10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISION

Washington, D.C. 20549

FORM 10-Q

(Mark one)

[X]     QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2019

Or

[   ]     TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES

EXCHANGE ACT OF 1934

For the transition period from __________ to______________

Commission File Number 0-25045

CENTRAL FEDERAL CORPORATION

(Exact name of registrant as specified in its charter)

Delaware	34-1877137
(State or other jurisdiction of	(IRS Employer
incorporation or organization)	Identification No.)

7000 North High St., Worthington, Ohio  43085

(Address of principal executive offices) (Zip Code)

(614) 334-7979

(Registrant’s telephone number, including area code)

_____________________________________________________________

(Former name or former address, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, $.01 par value	CFBK	The NASDAQ Capital Market

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes [X]    No [  ]

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).

Yes [X]   No [  ]

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company.  See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer [  ]    Accelerated filer [  ]    Non-accelerated filer [X]    Smaller reporting company [X]

Emerging growth company [  ]

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  [  ]

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). 

Yes [  ]    No [X]

As of August1, 2019, there were 4,490,959 shares of the registrant’s Common Stock outstanding.

CENTRAL FEDERAL CORPORATION

INDEX

PART I.  Financial Information		Page
Item 1.     Financial Statements		3
	Consolidated Balance Sheets as of June 30, 2019 (unaudited) and December 31, 2018	3
	Consolidated Statements of Income for the three and six months ended June 30, 2019 and 2018 (unaudited)	4
	Consolidated Statements of Comprehensive Income for the three and six months ended June 30, 2019 and 2018 (unaudited)	5
	Consolidated Statements of Changes in Stockholders’ Equity for the three and six months ended June 30, 2019 and 2018 (unaudited)	6
	Consolidated Statements of Cash Flows for the six months ended June 30, 2019 and 2018 (unaudited)	8
	Notes to Consolidated Financial Statements (three and six months ended June 30, 2019 and 2018 unaudited)	9
Item 2.      Management’s Discussion and Analysis of Financial Condition and Results of Operations		39
Item 3.     Quantitative and Qualitative Disclosures About Market Risk		53
Item 4.     Controls and Procedures		54
PART II.  Other Information		55
Item 1.     Legal Proceedings		55
Item 1A.   Risk Factors		55
Item 2.     Unregistered Sales of Equity Securities and Use of Proceeds		55
Item 3.     Defaults Upon Senior Securities		55
Item 4.     Mine Safety Disclosures		55
Item 5.     Other Information		55
Item 6.     Exhibits		56
Signatures		57

CENTRAL FEDERAL CORPORATION

CONSOLIDATED BALANCE SHEETS

(Dollars in thousands except per share data)

	June 30,		December 31,
	2019		2018
ASSETS
Cash and cash equivalents	$	34,323	$	67,304
Interest-bearing deposits in other financial institutions		100		100
Securities available for sale		10,189		10,114
Loans held for sale, at fair value		52,184		17,385
Loans and leases, net of allowance of $7,029 and $7,012		598,695		550,683
FHLB and FRB stock		3,816		3,476
Foreclosed assets, net		-		38
Premises and equipment, net		4,032		3,864
Operating lease right-of-use assets		1,967		-
Bank owned life insurance		5,272		5,203
Accrued interest receivable and other assets		10,415		6,858
Total assets	$	720,993	$	665,025
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits
Noninterest bearing	$	106,716	$	111,445
Interest bearing		521,870		468,341
Total deposits		628,586		579,786
FHLB advances and other debt		18,500		19,500
Advances by borrowers for taxes and insurance		340		827
Operating lease liabilities		2,163		-
Accrued interest payable and other liabilities		5,698		4,586
Subordinated debentures		14,786		14,767
Total liabilities		670,073		619,466
Commitments and contingent liabilities		-		-
Stockholders' equity
Common stock, $.01 par value;
shares authorized: 9,090,909(1);
shares issued: 4,502,600 at June 30, 2019 and 4,366,297 at December 31, 2018		45		44
Series B Preferred stock, $0.01 par value; 480,000 shares authorized;
0 issued at June 30, 2019 and 0 at December 31, 2018		-		-
Additional paid-in capital		62,835		61,706
Accumulated deficit		(8,608)		(12,752)
Accumulated other comprehensive loss		14		(73)
Treasury stock, at cost;  31,235 shares of common stock at June 30, 2019 and December 31, 2018		(3,366)		(3,366)
Total stockholders' equity		50,920		45,559
Total liabilities and stockholders' equity	$	720,993	$	665,025

⁽¹⁾ Reflects 1-for-5.5 reverse stock split on August 20, 2018 – See Note 1

See accompanying notes to consolidated financial statements.

3

CENTRAL FEDERAL CORPORATION

CONSOLIDATED STATEMENTS OF INCOME

(Dollars in thousands except per share data)

(Unaudited)

	Three months ended				Six months ended
	June 30,				June 30,
	2019		2018		2019		2018
Interest and dividend income
Loans and leases, including fees	$	8,112	$	5,616	$	15,602	$	10,483
Securities		43		47		85		90
FHLB and FRB stock dividends		53		48		107		95
Federal funds sold and other		297		156		652		303
		8,505		5,867		16,446		10,971
Interest expense
Deposits		2,876		1,288		5,309		2,330
FHLB advances and other debt		144		165		295		257
Subordinated debentures		256		67		513		126
		3,276		1,520		6,117		2,713
Net interest income		5,229		4,347		10,329		8,258
Provision for loan and lease losses		-		-		-		-
Net interest income after provision for loan losses		5,229		4,347		10,329		8,258
Noninterest income
Service charges on deposit accounts		138		118		262		236
Net gains on sales of loans		2,362		509		3,865		817
Earnings on bank owned life insurance		35		35		69		68
Other		30		70		63		92
		2,565		732		4,259		1,213
Noninterest expense
Salaries and employee benefits		2,643		2,013		5,144		3,910
Occupancy and equipment		228		182		446		349
Data processing		293		227		609		458
Franchise and other taxes		106		103		212		205
Professional fees		356		254		644		504
Director fees		133		98		264		195
Postage, printing and supplies		59		52		126		101
Advertising and marketing		616		370		1,242		637
Telephone		45		38		90		70
Loan expenses		45		28		91		43
Foreclosed assets, net		-		-		(9)		-
Depreciation		78		62		149		121
FDIC premiums		152		99		304		187
Regulatory assessment		40		35		82		69
Other insurance		24		19		47		41
Other		113		90		184		194
		4,931		3,670		9,625		7,084
Income before incomes taxes		2,863		1,409		4,963		2,387
Income tax expense		583		279		1,002		465
Net income		2,280		1,130		3,961		1,922
Accretion of discount and value of warrants exercised related to Series B preferred stock		157		(12)		183		(38)
Net income attributable to common stockholders	$	2,437	$	1,118	$	4,144	$	1,884
Earnings per common share:
Basic (Restated - See Note 1)	$	0.55	$	0.26	$	0.95	$	0.44
Diluted (Restated - See Note 1)	$	0.55	$	0.25	$	0.93	$	0.42

See accompanying notes to consolidated financial statements.

4

CENTRAL FEDERAL CORPORATION

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Dollars in thousands except per share data)

(Unaudited)

	Three months ended				Six months ended
	June 30,				June 30,
	2019		2018		2019		2018
Net income	$	2,280	$	1,130	$	3,961	$	1,922
Other comprehensive income (loss):
Unrealized holding gains (losses) arising during the period related to securities available for sale, net of tax of $14 and ($3) and $23 and ($14)		52		(15)		87		(69)
Other comprehensive income (loss), net of tax		52		(15)		87		(69)
Comprehensive income	$	2,332	$	1,115	$	4,048	$	1,853

See accompanying notes to consolidated financial statements.

5

CENTRAL FEDERAL CORPORATION

CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY

(Dollars in thousands except per share data)

(Unaudited)

							Accumulated
			Additional				Other				Total
	Common		Paid-In		Accumulated		Comprehensive		Treasury		Stockholders'
Three months ended June 30, 2019	Stock		Capital		Deficit		Income (Loss)		Stock		Equity
Balance at April 1, 2019	$	44	$	62,039	$	(11,045)	$	(38)	$	(3,366)	$	47,634
Net income						2,280						2,280
Other comprehensive income								52				52
Restricted stock expense, net of forfeitures				138								138
Exercise of warrants to common stock		1		815								816
Accretion of discount and value of warrants exercised				(157)		157						-
Balance at June 30, 2019	$	45	$	62,835	$	(8,608)	$	14	$	(3,366)	$	50,920

							Accumulated
			Additional				Other				Total
	Common		Paid-In		Accumulated		Comprehensive		Treasury		Stockholders'
Six months ended June 30, 2019	Stock		Capital		Deficit		Income (Loss)		Stock		Equity
Balance at January 1, 2019	$	44	$	61,706	$	(12,752)	$	(73)	$	(3,366)	$	45,559
Net income						3,961						3,961
Other comprehensive income								87				87
Issuance of 33,788 stock based incentive plan shares, net of forfeitures		-		-								-
Restricted stock expense, net of forfeitures				254								254
Exercise of warrants to common stock		1		1,058								1,059
Accretion of discount and value of warrants exercised				(183)		183						-
Balance at June 30, 2019	$	45	$	62,835	$	(8,608)	$	14	$	(3,366)	$	50,920

							Accumulated
			Additional				Other				Total
	Common		Paid-In		Accumulated		Comprehensive		Treasury		Stockholders'
Three months ended June 30, 2018	Stock		Capital		Deficit		Loss		Stock		Equity
Balance at April 1, 2018 (1)	$	43	$	60,805	$	(16,321)	$	(101)	$	(3,324)	$	41,102
Net income						1,130						1,130
Other comprehensive loss								(15)				(15)
Issuance of 727 stock based incentive plan shares, net of forfeitures (1)		(1)		-								(1)
Restricted stock expense, net of forfeitures				96								96
Exercise of warrants to common stock		1		131								132
Accretion of discount on warrants				12		(12)						-
Balance at June 30, 2018	$	43	$	61,044	$	(15,203)	$	(116)	$	(3,324)	$	42,444

(1) Common Stock and Additional Paid-In Capital balances were restated for 1-for-5.5 reverse stock split on August 20, 2018 – See Note 1.

See accompanying notes to consolidated financial statements.

6

CENTRAL FEDERAL CORPORATION

CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY

(Dollars in thousands except per share data)

(Unaudited)

							Accumulated
			Additional				Other				Total
	Common		Paid-In		Accumulated		Comprehensive		Treasury		Stockholders'
Six months ended June 30, 2018	Stock		Capital		Deficit		Loss		Stock		Equity
Balance at January 1, 2018 (1)	$	43	$	60,676	$	(17,087)	$	(47)	$	(3,324)	$	40,261
Net income						1,922						1,922
Other comprehensive loss								(69)				(69)
Issuance of 727 stock based incentive plan shares, net of forfeitures (1)		(1)		-								(1)
Restricted stock expense, net of forfeitures				192								192
Exercise of warrants to common stock		1		138								139
Accretion of discount on warrants				38		(38)						-
Balance at June 30, 2018	$	43	$	61,044	$	(15,203)	$	(116)	$	(3,324)	$	42,444

(1) Common Stock and Additional Paid-In Capital balances were restated for 1-for-5.5 reverse stock split on August 20, 2018 – See Note 1.

See accompanying notes to consolidated financial statements.

7

CENTRAL FEDERAL CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Dollars in thousands, except per share data)

(Unaudited)

		Six months ended
		June 30,
		2019		2018
Net Income	$	3,961	$	1,922
Adjustments to reconcile net income to net cash from operating activities:
Provision for loan and lease losses		-		-
Depreciation		149		121
Amortization, net		(18)		(3)
Deferred income tax (benefit)		6		6
Originations of loans held for sale		(205,715)		(71,642)
Proceeds from sale of loans held for sale		174,123		47,159
Net gains on sales of loans		(3,865)		(817)
Write-down of premises and equipment		-		32
Gain on sale of foreclosed assets		(12)		-
Earnings on bank owned life insurance		(69)		(68)
Stock-based compensation expense		254		192
Net change in:
Accrued interest receivable and other assets		(2,290)		(734)
Operating lease right-of-use asset		217		-
Operating lease right-of-use liability		(205)		-
Accrued interest payable and other liabilities		670		488
Net cash used by operating activities		(32,794)		(23,344)
Cash flows from investing activities
Available-for-sale securities:
Maturities, prepayments and calls		1,535		1,558
Purchases		(1,494)		(1,475)
Loan and lease originations and payments, net		(48,502)		(44,478)
Loans purchased		-		(19,669)
Proceeds from the sale of loans		1,137		-
Additions to premises and equipment		(317)		(299)
Purchase of FRB Stock		(340)		(24)
Purchase of other investments		(723)		-
Return of investment-joint ventures		95		-
Proceeds from the sale of foreclosed assets		50		-
Net cash used by investing activities		(48,559)		(64,387)
Cash flows from financing activities
Net change in deposits		48,800		69,097
Proceeds from FHLB advances and other debt		-		48,100
Repayments on FHLB advances and other debt		(1,000)		(42,100)
Net change in advances by borrowers for taxes and insurance		(487)		(264)
Exercise of warrants to common stock		1,059		139
Net cash from financing activities		48,372		74,972
Net change in cash and cash equivalents		(32,981)		(12,759)
Beginning cash and cash equivalents		67,304		45,498
Ending cash and cash equivalents	$	34,323	$	32,739
Supplemental cash flow information:
Interest paid	$	2,833	$	2,619
Income tax paid		985		200
Supplemental noncash disclosures:
Loans transferred from held for sale to portfolio		657		-
Investment payable on limited liability corporation		670		-
Transfer of other liability to operating lease right-of-use asset		184		-
Initial recognition of operating right-of-use lease asset		2,368		-
Initial recognition of operating right-of-use lease liability		2,368		-

See accompanying notes to consolidated financial statements.

8

CENTRAL FEDERAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands)

NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation: 

The consolidated financial statements include Central Federal Corporation (the “Holding Company”) and its wholly-owned subsidiary, CFBank, National Association (“CFBank”).  The Holding Company and CFBank are sometimes collectively referred to herein as the “Company”.  Intercompany transactions and balances are eliminated in consolidation.  The accompanying unaudited interim consolidated financial statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”) and in compliance with U.S. generally accepted accounting principles (GAAP).  Because this report is based on an interim period, certain information and footnote disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted.

In the opinion of the management of the Company, the accompanying unaudited interim consolidated financial statements include all adjustments necessary for a fair presentation of the Company’s financial condition and the results of operations for the periods presented.  These adjustments are of a normal recurring nature, unless otherwise disclosed in this Form 10-Q.  The financial performance reported for the Company for the three and six months ended June 30, 2019 is not necessarily indicative of the results that may be expected for the full year.  This information should be read in conjunction with the Company’s latest Annual Report to Stockholders and Annual Report on Form 10-K on file with the SEC.  Reference is made to the accounting policies of the Company described in Note 1 to the Audited Consolidated Financial Statements contained in the Company’s 2018 Annual Report to Stockholders that was filed as Exhibit 13.1 to the Company’s Form 10-K for the year ended December 31, 2018 (referred to herein as the “2018 Audited Financial Statements”).  The Company has consistently followed those policies in preparing this Form 10-Q.

Reverse Stock Split:On August 20, 2018, the Company effected a 1-for-5.5 reverse stock split, whereby each 5.5 shares of the Company’s common stock were reclassified into one share of common stock.  All share and per share amounts for all periods presented have been adjusted to reflect the reverse stock split as though it had occurred prior to the earliest period presented.

Loans and Leases:Loans and leases that management has the intent and ability to hold for the foreseeable future or until maturity or payoff are reported at the principal balance outstanding, adjusted for purchase premiums and discounts, deferred loan fees and costs and an allowance for loan and lease losses (ALLL).  Interest income is accrued on the unpaid principal balance.  Loan origination fees, net of certain direct origination costs, are deferred and recognized in interest income using the level yield method without anticipating prepayments. 

The accrual of interest income on all classes of loans, except other consumer loans, is discontinued and the loan is placed on nonaccrual status at the time the loan is 90 days delinquent unless the loan is well-secured and in process of collection.  Other consumer loans are typically charged off no later than 90 days past due.  Past due status is based on the contractual terms of the loan for all classes of loans.  In all cases, loans are placed on nonaccrual or charged-off at an earlier date if collection of principal or interest is considered doubtful.  Nonaccrual loans and loans past due 90 days still on accrual include both smaller balance homogeneous loans that are collectively evaluated for impairment and individually classified impaired loans.  Commercial, multi-family residential real estate loans and commercial real estate loans placed on nonaccrual status are individually classified as impaired loans.

All interest accrued but not received for each loan placed on nonaccrual is reversed against interest income in the period in which it is placed in a nonaccrual status.  Interest received on such loans is accounted for on the cash-basis or cost recovery method, until qualifying for return to accrual status.  Loans are considered for return to accrual status provided all the principal and interest amounts that are contractually due are brought current, there is a current and well documented credit analysis,  there is reasonable assurance of repayment of principal and interest, and the customer has demonstrated sustained, amortizing payment performance of at least six months.

Allowance for Loan and Lease Losses (ALLL):  The ALLL is a valuation allowance for probable incurred credit losses.  Loan losses are charged against the allowance when management believes the uncollectibility of a loan balance is confirmed.  Subsequent recoveries, if any, are credited to the allowance.  Management estimates the allowance balance required using past loan loss experience, the nature and volume of the portfolio, information about specific borrower situations and estimated collateral values, economic conditions, and other factors.  Allocations of the allowance may be made for specific loans, but the entire allowance is available for any loan that, in management’s judgment, should be charged off.

The allowance consists of specific and general components.  The specific component relates to loans that are individually classified as impaired. A loan is impaired when, based on current information and events, it is probable that CFBank will be unable to collect all amounts due according to the contractual terms of the loan agreement.  Loans within any loan class for which the terms have been modified resulting in a concession, and for which the borrower is experiencing financial difficulties, are considered troubled debt restructurings (TDRs) and classified as impaired.  

9

CENTRAL FEDERAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands)

Factors considered by management in determining impairment for all loan classes include payment status, collateral value, and the probability of collecting scheduled principal and interest payments when due. Loans that experience insignificant payment delays and payment shortfalls generally are not classified as impaired.  Management determines the significance of payment delays and payment shortfalls on a case-by-case basis, taking into consideration all of the circumstances surrounding the loan and the borrower, including the length of the delay, the reasons for the delay, the borrower’s prior payment record and the amount of the shortfall in relation to the principal and interest owed.

All loans within the commercial, multi-family residential and commercial real estate segments, regardless of size, and loans of all other classes with balances over $250 are individually evaluated for impairment when they are 90 days past due, or earlier than 90 days past due if information regarding the payment capacity of the borrower indicates that payment in full according to the loan terms is doubtful.  If a loan is impaired, a portion of the allowance is allocated so that the loan is reported, net, at the present value of estimated future cash flows using the loan’s existing rate, or at the fair value of collateral, less costs to sell, if repayment is expected solely from the collateral.  Large groups of smaller balance homogeneous loans, such as consumer and single-family residential real estate loans, are collectively evaluated for impairment, and accordingly, they are not separately identified for impairment disclosures.

TDRs of all classes of loans are separately identified for impairment disclosures and are measured at the present value of estimated future cash flows using each loan’s effective rate at inception.  If a TDR is considered to be a collateral dependent loan, the loan is reported, net, at the fair value of the collateral. If the payment of the loan is dependent on the sale of the collateral, then costs to liquidate the collateral are included when determining the impairment.  For TDRs that subsequently default, the amount of reserve is determined in accordance with the accounting policy for the ALLL.

Interest income on all classes of impaired loans that are on nonaccrual status is recognized in accordance with the accounting policy for nonaccrual loans.  Cash receipts on all classes of impaired loans that are on nonaccrual status are generally applied to the principal balance outstanding.  Interest income on all classes of impaired loans that are not on nonaccrual status is recognized on the accrual method. TDRs may be classified as accruing if the borrower has been current for a period of at least six months with respect to loan payments and management expects that the borrower will be able to continue to make payments in accordance with the terms of the restructured note.

The general reserve component covers non impaired loans of all classes and is based on historical loss experience adjusted for current factors.  The historical loss experience is determined by loan class and is based on the actual loss history experienced by the Company over a three-year period.  The general component is calculated based on CFBank’s loan balances and actual historical three-year historical loss rates.  For loans with little or no actual loss experience, industry estimates are used based on loan segment. This loss experience is supplemented with other economic and judgmental factors based on the risks present for each loan class.  These economic and judgmental factors include consideration of the following:  levels of and trends in delinquencies and impaired loans; levels of and trends in charge-offs and recoveries; trends in volume and terms of loans; effects of any changes in risk selection and underwriting standards; other changes in lending policies, procedures, and practices; experience, ability, and depth of lending management and other relevant staff; national and local economic trends and conditions; industry conditions; and effects of changes in credit concentrations.

CFBank’s charge-off policy for commercial loans, single-family residential real estate loans, multi-family residential real estate loans, commercial real estate loans, construction loans and home equity lines of credit requires management to record a specific reserve or charge-off as soon as it is apparent that the borrower is troubled and there is, or likely will be, a collateral shortfall related to the estimated value of the collateral securing the loan.  Other consumer loans are typically charged off no later than 90 days past due.

Joint Ventures:The Holding Company has contributed funds into a series of joint ventures (equity stake) for the purpose of allocating excess liquidity into higher earning assets while diversifying its revenue sources.  The joint ventures are engaged in shorter term operating activities related to single family real estate developments.  Income is recognized based on a rate of return on the outstanding investment balance.  As units are sold, the Holding Company receives an additional incentive payment, which is recognized as income. Under ASU 2016-15, the Company has elected the nature of distribution approach to recognize returns from equity method investments.  Returns on investment are classified as cash flows from operating activities and returns of investment are classified as investing activities.

Low Income Housing Tax Credits (LIHTC):The Company has invested in low income housing tax credits through funds that assist corporations in investing in limited partnerships and limited liability companies that own, develop and operate low income residential rental properties for purposes of qualifying for the Housing Tax Credit. These investments are accounted for under the proportional amortization method which recognizes the amortization of the investment in proportion to the tax credit and other tax benefits received.

10

CENTRAL FEDERAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands)

Historic Tax Credits:  In June 2019, the Company made an equity investment as a non-managing member in an entity that receives historic tax credits (HTC) pursuant to Section 47 of the Internal Revenue Code.  This investment may generate a return through the realization of federal income tax credits, as well as other tax benefits, such as tax deductions from net operating losses of the investments over a period of time.  The investment in HTC is accounted for under the equity method of accounting and is included in accrued interest receivable and other assets on the consolidated balance sheets.  The Company’s recorded investment in this entity was $894 at June 30, 2019.  The maximum exposure to loss related to these investments was $894 at June 30, 2019, representing the Company’s investment balance and its unfunded commitments to invest additional amounts. 

Earnings Per Common Share: The two-class method is used in the calculation of basic and diluted earnings per share.  Under the two-class method, earnings available to common stockholders for the period are allocated between common stockholders and participating securities (unvested share-based payment awards) according to dividends declared (or accumulated) and participation rights in undistributed earnings.  The factors used in the earnings per share computation follow:

	Three months ended				Six months ended
	June 30,				June 30,
	2019		2018		2019		2018
	(unaudited)				(unaudited)
Basic
Net income	$	2,280	$	1,130	$	3,961	$	1,922
Accretion of discount and value of warrants exercised related to Series B preferred stock		157		(12)		183		(38)
Net income allocated to common stockholders	$	2,437	$	1,118	$	4,144	$	1,884
Weighted average common shares outstanding including unvested share-based payment awards(1)		4,412,726		4,248,573		4,384,395		4,245,757
Less: Unvested share-based payment awards		-		-		-		-
Average shares		4,412,726		4,248,573		4,384,395		4,245,757
Basic earnings per common share	$	0.55	$	0.26	$	0.95	$	0.44
Diluted
Net earnings allocated to common stockholders	$	2,437	$	1,118	$	4,144	$	1,884
Add back: Preferred Dividends on Series B preferred stock and accretion of discount		-		-		-		-
Net earnings allocated to common stockholders	$	2,437	$	1,118	$	4,144	$	1,884
Weighted average common shares outstanding for basic earnings per common share(1)		4,412,726		4,248,573		4,384,395		4,245,757
Add:  Dilutive effects of assumed exercises of stock options		35,077		41,226		37,075		40,263
Add:  Dilutive effects of assumed exercises of stock warrants		4,834		198,540		13,894		202,186
Average shares and dilutive potential common shares		4,452,637		4,488,339		4,435,364		4,488,206
Diluted earnings per common share	$	0.55	$	0.25	$	0.93	$	0.42

⁽¹⁾ Adjusted for 1-for-5.5 reverse stock split on August 20, 2018.

The following securities exercisable forcommon shares were anti-dilutive and not considered in computing diluted earnings per common share:

	Three months ended June 30,		Six months ended June 30,
	2019	2018	2019	2018
	(unaudited)		(unaudited)
Stock options	467	882	475	901

11

CENTRAL FEDERAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands)

Dividend Restriction:Banking regulations require us to maintain certain capital levels and may limit the dividends paid by CFBank to the Holding Company or by the Holding Company to stockholders.  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.  The Holding Company also is subject to various legal and regulatory policies and guidelines 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 Holding 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.

Adoption of New Accounting Standards:

The Financial Accounting Standards Board (FASB) has issued Accounting Standards Update (ASU) No. 2017-12, Derivatives and Hedging (Topic 815):  Targeted Improvements to Accounting for Hedging Activities.  The new standard is intended to improve and simplify accounting rules around hedge accounting.  The new standard refines and expands hedge accounting for both financial (e.g., interest rate) and commodity risks.  Its provisions create more transparency around how economic results are presented, both on the face of the financial statements and in the footnotes, for investors and analysts.  The new standard takes effect for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018.  For public companies, early adoption is permitted in any interim period or fiscal years before the effective date of the standard.  Adoption of ASU 2017-12 did not have a significant impact on the Company’s consolidated financial statements.

On February 25, 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842).  Under the new ASU, lessees recognize lease assets and liabilities on their balance sheets for all leases with terms of more than 12 months.  The new lessee accounting model retains two types of leases, and is consistent with the lessee accounting model under existing GAAP.  One type of lease (finance leases) is accounted for in substantially the same manner as capital leases were previously accounted for.  The other type of lease (operating leases) is accounted for (both in the income statement and statement of cash flows) in a manner consistent with today’s operating leases.  Lessor accounting under the new standard is fundamentally consistent with existing GAAP.  Lessees and lessors would be required to provide additional qualitative and quantitative disclosures to help financial statement users assess the amount, timing, and uncertainty of cash flows arising from leases.  These disclosures are intended to supplement the amounts recorded in the financial statements so that users can understand more about the nature of an organization’s leasing activities.  For public business entities, the final lease standard was effective for fiscal years beginning after December 15, 2018 including interim periods within those fiscal years.  Early application was permitted.   

The Company adopted the guidance on January 1, 2019 by electing the optional additional transition method permitted by ASU 2018-11 allowing for recognition of applicable leases as of January 1, 2019.  Additionally, the Company elected the following accounting policies:

· The practical expedient package that foregoes:

· reassessment of any expired or existing contracts for a lease

· reassessment of lease classifications for expired or existing leases

· reassessment of initial direct costs for existing leases

· The hindsight practical expedient to determine lease term and impairments of right-to-use assets.

· Other practical expedients regarding land easement, combining lease and non-lease components and the exclusion of short-term leases.

The Company recognized right-of-use assets and lease liabilities of approximately $2.4 million, representing its operating lease commitments, upon adoption.

In March 2019, the FASB issued ASU No. 2019-01, Leases (Topic 842): Codification Improvements. This ASU (1) states that for lessors that are not manufacturers or dealers, the fair value of the underlying asset is its cost, less any volume or trade discounts, as long as there isn’t a significant amount of time between acquisition of the asset and lease commencement; (2) clarifies that lessors in the scope of ASC 942 must classify principal payments received from sales-type and direct financing leases in investing activities in the statement of cash flows; and (3) clarifies the transition guidance related to certain interim disclosures provided in the year of adoption. To coincide with the adoption of ASU No. 2016-02, the Company elected to early adopt ASU 2019-01 on January 1, 2019. The adoption of this ASU did not have a material impact on the Company’s consolidated financial statements.  

12

CENTRAL FEDERAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands)

Future Accounting Matters:

In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments.  Once effective, ASU 2016-13 will significantly change current guidance for recognizing impairment of financial instruments.  Current guidance requires an "incurred loss" methodology for recognizing credit losses that delays recognition until it is probable a loss has been incurred.  ASU 2016-13 replaces the incurred loss impairment methodology with a new methodology that reflects expected credit losses over the lives of the loans and requires consideration of a broader range of information to inform credit loss estimates.  The ASU requires an organization to estimate all expected credit losses for financial assets measured at amortized cost, including loans and held-to-maturity debt securities, based on historical experience, current conditions, and reasonable and supportable forecasts.  Additional disclosures are required.  ASU 2016-13 also amends the accounting for credit losses on available-for-sale debt securities and purchased financial assets with credit deterioration.  Under the new guidance, entities will determine whether all or a portion of the unrealized loss on an available-for-sale debt security is a credit loss.  Any credit loss will be recognized as an allowance for credit losses on available-for-sale debt securities rather than as a direct reduction of the amortized cost basis of the investment, as is currently required.  As a result, entities will recognize improvements to estimated credit losses on available-for-sale debt securities immediately in earnings rather than as interest income over time, as currently required.  ASU 2016-13 eliminates the current accounting model for purchased credit impaired loans and debt securities.  Instead, purchased financial assets with credit deterioration will be recorded gross of estimated credit losses as of the date of acquisition and the estimated credit losses amounts will be added to the allowance for credit losses.  Thereafter, entities will account for additional impairment of such purchased assets using the models listed above.  ASU 2016-13 will take effect for U.S. Securities and Exchange Commission (SEC) filers for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019.  Early application will be permitted for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018.  While the Company generally expects that the implementation of ASU 2016-13 has the potential to increase its allowance for loan losses balance, the Company is continuing to evaluate the potential impact on the Company’s financial statements and disclosures.  Management has been running and evaluating various scenarios.  At this time, the estimated impact on the Company’s consolidated financial statements, including disclosures, cannot be reasonably determined.  

General Litigation

The Company is subject to claims and lawsuits that arise primarily in the ordinary course of business.  In the opinion of management, the disposition or ultimate resolution of such claims and lawsuits is not anticipated to have a material adverse effect on the consolidated financial position, results of operations and cash flows of the Company.

Reclassifications

Reclassification of certain amounts in the 2018 consolidated financial statements have been made to conform to the 2019 presentation.

NOTE 2 – REVENUE RECOGNITION

Accounting Standards Codification ("ASC") 606, Revenue from Contracts with Customers ("ASC 606"), establishes principles for reporting information about the nature, amount, timing and uncertainty of revenue and cash flows arising from the entity's contracts to provide goods or services to customers. The core principle requires an entity to recognize revenue to depict the transfer of goods or services to customers in an amount that reflects the consideration that it expects to be entitled to receive in exchange for those goods or services recognized as performance obligations are satisfied.

The majority of our revenue-generating transactions are not subject to ASC 606, including revenue generated from financial instruments, such as our loans, letters of credit, derivatives and investment securities, as well as revenue related to our mortgage activities related to net gains on sale of loans.

All of the Company’s revenue from contracts with customers in the scope of ASC 606 is recognized within Noninterest Income.  Descriptions of our revenue-generating activities that are within the scope of ASC 606, which are presented in our income statements as components of non-interest income are as follows:

· Service charges on deposit accounts - these represent general service fees for monthly account maintenance and activity, or transaction-based fees, and consist of transaction-based revenue, time-based revenue (service period), item-based revenue or some other individual attribute-based revenue. Revenue is recognized when our performance obligation is completed which is generally monthly for account maintenance services or when a transaction has been completed (such as a wire transfer). Payment for such performance obligations are generally received at the time the performance obligations are satisfied.

13

CENTRAL FEDERAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands)

NOTE 3 – SECURITIES

The following table summarizes the amortized cost and fair value of the available-for-sale securities portfolio at June 30, 2019 and December 31, 2018 and the corresponding amounts of unrealized gains and losses recognized in accumulated other comprehensive income (loss):

	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
June 30, 2019 (unaudited)
Issued by U.S. government-sponsored entities and agencies:
U.S. Treasury	$	9,977	$	30	$	17	$	9,990
Mortgage-backed securities - residential		147		4		-		151
Collateralized mortgage obligations		47		1		-		48
Total	$	10,171	$	35	$	17	$	10,189

	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
December 31, 2018
Issued by U.S. government-sponsored entities and agencies:
U.S. Treasury	$	9,978	$	2	$	99	$	9,881
Mortgage-backed securities - residential		167		3		-		170
Collateralized mortgage obligations		62		1		-		63
Total	$	10,207	$	6	$	99	$	10,114

There was no other-than-temporary impairment recognized in accumulated other comprehensive income (loss) for securities available for sale at June 30, 2019 or June 30, 2018.

There were no sales of securities for the three and six months ended June 30, 2019 and 2018.

The amortized cost and fair value of debt securities at June 30, 2019 and December 31, 2018 are shown in the table below by contractual maturity.  Expected maturities may differ from contractual maturities if borrowers have the right to call or prepay obligations with or without call or prepayment penalties.  Securities not due at a single maturity date are shown separately.

	June 30, 2019					December 31, 2018
	(unaudited)
	Amortized Cost		Fair Value		Amortized Cost		Fair Value
Due in one year or less	$	4,991	$	4,980	$	3,495	$	3,472
Due from one to five years		4,986		5,010		6,483		6,409
Mortgage-backed securities - residential		147		151		167		170
Collateralized mortgage obligations		47		48		62		63
Total	$	10,171	$	10,189	$	10,207	$	10,114

Fair value of securities pledged was as follows:

	June 30, 2019		December 31, 2018
	(unaudited)
Pledged as collateral for:
FHLB advances	$	3,586	$	4,058
Public deposits		2,015		1,997
Mortgage banking derivatives		1,494		-
Interest-rate swaps		93		104
Total	$	7,188	$	6,159

14

CENTRAL FEDERAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands)

At June 30, 2019 and December 31, 2018, there were no holdings of securities of any one issuer, other than U.S. government-sponsored entities and agencies, in an amount greater than 10% of stockholders’ equity.

The following table summarizes securities with unrealized losses at June 30, 2019 and December 31, 2018, aggregated by major security type and length of time in a continuous unrealized loss position.

June 30, 2019 (unaudited)	Less than 12 Months				12 Months or More				Total
Description of Securities	Fair Value		Unrealized Loss		Fair Value		Unrealized Loss		Fair Value		Unrealized Loss
Issued by U.S. government-sponsored entities and agencies:
U.S. Treasury	$	1,495	(1)	-	$	5,987	$	17	$	7,482	$	17
Total temporarily impaired	$	1,495	$	-	$	5,987	$	17	$	7,482	$	17

⁽¹⁾ Unrealized loss is less than $1 resulting in rounding to zero.

December 31, 2018	Less than 12 Months				12 Months or More				Total
Description of Securities	Fair Value		Unrealized Loss		Fair Value		Unrealized Loss		Fair Value		Unrealized Loss
Issued by U.S. government-sponsored entities and agencies:
U.S. Treasury	$	499	$	1	$	8,401	$	98	$	8,900	$	99
Total temporarily impaired	$	499	$	1	$	8,401	$	98	$	8,900	$	99

The unrealized losses in U.S. Treasuries at June 30, 2019 and December 31, 2018 are related to multiple securities.  Because the decline in fair value is attributable to changes in market conditions, and not credit quality, and because the Company does not have the intent to sell these securities and it is likely that it will not be required to sell these securities before their anticipated recovery, the Company did not consider these securities to be other-than-temporarily impaired at June 30, 2019 and December 31, 2018.

NOTE 4 – LOANS AND LEASES

The following table presents the recorded investment in loans and leases by portfolio segment.  The recorded investment in loans and leases includes the principal balance outstanding adjusted for purchase premiums and discounts, and deferred loan fees and costs.

	June 30, 2019		December 31, 2018
	(unaudited)
Commercial (1)	$	146,450	$	126,887
Real estate:
Single-family residential		131,517		118,386
Multi-family residential		47,612		47,651
Commercial		190,575		173,435
Construction		62,359		61,792
Consumer:
Home equity lines of credit		22,232		23,961
Other		4,979		5,583
Subtotal		605,724		557,695
Less: ALLL		(7,029)		(7,012)
Loans and leases, net	$	598,695	$	550,683

⁽¹⁾ Includes $5,094 and $5,403 of commercial leases at June 30, 2019 and December 31, 2018, respectively.

15

CENTRAL FEDERAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands)

Mortgage Purchase Program

CFBank has participated in a Mortgage Purchase Program with Northpointe Bank (Northpointe), a Michigan banking corporation, since December 2012.  Pursuant to the terms of a participation agreement, CFBank purchases participation interests in loans made by Northpointe related to fully underwritten and pre-sold mortgage loans originated by various prescreened mortgage brokers located throughout the U.S.  The underlying loans are individually (MERS) registered loans which are held until funded by the end investor. The mortgage loan investors include Fannie Mae and Freddie Mac, and other major financial institutions.  This process on average takes approximately 14 days.  Given the short-term holding period of the underlying loans, common credit risks (such as past due, impairment and TDR, nonperforming, and nonaccrual classification) are substantially reduced.  Therefore, no allowance is allocated by CFBank to these loans.  These loans are 100% risk rated for CFBank capital adequacy purposes.  Under the participation agreement, CFBank agrees to purchase a 95% ownership/participation interest in each of the aforementioned loans, and Northpointe maintains a 5% ownership interest in each loan it participates.  At June 30, 2019 and December 31, 2018, CFBank held $40,572 and $36,845, respectively, of such loans which have been included in single-family residential loan totals above.

Allowance for Loan and Lease Losses

The ALLL is a valuation allowance for probable incurred credit losses in the loan portfolio based on management’s evaluation of various factors including past loan loss experience, the nature and volume of the portfolio, information about specific borrower situations and estimated collateral values, economic conditions and other factors. A provision for loan and lease losses is charged to operations based on management’s periodic evaluation of these and other pertinent factors described in Note 1 to the 2018 Audited Financial Statements. 

The following tables present the activity in the ALLL by portfolio segment for the three and six months ended June 30, 2019:

	Three months ended June 30, 2019 (unaudited)
			Real Estate								Consumer
	Commercial		Single-family		Multi-family		Commercial		Construction		Home Equity lines of credit		Other		Total
Beginning balance	$	1,819	$	1,063	$	622	$	2,299	$	759	$	375	$	87	$	7,024
Addition to (reduction in) provision for loan losses		150		(50)		(60)		40		-		(70)		(10)		-
Charge-offs		-		-		-		-		-		-		-		-
Recoveries		-		1		-		-		-		4		-		5
Ending balance	$	1,969	$	1,014	$	562	$	2,339	$	759	$	309	$	77	$	7,029

	Six months ended June, 2019 (unaudited)
			Real Estate								Consumer
	Commercial		Single-family		Multi-family		Commercial		Construction		Home Equity lines of credit		Other		Total
Beginning balance	$	1,819	$	1,061	$	612	$	2,274	$	739	$	410	$	97	$	7,012
Addition to (reduction in) provision for loan losses		150		(50)		(50)		65		20		(115)		(20)		-
Charge-offs		-		-		-		-		-		-		-		-
Recoveries		-		3		-		-		-		14		-		17
Ending balance	$	1,969	$	1,014	$	562	$	2,339	$	759	$	309	$	77	$	7,029

16

CENTRAL FEDERAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands)

The following tables present the activity in the ALLL by portfolio segment for the three and six months ended June 30, 2018:  

	Three months ended June 30, 2018 (unaudited)
			Real Estate								Consumer
	Commercial		Single-family		Multi-family		Commercial		Construction		Home Equity lines of credit		Other		Total
Beginning balance	$	1,869	$	1,039	$	687	$	2,139	$	614	$	521	$	107	$	6,976
Addition to (reduction in) provision for loan losses		20		-		10		10		-		(40)		-		-
Charge-offs		-		-		-		-		-		-		-		-
Recoveries		-		-		-		-		-		5		-		5
Ending balance	$	1,889	$	1,039	$	697	$	2,149	$	614	$	486	$	107	$	6,981

	Six months ended June, 2018 (unaudited)
			Real Estate								Consumer
	Commercial		Single-family		Multi-family		Commercial		Construction		Home Equity lines of credit		Other		Total
Beginning balance	$	1,984	$	912	$	660	$	2,143	$	672	$	597	$	2	$	6,970
Addition to (reduction in) provision for loan losses		(97)		131		37		6		(58)		(124)		105		-
Charge-offs		-		(6)		-		-		-		-		-		(6)
Recoveries		2		2		-		-		-		13		-		17
Ending balance	$	1,889	$	1,039	$	697	$	2,149	$	614	$	486	$	107	$	6,981

The following table presents the balance in the ALLL and the recorded investment in loans and leases by portfolio segment and based on the impairment method as of June 30, 2019 (unaudited):

			Real Estate								Consumer
	Commercial		Single- family		Multi- family		Commercial		Construction		Home Equity lines of credit		Other		Total
ALLL:
Ending allowance balance attributable to loans:
Individually evaluated for impairment	$	-	$	-	$	-	$	33	$	-	$	-	$	-	$	33
Collectively evaluated for impairment		1,969		1,014		562		2,306		759		309		77		6,996
Total ending allowance balance	$	1,969	$	1,014	$	562	$	2,339	$	759	$	309	$	77	$	7,029
Loans:
Individually evaluated for impairment	$	93	$	108	$	-	$	4,599	$	-	$	-	$	-	$	4,800
Collectively evaluated for impairment		146,357		131,409		47,612		185,976		62,359		22,232		4,979		600,924
Total ending loan balance	$	146,450	$	131,517	$	47,612	$	190,575	$	62,359	$	22,232	$	4,979	$	605,724

17

CENTRAL FEDERAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands)

The following table presents the balance in the ALLL and the recorded investment in loans and leases by portfolio segment and based on the impairment method as of December 31, 2018: 

			Real Estate								Consumer
	Commercial		Single- family		Multi- family		Commercial		Construction		Home Equity lines of credit		Other		Total
ALLL:
Ending allowance balance attributable to loans:
Individually evaluated for impairment	$	-	$	-	$	-	$	22	$	-	$	-	$	-	$	22
Collectively evaluated for impairment		1,819		1,061		612		2,252		739		410		97		6,990
Total ending allowance balance	$	1,819	$	1,061	$	612	$	2,274	$	739	$	410	$	97	$	7,012
Loans:
Individually evaluated for impairment	$	100	$	110	$	-	$	2,951	$	-	$	-	$	-	$	3,161
Collectively evaluated for impairment		126,787		118,276		47,651		170,484		61,792		23,961		5,583		554,534
Total ending loan balance	$	126,887	$	118,386	$	47,651	$	173,435	$	61,792	$	23,961	$	5,583	$	557,695

The following table presents loans individually evaluated for impairment by class of loans as of and for the period ended June 30, 2019.  The unpaid principal balance is the contractual principal balance outstanding.  The recorded investment is the unpaid principal balance adjusted for partial charge-offs, purchase premiums and discounts, and deferred loan fees and costs.  The table presents accrual basis interest income recognized during the three and six months ended June 30, 2019.  Cash payments of interest on these loans during the three and six months ended June 30, 2019 totaled $43 and $88, respectively.

							Three months ended				Six months ended
	As of June 30, 2019						June 30, 2019				June 30, 2019
	(unaudited)						(unaudited)				(unaudited)
	Unpaid Principal Balance		Recorded Investment		ALLL Allocated		Average Recorded Investment		Interest Income Recognized		Average Recorded Investment		Interest Income Recognized
With no related allowance recorded:
Commercial	$	93	$	93	$	-	$	94	$	-	$	96	$	-
Real estate:
Single-family residential		108		108		-		109		2		109		3
Commercial:
Owner occupied	$	226	$	122	$	-	$	121	$	1		122		7
Total with no allowance recorded		427		323		-		324		3		327		10
With an allowance recorded:
Real estate:
Commercial:
Non-owner occupied		4,477		4,477		33		4,483		39		3,932		76
Total with an allowance recorded		4,477		4,477		33		4,483		39		3,932		76
Total	$	4,904	$	4,800	$	33	$	4,807	$	42	$	4,259	$	86

18

CENTRAL FEDERAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands)

The following table presents loans individually evaluated for impairment by class of loans as of December 31, 2018.  The unpaid principal balance is the contractual principal balance outstanding.  The recorded investment is the unpaid principal balance adjusted for partial charge-offs, purchase premiums and discounts, and deferred loan fees and costs.  The table presents accrual basis interest income recognized during the three and six months ended June 30, 2018.  Cash payments of interest during the three and six months ended June 30, 2018 totaled $48 and $99, respectively.

							Three months ended				Six months ended
	As of December 31, 2018						June 30, 2018				June 30, 2018
							(unaudited)				(unaudited)
	Unpaid Principal Balance		Recorded Investment		ALLL Allocated		Average Recorded Investment		Interest Income Recognized		Average Recorded Investment		Interest Income Recognized
With no related allowance recorded:
Commercial	$	-	$	-	$	-	$	-	$	-	$	-	$	-
Real estate:
Commercial:
Owner occupied		379		125		-		132		5		133		10
Total with no allowance recorded		379		125		-		132		5		133		10
With an allowance recorded:
Commercial (1)		100		100		-		208		1		218		3
Real estate:
Single-family residential (1)		110		110		-		114		2		115		3
Commercial:
Non-owner occupied		2,826		2,826		22		2,844		39		2,845		78
Owner occupied		-		-		-		186		2		187		4
Total with an allowance recorded		3,036		3,036		22		3,352		44		3,365		88
Total	$	3,415	$	3,161	$	22	$	3,484	$	49	$	3,498	$	98

⁽¹⁾ Allowance recorded is less than $1 resulting in rounding to zero.

The following table presents the recorded investment in nonperforming loans by class of loans:

	June 30, 2019		December 31, 2018
	(unaudited)
Loans past due over 90 days still on accrual	$	-	$	-
Nonaccrual loans:
Commercial		93		100
Real estate:
Single-family residential		528		167
Commercial:
Non-owner occupied		1,689		-
Consumer:
Home equity lines of credit:
Originated for portfolio		15		-
Purchased for portfolio		84		89
Other consumer		9		21
Total nonaccrual		2,418		377
Total nonaccrual and nonperforming loans	$	2,418	$	377

Nonaccrual loans include both smaller balance single-family mortgage and consumer loans that are collectively evaluated for impairment and individually classified impaired loans.  There were no loans 90 days or more past due and still accruing interest at June 30, 2019 or December 31, 2018.  

19

CENTRAL FEDERAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands)

The following table presents the aging of the recorded investment in past due loans and leases by class of loans as of June 30, 2019 (unaudited):

	30 - 59 Days Past Due		60 - 89 Days Past Due		Greater than 90 Days Past Due		Total Past Due		Loans Not Past Due		Nonaccrual Loans Not > 90 days Past Due
Commercial	$	40	$	-	$	-	$	40	$	146,410	$	93
Real estate:
Single-family residential		74		371		22		467		131,050		506
Multi-family residential		-		-		-		-		47,612		-
Commercial:
Non-owner occupied		-		-		1,689		1,689		123,894		-
Owner occupied		-		-		-		-		45,558		-
Land		-		-		-		-		19,434		-
Construction		-		-		-		-		62,359		-
Consumer:
Home equity lines of credit:
Originated for portfolio		273		-		-		273		21,669		15
Purchased for portfolio		31		-		-		31		259		84
Other		-		-		9		9		4,970		-
Total	$	418	$	371	$	1,720	$	2,509	$	603,215	$	698

The following table presents the aging of the recorded investment in past due loans and leases by class of loans as of December 31, 2018:  

	30 - 59 Days Past Due		60 - 89 Days Past Due		Greater than 90 Days Past Due		Total Past Due		Loans Not Past Due		Nonaccrual Loans Not > 90 days Past Due
Commercial	$	-	$	-	$	-	$	-	$	126,887	$	100
Real estate:
Single-family residential		597		-		23		620		117,766		144
Multi-family residential		-		-		-		-		47,651		-
Commercial:
Non-owner occupied		-		-		-		-		122,465		-
Owner occupied		-		-		-		-		43,087		-
Land		-		-		-		-		7,883		-
Construction		-		-		-		-		61,792		-
Consumer:
Home equity lines of credit:
Originated for portfolio		474		-		-		474		23,119		-
Purchased for portfolio		-		33		-		33		335		89
Other		-		-		21		21		5,562		-
Total	$	1,071	$	33	$	44	$	1,148	$	556,547	$	333

Troubled Debt Restructurings (TDRs):

From time to time, the terms of certain loans are modified as TDRs, where concessions are granted to borrowers experiencing financial difficulties. The modification of the terms of such loans may have included one or a combination of the following: a reduction of the stated interest rate of the loan; an increase in the stated rate of interest lower than the current market rate for new debt with similar risk; an extension of the maturity date; or a change in the payment terms.

20

CENTRAL FEDERAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands)

As of June 30, 2019 and December 31, 2018, TDRs totaled $3,111 and $3,161, respectively.  The Company allocated $20 and $22 of specific reserves to loans whose terms had been modified in TDRs as of June 30, 2019 and December 31, 2018, respectively.  The Company had not committed to lend any additional amounts as of June 30, 2019 or December 31, 2018 to customers with outstanding loans classified as nonaccrual TDRs.

During the three and six months ended June 30, 2019and June 30, 2018, there were no loans modified as a TDR. 

There were no TDRs in payment default or that became nonperforming during the quarters ended June 30, 2019 and June 30, 2018.  A loan is considered to be in payment default once it is 90 days contractually past due under the modified terms, at which time the loan is re-evaluated to determine whether an impairment loss should be recognized, either through a write-off or specific valuation allowance, so that the loan is reported, net, at the present value of estimated future cash flows, or at the fair value of collateral, less cost to sell, if repayment is expected solely from the collateral.

The terms of certain other loans were modified during the quarters ended June 30, 2019 and 2018 that did not meet the definition of a TDR. These loans had a total recorded investment of $15,821 and $21,612as of June 30, 2019 and 2018, respectively. The modification of these loans involved either a modification of the terms of a loan to borrowers who were not experiencing financial difficulties, a delay in payments that was considered to be insignificant or a modification where no concessions were granted.

In order to determine whether a borrower is experiencing financial difficulty, an evaluation is performed of the probability that the borrower will be in payment default on any of its debt in the foreseeable future without the modification. This evaluation is performed under the Company’s internal underwriting policy.

Nonaccrual loans include loans that were modified and identified as TDRs and the loans are not performing.  At June 30, 2019 and December 31, 2018, nonaccrual TDRs were as follows:

	June 30, 2019		December 31, 2018
	(unaudited)
Commercial	$	93	$	100
Total	$	93	$	100

Nonaccrual loans at June 30, 2019 and December 31, 2018 do not include $3,018 and $3,061, respectively, of TDRs where customers have established a sustained period of repayment performance, generally six months, the loans are current according to their modified terms and repayment of the remaining contractual payments is expected. These loans are included in total impaired loans.

Credit Quality Indicators:

The Company categorizes loans into risk categories based on relevant information about the ability of borrowers to service their debt, such as current financial information, historical payment experience, credit documentation, public information and current economic trends, among other factors.  Management analyzes loans individually by classifying the loans as to credit risk.  This analysis includes commercial, commercial real estate and multi-family residential real estate loans.  Internal loan reviews for these loan types are performed at least annually, and more often for loans with higher credit risk. Adjustments to loan risk ratings are made based on the reviews and at any time information is received that may affect risk ratings.  The following definitions are used for risk ratings:

Special Mention.  Loans classified as special mention have a potential weakness that deserves management’s close attention.  If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the loan or of CFBank’s credit position at some future date.

Substandard.  Loans classified as substandard are inadequately protected by the current net worth and paying capacity of the obligor or of the collateral pledged, if any.  Loans so classified have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt.  They are characterized by the distinct possibility that there will be some loss if the deficiencies are not corrected.

Doubtful.  Loans classified as doubtful have all the weaknesses inherent in those classified as substandard, with the added characteristic that the weaknesses make collection or liquidation in full, on the basis of currently existing facts, conditions and values, highly questionable and improbable.

21

CENTRAL FEDERAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands)

Loans not meeting the criteria to be classified into one of the above categories are considered to be not rated or pass-rated loans.  Loans listed as not rated are primarily groups of homogeneous loans.  Past due information is the primary credit indicator for groups of homogenous loans.  Loans listed as pass-rated loans are loans that are subject to internal loan reviews and are determined not to meet the criteria required to be classified as special mention, substandard or doubtful. 

The recorded investment in loans and leases by risk category and by class of loans and leases as of June 30, 2019 and based on the most recent analysis performed follows.  There were no loans or leases rated doubtful at June 30, 2019.  

(unaudited)	Not Rated		Pass		Special Mention		Substandard		Total
Commercial	$	-	$	140,266	$	5,468	$	716	$	146,450
Real estate:
Single-family residential		130,989		-		-		528		131,517
Multi-family residential		-		47,059		403		150		47,612
Commercial:
Non-owner occupied		71		121,035		-		4,477		125,583
Owner occupied		-		43,260		2,176		122		45,558
Land		-		19,434		-		-		19,434
Construction		3,280		59,079		-		-		62,359
Consumer:
Home equity lines of credit:
Originated for portfolio		21,862		-		-		80		21,942
Purchased for portfolio		206		-		-		84		290
Other		4,970		-		-		9		4,979
	$	161,378	$	430,133	$	8,047	$	6,166	$	605,724

The recorded investment in loans and leases by risk category and by class of loans and leases as of December 31, 2018 follows.  There were no loans or leases rated doubtful at December 31, 2018. 

	Not Rated		Pass		Special Mention		Substandard		Total
Commercial	$	-	$	123,369	$	2,651	$	867	$	126,887
Real estate:
Single-family residential		118,219		-		-		167		118,386
Multi-family residential		-		47,072		425		154		47,651
Commercial:
Non-owner occupied		76		119,843		1,701		845		122,465
Owner occupied		-		39,747		2,252		1,088		43,087
Land		-		7,883		-		-		7,883
Construction		3,279		58,513		-		-		61,792
Consumer:
Home equity lines of credit:
Originated for portfolio		23,525		-		-		68		23,593
Purchased for portfolio		279		-		-		89		368
Other		5,562		-		-		21		5,583
	$	150,940	$	396,427	$	7,029	$	3,299	$	557,695

22

CENTRAL FEDERAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands)

Leases:

The following lists the components of the net investment in direct financing leases(1):

	June 30, 2019		December 31, 2018
	(unaudited)
Total minimum lease payments to be received	$	5,649	$	6,045
Less: unearned income		(555)		(642)
Net investment in direct financing leases	$	5,094	$	5,403

⁽¹⁾ There were no initial direct costs associated with these leases.

The following summarizes the future minimum lease payments receivable in fiscal year 2019 and in subsequent fiscal years:

2019	$	397
2020		793
2021		793
2022		793
2023		1,563
Thereafter		1,310
	$	5,649

NOTE 5 – LEASES

A lease is defined as a contract, or part of a contract, that conveys the right to control the use of identified property, plant or equipment for a period of time in exchange for consideration. On January 1, 2019, the Company adopted ASU No. 2016-02, Leases (Topic 842) and all subsequent ASUs that modified Topic 842. For the Company, Topic 842 primarily affected the accounting treatment for operating lease agreements in which the Company is the lessee.

The leases in which the Company is the lessee are comprised of real estate property for branches and offices and for equipment with terms extending through 2024. All of our leases are classified as operating leases, and therefore, were previously not recognized on the Company’s consolidated balance sheets. With the adoption of Topic 842, operating lease agreements are required to be recognized on the consolidated balance sheets as a right-of-use (“ROU”) asset and a corresponding operating lease liability.  The Company does not have any leases classified as finance leases.

The calculated amount of the ROU assets and lease liabilities are impacted by the length of the lease term and the discount rate used to present value the minimum lease payments. The Company’s lease agreements often include one or more options to renew at the Company’s discretion which were considered, as applicable, in the calculation of the ROU assets and lease liabilities. If at lease inception, the Company considers the exercising of a renewal option to be reasonably certain, the Company will include the extended term in the calculation of the ROU asset and lease liability. Regarding the discount rate, Topic 842 requires the use of the rate implicit in the lease whenever this rate is readily determinable. As this rate is not readily determinable in our operating leases, the Company utilizes its incremental borrowing rate at lease inception, on a collateralized basis, over a similar term.  At June 30, 2019, the weighted-average remaining lease term for the Company’s operating leases was 4.7 years and the weighted-average discount rate was 6.56%.

The Company’s operating lease costs were $90 for the three months ended June 30, 2019 and $217 for the six months ended June 30, 2019.  The variable lease costs totaled $70 for the three months ended June 30, 2019 and $101 for the six months ended June 30, 2019. As the Company elected not to separate lease and non-lease components for all classes of underlying assets and instead to account for them as a single lease component, the variable lease cost primarily represents variable payments such as common area maintenance and utilities.  

23

CENTRAL FEDERAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands)

Future minimum operating lease payments as of June 30, 2019 are as follows:

2019, excluding the six months ended June 30, 2019	$	271
2020		544
2021		548
2022		536
2023		377
Thereafter		250
Total future minimum rental commitments		2,526
Less - amounts representing interest		(363)
Total operating lease liabilities	$	2,163

NOTE 6 - FAIR VALUE 

Fair value is the exchange price that would be received for an asset or paid to transfer a liability in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date.  There are three levels of inputs that may be used to measure fair values:

Level 1 – Quoted prices (unadjusted) for identical assets or liabilities in active markets that the entity has the ability to access as of the measurement date.

Level 2 – Significant other observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities, quoted prices in markets that are not active, or other inputs that are observable or can be corroborated by observable market data.

Level 3 – Significant unobservable inputs that reflect a company’s own assumptions about the assumptions that market participants would use in pricing an asset or liability.

The Company used the following methods and significant assumptions to estimate the fair value of each type of asset and liability:

Securities available for sale:  The fair value of securities available for sale is determined using pricing models that vary based on asset class and include available trade, bid and other market information or matrix pricing, which is a mathematical technique widely used in the industry to value debt securities without relying exclusively on quoted prices for the specific securities but rather by relying on the securities’ relationship to other benchmark quoted securities (Level 2).

Derivatives:  The fair value of derivatives, which includes yield maintenance provisions, interest rate lock commitments and interest rate swaps, is based on valuation models using observable market data as of the measurement date (Level 2).

TBA mortgage – back securities:  To mitigate the effect of the interest rate risk inherent in providing rate lock commitments to borrowers, the Company enters into either a forward sales contract to sell loans to investors when using best efforts or a trade of “to be announced (TBA)” mortgage-backed securities for mandatory delivery.  The forward sales contracts lock in a price for the sale of loans with similar characteristics to the specific rate lock commitments based on a valuation model using observable market data for pricing commitments (Level 2).

Impaired loans:  The fair value of impaired loans with specific allocations of the ALLL is generally based on recent real estate appraisals. These appraisals may utilize a single valuation approach or a combination of approaches including comparable sales and the income approach. Adjustments are routinely made in the appraisal process by the appraisers to adjust for differences between the comparable sales and income data available. Such adjustments are usually significant and typically result in a Level 3 classification of the inputs for determining fair value.

24

CENTRAL FEDERAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands)

Appraisals for collateral-dependent impaired loans are performed by certified general appraisers (for commercial properties) or certified residential appraisers (for residential properties) whose qualifications and licenses have been reviewed and verified by a third-party appraisal management company approved by the Board of Directors annually. Once received, the loan officer or a member of the credit department reviews the assumptions and approaches utilized in the appraisal as well as the overall resulting fair value in comparison with independent data sources such as recent market data or industry-wide statistics.  Appraisals are updated as needed based on facts and circumstances associated with the individual properties.  Real estate appraisals typically incorporate measures such as recent sales prices for comparable properties.  Appraisers may make adjustments to the sales prices of the comparable properties as deemed appropriate based on the age, condition or general characteristics of the subject property.  Management applies an additional discount to real estate appraised values, typically to reflect changes in market conditions since the date of the appraisal if warranted and to cover disposition costs (including selling expenses) based on the intended disposition method of the property.  Non-real estate collateral may be valued using an appraisal, net book value per the borrower’s financial statements, or aging reports, adjusted or discounted based on management’s historical knowledge, changes in market conditions from the time of the valuation, and management’s expertise and knowledge of the client and client’s business, resulting in a Level 3 fair value classification.  Impaired loans are evaluated on a quarterly basis for additional impairment and adjusted accordingly.

Loans held for sale:  Loans held for sale are carried at fair value, as determined by outstanding commitments from third party investors (Level 2). 

Assets and liabilities measured at fair value on a recurring basis, including financial assets and liabilities for which the Company has elected the fair value option, are summarized below:

	Fair Value Measurements at June 30, 2019 using Significant Other Observable Inputs
	(Level 2)
	(unaudited)
Financial Assets:
Securities available for sale:
Issued by U.S. government-sponsored entities and agencies:
U.S. Treasury	$	9,990
Mortgage-backed securities - residential		151
Collateralized mortgage obligations		48
Total securities available for sale	$	10,189
Loans held for sale	$	52,184
Yield maintenance provisions (embedded derivatives)	$	8
Interest rate lock commitments	$	2,480
Financial Liabilities:
Interest-rate swaps	$	8
TBA Mortgage-back securities	$	645

25

CENTRAL FEDERAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands)

	Fair Value Measurements at December 31, 2018 using Significant Other Observable Inputs
	(Level 2)
Financial Assets:
Securities available for sale:
Issued by U.S. government-sponsored entities and agencies:
U.S. Treasury	$	9,881
Mortgage-backed securities - residential		170
Collateralized mortgage obligations		63
Total securities available for sale	$	10,114
Loans held for sale	$	17,385
Yield maintenance provisions (embedded derivatives)	$	17
Interest rate lock commitments	$	721
Financial Liabilities:
Interest-rate swaps	$	17
TBA Mortgage-backed securities	$	342

The Company had noassets or liabilities measured at fair value on a recurring basis that were measured using Level 1 or Level 3 inputs at June 30, 2019 or December 31, 2018.  There were notransfers of assets or liabilities measured at fair value between levels during the periods ended June 30, 2019 and December 31, 2018.

Assets and liabilities measured at fair value on a non-recurring basis are summarized below:

Fair Value Measurements at June 30, 2019 Using
Significant Unobservable Inputs (Level 3)
(unaudited)
Impaired loans:
Commercial	$	93
Real Estate:
Single-family residential		109
Commercial:
Non-owner occupied		4,444
Total impaired loans	$	4,646

Fair Value Measurements at December 31, 2018 Using
Significant Unobservable Inputs (Level 3)
Impaired loans:
Commercial	$	100
Real Estate:
Single-family residential		110
Commercial:
Non-owner occupied		2,804
Total impaired loans	$	3,014

The Company had nomaterialassets or liabilities measured at fair value on a non-recurring basis that were measured using Level 1 or Level 2 inputs at June 30, 2019 or December 31, 2018. 

Impaired loans that are measured for impairment using the fair value of the collateral for collateral dependent loans, had a principal balance of $4,679 with a valuation allowance of $33 at June 30, 2019. There were no write-downs of impaired collateral dependent loans during the three and six months ended June 30, 2019 or 2018.  Impaired loans that are measured for impairment using the fair value of the collateral for collateral dependent loans, had a principal balance of $3,036, with a valuation allowance of $22 at December 31, 2018.

26

CENTRAL FEDERAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands)

During the three and six months ended June 30, 2019, the Company did not have any transfers of assets or liabilities between those measured using Level 1, 2 or 3 inputs.  The Company recognizes transfers of assets and liabilities between Level 1, 2 and 3 inputs based on the information relating to those assets and liabilities at the end of the reporting period.

The following table presents quantitative information about Level 3 fair value measurements for financial instruments measured at fair value on a non-recurring basis at June 30, 2019 (unaudited):

		Fair Value	Valuation Technique(s)	Unobservable Inputs	(Range) Weighted Average
Impaired loans:
Commercial	$	93	Comparable sales approach	Adjustment for differences between the comparable market transactions	2.06%
Real estate:
Single-family residential		109	Comparable sales approach	Adjustment for differences between the comparable market transactions	3.61%
Commercial:
Non-owner occupied		4,444	Comparable sales approach	Adjustment for differences between the comparable market transactions	(-2.58%, 8.61%) 1.52%

The following table presents quantitative information about Level 3 fair value measurements for financial instruments measured at fair value on a non-recurring basis at December 31, 2018:

		Fair Value	Valuation Technique(s)	Unobservable Inputs	(Range) Weighted Average
Impaired loans:
Commercial	$	100	Comparable sales approach	Adjustment for differences between the comparable market transactions	3.48%
Real estate:
Single -family residential		110	Comparable sales approach	Adjustment for differences between the comparable market transactions	3.61%
Commercial:
Non-owner occupied		2,804	Comparable sales approach	Adjustment for differences between the comparable market transactions	(3.48%, 8.61%) 5.02%

Financial Instruments Recorded Using Fair Value Option

The Company has elected the fair value option for loans held for sale.  These loans are intended for sale and the Company believes that the fair value is the best indicator of the resolution of these loans.  Loans originated as construction loans, that were subsequently transferred to held for sale, are carried at the lower of cost or market and are not included.  Interest income is recorded based on the contractual terms of the loan and in accordance with the Company’s policy on loans held for investment.  None of these loans were 90 days or more past due or on nonaccrual as of June 30, 2019 or December 31, 2018. 

As of June 30, 2019 and December 31, 2018, the aggregate fair value, contractual balance and gain or loss of loans held for sale were as follows:

	June 30, 2019		December 31, 2018
	(unaudited)
Aggregate fair value	$	52,184	$	17,385
Contractual balance		51,031		17,008
Gain (loss)	$	1,153	$	377

27

CENTRAL FEDERAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands)

The total amount of gains and losses from changes in fair value included in earnings for the three and six months ended June 30, 2019 and 2018 for loans held for sale were:

	Three months ended June 30,				Six months ended June 30,
	2019		2018		2019		2018
	(unaudited)				(unaudited)
Interest income	$	275	$	142	$	490	$	166
Interest expense		-		-		-		-
Change in fair value		516		216		776		274
Total change in fair value	$	791	$	358	$	1,266	$	440

The carrying amounts and estimated fair values of financial instruments at June 30, 2019 were as follows:

	Fair Value Measurements at June 30, 2019 Using:
	Carrying
(unaudited)	Value		Level 1		Level 2		Level 3		Total
Financial assets
Cash and cash equivalents	$	34,323	$	34,323	$	-	$	-	$	34,323
Interest-bearing deposits in other financial institutions		100		100		-		-		100
Securities available for sale		10,189		-		10,189		-		10,189
Loans held for sale		52,184		-		52,184		-		52,184
Loans and leases, net		598,695		-		-		591,720		591,720
FHLB and FRB stock		3,816		n/a		n/a		n/a		n/a
Accrued interest receivable		2,245		26		44		2,175		2,245
Yield maintenance provisions (embedded derivatives)		8		-		8		-		8
Interest rate lock commitments		2,480		-		2,480		-		2,480
Financial liabilities
Deposits	$	(628,586)	$	(328,081)	$	(303,660)	$	-	$	(631,741)
FHLB advances and other borrowings		(18,500)		-		(18,677)		-		(18,677)
Advances by borrowers for taxes and insurance		(340)		-		-		(340)		(340)
Subordinated debentures		(14,786)		-		(15,609)		-		(15,609)
Accrued interest payable		(239)		(20)		(219)		-		(239)
Interest-rate swaps		(8)		-		(8)		-		(8)
TBA mortgage-back securities		(645)		-		(645)		-		(645)

28

CENTRAL FEDERAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands)

The carrying amounts and estimated fair values of financial instruments at December 31, 2018 were as follows:

	Fair Value Measurements at December 31, 2018 Using:
	Carrying
	Value		Level 1		Level 2		Level 3		Total
Financial assets
Cash and cash equivalents	$	67,304	$	67,304	$	-	$	-	$	67,304
Interest-bearing deposits in other financial institutions		100		100		-		-		100
Securities available for sale		10,114		-		10,114		-		10,114
Loans held for sale		17,385		-		17,385		-		17,385
Loans and leases, net		550,683		-		-		549,599		549,599
FHLB stock		3,476		n/a		n/a		n/a		n/a
Accrued interest receivable		2,181		45		40		2,097		2,182
Yield maintenance provisions (embedded derivatives)		17		-		17		-		17
Interest rate lock commitments		721		-		721		-		721
Financial liabilities
Deposits	$	(579,786)	$	(306,121)	$	(272,924)	$	-	$	(579,045)
FHLB advances and other borrowings		(19,500)		-		(19,589)		-		(19,589)
Advances by borrowers for taxes and insurance		(827)		-		-		(827)		(827)
Subordinated debentures		(14,767)		-		(14,280)		-		(14,280)
Accrued interest payable		(231)		-		(231)		-		(231)
Interest-rate swaps		(17)		-		(17)		-		(17)
TBA mortgage-backed securities		(342)		-		(342)		-		(342)

The methods and assumptions, not previously presented, used to estimate fair values are described below.

Cash and Cash Equivalents and Interest-Bearing Deposits in Other Financial Institutions

The carrying amounts of cash and short-term instruments approximate fair values and are classified as Level 1.

FHLB and FRB Stock

It is not practical to determine the fair value of FHLB and FRB stock due to restrictions placed on its transferability. 

Loans and Leases

Fair values of loans and leases as of June 30, 2019, excluding loans held for sale, are estimated utilizing an exit pricing methodology as follows:  For variable rate loans that reprice frequently and with no significant change in credit risk, fair values are based on carrying values resulting in a Level 3 classification.  Fair values for other loans are estimated using discounted cash flow analyses, using interest rates currently being offered for loans with similar terms to borrowers of similar credit quality resulting in a Level 3 classification.  The discount rate for the discounted cash flow analyses includes a credit quality adjustment.  Impaired loans are valued at the lower of cost or fair value as described previously.

Deposits

The fair values disclosed for demand deposits (e.g., interest and noninterest bearing checking, passbook savings, and money market accounts) are, by definition, equal to the amount payable on demand at the reporting date (i.e., their carrying amount) resulting in a Level 1 classification. Fair values for fixed rate certificates of deposit are estimated using a discounted cash flows calculation that applies interest rates currently being offered on certificates to a schedule of aggregated expected monthly maturities on time deposits resulting in a Level 2 classification.

29

CENTRAL FEDERAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands)

Other Borrowings

The fair values of the Company’s long-term FHLB and credit facility advances are estimated using discounted cash flow analyses based on the current borrowing rates for similar types of borrowing arrangements resulting in a Level 2 classification.

The fair values of the Company’s subordinated debentures are estimated using discounted cash flow analyses based on the current borrowing rates for similar types of borrowing arrangements resulting in a Level 2 classification.

Accrued Interest Receivable/Payable

The carrying amounts of accrued interest approximate fair value resulting in a Level 1, 2 or 3 classification,consistent with the asset or liability with which they are associated.

Advances by Borrowers for Taxes and Insurance

The carrying amount of advances by borrowers for taxes and insurance approximates fair value resulting in a Level 3 classification,consistent with the liability with which they are associated.

Off-Balance-Sheet Instruments

The fair value of off-balance-sheet items is not considered material.

NOTE 7 – SUBORDINATED DEBENTURES

2003 Subordinated debentures:

In December 2003, Central Federal Capital Trust I, a trust formed by the Holding Company, closed a pooled private offering of 5,000 trust preferred securities with a liquidation amount of $1 per security.  The Holding Company issued $5,155 of subordinated debentures to the trust in exchange for ownership of all of the common stock of the trust and the proceeds of the preferred securities sold by the trust.  The Holding Company is not considered the primary beneficiary of this trust (which is classified as a variable interest entity); therefore, the trust is not consolidated in the Company’s financial statements, but rather the subordinated debentures are shown as a liability.  The Holding Company’s investment in the common stock of the trust was $155 and is included in other assets.

The Holding Company may redeem the subordinated debentures, in whole or in part, in a principal amount with integral multiples of $1,  at 100% of the principal amount, plus accrued and unpaid interest.  The subordinated debentures mature on December 30, 2033.  The subordinated debentures are also redeemable in whole or in part from time to time, upon the occurrence of specific events defined within the trust indenture.  There are no required principal payments on the subordinated debentures over the next five years.  The Holding Company has the option to defer interest payments on the subordinated debentures for a period not to exceed five consecutive years. 

The subordinated debentures have a variable rate of interest, reset quarterly, equal to the three-month London Interbank Offered Rate (LIBOR) plus 2.85%, which was 5.44% at June 30, 2019 and 5.65% at December 31, 2018. 

2018 Fixed-to-floating rate subordinated notes:

In December 2018, the Holding Company entered into subordinated note purchase agreements with certain qualified institutional buyers and completed a private placement of $10 million of fixed-to-floating rate subordinated notes with a maturity date of December 30, 2028 pursuant to Section 4(a)(2) of the Securities Act of 1933, as amended, and Rule 506(b) of Regulation D promulgated thereunder.

The subordinated notes initially bear interest at 7.00%, from and including December 20, 2018, to but excluding December 30, 2023, payable semi-annually in arrears on June 30 and December 30 of each year. From and including December 30, 2023, to but excluding December 30, 2028 or the earlier redemption of the notes, the interest rate will reset quarterly to an interest rate equal to the then current three-month LIBOR (but not less than zero) plus 4.14%, payable quarterly in arrears on March 30, June 30, September 30, and December 30 of each year.  The Holding Company may, at its option, redeem the notes beginning on December 30, 2023 and on any scheduled interest payment date thereafter.  After payment of approximately $388 of debt issuance costs, the Holding Company’s net proceeds were approximately $9,612.  At June 30, 2019, the balance of the subordinated notes, net of unamortized debt issuance costs, was $9,631.

30

CENTRAL FEDERAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands)

NOTE 8 – FHLB ADVANCES AND OTHER DEBT

FHLB advances and other debt were as follows:

	Weighted
	Average Rate	June 30, 2019		December 31, 2018
FHLB fixed rate advances :
Maturities:
2019	1.62%	$	3,500	$	3,500
2020	1.98%		4,500		4,500
2021	2.32%		4,000		4,000
2022	2.05%		1,500		1,500
Total FHLB fixed rate advances			13,500		13,500
Variable rate other debt:
Maturities:
2020	6.25%		5,000		6,000
Total variable rate other debt			5,000		6,000
Total		$	18,500	$	19,500

Each FHLB advance is payable at its maturity date, with a prepayment penalty for fixed-rate advances. 

In February 2018, the Holding Company entered into a credit facility with a third-party bank pursuant to which the Holding Company could borrow up to an aggregate principal amount of $6,000.  The Holding Company increased the credit facility by $2,000 in July 2018, and by an additional $2,000 in December 2018, which increased the total borrowing limit to $10,000.  In December 2018, the credit facility was also modified to a revolving line-of-credit.  The purpose of the credit facility is to provide an additional source of liquidity for the Holding Company and to provide funds for the Holding Company to downstream as additional capital to CFBank to support growth. Loans under the credit facility bear interest at a rate equal to the Prime Rate plus 0.75%.  The credit facility is secured by a pledge of the Holding Company’s stock of CFBank.  The credit facility will expire in February 2020 unless extended or replaced.  As of June 30, 2019, the Company had an outstanding balance of $5,000 on the credit facility.

NOTE 9 – STOCK-BASED COMPENSATION

The Company has three stock-based compensation plans (collectively, the “Plans”), as described below, under which awards are outstanding or may be granted in the future.  Total compensation cost that has been charged against income for those Plans totaled $138  and $254, respectively, for the three and six months ended June 30, 2019 and $96 and $192, respectively, for the three and six months ended June 30, 2018.  The total income tax effect was $29 and $53, respectively, for the three and six months ended June 30, 2019 and $20and $40, respectively, for the three and six months June 30, 2018.  All exercise prices and share amounts have been restated for the 1-for-5.5 reverse stock split on August 20, 2018 (see Note 1).

The Plans are all stockholder-approved and authorize stock option grants and restricted stock awards to be made to directors, officers and employees.  The 2003 Equity Compensation Plan (the “2003 Plan”), as amended and restated, provided an aggregate of 18,181 shares for stock option grants and restricted stock awards, of which up to 5,454 shares could be awarded in the form of restricted stock awards.  The 2009 Equity Compensation Plan (the “2009 Plan”), which was approved by stockholders on May 21, 2009, replaced the 2003 Plan and provided for 36,363 shares, plus any remaining shares available to grant or that are later forfeited or expire under the 2003 Plan, to be made available to be issued as stock option grants, stock appreciation rights or restricted stock awards.  On May 16, 2013, the Company’s stockholders approved the First Amendment to the 2009 Plan to increase the number of shares of common stock reserved for stock option grants and restricted stock awards thereunder to 272,727.  The 2019 Equity Incentive Plan (the “2019 Plan”), which was approved by stockholders on May 29, 2019, authorizes up to 300,000 shares (plus any shares that are subject to grants under the Central Federal Corporation 2009 Equity Compensation Plan and that are later forfeited or expire), to be awardedas stock option grants, stock appreciation rights, restricted stock awards or restricted stock units.

Stock Options:

The Plans permit the grant of stock options to directors, officers and employees of the Holding Company and CFBank.  Option awards are granted with an exercise price equal to the market price of the Company’s common stock on the date of grant, generally have vesting periods ranging from one to three years, and are exercisable for ten years from the date of grant.  Unvested stock options immediately vest upon a change of control. 

31

CENTRAL FEDERAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands)

The fair value of each option award is estimated on the date of grant using a closed form option valuation (Black-Scholes) model that uses the assumptions noted in the table below.  Expected volatilities are based on historical volatilities of the Company’s common stock.  The Company uses historical data to estimate option exercise and post-vesting termination behavior.  Employee and management options are tracked separately.  The expected term of options granted is based on historical data and represents the period of time that options granted are expected to be outstanding, which takes into account that the options are not transferable.  The risk-free interest rate for the expected term of the option is based on the U.S. Treasury yield curve in effect at the time of the grant.

There were nooptionsgranted or exercised during the three and six months ended June 30, 2019 and June 30, 2018. 

A summary of stock option activity in the Plans for the six months ended June 30, 2019 follows (unaudited):

	Shares	Weighted Average Exercise Price		Weighted Average Remaining Contractual Term (Years)	Intrinsic Value
Outstanding at beginning of year	96,379	$	7.65
Expired	-		-
Cancelled or forfeited	(925)		8.03
Outstanding at end of period	95,454	$	7.64	3.9	$	422,330
Exercisable at end of period	95,454		7.64	3.9	$	422,330

During the six months ended June 30, 2019, there were 925 stock options canceled, forfeited or expired.  There were 73 stock options canceled, forfeited or expired during the six months ended June 30, 2018.  As of June 30, 2019, all stock options granted under the Plans were vested.

Restricted Stock Awards:

The Plans also permit the grant of restricted stock awards to directors, officers and employees. Compensation is recognized over the vesting period of the awards based on the fair value of the stock at grant date.  The fair value of the stock is determined using the closing share price on the date of grant and shares generally have vesting periods of one to three years.  There were 33,788 shares of restricted stock granted under the 2009 Plan during the six months ended June 30, 2019.  There were 727 shares of restricted stock granted under the 2009 Plan during the six months ended June 30, 2018.

A summary of changes in the Company’s nonvested restricted stock awards as of June 30, 2019 follows (unaudited):

Nonvested Shares	Shares	Weighted Average Grant-Date Fair Value
Nonvested at January 1, 2019	69,324	$	11.91
Granted	33,788		12.81
Vested	-		-
Forfeited	(1,493)		12.12
Nonvested at June 30, 2019	101,619	$	12.21

As of June 30, 2019 and 2018, the unrecognized compensation cost related to nonvested restricted stock awards granted under the Plans was $972 and $642, respectively. 

There were 1,493 shares of restricted stock forfeited during the six month period ended June 30, 2019.  There were 7,999 shares of restricted stock forfeited during the six months ended June 30, 2018.  There were no shares of restricted stock that vested during the six months ended June 30, 2019 and 2018.

The 2009 Plan terminated in accordance with its terms on March 19, 2019 and, as a result, no further awards may be granted under the 2009 Plan.  There were 300,000 shares remaining available for grant under the 2019 Plan at June 30, 2019.

32

CENTRAL FEDERAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands)

NOTE 10 – REGULATORY CAPITAL MATTERS

CFBank is subject to regulatory capital requirements administered by federal banking agencies.  Prompt corrective action regulations involve quantitative measures of assets, liabilities, and certain off balance-sheet items calculated under regulatory accounting practices.  Capital amounts and classifications are also subject to qualitative judgments by regulators. Failure to meet capital requirements can initiate regulatory action. 

Prompt corrective action regulations provide five classifications for banking organizations:  well capitalized, adequately capitalized, undercapitalized, significantly undercapitalized, and critically undercapitalized, although these terms are not used to represent overall financial condition.  If a banking organization is classified as adequately capitalized, regulatory approval is required to accept brokered deposits.  If a banking organization is classified as undercapitalized, capital distributions are limited, as is asset growth and expansion, and capital restoration plans are required.

In July 2013, the Holding Company’s primary federal regulator, the FRB, published final rules (the “Basel III Capital Rules”) establishing a new comprehensive capital framework for U.S. banking organizations.  The rules implement the Basel Committee's December 2010 framework known as “Basel III” for strengthening international capital standards as well as certain provisions of the Dodd-Frank Act.  The Basel III Capital Rules provide higher capital requirements and more restrictive leverage and liquidity ratios than those previously in place.  In addition, in order to avoid limitations on capital distributions, such as dividend payments and certain bonus payments to executive officers, the Basel III Capital Rules require insured financial institutions to hold a capital conservation buffer of common equity tier 1 capital above the minimum risk-based capital requirements.  The capital conservation buffer was phased in over time, became fully effective on January 1, 2019, and consists of an additional amount of common equity equal to 2.5%of risk-weighted assets.  The Basel III Capital Rules revise the regulatory agencies' prompt corrective action framework by incorporating the new regulatory capital minimums and updating the definition of common equity.  The Basel III Capital Rules became effective for the Company on January 1, 2015, and were fully phased in effective January 1, 2019.  Quantitative measures established by the Basel III Capital Rules to ensure capital adequacy require the maintenance of minimum amounts and ratios of Common Equity Tier 1 capital, Tier 1 capital and Total capital, as defined in the regulations, to risk-weighted assets, and of Tier 1 capital to adjusted quarterly average assets (“Leverage Ratio”).  CFBank’s implementation of the new rules on January 1, 2015 did not have a material impact on our capital needs or classification.

As fully phased in on January 1, 2019, the Basel III Capital Rules require CFBank to maintain: 1) a minimum ratio of Common Equity Tier 1 capital to risk-weighted assets of 4.5%, plus a 2.5% “capital conservation buffer” (resulting in a minimum ratio of Common Equity Tier 1 capital to risk-weighted assets of 7.0% upon full implementation); 2) a minimum ratio of Tier 1 capital to risk-weighted assets of 6.0%, plus the capital conservation buffer (resulting in a minimum Tier 1 capital ratio of 8.5% upon full implementation); 3) a minimum ratio of Total capital to risk-weighted assets of 8.0%, plus the capital conservation buffer (resulting in a minimum Total capital ratio of 10.5% upon full implementation); and 4) a minimum Leverage Ratio of 4.0%.

The implementation of the capital conservation buffer began on January 1, 2016 at the 0.625% level and was phased in over a four-year period increasing by increments of that amount on each subsequent January 1 until it reached 2.5% on January 1, 2019.  The capital conservation buffer is designed to absorb losses during periods of economic stress.  Failure to maintain the minimum Common Equity Tier 1 capital ratio plus the capital conservation buffer will result in potential restrictions on a banking institution’s ability to pay dividends, repurchase stock and/or pay discretionary compensation to its employees.

The following tables present actual and required capital ratios as of June 30, 2019 and December 31, 2018 for CFBank under the Basel III Capital Rules.  Capital levels required to be considered well capitalized are based upon prompt corrective action regulations, as amended to reflect the changes under the Basel III Capital Rules.

	Actual			Minimum Capital Required-Basel III Fully Phased-In			To Be Well Capitalized Under Applicable Regulatory Capital Standards
	Amount		Ratio	Amount		Ratio	Amount		Ratio
June 30, 2019
Total Capital to risk weighted assets	$	74,274	11.95%	$	65,270	10.50%	$	62,162	10.00%
Tier 1 (Core) Capital to risk weighted assets		67,103	10.79%		52,838	8.50%		49,730	8.00%
Common equity tier 1 capital to risk-weighted assets		67,103	10.79%		43,514	7.00%		40,405	6.50%
Tier 1 (Core) Capital to adjusted total assets (Leverage ratio)		67,103	9.44%		28,438	4.00%		35,548	5.00%

33

CENTRAL FEDERAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands)

	Actual			Minimum Capital Required-Basel III Phase-In Schedule			Minimum Capital Required-Basel III Fully Phased-In			To Be Well Capitalized Under Applicable Regulatory Capital Standards
	Amount		Ratio	Amount		Ratio	Amount		Ratio	Amount		Ratio
December 31, 2018
Total Capital to risk weighted assets	$	69,066	12.37%	$	55,164	9.88%	$	58,626	10.50%	$	55,834	10.00%
Tier 1 (Core) Capital to risk weighted assets		62,085	11.12%		43,998	7.88%		47,459	8.50%		44,668	8.00%
Common equity tier 1 capital to risk-weighted assets		62,085	11.12%		35,622	6.38%		39,084	7.00%		36,292	6.50%
Tier 1 (Core) Capital to adjusted total assets (Leverage ratio)		62,085	10.13%		24,526	4.00%		24,526	4.00%		30,658	5.00%

CFBank converted from a mutual to a stock institution in 1998, and a “liquidation account” was established in the amount of $14,300, which was the net worth reported in the conversion prospectus.  The liquidation account represents a calculated amount for the purposes described below, and it does not represent actual funds included in the consolidated financial statements of the Company.  Eligible depositors who have maintained their accounts, less annual reductions to the extent they have reduced their deposits, would be entitled to a priority distribution from this account if CFBank liquidated and its assets exceeded its liabilities.  Dividends may not reduce CFBank’s stockholder’s equity below the required liquidation account balance.

Dividend Restrictions:

Banking regulations require us to maintain certain capital levels and may limit the dividends paid by CFBank to the Holding Company or by the Holding Company to stockholders.  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.  The Holding Company also is subject to various legal and regulatory policies and guidelines 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 Holding 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. 

Additionally, CFBank does not intend to make distributions to the Holding Company that would result in a recapture of any portion of its thrift bad debt reserve as discussed in Note 12-Income Taxes.

NOTE 11 – DERIVATIVE INSTRUMENTS 

Interest-rate swaps:

CFBank utilizes interest-rate swaps as part of its asset/liability management strategy to help manage its interest rate risk position, and does not use derivatives for trading purposes.  The notional amount of the interest-rate swaps does not represent amounts exchanged by the parties.  The amount exchanged is determined by reference to the notional amount and the other terms of the individual interest-rate swap agreements.  CFBank was party to interest-rate swaps with a combined notional amount of $665 at June 30, 2019 and $1,359 at December 31, 2018.

The objective of the interest-rate swaps is to protect the related fixed-rate commercial real estate loans from changes in fair value due to changes in interest rates.  CFBank has a program whereby it lends to its borrowers at a fixed rate with the loan agreement containing a two-way yield maintenance provision, which will be invoked in the event of prepayment of the loan, and is expected to exactly offset the fair value of unwinding the swap.  The yield maintenance provision represents an embedded derivative which is bifurcated from the host loan contract and, as such, the swaps and embedded derivatives are not designated as hedges.  Accordingly, both instruments are carried at fair value and changes in fair value are reported in current period earnings.  CFBank currently does not have any derivatives designated as hedges. 

The counterparty to CFBank’s interest-rate swaps is exposed to credit risk whenever the interest-rate swaps are in a liability position.  At June 30, 2019, CFBank had $93 in securities and cash pledged as collateral for these derivatives.  Should the liability increase, beyond the collateral value, CFBank will be required to pledge additional collateral. 

Additionally, CFBank’s interest-rate swap instruments contain provisions that require CFBank to remain well capitalized under regulatory capital standards.  The interest-rate swaps may be called by the counterparty if CFBank fails to maintain well-capitalized status under regulatory capital standards.  As of June 30, 2019, CFBank was well-capitalized under regulatory capital standards.

34

CENTRAL FEDERAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands)

Summary information about the derivative instruments is as follows:

	June 30, 2019		December 31, 2018
	(unaudited)
Notional amount	$	665	$	1,359
Weighted average pay rate on interest-rate swaps		2.74%		3.12%
Weighted average receive rate on interest-rate swaps		2.38%		2.49%
Weighted average maturity (years)		1.3		2.0
Fair value of interest-rate swaps	$	(8)	$	(17)
Fair value of yield maintenance provisions		8		17

The fair value of the yield maintenance provisions and interest-rate swaps is recorded in other assets and other liabilities, respectively, in the consolidated balance sheet.  Changes in the fair value of the yield maintenance provisions and interest-rate swaps are reported currently in earnings, as other noninterest income in the consolidated statements of income.  There were no net gains or losses recognized in earnings related to yield maintenance provisions and interest-rate swaps for the six months ended June 30, 2019 or 2018.  

Mortgage banking derivatives:

Commitments to fund certain mortgage loans (interest rate locks) to be sold into the secondary market are considered derivatives.  These mortgage banking derivatives are not designated in hedge relationships.  The Company had approximately $242,571 and $55,220 of interest rate lock commitments related to residential mortgage loans at June 30, 2019 and December 31, 2018, respectively.  The fair value of these mortgage banking derivatives was reflected by a derivative asset of $2,480 and $721 at June 30, 2019 and December 31, 2018, respectively, which was included in other assets in the consolidated balance sheet. Fair values were estimated based on anticipated gains on the sale of the underlying loans. Changes in the fair values of these mortgage banking derivatives are included in net gains on sales of loans.

Mortgage banking activities include two types of commitments: rate lock commitments and forward loan commitments. Rate lock commitments are loans in our pipeline that have an interest rate locked with the customer. The commitments are generally for periods of 30 to 60 days and are at market rates. In order to mitigate the effect of the interest rate risk inherent in providing rate lock commitments, we economically hedge our commitments by entering into either a forward loan sales contract under best efforts or a trade of “to be announced (TBA)” mortgage-backed securities (“notional securities”) for mandatory delivery. The changes in fair value related to movements in market rates of the rate lock commitments and the forward loan sales contracts and notional securities generally move in opposite directions, and the net impact of changes in these valuations on net income during the loan commitment period is generally inconsequential. The Company has not formally designated these derivatives as a qualifying hedge relationship and, accordingly, accounts for such forward contracts as freestanding derivatives with changes in fair value recorded to earnings each period.

The following table reflects the amount and market value of mortgage banking derivatives included in the consolidated balance sheet as of the period end (in thousands):

	June 30, 2019 (unaudited)				December 31, 2018
	Notional Amount		Fair Value		Notional Amount		Fair Value
Assets:
Interest rate commitments	$	242,571	$	2,480	$	55,220	$	721
TBA mortgage-back securities		144,250		(645)		33,250		(342)

35

CENTRAL FEDERAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands)

The following table represents the revenue recognized on mortgage activities for the three and six months ended June 30, 2019 and 2018 (unaudited):

	Three months ended				Six months ended
	June 30,				June 30,
	2019		2018		2019		2018
Gain on loans sold	$	1,884	$	276	$	3,116	$	290
Gain (loss) from change in fair value of loans held-for-sale		516		216		776		274
Gain (loss) from change in fair value of derivatives		(49)		17		(90)		253
	$	2,351	$	509	$	3,802	$	817

NOTE 12 – INCOME TAXES

At June 30, 2019, the Company had a deferred tax asset recorded in the amount of $1,600.  At December 31, 2018, the Company had a deferred tax asset recorded of approximately $1,600.  At June 30, 2019 and December 31, 2018, the Company had no unrecognized tax benefits recorded.  The Company is subject to U.S. federal income tax and is no longer subject to federal examination for years prior to 2015.

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 June 30, 2019 that no valuation allowance was required against the net deferred tax asset.

In 2012 the Company completed a recapitalization program pursuant to which the Holding Company sold $22,500 in common stock, which improved the capital levels of CFBank and provided working capital for the Holding Company. The result of the change in stock ownership associated with the stock offering, however, was that the Company incurred an ownership change within the guidelines of Section 382 of the Internal Revenue Code of 1986.  At June 30, 2019, the Company had net operating loss carryforwards of $22,742, which expire at various dates from 2024 to 2033. As a result of the ownership change, the Company's ability to utilize carryforwards that arose before the 2012 stock offering closed is limited to $163 per year.  Due to this limitation, management determined it is more likely than not that $20,520 of net operating loss carryforwards will expire unutilized.  As required by accounting standards, the Company reduced the carrying value of deferred tax assets, and the corresponding valuation allowance, by the $6,977 tax effect of this lost realizability.

Federal income tax laws provided additional deductions, totaling $2,250, 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 at year-end 2018.  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.

The Company records income tax expense based on the federal statutory rate adjusted for the effect of low income housing credits, bank owned life insurance and other miscellaneous items.  The effective tax rate for the three and six months ended June 30, 2019was approximately 20.4% and 20.2%, respectively, and 19.8% and19.5%, respectively, for the three and six months ended June 30, 2018, which management believes is a reasonable estimate for the effective tax rate.

36

CENTRAL FEDERAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands)

The following table summarizes the major components creating differences between income taxes at the federal statutory tax rate and the effective tax rate recorded in the consolidated statements of income for the three and six months ended June 30, 2019 and 2018:

	For the three months ended June 30,		For the six months ended June 30,
	2019	2018	2019	2018
	(unaudited)		(unaudited)
Statutory tax rate	21.0%	21.0%	21.0%	21.0%
Increase (decrease) resulting from:
Tax exempt income on bank owned life insurance	(0.3%)	(0.5%)	(0.3%)	(0.6)%
Low income housing credits	(0.5%)	(1.1%)	(0.6%)	(1.0%)
Other, net	0.2%	0.4%	0.1%	0.1%
Effective tax rate	20.4%	19.8%	20.2%	19.5%

NOTE 13- ACCUMULATED OTHER COMPREHENSIVE INCOME

The following table summarizes the changes within each classification of accumulated other comprehensive income, net of tax, for the three and six months ended June 30, 2019 and 2018 and summarizes the significant amounts reclassified out of each component of accumulated other comprehensive loss:

Changes in Accumulated Other Comprehensive Income by Component (1)
	Three months ended				Six months ended
	June 30,				June 30,
	2019		2018		2019		2018
	(unaudited)				(unaudited)
	Unrealized Gains and Losses on Available-for-Sale Securities				Unrealized Gains and Losses on Available-for-Sale Securities
Accumulated other comprehensive income (loss), beginning of period	$	(38)	$	(101)	$	(73)	$	(47)
Other comprehensive income (loss) before reclassifications (2)		52		(15)		87		(69)
Net current-period other comprehensive income (loss)		52		(15)		87		(69)
Accumulated other comprehensive income (loss), end of period	$	14	$	(116)	$	14	$	(116)

⁽¹⁾ All amounts are net of tax.  Amounts in parentheses indicate a reduction of other comprehensive income.

⁽²⁾ There were no amounts reclassified out of other comprehensive income for the three and six months ended June 30, 2019 and 2018.

NOTE 14 - PREFERRED STOCK

Series B Preferred Stock:

Commencing in April 2014, the Company conducted a private placement of up to 480,000 shares of its 6.25% Non-Cumulative Convertible Perpetual Preferred Stock, Series B (“Series B Preferred Stock”) for an offering price of $25.00 per share (the “Private Placement”).  Pursuant to the Private Placement, the Company sold an aggregate of 480,000 shares of Series B Preferred Stock on May 12, 2014 and July 15, 2014, for an aggregate offering price of $12,000.  After payment of approximately $482 in placement fees and approximately $149 of other offering expenses, the Company’s net proceeds from its sale of the 480,000 shares of Series B Preferred Stock in the Private Placement were approximately $11,369. 

For each share of Series B Preferred Stock sold in the Private Placement, the Company also issued, at no additional charge, a Warrant to purchase common stock of the Company.  See Note 15-Common Stock Warrants for additional information.  

Conversion of Series B Preferred Stock to Common Stock:

On September 29, 2017, the Company announced the conversion of its Series B Preferred Stock into shares of Common Stock of the Company.  The conversion was effective October 6, 2017, and resulted in the conversion of all 480,000 of the Company’s issued and outstanding shares of Series B Preferred Stock into approximately 6,857,143 shares of Common Stock (prior to the 1-for-5.5 reverse stock split effective August 20, 2018), or approximately 1,246,753 shares of Common Stock on a post-reverse-split basis.   

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CENTRAL FEDERAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands)

The conversion of the Series B Preferred Stock resulted in the elimination of the non-cumulative preferred dividend payments on the Series B Preferred Stock in the aggregate amount of approximately $187,500 quarterly ($750,000 annually) beginning with the 4th quarter of 2017.

NOTE 15 - COMMON STOCK WARRANTS

Series B Preferred Stock – Warrants:

For each share of Series B Preferred Stock issued by the Company in the Private Placement, the Company also issued, at no additional charge, a Warrant to purchase (i) 2.00 shares of common stock of the Company (or 0.364 shares on a post-reverse-split basis) if the purchaser purchased less than $700 (28,000 shares) of Series B Preferred Stock in the Private Placement, or (ii) 3.25 shares of common stock (or 0.591 shares on a post-reverse-split basis) if the purchaser purchased $700 (28,000 shares) or more of Series B Preferred Stock in the Private Placement.  Warrants to purchase an aggregate of 1,152,125 shares of common stock (or 209,477 shares on a post-reverse-split basis) were issued by the Company to the purchasers of the 480,000 shares of Series B Preferred Stock sold in the Private Placement.  The Warrants are exercisable for a period of approximately five (5) years expiring on July 15, 2019, at an exercise price of $10.18 (on a post-reverse-split basis) per share of common stock.  As of June 30, 2019, warrants to purchase an aggregate of31,294 shares of common stock (on a post-reverse-split basis) were outstanding.

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CENTRAL FEDERAL CORPORATION

PART 1. Item 2

MANAGEMENT DISCUSSION AND ANALYSIS

FORWARD LOOKING STATEMENTS

This quarterly report 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 (the “Holding Company”) or CFBank, National Association (“CFBank” and, together with the Holding Company, the “Company”); (3) statements regarding future events, actions or economic performance; and (4) statements of assumptions underlying such statements.  Words such as "estimate," "strategy," "may," "believe," "anticipate," "expect," "predict," "will," "intend," "plan," "targeted," and the negative of these terms, or similar expressions, are intended to identify forward-looking statements, but are not the exclusive means of identifying such statements.  Various risks and uncertainties may cause actual results to differ materially from those indicated by our forward-looking statements, 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 quarterly report speak only as of the date of the report.  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.

Business Overview

The Holding Company is a financial 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 and elected financial holding status with the FRB.

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.  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.  Most of our deposits and loans come from our market area.  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.

Our principal market area for loans and deposits includes the following Ohio counties: Franklin County through our office in Worthington, Ohio and our loan production office in Columbus, Ohio; Summit County through our office in Fairlawn, Ohio; Hamilton County through our offices in Glendale and Blue Ash (opened in March 2019), Ohio; Columbiana County through our offices in Calcutta and Wellsville, Ohio; and Cuyahoga County, through our agency office in Woodmere, Ohio.   

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CENTRAL FEDERAL CORPORATION

PART 1. Item 2

MANAGEMENT DISCUSSION AND ANALYSIS

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 loan and lease 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 loan and lease 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 $721.0 million at June 30, 2019 and increased $56.0 million, or 8.4%, from $665.0 million at December 31, 2018.  The increase was primarily due to a $48.0 million increase in net loan balances and a $34.8 million increase in loans held for sale, partially offset by a $33.0 million decrease in cash and cash equivalents.

Cash and cash equivalents.  Cash and cash equivalents totaled $34.3 million at June 30, 2019, and decreased $33.0 million, or 49.0%, from $67.3 million at December 31, 2018.  The decrease in cash and cash equivalents was primarily attributed to an increase in loans and loans held for sale, partially offset by an increase in deposit balances.

Securities. Securities available for sale totaled $10.2 million at June 30, 2019, and increased $75,000, or 0.7%, compared to $10.1 million at December 31, 2018.  The increase was primarily due to a security purchase, partially offset by principal maturities.

Loans and Leases.Net loans and leases totaled $598.7 million at June 30, 2019, and increased $48.0 million, or 8.7%, from $550.7 million at December 31, 2018.  The increase was primarily due to a $19.6 million increase in commercial loan balances, a $17.1 million increase in commercial real estate loan balances, and a $13.1 million increase in single-family loan balances, partially offset by a $2.3 million decrease in consumer loan balances.  The increases in the aforementioned loan balances were primarily due to increased sales activity and new relationships.

CFBank has participated in a Mortgage Purchase Program with Northpointe Bank (Northpointe), a Michigan banking corporation, since December 2012.  Pursuant to the terms of a participation agreement, CFBank purchases participation interests in loans made by Northpointe related to fully underwritten and pre-sold mortgage loans originated by various prescreened mortgage brokers located throughout the U.S.  The underlying loans are individually (MERS) registered loans which are held until funded by the end investor.  The mortgage loan investors include Fannie Mae and Freddie Mac, and other major financial institutions.  This process on average takes approximately 14 days.  Given the short-term holding period of the underlying loans, common credit risks (such as past due, impairment and TDR, nonperforming, and nonaccrual classification) are substantially reduced.  Therefore, no allowance is allocated by CFBank to these loans.  These loans are 100% risk rated for CFBank capital adequacy purposes.  Under the participation agreement, CFBank agrees to purchase a 95% ownership/participation interest in each of the aforementioned loans, and Northpointe maintains a 5% ownership interest in each loan it participates.During the three and six months ended June 30, 2019, loan origination activity totaled $222.9 million and $436.7, respectively, and payoffs for the same period totaled $221.7 million and $432.9, respectively.  At June 30, 2019 and December 31, 2018, CFBank held $40.6 million and $36.8 million, respectively, of such loans which are included in single-family residential loan totals.

Allowance for loan and lease losses (ALLL).The allowance for loan and lease losses totaled $7.0 million at June 30, 2019, and increased $17,000, or 0.2%, from $7.0 million at December 31, 2018.  The increase in the ALLL is due to net recoveries during the six months ended June 30, 2019.  The ratio of the ALLL to total loans was 1.16% at June 30, 2019, compared to 1.26% at December 31, 2018.   

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CENTRAL FEDERAL CORPORATION

PART 1. Item 2

MANAGEMENT DISCUSSION AND ANALYSIS

The ALLL is a valuation allowance for probable incurred credit losses.  The ALLL methodology is designed as part of a thorough process that incorporates management’s current judgments about the credit quality of the loan portfolio into a determination of the ALLL in accordance with generally accepted accounting principles and supervisory guidance.  Management analyzes the adequacy of the ALLL quarterly through reviews of the loan portfolio, including the nature and volume of the loan portfolio and segments of the portfolio; industry and loan concentrations; historical loss experience; delinquency statistics and the level of nonperforming loans; specific problem loans; the ability of borrowers to meet loan terms; an evaluation of collateral securing loans and the market for various types of collateral; various collection strategies; current economic conditions, trends and outlook; and other factors that warrant recognition in providing for an adequate ALLL.  Based on the variables involved and the significant judgments management must make about outcomes that are uncertain, the determination of the ALLL is considered to be a critical accounting policy.  See the section titled “Critical Accounting Policies” for additional discussion.

The ALLL consists of specific and general components.  The specific component relates to loans that are individually classified as impaired.  A loan is impaired when, based on current information and events, it is probable that CFBank will be unable to collect all amounts due according to the contractual terms of the loan agreement. Loans of all classes within the commercial, commercial real estate and multi-family residential loan segments, regardless of size, and loans of all other classes over $250,000, are individually evaluated for impairment when they are 90 days past due, or earlier than 90 days past due if information regarding the payment capacity of the borrower indicates that payment in full according to the loan terms is doubtful.  If a loan is impaired, a portion of the allowance is allocated so that the loan is reported, net, at the present value of estimated future cash flows using the loan’s existing rate, or at the fair value of collateral, less costs to sell, if repayment is expected solely from the collateral.  Large groups of smaller balance loans, such as consumer and single-family residential real estate loans, are collectively evaluated for impairment, and accordingly, they are not separately identified for impairment disclosures.  Loans within any class for which the terms have been modified resulting in a concession, and for which the borrower is experiencing financial difficulties, are considered troubled debt restructurings (TDRs) and are classified as impaired.  See Notes 1 and 4 to our consolidated financial statements included in this Quarterly Report on Form 10-Q for additional information regarding the ALLL.

Individually evaluated impaired loans totaled $4.8 million at June 30, 2019, and increased $1.6 million, or 51.9%, from $3.2 million at December 31, 2018.  The increase was primarily due to a commercial real estate loan that became impaired during the first quarter of 2019. The amount of the ALLL specifically allocated to individually impaired loans totaled $33,000 at June 30, 2019 and $22,000 at December 31, 2018.  The increase in the ALLL specifically allocated to impaired loans was primarily due to management’s updated analysis.

The specific reserve on impaired 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 impaired loan to determine whether it should have a specific 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 specific 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 $2.4 million at June 30, 2019, and increased $2.0 million from $377,000 at December 31, 2018.  The increase was primarily due to a commercial real estate loan that became nonaccrual during the first quarter of 2019.  The ratio of nonperforming loans to total loans was 0.40% at June 30, 2019 compared to 0.07% at December 31, 2018. 

Nonaccrual loans include some loans that were modified and identified as TDRs and are not performing. TDRs included in nonaccrual loans totaled $93,000 at June 30, 2019 and $100,000 at December 31, 2018.  The decrease in TDRs included in nonaccrual loans was primarily due to loan repayments.

Nonaccrual loans at June 30, 2019 and December 31, 2018 do not include $3.0 million and $3.1 million, respectively, in TDRs where customers have established a sustained period of repayment performance, generally six months, loans are current according to their modified terms and repayment of the remaining contractual payments is expected.  These loans are included in total impaired loans.  See Notes 1 and 4 to the consolidated financial statements included in this Quarterly Report on Form 10-Q for additional information regarding impaired loans and nonperforming loans.

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CENTRAL FEDERAL CORPORATION

PART 1. Item 2

MANAGEMENT DISCUSSION AND ANALYSIS

The general reserve component of our ALLL covers non-impaired loans of all classes and is based on historical loss experience adjusted for current factors.  The historical loss experience is determined by loan class and is based on the actual loss history experienced by CFBank over a three-year period.  The general component is calculated based on CFBank’s loan balances and actual three-year historical loss rates.  For loans with little or no actual loss experience, industry estimates are used based on loan segment. This actual loss experience is supplemented with other economic and judgmental factors based on the risks present for each loan class.  These economic and judgmental factors include consideration of the following:  levels of and trends in delinquencies and impaired loans; levels of and trends in charge-offs and recoveries; trends in volume and terms of loans; effects of any changes in risk selection and underwriting standards; other changes in lending policies, procedures, and practices; experience, ability, and depth of lending management and other relevant staff; national and local economic trends and conditions; industry conditions; and effects of changes in credit concentrations.

Management’s loan review process is an integral part of identifying problem loans and determining the ALLL. We maintain an internal credit rating system and loan review procedures specifically developed as the primary credit quality indicator to monitor credit risk for commercial, commercial real estate and multi-family residential real estate loans.  We analyze these loans individually and categorize loans into risk categories based on relevant information about the ability of borrowers to service their debt, such as current financial information, historical payment experience, credit documentation, public information and current economic trends, among other factors.  Credit reviews for these loan types are performed at least annually, and more often for loans with higher credit risk.  Loan officers maintain close contact with borrowers between reviews.  Adjustments to loan risk ratings are based on the reviews and at any time information is received that may affect risk ratings.  Additionally, an independent third party review of commercial, commercial real estate and multi-family residential loans is performed at least annually.  Management uses the results of these reviews to help determine the effectiveness of the existing policies and procedures and to provide an independent assessment of our internal loan risk rating system.

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 our consolidated financial statements included in this Quarterly Report on Form 10-Q for additional information regarding the regulatory asset classifications.

The level of total criticized and classified loans increased by $3.9 million, or 37.6%, during the six months ended June 30, 2019 primarily due to loan downgrades.  Loans designated as special mention increased $1.0 million, or 14.5%, and totaled $8.0 million at June 30, 2019, compared to $7.0 million at December 31, 2018.  Loans classified as substandard increased $2.9 million, or 86.9%, and totaled $6.2 million at June 30, 2019, compared to $3.3 million at December 31, 2018.  No loans were classified as doubtful at June 30, 2019 and December 31, 2018.  See Note 4 to our consolidated financial statements included in this Quarterly Report on Form 10-Q 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 $1.4 million, or 118.6%, and totaled $2.5 million at June 30, 2019, compared to $1.1 million at December 31, 2018.  Past due loans totaled 0.4% of the loan portfolio at June 30, 2019, compared to 0.2% at December 31, 2018.  See Note 4 to our consolidated financial statements included in this Quarterly Report on Form 10-Q 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 made by CFBank primarily consist of 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, there is 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 $69.4 million, or 47.4%, of CFBank’s commercial portfolio at June 30, 2019, compared to $73.5 million, or 57.9%, at December 31, 2018.  Interest only home equity lines of credit totaled $20.4 million, or 91.9%, of the total home equity lines of credit at June 30, 2019 compared to $22.6 million, or 94.4%, at December 31, 2018.

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CENTRAL FEDERAL CORPORATION

PART 1. Item 2

MANAGEMENT DISCUSSION AND ANALYSIS

We believe the ALLL is adequate to absorb probable incurred credit losses in the loan portfolio as of June 30, 2019; 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 ALLL.  Such agencies may require additional provisions for loan 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 loan 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 June 30, 2019 compared to $38,000 at December 31, 2018.  Foreclosed assets at December 31, 2018 consisted of one single-family residential property that was transferred into REO at fair value during the fourth quarter of 2018 and was sold during the first quarter of 2019.  The level of foreclosed assets and charges to foreclosed assets expense may increase in the future in connection with workout efforts related to foreclosed assets, nonperforming loans and other loans with credit issues.

Deposits.Deposits totaled $628.6 million at June 30, 2019, an increase of $48.8 million, or 8.4%, from $579.8 million at December 31, 2018.  The increase is primarily attributed to a $46.8 million increase in money market account balances, a $26.8 million increase in certificate of deposit account balances, and a $2.4 million increase in saving account balances, partially offset by a $27.2 million decrease in checking account balances.  The increases in money market, certificate of deposit, and savings account balances were primarily due to increases in customer relationships and balances from on-going sales and marketing activities.  The decrease in checking account balances was due to the timing of certain large customer transactions.

CFBank is a participant in the Certificate of Deposit Account Registry Service® (CDARS) and Insured Cash Sweep (ICS) programs offered through Promontory Interfinancial Network.  Promontory works with a network of banks to offer products that can provide up to approximately $50 million of FDIC insurance coverage through these innovative products.  Brokered deposits, including CDARS deposits that qualify as brokered, totaled $93.0 million at June 30, 2019, and decreased $8.2 million, or 8.1%, from $101.2 million at December 31, 2018.  Customer balances in the CDARS reciprocal and ICS reciprocal programs, which no longer qualify as brokered, totaled $25.7 million at June 30, 2019 and decreased $22.4 million, or 46.6%, from $48.1 million at December 31, 2018.

FHLB advances and other debt.  FHLB advances and other debt totaled $18.5 million at June 30, 2019 and decreased $1.0 million, or 5.1%, compared to $19.5 million at December 31, 2018.  In February 2018, the Holding Company entered into a credit facility with a third-party bank pursuant to which the Holding Company could borrow up to an aggregate principal amount of $6.0 million, which was subsequently increased to $8.0 million in July 2018 and to $10 million in December 2018.  In December 2018, the credit facility was also modified to a revolving line-of-credit.  The purpose of the credit facility is to provide an additional source of liquidity for the Holding Company and to provide funds for the Holding Company to downstream as additional capital to CFBank to support growth.  Loans under the credit facility bear interest at a rate equal to the Prime Rate plus 0.75%.  As of June 30, 2019, the Holding Company had an outstanding balance of $5.0 million on the credit facility.  See the section titled “Liquidity and Capital Resources” for additional information regarding FHLB advances and other debt.

Subordinated debentures.  Subordinated debentures totaled $14.8 million at June 30, 2019 and at December 31, 2018.  In December 2018, the Holding Company entered into subordinated note purchase agreements with certain qualified institutional buyers and completed a private placement of $10 million of fixed-to-floating rate subordinated notes, net of 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 payment were current at June 30, 2019 and December 31, 2018.

Stockholders’ equity.Stockholders’ equity totaled $50.9 million at June 30, 2019, an increase of $5.3 million, or 11.8%, from $45.6 million at December 31, 2018.  The increase in total stockholders’ equity was primarily attributed to net income of $4.0 million, as well as the receipt of additional equity totaling $1.1 million upon the exercise of outstanding warrants to purchase common stock of the Company.

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 in this Quarterly Report on Form 10-Q. 

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CENTRAL FEDERAL CORPORATION

PART 1. Item 2

MANAGEMENT DISCUSSION AND ANALYSIS

Currently, the Holding Company has excess cash to cover its expenses for the foreseeable future, and could inject capital into CFBank if necessary.  Also, CFBank has the flexibility to manage its balance sheet size as a result of the short duration of the assets as discussed with the Northpointe mortgage program, as well as to deploy those assets into higher earning assets to improve net interest income as the opportunity presents itself.

Comparison of the Results of Operations for the Three Months Ended June 30, 2019 and 2018.

General.  The Company’s income before income tax expense for the quarter ended June 30, 2019 totaled $2.9 million and increased $1.5 million, or 103.2%, compared to $1.4 million for the quarter ended June 30, 2018. The increase in income before income tax expense was due to a $1.8 million increase in noninterest income and a $882,000 increase in net interest income,partially offset by a $1.3 million increase in noninterest expense.

Net income for the three months ended June 30, 2019 totaled $2.3 million and increased $1.2 million, or 101.8%, compared to net income of $1.1 million for the three months ended June 30, 2018.   Net income attributable to common stockholders for the three months ended June 30, 2019, totaled $2.4 million (or $0.55 per diluted common share) and increased $1.3 million compared to net income attributable to common stockholders of $1.1 million  (or $0.25 per diluted common share) for the three months ended June 30, 2018.

For the three months ended June 30, 2019, the accretion of discount from the Company’s Series B Preferred Stock and the value of warrants exercised increased net income attributable to common shareholders by $157,000.  For the three months ended June 30, 2018, the accretion of discount from the Company’s Series B Preferred Stock decreased net income attributable to common stockholders by $12,000.

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 in the sections 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 $5.2 million for the quarter ended June 30, 2019 and increased $882,000, or 20.3%, compared to net interest income of $4.3 million for the quarter ended June 30, 2018.  The increase in net interest income was primarily due to a $2.6 million, or 45.0%, increase in interest income, partially offset by a $1.8 million, or 115.5%, increase in interest expense.  The increase in interest income was primarily attributed to a $171.8 million, or 33.9%, increase in average interest-earning assets outstanding, resulting primarily from an increase in net loans, increased  loan fees, and a 38bps increase in average yield on interest-earning assets.  The increase in interest expense was attributed to an 85bps increase in the average cost of funds on interest-bearing liabilities and a $154.0 million, or 39.7%, increase in average interest-bearing liabilities.  As a result, the net interest margin of 3.08% for the quarter ended June 30, 2019 decreased 35bps compared to the net interest margin of 3.43% for the quarter ended June 30, 2018.

Interest income totaled $8.5 million and increased $2.6 million, or 45.0%, for the quarter ended June 30, 2019, compared to $5.9million for the quarter ended June 30, 2018. The increase in interest income was primarily attributed to a $163.5 million, or 35.4%, increase in average loans and loans held for sale outstanding, increased loan fees and a 33bp increase in average yield on loans and loans held for sale. 

Interest expense totaled $3.3 million and increased $1.8 million, or 115.5%, for the quarter ended June 30, 2019, compared to $1.5 million for the quarter ended June 30, 2018.  The increase in interest expense was attributed to an 83bps increase in the overall cost of funds on total interest-bearing deposits coupled with a $148.8 million, or 41.4%, increase in average interest-bearing deposit balances.

Provision for loan and lease losses.  There was no provision for loan and lease losses for the quarter ended June 30, 2019 or the quarter ended June 30, 2018, which is due to strong credit quality and net recoveries.  Net recoveries totaled $5,000 for each of the quarters ended June 30, 2019 and June 30, 2018.

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CENTRAL FEDERAL CORPORATION

PART 1. Item 2

MANAGEMENT DISCUSSION AND ANALYSIS

The following table presents information regarding net charge-offs (recoveries) for the three months ended June 30, 2019 and 2018.

	For the three months ended June 30,
	2019		2018
(unaudited)		(Dollars in thousands)
Single-family residential real estate	$	(1)	$	-
Home equity lines of credit		(4)		(5)
Total	$	(5)	$	(5)

Noninterest income.Noninterest income for the quarter ended June 30, 2019 totaled $2.6 million and increased $1.8 million, or 250.4%, compared to $732,000 for the quarter ended June 30, 2018.  The increase was primarily due to a $1.9 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 related to our residential mortgage lending business.

Noninterest expense.Noninterest expense for the quarter ended June 30, 2019 totaled $4.9 million and increased $1.2 million, or 34.4%, compared to $3.7 million for the quarter ended June 30, 2018.  The increase in noninterest expense during the three months ended June 30, 2019 was primarily due to a $630,000 increase in salaries and employee benefits expense and a  $246,000 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 taxes.Income tax expense was $583,000 for the quarter ended June 30, 2019, an increase of $304,000, compared to $279,000 for the quarter ended June 30, 2018.  The effective tax rate for the quarter ended June 30, 2019 was approximately 20.4%, as compared to approximately 19.8% for the quarter ended June 30, 2018.

Our deferred tax assets are composed of 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 June 30, 2019 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, bank owned life insurance and other miscellaneous items.

Comparison of the Results of Operations for the Six Months Ended June 30, 2019 and 2018.

General.  The Company’s income before income tax expense for the six months ended June 30, 2019 totaled $5.0 million and increased $2.6million, or 107.9%, compared to $2.4 million for the six months ended June 30, 2018. The increase in income before income tax expense was due to a $2.0 million increase in net interest income and a $3.1 million increase in noninterest income, partially offset by a $2.5 million increase in noninterest expense.

Net income for the six months ended June 30, 2019 totaled $4.0 million and increased $2.1 million, or 106.1%, compared to net income of $1.9 million for the six months ended June 30, 2018.   Net income attributable to common stockholders for the six months ended June 30, 2019, totaled $4.1 million  (or $0.93 per diluted common share) and increased $2.2 million compared to net income attributable to common stockholders of $1.9 million  (or $0.42 per diluted common share) for the six months ended June 30, 2018.

For the six months ended June 30, 2019, the accretion of discount from the Company’s Series B Preferred Stock and the value of warrants exercised increased net income attributable to common shareholders by $183,000.  For the six months ended June 30, 2018, the accretion of discount from the Company’s Series B Preferred Stock decreased net income attributable to common stockholders by $38,000.

45

CENTRAL FEDERAL CORPORATION

PART 1. Item 2

MANAGEMENT DISCUSSION AND ANALYSIS

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 in the sections 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 $10.3 million for the six months ended June 30, 2019 and increased $2.0 million, or 25.1%, compared to net interest income of $8.3 million for the six months ended June 30, 2018.  The increase in net interest income was primarily due to a $5.4 million, or 49.9%, increase in interest income, partially offset by a $3.4 million, or 125.5%, increase in interest expense.  The increase in interest income was primarily attributed to a $174.8 million, or 36.2%, increase in average interest-earning assets outstanding, resulting primarily from an increase in net loans, and a 46bps increase in average yield on interest-earning assets.  The increase in interest expense was attributed to an 89bps increase in the average cost of funds on interest-bearing liabilities and a $149.1 million, or 40.1%, increase in average interest-bearing liabilities.  As a result, the net interest margin of 3.14% for the six months ended June 30, 2019 decreased 28bps compared to the net interest margin of 3.42% for the six months ended June 30, 2018.

Interest income totaled $16.4 million and increased $5.4 million, or 49.9%, for the six months ended June 30, 2019, compared to $11.0 million for the quarter ended June 30, 2018. The increase in interest income was primarily attributed to a $164.1 million, or 37.6%, increase in average loans and loans held for sale outstanding, and a 39bp increase in average yield on loans and loans held for sale. 

Interest expense totaled $6.1 million and increased $3.4 million, or 125.5%, for the six months ended June 30, 2019, compared to $2.7 million for the six months ended June 30, 2018.  The increase in interest expense was attributed to an 84bps increase in the overall cost of funds on total interest-bearing deposits coupled with a $140.0 million, or 40.3%, increase in average interest-bearing deposit balances.

Provision for loan and lease losses.  There was no provision for loan and lease losses for the six months ended June 30, 2019 or the six months ended June 30, 2018, which is due to strong credit quality and net recoveries.  Net recoveries for the six months ended June 30, 2019 totaled $17,000, compared to net recoveries of $11,000 for the six months ended June 30, 2018.  

The following table presents information regarding net charge-offs (recoveries) for the six months ended June 30, 2019 and 2018.

	For the six months ended June 30,
	2019		2018
(unaudited)	(Dollars in thousands)
Commercial	$	-	$	(2)
Single-family residential real estate		(3)		4
Home equity lines of credit		(14)		(13)
Total	$	(17)	$	(11)

Noninterest income.Noninterest income for the six months ended June 30, 2019 totaled $4.3 million and increased $3.1 million, or 251.1%, compared to $1.2 million for the six months ended June 30, 2018.  The increase was primarily due to a $3.0 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 related to our residential mortgage lending business.

Noninterest expense.Noninterest expense for the six months ended June 30, 2019 totaled $9.6 million and increased $2.5 million, or 35.9%, compared to $7.1 million for the six months ended June 30, 2018.  The increase in noninterest expense during the six months ended June 30, 2019 was primarily due to a $1.2 million increase in salaries and employee benefits expense and a $605,000 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 increases in personnel due to our geographic expansion and 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 taxes.Income tax expense was $1.0 million for the six months ended June 30, 2019, an increase of $537,000, compared to $465,000 for the six months ended June 30, 2018.  The effective tax rate for the six months ended June 30, 2019 was approximately 20.2%, as compared to approximately 19.5% for the six months ended June 30, 2018.

46

CENTRAL FEDERAL CORPORATION

PART 1. Item 2

MANAGEMENT DISCUSSION AND ANALYSIS

Our deferred tax assets are composed of 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 June 30, 2019 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, bank owned life insurance and other miscellaneous items.

Average Balances, Interest Rates and Yields.The following tables present, 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 Three Months Ended June 30,
	2019						2018
	Average		Interest		Average		Average		Interest		Average
	Outstanding		Earned/		Yield/		Outstanding		Earned/		Yield/
	Balance		Paid		Rate		Balance		Paid		Rate
	(Dollars in thousands)
Interest-earning assets:
Securities (1) (2)	$	9,557	$	43		1.79%	$	11,708	$	47		1.59%
Loans and loans held for sale (3)		625,745		8,112		5.19%		462,273		5,616		4.86%
Other earning assets		39,448		297		3.01%		29,512		156		2.11%
FHLB and FRB stock		3,816		53		5.56%		3,251		48		5.91%
Total interest-earning assets		678,566		8,505		5.01%		506,744		5,867		4.63%
Noninterest-earning assets		33,566						24,609
Total assets	$	712,132					$	531,353
Interest-bearing liabilities:
Deposits	$	508,424		2,876		2.26%	$	359,580		1,288		1.43%
FHLB advances and other borrowings		33,281		400		4.81%		28,081		232		3.30%
Total interest-bearing liabilities		541,705		3,276		2.42%		387,661		1,520		1.57%
Noninterest-bearing liabilities		121,851						102,156
Total liabilities		663,556						489,817
Equity		48,576						41,536
Total liabilities and equity	$	712,132					$	531,353
Net interest-earning assets	$	136,861					$	119,083
Net interest income/interest rate spread			$	5,229		2.59%			$	4,347		3.06%
Net interest margin						3.08%						3.43%
Average interest-earning assets
to average interest-bearing liabilities		125.26%						130.72%

⁽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 ALLL and includes nonperforming loans.

47

CENTRAL FEDERAL CORPORATION

PART 1. Item 2

MANAGEMENT DISCUSSION AND ANALYSIS

	For Six Months Ended June 30,
	2019						2018
	Average		Interest		Average		Average		Interest		Average
	Outstanding		Earned/		Yield/		Outstanding		Earned/		Yield/
	Balance		Paid		Rate		Balance		Paid		Rate
	(Dollars in thousands)
Interest-earning assets:
Securities (1) (2)	$	9,622	$	85		1.76%	$	11,711	$	90		1.52%
Loans and loans held for sale (3)		600,980		15,602		5.19%		436,856		10,483		4.80%
Other earning assets		43,557		652		2.99%		31,212		303		1.94%
FHLB and FRB stock		3,678		107		5.82%		3,240		95		5.86%
Total interest-earning assets		657,837		16,446		5.00%		483,019		10,971		4.54%
Noninterest-earning assets		33,748						24,476
Total assets	$	691,585					$	507,495
Interest-bearing liabilities:
Deposits	$	487,613		5,309		2.18%	$	347,621		2,330		1.34%
FHLB advances and other borrowings		33,488		808		4.83%		24,352		383		3.15%
Total interest-bearing liabilities		521,101		6,117		2.35%		371,973		2,713		1.46%
Noninterest-bearing liabilities		123,125						94,515
Total liabilities		644,226						466,488
Equity		47,359						41,007
Total liabilities and equity	$	691,585					$	507,495
Net interest-earning assets	$	136,736					$	111,046
Net interest income/interest rate spread			$	10,329		2.65%			$	8,258		3.08%
Net interest margin						3.14%						3.42%
Average interest-earning assets
to average interest-bearing liabilities		126.24%						129.85%

⁽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 ALLL and includes nonperforming loans.

48

CENTRAL FEDERAL CORPORATION

PART 1. Item 2

MANAGEMENT DISCUSSION AND ANALYSIS

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 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.

	Three Months Ended						Six Months Ended
	June 30, 2019						June 30, 2019
	Compared to Three Months Ended						Compared to Six Months Ended
	June 30, 2018						June 30, 2018
	Increase (decrease)						Increase (decrease)
	due to						due to
	Rate		Volume		Net		Rate		Volume		Net
	(Dollars in thousands)						(Dollars in thousands)
Interest-earning assets:
Securities (1)	$	26	$	(30)	$	(4)	$	28	$	(33)	$	(5)
Loans and loans held for sale		398		2,098		2,496		916		4,203		5,119
Other earning assets		79		62		141		202		147		349
FHLB and FRB Stock		(15)		20		5		(1)		13		12
Total interest-earning assets		488		2,150		2,638		1,145		4,330		5,475
Interest-bearing liabilities:
Deposits		926		662		1,588		1,811		1,168		2,979
FHLB advances and other borrowings		119		49		168		250		175		425
Total interest-bearing liabilities		1,045		711		1,756		2,061		1,343		3,404
Net change in net interest income	$	(557)	$	1,439	$	882	$	(916)	$	2,987	$	2,071

(1)Securities amounts are presented on a fully taxable equivalent basis.

Critical Accounting Policies

We follow financial accounting and reporting policies that are in accordance with U.S. generally accepted accounting principles and conform to general practices within the banking industry.  These policies are presented in Note 1 to our 2018 Audited 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 accounting policies that are critical accounting policies, and an understanding of these policies is necessary to understand our financial statements.  The following discussion details the critical accounting policies and the nature of the estimates made by management.

49

CENTRAL FEDERAL CORPORATION

PART 1. Item 2

MANAGEMENT DISCUSSION AND ANALYSIS

Determination of the ALLL.  The ALLL represents management’s estimate of probable incurred credit losses in the loan portfolio at each balance sheet date. The allowance consists of general and specific components.  The general component covers loans not classified as impaired and is based on historical loss experience, adjusted for current factors. Current factors considered include, but are not limited to, management’s oversight of the portfolio, including lending policies and procedures; nature, level and trend of the portfolio, including past due and nonperforming loans, loan concentrations, loan terms and other characteristics; current economic conditions and outlook; collateral values; and other items.  The specific component of the ALLL relates to loans that are individually classified as impaired. Loans exceeding policy thresholds are regularly reviewed to identify impairment. A loan is impaired when, based on current information and events, it is probable that CFBank will be unable to collect all amounts due according to the contractual terms of the loan agreement. Loans for which the terms have been modified resulting in a concession, and for which the borrower is experiencing financial difficulties, are considered troubled debt restructurings and classified as impaired.  Determining whether a loan is impaired and whether there is an impairment loss requires judgment and estimates, and the eventual outcomes may differ from estimates made by management.  The determination of whether a loan is impaired includes: review of historical data; judgments regarding the ability of the borrower to meet the terms of the loan; an evaluation of the collateral securing the loan and estimation of its value, net of selling expenses, if applicable; various collection strategies; and other factors relevant to the loan or loans.  Impairment is measured based on the fair value of collateral, less costs to sell, if the loan is collateral dependent, or alternatively, the present value of expected future cash flows discounted at the loan’s effective rate, if the loan is not collateral dependent. When the selected measure is less than the recorded investment in the loan, an impairment loss is recorded. As a result, determining the appropriate level for the ALLL involves not only evaluating the current financial situation of individual borrowers or groups of borrowers, but also current predictions about future events that could change before an actual loss is determined.  Based on the variables involved and the fact that management must make judgments about outcomes that are inherently uncertain, the determination of the ALLL is considered to be a critical accounting policy.  Additional information regarding this policy is included in the previous section titled “Financial Condition - Allowance for loan losses”, in Note 4 to the consolidated financial statements included in this Quarterly Report on Form 10-Q and in Notes 1, 4 and 6 to our 2018 Audited Financial Statements.

Fair value of financial instruments.  Another critical accounting policy relates to the fair values of financial instruments, which are estimated using relevant market information and other assumptions.  Fair value estimates involve uncertainties and matters of significant judgment regarding interest rates, credit risk, prepayments and other factors, especially in the absence of broad markets for particular items.  Changes in assumptions or in market conditions could significantly affect the estimates.  Additional information is included in Note 6 to the consolidated financial statements included in this Quarterly Report on Form 10-Q and in Notes 1 and 6 to our 2018 Audited Financial Statements.

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 line of credit. 

50

CENTRAL FEDERAL CORPORATION

PART 1. Item 2

MANAGEMENT DISCUSSION AND ANALYSIS

The following table summarizes CFBank’s cash available from liquid assets and borrowing capacity at June 30, 2019 and December 31, 2018.

	June 30, 2019		December 31, 2018
	(Dollars in thousands)
Cash, unpledged securities and deposits in other financial institutions	$	34,017	$	67,952
Additional borrowing capacity at the FHLB		74,865		54,769
Additional borrowing capacity at the FRB		61,558		58,502
Unused commercial bank line of credit		8,000		8,000
Total	$	178,440	$	189,223

Cash, unpledged securities and deposits in other financial institutions decreased $34.0 million, or 49.9%, to $34.0 million at June 30, 2019, compared to $68.0 million at December 31, 2018. The decrease is primarily attributed to an increase in loans and loans held for sale, partially offset by an increase in deposit balances.  

CFBank’s additional borrowing capacity with the FHLB increased $20.1 million, or 36.7%, to $74.9 million at June 30, 2019, compared to $54.8 million at December 31, 2018. 

CFBank’s additional borrowing capacity at the FRB increased $3.1million, or 5.2%, to $61.6 million at June 30, 2019 from $58.5 million at December 31, 2018.  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 $8.0 million of availability in an unused line of credit with a commercial bank at June 30, 2019 and December 31, 2018. 

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 toretain deposits.To promote and stabilize liquidity inthe bankingand financialservices sector, the FDIC, pursuant to the provisions ofthe Dodd-Frank Act as previously discussed, permanently increased deposit insurance coverage from$100,000to $250,000 per depositor.

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 at June 30, 2019 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 elect to 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 $280,000.  The subordinated debentures have a variable rate of interest, reset quarterly, equal to the three-month LIBOR plus 2.85%.  The total rate in effect was 5.44% at June 30, 2019.  An increase in the three-month LIBOR would increase the debt service requirement of the subordinated debentures. 

Currently, the annual debt service on the Company’s $10 million of fixed-to-floating rate subordinated notes is $700,000.  The subordinated notes have a fixed rate of 7.00% until December 2023 at which time the interest rate will reset quarterly to a rate equal to the then current three-month LIBOR plus 4.14%.

51

CENTRAL FEDERAL CORPORATION

PART 1. Item 2

MANAGEMENT DISCUSSION AND ANALYSIS

In February 2018, the Holding Company entered into a credit facility with a third-party bank pursuant to which the Holding Company could borrow up to an aggregate principal amount of $6 million.  In July 2018, the Holding Company increased the credit facility to an aggregate of $8 million.  In December 2018, the Holding Company increased the line by an additional $2 million bringing the total borrowing limit to $10 million and the credit facility was also modified to a revolving line-of-credit.  The purpose of the credit facility is to provide an additional source of liquidity for the Holding Company and to provide funds for the Holding Company to downstream as additional capital to CFBank to support growth.  During 2018, a total of $6.5 million was downstreamed as capital contributions to CFBank.  Loans under the credit facility bear interest at a rate equal to the Prime Rate plus 0.75%.  The credit facility is secured by a pledge of the Holding Company’s stock of CFBank.  The credit facility will expire in February 2020 unless extended or replaced.  As of June 30, 2019, the Company had an outstanding balance of $5 million on the credit 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.  As of June 30, 2019, the Holding Company had a total of $1.2 million of cash at the Holding Company level, which included approximately $1.1 million of retained proceeds from the Holding Company’s issuance of $10 million of fixed-to-floating rate subordinated debt in December 2018, as well as an additional $5 million of availability under the Holding Company’s revolving line-of-credit.

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 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.  In addition, so long as CFBank has a negative accumulated deficit, any dividends or distributions by CFBank to the Holding Company will require prior non-objection of the OCC.  As of June 30, 2019, CFBank had an accumulated deficit of approximately $2.5 million, which reflected a reduction of $4.7 million since December 31, 2018 as a result of the retention of earnings.

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 2018.  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.

52

CENTRAL FEDERAL CORPORATION

PART 1. Item 3

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Management believes that, as of June 30, 2019, there has been no material change in the Company’s market risk from the information contained in the Company’s Annual Report on Form 10-K filed with the SEC for the year ended December 31, 2018.

53

CENTRAL FEDERAL CORPORATION

PART 1. Item 4

CONTROLS AND PROCEDURES

Evaluation of disclosure controls and procedures.  We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our Securities Exchange Act of 1934 (Exchange Act) reports is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate, to allow timely decisions regarding required disclosure.  Management, with the participation of our principal executive officer and principal financial officer, has evaluated the effectiveness of our disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of the end of the period covered by this report.  Based on such evaluation, our principal executive officer and principal financial officer have concluded that our disclosure controls and procedures were effective as of and for the quarter ended June 30, 2019. 

Changes in internal control over financial reporting.  We made no changes in our internal controls over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) in the second quarter of 2019 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

54

CENTRAL FEDERAL CORPORATION

PART II. Item 4

OTHER INFORMATION

Item 1. Legal Proceedings

The Holding Company and CFBank 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 claims and lawsuits 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 results of operations, if decided adversely to us.

Item 1A.  Risk Factors

There were no material changes to the risk factors as presented in the Company’s Annual Report on Form 10-K for the year ended December 31, 2018. 

Item 2.  Unregistered Sales of Equity Securities and Use of Proceeds

(a) None.

(b) Not applicable.

(c) No repurchases of the Holding Company’s common shares were made by or on behalf of the Holding Company or any “affiliated purchaser” as defined in Rule 10b-18(a)(3) under the Exchange Act during the second quarter of 2019.

Item 3.  Defaults upon Senior Securities

Not applicable.

Item 4.  Mine Safety Disclosures

Not applicable.

Item 5.  Other Information

Not applicable.

55

CENTRAL FEDERAL CORPORATION

PART II. Item 4

OTHER INFORMATION

Item 6.  Exhibits

Exhibit Number	Description of Exhibit
3.1	Certificate of Incorporation of the registrant (incorporated by reference to Exhibit 3.1 to the registrant’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2017, filed with the Commission on November 9, 2017 (File No. 0-25045))
3.2	Amendment to Certificate of Incorporation of the registrant (incorporated by reference to Exhibit 3.2 to the registrant’s Registration Statement on Form S-2, filed with the Commission on October 28, 2005 (File No. 333-129315))
3.3	Amendment to Certificate of Incorporation of the registrant (incorporated by reference to Exhibit 3.4 to the registrant’s Form 10-Q for the quarter ended June 30, 2009, filed with the Commission on August 14, 2009 (File No. 0-25045))
3.4	Amendment to Certificate of Incorporation of the registrant (incorporated by reference to Exhibit 3.5 to the registrant’s Form 10-Q for the quarter ended September 30, 2011, filed with the Commission on November 10, 2011 (File No. 0-25045))
3.5	Amendment to Certificate of Incorporation of the registrant (incorporated by reference to Exhibit 3.5 to the registrant’s Post-Effective Amendment to the Registration Statement on Form S-1, filed with the Commission on May 4, 2012 (File No. 333-177434))
3.6	Certificate of Designations to Certificate of Incorporation of the registrant (incorporated by reference to Exhibit 3.1 to the registrant’s Current Report on Form 8-K dated May 7, 2014 and filed with the Commission on May 13, 2014 (File No. 0-25045))
3.7	Amendment to Certificate of Incorporation of the registrant (incorporated by reference to Exhibit 3.1 to the registrant’s Current Report on Form 8-K dated August 20, 2018, filed with the commission on August 20, 2018 (File No. 0-25045)
3.8	Second Amended and Restated Bylaws of the registrant (incorporated by reference to Exhibit 3.3 to the registrant’s Form 10-K for the fiscal year ended December 31, 2007, filed with the Commission on March 27, 2008 (File No. 0-25045))
11.1	Statement Re: Computation of Per Share Earnings
31.1	Rule 13a-14(a) Certifications of the Chief Executive Officer
31.2	Rule 13a-14(a) Certifications of the Chief Financial Officer
32.1	Section 1350 Certifications of the Chief Executive Officer and Chief Financial Officer
101.1	Interactive Data File (XBRL)

56

CENTRAL FEDERAL CORPORATION

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	CENTRAL FEDERAL CORPORATION
Dated: August 12, 2019	By:	/s/ Timothy T. O’Dell
		Timothy T. O’Dell
		President and Chief Executive Officer
Dated: August 12, 2019	By:	/s/ John W. Helmsdoerfer
		John W. Helmsdoerfer, CPA
		Treasurer and Chief Financial Officer

57

EX-11.1

CENTRAL FEDERAL CORPORATION

Exhibit 11.1

Computation of Per Share Earnings

The information regarding Computation of Per Share Earnings is contained in Note 1 – Summary of Significant Accounting Policies in the Notes to Consolidated Financial Statements contained in this Quarterly Report on Form 10-Q.

EX-31.1

CENTRAL FEDERAL CORPORATION

Exhibit 31.1

Rule 13a-14(a) Certifications of the Chief Executive Officer

I, Timothy T. O’Dell, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2019 of Central Federal Corporation;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal controls over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, 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;

c)Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d)Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors:

a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. 

Dated:  August 12, 2019	/s/ Timothy T. O’Dell
	Timothy T. O’Dell
	President and Chief Executive Officer

EX-31.2

CENTRAL FEDERAL CORPORATION

Exhibit 31.2

Rule 13a-14(a) Certifications of the Chief Financial Officer

I, John W. Helmsdoerfer, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2019 of Central Federal Corporation;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal controls over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, 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;

c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors:

a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. 

Dated:   August 12, 2019	/s/ John W. Helmsdoerfer
	John W. Helmsdoerfer, CPA
	Treasurer and Chief Financial Officer

EX-32.1

CENTRAL FEDERAL CORPORATION

Exhibit 32.1

Section 1350 Certifications of the Chief Executive Officer and Chief Financial Officer

In connection with the Quarterly Report of Central Federal Corporation (the “Company”) on Form 10-Q for the quarter ended June 30, 2019, as filed with the Securities and Exchange Commission (the “Report”), the undersigned, Timothy T. O’Dell, President and Chief Executive Officer of the Company, and John W. Helmsdoerfer, Treasurer and Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as added by Section 906 of the Sarbanes-Oxley Act of 2002, that:

(1)     The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2)The information contained in this Report fairly presents, in all material respects, the consolidated financial condition and results of operations of the Company and its subsidiaries as of and for the period covered by this Report.

Dated:   August 12, 2019	By:	/s/ Timothy T. O’Dell
		Timothy T. O’Dell
		President and Chief Executive Officer

Dated:   August 12, 2019	By:	/s/ John W. Helmsdoerfer
		John W. Helmsdoerfer, CPA
		Treasurer and Chief Financial Officer

XML

Document And Entity Information - shares	6 Months Ended
	Jun. 30, 2019	Aug. 01, 2019
Document And Entity Information [Abstract]
Document Type	10-Q
Amendment Flag	false
Document Period End Date	Jun. 30, 2019
Document Fiscal Year Focus	2019
Document Fiscal Period Focus	Q2
Entity Registrant Name	CENTRAL FEDERAL CORP
Entity Central Index Key	0001070680
Current Fiscal Year End Date	--12-31
Entity Current Reporting Status	Yes
Entity Filer Category	Non-accelerated Filer
Entity Small Business	true
Entity Emerging Growth Company	false
Entity Ex Transition Period	false
Entity Shell Company	false
Entity Common Stock, Shares Outstanding		4,490,959

XML

Consolidated Balance Sheets - USD ($) $ in Thousands	Jun. 30, 2019	Dec. 31, 2018
ASSETS
Cash and cash equivalents	$ 34,323	$ 67,304
Interest-bearing deposits in other financial institutions	100	100
Securities available for sale	10,189	10,114
Loans held for sale, at fair value	52,184	17,385
Loans and leases, net of allowance of $7,029 and $7,012	598,695	550,683
FHLB and FRB stock	3,816	3,476
Foreclosed assets, net		38
Premises and equipment, net	4,032	3,864
Operating lease right-of-use assets	1,967
Bank owned life insurance	5,272	5,203
Accrued interest receivable and other assets	10,415	6,858
Total assets	720,993	665,025
Deposits
Noninterest bearing	106,716	111,445
Interest bearing	521,870	468,341
Total deposits	628,586	579,786
FHLB advances and other debt	18,500	19,500
Advances by borrowers for taxes and insurance	340	827
Operating lease liabilities	2,163
Accrued interest payable and other liabilities	5,698	4,586
Subordinated debentures	14,786	14,767
Total liabilities	670,073	619,466
Commitments and contingent liabilities
Stockholders' equity
Common stock, $.01 par value; shares authorized: 9,090,909; shares issued: 4,502,600 at June 30, 2019 and 4,366,297 at December 31, 2018	45	44
Series B Preferred stock, $0.01 par value; 480,000 shares authorized; 0 issued at June 30, 2019 and 0 at December 31, 2018
Additional paid-in capital	62,835	61,706
Accumulated deficit	(8,608)	(12,752)
Accumulated other comprehensive loss	14	(73)
Treasury stock, at cost; 31,235 shares of common stock at June 30, 2019 and December 31, 2018	(3,366)	(3,366)
Total stockholders' equity	50,920	45,559
Total liabilities and stockholder's equity	$ 720,993	$ 665,025

XML

Consolidated Balance Sheets (Parenthetical) - USD ($) $ in Thousands		Jun. 30, 2019	Dec. 31, 2018
Allowance for loans		$ 7,029	$ 7,012
Common stock, par value		$ 0.01	$ 0.01
Common stock, shares authorized	[1]	9,090,909	9,090,909
Common stock, shares issued		4,502,600	4,366,297
Treasury stock, shares		31,235	31,235
Series B Preferred Stock [Member]
Preferred stock, par value		$ 0.01	$ 0.01
Preferred stock, share authorized		480,000	480,000
Preferred stock, share issued		0	0

[1] Reflects 1-for-5.5 reverse stock split on August 20, 2018 - See Note 1

XML

Consolidated Statements Of Income - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018
Interest and dividend income
Loans and leases, including fees	$ 8,112	$ 5,616	$ 15,602	$ 10,483
Securities	43	47	85	90
FHLB and FRB stock dividends	53	48	107	95
Federal funds sold and other	297	156	652	303
Total interest and dividend income	8,505	5,867	16,446	10,971
Interest expense
Deposits	2,876	1,288	5,309	2,330
FHLB advances and other debt	144	165	295	257
Subordinated debentures	256	67	513	126
Total interest expense	3,276	1,520	6,117	2,713
Net interest income	5,229	4,347	10,329	8,258
Provision for loan and lease losses
Net interest income after provision for loan losses	5,229	4,347	10,329	8,258
Noninterest income
Service charges on deposit accounts	138	118	262	236
Net gains on sales of loans	2,362	509	3,865	817
Earnings on bank owned life insurance	35	35	69	68
Other	30	70	63	92
Total noninterest income	2,565	732	4,259	1,213
Noninterest expense
Salaries and employee benefits	2,643	2,013	5,144	3,910
Occupancy and equipment	228	182	446	349
Data processing	293	227	609	458
Franchise and other taxes	106	103	212	205
Professional fees	356	254	644	504
Director fees	133	98	264	195
Postage, printing and supplies	59	52	126	101
Advertising and marketing	616	370	1,242	637
Telephone	45	38	90	70
Loan expenses	45	28	91	43
Foreclosed assets, net			(9)
Depreciation	78	62	149	121
FDIC premiums	152	99	304	187
Regulatory assessment	40	35	82	69
Other insurance	24	19	47	41
Other	113	90	184	194
Total noninterest expense	4,931	3,670	9,625	7,084
Income before incomes taxes	2,863	1,409	4,963	2,387
Income tax expense	583	279	1,002	465
Net income	2,280	1,130	3,961	1,922
Accretion of discount and value of warrants exercised related to Series B preferred stock	157	(12)	183	(38)
Net income attributable to common stockholders	$ 2,437	$ 1,118	$ 4,144	$ 1,884
Earnings per common share:
Basic (Restated - See Note 1)	$ 0.55	$ 0.26	$ 0.95	$ 0.44
Diluted (Restated - See Note 1)	$ 0.55	$ 0.25	$ 0.93	$ 0.42

XML

Consolidated Statements Of Comprehensive Income - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018
Consolidated Statements Of Comprehensive Income [Abstract]
Net income	$ 2,280	$ 1,130	$ 3,961	$ 1,922
Other comprehensive income (loss):
Unrealized holding gains (losses) arising during the period related to securities available for sale, net of tax of $14 and ($3) and $23 and ($14)	52	(15)	87	(69)
Other comprehensive income (loss), net of tax	52	(15)	87	(69)
Comprehensive income	$ 2,332	$ 1,115	$ 4,048	$ 1,853

XML

Consolidated Statements Of Comprehensive Income (Parenthetical) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018
Consolidated Statements Of Comprehensive Income [Abstract]
Unrealized holding gains (losses) arising during the period related to securities available for sale, tax	$ 14	$ (3)	$ 23	$ (14)

XML

Consolidated Statement Of Changes In Stockholders' Equity - USD ($) $ in Thousands		Common Stock	Additional Paid-In Capital	Accumulated Deficit	Accumulated Other Comprehensive Income (Loss)	Treasury Stock	Total
Balance at Dec. 31, 2017	[1]	$ 43	$ 60,676	$ (17,087)	$ (47)	$ (3,324)	$ 40,261
Net income				1,922			1,922
Other comprehensive income (loss)					(69)		(69)
Issuance of stock based incentive plan shares, net of forfeitures	[1]	(1)					(1)
Restricted stock expense, net of forfeitures			192				192
Exercise of warrants to common stock		1	138				139
Accretion of discount and value of warrants exercised			38	(38)
Balance at Jun. 30, 2018		43	61,044	(15,203)	(116)	(3,324)	42,444
Balance at Mar. 31, 2018	[1]	43	60,805	(16,321)	(101)	(3,324)	41,102
Net income				1,130			1,130
Other comprehensive income (loss)					(15)		(15)
Issuance of stock based incentive plan shares, net of forfeitures	[1]	(1)					(1)
Restricted stock expense, net of forfeitures			96				96
Exercise of warrants to common stock		1	131				132
Accretion of discount and value of warrants exercised			12	(12)
Balance at Jun. 30, 2018		43	61,044	(15,203)	(116)	(3,324)	42,444
Balance at Dec. 31, 2018		44	61,706	(12,752)	(73)	(3,366)	45,559
Net income				3,961			3,961
Other comprehensive income (loss)					87		87
Issuance of stock based incentive plan shares, net of forfeitures	[2]
Restricted stock expense, net of forfeitures			254				254
Exercise of warrants to common stock		1
Exercise of warrants to common stock			1,058				1,059
Accretion of discount and value of warrants exercised			(183)	183
Balance at Jun. 30, 2019		45	62,835	(8,608)	14	(3,366)	50,920
Balance at Mar. 31, 2019		44	62,039	(11,045)	(38)	(3,366)	47,634
Net income				2,280			2,280
Other comprehensive income (loss)					52		52
Restricted stock expense, net of forfeitures			138				138
Exercise of warrants to common stock		1
Exercise of warrants to common stock			815				816
Accretion of discount and value of warrants exercised			(157)	157
Balance at Jun. 30, 2019		$ 45	$ 62,835	$ (8,608)	$ 14	$ (3,366)	$ 50,920

[1] Common Stock and Additional Paid-In Capital balances were restated for 1-for-5.5 reverse stock split on August 20, 2018 - See Note 1.

[2] Reflects 1-for-5.5 reverse stock split on August 20, 2018 - See Note 1

XML

Consolidated Statement Of Changes In Stockholders' Equity (Parenthetical) - shares	3 Months Ended	6 Months Ended
	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018
Consolidated Statement Of Changes In Stockholders' Equity [Abstract]
Issuance of stock based incentive plan shares, forfeitures	727	33,788	727

XML

Consolidated Statements Of Cash Flows - USD ($) $ in Thousands	6 Months Ended
	Jun. 30, 2019	Jun. 30, 2018
Consolidated Statements Of Cash Flows [Abstract]
Net Income	$ 3,961	$ 1,922
Adjustments to reconcile net income to net cash from operating activities:
Provision for loan and lease losses
Depreciation	149	121
Amortization, net	(18)	(3)
Deferred income tax (benefit)	6	6
Originations of loans held for sale	(205,715)	(71,642)
Proceeds from sale of loans held for sale	174,123	47,159
Net gains on sales of loans	(3,865)	(817)
Write-down of premises and equipment		32
Gain on sale of foreclosed assets	(12)
Earnings on bank owned life insurance	(69)	(68)
Stock-based compensation expense	254	192
Net change in:
Accrued interest receivable and other assets	(2,290)	(734)
Operating lease right-of-use asset	217
Operating lease right-of-use liability	(205)
Accrued interest payable and other liabilities	670	488
Net cash used by operating activities	(32,794)	(23,344)
Available-for-sale securities:
Maturities, prepayments and calls	1,535	1,558
Purchases	(1,494)	(1,475)
Loan and lease originations and payments, net	(48,502)	(44,478)
Loans purchased		(19,669)
Proceeds from the sale of loans	1,137
Additions to premises and equipment	(317)	(299)
Purchase of FRB Stock	(340)	(24)
Purchase of investment in joint ventures	(723)
Return of investment-joint ventures	95
Proceeds from the sale of foreclosed assets	50
Net cash used by investing activities	(48,559)	(64,387)
Cash flows from financing activities
Net change in deposits	48,800	69,097
Proceeds from FHLB advances and other debt		48,100
Repayments on FHLB advances and other debt	(1,000)	(42,100)
Net change in advances by borrowers for taxes and insurance	(487)	(264)
Exercise of warrants to common stock	1,059	139
Net cash from financing activities	48,372	74,972
Net change in cash and cash equivalents	(32,981)	(12,759)
Beginning cash and cash equivalents	67,304	45,498
Ending cash and cash equivalents	34,323	32,739
Supplemental cash flow information:
Interest paid	2,833	2,619
Income tax paid	985	$ 200
Supplemental noncash disclosures:
Loans transferred from held for sale to portfolio	657
Investment payable on limited liability corporation	670
Transfer of other liability to operating lease right-of-use asset	184
Initial recognition of operating right-of-use lease asset	2,368
Initial recognition of operating right-of-use lease liability	$ 2,368

XML

Summary Of Significant Accounting Policies

6 Months Ended

Jun. 30, 2019

Summary Of Significant Accounting Policies [Abstract]

Summary Of Significant Accounting Policies

NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation: 

The consolidated financial statements include Central Federal Corporation (the “Holding Company”) and its wholly-owned subsidiary, CFBank, National Association (“CFBank”).  The Holding Company and CFBank are sometimes collectively referred to herein as the “Company”.  Intercompany transactions and balances are eliminated in consolidation.  The accompanying unaudited interim consolidated financial statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”) and in compliance with U.S. generally accepted accounting principles (GAAP).  Because this report is based on an interim period, certain information and footnote disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted.

In the opinion of the management of the Company, the accompanying unaudited interim consolidated financial statements include all adjustments necessary for a fair presentation of the Company’s financial condition and the results of operations for the periods presented.  These adjustments are of a normal recurring nature, unless otherwise disclosed in this Form 10-Q.  The financial performance reported for the Company for the three and six months ended June 30, 2019 is not necessarily indicative of the results that may be expected for the full year.  This information should be read in conjunction with the Company’s latest Annual Report to Stockholders and Annual Report on Form 10-K on file with the SEC.  Reference is made to the accounting policies of the Company described in Note 1 to the Audited Consolidated Financial Statements contained in the Company’s 2018 Annual Report to Stockholders that was filed as Exhibit 13.1 to the Company’s Form 10-K for the year ended December 31, 2018 (referred to herein as the “2018 Audited Financial Statements”).  The Company has consistently followed those policies in preparing this Form 10-Q.

Reverse Stock Split: On August 20, 2018, the Company effected a 1-for-5.5 reverse stock split, whereby each 5.5 shares of the Company’s common stock were reclassified into one share of common stock.  All share and per share amounts for all periods presented have been adjusted to reflect the reverse stock split as though it had occurred prior to the earliest period presented.

Loans and Leases:  Loans and leases that management has the intent and ability to hold for the foreseeable future or until maturity or payoff are reported at the principal balance outstanding, adjusted for purchase premiums and discounts, deferred loan fees and costs and an allowance for loan and lease losses (ALLL).  Interest income is accrued on the unpaid principal balance.  Loan origination fees, net of certain direct origination costs, are deferred and recognized in interest income using the level yield method without anticipating prepayments. 

The accrual of interest income on all classes of loans, except other consumer loans, is discontinued and the loan is placed on nonaccrual status at the time the loan is 90 days delinquent unless the loan is well-secured and in process of collection.  Other consumer loans are typically charged off no later than 90 days past due.  Past due status is based on the contractual terms of the loan for all classes of loans.  In all cases, loans are placed on nonaccrual or charged-off at an earlier date if collection of principal or interest is considered doubtful.  Nonaccrual loans and loans past due 90 days still on accrual include both smaller balance homogeneous loans that are collectively evaluated for impairment and individually classified impaired loans.  Commercial, multi-family residential real estate loans and commercial real estate loans placed on nonaccrual status are individually classified as impaired loans.

All interest accrued but not received for each loan placed on nonaccrual is reversed against interest income in the period in which it is placed in a nonaccrual status.  Interest received on such loans is accounted for on the cash-basis or cost recovery method, until qualifying for return to accrual status.  Loans are considered for return to accrual status provided all the principal and interest amounts that are contractually due are brought current, there is a current and well documented credit analysis,  there is reasonable assurance of repayment of principal and interest, and the customer has demonstrated sustained, amortizing payment performance of at least six months.

Allowance for Loan and Lease Losses (ALLL):  The ALLL is a valuation allowance for probable incurred credit losses.  Loan losses are charged against the allowance when management believes the uncollectibility of a loan balance is confirmed.  Subsequent recoveries, if any, are credited to the allowance.  Management estimates the allowance balance required using past loan loss experience, the nature and volume of the portfolio, information about specific borrower situations and estimated collateral values, economic conditions, and other factors.  Allocations of the allowance may be made for specific loans, but the entire allowance is available for any loan that, in management’s judgment, should be charged off.

The allowance consists of specific and general components.  The specific component relates to loans that are individually classified as impaired. A loan is impaired when, based on current information and events, it is probable that CFBank will be unable to collect all amounts due according to the contractual terms of the loan agreement.  Loans within any loan class for which the terms have been modified resulting in a concession, and for which the borrower is experiencing financial difficulties, are considered troubled debt restructurings (TDRs) and classified as impaired.  

Factors considered by management in determining impairment for all loan classes include payment status, collateral value, and the probability of collecting scheduled principal and interest payments when due. Loans that experience insignificant payment delays and payment shortfalls generally are not classified as impaired.  Management determines the significance of payment delays and payment shortfalls on a case-by-case basis, taking into consideration all of the circumstances surrounding the loan and the borrower, including the length of the delay, the reasons for the delay, the borrower’s prior payment record and the amount of the shortfall in relation to the principal and interest owed.

All loans within the commercial, multi-family residential and commercial real estate segments, regardless of size, and loans of all other classes with balances over $250 are individually evaluated for impairment when they are 90 days past due, or earlier than 90 days past due if information regarding the payment capacity of the borrower indicates that payment in full according to the loan terms is doubtful.  If a loan is impaired, a portion of the allowance is allocated so that the loan is reported, net, at the present value of estimated future cash flows using the loan’s existing rate, or at the fair value of collateral, less costs to sell, if repayment is expected solely from the collateral.  Large groups of smaller balance homogeneous loans, such as consumer and single-family residential real estate loans, are collectively evaluated for impairment, and accordingly, they are not separately identified for impairment disclosures.

TDRs of all classes of loans are separately identified for impairment disclosures and are measured at the present value of estimated future cash flows using each loan’s effective rate at inception.  If a TDR is considered to be a collateral dependent loan, the loan is reported, net, at the fair value of the collateral. If the payment of the loan is dependent on the sale of the collateral, then costs to liquidate the collateral are included when determining the impairment.  For TDRs that subsequently default, the amount of reserve is determined in accordance with the accounting policy for the ALLL.

Interest income on all classes of impaired loans that are on nonaccrual status is recognized in accordance with the accounting policy for nonaccrual loans.  Cash receipts on all classes of impaired loans that are on nonaccrual status are generally applied to the principal balance outstanding.  Interest income on all classes of impaired loans that are not on nonaccrual status is recognized on the accrual method. TDRs may be classified as accruing if the borrower has been current for a period of at least six months with respect to loan payments and management expects that the borrower will be able to continue to make payments in accordance with the terms of the restructured note.

The general reserve component covers non impaired loans of all classes and is based on historical loss experience adjusted for current factors.  The historical loss experience is determined by loan class and is based on the actual loss history experienced by the Company over a three-year period.  The general component is calculated based on CFBank’s loan balances and actual historical three-year historical loss rates.  For loans with little or no actual loss experience, industry estimates are used based on loan segment. This loss experience is supplemented with other economic and judgmental factors based on the risks present for each loan class.  These economic and judgmental factors include consideration of the following:  levels of and trends in delinquencies and impaired loans; levels of and trends in charge-offs and recoveries; trends in volume and terms of loans; effects of any changes in risk selection and underwriting standards; other changes in lending policies, procedures, and practices; experience, ability, and depth of lending management and other relevant staff; national and local economic trends and conditions; industry conditions; and effects of changes in credit concentrations.

CFBank’s charge-off policy for commercial loans, single-family residential real estate loans, multi-family residential real estate loans, commercial real estate loans, construction loans and home equity lines of credit requires management to record a specific reserve or charge-off as soon as it is apparent that the borrower is troubled and there is, or likely will be, a collateral shortfall related to the estimated value of the collateral securing the loan.  Other consumer loans are typically charged off no later than 90 days past due.

Joint Ventures:  The Holding Company has contributed funds into a series of joint ventures (equity stake) for the purpose of allocating excess liquidity into higher earning assets while diversifying its revenue sources.  The joint ventures are engaged in shorter term operating activities related to single family real estate developments.  Income is recognized based on a rate of return on the outstanding investment balance.  As units are sold, the Holding Company receives an additional incentive payment, which is recognized as income. Under ASU 2016-15, the Company has elected the nature of distribution approach to recognize returns from equity method investments.  Returns on investment are classified as cash flows from operating activities and returns of investment are classified as investing activities.

Low Income Housing Tax Credits (LIHTC):  The Company has invested in low income housing tax credits through funds that assist corporations in investing in limited partnerships and limited liability companies that own, develop and operate low income residential rental properties for purposes of qualifying for the Housing Tax Credit. These investments are accounted for under the proportional amortization method which recognizes the amortization of the investment in proportion to the tax credit and other tax benefits received.

Historic Tax Credits:  In June 2019, the Company made an equity investment as a non-managing member in an entity that receives historic tax credits (HTC) pursuant to Section 47 of the Internal Revenue Code.  This investment may generate a return through the realization of federal income tax credits, as well as other tax benefits, such as tax deductions from net operating losses of the investments over a period of time.  The investment in HTC is accounted for under the equity method of accounting and is included in accrued interest receivable and other assets on the consolidated balance sheets.  The Company’s recorded investment in this entity was $894 at June 30, 2019.  The maximum exposure to loss related to these investments was $894 at June 30, 2019, representing the Company’s investment balance and its unfunded commitments to invest additional amounts. 

Earnings Per Common Share: The two-class method is used in the calculation of basic and diluted earnings per share.  Under the two-class method, earnings available to common stockholders for the period are allocated between common stockholders and participating securities (unvested share-based payment awards) according to dividends declared (or accumulated) and participation rights in undistributed earnings.  The factors used in the earnings per share computation follow:

	Three months ended				Six months ended
	June 30,				June 30,
	2019		2018		2019		2018
	(unaudited)				(unaudited)
Basic
Net income	$	2,280	$	1,130	$	3,961	$	1,922
Accretion of discount and value of warrants exercised related to Series B preferred stock		157		(12)		183		(38)
Net income allocated to common stockholders	$	2,437	$	1,118	$	4,144	$	1,884
Weighted average common shares outstanding including unvested share-based payment awards(1)		4,412,726		4,248,573		4,384,395		4,245,757
Less: Unvested share-based payment awards		-		-		-		-
Average shares		4,412,726		4,248,573		4,384,395		4,245,757
Basic earnings per common share	$	0.55	$	0.26	$	0.95	$	0.44
Diluted
Net earnings allocated to common stockholders	$	2,437	$	1,118	$	4,144	$	1,884
Add back: Preferred Dividends on Series B preferred stock and accretion of discount		-		-		-		-
Net earnings allocated to common stockholders	$	2,437	$	1,118	$	4,144	$	1,884
Weighted average common shares outstanding for basic earnings per common share(1)		4,412,726		4,248,573		4,384,395		4,245,757
Add:  Dilutive effects of assumed exercises of stock options		35,077		41,226		37,075		40,263
Add:  Dilutive effects of assumed exercises of stock warrants		4,834		198,540		13,894		202,186
Average shares and dilutive potential common shares		4,452,637		4,488,339		4,435,364		4,488,206
Diluted earnings per common share	$	0.55	$	0.25	$	0.93	$	0.42

⁽¹⁾ Adjusted for 1-for-5.5 reverse stock split on August 20, 2018.

The following securities exercisable for common shares were anti-dilutive and not considered in computing diluted earnings per common share:

	Three months ended June 30,		Six months ended June 30,
	2019	2018	2019	2018
	(unaudited)		(unaudited)
Stock options	467	882	475	901

Dividend Restriction:  Banking regulations require us to maintain certain capital levels and may limit the dividends paid by CFBank to the Holding Company or by the Holding Company to stockholders.  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.  The Holding Company also is subject to various legal and regulatory policies and guidelines 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 Holding 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.

Adoption of New Accounting Standards:

The Financial Accounting Standards Board (FASB) has issued Accounting Standards Update (ASU) No. 2017-12, Derivatives and Hedging (Topic 815):  Targeted Improvements to Accounting for Hedging Activities.  The new standard is intended to improve and simplify accounting rules around hedge accounting.  The new standard refines and expands hedge accounting for both financial (e.g., interest rate) and commodity risks.  Its provisions create more transparency around how economic results are presented, both on the face of the financial statements and in the footnotes, for investors and analysts.  The new standard takes effect for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018.  For public companies, early adoption is permitted in any interim period or fiscal years before the effective date of the standard.  Adoption of ASU 2017-12 did not have a significant impact on the Company’s consolidated financial statements.

On February 25, 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842).  Under the new ASU, lessees recognize lease assets and liabilities on their balance sheets for all leases with terms of more than 12 months.  The new lessee accounting model retains two types of leases, and is consistent with the lessee accounting model under existing GAAP.  One type of lease (finance leases) is accounted for in substantially the same manner as capital leases were previously accounted for.  The other type of lease (operating leases) is accounted for (both in the income statement and statement of cash flows) in a manner consistent with today’s operating leases.  Lessor accounting under the new standard is fundamentally consistent with existing GAAP.  Lessees and lessors would be required to provide additional qualitative and quantitative disclosures to help financial statement users assess the amount, timing, and uncertainty of cash flows arising from leases.  These disclosures are intended to supplement the amounts recorded in the financial statements so that users can understand more about the nature of an organization’s leasing activities.  For public business entities, the final lease standard was effective for fiscal years beginning after December 15, 2018 including interim periods within those fiscal years.  Early application was permitted.   

The Company adopted the guidance on January 1, 2019 by electing the optional additional transition method permitted by ASU 2018-11 allowing for recognition of applicable leases as of January 1, 2019.  Additionally, the Company elected the following accounting policies:

· The practical expedient package that foregoes:

· reassessment of any expired or existing contracts for a lease

· reassessment of lease classifications for expired or existing leases

· reassessment of initial direct costs for existing leases

· The hindsight practical expedient to determine lease term and impairments of right-to-use assets.

· Other practical expedients regarding land easement, combining lease and non-lease components and the exclusion of short-term leases.

The Company recognized right-of-use assets and lease liabilities of approximately $2.4 million, representing its operating lease commitments, upon adoption.

In March 2019, the FASB issued ASU No. 2019-01, Leases (Topic 842): Codification Improvements. This ASU (1) states that for lessors that are not manufacturers or dealers, the fair value of the underlying asset is its cost, less any volume or trade discounts, as long as there isn’t a significant amount of time between acquisition of the asset and lease commencement; (2) clarifies that lessors in the scope of ASC 942 must classify principal payments received from sales-type and direct financing leases in investing activities in the statement of cash flows; and (3) clarifies the transition guidance related to certain interim disclosures provided in the year of adoption. To coincide with the adoption of ASU No. 2016-02, the Company elected to early adopt ASU 2019-01 on January 1, 2019. The adoption of this ASU did not have a material impact on the Company’s consolidated financial statements.

Future Accounting Matters:

In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments.  Once effective, ASU 2016-13 will significantly change current guidance for recognizing impairment of financial instruments.  Current guidance requires an "incurred loss" methodology for recognizing credit losses that delays recognition until it is probable a loss has been incurred.  ASU 2016-13 replaces the incurred loss impairment methodology with a new methodology that reflects expected credit losses over the lives of the loans and requires consideration of a broader range of information to inform credit loss estimates.  The ASU requires an organization to estimate all expected credit losses for financial assets measured at amortized cost, including loans and held-to-maturity debt securities, based on historical experience, current conditions, and reasonable and supportable forecasts.  Additional disclosures are required.  ASU 2016-13 also amends the accounting for credit losses on available-for-sale debt securities and purchased financial assets with credit deterioration.  Under the new guidance, entities will determine whether all or a portion of the unrealized loss on an available-for-sale debt security is a credit loss.  Any credit loss will be recognized as an allowance for credit losses on available-for-sale debt securities rather than as a direct reduction of the amortized cost basis of the investment, as is currently required.  As a result, entities will recognize improvements to estimated credit losses on available-for-sale debt securities immediately in earnings rather than as interest income over time, as currently required.  ASU 2016-13 eliminates the current accounting model for purchased credit impaired loans and debt securities.  Instead, purchased financial assets with credit deterioration will be recorded gross of estimated credit losses as of the date of acquisition and the estimated credit losses amounts will be added to the allowance for credit losses.  Thereafter, entities will account for additional impairment of such purchased assets using the models listed above.  ASU 2016-13 will take effect for U.S. Securities and Exchange Commission (SEC) filers for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019.  Early application will be permitted for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018.  While the Company generally expects that the implementation of ASU 2016-13 has the potential to increase its allowance for loan losses balance, the Company is continuing to evaluate the potential impact on the Company’s financial statements and disclosures.  Management has been running and evaluating various scenarios.  At this time, the estimated impact on the Company’s consolidated financial statements, including disclosures, cannot be reasonably determined.  

General Litigation

The Company is subject to claims and lawsuits that arise primarily in the ordinary course of business.  In the opinion of management, the disposition or ultimate resolution of such claims and lawsuits is not anticipated to have a material adverse effect on the consolidated financial position, results of operations and cash flows of the Company.

Reclassifications

Reclassification of certain amounts in the 2018 consolidated financial statements have been made to conform to the 2019 presentation.

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Revenue Recognition

6 Months Ended

Jun. 30, 2019

Revenue Recognition [Abstract]

Revenue Recognition

NOTE 2 – REVENUE RECOGNITION

Accounting Standards Codification ("ASC") 606, Revenue from Contracts with Customers ("ASC 606"), establishes principles for reporting information about the nature, amount, timing and uncertainty of revenue and cash flows arising from the entity's contracts to provide goods or services to customers. The core principle requires an entity to recognize revenue to depict the transfer of goods or services to customers in an amount that reflects the consideration that it expects to be entitled to receive in exchange for those goods or services recognized as performance obligations are satisfied.

The majority of our revenue-generating transactions are not subject to ASC 606, including revenue generated from financial instruments, such as our loans, letters of credit, derivatives and investment securities, as well as revenue related to our mortgage activities related to net gains on sale of loans.

All of the Company’s revenue from contracts with customers in the scope of ASC 606 is recognized within Noninterest Income.  Descriptions of our revenue-generating activities that are within the scope of ASC 606, which are presented in our income statements as components of non-interest income are as follows:

· Service charges on deposit accounts - these represent general service fees for monthly account maintenance and activity, or transaction-based fees, and consist of transaction-based revenue, time-based revenue (service period), item-based revenue or some other individual attribute-based revenue. Revenue is recognized when our performance obligation is completed which is generally monthly for account maintenance services or when a transaction has been completed (such as a wire transfer). Payment for such performance obligations are generally received at the time the performance obligations are satisfied.

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Securities

6 Months Ended

Jun. 30, 2019

Securities [Abstract]

Securities

NOTE 3 – SECURITIES

The following table summarizes the amortized cost and fair value of the available-for-sale securities portfolio at June 30, 2019 and December 31, 2018 and the corresponding amounts of unrealized gains and losses recognized in accumulated other comprehensive income (loss):

	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
June 30, 2019 (unaudited)
Issued by U.S. government-sponsored entities and agencies:
U.S. Treasury	$	9,977	$	30	$	17	$	9,990
Mortgage-backed securities - residential		147		4		-		151
Collateralized mortgage obligations		47		1		-		48
Total	$	10,171	$	35	$	17	$	10,189

	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
December 31, 2018
Issued by U.S. government-sponsored entities and agencies:
U.S. Treasury	$	9,978	$	2	$	99	$	9,881
Mortgage-backed securities - residential		167		3		-		170
Collateralized mortgage obligations		62		1		-		63
Total	$	10,207	$	6	$	99	$	10,114

There was no other-than-temporary impairment recognized in accumulated other comprehensive income (loss) for securities available for sale at June 30, 2019 or June 30, 2018.

There were no sales of securities for the three and six months ended June 30, 2019 and 2018.

The amortized cost and fair value of debt securities at June 30, 2019 and December 31, 2018 are shown in the table below by contractual maturity.  Expected maturities may differ from contractual maturities if borrowers have the right to call or prepay obligations with or without call or prepayment penalties.  Securities not due at a single maturity date are shown separately.

	June 30, 2019					December 31, 2018
	(unaudited)
	Amortized Cost		Fair Value		Amortized Cost		Fair Value
Due in one year or less	$	4,991	$	4,980	$	3,495	$	3,472
Due from one to five years		4,986		5,010		6,483		6,409
Mortgage-backed securities - residential		147		151		167		170
Collateralized mortgage obligations		47		48		62		63
Total	$	10,171	$	10,189	$	10,207	$	10,114

Fair value of securities pledged was as follows:

	June 30, 2019		December 31, 2018
	(unaudited)
Pledged as collateral for:
FHLB advances	$	3,586	$	4,058
Public deposits		2,015		1,997
Mortgage banking derivatives		1,494		-
Interest-rate swaps		93		104
Total	$	7,188	$	6,159

At June 30, 2019 and December 31, 2018, there were no holdings of securities of any one issuer, other than U.S. government-sponsored entities and agencies, in an amount greater than 10% of stockholders’ equity.

The following table summarizes securities with unrealized losses at June 30, 2019 and December 31, 2018, aggregated by major security type and length of time in a continuous unrealized loss position.

June 30, 2019 (unaudited)	Less than 12 Months				12 Months or More				Total
Description of Securities	Fair Value		Unrealized Loss		Fair Value		Unrealized Loss		Fair Value		Unrealized Loss
Issued by U.S. government-sponsored entities and agencies:
U.S. Treasury	$	1,495	(1)	-	$	5,987	$	17	$	7,482	$	17
Total temporarily impaired	$	1,495	$	-	$	5,987	$	17	$	7,482	$	17

⁽¹⁾ Unrealized loss is less than $1 resulting in rounding to zero.

December 31, 2018	Less than 12 Months				12 Months or More				Total
Description of Securities	Fair Value		Unrealized Loss		Fair Value		Unrealized Loss		Fair Value		Unrealized Loss
Issued by U.S. government-sponsored entities and agencies:
U.S. Treasury	$	499	$	1	$	8,401	$	98	$	8,900	$	99
Total temporarily impaired	$	499	$	1	$	8,401	$	98	$	8,900	$	99

The unrealized losses in U.S. Treasuries at June 30, 2019 and December 31, 2018 are related to multiple securities.  Because the decline in fair value is attributable to changes in market conditions, and not credit quality, and because the Company does not have the intent to sell these securities and it is likely that it will not be required to sell these securities before their anticipated recovery, the Company did not consider these securities to be other-than-temporarily impaired at June 30, 2019 and December 31, 2018.

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Loans And Leases

6 Months Ended

Jun. 30, 2019

Loans And Leases [Abstract]

Loans And Leases

NOTE 4 – LOANS AND LEASES

The following table presents the recorded investment in loans and leases by portfolio segment.  The recorded investment in loans and leases includes the principal balance outstanding adjusted for purchase premiums and discounts, and deferred loan fees and costs.

	June 30, 2019		December 31, 2018
	(unaudited)
Commercial (1)	$	146,450	$	126,887
Real estate:
Single-family residential		131,517		118,386
Multi-family residential		47,612		47,651
Commercial		190,575		173,435
Construction		62,359		61,792
Consumer:
Home equity lines of credit		22,232		23,961
Other		4,979		5,583
Subtotal		605,724		557,695
Less: ALLL		(7,029)		(7,012)
Loans and leases, net	$	598,695	$	550,683

⁽¹⁾ Includes $5,094 and $5,403 of commercial leases at June 30, 2019 and December 31, 2018, respectively.

Mortgage Purchase Program

CFBank has participated in a Mortgage Purchase Program with Northpointe Bank (Northpointe), a Michigan banking corporation, since December 2012.  Pursuant to the terms of a participation agreement, CFBank purchases participation interests in loans made by Northpointe related to fully underwritten and pre-sold mortgage loans originated by various prescreened mortgage brokers located throughout the U.S.  The underlying loans are individually (MERS) registered loans which are held until funded by the end investor. The mortgage loan investors include Fannie Mae and Freddie Mac, and other major financial institutions.  This process on average takes approximately 14 days.  Given the short-term holding period of the underlying loans, common credit risks (such as past due, impairment and TDR, nonperforming, and nonaccrual classification) are substantially reduced.  Therefore, no allowance is allocated by CFBank to these loans.  These loans are 100% risk rated for CFBank capital adequacy purposes.  Under the participation agreement, CFBank agrees to purchase a 95% ownership/participation interest in each of the aforementioned loans, and Northpointe maintains a 5% ownership interest in each loan it participates.  At June 30, 2019 and December 31, 2018, CFBank held $40,572 and $36,845, respectively, of such loans which have been included in single-family residential loan totals above.

Allowance for Loan and Lease Losses

The ALLL is a valuation allowance for probable incurred credit losses in the loan portfolio based on management’s evaluation of various factors including past loan loss experience, the nature and volume of the portfolio, information about specific borrower situations and estimated collateral values, economic conditions and other factors. A provision for loan and lease losses is charged to operations based on management’s periodic evaluation of these and other pertinent factors described in Note 1 to the 2018 Audited Financial Statements. 

The following tables present the activity in the ALLL by portfolio segment for the three and six months ended June 30, 2019:

	Three months ended June 30, 2019 (unaudited)
			Real Estate								Consumer
	Commercial		Single-family		Multi-family		Commercial		Construction		Home Equity lines of credit		Other		Total
Beginning balance	$	1,819	$	1,063	$	622	$	2,299	$	759	$	375	$	87	$	7,024
Addition to (reduction in) provision for loan losses		150		(50)		(60)		40		-		(70)		(10)		-
Charge-offs		-		-		-		-		-		-		-		-
Recoveries		-		1		-		-		-		4		-		5
Ending balance	$	1,969	$	1,014	$	562	$	2,339	$	759	$	309	$	77	$	7,029

	Six months ended June, 2019 (unaudited)
			Real Estate								Consumer
	Commercial		Single-family		Multi-family		Commercial		Construction		Home Equity lines of credit		Other		Total
Beginning balance	$	1,819	$	1,061	$	612	$	2,274	$	739	$	410	$	97	$	7,012
Addition to (reduction in) provision for loan losses		150		(50)		(50)		65		20		(115)		(20)		-
Charge-offs		-		-		-		-		-		-		-		-
Recoveries		-		3		-		-		-		14		-		17
Ending balance	$	1,969	$	1,014	$	562	$	2,339	$	759	$	309	$	77	$	7,029

The following tables present the activity in the ALLL by portfolio segment for the three and six months ended June 30, 2018:

	Three months ended June 30, 2018 (unaudited)
			Real Estate								Consumer
	Commercial		Single-family		Multi-family		Commercial		Construction		Home Equity lines of credit		Other		Total
Beginning balance	$	1,869	$	1,039	$	687	$	2,139	$	614	$	521	$	107	$	6,976
Addition to (reduction in) provision for loan losses		20		-		10		10		-		(40)		-		-
Charge-offs		-		-		-		-		-		-		-		-
Recoveries		-		-		-		-		-		5		-		5
Ending balance	$	1,889	$	1,039	$	697	$	2,149	$	614	$	486	$	107	$	6,981

	Six months ended June, 2018 (unaudited)
			Real Estate								Consumer
	Commercial		Single-family		Multi-family		Commercial		Construction		Home Equity lines of credit		Other		Total
Beginning balance	$	1,984	$	912	$	660	$	2,143	$	672	$	597	$	2	$	6,970
Addition to (reduction in) provision for loan losses		(97)		131		37		6		(58)		(124)		105		-
Charge-offs		-		(6)		-		-		-		-		-		(6)
Recoveries		2		2		-		-		-		13		-		17
Ending balance	$	1,889	$	1,039	$	697	$	2,149	$	614	$	486	$	107	$	6,981

The following table presents the balance in the ALLL and the recorded investment in loans and leases by portfolio segment and based on the impairment method as of June 30, 2019 (unaudited):

			Real Estate								Consumer
	Commercial		Single- family		Multi- family		Commercial		Construction		Home Equity lines of credit		Other		Total
ALLL:
Ending allowance balance attributable to loans:
Individually evaluated for impairment	$	-	$	-	$	-	$	33	$	-	$	-	$	-	$	33
Collectively evaluated for impairment		1,969		1,014		562		2,306		759		309		77		6,996
Total ending allowance balance	$	1,969	$	1,014	$	562	$	2,339	$	759	$	309	$	77	$	7,029
Loans:
Individually evaluated for impairment	$	93	$	108	$	-	$	4,599	$	-	$	-	$	-	$	4,800
Collectively evaluated for impairment		146,357		131,409		47,612		185,976		62,359		22,232		4,979		600,924
Total ending loan balance	$	146,450	$	131,517	$	47,612	$	190,575	$	62,359	$	22,232	$	4,979	$	605,724

The following table presents the balance in the ALLL and the recorded investment in loans and leases by portfolio segment and based on the impairment method as of December 31, 2018: 

			Real Estate								Consumer
	Commercial		Single- family		Multi- family		Commercial		Construction		Home Equity lines of credit		Other		Total
ALLL:
Ending allowance balance attributable to loans:
Individually evaluated for impairment	$	-	$	-	$	-	$	22	$	-	$	-	$	-	$	22
Collectively evaluated for impairment		1,819		1,061		612		2,252		739		410		97		6,990
Total ending allowance balance	$	1,819	$	1,061	$	612	$	2,274	$	739	$	410	$	97	$	7,012
Loans:
Individually evaluated for impairment	$	100	$	110	$	-	$	2,951	$	-	$	-	$	-	$	3,161
Collectively evaluated for impairment		126,787		118,276		47,651		170,484		61,792		23,961		5,583		554,534
Total ending loan balance	$	126,887	$	118,386	$	47,651	$	173,435	$	61,792	$	23,961	$	5,583	$	557,695

The following table presents loans individually evaluated for impairment by class of loans as of and for the period ended June 30, 2019.  The unpaid principal balance is the contractual principal balance outstanding.  The recorded investment is the unpaid principal balance adjusted for partial charge-offs, purchase premiums and discounts, and deferred loan fees and costs.  The table presents accrual basis interest income recognized during the three and six months ended June 30, 2019.  Cash payments of interest on these loans during the three and six months ended June 30, 2019 totaled $43 and $88, respectively.

							Three months ended				Six months ended
	As of June 30, 2019						June 30, 2019				June 30, 2019
	(unaudited)						(unaudited)				(unaudited)
	Unpaid Principal Balance		Recorded Investment		ALLL Allocated		Average Recorded Investment		Interest Income Recognized		Average Recorded Investment		Interest Income Recognized
With no related allowance recorded:
Commercial	$	93	$	93	$	-	$	94	$	-	$	96	$	-
Real estate:
Single-family residential		108		108		-		109		2		109		3
Commercial:
Owner occupied	$	226	$	122	$	-	$	121	$	1		122		7
Total with no allowance recorded		427		323		-		324		3		327		10
With an allowance recorded:
Real estate:
Commercial:
Non-owner occupied		4,477		4,477		33		4,483		39		3,932		76
Total with an allowance recorded		4,477		4,477		33		4,483		39		3,932		76
Total	$	4,904	$	4,800	$	33	$	4,807	$	42	$	4,259	$	86

The following table presents loans individually evaluated for impairment by class of loans as of December 31, 2018.  The unpaid principal balance is the contractual principal balance outstanding.  The recorded investment is the unpaid principal balance adjusted for partial charge-offs, purchase premiums and discounts, and deferred loan fees and costs.  The table presents accrual basis interest income recognized during the three and six months ended June 30, 2018.  Cash payments of interest during the three and six months ended June 30, 2018 totaled $48 and $99, respectively.

							Three months ended				Six months ended
	As of December 31, 2018						June 30, 2018				June 30, 2018
							(unaudited)				(unaudited)
	Unpaid Principal Balance		Recorded Investment		ALLL Allocated		Average Recorded Investment		Interest Income Recognized		Average Recorded Investment		Interest Income Recognized
With no related allowance recorded:
Commercial	$	-	$	-	$	-	$	-	$	-	$	-	$	-
Real estate:
Commercial:
Owner occupied		379		125		-		132		5		133		10
Total with no allowance recorded		379		125		-		132		5		133		10
With an allowance recorded:
Commercial (1)		100		100		-		208		1		218		3
Real estate:
Single-family residential (1)		110		110		-		114		2		115		3
Commercial:
Non-owner occupied		2,826		2,826		22		2,844		39		2,845		78
Owner occupied		-		-		-		186		2		187		4
Total with an allowance recorded		3,036		3,036		22		3,352		44		3,365		88
Total	$	3,415	$	3,161	$	22	$	3,484	$	49	$	3,498	$	98

⁽¹⁾ Allowance recorded is less than $1 resulting in rounding to zero.

The following table presents the recorded investment in nonperforming loans by class of loans:

	June 30, 2019		December 31, 2018
	(unaudited)
Loans past due over 90 days still on accrual	$	-	$	-
Nonaccrual loans:
Commercial		93		100
Real estate:
Single-family residential		528		167
Commercial:
Non-owner occupied		1,689		-
Consumer:
Home equity lines of credit:
Originated for portfolio		15		-
Purchased for portfolio		84		89
Other consumer		9		21
Total nonaccrual		2,418		377
Total nonaccrual and nonperforming loans	$	2,418	$	377

Nonaccrual loans include both smaller balance single-family mortgage and consumer loans that are collectively evaluated for impairment and individually classified impaired loans.  There were no loans 90 days or more past due and still accruing interest at June 30, 2019 or December 31, 2018.

The following table presents the aging of the recorded investment in past due loans and leases by class of loans as of June 30, 2019 (unaudited):

	30 - 59 Days Past Due		60 - 89 Days Past Due		Greater than 90 Days Past Due		Total Past Due		Loans Not Past Due		Nonaccrual Loans Not > 90 days Past Due
Commercial	$	40	$	-	$	-	$	40	$	146,410	$	93
Real estate:
Single-family residential		74		371		22		467		131,050		506
Multi-family residential		-		-		-		-		47,612		-
Commercial:
Non-owner occupied		-		-		1,689		1,689		123,894		-
Owner occupied		-		-		-		-		45,558		-
Land		-		-		-		-		19,434		-
Construction		-		-		-		-		62,359		-
Consumer:
Home equity lines of credit:
Originated for portfolio		273		-		-		273		21,669		15
Purchased for portfolio		31		-		-		31		259		84
Other		-		-		9		9		4,970		-
Total	$	418	$	371	$	1,720	$	2,509	$	603,215	$	698

The following table presents the aging of the recorded investment in past due loans and leases by class of loans as of December 31, 2018:

	30 - 59 Days Past Due		60 - 89 Days Past Due		Greater than 90 Days Past Due		Total Past Due		Loans Not Past Due		Nonaccrual Loans Not > 90 days Past Due
Commercial	$	-	$	-	$	-	$	-	$	126,887	$	100
Real estate:
Single-family residential		597		-		23		620		117,766		144
Multi-family residential		-		-		-		-		47,651		-
Commercial:
Non-owner occupied		-		-		-		-		122,465		-
Owner occupied		-		-		-		-		43,087		-
Land		-		-		-		-		7,883		-
Construction		-		-		-		-		61,792		-
Consumer:
Home equity lines of credit:
Originated for portfolio		474		-		-		474		23,119		-
Purchased for portfolio		-		33		-		33		335		89
Other		-		-		21		21		5,562		-
Total	$	1,071	$	33	$	44	$	1,148	$	556,547	$	333

Troubled Debt Restructurings (TDRs):

From time to time, the terms of certain loans are modified as TDRs, where concessions are granted to borrowers experiencing financial difficulties. The modification of the terms of such loans may have included one or a combination of the following: a reduction of the stated interest rate of the loan; an increase in the stated rate of interest lower than the current market rate for new debt with similar risk; an extension of the maturity date; or a change in the payment terms.

As of June 30, 2019 and December 31, 2018, TDRs totaled $3,111 and $3,161, respectively.  The Company allocated $20 and $22 of specific reserves to loans whose terms had been modified in TDRs as of June 30, 2019 and December 31, 2018, respectively.  The Company had not committed to lend any additional amounts as of June 30, 2019 or December 31, 2018 to customers with outstanding loans classified as nonaccrual TDRs.

During the three and six months ended June 30, 2019 and June 30, 2018, there were no loans modified as a TDR. 

There were no TDRs in payment default or that became nonperforming during the quarters ended June 30, 2019 and June 30, 2018.  A loan is considered to be in payment default once it is 90 days contractually past due under the modified terms, at which time the loan is re-evaluated to determine whether an impairment loss should be recognized, either through a write-off or specific valuation allowance, so that the loan is reported, net, at the present value of estimated future cash flows, or at the fair value of collateral, less cost to sell, if repayment is expected solely from the collateral.

The terms of certain other loans were modified during the quarters ended June 30, 2019 and 2018 that did not meet the definition of a TDR. These loans had a total recorded investment of $15,821 and $21,612 as of June 30, 2019 and 2018, respectively. The modification of these loans involved either a modification of the terms of a loan to borrowers who were not experiencing financial difficulties, a delay in payments that was considered to be insignificant or a modification where no concessions were granted.

In order to determine whether a borrower is experiencing financial difficulty, an evaluation is performed of the probability that the borrower will be in payment default on any of its debt in the foreseeable future without the modification. This evaluation is performed under the Company’s internal underwriting policy.

Nonaccrual loans include loans that were modified and identified as TDRs and the loans are not performing.  At June 30, 2019 and December 31, 2018, nonaccrual TDRs were as follows:

	June 30, 2019		December 31, 2018
	(unaudited)
Commercial	$	93	$	100
Total	$	93	$	100

Nonaccrual loans at June 30, 2019 and December 31, 2018 do not include $3,018 and $3,061, respectively, of TDRs where customers have established a sustained period of repayment performance, generally six months, the loans are current according to their modified terms and repayment of the remaining contractual payments is expected. These loans are included in total impaired loans.

Credit Quality Indicators:

The Company categorizes loans into risk categories based on relevant information about the ability of borrowers to service their debt, such as current financial information, historical payment experience, credit documentation, public information and current economic trends, among other factors.  Management analyzes loans individually by classifying the loans as to credit risk.  This analysis includes commercial, commercial real estate and multi-family residential real estate loans.  Internal loan reviews for these loan types are performed at least annually, and more often for loans with higher credit risk. Adjustments to loan risk ratings are made based on the reviews and at any time information is received that may affect risk ratings.  The following definitions are used for risk ratings:

Special Mention.  Loans classified as special mention have a potential weakness that deserves management’s close attention.  If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the loan or of CFBank’s credit position at some future date.

Substandard.  Loans classified as substandard are inadequately protected by the current net worth and paying capacity of the obligor or of the collateral pledged, if any.  Loans so classified have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt.  They are characterized by the distinct possibility that there will be some loss if the deficiencies are not corrected.

Doubtful.  Loans classified as doubtful have all the weaknesses inherent in those classified as substandard, with the added characteristic that the weaknesses make collection or liquidation in full, on the basis of currently existing facts, conditions and values, highly questionable and improbable.

Loans not meeting the criteria to be classified into one of the above categories are considered to be not rated or pass-rated loans.  Loans listed as not rated are primarily groups of homogeneous loans.  Past due information is the primary credit indicator for groups of homogenous loans.  Loans listed as pass-rated loans are loans that are subject to internal loan reviews and are determined not to meet the criteria required to be classified as special mention, substandard or doubtful. 

The recorded investment in loans and leases by risk category and by class of loans and leases as of June 30, 2019 and based on the most recent analysis performed follows.  There were no loans or leases rated doubtful at June 30, 2019.

(unaudited)	Not Rated		Pass		Special Mention		Substandard		Total
Commercial	$	-	$	140,266	$	5,468	$	716	$	146,450
Real estate:
Single-family residential		130,989		-		-		528		131,517
Multi-family residential		-		47,059		403		150		47,612
Commercial:
Non-owner occupied		71		121,035		-		4,477		125,583
Owner occupied		-		43,260		2,176		122		45,558
Land		-		19,434		-		-		19,434
Construction		3,280		59,079		-		-		62,359
Consumer:
Home equity lines of credit:
Originated for portfolio		21,862		-		-		80		21,942
Purchased for portfolio		206		-		-		84		290
Other		4,970		-		-		9		4,979
	$	161,378	$	430,133	$	8,047	$	6,166	$	605,724

The recorded investment in loans and leases by risk category and by class of loans and leases as of December 31, 2018 follows.  There were no loans or leases rated doubtful at December 31, 2018. 

	Not Rated		Pass		Special Mention		Substandard		Total
Commercial	$	-	$	123,369	$	2,651	$	867	$	126,887
Real estate:
Single-family residential		118,219		-		-		167		118,386
Multi-family residential		-		47,072		425		154		47,651
Commercial:
Non-owner occupied		76		119,843		1,701		845		122,465
Owner occupied		-		39,747		2,252		1,088		43,087
Land		-		7,883		-		-		7,883
Construction		3,279		58,513		-		-		61,792
Consumer:
Home equity lines of credit:
Originated for portfolio		23,525		-		-		68		23,593
Purchased for portfolio		279		-		-		89		368
Other		5,562		-		-		21		5,583
	$	150,940	$	396,427	$	7,029	$	3,299	$	557,695

Leases:

The following lists the components of the net investment in direct financing leases (1):

	June 30, 2019		December 31, 2018
	(unaudited)
Total minimum lease payments to be received	$	5,649	$	6,045
Less: unearned income		(555)		(642)
Net investment in direct financing leases	$	5,094	$	5,403

⁽¹⁾ There were no initial direct costs associated with these leases.

The following summarizes the future minimum lease payments receivable in fiscal year 2019 and in subsequent fiscal years:

2019	$	397
2020		793
2021		793
2022		793
2023		1,563
Thereafter		1,310
	$	5,649

XML

Leases

6 Months Ended

Jun. 30, 2019

Leases [Abstract]

Leases

NOTE 5 – LEASES

A lease is defined as a contract, or part of a contract, that conveys the right to control the use of identified property, plant or equipment for a period of time in exchange for consideration. On January 1, 2019, the Company adopted ASU No. 2016-02, Leases (Topic 842) and all subsequent ASUs that modified Topic 842. For the Company, Topic 842 primarily affected the accounting treatment for operating lease agreements in which the Company is the lessee.

The leases in which the Company is the lessee are comprised of real estate property for branches and offices and for equipment with terms extending through 2024. All of our leases are classified as operating leases, and therefore, were previously not recognized on the Company’s consolidated balance sheets. With the adoption of Topic 842, operating lease agreements are required to be recognized on the consolidated balance sheets as a right-of-use (“ROU”) asset and a corresponding operating lease liability.  The Company does not have any leases classified as finance leases.

The calculated amount of the ROU assets and lease liabilities are impacted by the length of the lease term and the discount rate used to present value the minimum lease payments. The Company’s lease agreements often include one or more options to renew at the Company’s discretion which were considered, as applicable, in the calculation of the ROU assets and lease liabilities.  If at lease inception, the Company considers the exercising of a renewal option to be reasonably certain, the Company will include the extended term in the calculation of the ROU asset and lease liability. Regarding the discount rate, Topic 842 requires the use of the rate implicit in the lease whenever this rate is readily determinable. As this rate is not readily determinable in our operating leases, the Company utilizes its incremental borrowing rate at lease inception, on a collateralized basis, over a similar term.  At June 30, 2019, the weighted-average remaining lease term for the Company’s operating leases was 4.7 years and the weighted-average discount rate was 6.56%.

The Company’s operating lease costs were $90 for the three months ended June 30, 2019 and $217 for the six months ended June 30, 2019.  The variable lease costs totaled $70 for the three months ended June 30, 2019 and $101 for the six months ended June 30, 2019. As the Company elected not to separate lease and non-lease components for all classes of underlying assets and instead to account for them as a single lease component, the variable lease cost primarily represents variable payments such as common area maintenance and utilities.

Future minimum operating lease payments as of June 30, 2019 are as follows:

2019, excluding the six months ended June 30, 2019	$	271
2020		544
2021		548
2022		536
2023		377
Thereafter		250
Total future minimum rental commitments		2,526
Less - amounts representing interest		(363)
Total operating lease liabilities	$	2,163

XML

Fair Value

6 Months Ended

Jun. 30, 2019

Fair Value [Abstract]

Fair Value

NOTE 6 - FAIR VALUE 

Fair value is the exchange price that would be received for an asset or paid to transfer a liability in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date.  There are three levels of inputs that may be used to measure fair values:

Level 1 – Quoted prices (unadjusted) for identical assets or liabilities in active markets that the entity has the ability to access as of the measurement date.

Level 2 – Significant other observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities, quoted prices in markets that are not active, or other inputs that are observable or can be corroborated by observable market data.

Level 3 – Significant unobservable inputs that reflect a company’s own assumptions about the assumptions that market participants would use in pricing an asset or liability.

The Company used the following methods and significant assumptions to estimate the fair value of each type of asset and liability:

Securities available for sale:  The fair value of securities available for sale is determined using pricing models that vary based on asset class and include available trade, bid and other market information or matrix pricing, which is a mathematical technique widely used in the industry to value debt securities without relying exclusively on quoted prices for the specific securities but rather by relying on the securities’ relationship to other benchmark quoted securities (Level 2).

Derivatives:  The fair value of derivatives, which includes yield maintenance provisions, interest rate lock commitments and interest rate swaps, is based on valuation models using observable market data as of the measurement date (Level 2).

TBA mortgage – back securities:  To mitigate the effect of the interest rate risk inherent in providing rate lock commitments to borrowers, the Company enters into either a forward sales contract to sell loans to investors when using best efforts or a trade of “to be announced (TBA)” mortgage-backed securities for mandatory delivery.  The forward sales contracts lock in a price for the sale of loans with similar characteristics to the specific rate lock commitments based on a valuation model using observable market data for pricing commitments (Level 2).

Impaired loans:  The fair value of impaired loans with specific allocations of the ALLL is generally based on recent real estate appraisals. These appraisals may utilize a single valuation approach or a combination of approaches including comparable sales and the income approach. Adjustments are routinely made in the appraisal process by the appraisers to adjust for differences between the comparable sales and income data available. Such adjustments are usually significant and typically result in a Level 3 classification of the inputs for determining fair value.

Appraisals for collateral-dependent impaired loans are performed by certified general appraisers (for commercial properties) or certified residential appraisers (for residential properties) whose qualifications and licenses have been reviewed and verified by a third-party appraisal management company approved by the Board of Directors annually. Once received, the loan officer or a member of the credit department reviews the assumptions and approaches utilized in the appraisal as well as the overall resulting fair value in comparison with independent data sources such as recent market data or industry-wide statistics.  Appraisals are updated as needed based on facts and circumstances associated with the individual properties.  Real estate appraisals typically incorporate measures such as recent sales prices for comparable properties.  Appraisers may make adjustments to the sales prices of the comparable properties as deemed appropriate based on the age, condition or general characteristics of the subject property.  Management applies an additional discount to real estate appraised values, typically to reflect changes in market conditions since the date of the appraisal if warranted and to cover disposition costs (including selling expenses) based on the intended disposition method of the property.  Non-real estate collateral may be valued using an appraisal, net book value per the borrower’s financial statements, or aging reports, adjusted or discounted based on management’s historical knowledge, changes in market conditions from the time of the valuation, and management’s expertise and knowledge of the client and client’s business, resulting in a Level 3 fair value classification.  Impaired loans are evaluated on a quarterly basis for additional impairment and adjusted accordingly.

Loans held for sale:  Loans held for sale are carried at fair value, as determined by outstanding commitments from third party investors (Level 2). 

Assets and liabilities measured at fair value on a recurring basis, including financial assets and liabilities for which the Company has elected the fair value option, are summarized below:

	Fair Value Measurements at June 30, 2019 using Significant Other Observable Inputs
	(Level 2)
	(unaudited)
Financial Assets:
Securities available for sale:
Issued by U.S. government-sponsored entities and agencies:
U.S. Treasury	$	9,990
Mortgage-backed securities - residential		151
Collateralized mortgage obligations		48
Total securities available for sale	$	10,189
Loans held for sale	$	52,184
Yield maintenance provisions (embedded derivatives)	$	8
Interest rate lock commitments	$	2,480
Financial Liabilities:
Interest-rate swaps	$	8
TBA Mortgage-back securities	$	645

	Fair Value Measurements at December 31, 2018 using Significant Other Observable Inputs
	(Level 2)
Financial Assets:
Securities available for sale:
Issued by U.S. government-sponsored entities and agencies:
U.S. Treasury	$	9,881
Mortgage-backed securities - residential		170
Collateralized mortgage obligations		63
Total securities available for sale	$	10,114
Loans held for sale	$	17,385
Yield maintenance provisions (embedded derivatives)	$	17
Interest rate lock commitments	$	721
Financial Liabilities:
Interest-rate swaps	$	17
TBA Mortgage-backed securities	$	342

The Company had noassets or liabilities measured at fair value on a recurring basis that were measured using Level 1 or Level 3 inputs at June 30, 2019 or December 31, 2018.  There were notransfers of assets or liabilities measured at fair value between levels during the periods ended June 30, 2019 and December 31, 2018.

Assets and liabilities measured at fair value on a non-recurring basis are summarized below:

Fair Value Measurements at June 30, 2019 Using
Significant Unobservable Inputs (Level 3)
(unaudited)
Impaired loans:
Commercial	$	93
Real Estate:
Single-family residential		109
Commercial:
Non-owner occupied		4,444
Total impaired loans	$	4,646

Fair Value Measurements at December 31, 2018 Using
Significant Unobservable Inputs (Level 3)
Impaired loans:
Commercial	$	100
Real Estate:
Single-family residential		110
Commercial:
Non-owner occupied		2,804
Total impaired loans	$	3,014

The Company had nomaterialassets or liabilities measured at fair value on a non-recurring basis that were measured using Level 1 or Level 2 inputs at June 30, 2019 or December 31, 2018. 

Impaired loans that are measured for impairment using the fair value of the collateral for collateral dependent loans, had a principal balance of $4,679 with a valuation allowance of $33 at June 30, 2019. There were no write-downs of impaired collateral dependent loans during the three and six months ended June 30, 2019 or 2018.  Impaired loans that are measured for impairment using the fair value of the collateral for collateral dependent loans, had a principal balance of $3,036, with a valuation allowance of $22 at December 31, 2018.

During the three and six months ended June 30, 2019, the Company did not have any transfers of assets or liabilities between those measured using Level 1, 2 or 3 inputs.  The Company recognizes transfers of assets and liabilities between Level 1, 2 and 3 inputs based on the information relating to those assets and liabilities at the end of the reporting period.

The following table presents quantitative information about Level 3 fair value measurements for financial instruments measured at fair value on a non-recurring basis at June 30, 2019 (unaudited):

		Fair Value	Valuation Technique(s)	Unobservable Inputs	(Range) Weighted Average
Impaired loans:
Commercial	$	93	Comparable sales approach	Adjustment for differences between the comparable market transactions	2.06%
Real estate:
Single-family residential		109	Comparable sales approach	Adjustment for differences between the comparable market transactions	3.61%
Commercial:
Non-owner occupied		4,444	Comparable sales approach	Adjustment for differences between the comparable market transactions	(-2.58%,  8.61%) 1.52%

The following table presents quantitative information about Level 3 fair value measurements for financial instruments measured at fair value on a non-recurring basis at December 31, 2018:

		Fair Value	Valuation Technique(s)	Unobservable Inputs	(Range) Weighted Average
Impaired loans:
Commercial	$	100	Comparable sales approach	Adjustment for differences between the comparable market transactions	3.48%
Real estate:
Single -family residential		110	Comparable sales approach	Adjustment for differences between the comparable market transactions	3.61%
Commercial:
Non-owner occupied		2,804	Comparable sales approach	Adjustment for differences between the comparable market transactions	(3.48%,  8.61%) 5.02%

Financial Instruments Recorded Using Fair Value Option

The Company has elected the fair value option for loans held for sale.  These loans are intended for sale and the Company believes that the fair value is the best indicator of the resolution of these loans.  Loans originated as construction loans, that were subsequently transferred to held for sale, are carried at the lower of cost or market and are not included.  Interest income is recorded based on the contractual terms of the loan and in accordance with the Company’s policy on loans held for investment.  None of these loans were 90 days or more past due or on nonaccrual as of June 30, 2019 or December 31, 2018. 

As of June 30, 2019 and December 31, 2018, the aggregate fair value, contractual balance and gain or loss of loans held for sale were as follows:

	June 30, 2019		December 31, 2018
	(unaudited)
Aggregate fair value	$	52,184	$	17,385
Contractual balance		51,031		17,008
Gain (loss)	$	1,153	$	377

The total amount of gains and losses from changes in fair value included in earnings for the three and six months ended June 30, 2019 and 2018 for loans held for sale were:

	Three months ended June 30,				Six months ended June 30,
	2019		2018		2019		2018
	(unaudited)				(unaudited)
Interest income	$	275	$	142	$	490	$	166
Interest expense		-		-		-		-
Change in fair value		516		216		776		274
Total change in fair value	$	791	$	358	$	1,266	$	440

The carrying amounts and estimated fair values of financial instruments at June 30, 2019 were as follows:

	Fair Value Measurements at June 30, 2019 Using:
	Carrying
(unaudited)	Value		Level 1		Level 2		Level 3		Total
Financial assets
Cash and cash equivalents	$	34,323	$	34,323	$	-	$	-	$	34,323
Interest-bearing deposits in other financial institutions		100		100		-		-		100
Securities available for sale		10,189		-		10,189		-		10,189
Loans held for sale		52,184		-		52,184		-		52,184
Loans and leases, net		598,695		-		-		591,720		591,720
FHLB and FRB stock		3,816		n/a		n/a		n/a		n/a
Accrued interest receivable		2,245		26		44		2,175		2,245
Yield maintenance provisions (embedded derivatives)		8		-		8		-		8
Interest rate lock commitments		2,480		-		2,480		-		2,480
Financial liabilities
Deposits	$	(628,586)	$	(328,081)	$	(303,660)	$	-	$	(631,741)
FHLB advances and other borrowings		(18,500)		-		(18,677)		-		(18,677)
Advances by borrowers for taxes and insurance		(340)		-		-		(340)		(340)
Subordinated debentures		(14,786)		-		(15,609)		-		(15,609)
Accrued interest payable		(239)		(20)		(219)		-		(239)
Interest-rate swaps		(8)		-		(8)		-		(8)
TBA mortgage-back securities		(645)		-		(645)		-		(645)

The carrying amounts and estimated fair values of financial instruments at December 31, 2018 were as follows:

	Fair Value Measurements at December 31, 2018 Using:
	Carrying
	Value		Level 1		Level 2		Level 3		Total
Financial assets
Cash and cash equivalents	$	67,304	$	67,304	$	-	$	-	$	67,304
Interest-bearing deposits in other financial institutions		100		100		-		-		100
Securities available for sale		10,114		-		10,114		-		10,114
Loans held for sale		17,385		-		17,385		-		17,385
Loans and leases, net		550,683		-		-		549,599		549,599
FHLB stock		3,476		n/a		n/a		n/a		n/a
Accrued interest receivable		2,181		45		40		2,097		2,182
Yield maintenance provisions (embedded derivatives)		17		-		17		-		17
Interest rate lock commitments		721		-		721		-		721
Financial liabilities
Deposits	$	(579,786)	$	(306,121)	$	(272,924)	$	-	$	(579,045)
FHLB advances and other borrowings		(19,500)		-		(19,589)		-		(19,589)
Advances by borrowers for taxes and insurance		(827)		-		-		(827)		(827)
Subordinated debentures		(14,767)		-		(14,280)		-		(14,280)
Accrued interest payable		(231)		-		(231)		-		(231)
Interest-rate swaps		(17)		-		(17)		-		(17)
TBA mortgage-backed securities		(342)		-		(342)		-		(342)

The methods and assumptions, not previously presented, used to estimate fair values are described below.

Cash and Cash Equivalents and Interest-Bearing Deposits in Other Financial Institutions

The carrying amounts of cash and short-term instruments approximate fair values and are classified as Level 1.

FHLB and FRB Stock

It is not practical to determine the fair value of FHLB and FRB stock due to restrictions placed on its transferability. 

Loans and Leases

Fair values of loans and leases as of June 30, 2019, excluding loans held for sale, are estimated utilizing an exit pricing methodology as follows:  For variable rate loans that reprice frequently and with no significant change in credit risk, fair values are based on carrying values resulting in a Level 3 classification.  Fair values for other loans are estimated using discounted cash flow analyses, using interest rates currently being offered for loans with similar terms to borrowers of similar credit quality resulting in a Level 3 classification.  The discount rate for the discounted cash flow analyses includes a credit quality adjustment.  Impaired loans are valued at the lower of cost or fair value as described previously.

Deposits

The fair values disclosed for demand deposits (e.g., interest and noninterest bearing checking, passbook savings, and money market accounts) are, by definition, equal to the amount payable on demand at the reporting date (i.e., their carrying amount) resulting in a Level 1 classification. Fair values for fixed rate certificates of deposit are estimated using a discounted cash flows calculation that applies interest rates currently being offered on certificates to a schedule of aggregated expected monthly maturities on time deposits resulting in a Level 2 classification.

Other Borrowings

The fair values of the Company’s long-term FHLB and credit facility advances are estimated using discounted cash flow analyses based on the current borrowing rates for similar types of borrowing arrangements resulting in a Level 2 classification.

The fair values of the Company’s subordinated debentures are estimated using discounted cash flow analyses based on the current borrowing rates for similar types of borrowing arrangements resulting in a Level 2 classification.

Accrued Interest Receivable/Payable

The carrying amounts of accrued interest approximate fair value resulting in a Level 1, 2 or 3 classification,consistent with the asset or liability with which they are associated.

Advances by Borrowers for Taxes and Insurance

The carrying amount of advances by borrowers for taxes and insurance approximates fair value resulting in a Level 3 classification,consistent with the liability with which they are associated.

Off-Balance-Sheet Instruments

The fair value of off-balance-sheet items is not considered material.

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Subordinated Debentures

6 Months Ended

Jun. 30, 2019

Subordinated Debentures [Abstract]

Subordinated Debentures

NOTE 7 – SUBORDINATED DEBENTURES

2003 Subordinated debentures:

In December 2003, Central Federal Capital Trust I, a trust formed by the Holding Company, closed a pooled private offering of 5,000 trust preferred securities with a liquidation amount of $1 per security.  The Holding Company issued $5,155 of subordinated debentures to the trust in exchange for ownership of all of the common stock of the trust and the proceeds of the preferred securities sold by the trust.  The Holding Company is not considered the primary beneficiary of this trust (which is classified as a variable interest entity); therefore, the trust is not consolidated in the Company’s financial statements, but rather the subordinated debentures are shown as a liability.  The Holding Company’s investment in the common stock of the trust was $155 and is included in other assets.

The Holding Company may redeem the subordinated debentures, in whole or in part, in a principal amount with integral multiples of $1, at 100% of the principal amount, plus accrued and unpaid interest.  The subordinated debentures mature on December 30, 2033.  The subordinated debentures are also redeemable in whole or in part from time to time, upon the occurrence of specific events defined within the trust indenture.  There are no required principal payments on the subordinated debentures over the next five years.  The Holding Company has the option to defer interest payments on the subordinated debentures for a period not to exceed five consecutive years. 

The subordinated debentures have a variable rate of interest, reset quarterly, equal to the three-month London Interbank Offered Rate (LIBOR) plus 2.85%, which was 5.44% at June 30, 2019 and 5.65% at December 31, 2018. 

2018 Fixed-to-floating rate subordinated notes:

In December 2018, the Holding Company entered into subordinated note purchase agreements with certain qualified institutional buyers and completed a private placement of $10 million of fixed-to-floating rate subordinated notes with a maturity date of December 30, 2028 pursuant to Section 4(a)(2) of the Securities Act of 1933, as amended, and Rule 506(b) of Regulation D promulgated thereunder.

The subordinated notes initially bear interest at 7.00%, from and including December 20, 2018, to but excluding December 30, 2023, payable semi-annually in arrears on June 30 and December 30 of each year. From and including December 30, 2023, to but excluding December 30, 2028 or the earlier redemption of the notes, the interest rate will reset quarterly to an interest rate equal to the then current three-month LIBOR (but not less than zero) plus 4.14%, payable quarterly in arrears on March 30, June 30, September 30, and December 30 of each year.  The Holding Company may, at its option, redeem the notes beginning on December 30, 2023 and on any scheduled interest payment date thereafter.  After payment of approximately $388 of debt issuance costs, the Holding Company’s net proceeds were approximately $9,612.  At June 30, 2019, the balance of the subordinated notes, net of unamortized debt issuance costs, was $9,631.

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FHLB Advances And Other Debt

6 Months Ended

Jun. 30, 2019

FHLB Advances And Other Debt [Abstract]

FHLB Advances And Other Debt

NOTE 8 – FHLB ADVANCES AND OTHER DEBT

FHLB advances and other debt were as follows:

	Weighted
	Average Rate	June 30, 2019		December 31, 2018
FHLB fixed rate advances :
Maturities:
2019	1.62%	$	3,500	$	3,500
2020	1.98%		4,500		4,500
2021	2.32%		4,000		4,000
2022	2.05%		1,500		1,500
Total FHLB fixed rate advances			13,500		13,500
Variable rate other debt:
Maturities:
2020	6.25%		5,000		6,000
Total variable rate other debt			5,000		6,000
Total		$	18,500	$	19,500

Each FHLB advance is payable at its maturity date, with a prepayment penalty for fixed-rate advances. 

In February 2018, the Holding Company entered into a credit facility with a third-party bank pursuant to which the Holding Company could borrow up to an aggregate principal amount of $6,000.  The Holding Company increased the credit facility by $2,000 in July 2018, and by an additional $2,000 in December 2018, which increased the total borrowing limit to $10,000.  In December 2018, the credit facility was also modified to a revolving line-of-credit.  The purpose of the credit facility is to provide an additional source of liquidity for the Holding Company and to provide funds for the Holding Company to downstream as additional capital to CFBank to support growth. Loans under the credit facility bear interest at a rate equal to the Prime Rate plus 0.75%.  The credit facility is secured by a pledge of the Holding Company’s stock of CFBank.  The credit facility will expire in February 2020 unless extended or replaced.  As of June 30, 2019, the Company had an outstanding balance of $5,000 on the credit facility.

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Stock-Based Compensation

6 Months Ended

Jun. 30, 2019

Stock-Based Compensation [Abstract]

Stock-Based Compensation

NOTE 9 – STOCK-BASED COMPENSATION

The Company has three stock-based compensation plans (collectively, the “Plans”), as described below, under which awards are outstanding or may be granted in the future.  Total compensation cost that has been charged against income for those Plans totaled $138 and $254, respectively, for the three and six months ended June 30, 2019 and $96 and $192, respectively, for the three and six months ended June 30, 2018.  The total income tax effect was $29 and $53, respectively, for the three and six months ended June 30, 2019 and $20and $40, respectively, for the three and six months June 30, 2018.  All exercise prices and share amounts have been restated for the 1-for-5.5 reverse stock split on August 20, 2018 (see Note 1).

The Plans are all stockholder-approved and authorize stock option grants and restricted stock awards to be made to directors, officers and employees.  The 2003 Equity Compensation Plan (the “2003 Plan”), as amended and restated, provided an aggregate of 18,181 shares for stock option grants and restricted stock awards, of which up to 5,454 shares could be awarded in the form of restricted stock awards.  The 2009 Equity Compensation Plan (the “2009 Plan”), which was approved by stockholders on May 21, 2009, replaced the 2003 Plan and provided for 36,363 shares, plus any remaining shares available to grant or that are later forfeited or expire under the 2003 Plan, to be made available to be issued as stock option grants, stock appreciation rights or restricted stock awards.  On May 16, 2013, the Company’s stockholders approved the First Amendment to the 2009 Plan to increase the number of shares of common stock reserved for stock option grants and restricted stock awards thereunder to 272,727.  The 2019 Equity Incentive Plan (the “2019 Plan”), which was approved by stockholders on May 29, 2019, authorizes up to300,000shares (plus any shares that are subject to grants under the Central Federal Corporation 2009 Equity Compensation Plan and that are later forfeited or expire), to be awarded as stock option grants, stock appreciation rights, restricted stock awards or restricted stock units.

Stock Options:

The Plans permit the grant of stock options to directors, officers and employees of the Holding Company and CFBank.  Option awards are granted with an exercise price equal to the market price of the Company’s common stock on the date of grant, generally have vesting periods ranging from one to three years, and are exercisable for ten years from the date of grant.  Unvested stock options immediately vest upon a change of control. 

The fair value of each option award is estimated on the date of grant using a closed form option valuation (Black-Scholes) model that uses the assumptions noted in the table below.  Expected volatilities are based on historical volatilities of the Company’s common stock.  The Company uses historical data to estimate option exercise and post-vesting termination behavior.  Employee and management options are tracked separately.  The expected term of options granted is based on historical data and represents the period of time that options granted are expected to be outstanding, which takes into account that the options are not transferable.  The risk-free interest rate for the expected term of the option is based on the U.S. Treasury yield curve in effect at the time of the grant.

There were nooptionsgranted or exercised during the three and six months ended June 30, 2019 and June 30, 2018. 

A summary of stock option activity in the Plans for the six months ended June 30, 2019 follows (unaudited):

	Shares	Weighted Average Exercise Price		Weighted Average Remaining Contractual Term (Years)	Intrinsic Value
Outstanding at beginning of year	96,379	$	7.65
Expired	-		-
Cancelled or forfeited	(925)		8.03
Outstanding at end of period	95,454	$	7.64	3.9	$	422,330
Exercisable at end of period	95,454		7.64	3.9	$	422,330

During the six months ended June 30, 2019, there were 925 stock options canceled, forfeited or expired.  There were 73stock options canceled, forfeited or expired during the six months ended June 30, 2018.  As of June 30, 2019, all stock options granted under the Plans were vested.

Restricted Stock Awards:

The Plans also permit the grant of restricted stock awards to directors, officers and employees. Compensation is recognized over the vesting period of the awards based on the fair value of the stock at grant date.  The fair value of the stock is determined using the closing share price on the date of grant and shares generally have vesting periods of one to three years.  There were 33,788 shares of restricted stock granted under the 2009 Plan during the six months ended June 30, 2019.  There were 727 shares of restricted stock granted under the 2009 Plan during the six months ended June 30, 2018.

A summary of changes in the Company’s nonvested restricted stock awards as of June 30, 2019 follows (unaudited):

Nonvested Shares	Shares	Weighted Average Grant-Date Fair Value
Nonvested at January 1, 2019	69,324	$	11.91
Granted	33,788		12.81
Vested	-		-
Forfeited	(1,493)		12.12
Nonvested at June 30, 2019	101,619	$	12.21

As of June 30, 2019 and 2018, the unrecognized compensation cost related to nonvested restricted stock awards granted under the Plans was $972 and $642, respectively. 

There were 1,493 shares of restricted stock forfeited during the six month period ended June 30, 2019.  There were 7,999 shares of restricted stock forfeited during the six months ended June 30, 2018.  There were no shares of restricted stock that vested during the six months ended June 30, 2019 and 2018.

The 2009 Plan terminated in accordance with its terms on March 19, 2019 and, as a result, no further awards may be granted under the 2009 Plan.  There were 300,000 shares remaining available for grant under the 2019 Plan at June 30, 2019.

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Regulatory Capital Matters

6 Months Ended

Jun. 30, 2019

Regulatory Capital Matters [Abstract]

Regulatory Capital Matters

NOTE 10 – REGULATORY CAPITAL MATTERS

CFBank is subject to regulatory capital requirements administered by federal banking agencies.  Prompt corrective action regulations involve quantitative measures of assets, liabilities, and certain off balance-sheet items calculated under regulatory accounting practices.  Capital amounts and classifications are also subject to qualitative judgments by regulators. Failure to meet capital requirements can initiate regulatory action. 

Prompt corrective action regulations provide five classifications for banking organizations:  well capitalized, adequately capitalized, undercapitalized, significantly undercapitalized, and critically undercapitalized, although these terms are not used to represent overall financial condition.  If a banking organization is classified as adequately capitalized, regulatory approval is required to accept brokered deposits.  If a banking organization is classified as undercapitalized, capital distributions are limited, as is asset growth and expansion, and capital restoration plans are required.

In July 2013, the Holding Company’s primary federal regulator, the FRB, published final rules (the “Basel III Capital Rules”) establishing a new comprehensive capital framework for U.S. banking organizations.  The rules implement the Basel Committee's December 2010 framework known as “Basel III” for strengthening international capital standards as well as certain provisions of the Dodd-Frank Act.  The Basel III Capital Rules provide higher capital requirements and more restrictive leverage and liquidity ratios than those previously in place.  In addition, in order to avoid limitations on capital distributions, such as dividend payments and certain bonus payments to executive officers, the Basel III Capital Rules require insured financial institutions to hold a capital conservation buffer of common equity tier 1 capital above the minimum risk-based capital requirements.  The capital conservation buffer was phased in over time, became fully effective on January 1, 2019, and consists of an additional amount of common equity equal to 2.5% of risk-weighted assets.  The Basel III Capital Rules revise the regulatory agencies' prompt corrective action framework by incorporating the new regulatory capital minimums and updating the definition of common equity.  The Basel III Capital Rules became effective for the Company on January 1, 2015, and were fully phased in effective January 1, 2019.  Quantitative measures established by the Basel III Capital Rules to ensure capital adequacy require the maintenance of minimum amounts and ratios of Common Equity Tier 1 capital, Tier 1 capital and Total capital, as defined in the regulations, to risk-weighted assets, and of Tier 1 capital to adjusted quarterly average assets (“Leverage Ratio”).  CFBank’s implementation of the new rules on January 1, 2015 did not have a material impact on our capital needs or classification.

As fully phased in on January 1, 2019, the Basel III Capital Rules require CFBank to maintain: 1) a minimum ratio of Common Equity Tier 1 capital to risk-weighted assets of 4.5%, plus a 2.5% “capital conservation buffer” (resulting in a minimum ratio of Common Equity Tier 1 capital to risk-weighted assets of 7.0% upon full implementation); 2) a minimum ratio of Tier 1 capital to risk-weighted assets of 6.0%, plus the capital conservation buffer (resulting in a minimum Tier 1 capital ratio of 8.5% upon full implementation); 3) a minimum ratio of Total capital to risk-weighted assets of 8.0%, plus the capital conservation buffer (resulting in a minimum Total capital ratio of 10.5% upon full implementation); and 4) a minimum Leverage Ratio of 4.0%.

The implementation of the capital conservation buffer began on January 1, 2016 at the 0.625% level and was phased in over a four-year period increasing by increments of that amount on each subsequent January 1 until it reached 2.5% on January 1, 2019.  The capital conservation buffer is designed to absorb losses during periods of economic stress.  Failure to maintain the minimum Common Equity Tier 1 capital ratio plus the capital conservation buffer will result in potential restrictions on a banking institution’s ability to pay dividends, repurchase stock and/or pay discretionary compensation to its employees.

The following tables present actual and required capital ratios as of June 30, 2019 and December 31, 2018 for CFBank under the Basel III Capital Rules.  Capital levels required to be considered well capitalized are based upon prompt corrective action regulations, as amended to reflect the changes under the Basel III Capital Rules.

	Actual			Minimum Capital Required-Basel III Fully Phased-In			To Be Well Capitalized Under Applicable Regulatory Capital Standards
	Amount		Ratio	Amount		Ratio	Amount		Ratio
June 30, 2019
Total Capital to risk weighted assets	$	74,274	11.95%	$	65,270	10.50%	$	62,162	10.00%
Tier 1 (Core) Capital to risk weighted assets		67,103	10.79%		52,838	8.50%		49,730	8.00%
Common equity tier 1 capital to risk-weighted assets		67,103	10.79%		43,514	7.00%		40,405	6.50%
Tier 1 (Core) Capital to adjusted total assets (Leverage ratio)		67,103	9.44%		28,438	4.00%		35,548	5.00%

	Actual			Minimum Capital Required-Basel III Phase-In Schedule			Minimum Capital Required-Basel III Fully Phased-In			To Be Well Capitalized Under Applicable Regulatory Capital Standards
	Amount		Ratio	Amount		Ratio	Amount		Ratio	Amount		Ratio
December 31, 2018
Total Capital to risk weighted assets	$	69,066	12.37%	$	55,164	9.88%	$	58,626	10.50%	$	55,834	10.00%
Tier 1 (Core) Capital to risk weighted assets		62,085	11.12%		43,998	7.88%		47,459	8.50%		44,668	8.00%
Common equity tier 1 capital to risk-weighted assets		62,085	11.12%		35,622	6.38%		39,084	7.00%		36,292	6.50%
Tier 1 (Core) Capital to adjusted total assets (Leverage ratio)		62,085	10.13%		24,526	4.00%		24,526	4.00%		30,658	5.00%

CFBank converted from a mutual to a stock institution in 1998, and a “liquidation account” was established in the amount of $14,300, which was the net worth reported in the conversion prospectus.  The liquidation account represents a calculated amount for the purposes described below, and it does not represent actual funds included in the consolidated financial statements of the Company.  Eligible depositors who have maintained their accounts, less annual reductions to the extent they have reduced their deposits, would be entitled to a priority distribution from this account if CFBank liquidated and its assets exceeded its liabilities.  Dividends may not reduce CFBank’s stockholder’s equity below the required liquidation account balance.

Dividend Restrictions:

Banking regulations require us to maintain certain capital levels and may limit the dividends paid by CFBank to the Holding Company or by the Holding Company to stockholders.  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.  The Holding Company also is subject to various legal and regulatory policies and guidelines 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 Holding 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. 

Additionally, CFBank does not intend to make distributions to the Holding Company that would result in a recapture of any portion of its thrift bad debt reserve as discussed in Note 12-Income Taxes.

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Derivative Instruments

6 Months Ended

Jun. 30, 2019

Derivative Instruments [Abstract]

Derivative Instruments

NOTE 11 – DERIVATIVE INSTRUMENTS 

Interest-rate swaps:

CFBank utilizes interest-rate swaps as part of its asset/liability management strategy to help manage its interest rate risk position, and does not use derivatives for trading purposes.  The notional amount of the interest-rate swaps does not represent amounts exchanged by the parties.  The amount exchanged is determined by reference to the notional amount and the other terms of the individual interest-rate swap agreements.  CFBank was party to interest-rate swaps with a combined notional amount of $665 at June 30, 2019 and $1,359 at December 31, 2018.

The objective of the interest-rate swaps is to protect the related fixed-rate commercial real estate loans from changes in fair value due to changes in interest rates.  CFBank has a program whereby it lends to its borrowers at a fixed rate with the loan agreement containing a two-way yield maintenance provision, which will be invoked in the event of prepayment of the loan, and is expected to exactly offset the fair value of unwinding the swap.  The yield maintenance provision represents an embedded derivative which is bifurcated from the host loan contract and, as such, the swaps and embedded derivatives are not designated as hedges.  Accordingly, both instruments are carried at fair value and changes in fair value are reported in current period earnings.  CFBank currently does not have any derivatives designated as hedges. 

The counterparty to CFBank’s interest-rate swaps is exposed to credit risk whenever the interest-rate swaps are in a liability position.  At June 30, 2019, CFBank had $93 in securities and cash pledged as collateral for these derivatives.  Should the liability increase, beyond the collateral value, CFBank will be required to pledge additional collateral. 

Additionally, CFBank’s interest-rate swap instruments contain provisions that require CFBank to remain well capitalized under regulatory capital standards.  The interest-rate swaps may be called by the counterparty if CFBank fails to maintain well-capitalized status under regulatory capital standards.  As of June 30, 2019, CFBank was well-capitalized under regulatory capital standards.

Summary information about the derivative instruments is as follows:

	June 30, 2019		December 31, 2018
	(unaudited)
Notional amount	$	665	$	1,359
Weighted average pay rate on interest-rate swaps		2.74%		3.12%
Weighted average receive rate on interest-rate swaps		2.38%		2.49%
Weighted average maturity (years)		1.3		2.0
Fair value of interest-rate swaps	$	(8)	$	(17)
Fair value of yield maintenance provisions		8		17

The fair value of the yield maintenance provisions and interest-rate swaps is recorded in other assets and other liabilities, respectively, in the consolidated balance sheet.  Changes in the fair value of the yield maintenance provisions and interest-rate swaps are reported currently in earnings, as other noninterest income in the consolidated statements of income.  There were no net gains or losses recognized in earnings related to yield maintenance provisions and interest-rate swaps for the six months ended June 30, 2019 or 2018.

Mortgage banking derivatives:

Commitments to fund certain mortgage loans (interest rate locks) to be sold into the secondary market are considered derivatives.  These mortgage banking derivatives are not designated in hedge relationships.  The Company had approximately $242,571 and $55,220 of interest rate lock commitments related to residential mortgage loans at June 30, 2019 and December 31, 2018, respectively.  The fair value of these mortgage banking derivatives was reflected by a derivative asset of $2,480 and $721 at June 30, 2019 and December 31, 2018, respectively, which was included in other assets in the consolidated balance sheet. Fair values were estimated based on anticipated gains on the sale of the underlying loans. Changes in the fair values of these mortgage banking derivatives are included in net gains on sales of loans.

Mortgage banking activities include two types of commitments: rate lock commitments and forward loan commitments. Rate lock commitments are loans in our pipeline that have an interest rate locked with the customer. The commitments are generally for periods of 30 to 60 days and are at market rates. In order to mitigate the effect of the interest rate risk inherent in providing rate lock commitments, we economically hedge our commitments by entering into either a forward loan sales contract under best efforts or a trade of “to be announced (TBA)” mortgage-backed securities (“notional securities”) for mandatory delivery. The changes in fair value related to movements in market rates of the rate lock commitments and the forward loan sales contracts and notional securities generally move in opposite directions, and the net impact of changes in these valuations on net income during the loan commitment period is generally inconsequential. The Company has not formally designated these derivatives as a qualifying hedge relationship and, accordingly, accounts for such forward contracts as freestanding derivatives with changes in fair value recorded to earnings each period.

The following table reflects the amount and market value of mortgage banking derivatives included in the consolidated balance sheet as of the period end (in thousands):

	June 30, 2019 (unaudited)				December 31, 2018
	Notional Amount		Fair Value		Notional Amount		Fair Value
Assets:
Interest rate commitments	$	242,571	$	2,480	$	55,220	$	721
TBA mortgage-back securities		144,250		(645)		33,250		(342)

The following table represents the revenue recognized on mortgage activities for the three and six months ended June 30, 2019 and 2018 (unaudited):

	Three months ended				Six months ended
	June 30,				June 30,
	2019		2018		2019		2018
Gain on loans sold	$	1,884	$	276	$	3,116	$	290
Gain (loss) from change in fair value of loans held-for-sale		516		216		776		274
Gain (loss) from change in fair value of derivatives		(49)		17		(90)		253
	$	2,351	$	509	$	3,802	$	817

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Income Taxes

6 Months Ended

Jun. 30, 2019

Income Taxes [Abstract]

Income Taxes

NOTE 12 – INCOME TAXES

At June 30, 2019, the Company had a deferred tax asset recorded in the amount of $1,600.  At December 31, 2018, the Company had a deferred tax asset recorded of approximately $1,600.  At June 30, 2019 and December 31, 2018, the Company had no unrecognized tax benefits recorded.  The Company is subject to U.S. federal income tax and is no longer subject to federal examination for years prior to 2015.

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 June 30, 2019 that no valuation allowance was required against the net deferred tax asset.

In 2012 the Company completed a recapitalization program pursuant to which the Holding Company sold $22,500 in common stock, which improved the capital levels of CFBank and provided working capital for the Holding Company. The result of the change in stock ownership associated with the stock offering, however, was that the Company incurred an ownership change within the guidelines of Section 382 of the Internal Revenue Code of 1986.  At June 30, 2019, the Company had net operating loss carryforwards of $22,742, which expire at various dates from 2024 to 2033. As a result of the ownership change, the Company's ability to utilize carryforwards that arose before the 2012 stock offering closed is limited to $163 per year.  Due to this limitation, management determined it is more likely than not that $20,520 of net operating loss carryforwards will expire unutilized.  As required by accounting standards, the Company reduced the carrying value of deferred tax assets, and the corresponding valuation allowance, by the $6,977 tax effect of this lost realizability.

Federal income tax laws provided additional deductions, totaling $2,250, 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 at year-end 2018.  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.

The Company records income tax expense based on the federal statutory rate adjusted for the effect of low income housing credits, bank owned life insurance and other miscellaneous items.  The effective tax rate for the three and six months ended June 30, 2019 was approximately 20.4% and 20.2%, respectively, and 19.8% and 19.5%, respectively, for the three and six months ended June 30, 2018, which management believes is a reasonable estimate for the effective tax rate.

The following table summarizes the major components creating differences between income taxes at the federal statutory tax rate and the effective tax rate recorded in the consolidated statements of income for the three and six months ended June 30, 2019 and 2018:

	For the three months ended June 30,		For the six months ended June 30,
	2019	2018	2019	2018
	(unaudited)		(unaudited)
Statutory tax rate	21.0%	21.0%	21.0%	21.0%
Increase (decrease) resulting from:
Tax exempt income on bank owned life insurance	(0.3%)	(0.5%)	(0.3%)	(0.6)%
Low income housing credits	(0.5%)	(1.1%)	(0.6%)	(1.0%)
Other, net	0.2%	0.4%	0.1%	0.1%
Effective tax rate	20.4%	19.8%	20.2%	19.5%

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Accumulated Other Comprehensive Income

6 Months Ended

Jun. 30, 2019

Accumulated Other Comprehensive Income [Abstract]

Accumulated Other Comprehensive Income

NOTE 13- ACCUMULATED OTHER COMPREHENSIVE INCOME

The following table summarizes the changes within each classification of accumulated other comprehensive income, net of tax, for the three and six months ended June 30, 2019 and 2018 and summarizes the significant amounts reclassified out of each component of accumulated other comprehensive loss:

Changes in Accumulated Other Comprehensive Income by Component (1)
	Three months ended				Six months ended
	June 30,				June 30,
	2019		2018		2019		2018
	(unaudited)				(unaudited)
	Unrealized Gains and Losses on Available-for-Sale Securities				Unrealized Gains and Losses on Available-for-Sale Securities
Accumulated other comprehensive income (loss), beginning of period	$	(38)	$	(101)	$	(73)	$	(47)
Other comprehensive income (loss) before reclassifications (2)		52		(15)		87		(69)
Net current-period other comprehensive income (loss)		52		(15)		87		(69)
Accumulated other comprehensive income (loss), end of period	$	14	$	(116)	$	14	$	(116)

⁽¹⁾ All amounts are net of tax.  Amounts in parentheses indicate a reduction of other comprehensive income.

⁽²⁾ There were no amounts reclassified out of other comprehensive income for the three and six months ended June 30, 2019 and 2018.

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Preferred Stock

6 Months Ended

Jun. 30, 2019

Preferred Stock [Abstract]

Preferred Stock

NOTE 14 - PREFERRED STOCK

Series B Preferred Stock:

Commencing in April 2014, the Company conducted a private placement of up to 480,000 shares of its 6.25% Non-Cumulative Convertible Perpetual Preferred Stock, Series B (“Series B Preferred Stock”) for an offering price of $25.00 per share (the “Private Placement”).  Pursuant to the Private Placement, the Company sold an aggregate of 480,000 shares of Series B Preferred Stock on May 12, 2014 and July 15, 2014, for an aggregate offering price of $12,000.  After payment of approximately $482 in placement fees and approximately $149 of other offering expenses, the Company’s net proceeds from its sale of the 480,000 shares of Series B Preferred Stock in the Private Placement were approximately $11,369. 

For each share of Series B Preferred Stock sold in the Private Placement, the Company also issued, at no additional charge, a Warrant to purchase common stock of the Company.  See Note 15-Common Stock Warrants for additional information.  

Conversion of Series B Preferred Stock to Common Stock:

On September 29, 2017, the Company announced the conversion of its Series B Preferred Stock into shares of Common Stock of the Company.  The conversion was effective October 6, 2017, and resulted in the conversion of all 480,000 of the Company’s issued and outstanding shares of Series B Preferred Stock into approximately 6,857,143 shares of Common Stock (prior to the 1-for-5.5 reverse stock split effective August 20, 2018), or approximately 1,246,753 shares of Common Stock on a post-reverse-split basis.   

The conversion of the Series B Preferred Stock resulted in the elimination of the non-cumulative preferred dividend payments on the Series B Preferred Stock in the aggregate amount of approximately $187,500 quarterly ($750,000 annually) beginning with the 4th quarter of 2017.

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Common Stock Warrants

6 Months Ended

Jun. 30, 2019

Common Stock Warrants [Abstract]

Common Stock Warrants

NOTE 15 - COMMON STOCK WARRANTS

Series B Preferred Stock – Warrants:

For each share of Series B Preferred Stock issued by the Company in the Private Placement, the Company also issued, at no additional charge, a Warrant to purchase (i) 2.00 shares of common stock of the Company (or 0.364 shares on a post-reverse-split basis) if the purchaser purchased less than $700  (28,000 shares) of Series B Preferred Stock in the Private Placement, or (ii) 3.25 shares of common stock (or 0.591 shares on a post-reverse-split basis) if the purchaser purchased $700  (28,000 shares) or more of Series B Preferred Stock in the Private Placement.  Warrants to purchase an aggregate of 1,152,125 shares of common stock (or 209,477 shares on a post-reverse-split basis) were issued by the Company to the purchasers of the 480,000 shares of Series B Preferred Stock sold in the Private Placement.  The Warrants are exercisable for a period of approximately five (5) years expiring on July 15, 2019, at an exercise price of $10.18 (on a post-reverse-split basis) per share of common stock.  As of June 30, 2019, warrants to purchase an aggregate of 31,294 shares of common stock (on a post-reverse-split basis) were outstanding.

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Summary of Significant Accounting Policies (Policy)

6 Months Ended

Jun. 30, 2019

Summary Of Significant Accounting Policies [Abstract]

Basis of Presentation

Basis of Presentation: 

The consolidated financial statements include Central Federal Corporation (the “Holding Company”) and its wholly-owned subsidiary, CFBank, National Association (“CFBank”).  The Holding Company and CFBank are sometimes collectively referred to herein as the “Company”.  Intercompany transactions and balances are eliminated in consolidation.  The accompanying unaudited interim consolidated financial statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”) and in compliance with U.S. generally accepted accounting principles (GAAP).  Because this report is based on an interim period, certain information and footnote disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted.

In the opinion of the management of the Company, the accompanying unaudited interim consolidated financial statements include all adjustments necessary for a fair presentation of the Company’s financial condition and the results of operations for the periods presented.  These adjustments are of a normal recurring nature, unless otherwise disclosed in this Form 10-Q.  The financial performance reported for the Company for the three and six months ended June 30, 2019 is not necessarily indicative of the results that may be expected for the full year.  This information should be read in conjunction with the Company’s latest Annual Report to Stockholders and Annual Report on Form 10-K on file with the SEC.  Reference is made to the accounting policies of the Company described in Note 1 to the Audited Consolidated Financial Statements contained in the Company’s 2018 Annual Report to Stockholders that was filed as Exhibit 13.1 to the Company’s Form 10-K for the year ended December 31, 2018 (referred to herein as the “2018 Audited Financial Statements”).  The Company has consistently followed those policies in preparing this Form 10-Q.

Reverse Stock Split

Reverse Stock Split: On August 20, 2018, the Company effected a 1-for-5.5 reverse stock split, whereby each 5.5 shares of the Company’s common stock were reclassified into one share of common stock.  All share and per share amounts for all periods presented have been adjusted to reflect the reverse stock split as though it had occurred prior to the earliest period presented.

Loans And Leases

Loans and Leases:  Loans and leases that management has the intent and ability to hold for the foreseeable future or until maturity or payoff are reported at the principal balance outstanding, adjusted for purchase premiums and discounts, deferred loan fees and costs and an allowance for loan and lease losses (ALLL).  Interest income is accrued on the unpaid principal balance.  Loan origination fees, net of certain direct origination costs, are deferred and recognized in interest income using the level yield method without anticipating prepayments. 

The accrual of interest income on all classes of loans, except other consumer loans, is discontinued and the loan is placed on nonaccrual status at the time the loan is 90 days delinquent unless the loan is well-secured and in process of collection.  Other consumer loans are typically charged off no later than 90 days past due.  Past due status is based on the contractual terms of the loan for all classes of loans.  In all cases, loans are placed on nonaccrual or charged-off at an earlier date if collection of principal or interest is considered doubtful.  Nonaccrual loans and loans past due 90 days still on accrual include both smaller balance homogeneous loans that are collectively evaluated for impairment and individually classified impaired loans.  Commercial, multi-family residential real estate loans and commercial real estate loans placed on nonaccrual status are individually classified as impaired loans.

All interest accrued but not received for each loan placed on nonaccrual is reversed against interest income in the period in which it is placed in a nonaccrual status.  Interest received on such loans is accounted for on the cash-basis or cost recovery method, until qualifying for return to accrual status.  Loans are considered for return to accrual status provided all the principal and interest amounts that are contractually due are brought current, there is a current and well documented credit analysis,  there is reasonable assurance of repayment of principal and interest, and the customer has demonstrated sustained, amortizing payment performance of at least six months.

Allowance For Loan And Lease Losses (ALLL)

Allowance for Loan and Lease Losses (ALLL):  The ALLL is a valuation allowance for probable incurred credit losses.  Loan losses are charged against the allowance when management believes the uncollectibility of a loan balance is confirmed.  Subsequent recoveries, if any, are credited to the allowance.  Management estimates the allowance balance required using past loan loss experience, the nature and volume of the portfolio, information about specific borrower situations and estimated collateral values, economic conditions, and other factors.  Allocations of the allowance may be made for specific loans, but the entire allowance is available for any loan that, in management’s judgment, should be charged off.

The allowance consists of specific and general components.  The specific component relates to loans that are individually classified as impaired. A loan is impaired when, based on current information and events, it is probable that CFBank will be unable to collect all amounts due according to the contractual terms of the loan agreement.  Loans within any loan class for which the terms have been modified resulting in a concession, and for which the borrower is experiencing financial difficulties, are considered troubled debt restructurings (TDRs) and classified as impaired.  

Factors considered by management in determining impairment for all loan classes include payment status, collateral value, and the probability of collecting scheduled principal and interest payments when due. Loans that experience insignificant payment delays and payment shortfalls generally are not classified as impaired.  Management determines the significance of payment delays and payment shortfalls on a case-by-case basis, taking into consideration all of the circumstances surrounding the loan and the borrower, including the length of the delay, the reasons for the delay, the borrower’s prior payment record and the amount of the shortfall in relation to the principal and interest owed.

All loans within the commercial, multi-family residential and commercial real estate segments, regardless of size, and loans of all other classes with balances over $250 are individually evaluated for impairment when they are 90 days past due, or earlier than 90 days past due if information regarding the payment capacity of the borrower indicates that payment in full according to the loan terms is doubtful.  If a loan is impaired, a portion of the allowance is allocated so that the loan is reported, net, at the present value of estimated future cash flows using the loan’s existing rate, or at the fair value of collateral, less costs to sell, if repayment is expected solely from the collateral.  Large groups of smaller balance homogeneous loans, such as consumer and single-family residential real estate loans, are collectively evaluated for impairment, and accordingly, they are not separately identified for impairment disclosures.

TDRs of all classes of loans are separately identified for impairment disclosures and are measured at the present value of estimated future cash flows using each loan’s effective rate at inception.  If a TDR is considered to be a collateral dependent loan, the loan is reported, net, at the fair value of the collateral. If the payment of the loan is dependent on the sale of the collateral, then costs to liquidate the collateral are included when determining the impairment.  For TDRs that subsequently default, the amount of reserve is determined in accordance with the accounting policy for the ALLL.

Interest income on all classes of impaired loans that are on nonaccrual status is recognized in accordance with the accounting policy for nonaccrual loans.  Cash receipts on all classes of impaired loans that are on nonaccrual status are generally applied to the principal balance outstanding.  Interest income on all classes of impaired loans that are not on nonaccrual status is recognized on the accrual method. TDRs may be classified as accruing if the borrower has been current for a period of at least six months with respect to loan payments and management expects that the borrower will be able to continue to make payments in accordance with the terms of the restructured note.

The general reserve component covers non impaired loans of all classes and is based on historical loss experience adjusted for current factors.  The historical loss experience is determined by loan class and is based on the actual loss history experienced by the Company over a three-year period.  The general component is calculated based on CFBank’s loan balances and actual historical three-year historical loss rates.  For loans with little or no actual loss experience, industry estimates are used based on loan segment. This loss experience is supplemented with other economic and judgmental factors based on the risks present for each loan class.  These economic and judgmental factors include consideration of the following:  levels of and trends in delinquencies and impaired loans; levels of and trends in charge-offs and recoveries; trends in volume and terms of loans; effects of any changes in risk selection and underwriting standards; other changes in lending policies, procedures, and practices; experience, ability, and depth of lending management and other relevant staff; national and local economic trends and conditions; industry conditions; and effects of changes in credit concentrations.

CFBank’s charge-off policy for commercial loans, single-family residential real estate loans, multi-family residential real estate loans, commercial real estate loans, construction loans and home equity lines of credit requires management to record a specific reserve or charge-off as soon as it is apparent that the borrower is troubled and there is, or likely will be, a collateral shortfall related to the estimated value of the collateral securing the loan.  Other consumer loans are typically charged off no later than 90 days past due.

Joint Ventures

Joint Ventures:  The Holding Company has contributed funds into a series of joint ventures (equity stake) for the purpose of allocating excess liquidity into higher earning assets while diversifying its revenue sources.  The joint ventures are engaged in shorter term operating activities related to single family real estate developments.  Income is recognized based on a rate of return on the outstanding investment balance.  As units are sold, the Holding Company receives an additional incentive payment, which is recognized as income. Under ASU 2016-15, the Company has elected the nature of distribution approach to recognize returns from equity method investments.  Returns on investment are classified as cash flows from operating activities and returns of investment are classified as investing activities.

Low Income Housing Tax Credits (LIHTC)

Low Income Housing Tax Credits (LIHTC):  The Company has invested in low income housing tax credits through funds that assist corporations in investing in limited partnerships and limited liability companies that own, develop and operate low income residential rental properties for purposes of qualifying for the Housing Tax Credit. These investments are accounted for under the proportional amortization method which recognizes the amortization of the investment in proportion to the tax credit and other tax benefits received.

Historic Tax Credits

Historic Tax Credits:  In June 2019, the Company made an equity investment as a non-managing member in an entity that receives historic tax credits (HTC) pursuant to Section 47 of the Internal Revenue Code.  This investment may generate a return through the realization of federal income tax credits, as well as other tax benefits, such as tax deductions from net operating losses of the investments over a period of time.  The investment in HTC is accounted for under the equity method of accounting and is included in accrued interest receivable and other assets on the consolidated balance sheets.  The Company’s recorded investment in this entity was $894 at June 30, 2019.  The maximum exposure to loss related to these investments was $894 at June 30, 2019, representing the Company’s investment balance and its unfunded commitments to invest additional amounts. 

Earnings Per Common Share

Earnings Per Common Share: The two-class method is used in the calculation of basic and diluted earnings per share.  Under the two-class method, earnings available to common stockholders for the period are allocated between common stockholders and participating securities (unvested share-based payment awards) according to dividends declared (or accumulated) and participation rights in undistributed earnings.  The factors used in the earnings per share computation follow:

	Three months ended				Six months ended
	June 30,				June 30,
	2019		2018		2019		2018
	(unaudited)				(unaudited)
Basic
Net income	$	2,280	$	1,130	$	3,961	$	1,922
Accretion of discount and value of warrants exercised related to Series B preferred stock		157		(12)		183		(38)
Net income allocated to common stockholders	$	2,437	$	1,118	$	4,144	$	1,884
Weighted average common shares outstanding including unvested share-based payment awards(1)		4,412,726		4,248,573		4,384,395		4,245,757
Less: Unvested share-based payment awards		-		-		-		-
Average shares		4,412,726		4,248,573		4,384,395		4,245,757
Basic earnings per common share	$	0.55	$	0.26	$	0.95	$	0.44
Diluted
Net earnings allocated to common stockholders	$	2,437	$	1,118	$	4,144	$	1,884
Add back: Preferred Dividends on Series B preferred stock and accretion of discount		-		-		-		-
Net earnings allocated to common stockholders	$	2,437	$	1,118	$	4,144	$	1,884
Weighted average common shares outstanding for basic earnings per common share(1)		4,412,726		4,248,573		4,384,395		4,245,757
Add:  Dilutive effects of assumed exercises of stock options		35,077		41,226		37,075		40,263
Add:  Dilutive effects of assumed exercises of stock warrants		4,834		198,540		13,894		202,186
Average shares and dilutive potential common shares		4,452,637		4,488,339		4,435,364		4,488,206
Diluted earnings per common share	$	0.55	$	0.25	$	0.93	$	0.42

⁽¹⁾ Adjusted for 1-for-5.5 reverse stock split on August 20, 2018.

The following securities exercisable for common shares were anti-dilutive and not considered in computing diluted earnings per common share:

	Three months ended June 30,		Six months ended June 30,
	2019	2018	2019	2018
	(unaudited)		(unaudited)
Stock options	467	882	475	901

Dividend Restriction

Dividend Restriction:  Banking regulations require us to maintain certain capital levels and may limit the dividends paid by CFBank to the Holding Company or by the Holding Company to stockholders.  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.  The Holding Company also is subject to various legal and regulatory policies and guidelines 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 Holding 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.

Adoption Of New Accounting Standards

Adoption of New Accounting Standards:

The Financial Accounting Standards Board (FASB) has issued Accounting Standards Update (ASU) No. 2017-12, Derivatives and Hedging (Topic 815):  Targeted Improvements to Accounting for Hedging Activities.  The new standard is intended to improve and simplify accounting rules around hedge accounting.  The new standard refines and expands hedge accounting for both financial (e.g., interest rate) and commodity risks.  Its provisions create more transparency around how economic results are presented, both on the face of the financial statements and in the footnotes, for investors and analysts.  The new standard takes effect for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018.  For public companies, early adoption is permitted in any interim period or fiscal years before the effective date of the standard.  Adoption of ASU 2017-12 did not have a significant impact on the Company’s consolidated financial statements.

On February 25, 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842).  Under the new ASU, lessees recognize lease assets and liabilities on their balance sheets for all leases with terms of more than 12 months.  The new lessee accounting model retains two types of leases, and is consistent with the lessee accounting model under existing GAAP.  One type of lease (finance leases) is accounted for in substantially the same manner as capital leases were previously accounted for.  The other type of lease (operating leases) is accounted for (both in the income statement and statement of cash flows) in a manner consistent with today’s operating leases.  Lessor accounting under the new standard is fundamentally consistent with existing GAAP.  Lessees and lessors would be required to provide additional qualitative and quantitative disclosures to help financial statement users assess the amount, timing, and uncertainty of cash flows arising from leases.  These disclosures are intended to supplement the amounts recorded in the financial statements so that users can understand more about the nature of an organization’s leasing activities.  For public business entities, the final lease standard was effective for fiscal years beginning after December 15, 2018 including interim periods within those fiscal years.  Early application was permitted.   

The Company adopted the guidance on January 1, 2019 by electing the optional additional transition method permitted by ASU 2018-11 allowing for recognition of applicable leases as of January 1, 2019.  Additionally, the Company elected the following accounting policies:

· The practical expedient package that foregoes:

· reassessment of any expired or existing contracts for a lease

· reassessment of lease classifications for expired or existing leases

· reassessment of initial direct costs for existing leases

· The hindsight practical expedient to determine lease term and impairments of right-to-use assets.

· Other practical expedients regarding land easement, combining lease and non-lease components and the exclusion of short-term leases.

The Company recognized right-of-use assets and lease liabilities of approximately $2.4 million, representing its operating lease commitments, upon adoption.

In March 2019, the FASB issued ASU No. 2019-01, Leases (Topic 842): Codification Improvements. This ASU (1) states that for lessors that are not manufacturers or dealers, the fair value of the underlying asset is its cost, less any volume or trade discounts, as long as there isn’t a significant amount of time between acquisition of the asset and lease commencement; (2) clarifies that lessors in the scope of ASC 942 must classify principal payments received from sales-type and direct financing leases in investing activities in the statement of cash flows; and (3) clarifies the transition guidance related to certain interim disclosures provided in the year of adoption. To coincide with the adoption of ASU No. 2016-02, the Company elected to early adopt ASU 2019-01 on January 1, 2019. The adoption of this ASU did not have a material impact on the Company’s consolidated financial statements.

Future Accounting Matters

Future Accounting Matters:

In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments.  Once effective, ASU 2016-13 will significantly change current guidance for recognizing impairment of financial instruments.  Current guidance requires an "incurred loss" methodology for recognizing credit losses that delays recognition until it is probable a loss has been incurred.  ASU 2016-13 replaces the incurred loss impairment methodology with a new methodology that reflects expected credit losses over the lives of the loans and requires consideration of a broader range of information to inform credit loss estimates.  The ASU requires an organization to estimate all expected credit losses for financial assets measured at amortized cost, including loans and held-to-maturity debt securities, based on historical experience, current conditions, and reasonable and supportable forecasts.  Additional disclosures are required.  ASU 2016-13 also amends the accounting for credit losses on available-for-sale debt securities and purchased financial assets with credit deterioration.  Under the new guidance, entities will determine whether all or a portion of the unrealized loss on an available-for-sale debt security is a credit loss.  Any credit loss will be recognized as an allowance for credit losses on available-for-sale debt securities rather than as a direct reduction of the amortized cost basis of the investment, as is currently required.  As a result, entities will recognize improvements to estimated credit losses on available-for-sale debt securities immediately in earnings rather than as interest income over time, as currently required.  ASU 2016-13 eliminates the current accounting model for purchased credit impaired loans and debt securities.  Instead, purchased financial assets with credit deterioration will be recorded gross of estimated credit losses as of the date of acquisition and the estimated credit losses amounts will be added to the allowance for credit losses.  Thereafter, entities will account for additional impairment of such purchased assets using the models listed above.  ASU 2016-13 will take effect for U.S. Securities and Exchange Commission (SEC) filers for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019.  Early application will be permitted for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018.  While the Company generally expects that the implementation of ASU 2016-13 has the potential to increase its allowance for loan losses balance, the Company is continuing to evaluate the potential impact on the Company’s financial statements and disclosures.  Management has been running and evaluating various scenarios.  At this time, the estimated impact on the Company’s consolidated financial statements, including disclosures, cannot be reasonably determined.  

General Litigation

General Litigation

The Company is subject to claims and lawsuits that arise primarily in the ordinary course of business.  In the opinion of management, the disposition or ultimate resolution of such claims and lawsuits is not anticipated to have a material adverse effect on the consolidated financial position, results of operations and cash flows of the Company.

Reclassifications

Reclassifications

Reclassification of certain amounts in the 2018 consolidated financial statements have been made to conform to the 2019 presentation.

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Summary Of Significant Accounting Policies (Tables)

6 Months Ended

Jun. 30, 2019

Summary Of Significant Accounting Policies [Abstract]

Earnings Per Common Share

	Three months ended				Six months ended
	June 30,				June 30,
	2019		2018		2019		2018
	(unaudited)				(unaudited)
Basic
Net income	$	2,280	$	1,130	$	3,961	$	1,922
Accretion of discount and value of warrants exercised related to Series B preferred stock		157		(12)		183		(38)
Net income allocated to common stockholders	$	2,437	$	1,118	$	4,144	$	1,884
Weighted average common shares outstanding including unvested share-based payment awards(1)		4,412,726		4,248,573		4,384,395		4,245,757
Less: Unvested share-based payment awards		-		-		-		-
Average shares		4,412,726		4,248,573		4,384,395		4,245,757
Basic earnings per common share	$	0.55	$	0.26	$	0.95	$	0.44
Diluted
Net earnings allocated to common stockholders	$	2,437	$	1,118	$	4,144	$	1,884
Add back: Preferred Dividends on Series B preferred stock and accretion of discount		-		-		-		-
Net earnings allocated to common stockholders	$	2,437	$	1,118	$	4,144	$	1,884
Weighted average common shares outstanding for basic earnings per common share(1)		4,412,726		4,248,573		4,384,395		4,245,757
Add:  Dilutive effects of assumed exercises of stock options		35,077		41,226		37,075		40,263
Add:  Dilutive effects of assumed exercises of stock warrants		4,834		198,540		13,894		202,186
Average shares and dilutive potential common shares		4,452,637		4,488,339		4,435,364		4,488,206
Diluted earnings per common share	$	0.55	$	0.25	$	0.93	$	0.42

⁽¹⁾ Adjusted for 1-for-5.5 reverse stock split on August 20, 2018.

Anti-Dilutive Common Shares

	Three months ended June 30,		Six months ended June 30,
	2019	2018	2019	2018
	(unaudited)		(unaudited)
Stock options	467	882	475	901

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Securities (Tables)

6 Months Ended

Jun. 30, 2019

Securities [Abstract]

Amortized Cost And Fair Value Of Available-For-Sale Securities Portfolio

	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
June 30, 2019 (unaudited)
Issued by U.S. government-sponsored entities and agencies:
U.S. Treasury	$	9,977	$	30	$	17	$	9,990
Mortgage-backed securities - residential		147		4		-		151
Collateralized mortgage obligations		47		1		-		48
Total	$	10,171	$	35	$	17	$	10,189

	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
December 31, 2018
Issued by U.S. government-sponsored entities and agencies:
U.S. Treasury	$	9,978	$	2	$	99	$	9,881
Mortgage-backed securities - residential		167		3		-		170
Collateralized mortgage obligations		62		1		-		63
Total	$	10,207	$	6	$	99	$	10,114

Amortized Cost and Fair Value of Debt Securities by Contractual Maturity

	June 30, 2019					December 31, 2018
	(unaudited)
	Amortized Cost		Fair Value		Amortized Cost		Fair Value
Due in one year or less	$	4,991	$	4,980	$	3,495	$	3,472
Due from one to five years		4,986		5,010		6,483		6,409
Mortgage-backed securities - residential		147		151		167		170
Collateralized mortgage obligations		47		48		62		63
Total	$	10,171	$	10,189	$	10,207	$	10,114

Fair Value Of Securities Pledged

	June 30, 2019		December 31, 2018
	(unaudited)
Pledged as collateral for:
FHLB advances	$	3,586	$	4,058
Public deposits		2,015		1,997
Mortgage banking derivatives		1,494		-
Interest-rate swaps		93		104
Total	$	7,188	$	6,159

Securities With Unrealized Losses

June 30, 2019 (unaudited)	Less than 12 Months				12 Months or More				Total
Description of Securities	Fair Value		Unrealized Loss		Fair Value		Unrealized Loss		Fair Value		Unrealized Loss
Issued by U.S. government-sponsored entities and agencies:
U.S. Treasury	$	1,495	(1)	-	$	5,987	$	17	$	7,482	$	17
Total temporarily impaired	$	1,495	$	-	$	5,987	$	17	$	7,482	$	17

⁽¹⁾ Unrealized loss is less than $1 resulting in rounding to zero.

December 31, 2018	Less than 12 Months				12 Months or More				Total
Description of Securities	Fair Value		Unrealized Loss		Fair Value		Unrealized Loss		Fair Value		Unrealized Loss
Issued by U.S. government-sponsored entities and agencies:
U.S. Treasury	$	499	$	1	$	8,401	$	98	$	8,900	$	99
Total temporarily impaired	$	499	$	1	$	8,401	$	98	$	8,900	$	99

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Loans And Leases (Tables)

6 Months Ended

Jun. 30, 2019

Loans And Leases [Abstract]

Recorded Investment In Loans By Portfolio Segment

	June 30, 2019		December 31, 2018
	(unaudited)
Commercial (1)	$	146,450	$	126,887
Real estate:
Single-family residential		131,517		118,386
Multi-family residential		47,612		47,651
Commercial		190,575		173,435
Construction		62,359		61,792
Consumer:
Home equity lines of credit		22,232		23,961
Other		4,979		5,583
Subtotal		605,724		557,695
Less: ALLL		(7,029)		(7,012)
Loans and leases, net	$	598,695	$	550,683

⁽¹⁾ Includes $5,094 and $5,403 of commercial leases at June 30, 2019 and December 31, 2018, respectively.

Activity In ALLL By Portfolio Segment

The following tables present the activity in the ALLL by portfolio segment for the three and six months ended June 30, 2019:

	Three months ended June 30, 2019 (unaudited)
			Real Estate								Consumer
	Commercial		Single-family		Multi-family		Commercial		Construction		Home Equity lines of credit		Other		Total
Beginning balance	$	1,819	$	1,063	$	622	$	2,299	$	759	$	375	$	87	$	7,024
Addition to (reduction in) provision for loan losses		150		(50)		(60)		40		-		(70)		(10)		-
Charge-offs		-		-		-		-		-		-		-		-
Recoveries		-		1		-		-		-		4		-		5
Ending balance	$	1,969	$	1,014	$	562	$	2,339	$	759	$	309	$	77	$	7,029

	Six months ended June, 2019 (unaudited)
			Real Estate								Consumer
	Commercial		Single-family		Multi-family		Commercial		Construction		Home Equity lines of credit		Other		Total
Beginning balance	$	1,819	$	1,061	$	612	$	2,274	$	739	$	410	$	97	$	7,012
Addition to (reduction in) provision for loan losses		150		(50)		(50)		65		20		(115)		(20)		-
Charge-offs		-		-		-		-		-		-		-		-
Recoveries		-		3		-		-		-		14		-		17
Ending balance	$	1,969	$	1,014	$	562	$	2,339	$	759	$	309	$	77	$	7,029

The following tables present the activity in the ALLL by portfolio segment for the three and six months ended June 30, 2018:

	Three months ended June 30, 2018 (unaudited)
			Real Estate								Consumer
	Commercial		Single-family		Multi-family		Commercial		Construction		Home Equity lines of credit		Other		Total
Beginning balance	$	1,869	$	1,039	$	687	$	2,139	$	614	$	521	$	107	$	6,976
Addition to (reduction in) provision for loan losses		20		-		10		10		-		(40)		-		-
Charge-offs		-		-		-		-		-		-		-		-
Recoveries		-		-		-		-		-		5		-		5
Ending balance	$	1,889	$	1,039	$	697	$	2,149	$	614	$	486	$	107	$	6,981

	Six months ended June, 2018 (unaudited)
			Real Estate								Consumer
	Commercial		Single-family		Multi-family		Commercial		Construction		Home Equity lines of credit		Other		Total
Beginning balance	$	1,984	$	912	$	660	$	2,143	$	672	$	597	$	2	$	6,970
Addition to (reduction in) provision for loan losses		(97)		131		37		6		(58)		(124)		105		-
Charge-offs		-		(6)		-		-		-		-		-		(6)
Recoveries		2		2		-		-		-		13		-		17
Ending balance	$	1,889	$	1,039	$	697	$	2,149	$	614	$	486	$	107	$	6,981

Balance In ALLL And Recorded Investment In Loans By Portfolio Segment And Based On Impairment Method

The following table presents the balance in the ALLL and the recorded investment in loans and leases by portfolio segment and based on the impairment method as of June 30, 2019 (unaudited):

			Real Estate								Consumer
	Commercial		Single- family		Multi- family		Commercial		Construction		Home Equity lines of credit		Other		Total
ALLL:
Ending allowance balance attributable to loans:
Individually evaluated for impairment	$	-	$	-	$	-	$	33	$	-	$	-	$	-	$	33
Collectively evaluated for impairment		1,969		1,014		562		2,306		759		309		77		6,996
Total ending allowance balance	$	1,969	$	1,014	$	562	$	2,339	$	759	$	309	$	77	$	7,029
Loans:
Individually evaluated for impairment	$	93	$	108	$	-	$	4,599	$	-	$	-	$	-	$	4,800
Collectively evaluated for impairment		146,357		131,409		47,612		185,976		62,359		22,232		4,979		600,924
Total ending loan balance	$	146,450	$	131,517	$	47,612	$	190,575	$	62,359	$	22,232	$	4,979	$	605,724

The following table presents the balance in the ALLL and the recorded investment in loans and leases by portfolio segment and based on the impairment method as of December 31, 2018: 

			Real Estate								Consumer
	Commercial		Single- family		Multi- family		Commercial		Construction		Home Equity lines of credit		Other		Total
ALLL:
Ending allowance balance attributable to loans:
Individually evaluated for impairment	$	-	$	-	$	-	$	22	$	-	$	-	$	-	$	22
Collectively evaluated for impairment		1,819		1,061		612		2,252		739		410		97		6,990
Total ending allowance balance	$	1,819	$	1,061	$	612	$	2,274	$	739	$	410	$	97	$	7,012
Loans:
Individually evaluated for impairment	$	100	$	110	$	-	$	2,951	$	-	$	-	$	-	$	3,161
Collectively evaluated for impairment		126,787		118,276		47,651		170,484		61,792		23,961		5,583		554,534
Total ending loan balance	$	126,887	$	118,386	$	47,651	$	173,435	$	61,792	$	23,961	$	5,583	$	557,695

Individually Evaluated For Impairment By Class Of Loans

The following table presents loans individually evaluated for impairment by class of loans as of and for the period ended June 30, 2019.  The unpaid principal balance is the contractual principal balance outstanding.  The recorded investment is the unpaid principal balance adjusted for partial charge-offs, purchase premiums and discounts, and deferred loan fees and costs.  The table presents accrual basis interest income recognized during the three and six months ended June 30, 2019.  Cash payments of interest on these loans during the three and six months ended June 30, 2019 totaled $43 and $88, respectively.

							Three months ended				Six months ended
	As of June 30, 2019						June 30, 2019				June 30, 2019
	(unaudited)						(unaudited)				(unaudited)
	Unpaid Principal Balance		Recorded Investment		ALLL Allocated		Average Recorded Investment		Interest Income Recognized		Average Recorded Investment		Interest Income Recognized
With no related allowance recorded:
Commercial	$	93	$	93	$	-	$	94	$	-	$	96	$	-
Real estate:
Single-family residential		108		108		-		109		2		109		3
Commercial:
Owner occupied	$	226	$	122	$	-	$	121	$	1		122		7
Total with no allowance recorded		427		323		-		324		3		327		10
With an allowance recorded:
Real estate:
Commercial:
Non-owner occupied		4,477		4,477		33		4,483		39		3,932		76
Total with an allowance recorded		4,477		4,477		33		4,483		39		3,932		76
Total	$	4,904	$	4,800	$	33	$	4,807	$	42	$	4,259	$	86

The following table presents loans individually evaluated for impairment by class of loans as of December 31, 2018.  The unpaid principal balance is the contractual principal balance outstanding.  The recorded investment is the unpaid principal balance adjusted for partial charge-offs, purchase premiums and discounts, and deferred loan fees and costs.  The table presents accrual basis interest income recognized during the three and six months ended June 30, 2018.  Cash payments of interest during the three and six months ended June 30, 2018 totaled $48 and $99, respectively.

							Three months ended				Six months ended
	As of December 31, 2018						June 30, 2018				June 30, 2018
							(unaudited)				(unaudited)
	Unpaid Principal Balance		Recorded Investment		ALLL Allocated		Average Recorded Investment		Interest Income Recognized		Average Recorded Investment		Interest Income Recognized
With no related allowance recorded:
Commercial	$	-	$	-	$	-	$	-	$	-	$	-	$	-
Real estate:
Commercial:
Owner occupied		379		125		-		132		5		133		10
Total with no allowance recorded		379		125		-		132		5		133		10
With an allowance recorded:
Commercial (1)		100		100		-		208		1		218		3
Real estate:
Single-family residential (1)		110		110		-		114		2		115		3
Commercial:
Non-owner occupied		2,826		2,826		22		2,844		39		2,845		78
Owner occupied		-		-		-		186		2		187		4
Total with an allowance recorded		3,036		3,036		22		3,352		44		3,365		88
Total	$	3,415	$	3,161	$	22	$	3,484	$	49	$	3,498	$	98

⁽¹⁾ Allowance recorded is less than $1 resulting in rounding to zero.

Recorded Investment In Nonperforming Loans By Class Of Loans

	June 30, 2019		December 31, 2018
	(unaudited)
Loans past due over 90 days still on accrual	$	-	$	-
Nonaccrual loans:
Commercial		93		100
Real estate:
Single-family residential		528		167
Commercial:
Non-owner occupied		1,689		-
Consumer:
Home equity lines of credit:
Originated for portfolio		15		-
Purchased for portfolio		84		89
Other consumer		9		21
Total nonaccrual		2,418		377
Total nonaccrual and nonperforming loans	$	2,418	$	377

Aging Of Recorded Investment In Past Due Loans By Class Of Loans

The following table presents the aging of the recorded investment in past due loans and leases by class of loans as of June 30, 2019 (unaudited):

	30 - 59 Days Past Due		60 - 89 Days Past Due		Greater than 90 Days Past Due		Total Past Due		Loans Not Past Due		Nonaccrual Loans Not > 90 days Past Due
Commercial	$	40	$	-	$	-	$	40	$	146,410	$	93
Real estate:
Single-family residential		74		371		22		467		131,050		506
Multi-family residential		-		-		-		-		47,612		-
Commercial:
Non-owner occupied		-		-		1,689		1,689		123,894		-
Owner occupied		-		-		-		-		45,558		-
Land		-		-		-		-		19,434		-
Construction		-		-		-		-		62,359		-
Consumer:
Home equity lines of credit:
Originated for portfolio		273		-		-		273		21,669		15
Purchased for portfolio		31		-		-		31		259		84
Other		-		-		9		9		4,970		-
Total	$	418	$	371	$	1,720	$	2,509	$	603,215	$	698

The following table presents the aging of the recorded investment in past due loans and leases by class of loans as of December 31, 2018:

	30 - 59 Days Past Due		60 - 89 Days Past Due		Greater than 90 Days Past Due		Total Past Due		Loans Not Past Due		Nonaccrual Loans Not > 90 days Past Due
Commercial	$	-	$	-	$	-	$	-	$	126,887	$	100
Real estate:
Single-family residential		597		-		23		620		117,766		144
Multi-family residential		-		-		-		-		47,651		-
Commercial:
Non-owner occupied		-		-		-		-		122,465		-
Owner occupied		-		-		-		-		43,087		-
Land		-		-		-		-		7,883		-
Construction		-		-		-		-		61,792		-
Consumer:
Home equity lines of credit:
Originated for portfolio		474		-		-		474		23,119		-
Purchased for portfolio		-		33		-		33		335		89
Other		-		-		21		21		5,562		-
Total	$	1,071	$	33	$	44	$	1,148	$	556,547	$	333

Loans Modified As TDRs By Class Of Loans

	June 30, 2019		December 31, 2018
	(unaudited)
Commercial	$	93	$	100
Total	$	93	$	100

Recorded Investment In Loans By Risk Category And Class Of Loans

The recorded investment in loans and leases by risk category and by class of loans and leases as of June 30, 2019 and based on the most recent analysis performed follows.  There were no loans or leases rated doubtful at June 30, 2019.

(unaudited)	Not Rated		Pass		Special Mention		Substandard		Total
Commercial	$	-	$	140,266	$	5,468	$	716	$	146,450
Real estate:
Single-family residential		130,989		-		-		528		131,517
Multi-family residential		-		47,059		403		150		47,612
Commercial:
Non-owner occupied		71		121,035		-		4,477		125,583
Owner occupied		-		43,260		2,176		122		45,558
Land		-		19,434		-		-		19,434
Construction		3,280		59,079		-		-		62,359
Consumer:
Home equity lines of credit:
Originated for portfolio		21,862		-		-		80		21,942
Purchased for portfolio		206		-		-		84		290
Other		4,970		-		-		9		4,979
	$	161,378	$	430,133	$	8,047	$	6,166	$	605,724

The recorded investment in loans and leases by risk category and by class of loans and leases as of December 31, 2018 follows.  There were no loans or leases rated doubtful at December 31, 2018. 

	Not Rated		Pass		Special Mention		Substandard		Total
Commercial	$	-	$	123,369	$	2,651	$	867	$	126,887
Real estate:
Single-family residential		118,219		-		-		167		118,386
Multi-family residential		-		47,072		425		154		47,651
Commercial:
Non-owner occupied		76		119,843		1,701		845		122,465
Owner occupied		-		39,747		2,252		1,088		43,087
Land		-		7,883		-		-		7,883
Construction		3,279		58,513		-		-		61,792
Consumer:
Home equity lines of credit:
Originated for portfolio		23,525		-		-		68		23,593
Purchased for portfolio		279		-		-		89		368
Other		5,562		-		-		21		5,583
	$	150,940	$	396,427	$	7,029	$	3,299	$	557,695

Components Of Net Investment In Direct Financing Leases

	June 30, 2019		December 31, 2018
	(unaudited)
Total minimum lease payments to be received	$	5,649	$	6,045
Less: unearned income		(555)		(642)
Net investment in direct financing leases	$	5,094	$	5,403

⁽¹⁾ There were no initial direct costs associated with these leases.

Summary Of Future Minimum Lease Payments Receivable

2019	$	397
2020		793
2021		793
2022		793
2023		1,563
Thereafter		1,310
	$	5,649

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Leases (Tables)

6 Months Ended

Jun. 30, 2019

Leases [Abstract]

Future Minimum Operating Lease Payments

2019, excluding the six months ended June 30, 2019	$	271
2020		544
2021		548
2022		536
2023		377
Thereafter		250
Total future minimum rental commitments		2,526
Less - amounts representing interest		(363)
Total operating lease liabilities	$	2,163

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Fair Value (Tables)

6 Months Ended

Jun. 30, 2019

Fair Value [Abstract]

Assets And Liabilities Measured At Fair Value On A Recurring Basis, Including Financial Assets And Liabilities

	Fair Value Measurements at June 30, 2019 using Significant Other Observable Inputs
	(Level 2)
	(unaudited)
Financial Assets:
Securities available for sale:
Issued by U.S. government-sponsored entities and agencies:
U.S. Treasury	$	9,990
Mortgage-backed securities - residential		151
Collateralized mortgage obligations		48
Total securities available for sale	$	10,189
Loans held for sale	$	52,184
Yield maintenance provisions (embedded derivatives)	$	8
Interest rate lock commitments	$	2,480
Financial Liabilities:
Interest-rate swaps	$	8
TBA Mortgage-back securities	$	645

	Fair Value Measurements at December 31, 2018 using Significant Other Observable Inputs
	(Level 2)
Financial Assets:
Securities available for sale:
Issued by U.S. government-sponsored entities and agencies:
U.S. Treasury	$	9,881
Mortgage-backed securities - residential		170
Collateralized mortgage obligations		63
Total securities available for sale	$	10,114
Loans held for sale	$	17,385
Yield maintenance provisions (embedded derivatives)	$	17
Interest rate lock commitments	$	721
Financial Liabilities:
Interest-rate swaps	$	17
TBA Mortgage-backed securities	$	342

Assets And Liabilities Measured At Fair Value On A Non-Recurring Basis

Fair Value Measurements at June 30, 2019 Using
Significant Unobservable Inputs (Level 3)
(unaudited)
Impaired loans:
Commercial	$	93
Real Estate:
Single-family residential		109
Commercial:
Non-owner occupied		4,444
Total impaired loans	$	4,646

Fair Value Measurements at December 31, 2018 Using
Significant Unobservable Inputs (Level 3)
Impaired loans:
Commercial	$	100
Real Estate:
Single-family residential		110
Commercial:
Non-owner occupied		2,804
Total impaired loans	$	3,014

Financial Instruments Measured At Fair Value On A Non-Recurring Basis

The following table presents quantitative information about Level 3 fair value measurements for financial instruments measured at fair value on a non-recurring basis at June 30, 2019 (unaudited):

		Fair Value	Valuation Technique(s)	Unobservable Inputs	(Range) Weighted Average
Impaired loans:
Commercial	$	93	Comparable sales approach	Adjustment for differences between the comparable market transactions	2.06%
Real estate:
Single-family residential		109	Comparable sales approach	Adjustment for differences between the comparable market transactions	3.61%
Commercial:
Non-owner occupied		4,444	Comparable sales approach	Adjustment for differences between the comparable market transactions	(-2.58%,  8.61%) 1.52%

The following table presents quantitative information about Level 3 fair value measurements for financial instruments measured at fair value on a non-recurring basis at December 31, 2018:

		Fair Value	Valuation Technique(s)	Unobservable Inputs	(Range) Weighted Average
Impaired loans:
Commercial	$	100	Comparable sales approach	Adjustment for differences between the comparable market transactions	3.48%
Real estate:
Single -family residential		110	Comparable sales approach	Adjustment for differences between the comparable market transactions	3.61%
Commercial:
Non-owner occupied		2,804	Comparable sales approach	Adjustment for differences between the comparable market transactions	(3.48%,  8.61%) 5.02%

Aggregate Fair Value, Contractual Balance (Including Accrued Interest) And Gain Or Loss

	June 30, 2019		December 31, 2018
	(unaudited)
Aggregate fair value	$	52,184	$	17,385
Contractual balance		51,031		17,008
Gain (loss)	$	1,153	$	377

Amount Of Gains And Losses From Changes In Fair Value Included In Earnings

	Three months ended June 30,				Six months ended June 30,
	2019		2018		2019		2018
	(unaudited)				(unaudited)
Interest income	$	275	$	142	$	490	$	166
Interest expense		-		-		-		-
Change in fair value		516		216		776		274
Total change in fair value	$	791	$	358	$	1,266	$	440

Carrying Amounts And Estimated Fair Values Of Financial Instruments

The carrying amounts and estimated fair values of financial instruments at June 30, 2019 were as follows:

	Fair Value Measurements at June 30, 2019 Using:
	Carrying
(unaudited)	Value		Level 1		Level 2		Level 3		Total
Financial assets
Cash and cash equivalents	$	34,323	$	34,323	$	-	$	-	$	34,323
Interest-bearing deposits in other financial institutions		100		100		-		-		100
Securities available for sale		10,189		-		10,189		-		10,189
Loans held for sale		52,184		-		52,184		-		52,184
Loans and leases, net		598,695		-		-		591,720		591,720
FHLB and FRB stock		3,816		n/a		n/a		n/a		n/a
Accrued interest receivable		2,245		26		44		2,175		2,245
Yield maintenance provisions (embedded derivatives)		8		-		8		-		8
Interest rate lock commitments		2,480		-		2,480		-		2,480
Financial liabilities
Deposits	$	(628,586)	$	(328,081)	$	(303,660)	$	-	$	(631,741)
FHLB advances and other borrowings		(18,500)		-		(18,677)		-		(18,677)
Advances by borrowers for taxes and insurance		(340)		-		-		(340)		(340)
Subordinated debentures		(14,786)		-		(15,609)		-		(15,609)
Accrued interest payable		(239)		(20)		(219)		-		(239)
Interest-rate swaps		(8)		-		(8)		-		(8)
TBA mortgage-back securities		(645)		-		(645)		-		(645)

The carrying amounts and estimated fair values of financial instruments at December 31, 2018 were as follows:

	Fair Value Measurements at December 31, 2018 Using:
	Carrying
	Value		Level 1		Level 2		Level 3		Total
Financial assets
Cash and cash equivalents	$	67,304	$	67,304	$	-	$	-	$	67,304
Interest-bearing deposits in other financial institutions		100		100		-		-		100
Securities available for sale		10,114		-		10,114		-		10,114
Loans held for sale		17,385		-		17,385		-		17,385
Loans and leases, net		550,683		-		-		549,599		549,599
FHLB stock		3,476		n/a		n/a		n/a		n/a
Accrued interest receivable		2,181		45		40		2,097		2,182
Yield maintenance provisions (embedded derivatives)		17		-		17		-		17
Interest rate lock commitments		721		-		721		-		721
Financial liabilities
Deposits	$	(579,786)	$	(306,121)	$	(272,924)	$	-	$	(579,045)
FHLB advances and other borrowings		(19,500)		-		(19,589)		-		(19,589)
Advances by borrowers for taxes and insurance		(827)		-		-		(827)		(827)
Subordinated debentures		(14,767)		-		(14,280)		-		(14,280)
Accrued interest payable		(231)		-		(231)		-		(231)
Interest-rate swaps		(17)		-		(17)		-		(17)
TBA mortgage-backed securities		(342)		-		(342)		-		(342)

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FHLB Advances And Other Debt (Tables)

6 Months Ended

Jun. 30, 2019

FHLB Advances And Other Debt [Abstract]

Schedule Of FHLB Fixed Rate Advances And Other Debt

	Weighted
	Average Rate	June 30, 2019		December 31, 2018
FHLB fixed rate advances :
Maturities:
2019	1.62%	$	3,500	$	3,500
2020	1.98%		4,500		4,500
2021	2.32%		4,000		4,000
2022	2.05%		1,500		1,500
Total FHLB fixed rate advances			13,500		13,500
Variable rate other debt:
Maturities:
2020	6.25%		5,000		6,000
Total variable rate other debt			5,000		6,000
Total		$	18,500	$	19,500

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Stock-Based Compensation (Tables)

6 Months Ended

Jun. 30, 2019

Stock-Based Compensation [Abstract]

Summary Of Stock Option Activity

	Shares	Weighted Average Exercise Price		Weighted Average Remaining Contractual Term (Years)	Intrinsic Value
Outstanding at beginning of year	96,379	$	7.65
Expired	-		-
Cancelled or forfeited	(925)		8.03
Outstanding at end of period	95,454	$	7.64	3.9	$	422,330
Exercisable at end of period	95,454		7.64	3.9	$	422,330

Nonvested Restricted Shares Activity

Nonvested Shares	Shares	Weighted Average Grant-Date Fair Value
Nonvested at January 1, 2019	69,324	$	11.91
Granted	33,788		12.81
Vested	-		-
Forfeited	(1,493)		12.12
Nonvested at June 30, 2019	101,619	$	12.21

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Regulatory Capital Matters (Tables)

6 Months Ended

Jun. 30, 2019

Regulatory Capital Matters [Abstract]

Actual And Required Capital Amounts And Ratios Of CFBank

	Actual			Minimum Capital Required-Basel III Fully Phased-In			To Be Well Capitalized Under Applicable Regulatory Capital Standards
	Amount		Ratio	Amount		Ratio	Amount		Ratio
June 30, 2019
Total Capital to risk weighted assets	$	74,274	11.95%	$	65,270	10.50%	$	62,162	10.00%
Tier 1 (Core) Capital to risk weighted assets		67,103	10.79%		52,838	8.50%		49,730	8.00%
Common equity tier 1 capital to risk-weighted assets		67,103	10.79%		43,514	7.00%		40,405	6.50%
Tier 1 (Core) Capital to adjusted total assets (Leverage ratio)		67,103	9.44%		28,438	4.00%		35,548	5.00%

	Actual			Minimum Capital Required-Basel III Phase-In Schedule			Minimum Capital Required-Basel III Fully Phased-In			To Be Well Capitalized Under Applicable Regulatory Capital Standards
	Amount		Ratio	Amount		Ratio	Amount		Ratio	Amount		Ratio
December 31, 2018
Total Capital to risk weighted assets	$	69,066	12.37%	$	55,164	9.88%	$	58,626	10.50%	$	55,834	10.00%
Tier 1 (Core) Capital to risk weighted assets		62,085	11.12%		43,998	7.88%		47,459	8.50%		44,668	8.00%
Common equity tier 1 capital to risk-weighted assets		62,085	11.12%		35,622	6.38%		39,084	7.00%		36,292	6.50%
Tier 1 (Core) Capital to adjusted total assets (Leverage ratio)		62,085	10.13%		24,526	4.00%		24,526	4.00%		30,658	5.00%

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Derivative Instruments (Tables)

6 Months Ended

Jun. 30, 2019

Derivative Instruments [Abstract]

Summary Of Derivative Instruments

	June 30, 2019		December 31, 2018
	(unaudited)
Notional amount	$	665	$	1,359
Weighted average pay rate on interest-rate swaps		2.74%		3.12%
Weighted average receive rate on interest-rate swaps		2.38%		2.49%
Weighted average maturity (years)		1.3		2.0
Fair value of interest-rate swaps	$	(8)	$	(17)
Fair value of yield maintenance provisions		8		17

Schedule Of Mortgage Banking Derivatives

	June 30, 2019 (unaudited)				December 31, 2018
	Notional Amount		Fair Value		Notional Amount		Fair Value
Assets:
Interest rate commitments	$	242,571	$	2,480	$	55,220	$	721
TBA mortgage-back securities		144,250		(645)		33,250		(342)

Schedule Of Revenue Recognized On Mortgage Activities

	Three months ended				Six months ended
	June 30,				June 30,
	2019		2018		2019		2018
Gain on loans sold	$	1,884	$	276	$	3,116	$	290
Gain (loss) from change in fair value of loans held-for-sale		516		216		776		274
Gain (loss) from change in fair value of derivatives		(49)		17		(90)		253
	$	2,351	$	509	$	3,802	$	817

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Income Taxes (Tables)

6 Months Ended

Jun. 30, 2019

Income Taxes [Abstract]

Summary Of Differences Between Income Taxes At The Federal Statutory And Effective Tax Rate

	For the three months ended June 30,		For the six months ended June 30,
	2019	2018	2019	2018
	(unaudited)		(unaudited)
Statutory tax rate	21.0%	21.0%	21.0%	21.0%
Increase (decrease) resulting from:
Tax exempt income on bank owned life insurance	(0.3%)	(0.5%)	(0.3%)	(0.6)%
Low income housing credits	(0.5%)	(1.1%)	(0.6%)	(1.0%)
Other, net	0.2%	0.4%	0.1%	0.1%
Effective tax rate	20.4%	19.8%	20.2%	19.5%

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Accumulated Other Comprehensive Income (Tables)

6 Months Ended

Jun. 30, 2019

Accumulated Other Comprehensive Income [Abstract]

Schedule Of Accumulated Other Comprehensive Income

Changes in Accumulated Other Comprehensive Income by Component (1)
	Three months ended				Six months ended
	June 30,				June 30,
	2019		2018		2019		2018
	(unaudited)				(unaudited)
	Unrealized Gains and Losses on Available-for-Sale Securities				Unrealized Gains and Losses on Available-for-Sale Securities
Accumulated other comprehensive income (loss), beginning of period	$	(38)	$	(101)	$	(73)	$	(47)
Other comprehensive income (loss) before reclassifications (2)		52		(15)		87		(69)
Net current-period other comprehensive income (loss)		52		(15)		87		(69)
Accumulated other comprehensive income (loss), end of period	$	14	$	(116)	$	14	$	(116)

⁽¹⁾ All amounts are net of tax.  Amounts in parentheses indicate a reduction of other comprehensive income.

⁽²⁾ There were no amounts reclassified out of other comprehensive income for the three and six months ended June 30, 2019 and 2018.

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Summary of Significant Accounting Policies (Narrative) (Details) $ in Thousands		1 Months Ended
	Aug. 20, 2018	Jun. 30, 2019 USD ($)	Jan. 01, 2019 USD ($)
Reverse stock split	1-for-5.5
Reverse stock split ratio	5.5
Balances of loans of all other classes while impairment evaluation		$ 250
Investment tax credit		894
Operating lease right-of-use assets		1,967
Operating lease liabilities		$ 2,163
Accounting Standards Update 2016-02 [Member]
Operating lease right-of-use assets			$ 2,400
Operating lease liabilities			$ 2,400

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Summary Of Significant Accounting Policies (Earnings Per Common Share) (Details) $ / shares in Units, $ in Thousands			3 Months Ended		6 Months Ended
		Aug. 20, 2018	Jun. 30, 2019 USD ($) $ / shares shares	Jun. 30, 2018 USD ($) $ / shares shares	Jun. 30, 2019 USD ($) $ / shares shares	Jun. 30, 2018 USD ($) $ / shares shares
Basic
Net income | $			$ 2,280	$ 1,130	$ 3,961	$ 1,922
Accretion of discount and value of warrants exercised related to Series B preferred stock | $			157	(12)	183	(38)
Net income attributable to common stockholders | $			$ 2,437	$ 1,118	$ 4,144	$ 1,884
Weighted average common shares outstanding including unvested share-based payment awards	[1]		4,412,726	4,248,573	4,384,395	4,245,757
Less: Unvested share-based payment awards
Average shares			4,412,726	4,248,573	4,384,395	4,245,757
Basic earnings per common share | $ / shares			$ 0.55	$ 0.26	$ 0.95	$ 0.44
Diluted
Add back: Preferred Dividends on Series B preferred stock and accretion of discount | $
Net earnings allocated to common stockholders | $			$ 2,437	$ 1,118	$ 4,144	$ 1,884
Add: Dilutive effects of assumed exercises of stock options			35,077	41,226	37,075	40,263
Add: Dilutive effects of assumed exercises of stock warrants			4,834	198,540	13,894	202,186
Average shares and dilutive potential common shares			4,452,637	4,488,339	4,435,364	4,488,206
Diluted earnings per common share | $ / shares			$ 0.55	$ 0.25	$ 0.93	$ 0.42
Reverse stock split ratio		5.5

[1] Adjusted for 1-for-5.5 reverse stock split on August 20, 2018.

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Summary Of Significant Accounting Policies (Anti-Dilutive Common Shares) (Details) - shares	3 Months Ended		6 Months Ended
	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018
Stock Options [Member]
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Anti-dilutive securities	467	882	475	901

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Securities (Narrative) (Details)	6 Months Ended		12 Months Ended
	Jun. 30, 2019 USD ($) security	Jun. 30, 2018 USD ($)	Dec. 31, 2018 USD ($) security
Schedule of Available-for-sale Securities [Line Items]
Other-than-temporary impairment recognized in accumulated other comprehensive income (loss) for securities available for sale	$ 0	$ 0
Sales of securities	$ 0	$ 0
Issued by U.S. Government-Sponsored Entities and Agencies [Member]
Schedule of Available-for-sale Securities [Line Items]
Minimum percentage of securities hold	10.00%		10.00%
Number of securities | security	0		0
U.S. Treasury [Member]
Schedule of Available-for-sale Securities [Line Items]
Other-than-temporarily impaired securities	$ 0		$ 0

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Securities (Amortized Cost And Fair Value Of Available-For-Sale Securities Portfolio) (Details) - USD ($) $ in Thousands	Jun. 30, 2019	Dec. 31, 2018
Schedule of Available-for-sale Securities [Line Items]
Amortized Cost	$ 10,171	$ 10,207
Gross Unrealized Gains	35	6
Gross Unrealized Losses	17	99
Fair Value	10,189	10,114
U.S. Treasury [Member]
Schedule of Available-for-sale Securities [Line Items]
Amortized Cost	9,977	9,978
Gross Unrealized Gains	30	2
Gross Unrealized Losses	17	99
Fair Value	9,990	9,881
Mortgage-Backed Securities - Residential [Member]
Schedule of Available-for-sale Securities [Line Items]
Amortized Cost	147	167
Gross Unrealized Gains	4	3
Fair Value	151	170
Collateralized Mortgage Obligations [Member]
Schedule of Available-for-sale Securities [Line Items]
Amortized Cost	47	62
Gross Unrealized Gains	1	1
Fair Value	$ 48	$ 63

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Securities (Amortized Cost and Fair Value of Debt Securities by Contractual Maturity) (Details) - USD ($) $ in Thousands	Jun. 30, 2019	Dec. 31, 2018
Schedule Of Available For Sale Securities [Line Items]
Due in one year or less, Amortized Cost	$ 4,991	$ 3,495
Due from one to five years, Amortized Cost	4,986	6,483
Available-for-sale Securities Total, Amortized Cost	10,171	10,207
Due in one year or less, Fair Value	4,980	3,472
Due from one to five years, Fair Value	5,010	6,409
Available-for-sale Securities Total, Fair Value	10,189	10,114
Mortgage-Backed Securities - Residential [Member]
Schedule Of Available For Sale Securities [Line Items]
No single maturity, Amortized Cost	147	167
No single maturity, Fair Value	151	170
Available-for-sale Securities Total, Fair Value	151	170
Collateralized Mortgage Obligations [Member]
Schedule Of Available For Sale Securities [Line Items]
No single maturity, Amortized Cost	47	62
No single maturity, Fair Value	48	63
Available-for-sale Securities Total, Fair Value	$ 48	$ 63

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Securities (Fair Value Of Securities Pledged) (Details) - USD ($) $ in Thousands	Jun. 30, 2019	Dec. 31, 2018
Pledged as collateral for:
FHLB advances	$ 3,586	$ 4,058
Public deposits	2,015	1,997
Mortgage banking derivatives	1,494
Interest-rate swaps	93	104
Total	$ 7,188	$ 6,159

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Securities (Securities With Unrealized Losses) (Details) - USD ($) $ in Thousands	Jun. 30, 2019		Dec. 31, 2018
Schedule of Available-for-sale Securities [Line Items]
Less than Twelve Months, Fair Value	$ 1,495		$ 499
Less than Twelve Months, Unrealized Loss			1
Twelve Months or More, Fair Value	5,987		8,401
Twelve Months or More, Unrealized Loss	17		98
Total, Fair Value	7,482		8,900
Total, Unrealized Loss	17		99
U.S. Treasury [Member]
Schedule of Available-for-sale Securities [Line Items]
Less than Twelve Months, Fair Value	1,495		499
Less than Twelve Months, Unrealized Loss		[1]	1
Twelve Months or More, Fair Value	5,987		8,401
Twelve Months or More, Unrealized Loss	17		98
Total, Fair Value	7,482		8,900
Total, Unrealized Loss	$ 17		$ 99

[1] Unrealized loss is less than $1 resulting in rounding to zero.

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Loans And Leases (Narrative) (Details)	3 Months Ended		6 Months Ended
	Jun. 30, 2019 USD ($) loan	Jun. 30, 2018 USD ($) loan	Jun. 30, 2019 USD ($) loan	Jun. 30, 2018 USD ($) loan	Dec. 31, 2018 USD ($)
Accounts Notes And Loans Receivable [Line Items]
Loans	$ 598,695,000		$ 598,695,000		$ 550,683,000
Cash payments of interest	43,000	$ 48,000	88,000	$ 99,000
Loans 90 days or more past due and still accruing interest
Number of days of default payment			90 days
Total TDR's	3,111,000		$ 3,111,000		3,161,000
Allocated specific reserves to modified TDRs	20,000		20,000		22,000
Commitment to lend additional amounts	$ 0		$ 0		0
Number of loans modified as a TDR | loan	0	0	0	0
Number of TDRs in payment default | loan	0	0
Recorded investment of loans undergoing modifications, not TDRs	$ 15,821,000	$ 21,612,000	$ 15,821,000	$ 21,612,000
Accruing TDR's	3,018,000		3,018,000		3,061,000
Loans And Leases Receivable Net Of Deferred Income	605,724,000		605,724,000		557,695,000
Doubtful [Member]
Accounts Notes And Loans Receivable [Line Items]
Loans And Leases Receivable Net Of Deferred Income	0		$ 0		0
Northpointe [Member] | Mortgage Purchase Program [Member]
Accounts Notes And Loans Receivable [Line Items]
Average days			14 days
Percent of loans risk rated for capital adequacy			100.00%
Mortgage allowance	$ 0		$ 0
Percent of participation agreement interest	95.00%		95.00%
Ownership interest in each loan it participates			5.00%
Single-Family Residential[Member]
Accounts Notes And Loans Receivable [Line Items]
Loans And Leases Receivable Net Of Deferred Income	$ 131,517,000		$ 131,517,000		118,386,000
Single-Family Residential[Member] | Northpointe [Member] | Mortgage Purchase Program [Member]
Accounts Notes And Loans Receivable [Line Items]
Loans	40,572,000		40,572,000		36,845,000
Commercial Portfolio Segment [Member]
Accounts Notes And Loans Receivable [Line Items]
Loans And Leases Receivable Net Of Deferred Income	$ 146,450,000		$ 146,450,000		$ 126,887,000

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Loans And Leases (Recorded Investment In Loans By Portfolio Segment) (Details) - USD ($) $ in Thousands	Jun. 30, 2019	Mar. 31, 2019	Dec. 31, 2018	Jun. 30, 2018	Mar. 31, 2018	Dec. 31, 2017
Accounts Notes And Loans Receivable [Line Items]
Subtotal	$ 605,724		$ 557,695
Less: ALLL	(7,029)	$ (7,024)	(7,012)	$ (6,981)	$ (6,976)	$ (6,970)
Loans and leases, net	598,695		550,683
Single-Family Residential[Member]
Accounts Notes And Loans Receivable [Line Items]
Subtotal	131,517		118,386
Less: ALLL	(1,014)	(1,063)	(1,061)	(1,039)	(1,039)	(912)
Multi-Family Residential [Member]
Accounts Notes And Loans Receivable [Line Items]
Subtotal	47,612		47,651
Less: ALLL	(562)	(622)	(612)	(697)	(687)	(660)
Construction Loans [Member]
Accounts Notes And Loans Receivable [Line Items]
Subtotal	62,359		61,792
Less: ALLL	(759)	(759)	(739)	(614)	(614)	(672)
Home Equity Line of Credit [Member]
Accounts Notes And Loans Receivable [Line Items]
Subtotal	22,232		23,961
Less: ALLL	(309)	(375)	(410)	(486)	(521)	(597)
Commercial Leases [Member]
Accounts Notes And Loans Receivable [Line Items]
Subtotal	5,094		5,403
Commercial Portfolio Segment [Member]
Accounts Notes And Loans Receivable [Line Items]
Subtotal	146,450		126,887
Less: ALLL	(1,969)	(1,819)	(1,819)	(1,889)	(1,869)	(1,984)
Real Estate Commercial [Member]
Accounts Notes And Loans Receivable [Line Items]
Subtotal	190,575		173,435
Less: ALLL	(2,339)	(2,299)	(2,274)	(2,149)	(2,139)	(2,143)
Consumer Portfolio Segment [Member]
Accounts Notes And Loans Receivable [Line Items]
Subtotal	4,979		5,583
Less: ALLL	$ (77)	$ (87)	$ (97)	$ (107)	$ (107)	$ (2)

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Loans And Leases (Activity In ALLL By Portfolio Segment) (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018
Financing Receivable, Allowance for Credit Losses [Line Items]
Beginning balance	$ 7,024	$ 6,976	$ 7,012	$ 6,970
Addition to (reduction in) provision for loan losses
Charge-offs				(6)
Recoveries	5	5	17	17
Ending balance	7,029	6,981	7,029	6,981
Single-Family Residential[Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Beginning balance	1,063	1,039	1,061	912
Addition to (reduction in) provision for loan losses	(50)		(50)	131
Charge-offs				(6)
Recoveries	1		3	2
Ending balance	1,014	1,039	1,014	1,039
Multi-Family Residential [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Beginning balance	622	687	612	660
Addition to (reduction in) provision for loan losses	(60)	10	(50)	37
Charge-offs
Ending balance	562	697	562	697
Construction Loans [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Beginning balance	759	614	739	672
Addition to (reduction in) provision for loan losses			20	(58)
Charge-offs
Recoveries
Ending balance	759	614	759	614
Home Equity Line of Credit [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Beginning balance	375	521	410	597
Addition to (reduction in) provision for loan losses	(70)	(40)	(115)	(124)
Charge-offs
Recoveries	4	5	14	13
Ending balance	309	486	309	486
Commercial Portfolio Segment [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Beginning balance	1,819	1,869	1,819	1,984
Addition to (reduction in) provision for loan losses	150	20	150	(97)
Charge-offs
Recoveries				2
Ending balance	1,969	1,889	1,969	1,889
Real Estate Commercial [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Beginning balance	2,299	2,139	2,274	2,143
Addition to (reduction in) provision for loan losses	40	10	65	6
Charge-offs
Ending balance	2,339	2,149	2,339	2,149
Consumer Portfolio Segment [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Beginning balance	87	107	97	2
Addition to (reduction in) provision for loan losses	(10)		(20)	105
Charge-offs
Ending balance	$ 77	$ 107	$ 77	$ 107

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Loans And Leases (Balance In ALLL And Recorded Investment In Loans By Portfolio Segment And Based On Impairment Method) (Details) - USD ($) $ in Thousands	Jun. 30, 2019	Mar. 31, 2019	Dec. 31, 2018	Jun. 30, 2018	Mar. 31, 2018	Dec. 31, 2017
Financing Receivable, Allowance for Credit Losses [Line Items]
Individually evaluated for impairment	$ 33		$ 22
Collectively evaluated for impairment	6,996		6,990
Total ending allowance balance	7,029	$ 7,024	7,012	$ 6,981	$ 6,976	$ 6,970
Individually evaluated for impairment	4,800		3,161
Collectively evaluated for impairment	600,924		554,534
Subtotal	605,724		557,695
Single-Family Residential[Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Collectively evaluated for impairment	1,014		1,061
Total ending allowance balance	1,014	1,063	1,061	1,039	1,039	912
Individually evaluated for impairment	108		110
Collectively evaluated for impairment	131,409		118,276
Subtotal	131,517		118,386
Multi-Family Residential [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Collectively evaluated for impairment	562		612
Total ending allowance balance	562	622	612	697	687	660
Collectively evaluated for impairment	47,612		47,651
Subtotal	47,612		47,651
Construction Loans [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Collectively evaluated for impairment	759		739
Total ending allowance balance	759	759	739	614	614	672
Collectively evaluated for impairment	62,359		61,792
Subtotal	62,359		61,792
Home Equity Line of Credit [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Collectively evaluated for impairment	309		410
Total ending allowance balance	309	375	410	486	521	597
Collectively evaluated for impairment	22,232		23,961
Subtotal	22,232		23,961
Commercial Portfolio Segment [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Collectively evaluated for impairment	1,969		1,819
Total ending allowance balance	1,969	1,819	1,819	1,889	1,869	1,984
Individually evaluated for impairment	93		100
Collectively evaluated for impairment	146,357		126,787
Subtotal	146,450		126,887
Real Estate Commercial [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Individually evaluated for impairment	33		22
Collectively evaluated for impairment	2,306		2,252
Total ending allowance balance	2,339	2,299	2,274	2,149	2,139	2,143
Individually evaluated for impairment	4,599		2,951
Collectively evaluated for impairment	185,976		170,484
Subtotal	190,575		173,435
Consumer Portfolio Segment [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Collectively evaluated for impairment	77		97
Total ending allowance balance	77	$ 87	97	$ 107	$ 107	$ 2
Collectively evaluated for impairment	4,979		5,583
Subtotal	$ 4,979		$ 5,583

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Loans And Leases (Individually Evaluated For Impairment By Class Of Loans) (Details) - USD ($) $ in Thousands		3 Months Ended		6 Months Ended		12 Months Ended
		Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018	Dec. 31, 2018
Financing Receivable, Impaired [Line Items]
Impaired Financing Receivable, with No Related Allowance, Unpaid Principal Balance		$ 427		$ 427		$ 379
Impaired Financing Receivable, with Related Allowance, Unpaid Principal Balance		4,477		4,477		3,036
Impaired Financing Receivable, Unpaid Principal Balance, Total		4,904		4,904		3,415
Impaired Financing Receivable, with No Related Allowance, Recorded Investment		323		323		125
Impaired Financing Receivable, with Related Allowance, Recorded Investment		4,477		4,477		3,036
Impaired Financing Receivable, Recorded Investment, Total		4,800		4,800		3,161
Impaired Financing Receivable, ALL Allocated		33		33		22
Impaired Financing Receivable, with No Related Allowance, Average Recorded Investment		324	$ 132	327	$ 133
Impaired Financing Receivable, with Related Allowance, Average Recorded Investment		4,483	3,352	3,932	3,365
Impaired Financing Receivable, Average Recorded Investment, Total		4,807	3,484	4,259	3,498
Impaired Financing Receivable, with no Related Allowance, Interest Income Recognized		3	5	10	10
Impaired Financing Receivable, with Related Allowance, Interest Income Recognized		39	44	76	88
Impaired Financing Receivable, Interest Income Recognized, Total		42	49	86	98
Impaired Financing Receivable Allocated Loans and Leases		33		33		22
Impaired financing receivable, rounding threshold						1
Single-Family Residential[Member]
Financing Receivable, Impaired [Line Items]
Impaired Financing Receivable, with No Related Allowance, Unpaid Principal Balance		108		108
Impaired Financing Receivable, with Related Allowance, Unpaid Principal Balance	[1]					110
Impaired Financing Receivable, with No Related Allowance, Recorded Investment		108		108
Impaired Financing Receivable, with Related Allowance, Recorded Investment	[1]					110
Impaired Financing Receivable, with No Related Allowance, Average Recorded Investment		109		109
Impaired Financing Receivable, with Related Allowance, Average Recorded Investment	[1]		114		115
Impaired Financing Receivable, with no Related Allowance, Interest Income Recognized		2		3
Impaired Financing Receivable, with Related Allowance, Interest Income Recognized	[1]		2		3
Real Estate, Commercial, Non-Owner Occupied [Member]
Financing Receivable, Impaired [Line Items]
Impaired Financing Receivable, with Related Allowance, Unpaid Principal Balance		4,477		4,477		2,826
Impaired Financing Receivable, with Related Allowance, Recorded Investment		4,477		4,477		2,826
Impaired Financing Receivable, ALL Allocated		33		33		22
Impaired Financing Receivable, with Related Allowance, Average Recorded Investment		4,483	2,844	3,932	2,845
Impaired Financing Receivable, with Related Allowance, Interest Income Recognized		39	39	76	78
Real Estate, Commercial, Owner Occupied [Member]
Financing Receivable, Impaired [Line Items]
Impaired Financing Receivable, with No Related Allowance, Unpaid Principal Balance		226		226		379
Impaired Financing Receivable, with No Related Allowance, Recorded Investment		122		122		125
Impaired Financing Receivable, with No Related Allowance, Average Recorded Investment		121	132	122	133
Impaired Financing Receivable, with Related Allowance, Average Recorded Investment			186		187
Impaired Financing Receivable, with no Related Allowance, Interest Income Recognized		1	5	7	10
Impaired Financing Receivable, with Related Allowance, Interest Income Recognized			2		4
Commercial Portfolio Segment [Member]
Financing Receivable, Impaired [Line Items]
Impaired Financing Receivable, with No Related Allowance, Unpaid Principal Balance		93		93
Impaired Financing Receivable, with Related Allowance, Unpaid Principal Balance	[1]					100
Impaired Financing Receivable, with No Related Allowance, Recorded Investment		93		93
Impaired Financing Receivable, with Related Allowance, Recorded Investment	[1]					$ 100
Impaired Financing Receivable, with No Related Allowance, Average Recorded Investment		$ 94		$ 96
Impaired Financing Receivable, with Related Allowance, Average Recorded Investment	[1]		208		218
Impaired Financing Receivable, with Related Allowance, Interest Income Recognized	[1]		$ 1		$ 3

[1] Allowance recorded is less than $1 resulting in rounding to zero.

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Loans And Leases (Recorded Investment In Nonperforming Loans By Class Of Loans) (Details) - USD ($) $ in Thousands	Jun. 30, 2019	Dec. 31, 2018
Financing Receivable, Recorded Investment, Past Due [Line Items]
Loans past due over 90 days still on accrual
Total nonaccrual and nonperforming loans	2,418	377
Single-Family Residential[Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total nonaccrual and nonperforming loans	528	167
Real Estate, Commercial, Non-Owner Occupied [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total nonaccrual and nonperforming loans	1,689
Home Equity Line of Credit, Originated Portfolio [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total nonaccrual and nonperforming loans	15
Home Equity Line of Credit, Purchased Portfolio [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total nonaccrual and nonperforming loans	84	89
Nonaccrual [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total nonaccrual and nonperforming loans	2,418	377
Commercial Portfolio Segment [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total nonaccrual and nonperforming loans	93	100
Consumer Portfolio Segment [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total nonaccrual and nonperforming loans	$ 9	$ 21

XML

Loans And Leases (Aging Of Recorded Investment In Past Due Loans By Class Of Loans) (Details) - USD ($) $ in Thousands	Jun. 30, 2019	Dec. 31, 2018
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Past Due	$ 2,509	$ 1,148
Loans Not Past Due	603,215	556,547
Nonaccrual Loans Not > 90 Days Past Due	698	333
Single-Family Residential[Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Past Due	467	620
Loans Not Past Due	131,050	117,766
Nonaccrual Loans Not > 90 Days Past Due	506	144
Multi-Family Residential [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Loans Not Past Due	47,612	47,651
Real Estate, Commercial, Non-Owner Occupied [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Past Due	1,689
Loans Not Past Due	123,894	122,465
Real Estate, Commercial, Owner Occupied [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Loans Not Past Due	45,558	43,087
Real Estate, Commercial, Land Acquisition [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Loans Not Past Due	19,434	7,883
Construction Loans [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Loans Not Past Due	62,359	61,792
Home Equity Line of Credit, Originated Portfolio [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Past Due	273	474
Loans Not Past Due	21,669	23,119
Nonaccrual Loans Not > 90 Days Past Due	15
Home Equity Line of Credit, Purchased Portfolio [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Past Due	31	33
Loans Not Past Due	259	335
Nonaccrual Loans Not > 90 Days Past Due	84	89
30 - 59 Days Past Due [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Past Due	418	1,071
30 - 59 Days Past Due [Member] | Single-Family Residential[Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Past Due	74	597
30 - 59 Days Past Due [Member] | Home Equity Line of Credit, Originated Portfolio [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Past Due	273	474
30 - 59 Days Past Due [Member] | Home Equity Line of Credit, Purchased Portfolio [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Past Due	31
60 - 89 Days Past Due [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Past Due	371	33
60 - 89 Days Past Due [Member] | Single-Family Residential[Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Past Due	371
60 - 89 Days Past Due [Member] | Home Equity Line of Credit, Purchased Portfolio [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Past Due		33
Greater than 90 Days Past Due [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Past Due	1,720	44
Greater than 90 Days Past Due [Member] | Single-Family Residential[Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Past Due	22	23
Greater than 90 Days Past Due [Member] | Real Estate, Commercial, Non-Owner Occupied [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Past Due	1,689
Commercial Portfolio Segment [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Past Due	40
Loans Not Past Due	146,410	126,887
Nonaccrual Loans Not > 90 Days Past Due	93	100
Commercial Portfolio Segment [Member] | 30 - 59 Days Past Due [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Past Due	40
Consumer Portfolio Segment [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Past Due	9	21
Loans Not Past Due	4,970	5,562
Consumer Portfolio Segment [Member] | Greater than 90 Days Past Due [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Past Due	$ 9	$ 21

XML

Loans And Leases (Loans Modified As TDRs By Class Of Loans) (Details) - USD ($) $ in Thousands	Jun. 30, 2019	Dec. 31, 2018
Financing Receivable, Modifications [Line Items]
Financing Receivable, Modifications, Recorded Investment	$ 3,111	$ 3,161
Nonperforming Financing Receivable [Member]
Financing Receivable, Modifications [Line Items]
Financing Receivable, Modifications, Recorded Investment	93	100
Commercial Portfolio Segment [Member] | Nonperforming Financing Receivable [Member]
Financing Receivable, Modifications [Line Items]
Financing Receivable, Modifications, Recorded Investment	$ 93	$ 100

XML

Loans And Leases (Recorded Investment In Loans By Risk Category And Class Of Loans) (Details) - USD ($) $ in Thousands	Jun. 30, 2019	Dec. 31, 2018
Financing Receivable, Recorded Investment [Line Items]
Loans	$ 605,724	$ 557,695
Not Rated [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans	161,378	150,940
Pass [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans	430,133	396,427
Special Mention [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans	8,047	7,029
Substandard [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans	6,166	3,299
Single-Family Residential[Member]
Financing Receivable, Recorded Investment [Line Items]
Loans	131,517	118,386
Single-Family Residential[Member] | Not Rated [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans	130,989	118,219
Single-Family Residential[Member] | Substandard [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans	528	167
Multi-Family Residential [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans	47,612	47,651
Multi-Family Residential [Member] | Pass [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans	47,059	47,072
Multi-Family Residential [Member] | Special Mention [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans	403	425
Multi-Family Residential [Member] | Substandard [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans	150	154
Real Estate, Commercial, Non-Owner Occupied [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans	125,583	122,465
Real Estate, Commercial, Non-Owner Occupied [Member] | Not Rated [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans	71	76
Real Estate, Commercial, Non-Owner Occupied [Member] | Pass [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans	121,035	119,843
Real Estate, Commercial, Non-Owner Occupied [Member] | Special Mention [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans		1,701
Real Estate, Commercial, Non-Owner Occupied [Member] | Substandard [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans	4,477	845
Real Estate, Commercial, Owner Occupied [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans	45,558	43,087
Real Estate, Commercial, Owner Occupied [Member] | Pass [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans	43,260	39,747
Real Estate, Commercial, Owner Occupied [Member] | Special Mention [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans	2,176	2,252
Real Estate, Commercial, Owner Occupied [Member] | Substandard [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans	122	1,088
Real Estate, Commercial, Land Acquisition [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans	19,434	7,883
Real Estate, Commercial, Land Acquisition [Member] | Pass [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans	19,434	7,883
Construction Loans [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans	62,359	61,792
Construction Loans [Member] | Not Rated [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans	3,280	3,279
Construction Loans [Member] | Pass [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans	59,079	58,513
Home Equity Line of Credit, Originated Portfolio [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans	21,942	23,593
Home Equity Line of Credit, Originated Portfolio [Member] | Not Rated [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans	21,862	23,525
Home Equity Line of Credit, Originated Portfolio [Member] | Substandard [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans	80	68
Home Equity Line of Credit, Purchased Portfolio [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans	290	368
Home Equity Line of Credit, Purchased Portfolio [Member] | Not Rated [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans	206	279
Home Equity Line of Credit, Purchased Portfolio [Member] | Substandard [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans	84	89
Commercial Portfolio Segment [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans	146,450	126,887
Commercial Portfolio Segment [Member] | Pass [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans	140,266	123,369
Commercial Portfolio Segment [Member] | Special Mention [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans	5,468	2,651
Commercial Portfolio Segment [Member] | Substandard [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans	716	867
Consumer Portfolio Segment [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans	4,979	5,583
Consumer Portfolio Segment [Member] | Not Rated [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans	4,970	5,562
Consumer Portfolio Segment [Member] | Substandard [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans	$ 9	$ 21

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Loans And Leases (Components Of Net Investment In Direct Financing Leases) (Details) - USD ($) $ in Thousands		Jun. 30, 2019	Dec. 31, 2018
Loans And Leases [Abstract]
Total minimum lease payments to be received	[1]	$ 5,649	$ 6,045
Less: unearned income	[1]	(555)	(642)
Net investment in direct financing leases	[1]	$ 5,094	$ 5,403

[1] There were no initial direct costs associated with these leases.

XML

Loans And Leases (Summary Of Future Minimum Lease Payments Receivable) (Details) $ in Thousands	Jun. 30, 2019 USD ($)
Loans And Leases [Abstract]
2019	$ 397
2020	793
2021	793
2022	793
2023	1,563
Thereafter	1,310
Future minimum lease payments	$ 5,649

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Leases (Narrative) (Details) $ in Thousands	3 Months Ended	6 Months Ended
	Jun. 30, 2019 USD ($)	Jun. 30, 2019 USD ($)
Leases [Abstract]
Lease terms extending through year		2024
Weighted-average remaining lease term	4 years 8 months 12 days	4 years 8 months 12 days
Weighted-average discount rate	6.56%	6.56%
Operating lease costs	$ 90	$ 217
Variable lease costs	$ 70	$ 101

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Leases (Future Minimum Operating Lease Payments) (Details) $ in Thousands	Jun. 30, 2019 USD ($)
Leases [Abstract]
2019, excluding the six months ended June 30, 2019	$ 271
2020	544
2021	548
2022	536
2023	377
Thereafter	250
Total future minimum rental commitments	2,526
Less - amounts representing interest	(363)
Total operating lease liabilities	$ 2,163

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Fair Value (Narrative) (Details)	3 Months Ended		6 Months Ended
	Jun. 30, 2019 USD ($)	Jun. 30, 2018 USD ($)	Jun. 30, 2019 USD ($)	Jun. 30, 2018 USD ($)	Dec. 31, 2018 USD ($)
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair value assets and liabilities transfer level 1 to level 3	0		0		0
Fair value assets and liabilities transfer level 3 to level 1	0		0		0
Unpaid principal balance of impairment loan at collateral	$ 4,679,000		$ 4,679,000		$ 3,036,000
Valuation allowance	33,000		33,000		22,000
Fair value option, 90 days or more past due	0		0		0
Write-downs of impaired collateral-dependent loans	0	$ 0	0	$ 0
Loans 90 days or more past due and still accruing interest
Fair Value, Inputs, Level 1 [Member] | Financial Instruments Measured At Fair Value On A Non-Recurring Basis [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets measured at fair value on a recurring basis	0		0		0
Liabilities measured at fair value on a recurring basis	0		0		0
Fair Value, Inputs, Level 1 [Member] | Fair Value, Measurements, Recurring [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets measured at fair value on a recurring basis	0		0		0
Liabilities measured at fair value on a recurring basis	0		0		0
Fair Value, Inputs, Level 2 [Member] | Financial Instruments Measured At Fair Value On A Non-Recurring Basis [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets measured at fair value on a recurring basis	0		0		0
Liabilities measured at fair value on a recurring basis	0		0		0
Fair Value, Inputs, Level 3 [Member] | Fair Value, Measurements, Recurring [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets measured at fair value on a recurring basis	0		0		0
Liabilities measured at fair value on a recurring basis	$ 0		$ 0		$ 0

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Fair Value (Assets And Liabilities Measured At Fair Value On A Recurring Basis, Including Financial Assets And Liabilities) (Details) - USD ($) $ in Thousands	6 Months Ended	12 Months Ended
	Jun. 30, 2019	Dec. 31, 2018
Financial Assets:
Total securities available for sale	$ 10,189	$ 10,114
Fair Value, Inputs, Level 2 [Member]
Financial Assets:
Total securities available for sale	10,189	10,114
Yield maintenance provisions (embedded derivatives)	8	17
Interest rate lock commitments	2,480	721
Financial Liabilities:
Interest-rate swaps	8	17
TBA Mortgage-back securities	645	342
Fair Value, Measurements, Recurring [Member] | Fair Value, Inputs, Level 2 [Member]
Financial Assets:
Total securities available for sale	10,189	10,114
Loans held for sale	52,184	17,385
Fair Value, Measurements, Recurring [Member] | U.S. Treasury [Member] | Fair Value, Inputs, Level 2 [Member]
Financial Assets:
Total securities available for sale	9,990	9,881
Fair Value, Measurements, Recurring [Member] | Mortgage-Backed Securities - Residential [Member] | Fair Value, Inputs, Level 2 [Member]
Financial Assets:
Total securities available for sale	151	170
Fair Value, Measurements, Recurring [Member] | Collateralized Mortgage Obligations [Member] | Fair Value, Inputs, Level 2 [Member]
Financial Assets:
Total securities available for sale	48	63
Fair Value, Measurements, Recurring [Member] | Yield maintenance provisions (embedded derivatives) [Member] | Fair Value, Inputs, Level 2 [Member]
Financial Assets:
Yield maintenance provisions (embedded derivatives)	8	17
Fair Value, Measurements, Recurring [Member] | Interest Rate Lock Commitments [Member] | Fair Value, Inputs, Level 2 [Member]
Financial Assets:
Interest rate lock commitments	2,480	721
Fair Value, Measurements, Recurring [Member] | Interest Rate Swap [Member] | Fair Value, Inputs, Level 2 [Member]
Financial Liabilities:
Interest-rate swaps	8	17
Fair Value, Measurements, Recurring [Member] | TBA Mortgage-Back Security [Member] | Fair Value, Inputs, Level 2 [Member]
Financial Liabilities:
TBA Mortgage-back securities	$ 645	$ 342

XML

Fair Value (Assets And Liabilities Measured At Fair Value On A Non-Recurring Basis) (Details) - USD ($) $ in Thousands	Jun. 30, 2019	Dec. 31, 2018
Impaired loans:
Total impaired loans	$ 4,904	$ 3,415
Financial Instruments Measured At Fair Value On A Non-Recurring Basis [Member] | Fair Value, Inputs, Level 3 [Member]
Impaired loans:
Total impaired loans	4,646	3,014
Commercial Portfolio Segment [Member] | Financial Instruments Measured At Fair Value On A Non-Recurring Basis [Member] | Fair Value, Inputs, Level 3 [Member]
Impaired loans:
Total impaired loans	93	100
Single-Family Residential[Member] | Financial Instruments Measured At Fair Value On A Non-Recurring Basis [Member] | Fair Value, Inputs, Level 3 [Member]
Impaired loans:
Total impaired loans	109	110
Real Estate, Commercial, Non-Owner Occupied [Member] | Financial Instruments Measured At Fair Value On A Non-Recurring Basis [Member] | Fair Value, Inputs, Level 3 [Member]
Impaired loans:
Total impaired loans	$ 4,444	$ 2,804

XML

Fair Value (Financial Instruments Measured At Fair Value On A Non-Recurring Basis) (Details) - USD ($)	Jun. 30, 2019	Dec. 31, 2018
Commercial Portfolio Segment [Member]
Impaired loans:
Impaired loans, Fair Value	$ 93,000	$ 100,000
Commercial Portfolio Segment [Member] | Weighted Average [Member] | Measurement Input, Comparability Adjustment [Member]
Impaired loans:
Impaired loans, Measurement Input	2.06	3.48
Single-Family Residential[Member]
Impaired loans:
Impaired loans, Fair Value	$ 109,000	$ 110,000
Single-Family Residential[Member] | Weighted Average [Member] | Measurement Input, Comparability Adjustment [Member]
Impaired loans:
Impaired loans, Measurement Input	3.61	3.61
Real Estate, Commercial, Non-Owner Occupied [Member]
Impaired loans:
Impaired loans, Fair Value	$ 4,444,000	$ 2,804,000
Real Estate, Commercial, Non-Owner Occupied [Member] | Minimum [Member] | Measurement Input, Comparability Adjustment [Member]
Impaired loans:
Impaired loans, Measurement Input	(2.58)	3.48
Real Estate, Commercial, Non-Owner Occupied [Member] | Maximum [Member] | Measurement Input, Comparability Adjustment [Member]
Impaired loans:
Impaired loans, Measurement Input	8.61	8.61
Real Estate, Commercial, Non-Owner Occupied [Member] | Weighted Average [Member] | Measurement Input, Comparability Adjustment [Member]
Impaired loans:
Impaired loans, Measurement Input	1.52	5.02

XML

Fair Value (Aggregate Fair Value, Contractual Balance (Including Accrued Interest) And Gain Or Loss) (Details) - USD ($) $ in Thousands	Jun. 30, 2019	Dec. 31, 2018
Fair Value [Abstract]
Aggregate fair value	$ 52,184	$ 17,385
Contractual balance	51,031	17,008
Gain (loss)	$ 1,153	$ 377

XML

Fair Value (Amount Of Gains And Losses From Changes In Fair Value Included In Earnings) (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018
Fair Value [Abstract]
Interest income	$ 275	$ 142	$ 490	$ 166
Interest expense
Change in fair value	516	216	776	274
Total change in fair value	$ 791	$ 358	$ 1,266	$ 440

XML

Fair Value (Carrying Amounts And Estimated Fair Values Of Financial Instruments) (Details) - USD ($) $ in Thousands	6 Months Ended	12 Months Ended
	Jun. 30, 2019	Dec. 31, 2018
Financial assets
Securities available for sale	$ 10,189	$ 10,114
Loans held for sale	52,184	17,385
Financial liabilities
Advances by borrowers for taxes and insurance	(340)	(827)
Fair Value, Inputs, Level 1 [Member]
Financial assets
Cash and cash equivalents	34,323	67,304
Interest-bearing deposits in other financial institutions	100	100
Accrued interest receivable	26	45
Financial liabilities
Deposits	(328,081)	(306,121)
Accrued interest payable	(20)
Fair Value, Inputs, Level 2 [Member]
Financial assets
Securities available for sale	10,189	10,114
Loans held for sale	52,184	17,385
Accrued interest receivable	44	40
Yield maintenance provisions (embedded derivatives)	8	17
Interest rate lock commitments	2,480	721
Financial liabilities
Deposits	(303,660)	(272,924)
FHLB advances and other borrowings	(18,677)	(19,589)
Subordinated debentures	(15,609)	(14,280)
Accrued interest payable	(219)	(231)
Interest-rate swaps	(8)	(17)
TBA Mortgage-back securities	(645)	(342)
Fair Value, Inputs, Level 3 [Member]
Financial assets
Loans and leases, net	591,720	549,599
Accrued interest receivable	2,175	2,097
Financial liabilities
Advances by borrowers for taxes and insurance	(340)	(827)
Carrying Value [Member]
Financial assets
Cash and cash equivalents	34,323	67,304
Interest-bearing deposits in other financial institutions	100	100
Securities available for sale	10,189	10,114
Loans held for sale	52,184	17,385
Loans and leases, net	598,695	550,683
FHLB and FRB stock	3,816	3,476
Accrued interest receivable	2,245	2,181
Yield maintenance provisions (embedded derivatives)	8	17
Interest rate lock commitments	2,480	721
Financial liabilities
Deposits	(628,586)	(579,786)
FHLB advances and other borrowings	(18,500)	(19,500)
Advances by borrowers for taxes and insurance	(340)	(827)
Subordinated debentures	(14,786)	(14,767)
Accrued interest payable	(239)	(231)
Interest-rate swaps	(8)	(17)
TBA Mortgage-back securities	(645)	(342)
Estimate of Fair Value [Member]
Financial assets
Cash and cash equivalents	34,323	67,304
Interest-bearing deposits in other financial institutions	100	100
Securities available for sale	10,189	10,114
Loans held for sale	52,184	17,385
Loans and leases, net	591,720	549,599
Accrued interest receivable	2,245	2,182
Yield maintenance provisions (embedded derivatives)	8	17
Interest rate lock commitments	2,480	721
Financial liabilities
Deposits	(631,741)	(579,045)
FHLB advances and other borrowings	(18,677)	(19,589)
Advances by borrowers for taxes and insurance	(340)	(827)
Subordinated debentures	(15,609)	(14,280)
Accrued interest payable	(239)	(231)
Interest-rate swaps	(8)	(17)
TBA Mortgage-back securities	$ (645)	$ (342)

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Subordinated Debentures (Narrative) (Details) - USD ($)	1 Months Ended	6 Months Ended
	Dec. 31, 2018	Jun. 30, 2019	Dec. 31, 2008	Dec. 31, 2003
Subsidiary, Sale of Stock [Line Items]
Subordinated debentures	$ 14,767,000	$ 14,786,000		$ 5,155,000
Holding Company's investment in the common stock				$ 155,000
Private Placement [Member]
Subsidiary, Sale of Stock [Line Items]
Holding Company, closed a pooled private offering				5,000
Trust preferred securities with a liquidation amount				$ 1
Subordinated Debt [Member]
Subsidiary, Sale of Stock [Line Items]
Maturity date		Dec. 30, 2033
Required principal payments over next five years		$ 0
Number of years with no principal repayment		5 years
Maximum number of years for deferred interest payments		5 years
Subordinated Debt [Member] | Subordinated debentures mature on December 30, 2033 [Member]
Subsidiary, Sale of Stock [Line Items]
Holding Company may redeem the subordinated debentures in a principal amount with integral multiples			$ 1
Percentage in which holding company redeem subordinated debentures			100.00%
Trust preferred securities and subordinated debentures have a stated percentage	5.65%	5.44%
Subordinated Debt [Member] | London Interbank Offered Rate (LIBOR) [Member] | Subordinated debentures mature on December 30, 2033 [Member]
Subsidiary, Sale of Stock [Line Items]
Variable rate spread		2.85%
Subordinated notes		$ 9,612,000
Subordinated Debt [Member] | Private Placement [Member] | Fixed-To-Floating Rate Subordinated Notes [Member]
Subsidiary, Sale of Stock [Line Items]
Maturity date	Dec. 30, 2028
Subordinated notes	$ 10,000,000	$ 9,631,000
Debt issuance costs	$ 388,000
Interest rate	7.00%
Subordinated Debt [Member] | Private Placement [Member] | London Interbank Offered Rate (LIBOR) [Member] | Fixed-To-Floating Rate Subordinated Notes [Member]
Subsidiary, Sale of Stock [Line Items]
Variable rate spread	4.14%

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FHLB Advances And Other Debt (Narrative) (Details) - Third-Party Bank [Member] - USD ($) $ in Thousands	1 Months Ended	6 Months Ended
	Dec. 31, 2018	Jun. 30, 2019	Jul. 31, 2018	Feb. 28, 2018
Line of Credit Facility [Line Items]
Line of credit, borrowing capacity	$ 10,000			$ 6,000
Line of credit, increase	$ 2,000
Variable rate spread		0.75%
Line of credit, increase in borrowing capacity			$ 2,000
Line of credit, expiration date		Feb. 01, 2020
Line of credit outstanding		$ 5,000

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FHLB Advances (Schedule Of FHLB Fixed Rate Advances And Other Debt) (Details) - USD ($) $ in Thousands	6 Months Ended
	Jun. 30, 2019	Dec. 31, 2018
Federal Home Loan Bank, Advances, Branch of FHLB Bank [Line Items]
Total	$ 18,500	$ 19,500
Federal Home Loan Bank Advances [Member]
Federal Home Loan Bank, Advances, Branch of FHLB Bank [Line Items]
2019, Weighted Average Rate	1.62%
2020, Weighted Average Rate	1.98%
2021, Weighted Average Rate	2.32%
2022, Weighted Average Rate	2.05%
2019	$ 3,500	3,500
2020	4,500	4,500
2021	4,000	4,000
2022	1,500	1,500
Total FHLB fixed rate advances	$ 13,500	13,500
Line of Credit [Member]
Federal Home Loan Bank, Advances, Branch of FHLB Bank [Line Items]
2020, Weighted Average Rate	6.25%
2020	$ 5,000	6,000
Total	$ 5,000	$ 6,000

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Stock-Based Compensation (Narrative) (Details) $ in Thousands		3 Months Ended		6 Months Ended
	Aug. 20, 2018	Jun. 30, 2019 USD ($) shares	Jun. 30, 2018 USD ($) shares	Jun. 30, 2019 USD ($) ShareBasedCompensationPlan shares	Jun. 30, 2018 USD ($) shares	May 29, 2019 shares	Mar. 19, 2019 shares	May 16, 2013 shares
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Number of stock-based compensation plans | ShareBasedCompensationPlan				3
Compensation cost | $		$ 138	$ 96	$ 254	$ 192
Total income tax effect recognized for share-based compensation arrangements | $		$ 29	$ 20	$ 53	$ 40
Reverse stock split ratio	5.5
Shares available to be issued								272,727
Shares expired					73
Shares cancelled or forfeited				925	73
2003 Equity Compensation Plan [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Number of shares authorized		18,181		18,181
2009 Equity Compensation Plan [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Available for grant							0
2019 Equity Compensation Plan [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Number of shares authorized						300,000
Available for grant		300,000		300,000
Stock Options [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Expiration period				10 years
Shares Granted		0	0	0	0
Stock Options Exercised		0	0	0	0
Stock Options [Member] | Minimum [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Vesting periods				1 year
Stock Options [Member] | Maximum [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Vesting periods				3 years
Restricted Stock [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Unrecognized compensation cost | $		$ 972	$ 642	$ 972	$ 642
Nonvested shares, granted				33,788	727
Shares, Forfeited				1,493	7,999
Shares, Vested
Restricted Stock [Member] | 2003 Equity Compensation Plan [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Number of shares authorized		5,454		5,454
Restricted Stock [Member] | 2009 Equity Compensation Plan [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Number of shares authorized		36,363		36,363
Restricted Stock [Member] | Minimum [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Vesting periods				1 year
Restricted Stock [Member] | Maximum [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Vesting periods				3 years

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Stock-Based Compensation (Summary Of Stock Option Activity) (Details) - USD ($) $ / shares in Units, $ in Thousands	6 Months Ended
	Jun. 30, 2019	Jun. 30, 2018
Stock-Based Compensation [Abstract]
Shares, Outstanding at beginning of year	96,379
Shares Expired		(73)
Shares Cancelled or Forfeited	(925)	(73)
Shares, Outstanding at end of period	95,454
Shares, Exercisable at end of period	95,454
Weighted Average Exercise Price, Outstanding at beginning of year	$ 7.65
Weighted Average Exercise Price, Expired
Weighted Average Exercise Price, Cancelled or Forfeited	8.03
Weighted Average Exercise Price, Outstanding at end of period	7.64
Weighted Average Exercise Price, Exercisable at end of period	$ 7.64
Weighted average remaining contractual term, Outstanding at end of period	3 years 10 months 24 days
Weighted average remaining contractual term, Exercisable at end of period	3 years 10 months 24 days
Intrinsic value, Outstanding at end of period	$ 422,330
Intrinsic value, Exercisable at end of period	$ 422,330

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Stock-Based Compensation (Nonvested Restricted Shares Activity) (Details) - Restricted Stock [Member] - $ / shares	6 Months Ended
	Jun. 30, 2019	Jun. 30, 2018
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Nonvested shares, beginning balance	69,324
Nonvested shares, granted	33,788	727
Nonvested shares, vested
Nonvested shares, forfeited	(1,493)	(7,999)
Nonvested shares, ending balance	101,619
Nonvested, weighted average grant date fair value, beginning balance	$ 11.91
Nonvested, weighted average grant date fair value, granted	12.81
Nonvested, weighted average grant date fair value, vested
Nonvested, weighted average grant date fair value, forfeited	12.12
Nonvested, weighted average grant date fair value, ending balance	$ 12.21

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Regulatory Capital Matters (Narrative) (Details) - USD ($) $ in Thousands	6 Months Ended
	Jun. 30, 2019	Jan. 01, 2016
Regulatory Capital Matters [Abstract]
Common equity tier 1 capital to risk-weighted assets, ratio	4.50%
Capital conservation buffer	2.50%	0.625%
Common Equity Tier 1 capital to risk weighted assets, upon full implementation, ratio	7.00%
Tier 1 capital to risk-weighted assets, ratio	6.00%
Tier 1 capital to risk weighted assets, upon full implementation, ratio	8.50%
Total capital to risk-weighted assets, ratio	8.00%
Total capital to risk weighted assets, upon full implementation, ratio	10.50%
Minimum leverage ratio	4.00%
Capital conservative buffer phase period	4 years
Opening Balance in Liquidation Account	$ 14,300
Future percent, common equity of risk-weighted assets	2.50%

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Regulatory Capital Matters (Actual And Required Capital Amounts And Ratios Of CFBank) (Details) - USD ($) $ in Thousands	Jun. 30, 2019	Dec. 31, 2018
Regulatory Capital Matters [Abstract]
Total Capital to risk weighted assets, Actual Amount	$ 74,274	$ 69,066
Tier 1 (Core) Capital to risk weighted assets, Actual Amount	67,103	62,085
Common equity Tier 1 Capital to risk weighted assets, Actual Amount	67,103	62,085
Tier 1 (Core) Capital to adjusted total assets (Leverage Ratio), Actual Amount	$ 67,103	$ 62,085
Total Capital to risk weighted assets, Actual Ratio	11.95%	12.37%
Tier 1 (Core) Capital to risk weighted assets, Actual Ratio	10.79%	11.12%
Common equity Tier 1 Capital to risk weighted assets, Actual Ratio	10.79%	11.12%
Tier 1 (Core) Capital to adjusted total assets, Actual Ratio	9.44%	10.13%
Total Capital to risk weighted assets, Phase-In Schedule Amount	$ 65,270	$ 55,164
Tier 1 (Core) Capital to risk weighted assets, Phase-In Schedule Amount	52,838	43,998
Common equity Tier 1 (Core) Capital to risk weighted assets, Phase-In Schedule Amount	43,514	35,622
Tier 1 (Core) Capital to adjusted total assets, Phase-In Schedule Amount	$ 28,438	$ 24,526
Total Capital to risk weighted assets, Phase-In Schedule Ratio	10.50%	9.88%
Tier 1 (Core) Capital to risk weighted assets, Phase-In Schedule Ratio	8.50%	7.88%
Common equity Tier 1 (Core) Capital to risk weighted assets, Phase-In Schedule Ratio	7.00%	6.38%
Tier 1 (Core) Capital to adjusted total assets, Phase-In Schedule Ratio	4.00%	4.00%
Total Capital to risk weighted assets, Fully Phased-In Amount		$ 58,626
Tier 1 (Core) Capital to risk weighted assets, Fully Phased-In Amount		47,459
Common equity Tier 1 (Core) Capital to risk weighted assets, Fully Phased-In Amount		39,084
Tier 1 (Core) Capital to adjusted total assets, Fully Phased-In Amount		$ 24,526
Total Capital to risk weighted assets, Fully Phased-In Ratio		10.50%
Tier 1 (Core) Capital to risk weighted assets, Fully Phased-In Ratio		8.50%
Common equity Tier 1 (Core) Capital to risk weighted assets, Fully Phased-In Ratio		7.00%
Tier 1 (Core) Capital to adjusted total assets, Fully Phased-In Ratio		4.00%
Capital Required to be Well Capitalized, Amount	$ 62,162	$ 55,834
Tier One Risk Based Capital Required to be Well Capitalized	49,730	44,668
Common equity Tier One Risk Based Capital Required to be Well Capitalized	40,405	36,292
Tier One Leverage Capital Required to be Well Capitalized	$ 35,548	$ 30,658
Capital Required to be Well Capitalized to Risk Weighted Assets	10.00%	10.00%
Tier One Risk Based Capital Required to be Well Capitalized to Risk Weighted Assets	8.00%	8.00%
Common equity Tier One Risk Based Capital Required to be Well Capitalized to Risk Weighted Assets	6.50%	6.50%
Tier One Leverage Capital Required to be Well Capitalized to Average Assets	5.00%	5.00%

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Derivative Instruments (Narrative) (Details) - USD ($)	6 Months Ended
	Jun. 30, 2019	Jun. 30, 2018	Dec. 31, 2018
Derivative [Line Items]
Notional amount	$ 665,000		$ 1,359,000
Interest Rate Swap [Member]
Derivative [Line Items]
Notional amount	665,000		1,359,000
Net gains (losses) recognized in earnings	0	$ 0
Interest Rate Lock Commitments [Member]
Derivative [Line Items]
Notional amount	242,571,000		55,220,000
Fair value of yield maintenance provisions	2,480,000		$ 721,000
CF Bank [Member]
Derivative [Line Items]
Securities pledged as collateral	$ 93,000

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Derivative Instruments (Summary Of Derivative Instruments) (Details) - USD ($) $ in Thousands	6 Months Ended	12 Months Ended
	Jun. 30, 2019	Dec. 31, 2018
Derivative Instruments [Abstract]
Notional amount	$ 665	$ 1,359
Weighted average pay rate on interest-rate swaps	2.74%	3.12%
Weighted average receive rate on interest-rate swaps	2.38%	2.49%
Weighted average maturity (years)	1 year 3 months 18 days	2 years
Fair value of interest-rate swaps	$ (8)	$ (17)
Fair value of yield maintenance provisions	$ 8	$ 17

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Derivative Instruments (Schedule Of Mortgage Banking Derivatives) (Details) - USD ($) $ in Thousands	Jun. 30, 2019	Dec. 31, 2018
Interest Rate Commitments [Member]
Derivatives, Fair Value [Line Items]
Notional Amount, Assets	$ 242,571	$ 55,220
Fair value, Derivative	2,480	721
TBA Mortgage-Back Securities [Member]
Derivatives, Fair Value [Line Items]
Notional Amount, Assets	144,250	33,250
Fair value, Derivative	$ (645)	$ (342)

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Derivative Instruments (Schedule Of Revenue Recognized On Mortgage Activities) (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018
Derivative Instruments [Abstract]
Gain on loans sold	$ 1,884	$ 276	$ 3,116	$ 290
Gain (loss) from change in fair value of loans held-for-sale	516	216	776	274
Gain (loss) from change in fair value of derivatives	(49)	17	(90)	253
Gain (loss) recognized on mortgage activities	$ 2,351	$ 509	$ 3,802	$ 817

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Income Taxes (Narrative) (Details) - USD ($)	3 Months Ended		6 Months Ended		12 Months Ended
	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018	Dec. 31, 2012	Dec. 31, 2018
Proceeds from sale of common stock					$ 22,500,000
Valuation allowance against net deferred tax asset	$ 0		$ 0
Net operating loss carry forwards	22,742,000		22,742,000
Carryforwards utilize limit before the stock offering closed			163,000
Unutilized operating loss carryforwards that will expire	20,520,000		20,520,000
Reduced deferred tax assets and valuation allowance	6,977,000		6,977,000
Additional bad debt deductions (expense)			2,250,000
Deferred tax liability not recorded	473,000		473,000
Deferred tax asset	1,600,000		1,600,000			$ 1,600,000
Unrecognized Tax Benefits	$ 0		$ 0			$ 0
Effective tax rate	20.40%	19.80%	20.20%	19.50%
Minimum [Member]
Operating loss carryforwards, expiration			Dec. 31, 2024
Maximum [Member]
Operating loss carryforwards, expiration			Dec. 31, 2033

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Income Taxes (Summary Of Differences Between Income Taxes At The Federal Statutory And Effective Tax Rate) (Details)	3 Months Ended		6 Months Ended
	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018
Income Taxes [Abstract]
Statutory tax rate	21.00%	21.00%	21.00%	21.00%
Increase (decrease) resulting from:
Tax exempt income on bank owned life insurance	(0.30%)	(0.50%)	(0.30%)	(0.60%)
Low income housing credits	(0.50%)	(1.10%)	(0.60%)	(1.00%)
Other, net	0.20%	0.40%	0.10%	0.10%
Effective tax rate	20.40%	19.80%	20.20%	19.50%

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Accumulated Other Comprehensive Income (Details) - USD ($)		3 Months Ended		6 Months Ended
		Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018
Accumulated Other Comprehensive Income (Loss) [Line Items]
Amount reclassified from accumulated other comprehensive income		$ 0	$ 0	$ 0	$ 0
Unrealized Gains and Losses on Available-for-Sale Securities [Member]
Accumulated Other Comprehensive Income (Loss) [Line Items]
Accumulated other comprehensive income (loss), beginning of period	[1]	(38,000)	(101,000)	(73,000)	(47,000)
Other comprehensive income (loss) before reclassifications	[1],[2]	52,000	(15,000)	87,000	(69,000)
Net current-period other comprehensive income (loss)	[1]	52,000	(15,000)	87,000	(69,000)
Accumulated other comprehensive income (loss), end of period	[1]	$ 14,000	$ (116,000)	$ 14,000	$ (116,000)

[1] All amounts are net of tax. Amounts in parentheses indicate a reduction of other comprehensive income.

[2] There were no amounts reclassified out of other comprehensive income for the three and six months ended June 30, 2019 and 2018.

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Preferred Stock (Details)					1 Months Ended	3 Months Ended
	Aug. 20, 2018	Sep. 29, 2017 shares	Jul. 15, 2014 USD ($) shares	May 12, 2014 USD ($) shares	Apr. 30, 2014 $ / shares shares	Dec. 31, 2017 USD ($)	Jun. 30, 2019 USD ($) shares	Dec. 31, 2018 USD ($) shares
Schedule of Capitalization, Equity [Line Items]
Aggregate value
Share conversion, original shares converted | shares		480,000
Reverse stock split ratio	5.5
Non-Cumulative Convertible Perpetual Preferred Stock Series B [Member] | Private Placement [Member]
Schedule of Capitalization, Equity [Line Items]
Preferred stock rate					6.25%
Price per share | $ / shares					$ 25.00
Series B Preferred Stock [Member]
Schedule of Capitalization, Equity [Line Items]
Preferred Stock Shares Issued | shares							0	0
Stock conversion, estimated preferred stock dividends eliminated quarterly						$ 187,500
Stock conversion, estimated preferred stock dividends eliminated annually						$ (750,000)
Series B Preferred Stock [Member] | Private Placement [Member]
Schedule of Capitalization, Equity [Line Items]
Preferred Stock Shares Issued | shares			480,000	480,000	480,000		480,000
Aggregate value			$ 12,000,000	$ 12,000,000
Expenses for issuance of stock			482,000	482,000
Other offering expenses			149,000	149,000
Proceeds from Issuance of Private Placement			$ 11,369,000	$ 11,369,000
Common Stock
Schedule of Capitalization, Equity [Line Items]
Shares issued upon conversion | shares		6,857,143
Shares post-reverse-split | shares		1,246,753

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Common Stock Warrants (Details) - USD ($) $ / shares in Units, $ in Thousands	6 Months Ended
	Jun. 30, 2019	Dec. 31, 2018	Jul. 15, 2014	May 12, 2014	Apr. 30, 2014
Post-Reverse-Split Basis [Member]
Class of Warrant or Right [Line Items]
Warrants issued	0.591
Warrant, shares	31,294
Series B Preferred Stock [Member]
Class of Warrant or Right [Line Items]
Preferred stock, share issued	0	0
Common Stock
Class of Warrant or Right [Line Items]
Warrants issued	1,152,125
Warrant, exercise period	5 years
Warrant, expiration date	Jul. 15, 2019
Common Stock | Post-Reverse-Split Basis [Member]
Class of Warrant or Right [Line Items]
Warrants issued	209,477
Exercise price of warrant	$ 10.18
Private Placement [Member] | Series B Preferred Stock [Member]
Class of Warrant or Right [Line Items]
Warrants issued	2.00
Warrant, value	$ 700
Warrant, shares	28,000
Preferred stock, share issued	480,000		480,000	480,000	480,000
Private Placement [Member] | Series B Preferred Stock [Member] | Post-Reverse-Split Basis [Member]
Class of Warrant or Right [Line Items]
Warrants issued	0.364
Private Placement [Member] | Common Stock
Class of Warrant or Right [Line Items]
Warrants issued	3.25
Warrant, value	$ 700
Warrant, shares	28,000