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CF Bankshares (CFBK) - 2025 Q2 - Quarterly Results
CF Bankshares CF Bankshares (US:CFBK)2025-08-04 13:03

Executive Summary & Highlights This section provides an overview of the company's strong Q2 2025 financial performance, recent dividend declarations, and strategic commentary from leadership Second Quarter 2025 Highlights CF Bankshares Inc. reported strong financial performance for Q2 2025, with significant increases in net income and pre-provision, pre-tax net revenue (PPNR) compared to prior periods. The company also achieved improved efficiency, expanded its net interest margin for the fifth consecutive quarter, and increased book value per share Q2 2025 Key Financial Highlights | Metric | Q2 2025 | Change vs Q2 2024 | Change vs Q1 2025 | | :-------------------------------- | :------ | :------------------ | :------------------ | | Net income ($ millions) | $5.0 | +197% | - | | Diluted EPS ($) | $0.77 | - | - | | Pre-provision, pre-tax net revenue (PPNR) ($ millions) | $7.8 | +42% | +27% | | Return on Average Equity (ROE) (%) | 11.47 | - | - | | Return on Average Assets (ROA) (%) | 0.97 | - | - | | Book value per share ($) | $26.63 | - | - | | Net Interest Margin (NIM) (bps) | - | +44 | +19 | | Cost of funds (bps) | - | -48 | - | | Efficiency Ratio (%) | 49.8 | Improved from 56.4 | Improved from 55.9 | Recent Developments The Company's Board of Directors declared cash dividends for both common and Series D Preferred Stock in July 2025, which were subsequently paid - On July 1, 2025, the Board declared a cash dividend of $0.08 per share on common stock and $8.00 per share on Series D Preferred Stock, paid on July 21, 20253 CEO and Board Chair Commentary CEO Timothy T. O'Dell highlighted the successful execution of key strategic objectives in the first half of 2025, including strengthening regional banking teams, generating strong PPNR, and improving efficiency. Chairman Robert E. Hoeweler expressed satisfaction with the leadership team's strategic initiatives and solid core earnings growth - Key strategic objectives include scaling the Commercial Bank, improving loan and customer mix, strengthening regional market leadership, expanding banking teams, improving the deposit franchise by lowering cost of funds, and reducing/refinancing low-rate loans46 - Q2 2025 PPNR was $7.8 million with an Efficiency Ratio below 50%. Net Earnings of $5.0 million included $1.4 million of Loan Provision expense, and $10 million of Capital was downstreamed to the Bank4 Financial Performance Overview This section details the company's financial performance, including net interest income, noninterest income, noninterest expense, and income tax expense trends Overview of Results The company reported substantial growth in net income and pre-provision, pre-tax net revenue (PPNR) for both the second quarter and the first half of 2025 compared to prior periods Net Income and PPNR Performance | Metric | Q2 2025 | Q1 2025 | Q2 2024 | H1 2025 | H1 2024 | | :-------------------------------- | :------ | :------ | :------ | :------ | :------ | | Net income ($ millions) | $5.0 | $4.4 | $1.7 | $9.5 | $4.8 | | Diluted EPS ($) | $0.77 | $0.68 | $0.26 | $1.45 | $0.74 | | PPNR ($ millions) | $7.8 | $6.2 | $5.5 | $14.0 | $10.5 | Net Interest Income and Net Interest Margin Net interest income increased significantly, driven by a rise in interest income and a decrease in interest expense. The net interest margin expanded for the fifth consecutive quarter, reflecting improved asset yields and lower cost of funds Net Interest Income and Margin | Metric | Q2 2025 | Q1 2025 | Q2 2024 | YoY Change (Q2) | QoQ Change (Q2) | | :------------------ | :------ | :------ | :------ | :-------------- | :-------------- | | Net interest income ($ millions) | $14.0 | $12.9 | $11.4 | +23.2% | +8.5% | | Net interest margin (%) | 2.83 | 2.64 | 2.39 | +44bps | +19bps | - The increase in net interest income QoQ was primarily due to a $1.2 million (4.0%) increase in interest income, partially offset by a $67,000 increase in interest expense. This was driven by a 16bps increase in average yield on interest-earning assets and a 1.3% increase in average interest-earning assets11 - The increase in net interest income YoY was primarily due to a $1.6 million (8.9%) decrease in interest expense, coupled with a $1.0 million (3.6%) increase in interest income. This was attributed to a 41bps decrease in the average cost of funds12 Noninterest Income Noninterest income experienced significant growth both quarter-over-quarter and year-over-year, primarily driven by increased SWAP fee income, higher gains on residential mortgage loan sales, and a decrease in loss on security sales Noninterest Income Performance | Metric | Q2 2025 | Q1 2025 | Q2 2024 | QoQ Change | YoY Change | | :---------------------------------------- | :------ | :------ | :------ | :--------- | :--------- | | Noninterest income ($ millions) | $1.6 | $1.2 | $1.2 | +31.0% | +29.7% | | SWAP fee income ($ thousands) | +$196 | - | - | - | - | | Gain on sales of residential mortgage loans ($ thousands) | +$92 | - | - | - | - | | Decrease in loss on sale of security ($ thousands) | +$103 | - | - | - | - | Notional Amount of Loans Sold (in thousands) | Period | Notional Amount | | :----------------- | :-------------- | | June 30, 2025 | $14,023 | | March 31, 2025 | $27,277 | | June 30, 2024 | $10,837 | Noninterest Expense Noninterest expense decreased quarter-over-quarter due to lower salaries and employee benefits, but increased year-over-year, primarily driven by higher salary expenses from increased full-time equivalents (FTEs) and professional fees related to recruiting Noninterest Expense Performance | Metric | Q2 2025 | Q1 2025 | Q2 2024 | QoQ Change | YoY Change | | :-------------------------------- | :------ | :------ | :------ | :--------- | :--------- | | Noninterest expense ($ millions) | $7.8 | $8.0 | $7.1 | -2.5% | +9.3% | | Salaries and employee benefits ($ thousands) | -$229 (QoQ) | - | +$384 (YoY) | - | - | | Professional fee expense ($ thousands) | - | - | +$309 (YoY) | - | - | - The QoQ decrease in salaries and employee benefits was impacted by a decrease in payroll taxes, which are typically higher in Q117 - The YoY increase in salaries and employee benefits was driven by higher salary expense due to increased FTEs and expense accruals related to staff incentives and deferred compensation. Professional fee expense increased due to higher recruiting expenses18 Income Tax Expense Income tax expense and the effective tax rate increased significantly both quarter-over-quarter and year-over-year Income Tax Expense and Effective Tax Rate | Metric | Q2 2025 | Q1 2025 | Q2 2024 | | :-------------------------- | :------ | :------ | :------ | | Income tax expense ($ millions) | $1.4 | $1.1 | $0.237 | | Effective tax rate (%) | 21.3 | 20.6 | 12.3 | Balance Sheet Analysis This section analyzes the company's balance sheet components, including loans, asset quality, deposits, borrowings, and capital structure Loans and Loans Held For Sale Net loans and leases showed modest growth quarter-over-quarter and from year-end 2024, primarily driven by increases in commercial and industrial (C&I) and commercial real estate loans, partially offset by a decrease in single-family residential loans Net Loans and Leases (in thousands) | Period | Net Loans and Leases | | :----------------- | :------------------- | | June 30, 2025 | $1,800,000 | | March 31, 2025 | $1,795,000 | | December 31, 2024 | $1,767,000 | - QoQ increase in loans was primarily due to a $7.1 million increase in C&I loans and a $5.1 million increase in commercial real estate loans, partially offset by decreases in single-family residential and construction loans20 - Increase from December 31, 2024, was mainly due to a $52.8 million increase in commercial real estate loans, partially offset by a $27.9 million decrease in single-family residential loans, largely from the sale of two loan portfolios21 Recorded Investment in Non-Owner-Occupied Loan Types (in thousands) | Loan Type | June 30, 2025 | March 31, 2025 | | :------------------------------ | :------------ | :------------- | | Construction – 1-4 family | $29,131 | $29,430 | | Construction – Multi-family | $157,743 | $155,983 | | Construction – Non-residential | $18,785 | $23,646 | | Hotel/Motel | $11,853 | $11,926 | | Industrial / Warehouse | $75,408 | $74,068 | | Land/Land Development | $32,942 | $33,195 | | Medical/Healthcare/Senior Housing | $2,045 | $2,184 | | Multi-family | $218,523 | $211,937 | | Office | $40,150 | $41,109 | | Retail | $69,815 | $71,948 | | Other | $7,424 | $7,603 | Asset Quality Asset quality metrics showed an increase in nonaccrual loans and loans 30 days or more past due. The allowance for credit losses on loans and leases also increased, with a higher provision for credit losses primarily due to a specific reserve on a loan participation Asset Quality Indicators (in thousands) | Metric | June 30, 2025 | March 31, 2025 | December 31, 2024 | | :------------------------------------------ | :------------ | :------------- | :---------------- | | Nonaccrual loans ($ thousands) | $16,600 | $14,500 | $14,500 | | Nonaccrual loans as % of total loans (%) | 0.94 | - | - | | Loans 30+ days past due ($ thousands) | $15,200 | $11,400 | $12,500 | | Allowance for credit losses on loans and leases ($ thousands) | $19,100 | $17,800 | $17,500 | | ACL as % of total loans and leases (%) | 1.08 | 1.01 | 1.00 | | Provision for credit losses expense (Q2) ($ thousands) | $1,400 | $582 | $3,600 | | Net charge-offs (Q2) ($ thousands) | $51 | $23 | $2,100 | - The increase in provision expense and the allowance for credit losses was driven by a $1.2 million increase in the specific reserve on a loan participation, which is not part of the Bank's core loan portfolio26 Deposits Total deposits increased quarter-over-quarter and from year-end 2024, with growth observed in both interest-bearing and noninterest-bearing accounts. The proportion of deposits exceeding the FDIC insurance limit slightly decreased Total Deposits (in billions) | Period | Total Deposits | | :----------------- | :------------- | | June 30, 2025 | $1.81 | | March 31, 2025 | $1.78 | | December 31, 2024 | $1.76 | - The QoQ increase was primarily due to a $21.6 million increase in interest-bearing accounts and a $4.5 million increase in noninterest-bearing accounts27 Deposits Exceeding FDIC Insurance Limit | Period | % Exceeding FDIC Limit | | :----------------- | :--------------------- | | June 30, 2025 | 29.1 | | March 31, 2025 | 31.1 | | December 31, 2024 | 29.8 | Borrowings FHLB advances and other debt increased quarter-over-quarter, primarily due to an increase in the outstanding balance on the holding company credit facility FHLB Advances and Other Debt (in millions) | Period | Amount | | :----------------- | :----- | | June 30, 2025 | $100.9 | | March 31, 2025 | $92.7 | | December 31, 2024 | $92.7 | - The increase was primarily due to a $10 million increase in the outstanding balance on the holding company credit facility29 Capital Stockholders' equity increased quarter-over-quarter and from year-end 2024, primarily driven by net income, partially offset by dividend payments Stockholders' Equity (in millions) | Period | Amount | | :----------------- | :----- | | June 30, 2025 | $177.0 | | March 31, 2025 | $172.7 | | December 31, 2024 | $168.4 | - The increase in stockholders' equity during Q2 2025 was primarily attributed to net income, partially offset by $456,000 in dividend payments30 - The increase in stockholders' equity during H1 2025 was primarily attributed to net income, partially offset by $909,000 in dividend payments30 Company Information & Disclosures This section provides important company information, including disclosures on non-GAAP financial measures, company profile, and forward-looking statements Use of Non-GAAP Financial Measures This section clarifies the use of non-GAAP financial measures, specifically Pre-Provision, Pre-Tax Net Revenue (PPNR), which management uses to analyze performance and enhance comparability. A reconciliation to GAAP is provided - The earnings release includes non-GAAP financial measures, such as Pre-Provision, Pre-Tax Net Revenue (PPNR), which management uses for performance analysis and comparability31 - These non-GAAP measures are not substitutes for GAAP measures and may not be comparable to those presented by other companies. A reconciliation is provided31 About CF Bankshares Inc. and CFBank CF Bankshares Inc. is the parent company of CFBank, a nationally chartered boutique Commercial bank operating in five major metro markets across Ohio and Indiana. Since its recapitalization in 2012, CFBank has focused on serving closely held businesses and entrepreneurs with comprehensive commercial, retail, and mortgage lending services, emphasizing individualized service and direct access to decision-makers - CF Bankshares Inc. is the parent of CFBank, National Association, a nationally chartered boutique Commercial bank32 - CFBank operates primarily in Columbus, Cleveland, Cincinnati, Akron Ohio, and Indianapolis, Indiana, and was repositioned as a full-service Commercial Bank in 201232 - CFBank focuses on closely held businesses and entrepreneurs, offering commercial loans, equipment leases, real estate loans, treasury management, residential mortgage lending, and full-service commercial and retail banking, differentiated by individualized service and direct access to decision-makers33 Forward-Looking Statements This section provides a standard disclaimer regarding forward-looking statements, indicating that they are based on good faith assumptions but are subject to various risks and uncertainties that may cause actual results to differ materially. The company disclaims any obligation to publicly release revisions to these statements unless required by law - The press release contains forward-looking statements regarding projections of financial items, management plans, and future events, identified by terms like 'estimate,' 'believe,' 'anticipate,' and 'expect'34 - Actual results may differ materially due to various risks and uncertainties detailed in SEC filings, including those in the Annual Report on Form 10-K34 - Forward-looking statements are not guarantees of performance, and assumptions almost always vary from actual results. The company undertakes no obligation to publicly release revisions unless required by law35 Financial Statements & Tables This section presents detailed financial statements and tables, including consolidated income, balance sheet, average balance sheet, financial highlights, and non-GAAP reconciliations Consolidated Statements of Income This table presents the unaudited consolidated statements of income for the three and six months ended June 30, 2025, and 2024, detailing key revenue, expense, and net income figures Consolidated Statements of Income (in thousands, except share data) | (unaudited) | Three months ended June 30, 2025 | Three months ended June 30, 2024 | % change (QoQ) | Six months ended June 30, 2025 | Six months ended June 30, 2024 | % change (YoY) | | :------------------------------------------ | :------------------------------- | :------------------------------- | :------------- | :------------------------------- | :------------------------------- | :------------- | | Total interest income | $30,359 | $29,315 | 4% | $59,559 | $58,401 | 2% | | Total interest expense | $16,358 | $17,948 | -9% | $32,649 | $35,750 | -9% | | Net interest income | $14,001 | $11,367 | 23% | $26,910 | $22,651 | 19% | | Provision for credit losses | $1,427 | $3,561 | -60% | $2,009 | $4,798 | -58% | | Noninterest income | $1,580 | $1,218 | 30% | $2,786 | $2,123 | 31% | | Noninterest expense | $7,754 | $7,092 | 9% | $15,708 | $14,279 | 10% | | Income before income taxes | $6,400 | $1,932 | 231% | $11,979 | $5,697 | 110% | | Income tax expense | $1,365 | $237 | 476% | $2,514 | $932 | 170% | | Net income | $5,035 | $1,695 | 197% | $9,465 | $4,765 | 99% | | Net Income attributable to common stockholders | $4,880 | $1,641 | 197% | $9,173 | $4,644 | 98% | | Diluted earnings per common share | $0.77 | $0.26 | - | $1.45 | $0.74 | - | Consolidated Statements of Financial Condition This table provides the unaudited consolidated statements of financial condition, detailing assets, liabilities, and stockholders' equity at various quarter-end dates Consolidated Statements of Financial Condition (in thousands) | ($ in thousands) | Jun 30, 2025 | Mar 31, 2025 | Dec 31, 2024 | Sept 30, 2024 | Jun 30, 2024 | | :------------------------------------------ | :----------- | :----------- | :----------- | :------------ | :----------- | | Assets | | | | | | | Cash and cash equivalents | $275,684 | $240,986 | $235,272 | $233,520 | $241,775 | | Loans and leases, net | $1,754,808 | $1,750,139 | $1,722,019 | $1,717,075 | $1,687,695 | | Total assets | $2,133,537 | $2,094,681 | $2,065,523 | $2,066,494 | $2,040,634 | | Liabilities and Stockholders' Equity | | | | | | | Total deposits | $1,809,848 | $1,783,689 | $1,755,795 | $1,745,576 | $1,696,476 | | FHLB advances and other debt | $100,947 | $92,689 | $92,680 | $108,672 | $137,163 | | Total liabilities | $1,956,514 | $1,921,999 | $1,897,086 | $1,902,491 | $1,881,044 | | Stockholders' equity | $177,023 | $172,682 | $168,437 | $164,003 | $159,590 | | Total liabilities and stockholders' equity | $2,133,537 | $2,094,681 | $2,065,523 | $2,066,494 | $2,040,634 | Average Balance Sheet and Yield Analysis This table provides an average balance sheet and yield analysis for interest-earning assets and interest-bearing liabilities for the three months ended June 30, 2025, March 31, 2025, and June 30, 2024, including average outstanding balances, interest earned/paid, and average yield/rate Average Balance Sheet and Yield Analysis (in thousands) | Metric | June 30, 2025 | March 31, 2025 | June 30, 2024 | | :------------------------------------------ | :-------------- | :------------- | :------------ | | Interest-earning assets: | | | | | Total interest-earning assets (Avg. Balance) | $1,977,780 | $1,953,172 | $1,901,269 | | Total interest earned | $30,359 | $29,200 | $29,315 | | Average Yield/Rate | 6.13% | 5.97% | 6.16% | | Interest-bearing liabilities: | | | | | Total interest-bearing liabilities (Avg. Balance) | $1,572,157 | $1,572,735 | $1,570,778 | | Total interest paid | $16,358 | $16,291 | $17,948 | | Average Yield/Rate | 4.16% | 4.14% | 4.57% | | Net interest income/interest rate spread | $14,001 / 1.97% | $12,909 / 1.83% | $11,367 / 1.59% | | Net interest margin | 2.83% | 2.64% | 2.39% | Consolidated Financial Highlights This comprehensive table summarizes key financial performance, capital, and asset quality ratios for various periods, providing a quick overview of the company's financial health and trends Consolidated Financial Highlights (in thousands except per share data) | Metric | Jun 30, 2025 | Mar 31, 2025 | Dec 31, 2024 | Sept 30, 2024 | Jun 30, 2024 | | :------------------------------------------ | :----------- | :----------- | :----------- | :------------ | :----------- | | Earnings and Dividends | | | | | | | Net income | $5,035 | $4,430 | $4,417 | $4,205 | $1,695 | | Diluted earnings per common share | $0.77 | $0.68 | $0.68 | $0.65 | $0.26 | | Dividends declared per share | $0.07 | $0.07 | $0.07 | $0.06 | $0.06 | | Performance Ratios (annualized) | | | | | | | Return on average assets | 0.97% | 0.86% | 0.86% | 0.84% | 0.34% | | Return on average equity | 11.47% | 10.37% | 10.61% | 10.38% | 4.23% | | Net interest margin, fully taxable equivalent | 2.83% | 2.64% | 2.57% | 2.41% | 2.39% | | Efficiency ratio | 49.77% | 55.94% | 53.17% | 55.30% | 56.35% | | Capital | | | | | | | Tier 1 capital leverage ratio | 11.20% | 10.55% | 10.33% | 10.36% | 10.11% | | Total risk-based capital ratio | 14.69% | 13.76% | 13.60% | 13.43% | 13.48% | | Book value per common share | $26.63 | $25.86 | $25.51 | $24.83 | $24.17 | | Asset Quality | | | | | | | Nonperforming loans | $16,632 | $14,563 | $14,719 | $14,597 | $10,909 | | Nonperforming loans to total loans | 0.94% | 0.82% | 0.87% | 0.84% | 0.64% | | Allowance for credit losses on loans and leases to total loans and leases | 1.08% | 1.01% | 1.00% | 0.97% | 1.13% | | Net charge-offs (recoveries) | $51 | $23 | $95 | $3,291 | $2,108 | Non-GAAP Financial Measure Reconciliation This table provides a reconciliation of the non-GAAP financial measure Pre-provision, pre-tax net revenue (PPNR) to net income for the three and six months ended June 30, 2025, March 31, 2025, and June 30, 2024 Pre-provision, Pre-tax Net Revenue (PPNR) Reconciliation (in thousands) | Metric | Jun 30, 2025 | Mar 31, 2025 | Jun 30, 2024 | Six months ended Jun 30, 2025 | Six months ended Jun 30, 2024 | | :-------------------------- | :----------- | :----------- | :----------- | :---------------------------- | :---------------------------- | | Net income | $5,035 | $4,430 | $1,695 | $9,465 | $4,765 | | Add: Provision for credit losses | $1,427 | $582 | $3,561 | $2,009 | $4,798 | | Add: Income tax expense | $1,365 | $1,149 | $237 | $2,514 | $932 | | Pre-provision, pre-tax net revenue | $7,827 | $6,161 | $5,493 | $13,988 | $10,495 |