CF Bankshares (US:CFBK)2022-03-15 16:00Loan and Lease Losses - The Allowance for Loan and Lease Losses (ALLL) totaled $15.5 million at December 31, 2021, a decrease of $1.5 million, or 8.9%, from $17.0 million at December 31, 2020[57]. - The ratio of ALLL to total loans was 1.26% at December 31, 2021, compared to 1.87% at December 31, 2020[57]. - Nonperforming loans increased by $302,000 in 2021 compared to 2020, primarily due to one consumer loan and one mortgage loan going into nonaccrual status[52]. - The amount of additional interest income that would have been recognized on nonaccrual loans was approximately $39,000 if they had continued to perform according to their contractual terms[53]. - At year-end 2021, there were a total of $2.8 million of Troubled Debt Restructurings (TDRs), including $2.7 million in commercial real estate loans[55]. - The company had no loans restructured in 2021 identified as TDRs[54]. - The net charge-offs for the year were $1.031 million, with a provision for loan and lease losses of negative $1.6 million[58]. - The ALLL to nonperforming loans ratio was 1555.47% at December 31, 2021, compared to 2449.21% at December 31, 2020[61]. Deposits and Liquidity - CFBank's total deposits reached $1,212.5 million in 2021, with certificates of deposit accounting for 48.5% of average deposit balances[78]. - Brokered deposits amounted to $278.1 million as of December 31, 2021, with cash and unpledged securities totaling $169.0 million[75]. - CFBank had $65.0 million in FHLB advances at year-end 2021, with eligibility to borrow up to $178.4 million based on collateral pledged[79]. - The Holding Company's available cash and cash equivalents totaled $819,000 at December 31, 2021, indicating adequate liquidity for operating needs[71]. - Customer balances in the CDARS reciprocal and ICS programs increased by $11.5 million, or 24.4%, from $46.9 million at December 31, 2020[76]. - CFBank's average interest-bearing checking accounts had an average balance of $92.1 million, representing 7.6% of total average deposits[78]. - At December 31, 2021, deposits exceeding the FDIC insured limit of $250,000 totaled $504.9 million, up from $433.2 million in 2020[77]. Capital and Regulatory Compliance - The Basel III Capital Rules require a minimum common equity tier 1 capital ratio of 4.5%, a minimum Tier 1 capital ratio of 6.0%, and a minimum total capital ratio of 8.0%[103]. - The Company is subject to extensive regulation by the Federal Reserve Board, which includes regular examinations and the ability to impose civil money penalties[91]. - The Economic Growth, Regulatory Relief and Consumer Protection Act eased certain restrictions for bank holding companies with consolidated assets of less than $100 billion[97]. - CFBank is subject to regulation and examination by the Office of the Comptroller of the Currency and the FDIC, which insures its deposits[89]. - The Company must maintain a capital conservation buffer of greater than 2.5% to avoid restrictions on capital distributions, including dividends[108]. - CFBank did not utilize the Community Bank Leverage Ratio (CBLR) framework and continued to follow existing capital rules[109]. - As of December 31, 2021, CFBank met the requirements to be deemed "well-capitalized" with a common equity tier I capital ratio of at least 6.5%, total risk-based capital of at least 10.0%, and a leverage ratio of at least 5.0%[110]. Tax and Ownership Changes - The Company had net operating loss carryforwards of $22.3 million as of year-end 2021, which expire between 2024 and 2032[147]. - Due to an ownership change, the Company's ability to utilize carryforwards from before the 2012 stock offering is limited to $163,000 per year[147]. - The Company determined that $20.5 million of net operating loss carryforwards will likely expire unutilized due to limitations imposed by tax laws[147]. - Federal income tax laws provided additional deductions totaling $2.3 million for thrift bad debt reserves established before 1988[148]. - The Company incurred an ownership change as a result of a recapitalization program through the sale of $22.5 million in common stock[146]. Interest Rate Risk Management - CFBank's Economic Value Ratio (EVE) is projected to be 11.8% at current interest rates, with a potential increase to 11.9% if rates decrease by 100 basis points[349]. - The EVE ratio could drop to 8.6% if interest rates rise by 400 basis points, indicating significant sensitivity to interest rate changes[349]. - Changes in market interest rates could adversely affect net interest income, loan volume, asset quality, and overall profitability[350]. - Rising interest rates are generally associated with a lower volume of residential mortgage loan originations, while falling rates typically lead to higher originations[351]. - CFBank's portfolio includes adjustable-rate loans, which may mitigate some risks associated with rising interest rates, but could also lead to increased delinquencies[351]. - The company has a hedging policy allowing interest rate swaps up to 10% of total assets and a value at risk of 10% of core capital[347]. - Cash flows are influenced by market interest rates, with prepayment rates likely declining in rising rate environments[352]. - The company does not engage in trading accounts, commodities, or foreign exchange, limiting its exposure to certain market risks[347]. - CFBank actively monitors and manages interest rate risk to limit adverse impacts on net interest income and capital[347]. - The company’s market risk primarily arises from interest rate risk inherent in its lending, investing, deposit gathering, and borrowing activities[347]. Employment and Corporate Structure - The Company employed 129 full-time and 5 part-time employees as of December 31, 2021[86]. - The Holding Company became a financial holding company effective December 1, 2016, allowing it to engage in a broader range of financial activities[94]. Compliance and Cybersecurity - CFBank is required to establish policies compliant with the Patriot Act and has done so[127]. - The Anti-Money Laundering Act of 2020 codifies a risk-based approach to compliance for financial institutions[128]. - CFBank is responsible for blocking accounts and transactions with specially designated targets under OFAC regulations[129]. - The Company has implemented significant resources and technology to manage and maintain cybersecurity controls[142].