense, partially offset by a $9.8 million, or 12.5%, increase in interest income. The increase in interest expense was attributed to a 78bps increase in the average cost of funds on interest-bearing liabilities, coupled with an $81.4 million, or 5.5%, increase in average interest-bearing liabilities. The increase in interest income was primarily attributed to a 39bps increase in the average yield on interest-earning assets, coupled with a $100.0 million, or 5.5%, increase in average interest-earning assets outstanding. The net interest margin of 2.38% for the nine months ended September 30, 2024 decreased 27bps compared to the net interest margin of 2.65% for the nine months ended September 30, 2023.

Previous wording

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 wording

Interest income totaled $88.4 million for the nine months ended September 30, 2024, and increased $9.8 million, or 12.5%, compared to $78.6 million for the nine months ended September 30, 2023. The increase in interest income was primarily attributed to a 40bps increase in the average yield on loans and leases and loans held for sale, coupled with a $76.1 million, or 4.7%, increase in average loans and leases outstanding and loans held for sale.

Previous wording

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 wording

Interest expense totaled $54.3 million for the nine months ended September 30, 2024, and increased $11.6 million, or 27.2%, compared to $42.7 million for the nine months ended September 30, 2023. The increase in interest expense was primarily attributed to an 82bps increase in the average rate of interest-bearing deposits, coupled with an $80.9 million, or 5.9%, increase in average interest-bearing deposits.

Previous wording

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 wording

Provision for credit losses. There was $5.4 million in provision for credit losses expense for the nine months ended September 30, 2024, which reflected an increase of $4.0 million compared to a $1.4 million provision for the nine months ended September 30, 2023. The increase in the provision for credit losses during the nine months ended September 30, 2024 was primarily driven by reserves placed on two individually evaluated commercial loan participations (purchased loans), totaling $3.1 million, in the second quarter of 2024. During the quarter ended September 30, 2024, one of those individually evaluated loans, totaling $2.9 million, was charged off. Net charge-offs for the nine months ended September 30, 2024 totaled $5.4 million, compared to net charge-offs of $23,000 for the nine months ended September 30, 2023.

Previous wording

The following table presents information regarding net charge-offs (recoveries) for the six months ended June 30, 2024 and 2023.

Current wording

The following table presents information regarding net charge-offs (recoveries) for the nine months ended September 30, 2024 and 2023.

Previous 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.

Current wording

Noninterest income. Noninterest income for the nine months ended September 30, 2024 totaled $3.7 million and increased $731,000, or 24.4%, compared to $3.0 million for the nine months ended September 30, 2023. The increase was primarily due to a $758,000 increase in service charges on deposit accounts and increases of $202,000 and $155,000 in net gains on sales of residential mortgage loans and commercial loans, respectively, partially offset by a $364,000 decrease in swap fee income.

Previous wording

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 wording

Noninterest expense. Noninterest expense for the nine months ended September 30, 2024 totaled $21.5 million and decreased $119,000, or 0.6%, compared to $21.6 million for the nine months ended September 30, 2023. The decrease in noninterest expense was primarily due to a $567,000 decrease in salaries and employee benefits, partially offset by a $319,000 increase in data processing expense. The decrease in salaries and employee benefits was primarily related to a $349,000 decrease in salaries and related benefits, a $134,000 decrease in deferred compensation incentive plan expense, and a $105,000 decrease in incentive expense. The increase in data processing expense was primarily due to an increase in our average monthly core processing charges of approximately $27,000 per month coupled with a $37,000 one-time implementation fee.

Previous wording

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.

Current wording

Income tax expense. Income tax expense was $2.0 million for the nine months ended September 30, 2024, a decrease of $1.1 million compared to $3.1 million for the nine months ended September 30, 2023. The effective tax rate for the nine months ended September 30, 2024 was approximately 18.3%, as compared to approximately 19.7% for the nine months ended September 30, 2023. The reduction in the effective tax rate for the nine months ended September 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 and tax exempt income.

Previous 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.

Current wording

We believe there have been no significant changes during the nine months ended September 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 $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.

Current wording

Cash, unpledged securities and deposits in other financial institutions decreased $26.1 million, or 10.0%, to $235.9 million at September 30, 2024, compared to $262.0 million at December 31, 2023. The decrease in cash and cash equivalents was primarily attributed to an increase in loans and leases.

Previous 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.

Current wording

CFBank’s additional borrowing capacity with the FHLB decreased $11.3 million, or 6.1%, to $172.4 million at September 30, 2024, compared to $183.7 million at December 31, 2023. The decrease was primarily related to a decline in our pledged collateral, which includes single-family residential loans.

Previous 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.

Current wording

CFBank’s additional borrowing capacity at the FRB increased $1.9 million, or 1.3%, to $138.1 million at September 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.