CF Bankshares Inc. / Central Federal Corporation — FY 2015 Form 10-K
Business context and reporting period. The filing is for the fiscal year ended December 31, 2015, and was signed March 23, 2016. The registrant named in the filing is Central Federal Corporation, parent of CFBank, a community-focused Ohio savings institution. Its lending is concentrated in commercial, commercial real estate, multifamily and residential real estate, and consumer loans. The filing describes operations in Ohio markets including Summit, Franklin, Columbiana and Cuyahoga counties.
Financial position and performance
Unless otherwise noted, amounts below are in U.S. dollars; the filing’s balance-sheet and portfolio figures are generally stated in millions.
| Metric | FY 2015 / year-end | Comparison or context |
|---|---|---|
| Total assets | $351.3 million | Stockholders’ equity was $38.3 million. |
| Gross loans | $303.7 million | Up $40.3 million, or 15.3%, from $263.4 million at year-end 2014. |
| Loan mix | Commercial, commercial real estate and multifamily: $171.6 million, or 56.5% of gross loans. Single-family residential: $81.985 million; consumer: $27.855 million. | Commercial/CRE/multifamily share fell from 69.2% in 2014 as residential lending grew. |
| Allowance for loan losses | $6.620 million | Up 4.8% year over year; 2.18% of gross loans versus 2.39% in 2014. |
| Credit quality | Nonperforming loans: $1.425 million; nonperforming assets: $3.061 million. | Down from $1.548 million and $3.184 million, respectively, in 2014. Nonperforming loans were 0.47% of loans versus 0.59%. |
| Deposits and funding | Average deposits: $271.9 million; average cost: 0.92%. Brokered deposits at year-end: $22.1 million. | Average deposits were $233.6 million and cost 0.78% in 2014. Certificates of deposit were 52.3% of 2015 average deposits. |
| Liquidity and borrowings | Cash, unpledged securities and deposits at other institutions: $25.6 million. FHLB advances: $14.5 million. Holding-company cash and equivalents: $2.7 million. | CFBank reported additional borrowing capacity of $30.2 million at the Federal Reserve and $1.0 million on an unused commercial-bank line. |
| Securities | Available-for-sale portfolio: $9.368 million fair value. | Amortized cost was $9.377 million at year-end. |
Revenue, profit, cash flow and margins: The provided filing text incorporates the annual report’s financial statements and MD&A by reference but does not include their detailed results. It therefore does not provide clear values here for revenue, net income, earnings per share, operating cash flow, net interest margin or period-end total deposits. Management states the company recorded operating profits in 2014 and 2015 and had achieved seven consecutive quarters of pretax income by year-end 2015.
Material changes versus the prior comparable period
- Loans grew 15.3%, with single-family residential loans’ share increasing while commercial, CRE and multifamily loans’ share declined. Consumer loans rose 27.3% to $27.9 million.
- Single-family mortgage loans originated for sale fell 17.0% to $41.6 million from $50.1 million, partly attributed to lower sales activity.
- Credit indicators continued to improve: nonperforming loans declined, while the allowance increased in dollars but fell as a percentage of total loans. The allowance covered 464.6% of nonperforming loans versus 408.0% in 2014. Net recoveries were $54,000 in 2015.
- Average deposits increased, with a higher average funding cost. Money-market balances and their average rate rose notably; certificate balances remained the largest deposit category.
- The company reversed its deferred-tax-asset valuation allowance in 2015, recording a $3.2 million credit to income tax expense. It reported $25.166 million of net operating loss carryforwards, but estimated $20.520 million would expire unused because of ownership-change limitations.
Outlook, risks and unusual items
- The 2011 cease-and-desist orders had been terminated: the CFBank order in January 2014 and the holding-company order in May 2014. Heightened bank capital requirements and related commitments ended December 23, 2015; holding-company commitments ended January 8, 2016. The company remained subject to ordinary banking supervision and regulation.
- No quantified earnings or revenue guidance is provided in the supplied text. Management says holding-company cash is adequate for foreseeable operating needs, but future bank dividends depend on earnings, capital, law and, where required, regulatory approval.
- Credit risks include exposure to commercial and real-estate lending, borrower and collateral deterioration, concentration in Ohio markets, and potential increases in loan-loss provisions. Management cautions that its allowance estimate is judgmental and regulators may require additional provisions.
- Other stated risks include interest-rate changes, competition for loans and deposits, reliance on certificates of deposit and brokered funding, regulatory and compliance costs, cybersecurity, technology needs, and the possibility of difficulty managing growth.
- The filing reports $5.3 million of performing troubled debt restructurings at year-end, while a separate table reports $4.920 million of TDRs and $7.981 million of combined nonperforming loans and TDRs. The supplied text does not clearly reconcile these presentations.
- Management reports no pending legal proceeding believed likely to have a material adverse effect and states disclosure controls were effective at year-end. No material fourth-quarter changes in internal control were reported.
Important facts for investors to verify
- Confirm the registrant identity: the request metadata says CF Bankshares Inc., while this 10-K identifies Central Federal Corporation.
- Review Exhibit 13.1 for the full income statement, balance sheet and cash-flow statement, including revenue, net income, EPS, cash flows, net interest margin, and actual year-end deposit balances.
- Reconcile TDR amounts and definitions, including the $5.3 million, $4.920 million and $7.981 million disclosures.
- Check year-end regulatory capital ratios and the effects of the ended supervisory commitments; the supplied text does not state actual 2015 ratios.
- Assess loan growth, portfolio concentration, brokered deposits, certificates maturing, and the adequacy of the allowance against future credit deterioration.
- Evaluate the tax benefit and the realizability and limitations of deferred tax assets and net operating loss carryforwards.