CF Bankshares Inc. (Central Federal Corporation) — FY 2017 Form 10-K
Business context and reporting period. The filing covers the fiscal year ended December 31, 2017. The company is a bank holding company whose principal operating subsidiary, CFBank, is a community-oriented national bank serving markets in Ohio. Lending, especially commercial, commercial real estate, multifamily, and residential real estate lending, is its primary business.
Financial and operating metrics
| Metric | FY 2017 / year-end | Comparable prior period |
|---|---|---|
| Total assets | $481.4 million | Not stated in the provided text |
| Stockholders’ equity | $40.3 million | Not stated in the provided text |
| Gross loans | $413.4 million | $353.1 million; up 17.1% |
| Net loans | $406.4 million | $346.1 million |
| Securities portfolio | $11.8 million fair value | $14.1 million fair value |
| Allowance for loan and lease losses | $7.0 million; 1.69% of loans | $6.9 million; 1.96% of loans |
| Nonperforming loans | $470,000; 0.11% of loans | $704,000; 0.20% of loans |
| Nonperforming assets | $470,000; 0.10% of assets | $908,000; 0.21% of assets |
| Cash, unpledged securities, and deposits at other institutions | $46.8 million | Not stated in the provided text |
| FHLB advances | $13.5 million | Not stated in the provided text |
| Brokered deposits | $46.9 million | Not stated in the provided text |
The provided filing text does not give clear values for revenue, net income, earnings per share, operating cash flow, net interest margin, or detailed liquidity ratios; the financial statements and management’s discussion are incorporated by reference to the separate 2017 Annual Report.
Material changes versus the prior comparable period
- Commercial, commercial real estate, and multifamily loans, including construction loans, rose to $276.2 million, up 24.8% year over year and representing 66.8% of gross loans.
- Commercial loans increased 43.0% to $102.0 million; construction loans rose 66.0% to $42.9 million.
- Nonperforming loans declined by $234,000, primarily from payments and payoffs. Foreclosed real estate declined to zero from $204,000.
- The allowance increased slightly in dollars, but declined as a percentage of loans as the loan portfolio expanded. The company reported net recoveries of $45,000 and no provision for loan losses in 2017.
- Average deposits increased to $369.1 million from $315.7 million. The average rate paid increased to 1.05% from 0.98%; certificates of deposit represented 45.7% of average deposits.
- The securities portfolio declined to $11.8 million from $14.1 million at fair value.
Outlook, commentary, risks, and unusual items
- No quantitative earnings or financial guidance is provided in the supplied text. Management says strong capital allowed CFBank to pursue selected construction-lending opportunities. The bank generally sells long-term fixed-rate residential mortgages to limit interest-rate exposure.
- Management considered the allowance adequate at year-end, while warning that weaker borrower performance, economic conditions, or real estate values could require additional provisions and adversely affect earnings and capital.
- The company identifies concentrated Ohio markets and growing exposure to commercial, commercial real estate, multifamily, and construction lending as key credit risks. Rising rates could increase payments on adjustable-rate loans, pressure borrowers, raise deposit costs, and affect mortgage originations and loan-sale gains.
- The Tax Cuts and Jobs Act reduced the federal corporate tax rate to 21% beginning in 2018. Revaluing deferred tax assets resulted in an additional $979,000 of tax expense in the fourth quarter of 2017. The filing also reports $23.1 million of net operating loss carryforwards, with $20.5 million expected to expire unused because of ownership-change limits; the related tax effect was $7.0 million.
- CFBank’s prior cease-and-desist order and the holding company’s related regulatory commitments had ended by January 2016. Management states CFBank met the requirements to be considered well-capitalized at December 31, 2017; specific capital ratios are not included in the supplied text.
- The company reported no pending legal proceeding that management believed would materially adversely affect its financial condition or operations. Management concluded financial-reporting controls were effective and reported no material fourth-quarter changes to those controls.
Important facts for investors to verify
- Review the incorporated 2017 Annual Report for audited income, cash-flow, margin, capital-ratio, liquidity, and full balance-sheet data, which are not included clearly in the supplied filing text.
- Assess whether rapid loan growth and the increased concentration in commercial and construction lending are matched by underwriting quality, capital, and allowance coverage.
- Reconcile the filing’s troubled-debt-restructuring figures: the table reports $3.271 million, while the narrative describes approximately $3.4 million at year-end.
- Confirm the accounting and earnings effects of the $979,000 fourth-quarter deferred-tax revaluation and the $7.0 million tax effect of restricted NOL carryforwards.
- Monitor brokered-deposit reliance, certificate maturities, funding costs, and the availability of FHLB and other borrowing capacity.