CF BANKSHARES INC. ANNOUNCES NET INCOME OF $4.5 MILLION OR $0.68 PER SHARE FOR THE 4TH QUARTER AND FULL YEAR 2021 NET INCOME OF $18.5 MILLION OR $2.77 PER SHARE.

COLUMBUS, Ohio, Feb. 7, 2022 /PRNewswire/ -- CF Bankshares Inc. (NASDAQ: CFBK) (the "Company"), the parent of CFBank, today announced financial results for Q4 and the year ended December 31, 2021.

Q4 and Full Year 2021 Highlights

• Net Income of $4.5 million for Q4 and $18.5 million for the full year, and Earnings Per Share (EPS) of $0.68 for Q4 and $2.77 for the full year.
• Return on Average Assets (ROA) and Return on Average Equity (ROE) were 1.29% and 14.50%, respectively, for Q4. For 2021, ROA was 1.26% and ROE was 15.58%.
• Book value per share increased to $19.28 at December 31, 2021.
• Net Interest Margin (NIM) for Q4 was 3.36% compared to 3.21% in the preceding quarter and 2.48% in Q4 of 2020. Full Year 2021 NIM was 3.04% compared to 2.55% for 2020.
• Net Interest Income (NII) of $11.0 million for the quarter represents a 33% increase as compared to Q4 of 2020.
• Net loans and leases grew by $90.4 million during the quarter.
• Credit quality remains strong with non-performing assets as a percentage of total assets of 0.07% and loans more than 30 days past due at 0.29% of total loans at December 31, 2021.
• ALLL reserves of $15.5 million equals 1.26% of total loans and 1.27% of total non-government guaranteed loans at December 31, 2021.

Recent Developments

• On January 10, 2022, the Company's Board of Directors declared a Cash Dividend of $0.04 per share payable to shareholders on February 1, 2022.
• Subsequent to year end, two classified loans paid off in full, further reducing the criticized and classified loan totals to approximately $4.2 million, down from $6.1 million at December 31, 2021 and $13.5 million at September 30, 2021.
• In January 2022, CFBank added Chad Owens to continue building and expanding its Equipment Leasing Business, targeting a regional six state market of Ohio along with contiguous states. Chad is a proven business developer experienced in Equipment Financing.

CEO and Board Chair Commentary

Timothy T. O'Dell, President and CEO, commented, "Our CFBank Team stepped up again during 2021. We produced solid Earnings and performance results, while investing in expanding our geographic footprint and increasing our market presence, along with deepening our Commercial & Retail Bank teams, and repositioning our Residential Mortgage Lending business. 

During the 4th quarter, we generated Net Earnings of $4.5 million, which equates to 68 cents per share, with a corresponding ROA and ROE of 1.29%, and 14.5%, respectively. 

Full year 2021 Earnings were $18.5 million, resulting in an ROA of 1.26% and ROE of 15.58%.

Loans grew by $90 million during Q4 as a result of adding new customers and expanding existing relationships. 

Sequential, quarter over quarter earnings increased by $1.9 million after adjusting for the $1.5 million impact from the gain on the sale of the Columbiana County branches in Q3. 

Our full year and Q4 results include losses from Mortgage Banking activities of $2.5 million, and $769 thousand respectively. Mortgage lending operating results are reported on a "flow" or salable loan basis only, not including interest income earned resulting from mortgage loans placed in our Mortgage loan portfolio and serviced by us. 

Our 2022 objective is for the repositioned Retail focused mortgage business to begin contributing to earnings on a flow (salable) loan basis as well as from interest earned on Portfolio loans. We have successfully recruited experienced retail mortgage originators with the objective of increasing loan volumes, including salable loans. 

Our Commercial and Retail Banking businesses, which we consider our Core businesses, continue to perform well.  We are having good success adding quality new business and customers. For nearly a decade, and since our recap of the former Central Federal Corp., our CF Leadership Team has demonstrated its ability to consistently deliver growth rates superior to our peers while maintaining strong credit quality.

With our significantly deepened teams with added business development and lending horsepower, plus our expanding footprint with the addition of Indianapolis as our fourth major metro market, CFBank is ready to continue to build upon its previous successes in 2022." 

Robert E. Hoeweler, Chairman of the Board, added: "The CF Team has once again shown its ability to be nimble in the face of dramatic changes in the economy in our diverse major metropolitan markets. We continue to add quality to the Team as we grow. We have been recognized as a Small Cap All-Star performer by Piper Sandler for 3 consecutive years and by Bank Director as #4 in Performance and #2 in Growth Strategy. This national recognition we have received speaks to the success of the Team CF has built. We look forward to the opportunities that will present to the Bank in 2022."

We are just Revving Up!

Overview of Results 

Net income for the three months ended December 31, 2021 totaled $4.5 million (or $0.68 per diluted common share) compared to net income of $4.1 million (or $0.61 per diluted common share) for the three months ended September 30, 2021 and net income of $7.3 million (or $1.11 per diluted common share) for the three months ended December 31, 2020.

Net income for the year ended December 31, 2021 totaled $18.5 million (or $2.77 per diluted common share) compared to net income of $29.6 million (or $4.47 per diluted common share) for the year ended December 31, 2020.  The decrease in net income was primarily the result of decreased margins and volumes on Direct to Consumer (DTC) residential mortgage loans, partially offset by an increase in net interest income and reductions in the provision for loan and lease losses and other noninterest expense.

Net Interest Income and Net Interest Margin

Net interest income totaled $11.0 million for the quarter ended December 31, 2021 and increased $556,000, or 5.3%, compared to $10.4 million in the prior quarter, and increased $2.7 million, or 32.8%, compared to $8.3 million in the fourth quarter of 2020.  The increase in net interest income compared to the prior quarter was primarily due to a $424,000, or 3.3%, increase in interest income, coupled with a $132,000, or 5.8%, decrease in interest expense.  The increase in interest income was primarily attributed to a $8.2 million, or 0.6%, increase in average interest-earning assets outstanding, coupled with a 10bps increase in average yield on interest-earning assets.  The decrease in interest expense was attributed to a 5bps decrease in the average cost of funds on interest-bearing liabilities, partially offset by a $3.8 million, or 0.4%, increase in average interest-bearing liabilities.  The net interest margin of 3.36% for the quarter ended December 31, 2021 increased 15bps compared to the net interest margin of 3.21% for the prior quarter.

The increase in net interest income compared to the fourth quarter of 2020 was primarily due to a $1.2 million, or 9.8%, increase in interest income and a $1.5 million, or 41.6%, decrease in interest expense.  The increase in interest income was primarily attributed to a 43bps increase in average yield on interest-earning assets, partially offset by a $25.3 million, or 1.9%, decrease in average interest-earning assets outstanding, resulting primarily from a decrease in loans held for sale. The decrease in interest expense was attributed to a 47bps decrease in the average cost of funds on interest-bearing liabilities, coupled with a $109.4 million, or 10.0%, decrease in average interest-bearing liabilities.  The net interest margin of 3.36% for the quarter ended December 31, 2021 increased 88bps compared to the net interest margin of 2.48% for the fourth quarter of 2020.

Noninterest Income

Noninterest income for the quarter ended December 31, 2021 totaled $1.4 million and decreased $695,000, or 33.5%, compared to $2.1 million for the prior quarter.  The decrease was primarily due to a $1.9 million decrease in the gain on the sale of deposits in the third quarter, partially offset by an $836,000 increase in net gain on sales of residential mortgage loans, and a $286,000 increase in the net gain on sales of SBA loans.  The net gain on sale of deposits in the third quarter was a result of the sale of CFBank's two Columbiana County branches.  The increase in the net gain on sales of residential mortgages was primarily driven by reduced early payoff fee expense during the fourth quarter.

Noninterest income for the quarter ended December 31, 2021 decreased $11.9 million, or 89.6%, compared to $13.3 million for the quarter ended December 31, 2020.  The decrease was primarily due to a $12.2 million decrease in net gain on sale of residential mortgage loans.  The decrease in the net gain on sale of residential mortgage loans was primarily a result of decreased volumes and margins on DTC residential mortgage loans. 

The following table represents the notional amount of loans sold during the three months ended December 31, 2021, September 30, 2021, and December 31, 2020 (in thousands).

Noninterest Expense

Noninterest expense for the quarter ended December 31, 2021 totaled $6.8 million and decreased $633,000, or 8.5%, compared to $7.4 million for the prior quarter.  The decrease in noninterest expense was primarily due to a $712,000 decrease in salaries and employee benefits, and a $333,000 decrease in FDIC Premiums, partially offset by a $444,000 increase in advertising and marketing expense.  The decrease in salaries and employee benefits was primarily the result of the repositioning of our mortgage lending business from a national DTC model to a more retail and regionally focused loan origination model.

Noninterest expense for the quarter ended December 31, 2021 decreased $4.5 million, or 40.0%, compared to $11.3 million for the quarter ended December 31, 2020.  The decrease in noninterest expense was primarily due to a $1.8 million decrease in salaries and employee benefits, a $1.2 million decrease in other noninterest expense, a $999,000 decrease in advertising and marketing expense, and a $732,000 decrease in professional fee expense. The decreases in salaries and employee benefits expense, advertising and marketing expense, and professional fee expense were primarily the result of the repositioning of our mortgage lending business as previously disclosed. The decrease in other noninterest expense was primarily due to increased amortization of a historic tax credit investment in the fourth quarter of 2020.

Income Tax Expense

Income tax expense was $1.1 million for the quarter ended December 31, 2021 (effective tax rate of 19.6%), compared to $985,000 for the prior quarter (effective tax rate of 19.5%) and $861,000 for the quarter ended December 31, 2020 (effective tax rate of 10.5%). The effective tax rate for the quarter ended December 31, 2020 was favorably impacted by the recognition of approximately $1.0 million of historical tax credits.

Loans and Loans Held For Sale

Net loans and leases totaled $1.2 billion and increased $90.4 million, or 8.0%, from the prior quarter and increased $318.8 million, or 35.6%, from December 31, 2020.  The increase in net loans during the quarter was primarily due to a $57.8 million increase in single-family residential loan balances and a $43.3 million increase in commercial loan balances, partially offset by a $12.0 million decrease in multi-family loan balances.  The increases in the aforementioned loan balances were related to increased sales activity and new relationships.

The increase in total loans from December 31, 2020 was primarily due to a $198.9 million increase in single-family residential loan balances, an $82.5 million increase in commercial real estate loan balances, a $31.4 million increase in multi-family loan balances, a $2.9 million increase in construction loans balances, and a $2.9 million increase in consumer loan balances, partially offset by a $1.4 million decrease in commercial loan balances.  The increases in the aforementioned loan balances were related to increased sales activity and new relationships.  The decrease in commercial loan balances was primarily the result of PPP loan repayments of $104.8 million, partially offset by new and increased relationships.

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

Asset Quality

Nonaccrual loans were $1.0 million, or 0.08% of total loans at December 31, 2021, a decrease of $14,000 from nonaccrual loans of $1.0 million at September 30, 2021 and an increase of $302,000 from nonaccrual loans of $695,000 at December 31, 2020.  Loans past due more than 30 days totaled $3.6 million at December 31, 2021, compared to $2.1 million at September 30, 2021 and $2.2 million at December 31, 2020.

The allowance for loan and lease losses totaled $15.5 million at December 31, 2021 compared to $15.5 million at September 30, 2021, and $17.0 million at December 31, 2020.  The ratio of the ALLL to total loans was 1.26% at December 31, 2021, compared to 1.36% at September 30, 2021, and 1.87% at December 31, 2020.

The provision for loan and lease losses expense for the quarter ended December 31, 2021 was $0 compared to $0 for the prior quarter and $2.0 million for the quarter ended December 31, 2020.  Net recoveries for the quarter ended December 31, 2021 totaled $21,000 compared to net charge-offs of $8,000 for the prior quarter and net charge-offs of $510,000 for the quarter ended December 31, 2020.

Deposits

Deposits totaled $1.2 billion at December 31, 2021, an increase of $89.6 million, or 7.7%, when compared to $1.2 billion at September 30, 2021, and an increase of $133.3 million, or 12.0%, when compared to $1.1 billion at December 31, 2020.   The increase when compared to the prior quarter end is primarily due to a $37.9 million increase in checking account balances, a $28.5 million increase in certificate of deposit account balances, a $23.1 million increase in money market account balance, and a $108,000 increase in savings account balances.  The increase when compared to December 31, 2020 is primarily due to a $137.4 million increase in checking account balances, a $26.1 million increase in certificate of deposit account balances, partially offset by a $14.7 million decrease in money market account balances, and a $15.5 million decrease in savings account balances.  Noninterest-bearing deposit accounts increased $41.7 million to $284.9 million from $243.2 million at September 30, 2021, and increased $86.2 million from $198.7 million at December 31, 2020.

Borrowings

FHLB advances and other debt totaled $89.7 million at December 31, 2021, an increase of $48.5 million when compared to $41.2 million at September 30, 2021. The increase was primarily due to a $45.0 million increase in FHLB advances and a $3.5 million increase in the holding company line of credit facility.

Capital

Stockholders' equity totaled $125.3 million at December 31, 2021, an increase of $2.1 million, or 1.8%, from $123.2 million at September 30, 2021. Stockholders' equity increased $15.1 million, or 13.7% from $110.2 million at December 31, 2020.  The increase in total stockholders' equity during the three and twelve months ended December 31 2021 was primarily attributed to net income, partially offset by share repurchases.

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 of nearly 25%.

CFBank focuses on serving the financial needs of closely held businesses and entrepreneurs, by providing 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 has been recognized as among the Top 200 Publicly Traded Community Banks by American Banker, and in addition, as a Small Cap All-Star performer by Piper Sandler in 2021, 2020, and 2019. CFBank is the only Ohio-based bank and 1 of only 4 banks in the country that have achieved this award for the past 3 consecutive years. In addition, CFBank has been ranked #4 in Performance and #2 in Growth Strategy by Bank Director.

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

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).  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.  Non-GAAP financial measures included in this earnings release include Pre-Provision, Pre-Tax Net Revenue (PPNR), PPNR Return on Average Assets and PPNR Return on Average Equity.  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."

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, impacts from the ongoing COVID-19 pandemic on local, national and global economic conditions in general and on our industry and business in particular, including adverse impacts on our customer's operations, financial condition and ability to repay loans, changes in interest rates or disruptions in the mortgage market, and the effects of various governmental responses to the pandemic, including stimulus packages and programs, and those additional risks 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 Annual Report on Form 10-K filed with SEC for the year ended December 31, 2020, as supplemented by the risk factor set forth in "Item 1A. Risk Factors" of Part II of our Quarterly Report on Form 10-Q filed with the SEC for the quarterly period ended September 30, 2021.

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 earnings (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:

SOURCE CF BANKSHARES INC.