CFBK CF Bankshares Inc

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): May 7, 2024

CF BANKSHARES INC.

(Exact name of registrant as specified in its charter)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

☐ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

☐ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

☐ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

☐ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Securities registered pursuant to Section 12(b) of the Act:

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Item 2.02. Results of Operations and Financial Condition.

On May 7, 2024, CF Bankshares Inc. (the “Company”) issued a press release announcing financial results for the first quarter ended March 31, 2024 (the “Earnings Release”). A copy of the Earnings Release is included as Exhibit 99.1 to this Current Report on Form 8-K and incorporated by reference herein.

Item 9.01. Financial Statements and Exhibits

‎

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

Parent of CFBank, NA







CF BANKSHARES INC., PARENT OF CFBANK NA, REPORTS RESULTS FOR THE 1st QUARTER 2024.



Columbus, Ohio – May 7, 2024 – CF Bankshares Inc. (NASDAQ: CFBK) (the “Company”), the parent of CFBank, National Association (“CFBank”), today announced financial results for the first quarter ended March 31, 2024.



First Quarter 2024 Highlights



Recent Developments



CEO and Board Chair Commentary



Timothy T. O’Dell, President and CEO, commented: “Our Q1 results were impacted by $1.2 million of provision expense, coupled with approximately $750 thousand of other nonrecurring items including higher payroll tax expense, which is typically elevated during the first quarter, and recruiting fees. PPNR was $5.0 million for the quarter reflective of solid core earnings performance. 



Our net interest margin (“NIM”) remained relatively stable during Q1, which we believe is indicative of greater stabilization going forward. Our NIM for Q1 included some one-time impacts including fewer days along with lower loan fees. In the face

of local regional bank competitors promoting ultra-high rates on money market savings accounts, we held the line and successfully maintained our overall cost of funds.



Credit quality remains strong in our core customer loan portfolios. CFBank has sustained minimal loan losses during the previous 12 years, coupled with strong growth performance. We believe our industry, CFBank included, will return to more normalized levels of loan losses going forward.



We generated $37 million of new commercial loan production during Q1. Net growth was impacted by significant loan payoffs during Q1, mostly from successful CRE projects being refinanced at completion by permanent lenders. We anticipate positive growth in interest income as new loan pricing is adjusted upward, plus existing loans refinancing at higher market rates. An objective is to produce interest income increases which will require lower net loan growth rates and consequently also be beneficial to operations through deploying less capital.



Going forward we believe our business initiatives will result in fee income growth. In particular, we see opportunities within our Treasury Management and Mortgage Lending lines of business.



We continue to have success attracting proven banking talent for building and strengthening all of our Regional Banking Teams. Our boutique business model continues to resonate strongly with closely held business owners. Competitively we compete effectively with regional players for banking talent along with quality Business & Personal Banking relationships. 



Challenging but with much opportunity is our 2024 theme.” 



Robert E. Hoeweler, Chairman of the Board, added: “Our seasoned CFBank Team has remained nimble and proactive in the face of unique challenges and the ever-changing landscape the banking industry continues to experience.  We believe this ability has us well positioned to opportunistically capture new business as we move through 2024.”

Overview of Results 

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 $4.2 million (or $0.65 per diluted common share) for the three months ended December 31, 2023 and net income of $4.4 million (or $0.68 per diluted common share) for the three months ended March 31, 2023.  Pre-provision, pre-tax net revenue (“PPNR”) for the three months ended March 31, 2024 was $5.0 million compared to PPNR of $6.0 million for the three months ended December 31, 2023 and PPNR of $5.8 million for the three months ended March 31, 2023.

Net Interest Income and Net Interest Margin

Net interest income totaled $11.3 million for the quarter ended March 31, 2024 and decreased $470,000, or 4.0%, compared to $11.8 million in the prior quarter, and decreased $1.4 million, or 11.4%, compared to $12.7 million in the first quarter of 2023.

The decrease in net interest income compared to the prior quarter was primarily due to a $626,000, or 2.1%, decrease in interest income, partially offset by a $156,000, or 0.9%, decrease in interest expense.  The decrease in interest income was primarily attributed to a 9bps decrease in the average yield on interest-earning assets, coupled with a $14.3 million, or 0.74%, decrease in average interest-earning assets. The decrease in interest expense when compared to the prior quarter was attributed to a $21.2 million, or 1.3%, decrease in average interest-bearing liabilities, partially offset by a 2bps increase in the average cost of funds on interest-bearing liabilities. The net interest margin of 2.36% for the quarter ended March 31, 2024 decreased 8bps compared to the net interest margin of 2.44% for the prior quarter.

The decrease in net interest income compared to the first quarter of 2023 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.

Noninterest Income

Noninterest income for the quarter ended March 31, 2024 totaled $905,000 and decreased $128,000, or 12.4%, compared to $1.0 million for the prior quarter.  The decrease was primarily due to a $270,000 decrease in other noninterest income, partially offset by a $113,000 increase in net gain on sales of commercial loans

Noninterest income for the quarter ended March 31, 2024 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 and a $167,000 increase in the net gain on sales of commercial loans, partially offset by a $299,000 decrease in other noninterest income.

The following table represents the notional amount of loans sold during the three months ended March 31, 2024, December 31, 2023, and March 31, 2023 (in thousands).









Noninterest Expense

Noninterest expense for the quarter ended March 31, 2024 totaled $7.2 million and increased $442,000, or 6.6%, compared to $6.7 million for the prior quarter.  The increase in noninterest expense was primarily due to a $338,000 increase in loan expense and a $179,000 increase in salaries and employee benefits.  The increase in salaries and benefits was primarily due to an increase in payroll taxes which on a percentage basis is higher in the first quarter of the year. 

Noninterest expense for the quarter ended March 31, 2024 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. 

Income Tax Expense

Income tax expense was $695,000 for the quarter ended March 31, 2024 (effective tax rate of 18.5%), compared to $932,000 for the prior quarter (effective tax rate of 18.0%) and $1.1 million for the quarter ended March 31, 2023 (effective tax rate of 19.5%).

Loans and Loans Held For Sale

Net loans and leases totaled $1.7 billion at March 31, 2024 and increased $1.6 million, or 0.1%, from 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.

The following table presents the recorded investment in loans and leases for certain non-owner-occupied loan types (in thousands).





*CFBank possesses a core competency and deep expertise in Construction Lending.  The construction lending business sector has produced many full banking relationships with proven developers with long successful track records.

Asset Quality

Nonaccrual loans were $7.9 million, or 0.46%, of total loans at March 31, 2024, an increase of $2.2 million from $5.7 million at December 31, 2023 and an increase of $7.2 million from $718,000 at March 31, 2023.  The increase in nonaccrual loans when compared to the prior quarter end was primarily due to two commercial loans, totaling $1.6 million, one single-family residential loan, totaling $372,000, and one consumer loan, totaling $251,000, becoming nonaccrual during the first quarter of 2024. 

The increase in nonaccrual loans when compared to March 31, 2023 was primarily driven by nine commercial loans, totaling $6.6 million, becoming nonaccrual during since March 31, 2023.  Loans past due more than 30 days totaled $5.4 million at March 31, 2024 compared to $2.0 million at December 31, 2023 and $973,000 at March 31, 2023. 

The allowance for credit losses on loans and leases totaled $18.2 million at March 31, 2024 compared to $16.9 million at December 31, 2023 and $15.9 million at March 31, 2023.  The ratio of the allowance for credit losses on loans and leases to total loans and leases was 1.06% at March 31, 2024 compared to 0.99% at December 31, 2023 and 0.98% at March 31, 2023.  The increase in the allowance for credit losses during the quarter ended March 31, 2024 was primarily driven by an increase in reserves placed on an individually-evaluated commercial loan. 

There was $1.2 million in provision for credit losses expense for the quarter ended March 31, 2024, compared to $875,000 for the quarter ended December 31, 2023 and $237,000 for the quarter ended March 31, 2023.  Net recoveries for the quarter ended March 31, 2024 totaled $16,000 compared to net charge-offs of $623,000 for the prior quarter and net charge offs of $5,000 for the quarter ended March 31, 2023.

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.

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.

Borrowings

FHLB advances and other debt totaled $111.0 million at March 31, 2023 and increased $1.0 million when compared to $110.0 million at December 31, 2023. The increase when compared to December 31, 2023, was due to a $1.0 million increase on the Company’s line of credit with a third party financial institution. 

Capital

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. 

Use of Non-GAAP Financial Measures

This earnings release contains financial information and performance measures determined by methods other than in accordance with accounting principles generally accepted in the United States of America (“GAAP”).  Non-GAAP financial measures included in this earnings release include Pre-Provision, Pre-Tax Net Revenue (PPNR), PPNR Return on Average Assets (PPNR ROA) and PPNR Return on Average Equity (PPNR ROE).  Management uses these "non-GAAP" financial measures in its analysis of the Company’s performance and believes that these non-GAAP financial measures provide a greater understanding of ongoing operations and enhance comparability of results with prior periods and peers.  These disclosures should not be viewed as substitutes for financial measures determined in accordance with GAAP, nor are they necessarily comparable to non-GAAP performance measures that may be presented by other companies.  A reconciliation of these non-GAAP financial measures to the most directly comparable GAAP financial measures is included at the end of this earnings release under the heading "GAAP TO NON-GAAP RECONCILIATION."



About CF Bankshares Inc. and CFBank

CF Bankshares Inc. (the “Company”) is a holding company that owns 100% of the stock of CFBank, National Association (“CFBank”). CFBank is a nationally chartered boutique Commercial bank operating primarily in Four (4) Major Metro Markets: Columbus, Cleveland, and Cincinnati, Ohio, and Indianapolis, Indiana. The current Leadership Team and Board recapitalized the Company and CFBank in 2012 during the financial crisis, repositioning CFBank as a full-service Commercial Bank model. Since the 2012 recapitalization, CFBank has achieved a CAGR in excess of 20%.

CFBank focuses on serving the financial needs of closely held businesses and entrepreneurs, by providing a comprehensive Commercial, Retail, and Mortgage Lending services presence. In all regional markets, CFBank provides commercial loans and equipment leases, commercial and residential real estate loans and treasury management depository services, residential mortgage lending, and full-service commercial and retail banking services and products.  CFBank is differentiated by our penchant for individualized service coupled with direct customer access to decision-makers, and ease of doing business. CFBank matches the sophistication of much larger banks, without the bureaucracy.

CFBank was named one of Piper Sandler’s “Bank & Thrift Sm-All Stars” for 2023.  This recognition places us among the top 10% of small-cap banks and thrifts in the United States.  In addition, CFBank ranked #7 on American Banker’s listing of Top 200 Publicly Traded Community Banks based on 3-year average return on equity as of December 31, 2022.

Additional information about the Company and CFBank is available at www.CF.Bank



FORWARD LOOKING STATEMENTS

This press release and other materials we have filed or may file with the Securities and Exchange Commission (“SEC”) contain or may contain forward-looking statements within the meaning of the safe harbor provisions of the U.S. Private Securities Reform Act of 1995, which are made in good faith by us.  Forward-looking statements include, but are not limited to: (1) projections of revenues, income or loss, earnings or loss per common share, capital structure and other financial items; (2) plans and objectives of the management or Boards of Directors of CF Bankshares Inc. or CFBank; (3) statements regarding future events, actions or economic performance; and (4) statements of assumptions underlying such statements.  Words such as "estimate," "strategy," "may," "believe," "anticipate," "expect," "predict," "will," "intend," "plan," "targeted," and the negative of these terms, or similar expressions, are intended to identify forward-looking statements, but are not the exclusive means of identifying such statements.  Various risks and uncertainties may cause actual results to differ materially from those indicated by our forward-looking statements, including, without limitation those risks detailed from time to time in our reports filed with the SEC, including those risk factors identified in “Item 1A.  Risk Factors” of Part I of our Annual Report on Form 10-K filed with SEC for the year ended December 31, 2023.

Forward-looking statements are not guarantees of performance or results.  A forward-looking statement may include a statement of the assumptions or bases underlying the forward-looking statement.  We believe that we have chosen these assumptions or bases in good faith and that they are reasonable.  We caution you, however, that assumptions or bases almost always vary from actual results, and the differences between assumptions or bases and actual results can be material.  The forward-looking statements included in this press release speak only as of the date hereof.  We undertake no obligation to publicly release revisions to any forward-looking statements to reflect events or circumstances after the date of such statements, except to the extent required by law. 













































GAAP TO NON-GAAP RECONCILIATION



This press release contains certain non-GAAP disclosures for: (1) PPNR, (2) PPNR return on average assets and (3) PPNR return on average equity.  The Company uses these non-GAAP financial measures to provide meaningful supplemental information regarding the Company’s operations performance and to enhance investors’ overall understanding of such financial performance.  In particular, the use of PPNR is prevalent among banking regulators, investors, and analysts.  Accordingly, we disclose the non-GAAP measures in addition to the related GAAP measures of (1) net income, (2) return on average assets and (3) return on average equity.



The table below presents the reconciliation of these GAAP financial measures to the related non-GAAP financial measures: