10-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C.  20549

FORM 10-K

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

For the Fiscal Year ended December 31, 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 N. High Street, Worthington, Ohio	43085
(Address of Principal Executive Offices)	(Zip Code)

(614) 334-7979

(Registrant’s Telephone Number, Including Area Code)

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

Common Stock, par value $.01 per share	CFBK	Nasdaq® Capital Market
(Title of Class)	(Trading Symbol)	(Name of Exchange on which Registered)

Securities registered pursuant to Section 12(g) of the Exchange Act: None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act

YES [  ]    NO [X]

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act

YES [  ]NO[X]

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 (Section 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.  (Check one):

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 Act). 

YES [  ]  NO [X]

The aggregate market value of the voting and non-voting common equity of the registrant held by non-affiliates as of June 30, 2019was $53.8 million based upon the closing price as reported on the Nasdaq® Capital Market for that date.

As of March8, 2020, there were 5,373,858shares of the registrant’s Common Stock outstanding.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the registrant’s Annual Report to Stockholders  for its fiscal year ended December 31, 2019,  included as Exhibit 13.1 to this Form 10-K,and its Proxy Statement for the Annual Meeting of Stockholders  to be held on May27,2020,  are incorporated herein by reference into Parts II and III, respectively, of this Form 10-K.

INDEX

PART I
Item 1.	Business	3
Item 1A.	Risk Factors	31
Item 1B.	Unresolved Staff Comments	39
Item 2.	Properties	39
Item 3.	Legal Proceedings	40
Item 4.	Mine Safety Disclosures	40
PART II
Item 5.	Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	40
Item 6.	Selected Financial Data	41
Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	41
Item 7A.	Quantitative and Qualitative Disclosures About Market Risk	41
Item 8.	Financial Statements and Supplementary Data	41
Item 9.	Changes in and Disagreements With Accountants on Accounting and Financial Disclosure	41
Item 9A.	Controls and Procedures	42
Item 9B.	Other Information	42
PART III
Item 10.	Directors, Executive Officers and Corporate Governance	42
Item 11.	Executive Compensation	43
Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	43
Item 13.	Certain Relationships and Related Transactions, and Director Independence	43
Item 14.	Principal Accounting Fees and Services	43
PART IV
Item 15.	Exhibits and Financial Statement Schedules	44
Item 16.	Form 10-K Summary	45
SIGNATURES		46

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Forward-Looking Statements

Statements in this Annual Report on Form 10-K(this “Form 10-K”) and in our other communications that are not statements of historical fact are forward-looking statements which are made in good faith by us.Forward-looking statements include, but are not limited to: (1) projections of revenues, income or loss, earnings or loss per share of common stock, capital structure and other financial items; (2) plans and objectives of the management or Boards of Directors of Central Federal Corporation (the “Holding Company”) or CFBank, National Association (“CFBank”); (3) statements regarding future events, actions or economic performance; and (4) statements of assumptions underlying such statements.  Words such as "estimate," "strategy," "may," "believe," "anticipate," "expect," "predict," "will," "intend," "plan," "targeted," and the negative of these terms, or similar expressions, are intended to identify forward-looking statements, but are not the exclusive means of identifying such statements.  Various risks and uncertainties may cause actual results to differ materially from those indicated by our forward-looking statements, including, without limitation, those risks set forth in the section captioned “RISK FACTORS” in Part I, Item 1A of this Form 10-K. 

Forward-looking statements are not guarantees of performance or results.  A forward-looking statement may include a statement of the assumptions or bases underlying the forward-looking statement.  The Holding Company, including its wholly-owned subsidiary, CFBank,believes it has 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 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.

PART I

Item 1.  Business.

General

The Holding Company was organized as a Delaware corporation in September 1998 as the holding company for CFBank,in connection with CFBank’s conversion from a mutual to stock form of organization.CFBank was originally organized in 1892 and was formerly known as Central Federal Savings and Loan Association of Wellsville and more recently as Central Federal Bank.On December 1, 2016, CFBank converted from a federal savings institution to a national bank.  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 company status.  As a financial holding company, we are subject to regulation by the Board of Governors of the Federal Reserve System (the “FRB”).  As used herein, the terms “we,” “us,” “our” and the “Company” refer to Central Federal Corporation and its subsidiaries, unless the context indicates to the contrary.

The consolidated financial statements include the Holding Company and CFBank.Intercompany transactions and balances are eliminated in consolidation.

Central Federal Capital Trust I (the “Trust”), a wholly-owned subsidiary of the Holding Company, was formed in 2003 to raise additional funding for the Company through a pooled private offering of trust preferred securities.  The Holding Company issued $5,155,000 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 (variable interest entity) and, therefore, the trust is not consolidated in the Company’s financial statements, but rather the subordinated debentures are shown as a liability. 

Currently, the Company does not transact material business other than through CFBank.  At December 31, 2019, the Company’s assets totaled $880.5 million and stockholders’ equity totaled $80.7 million. 

CFBank has a presence in four major metro Ohio markets – Columbus, Cleveland, Cincinnati and Akron- as well as its two branch locations in Columbiana County, Ohio.  Also, in March 2019, CFBank opened a branch location in Blue Ash, Ohio, which is its second location in the Cincinnati market.  CFBank provides personalized Business Banking products and services including commercial loans and leases, commercial and residential real estate loans, equipment leasing, SBA loans and treasury management depository services.  In addition, CFBank also has a national residential lending platform.  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.  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.

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Our revenues are derived principally from the generation of interest and fees on loans originated and noninterest income generated on the sale of loans.  Ourprimary sources of funds are retail and business deposit accounts and certificates of deposit, brokered certificates of deposit and, to a lesser extent, principal and interest payments on loans and securities, Federal Home Loan Bank (FHLB) advances, other borrowings and proceeds from the sale of loans.

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, Ohio; Columbiana County through our offices in Calcutta and Wellsville, Ohio; and Cuyahoga County through our agency office in Woodmere, Ohio.We originate commercial and business loans primarily throughout Ohio, and residential real estate loans on a national basis.

Market Area and Competition

Ourprimary market areas in Ohio are competitive markets for financial servicesand we face competition both in making loans and in attracting deposits.  Direct competition comes from a number of financial institutions operating in our market area, many of which have a statewide or regional presence, and in some cases, a national presence.  Many of these financial institutions are significantly larger and have greater financial resources than we do.  Competition for loans and deposits comes from savings institutions, mortgage banking companies, commercial banks, credit unions, brokerage firms and insurance companies. 

Lending Activities

Loan and Lease Portfolio Composition.Ourloan and lease portfolio consists primarily of commercial, commercial real estate and multi-family mortgage loans,mortgage loans secured by single-family residences and, to a lesser degree, consumer loans.It also consists of a portfolio of residential mortgage loans totaling $26.0 millionas a result of participation in the Northpointe Mortgage Purchase Program.  See Note 4 to the Consolidated Financial Statements included in our 2019 Annual Report to Stockholders (our “2019 Annual Report”), included as Exhibit 13.1 to this Form 10-K, for additional information regarding the Northpointe Mortgage Purchase Program.  CFBank also finances a variety of commercial and residential construction projects.At December 31, 2019,grossloans receivable totaled  $670.4 million and increased approximately $112.7 million, or 20.2%, from $557.7 million at December 31, 2018.  Commercial, commercial real estate and multi-family mortgage loans, including related construction loans, totaled $510.0million in the aggregate and represented 76.1%  of the gross loan portfolio at December 31, 2019as compared to69.9% of the gross loan portfolioat December 31, 2018.Commercial, commercial real estate and multi-family mortgage loan balances, including related construction loans,increased  $120.3 million, or 30.9%, during 2019.Portfoliosingle-family residential mortgage loans, including related construction loans and residential mortgage loans originated throughthe Northpointe Mortgage Purchase Program, totaled $135.3 million and represented 20.2% of total gross loans at year-end 2019,compared to 24.8% at year-end 2018.The remainder of our loan portfolio consists ofconsumer loans, whichtotaled$25.1 million, or 3.7% of gross loans receivable, at year-end 2019.

The types of loans originated are subject to federal and state laws and regulations.  Interest rates charged on loans are affected by the demand for such loans,  the supply of money available for lending purposes and the rates offered by competitors.  In turn, these factors are affected by, among other things, economic conditions, fiscal policies of the federal government, monetary policies of the FRB and legislative tax policies.

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The following table sets forth the composition of CFBank’sloan and lease portfolio in dollar amounts andas a percentage of the portfolio at the dates indicated.

	December 31,
	2019			2018			2017			2016			2015
			Percent			Percent			Percent			Percent			Percent
	Amount		of Total	Amount		of Total	Amount		of Total	Amount		of Total	Amount		of Total
	(Dollars in thousands)
Real estate mortgage loans:
Single-family	$	120,256	17.94%	$	118,386	21.23%	$	95,578	23.12%	$	92,544	26.21%	$	81,985	27.00%
Multi-family		39,229	5.85%		47,651	8.54%		35,665	8.63%		34,291	9.71%		28,950	9.53%
Construction		67,652	10.09%		61,792	11.08%		42,862	10.37%		25,822	7.31%		24,662	8.12%
Commercial real estate		247,543	36.92%		173,435	31.10%		111,866	27.06%		105,313	29.83%		96,488	31.78%
Total real estate mortgage loans		474,680	70.80%		401,264	71.95%		285,971	69.18%		257,970	73.06%		232,085	76.43%
Consumer loans:
Home equity loans		4,023	0.61%		5,321	0.95%		224	0.05%		479	0.14%		504	0.17%
Home equity lines of credit		20,941	3.12%		23,961	4.30%		25,054	6.06%		23,109	6.55%		21,837	7.19%
Automobile		-	0.00%		-	0.00%		-	0.00%		-	0.00%		65	0.02%
Other		151	0.02%		262	0.05%		152	0.04%		158	0.04%		5,449	1.79%
Total consumer loans		25,115	3.75%		29,544	5.30%		25,430	6.15%		23,746	6.73%		27,855	9.17%
Commercial loans (1)		170,646	25.45%		126,887	22.75%		101,975	24.67%		71,334	20.21%		43,744	14.40%
Total loans receivable		670,441	100.0%		557,695	100.0%		413,376	100.0%		353,050	100.0%		303,684	100.0%
Less:
Allowance for loan and lease losses		(7,138)			(7,012)			(6,970)			(6,925)			(6,620)
Loans receivable, net	$	663,303		$	550,683		$	406,406		$	346,125		$	297,064

⁽¹⁾ Includes commercial leases of  $4,779 at December 31, 2019,  $5,403at December 31, 2018,  $6,008 at December 31, 2017 and $2,874 at December 31, 2016.

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Loan Maturity.  The following table shows the remaining contractual maturity of CBank’sloan portfolio at December 31, 2019.  Demand loans and other loans having no stated schedule of repayments or no stated maturity are reported as due within one year.  The table does not include potential prepayments or scheduled principal amortization.

	At December 31, 2019
	Real Estate Mortgage Loans(1)		Consumer Loans		Commercial Loans		Total Loans Receivable
	(Dollars in thousands)
Amounts due:
Within one year	$	73,926	$	34	$	46,615	$	120,575
After one year:
More than one year to three years		99,813		121		31,835		131,769
More than three years to five years		81,775		56		48,615		130,446
More than five years to 10 years		112,468		1,480		27,368		141,316
More than 10 years to 15 years		14,176		5,143		16,213		35,532
More than 15 years		92,522		18,281		-		110,803
Total due after 2019		400,754		25,081		124,031		549,866
Total amount due	$	474,680	$	25,115	$	170,646	$	670,441

⁽¹⁾ Real estate mortgage loans include single-family, multi-family and commercial real estate loans and construction loans.

The following table sets forth at December 31, 2019, the dollar amount of total loans and leases receivable contractually due after one year (December 31, 2020), and whether such loans have fixed interest rates or adjustable interest rates.

	Due After December 31, 2020
	Fixed		Adjustable		Total
	(Dollars in thousands)
Real estate mortgage loans(1)	$	225,471	$	175,283	$	400,754
Consumer loans		121		24,960		25,081
Commercial loans		61,115		62,916		124,031
Total loans	$	286,707	$	263,159	$	549,866

⁽¹⁾ Real estate mortgage loans include single-family, multi-family and commercial real estate loans and construction loans.

Origination of Loans and Leases.Lending activities are conducted through ouroffices located in Franklin, Cuyahoga,Summit, Hamilton and Columbiana Counties, Ohio. We originate commercial, commercial real estate, multi-family and single-family residential mortgage loans and also expanded into business financial services in theColumbus,Cleveland,Cincinnati, and Akron,Ohio markets.

Commercial, commercial real estate and multi-family loans are originated with fixed, floating and ARM interest rates.  Fixed-rate loans are typicallylimited to terms of three to five years.CFBank has also utilized interest-rate swaps to protect the related fixed-rate loans from changes in value due to changes in interest rates.  See Note 19to the Consolidated Financial Statementsincluded in our 2019 Annual Reportfor additional information on interest-rate swaps.  

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CFBank participates in various loan programs offered by the Small Business Administration (SBA), enabling us to provide our customers and small business owners in our markets with access to funding to support their businesses, as well as reduce credit risk associated with these loans. Individual loans include SBA guarantees of up to 75%. 

A majority of oursingle-family mortgage loan originations are fixed-rate loans.  Current originations of long-term, fixed-rate single-family mortgages are generally sold rather than retained in portfolio in order to minimize investment in long-term, fixed-rate assets that have the potential to expose the Company to long-term interest rate risk.  Although we currently expect that most of our long-term, fixed-rate mortgage loan originations will continue to be sold, primarily on a servicing-released basis, a portion of these loans may be retained for portfolio within our interest rate risk and profitability guidelines. 

Single-Family Mortgage Lending.A significant lending activity has been the origination of permanent conventional mortgage loans secured by single-family residences located within and outside of ourprimary market area. Loan originations are primarily obtained through leads-based marketing and from our loan officers and their contacts within the local real estate industry and with existing or past customers and members of the local communities.We offer both fixed-rate and adjustable-rate mortgage (ARM) loans with maturities generally up to 30 years, priced competitively with current market rates.  We offer several ARM loan programs with terms of up to 30 years and,with the majority of the programs,interest rates adjust with a maximum adjustment limitation of 2.0% per year and a 5.0% lifetime cap.  The interest rate adjustments on ARM loans currently offered are indexed to a variety of established indices and these loans do not provide for initial deep discount interest rates. We do not originate option ARM loans or loans with negative amortization.

The volume and types of single-family ARM loan originations are affected by market factors such as the level of interest rates, consumer preferences, competition and the availability of funds.  In recent years, demand for single-family ARM loans has been weak due to consumer preference for fixed-rate loans as a result of the low interest rate environment.  Consequently, our origination of ARM loans on single-family residential properties has not been significant as compared to our origination of fixed-rate loans.  

We currently sell the majority of the single-family mortgage loans that we originateon a servicing released basis.  All single-family mortgage loans sold are underwritten according to Federal Home Loan Mortgage Corporation (Freddie Mac) or Federal National Mortgage Association (Fannie Mae) guidelines, or are underwritten to comply with additional guidelines as may be required by the individual investor.  CFBank is  adirect endorsed underwriter, a designation by the Department of Housing and Urban Development that allows us to offer loans insured by the Federal Housing Authority (FHA). 

For the year ended December 31, 2019, single-family mortgage loansoriginated for saletotaled $733.7million,  anincrease of $499.8 million, or 213.8%,compared to $233.9 million that was originated in 2018.The increase in originations was due to the expansion of our leads-based mortgage business and increased sales activity.  The volume of refinance activity, which is very sensitive to market mortgage interest rates,wasa significant factor that impacted the level of residential loan originations in 2019.If market mortgage rates increase, our mortgage production, and the resultant gains on sales of loans, could decrease.

For the year endedDecember 31, 2019, portfolio single-family mortgage loans originated by CFBank totaled $35.3 million, or 5.3% of total loans.Our policy is to originate quality loans that are evaluated for risk based on the borrower’s ability to repay the loan.  Collateral positions are established by obtaining independent appraisal opinions.  Mortgage insurance is generally required when the LTV exceeds 80%.

Portfolio single-family residential ARM loans totaled $56.4million, or 46.9% of the single-family mortgage loan portfolio, at December 31, 2019.  These loans generally pose credit risks not inherent in fixed-rate loans, primarily because as interest rates rise, the borrowers’ payments rise, increasing the potential for default. Periodic and lifetime caps on interest rate increases help to reduce the credit risks associated with ARM loans, but also limit the interest rate sensitivity of such loans.

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.See Note 4 to the Consolidated Financial Statements included in our 2019 Annual Report.

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Commercial Real Estate and Multi-Family ResidentialMortgage Lending.Origination of commercial real estate and multi-family residential mortgage loanscontinues to be a  significant portion of CFBank’s lending activity.Commercial real estate and multi-family residential mortgage loan balances  increased $65.7 million to $286.8 million at December 31, 2019. This represented an increase of 29.7% over the $221.1million balance at December 31, 2018.  

Weoriginate commercial real estate loans that are secured by properties used for business purposes, such as manufacturing facilities, office buildings or retail facilities.  We originate multi-family residential mortgage loans that are secured by apartment buildings, condominiums, and multi-family residential houses.Commercial real estate and multi-family residential mortgage loans are secured by propertiesgenerally located in our primary market area.

Underwriting policies provide that commercial real estate and multi-family residential mortgage loans may be made in amounts up to 85% of the lower of theappraised value or purchase price of the property.An independent appraisal of the property is required on all loans greater than or equal to $500,000.  In underwriting commercial real estate and multi-family residential mortgage loans,we consider the appraised value and net operating income of the property, the debt service ratio and the  property owner’s and/or guarantor’s financial strength, expertise and credit history.We offer both fixed and adjustable rate loans.Fixed rate loans are generally limited to three to five years, at which time they convert to adjustable rate loans.At times, CFBank accommodates loansto borrowers who desire fixed-rate loans for longer than three to five years.  We have utilized interest-rate swaps to protect these fixed-rate loans from changes in value due to changes in interest rates, as appropriate.See Note 19to the Consolidated Financial Statements  included in our 2019 Annual Report for additional information on interest-rate swaps.  Adjustable-rate loans are tied to various market indices and generally adjust monthly or annually. Payments on both fixed and adjustable rate loans are based on 15 to 25 year amortization periods.

Commercial real estate and multi-family residential mortgage loans are generally considered to involve a greater degree of risk than single-family residential mortgage loans.  Because payments on loans secured by commercial real estate and multi-family residential properties are dependent on successful operation or management of the properties, repayment of commercial real estate and multi-family residential mortgage loans may be subject to a greater extent to adverse conditions in the real estate market or the economy.  As with single-family residential mortgage loans, adjustable rate commercial real estate and multi-family residential mortgage loans generally pose credit risks not inherent in fixed-rate loans, primarily because as interest rates rise, the borrowers’ payments rise, increasing the potential for default.Additionally, adjustable rate commercial real estate and multi-family residential mortgage loans generally do not contain periodic and lifetime caps on interest rate changes.  We seek to minimize the additional risk presented by adjustable rate commercial real estate and multi-family residential mortgage loans through underwriting criteriathat require such loans to be qualified at origination with sufficient debt coverage ratios under increasing interest rate stress scenarios.

Commercial real estate and multi-family residential mortgage loans also have larger loan balances to single borrowers or groups of related borrowers compared to single-family residential mortgage loans.  Some of our borrowers also have more than one commercial real estate or multi-family residential mortgage loan outstanding with us.  Additionally, some loans may be collateralized by junior liens. Consequently, an adverse development involving one or more loans or credit relationships can expose us to significantly greater risk of loss compared to an adverse development involving a single-family residential mortgage loan.  We seek to minimize and mitigate these risks through underwriting policies which require such loans to be qualified at origination on the basis of the property’s income and debt coverage ratio and the financial strength of the propertyowners and/or guarantors.

Commercial Lending.  The origination of commercial loans continues to be a significant component of our lending activity.  During 2019, commercial loan balances increased by $43.8 million, or 34.5%, to $170.6 million at year-end 2019.Commercial loans are generally secured by business equipment, inventory, accounts receivable and other business assets.  In underwriting commercial loans, we consider the net operating income of the borrower, the debt service ratio and the financial strength, expertise and credit history of the business owners and/or guarantors.  We offer both fixed and adjustable rate commercial loans.  Fixed-rate loans are typicallylimited to a maximum term of five years.  Adjustable-rate loans are tied to various market indices and generally adjust monthly or annually.  

Commercial loans are generally considered to involve a greater degree of risk than loans secured by real estate.  Because payments on commercial loans are dependent on successful operation of the business enterprise, repayment of such loans may be subject to a greater extent to adverse conditions in the economy.  We seek to mitigate these risks through underwriting policies which require such loans to be qualified at origination on the basis of the enterprise’s income and debt coverage ratio and the financial strength of the business owners and/or guarantors.

Adjustable-rate commercial loans generally pose credit risks not inherent in fixed-rate loans, primarily because as interest rates rise, the borrowers’ payments rise, increasing the potential for default. Additionally, adjustable-rate commercial loans generally do not contain periodic and lifetime caps on interest rate changes.  We seek to minimize the additional risk presented by adjustable-rate commercial loans through underwriting criteria that require such loans to be qualified at origination with sufficient debt coverage ratios under increasing interest rate scenarios.

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Construction and Land Lending.With economic improvement in our market areas, there was also an increase in commercial building activity. During 2019, construction loans increased by $5.9 million, or 9.5%, to $67.7 million compared to the $61.8 million in the portfolio at year-end 2018.  CFBank’s strong capital levels has allowed CFBank to take advantage of select market opportunities in this area within the risk tolerances we have identified.

Construction loans are made to finance the construction of residential and commercial properties generally located within our primary market area.  Construction loans are fixed- or adjustable-rate loans which may convert to permanent loans with maturities of up to 30 years.  Our policies provide that construction loans may be made in amounts generally up to 80% of the appraised value of the property, and an independent appraisal of the property is required.  Loan proceeds are disbursed in increments as construction progresses and as inspections warrant and regular inspections are required to monitor the progress of construction.  Land development loans generally do not exceed 75% of the actual cost or current appraised value of the property, whichever is less.  Loans on raw land generally do not exceed 65% of the actual cost or current appraised value of the property, whichever is less.

Construction and land financing is considered to involve a higher degree of credit risk than long-term financing on improved, owner-occupied real estate.  Risk of loss on a construction loan is dependent largely upon the accuracy of the initial estimate of the property’s value at completion of construction or development compared to the estimated cost (including interest) of construction.  If the estimate of value proves to be inaccurate, wemay be confronted with a project, when completed, having a value which is insufficient to assure full repayment.We attempt to reduce such risks on construction loans by requiring personal guarantees and reviewing current personal financial statements and tax returns, as well as other projects of the developer. 

Consumer and Other Lending.  The consumer loan portfolio generally consists of home equity lines of credit, automobile loans, home improvement loans, loans secured by deposits and purchased loans.  At December 31, 2019, the consumer loan portfolio totaled $25.1 million, which was 3.8% of gross loans receivable. During 2019, the consumer loan portfolio decreased  $4.4 million, or 15.0%, over the year-end 2018 balance of $29.5 million.

Home equity lines of credit include those loans we originate for our portfolioand purchased loans.  We offer a  variable rate home equity line of creditproduct which we originate for our portfolio.  The interest rateadjusts monthly at various margins above the prime rate of interest as disclosed in The Wall Street Journal.  The margin is based on certain factors including the loan balance, value of collateral, election of auto-payment and the borrower’s FICO® score.  The amount of the line is based on the borrower’s credit history,  income and equity in the home. When combined with the balance of the prior mortgage liens, these lines generally may not exceed 89.9% of the appraised value of the property at the time of the loan commitment. The lines are secured by a subordinate lien on the underlying real estate and are, therefore, vulnerable to declines in property values in the geographic areas where the properties are located.Credit approval for home equity lines of credit requires income sufficient to repay principal and interest due, stability of employment, an established credit record and sufficient collateral.

Delinquencies and Classified Assets.Management and the Board of Directors monitors the status of all loans 30 days or more past due on a monthly basis through the analysis ofpast due statistics and trends for all loans.Procedures with respect to resolving delinquencies vary depending on the nature and type of the loan and period of delinquency.  We make efforts, consistent with safety and soundness principles, to work with the borrower and develop action steps to have the loan brought current.  If the loan is not brought current, it then becomes necessary to take additional legal actions including therepossession of collateral.

We maintain an internal credit rating system and loan review procedures specifically developed to monitor credit risk for commercial, commercial real estate and multi-family residential loans.  Internal loan 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.

Federal regulations and CFBank’s asset classification policy require use of an internal asset classification system as a means of reporting and monitoring assets.We have incorporated the regulatory asset classifications as a part of our credit monitoring and internal loan risk rating system.Loans are classified into risk categories based on relevant information about the ability of borrowers to service their debt, such ascurrent financial information, historical payment experience, credit documentation, public information and current economic trends, among other factors.  In accordance with regulations, problem loans are classified as special mention, substandard, doubtful or loss, and the classifications are subject to review by banking regulators.Loans designated as special mention are considered criticized assets.  Loans designated as substandard, doubtful or loss are considered classified assets. Loans designated as special mentionpossess weaknesses that, if left uncorrected, may result in deterioration of the repayment prospects for the loan or of CFBank’s credit position at some future date. A loan is considered substandard if it is 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. A loan considered doubtful has all of the weaknesses inherent in those classified substandard with

9

the added characteristic that the weaknesses make collection or liquidation in full, on the basis of currently existing facts, condition and values, highly questionable and improbable.  Loans designated as loss are considered uncollectible based on the borrower’s inability to make payments, and any value attached to collateral, if any, is based on liquidation value. Loans considered loss are generally uncollectible and have so little value that their continuance as assets is not warranted and are charged off, unless certain circumstances exist that could potentially warrant a specific reserve to be established.

See the section titled “Financial Condition -Allowance for loan losses”and Notes 1and4  to the Consolidated Financial Statements included in our 2019 Annual Reportfor detailed information on criticized and classified loans as of December 31, 2019 and 2018. 

Classified loans include all nonaccrual loans, which are discussed in further detail in the section below titled “Nonperforming Assets”.  In addition to nonaccrual loans, classified loans include the following loans that were identified as substandard assets,were still accruing interest at December 31, 2019, but exhibit weaknesses that could lead to nonaccrual status in the future.  

	# of Loans		Balance
Commercial	2	$	519
Multi-family residential real estate	1		148
Commercial real estate	2		2,731
Home equity lines of credit	1		18
Total	6	$	3,416

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The following tablesets forth information concerning delinquent loans in dollar amounts and as a percentage of the total loan portfolio.  The amounts presented in the table below represent the total remaining balances of the loans rather than the actual payment amounts which are overdue. Loans shown as 90 days or more delinquent include nonaccrual loans, regardless of delinquency.

	December 31, 2019						December 31, 2018						December 31, 2017
	60-89 Days			90 Days or More			60-89 Days			90 Days or More			60-89 Days			90 Days or More
	Number of Loans	Balance of Loans		Number of Loans	Balance of Loans		Number of Loans	Balance of Loans		Number of Loans	Balance of Loans		Number of Loans	Balance of Loans		Number of Loans	Balance of Loans
	(Dollars in thousands)						(Dollars in thousands)						(Dollars in thousands)
Real estate loans:
Single-family	1	$	210	6	$	550	-	$	-	4	$	167	2	$	27	6	$	253
Commercial	-		-	1		1,689	-		-	-		-	-		-	-		-
Consumer loans:
Home equity lines of credit	-		-	4		115	-		-	2		89	-		-	2		102
Other	-		-	-		-	-		-	1		21	-		-	-		-
Commercial loans	1		71	1		85	-		-	1		100	-		-	1		115
Total delinquent loans	2	$	281	12	$	2,439	-	$	-	8	$	377	2	$	27	9	$	470
Delinquent loans as a percent of total loans			.04%			.36%			.00%			.07%			.01%			.11%

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	December 31, 2016						December 31, 2015
	60-89 Days			90 Days or More			60-89 Days			90 Days or More
	Number of Loans	Balance of Loans		Number of Loans	Balance of Loans		Number of Loans	Balance of Loans		Number of Loans	Balance of Loans
	(Dollars in thousands)						(Dollars in thousands)
Real estate loans:
Single-family	1	$	49	8	$	397	-	$	-	12	$	640
Commercial	1		600	-		-	-		-	1		446
Consumer loans:
Home equity lines of credit	1		15	1		44	-		-	2		115
Other	-		-	-		-	-		-	-		-
Commercial loans	-		-	3		263	1		9	3		224
Total delinquent loans	3	$	664	12	$	704	1	$	9	18	$	1,425
Delinquent loans as a percent of total loans			.19%			.20%			.00%			.47%

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Nonperforming Assets.  The following table contains information regarding nonperforming loans andrepossessed assets.  CFBank’s policy isto stop accruing interest on loans 90 daysor more past due unless the loan principal and interest are determined by management to be fully secured and in the process of collection. All interest accrued but not received for loans placed on nonaccrual is reversed against interest income.

	At December 31,
	2019		2018		2017		2016		2015
	(Dollars in thousands)
Loans past due over 90 days still on accrual	$	-	$	-	$	-	$	-	$	-
Nonaccrual loans:
Single-family real estate		550		167		253		397		640
Commercial real estate		1,689		-		-		-		446
Consumer		115		110		102		44		115
Commercial		85		100		115		263		224
Total nonaccrual loans		2,439		377		470		704		1,425
Total nonperforming loans		2,439		377		470		704		1,425
REO		-		38		-		204		1,636
Other foreclosed assets		-		-		-		-		-
Total nonperforming assets		2,439		415		470		908		3,061
Troubled Debt Restructurings (TDRs) (1)		2,838		3,061		3,271		2,986		4,920
Total nonperforming and troubled debt restructurings	$	5,277	$	3,476	$	3,741	$	3,894	$	7,981
Nonperforming loans to total loans		0.36%		0.07%		0.11%		0.20%		0.47%
Nonperforming assets to total assets		0.28%		0.06%		0.10%		0.21%		0.87%

⁽¹⁾ Reflects TDRs where customers have established a sustained period of repayment performance, loans are current according to their modified terms, and repayment of the remaining contractual payments is expected.

The $2.1 million increase in nonperforming loans in 2019compared to 2018was primarily due to  $2.1 million in loans that became nonperforming in 2019 related to one commercial loan,twosingle-family residential loansand twoconsumer loans, partially offset by loan payments and one consumer loan that paid off.

For the year ended December 31, 2019, the amount of additional interest income that would have been recognized on nonaccrual loans, if such loans had continued to perform in accordance with their contractual terms, was approximately $236,000.  There was no interest income recognized on nonaccrual loans in 2019, except for $2,000 of interest income that was collected from the payoff of aconsumer loan and a commercial loan.

Accounting Standards Update (ASU) No. 2011-02 to Receivables (ASC 310), A Creditor’s Determination of Whether a Restructuring is a Troubled Debt Restructuring,clarified the guidance for a creditor’s evaluation of whether it has granted a concession and whether a debtor is experiencing financial difficulties. With regard to determining whether a concession has been granted, the ASU clarified that creditors are precluded from using the effective interest method to determine whether a concession has been granted. In the absence of using the effective interest method, a creditor must now focus on other considerations such as the value of the underlying collateral, evaluation of other collateral or guarantees, the debtor’s ability to access other funds at market rates, interest rate increases and whether the restructuring results in a delay in payment that is insignificant.The Company applies the guidance in this ASU to identify its restructured loans as troubled debt restructurings (“TDRs”). There were no loans restructured in 2019 identified as TDRs.

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As a component of management’s focus on the workout of troubled credits, the terms of certain loans were modified in TDRs, where concessions were 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. Nonaccrual loans included $85,000in TDRs at December 31, 2019, while non-accrual loans included $100,000 of TDRs at December 31, 2018.

At year-end 2019, there were a total of $2.9 million of TDRs,including$2.7 million in commercial real estate loansand $107,000 in single family residential loans, which were not included in nonperforming loans, where customers have established a sustained period of repayment performance, loans are current according to their modified terms, and repayment of the remaining contractual payments is expected.

See the section titled “Financial Condition -Allowance for loan losses” and Notes 1and 4  to the Consolidated Financial Statements included in our 2019 Annual Reportfor additional information on nonperforming loans and TDRs as of December 31, 2019 and 2018. 

For information on real estate owned (REO) and other foreclosed assets, see the section below titled “Foreclosed Assets.”

Allowance for Loan and Lease Losses (ALLL).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 condition, trends and outlook; and other factors that warrant recognition in providing for an adequate ALLL.  See the section titled “Financial Condition -Allowance for loan losses” in our 2019 Annual Reportfor a detailed discussion of management’s methodology for determining the appropriate level of the ALLL.

The ALLL totaled $7.1 million at December 31, 2019, and increased $126,000, or 1.8%, from $7.0million at December 31, 2018.  The increase in the ALLL is due to net recoveries during the twelve months ended December 31, 2019.  The ratio of the ALLL to total loans was 1.06% at December 31, 2019, compared to 1.26% at December 31, 2018.

We believe the ALLL is adequate to absorb probable incurred credit losses in the loan portfolio as of December 31, 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.  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 estimated probable incurred losses and an increase in required loan provision expense could occur if economic conditions and factors which affect credit quality, real estate values and general business conditions worsen.

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The following table sets forth activity in the ALLL for the years ended December 31:

	2019		2018		2017		2016		2015
ALLL, beginning of period	$	7,012	$	6,970	$	6,925	$	6,620	$	6,316
Charge-offs:
Real estate loans:
Single-family		-		6		-		147		40
Commercial real estate		-		-		-		-		25
Consumer loans:
Home equity		-		-		-		53		41
Other		36		-		-		1		10
Commercial loans		-		-		-		123		8
Total charge-offs		36		6		-		324		124
Recoveries on loans previously charged off:
Recoveries
Real estate loans:
Single-family		7		24		20		42		1
Multi-family		-		-		-		143		-
Commercial real estate		105		-		-		145		33
Consumer loans:
Home equity		50		22		23		69		113
Other		-		-		-		-		6
Commercial loans		-		2		2		-		25
Total recoveries		162		48		45		399		178
Net charge-offs (recoveries)		(126)		(42)		(45)		(75)		(54)
Provision for loan and lease losses		-		-		-		230		250
Reclassification of ALLL on loan-related commitments		-		-		-		-		-
ALLL, end of period	$	7,138	$	7,012	$	6,970	$	6,925	$	6,620
ALLL to total loans and leases		1.06%		1.26%		1.69%		1.96%		2.18%
ALLL to nonperforming loans		292.66%		1859.95%		1483.00%		983.66%		464.56%
Net charge-offs (recoveries) to ALLL		-1.77%		-0.60%		-0.65%		-1.08%		-0.82%
Net charge-offs (recoveries) to average loans and leases		-0.02%		-0.01%		-0.01%		-0.02%		-0.02%

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The impact of economic conditions on the housing market, collateral values, and businesses’ and consumers’ ability to pay may increase the level of charge-offs in the future.Additionally, our commercial, commercial real estate and multi-family residential loan portfoliosmay be detrimentally affected by adverse economic conditions. Declines in these portfolios could expose us to losses which could materially affect the Company’s earnings, capital and profitability.

The following table sets forth the ALLL in each of the categories listed at the dates indicated and the percentage of such amounts to the total ALLL and loans in each category as a percent of total loans.  Although the ALLL may be allocated to specific loans or loan types, the entire ALLL is available for any loan that, in management’s judgment, should be chargedoff.

	At December 31,
	2019				2018				2017
	Amount		% of Allowance in each Category to Total Allowance	% of Loans in each Category	Amount		% of Allowance in each Category to Total Allowance	% of Loans in each Category	Amount		% of Allowance in each Category to Total Allowance	% of Loans in each Category
	(Dollars in thousands)
Real estate loans:
Single-family	$	948	13.28%	17.94%	$	1,061	15.13%	21.23%	$	912	13.08%	23.12%
Multi-family		447	6.26%	5.85%		612	8.73%	8.54%		660	9.47%	8.63%
Commercial real estate		2,604	36.48%	36.92%		2,274	32.43%	31.10%		2,143	30.75%	27.06%
Construction		759	10.63%	10.09%		739	10.54%	11.08%		672	9.64%	10.37%
Consumer loans:
Home equity lines of credit		265	3.71%	3.12%		410	5.85%	4.30%		597	8.57%	6.06%
Other		61	.86%	.63%		97	1.38%	1.00%		2	.03%	.09%
Commercial loans		2,054	28.78%	25.45%		1,819	25.94%	22.75%		1,984	28.46%	24.67%
Total ALLL	$	7,138	100.00%	100.00%	$	7,012	100.00%	100.00%	$	6,970	100.00%	100.00%

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	At December 31,
	2016				2015
	Amount		% of Allowance in each Category to Total Allowance	% of Loans in each Category	Amount		% of Allowance in each Category to Total Allowance	% of Loans in each Category
	(Dollars in thousands)
Real estate loans:
Single-family	$	735	10.61%	26.21%	$	691	10.44%	27.00%
Multi-family		716	10.34%	9.71%		705	10.65%	9.53%
Commercial real estate		2,727	39.38%	29.83%		2,710	40.94%	31.78%
Construction		580	8.38%	7.31%		561	8.47%	8.12%
Consumer loans:
Home equity lines of credit		486	7.02%	6.55%		474	7.16%	7.19%
Other		34	.49%	.18%		99	1.50%	1.98%
Commercial loans		1,647	23.78%	20.21%		1,380	20.84%	14.40%
Total ALLL	$	6,925	100.00%	100.00%	$	6,620	100.00%	100.00%

Foreclosed Assets

Assets acquired through or instead of loan foreclosure are initially recorded at fair value less costs to sell when acquired, establishing a new cost basis.  If fair value declines subsequent to foreclosure, a valuation allowance is recorded through expense.  Operating and maintenance costs after acquisition are expensed.  REO and other foreclosed assets totaled $0  at December 31, 2019 and $38,000 at December 31, 2018.See the section titled “Financial Condition -Foreclosed Assets”and Note 5  to the Consolidated Financial Statementsin our 2019 Annual Reportfor information regarding foreclosed assets at December 31, 2019.  Foreclosure activities are closely tied with general economic conditions and the ability of our customers to continue to meet their loan payment obligations and, therefore, the level of foreclosed assets may increase in the future if, among other things, economic conditions in our market area decline.  

Investment Activities

National banks have the authority to invest in various types of liquid assets, including U.S. Treasury obligations, securities of various federal agencies, certificates of deposit of insured banks and savings institutions, bankers’ acceptances and federal funds.  Subject to various restrictions, national banks may also invest their assets in commercial paper, municipal bonds, investment-grade corporate debt securities and mutual funds whose assets conform to the investments that a national bank is otherwise authorized to make directly. 

The investment policy established by theBoard of Directors is designed to provide and maintain adequate liquidity, generate a favorable return on investmentwithout incurring undue interest rate and credit risk, and compliment lending activities.  The policy provides authority to invest in U.S. Treasury and federal entity/agency securities meeting the policy’sguidelines, mortgage-backed securities and collateralized mortgage obligations insured or guaranteed by the United States government and its entities/agencies,  municipal and corporate bonds and other investment instruments. 

At December 31, 2019, the securities portfolio totaled $8.2 million.  At December 31, 2019, all mortgage-backed securities and collateralized mortgage obligations in the securities portfolio were insured or guaranteed by Ginnie Mae, Freddie Mac or Fannie Mae.

17

Management evaluates securities for other-than-temporary impairment (OTTI) at least on a quarterly basis, and more frequently when economic or market conditions warrant such an evaluation.See Notes  1and 3  to the Consolidated Financial Statements contained in our 2019 Annual Reportfor a detailed discussion of management’s evaluation of securities for OTTI.

The following table sets forth certain information regarding the amortized cost and fair value of securities at the dates indicated.

	At December 31,
	2019				2018				2017
Securities Available For Sale	Amortized Cost		Fair Value		Amortized Cost		Fair Value		Amortized Cost		Fair Value
Issued by U.S. government-sponsored entities and agencies:
U.S. Treasury	$	7,986	$	8,017	$	9,978	$	9,881	$	11,499	$	11,417
Mortgage-backed securities - residential		126		130		167		170		236		244
Collateralized mortgage obligations		27		27		62		63		110		112
Total	$	8,139	$	8,174	$	10,207	$	10,114	$	11,845	$	11,773

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The following table sets forth information regarding the amortized cost, weighted average yield and contractual maturity dates of debt securities as ofDecember 31, 2019.

				After One Year			After Five Years
	One Year or Less			through Five Years			through Ten Years			After Ten Years			Total
			Weighted			Weighted			Weighted			Weighted			Weighted
	Amortized		Average	Amortized		Average	Amortized		Average	Amortized		Average	Amortized		Average
Securities Available For Sale	Cost		Yield	Cost		Yield	Cost		Yield	Cost		Yield	Cost		Yield
Issued by U.S. government-sponsored entities and agencies:
U.S. Treasury	$	5,001	1.69%	$	2,985	2.18%	$	-	0.00%	$	-	0.00%	$	7,986	1.87%
Mortgage-backed securities - residential		-	0.00%		82	3.98%		-	0.00%		44	7.01%		126	5.03%
Collateralized mortgage obligations		-	0.00%		-	0.00%		-	0.00%		27	4.22%		27	4.22%
Total	$	5,001	1.69%	$	3,067	2.23%	$	-	0.00%	$	71	5.95%	$	8,139	1.93%

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Sources of Funds

General.CFBank’s primary sources of funds are deposits, principal and interest payments on loans and securities, proceeds from sales of loans, borrowings, and funds generated from operations of CFBank. Contractual loan payments are a relatively stable source of funds, while deposit inflows and outflows and loan prepayments are significantly influenced by general market interest rates and economic conditions and competition.  Borrowings may be used on a short-term basis for liquidity purposes or on a long-term basis to fund asset growth or manage interest rate risk in accordance with asset/liability management strategies.  

The Holding Company, as a financial 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, dividends received from its subsidiaries or the sale of assets.

Dividends from CFBank serve as a potential source of liquidity to the Holding Company to meet its obligations.  Generally, CFBank may pay dividends to the Holding Company 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 CFBank remains well capitalized after the dividend payment.  See Note 18to the Consolidated Financial Statements included in our 2019 Annual Report.

The Holding Company’s available cash and cash equivalents totaled $10.0 million at December 31, 2019.  Management believes that the Holding Company had adequate funds at December 31, 2019 to meet its current and anticipated operating needs at this time.See the section titled “Liquidity and Capital Resources” contained in our 2019 Annual Reportfor information regarding Holding Company liquidity and regulatory matters.

Deposits.CFBank offers a variety of deposit accounts with a range of interest rates and terms includingsavings accounts, retail and businesschecking accounts, money market accounts and certificates of deposit.  Management regularly evaluates the internal cost of funds, surveys rates offered by competitors, reviews cash flow requirements for lending and liquidity and executes rate changes when necessary as part of its asset/liability management, profitability and liquidity objectives. Certificate of deposit accounts represent the largest portion of our deposit portfolio and totaled48.7%of average deposit balances in 2019.  The term of the certificates of deposit typically offered vary from seven days to five years at rates established by management.  Specific terms of an individual account vary according to the type of account, the minimum balance required, the time period funds must remain on deposit and the interest rate, among other factors.

The flow of deposits is influenced significantly by general economic conditions, changes in money market rates, prevailing interest rates and competition.  Deposits are obtained predominantly from the areas 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, as well as customer service and relationships with customers. 

At December 31, 2019, CFBank had $124.9million in brokered deposits with maturity dates from January 2020 through August 2024. At December 31, 2019, cash, unpledged securities and deposits in other financial institutions totaled $44.1 million.

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. CDARS one-way balances are considered brokered deposits by regulation.  Customer balances in the CDARS reciprocal and ICS programs, which no longer qualify as brokered, totaled $28.0 million at December 31, 2019 anddecreased $20.1 million, or 41.8%, from $48.1 million at December 31, 2018. 

Certificate accounts in amounts of $100,000 or more totaled $294.5 million at December 31, 2019,  maturing as follows:

Maturity Period	Amount		Weighted Average Rate
	(Dollars in thousands)
Three months or less	$	42,975	2.21%
Over 3 through 6 months		38,074	2.38%
Over 6 through 12 months		69,664	2.14%
Over 12 months		143,739	3.06%
Total	$	294,452

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The following table sets forth the distribution of average deposit account balances for the periods indicated and the weighted average interest rates on each category of deposits presented.Averages for the periods presented are based on month-end balances.

	For The Year Ended December 31,
	2019				2018				2017
	Average Balance		Percent of Total Average Deposits	Average Rate Paid	Average Balance		Percent of Total Average Deposits	Average Rate Paid	Average Balance		Percent of Total Average Deposits	Average Rate Paid
	(Dollars in thousands)
Interest- bearing checking accounts	$	29,943	4.69%	1.80%	$	28,985	6.06%	1.34%	$	7,757	2.10%	0.09%
Money market accounts		166,721	26.13%	1.98%		117,773	24.63%	1.29%		99,166	26.87%	0.75%
Savings accounts		18,241	2.86%	0.10%		17,048	3.56%	0.10%		16,876	4.57%	0.10%
Certificates of deposit		310,913	48.74%	2.52%		220,145	46.03%	1.90%		168,443	45.65%	1.36%
Total Interest-bearing deposits		525,818	82.42%	2.22%		383,951	80.28%	1.59%		292,242	79.19%	1.05%
Noninterest-bearing deposits:
Demand deposits		112,151	17.58%	-		94,333	19.72%	-		76,810	20.81%	-
Total Average Deposits	$	637,969	100.00%		$	478,284	100.00%		$	369,052	100.00%

The following table presents, by various rate categories, the amount of certificate accounts outstanding at the dates indicated and the periods to maturity of the certificate accounts outstanding at December 31, 2019.

	Period to Maturity from December 31, 2019								At December 31,
	Less than		One to		Two to		Over
	One Year		Two Years		Three Years		Three Years		2019		2018		2017
	(Dollars in thousands)
Certificate accounts:
0 to 0.99%	$	6,858	$	1,880	$	370	$	19	$	9,127	$	8,554	$	16,357
1.00 to 1.99%		63,868		13,792		6,382		7,063		91,105		62,992		123,029
2.00 to 2.99%		109,940		42,717		39,205		20,603		212,465		172,672		42,845
3.00 to 3.99%		8,602		24,424		8,807		9,620		51,453		29,427		-
4.00 to 4.99%		-		-		-		-		-		20		-
5.00% and above		-		-		-		-		-		-		-
Total certificate accounts	$	189,268	$	82,813	$	54,764	$	37,305	$	364,150	$	273,665	$	182,231

See the sections titled “Financial Condition – Deposits”  and “Liquidity and Capital Resources” contained in our 2019 Annual Reportto Stockholders for additional information regarding deposits.

Borrowings. As part of our operating strategy, FHLB advances are used as an alternative to retail and brokered deposits to fund our asset growth.  The advances are collateralized primarily by single-family mortgage loans, multi-family mortgage loans, 1-4 family commercial real estate loans and home equity lines of credit loans,  securities and cash, and secondarily by CFBank’s investment in the

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capital stock of the FHLB of Cincinnati.  FHLB advances are made pursuant to several credit programs, each of which has its own interest rate and range of maturities. The maximum amount that the FHLB will advance to member institutions fluctuates from time to time in accordance with the policies of the FHLB. FHLB advances totaled $16.5 million at December 31, 2019.  Based on the collateral pledged, CFBank was eligible to borrow up to a total of $89.0 million at year-end 2019.

The Holding Company had an existing credit facility with a third-party bank which was modified to a $10.0 million revolving line-of-credit in December 2018.  In December 2019, the $5.0 million outstanding balance on the existing line-of-credit was converted to a $5.0 million term loan with an additional $10.0 million revolving line-of-credit.  The new term loan requires quarterly principal payments of $125,000 plus accrued interest.  Any remaining principal is due and payable on the maturity date, which is December 23, 2022. Loans under the credit facility bear interest at a rate equal to the Prime Rate plus 0.75%. 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.  As of December 31, 2019, the Company had an outstanding balance of $5.0 million on the term loan and no outstanding balance on the revolving line-of-credit. At December 31, 2018, the credit facility had an outstanding balance of $6.0 million.

In addition to access to FHLB advances, CFBank hasborrowing capacity available with the Federal Reserve Bank through the Borrower in Custody program.  The borrowings are collateralized by commercial loansand commercial real estate loans.  Based on the collateral pledged, CFBank was eligible to borrow up to a total of $65.6 million at year-end 2019.  There were no amounts outstanding from the Federal Reserve Bank at December 31, 2019.  At December 31, 2018, CFBank had $8.0 million of availability in an unused line of credit at a commercial bank.  During the third quarter of 2019, CFBank added an additional $15.0 million line of credit at another commercial bank.  There were no outstanding borrowings on these lines of credit at December 31, 2019 or December 31, 2018.  If CFBank were to borrow on these lines of credit, interest would accrue daily at a variable rate based on the commercial bank’s cost of funds and current market returns.

During the fourth quarter of 2019, CFBank entered into a $25.0 million warehouse facility with a commercial bank.  The warehouse facility is used to periodically fund loans held for sale from the close (funding) date until they are sold in the secondary market.  Borrowings on the facility bear interest at the greater of the 30 day LIBORplus 2.00% or 4.00% and are secured by the specific loans that were funded.  At December 31, 2019, the warehouse facility had an outstanding balance of $7.5 million.  See Note 10 to the Consolidated Financial Statements in our 2019 Annual Reportto Stockholders for additional information.

See the section titled “Financial Condition - Subordinated Debentures” contained in our 2019 Annual Reportfor information regarding subordinated debentures issued by the Company in 2003and 2018.

The following table sets forth certain information regarding short-term borrowings at or for the periods ended on the dates indicated:

	For the Year ended December 31,
	2019		2018		2017
Short-term FHLB advances and other borrowings:
Average balance outstanding	$	3,713	$	1,054	$	325
Maximum amount outstanding at any month-end during the period		23,500		17,500		11,100
Balance outstanding at end of period		-		-		-
Weighted average interest rate during the period		2.11%		1.98%		1.29%

Subsidiary Activities

As of December 31, 2019,  we maintained CFBank and the Trust as wholly owned subsidiaries. 

Personnel

As of December 31, 2019,  the Company had117full-time and 8part-time employees. 

Regulation and Supervision

Set forth below is a brief description of certain laws and regulations that apply to us.  This description, as well as other descriptions of laws and regulations contained in this Form 10-K, is not complete and is qualified in its entirety by reference to the applicable laws and regulations.

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Overview

The Holding Company and CFBank are subject to examination and comprehensive federal regulation and oversight by federal banking agencies.  Such regulation and oversight is intended primarily for the protection of consumers, depositors, borrowers, the FDIC’s Deposit Insurance Fund (the “DIF”) and the banking system as a whole and not for the protection of shareholders.  Applicable laws and regulations restrict permissible activities and investments and require actions to protect loan, deposit, brokerage, fiduciary and other customers, as well as the DIF.  They also may restrict the Holding Company’s ability to repurchase its stock or to receive dividends from CFBank and impose capital adequacy and liquidity requirements.

As a financial holding company, the Holding Company is subject to regulation by the Federal Reserve Board (the “FRB”) under the Bank Holding Company Act and to inspection, examination and supervision by the FRB.  The Holding Company is also subject to the disclosure and regulatory requirements of the Securities Act of 1933, as amended (the “Securities Act”), and the Securities Exchange Act of 1934, as amended (the “Exchange Act”), as administered by the SEC.   The Holding Company’s common stock trades on the NASDAQ Capital Market under the symbol “CFBK,” which subjects the Holding Company to various requirements under the NASDAQ Marketplace Rules.

CFBank, as a national banking association, is subject to regulation, supervision and examination primarily by the Office of the Comptroller of the Currency (the “OCC”).  In addition, CFBank is subject to regulation and examination by the FDIC, which insures the deposits of CFBank to the maximum extent permitted by law, and certain other requirements established by the FDIC.

The Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (the “Dodd-Frank Act”) established the Consumer Financial Protection Bureau (the “CFPB”), which regulates consumer financial products and services and certain financial services providers. The CFPB is authorized to prevent unfair, deceptive or abusive acts or practices and ensures consistent enforcement of laws so that consumers have access to fair, transparent and competitive markets for consumer financial products and services. Since its establishment, the CFPB has exercised extensively its rulemaking and interpretative authority.

Federal law provides federal banking regulators, including the OCC, the FRB and the FDIC, with substantial enforcement powers. The enforcement authority of the OCC and the FRB over national banks and their holding companies includes, among other things, the ability to assess civil money penalties, to issue cease and desist or removal orders and to initiate injunctive actions. In general, these enforcement actions may be initiated for violations of laws and regulations and unsafe and unsound practices. Other actions or inactions may also provide the basis for enforcement action.

Regulation of the Holding Company

General.  As a financial holding company, the Holding Company’s activities are subject to extensive regulation by the FRB.   The Holding Company is required to file reports with the FRB and such additional information as the FRB may require, and is subject to regular examinations by the FRB.  The FRB also has extensive enforcement authority over financial holding companies, including, among other things, the ability to assess civil money penalties, issue cease and desist or removal orders, and require that a financial holding company divest subsidiaries (including a subsidiary bank).  In general, the FRB may initiate enforcement actions for violations of laws and regulations and unsafe or unsound practices.

Source of Strength.  A financial holding company is required by law and FRB policyto act as a source of financial strength to each subsidiary bank and to commit resources to support such subsidiary bank.  The FRB may require a financial holding company to contribute additional capital to an undercapitalized subsidiary bank and may disapprove of the payment of dividends to shareholders if the FRB believes the payment of such dividends would be an unsafe or unsound practice.

Prior FRB Approval.  The Bank Holding Company Act requires the prior approval of the FRB in any case where a financial holding company proposes to:

· acquire direct or indirect ownership or control of more than 5% of the voting shares of any bank that is not already majority-owned by the financial holding company;

· acquire all or substantially all of the assets of another bank or another financial or bank holding company; or

· merge or consolidate with any other financial or bank holding company.

Financial Holding Company Status.  A qualifying bank holding company may elect to become a financial holding company and thereby affiliate with securities firms and insurance companies and engage in other activities that are financial in nature and not otherwise permissible for a bank holding company, if the holding company is “well managed” and “well capitalized” and each of its subsidiary banks is well capitalized under the Federal Deposit Insurance Corporation Act of 1991 prompt corrective action provisions, is well managed, and has at least a satisfactory rating under the Community Reinvestment Act.  The Holding Company became a financial holding company effective as of December 1, 2016.

No regulatory approval is required for a financial holding company to acquire a company, other than a bank or savings association, engaged in activities that are financial in nature or incidental to activities that are financial in nature, as determined by the Federal

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Reserve Board.  The Financial Services Modernization Act defines “financial in nature” to include:

· securities underwriting, dealing and market making;

· sponsoring mutual funds and investment companies;

· insurance underwriting and agency;

· merchant banking; and

· activities that the Federal Reserve Board has determined to be closely related to banking.

A national bank also may engage, subject to limitations on investment, in activities that are financial in nature, other than insurance underwriting, insurance company portfolio investment, real estate development and real estate investment, through a financial subsidiary of the bank, if the bank is well capitalized and well managed and has at least a satisfactory Community Reinvestment Act rating. If a financial holding company or a subsidiary bank fails to maintain all requirements for the holding company to maintain financial holding company status, material restrictions may be placed on the activities of the financial holding company and its subsidiaries and on the ability of the holding company to enter into certain transactions and obtain regulatory approvals for new activities and transactions.  The financial holding company could also be required to divest of subsidiaries that engage in activities that are not permitted for bank holding companies that are not financial holding companies.  If restrictions are imposed on the activities of a financial holding company, the existence of such restrictions may not be made publicly available pursuant to confidentiality regulations of the bank regulatory agencies.

Each subsidiary bank of a financial holding company is subject to certain restrictions on the maintenance of reserves against deposits, extensions of credit to the financial holding company or any of its subsidiaries, investments in the stock or other securities of the financial holding company or its subsidiaries and the taking of such stock or securities as collateral for loans to any borrower.  Further, a financial holding company and its subsidiaries are prohibited from engaging in certain tying arrangements in connection with any extension of credit, lease or sale of property or furnishing of any services.  Various consumer laws and regulations also affect the operations of these subsidiaries.

Economic Growth, Regulatory Relief and Consumer Protection Act

On May 25, 2018, the Economic Growth, Regulatory Relief and Consumer Protection Act (the "Regulatory Relief Act") was signed into law. The Regulatory Relief Act repealed or modified certain provisions of the Dodd-Frank Act and eased restrictions on all but the largest banks (those with consolidated assets in excess of $250 billion).  Bank holding companies with consolidated assets of less than $100 billion, including the Company, are no longer subject to enhanced prudential standards.  The Regulatory Relief Act also relieves bank holding companies and banks with consolidated assets of less than $100 billion, including the Company, from certain record-keeping, reporting and disclosure requirements.  Certain other regulatory requirements applied only to banks with consolidated assets in excess of $50 billion and so did not apply to the Company even before the enactment of the Regulatory Relief Act.  

Transactions with Affiliates, Directors, Executive Officers and Shareholders

Sections 23A and 23B of the Federal Reserve Act and Federal Reserve Board Regulation W generally:

· limit the extent to which a bank or its subsidiaries may engage in “covered transactions” with any one affiliate;

· limit the extent to which a bank or its subsidiaries may engage in “covered transactions” with all affiliates; and

· require that all such transactions be on terms substantially the same, or at least as favorable to the bank or subsidiary, as those provided to a non-affiliate.

An affiliate of a bank is any company or entity which controls, is controlled by or is under common control with the bank.  The term “covered transaction” includes the making of loans to anaffiliate, the purchase of assets from anaffiliate, the issuance of a guarantee on behalf of anaffiliate, the purchase of securities issued by anaffiliate and other similar types of transactions with an affiliate.

A bank’s authority to extend credit to executive officers, directors and greater than 10% shareholders, as well as entities such persons control, is subject to Sections 22(g) and 22(h) of the Federal Reserve Act and Regulation O promulgated thereunder by the FRB.  Among other things, these loans must be made on terms (including interest rates charged and collateral required) substantially the same as those offered to unaffiliated individuals or be made as part of a benefit or compensation program and on terms widely available to employees, and must not involve a greater than normal risk of repayment.  In addition, the amount of loans a bank may make to these persons is based, in part, on the bank’s capital position, and specified approval procedures must be followed in making loans which exceed specified amounts.

Regulation of CFBank

General. CFBank, as a national bank, is subject to regulation, periodic examination, enforcement authority and oversight by the OCC extending to all aspects of CFBank’s operations.  OCC regulations govern permissible activities, capital requirements, dividend limitations, investments, loans and other matters.  CFBank also is subject to regulation and examination by the FDIC, which insures the

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deposits of CFBank to the maximum extent permitted by law.  Furthermore, CFBank is subject, as a member bank, to certain rules and regulations of the FRB, many of which restrict activities and prescribe documentation to protect consumers.  In addition, the establishment of branches by CFBank is subject to prior approval of the OCC.  The OCC has broad enforcement powers over national banks, including the power to impose fines and other civil and criminal penalties and to appoint a conservator or receiver if any of a number of conditions are met.

The CFPB regulates consumer financial products and services provided by CFBank through interpretations designed to protect consumers.

Regulatory Capital.  National banks are required to maintain a minimum level of regulatory capital.  The OCC has adopted risked-based capital guidelines for national banks, which guidelines include both a definition of capital and a framework for calculating risk weighted assets by assigning assets and off-balance-sheet items to broad risk categories.   

The risk-based capital guidelines adopted by the federal banking agencies are based on the “International Convergence of Capital Measurement and Capital Standard” (Basel I), published by the Basel Committee on Banking Supervision (the “Basel Committee”).  In July 2013, the United States banking regulators issued new capital rules applicable to smaller banking organizations which also implement certain of the provisions of the Dodd-Frank Act (the “Basel III Capital Rules”).  Community banking organizations, including CFBank, began transitioning to the new rules on January 1, 2015.  The new minimum capital requirements became effective on January 1, 2015, whereas a new capital conservation buffer and deductions from common equity capital phased in from January 1, 2016 through January 1, 2019, and most deductions from common equity tier 1 capital were phased in from January 1, 2015 through January 1, 2019.

The rules include (a) a minimumcommon equity tier 1 capital ratio of 4.5%, (b) a minimum Tier 1 capital ratio of 6.0%, (c) a minimum total capital ratio of 8.0%, and (d) a minimum leverage ratio of 4.0%.

Common equity for the common equity tier 1 capital ratio includes common stock (plus related surplus) and retained earnings, plus limited amounts of minority interests in the form of common stock, less the majority of certain regulatory deductions.        

Tier 1 capital includes common equity as defined for the common equity tier 1 capital ratio, plus certain non-cumulative preferred stock and related surplus, cumulative preferred stock and related surplus and trust preferred securities that have been grandfathered (but which are not permitted going forward), and limited amounts of minority interests in the form of additional Tier 1 capital instruments, less certain deductions.

Tier 2 capital, which can be included in the total capital ratio, includes certain capital instruments (such as subordinated debt) and limited amounts of the allowance for loan and lease losses, subject to new eligibility criteria, less applicable deductions.

The deductions from common equity tier 1 capital include goodwill and other intangibles, certain deferred tax assets, mortgage-servicing assets above certain levels, gains on sale in connection with a securitization, investments in a banking organization’s own capital instruments and investments in the capital of unconsolidated financial institutions (above certain levels).  The deductions phased in beginning in 2015 and were fully phased in as of January 1, 2019. 

Under the guidelines, capital is compared to the relative risk related to the balance sheet.  To derive the risk included in the balance sheet, one of several risk weights is applied to different balance sheet and off-balance sheet assets, primarily based on the relative credit risk of the counterparty.  The capital amounts and classification are also subject to qualitative judgments by the regulators about components, risk weightings and other factors. 

The rules also place restrictions on the payment of capital distributions, including dividends, and certain discretionary bonus payments to executive officers if the banking organizationdoes not hold a capital conservation buffer of greater than 2.5 percent composed of common equity tier 1 capital above its minimum risk-based capital requirements, or if its eligible retained income is negative in that quarter and its capital conservation buffer ratio was less than 2.5 percent at the beginning of the quarter.  The capital conservation buffer, which began to phase in starting on January 1, 2016, at .625% of risk-weighted assets,was 1.88% at December 31, 2018 and was fully phased in at 2.5% on January 1, 2019. 

In September 2019, the Federal Reserve Board, along with other federal bank regulatory agencies, issued a final rule, effective January 1, 2020, that gives community banks, including CFBank, the option to calculate a simple leverage ratio to measure capital adequacy if the community banks meet certain requirements.  Under the rule, a community bank is eligible to elect the Community Bank Leverage Ratio ("CBLR") framework if it has less than $10 billion in total consolidated assets, limited amounts of certain assets and off-balance sheet exposures, and a leverage ratio greater than 9.0%.  Qualifying institutions that elect to use the CBLR framework and that maintain a leverage ratio of greater than 9.0% will be considered to have satisfied the risk-based and leverage capital requirements in the regulatory agencies' generally applicable capital rules and to have met the well-capitalized ratio requirements.  The Company is currently considering whether to opt out of the simplified framework and continue to follow existing capital rules.

In December 2018, the federal banking agencies issued a final rule to address regulatory capital treatment of credit loss allowances

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under the current expected credit loss (“CECL”) model (accounting standard).  The rule revises the federal banking agencies’ regulatory capital rules to identify which credit loss allowances under the CECL model are eligible for inclusion in regulatory capital and to provide banking organizations the option to phase in over three years the day-one adverse effects on regulatory capital that may result from the adoption of the CECL model.

The federal banking agencies have established a system of prompt corrective action to resolve certain of the problems of undercapitalized institutions.  This system is based on five capital level categories for insured depository institutions:  “well capitalized,” “adequately capitalized,” “undercapitalized,” “significantly undercapitalized” and “critically undercapitalized.”

The federal banking agencies may (or in some cases must) take certain supervisory actions depending upon a bank’s capital level.  For example, the banking agencies must appoint a receiver or conservator for a bank within 90 days after the bank becomes “critically undercapitalized” unless the bank’s primary regulator determines, with the concurrence of the FDIC, that other action would better achieve regulatory purposes.  Banking operations otherwise may be significantly affected depending on a bank’s capital category.  For example, a bank that is not “well capitalized” generally is prohibited from accepting brokered deposits and offering interest rates on deposits higher than the prevailing rate in its market, and the holding company of any undercapitalized depository institution must guarantee, in part, specific aspects of the bank’s capital plan for the plan to be acceptable.

In order to be “well-capitalized”, a bank must have a common equity tier I capital ratio of at least 6.5%, a total risk-based capital of at least 10.0%, a Tier 1 risk-based capital ratio of at least 8.0% and a leverage ratio of at least 5.0%, and the bank must not be subject to any written agreement, order, capital directive or prompt corrective action directive to meet and maintain a specific capital level for any capital measure.  The Company’s management believes that CFBank met the ratio requirements to be deemed “well-capitalized” according to the guidelines described above as of December 31, 2019.

The Holding Company currently qualifies under the FRB’s Small Bank Holding Company Policy Statement for exemption from the FRB’s consolidated risk-based capital and leverage rules at the holding company level.  In April 2015, the FRB issued a final rule which increased the size limitation for qualifying bank holding companies under the Small Bank Holding Company Policy Statement from $500 million to $1 billion of total consolidated assets.In August 2018, the FRB issued an interim final rule, as required by the Regulatory Relief Act, to further increase the size limitation under the Small Bank Holding Company Policy Statement to $3 billion of total consolidated assets.

FDIC Regulation and Insurance of Accounts.CFBank’s deposits are insured up to the applicable limits by the FDIC, and such insurance is backed by the full faith and credit of the United States Government.  The general deposit insurance limit is $250,000 per separately insured depositor.  As insurer, the FDIC imposes deposit insurance premiums and is authorized to conduct examinations of and to require reporting by FDIC-insured institutions, to prohibit any insured institution from engaging in any activity the FDIC determines to pose a threat to the deposit insurance fund, and to take enforcement actions against insured institutions.  The FDIC may terminate insurance of deposits of any insured institution if the FDIC finds that the insured institution has engaged in unsafe and unsound practices, is in an unsafe or unsound condition or has violated any applicable law, regulation, rule, order or condition imposed by the FDIC or any other regulatory agency.

The FDIC assesses quarterly deposit insurance premiums on each insured institution based on risk characteristics of the insured institution and may also impose special assessments in emergency situations.  The premiums fund the DIF.  Pursuant to the Dodd-Frank Act, the FDIC has established 2.0% as the designated reserve ratio (“DRR”), which is the amount in the DIF as a percentage of all DIF insured deposits.  In March 2016, the FDIC adopted final rules designed to meet the statutory minimum DRR of 1.35% by September 30, 2020, the deadline imposed by the Dodd-Frank Act.  As of September 30, 2018, the DRR met the statutory minimum of 1.35%.  As a result, the previous surcharge imposed on banks with assets of $10 billion or more was lifted.  In addition, preliminary assessment credits have been determined by the FDIC for banks with assets of less than $10 billion, which had previously contributed to the increase of the DRR to 1.35%.  These credits may be redeemed beginning in the quarterly assessment period in which the DRR reaches a minimum of 1.38%, and is not to exceed the total quarterly assessment due.

In addition, all FDIC-insured institutions are required to pay assessments to fund interest payments on bonds issued by the Financing Corporation, which was established by the government to recapitalize a predecessor to the DIF. These assessments continued until the Financing Corporation bonds matured in September 2019.  The final assessment was collected on the March 2019 FDIC invoice.

Limitations on Dividends and Other Capital Distributions.Banking regulations impose various restrictions on distributions of capital, which include dividends, stock redemptions or repurchases, cash-out mergers and other transactions charged to the capital account.

Generally, for national banks such as CFBank, it is required that before and after the proposed distribution the institution remain well-capitalized.  National banks may make capital distributions during any calendar year equal to thegreaterof 100% of net income for the year-to-date plus retained net income for the two preceding years.  However, an institution deemed to be in need of more than normal supervision by the OCC may have its dividend authority restricted by the OCC.  In addition, to the extent that a national bank has a negative accumulated deficit, any distributions or dividends by the bank are subject to prior non-objection by the OCC. 

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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 December 31, 2019, the Holding Company a total of $10.0 million of cash at the Holding Company level.

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.See Note 18-Regulatory Capital Matters to the Consolidated Financial Statements included in our 2019 Annual Reportfor additional information.

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 total $473,000at year-end 2019. 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.

Federal Home Loan Bank

The Federal Home Loan Banks (“FHLBs”) provide credit to their members in the form of advances.  CFBank is a member of the FHLB of Cincinnati.  As an FHLB member, CFBank must maintain an investment in the capital stock of the FHLB of Cincinnati

Upon the origination or renewal of a loan or advance, each FHLB is required by law to obtain and maintain a security interest in certain types of collateral.  Each FHLB is required to establish standards of community investment or service that its members must maintain for continued access to long-term advances from the FHLB.  The standards take into account a member’s performance under the Community Reinvestment Act and the member’s record of lending to first-time home buyers.

Community Reinvestment Act

The Community Reinvestment Act requires CFBank’s primary federal regulatory agency, the OCC, to assess CFBank’s record in meeting the credit needs of the communities it serves.  The OCC assigns one of four ratings: outstanding, satisfactory, needs to improve or substantial noncompliance.  The rating assigned to a financial institution is considered in connection with various applications submitted by the financial institution or its holding company to its banking regulators, including applications to acquire another financial institution or to open or close a branch office.  In addition, all subsidiary banks of a financial holding company must maintain a satisfactory or outstanding rating in order for the financial holding company to avoid limitations on its activities.

Consumer Protection Laws and Regulations

Banks are subject to regular examination to ensure compliance with federal consumer protection statutes and regulations, including, but not limited to, the following:

· The Equal Credit Opportunity Act (prohibiting discrimination in any credit transaction on the basis of any of various criteria);

· The Truth in Lending Act (requiring that credit terms are disclosed in a manner that permits a consumer to understand and compare credit terms more readily and knowledgeably);

· The Fair Housing Act (making it unlawful for a lender to discriminate in its housing-related lending activities against any person on the basis of certain criteria);

· The Home Mortgage Disclosure Act (requiring financial institutions to collect data that enables regulatory agencies to determine whether financial institutions are serving the housing credit needs of the communities in which they are located); and

· The Real Estate Settlement Procedures Act (requiring that lenders provide borrowers with disclosures regarding the nature and cost of real estate settlements and prohibits abusive practices that increase borrowers’ costs).

The banking regulators also use their authority under the Federal Trade Commission Act to take supervisory or enforcement action with respect to unfair or deceptive acts or practices by banks that may not necessarily fall within the scope of a specific banking or consumer finance law.

Patriot Act

In response to the terrorist events of September 11, 2001, the Uniting and Strengthening of America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001 (the “Patriot Act”) was signed into law in October 2001.  The Patriot Act gives the United States government powers to address terrorist threats through enhanced domestic security measures, expanded

27

surveillance powers, increased information sharing and broadened anti-money laundering requirements.  Title III of the Patriot Act takes measures intended to encourage information sharing among bank regulatory agencies and law enforcement bodies.  Further, certain provisions of Title III impose affirmative obligations on a broad range of financial institutions.  Among other requirements, Title III and related regulations require regulated financial institutions to establish a program specifying procedures for obtaining identifying information from customers seeking to open new accounts and establish enhanced due diligence policies, procedures and controls designed to detect and report suspicious activity.  CFBank has established policies and procedures that are believed to be compliant with the requirements of the Patriot Act.

Office of Foreign Assets Control Regulation

The U.S. Treasury Department’s Office of Foreign Assets Control (“OFAC”) administers and enforces economic and trade sanctions against targeted foreign countries and regimes, under authority of various laws, including designated foreign countries, nationals and others.  OFAC publishes lists of specially designated targets and countries.  CFBank is responsible for, among other things, blocking accounts of, and transactions with, such targets and countries, prohibiting unlicensed trade and financial transactions with them and reporting blocked transactions after their occurrence.  Failure to comply with these sanctions could have serious financial, legal and reputational consequences, including causing applicable bank regulatory authorities not to approve merger or acquisition transactions when regulatory approval is required or to prohibit such transactions even if approval is not required.  Regulatory authorities have imposed cease and desist orders and civil money penalties against institutions found to be violating these obligations.

Corporate Governance

As mandated by the Sarbanes-Oxley Act of 2002, the SEC has adopted rules and regulations governing, among other issues, corporate governance, auditing and accounting, executive compensation and enhanced and timely disclosure of corporate information.  The Nasdaq Stock Market has also adopted corporate governance rules. The Board of Directors of the Company has taken a series of actions to strengthen and improve the Company’s already strong corporate governance practices in light of the rules of the SEC and Nasdaq.  The Board of Directors has adopted charters for the Board’s various committees, including the Audit Committee, the Compensation Committee, and the Nominating and Corporate Governance Committee, as well as a Code of Business Conduct and Ethics governing the directors, officers and employees of the Company.

Executive and Incentive Compensation

In June 2010, the Federal Reserve Board, the OCC and the FDIC issued joint interagency guidance on incentive compensation policies (the “Joint Guidance”) intended to ensure that the incentive compensation policies of banking organizations do not undermine the safety and soundness of such organizations by encouraging excessive risk-taking. This principles-based guidance, which covers all employees that have the ability to materially affect the risk profile of an organization, either individually or as part of a group, is based upon the key principles that a banking organization’s incentive compensation arrangements should: (i) provide incentives that do not encourage risk-taking beyond the organization’s ability to effectively identify and manage risks; (ii) be compatible with effective internal controls and risk management; and (iii) be supported by strong corporate governance, including active and effective oversight by the organization’s board of directors.

In 2011, federal banking regulatory agencies jointly issued proposed rules on incentive-based compensation arrangements under applicable provisions of the Dodd-Frank Act (the “First Proposed Joint Rules”).  The First Proposed Joint Rules generally would have applied to financial institutions with $1 billion or more in assets that maintain incentive-based compensation arrangements for certain covered employees.

In May 2016, the federal bank regulatory agencies approved a second joint notice of proposed rules (the “Second Proposed Joint Rules”) designed to prohibit incentive-based compensation arrangements that encourage inappropriate risks at financial institutions.  The Second Proposed Joint Rules would apply to covered financial institutions with total assets of $1 billion or more, and are still in proposed rule status. The requirements of the Second Proposed Joint Rules would differ for each of three categories of financial institutions:

· Level 1 consists of institutions with assets of $250 billion or more;

· Level 2 consists of institutions with assets of at least $50 billion and less than $250 billion; and

· Level 3 consists of institutions with assets of at least $1 billion and less than $50 billion.

Some of the requirements would apply only to Level 1 and Level 2 institutions. For all covered institutions, however, the Second Proposed Joint Rules would (A) prohibit incentive-based compensation arrangements that are “excessive” or “could lead to material financial loss; (B) require incentive-based compensation that is consistent with a balance of risk and reward, effective management and control of risk, and effective governance; and (C) require board oversight, recordkeeping and disclosure to the appropriate regulatory agency.  So long as CFBank’s total assets are less than $1 billion, CFBank would not be subject to the express requirements of the Second Proposed Joint Rules. 

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Pursuant to rules adopted by the stock exchanges and approved by the SEC in January 2013 under the Dodd-Frank Act, public company compensation committee members must meet heightened independence requirements and consider the independence of compensation consultants, legal counsel and other advisors to the compensation committee.  A compensation committee must have the authority to hire advisors and to have the public company fund reasonable compensation of such advisors.

Public companies will be required, once stock exchanges impose additional listing requirements under the Dodd-Frank Act, to implement “clawback” procedures for incentive compensation payments and to disclose the details of the procedures which allow recovery of incentive compensation that was paid on the basis of erroneous financial information necessitating a restatement due to material noncompliance with financial reporting requirements.  This clawback policy is intended to apply to compensation paid within a three-year look-back window of the restatement and would cover all executives who received incentive awards.

Cybersecurity

In March 2015, federal regulators issued two related statements regarding cybersecurity.  One statement indicates that financial institutions should design multiple layers of security controls to establish several lines of defense and to ensure that their risk management processes also address the risk posed by compromised customer credentials, including security measures to reliably authenticate customers accessing Internet-based services of the financial institution. The other statement indicates that a financial institution’s management is expected to maintain sufficient business continuity planning processes to ensure the rapid recovery, resumption and maintenance of the financial institution’s operations after a cyber attack involving destructive malware. A financial institution is also expected to develop appropriate processes to enable recovery of data and business operations and address rebuilding network capabilities and restoring data if the finanical institution or its critical service providers fall victim to this type of cyber-attack. If CFBank fails to observe the regulatory guidance, it could be subject to various regulatory sanctions, including financial penalties.

In February 2018, the SEC published interpretive guidance to assist public companies in preparing disclosures about cybersecurity risks and incidents. These SEC guidelines, and any other regulatory guidance, are in addition to notification and disclosure requirements under state and federal banking law and regulations.

State regulators have also been increasingly active in implementing privacy and cybersecurity standards and regulations. Recently, several states have adopted regulations requiring certain financial institutions to implement cybersecurity programs and providing detailed requirements with respect to these programs, including data encryption requirements. Many states have also recently implemented or modified their data breach notification and data privacy requirements. The Company expects this trend of state-level activity in those areas to continue, and is continually monitoring developments in the states in which our customers are located.

In the ordinary course of business, the Company relies on electronic communications and information systems to conduct its operations and to store sensitive data.  The Company employs significant resources, processes and technology to manage and maintain cybersecurity controls. The Company employs a variety of preventative and detective tools to monitor, block, and provide alerts regarding suspicious activity, as well as to report on any suspected advanced persistent threats. Notwithstanding the strength of the Company’s defensive measures, the threat from cyber attacks is severe, attacks are sophisticated and increasing in volume, and attackers respond rapidly to changes in defensive measures.  Although to date the Company has not detected a significant compromise, significant data loss or any material financial losses related to cybersecurity attacks, the Company’s systems and those of its customers and third-party service providers are under constant threat and it is possible that the Company could experience a significant event in the future. Risks and exposures related to cybersecurity attacks are expected to remain high for the foreseeable future due to the rapidly evolving nature and sophistication of these threats, as well as due to the expanding use of Internet banking, mobile banking and other technology-based products and services by us and our customers.

Effect of Environmental Regulation

Compliance with federal, state and local provisions regulating the discharge of materials into the environment, or otherwise relating to the protection of the environment, has not had a material effect upon the capital expenditures, earnings or competitive position of the Company.  In the opinion of management, the Company does not have exposure to material costs associated with compliance with environmental laws and regulations or material expenditures related to environmental hazardous waste mitigation or cleanup.

The Company believes its primary exposure to environmental risk is through the lending activities of CFBank.  In cases where management believes environmental risk potentially exists, CFBank mitigates its environmental risk exposure by requiring environmental site assessments at the time of loan origination to confirm collateral quality as to commercial real estate parcels posing higher than normal potential for environmental impact, as determined by reference to present and past uses of the subject property and adjacent sites.  In addition, environmental assessments are typically required prior to any foreclosure activity involving non-residential real estate collateral.

Future Legislation

Various and significant legislation affecting financial institutions and the financial industry is from time to time introduced by the U.S. Congress, as evidenced by the sweeping reforms in the Dodd-Frank Act adopted in 2010, and the rollback of the Dodd-Frank Act that

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began in 2018.  Many of the regulations mentioned above were adopted or amended pursuant to the Dodd-Frank Act.  Such legislation may continue to change banking statutes and regulations, and the operating environment of the Company and its subsidiaries in substantial and unpredictable ways, and such legislation could significantly increase or decrease costs of doing business, limit or expand permissible activities, and/or affect the competitive balance among financial institutions.  The enactment of the Dodd-Frank Act, the subsequent rollback and the continuing implementation of final rules and regulations thereunder, and continuing political change makes the nature and extent of future legislative and regulatory changes affecting financial institutions unpredictable.

Federal and State Taxation

Federal TaxationGeneral.Wereport income on a calendar year, consolidated basis using the accrual method of accounting, and we are subject to federal income taxation in the same manner as other corporations, with some exceptions discussed below.  The following discussion of tax matters is intended only as a summary and does not purport to be a comprehensive description of the tax rules applicable to the Company and CFBank.

Our deferred tax assets are composed of U.S. net operating losses (“NOLs”), and other temporary book to tax differences.  When determining the amount of deferred tax assets that are more-likely-than-not to be realized, and therefore recorded as a benefit, the Company conducts a regular assessment of all available information. This information includes, but is not limited to, taxable income in prior periods, projected future income and projected future reversals of deferred tax items.  Based on these criteria, the Company determined as of December 31, 2019 that no valuation allowance was required against the net deferred tax asset.

In 2012, a recapitalization program through the sale of $22.5 million in common stock 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 year-end 2019, the Company had net operating loss carryforwards of $22.6 million, 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 $163,000 per year. Due to this limitation, management determined it is more likely than not that $20.5 million 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 $7.0 million tax effect of this lost realizability.

Federal income tax laws provided additional 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 2019.  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.See Note 13 to the Consolidated Financial Statements included in our 2019 Annual Reportto Stockholders, included as Exhibit 13.1 to this Form 10-K, for additional information.

Distributions.  Under the Small Business Job Protection Act of 1996, if CFBank makes “non-dividend distributions” to the Company, such distributions will be considered to have been made from CFBank’s unrecaptured tax bad debt reserves (including the balance of its reserves as of December 31, 1987) to the extent thereof, and then from CFBank’s supplemental reserve for losses on loans, to the extent thereof, and an amount based on the amount distributed (but not in excess of the amount of such reserves) will be included in CFBank’s taxable income.  Non-dividend distributions include distributions in excess of CFBank’s current and accumulated earnings and profits, as calculated for federal income tax purposes, distributions in redemption of stock, and distributions in partial or complete liquidation.Dividends paid out of CFBank’s current or accumulated earnings and profits will not be so included in CFBank’s taxable income.

Ohio Taxation

The consolidated organization is  subject to the Ohio Financial Institutions Tax (“FIT”). The FITis a business privilege tax for financial institutions doing business or domiciled in the State of Ohio. The three-tier structure charges financial institutions based on total capital at the prior calendar year-end based on regulatory reporting requirements.

Delaware Taxation

As a Delaware corporation not earning income in Delaware, the Company is exempted from Delaware corporate income tax, but is required to file an annual report with and pay an annual franchise tax to the State of Delaware.

Available Information

Our website address is www.CFBankonline.com.  We make available free of charge through our website our annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and any amendments to these reports as soon as reasonably practicable after we electronically file such reports with the Securities Exchange Commission (SEC).  These reports can be found on our website under the caption “Investor Relations – SEC Filings.”  Investors also can obtain copies of our filings from the SEC

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website at www.sec.gov.

Item 1A.  Risk Factors.

The following are certain risk factors that could impact our business, financial results and results of operations.  Investing in our common stock involves risks, including those described below.  These risk factors should be considered by prospective and current investors in our common stock when evaluating the disclosures contained in thisForm 10-K and in other reports that we file with the SEC. These risk factors could cause actual results and conditions to differ materially from those projected in forward-looking statements.  If any of the events described in the following risk factors actually occur, or if additional risks and uncertainties not presently known to us or that we believe are immaterial do materialize, then our business, financial condition or results of operations could be materially adversely impacted.  In addition, the trading price of our common stock could decline due to any of the events described in these risk factors.

Changes in economic and political conditions could adversely affect our earnings through declines in deposits, loan demand, the ability of our customers to repay loans and the value of the collateral securing our loans.

Our success depends to a significant extent upon local and national economic and political conditions, as well as governmental fiscal and monetary policies.  Conditions such as inflation, recession, unemployment, changes in interest rates, money supply and other factors beyond our control can adversely affect our asset quality, deposit levels and loan demand and, therefore, our earnings and our capital.  Conditions such as inflation, recession, unemployment, changes in interest rates, fiscal and monetary policy, tariffs, a U.S. withdrawal from or significant renegotiation of trade agreements, trade wars, the election of a new U.S. President in 2020, and other factors beyond our control may adversely affect CFBank’s deposit levels and composition, the quality of investment securities available for purchase, demand for loans, the ability of CFBank’s borrowers to repay their loans, and the value of the collateral securing loans made by CFBank.  Recent political developments have resulted in substantial changes in economic and political conditions for the U.S. and the remainder of the world.  Disruptions in U.S. and global financial markets, and changes in oil production in the Middle East also affect the economy and stock prices in the U.S., which can affect our earnings capital, as well as the ability of our customers to repay loans.  The potential effects of the United Kingdom leaving the European Union (Brexit) on the United States are still unknown. 

Because we have a significant amount of real estate loans, decreases in real estate values could adversely affect the value of property used as collateral and our ability to sell the collateral upon foreclosure.  Adverse changes in the economy may also have a negative effect on the ability of our borrowers to make timely repayments of their loans, which would have an adverse impact on our earnings and cash flows.  Moreover, our market activities are concentrated in the following Ohio counties:  Franklin County, and contiguous counties through our office in Worthington, Ohio and loan production office in Columbus, Ohio, Cuyahoga County, and contiguous counties through our agency office in Woodmere, Ohio, Hamilton County, and contiguous counties through our office in Glendale, Ohio, Summit County, and contiguous counties through our office in Fairlawn, Ohio; Columbiana County, and contiguous counties through our offices in Wellsville and Calcutta, Ohio.   Our success depends on the general economic conditions of these areas, particularly given that a significant portion of our lending relates to real estate located in these regions.  Therefore, adverse changes in the economic conditions in these areas could adversely impact our earnings and cash flows.

We may not be able to effectively manage our growth.

We have experienced significant growth in the amount of our total loans in the past several years.  Since January 1, 2015, our total net loans have grown by $406.2 million, or 158.0%, and our total assets have grown by $565.0 million, or 179.0%.  Our continued growth may place significant demands on our operations and management, and our future operating results depend to a large extent on our ability to successfully manage our growth.  We may not successfully implement improvements to, or integrate, our management information and control systems, procedures and processes in an efficient or timely manner and may discover deficiencies in existing systems and controls.  In particular, our controls and procedures must be able to accommodate increases in our loan volume and our growth and expansion.  If we are unable to manage our loan growth and/or expanded operations, we may experience compliance and operational problems, have to slow the pace of growth, or have to incur additional expenditures beyond current projections to support such growth, any one of which could materially and adversely affect us.

Our allowance for loan losses may not be adequate to cover actual losses.  Higher loan losses could require us to increase our allowance for loan losses through a charge to earnings.

When we loan money we incur the risk that our borrowers will not repay their loans.  We reserve for loan losses by establishing an allowance through a charge to earnings.  The amount of this allowance is based on our assessment of probable incurred credit losses in our loan portfolio.  The process for determining the amount of the allowance is critical to our financial condition and results of operations.  It requires subjective and complex judgments about the future, including forecasts of economic or market conditions that might impair the ability of our borrowers to repay their loans.  It also requires that we make various assumptions and judgments about the collectability of our loan portfolio, including the creditworthiness of our borrowers and the value of the real estate and other assets serving as collateral for the repayment of many of our loans.  The allowance for loan losses may not be sufficient to cover probable

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losses in our loan portfolio.  We might underestimate the loan losses inherent in our loan portfolio and have loan losses in excess of the amount reserved.  We might increase the allowance because of changing economic conditions.  For example, when real estate values decline, the potential severity of loss on a real estate-secured loan can increase significantly, especially in the case of loans with high loan-to-value ratios.  A decline in the national economy or inthe local economies of the areas in which our loans are concentrated could result in an increase in loan delinquencies, foreclosures or repossessions resulting in increased charge-off amounts and the need for additional loan loss allowances in future periods.  In addition, our determination as to the amount of our allowance for loan losses is subject to review by our regulators as part of their examination process, which may result in the establishment of an additional allowance based upon the judgment of the regulators after a review of the information available at the time of their examination.  The additions to our allowance for loan losses would be made through increased provisions for loan losses, which would reduce our income and could materially and adversely affect our financial condition, earnings and profitability.

In addition, bank regulators periodically review our allowance for loan losses and may require us to increase our allowance for loan losses or recognize further loan charge-offs. Moreover, the Financial Accounting Standards Board (“FASB”) has changed its requirements for establishing the allowance for loan losses.

On June 16, 2016, the FASB issued Accounting Standard Update (“ASU”) 2016-13 “Financial Instruments - Credit Losses”, which replaces the incurred loss model with an expected loss model, and is referred to as the current expected credit loss (“CECL”) model.  Under the incurred loss model, loans are recognized as impaired when there is no longer an assumption that future cash flows will be collected in full under the originally contracted terms.  The FASB voted to defer the effective date for this ASU for smaller reporting companies, such as the Company, to annual reporting periods and interim reporting periods within those annual periods, beginning after December 15, 2022.  Under the CECL model, financial institutions will be required to use historical information, current conditions and reasonable forecasts to estimate the expected loss over the life of the loan. The transition to the CECL model will bring with it significantly greater data requirements and changes to methodologies to accurately account for expected losses under the new parameters.  If the methodologies and assumptions that we use in the CECL model are proven to be incorrect, or inadequate, the allowance for credit losses may not be sufficient, resulting in the need for additional allowance for credit losses to be established, which could have a material adverse impact on our financial condition and results of operations.

Any increase in our allowance for loan losses or loan charge-offs as required by these regulatory authorities could have a material adverse effect on our financial condition and results of operations.

We may make, or be required to make, further increases in our provision for loan losses and to charge off additional loans in the future, which could adversely affect our results of operations.

As a result of changes in balances and composition of the loan portfolio, changes in economic and market conditions that occur from time to time and other factors specific to a borrower’s circumstances, the level of nonperforming assets will fluctuate.  If housing and real estate markets decline, we may experience increased delinquencies and credit losses.  An increase in our nonperforming assets, credit losses or our provision for loan losses would adversely affect our financial condition and results of operations. 

Our emphasis on commercial, commercial real estate and multi-family residential real estate lending may expose us to increased lending risks.

Because payments on commercial loans are dependent on successful operation of the borrowers’ business enterprises, repayment of such loans may be subject to a greater extent to adverse conditions in the economy.  Because payments on loans secured by commercial real estate properties are dependent on successful operation or management of the properties, repayment of commercial real estate loans may be subject to a greater extent to adverse conditions in the real estate market or the economy.  Commercial real estate and multi-family residential mortgage loans also have larger loan balances to single borrowers or groups of related borrowers compared to single-family residential mortgage loans.  Some of our borrowers also have more than one commercial real estate or multi-family residential mortgage loan outstanding with us.  Additionally, some loans may be collateralized by junior liens.  Consequently, an adverse development involving one or more loans or credit relationships can expose us to significantly greater risk of loss compared to an adverse development involving a single-family residential mortgage loan. 

Our adjustable-rate loans may expose us to increased lending risks.

While adjustable-rate loans better offset the adverse effects of an increase in interest rates as compared to fixed-rate loans, the increased payments required of adjustable-rate loan borrowers upon an interest rate adjustment in a rising interest rate environment could cause an increase in delinquencies and defaults.  The marketability of the underlying property also may be adversely affected in a rising interest rate environment.  In addition, although adjustable-rate loans help make our asset base more responsive to changes in interest rates, the extent of this interest sensitivity is limited by the annual and lifetime interest rate adjustment limits.

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We are a holding company and depend on our subsidiary bank for dividends.

The Holding Company is a legal entity separate and distinct from its subsidiaries and affiliates.  The Holding Company’s ability to support its operations, pay dividends on its common shares and service its debt is dependent upon the amount of cash and liquidity available at the Holding Company level, as well as the receipt of dividends and other distributions from CFBank to the extent necessary to fund such dividends.  As of December 31, 2019, the Holding Company a total of $10.0 million of cash at the Holding Company level.  

In the event that CFBank is unable to pay dividends to the Holding Company, the Holding Company may not be able to service its debt, pay its other obligations or pay dividends on its outstanding stock.  Accordingly, the Holding Company’s inability to receive dividends from CFBank could also have a material adverse effect on our business, financial condition and results of operations. 

Various federal and state statutory provisions and regulations limit the amount of dividends that CFBank may pay to the Holding Company without regulatory approval.  Generally, financial institutions may pay dividends without prior approval as long as the dividend does not exceed the total of the current calendar year-to-date earnings plus any earnings from the previous two years not already paid out in dividends, and as long as the financial institution remains well capitalized after the dividend payment.

The ability of CFBank to pay dividends in the future is currently influenced, and could be further influenced, by bank regulatory policies and capital guidelines and may restrict the Holding Company’s ability to declare and pay dividends on its common shares.  The ability of CFBank and any other subsidiaries to pay dividends to the Holding Company is also subject to their profitability, financial condition, capital expenditures and other cash flow requirements and contractual obligations.  There can be no guaranty that CFBank will be able or permitted to pay dividends to the Holding Company in the future, and any such future dividends by CFBank would be based on future earnings and, if necessary, regulatory approval. 

Deposit insurance premiums may increase and have a negative effect on our results of operations.

The DIF maintained by the FDIC to resolve bank failures is funded by fees assessed on insured depository institutions.  The costs of resolving bank failures increased for a period of time and decreased the DIF.  The FDIC collected a special assessment in 2009 to replenish the DIF and also required a prepayment of an estimated amount of future deposit insurance premiums.  If the costs of future bank failures increase, the deposit insurance premiums required to be paid by CFBank may also increase.  The FDIC recently adopted rules revising its assessments in a manner benefitting banks, such as CFBank, with assets totaling less than $10 billion.  There can be no assurance, however, that assessments will not be changed in the future.

Changing interest rates may decrease our earnings and asset values.

Management is unable to accurately predict future market interest rates, which are affected by many factors, including, but not limited to inflation, recession, changes in employment levels, changes in the money supply and domestic and international disorder and instability in domestic and foreign financial markets.  Changes in the interest rate environment may reduce our profits.  Net interest income is a significant component of our net income, and consists of the difference, or spread, between interest income generated on interest-earning assets and interest expense incurred on interest-bearing liabilities.  Net interest spreads are affected by the difference between the maturities and repricing characteristics of interest-earning assets and interest-bearing liabilities.  Although certain interest-earning assets and interest-bearing liabilities may have similar maturities or periods to which they reprice, they may react in different degrees to changes in market interest rates.  In addition, residential mortgage loan origination and refinancing volumes are affected by market interest rates on loans.  Rising interest rates generally are associated with a lower volume of loan originations and refinancings, while falling interest rates are usually associated with higher loan originations and refinancings.  Our ability to generate gains on sales of mortgage loans is significantly dependent on the level of originations.  Cash flows are affected by changes in market interest rates.  Generally, in rising interest rate environments, loan prepayment rates are likely to decline, and in falling interest rate environments, loan prepayment rates are likely to increase.  A majority of our commercial, commercial real estate and multi-family residential real estate loans are adjustable rate loans and an increase in the general level of interest rates may adversely affect the ability of some borrowers to pay the interest on and principal of their obligations, especially borrowers with loans that have adjustable rates of interest.  Changes in interest rates, prepayment speeds and other factors may also cause the value of our loans held for sale to change.  Accordingly, changes in levels of market interest rates could materially and adversely affect our net interest spread, loan volume, asset quality, value of loans held for sale and cash flows, as well as the market value of our securities portfolio and overall profitability.

Adverse changes in the financial markets may adversely impact our results of operations.

While we generally invest in securities issued by U.S. government agencies and sponsored entities and U.S. state and local governments with limited credit risk, certain investment securities we hold possess higher credit risk since they represent beneficial interests in structured investments collateralized by residential mortgages, debt obligations and other similar asset-backed assets.  Even securities issued by governmental agencies and entities may entail risk depending on political and economic changes.  Regardless of the level of credit risk, all investment securities are subject to changes in market value due to changing interest rates, implied credit spreads and credit ratings.

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Legislative or regulatory changes or actions could adversely impact our business.

The financial services industry is extensively regulated.  We are subject to extensive state and federal regulation, supervision and legislation that govern almost all aspects of our operations.  These laws and regulations are primarily intended for the protection of consumers, depositors, borrowers and the DIF, not to benefit our shareholders. 

Regulations affecting banks and financial services businesses are undergoing continuous change, and management cannot predict the effect of those changes.  While such changes are generally intended to lessen the regulatory burden on financial institutions, the impact of any changes to laws and regulations or other actions by regulatory agencies could adversely affect our business.  Regulatory authorities have extensive discretion in connection with their supervisory and enforcement activities, including the ability to impose restrictions on the operation of an institution and the ability to determine the adequacy of an institution’s allowance for loan losses.  Failure to comply with applicable laws, regulations and policies could result in sanctions being imposed by the regulatory agencies, including the imposition of civil money penalties, which could have a material adverse effect on our operations and financial condition. Even the reduction of regulatory restrictions could have an adverse effect on us if such lessening of restrictions increases competition within our industry or market areas.

In light of conditions in the global financial markets and the global economy that occurred in the last decade, regulators increased their focus on the regulation of the financial services industry.  In the last several years, Congress and the federal bank regulators have acted on an unprecedented scale in responding to the stresses experienced in the global financial markets.  Some of the laws enacted by Congress and regulations promulgated by federal bank regulators subject us and other financial institutions to additional restrictions, oversight and costs that may have an adverse impact on our business and results of operations.  In addition to laws, regulations and supervisory and enforcement actions directed at the operations of banks, proposals to reform the housing finance market contemplate winding down Fannie Mae and Freddie Mac, which could negatively affect our sales of loans.

We face strong competition from other financial institutions, financial services companies and other organizations offering services similar to those offered by us, which could result in our not being able to sustain or grow our loan and deposit businesses.

We conduct our business operations primarily in Franklin, Cuyahoga, Hamilton, Summit, and ColumbianaCounties, Ohio, and make loans generally throughout Ohio, and residential mortgage loans on a national basis.  Increased competition within these markets may result in reduced loan originations and deposits.  Ultimately, we may not be able to compete successfully against current and future competitors.  Many competitors offer the types of loans and banking services that we offer.  These competitors include other savings associations, community banks, regional banks and money center banks.  We also face competition from many other types of financial institutions, including finance companies, brokerage firms, insurance companies, credit unions, mortgage banks and other financial intermediaries.  Our competitors with greater resources may have a marketplace advantage enabling them to maintain numerous banking locations and mount extensive promotional and advertising campaigns.

Additionally, financial intermediaries not subject to bank regulatory restrictions and banks and other financial institutions with larger capitalization have larger lending limits and are thereby able to serve the credit needs of larger clients.  These institutions, particularly to the extent they are more diversified than we are, may be able to offer the same loan products and services that we offer at more competitive rates and prices.  If we are unable to attract and retain banking clients, we may be unable to sustain current loan and deposit levels or increase our loan and deposit levels, and our business, financial condition and future prospects may be negatively affected.

Provisions in the Holding Company’s Amended and Restated Certificate of Incorporation and statutory provisions could discourage a hostile acquisition of control.

The Holding Company’s Amended and Restated Certificate of Incorporation contains certain provisions that could discourage non-negotiated takeover attempts that certain stockholders might deem to be in their interests or through which stockholders might otherwise receive a premium for their shares over the then current market price and that may tend to perpetuate existing management.  The Amended and Restated Certificate of Incorporation restricts the ability of an acquirer to vote more than 10% of our outstanding common stock.  The provisions of the Amended and Restated Certificate of Incorporation also include: the classification of the terms of the members of the board of directors; supermajority provisions for the approval of certain business combinations; elimination of cumulative voting by stockholders in the election of directors; certain provisions relating to meetings of stockholders; and provisions allowing the board of directors to consider nonmonetary factors in evaluating a business combination or a tender or exchange offer.  The provisions in the Amended and Restated Certificate of Incorporation requiring a supermajority vote for the approval of certain business combinations and containing restrictions on acquisitions of the Company’s equity securities provide that the supermajority voting requirements or acquisition restrictions do not apply to business combinations or acquisitions meeting specified board of directors’ approval requirements.

The Amended and Restated Certificate of Incorporation also authorizes the issuance of 1,000,000 shares of preferred stock, as well as 9,090,909 shares of common stock. These shares could be issued without further stockholder approval on terms or in circumstances

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that could deter a future takeover attempt.

Additionally, federal banking laws contain various restrictions on acquisitions of control of national banks and their holding companies.

The Amended and Restated Certificate of Incorporation, as well as certain provisions of state and federal law, may have the effect of discouraging or preventing a future takeover attempt in which stockholders of the Company otherwise might receive a substantial premium for their shares over then current market prices.

We may elect or need to raise additional capital in the future, but capital may not be available when it is needed. 

We are required by federal regulatory authorities to maintain adequate levels of capital to support our operations.  In addition, federal banking agencies have recently finalized extensive changes to their capital requirements, including the adoption of the Basel III Capital Rules as discussed above, which result in higher capital requirements and more restrictive leverage and liquidity ratios than those previously in place.  The final impact on us is unknown at this time, but could potentiallyrequire us to raise additional capital in the future.  Our ability to raise additional capital, if needed, will depend on conditions in the capital markets, economic conditions and a number of other factors, many of which are outside our control, and are based on our financial performance.  Accordingly, we cannot be assured of our ability to raise additional capital if needed or on terms acceptable to us.  If we cannot raise additional capital when needed or on acceptable terms, it may have a material adverse effect on our financial condition, results of operations and prospects.

We rely heavily on our management team, and the unexpected loss of key management may adversely affect our operations.

Our current management team was put in place following the completion of the Company’s common stock offering in August 2012.  Our performance since August 2012 has been strongly influenced by our ability to attract and to retain senior management experienced in banking in the markets we serve.  Our ability to retain executive officers and the current management team will continue to be important to successful implementation of our strategies.  The unexpected loss of services of any key management personnel, or the inability to recruit and retain qualified personnel in the future, could have an adverse effect on our business and financial results.

Changes in tax laws could adversely affect our performance.

We are subject to extensive federal, state and local taxes, including income, excise, sales/use, payroll, franchise, financial institutions tax, withholding and ad valorem taxes.  Changes to tax laws could have a material adverse effect on our results of operations, fair values of net deferred tax assets and obligations of states and political subdivisions held in our investment securities portfolio.  In addition, our customers are subject to a wide variety of federal, state and local taxes.  Changes in taxes paid by our customers may adversely affect their ability to purchase homes or consumer products, which could adversely affect their demand for our loans and deposit products.  In addition, such negative effects on our customers could result in defaults on the loans we have made and decrease the value of mortgage-backed securities in which we have invested.

Changes in accounting standards, policies, estimates or procedures could impact our reported financial condition or results of operations.

The accounting standard setters, including the FASB, the SEC and other regulatory bodies, periodically change the financial accounting and reporting guidance that governs the preparation of our consolidated financial statements.  The pace of change continues to accelerate and changes in accounting standards can be hard to predict and could materially impact how we record and report our financial condition and results of operations.  In some cases, we could be required to apply new or revised guidance retroactively, resulting in the restatement of prior period financial statements.

The preparation of consolidated financial statements in conformity with GAAP requires management to make significant estimates that affect the financial statements.  Due to the inherent nature of these estimates, actual results may vary materially from management’s estimates.  In June 2016, FASB issued a new accounting standard for recognizing current expected credit losses, commonly referred to as CECL.  CECL will result in earlier recognition of credit losses and requires consideration of not only past and current events but also reasonable and supportable forecasts that affect collectability.  The Company will be required to comply with the new standard beginning January 1, 2023.  Upon adoption of CECL, credit loss allowances may increase, which would decrease retained earnings and regulatory capital.  The federal banking regulators have adopted a regulation that will allow banks to phase in the day-one impact of CECL on regulatory capital over three years.  CECL implementation poses operational risk, including the failure to properly transition internal processes or systems, which could lead to call report errors, financial misstatements, or operational losses.

We need to constantly update our technology in order to compete and meet customer demands.

The financial services market, including banking services, is undergoing rapid technological changes with frequent introductions of new technology-driven products and services.  In addition to better serving customers, the effective use of technology increases

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efficiency and may enable us to reduce costs.  Our future success will depend, in part, on our ability to use current technology to provide products and services that provide convenience to customers and to create additional efficiencies in our operations.  Some of our competitors have substantially greater resources to invest in technological improvements.  We may not be able to effectively implement new technology-driven products and services or be successful in marketing these products and services to our customers.  Failure to successfully keep pace with technological changes affecting the financial services industry could negatively affect our growth, revenue and profit.

Unauthorized disclosure of sensitive or confidential client information or breaches in security of our systems could severly harm our business.

As part of our financial institution business, we collect, process and store sensitive consumer data by utilizing computer systems and telecommunications networks operated by both us and third-party service providers.  Our necessary dependence upon automated systems to record and process transactions poses the risk that technical system flaws, employee errors, tampering or manipulation of those systems, or attacks by third parties will result in losses and may be difficult to detect.  We have security and backup and recovery systems in place, as well as a business continuity plan, to ensure the computer systems will not be inoperable, to the extent possible.  The Company also routinely reviews documentation of such controls and backups related to third-party service providers.  Our inability to use or access these information systems at critical points in time could unfavorably impact the timeliness and efficiency of our business operations.  In recent years, some banks have experienced denial of service attacks in which individuals or organizations flood the bank's website with extraordinarily high volumes of traffic, with the goal and effect of disrupting the ability of the bank to process transactions. 

We could be adversely affected if one of our employees causes a significant operational break-down or failure, either as a result of human error or where an individual purposefully sabotages or fraudulently manipulates our operations or systems.  We are further exposed to the risk that the third-party service providers may be unable to fulfill their contractual obligations (or will be subject to the same risks as faced by us). These disruptions may interfere with service to our customers, cause additional regulatory scrutiny and result in a financial loss or liability.

Misconduct by employees could include fraudulent, improper or unauthorized activities on behalf of clients or improper use of confidential information.  We may not be able to prevent employee errors or misconduct, and the precautions we take to detect this type of activity might not be effective in all cases.  Employee errors or misconduct could subject us to civil claims for negligence or regulatory enforcement actions, including fines and restrictions on our business.

In addition, there have been instances where financial institutions have been victims of fraudulent activity in which criminals pose as customers to initiate wire and automated clearinghouse transactions out of customer accounts.  Although we have policies and procedures in place to verify the authenticity of our customers, we cannot assure that such policies and procedures will prevent all fraudulent transfers.  Such activity can result in financial liability and harm to our reputation.

We have implemented security controls to prevent unauthorized access to the computer systems and require our third-party service providers to maintain similar controls.  However, we cannot be certain that these measures will be successful.  A security breach of our computer systems and loss of confidential information, such as customer account numbers and related information, could result in a loss of customers’ confidence and, thus, loss of business. In addition, unauthorized access to or use of sensitive data could subject us to litigation and liability and costs to prevent further such occurrences.  Further, we may be impacted by data breaches at retailers and other third parties who participate in data interchanges with us and our customers that involve the theft of customer credit and debit card data, which may include the theft of our debit card personal identification numbers (PINs) and commercial card information used to make purchases at such retailers and other third parties.  Such data breaches could result in us incurring significant expenses to reissue debit cards and cover losses, which could result in a material adverse effect on our results of operations. To date, we have not experienced any material losses relating to cyber-attacks or other information security breaches, but there can be no assurance that we will not suffer such attacks or attempted breaches, or incur resulting losses in the future.  Our risk and exposure to these matters remains heightened because of, among other things, the evolving nature of these threats, and our plans to continue to implement internet and mobile banking capabilities to meet customer demand.  As cyber and other data security threats continue to evolve, we may be required to expend significant additional resources to continue to modify and enhance its protective measures or to investigate and remediate any security vulnerabilities.

Our assets at risk for cyber-attacks include financial assets and non-public information belonging to customers.  We use several third-party vendors who have access to our assets via electronic media.  Certain cyber security risks arise due to this access, including cyber espionage, blackmail, ransom, and theft.  As cyber and other data security threats continue to evolve, we may be required to expend significant additional resources to continue to modify and enhance our protective measures or to investigate and remediate any security vulnerabilities.

All of the types of cyber incidents discussed above could result in damage to our reputation, loss of customer business, costs of incentives to customers or business partners in order to maintain their relationships, litigation, increased regulatory scrutiny and potential enforcement actions, repairs of system damage, increased investments in cybersecurity (such as obtaining additional

36

technology, making organizational changes, deploying additional personnel, training personnel and engaging consultants), increased insurance premiums, and loss of investor confidence and a reduction in the price of our common shares, all of which could result in financial loss and material adverse effects on our results of operations and financial condition.

Noncompliance with the Bank Secrecy Act and other anti-money laundering statutes and regulations could cause a material financial loss.

The Bank Secrecy Act and the USA Patriot Act contain anti-money laundering and financial transparency provisions intended to detect and prevent the use of the U.S. financial system for money laundering and terrorist financing activities. The Bank Secrecy Act, as amended by the USA Patriot Act, requires depository institutions and their holding companies to undertake activities including maintaining an anti-money laundering program, verifying the identity of clients, monitoring for and reporting suspicious transactions, reporting on cash transactions exceeding specified thresholds, and responding to requests for information by regulatory authorities and law enforcement agencies.  Financial Crimes Enforcement Network (also known as FinCEN), a unit of the Treasury Department that administers the Bank Secrecy Act, is authorized to impose significant civil money penalties for violations of those requirements and has recently engaged in coordinated enforcement efforts with the federal bank regulatory agencies, as well as the U.S. Department of Justice, Drug Enforcement Administration, and Internal Revenue Service.

There is also increased scrutiny of compliance with the rules enforced by the Office of Foreign Assets Control (also known as OFAC). If the Company’s policies, procedures, and systems are deemed deficient, or if the policies, procedures, and systems of the financial institutions that the Company has already acquired or may acquire in the future are deficient, the Company may be subject to liability, including fines and regulatory actions such as restrictions on Peoples' ability to pay dividends and the necessity to obtain regulatory approvals to proceed with certain planned business activities, including acquisition plans, which could negatively impact our business, financial condition, and results of operations.  Failure to maintain and implement adequate programs to combat money laundering and terrorist financing could also have serious reputational consequences for the Company.

We are at risk of increased losses from fraud.

Criminals are committing fraud at an increasing rate and are using more sophisticated techniques.  In some cases, these individuals are part of larger criminal rings, which allow them to be more effective.  Such fraudulent activity has taken many forms, ranging from debit card fraud, check fraud, mechanical devices attached to ATM machines, social engineering and phishing attacks to obtain personal information, or impersonation of clients through the use of falsified or stolen credentials.  Additionally, an individual or business entity may properly identify itself, yet seek to establish a business relationship for the purpose of perpetrating fraud.  An emerging type of fraud even involves the creation of synthetic identification in which fraudsters "create" individuals for the purpose of perpetrating fraud.  Further, in addition to fraud committed directly against the Company, the Company may suffer losses as a result of fraudulent activity committed against third parties.  Increased deployment of technologies, such as chip card technology, defray and reduce certain aspects of fraud; however, criminals are turning to other sources to steal personally identifiable information, such as unaffiliated healthcare providers and government entities, in order to impersonate the consumer and thereby commit fraud.

Our business could be adversely affected through third parties who perform significant operational services on our behalf.

The third parties performing operational services for the Company are subject to risks similar to those faced by the Company relating to cybersecurity, breakdowns or failures of their own systems, or misconduct of their employees.  Like many other community banks, CFBank also relies, in significant part, on a single vendor for the systems which allow CFBank to provide banking services to CFBank’s customers, for which the systems are maintained on CFBank’s behalf by this single vendor.

One or more of the third parties utilized by us may experience a cybersecurity event or operational disruption and, if any such event does occur, it may not be adequately addressed, either operationally or financially, by such third party.  Certain of these third parties may have limited indemnification obligations to us in the event of a cybersecurity event or operational disruption, or may not have the financial capacity to satisfy their indemnification obligations.

Financial or operational difficulties of a third party provider could also impair our operations if those difficulties interfere with such third party’s ability to serve the Company.  If a critical third-party provider is unable to meet the needs of the Company in a timely manner, or if the services or products provided by such third party are terminated or otherwise delayed and if the Company is not able to develop alternative sources for these services and products quickly and cost-effectively, our business could be materially adversely effected.

Additionally, regulatory guidance adopted by federal banking regulators addressing how banks select, engage and manage their third-party relationships, affects the circumstances and conditions under which we work with third parties and the cost of managing such relationships.

We depend upon the accuracy and completeness of information about customers and counterparties.

In deciding whether to extend credit or enter into other transactions with customers and counterparties, we may rely on information

37

provided to us by customers and counterparties, including financial statements and other financial information. We may also rely on representations of customers and counterparties as to the accuracy and completeness of that information and, with respect to financial statements, on reports of independent auditors.  For example, in deciding whether to extend credit to a business, we may assume that the customer’s audited financial statements conform with GAAP and present fairly, in all material respects, the financial condition, results of operations and cash flows of the customer. We may also rely on the audit report covering those financial statements. Our financial condition, results of operations and cash flows could be negatively impacted to the extent that we rely on financial statements that do not comply with GAAP or on financial statements and other financial information that are materially misleading.

We may be the subject of litigation which could result in legal liability and damage to our business and reputation.

From time to time, we may be subject to claims or legal action from customers, employees or others.  Financial institutions like the Company and CFBank are facing a growing number of significant class actions, including those based on the manner of calculation of interest on loans and the assessment of overdraft fees.  Future litigation could include claims for substantial compensatory and/or punitive damages or claims for indeterminate amounts of damages.  We are also involved from time to time in other reviews, investigations and proceedings (both formal and informal) by governmental and other agencies regarding our business.  These matters also could result in adverse judgments, settlements, fines, penalties, injunctions or other relief.  Like other large financial institutions, we are also subject to risk from potential employee misconduct, including non-compliance with policies and improper use or disclosure of confidential information.  Substantial legal liability or significant regulatory action against us could materially adversely affect our business, financial condition or results of operations and/or cause significant reputational harm to our business.

Although publicly traded, our Common Stock has less liquidity than the average liquidity of stocks listed on NASDAQ.

Although our common stock is listed for trading on NASDAQ, our common stock has less liquidity than the average liquidity for companies listed on NASDAQ. A public trading market having the desired characteristics of depth, liquidity and orderliness depends on the presence in the marketplace of willing buyers and sellers of our common stock at any given time. This marketplace depends on the individual decisions of investors and general economic and market conditions over which we have no control. This limited market may affect your ability to sell your shares on short notice, and the sale of a large number of shares at one time could temporarily depress the market price of our common stock. For these reasons, our common stock should not be viewed as a short-term investment.

The market price of our common stock may fluctuate in the future, and this volatility may be unrelated to our performance. General market price declines or overall market swings in the future could adversely affect the price of our common stock, and the current market price may not be indicative of future market prices.

We may be required to repurchase loans we have sold or indemnify loan purchasers under the terms of the sale agreements, which could adversely affect our liquidity, results of operations and financial condition.  

When we sell a mortgage loan, we may agree to repurchase or substitute a mortgage loan if we are later found to have breached any representation or warranty we made about the loan or if the borrower is later found to have committed fraud in connection with the origination of the loan.  While we have underwriting policies and procedures designed to avoid breaches of representations and warranties as well as borrower fraud, there can be no assurance that no breach or fraud will ever occur.  Required repurchases, substitutions or indemnifications could have an adverse effect on our liquidity, results of operations and financial condition.

A transition away from LIBOR as a reference rate for financial contracts could negatively affect our income and expenses and the value of various financial contracts.

LIBOR is used extensively in the U.S. and globally as a benchmark for various commercial and financial contracts, including adjustable rate mortgages, corporate debt, interest rate swaps and other derivatives.  LIBOR is set based on interest rate information reported by certain banks, which may stop reporting such information after 2021.  It is uncertain at this time whether LIBOR will change or cease to exist or the extent to which those entering into financial contracts will transition to any other particular benchmark.  Benchmarks that are used in place of LIBOR, such as the Secured Overnight Finance Rate, may perform differently than LIBOR, and such alternative benchmarks may also perform differently in the future than they have in the past. The use of alternative benchmarks may also have other consequences that cannot currently be anticipated.  It is also uncertain what will happen with instruments that rely on LIBOR for future interest rate adjustments and which remain outstanding if LIBOR ceases to exist.

The Company’s primary exposure to LIBOR relates to its promissory notes with borrowers, swap contracts with clients, offsetting swap contracts with third parties related to the swap contracts with clients, the Company’s LIBOR-based borrowings and CFBank’s swap contracts which can be tied to LIBOR.  The Company’s contracts generally include a LIBOR term (for example, one month, three month, or one year) plus an incremental margin rate.  The Company is working through this transition via a multi-disciplinary project team.

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We operate in a highly regulated industry, and the laws and regulations that govern our operations, corporate governance, executive compensation and financial accounting, or reporting, including changes in, or failure to comply with the same, may adversely affect the Company.

The banking industry is highly regulated. We are subject to supervision, regulation and examination by various federal and state regulators, including the Federal Reserve Board, the SEC, the CFPB, the OCC, the FDIC, Financial Industry Regulatory Authority, Inc. (also known as FINRA), and various state regulatory agencies.  The statutory and regulatory framework that governs the Company is generally designed to protect depositors and customers, the Deposit Insurance Fund, the U.S. banking and financial system, and financial markets as a whole and not to protect shareholders.  These laws and regulations, among other matters, prescribe minimum capital requirements, impose limitations on our business activities (including foreclosure and collection practices), limit the dividends or distributions that we can pay, and impose certain specific accounting requirements that may be more restrictive and may result in greater or earlier charges to earnings or reductions in capital than would otherwise be required under generally accepted accounting principles in the United States of America.  Compliance with laws and regulations can be difficult and costly, and changes to laws and regulations often impose additional compliance costs.  Both the scope of the laws and regulations and the intensity of the supervision to which we are subject have increased in recent years in response to the perceived state of the financial services industry, as well as other factors such as technological and market changes. Such regulation and supervision may increase our costs and limit our ability to pursue business opportunities.  Further, our failure to comply with these laws and regulations, even if the failure was inadvertent or reflects a difference in interpretation, could subject the Company to restrictions on business activities, fines, and other penalties, any of which could adversely affect results of operations, the capital base, and the price of our common shares.  Further, any new laws, rules, or regulations could make compliance more difficult or expensive or otherwise adversely affect our business and financial condition

Item 1B.  Unresolved Staff Comments

Not Applicable

Item 2.Properties.

We conducted our business through sixbranch offices located in Franklin, Hamilton, Summit and Columbiana Counties, Ohio, and through a loan production office located in Franklin County, Ohio and anagencyoffice located in Cuyahoga County, Ohio as of December 31, 2019.  The net book value of the Company’s properties totaled $3.2 million at December 31, 2019.  CFBank also leases its branch offices in Fairlawn, Ohio,  Glendale, Ohio and Blue Ash, Ohio,  its loan production office in Columbus, Ohio and its agency office located in Woodmere, Ohio in Cuyahoga County.  See Note 8 to the Consolidated Financial Statements included in our 2019 Annual Reportfor further discussion.

Locations

Administrative Office (owned facility):

7000 N. High Street

Worthington, Ohio 43085

Branch Offices:

Worthington Branch (owned facility)

7000 N. High Street

Worthington, Ohio 43085

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Glendale Branch (leased facility)

38 Village Square

Glendale, Ohio 44122

Blue Ash Branch (leased facility)

10300 Alliance Rd. #150

Cincinnati, Oh 45242

Fairlawn Branch (leased facility)

3009 Smith Road, Suite 100

Fairlawn, Ohio 44333

Wellsville Branch (owned facility)

601 Main Street

Wellsville, Ohio 43968

Calcutta Branch (owned facility)

49028 Foulks Drive

Calcutta, Ohio 43920

Loan Production Office (leased facility):

8101 North High Street, Suite 180

Columbus, Ohio 43235

Agency Office (leased facility):

28879 Chagrin Blvd.

Woodmere, Ohio 44122

Item 3.Legal Proceedings.

We may, from time to time, be involved in various legal proceedings in the normal course of business.  Periodically, there have been various claims and lawsuits involving CFBank, such as claims to enforce liens, condemnation proceedings on properties in which CFBank holds security interests, claims involving the making and servicing of real property loans and other issues incident to our banking business.We are not a party to any pending legal proceeding that management believes would have a material adverse effect on our financial condition or operations, if decided adversely to us.

Item 4.Mine Safety Disclosures.

Not Applicable

PART II

Item 5.  Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.

(a) None except as previously reported

(b) Not applicable.

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(c) The following table provides information concerning purchases of the Holding Company’s shares of common stock made by or on behalf of the Company or any “affiliated purchaser” as defined in Rule 10b-18(a)(3) under the Securities Exchange Act of 1934, as amended, during the three months ended December 31, 2019. 

Period	Total number of common shares purchased (1)	Average price paid per common share			Total number of common shares purchased as part of publicly announced plans or programs
October 1 through October 31, 2019	-		-		-
November 1 through November 30, 2019	-	$	-		-
December 1 through December 31, 2019	1,705		13.70	(2)	-
Total	1,705	$	13.70		-

⁽¹⁾ Represents shares of common stock surrendered by officers and employees of the Company for payment of taxes upon vesting of restricted stock granted under the 2009 Equity Compensation Plan.

⁽²⁾ Represents the average closing price of the Company’s common stock on December 20,2019 and December 21, 2019, which were the vesting dates of the restricted stock surrendered for payment of taxes.

Item 6.Selected Financial Data.

Information required by Item 301 of Regulation S-K is incorporated herein by reference from our 2019 Annual Report; the information appears under the caption “Selected Financial and Other Data” therein.

Item 7.Management’s Discussion and Analysis of Financial Condition and Results of Operation.

Information required by Item 303 of Regulation S-K is incorporated herein by reference from our 2019 Annual Report; the information appears under the caption “Management’s Discussion and Analysis of Financial Condition and Results of Operations”therein.

Item  7A.Quantitative and Qualitative Disclosures About Market Risk.

Information required by Item 305 of Regulation S-K is incorporated herein by reference from our 2019 Annual Report; the information appears under the caption “Management’s Discussion and Analysis of Financial Condition and Results of Operations−Quantitative and Qualitative Disclosures about Market Risks” therein.

Item  8.Financial Statements and Supplementary Data.

The consolidated financial statements required by Article 8 of Regulation S-X are incorporated by reference to our 2019 Annual Report; the consolidated financial statements appear under the caption “Financial Statements”  therein and include the following: 

Management’s Report on Internal Control over Financial Reporting

Report of Independent Registered Public Accounting Firm

Consolidated Balance Sheets

Consolidated Statements of Income

Consolidated Statements of Comprehensive Income

Consolidated Statements of Changes in Stockholders’ Equity

Consolidated Statements of Cash Flows

Notes to Consolidated Financial Statements

Item  9.Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.

None

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Item  9A.Controls and Procedures.

Evaluation of disclosure controls and procedures.Management is responsible for establishing and maintaining effective disclosure controls and procedures, as defined under Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934.  Management's assessment of the effectiveness of internal control over financial reporting is expressed at the level of reasonable assurance because a control system, no matter how well designed and operated, can provide only reasonable, but not absolute, assurance that the control system's objectives will be met.  As of December 31, 2019, an evaluation was performed under the supervision and with the participation of management, including the Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures.  Based on that evaluation, management concluded that our internal controls over financial reporting as of December 31, 2019were effective.

Management’s Report on Internal Control Over Financial Reporting.  Information required by Item 308 of Regulation S-K is incorporated herein by reference from our 2019 Annual Report;the information appears under the caption “Management’s Report on Internal Control over Financial Reporting”  therein.

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

Item  9B.Other Information.

None

PART III

Item  10.  Directors,Executive Officers and Corporate Governance.

Directors.  Information required by Item 401 of Regulation S-K with respect to our directorsis incorporated herein by reference from our definitive Proxy Statement for our2019 Annual Meeting of Stockholders to be filed with the Commission pursuant to SEC Regulation 14A (the “2020 Proxy Statement”), under the caption “PROPOSAL 1.  ELECTION OF DIRECTORS.”

Executive Officers of the Registrant.  Provided below is information regarding our executive officers:

Name	Age at December 31, 2019	Position held with the Holding Company and/or Subsidiaries
Timothy T. O’Dell	66	President and Chief Executive Officer of the Holding Company and CFBank
John W. Helmsdoerfer	61	Chief Financial Officer of the Holding Company and CFBank; Treasurer of the Holding Company

Mr. O’Dell is the President and CEO and a  Director of CFBank and the Holding Company.  Prior to joining CFBank in 2012, Mr. O’Dell owned and operated a consulting and business investment company specializing in providing advisory services to a number of privately held enterprises in construction, health care, real estate and professional services.  Mr. O’Dell previously spent 22 years at Fifth Third Bank, and was a senior executive with Fifth Third’s Central Ohio operations for 12 of those years, concluding his tenure serving as President and Chief Executive Officer. At Fifth Third’s Central Ohio Affiliate, Mr. O’Dell also served as Executive Vice President and senior lender and managed its commercial banking and residential, commercial real estate divisions.  Previously he managed the Asset Based Lending Division for Fifth Third Bank engaged in financing growth companies and acquisition financing.  During his tenure, Fifth Third’s Central Ohio division grew by $4 billion in deposits and $5 billion in loans from organic growth and through strategic acquisitions.  Mr. O’Dell currently serves on the Foundation and audit committees of National Church Residences, a senior living management and development entity, with 340 locations in 25 states.  He also has served on the board of the Columbus Chamber of Commerce and The Ohio State University Medical Center, and he was a founding investor in the Ohio TechAngel Venture Fund.  Mr. O'Dell holds a B.B.A. from Marshall University.

Mr. Helmsdoerferhas been the CFO of the Holding Company and CFBank since March 2013.  As a CPA with over 39 years of financial experience, which includes Big Four public accounting and 29 years as a CFO, he has a diverse finance and operations background in addition to his financial services background.  Prior to joining CFBank, Mr. Helmsdoerfer spent 18 years with Fifth Third Bank where he held positions as both a CFO and Regional CFO for the Central Ohio affiliate and region.   He also served as

42

CFO for Nationwide Bank and Wilmington Savings Bank during his career.   Mr. Helmsdoerfer holds a B.S.B.A degree from Miami University where he graduated cum laude. 

Compliance with Section 16(a) of the Exchange Act.  Information required by Item 405 of Regulation S-K is incorporated herein by reference from our2019 ProxyStatement, under the caption “BENEFICIAL OWNERSHIP OF COMPANY COMMON STOCK–DELINQUENT SECTION 16(a) REPORTS.”Copies of Forms 3, 4 and 5 filed under section 16(a) of the Exchange Act are available on our website, www.CFBankonline.com,  under the tab “Investor Relations – Section 16 Filings.”

Code of Ethics.  We have adopted a Code of Ethics and Business Conduct, whichapplies to all employees, includingourprincipal executive officer, principal financial officer and principal accounting officer.  We require all directors, officers and other employees to review and adhere to the Code of Ethics and Business Conduct in addressing the legal and ethical issues encountered in conducting their work.  The Code of Ethics and Business Conduct requires that our employees avoid conflicts of interest, comply with all laws and other legal requirements, conduct business in an honest and ethical manner and otherwise act with integrity and in the Company’s best interest.The Code of Ethics and Business Conductis available on our website, www.CFBankonline.com under the tab “Investor Relations – Corporate Governance.”  Disclosures of any amendments to or waivers with regard to the provisions of the Code of Ethics and Business Conduct also will be posted on the Company’s website. 

Corporate Governance.  Information required by Items 407(c)(3), (d)(4) and (d)(5) of Regulation S-K is incorporated herein by reference from our 2020 ProxyStatement, under the captions  “CORPORATE GOVERNANCE” and “AUDIT COMMITTEE MATTERS.”

Item  11.Executive Compensation.

Information required by Item 402 of Regulation S-K is incorporated herein by reference from our 2020Proxy Statement, under the captions “COMPENSATION OF EXECUTIVE OFFICERS” and “2019 COMPENSATION OF DIRECTORS.”

Item  12.Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.

Security Ownership of Certain Beneficial Owners and Management. Information required by Item 403 of Regulation S-Kis incorporated hereinby reference from our2020 Proxy Statement under the caption “BENEFICIAL OWNERSHIP OF COMPANY COMMON STOCK.”  

Related Stockholder Matters – Equity Compensation Plan Information.  Information required by Item 201(d) of Regulation S-K is incorporated herein by reference from our 2020 Proxy Statement, under the caption “COMPENSATION OF EXECUTIVE OFFICERS-Equity  Compensation  Plan  Information,” and from our 2019 Annual Report, where the information appears under the caption “Note 15– Stock-Based Compensation” therein. 

Item 13.Certain Relationships and Related Transactions, and Director Independence.

Information required by Items 404 and 407(a) of Regulation S-K is incorporated herein by reference from our 2020 Proxy Statement, under the caption“CORPORATEGOVERNANCE–Certain Relationships and Related Transactions”  and “CORPORATE GOVERNANCE–Director  Independence.”  

Item 14.Principal Accounting Fees and Services.

Information required by this Item 14 is incorporated by reference from our2020Proxy Statement, under the caption “AUDIT COMMITTEE MATTERS.”

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PART IV

Item  15.Exhibits and Financial Statement Schedules

EXHIBIT INDEX

Exhibit No.	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 (File No. 333-129315), filed with the Commission on October28, 2005)
3.3	Amendment to Certificate of Incorporation of the registrant (incorporated by reference to Exhibit 3.4 to the registrant’s Quarterly Report on Form 10-Q for the quarter ended June30, 2009, filed with the commission on August14, 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 Quarterly Report on Form 10-Q for the fiscal quarter ended September30, 2011, filed with the Commission on November10, 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 (File No. 333-177434), filed with the Commission on May4, 2012)
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 May7, 2014 and filed with the Commission on May13, 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	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 October 25, 2019, filed with the Commission on October 31, 2019 (File No. 0-25045))
3.9	Second Amended and Restated Bylaws of the registrant (incorporated by reference to Exhibit 3.3 to the registrant’s Annual Report on Form 10-K for the fiscal year ended December31, 2007, filed with the Commission on March27, 2008 (File No. 0-25045))
4.1	Form of Stock Certificate of Central Federal Corporation (incorporated by reference to Exhibit 4.0 to the registrant’s Registration Statement on Form SB-2 (File No. 333-64089), filed with the Commission on September23, 1998)
4.2	Form of Warrant for the purchase of common stock of Central Federal Corporation (incorporated by reference to Exhibit 4.2 to the registrant’s Current Report on Form 8-K dated May7, 2014 and filed with the Commission on May13, 2014 (File No. 0-25045))
4.3	Form of Registration Rights Agreement (incorporated by reference to Exhibit 4.3 to the registrant’s Current Report on Form 8-K dated May7, 2014 and filed with the Commission on May13, 2014 (File No. 0-25045))
4.4	Form of Subordinated Note Purchase Agreement by and between the Company and several Purchasers, dated December 20,2018 (incorporated by reference to Exhibit 10.1 to the registrants Current Report on Form 8-K filed with the Commission on December 21, 2018 (File No. 0-25045))
4.5	Form of 7.0% Fixed-to-Floating Rate Subordinated Note due 2028 (incorporated by reference to Exhibit 10.2 to the registrants Current Report on Form 8-K filed with the Commission on December 21, 2018 (File No. 0-25045))
4.6	Agreement to furnish instruments defining rights of holders of long-term debt
10.1*	Central Federal Corporation 2009 Equity Compensation Plan (incorporated by reference to Appendix A to the registrant’s Definitive Proxy Statement filed with the Commission on March31, 2009)
10.2*	First Amendment to the Central Federal Corporation 2009 Equity Compensation Plan (incorporated by reference to Appendix A to the registrant’s Definitive Proxy Statement filed with the Commission on April11, 2013)
10.3*	Central Federal Corporation 2019 Equity Compensation Plan (incorporated by reference to Annex A to the registrant’s Definitive Proxy Statement filed with the Commission on April 26, 2019)
10.4*	Form of Incentive Stock Options Award Agreement under the Central Federal Corporation 2009 Equity Compensation Plan (incorporated by reference to Exhibit 10.3 to the registrant’s Annual Report on Form 10-K for the fiscal year ended December31, 2012, filed with the Commission on April1, 2013 (File No. 0-25045)

44

10.5*	Form of Non-Qualified Stock Option Award Agreement under the Central Federal Corporation 2009 Equity Compensation Plan (incorporated by reference to Exhibit 10.4 to the registrant’s Annual Report on Form 10-K for the fiscal year ended December31, 2012, filed with the Commission on April1, 2013 (File No. 0-25045)
10.6*	Form of Employee Restricted Stock Award Agreement under the Central Federal Corporation 2009 Equity Compensation Plan (incorporated by reference to Exhibit 10.3 to the registrant’s Current Report on Form 8-K filed with the Commission on November3, 2015 (File No. 0-25045))
10.7*	Form of Director Restricted Stock Award Agreement under the Central Federal Corporation 2009 Equity Compensation Plan (incorporated by reference to Exhibit 10.4 to the registrant’s Current Report on Form 8-K filed with the Commission on November3, 2015 (File No. 0-25045))
10.8*	Form of Employee Restricted Stock Award Agreement under the Central Federal Corporation 2019 Equity Compensation Plan
10.9*	Form of Director Restricted Stock Award Agreement under the Central Federal Corporation 2019 Equity Compensation Plan
10.10*	Employment Agreement, dated April 22, 2019, by and among Central Federal Corporation, CFBank and Timothy T. O’Dell (incorporated by reference to Exhibit 10.1 to the registrant’s Current Report on Form 8-K filed with the Commission on April 26, 2019 (File No. 0-25045))
10.11*	Employment Agreement, dated April 22, 2019, by and among Central Federal Corporation, CFBank and John W. Helmsdoerfer (incorporated by reference to Exhibit 10.2 to the registrant’s Current Report on Form 8-K filed with the Commission on April 26 2019 (File No. 0-25045))
10.12*	Central Federal Corporation Incentive Compensation Plan (incorporated by reference to Exhibit 10.3 to the registrant’s Current Report on Form 8-K filed with the Commission on August16, 2016 (File No. 0-25045))
11.1	Statement Re:  Computation of Per Share Earnings
13.1	Annual Report to Security Holders for the Fiscal Year Ended December31, 2019
21.1	Subsidiaries of the Registrant
23.1	Consent of Independent Registered Public Accounting Firm
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)

*Management contract or compensation plan or arrangement identified pursuant to Item 15 of Form 10-K

Item 16.  Form 10-K Summary

Not Applicable

45

SIGNATURES

Pursuant to the requirements ofSection 13 or 15(d) 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 authorize

CENTRAL FEDERAL CORPORATION

/s/ Timothy T. O’Dell

Timothy T. O’Dell

President and Chief Executive Officer

Date: March 16, 2020

Pursuant to the requirements of the Securities Exchange Act of 1934,  this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

Name	Title	Date
/s/ Robert E. Hoeweler	Chairman	March 16, 2020
Robert E. Hoeweler
/s/ Timothy T. O’Dell	Director, President and Chief Executive Officer	March 16, 2020
Timothy T. O’Dell
/s/ Thomas P. Ash	Director	March 16, 2020
Thomas P. Ash
/s/ James H. Frauenberg II	Director	March 16, 2020
James H. Frauenberg II
/s/ Edward W. Cochran	Director	March 16, 2020
Edward W. Cochran
/s/ Robert H. Milbourne	Director	March 16, 2020
Robert H. Milbourne
/s/ David L. Royer	Director	March 16, 2020
David L. Royer
/s/ John T. Pietrzak	Director	March 16,  2020
JohnT.  Pietrzak

46

EX-4.6

Exhibit 4.6

March 16, 2020

Securities and Exchange Commission

100 F Street, NE

Washington, D.C. 20549

Re: Central Federal Corporation —Annual Report on Form 10-K for the fiscal year ended December 31, 2019.

Ladies and Gentlemen:

Central Federal Corporation, a Delaware  corporation,is today filing with the Securities and Exchange Commission (the "SEC") its Annual Report on Form 10-K of Central Federal Corporation for the fiscal year ended December 31, 2019.

Pursuant to the instructions relating to the Exhibits in Item 601(b)(4)(iii) of Regulation S-K, Central Federal Corporation hereby agrees to furnish to the SEC, upon request, copies of instrumentsdefining the rights of holders of long-term debt and of the long-term debt of its consolidated subsidiaries, which are not being filed as exhibits to Central Federal Corporation’s 2019 Annual Report on Form 10-K. None of such long-term debt exceeds 10% of the total assets of Central Federal Corporation and its subsidiaries on a consolidatedbasis.

Very truly yours,

CENTRAL FEDERAL CORPORATION

/s/Timothy T. O’Dell

Timothy T. O’Dell

President and Chief Executive Officer

EX-10.8

Exhibit 10.8

CENTRAL FEDERAL CORPORATION

2019 EQUITY INCENTIVE PLAN

EMPLOYEE RESTRICTED STOCK AWARD AGREEMENT

Central Federal Corporation (the “Company”) hereby grants the undersigned Participant an award of Restricted Stock (the “Award”), subject to the terms and conditions described in the Central Federal Corporation 2019Equity IncentivePlan, as amended (the “Plan”), and this Restricted Stock Award Agreement (this “Award Agreement”).  This grant is made in consideration of the non-solicitation covenants set forth in Section 8 of this Award Agreement.

1. Name of Participant:  ______________________________________

2. Grant Date:___________________(the “Grant Date”).

3. Number of Shares of Restricted Stock:_______ (the “Restricted Stock”).

4. Vesting:  Except as provided in Section 5 of this Award Agreement, and provided that the Participant remains an employee of the Company on the relevant date (each a “Vesting Date”), the Restricted Stock will vest in three (3)annual installments (rounded down to the nearest whole share) on each anniversary of the Grant Date as follows:

33.34% shall be vested on the first anniversary of the Grant Date

33.33% (50% of remainder) shall be vested on the second anniversary of the Grant Date

33.33% (100% of remainder) shall be vested on the third anniversary of the Grant Date

5. Accelerated Vesting:  If a Participant retires or otherwise terminates employment with the Company prior to any Vesting Date, any unvested Restricted Stock will be forfeited.  Notwithstanding the foregoing, if prior to any Vesting Date:

(a) Death; Disability.  The Participant dies or becomes Disabled, all unvested Restricted Stock will immediately vest on the date of death or Disability.

(b) Change in Control.  Any unvested Restricted Stock will immediately vest on the date of a  Change in Control.

6. Transferability:  Until the Restricted Stock vests as described in this Award Agreement, the Restricted Stock may not be sold, transferred, pledged, assigned or otherwise alienated or hypothecated, except by will or by the laws of descent and distribution and in accordance with Section 9(b) of this Award Agreement.

7. Settlement:  If the applicable terms and conditions of this Award Agreement are satisfied, the Restricted Stock will be released from any transfer restrictions or delivered to the Participant as soon as administratively feasible after all applicable restrictions have lapsed.

8. Non-Solicitation Covenant: In consideration for this Award of Restricted Stock, the Participant hereby agrees and covenants that, for a period of the Participant’s employment with the Company and for one year after the termination of the Participant’s employment, the Participant will not, without the express written consent of the Company:

(a) Call upon or solicit, either for the Participant or for any other person or firm that engages in competition with any business operation of the kind actively conducted by the Company or any current or future Subsidiary for the period that the Participant was employed with the Company or any Subsidiary, as applicable, any customer with whom the Company or any current or future Subsidiary directly conducts business during the period of the Participant’s employment, any referral source of the Company or any current or future Subsidiary during the period of the Participant’s employment (including, solely by way of example, intermediaries and corporations that purchase directly from the Company or any current or future Subsidiary); or

(b) Interfere with any relationship, contractual or otherwise, between the Company or any current or future Subsidiary, any customer with whom the Company or any current or future Subsidiary directly conducts business during the period of the Participant’s employment, or any referral source of the Company or any current or future Subsidiary existing during the period of your employment; or

(c) Induce any person who is as of the date of the Participant’s termination of employment or was during any of the 12 months preceding the date of the Participant’s termination, an employee, officer, director, or agent of the Company or any current or future Subsidiary to terminate said relationship.

In the event the Participant breaches any covenant set forth in this Award Agreement, the term of such covenant shall be extended by the period of the duration of such breach.  This covenant will survive for 12 months after the termination of the Participant’s employment, plus any extension under the preceding sentence, even if this Award has expired or terminated.  Notwithstanding Section 9(e) to this Award Agreement, the restrictions contained in this Section 8 are in addition to any restrictions contained in any other agreement between the Participant and the Company or any Subsidiary.These restrictions may be enforced by the Company, any current or future Subsidiary and/or any successor, by an action to recover payments made under this Award Agreement, an action for injunction, and/or an action for damages.  The provisions of this Section 8 constitute an essential element of this Agreement, without which the Company would not have entered into this Agreement.  Notwithstanding any other remedy available to the Company at law or at equity, the parties hereto agree that the Company or any successor thereto, shall have the right, at any and all times, to seek injunctive relief in order to enforce the terms and conditions of this Section 8.

If the scope of any restriction contained in this Section 8 is too broad to permit enforcement of such restriction to its fullest extent, then such restriction will be enforced to the maximum extent permitted by law, and the Participant hereby consents and agrees that such scope may be judicially modified accordingly in any proceeding brought to enforce such restriction.

9. Other Terms and Conditions:

(a) Rights Before Vesting.  Before the Restricted Stock vests, the Participant (i) may exercise full voting rights associated with the Restricted Stock; and (ii) will be entitled to receive all dividends and other distributions paid with respect to the Restricted Stock, provided that any such dividends or other distributions will be subject to the same restrictions, terms and conditions as the Restricted Stock to which the dividends or distributions relate.

-2-

(b) Beneficiary Designation.  The Participant may name a beneficiary or beneficiaries to receive any Restricted Stock settled after the Participant’s death by completing a “Beneficiary Designation Form” in a form provided by the Company.  The Beneficiary Designation Form does not need to be completed upon execution of this Award Agreement and is not required to be completed as a condition of receiving the Restricted Stock.  However, if the Participant dies without completing a Beneficiary Designation Form or if the Participant does not complete the form correctly, the Participant’s beneficiary under this Award Agreement will be the Participant’s surviving spouse or, if the Participant does not have a surviving spouse, the Participant’s estate.

(c) Tax Withholding.  The Participant hereby agrees that, upon request by the Company, the Participant shall pay to the Company an amount equal to all taxes which the Company is required to withhold with respect to the Restricted Stock or make arrangements satisfactory to the Company regarding the payment of such taxes, or, in lieu thereof, the Company shall have the right to withhold a number of shares of Restricted Stock with a fair market value equal to the minimum amount required to be withheld.

(d) Governing Law.  This Award Agreement will be construed in accordance with, and governed by, the laws (other than laws governing conflicts of laws) of the State of Ohio.

(e) Entire Agreement.  This Award Agreement, along with the Plan, constitutes the entire agreement between the Company and the Participant regarding the subject matter of this Award Agreement.  All representations of any type relied upon by the Participant and the Company in making this Award Agreement are specifically set forth herein, and the Participant and the Company each acknowledge that they have relied on no other representation in entering into this Award Agreement.  No change, termination or attempted waiver of any of the provisions of this Award Agreement will be binding upon any party hereto unless contained in a writing signed by the party to be changed.

(f) Restricted Stock Subject to the Plan.  The Restricted Stock is subject to the terms and conditions described in this Award Agreement and the Plan, which is incorporated by reference into and made a part of this Award Agreement.  In the event of a conflict between the terms of the Plan and the terms of this Award Agreement, the terms of the Plan will govern.  The Company has the sole responsibility for interpreting the Plan and this Award Agreement, and its determination of the meaning of any provision in the Plan or this Award Agreement will be binding on the Participant.  Capitalized terms that are not defined in this Award Agreement have the same meaning as in the Plan.

(g) Requirements of Law.  This Award Agreement and the grant of Restricted Stock is subject to all applicable laws, rules and regulations (including applicable federal and state securities laws) and to all required approvals of any governmental agencies or national securities exchange, market or other quotation system, if applicable.  No Restricted Stock will be issued pursuant to the Award unless, at that time, such issuance: (i) is the subject matter of an effective registration statement filed under the Securities Act of 1933, as amended, and all applicable state securities laws, or (ii) qualifies for an exemption from registration under the Securities Act of 1933, as amended, and applicable state securities laws, to the extent necessary.

(h) Signature in Counterparts.  This Award Agreement may be signed in counterparts, each of which will be deemed an original, but all of which will constitute one and the same instrument.

-3-

	____________________________________
PARTICIPANT ________________________________________ Signature Date: ____________________________________	CENTRAL FEDERAL CORPORATION By: ______________________________________ Title: ____________________________________ Date: ____________________________________

-4-

EX-10.9

Exhibit 10.9

CENTRAL FEDERAL CORPORATION

2019  EQUITY INCENTIVE PLAN

DIRECTOR RESTRICTED STOCK AWARD AGREEMENT

Central Federal Corporation (the “Company”) hereby grants the undersigned Participant an award of Restricted Stock (the “Award”), subject to the terms and conditions described in the Central Federal Corporation 2019Equity Incentive Plan, as amended (the “Plan”), and this Restricted Stock Award Agreement (this “Award Agreement”). 

1. Name of Participant____________________________

2. Grant Date:______________(the “Grant Date”).

3. Number of Shares of Restricted Stock:_______ (the “Restricted Stock”).

4. Vesting:  Except as provided in Section 5 of this Award Agreement, and provided that the Participant remains a director of the Company on the relevant date (each a “Vesting Date”), the Restricted Stock will vest in three (3)annual installments (rounded down to the nearest whole share) on each anniversary of the Grant Date as follows:

33.34% shall be vested on the first anniversary of the Grant Date

33.33% (50% of remainder) shall be vested on the second anniversary of the Grant Date

33.33% (100% of remainder) shall be vested on the third anniversary of the Grant Date

5. Accelerated Vesting:  If a Participant retires or otherwise end service as a director of the Company prior to any Vesting Date, any unvested Restricted Stock will be forfeited.  Notwithstanding the foregoing, if prior to any Vesting Date:

(a) Death; Disability.  The Participant dies or becomes Disabled, all unvested Restricted Stock will immediately vest on the date of death or Disability.

(b) Change in Control.  Any unvested Restricted Stock will immediately vest on the date of a  Change in Control.

6. Transferability:  Until the Restricted Stock vests as described in this Award Agreement, the Restricted Stock may not be sold, transferred, pledged, assigned or otherwise alienated or hypothecated, except by will or by the laws of descent and distribution and in accordance with Section 8(b) of this Award Agreement.

7. Settlement:  If the applicable terms and conditions of this Award Agreement are satisfied, the Restricted Stock will be released from any transfer restrictions or delivered to the Participant as soon as administratively feasible after all applicable restrictions have lapsed.

8. Other Terms and Conditions:

(a) Rights Before Vesting.  Before the Restricted Stock vests, the Participant (i) may exercise full voting rights associated with the Restricted Stock; and (ii) will be entitled to receive all dividends and other distributions paid with respect to the Restricted Stock, provided that any such dividends or other distributions will be subject to the same restrictions, terms and conditions as the Restricted Stock to which the dividends or distributions relate.

(b) Beneficiary Designation.  The Participant may name a beneficiary or beneficiaries to receive any Restricted Stock settled after the Participant’s death by completing a “Beneficiary Designation Form” in a form provided by the Company.  The Beneficiary Designation Form does not need to be completed upon execution of this Award Agreement and is not required to be completed as a condition of receiving the Restricted Stock.  However, if the Participant dies without completing a Beneficiary Designation Form or if the Participant does not complete the form correctly, the Participant’s beneficiary under this Award Agreement will be the Participant’s surviving spouse or, if the Participant does not have a surviving spouse, the Participant’s estate.

(c) Tax Withholding.  The Participant hereby agrees that, upon request by the Company, the Participant shall pay to the Company an amount equal to all taxes which the Company is required to withhold with respect to the Restricted Stock or make arrangements satisfactory to the Company regarding the payment of such taxes, or, in lieu thereof, the Company shall have the right to withhold a number of shares of Restricted Stock with a fair market value equal to the minimum amount required to be withheld.

(d) Governing Law.  This Award Agreement will be construed in accordance with, and governed by, the laws (other than laws governing conflicts of laws) of the State of Ohio.

(e) Entire Agreement.  This Award Agreement, along with the Plan, constitutes the entire agreement between the Company and the Participant regarding the subject matter of this Award Agreement.  All representations of any type relied upon by the Participant and the Company in making this Award Agreement are specifically set forth herein, and the Participant and the Company each acknowledge that they have relied on no other representation in entering into this Award Agreement.  No change, termination or attempted waiver of any of the provisions of this Award Agreement will be binding upon any party hereto unless contained in a writing signed by the party to be changed.

(f) Restricted Stock Subject to the Plan.  The Restricted Stock is subject to the terms and conditions described in this Award Agreement and the Plan, which is incorporated by reference into and made a part of this Award Agreement.  In the event of a conflict between the terms of the Plan and the terms of this Award Agreement, the terms of the Plan will govern.  The Company has the sole responsibility for interpreting the Plan and this Award Agreement, and its determination of the meaning of any provision in the Plan or this Award Agreement will be binding on the Participant.  Capitalized terms that are not defined in this Award Agreement have the same meaning as in the Plan.

(g) Requirements of Law.  This Award Agreement and the grant of Restricted Stock is subject to all applicable laws, rules and regulations (including applicable federal and state securities laws) and to all required approvals of any governmental agencies or national securities exchange, market or other quotation system, if applicable.  No Restricted Stock will be issued pursuant to the Award unless, at that time, such issuance: (i) is the subject matter of an effective registration statement filed under the Securities Act of 1933, as amended, and all applicable state securities laws, or (ii) qualifies for an exemption from registration under the Securities Act of 1933, as amended, and applicable state securities laws, to the extent necessary.

(h) Signature in Counterparts.  This Award Agreement may be signed in counterparts, each of which will be deemed an original, but all of which will constitute one and the same instrument.

-2-

	____________________________________
PARTICIPANT ________________________________________ Signature Date: ____________________________________	CENTRAL FEDERAL CORPORATION By: ______________________________________ Title: ____________________________________ Date: ____________________________________

-3-

EX-11.1

Exhibit 11.1

Computation of Per Share Earnings

The information regarding Computation of Per Share Earnings is incorporated by reference from the Company’s 2019 Annual Report to Stockholders distributed to stockholders and furnished to the Commission under Rules 14a-3(b) and (c) of the Exchange Act; the computation appears under the caption “Note 22 - Earnings (Loss) Per Common Share” therein.

EX-13.1

Exhibit 13.1

Annual Report to Security Holders For the FiscalYear ended December 31, 2019

TABLE OF CONTENTS

	Page
MESSAGE TO STOCKHOLDERS
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Selected Financial and Other Data	1
Forward-Looking Statements	3
Business Overview	3
Financial Condition	4
Comparison of Results of Operations for 2019 and 2018	8
Comparison of Results of Operations for 2018 and 2017	9
Quantitative and Qualitative Disclosures about Market Risk	12
Liquidity and Capital Resources	13
Impact of Inflation	15
Critical Accounting Policies	15
Market and Dividend Information	16
FINANCIAL STATEMENTS
Management’s Report on Internal Control Over Financial Reporting	1
Report of Independent Registered Public Accounting Firm	2
Consolidated Financial Statements	3
Notes to Consolidated Financial Statements	8
BOARD OF DIRECTORS AND OFFICERS	46
CFBANK LOCATIONS	46
CORPORATE DATA	47
Annual Report	47
Annual Meeting	47
Shareholder Services	47

Dear fellow Shareholders,

Our story for 2019 consists of a breakout performance year in terms of elevated Earnings along with overall performance as we achieved benefit from increasing scale, expanding fee income, along with geographic and product diversification. Here are just a few of the highlights from last year:

Ø Sandler O’Neill (now Piper-Sandler) recognized us as a top performer, selecting CFBank as one of only 30 small-cap institutions nationwide in the Sm-All Stars Class of 2019.  

Ø CB Resource, Inc. recently ranked us in the top 10% of our 496 member peer group in overall performance.  

Ø We posted above average Return on Assets (ROA) of 1.3% for the year, including quarterly ROA higher than 1.4% for both the 3rd and 4th quarters of 2019.

Ø Our CF Team’s loans grew by over 20%, while at the same time credit quality – already strong – became even stronger, with 2019 being our 6th consecutive year in which we achieved net loan recoveries.

Ø We executed on our prior year goal of increasing noninterest income, increasing fee income by over 300% during 2019, driven primarily by Residential Mortgage Lending as well as SBA Lending and SWAP fee income.

Looking ahead to 2020, we expect to build upon our 2019 results. Our 2020 theme which we are rallying around is: “Good to Great!”

We have stronger and more diverse pipelines in terms of geography and products than we had this time last year, expanding our customer niche as we’ve grown. Our growing team is more talented and diverse than ever. We are realizing benefits from both increasing scale as well as the earlier investments for expanding our market presence into Cincinnati, along with growing our Residential Mortgage and SBA Lending businesses. Our business model consisting of strong credit discipline couples with a highly effective Team Sales Culture, positioning us uniquely to take advantage of quality growth opportunities.

We believe that we have all the key business factors in place, including capital, to execute our business plans.

As a shareholder, you are invited to become a CFBank customer and experience our commitment to service for yourself. Please feel free to contact me directly at 614-318-4660 to learn more about our full service commercial and consumer products and services.

We are enthused and bullish about our opportunities for the coming year and intend to continue to build upon our solid 2019 results. Our team believes that we are just getting revved up!

On behalf of our CFBank colleagues and our Directors, we express our appreciation and sincere thanks to you for your continued support.

/s/ Timothy T. O’Dell	/s/ Robert E. Hoeweler
Timothy T. O’Dell	Robert E. Hoeweler
President and Chief Executive Officer	Chairman of the Board

Management’s Discussion and Analysis of Financial Condition and Results of Operations

SELECTED FINANCIAL AND OTHER DATA

The information in the following tables should be read in conjunction with our Consolidated Financial Statements, the related Notes and Management’s Discussion and Analysis of Financial Condition and Results of Operations contained in this report.

		At December 31,
	2019		2018		2017		2016		2015
		(Dollars in thousands)
Selected Financial Condition Data:
Total assets	$	880,545	$	665,025	$	481,425	$	436,112	$	351,293
Cash and cash equivalents		45,879		67,304		45,498		57,941		25,895
Securities available for sale		8,174		10,114		11,773		14,058		9,368
Loans held for sale		135,711		17,385		1,124		2,812		889
Loans and leases, net (1)		663,303		550,683		406,406		346,125		297,064
Allowance for loan and lease loss (ALLL)		7,138		7,012		6,970		6,925		6,620
Nonperforming assets		2,439		415		470		908		3,061
Foreclosed assets		-		38		-		204		1,636
Deposits		746,323		579,786		419,028		375,364		290,467
FHLB advances and other debt		29,017		19,500		13,500		13,500		14,500
Subordinated debentures		14,806		14,767		5,155		5,155		5,155
Total stockholders' equity		80,664		45,559		40,261		39,292		38,312

		For the year ended December 31,
	2019		2018		2017		2016		2015
		(Dollars in thousands)
Summary of Operations:
Total interest income	$	35,104	$	24,886	$	17,207	$	14,409	$	12,405
Total interest expense		13,404		6,997		3,534		3,096		2,608
Net interest income		21,700		17,889		13,673		11,313		9,797
Provision for loan and lease losses		-		-		-		230		250
Net interest income after provision for loan and lease losses		21,700		17,889		13,673		11,083		9,547
Noninterest income:
Net loss on sale of securities		-		-		-		-		(12)
Other		11,720		2,716		743		1,177		1,360
Total noninterest income		11,720		2,716		743		1,177		1,348
Noninterest expense		21,379		15,275		10,955		9,823		9,611
Income before income taxes		12,041		5,330		3,461		2,437		1,284
Income tax expense (benefit)		2,440		1,057		2,115		810		(3,193)
Net income	$	9,601	$	4,273	$	1,346	$	1,627	$	4,477

1

Management’s Discussion and Analysis of Financial Condition and Results of Operations

		At or for the year ended December 31,
	2019		2018		2017		2016		2015
		(Dollars in thousands)
Selected Financial Ratios and Other Data:
Performance Ratios (2)
Return on average assets		1.30%		0.78%		0.31%		0.43%		1.36%
Return on average equity		17.57%		10.11%		3.36%		4.19%		12.84%
Average yield on interest-earning assets (3)		4.98%		4.75%		4.25%		4.09%		4.06%
Average rate paid on interest-bearing liabilities		2.38%		1.71%		1.14%		1.06%		1.00%
Average interest rate spread (4)		2.60%		3.04%		3.11%		3.03%		3.06%
Net interest margin, fully taxable equivalent (5)		3.08%		3.41%		3.38%		3.21%		3.21%
Average interest-earning assets to interest bearing liabilities		124.90%		128.04%		130.09%		121.04%		117.42%
Efficiency ratio (6)		63.97%		74.13%		75.99%		78.65%		86.14%
Noninterest expenses to average assets		2.89%		2.78%		2.54%		2.60%		2.92%
Common stock dividend payout ratio		n/m		n/m		n/m		n/m		n/m
Capital Ratios: (2)
Equity to total assets at end of period		9.16%		6.85%		8.36%		9.01%		10.91%
Average equity to average assets		7.39%		7.68%		9.28%		10.27%		10.60%
Tier 1 (core) capital to adjusted total assets (Leverage ratio) (7)		10.58%		10.13%		9.37%		9.66%		11.12%
Total capital to risk weighted assets (7)		12.96%		12.37%		11.91%		12.46%		13.67%
Tier 1 (core) capital to risk weighted assets (7)		11.97%		11.12%		10.65%		11.20%		12.40%
Common equity tier 1 capital to risk weighted assets (7)		11.97%		11.12%		10.65%		11.20%		12.40%
Asset Quality Ratios: (2)
Nonperforming loans to total loans (8)		0.36%		0.07%		0.11%		0.20%		0.47%
Nonperforming assets to total assets (9)		0.28%		0.06%		0.10%		0.21%		0.87%
Allowance for loan and lease losses to total loans		1.06%		1.26%		1.69%		1.96%		2.18%
Allowance for loan and lease losses to nonperforming loans (8)		292.66%		1859.95%		1482.98%		983.66%		464.56%
Net charge-offs (recoveries) to average loans		(0.02%)		(0.01%)		(0.01%)		(0.02%)		(0.02%)
Per Share Data: (10)
Basic earnings per common share	$	2.05	$	1.02	$	0.21	$	0.28	$	1.27
Diluted earnings per common share		2.03		1.00		0.19		0.28		1.10
Dividends declared per common share		-		-		-		-		-
Tangible book value per common share at end of period		12.40		10.51		9.48		9.19		9.02

(1)	Loans and leases, net represents the recorded investment in loans net of the ALLL.
(2)	Asset quality ratios and capital ratios are end-of-period ratios.  All other ratios are based on average monthly balances during the indicated periods.
(3)	Calculations of yield are presented on a taxable equivalent basis using the federal income tax rate.
(4)	The average interest rate spread represents the difference between the weighted average yield on average interest-earning assets and the weighted average cost of average interest-bearing liabilities.
(5)	The net interest margin represents net interest income as a percent of average interest-earning assets.
(6)	The efficiency ratio equals noninterest expense (excluding amortization of intangibles and foreclosed asset writedowns) divided by net interest income plus noninterest income (excluding gains or losses on securities transactions).
(7)	Regulatory capital ratios of CFBank.
(8)	Nonperforming loans consist of nonaccrual loans and other loans 90 days or more past due.
(9)	Nonperforming assets consist of nonperforming loans and foreclosed assets.
(10)	Adjusted to reflect the 1-for-5.5 reverse stock split effected on August 20, 2018.
	n/m - not meaningful

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Management’s Discussion and Analysis of Financial Condition and Results of Operations

FORWARD LOOKING STATEMENTS

Statements in this annual report that are not statements of historical fact are forward-looking statements which are made in good faith by us. Forward-looking statements include, but are not limited to: (1) projections of revenues, income or loss, earnings or loss per share of common stock, capital structure and other financial items; (2) plans and objectives of the management or Boards of Directors of Central Federal Corporation (the “Holding Company”) or CFBank, National Association (“CFBank”); (3) statements regarding future events, actions or economic performance; and (4) statements of assumptions underlying such statements.  Words such as "estimate," "strategy," "may," "believe," "anticipate," "expect," "predict," "will," "intend," "plan," "targeted," and the negative of these terms, or similar expressions, are intended to identify forward-looking statements, but are not the exclusive means of identifying such statements.  Various risks and uncertainties may cause actual results to differ materially from those indicated by our forward-looking statements, including, without limitation, those detailed from time to time in our reports filed with the Securities and Exchange Commission (the “SEC”), including those identified in “Item 1A. Risk Factors” of Part I of our Form 10-K filed with the SEC for the year ended December 31, 2019. 

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.  The Holding Company, including its subsidiaries (together referred to as the “Company”) believes it has 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 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, equipment leasing, SBA loans and treasury management depository services.  In addition, CFBank also has a national residential lending platform.  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, Ohio; Columbiana County through our offices in Calcutta and Wellsville, Ohio; and Cuyahoga County, through our agency office in Woodmere, Ohio.  

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

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Management’s Discussion and Analysis of Financial Condition and Results of Operations

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 $880.5 million at December 31, 2019 and increased $215.5 million, or 32.4%, from $665.0 million at December 31, 2018.  The increase was primarily due to a $118.3 million increase in loans held for sale, and a $112.6 million increase in net loan balances, partially offset by a $21.4 million decrease in cash and cash equivalents.

Cash and cash equivalents.Cash and cash equivalents totaled $45.9 million at December 31, 2019, and decreased $21.4 million, or 31.8%, 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 $8.2 million at December 31, 2019, and decreased $1.9 million, or 19.2%, compared to $10.1 million at December 31, 2018.  The decrease was primarily due to principal maturities.  

Loans held for sale.  Loans held for sale totaled $135.7 million at December 31, 2019 and increased $118.3 million, or 680.6%, from $17.4 million at December 31, 2018.  The increase was due to increased mortgage volume activity.

Loans and Leases.Net loans and leases totaled $663.3 million at December 31, 2019, and increased $112.6 million, or 20.5%, from $550.7 million at December 31, 2018.  The increase was primarily due to a $74.1 million increase in commercial real estate loan balances and a $43.8 million increase in commercial loan balances, partially offset by an $8.4 million decrease in multi-family 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 twelve months ended December 31, 2019 and December 31, 2018, loan origination activity totaled $844.7 million and $615.1 million, respectively, and payoffs for the same period totaled $855.5 million and $616.0 million, respectively.  At December 31, 2019 and December 31, 2018, CFBank held $26.0 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 $7.1 million at December 31, 2019, and increased $126,000, or 1.8%, from $7.0 million at December 31, 2018.  The increase in the ALLL is due to net recoveries during the year ended December 31, 2019.  The ratio of the ALLL to total loans was 1.06% at December 31, 2019, compared to 1.26% at December 31, 2018. 

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. Substandard loans of all classes within the commercial, commercial real estate and multi-family residential loan segments, regardless of size, and loans of all other risk classifications with balances 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

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Management’s Discussion and Analysis of Financial Condition and Results of Operations

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 annual report for additional information regarding the ALLL.

Individually impaired loans totaled $4.6 million at December 31, 2019, and increased $1.4 million, or 45.9%, from $3.2million 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 $35,000 at December 31, 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 90 days past due but still accruing interest,totaled $2.4 million at December 31, 2019, andincreased $2.1 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 0.36% at December 31, 2019, compared to 0.07% at December 31, 2018.

The following table presents information regarding the number and balance of nonperforming loans at December 31, 2019 and December 31, 2018.  

	December 31, 2019			December 31, 2018
	# of loans	Balance			# of loans	Balance
	(dollars in thousands)
Commercial	1	$	85		1	$	100
Single-family residential real estate	6		550		4		167
Commercial real estate	1		1,689		-		-
Home equity lines of credit	4		115		2		89
Other Consumer	-		-		1		21
Total	12	$	2,439		8	$	377

Nonaccrual loans include some nonperforming loans that were previously modified and identified as TDRs.  TDRs included in nonaccrual loans totaled $85,000 at December 31, 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 December 31, 2019 and December 31, 2018 do not include $2.8 million and $3.1million, respectively, of 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 our consolidated financial statements included in this annual report for additional information regarding impaired loans and nonperforming loans.

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.

5

Management’s Discussion and Analysis of Financial Condition and Results of Operations

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 annual report for additional information regarding descriptions of the regulatory asset classifications.

The level of total criticized and classified loans increased by $547,000 during the twelve months ended December 31, 2019 due to downgrades of certain loans during the year.  Loans designated as special mention decreased $2.0 million, or 28.6%, and totaled $5.0 million at December 31, 2019, compared to $7.0 million at December 31, 2018.  Loans classified as substandardincreased $2.6 million, or 77.5%, and totaled $5.9 million at December 31, 2019, compared to $3.3million at December 31, 2018.  No loans were classified as doubtful at December 31, 2019orDecember 31, 2018.  See Note 4 to our consolidated financial statements included in this annual report 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 $4.1 million, and totaled $5.2 million at December 31, 2019, compared to $1.1 million at December 31, 2018.  Past due loans totaled 0.8% of the loan portfolio at December 31, 2019, compared to 0.2% at December 31, 2018.  See Note 4 to our consolidated financial statements included in this annual report 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.  

Unsecured commercial loans may present a higher risk of non-collection than secured commercial loans.  Unsecured commercial loans totaled $16.6 million, or 9.7% of the commercial loan portfolio, at December 31, 2019 and $6.5million, or 5.1% of the commercial loan portfolio, at December 31, 2018.  The unsecured loans are primarily lines of credit to small businesses in CFBank’s market area and are guaranteed by the small business owners.  At December 31, 2019 and December 31, 2018, none of the unsecured loans were 30 days or more delinquent.

Loans that contain interest only payments may present a higher risk than those loans with an amortizing payment that includes periodic principal reductions. Interest only loans are primarily commercial lines of credit secured by business assets and inventory, and consumer home equity lines of credit secured by the borrower’s primary residence. Due to the fluctuations in business assets and inventory of our commercial borrowers, CFBank has increased risk due to a potential decline in collateral values without a corresponding decrease in the outstanding principal. Interest only commercial lines of credit totaled $82.5 million, or 48.4% of the commercial loan portfolio, at December 31, 2019 compared to $73.5million, or 57.9%, at December 31, 2018.  Interest only home equity lines of credit totaled $19.4million, or 92.7% of total home equity lines of credit, at December 31, 2019 compared to $22.6 million, or 94.4%, at December 31, 2018.

We believe the ALLL is adequate to absorb probable incurred credit losses in the loan portfolio as of December 31, 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.  

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Management’s Discussion and Analysis of Financial Condition and Results of Operations

Foreclosed assets.  There were no foreclosed assets at December 31, 2019 compared to foreclosed assets of $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 change in the future in connection with workout efforts related to foreclosed assets, nonperforming loans and other loans with credit issues.

Premises and equipment.  Premises and equipment, net, totaled $4.0 million at December 31, 2019, and increased $127,000, or 3.3%, from $3.9 million at December 31, 2018.  See Note 8 – Premises and Equipment to our consolidated financial statements included in this annual report for additional information.

Deposits.  Deposits totaled $746.3 million at December 31, 2019, an increase of $166.5 million, or 28.7%, from $579.8 million at December 31, 2018.  Interest-bearing deposit accounts increased to $630.8 million at December 31, 2019, from $468.3 million at December 31, 2018.  The increase in interest-bearing accounts is primarily attributed to a $93.1 million increase in money market account balances, a $90.5 million increase in certificate of deposit account balances, and a $2.3 million increase in saving account balances, partially offset by a $23.4 million decrease in interest-bearing checking account balances.  The increase in certificate of deposit account balances was due to a combination of increases in retail, brokered and listing service certificates of deposit.  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 interest-bearing checking account balances was due to the timing of certain large customer transactions. The increase in noninterest-bearing checking accounts was due to increases in customer relationships and balances.

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 $124.9 million at December 31, 2019, and increased $23.7 million, or 23.4% from $101.2 million at December 31, 2018.  Customer balances in the CDARS reciprocal and ICS reciprocal programs, which do not qualify as brokered, totaled $28.0 million at December 31, 2019 and decreased $20.1 million, or 41.8%, from $48.1 million at December 31, 2018.

FHLB advances and other debt.  FHLB advances and other debt totaled $29.0 million at December 31, 2019 and increased $9.5 million, or 48.8%, compared to $19.5 million at December 31, 2018.  The Holding Company had an existing credit facility with a third-party bank which was modified to a $10.0 million revolving line-of-credit in December 2018.  In December 2019, the $5.0 million outstanding balance on the existing line-of-credit was converted to a $5.0 million term loan with an additional $10.0 million revolving line-of-credit.  The new term loan requires quarterly principal payments of $125,000 plus accrued interest.  Any remaining principal is due and payable on the maturity date, which is December 23,2022. Loans under the credit facility bear interest at a rate equal to the Prime Rate plus 0.75%. 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.  As of December 31, 2019, the Company had an outstanding balance of $5.0 million on the term loan and no outstanding balance on the revolving line-of-credit. At December 31, 2018, the credit facility had an outstanding balance of $6.0 million.

At December 31, 2018, CFBank had $8.0 million of availability in an unused line of credit at a commercial bank.  During the third quarter of 2019, CFBank added an additional $15.0 million line of credit at another commercial bank.  There were no outstanding borrowings on these lines of credit at December 31, 2019 or December 31, 2018.  If CFBank were to borrow on these lines of credit, interest would accrue daily at a variable rate based on the commercial bank’s cost of funds and current market returns.

During the fourth quarter of 2019, CFBank entered into a $25.0 million warehouse facility with a commercial bank.  The warehouse facility is used to periodically fund loans held for sale from the close (funding) date until they are sold in the secondary market.  Borrowings on the facility bear interest at the greater of 30-day Libor plus 2.00%, or 4.00% and are secured by the specific loans that were funded.  At December 31, 2019, the warehouse facility had an outstanding balance of $7.5 million.  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 atDecember 31, 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 December  31, 2019 and December 31, 2018.  See Note 11-Subordinated Debentures to our consolidated financial statements included in this annual report for additional information.

Stockholders’ equity.Stockholders’ equity totaled $80.7 million at December 31, 2019, an increase of $35.1 million, or 77.1%, from $45.6 million at December 31, 2018.  The increase in total stockholders’ equity was primarily attributed to the private placement

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Management’s Discussion and Analysis of Financial Condition and Results of Operations

offering of approximately $23.6 million (net of offering costs) in October 2019, net income, as well as 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 report. 

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 and loans held for sale, as well as to deploy those assets into higher earning assets to improve net interest income as the opportunity presents itself.

Comparison of Results of Operations for 2019 and 2018

General.Net income for the year ended December 31, 2019 totaled $9.6 million (or $2.03 per diluted common share) and increased $5.3 million, or 124.7%, compared to net income of $4.3 million (or $1.00 per diluted common share) for the year ended December 31, 2018.

Net interest income.Net interest income is a significant component of net income, and consists of the difference between interest income generated on interest-earning assets and interest expense incurred on interest-bearing liabilities.  Net interest income is primarily affected by the volumes, interest rates and composition of interest-earning assets and interest-bearing liabilities.  The tables below titled “Average Balances, Interest Rates and Yields” and “Rate/Volume Analysis of Net Interest Income” provide important information on factors impacting net interest income and should be read in conjunction with this discussion of net interest income.

Net interest income totaled $21.7 million for the year ended December 31, 2019 and increased $3.8 million, or 21.3%, compared to net interest income of $17.9 million for the year ended December 31, 2018.  The increase in net interest income was primarily due to a $10.2 million, or 41.1%, increase in interest income, partially offset by a $6.4 million, or 91.6%, increase in interest expense.  The increase in interest income was primarily attributed to a $180.0 million, or 34.3%, increase in average interest-earning assets outstanding, resulting primarily from an increase in net loans and loans held for sale, and a 23bps increase in average yield on interest-earning assets.  The increase in interest expense was attributed to a $154.4 million, or 37.7%, increase in average interest-bearing liabilities and a 67bps increase in the average cost of funds on interest-bearing liabilities.  As a result, the net interest margin of 3.08% for the year ended December 31, 2019 decreased 33bps compared to the net interest margin of 3.41% for the year ended December 31, 2018.

Interest income totaled $35.1million and increased $10.2 million, or 41.1%, for the twelve months ended December 31, 2019, compared to $24.9 million for the twelve months ended December 31, 2018. The increase in interest income was primarily due to a $176.1million, or 36.6%, increase in average loans and loans held for sale balances from $481.7million for the year ended December 31, 2018, to $657.8million for the year ended December 31, 2019.

Interest expense totaled $13.4 million and increased $6.4 million, or 91.6%, for the year ended December 31, 2019, compared to $7.0 million for the year ended December 31, 2018.  The increase in interest expense resulted primarily from increased deposit costs due to a 63bps increase inthe cost of funds on total interest-bearing deposits to222bps atDecember 31, 2019 compared to 159bps at December 31, 2018, coupled with a $141.9 million, or 36.9%, increase in average interest-bearing deposit balances.

Provision for loan and lease losses.There was no provision for loan and lease losses for the year ended December 31, 2019 or the year ended December 31, 2018, which is due to strong credit quality and net recoveries.  Net recoveries for the year ended December 31, 2019 totaled $126,000, compared to net recoveries of $42,000 for the year ended December 31, 2018.

The following table presents information regarding net charge-offs (recoveries) for 2019 and 2018.

	2019		2018
(Dollars in thousands)	Net charge-offs (recoveries)
Commercial	$	-	$	(2)
Single-family residential real estate		(7)		(18)
Commercial real estate		(105)		-
Home equity lines of credit		(50)		(22)
Other consumer loans		36		-
Total	$	(126)	$	(42)

See the section titled “Financial Condition – Allowance for loan and lease losses” for additional information.

8

Management’s Discussion and Analysis of Financial Condition and Results of Operations

Noninterest income.Noninterest income for the year ended December 31, 2019 totaled $11.7 million and increased $9.0 million, or 331.5%, compared to $2.7 million for the year ended December 31, 2018.  The increase was primarily due to a $8.8 million increase in net gain on sale of loans.  The increase in net gain on sale of loans was primarily a result of increased sales volume related to our residential mortgage lending business.

Noninterest expense.Noninterest expense for the year ended December 31, 2019 totaled $21.4 million and increased $6.1 million, or 40.0%, compared to $15.3 million for the year ended December 31, 2018.  The increase in noninterest expense during the year ended December 31, 2019 was primarily due to a $3.0 million increase in salaries and employee benefits expense, a $1.4 million increase in advertising and marketing expense and a $580,000 increase in professional fee 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.  The increase in professional fees was related to increased activities and volumes in our residential mortgage business.

Income taxes.Income tax expense was $2.4 million for the year ended December 31, 2019, an increase of $1.3 million, compared to $1.1 million for the year ended December 31, 2018.  The effective tax rate for the year ended December 31, 2019 was approximately 20.3%, as compared to approximately 19.8% for the year ended December 31, 2018.

Our deferred tax assets are composed of U.S. net operating losses (“NOLs”), and other temporary book to tax differences.  When determining the amount of deferred tax assets that are more-likely-than-not to be realized, and therefore recorded as a benefit, the Company conducts a regular assessment of all available information. This information includes, but is not limited to, taxable income in prior periods, projected future income and projected future reversals of deferred tax items.  Based on these criteria, the Company determined as of December 31, 2019that 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 Results of Operations for 2018 and 2017

General.The Company’s income before income tax expense for the year ended December 31, 2018 totaled $5.3 million and increased $1.8 million, or 54.0%, compared to $3.5 million for the year ended December 31, 2017. The increase in income before income tax expense was due to a $4.2 million increase in net interest income and a $2.0 million increase in noninterest income, partially offset by a $4.3 million increase in noninterest expense.   

Net income for the year ended December 31, 2018 totaled $4.3 million and increased $3.0 million, or 217.5%, compared to net income of $1.3 million for the year ended December 31, 2017.  The increase in net income was due to a $4.2 million increase in net interest income, a $2.0 million increase in noninterest income, and a decrease in income tax expenses of $1.1 million, partially offset by a $4.3 million increase in noninterest expense.  The decrease in income tax expense was due to the reduction in the federal corporate tax rate, effective January 1, 2018, as a result of the Tax Cuts and Jobs Act.  In addition, in the fourth quarter of 2017 the Company revaluated its existing deferred tax asset (DTA) to reflect the impact of the new tax rates, which resulted in the Company recording an additional tax expense in the amount of $979,000, during the quarter ended December 31, 2017.

Net income attributable to common stockholders for the year ended December 31, 2018, totaled $4.3 million, or $1.00 per diluted common share, and increased $3.7 million, compared to net income attributable to common stockholders of $680,000, or $0.19 per diluted common share, for the year ended December 31, 2017.  For the year ended December 31, 2018, the accretion of discount from the Company’s Series B Preferred Stock and the value of warrants exercised increased net income attributable to common stockholders by $62,000.  For the year ended December 31, 2017, preferred dividends and accretion of discount related to the Company’s Series B Preferred Stock reduced net income attributable to common stockholders by $666,000.  The change in the preferred dividends, accretion of discount and value of warrants exercised related to the Series B Preferred Stock was primarily due to the conversion of all of the Company’s outstanding Series B Preferred Stock into shares of Common Stock of the Company effective October 6, 2017.

Net interest income.Net interest income is a significant component of net income, and consists of the difference between interest income generated on interest-earning assets and interest expense incurred on interest-bearing liabilities.  Net interest income is primarily affected by the volumes, interest rates and composition of interest-earning assets and interest-bearing liabilities.  The tables below titled “Average Balances, Interest Rates and Yields” and “Rate/Volume Analysis of Net Interest Income” provide important information on factors impacting net interest income and should be read in conjunction with this discussion of net interest income.

Net interest income totaled $17.9 million for the year ended December 31, 2018 and increased $4.2 million, or 30.8%, compared to $13.7 million for the year ended December 31, 2017.  The increase in net interest income was primarily due to a $7.7 million, or 44.6%, increase in interest income, partially offset by a $3.5 million, or 98.0%, increase in interest expense.  The increase in interest income was primarily attributed to a $119.4 million, or 29.5%, increase in average interest-earning assets outstanding, resulting

9

Management’s Discussion and Analysis of Financial Condition and Results of Operations

primarily from an increase in net loans and a 50bp increase in average yield on interest-earning assets.  The increase in interest expense was primarily attributed to a $98.2 million, or 31.6%, increase in average interest-bearing liabilities and a 57bps increase in the average cost of funds on interest-bearing liabilities.  As a result, the net interest margin of 3.41% for the year ended December 31, 2018 increased 3bps compared to the net interest margin of 3.38% for the year ended December 31, 2017.

Interest income totaled $24.9 million and increased $7.7 million, or 44.6%, for the twelve months ended December 31, 2018, compared to $17.2 million for the twelve months ended December 31, 2017. The increase in interest income was primarily due to a $123.3 million, or 34.4%, increase in average loans and loans held for sale balances from $358.4 million for the year ended December 31, 2017, to $481.7 million for the year ended December 31, 2018. 

Interest expense totaled $7.0 million and increased $3.5 million, or 98.0%, for the year ended December 31, 2018, compared to $3.5 million for the year ended December 31, 2017.  The increase in interest expense resulted primarily from increased deposit costs due to a $91.7 million, or 31.4%, increase in average interest-bearing deposit balances. The overall cost of funds on total interest-bearing deposits increased 54bps to 159bps at December 31, 2018 compared to 105bps at December 31, 2017.

Provision for loan and lease losses.There was no provision for loan and lease losses for either the year ended December 31, 2018 or the year ended December 31, 2017, which is due to strong credit quality, favorable trends in certain qualitative factors and net recoveries.  Net recoveries for the year ended December 31, 2018 totaled $42,000, compared to net recoveries of $45,000 for the year ended December 31, 2017.

The following table presents information regarding net charge-offs (recoveries) for 2018 and 2017.

	2018		2017
(Dollars in thousands)	Net charge-offs (recoveries)
Commercial	$	(2)	$	(2)
Single-family residential real estate		(18)		(20)
Home equity lines of credit		(22)		(23)
Total	$	(42)	$	(45)

See the section titled “Financial Condition – Allowance for loan and lease losses” for additional information.

Noninterest income.Noninterest income for the year ended December 31, 2018 totaled $2.7 million and increased $2.0 million, or 265.6%, compared to $743,000 for the year ended December 31, 2017.  The increase was primarily due to a $1.9 million increase in net gain on sale of loans and an $82,000 increase in service charges on deposit accounts.  The increase in net gain on sale of loans was a result of increased sales volume due to the expansion of our residential mortgage business.  The increase in service charges on deposit accounts was related to increased account relationships and pricing. 

Noninterest expense.Noninterest expense for the year ended December 31, 2018 totaled $15.3 million and increased $4.3 million, or 39.4%, compared to $11.0 million for the year ended December 31, 2017.  The increase in noninterest expense during the year ended December 31, 2018 was primarily due to a $2.1 million increase in salaries and employee benefits expense, a $1.2 million increase in advertising and marketing expense, a $287,000 increase in professional fees and a $203,000 increase in FDIC premium expense.  The increase in salaries and employee benefits expense was primarily due to the hiring of mortgage personnel in connection with the expansion of our mortgage business, consistent with our focus on driving noninterest income. The increase in salaries and employee benefits expense also resulted from the increase in personnel associated with the opening of our Glendale branch in the Cincinnati market, the addition of experienced treasury management personnel and an increase in credit and finance 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 the expansion of our residential mortgage business, coupled with increased advertising focused on increasing core deposits.  Professional fees increased primarily due to the reverse stock split that occurred during the third quarter and professional fees associated with the expansion of our residential mortgage business.  The FDIC premium expense increased as a result of an increase in the assessment rate and volume.

Income taxes.Income tax expense was $1.1 million for the year ended December 31, 2018, a decrease of $1.0 million compared to $2.1 million for the year ended December 31, 2017.  The decrease was primarily due to the Company recording an additional tax expense of $979,000 during the fourth quarter of 2017 due to a revaluation of the Company’s deferred tax asset and the reduction of the federal corporate tax rate to 21%, effective January 1, 2018, pursuant to the Tax Cuts and Jobs Act, which was partially offset by an increase in earnings.  As a result, the effective tax rate for the year ended December 31, 2018 decreased to approximately 19.8%, as compared to approximately 61.1% for the year ended December 31, 2017.

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

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Management’s Discussion and Analysis of Financial Condition and Results of Operations

determined as of December 31, 2018 that no valuation allowance was required against the net deferred tax asset.  However, as discussed above, the Company performed a revaluation of its deferred tax asset during the fourth quarter of 2017 to reflect the impact of the new tax rates under the Tax Cuts and Jobs Act, which resulted in a decrease in the deferred tax asset and the recording of an additional tax expense by the Company in the fourth quarter of 2017 in the amount of $979,000.

Average Balances, Interest Rates and Yields.  The following table presents, for the periods indicated, the total dollar amount of fully taxable equivalent interest income from average interest-earning assets and the resultant yields, as well as the interest expense on average interest-bearing liabilities, expressed in both dollars and rates. Average balances are computed using month-end balances.

	For the Years Ended December 31,
	2019					2018					2017
	Average		Interest		Average	Average		Interest		Average	Average		Interest		Average
	Outstanding		Earned/		Yield/	Outstanding		Earned/		Yield/	Outstanding		Earned/		Yield/
	Balance		Paid		Rate	Balance		Paid		Rate	Balance		Paid		Rate
		(Dollars in thousands)
Interest-earning assets:
Securities (1) (2)	$	9,460	$	172	1.82%	$	11,413	$	185	1.60%	$	13,192	$	183	1.39%
Loans and loans held for sale (3)		657,843		33,778	5.13%		481,723		23,855	4.95%		358,423		16,487	4.60%
Other earning assets		33,169		947	2.86%		27,811		650	2.34%		30,351		383	1.26%
FHLB and FRB stock		3,790		207	5.46%		3,308		196	5.93%		2,890		154	5.33%
Total interest-earning assets		704,262		35,104	4.98%		524,255		24,886	4.75%		404,856		17,207	4.25%
Noninterest-earning assets		35,081					25,822					26,413
Total assets	$	739,343				$	550,077				$	431,269
Interest-bearing liabilities:
Deposits	$	525,818		11,684	2.22%	$	383,951		6,102	1.59%	$	292,242		3,059	1.05%
FHLB advances and other borrowings		38,021		1,720	4.52%		25,501		895	3.51%		18,979		475	2.50%
Total interest-bearing liabilities		563,839		13,404	2.38%		409,452		6,997	1.71%		311,221		3,534	1.14%
Noninterest-bearing liabilities		120,858					98,378					80,019
Total liabilities		684,697					507,830					391,240
Equity		54,646					42,247					40,029
Total liabilities and equity	$	739,343				$	550,077				$	431,269
Net interest-earning assets	$	140,423				$	114,803				$	93,635
Net interest income/interest rate spread			$	21,700	2.60%			$	17,889	3.04%			$	13,673	3.11%
Net interest margin					3.08%					3.41%					3.38%
Average interest-earning assets to average interest-bearing liabilities		124.90%					128.04%					130.09%
(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.

11

Management’s Discussion and Analysis of Financial Condition and Results of Operations

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.

	Year Ended						Year Ended
	December 31, 2019						December 31, 2018
	Compared to Year Ended						Compared to Year Ended
	December 31, 2018						December 31, 2017
	Increase (decrease) due to						Increase (decrease) due to
	Rate		Volume		Net		Rate		Volume		Net
	(Dollars in thousands)
Interest-earning assets:
Securities (1)	$	21	$	(34)	$	(13)	$	27	$	(25)	$	2
Loans and loans held for sale		910		9,013		9,923		1,341		6,027		7,368
Other earning assets		159		138		297		301		(34)		267
FHLB and FRB stock		(16)		27		11		18		24		42
Total interest-earning assets		1,074		9,144		10,218		1,687		5,992		7,679
Interest-bearing liabilities:
Deposits		2,895		2,687		5,582		1,896		1,147		3,043
FHLB advances and other borrowings		306		519		825		227		193		420
Total interest-bearing liabilities		3,201		3,206		6,407		2,123		1,340		3,463
Net change in net interest income	$	(2,127)	$	5,938	$	3,811	$	(436)	$	4,652	$	4,216

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

Quantitative and Qualitative Disclosures about Market Risk

Market risk is the risk of loss from adverse changes in market prices and interest rates. We have not engaged in and, accordingly, have no risk related to trading accounts, commodities or foreign exchange.  Our hedging policy allows hedging activities, such as interest-rate swaps, up to a notional amount of 10% of total assets and a value at risk of 10% of core capital.  Disclosures about our hedging activities are set forth in Note 19 to our consolidated financial statements.  The Company’s market risk arises primarily from interest rate risk inherent in our lending, investing, deposit gathering and borrowing activities.  The measurement of market risk associated with financial instruments is meaningful only when all related and offsetting on- and off-balance-sheet transactions are aggregated and the resulting net positions are identified. Disclosures about fair value are set forth in Note 6 to our consolidated financial statements. 

Management actively monitors and manages interest rate risk.  The primary objective in managing interest rate risk is to limit, within established guidelines, the adverse impact of changes in interest rates on our net interest income and capital. We measure the effect of interest rate changes on CFBank’s economic value of equity (EVE), which is the difference between the estimated market value of its assets and liabilities under different interest rate scenarios.  The change in the EVE ratio is a long-term measure of what might happen to the market value of financial assets and liabilities over time if interest rates changed instantaneously and CFBank did not change existing strategies.  At December 31, 2019, CFBank’s EVE ratios, using interest rate shocks ranging from a 400 bps rise in rates to a 200 bps decline in rates, are shown in the following table.  All values are within the acceptable range established by CFBank’s Board of Directors.

12

Management’s Discussion and Analysis of Financial Condition and Results of Operations

Economic Value of Equity
as a Percent of Assets
(CFBank only)
Basis Point	Economic
Change in Rates	Value Ratio
+400	8.2%
+300	8.8%
+200	9.4%
+100	9.9%
0	10.4%
-100	10.4%
-200	10.3%

In evaluating CFBank’s exposure to interest rate risk, certain limitationsinherent in the method of analysis presented in the foregoing table must be considered.  For example, the table indicates results based on changes in the level of interest rates, but not changes in the shape of the yield curve. CFBank also has exposure to changes in the shape of the yield curve.  Although certain assets and liabilities may have similar maturities or periods to which they reprice, they may react in different degrees to changes in market interest rates.  The interest rates on certain types of assets and liabilities may fluctuate in advance of changes in market interest rates, while interest rates on other types may lag behind changes in market rates.  In the event of a change in interest rates, prepayments and early withdrawal levels would likely deviate significantly from those assumed in calculating the table.  The ability of many borrowers to service their debt may decrease when interest rates rise.  As a result, the actual effect of changing interest rates may differ materially from that presented in the foregoing table.

Changes in levels of market interest rates could materially and adversely affect our net interest income, loan volume, asset quality, value of loans held for sale and cash flows, as well as the market value of our securities portfolio and overall profitability.

We continue to originate the majority of fixed-rate single-family residential real estate loans for sale rather than retain long-term, low fixed-rate loans in portfolio.  Residential mortgage loan origination volumes are affected by market interest rates on loans.  Rising interest rates generally are associated with a lower volume of loan originations, while falling interest rates are usually associated with higher loan originations.  Our ability to generate gains on sales of mortgage loans is significantly dependent on the level of originations. Changes in interest rates, prepayment speeds and other factors may also cause the value of our loans held for sale to change.

We originate commercial, commercial real estate,  multi-family residential and single family residential real estate mortgage loans for our portfolio, which, in many cases, have adjustable interest rates.  Many of these loans have interest-rate floors, which protect income to CFBank should rates fall.  While adjustable-rate loans better offset the adverse effects of an increase in interest rates as compared to fixed-rate loans, the increased payments required of adjustable-rate loan borrowers upon an interest rate adjustment in a rising interest rate environment could cause an increase in delinquencies and defaults.  The marketability of the underlying property also may be adversely affected in a rising interest rate environment. 

Cash flows are affected by changes in market interest rates.  Generally, in rising interest rate environments, loan prepayment rates are likely to decline, and in falling interest rate environments, loan prepayment rates are likely to increase.

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 ofthe 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

13

Management’s Discussion and Analysis of Financial Condition and Results of Operations

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. 

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

	December 31, 2019		December 31, 2018
	(Dollars in thousands)
Cash, unpledged securities and deposits in other financial institutions	$	44,080	$	67,952
Additional borrowing capacity at the FHLB		72,153		54,769
Additional borrowing capacity at the FRB		65,614		58,502
Unused commercial bank lines of credit		23,000		8,000
Total	$	204,847	$	189,223

Cash, unpledged securities and deposits in other financial institutions decreased $23.9 million, or 35.1%, to $44.1million at December 31, 2019 compared to $68.0 million at December 31, 2018.  The decrease is primarily due to increased loans and loans held for sale, partially offset by an increase in deposits.

CFBank’s additional borrowing capacity with the FHLB increased $17.4 million, or 31.7%, to $72.2 million at December 31, 2019 compared to $54.8 million at December 31, 2018.  The increase in additional borrowing capacity is a result of additional collateral pledged due to the increase in loans. 

CFBank’s additional borrowing capacity at the FRB increased $7.1 million, or 12.2%, to $65.6 million at December 31, 2019from $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 including, 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 $23.0 million of availability in unused lines of credit with two commercial banks at December 31, 2019 and a $8.0 million unused line of credit with one commercial bank at December 31, 2018.The increase was due to the addition of a $15.0 million line of credit with a commercial bank during the third quarter of 2019.

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 Wall Street Reform and Consumer Protection Act, 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 December 31, 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 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 4.81% at December 31, 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%.

The Holding Company had an existing credit facility with a third-party bank which was modified to a $10.0 million revolving line-of-credit in December 2018.  In December 2019, the $5.0 million outstanding balance on the existing line-of-credit was converted to a

14

Management’s Discussion and Analysis of Financial Condition and Results of Operations

$5.0 million term loan with an additional $10.0 million revolving line-of-credit.  The new term loan requires quarterly principal payments of $125,000 plus accrued interest.  Any remaining principal is due and payable on the maturity date, which is December 23,2022. Loans under the credit facility bear interest at a rate equal to the Prime Rate plus 0.75%. 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.  As of December 31, 2019, the Company had an outstanding balance of $5.0 million on the term loan and no outstanding balance on the revolving line-of-credit. At December 31, 2018, the credit facility had an outstanding balance of $6.0 million.The ability of the Holding Company to pay dividends on its common stock is dependent upon the amount of cash and liquidity available at the Holding Company level, as well as the receipt of dividends and other distributions from CFBank to the extent necessary to fund such dividends.

The Holding Company is a legal entity that is separate and distinct from CFBank, which has no obligation to make any dividends or other funds available for the payment of dividends by the Holding Company.  Banking regulations limit the amount of dividends that can be paid to the Holding Company by CFBank without prior regulatory approval. Generally, financial institutions may pay dividends without prior approval as long as the dividend does not exceed the total of the current calendar year-to-date earnings plus any earnings from the previous two years not already paid out in dividends, and as long as the financial institution remains well capitalized after the dividend payment.

The Holding Company also is subject to various legal and regulatory policies and requirements impacting the Holding Company’s ability to pay dividends on its stock.  In addition, the Holding Company’s ability to pay dividends on its stock is conditioned upon the payment, on a current basis, of quarterly interest payments on the subordinated debentures underlying the Company’s trust preferred securities.  Finally, under the terms of the Company’s fixed-to-floating rate subordinated debt, the Holding Company’s ability to pay dividends on its stock is conditioned upon the Holding Company continuing to make required principal and interest payments, and not incurring an event of default, with respect to the subordinated debt. 

Federal income tax laws provided deductions, totaling $2.3 million, for thrift bad debt reserves established before 1988. Accounting standards do not require a deferred tax liability to be recorded on this amount, which otherwise would have totaled  $473,000 at year-end 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.

Impact of Inflation

The financial statements and related data presented herein have been prepared in accordance with U.S. generally accepted accounting principles, which presently require us to measure financial position and results of operations primarily in terms of historical dollars.  Changes in the relative value of money due to inflation are generally not considered.  In our opinion, changes in interest rates affect our financial condition to a far greater degree than changes in the inflation rate.  While interest rates are generally influenced by changes in the inflation rate, they do not move concurrently.  Rather, interest rate volatility is based on changes in the expected rate of inflation, as well as changes in monetary and fiscal policy.  A financial institution’s ability to be relatively unaffected by changes in interest rates is a good indicator of its ability to perform in a volatile economic environment.  In an effort to protect performance from the effects of interest rate volatility, we review interest rate risk frequently and take steps to minimize detrimental effects on profitability.

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 consolidated financial statements.  Some of these accounting policies are considered to be critical accounting policies, which are those policies that are both most important to the portrayal of the Company’s financial condition and results of operations, and require management’s most difficult, subjective or complex judgments, often as a result of the need to make estimates about the effect of matters that are inherently uncertain.  Application of assumptions different than those used by management could result in material changes in our financial condition or results of operations.  These policies, current assumptions and estimates utilized, and the related disclosure of this process, are determined by management and routinely reviewed with the Audit Committee of the Board of Directors.  We believe that the judgments, estimates and assumptions used in the preparation of the consolidated financial statements were appropriate given the factual circumstances at the time.

We have identified 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.

Determination of the allowance for loan and lease losses.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

15

Management’s Discussion and Analysis of Financial Condition and Results of Operations

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 and lease losses” and in Notes 1, 4 and 6 to our consolidated financial statements.

Fair value of financial instruments.  Another critical accounting policy relates to fair value 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 Notes 1 and 6 to our consolidated financial statements.

Marketand Dividend Information

The common stock of Central Federal Corporation trades on the Nasdaq® Capital Market under the symbol “CFBK.”  As of December 31, 2019, there were 5,376,454 shares of common stock outstanding and held by approximately485shareholders of record.

There were no dividends declared or paid on our common stock during 2019 or 2018.The Holding Company is subject to various legal and regulatory policies and guidelines impacting the Holding Company’s ability to pay dividends on its stock.  In addition, banking regulations limit the amount of dividends that can be paid to the Holding Company by CFBank without prior regulatory approval and, thus, can limit the availability of funds available to the Holding Company for the payment of dividends on its stock. The Holding Company’s ability to pay dividends on its common stock is also conditioned upon the Holding Company continuing to make certain payments on, and no event of default occurring under, the Company’s fixed-to-floating rate subordinated debt and the subordinated debentures underlying the Holding Company’s trust preferred securities.  Additional information is contained in the sections above titled “Financial Condition - Stockholders’ equity” and “Liquidity and Capital Resources” and in Notes 16 and 18 to our consolidated financial statements.

16

CENTRAL FEDERAL CORPORATION

Worthington, Ohio

ANNUAL REPORT

December 31, 2019 and 2018

CONTENTS
	Page
Management’s Report on Internal Control Over Financial Reporting	1
Report of Independent Registered Public Accounting Firm	2
Consolidated Balance Sheets	3
Consolidated Statements of Income	4
Consolidated Statements of Comprehensive Income	5
Consolidated Statements of Changes in Stockholders’ Equity	6
Consolidated Statements of Changes of Cash Flows	7
Notes to Consolidated Financial Statements	8

CENTRAL FEDERAL CORPORATION

MANAGEMENT’S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING

The management of Central Federal Corporation is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rules 13a-15(f) and 15d-15(f) under the Securities and Exchange Act of 1934, as amended.  The Company’s internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with U.S. generally accepted accounting principles.

The Company’s internal control over financial reporting includes those policies and procedures that:  (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the Company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with U.S. generally accepted accounting principles, and that receipts and expenditures of the Company are being made only in accordance with authorizations of management and directors of the Company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.  Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Management assessed the effectiveness of the Company’s internal control over financial reporting as of December 31, 2019.  In making this assessment, management used the criteria for effective internal control over financial reporting as described in the 2013 Internal Control-Integrated Frameworkissued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).Based on our assessment and those criteria, management concluded that the Company maintained effective internal control over financial reporting as of December 31, 2019.  

This annual report does not contain an audit report of the Company’s registered public accounting firm regarding internal control over financial reporting.  Management’s report was not subject to audit by the Company’s registered public accounting firm pursuant to rules of the Securities and Exchange Commission that permit the Company to provide only management’s report in this annual report.

/s/ Timothy T. O’Dell

Timothy T. O’Dell

President and Chief Executive Officer

/s/ John W. Helmsdoerfer

John W. Helmsdoerfer, CPA

Chief Financial Officer and Treasurer

March 16,  2020

1

Report of Independent Registered Public Accounting Firm

To the Shareholders, Board of Directors and Audit Committee

Central Federal Corporation

Worthington, Ohio

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of Central Federal Corporation (Company) as of December 31, 2019 and 2018, the related consolidated statements of income, comprehensive income, changes in stockholders' equity and changes of cash flows for each of the years in the two-year period ended December 31, 2019, and the related notes (collectively referred to as the "financial statements").  In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2019 and 2018, and the results of its operations and its cash flows for each of the years in the two-year period ended December 31, 2019, in conformity with accounting principles generally accepted in the United States of America.

Basis for Opinion

These financial statements are the responsibility of the Company's management.  Our responsibility is to express an opinion on the Company's financial statements based on our audits. 

We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) ("PCAOB") and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB.  Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.  The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting.  As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting.  Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks.  Such procedures include examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements.  Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements.  We believe that our audits provide a reasonable basis for our opinion.

Emphasis of Matter

As discussed in Note 1 to the consolidated financial statements, in 2019, the Company adopted new accounting guidance for Leases (Topic 842).  Our opinion is not modified with respect to this matter.

/s/ BKD, LLP

BKD, LLP

We have served as the Company's auditor since 2014.

Indianapolis, Indiana

March 16, 2020

2

CENTRAL FEDERAL CORPORATION

CONSOLIDATED BALANCE SHEETS

December 31, 2019 and 2018

(Dollars in thousands, except per share data)

	December 31,		December 31,
	2019		2018
ASSETS
Cash and cash equivalents	$	45,879	$	67,304
Interest-bearing deposits in other financial institutions		100		100
Securities available for sale		8,174		10,114
Loans held for sale, at fair value		135,711		17,385
Loans and leases, net of allowance of $7,138 and $7,012		663,303		550,683
FHLB and FRB stock		4,008		3,476
Foreclosed assets, net		-		38
Premises and equipment, net		3,991		3,864
Operating lease right-of-use assets		1,780		-
Bank owned life insurance		5,345		5,203
Accrued interest receivable and other assets		12,254		6,858
Total assets	$	880,545	$	665,025
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits
Noninterest bearing	$	115,530	$	111,445
Interest bearing		630,793		468,341
Total deposits		746,323		579,786
FHLB advances and other debt		29,017		19,500
Advances by borrowers for taxes and insurance		929		827
Operating lease liabilities		1,960		-
Accrued interest payable and other liabilities		6,846		4,586
Subordinated debentures		14,806		14,767
Total liabilities		799,881		619,466
Commitments and contingent liabilities		-		-
Stockholders' equity
Common stock, $.01 par value;
shares authorized: 9,090,909(1);
shares issued: 5,409,394 at December 31, 2019 and 4,366,297 at December 31, 2018		54		44
Series B Preferred stock, $0.01 par value; 480,000 shares authorized;
0 issued at December 31, 2019 and 0 at December 31, 2018		-		-
Series C Preferred stock, $0.01 par value; 12,337 shares authorized;
12,337 issued at December 31, 2019 and 0 at December 31, 2018		-		-
Additional paid-in capital		86,903		61,706
Accumulated deficit		(2,932)		(12,752)
Accumulated other comprehensive income (loss)		28		(73)
Treasury stock, at cost; 32,940 shares of common stock at December 31, 2019 and 31,235 at December 31, 2018		(3,389)		(3,366)
Total stockholders' equity		80,664		45,559
Total liabilities and stockholders' equity	$	880,545	$	665,025

⁽¹⁾ Restated for 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

Years ended December 31, 2019  and 2018

(Dollars in thousands, except per share data)

	2019		2018
Interest and dividend income
Loans and leases, including fees	$	33,778	$	23,855
Securities		172		185
FHLB and FRB stock dividends		207		196
Federal funds sold and other		947		650
		35,104		24,886
Interest expense
Deposits		11,684		6,102
FHLB advances and other debt		704		611
Subordinated debentures		1,016		284
		13,404		6,997
Net interest income		21,700		17,889
Provision for loan and lease losses		-		-
Net interest income after provision for loan and lease losses		21,700		17,889
Noninterest income
Service charges on deposit accounts		553		491
Net gains on sales of loans		10,767		1,927
Earnings on bank owned life insurance		142		138
Other		258		160
		11,720		2,716
Noninterest expense
Salaries and employee benefits		11,170		8,199
Occupancy and equipment		965		792
Data processing		1,350		1,027
Franchise and other taxes		454		345
Professional fees		1,855		1,275
Director fees		547		413
Postage, printing and supplies		225		189
Advertising and marketing		2,829		1,393
Telephone		201		158
Loan expenses		232		116
Foreclosed assets, net		(9)		6
Depreciation		316		248
FDIC premiums		529		485
Regulatory assessment		165		146
Other insurance		99		86
Other		451		397
		21,379		15,275
Income before incomes taxes		12,041		5,330
Income tax expense		2,440		1,057
Net income	$	9,601	$	4,273
Earnings per common share:
Basic	$	2.05	$	1.02
Diluted	$	2.03	$	1.00

See accompanying notes to consolidated financial statements.

4

CENTRAL FEDERAL CORPORATION

CONSOLIDATED STATEMENTS OF COMREHENSIVE INCOME

Years ended December 31, 2019  and 2018

(Dollars in thousands, except per share data)

	2019		2018
Net income	$	9,601	$	4,273
Other comprehensive income (loss):
Unrealized holding gains (losses) arising during the period related to investment securities available for sale, net of tax of $27 and ($5):		101		(26)
Other comprehensive income (loss), net of tax		101		(26)
Comprehensive income	$	9,702	$	4,247

See accompanying notes to consolidated financial statements.

5

CENTRAL FEDERAL CORPORATION

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

Years ended December 31, 2019  and 2018

(Dollars in thousands, except per share data)

									Accumulated
			Series C		Additional				Other				Total
	Common		Preferred		Paid-In		Accumulated		Comprehensive		Treasury		Stockholders'
	Stock		Stock		Capital		Deficit		Income (Loss)		Stock		Equity
Balance at January 1, 2018	$	43		-		60,676		(17,087)		(47)		(3,324)		40,261
Net income								4,273						4,273
Other comprehensive loss										(26)				(26)
Issuance of 31,827 stock based incentive plan shares, net of forfeitures (1)		1				-								1
Restricted stock expense, net of forfeitures						376								376
Acquisition of 3,535 treasury shares surrendered upon vesting of restricted stock for payment of taxes (1)												(42)		(42)
Exercise of warrants to common stock						716								716
Accretion of discount and value of warrants exercised						(62)		62						-
Balance at December 31, 2018		44		-		61,706		(12,752)		(73)		(3,366)		45,559
Net income								9,601						9,601
Other comprehensive income										101				101
Issuance of 73,738 stock based incentive plan shares, net of forfeitures		1				(1)								-
Restricted stock expense, net of forfeitures						527								527
Acquisition of 1,705 treasury shares surrendered upon vesting of restricted stock for payment of taxes												(23)		(23)
Exercise of warrants to common stock		1				1,257								1,258
Accretion of discount and value of warrants exercised						(219)		219						-
Proceeds from the issuance of 12,337 shares from the preferred stock private placement, net of $805 in offering expenses.				-		14,000								14,000
Proceeds from the issuance of 849,615 shares from the  common stock private placement, net of $554 in offering expenses		8				9,633								9,641
Balance at December 31, 2019	$	54	$	-	$	86,903	$	(2,932)	$	28	$	(3,389)	$	80,664

⁽¹⁾ 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 STATEMENTS OF CHANGES OF CASH FLOWS

Years ended December 31, 2019  and 2018

(Dollars in thousands, except per share data)

	2019		2018
Net income	$	9,601	$	4,273
Adjustments to reconcile net income to net cash from operating activities:
Provision for loan and lease losses		-		-
Depreciation		316		248
Amortization, net		(96)		(41)
Deferred income tax (benefit)		(187)		85
Originations of loans held for sale		(726,208)		(233,855)
Proceeds from sale of loans held for sale		625,509		219,521
Net gains on sales of loans		(10,767)		(1,927)
Write-down of premises and equipment		-		33
Gain on sale of foreclosed assets		(12)		-
Earnings on bank owned life insurance		(142)		(138)
Stock-based compensation expense		527		376
Net change in:
Accrued interest receivable and other assets		(3,412)		(1,479)
Operating lease right-of-use asset		404		-
Operating lease right-of-use liability		(408)		-
Accrued interest payable and other liabilities		1,337		1,094
Net cash used by operating activities		(103,538)		(11,810)
Cash flows from investing activities:
Available-for-sale securities:
Maturities, prepayments and calls		3,576		3,115
Purchases		(1,494)		(1,475)
Loan and lease originations and payments, net		(118,467)		(118,317)
Loans purchased		-		(25,958)
Proceeds from the sale of loans		6,547		-
Additions to premises and equipment		(443)		(612)
Purchase of FRB and FHLB Stock		(532)		(249)
Purchase of other investments		(734)		(500)
Return of investment- joint ventures		95		230
Proceeds from the sale of foreclosed assets		50		-
Net cash used by investing activities		(111,402)		(143,766)
Cash flows from financing activities:
Net change in deposits		166,537		160,758
Proceeds from FHLB advances and other debt		766,700		74,600
Repayments on FHLB advances and other debt		(764,700)		(68,600)
Net proceeds from issuance of subordinated debentures		-		9,612
Net change in advances by borrowers for taxes and insurance		102		338
Net proceeds from issuance of Series C preferred stock in private placement		14,000		-
Net proceeds from issuance of common stock in private placement		9,641		-
Exercise of warrants to common stock		1,258		716
Acquisition of treasury shares surrendered upon vesting of restricted stock for payment of taxes		(23)		(42)
Net cash from financing activities		193,515		177,382
Net change in cash and cash equivalents		(21,425)		21,806
Beginning cash and cash equivalents		67,304		45,498
Ending cash and cash equivalents	$	45,879	$	67,304
Supplemental cash flow information:
Interest paid	$	13,427	$	6,845
Income tax paid		2,510		968
Supplemental noncash disclosures:
Transfers from loans to repossessed assets	$	-	$	38
Loans transferred from held for sale to portfolio		657		-
Investment payable on limited liability corporation and limited partnership		1,170		500
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		-
Loans held for sale funded with other debt		7,517		-

See accompanying notes to consolidated financial statements.

7

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except per share data)

NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Nature of Operations and Principles of Consolidation: 

The consolidated financial statements include Central Federal Corporation (the “Holding Company”) and its wholly-owned subsidiary, CFBank, National Association (“CFBank”).  On December 1, 2016, CFBank converted from a federal savings institution to a national bank.  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.  The Holding Company and CFBank are sometimes collectively referred to herein as the “Company”.  Intercompany transactions and balances are eliminated in consolidation. 

CFBank provides financial services through its six full-service banking offices in Worthington, Fairlawn, Glendale, Blue Ash, Calcutta, and Wellsville, Ohio, and through its loan production office in Columbus, Ohio and its agency office in Woodmere, Ohio.  Its primary deposit products are commercial and retail checking, savings, money market and term certificate accounts. Its primary lending products are commercial and commercial real estate, residential mortgages and installment loans.  There are no significant concentrations of loans to any one industry or customer segment.  However, our customers’ ability to repay their loans is dependent on general economic conditions and the real estate values in their geographic areas. 

Use of Estimates:  To prepare financial statements in conformity with U.S. generally accepted accounting principles (GAAP), management makes estimates and assumptions based on available information. These estimates and assumptions affect the amounts reported in the financial statements and the disclosures provided, and actual results could differ. The allowance for loan and lease losses (ALLL), deferred tax assets and fair values of financial instruments are particularly subject to change.

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 split as though it had occurred prior to the earliest period presented.

Cash Flows:  Cash and cash equivalents include cash, deposits with other financial institutions with maturities fewer than 90 days and federal funds sold.  Net cash flows are reported for customer loan and deposit transactions, interest-bearing deposits in other financial institutions and borrowings with original maturities under 90 days.

Cash in Excess of FDIC Limits:  At December 31, 2019, the Company’s cash accounts exceeded federally insured limits by approximately $41.6 million.  Approximately$37.5 million of that amount was held by either the Federal Reserve Bank or the Federal Home Loan Bank of Cincinnati, which is not federally insured.

Interest-Bearing Deposit in Other Financial Institution:  Interest-bearing deposits in other financial institutions mature in April, 2022 and are carried at cost.  As of December 31, 2019 and December 31, 2018, there was $100 in an interest-bearing deposit in other financial institutions.

Securities:  Debt securities are classified as available for sale when they might be sold before maturity. Equity securities with readily determinable fair values are classified as available for sale.  Securities available for sale are carried at fair value, with unrealized holding gains and losses reported in other comprehensive income. 

Interest income includes amortization of purchase premium or accretion of discount.  Premiums and discounts on securities are amortized or accreted on the level-yield method, except for mortgage-backed securities and collateralized mortgage obligations where prepayments are anticipated based on industry payment trends.  Gains and losses on sales are recorded on the trade date and determined using the specific identification method.

Management evaluates securities for other-than-temporary impairment (OTTI) at least on a quarterly basis, and more frequently when economic or market conditions warrant such an evaluation.  For securities in an unrealized loss position, management considers the extent and duration of the unrealized loss and the financial condition and near-term prospects of the issuer.  Management also assesses whether it intends to sell, or will more likely than not be required to sell, a security in an unrealized loss position before recovery of its amortized cost basis. If either of the criteria regarding intent or requirement to sell is met, the entire difference between amortized cost and fair value is recognized as impairment through earnings.  For debt securities that do not meet the aforementioned criteria, the amount of impairment is split into two components as follows: 1) OTTI related to credit loss, which must be recognized in the income statement and 2) OTTI related to other factors, which is recognized in other comprehensive income.  The credit loss is defined as the difference between the present value of the cash flows expected to be collected and the amortized cost basis. For equity securities, the entire amount of impairment is recognized through earnings.

Loans Held for Sale:  Mortgage loans originated and intended for sale in the secondary market are carried at fair value, as determined by outstanding commitments from investors. Mortgage loans held for sale are generally sold with servicing rights released.  The

8

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except per share data)

carrying value of mortgage loans sold is reduced by the amount allocated to the servicing rights when mortgage loans held for sale are sold with servicing rights retained.  Loans originated as construction loans, that were subsequently transferred to held for sale, are carried at the lower of cost or market.  Gains and losses on sales of mortgage loans are based on the difference between the selling price and the carrying value of the related loan sold.

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.

Concentration of Credit Risk:  Most of the Company’s primary business activity is with customers located within the Ohio counties of Franklin, Hamilton, Cuyahoga, Summit, Columbiana and contiguous counties.  Therefore, the Company’s exposure to credit risk can be affected by changes in the economies within these counties.  Although these counties are the Company’s primary market area for loans, the Company originates residential and commercial real estate loans throughout the United States. 

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 substandard loans within the commercial, multi-family residential and commercial real estate segments, regardless of size, and loans of all other risk classifications 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.

9

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except per share data)

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.

The following portfolio segments have been identified:  commercial loans; single-family residential real estate loans; multi-family residential real estate loans; commercial real estate loans; construction loans; home equity lines of credit; and other consumer loans. A description of each segment of the loan portfolio, along with the risk characteristics of each segment, is included below.

Commercial loans:  Commercial loans and direct financing leases include loans and leases to businesses generally located within our primary market area. Those loans and leases are typically secured by business equipment, inventory, accounts receivable and other business assets.  In underwriting commercial loans, we consider the net operating income of the borrower, the debt service ratio and the financial strength, expertise and credit history of the business owners and/or guarantors.  Because payments on commercial loans are dependent on successful operation of the business enterprise, repayment of such loans may be subject to a greater extent to adverse conditions in the economy.  We seek to mitigate these risks through underwriting policies which require such loans to be qualified at origination on the basis of the borrower’s financial performance and the financial strength of the business owners and/or guarantors.

Single-family residential real estate loans:  Single-family residential real estate loans include permanent conventional mortgage loans secured by single-family residences that we originate for portfolio and purchased loans located primarily within our primary market area. Credit approval for single-family residential real estate loans requires demonstration of sufficient income to repay the principal and interest and the real estate taxes and insurance, stability of employment and an established credit record.  Our policy is to originate quality loans that are evaluated for risk based on the borrower’s ability to repay the loan.  Collateral positions are established by obtaining independent appraisal opinions.  Mortgage insurance is generally required when the LTV exceeds 80%.

Multi-family residential real estate loans:  Multi-family residential real estate loans include loans secured by apartment buildings, condominiums and multi-family residential houses generally located within our primary market area. Underwriting policies provide that multi-family residential real estate loans generally may be made in amounts up to 85% of the lower of the appraised value or purchase price of the property.  In underwriting multi-family residential real estate loans, we consider the appraised value and net operating income of the property, the debt service ratio and the property owner’s and/or guarantor’s financial strength, expertise and credit history. We offer both fixed-rate and adjustable-rate loans. Fixed-rate loans are generally limited to three to five years, at which time they convert to adjustable-rate loans. Because payments on loans secured by multi-family residential properties are dependent on successful operation or management of the properties, repayment of multi-family residential real estate loans may be subject to a greater extent to adverse conditions in the real estate market or the economy.  Adjustable-rate multi-family residential real estate loans generally pose credit risks not inherent in fixed-rate loans, primarily because as interest rates rise, the borrowers’ payments rise, increasing the potential for default. Additionally, adjustable-rate multi-family residential real estate loans generally do not contain periodic and lifetime caps on interest rate changes.  We seek to minimize the additional risk presented by adjustable-rate multi-family residential real estate loans through underwriting criteria that require such loans to be qualified at origination with sufficient debt coverage ratios under increasing interest rate scenarios.

Commercial real estate loans:  Commercial real estate loans include loans secured by owner occupied and non-owner occupied properties used for business purposes, such as manufacturing facilities, office buildings or retail facilities generally located within our primary market area.  Underwriting policies provide that commercial real estate loans may be made in amounts up to 85% of the lower

10

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except per share data)

of the appraised value or purchase price of the property. In underwriting commercial real estate loans, we consider the appraised value and net operating income of the property, the debt service ratio and the property owner’s and/or guarantor’s financial strength, expertise and credit history. We offer both fixed and adjustable-rate loans. Fixed-rate loans are generally limited to three to five years, at which time they convert to adjustable-rate loans. Because payments on loans secured by commercial real estate properties are dependent on successful operation or management of the properties, repayment of commercial real estate loans may be subject to a greater extent to adverse conditions in the real estate market or the economy.  Adjustable-rate commercial real estate loans generally pose credit risks not inherent in fixed-rate loans, primarily because as interest rates rise, the borrowers’ payments rise, increasing the potential for default. Additionally, adjustable-rate commercial real estate loans generally do not contain periodic and lifetime caps on interest rate changes.  We seek to minimize the additional risk presented by adjustable-rate commercial real estate loans through underwriting criteria that require such loans to be qualified at origination with sufficient debt coverage ratios under increasing interest rate scenarios.

Construction loans:  Construction loans include loans to finance the construction of residential and commercial properties generally located within our primary market area. Construction loans are fixed-rate or adjustable-rate loans which may convert to permanent loans with maturities of up to 30 years.  Our policies provide that construction loans may generally be made in amounts up to 80% of the appraised value of the property, and an independent appraisal of the property is required.  Loan proceeds are disbursed in increments as construction progresses and as inspections warrant, and regular inspections are required to monitor the progress of construction.  In underwriting construction loans, we consider the property owner’s and/or guarantor’s financial strength, expertise and credit history. Construction financing is considered to involve a higher degree of credit risk than long-term financing on improved, owner occupied real estate.  Risk of loss on a construction loan is dependent largely upon the accuracy of the initial estimate of the property’s value at completion of construction or development compared to the estimated cost (including interest) of construction.  If the estimate of value proves to be inaccurate, we may be confronted with a project, when completed, having a value which is insufficient to assure full repayment.  We attempt to reduce such risks on construction loans through inspections of construction progress on the property and by requiring personal guarantees and reviewing current personal financial statements and tax returns, as well as other projects of the developer.

Home equity lines of credit:  Home equity lines of credit include both loans we originate for portfolio and purchased loans.  We originate home equity lines of credit to customers generally within our primary market area.  Home equity lines of credit are variable rate loans and the interest rate adjusts monthly at various margins to the prime rate of interest as disclosed in The Wall Street Journal. The margin is based on certain factors including the loan balance, value of collateral, election of auto-payment, and the borrower’s FICO® score.  The amount of the line is based on the borrower’s credit, income and equity in the home.  When combined with the balance of the prior mortgage liens, these lines generally may not exceed 89.9% of the appraised value of the property at the time of the loan commitment.  The lines are secured by a subordinate lien on the underlying real estate and are, therefore, vulnerable to declines in property values in the geographic areas where the properties are located.  Credit approval for home equity lines of credit requires income sufficient to repay principal and interest due, stability of employment, an established credit record and sufficient collateral.  Collectability of home equity lines of credit are dependent on the borrower's continuing financial stability, and thus are more likely to be affected by adverse personal circumstances.We continue to monitor collateral values and borrower FICO® scores on both purchased and portfolio loans and, when the situation warrants, have frozen the lines of credit.

Other consumer loans:  Other consumer loans include closed-end home equity, home improvement, auto,  credit card loans and any purchased loans to consumers generally located within our primary market area.  Credit approval for other consumer loans requires income sufficient to repay principal and interest due, stability of employment, an established credit record and sufficient collateral for secured loans.  Consumer loans typically have shorter terms and lower balances with higher yields as compared to real estate mortgage loans, but generally carry higher risks of default. Consumer loan collections are dependent on the borrower's continuing financial stability, and thus are more likely to be affected by adverse personal circumstances.

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.

Transfers of Financial Assets:  Transfers of financial assets are accounted for as sales when control over the assets has been relinquished.  Control over transferred assets is deemed to be surrendered when the assets have been isolated from the Company, the transferee obtains the right (free of conditions that constrain it from taking advantage of that right) to pledge or exchange the transferred assets, and the Company does not maintain effective control over the transferred assets through an agreement to repurchase them before their maturity. 

Foreclosed Assets:  Assets acquired through or instead of loan foreclosure are initially recorded at fair value less costs to sell when acquired, establishing a new cost basis.  These assets are subsequently accounted for at lower of cost or fair value less estimated costs

11

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except per share data)

to sell.  If fair value declines subsequent to foreclosure, an adjustment is recorded through expense.  Operating costs after acquisition are expensed.

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 is expected to receive historic tax credits (HTC) pursuant to Section 47 of the Internal Revenue Code.  The Company expects to receive 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 investment 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 December 31, 2019.  The maximum exposure to loss related to these investments was $894 at December 31, 2019, representing the Company’s investment balance. 

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.  The balance outstanding in joint ventures at December 31, 2019 and December 31, 2018 was $1,000and $595, respectively.  Income recognized on the joint ventures was $57 and $69, respectively, for 2019 and 2018.  

Premises and Equipment:  Land is carried at cost.  Premises and equipment are stated at cost less accumulated depreciation.  Buildings and related components are depreciated using the straight‑line method with useful lives ranging from 3 to 40 years. Furniture, fixtures and equipment are depreciated using the straight‑line method with useful lives ranging from 2 to 25 years. Leasehold improvements are depreciated straight-line over the shorter of the useful life or the lease term.

Federal Home Loan Bank (FHLB) stock:  CFBank is a member of the FHLB system.  Members are required to own a certain amount of stock based on the level of borrowings and other factors, and may invest in additional amounts.  FHLB stock is carried at cost, classified as a restricted security, and periodically evaluated for impairment based on ultimate recovery of par value.  Both cash and stock dividends are reported as income.

Federal Reserve Bank (FRB) stock:  CFBank is a member of the FRB system and is required to own a certain amount of stock.  FRB stock is carried at cost, classified as a restricted security, and periodically evaluated for impairment based on ultimate recovery of par value.  Both cash and stock dividends are reported as income.

Bank Owned Life Insurance:  CFBank purchased life insurance policies on certain directors and employees in 2002.  Bank owned life insurance is recorded at the amount that can be realized under the insurance contract at the balance sheet date, which is the cash surrender value adjusted for other charges or other amounts due that are probable at settlement.

Loan Commitments and Related Financial Instruments:  Financial instruments include off‑balance-sheet credit instruments, such as commitments to make loans and commercial letters of credit, issued to meet customer financing needs.  The face amount for these items represents the exposure to loss, before considering customer collateral or ability to repay.  Such financial instruments are recorded when they are funded, and fees associated with origination are booked to non-interest income at the origination date.

Derivatives:  Derivative financial instruments are recognized as assets or liabilities at fair value.  The Company's derivatives consist mainly of interest rate swap agreements, which are used as part of its asset liability management program to help manage interest rate risk.  The Company does not use derivatives for trading purposes.  The derivative transactions are considered instruments with no hedging designation, otherwise known as stand-alone derivatives.  Changes in the fair value of the derivatives are reported currently in earnings, as other noninterest income.

Mortgage Banking Derivatives:  Commitments to fund mortgage loans to be sold into the secondary market, otherwise known as interest rate locks, are accounted for as free standing derivatives.  Mortgage banking activities include two types of commitments: rate lock commitments and forward loan commitments.  Fair values of these mortgage derivatives are based on anticipated gains on the underlying loans.  Changes in the fair values of these derivatives are included in net gains on sales of loans.

Stock-Based Compensation:  Compensation cost is recognized for stock options and restricted stock awards issued to directors and employees, based on the fair value of these awards at the date of grant. A Black-Scholes model is utilized to estimate the fair value of

12

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except per share data)

stock options, while the market price of the Company’s common stock at the date of grant is used for restricted stock awards. Compensation cost is recognized over the required service period, generally defined as the vesting period.  For awards with graded vesting, compensation cost is recognized on a straight-line basis over the required service period for each separately vesting portion of the award.  Forfeitures are recognized as incurred.

Income Taxes:  Income tax expense is the total of the current year income tax due or refundable and the change in deferred tax assets and liabilities.  Deferred tax assets and liabilities are the expected future tax amounts for the temporary differences between carrying amounts and tax basis of assets and liabilities, computed using enacted tax rates. 

A tax position is recognized as a benefit only if it is “more likely than not” that the tax position would be sustained in a tax examination, with a tax examination being presumed to occur.  The amount recognized is the largest amount of tax benefit that is greater than 50% likely of being realized on examination.  For tax positions not meeting the “more likely than not” test, no tax benefit is recorded.

The Company recognizes interest related to income tax matters as interest expense and penalties related to income tax matters as other noninterest expense. 

Retirement Plans:  Pension expense is the amount of annual contributions by the Company to the multi-employer contributory trusteed pension plan. Employee 401(k) and profit sharing plan expense is the amount of matching contributions.  Supplemental retirement plan expense allocates the benefits over years of service.

Earnings Per Common Share:  Basic earnings per common share is net income available to common stockholders divided by the weighted average number of common shares outstanding during the period.  All outstanding unvested share-based payment awards that contain rights to nonforfeitable dividends are considered participating securities for this calculation.  Shares of Series C preferred stock outstanding are also considered participating securities as they contain rights to nonforfeitable dividends.  Diluted earnings per common share includes the dilutive effect of additional potential common shares issuable under preferred stock, stock options and warrants. 

Comprehensive Income (Loss):  Comprehensive income (loss) consists of net income (loss) and other comprehensive income (loss).  Other comprehensive income (loss) includes unrealized gains and losses on securities available for sale, which are also recognized as a separate component of equity.  Reclassifications from accumulated other comprehensive income are conducted on a specific identification method.

Loss Contingencies:  Loss contingencies, including claims and legal actions arising in the ordinary course of business, are recorded as liabilities when the likelihood of loss is probable and an amount or range of loss can be reasonably estimated.  Management does not believe there are any such matters that will have a material effect on the financial statements.  See Note 23 – Contingent Liabilities.

Restrictions on Cash:  Cash on hand or on deposit with the Federal Reserve Bank (FRB) is required to meet regulatory reserve and clearing requirements. The reserve requirement at December 31, 2019 and December 31, 2018 was $5,164and $3,502, respectively.  Cash on deposit with the FHLB includes $3,300 pledged as collateral for FHLB advances. 

Equity:  Treasury stock is carried at cost. The carrying value of preferred stock and common stock warrants is based on allocation of issuance proceeds, net of issuance costs, in proportion to their relative fair values.  Preferred stock is carried net of the discount established through the allocation of proceeds.

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.

Fair Value of Financial Instruments:  Fair values of financial instruments are estimated using relevant market information and other assumptions, as more fully disclosed in Note 6 – Fair Value.  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 these estimates.

13

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except per share data)

Advertising and Marketing Expense:  Advertising costs are expensed as incurred and are recorded as advertising and marketing, a component of noninterest expense.  Advertising and marketing expense also includes leads-based marketing for our residential mortgage lending business.

Operating Segments:  While management monitors and analyzes the revenue streams of the Company’s various products and services, the operations and financial performance is evaluated on a Company‑wide basis.  Operating results are not reviewed by senior management to make resource allocation or performance decisions.  Accordingly, all of the financial service operations are considered by management to be aggregated in one reportable operating segment. 

Reclassifications:  Some items in the prior year financial statements were reclassified to conform to the current presentation.  Reclassifications had no effect on prior period net income or stockholders’ equity.

Adoption of New Accounting Standards:

The FASB has issued 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 was effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018.  For public companies, early adoption was 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 previous 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

14

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except per share data)

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.  In October 2019, the FASB voted to extend the implementation of ASU No. 2016-13 for certain financial institutions including smaller reporting companies.  As a result, ASU 2016-13 will be effective for the Company for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2022.  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.

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.

NOTE 3 – SECURITIES

The following table summarizes the amortized cost and fair value of the available-for-sale securities portfolio at December 31, 2019 and December31, 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
December 31, 2019
Issued by U.S. government-sponsored entities and agencies:
U.S. Treasury	$	7,986	$	32	$	1	$	8,017
Mortgage-backed securities - residential		126		4		-		130
Collateralized mortgage obligations		27		-		-		27
Total	$	8,139	$	36	$	1	$	8,174

15

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except per share data)

	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 December 31, 2019 or December 31, 2018.

There were no sales of securities for the years ended December 31, 2019 or December 31, 2018.

The amortized cost and fair value of debt securities at December 31, 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.

	December 31, 2019				December 31, 2018
	Amortized Cost		Fair Value		Amortized Cost		Fair Value
Due in one year or less	$	5,001	$	5,000	$	3,495	$	3,472
Due from one to five years		2,985		3,017		6,483		6,409
Mortgage-backed securities - residential		126		130		167		170
Collateralized mortgage obligations		27		27		62		63
Total	$	8,139	$	8,174	$	10,207	$	10,114

Fair value of securities pledged was as follows:

	2019		2018
Pledged as collateral for:
FHLB advances	$	3,074	$	4,058
Public deposits		2,015		1,997
Mortgage banking derivatives		1,500		-
Interest-rate swaps		77		104
Total	$	6,666	$	6,159

At year end 2019 and 2018, there were no holdings of securities of any one issuer, other than U.S. Treasuries and 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 December 31, 2019 and December 31, 2018 aggregated by major security type and length of time in a continuous unrealized loss position.

December 31, 2019	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)	$	499	$	-	$	2,501	$	1	$	3,000	$	1
Total temporarily impaired	$	499	$	-	$	2,501	$	1	$	3,000	$	1

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

16

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except per share data)

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 December 31, 2019and December 31, 2018are 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 will unlikely be required to sell these securities before their anticipated recovery, the Company did not consider these securities to be other-than-temporarily impaired at December 31, 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.

	December 31, 2019		December 31, 2018
Commercial (1)	$	170,646	$	126,887
Real estate:
Single-family residential		120,256		118,386
Multi-family residential		39,229		47,651
Commercial		247,543		173,435
Construction		67,652		61,792
Consumer:
Home equity lines of credit		20,941		23,961
Other		4,174		5,583
Subtotal		670,441		557,695
Less: ALLL		(7,138)		(7,012)
Loans and Leases, net	$	663,303	$	550,683

⁽¹⁾ Includes $4,779 and $5,403 of commercial leases at December 31, 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 December 31, 2019 and 2018, CFBank held $26,046 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 and lease 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 of the Notes to Consolidated Financial Statements.

17

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except per share data)

The following tables present the activity in the ALLL by portfolio segment for the years ended December 31, 2019 and 2018:

	December 31, 2019
			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		235		(120)		(165)		225		20		(195)		-		-
Charge-offs		-		-		-		-		-		-		(36)		(36)
Recoveries		-		7		-		105		-		50		-		162
Ending balance	$	2,054	$	948	$	447	$	2,604	$	759	$	265	$	61	$	7,138

	December 31, 2018
			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		(167)		131		(48)		131		67		(209)		95		-
Charge-offs		-		(6)		-		-		-		-		-		(6)
Recoveries		2		24		-		-		-		22		-		48
Ending balance	$	1,819	$	1,061	$	612	$	2,274	$	739	$	410	$	97	$	7,012

The following table presents the balance in the ALLL and the recorded investment in loans and leases by portfolio segment and based on impairment method as of December 31, 2019:

			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	$	1	$	1	$	-	$	33	$	-	$	-	$	-	$	35
Collectively evaluated for impairment		2,053		947		447		2,571		759		265		61		7,103
Total ending allowance balance	$	2,054	$	948	$	447	$	2,604	$	759	$	265	$	61	$	7,138
Loans:
Individually evaluated for impairment	$	85	$	107	$	-	$	4,420	$	-	$	-	$	-	$	4,612
Collectively evaluated for impairment		170,561		120,149		39,229		243,123		67,652		20,941		4,174		665,829
Total ending loan balance	$	170,646	$	120,256	$	39,229	$	247,543	$	67,652	$	20,941	$	4,174	$	670,441

18

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except per share data)

The following table presents the balance in the ALLL and the recorded investment in loans and leases by portfolio segment and based on 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 year ended December 31, 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, deferred loan fees and costs. Cash payments of interest on these loans during the twelve months ended December 31, 2019 totaled $168.

	Unpaid Principal Balance		Recorded Investment		ALLL Allocated		Average Recorded Investment		Interest Income Recognized
With no related allowance recorded:
Real estate:
Commercial:
Owner occupied	$	-	$	-	$	-	$	111	$	6
Total with no allowance recorded		-		-		-		111		6
With an allowance recorded:
Commercial		85		85		1		92		-
Real estate:
Single-family residential		107		107		1		108		6
Commercial:
Non-owner occupied		4,420		4,420		33		4,194		154
Total with an allowance recorded		4,612		4,612		35		4,394		160
Total	$	4,612	$	4,612	$	35	$	4,505	$	166

19

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except per share data)

The following table presents loans individually evaluated for impairment by class of loans as of and for the year ended 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, deferred loan fees and costs. Cash payments of interest on these loans during the twelve months ended December 31, 2018 totaled $192.

	Unpaid Principal Balance		Recorded Investment		ALLL Allocated		Average Recorded Investment		Interest Income Recognized
With no related allowance recorded:
Real estate:
Commercial:
Owner occupied	$	379	$	125	$	-	$	130	$	21
Total with no allowance recorded		379		125		-		130		21
With an allowance recorded:
Commercial (1)		100		100		-		185		4
Real estate:
Single-family residential (1)		110		110		-		113		6
Commercial:
Non-owner occupied		2,826		2,826		22		2,837		157
Owner occupied		-		-		-		131		7
Total with an allowance recorded		3,036		3,036		22		3,266		174
Total	$	3,415	$	3,161	$	22	$	3,396	$	195

⁽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 as of December 31, 2019 and 2018:

	2019		2018
Loans past due over 90 days still on accrual	$	-	$	-
Nonaccrual loans:
Commercial		85		100
Real estate:
Single-family residential		550		167
Commercial:
Non-owner occupied		1,689		-
Consumer:
Home equity lines of credit:
Originated for portfolio		36		-
Purchased for portfolio		79		89
Other consumer		-		21
Total nonaccrual		2,439		377
Total nonperforming loans	$	2,439	$	377

Nonaccrual loans include both 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 December 31, 2019 or December 31, 2018.  

20

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except per share data)

The following table presents the aging of the recorded investment in past due loans and leases by class of loans as of December 31, 2019:

	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	$	-	$	71	$	-	$	71	$	170,575	$	85
Real estate:
Single-family residential		2,453		261		426		3,140		117,116		124
Multi-family residential		-		-		-		-		39,229		-
Commercial:
Non-owner occupied		-		-		1,689		1,689		138,762		-
Owner occupied		-		-		-		-		81,871		-
Land		-		-		-		-		25,221		-
Construction		304		-		-		304		67,348		-
Consumer:
Home equity lines of credit:
Originated for portfolio		-		-		22		22		20,713		14
Purchased for portfolio		-		-		-		-		206		79
Other		-		-		-		-		4,174		-
Total	$	2,757	$	332	$	2,137	$	5,226	$	665,215	$	302

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 December 31, 2019 and December 31, 2018, TDR’s totaled $2,923 and $3,161, respectively.  The Company allocated $22 and $22 of specific reserves to loans modified in TDRs as of December 31, 2019 and 2018, respectively. The Company had not committed

21

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except per share data)

to lend any additional amounts as of December 31, 2019 or 2018 to customers with outstanding loans that were classified as nonaccrual TDRs.

There were no loans modified as a TDR during the years ended December 31, 2019 and December 31, 2018. 

The TDRs described above resulted in no charge-offs during the years ended December 31, 2019 and December 31, 2018.

There were no TDR’s that went into payment default during the years ended December 31, 2019 and December 31, 2018.  

The terms of certain other loans were modified during the years ended December 31, 2019 and 2018 that did not meet the definition of a TDR. These loans had a total recorded investment of $56,676 and $64,898 as of December 31, 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 a payment that was considered to be insignificant or there were no concessions 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 December 31, 2019 and 2018, nonaccrual TDRs were as follows: 

	2019		2018
Commercial	$	85	$	100
Total	$	85	$	100

Nonaccrual loans at December 31, 2019 and 2018 did not include $2,838 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 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, condition 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 included in 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, doubtful or loss.

22

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except per share data)

The recorded investment in loans and leases by risk category and by class of loans as of December 31, 2019 and based on the most recent analysis performed follows.  There were no loans rated doubtful at December 31, 2019. 

	Not Rated		Pass		Special Mention		Substandard		Total
Commercial	$	-	$	168,617	$	1,424	$	605	$	170,646
Real estate:
Single-family residential		119,707		-		-		549		120,256
Multi-family residential		-		39,081		-		148		39,229
Commercial:
Non-owner occupied		67		134,466		1,498		4,420		140,451
Owner occupied		-		79,773		2,098		-		81,871
Land		-		25,221		-		-		25,221
Construction		1,855		65,797		-		-		67,652
Consumer:
Home equity lines of credit:
Originated for portfolio		20,681		-		-		54		20,735
Purchased for portfolio		127		-		-		79		206
Other		4,174		-		-		-		4,174
	$	146,611	$	512,955	$	5,020	$	5,855	$	670,441

The recorded investment in loans and leases by risk category and class of loans as of December 31, 2018 follows.  There were no loans 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):

	December 31, 2019		December 31, 2018
Total minimum lease payments to be received	$	5,252	$	6,045
Less: unearned income		(473)		(642)
Net investment in direct financing leases	$	4,779	$	5,403

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

23

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except per share data)

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

2020	$	793
2021		793
2022		793
2023		1,563
2024		1,310
	$	5,252

NOTE 5 – FORECLOSED ASSETS

Foreclosed assets at year-end were as follows:

	2019		2018
Single-family residential	$	-	$	38
Valuation allowance		-		-
Total	$	-	$	38

There was no activity in the valuation allowance account or any write-downs during the years ended December 31, 2019 and 2018.

Expenses related to foreclosed assets include:

	2019		2018
Net loss (gain) on sales	$	(12)	$	-
Operating expenses, net of rental income		3		6
	$	(9)	$	6

There were no foreclosed assets at December 31, 2019.  Foreclosed assets at December 31, 2018 consisted of one single-family residential property that was transferred into REO at fair value at the time of transfer in the fourth quarter of 2018.Foreclosed asset expenses incurred during 2019 and 2018 were related to maintenance expense to ready the property to sell. 

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).

24

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except per share data)

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 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 December 31, 2019 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	$	8,017
Mortgage-backed securities - residential		130
Collateralized mortgage obligations		27
Total securities available for sale	$	8,174
Loans held for sale	$	135,711
Yield maintenance provisions (embedded derivatives)	$	12
Interest rate lock commitments	$	3,104
Financial Liabilities:
Interest-rate swaps	$	12
TBA mortgage-backed securities	$	350

25

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except per share data)

	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 no assets or liabilities measured at fair value on a recurring basis that were measured using Level 1 or Level 3 inputs at December 31, 2019 or December 31, 2018.  There were no transfers of assets or liabilities measured at fair value between levels during 2019 or 2018.

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

Fair Value Measurements at December 31, 2019 Using
Significant Unobservable Inputs (Level 3)
Impaired loans:
Commercial	$	84
Real Estate:
Single-family residential		106
Commercial:
Non-owner occupied		4,387
Total impaired loans	$	4,577

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 no assets or liabilities measured at fair value on a non-recurring basis that were measured using Level 1 or 2 inputs at December 31, 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 $4,612, with a valuation allowance of $35 at December 31, 2019.  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

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except per share data)

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, 2019:  

	Fair Value		Valuation Technique(s)	Unobservable Inputs	(Range) Weighted Average
Impaired loans:
Commercial	$	84	Comparable sales approach	Adjustment for differences between the comparable market transactions	2.06%
Real estate:
Single-family residential		106	Comparable sales approach	Adjustment for differences between the comparable market transactions	3.61%
Commercial:
Non-owner occupied		4,387	Comparable sales approach	Adjustment for differences between the comparable market transactions	(-2.58%,  14.00%) 2.44%

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 December 31, 2019 or December 31, 2018. 

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

	December 31, 2019		December 31, 2018
Aggregate fair value	$	135,711	$	17,385
Contractual balance		133,993		17,008
Gain		1,718		377

The total amount of gains and losses from changes in fair value included in earnings for the year ended December 31, 2019 and 2018 for loans held for sale were:

	2019		2018
Interest income	$	2,153	$	669
Interest expense		-		-
Change in fair value		1,341		373
Total change in fair value	$	3,494	$	1,042

27

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except per share data)

The carrying amounts and estimated fair values of financial instruments at year-end were as follows:

	Fair Value Measurements at December 31, 2019 Using:
	Carrying
	Value		Level 1		Level 2		Level 3		Total
Financial assets
Cash and cash equivalents	$	45,879	$	45,879	$	-	$	-	$	45,879
Interest-bearing deposits in other financial institutions		100		100		-		-		100
Securities available for sale		8,174		-		8,174		-		8,174
Loans held for sale		135,711		-		135,711		-		135,711
Loans and leases, net		663,303		-		-		664,152		664,152
FHLB and FRB stock		4,008		n/a		n/a		n/a		n/a
Accrued interest receivable		2,749		25		40		2,684		2,749
Yield maintenance provisions (embedded derivatives)		12		-		12		-		12
Interest rate lock commitments		3,104		-		3,104		-		3,104
Financial liabilities
Deposits	$	(746,323)	$	(382,173)	$	(367,375)	$	-	$	(749,548)
FHLB advances and other debt		(29,017)		-		(29,669)		-		(29,669)
Advances by borrowers for taxes and insurance		(929)		-		-		(929)		(929)
Subordinated debentures		(14,806)		-		(15,940)		-		(15,940)
Accrued interest payable		(208)		-		(208)		-		(208)
Interest-rate swaps		(12)		-		(12)		-		(12)
TBA mortgage-backed securities		(350)		-		(350)		-		(350)

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 debt		(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)

28

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except per share data)

The methods and assumptions used to estimate fair value are described as follows.

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, 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.

FHLB Advances and Other Debt

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 – LOAN SERVICING

Mortgage loans serviced for others are not reported as assets.  The principal balances of these loans at year-end were as follows:

	December 31, 2019		December 31, 2018
Mortgage loans serviced for Freddie Mac	$	2,649	$	2,999

Custodial escrow balances maintained in connection with serviced loans were $59 and $70 at year-end 2019 and 2018, respectively.

29

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except per share data)

NOTE 8- PREMISES AND EQUIPMENT AND OPERATING LEASES

Year-end premises and equipment were as follows:

	December 31, 2019		December 31, 2018
Land and land improvements	$	1,293	$	1,293
Buildings		4,294		4,239
Furniture, fixtures and equipment		2,729		2,592
		8,316		8,124
Less: accumulated depreciation		(4,325)		(4,260)
	$	3,991	$	3,864

Depreciation expense for 2019 and 2018 totaled $316 and $248, respectively.

Operating 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 December 31, 2019, the weighted-average remaining lease term for the Company’s operating leases was 4.3 years and the weighted-average discount rate was 6.57%.

The Company’s operating lease costs were $404 for the year ended December 31, 2019.  The variable lease costs totaled $231 for the year ended December 31, 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 December 31, 2019 are as follows:

2020	$	544
2021		548
2022		536
2023		377
Thereafter		250
Total future minimum rental commitments		2,255
Less - amounts representing interest		(295)
Total operating lease liabilities	$	1,960

30

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except per share data)

NOTE 9 – DEPOSITS

Time deposits of $100 or more were $294,452 and $216,577 at year-end 2019 and 2018, respectively.  Time deposits of $250 or more were $148,473and $72,685 at year-end 2019 and 2018, respectively.

Scheduled maturities of time deposits for the next five years are as follows:

2020	$	189,268
2021		82,813
2022		54,764
2023		20,174
2024		17,124
Thereafter		7
Total	$	364,150

Brokereddeposits at year-end 2019 and 2018 totaled $124,884 and $101,215, respectively. 

NOTE 10 –FHLB ADVANCES AND OTHER DEBT

FHLB advances and other debt were as follows:

	Weighted
	Average Rate	December 31, 2019		December 31, 2018
FHLB fixed rate advances
Maturities:
2019	-	$	-	$	3,500
2020	1.98%		4,500		4,500
2021	2.32%		4,000		4,000
2022	2.05%		1,500		1,500
2024	1.90%		6,500		-
Total FHLB fixed rate advances			16,500		13,500
Variable rate other debt:
Holding Company credit facility	5.50%		5,000		6,000
Warehouse facility	4.00%		7,517		-
Total variable rate other debt			12,517		6,000
Total		$	29,017	$	19,500

Each FHLB advance is payable at its maturity date, with a prepayment penalty. 

The advances were collateralized as follows:

	December 31, 2019		December 31, 2018
Single-family mortgage loans	$	79,144	$	70,140
Multi-family mortgage loans		21,258		18,841
Commercial real estate loans (1-4 family)		6,639		5,986
Home equity lines of credit		5,028		6,446
Securities		3,074		4,058
Cash		3,300		3,300
Total	$	118,443	$	108,771

Based on the collateral pledged to the FHLB, CFBank was eligible to borrow up to a total of $88,953 from the FHLB at December 31, 2019.  

31

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except per share data)

Payments due on FHLB advances and other debt over the next five years are as follows:
	December 31, 2019
2020	$	12,517
2021		4,500
2022		5,500
2023		-
2024		6,500
	$	29,017

The Holding Company had an existing credit facility with a third-party bank which was modified to a $10,000 revolving line-of-credit in December 2018.In December 2019, the $5,000 outstanding balance on the existing line-of-credit was converted to a $5,000 term loan with an additional $10,000 revolving line-of-credit.  The new term loan requires quarterly principal payments of $125 plus accrued interest.  Any remaining principal is due and payable on the maturity date, which is December 23,2022.  Loans under the credit facility bear interest at a rate equal to the Prime Rate plus 0.75%.  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.  As of December 31, 2019, the Company had an outstanding balance of $5,000 on the term loan and no outstanding balance on the revolving line-of-credit. At December 31, 2018, the credit facility had an outstanding balance of $6,000.

At December 31, 2018, CFBank had $8,000 of availability in an unused line of credit at a commercial bank.  During the third quarter of 2019, CFBank added an additional $15,000 line of credit at another commercial bank.  There were no outstanding borrowings on these lines of credit at December 31, 2019 or December 31, 2018.  If CFBank were to borrow on these lines of credit, interest would accrue daily at a variable rate based on the commercial bank’s cost of funds and current market returns.

During the fourth quarter of 2019, CFBank entered into a $25,000 warehouse facility with a commercial bank.  The warehouse facility is used to periodically fund loans held for sale from the close (funding) date until they are sold in the secondary market.  Borrowings on the facility bear interest at the greater of 30 Day Libor plus 2.00% or 4.00% and are secured by the specific loans that were funded.  At December 31, 2019, the warehouse facility had an outstanding balance of $7,517.

There were no outstanding borrowings with the Federal Reserve Bank (the “FRB”) at December 31, 2019 or at December 31, 2018.

Assets pledged as collateral with the FRB were as follows:

	2019		2018
Commercial loans	$	38,317	$	29,578
Commercial real estate loans		77,733		76,332
	$	116,050	$	105,910

Based on the collateral pledged, CFBank was eligible to borrow up to $65,614 from the FRB at year-end 2019.

NOTE 11 – 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 (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.

32

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except per share data)

The subordinated debentures have a variable rate of interest, reset quarterly, equal to the three-month London Interbank Offered Rate plus 2.85%, which was 4.81% at year-end 2019 and 5.65% at year-end 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 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 December 31, 2019, the balance of the subordinated notes, net of unamortized debt issuance costs, was $9,651.

NOTE 12 – BENEFIT PLANS

Multi-employer pension plan:

CFBank participates in the Pentegra Defined Benefit Plan for Financial Institutions (the “Pentegra DB Plan”), a multi-employer contributory trusteed pension plan.  The retirement benefits to be provided by the plan were frozen as of June 30, 2003 and future employee participation in the plan was stopped.  The plan was maintained for all eligible employees and the benefits were funded as accrued.  The cost of funding was charged directly to operations. 

The unfunded liability under the Pentegra DB Plan at June 30, 2019 totaled $110 and at June 30, 2018 was $61.  CFBank’s contributions for the plan years ending June 30, 2019 and June 30, 2018, totaled $59and $18, respectively.  Contributions to the plan may vary from period to period due to the change in the plan's unfunded liability. The unfunded liability is primarily related to the change in plan assets and the change in plan liability from one year to the next.  The change in plan assets is based on contributions deposited, benefits paid and the actual rate of return earned on those assets.  The change in plan liability is based on demographic changes and changes in the interest rates used to determine plan liability. In the event the actual rate of return earned on plan assets declines, the value of the plan assets will decline. In the event the interest rates used to determine plan liability decrease, plan liability will increase.  The combined effect of each change determines the change in the unfunded liability and the change in the employer contributions.

The Pentegra DB Plan is a tax-qualified defined-benefit pension plan.  The Pentegra DB Plan operates as a multi-employer plan for accounting purposes and as a multiple-employer plan under the Employee Retirement Income Security Act of 1974 and the Internal Revenue Code. There are no collective bargaining agreements in place that require contributions to the Pentegra DB Plan.

The Pentegra DB Plan is a single plan under Internal Revenue Code Section 413(c) and, as a result, all of the assets stand behind all of the liabilities. Accordingly, under the Pentegra DB Plan contributions made by a participating employer may be used to provide benefits to participants of other participating employers.

Funded status (market value of plan assets divided by funding target) based on valuation reports as of July 1, 2019 and 2018 was 89.69% and  94.33%, respectively. 

Total contributions made to the Pentegra DB Plan, as reported on Form 5500 of the Pentegra DB Plan, totaled $164,570 and $367,119 for the plan years ended June 30, 2018 and June 30, 2017, respectively.CFBank’s contributions to the Pentegra DB Plan were not more than 5% of the total contributions to the Pentegra DB Plan.

401(k) Plan:

The Company sponsors a 401(k) plan that allows employee contributions up to the maximum amount allowable under federal tax regulations, which are currently matched in an amount equal to 50% of the first 6% of the compensation contributed.  Expense for 2019 and 2018 was $188 and  $106, respectively.

Salary Continuation Agreement:

In 2004, CFBank entered into a nonqualified salary continuation agreement with its former Chairman Emeritus.  Benefits provided under the plan are unfunded, and payments are made by CFBank.  Under the plan, CFBank pays him, or his beneficiary, a benefit of $25 annually for 20 years, beginning 6 months after his retirement date, which was February 28, 2008.  The expense related to this

33

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except per share data)

plan totaled $8 and  $9 in 2019 and 2018, respectively. The accrual is included in accrued interest payable and other liabilities in the consolidated balance sheets and totaled $170 at year-end 2019 and $187 at year-end 2018. 

Life Insurance Benefits:

CFBank has entered into agreements with certain employees, former employees and directors to provide life insurance benefits which are funded through life insurance policies purchased and owned by CFBank.  The expense related to these benefits totaled ($12) and($9) in 2019 and 2018, respectively.  The accrual for CFBank’s obligation under these agreements is included in accrued interest payable and other liabilities in the consolidated balance sheets and totaled $171 at year-end 2019 and $182 at year-end 2018.

NOTE 13 – INCOME TAXES

Income tax expense was as follows:

	December 31, 2019		December 31, 2018
Current federal	$	2,627	$	972
Deferred federal (1)		(187)		85
Total	$	2,440	$	1,057

⁽¹⁾ Includes tax benefit of operating loss carryforwards of $34 and $34 for the years ended December 31, 2019 and 2018, respectively.

Effective tax rates differ from the federal statutoryrate of 21% for 2019 and 2018applied to income before income taxes due to the following:

	December 31, 2019		December 31, 2018
Federal Statutory rate times financial statement income	$	2,529	$	1,119
Effect of:
Stock compensation		(18)		(13)
Bank owned life insurance income		(30)		(29)
Low income housing tax credits		(59)		(30)
Other		18		10
	$	2,440	$	1,057
Effective tax rate		20%		20%

Year-end deferred tax assets and liabilities were due to the following:

	2019		2018
Deferred tax assets:
Allowance for loan and lease losses	$	1,170	$	1,085
Compensation related issues		433		273
Deferred loan fees		-		6
Nonaccrual interest		55		45
Net operating loss carry forward		432		467
Operating lease liabilities		412		-
Other		-		40
		2,502		1,916
Deferred tax liabilities:
FHLB stock dividend		226		226
Deferred loan costs		7		-
Depreciation		73		82
Operating lease right-of-use assets		374		-
Other		36		-
Prepaid expenses		65		48
		781		356
Net deferred tax asset	$	1,721	$	1,560

34

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except per share data)

At December 31, 2019, the Company had a deferred tax asset recorded of approximately $1,700.  At December 31, 2018, the Company had a deferred tax asset recorded of approximately $1,600.  At December 31, 2019and 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 2016. 

Our deferred tax assets are composed of U.S. net operating losses (“NOLs”), and other temporary book to tax differences.When determining the amount of deferred tax assets that are more-likely-than-not to be realized, and therefore recorded as a benefit, the Company conducts a regular assessment of all available information. This information includes, but is not limited to, taxable income in prior periods, projected future income and projected future reversals of deferred tax items.Based on these criteria, the Company determined as of December 31, 2019 that no valuation allowance was required against the net deferred tax asset.

In 2012, a recapitalization program through the sale of $22,500 in common stock 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 year-end 2019, the Company had net operating loss carryforwards of $22,579, 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 2019.  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.

NOTE 14 – RELATED-PARTY TRANSACTIONS

Loans to principal officers, directors and their affiliates during 2019 were as follows:

Beginning balance	$	3,672
New loans		3,062
Repayments		(621)
Ending balance	$	6,113

All loans to related parties were made in the ordinary course of business under terms equivalent to those prevailing in the market for arm’s length transactions at the time of origination. 

Deposits from principal officers, directors, and their affiliates at year-end 2019 and 2018 were $976 and $593, respectively.

NOTE 15 – STOCK-BASED COMPENSATION

The Company hastwo 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 $527 and $376 for 2019 and 2018, respectively.  The total income tax benefit was $111 and $79 for 2019 and 2018, respectively.  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 allstockholder-approved and authorize stock option grants and restricted stock awards to be made to directors, officers and employees. The 2009 Equity Compensation Plan (the “2009 Plan”), which was approved by stockholders on May 21, 2009, replaced the Company’s 2003 equity compensation plan (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 2009 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.

35

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except per share data)

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 no stock options granted or exercised during the years ended December 31, 2019 and December 31, 2018. 

A summary of stock option activity in the Plans for 2019 follows:

	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	(941)		8.19
Outstanding at end of period	95,438	$	7.64	3.4	$	604
Exercisable at end of period	95,438	$	7.64	3.4	$	604

During the years ended December 31, 2019 and 2018, there were 941and 1,667 stock options canceled or forfeited, respectively.  Expense associated with unvested forfeited shares is reversed.As of December 31, 2019 and 2018,all stock options granted under the Plans were vested.

36

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except per share data)

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 were73,738 shares of restricted stock issued in 2019 and31,827 shares of restricted stock issued in 2018. 

A summary of changes in the Company’s nonvested restricted shares for the year follows:

Nonvested Shares	Shares	Weighted Average Grant-Date Fair Value
Nonvested at January 1, 2019	69,324	$	11.91
Granted	73,738		13.35
Vested	(36,288)		11.38
Forfeited	(3,858)		12.37
Nonvested at December 31, 2019	102,916	$	13.11

As of December 31, 2019 and 2018, the unrecognized compensation cost related to nonvested shares granted under the Plans was $1,221 and $812, respectively.   There were 36,288 shares that vested during the year ended December 31, 2019.  

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 264,456 shares remaining available for awards of stock option grants, stock appreciation rights,  restricted stock awards or restricted stock units under the 2019 Plan at December 31, 2019.

NOTE 16 – PREFERRED AND COMMON 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 “2014 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 17-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 6,857,143shares 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 $188 quarterly ($750 annually) beginning with the 4th quarter of 2017.

Series C Preferred Stock:

On October 25, 2019, the Company entered into a Securities Purchase Agreement with certain accredited investors in a private placement for an aggregate offering price of approximately $25 million, pursuant to which on October 31, 2019, the Holding Company sold (i) 849,615 shares of the Company’s common stock, at a purchase price of $12.00 per share and (ii) 12,337 shares of a new series of the Company’s non-voting convertible perpetual preferred stock, series C, par value $0.01 per share (the “Series C Preferred Stock”), at a purchase price of $1,200.00 per share. 

Each share of Series C Preferred Stock will be convertible either (i) automatically into 100 shares of the Company’s non-voting common stock, par value $0.01 per share (which will also be convertible into Common Stock) (the “Non-Voting Common Stock”), effective as of the close of business on the date that the Company obtains stockholder approval for, and files, a Certificate of Amendment to the Company’s Certificate of Incorporation to authorize such class of Non-Voting Common Stock; or (ii) unless

37

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except per share data)

previously converted into shares of Non-Voting Common Stock, into 100 shares of the Company’s common stock upon transfer of such shares of Series C Preferred Stock to a non-affiliate of the holder in specified permitted transactions.

NOTE 17 – COMMON STOCK WARRANTS

Series B Preferred Stock – Warrants:

For each share of Series B Preferred Stock issued by the Company in the 2014 Private Placement, the Company also issued, at no additional charge, a Warrant to purchase shares of common stock of the Company.  (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 were 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 December 31, 2019, there were no outstanding warrants asall of the unexercised warrants expired on July 15, 2019.

NOTE 18 – 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 December 31, 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.

38

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except per share data)

	Actual			Minimum Capital Required-Basel III Fully Phased-In			To Be Well Capitalized Under Applicable Regulatory Capital Standards
	Amount		Ratio	Amount		Ratio	Amount		Ratio
December 31, 2019
Total Capital to risk weighted assets	$	95,164	12.96%	$	77,097	10.50%	$	73,425	10.00%
Tier 1 (Core) Capital to risk weighted assets		87,857	11.97%		62,412	8.50%		58,740	8.00%
Common equity tier 1 capital to risk-weighted assets		87,857	11.97%		51,398	7.00%		47,726	6.50%
Tier 1 (Core) Capital to adjusted total assets (Leverage ratio)		87,857	10.58%		33,221	4.00%		41,526	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 with an initial balance 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 13-Income Taxes.

NOTE 19 – 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 $12,039 at December 31, 2019 and $1,359 at December 31, 2018.

39

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except per share data)

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 December 31, 2019, CFBank had $77 in securities pledged as collateral for these derivatives. Should the liability increase beyond the collateral value, CFBank may 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 December 31, 2019, CFBank was well-capitalized under regulatory capital standards.

Summary information about the derivative instruments is as follows:

	2019		2018
Notional amount	$	12,039	$	1,359
Weighted average pay rate on interest-rate swaps		4.66%		3.12%
Weighted average receive rate on interest-rate swaps		4.63%		2.49%
Weighted average maturity (years)		7.3		2.0
Fair value of interest-rate swaps	$	(12)	$	(17)
Fair value of yield maintenance provisions	$	12	$	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 in 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 $297,454 and $55,220 of interest rate lock commitments related to residential mortgage loans at December 31, 2019 and December 31, 2018, respectively.  The fair value of these mortgage banking derivatives was reflected by a derivative asset of $3,104 and $721 at December 31, 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 30-60 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 Company had approximately $225,500 and $33,250 of TBA mortgage-backed securities at December 31, 2019 and December 31, 2018, respectively.  The fair value of these TBA mortgage-backed securities was ($350) and ($342) at December 31, 2019 and December 31, 2018, respectively, which is included in other liabilities on the consolidated balance sheet.  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.

40

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except per share data)

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):

	December 31, 2019				December 31, 2018
	Notional Amount		Fair Value		Notional Amount		Fair Value
Assets (Liabilities):
Interest rate commitments	$	297,454	$	3,104	$	55,220	$	721
TBA mortgage-back securities		225,500		(350)		33,250		(342)

The following table represents the revenue recognized on mortgage activities for the years ended December 31, 2019 and 2018:

	December 31, 2019		December 31, 2018
Gain on loans sold	$	9,603	$	1,152
Gain (loss) from change in fair value of loans held-for-sale		1,341		373
Gain (loss) from change in fair value of derivatives		(490)		402
	$	10,454	$	1,927

NOTE 20 – LOAN COMMITMENTS AND OTHER RELATED ACTIVITIES

Some financial instruments, such as loan commitments, credit lines, letters of credit and overdraft protection, are issued to meet customer financing needs.  These are agreements to provide credit or to support the credit of others, as long as conditions established in the contract are met, and usually have expiration dates.  Commitments may expire without being used. Off‑balance-sheet risk to credit loss exists up to the face amount of these instruments, although material losses are not anticipated.  The same credit policies are used to make such commitments as are used for loans, including obtaining collateral at exercise of the commitment.

The contractual amounts of financial instruments with off-balance-sheet risk at year end were as follows:

	2019				2018
	Fixed Rate		Variable Rate		Fixed Rate		Variable Rate
Commitments to make loans	$	314,705	$	43,979	$	80,528	$	36,542
Unused lines of credit	$	10,678	$	55,684	$	6,218	$	50,355
Standby letters of credit	$	1,415	$	-	$	946	$	-

Commitments to make loans are generally made for periods of 60 days or less, except for construction loan commitments, which are typically for a period of one year, and loans under a specific drawdown schedule, which are based on the individual contracts.  The fixed-rate loan commitments had interest rates ranging from 2.00% to 8.75% and maturities ranging from 3  months to 30 years at December 31, 2019. The fixed-rate loan commitments had interest rates ranging from 3.75% to 6.25% and maturities ranging from 5 months to 30 years at December 31, 2018.

41

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except per share data)

NOTE 21 – PARENT COMPANY ONLY CONDENSED FINANCIAL INFORMATION

Condensed financial information of Central Federal Corporation follows:

	2019		2018
Assets
Cash and cash equivalents	$	10,037	$	2,675
Investment in banking subsidiary		88,317		62,479
Investment in and advances to other subsidiary		238		233
Other assets		2,045		1,213
Total assets	$	100,637	$	66,600
Liabilities and Equity
Subordinated debentures	$	14,806	$	14,767
Other borrowings		5,000		6,000
Accrued expenses and other liabilities		167		274
Stockholders' equity		80,664		45,559
Total liabilities and stockholders' equity	$	100,637	$	66,600

	2019		2018
Interest income	$	-	$	-
Other income		70		95
Interest expense		1,353		604
Other expense		758		877
Loss before income tax and before undistributed subsidiary income		(2,041)		(1,386)
Tax effect		427		290
Loss after income tax and before undistributed subsidiary income		(1,614)		(1,096)
Equity in undistributed subsidiary income		11,215		5,369
Net income	$	9,601	$	4,273
Comprehensive income	$	9,702	$	4,247

42

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except per share data)

	2019		2018
Cash flows from operating activities
Net Income	$	9,601	$	4,273
Adjustments:
Effect of subsidiaries' operations		(11,215)		(5,369)
Amortization, net		39		-
Change in other assets and other liabilities		(939)		95
Net cash used by operating activities		(2,514)		(1,001)
Cash flows from investing activities
Investments in banking subsidiary		(14,000)		(13,133)
Net cash used by investing activities		(14,000)		(13,133)
Cash flows from financing activities
Proceeds from other borrowings		4,000		8,000
Repayments of other borrowings		(5,000)		(2,000)
Net proceeds from issuance of subordinated debentures		-		9,612
Net proceeds from the issuance of preferred stock private placement		14,000		-
Net proceeds from the issuance of common stock private placement		9,641		-
Acquisition of treasury shares surrendered upon vesting of restricted stock for payment of taxes		(23)		(42)
Exercise of warrants to common stock		1,258		716
Net cash from financing activities		23,876		16,286
Net change in cash and cash equivalents		7,362		2,152
Beginning cash and cash equivalents		2,675		523
Ending cash and cash equivalents	$	10,037	$	2,675

43

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except per share data)

NOTE 22 – 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 (certain unvested share-based awards and Series C preferred stock outstanding) according to dividends declared (or accumulated) and participation rights in undistributed earnings.  The factors used in the earnings per share computation follow:

	December 31, 2019		December 31, 2018
Basic
Net income	$	9,601	$	4,273
Dividends on Series B preferred stock, accretion of discount and value of warrants exercised		219		62
Earnings allocated to participating securities (Series C preferred stock)		(430)		-
Net income allocated to common stockholders	$	9,390	$	4,335
Weighted average common shares outstanding including unvested share-based payment awards (1)		4,582,997		4,260,617
Less: Unvested share-based payment awards		(1,532)		-
Average shares		4,581,465		4,260,617
Basic earnings per common share	$	2.05	$	1.02
Diluted
Net earnings allocated to common stockholders	$	9,390	$	4,335
Add back: Preferred Dividends on Series B stock and accretion of discount		-		-
Net earnings allocated to common stockholders	$	9,390	$	4,335
Weighted average common shares outstanding for basic earnings per common share  (1)		4,581,465		4,260,617
Add: Dilutive effects of assumed exercises of stock options		38,620		40,903
Add: Dilutive effects of assumed exercises of stock warrants		6,947		42,210
Add:  Dilutive effects of unvested share-based payment awards		1,532		-
Average shares and dilutive potential common shares		4,628,564		4,343,730
Diluted earnings per common share	$	2.03	$	1.00

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

The following potential common shares were anti-dilutive and not considered in computing diluted earnings per common share.

	2019	2018
Stock options	463	792

NOTE 23 - CONTINGENT LIABILITIES

General Litigation:

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

44

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except per share data)

NOTE 24 - ACCUMULATED OTHER COMPREHENSIVE INCOME

The following table summarizes the changes within each classification of accumulated other comprehensive income, net of tax, for the years ended December 31, 2019 and December 31, 2018 and summarizes the significant amounts reclassified out of each component of accumulated other comprehensive income:

Changes in Accumulated Other Comprehensive Income by Component
For the Year Ended December 31, 2019 and 2018  (1)
	Unrealized Gains and Losses on Available-for-Sale Securities
	2019		2018
Accumulated other comprehensive loss, beginning of period	$	(73)	$	(47)
Other comprehensive gain (loss) before reclassifications		101		(26)
Less amount reclassified from accumulated other comprehensive loss (2)		-		-
Net current-period other comprehensive income (loss)		101		(26)
Accumulated other comprehensive income (loss), end of period	$	28	$	(73)

⁽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 years ended December 31, 2019 and December 31, 2018.

NOTE 25- SUBSEQUENT EVENT

On March 12, 2020, the Board of Directors of Central Federal Corporation (the “Company) authorized a stock repurchase program pursuant to which the Company may repurchase up to 3% of the Company’s outstanding common stock over the period commencing March 13, 2020 and ending September 30, 2020.  Under the stock repurchase program, the Company may purchase shares of its common stock from time to time through various means, including open market transactions and privately negotiated transactions.  Open market repurchases will be made in accordance with applicable securities laws and regulations, including Rule 10b-18 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and may be effected pursuant to Rule 10b5-1 under the Exchange Act.  The manner, timing and amount of any stock repurchases will be determined by the Company’s management in its discretion based on its evaluation of various factors, including the trading price of the Company’s common stock, market and economic conditions, regulatory requirements and other corporate considerations.  The repurchase program may be suspended or discontinued at any time.

45

Central Federal Corporation and CFBank	Central Federal Corporation Officers
Board of Directors
	Timothy T. O’Dell
Robert E. Hoeweler	President and Chief Executive Officer
Chief Executive Officer, Hoeweler Holdings
Chairman of the Board, Central Federal Corporation and CFBank	John W. Helmsdoerfer, CPA
	Executive Vice President,
Thomas P. Ash	Chief Financial Officer and Treasurer
Retired, formerly Director of Governmental Relations
Buckeye Association of School Administrators	Barbara Pyke
	Corporate Secretary
Edward W. Cochran
Attorney	CFBank Executive Officers
James H. Frauenberg II	Timothy T. O’Dell
Principal Owner,	President and Chief Executive Officer
Addison Holdings LLC,
	John W. Helmsdoerfer, CPA
Robert H. Milbourne	Executive Vice President and
RHM Advisors	Chief Financial Officer
John T. Pietrzak
Managing Principal
Castle Creek Capital
David L. Royer
Executive Vice President of Development,
Continental Real Estate Companies
Timothy T. O’Dell
President and Chief Executive Officer,
Central Federal Corporation and CFBank
CFBank Office Locations
(Markets Served)
Worthington, Ohio (Greater Columbus)*	Glendale, Ohio (Cincinnati)*
7000 North High Street	38 Village Square
Worthington, Ohio 43085	Glendale, Ohio 45246
614-334-7979	513-772-0263
Columbus, Ohio (Greater Columbus)***	Blue Ash, Ohio (Cincinnati)*
8101 North High Street, Suite 180	10300 Alliance Road #150
Columbus, Ohio 43235	Cincinnati, Ohio 45242
614-639-6333	513-427-3005
Woodmere, Ohio (Greater Cleveland)**	Wellsville, Ohio (Columbiana County)*
28879 Chagrin Blvd.	601 Main Street
Woodmere, Ohio 44122	Wellsville, Ohio 43968
216-468-3100	330-532-1517
Fairlawn, Ohio (Akron/Canton)*	Calcutta, Ohio (Columbiana County)*
3009 Smith Road, Suite 100	49028 Foulks Drive
Fairlawn, Ohio 44333	Calcutta, Ohio 43920
330-666-7979	330-385-4323

* Full service branch

** Agency office

*** Loan production office

46

Corporate Data

Annual Report

A  COPY OF THE ANNUAL REPORT ON FORM 10-K FILED WITH THE SECURITIES AND EXCHANGE COMMISSION IS AVAILABLE WITHOUT CHARGE UPON WRITTEN REQUEST TO:

John W. Helmsdoerfer, CPA

Executive Vice President and Chief Financial Officer

Central Federal Corporation

7000 North High Street

Worthington, Ohio 43085

Phone: 614-318-4661

Fax: 614-334-7980

Email: Johnhelmsdoerfer@cfbankmail.com

Annual Meeting

The Annual Meeting of Shareholders of Central Federal Corporation will be held at 10:00 a.m., local time,on Wednesday, May 27, 2020, at the New Albany Country Club, 1 Club Lane, New Albany, Ohio 43054.

Shareholder Services

Computershare, Inc. serves as transfer agent for Central Federal Corporation shares. Communications regarding change of address, transfer of shares or lost certificates should be sent to:

Computershare, Inc.

250 Royall Street

Canton, MA 02021

Phone: 1-800-368-5948

47

EX-21.1

Exhibit 21.1

Subsidiaries of the Registrant

CFBank, National Association

Central Federal Capital Trust I

EX-23.1

Exhibit 23.1

Consent of Independent Registered Public Accounting Firm

We consent to the incorporation by reference in the Registration Statements of Central Federal Corporation on Form S-8 (File Nos. 333-84817, 333-114025,  333-163102,  333-207354 and 333-234817) and Form S-3 (File Nos. 333-216922, 333-221607, 333-110218, 333-124323 and 333-156564) of our report dated March 16,  2020 on our audits of the consolidated financial statements of Central Federal Corporation as of December 31, 2019 and 2018, and for each of the two years in the period ended December 31, 2019, which report is included in this Annual Report on Form 10-K.

/s/ BKD, LLP

BKD, LLP

Indianapolis, Indiana

March 16, 2020

EX-31.1

Exhibit 31.1

Rule 13a-14(a) Certifications

I, Timothy T. O’Dell, certify, that:

1. I have reviewed this report on Form 10-K 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 small business issuer 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 control 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 U.S. 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 fourth 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 the registrant’s board of directors (or persons performing equivalent functions):

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. 

Date: March 16, 2020	/s/ Timothy T. O’Dell
	Timothy T. O’Dell
	President and Chief Executive Officer

EX-31.2

Exhibit 31.2

Rule 13a-14(a) Certifications

I, John W. Helmsdoerfer, certify, that:

1. I have reviewed this report on Form 10-K 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 small business issuer 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 control 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 U.S. 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 fourth 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 the registrant’s board of directors (or persons performing equivalent functions):

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. 

Date:  March 16, 2020	/s/ John W. Helmsdoerfer
	John W. Helmsdoerfer, CPA
	Treasurer and Chief Financial Officer

EX-32.1

Exhibit 32.1

Section 1350 Certifications

In connection with the Annual Report of Central Federal Corporation (the “Company”) on Form 10-K for the fiscal year ended December 31, 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. §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 the Report fairly presents, in all material respects, the financial condition and results of operations of the Company as of and for the period covered by the Report.

/s/ Timothy T. O’Dell

Timothy T. O’Dell

President and Chief Executive Officer

/s/ John W. Helmsdoerfer

John W. Helmsdoerfer, CPA

Treasurer and Chief Financial Officer

Date:March 16, 2020

XML

Loans And Leases (Narrative) (Details) $ in Thousands	12 Months Ended
	Dec. 31, 2019 USD ($) loan	Dec. 31, 2018 USD ($) loan
Accounts Notes And Loans Receivable [Line Items]
Loans	$ 663,303	$ 550,683
Loans 90 days or more past due and still accruing interest
Total TDR's	2,923	3,161
Allocated specific reserves to modified TDRs	22	22
TDR's charge-offs	$ 0	$ 0
Number of TDRs in payment default | loan	0	0
Cash payments of interest	$ 168	$ 192
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%
Percent of participation agreement interest	95.00%
Ownership interest in each loan is participates	5.00%
Nonaccrual [Member] | Commitments To Lend Additional Amounts [Member]
Accounts Notes And Loans Receivable [Line Items]
Total TDR's	$ 0	0
Single-Family Residential [Member] | Northpointe [Member] | Mortgage Purchase Program [Member]
Accounts Notes And Loans Receivable [Line Items]
Loans	26,046	36,845
Other Loans [Member]
Accounts Notes And Loans Receivable [Line Items]
Total TDR's	56,676	64,898
Accruing [Member]
Accounts Notes And Loans Receivable [Line Items]
Total TDR's	$ 2,838	$ 3,061
Commercial Real Estate [Member]
Accounts Notes And Loans Receivable [Line Items]
Number of loans modified as a TDR | loan		0

XML

Parent Company Only Condensed Financial Information (Condensed Statements Of Cash Flows) (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2019	Dec. 31, 2018
Cash flows from operating activities
Net income	$ 9,601	$ 4,273
Amortization, net	(96)	(41)
Net cash used by operating activities	(103,538)	(11,810)
Cash flows from investing activities
Net cash used by investing activities	(111,402)	(143,766)
Cash flows from financing activities:
Net proceeds from issuance of subordinated debentures		9,612
Net proceeds from the issuance of preferred stock private placement	14,000
Net proceeds from issuance of common stock in private placement	9,641
Acquisition of treasury shares surrendered upon vesting of restricted stock for payment of taxes	(23)	(42)
Exercise of warrants to common stock	1,258	716
Net cash from financing activities	193,515	177,382
Net change in cash and cash equivalents	(21,425)	21,806
Beginning cash and cash equivalents	67,304	45,498
Ending cash and cash equivalents	45,879	67,304
Parent Company [Member]
Cash flows from operating activities
Net income	9,601	4,273
Effect of subsidiaries' operations	(11,215)	(5,369)
Amortization, net	39
Change in other assets and other liabilities	(939)	95
Net cash used by operating activities	(2,514)	(1,001)
Cash flows from investing activities
Investments in banking subsidiary	(14,000)	(13,133)
Net cash used by investing activities	(14,000)	(13,133)
Cash flows from financing activities:
Proceeds from other borrowings	4,000	8,000
Repayments of other borrowings	(5,000)	(2,000)
Net proceeds from issuance of subordinated debentures		9,612
Net proceeds from the issuance of preferred stock private placement	14,000
Net proceeds from issuance of common stock in private placement	9,641
Acquisition of treasury shares surrendered upon vesting of restricted stock for payment of taxes	(23)	(42)
Exercise of warrants to common stock	1,258	716
Net cash from financing activities	23,876	16,286
Net change in cash and cash equivalents	7,362	2,152
Beginning cash and cash equivalents	2,675	523
Ending cash and cash equivalents	$ 10,037	$ 2,675

XML

Loan Commitments And Other Related Activities (Narrative) (Details)	12 Months Ended
	Dec. 31, 2019	Dec. 31, 2018
Contractual Commitments Contingencies And Off Balance Sheet Arrangements [Line Items]
Period for commitments and construction loan commitments	60 days
Construction [Member]
Contractual Commitments Contingencies And Off Balance Sheet Arrangements [Line Items]
Period for commitments and construction loan commitments	1 year
Minimum [Member]
Contractual Commitments Contingencies And Off Balance Sheet Arrangements [Line Items]
Interest rates for fixed rate loan commitments	2.00%	3.75%
Maturities for fixed rate loan commitments	3 months	5 months
Maximum [Member]
Contractual Commitments Contingencies And Off Balance Sheet Arrangements [Line Items]
Interest rates for fixed rate loan commitments	8.75%	6.25%
Maturities for fixed rate loan commitments	30 years	30 years

XML

Subsequent Event (Details)	1 Months Ended
	Mar. 31, 2020
Subsequent Event [Member] | Maximum [Member]
Subsequent Event [Line Items]
Stock Repurchase Program, percentage	3.00%

XML

Securities (Amortized Cost And Fair Value Of Available-For-Sale Securities Portfolio) (Details) - USD ($) $ in Thousands	Dec. 31, 2019	Dec. 31, 2018
Schedule of Available-for-sale Securities [Line Items]
Amortized Cost	$ 8,139	$ 10,207
Gross Unrealized Gains	36	6
Gross Unrealized Losses	1	99
Fair Value	8,174	10,114
U.S. Treasury [Member]
Schedule of Available-for-sale Securities [Line Items]
Amortized Cost	7,986	9,978
Gross Unrealized Gains	32	2
Gross Unrealized Losses	1	99
Fair Value	8,017	9,881
Mortgage-Backed Securities - Residential [Member]
Schedule of Available-for-sale Securities [Line Items]
Amortized Cost	126	167
Gross Unrealized Gains	4	3
Gross Unrealized Losses
Fair Value	130	170
Collateralized Mortgage Obligations [Member]
Schedule of Available-for-sale Securities [Line Items]
Amortized Cost	27	62
Gross Unrealized Gains		1
Gross Unrealized Losses
Fair Value	$ 27	$ 63

XML

Earnings Per Common Share (Tables)

12 Months Ended

Dec. 31, 2019

Earnings Per Common Share [Abstract]

Computation Of Earnings Per Share

	December 31, 2019		December 31, 2018
Basic
Net income	$	9,601	$	4,273
Dividends on Series B preferred stock, accretion of discount and value of warrants exercised		219		62
Earnings allocated to participating securities (Series C preferred stock)		(430)		-
Net income allocated to common stockholders	$	9,390	$	4,335
Weighted average common shares outstanding including unvested share-based payment awards (1)		4,582,997		4,260,617
Less: Unvested share-based payment awards		(1,532)		-
Average shares		4,581,465		4,260,617
Basic earnings per common share	$	2.05	$	1.02
Diluted
Net earnings allocated to common stockholders	$	9,390	$	4,335
Add back: Preferred Dividends on Series B stock and accretion of discount		-		-
Net earnings allocated to common stockholders	$	9,390	$	4,335
Weighted average common shares outstanding for basic earnings per common share  (1)		4,581,465		4,260,617
Add: Dilutive effects of assumed exercises of stock options		38,620		40,903
Add: Dilutive effects of assumed exercises of stock warrants		6,947		42,210
Add:  Dilutive effects of unvested share-based payment awards		1,532		-
Average shares and dilutive potential common shares		4,628,564		4,343,730
Diluted earnings per common share	$	2.03	$	1.00

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

Summary Of Anti-Dilutive Options Or Warrants

	2019	2018
Stock options	463	792

XML

Consolidated Statements Of Changes Of Cash Flows - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2019	Dec. 31, 2018
Consolidated Statements Of Changes Of Cash Flows [Abstract]
Net income	$ 9,601	$ 4,273
Adjustments to reconcile net income to net cash from operating activities:
Provision for loan and lease losses
Depreciation	316	248
Amortization, net	(96)	(41)
Deferred income tax (benefit)	(187)	85
Originations of loans held for sale	(726,208)	(233,855)
Proceeds from sale of loans held for sale	625,509	219,521
Net gains on sales of loans	(10,767)	(1,927)
Write-down of premises and equipment		33
Gain on sale of foreclosed assets	(12)
Earnings on bank owned life insurance	(142)	(138)
Stock-based compensation expense	527	376
Net change in:
Accrued interest receivable and other assets	(3,412)	(1,479)
Operating lease right-of-use asset	404
Operating lease right-of-use liability	(408)
Accrued interest payable and other liabilities	1,337	1,094
Net cash used by operating activities	(103,538)	(11,810)
Available-for-sale securities:
Maturities, prepayments and calls	3,576	3,115
Purchases	(1,494)	(1,475)
Loan and lease originations and payments, net	(118,467)	(118,317)
Loans purchased		(25,958)
Proceeds from the sale of loans	6,547
Additions to premises and equipment	(443)	(612)
Purchase of FRB and FHLB Stock	(532)	(249)
Purchase of other investments	(734)	(500)
Return of investment- joint ventures	95	230
Proceeds from the sale of foreclosed assets	50
Net cash used by investing activities	(111,402)	(143,766)
Cash flows from financing activities:
Net change in deposits	166,537	160,758
Proceeds from FHLB advances and other debt	766,700	74,600
Repayments on FHLB advances and other debt	(764,700)	(68,600)
Net proceeds from issuance of subordinated debentures		9,612
Net change in advances by borrowers for taxes and insurance	102	338
Net proceeds from issuance of Series C preferred stock in private placement	14,000
Net proceeds from issuance of common stock in private placement	9,641
Exercise of warrants to common stock	1,258	716
Acquisition of treasury shares surrendered upon vesting of restricted stock for payment of taxes	(23)	(42)
Net cash from financing activities	193,515	177,382
Net change in cash and cash equivalents	(21,425)	21,806
Beginning cash and cash equivalents	67,304	45,498
Ending cash and cash equivalents	45,879	67,304
Supplemental cash flow information:
Interest paid	13,427	6,845
Income tax paid	2,510	968
Supplemental noncash disclosures:
Transfers from loans to repossessed assets		38
Loans transferred from held for sale to portfolio	657
Investment payable on limited liability corporation and limited partnership	1,170	$ 500
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
Loans held for sale funded with other debt	$ 7,517

XML

Consolidated Statements Of Comprehensive Income - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2019	Dec. 31, 2018
Consolidated Statements Of Comprehensive Income [Abstract]
Net income	$ 9,601	$ 4,273
Other comprehensive income (loss):
Unrealized holding gains (losses) arising during the period related to investment securities available for sale, net of tax of $27 and ($5):	101	(26)
Other comprehensive income (loss), net of tax	101	(26)
Comprehensive income	$ 9,702	$ 4,247

XML

Premises And Equipment And Operating Leases (Narrative) (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2019	Dec. 31, 2018
Premises And Equipment And Operating Leases [Abstract]
Depreciation	$ 316	$ 248
Operating lease, Weighted average remaining lease term	4 years 3 months 18 days
Operating lease, Weighted average discount rate	6.57%
Operating lease costs	$ 404
Variable lease costs	$ 231

XML

Foreclosed Assets (Expenses Related To Foreclosed Assets) (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2019	Dec. 31, 2018
Foreclosed Assets [Abstract]
Net loss (gain) on sales	$ (12)
Operating expenses, net of rental income	3	6
Foreclosed assets, net	$ (9)	$ 6

XML

Fair Value (Financial Instruments Measured At Fair Value On A Non-Recurring Basis) (Details) - Unobservable Input, Comparability Adjustment [Member] - Financial instruments measured at fair value on a non-recurring basis [Member] - Market approach [Member] $ in Thousands	Dec. 31, 2019 USD ($)	Dec. 31, 2018 USD ($)
Commercial Real Estate [Member]
Fair Value Measurements, Recurring and Nonrecurring, Valuation Techniques [Line Items]
Fair Value	$ 84	$ 100
(Range) Weighted Average	2.06	3.48
Single-Family Residential [Member]
Fair Value Measurements, Recurring and Nonrecurring, Valuation Techniques [Line Items]
Fair Value	$ 106	$ 110
(Range) Weighted Average	3.61	3.61
Non-Owner Occupied [Member]
Fair Value Measurements, Recurring and Nonrecurring, Valuation Techniques [Line Items]
Fair Value	$ 4,387	$ 2,804
Non-Owner Occupied [Member] | Minimum [Member]
Fair Value Measurements, Recurring and Nonrecurring, Valuation Techniques [Line Items]
(Range) Weighted Average	(2.58)	3.48
Non-Owner Occupied [Member] | Maximum [Member]
Fair Value Measurements, Recurring and Nonrecurring, Valuation Techniques [Line Items]
(Range) Weighted Average	14.00	8.61
Non-Owner Occupied [Member] | Weighted Average [Member]
Fair Value Measurements, Recurring and Nonrecurring, Valuation Techniques [Line Items]
(Range) Weighted Average	2.44	5.02

XML

Deposits (Scheduled Maturities Of Time Deposits) (Details) $ in Thousands	Dec. 31, 2019 USD ($)
Deposits [Abstract]
2019	$ 189,268
2020	82,813
2021	54,764
2022	20,174
2023	17,124
Thereafter	7
Total	$ 364,150

XML

Document And Entity Information - USD ($)
$ in Millions

12 Months Ended

Dec. 31, 2019

Mar. 08, 2020

Jun. 30, 2019

Document And Entity Information [Abstract]

Document Type

10-K

Document Annual Report

true

Document Period End Date

Dec. 31, 2019

Current Fiscal Year End Date

--12-31

Document Transition Report

false

Entity File Number

0-25045

Entity Registrant Name

CENTRAL FEDERAL CORP

Entity Incorporation, State or Country Code

DE

Entity Tax Identification Number

34-1877137

Entity Address, Address Line One

7000 N. High Street

Entity Address, City or Town

Worthington

Entity Address, State or Province

OH

Entity Address, Postal Zip Code

43085

City Area Code

614

Local Phone Number

334-7979

Title of 12(b) Security

Common Stock, par value $.01 per share

Trading Symbol

cfbk

Security Exchange Name

NASDAQ

Entity Well-known Seasoned Issuer

No

Entity Voluntary Filers

No

Entity Current Reporting Status

Yes

Entity Interactive Data Current

Yes

Entity Filer Category

Non-accelerated Filer

Entity Small Business

true

Entity Emerging Growth Company

false

Entity Shell Company

false

Entity Public Float

$ 53.8

Entity Common Stock, Shares Outstanding

5,373,858

Documents Incorporated By Reference

Portions of the registrant’s Annual Report to Stockholders  for its fiscal year ended December 31, 2019,  included as Exhibit 13.1 to this Form 10-K, and its Proxy Statement for the Annual Meeting of Stockholders  to be held on May 27, 2020,  are incorporated herein by reference into Parts II and III, respectively, of this Form 10-K.

Amendment Flag

false

Entity Central Index Key

0001070680

Document Fiscal Year Focus

2019

Document Fiscal Period Focus

FY

XML

Premises And Equipment And Operating Leases

12 Months Ended

Dec. 31, 2019

Premises And Equipment And Operating Leases [Abstract]

Premises And Equipment And Operating Leases

NOTE 8- PREMISES AND EQUIPMENT AND OPERATING LEASES

Year-end premises and equipment were as follows:

	December 31, 2019		December 31, 2018
Land and land improvements	$	1,293	$	1,293
Buildings		4,294		4,239
Furniture, fixtures and equipment		2,729		2,592
		8,316		8,124
Less: accumulated depreciation		(4,325)		(4,260)
	$	3,991	$	3,864

Depreciation expense for 2019 and 2018 totaled $316 and $248, respectively.

Operating 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 December 31, 2019, the weighted-average remaining lease term for the Company’s operating leases was 4.3 years and the weighted-average discount rate was 6.57%.

The Company’s operating lease costs were $404 for the year ended December 31, 2019.  The variable lease costs totaled $231 for the year ended December 31, 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 December 31, 2019 are as follows:

2020	$	544
2021		548
2022		536
2023		377
Thereafter		250
Total future minimum rental commitments		2,255
Less - amounts representing interest		(295)
Total operating lease liabilities	$	1,960

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Loans And Leases

12 Months Ended

Dec. 31, 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.

	December 31, 2019		December 31, 2018
Commercial (1)	$	170,646	$	126,887
Real estate:
Single-family residential		120,256		118,386
Multi-family residential		39,229		47,651
Commercial		247,543		173,435
Construction		67,652		61,792
Consumer:
Home equity lines of credit		20,941		23,961
Other		4,174		5,583
Subtotal		670,441		557,695
Less: ALLL		(7,138)		(7,012)
Loans and Leases, net	$	663,303	$	550,683

⁽¹⁾ Includes $4,779 and $5,403 of commercial leases at December 31, 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 December 31, 2019 and 2018, CFBank held $26,046 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 and lease 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 of the Notes to Consolidated Financial Statements.

The following tables present the activity in the ALLL by portfolio segment for the years ended December 31, 2019 and 2018:

	December 31, 2019
			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		235		(120)		(165)		225		20		(195)		-		-
Charge-offs		-		-		-		-		-		-		(36)		(36)
Recoveries		-		7		-		105		-		50		-		162
Ending balance	$	2,054	$	948	$	447	$	2,604	$	759	$	265	$	61	$	7,138

	December 31, 2018
			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		(167)		131		(48)		131		67		(209)		95		-
Charge-offs		-		(6)		-		-		-		-		-		(6)
Recoveries		2		24		-		-		-		22		-		48
Ending balance	$	1,819	$	1,061	$	612	$	2,274	$	739	$	410	$	97	$	7,012

The following table presents the balance in the ALLL and the recorded investment in loans and leases by portfolio segment and based on impairment method as of December 31, 2019:

			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	$	1	$	1	$	-	$	33	$	-	$	-	$	-	$	35
Collectively evaluated for impairment		2,053		947		447		2,571		759		265		61		7,103
Total ending allowance balance	$	2,054	$	948	$	447	$	2,604	$	759	$	265	$	61	$	7,138
Loans:
Individually evaluated for impairment	$	85	$	107	$	-	$	4,420	$	-	$	-	$	-	$	4,612
Collectively evaluated for impairment		170,561		120,149		39,229		243,123		67,652		20,941		4,174		665,829
Total ending loan balance	$	170,646	$	120,256	$	39,229	$	247,543	$	67,652	$	20,941	$	4,174	$	670,441

The following table presents the balance in the ALLL and the recorded investment in loans and leases by portfolio segment and based on 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 year ended December 31, 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, deferred loan fees and costs. Cash payments of interest on these loans during the twelve months ended December 31, 2019 totaled $168.

	Unpaid Principal Balance		Recorded Investment		ALLL Allocated		Average Recorded Investment		Interest Income Recognized
With no related allowance recorded:
Real estate:
Commercial:
Owner occupied	$	-	$	-	$	-	$	111	$	6
Total with no allowance recorded		-		-		-		111		6
With an allowance recorded:
Commercial		85		85		1		92		-
Real estate:
Single-family residential		107		107		1		108		6
Commercial:
Non-owner occupied		4,420		4,420		33		4,194		154
Total with an allowance recorded		4,612		4,612		35		4,394		160
Total	$	4,612	$	4,612	$	35	$	4,505	$	166

The following table presents loans individually evaluated for impairment by class of loans as of and for the year ended 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, deferred loan fees and costs. Cash payments of interest on these loans during the twelve months ended December 31, 2018 totaled $192.

	Unpaid Principal Balance		Recorded Investment		ALLL Allocated		Average Recorded Investment		Interest Income Recognized
With no related allowance recorded:
Real estate:
Commercial:
Owner occupied	$	379	$	125	$	-	$	130	$	21
Total with no allowance recorded		379		125		-		130		21
With an allowance recorded:
Commercial (1)		100		100		-		185		4
Real estate:
Single-family residential (1)		110		110		-		113		6
Commercial:
Non-owner occupied		2,826		2,826		22		2,837		157
Owner occupied		-		-		-		131		7
Total with an allowance recorded		3,036		3,036		22		3,266		174
Total	$	3,415	$	3,161	$	22	$	3,396	$	195

⁽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 as of December 31, 2019 and 2018:

	2019		2018
Loans past due over 90 days still on accrual	$	-	$	-
Nonaccrual loans:
Commercial		85		100
Real estate:
Single-family residential		550		167
Commercial:
Non-owner occupied		1,689		-
Consumer:
Home equity lines of credit:
Originated for portfolio		36		-
Purchased for portfolio		79		89
Other consumer		-		21
Total nonaccrual		2,439		377
Total nonperforming loans	$	2,439	$	377

Nonaccrual loans include both 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 December 31, 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 December 31, 2019:

	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	$	-	$	71	$	-	$	71	$	170,575	$	85
Real estate:
Single-family residential		2,453		261		426		3,140		117,116		124
Multi-family residential		-		-		-		-		39,229		-
Commercial:
Non-owner occupied		-		-		1,689		1,689		138,762		-
Owner occupied		-		-		-		-		81,871		-
Land		-		-		-		-		25,221		-
Construction		304		-		-		304		67,348		-
Consumer:
Home equity lines of credit:
Originated for portfolio		-		-		22		22		20,713		14
Purchased for portfolio		-		-		-		-		206		79
Other		-		-		-		-		4,174		-
Total	$	2,757	$	332	$	2,137	$	5,226	$	665,215	$	302

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 December 31, 2019 and December 31, 2018, TDR’s totaled $2,923 and $3,161, respectively.  The Company allocated $22 and $22 of specific reserves to loans modified in TDRs as of December 31, 2019 and 2018, respectively. The Company had not committed to lend any additional amounts as of December 31, 2019 or 2018 to customers with outstanding loans that were classified as nonaccrual TDRs.

There were no loans modified as a TDR during the years ended December 31, 2019 and December 31, 2018. 

The TDRs described above resulted in no charge-offs during the years ended December 31, 2019 and December 31, 2018.

There were no TDR’s that went into payment default during the years ended December 31, 2019 and December 31, 2018.  

The terms of certain other loans were modified during the years ended December 31, 2019 and 2018 that did not meet the definition of a TDR. These loans had a total recorded investment of $56,676 and $64,898 as of December 31, 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 a payment that was considered to be insignificant or there were no concessions 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 December 31, 2019 and 2018, nonaccrual TDRs were as follows: 

	2019		2018
Commercial	$	85	$	100
Total	$	85	$	100

Nonaccrual loans at December 31, 2019 and 2018 did not include $2,838 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 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, condition 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 included in 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, doubtful or loss.

The recorded investment in loans and leases by risk category and by class of loans as of December 31, 2019 and based on the most recent analysis performed follows.  There were no loans rated doubtful at December 31, 2019. 

	Not Rated		Pass		Special Mention		Substandard		Total
Commercial	$	-	$	168,617	$	1,424	$	605	$	170,646
Real estate:
Single-family residential		119,707		-		-		549		120,256
Multi-family residential		-		39,081		-		148		39,229
Commercial:
Non-owner occupied		67		134,466		1,498		4,420		140,451
Owner occupied		-		79,773		2,098		-		81,871
Land		-		25,221		-		-		25,221
Construction		1,855		65,797		-		-		67,652
Consumer:
Home equity lines of credit:
Originated for portfolio		20,681		-		-		54		20,735
Purchased for portfolio		127		-		-		79		206
Other		4,174		-		-		-		4,174
	$	146,611	$	512,955	$	5,020	$	5,855	$	670,441

The recorded investment in loans and leases by risk category and class of loans as of December 31, 2018 follows.  There were no loans 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):

	December 31, 2019		December 31, 2018
Total minimum lease payments to be received	$	5,252	$	6,045
Less: unearned income		(473)		(642)
Net investment in direct financing leases	$	4,779	$	5,403

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

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

2020	$	793
2021		793
2022		793
2023		1,563
2024		1,310
	$	5,252

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Parent Company Only Condensed Financial Information

12 Months Ended

Dec. 31, 2019

Parent Company Only Condensed Financial Information [Abstract]

Parent Company Only Condensed Financial Information

NOTE 21 – PARENT COMPANY ONLY CONDENSED FINANCIAL INFORMATION

Condensed financial information of Central Federal Corporation follows:

	2019		2018
Assets
Cash and cash equivalents	$	10,037	$	2,675
Investment in banking subsidiary		88,317		62,479
Investment in and advances to other subsidiary		238		233
Other assets		2,045		1,213
Total assets	$	100,637	$	66,600
Liabilities and Equity
Subordinated debentures	$	14,806	$	14,767
Other borrowings		5,000		6,000
Accrued expenses and other liabilities		167		274
Stockholders' equity		80,664		45,559
Total liabilities and stockholders' equity	$	100,637	$	66,600

	2019		2018
Interest income	$	-	$	-
Other income		70		95
Interest expense		1,353		604
Other expense		758		877
Loss before income tax and before undistributed subsidiary income		(2,041)		(1,386)
Tax effect		427		290
Loss after income tax and before undistributed subsidiary income		(1,614)		(1,096)
Equity in undistributed subsidiary income		11,215		5,369
Net income	$	9,601	$	4,273
Comprehensive income	$	9,702	$	4,247

	2019		2018
Cash flows from operating activities
Net Income	$	9,601	$	4,273
Adjustments:
Effect of subsidiaries' operations		(11,215)		(5,369)
Amortization, net		39		-
Change in other assets and other liabilities		(939)		95
Net cash used by operating activities		(2,514)		(1,001)
Cash flows from investing activities
Investments in banking subsidiary		(14,000)		(13,133)
Net cash used by investing activities		(14,000)		(13,133)
Cash flows from financing activities
Proceeds from other borrowings		4,000		8,000
Repayments of other borrowings		(5,000)		(2,000)
Net proceeds from issuance of subordinated debentures		-		9,612
Net proceeds from the issuance of preferred stock private placement		14,000		-
Net proceeds from the issuance of common stock private placement		9,641		-
Acquisition of treasury shares surrendered upon vesting of restricted stock for payment of taxes		(23)		(42)
Exercise of warrants to common stock		1,258		716
Net cash from financing activities		23,876		16,286
Net change in cash and cash equivalents		7,362		2,152
Beginning cash and cash equivalents		2,675		523
Ending cash and cash equivalents	$	10,037	$	2,675

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Subsequent Event

12 Months Ended

Dec. 31, 2019

Subsequent Event [Abstract]

Subsequent Event

NOTE 25- SUBSEQUENT EVENT

On March 12, 2020, the Board of Directors of Central Federal Corporation (the “Company) authorized a stock repurchase program pursuant to which the Company may repurchase up to 3%of the Company’s outstanding common stock over the period commencing March 13, 2020 and ending September 30, 2020.  Under the stock repurchase program, the Company may purchase shares of its common stock from time to time through various means, including open market transactions and privately negotiated transactions.  Open market repurchases will be made in accordance with applicable securities laws and regulations, including Rule 10b-18 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and may be effected pursuant to Rule 10b5-1 under the Exchange Act.  The manner, timing and amount of any stock repurchases will be determined by the Company’s management in its discretion based on its evaluation of various factors, including the trading price of the Company’s common stock, market and economic conditions, regulatory requirements and other corporate considerations.  The repurchase program may be suspended or discontinued at any time.

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Foreclosed Assets (Tables)

12 Months Ended

Dec. 31, 2019

Foreclosed Assets [Abstract]

Foreclosed Assets

	2019		2018
Single-family residential	$	-	$	38
Valuation allowance		-		-
Total	$	-	$	38

Expenses Related To Foreclosed Assets

	2019		2018
Net loss (gain) on sales	$	(12)	$	-
Operating expenses, net of rental income		3		6
	$	(9)	$	6

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Loan Commitments And Other Related Activities

12 Months Ended

Dec. 31, 2019

Loan Commitments And Other Related Activities [Abstract]

Loan Commitments And Other Related Activities

NOTE 20 – LOAN COMMITMENTS AND OTHER RELATED ACTIVITIES

Some financial instruments, such as loan commitments, credit lines, letters of credit and overdraft protection, are issued to meet customer financing needs.  These are agreements to provide credit or to support the credit of others, as long as conditions established in the contract are met, and usually have expiration dates.  Commitments may expire without being used. Off‑balance-sheet risk to credit loss exists up to the face amount of these instruments, although material losses are not anticipated.  The same credit policies are used to make such commitments as are used for loans, including obtaining collateral at exercise of the commitment.

The contractual amounts of financial instruments with off-balance-sheet risk at year end were as follows:

	2019				2018
	Fixed Rate		Variable Rate		Fixed Rate		Variable Rate
Commitments to make loans	$	314,705	$	43,979	$	80,528	$	36,542
Unused lines of credit	$	10,678	$	55,684	$	6,218	$	50,355
Standby letters of credit	$	1,415	$	-	$	946	$	-

Commitments to make loans are generally made for periods of 60 days or less, except for construction loan commitments, which are typically for a period of one year, and loans under a specific drawdown schedule, which are based on the individual contracts.  The fixed-rate loan commitments had interest rates ranging from 2.00% to 8.75% and maturities ranging from 3 months to 30 years at December 31, 2019. The fixed-rate loan commitments had interest rates ranging from 3.75% to 6.25%and maturities ranging from 5 months to 30 years at December 31, 2018.

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Preferred And Common Stock

12 Months Ended

Dec. 31, 2019

Preferred And Common Stock [Abstract]

Preferred And Common Stock

NOTE 16 – PREFERRED AND COMMON 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 “2014 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 17-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 $188 quarterly ($750 annually) beginning with the 4th quarter of 2017.

Series C Preferred Stock:

On October 25, 2019, the Company entered into a Securities Purchase Agreement with certain accredited investors in a private placement for an aggregate offering price of approximately $25 million, pursuant to which on October 31, 2019, the Holding Company sold (i) 849,615 shares of the Company’s common stock, at a purchase price of $12.00 per share and (ii) 12,337 shares of a new series of the Company’s non-voting convertible perpetual preferred stock, series C, par value $0.01 per share (the “Series C Preferred Stock”), at a purchase price of $1,200.00 per share. 

Each share of Series C Preferred Stock will be convertible either (i) automatically into 100 shares of the Company’s non-voting common stock, par value $0.01 per share (which will also be convertible into Common Stock) (the “Non-Voting Common Stock”), effective as of the close of business on the date that the Company obtains stockholder approval for, and files, a Certificate of Amendment to the Company’s Certificate of Incorporation to authorize such class of Non-Voting Common Stock; or (ii) unless previously converted into shares of Non-Voting Common Stock, into 100 shares of the Company’s common stock upon transfer of such shares of Series C Preferred Stock to a non-affiliate of the holder in specified permitted transactions.

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Benefit Plans

12 Months Ended

Dec. 31, 2019

Benefit Plans [Abstract]

Benefit Plans

NOTE 12 – BENEFIT PLANS

Multi-employer pension plan:

CFBank participates in the Pentegra Defined Benefit Plan for Financial Institutions (the “Pentegra DB Plan”), a multi-employer contributory trusteed pension plan.  The retirement benefits to be provided by the plan were frozen as of June 30, 2003 and future employee participation in the plan was stopped.  The plan was maintained for all eligible employees and the benefits were funded as accrued.  The cost of funding was charged directly to operations. 

The unfunded liability under the Pentegra DB Plan at June 30, 2019 totaled $110 and at June 30, 2018 was $61.  CFBank’s contributions for the plan years ending June 30, 2019 and June 30, 2018, totaled $59 and $18, respectively.  Contributions to the plan may vary from period to period due to the change in the plan's unfunded liability. The unfunded liability is primarily related to the change in plan assets and the change in plan liability from one year to the next.  The change in plan assets is based on contributions deposited, benefits paid and the actual rate of return earned on those assets.  The change in plan liability is based on demographic changes and changes in the interest rates used to determine plan liability.  In the event the actual rate of return earned on plan assets declines, the value of the plan assets will decline.  In the event the interest rates used to determine plan liability decrease, plan liability will increase.  The combined effect of each change determines the change in the unfunded liability and the change in the employer contributions.

The Pentegra DB Plan is a tax-qualified defined-benefit pension plan.  The Pentegra DB Plan operates as a multi-employer plan for accounting purposes and as a multiple-employer plan under the Employee Retirement Income Security Act of 1974 and the Internal Revenue Code. There are no collective bargaining agreements in place that require contributions to the Pentegra DB Plan.

The Pentegra DB Plan is a single plan under Internal Revenue Code Section 413(c) and, as a result, all of the assets stand behind all of the liabilities. Accordingly, under the Pentegra DB Plan contributions made by a participating employer may be used to provide benefits to participants of other participating employers.

Funded status (market value of plan assets divided by funding target) based on valuation reports as of July 1, 2019 and 2018 was 89.69% and 94.33%, respectively. 

Total contributions made to the Pentegra DB Plan, as reported on Form 5500 of the Pentegra DB Plan, totaled $164,570 and $367,119 for the plan years ended June 30, 2018 and June 30, 2017, respectively.  CFBank’s contributions to the Pentegra DB Plan were not more than 5% of the total contributions to the Pentegra DB Plan.

401(k) Plan:

The Company sponsors a 401(k) plan that allows employee contributions up to the maximum amount allowable under federal tax regulations, which are currently matched in an amount equal to 50% of the first 6% of the compensation contributed.  Expense for 2019 and 2018 was $188 and $106, respectively.

Salary Continuation Agreement:

In 2004, CFBank entered into a nonqualified salary continuation agreement with its former Chairman Emeritus.  Benefits provided under the plan are unfunded, and payments are made by CFBank.  Under the plan, CFBank pays him, or his beneficiary, a benefit of $25 annually for 20 years, beginning 6 months after his retirement date, which was February 28, 2008.  The expense related to this plan totaled $8 and $9 in 2019 and 2018, respectively. The accrual is included in accrued interest payable and other liabilities in the consolidated balance sheets and totaled $170 at year-end 2019 and $187 at year-end 2018. 

Life Insurance Benefits:

CFBank has entered into agreements with certain employees, former employees and directors to provide life insurance benefits which are funded through life insurance policies purchased and owned by CFBank.  The expense related to these benefits totaled ($12) and ($9) in 2019 and 2018, respectively.  The accrual for CFBank’s obligation under these agreements is included in accrued interest payable and other liabilities in the consolidated balance sheets and totaled $171 at year-end 2019 and $182 at year-end 2018.

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Loan Servicing (Tables)

12 Months Ended

Dec. 31, 2019

Loan Servicing [Abstract]

Principal Balances Of Mortgage Loans At Year-End

	December 31, 2019		December 31, 2018
Mortgage loans serviced for Freddie Mac	$	2,649	$	2,999

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Derivative Instruments (Summary Of Derivative Instruments) (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2019	Dec. 31, 2018
Interest Rate Swap [Member]
Derivative Instruments, Gain (Loss) [Line Items]
Notional amount	$ 12,039	$ 1,359
Weighted average pay rate on interest-rate swaps	4.66%	3.12%
Weighted average receive rate on interest-rate swaps	4.63%	2.49%
Weighted average maturity (years)	7 years 3 months 18 days	2 years
Fair value of interest-rate swaps	$ (12)	$ (17)
Yield Maintenance Provisions [Member]
Derivative Instruments, Gain (Loss) [Line Items]
Fair value of yield maintenance provisions	$ 12	$ 17

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Income Taxes (Tables)

12 Months Ended

Dec. 31, 2019

Income Taxes [Abstract]

Income Tax Expense

	December 31, 2019		December 31, 2018
Current federal	$	2,627	$	972
Deferred federal (1)		(187)		85
Total	$	2,440	$	1,057

⁽¹⁾ Includes tax benefit of operating loss carryforwards of $34 and $34 for the years ended December 31, 2019 and 2018, respectively.

Effective Tax Rates Differ From Federal Statutory Rate

	December 31, 2019		December 31, 2018
Federal Statutory rate times financial statement income	$	2,529	$	1,119
Effect of:
Stock compensation		(18)		(13)
Bank owned life insurance income		(30)		(29)
Low income housing tax credits		(59)		(30)
Other		18		10
	$	2,440	$	1,057
Effective tax rate		20%		20%

Deferred Tax Assets And Liabilities

	2019		2018
Deferred tax assets:
Allowance for loan and lease losses	$	1,170	$	1,085
Compensation related issues		433		273
Deferred loan fees		-		6
Nonaccrual interest		55		45
Net operating loss carry forward		432		467
Operating lease liabilities		412		-
Other		-		40
		2,502		1,916
Deferred tax liabilities:
FHLB stock dividend		226		226
Deferred loan costs		7		-
Depreciation		73		82
Operating lease right-of-use assets		374		-
Other		36		-
Prepaid expenses		65		48
		781		356
Net deferred tax asset	$	1,721	$	1,560

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Stock-Based Compensation (Narrative) (Details) $ in Thousands		12 Months Ended
	Aug. 20, 2018	Dec. 31, 2019 USD ($) ShareBasedCompensationPlan shares	Dec. 31, 2018 USD ($) shares	May 29, 2019 shares	May 16, 2013 shares
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Number of stock-based compensation plans | ShareBasedCompensationPlan		2
Compensation cost | $		$ 527	$ 376
Total income tax (expense) benefit | $		$ 111	$ 79
Reverse stock split ratio	5.5
Shares granted		0	0
Shares vested		36,288
2009 Equity Compensation Plan [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Shares available to be issued					272,727
Shares remaining available		264,456
Maximum [Member] | 2019 Equity Incentive Plan
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Number of shares authorized				300,000
Stock Options [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Vesting periods exercisable from date of grant		10 years
Shares cancelled, forfeited or expired		941	1,667
Stock Options [Member] | 2009 Equity Compensation Plan [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Number of shares authorized		36,363
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]
Shares available to be issued		73,738	31,827
Unrecognized compensation cost | $		$ 1,221	$ 812
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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Derivative Instruments (Tables)

12 Months Ended

Dec. 31, 2019

Derivative Instruments [Abstract]

Summary Of Derivative Instruments

	2019		2018
Notional amount	$	12,039	$	1,359
Weighted average pay rate on interest-rate swaps		4.66%		3.12%
Weighted average receive rate on interest-rate swaps		4.63%		2.49%
Weighted average maturity (years)		7.3		2.0
Fair value of interest-rate swaps	$	(12)	$	(17)
Fair value of yield maintenance provisions	$	12	$	17

Schedule Of Mortgage Banking Derivatives

	December 31, 2019				December 31, 2018
	Notional Amount		Fair Value		Notional Amount		Fair Value
Assets (Liabilities):
Interest rate commitments	$	297,454	$	3,104	$	55,220	$	721
TBA mortgage-back securities		225,500		(350)		33,250		(342)

Schedule Of Revenue Recognized On Mortgage Activities

	December 31, 2019		December 31, 2018
Gain on loans sold	$	9,603	$	1,152
Gain (loss) from change in fair value of loans held-for-sale		1,341		373
Gain (loss) from change in fair value of derivatives		(490)		402
	$	10,454	$	1,927

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Common Stock Warrants (Details) - $ / shares	12 Months Ended
	Dec. 31, 2019	Dec. 31, 2018	Apr. 30, 2014
Class of Warrant or Right [Line Items]
Warrant, shares	0
Series B Preferred Stock [Member]
Class of Warrant or Right [Line Items]
Issuance of preferred stock	0	0
Common Stock [Member]
Class of Warrant or Right [Line Items]
Warrants issued	1,152,125
Warrant exercise period	5 years
Common Stock [Member] | 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]
Issuance of preferred stock			480,000

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Income Taxes (Deferred Tax Assets and Liabilities) (Details) - USD ($) $ in Thousands	Dec. 31, 2019	Dec. 31, 2018
Deferred tax assets:
Allowance for loan and lease losses	$ 1,170	$ 1,085
Compensation related issues	433	273
Deferred loan fees		6
Nonaccrual interest	55	45
Net operating loss carryforward	432	467
Operating lease liabilities	412
Other		40
Gross deferred tax assets	2,502	1,916
Deferred tax liabilities:
FHLB stock dividend	226	226
Deferred loan costs	7
Depreciation	73	82
Operating lease right-of-use assets	374
Other	36
Prepaid expenses	65	48
Deferred tax liabilities	781	356
Net deferred tax asset	$ 1,721	$ 1,560

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Loans And Leases (Recorded Investment In Loans By Risk Category And Class Of Loans) (Details) - USD ($) $ in Thousands		Dec. 31, 2019	Dec. 31, 2018
Financing Receivable, Recorded Investment [Line Items]
Loans		$ 670,441	$ 557,695
Not Rated [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans		146,611	150,940
Pass [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans		512,955	396,427
Special Mention [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans		5,020	7,029
Substandard [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans		5,855	3,299
Doubtful [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans		0	0
Commercial Real Estate [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans	[1]	170,646	126,887
Commercial Real Estate [Member] | Pass [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans		168,617	123,369
Commercial Real Estate [Member] | Special Mention [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans		1,424	2,651
Commercial Real Estate [Member] | Substandard [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans		605	867
Single-Family Residential [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans		120,256	118,386
Single-Family Residential [Member] | Not Rated [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans		119,707	118,219
Single-Family Residential [Member] | Substandard [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans		549	167
Multi-Family Residential [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans		39,229	47,651
Multi-Family Residential [Member] | Pass [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans		39,081	47,072
Multi-Family Residential [Member] | Special Mention [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans			425
Multi-Family Residential [Member] | Substandard [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans		148	154
Real Estate Commercial [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans		247,543	173,435
Non-Owner Occupied [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans		140,451	122,465
Non-Owner Occupied [Member] | Not Rated [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans		67	76
Non-Owner Occupied [Member] | Pass [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans		134,466	119,843
Non-Owner Occupied [Member] | Special Mention [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans		1,498	1,701
Non-Owner Occupied [Member] | Substandard [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans		4,420	845
Owner Occupied [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans		81,871	43,087
Owner Occupied [Member] | Pass [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans		79,773	39,747
Owner Occupied [Member] | Special Mention [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans		2,098	2,252
Owner Occupied [Member] | Substandard [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans			1,088
Land [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans		25,221	7,883
Land [Member] | Pass [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans		25,221	7,883
Construction [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans		67,652	61,792
Construction [Member] | Not Rated [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans		1,855	3,279
Construction [Member] | Pass [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans		65,797	58,513
Home Equity Lines Of Credit [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans		20,941	23,961
Originated For Portfolio [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans		20,735	23,593
Originated For Portfolio [Member] | Not Rated [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans		20,681	23,525
Originated For Portfolio [Member] | Substandard [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans		54	68
Purchased For Portfolio [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans		206	368
Purchased For Portfolio [Member] | Not Rated [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans		127	279
Purchased For Portfolio [Member] | Substandard [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans		79	89
Other Consumer [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans		4,174	5,583
Other Consumer [Member] | Not Rated [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans		$ 4,174	5,562
Other Consumer [Member] | Substandard [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans			$ 21

[1] Includes $4,779 and $5,403 of commercial leases at December 31, 2019 and December 31, 2018, respectively.

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Loans And Leases (Individually Evaluated For Impairment By Class Of Loans) (Details) - USD ($) $ in Thousands		12 Months Ended
		Dec. 31, 2019	Dec. 31, 2018
Financing Receivable, Impaired [Line Items]
Impaired Financing Receivable, with No Related Allowance, Unpaid Principal Balance			$ 379
Impaired Financing Receivable, with Related Allowance, Unpaid Principal Balance		$ 4,612	3,036
Impaired Financing Receivable, Unpaid Principal Balance, Total		4,612	3,415
Impaired Financing Receivable, with No Related Allowance, Recorded Investment			125
Impaired Financing Receivable, with Related Allowance, Recorded Investment		4,612	3,036
Impaired Financing Receivable, Recorded Investment, Total		4,612	3,161
Impaired Financing Receivable, ALLL Allocated		35	22
Impaired Financing Receivable, with No Related Allowance, Average Recorded Investment		111	130
Impaired Financing Receivable, with Related Allowance, Average Recorded Investment		4,394	3,266
Impaired Financing Receivable, Average Recorded Investment, Total		4,505	3,396
Impaired Financing Receivable, with no Related Allowance, Interest Income Recognized		6	21
Impaired Financing Receivable, with Related Allowance, Interest Income Recognized		160	174
Impaired Financing Receivable, Interest Income Recognized, Total		166	195
Commercial Real Estate [Member]
Financing Receivable, Impaired [Line Items]
Impaired Financing Receivable, with Related Allowance, Unpaid Principal Balance	[1]	85	100
Impaired Financing Receivable, with Related Allowance, Recorded Investment	[1]	85	100
Impaired Financing Receivable, ALLL Allocated	[1]	1
Impaired Financing Receivable, with Related Allowance, Average Recorded Investment	[1]	92	185
Impaired Financing Receivable, with Related Allowance, Interest Income Recognized	[1]		4
Single-Family Residential [Member]
Financing Receivable, Impaired [Line Items]
Impaired Financing Receivable, with Related Allowance, Unpaid Principal Balance	[1]	107	110
Impaired Financing Receivable, with Related Allowance, Recorded Investment	[1]	107	110
Impaired Financing Receivable, ALLL Allocated	[1]	1
Impaired Financing Receivable, with Related Allowance, Average Recorded Investment	[1]	108	113
Impaired Financing Receivable, with Related Allowance, Interest Income Recognized	[1]	6	6
Non-Owner Occupied [Member]
Financing Receivable, Impaired [Line Items]
Impaired Financing Receivable, with Related Allowance, Unpaid Principal Balance		4,420	2,826
Impaired Financing Receivable, with Related Allowance, Recorded Investment		4,420	2,826
Impaired Financing Receivable, ALLL Allocated		33	22
Impaired Financing Receivable, with Related Allowance, Average Recorded Investment		4,194	2,837
Impaired Financing Receivable, with Related Allowance, Interest Income Recognized		154	157
Owner Occupied [Member]
Financing Receivable, Impaired [Line Items]
Impaired Financing Receivable, with No Related Allowance, Unpaid Principal Balance			379
Impaired Financing Receivable, with No Related Allowance, Recorded Investment			125
Impaired Financing Receivable, with No Related Allowance, Average Recorded Investment		111	130
Impaired Financing Receivable, with Related Allowance, Average Recorded Investment			131
Impaired Financing Receivable, with no Related Allowance, Interest Income Recognized		$ 6	21
Impaired Financing Receivable, with Related Allowance, Interest Income Recognized			$ 7

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

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Benefit Plans (Details) - USD ($) $ in Thousands			12 Months Ended
	Jun. 30, 2018	Jun. 30, 2017	Dec. 31, 2019	Jun. 30, 2019	Dec. 31, 2018	Jun. 30, 2018	Jun. 30, 2017	Jul. 01, 2019	Jul. 01, 2018
Life Insurance Benefits [Member]
Defined Benefit Plans and Other Postretirement Benefit Plans Table Text Block [Line Items]
Benefit plan expense			$ (12)		$ (9)
Accrued interest payable and other liabilities Total			$ 171		182
401 (k) plan [Member]
Defined Benefit Plans and Other Postretirement Benefit Plans Table Text Block [Line Items]
Percentage of amount allowable under federal tax regulations			50.00%
Percentage of compensation contributed under federal tax regulations			6.00%
Benefit plan expense			$ 188		106
Salary Continuation Agreement [Member]
Defined Benefit Plans and Other Postretirement Benefit Plans Table Text Block [Line Items]
Benefit plan expense			8		9
Accrued interest payable and other liabilities Total			170		$ 187
Annual benefit for 20 years			$ 25
Duration of Annual benefit			20 years
Multi-employer pension plan [Member]
Defined Benefit Plans and Other Postretirement Benefit Plans Table Text Block [Line Items]
Unfunded liability	$ 61			$ 110		$ 61
CFBank's contributions				$ 59		18
Funded status								89.69%	94.33%
Total contributions made to Pentegra DB Plan						$ 164,570	$ 367,119
Percentage of amount allowable under federal tax regulations	5.00%	5.00%

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Stock-Based Compensation

12 Months Ended

Dec. 31, 2019

Stock-Based Compensation [Abstract]

Stock-Based Compensation

NOTE 15 – STOCK-BASED COMPENSATION

The Company has two 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 $527 and $376 for 2019 and 2018, respectively.  The total income tax benefit was $111 and $79 for 2019 and 2018, respectively.  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 2009 Equity Compensation Plan (the “2009 Plan”), which was approved by stockholders on May 21, 2009, replaced the Company’s 2003 equity compensation plan (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 2009 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 no stock options granted or exercised during the years ended December 31, 2019 and December 31, 2018. 

A summary of stock option activity in the Plans for 2019 follows:

	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	(941)		8.19
Outstanding at end of period	95,438	$	7.64	3.4	$	604
Exercisable at end of period	95,438	$	7.64	3.4	$	604

During the years ended December 31, 2019 and 2018, there were 941 and 1,667 stock options canceled or forfeited, respectively.  Expense associated with unvested forfeited shares is reversed.  As of December 31, 2019 and 2018, 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 73,738 shares of restricted stock issued in 2019 and 31,827 shares of restricted stock issued in 2018. 

A summary of changes in the Company’s nonvested restricted shares for the year follows:

Nonvested Shares	Shares	Weighted Average Grant-Date Fair Value
Nonvested at January 1, 2019	69,324	$	11.91
Granted	73,738		13.35
Vested	(36,288)		11.38
Forfeited	(3,858)		12.37
Nonvested at December 31, 2019	102,916	$	13.11

As of December 31, 2019 and 2018, the unrecognized compensation cost related to nonvested shares granted under the Plans was $1,221 and $812, respectively.   There were 36,288 shares that vested during the year ended December 31, 2019.

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 264,456 shares remaining available for awards of stock option grants, stock appreciation rights, restricted stock awards or restricted stock units under the 2019 Plan at December 31, 2019. 

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Subordinated Debentures

12 Months Ended

Dec. 31, 2019

Subordinated Debentures [Abstract]

Subordinated Debentures

NOTE 11 – 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 (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 plus 2.85%, which was 4.81% at year-end 2019 and 5.65% at year-end 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 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 December 31, 2019, the balance of the subordinated notes, net of unamortized debt issuance costs, was $9,651.

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Derivative Instruments

12 Months Ended

Dec. 31, 2019

Derivative Instruments [Abstract]

Derivative Instruments

NOTE 19 – 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 $12,039 at December 31, 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 December 31, 2019, CFBank had $77 in securities pledged as collateral for these derivatives. Should the liability increase beyond the collateral value, CFBank may 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 December 31, 2019, CFBank was well-capitalized under regulatory capital standards.

Summary information about the derivative instruments is as follows:

	2019		2018
Notional amount	$	12,039	$	1,359
Weighted average pay rate on interest-rate swaps		4.66%		3.12%
Weighted average receive rate on interest-rate swaps		4.63%		2.49%
Weighted average maturity (years)		7.3		2.0
Fair value of interest-rate swaps	$	(12)	$	(17)
Fair value of yield maintenance provisions	$	12	$	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 in 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 $297,454 and $55,220 of interest rate lock commitments related to residential mortgage loans at December 31, 2019 and December 31, 2018, respectively.  The fair value of these mortgage banking derivatives was reflected by a derivative asset of $3,104 and $721 at December 31, 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 30-60 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 Company had approximately $225,500 and $33,250 of TBA mortgage-backed securities at December 31, 2019 and December 31, 2018, respectively.  The fair value of these TBA mortgage-backed securities was ($350) and ($342) at December 31, 2019 and December 31, 2018, respectively, which is included in other liabilities on the consolidated balance sheet.  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):

	December 31, 2019				December 31, 2018
	Notional Amount		Fair Value		Notional Amount		Fair Value
Assets (Liabilities):
Interest rate commitments	$	297,454	$	3,104	$	55,220	$	721
TBA mortgage-back securities		225,500		(350)		33,250		(342)

The following table represents the revenue recognized on mortgage activities for the years ended December 31, 2019 and 2018:

	December 31, 2019		December 31, 2018
Gain on loans sold	$	9,603	$	1,152
Gain (loss) from change in fair value of loans held-for-sale		1,341		373
Gain (loss) from change in fair value of derivatives		(490)		402
	$	10,454	$	1,927

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Stock-Based Compensation (Summary Of Stock Option Activity) (Details) $ / shares in Units, $ in Thousands	12 Months Ended
	Dec. 31, 2019 USD ($) $ / shares shares
Stock-Based Compensation [Abstract]
Shares, Outstanding at beginning of year	96,379
Shares, Expired
Shares Cancelled or forfeited	(941)
Shares, Outstanding at end of period	95,438
Shares, Exercisable at end of period	95,438
Weighted Average Exercise Price, Beginning Balance | $ / shares	$ 7.65
Weighted Average Exercise Price, Cancelled or forfeited | $ / shares	8.19
Weighted Average Exercise Price, Ending Balance | $ / shares	7.64
Weighted Average Exercise Price, Exercisable at end of period | $ / shares	$ 7.64
Weighted average remaining contractual term ,Outstanding at end of period	3 years 4 months 24 days
Weighted average remaining contractual term , Exercisable at end of period	3 years 4 months 24 days
Intrinsic value, Outstanding at end of period | $	$ 604
Intrinsic Value Exercisable at end of period | $	$ 604

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Regulatory Capital Matters (Narrative) (Details) - USD ($) $ in Thousands		12 Months Ended
	Jan. 01, 2019	Dec. 31, 2019	Jan. 01, 2016
Regulatory Capital Matters [Abstract]
Future percent of common equity to risk-weighted assets	2.50%
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 Based On Required Basel 3 Rules	4.00%
Capital Conservative Buffer Phase Period		4 years
Opening balance in liquidation account		$ 14,300

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Loan Commitments And Other Related Activities (Tables)

12 Months Ended

Dec. 31, 2019

Loan Commitments And Other Related Activities [Abstract]

Contractual Amounts Of Financial Instruments With Off-Balance-Sheet Risk

	2019				2018
	Fixed Rate		Variable Rate		Fixed Rate		Variable Rate
Commitments to make loans	$	314,705	$	43,979	$	80,528	$	36,542
Unused lines of credit	$	10,678	$	55,684	$	6,218	$	50,355
Standby letters of credit	$	1,415	$	-	$	946	$	-

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Premises And Equipment And Operating Leases (Tables)

12 Months Ended

Dec. 31, 2019

Premises And Equipment And Operating Leases [Abstract]

Year-End Premises And Equipment

	December 31, 2019		December 31, 2018
Land and land improvements	$	1,293	$	1,293
Buildings		4,294		4,239
Furniture, fixtures and equipment		2,729		2,592
		8,316		8,124
Less: accumulated depreciation		(4,325)		(4,260)
	$	3,991	$	3,864

Future Minimum Operating Lease Payments

2020	$	544
2021		548
2022		536
2023		377
Thereafter		250
Total future minimum rental commitments		2,255
Less - amounts representing interest		(295)
Total operating lease liabilities	$	1,960

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Related-Party Transactions (Tables)

12 Months Ended

Dec. 31, 2019

Related-Party Transactions [Abstract]

Loans To Principal Officers, Directors And Affiliates

Beginning balance	$	3,672
New loans		3,062
Repayments		(621)
Ending balance	$	6,113

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Derivative Instruments (Schedule Of Mortgage Banking Derivatives) (Details) - USD ($) $ in Thousands	Dec. 31, 2019	Dec. 31, 2018
Interest Rate Commitments [Member]
Derivatives, Fair Value [Line Items]
Notional Amount, Assets	$ 297,454	$ 55,220
Fair Value, Derivative	3,104	721
TBA Mortgage-Back Securities [Member]
Derivatives, Fair Value [Line Items]
Notional Amount, Assets	225,500	33,250
Fair Value, Derivative	$ (350)	$ (342)

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Income Taxes (Effective Tax Rates Differ From Federal Statutory Rate) (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2019	Dec. 31, 2018
Income Taxes [Abstract]
Federal statutory income tax rate	21.00%	21.00%
Federal statutory rate times financial statement income	$ 2,529	$ 1,119
Stock compensation	(18)	(13)
Bank owned life insurance income	(30)	(29)
Low income housing tax credits	(59)	(30)
Other	18	10
Total	$ 2,440	$ 1,057
Effective tax rate	20.00%	20.00%

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Loans And Leases (Schedule Of Debtor Troubled Debt Restructuring, Subsequent Periods) (Details) - USD ($) $ in Thousands	Dec. 31, 2019	Dec. 31, 2018
Financing Receivable, Modifications [Line Items]
Nonaccrual TDRs, Total	$ 85	$ 100
Commercial Real Estate [Member]
Financing Receivable, Modifications [Line Items]
Nonaccrual TDRs, Total	$ 85	$ 100

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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		Dec. 31, 2019	Dec. 31, 2018	Dec. 31, 2017
Financing Receivable, Allowance for Credit Losses [Line Items]
Individually evaluated for impairment		$ 35	$ 22
Collectively evaluated for impairment		7,103	6,990
Total ending allowance balance		7,138	7,012	$ 6,970
Individually evaluated for impairment		4,612	3,161
Collectively evaluated for impairment		665,829	554,534
Recorded investment in loans and leases		670,441	557,695
Commercial Real Estate [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Individually evaluated for impairment		1
Collectively evaluated for impairment		2,053	1,819
Total ending allowance balance		2,054	1,819	1,984
Individually evaluated for impairment		85	100
Collectively evaluated for impairment		170,561	126,787
Recorded investment in loans and leases	[1]	170,646	126,887
Single-Family Residential [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Individually evaluated for impairment		1
Collectively evaluated for impairment		947	1,061
Total ending allowance balance		948	1,061	912
Individually evaluated for impairment		107	110
Collectively evaluated for impairment		120,149	118,276
Recorded investment in loans and leases		120,256	118,386
Multi-Family Residential [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Collectively evaluated for impairment		447	612
Total ending allowance balance		447	612	660
Collectively evaluated for impairment		39,229	47,651
Recorded investment in loans and leases		39,229	47,651
Real Estate Commercial [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Individually evaluated for impairment		33	22
Collectively evaluated for impairment		2,571	2,252
Total ending allowance balance		2,604	2,274	2,143
Individually evaluated for impairment		4,420	2,951
Collectively evaluated for impairment		243,123	170,484
Recorded investment in loans and leases		247,543	173,435
Construction [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Collectively evaluated for impairment		759	739
Total ending allowance balance		759	739	672
Collectively evaluated for impairment		67,652	61,792
Recorded investment in loans and leases		67,652	61,792
Home Equity Lines Of Credit [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Collectively evaluated for impairment		265	410
Total ending allowance balance		265	410	597
Collectively evaluated for impairment		20,941	23,961
Recorded investment in loans and leases		20,941	23,961
Other Consumer [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Collectively evaluated for impairment		61	97
Total ending allowance balance		61	97	$ 2
Collectively evaluated for impairment		4,174	5,583
Recorded investment in loans and leases		$ 4,174	$ 5,583

[1] Includes $4,779 and $5,403 of commercial leases at December 31, 2019 and December 31, 2018, respectively.

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Subordinated Debentures (Details) - USD ($) $ / shares in Units, $ in Thousands	1 Months Ended	12 Months Ended
	Dec. 31, 2018	Dec. 31, 2019	Dec. 31, 2018	Dec. 31, 2003
Subsidiary, Sale of Stock [Line Items]
Subordinated debentures	$ 14,767	$ 14,806	$ 14,767	$ 5,155
Holding Company's investment in the common stock		$ 155
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%
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 Debentures Maturing On December 30,2033 [Member]
Subsidiary, Sale of Stock [Line Items]
Maturity date		Dec. 30, 2033
Trust preferred securities and subordinated debentures have a stated percentage	5.65%	4.81%	5.65%
Subordinated [Member]
Subsidiary, Sale of Stock [Line Items]
Number of years with no principal repayment		5 years
Maximum number of years for deferred interest payments		5 years
Subordinated [Member] | Fixed-To-Floating Rate Subordinated Notes [Member] | Private Placement [Member]
Subsidiary, Sale of Stock [Line Items]
Maturity date	Dec. 30, 2028
Subordinated notes	$ 10,000		$ 10,000
Debt issuance costs	388		388
Debt issuance costs, net	$ 9,612	$ 9,651	$ 9,612
Subordinated [Member] | Fixed-To-Floating Rate Subordinated Notes [Member] | Private Placement [Member] | From December 20, 2018 To But Excluding December 30, 2023 [Member]
Subsidiary, Sale of Stock [Line Items]
Interest rate	7.00%		7.00%
London Interbank Offered Rate [Member]
Subsidiary, Sale of Stock [Line Items]
Variable rate of interest		2.85%	2.85%
London Interbank Offered Rate [Member] | Subordinated [Member] | Fixed-To-Floating Rate Subordinated Notes [Member] | Private Placement [Member] | From December 30, 2023 To But Excluding December 30, 2028 [Member]
Subsidiary, Sale of Stock [Line Items]
Variable rate of interest	4.14%

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Securities (Narrative) (Details) - USD ($)	12 Months Ended
	Dec. 31, 2019	Dec. 31, 2018
Schedule of Available-for-sale Securities [Line Items]
Other-than-temporary impairment	$ 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 held	10.00%	10.00%

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Accumulated Other Comprehensive Income (Schedule Of Accumulated Other Comprehensive Income) (Details) - USD ($) $ in Thousands		12 Months Ended
		Dec. 31, 2019	Dec. 31, 2018
Accumulated Other Comprehensive Income (Loss) [Line Items]
Accumulated other comprehensive loss, beginning of period		$ (73)
Other comprehensive income (loss), net of tax		101	$ (26)
Accumulated other comprehensive income (loss), end of period		28	(73)
Unrealized Gains and Losses on Available-for-Sale Securities [Member]
Accumulated Other Comprehensive Income (Loss) [Line Items]
Accumulated other comprehensive loss, beginning of period	[1]	(73)	(47)
Other comprehensive gain (loss) before reclassifications	[1]	101	(26)
Less amount reclassified from accumulated other comprehensive loss	[1],[2]
Other comprehensive income (loss), net of tax	[1]	101	(26)
Accumulated other comprehensive income (loss), end of period	[1]	$ 28	$ (73)

[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 years ended December 31, 2019 and December 31, 2018.

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Parent Company Only Condensed Financial Information (Tables)

12 Months Ended

Dec. 31, 2019

Parent Company Only Condensed Financial Information [Abstract]

Condensed Balance Sheets

	2019		2018
Assets
Cash and cash equivalents	$	10,037	$	2,675
Investment in banking subsidiary		88,317		62,479
Investment in and advances to other subsidiary		238		233
Other assets		2,045		1,213
Total assets	$	100,637	$	66,600
Liabilities and Equity
Subordinated debentures	$	14,806	$	14,767
Other borrowings		5,000		6,000
Accrued expenses and other liabilities		167		274
Stockholders' equity		80,664		45,559
Total liabilities and stockholders' equity	$	100,637	$	66,600

Condensed Statements Of Operations

	2019		2018
Interest income	$	-	$	-
Other income		70		95
Interest expense		1,353		604
Other expense		758		877
Loss before income tax and before undistributed subsidiary income		(2,041)		(1,386)
Tax effect		427		290
Loss after income tax and before undistributed subsidiary income		(1,614)		(1,096)
Equity in undistributed subsidiary income		11,215		5,369
Net income	$	9,601	$	4,273
Comprehensive income	$	9,702	$	4,247

Condensed Statements Of Cash Flows

	2019		2018
Cash flows from operating activities
Net Income	$	9,601	$	4,273
Adjustments:
Effect of subsidiaries' operations		(11,215)		(5,369)
Amortization, net		39		-
Change in other assets and other liabilities		(939)		95
Net cash used by operating activities		(2,514)		(1,001)
Cash flows from investing activities
Investments in banking subsidiary		(14,000)		(13,133)
Net cash used by investing activities		(14,000)		(13,133)
Cash flows from financing activities
Proceeds from other borrowings		4,000		8,000
Repayments of other borrowings		(5,000)		(2,000)
Net proceeds from issuance of subordinated debentures		-		9,612
Net proceeds from the issuance of preferred stock private placement		14,000		-
Net proceeds from the issuance of common stock private placement		9,641		-
Acquisition of treasury shares surrendered upon vesting of restricted stock for payment of taxes		(23)		(42)
Exercise of warrants to common stock		1,258		716
Net cash from financing activities		23,876		16,286
Net change in cash and cash equivalents		7,362		2,152
Beginning cash and cash equivalents		2,675		523
Ending cash and cash equivalents	$	10,037	$	2,675

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Parent Company Only Condensed Financial Information (Condensed Statements Of Operations) (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2019	Dec. 31, 2018
Interest income	$ 35,104	$ 24,886
Other income	258	160
Interest expense	13,404	6,997
Loss before income tax and before undistributed subsidiary income	12,041	5,330
Tax effect	2,440	1,057
Net income	9,601	4,273
Comprehensive income	9,702	4,247
Parent Company [Member]
Other income	70	95
Interest expense	1,353	604
Other expense	758	877
Loss before income tax and before undistributed subsidiary income	(2,041)	(1,386)
Tax effect	427	290
Loss after income tax and before undistributed subsidiary income	(1,614)	(1,096)
Equity in undistributed subsidiary income	11,215	5,369
Net income	9,601	4,273
Comprehensive income	$ 9,702	$ 4,247

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Securities (Securities With Unrealized Losses) (Details) - USD ($) $ in Thousands	Dec. 31, 2019		Dec. 31, 2018
Schedule of Available-for-sale Securities [Line Items]
Less than 12 Months, Fair Value	$ 499		$ 499
Less than 12 Months, Unrealized Loss			1
12 Months or More, Fair Value	2,501		8,401
12 Months or More, Unrealized Loss	1		98
Total, Fair Value	3,000		8,900
Total, Unrealized Loss	1		99
U.S. Treasury [Member]
Schedule of Available-for-sale Securities [Line Items]
Less than 12 Months, Fair Value	499	[1]	499
Less than 12 Months, Unrealized Loss			1
12 Months or More, Fair Value	2,501	[1]	8,401
12 Months or More, Unrealized Loss	1	[1]	98
Total, Fair Value	3,000	[1]	8,900
Total, Unrealized Loss	$ 1	[1]	$ 99

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

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Derivative Instruments (Schedule Of Revenue Recognized On Mortgage Activities) (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2019	Dec. 31, 2018
Derivative Instruments [Abstract]
Gain on loans sold	$ 9,603	$ 1,152
Gain (loss) from change in fair value of loans held-for-sale	1,341	373
Gain (loss) from change in fair value of derivatives	(490)	402
Gain (loss) recognized in income	$ 10,454	$ 1,927

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Consolidated Statements Of Income - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2019	Dec. 31, 2018
Interest and dividend income
Loans and leases, including fees	$ 33,778	$ 23,855
Securities	172	185
FHLB and FRB stock dividends	207	196
Federal funds sold and other	947	650
Total interest and dividend income	35,104	24,886
Interest expense
Deposits	11,684	6,102
FHLB advances and other debt	704	611
Subordinated debentures	1,016	284
Total interest expense	13,404	6,997
Net interest income	21,700	17,889
Provision for loan and lease losses
Net interest income after provision for loan and lease losses	21,700	17,889
Noninterest income
Service charges on deposit accounts	553	491
Net gains on sales of loans	10,767	1,927
Earnings on bank owned life insurance	142	138
Other	258	160
Total noninterest income	11,720	2,716
Noninterest expense
Salaries and employee benefits	11,170	8,199
Occupancy and equipment	965	792
Data processing	1,350	1,027
Franchise and other taxes	454	345
Professional fees	1,855	1,275
Director fees	547	413
Postage, printing and supplies	225	189
Advertising and marketing	2,829	1,393
Telephone	201	158
Loan expenses	232	116
Foreclosed assets, net	(9)	6
Depreciation	316	248
FDIC premiums	529	485
Regulatory assessment	165	146
Other insurance	99	86
Other	451	397
Total noninterest expense	21,379	15,275
Income before incomes taxes	12,041	5,330
Income tax expense	2,440	1,057
Net income	$ 9,601	$ 4,273
Earnings per common share:
Basic	$ 2.05	$ 1.02
Diluted	$ 2.03	$ 1.00

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Premises And Equipment And Operating Leases (Year-End Premises And Equipment) (Details) - USD ($) $ in Thousands	Dec. 31, 2019	Dec. 31, 2018
Premises And Equipment And Operating Leases [Abstract]
Land and land improvements	$ 1,293	$ 1,293
Buildings	4,294	4,239
Furniture, fixtures and equipment	2,729	2,592
Premises and equipment, gross	8,316	8,124
Less: accumulated depreciation	(4,325)	(4,260)
Premises and equipment, net	$ 3,991	$ 3,864

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Fair Value (Narrative) (Details) - USD ($) $ in Thousands	Dec. 31, 2019	Dec. 31, 2018
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Unpaid principal balance of impairment loan at collateral	$ 4,612	$ 3,036
Valuation allowance	35	22
Fair Value, Inputs, Level 1 [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
Liabilities measured at fair value on a recurring basis	0	0
Fair Value, Inputs, Level 2 [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
Liabilities measured at fair value on a recurring basis	0	0
Fair Value, Inputs, Level 3 [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
Liabilities measured at fair value on a recurring basis	$ 0	$ 0

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Fair Value (Aggregate Fair Value, Contractual Balance And Gain Or Loss) (Details) - USD ($) $ in Thousands	Dec. 31, 2019	Dec. 31, 2018
Fair Value [Abstract]
Aggregate fair value	$ 135,711	$ 17,385
Contractual balance	133,993	17,008
Gain	$ 1,718	$ 377

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FHLB Advances And Other Debt (Narrative) (Details) - USD ($)	1 Months Ended	12 Months Ended
	Dec. 31, 2019	Dec. 31, 2019	Dec. 31, 2018	Sep. 30, 2019
Amount available of FHLB	$ 88,953,000	$ 88,953,000
London Interbank Offered Rate [Member]
Variable rate spread		2.85%	2.85%
Third-Party Bank [Member] | Term Loan [Member]
Loan	5,000,000	$ 5,000,000
Federal Reserve Bank Advances [Member]
Outstanding borrowings	0	0	$ 0
Debt instrument maximum borrowing capacity amount	65,614,000	65,614,000
Line Of Credit [Member]
Line of credit, borrowing capacity	10,000,000	10,000,000		$ 15,000,000
Line of credit outstanding	0	$ 0	0
Unused line of credit			8,000,000
Line Of Credit [Member] | Term Loan [Member]
Principal payments	125,000
Variable rate spread		0.75%
Line of credit, expiration date		Dec. 23, 2022
Line of credit outstanding	5,000,000	$ 5,000,000
Line Of Credit [Member] | Third-Party Bank [Member]
Line of credit, borrowing capacity			10,000,000
Line of credit outstanding	5,000,000	5,000,000	$ 6,000,000
Warehouse Facility [Member]
Line of credit, borrowing capacity	25,000,000	25,000,000
Line of credit outstanding	$ 7,517,000	$ 7,517,000
Minimum [Member] | Warehouse Facility [Member] | London Interbank Offered Rate [Member]
Variable rate spread		2.00%
Maximum [Member] | Warehouse Facility [Member] | London Interbank Offered Rate [Member]
Variable rate spread		4.00%

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Consolidated Statements Of Changes In Stockholders' Equity (Parenthetical) $ in Thousands	12 Months Ended
	Dec. 31, 2019 USD ($) shares	Dec. 31, 2018 shares
Issuance of stock based incentive plan, shares	73,738	31,827
Treasury stock, shares, acquired	1,705	3,535
Preferred Stock [Member]
Issuance of shares from private placement	12,337
Offering expenses | $	$ 805
Common Stock [Member]
Issuance of shares from private placement	849,615
Offering expenses | $	$ 554

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Loan Servicing

12 Months Ended

Dec. 31, 2019

Loan Servicing [Abstract]

Loan Servicing

NOTE 7 – LOAN SERVICING

Mortgage loans serviced for others are not reported as assets.  The principal balances of these loans at year-end were as follows:

	December 31, 2019		December 31, 2018
Mortgage loans serviced for Freddie Mac	$	2,649	$	2,999

Custodial escrow balances maintained in connection with serviced loans were $59 and $70 at year-end 2019 and 2018, respectively. 

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Securities

12 Months Ended

Dec. 31, 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 December 31, 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
December 31, 2019
Issued by U.S. government-sponsored entities and agencies:
U.S. Treasury	$	7,986	$	32	$	1	$	8,017
Mortgage-backed securities - residential		126		4		-		130
Collateralized mortgage obligations		27		-		-		27
Total	$	8,139	$	36	$	1	$	8,174

	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 December 31, 2019 or December 31, 2018.

There were no sales of securities for the years ended December 31, 2019 or December 31, 2018.

The amortized cost and fair value of debt securities at December 31, 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.

	December 31, 2019				December 31, 2018
	Amortized Cost		Fair Value		Amortized Cost		Fair Value
Due in one year or less	$	5,001	$	5,000	$	3,495	$	3,472
Due from one to five years		2,985		3,017		6,483		6,409
Mortgage-backed securities - residential		126		130		167		170
Collateralized mortgage obligations		27		27		62		63
Total	$	8,139	$	8,174	$	10,207	$	10,114

Fair value of securities pledged was as follows:

	2019		2018
Pledged as collateral for:
FHLB advances	$	3,074	$	4,058
Public deposits		2,015		1,997
Mortgage banking derivatives		1,500		-
Interest-rate swaps		77		104
Total	$	6,666	$	6,159

At year end 2019 and 2018, there were no holdings of securities of any one issuer, other than U.S. Treasuries and 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 December 31, 2019 and December 31, 2018 aggregated by major security type and length of time in a continuous unrealized loss position.

December 31, 2019	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)	$	499	$	-	$	2,501	$	1	$	3,000	$	1
Total temporarily impaired	$	499	$	-	$	2,501	$	1	$	3,000	$	1

⁽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 December 31, 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 will unlikely be required to sell these securities before their anticipated recovery, the Company did not consider these securities to be other-than-temporarily impaired at December 31, 2019 and December 31, 2018.

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Fair Value (Tables)

12 Months Ended

Dec. 31, 2019

Fair Value [Abstract]

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

	Fair Value Measurements at December 31, 2019 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	$	8,017
Mortgage-backed securities - residential		130
Collateralized mortgage obligations		27
Total securities available for sale	$	8,174
Loans held for sale	$	135,711
Yield maintenance provisions (embedded derivatives)	$	12
Interest rate lock commitments	$	3,104
Financial Liabilities:
Interest-rate swaps	$	12
TBA mortgage-backed securities	$	350

	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 Measured At Fair Value On A Non-Recurring Basis

Fair Value Measurements at December 31, 2019 Using
Significant Unobservable Inputs (Level 3)
Impaired loans:
Commercial	$	84
Real Estate:
Single-family residential		106
Commercial:
Non-owner occupied		4,387
Total impaired loans	$	4,577

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 December 31, 2019:

	Fair Value		Valuation Technique(s)	Unobservable Inputs	(Range) Weighted Average
Impaired loans:
Commercial	$	84	Comparable sales approach	Adjustment for differences between the comparable market transactions	2.06%
Real estate:
Single-family residential		106	Comparable sales approach	Adjustment for differences between the comparable market transactions	3.61%
Commercial:
Non-owner occupied		4,387	Comparable sales approach	Adjustment for differences between the comparable market transactions	(-2.58%,  14.00%) 2.44%

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 And Gain Or Loss

	December 31, 2019		December 31, 2018
Aggregate fair value	$	135,711	$	17,385
Contractual balance		133,993		17,008
Gain		1,718		377

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

	2019		2018
Interest income	$	2,153	$	669
Interest expense		-		-
Change in fair value		1,341		373
Total change in fair value	$	3,494	$	1,042

Carrying Amounts And Estimated Fair Values Of Financial Instruments

The carrying amounts and estimated fair values of financial instruments at year-end were as follows:

	Fair Value Measurements at December 31, 2019 Using:
	Carrying
	Value		Level 1		Level 2		Level 3		Total
Financial assets
Cash and cash equivalents	$	45,879	$	45,879	$	-	$	-	$	45,879
Interest-bearing deposits in other financial institutions		100		100		-		-		100
Securities available for sale		8,174		-		8,174		-		8,174
Loans held for sale		135,711		-		135,711		-		135,711
Loans and leases, net		663,303		-		-		664,152		664,152
FHLB and FRB stock		4,008		n/a		n/a		n/a		n/a
Accrued interest receivable		2,749		25		40		2,684		2,749
Yield maintenance provisions (embedded derivatives)		12		-		12		-		12
Interest rate lock commitments		3,104		-		3,104		-		3,104
Financial liabilities
Deposits	$	(746,323)	$	(382,173)	$	(367,375)	$	-	$	(749,548)
FHLB advances and other debt		(29,017)		-		(29,669)		-		(29,669)
Advances by borrowers for taxes and insurance		(929)		-		-		(929)		(929)
Subordinated debentures		(14,806)		-		(15,940)		-		(15,940)
Accrued interest payable		(208)		-		(208)		-		(208)
Interest-rate swaps		(12)		-		(12)		-		(12)
TBA mortgage-backed securities		(350)		-		(350)		-		(350)

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 debt		(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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Earnings Per Common Share

12 Months Ended

Dec. 31, 2019

Earnings Per Common Share [Abstract]

Earnings Per Common Share

NOTE 22 – 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 (certain unvested share-based awards and Series C preferred stock outstanding) according to dividends declared (or accumulated) and participation rights in undistributed earnings.  The factors used in the earnings per share computation follow:

	December 31, 2019		December 31, 2018
Basic
Net income	$	9,601	$	4,273
Dividends on Series B preferred stock, accretion of discount and value of warrants exercised		219		62
Earnings allocated to participating securities (Series C preferred stock)		(430)		-
Net income allocated to common stockholders	$	9,390	$	4,335
Weighted average common shares outstanding including unvested share-based payment awards (1)		4,582,997		4,260,617
Less: Unvested share-based payment awards		(1,532)		-
Average shares		4,581,465		4,260,617
Basic earnings per common share	$	2.05	$	1.02
Diluted
Net earnings allocated to common stockholders	$	9,390	$	4,335
Add back: Preferred Dividends on Series B stock and accretion of discount		-		-
Net earnings allocated to common stockholders	$	9,390	$	4,335
Weighted average common shares outstanding for basic earnings per common share  (1)		4,581,465		4,260,617
Add: Dilutive effects of assumed exercises of stock options		38,620		40,903
Add: Dilutive effects of assumed exercises of stock warrants		6,947		42,210
Add:  Dilutive effects of unvested share-based payment awards		1,532		-
Average shares and dilutive potential common shares		4,628,564		4,343,730
Diluted earnings per common share	$	2.03	$	1.00

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

The following potential common shares were anti-dilutive and not considered in computing diluted earnings per common share.

	2019	2018
Stock options	463	792

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Summary Of Significant Accounting Policies (Policy)

12 Months Ended

Dec. 31, 2019

Summary Of Significant Accounting Policies [Abstract]

Nature Of Operations And Principles Of Consolidation

Nature of Operations and Principles of Consolidation: 

The consolidated financial statements include Central Federal Corporation (the “Holding Company”) and its wholly-owned subsidiary, CFBank, National Association (“CFBank”).  On December 1, 2016, CFBank converted from a federal savings institution to a national bank.  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.  The Holding Company and CFBank are sometimes collectively referred to herein as the “Company”.  Intercompany transactions and balances are eliminated in consolidation. 

CFBank provides financial services through its six full-service banking offices in Worthington, Fairlawn, Glendale, Blue Ash, Calcutta, and Wellsville, Ohio, and through its loan production office in Columbus, Ohio and its agency office in Woodmere, Ohio.  Its primary deposit products are commercial and retail checking, savings, money market and term certificate accounts. Its primary lending products are commercial and commercial real estate, residential mortgages and installment loans.  There are no significant concentrations of loans to any one industry or customer segment.  However, our customers’ ability to repay their loans is dependent on general economic conditions and the real estate values in their geographic areas. 

Use Of Estimates

Use of Estimates:  To prepare financial statements in conformity with U.S. generally accepted accounting principles (GAAP), management makes estimates and assumptions based on available information. These estimates and assumptions affect the amounts reported in the financial statements and the disclosures provided, and actual results could differ. The allowance for loan and lease losses (ALLL), deferred tax assets and fair values of financial instruments are particularly subject to change.

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 split as though it had occurred prior to the earliest period presented.

Cash Flows

Cash Flows:  Cash and cash equivalents include cash, deposits with other financial institutions with maturities fewer than 90 days and federal funds sold.  Net cash flows are reported for customer loan and deposit transactions, interest-bearing deposits in other financial institutions and borrowings with original maturities under 90 days.

Cash In Excess Of FDIC Limits

Cash in Excess of FDIC Limits:  At December 31, 2019, the Company’s cash accounts exceeded federally insured limits by approximately $41.6 million.  Approximately $37.5 million of that amount was held by either the Federal Reserve Bank or the Federal Home Loan Bank of Cincinnati, which is not federally insured.

Interest-Bearing Deposit In Other Financial Institution

Interest-Bearing Deposit in Other Financial Institution:  Interest-bearing deposits in other financial institutions mature in April, 2022 and are carried at cost.  As of December 31, 2019 and December 31, 2018, there was $100 in an interest-bearing deposit in other financial institutions.

Securities

Securities:  Debt securities are classified as available for sale when they might be sold before maturity. Equity securities with readily determinable fair values are classified as available for sale.  Securities available for sale are carried at fair value, with unrealized holding gains and losses reported in other comprehensive income. 

Interest income includes amortization of purchase premium or accretion of discount.  Premiums and discounts on securities are amortized or accreted on the level-yield method, except for mortgage-backed securities and collateralized mortgage obligations where prepayments are anticipated based on industry payment trends.  Gains and losses on sales are recorded on the trade date and determined using the specific identification method.

Management evaluates securities for other-than-temporary impairment (OTTI) at least on a quarterly basis, and more frequently when economic or market conditions warrant such an evaluation.  For securities in an unrealized loss position, management considers the extent and duration of the unrealized loss and the financial condition and near-term prospects of the issuer.  Management also assesses whether it intends to sell, or will more likely than not be required to sell, a security in an unrealized loss position before recovery of its amortized cost basis. If either of the criteria regarding intent or requirement to sell is met, the entire difference between amortized cost and fair value is recognized as impairment through earnings.  For debt securities that do not meet the aforementioned criteria, the amount of impairment is split into two components as follows: 1) OTTI related to credit loss, which must be recognized in the income statement and 2) OTTI related to other factors, which is recognized in other comprehensive income.  The credit loss is defined as the difference between the present value of the cash flows expected to be collected and the amortized cost basis. For equity securities, the entire amount of impairment is recognized through earnings.

Loans Held For Sale

Loans Held for Sale:  Mortgage loans originated and intended for sale in the secondary market are carried at fair value, as determined by outstanding commitments from investors. Mortgage loans held for sale are generally sold with servicing rights released.  The carrying value of mortgage loans sold is reduced by the amount allocated to the servicing rights when mortgage loans held for sale are sold with servicing rights retained.  Loans originated as construction loans, that were subsequently transferred to held for sale, are carried at the lower of cost or market.  Gains and losses on sales of mortgage loans are based on the difference between the selling price and the carrying value of the related loan sold.

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.

Concentration Of Credit Risk

Concentration of Credit Risk:  Most of the Company’s primary business activity is with customers located within the Ohio counties of Franklin, Hamilton, Cuyahoga, Summit, Columbiana and contiguous counties.  Therefore, the Company’s exposure to credit risk can be affected by changes in the economies within these counties.  Although these counties are the Company’s primary market area for loans, the Company originates residential and commercial real estate loans throughout the United States. 

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 substandard loans within the commercial, multi-family residential and commercial real estate segments, regardless of size, and loans of all other risk classifications 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.

The following portfolio segments have been identified:  commercial loans; single-family residential real estate loans; multi-family residential real estate loans; commercial real estate loans; construction loans; home equity lines of credit; and other consumer loans. A description of each segment of the loan portfolio, along with the risk characteristics of each segment, is included below.

Commercial loans:  Commercial loans and direct financing leases include loans and leases to businesses generally located within our primary market area. Those loans and leases are typically secured by business equipment, inventory, accounts receivable and other business assets.  In underwriting commercial loans, we consider the net operating income of the borrower, the debt service ratio and the financial strength, expertise and credit history of the business owners and/or guarantors.  Because payments on commercial loans are dependent on successful operation of the business enterprise, repayment of such loans may be subject to a greater extent to adverse conditions in the economy.  We seek to mitigate these risks through underwriting policies which require such loans to be qualified at origination on the basis of the borrower’s financial performance and the financial strength of the business owners and/or guarantors.

Single-family residential real estate loans:  Single-family residential real estate loans include permanent conventional mortgage loans secured by single-family residences that we originate for portfolio and purchased loans located primarily within our primary market area. Credit approval for single-family residential real estate loans requires demonstration of sufficient income to repay the principal and interest and the real estate taxes and insurance, stability of employment and an established credit record.  Our policy is to originate quality loans that are evaluated for risk based on the borrower’s ability to repay the loan.  Collateral positions are established by obtaining independent appraisal opinions.  Mortgage insurance is generally required when the LTV exceeds 80%.

Multi-family residential real estate loans:  Multi-family residential real estate loans include loans secured by apartment buildings, condominiums and multi-family residential houses generally located within our primary market area. Underwriting policies provide that multi-family residential real estate loans generally may be made in amounts up to 85% of the lower of the appraised value or purchase price of the property.  In underwriting multi-family residential real estate loans, we consider the appraised value and net operating income of the property, the debt service ratio and the property owner’s and/or guarantor’s financial strength, expertise and credit history. We offer both fixed-rate and adjustable-rate loans. Fixed-rate loans are generally limited to three to five years, at which time they convert to adjustable-rate loans. Because payments on loans secured by multi-family residential properties are dependent on successful operation or management of the properties, repayment of multi-family residential real estate loans may be subject to a greater extent to adverse conditions in the real estate market or the economy.  Adjustable-rate multi-family residential real estate loans generally pose credit risks not inherent in fixed-rate loans, primarily because as interest rates rise, the borrowers’ payments rise, increasing the potential for default. Additionally, adjustable-rate multi-family residential real estate loans generally do not contain periodic and lifetime caps on interest rate changes.  We seek to minimize the additional risk presented by adjustable-rate multi-family residential real estate loans through underwriting criteria that require such loans to be qualified at origination with sufficient debt coverage ratios under increasing interest rate scenarios.

Commercial real estate loans:  Commercial real estate loans include loans secured by owner occupied and non-owner occupied properties used for business purposes, such as manufacturing facilities, office buildings or retail facilities generally located within our primary market area.  Underwriting policies provide that commercial real estate loans may be made in amounts up to 85% of the lower of the appraised value or purchase price of the property. In underwriting commercial real estate loans, we consider the appraised value and net operating income of the property, the debt service ratio and the property owner’s and/or guarantor’s financial strength, expertise and credit history. We offer both fixed and adjustable-rate loans. Fixed-rate loans are generally limited to three to five years, at which time they convert to adjustable-rate loans. Because payments on loans secured by commercial real estate properties are dependent on successful operation or management of the properties, repayment of commercial real estate loans may be subject to a greater extent to adverse conditions in the real estate market or the economy.  Adjustable-rate commercial real estate loans generally pose credit risks not inherent in fixed-rate loans, primarily because as interest rates rise, the borrowers’ payments rise, increasing the potential for default. Additionally, adjustable-rate commercial real estate loans generally do not contain periodic and lifetime caps on interest rate changes.  We seek to minimize the additional risk presented by adjustable-rate commercial real estate loans through underwriting criteria that require such loans to be qualified at origination with sufficient debt coverage ratios under increasing interest rate scenarios.

Construction loans:  Construction loans include loans to finance the construction of residential and commercial properties generally located within our primary market area. Construction loans are fixed-rate or adjustable-rate loans which may convert to permanent loans with maturities of up to 30 years.  Our policies provide that construction loans may generally be made in amounts up to 80% of the appraised value of the property, and an independent appraisal of the property is required.  Loan proceeds are disbursed in increments as construction progresses and as inspections warrant, and regular inspections are required to monitor the progress of construction.  In underwriting construction loans, we consider the property owner’s and/or guarantor’s financial strength, expertise and credit history. Construction financing is considered to involve a higher degree of credit risk than long-term financing on improved, owner occupied real estate.  Risk of loss on a construction loan is dependent largely upon the accuracy of the initial estimate of the property’s value at completion of construction or development compared to the estimated cost (including interest) of construction.  If the estimate of value proves to be inaccurate, we may be confronted with a project, when completed, having a value which is insufficient to assure full repayment.  We attempt to reduce such risks on construction loans through inspections of construction progress on the property and by requiring personal guarantees and reviewing current personal financial statements and tax returns, as well as other projects of the developer.

Home equity lines of credit:  Home equity lines of credit include both loans we originate for portfolio and purchased loans.  We originate home equity lines of credit to customers generally within our primary market area.  Home equity lines of credit are variable rate loans and the interest rate adjusts monthly at various margins to the prime rate of interest as disclosed in The Wall Street Journal. The margin is based on certain factors including the loan balance, value of collateral, election of auto-payment, and the borrower’s FICO® score.  The amount of the line is based on the borrower’s credit, income and equity in the home.  When combined with the balance of the prior mortgage liens, these lines generally may not exceed 89.9% of the appraised value of the property at the time of the loan commitment.  The lines are secured by a subordinate lien on the underlying real estate and are, therefore, vulnerable to declines in property values in the geographic areas where the properties are located.  Credit approval for home equity lines of credit requires income sufficient to repay principal and interest due, stability of employment, an established credit record and sufficient collateral.  Collectability of home equity lines of credit are dependent on the borrower's continuing financial stability, and thus are more likely to be affected by adverse personal circumstances.  We continue to monitor collateral values and borrower FICO® scores on both purchased and portfolio loans and, when the situation warrants, have frozen the lines of credit.

Other consumer loans:  Other consumer loans include closed-end home equity, home improvement, auto, credit card loans and any purchased loans to consumers generally located within our primary market area.  Credit approval for other consumer loans requires income sufficient to repay principal and interest due, stability of employment, an established credit record and sufficient collateral for secured loans.  Consumer loans typically have shorter terms and lower balances with higher yields as compared to real estate mortgage loans, but generally carry higher risks of default. Consumer loan collections are dependent on the borrower's continuing financial stability, and thus are more likely to be affected by adverse personal circumstances.

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.

Transfers Of Financial Assets

Transfers of Financial Assets:  Transfers of financial assets are accounted for as sales when control over the assets has been relinquished.  Control over transferred assets is deemed to be surrendered when the assets have been isolated from the Company, the transferee obtains the right (free of conditions that constrain it from taking advantage of that right) to pledge or exchange the transferred assets, and the Company does not maintain effective control over the transferred assets through an agreement to repurchase them before their maturity. 

Foreclosed Assets

Foreclosed Assets:  Assets acquired through or instead of loan foreclosure are initially recorded at fair value less costs to sell when acquired, establishing a new cost basis.  These assets are subsequently accounted for at lower of cost or fair value less estimated costs to sell.  If fair value declines subsequent to foreclosure, an adjustment is recorded through expense.  Operating costs after acquisition are expensed.

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 is expected to receive historic tax credits (HTC) pursuant to Section 47 of the Internal Revenue Code.  The Company expects to receive 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 investment 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 December 31, 2019.  The maximum exposure to loss related to these investments was $894 at December 31, 2019, representing the Company’s investment balance. 

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. The balance outstanding in joint ventures at December 31, 2019 and December 31, 2018 was $1,000 and $595, respectively.  Income recognized on the joint ventures was $57 and $69, respectively, for 2019 and 2018.

Premises And Equipment

Premises and Equipment:  Land is carried at cost.  Premises and equipment are stated at cost less accumulated depreciation.  Buildings and related components are depreciated using the straight‑line method with useful lives ranging from 3 to 40 years. Furniture, fixtures and equipment are depreciated using the straight‑line method with useful lives ranging from 2 to 25 years. Leasehold improvements are depreciated straight-line over the shorter of the useful life or the lease term.

Federal Home Loan Bank (FHLB) Stock

Federal Home Loan Bank (FHLB) stock:  CFBank is a member of the FHLB system.  Members are required to own a certain amount of stock based on the level of borrowings and other factors, and may invest in additional amounts.  FHLB stock is carried at cost, classified as a restricted security, and periodically evaluated for impairment based on ultimate recovery of par value.  Both cash and stock dividends are reported as income.

Federal Reserve Bank (FRB) Stock

Federal Reserve Bank (FRB) stock:  CFBank is a member of the FRB system and is required to own a certain amount of stock.  FRB stock is carried at cost, classified as a restricted security, and periodically evaluated for impairment based on ultimate recovery of par value.  Both cash and stock dividends are reported as income.

Bank Owned Life Insurance

Bank Owned Life Insurance:  CFBank purchased life insurance policies on certain directors and employees in 2002.  Bank owned life insurance is recorded at the amount that can be realized under the insurance contract at the balance sheet date, which is the cash surrender value adjusted for other charges or other amounts due that are probable at settlement.

Loan Commitments And Related Financial Instruments

Loan Commitments and Related Financial Instruments:  Financial instruments include off‑balance-sheet credit instruments, such as commitments to make loans and commercial letters of credit, issued to meet customer financing needs.  The face amount for these items represents the exposure to loss, before considering customer collateral or ability to repay.  Such financial instruments are recorded when they are funded, and fees associated with origination are booked to non-interest income at the origination date.

Derivatives

Derivatives:  Derivative financial instruments are recognized as assets or liabilities at fair value.  The Company's derivatives consist mainly of interest rate swap agreements, which are used as part of its asset liability management program to help manage interest rate risk.  The Company does not use derivatives for trading purposes.  The derivative transactions are considered instruments with no hedging designation, otherwise known as stand-alone derivatives.  Changes in the fair value of the derivatives are reported currently in earnings, as other noninterest income.

Mortgage Banking Derivatives

Mortgage Banking Derivatives:  Commitments to fund mortgage loans to be sold into the secondary market, otherwise known as interest rate locks, are accounted for as free standing derivatives.  Mortgage banking activities include two types of commitments: rate lock commitments and forward loan commitments.  Fair values of these mortgage derivatives are based on anticipated gains on the underlying loans.  Changes in the fair values of these derivatives are included in net gains on sales of loans.

Stock-Based Compensation

Stock-Based Compensation:  Compensation cost is recognized for stock options and restricted stock awards issued to directors and employees, based on the fair value of these awards at the date of grant. A Black-Scholes model is utilized to estimate the fair value of stock options, while the market price of the Company’s common stock at the date of grant is used for restricted stock awards. Compensation cost is recognized over the required service period, generally defined as the vesting period.  For awards with graded vesting, compensation cost is recognized on a straight-line basis over the required service period for each separately vesting portion of the award.  Forfeitures are recognized as incurred.

Income Taxes

Income Taxes:  Income tax expense is the total of the current year income tax due or refundable and the change in deferred tax assets and liabilities.  Deferred tax assets and liabilities are the expected future tax amounts for the temporary differences between carrying amounts and tax basis of assets and liabilities, computed using enacted tax rates. 

A tax position is recognized as a benefit only if it is “more likely than not” that the tax position would be sustained in a tax examination, with a tax examination being presumed to occur.  The amount recognized is the largest amount of tax benefit that is greater than 50% likely of being realized on examination.  For tax positions not meeting the “more likely than not” test, no tax benefit is recorded.

The Company recognizes interest related to income tax matters as interest expense and penalties related to income tax matters as other noninterest expense. 

Retirement Plans

Retirement Plans:  Pension expense is the amount of annual contributions by the Company to the multi-employer contributory trusteed pension plan. Employee 401(k) and profit sharing plan expense is the amount of matching contributions.  Supplemental retirement plan expense allocates the benefits over years of service.

Earnings Per Common Share

Earnings Per Common Share:  Basic earnings per common share is net income available to common stockholders divided by the weighted average number of common shares outstanding during the period.  All outstanding unvested share-based payment awards that contain rights to nonforfeitable dividends are considered participating securities for this calculation.  Shares of Series C preferred stock outstanding are also considered participating securities as they contain rights to nonforfeitable dividends.  Diluted earnings per common share includes the dilutive effect of additional potential common shares issuable under preferred stock, stock options and warrants. 

Comprehensive Income (Loss)

Comprehensive Income (Loss):  Comprehensive income (loss) consists of net income (loss) and other comprehensive income (loss).  Other comprehensive income (loss) includes unrealized gains and losses on securities available for sale, which are also recognized as a separate component of equity.  Reclassifications from accumulated other comprehensive income are conducted on a specific identification method.

Loss Contingencies

Loss Contingencies:  Loss contingencies, including claims and legal actions arising in the ordinary course of business, are recorded as liabilities when the likelihood of loss is probable and an amount or range of loss can be reasonably estimated.  Management does not believe there are any such matters that will have a material effect on the financial statements.  See Note 23 – Contingent Liabilities.

Restrictions On Cash

Restrictions on Cash:  Cash on hand or on deposit with the Federal Reserve Bank (FRB) is required to meet regulatory reserve and clearing requirements. The reserve requirement at December 31, 2019 and December 31, 2018 was $5,164 and $3,502, respectively.  Cash on deposit with the FHLB includes $3,300 pledged as collateral for FHLB advances. 

Equity

Equity:  Treasury stock is carried at cost. The carrying value of preferred stock and common stock warrants is based on allocation of issuance proceeds, net of issuance costs, in proportion to their relative fair values.  Preferred stock is carried net of the discount established through the allocation of proceeds.

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.

Fair Value Of Financial Instruments

Fair Value of Financial Instruments:  Fair values of financial instruments are estimated using relevant market information and other assumptions, as more fully disclosed in Note 6 – Fair Value.  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 these estimates.

Advertising And Marketing Expense

Advertising and Marketing Expense:  Advertising costs are expensed as incurred and are recorded as advertising and marketing, a component of noninterest expense.  Advertising and marketing expense also includes leads-based marketing for our residential mortgage lending business.

Operating Segments

Operating Segments:  While management monitors and analyzes the revenue streams of the Company’s various products and services, the operations and financial performance is evaluated on a Company‑wide basis.  Operating results are not reviewed by senior management to make resource allocation or performance decisions.  Accordingly, all of the financial service operations are considered by management to be aggregated in one reportable operating segment.

Reclassifications

Reclassifications:  Some items in the prior year financial statements were reclassified to conform to the current presentation.  Reclassifications had no effect on prior period net income or stockholders’ equity.

Adoption Of New Accounting Standards

Adoption of New Accounting Standards:

The FASB has issued 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 was effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018.  For public companies, early adoption was 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 previous 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.  In October 2019, the FASB voted to extend the implementation of ASU No. 2016-13 for certain financial institutions including smaller reporting companies.  As a result, ASU 2016-13 will be effective for the Company for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2022.  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.

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Common Stock Warrants

12 Months Ended

Dec. 31, 2019

Common Stock Warrants [Abstract]

Common Stock Warrants

NOTE 17 – COMMON STOCK WARRANTS

Series B Preferred Stock – Warrants:

For each share of Series B Preferred Stock issued by the Company in the 2014 Private Placement, the Company also issued, at no additional charge, a Warrant to purchase shares of common stock of the Company.  (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 were 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 December 31, 2019, there were no outstanding warrants as all of the unexercised warrants expired on July 15, 2019.

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Income Taxes

12 Months Ended

Dec. 31, 2019

Income Taxes [Abstract]

Income Taxes

NOTE 13 – INCOME TAXES

Income tax expense was as follows:

	December 31, 2019		December 31, 2018
Current federal	$	2,627	$	972
Deferred federal (1)		(187)		85
Total	$	2,440	$	1,057

⁽¹⁾ Includes tax benefit of operating loss carryforwards of $34 and $34 for the years ended December 31, 2019 and 2018, respectively.

Effective tax rates differ from the federal statutory rate of 21% for 2019 and 2018 applied to income before income taxes due to the following:

	December 31, 2019		December 31, 2018
Federal Statutory rate times financial statement income	$	2,529	$	1,119
Effect of:
Stock compensation		(18)		(13)
Bank owned life insurance income		(30)		(29)
Low income housing tax credits		(59)		(30)
Other		18		10
	$	2,440	$	1,057
Effective tax rate		20%		20%

Year-end deferred tax assets and liabilities were due to the following:

	2019		2018
Deferred tax assets:
Allowance for loan and lease losses	$	1,170	$	1,085
Compensation related issues		433		273
Deferred loan fees		-		6
Nonaccrual interest		55		45
Net operating loss carry forward		432		467
Operating lease liabilities		412		-
Other		-		40
		2,502		1,916
Deferred tax liabilities:
FHLB stock dividend		226		226
Deferred loan costs		7		-
Depreciation		73		82
Operating lease right-of-use assets		374		-
Other		36		-
Prepaid expenses		65		48
		781		356
Net deferred tax asset	$	1,721	$	1,560

At December 31, 2019, the Company had a deferred tax asset recorded of approximately $1,700.  At December 31, 2018, the Company had a deferred tax asset recorded of approximately $1,600.  At December 31, 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 2016. 

Our deferred tax assets are composed of U.S. net operating losses (“NOLs”), and other temporary book to tax differences.  When determining the amount of deferred tax assets that are more-likely-than-not to be realized, and therefore recorded as a benefit, the Company conducts a regular assessment of all available information. This information includes, but is not limited to, taxable income in prior periods, projected future income and projected future reversals of deferred tax items.  Based on these criteria, the Company determined as of December 31, 2019 that no valuation allowance was required against the net deferred tax asset.

In 2012, a recapitalization program through the sale of $22,500 in common stock 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 year-end 2019, the Company had net operating loss carryforwards of $22,579, 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 2019.  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. 

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Loans And Leases (Components Of Net Investment In Direct Financing Leases) (Details) - USD ($) $ in Thousands		Dec. 31, 2019	Dec. 31, 2018
Loans And Leases [Abstract]
Total minimum lease payments to be received	[1]	$ 5,252	$ 6,045
Less: unearned income	[1]	(473)	(642)
Net investment in direct financing leases	[1]	$ 4,779	$ 5,403

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

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Related-Party Transactions (Narrative) (Details) - USD ($) $ in Thousands	Dec. 31, 2019	Dec. 31, 2018
Related-Party Transactions [Abstract]
Deposits from principal officers, directors, and their affiliates	$ 976	$ 593

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Income Taxes (Narrative) (Details) - USD ($)	12 Months Ended
	Dec. 31, 2019	Dec. 31, 2018	Dec. 31, 2012
Proceeds from sale of common stock			$ 22,500,000
Net operating loss carry forwards	$ 22,579,000
Carryforwards utilize limit before the stock offering closed	163,000
Unutilized operating loss carryforwards that will expire	20,520,000
Reduced deferred tax assets and valuation allowance	6,977,000
Deferred tax liability to be recorded	$ 473,000
Federal statutory income tax rate	21.00%	21.00%
Additional bad debt deductions	$ 2,250,000
Deferred tax asset	1,721,000	$ 1,560,000
Deferred tax asset, valuation allowance	0
Unrecognized tax benefits	$ 0	$ 0
Minimum [Member]
Net operating loss carryforwards expiration year	2024
Maximum [Member]
Net operating loss carryforwards expiration year	2033

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Loans And Leases (Recorded Investment In Nonaccrual Loans By Class Of Loans) (Details) - USD ($) $ in Thousands	Dec. 31, 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	2,439	377
Commercial Real Estate [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total nonaccrual and nonperforming loans	85	100
Single-Family Residential [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total nonaccrual and nonperforming loans	550	167
Non-Owner Occupied [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total nonaccrual and nonperforming loans	1,689
Originated For Portfolio [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total nonaccrual and nonperforming loans	36
Purchased For Portfolio [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total nonaccrual and nonperforming loans	79	89
Other Consumer [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total nonaccrual and nonperforming loans		21
Nonaccrual [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total nonaccrual and nonperforming loans	$ 2,439	$ 377

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Loans And Leases (Recorded Investment In Loans By Portfolio Segment) (Details) - USD ($) $ in Thousands		Dec. 31, 2019	Dec. 31, 2018	Dec. 31, 2017
Accounts Notes And Loans Receivable [Line Items]
Subtotal		$ 670,441	$ 557,695
Less: ALLL		(7,138)	(7,012)	$ (6,970)
Loans and Leases, net		663,303	550,683
Commercial Real Estate [Member]
Accounts Notes And Loans Receivable [Line Items]
Subtotal	[1]	170,646	126,887
Less: ALLL		(2,054)	(1,819)	(1,984)
Single-Family Residential [Member]
Accounts Notes And Loans Receivable [Line Items]
Subtotal		120,256	118,386
Less: ALLL		(948)	(1,061)	(912)
Multi-Family Residential [Member]
Accounts Notes And Loans Receivable [Line Items]
Subtotal		39,229	47,651
Less: ALLL		(447)	(612)	(660)
Real Estate Commercial [Member]
Accounts Notes And Loans Receivable [Line Items]
Subtotal		247,543	173,435
Less: ALLL		(2,604)	(2,274)	(2,143)
Construction [Member]
Accounts Notes And Loans Receivable [Line Items]
Subtotal		67,652	61,792
Less: ALLL		(759)	(739)	(672)
Home Equity Lines Of Credit [Member]
Accounts Notes And Loans Receivable [Line Items]
Subtotal		20,941	23,961
Less: ALLL		(265)	(410)	(597)
Other Consumer [Member]
Accounts Notes And Loans Receivable [Line Items]
Subtotal		4,174	5,583
Less: ALLL		(61)	(97)	$ (2)
Commercial Leases [Member]
Accounts Notes And Loans Receivable [Line Items]
Subtotal		$ 4,779	$ 5,403

[1] Includes $4,779 and $5,403 of commercial leases at December 31, 2019 and December 31, 2018, respectively.

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FHLB Advances And Other Debt (FHLB Advances And Other Debt Outstanding Maturity Period) (Details) - USD ($) $ in Thousands	Dec. 31, 2019	Dec. 31, 2018
FHLB Advances And Other Debt [Abstract]
2019	$ 12,517
2020	4,500
2021	5,500
2022
2023	6,500
Total	$ 29,017	$ 19,500

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Preferred And Common Stock (Details) $ / shares in Units, $ in Thousands				1 Months Ended	3 Months Ended	12 Months Ended
	Oct. 31, 2019 $ / shares shares	Aug. 20, 2018	Oct. 06, 2017 shares	Apr. 30, 2014 $ / shares shares	Dec. 31, 2017 USD ($)	Dec. 31, 2014 USD ($)	Dec. 31, 2019 USD ($) $ / shares shares	Oct. 25, 2019 USD ($)	Dec. 31, 2018 USD ($) $ / shares shares
Schedule of Capitalization, Equity [Line Items]
Reverse stock split ratio		5.5
Common stock, par value | $ / shares							$ 0.01		$ 0.01
Series B Preferred Stock [Member]
Schedule of Capitalization, Equity [Line Items]
Issuance of preferred stock | shares							0		0
Aggregate value | $
Share conversion, original shares converted | shares			480,000
Stock conversion, estimated preferred stock dividends eliminated quarterly | $					$ 188
Stock conversion, estimated preferred stock dividends eliminated annually | $					$ 750
Preferred stock, par value | $ / shares							$ 0.01		$ 0.01
Series B Preferred Stock [Member] | Private Placement [Member]
Schedule of Capitalization, Equity [Line Items]
Issuance of preferred stock | shares				480,000
Preferred stock rate				6.25%
Share Price | $ / shares				$ 25.00
Aggregate value | $						$ 12,000
Placement fees | $						482
Other offering expenses | $						149
Net proceeds from issuance of Series B preferred stock | $						$ 11,369
Series C Preferred Stock [Member]
Schedule of Capitalization, Equity [Line Items]
Issuance of preferred stock | shares							12,337		0
Aggregate value | $
Preferred stock, par value | $ / shares							$ 0.01		$ 0.01
Series C Preferred Stock [Member] | Private Placement [Member]
Schedule of Capitalization, Equity [Line Items]
Issuance of preferred stock | shares	12,337
Aggregate value | $								$ 25,000
Purchase price per share | $ / shares	$ 1,200.00
Preferred stock, par value | $ / shares	0.01
Common Stock [Member]
Schedule of Capitalization, Equity [Line Items]
Shares issued upon conversion | shares			6,857,143
Shares post-reverse-split | shares			1,246,753
Common Stock [Member] | Private Placement [Member]
Schedule of Capitalization, Equity [Line Items]
Share Price | $ / shares	$ 12.00
Shares sold | shares	849,615
Nonvoting Common Stock [Member] | Private Placement [Member]
Schedule of Capitalization, Equity [Line Items]
Shares upon conversion | shares	100
Common stock, par value | $ / shares	$ 0.01

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Derivative Instruments (Narrative) (Details) - USD ($)	12 Months Ended
	Dec. 31, 2019	Dec. 31, 2018
Derivative [Line Items]
Net gain/loss recognised of fair value of yield maintenance provisions	$ 0	$ 0
Interest Rate Swap [Member]
Derivative [Line Items]
Notional amount	12,039,000	1,359,000
Interest-rate swaps	77,000
Interest Rate Commitments [Member]
Derivative [Line Items]
Fair value of yield maintenance provisions	3,104,000	721,000
Notional amount	297,454,000	55,220,000
Interest Rate Lock Commitments [Member]
Derivative [Line Items]
Notional amount	297,454,000	55,220,000
Fair value of yield maintenance provisions	$ 3,104,000	721,000
Interest Rate Lock Commitments [Member] | Minimum [Member]
Derivative [Line Items]
Commitments period	30 days
Interest Rate Lock Commitments [Member] | Maximum [Member]
Derivative [Line Items]
Commitments period	60 days
TBA Mortgage-Back Securities [Member]
Derivative [Line Items]
Notional amount	$ 225,500,000	33,250,000
Fair value	(350,000)	(342,000)
Yield Maintenance Provisions [Member]
Derivative [Line Items]
Fair value of yield maintenance provisions	$ 12,000	$ 17,000

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FHLB Advances And Other Debt (Tables)

12 Months Ended

Dec. 31, 2019

FHLB Advances And Other Debt [Abstract]

Schedule Of FHLB Advances And Other Debt

	Weighted
	Average Rate	December 31, 2019		December 31, 2018
FHLB fixed rate advances
Maturities:
2019	-	$	-	$	3,500
2020	1.98%		4,500		4,500
2021	2.32%		4,000		4,000
2022	2.05%		1,500		1,500
2024	1.90%		6,500		-
Total FHLB fixed rate advances			16,500		13,500
Variable rate other debt:
Holding Company credit facility	5.50%		5,000		6,000
Warehouse facility	4.00%		7,517		-
Total variable rate other debt			12,517		6,000
Total		$	29,017	$	19,500

Schedule Of Federal Home Loan Advances Pledged By Assets

	December 31, 2019		December 31, 2018
Single-family mortgage loans	$	79,144	$	70,140
Multi-family mortgage loans		21,258		18,841
Commercial real estate loans (1-4 family)		6,639		5,986
Home equity lines of credit		5,028		6,446
Securities		3,074		4,058
Cash		3,300		3,300
Total	$	118,443	$	108,771

FHLB Advances And Other Debt Outstanding Maturity Period

Payments due on FHLB advances and other debt over the next five years are as follows:
	December 31, 2019
2020	$	12,517
2021		4,500
2022		5,500
2023		-
2024		6,500
	$	29,017

Assets Pledged As Collateral With FRB

	2019		2018
Commercial loans	$	38,317	$	29,578
Commercial real estate loans		77,733		76,332
	$	116,050	$	105,910

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Regulatory Capital Matters (Tables)

12 Months Ended

Dec. 31, 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
December 31, 2019
Total Capital to risk weighted assets	$	95,164	12.96%	$	77,097	10.50%	$	73,425	10.00%
Tier 1 (Core) Capital to risk weighted assets		87,857	11.97%		62,412	8.50%		58,740	8.00%
Common equity tier 1 capital to risk-weighted assets		87,857	11.97%		51,398	7.00%		47,726	6.50%
Tier 1 (Core) Capital to adjusted total assets (Leverage ratio)		87,857	10.58%		33,221	4.00%		41,526	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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Loan Servicing (Principal Balances Of Mortgage Loans At Year-End) (Details) - USD ($) $ in Thousands	Dec. 31, 2019	Dec. 31, 2018
Loan Servicing [Abstract]
Mortgage loans serviced for Freddie Mac	$ 2,649	$ 2,999

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Consolidated Statements Of Comprehensive Income (Parenthetical) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2019	Dec. 31, 2018
Consolidated Statements Of Comprehensive Income [Abstract]
Unrealized holding gains (losses) arising during the period related to investment securities available for sale, tax	$ 27	$ (5)

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Foreclosed Assets (Foreclosed Assets) (Details) - USD ($) $ in Thousands	Dec. 31, 2019	Dec. 31, 2018
Accounts, Notes, Loans and Financing Receivable [Line Items]
Valuation allowance
Foreclosed assets, Total		38
Single-Family Residential [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Foreclosed assets		$ 38

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Fair Value (Assets Measured At Fair Value On A Non-Recurring Basis) (Details) - USD ($) $ in Thousands	Dec. 31, 2019	Dec. 31, 2018
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Total impaired loans	$ 4,612	$ 3,415
Financial instruments measured at fair value on a non-recurring basis [Member] | Fair Value, Inputs, Level 3 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Total impaired loans	4,577	3,014
Commercial Real Estate [Member] | Financial instruments measured at fair value on a non-recurring basis [Member] | Fair Value, Inputs, Level 3 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Total impaired loans	84	100
Single-Family Residential [Member] | Financial instruments measured at fair value on a non-recurring basis [Member] | Fair Value, Inputs, Level 3 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Total impaired loans	106	110
Non-Owner Occupied [Member] | Financial instruments measured at fair value on a non-recurring basis [Member] | Fair Value, Inputs, Level 3 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Total impaired loans	$ 4,387	$ 2,804

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Consolidated Balance Sheets - USD ($) $ in Thousands	Dec. 31, 2019	Dec. 31, 2018
ASSETS
Cash and cash equivalents	$ 45,879	$ 67,304
Interest-bearing deposits in other financial institutions	100	100
Securities available for sale	8,174	10,114
Loans held for sale, at fair value	135,711	17,385
Loans and leases, net of allowance of $7,138 and $7,012	663,303	550,683
FHLB and FRB stock	4,008	3,476
Foreclosed assets, net		38
Premises and equipment, net	3,991	3,864
Operating lease right-of-use assets	1,780
Bank owned life insurance	5,345	5,203
Accrued interest receivable and other assets	12,254	6,858
Total assets	880,545	665,025
Deposits
Noninterest bearing	115,530	111,445
Interest bearing	630,793	468,341
Total deposits	746,323	579,786
FHLB advances and other debt	29,017	19,500
Advances by borrowers for taxes and insurance	929	827
Operating lease liabilities	1,960
Accrued interest payable and other liabilities	6,846	4,586
Subordinated debentures	14,806	14,767
Total liabilities	799,881	619,466
Commitments and contingent liabilities
Stockholders' equity
Common stock, $.01 par value; shares authorized: 9,090,909; shares issued: 5,409,394 at December 31, 2019 and 4,366,297 at December 31, 2018	54	44
Additional paid-in capital	86,903	61,706
Accumulated deficit	(2,932)	(12,752)
Accumulated other comprehensive income (loss)	28	(73)
Treasury stock, at cost; 32,940 shares of common stock at December 31, 2019 and 31,235 shares at December 31, 2018	(3,389)	(3,366)
Total stockholders' equity	80,664	45,559
Total liabilities and stockholder's equity	880,545	665,025
Series B Preferred Stock [Member]
Stockholders' equity
Preferred stock
Series C Preferred Stock [Member]
Stockholders' equity
Preferred stock
Total stockholders' equity

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Deposits (Narrative) (Details) - USD ($) $ in Thousands	Dec. 31, 2019	Dec. 31, 2018
Deposits [Abstract]
Time deposits, $100,000 or more	$ 294,452	$ 216,577
Time deposits, $250,000 or more	148,473	72,685
Brokered deposits	$ 124,884	$ 101,215

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FHLB Advances And Other Debt (Schedule Of Federal Home Loan Advances Pledged By Assets) (Details) - USD ($) $ in Thousands	Dec. 31, 2019	Dec. 31, 2018
Federal Home Loan Bank, Advances, Branch of FHLB Bank [Line Items]
Collateral pledged to secure advances	$ 118,443	$ 108,771
Securities [Member]
Federal Home Loan Bank, Advances, Branch of FHLB Bank [Line Items]
Collateral pledged to secure advances	3,074	4,058
Cash [Member]
Federal Home Loan Bank, Advances, Branch of FHLB Bank [Line Items]
Collateral pledged to secure advances	3,300	3,300
Single-Family Residential [Member]
Federal Home Loan Bank, Advances, Branch of FHLB Bank [Line Items]
Collateral pledged to secure advances	79,144	70,140
Multi-Family Residential [Member]
Federal Home Loan Bank, Advances, Branch of FHLB Bank [Line Items]
Collateral pledged to secure advances	21,258	18,841
Real Estate Commercial [Member]
Federal Home Loan Bank, Advances, Branch of FHLB Bank [Line Items]
Collateral pledged to secure advances	6,639	5,986
Home Equity Lines Of Credit [Member]
Federal Home Loan Bank, Advances, Branch of FHLB Bank [Line Items]
Collateral pledged to secure advances	$ 5,028	$ 6,446

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Fair Value (Carrying Amounts And Estimated Fair Values Of Financial Instruments) (Details) - USD ($) $ in Thousands	Dec. 31, 2019	Dec. 31, 2018
Financial assets
Securities available for sale	$ 8,174	$ 10,114
Loans held for sale	135,711	17,385
Financial liabilities
FHLB advances and other borrowings	(29,017)	(19,500)
Advances by borrowers for taxes and insurance	(929)	(827)
Fair Value, Inputs, Level 1 [Member]
Financial assets
Cash and cash equivalents	45,879	67,304
Interest-bearing deposits in other financial institutions	100	100
Accrued interest receivable	25	45
Financial liabilities
Deposits	(382,173)	(306,121)
Fair Value, Inputs, Level 2 [Member]
Financial assets
Interest-bearing deposits in other financial institutions
Securities available for sale	8,174	10,114
Loans held for sale	135,711	17,385
Accrued interest receivable	40	40
Yield maintenance provisions (embedded derivatives)	12	17
Interest rate lock commitments	3,104	721
Financial liabilities
Deposits	(367,375)	(272,924)
FHLB advances and other borrowings	(29,669)	(19,589)
Subordinated debentures	(15,940)	(14,280)
Accrued interest payable	(208)	(231)
Interest-rate swaps	(12)	(17)
TBA mortgage-backed securities	(350)	(342)
Fair Value, Inputs, Level 3 [Member]
Financial assets
Interest-bearing deposits in other financial institutions
Loans and leases, net	664,152	549,599
Accrued interest receivable	2,684	2,097
Financial liabilities
Advances by borrowers for taxes and insurance	(929)	(827)
Carrying Value [Member]
Financial assets
Cash and cash equivalents	45,879	67,304
Interest-bearing deposits in other financial institutions	100	100
Securities available for sale	8,174	10,114
Loans held for sale	135,711	17,385
Loans and leases, net	663,303	550,683
FHLB and FRB stock	4,008
FHLB stock		3,476
Accrued interest receivable	2,749	2,181
Yield maintenance provisions (embedded derivatives)	12	17
Interest rate lock commitments	3,104	721
Financial liabilities
Deposits	(746,323)	(579,786)
FHLB advances and other borrowings	(29,017)	(19,500)
Advances by borrowers for taxes and insurance	(929)	(827)
Subordinated debentures	(14,806)	(14,767)
Accrued interest payable	(208)	(231)
Interest-rate swaps	(12)	(17)
TBA mortgage-backed securities	(350)	(342)
Fair Value [Member]
Financial assets
Cash and cash equivalents	45,879	67,304
Interest-bearing deposits in other financial institutions	100	100
Securities available for sale	8,174	10,114
Loans held for sale	135,711	17,385
Loans and leases, net	664,152	549,599
Accrued interest receivable	2,749	2,182
Yield maintenance provisions (embedded derivatives)	12	17
Interest rate lock commitments	3,104	721
Financial liabilities
Deposits	(749,548)	(579,045)
FHLB advances and other borrowings	(29,669)	(19,589)
Advances by borrowers for taxes and insurance	(929)	(827)
Subordinated debentures	(15,940)	(14,280)
Accrued interest payable	(208)	(231)
Interest-rate swaps	(12)	(17)
TBA mortgage-backed securities	$ (350)	$ (342)

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Securities (Securities Classified By Maturity Date) (Details) - USD ($) $ in Thousands	Dec. 31, 2019	Dec. 31, 2018
Schedule Of Available For Sale Securities [Line Items]
Due in one year or less, Amortized Cost	$ 5,001	$ 3,495
Due from one to five years, Amortized Cost	2,985	6,483
Amortized Cost	8,139	10,207
Due in one year or less, Fair Value	5,000	3,472
Due from one to five years, Fair Value	3,017	6,409
Available-for-sale Securities Total, Fair Value	8,174	10,114
Mortgage-Backed Securities - Residential [Member]
Schedule Of Available For Sale Securities [Line Items]
Amortized Cost	126	167
Available-for-sale Securities Total, Fair Value	130	170
Collateralized Mortgage Obligations [Member]
Schedule Of Available For Sale Securities [Line Items]
Amortized Cost	27	62
Available-for-sale Securities Total, Fair Value	$ 27	$ 63

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Accumulated Other Comprehensive Income (Tables)

12 Months Ended

Dec. 31, 2019

Accumulated Other Comprehensive Income [Abstract]

Schedule Of Accumulated Other Comprehensive Income

Changes in Accumulated Other Comprehensive Income by Component
For the Year Ended December 31, 2019 and 2018  (1)
	Unrealized Gains and Losses on Available-for-Sale Securities
	2019		2018
Accumulated other comprehensive loss, beginning of period	$	(73)	$	(47)
Other comprehensive gain (loss) before reclassifications		101		(26)
Less amount reclassified from accumulated other comprehensive loss (2)		-		-
Net current-period other comprehensive income (loss)		101		(26)
Accumulated other comprehensive income (loss), end of period	$	28	$	(73)

⁽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 years ended December 31, 2019 and December 31, 2018.

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Earnings Per Common Share (Computation Of Earnings Per Share) (Details) - USD ($) $ / shares in Units, $ in Thousands		12 Months Ended
		Dec. 31, 2019	Dec. 31, 2018
Basic
Net income		$ 9,601	$ 4,273
Dividends on Series B preferred stock, accretion of discount and value of warrants exercised		219	62
Earnings allocated to participating securities (Series C preferred stock)		(430)
Net income allocated to common stockholders		$ 9,390	$ 4,335
Weighted average common shares outstanding including unvested share-based payment awards	[1]	4,582,997	4,260,617
Less: Unvested share-based payment awards		(1,532)
Average shares	[1]	4,581,465	4,260,617
Basic earnings per common share		$ 2.05	$ 1.02
Diluted
Net earnings allocated to common stockholders		$ 9,390	$ 4,335
Weighted average common shares outstanding for basic earnings per common share	[1]	4,581,465	4,260,617
Add: Dilutive effects of assumed exercises of stock options		38,620	40,903
Add: Dilutive effects of assumed exercises of stock warrants		6,947	42,210
Add: Dilutive effects of unvested share-based payment awards		1,532
Average shares and dilutive potential common shares		4,628,564	4,343,730
Diluted earnings per common share		$ 2.03	$ 1.00

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

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Loan Commitments And Other Related Activities (Contractual Amounts Of Financial Instruments With Off-Balance-Sheet Risk) (Details) - USD ($) $ in Thousands	Dec. 31, 2019	Dec. 31, 2018
Commitments to make loans [Member]
Other Contingencies And Commitments [Line Items]
Fixed Rate	$ 314,705	$ 80,528
Variable Rate	43,979	36,542
Unused lines of credit [Member]
Other Contingencies And Commitments [Line Items]
Fixed Rate	10,678	6,218
Variable Rate	55,684	50,355
Standby letters of credit [Member]
Other Contingencies And Commitments [Line Items]
Fixed Rate	$ 1,415	$ 946

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Accumulated Other Comprehensive Income

12 Months Ended

Dec. 31, 2019

Accumulated Other Comprehensive Income [Abstract]

Accumulated Other Comprehensive Income

NOTE 24 - ACCUMULATED OTHER COMPREHENSIVE INCOME

The following table summarizes the changes within each classification of accumulated other comprehensive income, net of tax, for the years ended December 31, 2019 and December 31, 2018 and summarizes the significant amounts reclassified out of each component of accumulated other comprehensive income:

Changes in Accumulated Other Comprehensive Income by Component
For the Year Ended December 31, 2019 and 2018  (1)
	Unrealized Gains and Losses on Available-for-Sale Securities
	2019		2018
Accumulated other comprehensive loss, beginning of period	$	(73)	$	(47)
Other comprehensive gain (loss) before reclassifications		101		(26)
Less amount reclassified from accumulated other comprehensive loss (2)		-		-
Net current-period other comprehensive income (loss)		101		(26)
Accumulated other comprehensive income (loss), end of period	$	28	$	(73)

⁽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 years ended December 31, 2019 and December 31, 2018.

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Loans And Leases (Tables)

12 Months Ended

Dec. 31, 2019

Loans And Leases [Abstract]

Recorded Invetment In Loans By Portfolio Segment

	December 31, 2019		December 31, 2018
Commercial (1)	$	170,646	$	126,887
Real estate:
Single-family residential		120,256		118,386
Multi-family residential		39,229		47,651
Commercial		247,543		173,435
Construction		67,652		61,792
Consumer:
Home equity lines of credit		20,941		23,961
Other		4,174		5,583
Subtotal		670,441		557,695
Less: ALLL		(7,138)		(7,012)
Loans and Leases, net	$	663,303	$	550,683

⁽¹⁾ Includes $4,779 and $5,403 of commercial leases at December 31, 2019 and December 31, 2018, respectively.

Activity In ALLL By Portfolio Segment

	December 31, 2019
			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		235		(120)		(165)		225		20		(195)		-		-
Charge-offs		-		-		-		-		-		-		(36)		(36)
Recoveries		-		7		-		105		-		50		-		162
Ending balance	$	2,054	$	948	$	447	$	2,604	$	759	$	265	$	61	$	7,138

	December 31, 2018
			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		(167)		131		(48)		131		67		(209)		95		-
Charge-offs		-		(6)		-		-		-		-		-		(6)
Recoveries		2		24		-		-		-		22		-		48
Ending balance	$	1,819	$	1,061	$	612	$	2,274	$	739	$	410	$	97	$	7,012

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 impairment method as of December 31, 2019:

			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	$	1	$	1	$	-	$	33	$	-	$	-	$	-	$	35
Collectively evaluated for impairment		2,053		947		447		2,571		759		265		61		7,103
Total ending allowance balance	$	2,054	$	948	$	447	$	2,604	$	759	$	265	$	61	$	7,138
Loans:
Individually evaluated for impairment	$	85	$	107	$	-	$	4,420	$	-	$	-	$	-	$	4,612
Collectively evaluated for impairment		170,561		120,149		39,229		243,123		67,652		20,941		4,174		665,829
Total ending loan balance	$	170,646	$	120,256	$	39,229	$	247,543	$	67,652	$	20,941	$	4,174	$	670,441

The following table presents the balance in the ALLL and the recorded investment in loans and leases by portfolio segment and based on 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 year ended December 31, 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, deferred loan fees and costs. Cash payments of interest on these loans during the twelve months ended December 31, 2019 totaled $168.

	Unpaid Principal Balance		Recorded Investment		ALLL Allocated		Average Recorded Investment		Interest Income Recognized
With no related allowance recorded:
Real estate:
Commercial:
Owner occupied	$	-	$	-	$	-	$	111	$	6
Total with no allowance recorded		-		-		-		111		6
With an allowance recorded:
Commercial		85		85		1		92		-
Real estate:
Single-family residential		107		107		1		108		6
Commercial:
Non-owner occupied		4,420		4,420		33		4,194		154
Total with an allowance recorded		4,612		4,612		35		4,394		160
Total	$	4,612	$	4,612	$	35	$	4,505	$	166

The following table presents loans individually evaluated for impairment by class of loans as of and for the year ended 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, deferred loan fees and costs. Cash payments of interest on these loans during the twelve months ended December 31, 2018 totaled $192.

	Unpaid Principal Balance		Recorded Investment		ALLL Allocated		Average Recorded Investment		Interest Income Recognized
With no related allowance recorded:
Real estate:
Commercial:
Owner occupied	$	379	$	125	$	-	$	130	$	21
Total with no allowance recorded		379		125		-		130		21
With an allowance recorded:
Commercial (1)		100		100		-		185		4
Real estate:
Single-family residential (1)		110		110		-		113		6
Commercial:
Non-owner occupied		2,826		2,826		22		2,837		157
Owner occupied		-		-		-		131		7
Total with an allowance recorded		3,036		3,036		22		3,266		174
Total	$	3,415	$	3,161	$	22	$	3,396	$	195

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

Recorded Investment In Nonaccrual Loans By Class Of Loans

	2019		2018
Loans past due over 90 days still on accrual	$	-	$	-
Nonaccrual loans:
Commercial		85		100
Real estate:
Single-family residential		550		167
Commercial:
Non-owner occupied		1,689		-
Consumer:
Home equity lines of credit:
Originated for portfolio		36		-
Purchased for portfolio		79		89
Other consumer		-		21
Total nonaccrual		2,439		377
Total nonperforming loans	$	2,439	$	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 December 31, 2019:

	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	$	-	$	71	$	-	$	71	$	170,575	$	85
Real estate:
Single-family residential		2,453		261		426		3,140		117,116		124
Multi-family residential		-		-		-		-		39,229		-
Commercial:
Non-owner occupied		-		-		1,689		1,689		138,762		-
Owner occupied		-		-		-		-		81,871		-
Land		-		-		-		-		25,221		-
Construction		304		-		-		304		67,348		-
Consumer:
Home equity lines of credit:
Originated for portfolio		-		-		22		22		20,713		14
Purchased for portfolio		-		-		-		-		206		79
Other		-		-		-		-		4,174		-
Total	$	2,757	$	332	$	2,137	$	5,226	$	665,215	$	302

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

Schedule Of Debtor Troubled Debt Restructuring, Subsequent Periods

	2019		2018
Commercial	$	85	$	100
Total	$	85	$	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 as of December 31, 2019 and based on the most recent analysis performed follows.  There were no loans rated doubtful at December 31, 2019. 

	Not Rated		Pass		Special Mention		Substandard		Total
Commercial	$	-	$	168,617	$	1,424	$	605	$	170,646
Real estate:
Single-family residential		119,707		-		-		549		120,256
Multi-family residential		-		39,081		-		148		39,229
Commercial:
Non-owner occupied		67		134,466		1,498		4,420		140,451
Owner occupied		-		79,773		2,098		-		81,871
Land		-		25,221		-		-		25,221
Construction		1,855		65,797		-		-		67,652
Consumer:
Home equity lines of credit:
Originated for portfolio		20,681		-		-		54		20,735
Purchased for portfolio		127		-		-		79		206
Other		4,174		-		-		-		4,174
	$	146,611	$	512,955	$	5,020	$	5,855	$	670,441

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

	December 31, 2019		December 31, 2018
Total minimum lease payments to be received	$	5,252	$	6,045
Less: unearned income		(473)		(642)
Net investment in direct financing leases	$	4,779	$	5,403

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

Summary Of Future Minimum Lease Payments Receivable

2020	$	793
2021		793
2022		793
2023		1,563
2024		1,310
	$	5,252

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Deposits

12 Months Ended

Dec. 31, 2019

Deposits [Abstract]

Deposits

NOTE 9 – DEPOSITS

Time deposits of $100 or more were $294,452 and $216,577 at year-end 2019 and 2018, respectively.  Time deposits of $250 or more were $148,473 and $72,685 at year-end 2019 and 2018, respectively.

Scheduled maturities of time deposits for the next five years are as follows:

2020	$	189,268
2021		82,813
2022		54,764
2023		20,174
2024		17,124
Thereafter		7
Total	$	364,150

Brokered deposits at year-end 2019 and 2018 totaled $124,884 and $101,215, respectively.   

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Foreclosed Assets

12 Months Ended

Dec. 31, 2019

Foreclosed Assets [Abstract]

Foreclosed Assets

NOTE 5 – FORECLOSED ASSETS

Foreclosed assets at year-end were as follows:

	2019		2018
Single-family residential	$	-	$	38
Valuation allowance		-		-
Total	$	-	$	38

There was no activity in the valuation allowance account or any write-downs during the years ended December 31, 2019 and 2018.

Expenses related to foreclosed assets include:

	2019		2018
Net loss (gain) on sales	$	(12)	$	-
Operating expenses, net of rental income		3		6
	$	(9)	$	6

There were no foreclosed assets at December 31, 2019.  Foreclosed assets at December 31, 2018 consisted of one single-family residential property that was transferred into REO at fair value at the time of transfer in the fourth quarter of 2018.  Foreclosed asset expenses incurred during 2019 and 2018 were related to maintenance expense to ready the property to sell.  

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Summary Of Significant Accounting Policies

12 Months Ended

Dec. 31, 2019

Summary Of Significant Accounting Policies [Abstract]

Summary Of Significant Accounting Policies

NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Nature of Operations and Principles of Consolidation: 

The consolidated financial statements include Central Federal Corporation (the “Holding Company”) and its wholly-owned subsidiary, CFBank, National Association (“CFBank”).  On December 1, 2016, CFBank converted from a federal savings institution to a national bank.  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.  The Holding Company and CFBank are sometimes collectively referred to herein as the “Company”.  Intercompany transactions and balances are eliminated in consolidation. 

CFBank provides financial services through its six full-service banking offices in Worthington, Fairlawn, Glendale, Blue Ash, Calcutta, and Wellsville, Ohio, and through its loan production office in Columbus, Ohio and its agency office in Woodmere, Ohio.  Its primary deposit products are commercial and retail checking, savings, money market and term certificate accounts. Its primary lending products are commercial and commercial real estate, residential mortgages and installment loans.  There are no significant concentrations of loans to any one industry or customer segment.  However, our customers’ ability to repay their loans is dependent on general economic conditions and the real estate values in their geographic areas. 

Use of Estimates:  To prepare financial statements in conformity with U.S. generally accepted accounting principles (GAAP), management makes estimates and assumptions based on available information. These estimates and assumptions affect the amounts reported in the financial statements and the disclosures provided, and actual results could differ. The allowance for loan and lease losses (ALLL), deferred tax assets and fair values of financial instruments are particularly subject to change.

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 split as though it had occurred prior to the earliest period presented.

Cash Flows:  Cash and cash equivalents include cash, deposits with other financial institutions with maturities fewer than 90 days and federal funds sold.  Net cash flows are reported for customer loan and deposit transactions, interest-bearing deposits in other financial institutions and borrowings with original maturities under 90 days.

Cash in Excess of FDIC Limits:  At December 31, 2019, the Company’s cash accounts exceeded federally insured limits by approximately $41.6 million.  Approximately $37.5 million of that amount was held by either the Federal Reserve Bank or the Federal Home Loan Bank of Cincinnati, which is not federally insured.

Interest-Bearing Deposit in Other Financial Institution:  Interest-bearing deposits in other financial institutions mature in April, 2022 and are carried at cost.  As of December 31, 2019 and December 31, 2018, there was $100 in an interest-bearing deposit in other financial institutions.

Securities:  Debt securities are classified as available for sale when they might be sold before maturity. Equity securities with readily determinable fair values are classified as available for sale.  Securities available for sale are carried at fair value, with unrealized holding gains and losses reported in other comprehensive income. 

Interest income includes amortization of purchase premium or accretion of discount.  Premiums and discounts on securities are amortized or accreted on the level-yield method, except for mortgage-backed securities and collateralized mortgage obligations where prepayments are anticipated based on industry payment trends.  Gains and losses on sales are recorded on the trade date and determined using the specific identification method.

Management evaluates securities for other-than-temporary impairment (OTTI) at least on a quarterly basis, and more frequently when economic or market conditions warrant such an evaluation.  For securities in an unrealized loss position, management considers the extent and duration of the unrealized loss and the financial condition and near-term prospects of the issuer.  Management also assesses whether it intends to sell, or will more likely than not be required to sell, a security in an unrealized loss position before recovery of its amortized cost basis. If either of the criteria regarding intent or requirement to sell is met, the entire difference between amortized cost and fair value is recognized as impairment through earnings.  For debt securities that do not meet the aforementioned criteria, the amount of impairment is split into two components as follows: 1) OTTI related to credit loss, which must be recognized in the income statement and 2) OTTI related to other factors, which is recognized in other comprehensive income.  The credit loss is defined as the difference between the present value of the cash flows expected to be collected and the amortized cost basis. For equity securities, the entire amount of impairment is recognized through earnings.

Loans Held for Sale:  Mortgage loans originated and intended for sale in the secondary market are carried at fair value, as determined by outstanding commitments from investors. Mortgage loans held for sale are generally sold with servicing rights released.  The carrying value of mortgage loans sold is reduced by the amount allocated to the servicing rights when mortgage loans held for sale are sold with servicing rights retained.  Loans originated as construction loans, that were subsequently transferred to held for sale, are carried at the lower of cost or market.  Gains and losses on sales of mortgage loans are based on the difference between the selling price and the carrying value of the related loan sold.

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.

Concentration of Credit Risk:  Most of the Company’s primary business activity is with customers located within the Ohio counties of Franklin, Hamilton, Cuyahoga, Summit, Columbiana and contiguous counties.  Therefore, the Company’s exposure to credit risk can be affected by changes in the economies within these counties.  Although these counties are the Company’s primary market area for loans, the Company originates residential and commercial real estate loans throughout the United States. 

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 substandard loans within the commercial, multi-family residential and commercial real estate segments, regardless of size, and loans of all other risk classifications 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.

The following portfolio segments have been identified:  commercial loans; single-family residential real estate loans; multi-family residential real estate loans; commercial real estate loans; construction loans; home equity lines of credit; and other consumer loans. A description of each segment of the loan portfolio, along with the risk characteristics of each segment, is included below.

Commercial loans:  Commercial loans and direct financing leases include loans and leases to businesses generally located within our primary market area. Those loans and leases are typically secured by business equipment, inventory, accounts receivable and other business assets.  In underwriting commercial loans, we consider the net operating income of the borrower, the debt service ratio and the financial strength, expertise and credit history of the business owners and/or guarantors.  Because payments on commercial loans are dependent on successful operation of the business enterprise, repayment of such loans may be subject to a greater extent to adverse conditions in the economy.  We seek to mitigate these risks through underwriting policies which require such loans to be qualified at origination on the basis of the borrower’s financial performance and the financial strength of the business owners and/or guarantors.

Single-family residential real estate loans:  Single-family residential real estate loans include permanent conventional mortgage loans secured by single-family residences that we originate for portfolio and purchased loans located primarily within our primary market area. Credit approval for single-family residential real estate loans requires demonstration of sufficient income to repay the principal and interest and the real estate taxes and insurance, stability of employment and an established credit record.  Our policy is to originate quality loans that are evaluated for risk based on the borrower’s ability to repay the loan.  Collateral positions are established by obtaining independent appraisal opinions.  Mortgage insurance is generally required when the LTV exceeds 80%.

Multi-family residential real estate loans:  Multi-family residential real estate loans include loans secured by apartment buildings, condominiums and multi-family residential houses generally located within our primary market area. Underwriting policies provide that multi-family residential real estate loans generally may be made in amounts up to 85% of the lower of the appraised value or purchase price of the property.  In underwriting multi-family residential real estate loans, we consider the appraised value and net operating income of the property, the debt service ratio and the property owner’s and/or guarantor’s financial strength, expertise and credit history. We offer both fixed-rate and adjustable-rate loans. Fixed-rate loans are generally limited to three to five years, at which time they convert to adjustable-rate loans. Because payments on loans secured by multi-family residential properties are dependent on successful operation or management of the properties, repayment of multi-family residential real estate loans may be subject to a greater extent to adverse conditions in the real estate market or the economy.  Adjustable-rate multi-family residential real estate loans generally pose credit risks not inherent in fixed-rate loans, primarily because as interest rates rise, the borrowers’ payments rise, increasing the potential for default. Additionally, adjustable-rate multi-family residential real estate loans generally do not contain periodic and lifetime caps on interest rate changes.  We seek to minimize the additional risk presented by adjustable-rate multi-family residential real estate loans through underwriting criteria that require such loans to be qualified at origination with sufficient debt coverage ratios under increasing interest rate scenarios.

Commercial real estate loans:  Commercial real estate loans include loans secured by owner occupied and non-owner occupied properties used for business purposes, such as manufacturing facilities, office buildings or retail facilities generally located within our primary market area.  Underwriting policies provide that commercial real estate loans may be made in amounts up to 85% of the lower of the appraised value or purchase price of the property. In underwriting commercial real estate loans, we consider the appraised value and net operating income of the property, the debt service ratio and the property owner’s and/or guarantor’s financial strength, expertise and credit history. We offer both fixed and adjustable-rate loans. Fixed-rate loans are generally limited to three to five years, at which time they convert to adjustable-rate loans. Because payments on loans secured by commercial real estate properties are dependent on successful operation or management of the properties, repayment of commercial real estate loans may be subject to a greater extent to adverse conditions in the real estate market or the economy.  Adjustable-rate commercial real estate loans generally pose credit risks not inherent in fixed-rate loans, primarily because as interest rates rise, the borrowers’ payments rise, increasing the potential for default. Additionally, adjustable-rate commercial real estate loans generally do not contain periodic and lifetime caps on interest rate changes.  We seek to minimize the additional risk presented by adjustable-rate commercial real estate loans through underwriting criteria that require such loans to be qualified at origination with sufficient debt coverage ratios under increasing interest rate scenarios.

Construction loans:  Construction loans include loans to finance the construction of residential and commercial properties generally located within our primary market area. Construction loans are fixed-rate or adjustable-rate loans which may convert to permanent loans with maturities of up to 30 years.  Our policies provide that construction loans may generally be made in amounts up to 80% of the appraised value of the property, and an independent appraisal of the property is required.  Loan proceeds are disbursed in increments as construction progresses and as inspections warrant, and regular inspections are required to monitor the progress of construction.  In underwriting construction loans, we consider the property owner’s and/or guarantor’s financial strength, expertise and credit history. Construction financing is considered to involve a higher degree of credit risk than long-term financing on improved, owner occupied real estate.  Risk of loss on a construction loan is dependent largely upon the accuracy of the initial estimate of the property’s value at completion of construction or development compared to the estimated cost (including interest) of construction.  If the estimate of value proves to be inaccurate, we may be confronted with a project, when completed, having a value which is insufficient to assure full repayment.  We attempt to reduce such risks on construction loans through inspections of construction progress on the property and by requiring personal guarantees and reviewing current personal financial statements and tax returns, as well as other projects of the developer.

Home equity lines of credit:  Home equity lines of credit include both loans we originate for portfolio and purchased loans.  We originate home equity lines of credit to customers generally within our primary market area.  Home equity lines of credit are variable rate loans and the interest rate adjusts monthly at various margins to the prime rate of interest as disclosed in The Wall Street Journal. The margin is based on certain factors including the loan balance, value of collateral, election of auto-payment, and the borrower’s FICO® score.  The amount of the line is based on the borrower’s credit, income and equity in the home.  When combined with the balance of the prior mortgage liens, these lines generally may not exceed 89.9% of the appraised value of the property at the time of the loan commitment.  The lines are secured by a subordinate lien on the underlying real estate and are, therefore, vulnerable to declines in property values in the geographic areas where the properties are located.  Credit approval for home equity lines of credit requires income sufficient to repay principal and interest due, stability of employment, an established credit record and sufficient collateral.  Collectability of home equity lines of credit are dependent on the borrower's continuing financial stability, and thus are more likely to be affected by adverse personal circumstances.  We continue to monitor collateral values and borrower FICO® scores on both purchased and portfolio loans and, when the situation warrants, have frozen the lines of credit.

Other consumer loans:  Other consumer loans include closed-end home equity, home improvement, auto, credit card loans and any purchased loans to consumers generally located within our primary market area.  Credit approval for other consumer loans requires income sufficient to repay principal and interest due, stability of employment, an established credit record and sufficient collateral for secured loans.  Consumer loans typically have shorter terms and lower balances with higher yields as compared to real estate mortgage loans, but generally carry higher risks of default. Consumer loan collections are dependent on the borrower's continuing financial stability, and thus are more likely to be affected by adverse personal circumstances.

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.

Transfers of Financial Assets:  Transfers of financial assets are accounted for as sales when control over the assets has been relinquished.  Control over transferred assets is deemed to be surrendered when the assets have been isolated from the Company, the transferee obtains the right (free of conditions that constrain it from taking advantage of that right) to pledge or exchange the transferred assets, and the Company does not maintain effective control over the transferred assets through an agreement to repurchase them before their maturity. 

Foreclosed Assets:  Assets acquired through or instead of loan foreclosure are initially recorded at fair value less costs to sell when acquired, establishing a new cost basis.  These assets are subsequently accounted for at lower of cost or fair value less estimated costs to sell.  If fair value declines subsequent to foreclosure, an adjustment is recorded through expense.  Operating costs after acquisition are expensed.

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 is expected to receive historic tax credits (HTC) pursuant to Section 47 of the Internal Revenue Code.  The Company expects to receive 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 investment 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 December 31, 2019.  The maximum exposure to loss related to these investments was $894 at December 31, 2019, representing the Company’s investment balance. 

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. The balance outstanding in joint ventures at December 31, 2019 and December 31, 2018 was $1,000 and $595, respectively.  Income recognized on the joint ventures was $57 and $69, respectively, for 2019 and 2018.

Premises and Equipment:  Land is carried at cost.  Premises and equipment are stated at cost less accumulated depreciation.  Buildings and related components are depreciated using the straight‑line method with useful lives ranging from 3 to 40 years. Furniture, fixtures and equipment are depreciated using the straight‑line method with useful lives ranging from 2 to 25 years. Leasehold improvements are depreciated straight-line over the shorter of the useful life or the lease term.

Federal Home Loan Bank (FHLB) stock:  CFBank is a member of the FHLB system.  Members are required to own a certain amount of stock based on the level of borrowings and other factors, and may invest in additional amounts.  FHLB stock is carried at cost, classified as a restricted security, and periodically evaluated for impairment based on ultimate recovery of par value.  Both cash and stock dividends are reported as income.

Federal Reserve Bank (FRB) stock:  CFBank is a member of the FRB system and is required to own a certain amount of stock.  FRB stock is carried at cost, classified as a restricted security, and periodically evaluated for impairment based on ultimate recovery of par value.  Both cash and stock dividends are reported as income.

Bank Owned Life Insurance:  CFBank purchased life insurance policies on certain directors and employees in 2002.  Bank owned life insurance is recorded at the amount that can be realized under the insurance contract at the balance sheet date, which is the cash surrender value adjusted for other charges or other amounts due that are probable at settlement.

Loan Commitments and Related Financial Instruments:  Financial instruments include off‑balance-sheet credit instruments, such as commitments to make loans and commercial letters of credit, issued to meet customer financing needs.  The face amount for these items represents the exposure to loss, before considering customer collateral or ability to repay.  Such financial instruments are recorded when they are funded, and fees associated with origination are booked to non-interest income at the origination date.

Derivatives:  Derivative financial instruments are recognized as assets or liabilities at fair value.  The Company's derivatives consist mainly of interest rate swap agreements, which are used as part of its asset liability management program to help manage interest rate risk.  The Company does not use derivatives for trading purposes.  The derivative transactions are considered instruments with no hedging designation, otherwise known as stand-alone derivatives.  Changes in the fair value of the derivatives are reported currently in earnings, as other noninterest income.

Mortgage Banking Derivatives:  Commitments to fund mortgage loans to be sold into the secondary market, otherwise known as interest rate locks, are accounted for as free standing derivatives.  Mortgage banking activities include two types of commitments: rate lock commitments and forward loan commitments.  Fair values of these mortgage derivatives are based on anticipated gains on the underlying loans.  Changes in the fair values of these derivatives are included in net gains on sales of loans.

Stock-Based Compensation:  Compensation cost is recognized for stock options and restricted stock awards issued to directors and employees, based on the fair value of these awards at the date of grant. A Black-Scholes model is utilized to estimate the fair value of stock options, while the market price of the Company’s common stock at the date of grant is used for restricted stock awards. Compensation cost is recognized over the required service period, generally defined as the vesting period.  For awards with graded vesting, compensation cost is recognized on a straight-line basis over the required service period for each separately vesting portion of the award.  Forfeitures are recognized as incurred.

Income Taxes:  Income tax expense is the total of the current year income tax due or refundable and the change in deferred tax assets and liabilities.  Deferred tax assets and liabilities are the expected future tax amounts for the temporary differences between carrying amounts and tax basis of assets and liabilities, computed using enacted tax rates. 

A tax position is recognized as a benefit only if it is “more likely than not” that the tax position would be sustained in a tax examination, with a tax examination being presumed to occur.  The amount recognized is the largest amount of tax benefit that is greater than 50% likely of being realized on examination.  For tax positions not meeting the “more likely than not” test, no tax benefit is recorded.

The Company recognizes interest related to income tax matters as interest expense and penalties related to income tax matters as other noninterest expense. 

Retirement Plans:  Pension expense is the amount of annual contributions by the Company to the multi-employer contributory trusteed pension plan. Employee 401(k) and profit sharing plan expense is the amount of matching contributions.  Supplemental retirement plan expense allocates the benefits over years of service.

Earnings Per Common Share:  Basic earnings per common share is net income available to common stockholders divided by the weighted average number of common shares outstanding during the period.  All outstanding unvested share-based payment awards that contain rights to nonforfeitable dividends are considered participating securities for this calculation.  Shares of Series C preferred stock outstanding are also considered participating securities as they contain rights to nonforfeitable dividends.  Diluted earnings per common share includes the dilutive effect of additional potential common shares issuable under preferred stock, stock options and warrants. 

Comprehensive Income (Loss):  Comprehensive income (loss) consists of net income (loss) and other comprehensive income (loss).  Other comprehensive income (loss) includes unrealized gains and losses on securities available for sale, which are also recognized as a separate component of equity.  Reclassifications from accumulated other comprehensive income are conducted on a specific identification method.

Loss Contingencies:  Loss contingencies, including claims and legal actions arising in the ordinary course of business, are recorded as liabilities when the likelihood of loss is probable and an amount or range of loss can be reasonably estimated.  Management does not believe there are any such matters that will have a material effect on the financial statements.  See Note 23 – Contingent Liabilities.

Restrictions on Cash:  Cash on hand or on deposit with the Federal Reserve Bank (FRB) is required to meet regulatory reserve and clearing requirements. The reserve requirement at December 31, 2019 and December 31, 2018 was $5,164 and $3,502, respectively.  Cash on deposit with the FHLB includes $3,300 pledged as collateral for FHLB advances. 

Equity:  Treasury stock is carried at cost. The carrying value of preferred stock and common stock warrants is based on allocation of issuance proceeds, net of issuance costs, in proportion to their relative fair values.  Preferred stock is carried net of the discount established through the allocation of proceeds.

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.

Fair Value of Financial Instruments:  Fair values of financial instruments are estimated using relevant market information and other assumptions, as more fully disclosed in Note 6 – Fair Value.  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 these estimates.

Advertising and Marketing Expense:  Advertising costs are expensed as incurred and are recorded as advertising and marketing, a component of noninterest expense.  Advertising and marketing expense also includes leads-based marketing for our residential mortgage lending business.

Operating Segments:  While management monitors and analyzes the revenue streams of the Company’s various products and services, the operations and financial performance is evaluated on a Company‑wide basis.  Operating results are not reviewed by senior management to make resource allocation or performance decisions.  Accordingly, all of the financial service operations are considered by management to be aggregated in one reportable operating segment. 

Reclassifications:  Some items in the prior year financial statements were reclassified to conform to the current presentation.  Reclassifications had no effect on prior period net income or stockholders’ equity.

Adoption of New Accounting Standards:

The FASB has issued 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 was effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018.  For public companies, early adoption was 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 previous 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.  In October 2019, the FASB voted to extend the implementation of ASU No. 2016-13 for certain financial institutions including smaller reporting companies.  As a result, ASU 2016-13 will be effective for the Company for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2022.  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. 

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FHLB Advances And Other Debt (Schedule Of FHLB Advances And Other Debt) (Details) - USD ($) $ in Thousands	Dec. 31, 2019	Dec. 31, 2018
Federal Home Loan Bank, Advances, Branch of FHLB Bank [Line Items]
2019, FHLB Weighted Average Rate
2020, FHLB Weighted Average Rate	1.98%
2021, FHLB Weighted Average Rate	2.32%
2022, FHLB Weighted Average Rate	2.05%
2024, FHLB Weighted Average Rate	1.90%
2019, FHLB fixed rate advances		$ 3,500
2020, FHLB fixed rate advances	4,500	4,500
2021, FHLB fixed rate advances	4,000	4,000
2022, FHLB fixed rate advances	1,500	1,500
2024, FHLB fixed rate advances	6,500
Total FHLB fixed rate advances	16,500	13,500
Total variable rate other debt	12,517	6,000
Total	$ 29,017	19,500
Holding Company Credit Facility [Member]
Federal Home Loan Bank, Advances, Branch of FHLB Bank [Line Items]
Variable rate other debt, Weighted Average Rate	5.50%
Variable rate other debt	$ 5,000	6,000
Warehouse Facility [Member]
Federal Home Loan Bank, Advances, Branch of FHLB Bank [Line Items]
Variable rate other debt, Weighted Average Rate	4.00%
Variable rate other debt	$ 7,517

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Fair Value (Total Amount Of Gains And Losses From Changes In Fair Value Included In Earnings) (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2019	Dec. 31, 2018
Fair Value [Abstract]
Interest income	$ 2,153	$ 669
Interest expense
Change in fair value	1,341	373
Total change in fair value	$ 3,494	$ 1,042

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Loan Servicing (Narrative) (Details) - USD ($) $ in Thousands	Dec. 31, 2019	Dec. 31, 2018
Loan Servicing [Abstract]
Custodial escrow balances maintained in connection with serviced loans	$ 59	$ 70

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Consolidated Statements Of Changes In Stockholders' Equity - USD ($) $ in Thousands		Common Stock [Member]	Additional Paid-In Capital [Member]	Accumulated Deficit [Member]	Accumulated Other Comprehensive Income (Loss) [Member]	Treasury Stock [Member]	Series C Preferred Stock [Member]	Total
Balance at Dec. 31, 2017		$ 43	$ 60,676	$ (17,087)	$ (47)	$ (3,324)		$ 40,261
Net income				4,273				4,273
Other comprehensive income (loss)					(26)			(26)
Issuance of stock based incentive plan shares, net of forfeitures	[1]	1						1
Restricted stock expense, net of forfeitures			376					376
Acquisition of treasury shares surrendered upon vesting of restricted stock for payment of taxes	[1]					(42)		(42)
Exercise of warrants to common stock			716					716
Accretion of discount and value of warrants exercised			(62)	62
Balance at Dec. 31, 2018		44	61,706	(12,752)	(73)	(3,366)		45,559
Net income				9,601				9,601
Other comprehensive income (loss)					101			101
Issuance of stock based incentive plan shares, net of forfeitures	[1]	1	(1)
Restricted stock expense, net of forfeitures			527					527
Acquisition of treasury shares surrendered upon vesting of restricted stock for payment of taxes	[1]					(23)		(23)
Exercise of warrants to common stock		1
Exercise of warrants to common stock			1,257					1,258
Accretion of discount and value of warrants exercised			(219)	219
Proceeds from the issuance of shares from the preferred stock private placement, net of offering expenses			14,000					14,000
Proceeds from the issuance of shares from the common stock private placement, net of offering expenses		8	9,633					9,641
Balance at Dec. 31, 2019		$ 54	$ 86,903	$ (2,932)	$ 28	$ (3,389)		$ 80,664

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

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Foreclosed Assets (Narrative) (Details)	12 Months Ended
	Dec. 31, 2019 property
Single-Family Residential [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Number of properties transferred into REO	1

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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	Dec. 31, 2019	Dec. 31, 2018
Financial Assets:
Total securities available for sale	$ 8,174	$ 10,114
Loans held for sale	135,711	17,385
Fair Value, Inputs, Level 2 [Member]
Financial Assets:
Total securities available for sale	8,174	10,114
Loans held for sale	135,711	17,385
Yield maintenance provisions (embedded derivatives)	12	17
Interest rate lock commitments	3,104	721
Financial Liabilities:
Interest-rate swaps	12	17
TBA mortgage-backed securities	350	342
Fair Value, Measurements, Recurring [Member] | Fair Value, Inputs, Level 2 [Member]
Financial Assets:
Total securities available for sale	8,174	10,114
Loans held for sale	135,711	17,385
Fair Value, Measurements, Recurring [Member] | U.S. Treasury [Member] | Fair Value, Inputs, Level 2 [Member]
Financial Assets:
Total securities available for sale	8,017	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	130	170
Fair Value, Measurements, Recurring [Member] | Collateralized Mortgage Obligations [Member] | Fair Value, Inputs, Level 2 [Member]
Financial Assets:
Total securities available for sale	27	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)	12	17
Fair Value, Measurements, Recurring [Member] | Interest Rate Lock Commitments [Member] | Fair Value, Inputs, Level 2 [Member]
Financial Assets:
Interest rate lock commitments	3,104	721
Fair Value, Measurements, Recurring [Member] | Interest Rate Swap [Member] | Fair Value, Inputs, Level 2 [Member]
Financial Liabilities:
Interest-rate swaps	12	17
Fair Value, Measurements, Recurring [Member] | TBA Mortgage-Back Securities [Member] | Fair Value, Inputs, Level 2 [Member]
Financial Liabilities:
TBA mortgage-backed securities	$ 350	$ 342

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Consolidated Balance Sheets (Parenthetical) $ in Thousands		Dec. 31, 2019 USD ($) $ / shares shares	Dec. 31, 2018 USD ($) $ / shares shares
Allowance for loans and leases | $		$ 7,138	$ 7,012
Common stock, par value | $ / shares		$ 0.01	$ 0.01
Common stock, shares authorized	[1]	9,090,909	9,090,909
Common stock, shares issued		5,409,394	4,366,297
Treasury stock, shares		32,940	31,235
Series B Preferred Stock [Member]
Preferred stock, par value | $ / shares		$ 0.01	$ 0.01
Preferred stock, share authorized		480,000	480,000
Preferred stock, share issued		0	0
Series C Preferred Stock [Member]
Preferred stock, par value | $ / shares		$ 0.01	$ 0.01
Preferred stock, share authorized		12,337	12,337
Preferred stock, share issued		12,337	0

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

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Premises And Equipment And Operating Leases (Future Minimum Operating Lease Payments) (Details) $ in Thousands	Dec. 31, 2019 USD ($)
Premises And Equipment And Operating Leases [Abstract]
2020	$ 544
2021	548
2022	536
2023	377
Thereafter	250
Total future minimum rental commitments	2,255
Less - amounts representing interest	(295)
Total operating lease liabilities	$ 1,960

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Earnings Per Common Share (Summary Of Anti-Dilutive Options Or Warrants) (Details) - shares	12 Months Ended
	Dec. 31, 2019	Dec. 31, 2018
Stock Options [Member]
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Anti-dilutive shares	463	792

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Parent Company Only Condensed Financial Information (Condensed Balance Sheets) (Details) - USD ($) $ in Thousands	Dec. 31, 2019	Dec. 31, 2018	Dec. 31, 2017	Dec. 31, 2003
ASSETS
Cash and cash equivalents	$ 45,879	$ 67,304	$ 45,498
Other assets	12,254	6,858
Total assets	880,545	665,025
Liabilities and Equity
Subordinated debentures	14,806	14,767		$ 5,155
Stockholders' equity	80,664	45,559	40,261
Total liabilities and stockholder's equity	880,545	665,025
Parent Company [Member]
ASSETS
Cash and cash equivalents	10,037	2,675	$ 523
Investment in banking subsidiary	88,317	62,479
Investment in and advances to other subsidiary	238	233
Other assets	2,045	1,213
Total assets	100,637	66,600
Liabilities and Equity
Subordinated debentures	14,806	14,767
Other borrowings	5,000	6,000
Accrued expenses and other liabilities	167	274
Stockholders' equity	80,664	45,559
Total liabilities and stockholder's equity	$ 100,637	$ 66,600

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Securities (Fair Value Of Securities Pledged) (Details) - USD ($) $ in Thousands	Dec. 31, 2019	Dec. 31, 2018
Pledged as collateral for:
FHLB advances	$ 3,074	$ 4,058
Public deposits	2,015	1,997
Mortgage banking derivatives	1,500
Interest-rate swaps	77	104
Total	$ 6,666	$ 6,159

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Summary of Significant Accounting Policies (Details) $ in Thousands			12 Months Ended
	Dec. 31, 2019 USD ($) store	Aug. 20, 2018	Dec. 31, 2019 USD ($) store	Dec. 31, 2018 USD ($)	Jan. 01, 2019 USD ($)
Significant Accounting Policies [Line Items]
Number of full-service banking offices | store	6		6
Stock split description			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.
Reverse stock split ratio		5.5
Cash exceeded federally insured limits	$ 41,600		$ 41,600
Cash held, not federally insured	37,500		37,500
Interest-bearing deposits in other financial institutions	100		100	$ 100
Minimum balance of loans individually evaluated for impairment	250		250
Balance outstanding in joint ventures	1,000		1,000	595
Income recognized on joint ventures			$ 57	69
Tax benefit greater than being realized on examination			50.00%
FRB regulatory reserve requirement	5,164		$ 5,164	$ 3,502
Investment	894
Maximum exposure to loss related to investments	894
Operating lease, right-of-use assets	1,780		1,780
Operating lease, liabilities	$ 1,960		$ 1,960
ASU 2016-02 [Member]
Significant Accounting Policies [Line Items]
Operating lease, right-of-use assets					$ 2,400
Operating lease, liabilities					$ 2,400
Minimum [Member] | Buildings And Related Components [Member]
Significant Accounting Policies [Line Items]
Estimated useful life			3 years
Minimum [Member] | Furniture, fixtures and equipment [Member]
Significant Accounting Policies [Line Items]
Estimated useful life			2 years
Maximum [Member]
Significant Accounting Policies [Line Items]
Home equity lines of credit combined with the balance of the prior mortgage liens	89.90%		89.90%
Maturity of cash, deposits with other financial institutions			90 days
Maximum [Member] | Buildings And Related Components [Member]
Significant Accounting Policies [Line Items]
Estimated useful life			40 years
Maximum [Member] | Furniture, fixtures and equipment [Member]
Significant Accounting Policies [Line Items]
Estimated useful life			25 years
Single-Family Residential [Member] | Maximum [Member]
Significant Accounting Policies [Line Items]
Lending amount up to the percentage of collateral	80.00%		80.00%
Multi-Family Residential [Member] | Minimum [Member]
Significant Accounting Policies [Line Items]
Fixed rates loans limit, period			3 years
Multi-Family Residential [Member] | Maximum [Member]
Significant Accounting Policies [Line Items]
Lending amount up to the percentage of collateral	85.00%		85.00%
Fixed rates loans limit, period			5 years
Real Estate Commercial [Member] | Minimum [Member]
Significant Accounting Policies [Line Items]
Fixed rates loans limit, period			3 years
Real Estate Commercial [Member] | Maximum [Member]
Significant Accounting Policies [Line Items]
Lending amount up to the percentage of collateral	85.00%		85.00%
Fixed rates loans limit, period			5 years
Construction [Member] | Maximum [Member]
Significant Accounting Policies [Line Items]
Lending amount up to the percentage of collateral	80.00%		80.00%
Maturity of construction loans convert to permanent loans			30 years

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Contingent Liabilities

12 Months Ended

Dec. 31, 2019

Contingent Liabilities [Abstract]

Contingent Liabilities

NOTE 23 - CONTINGENT LIABILITIES

General Litigation:

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

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Securities (Tables)

12 Months Ended

Dec. 31, 2019

Securities [Abstract]

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

	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
December 31, 2019
Issued by U.S. government-sponsored entities and agencies:
U.S. Treasury	$	7,986	$	32	$	1	$	8,017
Mortgage-backed securities - residential		126		4		-		130
Collateralized mortgage obligations		27		-		-		27
Total	$	8,139	$	36	$	1	$	8,174

	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

Securities Classified By Maturity Date

	December 31, 2019				December 31, 2018
	Amortized Cost		Fair Value		Amortized Cost		Fair Value
Due in one year or less	$	5,001	$	5,000	$	3,495	$	3,472
Due from one to five years		2,985		3,017		6,483		6,409
Mortgage-backed securities - residential		126		130		167		170
Collateralized mortgage obligations		27		27		62		63
Total	$	8,139	$	8,174	$	10,207	$	10,114

Fair Value Of Securities Pledged

	2019		2018
Pledged as collateral for:
FHLB advances	$	3,074	$	4,058
Public deposits		2,015		1,997
Mortgage banking derivatives		1,500		-
Interest-rate swaps		77		104
Total	$	6,666	$	6,159

Securities With Unrealized Losses

December 31, 2019	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)	$	499	$	-	$	2,501	$	1	$	3,000	$	1
Total temporarily impaired	$	499	$	-	$	2,501	$	1	$	3,000	$	1

⁽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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Fair Value

12 Months Ended

Dec. 31, 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 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 December 31, 2019 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	$	8,017
Mortgage-backed securities - residential		130
Collateralized mortgage obligations		27
Total securities available for sale	$	8,174
Loans held for sale	$	135,711
Yield maintenance provisions (embedded derivatives)	$	12
Interest rate lock commitments	$	3,104
Financial Liabilities:
Interest-rate swaps	$	12
TBA mortgage-backed securities	$	350

	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 no assets or liabilities measured at fair value on a recurring basis that were measured using Level 1 or Level 3 inputs at December 31, 2019 or December 31, 2018.  There were no transfers of assets or liabilities measured at fair value between levels during 2019 or 2018.

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

Fair Value Measurements at December 31, 2019 Using
Significant Unobservable Inputs (Level 3)
Impaired loans:
Commercial	$	84
Real Estate:
Single-family residential		106
Commercial:
Non-owner occupied		4,387
Total impaired loans	$	4,577

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 no assets or liabilities measured at fair value on a non-recurring basis that were measured using Level 1 or 2 inputs at December 31, 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 $4,612, with a valuation allowance of $35 at December 31, 2019.  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. 

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, 2019:

	Fair Value		Valuation Technique(s)	Unobservable Inputs	(Range) Weighted Average
Impaired loans:
Commercial	$	84	Comparable sales approach	Adjustment for differences between the comparable market transactions	2.06%
Real estate:
Single-family residential		106	Comparable sales approach	Adjustment for differences between the comparable market transactions	3.61%
Commercial:
Non-owner occupied		4,387	Comparable sales approach	Adjustment for differences between the comparable market transactions	(-2.58%,  14.00%) 2.44%

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 December 31, 2019 or December 31, 2018. 

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

	December 31, 2019		December 31, 2018
Aggregate fair value	$	135,711	$	17,385
Contractual balance		133,993		17,008
Gain		1,718		377

The total amount of gains and losses from changes in fair value included in earnings for the year ended December 31, 2019 and 2018 for loans held for sale were:

	2019		2018
Interest income	$	2,153	$	669
Interest expense		-		-
Change in fair value		1,341		373
Total change in fair value	$	3,494	$	1,042

The carrying amounts and estimated fair values of financial instruments at year-end were as follows:

	Fair Value Measurements at December 31, 2019 Using:
	Carrying
	Value		Level 1		Level 2		Level 3		Total
Financial assets
Cash and cash equivalents	$	45,879	$	45,879	$	-	$	-	$	45,879
Interest-bearing deposits in other financial institutions		100		100		-		-		100
Securities available for sale		8,174		-		8,174		-		8,174
Loans held for sale		135,711		-		135,711		-		135,711
Loans and leases, net		663,303		-		-		664,152		664,152
FHLB and FRB stock		4,008		n/a		n/a		n/a		n/a
Accrued interest receivable		2,749		25		40		2,684		2,749
Yield maintenance provisions (embedded derivatives)		12		-		12		-		12
Interest rate lock commitments		3,104		-		3,104		-		3,104
Financial liabilities
Deposits	$	(746,323)	$	(382,173)	$	(367,375)	$	-	$	(749,548)
FHLB advances and other debt		(29,017)		-		(29,669)		-		(29,669)
Advances by borrowers for taxes and insurance		(929)		-		-		(929)		(929)
Subordinated debentures		(14,806)		-		(15,940)		-		(15,940)
Accrued interest payable		(208)		-		(208)		-		(208)
Interest-rate swaps		(12)		-		(12)		-		(12)
TBA mortgage-backed securities		(350)		-		(350)		-		(350)

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 debt		(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 used to estimate fair value are described as follows.

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, 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.

FHLB Advances and Other Debt

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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Revenue Recognition

12 Months Ended

Dec. 31, 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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FHLB Advances And Other Debt

12 Months Ended

Dec. 31, 2019

FHLB Advances And Other Debt [Abstract]

FHLB Advances And Other Debt

NOTE 10 –FHLB ADVANCES AND OTHER DEBT

FHLB advances and other debt were as follows:

	Weighted
	Average Rate	December 31, 2019		December 31, 2018
FHLB fixed rate advances
Maturities:
2019	-	$	-	$	3,500
2020	1.98%		4,500		4,500
2021	2.32%		4,000		4,000
2022	2.05%		1,500		1,500
2024	1.90%		6,500		-
Total FHLB fixed rate advances			16,500		13,500
Variable rate other debt:
Holding Company credit facility	5.50%		5,000		6,000
Warehouse facility	4.00%		7,517		-
Total variable rate other debt			12,517		6,000
Total		$	29,017	$	19,500

Each FHLB advance is payable at its maturity date, with a prepayment penalty. 

The advances were collateralized as follows:

	December 31, 2019		December 31, 2018
Single-family mortgage loans	$	79,144	$	70,140
Multi-family mortgage loans		21,258		18,841
Commercial real estate loans (1-4 family)		6,639		5,986
Home equity lines of credit		5,028		6,446
Securities		3,074		4,058
Cash		3,300		3,300
Total	$	118,443	$	108,771

Based on the collateral pledged to the FHLB, CFBank was eligible to borrow up to a total of $88,953 from the FHLB at December 31, 2019.

Payments due on FHLB advances and other debt over the next five years are as follows:
	December 31, 2019
2020	$	12,517
2021		4,500
2022		5,500
2023		-
2024		6,500
	$	29,017

The Holding Company had an existing credit facility with a third-party bank which was modified to a $10,000 revolving line-of-credit in December 2018.  In December 2019, the $5,000 outstanding balance on the existing line-of-credit was converted to a $5,000 term loan with an additional $10,000 revolving line-of-credit.  The new term loan requires quarterly principal payments of $125 plus accrued interest.  Any remaining principal is due and payable on the maturity date, which is December 23, 2022.  Loans under the credit facility bear interest at a rate equal to the Prime Rate plus 0.75%.  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.  As of December 31, 2019, the Company had an outstanding balance of $5,000 on the term loan and no outstanding balance on the revolving line-of-credit.  At December 31, 2018, the credit facility had an outstanding balance of $6,000.

At December 31, 2018, CFBank had $8,000 of availability in an unused line of credit at a commercial bank.  During the third quarter of 2019, CFBank added an additional $15,000 line of credit at another commercial bank.  There were no outstanding borrowings on these lines of credit at December 31, 2019 or December 31, 2018.  If CFBank were to borrow on these lines of credit, interest would accrue daily at a variable rate based on the commercial bank’s cost of funds and current market returns.

During the fourth quarter of 2019, CFBank entered into a $25,000 warehouse facility with a commercial bank.  The warehouse facility is used to periodically fund loans held for sale from the close (funding) date until they are sold in the secondary market.  Borrowings on the facility bear interest at the greater of 30 Day Libor plus 2.00% or 4.00% and are secured by the specific loans that were funded.  At December 31, 2019, the warehouse facility had an outstanding balance of $7,517.

There were no outstanding borrowings with the Federal Reserve Bank (the “FRB”) at December 31, 2019 or at December 31, 2018.

Assets pledged as collateral with the FRB were as follows:

	2019		2018
Commercial loans	$	38,317	$	29,578
Commercial real estate loans		77,733		76,332
	$	116,050	$	105,910

Based on the collateral pledged, CFBank was eligible to borrow up to $65,614 from the FRB at year-end 2019.

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Regulatory Capital Matters

12 Months Ended

Dec. 31, 2019

Regulatory Capital Matters [Abstract]

Regulatory Capital Matters

NOTE 18 – 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 December 31, 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
December 31, 2019
Total Capital to risk weighted assets	$	95,164	12.96%	$	77,097	10.50%	$	73,425	10.00%
Tier 1 (Core) Capital to risk weighted assets		87,857	11.97%		62,412	8.50%		58,740	8.00%
Common equity tier 1 capital to risk-weighted assets		87,857	11.97%		51,398	7.00%		47,726	6.50%
Tier 1 (Core) Capital to adjusted total assets (Leverage ratio)		87,857	10.58%		33,221	4.00%		41,526	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 with an initial balance 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 13-Income Taxes.

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Related-Party Transactions

12 Months Ended

Dec. 31, 2019

Related-Party Transactions [Abstract]

Related-Party Transactions

NOTE 14 – RELATED-PARTY TRANSACTIONS

Loans to principal officers, directors and their affiliates during 2019 were as follows:

Beginning balance	$	3,672
New loans		3,062
Repayments		(621)
Ending balance	$	6,113

All loans to related parties were made in the ordinary course of business under terms equivalent to those prevailing in the market for arm’s length transactions at the time of origination. 

Deposits from principal officers, directors, and their affiliates at year-end 2019 and 2018 were $976 and $593, respectively.

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Income Taxes (Income Tax Expense) (Details) - USD ($) $ in Thousands		12 Months Ended
		Dec. 31, 2019	Dec. 31, 2018
Operating Loss Carryforwards [Line Items]
Current federal		$ 2,627	$ 972
Deferred federal	[1]	(187)	85
Total		2,440	1,057
Operating Loss Carryforwards [Member]
Operating Loss Carryforwards [Line Items]
Deferred federal		$ 34	$ 34

[1] Includes tax benefit of operating loss carryforwards of $34 and $34 for the years ended December 31, 2019 and 2018, respectively.

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Loans And Leases (Aging Of Recorded Investment In Past Due Loans By Class Of Loans) (Details) - USD ($) $ in Thousands	Dec. 31, 2019	Dec. 31, 2018
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Past Due	$ 5,226	$ 1,148
Loans Not Past Due	665,215	556,547
Nonaccrual Loans Not > 90 Days Past Due	302	333
30 - 59 Days Past Due [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Past Due	2,757	1,071
60 - 89 Days Past Due [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Past Due	332	33
Greater Than 90 Days Past Due [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Past Due	2,137	44
Commercial Real Estate [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Past Due	71
Loans Not Past Due	170,575	126,887
Nonaccrual Loans Not > 90 Days Past Due	85	100
Commercial Real Estate [Member] | 60 - 89 Days Past Due [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Past Due	71
Single-Family Residential [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Past Due	3,140	620
Loans Not Past Due	117,116	117,766
Nonaccrual Loans Not > 90 Days Past Due	124	144
Single-Family Residential [Member] | 30 - 59 Days Past Due [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Past Due	2,453	597
Single-Family Residential [Member] | 60 - 89 Days Past Due [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Past Due	261
Single-Family Residential [Member] | Greater Than 90 Days Past Due [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Past Due	426	23
Multi-Family Residential [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Loans Not Past Due	39,229	47,651
Non-Owner Occupied [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Past Due	1,689
Loans Not Past Due	138,762	122,465
Non-Owner Occupied [Member] | Greater Than 90 Days Past Due [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Past Due	1,689
Owner Occupied [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Loans Not Past Due	81,871	43,087
Land [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Loans Not Past Due	25,221	7,883
Construction [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Past Due	304
Loans Not Past Due	67,348	61,792
Construction [Member] | 30 - 59 Days Past Due [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Past Due	304
Originated For Portfolio [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Past Due	22	474
Loans Not Past Due	20,713	23,119
Nonaccrual Loans Not > 90 Days Past Due	14
Originated For Portfolio [Member] | 30 - 59 Days Past Due [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Past Due		474
Originated For Portfolio [Member] | Greater Than 90 Days Past Due [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Past Due	22
Purchased For Portfolio [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Past Due		33
Loans Not Past Due	206	335
Nonaccrual Loans Not > 90 Days Past Due	79	89
Purchased For Portfolio [Member] | 60 - 89 Days Past Due [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Past Due		33
Other Consumer [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Past Due		21
Loans Not Past Due	$ 4,174	5,562
Other Consumer [Member] | Greater Than 90 Days Past Due [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Past Due		$ 21

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Loans And Leases (Activity In ALLL By Portfolio Segment) (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2019	Dec. 31, 2018
Financing Receivable, Allowance for Credit Losses [Line Items]
Beginning balance	$ 7,012	$ 6,970
Addition to (reduction in) provision for loan losses
Charge-offs	(36)	(6)
Recoveries	162	48
Ending balance	7,138	7,012
Commercial Real Estate [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Beginning balance	1,819	1,984
Addition to (reduction in) provision for loan losses	235	(167)
Charge-offs
Recoveries		2
Ending balance	2,054	1,819
Single-Family Residential [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Beginning balance	1,061	912
Addition to (reduction in) provision for loan losses	(120)	131
Charge-offs		(6)
Recoveries	7	24
Ending balance	948	1,061
Multi-Family Residential [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Beginning balance	612	660
Addition to (reduction in) provision for loan losses	(165)	(48)
Charge-offs
Recoveries
Ending balance	447	612
Real Estate Commercial [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Beginning balance	2,274	2,143
Addition to (reduction in) provision for loan losses	225	131
Charge-offs
Recoveries	105
Ending balance	2,604	2,274
Construction [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Beginning balance	739	672
Addition to (reduction in) provision for loan losses	20	67
Charge-offs
Recoveries
Ending balance	759	739
Home Equity Lines Of Credit [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Beginning balance	410	597
Addition to (reduction in) provision for loan losses	(195)	(209)
Charge-offs
Recoveries	50	22
Ending balance	265	410
Other Consumer [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Beginning balance	97	2
Addition to (reduction in) provision for loan losses		95
Charge-offs	(36)
Recoveries
Ending balance	$ 61	$ 97

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FHLB Advances And Other Debt (Assets Pledged As Collateral With FRB) (Details) - USD ($) $ in Thousands	Dec. 31, 2019	Dec. 31, 2018
Assets Pledged As Collateral [Line Items]
Assets pledged as collateral with the FRB	$ 116,050	$ 105,910
Commercial Real Estate [Member]
Assets Pledged As Collateral [Line Items]
Assets pledged as collateral with the FRB	38,317	29,578
Real Estate Commercial [Member]
Assets Pledged As Collateral [Line Items]
Assets pledged as collateral with the FRB	$ 77,733	$ 76,332

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Loans And Leases (Summary Of Future Minimum Lease Payments Receivable) (Details) $ in Thousands	Dec. 31, 2019 USD ($)
Loans And Leases [Abstract]
2019	$ 793
2020	793
2021	793
2022	1,563
2023	1,310
Future minimum lease payments	$ 5,252

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Related-Party Transactions (Loans To Principal Officers, Directors And Affiliates) (Details) $ in Thousands	12 Months Ended
	Dec. 31, 2019 USD ($)
Related-Party Transactions [Abstract]
Beginning balance	$ 3,672
New loans	3,062
Repayments	(621)
Ending balance	$ 6,113

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Deposits (Tables)

12 Months Ended

Dec. 31, 2019

Deposits [Abstract]

Scheduled Maturities Of Time Deposits

2020	$	189,268
2021		82,813
2022		54,764
2023		20,174
2024		17,124
Thereafter		7
Total	$	364,150

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Stock-Based Compensation (Tables)

12 Months Ended

Dec. 31, 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	(941)		8.19
Outstanding at end of period	95,438	$	7.64	3.4	$	604
Exercisable at end of period	95,438	$	7.64	3.4	$	604

Summary Of Changes In Company's Nonvested Restricted Shares

Nonvested Shares	Shares	Weighted Average Grant-Date Fair Value
Nonvested at January 1, 2019	69,324	$	11.91
Granted	73,738		13.35
Vested	(36,288)		11.38
Forfeited	(3,858)		12.37
Nonvested at December 31, 2019	102,916	$	13.11

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Stock-Based Compensation (Summary Of Changes In Company's Nonvested Restricted Shares) (Details)	12 Months Ended
	Dec. 31, 2019 $ / shares shares
Stock-Based Compensation [Abstract]
Shares, Nonvested at January 1, 2019 | shares	69,324
Shares, Granted | shares	73,738
Shares, Vested | shares	(36,288)
Shares, Forfeited | shares	(3,858)
Shares, Nonvested at December 31, 2019 | shares	102,916
Weighted Average Grant date Fair Value, Nonvested at January 1, 2019 | $ / shares	$ 11.91
Weighted Average Grant date Fair Value, Granted | $ / shares	13.35
Weighted Average Grant date Fair Value, Vested | $ / shares	11.38
Weighted Average Grant date Fair Value, Forfeited | $ / shares	12.37
Weighted Average Grant date Fair Value, Nonvested at December 31, 2019 | $ / shares	$ 13.11

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Regulatory Capital Matters (Actual And Required Capital Amounts And Ratios Of CFBank) (Details) - USD ($) $ in Thousands	Dec. 31, 2019	Dec. 31, 2018
Compliance with Regulatory Capital Requirements under Banking Regulations [Line Items]
Total Capital to risk weighted assets, Actual Amount	$ 95,164	$ 69,066
Tier 1 (Core) Capital to risk weighted assets, Actual Amount	87,857	62,085
Common equity tier 1 capital to risk-weighted assets, Actual Amount	87,857	62,085
Tier 1 (Core) Capital to adjusted total assets, Actual Amount	$ 87,857	$ 62,085
Total Capital to risk weighted assets, Actual Ratio	12.96%	12.37%
Tier 1 (Core) Capital to risk weighted assets, Actual Ratio	11.97%	11.12%
Common equity tier 1 capital to risk-weighted assets, Actual Ratio	11.97%	11.12%
Tier 1 (Core) Capital to adjusted total assets, Actual Ratio	10.58%	10.13%
Total Capital to risk weighted assets, To Be Well Capitalized Under Applicable Regulatory Capital Standards Amount	$ 73,425	$ 55,834
Tier 1 (Core) Capital to risk weighted assets, To Be Well Capitalized Under Applicable Regulatory Capital Standards Amount	58,740	44,668
Common equity tier 1 capital to risk-weighted assets, To Be Well Capitalized Under Applicable Regulatory Capital Standards Amount	47,726	36,292
Tier 1 (Core) Capital to adjusted total assets, To Be Well Capitalized Under Applicable Regulatory Capital Standards Amount	$ 41,526	$ 30,658
Capital to risk weighted assets, To Be Well Capitalized Under Applicable Regulatory Capital Standards Ratio	10.00%	10.00%
Tier 1 (Core) Capital to risk weighted assets, To Be Well Capitalized Under Applicable Regulatory Capital Standards Ratio	8.00%	8.00%
Common equity tier 1 capital to risk-weighted assets, To Be Well Capitalized Under Applicable Regulatory Capital Standards Ratio	6.50%	6.50%
Tier 1 (Core) Capital to adjusted total assets, To Be Well Capitalized Under Applicable Regulatory Capital Standards Ratio	5.00%	5.00%
Basel III Phase-In Schedule [Member]
Compliance with Regulatory Capital Requirements under Banking Regulations [Line Items]
Total Capital to risk weighted assets, Minimum Capital Required-Basel III Fully Phased-In Amount		$ 55,164
Tier 1 (Core) Capital to risk weighted assets, Minimum Capital Required-Basel III Fully Phased-In Amount		43,998
Common equity tier 1 capital to risk-weighted assets, Minimum Capital Required-Basel III Fully Phased-In Amount		35,622
Tier 1 (Core) Capital to adjusted total assets, Minimum Capital Required-Basel III Fully Phased-In Amount		$ 24,526
Total Capital to risk weighted assets, Minimum Capital Required-Basel III Fully Phased-In Ratio		9.88%
Tier 1 (Core) Capital to risk weighted assets, Minimum Capital Required-Basel III Fully Phased-In Ratio		7.88%
Common equity tier 1 capital to risk-weighted assets, Minimum Capital Required-Basel III Fully Phased-In Ratio		6.38%
Tier 1 (Core) Capital to adjusted total assets, Minimum Capital Required-Basel III Fully Phased-In Ratio		4.00%
Basel III Fully Phased-In [Member]
Compliance with Regulatory Capital Requirements under Banking Regulations [Line Items]
Total Capital to risk weighted assets, Minimum Capital Required-Basel III Fully Phased-In Amount	$ 77,097	$ 58,626
Tier 1 (Core) Capital to risk weighted assets, Minimum Capital Required-Basel III Fully Phased-In Amount	62,412	47,459
Common equity tier 1 capital to risk-weighted assets, Minimum Capital Required-Basel III Fully Phased-In Amount	51,398	39,084
Tier 1 (Core) Capital to adjusted total assets, Minimum Capital Required-Basel III Fully Phased-In Amount	$ 33,221	$ 24,526
Total Capital to risk weighted assets, Minimum Capital Required-Basel III Fully Phased-In Ratio	10.50%	10.50%
Tier 1 (Core) Capital to risk weighted assets, Minimum Capital Required-Basel III Fully Phased-In Ratio	8.50%	8.50%
Common equity tier 1 capital to risk-weighted assets, Minimum Capital Required-Basel III Fully Phased-In Ratio	7.00%	7.00%
Tier 1 (Core) Capital to adjusted total assets, Minimum Capital Required-Basel III Fully Phased-In Ratio	4.00%	4.00%