Workflow
CF Bankshares (CFBK) - 2020 Q4 - Annual Report
CF Bankshares CF Bankshares (US:CFBK)2021-03-22 16:00

PART I Business CF Bankshares Inc. operates CFBank, focusing on personalized business banking in Ohio and national residential lending, with total assets reaching $1.5 billion in 2020 - The company operates as a financial holding company for CFBank, focusing on personalized business banking in four major Ohio metro markets and a national residential lending platform12 - CFBank agreed to sell two Columbiana County branches, including approximately $100 million in deposits, with the transaction expected to close in Q3 202115 Company Financial Snapshot as of December 31, 2020 | Metric | Value | | :--- | :--- | | Total Assets | $1.5 billion | | Stockholders' Equity | $110.2 million | Lending Activities Lending activities saw significant growth in 2020, with gross loans reaching $912.4 million, driven by commercial and real estate loans, alongside substantial single-family mortgage originations and PPP participation Loan Portfolio Composition (2019 vs. 2020) | Loan Category | 2020 Amount (in thousands) | 2020 Percent of Total | 2019 Amount (in thousands) | 2019 Percent of Total | | :--- | :--- | :--- | :--- | :--- | | Single-family | $147,860 | 16.21% | $120,256 | 17.94% | | Multi-family | $45,375 | 4.97% | $39,229 | 5.85% | | Construction | $80,426 | 8.82% | $67,652 | 10.09% | | Commercial real estate | $277,028 | 30.36% | $247,543 | 36.92% | | Consumer loans | $23,391 | 2.56% | $25,115 | 3.75% | | Commercial loans | $338,286 | 37.08% | $170,646 | 25.45% | | Total loans receivable | $912,366 | 100.0% | $670,441 | 100.0% | - Gross loans receivable increased by $242.0 million, or 36.1%, in 2020, primarily due to a $219.8 million (43.1%) rise in commercial, commercial real estate, and multi-family mortgage loans17 - The company originated $2.2 billion in single-family mortgage loans for sale in 2020, a 203.8% increase from $733.7 million in 2019, driven by business expansion and refinance activity27 - The company originated $105.3 million in Paycheck Protection Program (PPP) loans, which are 100% guaranteed by the SBA, as part of the CARES Act31 Credit Quality Credit quality improved in 2020 with nonperforming loans decreasing to $0.7 million, while the Allowance for Loan and Lease Losses (ALLL) significantly increased to $17.0 million due to portfolio growth and economic uncertainty Nonperforming Assets (2019 vs. 2020) | Metric | 2020 (in thousands) | 2019 (in thousands) | | :--- | :--- | :--- | | Total nonaccrual loans | $695 | $2,439 | | Total nonperforming assets | $695 | $2,439 | | Nonperforming loans to total loans | 0.08% | 0.36% | | Nonperforming assets to total assets | 0.05% | 0.28% | Allowance for Loan and Lease Losses (ALLL) Activity | Metric (in thousands) | 2020 | 2019 | | :--- | :--- | :--- | | ALLL, beginning of period | $7,138 | $7,012 | | Net charge-offs (recoveries) | $1,031 | ($126) | | Provision for loan and lease losses | $10,915 | $0 | | ALLL, end of period | $17,022 | $7,138 | | ALLL to total loans and leases | 1.87% | 1.06% | - The decrease in nonperforming loans in 2020 was primarily due to the payoff of a $1.7 million commercial real estate loan44 - The ratio of ALLL to total loans, excluding SBA-guaranteed loans, was 2.15% at December 31, 2020, compared to 1.07% at December 31, 201947 Investment Activities The company's investment policy prioritizes liquidity and returns, with its securities available for sale totaling $8.7 million and equity securities at $5.0 million as of December 31, 2020 Securities Available For Sale (Fair Value) | Security Type | Dec 31, 2020 (in thousands) | Dec 31, 2019 (in thousands) | | :--- | :--- | :--- | | U.S. Treasury | $8,636 | $8,017 | | Mortgage-backed securities | $65 | $130 | | Collateralized mortgage obligations | $0 | $27 | | Total | $8,701 | $8,174 | - Equity securities, primarily preferred stock in another financial institution, totaled $5.0 million at December 31, 2020, up from $0 in the prior year60 Sources of Funds Primary funding sources include deposits, loan payments, and borrowings, with average total deposits growing to $886.4 million in 2020, supplemented by FHLB advances, brokered deposits, and the PPPLF Average Deposit Balances | Deposit Type | 2020 Avg. Balance (in thousands) | 2019 Avg. Balance (in thousands) | | :--- | :--- | :--- | | Interest-bearing deposits | $739,462 | $525,818 | | Noninterest-bearing deposits | $146,935 | $112,151 | | Total Average Deposits | $886,397 | $637,969 | - The company held $168.7 million in brokered deposits as of December 31, 202068 - The company utilized the Federal Reserve's Paycheck Protection Program Lending Facility (PPPLF) to fund PPP loans, with an outstanding balance of $107.4 million at December 31, 202074 - An additional $75 million warehouse facility was established in Q2 2020 to fund loans held for sale, with $70.0 million outstanding at year-end74 Regulation and Supervision CF Bankshares Inc. and CFBank are extensively regulated by federal agencies, adhering to capital adequacy rules like Basel III, and participated in the CARES Act's PPP - The Holding Company is regulated by the FRB, while CFBank, a national bank, is primarily regulated by the OCC and the FDIC77 - As of December 31, 2020, management believes CFBank met the 'well-capitalized' ratio requirements, including a common equity tier 1 ratio of at least 6.5%, a total risk-based capital ratio of at least 10.0%, and a leverage ratio of at least 5.0%90 - The company participated in the Paycheck Protection Program (PPP) established by the CARES Act in response to the COVID-19 pandemic98 Risk Factors Key risks include the COVID-19 pandemic's economic impact, potential inadequacy of loan loss allowance, concentration in commercial real estate, interest rate sensitivity, operational risks, and challenges from rapid growth and competition - The COVID-19 pandemic poses significant risks, potentially increasing loan delinquencies, credit losses, and operational challenges from remote work117120 - The allowance for loan losses may be inadequate, with the upcoming CECL model potentially requiring a significant increase in the allowance129131 - A significant emphasis on commercial and commercial real estate lending exposes the company to increased risks due to larger balances and sensitivity to adverse economic conditions132 - Operational risks include cybersecurity threats, system disruptions, reliance on third-party vendors, and challenges managing rapid growth, with total assets increasing by 320.4% since January 1, 2016135138143 Unresolved Staff Comments This section is not applicable Properties As of December 31, 2020, the company operated six branch offices and two other offices in Ohio, with a total net book value of owned properties at $2.9 million - The company operates through six branch offices and two other offices across various Ohio counties171 - The net book value of the company's properties totaled $2.9 million at December 31, 2020171 Legal Proceedings The company is involved in routine legal proceedings, none of which are expected to materially adversely affect its financial condition or operations - The company is not a party to any pending legal proceeding that management believes would have a material adverse effect on its financial condition or operations173 Mine Safety Disclosures This section is not applicable PART II Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities This section references the 2020 Annual Report for common stock market and dividend information, and details the purchase of 289 shares for tax payments related to restricted stock vesting in Q4 2020 Issuer Purchases of Equity Securities (Q4 2020) | Period | Total number of common shares purchased | Average price paid per common share | | :--- | :--- | :--- | | Oct 2020 | - | - | | Nov 2020 | - | - | | Dec 2020 | 289 | $18.00 | | Total | 289 | $18.00 | - The shares purchased in December 2020 were surrendered by officers and employees to cover tax payments upon the vesting of restricted stock176 Selected Financial Data This section incorporates by reference the 'Selected Financial and Other Data' from the company's 2020 Annual Report Management's Discussion and Analysis of Financial Condition and Results of Operations This section incorporates by reference the 'Management's Discussion and Analysis of Financial Condition and Results of Operations' from the 2020 Annual Report Quantitative and Qualitative Disclosures About Market Risk This section incorporates by reference the 'Quantitative and Qualitative Disclosures about Market Risks' from the company's 2020 Annual Report Financial Statements and Supplementary Data This section incorporates by reference the company's consolidated financial statements from its 2020 Annual Report, including audit and internal control reports Changes in and Disagreements With Accountants on Accounting and Financial Disclosure No changes in or disagreements with accountants on accounting and financial disclosure were reported Controls and Procedures Management concluded that the company's disclosure controls and procedures were effective as of December 31, 2020, with no material changes to internal controls in Q4 2020 - Management concluded that the company's internal controls over financial reporting were effective as of December 31, 2020184 Other Information No other information was reported PART III Directors, Executive Officers and Corporate Governance This section incorporates by reference information from the 2021 Proxy Statement regarding directors, executive officers, Section 16(a) compliance, and corporate governance, including the Code of Ethics - The company has adopted a Code of Ethics and Business Conduct applicable to all employees, officers, and directors, available on its website186188 Executive Compensation This section incorporates by reference information from the company's 2021 Proxy Statement regarding executive officer and director compensation Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters This section incorporates by reference information from the 2021 Proxy Statement regarding beneficial ownership of common stock and equity compensation plans Certain Relationships and Related Transactions, and Director Independence This section incorporates by reference information from the 2021 Proxy Statement regarding related party transactions and director independence Principal Accounting Fees and Services This section incorporates by reference information from the company's 2021 Proxy Statement regarding fees paid to the principal accountant PART IV Exhibits and Financial Statement Schedules This section provides an index of all exhibits filed with the Form 10-K, including corporate documents, material contracts, and various certifications Form 10-K Summary This section is not applicable