Central Federal Corporation Announces 1st Quarter 2014 Results

WORTHINGTON, Ohio, May 15, 2014 /PRNewswire/ -- Central Federal Corporation (NASDAQ: CFBK) (the "Company") announced a net loss available to common stockholders for the quarter ended March 31, 2014 of $214,000, or $(0.01) per diluted common share, compared to a net loss available to common stockholders of $810,000, or $(0.05) per diluted common share, for the quarter-ended March 31, 2013, due primarily to a $575,000 increase in net interest income, a $306,000 decrease in provision expense and a $112,000 increase in noninterest income, partially offset by a $397,000 increase in noninterest expense.

Timothy T O'Dell, CEO, commented:  "We continue our focus on improving key metrics including improving credit quality and profitability. Our business loan and residential mortgage pipelines are firming up, bringing 2014 into better focus."

Overview of Results

Net interest income.  Net interest income totaled $1.8 million for the quarter ended March 31, 2014 and increased $575,000, or 48.5%, compared to $1.2 million for the quarter ended March 31, 2013. The increase in net interest income was primarily due to a $492,000, or 28.8%, increase in interest income, coupled with an $83,000, or 15.8%, decrease in interest expense.  The increase in interest income was primarily attributed to a $28.6 million, or 14.0%, increase in average interest-earning assets outstanding, a 43bps increase in average yield and improved mix. The decrease in interest expense was attributed to a 31 bps reduction in the average cost of funds on interest bearing liabilities, and improved mix from noninterest bearing deposits.  As a result, the net interest margin of 3.02% for the quarter ended March 31, 2014 improved 70 bps compared to the net interest margin of 2.32% for the quarter ended March 31, 2013.

Robert E. Hoeweler, Chairman of the Board, added "Our team continues to execute our business plan. Key areas are improving credit quality, strengthening operations, and adding quality earning assets which drive growth in net interest income."

Provision for loan losses.  The provision for loan losses totaled $20,000 for the quarter ended March 31, 2014 and decreased $306,000, or 93.9%, compared to $326,000 for the quarter ended March 31, 2013.  The decrease in the provision for loan losses for the quarter ended March 31, 2014 was primarily due to improved credit quality, a decrease in special mention and substandard loans, which more than offset the provision for growth in the portfolio for new loans generated in 2014, and a slight decrease in net recoveries. Net recoveries decreased $105,000 due to the fact that there were net recoveries of $14,000 for the quarter ended March 31, 2014 compared to net recoveries of $119,000 for the quarter ended March 31, 2013.  The decrease in net recoveries is primarily due to commercial real estate and multi-family residential real estate loans.

Noninterest income.  Noninterest income for the quarter ended March 31, 2014 totaled $245,000 and increased $112,000, or 84.2%, compared to $133,000 for the quarter ended March 31, 2013. The increase was primarily due to a $30,000 increase in service charges, a $71,000 increase in other noninterest income and an $11,000 increase in net gain on sale of loans. The $71,000 increase in other noninterest income included $30,000 of revenues resulting from the Company's joint ventures.

Noninterest expense. Noninterest expense increased $397,000 or 22.0%, and totaled $2.2 million for the first quarter of 2014, compared to $1.8 million for the first quarter of 2013. The increase in noninterest expense during the three months ended March 31, 2014 was primarily due to a $211,000 increase in salaries and employee benefits, an $85,000 increase in professional fees and an $83,000 increase in occupancy and equipment. Salaries and benefit expenses increased primarily due to the investment in mortgage personnel as this business line was ramped up in the latter part of 2013.  Professional fees increased due to increased legal and workout fees, increased audit, tax and accounting fees, and increased consulting fees associated with special project work related to the mortgage division.  The increase in occupancy and equipment expenses are related to rent expense, leasehold improvements and associated utilities related to our growth and expansion.

Thad Perry, President, commented, "During the quarter ended March 31, 2014, we opened a loan production office in the greater Cleveland area. This new location is being well received by both business owners and entrepreneurs alike."

Balance Sheet Activity

General. Assets totaled $259.0 million at March 31, 2014 and increased $3.2 million, or 1.3%, from $255.7 million at December 31, 2013.  The increase was primarily due to a $2.4 million increase in cash and cash equivalents, a $1.8 million increase in net loan balances, partially offset by a $598,000 decrease in securities available for sale and a $496,000 decrease in interest bearing deposits in other financial institutions related to repayments and maturities.

Cash and cash equivalents.  Cash and cash equivalents totaled $21.6 million at March 31, 2014 and increased $2.4 million, or 12.6%, from $19.2 million at December 31, 2013. The increase in liquidity was a result of management's efforts to increase deposit activity in order to fund anticipated loan growth in the pipeline.

Securities. Securities available for sale totaled $9.1 million at March 31, 2014 and decreased $598,000, or 6.2%, compared to $9.7 million at December 31, 2013.  The decrease was due to maturities and repayments.

Loans.  Net loans totaled $208.9 million at March 31, 2014 and increased 1.8 million, or 0.9%, from $207.1 million at December 31, 2013. The increase was primarily due to a $5.6 million increase in commercial and a $5.8 million increase in construction loan balances, partially offset by a $3.5 million decrease in multi-family and $7.1 million decrease in single-family residential loan balances, as a result of a decline in Northpointe loan balances.

Allowance for loan losses (ALLL). The ALLL totaled $5.8 million at March 31, 2014 and increased $34,000, or 0.6%, from $5.7 million at December 31, 2013.  The increase in the ALLL was due to a 0.9% increase in overall loan balances and net recoveries during the three months ended March 31, 2014. The ratio of the ALLL to total loans was 2.68% at March 31, 2014, compared to 2.69% at December 31, 2013. In addition, the ratio of the ALLL to nonperforming loans improved to 103.6% at March 31, 2014, compared to 99.9% at December 31, 2013.

Foreclosed assets. Foreclosed assets totaled $1.6 million at March 31, 2014, and remained constant compared to $1.6 million at December 31, 2013.  Foreclosed assets at March 31, 2014 consisted of one multi-family property in Mansfield, Ohio.

Deposits. Deposits totaled $215.7 million at March 31, 2014 and increased $7.4 million, or 3.5%, from $208.3 million at December 31, 2013.  The increase is primarily attributed to a $4.7 million increase in checking account balances, a $4.4 million increase in certificate of deposits and a $815,000 increase in saving account balances, offset by a $2.5 million decrease in money market account balances.

Stockholders' equity.  Stockholders' equity totaled $22.7 million at March 31, 2014, a decrease of $164,000, or 0.7%, from $22.9 million at December 31, 2013.  The decline in total stockholders' equity was primarily attributed to a $214,000 net operating loss during the three months ended March 31, 2014.

About Central Federal Corporation and CFBank

Central Federal Corporation is the holding company for CFBank, a federally chartered savings association formed in Ohio in 1892.  CFBank has four full-service banking offices in Fairlawn, Calcutta, Wellsville and Worthington, Ohio.  Additionally, CFBank entered into a new lease agreement in Woodmere, Ohio in Cuyahoga County for the location of a loan production office effective January 2014.  Additional information about CFBank's banking services and the Company is available at www.CFBankOnline.com

FORWARD LOOKING STATEMENTS

Statements in this quarterly report and in other communications by the Company that are not statements of historical fact are forward-looking statements 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 (the Holding Company) 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.  The following factors could cause such differences:

• a continuation of difficult economic conditions including high unemployment rates or other adverse changes in general economic conditions, economic conditions in the markets we serve, any of which may affect, among other things, our level of nonperforming assets, charge-offs, and provision for loan loss expense;
• changes in interest rates that may reduce net interest margin and impact funding sources;
• the possibility that we will need to make increased provisions for loan losses;
• our ability to maintain sufficient liquidity to continue to fund our operations;
• our ability to reduce our high level of nonperforming assets and the associated operating expenses;
• changes in market rates and prices, including real estate values, which may adversely impact the value of financial products including securities, loans and deposits;
• the possibility of other-than-temporary impairment of securities held in our securities portfolio;
• results of examinations of the Holding Company and CFBank by the regulators, including the possibility that the regulators may, among other things, require CFBank to increase its allowance for loan losses or write-down assets;
• our ability to continue to meet regulatory guidelines, and to meet the requirements of the regulatory orders and commitments to which we are subject;
• uncertainty related to the counterparty to call our interest-rate swaps;
• our ability to generate profits in the future;
• our ability to raise additional capital in the future, if necessary;
• changes in tax laws, rules and regulations;
• increases in deposit insurance rates or premiums;
• further legislative and regulatory changes which may increase compliance costs and burdens;
• unexpected losses of key management;
• various monetary and fiscal policies and regulations, including those determined by the Board of Governors of the Federal Reserve System (the "FRB"), the Federal Deposit Insurance Corporation (the "FDIC") and the Office of the Comptroller of the Currency (the "OCC");
• competition with other local and regional commercial banks, savings banks, credit unions and other non-bank financial institutions;
• our ability to grow our core businesses;
• technological factors which may affect our operations, pricing, products and services;
• unanticipated litigation, claims or assessments; and
• Management's ability to manage these and other risks.

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.  The Company, believes it has 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 report speak only as of the date of the report.  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.

Our filings with the Securities and Exchange Commission (the "SEC"), detail other risks, all of which are difficult to predict and many of which are beyond our control.

SOURCE Central Federal Corporation

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