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PRESS RELEASE
FOR IMMEDIATE RELEASE
CENTRAL FEDERAL CORPORATION ANNOUNCES EARNINGS
Fairlawn, OH - News Release Date: 04-18-2008 -
• Net income increased 46% and totaled $124,000, or $.03 per diluted share, for the quarter ended March 31, 2008, compared to $85,000 or $.02 per diluted share, for the prior year quarter.
• Net interest income increased 13% during the 1st quarter of 2008 compared to the prior year quarter.
Fairlawn, Ohio – April 18, 2008 – Central Federal Corporation (Nasdaq: CFBK) announced net income for the 1st quarter of 2008 of $124,000, or $.03 per diluted share, compared to net income of $85,000, or $.02 per diluted share, in the 1st quarter of 2007.
Net interest income
Net interest income increased $242,000, to $2.0 million, during the quarter ended March 31, 2008 compared to $1.8 million for the quarter ended March 31, 2007. The increase was primarily due to $36.0 million growth in average interest earning assets from the 1st quarter 2007 to the 1st quarter 2008, partially offset by a decline in the average yield on interest earning assets. Gross interest income increased 10.1% and interest expense increased 7.4%, resulting in a 13.4% increase in net interest income for the 1st quarter of 2008 compared to the prior year quarter.
Reductions in the Federal Funds rate, the prime rate and other market indices resulted in a decrease in both asset yields and funding costs. The yield on interest earning assets decreased 36 basis points (bp) to 6.77% in the 1st quarter of 2008, from 7.13% in the 1st quarter of 2007, due to lower interest rates on new loan originations and downward repricing on existing adjustable rate loans. The cost of interest bearing liabilities decreased 41bp to 3.96% in the 1st quarter of 2008, from 4.37% in the 1st quarter of 2007, due to lower borrowing costs and reduced pricing on deposit accounts. Net interest margin decreased 6bp to 3.18% in the 1st quarter of 2008 compared to 3.24% in the 1st quarter of 2007, primarily as a result of an increase in nonaccrual loans.
Noninterest income
Noninterest income totaled $184,000 for the quarter ended March 31, 2008, compared to $200,000 in the prior year quarter. The decrease in noninterest income was primarily due to lower mortgage loan originations in the current year quarter, which resulted in lower net gains on sales of loans, partially offset by a $23,000 gain recognized on the redemption of VISA, Inc. shares.
Provision for loan losses
Provisions for loan losses are provided in relation to loan growth, portfolio composition, current economic conditions and trends, and ascertainable credit risk information available. The provision totaled $224,000 in the three months ended March 31, 2008 compared to $35,000 for the same period in 2007. The increase in the provision was due to an increase in nonperforming loans and loan charge-offs. Nonperforming loans increased $1.1 million and totaled $1.6 million, or 0.71% of total loans, at March 31, 2008 compared to $488,000, or 0.21% of total loans, at December 31, 2007. The increase in nonperforming loans was due to three multi-family loans to one borrower, totaling $1.3 million and secured by apartment buildings in the Columbus, Ohio area, which were past due and nonaccrual at March 31, 2008. For the quarter ended March 31, 2008, CFBank had net charge-offs of $179,000, or 0.32% on an annualized basis of average loans, that were principally related to one home equity line of credit on property located outside of our market area.
The ratio of the allowance for loan losses to total loans was 1.20% at March 31, 2008 compared to 1.15% at December 31, 2007. The company stated that it believes that the allowance for loan losses is adequate to absorb probable incurred credit losses in the loan portfolio at March 31, 2008; however, future additions to the allowance may be necessary based on factors such as changes in client business performance, economic conditions, and sudden changes in real estate values. Management continues to diligently monitor credit quality in the existing portfolio and analyzes potential loan opportunities carefully in order to manage credit risk.
Noninterest expense
Noninterest expense in the 1st quarter of 2008 totaled $1,839,000 and was comparable to $1,852,000 in the prior year quarter. The ratio of noninterest expense to average assets improved to 2.67% in the 1st quarter of 2008 compared to 3.11% in the prior year quarter due to growth in total assets over the last 12-month period.
Balance sheet activity
Assets totaled $276.4 million at March 31, 2008, a decrease of $3.2 million, or 1.1%, from $279.6 million at December 31, 2007. The decline was primarily due to a decrease in commercial real estate loan balances.
Net loans totaled $224.7 million at March 31, 2008 and decreased $5.8 million, or 2.5%, from $230.5 million at December 31, 2007. Commercial, commercial real estate and multi-family loans totaled $169.6 million at March 31, 2008 and decreased $4.3 million, or 2.5%, from $173.9 million at December 31, 2007. The decrease was due to loan payoffs primarily in the commercial real estate loan portfolio. Consumer loans decreased $1.3 million and totaled $26.9 million at March 31, 2008 compared to $28.2 million at December 31, 2007. The decrease was primarily due to repayments on auto loans and home equity lines of credit. Mortgage loans totaled $30.9 million at March 31, 2008, a decrease of $54,000 from $31.0 million at December 31, 2007.
Deposits totaled $186.4 million at March 31, 2008 and decreased $8.0 million, or 4.1%, from $194.3 million at December 31, 2007. Certificate of deposit accounts decreased $8.1 million, which included $6.7 million in brokered accounts where CFBank exercised its call option. These callable accounts, which had an average cost of 5.50%, were replaced at lower current market funding rates at an annual cost savings of approximately $133,000. Money market account balances increased $370,000, traditional savings account balances increased by $355,000 and interest bearing checking account balances decreased $611,000 during the quarter.
FHLB advances totaled $55.2 million at March 31, 2008 and increased $5.7 million, or 11.5%, compared to $49.5 million at December 31, 2007. FHLB advances were used to fund the decrease in deposits.
Shareholders’ equity totaled $27.6 million at March 31, 2008 and increased $172,000, or 0.6%, compared to $27.4 million at December 31, 2007. The increase in equity was due to current quarter net income and an increase in the market value of securities, offset by dividends to shareholders.
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, Wellsville and Worthington, Ohio. Additional information about CFBank’s banking services and the Company is available at www.CFBankOnline.com.
Forward-Looking Information
Certain statements contained in this earnings release which are not statements of historical fact constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Words such as “believes,” “anticipates,” “expects,” “intends,” “targeted” and similar expressions are intended to identify forward-looking statements, but are not the exclusive means of identifying those statements. Forward-looking statements involve risks and uncertainties. Actual results may differ materially from those predicted by the forward-looking statements because of various factors and possible events, including: (i) changes in political, economic or other factors such as inflation rates, recessionary or expansive trends, and taxes; (ii) competitive pressures; (iii) fluctuations in interest rates; (iv) the level of defaults and prepayments on loans made by CFBank; (v) unanticipated litigation, claims or assessments; (vi) fluctuations in the cost of obtaining funds to make loans; and (vii) regulatory changes. Further information on these risk factors is included in the Company's filings with the Securities and Exchange Commission. Forward-looking statements speak only as of the date on which they are made and the Company undertakes no obligation to update any forward-looking statement to reflect events or circumstances after the date on which the statement is made to reflect unanticipated events.
Mark Allio
CEO
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