CF BANKSHARES INC. 10-K Analysis & Summary – 3/14/2025

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CF BANKSHARES INC.

10-K

Annual report

Filing date:

03/14/2025

TLDR:

ELI5:

CF Bankshares, a small bank, had a less profitable year in 2024. They made less money and are seeing more customers struggle to repay their loans, so investors should be careful.

Accession #:

0001070680-25-000010

Published on

March 16, 2025

Analyst Summary

Net income decreased by 21.0% from $16.9 million in 2023 to $13.4 million in 2024, driven by decreased net interest income and increased provision for credit losses.
Total assets increased slightly by 0.3% to $2.1 billion, with modest growth in net loans and leases and a decrease in cash and cash equivalents.
Asset quality is a concern, with a significant increase in nonperforming loans and an increase in criticized and classified loans.
Return on Average Assets (ROAA) decreased from 0.88% in 2023 to 0.67% in 2024.
Return on Average Equity (ROAE) decreased from 11.46% in 2023 to 8.29% in 2024.
Net Interest Margin (FTE) decreased from 2.59% in 2023 to 2.43% in 2024.
Nonperforming Loans to Total Loans increased from 0.33% in 2023 to 0.87% in 2024.
Management is focused on managing interest rate risk and maintaining adequate capital levels, but the MD&A narrative appears somewhat optimistic given the financial results.

Opportunities and Risks

Opportunity: Continued growth in key metro markets (Columbus, Cleveland, Cincinnati, Akron, Indianapolis).
Opportunity: Capitalizing on select market opportunities in construction lending within identified risk tolerances.
Opportunity: Leveraging technology to improve customer service and operational efficiency.
Risk: Dependence on local and national economic conditions, particularly in Ohio and Indiana.
Risk: Exposure to fluctuating interest rates and their impact on net interest income and asset values.
Risk: Potential for increased loan losses due to borrower defaults, especially in commercial and real estate portfolios.
Risk: Cybersecurity threats, reliance on third-party vendors, and potential for employee misconduct.
Risk: Compliance with complex and evolving banking regulations, including potential impacts from the CRA rating.

Potential Implications

Company Performance

Declining profitability may limit the company’s ability to invest in growth initiatives or return capital to shareholders.
Deterioration in asset quality could lead to further increases in the provision for credit losses, negatively impacting future earnings.
Effective management of interest rate risk will be crucial to maintaining net interest margin and profitability.
The company’s ability to capitalize on market expansion and strategic lending opportunities will be key to future growth.

Stock Price

Increased credit risk and declining profitability could negatively impact investor sentiment and lead to a decrease in the stock price.
Successful execution of growth strategies and effective management of risks could improve investor confidence and support the stock price.
Close monitoring of asset quality metrics and net interest margin trends will be important for investors.

SEC Filing Report: CF BANKSHARES INC. 10-K Analysis (FY 2024)

Executive Summary

This report analyzes CF BANKSHARES INC.’s 10-K filing for the fiscal year ended December 31, 2024. The analysis reveals a mixed performance picture. While asset and deposit growth were modest, net income declined due to increased provision for credit losses and higher interest expenses. Asset quality shows signs of deterioration with increasing non-performing loans. Overall, a cautious approach is warranted. Recommendation: Hold. Further monitoring of asset quality and interest rate risk management is crucial.

Company Overview

CF Bankshares Inc. is a financial holding company operating primarily through its subsidiary, CFBank, National Association. CFBank is a boutique commercial bank focusing on serving closely held businesses and entrepreneurs in Ohio and Indiana. The bank offers a range of commercial, retail, and mortgage lending services.

Financial Statement Analysis

Key Financial Ratios and Trends

Ratio	2024	2023	2022	Trend
Return on Average Assets (ROAA)	0.67%	0.88%	1.11%	Decreasing
Return on Average Equity (ROAE)	8.29%	11.46%	13.69%	Decreasing
Net Interest Margin (FTE)	2.43%	2.59%	3.15%	Decreasing
Efficiency Ratio	55.84%	54.90%	55.04%	Relatively Stable
Nonperforming Loans to Total Loans	0.87%	0.33%	0.05%	Increasing
Allowance for Credit Losses (ACL) to Total Loans	1.00%	0.99%	1.01%	Relatively Stable

Income Statement Highlights

Net income decreased by 21.0% from $16.9 million in 2023 to $13.4 million in 2024. This decline was driven by:

A decrease in net interest income, primarily due to rising interest expenses outpacing interest income growth.
A significant increase in the provision for credit losses, reflecting concerns about asset quality.

Balance Sheet Highlights

Total assets increased slightly by 0.3% to $2.1 billion. Key changes include:

Modest growth in net loans and leases.
A decrease in cash and cash equivalents.

Asset Quality

Asset quality is a concern, as indicated by:

A significant increase in nonperforming loans.
An increase in criticized and classified loans.

Management’s Discussion and Analysis (MD&A) Insights

A review of the MD&A reveals a focus on managing interest rate risk and maintaining adequate capital levels. Management acknowledges the competitive landscape and the importance of providing individualized service. However, the MD&A narrative appears somewhat optimistic given the decline in net income and the deterioration in asset quality. The increase in non-performing loans warrants close scrutiny.

Risk Assessment

Key Risks Identified:

Economic and Political Risks: Dependence on local and national economic conditions, particularly in Ohio and Indiana.
Interest Rate Risk: Exposure to fluctuating interest rates and their impact on net interest income and asset values.
Credit Risk: Potential for increased loan losses due to borrower defaults, especially in commercial and real estate portfolios.
Operational Risk: Cybersecurity threats, reliance on third-party vendors, and potential for employee misconduct.
Regulatory Risk: Compliance with complex and evolving banking regulations, including potential impacts from the CRA rating.

Opportunity Assessment

Potential Opportunities:

Market Expansion: Continued growth in key metro markets (Columbus, Cleveland, Cincinnati, Akron, Indianapolis).
Strategic Lending: Capitalizing on select market opportunities in construction lending within identified risk tolerances.
Technology Adoption: Leveraging technology to improve customer service and operational efficiency.

Conclusion & Actionable Insights

CF Bankshares Inc. faces challenges related to declining profitability and increasing credit risk. While the company has opportunities for growth and strategic lending, a cautious approach is warranted. Recommendation: Hold. Investors should closely monitor asset quality metrics (non-performing loans, charge-offs), net interest margin trends, and management’s ability to effectively manage interest rate risk and regulatory compliance.

Financial Analysis of CF Bankshares Inc. (CFBK) – 2024

1. Commentary

CF Bankshares Inc. experienced a mixed financial performance in 2024. While total assets slightly increased, net income decreased compared to the previous year. The bank’s asset quality remains strong, as indicated by low nonperforming loan ratios, but the provision for credit losses increased significantly. The company’s capital ratios are healthy and exceed regulatory requirements, providing a solid foundation for future growth.

2. Financial Ratio and Metric Analysis

Profitability

Ratio/Metric	2024	2023	Change (%)	Industry Average/Benchmark	Commentary
Gross Profit Margin	N/A	N/A	N/A	N/A	Not applicable for banks.
Operating Profit Margin	N/A	N/A	N/A	N/A	Calculated as (Net Interest Income + Noninterest Income – Noninterest Expense) / Total Revenue: (46,644 + 5,175 – 28,938) / (118,389 + 5,175) = 18.89%. Previous year: (47,640 + 4,031 – 28,369) / (108,279 + 4,031) = 21.56%.
Net Profit Margin	11.31%	15.64%	-27.7%	Community Banks: 20-30%	Calculated as Net Income / Total Revenue: 13,387 / (118,389 + 5,175) = 11.31%. The decrease suggests reduced profitability compared to the previous year.
Return on Assets (ROA)	0.67%	0.88%	-23.9%	Community Banks: 0.8-1.2%	ROA decreased, indicating the company is generating less profit per dollar of assets.
Return on Equity (ROE)	8.29%	11.46%	-27.7%	Community Banks: 8-12%	ROE decreased, suggesting the company is generating less profit per dollar of equity.
Earnings Per Share (EPS) – Basic	$2.08	$2.64	-21.2%	Varies widely	EPS decreased, reflecting lower profitability for shareholders.
Earnings Per Share (EPS) – Diluted	$2.06	$2.63	-21.7%	Varies widely	Diluted EPS also decreased, indicating the potential dilution from stock options and other convertible securities is impacting earnings.

Liquidity

Ratio/Metric	2024	2023	Change (%)	Industry Average/Benchmark	Commentary
Current Ratio	N/A	N/A	N/A	N/A	Not typically calculated for banks.
Quick Ratio (Acid-Test Ratio)	N/A	N/A	N/A	N/A	Not typically calculated for banks.
Cash Ratio	0.12	0.14	-14.3%	Community Banks: 0.10-0.20	Calculated as (Cash and cash equivalents) / Total Current Liabilities: 235,272 / (1,755,795 + 92,680 + 2,238 + 6,229 + 25,144 + 15,000) = 0.12. The cash ratio indicates the bank’s ability to cover its current liabilities with its most liquid assets.

Solvency/Leverage

Ratio/Metric	2024	2023	Change (%)	Industry Average/Benchmark	Commentary
Debt-to-Equity Ratio	11.26	12.25	-8.1%	Community Banks: 8-12	Calculated as Total Liabilities / Total Stockholders’ Equity: 1,897,086 / 168,437 = 11.26. The debt-to-equity ratio indicates the proportion of debt the company is using to finance its assets relative to the value of shareholders’ equity.
Debt-to-Assets Ratio	0.92	0.92	0%	Community Banks: 0.8-0.9	Calculated as Total Liabilities / Total Assets: 1,897,086 / 2,065,523 = 0.92. The debt-to-assets ratio measures the proportion of a company’s assets that are financed by debt.
Interest Coverage Ratio (Times Interest Earned)	1.29	1.29	0%	Varies widely	Calculated as Earnings Before Interest and Taxes (EBIT) / Interest Expense: (16,144 + 71,745) / 71,745 = 1.29. The interest coverage ratio measures a company’s ability to pay its interest expenses with its earnings.

Activity/Efficiency

Ratio/Metric	2024	2023	Change (%)	Industry Average/Benchmark	Commentary
Inventory Turnover	N/A	N/A	N/A	N/A	Not applicable for banks.
Days Sales Outstanding (DSO)	N/A	N/A	N/A	N/A	Not directly applicable for banks; reflects loan portfolio management.
Days Payable Outstanding (DPO)	N/A	N/A	N/A	N/A	Not directly applicable for banks; reflects liability management.
Asset Turnover	0.06	0.06	0%	Community Banks: 0.05-0.08	Calculated as Total Revenue / Average Total Assets: (118,389 + 5,175) / ((2,065,523 + 2,058,615)/2) = 0.06. The asset turnover ratio measures how efficiently a company uses its assets to generate revenue.

Valuation

Ratio/Metric	2024	Commentary
Price-to-Earnings Ratio (P/E)	8.28	Calculated as Stock Price / EPS: 21.73 / 2.62 (2023 EPS) = 8.28. The P/E ratio indicates how much investors are willing to pay for each dollar of earnings.
Price-to-Book Ratio (P/B)	0.85	Calculated as Stock Price / Tangible Book Value per Share: 21.73 / 25.51 = 0.85. The P/B ratio compares a company’s market capitalization to its book value of equity.
Price-to-Sales Ratio (P/S)	1.39	Calculated as Market Cap / Total Revenue: (21.73 * 6,799,286) / (118,389 + 5,175) = 1.39. The P/S ratio compares a company’s market capitalization to its total revenue. Shares outstanding is calculated as 5,539,586 + 1,260,700 – 398,201 = 6,402,085.
Enterprise Value to EBITDA (EV/EBITDA)	10.23	Calculated as (Market Cap + Total Debt – Cash) / EBITDA: ((21.73 * 6,402,085) + (92,680 + 15,000 + 34,680) – 235,272) / (13,387 + 71,745) = 10.23. EBITDA is calculated as Net Income + Interest Expense + Taxes + Depreciation.

Growth Rates

Ratio/Metric	2024	2023	Change (%)	Commentary
Revenue Growth	5.14%	60.08%	-91.5%	Calculated as (2024 Revenue – 2023 Revenue) / 2023 Revenue: ((118,389 + 5,175) – (108,279 + 4,031)) / (108,279 + 4,031) = 5.14%.
Net Income Growth	-20.96%	-6.76%	210.0%	Calculated as (2024 Net Income – 2023 Net Income) / 2023 Net Income: (13,387 – 16,937) / 16,937 = -20.96%.
EPS Growth	-21.2%	-6.67%	217.8%	Calculated as (2024 EPS – 2023 EPS) / 2023 EPS: (2.08 – 2.64) / 2.64 = -21.2%.

Other Relevant Metrics

Economic Value of Equity (EVE): The provided data shows the sensitivity of the bank’s Economic Value of Equity to changes in interest rates. A higher EVE ratio suggests a greater ability to withstand interest rate shocks. The EVE analysis indicates that CFBank’s equity value is more sensitive to decreasing interest rates than increasing rates.