10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISION

Washington, D.C. 20549

FORM 10-Q

(Mark one)

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

For the quarterly period ended June 30, 2020

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

CF BANKSHARES INC.

(Exact name of registrant as specified in its charter)

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

7000 North High St.,  Worthington,  Ohio43085

(Address of principal executive offices) (Zip Code)

(614)  334-7979

(Registrant’s telephone number, including area code)

Central Federal Corporation

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

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

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

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

Yes [X]    No [  ]

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

Yes [X]   No [  ]

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

Large Accelerated Filer [  ]    Accelerated Filer [  ]    Non-accelerated Filer [X]    Smaller Reporting Company [X]

Emerging Growth Company [  ]

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

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

Yes [  ]    No [X]

As of August 1, 2020, there were 5,305,556 shares of the registrant’s (Voting) Common Stock outstanding and 1,260,700 shares of the registrant’s Non-Voting Common Stock outstanding.

CF BANKSHARES INC.

INDEX

PART I.  Financial Information		Page
Item 1.     Financial Statements		3
	Consolidated Balance Sheets as of June 30, 2020 (unaudited) and December 31, 2019	3
	Consolidated Statements of Income for the threeand six months ended June 30, 2020 and 2019 (unaudited)	4
	Consolidated Statements of Comprehensive Income for the threeand six months ended June 30, 2020 and 2019 (unaudited)	5
	Consolidated Statements of Changes in Stockholders’ Equity for the three and six months ended June 30, 2020 and 2019 (unaudited)	6
	Consolidated Statements of Cash Flows for the three  and six months ended June 30, 2020 and 2019 (unaudited)	8
	Notes to Consolidated Financial Statements (three and six months ended June 30, 2020 and 2019 unaudited)	9
Item 2.      Management’s Discussion and Analysis of Financial Condition and Results of Operations		39
Item 3.     Quantitative and Qualitative Disclosures About Market Risk		54
Item 4.     Controls and Procedures		55
PART II.  Other Information		56
Item 1.     Legal Proceedings		56
Item 1A.   Risk Factors		56
Item 2.     Unregistered Sales of Equity Securities and Use of Proceeds		57
Item 3.     Defaults Upon Senior Securities		58
Item 4.     Mine Safety Disclosures		58
Item 5.     Other Information		58
Item 6.     Exhibits		59
Signatures		60

CF BANKSHARES INC.

CONSOLIDATED BALANCE SHEETS

(Dollars in thousands except per share data)

	June 30,		December 31,
	2020		2019
	(unaudited)
ASSETS
Cash and cash equivalents	$	77,376	$	45,879
Interest-bearing deposits in other financial institutions		100		100
Securities available for sale		10,802		8,174
Loans held for sale, at fair value		165,891		135,711
Loans and leases, net of allowance of $10,107 and $7,138		846,529		663,303
FHLB and FRB stock		5,216		4,008
Premises and equipment, net		4,005		3,991
Operating lease right-of-use assets		1,588		1,780
Bank owned life insurance		5,416		5,345
Accrued interest receivable and other assets		29,165		12,254
Total assets	$	1,146,088	$	880,545
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits
Noninterest bearing	$	148,188	$	115,530
Interest bearing		700,850		630,793
Total deposits		849,038		746,323
FHLB advances and other debt		165,806		29,017
Advances by borrowers for taxes and insurance		782		929
Operating lease liabilities		1,750		1,960
Accrued interest payable and other liabilities		21,320		6,846
Subordinated debentures		14,825		14,806
Total liabilities		1,053,521		799,881
Commitments and contingent liabilities		-		-
Stockholders' equity
Common stock, $.01 par value;
shares authorized: 9,090,909;
shares issued: 5,381,705 at June 30, 2020 and 5,409,394 at December 31, 2019		54		54
Non-voting Common stock, $.01 par value;
shares authorized: 1,260,700;
shares issued: 1,260,700 at June 30, 2020 and 0 at December 31, 2019		13		-
Series B Preferred stock, $0.01 par value; 480,000 shares authorized;
0 issued at June 30, 2020 and 0 at December 31, 2019		-		-
Series C Preferred stock, $0.01 par value; 12,607 shares authorized;
0 issued at June 30, 2020 and 12,337 shares authorized and issued at December 31, 2019		-		-
Additional paid-in capital		87,276		86,903
Retained earnings (accumulated deficit)		9,142		(2,932)
Accumulated other comprehensive income		146		28
Treasury stock, at cost; 95,809 shares of common stock at June 30, 2020 and 32,940 shares of common stock at December 31, 2019		(4,064)		(3,389)
Total stockholders' equity		92,567		80,664
Total liabilities and stockholders' equity	$	1,146,088	$	880,545

See accompanying notes to consolidated financial statements.

3

CF BANKSHARES INC.

CONSOLIDATED STATEMENTS OF INCOME

(Dollars in thousands except per share data)

(Unaudited)

	Three months ended				Six months ended
	June 30,				June 30,
	2020		2019		2020		2019
Interest and dividend income
Loans and leases, including fees	$	9,759	$	8,112	$	19,511	$	15,602
Securities		42		43		85		85
FHLB and FRB stock dividends		50		53		94		107
Federal funds sold and other		17		297		124		652
		9,868		8,505		19,814		16,446
Interest expense
Deposits		3,001		2,876		6,317		5,309
FHLB advances and other debt		344		144		604		295
Subordinated debentures		240		256		487		513
		3,585		3,276		7,408		6,117
Net interest income		6,283		5,229		12,406		10,329
Provision for loan and lease losses		3,125		-		3,125		-
Net interest income after provision for loan and lease losses		3,158		5,229		9,281		10,329
Noninterest income
Service charges on deposit accounts		139		138		290		262
Net gains on sales of loans		19,625		2,362		22,469		3,865
Swap fee income		14		-		407		-
Earnings on bank owned life insurance		36		35		71		69
Other		42		30		63		63
		19,856		2,565		23,300		4,259
Noninterest expense
Salaries and employee benefits		6,250		2,643		9,295		5,144
Occupancy and equipment		247		228		500		446
Data processing		427		293		874		609
Franchise and other taxes		184		106		363		212
Professional fees		1,182		356		2,187		644
Director fees		221		133		379		264
Postage, printing and supplies		58		59		116		126
Advertising and marketing		1,248		616		2,523		1,242
Telephone		52		45		106		90
Loan expenses		65		45		162		91
Foreclosed assets, net		-		-		-		(9)
Depreciation		94		78		180		149
FDIC premiums		134		152		291		304
Regulatory assessment		45		40		90		82
Other insurance		27		24		54		47
Other		79		113		237		184
		10,313		4,931		17,357		9,625
Income before incomes taxes		12,701		2,863		15,224		4,963
Income tax expense		2,633		583		3,150		1,002
Net income		10,068		2,280		12,074		3,961
Accretion of discount and value of warrants exercised related to Series B preferred stock		-		157		-		183
Earnings allocated to participating securities (Series C preferred stock)		(1,218)		-		(1,866)		-
Net income attributable to common stockholders	$	8,850	$	2,437	$	10,208	$	4,144
Earnings per common share:
Basic	$	1.54	$	0.55	$	1.84	$	0.95
Diluted	$	1.53	$	0.55	$	1.82	$	0.93

See accompanying notes to consolidated financial statements.

4

CF BANKSHARES INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Dollars in thousands except per share data)

(Unaudited)

	Three months ended				Six months ended
	June 30,				June 30,
	2020		2019		2020		2019
Net income	$	10,068	$	2,280	$	12,074	$	3,961
Other comprehensive income:
Unrealized holding gains (losses) arising during the period related to securities available for sale, net of tax of ($7) and $14, and $31 and $23		(26)		52		118		87
Other comprehensive income (loss), net of tax		(26)		52		118		87
Comprehensive income	$	10,042	$	2,332	$	12,192	$	4,048

See accompanying notes to consolidated financial statements.

5

CF BANKSHARES INC.

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

(Dollars in thousands except per share data)

(Unaudited)

			Non-voting		Additional		Retained Earnings		Accumulated Other				Total
	Common		Common		Paid-In		(Accumulated		Comprehensive		Treasury		Stockholders'
Three months ended June 30, 2020	Stock		Stock		Capital		Deficit)		Income (Loss)		Stock		Equity
Balance at April 1, 2020	$	54	$	-	$	87,046	$	(926)	$	172	$	(3,465)	$	82,881
Net income								10,068						10,068
Other comprehensive loss										(26)				(26)
Restricted stock expense, net of forfeitures						207								207
Stock options exercised						36								36
Purchase of 56,247 treasury shares												(599)		(599)
Conversion of 12,607 shares of Series C preferred stock to 1,260,700 shares of non-voting common stock				13		(13)								-
Balance at June 30, 2020	$	54	$	13	$	87,276	$	9,142	$	146	$	(4,064)	$	92,567

			Non-voting		Additional		Retained Earnings		Accumulated Other				Total
	Common		Common		Paid-In		(Accumulated		Comprehensive		Treasury		Stockholders'
Six months ended June 30, 2020	Stock		Stock		Capital		Deficit)		Income		Stock		Equity
Balance at January 1, 2020	$	54	$	-	$	86,903	$	(2,932)	$	28	$	(3,389)	$	80,664
Net income								12,074						12,074
Other comprehensive income										118				118
Restricted stock expense, net of forfeitures						350								350
Stock options exercised						36								36
Acquisition of 1,869 treasury shares surrendered upon vesting for restricted stock for payment of taxes												(27)		(27)
Purchase of 61,000 treasury shares												(648)		(648)
Conversion of 12,607 shares of Series C preferred stock to 1,260,700 shares of non-voting common stock				13		(13)								-
Balance at June 30, 2020	$	54	$	13	$	87,276	$	9,142	$	146	$	(4,064)	$	92,567

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

See accompanying notes to consolidated financial statements.

6

CF BANKSHARES INC.

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

(Dollars in thousands except per share data)

(Unaudited)

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

See accompanying notes to consolidated financial statements.

7

CF BANKSHARES INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Dollars in thousands, except per share data)

(Unaudited)

		Six months ended June 30,
	2020		2019
Net Income	$	12,074	$	3,961
Adjustments to reconcile net income to net cash from operating activities:
Provision for loan and lease losses		3,125		-
Depreciation		180		149
Amortization, net		(507)		(18)
Deferred income tax (benefit)		(31)		6
Originations of loans held for sale		(806,205)		(205,715)
Proceeds from sale of loans held for sale		789,573		174,123
Net gains on sales of loans		(22,469)		(3,865)
Gain on sale of foreclosed assets		-		(12)
Earnings on bank owned life insurance		(71)		(69)
Stock-based compensation expense		350		254
Net change in:
Accrued interest receivable and other assets		(15,510)		(2,290)
Operating lease right-of-use asset		192		217
Operating lease right-of-use liability		(210)		(205)
Accrued interest payable and other liabilities		13,974		670
Net cash used by operating activities		(25,535)		(32,794)
Cash flows from investing activities:
Available-for-sale securities:
Maturities, prepayments and calls		3,066		1,535
Purchases		(5,552)		(1,494)
Loan and lease originations and payments, net		(184,413)		(48,502)
Proceeds from the sale of loans		-		1,137
Additions to premises and equipment		(194)		(317)
Purchase of FRB Stock		(1,208)		(340)
Purchase of other investments		(1,000)		(723)
Return of investment-joint ventures		98		95
Proceeds from the sale of foreclosed assets		-		50
Net cash used by investing activities		(189,203)		(48,559)
Cash flows from financing activities:
Net change in deposits		102,715		48,800
Proceeds from FHLB advances and other debt		450,636		-
Repayments on FHLB advances and other debt		(306,330)		(1,000)
Net change in advances by borrowers for taxes and insurance		(147)		(487)
Proceeds from exercise of stock options		36		-
Exercise of warrants to common stock		-		1,059
Acquisition of treasury shares surrendered upon vesting of restricted stock for payment of taxes		(27)		-
Purchase of treasury shares		(648)		-
Net cash from financing activities		246,235		48,372
Net change in cash and cash equivalents		31,497		(32,981)
Beginning cash and cash equivalents		45,879		67,304
Ending cash and cash equivalents	$	77,376	$	34,323
Supplemental cash flow information:
Interest paid	$	7,388	$	2,833
Income tax paid		-		985
Supplemental noncash disclosures:
Loans transferred from held for sale to portfolio		1,404		657
Investment payable on limited liability corporation and limited partnership		500		670
Transfer of other liability to operating lease right-of-use asset		-		184
Initial recognition of operating right-of-use lease asset		-		2,368
Initial recognition of operating right-of-use lease liability		-		2,368
Loans held for sale funded with other debt, net of repayments		(7,517)		-

See accompanying notes to consolidated financial statements.

8

CF BANKSHARES INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except per share data)

NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation: 

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

In the opinion of the management of the Company, the accompanying unaudited interim consolidated financial statements include all adjustments necessary for a fair presentation of the Company’s financial condition and the results of operations for the periods presented.  These adjustments are of a normal recurring nature, unless otherwise disclosed in this Form 10-Q.  The financial performance reported for the Company for the three and six months ended June 30, 2020 is not necessarily indicative of the results that may be expected for the full year.  This information should be read in conjunction with the Company’s latest Annual Report to Stockholders and Annual Report on Form 10-K on file with the SEC.  Reference is made to the accounting policies of the Company described in Note 1 to the Audited Consolidated Financial Statements contained in the Company’s 2019 Annual Report to Stockholders that was filed as Exhibit 13.1 to the Company’s Form 10-K for the year ended December 31, 2019 (referred to herein as the “2019 Audited Financial Statements”).  The Company has consistently followed those policies in preparing this Form 10-Q.

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

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

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

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

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

9

CF BANKSHARES INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except per share data)

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

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

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

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

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

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

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

10

CF BANKSHARES INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except per share data)

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 HTC investment is accounted for under the equity method of accounting and is included in accrued interest receivable and other assets on the consolidated balance sheets.  The Company’s recorded investment in this entity was $894 at June 30, 2020 and December 31, 2019.  The maximum exposure to loss related to these investments was $894 at June 30, 2020, representing the Company’s investment balance. 

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

	Three months ended				Six months ended
	June 30,				June 30,
	2020		2019		2020		2019
	(unaudited)				(unaudited)
Basic
Net income	$	10,068	$	2,280	$	12,074	$	3,961
Accretion of discount and value of warrants exercised related to Series B preferred stock (1)		-		157		-		183
Earnings allocated to participating securities (Series C preferred stock)		(1,218)		-		(1,866)		-
Net income allocated to common stockholders	$	8,850	$	2,437	$	10,208	$	4,144
Weighted average common shares outstanding including unvested share-based payment awards		5,777,816		4,412,726		5,575,856		4,384,395
Less: Unvested share-based payment awards-2019 Plan		(38,719)		-		(39,335)		-
Average shares		5,739,097		4,412,726		5,536,521		4,384,395
Basic earnings per common share	$	1.54	$	0.55	$	1.84	$	0.95
Diluted
Net earnings allocated to common stockholders	$	8,850	$	2,437	$	10,208	$	4,144
Add back: Preferred Dividends on Series B preferred stock and accretion of discount		-		-		-		-
Net earnings allocated to common stockholders	$	8,850	$	2,437	$	10,208	$	4,144
Weighted average common shares outstanding for basic earnings per common share		5,739,097		4,412,726		5,536,521		4,384,395
Add:  Dilutive effects of assumed exercises of stock options		24,762		35,077		25,591		37,075
Add:  Dilutive effects of assumed exercises of stock warrants		-		4,834		-		13,894
Add:  Dilutive effects of unvested share-based payment awards-2019 Plan		38,719		-		39,335
Average shares and dilutive potential common shares		5,802,578		4,452,637		5,601,447		4,435,364
Diluted earnings per common share	$	1.53	$	0.55	$	1.82	$	0.93

⁽¹⁾ All outstanding warrants expired on July 15, 2019.

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

	Three months ended June 30,		Six months ended June 30,
	2020	2019	2020	2019
	(unaudited)		(unaudited)
Stock options	437	467	444	475

11

CF BANKSHARES INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except per share data)

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.

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.  

In March 2020, the FASB issued ASU No. 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting. These amendments provide temporary optional guidance to ease the potential burden in accounting for reference rate reform. The ASU provides optional expedients and exceptions for applying generally accepted accounting principles to contract modifications and hedging relationships, subject to meeting certain criteria, that reference LIBOR or another reference rate expected to be discontinued. It is intended to help stakeholders during the global market-wide reference rate transition period. The guidance is effective for all entities as of March 12, 2020 through December 31, 2022. The Company is implementing a transition plan to identify and modify its loans and other financial instruments with attributes that are either directly or indirectly influenced by LIBOR. The Company is assessing ASU 2020-04 and its impact on the Company's transition away from LIBOR for its loan and other financial instruments.

General Litigation

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

12

CF BANKSHARES INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except per share data)

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). Payments 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 June 30, 2020 and December 31, 2019 and the corresponding amounts of unrealized gains and losses recognized in accumulated other comprehensive income (loss):

	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
June 30, 2020 (unaudited)
Issued by U.S. government-sponsored entities and agencies:
U.S. Treasury	$	10,530	$	181	$	-	$	10,711
Mortgage-backed securities - residential		77		4		-		81
Collateralized mortgage obligations		10		-		-		10
Total	$	10,617	$	185	$	-	$	10,802

	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

There was no other-than-temporary impairment recognized in accumulated other comprehensive income (loss) for securities available for sale at June 30, 2020 or June 30, 2019.

There were no sales of securities for the three and six months ended June 30, 2020 and 2019.

13

CF BANKSHARES INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except per share data)

The amortized cost and fair value of debt securities at June 30, 2020 and December 31, 2019 are shown in the table below by contractual maturity.  Expected maturities may differ from contractual maturities if borrowers have the right to call or prepay obligations with or without call or prepayment penalties.  Securities not due at a single maturity date are shown separately.

	June 30, 2020					December 31, 2019
	(unaudited)
	Amortized Cost		Fair Value		Amortized Cost		Fair Value
Due in one year or less	$	6,026	$	6,065	$	5,001	$	5,000
Due from one to five years		4,504		4,646		2,985		3,017
Mortgage-backed securities - residential		77		81		126		130
Collateralized mortgage obligations		10		10		27		27
Total	$	10,617	$	10,802	$	8,139	$	8,174

Fair value of securities pledged as collateral was as follows:

	June 30, 2020		December 31, 2019
	(unaudited)
Pledged as collateral for:
FHLB advances	$	2,544	$	3,074
Public deposits		2,552		2,015
Mortgage banking derivatives		3,039		1,500
Interest-rate swaps		65		77
Total	$	8,200	$	6,666

At June 30, 2020 and December 31, 2019, there were no holdings of securities of any one issuer, other than U.S. government-sponsored entities and agencies, in an amount greater than 10% of stockholders’ equity.

There were no unrealized losses at June 30, 2020.

The following table summarizes securities with unrealized losses at December 31, 2019, 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.

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

14

CF BANKSHARES INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except per share data)

NOTE 4 – LOANS AND LEASES

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

	June 30, 2020		December 31, 2019
	(unaudited)
Commercial (1)	$	327,539	$	170,646
Real estate:
Single-family residential		128,241		120,256
Multi-family residential		46,654		39,229
Commercial		272,207		247,543
Construction		59,574		67,652
Consumer:
Home equity lines of credit		19,596		20,941
Other		2,825		4,174
Subtotal		856,636		670,441
Less: ALLL		(10,107)		(7,138)
Loans and leases, net	$	846,529	$	663,303

⁽¹⁾ Includes $4,459 and $4,779 of commercial leases at June 30, 2020 and December 31, 2019, respectively.

Included in Commercial loans at June 30, 2020, were $123.5 million of loans originated under the Small Business Administration (“SBA”) Paycheck Protection Program (“PPP”).  The CARES Act authorized the SBA to temporarily guarantee loans under a new 7(a) loan program, the PPP.  These loans are 100% guaranteed by the SBA and the full principal amount of the loan may qualify for forgiveness.  The loans we originated have a maturity of two years, an interest rate of 1.00% and loan payments are deferred for the initial six months.  The majority of these loans have been pledged as collateral on borrowings under the FRB Paycheck Protection Program Lending Facility (“PPPLF”).  See Note8-  FHLB Advances and Other Debt for additional information.

Mortgage Purchase Program

CFBank has participated in a Mortgage Purchase Program with Northpointe Bank (Northpointe), a Michigan banking corporation, since December 2012.  Pursuant to the terms of a participation agreement, CFBank purchases participation interests in loans made by Northpointe related to fully underwritten and pre-sold mortgage loans originated by various prescreened mortgage brokers located throughout the U.S.  The underlying loans are individually (MERS) registered loans which are held until funded by the end investor. The mortgage loan investors include Fannie Mae and Freddie Mac, and other major financial institutions.  This process on average takes approximately 14 days.  Given the short-term holding period of the underlying loans, common credit risks (such as past due, impairment and TDR, nonperforming, and nonaccrual classification) are substantially reduced.  Therefore, no allowance is allocated by CFBank to these loans.  These loans are 100% risk rated for CFBank capital adequacy purposes.  Under the participation agreement, CFBank agrees to purchase a 95% ownership/participation interest in each of the aforementioned loans, and Northpointe maintains a 5% ownership interest in each loan it participates.  At June 30, 2020 and December 31, 2019, CFBank held $23,116 and $26,046, respectively, of such loans which have been included in single-family residential loan totals above.

Allowance for Loan and Lease Losses

The ALLL is a valuation allowance for probable incurred credit losses in the loan portfolio based on management’s evaluation of various factors including past loan loss experience, the nature and volume of the portfolio, information about specific borrower situations and estimated collateral values, economic conditions and other factors. A provision for loan and lease losses is charged to operations based on management’s periodic evaluation of these and other pertinent factors described in Note 1 to the 2019 Audited Financial Statements. 

15

CF BANKSHARES INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except per share data)

The following table presents the activity in the ALLL by portfolio segment for the three and six months ended June 30, 2020:

	Three months ended June 30, 2020 (unaudited)
			Real Estate								Consumer
	Commercial		Single-family		Multi-family		Commercial		Construction		Home Equity lines of credit		Other		Total
Beginning balance	$	2,103	$	905	$	512	$	2,674	$	574	$	249	$	56	$	7,073
Addition to (reduction in) provision for loan losses		600		150		55		1,860		450		10		-		3,125
Charge-offs		(39)		(58)		-		-		-		-		-		(97)
Recoveries		-		2		-		-		-		4		-		6
Ending balance	$	2,664	$	999	$	567	$	4,534	$	1,024	$	263	$	56	$	10,107

	Six months ended June 30, 2020 (unaudited)
			Real Estate								Consumer
	Commercial		Single-family		Multi-family		Commercial		Construction		Home Equity lines of credit		Other		Total
Beginning balance	$	2,054	$	948	$	447	$	2,604	$	759	$	265	$	61	$	7,138
Addition to (reduction in) provision for loan losses		720		105		120		1,930		265		(10)		(5)		3,125
Charge-offs		(110)		(58)		-		-		-		-		-		(168)
Recoveries		-		4		-		-		-		8		-		12
Ending balance	$	2,664	$	999	$	567	$	4,534	$	1,024	$	263	$	56	$	10,107

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

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

16

CF BANKSHARES INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except per share data)

	Six months ended June 30, 2019 (unaudited)
			Real Estate								Consumer
	Commercial		Single-family		Multi-family		Commercial		Construction		Home Equity lines of credit		Other		Total
Beginning balance	$	1,819	$	1,061	$	612	$	2,274	$	739	$	410	$	97	$	7,012
Addition to (reduction in) provision for loan losses		150		(50)		(50)		65		20		(115)		(20)		-
Charge-offs		-		-		-		-		-		-		-		-
Recoveries		-		3		-		-		-		14		-		17
Ending balance	$	1,969	$	1,014	$	562	$	2,339	$	759	$	309	$	77	$	7,029

The following table presents the balance in the ALLL and the recorded investment in loans and leases by portfolio segment and based on the impairment method as of June 30, 2020 (unaudited):

			Real Estate								Consumer
	Commercial		Single- family		Multi- family		Commercial		Construction		Home Equity lines of credit		Other		Total
ALLL:
Ending allowance balance attributable to loans:
Individually evaluated for impairment	$	-	$	-	$	-	$	22	$	-	$	-	$	-	$	22
Collectively evaluated for impairment		2,664		999		567		4,512		1,024		263		56		10,085
Total ending allowance balance	$	2,664	$	999	$	567	$	4,534	$	1,024	$	263	$	56	$	10,107
Loans:
Individually evaluated for impairment	$	81	$	106	$	-	$	2,728	$	-	$	-	$	-	$	2,915
Collectively evaluated for impairment		327,458		128,135		46,654		269,479		59,574		19,596		2,825		853,721
Total ending loan balance	$	327,539	$	128,241	$	46,654	$	272,207	$	59,574	$	19,596	$	2,825	$	856,636

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

17

CF BANKSHARES INC.

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 period ended June 30, 2020.  The unpaid principal balance is the contractual principal balance outstanding.  The recorded investment is the unpaid principal balance adjusted for partial charge-offs, purchase premiums and discounts, and deferred loan fees and costs.  The table presents accrual basis interest income recognized during the three and six months ended June 30, 2020.  Cash payments of interest on these loans during the three and six months ended June 30, 2020 totaled $11 and $53, respectively.

							Three months ended				Six months ended
	As of June 30, 2020						June 30, 2020				June 30, 2020
	(unaudited)						(unaudited)				(unaudited)
	Unpaid Principal Balance		Recorded Investment		ALLL Allocated		Average Recorded Investment		Interest Income Recognized		Average Recorded Investment		Interest Income Recognized
With no related allowance recorded:
Real estate:
Commercial:
Owner occupied	$	-	$	-	$	-	$	-	$	-	$	-	$	-
Total with no allowance recorded		-		-		-		-		-		-		-
With an allowance recorded:
Commercial (1)		81		81		-		108		3		126		5
Real estate:
Single-family residential (1)		106		106		-		106		-		106		1
Commercial:
Non-owner occupied		2,728		2,728		22		2,730		38		2,732		75
Total with an allowance recorded		2,915		2,915		22		2,944		41		2,964		81
Total	$	2,915	$	2,915	$	22	$	2,944	$	41	$	2,964	$	81

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

The following table presents loans individually evaluated for impairment by class of loans as of 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, and deferred loan fees and costs.  The table presents accrual basis interest income recognized during the three and six months ended June 30, 2019.  Cash payments of interest during the three and six months ended June 30, 2019 totaled $43 and $88.

							Three months ended				Six months ended
	As of December 31, 2019						June 30, 2019				June 30, 2019
							(unaudited)				(unaudited)
	Unpaid Principal Balance		Recorded Investment		ALLL Allocated		Average Recorded Investment		Interest Income Recognized		Average Recorded Investment		Interest Income Recognized
With no related allowance recorded:
Commercial	$	-	$	-	$	-	$	94	$	-	$	96	$	-
Real estate:
Single-family residential		-		-		-		109		2		109		3
Commercial:
Owner occupied		-		-		-		121		1		122		7
Total with no allowance recorded		-		-		-		324		3		327		10
With an allowance recorded:
Commercial		85		85		1		-		-		-		-
Real estate:
Single-family residential		107		107		1		-		-		-		-
Multi-family residential		-		-		-		-		-
Commercial:
Non-owner occupied		4,420		4,420		33		4,483		39		3,932		76
Total with an allowance recorded		4,612		4,612		35		4,483		39		3,932		76
Total	$	4,612	$	4,612	$	35	$	4,807	$	42	$	4,259	$	86

18

CF BANKSHARES INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except per share data)

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

	June 30, 2020		December 31, 2019
	(unaudited)
Loans past due over 90 days still on accrual	$	-	$	-
Nonaccrual loans:
Commercial		-		85
Real estate:
Single-family residential		472		550
Commercial:
Non-owner occupied		-		1,689
Consumer:
Home equity lines of credit:
Originated for portfolio		35		36
Purchased for portfolio		74		79
Other consumer		-		-
Total nonaccrual		581		2,439
Total nonaccrual and nonperforming loans	$	581	$	2,439

Nonaccrual loans include both smaller balance single-family mortgage and consumer loans that are collectively evaluated for impairment and individually classified impaired loans.  There were no loans 90 days or more past due and still accruing interest at June 30, 2020 or December 31, 2019.

The following table presents the aging of the recorded investment in past due loans and leases by class of loans as of June 30, 2020 (unaudited):

	30 - 59 Days Past Due		60 - 89 Days Past Due		Greater than 90 Days Past Due		Total Past Due		Loans Not Past Due		Nonaccrual Loans Not > 90 days Past Due
Commercial	$	-	$	-	$	-	$	-	$	327,539	$	-
Real estate:
Single-family residential		892		17		358		1,267		126,974		114
Multi-family residential		-		-		-		-		46,654		-
Commercial:
Non-owner occupied		-		-		-		-		151,927		-
Owner occupied		-		-		-		-		92,176		-
Land		-		-		-		-		28,104		-
Construction		-		-		-		-		59,574		-
Consumer:
Home equity lines of credit:
Originated for portfolio		132		-		22		154		19,245		13
Purchased for portfolio		-		-		-		-		197		74
Other		-		-		-		-		2,825		-
Total	$	1,024	$	17	$	380	$	1,421	$	855,215	$	201

19

CF BANKSHARES INC.

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

Short-term Loan Deferrals

Under the CARES Act, financial institutions are permitted to not classify loan modifications that were related to the impact of COVID-19 if:

· The modifications were made between March 1, 2020 and the earlier of December 31, 2020 or 60 days after the end of the public health emergency, and

· The underlying loans were not more than 30 days past due as of December 31, 2019.

We implemented a loan modification program in accordance with the CARES Act to provide temporary relief to borrowers that meet the requirements under the CARES Act.  The program allows for deferral of payments for up to 90 days, which we may extend for up to an additional 90 days at our option.  The deferred payments and accrued interest during the deferral period are due and payable on or before the maturity of the loans.  At June 30, 2020, we granted temporary deferrals on loans with an outstanding balance of approximately $100 million. Under the provisions of the CARES Act, none of these loans were considered a troubled debt restructuring (“TDR”) at June 30, 2020.

Troubled Debt Restructurings (TDRs):

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

As of June 30, 2020 and December 31, 2019, TDRs totaled $2,915 and $2,923, respectively.  The Company allocated $22 and $22 of specific reserves to loans whose terms had been modified in TDRs as of June 30, 2020 and December 31, 2019, respectively.  The Company had not committed to lend any additional amounts as of June 30, 2020 or December 31, 2019 to customers with outstanding loans classified as nonaccrual TDRs.

During the three months ended June 30, 2020 and June 30, 2019, there were no loans modified as a TDR. 

20

CF BANKSHARES INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except per share data)

There were no TDRs in payment default or that became nonperforming during the quarters ended June 30, 2020 and June 30, 2019.  A loan is considered to be in payment default once it is 90 days contractually past due under the modified terms, at which time the loan is re-evaluated to determine whether an impairment loss should be recognized, either through a write-off or specific valuation allowance, so that the loan is reported, net, at the present value of estimated future cash flows, or at the fair value of collateral, less cost to sell, if repayment is expected solely from the collateral.

The terms of certain other loans were modified during the six months ended June 30, 2020 and 2019 that did not meet the definition of a TDR. These loans had a total recorded investment of $26,995 and $15,821 as of June 30, 2020 and 2019, respectively. The modification of these loans involved either a modification of the terms of a loan to borrowers who were not experiencing financial difficulties, a delay in payments that was considered to be insignificant or a modification where no concessions were granted.

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

Nonaccrual loans include loans that were modified and identified as TDRs and the loans are not performing.  At June 30, 2020 there were no nonaccrual TDR’s and at December 31, 2019, nonaccrual TDRs were as follows:

	June 30, 2020		December 31, 2019
	(unaudited)
Commercial	$	-	$	85
Total	$	-	$	85

Nonaccrual loans at June 30, 2020 and December 31, 2019 do not include $2,915 and $2,838, respectively, of TDRs where customers have established a sustained period of repayment performance, generally six months, the loans are current according to their modified terms and repayment of the remaining contractual payments is expected. These loans are included in total impaired loans.

Credit Quality Indicators:

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

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

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

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

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

21

CF BANKSHARES INC.

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 and leases as of June 30, 2020 and based on the most recent analysis performed follows.  There were no loans or leases rated doubtful at June 30, 2020.

(unaudited)	Not Rated		Pass		Special Mention		Substandard		Total
Commercial	$	847	$	324,884	$	1,298	$	510	$	327,539
Real estate:
Single-family residential		127,769		-		-		472		128,241
Multi-family residential		-		46,508		-		146		46,654
Commercial:
Non-owner occupied		62		142,706		6,431		2,728		151,927
Owner occupied		309		88,951		2,018		898		92,176
Land		-		28,104		-		-		28,104
Construction		3,045		56,529		-		-		59,574
Consumer:
Home equity lines of credit:
Originated for portfolio		19,348		-		-		51		19,399
Purchased for portfolio		122		-		-		75		197
Other		2,825		-		-		-		2,825
	$	154,327	$	687,682	$	9,747	$	4,880	$	856,636

The recorded investment in loans and leases by risk category and by class of loans and leases as of December 31, 2019 follows.  There were no loans or leases 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

Leases:

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

	June 30, 2020		December 31, 2019
	(unaudited)
Total minimum lease payments to be received	$	4,856	$	5,252
Less: unearned income		(397)		(473)
Net investment in direct financing leases	$	4,459	$	4,779

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

22

CF BANKSHARES INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except per share data)

The following summarizes the future minimum lease payments receivable in fiscal year 2020 and in subsequent fiscal years:

2020	$	397
2021		793
2022		793
2023		1,563
2024		1,310
	$	4,856

NOTE 5 – LEASES

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

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

The calculated amount of the ROU assets and lease liabilities are impacted by the length of the lease term and the discount rate used to present value the minimum lease payments. The Company’s lease agreements often include one or more options to renew at the Company’s discretion which were considered, as applicable, in the calculation of the ROU assets and lease liabilities.  If at lease inception, the Company considers the exercising of a renewal option to be reasonably certain, the Company will include the extended term in the calculation of the ROU asset and lease liability. Regarding the discount rate, Topic 842 requires the use of the rate implicit in the lease whenever this rate is readily determinable. As this rate is not readily determinable in our operating leases, the Company utilizes its incremental borrowing rate at lease inception, on a collateralized basis, over a similar term.  At June 30, 2020, the weighted-average remaining lease term for the Company’s operating leases was 3.7 years and the weighted-average discount rate was 6.58%.

The Company’s operating lease costs were $97 and $192 for the three and six months ended June 30, 2020 and $90 and $217 for the three and six months ended June 30, 2019.  The variable lease costs totaled $81 and $129 for the three and six months ended June 30, 2020 and $70 and $101 for the three and six months ended June 30, 2019. As the Company elected not to separate lease and non-lease components for all classes of underlying assets and instead to account for them as a single lease component, the variable lease cost primarily represents variable payments such as common area maintenance and utilities.

Future minimum operating lease payments as of June 30, 2020 are as follows:

2020, excluding the six months ended June 30, 2020	$	273
2021		548
2022		536
2023		377
2024		250
Total future minimum rental commitments		1,984
Less - amounts representing interest		(234)
Total operating lease liabilities	$	1,750

23

CF BANKSHARES INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except per share data)

NOTE 6 - FAIR VALUE 

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

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

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

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

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

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

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

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

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

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

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

24

CF BANKSHARES INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except per share data)

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

	Fair Value Measurements at June 30, 2020 using Significant Other Observable Inputs
	(Level 2)
	(unaudited)
Financial Assets:
Securities available for sale:
Issued by U.S. government-sponsored entities and agencies:
U.S. Treasury	$	10,711
Mortgage-backed securities - residential		81
Collateralized mortgage obligations		10
Total securities available for sale	$	10,802
Loans held for sale	$	165,891
Yield maintenance provisions (embedded derivatives)	$	2,055
Interest rate lock commitments	$	15,402
Financial Liabilities:
Interest-rate swaps	$	2,055
TBA Mortgage-back securities	$	2,378

	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

The Company had noassets or liabilities measured at fair value on a recurring basis that were measured using Level 1 or Level 3 inputs at June 30, 2020 or December 31, 2019.  There were notransfers of assets or liabilities measured at fair value between levels during theperiods ended June 30, 2020 and December 31, 2019.

25

CF BANKSHARES INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except per share data)

There were no assets or liabilities measured at fair value on a non-recurring basis at June 30, 2020.  Assets and liabilities measured at fair value on a non-recurring basis at December 31, 2019 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

The Company had nomaterialassets or liabilities measured at fair value on a non-recurring basis that were measured using Level 1 or Level 2 inputs at June 30, 2020 or December 31, 2019. 

There were no write-downs of impaired collateral dependent loans during the six months ended June 30, 2020 or 2019.  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.

During the six months ended June 30, 2020, the Company did not have any transfers of assets or liabilities between those measured using Level 1, 2 or 3 inputs.  The Company recognizes transfers of assets and liabilities between Level 1, 2 and 3 inputs based on the information relating to those assets and liabilities at the end of the reporting period.

There were no assets or liabilities measured at fair value on a non-recurring basis at June 30, 2020.  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%

Financial Instruments Recorded Using Fair Value Option

The Company has elected the fair value option for loans held for sale.  These loans are intended for sale and the Company believes that the fair value is the best indicator of the resolution of these loans.  Loans originated as construction loans, that were subsequently transferred to held for sale, are carried at the lower of cost or market and are not included.  Interest income is recorded based on the contractual terms of the loan and in accordance with the Company’s policy on loans held for investment.  None of these loans were 90 days or more past due or on nonaccrual as of June 30, 2020 or December 31, 2019. 

As of June 30, 2020 and December 31, 2019, the aggregate fair value, contractual balance and gain or loss of loans held for sale were as follows:

	June 30, 2020		December 31, 2019
	(unaudited)
Aggregate fair value	$	165,891	$	135,711
Contractual balance		159,718		133,993
Gain	$	6,173	$	1,718

26

CF BANKSHARES INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except per share data)

The total amount of gains and losses from changes in fair value included in earnings for the three and six months ended June 30, 2020 and 2019 for loans held for sale were:

	Three months ended June 30,				Six months ended June 30,
	2020		2019		2020		2019
	(unaudited)				(unaudited)
Interest income	$	1,256	$	275	$	2,453	$	490
Interest expense		-		-		-		-
Change in fair value		3,220		516		4,455		776
Total change in fair value	$	4,476	$	791	$	6,908	$	1,266

The carrying amounts and estimated fair values of financial instruments at June 30, 2020 were as follows:

	Fair Value Measurements at June 30, 2020 Using:
	Carrying
(unaudited)	Value		Level 1		Level 2		Level 3		Total
Financial assets
Cash and cash equivalents	$	77,376	$	77,376	$	-	$	-	$	77,376
Interest-bearing deposits in other financial institutions		100		100		-		-		100
Securities available for sale		10,802		-		10,802		-		10,802
Loans held for sale		165,891		-		165,891		-		165,891
Loans and leases, net		846,529		-		-		856,282		856,282
FHLB and FRB stock		5,216		n/a		n/a		n/a		n/a
Accrued interest receivable		3,845		1		44		3,800		3,845
Yield maintenance provisions (embedded derivatives)		2,055		-		2,055		-		2,055
Interest rate lock commitments		15,402		-		15,402		-		15,402
Financial liabilities
Deposits	$	(849,038)	$	(448,685)	$	(408,995)	$	-	$	(857,680)
FHLB advances and other borrowings		(165,806)		-		(167,298)		-		(167,298)
Advances by borrowers for taxes and insurance		(782)		-		-		(782)		(782)
Subordinated debentures		(14,825)		-		(15,622)		-		(15,622)
Accrued interest payable		(229)		-		(229)		-		(229)
Interest-rate swaps		(2,055)		-		(2,055)		-		(2,055)
TBA mortgage-back securities		(2,378)		-		(2,378)		-		(2,378)

27

CF BANKSHARES INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except per share data)

The carrying amounts and estimated fair values of financial instruments at December 31, 2019 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 borrowings		(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 methods and assumptions, not previously presented, used to estimate fair values are described below.

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

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

FHLB and FRB Stock

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

Loans and Leases

Fair values of loans and leases as of June 30, 2020, 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.

28

CF BANKSHARES INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except per share data)

The PPPLF funding has a fixed rate of 0.35% for all participants; thus the carrying value approximates the estimated fair value and represents a Level 2 measurement.

Accrued Interest Receivable/Payable

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

Advances by Borrowers for Taxes and Insurance

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

Off-Balance-Sheet Instruments

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

NOTE 7 – SUBORDINATED DEBENTURES

2003 Subordinated debentures:

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

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

The subordinated debentures have a variable rate of interest, reset quarterly, equal to the three-month London Interbank Offered Rate (LIBOR) plus 2.85%, which was 4.22% at June 30, 2020 and 4.81% at December 31, 2019. 

2018 Fixed-to-floating rate subordinated notes:

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

The subordinated notes initially bear interest at 7.00%, from and including December 20, 2018, to but excluding December 30, 2023, payable semi-annually in arrears on June 30 and December 30 of each year. From and including December 30, 2023, to but excluding December 30, 2028 or the earlier redemption of the notes, the interest rate will reset quarterly to an interest rate equal to the then current three-month LIBOR (but not less than zero) plus 4.14%, payable quarterly in arrears on March 30, June 30, September 30, and December 30 of each year.  The Holding Company may, at its option, redeem the notes beginning on December 30, 2023 and on any scheduled interest payment date thereafter.  After payment of approximately $388 of debt issuance costs, the Holding Company’s net proceeds were approximately $9,612.  At June 30, 2020, the balance of the subordinated notes, net of unamortized debt issuance costs, was $9,670.

29

CF BANKSHARES INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except per share data)

NOTE 8 – FHLB ADVANCES AND OTHER DEBT

FHLB advances and other debt were as follows:

	Weighted
	Average Rate	June 30, 2020		December 31, 2019
FHLB fixed rate advances:
Maturities:
2020	2.15%	$	3,500	$	4,500
2021	1.63%		7,500		4,000
2022	1.16%		10,000		1,500
2023	0.92%		3,500		-
2024	1.90%		6,500		6,500
Total FHLB fixed rate advances			31,000		16,500
Fixed rate other debt:
FRB PPPLF advances	0.35%		125,056		-
Variable rate other debt:
Holding Company credit facility	4.00%		9,750		5,000
Warehouse facility	-		-		7,517
Total variable rate other debt			9,750		12,517
Total		$	165,806	$	29,017

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

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 June 30, 2020, the Company had an outstanding balance of $4,750 on the term loan and a $5,000 outstanding balance on the revolving line-of-credit.  At December 31, 2019, the term loan had an outstanding balance of $5,000 and no outstanding balance on the line of credit facility.

At June 30, 2020, CFBank had $8,000 of availability in an unused line of credit at a commercial bank.  There were no outstanding borrowings on this line at June 30, 2020 and December 31, 2019.  During the third quarter of 2019, CFBank added an additional $15,000line of credit at another commercial bank.  There was no outstanding borrowings on this line of credit at June 30, 2020 and  December 31, 2019. Interest on any principal amounts outstanding from time to time under these lines accrues 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 the 30-day LIBOR plus 2.00% or 4.00% and are secured by the specific loans that were funded.  This warehouse facility had an no outstanding balance at June 30, 2020 and an outstanding balance of $7,517 at December 31, 2019.

During the second quarter of 2020, CFBank entered into an additional $75,000 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 the 30-day LIBOR plus 1.75% or 3.50% and are secured by the specific loans that were funded.  This warehouse facility had no outstanding balance at June 30, 2020 and December 31, 2019.

To support the effectiveness of the PPP loans, the Federal Reserve introduced the PPPLF to extend credit to financial institutions that made PPP loans, with the related PPP loans used as collateral on the borrowings.  The PPPLF borrowings have a fixed interest rate of 0.35% and a maturity equal to the maturity date of the related PPP loans, with the PPP loans maturing two years from the origination date of the PPP loan.  At June 30, 2020, the Company’s PPP loans and related PPPLF funding had a weighted average life of approximately two years.  At June 30, 2020, the principal balance of PPPLF advances outstanding was $125,056.  

30

CF BANKSHARES INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except per share data)

NOTE 9 – 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 $207 and  $350,  respectively, for the three and six months ended June 30, 2020 and $138 and $254, respectively, for the three and six months June 30, 2019.  The total income tax effect was $43 and $73, respectively, for the three and six months ended June 30, 2020 and $29 and$53, respectively, for the three and six months ended June 30, 2019. 

The Plans are all stockholder-approved plans 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 pursuant to stock options, stock appreciation rights, restricted stock 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 options granted during the six months ended June 30, 2020 and June 30, 2019.  There were 4,545 options exercised during the six months ended June 30, 2020 and no options exercised during the six months ended June 30, 2019.

A summary of stock option activity in the Plans for the six months ended June 30, 2020 follows (unaudited):

	Shares	Weighted Average Exercise Price		Weighted Average Remaining Contractual Term (Years)	Intrinsic Value
Outstanding at beginning of year	95,438	$	7.64
Exercised	(4,545)		7.98
Cancelled or forfeited	(14)		17.33
Outstanding at end of period	90,879	$	7.62	2.9	$	258
Exercisable at end of period	90,879	$	7.62	2.9	$	258

During the six months ended June 30, 2020, there were 14 stock options canceled, forfeited or expired. There were 925 stock options canceled, forfeited or expired during the six months ended June 30, 2019.  As of June 30, 2020, all stock options granted under the Plans were vested.

31

CF BANKSHARES INC.

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 were no shares of restricted stock granted under the Plan during the six months ended June 30, 2020.  There were 33,788 shares of restricted stock granted during the three months ended June 30, 2019.

A summary of changes in the Company’s nonvested restricted stock awards as of June 30, 2020 follows (unaudited):

Nonvested Shares	Shares	Weighted Average Grant-Date Fair Value
Nonvested at January 1, 2020	102,916	$	13.11
Granted	-		-
Vested	(17,092)		12.89
Forfeited	(5,234)		12.81
Nonvested at June 30, 2020	80,590	$	13.17

As of June 30, 2020 and 2019, the unrecognized compensation cost related to nonvested restricted stock awards granted under the Plans was $805 and $972, respectively. 

There were 5,234 shares of restricted stock forfeited during the six month period ended June 30, 2020.  There were 1,493 shares of restricted stock forfeited during the six months ended June 30, 2019.  There were 17,092 shares of restricted stock that vested during the six months ended June 30, 2020 and no shares of restricted stock that vested during the six months ended June 30, 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 269,704 shares remaining available for awards of stock option grants, stock appreciation rights, restricted stock awards or restricted stock units under the 2019 Plan at June 30, 2020.

NOTE 10 – REGULATORY CAPITAL MATTERS

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

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

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

32

CF BANKSHARES INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except per share data)

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

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

The following tables present actual and required capital ratios as of June 30, 2020 and December 31, 2019 for CFBank under the Basel III Capital Rules.  Capital levels required to be considered well capitalized are based upon prompt corrective action regulations, as amended to reflect the changes under the Basel III Capital Rules.

	Actual			Minimum Capital Required-Basel III Fully Phased-In			To Be Well Capitalized Under Applicable Regulatory Capital Standards
	Amount		Ratio	Amount		Ratio	Amount		Ratio
June 30, 2020
Total Capital to risk weighted assets	$	116,380	14.01%	$	87,231	10.50%	$	83,077	10.00%
Tier 1 (Core) Capital to risk weighted assets		106,086	12.77%		70,615	8.50%		66,461	8.00%
Common equity tier 1 capital to risk-weighted assets		106,086	12.77%		58,154	7.00%		54,000	6.50%
Tier 1 (Core) Capital to adjusted total assets (Leverage ratio)		106,086	10.44%		40,637	4.00%		50,796	5.00%

	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%

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

33

CF BANKSHARES INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except per share data)

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 stock is dependent upon the amount of cash and liquidity available at the Holding Company level, as well as the receipt of dividends and other distributions from CFBank to the extent necessary to fund such dividends.  The Holding Company is a legal entity that is separate and distinct from CFBank, which has no obligation to make any dividends or other funds available for the payment of dividends by the Holding Company.  The Holding Company also is subject to various legal and regulatory policies and guidelines impacting the Holding Company’s ability to pay dividends on its stock.  In addition, the Holding Company’s ability to pay dividends on its stock is conditioned upon the payment, on a current basis, of quarterly interest payments on the subordinated debentures underlying the Company’s trust preferred securities.  Finally, under the terms of the Holding Company’s fixed-to-floating rate subordinated debt, the Holding Company’s ability to pay dividends on its stock is conditioned upon the Holding Company continuing to make required principal and interest payments, and not incurring an event of default, with respect to the subordinated debt. 

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

NOTE 11 – DERIVATIVE INSTRUMENTS 

Interest-rate swaps:

CFBank utilizes interest-rate swaps as part of its asset/liability management strategy to help manage its interest rate risk position, and does not use derivatives for trading purposes.  The notional amount of the interest-rate swaps does not represent amounts exchanged by the parties.  The amount exchanged is determined by reference to the notional amount and the other terms of the individual interest-rate swap agreements.  CFBank was party to interest-rate swaps with a combined notional amount of $31,391 at June 30, 2020 and $12,039 at December 31, 2019.

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

The counterparty to CFBank’s interest-rate swaps is exposed to credit risk whenever the interest-rate swaps are in a liability position.  At June 30, 2020, CFBank had $2,456 in securities and cash pledged as collateral for these derivatives.  Should the liability increase, beyond the collateral value, CFBank will be required to pledge additional collateral. 

Additionally, CFBank’s interest-rate swap instruments contain provisions that require CFBank to remain well capitalized under regulatory capital standards and to require with certain other regulatory requirements.  The interest-rate swaps may be called by the counterparty if CFBank fails to maintain well-capitalized status under regulatory capital standards or becomes subject to certain adverse regulatory events such as a regulatory cease and desist order.  As of June 30, 2020, CFBank was well-capitalized under regulatory capital standards and was not subject to any adverse regulatory events specified in CFBank’s interest-rate swap instruments.

Summary information about the derivative instruments is as follows:

	June 30, 2020		December 31, 2019
	(unaudited)
Notional amount	$	31,391	$	12,039
Weighted average pay rate on interest-rate swaps		4.35%		4.66%
Weighted average receive rate on interest-rate swaps		3.06%		4.63%
Weighted average maturity (years)		8.2		7.3
Fair value of interest-rate swaps	$	(2,055)	$	(12)
Fair value of yield maintenance provisions		2,055		12

34

CF BANKSHARES INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except per share data)

As of June 30, 2020, CFBank has minimum collateral posting thresholds with certain of its interest-rate swap counterparties and has posted cash collateral of $2,391.

The fair value of the yield maintenance provisions and interest-rate swaps is recorded in other assets and other liabilities, respectively, in the consolidated balance sheet.  Changes in the fair value of the yield maintenance provisions and interest-rate swaps are reported currently in earnings, as other noninterest income in the consolidated statements of income.  There were no net gains or losses recognized in earnings related to yield maintenance provisions and interest-rate swaps for the three months ended June 30, 2020 or 2019.

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 $668,009 and $297,454 of interest rate lock commitments related to residential mortgage loans at June 30, 2020 and December 31, 2019, respectively.  The fair value of these mortgage banking derivatives was reflected by a derivative asset of $15,402 and $3,104 at June 30, 2020 and December 31, 2019, 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 $402,250 and $225,500 of TBA mortgage-backed securities at June 30, 2020 and December 31, 2019, respectively.  The fair value of these TBA mortgage-backed securities was ($2,378) and ($350) at June 30, 2020 and December 31, 2019, 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):

	June 30, 2020				December 31, 2019
	Notional Amount		Fair Value		Notional Amount		Fair Value
Assets (Liabilities):
Interest rate commitments	$	668,009	$	15,402	$	297,454	$	3,104
TBA mortgage-back securities		402,250		(2,378)		225,500		(350)

As of June 30, 2020, CFBank has minimum collateral posting thresholds with certain of its derivative counterparties and has posted cash collateral of $2,192.

The following table represents the revenue recognized on mortgage activities for the three and six months ended June 30, 2020 and 2019 (unaudited):

	Three months ended				Six months ended
	June 30,				June 30,
	2020		2019		2020		2019
Gain on loans sold	$	11,901	$	1,884	$	17,482	$	3,116
Gain (loss) from change in fair value of loans held-for-sale		3,220		516		4,455		776
Gain (loss) from change in fair value of derivatives		4,455		(49)		483		(90)
	$	19,576	$	2,351	$	22,420	$	3,802

35

CF BANKSHARES INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except per share data)

NOTE 12 – INCOME TAXES

At June 30, 2020, the Company had a deferred tax asset recorded in the amount of approximately $1,600.  At December 31, 2019, the Company had a deferred tax asset recorded of approximately $1,700.  At June 30, 2020 and December 31, 2019, 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 June 30, 2020 that no valuation allowance was required against the net deferred tax asset.

In 2012 the Company completed a recapitalization program pursuant to which the Holding Company sold $22,500 in common stock, which improved the capital levels of CFBank and provided working capital for the Holding Company. The result of the change in stock ownership associated with the stock offering, however, was that the Company incurred an ownership change within the guidelines of Section 382 of the Internal Revenue Code of 1986.  At June 30, 2020, 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.

The Company records income tax expense based on the federal statutory rate adjusted for the effect of low income housing credits, bank owned life insurance and other miscellaneous items.  The effective tax rate for the three and six months ended June 30, 2020 was approximately 20.7% and 20.7%, respectively, and 20.4% and 20.2%, respectively, for the three and six months ended June 30, 2019, which management believes is a reasonable estimate for the effective tax rate.

The following table summarizes the major components creating differences between income taxes at the federal statutory tax rate and the effective tax rate recorded in the consolidated statements of income for the three and six months ended June 30, 2020 and 2019:

	For the three months ended June 30,		For the six months ended June 30,
	2020	2019	2020	2019
	(unaudited)		(unaudited)
Statutory tax rate	21.0%	21.0%	21.0%	21.0%
Increase (decrease) resulting from:
Restricted stock	0.0%	0.0%	0.1%	0.0%
Tax exempt income on bank owned life insurance	(0.1%)	(0.3%)	(0.1%)	(0.3)%
Low income housing credits	(0.2%)	(0.5%)	(0.3%)	(0.6%)
Other, net	0.0%	0.2%	0.0%	0.1%
Effective tax rate	20.7%	20.4%	20.7%	20.2%

36

CF BANKSHARES INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except per share data)

NOTE 13- ACCUMULATED OTHER COMPREHENSIVE INCOME

The following table summarizes the changes within each classification of accumulated other comprehensive income, net of tax, for the three and six months ended June 30, 2020 and 2019 and summarizes the significant amounts reclassified out of each component of accumulated other comprehensive income (loss):

Changes in Accumulated Other Comprehensive Income by Component (1)
	Three months ended				Six months ended
	June 30,				June 30,
	2020		2019		2020		2019
	(unaudited)				(unaudited)
	Unrealized Gains and Losses on Available-for-Sale Securities				Unrealized Gains and Losses on Available-for-Sale Securities
Accumulated other comprehensive income (loss), beginning of period	$	172	$	(38)	$	28	$	(73)
Other comprehensive income (loss) before reclassifications (2)		(26)		52		118		87
Net current-period other comprehensive income (loss)		(26)		52		118		87
Accumulated other comprehensive income, end of period	$	146	$	14	$	146	$	14

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

⁽²⁾ There were no amounts reclassified out of other comprehensive income for the three and six months ended June 30, 2020 and 2019.

NOTE 14 - PREFERRED STOCK

Series B Preferred Stock:

Commencing in April 2014, the Company conducted a private placement of up to 480,000 shares of its 6.25% Non-Cumulative Convertible Perpetual Preferred Stock, Series B (“Series B Preferred Stock”) for an offering price of $25.00 per share (the “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 15-Common Stock Warrants for additional information.  

Conversion of Series B Preferred Stock to Common Stock:

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

The conversion of the Series B Preferred Stock resulted in the elimination of the non-cumulative preferred dividend payments on the Series B Preferred Stock in the aggregate amount of approximately $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.

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(Dollars in thousands, except per share data)

Each share of Series C Preferred Stock was 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 obtained stockholder approval for, and filed, 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.

On March 30, 2020, the Company entered into an Exchange Agreement providing for the exchange of 27,000 of the shares of common stock purchased in the private placement for 270 additional shares of Series C Preferred Stock (at the Series C Preferred Stock’s current conversion ratio of 100 shares of common stock for each share of Series C Preferred Stock).  The exchange of common stock for Series C Preferred Stock was effected in order to accommodate and facilitate the Company’s stock repurchase program announced on March 13, 2020.  The exchange resulted in an increase in the number of outstanding shares of Series C Preferred Stock from 12,337 to 12,607.

Conversion of Series C Preferred Stock to Non-Voting Common Stock:

On May 27, 2020, an amendment to the Company’s Certificate of Incorporation, as amended (the “Certificate of Amendment”), to authorize a separate class of Non-Voting Common Stock was approved by the stockholders of the Company at the Company’s 2020 annual meeting of stockholders.  On May 28, 2020, the Company filed with the Delaware Secretary of State a Certificate of Amendment to the Company’s Certificate of Incorporation to authorize1,260,700shares of Non-Voting Common Stock. Effective as of the close of business on May 28, 2020, all 1,260,700authorized shares of Non-Voting Common Stock were issued upon conversion of the12,607outstanding shares of the Company’s Series C Preferred Stock. Pursuant to the terms of the Series C Preferred Stock, each outstanding share of Series C Preferred Stock converted automatically into100shares of Non-Voting Common Stock at such time.

NOTE 15 - 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.  All of the unexercised Warrants expired on July 15, 2019 and, therefore, there were no Warrants outstanding as of June 30, 2020.

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FORWARD LOOKING STATEMENTS

This quarterly report and other materials we have filed or may file with the Securities and Exchange Commission (“SEC”) contain or may contain forward-looking statements within the meaning of the safe harbor provisions of the U.S. Private Securities Reform Act of 1995, which are made in good faith by us.  Forward-looking statements include, but are not limited to: (1) projections of revenues, income or loss, earnings or loss per common share, capital structure and other financial items; (2) plans and objectives of the management or Boards of Directors of CF Bankshares Inc. (formerly known as Central Federal Corporation) (the “Holding Company”) or CFBank, National Association (“CFBank” and, together with the Holding Company, the “Company”); (3) statements regarding future events, actions or economic performance; and (4) statements of assumptions underlying such statements.  Words such as "estimate," "strategy," "may," "believe," "anticipate," "expect," "predict," "will," "intend," "plan," "targeted," and the negative of these terms, or similar expressions, are intended to identify forward-looking statements, but are not the exclusive means of identifying such statements.  Various risks and uncertainties may cause actual results to differ materially from those indicated by our forward-looking statements, including, without limitation, impacts from the ongoing COVID-19 pandemic on local, national and global economic conditions in general and on our industry and business in particular, including adverse impacts on our customer’s operations, financial condition and ability to repay loans, changes in interest rates or disruptions in the mortgage market, and the effects of various governmental responses to the pandemic, including stimulus packages and programs; potential litigation or other risks related to participating in the U.S. Small Business Administration Paycheck Protection Program; and those additional risks detailed from time to time in our reports filed with the SEC, including those identified in “Item 1A.  Risk Factors” of Part I of our Annual Report on Form 10-K filed with SEC for the year ended December 31, 2019 and in“Item 1A. Risk Factors” of Part II of our Quarterly Report on Form 10-Q filed with the SEC for the quarter ended March 31, 2020, as supplemented by “Item 1A. Risk Factors” of Part II of this Quarterly Report on Form 10-Q.

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

Business Overview

The Holding Company is a financial holding company that owns 100% of the stock of CFBank, which was formed in Ohio in 1892 and converted from a federal savings association to a national bank on December 1, 2016.  Prior to December 1, 2016, the Holding Company was a registered savings and loan holding company.  Effective as of December 1, 2016 and in conjunction with the conversion of CFBank to a national bank, the Holding Company became a registered bank holding company and elected financial holding status with the FRB.  Effective as of July 27, 2020, the Company changed its name from Central Federal Corporation to CF Bankshares Inc. 

CFBank is a boutique Commercial bank headquartered in Columbus, Ohio. CFBank has focused on bettering the Ohio economy and serving the financial needs of closely held businesses since 1892. Over a century has passed, and yet, our focus remains the same: guide fellow Ohioans to financial stability and success with agility, ease, and care. As CFBank has expanded, we’ve maintained our penchant for individualized service and direct customer access to decision makers. CFBank now has locations in four major metro Ohio markets - Columbus, Cleveland, Cincinnati, and Akron, as well as branch locations in Columbiana Country (two locations).  In every location, CFBank provides commercial loans and leases, commercial and residential real estate loans and treasury management depository services, corporate treasury management, residential lending, and full service retail banking services and products. In addition, CFBank also has a national residential lending platform.  CFBank is also glad to offer its clients the convenience of online internet banking, mobile banking, and remote deposit. 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.      

COVID-19 Impact. The World Health Organization declared the coronavirus COVID-19 a pandemic in March 2020.  The impacts of the COVID-19 pandemic have resulted in, among other things, stock and global market declines, disruption in business and leisure activities as nation-wide stay-at-home orders were mandated, significant strain on the health care industry as it addressed the severity of the health crisis, and shifts in the general economy (such as high unemployment, negative GDP expectations, a 150 bps decline in Federal funds rates, and unprecedented government stimulus), triggering a 2020 recession.  The dramatic events surrounding the

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pandemic and the uncertainty about the longevity of the pandemic’s affects will continue to impact future expectations about credit costs and margins and noninterest expenses.

Given the extent of uncertainty, we guided numerous existing and new customers through participation in the Paycheck Protection Program (“PPP”) or temporary loan modifications.  The Company originated approximately $126 million of PPP loans during the second quarter to over 550 borrowers.  The PPP loans provided low interest rates (1%) and potentially forgivable funds to small businesses and are fully guaranteed by the SBA warranting no credit loss provision.  Using the PPP loans as collateral, the Company funded nearly all of the PPP loans through loans obtained under the Federal Reserve’s Paycheck Protection Program Liquidity Facility (“PPPLF”), which carry a low interest rate of 0.35%.  The Company’s loans through the PPPLF totaled $125.1 million at June 30, 2020.  PPP loans are given a zero risk-weight in regulatory risk-based capital ratios.  Also, to the extent the PPP loans are funded through the PPPLF, they are also excluded from average assets in the regulatory leverage ratio.  Since the pandemic started, payment modifications were made on loans totaling approximately $100 million (or approximately 12% of outstanding loan balances). 

Amid the uncertainty, the Company significantly increased the allowance for loan and lease losses in the first half of 2020 for the dramatically changed circumstances that continue to evolve.  Initial actions to keep customers and employees safe included transitioning a majority of our on-site staff to remote work arrangements and limiting branch access through appointment-only lobbies.  

Also in response to COVID-19, the Company has modified its business practices with a portion of employees working remotely from their homes to limit interruptions to operations as much as possible and to help reduce the risk of COVID-19 infecting entire departments.  The Company is promoting social distancing, frequent hand washing and thorough disinfection of all surfaces.  CFBank’s financial service location lobbies were closed for periods of time except for advance appointments only.  Branch drive-ups,ATMs and online/mobile banking services continue to operate and are the preferred option of service. 

General

Our net income is dependent primarily on net interest income, which is the difference between the interest income earned on loans and securities and our cost of funds, consisting of interest paid on deposits and borrowed funds.  Net interest income is affected by regulatory, economic and competitive factors that influence interest rates, loan demand, the level of nonperforming assets and deposit flows.

Net income is also affected by, among other things, provisions for loan and lease losses, loan fee income, service charges, gains on loan sales, operating expenses, and taxes.  Operating expenses principally consist of employee compensation and benefits, occupancy, advertising and marketing, data processing, professional fees, FDIC insurance premiums and other general and administrative expenses.  Our results of operations are significantly affected by general economic and competitive conditions, changes in market interest rates and real estate values, government policies and actions of regulatory authorities.  Our regulators have extensive discretion in their supervisory and enforcement activities, including the authority to impose restrictions on our operations, to classify our assets and to require us to increase the level of our allowance for loan and lease losses.  Any change in such regulation and oversight, whether in the form of regulatory policy, regulations, legislation or supervisory action, may have a material impact on our business, financial condition, results of operations and/or cash flows.

Management’s Discussion and Analysis represents a review of our consolidated financial condition and results of operations for the periods presented.  This review should be read in conjunction with our consolidated financial statements and related notes contained in this Quarterly Report on Form 10-Q and our 2019 Audited Financial Statements.  

Financial Condition

General. Assets totaled $1.1 billion at June 30, 2020 and increased $265.5 million, or 30.2%, from $880.5 million at December 31, 2019.  The increase was primarily due to a $183.2 million increase in net loan balances, a $31.5 million increase in cash and cash equivalents, and a $30.2 million increase in loans held for sale.

Cash and cash equivalents.  Cash and cash equivalents totaled $77.4 million at June 30, 2020, and increased $31.5 million, or 68.7%, from $45.9 million at December 31, 2019.  The increase in cash and cash equivalents was primarily attributed to increases in FHLB advances and other borrowings and deposits, partially offset by an increase in net loans and loans held for sale.

Securities. Securities available for sale totaled $10.8 million at June 30, 2020, and increased $2.6 million, or 32.2%, compared to $8.2 million at December 31, 2019.  The increase was due to security purchases, partially offset by principal maturities.

Loans held for sale.  Loans held for sale totaled $165.9 million at June 30, 2020 and increased $30.2 million, or 22.2%, from $135.7 million at December 31, 2019. 

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Loans and Leases.  Net loans and leases totaled $846.5 million at June 30, 2020, and increased $183.2 million, or 27.6%, from $663.3 million at December 31, 2019.  The increase was primarily due to a $156.9 million increase in commercial loan balances, a $24.7 million increase in commercial real estate loan balances, an $8.0 million increase in single-family residential loan balances, and a $7.4 million increase in multi-family loan balances, partially offset by an $8.1 million decrease in construction loan balances.  The increases in the aforementioned loan balances were primarily due to the origination and funding of $126.2 million of loans under the SBA’s Paycheck Protection Program (PPP), coupled with increased sales activity and new relationships.  The decrease in construction loan balances was primarily due to the completion of construction projects. 

CFBank has participated in a Mortgage Purchase Program with Northpointe Bank (Northpointe), a Michigan banking corporation, since December 2012.  Pursuant to the terms of a participation agreement, CFBank purchases participation interests in loans made by Northpointe related to fully underwritten and pre-sold mortgage loans originated by various prescreened mortgage brokers located throughout the U.S.  The underlying loans are individually (MERS) registered loans which are held until funded by the end investor.  The mortgage loan investors include Fannie Mae and Freddie Mac, and other major financial institutions.  This process on average takes approximately 14 days.  Given the short-term holding period of the underlying loans, common credit risks (such as past due, impairment and TDR, nonperforming, and nonaccrual classification) are substantially reduced.  Therefore, no allowance is allocated by CFBank to these loans.  These loans are 100% risk rated for CFBank capital adequacy purposes.  Under the participation agreement, CFBank agrees to purchase a 95% ownership/participation interest in each of the aforementioned loans, and Northpointe maintains a 5% ownership interest in each loan it participates.  During the three and six months ended June 20, 2020, loan origination activity totaled $115.6 million and $217.8, respectively, and payoffs for the same period totaled $112.3 million and $220.7 million, respectively.  At June 30, 2020 and December 31, 2019, CFBank held $23.1 million and $26.0 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 $10.1 million at June 30, 2020, and increased $3.0 million, or 41.6%, from $7.1 million at December 31, 2019.  The increase in the ALLL is due to  a $3.1 million provision for loan and lease losses expense, partially offset by net charge-offs during the six months ended June 30, 2020.  The ratio of the ALLL to total loans was 1.18% at June 30, 2020, compared to 1.06% at December 31, 2019.  The ratio of the ALLL to total loans, excluding loan balances subject to SBA guarantees, was 1.40% at June 30, 2020, compared to 1.07% at December 31, 2019.

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

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

Individually evaluated impaired loans totaled $2.9 million at June 30, 2020, and decreased $1.7 million, or 36.8%, from $4.6 million at December 31, 2019.  The decrease was primarily due to a payoff of a commercial real estate loan during the first quarter. The amount of the ALLL specifically allocated to individually impaired loans totaled $22,000 at June 30, 2020 and $35,000 at December 31, 2019.  The decrease in the ALLL specifically allocated to impaired loans was primarily due to the payoff of a commercial real estate loan and management’s updated analysis.

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The specific reserve on impaired loans is based on management’s estimate of the present value of estimated future cash flows using the loan’s effective rate or the fair value of collateral, if repayment is expected solely from the collateral.  On at least a quarterly basis, management reviews each impaired loan to determine whether it should have a specific reserve or partial charge-off. Management relies on appraisals or internal evaluations to help make this determination.  Determination of whether to use an updated appraisal or internal evaluation is based on factors including, but not limited to, the age of the loan and the most recent appraisal, condition of the property and whether we expect the collateral to go through the foreclosure or liquidation process.  Management considers the need for a downward adjustment to the valuation based on current market conditions and on management’s analysis, judgment and experience. The amount ultimately charged-off for these loans may be different from the specific reserve, as the ultimate liquidation of the collateral and/or projected cash flows may be different from management’s estimates. 

Nonperforming loans, which are nonaccrual loans and loans at least 90 days past due but still accruing interest, totaled $581,000 at June 30, 2020, and decreased $1.9 million from $2.4 million at December 31, 2019.  The decrease was primarily due to a payoff of a commercial real estate loan during the first quarter.  The ratio of nonperforming loans to total loans was 0.07% at June 30, 2020 compared to 0.36% at December 31, 2019. 

Nonaccrual loans include some loans that were modified and identified as TDRs and are not performing. TDRs included in nonaccrual loans totaled $0 at June 30, 2020 and $85,000 at December 31, 2019.  The decrease in TDRs included in nonaccrual loans was primarily due to a commercial loan that was returned to accrual status during the first quarter.

Nonaccrual loans at June 30, 2020 and December 31, 2019 do not include $2.9 million and $2.8 million, respectively, in TDRs where customers have established a sustained period of repayment performance, generally six months, loans are current according to their modified terms and repayment of the remaining contractual payments is expected.  These loans are included in total impaired loans.  See Notes 1 and 4 to the consolidated financial statements included in this Quarterly Report on Form 10-Q for additional information regarding impaired loans and nonperforming loans.

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

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

We have incorporated the regulatory asset classifications as a part of our credit monitoring and internal loan risk rating system.  In accordance with regulations, problem loans are classified as special mention, substandard, doubtful or loss, and the classifications are subject to review by the regulators.  Assets designated as special mention are considered criticized assets.  Assets designated as substandard, doubtful or loss are considered classified assets.  See Note 4 to our consolidated financial statements included in this Quarterly Report on Form 10-Q for additional information regarding the regulatory asset classifications.

The level of total criticized and classified loans increased by $3.8 million, or 34.5%, during the six months ended June 30, 2020 primarily due to aloan downgrade.  Loans designated as special mention increased $4.7 million, or 94.2%, and totaled $9.7 million at June 30, 2020, compared to $5.0 million at December 31, 2019.  Loans classified as substandard decreased $975,000, or 16.7%, and totaled $4.9 million at June 30, 2020, compared to $5.9 million at December 31, 2019.  No loans were classified as doubtful at June  30, 2020 or December 31, 2019.  See Note 4 to our consolidated financial statements included in this Quarterly Report on Form 10-Q for additional information regarding risk classification of loans.

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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 decreased $3.8 million and totaled $1.4 million at June 30, 2020, compared to $5.2 million at December 31, 2019.  Past due loans totaled 0.2% of the loan portfolio at June 30, 2020, compared to 0.8% at December 31, 2019.  See Note 4 to our consolidated financial statements included in this Quarterly Report on Form 10-Q for additional information regarding loan delinquencies.

All lending activity involves risk of loss.  Certain types of loans, such as option adjustable-rate mortgage (ARM) products, junior lien mortgages, high loan-to-value ratio mortgages, interest only loans, subprime loans and loans with initial teaser rates, can have a greater risk of non-collection than other loans.  CFBank has not engaged in subprime lending or used option ARM products.

Loans that contain interest only payments may present a higher risk than those loans with an amortizing payment that includes periodic principal reductions. Interest only loans 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 $84.3 million, or 25.7%, of CFBank’s commercial portfolio at June 30, 2020, compared to $82.5 million, or 48.4%, at December 31, 2019.  Interest only home equity lines of credit totaled $18.1  million, or 92.4%, of the total home equity lines of credit at June 30, 2020 compared to $19.4 million, or 92.7%, at December 31, 2019.

We believe the ALLL is adequate to absorb probable incurred credit losses in the loan portfolio as of June 30, 2020; 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, including any of the foregoing that may result from the ongoing COVID-19 pandemic and/or the effects of various governmental responses to the pandemic, including stimulus packages and programs.  Additionally, various regulatory agencies, as an integral part of their examination process, periodically review the ALLL.  Such agencies may require additional provisions for loan losses based on judgments and estimates that differ from those used by management, or on information available at the time of their review.  Management continues to diligently monitor credit quality in the existing portfolio and analyze potential loan opportunities carefully in order to manage credit risk.  An increase in loan losses could occur if economic conditions and factors which affect credit quality, real estate values and general business conditions worsen or do not improve.

Foreclosed assets.   There were no foreclosed assets at June 30, 2020 and at December 31, 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.

Deposits.Deposits totaled $849.0 million at June 30, 2020, an increase of $102.7 million, or 13.8%, from $746.3 million at December 31, 2019.   The increase is due to a $70.0 million increase in interest-bearing deposit accounts and a $32.7 million increase in noninterest-bearing account balances.  Interest-bearing deposit accounts increased to $700.8 million at June 30, 2020, from $630.8 million at December 31, 2019.  The increase in interest-bearing accounts is primarily attributed to a $36.2 million increase in certificate of deposit account balances, a $16.9 million increase in money market account balances, and a $14.7 million increase in interest-bearing checking account balances. The increase in certificate of deposit account balances was due to increases in retail and listing service certificates of deposits, partially offset by a decrease in brokered certificates of deposit.  The increases in retail certificate of deposits and money market account balances were primarily due to increases in customer relationships and balances from on-going sales and marketing activities. The increase in interest-bearing checking is primarily related to the balances in the Insured Cash Sweep (ICS) programs offered through Promontory Interfinancial Network.  The increase in noninterest bearing checking account balances was primarily driven by PPP loan proceeds being deposited into customers’ accounts.

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 $121.9 million at June 30, 2020, and decreased $3.0 million, or 2.4% from $124.9 million at December 31, 2019.  Customer balances in the CDARS reciprocal and ICS reciprocal programs, which do not qualify as brokered, totaled $42.0 million at June 30, 2020 and increased $14.0 million, or 49.9%, from $28.0 million at December 31, 2019. 

FHLB advances and other debt.  FHLB advances and other debt totaled $165.8 million at June 30, 2020 and increased $136.8 million, or 471.4%, compared to $29.0 million at December 31, 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

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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 June 30, 2020, the Company had an outstanding balance of $4.8 million on the term loan and $5.0 million outstanding balance on the revolving line-of-credit.  At December 31, 2019, the term loan had an outstanding balance of $5.0 million and no outstanding balance on the credit facility.

At June 30, 2020, CFBank had $8.0 million of availability in an unused line of credit at a commercial bank.  There were no outstanding borrowings on this line at June 30, 2020 and December 31, 2019.  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 this line of credit at June 30, 2020 and December 31, 2019. 

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 LIBOR plus 2.00% or 4.00% and are secured by the specific loans that were funded.  This warehouse facility had no outstanding balance at June 30, 2020 and $7.5 million at December 31, 2019.  See the section titled “Liquidity and Capital Resources” for additional information regarding FHLB advances and other debt.

During the second quarter of 2020, CFBank entered into an additional $75 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 LIBOR plus 1.75% or 3.50% and are secured by the specific loans that were funded.  This warehouse facility had no outstanding balance at June 30, 2020 and December 31, 2019.

During the quarter ended June 30, 2020, the Bank participated in PPPLF, which provided liquidity through term financing backed by PPP loans.  At June 30, 2020, the principal balance of PPPLF advances outstanding was $125.1 million. Principal payments are due on the PPPLF advances when the related PPP loans are repaid or forgiven by the SBA.

Subordinated debentures.  Subordinated debentures totaled $14.8 million at June 30, 2020 and at December 31, 2019.  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 payments were current at June 30, 2020 and December 31, 2019.

Stockholders’ equity.Stockholders’ equity totaled $92.6 million at June 30, 2020, an increase of $11.9 million, or 14.8%, from $80.7 million at December 31, 2019.  The increase in total stockholders’ equity was primarily attributed to net income. 

Management continues to proactively monitor capital levels and ratios in its on-going capital planning process.  CFBank has leveraged its capital to support balance sheet growth and drive increased net interest income.  Management remains focused on growing capital though improving results from operations; however, should the need arise, CFBank has additional sources of capital and alternatives it could utilize as further discussed in the “Liquidity and Capital Resources” section in this Quarterly Report on Form 10-Q. 

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

Comparison of the Results of Operations for the Three Months Ended June 30, 2020 and 2019.

General.  Net income for the three months ended June 30, 2020 totaled $10.1 million (or $1.53 per diluted common share) and increased $7.8 million, or 341.6%, compared to net income of $2.3 million (or $0.55 per diluted common share) for the three months ended June 30, 2019. 

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

Net interest income totaled $6.3 million for the quarter ended June 30, 2020 and increased $1.1 million, or 20.2%, compared to net interest income of $5.2 million for the quarter ended June 30, 2019.  The increase in net interest income was primarily due to a $1.4 million, or 16.0%, increase in interest income, partially offset by a $309,000, or 9.4%, increase in interest expense.  The increase in interest income was primarily attributed to a $360.7 million, or 53.2%, increase in average interest-earning assets outstanding, resulting primarily from an increase in net loans and loans held for sale, partially offset by a 121bps decrease in average yield on interest-earning assets.  The increase in interest expense was attributed to a $290.8 million, or 53.7%, increase in average interest-bearing liabilities, partially offset by a 70bps decrease in the average cost of funds on interest-bearing liabilities.  The net interest margin of 2.42% for the quarter ended June 30, 2020 decreased 66bps compared to the net interest margin of 3.08% for the quarter ended June 30, 2019.

Interest income totaled $9.9 million and increased $1.4 million, or 16.0%, for the quarter ended June 30, 2020, compared to $8.5 million for the quarter ended June 30, 2019.  The increase in interest income was primarily attributed to a $341.2 million, or 54.5%, increase in average loans and loans held for sale outstanding, partially offset by a 115bp decrease in average yield on loans and loans held for sale. 

Interest expense totaled $3.6 million and increased $309,000, or 9.4%, for the quarter ended June 30, 2020, compared to $3.3 million for the quarter ended June 30, 2019.  The increase in interest expense was attributed a $290.8 million, or 53.7%, increase in average interest-bearing liabilities, partially offset by a 70bps decrease in the average yield of interest-bearing liabilities.

Provision for loan and lease losses.  The provision for loan and lease losses expense for the quarter ended June 30, 2020 was $3.1 million compared to no provision for loan and lease losses expense for the quarter ended June 30, 2019.The increase in the provision for loan and lease losses was a reflection of the increased economic stress associated with the COVID-19 pandemic and specific consideration of its impact on certain industries.  Net charge-offs for the quarter ended June 30, 2020 totaled $91,000, compared to net recoveries of $5,000 for the quarter ended June 30, 2019.

The following table presents information regarding net charge-offs (recoveries) for the three months ended June 30, 2020 and 2019.

	For the three months ended June 30,
	2020		2019
(unaudited)		(Dollars in thousands)
Commercial	$	39	$	-
Single-family residential real estate		56		(1)
Home equity lines of credit		(4)		(4)
Total	$	91	$	(5)

Noninterest income.Noninterest income for the quarter ended June 30, 2020 totaled $19.9 million and increased $17.3 million, or 674.1%, compared to $2.6 million for the quarter ended June 30, 2019.  The increase was primarily due to a $17.3 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 quarter ended June 30, 2020 totaled $10.3 million and increased $5.4 million, or 109.1%, compared to $4.9 million for the quarter ended June 30, 2019.  The increase in noninterest expense during the three months ended June 30, 2020 was primarily due to a $3.6 million increase in salaries and employee benefits expense, an $826,000 increase in professional fees expense, and a $632,000 increase in advertising and marketing expense. The increase in salaries and employee benefits expense was primarily due to the expansion of our residential mortgage lending business, consistent with our focus on driving noninterest income, coupled with an increase in personnel to support our growth, infrastructure and risk management practices.  The increase in professional fees was related to increased activities, volumes and outsourcing in our residential mortgage business.  The increase in advertising and marketing expense was primarily due to increased expenditures related to leads-based marketing to drive revenue growth in our residential mortgage lending business.

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Income taxes.Income tax expense was $2.6 million for the quarter ended June 30, 2020, an increase of $2.0 million, compared to $583,000 for the quarter ended June 30, 2019.  The effective tax rate for the quarter ended June 30, 2020 was approximately 20.7%, as compared to approximately 20.4% for the quarter ended June 30, 2019. 

Our deferred tax assets are composed of NOLs, and other temporary book to tax differences.  When determining the amount of deferred tax assets that are more-likely-than-not to be realized, and therefore recorded as a benefit, the Company conducts a regular assessment of all available information. This information includes, but is not limited to, taxable income in prior periods, projected future income and projected future reversals of deferred tax items.  Based on these criteria, the Company determined as of June 30, 2020 that no valuation allowance was required against the net deferred tax asset.

The Company records income tax expense based on the federal statutory rate adjusted for the effect of other items such as low income housing credits, bank owned life insurance and other miscellaneous items. 

Comparison of the Results of Operations for the Six Months Ended June 30, 2020 and 2019.

General.  Net income for the six months ended June 30, 2020 totaled $12.1 million (or $1.82 per diluted common share) and increased $8.1 million, or 204.8%, compared to net income of $4.0 million (or $0.93 per diluted common share) for the six months ended June 30, 2019. 

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

Net interest income totaled $12.4 million for the six months ended June 30, 2020 and increased $2.1 million, or 20.1%, compared to net interest income of $10.3 million for the six months ended June 30, 2019.  The increase in net interest income was primarily due to a $3.4 million, or 20.1%, increase in interest income, partially offset by a $1.3 million, or 21.1%, increase in interest expense.  The increase in interest income was primarily attributed to a $288.7 million, or 43.9%, increase in average interest-earning assets outstanding, resulting primarily from an increase in net loans and loans held for sale, partially offset by an 81bps decrease in average yield on interest-earning assets.  The increase in interest expense was attributed to a $241.6 million, or 46.4%, increase in average interest-bearing liabilities, partially offset by a 41bps decrease in the average cost of funds on interest-bearing liabilities.  The net interest margin of 2.62% for the six months ended June 30, 2020 decreased 52bps compared to the net interest margin of 3.14% for the six months ended June 30, 2019.

Interest income totaled $19.8 million and increased $3.4 million, or 20.5%, for the six months ended June 30, 2020, compared to $16.4 million for the six months ended June 30, 2019.  The increase in interest income was primarily attributed to a $288.1 million, or 47.9%, increase in average loans and loans held for sale outstanding, partially offset by a 80bp decrease in average yield on loans and loans held for sale. 

Interest expense totaled $7.4 million and increased $1.3 million, or 21.1%, for the six months ended June 30, 2020, compared to $6.1 million for the six months ended June 30, 2019.  The increase in interest expense was primarily attributed a $178.5 million, or 36.6%, increase in average interest-bearing deposits, partially offset by a 28bps decrease in the average yield of interest-bearing deposits.

Provision for loan and lease losses.  The provision for loan and lease losses expense for the six months ended June 30, 2020 was $3.1 million compared to no provision for loan and lease losses expense for the six months ended June 30, 2019.  As noted above, the increase in the provision for loan and lease losses was a reflection of the increased economic stress associated with the COVID-19 pandemic and specific consideration of its impact on certain industries.  Net charge-offs for the six months ended June 30, 2020 totaled $156,000, compared to net recoveries of $17,000 for the six months ended June 30, 2019.

The following table presents information regarding net charge-offs (recoveries) for the sixmonths ended June 30, 2020 and 2019

	For the six months ended June 30,
	2020		2019
(unaudited)	(Dollars in thousands)
Commercial	$	110	$	-
Single-family residential real estate		54		(3)
Home equity lines of credit		(8)		(14)
Total	$	156	$	(17)

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Noninterest income.Noninterest income for the six months ended June 30, 2020 totaled $23.3 million and increased $19.0 million, or 447.1%, compared to $4.3 million for the quarter ended June 30, 2019.  The increase was primarily due to an $18.6 million increase in net gain on sale of loans, coupled with a $407,000 increase in swap fee income.  The increase in net gain on sale of loans was primarily a result of increased sales volume related to our residential mortgage lending business.  The increase in swap fee income was due to an increase in customer swap transactions. 

Noninterest expense.  Noninterest expense for the six months ended June 30, 2020 totaled $17.4 million and increased $7.8 million, or 80.3%, compared to $9.6 million for the six months ended June 30, 2019.  The increase in noninterest expense during the six months ended June 30, 2020 was primarily due to a $4.2 million increase in salaries and employee benefits expense, a $1.5 million increase in professional fees expense, and a $1.3 million increase in advertising and marketing expense. The increase in salaries and employee benefits expense was primarily due to the expansion of our residential mortgage lending business, consistent with our focus on driving noninterest income, coupled with an increase in personnel to support our growth, infrastructure and risk management practices.  The increase in professional fees was related to increased activities, volumes and outsourcing in our residential mortgage business.  The increase in advertising and marketing expense was primarily due to increased expenditures related to leads-based marketing to drive revenue growth in our residential mortgage lending business.   

Income taxes.Income tax expense was $3.2 million for the six months ended June 30, 2020, an increase of $2.2 million, compared to $1.0 million for the quarter ended June 30, 2019.  The effective tax rate for the quarter ended June 30, 2020 was approximately 20.7%, as compared to approximately 20.2% for the quarter ended June 30, 2019.

Our deferred tax assets are composed of NOLs, and other temporary book to tax differences.  When determining the amount of deferred tax assets that are more-likely-than-not to be realized, and therefore recorded as a benefit, the Company conducts a regular assessment of all available information. This information includes, but is not limited to, taxable income in prior periods, projected future income and projected future reversals of deferred tax items.  Based on these criteria, the Company determined as of June, 2020 that no valuation allowance was required against the net deferred tax asset.

The Company records income tax expense based on the federal statutory rate adjusted for the effect of other items such as low income housing credits, bank owned life insurance and other miscellaneous items. 

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

	For Three Months Ended June 30,
	2020						2019
	Average		Interest		Average		Average		Interest		Average
	Outstanding		Earned/		Yield/		Outstanding		Earned/		Yield/
	Balance		Paid		Rate		Balance		Paid		Rate
	(Dollars in thousands)
Interest-earning assets:
Securities (1) (2)	$	11,023	$	42		1.55%	$	9,557	$	43		1.79%
Loans and loans held for sale (3)		966,902		9,759		4.04%		625,745		8,112		5.19%
Other earning assets		56,302		17		0.12%		39,448		297		3.01%
FHLB and FRB stock		5,011		50		3.99%		3,816		53		5.56%
Total interest-earning assets		1,039,238		9,868		3.80%		678,566		8,505		5.01%
Noninterest-earning assets		49,418						33,566
Total assets	$	1,088,656					$	712,132
Interest-bearing liabilities:
Deposits	$	693,823		3,001		1.73%	$	508,424		2,876		2.26%
FHLB advances and other borrowings		138,648		584		1.68%		33,281		400		4.81%
Total interest-bearing liabilities		832,471		3,585		1.72%		541,705		3,276		2.42%
Noninterest-bearing liabilities		170,533						121,851
Total liabilities		1,003,004						663,556
Equity		85,652						48,576
Total liabilities and equity	$	1,088,656					$	712,132
Net interest-earning assets	$	206,767					$	136,861
Net interest income/interest rate spread			$	6,283		2.08%			$	5,229		2.59%
Net interest margin						2.42%						3.08%
Average interest-earning assets
to average interest-bearing liabilities		124.84%						125.26%

⁽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.

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	For Six Months Ended June 30,
	2020						2019
	Average		Interest		Average		Average		Interest		Average
	Outstanding		Earned/		Yield/		Outstanding		Earned/		Yield/
	Balance		Paid		Rate		Balance		Paid		Rate
	(Dollars in thousands)
Interest-earning assets:
Securities (1) (2)	$	10,580	$	85		1.63%	$	9,622	$	85		1.76%
Loans and loans held for sale (3)		889,050		19,511		4.39%		600,980		15,602		5.19%
Other earning assets		42,326		124		0.59%		43,557		652		2.99%
FHLB and FRB stock		4,551		94		4.13%		3,678		107		5.82%
Total interest-earning assets		946,507		19,814		4.19%		657,837		16,446		5.00%
Noninterest-earning assets		45,634						33,748
Total assets	$	992,141					$	691,585
Interest-bearing liabilities:
Deposits	$	666,145		6,317		1.90%	$	487,613		5,309		2.18%
FHLB advances and other borrowings		96,511		1,091		2.26%		33,488		808		4.83%
Total interest-bearing liabilities		762,656		7,408		1.94%		521,101		6,117		2.35%
Noninterest-bearing liabilities		145,750						123,125
Total liabilities		908,406						644,226
Equity		83,735						47,359
Total liabilities and equity	$	992,141					$	691,585
Net interest-earning assets	$	183,851					$	136,736
Net interest income/interest rate spread			$	12,406		2.25%			$	10,329		2.65%
Net interest margin						2.62%						3.14%
Average interest-earning assets
to average interest-bearing liabilities		124.11%						126.24%

⁽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.

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Rate/Volume Analysis of Net Interest Income.  The following table presents the dollar amount of changes in interest income and interest expense for major components of interest-earning assets and interest-bearing liabilities.  It distinguishes between the increase and decrease related to changes in balances and/or changes in interest rates.  For each category of interest-earning assets and interest-bearing liabilities, information is provided on changes attributable to (i) changes in volume (i.e., changes in volume multiplied by the prior rate) and (ii) changes in rate (i.e., changes in rate multiplied by prior volume).  For purposes of this table, changes attributable to both rate and volume which cannot be segregated have been allocated proportionately to the change due to volume and the change due to rate.

	Three Months Ended						Six Months Ended
	June 30, 2020						June 30, 2020
	Compared to Six Months Ended						Compared to Six Months Ended
	June 30, 2019						June 30, 2019
	Increase (decrease)						Increase (decrease)
	due to						due to
	Rate		Volume		Net		Rate		Volume		Net
	(Dollars in thousands)						(Dollars in thousands)
Interest-earning assets:
Securities (1)	$	(25)	$	24	$	(1)	$	(14)	$	14	$	-
Loans and loans held for sale		(9,744)		11,391		1,647		(6,344)		10,253		3,909
Other earning assets		(897)		617		(280)		(510)		(18)		(528)
FHLB and FRB Stock		(64)		61		(3)		(63)		50		(13)
Total interest-earning assets		(10,730)		12,093		1,363		(6,931)		10,299		3,368
Interest-bearing liabilities:
Deposits		(3,242)		3,367		125		(1,763)		2,771		1,008
FHLB advances and other borrowings		(1,693)		1,877		184		(1,277)		1,560		283
Total interest-bearing liabilities		(4,935)		5,244		309		(3,040)		4,331		1,291
Net change in net interest income	$	(5,795)	$	6,849	$	1,054	$	(3,891)	$	5,968	$	2,077

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

Critical Accounting Policies

We follow financial accounting and reporting policies that are in accordance with U.S. generally accepted accounting principles and conform to general practices within the banking industry.  These policies are presented in Note 1 to our 2019 Audited Financial Statements.  Some of these accounting policies are considered to be critical accounting policies, which are those policies that are both most important to the portrayal of the Company’s financial condition and results of operations, and require management’s most difficult, subjective or complex judgments, often as a result of the need to make estimates about the effect of matters that are inherently uncertain.  Application of assumptions different than those used by management could result in material changes in our financial condition or results of operations.  These policies, current assumptions and estimates utilized, and the related disclosure of this process, are determined by management and routinely reviewed with the Audit Committee of the Board of Directors.  We believe that the judgments, estimates and assumptions used in the preparation of the consolidated financial statements were appropriate given the factual circumstances at the time.

We have identified accounting policies that are critical accounting policies, and an understanding of these policies is necessary to understand our financial statements.  The following discussion details the critical accounting policies and the nature of the estimates made by management.

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Determination of the ALLL.  The ALLL represents management’s estimate of probable incurred credit losses in the loan portfolio at each balance sheet date. The allowance consists of general and specific components.  The general component covers loans not classified as impaired and is based on historical loss experience, adjusted for current factors. Current factors considered include, but are not limited to, management’s oversight of the portfolio, including lending policies and procedures; nature, level and trend of the portfolio, including past due and nonperforming loans, loan concentrations, loan terms and other characteristics; current economic conditions and outlook; collateral values; and other items.  The specific component of the ALLL relates to loans that are individually classified as impaired. Loans exceeding policy thresholds are regularly reviewed to identify impairment. A loan is impaired when, based on current information and events, it is probable that CFBank will be unable to collect all amounts due according to the contractual terms of the loan agreement. Loans for which the terms have been modified resulting in a concession, and for which the borrower is experiencing financial difficulties, are considered troubled debt restructurings and classified as impaired.  Determining whether a loan is impaired and whether there is an impairment loss requires judgment and estimates, and the eventual outcomes may differ from estimates made by management.  The determination of whether a loan is impaired includes: review of historical data; judgments regarding the ability of the borrower to meet the terms of the loan; an evaluation of the collateral securing the loan and estimation of its value, net of selling expenses, if applicable; various collection strategies; and other factors relevant to the loan or loans.  Impairment is measured based on the fair value of collateral, less costs to sell, if the loan is collateral dependent, or alternatively, the present value of expected future cash flows discounted at the loan’s effective rate, if the loan is not collateral dependent. When the selected measure is less than the recorded investment in the loan, an impairment loss is recorded. As a result, determining the appropriate level for the ALLL involves not only evaluating the current financial situation of individual borrowers or groups of borrowers, but also current predictions about future events that could change before an actual loss is determined.  Based on the variables involved and the fact that management must make judgments about outcomes that are inherently uncertain, the determination of the ALLL is considered to be a critical accounting policy.  Additional information regarding this policy is included in the previous section titled “Financial Condition - Allowance for loan losses”, in Note 4 to the consolidated financial statements included in this Quarterly Report on Form 10-Q and in Notes 1, 4 and 6 to our 2019 Audited Financial Statements.

Fair value of financial instruments.  Another critical accounting policy relates to the fair values of financial instruments, which are estimated using relevant market information and other assumptions.  Fair value estimates involve uncertainties and matters of significant judgment regarding interest rates, credit risk, prepayments and other factors, especially in the absence of broad markets for particular items.  Changes in assumptions or in market conditions could significantly affect the estimates.  Additional information is included in Note 6 to the consolidated financial statements included in this Quarterly Report on Form 10-Q and in Notes 1 and 6 to our 2019 Audited Financial Statements.

Liquidity and Capital Resources

In general terms, liquidity is a measurement of an enterprise’s ability to meet cash needs.  The primary objective in liquidity management is to maintain the ability to meet loan commitments and to repay deposits and other liabilities in accordance with their terms without an adverse impact on current or future earnings.  Principal sources of funds are deposits; amortization and prepayments of loans; maturities, sales and principal receipts of securities available for sale; borrowings; and operations.  While maturities and scheduled amortization of loans are predictable sources of funds, deposit flows and loan prepayments are greatly influenced by general interest rates, economic conditions and competition.

CFBank is required by regulation to maintain sufficient liquidity to ensure its safe and sound operation. Thus, adequate liquidity may vary depending on CFBank’s overall asset/liability structure, market conditions, the activities of competitors, the requirements of our own deposit and loan customers and regulatory considerations.  Management believes that each of the Holding Company’s and CFBank’s current liquidity is sufficient to meet its daily operating needs and fulfill its strategic planning.

Liquidity management is both a daily and long-term responsibility of management.  We adjust our investments in liquid assets, primarily cash, short-term investments and other assets that are widely traded in the secondary market, based on our ongoing assessment of expected loan demand, expected deposit flows, yields available on interest-earning deposits and securities and the objective of our asset/liability management program.  In addition to liquid assets, we have other sources of liquidity available including, but not limited to, access to advances from the FHLB and borrowings from the FRB and our commercial bank lines of credit. 

51

CF BANKSHARES INC.

PART 1. Item 2

MANAGEMENT DISCUSSION AND ANALYSIS

The following table summarizes CFBank’s cash available from liquid assets and borrowing capacity at June 30, 2020 and December 31, 2019.

	June 30, 2020		December 31, 2019
	(Dollars in thousands)
Cash, unpledged securities and deposits in other financial institutions	$	72,085	$	44,080
Additional borrowing capacity at the FHLB		60,255		72,153
Additional borrowing capacity at the FRB		66,094		65,614
Unused commercial bank lines of credit		23,000		23,000
Total	$	221,434	$	204,847

Cash, unpledged securities and deposits in other financial institutions increased $28.0 million, or 63.5%, to $72.1 million at June 30, 2020, compared to $44.1 million at December 31, 2019.  The increase is primarily attributed to an increase in FHLB advances and other borrowings and deposits, partially offset by an increase in loans and leases and loans held for sale

CFBank’s additional borrowing capacity with the FHLB decreased $11.9 million, or 16.5%, to $60.3 million at June 30, 2020, compared to $72.2 million at December 31, 2019.  The decrease is primary attributed to an increase in FHLB fixed rate advances. 

CFBank’s additional borrowing capacity at the FRB increased $480,000, or 0.07%, to $66.1 million at June 30, 2020 from $65.6 million at December 31, 2019.CFBank is eligible to participate in the FRB’s primary credit program, providing CFBank access to short-term funds at any time, for any reason, based on the collateral pledged. 

CFBank’s borrowing capacity with both the FHLB and FRB may be negatively impacted by changes such as, but not limited to, further tightening of credit policies by the FHLB or FRB, deterioration in the credit performance of CFBank’s loan portfolio or CFBank’s financial performance, or a decrease in the balance of pledged collateral.

CFBank had $23.0 million of availability in unused lines of credit with two commercial banks at June 30, 2020 and December 31, 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 June 30, 2020 to meet its current and anticipated operating needs at this time.  The Holding Company’s current cash requirements include operating expenses and interest on subordinated debentures and other debt.  The Company may also elect to pay dividends on its common stock, if and when declared by the Board of Directors.

Currently, annual debt service on the subordinated debentures underlying the Company’s trust preferred securities is approximately $220,000.  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 4.22% at June 30, 2020. 

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%.

52

CF BANKSHARES INC.

PART 1. Item 2

MANAGEMENT DISCUSSION AND ANALYSIS

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 $5,000 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 June 30, 2020, the Company had an outstanding balance of $4.8 million on the term loan and $5.0 million outstanding balance on the revolving line-of-credit.  At December 31, 2019, the term loan had an outstanding balance of $5.0 million and no outstanding balance on the credit facility.  The ability of the Holding Company to pay dividends on its common stock is dependent upon the amount of cash and liquidity available at the Holding Company level, as well as the receipt of dividends and other distributions from CFBank to the extent necessary to fund such dividends.  

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 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.

53

CF BANKSHARES INC.

PART 1. Item 3

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Management believes that, as of June 30, 2020, there has been no material change in the Company’s market risk from the information contained in the Company’s Annual Report on Form 10-K filed with the SEC for the year ended December 31, 2019.

54

CF BANKSHARES INC.

PART 1. Item 4

CONTROLS AND PROCEDURES

Evaluation of disclosure controls and procedures.  We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our Securities Exchange Act of 1934 (Exchange Act) reports is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate, to allow timely decisions regarding required disclosure.  Management, with the participation of our principal executive officer and principal financial officer, has evaluated the effectiveness of our disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of the end of the period covered by this report.  Based on such evaluation, our principal executive officer and principal financial officer have concluded that our disclosure controls and procedures were effective as of and for the quarter ended June 30, 2020. 

Changes in internal control over financial reporting.  We made no changes in our internal controls over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) in the second quarter of 2020 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

55

CF BANKSHARES INC.

PART II. Item 1 to 6

OTHER INFORMATION

Item 1. Legal Proceedings

The Holding Company and CFBank may, from time to time, be involved in various legal proceedings in the normal course of business.  Periodically, there have been various claims and lawsuits involving CFBank, such as claims to enforce liens, condemnation proceedings on properties in which CFBank holds security interests, claims involving the making and servicing of real property loans and other claims and lawsuits incident to our banking business.

We are not a party to any pending legal proceeding that management believes would have a material adverse effect on our financial condition or results of operations, if decided adversely to us.

Item 1A.  Risk Factors

The following information updates and supplements our risk factors and should be read in conjunction with the risk factors disclosed in the Company’s Annual Report on Form 10-K for the year ended December 31, 2019 and in the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31,2020:

As a participating lender in the SBA Paycheck Protection Program (“PPP”), CFBank is subject to additional risks of litigation from its customers or other parties regarding CFBank’s processing of loans for the PPP and risks that the SBA may not fund some or all PPP loan guaranties.

On March 27, 2020, President Trump signed the CARES Act, which included a loan program administered through the SBA referred to as the PPP.  Under the PPP, small businesses and other entities and individuals can apply for loans from existing SBA lenders and other approved regulated lenders that enroll in the program, subject to numerous limitations and eligibility criteria.  CFBank has participated as a lender in the PPP. The PPP opened on April 3, 2020; however, because of the short timeframe between the passing of the CARES Act and the opening of the PPP, there was some ambiguity in the laws, rules and guidance regarding the operation of the PPP, which exposes CFBank to potential risks relating to noncompliance with the PPP.

Since the opening of the PPP, several other larger banks have been subject to litigation regarding the process and procedures that such banks used in processing applications for the PPP and claims related to agent fees.  CFBank may be exposed to the risk of similar litigation, from both customers and non-customers that approached CFBank regarding PPP loans, regarding its process and procedures used in processing applications for the PPP, or litigation from agents with respect to agent fees.  If any such litigation is filed against CFBank and is not resolved in a favorable manner, it may result in significant financial liability or adversely affect the Company’s reputation.  In addition, litigation can be costly, regardless of outcome.  Any financial liability, litigation costs or reputational damage caused by PPP-related litigation could have a material adverse impact on our business, financial condition and results of operations.

CFBank also has credit risk on PPP loans if a determination is made by the SBA that there is a deficiency in the manner in which a PPP loan was originated, funded, or serviced by CFBank, such as an issue with the eligibility of a borrower to receive a PPP loan, which may or may not be related to the ambiguity in the laws, rules and guidance regarding the operation of the PPP.  In the event of a loss resulting from a default on a PPP loan and a determination by the SBA that there was a deficiency in the manner in which the PPP loan was originated, funded, or serviced by CFBank, the SBA may deny its liability under the guaranty, reduce the amount of the guaranty, or, if it has already paid under the guaranty, seek recovery of any loss related to the deficiency from CFBank.

Operational impacts from the COVID-19 pandemic could adversely affect our business, financial condition and results of operations. 

In response to COVID-19, the Company has modified its business practices with a portion of employees working remotely from their homes to limit interruptions to operations as much as possible and to help reduce the risk of COVID-19 infecting entire departments.  Reduced workforces which may be caused by, but not limited to, illness, quarantine, stay at home or other government mandates, or difficulties transitioning back to an in office environment, could result in an adverse impact to the Company’s operations and financial performance.  Employees with health conditions putting them at higher risk of adverse effects from COVID-19 are working remotely.  The Company is encouraging virtual meetings and conference calls in place of in-person meetings, including the annual shareholders meeting which was held via teleconference this year.  Additionally, travel has been restricted.  The Company is promoting social distancing, frequent hand washing and thorough disinfection of all surfaces.  CFBank’s financial service location lobbies were closed for periods of time except for advance appointments only.  Branch drive-ups, ATMs and online/mobile banking services continue to operate and are the preferred option of service.  Even with the precautions undertaken, the continued spread or prolonged impact of COVID-19 could negatively impact the availability of key personnel or significant numbers of the Company's staff, who are necessary to conduct the Company' business.

Further, technology in employees’ homes may not be as robust as in the Company’s offices and could cause the networks, information systems, applications, and other tools available to employees to be more limited or less reliable than in our offices.  The continuation of

56

CF BANKSHARES INC.

PART II. Item 1 to 6

OTHER INFORMATION

these work-from-home measures also introduces additional operational risk, including increased cybersecurity risk.  These cybersecurity risks include greater phishing, malware, and other cybersecurity attacks, vulnerability to disruptions of the Company’s information technology infrastructure and telecommunications systems for remote operations, increased risk of unauthorized dissemination of confidential information, limited ability to restore the systems in the event of a systems failure or interruption, greater risk of a security breach resulting in destruction or misuse of valuable information, and potential impairment of the Company’s ability to perform critical functions, including wiring funds, all of which could expose the Company to risks of data or financial loss, litigation and liability and could seriously disrupt operations and the operations of any impacted customers.

The Company also relies on many third parties in business operations, including appraisers of real property collateral, vendors that supply essential services such as loan servicers, providers of financial information, systems and analytical tools and providers of electronic payment and settlement systems, and local and federal government agencies, offices, and courthouses.  In light of the developing measures responding to the pandemic, many of these entities may limit the availability and access of their services.  For example, loan originations could be delayed due to the limited availability of real estate appraisers for the underlying collateral.  Loan closings could be delayed due to reductions in available staff in recording offices or the closing of courthouses in certain counties, which slows the process for title work, and mortgage and UCC filings in those counties.  If the third-party service providers continue to have limited capacities for a prolonged period or if additional limitations or potential disruptions in these services materialize, it may negatively affect the Company’s operations.

The Company may be exposed to increased interest rate risk as a result of the COVID-19 pandemic. 

The Company’s net interest income, lending activities, deposits and profitability could be negatively affected by volatility in interest rates caused by uncertainties stemming from COVID-19.  In March 2020, the Federal Reserve lowered the target range for the federal funds rate to a range from 0% to 0.25%, citing concerns about the impact of COVID-19 on markets and stress in the energy sector.  A prolonged period of extremely volatile and unstable market conditions would likely increase the Company’s funding costs and negatively affect market risk mitigation strategies.  Higher revenue volatility from changes in interest rates and spreads to benchmark indices could cause a loss of future net interest income and a decrease in the fair market values of the Company’s assets.  Fluctuations in interest rates will impact both the level of income and expense recorded on most of the Company’s assets and liabilities and the market value of all interest-earning assets and interest-bearing liabilities, which in turn could have a material adverse effect on the Company’s net income, results of operations and financial condition.  Low rates increase the risk in the U.S. of a negative interest rate environment in which interest rates drop below zero, either broadly or for some types of instruments.  Such an occurrence would likely further reduce the interest the Company earns on loans and other earning assets, while also likely requiring the Company to pay to maintain its deposits with the Federal Reserve. The Company’s systems may not be able to adequately handle a negative interest rate environment and not all variable rate instruments are designed for such a circumstance.  The Company cannot predict the nature or timing of future changes in monetary policies in response to the outbreak or the precise effects that they may have on the Company’s activities and financial results.

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

(a) None.

(b) Not applicable.

57

CF BANKSHARES INC.

PART II. Item 1 to 6

OTHER INFORMATION

(c) The following table provides information concerning purchases of the Holding Company’s shares of common stock made by or on behalf of the Holding 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 June 30, 2020.

Period	Total number of common shares purchased	Average price paid per common share		Total number of common shares purchased as part of publicly announced plans or programs	Maximum number of common shares that may yet be purchased under the plans or programs (1)
April 1 through April 30, 2020	18,475		10.33	18,475	37,772
May 1 through May 31, 2020	24,042	$	10.64	24,042	13,760
June 1 through June 30, 2020	13,730		10.92	13,730	-
Total	56,247	$	10.61	56,247

⁽¹⁾ On March 12, 2020, the Board of Directors of the Holding Company authorized a stock repurchase program pursuant to which the Holding Company may repurchase up to 3% of the Holding Company’s outstanding common stock over the period commencing March 13, 2020 and ending September 30, 2020.  Under the stock repurchase program, the Holding Company may purchase shares of its common stock from time to time through various means, including open market transactions and privately negotiated transactions.

Item 3.  Defaults upon Senior Securities

Not applicable.

Item 4.  Mine Safety Disclosures

Not applicable.

Item 5.  Other Information

Not applicable.

58

CF BANKSHARES INC.

PART II. Item 1 to 6

OTHER INFORMATION

Item 6.  Exhibits

Exhibit Number	Description of Exhibit
3.1	Certificate of Incorporation of the registrant (incorporated by reference to Exhibit 3.1 to the registrant’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2017, filed with the Commission on November 9, 2017 (File No. 0-25045))
3.2	Amendment to Certificate of Incorporation of the registrant (incorporated by reference to Exhibit 3.2 to the registrant’s Registration Statement on Form S-2, filed with the Commission on October 28, 2005 (File No. 333-129315))
3.3	Amendment to Certificate of Incorporation of the registrant (incorporated by reference to Exhibit 3.4 to the registrant’s Form 10-Q for the quarter ended June 30, 2009, filed with the Commission on August 14, 2009 (File No. 0-25045))
3.4	Amendment to Certificate of Incorporation of the registrant (incorporated by reference to Exhibit 3.5 to the registrant’s Form 10-Q for the quarter ended September 30, 2011, filed with the Commission on November 10, 2011 (File No. 0-25045))
3.5	Amendment to Certificate of Incorporation of the registrant (incorporated by reference to Exhibit 3.5 to the registrant’s Post-Effective Amendment to the Registration Statement on Form S-1, filed with the Commission on May 4, 2012 (File No. 333-177434))
3.6	Certificate of Designations to Certificate of Incorporation of the registrant (incorporated by reference to Exhibit 3.1 to the registrant’s Current Report on Form 8-K dated May 7, 2014 and filed with the Commission on May 13, 2014 (File No. 0-25045))
3.7	Amendment to Certificate of Incorporation of the registrant (incorporated by reference to Exhibit 3.1 to the registrant’s Current Report on Form 8-K dated August 20, 2018, filed with the commission on August 20, 2018 (File No. 0-25045)
3.8	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	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 July 28, 2020, filed with the commission on July 20, 2020 (File No. 0-25045)
3.10	Certificate of Incorporation, as amended, of the registrant [This document represents the Certificate of Incorporation of the registrant in compiled form incorporating all amendments.  This compiled document has not been filed with the Delaware Secretary of State.]
3.11	Second Amended and Restated Bylaws of the registrant (incorporated by reference to Exhibit 3.3 to the registrant’s Form 10-K for the fiscal year ended December 31, 2007, filed with the Commission on March 27, 2008 (File No. 0-25045))
11.1	Statement Re: Computation of Per Share Earnings
31.1	Rule 13a-14(a) Certifications of the Chief Executive Officer
31.2	Rule 13a-14(a) Certifications of the Principal Financial Officer
32.1	Section 1350 Certifications
101.1	Interactive Data File (XBRL)

59

CF BANKSHARES INC.

SIGNATURES

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

	CF BANKSHARES INC.
Dated: August 12, 2020	By:	/s/ Timothy T. O’Dell
		Timothy T. O’Dell
		President and Chief Executive Officer
Dated: August 12, 2020	By:	/s/ Kevin J. Beerman
		Kevin J. Beerman
		Senior Vice President and Senior Financial Officer

60

EX-3.10

Exhibit 3.10

CERTIFICATE OF INCORPORATION

OF

CF BANKSHARES INC.

(reflecting amendments through July 24, 2020)

[For purposes of SEC reporting compliance only]

FIRST:  The name of the Corporation is CF Bankshares Inc. (hereinafter sometimes referred to as the “Corporation”).

SECOND:  The address of the registered office of the Corporation in the State of Delaware is Corporation Trust Center, 1209 Orange Street, in the City of Wilmington, County of New Castle. The name of the registered agent at that address is The Corporation Trust Company.

THIRD:  The purpose of the Corporation is to engage in any lawful act or activity for which a corporation may be organized under the General Corporation Law of the State of Delaware.

FOURTH:

A.   The total number of shares of all classes of stock which the Corporation shall have authority to issue is 10,090,909consisting of:

1.   One million (1,000,000) shares of Preferred Stock, par value one cent ($.01) per share (the “Preferred Stock”); and

[NOTE: Pursuant to a Certificate of Designations of Fixed Rate Cumulative Perpetual Preferred Stock, Series A, of the Corporation filed with the Delaware Secretary of State on December 1, 2008, the Certificate of Incorporation of the Corporation was amended to create a series of Preferred Stock designated as Fixed Rate Cumulative Perpetual Preferred Stock, Series A, having the number of shares of such series, and the voting and other powers, preferences and relative, participating, optional or other rights, and the qualifications, limitations and restrictions thereof, as set forth on Annex A hereto.]

[NOTE: Pursuant to a Certificate of Designations of Series B Preferred Stock of the Corporation filed with the Delaware Secretary of State on May 7, 2014, the Certificate of Incorporation of the Corporation was amended to create a series of Preferred Stock designated as the 6.25% Non-Cumulative Convertible Perpetual Preferred Stock, Series B, having the number of shares of such series, and the voting and otherpowers, preferences and relative, participating, optional or other rights, and the qualifications, limitations and restrictions thereof, as set forth on Annex B hereto.]

[NOTE: Pursuant to a Certificate of Designations of Series C Convertible Perpetual Preferred Stock of the Corporation filed with the Delaware Secretary of State on October 29, 2019, the Certificate of Incorporation of the Corporation was amended to create a series of Preferred Stock designated as the Series C Convertible Perpetual Preferred Stock, having the number of shares of such series, and the voting and other powers, preferences and relative, participating, optional or other rights, and the qualifications, limitations and

restrictions thereof, as set forth on Annex C hereto.On March 26, 2020, the Corporation filed with the Delaware Secretary of State a Certificate of Amendment to the Certificate of Designations of Series C Convertible Perpetual Preferred Stock of the Corporation to increase the authorized number of Series C Convertible Perpetual Preferred Stock from 12,337 shares to 12,607 shares, as reflected in Annex C hereto.]

2.   9,090,909 shares of Common Stock, par value one cent ($.01) per share (the “Common Stock”).

[NOTE: Pursuant to a Certificate of Amendment to the Certificate of Incorporation of the Corporation filed with the Delaware Secretary of State on May 28, 2020, the Certificate of Incorporation of the Corporation was amended to create a series of Non-VotingCommon Stock of the Corporation containing the number of shares of such series, and the voting and other powers, preferences and relative, participating, optional or other rights, and the qualifications, limitations and restrictions thereof, as set forth on Annex D hereto.]

B.   The Board of Directors is authorized, subject to any limitations prescribed by law, to provide for the issuance of the shares of Preferred Stock in series, and by filing a certificate pursuant to the applicable law of the State of Delaware (such certificate being hereinafter referred to as a  “Preferred Stock Designation”), to establish from time to time the number of shares to be included in each such series, and to fix the designation, powers, preferences, and rights of the shares of each such series and any qualifications, limitations or restrictions thereof. The number of authorized shares of Preferred Stock may be increased or decreased (but not below the number of shares thereof then outstanding) by the affirmative vote of the holders of a majority of the Common Stock, without a vote of the holders of the Preferred Stock, or of any series thereof, unless a vote of any such holders is required pursuant to the terms of any Preferred Stock Designation.

C.   1.   Notwithstanding any other provision of this Certificate of Incorporation, in no event shall any record owner of any outstanding Common Stock which is beneficially owned, directly or indirectly, by a person who, as of any record date for the determination of stockholders entitled to vote on any matter, beneficially owns in excess of 10% of the then-outstanding shares of Common Stock (the “Limit”), be entitled, or permitted to any vote in respect of the shares held in excess of the Limit. The number of votes which may be cast by any record owner by virtue of the provisions hereof in respect of Common

Stock beneficially owned by such person beneficially owning shares in excess of the Limit shall be a number equal to the total number of votes which a single record owner of all Common Stock beneficially owned by such person would be entitled to cast, (subject to the provisions of this Article FOURTH) multiplied by a fraction, the numerator of which is the number of shares of such class or series which are both beneficially owned by such person and owned of record by such record owner and the denominator of which is the total number of shares of Common Stock beneficially owned by such person owning shares in excess of the Limit.

2.   The following definitions shall apply to this Section C of this Article FOURTH:

a.“Affiliate” shall have the meaning ascribed to it in Rule 12b-2 of the General Rules and Regulations under the Securities Exchange Act of 1934, as amended, as in effect on the date of filing of this Certificate of Incorporation.

b.“Beneficial ownership” shall be determined pursuant to Rule 13d-3 of the General Rules and Regulations under the Securities Exchange Act of 1934, as amended, (or any successor rule or statutory provision), or, if said Rule 13d-3 shall be rescinded and there shall be no successor rule or provision thereto, pursuant to said Rule 13d-3 as in effect on the date of filing of this Certificate of Incorporation; provided, however, that a person shall, in any event, also be deemed the “beneficial owner” of any Common Stock:

(1) which such person or any of its affiliates beneficially owns, directly or indirectly; or

(2)which such person or any of its affiliates has: (i) the right to acquire (whether such right is exercisable immediately or only after the passage of time), pursuant to any agreement, arrangement or understanding (but shall not be deemed to be the beneficial owner of any voting shares solely by reason of an agreement, contract, or other arrangement with this Corporation to effect any transaction which is described in any one or more of clauses 1 through 5 of Section A of Article EIGHTH of this Certificate of Incorporation (“Article EIGHTH”)), or upon the exercise of conversion rights, exchange rights, warrants, or options or otherwise, or (ii) sole or shared voting or investment power with respect thereto pursuant to any agreement, arrangement, understanding, relationship or otherwise (but shall not be deemed to be the beneficial owner of any voting shares solely by reason of a revocable proxy granted for a particular meeting of stockholders, pursuant to a public solicitation of proxies for such meeting, with respect to shares of which neither such person nor any such Affiliate is otherwise deemed the beneficial owner); or

(3)  which are beneficially owned, directly or indirectly, by any other person with which such first mentioned person or any of its Affiliates acts as apartnership, limited partnership, syndicate or other group pursuant to any agreement, arrangement or understanding for the purpose of acquiring, holding, voting or disposing of any shares of capital stock of this Corporation; and provided further, however, that: (1) no Director or Officer of this Corporation (or any Affiliate of any such Director or Officer) shall, solely by reason of any or all of such Directors or Officers acting in their capacities as such, be deemed, for any purposes hereof, to beneficially own any Common

Stock beneficially owned by any other such Director or Officer (or any Affiliate thereof); and (2) neither any employee stock ownership or similar plan of this Corporation or any subsidiary of this Corporation, nor any trustee with respect thereto or any Affiliate of such trustee (solely by reason of such capacity of such trustee), shall be deemed, for any purposes hereof, to beneficially own any Common Stock held under any such plan. For purposes only of computing the percentage of beneficial ownership of Common Stock of a person, the outstanding Common Stock shall include shares deemed owned by such person through application of this subsection but shall not include any other Common Stock which may be issuable by this Corporation pursuant to any agreement, or upon exercise of conversion rights, warrants or options, or otherwise. For all other purposes, the outstanding Common Stock shall include only Common Stock then outstanding and shall not include any Common Stock which may be issuable by this Corporation pursuant to any agreement, or upon the exercise of conversion rights, warrants or options, or otherwise.

c. The “Limit” shall mean 10% of the then-outstanding shares of Common Stock.

d.  A  “person” shall include an individual, a firm, a group acting in concert, a corporation, a partnership, an association, a joint venture, a pool, a joint stock company, a trust, an unincorporated organization or similar company, a syndicate or any other group formed for the purpose of acquiring, holding or disposing of securities or any other entity.

3. The Board of Directors shall have the power to construe and apply the provisions of this section and to make all determinations necessary or desirable to implement such provisions, including but not limited to matters with respect to: (i) the number of shares of Common Stock beneficially owned by any person; (ii) whether a person is an affiliate of another; (iii) whether a person has an agreement, arrangement, or understanding with another as to the matters referred to in the definition of beneficial ownership; (iv) the application of any other definition or operative provision of the section to the given facts; or (v) any other matter relating to the applicability or effect of this section.

4.   The Board of Directors shall have the right to demand that any person who is reasonably believed to beneficially own Common Stock in excess of the Limit (orholds of record Common Stock beneficially owned by any person in excess of the Limit) supply the Corporation with complete information as to:  (i) the record owner(s) of all shares beneficially owned by such person who is reasonably believed to own shares in excess of the Limit; and (ii) any other factual matter relating to the applicability or effect of this section as may reasonably be requested of such person.

5.   Except as otherwise provided by law or expressly provided in this Section C, the presence, in person or by proxy, of the holders of record of shares of capital stock of the Corporation entitling the holders thereof to cast a majority of the votes (after giving effect, if required, to the provisions of this Section C) entitled to be cast by the holders of shares of capital stock of the Corporation entitled to vote shall constitute a quorum at all meetings of the stockholders, and every reference in this Certificate of Incorporation to a majority or other proportion of capital stock (or the holders thereof) for purposes of determining any quorum requirement or any requirement for stockholder consent or approval shall be deemed to refer to such majority or other proportion of the votes (or the holders thereof) then entitled to be cast in respect of such capital stock.

6.   Any constructions, applications, or determinations made by the Board of Directors pursuant to this section in good faith and on the basis of such information and assistance as was then reasonably available for such purpose shall be conclusive and binding upon the Corporation and its stockholders.

7.   In the event any provision (or portion thereof) of this Section C shall be found to be invalid, prohibited or unenforceable for any reason, the remaining provisions (or portions thereof) of this Section shall remain in full force and effect, and shall be construed as if such invalid, prohibited or unenforceable provision had been stricken herefrom or otherwise rendered inapplicable, it being the intent of this Corporation and its stockholders that each such remaining provision (or portion thereof) of this Section C remain, to the fullest extent permitted by law, applicable and enforceable as to all stockholders, including stockholders owning an amount of stock over the Limit, notwithstanding any such finding.

FIFTH:  The following provisions are inserted for the management of the business and the conduct of the affairs of the Corporation, and for further definition, limitation and regulation of the powers of the Corporation and of its Directors and stockholders:

A.   The business and affairs of the Corporation shall be managed by or under the direction of the Board of Directors. In addition to the powers and authority expressly conferred upon them by statute or by this Certificate of Incorporation or the Bylaws of the Corporation, the Directors are hereby empowered to exercise all such powers and do all such acts and things as may be exercised or done by the Corporation.

B.   The Directors of the Corporation need not be elected by written ballot unless the Bylaws so provide.

C.   Any action required or permitted to be taken by the stockholders of the Corporation must be effected at a duly called annual or special meeting of stockholders of the Corporation and may not be effected by any consent in writing by such stockholders.

D.   Special meetings of stockholders of the Corporation may be called only by the Board of Directors pursuant to a resolution adopted by a majority of the Whole Board or as otherwise provided in the Bylaws.  The term “Whole Board” shall mean the total number of authorized directorships (whether or not there exist any vacancies in previously

authorized directorships at the time any such resolution is presented to the Board for adoption).

SIXTH:

A.   The number of Directors shall be fixed from time to time exclusively by the Board of Directors pursuant to a resolution adopted by a majority of the Whole Board. The Directors shall be divided into three classes, as nearly equal in number as reasonably possible, with the term of office of the first class to expire at the first annual meeting of stockholders, the term of office of the second class to expire at the annual meeting of stockholders one year thereafter and the term of office of the third class to expire at the annual meeting of stockholders two years thereafter with each Director to hold office until his or her successor shall have been duly elected and qualified. At each annual meeting of stockholders following such initial classification and election, Directors elected to succeed those Directors whose terms expire shall be elected for a term of office to expire at the third succeeding annual meeting of stockholders after their election with each Director to hold office until his or her successor shall have been duly elected and qualified.

B.   Subject to the rights of holders of any series of Preferred Stock outstanding, the newly created directorships resulting from any increase in the authorized number of Directors or any vacancies in the Board of Directors resulting from death, resignation, retirement, disqualification, removal from office or other cause may be filled only by a majority vote of the Directors then in office, though less than a quorum, and Directors so chosen shall hold office for a term expiring at the annual meeting of stockholders at which the term of office of the class to which they have been chosen expires.  No decrease in the number of Directors constituting the Board of Directors shall shorten the term of any incumbent Director.

C.   Advance notice of stockholder nominations for the election of Directors and of business to be brought by stockholders before any meeting of the stockholders of the Corporation shall be given in the manner provided in the Bylaws of the Corporation.

D.   Subject to the rights of holders of any series of Preferred Stock then outstanding, any Director, or the entire Board of Directors, may be removed from office at any time, but only for cause and only by the affirmative vote of the holders of at least 80 percent of the voting power of all of the then-outstanding shares of capital stock of the Corporation entitled to vote generally in the election of Directors (after giving effect to the provisions of Article FOURTH of this Certificate of Incorporation (“Article FOURTH”)), voting together as a single class.

SEVENTH:  The Board of Directors is expressly empowered to adopt, amend or repeal Bylaws of the Corporation. Any adoption, amendment or repeal of the Bylaws of the Corporation by the Board of Directors shall require the approval of a majority of the Whole Board. The stockholders shall also have power to adopt, amend or repeal the Bylaws of the Corporation; provided, however, that, in addition to any vote of the holders of any class or series of stock of this Corporation required by law or by this Certificate of Incorporation, the affirmative vote of the holders of at least 80 percent of the voting power of all of the then-outstanding shares of the

capital stock of the Corporation entitled to vote generally in the election of Directors (after giving effect to the provisions of Article FOURTH), voting together as a single class, shall be required to adopt, amend or repeal any provisions of the Bylaws of the Corporation.

EIGHTH:

A.  In addition to any affirmative vote required by law or this Certificate of Incorporation, and except as otherwise expressly provided in this Article EIGHTH:

1.   any merger or consolidation of the Corporation or any Subsidiary (as hereinafter defined) with: (i) any Interested Stockholder (as hereinafter defined); or (ii) any other corporation (whether or not itself an Interested Stockholder) which is, or after such merger or consolidation would be, an Affiliate (as hereinafter defined) of an Interested Stockholder; or

2.   any sale, lease, exchange, mortgage, pledge, transfer or other disposition (in one transaction or a series of transactions) to or with any Interested Stockholder, or any Affiliate of any Interested Stockholder, of any assets of the Corporation or any Subsidiary having an aggregate Fair Market Value (as hereinafter defined) equaling or exceeding 25% or more of the combined assets of the Corporation and its Subsidiaries; or

3.   the issuance or transfer by the Corporation or any Subsidiary (in one transaction or a series of transactions) of any securities of the Corporation or any Subsidiary to any Interested Stockholder or any Affiliate of any Interested Stockholder in exchange for cash, securities or other property (or a combination thereof) having an aggregate Fair Market Value (as hereinafter defined) equaling or exceeding 25% of the combined Fair Market Value of the outstanding common stock of the Corporation and its Subsidiaries, except for any issuance or transfer pursuant to an employee benefit plan of the Corporation or any Subsidiary thereof; or

4.   the adoption of any plan or proposal for the liquidation or dissolution of the Corporation proposed by or on behalf of an Interested Stockholder or any Affiliate of any Interested Stockholder; or

5.   any reclassification of securities (including any reverse stock split), or recapitalization of the Corporation, or any merger or consolidation of the Corporation with any of its Subsidiaries or any other transaction (whether or not with or into or otherwise involving an Interested Stockholder) which has the effect, directly or indirectly, of increasing the proportionate share of the outstanding shares of any class of equity or convertible securities of the Corporation or any Subsidiary which is directly or indirectly owned by any Interested Stockholder or any Affiliate of any Interested Stockholder;shall require the affirmative vote of the holders of at least 80% of the voting power of the then-outstanding shares of stock of the Corporation entitled to vote in the election of Directors (the “Voting Stock”) (after giving effect to the provisions of Article FOURTH), voting together as a single class. Such affirmative vote shall be required notwithstanding the fact that no vote may be required, or that a lesser

percentage may be specified, by law or by any other provisions of this Certificate of Incorporation or any Preferred Stock Designation in any agreement with any national securities exchange or otherwise.

The term “Business Combination” as used in this Article EIGHTH shall mean any transaction which is referred to in any one or more of paragraphs 1 through 5 of Section A of this Article EIGHTH.

B.   The provisions of Section A of this Article EIGHTH shall not be applicable to any particular Business Combination, and such Business Combination shall require only the affirmative vote of the majority of the outstanding shares of capital stock entitled to vote after giving effect to the provisions of Article FOURTH, or such vote (if any), as is required by law or by this Certificate of Incorporation, if, in the case of any Business Combination that does not involve any cash or other consideration being received by the stockholders of the Corporation solely in their capacity as stockholders of the Corporation, the condition specified in the following paragraph 1 is met or, in the case of any other Business Combination, all of the conditions specified in either of the following paragraphs 1 or 2 are met:

1.   The Business Combination shall have been approved by a majority of the Disinterested Directors (as hereinafter defined).

2.   All of the following conditions shall have been met:

a. The aggregate amount of the cash and the Fair Market Value as of the date of the consummation of the Business Combination of consideration other than cash to be received per share by the holders of Common Stock in such Business Combination shall at least be equal to the higher of the following:

(1)(if applicable) the Highest Per Share Price (as hereinafter defined), including any brokerage commissions, transfer taxes and soliciting dealers’ fees, paid by the Interested Stockholder or any of its Affiliates for any shares of Common Stock acquired by it: (i) within the two-yearperiod immediately prior to the first public announcement of the proposal of the Business Combination (the “Announcement Date”); or (ii) in the transaction in which it became an Interested Stockholder, whichever is higher; or

(2)the Fair Market Value per share of Common Stock on the Announcement Date or on the date on which the Interested Stockholder became an Interested Stockholder (such latter date is referred to in this Article EIGHTH as the “Determination Date”), whichever is higher.

b.  The aggregate amount of the cash and the Fair Market Value as of the date of the consummation of the Business Combination of consideration other than cash to be received per share by holders of shares of any  class of outstanding Voting Stock other than Common Stock shall be at least equal

to the highest of the following (it being intended that the requirements of this subparagraph (b) shall be required to be met with respect to every such class of outstanding previously acquired any shares of a particular class of Voting Stock):

(1)  (if applicable) the Highest Per Share Price (as hereinafter defined), including any brokerage commissions, transfer taxes and soliciting dealers’ fees, paid by the Interested Stockholder for any shares of such class of Voting Stock acquired by it: (i) within the two-year period immediately prior to the Announcement Date; or (ii) in the transaction in which it became an Interested Stockholder, whichever is higher; or

(2) (if applicable) the highest preferential amount per share to which the holders of shares of such class of Voting Stock are entitled in the event of any voluntary or involuntary liquidation, dissolution or winding up of the Corporation; or

(3) the Fair Market Value per share of such class of Voting Stock on the Announcement Date or on the Determination Date, whichever is higher.

c. The consideration to be received by holders of a particular class of outstanding Voting Stock (including Common Stock) shall be in cash or in the same form as the Interested Stockholder has previously paid for shares of such class of Voting Stock. If the Interested Stockholder has paid for shares of any class of Voting Stock with varying forms of consideration, the form of consideration to be received per share by holders of shares of such class of Voting Stock shall be either cash or the form used to acquire the largest number of shares of such class of Voting Stock previously acquired by the Interested Stockholder. The price determined in accordance with subparagraph B.2 of this Article EIGHTH shall be subject to appropriate adjustment in the event of any stock dividend, stock split, combination of shares or similar event.

d. After such Interested Stockholder has become an Interested Stockholder and prior to the consummation of such Business Combination: (1) except as approved by a majority of the Disinterested Directors (as hereinafter defined), there shall have been no failure to declare and pay at the regular date therefor any full quarterly dividends (whether or not cumulative) on any outstanding stock having preference over the Common Stock as to dividends or liquidation; (2) there shall have been: (i) no reduction in the annual rate of dividends paid on the Common Stock (except as necessary to reflect any subdivision of the Common Stock), except as approved by a majority of the Disinterested Directors; and (ii) an increase in such annual rate of dividends as necessary to reflect any reclassification (including any reverse stock split), recapitalization, reorganization or any similar transaction which has

the effect of reducing the number of outstanding shares of the Common Stock, unless the failure to so increase such annual rate is approved by a majority of the Disinterested Directors, and (3) neither such Interested Stockholder or any of its Affiliates shall have become the beneficial owner of any additional shares of Voting Stock except as part of the transaction which results in such Interested Stockholder becoming an Interested Stockholder.

e. After such Interested Stockholder has become an Interested Stockholder, such Interested Stockholder shall not have received the benefit, directly or indirectly (except proportionately as a stockholder), of any loans, advances, guarantees, pledges or other financial assistance or any tax credits or other tax advantages provided, directly or indirectly, by the Corporation, whether in anticipation of or in connection with such Business Combination or otherwise.

f.A proxy or information statement describing the proposed Business Combination and complying with the requirements of the Securities Exchange Act of 1934, as amended, and the rules and regulations thereunder (or any subsequent provisions replacing such Act, and the rules or regulations thereunder) shall be mailed to stockholders of the Corporation at least 30 days prior to the consummation of such Business Combination (whether or not such proxy or information statement is required to be mailed pursuant to such Act or subsequent provisions).

C.   For the purposes of this Article EIGHTH:

1.   A  “Person” shall include an individual, a firm, a group acting in concert, a corporation, a partnership, an association, a joint venture, a pool, a joint stock company, a trust, an unincorporated organization or similar company, a syndicate or any other group formed for the purpose of acquiring, holding or disposing of securities or any other entity.

2. “Interested Stockholder” shall mean any person (other than the Corporation or any Holding Company or Subsidiary thereof) who or which:

a. is the beneficial owner, directly or indirectly, of more than 10% of the voting power of the outstanding Voting Stock; or

b. is an Affiliate of the Corporation and at any time within the two-year period immediately prior to the date in question was the beneficial owner, directly or indirectly, of 10% or more of the voting power of the then outstanding Voting Stock; or

c. is an assignee of or has otherwise succeeded to any shares of Voting Stock which were at any time within the two-year period immediately prior to the date in question beneficially owned by any Interested Stockholder, if such assignment or succession shall have occurred in the course of a

transaction or series of transactions not involving a public offering within the meaning of the Securities Act of 1933, as amended.

3.   For purposes of this Article EIGHTH, “beneficial ownership” shall be determined in the manner provided in Section C of Article FOURTH hereof.

4. “Affiliate” and “Associate” shall have the respective meanings ascribed to such terms in Rule 12b-2 of the General Rules and Regulations under the Securities Exchange Act of 1934, as in effect on the date of filing of this Certificate of Incorporation.

5.   “Subsidiary” means any corporation of which a majority of any class of equity security is owned, directly or indirectly, by the Corporation; provided, however, that for the purposes of the definition of Interested Stockholder set forth in Paragraph 2 of this Section C, the term “Subsidiary” shall mean only a corporation of which a majority of each class of equity security is owned, directly or indirectly, by the Corporation.

6.  “Disinterested Director”  means any member of the Board of Directors who is unaffiliated with the Interested Stockholder and was a member of the Board of Directors prior to the time that the Interested Stockholder became an Interested Stockholder, and any Director who is thereafter chosen to fill any vacancy of the Board of Directors or who is elected and who, in either event, is unaffiliated with the Interested Stockholder and in connection with his or her initial assumption of office is recommended for appointment or election by a majority of Disinterested Directors then on the Board of Directors.

7.  “Fair Market Value” means:

a.in the case of stock, the highest closing sales price of the stock during the 30-day period immediately preceding the date in question of a share of such stock on the National Association of Securities Dealers Automated Quotation System or any system then in use, or, if such stock is admitted to trading on a principal United States securities exchange registered under the Securities Exchange Act of 1934, as amended, Fair Market Value shall be the highest sale price reported during the 30-day period preceding the date in question, or, if no such quotations are available, the Fair Market Value on the date in question of a share of such stock as determined by the Board of Directors in good faith, in each case with respect to any class of stock, appropriately adjusted for any dividend or distribution in shares of such stock or any stock split or reclassification of outstanding shares of such stock into a greater number of shares of such stock or any combination or reclassification of outstanding shares of such stock into a smaller number of shares of such stock; and

b.in the case of property other than cash or stock, the Fair Market Value of such property on the date in question as determined by the Board of Directors in good faith.

8.   Reference to “Highest Per Share Price” shall in each case with respect to any class of stock reflect an appropriate adjustment for any dividend or distribution in shares of such stock or any stock split or reclassification of outstanding shares of such stock into a greater number of shares of such stock or any combination or reclassification of outstanding shares of such stock into a smaller number of shares of such stock.

9.   In the event of any Business Combination in which the Corporation survives, the phrase  “consideration other than cash to be received” as used in Subparagraphs (a) and (b) of Paragraph 2 of Section B of this Article EIGHTH shall include the shares of Common Stock and/or the shares of any other class of outstanding Voting Stock retained by the holders of such shares.

D.   A majority of the Disinterested Directors of the Corporation shall have the power and duty to determine for the purposes of this Article EIGHTH, on the basis of information known to them after reasonable inquiry: (a) whether a person is an Interested Stockholder; (b) the number of shares of Voting Stock beneficially owned by any person; (c) whether a person is an Affiliate or Associate of another; and (d) whether the assets which are the subject of any Business Combination have, or the consideration to be received for the issuance or transfer of securities by the Corporation or any Subsidiary in any Business Combination has an aggregate Fair Market Value equaling or exceeding 25% of the combined Fair Market Value of the Common Stock of the Corporation and its Subsidiaries. A majority of the Disinterested Directors shall have the further power to interpret all of the terms and provisions of this Article EIGHTH.

E.   Nothing contained in this Article EIGHTH shall be construed to relieve any Interested Stockholder from any fiduciary obligation imposed by law.

F.  Notwithstanding any other provisions of this Certificate of Incorporation or any provision of law which might otherwise permit a lesser vote or no vote, but in addition to any affirmative vote of the holders of any particular class or series of the Voting Stockrequired by law, this Certificate of Incorporation or any Preferred Stock Designation, the affirmative vote of the holders of at least 80 percent of the voting power of all of the then-outstanding shares of the Voting Stock (after giving effect to the provisions of Article FOURTH), voting together as a single class, shall be required to alter, amend or repeal this Article EIGHTH.

NINTH:   The Board of Directors of the Corporation, when evaluating any offer of another Person (as defined in Article EIGHTH hereof) to:  (A) make a tender or exchange offer for any equity security of the Corporation; (B) merge or consolidate the Corporation with another corporation or entity; or (C) purchase or otherwise acquire all or substantially all of the properties and assets of the Corporation, may, in connection with the exercise of its judgment in determining what is in the best interest of the Corporation and its stockholders, give due consideration to all relevant factors, including, without limitation, those factors that Directors of any subsidiary of the Corporation may consider in evaluating any action that may result in a

change or potential change in the control of the subsidiary, and the social and economic effect of acceptance of such offer:  on the Corporation’s present and future customers and employees and those of its Subsidiaries (as defined in Article EIGHTH hereof); on the communities in which the Corporation and its Subsidiaries operate or are located; on the ability of the Corporation to fulfill its corporate objective as a savings and loan holding company under applicable laws and regulations; and on the ability of its subsidiary savings and loan association to fulfill the objectives of a stock form savings and loan association under applicable statutes and regulations.

TENTH:

A.  Each person who was or is made a party or is threatened to be made a party to or is otherwise involved in any action, suit or proceeding, whether civil, criminal, administrative or investigative (hereinafter a “proceeding”), by reason of the fact that he or she is or was a Director or an Officer of the Corporation or is or was serving at the request of the Corporation as a Director, Officer, employee or agent of another  corporation or of a partnership, joint venture, trust or other enterprise, including service with respect to an employee benefit plan (hereinafter an “indemnitee”), whether the basis of such proceeding is alleged action in an official capacity as a Director, Officer, employee or agent or in any other capacity while serving as a Director, Officer, employee or agent, shall be indemnified and held harmless by the Corporation to the fullest extent authorized by the Delaware General Corporation Law, as the same exists or may hereafter be amended (but, in the case of any such amendment, only to the extent that such amendment permits the Corporation to provide broader indemnification rights than such law permitted the Corporation to provide prior to such amendment), against all expense, liability and loss (including attorneys’ fees, judgments, fines, ERISA excise taxes or penalties and amounts paid in settlement) reasonably incurred or suffered by such indemnitee in connection therewith; provided, however, that, except as provided in Section C hereof with respect to proceedings to enforce rights to indemnification, the Corporation shall indemnify any such indemnitee in connection with a proceeding (or part thereof) initiated by such indemnitee only if such proceeding (or part thereof) was authorized by the Board of Directors of the Corporation.

B.   The right to indemnification conferred in Section A of this Article TENTH shall include the right to be paid by the Corporation the expenses incurred in defending any such proceeding in advance of its final disposition (hereinafter an “advancement of expenses”); provided, however, that, if the Delaware General Corporation Law requires, an advancement of expenses incurred by an indemnitee in his or her capacity as a Director or Officer (and not in any other capacity in which service was or is rendered by such indemnitee, including, without limitation, services to an employee benefit plan) shall be made only upon delivery to the Corporation of an undertaking (hereinafter an “undertaking”), by or on behalf of such indemnitee, to repay all amounts so advanced if it shall ultimately be determined by final judicial decision from which there is no further right to appeal (hereinafter a “final adjudication”) that such indemnitee is not entitled to be indemnified for such expenses under this Section or otherwise.  The rights to indemnification and to the advancement of expenses conferred in Sections A and B of this Article TENTH shall be contract rights and such

rights shall continue as to an indemnitee who has ceased to be a Director, Officer, employee or agent and shall inure to the benefit of the indemnitee’s heirs, executors and administrators.

C.   If a claim under Section A or B of this Article TENTH is not paid in full by the Corporation within sixty days after a written claim has been received by the Corporation, except in the case of a claim for an advancement of expenses, in which case the applicable period shall be twenty days, the indemnitee may at any time thereafter bring suit against the Corporation to recover the unpaid amount of the claim. If successful in whole or in part in any such suit, or in a suit brought by the Corporation to recover an advancement of expenses pursuant to the terms of an undertaking, the indemnitee shall be entitled to be paid also the expenses of prosecuting or defending such suit. In (i) any suit brought by the indemnitee to enforce a right to indemnification hereunder (but not in a suit brought by the indemnitee to enforce a right to an advancement of expenses) it shall be a defense that, and (ii) in any suit by the Corporation to recover an advancement of expenses pursuant to the terms of an undertaking the Corporation shall be entitled to recover such expenses upon a final adjudication that, the indemnitee has not met any applicable standard for indemnification set forth in the Delaware General Corporation Law. Neither the failure of the Corporation (including its Board of Directors, independent legal counsel, or its stockholders) to have made a determination prior to the commencement of such suit that indemnification of the indemnitee is proper in the circumstances because the indemnitee has met the applicable standard of conduct set forth in the Delaware General Corporation Law, nor an actual determination by the Corporation (including its Board of Directors, independent legal counsel, or its stockholders) that the indemnitee has not met such applicable standard of conduct, shall create a presumption that the indemnitee has not met the applicable standard of conduct or, in the case of such a suit brought by the indemnitee, be a defense to such suit. In any suit brought by the indemnitee to enforce a right to indemnification or to an advancement of expenses hereunder, or by the Corporation to recover an advancement of expenses pursuant to the terms of an undertaking, the burden of proving that the indemnitee is not entitled to be indemnified, or to such advancement of expenses, under this Article TENTH or otherwise shall be on the Corporation.

D.   The rights to indemnification and to the advancement of expenses conferred in this Article TENTH shall not be exclusive of any other right which any person may have or hereafter acquire under any statute, the Corporation’s Certificate of Incorporation, Bylaws, agreement, vote of stockholders or Disinterested Directors or otherwise.

E.   The Corporation may maintain insurance, at its expense, to protect itself and any Director, Officer, employee or agent of the Corporation or subsidiary or Affiliate or another corporation, partnership, joint venture, trust or other enterprise against any expense, liability or loss, whether or not the Corporation would have the power to indemnify such person against such expense, liability or loss under the Delaware General Corporation Law.

F.   The Corporation may, to the extent authorized from time to time by the Board of Directors, grant rights to indemnification and to the advancement of expenses to any employee or agent of the Corporation to the fullest extent of the provisions of this Article

TENTH with respect to the indemnification and advancement of expenses of Directors and Officers of the Corporation.

ELEVENTH:   A Director of this Corporation shall not be personally liable to the Corporation or its stockholders for monetary damages for breach of fiduciary duty as a Director, except for liability: (i) for any breach of the Director’s duty of loyalty to the Corporation or its stockholders; (ii) for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law; (iii) under Section 174 of the Delaware General Corporation Law; or (iv) for any transaction from which the Director derived an improper personal benefit. If the Delaware General Corporation Law is amended to authorize corporate action further eliminating or limiting the personal liability of Directors, then the liability of a Director of the Corporation shall be eliminated or limited to the fullest extent permitted by the Delaware General Corporation Law, as so amended.

Any repeal or modification of the foregoing paragraph by the stockholders of the Corporation shall not adversely affect any right or protection of a Director of the Corporation existing at the time of such repeal or modification.

TWELFTH:  The Corporation reserves the right to amend or repeal any provision contained in this Certificate of Incorporation in the manner prescribed by the laws of the State of Delaware and all rights conferred upon stockholders are granted subject to this reservation; provided, however, that, notwithstanding any other provision of this Certificate of Incorporation or any provision of law which might otherwise permit a lesser vote or no vote, but in addition to any vote of the holders of any class or series of the stock of this Corporation required by law or by this Certificate of Incorporation, the affirmative vote of the holders of at least 80 percent of the voting power of all of the then-outstanding shares of the capital stock of the Corporation entitled to vote generally in the election of Directors (after giving effect to the provisions of Article FOURTH), voting together as a single class, shall be required to amend or repeal this Article TWELFTH, Section C of Article FOURTH, Sections C or D of Article FIFTH, Article SIXTH, Article SEVENTH, Article EIGHTH or Article TENTH.

THIRTEENTH:  The name and mailing address of the sole incorporator are as follows:

Name	Mailing Address
Mia Sunmee Kim	Muldoon, Murphy & Faucette
	5101 Wisconsin Avenue, N.W.
	Washington, D.C.  20016

ANNEX A

CERTIFICATE OF DESIGNATIONS

OF

FIXED RATE CUMULATIVE PERPETUAL PREFERRED STOCK, SERIES A

OF

CENTRAL FEDERAL CORPORATION

Central Federal Corporation, a corporation organized and existing under the laws of the Delaware (the “Corporation”), in accordance with the provisions of Section 151 of the Delaware General Corporation Law, does hereby certify:

The board of directors of the Corporation (the “Board of Directors”) or an applicable committee of the Board of Directors, in accordance with the certificate of incorporation and bylaws of the Corporation and applicable law, adopted the following resolution on November 25, 2008 creating a series of 7,225 shares of Preferred Stock of the Corporation designated as “Fixed Rate  Cumulative Perpetual Preferred Stock, Series A”.

RESOLVED, that pursuant to the provisions of the certificate of incorporation and the bylaws of the Corporation and applicable law, a series of Preferred Stock, par value $.01 per share, of the Corporation be and hereby is created, and that the designation and number of shares of such series, and the voting and other powers, preferences and relative, participating, optional or other rights, and the qualifications, limitations and restrictions thereof, of the shares of such series, are as follows:

Part 1. Designation and Number of Shares. There is hereby created out of the authorized and unissued shares of preferred stock of the Corporation a series of preferred stock designated as the “Fixed Rate Cumulative Perpetual Preferred Stock, Series A” (the “Designated Preferred Stock”). The authorized number of shares of Designated Preferred Stock shall be 7,225.

Part 2. Standard Provisions. The Standard Provisions contained in Annex A attached hereto are incorporated herein by reference in their entirety and shall be deemed to be a part of this Certificate of Designations to the same extent as if such provisions had been set forth in full herein.

Part. 3. Definitions. The following terms are used in this Certificate of Designations (including the Standard Provisions in Annex A hereto) as defined below:

(a) “Common Stock” means the common stock, par value $.01 per share, of the Corporation.

(b) “Dividend Payment Date” means February 15, May 15, August 15 and November 15 of each year.

(c) “Junior Stock” means the Common Stock, and any other class or series of stock of the Corporation the terms of which expressly provide that it ranks junior to Designated Preferred Stock as to dividend rights and/or as to rights on liquidation, dissolution or winding up of the Corporation.

(d) “Liquidation Amount” means $1,0001 per share of Designated Preferred Stock.

(e) “Minimum Amount” means $1,806,250.

(f) “Parity Stock” means any class or series of stock of the Corporation (other than Designated Preferred Stock) the terms of which do not expressly provide that such class or series will rank senior or junior to Designated Preferred Stock as to dividend rights and/or as to rights on liquidation, dissolution or winding up of the Corporation (in each case without regard to whether dividends accrue cumulatively or non-cumulatively).

(g) “Signing Date” means December 5, 2008.

_________________________________

1If issuer desires to issue shares with a higher dollar amount liquidation preference, liquidation preference references will be modified accordingly. In such case (in accordance with Section 4.7 of the Securities Purchase Agreement), the issuer will be required to enter into a deposit agreement.

Part. 4. Certain Voting Matters. Holders of shares of Designated Preferred Stock will be entitled to one vote for each such share on any matter on which holders of Designated Preferred Stock are entitled to vote, including any action by written consent.

[Remainder of Page Intentionally Left Blank]

IN WITNESS WHEREOF, Central Federal Corporation has caused this Certificate of Designations to be signed by Mark S. Allio, its Chairman, President and Chief Executive Officer, this 25th day of November 2008.

CENTRAL FEDERAL CORPORATION

By: /s/ Mark S. Allio

Name: Mark S. Allio

Title: Chairman, President and CEO

STANDARD PROVISIONS

Section 1. General Matters. Each share of Designated Preferred Stock shall be identical in all respects to every other share of Designated Preferred Stock. The Designated Preferred Stock shall be perpetual, subject to the provisions of Section 5 of these Standard Provisions that form a part of the Certificate of Designations. The Designated Preferred Stock shall rank equally with Parity Stock and shall rank senior to Junior Stock with respect to the payment of dividends and the distribution of assets in the event of any dissolution, liquidation or winding up of the Corporation.

Section 2. Standard Definitions. As used herein with respect to Designated Preferred Stock:

(a) “Applicable Dividend Rate” means (i) during the period from the Original Issue Date to, but excluding, the first day of the first Dividend Period commencing on or after the fifth anniversary of the Original Issue Date, 5% per annum and (ii) from and after the first day of the first Dividend Period commencing on or after the fifth anniversary of the Original Issue Date, 9% per annum.

(b) “Appropriate Federal Banking Agency” means the “appropriate Federal banking agency” with respect to the Corporation as defined in Section 3(q) of the Federal Deposit Insurance Act (12 U.S.C. Section 1813(q)), or any successor provision.

(c) “Business Combination” means a merger, consolidation, statutory share exchange or similar transaction that requires the approval of the Corporation’s stockholders.

(d) “Business Day” means any day except Saturday, Sunday and any day on which banking institutions in the State of New York generally are authorized or required by law or other governmental actions to close.

(e) “Bylaws” means the bylaws of the Corporation, as they may be amended from time to time.

(f) “Certificate of Designations” means the Certificate of Designations or comparable instrument relating to the Designated Preferred Stock, of which these Standard Provisions form a part, as it may be amended from time to time.

(g) “Charter” means the Corporation’s certificate or articles of incorporation, articles of association, or similar organizational document.

(h) “Dividend Period” has the meaning set forth in Section 3(a).

“Dividend Record Date” has the meaning set forth in Section 3(a).

(i) “Liquidation Preference” has the meaning set forth in Section 4(a).

(k) “Original Issue Date” means the date on which shares of Designated Preferred Stock are first issued.

(l) “Preferred Director” has the meaning set forth in Section 7(b).

(m) “Preferred Stock” means any and all series of preferred stock of the Corporation, including the Designated Preferred Stock.

(n) “Qualified Equity Offering” means the sale and issuance for cash by the Corporation to persons other than the Corporation or any of its subsidiaries after the Original Issue Date of shares of perpetual Preferred Stock, Common Stock or any combination of such stock, that, in each case, qualify as and may be included in Tier 1 capital of the Corporation at the time of issuance under the applicable risk-based capital guidelines of the Corporation’s Appropriate Federal Banking Agency (other than any such sales and issuances made pursuant to agreements or arrangements entered into, or pursuant to financing plans which were publicly announced, on or prior to October 13, 2008).

(o) “Share Dilution Amount” has the meaning set forth in Section 3(b).

(p) “Standard Provisions” mean these Standard Provisions that form a part of the Certificate of Designations relating to the Designated Preferred Stock.

(q) “Successor Preferred Stock” has the meaning set forth in Section 5(a).

(r) “Voting Parity Stock” means, with regard to any matter as to which the holders of Designated Preferred Stock are entitled to vote as specified in Sections 7(a) and 7(b) of these Standard Provisions that form a part of the Certificate of Designations, any and all series of Parity Stock upon which like voting rights have been conferred and are exercisable with respect to such matter.

Section 3. Dividends.

(a) Rate. Holders of Designated Preferred Stock shall be entitled to receive, on each share of Designated Preferred Stock if, as and when declared by the Board of Directors or any duly authorized committee of the Board of Directors, but only out of assets legally available therefor, cumulative cash dividends with respect to each Dividend Period (as defined below) at a rate per annum equal to the Applicable Dividend Rate on (i) the Liquidation Amount per share of Designated Preferred Stock and (ii) the amount of accrued and unpaid dividends for any prior Dividend Period on such share of Designated Preferred Stock, if any. Such dividends shall begin to accrue and be cumulative from the Original Issue Date, shall compound on each subsequent Dividend Payment Date (i.e., no dividends shall accrue on other dividends unless and until the first Dividend Payment Date for such other dividends has passed without such other dividends having been paid on such date) and shall be payable quarterly in arrears on each Dividend Payment Date, commencing with the first such Dividend Payment Date to occur at least 20 calendar days after the Original Issue Date. In the event that any Dividend Payment Date would otherwise fall on a day that is not a Business Day, the dividend payment due on that date will be postponed to the next day that is a Business Day and no additional dividends will accrue as a result of that postponement. The period from and including any Dividend Payment Date to, but excluding, the next Dividend Payment Date is a “Dividend Period”, provided that the initial Dividend Period shall be the period from and including the Original Issue Date to, but excluding, the next Dividend Payment Date.

Dividends that are payable on Designated Preferred Stock in respect of any Dividend Period shall be computed on the basis of a 360-day year consisting of twelve 30-day months. The amount of dividends payable on Designated Preferred Stock on any date prior to the end of a Dividend Period, and for the initial Dividend Period, shall be computed on the basis of a 360-day year consisting of twelve 30-day months, and actual days elapsed over a 30-day month.

Dividends that are payable on Designated Preferred Stock on any Dividend Payment Date will be payable to holders of record of Designated Preferred Stock as they appear on the stock register of the Corporation on the applicable record date, which shall be the 15th calendar day immediately preceding such Dividend Payment Date or such other record date fixed by the Board of Directors or any duly authorized committee of the Board of Directors that is not more than 60 nor less than 10 days prior to such Dividend Payment Date (each, a “Dividend Record Date”). Any such day that is a Dividend Record Date shall be a Dividend Record Date whether or not such day is a Business Day.

Holders of Designated Preferred Stock shall not be entitled to any dividends, whether payable in cash, securities or other property, other than dividends (if any) declared and payable on Designated Preferred Stock as specified in this Section 3 (subject to the other provisions of the Certificate of Designations).

(b) Priority of Dividends. So long as any share of Designated Preferred Stock remains outstanding, no dividend or distribution shall be declared or paid on the Common Stock or any other shares of Junior Stock (other than dividends payable solely in shares of Common Stock) or Parity Stock, subject to the immediately following paragraph in the case of Parity Stock, and no Common Stock, Junior Stock or Parity Stock shall be, directly or indirectly, purchased, redeemed or otherwise acquired for consideration by the Corporation or any of its subsidiaries unless all accrued and unpaid dividends for all past Dividend Periods, including the latest completed Dividend Period (including, if applicable as provided in Section 3(a) above, dividends on such amount), on all outstanding shares of Designated Preferred Stock have been or are contemporaneously declared and paid in full (or have been declared and a sum sufficient for the payment thereof has been set aside for the benefit of the holders of shares of Designated Preferred Stock on the applicable record date). The foregoing limitation shall not apply to (i) redemptions, purchases or other acquisitions of shares of Common Stock or other Junior Stock in connection with the administration of any employee benefit plan in the ordinary course of business (including purchases to offset the Share Dilution Amount (as defined below) pursuant to a publicly announced repurchase plan) and consistent with past practice, provided that any purchases to offset the Share Dilution Amount shall in no event exceed the Share Dilution Amount; (ii) purchases or other acquisitions by a broker-dealer subsidiary of the Corporation solely for the purpose of market-making, stabilization or customer facilitation transactions in Junior Stock or Parity Stock in the ordinary course of its business; (iii) purchases by a broker-dealer subsidiary of the Corporation of capital stock of

the Corporation for resale pursuant to an offering by the Corporation of such capital stock underwritten by such broker-dealer subsidiary; (iv) any dividends or distributions of rights or Junior Stock in connection with a stockholders’ rights plan or any redemption or repurchase of rights pursuant to any stockholders’ rights plan; (v) the acquisition by the Corporation or any of its subsidiaries of record ownership in Junior Stock or Parity Stock for the beneficial ownership of any other persons (other than the Corporation or any of its subsidiaries), including as trustees or custodians; and (vi) the exchange or conversion of Junior Stock for or into other Junior Stock or of Parity Stock for or into other Parity Stock (with the same or lesser aggregate liquidation amount) or Junior Stock, in each case, solely to the extent required pursuant to binding contractual agreements entered into prior to the Signing Date or any subsequent agreement for the accelerated exercise, settlement or exchange thereof for Common Stock. “Share Dilution Amount” means the increase in the number of diluted shares outstanding (determined in accordance with generally accepted accounting principles in the United States, and as measured from the date of the Corporation’s consolidated financial statements most recently filed with the Securities and Exchange Commission prior to the Original Issue Date) resulting from the grant, vesting or exercise of equity-based compensation to employees and equitably adjusted for any stock split, stock dividend, reverse stock split, reclassification or similar transaction.

When dividends are not paid (or declared and a sum sufficient for payment thereof set aside for the benefit of the holders thereof on the applicable record date) on any Dividend Payment Date (or, in the case of Parity Stock having dividend payment dates different from the Dividend Payment Dates, on a dividend payment date falling within a Dividend Period related to such Dividend Payment Date) in full upon Designated Preferred Stock and any shares of Parity Stock, all dividends declared on Designated Preferred Stock and all such Parity Stock and payable on such Dividend Payment Date (or, in the case of Parity Stock having dividend payment dates different from the Dividend Payment Dates, on a dividend payment date falling within the Dividend Period related to such Dividend Payment Date) shall be declared pro rata so that the respective amounts of such dividends declared shall bear the same ratio to each other as all accrued and unpaid dividends per share on the shares of Designated Preferred Stock (including, if applicable as provided in Section 3(a) above, dividends on such amount) and all Parity Stock payable on such Dividend Payment Date (or, in the case of Parity Stock having dividend payment dates different from the Dividend Payment Dates, on a dividend payment date falling within the Dividend Period related to such Dividend Payment Date) (subject to their having been declared by the Board of Directors or a duly authorized committee of the Board of Directors out of legally available funds and including, in the case of Parity Stock that bears cumulative dividends, all accrued but unpaid dividends) bear to each other. If the Board of Directors or a duly authorized committee of the Board of Directors determines not to pay any dividend or a full dividend on a Dividend Payment Date, the Corporation will provide written notice to the holders of Designated Preferred Stock prior to such Dividend Payment Date.

Subject to the foregoing, and not otherwise, such dividends (payable in cash, securities or other property) as may be determined by the Board of Directors or any duly authorized committee of the Board of Directors may be declared and paid on any securities, including Common Stock and other Junior Stock, from time to time out of any funds legally available for such payment, and holders of Designated Preferred Stock shall not be entitled to participate in any such dividends.

Section 4. Liquidation Rights.

(a) Voluntary or Involuntary Liquidation. In the event of any liquidation, dissolution or winding up of the affairs of the Corporation, whether voluntary or involuntary, holders of Designated Preferred Stock shall be entitled to receive for each share of Designated Preferred Stock, out of the assets of the Corporation or proceeds thereof (whether capital or surplus) available for distribution to stockholders of the Corporation, subject to the rights of any creditors of the Corporation, before any distribution of such assets or proceeds is made to or set aside for the holders of Common Stock and any other stock of the Corporation ranking junior to Designated Preferred Stock as to such distribution, payment in full in an amount equal to the sum of (i) the Liquidation Amount per share and (ii) the amount of any accrued and unpaid dividends (including, if applicable as provided in Section 3(a) above, dividends on such amount), whether or not declared, to the date of payment (such amounts collectively, the “Liquidation Preference”).

(b) Partial Payment. If in any distribution described in Section 4(a) above the assets of the Corporation or proceeds thereof are not sufficient to pay in full the amounts payable with respect to all outstanding shares of Designated Preferred Stock and the corresponding amounts payable with respect of any other stock of the Corporation ranking equally with Designated Preferred Stock as to such distribution, holders of Designated Preferred Stock and the holders of such other stock shall share ratably in any such distribution in proportion to the full respective distributions to which they are entitled.

(c) Residual Distributions. If the Liquidation Preference has been paid in full to all holders of Designated Preferred Stock and the corresponding amounts payable with respect of any other stock of the Corporation ranking equally with Designated Preferred Stock as to such distribution has been paid in full, the holders of other stock of the Corporation shall be entitled to receive all remaining assets of the Corporation (or proceeds thereof) according to their respective rights and preferences.

(d) Merger, Consolidation and Sale of Assets Not Liquidation. For purposes of this Section 4, the merger or consolidation of the Corporation with any other corporation or other entity, including a merger or consolidation in which the holders of Designated Preferred Stock receive cash, securities or other property for their shares, or the sale, lease or exchange (for cash, securities or other property) of all or substantially all of the assets of the Corporation, shall not constitute a liquidation, dissolution or winding up of the Corporation.

Section 5. Redemption.

(a) Optional Redemption. Except as provided below, the Designated Preferred Stock may not be redeemed prior to the first Dividend Payment Date falling on or after the third anniversary of the Original Issue Date. On or after the first Dividend Payment Date falling on or after the third anniversary of the Original Issue Date, the Corporation, at its option, subject to the approval of the Appropriate Federal Banking Agency, may redeem, in whole or in part, at any time and from time to time, out of funds legally available therefor, the shares of Designated Preferred Stock at the time outstanding, upon notice given as provided in Section 5(c) below, at a redemption price equal to the sum of (i) the Liquidation Amount per share and (ii) except as otherwise provided below, any accrued and unpaid dividends (including, if applicable as provided in Section 3(a) above, dividends on such amount) (regardless of whether any dividends are actually declared) to, but excluding, the date fixed for redemption.

Notwithstanding the foregoing, prior to the first Dividend Payment Date falling on or after the third anniversary of the Original Issue Date, the Corporation, at its option, subject to the approval of the Appropriate Federal Banking Agency, may redeem, in whole or in part, at any time and from time to time, the shares of Designated Preferred Stock at the time outstanding, upon notice given as provided in Section 5(c) below, at a redemption price equal to the sum of (i) the Liquidation Amount per share and (ii) except as otherwise provided below, any accrued and unpaid dividends (including, if applicable as provided in Section 3(a) above, dividends on such amount) (regardless of whether any dividends are actually declared) to, but excluding, the date fixed for redemption; provided that (x) the Corporation (or any successor by Business Combination) has received aggregate gross proceeds of not less than the Minimum Amount (plus the “Minimum Amount” as defined in the relevant certificate of designations for each other outstanding series of preferred stock of such successor that was originally issued to the United States Department of the Treasury (the “Successor Preferred Stock”) in connection with the Troubled Asset Relief Program Capital Purchase Program) from one or more Qualified Equity Offerings (including Qualified Equity Offerings of such successor), and (y) the aggregate redemption price of the Designated Preferred Stock (and any Successor Preferred Stock) redeemed pursuant to this paragraph may not exceed the aggregate net cash proceeds received by the Corporation (or any successor by Business Combination) from such Qualified Equity Offerings (including Qualified Equity Offerings of such successor).

The redemption price for any shares of Designated Preferred Stock shall be payable on the redemption date to the holder of such shares against surrender of the certificate(s) evidencing such shares to the Corporation or its agent. Any declared but unpaid dividends payable on a redemption date that occurs subsequent to the Dividend Record Date for a Dividend Period shall not be paid to the holder entitled to receive the redemption price on the redemption date, but rather shall be paid to the holder of record of the redeemed shares on such Dividend Record Date relating to the Dividend Payment Date as provided in Section 3 above.

(b) No Sinking Fund. The Designated Preferred Stock will not be subject to any mandatory redemption, sinking fund or other similar provisions. Holders of Designated Preferred Stock will have no right to require redemption or repurchase of any shares of Designated Preferred Stock.

(c) Notice of Redemption. Notice of every redemption of shares of Designated Preferred Stock shall be given by first class mail, postage prepaid, addressed to the holders of record of the shares to be redeemed at their respective last addresses appearing on the books of the Corporation. Such mailing shall be at least 30 days and not more than 60 days before the date fixed for redemption. Any notice mailed as provided in this Subsection shall be conclusively presumed to have been duly given, whether or not the holder receives such notice, but failure duly to give such notice by mail, or any defect in such notice or in the mailing thereof, to any holder of shares of Designated Preferred Stock designated for redemption shall not affect the validity of the proceedings for the redemption of any other shares of Designated Preferred Stock. Notwithstanding the foregoing, if shares of Designated Preferred Stock

are issued in book-entry form through The Depository Trust Corporation or any other similar facility, notice of redemption may be given to the holders of Designated Preferred Stock at such time and in any manner permitted by such facility. Each notice of redemption given to a holder shall state: (1) the redemption date; (2) the number of shares of Designated Preferred Stock to be redeemed and, if less than all the shares held by such holder are to be redeemed, the number of such shares to be redeemed from such holder; (3) the redemption price; and (4) the place or places where certificates for such shares are to be surrendered for payment of the redemption price.

(d) Partial Redemption. In case of any redemption of part of the shares of Designated Preferred Stock at the timeoutstanding, the shares to be redeemed shall be selected either pro rata or in such other manner as the Board of Directors or a duly authorized committee thereof may determine to be fair and equitable. Subject to the provisions hereof, the Board of Directors or a duly authorized committee thereof shall have full power and authority to prescribe the terms and conditions upon which shares of Designated Preferred Stock shall be redeemed from time to time. If fewer than all the shares represented by any certificate are redeemed, a new certificate shall be issued representing the unredeemed shares without charge to the holder thereof.

(e) Effectiveness of Redemption. If notice of redemption has been duly given and if on or before the redemption date specified in the notice all funds necessary for the redemption have been deposited by the Corporation, in trust for the pro rata benefit of the holders of the shares called for redemption, with a bank or trust company doing business in the Borough of Manhattan, The City of New York, and having a capital and surplus of at least $500 million and selected by the Board of Directors, so as to be and continue to be available solely therefor, then, notwithstanding that any certificate for any share so called for redemption has not been surrendered for cancellation, on and after the redemption date dividends shall cease to accrue on all shares so called for redemption, all shares so called for redemption shall no longer be deemed outstanding and all rights with respect to such shares shall forthwith on such redemption date cease and terminate, except only the right of the holders thereof to receive the amount payable on such redemption from such bank or trust company, without interest. Any funds unclaimed at the end of three years from the redemption date shall, to the extent permitted by law, be released to the Corporation, after which time the holders of the shares so called for redemption shall look only to the Corporation for payment of the redemption price of such shares.

(f) Status of Redeemed Shares. Shares of Designated Preferred Stock that are redeemed, repurchased or otherwise acquired by the Corporation shall revert to authorized but unissued shares of Preferred Stock (provided that any such cancelled shares of Designated Preferred Stock may be reissued only as shares of any series of Preferred Stock other than Designated Preferred Stock).

Section 6. Conversion. Holders of Designated Preferred Stock shares shall have no right to exchange or convert such shares into any other securities.

Section 7. Voting Rights.

(a) General. The holders of Designated Preferred Stock shall not have any voting rights except as set forth below or as otherwise from time to time required by law.

(b) Preferred Stock Directors. Whenever, at any time or times, dividends payable on the shares of Designated Preferred Stock have not been paid for an aggregate of six quarterly Dividend Periods or more, whether or not consecutive, the authorized number of directors of the Corporation shall automatically be increased by two and the holders of the Designated Preferred Stock shall have the right, with holders of shares of any one or more other classes or series of Voting Parity Stock outstanding at the time, voting together as a class, to elect two directors (hereinafter the “Preferred Directors” and each a “Preferred Director”) to fill such newly created directorships at the Corporation’s next annual meeting of stockholders (or at a special meeting called for that purpose prior to such next annual meeting) and at each subsequent annual meeting of stockholders until all accrued and unpaid dividends for all past Dividend Periods, including the latest completed Dividend Period (including, if applicable as provided in Section 3(a) above, dividends on such amount), on all outstanding shares of Designated Preferred Stock have been declared and paid in full at which time such right shall terminate with respect to the Designated Preferred Stock, except as herein or by law expressly provided, subject to revesting in the event of each and every subsequent default of the character above mentioned; provided that it shall be a qualification for election for any Preferred Director that the election of such Preferred Director shall not cause the Corporation to violate any corporate governance requirements of any securities exchange or other trading facility on which securities of the Corporation may then be listed or traded that listed or traded companies must have a majority of independent directors. Upon any termination of the right of the holders of shares of Designated Preferred Stock and Voting Parity Stock as a class to vote for directors as provided above, the Preferred Directors shall cease to be qualified as directors, the term of office of all Preferred Directors then in office shall terminate immediately and the authorized number of directors shall be reduced by the number of Preferred

Directors elected pursuant hereto. Any Preferred Director may be removed at any time, with or without cause, and any vacancy created thereby may be filled, only by the affirmative vote of the holders a majority of the shares of Designated Preferred Stock at the time outstanding voting separately as a class together with the holders of shares of Voting Parity Stock, to the extent the voting rights of such holders described above are then exercisable. If the office of any Preferred Director becomes vacant for any reason other than removal from office as aforesaid, the remaining Preferred Director may choose a successor who shall hold office for the unexpired term in respect of which such vacancy occurred.

(c) Class Voting Rights as to Particular Matters. So long as any shares of Designated Preferred Stock are outstanding, in addition to any other vote or consent of stockholders required by law or by the Charter, the vote or consent of the holders of at least 66 2/3% of the shares of Designated Preferred Stock at the time outstanding, voting as a separate class, given in person or by proxy, either in writing without a meeting or by vote at any meeting called for the purpose, shall be necessary for effecting or validating:

(i) Authorization of Senior Stock. Any amendment or alteration of the Certificate of Designations for the Designated Preferred Stock or the Charter to authorize or create or increase the authorized amount of, or any issuance of, any shares of, or any securities convertible into or exchangeable or exercisable for shares of, any class or series of capital stock of the Corporation ranking senior to Designated Preferred Stock with respect to either or both the payment of dividends and/or the distribution of assets on any liquidation, dissolution or winding up of the Corporation;

(ii) Amendment of Designated Preferred Stock. Any amendment, alteration or repeal of any provision of the Certificate of Designations for the Designated Preferred Stock or the Charter (including, unless no vote on such merger or consolidation is required by Section 7(c)(iii) below, any amendment, alteration or repeal by means of a merger, consolidation or otherwise) so as to adversely affect the rights, preferences, privileges or voting powers of the Designated Preferred Stock; or

(iii) Share Exchanges, Reclassifications, Mergers and Consolidations. Any consummation of a binding share exchange or reclassification involving the Designated Preferred Stock, or of a merger or consolidation of the Corporation with another corporation or other entity, unless in each case (x) the shares of Designated Preferred Stock remain outstanding or, in the case of any such merger or consolidation with respect to which the Corporation is not the surviving or resulting entity, are converted into or exchanged for preference securities of the surviving or resulting entity or its ultimate parent, and (y) such shares remaining outstanding or such preference securities, as the case may be, have such rights, preferences, privileges and voting powers, and limitations and restrictions thereof, taken as a whole, as are not materially less favorable to the holders thereof than the rights, preferences, privileges and voting powers, and limitations and restrictions thereof, of Designated Preferred Stock immediately prior to such consummation, taken as a whole;

provided, however, that for all purposes of this Section 7(c), any increase in the amount of the authorized Preferred Stock, including any increase in the authorized amount of Designated Preferred Stock necessary to satisfy preemptive or similar rights granted by the Corporation to other persons prior to the Signing Date, or the creation and issuance, or an increase in the authorized or issued amount, whether pursuant to preemptive or similar rights or otherwise, of any other series of Preferred Stock, or any securities convertible into or exchangeable or exercisable for any other series of Preferred Stock, ranking equally with and/or junior to Designated Preferred Stock with respect to the payment of dividends (whether such dividends are cumulative or non-cumulative) and the distribution of assets upon liquidation, dissolution or winding up of the Corporation will not be deemed to adversely affect the rights, preferences, privileges or voting powers, and shall not require the affirmative vote or consent of, the holders of outstanding shares of the Designated Preferred Stock.

(d) Changes after Provision for Redemption. No vote or consent of the holders of Designated Preferred Stock shall be required pursuant to Section 7(c) above if, at or prior to the time when any such vote or consent would otherwise be required pursuant to such Section, all outstanding shares of the Designated Preferred Stock shall have been redeemed, or shall have been called for redemption upon proper notice and sufficient funds shall have been deposited in trust for such redemption, in each case pursuant to Section 5 above.

(e) Procedures for Voting and Consents. The rules and procedures for calling and conducting any meeting of the holders of Designated Preferred Stock (including, without limitation, the fixing of a record date in connection therewith), the solicitation and use of proxies at such a meeting, the obtaining of written consents and any other aspect or matter with regard to such a meeting or such consents shall be governed by any rules of the Board of Directors or any duly authorized committee of the Board of Directors, in its discretion, may adopt from time to time, which rules and procedures shall conform to the requirements of the Charter, the Bylaws, and applicable law and the

rules of any national securities exchange or other trading facility on which Designated Preferred Stock is listed or traded at the time.

Section 8. Record Holders. To the fullest extent permitted by applicable law, the Corporation and the transfer agent for Designated Preferred Stock may deem and treat the record holder of any share of Designated Preferred Stock as the true and lawful owner thereof for all purposes, and neither the Corporation nor such transfer agent shall be affected by any notice to the contrary.

Section 9. Notices. All notices or communications in respect of Designated Preferred Stock shall be sufficiently given if given in writing and delivered in person or by first class mail, postage prepaid, or if given in such other manner as may be permitted in this Certificate of Designations, in the Charter or Bylaws or by applicable law. Notwithstanding the foregoing, if shares of Designated Preferred Stock are issued in book-entry form through The Depository Trust Corporation or any similar facility, such notices may be given to the holders of Designated Preferred Stock in any manner permitted by such facility.

Section 10. No Preemptive Rights. No share of Designated Preferred Stock shall have any rights of preemption whatsoever as to any securities of the Corporation, or any warrants, rights or options issued or granted with respect thereto, regardless of how such securities, or such warrants, rights or options, may be designated, issued or granted.

Section 11. Replacement Certificates. The Corporation shall replace any mutilated certificate at the holder’s expense upon surrender of that certificate to the Corporation. The Corporation shall replace certificates that become destroyed, stolen or lost at the holder’s expense upon delivery to the Corporation of reasonably satisfactory evidence that the certificate has been destroyed, stolen or lost, together with any indemnity that may be reasonably required by the Corporation.

Section 12. Other Rights. The shares of Designated Preferred Stock shall not have any rights, preferences, privileges or voting powers or relative, participating, optional or other special rights, or qualifications, limitations or restrictions thereof, other than as set forth herein or in the Charter or as provided by applicable law.

ANNEX B

CERTIFICATE OF DESIGNATIONS

OF

SERIES B PREFERRED STOCK

OF

CENTRAL FEDERAL CORPORATION

Central Federal Corporation, a Delaware corporation (the “Corporation”), in accordance with the provisions of Section 151 of the Delaware General Corporation Law, does hereby certify that the following resolution was duly adopted by the Board of Directors of the Corporation on March 31, 2014:

RESOLVED, that pursuant to the authority expressly granted to and vested in the Board of Directors of the Corporation (the “Board of Directors”) by the provisions of Article FOURTH of the Certificate of Incorporation of the Corporation (the “Certificate of Incorporation”), there is hereby created, out of the 1,000,000 shares of preferred stock, par value $0.01 per share, of the Corporation authorized in Article FOURTH of the Certificate of Incorporation, a series of the preferred stock consisting of 480,000 shares, which series shall have the following powers, designations, preferences and relative, participating, optional or other rights, and the following qualifications, limitations and restrictions (in addition to any powers, designations, preferences and relative, participating, optional or other rights, and any qualifications, limitations and restrictions, set forth in the Certificate of Incorporation which are applicable to the preferred stock of the Corporation):

Section 1. Designation and Amount. There is hereby created out of the authorized and unissued shares of preferred stock of the Corporation a series of preferred stock designated as the “6.25% Non-Cumulative Convertible Perpetual Preferred Stock, Series B” (the “Series B Preferred Stock”). The authorized number of shares of Series B Preferred Stock shall be 480,000 shares, each having a par value of $0.01 per share and a liquidation preference of $25.00 per share. Outstanding shares of Series B Preferred Stock that are purchased or otherwise acquired by the Corporation, or converted into Common Shares, shall be cancelled and shall revert to authorized but unissued shares of preferred stock undesignated as to series.

Section 2. Definitions. As used herein with respect to the Series B Preferred Stock, in addition to those terms defined herein, the following terms shall have the following meanings:

(a) “Affiliate” shall mean, with respect to any Person, any Person directly or indirectly controlling, controlled by or under common control with, such other Person. For purposes of this definition, “control” (including, with correlative meanings, the terms “controlled by” and “under common control with”) when used with respect to any Person, means the possession, directly or indirectly, of the power to cause the direction of management or policies of such Person, whether through the ownership of voting securities, by contract or otherwise.

(b) “Business Day” shall mean any day except Saturday, Sunday and any day on which banking institutions in the State of Ohio generally are authorized or required by law or other governmental actions to close.

(c) “Closing  Sales Price” means, with respect to a particular day, the closing sale price or, if no closing sale price is reported, the last reported sale price per share of Common Stock on such day on the NASDAQ Capital Market or such other national securities exchange or automated quotation system on which the Common Stock is then listed or authorized for quotation or, if the Common Stock is not so listed or authorized for quotation, an amount determined in good faith by the Board of Directors to be the fair value of a share of the Common Stock.

(d) “Common Stock” means the common stock, par value $0.01 per share, of the Corporation.

(e) “Conversion Date” shall have the meaning ascribed to such term in Section 6(c) hereto.

(f) “Conversion Price” means, initially, $1.75, subject to adjustment in accordance with Section 9 hereof.

(g) “Conversion Ratio” means the number of shares of Common Stock into which each share of Series B Preferred Stock may be converted at any time pursuant to and in accordance with Section 6 or 7, and shall equal the Liquidation Preference divided by the Conversion Price applicable upon such conversion.

(h) “Conversion Right” shall have the meaning ascribed to such term in Section 6(a) hereto.

(i) “Corporation” means Central Federal Corporation, a Delaware corporation.

(j) “Corporation Conversion Option” shall have the meaning ascribed to such term in Section 7(a) hereto.

(k) “Dividend Payment Date” means January 15, April 15, July 15 and October 15 of each year.

(l) “Dividend Period” means the quarterly period commencing on and including the first day of the calendar quarter and ending and including the last day of the calendar quarter that immediately precedes the quarter in which the corresponding Dividend Payment Date occurs, other than the Initial Dividend Period.

(m) “Federal Reserve” means the Board of Governors of the Federal Reserve System.

(n) “HOLA” means the Home Owners’ Loan Act of 1933, as amended.

(o) “Holder” or “holder” means a holder of record of the Series B Preferred Stock.

(p) “Initial Dividend Period” means the period commencing on the first day upon which a share of Series B Preferred Stock shall be issued and ending on June 30, 2014.

(q) “Issue Date” means the date on which the first share of Series B Preferred Stock is issued by the Corporation.

(r) “Junior Stock” means the Common Stock and any other class or series of capital stock of the Corporation now or hereafter authorized, issued or outstanding that, by its terms, does not expressly provide that it ranks pari passu with or senior to the Series B Preferred Stock with respect to dividend rights and rights upon liquidation, dissolution and winding up of the Corporation.

(s) “Liquidation Parity Stock” means Parity Stock the terms of which expressly provide that it will rank pari passu with the Series B Preferred Stock as to rights upon liquidation, dissolution and winding up of the Corporation.

(t) “Liquidation Preference” means, with respect to each share of Series B Preferred Stock, $25.00 per share.

(u) “Mandatory Conversion Date” means the date on which any shares of Series B Preferred Stock are converted into Common Stock in accordance with Sections 7(a) or (b) hereof.

(v) “Notice of Mandatory Conversion” means the notice described in Section7(d) hereof.

(w) “Parity Stock” means any class or series of capital stock of the Corporation hereafter authorized, issued or outstanding that, by its terms, expressly provides that it ranks pani passu with the Series B Preferred Stock with respect to dividend rights and rights upon liquidation, dissolution and winding up of the Corporation (without regard to whether dividends accrue cumulatively or non-cumulatively).

(x) “Partial Dividend” shall have the meaning ascribed to such term in Section 4(c) hereto.

(y) “Person” means any individual, corporation, general partnership, limited partnership, limited liability partnership, joint venture, association, joint-stock corporation, trust, limited liability corporation, unincorporated organization, other entity or government or any agency or political subdivision thereof.

(z) “Record Date” means the date as determined by the Board of Directors of the Corporation for determining Holders of Series B Preferred Stock entitled to receive a dividend or to vote on any matter to which Holders are entitled to vote.

(aa) “Senior Stock” means any class or series of capital stock of theCorporation hereafter authorized, issued or outstanding that, by its terms, expressly provides that it ranks senior to the Series B Preferred Stock with respect to dividend rights or rights upon liquidation, dissolution and winding up of the Corporation.

(bb) “Series B Preferred Stock” shall have the meaning ascribed to such term in Section 1 hereto.

(cc) “Shareholder Approval” shall have the meaning ascribed to such term inSection 12(c) hereto.

(dd) “Trading Day” means any day on which the NASDAQ Stock Market (or such other successor national securities exchange or automated quotation system on which the Common Stock is then listed or authorized for quotation) is open for the transaction of business.

(ee) “Transfer Agent” means the Corporation’s duly appointed transfer agent,registrar, conversion and dividend disbursing agent for the Series B Preferred Stock and transfer agent and registrar for any shares of Common Stock issued upon conversion of the Series B Preferred Stock, or any successor duly appointed by the Corporation.

Section 3. Ranking. The Series B Preferred Stock shall rank, with respect to dividend rights and rights upon liquidation, dissolution or winding up of the Corporation, (a) senior to all Junior Stock, (b) on parity with all Parity Stock and (c) junior to all Senior Stock.

Section 4. Dividends.

(a) Subject to the rights of any holders of Senior Stock, Holders of shares ofSeries B Preferred Stock shall be entitled to receive, if, when and as declared by the Board of Directors, out of funds legally available therefor, non-cumulative cash dividends at an annual rate of 6.25% of the Liquidation Preference. Such non-cumulative cash dividends shall be payable, if declared by the Board of Directors, quarterly in arrears on each Dividend Payment Date. In the event that a Dividend Payment Date would otherwise fall on a day that is not a Business Day, the dividend payment due on that date will be postponed to the next day that is a Business Day and no interest or other amount will accrue as a result of that postponement. The first Dividend Payment Date shall be July 15, 2014, to the extent a dividend is declared (or is otherwise payable pursuant to the terms and conditions hereof) for the Initial Dividend Period. Each declared dividend shall be payable to holders of record of the Series B Preferred Stock as they appear on the stock books of the Corporation at the close of business on the Record Date.

(b) The amount of dividends payable on each share of Series B PreferredStock for each full Dividend Period during which such share is outstanding and the amount of dividends payable for the Initial Dividend Period and for any Dividend Period which, as to a share of Series B Preferred Stock, is less than a full quarter (determined by reference to the issuance date and the retirement date thereof) shall be computed on the basis of a 360-day year composed of twelve thirty-day months and the actual number of days elapsed in the Initial Dividend Period or such Dividend Period.

(c) In the event that the Board of Directors declares a dividend on the SeriesB Preferred Stock with respect to a Dividend Period in an amount less than the full amount payable to the Holders with respect to such Dividend Period pursuant to Sections 4(a) and 4(b) (such lesser amount, a “Partial Dividend”), such Partial Dividend shall be distributed to the Holders on a pro rata basis with respect to the outstanding shares of Series B Preferred Stock.

(d) Dividends on the Series B Preferred Stock will not be cumulative. If theBoard of Directors does not declare a dividend on the Series B Preferred Stock in respect of a Dividend Period, then no dividend shall be deemed to have accrued for such Dividend Period, be payable on the applicable Dividend Payment Date or be cumulative, and the Corporation will have no obligation to pay any dividend for that Dividend Period, whether or not the Board of Directors declares a dividend for any future Dividend Period with respect to the Series B Preferred Stock or any other class or series of the Corporation’s preferred stock.

(e) So long as any shares of Series B Preferred Stock remain outstanding,unless the full dividends for the most recently completed Dividend Period have been declared and paid (or declared and a sum sufficient for the payment thereof has been set aside) on all outstanding shares of Series B Preferred Stock, during a Dividend Period:

(i) no dividend shall be declared or paid or set aside for payment and no distribution shall be declared or made or set aside for payment on any Junior Stock (other than a dividend payable solely in Junior Stock);

(ii) no shares of Junior Stock shall be repurchased, redeemed or otherwise acquired for consideration by the Corporation, directly or indirectly (other than (A) as a result of a reclassification of Junior Stock for or into other Junior Stock, (B) the exchange or conversion of one share of Junior Stock for or into another share of Junior Stock, (C) through the use of the proceeds of a substantially contemporaneous sale of other Junior Stock, (D) purchases, redemptions or other acquisitions of shares of Junior Stock in connection with any employment contract, benefit plan or other similar arrangement with or for the benefit of employees, officers, directors or consultants, or (E) the purchase of fractional interests in Junior Stock pursuant to the conversion or exchange provisions of such stock or the security being converted or exchanged) nor shall any monies be paid to or made available for a sinking fund for the redemption of any such securities by the Corporation; and

(iii) no shares of Parity Stock shall be repurchased, redeemed or otherwise acquired for consideration by the Corporation, other than pursuant to pro rata offers to purchase all, or a pro rata portion, of the shares of Series B Preferred Stock and such Parity Stock, except by conversion into or exchange for Junior Stock.

(f) When dividends are not paid in full upon the Series B Preferred Stock andParity Stock, if any, all dividends declared upon Series B Preferred Stock and Parity Stock, if any, will be declared on a proportional basis so that the amount of dividends declared per share will bear to each other the same ratio that accrued dividends for the Series B Preferred Stock, and accrued dividends, including any accumulations, on Parity Stock, if any, bear to each other for the then-current Dividend Period.

(g) Subject to the foregoing provisions of Section 4(e) and 4(f), and nototherwise, dividends(payable in cash, stock or otherwise), as may be determined by the Board of Directors, may be declared and paid on the Common Stock and any other Junior Stock or any Parity Stock from time to time out of any assets legally available for such payment, and the Holders of Series B Preferred Stock shall not be entitled to participate in any such dividend.

(h) Dividends on the Series B Preferred Stock will not be declared, paid or set aside for payment to the extent such act would cause the Corporation to fail to comply with applicable laws and regulations, including applicable capital adequacy guidelines, or to violate any order or agreement by or with the Corporation’s regulatory authorities.

(i) Payments of cash for dividends will be delivered to the Holders at their addresses listed in the stock record books maintained by the Transfer Agent.

Section 5. Liquidation Preference.

(a) In the event of any liquidation, dissolution or winding up of the Corporation, whether voluntary or involuntary, each Holder of Series B Preferred Stock shall be entitled to receive, out of the assets of the Corporation or proceeds thereof (whether capital or surplus) available for distribution to shareholders of the Corporation, subject to the prior rights of holders of any Senior Stock, the Liquidation Preference for each outstanding share of Series B Preferred Stock held by such Holder, plus any declared but unpaid dividends (subject to the prior approval of the Federal Reserve, if required), but without accumulation of any undeclared dividends, in preference to the holders of, and before any payment or distribution is made on (or any setting apart for any payment or distribution), any Junior Stock, including, without limitation, on any Common Stock. After the payment to the Holders of the Liquidation Preference for each outstanding share of Series B Preferred Stock, such Holders shall not be entitled to convert any Series B Preferred Stock into Common Stock and shall not be entitled to any further participation in distributions of, and shall have no right or claim to, any of the remaining assets of the Corporation in respect of the Series B Preferred Stock.

(b) Neither (i) the sale, lease, exchange or conveyance for cash, securities or other property of all or substantially all the assets of the Corporation (other than in connection with the voluntary or involuntary liquidation, dissolution or winding up of the Corporation) nor (ii) the merger, consolidation or share exchange of the Corporation into or with any other Person shall be deemed to be a liquidation, dissolution or winding up of the Corporation, voluntary or involuntary, for the purposes of this Section 5.

(c) In the event the assets of the Corporation legally available for distribution to the Holders of the Series B Preferred Stock upon any liquidation, dissolution or winding up of the Corporation, whether voluntary or involuntary, shall be insufficient to pay in full all amounts to which such Holders are entitled pursuant to Section 5(a), no such distribution shall be made on account of any Liquidation Parity Stock upon such liquidation, dissolution or winding up of the Corporation unless proportionate distributable amounts shall be paid with equal priority on account of the Series B Preferred Stock, ratably, in proportion to the full distributable amounts for which Holders of the Series B Preferred Stock and holders of any Liquidation Parity Stock are entitled upon such liquidation, dissolution or winding up of the Corporation.

(d) All distributions made with respect to the Series B Preferred Stock in connection with any liquidation, dissolution or winding up of the Corporation shall be made pro rata to the Holders.

Section 6. Conversion Rights.

(a) Each Holder shall have the right (the “Conversion Right”), at such Holder’s option, exercisable at any time and from time to time, to convert, subject to the terms and provisions of Section 10 and this Section 6, any or all of such Holder’s shares of Series B Preferred Stock (including any fraction thereof) into such whole number of shares of Common Stock per share of Series B Preferred Stock as is equal to the Conversion Ratio in effect on the date of conversion, plus cash in lieu of any fractional Common Share as provided in Section 8. Notwithstanding anything to the contrary set forth herein, each Holder shall be entitled to convert Series B Preferred Stock pursuant to this Section 6, or receive Common Stock upon any such conversion, to the extent (but only to the extent) that such conversion or receipt would not cause or result in such Holder and its Affiliates, collectively, being deemed to own, control or have the power to vote, for purposes of HOLA and Federal Reserve regulations (including Federal Reserve Regulation LL) to the extent applicable to the Corporation, 10% or more of any class of voting securities of the Corporation outstanding at such time (it being understood, for the avoidance of doubt, that no Security shall be included in any such percentage calculation to the extent that it cannot by its terms be converted into or exercised for voting securities by such Holder or its Affiliates at the time of such measurement or transfer).

(b) A Holder of Series B Preferred Stock must complete each of the following procedures to exercise the Conversion Right:

(i) complete, manually sign and deliver to the Transfer Agent a written notice in the form provided by the Transfer Agent indicating that the Holder elects to convert the number of such Holder’s shares of Series B Preferred Stock (including any fraction thereof) specified in such notice;

(ii) if the shares of Series B Preferred Stock that the Holder wishes to convert are represented by one or more physical certificates, surrender such physical certificate(s) to the Transfer Agent;

(iii) if required by the Corporation or the Transfer Agent, furnish appropriate endorsements and transfer documents; and

(iv) if required, pay all transfer or similar taxes.

(c) The date on which a Holder complies with the applicable procedures set forth in Section 6(b) is the “Conversion Date.” Immediately prior to the close of business on the Conversion Date, each converting Holder shall be deemed to be the holder of record of shares of Common Stock issuable upon conversion of such Holder’s shares of Series B Preferred Stock notwithstanding that the share register of the Corporation shall then be closed or that, if applicable, physical certificates representing such Common Stock shall not then be actually delivered to such Holder. On the Conversion Date, all rights of any Holder with respect to the Series B Preferred Stock so converted, including the rights, if any, to receive distributions of the Corporation’s assets (including, but not limited to, the Liquidation Preference) or notices from the Corporation, will terminate, except only for the rights of any such Holder to (i) receive

physical certificates (if applicable) for the number of fully paid and non-assessable whole shares of Common Stock into which such shares of Series B Preferred Stock have been converted and cash in lieu of any fractional share as provided in Section 8, and (ii) exercise the rights to which such Holder is entitled as a holder of shares of Common Stock into which such shares of Series B Preferred Stock have been converted.

(d) The Transfer Agent shall, on a Holder’s behalf, convert the shares of Series B Preferred Stock into shares of Common Stock in accordance with the terms of the notice delivered by such Holder described in clause Section 6(b)(i) above. The shares of Common Stock and cash in lieu of any fractional share due to a Holder surrendering physical certificates shall be delivered to the Holder and each surrendered physical certificate shall be canceled and retired. In the event that the Holders shall not by written notice designate the name in which shares of Common Stock and/or cash, securities or other property (including payments of cash in lieu of fractional shares) to be issued or paid upon conversion of shares of Series B Preferred Stock should be registered or paid or the manner in which such shares should be delivered, the Corporation shall be entitled to register and deliver such shares, and make such payment, in the name of the Holders and in the manner shown on the records of the Corporation.

(e) If the Conversion Date occurs on or before the close of business on a dividend Record Date, the Holder shall not be entitled to receive any portion of the dividend declared on such converted shares of Series B Preferred Stock and paid or payable on the corresponding Dividend Payment Date.

(f) If the Conversion Date occurs after the close of business on a dividend Record Date but prior to the corresponding Dividend Payment Date, the Holder on the dividend Record Date shall receive on that Dividend Payment Date dividends declared and paid on those shares of Series B Preferred Stock, notwithstanding the conversion of those shares of Series B Preferred Stock prior to that Dividend Payment Date, because that Holder shall have been the Holder of record on the corresponding dividend Record Date.

(g) The Corporation shall reserve out of its authorized but unissued shares of Common Stock, sufficient shares of Common Stock to provide for the conversion of shares of Series B Preferred Stock from time to time as such shares of Series B Preferred Stock are presented for conversion. The Corporation shall take all action necessary so that all shares of Common Stock that may be issued upon conversion of shares of Series B Preferred Stock will upon issue be validly issued, fully paid and nonassessable, and free from all liens and charges in respect of the issuance or delivery thereof (excluding any restrictions imposed under applicable securities laws).

Section 7. Corporation Conversion Option.

(a) At any time on or after the third anniversary of the Issue Date, theCorporation shall have the option to require the Holders to convert all of the outstanding Series B Preferred Stock into that number of shares of Common Stock that are issuable at the Conversion Ratio then in effect (the “Corporation Conversion Option”). The Corporation may exercise the Corporation Conversion Option only: (i) if the Closing Sale Price equals or exceeds 135% of the Conversion Price then in effect for at least 20 Trading Days in a period of 30 consecutive Trading Days (including the last Trading Day of such period) ending on the Trading Day immediately preceding the date the Corporation gives notice of mandatory conversion; and (ii) to the extent permitted under Section 10 hereof.

(b) In order to exercise the mandatory conversion rights described in thisSection 7, the Corporation shall provide a Notice of Mandatory Conversion to each Holder on or before the Mandatory Conversion Date. In addition to any information required by applicable law or regulation, the Notice of Mandatory Conversion shall state, as appropriate:

(i) the Mandatory Conversion Date;

(ii) the number of shares of Common Stock to be issued upon conversion of each share of Series B Preferred Stock; and

(iii) the place where certificates of Series B Preferred Stock may be surrendered, if certificates of Common Stock are to be issued.

(c) Upon exercise of the Corporation Conversion Option and the surrender ofshares of Series B Preferred Stock by a Holder thereof, the Corporation shall issue and shall deliver or cause to be issued and delivered

to such Holder, or to such other Person on such Holder’s written order (i) certificates representing the number of validly issued, fully paid and non-assessable whole shares of Common Stock to which a Holder of shares of Series B Preferred Stock being converted, or a Holder’s transferee, shall be entitled and (ii) cash in lieu of any fractional share of Common Stock as provided in Section 8.

(d) Each conversion shall be deemed to have been made at the close ofbusiness on the Mandatory Conversion Date so that the rights of the Holder shall cease except for the right to receive the number of fully paid and non-assessable shares ofCommon Stock at the Conversion Ratio (subject to adjustment in accordance with the provisions of Section 9), and cash in lieu of fractional shares as providedin Section 8, and the Person entitled to receive shares of Common Stock shall be treated for all purposes as having become the record holder of those shares of Common Stock at that time.

(e) If the Corporation exercises the Corporation Conversion Option and the Mandatory Conversion Date is a date that is prior to the close of business on any dividend Record Date, the Holder shall not be entitled to receive any portion of the dividend payable for such Dividend Period on such converted shares on the corresponding Dividend Payment Date.

(f) If the Corporation exercises the Corporation Conversion Option and the Mandatory Conversion Date is a date that is after the close of business on any dividend Record Date and prior to the close of business on the corresponding Dividend Payment Date, all dividends for that Dividend Period with respect to the shares of Series B Preferred Stock called for conversion on such date shall be payable on such Dividend Payment Date to the record holder of such shares on such record date.

Section 8. No Fractional Shares Upon Conversion. No fractional shares of Common Stock shall be issued upon conversion of the Series B Preferred Stock. Upon any conversion, all fractional share interests to which a Holder may be entitled shall be aggregated into whole shares of Common Stock with cash being paid for any fractional interest that may remain after such aggregation. The Corporation shall pay cash equal to such fraction multiplied by the closing price of the Corporation’s Common Stock on the most recent Trading Day immediately preceding the conversion.

Section 9. Anti-Dilution Adjustments.

(a) Any adjustment to the Conversion Price shall result in a change in the Conversion Ratio. The Conversion Price shall be subject to the following adjustments; provided,  however, that notwithstanding anything to the contrary set forth herein, any adjustment to the Conversion Price to be made pursuant to this Section 9 shall be made to the extent (but only to the extent) that such adjustment would not cause or result in any Holder and its Affiliates, collectively, being deemed to own, control or have the power to vote, for purposes of HOLA and Federal Reserve regulations (including Federal Reserve Regulation LL) to the extent applicable to the Corporation, voting securities which (assuming, for this purpose only, full conversion and/or exercise of all such securities) would represent 10% or more of any class of voting securities of the Corporation outstanding at such time; provided,  further,  however, that any adjustment (or portion thereof) prohibited pursuant to this Section 9(a) shall be postponed and implemented on the first date on which such implementation would not result in the condition described above in this Section 9(a):

(i) If the Corporation shall pay a dividend or make a distribution to holders of outstanding Common Stock in shares of Common Stock, the Conversion Price shall be proportionately adjusted by multiplying the Conversion Price in effect immediately prior to such dividend or distribution by a fraction, (A) the numerator of which shall be the number of shares of Common Stock outstanding immediately prior to such dividend or distribution and (B) the denominator of which shall be the sum of (1) the number of shares of Common Stock outstanding immediately prior to such dividend or distribution plus (2) the total number of shares of Common Stock constituting such dividend or other distribution. Such adjustment shall be made successively whenever any such dividend or distribution is made and shall become effective immediately after such dividend or distribution. If any dividend or distribution of the type described in this clause (i) is declared but not so paid or made, the Conversion Price shall again be adjusted to the Conversion Price that would then be in effect had such dividend or distribution not been declared.

(ii) If the Corporation shall subdivide or split its outstanding Common Stock into a greater number of shares of Common Stock, or combine its outstanding Common Stock into a smaller number of shares of

Common Stock, the Conversion Price in effect immediately prior to the day upon which such subdivision, split or combination becomes effective shall be, in the caseof a subdivision or split of Common Stock, proportionately decreased and, in the case of a combination of Common Stock, proportionately increased. Such adjustment shall be made successively whenever any such subdivision, split or combination of the Common Stock occurs and shall become effective immediately after the date upon which such subdivision, split or combination becomes effective.

(b) All adjustments to the Conversion Price shall be calculated to the nearest 1/10th of a cent. No adjustment in the Conversion Price shall be required if such adjustment would be less than $0.01; provided that any adjustments which by reason of this subparagraph are not required to be made shall be carried forward and taken into account in any subsequent adjustment; provided,  further, that on any Conversion Date adjustments to the Conversion Price will be made with respect to any such adjustment carried forward and which has not been taken into account before such date.

(c) Whenever the Conversion Price is to be adjusted in accordance with Section 9(a), the Corporation shall: (i) compute the Conversion Price in accordance with Section 9(a), taking into account the $0.01 threshold set forth in Section 9(b) hereof; (ii) as soon as practicable following the occurrence of an event that requires an adjustment to the Conversion Price pursuant to Section 9(a), taking into account the $0.01 threshold set forth in Section 9(b) hereof (or if the Corporation is not aware of such occurrence, as soon as practicable after becoming so aware), provide, or cause to be provided, a written notice to the Holders of the occurrence of such event; and (iii) as soon as practicable following the determination of the revised Conversion Price in accordance with Section 9(a) hereof, provide, or cause to be provided, a written notice to the Holders setting forth in reasonable detail the method by which the adjustment to the Conversion Price was determined and setting forth the revised Conversion Price.

Section 10.Conversion Limitation. Notwithstanding anything to the contrary contained herein, (a) the Series B Preferred Stock may not be converted until after July 15, 2014, and (b) until the Corporation obtains Shareholder Approval, the Series B Preferred Stock and all warrants issued by the Corporation in connection with the sale and issuance of the Series B Preferred Stock (the “Warrants”) may not be converted or exercised, as applicable, for more than 19.9% of the total outstanding Common Stock of the Corporation or more than 19.9% of the total voting power of the Corporation’s securities immediately preceding the issuance of the Series B Preferred Stock and Warrants. Until Shareholder Approval is obtained, no holder of Series B Preferred Stock will be permitted to convert Series B Preferred Stock and/or exercise Warrants with respect to more than such holder’s pro rata amount (such amount being referred to as the “Maximum Exercise Amount”)of such total determined based upon such holder’s percentage ownership of the aggregate number of shares of Common Stock issuable upon conversion of the Series B Preferred Stock and exercise of the Warrants. Upon the written request of a holder of Series B Preferred Stock, the Corporation shall confirm in writing to such holder, within five business days, the Holder’s Maximum Exercise Amount.

Section 11.Redemption. The shares of Series B Preferred Stock are not redeemable at any time.

Section 12. Voting Rights.

(a) Holders of the Series B Preferred Stock shall have no voting rights except as set forth in this Section 12 and as otherwise required by Delaware law as in effect from time to time. Except as otherwise provided in this Section 12, in exercising any such voting rights, each Holder shall be entitled to one vote for each share of Series B Preferred Stock held by such Holder.

(b) So long as any shares of Series B Preferred Stock remain outstanding, unless a greater percentage shall then be required by law, the affirmative vote or written consent of the Holders of at least two-thirds of all of the shares of Series B Preferred Stock at the time outstanding, voting separately as a class, shall be required to:

(i) amend, alter or repeal any provision of the Corporation’s Certificate of Incorporation (including this Certificate of Designations creating the Series B Preferred Stock), if the amendment, alteration or repeal of the Certificate of Incorporation would materially and adversely affect the rights, preferences, powers or privileges of the Series B Preferred Stock;

(ii) create, authorize, issue or increase the authorized or issued amount of any class or series of any of the Corporation’s equity securities, or any warrants, options or other rights convertible or

exchangeable into any class or series of any of the Corporation’s equity securities, which would constitute Senior Stock or Parity Stock or reclassify any authorized stock of the Corporation into any such stock, or create, authorize or issue any obligation or security convertible into, exchangeable or exercisable for, or evidencing the right to purchase any such stock; or

(iii) enter into or consummate any (A) reclassification of the outstanding shares of Common Stock (other than a change in par value, or from no par value to par value, or from par value to no par value), (B) consolidation, merger or share exchange of the Corporation with or into another Person or any merger, consolidation or share exchange of another Person with or into the Corporation (other than a consolidation, merger or share exchange in which the Corporation is the resulting or surviving entity and which does not result in any reclassification of the outstanding shares of Common Stock), or (C) sale, lease or other disposition to another Person of all or substantially all of the assets of the Corporation (computed on a consolidated basis), other than to one or more of the Corporation’s subsidiaries (any of the foregoing, a “Reorganization Event”); provided,  however, that the Holders will have no right to vote under this Section 12 regarding the Corporation’s entry into or consummation of a Reorganization Event if, upon the consummation of the Reorganization Event, (I) the Series B Preferred Stock remains outstanding or, in the case of any such merger or consolidation with respect to which the Corporation is not the resulting or surviving entity, are converted into or exchanged for preference securities of the surviving or resulting entity or its ultimate parent, and (II) such Series B Preferred Stock remaining outstanding or such preference securities, as the case may be, have such rights, preferences, privileges and voting powers, taken as a whole, as are not materially less favorable to the holders thereof than the rights, preferences, privileges and voting powers of the Series B Preferred Stock, taken as a whole.

Notwithstanding the foregoing, except as otherwise required by law, the Corporation may, without the consent of any Holder, (x) authorize, increase the authorized amount of, or issue Parity Stock (provided that dividend rights are noncumulative) and Junior Stock or (y) increase the amount of authorized shares of Series B Preferred Stock or issue any additional shares of Series B Preferred Stock; provided,  however, that with respect to clause (x), such Parity Stock or Junior Stock, as the case may be, does not rank senior to the Series B Preferred Stock as to dividend rights or rights upon liquidation, dissolution or winding up of the Corporation.

(c)Holders of shares of Common Stock acquired upon the conversion of shares of Series B Preferred Stock shall be entitled to the same voting rights as each other holder of Common Stock except that such holders may not vote upon the proposal to be submitted by the Corporation to its stockholders in accordance with Rule 5635 of the listing rules of The NASDAQ Stock Market LLC, for the issuance of the shares of Common Stock upon the conversion of the Series B Preferred Stock and/or upon exercise of Warrants issued in connection with the sale and issuance of the Series B Preferred Stock (“Shareholder Approval”).

Section 13.No Preemptive Rights. The Holders of Series B Preferred Stock shall have no preemptive rights with respect to any shares of the Corporation’s capital stock or any of its other securities convertible into or carrying rights or options to purchase any such capital stock.

Section 14.No Sinking Fund. No sinking fund shall be established for and no sinking fund provisions shall apply to the Series B Preferred Stock.

Section 15.Compliance with Applicable Law. Declaration by the Board of Directors and payment by the Corporation of dividends to holders of the Series B Preferred Stock shall be subject in all respects to any and all restrictions and limitations placed on dividends or other distributions by the Corporation under (i) laws, regulations and regulatory conditions or limitations applicable to or regarding the Corporation from time to time and (ii) agreements of any type with federal banking authorities with respect to the Corporation or other regulatory restrictions applicable to the Corporation from time to time in effect.

Section 16.Form. Shares of Series B Preferred Stock may be issued in the form of physical certificates or in book entry form through the direct registration system of the Transfer Agent.

Section 17.Other Provisions.

(a) With respect to any notice to a Holder required to be provided hereunder, such notice shall be mailed to the registered address of such Holder, and neither failure to mail such notice, nor any defect therein or in the mailing

thereof, to any particular Holder shall affect the sufficiency of the notice or the validity of the proceedings referred to in such notice with respect to the other Holders or affect the legality or validity of any redemption, conversion, distribution, rights, warrant, reclassification, consolidation, merger, conveyance, transfer, dissolution, liquidation, winding up or other action, or the vote upon any action with respect to which the Holders are entitled to vote. All notice periods referred to herein shall commence on the date of the mailing of the applicable notice. Any notice which was mailed in the manner herein provided shall be conclusively presumed to have been duly given whether or not the Holder receives the notice.

(b) The Liquidation Preference (and, therefore, the Conversion Ratio) shall be subject to adjustment whenever there shall occur a stock split, combination, reclassification or other similar event involving Series B Preferred Stock. Such adjustments shall be made in such manner and at such time as the Board of Directors of the Corporation in good faith determines to be equitable in the circumstances, any such determination to be evidenced in a resolution. Upon any such equitable adjustment, the Corporation shall promptly deliver to the Transfer Agent and each Holder an Officers’ Certificate attaching and certifying the resolution of the Board of Directors, describing in reasonable detail the event requiring the adjustment and the method of calculation thereof and specifying the increased or decreased Liquidation Preference or annual dividend rate in effect following such adjustment.

(c) All issued shares of Series B Preferred Stock shall be deemed outstanding except (i) from the date of surrender of certificates representing Series B Preferred Stock, all shares of Series B Preferred Stock converted into shares of Common Stock; and (ii) from the date of registration of transfer, all shares of Series B Preferred Stock held of record by the Corporation or any subsidiary of the Corporation.

(d) In case, at any time while any shares of the Series B Preferred Stock are outstanding:

(i) the Corporation shall declare a dividend (or any other distribution) on its Common Stock or any other Junior Stock;

(ii) the Corporation shall authorize the issuance to all holders of its Common Stock or any Junior Stock of rights or warrants to subscribe for or purchase Common Stock or of any other subscription rights or warrants;

(iii) there is any Reorganization Event; or

(iv) there is a voluntary or involuntary dissolution, liquidation or winding up of the

Corporation;

then the Corporation shall cause to be mailed to the Transfer Agent, if any, for the Series B Preferred Stock and the Transfer Agent shall cause to be mailed to the Holders of the outstanding shares of Series B Preferred Stock at their respective addresses as they appear on the books of the Corporation, at least ten (10) days before the date hereinafter specified (or the earlier of the dates herein specified, in the event that more than one date is specified), a notice stating (i) the date on which a record is to be taken for the purpose of such dividend, distribution, rights or warrants, or, if a record is not to be taken, the date as of which the holders of Common Stock of record to be entitled to such dividend, distribution, rights or warrants are to be determined, (ii) the date on which any such Reorganization Event, dissolution, liquidation or winding up is expected to become effective, and the date as of which it is expected that holders of Common Stock of record shall be entitled to exchange their shares for the applicable consideration, deliverable upon such Reorganization Event, dissolution, liquidation or winding up or (iii) the date after which the Series B Preferred Stock may be converted into Common Stock at the option of the Holder pursuant to Section 6(a) hereof.

(e) The headings of the various sections and subsections contained herein are for convenience of reference only and shall not affect the interpretation of any of the provisions hereof.

(f) Except as may otherwise be required by law, the Series B Preferred Stock shall not have any powers, designations, preferences and relative, participating, optional or other special rights, other than those specifically set forth in this Certificate of Designations and the Certificate of Incorporation, as amended, of the Corporation.

IN WITNESS WHEREOF, the Corporation has caused this Certificate to be duly executed by an authorized officer this 7th day of May, 2014.

CENTRAL FEDERAL CORPORATION

By: /s/ Timothy T. O’Dell 

Name: Timothy T. O’Dell

Title: Chief Executive Officer

ANNEX C

CERTIFICATE OF DESIGNATIONS

OF

SERIES C CONVERTIBLE PERPETUAL PREFERRED STOCK

OF

CENTRAL FEDERAL CORPORATION

Pursuant to the provisions of the certificate of incorporation and the bylaws of the Corporation and applicable law, a series of preferred stock, $0.01 par value per share, of the Corporation be and hereby is created, and that the designation and number of shares of such series, and the voting and other powers, preferences and relative, participating, optional or other rights, and the qualifications, limitations and restrictions thereof, of the shares of such series, are as follows:

1.Definitions.

(a)“Affiliate” has the meaning set forth in 12 C.F.R. Section 225.2(a) or any successor provision.

(b)“Board of Directors” means the board of directors of the Corporation.

(c)A “business day” means any day other than a Saturday or a Sunday or a day on which banks in Ohio are authorized or required by law, executive order or regulation to close.

(d)“Certificate” means a certificate representing one (1) or more shares of Series C Preferred Stock.

(e)“Certificate of Incorporation” means the Certificate of Incorporation of the Corporation, as amended and in effect from time and time.

(f)“Common Stock” means the voting common stock of the Corporation, $0.01 par value per share.

(g)“Corporation” means Central Federal Corporation, a Delaware corporation.

(h)“Dividends” has the meaning set forth in Section 3.

(i)“Exchange Agent” means Computershare Trust Company, N.A., solely in its capacity as transfer and exchange agent for the Corporation, or any successor transfer and exchange agent for the Corporation.

(j)“Exchange Cap” has the meaning set forth in Section 5(b).

(k)“Exchange Cap Allocation Amount” has the meaning set forth in Section 5(b).

(l)“Exchange Cap Maximum” has the meaning set forth in Section 5(b).

(m)“Existing Buyer” has the meaning set forth in Section 5(b).

(n)“Liquidation Distribution” has the meaning set forth in Section 4(b).

(o)“Mandatory Conversion Date” means, with respect to shares of Series C Preferred Stock of any and all holders thereof, the Non-Voting Common Stock Certificate of Amendment Effective Date.

(p)“Non-Voting Common Stock” means, if authorized by all necessary action on the part of the Corporation, a class of common equity of the Corporation containing the terms set forth in a certificate of

designations reflecting non-voting common stock substantially identical to this Certificate of Designations, mutatis mutandis.

(q)“Non-Voting Common Stock Certificate of Amendment Effective Date” means the date that the Corporation shall have filed an amendment to the Certificate of Incorporation with the Delaware Secretary of State as required by the Delaware General Corporation Law to authorize a class of Non-Voting Common Stock containing the terms set forth in a certificate of designations reflecting non-voting common stock substantially identical to this Certificate of Designations, mutatis mutandis, in an amount of shares sufficient to permit the full conversion of the Series C Preferred Stock into shares of Non-Voting Common Stock.

(r)“Permissible Transfer” means a transfer by the holder of Series C Preferred Stock (i) to the Corporation; (ii) in a widely distributed public offering of Common Stock or Series C Preferred Stock; (iii) that is part of an offering that is not a widely distributed public offering of Common Stock or Series C Preferred Stock but is one in which no one transferee (or group of associated transferees) acquires the right to receive two percent (2%) or more of any class of the Voting Securities of the Corporation then outstanding (including pursuant to a related series of transfers); (iv) that is part of a transfer of Common Stock or Series C Preferred Stock to an underwriter for the purpose of conducting a widely distributed public offering; or (v) to a transferee that controls more than fifty percent (50%) of the Voting Securities of the Corporation without giving effect to such transfer.

(s)“Person” means an individual, corporation, partnership, limited liability company, trust, business trust, association, joint stock company, joint venture, sole proprietorship, unincorporated organization, or any other form of entity not specifically listed herein.

(t)“Principal Market” means the NASDAQ Capital Market.

(u)“Series C Preferred Stock” has the meaning set forth in Section 2.

(v)“SPA” has the meaning set forth in Section 5(b).

(w)“Voting Security” has the meaning set forth in 12 C.F.R. Section 225.2(q) or any successor provision.

2.Designation; Number of Shares. The series of shares of Preferred Stock hereby authorized shall be designated the “Series C Convertible Perpetual Preferred Stock”. The number of authorized shares of the Series C Preferred Stock shall be 12,607 shares. The Series C Preferred Stock shall have a par value of $0.01 per share. Each share of Series C Preferred Stock has the designations, preferences, conversion or other rights, voting powers, restrictions, limitations as to dividends, qualifications, or terms or conditions of redemption as described herein. Each share of Series C Preferred Stock is identical in all respects to every other share of Series C Preferred Stock.

3.Dividends. The Series C Preferred Stock will rank pari passu with the Common Stock with respect to the payment of dividends or distributions, whether payable in cash, securities, options or other property, and with respect to issuance, grant or sale of any rights to purchase stock, warrants, securities or other property (collectively, the “Dividends”) on a pro rata basis with the Common Stock determined on an as-converted basis assuming all shares had been converted pursuant to Section 5 as of immediately prior to the record date of the applicable Dividend (or if no record date is fixed, the date as of which the record holders of Common Stock entitled to such Dividends are to be determined). Accordingly, the holders of record of Series C Preferred Stock will be entitled to receive as, when, and if declared by the Board ofDirectors, Dividends in the same per share amount as paid on the number of shares of Common Stock with respect to the number of shares of Common Stock into which the shares of Series C Preferred Stock would be converted, and no Dividends will be payable on the Common Stock or any other class or series of capital stock ranking with respect to Dividends pari passu with the Common Stock unless a Dividend identical to that paid on the Common Stock is payable at the same time on the Series C Preferred Stock in an amount per share of Series C Preferred Stock equal to the product of (a) the per share Dividend declared and paid in respect of each share of Common Stock and (b) the number of shares of Common Stock into which such share of Series C Preferred Stock is then convertible (without regard to any limitations on conversion of the Series C Preferred Stock); provided, however, that if a stock Dividend is declared on Common Stock payable solely in

Common Stock, the holders of Series C Preferred Stock will be entitled to a stock Dividend payable solely in shares of Series C Preferred Stock. Dividends that are payable on Series C Preferred Stock will be payable to the holders of record of Series C Preferred Stock as they appear on the stock register of the Corporation on the applicable record date, as determined by the Board of Directors, which record date will be the same as the record date for the equivalent Dividend of the Common Stock. In the event that the Board of Directors does not declare or pay any Dividends with respect to shares of Common Stock, then the holders of Series C Preferred Stock will have no right to receive any Dividends.

4.Liquidation.

(a)Rank. The Series C Preferred Stock will, with respect to rights upon liquidation, winding up and dissolution, rank (i) subordinate and junior in right of payment to all other securities of the Corporation which, by their respective terms, are senior to the Series C Preferred Stock or the Common Stock, and (ii) pari passu with the Common Stock pro rata on an as-converted basis. Not in limitation of anything contained herein, and for purposes of clarity, the Series C Preferred Stock is subordinated to the general creditors and subordinated debt holders of the Company, and the depositors of the Company’s bank subsidiaries, in any receivership, insolvency, liquidation or similar proceeding.

(b)Liquidation Distributions. In the event of any liquidation, dissolution or winding up of the affairs of the Corporation, whether voluntary or involuntary, holders of Series C Preferred Stock will be entitled to receive, for each share of Series C Preferred Stock, out of the assets of the Corporation or proceeds thereof (whether capital or surplus) available for distribution to stockholders of the Corporation, subject to the rights of any Persons to whom the Series C Preferred Stock is subordinate, a distribution (“Liquidation Distribution”) equal to (i) any authorized and declared, but unpaid, Dividends with respect to such share of Series C Preferred Stock at the time of such liquidation, dissolution or winding up, and (ii) the amount the holder of such share of Series C Preferred Stock would receive in respect of such share if such share had been converted into shares of Common Stock at the then applicable conversion rate at the time of such liquidation, dissolution or winding up (assuming the conversion of all shares of Series C Preferred Stock at such time, without regard to any limitations on conversion of the Series C Preferred Stock). All Liquidation Distributions to the holders of the Series C Preferred Stock and Common Stock set forth in clause (ii) above will be made pro rata to the holders thereof.

(c)Merger, Consolidation and Sale of Assets Not Liquidation. For purposes of this Section 4, the merger or consolidation of the Corporation with any other corporation or other entity, including a merger or consolidation in which the holders of Series C Preferred Stock receive cash, securities or other property for their shares, or the sale, lease or exchange (for cash, securities or property) of all or substantially all of the assets of the Corporation, will not constitute a liquidation, dissolution or winding up of the Corporation.

5.Conversion.

(a)General.

(i)Unless the shares of Series C Preferred Stock shall have previously been converted into shares of Non-Voting Common Stock pursuant to Section 5(a)(iii), a holder of Series CPreferred Stock shall be permitted to convert, or upon the written request of the Corporation shall convert, shares of Series C Preferred Stock into shares of Common Stock at any time or from time to time, provided that upon such conversion the holder, together with all Affiliates of the holder, will not own or control in the aggregate more than nine point nine percent (9.9%) of the Common Stock (or of any class of Voting Securities issued by the Corporation), excluding for the purpose of this calculation any reduction in ownership resulting from transfers by such holder of Voting Securities of the Corporation (which, for the avoidance of doubt, does not include Series C Preferred Stock), provided further that the right to convert under this Section 5(a)(i) shall not be available to a transferee of shares of Series C Preferred Stock with respect to a transfer other than a Permissible Transfer. In any such conversion, each share of Series C Preferred Stock will convert initially into 100 shares of Common Stock, subject to adjustment as provided in Section 6 below.

(ii)Unless the shares of Series C Preferred Stock shall have previously been converted into shares of Non-Voting Common Stock pursuant to Section 5(a)(iii), each share of Series C Preferred Stock will automatically convert into 100 shares of Common Stock, without any further action on the part of any holder, subject to adjustment as provided in Section 6, below, on the date a holder of Series C Preferred Stock transfers any shares of Series C Preferred Stock to a non-Affiliate of the holder in a Permissible Transfer.

(iii) Effective as of the close of business on the Mandatory Conversion Date, each share of Series C Preferred Stock will automatically convert into 100 shares of Non-Voting Common Stock, without any further action on the part of any holder.

(iv) To effect any permitted conversion under Section 5(a)(i) or Section 5(a)(ii), the holder shall surrender the certificate or certificates evidencing such shares of Series C Preferred Stock, duly endorsed, at the registered office of the Corporation, and provide written instructions to the Corporation as to the number of whole shares for which such conversion shall be effected, together with any appropriate documentation that may be reasonably required by the Corporation. Upon the surrender of such certificate(s), the Corporation will issue and deliver to such holder (in the case of a conversion under Section 5(a)(i)) or such holder’s transferee (in the case of a conversion under Section 5(a)(ii)) a certificate or certificates for the number of shares of Common Stock into which the Series C Preferred Stock has been converted and, in the event that such conversion is with respect to some, but not all, of the holder’s shares of Series C Preferred Stock, the Corporation shall deliver to such holder a certificate or certificate(s) representing the number of shares of Series C Preferred Stock that were not converted to Common Stock or Non-Voting Common Stock.

(v) Upon occurrence of the Mandatory Conversion Date, the Corporation shall promptly provide notice of such event and the resulting conversion of the Series C Preferred Stock to each registered holder of the Series C Preferred Stock. Such notice shall provide instructions for the surrender to the Corporation of certificates for shares of Series C Preferred Stock held of record by such holders for issuance of certificates representing shares of Non-Voting Common Stock into which the Series C Preferred Stock have been converted pursuant to Section 5(a)(iii).

(vi) All shares of Common Stock or Non-Voting Common Stock delivered upon conversion of the Series C Preferred Stock shall be duly authorized, validly issued, fully paid and non-assessable, free and clear of all liens, claims, security interests, charges and other encumbrances.

(b)Principal Market Regulation. Notwithstanding anything herein to the contrary, the Company shall not issue any shares of Common Stock upon the conversion of the Series C Preferred Stockif the issuance of such shares of Common Stock (taken together with each issuance of such shares of Common Stock (x) pursuant to the Securities Purchase Agreement, dated as of October 25, 2019, by and among the Company and the purchasers party thereto (the “SPA”) and (y) following the Non-Voting Common Stock Certificate of Amendment Effective Date, upon conversion of the Non-Voting Common Stock) would exceed 19.9% of the total outstanding shares of Common Stock of the Company, or more than 19.9% of the total voting power of the Company’s securities, in each case immediately preceding the issuance of the shares of Common Stock and Series C Preferred Stock pursuant to the SPA (the number of shares which may be issued without violating such limitation, the “Exchange Cap”), except that such limitation shall not apply in the event that the Company (A) obtains the approval of its shareholders as required by the applicable rules of the Principal Market for issuances of shares of Common Stock in excess of such amount or (B) obtains a written opinion from outside counsel to the Company that such approval is not required, which opinion shall be reasonably satisfactory to the holder of the Series C Preferred Stock or Non-Voting Common Stock (as the case may be). Until such approval or such written opinion is obtained, (i) the holders of the Series C Preferred Stock and Non-Voting Common Stock (collectively, the “Exiting Buyers” and each, individually, an “Existing Buyer”) shall not be issued in the aggregate, upon conversion of any Series C Preferred Stock or Non-Voting Common Stock, or otherwise pursuant to the terms of the SPA or the Certificate of Incorporation, shares of Common Stock in an amount greater than the difference between the Exchange Cap minus the aggregate number of shares of Common Stock issued pursuant to the SPA (the “Exchange Cap Maximum”) and (ii) no Existing Buyer shall be permitted to convert Series C Preferred Stock or Non-Voting Common Stock with respect to more than such

Existing Buyer’s pro rata amount of such Exchange Cap Maximum (such amount, with respect to each Existing Buyer, its “Exchange Cap Allocation Amount”)determined based upon such Existing Buyer’s percentage ownership of the sum of (1) the aggregate number of shares of Common Stock issued to all Purchasers that purchased Preferred Stock pursuant to this Agreement on the Closing Date plus (2) the aggregate number of shares of Common Stock issuable upon the conversion of all shares of Preferred Stock and/or Non-Voting Common Stock. In the event that such Existing Buyer shall sell or otherwise transfer any of such Existing Buyer’s shares of Series C Preferred Stock or Non-Voting Common Stock, the transferee shall be allocated a pro rata portion of such Existing Buyer’s Exchange Cap Allocation Amount with respect to such portion of such Series C Preferred Stock or Non-Voting Common Stock so transferred, and the restrictions of the prior sentence shall apply to such transferee with respect to the portion of the Exchange Cap Allocation Amount so allocated to such transferee. Upon conversion in full of such Existing Buyer’s Series C Preferred Stock or Non-Voting Common Stock, the difference (if any) between such Existing Buyer’s Exchange Cap Allocation Amount and the number of shares of Common Stock actually issued to such Existing Buyer upon such Existing Buyer’s conversion in full of such Series C Preferred Stock or Non-Voting Common Stock shall be allocated to the respective Exchange Cap Allocation Amounts of the remaining Existing Buyers of Series C Preferred Stock or Non-Voting Common Stock on a pro rata basis in proportion to the relative Exchange Cap Allocation Amounts of such Existing Buyers.

(c)Reservation of Shares Issuable Upon Conversion. The Corporation will at all times reserve and keep available out of its authorized but unissued Common Stock and, when authorized, Non-Voting Common Stock solely for the purpose of effecting the conversion of the Series C Preferred Stock such number of shares of Common Stock or Non-Voting Common Stock as will from time to time be sufficient to effect the conversion of all outstanding Series C Preferred Stock; and if at any time the number of shares of authorized but unissued Common Stock or Non-Voting Common Stock (when authorized) will not be sufficient to effect the conversion of all then outstanding Series C Preferred Stock, the Corporation will take such action as may, in the opinion of its counsel, be necessary to increase its authorized but unissued Common Stock or Non-Voting Common Stock to such number of shares as will be sufficient for such purpose.

(d)No Impairment. The Corporation will not, by amendment of its Certificate of Incorporation or through any reorganization, transfer of assets, consolidation, merger, dissolution, issue or sale of securities or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms to be observed or performed hereunder by the Corporation, but will at all times in good faith assist inthe carrying out of all the provisions of this Section 5 and in the taking of all such actions as may be necessary or appropriate in order to protect the conversion rights of the holders of the Series C Preferred Stock against impairment.

(e)Compliance with Law. Prior to the delivery of any securities that the Corporation shall be obligated to deliver upon conversion of the Series C Preferred Stock, the Corporation shall use its reasonable best efforts to comply with any federal and state laws and regulations thereunder requiring the registration of such securities with, or any approval of or consent to the delivery thereof by, any governmental authority.

(f)Listing. The Corporation hereby covenants and agrees that, if at any time the Common Stock shall be traded on any national securities exchange, the Corporation will, if permitted by the rules of such exchange, list and keep listed, so long as the Common Stock shall be so listed on such exchange, all the Common Stock issuable upon conversion of the Series C Preferred Stock; provided, however, that if the rules of such exchange require the Corporation to defer the listing of such Common Stock until the first conversion of Series C Preferred Stock into Common Stock in accordance with the provisions hereof, the Corporation covenants to list such Common Stock issuable upon conversion of the Series C Preferred Stock in accordance with the requirements of such exchange at such time.

6.Adjustments.

(a)Combinations or Divisions of Common Stock. In the event that the Corporation at any time or from time to time will effect a division of the Common Stock into a greater number of shares (by stock split, reclassification or otherwise other than by payment of a Dividend in Common Stock or in any right to acquire the Common Stock), or in the event the outstanding Common Stock will be combined or consolidated, by reclassification, reverse stock split or otherwise, into a lesser number of shares of the Common Stock, then the dividend, liquidation, and conversion rights of each share of Series C Preferred Stock in effect immediately prior to

such event will, concurrently with the effectiveness of such event, be proportionately decreased or increased, as appropriate.

(b)Reclassification, Exchange or Substitution. If the Common Stock is changed into the same or a different number of shares of any other class or classes of stock, whether by capital reorganization, reclassification or otherwise (other than a division or combination of shares provided for in Section 6(a) above), (1) the conversion ratio then in effect will, concurrently with the effectiveness of such transaction, be adjusted so that each share of the Series C Preferred Stock will be convertible into, in lieu of the number of shares of Common Stock which the holders of the Series C Preferred Stock would otherwise have been entitled to receive, a number of shares of such other class or classes of stock equal to the product of (i) the number of shares of such other class or classes of stock that a holder of a share of Common Stock would be entitled to receive in such transaction and (ii) the number of shares of Common Stock into which such share of Series C Preferred Stock is then convertible (without regard to any limitations on conversion of the Series C Preferred Stock) immediately before that transaction and (2) the Dividend and Liquidation Distribution rights then in effect will, concurrently with the effectiveness of such transaction, be adjusted so that each share of Series C Preferred Stock will be entitled to a Dividend and Liquidation Distribution right, in lieu of with respect to the number of shares of Common Stock which the holders of the Series C Preferred Stock would otherwise have been entitled to receive, with respect to a number of shares of such other class or classes of stock equal to the product of (i) the number of shares of such other class or classes of stock that a holder of a share of Common Stock would be entitled to receive in such transaction and (ii) the number of shares of Common Stock into which such share of Series C Preferred Stock is then convertible (without regard to any limitations on conversion of the Series C Preferred Stock) immediately before that transaction.

(c)Certificates as to Adjustments. Upon the occurrence of each adjustment or readjustment pursuant to this Section 6, the Corporation at its expense will promptly compute such adjustment orreadjustment in accordance with the terms hereof and prepare and furnish to each holder of Series C Preferred Stock a certificate executed by the Corporation’s President (or other appropriate officer) setting forth such adjustment or readjustment and showing in detail the facts upon which such adjustment or readjustment is based. The Corporation will, upon the written request at any time of any holder of Series C Preferred Stock, furnish or cause to be furnished to such holder a like certificate setting forth (i) such adjustments and readjustments, and (ii) the number of shares of Common Stock and the amount, if any, of other property which at the time would be received upon the conversion of the Series C Preferred Stock.

7.Reorganization,Mergers, Consolidations or Sales of Assets. If at any time or from time to time there will be a capital reorganization of the Common Stock (other than a subdivision, combination, reclassification or exchange of shares otherwise provided for in Section 6) or a merger or consolidation of the Corporation with or into another corporation, or the sale of all or substantially all the Corporation’s properties and assets to any other Person, then, as a part of such reorganization, merger, consolidation or sale, provision will be made so that the holders of the Series C Preferred Stock will thereafter be entitled to receive upon conversion of the Series C Preferred Stock, the number of shares of stock or other securities or property of the Corporation, or of the successor company resulting from such merger or consolidation or sale, to which a holder of that number of shares of Common Stock deliverable upon conversion of the Series C Preferred Stock would have been entitled to receive on such capital reorganization, merger, consolidation or sale (without regard to any limitations on conversion of the Series C Preferred Stock).

8.Redemption. Except to the extent a liquidation under Section 4 may be deemed to be a redemption, the Series C Preferred Stock will not be redeemable at the option of the Corporation or any holder of Series C Preferred Stock at any time. Notwithstanding the foregoing, the Corporation will not be prohibited from repurchasing or otherwise acquiring shares of Series C Preferred Stock in voluntary transactions with the holders thereof, subject to compliance with any applicable legal or regulatory requirements, including applicable regulatory capital requirements. Any shares of Series C Preferred Stock repurchased or otherwise acquired may be cancelled by the Corporation and thereafter be reissued as shares of any series of preferred stock of the Corporation.

9.Voting Rights. The holders of Series C Preferred Stock will not have any voting rights, except as may otherwise from time to time be required by law. If the holders of Series C Preferred Stock shall be entitled by law to vote as a single class with the holders of outstanding shares of Common Stock, with respect to any and all matters presented to the shareholders of the Corporation for their action or consideration (by vote or written

consent), each share of Series C Preferred Stock shall be entitled to a number of votes equal to the number of shares of Common Stock into which such share is convertible pursuant to Section 5.

10.Protective Provisions. So long as any shares of Series C Preferred Stock are issued and outstanding, the Corporation will not (including by means of merger, consolidation or otherwise), without obtaining the approval (by vote or written consent) of the holders of a majority of the issued and outstanding shares of Series C Preferred Stock, (a) alter or change the rights, preferences, privileges or restrictions provided for the benefit of the holders of the Series C Preferred Stock so as to affect them adversely, (b) increase or decrease the authorized number of shares of Series C Preferred Stock or (c) enter into any agreement, merger or business consolidation, or engage in any other transaction, or take any action that would have the effect of adversely changing any preference or any relative or other right provided for the benefit of the holders of the Series C Preferred Stock. In the event that the Corporation offers to repurchase shares of Common Stock, the Corporation shall offer to repurchase shares of Series C Preferred Stock pro rata based upon the number of shares of Common Stock such holders would be entitled to receive if such shares were converted into shares of Common Stock immediately prior to such repurchase.

11.Notices. All notices required or permitted to be given by the Corporation with respect to the Series C Preferred Stock shall be in writing, and if delivered by first class United States mail, postage prepaid, to the holders of the Series C Preferred Stock at their last addresses as they shall appear upon thebooks of the Corporation, shall be conclusively presumed to have been duly given, whether or not the holder actually receives such notice; provided, however, that failure to duly give such notice by mail, or any defect in such notice, to the holders of any stock designated for repurchase, shall not affect the validity of the proceedings for the repurchase of any other shares of Series C Preferred Stock, or of any other matter required to be presented for the approval of the holders of the Series C Preferred Stock.

12.Record Holders. To the fullest extent permitted by law, the Corporation will be entitled to recognize the record holder of any share of Series C Preferred Stock as the true and lawful owner thereof for all purposes and will not be bound to recognize any equitable or other claim to or interest in such share or shares on the part of any other Person, whether or not it will have express or other notice thereof.

13.Term. The Series C Preferred Stock shall have perpetual term unless converted in accordance with Section 5.

14.No Preemptive Rights. The holders of Series C Preferred Stock are not entitled to any preemptive or preferential right to purchase or subscribe for any capital stock, obligations, warrants or other securities or rights of the Corporation, except for any such rights that may be granted by way of separate contract or agreement to one or more holders of Series C Preferred Stock.

15.Replacement Certificates. In the event that any Certificate will have been lost, stolen or destroyed, upon the making of an affidavit of that fact by the Person claiming such Certificate to be lost, stolen or destroyed and, if required by the Corporation, the posting by such Person of a bond in such amount as the Corporation may determine is necessary as indemnity against any claim that may be made against it with respect to such Certificate, the Corporation or the Exchange Agent, as applicable, will deliver in exchange for such lost, stolen or destroyed Certificate a replacement Certificate.

16.Other Rights. The shares of Series C Preferred Stock have no preferences, conversion or other rights, voting powers, restrictions, limitations as to dividends, qualifications, or rights, other than as set forth herein or as provided by applicable law.

17.General Provisions. In addition to the above provisions with respect to the Series C Preferred Stock, such Series C Preferred Stock shall be subject to, and entitled to the benefits of, the provisions set forth in the Corporation’s Certificate of Incorporation with respect to preferred stock generally.

IN WITNESS WHEREOF, the Corporation has caused this Certificate to be duly executed by an authorized officer this 29th day of October, 2019.

CENTRAL FEDERAL CORPORATION

By:/s/ Timothy T. O’Dell

Name: Timothy T. O’Dell

Title: Chief Executive Officer and President

ANNEX D

CERTIFICATE OF AMENDMENT

TO THE CERTIFICATE OF INCORPORATION  

OF

CENTRAL FEDERAL CORPORATION

Pursuant to the provisions of the Certificate of Incorporation and the Bylaws of the Corporation and applicable law, the Certificate of Incorporation of the Corporation is hereby amended to create a series of non-voting common stock, par value $0.01 per share, of the Corporation containing the designation and number of shares of such series, and the voting and other powers, preferences and relative, participating, optional or other rights, and the qualifications, limitations and restrictions thereof, of the shares of such series, as follows:

1.Definitions.

(a) “Affiliate” has the meaning set forth in 12 C.F.R. Section 225.2(a) or any successor provision.

(b) “Board of Directors” means the board of directors of the Corporation.

(c) A “business day” means any day other than a Saturday or a Sunday or a day on which banks in Ohio are authorized or required by law, executive order or regulation to close.

(d) “Certificate” means a certificate representing one (1) or more shares of Non-Voting Common Stock.

(e) “Certificate of Incorporation” means the Certificate of Incorporation of the Corporation, as amended and in effect from time and time

(f) “Common Stock” means the voting common stock of the Corporation, par value $0.01 per share.

(g) “Corporation” means Central Federal Corporation, a Delaware corporation.

(h) “Dividends” has the meaning set forth in Section 3.

(i) “Exchange Agent” means Computershare Trust Company, N.A., solely in its capacity as transfer and exchange agent for the Corporation, or any successor transfer and exchange agent for the Corporation.

(j) “Exchange Cap” has the meaning set forth in Section 5(b).

(k) “Exchange Cap Allocation Amount” has the meaning set forth in Section 5(b).

(l) “Exchange Cap Maximum” has the meaning set forth in Section 5(b).

(m) “Existing Buyer” has the meaning set forth in Section 5(b).

(n) “Liquidation Distribution” has the meaning set forth in Section 4(b).

(o) “Non-Voting Common Stock” has the meaning set forth in Section 2.

(p) “Permissible Transfer” means a transfer by the holder of Non-Voting Common Stock (i) to the Corporation; (ii) in a widely distributed public offering of Common Stock or Non-Voting Common Stock; (iii) that is part of an offering that is not a widely distributed public offering of Common Stock or Non-Voting Common Stock but is one in which no one transferee (or group of associated transferees) acquires the rights to receive two percent (2%) or more of any class of the Voting Securities of the Corporation then outstanding (including pursuant to a related series of transfers); (iv) that is part of a transfer of Common Stock or Non-

Voting Common Stock to an underwriter for the purpose of conducting a widely distributed public offering; or (v) to a transferee that controls more than fifty percent (50%) of the Voting Securities of the Corporation without giving effect to such transfer.

(q) “Person” means an individual, corporation, partnership, limited liability company, trust, business trust, association, joint stock company, joint venture, sole proprietorship, unincorporated organization, or any other form of entity not specifically listed herein.

(r) “Principal Market” means the NASDAQ Capital Market.

(s) “SPA” has the meaning set forth in Section 5(b).

(t) “Voting Security” has the meaning set forth in 12 C.F.R. Section 225.2(q) or any successor provision.

2. Designation; Number of Shares. The class of shares of capital stock hereby authorized shall be designated as “Non-Voting Common Stock”. The number of authorized shares of the Non-Voting Common Stock shall be 1,260,700 shares. The Non-Voting Common Stock shall have $0.01 par value per share. Each share of Non-Voting Common Stock has the designations, preferences, conversion or other rights, voting powers, restrictions, limitations as to dividends, qualifications, or terms or conditions of redemption as described herein. Each share of Non-Voting Common Stock is identical in all respects to every other share of Non-Voting Common Stock.

3. Dividends. The Non-Voting Common Stock will rank pari passu with the Common Stock with respect to the payment of dividends or distributions, whether payable in cash, securities, options or other property, and with respect to issuance, grant or sale of any rights to purchase stock, warrants, securities or other property (collectively, the “Dividends”). Accordingly, the holders of record of Non-Voting Common Stock will be entitled to receive as, when, and if declared by the Board of Directors, Dividends in the same per share amount as paid on the Common Stock, and no Dividends will be payable on the Common Stock or any other class or series of capital stock ranking with respect to Dividends pari passu with the Common Stock unless a Dividend identical to that paid on the Common Stock is payable at the same time on the Non-Voting Common Stock in an amount per share of Non-Voting Common Stock equal to the product of (i) the per share Dividend declared and paid in respect of each share of Common Stock and (ii) the number of shares of Common Stock into which such share of Non-Voting Common Stock is then convertible (without regard to any limitations on conversion of the Non-Voting Common Stock); provided however, that if a stock Dividend is declared on Common Stock payable solely in Common Stock, the holders of Non-Voting Common Stock will be entitled to a stock Dividend payable solely in shares of Non-Voting Common Stock. Dividends that are payable on Non-Voting Common Stock will be payable to the holders of record of Non-Voting Common Stock as they appear on the stock register of the Corporation on the applicable record date, as determined by the Board of Directors, which record date will be the same as the record date for the equivalent Dividend of the Common Stock. In the event that the Board of Directors does not declare or pay any Dividends with respect to shares of Common Stock, then the holders of Non-Voting Common Stock will have no right to receive any Dividends.

4. Liquidation.

(a) Rank. The Non-Voting Common Stock will, with respect to rights upon liquidation, winding up and dissolution, rank (i) subordinate and junior in right of payment to all other securities of the Corporation that, by their respective terms, are senior to the Non-Voting Common Stock or the Common Stock, and (ii) pari passu with the Common Stock. Not in limitation of anything contained herein, and for purposes of clarity, the Non-Voting Common Stock is subordinated to the general creditors and subordinated debt holders of the Company, and the depositors of the Company’s bank subsidiaries, in any receivership, insolvency, liquidation or similar proceeding.

(b) Liquidation Distributions. In the event of any liquidation, dissolution or winding up of the affairs of the Corporation, whether voluntary or involuntary, holders of Non-Voting Common Stock will be entitled to receive, for each share of Non-Voting Common Stock, out of the assets of the Corporation or proceeds thereof (whether capital or surplus) available for distribution to stockholders of the Corporation, subject to the rights of any Persons to whom the Non-Voting Common Stock is subordinate, a distribution (“LiquidationDistribution”) equal to (i) any authorized and declared, but unpaid, Dividends withrespect to such share of Non-Voting Common Stock at the time of such liquidation, dissolution or winding up, and (ii) the amount the holder of such share of Non-Voting Common Stock would receive in respect of such share if such share

had been converted into shares of Common Stock at the then applicable conversion rate at the time of such liquidation, dissolution or winding up (assuming the conversion of all shares of Non-Voting Common Stock at such time, without regard to any limitations on conversion of the Non-Voting Common Stock). All Liquidation Distributions to the holders of the Non-Voting Common Stock and Common Stock set forth in clause (ii) above will be made pro rata to the holders thereof.

(c)Merger, Consolidation and Sale of Assets Not Liquidation. For purposes of this Section 4, the merger or consolidation of the Corporation with any other corporation or other entity, including a merger or consolidation in which the holders of Non-Voting Common Stock receive cash, securities or other property for their shares, or the sale, lease or exchange (for cash, securities or property) of all or substantially all of the assets of the Corporation, will not constitute a liquidation, dissolution or winding up of the Corporation.

5.Conversion.

(a)General.

(i) A holder of Non-Voting Common Stock shall be permitted to convert, or upon the written request of the Corporation shall convert, shares of Non-Voting Common Stock into shares of Common Stock at any time or from time to time, provided that upon such conversion the holder, together with all Affiliates of the holder, will not own or control in the aggregate more than nine point nine percent (9.9%) of the Common Stock (or of any class of Voting Securities issued by the Corporation), excluding for the purpose of this calculation any reduction in ownership resulting from transfers by such holder of Voting Securities of the Corporation (which, for the avoidance of doubt, does not include Non-Voting Common Stock), provided further that the right to convert under this Section 5(a)(i) shall not be available to a transferee of shares of Non-Voting Common Stock with respect to a transfer other than a Permissible Transfer. In any such conversion, each share of Non-Voting Common Stock will convert initially into one (1) share of Common Stock, subject to adjustment as provided in Section 6 below.

(ii) Each share of Non-Voting Common Stock will automatically convert into one (1) share of Common Stock, without any further action on the part of any holder, subject to adjustment as provided in Section 6 below, on the date a holder of Non-Voting Common Stock transfers any shares of Non-Voting Common Stock to a non-affiliate of the holder in a Permissible Transfer.

(iii) To effect any permitted conversion under Section 5(a)(i) or Section 5(a)(ii), the holder shall surrender the certificate or certificates evidencing such shares of Non-Voting Common Stock, duly endorsed, at the registered office of the Corporation, and provide written instructions to the Corporation as to the number of whole shares for which such conversion shall be effected, together with any appropriate documentation that may be reasonably required by the Corporation. Upon the surrender of such certificate(s), the Corporation will issue and deliver to such holder (in the case of a conversion under Section 5(a)(i)) or such holder’s transferee (in the case of a conversion under Section 5(a)(ii)) a certificate or certificates for the number of shares of Common Stock into which the Non-Voting Common Stock has been converted and, in the event that such conversion is with respect to some, but not all, of the holder’s shares of Non-Voting Common Stock, the Corporation shall deliver to such holder a certificate or certificate(s) representing the number of shares of Non-Voting Common Stock that were not converted to Common Stock.

(iv) All shares of Common Stock delivered upon conversion of the Non-Voting Common Stock shall be duly authorized, validly issued, fully paid and non-assessable, free and clear of all liens, claims, security interests, charges and other encumbrances.

(b)Principal Market Regulation. Notwithstanding anything herein to the contrary, the Company shall not issue any shares of Common Stock upon the conversion of the Non-Voting Common Stock if the issuance of such shares of Common Stock taken together with each issuance of such shares of Common Stock (x) pursuant to the Securities Purchase Agreement, dated as of October 25, 2019, by and among the Company and the purchasers party thereto (the “SPA”) and (y) upon the conversion of the Series C Preferred Stock in accordance with the Certificate of Incorporation or otherwise) would exceed 19.9% of the total outstanding shares of Common Stock of the Company, or more than 19.9% of the total voting power of the Company’s securities, in each case immediately preceding the issuance of the shares of Common Stock and Series C

Preferred Stock pursuant to the SPA (the number of shares which may be issued without violating such limitation, the “Exchange Cap”), except that such limitation shall not apply in the event that the Company (A) obtains the approval of its shareholders as required by the applicable rules of the Principal Market for issuances of shares of Common Stock in excess of such amount or (B) obtainsa written opinion from outside counsel to the Company that such approval is not required, which opinion shall be reasonably satisfactory to the holder of the Series C Preferred Stock or Non-Voting Common Stock (as the case may be). Until such approval or such written opinion is obtained, (i) the holders of the Series C Preferred Stock and Non-Voting Common Stock (collectively, the “Exiting Buyers” and each, individually, an “Existing Buyer”) shall not be issued in the aggregate, upon conversion of any Series C Preferred Stock or Non-Voting Common Stock, or otherwise pursuant to the terms of the SPA or the Certificate of Incorporation, shares of Common Stock in an amount greater than the difference between the Exchange Cap minus the aggregate number of shares of Common Stock issued pursuant to the SPA (the “Exchange Cap Maximum”) and (ii) no Existing Buyer shall be permitted to convert Series C Preferred Stock or Non-Voting Common Stock with respect to more than such Existing Buyer’s pro rata amount of such Exchange Cap Maximum (such amount, with respect to each Existing Buyer, its “Exchange Cap Allocation Amount”) determined based upon such Existing Buyer’s percentage ownership of the sum of (1) the aggregate number of shares of Common Stock issued to all Purchasers that purchased Preferred Stock pursuant to this Agreement on the Closing Date plus (2) the aggregate number of shares of Common Stock issuable upon the conversion of all shares of Preferred Stock and/or Non-Voting Common Stock. In the event that such Existing Buyer shall sell or otherwise transfer any of such Existing Buyer’s shares of Series C Preferred Stock or Non-Voting Common Stock, the transferee shall be allocated a pro rata portion of such Existing Buyer’s Exchange Cap Allocation Amount with respect to such portion of such Series C Preferred Stock or Non-Voting Common Stock so transferred, and the restrictions of the prior sentence shall apply to such transferee with respect to the portion of the Exchange Cap Allocation Amount so allocated to such transferee. Upon conversion in full of such Existing Buyer’s Series C Preferred Stock or Non-Voting Common Stock, the difference (if any) between such Existing Buyer’s Exchange Cap Allocation Amount and the number of shares of Common Stock actually issued to such Existing Buyer upon such Existing Buyer’s conversion in full of such Series C Preferred Stock or Non-Voting Common Stock shall be allocated to the respective Exchange Cap Allocation Amounts of the remaining Existing Buyers of Series C Preferred Stock or Non-Voting Common Stock on a pro rata basis in proportion to the relative Exchange Cap Allocation Amounts of such Existing Buyers.

(c) Reservation of Shares Issuable Upon Conversion. The Corporation will at all times reserve and keep available out of its authorized but unissued Common Stock solely for the purpose of effecting the conversion of the Non-Voting Common Stock such number of shares of Common Stock as will from time to time be sufficient to effect the conversion of all outstanding Non-Voting Common Stock; and if at any time the number of shares of authorized but unissued Common Stock will not be sufficient to effect the conversion of all then outstanding Non-Voting Common Stock, the Corporation will take such action as may, in the opinion of its counsel, be necessary to increase its authorized but unissued Common Stock to such number of shares as will be sufficient for such purpose.

(d) No Impairment. The Corporation will not, by amendment of its Certificate of Incorporation or through any reorganization, transfer of assets, consolidation, merger, dissolution, issue or sale of securities or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms to be observed or performed hereunder by the Corporation, but will at all times in good faith assist in the carrying out of all the provisions of this Section 5 and in the taking of all such actions as may be necessary or appropriate in order to protect the conversion rights of the holders of the Non-Voting Common Stock against impairment.

(e) Compliance with Law. Prior to the delivery of any securities that the Corporation shall be obligated to deliver upon conversion of the Non-Voting Common Stock, the Corporation shall use its reasonable best efforts to comply with any federal and state laws and regulations thereunder requiring the registration of such securities with, or any approval of or consent to the delivery thereof by, any governmental authority.

(f) Listing. The Corporation hereby covenants and agrees that, if at any time the Common Stock shall be traded on any national securities exchange, the Corporation will, if permitted by the rules of such exchange, list and keep listed, so long as the Common Stock shall be so listed on such exchange, all the Common Stock issuable upon conversion of the Non-Voting Common Stock; provided, however, that if the rules of such exchange require the Corporation to defer the listing of such Common Stock until the first conversion of Non-Voting Common Stock into Common Stock in accordance with the provisions hereof,

the Corporation covenants to list such Common Stock issuable upon conversion of the Non-Voting Common Stock in accordance with the requirements of such exchange at such time.

6.Adjustments.

(a)Combinations or Divisions of Common Stock. In the event that the Corporation at any time or from time to time will effect a division of the Common Stock into a greater number of shares (by stock split, reclassification or otherwise other than by payment of a Dividend in Common Stock or in any right to acquire the Common Stock), or in the event the outstanding Common Stock will be combined or consolidated, by reclassification, reverse stock split or otherwise, into a lesser number of shares of the Common Stock, then the dividend, liquidation, and conversion rights of each share of Non-Voting Common Stock in effect immediately prior to such event will, concurrently with the effectiveness of such event, be proportionately decreased or increased, as appropriate.

(b) Reclassification, Exchange or Substitution. If the Common Stock is changed into the same or a different number of shares of any other class or classes of stock, whether by capital reorganization, reclassification or otherwise (other than a division or combination of shares provided for in Section 6(a) above), (1) the conversion ratio then in effect will, concurrently with the effectiveness of such transaction, be adjusted so that each share of the Non-Voting Common Stock will be convertible into, in lieu of the number of shares of Common Stock which the holders of the Non-Voting Common Stock would otherwise have been entitled to receive, a number of shares of such other class or classes of stock equal to the product of (i) the number of shares of such other class or classes of stock that a holder of a share of Common Stock would be entitled to receive in such transaction and (ii) the number of shares of Common Stock into which such share of Non-Voting Common Stock is then convertible (without regard to any limitations on conversion of the Non-Voting Common Stock) immediately before that transaction and (2) the Dividend and Liquidation Distribution rights then in effect will, concurrently with the effectiveness of such transaction, be adjusted so that each share of Non-Voting Common Stock will be entitled to a Dividend and Liquidation Distribution right, in lieu of with respect to the number of shares of Common Stock which the holders of the Non-Voting Common Stock would otherwise have been entitled to receive, with respect to a number of shares of such other class or classes of stock equal to the product of (i) the number of shares of such other class or classes of stock that a holder of a share of Common Stock would be entitled to receive in such transaction and (ii) the number of shares of Common Stock into which such share of Non-Voting Common Stock is then convertible (without regard to any limitations on conversion of the Non-Voting Common Stock) immediately before that transaction.

(c) Certificates as to Adjustments. Upon the occurrence of each adjustment or readjustment pursuant to this Section 6, the Corporation at its expense will promptly compute such adjustment or readjustment in accordance with the terms hereof and prepare and furnish to each holder of Non-Voting Common Stock a certificate executed by the Corporation’s President (or other appropriate officer) setting forth such adjustment or readjustment and showing in detail the facts upon which such adjustment or readjustment is based. The Corporation will, upon the written request at any time of any holder of Non-Voting Common Stock, furnish or cause to be furnished to such holder a like certificate setting forth (i) such adjustments and readjustments, and (ii) the number of shares of Common Stock and the amount, if any, of other property which at the time would be received upon the conversion of the Non-Voting Common Stock.

7. Reorganization, Mergers, Consolidations or Sales of Assets. If at any time or from time to time there will be a capital reorganization of the Common Stock (other than a subdivision, combination, reclassification or exchange of shares otherwise provided for in Section 6) or a merger or consolidation of the Corporation with or into another corporation, or the sale of all or substantially all the Corporation’s properties and assets to any other Person, then, as a part of such reorganization, merger, consolidation or sale, provision will be made so that the holders of the Non-Voting Common Stock will thereafter be entitled to receive upon conversion of the Non-Voting Common Stock, the number of shares of stock or other securities or property of the Corporation, or of the successor company resulting from such merger or consolidation or sale, to which a holder of that number of shares of Common Stock deliverable upon conversion of the Non-Voting Common Stock would have been entitled to receive on such capital reorganization, merger, consolidation or sale (without regard to any limitations on conversion of the Non-Voting Common Stock).

8. Redemption. Except to the extent a liquidation under Section 4 may be deemed to be a redemption, the Non-Voting Common Stock will not be redeemable at the option of the Corporation or any holder of Non-Voting Common Stock at any time. Notwithstanding the foregoing, the Corporation will not be prohibited from repurchasing or

otherwise acquiring shares of Non-Voting Common Stock in voluntary transactions with the holders thereof, subject to compliance with any applicable legal or regulatory requirements, including applicable regulatory capital requirements. Any shares of Non-Voting Common Stock repurchased or otherwise acquired may be reissued as additional shares of Non-Voting Common Stock.

9. Voting Rights. The holders of Non-Voting Common Stock will not have any voting rights, except as may otherwise from time to time be required by law.

10. Protective Provisions. So long as any shares of Non-Voting Common Stock are issued and outstanding, the Corporation will not (including by means of merger, consolidation or otherwise), without obtaining the approval (by vote or written consent) of the holders of a majority of the issued and outstanding shares of Non-Voting Common Stock, (i) alter or change the rights, preferences, privileges or restrictions provided for the benefit of the holders of the Non-Voting Common Stock so as to affect them adversely, (ii) increase or decrease the authorized number of shares of Non-Voting Common Stock or (iii) enter into any agreement, merger or business consolidation, or engage in any other transaction, or take any action that would have the effect of adversely changing any preference or any relative or other right provided for the benefit of the holders of the Non-Voting Common Stock. In the event that the Corporation offers to repurchase shares of Common Stock, the Corporation shall offer to repurchase shares of Non-Voting Common Stock pro rata based upon the number of shares of Common Stock such holders would be entitled to receive if such shares were converted into shares of Common Stock immediately prior to such repurchase.

11. Notices. All notices required or permitted to be given by the Corporation with respect to the Non-Voting Common Stock shall be in writing, and if delivered by first class United States mail, postage prepaid, to the holders of the Non-Voting Common Stock at their last addresses as they shall appear upon the books of the Corporation, shall be conclusively presumed to have been duly given, whether or not the holder actually receives such notice; provided, however, that failure to duly give such notice by mail, or any defect in such notice, to the holders of any stock designated for repurchase, shall not affect the validity of the proceedings for the repurchase of any other shares of Non-Voting Common Stock, or of any other matter required to be presented for the approval of the holders of the Non-Voting Common Stock.

12. Record Holders. To the fullest extent permitted by law, the Corporation will be entitled to recognize the record holder of any share of Non-Voting Common Stock as the true and lawful owner thereof for all purposes and will not be bound to recognize any equitable or other claim to or interest in such share or shares on the part of any other Person, whether or not it will have express or other notice thereof.

13. Term. The Non-Voting Common Stock shall have perpetual term unless converted in accordance with Section 5.

14. Replacement Certificates. In the event that any Certificate will have been lost, stolen or destroyed, upon the making of an affidavit of that fact by the Person claiming such Certificate to be lost, stolen or destroyed and, if required by the Corporation, the posting by such Person of a bond in such amount as the Corporation may determine is necessary as indemnity against any claim that may be made against it with respect to such Certificate, the Corporation or the Exchange Agent, as applicable, will deliver in exchange for such lost, stolen or destroyed Certificate a replacement Certificate.

15. Other Rights. The shares of Non-Voting Common Stock have no preferences, conversion or other rights, voting powers, restrictions, limitations as to dividends, qualifications, or rights, other than as set forth herein or as provided by applicable law.

IN WITNESS WHEREOF, the Corporation has caused this Certificate to be duly executed by an authorized officer this 28th day of May, 2020.

CENTRAL FEDERAL CORPORATION

By:/s/ Timothy T. O’Dell

Name: Timothy T. O’Dell

Title:Chief Executive Officer and President

EX-11.1

CF BANKSHARES INC.

Exhibit 11.1

Computation of Per Share Earnings

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

EX-31.1

CF BANKSHARES INC.

Exhibit 31.1

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

I, Timothy T. O’Dell, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2020 of CF Bankshares Inc.;

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

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

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

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

b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

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

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

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

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

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

Dated:  August 12, 2020	/s/ Timothy T. O’Dell
	Timothy T. O’Dell
	President and Chief Executive Officer

EX-31.2

CF BANKSHARES INC.

Exhibit 31.2

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

I, Kevin J. Beerman certify that:

1. I have reviewed this Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2020 of CF Bankshares Inc.;

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

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

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

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

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

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

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

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

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

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

Dated:   August 12, 2020	/s/ Kevin J. Beerman
	Kevin J. Beerman Senior Vice President and Senior Financial Officer

EX-32.1

CF BANKSHARES INC.

Exhibit 32.1

Section 1350 Certifications

In connection with the Quarterly Report of Central Federal Corporation (the “Company”) on Form 10-Q for the quarter ended June 30, 2020, 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 Kevin J. Beerman,  Senior Vice President and Senior Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as added by Section 906 of the Sarbanes-Oxley Act of 2002, that:

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

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

Dated:   August 12, 2020	By:	/s/ Timothy T. O’Dell
		Timothy T. O’Dell
		President and Chief Executive Officer

Dated:   August 12, 2020	By:	/s/ Kevin J. Beerman
		Kevin J. Beerman
		Senior Vice President and Senior Financial Officer

XML

Document And Entity Information - shares	6 Months Ended
	Jun. 30, 2020	Aug. 01, 2020
Document Type	10-Q
Document Quarterly Report	true
Document Period End Date	Jun. 30, 2020
Document Transition Report	false
Entity File Number	0-25045
Entity Registrant Name	CF BANKSHARES INC.
Entity Incorporation, State or Country Code	DE
Entity Tax Identification Number	34-1877137
Entity Address, Address Line One	7000 North High St.
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, $.01 par value
Trading Symbol	cfbk
Security Exchange Name	NASDAQ
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 Central Index Key	0001070680
Amendment Flag	false
Document Fiscal Period Focus	Q2
Current Fiscal Year End Date	--12-31
Document Fiscal Year Focus	2020
Common Stock [Member]
Entity Common Stock, Shares Outstanding		5,305,556
Non-Voting Common Stock [Member]
Entity Common Stock, Shares Outstanding		1,260,700

XML

Consolidated Balance Sheets - USD ($) $ in Thousands	Jun. 30, 2020	Dec. 31, 2019
ASSETS
Cash and cash equivalents	$ 77,376	$ 45,879
Interest-bearing deposits in other financial institutions	100	100
Securities available for sale	10,802	8,174
Loans held for sale, at fair value	165,891	135,711
Loans and leases, net of allowance of $10,107 and $7,138	846,529	663,303
FHLB and FRB stock	5,216	4,008
Premises and equipment, net	4,005	3,991
Operating lease right-of-use assets	1,588	1,780
Bank owned life insurance	5,416	5,345
Accrued interest receivable and other assets	29,165	12,254
Total assets	1,146,088	880,545
Deposits
Noninterest bearing	148,188	115,530
Interest bearing	700,850	630,793
Total deposits	849,038	746,323
FHLB advances and other debt	165,806	29,017
Advances by borrowers for taxes and insurance	782	929
Operating lease liabilities	1,750	1,960
Accrued interest payable and other liabilities	21,320	6,846
Subordinated debentures	14,825	14,806
Total liabilities	1,053,521	799,881
Commitments and contingent liabilities
Stockholders' equity
Common stock	54	54
Additional paid-in capital	87,276	86,903
Retained earnings (accumulated deficit)	9,142	(2,932)
Accumulated other comprehensive income	146	28
Treasury stock, at cost; 95,809 shares of common stock at June 30, 2020 and 32,940 shares of common stock at December 31, 2019	(4,064)	(3,389)
Total stockholders' equity	92,567	80,664
Total liabilities and stockholder's equity	1,146,088	880,545
Non-Voting Common Stock [Member]
Stockholders' equity
Common stock	13
Total stockholders' equity	13
Series B Preferred Stock [Member]
Stockholders' equity
Preferred stock
Series C Preferred Stock [Member]
Stockholders' equity
Preferred stock

XML

Consolidated Balance Sheets (Parenthetical) - USD ($) $ in Thousands	Jun. 30, 2020	Dec. 31, 2019
Allowance for loans and leases	$ 10,107	$ 7,138
Common stock, par value	$ 0.01	$ 0.01
Common stock, shares authorized	9,090,909	9,090,909
Common stock, shares issued	5,381,705	5,409,394
Treasury stock, shares	95,809	32,940
Non-Voting Common Stock [Member]
Common stock, par value	$ 0.01	$ 0.01
Common stock, shares authorized	1,260,700	1,260,700
Common stock, shares issued	1,260,700	0
Series B Preferred Stock [Member]
Preferred stock, par value	$ 0.01	$ 0.01
Preferred stock, share authorized	480,000	480,000
Preferred stock, share issued	0	0
Series C Preferred Stock [Member]
Preferred stock, par value	$ 0.01	$ 0.01
Preferred stock, share authorized	12,607	12,337
Preferred stock, share issued	0	12,337

XML

Consolidated Statements Of Income - USD ($) $ in Thousands		3 Months Ended		6 Months Ended
		Jun. 30, 2020	Jun. 30, 2019	Jun. 30, 2020	Jun. 30, 2019
Interest and dividend income
Loans and leases, including fees		$ 9,759	$ 8,112	$ 19,511	$ 15,602
Securities		42	43	85	85
FHLB and FRB stock dividends		50	53	94	107
Federal funds sold and other		17	297	124	652
Total interest and dividend income		9,868	8,505	19,814	16,446
Interest expense
Deposits		3,001	2,876	6,317	5,309
FHLB advances and other debt		344	144	604	295
Subordinated debentures		240	256	487	513
Total interest expense		3,585	3,276	7,408	6,117
Net interest income		6,283	5,229	12,406	10,329
Provision for loan and lease losses		3,125		3,125
Net interest income after provision for loan and lease losses		3,158	5,229	9,281	10,329
Noninterest income
Service charges on deposit accounts		139	138	290	262
Net gains on sales of loans		19,625	2,362	22,469	3,865
Swap fee income		14		407
Earnings on bank owned life insurance		36	35	71	69
Other		42	30	63	63
Total noninterest income		19,856	2,565	23,300	4,259
Noninterest expense
Salaries and employee benefits		6,250	2,643	9,295	5,144
Occupancy and equipment		247	228	500	446
Data processing		427	293	874	609
Franchise and other taxes		184	106	363	212
Professional fees		1,182	356	2,187	644
Director fees		221	133	379	264
Postage, printing and supplies		58	59	116	126
Advertising and marketing		1,248	616	2,523	1,242
Telephone		52	45	106	90
Loan expenses		65	45	162	91
Foreclosed assets, net					(9)
Depreciation		94	78	180	149
FDIC premiums		134	152	291	304
Regulatory assessment		45	40	90	82
Other insurance		27	24	54	47
Other		79	113	237	184
Total noninterest expense		10,313	4,931	17,357	9,625
Income before incomes taxes		12,701	2,863	15,224	4,963
Income tax expense		2,633	583	3,150	1,002
Net income		10,068	2,280	12,074	3,961
Accretion of discount and value of warrants exercised related to Series B preferred stock	[1]		157		183
Earnings allocated to participating securities (Series C preferred stock)		(1,218)		(1,866)
Net income attributable to common stockholders		$ 8,850	$ 2,437	$ 10,208	$ 4,144
Earnings per common share:
Basic		$ 1.54	$ 0.55	$ 1.84	$ 0.95
Diluted		$ 1.53	$ 0.55	$ 1.82	$ 0.93

[1] All outstanding warrants expired on July 15, 2019.

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Consolidated Statements Of Comprehensive Income - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2020	Jun. 30, 2019	Jun. 30, 2020	Jun. 30, 2019
Consolidated Statements Of Comprehensive Income [Abstract]
Net income	$ 10,068	$ 2,280	$ 12,074	$ 3,961
Other comprehensive income:
Unrealized holding gains (losses) arising during the period related to securities available for sale, net of tax of ($7) and $14, and $31 and $23	(26)	52	118	87
Other comprehensive income (loss), net of tax	(26)	52	118	87
Comprehensive income	$ 10,042	$ 2,332	$ 12,192	$ 4,048

XML

Consolidated Statements Of Comprehensive Income (Parenthetical) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2020	Jun. 30, 2019	Jun. 30, 2020	Jun. 30, 2019
Consolidated Statements Of Comprehensive Income [Abstract]
Unrealized holding gains (losses) arising during the period related to securities available for sale, tax	$ (7)	$ 14	$ 31	$ 23

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Consolidated Statement Of Changes In Stockholders' Equity - USD ($) $ in Thousands	Common Stock [Member]	Additional Paid-In Capital [Member] Series C Preferred Stock [Member]	Additional Paid-In Capital [Member]	Retained Earnings (Accumulated Deficit) [Member]	Accumulated Other Comprehensive Income (Loss) [Member]	Treasury Stock [Member]	Non-Voting Common Stock [Member]	Series C Preferred Stock [Member]	Total
Balance at Dec. 31, 2018	$ 44		$ 61,706	$ (12,752)	$ (73)	$ (3,366)			$ 45,559
Net income				3,961					3,961
Other comprehensive income (loss)					87				87
Issuance of stock based incentive plan shares, net of forfeitures
Restricted stock expense, net of forfeitures			254						254
Exercise of warrants to common stock	1		1,058						1,059
Accretion of discount and value of warrants exercised			(183)	183
Balance at Jun. 30, 2019	45		62,835	(8,608)	14	(3,366)			50,920
Balance at Mar. 31, 2019	44		62,039	(11,045)	(38)	(3,366)			47,634
Net income				2,280					2,280
Other comprehensive income (loss)					52				52
Restricted stock expense, net of forfeitures			138						138
Exercise of warrants to common stock	1		815						816
Accretion of discount and value of warrants exercised			(157)	157
Balance at Jun. 30, 2019	45		62,835	(8,608)	14	(3,366)			50,920
Balance at Dec. 31, 2019	54		86,903	(2,932)	28	(3,389)			80,664
Net income				12,074					12,074
Other comprehensive income (loss)					118				118
Restricted stock expense, net of forfeitures			350						350
Stock options exercised			36						36
Acquisition of treasury shares surrendered upon vesting of restricted stock for payment of taxes						(27)			(27)
Purchase of treasury shares						(648)			(648)
Conversion of 12,607 shares of Series C preferred stock to 1,260,700 shares of non-voting common stock		$ (13)						$ 13
Balance at Jun. 30, 2020	54		87,276	9,142	146	(4,064)	13		92,567
Balance at Mar. 31, 2020	54		87,046	(926)	172	(3,465)			82,881
Net income				10,068					10,068
Other comprehensive income (loss)					(26)				(26)
Restricted stock expense, net of forfeitures			207						207
Stock options exercised			36						36
Purchase of treasury shares						(599)			(599)
Conversion of 12,607 shares of Series C preferred stock to 1,260,700 shares of non-voting common stock		$ (13)						$ 13
Balance at Jun. 30, 2020	$ 54		$ 87,276	$ 9,142	$ 146	$ (4,064)	$ 13		$ 92,567

XML

Consolidated Statement Of Changes In Stockholders' Equity (Parenthetical) - shares	3 Months Ended	6 Months Ended
	Jun. 30, 2020	Jun. 30, 2020	Jun. 30, 2019
Issuance of stock based incentive plan, shares			33,788
Treasury shares, acquisition		1,869
Treasury shares, purchase	56,247	61,000
Series C Preferred Stock [Member]
Conversion of Series C preferred stock, shares	12,607	12,607
Non-Voting Common Stock [Member]
Non-voting common stock, shares	1,260,700	1,260,700

XML

Consolidated Statements Of Cash Flows - USD ($) $ in Thousands	6 Months Ended
	Jun. 30, 2020	Jun. 30, 2019
Consolidated Statements Of Cash Flows [Abstract]
Net income	$ 12,074	$ 3,961
Adjustments to reconcile net income to net cash from operating activities:
Provision for loan and lease losses	3,125
Depreciation	180	149
Amortization, net	(507)	(18)
Deferred income tax (benefit)	(31)	6
Originations of loans held for sale	(806,205)	(205,715)
Proceeds from sale of loans held for sale	789,573	174,123
Net gains on sales of loans	(22,469)	(3,865)
Gain on sale of foreclosed assets		(12)
Earnings on bank owned life insurance	(71)	(69)
Stock-based compensation expense	350	254
Net change in:
Accrued interest receivable and other assets	(15,510)	(2,290)
Operating lease right-of-use asset	192	217
Operating lease right-of-use liability	(210)	(205)
Accrued interest payable and other liabilities	13,974	670
Net cash used by operating activities	(25,535)	(32,794)
Cash flows from investing activities
Available-for-sale securities: Maturities, prepayments and calls	3,066	1,535
Available-for-sale securities: Purchases	(5,552)	(1,494)
Loan and lease originations and payments, net	(184,413)	(48,502)
Proceeds from the sale of loans		1,137
Additions to premises and equipment	(194)	(317)
Purchase of FRB Stock	(1,208)	(340)
Purchase of other investments	(1,000)	(723)
Return of investment- joint ventures	98	95
Proceeds from the sale of foreclosed assets		50
Net cash used by investing activities	(189,203)	(48,559)
Cash flows from financing activities:
Net change in deposits	102,715	48,800
Proceeds from FHLB advances and other debt	450,636
Repayments on FHLB advances and other debt	(306,330)	(1,000)
Net change in advances by borrowers for taxes and insurance	(147)	(487)
Proceeds from exercise of stock options	36
Exercise of warrants to common stock		1,059
Acquisition of treasury shares surrendered upon vesting of restricted stock for payment of taxes	(27)
Purchase of treasury shares	(648)
Net cash from financing activities	246,235	48,372
Net change in cash and cash equivalents	31,497	(32,981)
Beginning cash and cash equivalents	45,879	67,304
Ending cash and cash equivalents	77,376	34,323
Supplemental cash flow information:
Interest paid	7,388	2,833
Income tax paid		985
Supplemental noncash disclosures:
Loans transferred from held for sale to portfolio	1,404	657
Investment payable on limited liability corporation and limited partnership	500	670
Transfer of other liability to operating lease right-of-use asset		184
Initial recognition of operating right-of-use lease asset		2,368
Initial recognition of operating right-of-use lease liability		$ 2,368
Loans held for sale funded with other debt, net of repayments	$ (7,517)

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Summary Of Significant Accounting Policies

6 Months Ended

Jun. 30, 2020

Summary Of Significant Accounting Policies [Abstract]

Summary Of Significant Accounting Policies

NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation: 

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

In the opinion of the management of the Company, the accompanying unaudited interim consolidated financial statements include all adjustments necessary for a fair presentation of the Company’s financial condition and the results of operations for the periods presented.  These adjustments are of a normal recurring nature, unless otherwise disclosed in this Form 10-Q.  The financial performance reported for the Company for the three and six months ended June 30, 2020 is not necessarily indicative of the results that may be expected for the full year.  This information should be read in conjunction with the Company’s latest Annual Report to Stockholders and Annual Report on Form 10-K on file with the SEC.  Reference is made to the accounting policies of the Company described in Note 1 to the Audited Consolidated Financial Statements contained in the Company’s 2019 Annual Report to Stockholders that was filed as Exhibit 13.1 to the Company’s Form 10-K for the year ended December 31, 2019 (referred to herein as the “2019 Audited Financial Statements”).  The Company has consistently followed those policies in preparing this Form 10-Q.

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

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

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

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

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

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

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

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

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

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

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

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

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

Historic Tax Credits:  In June 2019, the Company made an equity investment as a non-managing member in an entity that 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 HTC investment is accounted for under the equity method of accounting and is included in accrued interest receivable and other assets on the consolidated balance sheets.  The Company’s recorded investment in this entity was $894 at June 30, 2020 and December 31, 2019.  The maximum exposure to loss related to these investments was $894 at June 30, 2020, representing the Company’s investment balance. 

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

	Three months ended				Six months ended
	June 30,				June 30,
	2020		2019		2020		2019
	(unaudited)				(unaudited)
Basic
Net income	$	10,068	$	2,280	$	12,074	$	3,961
Accretion of discount and value of warrants exercised related to Series B preferred stock (1)		-		157		-		183
Earnings allocated to participating securities (Series C preferred stock)		(1,218)		-		(1,866)		-
Net income allocated to common stockholders	$	8,850	$	2,437	$	10,208	$	4,144
Weighted average common shares outstanding including unvested share-based payment awards		5,777,816		4,412,726		5,575,856		4,384,395
Less: Unvested share-based payment awards-2019 Plan		(38,719)		-		(39,335)		-
Average shares		5,739,097		4,412,726		5,536,521		4,384,395
Basic earnings per common share	$	1.54	$	0.55	$	1.84	$	0.95
Diluted
Net earnings allocated to common stockholders	$	8,850	$	2,437	$	10,208	$	4,144
Add back: Preferred Dividends on Series B preferred stock and accretion of discount		-		-		-		-
Net earnings allocated to common stockholders	$	8,850	$	2,437	$	10,208	$	4,144
Weighted average common shares outstanding for basic earnings per common share		5,739,097		4,412,726		5,536,521		4,384,395
Add:  Dilutive effects of assumed exercises of stock options		24,762		35,077		25,591		37,075
Add:  Dilutive effects of assumed exercises of stock warrants		-		4,834		-		13,894
Add:  Dilutive effects of unvested share-based payment awards-2019 Plan		38,719		-		39,335
Average shares and dilutive potential common shares		5,802,578		4,452,637		5,601,447		4,435,364
Diluted earnings per common share	$	1.53	$	0.55	$	1.82	$	0.93

⁽¹⁾ All outstanding warrants expired on July 15, 2019.

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

	Three months ended June 30,		Six months ended June 30,
	2020	2019	2020	2019
	(unaudited)		(unaudited)
Stock options	437	467	444	475

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.

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.  

In March 2020, the FASB issued ASU No. 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting. These amendments provide temporary optional guidance to ease the potential burden in accounting for reference rate reform. The ASU provides optional expedients and exceptions for applying generally accepted accounting principles to contract modifications and hedging relationships, subject to meeting certain criteria, that reference LIBOR or another reference rate expected to be discontinued. It is intended to help stakeholders during the global market-wide reference rate transition period. The guidance is effective for all entities as of March 12, 2020 through December 31, 2022. The Company is implementing a transition plan to identify and modify its loans and other financial instruments with attributes that are either directly or indirectly influenced by LIBOR. The Company is assessing ASU 2020-04 and its impact on the Company's transition away from LIBOR for its loan and other financial instruments.

General Litigation

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

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Revenue Recognition

6 Months Ended

Jun. 30, 2020

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). Payments for such performance obligations are generally received at the time the performance obligations are satisfied.

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Securities

6 Months Ended

Jun. 30, 2020

Securities [Abstract]

Securities

NOTE 3 – SECURITIES

The following table summarizes the amortized cost and fair value of the available-for-sale securities portfolio at June 30, 2020 and December 31, 2019 and the corresponding amounts of unrealized gains and losses recognized in accumulated other comprehensive income (loss):

	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
June 30, 2020 (unaudited)
Issued by U.S. government-sponsored entities and agencies:
U.S. Treasury	$	10,530	$	181	$	-	$	10,711
Mortgage-backed securities - residential		77		4		-		81
Collateralized mortgage obligations		10		-		-		10
Total	$	10,617	$	185	$	-	$	10,802

	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

There was no other-than-temporary impairment recognized in accumulated other comprehensive income (loss) for securities available for sale at June 30, 2020 or June 30, 2019.

There were no sales of securities for the three and six months ended June 30, 2020 and 2019.

The amortized cost and fair value of debt securities at June 30, 2020 and December 31, 2019 are shown in the table below by contractual maturity.  Expected maturities may differ from contractual maturities if borrowers have the right to call or prepay obligations with or without call or prepayment penalties.  Securities not due at a single maturity date are shown separately.

	June 30, 2020					December 31, 2019
	(unaudited)
	Amortized Cost		Fair Value		Amortized Cost		Fair Value
Due in one year or less	$	6,026	$	6,065	$	5,001	$	5,000
Due from one to five years		4,504		4,646		2,985		3,017
Mortgage-backed securities - residential		77		81		126		130
Collateralized mortgage obligations		10		10		27		27
Total	$	10,617	$	10,802	$	8,139	$	8,174

Fair value of securities pledged as collateral was as follows:

	June 30, 2020		December 31, 2019
	(unaudited)
Pledged as collateral for:
FHLB advances	$	2,544	$	3,074
Public deposits		2,552		2,015
Mortgage banking derivatives		3,039		1,500
Interest-rate swaps		65		77
Total	$	8,200	$	6,666

At June 30, 2020 and December 31, 2019, there were no holdings of securities of any one issuer, other than U.S. government-sponsored entities and agencies, in an amount greater than 10% of stockholders’ equity.

There were no unrealized losses at June 30, 2020.

The following table summarizes securities with unrealized losses at December 31, 2019, 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.

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

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Loans And Leases

6 Months Ended

Jun. 30, 2020

Loans And Leases [Abstract]

Loans And Leases

NOTE 4 – LOANS AND LEASES

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

	June 30, 2020		December 31, 2019
	(unaudited)
Commercial (1)	$	327,539	$	170,646
Real estate:
Single-family residential		128,241		120,256
Multi-family residential		46,654		39,229
Commercial		272,207		247,543
Construction		59,574		67,652
Consumer:
Home equity lines of credit		19,596		20,941
Other		2,825		4,174
Subtotal		856,636		670,441
Less: ALLL		(10,107)		(7,138)
Loans and leases, net	$	846,529	$	663,303

⁽¹⁾ Includes $4,459 and $4,779 of commercial leases at June 30, 2020 and December 31, 2019, respectively.

Included in Commercial loans at June 30, 2020, were $123.5 million of loans originated under the Small Business Administration (“SBA”) Paycheck Protection Program (“PPP”).  The CARES Act authorized the SBA to temporarily guarantee loans under a new 7(a) loan program, the PPP.  These loans are 100% guaranteed by the SBA and the full principal amount of the loan may qualify for forgiveness.  The loans we originated have a maturity of two years, an interest rate of 1.00% and loan payments are deferred for the initial six months.  The majority of these loans have been pledged as collateral on borrowings under the FRB Paycheck Protection Program Lending Facility (“PPPLF”).  See Note8-  FHLB Advances and Other Debt for additional information.

Mortgage Purchase Program

CFBank has participated in a Mortgage Purchase Program with Northpointe Bank (Northpointe), a Michigan banking corporation, since December 2012.  Pursuant to the terms of a participation agreement, CFBank purchases participation interests in loans made by Northpointe related to fully underwritten and pre-sold mortgage loans originated by various prescreened mortgage brokers located throughout the U.S.  The underlying loans are individually (MERS) registered loans which are held until funded by the end investor. The mortgage loan investors include Fannie Mae and Freddie Mac, and other major financial institutions.  This process on average takes approximately 14 days.  Given the short-term holding period of the underlying loans, common credit risks (such as past due, impairment and TDR, nonperforming, and nonaccrual classification) are substantially reduced.  Therefore, no allowance is allocated by CFBank to these loans.  These loans are 100% risk rated for CFBank capital adequacy purposes.  Under the participation agreement, CFBank agrees to purchase a 95% ownership/participation interest in each of the aforementioned loans, and Northpointe maintains a 5% ownership interest in each loan it participates.  At June 30, 2020 and December 31, 2019, CFBank held $23,116 and $26,046, respectively, of such loans which have been included in single-family residential loan totals above.

Allowance for Loan and Lease Losses

The ALLL is a valuation allowance for probable incurred credit losses in the loan portfolio based on management’s evaluation of various factors including past loan loss experience, the nature and volume of the portfolio, information about specific borrower situations and estimated collateral values, economic conditions and other factors. A provision for loan and lease losses is charged to operations based on management’s periodic evaluation of these and other pertinent factors described in Note 1 to the 2019 Audited Financial Statements. 

The following table presents the activity in the ALLL by portfolio segment for the three and six months ended June 30, 2020:

	Three months ended June 30, 2020 (unaudited)
			Real Estate								Consumer
	Commercial		Single-family		Multi-family		Commercial		Construction		Home Equity lines of credit		Other		Total
Beginning balance	$	2,103	$	905	$	512	$	2,674	$	574	$	249	$	56	$	7,073
Addition to (reduction in) provision for loan losses		600		150		55		1,860		450		10		-		3,125
Charge-offs		(39)		(58)		-		-		-		-		-		(97)
Recoveries		-		2		-		-		-		4		-		6
Ending balance	$	2,664	$	999	$	567	$	4,534	$	1,024	$	263	$	56	$	10,107

	Six months ended June 30, 2020 (unaudited)
			Real Estate								Consumer
	Commercial		Single-family		Multi-family		Commercial		Construction		Home Equity lines of credit		Other		Total
Beginning balance	$	2,054	$	948	$	447	$	2,604	$	759	$	265	$	61	$	7,138
Addition to (reduction in) provision for loan losses		720		105		120		1,930		265		(10)		(5)		3,125
Charge-offs		(110)		(58)		-		-		-		-		-		(168)
Recoveries		-		4		-		-		-		8		-		12
Ending balance	$	2,664	$	999	$	567	$	4,534	$	1,024	$	263	$	56	$	10,107

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

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

	Six months ended June 30, 2019 (unaudited)
			Real Estate								Consumer
	Commercial		Single-family		Multi-family		Commercial		Construction		Home Equity lines of credit		Other		Total
Beginning balance	$	1,819	$	1,061	$	612	$	2,274	$	739	$	410	$	97	$	7,012
Addition to (reduction in) provision for loan losses		150		(50)		(50)		65		20		(115)		(20)		-
Charge-offs		-		-		-		-		-		-		-		-
Recoveries		-		3		-		-		-		14		-		17
Ending balance	$	1,969	$	1,014	$	562	$	2,339	$	759	$	309	$	77	$	7,029

The following table presents the balance in the ALLL and the recorded investment in loans and leases by portfolio segment and based on the impairment method as of June 30, 2020 (unaudited):

			Real Estate								Consumer
	Commercial		Single- family		Multi- family		Commercial		Construction		Home Equity lines of credit		Other		Total
ALLL:
Ending allowance balance attributable to loans:
Individually evaluated for impairment	$	-	$	-	$	-	$	22	$	-	$	-	$	-	$	22
Collectively evaluated for impairment		2,664		999		567		4,512		1,024		263		56		10,085
Total ending allowance balance	$	2,664	$	999	$	567	$	4,534	$	1,024	$	263	$	56	$	10,107
Loans:
Individually evaluated for impairment	$	81	$	106	$	-	$	2,728	$	-	$	-	$	-	$	2,915
Collectively evaluated for impairment		327,458		128,135		46,654		269,479		59,574		19,596		2,825		853,721
Total ending loan balance	$	327,539	$	128,241	$	46,654	$	272,207	$	59,574	$	19,596	$	2,825	$	856,636

The following table presents the balance in the ALLL and the recorded investment in loans and leases by portfolio segment and based on the impairment method as of December 31, 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 loans individually evaluated for impairment by class of loans as of and for the period ended June 30, 2020.  The unpaid principal balance is the contractual principal balance outstanding.  The recorded investment is the unpaid principal balance adjusted for partial charge-offs, purchase premiums and discounts, and deferred loan fees and costs.  The table presents accrual basis interest income recognized during the three and six months ended June 30, 2020.  Cash payments of interest on these loans during the three and six months ended June 30, 2020 totaled $11 and $53, respectively.

							Three months ended				Six months ended
	As of June 30, 2020						June 30, 2020				June 30, 2020
	(unaudited)						(unaudited)				(unaudited)
	Unpaid Principal Balance		Recorded Investment		ALLL Allocated		Average Recorded Investment		Interest Income Recognized		Average Recorded Investment		Interest Income Recognized
With no related allowance recorded:
Real estate:
Commercial:
Owner occupied	$	-	$	-	$	-	$	-	$	-	$	-	$	-
Total with no allowance recorded		-		-		-		-		-		-		-
With an allowance recorded:
Commercial (1)		81		81		-		108		3		126		5
Real estate:
Single-family residential (1)		106		106		-		106		-		106		1
Commercial:
Non-owner occupied		2,728		2,728		22		2,730		38		2,732		75
Total with an allowance recorded		2,915		2,915		22		2,944		41		2,964		81
Total	$	2,915	$	2,915	$	22	$	2,944	$	41	$	2,964	$	81

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

The following table presents loans individually evaluated for impairment by class of loans as of 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, and deferred loan fees and costs.  The table presents accrual basis interest income recognized during the three and six months ended June 30, 2019.  Cash payments of interest during the three and six months ended June 30, 2019 totaled $43 and $88.

							Three months ended				Six months ended
	As of December 31, 2019						June 30, 2019				June 30, 2019
							(unaudited)				(unaudited)
	Unpaid Principal Balance		Recorded Investment		ALLL Allocated		Average Recorded Investment		Interest Income Recognized		Average Recorded Investment		Interest Income Recognized
With no related allowance recorded:
Commercial	$	-	$	-	$	-	$	94	$	-	$	96	$	-
Real estate:
Single-family residential		-		-		-		109		2		109		3
Commercial:
Owner occupied		-		-		-		121		1		122		7
Total with no allowance recorded		-		-		-		324		3		327		10
With an allowance recorded:
Commercial		85		85		1		-		-		-		-
Real estate:
Single-family residential		107		107		1		-		-		-		-
Multi-family residential		-		-		-		-		-
Commercial:
Non-owner occupied		4,420		4,420		33		4,483		39		3,932		76
Total with an allowance recorded		4,612		4,612		35		4,483		39		3,932		76
Total	$	4,612	$	4,612	$	35	$	4,807	$	42	$	4,259	$	86

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

	June 30, 2020		December 31, 2019
	(unaudited)
Loans past due over 90 days still on accrual	$	-	$	-
Nonaccrual loans:
Commercial		-		85
Real estate:
Single-family residential		472		550
Commercial:
Non-owner occupied		-		1,689
Consumer:
Home equity lines of credit:
Originated for portfolio		35		36
Purchased for portfolio		74		79
Other consumer		-		-
Total nonaccrual		581		2,439
Total nonaccrual and nonperforming loans	$	581	$	2,439

Nonaccrual loans include both smaller balance single-family mortgage and consumer loans that are collectively evaluated for impairment and individually classified impaired loans.  There were no loans 90 days or more past due and still accruing interest at June 30, 2020 or December 31, 2019.

The following table presents the aging of the recorded investment in past due loans and leases by class of loans as of June 30, 2020 (unaudited):

	30 - 59 Days Past Due		60 - 89 Days Past Due		Greater than 90 Days Past Due		Total Past Due		Loans Not Past Due		Nonaccrual Loans Not > 90 days Past Due
Commercial	$	-	$	-	$	-	$	-	$	327,539	$	-
Real estate:
Single-family residential		892		17		358		1,267		126,974		114
Multi-family residential		-		-		-		-		46,654		-
Commercial:
Non-owner occupied		-		-		-		-		151,927		-
Owner occupied		-		-		-		-		92,176		-
Land		-		-		-		-		28,104		-
Construction		-		-		-		-		59,574		-
Consumer:
Home equity lines of credit:
Originated for portfolio		132		-		22		154		19,245		13
Purchased for portfolio		-		-		-		-		197		74
Other		-		-		-		-		2,825		-
Total	$	1,024	$	17	$	380	$	1,421	$	855,215	$	201

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

Short-term Loan Deferrals

Under the CARES Act, financial institutions are permitted to not classify loan modifications that were related to the impact of COVID-19 if:

· The modifications were made between March 1, 2020 and the earlier of December 31, 2020 or 60 days after the end of the public health emergency, and

· The underlying loans were not more than 30 days past due as of December 31, 2019.

We implemented a loan modification program in accordance with the CARES Act to provide temporary relief to borrowers that meet the requirements under the CARES Act.  The program allows for deferral of payments for up to 90 days, which we may extend for up to an additional 90 days at our option.  The deferred payments and accrued interest during the deferral period are due and payable on or before the maturity of the loans.  At June 30, 2020, we granted temporary deferrals on loans with an outstanding balance of approximately $100 million. Under the provisions of the CARES Act, none of these loans were considered a troubled debt restructuring (“TDR”) at June 30, 2020.

Troubled Debt Restructurings (TDRs):

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

As of June 30, 2020 and December 31, 2019, TDRs totaled $2,915 and $2,923, respectively.  The Company allocated $22 and $22 of specific reserves to loans whose terms had been modified in TDRs as of June 30, 2020 and December 31, 2019, respectively.  The Company had not committed to lend any additional amounts as of June 30, 2020 or December 31, 2019 to customers with outstanding loans classified as nonaccrual TDRs.

During the three months ended June 30, 2020 and June 30, 2019, there were no loans modified as a TDR. 

There were no TDRs in payment default or that became nonperforming during the quarters ended June 30, 2020 and June 30, 2019.  A loan is considered to be in payment default once it is 90 days contractually past due under the modified terms, at which time the loan is re-evaluated to determine whether an impairment loss should be recognized, either through a write-off or specific valuation allowance, so that the loan is reported, net, at the present value of estimated future cash flows, or at the fair value of collateral, less cost to sell, if repayment is expected solely from the collateral.

The terms of certain other loans were modified during the six months ended June 30, 2020 and 2019 that did not meet the definition of a TDR. These loans had a total recorded investment of $26,995 and $15,821 as of June 30, 2020 and 2019, respectively. The modification of these loans involved either a modification of the terms of a loan to borrowers who were not experiencing financial difficulties, a delay in payments that was considered to be insignificant or a modification where no concessions were granted.

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

Nonaccrual loans include loans that were modified and identified as TDRs and the loans are not performing.  At June 30, 2020 there were no nonaccrual TDR’s and at December 31, 2019, nonaccrual TDRs were as follows:

	June 30, 2020		December 31, 2019
	(unaudited)
Commercial	$	-	$	85
Total	$	-	$	85

Nonaccrual loans at June 30, 2020 and December 31, 2019 do not include $2,915 and $2,838, respectively, of TDRs where customers have established a sustained period of repayment performance, generally six months, the loans are current according to their modified terms and repayment of the remaining contractual payments is expected. These loans are included in total impaired loans.

Credit Quality Indicators:

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

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

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

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

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

The recorded investment in loans and leases by risk category and by class of loans and leases as of June 30, 2020 and based on the most recent analysis performed follows.  There were no loans or leases rated doubtful at June 30, 2020.

(unaudited)	Not Rated		Pass		Special Mention		Substandard		Total
Commercial	$	847	$	324,884	$	1,298	$	510	$	327,539
Real estate:
Single-family residential		127,769		-		-		472		128,241
Multi-family residential		-		46,508		-		146		46,654
Commercial:
Non-owner occupied		62		142,706		6,431		2,728		151,927
Owner occupied		309		88,951		2,018		898		92,176
Land		-		28,104		-		-		28,104
Construction		3,045		56,529		-		-		59,574
Consumer:
Home equity lines of credit:
Originated for portfolio		19,348		-		-		51		19,399
Purchased for portfolio		122		-		-		75		197
Other		2,825		-		-		-		2,825
	$	154,327	$	687,682	$	9,747	$	4,880	$	856,636

The recorded investment in loans and leases by risk category and by class of loans and leases as of December 31, 2019 follows.  There were no loans or leases 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

Leases:

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

	June 30, 2020		December 31, 2019
	(unaudited)
Total minimum lease payments to be received	$	4,856	$	5,252
Less: unearned income		(397)		(473)
Net investment in direct financing leases	$	4,459	$	4,779

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

The following summarizes the future minimum lease payments receivable in fiscal year 2020 and in subsequent fiscal years:

2020	$	397
2021		793
2022		793
2023		1,563
2024		1,310
	$	4,856

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Leases

6 Months Ended

Jun. 30, 2020

Leases [Abstract]

Leases

NOTE 5 – LEASES

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

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

The calculated amount of the ROU assets and lease liabilities are impacted by the length of the lease term and the discount rate used to present value the minimum lease payments. The Company’s lease agreements often include one or more options to renew at the Company’s discretion which were considered, as applicable, in the calculation of the ROU assets and lease liabilities.  If at lease inception, the Company considers the exercising of a renewal option to be reasonably certain, the Company will include the extended term in the calculation of the ROU asset and lease liability. Regarding the discount rate, Topic 842 requires the use of the rate implicit in the lease whenever this rate is readily determinable. As this rate is not readily determinable in our operating leases, the Company utilizes its incremental borrowing rate at lease inception, on a collateralized basis, over a similar term.  At June 30, 2020, the weighted-average remaining lease term for the Company’s operating leases was 3.7 years and the weighted-average discount rate was 6.58%.

The Company’s operating lease costs were $97 and $192 for the three and six months ended June 30, 2020 and $90 and $217 for the three and six months ended June 30, 2019.  The variable lease costs totaled $81 and $129 for the three and six months ended June 30, 2020 and $70 and $101 for the three and six months ended June 30, 2019. As the Company elected not to separate lease and non-lease components for all classes of underlying assets and instead to account for them as a single lease component, the variable lease cost primarily represents variable payments such as common area maintenance and utilities.

Future minimum operating lease payments as of June 30, 2020 are as follows:

2020, excluding the six months ended June 30, 2020	$	273
2021		548
2022		536
2023		377
2024		250
Total future minimum rental commitments		1,984
Less - amounts representing interest		(234)
Total operating lease liabilities	$	1,750

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Fair Value

6 Months Ended

Jun. 30, 2020

Fair Value [Abstract]

Fair Value

NOTE 6 - FAIR VALUE 

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

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

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

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

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

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

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

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

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

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

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

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

	Fair Value Measurements at June 30, 2020 using Significant Other Observable Inputs
	(Level 2)
	(unaudited)
Financial Assets:
Securities available for sale:
Issued by U.S. government-sponsored entities and agencies:
U.S. Treasury	$	10,711
Mortgage-backed securities - residential		81
Collateralized mortgage obligations		10
Total securities available for sale	$	10,802
Loans held for sale	$	165,891
Yield maintenance provisions (embedded derivatives)	$	2,055
Interest rate lock commitments	$	15,402
Financial Liabilities:
Interest-rate swaps	$	2,055
TBA Mortgage-back securities	$	2,378

	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

The Company had noassets or liabilities measured at fair value on a recurring basis that were measured using Level 1 or Level 3 inputs at June 30, 2020 or December 31, 2019.  There were notransfers of assets or liabilities measured at fair value between levels during theperiods ended June 30, 2020 and December 31, 2019.

There were no assets or liabilities measured at fair value on a non-recurring basis at June 30, 2020.  Assets and liabilities measured at fair value on a non-recurring basis at December 31, 2019 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

The Company had nomaterialassets or liabilities measured at fair value on a non-recurring basis that were measured using Level 1 or Level 2 inputs at June 30, 2020 or December 31, 2019. 

There were no write-downs of impaired collateral dependent loans during the six months ended June 30, 2020 or 2019.  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.

During the six months ended June 30, 2020, the Company did not have any transfers of assets or liabilities between those measured using Level 1, 2 or 3 inputs.  The Company recognizes transfers of assets and liabilities between Level 1, 2 and 3 inputs based on the information relating to those assets and liabilities at the end of the reporting period.

There were no assets or liabilities measured at fair value on a non-recurring basis at June 30, 2020.  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%

Financial Instruments Recorded Using Fair Value Option

The Company has elected the fair value option for loans held for sale.  These loans are intended for sale and the Company believes that the fair value is the best indicator of the resolution of these loans.  Loans originated as construction loans, that were subsequently transferred to held for sale, are carried at the lower of cost or market and are not included.  Interest income is recorded based on the contractual terms of the loan and in accordance with the Company’s policy on loans held for investment.  None of these loans were 90 days or more past due or on nonaccrual as of June 30, 2020 or December 31, 2019. 

As of June 30, 2020 and December 31, 2019, the aggregate fair value, contractual balance and gain or loss of loans held for sale were as follows:

	June 30, 2020		December 31, 2019
	(unaudited)
Aggregate fair value	$	165,891	$	135,711
Contractual balance		159,718		133,993
Gain	$	6,173	$	1,718

The total amount of gains and losses from changes in fair value included in earnings for the three and six months ended June 30, 2020 and 2019 for loans held for sale were:

	Three months ended June 30,				Six months ended June 30,
	2020		2019		2020		2019
	(unaudited)				(unaudited)
Interest income	$	1,256	$	275	$	2,453	$	490
Interest expense		-		-		-		-
Change in fair value		3,220		516		4,455		776
Total change in fair value	$	4,476	$	791	$	6,908	$	1,266

The carrying amounts and estimated fair values of financial instruments at June 30, 2020 were as follows:

	Fair Value Measurements at June 30, 2020 Using:
	Carrying
(unaudited)	Value		Level 1		Level 2		Level 3		Total
Financial assets
Cash and cash equivalents	$	77,376	$	77,376	$	-	$	-	$	77,376
Interest-bearing deposits in other financial institutions		100		100		-		-		100
Securities available for sale		10,802		-		10,802		-		10,802
Loans held for sale		165,891		-		165,891		-		165,891
Loans and leases, net		846,529		-		-		856,282		856,282
FHLB and FRB stock		5,216		n/a		n/a		n/a		n/a
Accrued interest receivable		3,845		1		44		3,800		3,845
Yield maintenance provisions (embedded derivatives)		2,055		-		2,055		-		2,055
Interest rate lock commitments		15,402		-		15,402		-		15,402
Financial liabilities
Deposits	$	(849,038)	$	(448,685)	$	(408,995)	$	-	$	(857,680)
FHLB advances and other borrowings		(165,806)		-		(167,298)		-		(167,298)
Advances by borrowers for taxes and insurance		(782)		-		-		(782)		(782)
Subordinated debentures		(14,825)		-		(15,622)		-		(15,622)
Accrued interest payable		(229)		-		(229)		-		(229)
Interest-rate swaps		(2,055)		-		(2,055)		-		(2,055)
TBA mortgage-back securities		(2,378)		-		(2,378)		-		(2,378)

The carrying amounts and estimated fair values of financial instruments at December 31, 2019 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 borrowings		(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 methods and assumptions, not previously presented, used to estimate fair values are described below.

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

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

FHLB and FRB Stock

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

Loans and Leases

Fair values of loans and leases as of June 30, 2020, 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.

The PPPLF funding has a fixed rate of 0.35% for all participants; thus the carrying value approximates the estimated fair value and represents a Level 2 measurement.

Accrued Interest Receivable/Payable

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

Advances by Borrowers for Taxes and Insurance

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

Off-Balance-Sheet Instruments

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

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Subordinated Debentures

6 Months Ended

Jun. 30, 2020

Subordinated Debentures [Abstract]

Subordinated Debentures

NOTE 7 – SUBORDINATED DEBENTURES

2003 Subordinated debentures:

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

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

The subordinated debentures have a variable rate of interest, reset quarterly, equal to the three-month London Interbank Offered Rate (LIBOR) plus 2.85%, which was 4.22% at June 30, 2020 and 4.81% at December 31, 2019. 

2018 Fixed-to-floating rate subordinated notes:

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

The subordinated notes initially bear interest at 7.00%, from and including December 20, 2018, to but excluding December 30, 2023, payable semi-annually in arrears on June 30 and December 30 of each year. From and including December 30, 2023, to but excluding December 30, 2028 or the earlier redemption of the notes, the interest rate will reset quarterly to an interest rate equal to the then current three-month LIBOR (but not less than zero) plus 4.14%, payable quarterly in arrears on March 30, June 30, September 30, and December 30 of each year.  The Holding Company may, at its option, redeem the notes beginning on December 30, 2023 and on any scheduled interest payment date thereafter.  After payment of approximately $388 of debt issuance costs, the Holding Company’s net proceeds were approximately $9,612.  At June 30, 2020, the balance of the subordinated notes, net of unamortized debt issuance costs, was $9,670.

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FHLB Advances And Other Debt

6 Months Ended

Jun. 30, 2020

FHLB Advances And Other Debt [Abstract]

FHLB Advances And Other Debt

NOTE 8 – FHLB ADVANCES AND OTHER DEBT

FHLB advances and other debt were as follows:

	Weighted
	Average Rate	June 30, 2020		December 31, 2019
FHLB fixed rate advances:
Maturities:
2020	2.15%	$	3,500	$	4,500
2021	1.63%		7,500		4,000
2022	1.16%		10,000		1,500
2023	0.92%		3,500		-
2024	1.90%		6,500		6,500
Total FHLB fixed rate advances			31,000		16,500
Fixed rate other debt:
FRB PPPLF advances	0.35%		125,056		-
Variable rate other debt:
Holding Company credit facility	4.00%		9,750		5,000
Warehouse facility	-		-		7,517
Total variable rate other debt			9,750		12,517
Total		$	165,806	$	29,017

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

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 June 30, 2020, the Company had an outstanding balance of $4,750 on the term loan and a $5,000 outstanding balance on the revolving line-of-credit.  At December 31, 2019, the term loan had an outstanding balance of $5,000 and no outstanding balance on the line of credit facility.

At June 30, 2020, CFBank had $8,000 of availability in an unused line of credit at a commercial bank.  There were no outstanding borrowings on this line at June 30, 2020 and December 31, 2019.  During the third quarter of 2019, CFBank added an additional $15,000line of credit at another commercial bank.  There was no outstanding borrowings on this line of credit at June 30, 2020 and  December 31, 2019. Interest on any principal amounts outstanding from time to time under these lines accrues 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 the 30-day LIBOR plus 2.00% or 4.00% and are secured by the specific loans that were funded.  This warehouse facility had an no outstanding balance at June 30, 2020 and an outstanding balance of $7,517 at December 31, 2019.

During the second quarter of 2020, CFBank entered into an additional $75,000 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 the 30-day LIBOR plus 1.75% or 3.50% and are secured by the specific loans that were funded.  This warehouse facility had no outstanding balance at June 30, 2020 and December 31, 2019.

To support the effectiveness of the PPP loans, the Federal Reserve introduced the PPPLF to extend credit to financial institutions that made PPP loans, with the related PPP loans used as collateral on the borrowings.  The PPPLF borrowings have a fixed interest rate of 0.35% and a maturity equal to the maturity date of the related PPP loans, with the PPP loans maturing two years from the origination date of the PPP loan.  At June 30, 2020, the Company’s PPP loans and related PPPLF funding had a weighted average life of approximately two years.  At June 30, 2020, the principal balance of PPPLF advances outstanding was $125,056.  

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Stock-Based Compensation

6 Months Ended

Jun. 30, 2020

Stock-Based Compensation [Abstract]

Stock-Based Compensation

NOTE 9 – 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 $207 and $350, respectively, for the three and six months ended June 30, 2020 and $138 and $254, respectively, for the three and six months June 30, 2019.  The total income tax effect was $43 and $73, respectively, for the three and six months ended June 30, 2020 and $29 and $53, respectively, for the three and six months ended June 30, 2019. 

The Plans are all stockholder-approved plans 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 pursuant to stock options, stock appreciation rights, restricted stock or restricted stock units.

Stock Options:

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

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

There were nooptionsgranted during the six months ended June 30, 2020 and June 30, 2019.  There were 4,545 options exercised during the six months ended June 30, 2020 and no options exercised during the six months ended June 30, 2019.

A summary of stock option activity in the Plans for the six months ended June 30, 2020 follows (unaudited):

	Shares	Weighted Average Exercise Price		Weighted Average Remaining Contractual Term (Years)	Intrinsic Value
Outstanding at beginning of year	95,438	$	7.64
Exercised	(4,545)		7.98
Cancelled or forfeited	(14)		17.33
Outstanding at end of period	90,879	$	7.62	2.9	$	258
Exercisable at end of period	90,879	$	7.62	2.9	$	258

During the six months ended June 30, 2020, there were 14 stock options canceled, forfeited or expired.  There were 925 stock options canceled, forfeited or expired during the six months ended June 30, 2019.  As of June 30, 2020, 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 no shares of restricted stock granted under the Plan during the six months ended June 30, 2020.  There were 33,788 shares of restricted stock granted during the three months ended June 30, 2019.

A summary of changes in the Company’s nonvested restricted stock awards as of June 30, 2020 follows (unaudited):

Nonvested Shares	Shares	Weighted Average Grant-Date Fair Value
Nonvested at January 1, 2020	102,916	$	13.11
Granted	-		-
Vested	(17,092)		12.89
Forfeited	(5,234)		12.81
Nonvested at June 30, 2020	80,590	$	13.17

As of June 30, 2020 and 2019, the unrecognized compensation cost related to nonvested restricted stock awards granted under the Plans was $805 and $972, respectively. 

There were 5,234 shares of restricted stock forfeited during the six month period ended June 30, 2020.  There were 1,493 shares of restricted stock forfeited during the six months ended June 30, 2019.  There were 17,092 shares of restricted stock that vested during the six months ended June 30, 2020 and no shares of restricted stock that vested during the six months ended June 30, 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 269,704 shares remaining available for awards of stock option grants, stock appreciation rights, restricted stock awards or restricted stock units under the 2019 Plan at June 30, 2020.

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Regulatory Capital Matters

6 Months Ended

Jun. 30, 2020

Regulatory Capital Matters [Abstract]

Regulatory Capital Matters

NOTE 10 – REGULATORY CAPITAL MATTERS

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

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

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

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

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

The following tables present actual and required capital ratios as of June 30, 2020 and December 31, 2019 for CFBank under the Basel III Capital Rules.  Capital levels required to be considered well capitalized are based upon prompt corrective action regulations, as amended to reflect the changes under the Basel III Capital Rules.

	Actual			Minimum Capital Required-Basel III Fully Phased-In			To Be Well Capitalized Under Applicable Regulatory Capital Standards
	Amount		Ratio	Amount		Ratio	Amount		Ratio
June 30, 2020
Total Capital to risk weighted assets	$	116,380	14.01%	$	87,231	10.50%	$	83,077	10.00%
Tier 1 (Core) Capital to risk weighted assets		106,086	12.77%		70,615	8.50%		66,461	8.00%
Common equity tier 1 capital to risk-weighted assets		106,086	12.77%		58,154	7.00%		54,000	6.50%
Tier 1 (Core) Capital to adjusted total assets (Leverage ratio)		106,086	10.44%		40,637	4.00%		50,796	5.00%

	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%

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

Dividend Restrictions:

Banking regulations require us to maintain certain capital levels and may limit the dividends paid by CFBank to the Holding Company or by the Holding Company to stockholders.  The ability of the Holding Company to pay dividends on its stock is dependent upon the amount of cash and liquidity available at the Holding Company level, as well as the receipt of dividends and other distributions from CFBank to the extent necessary to fund such dividends.  The Holding Company is a legal entity that is separate and distinct from CFBank, which has no obligation to make any dividends or other funds available for the payment of dividends by the Holding Company.  The Holding Company also is subject to various legal and regulatory policies and guidelines impacting the Holding Company’s ability to pay dividends on its stock.  In addition, the Holding Company’s ability to pay dividends on its stock is conditioned upon the payment, on a current basis, of quarterly interest payments on the subordinated debentures underlying the Company’s trust preferred securities.  Finally, under the terms of the Holding Company’s fixed-to-floating rate subordinated debt, the Holding Company’s ability to pay dividends on its stock is conditioned upon the Holding Company continuing to make required principal and interest payments, and not incurring an event of default, with respect to the subordinated debt. 

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

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Derivative Instruments

6 Months Ended

Jun. 30, 2020

Derivative Instruments [Abstract]

Derivative Instruments

NOTE 11 – DERIVATIVE INSTRUMENTS 

Interest-rate swaps:

CFBank utilizes interest-rate swaps as part of its asset/liability management strategy to help manage its interest rate risk position, and does not use derivatives for trading purposes.  The notional amount of the interest-rate swaps does not represent amounts exchanged by the parties.  The amount exchanged is determined by reference to the notional amount and the other terms of the individual interest-rate swap agreements.  CFBank was party to interest-rate swaps with a combined notional amount of $31,391 at June 30, 2020 and $12,039 at December 31, 2019.

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

The counterparty to CFBank’s interest-rate swaps is exposed to credit risk whenever the interest-rate swaps are in a liability position.  At June 30, 2020, CFBank had $2,456 in securities and cash pledged as collateral for these derivatives.  Should the liability increase, beyond the collateral value, CFBank will be required to pledge additional collateral. 

Additionally, CFBank’s interest-rate swap instruments contain provisions that require CFBank to remain well capitalized under regulatory capital standards and to require with certain other regulatory requirements.  The interest-rate swaps may be called by the counterparty if CFBank fails to maintain well-capitalized status under regulatory capital standards or becomes subject to certain adverse regulatory events such as a regulatory cease and desist order.  As of June 30, 2020, CFBank was well-capitalized under regulatory capital standards and was not subject to any adverse regulatory events specified in CFBank’s interest-rate swap instruments.

Summary information about the derivative instruments is as follows:

	June 30, 2020		December 31, 2019
	(unaudited)
Notional amount	$	31,391	$	12,039
Weighted average pay rate on interest-rate swaps		4.35%		4.66%
Weighted average receive rate on interest-rate swaps		3.06%		4.63%
Weighted average maturity (years)		8.2		7.3
Fair value of interest-rate swaps	$	(2,055)	$	(12)
Fair value of yield maintenance provisions		2,055		12

As of June 30, 2020, CFBank has minimum collateral posting thresholds with certain of its interest-rate swap counterparties and has posted cash collateral of $2,391.

The fair value of the yield maintenance provisions and interest-rate swaps is recorded in other assets and other liabilities, respectively, in the consolidated balance sheet.  Changes in the fair value of the yield maintenance provisions and interest-rate swaps are reported currently in earnings, as other noninterest income in the consolidated statements of income.  There were no net gains or losses recognized in earnings related to yield maintenance provisions and interest-rate swaps for the three months ended June 30, 2020 or 2019.

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 $668,009 and $297,454 of interest rate lock commitments related to residential mortgage loans at June 30, 2020 and December 31, 2019, respectively.  The fair value of these mortgage banking derivatives was reflected by a derivative asset of $15,402 and $3,104 at June 30, 2020 and December 31, 2019, 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 $402,250 and $225,500 of TBA mortgage-backed securities at June 30, 2020 and December 31, 2019, respectively.  The fair value of these TBA mortgage-backed securities was ($2,378) and ($350) at June 30, 2020 and December 31, 2019, 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):

	June 30, 2020				December 31, 2019
	Notional Amount		Fair Value		Notional Amount		Fair Value
Assets (Liabilities):
Interest rate commitments	$	668,009	$	15,402	$	297,454	$	3,104
TBA mortgage-back securities		402,250		(2,378)		225,500		(350)

As of June 30, 2020, CFBank has minimum collateral posting thresholds with certain of its derivative counterparties and has posted cash collateral of $2,192.

The following table represents the revenue recognized on mortgage activities for the three and six months ended June 30, 2020 and 2019 (unaudited):

	Three months ended				Six months ended
	June 30,				June 30,
	2020		2019		2020		2019
Gain on loans sold	$	11,901	$	1,884	$	17,482	$	3,116
Gain (loss) from change in fair value of loans held-for-sale		3,220		516		4,455		776
Gain (loss) from change in fair value of derivatives		4,455		(49)		483		(90)
	$	19,576	$	2,351	$	22,420	$	3,802

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Income Taxes

6 Months Ended

Jun. 30, 2020

Income Taxes [Abstract]

Income Taxes

NOTE 12 – INCOME TAXES

At June 30, 2020, the Company had a deferred tax asset recorded in the amount of approximately $1,600.  At December 31, 2019, the Company had a deferred tax asset recorded of approximately $1,700.  At June 30, 2020 and December 31, 2019, 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 June 30, 2020 that no valuation allowance was required against the net deferred tax asset.

In 2012 the Company completed a recapitalization program pursuant to which the Holding Company sold $22,500 in common stock, which improved the capital levels of CFBank and provided working capital for the Holding Company. The result of the change in stock ownership associated with the stock offering, however, was that the Company incurred an ownership change within the guidelines of Section 382 of the Internal Revenue Code of 1986.  At June 30, 2020, 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.

The Company records income tax expense based on the federal statutory rate adjusted for the effect of low income housing credits, bank owned life insurance and other miscellaneous items.  The effective tax rate for the three and six months ended June 30, 2020 was approximately 20.7% and 20.7%, respectively, and 20.4% and 20.2%, respectively, for the three and six months ended June 30, 2019, which management believes is a reasonable estimate for the effective tax rate.

The following table summarizes the major components creating differences between income taxes at the federal statutory tax rate and the effective tax rate recorded in the consolidated statements of income for the three and six months ended June 30, 2020 and 2019:

	For the three months ended June 30,		For the six months ended June 30,
	2020	2019	2020	2019
	(unaudited)		(unaudited)
Statutory tax rate	21.0%	21.0%	21.0%	21.0%
Increase (decrease) resulting from:
Restricted stock	0.0%	0.0%	0.1%	0.0%
Tax exempt income on bank owned life insurance	(0.1%)	(0.3%)	(0.1%)	(0.3)%
Low income housing credits	(0.2%)	(0.5%)	(0.3%)	(0.6%)
Other, net	0.0%	0.2%	0.0%	0.1%
Effective tax rate	20.7%	20.4%	20.7%	20.2%

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Accumulated Other Comprehensive Income

6 Months Ended

Jun. 30, 2020

Accumulated Other Comprehensive Income [Abstract]

Accumulated Other Comprehensive Income

NOTE 13- ACCUMULATED OTHER COMPREHENSIVE INCOME

The following table summarizes the changes within each classification of accumulated other comprehensive income, net of tax, for the three and six months ended June 30, 2020 and 2019 and summarizes the significant amounts reclassified out of each component of accumulated other comprehensive income (loss):

Changes in Accumulated Other Comprehensive Income by Component (1)
	Three months ended				Six months ended
	June 30,				June 30,
	2020		2019		2020		2019
	(unaudited)				(unaudited)
	Unrealized Gains and Losses on Available-for-Sale Securities				Unrealized Gains and Losses on Available-for-Sale Securities
Accumulated other comprehensive income (loss), beginning of period	$	172	$	(38)	$	28	$	(73)
Other comprehensive income (loss) before reclassifications (2)		(26)		52		118		87
Net current-period other comprehensive income (loss)		(26)		52		118		87
Accumulated other comprehensive income, end of period	$	146	$	14	$	146	$	14

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

⁽²⁾ There were no amounts reclassified out of other comprehensive income for the three and six months ended June 30, 2020 and 2019.

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Preferred Stock

6 Months Ended

Jun. 30, 2020

Preferred Stock [Abstract]

Preferred Stock

NOTE 14 - PREFERRED STOCK

Series B Preferred Stock:

Commencing in April 2014, the Company conducted a private placement of up to 480,000 shares of its 6.25% Non-Cumulative Convertible Perpetual Preferred Stock, Series B (“Series B Preferred Stock”) for an offering price of $25.00 per share (the “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 15-Common Stock Warrants for additional information.  

Conversion of Series B Preferred Stock to Common Stock:

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

The conversion of the Series B Preferred Stock resulted in the elimination of the non-cumulative preferred dividend payments on the Series B Preferred Stock in the aggregate amount of approximately $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 was 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 obtained stockholder approval for, and filed, 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.

On March 30, 2020, the Company entered into an Exchange Agreement providing for the exchange of 27,000 of the shares of common stock purchased in the private placement for 270 additional shares of Series C Preferred Stock (at the Series C Preferred Stock’s current conversion ratio of 100 shares of common stock for each share of Series C Preferred Stock).  The exchange of common stock for Series C Preferred Stock was effected in order to accommodate and facilitate the Company’s stock repurchase program announced on March 13, 2020.  The exchange resulted in an increase in the number of outstanding shares of Series C Preferred Stock from 12,337 to 12,607.

Conversion of Series C Preferred Stock to Non-Voting Common Stock:

On May 27, 2020, an amendment to the Company’s Certificate of Incorporation, as amended (the “Certificate of Amendment”), to authorize a separate class of Non-Voting Common Stock was approved by the stockholders of the Company at the Company’s 2020 annual meeting of stockholders.  On May 28, 2020, the Company filed with the Delaware Secretary of State a Certificate of Amendment to the Company’s Certificate of Incorporation to authorize1,260,700shares of Non-Voting Common Stock. Effective as of the close of business on May 28, 2020, all 1,260,700authorized shares of Non-Voting Common Stock were issued upon conversion of the12,607outstanding shares of the Company’s Series C Preferred Stock. Pursuant to the terms of the Series C Preferred Stock, each outstanding share of Series C Preferred Stock converted automatically into100shares of Non-Voting Common Stock at such time.

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Common Stock Warrants

6 Months Ended

Jun. 30, 2020

Common Stock Warrants [Abstract]

Common Stock Warrants

NOTE 15 - COMMON STOCK WARRANTS

Series B Preferred Stock – Warrants:

For each share of Series B Preferred Stock issued by the Company in the 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.  All of the unexercised Warrants expired on July 15, 2019 and, therefore, there were no Warrants outstanding as of June 30, 2020.

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Summary Of Significant Accounting Policies (Policy)

6 Months Ended

Jun. 30, 2020

Summary Of Significant Accounting Policies [Abstract]

Basis Of Presentation

Basis of Presentation: 

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

In the opinion of the management of the Company, the accompanying unaudited interim consolidated financial statements include all adjustments necessary for a fair presentation of the Company’s financial condition and the results of operations for the periods presented.  These adjustments are of a normal recurring nature, unless otherwise disclosed in this Form 10-Q.  The financial performance reported for the Company for the three and six months ended June 30, 2020 is not necessarily indicative of the results that may be expected for the full year.  This information should be read in conjunction with the Company’s latest Annual Report to Stockholders and Annual Report on Form 10-K on file with the SEC.  Reference is made to the accounting policies of the Company described in Note 1 to the Audited Consolidated Financial Statements contained in the Company’s 2019 Annual Report to Stockholders that was filed as Exhibit 13.1 to the Company’s Form 10-K for the year ended December 31, 2019 (referred to herein as the “2019 Audited Financial Statements”).  The Company has consistently followed those policies in preparing this Form 10-Q.

Loans And Leases

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

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

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

Allowance For Loan And Lease Losses (ALLL)

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

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

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

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

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

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

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

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

Joint Ventures

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

Low Income Housing Tax Credits (LIHTC)

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

Historic Tax Credits

Historic Tax Credits:  In June 2019, the Company made an equity investment as a non-managing member in an entity that 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 HTC investment is accounted for under the equity method of accounting and is included in accrued interest receivable and other assets on the consolidated balance sheets.  The Company’s recorded investment in this entity was $894 at June 30, 2020 and December 31, 2019.  The maximum exposure to loss related to these investments was $894 at June 30, 2020, representing the Company’s investment balance. 

Earnings Per Common Share

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

	Three months ended				Six months ended
	June 30,				June 30,
	2020		2019		2020		2019
	(unaudited)				(unaudited)
Basic
Net income	$	10,068	$	2,280	$	12,074	$	3,961
Accretion of discount and value of warrants exercised related to Series B preferred stock (1)		-		157		-		183
Earnings allocated to participating securities (Series C preferred stock)		(1,218)		-		(1,866)		-
Net income allocated to common stockholders	$	8,850	$	2,437	$	10,208	$	4,144
Weighted average common shares outstanding including unvested share-based payment awards		5,777,816		4,412,726		5,575,856		4,384,395
Less: Unvested share-based payment awards-2019 Plan		(38,719)		-		(39,335)		-
Average shares		5,739,097		4,412,726		5,536,521		4,384,395
Basic earnings per common share	$	1.54	$	0.55	$	1.84	$	0.95
Diluted
Net earnings allocated to common stockholders	$	8,850	$	2,437	$	10,208	$	4,144
Add back: Preferred Dividends on Series B preferred stock and accretion of discount		-		-		-		-
Net earnings allocated to common stockholders	$	8,850	$	2,437	$	10,208	$	4,144
Weighted average common shares outstanding for basic earnings per common share		5,739,097		4,412,726		5,536,521		4,384,395
Add:  Dilutive effects of assumed exercises of stock options		24,762		35,077		25,591		37,075
Add:  Dilutive effects of assumed exercises of stock warrants		-		4,834		-		13,894
Add:  Dilutive effects of unvested share-based payment awards-2019 Plan		38,719		-		39,335
Average shares and dilutive potential common shares		5,802,578		4,452,637		5,601,447		4,435,364
Diluted earnings per common share	$	1.53	$	0.55	$	1.82	$	0.93

⁽¹⁾ All outstanding warrants expired on July 15, 2019.

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

	Three months ended June 30,		Six months ended June 30,
	2020	2019	2020	2019
	(unaudited)		(unaudited)
Stock options	437	467	444	475

Dividend Restrictions

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.

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.  

In March 2020, the FASB issued ASU No. 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting. These amendments provide temporary optional guidance to ease the potential burden in accounting for reference rate reform. The ASU provides optional expedients and exceptions for applying generally accepted accounting principles to contract modifications and hedging relationships, subject to meeting certain criteria, that reference LIBOR or another reference rate expected to be discontinued. It is intended to help stakeholders during the global market-wide reference rate transition period. The guidance is effective for all entities as of March 12, 2020 through December 31, 2022. The Company is implementing a transition plan to identify and modify its loans and other financial instruments with attributes that are either directly or indirectly influenced by LIBOR. The Company is assessing ASU 2020-04 and its impact on the Company's transition away from LIBOR for its loan and other financial instruments.

General Litigation

General Litigation

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

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Summary Of Significant Accounting Policies (Tables)

6 Months Ended

Jun. 30, 2020

Summary Of Significant Accounting Policies [Abstract]

Earnings Per Common Share

	Three months ended				Six months ended
	June 30,				June 30,
	2020		2019		2020		2019
	(unaudited)				(unaudited)
Basic
Net income	$	10,068	$	2,280	$	12,074	$	3,961
Accretion of discount and value of warrants exercised related to Series B preferred stock (1)		-		157		-		183
Earnings allocated to participating securities (Series C preferred stock)		(1,218)		-		(1,866)		-
Net income allocated to common stockholders	$	8,850	$	2,437	$	10,208	$	4,144
Weighted average common shares outstanding including unvested share-based payment awards		5,777,816		4,412,726		5,575,856		4,384,395
Less: Unvested share-based payment awards-2019 Plan		(38,719)		-		(39,335)		-
Average shares		5,739,097		4,412,726		5,536,521		4,384,395
Basic earnings per common share	$	1.54	$	0.55	$	1.84	$	0.95
Diluted
Net earnings allocated to common stockholders	$	8,850	$	2,437	$	10,208	$	4,144
Add back: Preferred Dividends on Series B preferred stock and accretion of discount		-		-		-		-
Net earnings allocated to common stockholders	$	8,850	$	2,437	$	10,208	$	4,144
Weighted average common shares outstanding for basic earnings per common share		5,739,097		4,412,726		5,536,521		4,384,395
Add:  Dilutive effects of assumed exercises of stock options		24,762		35,077		25,591		37,075
Add:  Dilutive effects of assumed exercises of stock warrants		-		4,834		-		13,894
Add:  Dilutive effects of unvested share-based payment awards-2019 Plan		38,719		-		39,335
Average shares and dilutive potential common shares		5,802,578		4,452,637		5,601,447		4,435,364
Diluted earnings per common share	$	1.53	$	0.55	$	1.82	$	0.93

⁽¹⁾ All outstanding warrants expired on July 15, 2019.

Anti-dilutive Average Common Shares

	Three months ended June 30,		Six months ended June 30,
	2020	2019	2020	2019
	(unaudited)		(unaudited)
Stock options	437	467	444	475

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Securities (Tables)

6 Months Ended

Jun. 30, 2020

Securities [Abstract]

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

	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
June 30, 2020 (unaudited)
Issued by U.S. government-sponsored entities and agencies:
U.S. Treasury	$	10,530	$	181	$	-	$	10,711
Mortgage-backed securities - residential		77		4		-		81
Collateralized mortgage obligations		10		-		-		10
Total	$	10,617	$	185	$	-	$	10,802

	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

Securities Classified By Maturity Date

	June 30, 2020					December 31, 2019
	(unaudited)
	Amortized Cost		Fair Value		Amortized Cost		Fair Value
Due in one year or less	$	6,026	$	6,065	$	5,001	$	5,000
Due from one to five years		4,504		4,646		2,985		3,017
Mortgage-backed securities - residential		77		81		126		130
Collateralized mortgage obligations		10		10		27		27
Total	$	10,617	$	10,802	$	8,139	$	8,174

Fair Value Of Securities Pledged

	June 30, 2020		December 31, 2019
	(unaudited)
Pledged as collateral for:
FHLB advances	$	2,544	$	3,074
Public deposits		2,552		2,015
Mortgage banking derivatives		3,039		1,500
Interest-rate swaps		65		77
Total	$	8,200	$	6,666

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.

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Loans And Leases (Tables)

6 Months Ended

Jun. 30, 2020

Loans And Leases [Abstract]

Recorded Investment In Loans By Portfolio Segment

	June 30, 2020		December 31, 2019
	(unaudited)
Commercial (1)	$	327,539	$	170,646
Real estate:
Single-family residential		128,241		120,256
Multi-family residential		46,654		39,229
Commercial		272,207		247,543
Construction		59,574		67,652
Consumer:
Home equity lines of credit		19,596		20,941
Other		2,825		4,174
Subtotal		856,636		670,441
Less: ALLL		(10,107)		(7,138)
Loans and leases, net	$	846,529	$	663,303

⁽¹⁾ Includes $4,459 and $4,779 of commercial leases at June 30, 2020 and December 31, 2019, respectively.

Activity In ALLL By Portfolio Segment

The following table presents the activity in the ALLL by portfolio segment for the three and six months ended June 30, 2020:

	Three months ended June 30, 2020 (unaudited)
			Real Estate								Consumer
	Commercial		Single-family		Multi-family		Commercial		Construction		Home Equity lines of credit		Other		Total
Beginning balance	$	2,103	$	905	$	512	$	2,674	$	574	$	249	$	56	$	7,073
Addition to (reduction in) provision for loan losses		600		150		55		1,860		450		10		-		3,125
Charge-offs		(39)		(58)		-		-		-		-		-		(97)
Recoveries		-		2		-		-		-		4		-		6
Ending balance	$	2,664	$	999	$	567	$	4,534	$	1,024	$	263	$	56	$	10,107

	Six months ended June 30, 2020 (unaudited)
			Real Estate								Consumer
	Commercial		Single-family		Multi-family		Commercial		Construction		Home Equity lines of credit		Other		Total
Beginning balance	$	2,054	$	948	$	447	$	2,604	$	759	$	265	$	61	$	7,138
Addition to (reduction in) provision for loan losses		720		105		120		1,930		265		(10)		(5)		3,125
Charge-offs		(110)		(58)		-		-		-		-		-		(168)
Recoveries		-		4		-		-		-		8		-		12
Ending balance	$	2,664	$	999	$	567	$	4,534	$	1,024	$	263	$	56	$	10,107

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

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

	Six months ended June 30, 2019 (unaudited)
			Real Estate								Consumer
	Commercial		Single-family		Multi-family		Commercial		Construction		Home Equity lines of credit		Other		Total
Beginning balance	$	1,819	$	1,061	$	612	$	2,274	$	739	$	410	$	97	$	7,012
Addition to (reduction in) provision for loan losses		150		(50)		(50)		65		20		(115)		(20)		-
Charge-offs		-		-		-		-		-		-		-		-
Recoveries		-		3		-		-		-		14		-		17
Ending balance	$	1,969	$	1,014	$	562	$	2,339	$	759	$	309	$	77	$	7,029

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

The following table presents the balance in the ALLL and the recorded investment in loans and leases by portfolio segment and based on the impairment method as of June 30, 2020 (unaudited):

			Real Estate								Consumer
	Commercial		Single- family		Multi- family		Commercial		Construction		Home Equity lines of credit		Other		Total
ALLL:
Ending allowance balance attributable to loans:
Individually evaluated for impairment	$	-	$	-	$	-	$	22	$	-	$	-	$	-	$	22
Collectively evaluated for impairment		2,664		999		567		4,512		1,024		263		56		10,085
Total ending allowance balance	$	2,664	$	999	$	567	$	4,534	$	1,024	$	263	$	56	$	10,107
Loans:
Individually evaluated for impairment	$	81	$	106	$	-	$	2,728	$	-	$	-	$	-	$	2,915
Collectively evaluated for impairment		327,458		128,135		46,654		269,479		59,574		19,596		2,825		853,721
Total ending loan balance	$	327,539	$	128,241	$	46,654	$	272,207	$	59,574	$	19,596	$	2,825	$	856,636

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

Individually Evaluated For Impairment By Class Of Loans

The following table presents loans individually evaluated for impairment by class of loans as of and for the period ended June 30, 2020.  The unpaid principal balance is the contractual principal balance outstanding.  The recorded investment is the unpaid principal balance adjusted for partial charge-offs, purchase premiums and discounts, and deferred loan fees and costs.  The table presents accrual basis interest income recognized during the three and six months ended June 30, 2020.  Cash payments of interest on these loans during the three and six months ended June 30, 2020 totaled $11 and $53, respectively.

							Three months ended				Six months ended
	As of June 30, 2020						June 30, 2020				June 30, 2020
	(unaudited)						(unaudited)				(unaudited)
	Unpaid Principal Balance		Recorded Investment		ALLL Allocated		Average Recorded Investment		Interest Income Recognized		Average Recorded Investment		Interest Income Recognized
With no related allowance recorded:
Real estate:
Commercial:
Owner occupied	$	-	$	-	$	-	$	-	$	-	$	-	$	-
Total with no allowance recorded		-		-		-		-		-		-		-
With an allowance recorded:
Commercial (1)		81		81		-		108		3		126		5
Real estate:
Single-family residential (1)		106		106		-		106		-		106		1
Commercial:
Non-owner occupied		2,728		2,728		22		2,730		38		2,732		75
Total with an allowance recorded		2,915		2,915		22		2,944		41		2,964		81
Total	$	2,915	$	2,915	$	22	$	2,944	$	41	$	2,964	$	81

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

The following table presents loans individually evaluated for impairment by class of loans as of 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, and deferred loan fees and costs.  The table presents accrual basis interest income recognized during the three and six months ended June 30, 2019.  Cash payments of interest during the three and six months ended June 30, 2019 totaled $43 and $88.

							Three months ended				Six months ended
	As of December 31, 2019						June 30, 2019				June 30, 2019
							(unaudited)				(unaudited)
	Unpaid Principal Balance		Recorded Investment		ALLL Allocated		Average Recorded Investment		Interest Income Recognized		Average Recorded Investment		Interest Income Recognized
With no related allowance recorded:
Commercial	$	-	$	-	$	-	$	94	$	-	$	96	$	-
Real estate:
Single-family residential		-		-		-		109		2		109		3
Commercial:
Owner occupied		-		-		-		121		1		122		7
Total with no allowance recorded		-		-		-		324		3		327		10
With an allowance recorded:
Commercial		85		85		1		-		-		-		-
Real estate:
Single-family residential		107		107		1		-		-		-		-
Multi-family residential		-		-		-		-		-
Commercial:
Non-owner occupied		4,420		4,420		33		4,483		39		3,932		76
Total with an allowance recorded		4,612		4,612		35		4,483		39		3,932		76
Total	$	4,612	$	4,612	$	35	$	4,807	$	42	$	4,259	$	86

Recorded Investment In Nonaccrual Loans By Class Of Loans

	June 30, 2020		December 31, 2019
	(unaudited)
Loans past due over 90 days still on accrual	$	-	$	-
Nonaccrual loans:
Commercial		-		85
Real estate:
Single-family residential		472		550
Commercial:
Non-owner occupied		-		1,689
Consumer:
Home equity lines of credit:
Originated for portfolio		35		36
Purchased for portfolio		74		79
Other consumer		-		-
Total nonaccrual		581		2,439
Total nonaccrual and nonperforming loans	$	581	$	2,439

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

The following table presents the aging of the recorded investment in past due loans and leases by class of loans as of June 30, 2020 (unaudited):

	30 - 59 Days Past Due		60 - 89 Days Past Due		Greater than 90 Days Past Due		Total Past Due		Loans Not Past Due		Nonaccrual Loans Not > 90 days Past Due
Commercial	$	-	$	-	$	-	$	-	$	327,539	$	-
Real estate:
Single-family residential		892		17		358		1,267		126,974		114
Multi-family residential		-		-		-		-		46,654		-
Commercial:
Non-owner occupied		-		-		-		-		151,927		-
Owner occupied		-		-		-		-		92,176		-
Land		-		-		-		-		28,104		-
Construction		-		-		-		-		59,574		-
Consumer:
Home equity lines of credit:
Originated for portfolio		132		-		22		154		19,245		13
Purchased for portfolio		-		-		-		-		197		74
Other		-		-		-		-		2,825		-
Total	$	1,024	$	17	$	380	$	1,421	$	855,215	$	201

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

Schedule Of Debtor Troubled Debt Restructuring, Subsequent Periods

	June 30, 2020		December 31, 2019
	(unaudited)
Commercial	$	-	$	85
Total	$	-	$	85

Recorded Investment In Loans By Risk Category And Class Of Loans

The recorded investment in loans and leases by risk category and by class of loans and leases as of June 30, 2020 and based on the most recent analysis performed follows.  There were no loans or leases rated doubtful at June 30, 2020.

(unaudited)	Not Rated		Pass		Special Mention		Substandard		Total
Commercial	$	847	$	324,884	$	1,298	$	510	$	327,539
Real estate:
Single-family residential		127,769		-		-		472		128,241
Multi-family residential		-		46,508		-		146		46,654
Commercial:
Non-owner occupied		62		142,706		6,431		2,728		151,927
Owner occupied		309		88,951		2,018		898		92,176
Land		-		28,104		-		-		28,104
Construction		3,045		56,529		-		-		59,574
Consumer:
Home equity lines of credit:
Originated for portfolio		19,348		-		-		51		19,399
Purchased for portfolio		122		-		-		75		197
Other		2,825		-		-		-		2,825
	$	154,327	$	687,682	$	9,747	$	4,880	$	856,636

The recorded investment in loans and leases by risk category and by class of loans and leases as of December 31, 2019 follows.  There were no loans or leases 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

Components Of Net Investment In Direct Financing Leases

	June 30, 2020		December 31, 2019
	(unaudited)
Total minimum lease payments to be received	$	4,856	$	5,252
Less: unearned income		(397)		(473)
Net investment in direct financing leases	$	4,459	$	4,779

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

Summary Of Future Minimum Lease Payments Receivable

2020	$	397
2021		793
2022		793
2023		1,563
2024		1,310
	$	4,856

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Leases (Tables)

6 Months Ended

Jun. 30, 2020

Leases [Abstract]

Future Minimum Operating Lease Payments

2020, excluding the six months ended June 30, 2020	$	273
2021		548
2022		536
2023		377
2024		250
Total future minimum rental commitments		1,984
Less - amounts representing interest		(234)
Total operating lease liabilities	$	1,750

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Fair Value (Tables)

6 Months Ended

Jun. 30, 2020

Fair Value [Abstract]

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

	Fair Value Measurements at June 30, 2020 using Significant Other Observable Inputs
	(Level 2)
	(unaudited)
Financial Assets:
Securities available for sale:
Issued by U.S. government-sponsored entities and agencies:
U.S. Treasury	$	10,711
Mortgage-backed securities - residential		81
Collateralized mortgage obligations		10
Total securities available for sale	$	10,802
Loans held for sale	$	165,891
Yield maintenance provisions (embedded derivatives)	$	2,055
Interest rate lock commitments	$	15,402
Financial Liabilities:
Interest-rate swaps	$	2,055
TBA Mortgage-back securities	$	2,378

	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

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

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

		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%

Aggregate Fair Value, Contractual Balance And Gain Or Loss

	June 30, 2020		December 31, 2019
	(unaudited)
Aggregate fair value	$	165,891	$	135,711
Contractual balance		159,718		133,993
Gain	$	6,173	$	1,718

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

	Three months ended June 30,				Six months ended June 30,
	2020		2019		2020		2019
	(unaudited)				(unaudited)
Interest income	$	1,256	$	275	$	2,453	$	490
Interest expense		-		-		-		-
Change in fair value		3,220		516		4,455		776
Total change in fair value	$	4,476	$	791	$	6,908	$	1,266

Carrying Amounts And Estimated Fair Values Of Financial Instruments

The carrying amounts and estimated fair values of financial instruments at June 30, 2020 were as follows:

	Fair Value Measurements at June 30, 2020 Using:
	Carrying
(unaudited)	Value		Level 1		Level 2		Level 3		Total
Financial assets
Cash and cash equivalents	$	77,376	$	77,376	$	-	$	-	$	77,376
Interest-bearing deposits in other financial institutions		100		100		-		-		100
Securities available for sale		10,802		-		10,802		-		10,802
Loans held for sale		165,891		-		165,891		-		165,891
Loans and leases, net		846,529		-		-		856,282		856,282
FHLB and FRB stock		5,216		n/a		n/a		n/a		n/a
Accrued interest receivable		3,845		1		44		3,800		3,845
Yield maintenance provisions (embedded derivatives)		2,055		-		2,055		-		2,055
Interest rate lock commitments		15,402		-		15,402		-		15,402
Financial liabilities
Deposits	$	(849,038)	$	(448,685)	$	(408,995)	$	-	$	(857,680)
FHLB advances and other borrowings		(165,806)		-		(167,298)		-		(167,298)
Advances by borrowers for taxes and insurance		(782)		-		-		(782)		(782)
Subordinated debentures		(14,825)		-		(15,622)		-		(15,622)
Accrued interest payable		(229)		-		(229)		-		(229)
Interest-rate swaps		(2,055)		-		(2,055)		-		(2,055)
TBA mortgage-back securities		(2,378)		-		(2,378)		-		(2,378)

The carrying amounts and estimated fair values of financial instruments at December 31, 2019 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 borrowings		(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)

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FHLB Advances And Other Debt (Tables)

6 Months Ended

Jun. 30, 2020

FHLB Advances And Other Debt [Abstract]

Schedule Of FHLB Advances And Other Debt

	Weighted
	Average Rate	June 30, 2020		December 31, 2019
FHLB fixed rate advances:
Maturities:
2020	2.15%	$	3,500	$	4,500
2021	1.63%		7,500		4,000
2022	1.16%		10,000		1,500
2023	0.92%		3,500		-
2024	1.90%		6,500		6,500
Total FHLB fixed rate advances			31,000		16,500
Fixed rate other debt:
FRB PPPLF advances	0.35%		125,056		-
Variable rate other debt:
Holding Company credit facility	4.00%		9,750		5,000
Warehouse facility	-		-		7,517
Total variable rate other debt			9,750		12,517
Total		$	165,806	$	29,017

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Stock-Based Compensation (Tables)

6 Months Ended

Jun. 30, 2020

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	95,438	$	7.64
Exercised	(4,545)		7.98
Cancelled or forfeited	(14)		17.33
Outstanding at end of period	90,879	$	7.62	2.9	$	258
Exercisable at end of period	90,879	$	7.62	2.9	$	258

Summary Of Changes In Company's Nonvested Restricted Shares

Nonvested Shares	Shares	Weighted Average Grant-Date Fair Value
Nonvested at January 1, 2020	102,916	$	13.11
Granted	-		-
Vested	(17,092)		12.89
Forfeited	(5,234)		12.81
Nonvested at June 30, 2020	80,590	$	13.17

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Regulatory Capital Matters (Tables)

6 Months Ended

Jun. 30, 2020

Regulatory Capital Matters [Abstract]

Actual And Required Capital Amounts And Ratios Of CFBank

	Actual			Minimum Capital Required-Basel III Fully Phased-In			To Be Well Capitalized Under Applicable Regulatory Capital Standards
	Amount		Ratio	Amount		Ratio	Amount		Ratio
June 30, 2020
Total Capital to risk weighted assets	$	116,380	14.01%	$	87,231	10.50%	$	83,077	10.00%
Tier 1 (Core) Capital to risk weighted assets		106,086	12.77%		70,615	8.50%		66,461	8.00%
Common equity tier 1 capital to risk-weighted assets		106,086	12.77%		58,154	7.00%		54,000	6.50%
Tier 1 (Core) Capital to adjusted total assets (Leverage ratio)		106,086	10.44%		40,637	4.00%		50,796	5.00%

	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%

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Derivative Instruments (Tables)

6 Months Ended

Jun. 30, 2020

Derivative Instruments [Abstract]

Summary Of Derivative Instruments

	June 30, 2020		December 31, 2019
	(unaudited)
Notional amount	$	31,391	$	12,039
Weighted average pay rate on interest-rate swaps		4.35%		4.66%
Weighted average receive rate on interest-rate swaps		3.06%		4.63%
Weighted average maturity (years)		8.2		7.3
Fair value of interest-rate swaps	$	(2,055)	$	(12)
Fair value of yield maintenance provisions		2,055		12

Schedule Of Mortgage Banking Derivatives

	June 30, 2020				December 31, 2019
	Notional Amount		Fair Value		Notional Amount		Fair Value
Assets (Liabilities):
Interest rate commitments	$	668,009	$	15,402	$	297,454	$	3,104
TBA mortgage-back securities		402,250		(2,378)		225,500		(350)

Schedule Of Revenue Recognized On Mortgage Activities

	Three months ended				Six months ended
	June 30,				June 30,
	2020		2019		2020		2019
Gain on loans sold	$	11,901	$	1,884	$	17,482	$	3,116
Gain (loss) from change in fair value of loans held-for-sale		3,220		516		4,455		776
Gain (loss) from change in fair value of derivatives		4,455		(49)		483		(90)
	$	19,576	$	2,351	$	22,420	$	3,802

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Income Taxes (Tables)

6 Months Ended

Jun. 30, 2020

Income Taxes [Abstract]

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

	For the three months ended June 30,		For the six months ended June 30,
	2020	2019	2020	2019
	(unaudited)		(unaudited)
Statutory tax rate	21.0%	21.0%	21.0%	21.0%
Increase (decrease) resulting from:
Restricted stock	0.0%	0.0%	0.1%	0.0%
Tax exempt income on bank owned life insurance	(0.1%)	(0.3%)	(0.1%)	(0.3)%
Low income housing credits	(0.2%)	(0.5%)	(0.3%)	(0.6%)
Other, net	0.0%	0.2%	0.0%	0.1%
Effective tax rate	20.7%	20.4%	20.7%	20.2%

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Accumulated Other Comprehensive Income (Tables)

6 Months Ended

Jun. 30, 2020

Accumulated Other Comprehensive Income [Abstract]

Schedule Of Accumulated Other Comprehensive Income

Changes in Accumulated Other Comprehensive Income by Component (1)
	Three months ended				Six months ended
	June 30,				June 30,
	2020		2019		2020		2019
	(unaudited)				(unaudited)
	Unrealized Gains and Losses on Available-for-Sale Securities				Unrealized Gains and Losses on Available-for-Sale Securities
Accumulated other comprehensive income (loss), beginning of period	$	172	$	(38)	$	28	$	(73)
Other comprehensive income (loss) before reclassifications (2)		(26)		52		118		87
Net current-period other comprehensive income (loss)		(26)		52		118		87
Accumulated other comprehensive income, end of period	$	146	$	14	$	146	$	14

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

⁽²⁾ There were no amounts reclassified out of other comprehensive income for the three and six months ended June 30, 2020 and 2019.

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Summary of Significant Accounting Policies (Narrative) (Details) - USD ($) $ in Thousands	6 Months Ended	12 Months Ended
	Jun. 30, 2020	Dec. 31, 2019
Summary Of Significant Accounting Policies [Abstract]
Minimum balance of loans individually evaluated for impairment	$ 250
Investment	894	$ 894
Maximum exposure to loss related to investments	$ 894

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Summary Of Significant Accounting Policies (Earnings Per Common Share) (Details) - USD ($) $ / shares in Units, $ in Thousands		3 Months Ended		6 Months Ended
		Jun. 30, 2020	Jun. 30, 2019	Jun. 30, 2020	Jun. 30, 2019
Basic
Net income		$ 10,068	$ 2,280	$ 12,074	$ 3,961
Accretion of discount and value of warrants exercised related to Series B preferred stock	[1]		157		183
Earnings allocated to participating securities (Series C preferred stock)		(1,218)		(1,866)
Net income attributable to common stockholders		$ 8,850	$ 2,437	$ 10,208	$ 4,144
Weighted average common shares outstanding including unvested share-based payment awards		5,777,816	4,412,726	5,575,856	4,384,395
Less: Unvested share-based payment awards-2019 Plan		(38,719)		(39,335)
Average shares		5,739,097	4,412,726	5,536,521	4,384,395
Basic earnings per common share		$ 1.54	$ 0.55	$ 1.84	$ 0.95
Diluted
Net earnings allocated to common stockholders		$ 8,850	$ 2,437	$ 10,208	$ 4,144
Weighted average common shares outstanding for basic earnings per common share		5,739,097	4,412,726	5,536,521	4,384,395
Add: Dilutive effects of assumed exercises of stock options		24,762	35,077	25,591	37,075
Add: Dilutive effects of assumed exercises of stock warrants			4,834		13,894
Add: Dilutive effects of unvested share-based payment awards-2019 Plan		38,719		39,335
Average shares and dilutive potential common shares		5,802,578	4,452,637	5,601,447	4,435,364
Diluted earnings per common share		$ 1.53	$ 0.55	$ 1.82	$ 0.93

[1] All outstanding warrants expired on July 15, 2019.

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Summary Of Significant Accounting Policies (Anti Dilutive Average Common Shares) (Details) - shares	3 Months Ended		6 Months Ended
	Jun. 30, 2020	Jun. 30, 2019	Jun. 30, 2020	Jun. 30, 2019
Stock Option [Member]
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Anti-dilutive securities	437	467	444	475

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Securities (Narrative) (Details)	3 Months Ended		6 Months Ended
	Jun. 30, 2020 USD ($) security	Jun. 30, 2019 USD ($)	Jun. 30, 2020 USD ($) security	Jun. 30, 2019 USD ($)	Dec. 31, 2019 security
Schedule of Available-for-sale Securities [Line Items]
Other-than-temporary impairment	$ 0	$ 0	$ 0	$ 0
Sales of securities	$ 0	$ 0	$ 0	$ 0
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%		10.00%
Number of holdings | security	0		0		0

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Securities (Amortized Cost And Fair Value Of Available-For-Sale Securities Portfolio) (Details) - USD ($) $ in Thousands	Jun. 30, 2020	Dec. 31, 2019
Schedule of Available-for-sale Securities [Line Items]
Amortized Cost	$ 10,617	$ 8,139
Gross Unrealized Gains	185	36
Gross Unrealized Losses		1
Available-for-sale Securities Total, Fair Value	10,802	8,174
U.S. Treasury [Member]
Schedule of Available-for-sale Securities [Line Items]
Amortized Cost	10,530	7,986
Gross Unrealized Gains	181	32
Gross Unrealized Losses		1
Available-for-sale Securities Total, Fair Value	10,711	8,017
Mortgage-Backed Securities - Residential [Member]
Schedule of Available-for-sale Securities [Line Items]
Amortized Cost	77	126
Gross Unrealized Gains	4	4
Available-for-sale Securities Total, Fair Value	81	130
Collateralized Mortgage Obligations [Member]
Schedule of Available-for-sale Securities [Line Items]
Amortized Cost	10	27
Available-for-sale Securities Total, Fair Value	$ 10	$ 27

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Securities (Securities Classified By Maturity Date) (Details) - USD ($) $ in Thousands	Jun. 30, 2020	Dec. 31, 2019
Schedule Of Available For Sale Securities [Line Items]
Due in one year or less, Amortized Cost	$ 6,026	$ 5,001
Due from one to five years, Amortized Cost	4,504	2,985
Amortized Cost	10,617	8,139
Due in one year or less, Fair Value	6,065	5,000
Due from one to five years, Fair Value	4,646	3,017
Available-for-sale Securities Total, Fair Value	10,802	8,174
Mortgage-Backed Securities - Residential [Member]
Schedule Of Available For Sale Securities [Line Items]
Amortized Cost	77	126
Available-for-sale Securities Total, Fair Value	81	130
Collateralized Mortgage Obligations [Member]
Schedule Of Available For Sale Securities [Line Items]
Amortized Cost	10	27
Available-for-sale Securities Total, Fair Value	$ 10	$ 27

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Securities (Fair Value Of Securities Pledged) (Details) - USD ($) $ in Thousands	Jun. 30, 2020	Dec. 31, 2019
Pledged as collateral for:
FHLB advances	$ 2,544	$ 3,074
Public deposits	2,552	2,015
Mortgage banking derivatives	3,039	1,500
Interest-rate swaps	65	77
Total	$ 8,200	$ 6,666

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Securities (Securities With Unrealized Losses) (Details) $ in Thousands	Dec. 31, 2019 USD ($)
Schedule of Available-for-sale Securities [Line Items]
Less than 12 Months, Fair Value	$ 499
12 Months or More, Fair Value	2,501
12 Months or More, Unrealized Loss	1
Total, Fair Value	3,000
Total, Unrealized Loss	1
U.S. Treasury [Member]
Schedule of Available-for-sale Securities [Line Items]
Less than 12 Months, Fair Value	499	[1]
12 Months or More, Fair Value	2,501	[1]
12 Months or More, Unrealized Loss	1	[1]
Total, Fair Value	3,000	[1]
Total, Unrealized Loss	$ 1	[1]

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

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Loans And Leases (Narrative) (Details)		3 Months Ended		6 Months Ended
		Jun. 30, 2020 USD ($)	Jun. 30, 2019 USD ($)	Jun. 30, 2020 USD ($) loan	Jun. 30, 2019 USD ($) loan	Dec. 31, 2019 USD ($)
Accounts Notes And Loans Receivable [Line Items]
Loans		$ 846,529,000		$ 846,529,000		$ 663,303,000
Loans 90 days or more past due and still accruing interest
Total TDR's		2,915,000		2,915,000		2,923,000
Allocated specific reserves to modified TDRs		22,000		$ 22,000		22,000
Number of loans modified as a TDR | loan				0	0
Number of TDRs in payment default | loan				0	0
Cash payments of interest		11,000	$ 43,000	$ 53,000	$ 88,000
Recorded investment of loans undergoing modifications, not TDRs		26,995,000	$ 15,821,000	26,995,000	$ 15,821,000
Loans		856,636,000		856,636,000		670,441,000
Deferral loans outstanding balance		$ 100,000,000		$ 100,000,000
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%		95.00%
Ownership interest in each loan is participates				5.00%
Allowance allocated loans		$ 0		$ 0
Single-Family Residential [Member]
Accounts Notes And Loans Receivable [Line Items]
Loans		128,241,000		128,241,000		120,256,000
Single-Family Residential [Member] | Northpointe [Member] | Mortgage Purchase Program [Member]
Accounts Notes And Loans Receivable [Line Items]
Loans		23,116,000		23,116,000		26,046,000
Originated For Portfolio [Member]
Accounts Notes And Loans Receivable [Line Items]
Loans		19,399,000		19,399,000		20,735,000
Accruing [Member]
Accounts Notes And Loans Receivable [Line Items]
Total TDR's		2,915,000		2,915,000		2,838,000
Commercial Real Estate [Member]
Accounts Notes And Loans Receivable [Line Items]
Loans	[1]	327,539,000		327,539,000		$ 170,646,000
Commercial Loans - Paycheck Protection Program [Member]
Accounts Notes And Loans Receivable [Line Items]
Loans		$ 123,500,000		$ 123,500,000
Maturity term				2 years
Stated interest rate		1.00%		1.00%

[1] Includes $4,459 and $4,779 of commercial leases at June 30, 2020 and December 31, 2019, respectively.

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Loans And Leases (Recorded Investment In Loans By Portfolio Segment) (Details) - USD ($) $ in Thousands		Jun. 30, 2020	Mar. 31, 2020	Dec. 31, 2019	Jun. 30, 2019	Mar. 31, 2019	Dec. 31, 2018
Accounts Notes And Loans Receivable [Line Items]
Subtotal		$ 856,636		$ 670,441
Less: ALLL		(10,107)	$ (7,073)	(7,138)	$ (7,029)	$ (7,024)	$ (7,012)
Loans and Leases, net		846,529		663,303
Commercial Real Estate [Member]
Accounts Notes And Loans Receivable [Line Items]
Subtotal	[1]	327,539		170,646
Less: ALLL		(2,664)	(2,103)	(2,054)	(1,969)	(1,819)	(1,819)
Single-Family Residential [Member]
Accounts Notes And Loans Receivable [Line Items]
Subtotal		128,241		120,256
Less: ALLL		(999)	(905)	(948)	(1,014)	(1,063)	(1,061)
Multi-Family Residential [Member]
Accounts Notes And Loans Receivable [Line Items]
Subtotal		46,654		39,229
Less: ALLL		(567)	(512)	(447)	(562)	(622)	(612)
Real Estate Commercial [Member]
Accounts Notes And Loans Receivable [Line Items]
Subtotal		272,207		247,543
Less: ALLL		(4,534)	(2,674)	(2,604)	(2,339)	(2,299)	(2,274)
Construction [Member]
Accounts Notes And Loans Receivable [Line Items]
Subtotal		59,574		67,652
Less: ALLL		(1,024)	(574)	(759)	(759)	(759)	(739)
Home Equity Line Of Credit [Member]
Accounts Notes And Loans Receivable [Line Items]
Subtotal		19,596		20,941
Less: ALLL		(263)	(249)	(265)	(309)	(375)	(410)
Other Consumer [Member]
Accounts Notes And Loans Receivable [Line Items]
Subtotal		2,825		4,174
Less: ALLL		(56)	$ (56)	(61)	$ (77)	$ (87)	$ (97)
Commercial Leases [Member]
Accounts Notes And Loans Receivable [Line Items]
Subtotal		$ 4,459		$ 4,779

[1] Includes $4,459 and $4,779 of commercial leases at June 30, 2020 and December 31, 2019, respectively.

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Loans And Leases (Activity In ALLL By Portfolio Segment) (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2020	Jun. 30, 2019	Jun. 30, 2020	Jun. 30, 2019
Financing Receivable, Allowance for Credit Losses [Line Items]
Beginning balance	$ 7,073	$ 7,024	$ 7,138	$ 7,012
Addition to (reduction in) provision for loan losses	3,125		3,125
Charge-offs	(97)		(168)
Recoveries	6	5	12	17
Ending balance	10,107	7,029	10,107	7,029
Commercial Real Estate [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Beginning balance	2,103	1,819	2,054	1,819
Addition to (reduction in) provision for loan losses	600	150	720	150
Charge-offs	(39)		(110)
Recoveries
Ending balance	2,664	1,969	2,664	1,969
Single-Family Residential [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Beginning balance	905	1,063	948	1,061
Addition to (reduction in) provision for loan losses	150	(50)	105	(50)
Charge-offs	(58)		(58)
Recoveries	2	1	4	3
Ending balance	999	1,014	999	1,014
Multi-Family Residential [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Beginning balance	512	622	447	612
Addition to (reduction in) provision for loan losses	55	(60)	120	(50)
Charge-offs
Recoveries
Ending balance	567	562	567	562
Real Estate Commercial [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Beginning balance	2,674	2,299	2,604	2,274
Addition to (reduction in) provision for loan losses	1,860	40	1,930	65
Charge-offs
Recoveries
Ending balance	4,534	2,339	4,534	2,339
Construction [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Beginning balance	574	759	759	739
Addition to (reduction in) provision for loan losses	450		265	20
Charge-offs
Recoveries
Ending balance	1,024	759	1,024	759
Home Equity Line Of Credit [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Beginning balance	249	375	265	410
Addition to (reduction in) provision for loan losses	10	(70)	(10)	(115)
Charge-offs
Recoveries	4	4	8	14
Ending balance	263	309	263	309
Other Consumer [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Beginning balance	56	87	61	97
Addition to (reduction in) provision for loan losses		(10)	(5)	(20)
Charge-offs
Recoveries
Ending balance	$ 56	$ 77	$ 56	$ 77

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Loans And Leases (Balance In ALLL And Recorded Investment In Loans By Portfolio Segment And Based On Impairment Method) (Details) - USD ($) $ in Thousands		Jun. 30, 2020	Mar. 31, 2020	Dec. 31, 2019	Jun. 30, 2019	Mar. 31, 2019	Dec. 31, 2018
Financing Receivable, Allowance for Credit Losses [Line Items]
Individually evaluated for impairment		$ 22		$ 35
Collectively evaluated for impairment		10,085		7,103
Total ending allowance balance		10,107	$ 7,073	7,138	$ 7,029	$ 7,024	$ 7,012
Individually evaluated for impairment		2,915		4,612
Collectively evaluated for impairment		853,721		665,829
Recorded investment in loans and leases		856,636		670,441
Commercial Real Estate [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Individually evaluated for impairment				1
Collectively evaluated for impairment		2,664		2,053
Total ending allowance balance		2,664	2,103	2,054	1,969	1,819	1,819
Individually evaluated for impairment		81		85
Collectively evaluated for impairment		327,458		170,561
Recorded investment in loans and leases	[1]	327,539		170,646
Single-Family Residential [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Individually evaluated for impairment				1
Collectively evaluated for impairment		999		947
Total ending allowance balance		999	905	948	1,014	1,063	1,061
Individually evaluated for impairment		106		107
Collectively evaluated for impairment		128,135		120,149
Recorded investment in loans and leases		128,241		120,256
Multi-Family Residential [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Collectively evaluated for impairment		567		447
Total ending allowance balance		567	512	447	562	622	612
Collectively evaluated for impairment		46,654		39,229
Recorded investment in loans and leases		46,654		39,229
Real Estate Commercial [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Individually evaluated for impairment		22		33
Collectively evaluated for impairment		4,512		2,571
Total ending allowance balance		4,534	2,674	2,604	2,339	2,299	2,274
Individually evaluated for impairment		2,728		4,420
Collectively evaluated for impairment		269,479		243,123
Recorded investment in loans and leases		272,207		247,543
Construction [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Collectively evaluated for impairment		1,024		759
Total ending allowance balance		1,024	574	759	759	759	739
Collectively evaluated for impairment		59,574		67,652
Recorded investment in loans and leases		59,574		67,652
Home Equity Line Of Credit [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Collectively evaluated for impairment		263		265
Total ending allowance balance		263	249	265	309	375	410
Collectively evaluated for impairment		19,596		20,941
Recorded investment in loans and leases		19,596		20,941
Other Consumer [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Collectively evaluated for impairment		56		61
Total ending allowance balance		56	$ 56	61	$ 77	$ 87	$ 97
Collectively evaluated for impairment		2,825		4,174
Recorded investment in loans and leases		$ 2,825		$ 4,174

[1] Includes $4,459 and $4,779 of commercial leases at June 30, 2020 and December 31, 2019, respectively.

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Loans And Leases (Individually Evaluated For Impairment By Class Of Loans) (Details) - USD ($) $ in Thousands		3 Months Ended			6 Months Ended
		Jun. 30, 2020		Jun. 30, 2019	Jun. 30, 2020		Jun. 30, 2019	Dec. 31, 2019
Financing Receivable, Impaired [Line Items]
Impaired Financing Receivable, with Related Allowance, Unpaid Principal Balance		$ 2,915			$ 2,915			$ 4,612
Impaired Financing Receivable, Unpaid Principal Balance, Total		2,915			2,915			4,612
Impaired Financing Receivable, with Related Allowance, Recorded Investment		2,915			2,915			4,612
Impaired Financing Receivable, Recorded Investment, Total		2,915			2,915			4,612
Impaired Financing Receivable, ALLL Allocated		22			22			35
Impaired Financing Receivable, with No Related Allowance, Average Recorded Investment				$ 324			$ 327
Impaired Financing Receivable, with Related Allowance, Average Recorded Investment		2,944		4,483	2,964		3,932
Impaired Financing Receivable, Average Recorded Investment, Total		2,944		4,807	2,964		4,259
Impaired Financing Receivable, with No Related Allowance, Interest Income Recognized				3			10
Impaired Financing Receivable, with Related Allowance, Interest Income Recognized		41		39	81		76
Impaired Financing Receivable, Interest Income Recognized, Total		41		42	81		86
Impaired Financing Receivable Allocated Loans and Leases		22			22			35
Commercial Real Estate [Member]
Financing Receivable, Impaired [Line Items]
Impaired Financing Receivable, with Related Allowance, Unpaid Principal Balance		81	[1]		81	[1]		85
Impaired Financing Receivable, with Related Allowance, Recorded Investment		81	[1]		81	[1]		85
Impaired Financing Receivable, ALLL Allocated								1
Impaired Financing Receivable, with No Related Allowance, Average Recorded Investment				94			96
Impaired Financing Receivable, with Related Allowance, Average Recorded Investment	[1]	108			126
Impaired Financing Receivable, with Related Allowance, Interest Income Recognized	[1]	3			5
Single-Family Residential [Member]
Financing Receivable, Impaired [Line Items]
Impaired Financing Receivable, with Related Allowance, Unpaid Principal Balance		106	[1]		106	[1]		107
Impaired Financing Receivable, with Related Allowance, Recorded Investment		106	[1]		106	[1]		107
Impaired Financing Receivable, ALLL Allocated								1
Impaired Financing Receivable, with No Related Allowance, Average Recorded Investment				109			109
Impaired Financing Receivable, with Related Allowance, Average Recorded Investment	[1]	106			106
Impaired Financing Receivable, with No Related Allowance, Interest Income Recognized				2			3
Impaired Financing Receivable, with Related Allowance, Interest Income Recognized	[1]				1
Non-Owner Occupied [Member]
Financing Receivable, Impaired [Line Items]
Impaired Financing Receivable, with Related Allowance, Unpaid Principal Balance		2,728			2,728			4,420
Impaired Financing Receivable, with Related Allowance, Recorded Investment		2,728			2,728			4,420
Impaired Financing Receivable, ALLL Allocated		22			22			$ 33
Impaired Financing Receivable, with Related Allowance, Average Recorded Investment		2,730		4,483	2,732		3,932
Impaired Financing Receivable, with Related Allowance, Interest Income Recognized		$ 38		39	$ 75		76
Owner Occupied [Member]
Financing Receivable, Impaired [Line Items]
Impaired Financing Receivable, with No Related Allowance, Average Recorded Investment				121			122
Impaired Financing Receivable, with No Related Allowance, Interest Income Recognized				$ 1			$ 7

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

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Loans And Leases (Recorded Investment In Nonaccrual Loans By Class Of Loans) (Details) - USD ($) $ in Thousands	Jun. 30, 2020	Dec. 31, 2019
Financing Receivable, Recorded Investment, Past Due [Line Items]
Loans past due over 90 days still on accrual
Total nonaccrual and nonperforming loans	581	2,439
Commercial Real Estate [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total nonaccrual and nonperforming loans		85
Single-Family Residential [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total nonaccrual and nonperforming loans	472	550
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	35	36
Purchased For Portfolio [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total nonaccrual and nonperforming loans	74	79
Nonaccrual [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total nonaccrual and nonperforming loans	$ 581	$ 2,439

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Loans And Leases (Aging Of Recorded Investment In Past Due Loans By Class Of Loans) (Details) - USD ($) $ in Thousands	Jun. 30, 2020	Dec. 31, 2019
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Past Due	$ 1,421	$ 5,226
Loans Not Past Due	855,215	665,215
Nonaccrual Loans Not > 90 Days Past Due	201	302
30 - 59 Days Past Due [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Past Due	1,024	2,757
60 - 89 Days Past Due [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Past Due	17	332
Greater Than 90 Days Past Due [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Past Due	380	2,137
Commercial Real Estate [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Past Due		71
Loans Not Past Due	327,539	170,575
Nonaccrual Loans Not > 90 Days Past Due		85
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	1,267	3,140
Loans Not Past Due	126,974	117,116
Nonaccrual Loans Not > 90 Days Past Due	114	124
Single-Family Residential [Member] | 30 - 59 Days Past Due [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Past Due	892	2,453
Single-Family Residential [Member] | 60 - 89 Days Past Due [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Past Due	17	261
Single-Family Residential [Member] | Greater Than 90 Days Past Due [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Past Due	358	426
Multi-Family Residential [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Loans Not Past Due	46,654	39,229
Non-Owner Occupied [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Past Due		1,689
Loans Not Past Due	151,927	138,762
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	92,176	81,871
Land [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Loans Not Past Due	28,104	25,221
Construction [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Past Due		304
Loans Not Past Due	59,574	67,348
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	154	22
Loans Not Past Due	19,245	20,713
Nonaccrual Loans Not > 90 Days Past Due	13	14
Originated For Portfolio [Member] | 30 - 59 Days Past Due [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Past Due	132
Originated For Portfolio [Member] | Greater Than 90 Days Past Due [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Past Due	22	22
Purchased For Portfolio [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Loans Not Past Due	197	206
Nonaccrual Loans Not > 90 Days Past Due	74	79
Other Consumer [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Loans Not Past Due	$ 2,825	$ 4,174

XML

Loans And Leases (Recorded Investment In Loans By Risk Category And Class Of Loans) (Details) - USD ($)		Jun. 30, 2020	Dec. 31, 2019
Financing Receivable, Recorded Investment [Line Items]
Loans		$ 856,636,000	$ 670,441,000
Not Rated [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans		154,327,000	146,611,000
Pass [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans		687,682,000	512,955,000
Special Mention [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans		9,747,000	5,020,000
Substandard [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans		4,880,000	5,855,000
Doubtful [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans		0	0
Commercial Real Estate [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans	[1]	327,539,000	170,646,000
Commercial Real Estate [Member] | Not Rated [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans		847,000
Commercial Real Estate [Member] | Pass [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans		324,884,000	168,617,000
Commercial Real Estate [Member] | Special Mention [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans		1,298,000	1,424,000
Commercial Real Estate [Member] | Substandard [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans		510,000	605,000
Single-Family Residential [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans		128,241,000	120,256,000
Single-Family Residential [Member] | Not Rated [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans		127,769,000	119,707,000
Single-Family Residential [Member] | Substandard [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans		472,000	549,000
Multi-Family Residential [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans		46,654,000	39,229,000
Multi-Family Residential [Member] | Pass [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans		46,508,000	39,081,000
Multi-Family Residential [Member] | Substandard [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans		146,000	148,000
Real Estate Commercial [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans		272,207,000	247,543,000
Non-Owner Occupied [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans		151,927,000	140,451,000
Non-Owner Occupied [Member] | Not Rated [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans		62,000	67,000
Non-Owner Occupied [Member] | Pass [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans		142,706,000	134,466,000
Non-Owner Occupied [Member] | Special Mention [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans		6,431,000	1,498,000
Non-Owner Occupied [Member] | Substandard [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans		2,728,000	4,420,000
Owner Occupied [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans		92,176,000	81,871,000
Owner Occupied [Member] | Not Rated [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans		309,000
Owner Occupied [Member] | Pass [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans		88,951,000	79,773,000
Owner Occupied [Member] | Special Mention [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans		2,018,000	2,098,000
Owner Occupied [Member] | Substandard [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans		898,000
Land [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans		28,104,000	25,221,000
Land [Member] | Pass [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans		28,104,000	25,221,000
Construction [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans		59,574,000	67,652,000
Construction [Member] | Not Rated [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans		3,045,000	1,855,000
Construction [Member] | Pass [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans		56,529,000	65,797,000
Home Equity Line Of Credit [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans		19,596,000	20,941,000
Originated For Portfolio [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans		19,399,000	20,735,000
Originated For Portfolio [Member] | Not Rated [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans		19,348,000	20,681,000
Originated For Portfolio [Member] | Substandard [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans		51,000	54,000
Purchased For Portfolio [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans		197,000	206,000
Purchased For Portfolio [Member] | Not Rated [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans		122,000	127,000
Purchased For Portfolio [Member] | Substandard [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans		75,000	79,000
Other Consumer [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans		2,825,000	4,174,000
Other Consumer [Member] | Not Rated [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans		$ 2,825,000	$ 4,174,000

[1] Includes $4,459 and $4,779 of commercial leases at June 30, 2020 and December 31, 2019, respectively.

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Loans And Leases (Components Of Net Investment In Direct Financing Leases) (Details) - USD ($) $ in Thousands		Jun. 30, 2020	Dec. 31, 2019
Loans And Leases [Abstract]
Total minimum lease payments to be received	[1]	$ 4,856	$ 5,252
Less: unearned income	[1]	(397)	(473)
Net investment in direct financing leases	[1]	$ 4,459	$ 4,779

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

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Loans And Leases (Summary Of Future Minimum Lease Payments Receivable) (Details) $ in Thousands	Jun. 30, 2020 USD ($)
Loans And Leases [Abstract]
2020	$ 397
2021	793
2022	793
2023	1,563
2024	1,310
Future minimum lease payments	$ 4,856

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Leases (Narrative) (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2020	Jun. 30, 2019	Jun. 30, 2020	Jun. 30, 2019
Leases [Abstract]
Lease terms extending through year			2024
Operating lease, Weighted average remaining lease term	3 years 8 months 12 days		3 years 8 months 12 days
Operating lease, Weighted average discount rate	6.58%		6.58%
Operating lease costs	$ 97	$ 90	$ 192	$ 217
Variable lease costs	$ 81	$ 70	$ 129	$ 101

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Leases (Future Minimum Operating Lease Payments) (Details) - USD ($) $ in Thousands	Jun. 30, 2020	Dec. 31, 2019
Leases [Abstract]
2020, excluding the six months ended June 30, 2020	$ 273
2021	548
2022	536
2023	377
2024	250
Total future minimum rental commitments	1,984
Less - amounts representing interest	(234)
Total operating lease liabilities	$ 1,750	$ 1,960

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Fair Value (Narrative) (Details)	6 Months Ended
	Jun. 30, 2020 USD ($)	Jun. 30, 2019 USD ($)	Dec. 31, 2019 USD ($)
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair value assets and liabilities transfer level 1 to level 3	0		0
Fair value assets and liabilities transfer level 3 to level 1	0		0
Unpaid principal balance of impairment loan at collateral			$ 4,612,000
Valuation allowance			35,000
Fair value option, 90 days or more past due	$ 0		0
Write-downs of impaired collateral-dependent loans	0	$ 0
Loans 90 days or more past due and still accruing interest
PPPLF fixed rate	0.35%
Fair Value, Inputs, Level 1 [Member] | Fair Value, Measurements, Non-Recurring [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets measured at fair value on a recurring basis	$ 0		0
Liabilities measured at fair value on a recurring basis	0		0
Fair Value, Inputs, Level 1 [Member] | Fair Value, Measurements, Recurring [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets measured at fair value on a recurring basis	0		0
Liabilities measured at fair value on a recurring basis	0		0
Fair Value, Inputs, Level 2 [Member] | Fair Value, Measurements, Non-Recurring [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets measured at fair value on a recurring basis	0		0
Liabilities measured at fair value on a recurring basis	0		0
Fair Value, Inputs, Level 3 [Member] | Fair Value, Measurements, Recurring [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets measured at fair value on a recurring basis	0		0
Liabilities measured at fair value on a recurring basis	$ 0		$ 0

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Fair Value (Assets And Liabilities Measured At Fair Value On A Recurring Basis, Including Financial Assets And Liabilities) (Details) - USD ($) $ in Thousands	Jun. 30, 2020	Dec. 31, 2019
Financial Assets:
Total securities available for sale	$ 10,802	$ 8,174
Loans held for sale	165,891	135,711
Fair Value, Inputs, Level 2 [Member]
Financial Assets:
Total securities available for sale	10,802	8,174
Loans held for sale	165,891	135,711
Yield maintenance provisions (embedded derivatives)	2,055	12
Interest rate lock commitments	15,402	3,104
Financial Liabilities:
Interest-rate swaps	2,055	12
TBA Mortgage-backed securities	2,378	350
Fair Value, Measurements, Recurring [Member] | Fair Value, Inputs, Level 2 [Member]
Financial Assets:
Total securities available for sale	10,802	8,174
Loans held for sale	165,891	135,711
Fair Value, Measurements, Recurring [Member] | U.S. Treasury [Member] | Fair Value, Inputs, Level 2 [Member]
Financial Assets:
Total securities available for sale	10,711	8,017
Fair Value, Measurements, Recurring [Member] | Mortgage-Backed Securities - Residential [Member] | Fair Value, Inputs, Level 2 [Member]
Financial Assets:
Total securities available for sale	81	130
Fair Value, Measurements, Recurring [Member] | Collateralized Mortgage Obligations [Member] | Fair Value, Inputs, Level 2 [Member]
Financial Assets:
Total securities available for sale	10	27
Fair Value, Measurements, Recurring [Member] | Yield Maintenance Provisions (Embedded Derivatives) [Member] | Fair Value, Inputs, Level 2 [Member]
Financial Assets:
Yield maintenance provisions (embedded derivatives)	2,055	12
Fair Value, Measurements, Recurring [Member] | Interest Rate Lock Commitments [Member] | Fair Value, Inputs, Level 2 [Member]
Financial Assets:
Interest rate lock commitments	15,402	3,104
Fair Value, Measurements, Recurring [Member] | Interest Rate Swap [Member] | Fair Value, Inputs, Level 2 [Member]
Financial Liabilities:
Interest-rate swaps	2,055	12
Fair Value, Measurements, Recurring [Member] | TBA Mortgage-Back Securities [Member] | Fair Value, Inputs, Level 2 [Member]
Financial Liabilities:
TBA Mortgage-backed securities	$ 2,378	$ 350

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Fair Value (Assets Measured At Fair Value On A Non-Recurring Basis) (Details) - USD ($) $ in Thousands	Jun. 30, 2020	Dec. 31, 2019
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Total impaired loans	$ 2,915	$ 4,612
Fair Value, Measurements, Non-Recurring [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
Commercial Real Estate [Member] | Fair Value, Measurements, Non-Recurring [Member] | Fair Value, Inputs, Level 3 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Total impaired loans		84
Single-Family Residential [Member] | Fair Value, Measurements, Non-Recurring [Member] | Fair Value, Inputs, Level 3 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Total impaired loans		106
Non-Owner Occupied [Member] | Fair Value, Measurements, Non-Recurring [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

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Fair Value (Financial Instruments Measured At Fair Value On A Non-Recurring Basis) (Details) $ in Thousands	Dec. 31, 2019 USD ($)
Commercial Real Estate [Member]
Fair Value Measurements, Recurring and Nonrecurring, Valuation Techniques [Line Items]
Fair Value	$ 84
Commercial Real Estate [Member] | Weighted Average [Member] | Unobservable Input, Comparability Adjustment [Member]
Fair Value Measurements, Recurring and Nonrecurring, Valuation Techniques [Line Items]
(Range) Weighted Average	2.06%
Single-Family Residential [Member]
Fair Value Measurements, Recurring and Nonrecurring, Valuation Techniques [Line Items]
Fair Value	$ 106
Single-Family Residential [Member] | Weighted Average [Member] | Unobservable Input, Comparability Adjustment [Member]
Fair Value Measurements, Recurring and Nonrecurring, Valuation Techniques [Line Items]
(Range) Weighted Average	3.61%
Non-Owner Occupied [Member]
Fair Value Measurements, Recurring and Nonrecurring, Valuation Techniques [Line Items]
Fair Value	$ 4,387
Non-Owner Occupied [Member] | Minimum [Member] | Unobservable Input, Comparability Adjustment [Member]
Fair Value Measurements, Recurring and Nonrecurring, Valuation Techniques [Line Items]
(Range) Weighted Average	(2.58%)
Non-Owner Occupied [Member] | Maximum [Member] | Unobservable Input, Comparability Adjustment [Member]
Fair Value Measurements, Recurring and Nonrecurring, Valuation Techniques [Line Items]
(Range) Weighted Average	14.00%
Non-Owner Occupied [Member] | Weighted Average [Member] | Unobservable Input, Comparability Adjustment [Member]
Fair Value Measurements, Recurring and Nonrecurring, Valuation Techniques [Line Items]
(Range) Weighted Average	2.44%

XML

Fair Value (Aggregate Fair Value, Contractual Balance And Gain Or Loss) (Details) - USD ($) $ in Thousands	Jun. 30, 2020	Dec. 31, 2019
Fair Value [Abstract]
Aggregate fair value	$ 165,891	$ 135,711
Contractual balance	159,718	133,993
Gain	$ 6,173	$ 1,718

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Fair Value (Total Amount Of Gains And Losses From Changes In Fair Value Included In Earnings) (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2020	Jun. 30, 2019	Jun. 30, 2020	Jun. 30, 2019
Fair Value [Abstract]
Interest income	$ 1,256	$ 275	$ 2,453	$ 490
Interest expense
Change in fair value	3,220	516	4,455	776
Total change in fair value	$ 4,476	$ 791	$ 6,908	$ 1,266

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Fair Value (Carrying Amounts And Estimated Fair Values Of Financial Instruments) (Details) - USD ($) $ in Thousands	Jun. 30, 2020	Dec. 31, 2019
Financial assets
Securities available for sale	$ 10,802	$ 8,174
Loans held for sale	165,891	135,711
Financial liabilities
FHLB advances and other borrowings	(165,806)	(29,017)
Advances by borrowers for taxes and insurance	(782)	(929)
Fair Value, Inputs, Level 1 [Member]
Financial assets
Cash and cash equivalents	77,376	45,879
Interest-bearing deposits in other financial institutions	100	100
Accrued interest receivable	1	25
Financial liabilities
Deposits	(448,685)	(382,173)
Fair Value, Inputs, Level 2 [Member]
Financial assets
Securities available for sale	10,802	8,174
Loans held for sale	165,891	135,711
Accrued interest receivable	44	40
Yield maintenance provisions (embedded derivatives)	2,055	12
Interest rate lock commitments	15,402	3,104
Financial liabilities
Deposits	(408,995)	(367,375)
FHLB advances and other borrowings	(167,298)	(29,669)
Subordinated debentures	(15,622)	(15,940)
Accrued interest payable	(229)	(208)
Interest-rate swaps	(2,055)	(12)
TBA mortgage-backed securities	(2,378)	(350)
Fair Value, Inputs, Level 3 [Member]
Financial assets
Loans and leases, net	856,282	664,152
Accrued interest receivable	3,800	2,684
Financial liabilities
Advances by borrowers for taxes and insurance	(782)	(929)
Carrying Value [Member]
Financial assets
Cash and cash equivalents	77,376	45,879
Interest-bearing deposits in other financial institutions	100	100
Securities available for sale	10,802	8,174
Loans held for sale	165,891	135,711
Loans and leases, net	846,529	663,303
FHLB and FRB stock	5,216	4,008
Accrued interest receivable	3,845	2,749
Yield maintenance provisions (embedded derivatives)	2,055	12
Interest rate lock commitments	15,402	3,104
Financial liabilities
Deposits	(849,038)	(746,323)
FHLB advances and other borrowings	(165,806)	(29,017)
Advances by borrowers for taxes and insurance	(782)	(929)
Subordinated debentures	(14,825)	(14,806)
Accrued interest payable	(229)	(208)
Interest-rate swaps	(2,055)	(12)
TBA mortgage-backed securities	(2,378)	(350)
Fair Value [Member]
Financial assets
Cash and cash equivalents	77,376	45,879
Interest-bearing deposits in other financial institutions	100	100
Securities available for sale	10,802	8,174
Loans held for sale	165,891	135,711
Loans and leases, net	856,282	664,152
Accrued interest receivable	3,845	2,749
Yield maintenance provisions (embedded derivatives)	2,055	12
Interest rate lock commitments	15,402	3,104
Financial liabilities
Deposits	(857,680)	(749,548)
FHLB advances and other borrowings	(167,298)	(29,669)
Advances by borrowers for taxes and insurance	(782)	(929)
Subordinated debentures	(15,622)	(15,940)
Accrued interest payable	(229)	(208)
Interest-rate swaps	(2,055)	(12)
TBA mortgage-backed securities	$ (2,378)	$ (350)

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Subordinated Debentures (Narrative) (Details) - USD ($)	1 Months Ended	6 Months Ended
	Dec. 31, 2018	Jun. 30, 2020	Dec. 31, 2019	Dec. 31, 2003
Subsidiary, Sale of Stock [Line Items]
Subordinated debentures		$ 14,825,000	$ 14,806,000	$ 5,155,000
Holding Company's investment in the common stock				$ 155,000
Private Placement [Member]
Subsidiary, Sale of Stock [Line Items]
Holding Company, closed a pooled private offering				5,000
Trust preferred securities with a liquidation amount				$ 1
Subordinated [Member]
Subsidiary, Sale of Stock [Line Items]
Maturity date		Dec. 30, 2033
Required principal payments over next five years		$ 0
Number of years with no principal repayment		5 years
Maximum number of years for deferred interest payments		5 years
Subordinated [Member] | Subordinated Debentures Maturing On December 30,2033 [Member]
Subsidiary, Sale of Stock [Line Items]
Holding Company may redeem the subordinated debentures in a principal amount with integral multiples				$ 1
Percentage in which holding company redeem subordinated debentures				100.00%
Trust preferred securities and subordinated debentures have a stated percentage		4.22%	4.81%
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	$ 10,000,000	$ 9,670,000
Interest rate	7.00%
Debt issuance costs	$ 388,000
London Interbank Offered Rate [Member] | Subordinated [Member] | Subordinated Debentures Maturing On December 30,2033 [Member]
Subsidiary, Sale of Stock [Line Items]
Variable rate of interest		2.85%
London Interbank Offered Rate [Member] | Subordinated [Member] | Fixed-To-Floating Rate Subordinated Notes [Member]
Subsidiary, Sale of Stock [Line Items]
Subordinated notes		$ 9,612,000
London Interbank Offered Rate [Member] | Subordinated [Member] | Fixed-To-Floating Rate Subordinated Notes [Member] | Private Placement [Member]
Subsidiary, Sale of Stock [Line Items]
Variable rate of interest	4.14%

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FHLB Advances And Other Debt (Narrative) (Details) - USD ($)	1 Months Ended	3 Months Ended		6 Months Ended
	Dec. 31, 2019	Jun. 30, 2020	Dec. 31, 2019	Jun. 30, 2020	Sep. 30, 2019	Dec. 31, 2018
PPPLF fixed rate				0.35%
Line of credit outstanding	$ 0		$ 0
Third-Party Bank [Member]
Line of credit, borrowing capacity						$ 10,000,000
Variable rate spread	0.75%
Third-Party Bank [Member] | Term Loan [Member]
Loan	$ 5,000,000	$ 4,750,000	5,000,000	$ 4,750,000
Line Of Credit [Member] | Third-Party Bank [Member]
Line of credit, borrowing capacity	10,000,000		10,000,000
Line of credit outstanding		5,000,000		5,000,000
Outstanding borrowings	5,000,000		5,000,000
Line Of Credit [Member] | Third-Party Bank [Member] | Term Loan [Member]
Principal payments	$ 125,000
Line of credit, expiration date	Dec. 23, 2022
Line Of Credit [Member] | Commercial Bank [Member]
Line of credit, borrowing capacity		8,000,000		8,000,000
Line of credit outstanding	$ 0	0	0	0
Line Of Credit [Member] | Commercial Bank Two [Member]
Line of credit, borrowing capacity					$ 15,000,000
FRB PPPLF Advances [Member]
Outstanding borrowings		125,056,000		125,056,000
Warehouse Facility [Member] | Commercial Bank [Member]
Line of credit, borrowing capacity	25,000,000		25,000,000
Line of credit outstanding	7,517,000		7,517,000
Warehouse Facility [Member] | Commercial Bank Three [Member]
Line of credit, borrowing capacity		75,000,000		75,000,000
Line of credit outstanding	$ 0	$ 0	$ 0	$ 0
Minimum [Member] | Warehouse Facility [Member] | Commercial Bank [Member] | London Interbank Offered Rate [Member]
Variable rate spread			2.00%
Minimum [Member] | Warehouse Facility [Member] | Commercial Bank Three [Member] | London Interbank Offered Rate [Member]
Variable rate spread		1.75%
Maximum [Member] | Warehouse Facility [Member] | Commercial Bank [Member] | London Interbank Offered Rate [Member]
Variable rate spread			4.00%
Maximum [Member] | Warehouse Facility [Member] | Commercial Bank Three [Member] | London Interbank Offered Rate [Member]
Variable rate spread		3.50%

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FHLB Advances And Other Debt (Schedule Of FHLB Advances And Other Debt) (Details) - USD ($) $ in Thousands	Jun. 30, 2020	Dec. 31, 2019
Federal Home Loan Bank, Advances, Branch of FHLB Bank [Line Items]
Total	$ 165,806	$ 29,017
Federal Home Loan Bank Advances [Member]
Federal Home Loan Bank, Advances, Branch of FHLB Bank [Line Items]
2020, FHLB Weighted Average Rate	2.15%
2021, FHLB Weighted Average Rate	1.63%
2022, FHLB Weighted Average Rate	1.16%
2023, FHLB Weighted Average Rate	0.92%
2024, FHLB Weighted Average Rate	1.90%
2020, FHLB fixed rate advances	$ 3,500	4,500
2021, FHLB fixed rate advances	7,500	4,000
2022, FHLB fixed rate advances	10,000	1,500
2023, FHLB fixed rate advances	3,500
2024, FHLB fixed rate advances	6,500	6,500
Total FHLB fixed rate advances	$ 31,000	16,500
Federal Reserve Bank Advances [Member] | FRB PPPLF Advances [Member]
Federal Home Loan Bank, Advances, Branch of FHLB Bank [Line Items]
FRB PPPLF advances, Weighted Average Rate	0.35%
FRB PPPLF advances	$ 125,056
Line Of Credit [Member]
Federal Home Loan Bank, Advances, Branch of FHLB Bank [Line Items]
Total variable rate other debt	$ 9,750	12,517
Line Of Credit [Member] | Holding Company Credit Facility [Member]
Federal Home Loan Bank, Advances, Branch of FHLB Bank [Line Items]
Variable rate other debt, Weighted Average Rate	4.00%
Total variable rate other debt	$ 9,750	5,000
Line Of Credit [Member] | Warehouse Facility [Member]
Federal Home Loan Bank, Advances, Branch of FHLB Bank [Line Items]
Total variable rate other debt		$ 7,517

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Stock-Based Compensation (Narrative) (Details) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2020 USD ($) shares	Jun. 30, 2019 USD ($)	Jun. 30, 2020 USD ($) ShareBasedCompensationPlan shares	Jun. 30, 2019 USD ($) shares	May 29, 2019 shares	Mar. 19, 2019 shares	May 16, 2013 shares	May 21, 2009 shares
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Number of stock-based compensation plans | ShareBasedCompensationPlan			2
Compensation cost | $	$ 207	$ 138	$ 350	$ 254
Total income tax (expense) benefit | $	$ 43	29	$ 73	$ 53
Shares available to be issued							272,727
2009 Equity Compensation Plan [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Shares remaining available						0
2019 Equity Incentive Plan [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Number of shares authorized					300,000
Shares remaining available	269,704		269,704
Stock Options [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Expiration period			10 years
Shares cancelled, forfeited or expired			14	925
Options exercised			4,545
Shares granted			0	0
Stock Options [Member] | Minimum [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Vesting periods			1 year
Stock Options [Member] | Maximum [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Vesting periods			3 years
Restricted Stock [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Shares granted			0
Unrecognized compensation cost | $	$ 805	$ 972	$ 805	$ 972
Shares vested			17,092
Restricted Stock [Member] | 2009 Equity Compensation Plan [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Number of shares authorized								36,363
Restricted Stock [Member] | 2019 Equity Incentive Plan [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Shares granted				33,788
Restricted Stock [Member] | Minimum [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Vesting periods			1 year
Restricted Stock [Member] | Maximum [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Vesting periods			3 years

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Stock-Based Compensation (Summary Of Stock Option Activity) (Details) - Stock Options [Member] $ / shares in Units, $ in Thousands	6 Months Ended
	Jun. 30, 2020 USD ($) $ / shares shares
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Shares, Outstanding at beginning of year | shares	95,438
Shares, Exercised | shares	(4,545)
Shares Cancelled or forfeited | shares	(14)
Shares, Outstanding at end of period | shares	90,879
Shares, Exercisable at end of period | shares	90,879
Weighted Average Exercise Price, Beginning Balance | $ / shares	$ 7.64
Weighted Average Exercise Price, Exercised | $ / shares	7.98
Weighted Average Exercise Price, Cancelled or forfeited | $ / shares	17.33
Weighted Average Exercise Price, Ending Balance | $ / shares	7.62
Weighted Average Exercise Price, Exercisable at end of period | $ / shares	$ 7.62
Weighted average remaining contractual term ,Outstanding at end of period	2 years 10 months 24 days
Weighted average remaining contractual term , Exercisable at end of period	2 years 10 months 24 days
Intrinsic value, Outstanding at end of period | $	$ 258
Intrinsic value, Exercisable at end of period | $	$ 258

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Stock-Based Compensation (Summary Of Changes In Company's Nonvested Restricted Shares) (Details) - Restricted Stock [Member] - $ / shares	6 Months Ended
	Jun. 30, 2020	Jun. 30, 2019
Shares, Nonvested at, Beginning	102,916
Shares, Granted
Shares, Vested	(17,092)
Shares, Forfeited	(5,234)	(1,493)
Shares, Nonvested at, Ending	80,590
Weighted Average Grant date Fair Value, Nonvested at, Beginning	$ 13.11
Weighted Average Grant date Fair Value, Granted
Weighted Average Grant date Fair Value, Vested	12.89
Weighted Average Grant date Fair Value, Forfeited	12.81
Weighted Average Grant date Fair Value, Nonvested at, Ending	$ 13.17

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Regulatory Capital Matters (Narrative) (Details) - USD ($) $ in Thousands	Jan. 01, 2019	Jan. 01, 2016	Jun. 30, 2020
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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Regulatory Capital Matters (Actual And Required Capital Amounts And Ratios Of CFBank) (Details) - USD ($) $ in Thousands	Jun. 30, 2020	Dec. 31, 2019
Regulatory Capital Matters [Abstract]
Total Capital to risk weighted assets, Actual Amount	$ 116,380	$ 95,164
Tier 1 (Core) Capital to risk weighted assets, Actual Amount	106,086	87,857
Common equity tier 1 capital to risk-weighted assets, Actual Amount	106,086	87,857
Tier 1 (Core) Capital to adjusted total assets, Actual Amount	$ 106,086	$ 87,857
Total Capital to risk weighted assets, Actual Ratio	0.1401	0.1296
Tier 1 (Core) Capital to risk weighted assets, Actual Ratio	0.1277	0.1197
Common equity tier 1 capital to risk-weighted assets, Actual Ratio	0.1277%	0.1197%
Tier 1 (Core) Capital to adjusted total assets, Actual Ratio	0.1044	0.1058
Total Capital to risk weighted assets, Minimum Capital Required-Basel III Fully Phased-In Amount	$ 87,231	$ 77,097
Tier 1 (Core) Capital to risk weighted assets, Minimum Capital Required-Basel III Fully Phased-In Amount	70,615	62,412
Common equity tier 1 capital to risk-weighted assets, Minimum Capital Required-Basel III Fully Phased-In Amount	58,154	51,398
Tier 1 (Core) Capital to adjusted total assets, Minimum Capital Required-Basel III Fully Phased-In Amount	$ 40,637	$ 33,221
Total Capital to risk weighted assets, Minimum Capital Required-Basel III Fully Phased-In Ratio	0.1050	0.1050
Tier 1 (Core) Capital to risk weighted assets, Minimum Capital Required-Basel III Fully Phased-In Ratio	0.0850	0.0850
Common equity tier 1 capital to risk-weighted assets, Minimum Capital Required-Basel III Fully Phased-In Ratio	0.07%	0.07%
Tier 1 (Core) Capital to adjusted total assets, Minimum Capital Required-Basel III Fully Phased-In Ratio	0.0400	0.0400
Total Capital to risk weighted assets, To Be Well Capitalized Under Applicable Regulatory Capital Standards Amount	$ 83,077	$ 73,425
Tier 1 (Core) Capital to risk weighted assets, To Be Well Capitalized Under Applicable Regulatory Capital Standards Amount	66,461	58,740
Common equity tier 1 capital to risk-weighted assets, To Be Well Capitalized Under Applicable Regulatory Capital Standards Amount	54,000	47,726
Tier 1 (Core) Capital to adjusted total assets, To Be Well Capitalized Under Applicable Regulatory Capital Standards Amount	$ 50,796	$ 41,526
Total Capital to risk weighted assets, To Be Well Capitalized Under Applicable Regulatory Capital Standards Ratio	0.1000	0.1000
Tier 1 (Core) Capital to risk weighted assets, To Be Well Capitalized Under Applicable Regulatory Capital Standards Ratio	0.0800	0.0800
Common equity tier 1 capital to risk-weighted assets, To Be Well Capitalized Under Applicable Regulatory Capital Standards Ratio	0.065%	0.065%
Tier 1 (Core) Capital to adjusted total assets, To Be Well Capitalized Under Applicable Regulatory Capital Standards Ratio	0.0500	0.0500

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Derivative Instruments (Narrative) (Details) - USD ($)	6 Months Ended
	Jun. 30, 2020	Jun. 30, 2019	Dec. 31, 2019
Interest Rate Swap [Member]
Derivative [Line Items]
Notional amount	$ 31,391,000		$ 12,039,000
Fair value, Derivative assets	2,055,000		12,000
Posted cash collateral	2,391,000
Net gains (losses) recognized in earnings	0	$ 0
Interest Rate Commitments [Member]
Derivative [Line Items]
Fair value, Derivative assets	15,402,000		3,104,000
Notional amount	668,009,000		297,454,000
Interest Rate Lock Commitments [Member]
Derivative [Line Items]
Notional amount	668,009,000		297,454,000
Fair value, Derivative assets	$ 15,402,000		3,104,000
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	$ 402,250,000		225,500,000
Posted cash collateral	2,192,000
Notional amount	402,250,000		225,500,000
Fair value	(2,378,000)		$ (350,000)
CF Bank [Member]
Derivative [Line Items]
Pledged, collateral derivatives	$ 2,456,000

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Derivative Instruments (Summary Of Derivative Instruments) (Details) - Interest Rate Swap [Member] - USD ($) $ in Thousands	6 Months Ended	12 Months Ended
	Jun. 30, 2020	Dec. 31, 2019
Derivative Instruments, Gain (Loss) [Line Items]
Notional amount	$ 31,391	$ 12,039
Weighted average pay rate on interest-rate swaps	4.35%	4.66%
Weighted average receive rate on interest-rate swaps	3.06%	4.63%
Weighted average maturity (years)	8 years 2 months 12 days	7 years 3 months 18 days
Fair value of interest-rate swaps	$ (2,055)	$ (12)
Fair value of yield maintenance provisions	$ 2,055	$ 12

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Derivative Instruments (Schedule Of Mortgage Banking Derivatives) (Details) - USD ($) $ in Thousands	Jun. 30, 2020	Dec. 31, 2019
Interest Rate Commitments [Member]
Derivatives, Fair Value [Line Items]
Notional Amount, Assets	$ 668,009	$ 297,454
Fair value, Derivative assets	15,402	3,104
TBA Mortgage-Back Securities [Member]
Derivatives, Fair Value [Line Items]
Notional Amount, Assets	402,250	225,500
Fair Value, Derivative	$ (2,378)	$ (350)

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Derivative Instruments (Schedule Of Revenue Recognized On Mortgage Activities) (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2020	Jun. 30, 2019	Jun. 30, 2020	Jun. 30, 2019
Derivative Instruments [Abstract]
Gain on loans sold	$ 11,901	$ 1,884	$ 17,482	$ 3,116
Gain (loss) from change in fair value of loans held-for-sale	3,220	516	4,455	776
Gain (loss) from change in fair value of derivatives	4,455	(49)	483	(90)
Revenue recognized on mortgage activities	$ 19,576	$ 2,351	$ 22,420	$ 3,802

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Income Taxes (Narrative) (Details) - USD ($)	3 Months Ended		6 Months Ended		12 Months Ended
	Jun. 30, 2020	Jun. 30, 2019	Jun. 30, 2020	Jun. 30, 2019	Dec. 31, 2012	Dec. 31, 2019
Proceeds from sale of common stock					$ 22,500,000
Net operating loss carry forwards	$ 22,579,000		$ 22,579,000
Carryforwards utilize limit before the stock offering closed			163,000
Unutilized operating loss carryforwards that will expire	20,520,000		20,520,000
Reduced deferred tax assets and valuation allowance	$ 6,977,000		$ 6,977,000
Deferred tax liability to be recorded						$ 473,000
Effective tax rate	20.70%	20.40%	20.70%	20.20%
Additional bad debt deductions			$ 2,250,000
Deferred tax asset, valuation allowance	$ 0		0
Deferred tax asset	1,600,000		1,600,000			1,700,000
Unrecognized tax benefits	$ 0		$ 0			$ 0
Minimum [Member]
Net operating loss carryforwards, expiration date			Jan. 01, 2024
Maximum [Member]
Net operating loss carryforwards, expiration date			Dec. 31, 2033

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Income Taxes (Summary Of Differences Between Income Taxes At The Federal Statutory And Effective Tax Rate) (Details)	3 Months Ended		6 Months Ended
	Jun. 30, 2020	Jun. 30, 2019	Jun. 30, 2020	Jun. 30, 2019
Income Taxes [Abstract]
Statutory tax rate	21.00%	21.00%	21.00%	21.00%
Increase (decrease) resulting from:
Restricted stock	0.00%	0.00%	0.10%	0.00%
Tax exempt income on bank owned life insurance	(0.10%)	(0.30%)	(0.10%)	(0.30%)
Low income housing credits	(0.20%)	(0.50%)	(0.30%)	(0.60%)
Other, net	0.00%	0.20%	0.00%	0.10%
Effective tax rate	20.70%	20.40%	20.70%	20.20%

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Accumulated Other Comprehensive Income (Schedule Of Accumulated Other Comprehensive Income) (Details) - USD ($)		3 Months Ended		6 Months Ended
		Jun. 30, 2020	Jun. 30, 2019	Jun. 30, 2020	Jun. 30, 2019
Accumulated Other Comprehensive Income (Loss) [Line Items]
Accumulated other comprehensive income (loss), beginning of period				$ 28,000
Other comprehensive income (loss), net of tax		$ (26,000)	$ 52,000	118,000	$ 87,000
Accumulated other comprehensive income, end of period		146,000		146,000
Unrealized Gains and Losses on Available-for-Sale Securities [Member]
Accumulated Other Comprehensive Income (Loss) [Line Items]
Accumulated other comprehensive income (loss), beginning of period	[1]	172,000	(38,000)	28,000	(73,000)
Other comprehensive income (loss) before reclassifications	[1],[2]	(26,000)	52,000	118,000	87,000
Other comprehensive income (loss), net of tax	[1]	(26,000)	52,000	118,000	87,000
Accumulated other comprehensive income, end of period	[1]	146,000	14,000	146,000	14,000
Less amount reclassified from accumulated other comprehensive loss		$ 0	$ 0	$ 0	$ 0

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

[2] There were no amounts reclassified out of other comprehensive income for the three and six months ended June 30, 2020 and 2019.

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Preferred Stock (Narrative) (Details) - USD ($) $ / shares in Units, $ in Thousands								1 Months Ended	3 Months Ended
	May 28, 2020	Oct. 31, 2019	Oct. 25, 2019	Oct. 06, 2017	Sep. 29, 2017	Jul. 15, 2014	May 12, 2014	Apr. 30, 2014	Dec. 31, 2017	Jun. 30, 2020	Mar. 31, 2020	Mar. 30, 2020	Dec. 31, 2019
Schedule of Capitalization, Equity [Line Items]
Common stock, par value										$ 0.01			$ 0.01
Shares authorized										9,090,909			9,090,909
Private Placement [Member]
Schedule of Capitalization, Equity [Line Items]
Aggregate offering price			$ 25,000
Series B Preferred Stock [Member]
Schedule of Capitalization, Equity [Line Items]
Issuance of preferred stock										0			0
Aggregate value
Share conversion, original shares converted				480,000
Stock conversion, estimated preferred stock dividends eliminated quarterly									$ 188
Stock conversion, estimated preferred stock dividends eliminated annually									$ 750
Preferred stock, par value										$ 0.01			$ 0.01
Series B Preferred Stock [Member] | Private Placement [Member]
Schedule of Capitalization, Equity [Line Items]
Issuance of preferred stock						480,000	480,000			480,000
Preferred stock rate								6.25%
Price per share								$ 25.00
Aggregate value						$ 12,000	$ 12,000
Placement fees						482	482
Other offering expenses						149	149
Net proceeds from issuance of Series B preferred stock						$ 11,369	$ 11,369
Series C Preferred Stock [Member]
Schedule of Capitalization, Equity [Line Items]
Issuance of preferred stock										0			12,337
Aggregate value
Shares issued upon conversion	12,607
Preferred stock, par value										$ 0.01			$ 0.01
Number of outstanding shares											12,607	12,337
Series C Preferred Stock [Member] | Private Placement [Member]
Schedule of Capitalization, Equity [Line Items]
Issuance of preferred stock		12,337
Purchase price per share		$ 1,200.00
Shares upon conversion												270
Preferred stock, par value		$ 0.01
Common Stock [Member]
Schedule of Capitalization, Equity [Line Items]
Shares post-reverse-split					0.18
Number of shares exchange												27,000
Common Stock [Member] | Prior Reverse Stock Split [Member]
Schedule of Capitalization, Equity [Line Items]
Shares issued upon conversion				6,857,143
Common Stock [Member] | Post Reverse Stock Split [Member]
Schedule of Capitalization, Equity [Line Items]
Shares issued upon conversion				1,246,753
Common Stock [Member] | Private Placement [Member]
Schedule of Capitalization, Equity [Line Items]
Shares sold		849,615
Purchase price per share		$ 12.00
Non-Voting Common Stock [Member]
Schedule of Capitalization, Equity [Line Items]
Shares upon conversion	100
Common stock, par value										$ 0.01			$ 0.01
Shares authorized	1,260,700									1,260,700			1,260,700
Non-Voting Common Stock [Member] | Private Placement [Member]
Schedule of Capitalization, Equity [Line Items]
Shares upon conversion			100
Common stock, par value			$ 0.01

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Common Stock Warrants (Narrative) (Details) - $ / shares	6 Months Ended
	Jun. 30, 2020	Dec. 31, 2019	Jul. 15, 2014	May 12, 2014
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
Warrants, exercise period	5 years
Warrants, expiration date	Jul. 15, 2019
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		480,000	480,000