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Central Federal Corporation Announces 2nd Quarter 2019 Financial Results

WORTHINGTON/COLUMBUS, Ohio, Aug. 12, 2019 /PRNewswire/ -- Central Federal Corporation (CFBK) (the "Company") today announced financial results for the second quarter and year to date ended June 30, 2019.

Second Quarter Highlights

  • Net income for the quarter more than doubled (up 102%) when compared to the same quarter of 2018. Net income is up 106% for the first half of 2019 compared to the same six month period of 2018.
  • Return on average assets increased to 1.28% for the quarter.
  • Diluted earnings per share (EPS) increased $0.16, or 41%, compared to the prior quarter.
  • Book Value per common share increased year-to-date by $0.88, or 8.4%, to $11.39.
  • Net gain on sales of loans increased by 364% for the quarter when compared to the same quarter of 2018 due primarily to the investment in expanding the residential mortgage lending business.

Timothy T. O'Dell, President and CEO, commented, "We remain pleased with our continued expansion of and progression of earnings, with earnings more than doubling for the first half of 2019.  We feel our loan and deposit pipelines are strong making us bullish for continued strong growth performance during the second half of 2019. We are gaining traction in Cincinnati, our newest regional market, and our mortgage lending is giving a solid lift to our fee income up 364% when compared to the same quarter of 2018.  We are growing book value, and we believe also franchise value, at an accelerating pace."

Robert E. Hoeweler, Chairman of the Board, added, "Our experienced leadership team continues to execute well. We are benefitting from the resulting increased scale from our organic growth.  Our loan growth for the first half of 2019 is solid, up $48.0 million or 8.7%, following a year in which our loan growth was up 35% for 2018.  Our business approach and philosophy resonates with our targeted market including entrepreneurs and closely held businesses.  Our team has achieved top-tier loan growth among our peers, while maintaining strong credit quality.  We believe we have a strong infrastructure in place to be able to pursue potential strategic acquisitions to augment our strong organic growth."

Overview of Results 

Net income for the three months ended June 30, 2019 totaled $2.3 million and increased $1.2 million, or 101.8%, compared to net income of $1.1 million for the three months ended June 30, 2018.   Net income attributable to common stockholders for the three months ended June 30, 2019, totaled $2.4 million (or $0.55 per diluted common share) and increased $1.3 million compared to net income attributable to common stockholders of $1.1 million (or $0.25 per diluted common share) for the three months ended June 30, 2018. 

Net income for the six months ended June 30, 2019 totaled $4.0 million and increased $2.1 million, or 106.1%, compared to net income of $1.9 million for the six months ended June 30, 2018.   Net income attributable to common stockholders for the six months ended June 30, 2019, totaled $4.1 million (or $0.93 per diluted common share) and increased $2.2 million compared to net income attributable to common stockholders of $1.9 million (or $0.42 per diluted common share) for the six months ended June 30, 2018.

Net interest income.  Net interest income totaled $5.2 million for the quarter ended June 30, 2019 and increased $882,000, or 20.3%, compared to net interest income of $4.3 million for the quarter ended June 30, 2018.  The increase in net interest income was primarily due to a $2.6 million, or 45.0%, increase in interest income, partially offset by a $1.8 million, or 115.5%, increase in interest expense.  The increase in interest income was primarily attributed to a $171.8 million, or 33.9%, increase in average interest-earning assets outstanding, resulting primarily from an increase in net loans, increased loan fees, and a 38bps increase in average yield on interest-earning assets.  The increase in interest expense was attributed to an 85bps increase in the average cost of funds on interest-bearing liabilities and a $154.0 million, or 39.7%, increase in average interest-bearing liabilities.  As a result, the net interest margin of 3.08% for the quarter ended June 30, 2019 decreased 35bps compared to the net interest margin of 3.43% for the quarter ended June 30, 2018.

Net interest income totaled $10.3 million for the six months ended June 30, 2019 and increased $2.0 million, or 25.1%, compared to net interest income of $8.3 million for the six months ended June 30, 2018.  The increase in net interest income was primarily due to a $5.4 million, or 49.9%, increase in interest income, partially offset by a $3.4 million, or 125.5%, increase in interest expense.  The increase in interest income was primarily attributed to a $174.8 million, or 36.2%, increase in average interest-earning assets outstanding, resulting primarily from an increase in net loans, and a 46bps increase in average yield on interest-earning assets.  The increase in interest expense was attributed to an 89bps increase in the average cost of funds on interest-bearing liabilities and a $149.1 million, or 40.1%, increase in average interest-bearing liabilities.  As a result, the net interest margin of 3.14% for the six months ended June 30, 2019 decreased 28bps compared to the net interest margin of 3.42% for the six months ended June 30, 2018.

Provision for loan and lease losses.  There was no provision for loan and lease losses for the quarter ended June 30, 2019 or the quarter ended June 30, 2018, which is due to strong credit quality and net recoveries.  Net recoveries totaled $5,000 for each of the quarters ended June 30, 2019 and June 30, 2018.

There was no provision for loan and lease losses for the six months ended June 30, 2019 or the six months ended June 30, 2018, which is due to strong credit quality and net recoveries.  Net recoveries for the six months ended June 30, 2019 totaled $17,000, compared to net recoveries of $11,000 for the six months ended June 30, 2018.

Noninterest income.  Noninterest income for the quarter ended June 30, 2019 totaled $2.6 million and increased $1.8 million, or 250.4%, compared to $732,000 for the quarter ended June 30, 2018.  The increase was primarily due to a $1.9 million increase in net gain on sale of loans.  The increase in net gain on sale of loans was a result of increased sales volume related to our residential mortgage lending business. 

Noninterest income for the six months ended June 30, 2019 totaled $4.3 million and increased $3.1 million, or 251.1%, compared to $1.2 million for the six months ended June 30, 2018.  The increase was primarily due to a $3.0 million increase in net gain on sale of loans.  The increase in net gain on sale of loans was a result of increased sales volume related to our residential mortgage lending business. 

Noninterest expense.  Noninterest expense for the quarter ended June 30, 2019 totaled $4.9 million and increased $1.2 million, or 34.4%, compared to $3.7 million for the quarter ended June 30, 2018.  The increase in noninterest expense during the three months ended June 30, 2019 was primarily due to a $630,000 increase in salaries and employee benefits expense and a $246,000 increase in advertising and marketing expense. The increase in salaries and employee benefits expense was primarily due to the expansion of our residential mortgage lending business, consistent with our focus on driving noninterest income, coupled with an increase in personnel to support our growth, infrastructure and risk management practices.  The increase in advertising and marketing expense is primarily due to increased expenditures related to leads-based marketing expense to drive revenue growth in our residential mortgage lending business.

Noninterest expense for the six months ended June 30, 2019 totaled $9.6 million and increased $2.5 million, or 35.9%, compared to $7.1 million for the six months ended June 30, 2018.  The increase in noninterest expense during the six months ended June 30, 2019 was primarily due to a $1.2 million increase in salaries and employee benefits expense and a $605,000 increase in advertising and marketing expense. The increase in salaries and employee benefits expense was primarily due to the expansion of our residential mortgage lending business, consistent with our focus on driving noninterest income, coupled with increases in personnel due to our geographic expansion and to support our growth, infrastructure and risk management practices.  The increase in advertising and marketing expense is primarily due to increased expenditures related to leads-based marketing expense to drive revenue growth in our residential mortgage lending business.

Income tax expense.  Income tax expense was $583,000 for the quarter ended June 30, 2019, an increase of $304,000, compared to $279,000 for the quarter ended June 30, 2018.  The effective tax rate for the quarter ended June 30, 2019 was approximately 20.4%, as compared to approximately 19.8% for the quarter ended June 30, 2018.

Income tax expense was $1.0 million for the six months ended June 30, 2019, an increase of $537,000, compared to $465,000 for the six months ended June 30, 2018.  The effective tax rate for the six months ended June 30, 2019 was approximately 20.2%, as compared to approximately 19.5% for the six months ended June 30, 2018.

Balance Sheet Activity

General.  Assets totaled $721.0 million at June 30, 2019 and increased $56.0 million, or 8.4%, from $665.0 million at December 31, 2018.  The increase was primarily due to a $48.0 million increase in net loan balances and a $34.8 million increase in loans held for sale, partially offset by a $33.0 million decrease in cash and cash equivalents.

Cash and cash equivalentsCash and cash equivalents totaled $34.3 million at June 30, 2019, and decreased $33.0 million, or 49.0%, from $67.3 million at December 31, 2018.  The decrease in cash and cash equivalents was primarily attributed to an increase in loans and loans held for sale, partially offset by an increase in deposit balances.

Securities.  Securities available for sale totaled $10.2 million at June 30, 2019, and increased $75,000, or 0.7%, compared to $10.1 million at December 31, 2018.  The increase was primarily due to a security purchase, partially offset by principal maturities.

Loans and Leases.  Net loans and leases totaled $598.7 million at June 30, 2019, and increased $48.0 million, or 8.7%, from $550.7 million at December 31, 2018.  The increase was primarily due to a $19.6 million increase in commercial loan balances, a $17.1 million increase in commercial real estate loan balances, and a $13.1 million increase in single-family loan balances, partially offset by a $2.3 million decrease in consumer loan balances.  The increases in the aforementioned loan balances were primarily due to increased sales activity and new relationships. 

Allowance for loan and lease losses (ALLL).  The allowance for loan and lease losses totaled $7.0 million at June 30, 2019, and increased $17,000, or 0.2%, from $7.0 million at December 31, 2018.  The increase in the ALLL is due to net recoveries during the six months ended June 30, 2019.  The ratio of the ALLL to total loans was 1.16% at June 30, 2019, compared to 1.26% at December 31, 2018. 

Deposits.  Deposits totaled $628.6 million at June 30, 2019, an increase of $48.8 million, or 8.4%, from $579.8 million at December 31, 2018.  The increase is primarily attributed to a $46.8 million increase in money market account balances, a $26.8 million increase in certificate of deposit account balances, and a $2.4 million increase in saving account balances, partially offset by a $27.2 million decrease in checking account balances.  The increases in money market, certificate of deposit, and savings account balances were primarily due to increases in customer relationships and balances from on-going sales and marketing activities.  The decrease in checking account balances was due to the timing of certain large customer transactions.

Stockholders' equity. Stockholders' equity totaled $50.9 million at June 30, 2019, an increase of $5.3 million, or 11.8%, from $45.6 million at December 31, 2018.  The increase in total stockholders' equity was primarily attributed to net income, as well as the exercise of outstanding warrants to purchase common stock of the Company.

About Central Federal Corporation and CFBank

Central Federal Corporation is a financial holding company that owns 100% of the stock of CFBank, National Association (CFBank), which was formed in Ohio in 1892 and converted from a federal savings association to a national bank on December 1, 2016. CFBank has a presence in four major metro Ohio markets – Columbus, Cleveland, Cincinnati and Akron- as well as its two branch locations in Columbiana County, Ohio.  Also, in March 2019, CFBank opened a branch location in Blue Ash, Ohio, which is its second location in the Cincinnati market.  CFBank provides personalized Business Banking products and services including commercial loans and leases, commercial and residential real estate loans and treasury management depository services.  As a full service commercial bank, our business, along with our products and services, is focused on serving the banking and financial needs of closely held businesses.  Our business model emphasizes personalized service, customer access to decision makers, quick execution, and the convenience of online internet banking, mobile banking, remote deposit and corporate treasury management.  In addition, CFBank provides residential lending and full service retail banking services and products.  

Additional information about the Company and CFBank is available at www.CFBankOnline.com

FORWARD LOOKING STATEMENTS

This earnings 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 Central Federal Corporation or CFBank, National Association; (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 detailed from time to time in our reports filed with the SEC, including those identified in "Item 1A.  Risk Factors" of Part I of our Form 10-K filed with SEC for the year ended December 31, 2018.

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 earnings 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.

















Consolidated Statements of Income














($ in thousands, except share data)















(unaudited)

Three months ended




Six months ended




June 30,




June 30,




2019


2018


% change


2019


2018


% change

Total interest income

$

8,505


$

5,867


45%


$

16,446


$

10,971


50%

Total interest expense


3,276



1,520


116%



6,117



2,713


125%

      Net interest income


5,229



4,347


20%



10,329



8,258


25%

















Provision for loan and lease losses


-



-


n/m



-



-


n/m

Net interest income after provision for loan and lease losses


5,229



4,347


20%



10,329



8,258


25%

















Noninterest income
















   Service charges on deposit accounts


138



118


17%



262



236


11%

   Net gain on sales of loans


2,362



509


364%



3,865



817


373%

   Other


65



105


-38%



132



160


-18%

      Noninterest income


2,565



732


250%



4,259



1,213


251%

















Noninterest expense
















   Salaries and employee benefits


2,643



2,013


31%



5,144



3,910


32%

   Occupancy and equipment


228



182


25%



446



349


28%

   Data processing


293



227


29%



609



458


33%

   Franchise and other taxes


106



103


3%



212



205


3%

   Professional fees


356



254


40%



644



504


28%

   Director fees


133



98


36%



264



195


35%

   Postage, printing and supplies


59



52


13%



126



101


25%

   Advertising and marketing


616



370


66%



1,242



637


95%

   Telephone


45



38


18%



90



70


29%

   Loan expenses


45



28


61%



91



43


112%

   Foreclosed assets, net


-



-


n/m



(9)



-


n/m

   Depreciation


78



62


26%



149



121


23%

   FDIC premiums


152



99


54%



304



187


63%

   Regulatory assessment


40



35


14%



82



69


19%

   Other insurance


24



19


26%



47



41


15%

   Other


113



90


26%



184



194


-5%

      Noninterest expense


4,931



3,670


34%



9,625



7,084


36%

















Income before income taxes


2,863



1,409


103%



4,963



2,387


108%

Income tax expense


583



279


109%



1,002



465


115%

Net Income

$

2,280


$

1,130


102%


$

3,961


$

1,922


106%

Accretion of discount and value of warrants exercised
related to Series B preferred stock


157



(12)


n/m



183



(38)


n/m

Net Income attributable to common stockholders

$

2,437


$

1,118


118%


$

4,144


$

1,884


120%

















Share Data
















Basic earnings per common share (1)

$

0.55


$

0.26




$

0.95


$

0.44



Diluted earnings per common share (1)

$

0.55


$

0.25




$

0.93


$

0.42



















Average common shares outstanding - basic (1)


4,412,726



4,248,573





4,384,395



4,245,757



Average common shares outstanding - diluted (1)


4,452,637



4,488,339





4,435,364



4,488,206



















n/m - not meaningful
















(1)  Adjusted to reflect the 1-for-5.5 reverse stock split effected on August 20, 2018







 

 

















Consolidated Statements of Financial Condition






























($ in thousands)

Jun 30,


Mar 31,


Dec 31,


Sept 30,


Jun 30,


(unaudited)

2019


2019


2018


2018


2018


Assets
















Cash and cash equivalents

$

34,323


$

95,993


$

67,304


$

59,368


$

32,739


Interest-bearing deposits in other financial institutions


100



100



100



100



100


Securities available for sale


10,189



9,144



10,114



11,064



11,614


Loans held for sale


52,184



27,920



17,385



24,079



26,424


Loans and leases


605,724



571,580



557,695



500,534



477,538


  Less allowance for loan and lease losses


(7,029)



(7,024)



(7,012)



(7,005)



(6,981)


     Loans and leases, net


598,695



564,556



550,683



493,529



470,557


FHLB and FRB stock


3,816



3,816



3,476



3,476



3,251


Foreclosed assets, net


-



-



38



-



-


Premises and equipment, net


4,032



3,875



3,864



3,723



3,678


Operating lease right of use assets


1,967



2,057



-



-



-


Bank owned life insurance


5,272



5,237



5,203



5,168



5,133


Accrued interest receivable and other assets


10,415



7,781



6,858



5,872



5,433


Total assets

$

720,993


$

720,479


$

665,025


$

606,379


$

558,929


































Liabilities and Stockholders' Equity
















Deposits
















     Noninterest bearing

$

106,716


$

130,563


$

111,445


$

91,083


$

99,579


     Interest bearing


521,870



501,266



468,341



440,979



388,546


          Total deposits


628,586



631,829



579,786



532,062



488,125


FHLB advances and other debt


18,500



18,500



19,500



21,500



19,500


Advances by borrowers for taxes and insurance


340



398



827



449



225


Operating lease liabilities


2,163



2,261



-



-



-


Accrued interest payable and other liabilities


5,698



5,081



4,586



3,626



3,480


Subordinated debentures


14,786



14,776



14,767



5,155



5,155


          Total liabilities


670,073



672,845



619,466



562,792



516,485


















Stockholders' equity


50,920



47,634



45,559



43,587



42,444


Total liabilities and stockholders' equity

$

720,993


$

720,479


$

665,025


$

606,379


$

558,929


 

 
























Consolidated Financial Highlights


















At or for the three months ended



At or for the six months ended

($ in thousands except per share data)

Jun 30,


Mar 31,


Dec 31,


Sept 30,


Jun 30,



Jun 30,

(unaudited)

2019


2019


2018


2018


2018



2019



2018

Earnings





















Net interest income

$

5,229


$

5,100


$

4,948


$

4,683


$

4,347


$

10,329


$

8,258

Provision for loan and lease losses

$

-


$

-


$

-


$

-


$

-


$

-


$

-

Noninterest income

$

2,565


$

1,694


$

860


$

643


$

732


$

4,259


$

1,213

Noninterest expense

$

4,931


$

4,694


$

4,159


$

4,032


$

3,670


$

9,625


$

7,084

Net Income

$

2,280


$

1,681


$

1,296


$

1,055


$

1,130


$

3,961


$

1,922

Accretion of discount and value of warrants
exercised related to Series B preferred stock

$

157


$

26


$

126


$

(26)


$

(12)


$

183


$

(38)

Net income attributable to common
stockholders

$

2,437


$

1,707


$

1,422


$

1,029


$

1,118


$

4,144


$

1,884

Basic earnings per common share (2)

$

0.55


$

0.39


$

0.33


$

0.24


$

0.26


$

0.95


$

0.44

Diluted earnings per common share (2)

$

0.55


$

0.39


$

0.33


$

0.24


$

0.25


$

0.93


$

0.42























Performance Ratios (annualized)





















Return on average assets


1.28%



1.00%



0.84%



0.74%



0.85%



1.15%



0.76%

Return on average equity


18.77%



14.57%



11.74%



9.85%



10.88%



16.73%



9.37%

Average yield on interest-earning assets


5.01%



4.98%



4.99%



4.85%



4.63%



5.00%



4.54%

Average rate paid on interest-bearing
liabilities


2.42%



2.27%



2.02%



1.81%



1.57%



2.35%



1.46%

Average interest rate spread


2.59%



2.71%



2.97%



3.04%



3.06%



2.65%



3.08%

Net interest margin, fully taxable
equivalent


3.08%



3.20%



3.38%



3.43%



3.43%



3.14%



3.42%

Efficiency ratio


63.27%



69.09%



71.61%



75.70%



72.26%



65.98%



74.80%

Noninterest expense to average assets


2.77%



2.80%



2.71%



2.82%



2.76%



2.78%



2.79%























Capital






















Tier 1 capital leverage ratio (1)


9.44%



9.60%



10.13%



9.41%



9.56%



9.44%



9.56%

Total risk-based capital ratio (1)


11.95%



12.45%



12.37%



12.05%



11.97%



11.95%



11.97%

Tier 1 risk-based capital ratio (1)


10.79%



11.20%



11.12%



10.80%



10.71%



10.79%



10.71%

Common equity tier 1 capital to risk
weighted assets (1)


10.79%



11.20%



11.12%



10.80%



10.71%



10.79%



10.71%

Equity to total assets at end of period


7.06%



6.61%



6.85%



7.19%



7.59%



7.06%



7.59%

Book value per common share (2)

$

11.39


$

10.84


$

10.51


$

10.25


$

9.98


$

11.39


$

9.98

Tangible book value per common share (2)

$

11.39


$

10.84


$

10.51


$

10.25


$

9.98


$

11.39


$

9.98

Period-end market value per common
share (2)

$

12.04


$

12.82


$

11.69


$

15.50


$

13.20


$

12.04


$

13.20

Period-end common shares outstanding (2)


4,471,365



4,392,296



4,335,062



4,251,956



4,251,766



4,471,365



4,251,766

Average basic common shares
outstanding (2)


4,412,726



4,355,748



4,298,649



4,251,820



4,248,573



4,384,395



4,245,757

Average diluted common shares
outstanding (2)


4,452,637



4,417,775



4,349,707



4,367,222



4,488,339



4,435,364



4,488,206























Asset Quality





















Nonperforming loans

$

2,418


$

2,078


$

377


$

377


$

388


$

2,418


$

388

Nonperforming loans to total loans


0.40%



0.36%



0.07%



0.08%



0.08%



0.40%



0.08%

Nonperforming assets to total assets


0.34%



0.29%



0.06%



0.06%



0.07%



0.34%



0.07%

Allowance for loan and lease losses to
total loans


1.16%



1.23%



1.26%



1.40%



1.46%



1.16%



1.46%

Allowance for loan and lease losses to
nonperforming loans


290.69%



388.02%



1859.95%



1858.09%



1799.23%



290.69%



1799.23%

Net charge-offs (recoveries)

$

(5)


$

(12)


$

(7)


$

(24)


$

(5)


$

(17)


$

(11)

Annualized net charge-offs (recoveries)
to average loans


0.00%



(0.01%)



(0.01%)



(0.02%)



(0.00%)



(0.01%)



(0.01%)























Average Balances





















Loans


$

590,088


$

557,527


$

525,483


$

486,215


$

448,153


$

573,808


$

431,708

Assets


$

712,132


$

671,038


$

613,903


$

571,415


$

531,353


$

691,585


$

507,495

Stockholders' equity

$

48,576


$

46,142


$

44,146


$

42,830


$

41,536


$

47,359


$

41,007

 

(1)

Regulatory capital ratios of CFBank

(2)

Adjusted to reflect the 1-for-5.5 reverse stock split effected on August 20, 2018

 

Cision

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