Central Federal Corporation Announces 1st Quarter 2019 Financial Results

4/30/2019 8:56:17 AM

First Quarter Highlights

 

  • Net income more than doubled (up 112%) when compared to the same quarter of 2018..
  • Assets topped $700 million at March 31, 2019.
  • Net gain on sales of loans increased by 388% due primarily to the investment in and expansion of our residential mortgage lending business.
  • Net interest income increased $1.2 million, or 30% compared to the same quarter of 2018.
  • Deposits increased by $52 million, or 9% during the quarter.
  • We expanded our presence in the Cincinnati market, with the opening of our second branch location, and continue to gain business traction.

 

Timothy T. O'Dell, President and CEO, commented, "We are pleased with our solid start, with first quarter earnings more than doubling the first quarter pace of 2018. This comes on top of 2018 in which earnings for the year increased by 54%. Earnings growth continues to be driven by improving scale along with a lift from residential mortgage lending fee income. Our earlier investment in expanding the Residential Mortgage Lending business produced encouraging results during the quarter. Our Commercial Banking business also continues to perform well. Additionally, our experienced leadership team of David Jackson and Brian Brockhoff are successfully expanding our presence and growing our business pipelines in the Cincinnati regional market, our 4th major Ohio market. Our CFBank Team believes that we are just getting revved up."

 

Robert E. Hoeweler, Chairman of the Board, added "We are well pleased with the results of our proven Leadership Team and our accelerating earnings growth rates and overall top performance. We are now realizing bottom line benefits from earlier investments made in expanding our geographic presence to a fourth major market, hiring top performers, and in expanding the Residential Mortgage Lending business. With all of these factors in place, we are excited about our potential for 2019. We believe that CFBank is well positioned in every way to continue our successful growth and expansion."

 

Overview of Results

 

Net income for the three months ended March 31, 2019 totaled $1.7 million and increased $889,000, or 112.2%, compared to net income of $792,000 for the three months ended March 31, 2018. Net income attributable to common stockholders for the three months ended March 31, 2019, totaled $1.7 million, or $0.39 per diluted common share, and increased $941,000 compared to net income attributable to common stockholders of $766,000, or $0.17 per diluted common share, for the three months ended March 31, 2018.

 

Net interest income. Net interest income totaled $5.1 million for the quarter ended March 31, 2019 and increased $1.2 million, or 30.4%, compared to net interest income of $3.9 million for the quarter ended March 31, 2018. The increase in net interest income was primarily due to a $2.8 million, or 55.6%, increase in interest income, partially offset by a $1.6 million, or 138.1%, increase in interest expense. The increase in interest income was primarily attributed to a $177.8 million, or 38.7%, increase in average interest-earning assets outstanding, resulting primarily from an increase in net loans, and a 53bps increase in average yield on interest-earning assets. The increase in interest expense was primarily attributed to a $144.2 million, or 40.5%, increase in average interest-bearing liabilities and a 93bps increase in the average cost of funds on interest-bearing liabilities. As a result, the net interest margin of 3.20% for the quarter ended March 31, 2019 decreased 21bps compared to the net interest margin of 3.41% for the quarter ended March 31, 2018.

 

Provision for loan and lease losses. There was no provision for loan and lease losses for the quarter ended March 31, 2019 and March 31, 2018, which is due to strong credit quality and net recoveries. Net recoveries for the quarter ended March 31, 2019 totaled $12,000, compared to net recoveries of $6,000 for the quarter ended March 31, 2018.

 

Noninterest income. Noninterest income for the quarter ended March 31, 2019 totaled $1.7 million and increased $1.2 million, or 252.2%, compared to $481,000 for the quarter ended March 31, 2018. The increase was primarily due to a $1.2 million increase in net gain on sale of loans. The increase in net gain on sale of loans was a result of increased sales volume due to the expansion of the residential mortgage lending business.

 

Noninterest expense. Noninterest expense for the quarter ended March 31, 2019 totaled $4.7 million and increased $1.3 million, or 37.5%, compared to $3.4 million for the quarter ended March 31, 2018. The increase in noninterest expense during the three months ended March 31, 2019 was primarily due to a $604,000 increase in salaries and employee benefits expense and a $359,000 increase in advertising and marketing expense. The increase in salaries and employee benefits expense was primarily due to the expansion of our residential mortgage lending business, consistent with our focus on driving noninterest income, coupled with an increase in personnel to support our growth, infrastructure and risk management practices. The increase in advertising and marketing expense is primarily due to increased expenditures related to leads-based marketing expense to drive revenue growth in our residential mortgage lending business.

 

Income tax expense.Income tax expense was $419,000 for the quarter ended March 31, 2019, an increase of $233,000 compared to $186,000 for the quarter ended March 31, 2018. The effective tax rate for the quarter ended March 31, 2019 was approximately 20.0%, as compared to approximately 19.1% for the quarter ended March 31, 2018.

 

Balance Sheet Activity

 

General. Assets totaled $720.5 million at March 31, 2019 and increased $55.5 million, or 8.3%, from $665.0 million at December 31, 2018. The increase was primarily due to a $28.7 million increase in cash and cash equivalents, a $13.9 million increase in net loan balances, and a $10.5 million increase in loans held for sale.

 

Cash and cash equivalents. Cash and cash equivalents totaled $96.0 million at March 31, 2019, and increased $28.7 million, or 42.6%, from $67.3 million at December 31, 2018. The increase in cash and cash equivalents was primarily attributed to increased deposits, partially offset by an increase in loans.

 

Securities. Securities available for sale totaled $9.1 million at March 31, 2019, and decreased $970,000, or 9.6%, compared to $10.1 million at December 31, 2018. The decrease was primarily due to principal maturities.

 

Loans and Leases. Net loans and leases totaled $564.6 million at March 31, 2019, and increased $13.9 million, or 2.5%, from $550.7 million at December 31, 2018. The increase was primarily due to a $8.0 million increase in single-family loan balances, a $4.1 million increase in multi-family loan balances, and a $3.9 million increase in commercial real estate loan balances, partially offset by a $2.8 million decrease in commercial loan balances. The increases in the aforementioned loan balances were primarily due to increased sales activity and new relationships.

 

Allowance for loan and lease losses (ALLL). The allowance for loan and lease losses totaled $7.0 million at March 31, 2019, and increased $12,000, or 0.2%, from $7.0 million at December 31, 2018. The increase in the ALLL is due to net recoveries during the quarter ended March 31, 2019. The ratio of the ALLL to total loans was 1.23% at March 31, 2019, compared to 1.26% at December 31, 2018. In addition, the ratio of the ALLL to nonperforming loans was 338.0% at March 31, 2019, compared to 1859.9% at December 31, 2018.

 

Deposits. Deposits totaled $631.8 million at March 31, 2019, an increase of $52.0 million, or 9.0%, from $579.8 million at December 31, 2018. The increase is primarily attributed to a $34.3 million increase in certificate of deposit account balances, an $11.8 million increase in money market account balances, and a $6.3 million increase in checking account balances. The increases in certificate of deposit, checking and money market account balances were primarily due to increases in customer relationships and balances from on-going sales and marketing activities.

 

Stockholders' equity. Stockholders' equity totaled $47.6 million at March 31, 2019, an increase of $2.0 million, or 4.6%, from $45.6 million at December 31, 2018. The increase in total stockholders' equity was primarily attributed to net income, as well as the exercise of outstanding warrants to purchase common stock of the Company.

 

Deposits. Deposits totaled $488.1 million at June 30, 2018, an increase of $69.1 million, or 16.5%, from $419.0 million at December 31, 2017. The increase is primarily attributed to a $56.0 million increase in certificate of deposit account balances and $16.3 million increase in checking account balances, partially offset by a $3.1 million decrease in money market account balances. The increase in certificate of deposit accounts was primarily attributed to management's use of short-term CDARS deposits in anticipation of quarter end fluctuations associated with its mortgage business, along with ongoing efforts to grow core certificate of deposits to fund loan growth. The increase in checking account balances is primarily due to an increase in new account relationships and deposit balances.

 

Stockholders' equity. Stockholders' equity totaled $42.4 million at June 30, 2018, an increase of $2.2 million, or 5.4%, from $40.3 million at December 31, 2017. The increase in total stockholders' equity was primarily attributed to net income.

 

About Central Federal Corporation and CFBank

 

Central Federal Corporation is a financial holding company that owns 100% of the stock of CFBank, National Association (CFBank), which was formed in Ohio in 1892 and converted from a federal savings association to a national bank on December 1, 2016. CFBank has a presence in four major metro Ohio markets – Columbus, Cleveland, Cincinnati and Akron- as well as its two branch locations in Columbiana County, Ohio. Also, in March 2019, CFBank opened a branch location in Blue Ash, Ohio, which is its second location in the Cincinnati market. CFBank provides personalized Business Banking products and services including commercial loans and leases, commercial and residential real estate loans and treasury management depository services. As a full service commercial bank, our business, along with our products and services, is focused on serving the banking and financial needs of closely held businesses. Our business model emphasizes personalized service, customer access to decision makers, quick execution, and the convenience of online internet banking, mobile banking, remote deposit and corporate treasury management. In addition, CFBank provides residential lending and full service retail banking services and products.

 

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

 

FORWARD LOOKING STATEMENTS

 

This earnings release and other materials we have filed or may file with the Securities and Exchange Commission ("SEC") contain or may contain forward-looking statements within the meaning of the safe harbor provisions of the U.S. Private Securities Reform Act of 1995, which are made in good faith by us. Forward-looking statements include, but are not limited to: (1) projections of revenues, income or loss, earnings or loss per common share, capital structure and other financial items; (2) plans and objectives of the management or Boards of Directors of Central Federal Corporation or CFBank, National Association; (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 detailed from time to time in our reports filed with the SEC, including those identified in "Item 1A. Risk Factors" of Part I of our Form 10-K filed with SEC for the year ended December 31, 2018.

 

Forward-looking statements are not guarantees of performance or results. A forward-looking statement may include a statement of the assumptions or bases underlying the forward-looking statement. We believe that we have chosen these assumptions or bases in good faith and that they are reasonable. We caution you, however, that assumptions or bases almost always vary from actual results, and the differences between assumptions or bases and actual results can be material. The forward-looking statements included in this earnings release speak only as of the date hereof. We undertake no obligation to publicly release revisions to any forward-looking statements to reflect events or circumstances after the date of such statements, except to the extent required by law.

 

Consolidated Statements of Income

 

Consolidated Statements of Financial Condition

 

Liabilities and Stockholders' Equity

 

Consolidated Financial Highlights

 

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SOURCE Central Federal Corporation

http://www.cfbankonline.com