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PRESS RELEASE
FOR IMMEDIATE RELEASE
CENTRAL FEDERAL CORPORATION ANNOUNCES PROFITABLE OPERATIONS IN 1ST
Fairlawn, OH - News Release Date: 04-20-2007 -
Highlights
• Net income for the 1st quarter of 2007 totaled $85,000, or $.02 per diluted share, up $309,000 from a net loss of ($224,000), or ($.05) per diluted share in the 1st quarter of 2006.
• Net interest income increased 18% during the 1st quarter of 2007 compared to the 1st quarter of 2006.
• Total assets increased 22% or $44.1 million since March 31, 2006 to $240.7 million at March 31, 2007 and increased 8% on an annualized basis during the 1st quarter of 2007.
• Commercial, commercial real estate and multi-family loans grew 47% or $42.5 million since March 31, 2006 to $132.6 million at March 31, 2007 and increased 20% on an annualized basis during the 1st quarter of 2007.
Fairlawn, Ohio – April 20, 2007 – Central Federal Corporation (Nasdaq: CFBK) announced the fourth consecutive quarter of profitable operations for the 1st quarter of 2007 and a $309,000 improvement in net income compared to the 1st quarter of 2006. Net income for the 1st quarter of 2007 totaled $85,000 or $.02 per diluted share compared to a net loss of ($224,000) or ($.05) per diluted share in the 1st quarter of 2006. Sustained customer and asset growth resulting in improved profitability continues to be our focus.
As a result of $44.1 million growth in assets since March 31, 2006, particularly commercial, commercial real estate and multi-family loans, gross interest income increased 43% from $2.8 million in the 1st quarter of 2006 to $4.0 million in the 1st quarter of 2007. The current market interest rate environment continued to negatively affect funding costs, and interest expense increased 74% from $1.2 million in the 1st quarter of 2006 to $2.2 million in the 1st quarter of 2007. Net interest income increased 18% from $1.5 million in the 1st quarter of 2006 to $1.8 million in the 1st quarter of 2007.
Total assets increased $4.7 million or 8% on an annualized basis during the 1st quarter of 2007 and included an increase of $6.2 million, or a 19.6% annualized growth rate for commercial, commercial real estate and multi-family loans, which are the focus of our growth plan.
Net interest income
Growth positively impacted net interest income, as mentioned above. The level of short-term market interest rates, a flat to inverted yield curve and increased competition for both loans and deposits continued to impact yields on assets and the cost of funding. As a result, net interest margin declined from 3.56% the 1st quarter of 2006 to 3.24% in the 1st quarter of 2007. Management of the net interest margin in the current interest rate and competitive environment will continue to be a challenge and continued downward pressure on margins is expected.
Noninterest income
Noninterest income totaled $200,000 during the quarter ended March 31, 2007 and was $20,000 or 11.1% higher than during the quarter ended March 31, 2006 due to an increase in gains on loan sales. Net gain on sales of loans increased 134.4% from the prior year quarter and totaled $75,000 during the quarter ended March 31, 2007 due to increased loan originations during the current year period.
Provision for loan losses
We continued to provide appropriate reserves for loan losses in response to growth in commercial, commercial real estate and multi-family loans. The provision totaled $35,000 in the 1st quarter of 2007 compared to $290,000 in the prior year quarter. The current year quarter provision was lower than the prior year period due to a smaller increase in commercial, commercial real estate and multi-family loan balances in the 1st quarter of 2007. The ratio of the allowance for loan losses to total loans was 1.12% at March 31, 2007 and 1.13% at December 31, 2006. Periods of rapid loan growth will tend to show lower profitability levels than periods of slower loan growth due to the up-front provision recorded when loans are originated.
We continued to experience low levels of nonperforming loans and net loan charge-offs. Nonperforming loans totaled $296,000 or 0.15% of total loans at March 31, 2007 and was comparable to $297,000 or 0.16% of total loans at year-end 2006. More than 97% of the nonperforming balances were single-family mortgage loans at both March 31, 2007 and December 31, 2006. Net charge-offs (recoveries) to average loans totaled (.01%) during the quarter ended March 31, 2007 and 0.16% in the prior year quarter. As we continue to execute our plan for growth and improved profitability, we will continue to prudently monitor credit quality in both the existing portfolio and potential loan opportunities.
Noninterest expense
Noninterest expense totaled $1.9 million in the quarter ended March 31, 2007, compared to $1.8 million in the quarter ended March 31, 2006. Noninterest expense to average assets improved to 3.11% in the quarter ended March 31, 2007 from 3.80% in the quarter ended March 31, 2006 and the efficiency ratio improved to 92.51% from 103.51% in the same periods. The positive movement in these ratios resulted from control of noninterest expense, growth in the balance sheet and increased net interest income and noninterest income.
Balance sheet activity
Assets totaled $240.7 million at March 31, 2007 and increased $4.7 million or 2.0% from $236.0 million at December 31, 2006 due to growth in the loan portfolio, which was funded with Federal Home Loan Bank (FHLB) advances.
Net loans totaled $190.5 million at March 31, 2007 and increased $5.8 million from $184.7 million at December 31, 2006. Commercial, commercial real estate and multi-family loans totaled $132.6 million at March 31, 2007 and increased $6.2 million from $126.4 million at December 31, 2006. Mortgage loans totaled $29.5 million at March 31, 2007 and decreased $625,000 from $30.1 million at December 31, 2006 as most of our mortgage loan production was originated for sale. Consumer loans totaled $30.5 million at March 31, 2007 compared to $30.3 million at December 31, 2006.
Deposits totaled $165.5 million at March 31, 2007 and declined $2.1 million, or 1.2% from $167.6 million at December 31, 2006. The decline in deposits was due to a decrease of $1.5 million in certificate of deposit accounts, $1.2 million in noninterest bearing deposits, $497,000 in money market accounts and $300,000 in traditional savings account balances offset by an increase of $1.5 million in interest bearing checking accounts. The decrease in certificate of deposit accounts included $1.2 million in brokered deposits which matured during the quarter ended March 31, 2007 and were not replaced.
FHLB advances totaled $38.2 million at March 31, 2007 and increased $5.7 million or 17.4% compared to $32.5 million at December 31, 2006. A $2.2 million economic development advance from the FHLB was drawn during the March 2007 quarter to fund construction of our new Columbus regional office in Worthington. Relocation of the existing Columbus office is expected to occur in the 2nd quarter of 2007. The remaining increase in FHLB advances was used to fund loan growth.
Shareholders’ equity totaled $28.9 million at March 31, 2007 and decreased $222,000 or .8% compared to $29.1 million at December 31, 2006 as a result of dividend payments offset by net income in the 1st quarter of 2007.
About Central Federal Corporation and CFBank
Central Federal Corporation is the holding company for CFBank, a federally chartered savings association formed in Ohio in 1892. CFBank has four full-service banking offices in Fairlawn, Calcutta, Columbus and Wellsville, Ohio. Additional information about mortgage loans, home equity loans, commercial loans and other services is available at www.CFBankOnline.com.
Statements contained in this release that are not historical fact may be forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. The Company cautions that such statements necessarily are based on certain assumptions which are subject to risks and uncertainties, including, but not limited to, changes in general economic and market conditions. Further information on these risk factors is included in the Company's filings with the Securities and Exchange
Mark S. Allio
Chairman, President and CEO
330.576.1334
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