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Central Federal Corporation Announces 1st Quarter 2018 Financial Results

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Central Federal Corporation Announces 1st Quarter 2018 Financial Results

PR Newswire

WORTHINGTON, Ohio, May 8, 2018 /PRNewswire/ -- Central Federal Corporation (NASDAQ:CFBK) (the "Company") today announced financial results for the first quarter and the year ended March 31, 2018.

Highlights

  • Income before income tax expense was $978,000 for the three months ended March 31, 2018 and increased $366,000, or 59.8%, compared to $612,000 for the three months ended March 31, 2017
  • Net income for the three months ended March 31, 2018 totaled $792,000 and increased $388,000, or 96.0%, compared to net income of $404,000 for the three months ended March 31, 2017.
  • Net interest income totaled $3.9 million for the quarter ended March 31, 2018 and increased $845,000, or 27.6%, compared to $3.1 million for the quarter ended March 31, 2017.
  • Consistent with our focus on growing noninterest income, we invested in hiring an experienced mortgage team during the first quarter to expand our mortgage business.

Overview of Results

The Company's income before income tax expense for the quarter ended March 31, 2018 totaled $978,000 and increased $366,000, or 59.8%, compared to $612,000 for the quarter ended March 31, 2017. The increase in income before income tax expense was due to a $845,000 increase in net interest income, a $315,000 increase in noninterest income, partially offset by a $794,000 increase in noninterest expense.

On December 22, 2017, the "Tax Cuts and Jobs Act" was enacted into law reducing the federal corporate tax rate to 21%, effective January 1, 2018, which impacted the comparability of net income (after tax) between periods.  Net income for the three months ended March 31, 2018 totaled $792,000 and increased $388,000, or 96.0%, compared to net income of $404,000 for the three months ended March 31, 2017.  The increase in net income was due to a $845,000 increase in net interest income, a $315,000 increase in noninterest income and a $22,000 decrease in tax expense, partially offset by a $794,000 increase in noninterest expense.

Net income attributable to common stockholders for the three months ended March 31, 2018, totaled $766,000, or $0.03 per diluted common share, and increased $576,000, or 303%, compared to net income attributable to common stockholders of $190,000, or $0.01 per diluted common share, for the three months ended March 31, 2017.  For the three months ended March 31, 2018, the accretion of discount from the Company's Series B Preferred Stock reduced net income by $26,000.  For the three months ended March 31, 2017, preferred dividends on the Company's Series B Preferred Stock and accretion of discount reduced net income attributable to common stockholders by $214,000. The decrease in the preferred dividends on the Series B preferred stock and accretion of discount is due to the conversion of the Company's Preferred Stock into shares of Common Stock of the Company, effective October 6, 2017, resulting in the elimination of the preferred dividend payments beginning with the fourth quarter of 2017 of approximately $187,500 quarterly.

Timothy T. O'Dell, President and CEO, commented, "We remain pleased with our earnings growth and trajectory as income before income tax expense for the quarter grew by approximately 60% compared to first quarter of 2017.  In addition, noninterest income, an important area of focus for us, is reflecting significant growth (increasing by 189%) compared to the first quarter of the prior year.  We hired a talented and experienced mortgage team during the first quarter to expand our mortgage lending business.  This investment in and expansion of our mortgage lending business is a primary driver of the increase in noninterest income along with improved levels of deposit transactional related fees, mostly with business customers.  More recently, we also received designation as an SBA preferred lender, which we hope to translate into increased volumes of saleable SBA guaranteed loans.  Our CF Leadership Team remains focused on continuously improving sales and business execution, which we believe is an important key to increasing shareholder and franchise value."

Net interest income.  Net interest income totaled $3.9 million for the quarter ended March 31, 2018 and increased $845,000, or 27.6%, compared to $3.1 million for the quarter ended March 31, 2017.  The increase in net interest income was primarily due to a $1.2 million, or 32.3%, increase in interest income, partially offset by a $402,000, or 50.8%, increase in interest expense.  The increase in interest income was primarily attributed to a $68.3 million, or 17.5%, increase in average interest-earning assets outstanding and a 50bp increase in average yield on interest-earning assets.  The increase in interest expense was primarily attributed to a $50.4 million, or 16.5%, increase in average interest-bearing liabilities and a 31bps increase in the average cost of funds on interest-bearing liabilities.  As a result, net interest margin of 3.41% for the quarter ended March 31, 2018 increased 27bps compared to the net interest margin of 3.14% for the quarter ended March 31, 2017.

Robert E. Hoeweler, Chairman of the Board, added "We are extremely pleased by our consistent and solid earnings growth and overall Bank performance.  We remain well positioned to take advantage of both organic and geographic growth and expansion opportunities."

Provision for loan and lease losses.  The provision for loan and lease losses totaled $0 and $0 for the quarters ended March 31, 2018 and March 31, 2017, respectively, which is due to continued improvement in credit quality, favorable trends in certain qualitative factors and net recoveries.  Net recoveries for the quarter ended March 31, 2018 totaled $6,000, compared to net recoveries of $17,000 for the quarter ended March 31, 2017. 

Noninterest income.  Noninterest income for the quarter ended March 31, 2018 totaled $481,000 and increased $315,000, or 189.8%, compared to $166,000 for the quarter ended March 31, 2017.  The increase was primarily due to a $285,000 increase in net gain on sale of loans and a $29,000 increase in service charges on deposit accounts.  The increase in net gain on sale of loans was a result of increased sales volume due to the expansion of the mortgage business.  The increase in service charges on deposit accounts was related to increased account relationships and pricing.

Noninterest expense.  Noninterest expense for the quarter ended March 31, 2018 totaled $3.4 million and increased $794,000, or 30.3%, compared to $2.6 million for the quarter ended March 31, 2017.  The increase in noninterest expense during the three months ended March 31, 2018 was primarily due to a $483,000 increase in salaries and employee benefits expense and a $250,000 increase in advertising and marketing expense.  The increase in salaries and employee benefits was primarily due to the hiring of mortgage personnel during the first quarter in connection with the expansion of our mortgage business, consistent with our focus on driving noninterest income. The increase in salaries and employee benefits also resulted from an increase in personnel associated with the opening of our Glendale branch, the addition of experienced treasury management personnel, and an increase in credit and finance personnel to support our growth, infrastructure and risk management practices.  The increase in advertising and marketing expense is primarily due to increased expenditures in this area related to the expansion of our mortgage business, coupled with increased advertising focusing on increasing core deposits.  

Income tax expense.  Income tax expense was $186,000 for the quarter ended March 31, 2018, a decrease of $22,000 compared to $208,000 for the quarter ended March 31, 2017.  The decrease is due to the "Tax Cuts and Jobs Act" that was enacted into law reducing the federal corporate tax rate to 21%, effective January 1, 2018.  As a result, the effective tax rate for the quarter ended March 31, 2018 decreased to approximately 19.1%, as compared to approximately 34.0% for the quarter ended March 31, 2017. 

Balance Sheet Activity

General.  Assets totaled $529.9 million at March 31, 2018 and increased $48.5 million, or 10.1%, from $481.4 million at December 31, 2017.  The increase was primarily due to a $24.9 million increase in cash and cash equivalents, a $16.1 million increase in net loan balances and a $7.7 million increase in loans held for sale.

Cash and cash equivalentsCash and cash equivalents totaled $70.4 million at March 31, 2018, and increased $24.9 million, or 54.7%, from $45.5 million at December 31, 2017.  The increase in cash and cash equivalents was primarily attributed to management's use of short-term CDARS deposits in anticipation of quarter end fluctuations associated with its mortgage business, along with ongoing efforts to grow core deposits to fund loan growth.

Securities.  Securities available for sale totaled $11.2 million at March 31, 2018, and decreased $588,000, or 5.0%, compared to $11.8 million at December 31, 2017.  The decrease was primarily due to scheduled maturities and repayments.

Loans and Leases.  Net loans and leases totaled $422.5 million at March 31, 2018, and increased $16.1 million, or 4.0%, from $406.4 million at December 31, 2017.  The increase was primarily due to a $6.4 million increase in total consumer loan balances, a $5.7 million increase in commercial real estate loan balances, a $4.4 million increase in multi-family residential loan balances, a $3.8 million increase in single-family residential loan balances, partially offset by a $3.0 million decrease in construction loan balances and a $1.2 million decrease in commercial loan balances.  The increases in the aforementioned loan balances were primarily due to increased sales activity and new relationships, coupled with the purchase of a pool of primarily residential mortgage loans.

Allowance for loan and lease losses (ALLL).  The allowance for loan and lease losses totaled $7.0 million at March 31, 2018, and increased $6,000, or 0.1%, from $7.0 million at December 31, 2017.  The increase in the ALLL is due to net recoveries during the three months ended March 31, 2018.  The ratio of the ALLL to total loans was 1.62% at March 31, 2018, compared to 1.69% at December 31, 2017.  In addition, the ratio of the ALLL to nonperforming loans improved to 1744.0% at March 31, 2018, compared to 1483.0% at December 31, 2017.  

Deposits.  Deposits totaled $461.0 million at March 31, 2018, an increase of $42.0 million, or 10.0%, from $419.0 million at December 31, 2017.  The increase is primarily attributed to a $37.5 million increase in certificate of deposit account balances, a $7.0 million increase in checking account balances, and a $160,000 increase in savings account balances, partially offset by a $2.7 million decrease in money market account balances.  The increase was primarily attributed to management's use of short-term CDARS deposits in anticipation of quarter end fluctuations associated with its mortgage business, along with ongoing efforts to grow core deposits to fund loan growth.   

Stockholders' equity. Stockholders' equity totaled $41.1 million at March 31, 2018, an increase of $841,000, or 2.1%, from $40.3 million at December 31, 2017.  The increase in total stockholders' equity was primarily attributed to net income, which was partially offset by the accretion of discount from the Company's Series B Preferred Stock.

About Central Federal Corporation and CFBank

Central Federal Corporation is a financial holding company that owns 100% of the stock of CFBank, National Association (CFBank), which was formed in Ohio in 1892 and converted from a federal savings association to a national bank on December 1, 2016. CFBank has a presence in four major metro Ohio markets – Columbus, Cleveland, Cincinnati and Akron markets – as well as its two locations in Columbiana County, Ohio.  Additionally, In February 2018, CFBank entered into a new lease agreement in Columbus, Ohio in Franklin County for the opening of a loan production office.  CFBank provides personalized Business Banking products and services including commercial loans and leases, commercial and residential real estate loans and treasury management depository services.  As a full service commercial bank, our business, along with our products and services, is focused on serving the banking and financial needs of closely held businesses.  Our business model emphasizes personalized service, customer access to decision makers, quick execution, and the convenience of online internet banking, mobile banking, remote deposit and corporate treasury management.  In addition, CFBank provides residential lending and full service retail banking services and products.  

Additional information about the Company and CFBank is available at www.CFBankOnline.com

FORWARD LOOKING STATEMENTS

This earnings release or 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 Central Federal Corporation (the "Holding Company") or CFBank, National Association ("CFBank" and together with the Holding Company, the "Company"); (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.  The following, among other factors, including those identified in Item 1A of our Form 10-K filed with SEC for the year ended December 31, 2017, could cause such differences:

  • changes in economic and political conditions could adversely affect our earnings through declines in deposits, loan demand, the ability of our customers to repay loans and the value of the collateral securing our loans;
  • changes in interest rates that may reduce net interest margin and impact funding sources;
  • the possibility that our allowance for loan and lease losses may not be adequate to cover and/or we will need to make increased provisions for loan and lease losses;
  • our ability to maintain sufficient liquidity to continue to fund our operations;
  • our ability to effectively manage our growth;
  • changes in market rates and prices, including real estate values, which may adversely impact the value of financial products including securities, loans and deposits;
  • the possibility of other-than-temporary impairment of securities held in our securities portfolio;
  • results of examinations of the Holding Company and CFBank by their regulators, including the possibility that the regulators may, among other things, require CFBank to increase its allowance for loan and lease losses or write-down assets;
  • our ability to continue to meet regulatory requirements and guidelines to which we are subject;
  • our ability to maintain consistent earnings or profitability in the future;
  • our ability to raise additional capital if and when necessary in the future;
  • changes in tax laws, rules and regulations;
  • increases in deposit insurance rates or premiums;
  • legislative and regulatory changes which may increase compliance costs and burdens;
  • unexpected losses of key management;
  • various monetary and fiscal policies and regulations, including those determined by the Board of Governors of the Federal Reserve System, the Federal Deposit Insurance Corporation and the Office of the Comptroller of the Currency;
  • further increases in competition from other local and regional commercial banks, savings banks, credit unions and other non-bank financial institutions;
  • any efforts to minimize cyber-security risks may increase our costs, and a failure, interruption or breach of security of our systems could disrupt our business and adversely affect our reputation and customer relationships;
  • technological factors which may affect our operations, pricing, products and services;
  • unanticipated litigation, claims or assessments; and
  • Management's ability to manage these and other risks.

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 earnings 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.

 










Consolidated Statements of Income









($ in thousands, except share data)









(unaudited)

Three months ended





March 31,





2018


2017


% change











Total interest income

$

5,104


$

3,857


32%


Total interest expense


1,193



791


51%


      Net interest income


3,911



3,066


28%











Provision for loan and lease losses


-



-


n/m


Net interest income after provision for loan and lease losses


3,911



3,066


28%











Noninterest income









   Service charges on deposit accounts


118



89


33%


   Net gain on sales of loans


308



23


1239%


   Other


55



54


2%


      Noninterest income


481



166


190%











Noninterest expense









   Salaries and employee benefits


1,897



1,414


34%


   Occupancy and equipment


167



152


10%


   Data processing


231



277


-17%


   Franchise and other taxes


102



91


12%


   Professional fees


250



248


1%


   Director fees


97



69


41%


   Postage, printing and supplies


49



43


14%


   Advertising and marketing


267



17


1471%


   Telephone


32



32


0%


   Loan expenses


15



38


-61%


   Foreclosed assets, net


-



7


-100%


   Depreciation


59



51


16%


   FDIC premiums


88



71


24%


   Regulatory assessment


34



32


6%


   Other insurance


22



26


-15%


   Other


104



52


100%


      Noninterest expense


3,414



2,620


30%











Income before income taxes


978



612


60%


Income tax expense


186



208


-11%


Net Income (loss)

$

792


$

404


96%


Dividends on Series B preferred stock and accretion of discount


(26)



(214)


-88%


Earnings (loss) attributable to common stockholders

$

766


$

190


303%











Share Data









Basic earnings (loss) per common share

$

0.03


$

0.01




Diluted earnings (loss) per common share

$

0.03


$

0.01













Average common shares outstanding - basic


23,336,008



16,292,166




Average common shares outstanding - diluted


24,692,080



17,634,698













n/m - not meaningful









 

 

















Consolidated Statements of Financial Condition

































At or for the three months ended


($ in thousands)

Mar 31,


Dec 31,


Sept 30,


Jun 30,


Mar 31,


(unaudited)

2018


2017


2017


2017


2017


Assets
















Cash and cash equivalents

$

70,396


$

45,498


$

27,956


$

34,199


$

24,307


Interest-bearing deposits in other financial institutions


100



100



100



100



100


Securities available for sale


11,185



11,773



11,878



12,925



14,007


Loans held for sale


8,863



1,124



3,509



649



830


Loans and leases


429,471



413,376



394,713



372,807



367,916


  Less allowance for loan and lease losses


(6,976)



(6,970)



(6,964)



(6,958)



(6,942)


     Loans and leases, net


422,495



406,406



387,749



365,849



360,974


FHLB and FRB stock


3,251



3,227



3,227



3,186



3,186


Foreclosed assets, net


-



-



-



-



204


Premises and equipment, net


3,584



3,533



3,572



3,394



3,409


Bank owned life insurance


5,098



5,065



5,030



4,997



4,963


Accrued interest receivable and other assets


4,955



4,699



5,880



6,310



4,481


Total assets

$

529,927


$

481,425


$

448,901


$

431,609


$

416,461


































Liabilities and Stockholders' Equity
















Deposits
















     Noninterest bearing

$

91,359


$

89,588


$

76,445


$

85,129


$

72,001


     Interest bearing


369,686



329,440



304,508



284,182



276,244


          Total deposits


461,045



419,028



380,953



369,311



348,245


FHLB advances and other debt


19,500



13,500



19,000



13,500



21,500


Advances by borrowers for taxes and insurance


236



489



182



104



132


Accrued interest payable and other liabilities


2,889



2,992



3,061



3,543



1,860


Subordinated debentures


5,155



5,155



5,155



5,155



5,155


          Total liabilities


488,825



441,164



408,351



391,613



376,892


















Stockholders' equity


41,102



40,261



40,550



39,996



39,569


Total liabilities and stockholders' equity

$

529,927


$

481,425


$

448,901


$

431,609


$

416,461


 

 

















Consolidated Financial Highlights















At or for the three months ended

($ in thousands except per share data)


Mar 31,


Dec 31,


Sept 30,


Jun 30,


Mar 31,

(unaudited)


2018


2017


2017


2017


2017

















Earnings
















Net interest income


$

3,911


$

3,701


$

3,504


$

3,402


$

3,066

Provision for loan and lease losses


$

-


$

-


$

-


$

-


$

-

Noninterest income


$

481


$

205


$

195


$

177


$

166

Noninterest expense


$

3,414


$

2,900


$

2,682


$

2,753


$

2,620

Net Income (loss)


$

792


$

(299)


$

685


$

556


$

404

Dividends on Series B preferred stock and accretion of discount


$

(26)


$

(23)


$

(214)


$

(215)


$

(214)

Earnings (loss) available to common stockholders


$

766


$

(322)


$

471


$

341


$

190

Basic earnings (loss) per common share


$

0.03


$

(0.01)


$

0.03


$

0.02


$

0.01

Diluted earnings (loss) per common share


$

0.03


$

(0.01)


$

0.03


$

0.02


$

0.01

















Performance Ratios (annualized)
















Return on average assets



0.66%



(0.26%)



0.64%



0.54%



0.39%

Return on average equity



7.83%



(2.94%)



6.81%



5.60%



4.10%

Average yield on interest-earning assets



4.45%



4.38%



4.36%



4.30%



3.95%

Average rate paid on interest-bearing liabilities



1.34%



1.28%



1.16%



1.06%



1.03%

Average interest rate spread



3.11%



3.10%



3.20%



3.24%



2.91%

Net interest margin, fully taxable equivalent



3.41%



3.40%



3.47%



3.50%



3.14%

Efficiency ratio



77.73%



74.24%



72.51%



76.92%



81.06%

Noninterest expense to average assets



2.82%



2.51%



2.49%



2.66%



2.51%

















Capital
















Tier 1 capital leverage ratio (1)



10.21%



9.37%



9.99%



10.16%



9.88%

Total risk-based capital ratio (1)



13.05%



11.91%



12.22%



12.60%



12.47%

Tier 1 risk-based capital ratio (1)



11.80%



10.65%



10.97%



11.35%



11.22%

Common equity tier 1 capital to risk weighted assets (1)



11.80%



10.65%



10.97%



11.35%



11.22%

Equity to total assets at end of period



7.76%



8.36%



9.03%



9.27%



9.50%

Book value per common share


$

1.76


$

1.72


$

1.75


$

1.72


$

1.69

Tangible book value per common share


$

1.76


$

1.72


$

1.75


$

1.72


$

1.69

Period-end market value per common share


$

2.32


$

2.75


$

2.42


$

2.08


$

2.14

Period-end common shares outstanding



23,315,547



23,349,613



16,280,577



16,288,577



16,288,577

Average basic common shares outstanding



23,336,008



22,796,359



16,282,077



16,288,577



16,292,166

Average diluted common shares outstanding



24,692,080



22,796,359



24,520,626



17,621,111



17,634,698

















Asset Quality
















Nonperforming loans


$

400


$

470


$

1,038


$

1,098


$

1,385

Nonperforming loans to total loans



0.09%



0.11%



0.26%



0.29%



0.38%

Nonperforming assets to total assets



0.08%



0.10%



0.23%



0.25%



0.38%

Allowance for loan and lease losses to total loans



1.62%



1.69%



1.76%



1.87%



1.89%

Allowance for loan and lease losses to nonperforming loans



1744.00%



1482.98%



670.91%



633.70%



501.23%

Net charge-offs (recoveries)


$

(6)


$

(6)


$

(6)


$

(16)


$

(17)

Annualized net charge-offs (recoveries) to average loans



(0.01%)



(0.01%)



(0.01%)



(0.02%)



(0.02%)

















Average Balances
















Loans


$

415,262


$

389,208


$

372,346


$

361,843


$

329,618

Assets


$

483,637


$

461,945


$

431,008


$

413,786


$

418,340

Stockholders' equity


$

40,478


$

40,747


$

40,219


$

39,748


$

39,404

(1)  Regulatory capital ratios of CFBank










 

Cision View original content:http://www.prnewswire.com/news-releases/central-federal-corporation-announces-1st-quarter-2018-financial-results-300644559.html

SOURCE Central Federal Corporation

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