Item 1A. Risk Factors.
The following are certain risk factors that could impact our business, financial condition and/or results of operations. Investing in our common stock involves risks, including those described below. These risk factors should be considered by prospective and current investors in our common stock when evaluating the disclosures contained in this Form 10-K and in other reports that we file with the SEC. These risk factors could cause actual results and conditions to differ materially from those projected in forward-looking statements. If any of the events described in the following risk factors actually occur, or if additional risks and uncertainties not presently known to us or that we believe are immaterial do materialize, then our business, financial condition and/or results of operations could be materially adversely impacted. In addition, the trading price of our common stock could decline due to any of the events described in these risk factors.
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Economic, Market and Political Risks
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.
Our success depends to a significant extent upon local and national economic and political conditions, as well as governmental fiscal and monetary policies. Conditions such as inflation, recession, unemployment, changes in interest rates, fiscal and monetary policy, an increasing federal government budget deficit, the failure of the federal government to raise the federal debt ceiling and/or possible future U.S. government shutdowns over budget disagreements, slowing gross domestic product, threatened or imposed tariffs, a U.S. withdrawal from or significant renegotiation of trade agreements and other changes in the relationship of the U.S. and U.S. global partners, trade wars, and other factors beyond our control may adversely affect CFBank’s deposit levels and composition, the quality of investment securities available for purchase, demand for loans, the ability of CFBank’s borrowers to repay their loans, and the value of the collateral securing loans made by CFBank. The ongoing political turmoil and military conflict in Ukraine and the Middle East are likely to result in substantial changes in economic and political conditions for the U.S. and the remainder of the world. Disruptions in U.S. and global financial markets, and changes in oil production and supply in the Middle East and Russia, also affect the economy and stock prices in the U.S., which can affect our earnings and/or capital, as well as the ability of our customers to repay loans.
Because we have a significant amount of real estate loans, decreases in real estate values could adversely affect the value of property used as collateral and our ability to sell the collateral upon foreclosure. Adverse changes in the economy may also have a negative effect on the ability of our borrowers to make timely repayments of their loans, which would have an adverse impact on our earnings and cash flows. Moreover, our market activities are concentrated in the following counties: Franklin County through our office in Columbus, Ohio; Delaware County through our Polaris office in Columbus, Ohio; Cuyahoga County through our office in Orange Village, Ohio and our Ohio City office in Cleveland, Ohio; Hamilton County through our offices in Blue Ash, Ohio and our Red Bank office in Cincinnati, Ohio; Summit County through our office in Fairlawn, Ohio; and Marion County, Indiana through our office in Indianapolis. Our success depends on the general economic conditions of these areas, particularly given that a significant portion of our lending relates to real estate located in these regions. Therefore, adverse changes in the economic conditions in these areas could adversely impact our earnings and cash flows.
Changing interest rates may decrease our earnings and asset values.
Management is unable to accurately predict future market interest rates, which are affected by many factors, including, but not limited to inflation, recession, changes in employment levels, changes in the money supply and domestic and international disorder and instability in domestic and foreign financial markets. Policies of regulatory authorities, including monetary policies of the Board of Governors of the Federal Reserve System, also significantly affect the movement of interest rates. Changes in the interest rate environment may reduce our profits. Net interest income is a significant component of our net income, and consists of the difference, or spread, between interest income generated on interest-earning assets and interest expense incurred on interest-bearing liabilities. Net interest spreads are affected by the difference between the maturities and repricing characteristics of interest-earning assets and interest-bearing liabilities. Although certain interest-earning assets and interest-bearing liabilities may have similar maturities or periods to which they reprice, they may react in different degrees to changes in market interest rates. In addition, residential mortgage loan origination and refinancing volumes are affected by market interest rates on loans. Rising interest rates generally are associated with a lower volume of loan originations and refinancings, while falling interest rates are usually associated with higher loan originations and refinancings. Our ability to generate gains on sales of mortgage loans is significantly dependent on the level of originations. Cash flows are affected by changes in market interest rates. Generally, in rising interest rate environments, loan prepayment rates are likely to decline, and in falling interest rate environments, loan prepayment rates are likely to increase. A majority of our commercial, commercial real estate and multi-family residential real estate loans are adjustable rate loans and an increase in the general level of interest rates may adversely affect the ability of some borrowers to pay the interest on and principal of their obligations, especially borrowers with loans that have adjustable rates of interest. Changes in interest rates, prepayment speeds and other factors may also cause the value of our loans held for sale to change. Accordingly, changes in levels of market interest rates could materially and adversely affect our net interest spread, loan volume, asset quality, value of loans held for sale and cash flows, as well as the market value of our securities portfolio and overall profitability.
Interest rates are highly sensitive to many factors that are beyond our control. The Company’s management uses various measures to monitor interest rate risk and believes it has implemented effective asset and liability management strategies to reduce the potential adverse effects of changes in interest rates on the Company’s financial condition and results of operations. Management also periodically adjusts the mix of assets and liabilities to manage interest rate risk. However, any significant, unexpected, prolonged change in market interest rates could have a material adverse effect on our financial condition and results of operations.
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Defaults by other financial institutions could adversely affect our business, earnings and financial condition.
Many financial institutions and their related operations are closely intertwined, and the soundness of such financial institutions may, to some degree, be interdependent. Several high-profile bank failures in 2023, including Silicon Valley Bank, Signature Bank and Silvergate Capital, resulted in some degree of public panic and caused widespread questions about potential concerns in the financial institutions industry, which in turn impacted stock market prices of financial institutions in general. These failed banks were engaged in activities, such as lending focused on tech startups and cryptocurrency, that are significantly different than the activities and risk profile of community banks such as the Company, and at this time it does not appear that these bank failures were connected to any systematic risks or problems in the financial institutions industry in general. Nevertheless, concerns about, or a default or threatened default by, other financial institutions could lead to significant market-wide liquidity problems and/or losses or defaults by other financial institutions.
Risks Related to Our Lending Activities
Our allowance for credit losses may not be adequate to absorb the expected, lifetime losses in our loan portfolio.
We maintain an allowance for credit losses that is believed to be a reasonable estimate of the expected losses based on management's quarterly analysis of our loan portfolio. The determination of the allowance for credit losses requires management to make various assumptions and judgments about the collectability of CFBank’s loans, including the creditworthiness of its borrowers and the value of the real estate and other assets serving as collateral for the repayment of loans. Additional information regarding our allowance for credit losses methodology and the sensitivity of the estimates can be found in the discussion of the "Determination of the allowance for credit losses on loans (ACL - Loans)" included in Management’s Discussion and Analysis of Financial Condition and Results of Operations in Item 7 of this Form 10-K.
Our estimation of future credit losses is susceptible to changes in economic, operating and other conditions, including changes in regulations and interest rates, which may be beyond our control, and the losses may exceed current estimates. We cannot be assured of the amount or timing of losses, nor whether the allowance for credit losses will be adequate in the future.
If our assumptions prove to be incorrect, our allowance for credit losses may not be sufficient to cover the expected losses from our loan portfolio, resulting in the need for additions to the allowance for credit losses which could have a material adverse impact on our financial condition and results of operations. In addition, bank regulators periodically review our allowance for credit losses as part of their examination process and may require management to increase the allowance or recognize further loan charge-offs based on judgments different than those of management.
On June 16, 2016, the Financial Accounting Standards Board (“FASB”) issued ASU 2016-13 “Financial Instruments - Credit Losses”, which replaces the incurred loss model with an expected loss model, which is referred to as the current expected credit loss (“CECL”) model, which we adopted effective January 1, 2023. Under the CECL model, we are required to use historical information, current conditions and reasonable and supportable forecasts to estimate the expected credit losses. If the methodologies and assumptions that we use in the CECL model prove to be incorrect or inadequate, the allowance for credit losses may not be sufficient, resulting in the need for additional allowance for credit losses to be established, which could have a material adverse impact on our financial condition and results of operations. Additionally, the time horizon over which we are required to estimate future credit losses expanded under CECL, which could result in increased volatility in future provisions for credit losses. We may also experience a higher or more volatile provision for credit losses due to higher levels of nonperforming loans and net charge-offs if commercial and consumer customers are unable to make scheduled loan payments. The Company’s one-time cumulative effect adjustment to the allowance for credit losses upon adoption in the first quarter of 2023 was $49,000.
Our emphasis on commercial, commercial real estate and multi-family residential real estate lending may expose us to increased lending risks.
Because payments on commercial loans are dependent on successful operation of the borrowers’ business enterprises, repayment of such loans may be subject to a greater extent to adverse conditions in the economy. Because payments on loans secured by commercial real estate properties are dependent on successful operation or management of the properties, repayment of commercial real estate loans may be subject to a greater extent to adverse conditions in the real estate market or the economy. Commercial real estate and multi-family residential mortgage loans also have larger loan balances to single borrowers or groups of related borrowers compared to single-family residential mortgage loans. Some of our borrowers also have more than one commercial real estate or multi-family residential mortgage loan outstanding with us. Additionally, some loans may be collateralized by junior liens. Consequently, an adverse development involving one or more loans or credit relationships can expose us to significantly greater risk of loss compared to an adverse development involving a single-family residential mortgage loan.
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Our adjustable-rate loans may expose us to increased lending risks.
While adjustable-rate loans better offset the adverse effects of an increase in interest rates as compared to fixed-rate loans, the increased payments required of adjustable-rate loan borrowers upon an interest rate adjustment in a rising interest rate environment could cause an increase in delinquencies and defaults. The marketability of the underlying property also may be adversely affected in a rising interest rate environment. In addition, although adjustable-rate loans help make our asset base more responsive to changes in interest rates, the extent of this interest sensitivity is limited by the annual and lifetime interest rate adjustment limits.
We may be required to repurchase loans we have sold or indemnify loan purchasers under the terms of the sale agreements, which could adversely affect our liquidity, results of operations and financial condition.
When we sell a mortgage loan, we may agree to repurchase or substitute a mortgage loan if we are later found to have breached any representation or warranty we made about the loan or if the borrower is later found to have committed fraud in connection with the origination of the loan. While we have underwriting policies and procedures designed to avoid breaches of representations and warranties as well as borrower fraud, there can be no assurance that no breach or fraud will ever occur. Required repurchases, substitutions or indemnifications could have an adverse effect on our liquidity, results of operations and financial condition.
We depend upon the accuracy and completeness of information about customers and counterparties.
In deciding whether to extend credit or enter into other transactions with customers and counterparties, we may rely on information provided to us by customers and counterparties, including financial statements and other financial information. We may also rely on representations of customers and counterparties as to the accuracy and completeness of that information and, with respect to financial statements, on reports of independent auditors. For example, in deciding whether to extend credit to a business, we may assume that the customer’s audited financial statements conform with GAAP and present fairly, in all material respects, the financial condition, results of operations and cash flows of the customer. We may also rely on the audit report covering those financial statements. Our financial condition, results of operations and cash flows could be negatively impacted to the extent that we rely on financial statements that do not comply with GAAP or on financial statements and other financial information that are materially misleading.
Our business and financial results are subject to risks associated with the creditworthiness of our customers and counterparties.
Credit risk is inherent in the financial services business and results from, among other things, extending credit to customers, purchasing securities, and entering into financial derivative transactions and certain guarantee contracts. Credit risk is one of our most significant risks, particularly given the high percentage of our assets represented directly or indirectly by loans, and the importance of lending to our overall business. We manage credit risk by assessing and monitoring the creditworthiness of our customers and counterparties and by diversifying our loan portfolio. Many factors impact credit risk.
A borrower’s ability to repay a loan can be adversely affected by individual factors, such as business performance, job losses or health issues. A weak or deteriorating economy and changes in the United States or global markets also could adversely impact the ability of our borrowers to repay outstanding loans. Any decrease in our borrowers’ ability to repay loans would result in higher levels of nonperforming loans, net charge-offs, and provision for loan losses.
Despite maintaining a diversified loan portfolio, in the ordinary course of business, we may have concentrated credit exposure to a particular person or entity, industry, region or counterparty. Events adversely affecting specific customers, industries, regions or markets, a decrease in the credit quality of a customer base or an adverse change in the risk profile of a market, industry, or group of customers could adversely affect us.
Our credit risk may be exacerbated when collateral held by us to secure obligations to us cannot be realized upon or is liquidated at prices that are not sufficient to recover the full amount of the loan or derivative exposure due us.
If we experience higher levels of provision for loan losses in the future, our net income could be negatively affected.
Risks Related to Our Business Operations
We may not be able to effectively manage our growth.
We have experienced significant growth in the amount of our total loans in the past several years. Since January 1, 2017, our total net loans have grown by $1.3 billion, or 327.9%, and our total assets have grown by $1.6 billion, or 339.8%. Our continued growth may place significant demands on our operations and management, and our future operating results depend to a large extent on our ability to successfully manage our growth. We may not successfully implement improvements to, or integrate, our management information and control systems, procedures and processes in an efficient or timely manner and may discover deficiencies in existing systems and controls. In particular, our controls and procedures must be able to accommodate increases in our loan volume and our growth and
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expansion. If we are unable to manage our loan growth and/or expanded operations, we may experience compliance and operational problems, have to slow the pace of growth, or have to incur additional expenditures beyond current projections to support such growth, any one of which could materially and adversely affect us.
Future acquisitions or other expansion may adversely affect our financial condition and results of operations.
In the future, we may acquire other financial institutions or branches or assets of other financial institutions. We may also open new branches, enter into new lines of business, or offer new products or services. Any future acquisition or expansion of our business will involve a number of expenses and risks, which may include some or all of the following:
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the time and expense associated with identifying and evaluating potential acquisitions or expansions;
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the potential inaccuracy of estimates and judgments used to evaluate credit, operations, management and market risk with respect to target institutions;
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the time and costs of evaluating new markets, hiring local management and opening new offices, and the delay between commencing these activities and the generation of profits from the expansion;
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any financing required in connection with an acquisition or expansion;
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the diversion of management’s attention to the negotiation of a transaction and the integration of the operations and personnel of the combining businesses;
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entry into unfamiliar markets and the introduction of new products and services into our existing business;
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the possible impairment of goodwill associated with an acquisition and possible adverse short-term effects on our results of operations; and
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the risk of loss of key employees and customers.
We may incur substantial costs to expand, and we can give no assurance that such expansion will result in the levels of profits we expect. Neither can we assure that integration efforts for any future acquisitions will be successful. We may issue equity securities in connection with acquisitions, which could dilute the economic and voting interests of our existing stockholders.
We face strong competition from other financial institutions, financial services companies and other organizations offering services similar to those offered by us, which could result in our not being able to sustain or grow our loan and deposit businesses.
We conduct our business operations primarily in Franklin, Cuyahoga, Hamilton, and Summit, Counties, Ohio, and in Marion County, Indiana, and make loans generally throughout Ohio and Indiana. Increased competition within these markets may result in reduced loan originations and deposits. Ultimately, we may not be able to compete successfully against current and future competitors. Many competitors offer the types of loans and banking services that we offer. These competitors include other savings associations, community banks, regional banks and money center banks. We also face competition from many other types of financial institutions, including finance companies, brokerage firms, insurance companies, credit unions, mortgage banks, fintechs and other financial intermediaries. Our competitors with greater resources may have a marketplace advantage enabling them to maintain numerous banking locations and mount extensive promotional and advertising campaigns.
Additionally, financial intermediaries not subject to bank regulatory restrictions and banks and other financial institutions with larger capitalization have larger lending limits and are thereby able to serve the credit needs of larger clients. These institutions, particularly to the extent they are more diversified than we are, may be able to offer the same loan products and services that we offer at more competitive rates and prices. If we are unable to attract and retain banking clients, we may be unable to sustain current loan and deposit levels or increase our loan and deposit levels, and our business, financial condition and future prospects may be negatively affected.
We rely heavily on our management team and other key employees, and the unexpected loss of key employees may adversely affect our operations.
Our success depends, in large part, on our ability to attract, retain, develop and motivate management and key employees. Competition for key employees is ongoing and we may not be able to attract or retain the key employees that we want or need in order to successfully execute our business. Additionally, the unexpected loss of services of any key employee could have an adverse effect on our business and financial results.
We are exposed to operational risk.
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Similar to any large organization, we are exposed to many types of operational risk, including those discussed in more detail elsewhere in this Item, such as reputational risk, legal and compliance risk, cybersecurity risk, the risk of fraud or theft by employees or outsiders, unauthorized transactions by employees or operational errors, including clerical or record-keeping errors or those resulting from faulty or disabled computer or telecommunications systems.
We may be subject to disruptions of our operating systems arising from events that are wholly or partially beyond our control, which may include, for example, computer viruses, cyber-attacks, spikes in transaction volume and/or customer activity, electrical or telecommunications outages, or natural disasters. We could be adversely affected by operating systems disruptions if new or upgraded business management systems are defective, not installed properly or not properly integrated into existing operating systems. Although we have programs in place related to business continuity, disaster recovery and information security to maintain the confidentiality, integrity and availability of our operating systems, business applications and customer information, such disruptions may give rise to interruptions in service to customers, loss of data privacy and loss or liability to us.
Any failure or interruption in our operating or information systems, or any security or data breach, could cause reputational damage, jeopardize the confidentiality of customer information, result in a loss of customer business, subject us to regulatory intervention or expose us to civil litigation and financial loss or liability, any of which could have a material adverse effect on us.
Negative public opinion can result from our actual or alleged conduct in any number of activities, including lending practices, corporate governance and acquisitions, social media and other marketing activities, the implementation of environmental, social and governance (ESG) practices, and from actions taken by governmental regulators and community organizations in response to any of the foregoing. Negative public opinion could adversely affect our ability to attract and keep customers, could expose us to potential litigation or regulatory action, and could have a material adverse effect on our stock price or result in heightened volatility of our stock price.
Given the volume of transactions we process, certain errors may be repeated or compounded before they are discovered and successfully rectified. Our necessary dependence upon automated systems to record and process our transaction volume may further increase the risk that technical system flaws or employee tampering or manipulation of those systems will result in losses that are difficult to detect, which may give rise to disruption of service to customers and to financial loss or liability. We are further exposed to the risk that our external vendors may be unable to fulfill their contractual obligations (or will be subject to the same risk of fraud or operational errors by their respective employees as we are) or that our (or our vendors’) consumer compliance, business continuity, and data security systems will prove to be inadequate.
Unauthorized disclosure of sensitive or confidential client information or breaches in security of our systems could severely harm our business.
As part of our financial institution business, we collect, process and store sensitive consumer data by utilizing computer systems and telecommunications networks operated by both us and third-party service providers. Our necessary dependence upon automated systems to record and process transactions poses the risk that technical system flaws, employee errors, tampering or manipulation of those systems, or attacks by third parties will result in losses and may be difficult to detect. We have security and backup and recovery systems in place, as well as a business continuity plan, to ensure the computer systems will not be inoperable, to the extent possible. The Company also routinely reviews documentation of such controls and backups related to third-party service providers. Our inability to use or access these information systems at critical points in time could unfavorably impact the timeliness and efficiency of our business operations. In recent years, some banks have experienced denial of service attacks in which individuals or organizations flood the bank's website with extraordinarily high volumes of traffic, with the goal and effect of disrupting the ability of the bank to process transactions. Other businesses have been victims of ransomware attacks in which the business becomes unable to access its own information and is presented with a demand to pay a ransom in order to once again have access to its information.
We could be adversely affected if one of our employees causes a significant operational break-down or failure, either as a result of human error or where an individual purposefully sabotages or fraudulently manipulates our operations or systems. We are further exposed to the risk that the third-party service providers may be unable to fulfill their contractual obligations (or will be subject to the same risks as faced by us). These disruptions may interfere with service to our customers, cause additional regulatory scrutiny and result in a financial loss or liability. We are also at risk of the impact of natural disasters, terrorism and international hostilities on our systems or for the effects of outages or other failures involving power or communications systems operated by others.
Misconduct by employees could include fraudulent, improper or unauthorized activities on behalf of clients or improper use of confidential information. We may not be able to prevent employee errors or misconduct, and the precautions we take to detect this type of activity might not be effective in all cases. Employee errors or misconduct could subject us to civil claims for negligence or regulatory enforcement actions, including fines and restrictions on our business.
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Increasingly, there have been instances where financial institutions have been victims of fraudulent activity in which criminals pose as customers to initiate wire and automated clearinghouse transactions out of customer accounts. Although we have policies and procedures in place to verify the authenticity of our customers, we cannot assure that such policies and procedures will prevent all fraudulent transfers.
We have implemented security controls to prevent unauthorized access to our computer systems, and we require that our third-party service providers maintain similar controls. However, the Company’s management cannot be certain that these measures will be successful. A security breach of the computer systems and loss of confidential information, such as customer account numbers and related information, could result in a loss of customers’ confidence and, thus, loss of business. We could also lose revenue if competitors gain access to confidential information about our business operations and use it to compete with us. While we maintain specific "cyber" insurance coverage, which would apply in the event of various breach scenarios, the amount of coverage may not be adequate in any particular case. Furthermore, because cyber threat scenarios are inherently difficult to predict and can take many forms, some breaches may not be covered under our cyber insurance coverage.
Further, we may be impacted by data breaches at retailers and other third parties who participate in data interchanges with us and our customers that involve the theft of customer credit and debit card data, which may include the theft of our debit card personal identification numbers (PINs) and commercial card information used to make purchases at such retailers and other third parties. Such data breaches could result in us incurring significant expenses to reissue debit cards and cover losses, which could result in a material adverse effect on our results of operations.
There can be no assurance that we will not suffer such cyber-attacks or other information security breaches or attempted breaches, or incur resulting losses in the future. Our risk and exposure to these matters remains heightened because of, among other things, the evolving nature of these threats, and our plans to continue to implement internet and mobile banking capabilities to meet customer demand. As cyber and other data security threats continue to evolve, we may be required to expend significant additional resources to continue to modify and enhance its protective measures or to investigate and remediate any security vulnerabilities.
Our assets at risk for cyber-attacks include financial assets and non-public information belonging to customers. We use several third-party vendors who have access to our assets via electronic media. Certain cyber security risks arise due to this access, including cyber espionage, blackmail, ransom, and theft. As cyber and other data security threats continue to evolve, we may be required to expend significant additional resources to continue to modify and enhance our protective measures or to investigate and remediate any security vulnerabilities.
All of the types of cyber incidents discussed above could result in damage to our reputation, loss of customer business, costs of incentives to customers or business partners in order to maintain their relationships, litigation, increased regulatory scrutiny and potential enforcement actions, repairs of system damage, increased investments in cybersecurity (such as obtaining additional technology, making organizational changes, deploying additional personnel, training personnel and engaging consultants), increased insurance premiums, and loss of investor confidence and a reduction in the price of our common shares, all of which could result in financial loss and material adverse effects on our results of operations and financial condition
Our business could be adversely affected through third parties who perform significant operational services on our behalf.
The third parties performing operational services for the Company are subject to risks similar to those faced by the Company relating to cybersecurity, breakdowns or failures of their own systems, or misconduct of their employees. Like many other community banks, CFBank also relies, in significant part, on a single vendor for the systems which allow CFBank to provide banking services to CFBank’s customers, for which the systems are maintained on CFBank’s behalf by this single vendor.
One or more of the third parties utilized by us may experience a cybersecurity event or operational disruption and, if any such event does occur, it may not be adequately addressed, either operationally or financially, by such third party. Further, the operations of our third-party vendors could fail or otherwise become delayed. Certain of these third parties may have limited indemnification obligations to us in the event of a cybersecurity event or operational disruption, or may not have the financial capacity to satisfy their indemnification obligations.
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Financial or operational difficulties of a third party provider could also impair our operations if those difficulties interfere with such third party’s ability to serve the Company. If a critical third-party provider is unable to meet the needs of the Company in a timely manner, or if the services or products provided by such third party are terminated or otherwise delayed and if the Company is not able to develop alternative sources for these services and products quickly and cost-effectively, our business could be materially adversely effected.
Additionally, regulatory guidance adopted by federal banking regulators addressing how banks select, engage and manage their third-party relationships, affects the circumstances and conditions under which we work with third parties and the cost of managing such relationships.
Derivative transactions may expose us to unexpected risk and potential losses.
We are party to a number of derivative transactions. With regard to derivative transactions, we are dependent on the creditworthiness of the counterparties and are therefore susceptible to credit and operational risk in these situations. Derivative contracts and other transactions entered into with third parties are not always confirmed by the counterparties on a timely basis. While the transaction remains unconfirmed, we are subject to heightened credit and operational risk and, in the event of a default, we may find it more difficult to enforce the underlying contract. In addition, as new and more complex derivative products are created, covering a wider array of underlying credit and other instruments, disputes about the terms of the underlying contracts could arise, which could impair our ability to effectively manage our risk exposures from these products and subject us to increased costs. Any regulatory effort to create an exchange or trading platform for credit derivatives and other over-the-counter derivative contracts, or a market shift toward standardized derivatives, could reduce the risk associated with such transactions, but under certain circumstances could also limit our ability to develop derivatives that best suit our needs and those of our clients and adversely affect our profitability.
Legislative, Legal and Regulatory Risks
We operate in a highly regulated industry, and the laws and regulations that govern our operations, corporate governance, executive compensation and financial accounting, or reporting, including changes in, or failure to comply with the same, may adversely affect the Company.
The banking industry is highly regulated. We are subject to supervision, regulation and examination by various federal and state regulators, including the FRB, the SEC, the CFPB, the OCC, the FDIC, Financial Industry Regulatory Authority, Inc. (also known as FINRA), and various state regulatory agencies. The statutory and regulatory framework that governs the Company is generally designed to protect depositors and customers, the DIF, the U.S. banking and financial system, and financial markets as a whole and not to protect shareholders. These laws and regulations, among other matters, prescribe minimum capital requirements, impose limitations on our business activities (including foreclosure and collection practices), limit the dividends or distributions that we can pay, and impose certain specific accounting requirements that may be more restrictive and may result in greater or earlier charges to earnings or reductions in capital than would otherwise be required under generally accepted accounting principles in the United States of America. Compliance with laws and regulations can be difficult and costly, and changes to laws and regulations often impose additional compliance costs. Both the scope of the laws and regulations and the intensity of the supervision to which we are subject have increased in recent years in response to the perceived state of the financial services industry, as well as other factors such as technological and market changes. Such regulation and supervision may increase our costs and limit our ability to pursue business opportunities. Further, our failure to comply with these laws and regulations, even if the failure was inadvertent or reflects a difference in interpretation, could subject the Company to restrictions on business activities, fines, and other penalties, any of which could adversely affect results of operations, the capital base, and the price of our common shares. Further, any new laws, rules, or regulations could make compliance more difficult or expensive or otherwise adversely affect our business and financial condition.
Legislative or regulatory changes or actions could adversely impact our business.
Regulations affecting banks and financial services businesses are undergoing continuous change, and management cannot predict the effect of those changes. The impact of any changes to laws and regulations or other actions by regulatory agencies could adversely affect our business. Regulatory authorities have extensive discretion in connection with their supervisory and enforcement activities, including the ability to impose restrictions on the operation of an institution and the ability to determine the adequacy of an institution’s allowance for loan losses. Failure to comply with applicable laws, regulations and policies could result in sanctions being imposed by the regulatory agencies, including the imposition of civil money penalties, which could have a material adverse effect on our operations and financial condition. Even the reduction of regulatory restrictions could have an adverse effect on us if such lessening of restrictions increases competition within our industry or market areas.
We are subject to limitations and conditions on certain activities as a result of our “Needs to Improve” CRA rating.
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In March 2023, CFBank’s primary federal regulator, the OCC, publicly released its CRA rating of “Needs to Improve” for CFBank as a result of the OCC’s regularly scheduled evaluation covering 2020 through 2022. The Company believes that the “Needs to Improve” rating was primarily attributable to CFBank’s legacy direct-to-consumer residential mortgage business. Beginning in 2021, CFBank strategically scaled down its residential mortgage business and exited the direct-to-consumer mortgage business in favor of lending in our regional markets. The Company believes that this change in our residential mortgage business and focus, together with changes in our branch network and other actions taken since 2021, have remediated these legacy issues. While CFBank’s CRA rating remains “Needs to Improve,” the Company is subject to additional requirements and conditions with respect to certain activities, including acquisitions of and mergers with other financial institutions and commencement of new activities. CFBank’s next CRA evaluation is expected to commence in 2026.
Deposit insurance premiums may increase and have a negative effect on our results of operations.
The DIF maintained by the FDIC to resolve bank failures is funded by fees assessed on insured depository institutions. The costs of resolving bank failures increased for a period of time and decreased the DIF. The FDIC collected a special assessment in 2009 to replenish the DIF and also required a prepayment of an estimated amount of future deposit insurance premiums. In October 2022, the FDIC adopted a final rule increasing the assessment rate from three basis points to five basis points beginning with the first quarterly assessment period of 2023. If the costs of future bank failures increase, the deposit insurance premiums required to be paid by CFBank may also increase. The FDIC recently adopted rules revising its assessments in a manner benefiting banks, such as CFBank, with assets totaling less than $10 billion. There can be no assurance, however, that assessments will not be changed in the future.
We may be the subject of litigation which could result in legal liability and damage to our business and reputation.
From time to time, we may be subject to claims or legal action from customers, employees or others. Financial institutions like the Company and CFBank are facing a growing number of significant class actions, including those based on the manner of calculation of interest on loans and the assessment of overdraft fees. Future litigation could include claims for substantial compensatory and/or punitive damages or claims for indeterminate amounts of damages. We are also involved from time to time in other reviews, investigations and proceedings (both formal and informal) by governmental and other agencies regarding our business. These matters also could result in adverse judgments, settlements, fines, penalties, injunctions or other relief. Like other large financial institutions, we are also subject to risk from potential employee misconduct, including non-compliance with policies and improper use or disclosure of confidential information. Substantial legal liability or significant regulatory action against us could materially adversely affect our business, financial condition or results of operations and/or cause significant reputational harm to our business.
Changes in accounting standards, policies, estimates or procedures could impact our reported financial condition or results of operations.
The accounting standard setters, including the FASB, the SEC and other regulatory bodies, periodically change the financial accounting and reporting guidance that governs the preparation of our consolidated financial statements. The pace of change continues to accelerate and changes in accounting standards can be hard to predict and could materially impact how we record and report our financial condition and results of operations. In some cases, we could be required to apply new or revised guidance retroactively, resulting in the restatement of prior period financial statements.
The preparation of consolidated financial statements in conformity with GAAP requires management to make significant estimates that affect the financial statements. Due to the inherent nature of these estimates, actual results may vary materially from management’s estimates. In June 2016, FASB issued a new accounting standard for recognizing current expected credit losses, commonly referred to as CECL. CECL results in earlier recognition of credit losses and requires consideration of not only past and current events but also reasonable and supportable forecasts that affect collectability. The Company was required to comply with the new standard beginning January 1, 2023. The impact of the Company's adoption of CECL was a one-time cumulative-effect adjustment increasing our reserves for loans and unfunded commitments by $49,000.
Noncompliance with the Bank Secrecy Act (BSA) and other anti-money laundering statutes and regulations could cause a material financial loss.
The BSA and the Patriot Act contain anti-money laundering and financial transparency provisions intended to detect and prevent the use of the U.S. financial system for money laundering and terrorist financing activities. The BSA, as amended by the Patriot Act and the AMLA, requires depository institutions and their holding companies to undertake activities including maintaining an anti-money laundering program, verifying the identity of clients, monitoring for and reporting suspicious transactions, reporting on cash transactions exceeding specified thresholds, and responding to requests for information by regulatory authorities and law enforcement agencies. The Financial Crimes Enforcement Network (also known as FinCEN), a unit of the U.S. Treasury Department that administers the BSA, is authorized to impose significant civil money penalties for violations of those requirements and has recently engaged in coordinated enforcement efforts with the federal bank regulatory agencies, as well as the U.S. Department of Justice, Drug Enforcement Administration, and Internal Revenue Service. The AMLA is intended to be a comprehensive reform and modernization
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to U.S. bank secrecy and anti-money laundering laws, which includes a codified risk-based approach to anti-money laundering compliance for financial institutions; requires the development of standards for evaluating technology and internal processes for BSA compliance; expands enforcement-related and investigation-related authority, including increasing available sanctions for certain BSA violations and instituting BSA whistleblower incentives and protections.
There is also increased scrutiny of compliance with the rules enforced by the Office of Foreign Assets Control (also known as OFAC). If the Company’s policies, procedures, and systems are deemed deficient, or if the policies, procedures, and systems of the financial institutions that the Company has already acquired or may acquire in the future are deficient, the Company may be subject to liability, including fines and regulatory actions such as restrictions on CFBank’s ability to pay dividends and the necessity to obtain regulatory approvals to proceed with certain planned business activities, including acquisition plans, which could negatively impact our business, financial condition, and results of operations. Failure to maintain and implement adequate programs to combat money laundering and terrorist financing could also have serious reputational consequences for the Company.
Risks Related to our Capital and Capital Stock
We are a holding company and depend on our subsidiary bank for dividends.
The Holding Company is a legal entity separate and distinct from its subsidiaries and affiliates. The Holding Company’s ability to support its operations, pay dividends on its common shares and service its debt is dependent upon the amount of cash and liquidity available at the Holding Company level, as well as the receipt of dividends and other distributions from CFBank to the extent necessary to fund such dividends. As of December 31, 2025, the Holding Company had a total of $522,000 of cash at the Holding Company level.
In the event that CFBank is unable to pay dividends to the Holding Company, the Holding Company may not be able to service its debt, pay its other obligations or pay dividends on its outstanding stock. Accordingly, the Holding Company’s inability to receive dividends from CFBank could also have a material adverse effect on our business, financial condition and results of operations.
Various federal and state statutory provisions and regulations limit the amount of dividends that CFBank may pay to the Holding Company without regulatory approval. Generally, financial institutions may pay dividends without prior approval as long as the dividend does not exceed the total of the current calendar year-to-date earnings plus any earnings from the previous two years not already paid out in dividends, and as long as the financial institution remains well capitalized after the dividend payment.
The ability of CFBank to pay dividends in the future is currently influenced, and could be further influenced, by bank regulatory policies and capital guidelines and may restrict the Holding Company’s ability to declare and pay dividends on its common shares. The ability of CFBank and any other subsidiaries to pay dividends to the Holding Company is also subject to their profitability, financial condition, capital expenditures and other cash flow requirements and contractual obligations. There can be no guaranty that CFBank will be able or permitted to pay dividends to the Holding Company in the future, and any such future dividends by CFBank would be based on future earnings and, if necessary, regulatory approval.
We may elect or need to raise additional capital in the future, but capital may not be available when it is needed.
We are required by federal regulatory authorities to maintain adequate levels of capital to support our operations. In addition, federal banking agencies have recently finalized extensive changes to their capital requirements, including the adoption of the Basel III Capital Rules as discussed above, which result in higher capital requirements and more restrictive leverage and liquidity ratios than those previously in place. The final impact on us is unknown at this time, but could potentially require us to raise additional capital in the future. Our ability to raise additional capital, if needed, will depend on conditions in the capital markets, economic conditions and a number of other factors, many of which are outside our control, and are based on our financial performance. Accordingly, we cannot be assured of our ability to raise additional capital if needed or on terms acceptable to us. If we cannot raise additional capital when needed or on acceptable terms, it may have a material adverse effect on our financial condition, results of operations and prospects.
Although publicly traded, our Common Stock has less liquidity than the average liquidity of stocks listed on NASDAQ.
Although our common stock is listed for trading on NASDAQ, our common stock has less liquidity than the average liquidity for companies listed on NASDAQ. A public trading market having the desired characteristics of depth, liquidity and orderliness depends on the presence in the marketplace of willing buyers and sellers of our common stock at any given time. This marketplace depends on the individual decisions of investors and general economic and market conditions over which we have no control. This limited market may affect your ability to sell your shares on short notice, and the sale of a large number of shares at one time could temporarily depress the market price of our common stock. For these reasons, our common stock should not be viewed as a short-term investment.
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The market price of our Common Stock may be subject to fluctuations and volatility.
The market price of our common stock may fluctuate significantly due to, among other things, changes in market sentiment regarding our operations or business prospects, the banking industry generally or the macroeconomic outlook. Factors that could impact our trading price include:
•
our operating and financial results, including how those results vary from the expectations of management, securities analysts and investors;
•
developments in our business or operations or in the financial sector generally;
•
future offerings by us of debt or preferred shares, which would be senior to our common stock upon liquidation and for purposes of dividend distributions;
•
legislative or regulatory changes affecting our industry generally or our business and operations specifically;
•
the operating and stock price performance of companies that investors consider to be comparable to us;
•
announcements of strategic developments, acquisitions and other material events by us or our competitors;
•
actions by our current stockholders, including future sales of common shares by existing stockholders, including our directors and executive officers; and
•
other changes in U.S. or global financial markets, global economies and general market conditions, such as interest or foreign exchange rates, stock, commodity, credit or asset valuations or volatility.
Equity markets in general and our common stock in particular have experienced considerable volatility over the past few years. The market price of our common stock may continue to be subject to volatility unrelated to our operating performance or business prospects. Increased volatility could result in a decline in the market price of our common stock.
Provisions in the Holding Company’s Amended and Restated Certificate of Incorporation and statutory provisions could discourage a hostile acquisition of control.
The Holding Company’s Amended and Restated Certificate of Incorporation contains certain provisions that could discourage non-negotiated takeover attempts that certain stockholders might deem to be in their interests or through which stockholders might otherwise receive a premium for their shares over the then current market price and that may tend to perpetuate existing management. The Amended and Restated Certificate of Incorporation restricts the ability of an acquirer to vote more than 10% of our outstanding common stock. The provisions of the Amended and Restated Certificate of Incorporation also include: the classification of the terms of the members of the board of directors; supermajority provisions for the approval of certain business combinations; elimination of cumulative voting by stockholders in the election of directors; certain provisions relating to meetings of stockholders; and provisions allowing the board of directors to consider nonmonetary factors in evaluating a business combination or a tender or exchange offer. The provisions in the Amended and Restated Certificate of Incorporation requiring a supermajority vote for the approval of certain business combinations and containing restrictions on acquisitions of the Company’s equity securities provide that the supermajority voting requirements or acquisition restrictions do not apply to business combinations or acquisitions meeting specified board of directors’ approval requirements.
The Amended and Restated Certificate of Incorporation also authorizes the issuance of 1,000,000 shares of preferred stock, as well as 9,090,909 shares of common stock. These shares could be issued without further stockholder approval on terms or in circumstances that could deter a future takeover attempt.
Additionally, federal banking laws contain various restrictions on acquisitions of control of national banks and their holding companies.
The Amended and Restated Certificate of Incorporation, as well as certain provisions of state and federal law, may have the effect of discouraging or preventing a future takeover attempt in which stockholders of the Company otherwise might receive a substantial premium for their shares over then current market prices.
General Risk Factors
Adverse changes in the financial markets may adversely impact our results of operations.
While we generally invest in securities issued by U.S. government agencies and sponsored entities and U.S. state and local governments with limited credit risk, certain investment securities we hold possess higher credit risk since they represent beneficial interests in structured investments collateralized by residential mortgages, debt obligations and other similar asset-backed assets.
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Even securities issued by governmental agencies and entities may entail risk depending on political and economic changes. Regardless of the level of credit risk, all investment securities are subject to changes in market value due to changing interest rates, implied credit spreads and credit ratings.
We are at risk of increased losses from fraud.
Criminals are committing fraud at an increasing rate and are using more sophisticated techniques. In some cases, these individuals are part of larger criminal rings, which allow them to be more effective. Such fraudulent activity has taken many forms, ranging from wire fraud, debit card fraud, check fraud, mechanical devices attached to ATM machines, social engineering and phishing attacks to obtain personal information, or impersonation of clients through the use of falsified or stolen credentials. Additionally, an individual or business entity may properly identify itself, yet seek to establish a business relationship for the purpose of perpetrating fraud. An emerging type of fraud even involves the creation of synthetic identification in which fraudsters "create" individuals for the purpose of perpetrating fraud. Further, in addition to fraud committed directly against the Company, the Company may suffer losses as a result of fraudulent activity committed against third parties. Increased deployment of technologies, such as chip card technology, defray and reduce certain aspects of fraud; however, criminals are turning to other sources to steal personally identifiable information, such as unaffiliated healthcare providers and government entities, in order to impersonate the consumer and thereby commit fraud.
Changes in tax laws could adversely affect our performance.
We are subject to extensive federal, state and local taxes, including income, excise, sales/use, payroll, franchise, financial institutions tax, withholding and ad valorem taxes. Changes to tax laws could have a material adverse effect on our results of operations, fair values of net deferred tax assets and obligations of states and political subdivisions held in our investment securities portfolio. In addition, our customers are subject to a wide variety of federal, state and local taxes. Changes in taxes paid by our customers may adversely affect their ability to purchase homes or consumer products, which could adversely affect their demand for our loans and deposit products. In addition, such negative effects on our customers could result in defaults on the loans we have made and decrease the value of mortgage-backed securities in which we have invested.
We need to constantly update our technology in order to compete and meet customer demands.
The financial services market, including banking services, is undergoing rapid technological changes with frequent introductions of new technology-driven products and services. In addition to better serving customers, the effective use of technology increases efficiency and may enable us to reduce costs. Our future success will depend, in part, on our ability to use current technology to provide products and services that provide convenience to customers and to create additional efficiencies in our operations. Some of our competitors have substantially greater resources to invest in technological improvements. We may not be able to effectively implement new technology-driven products and services or be successful in marketing these products and services to our customers. Failure to successfully keep pace with technological changes affecting the financial services industry could negatively affect our growth, revenue and profit.
Climate change, severe weather, natural disasters, acts of war or terrorism and other external events could significantly impact our business.
Natural disasters, including severe weather events of increasing strength and frequency due to climate change, acts of war or terrorism, and other adverse external events could have a significant impact on our ability to conduct business or upon third parties who perform operational services for us or our customers. Such events could affect the stability of our deposit base, impair the ability of borrowers to repay outstanding loans, impair the value of collateral securing loans, cause significant property damage, result in lost revenue or cause us to incur additional expenses.
Item 1B. Unresolved Staff Comments
Not Applicable
Item 1C. Cybersecurity
Risk Management and Strategy
The Company prioritizes the security of our banking operations to protect our customers and our reputation, and to preserve our value. While eliminating all risk is unrealistic, we invest heavily in our Information Security program to mitigate cybersecurity risks. Our controls focus on safeguarding information systems, networks, and assets from unauthorized access, ransomware threats, and service disruptions. Third-party vendors are also held to similar standards, with reviews conducted annually.
The Company’s Information Security program establishes policies, procedures, and risk assessments related to effective and efficient controls related to design and operations of the program. The Company also leverages regulatory guidance issued by the Federal
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Financial Institutions Examination Council (FFIEC) and frameworks to develop and maintain the information security program, including, without limitation the: FFIEC Cybersecurity Assessment Tool, National Institute of Standards and Technology (NIST) Cybersecurity Framework, and Section 501(b) of the Gramm-Leach-Bliley Act of 1999. Senior Management also monitors notifications from the U.S. Computer Emergency Readiness Team (“CERT”) and the Financial Services Information Sharing and Analysis Center (FS-ISAC). Some of our procedures and controls include, without limitation:
•
Security Information and Event Management (“SIEM”) logging and triggers, alerts, and 24/7 monitoring.
•
Endpoint Detection and Response (“EDR”), encryption, and backups.
•
Third party vendor risk management.
•
Disaster recovery and incident response plans.
•
Security awareness training, social engineering testing, and remedial training.
•
Vulnerability scanning, remediation tracking, and reporting.
We regularly engage certified and reputable consultants and auditing firms to evaluate the maturity and effectiveness of our security, including testing the design and operational effectiveness of controls, penetration testing, engaging in independent reviews of policies and standards, and consulting on best practices.
CFBank also has a third-party risk management program. Management performs periodic reviews of third-party vendors on their cybersecurity and business continuity capabilities to ensure they meet contractual requirements and satisfactory audit testing results. Vendors not meeting CFBank’s risk requirements are notified to make improvements and, if the vendors cannot mitigate the identified risks, CFBank management looks to identify alternative vendors. Vendor risk assessments are retained by CFBank.
Governance
The Board of Directors, Audit Committee and the Information Technology (IT) Steering Committee, which is comprised of members from various departments including IT, Accounting, Compliance, Lending, Credit, Human Resources, Operations, Treasury Management, Treasury Support, Retail, Mortgage Sales, Mortgage Operations, Commercial Operations, and the Executive Team, provide oversight and direction of cybersecurity threats and risk management. The Board of Directors reviews and approves the Company’s policies related to Information Security and receives periodic updates from the IT Steering Committee and management in the areas of cybersecurity risks, controls, projects and initiatives, vulnerability assessments, vendor management, and security considerations.The Board of Directors is promptly notified and provided information on any cybersecurity incident that meets established reporting thresholds, as well as ongoing updates of any such incidents until they are resolved.
A dedicated team, led by the Senior Vice President of Information Technology and Information Security Officer (the “SVP of IT and ISO”) manages the day-to-day cybersecurity risk program and supervises internal personnel and relationships with external technology and security consultants.The SVP of IT and ISO has over 18 years of experience in the banking industry as it relates to strategy and cyber security and reports to the Chief Operating Officer, the IT Steering Committee, the Audit Committee, and the Board of Directors.
While we believe we have implemented robust security procedures and controls to mitigate cybersecurity threats, we cannot be certain that these measures will be successful. The threat from cybersecurity attacks is severe, attacks are sophisticated and increasing in volume, and attackers respond rapidly to changes in defensive measures. Although to date the Company has not detected a significant compromise, significant data loss or any material financial losses related to cybersecurity attacks, the Company’s systems and those of its customers and third-party service providers are under constant threat and it is possible that the Company could experience a significant event in the future. Risks and exposures related to cybersecurity attacks are expected to remain high for the foreseeable future due to the rapidly evolving nature and sophistication of these threats, as well as due to the expanding use of Internet banking, mobile banking and other technology-based products and services by us and our customers.
Item 2. Properties.
We currently conduct our business through eight branch offices located in Franklin, Cuyahoga, Delaware, Hamilton and Summit counties in Ohio and one branch office located in Marion County, Indiana as of December 31, 2025. The net book value of the Company’s real properties totaled $1.7 million at December 31, 2025, related to the owned facility used for the Company's branch office in Indianapolis, Indiana. CFBank leases its other seven branch offices in Columbus, Ohio, Cleveland, Ohio, Orange Village, Ohio, Fairlawn, Ohio, Blue Ash, Ohio, Cincinnati, Ohio. See Note 8 to the Consolidated Financial Statements included in this Form 10-K for further discussion.
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Locations
Administrative Office (leased facility):
4960 East Dublin Granville Road, Suite 400
Columbus, Ohio 43081
Branch Offices:
New Albany Branch (leased facility)
4960 East Dublin Granville Road, Suite 400
Columbus, Ohio 43081
Polaris Branch (leased facility)
1942 Polaris Parkway
Columbus, Ohio 43240
Pinecrest Branch (leased facility)
100 Park Ave, Suite 420.
Orange Village, Ohio 44122
Ohio City Branch (leased facility)
2715 Detroit Ave.
Cleveland, Ohio 44113
Fairlawn Branch (leased facility)
3009 Smith Road, Suite 100
Fairlawn, Ohio 44333
Blue Ash Branch (leased facility)
10300 Alliance Rd. #150
Cincinnati, Ohio 45242
Red Bank Branch (leased facility)
4770 Red Bank Expressway
Cincinnati, Ohio 45227
Indianapolis Branch (owned facility)
4729 East 82nd Street
Indianapolis, Indiana 46250
Item 3. Legal Proceedings.
We may, from time to time, be involved in various legal proceedings in the normal course of business. Periodically, there have been various claims and lawsuits involving CFBank, such as claims to enforce liens, condemnation proceedings on properties in which CFBank holds security interests, claims involving the making and servicing of real property loans and other issues incident to our banking business. We are not a party to any pending legal proceeding that management believes would have a material adverse effect on our financial condition or operations, if decided adversely to us.
Item 4. Mine Safety Disclosures.
Not Applicable
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PART II
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.
(a)
Market and Dividend Information
The (voting) common stock of CF Bankshares Inc. trades on the Nasdaq® Capital Market under the symbol “CFBK.” As of December 31, 2025, there were 6,341,649 shares of (voting) common stock outstanding and held by approximately 293 registered shareholders of record. As of December 31, 2025, the Company also had an aggregate of 76,700 shares of non-voting common stock outstanding which was held by one shareholder of record.
There was $0.30 per share in dividends declared and paid on our common stock during 2025, and equivalent dividends were declared and paid on our Series D Preferred Stock in the quarters ended March 31, June 30, September 30, and December 31, 2025. The Company presently anticipates continuing to pay dividends in the future at similar levels, subject to compliance with applicable legal and regulatory requirements. The Holding Company is subject to various legal and regulatory policies and guidelines impacting the Holding Company’s ability to pay dividends on its stock. In addition, banking regulations limit the amount of dividends that can be paid to the Holding Company by CFBank without prior regulatory approval and, thus, can limit the availability of funds available to the Holding Company for the payment of dividends on its stock. The Holding Company’s ability to pay dividends on its common stock is also conditioned upon the Holding Company continuing to make certain payments on, and no event of default occurring under, the Company’s fixed-to-floating rate subordinated debt and the subordinated debentures underlying the Holding Company’s trust preferred securities. Additional information regarding our ability to pay dividends is contained in the sections titled “Financial Condition - Stockholders’ equity” and “Liquidity and Capital Resources” in Management’s Discussion and Analysis of Financial Condition and Results of Operations in Item 7 of this Form 10-K and in Note 16 to the Consolidated Financial Statements included in this Form 10-K.
(b)
Not applicable.
(c)
The following table provides information concerning purchases of the Holding Company’s shares of common stock made by or on behalf of the Company or any “affiliated purchaser” as defined in Rule 10b-18(a)(3) under the Securities Exchange Act of 1934, as amended, during the three months ended December 31, 2025.
(1)
On February 4, 2025, the Company's Board of Directors authorized a stock repurchase program pursuant to which the Company is authorized to repurchase up to an aggregate of 325,000 shares, or approximately 5% of the Company's outstanding common stock, on or before January 31, 2026. On December 17, 2025, the Company's Board of Directors approved the extension of its stock repurchase program to August 15, 2026. As of December 31, 2025, 270,356 shares remained available to be purchased by the Company under this stock repurchase program.
Item 6. [Reserved]
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Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
FORWARD LOOKING STATEMENTS
Statements in this Form 10-K that are not statements of historical fact are forward-looking statements 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 share of common stock, capital structure and other financial items; (2) plans and objectives of the management or Boards of Directors of Holding Company or CFBank; (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, including, without limitation, those risks set forth in the section captioned “RISK FACTORS” in Part I, Item 1A of this Form 10-K.
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 Form 10-K 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.
CONDENSED CONSOLIDATED FINANCIAL DATA
The following information is derived from and should be read in conjunction with our audited Consolidated Financial Statements, the related Notes and Management’s Discussion and Analysis of Financial Condition and Results of Operations in Item 7 of this Form 10-K.
At December 31,
(Dollars in thousands)
Selected Financial Condition Data:
Foreclosed assets — — — — —
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For the year ended December 31,
(Dollars in thousands)
Summary of Operations:
Noninterest income:
Net loss on sale of equity security (103 ) — — — —
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At or for the Year ended December 31,
(Dollars in thousands)
Selected Financial Ratios and Other Data:
Performance Ratios (2)
Capital Ratios: (2)
Asset Quality Ratios: (2)
Per Share Data:
(1)
Loans and leases, net represents the recorded investment in loans net of the allowance for credit losses on loans and leases (ACL – Loans).
(2)
Asset quality ratios and capital ratios are end-of-period ratios. All other ratios are based on average monthly balances during the indicated periods.
(3)
Calculations of yield are presented on a taxable equivalent basis using the federal income tax rate of 21%.
(4)
The average interest rate spread represents the difference between the weighted average yield on average interest-earning assets and the weighted average cost of average interest-bearing liabilities.
(5)
The net interest margin represents net interest income as a percent of average interest-earning assets.
(6)
The efficiency ratio equals noninterest expense (excluding amortization of intangibles and foreclosed asset write-downs) divided by net interest income plus noninterest income (excluding gains or losses on securities transactions).
(7)
Regulatory capital ratios of CFBank.
(8)
Nonperforming loans consist of nonaccrual loans and other loans 90 days or more past due.
(9)
Nonperforming assets consist of nonperforming loans and foreclosed assets.
n/m - not meaningful
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Business Overview
The Holding Company is a bank holding company that owns 100% of the stock of CFBank, which was formed in Ohio in 1892 and converted from a federal savings association to a national bank on December 1, 2016. Prior to December 1, 2016, the Holding Company was a registered savings and loan holding company. Effective as of December 1, 2016 and in conjunction with the conversion of CFBank to a national bank, the Holding Company became a registered bank holding company subject to regulation and supervision by the Federal Reserve Board (the “Federal Reserve”). Effective as of July 27, 2020, the Holding Company changed its name from Central Federal Corporation to CF Bankshares Inc.
CFBank focuses on serving the financial needs of closely held businesses and entrepreneurs, by providing comprehensive Commercial, Retail, and Mortgage Lending services presence. In all regional markets, CFBank provides commercial loans and equipment leases, commercial and residential real estate loans and treasury management depository services, and full-service commercial and retail banking services and products. CFBank seeks to differentiate itself from its competitors by providing individualized service coupled with direct customer access to decision-makers, and ease of doing business. We believe that CFBank matches the sophistication of much larger banks, without the bureaucracy. CFBank also offers its clients the convenience of online banking, mobile banking and remote deposit capabilities.
Most of our deposits and loans come from our market area. Our principal market area for deposits and loans includes the following counties in Ohio and Indiana: Franklin County, Ohio through our offices in Columbus, Ohio; Delaware County, Ohio through our Polaris office in Columbus, Ohio; Cuyahoga County, Ohio through our office in Orange Village, Ohio and our Ohio City office in Cleveland, Ohio; Summit County, Ohio through our office in Fairlawn, Ohio; Hamilton County, Ohio through our offices in Blue Ash, Ohio and our Red Bank office in Cincinnati, Ohio; and Marion County, Indiana through our office in Indianapolis, Indiana. Because of CFBank’s concentration of business activities in Ohio, the Company’s financial condition and results of operations depend in large part upon economic conditions in Ohio.
Critical Accounting Policies and Estimates
We follow financial accounting and reporting policies that are in accordance with GAAP and conform to general practices within the banking industry. These policies are presented in Note 1 to our Consolidated Financial Statements. Some of these accounting policies are considered to be critical accounting policies, which are those policies that are both most important to the portrayal of the Company’s financial condition and results of operations, and require management’s most difficult, subjective or complex judgments, often as a result of the need to make estimates about the effect of matters that are inherently uncertain. Application of assumptions different than those used by management could result in material changes in our financial condition or results of operations. These policies, current assumptions and estimates utilized, and the related disclosure of this process, are determined by management and routinely reviewed with the Audit Committee of the Board of Directors. We believe that the judgments, estimates and assumptions used in the preparation of the Consolidated Financial Statements were appropriate given the factual circumstances at the time.
We have identified the following accounting policy as a critical accounting policy, and an understanding of this policy is necessary to understand our financial statements. The following discussion details the critical accounting policy and the nature of the estimates made by management.
Determination of the allowance for credit losses on loans (ACL – Loans) . The ACL - Loans represents the Company's best estimate of current expected credit losses (CECL) on loans and leases using relevant available information, from internal and external sources, related to past events, current conditions, and reasonable and supportable forecasts. Historical credit loss experience provides the basis for the estimation of expected credit losses. The CECL calculation is performed and evaluated quarterly and losses are estimated over the expected life of the loan. The level of the ACL - Loans is believed to be adequate to absorb all expected future losses inherent in the loan portfolio at the measurement date.
In calculating the ACL - Loans, the loan portfolio was pooled into loan segments with similar risk characteristics. Common characteristics include the type or purpose of the loan, underlying collateral and historical/expected credit loss patterns. In developing the loan segments, the Company analyzed the degree of correlation in how loans within each portfolio respond when subjected to varying economic conditions and scenarios as well as other portfolio stress factors.
The expected credit losses are measured over the life of each loan segment utilizing the average charge-off methodology combined with economic forecast models to estimate the current expected credit loss inherent in the loan portfolio. This approach is also leveraged to estimate the expected credit losses associated with unfunded loan commitments incorporating expected utilization rates.
The Company sub-segmented certain commercial portfolios by risk level where appropriate. The Company utilized a one-year reasonable and supportable economic forecast period.
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The Company qualitatively adjusts model results for risk factors that are not inherently considered in the historical losses, but are nonetheless relevant in assessing the expected credit losses within the loan portfolio. These adjustments may increase or decrease the estimate of expected credit losses based upon the assessed level of risk for each qualitative factor. The various risks that may be considered in making qualitative adjustments include, among other things, the impact of (i) changes in economic conditions, (ii) changes in the nature and volume of the loan portfolio, (iii) changes in the existence, growth and effect of any concentrations in credit, (iv) changes in lending policies and procedures, including changes in underwriting standards and practices for collections, write-offs, and recoveries, (v) changes in the quality of the credit review function, (vi) changes in the experience, ability and depth of lending management and staff, (vii) changes in the volume and severity of past due and adversely classified loans and the volume of non-accrual loans, (viii) changes in the value of underlying collateral for collateral-dependent loans, and (ix) other environmental factors such as regulatory, legal and technological considerations, as well as competition.
In some cases, management may determine that an individual loan exhibits unique risk characteristics which differentiate the loan from other loans within the loan segments. In such cases, the loans are evaluated for expected credit losses on an individual basis and excluded from the collective evaluation. Specific reserve allocations of the allowance for credit losses are determined by analyzing the borrower's ability to repay amounts owed, collateral deficiencies, the relative risk grade of the loan and economic conditions affecting the borrower's industry, among other things. A loan is considered to be collateral dependent when, based upon management's assessment, the borrower is experiencing financial difficulty and repayment is expected to be provided substantially through the operation or sale of the collateral. In such cases, expected credit losses are based on the fair value of the collateral at the measurement date, adjusted for estimated selling costs if satisfaction of the loan depends on the sale of the collateral. The fair value of collateral supporting collateral dependent loans is evaluated on a quarterly basis. Based on the variables involved and the fact that management must make judgments about outcomes that are inherently uncertain, the determination of the ACL - Loans is considered to be a critical accounting policy. Additional information regarding this policy is included in the section titled “Financial Condition - Allowance for Credit Losses on Loans” and in Notes 1, 4 and 6 to the Consolidated Financial Statements included in this Form 10-K.
General
Our net income is dependent primarily on net interest income, which is the difference between the interest income earned on loans and securities and our cost of funds, consisting of interest paid on deposits and borrowed funds. Net interest income is affected by regulatory, economic and competitive factors that influence interest rates, loan demand, the level of nonperforming assets and deposit flows.
Net income is also affected by, among other things, provisions for credit losses, loan fee income, service charges, gains on loan sales, operating expenses, and taxes. Operating expenses principally consist of employee compensation and benefits, occupancy, advertising and marketing, data processing, professional fees, FDIC insurance premiums and other general and administrative expenses. Our results of operations are significantly affected by general economic and competitive conditions, changes in market interest rates and real estate values, government policies and actions of regulatory authorities. Our regulators have extensive discretion in their supervisory and enforcement activities, including the authority to impose restrictions on our operations, to classify our assets and to require us to increase the level of our allowance for credit losses. Any change in such regulation and oversight, whether in the form of regulatory policy, regulations, legislation or supervisory action, may have a material impact on our business, financial condition, results of operations and/or cash flows.
Management’s discussion and analysis represents a review of our consolidated financial condition and results of operations for the periods presented. This review should be read in conjunction with our Consolidated Financial Statements and related Notes.
Financial Condition
General.Assets totaled $2.1 billion at December 31, 2025 and increased $51.8 million, or 2.5%, from $2.1 billion at December 31, 2024. The increase was primarily due to a $23.7 million increase in cash and cash equivalents and a $16.8 million increase in net loan balances.
Cash and cash equivalents.Cash and cash equivalents totaled $259.0 million at December 31, 2025, and increased $23.7 million, or 10.1%, from $235.3 million at December 31, 2024. The increase in cash and cash equivalents was primarily attributed to an increase in deposit balances and FHLB advances and other borrowings, partially offset by the increase in net loan balances.
Securities. Securities available for sale totaled $17.5 million at December 31, 2025, and increased $8.8 million, or 101.5%, compared to $8.7 million at December 31, 2024. The increase was primarily due to the purchase of a new security, partially offset by principal maturities. Equity securities totaled $0 at December 31, 2025 and $5.0 million at December 31, 2024. The decline in equity securities was due to the sale of the security during 2025.
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Loans held for sale. Loans held for sale totaled $5.6 million at December 31, 2025 and increased $3.0 million, or 113.9%, from $2.6 million at December 31, 2024.
Loans and Leases. Net loans and leases totaled $1.74 billion at December 31, 2025 and increased $16.8 million, or 1.0%, from $1.72 billion at December 31, 2024. The increase in net loans and leases from December 31, 2024, was primarily due to a $73.9 million increase in commercial real estate loan balances, a $20.5 million increase in Multi-family residential loan balances, a $6.8 million increase in construction loan balances, and a $2.5 million increase in home equity lines of credit balances, partially offset by a $49.4 million decrease in commercial and industrial (C&I) loan balances and a $37.6 million decrease in single-family residential loan balances. The decrease in single-family residential loan balances included the sale of two portfolios of loans in the first quarter of 2025 totaling $18.1 million.
Allowance for Credit Losses on Loans (ACL – Loans). The ACL – Loans totaled $17.7 million at December 31, 2025, and increased $204,000, or 1.2%, from $17.5 million at December 31, 2024. The increase in ACL - Loans is due to $7.5 million in loan provision expense, partially offset by $7.3 million in net charge-offs during the year ended December 31, 2025. The ratio of the ACL - Loans to total loans was 1.01% at December 31, 2025, compared to 1.0% at December 31, 2024.
The ACL - Loans is a valuation account that is deducted from the loans' amortized cost basis to present the net amount expected to be collected on loans over the expected remaining life. Loans are charged off against the allowance when the uncollectibility of the loan is confirmed. Expected recoveries do not exceed the aggregate of amounts previously charged off and expected to be charged off. Adjustments to the ACL - Loans are reported in the income statement as a component of provision for credit loss. The Company has made the accounting policy election to exclude accrued interest receivable on loans from the estimate of credit losses. Further information regarding the policies and methodology used to estimate the ACL - Loans is detailed in the accompanying Notes to the Consolidated Financial Statements included in this Form 10-K.
Individually evaluated loans totaled $12.4 million at December 31, 2025, and decreased $437,000, or 3.4%, from $12.8 million at December 31, 2024. The amount of the ACL - Loans specifically calculated for individually evaluated loans totaled $2.8 million at December 31, 2025 and $2.3 million at December 31, 2024.
The reserve on individually evaluated loans is based on management’s estimate of the present value of estimated future cash flows using the loan’s effective rate or the fair value of collateral, if repayment is expected solely from the collateral. On at least a quarterly basis, management reviews each individually evaluated loan to determine whether it should have a reserve or partial charge-off. Management relies on appraisals or internal evaluations to help make this determination. Determination of whether to use an updated appraisal or internal evaluation is based on factors including, but not limited to, the age of the loan and the most recent appraisal, condition of the property and whether we expect the collateral to go through the foreclosure or liquidation process. Management considers the need for a downward adjustment to the valuation based on current market conditions and on management’s analysis, judgment and experience. The amount ultimately charged-off for these loans may be different from the reserve, as the ultimate liquidation of the collateral and/or projected cash flows may be different from management’s estimates.
Nonperforming loans, which are nonaccrual loans and loans at least 90 days past due but still accruing interest, totaled $15.3 million at December 31, 2025, and increased $282,000 from $15.0 million at December 31, 2024. The increase in nonperforming loans in 2025 compared to 2024 was primarily driven by nine commercial loans, totaling $2.7 million, two commercial real estate loans, totaling $5.2 million, four single-family residential loans, totaling $913,000, and one home equity line of credit, totaling $87,000, becoming nonaccrual during the year ended December 31, 2025, partially offset by paydowns and approximately $7.1 million in charges-offs on loans that were in nonaccrual at December 31, 2024. The ratio of nonperforming loans to total loans was 0.87% at December 31, 2025 compared to 0.87% at December 31, 2024.
The following table presents information regarding the number and balance of nonperforming loans at December 31, 2025 and December 31, 2024:
# of loans Balance # of loans Balance
(dollars in thousands)
Single-family residential real estate 6 1,847 4 1,649
Home equity lines of credit 2 97 1 13
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During the year ended December 31, 2025, the Company did not modify any loans, where the borrower was experiencing financial difficulty. During the year ended December 31, 2024, the Company modified one commercial loan, with an amortized cost basis of $4.3 million at December 31, 2024, where the borrower was experiencing financial difficulty. The loan was modified to defer principal and interest payments, increase the interest rate, extend the maturity date and institute a minimum EBITDA covenant.
We have incorporated the regulatory asset classifications as a part of our credit monitoring and internal loan risk rating system. In accordance with regulations, problem loans are classified as special mention, substandard, doubtful or loss, and the classifications are subject to review by the regulators. Assets designated as special mention are considered criticized assets. Assets designated as substandard, doubtful or loss are considered classified assets. See Note 4 to the Consolidated Financial Statements included in this Form 10-K for additional information regarding the regulatory asset classifications.
The level of total criticized and classified loans decreased by $4.3 million, or 13.0%, during the year ended December 31, 2025. Loans designated as special mention increased $72,000, or 0.4%, and totaled $18.5 million at December 31, 2025, compared to $18.5 million at December 31, 2024. Loans classified as substandard decreased $4.3 million and totaled $9.9 million at December 31, 2025, compared to $14.2 million at December 31, 2024. Loans designated as doubtful totaled $385,000 at December 31, 2025 and December 31, 2024. See Note 4 to the Consolidated Financial Statements included in this Form 10-K for additional information regarding risk classification of loans.
In addition to credit monitoring through our internal loan risk rating system, we also monitor past due information for all loan segments. Loans that are not rated under our internal credit rating system include groups of homogenous loans, such as single-family residential real estate loans and consumer loans. The primary credit indicator for these groups of homogenous loans is past due information.
Total past due loans increased $472,000 and totaled $12.9 million at December 31, 2025, compared to $12.5 million at December 31, 2024. Past due loans totaled 0.7% of the loan portfolio at December 31, 2025 and December 31, 2024. See Note 4 to the Consolidated Financial Statements for additional information regarding loan delinquencies.
All lending activity involves risk of loss. Certain types of loans, such as option adjustable-rate mortgage (“ARM”) products, junior lien mortgages, high loan-to-value ratio mortgages, interest only loans, subprime loans and loans with initial teaser rates, can have a greater risk of non-collection than other loans. CFBank has not engaged in subprime lending or used option ARM products.
Loans that contain interest-only payments may present a higher risk than those loans with an amortizing payment that includes periodic principal reductions. Interest only loans are primarily commercial lines of credit secured by business assets and inventory, and consumer home equity lines of credit secured by the borrower’s primary residence. Due to the fluctuations in business assets and inventory of our commercial borrowers, CFBank has increased risk due to a potential decline in collateral values without a corresponding decrease in the outstanding principal. Interest only commercial lines of credit totaled $111.2 million, or 30.1% of CFBank’s commercial loan portfolio at December 31, 2025, compared to $131.2 million, or 31.3%, at December 31, 2024. Interest only home equity lines of credit totaled $41.1 million, or 98.5% of the total home equity lines of credit, at December 31, 2025 compared to $38.8 million, or 98.1%, at December 31, 2024.
We believe the ACL - Loans is adequate to absorb current expected credit losses in the loan portfolio as of December 31, 2025; however, future additions to the allowance may be necessary based on factors including, but not limited to, deterioration in client business performance, recessionary economic conditions, declines in borrowers’ cash flows and market conditions which result in lower real estate values. Additionally, various regulatory agencies, as an integral part of their examination process, periodically review the ACL - Loans. Such agencies may require additional provisions for credit losses based on judgments and estimates that differ from those used by management, or on information available at the time of their review. Management continues to diligently monitor credit quality in the existing portfolio and analyze potential loan opportunities carefully in order to manage credit risk. An increase in credit losses could occur if economic conditions and factors which affect credit quality, real estate values and general business conditions worsen or do not improve.
Foreclosed assets. There were no foreclosed assets at December 31, 2025 or December 31, 2024. The Company acquired a single-family residential property during the first quarter of 2025 by obtaining a deed in lieu of foreclosure. The property, which was valued at $524,000, was sold during the third quarter of 2025. The level of foreclosed assets and charges to foreclosed assets expense may change in the future in connection with workout efforts related to foreclosed assets, nonperforming loans and other loans with credit issues.
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Premises and equipment. Premises and equipment, net, totaled $3.5 million at December 31, 2025, and increased $11,000, or 0.3%, from $3.5 million at December 31, 2024. See Note 8 to the Consolidated Financial Statements included in this Form 10-K for additional information.
Deposits. Deposits totaled $1.78 billion at December 31, 2025, an increase of $24.9 million, or 1.4%, from $1.76 billion at December 31, 2024. The increase was primarily due to a $13.0 million increase in interest-bearing account balances, coupled with an $11.9 million increase in noninterest-bearing accounts balances.
At December 31, 2025, approximately 29.5% of our deposit balances exceeded the FDIC insurance limit of $250,000, as compared to approximately 29.8% at December 31, 2024.
CFBank is a participant in the Certificate of Deposit Account Registry Service® (CDARS) and Insured Cash Sweep (ICS) programs offered through IntraFi Network. IntraFi works with a network of banks to offer products that can provide FDIC insurance coverage in excess of $250,000 through these innovative products. Brokered deposits, including CDARS and ICS deposits that qualify as brokered, totaled $400.4 million at December 31, 2025, and decreased $20.4 million, or 4.9%, from $420.8 million at December 31, 2024. Customer balances in the CDARS reciprocal and ICS reciprocal programs, which do not qualify as brokered, totaled $278.7 million at December 31, 2025 and increased $7.0 million, or 2.6%, from $271.7 million at December 31, 2024.
FHLB advances and other debt. FHLB advances and other debt totaled $101.0 million at December 31, 2025, a increase of $8.3 million when compared to $92.7 million at December 31, 2024. The increase was primarily due to a $10 million increase in the outstanding balance on the Holding Company's credit facility.
The Holding Company has a credit facility with a third-party bank. Prior to April 30, 2025, the credit facility had a borrowing limit of $35 million with a revolving feature until May 21, 2024, at which time the outstanding balance was converted to a 10-year term note on a graduated 10-year amortization. Borrowings on the credit facility bore interest at a fixed rate of 3.85% until May 21, 2026, at which time the interest rate then would convert to a floating rate equal to PRIME with a floor of 3.25%. Effective April 30, 2025, an additional $10 million revolving line of credit was added to the credit facility and the interest rate was amended to reset the fixed rate to 6.00% until May 21, 2026, at which time the rate will convert to a floating rate equal to PRIME. The $10 million revolving line of credit matures on April 30, 2027. The revolving line of credit provided an additional $10 million that was injected as additional Tier 1 capital into CFBank during the second quarter of 2025. As of December 31, 2025, the Company had an outstanding balance, net of unamortized debt issuance costs, of $43.0 million on the facility.
At December 31, 2025 and 2024, CFBank had availability in unused lines of credit at two commercial banks in the amounts of $50.0 million and $15.0 million. There were no outstanding borrowings on either line at December 31, 2025 or December 31, 2024.
Subordinated debentures Subordinated debentures totaled $15.0 million at December 31, 2025 and December 31, 2024. In December 2018, the Holding Company entered into subordinated note purchase agreements with certain qualified institutional buyers and completed a private placement of $10.0 million of fixed-to-floating rate subordinated notes, resulting in net proceeds of $9,612,000 after deducting unamortized debt issuance costs of approximately $388,000. In 2003, the Holding Company issued subordinated debentures in exchange for the proceeds of a $5.0 million trust preferred securities offering issued by a trust formed by the Holding Company. The terms of the subordinated debentures allow for the Holding Company to defer interest payments for a period not to exceed five years. Interest payments on the subordinated debentures were current at December 31, 2025 and December 31, 2024. See Note 11 to the Consolidated Financial Statements included in this Form 10-K for additional information.
Stockholders’ equity. Stockholders’ equity totaled $184.4 million at December 31, 2025, an increase of $16.0 million, or 9.5%, from $168.4 million at December 31, 2024. The increase in total stockholders’ equity was primarily attributed to net income, partially offset by $1.9 million in dividend payments.
Management continues to proactively monitor capital levels and ratios in its on-going capital planning process. CFBank has leveraged its capital to support balance sheet growth and drive increased net interest income. Management remains focused on growing capital though improving results from operations; however, should the need arise, CFBank has additional sources of capital and alternatives it could utilize as further discussed in the “Liquidity and Capital Resources” section below.
Comparison of Results of Operations for 2025 and 2024
General. Net income for the year ended December 31, 2025 totaled $17.5 million (or $2.69 per diluted common share) and increased $4.1 million, or 31.0%, compared to net income of $13.4 million (or $2.06 per diluted common share) for the year ended December 31, 2024. The increase in net income was primarily due to an increase in net interest income and an increase in noninterest income, which was partially offset by an increase in provision expense and an increase in noninterest expense.
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Net interest income.Net interest income is a significant component of net income, and consists of the difference between interest income generated on interest-earning assets and interest expense incurred on interest-bearing liabilities. Net interest income is primarily affected by the volumes, interest rates and composition of interest-earning assets and interest-bearing liabilities. The tables below titled “Average Balances, Interest Rates and Yields” and “Rate/Volume Analysis of Net Interest Income” provide important information on factors impacting net interest income and should be read in conjunction with this discussion of net interest income.
Net interest income totaled $55.0 million for the year ended December 31, 2025 and increased $8.4 million, or 18.0%, compared to net interest income of $46.6 million for the year ended December 31, 2024. The increase in net interest income was primarily due to a $6.8 million, or 9.4%, decrease in interest expense, coupled with a $1.6 million, or 1.4%, increase in interest income. The decrease in interest expense was attributed to a 46bps decrease in the average cost of funds on interest-bearing liabilities, partially offset by a $12.2 million, or 0.8%, increase in average interest-bearing liabilities. The increase in interest income was primarily attributed to a $68.7 million, or 3.6%, increase in average interest-earning assets outstanding, partially offset by a 13bps decrease in the average yield on interest-earning assets. The net interest margin of 2.77% for the year ended December 31, 2025 increased 34bps compared to the net interest margin of 2.43% for the year ended December 31, 2024.
Interest income totaled $120.0 million for the year ended December 31, 2025, and increased $1.6 million, or 1.4%, compared to $118.4 million for the year ended December 31, 2024. The increase in interest income was primarily attributed to a $39.6 million, or 2.3%, increase in average loans and leases and loans held for sale.
Interest expense totaled $65.0 million for the year ended December 31, 2025, and decreased $6.8 million, or 9.4%, compared to $71.7 million for the year ended December 31, 2024. The decrease in interest expense was primarily attributed to a 56bps decrease in the average rate of interest-bearing deposits, partially offset by a $24.9 million, or 1.7%, increase in average interest-bearing deposits.
Provision for credit losses. The provision for credit losses expense for the year ended December 31, 2025 was $8.2 million, and increased $1.5 million, or 22.4%, compared to $6.7 million for the year ended December 31, 2024. Net charge-offs for the year ended December 31, 2025 totaled $7.3 million, compared to net charge-offs of $5.5 million for the year ended December 31, 2024. The increase in charge-offs was driven by the full charge-off of a non-core loan in 2025 totaling $7.0 million. This loan relationship has no remaining book balance.
The following table presents information regarding net charge-offs (recoveries) for 2025 and 2024 (in thousands):
(Dollars in thousands) Net charge-offs (recoveries)
Single-family residential real estate (9 ) (28 )
Home equity lines of credit (2 ) (6 )
Other consumer loans - 280
See the section above titled “Financial Condition – Allowance for Credit Losses on Loans” for additional information.
Noninterest income. Noninterest income for the year ended December 31, 2025 totaled $5.9 million and increased $752,000, or 14.5%, compared to $5.2 million for the year ended December 31, 2024. The increase was primarily due to a $371,000, or 14.8%, increase in service charges on deposit accounts.
Noninterest expense. Noninterest expense for the year ended December 31, 2025 totaled $31.2 million and increased $2.3 million, or 7.7%, compared to $28.9 million for the year ended December 31, 2024. The increase in noninterest expense during the year ended December 31, 2025 was primarily due to a $1.5 million increase in salaries and employee benefits expense and a $428,000 increase in professional fee expense.
Income taxes. Income tax expense was $4.0 million for the year ended December 31, 2025, an increase of $1.2 million, compared to $2.8 million for the year ended December 31, 2024. The effective tax rate for the year ended December 31, 2025 was approximately 18.5%, as compared to approximately 17.1% for the year ended December 31, 2024.
Our deferred tax assets are composed of U.S. net operating losses (“NOLs”), and other temporary book to tax differences. When determining the amount of deferred tax assets that are more-likely-than-not to be realized, and therefore recorded as a benefit, the Company conducts a regular assessment of all available information. This information includes, but is not limited to, taxable income
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in prior periods, projected future income and projected future reversals of deferred tax items. Based on these criteria, the Company determined as of December 31, 2025 that no valuation allowance was required against the net deferred tax asset.
The Company records income tax expense based on the federal statutory rate adjusted for the effect of other items such as low income housing credits, historic tax credits, bank owned life insurance and other miscellaneous items.
Comparison of Results of Operations for 2024 and 2023
General. Net income for the year ended December 31, 2024 totaled $13.4 million (or $2.06 per diluted common share) and decreased $3.5 million, or 21.0%, compared to net income of $16.9 million (or $2.63 per diluted common share) for the year ended December 31, 2023. The decrease in net income was primarily due to an increase in provision expense, a decrease in net interest income and an increase in noninterest expense, which was partially offset by an increase in noninterest income.
Net interest income.Net interest income is a significant component of net income, and consists of the difference between interest income generated on interest-earning assets and interest expense incurred on interest-bearing liabilities. Net interest income is primarily affected by the volumes, interest rates and composition of interest-earning assets and interest-bearing liabilities. The tables below titled “Average Balances, Interest Rates and Yields” and “Rate/Volume Analysis of Net Interest Income” provide important information on factors impacting net interest income and should be read in conjunction with this discussion of net interest income.
Net interest income totaled $46.6 million for the year ended December 31, 2024 and decreased $996,000, or 2.1%, compared to net interest income of $47.6 million for the year ended December 31, 2023. The decrease in net interest income was primarily due to a $11.1 million, or 18.3%, increase in interest expense, partially offset by a $10.1 million, or 9.3%, increase in interest income. The increase in interest expense was attributed to a 55bps increase in the average cost of funds on interest-bearing liabilities, coupled with a $57.5 million, or 3.8%, increase in average interest-bearing liabilities. The increase in interest income was primarily attributed to a 28bps increase in the average yield on interest-earning assets, coupled with a $79.3 million, or 4.3%, increase in average interest-earning assets outstanding. The net interest margin of 2.43% for the year ended December 31, 2024 decreased 16bps compared to the net interest margin of 2.59% for the year ended December 31, 2023.
Interest income totaled $118.4 million for the year ended December 31, 2024, and increased $10.1 million, or 9.3%, compared to $108.3 million for the year ended December 31, 2023. The increase in interest income was primarily attributed to a 31bps increase in the average yield on loans and leases and loans held for sale, coupled with a $67.3 million, or 4.1%, increase in average loans and leases and loans held for sale.
Interest expense totaled $71.7 million for the year ended December 31, 2024, and increased $11.1 million, or 18.3%, compared to $60.6 million for the year ended December 31, 2023. The increase in interest expense was primarily attributed to a 58bps increase in the average rate of interest-bearing deposits, coupled with a $58.1 million, or 4.2%, increase in average interest-bearing deposits.
Provision for credit losses. The provision for credit losses expense for the year ended December 31, 2024 was $6.7 million, and increased $4.4 million, or 190.8%, compared to $2.3 million for the year ended December 31, 2023. Net charge-offs for the year ended December 31, 2024 totaled $5.5 million, compared to net charge-offs of $646,000 for the year ended December 31, 2023.
The following table presents information regarding net charge-offs (recoveries) for 2024 and 2023 (in thousands):
(Dollars in thousands) Net charge-offs (recoveries)
Single-family residential real estate (28 ) (40 )
Home equity lines of credit (6 ) (4 )
Other consumer loans 280 —
See the section above titled “Financial Condition – Allowance for Credit Losses on Loans” for additional information.
Noninterest income. Noninterest income for the year ended December 31, 2024 totaled $5.2 million and increased $1.2 million, or 28.4%, compared to $4.0 million for the year ended December 31, 2023. The increase was primarily due to a $939,000, or 60.0%, increase in service charges on deposit accounts.
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Noninterest expense. Noninterest expense for the year ended December 31, 2024 totaled $28.9 million and increased $569,000, or 2.0%, compared to $28.4 million for the year ended December 31, 2023. The increase in noninterest expense during the year ended December 31, 2024 was primarily due to a $781,000 increase in loan expense.
Income taxes. Income tax expense was $2.8 million for the year ended December 31, 2024, a decrease of $1.2 million, compared to $4.0 million for the year ended December 31, 2023. The effective tax rate for the year ended December 31, 2024 was approximately 17.1%, as compared to approximately 19.3% for the year ended December 31, 2023. The reduction in the effective tax rate for the year ended December 31, 2024 was a result of a decrease in pre-tax net income combined with an increase in the benefits received from tax-credit investments and tax exempt income.
Our deferred tax assets are composed of U.S. net operating losses (“NOLs”), and other temporary book to tax differences. When determining the amount of deferred tax assets that are more-likely-than-not to be realized, and therefore recorded as a benefit, the Company conducts a regular assessment of all available information. This information includes, but is not limited to, taxable income in prior periods, projected future income and projected future reversals of deferred tax items. Based on these criteria, the Company determined as of December 31, 2024 that no valuation allowance was required against the net deferred tax asset.
The Company records income tax expense based on the federal statutory rate adjusted for the effect of other items such as low income housing credits, historic tax credits, bank owned life insurance and other miscellaneous items.
Average Balances, Interest Rates and Yields. The following table presents, for the periods indicated, the total dollar amount of fully taxable equivalent interest income from average interest-earning assets and the resultant yields, as well as the interest expense on average interest-bearing liabilities, expressed in both dollars and rates. Average balances are computed using month-end balances.
For the Years Ended December 31,
Average Interest Average Average Interest Average Average Interest Average
Outstanding Earned/ Yield/ Outstanding Earned/ Yield/ Outstanding Earned/ Yield/
Balance Paid Rate Balance Paid Rate Balance Paid Rate
(Dollars in thousands)
Interest-earning assets:
Interest-bearing liabilities:
(1)
Average balance is computed using the carrying value of securities. Average yield is computed using the historical amortized cost average balance for available for sale securities.
(2)
Average yields and interest earned are stated on a fully taxable equivalent basis.
(3)
Average balance is computed using the recorded investment in loans net of the ACL and includes nonperforming loans.
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Rate/Volume Analysis of Net Interest Income. The following table presents the dollar amount of changes in interest income and interest expense for major components of interest-earning assets and interest-bearing liabilities. It distinguishes between the increase and decrease related to changes in balances and/or changes in interest rates. For each category of interest-earning assets and interest-bearing liabilities, information is provided on changes attributable to (i) changes in volume (i.e., changes in volume multiplied by the prior rate) and (ii) changes in rate (i.e., changes in rate multiplied by the prior volume). For purposes of this table, changes attributable to both rate and volume which cannot be segregated have been allocated proportionately to the change due to volume and the change due to rate.
Compared to Year Ended Compared to Year Ended
Increase (decrease) due to Increase (decrease) due to
Rate Volume Net Rate Volume Net
(Dollars in thousands)
Interest-earning assets:
Interest-bearing liabilities:
(1)
Securities amounts are presented on a fully taxable equivalent basis.
Liquidity and Capital Resources
In general terms, liquidity is a measurement of an enterprise’s ability to meet cash needs. The primary objective in liquidity management is to maintain the ability to meet loan commitments and to repay deposits and other liabilities in accordance with their terms without an adverse impact on current or future earnings. Principal sources of funds are deposits; amortization and prepayments of loans; maturities, sales and principal receipts of securities available for sale; borrowings; and operations. While maturities and scheduled amortization of loans are predictable sources of funds, deposit flows and loan prepayments are greatly influenced by general interest rates, economic conditions and competition.
CFBank is required by regulation to maintain sufficient liquidity to ensure its safe and sound operation. Thus, adequate liquidity may vary depending on CFBank’s overall asset/liability structure, market conditions, the activities of competitors, the requirements of our own deposit and loan customers and regulatory considerations. Management believes that each of the Holding Company’s and CFBank’s current liquidity is sufficient to meet its daily operating needs and fulfill its strategic planning.
Liquidity management is both a daily and long-term responsibility of management. We adjust our investments in liquid assets, primarily cash, short-term investments and other assets that are widely traded in the secondary market, based on our ongoing assessment of expected loan demand, expected deposit flows, yields available on interest-earning deposits and securities and the objective of our asset/liability management program. In addition to liquid assets, we have other sources of liquidity available including, but not limited to, access to advances from the FHLB and borrowings from the FRB and our commercial bank lines of credit.
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The following table summarizes CFBank’s cash available from liquid assets and borrowing capacity at December 31, 2025 and 2024.
(Dollars in thousands)
Unused commercial bank lines of credit 65,000 65,000
Cash, unpledged securities and deposits in other financial institutions increased $35.4 million, or 14.8%, to $273.3 million at December 31, 2025, compared to $237.9 million at December 31, 2024. The increase was primarily attributed to an increase in deposits and an increase in FHLB borrowings and other debt, partially offset by an increase in net loans.
CFBank’s additional borrowing capacity with the FHLB decreased $1.9 million, or 1.0%, to $184.4 million at December 31, 2025, compared to $186.3 million at December 31, 2024.
CFBank’s additional borrowing capacity at the FRB decreased $5.1 million, or 4.0%, to $122.4 million at December 31, 2025 from $127.4 million at December 31, 2024. CFBank is eligible to participate in the FRB’s primary credit program, providing CFBank access to short-term funds at any time, for any reason, based on the collateral pledged.
CFBank’s borrowing capacity with both the FHLB and FRB may be negatively impacted by changes such as, but not limited to, further tightening of credit policies by the FHLB or FRB, deterioration in the credit performance of CFBank’s loan portfolio or CFBank’s financial performance, or a decrease in the balance of pledged collateral.
CFBank had $65.0 million of availability in unused lines of credit with two commercial banks at December 31, 2025 and December 31, 2024.
Deposits are obtained predominantly from the markets in which CFBank’s offices are located. We rely primarily on a willingness to pay market-competitive interest rates to attract and retain retail deposits. Accordingly, rates offered by competing financial institutions may affect our ability to attract and retain deposits. CFBank relies on competitive interest rates, customer service, and relationships with customers to retain deposits.
The Holding Company has more limited sources of liquidity than CFBank. In general, in addition to its existing liquid assets, sources of liquidity include funds raised in the securities markets through debt or equity offerings, funds borrowed from third party banks or other lenders, dividends received from CFBank or the sale of assets.
Management believes that the Holding Company had adequate funds and sources of liquidity at December 31, 2025 to meet its current and anticipated operating needs at this time. The Holding Company’s current cash requirements include operating expenses and interest on subordinated debentures and other debt. The Company may also pay dividends on its common stock, if and when declared by the Board of Directors.
Currently, annual debt service on the subordinated debentures underlying the Company’s trust preferred securities is approximately $385,000. Prior to July 1, 2023, the subordinated debentures had a variable rate of interest, which reset quarterly, equal to the three-month London Interbank Offered Rate (LIBOR) plus 2.85%. Effective July 1, 2023, the rate of interest on the subordinated debentures resets quarterly to the three-month Secured Overnight Financing Rate (SOFR) plus 3.112%, which was 6.80% at December 31, 2025.
Currently, the annual debt service on the Company’s $10 million of fixed-to-floating rate subordinated notes is approximately $875,000. The subordinated notes initially bore a fixed rate of 7.00% until December 2023, and now the interest rate resets quarterly to a rate equal to the current three-month SOFR plus 4.402%, which was 8.09% at December 31, 2025.
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The Holding Company has a credit facility with a third-party bank. Prior to April 30, 2025, the credit facility had a borrowing limit of $35 million with a revolving feature until May 21, 2024, at which time the outstanding balance was converted to a 10-year term note on a graduated 10-year amortization. Borrowings on the credit facility bore interest at a fixed rate of 3.85% until May 21, 2026, at which time the interest rate would convert to a floating rate equal to PRIME with a floor of 3.25%. Effective April 30, 2025, an additional $10 million revolving line of credit was added to the credit facility and the interest rate was amended to reset the fixed rate to 6.00% until May 21, 2026, at which time the rate will convert to a floating rate equal to PRIME. The $10 million revolving line of credit matures on April 30, 2027. The revolving line of credit provided an additional $10 million that was injected as additional Tier 1 capital into CFBank during the second quarter of 2025. At December 31, 2025, the Company had an outstanding balance, net of unamortized debt issuance costs, of $43.0 million on the facility.
The ability of the Holding Company to pay dividends on its common stock is dependent upon the amount of cash and liquidity available at the Holding Company level, as well as the receipt of dividends and other distributions from CFBank to the extent necessary to fund such dividends.
The Holding Company is a legal entity that is separate and distinct from CFBank, which has no obligation to make any dividends or other funds available for the payment of dividends by the Holding Company. Banking regulations limit the amount of dividends that can be paid to the Holding Company by CFBank without prior regulatory approval. Generally, financial institutions may pay dividends without prior regulatory approval as long as the dividend does not exceed the total of the current calendar year-to-date earnings plus any earnings from the previous two years not already paid out in dividends, and as long as the financial institution remains well capitalized after the dividend payment.
The Holding Company also is subject to various legal and regulatory policies and requirements impacting the Holding Company’s ability to pay dividends on its stock. In addition, the Holding Company’s ability to pay dividends on its stock is conditioned upon the payment, on a current basis, of quarterly interest payments on the subordinated debentures underlying the Company’s trust preferred securities. Finally, under the terms of the Company’s fixed-to-floating rate subordinated debt, the Holding Company’s ability to pay dividends on its stock is conditioned upon the Holding Company continuing to make required principal and interest payments, and not incurring an event of default, with respect to the subordinated debt.
Federal income tax laws provided deductions, totaling $2.3 million, for thrift bad debt reserves established before 1988. Accounting standards do not require a deferred tax liability to be recorded on this amount, which otherwise would have totaled $473,000 at year-end 2025. However, if CFBank were wholly or partially liquidated or otherwise ceases to be a bank, or if tax laws were to change, this amount would have to be recaptured and a tax liability recorded. Additionally, any distributions in excess of CFBank’s current or accumulated earnings and profits would reduce amounts allocated to its bad debt reserve and create a tax liability for CFBank.
Impact of Inflation
The financial statements and related data presented herein have been prepared in accordance with GAAP, which presently require us to measure financial position and results of operations primarily in terms of historical dollars. Changes in the relative value of money due to inflation are generally not considered. In our opinion, changes in interest rates affect our financial condition to a far greater degree than changes in the inflation rate. While interest rates are generally influenced by changes in the inflation rate, they do not move concurrently. Rather, interest rate volatility is based on changes in the expected rate of inflation, as well as changes in monetary and fiscal policy. A financial institution’s ability to be relatively unaffected by changes in interest rates is a good indicator of its ability to perform in a volatile economic environment. In an effort to protect performance from the effects of interest rate volatility, we review interest rate risk frequently and take steps to minimize detrimental effects on profitability.
Item 7A. Quantitative and Qualitative Disclosures about Market Risk
Market risk is the risk of loss from adverse changes in market prices and interest rates. We have not engaged in and, accordingly, have no risk related to trading accounts, commodities or foreign exchange. Our hedging policy allows economic hedging activities, such as interest-rate swaps, up to a notional amount of 10% of total assets and a value at risk of 10% of core capital. Disclosures about our economic hedging activities are set forth in Note 17 to our Consolidated Financial Statements. The Company’s market risk arises primarily from interest rate risk inherent in our lending, investing, deposit gathering and borrowing activities. The measurement of market risk associated with financial instruments is meaningful only when all related and offsetting on- and off-balance-sheet transactions are aggregated and the resulting net positions are identified. Disclosures about fair value are set forth in Note 6 to our Consolidated Financial Statements.
Management actively monitors and manages interest rate risk. The primary objective in managing interest rate risk is to limit, within established guidelines, the adverse impact of changes in interest rates on our net interest income and capital. We measure the effect of interest rate changes on CFBank’s economic value of equity (EVE), which is the difference between the estimated market value of CFBank’s assets and liabilities under different interest rate scenarios. The change in the EVE ratio is a long-term measure of what
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might happen to the market value of financial assets and liabilities over time if interest rates changed instantaneously and CFBank did not change existing strategies. At December 31, 2025, CFBank’s EVE ratios, using interest rate shocks ranging from a 400 bps rise in rates to a 400 bps decline in rates, are shown in the following table. All values are within the acceptable range established by CFBank’s Board of Directors.
Economic Value of Equity
as a Percent of Assets
(CFBank only)
Basis Point Economic
Change in Rates Value Ratio
In evaluating CFBank’s exposure to interest rate risk, certain limitations inherent in the method of analysis presented in the foregoing table must be considered. For example, the table indicates results based on changes in the level of interest rates, but not changes in the shape of the yield curve. CFBank also has exposure to changes in the shape of the yield curve. Although certain assets and liabilities may have similar maturities or periods to which they reprice, they may react in different degrees to changes in market interest rates. The interest rates on certain types of assets and liabilities may fluctuate in advance of changes in market interest rates, while interest rates on other types may lag behind changes in market rates. In the event of a change in interest rates, prepayments and early withdrawal levels would likely deviate significantly from those assumed in calculating the table. The ability of many borrowers to service their debt may decrease when interest rates rise. As a result, the actual effect of changing interest rates may differ materially from that presented in the foregoing table.
Changes in levels of market interest rates could materially and adversely affect our net interest income, loan volume, asset quality, value of loans held for sale and cash flows, as well as the market value of our securities portfolio and overall profitability.
Residential mortgage loan origination volumes are affected by market interest rates on loans. Rising interest rates generally are associated with a lower volume of loan originations, while falling interest rates are usually associated with higher loan originations. Our ability to generate gains on sales of mortgage loans is significantly dependent on the level of originations. Changes in interest rates, prepayment speeds and other factors may also cause the value of our loans held for sale to change.
We originate commercial, commercial real estate, multi-family residential and single family residential real estate mortgage loans for our portfolio, which, in many cases, have adjustable interest rates. Many of these loans have interest-rate floors, which protect income to CFBank should rates fall. While adjustable-rate loans better offset the adverse effects of an increase in interest rates as compared to fixed-rate loans, the increased payments required of adjustable-rate loan borrowers upon an interest rate adjustment in a rising interest rate environment could cause an increase in delinquencies and defaults. The marketability of the underlying property also may be adversely affected in a rising interest rate environment.
Cash flows are affected by changes in market interest rates. Generally, in rising interest rate environments, loan prepayment rates are likely to decline, and in falling interest rate environments, loan prepayment rates are likely to increase.
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CF BANKSHARES INC.
Item 8. Financial Statements and Supplementary Data.
The following consolidated financial statements of CF Bankshares Inc., and reports of independent registered public accounting firms and management are included below.
Page
Management’s Report on Internal Control over Financial Reporting 53
Reports of Independent Registered Public Accounting Firms 54
Notes to the Consolidated Financial Statements 62
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CF BANKSHARES INC.
MANAGEMENT’S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING
The management of CF Bankshares Inc. (the “Company”) is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rules 13a-15(f) and 15d-15(f) under the Securities and Exchange Act of 1934, as amended. The Company’s internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with U.S. generally accepted accounting principles.
The Company’s internal control over financial reporting includes those policies and procedures that: (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the Company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with U.S. generally accepted accounting principles, and that receipts and expenditures of the Company are being made only in accordance with authorizations of management and directors of the Company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Management assessed the effectiveness of the Company’s internal control over financial reporting as of December 31, 2025. In making this assessment, management used the criteria for effective internal control over financial reporting as described in the 2013 Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Based on our assessment and those criteria, management concluded that the Company maintained effective internal control over financial reporting as of December 31, 2025.
Plante & Moran, PLLC, independent registered public accounting firm, has issued an audit report on the effectiveness of the Company’s internal control over financial reporting as of December 31, 2025.
/s/ Timothy T. O’Dell
Timothy T. O’Dell
President and Chief Executive Officer
/s/ Kevin J. Beerman
Kevin J. Beerman
Executive Vice President and Chief Financial Officer
March 12, 2026
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Report of Independent Registered Public Accounting Firm
To the Stockholders and Board of Directors of CF Bankshares Inc.
Opinions on the Consolidated Financial Statements and Internal Control over Financial Reporting
We have audited the accompanying consolidated balance sheet of CF Bankshares Inc. (the “Company”) as of December 31, 2025, and the related consolidated statements of income, comprehensive income, changes in stockholders' equity, and changes in cash flows for the year then ended, and the related notes (collectively referred to as the “financial statements”). We also have audited the Company's internal control over financial reporting as of December 31, 2025, based on criteria established in Internal Control-Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (the “COSO framework”).
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2025, and the results of its operations and its cash flows for the year then ended, in conformity with accounting principles generally accepted in the United States of America. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2025, based on criteria established in the COSO framework.
Basis for Opinion
The Company's management is responsible for these consolidated financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the Company’s consolidated financial statements and an opinion on the Company's internal control over financial reporting based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects.
Our audit of the financial statements included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.
Definition and Limitations of Internal Control over Financial Reporting
A company's internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company's internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company's assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
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Report of Independent Registered Public Accounting Firm
Critical Audit Matter
The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that (1) relates to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.
Allowance for Credit Losses on Collectively Evaluated Loans – Refer to Notes 1 and 4 to the financial statements
Critical Audit Matter Description
Management’s estimate of the allowance for credit losses (“ACL”), includes a reserve on collectively evaluated loans. In the current year, significant assumptions in management’s estimate of the reserve on collectively evaluated loans include (i) the determination of the peer group utilized to determine historical loss rates; (ii) the determination of the historical lookback period utilized to determine historical loss rates; (iii) prepayment assumptions used to determine the estimated remaining life of each portfolio segment, (iv) determination of the forecast period adjustment, and (v) qualitative factor adjustments. In evaluating whether qualitative adjustments are necessary, management considers internal and external qualitative and credit market risk factors to reflect credit risks not fully captured by historical loss experience or forecast economic conditions.
Significant judgment was required by management in the selection and application of subjective assumptions. Accordingly, performing audit procedures to evaluate the Company’s estimated ACL involved a high degree of auditor judgment and required significant effort, including the involvement of professionals with specialized skill and knowledge.
How the Critical Audit Matter was Addressed in the Audit
Our audit procedures related to the Company’s estimate of the ACL on collectively evaluated loans included, but were not limited to, the following:
•
Testing the design and operating effectiveness of management’s controls over key assumptions and judgments.
•
Testing the completeness and accuracy of data utilized by management.
•
Evaluating the relevance and reliability of information used by management in the development of the estimate.
•
Evaluating the reasonableness of significant assumptions used in management’s estimate through a combination of evaluating the reasonableness of certain assumptions and developing an independent range of reasonable outcomes for the collectively evaluated component of the ACL for comparison to management’s estimate.
We have served as the Company's auditor since 2025.
/s/ Plante & Moran, PLLC
Plante & Moran, PLLC
Cleveland, Ohio
March 12, 2026
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Report of Independent Registered Public Accounting Firm
Shareholders, Board of Directors, and Audit Committee
CF Bankshares Inc.
Columbus, Ohio
Opinion on the Consolidated Financial Statements
We have audited the accompanying consolidated balance sheet of CF Bankshares Inc. (the “Company”) as of December 31, 2024, the related consolidated statements of income, comprehensive income, changes in stockholders’ equity, and cash flows for each of the years in the two-year period ended December 31, 2024, and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2024, and the results of its operations and its cash flows for each of the years in the two-year period ended December 31, 2024, in conformity with accounting principles generally accepted in the United States of America.
Basis for Opinion
These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audits.
We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud.
Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures include examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.
We served as the Company's auditor from 2014 to 2025.
/s/ Forvis Mazars, LLP
Forvis Mazars, LLP
Indianapolis, Indiana
March 14, 2025
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CF BANKSHARES INC.
CONSOLIDATED BALANCE SHEETS
December 31, 2025 and 2024
(Dollars in thousands, except per share data)
ASSETS
Interest-bearing deposits in other financial institutions 100 100
Equity securities — 5,000
Loans held for sale, at fair value 5,611 2,623
Operating lease right-of-use assets 5,680 6,087
Accrued interest receivable and other assets 50,658 46,169
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits
Advances by borrowers for taxes and insurance 2,523 2,238
Accrued interest payable and other liabilities 27,802 25,144
Commitments and contingent liabilities — —
Stockholders' equity
Accumulated other comprehensive loss (1,371 ) (1,803 )
See accompanying notes to consolidated financial statements.
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CF BANKSHARES INC.
CONSOLIDATED STATEMENTS OF INCOME
Years ended December 31, 2025, 2024 and 2023
(Dollars in thousands, except per share data)
Interest and dividend income
Interest expense
Provision for credit losses
Provision for credit losses-unfunded commitments 739 650 459
Noninterest income
Net gains on sales of residential mortgage loans 716 435 119
Net (losses) gains on sales of commercial loans (18 ) 246 66
Net loss on sale of equity security (103 ) — —
Earnings on bank owned life insurance 933 850 625
Noninterest expense
Foreclosed assets, net 18 — —
Impairment of premises and equipment — 56 60
Earnings per common share:
See accompanying notes to consolidated financial statements.
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CF BANKSHARES INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
Years ended December 31, 2025, 2024 and 2023
(Dollars in thousands, except per share data)
Other comprehensive income (loss):
Other comprehensive income (loss), net of tax 432 487 (253 )
See accompanying notes to consolidated financial statements.
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