CF Bankshares (CFBK) - 2022 Q4 - Annual Report

Loan Portfolio and Performance - The allowance for loan and lease losses (ALLL) totaled $16.1 million at December 31, 2022, an increase of $554,000, or 3.6%, from $15.5 million at December 31, 2021[140]. - The ratio of ALLL to total loans was 1.01% at December 31, 2022, compared to 1.26% at December 31, 2021[140]. - Gross loans receivable increased approximately $358.7 million, or 29.2%, to $1.6 billion at December 31, 2022, from $1.2 billion at December 31, 2021[153]. - Commercial, commercial real estate, and multi-family mortgage loans totaled $1.1 billion, representing 66.9% of the gross loan portfolio at December 31, 2022[153]. - Nonperforming loans decreased by $236,000 in 2022 compared to 2021, primarily due to two nonaccrual consumer loans paying off[135]. - The amount of additional interest income that would have been recognized on nonaccrual loans was approximately $47,000 if they had continued to perform according to their contractual terms[136]. - Nonaccrual loans included $80,000 in troubled debt restructurings (TDRs) at December 31, 2022, down from $147,000 at December 31, 2021[137]. - Total loans receivable as of December 31, 2022, amounted to $1,588.3 million, with real estate mortgage loans at $1,024.9 million and commercial loans at $338.7 million[156]. - Commercial loan balances increased by $90.5 million, or 26.9%, to $427.4 million at year-end 2022[169]. - Commercial real estate and multi-family residential mortgage loan balances increased by $42.9 million to $479.2 million at December 31, 2022, representing a 9.8% increase from $436.3 million in 2021[165]. - Portfolio single-family mortgage loans originated by the company totaled $146.1 million, or 9.2% of total loans, with ARM loans totaling $56.5 million, or 12.2% of the single-family mortgage loan portfolio[163]. Strategic Business Changes - The company strategically repositioned its Residential Mortgage Business, exiting the direct-to-consumer mortgage business in favor of regional lending[152]. - The company exited the direct-to-consumer mortgage business in favor of lending in regional markets due to a shift in the mortgage industry[162]. Interest Rate Risk and Market Conditions - The company has utilized interest-rate swaps to protect fixed-rate loans from changes in value due to interest rate fluctuations[157]. - The company's market risk primarily arises from interest rate risk, with a hedging policy allowing activities up to a notional amount of 10% of total assets and a value at risk of 10% of core capital[502]. - At December 31, 2022, the economic value ratio (EVE) under various interest rate shocks shows a range from 8.1% with a +400 bps rise to 12.4% with a -400 bps decline[504]. - Changes in market interest rates could materially affect net interest income, loan volume, asset quality, and overall profitability[505]. - Rising interest rates are generally associated with lower residential mortgage loan origination volumes, while falling rates typically lead to higher origination volumes[506]. - The company originates various types of loans, many of which have adjustable interest rates, which can mitigate the adverse effects of rising rates[506]. - In a rising interest rate environment, increased payments on adjustable-rate loans could lead to higher delinquencies and defaults[506]. - Cash flows are influenced by market interest rates, with prepayment rates likely declining in rising rate environments and increasing in falling rate environments[507]. Credit Quality Monitoring - The company continues to monitor credit quality and may need to increase the ALLL based on economic conditions and credit quality factors[142]. Loan Origination and Offerings - Single-family mortgage loans originated for sale in 2022 totaled $97.3 million, a decrease of $2.3 billion, or 95.9%, compared to $2.4 billion in 2021[162]. - The company offers both fixed-rate and adjustable-rate loans, with fixed-rate loans typically limited to terms of three to five years[169]. - The company participates in various loan programs offered by the Small Business Administration, enabling access to funding for small business owners[157]. Stock Options and Equity Compensation - As of December 31, 2022, the company has 11,089 common shares subject to outstanding stock option awards, with a weighted-average exercise price of $7.63 and 115,818 shares remaining available for future issuance under equity compensation plans[174].