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Me
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the Fiscal Year ended December 31, 2021
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 N. High Street, Worthington, Ohio | 43085
(Address of Principal Executive Offices) | (Zip Code)

(614) 334-7979
(Registrant’s Telephone Number, Including Area Code)

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

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

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

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

YES [ ] NO [X]

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

YES [ ] NO [X]

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES [X] NO [ ]

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

YES [X] NO [ ]

‎

1

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 [X] Non-accelerated Filer [ ] 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 has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. [X]

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

YES [ ] NO [X]

The aggregate market value of the voting and non-voting common equity of the registrant held by non-affiliates as of June 30, 2021 was $129.2 million based upon the closing price as reported on the Nasdaq® Capital Market for that date.

As of March 8, 2022, there were 5,258,604 shares of the registrant’s (Voting) Common Stock outstanding and 1,260,700 shares of the registrant’s Non-Voting Common Stock outstanding.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the registrant’s Proxy Statement for the Annual Meeting of Stockholders to be held on June 1, 2022, are incorporated herein by reference into Part III of this Form 10-K.

2

IN DEX

PART I |
Item 1. | Business | 4
Item 1A. | Risk Factors | 25
Item 1B. | Unresolved Staff Comments | 37
Item 2. | Properties | 37
Item 3. | Legal Proceedings | 38
Item 4. | Mine Safety Disclosures | 38
PART II |
Item 5. | Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities | 38
Item 6. | [Reserved] | 39
Item 7. | Management’s Discussion and Analysis of Financial Condition and Results of Operations | 40
Item 7A. | Quantitative and Qualitative Disclosures About Market Risk | 55
Item 8. | Financial Statements and Supplementary Data | 57
Item 9. | Changes in and Disagreements With Accountants on Accounting and Financial Disclosure | 104
Item 9A. | Controls and Procedures | 104
Item 9B. | Other Information | 104
Item 9C. | Disclosure Regarding Foreign Jurisdictions that Prevent Inspections | 104
PART III |
Item 10. | Directors, Executive Officers and Corporate Governance | 104
Item 11. | Executive Compensation | 105
Item 12. | Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters | 105
Item 13. | Certain Relationships and Related Transactions, and Director Independence | 105
Item 14. | Principal Accounting Fees and Services | 105
PART IV |
Item 15. | Exhibits and Financial Statement Schedules | 105
Item 16. | Form 10-K Summary | 107
SIGNATURES | 108

3

Table of Contents

Forward-Looking Statements

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

Forward-looking statements are not guarantees of performance or results. A forward-looking statement may include a statement of the assumptions or bases underlying the forward-looking statement. 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 Form 10-K speak only as of the date hereof. We undertake no obligation to publicly release revisions to any forward-looking statements to reflect events or circumstances after the date of such statements, except to the extent required by law.

### PAR T I

Item 1. B usiness.

General

The Holding Company was organized as a Delaware corporation in September 1998 as the holding company for CFBank, in connection with CFBank’s conversion from a mutual to stock form of organization. CFBank was originally organized in 1892 and was formerly known as Central Federal Savings and Loan Association of Wellsville and more recently as Central Federal Bank. On December 1, 2016, CFBank converted from a federal savings institution to a national bank. Effective as of December 1, 2016 and in conjunction with the conversion of CFBank to a national bank, the Holding Company became a registered bank holding company and elected financial holding company status. Effective as of July 27, 2020, the Holding Company changed its name from Central Federal Corporation to CF Bankshares Inc. As a financial holding company, we are subject to regulation by the Board of Governors of the Federal Reserve System (the “FRB”). As used herein, the terms “we,” “us,” “our” and the “Company” refer to CF Bankshares, Inc. and its subsidiaries, unless the context indicates to the contrary.

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

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

Currently, the Company does not transact material business other than through CFBank. At December 31, 2021, the Company’s assets totaled $1.5 billion and stockholders’ equity totaled $125.3 million.

CFBank is a nationally chartered boutique commercial bank operating primarily in four (4) major metro markets: Columbus, Cleveland, and Cincinnati, Ohio, and Indianapolis, Indiana. CFBank focuses on serving the financial needs of closely held businesses and entrepreneurs, by providing comprehensive Commercial, Retail and Mortgage Lending services presence. In all regional markets, CFBank provides commercial loans and equipment leases, commercial and residential real estate loans and treasury management depository services, residential mortgage lending, and full-service commercial and retail banking services and products. CFBank seeks to differentiate itself from its competitors by providing individualized service coupled with direct customer access to decision makers, and ease of doing business. We believe that CFBank matches the sophistication of much larger banks, without the bureaucracy.

CFBank also offers its clients the convenience of online internet banking, mobile banking, and remote deposit capabilities.

4

Table of Contents

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

Most of our deposits and loans come from our market area. 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; Hamilton County through our offices in Glendale and Blue Ash, Ohio; Cuyahoga County, through our office in Woodmere, Ohio; and Summit County through our office in Fairlawn, Ohio. 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.

Sale of Columbiana County, Ohio Branches

On December 29, 2020, CFBank entered into a Branch Purchase and Assumption Agreement (the “P&A Agreement”) with Consumers National Bank (“Consumers”) providing for the acquisition by Consumers of two branches of CFBank in Columbiana County, Ohio – CFBank’s drive-up branch location in Wellsville, Ohio and CFBank’s branch location in Calcutta, Ohio (the “Branches”).

On July 16, 2021, CBank completed its sale to Consumers of certain assets and liabilities associated with the Branches. Pursuant to the terms of the P&A Agreement, Consumers assumed certain deposit liabilities and acquired certain loans, as well as cash, real property, personal property and other fixed assets associated with the Branches.

During the third quarter of 2021, the Company recognized a combined gain on sale of deposits of $1.9 million related to the sale of the Branches.

Market Area and Competition

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

Lending Activities

Repositioning of Residential Mortgage Business Model. In early 2021, a shift in the mortgage industry resulted in significantly fewer refinance opportunities and lower margins on residential mortgage loans. In response, the Company has strategically scaled down its Residential Mortgage Business. Our Commercial Banking Business continues to experience strong growth and has become the primary driver of our earnings and performance.

Loan and Lease Portfolio Composition. Our loan and lease portfolio consists primarily of commercial, commercial real estate and multi-family mortgage loans, mortgage loans secured by single-family residences and, to a lesser degree, consumer loans. CFBank also finances a variety of commercial and residential construction projects. At December 31, 2021, gross loans receivable totaled $1.2 billion and increased approximately $317.3 million, or 34.8%, from $912.4 million at December 31, 2020. Commercial, commercial real estate and multi-family mortgage loans, including related construction loans, totaled $841.2 million in the aggregate and represented 68.4% of the gross loan portfolio at December 31, 2021, as compared to 80.0% of the gross loan portfolio at December 31, 2020. Commercial, commercial real estate and multi-family mortgage loan balances, including related construction loans, increased $111.4 million, or 15.3%, during 2021. Portfolio single-family residential mortgage loans, including related construction loans, totaled $362.2 million and represented 29.5% of total gross loans at year-end 2021, compared to 17.4% at year-end 2020. The remainder of our loan portfolio consists of consumer loans, which totaled $26.3 million, or 2.1% of gross loans receivable, at year-end 2021.

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

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Loan Maturity. The following table shows the remaining contractual maturity of CFBank’s loan portfolio at December 31, 2021. Demand loans and other loans having no stated schedule of repayments or no stated maturity are reported as due within one year. The table does not include potential prepayments or scheduled principal amortization.

| At December 31, 2021
| Real Estate Mortgage Loans |  | Consumer Loans |  | Commercial Loans |  | Total Loans Receivable
| (Dollars in thousands)
Amounts due: |  |  |  |  |  |  |  |  |  |  |
Within one year | $ | 69,695 |  | $ | 43 |  | $ | 84,298 |  | $ | 154,036
After one year: |  |  |  |  |  |  |  |  |  |  |
More than one year to five years |  | 243,273 |  |  | 236 |  |  | 149,984 |  |  | 393,493
More than five years to 15 years |  | 227,292 |  |  | 4,546 |  |  | 100,662 |  |  | 332,500
More than 15 years |  | 326,244 |  |  | 21,447 |  |  | 1,937 |  |  | 349,628
Total due after 2022 |  | 796,809 |  |  | 26,229 |  |  | 252,583 |  |  | 1,075,621
Total amount due | $ | 866,504 |  | $ | 26,272 |  | $ | 336,881 |  | $ | 1,229,657

The following table sets forth at December 31, 2021, the dollar amount of total loans and leases receivable contractually due after one year (December 31, 2022), and whether such loans have fixed interest rates or adjustable interest rates.

| Due After December 31, 2022
| Fixed |  | Adjustable |  | Total
| (Dollars in thousands)
Real estate mortgage loans | $ | 588,700 |  | $ | 208,109 |  | $ | 796,809
Consumer loans |  | 136 |  |  | 26,093 |  |  | 26,229
Commercial loans |  | 152,561 |  |  | 100,022 |  |  | 252,583
Total loans | $ | 741,397 |  | $ | 334,224 |  | $ | 1,075,621

Origination of Loans and Leases. Lending activities are conducted through our offices located in Franklin, Cuyahoga, Summit, and Hamilton Counties, Ohio and in Marion County, Indiana. We originate commercial, commercial real estate, multi-family and single-family residential mortgage loans and also expanded into business financial services in the Columbus, Cleveland, Cincinnati, and Akron, Ohio and Indianapolis, Indiana markets.

Commercial, commercial real estate and multi-family loans are originated with fixed, floating and ARM interest rates. Fixed-rate loans are typically limited to terms of three to five years. CFBank has also utilized interest-rate swaps to protect the related fixed-rate loans from changes in value due to changes in interest rates. See Note 18 in the accompanying Notes to Consolidated Financial Statements for additional information on interest-rate swaps.

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

During 2020, CFBank also originated loans under the SBA’s new 7(a) loan program, the Paycheck Protection Program (“PPP”). The Coronavirus Aid, Relief, and Economic Security Act of 2020, as amended (the “CARES Act”) authorized the SBA to temporarily guarantee PPP loans to provide funding to small businesses to pay certain payroll costs and benefits, and other expenses, during the COVID-19 pandemic. These loans are 100% guaranteed by the SBA and the full principal amount of the loans 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 (which deferral period was subsequently extended to 10 months pursuant to the Paycheck Protection Program Flexibility Act of 2020). The majority of these loans have been pledged as collateral on borrowings under the FRB’s Paycheck Protection Program Lending Facility (“PPPLF”). See Note 10, FHLB Advances and Other Debt, in the accompanying Notes to Consolidated Financial Statements for additional information.

Single-Family Mortgage Lending. A significant lending activity has been the origination of permanent conventional mortgage loans secured by single-family residences located within and outside of our primary market area. Loan originations are primarily obtained through leads-based marketing and from our loan officers and their contacts within the local real estate industry and with existing or past customers and members of the local communities. We offer both fixed-rate and adjustable-rate mortgage (ARM) loans with maturities generally up to 30 years, priced competitively with current market rates. We offer several ARM loan programs with terms of up to 30 years and, with the majority of the programs, interest rates adjust with a maximum adjustment limitation of 2.0% per year and a 5.0% lifetime cap. The interest rate adjustments on ARM loans currently offered are indexed to a variety of established indices

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and these loans do not provide for initial deep discount interest rates. We do not originate option ARM loans or loans with negative amortization.

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

All single-family mortgage loans sold are underwritten according to Federal Home Loan Mortgage Corporation (Freddie Mac) or Federal National Mortgage Association (Fannie Mae) guidelines, or are underwritten to comply with additional guidelines as may be required by the individual investor. CFBank is a direct endorsed underwriter, a designation by the Department of Housing and Urban Development that allows us to offer loans insured by the Federal Housing Authority (FHA). CFBank is approved by the Department of Veterans Affairs to originate and approve VA loans.

For the year ended December 31, 2021, single-family mortgage loans originated for sale totaled $2.4 billion, an increase of $129.5 million, or 5.8%, compared to $2.2 billion that was originated in 2020. The volume of refinance activity, which is very sensitive to market mortgage interest rates, has been a significant factor that impacts the level of residential loan originations. As market mortgage rates increase, our mortgage production, and the resultant gains on sales of loans, could decrease.

The performance of our mortgage lending business is impacted by market conditions and competition. Any changes could affect the value of our mortgage loans held for sale and mortgage banking derivatives and the performance of the mortgage lending business.

In early 2021, a shift in the mortgage industry resulted in significantly fewer refinance opportunities and lower margins on residential mortgage loans. In response, the Company has strategically scaled down its Residential Mortgage Business. Our Commercial Banking Business continues to experience strong growth and has become the primary driver of our earnings and performance.

For the year ended December 31, 2021, portfolio single-family mortgage loans originated by CFBank totaled $352.3 million, or 28.7% of total loans. Our policy is to originate quality loans that are evaluated for risk based on the borrower’s ability to repay the loan. Collateral positions are established by obtaining independent appraisal opinions. Mortgage insurance is generally required when the LTV exceeds 80%. In conjunction with competitive product offerings in the market, and the lack of availability for mortgage insurance, jumbo loans exceeding 80% are often originated without mortgage insurance.

Portfolio single-family residential ARM loans totaled $42.9 million, or 12.4% of the single-family mortgage loan portfolio, at December 31, 2021. These loans generally pose credit risks not inherent in fixed-rate loans, primarily because as interest rates rise, the borrowers’ payments rise, increasing the potential for default. Periodic and lifetime caps on interest rate increases help to reduce the credit risks associated with ARM loans, but also limit the interest rate sensitivity of such loans.

CFBank previously participated in a Mortgage Purchase Program with Northpointe Bank (Northpointe), a Michigan banking corporation, from December 2012 until CFBank discontinued its participation in the program in the first quarter of 2021. Pursuant to the terms of a participation agreement, CFBank purchased 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 were individually (MERS) registered loans which were held until funded by the end investor. The mortgage loan investors included Fannie Mae and Freddie Mac, and other major financial institutions. This process on average took 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) were substantially reduced. Therefore, no allowance was allocated by CFBank to these loans. These loans were 100% risk rated for CFBank capital adequacy purposes. Under the participation agreement, CFBank agreed to purchase a 95% ownership/participation interest in each of the aforementioned loans, and Northpointe maintained a 5% ownership interest in each loan it participated. CFBank exited this program during the first quarter of 2021. See Note 4 in the accompanying Notes to Consolidated Financial Statements included for additional information.

Commercial Real Estate and Multi-Family Residential Mortgage Lending. Origination of commercial real estate and multi-family residential mortgage loans continues to be a significant portion of CFBank’s lending activity. Commercial real estate and multi-family residential mortgage loan balances increased $113.9 million to $436.3 million at December 31, 2021. This represented an increase of 35.3% over the $322.4 million balance at December 31, 2020.

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

Underwriting policies provide that commercial real estate and multi-family residential mortgage loans may be made in amounts up to 85% of the lower of the appraised value or purchase price of the property. An independent appraisal of the property is required on all

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loans greater than or equal to $500,000. In underwriting commercial real estate and multi-family residential mortgage loans, we consider the appraised value and net operating income of the property, the debt service ratio and the property owner’s and/or guarantor’s financial strength, expertise and credit history. We offer both fixed and adjustable rate loans. Fixed rate loans are generally limited to three to five years, at which time they convert to adjustable rate loans. At times, CFBank accommodates loans to borrowers who desire fixed-rate loans for longer than three to five years. We have utilized interest-rate swaps to protect these fixed-rate loans from changes in value due to changes in interest rates, as appropriate. See Note 18 in the accompanying Notes to Consolidated Financial Statements for additional information on interest-rate swaps. Adjustable-rate loans are tied to various market indices and generally adjust monthly or annually. Payments on both fixed and adjustable rate loans are based on 15 to 30 year amortization periods.

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

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

Commercial Lending. The origination of commercial loans continues to be a significant component of our lending activity. During 2021, commercial loan balances decreased by $1.4 million, or 0.4%, to $336.9 million at year-end 2021. The decrease in commercial loan balances was primarily the result of PPP loan repayments of $104.8 million, partially offset by new and increased relationships. Commercial loans are generally secured by business equipment, inventory, accounts receivable and other business assets. In underwriting commercial loans, we consider the net operating income of the borrower, the debt service ratio and the financial strength, expertise and credit history of the business owners and/or guarantors. We offer both fixed and adjustable rate commercial loans. Fixed-rate loans are typically limited to a maximum term of five years. Adjustable-rate loans are tied to various market indices and generally adjust monthly or annually.

Included in Commercial loans at December 31, 2021 and December 31, 2020, were $445,000 and $105.3 million, respectively, of PPP loans. These loans are 100% guaranteed by the SBA and the full principal amount of the loans may qualify for forgiveness. The loans we originated have a maturity of two years, an interest rate of 1.00% and loan payments were deferred for the initial six months (which deferral period was subsequently extended to 10 months pursuant to the Paycheck Protection Program Flexibility Act of 2020). The majority of these loans have been pledged as collateral for borrowings by the Company under the PPPLF. See Note 10, FHLB Advances and Other Debt, in the accompanying Notes to Consolidated Financial Statements for additional information.

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

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

Construction and Land Lending. With economic improvement in our market areas, there was also an increase in commercial building activity. During 2021, construction loans increased by $3.0 million, or 3.6%, to $83.4 million, as compared to the $80.4 million in the portfolio at year-end 2020. CFBank’s strong capital levels has allowed CFBank to take advantage of select market opportunities in this area within the risk tolerances we have identified.

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

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

Consumer and Other Lending. The consumer loan portfolio generally consists of home equity lines of credit, home improvement loans, loans secured by deposits and purchased loans. At December 31, 2021, the consumer loan portfolio totaled $26.3 million, which was 2.1% of gross loans receivable. During 2021, the consumer loan portfolio increased $2.9 million, or 12.3%, over the year-end 2020 balance of $23.4 million.

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

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

We maintain an internal credit rating system and loan review procedures specifically developed to monitor credit risk for commercial, commercial real estate and multi-family residential loans. Internal loan reviews for these loan types are performed at least annually, and more often for loans with higher credit risk. Loan officers maintain close contact with borrowers between reviews. Adjustments to loan risk ratings are based on the reviews and at any time information is received that may affect risk ratings. Additionally, an independent third party review of commercial, commercial real estate and multi-family residential loans is performed at least annually. Management uses the results of these reviews to help determine the effectiveness of the existing policies and procedures and to provide an independent assessment of our internal loan risk rating system.

Federal regulations and CFBank’s asset classification policy require use of an internal asset classification system as a means of reporting and monitoring assets. We have incorporated the regulatory asset classifications as a part of our credit monitoring and internal loan risk rating system. Loans are classified into risk categories based on relevant information about the ability of borrowers to service their debt, such as current financial information, historical payment experience, credit documentation, public information and current economic trends, among other factors. In accordance with regulations, p roblem loans are classified as special mention, substandard, doubtful or loss, and the classifications are subject to review by banking regulators. Loans designated as special mention are considered criticized assets. Loans designated as substandard, doubtful or loss are considered classified assets. Loans designated as special mention possess weaknesses that, if left uncorrected, may result in deterioration of the repayment prospects for the loan or of CFBank’s credit position at some future date. A loan is considered substandard if it is inadequately protected by the current net worth and paying capacity of the obligor or of the collateral pledged, if any. Loans so classified have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt. They are characterized by the distinct possibility that there will be some loss if the deficiencies are not corrected. A loan considered doubtful has all of the weaknesses inherent in those classified substandard with the added characteristic that the weaknesses make collection or liquidation in full, on the basis of currently existing facts, condition and values, highly questionable and improbable. Loans designated as loss are considered uncollectible based on the borrower’s inability to make payments, and any value attached to collateral, if any, is based on liquidation value. Loans considered loss are generally uncollectible and have so little value that their continuance as assets is not warranted and are charged off, unless certain circumstances exist that could potentially warrant a specific reserve to be established.

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See the section titled “Financial Condition - Allowance for loan losses” in Management’s Discussion and Analysis of Financial Condition and Results of Operations in Item 7 of this Form 10-K and Notes 1 and 4 in the accompanying Notes to Consolidated Financial Statements for detailed information on criticized and classified loans as of December 31, 2021 and 2020.

Classified loans include all nonaccrual loans, which are discussed in further detail in the section below titled “Nonperforming Assets”. In addition to nonaccrual loans, classified loans include the following loans that were identified as substandard assets, were still accruing interest at December 31, 2021, but exhibit weaknesses that could lead to nonaccrual status in the future:

| # of Loans |  |  | Balance
Commercial | 1 |  | $ | 74
Commercial real estate | 2 |  |  | 2,658
Total | 3 |  | $ | 2,732

Nonperforming Assets.

The $302,000 increase in nonperforming loans in 2021 compared to 2020 was primarily due to one consumer loan and one mortgage loan going into nonaccrual status during the third quarter, partially offset by two consumer loans being returned to accrual status during the first quarter and one single family residential loan paying off in the second quarter.

For the year ended December 31, 2021, the amount of additional interest income that would have been recognized on nonaccrual loans, if such loans had continued to perform in accordance with their contractual terms, was approximately $39,000. There was no interest income recognized on nonaccrual loans in 2021, except for $10,000 of interest income that was collected from the payoff of a mortgage loan.

Accounting Standards Update (ASU) No. 2011-02 to Receivables (ASC 310), A Creditor’s Determination of Whether a Restructuring is a Troubled Debt Restructuring, clarified the guidance for a creditor’s evaluation of whether it has granted a concession and whether a debtor is experiencing financial difficulties. With regard to determining whether a concession has been granted, the ASU clarified that creditors are precluded from using the effective interest method to determine whether a concession has been granted. In the absence of using the effective interest method, a creditor must now focus on other considerations such as the value of the underlying collateral, evaluation of other collateral or guarantees, the debtor’s ability to access other funds at market rates, interest rate increases and whether the restructuring results in a delay in payment that is insignificant. The Company applies the guidance in this ASU to identify its restructured loans as troubled debt restructurings (“TDRs”). There were no loans restructured in 2021 identified as a TDR.

As a component of management’s focus on the work out of troubled credits, the terms of certain loans were modified in TDRs, where concessions were granted to borrowers experiencing financial difficulties. The modification of the terms of such loans may have included one or a combination of the following: a reduction of the stated interest rate of the loan; an increase in the stated rate of interest lower than the current market rate for new debt with similar risk; an extension of the maturity date; or a change in the payment terms. Nonaccrual loans included $147,000 in TDRs at December 31, 2021, while non-accrual loans included $190,000 of TDRs at December 31, 2020.

At year-end 2021, there were a total of $2.8 million of TDRs, including $2.7 million in commercial real estate loans, $99,000 in single family residential loans and $74,000 in commercial loans, which were not included in nonperforming loans, where customers have established a sustained period of repayment performance, loans are current according to their modified terms, and repayment of the remaining contractual payments is expected.

See the section titled “Financial Condition - Allowance for loan losses” in Management’s Discussion and Analysis of Financial Condition and Results of Operations in Item 7 of this Form 10-K and Notes 1 and 4, in the accompanying Notes to Consolidated Financial Statements for additional information on nonperforming loans and TDRs as of December 31, 2021 and 2020.

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

Allowance for Loan and Lease Losses (ALLL). The ALLL is a valuation allowance for probable incurred credit losses. The ALLL methodology is designed as part of a thorough process that incorporates management’s current judgments about the credit quality of the loan portfolio into a determination of the ALLL in accordance with generally accepted accounting principles and supervisory guidance. Management analyzes the adequacy of the ALLL quarterly through reviews of the loan portfolio, including: the nature and volume of the loan portfolio and segments of the portfolio; industry and loan concentrations; historical loss experience; delinquency statistics and the level of nonperforming loans; specific problem loans; the ability of borrowers to meet loan terms; an evaluation of collateral securing loans and the market for various types of collateral; various collection strategies; current economic condition, trends and outlook; and other factors that warrant recognition in providing for an adequate ALLL. See the section titled “Financial Condition - Allowance for loan losses” in Management’s Discussion and Analysis of Financial Condition and Results of Operations in Item 7 of this Form 10-K for a detailed discussion of management’s methodology for determining the appropriate level of the ALLL.

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The ALLL totaled $15.5 million at December 31, 2021, and decreased $1.5 million, or 8.9%, from $17.0 million at December 31, 2020. The decrease in the ALLL is due to negative provision expense of $1.6 million, partially offset by net recoveries of $86,000 during the year ended December 31, 2021. The ratio of the ALLL to total loans was 1.26% at December 31, 2021, compared to 1.87% at December 31, 2020. The ratio of the ALLL to total loans, excluding loan balances subject to SBA guarantees, was 1.27% at December 31, 2021, compared to 2.15% at December 31, 2020.

We believe the ALLL is adequate to absorb probable incurred credit losses in the loan portfolio as of December 31, 2021; however, future additions to the allowance may be necessary based on factors including, but not limited to, deterioration in client business performance, recessionary economic conditions, declines in borrowers’ cash flows, and market conditions which result in lower real estate values. Additionally, various regulatory agencies, as an integral part of their examination process, periodically review the ALLL. Such agencies may require additional provisions for loan losses based on judgments and estimates that differ from those used by management. Management continues to diligently monitor credit quality in the existing portfolio and analyze potential loan opportunities carefully in order to manage credit risk. An increase in estimated probable incurred losses and an increase in required loan provision expense could occur if economic conditions and factors which affect credit quality, real estate values and general business conditions worsen.

| 2021 |  | 2020 |  | 2019
ALLL, beginning of period | $ | 17,022 |  | $ | 7,138 |  | $ | 7,012
Charge-offs: |  |  |  |  |  |  |  |
Real estate loans: |  |  |  |  |  |  |  |
Single-family |  | 17 |  |  | 425 |  |  | -
Commercial real estate |  | - |  |  | - |  |  | -
Consumer loans: |  |  |  |  |  |  |  |
Home equity |  | - |  |  | 21 |  |  | -
Other |  | - |  |  | - |  |  | 36
Commercial loans |  | - |  |  | 648 |  |  | -
Total charge-offs |  | 17 |  |  | 1,094 |  |  | 36
Recoveries on loans previously charged off: |  |  |  |  |  |  |  |
Recoveries |  |  |  |  |  |  |  |
Real estate loans: |  |  |  |  |  |  |  |
Single-family |  | 26 |  |  | 31 |  |  | 7
Multi-family |  | - |  |  | - |  |  | -
Commercial real estate |  | - |  |  | - |  |  | 105
Consumer loans: |  |  |  |  |  |  |  |
Home equity |  | 21 |  |  | 17 |  |  | 50
Other |  | - |  |  | - |  |  | -
Commercial loans |  | 56 |  |  | 15 |  |  | -
Total recoveries |  | 103 |  |  | 63 |  |  | 162
Net charge-offs (recoveries) |  | (86) |  |  | 1,031 |  |  | (126)
Provision for loan and lease losses |  | (1,600) |  |  | 10,915 |  |  | -
Reclassification of ALLL on loan-related commitments |  | - |  |  | - |  |  | -
ALLL, end of period | $ | 15,508 |  | $ | 17,022 |  | $ | 7,138
ALLL to total loans and leases |  | 1.26% |  |  | 1.87% |  |  | 1.06%
ALLL to nonperforming loans |  | 1555.47% |  |  | 2449.21% |  |  | 292.66%
Net charge-offs (recoveries) to ALLL |  | -0.55% |  |  | 6.06% |  |  | -1.77%
Net charge-offs (recoveries) to average loans and leases |  | -0.01% |  |  | 0.13% |  |  | -0.02%

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

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

| At December 31,
| 2021 |  | 2020 |  | 2019
| Amount |  | % of Loans in each Category |  | Amount |  | % of Loans in each Category |  | Amount |  | % of Loans in each Category
| (Dollars in thousands)
Real estate loans: |  |  |  |  |  |  |  |  |  |  |  |  |  |
Single-family | $ | 3,348 |  | 28.20% |  | $ | 1,299 |  | 16.21% |  | $ | 948 |  | 17.94%
Multi-family |  | 827 |  | 6.24% |  |  | 467 |  | 4.97% |  |  | 447 |  | 5.85%
Commercial real estate |  | 5,034 |  | 29.24% |  |  | 9,184 |  | 30.36% |  |  | 2,604 |  | 36.92%
Construction |  | 1,744 |  | 6.78% |  |  | 2,254 |  | 8.82% |  |  | 759 |  | 10.09%
Consumer loans: |  |  |  |  |  |  |  |  |  |  |  |  |  |
Home equity lines of credit |  | 272 |  | 1.97% |  |  | 276 |  | 2.30% |  |  | 265 |  | 3.12%
Other |  | 156 |  | .17% |  |  | 116 |  | .26% |  |  | 61 |  | .63%
Commercial loans |  | 4,127 |  | 27.40% |  |  | 3,426 |  | 37.08% |  |  | 2,054 |  | 25.45%
Total ALLL | $ | 15,508 |  | 100.00% |  | $ | 17,022 |  | 100.00% |  | $ | 7,138 |  | 100.00%

## Foreclosed Assets

Assets acquired through or instead of loan foreclosure are initially recorded at fair value less costs to sell when acquired, establishing a new cost basis. If fair value declines subsequent to foreclosure, a valuation allowance is recorded through expense. Operating and maintenance costs after acquisition are expensed. REO and other foreclosed assets totaled $0 at December 31, 2021 and December 31, 2020. See the section titled “Financial Condition - Foreclosed Assets” in Management’s Discussion and Analysis of Financial Condition and Results of Operations in Item 7 of this Form 10-K and Note 5 in the accompanying Notes to Consolidated Financial Statements for information regarding foreclosed assets at December 31, 2021. Foreclosure activities are closely tied with general economic conditions and the ability of our customers to continue to meet their loan payment obligations and, therefore, the level of foreclosed assets may increase in the future if, among other things, economic conditions in our market area decline.

## Investment Activities

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

The investment policy established by the Board of Directors is designed to provide and maintain adequate liquidity, generate a favorable return on investment without incurring undue interest rate and credit risk, and compliment lending activities. The policy provides authority to invest in U.S. Treasury and federal entity/agency securities meeting the policy’s guidelines, mortgage-backed securities and collateralized mortgage obligations insured or guaranteed by the United States government and its entities/agencies, municipal and corporate bonds and other investment instruments.

At December 31, 2021, the securities available for sale portfolio totaled $16.3 million. At December 31, 2021, all mortgage-backed securities in the securities portfolio were insured or guaranteed by Ginnie Mae, Freddie Mac or Fannie Mae.

Equity securities, consisting of preferred stock in another financial institution, totaled $5.0 million at December 31, 2021 and December 31, 2020.

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

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

| At December 31,
| 2021 |  | 2020 |  | 2019
Securities Available For Sale | Amortized Cost |  | Fair Value |  | Amortized Cost |  | Fair Value |  | Amortized Cost |  | Fair Value
Corporate debt | $ | 9,976 |  | $ | 9,750 |  | $ | - |  | $ | - |  | $ | - |  | $ | -
Issued by U.S. government-sponsored entities and agencies: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
U.S. Treasury |  | 6,551 |  |  | 6,561 |  |  | 8,517 |  |  | 8,636 |  |  | 7,986 |  |  | 8,017
Mortgage-backed securities - residential |  | 35 |  |  | 36 |  |  | 62 |  |  | 65 |  |  | 126 |  |  | 130
Collateralized mortgage obligations |  | - |  |  | - |  |  | - |  |  | - |  |  | 27 |  |  | 27
Total | $ | 16,562 |  | $ | 16,347 |  | $ | 8,579 |  | $ | 8,701 |  | $ | 8,139 |  | $ | 8,174

The following table sets forth information regarding the amortized cost, weighted average yield and contractual maturity dates of debt securities as of December 31, 2021.

|  |  |  |  |  | After One Year |  | After Five Years |  |  |  |  |  |
| One Year or Less |  | through Five Years |  | through Ten Years |  | After Ten Years |  | Total
|  |  |  | Weighted |  |  |  |  | Weighted |  |  |  |  | Weighted |  |  |  |  | Weighted |  |  |  |  | Weighted
| Amortized |  | Average |  | Amortized |  | Average |  | Amortized |  | Average |  | Amortized |  | Average |  | Amortized |  | Average
Securities Available For Sale | Cost |  | Yield |  | Cost |  | Yield |  | Cost |  | Yield |  | Cost |  | Yield |  | Cost |  | Yield
Corporate | $ | - |  | 0.00% |  | $ | - |  | 0.00% |  | $ | 9,976 |  | 4.28% |  | $ | - |  | 0.00% |  | $ | 9,976 |  | 4.28%
Issued by U.S. government-sponsored entities and agencies: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
U.S. Treasury |  | 3,504 |  | 1.15% |  |  | 3,047 |  | 0.77% |  |  | - |  | 0.00% |  |  | - |  | 0.00% |  |  | 6,551 |  | 0.97%
Mortgage-backed securities - residential |  | - |  | 0.00% |  |  | 28 |  | 3.87% |  |  | 7 |  | 7.01% |  |  | - |  | 0.00% |  |  | 35 |  | 4.47%
Total | $ | 3,504 |  | 1.15% |  | $ | 3,075 |  | 0.80% |  | $ | 9,983 |  | 4.28% |  | $ | - |  | 0.00% |  | $ | 16,562 |  | 2.97%

(1)Interest yields are presented on a fully taxable equivalent basis using a 21 percent tax rate.

## Sources of Funds

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

The Holding Company, as a financial holding company, has more limited sources of liquidity than CFBank. In general, in addition to its existing liquid assets, sources of liquidity include funds raised in the securities markets through debt or equity offerings, dividends received from its subsidiaries or the sale of assets.

Dividends from CFBank serve as a potential source of liquidity to the Holding Company to meet its obligations. Generally, CFBank may pay dividends to the Holding Company without prior approval as long as the dividend does not exceed the total of the current calendar year-to-date earnings plus any earnings from the previous two years not already paid out in dividends, and as long as CFBank remains well capitalized after the dividend payment. See Note 17, Regulatory Capital Matters, in the accompanying Notes to Consolidated Financial Statements for additional information.

The Holding Company’s available cash and cash equivalents totaled $819,000 at December 31, 2021. Management believes that the Holding Company had adequate funds and liquidity sources at December 31, 2021 to meet its current and anticipated operating needs at this time. See the section titled “Liquidity and Capital Resources” for information regarding Holding Company liquidity and regulatory matters.

Deposits. CFBank offers a variety of deposit accounts with a range of interest rates and terms including savings accounts, retail and business checking accounts, money market accounts and certificates of deposit. Management regularly evaluates the internal cost of funds, surveys rates offered by competitors, reviews cash flow requirements for lending and liquidity and executes rate changes when necessary as part of its asset/liability management, profitability and liquidity objectives. Certificate of deposit accounts represent the largest portion of our deposit portfolio and totaled 48.5% of average deposit balances in 2021. The term of the certificates of deposit typically offered vary from seven days to five years at rates established by management. Specific terms of an individual account vary

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according to the type of account, the minimum balance required, the time period funds must remain on deposit and the interest rate, among other factors.

The flow of deposits is influenced significantly by general economic conditions, changes in money market rates, prevailing interest rates and competition. Deposits are obtained predominantly from the areas in which CFBank’s offices are located. We rely primarily on a willingness to pay market-competitive interest rates to attract and retain retail deposits, as well as customer service and relationships with customers.

At December 31, 2021, CFBank had $278.1 million in brokered deposits with maturity dates from January 2022 through July 2026. At December 31, 2021, cash, unpledged securities and deposits in other financial institutions totaled $169.0 million.

CFBank is a participant in the Certificate of Deposit Account Registry Service® (CDARS) and Insured Cash Sweep (ICS) programs offered through Promontory Interfinancial Network. Promontory works with a network of banks to offer products that can provide FDIC insurance coverage in excess of $250,000 through these innovative products. CDARS one-way balances are considered brokered deposits by regulation. Customer balances in the CDARS reciprocal and ICS programs, which no longer qualify as brokered, totaled $58.4 million at December 31, 2021 and increased $11.5 million, or 24.4%, from $46.9 million at December 31, 2020.

As of December 31, 2021 and 2020, deposits exceeding the FDIC insured limit of $250,000 totaled $504.9 million and $433.2 million, respectively.

Certificate accounts in amounts of $250,000 or more totaled $236.1 million at December 31, 2021, maturing as follows:

Maturity Period |  | Amount |  | Weighted Average Rate
|  | (Dollars in thousands)
Three months or less |  | $ | 32,837 |  | 0.65%
Over 3 through 6 months |  |  | 11,417 |  | 1.05%
Over 6 through 12 months |  |  | 77,978 |  | 1.01%
Over 12 months |  |  | 113,824 |  | 1.07%
Total |  | $ | 236,056 |  |

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

| For The Year Ended December 31,
| 2021 |  | 2020 |  | 2019
| Average Balance |  | Percent of Total Average Deposits |  | Average Rate Paid |  | Average Balance |  | Percent of Total Average Deposits |  | Average Rate Paid |  | Average Balance |  | Percent of Total Average Deposits |  | Average Rate Paid
| (Dollars in thousands)
Interest- bearing checking accounts | $ | 92,094 |  | 7.60% |  | 0.38% |  | $ | 35,681 |  | 4.03% |  | 1.45% |  | $ | 29,943 |  | 4.69% |  | 1.80%
Money market accounts |  | 282,299 |  | 23.28% |  | 0.50% |  |  | 254,033 |  | 28.65% |  | 1.13% |  |  | 166,721 |  | 26.13% |  | 1.98%
Savings accounts |  | 15,793 |  | 1.30% |  | 0.15% |  |  | 20,637 |  | 2.33% |  | 0.11% |  |  | 18,241 |  | 2.86% |  | 0.10%
Certificates of deposit |  | 588,072 |  | 48.50% |  | 1.06% |  |  | 429,111 |  | 48.41% |  | 1.96% |  |  | 310,913 |  | 48.74% |  | 2.52%
Total Interest-bearing deposits |  | 978,258 |  | 80.68% |  | 0.82% |  |  | 739,462 |  | 83.42% |  | 1.60% |  |  | 525,818 |  | 82.42% |  | 2.22%
Noninterest-bearing deposits: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Demand deposits |  | 234,239 |  | 19.32% |  | - |  |  | 146,935 |  | 16.58% |  | - |  |  | 112,151 |  | 17.58% |  | -
Total Average Deposits | $ | 1,212,497 |  | 100.00% |  |  |  | $ | 886,397 |  | 100.00% |  |  |  | $ | 637,969 |  | 100.00% |  |

See the sections titled “Financial Condition – Deposits” and “Liquidity and Capital Resources” for additional information regarding deposits.

Borrowings. As part of our operating strategy, FHLB advances are used as an alternative to retail and brokered deposits to fund our asset growth. The advances are collateralized primarily by single-family mortgage loans, multi-family mortgage loans, 1-4 family commercial real estate loans and home equity lines of credit loans, securities and cash, and secondarily by CFBank’s investment in the capital stock of the FHLB of Cincinnati. FHLB advances are made pursuant to several credit programs, each of which has its own interest rate and range of maturities. The maximum amount that the FHLB will advance to member institutions fluctuates from time to time in accordance with the policies of the FHLB. FHLB advances totaled $65.0 million at December 31, 2021. Based on the collateral pledged, CFBank was eligible to borrow up to a total of $178.4 million at year-end 2021.

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Prior to May 21, 2021, the Holding Company had a term loan in the original principal amount of $5.0 million with an additional $10.0 million revolving line-of-credit with a third-party bank That credit facility was refinanced into a new $35 million facility on May 21, 2021. The credit facility is revolving until May 21, 2024, at which time any then-outstanding balance will be converted to a 10-year term note on a graduated 10-year amortization. Borrowings on the credit facility bear interest at a fixed rate of 3.85% until May 21, 2026, and the interest rate then converts to a floating rate equal to PRIME with a floor of 3.25%. 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. At December 31, 2021, the Company had an outstanding balance, net of unamortized debt issuance costs, of $24.3 million on the facility.

In addition to access to FHLB advances, CFBank has borrowing capacity available with the Federal Reserve Bank through the Borrower in Custody program. The borrowings are collateralized by commercial loans and commercial real estate loans. Based on the collateral pledged, CFBank was eligible to borrow up to a total of $72.2 million at year-end 2021. There were no amounts outstanding from the Federal Reserve Bank at December 31, 2021.

At December 31, 2021, CFBank had $65.0 million of availability in unused lines of credit with two commercial banks. There were no outstanding borrowings on these lines of credit at December 31, 2021 or December 31, 2020. If CFBank were to borrow on these lines of credit, interest would accrue daily at a variable rate based on the commercial bank’s cost of funds and current market returns.

During 2019, CFBank entered into a $25.0 million warehouse facility with a commercial bank. The warehouse facility was used to periodically fund loans held for sale from the close (funding) date until they were sold in the secondary market. Borrowings on the facility bore interest at the greater of (a) the 30-day LIBOR plus 2.00% or (b) 4.00% and were secured by the specific loans that were funded. This warehouse facility was closed during the third quarter of 2021. At December 31, 2021, the warehouse facility had no outstanding balance. See Note 10 in the accompanying Notes to Consolidated Financial Statements for additional information.

During 2020, CFBank entered into an additional $75 million warehouse facility with a commercial bank. The purpose of the warehouse facility was to periodically fund loans held for sale from the close (funding) date until sold in the secondary market. Borrowings on the facility bore interest at the greater of (a) the 30-day LIBOR plus 2.35% or (b) 2.90% and were secured by the specific loans that were funded. This warehouse facility was closed during the second quarter of 2021. This warehouse facility had no outstanding balance at December 31, 2021. See Note 10 in the accompany Notes to Consolidated Financial Statements for additional information.

To support the effectiveness of the PPP, the FRB 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 December 31, 2021, the Company’s PPP loans and related PPPLF funding had a weighted average life of approximately 0.2 years. At December 31, 2021, the principal balance of PPPLF advances outstanding was $450,000.

See the section titled “Financial Condition - Subordinated Debentures” in Management’s Discussion and Analysis of Financial Condition and Results of Operations in Item 7 of this Form 10-K for information regarding subordinated debentures issued by the Company in 2003 and 2018.

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

| For the Year ended December 31,
| 2021 |  | 2020 |  | 2019
Short-term FHLB advances and other borrowings: |  |  |  |  |  |  |  |
Average balance outstanding | $ | 9,076 |  | $ | 23,178 |  | $ | 3,713
Maximum amount outstanding at any month-end during the period |  | 23,426 |  |  | 70,013 |  |  | 23,500
Balance outstanding at end of period |  | - |  |  | 70,013 |  |  | -
Weighted average interest rate during the period |  | 3.02% |  |  | 3.31% |  |  | 2.11%

Personnel

As of December 31, 2021, the Company had 129 full-time and 5 part-time employees.

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Regulation and Supervision

Set forth below is a brief description of certain laws and regulations that apply to us. This description, as well as other descriptions of laws and regulations contained in this Form 10-K, is not complete and is qualified in its entirety by reference to the applicable laws and regulations. The laws and regulations applicable to the Company are continually under review by the United States Congress and state legislatures and federal and state regulatory agencies, and a change in statutes, regulations or regulatory policies applicable to the Company could have a material effect on the Company’s business.

Overview

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

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

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

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

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

Regulation of the Holding Company

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

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

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

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

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

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

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In April 2020, the FRB adopted a final rule to revise its regulations related to determinations of whether a company has the ability to exercise a controlling influence over another company for purposes of the BHCA. The final rule expands and codifies the presumptions for use in such determinations. By codifying the presumptions, the final rule provides greater transparency on the types of relationships that the FRB generally views as supporting a facts-and-circumstances determination that one company controls another company. The FRB’s final rule applies to questions of control under the BHCA, but does not extend to the Change in Bank Control Act.

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

No regulatory approval is required for a financial holding company to acquire a company, other than a bank or savings association, engaged in activities that are financial in nature or incidental to activities that are financial in nature, as determined by the FRB. The Financial Services Modernization Act defines “financial in nature” to include:

securities underwriting, dealing and market making;

sponsoring mutual funds and investment companies;

insurance underwriting and agency;

merchant banking; and

activities that the FRB has determined to be closely related to banking.

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

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

Economic Growth, Regulatory Relief and Consumer Protection Act

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

Transactions with Affiliates, Directors, Executive Officers and Shareholders

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

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

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

require that all such transactions be on terms (including interest rates charged and collateral required) substantially the same, or at least as favorable to the bank or subsidiary, as those provided to a non-affiliate.

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

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

Regulation of CFBank

General. CFBank, as a national bank, is subject to regulation, periodic examination, enforcement authority and oversight by the OCC extending to all aspects of CFBank’s operations. OCC regulations govern permissible activities, capital requirements, dividend limitations, investments, loans and other matters. CFBank also is subject to regulation and examination by the FDIC, which insures the deposits of CFBank to the maximum extent permitted by law. Furthermore, CFBank is subject, as a member bank, to certain rules and regulations of the FRB, many of which restrict activities and prescribe documentation to protect consumers. In addition, the establishment of branches by CFBank is subject to prior approval of the OCC. The OCC has broad enforcement powers over national banks, including the power to impose fines and other civil and criminal penalties and to appoint a conservator or receiver if any of a number of conditions are met.

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

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

In July 2013, the United States banking regulators issued new capital rules applicable to smaller banking organizations which also implement certain of the provisions of the Dodd-Frank Act (the “Basel III Capital Rules”). Community banking organizations, including CFBank, began transitioning to the new rules on January 1, 2015. The new minimum capital requirements became effective on January 1, 2015, whereas a new capital conservation buffer and deductions from common equity capital phased in from January 1, 2016 through January 1, 2019, and most deductions from common equity tier 1 capital were phased in from January 1, 2015 through January 1, 2019.

The Basel III Capital Rules include (a) a minimum common equity tier 1 capital ratio of 4.5%, (b) a minimum Tier 1 capital ratio of 6.0%, (c) a minimum total capital ratio of 8.0%, and (d) a minimum leverage ratio of 4.0%.

Common equity for the common equity tier 1 capital ratio generally includes common stock (plus related surplus), retained earnings, accumulated other comprehensive income (unless an institution elects to exclude such income from regulatory capital), and limited amounts of minority interests in the form of common stock, subject to applicable regulatory adjustments and deductions.

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

Tier 2 capital, which can be included in the total capital ratio, generally consists of other preferred stock and subordinated debt meeting certain conditions plus limited amounts of the allowance for loan and lease losses, subject to specified eligibility criteria, less applicable deductions.

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

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

The Basel III Capital Rules also place restrictions on the payment of capital distributions, including dividends, and certain

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discretionary bonus payments to executive officers if the banking organization does not hold a capital conservation buffer of greater than 2.5 percent composed of common equity tier 1 capital above its minimum risk-based capital requirements, or if its eligible retained income is negative in that quarter and its capital conservation buffer ratio was less than 2.5 percent at the beginning of the quarter.

In September 2019, the FRB, along with other federal bank regulatory agencies, issued a final rule, effective January 1, 2020, that gave community banks, including CFBank, the option to calculate a simple leverage ratio to measure capital adequacy if the community banks met certain requirements. Under the rule, a community bank is eligible to elect the Community Bank Leverage Ratio ("CBLR") framework if it had less than $10 billion in total consolidated assets, limited amounts of certain assets and off-balance sheet exposures, and a leverage ratio greater than 9.0%. Qualifying institutions that elected to use the CBLR framework (each, a “CBLR Bank”) and that maintain a leverage ratio of greater than 9.0% will be considered to have satisfied the risk-based and leverage capital requirements in the regulatory agencies' generally applicable capital rules and to have met the well-capitalized ratio requirements. No CBLR Bank was required to calculate or report risk-based capital, and each CBLR Bank could opt out of the framework at any time, without restriction, by reverting to the generally applicable risk-based capital rule. Pursuant to the CARES Act, on August 26, 2020, the federal banking agencies adopted a final rule that temporarily lowered the CBLR threshold and provided a gradual transition back to the prior level. Specifically, the CBLR threshold was reduced to 8.0% for the remainder of 2020, increased to 8.5% for 2021, and returned to 9.0% on January 1, 2022. This final rule became effective on October 1, 2020. The Company did not utilize the CBLR in assessing capital adequacy and, instead, continued to follow existing capital rules.

In December 2018, the federal banking agencies issued a final rule to address regulatory capital treatment of credit loss allowances under the current expected credit loss (“CECL”) model (accounting standard). The rule revises the federal banking agencies’ regulatory capital rules to identify which credit loss allowances under the CECL model are eligible for inclusion in regulatory capital and to provide banking organizations the option to phase in over three years the day-one adverse effects on regulatory capital that may result from the adoption of the CECL model.

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

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

In order to be “well-capitalized”, a bank must have a common equity tier I capital ratio of at least 6.5%, a total risk-based capital of at least 10.0%, a Tier 1 risk-based capital ratio of at least 8.0% and a leverage ratio of at least 5.0%, and the bank must not be subject to any written agreement, order, capital directive or prompt corrective action directive to meet and maintain a specific capital level for any capital measure. The Company’s management believes that CFBank met the ratio requirements to be deemed “well-capitalized” according to the guidelines described above as of December 31, 2021.

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

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

The FDIC assesses quarterly deposit insurance premiums on each insured institution based on risk characteristics of the insured institution and may also impose special assessments in emergency situations. The premiums fund the DIF. Pursuant to the Dodd-

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Frank Act, the FDIC has established 2.0% as the designated reserve ratio (“DRR”), which is the amount in the DIF as a percentage of all DIF insured deposits. In March 2016, the FDIC adopted final rules designed to meet the statutory minimum DRR of 1.35% by September 30, 2020, the deadline imposed by the Dodd-Frank Act. The Dodd-Frank Act requires the FDIC to offset the effect on insured institutions with assets of less than $10 billion of the increase in the statutory minimum DRR to 1.35% from the former statutory minimum of 1.15%. Although the FDIC's rules reduced assessment rates on all banks, they imposed a surcharge on banks with assets of $10 billion or more to be paid until the DRR reached 1.35%. The DRR met the statutory minimum of 1.35% on September 30, 2018. As a result, the previous surcharge imposed on banks with assets of $10 billion or more was lifted. In addition, preliminary assessment credits have been determined by the FDIC for banks with assets of less than $10 billion, which had previously contributed to the increase of the DRR to 1.35%. On June 30, 2019, the DRR reached 1.40%, and the FDIC applied credits for banks with assets of less than $10 billion ("small bank credits") beginning September 30, 2019. As of June 30, 2021, the DRR fell below the minimum DRR to 1.30%. As a result, the FDIC adopted a restoration plan requiring the restoration of the DRR to 1.35% within eight years (September 30, 2028). This restoration plan maintained the scheduled assessment rates for all insured institutions. As of September 30, 2021, the DRR was 1.27%. The FDIC rules further changed the method of determining risk-based assessment rates for established banks with less than $10 billion in assets to better ensure that banks taking on greater risks pay more for deposit insurance than banks that take on less risk.

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

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

The ability of the Holding Company to pay dividends on its common stock is dependent upon the amount of cash and liquidity available at the Holding Company level, as well as the receipt of dividends and other distributions from CFBank to the extent necessary to fund such dividends. As of December 31, 2021, the Holding Company had a total of $819,000 of cash at the Holding Company level. At December 31, 2021, the Holding Company also had $10.3 million available on its revolving line-of-credit facility.

The Holding Company also is subject to various legal and regulatory policies and requirements impacting the Holding Company’s ability to pay dividends on its stock. In addition, the Holding Company’s ability to pay dividends on its stock is conditioned upon the payment, on a current basis, of quarterly interest payments on the subordinated debentures underlying the Company’s trust preferred securities. Finally, under the terms of the Company’s fixed-to-floating rate subordinated debt, the Holding Company’s ability to pay dividends on its stock is conditioned upon the Holding Company continuing to make required principal and interest payments, and not incurring an event of default, with respect to the subordinated debt. See Note 17, Regulatory Capital Matters, in the accompanying Notes to Consolidated Financial Statements f or additional information.

Federal income tax laws provided deductions, totaling $2.3 million, for thrift bad debt reserves established before 1988. Accounting standards do not require a deferred tax liability to be recorded on this amount, which otherwise would total $473,000 at year-end 2021. However, if CFBank were wholly or partially liquidated or otherwise ceases to be a bank, or if tax laws were to change, this amount would have to be recaptured and a tax liability recorded. Additionally, any distributions in excess of CFBank’s current or accumulated earnings and profits would reduce amounts allocated to its bad debt reserve and create a tax liability for CFBank.

Federal Home Loan Bank

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

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

Community Reinvestment Act

The CRA requires CFBank’s primary federal regulatory agency, the OCC, to assess CFBank’s record in meeting the credit needs of the communities it serves. The OCC assigns one of four ratings: outstanding, satisfactory, needs to improve or substantial noncompliance. The rating assigned to a financial institution is considered in connection with various applications submitted by the financial institution or its holding company to its banking regulators, including applications to acquire another financial institution or

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to open or close a branch office. In addition, all subsidiary banks of a financial holding company must maintain a satisfactory or outstanding rating in order for the financial holding company to avoid limitations on its activities.

Consumer Protection Laws and Regulations

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

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

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

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

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

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

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

COVID-19 Legislation and Initiatives

In response to the novel COVID-19 pandemic (“COVID-19”), the Coronavirus Aid, Relief, and Economic Security Act of 2020, as amended (the “CARES Act”), was signed into law on March 27, 2020, to provide national emergency economic relief measures. Many of the CARES Act’s programs are dependent upon the direct involvement of U.S. financial institutions, such as the Holding Company and CFBank, and have been implemented through rules and guidance adopted by federal departments and agencies, including the U.S. Department of Treasury, the FRB and other federal banking agencies, including those with direct supervisory jurisdiction over the Holding Company and CFBank. Furthermore, as COVID-19 evolves, federal regulatory authorities continue to issue additional guidance with respect to the implementation, lifecycle, and eligibility requirements for the various CARES Act programs as well as industry-specific recovery procedures for COVID-19. In addition, it is possible that Congress will enact supplementary COVID-19 response legislation, including amendments to the CARES Act or new bills comparable in scope to the CARES Act. For example, on December 27, 2020, the Consolidated Appropriations Act, 2021 (the “CAA”) was signed into law, which, among other things, allowed certain banks to temporarily postpone implementation of the current expected credit loss model (accounting standard), which is described above. The Company is continuing to assess the impact of the CARES Act and other statues, regulations and supervisory guidance related to COVID-19.

The CARES Act created the PPP as a new guaranteed, unsecured loan program to fund operational costs of eligible businesses, organizations and self-employed persons during COVID-19. These loans are eligible to be forgiven if certain conditions are satisfied and are fully guaranteed by the SBA. In June 2020, the Paycheck Protection Program Flexibility Act was enacted, which, among other things, gave borrowers additional time and flexibility to use PPP loan proceeds. After previously being extended by Congress, the application deadline for PPP loans expired on May 31, 2021. No collateral or personal guarantees were required for PPP loans. In addition, neither the government nor lenders have been permitted to charge the recipients of PPP loans any fees. On December 27, 2020, the President signed into law omnibus federal spending and economic stimulus legislation titled the “Consolidated Appropriations Act, 2021” that included the Economic Aid to Hard-Hit Small Businesses, Nonprofits, and Venues Act (the “HHSB Act”). Among other things, the HHSB Act renewed the PPP, allocating $284.45 billion for both new first-time PPP loans under the existing PPP and the expansion of existing PPP loans for certain qualified, existing PPP borrowers. In addition to extending and amending the PPP, the HHSB Act also creates a new grant program for “shuttered venue operators.” As a participating lender in the PPP, CFBank continues to monitor legislative, regulatory, and supervisory developments related thereto.

On September 29, 2020, the federal bank regulatory agencies issued a final rule that neutralizes the regulatory capital and liquidity coverage ratio effects of participating in certain COVID-19 liquidity facilities due to the fact there is no credit or market risk in association with exposures pledged to such facilities. As a result, the final rule supports the flow of credit to households and businesses affected by COVID-19.

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On December 2, 2020, the federal bank regulatory agencies issued an interim final rule that provides temporary relief for specified community banking organizations related to certain regulations and reporting requirements as a result, in large part, of their growth in size from the response to COVID-19. Community banking organizations are subject to different rules and requirements based on their risk profile and asset size. Due to their involvement in federal COVID-19 response programs (such as the PPP) and other lending that supports the U.S. economy, many community banking organizations experienced rapid and unexpected increases in their sizes, which were generally expected to be temporary. The temporary increase in size could have subjected community banking organizations to new regulations or reporting requirements. However, community banking organizations, such as the Holding Company and CFBank, under $10.0 billion in total assets as of December 31, 2019 were permitted to use asset data as of December 31, 2019, to determine the applicability of various regulatory asset thresholds during calendar years 2020 and 2021. As such, it was not until January 1, 2022 that asset growth again triggered new regulatory requirements for these community banking organizations.

Patriot Act and Anti-Money Laundering

In response to the terrorist events of September 11, 2001, the Uniting and Strengthening of America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001 (the “Patriot Act”) was signed into law in October 2001. The Patriot Act gives the United States government powers to address terrorist threats through enhanced domestic security measures, expanded surveillance powers, increased information sharing and broadened anti-money laundering requirements. Title III of the Patriot Act takes measures intended to encourage information sharing among bank regulatory agencies and law enforcement bodies. Further, certain provisions of Title III impose affirmative obligations on a broad range of financial institutions. Among other requirements, Title III and related regulations require regulated financial institutions to establish a program specifying procedures for obtaining identifying information from customers seeking to open new accounts and establish enhanced due diligence policies, procedures and controls designed to detect and report suspicious activity. CFBank has established policies and procedures that are believed to be compliant with the requirements of the Patriot Act.

The Anti-Money Laundering Act of 2020 (the “AMLA”), which amends the Bank Secrecy Act of 1970 (the “BSA”), was enacted in January 2021. The AMLA is intended to be a comprehensive reform and modernization to U.S. bank secrecy and anti-money laundering laws. Among other things, it codifies a risk-based approach to anti-money laundering compliance for financial institutions; requires the development of standards for evaluating technology and internal processes for BSA compliance; expands enforcement-related and investigation-related authority, including increasing available sanctions for certain BSA violations and instituting BSA whistleblower initiatives and protections.

Office of Foreign Assets Control Regulation

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

Corporate Governance

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

Executive and Incentive Compensation

The Dodd-Frank Act requires that the federal banking agencies, including the FRB and the FDIC, issue a rule related to incentive-based compensation. No final rule implementing this provision of the Dodd-Frank Act has, as of the date of the filing of this Annual Report on Form 10-K, been adopted, but a proposed rule was published in 2016 that expanded upon a prior proposed rule published in 2011. The proposed rule is intended to: (i) prohibit incentive-based payment arrangements that the banking agencies determine could encourage certain financial institutions to take inappropriate risks by providing excessive compensation or that could lead to material financial loss; (ii) require the board of directors of those financial institutions to take certain oversight actions related to incentive-based compensation; and (iii) require those financial institutions to disclose information concerning incentive-based compensation

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arrangements to the appropriate federal regulator. Although a final rule has not been issued, the Company has undertaken efforts to ensure that the Company’s incentive compensation plans do not encourage inappropriate risks, consistent with the principles identified above.

In June 2010, the FRB, the OCC and the FDIC issued comprehensive final guidance on incentive compensation policies intended to ensure that the incentive compensation policies of banking organizations do not undermine the safety and soundness of such organizations by encouraging excessive risk-taking. The guidance, which covers all employees that have the ability to materially affect the risk profile of an organization, either individually or as part of a group, is based upon the key principles that a banking organization's incentive compensation arrangements should (i) provide incentives that do not encourage risk-taking beyond the organization's ability to effectively identify and manage risks, (ii) be compatible with effective internal controls and risk management and (iii) be supported by strong corporate governance, including active and effective oversight by the organization's board of directors. These three principles are incorporated into the proposed joint compensation regulations under the Dodd-Frank Act, described above.

The FRB and the OCC review, as part of their respective regular, risk-focused examination process, the incentive compensation arrangements of banking organizations, such as the Holding Company and CFBank, that are not “large, complex banking organizations.” These reviews are tailored to each organization based on the scope and complexity of the organization’s activities and the prevalence of incentive compensation arrangements. Deficiencies will be incorporated into the organization's supervisory ratings, which can affect the organization's ability to make acquisitions and take other actions. Enforcement actions may be taken against a banking organization if its incentive compensation arrangements, or related risk-management control or governance processes, pose a risk to the organization's safety and soundness and the organization is not taking prompt and effective measures to correct the deficiencies.

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

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

SEC regulations require public companies such as the Holding Company to provide various disclosures about executive compensation in annual reports and proxy statements and to present to their shareholders a non-binding vote on the approval of executive compensation.

Financial Privacy Provisions

Federal and state regulations limit the ability of banks and other financial institutions to disclose non-public information about consumers to non-affiliated third parties. These limitations require disclosure of privacy policies to consumers and, in some circumstances, allow consumers to prevent disclosure of certain personal information to a non-affiliated third party. These regulations affect how consumer information is transmitted through diversified financial companies and conveyed to outside vendors.

CFBank is also subject to regulatory guidelines establishing standards for safeguarding customer information. These guidelines describe the federal bank regulatory agencies' expectations for the creation, implementation and maintenance of an information security program, which would include administrative, technical and physical safeguards appropriate to the size and complexity of the institution and the nature and scope of its activities. The standards set forth in the guidelines are intended to ensure the security and confidentiality of customer records and information, protect against any anticipated threats or hazards to the security or integrity of such records and protect against unauthorized access to or use of such records or information that could result in substantial harm or inconvenience to any customer.

Cybersecurity

In March 2015, federal regulators issued two related statements regarding cybersecurity. One statement indicates that financial institutions should design multiple layers of security controls to establish several lines of defense and to ensure that their risk management processes also address the risk posed by compromised customer credentials, including security measures to reliably authenticate customers accessing Internet-based services of the financial institution. The other statement indicates that a financial institution’s management is expected to maintain sufficient business continuity planning processes to ensure the rapid recovery, resumption and maintenance of the financial institution’s operations after a cyber attack involving destructive malware. A financial institution is also expected to develop appropriate processes to enable recovery of data and business operations and address rebuilding

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network capabilities and restoring data if the financial institution or its critical service providers fall victim to this type of cyber-attack. If CFBank fails to observe the regulatory guidance, it could be subject to various regulatory sanctions, including financial penalties.

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

In November 2021, the OCC, the FRB and the FDIC issued a final rule requiring banking organizations that experience a computer-security incident to notify certain entities. A computer-security incident occurs when actual or potential harm to the confidentiality, integrity, or availability of an information system or the information occurs, or there is a violation or imminent threat of a violation to banking security policies and procedures. The affected bank must notify its respective federal regulator of the computer-security incident as soon as possible and no later than 36 hours after the bank determines a computer-security incident has occurred. These notifications are intended to promote early awareness of threats to banking organizations and will help banks react to those threats before they manifest into bigger incidents. This rule also requires bank service providers to notify its customers of a computer-security incident.

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

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

Effect of Environmental Regulation

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

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

Federal and State Taxation

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

Our deferred tax assets are composed of U.S. net operating losses (“NOLs”), and other temporary book to tax differences. When determining the amount of deferred tax assets that are more-likely-than-not to be realized, and therefore recorded as a benefit, the Company conducts a regular assessment of all available information. This information includes, but is not limited to, taxable income in prior periods, projected future income and projected future reversals of deferred tax items. Based on these criteria, the Company determined as of December 31, 2021 that no valuation allowance was required against the net deferred tax asset.

In 2012, a recapitalization program through the sale of $22.5 million in common stock improved the capital levels of CFBank and

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provided working capital for the Holding Company. The result of the change in stock ownership associated with the stock offering, however, was that the Company incurred an ownership change within the guidelines of Section 382 of the Internal Revenue Code of 1986. At year-end 2021, the Company had net operating loss carryforwards of $22.3 million, which expire at various dates from 2024 to 2032. As a result of the ownership change, the Company's ability to utilize carryforwards that arose before the 2012 stock offering closed is limited to $163,000 per year. Due to this limitation, management determined it is more likely than not that $20.5 million of net operating loss carryforwards will expire unutilized. As required by accounting standards, the Company reduced the carrying value of deferred tax assets, and the corresponding valuation allowance, by the $7.0 million tax effect of this lost realizability.

Federal income tax laws provided additional deductions, totaling $2.3 million, for thrift bad debt reserves established before 1988. Accounting standards do not require a deferred tax liability to be recorded on this amount, which otherwise would have totaled $473,000 at year-end 2021. However, if CFBank were wholly or partially liquidated or otherwise ceases to be a bank, or if tax laws were to change, this amount would have to be recaptured and a tax liability recorded. Additionally, any distributions in excess of CFBank’s current or accumulated earnings and profits would reduce amounts allocated to its bad debt reserve and create a tax liability for CFBank. See Note 13 in the accompanying Notes to Consolidated Financial Statements for additional information.

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

Ohio Taxation

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

Delaware Taxation

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

Available Information

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

Ite m 1A. Risk Factors.

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

Economic, Market and Political Risks

The economic impact of the ongoing COVID-19 pandemic, or an outbreak of another highly infectious or contagious disease, could adversely affect our business, financial condition and results of operations.

The ongoing COVID-19 pandemic has negatively impacted global, national and local economies, disrupted global and national supply chains, lowered equity market valuations, and created significant volatility and disruption in financial markets. In addition, the pandemic resulted in temporary closures of many businesses and the institution of social distancing and sheltering in place

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requirements in many states and communities and may result in the same or similar restrictions in the future. As a result, the demand for CFBank’s products and services has been and may continue to be significantly impacted, which could adversely affect our revenue and results of operations. Furthermore, the COVID-19 pandemic could result in the recognition of credit losses in our loan portfolios and increases in our allowance for credit losses, particularly if businesses remain required to operate at diminished capacities or are required to close again, the impact on the global, national and local economies worsen, or more customers draw on their lines of credit or seek additional loans to help finance their businesses. Our business operations may also be disrupted if significant portions of our workforce are unable to work effectively, including because of illness, quarantines, government actions, or other restrictions in connection with COVID-19. The extent to which COVID-19 impacts our business, results of operations, and financial condition, as well as our regulatory capital and liquidity ratios, will depend on future developments, which are highly uncertain and cannot be predicted, including the scope and duration of the pandemic and actions taken by governmental authorities and other third parties in response to the pandemic.

As of December 31, 2021, we continued to hold and service a limited number of PPP loans. These PPP loans are subject to the provisions of the CARES Act and to complex and evolving rules and guidance issued by the SBA and other government agencies. We expect that the great majority of our PPP borrowers will seek full or partial forgiveness of their loan obligations. We have credit risk on the PPP loans if the SBA determines that there is a deficiency in the manner in which we originated, funded or serviced loans, including any issue with the eligibility of a borrower to receive a PPP loan. We could face additional risks in our administrative capabilities to service our PPP loans, and risk with respect to the determination of loan forgiveness. 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 we originated, funded or serviced the PPP loan, the SBA may deny its liability under the guaranty, reduce the amount of the guaranty or, if the SBA has already paid under the guaranty, seek recovery of any loss related to the deficiency.

The spread of COVID-19, including new variants thereof, has also caused us to modify our business practices, including employee travel, employee work locations, and cancellation of physical participation in meetings, events and conferences. Further, technology in employees’ homes may not be as robust as in our offices and could cause the networks, information systems, applications, and other tools available to such employees to be more limited or less reliable. The continuation of these work-from-home measures also introduces additional operational risk, including increased cybersecurity risk from phishing, malware, and other cybersecurity attacks, all of which could expose us to risks of data or financial loss and could seriously disrupt our operations and the operations of any impacted customers.

COVID-19, including the spread of new variants thereof, or a new pandemic could subject us to any of the following risks, any of which could, individually or in the aggregate, have a material adverse effect on our business, financial condition, liquidity, and results of operations:

demand for our products and services may decline, making it difficult to grow assets and income;

if the economy is unable to fully reopen or experiences additional or new closures or downturns as a result of the COVID-19 pandemic, loan delinquencies, problem assets, and foreclosures may increase, resulting in increased charges and reduced income;

collateral for loans, especially real estate, may decline in value, which could cause loan losses to increase;

our allowance for loan losses may have to be increased if borrowers experience financial difficulties beyond forbearance periods, which will adversely affect our net income;

the net worth and liquidity of loan guarantors may decline, impairing their ability to honor commitments to us;

a prolonged weakness in economic conditions resulting in a reduction of future projected earnings could result in our recording a valuation allowance against our current outstanding deferred tax assets;

we rely on third party vendors for certain services and the unavailability of a critical service due to COVID-19 could have an adverse effect on us; and

continued adverse economic conditions could result in protracted volatility in the price of our common shares.

Moreover, our future success and profitability substantially depend on the management skills of our executive officers and directors, many of whom have held officer and director positions with us for many years. The unanticipated loss or unavailability of key employees due to COVID-19, including new variants thereof, or any similar pandemic could harm our ability to operate our business or execute our business strategy. We may not be successful in finding and integrating suitable successors in the event of key employee loss or unavailability.

Even after the COVID-19 pandemic subsides, the U.S. economy will likely require time to recover, the length of which is unknown and during which the United States may experience a recession or market correction. Our business could be materially and adversely affected by such recession or market correction.

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We continue to closely monitor the impact of COVID-19 and related risks as they evolve. To the extent the effects of COVID-19 adversely impact our business, financial condition, liquidity or results of operations, it may also have the effect of heightening many of the other risks described in this section.

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

Our success depends to a significant extent upon local and national economic and political conditions, as well as governmental fiscal and monetary policies. Conditions such as inflation, recession, unemployment, changes in interest rates, fiscal and monetary policy, an increasing federal government budget deficit, slowing gross domestic product, tariffs, a U.S. withdrawal from or significant renegotiation of trade agreements, trade wars, and other factors beyond our control may adversely affect CFBank’s deposit levels and composition, the quality of investment securities available for purchase, demand for loans, the ability of CFBank’s borrowers to repay their loans, and the value of the collateral securing loans made by CFBank. Recent political developments in Russia and Ukraine are likely to result in substantial changes in economic and political conditions for the U.S. and the remainder of the world. Disruptions in U.S. and global financial markets, and changes in oil production and supply in the Middle East and Russia, also affect the economy and stock prices in the U.S., which can affect our earnings capital, as well as the ability of our customers to repay loans.

Because we have a significant amount of real estate loans, decreases in real estate values could adversely affect the value of property used as collateral and our ability to sell the collateral upon foreclosure. Adverse changes in the economy, including those resulting from the ongoing COVID-19 pandemic, may also have a negative effect on the ability of our borrowers to make timely repayments of their loans, which would have an adverse impact on our earnings and cash flows. Moreover, our market activities are concentrated in the following Ohio counties: Franklin County, and contiguous counties through our office in Worthington, Ohio and loan production office in Columbus, Ohio; Cuyahoga County, and contiguous counties through our agency office in Woodmere, Ohio, Hamilton County, and contiguous counties through our office in Glendale, Ohio, Summit County, and contiguous counties through our office in Fairlawn, Ohio; and in Marion County, Indiana through our presence in the Indianapolis market. Our success depends on the general economic conditions of these areas, particularly given that a significant portion of our lending relates to real estate located in these regions. Therefore, adverse changes in the economic conditions in these areas could adversely impact our earnings and cash flows.

Changing interest rates may decrease our earnings and asset values.

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

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

LIBOR is used extensively in the U.S. and globally as a benchmark for various commercial and financial contracts, including adjustable rate mortgages, corporate debt, interest rate swaps and other derivatives. LIBOR is set based on interest rate information reported by certain banks, which may stop reporting such information after 2021. On July 27, 2017, the United Kingdom’s Financial Conduct Authority (“FCA”) announced that it intends to stop persuading or compelling banks to submit LIBOR rates after 2021. On November 30, 2020, to facilitate an orderly LIBOR transition, the OCC, the FDIC, and the FRB jointly announced that entering into new contracts using LIBOR as a reference rate after December 31, 2021, would create a safety and soundness risk. On March 5, 2021, the FCA announced that all LIBOR settings will either cease to be provided by any administrator or no longer be representative immediately after December 31, 2021, in the case of 1-week and 2-month LIBOR, and immediately after June 30, 2023, in the case of the remaining LIBOR settings. In the U.S., efforts to identify a set of alternative U.S. dollar reference interest rates are ongoing, and

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the Alternative Reference Rate Committee (“ARRC”) has recommended the use of a Secured Overnight Funding Rate (“SOFR”). SOFR is different from LIBOR in that it is a backward looking secured rate rather than a forward looking unsecured rate. These differences could lead to a greater disconnect between our costs to raise funds for SOFR as compared to LIBOR. For cash products and loans, ARRC has also recommended Term SOFR, which is a forward looking SOFR based on SOFR futures and may in part reduce differences between SOFR and LIBOR. There are operational issues which may create a delay in the transition to SOFR or other substitute indices, leading to uncertainty across the industry. These consequences cannot be entirely predicted and could have an adverse impact on the market value for or value of LIBOR-linked securities, loans, and other financial obligations or extensions of credit.

The Company’s primary exposure to LIBOR relates to its promissory notes with borrowers, swap contracts with clients, offsetting swap contracts with third parties related to the swap contracts with clients, the Company’s LIBOR-based borrowings and CFBank’s swap contracts which can be tied to LIBOR. The Company’s contracts generally include a LIBOR term (for example, one month, three month, or one year) plus an incremental margin rate. The Company is working through this transition via a multi-disciplinary project team. We do not believe the change to a benchmark like SOFR will have a material impact on our financial condition, results of operations or cash flows.

Risks Related to Our Lending Activities

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

When we loan money we incur the risk that our borrowers will not repay their loans. We reserve for loan losses by establishing an allowance through a charge to earnings. The amount of this allowance is based on our assessment of probable incurred credit losses in our loan portfolio. The process for determining the amount of the allowance is critical to our financial condition and results of operations. It requires subjective and complex judgments about the future, including forecasts of economic or market conditions that might impair the ability of our borrowers to repay their loans. It also requires that we make various assumptions and judgments about the collectability of our loan portfolio, including the creditworthiness of our borrowers and the value of the real estate and other assets serving as collateral for the repayment of many of our loans. The allowance for loan losses may not be sufficient to cover probable losses in our loan portfolio. We might underestimate the loan losses inherent in our loan portfolio and have loan losses in excess of the amount reserved. We might increase the allowance because of changing economic conditions. For example, when real estate values decline, the potential severity of loss on a real estate-secured loan can increase significantly, especially in the case of loans with high loan-to-value ratios. A decline in the national economy or in the local economies of the areas in which our loans are concentrated could result in an increase in loan delinquencies, foreclosures or repossessions resulting in increased charge-off amounts and the need for additional loan loss allowances in future periods. In addition, our determination as to the amount of our allowance for loan losses is subject to review by our regulators as part of their examination process, which may result in the establishment of an additional allowance based upon the judgment of the regulators after a review of the information available at the time of their examination. The additions to our allowance for loan losses would be made through increased provisions for loan losses, which would reduce our income and could materially and adversely affect our financial condition, earnings and profitability.

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

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

We may further experience increased delinquencies, credit losses, and corresponding charges to capital, which could require us to increase our provision for loan losses associated with impacts related to the coronavirus outbreak due to quarantines, market downturns, increased unemployment rates, changes in consumer behavior related to pandemic fears, and related emergency response legislation. We cannot predict the full impact of the coronavirus outbreak or any other future global pandemic on our business, but we may experience increased delinquencies and credit losses as a result of the outbreak. Further, if real estate markets or the economy in general deteriorate (due to the coronavirus outbreak or otherwise), CFBank may experience increased delinquencies and credit losses.

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The allowance for loan losses may not be sufficient to cover actual loan-related losses. Additionally, banking regulators may require CFBank to increase its allowance for loan losses in the future, which could have a negative effect on the Company’s financial condition and results of operations. Additions to the allowance for loan losses will result in a decrease in net earnings and capital and could hinder our ability to grow our assets.

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

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

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

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

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

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

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

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

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

Our business and financial results are subject to risks associated with the creditworthiness of our customers and counterparties.

Credit risk is inherent in the financial services business and results from, among other things, extending credit to customers, purchasing securities, and entering into financial derivative transactions and certain guarantee contracts. Credit risk is one of our most significant risks, particularly given the high percentage of our assets represented directly or indirectly by loans, and the importance of lending to our overall business. We manage credit risk by assessing and monitoring the creditworthiness of our customers and counterparties and by diversifying our loan portfolio. Many factors impact credit risk.

A borrower’s ability to repay a loan can be adversely affected by individual factors, such as business performance, job losses or health issues. A weak or deteriorating economy and changes in the United States or global markets also could adversely impact the ability of our borrowers to repay outstanding loans. Any decrease in our borrowers’ ability to repay loans would result in higher levels of nonperforming loans, net charge-offs, and provision for loan losses.

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Despite maintaining a diversified loan portfolio, in the ordinary course of business, we may have concentrated credit exposure to a particular person or entity, industry, region or counterparty. Events adversely affecting specific customers, industries, regions or markets, a decrease in the credit quality of a customer base or an adverse change in the risk profile of a market, industry, or group of customers could adversely affect us.

Our credit risk may be exacerbated when collateral held by us to secure obligations to us cannot be realized upon or is liquidated at prices that are not sufficient to recover the full amount of the loan or derivative exposure due us.

Due in part to improvement in local and general economic conditions, as well as actions we have taken to manage our loan portfolio, our provision for loan losses has declined in recent years. However, if we experience higher levels of provision for loan losses in the future, our net income could be negatively affected.

Risks Related to Our Business Operations

We may not be able to effectively manage our growth.

We have experienced significant growth in the amount of our total loans in the past several years. Since January 1, 2016, our total net loans have grown by $917.1 million, or 308.7%, and our total assets have grown by $1.1 billion, or 325.7%. Our continued growth may place significant demands on our operations and management, and our future operating results depend to a large extent on our ability to successfully manage our growth. We may not successfully implement improvements to, or integrate, our management information and control systems, procedures and processes in an efficient or timely manner and may discover deficiencies in existing systems and controls. In particular, our controls and procedures must be able to accommodate increases in our loan volume and our growth and expansion. If we are unable to manage our loan growth and/or expanded operations, we may experience compliance and operational problems, have to slow the pace of growth, or have to incur additional expenditures beyond current projections to support such growth, any one of which could materially and adversely affect us.

Future acquisitions or other expansion may adversely affect our financial condition and results of operations.

In the future, we may acquire other financial institutions or branches or assets of other financial institutions. We may also open new branches, enter into new lines of business, or offer new products or services. Any future acquisition or expansion of our business will involve a number of expenses and risks, which may include some or all of the following:

the time and expense associated with identifying and evaluating potential acquisitions or expansions;

the potential inaccuracy of estimates and judgments used to evaluate credit, operations, management and market risk with respect to target institutions;

the time and costs of evaluating new markets, hiring local management and opening new offices, and the delay between commencing these activities and the generation of profits from the expansion;

any financing required in connection with an acquisition or expansion;

the diversion of management’s attention to the negotiation of a transaction and the integration of the operations and personnel of the combining businesses;

entry into unfamiliar markets and the introduction of new products and services into our existing business;

the possible impairment of goodwill associated with an acquisition and possible adverse short-term effects on our results of operations; and

the risk of loss of key employees and customers.

We may incur substantial costs to expand, and we can give no assurance that such expansion will result in the levels of profits we expect. Neither can we assure that integration efforts for any future acquisitions will be successful. We may issue equity securities in connection with acquisitions, which could dilute the economic and voting interests of our existing stockholders.

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

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

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advantage enabling them to maintain numerous banking locations and mount extensive promotional and advertising campaigns.

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

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

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

We are exposed to operational risk.

Similar to any large organization, we are exposed to many types of operational risk, including those discussed in more detail elsewhere in this Item, such as reputational risk, legal and compliance risk, the risk of fraud or theft by employees or outsiders, unauthorized transactions by employees or operational errors, including clerical or record-keeping errors or those resulting from faulty or disabled computer or telecommunications systems. Many of these risks are heightened in light of COVID-19.

We may be subject to disruptions of our operating systems arising from events that are wholly or partially beyond our control, which may include, for example, computer viruses, cyber-attacks, spikes in transaction volume and/or customer activity, electrical or telecommunications outages, or natural disasters. We could be adversely affected by operating systems disruptions if new or upgraded business management systems are defective, not installed properly or not properly integrated into existing operating systems. Although we have programs in place related to business continuity, disaster recovery and information security to maintain the confidentiality, integrity and availability of our operating systems, business applications and customer information, such disruptions may give rise to interruptions in service to customers, loss of data privacy and loss or liability to us.

Any failure or interruption in our operating or information systems, or any security or data breach, could cause reputational damage, jeopardize the confidentiality of customer information, result in a loss of customer business, subject us to regulatory intervention or expose us to civil litigation and financial loss or liability, any of which could have a material adverse effect on us.

Negative public opinion can result from our actual or alleged conduct in any number of activities, including lending practices, corporate governance and acquisitions, social media and other marketing activities, the implementation of environmental, social and governance (ESG) practices, and from actions taken by governmental regulators and community organizations in response to any of the foregoing. Negative public opinion could adversely affect our ability to attract and keep customers, could expose us to potential litigation or regulatory action, and could have a material adverse effect on our stock price or result in heightened volatility of our stock price.

Given the volume of transactions we process, certain errors may be repeated or compounded before they are discovered and successfully rectified. Our necessary dependence upon automated systems to record and process our transaction volume may further increase the risk that technical system flaws or employee tampering or manipulation of those systems will result in losses that are difficult to detect, which may give rise to disruption of service to customers and to financial loss or liability. We are further exposed to the risk that our external vendors may be unable to fulfill their contractual obligations (or will be subject to the same risk of fraud or operational errors by their respective employees as we are) or that our (or our vendors’) consumer compliance, business continuity, and data security systems will prove to be inadequate.

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

As part of our financial institution business, we collect, process and store sensitive consumer data by utilizing computer systems and telecommunications networks operated by both us and third-party service providers. Our necessary dependence upon automated systems to record and process transactions poses the risk that technical system flaws, employee errors, tampering or manipulation of those systems, or attacks by third parties will result in losses and may be difficult to detect. We have security and backup and recovery systems in place, as well as a business continuity plan, to ensure the computer systems will not be inoperable, to the extent possible. The Company also routinely reviews documentation of such controls and backups related to third-party service providers. Our inability to use or access these information systems at critical points in time could unfavorably impact the timeliness and

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efficiency of our business operations. In recent years, some banks have experienced denial of service attacks in which individuals or organizations flood the bank's website with extraordinarily high volumes of traffic, with the goal and effect of disrupting the ability of the bank to process transactions. Other businesses have been victims of ransomware attacks in which the business becomes unable to access its own information and is presented with a demand to pay a ransom in order to once again have access to its information.

We could be adversely affected if one of our employees causes a significant operational break-down or failure, either as a result of human error or where an individual purposefully sabotages or fraudulently manipulates our operations or systems. We are further exposed to the risk that the third-party service providers may be unable to fulfill their contractual obligations (or will be subject to the same risks as faced by us). These disruptions may interfere with service to our customers, cause additional regulatory scrutiny and result in a financial loss or liability. We are also at risk of the impact of natural disasters, terrorism and international hostilities on our systems or for the effects of outages or other failures involving power or communications systems operated by others.

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

In addition, there have been instances where financial institutions have been victims of fraudulent activity in which criminals pose as customers to initiate wire and automated clearinghouse transactions out of customer accounts. The massive breach of the systems of a credit bureau in 2019 presents additional threats as criminals now have more information than ever before about a larger portion of our country's population, which could be used by criminals to pose as customers initiating transfers of money from customer accounts. Although we have policies and procedures in place to verify the authenticity of our customers, we cannot assure that such policies and procedures will prevent all fraudulent transfers.

We have implemented security controls to prevent unauthorized access to our computer systems, and we require that our third-party service providers maintain similar controls. However, the Company’s management cannot be certain that these measures will be successful. A security breach of the computer systems and loss of confidential information, such as customer account numbers and related information, could result in a loss of customers’ confidence and, thus, loss of business. We could also lose revenue if competitors gain access to confidential information about our business operations and use it to compete with us. While we maintain specific "cyber" insurance coverage, which would apply in the event of various breach scenarios, the amount of coverage may not be adequate in any particular case. Furthermore, because cyber threat scenarios are inherently difficult to predict and can take many forms, some breaches may not be covered under our cyber insurance coverage.

Further, we may be impacted by data breaches at retailers and other third parties who participate in data interchanges with us and our customers that involve the theft of customer credit and debit card data, which may include the theft of our debit card personal identification numbers (PINs) and commercial card information used to make purchases at such retailers and other third parties. Such data breaches could result in us incurring significant expenses to reissue debit cards and cover losses, which could result in a material adverse effect on our results of operations.

To date, we have not experienced any material losses relating to cyber-attacks or other information security breaches, but there can be no assurance that we will not suffer such attacks or attempted breaches, or incur resulting losses in the future. Our risk and exposure to these matters remains heightened because of, among other things, the evolving nature of these threats, and our plans to continue to implement internet and mobile banking capabilities to meet customer demand. As cyber and other data security threats continue to evolve, we may be required to expend significant additional resources to continue to modify and enhance its protective measures or to investigate and remediate any security vulnerabilities.

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

All of the types of cyber incidents discussed above could result in damage to our reputation, loss of customer business, costs of incentives to customers or business partners in order to maintain their relationships, litigation, increased regulatory scrutiny and potential enforcement actions, repairs of system damage, increased investments in cybersecurity (such as obtaining additional technology, making organizational changes, deploying additional personnel, training personnel and engaging consultants), increased insurance premiums, and loss of investor confidence and a reduction in the price of our common shares, all of which could result in financial loss and material adverse effects on our results of operations and financial condition

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

The third parties performing operational services for the Company are subject to risks similar to those faced by the Company relating

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to cybersecurity, breakdowns or failures of their own systems, or misconduct of their employees. Like many other community banks, CFBank also relies, in significant part, on a single vendor for the systems which allow CFBank to provide banking services to CFBank’s customers, for which the systems are maintained on CFBank’s behalf by this single vendor.

One or more of the third parties utilized by us may experience a cybersecurity event or operational disruption and, if any such event does occur, it may not be adequately addressed, either operationally or financially, by such third party. Further, the operations of our third-party vendors could fail or otherwise become delayed as a result of COVID-19. Certain of these third parties may have limited indemnification obligations to us in the event of a cybersecurity event or operational disruption, or may not have the financial capacity to satisfy their indemnification obligations.

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

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

Derivative transactions may expose us to unexpected risk and potential losses.

We are party to a number of derivative transactions. Many of these derivative instruments are individually negotiated and non-standardized, which can make exiting, transferring or settling the position difficult. We carry borrowings which contain embedded derivatives. These borrowing arrangements require that we deliver underlying securities to the counterparty as collateral. We are dependent on the creditworthiness of the counterparties and are therefore susceptible to credit and operational risk in these situations.

Derivative contracts and other transactions entered into with third parties are not always confirmed by the counterparties on a timely basis. While the transaction remains unconfirmed, we are subject to heightened credit and operational risk and, in the event of a default, we may find it more difficult to enforce the underlying contract. In addition, as new and more complex derivative products are created, covering a wider array of underlying credit and other instruments, disputes about the terms of the underlying contracts could arise, which could impair our ability to effectively manage our risk exposures from these products and subject us to increased costs. Any regulatory effort to create an exchange or trading platform for credit derivatives and other over-the-counter derivative contracts, or a market shift toward standardized derivatives, could reduce the risk associated with such transactions, but under certain circumstances could also limit our ability to develop derivatives that best suit our needs and those of our clients and adversely affect our profitability.

Legislative, Legal and Regulatory Risks

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

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

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

Regulations affecting banks and financial services businesses are undergoing continuous change, particularly in light of COVID-19 and the stimulus programs issued in connection therewith, and management cannot predict the effect of those changes. While such changes are generally intended to lessen the regulatory burden on financial institutions, the impact of any changes to laws and regulations or other actions by regulatory agencies could adversely affect our business. Regulatory authorities have extensive discretion in connection with their supervisory and enforcement activities, including the ability to impose restrictions on the operation of an institution and the ability to determine the adequacy of an institution’s allowance for loan losses. Failure to comply with applicable laws, regulations and policies could result in sanctions being imposed by the regulatory agencies, including the imposition of civil money penalties, which could have a material adverse effect on our operations and financial condition. Even the reduction of regulatory restrictions could have an adverse effect on us if such lessening of restrictions increases competition within our industry or market areas.

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

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

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

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

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

The BSA and the Patriot Act contain anti-money laundering and financial transparency provisions intended to detect and prevent the use of the U.S. financial system for money laundering and terrorist financing activities. The BSA, as amended by the Patriot Act and the AMLA, requires depository institutions and their holding companies to undertake activities including maintaining an anti-money laundering program, verifying the identity of clients, monitoring for and reporting suspicious transactions, reporting on cash transactions exceeding specified thresholds, and responding to requests for information by regulatory authorities and law enforcement agencies. Financial Crimes Enforcement Network (also known as FinCEN), a unit of the Treasury Department that administers the BSA, is authorized to impose significant civil money penalties for violations of those requirements and has recently engaged in coordinated enforcement efforts with the federal bank regulatory agencies, as well as the U.S. Department of Justice, Drug Enforcement Administration, and Internal Revenue Service. The AMLA is intended to be a comprehensive reform and modernization to U.S. bank secrecy and anti-money laundering laws, which includes a codified risk-based approach to anti-money laundering compliance for financial institutions; requires the development of standards for evaluating technology and internal processes for BSA compliance; expands enforcement-related and investigation-related authority, including increasing available sanctions for certain BSA violations and instituting BSA whistleblower incentives and protections.

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

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Risks Related to our Capital and Capital Stock

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

The Holding Company is a legal entity separate and distinct from its subsidiaries and affiliates. The Holding Company’s ability to support its operations, pay dividends on its common shares and service its debt is dependent upon the amount of cash and liquidity available at the Holding Company level, as well as the receipt of dividends and other distributions from CFBank to the extent necessary to fund such dividends. As of December 31, 2021 the Holding Company had a total of $819,000 of cash at the Holding Company level.

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

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

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

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

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

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

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

The market price of our Common Stock may be subject to fluctuations and volatility.

The market price of our common stock may fluctuate significantly due to, among other things, changes in market sentiment regarding our operations or business prospects, the banking industry generally or the macroeconomic outlook. Factors that could impact our trading price include:

our operating and financial results, including how those results vary from the expectations of management, securities analysts and investors;

developments in our business or operations or in the financial sector generally;

future offerings by us of debt or preferred shares, which would be senior to our common stock upon liquidation and for purposes of dividend distributions;

legislative or regulatory changes affecting our industry generally or our business and operations specifically;

the operating and stock price performance of companies that investors consider to be comparable to us;

announcements of strategic developments, acquisitions and other material events by us or our competitors;

actions by our current stockholders, including future sales of common shares by existing stockholders, including our directors and executive officers; and

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other changes in U.S. or global financial markets, global economies and general market conditions, such as interest or foreign exchange rates, stock, commodity, credit or asset valuations or volatility.

Equity markets in general and our common stock in particular have experienced considerable volatility over the past few years. The market price of our common stock may continue to be subject to volatility unrelated to our operating performance or business prospects. Increased volatility could result in a decline in the market price of our common stock.

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

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

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

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

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

General Risk Factors

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

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

We are at risk of increased losses from fraud.

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

Changes in tax laws could adversely affect our performance.

We are subject to extensive federal, state and local taxes, including income, excise, sales/use, payroll, franchise, financial institutions tax, withholding and ad valorem taxes. Changes to tax laws could have a material adverse effect on our results of operations, fair

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values of net deferred tax assets and obligations of states and political subdivisions held in our investment securities portfolio. In addition, our customers are subject to a wide variety of federal, state and local taxes. Changes in taxes paid by our customers may adversely affect their ability to purchase homes or consumer products, which could adversely affect their demand for our loans and deposit products. In addition, such negative effects on our customers could result in defaults on the loans we have made and decrease the value of mortgage-backed securities in which we have invested.

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

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

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

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

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

Climate change, severe weather, natural disasters, acts of war or terrorism and other external events could significantly impact our business.

Natural disasters, including severe weather events of increasing strength and frequency due to climate change, acts of war or terrorism, and other adverse external events could have a significant impact on our ability to conduct business or upon third parties who perform operational services for us or our customers. Such events could affect the stability of our deposit base, impair the ability of borrowers to repay outstanding loans, impair the value of collateral securing loans, cause significant property damage, result in lost revenue or cause us to incur additional expenses.

It em 1B. Unresolved Staff Comments

Not Applicable

I tem 2. Properties.

We conducted our business through five branch offices located in Franklin, Cuyahoga, Hamilton, and Summit, Ohio, and through a loan production office located in Franklin County, Ohio as of December 31, 2021. The net book value of the Company’s properties totaled $4.8 million at December 31, 2021. CFBank also leases its branch offices in Woodmere, Ohio, Fairlawn, Ohio, Glendale, Ohio and Blue Ash, Ohio, and its loan production office in Columbus. See Note 8 in the accompanying Notes to Consolidated Financial Statements for further discussion.

Locations

Administrative Office (owned facility):

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7000 N. High Street

Worthington, Ohio 43085

Branch Offices:

Worthington Branch (owned facility)

7000 N. High Street

Worthington, Ohio 43085

Eton Branch (leased facility)

28879 Chagrin Blvd.

Woodmere, Ohio 44122

Fairlawn Branch (leased facility)

3009 Smith Road, Suite 100

Fairlawn, Ohio 44333

Glendale Branch (leased facility)

38 Village Square

Glendale, Ohio 44122

Blue Ash Branch (leased facility)

10300 Alliance Rd. #150

Cincinnati, Oh 45242

Loan Production Office (leased facility):

8101 North High Street, Suite 180

Columbus, Ohio 43235

Ite m 3. Legal Proceedings.

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

It em 4. Mine Safety Disclosures.

Not Applicable

PA RT II

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

(a)Market and Dividend Information

The (voting) common stock of CF Bankshares Inc. trades on the Nasdaq® Capital Market under the symbol “CFBK.” As of December 31, 2021, there were 5,239,548 shares of (voting) common stock outstanding and held by approximately 352 shareholders of record. As of December 31, 2021, the Company also had an aggregate of 1,260,700 shares of non-voting common stock outstanding which were held by two shareholders of record.

There was $0.13 per share in dividends declared or paid on our common stock during 2021. The Company presently anticipates continuing to pay dividends in the future at similar levels, subject to compliance with applicable legal and regulatory requirements. The Holding Company is subject to various legal and regulatory policies and guidelines impacting the Holding Company’s ability to pay dividends on its stock. In addition, banking regulations limit the amount of dividends that can be paid to the Holding Company by CFBank without prior regulatory approval and, thus, can limit the availability of funds available to the Holding Company for the payment of dividends on its stock. The Holding Company’s ability to pay dividends on its common stock is also conditioned upon the Holding Company continuing to make certain payments on, and no event of default occurring under, the Company’s fixed-to-floating rate subordinated debt and the subordinated

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debentures underlying the Holding Company’s trust preferred securities. Additional information is contained in the sections titled “Financial Condition - Stockholders’ equity” and “Liquidity and Capital Resources” in Management’s Discussion and Analysis of Financial Condition and Results of Operations in Item 7 of this Form 10-K and in Notes 16 and 17 in the accompanying Notes to Consolidated Financial Statements.

(b)Not applicable.

(c)The following table provides information concerning purchases of the Holding Company’s shares of common stock made by or on behalf of the Company or any “affiliated purchaser” as defined in Rule 10b-18(a)(3) under the Securities Exchange Act of 1934, as amended, during the three months ended December 31, 2021.

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 (1) |  | Maximum number of common shares that may yet be purchased under the plans or programs (1)
October 1 through October 31, 2021 (2) |  | 10,255 |  |  | 20.03 |  | 9,609 |  | 290,099
November 1 through November 31, 2021 (3) |  | 63,852 |  |  | 22.02 |  | 59,976 |  | 230,123
December 1 through December 31, 2021 |  | 23,674 |  |  | 20.52 |  | 23,674 |  | 206,449
Total |  | 97,781 |  | $ | 21.47 |  | 93,259 |  |

(1)On January 28, 2021, the Board of Directors of the Company authorized a new stock repurchase program pursuant to which the Company may repurchase up to 250,000 of the Company’s outstanding common stock on or before February 27, 2022. On October 5, 2021, the Company announced that its Board of Directors approved an increase in the maximum number of shares that the Company may repurchase under the program to 350,000 and further extended the stock repurchase program through June 30, 2022. Under the stock repurchase program, the Company may purchase shares of its common stock from time to time through various means, including open market transactions and privately negotiated transactions.

(2)Includes 646 shares of common stock surrendered to the Company for the payment of the exercise price and taxes upon the exercise of stock options.

(3)Includes 3,876 shares of common stock surrendered to the Company for the payment of the exercise price and taxes upon the exercise of stock options.

Ite m 6. [Reserved]

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

FORW ARD LOOKING STATEMENTS

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

Forward-looking statements are not guarantees of performance or results. A forward-looking statement may include a statement of the assumptions or bases underlying the forward-looking statement. 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.

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CONDENSE D CONSOLIDATED FINANCIAL DATA

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

|  | At December 31,
| 2021 |  | 2020 |  | 2019 |  | 2018 |  | 2017
|  | (Dollars in thousands)
Selected Financial Condition Data: |  |  |  |  |  |  |  |  |  |  |  |  |  |
Total assets | $ | 1,495,589 |  | $ | 1,476,995 |  | $ | 880,545 |  | $ | 665,025 |  | $ | 481,425
Cash and cash equivalents |  | 166,591 |  |  | 221,594 |  |  | 45,879 |  |  | 67,304 |  |  | 45,498
Securities available for sale |  | 16,347 |  |  | 8,701 |  |  | 8,174 |  |  | 10,114 |  |  | 11,773
Equity securities |  | 5,000 |  |  | 5,000 |  |  | - |  |  | - |  |  | -
Loans held for sale |  | 27,988 |  |  | 283,165 |  |  | 135,711 |  |  | 17,385 |  |  | 1,124
Loans and leases, net (1) |  | 1,214,149 |  |  | 895,344 |  |  | 663,303 |  |  | 550,683 |  |  | 406,406
Allowance for loan and lease loss (ALLL) |  | 15,508 |  |  | 17,022 |  |  | 7,138 |  |  | 7,012 |  |  | 6,970
Nonperforming assets |  | 997 |  |  | 695 |  |  | 2,439 |  |  | 415 |  |  | 470
Foreclosed assets |  | - |  |  | - |  |  | - |  |  | 38 |  |  | -
Deposits |  | 1,246,352 |  |  | 1,113,070 |  |  | 746,323 |  |  | 579,786 |  |  | 419,028
FHLB advances and other debt |  | 89,727 |  |  | 214,426 |  |  | 29,017 |  |  | 19,500 |  |  | 13,500
Subordinated debentures |  | 14,883 |  |  | 14,844 |  |  | 14,806 |  |  | 14,767 |  |  | 5,155
Total stockholders' equity |  | 125,330 |  |  | 110,210 |  |  | 80,664 |  |  | 45,559 |  |  | 40,261

|  | For the year ended December 31,
| 2021 |  | 2020 |  | 2019 |  | 2018 |  | 2017
|  | (Dollars in thousands)
Summary of Operations: |  |  |  |  |  |  |  |  |  |  |  |  |  |
Total interest income | $ | 52,348 |  | $ | 42,386 |  | $ | 35,104 |  | $ | 24,886 |  | $ | 17,207
Total interest expense |  | 10,309 |  |  | 14,578 |  |  | 13,404 |  |  | 6,997 |  |  | 3,534
Net interest income |  | 42,039 |  |  | 27,808 |  |  | 21,700 |  |  | 17,889 |  |  | 13,673
Provision for loan and lease losses |  | (1,600) |  |  | 10,915 |  |  | - |  |  | - |  |  | -
Net interest income after provision for loan and lease losses |  | 43,639 |  |  | 16,893 |  |  | 21,700 |  |  | 17,889 |  |  | 13,673
Noninterest income: |  |  |  |  |  |  |  |  |  |  |  |  |  |
Net gain on sale of loans |  | 7,359 |  |  | 58,366 |  |  | 10,767 |  |  | 1,927 |  |  | 75
Other |  | 4,281 |  |  | 1,627 |  |  | 953 |  |  | 789 |  |  | 668
Total noninterest income |  | 11,640 |  |  | 59,993 |  |  | 11,720 |  |  | 2,716 |  |  | 743
Noninterest expense |  | 32,461 |  |  | 40,603 |  |  | 21,379 |  |  | 15,275 |  |  | 10,955
Income before income taxes |  | 22,818 |  |  | 36,283 |  |  | 12,041 |  |  | 5,330 |  |  | 3,461
Income tax expense (benefit) |  | 4,365 |  |  | 6,675 |  |  | 2,440 |  |  | 1,057 |  |  | 2,115
Net income | $ | 18,453 |  | $ | 29,608 |  | $ | 9,601 |  | $ | 4,273 |  | $ | 1,346

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|  | At or for the year ended December 31,
| 2021 |  | 2020 |  | 2019 |  | 2018 |  | 2017
|  | (Dollars in thousands)
Selected Financial Ratios and Other Data: |  |  |  |  |  |  |  |  |  |  |  |  |  |
Performance Ratios (2) |  |  |  |  |  |  |  |  |  |  |  |  |  |
Return on average assets |  | 1.26% |  |  | 2.59% |  |  | 1.30% |  |  | 0.78% |  |  | 0.31%
Return on average equity |  | 15.58% |  |  | 32.04% |  |  | 17.57% |  |  | 10.11% |  |  | 3.36%
Average yield on interest-earning assets (3) |  | 3.79% |  |  | 3.89% |  |  | 4.98% |  |  | 4.75% |  |  | 4.25%
Average rate paid on interest-bearing liabilities |  | 0.95% |  |  | 1.64% |  |  | 2.38% |  |  | 1.71% |  |  | 1.14%
Average interest rate spread (4) |  | 2.84% |  |  | 2.25% |  |  | 2.60% |  |  | 3.04% |  |  | 3.11%
Net interest margin, fully taxable equivalent (5) |  | 3.04% |  |  | 2.55% |  |  | 3.08% |  |  | 3.41% |  |  | 3.38%
Average interest-earning assets to interest bearing liabilities |  | 127.13% |  |  | 122.64% |  |  | 124.90% |  |  | 128.04% |  |  | 130.09%
Efficiency ratio (6) |  | 60.47% |  |  | 46.24% |  |  | 63.97% |  |  | 74.13% |  |  | 75.99%
Noninterest expenses to average assets |  | 2.22% |  |  | 3.55% |  |  | 2.89% |  |  | 2.78% |  |  | 2.54%
Common stock dividend payout ratio |  | 4.69% |  |  | 0.67% |  |  | n/m |  |  | n/m |  |  | n/m
Capital Ratios: (2) |  |  |  |  |  |  |  |  |  |  |  |  |  |
Equity to total assets at end of period |  | 8.38% |  |  | 7.46% |  |  | 9.16% |  |  | 6.85% |  |  | 8.36%
Average equity to average assets |  | 8.11% |  |  | 8.07% |  |  | 7.39% |  |  | 7.68% |  |  | 9.28%
Tier 1 (core) capital to adjusted total assets (Leverage ratio) (7) |  | 11.29% |  |  | 9.74% |  |  | 10.58% |  |  | 10.13% |  |  | 9.37%
Total capital to risk weighted assets (7) |  | 14.02% |  |  | 14.31% |  |  | 12.96% |  |  | 12.37% |  |  | 11.91%
Tier 1 (core) capital to risk weighted assets (7) |  | 12.77% |  |  | 13.05% |  |  | 11.97% |  |  | 11.12% |  |  | 10.65%
Common equity tier 1 capital to risk weighted assets (7) |  | 12.77% |  |  | 13.05% |  |  | 11.97% |  |  | 11.12% |  |  | 10.65%
Asset Quality Ratios: (2) |  |  |  |  |  |  |  |  |  |  |  |  |  |
Nonperforming loans to total loans (8) |  | 0.08% |  |  | 0.08% |  |  | 0.36% |  |  | 0.07% |  |  | 0.11%
Nonperforming assets to total assets (9) |  | 0.07% |  |  | 0.05% |  |  | 0.28% |  |  | 0.06% |  |  | 0.10%
Allowance for loan and lease losses to total loans |  | 1.26% |  |  | 1.87% |  |  | 1.06% |  |  | 1.26% |  |  | 1.69%
Allowance for loan and lease losses to nonperforming loans (8) |  | 1555.47% |  |  | 2449.21% |  |  | 292.66% |  |  | 1859.95% |  |  | 1482.98%
Net charge-offs (recoveries) to average loans |  | (0.01%) |  |  | 0.13 |  |  | (0.02%) |  |  | (0.01%) |  |  | (0.01%)
Per Share Data: (10) |  |  |  |  |  |  |  |  |  |  |  |  |  |
Basic earnings per common share | $ | 2.84 |  | $ | 4.53 |  | $ | 2.05 |  | $ | 1.02 |  | $ | 0.21
Diluted earnings per common share |  | 2.77 |  |  | 4.47 |  |  | 2.03 |  |  | 1.00 |  |  | 0.19
Dividends declared per common share |  | 0.13 |  |  | 0.03 |  |  | - |  |  | - |  |  | -
Tangible book value per common share at end of period |  | 19.28 |  |  | 16.79 |  |  | 12.40 |  |  | 10.51 |  |  | 9.48

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

Bus iness 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

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CFBank to a national bank, the Holding Company became a registered bank holding company and elected financial holding status with the Federal Reserve Board (the “FRB”). Effective as of July 27, 2020, the Company changed its name from Central Federal Corporation to CF Bankshares Inc.

CFBank focuses on serving the financial needs of closely held businesses and entrepreneurs, by providing comprehensive Commercial, Retail, and Mortgage Lending services presence. In all regional markets, CFBank provides commercial loans and equipment leases, commercial and residential real estate loans and treasury management depository services, residential mortgage lending, and full-service commercial and retail banking services and products. CFBank seeks to differentiate itself from its competitors by providing individualized service coupled with direct customer access to decision-makers, and ease of doing business. We believe that CFBank matches the sophistication of much larger banks, without the bureaucracy.

Most of our deposits and loans come from our market areas. Our principal market area for loans and deposits includes the following counties: Franklin County through our office in Worthington, Ohio and our loan production office in Columbus, Ohio; Hamilton County through our offices in Glendale and Blue Ash, Ohio; Cuyahoga County, through our office in Woodmere, Ohio; Summit County through our office in Fairlawn, Ohio and Marion County, Indiana through our presence in Indianapolis. 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.

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 stay-at-home orders were mandated by state and local governments, 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 decline in the Federal funds rates, and unprecedented government stimulus). The dramatic events surrounding the 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.

During the COVID-19 pandemic, we have assisted numerous existing and new customers through our participation in the Paycheck Protection Program (“PPP”) and by providing temporary loan modifications to loan customers. CFBank originated approximately $126 million of PPP loans during the second quarter of 2020 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, CFBank funded nearly all of the PPP loans through loans obtained under the Federal Reserve Board’s Paycheck Protection Program Liquidity Facility (“PPPLF”), which carry a low interest rate of 0.35%. CFBank’s loans through the PPPLF totaled $450,000 at December 31, 2021 and $107.4 million at December 31, 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 for purposes of calculating CFBank’s regulatory leverage ratio. Since the pandemic started, CFBank granted payment modifications on loans totaling approximately $100 million (or approximately 12% of outstanding loan balances). At December 31, 2021, there were no remaining loans on payment deferrals.

Amid the uncertainty related to the COVID-19 pandemic, CFBank significantly increased the allowance for loan and lease losses during 2020 to account for the dramatically changing circumstances that continue to evolve.

Also in response to COVID-19, the Company modified its business practices with a portion of employees working remotely from their homes for a period of time to limit interruptions to operations as much as possible and to help reduce the risk of COVID-19 infecting entire departments. The Company has promoted 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, however, lobbies have since reopened.

Repositioning of Residential Mortgage Business Model. In early 2021, a shift in the mortgage industry resulted in significantly fewer refinance opportunities and lower margins on residential mortgage loans. In response, the Company has strategically scaled down its Residential Mortgage Business. Our Commercial Banking Business continues to experience strong growth and has become the primary driver of our earnings and performance.

Criti cal Accounting Policies and Estimates

We follow financial accounting and reporting policies that are in accordance with U.S. generally accepted accounting principles and conform to general practices within the banking industry. These policies are presented in Note 1 to our Consolidated Financial Statements. Some of these accounting policies are considered to be critical accounting policies, which are those policies that are both most important to the portrayal of the Company’s financial condition and results of operations, and require management’s most difficult, subjective or complex judgments, often as a result of the need to make estimates about the effect of matters that are inherently uncertain. Application of assumptions different than those used by management could result in material changes in our

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financial condition or results of operations. These policies, current assumptions and estimates utilized, and the related disclosure of this process, are determined by management and routinely reviewed with the Audit Committee of the Board of Directors. We believe that the judgments, estimates and assumptions used in the preparation of the consolidated financial statements were appropriate given the factual circumstances at the time.

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

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

Fair value of financial instruments. Another critical accounting policy relates to fair value of financial instruments, which are estimated using relevant market information and other assumptions. Fair value estimates involve uncertainties and matters of significant judgment regarding interest rates, credit risk, prepayments, and other factors, especially in the absence of broad markets for particular items. Changes in assumptions or in market conditions could significantly affect the estimates. Additional information is included in Notes 1 and 6 in the accompanying Notes to Consolidated Financial Statements.

Mortgage banking derivatives. Another critical accounting policy relates to the fair value of mortgage banking derivatives. Mortgage banking derivatives include two types of commitments: rate lock commitments and forward loan commitments. The fair values of these mortgage derivatives are based on anticipated gains on the underlying loans and are based on valuation models using observable market data as of the measurement date. Changes in the fair value of the derivatives are reported currently in earnings, as other noninterest income. Changes in assumptions or in market conditions could significantly affect the estimates. Additional information is included in Notes 1, 6 and 18 in the accompanying Notes to Consolidated Financial Statements.

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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.

Fi nancial Condition

General. Assets totaled $1.5 billion at December 31, 2021 and increased $18.6 million, or 1.3%, from $1.5 billion at December 31, 2020. The increase was primarily due to a $318.8 million increase in net loan balances, partially offset by a $255.2 million decrease in loans held for sale and a $55.0 million decrease in cash and cash equivalents.

Cash and cash equivalents. Cash and cash equivalents totaled $166.6 million at December 31, 2021, and decreased $55.0 million, or 24.8%, from $221.6 million at December 31, 2020. The decrease in cash and cash equivalents was primarily attributed to an increase in net loans, partially offset by an increase in deposits and decreases in loans held for sale, FHLB advances and other debt.

Securities. Securities available for sale totaled $16.3 million at December 31, 2021, and increased $7.6 million, or 87.9%, compared to $8.7 million at December 31, 2020. The increase was due to security purchases, partially offset by principal maturities. Equity securities totaled $5.0 million at December 31, 2021 and December 31, 2020.

Loans held for sale. Loans held for sale totaled $28.0 million at December 31, 2021 and decreased $255.2 million, or 90.1%, from $283.2 million at December 31, 2020. The decrease is the result of the Company’s decision to strategically scale down its Residential Mortgage Business in response to the shift in the mortgage industry.

Loans and Leases. Net loans and leases totaled $1.2 billion at December 31, 2021, and increased $318.8 million, or 35.6%, from $895.3 million at December 31, 2020. The increase was primarily due to a $198.9 million increase in single-family residential loan balances, an $82.5 million increase in commercial real estate loan balances, a $31.4 million increase in multi-family loan balances, a $2.9 million increase in construction loans balances, and a $2.9 million increase in consumer loan balances, partially offset by a $1.4 million decrease in commercial loan balances. The increases in the aforementioned loan balances were related to increased sales activity and new relationships. The decrease in commercial loan balances was primarily the result of PPP loan repayments of $104.8 million, partially offset by new and increased relationships.

CFBank previously participated in a Mortgage Purchase Program with Northpointe Bank (Northpointe), a Michigan banking corporation, from December 2012 until CFBank discontinued its participation in the program in the first quarter of 2021. Pursuant to the terms of a participation agreement, CFBank purchased 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 were individually (MERS) registered loans which were held until funded by the end investor. The mortgage loan investors included Fannie Mae and Freddie Mac, and other major financial institutions. This process on average took 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) were substantially reduced. Therefore, no allowance was allocated by CFBank to these loans. These loans were 100% risk rated for CFBank capital adequacy purposes. Under the participation agreement, CFBank agreed to purchase a 95% ownership/participation interest in each of the aforementioned loans, and Northpointe maintained a 5% ownership interest in each loan it participated. CFBank exited this program during the first quarter 2021. For the year ended December 31, 2021, loan origination activity totaled $5.0 million and payoffs for the same period totaled $20.7 million. At December 31, 2021 and December 31, 2020, CFBank held $0 and $15.7 million, respectively, of such loans which are included in single-family residential loan totals.

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Allowance for loan and lease losses (ALLL). The allowance for loan and lease losses totaled $15.5 million at December 31, 2021, and decreased $1.5 million, or 8.9%, from $17.0 million at December 31, 2020. The decrease in the ALLL is due to negative provision expense of $1.6 million, coupled with net recoveries of $86,000 during the year ended December 31, 2021. The ratio of the ALLL to total loans was 1.26% at December 31, 2021, compared to 1.87% at December 31, 2020. The ratio of the ALLL to total loans, excluding loan balances subject to SBA guarantees, was 1.27% at December 31, 2021, compared to 2.15% at December 31, 2020.

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 below titled “Critical Accounting Policies” for additional discussion.

The ALLL consists of specific and general components. The specific component relates to loans that are individually classified as impaired. A loan is impaired when, based on current information and events, it is probable that CFBank will be unable to collect all amounts due according to the contractual terms of the loan agreement. Substandard loans of all classes within the commercial, commercial real estate, construction and multi-family residential loan segments, regardless of size, 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 in the accompanying Notes to consolidated financial statements for additional information regarding the ALLL.

Individually impaired loans totaled $3.0 million at December 31, 2021, and decreased $112,000, or 3.6%, from $3.1 million at December 31, 2020. The decrease was primarily due to paydowns. The amount of the ALLL specifically allocated to individually impaired loans totaled $20,000 at December 31, 2021 and $23,000 at December 31, 2020. The decrease in the ALLL specifically allocated to impaired loans was primarily due to management’s updated analysis.

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

Nonperforming loans, which are nonaccrual loans and loans 90 days past due but still accruing interest, totaled $997,000 at December 31, 2021, and increased $302,000 from $695,000 at December 31, 2020. The increase was primarily due to one consumer loan and one mortgage loan going into nonaccrual status during the third quarter, partially offset by two consumer loans being returned to accrual status during the first quarter and one single family residential loan paying off in the second quarter. The ratio of nonperforming loans to total loans was 0.08% at December 31, 2021, compared to 0.08% at December 31, 2020.

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The following table presents information regarding the number and balance of nonperforming loans at December 31, 2021 and December 31, 2020.

| December 31, 2021 | December 31, 2020
| # of loans |  | Balance |  | # of loans |  | Balance
| (dollars in thousands)
Commercial | 1 |  | $ | 147 |  | 1 |  | $ | 190
Single-family residential real estate | 3 |  |  | 656 |  | 3 |  |  | 421
Commercial real estate | - |  |  | - |  | - |  |  | -
Home equity lines of credit | 2 |  |  | 194 |  | 3 |  |  | 84
Total | 6 |  | $ | 997 |  | 7 |  | $ | 695

Nonaccrual loans include some nonperforming loans that were previously modified and identified as TDRs. TDRs included in nonaccrual loans totaled $147,000 at December 31, 2021 and $190,000 at December 31, 2020. The decrease in TDRs included in nonaccrual loans was due to principal payments.

Nonaccrual loans at December 31, 2021 and December 31, 2020 do not include $2.8 million and $2.9 million, respectively, of TDRs where customers have established a sustained period of repayment performance, generally six months, loans are current according to their modified terms and repayment of the remaining contractual payments is expected. These loans are included in total impaired loans. See Notes 1 and 4 in the accompanying Notes to consolidated financial statements 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 in the accompanying Notes to Consolidated Financial Statements for additional information regarding descriptions of the regulatory asset classifications.

The level of total criticized and classified loans decreased by $8.0 million, or 56.7%, during the twelve months ended December 31, 2021 primarily due to payoffs. Loans designated as special mention decreased $7.0 million, or 74.4%, and totaled $2.4 million at December 31, 2021, compared to $9.4 million at December 31, 2020. Loans classified as substandard decreased $1.0 million, or 21.5%, and totaled $3.6 million at December 31, 2021, compared to $4.6 million at December 31, 2020. One commercial loan totaling $147,000 was classified as doubtful at December 31, 2021 compared to $190,000 at December 31, 2020. See Note 4 in the accompanying Notes to consolidated financial statements for additional information regarding risk classification of loans.

In addition to credit monitoring through our internal loan risk rating system, we also monitor past due information for all loan segments. Loans that are not rated under our internal credit rating system include groups of homogenous loans, such as single-family

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residential real estate loans and consumer loans. The primary credit indicator for these groups of homogenous loans is past due information.

Total past due loans increased $1.4 million, and totaled $3.6 million at December 31, 2021, compared to $2.2 million at December 31, 2020. Past due loans totaled 0.3% of the loan portfolio at December 31, 2021, compared to 0.2% at December 31, 2020. See Note 4 in the accompanying Notes to Consolidated Financial Statements included 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 $120.1 million, or 35.6%, of CFBank’s commercial portfolio at December 31, 2021, compared to $83.1 million, or 24.6%, at December 31, 2020. Interest only home equity lines of credit totaled $23.9 million, or 98.7%, of the total home equity lines of credit at December 31, 2021 compared to $20.2 million, or 96.5%, at December 31, 2020.

We believe the ALLL is adequate to absorb probable incurred credit losses in the loan portfolio as of December 31, 2021; 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 December 31, 2021 or December 31, 2020. The level of foreclosed assets and charges to foreclosed assets expense may change in the future in connection with workout efforts related to foreclosed assets, nonperforming loans and other loans with credit issues.

Premises and equipment. Premises and equipment, net, totaled $5.9 million at December 31, 2021, and increased $2.2 million, or 57.4%, from $3.7 million at December 31, 2020. See Note 8, Premises and Equipment, in the accompanying Notes to Consolidated Financial Statements for additional information.

Deposits. Deposits totaled $1.2 billion at December 31, 2021, an increase of $133.3 million, or 12.0%, from $1.1 billion at December 31, 2020. The increase is primarily due to a $137.4 million increase in checking account balances and a $26.1 million increase in certificate of deposit account balances, partially offset by a $14.7 million decrease in money market account balances, and a $15.5 million decrease in savings account balances. Noninterest-bearing deposit accounts increased $86.2 million to $284.9 million from from $198.7 million at December 31, 2020.

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 FDIC insurance coverage in excess of $250,000 through these innovative products. Brokered deposits, including CDARS and ICS deposits that qualify as brokered, totaled $278.1 million at December 31, 2021, and increased $109.4 million, or 64.8% from $168.7 million at December 31, 2020. Customer balances in the CDARS reciprocal and ICS reciprocal programs, which do not qualify as brokered, totaled $58.4 million at December 31, 2021 and increased $11.5 million, or 24.4%, from $46.9 million at December 31, 2020.

FHLB advances and other debt. FHLB advances and other debt totaled $89.7 million at December 31, 2021, a decrease of $124.7 million when compared to $214.4 million at December 31, 2020. The decrease was primarily due to a $107.0 million decrease in PPPLF advances and a $70.0 million decrease in the outstanding balance under CFBank’s warehouse facility, partially offset by a $37.5 million increase in FHLB advances and a $14.8 million increase in our Holding Company credit facility.

Prior to May 21, 2021, the Holding Company had a term loan in the original principal amount of $5.0 million with an additional $10.0 million revolving line-of-credit with a third-party bank. That credit facility was refinanced into a new $35.0 million facility on May 21, 2021. The credit facility is revolving until May 21, 2024, at which time any then-outstanding balance is converted to a 10-year term note on a graduated 10-year amortization. Borrowings on the credit facility bear interest at a fixed rate of 3.85% until May 21,

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2026, and the interest rate then converts to a floating rate equal to PRIME with a floor of 3.25%. The purpose of the credit facility is to provide an additional source of liquidity for the Holding Company and to provide funds for the Holding Company to downstream as additional capital to CFBank to support growth. As of December 31, 2021, the Company had an outstanding balance, net of unamortized debt issuance costs, of $24.3 million on the facility.

At December 31, 2021, CFBank had availability in unused lines of credit at two commercial banks in the amounts of $50.0 million and $15.0 million. There were no outstanding borrowings on either line at December 31, 2021 or December 31, 2020.

During 2019, CFBank entered into a $25.0 million warehouse facility with a commercial bank. The warehouse facility was used to periodically fund loans held for sale from the close (funding) date until they were sold in the secondary market. Borrowings on the facility bore interest at the greater of the 30-day LIBOR plus 2.00%, or 4.00% and were secured by the specific loans that were funded. This warehouse facility, which was closed during the third quarter of 2021, had no outstanding balance at December 31, 2021 and December 31, 2020.

During 2020, CFBank entered into an additional $75 million warehouse facility with a commercial bank. The purpose of this warehouse facility was to periodically fund loans held for sale from the close (funding) date until sold in the secondary market. Borrowings on the facility bore interest at the greater of the 30-day LIBOR plus 2.35% or 2.90% and were secured by the specific loans that were funded. This warehouse facility, which was closed in the second quarter of 2021, had $0 outstanding balance at December 31, 2021 and a $70.0 million outstanding balance at December 31, 2020.

CFBank has participated in the PPPLF, which provides liquidity through term financing backed by PPP loans. At December 31, 2021 and December 31, 2020, the principal balance of PPPLF advances outstanding was $450,000 and $107.4 million, respectively. Principal payments are due on the PPPLF advances when the related PPP loans are repaid or forgiven by the SBA. See the section below titled “Liquidity and Capital Resources” for additional information regarding FHLB advances and other debt.

Subordinated debentures Subordinated debentures totaled $14.9 million at December 31, 2021 and $14.8 million at December 31, 2020. 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 December 31, 2021 and December 31, 2020. See Note 11, Subordinated Debentures, in the accompanying Notes to Consolidated Financial Statements for additional information.

Stockholders’ equity. Stockholders’ equity totaled $125.3 million at December 31, 2021, an increase of $15.1 million, or 13.7%, from $110.2 million at December 31, 2020. The increase in total stockholders’ equity was primarily attributed to net income, partially offset by share repurchases.

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

Currently, the Holding Company has excess cash or sources of liquidity 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 loans held for sale, as well as to deploy those assets into higher earning assets to improve net interest income as the opportunity presents itself.

Co mparison of Results of Operations for 2021 and 2020

General. Net income for the year ended December 31, 2021 totaled $18.5 million (or $2.77 per diluted common share) and decreased $11.1 million, or 37.7%, compared to net income of $29.6 million (or $4.47 per diluted common share) for the year ended December 31, 2020. The decrease in net income was primarily the result of a decrease in the net gain on sale of loans which was driven by significantly lower refinance opportunities coupled with lower margins on loan sales. The decrease in the net gain on sale of loans was partially offset by an increase in the net interest income, a decrease in provision expense and a decrease in noninterest expenses.

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

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Net interest income totaled $42.0 million for the year ended December 31, 2021 and increased $14.2 million, or 51.2%, compared to net interest income of $27.8 million for the year ended December 31, 2020. The increase in net interest income was primarily due to a $9.9 million, or 23.5%, increase in interest income, coupled with a $4.3 million, or 29.3%, decrease in interest expense. The increase in interest income was primarily attributed to a $292.3 million, or 26.8%, increase in average interest-earning assets outstanding, resulting primarily from an increase in net loans and loans held for sale, partially offset by a 10bps decrease in average yield on interest-earning assets. The decrease in interest expense was attributed to a 69bps decrease in the average cost of funds on interest-bearing liabilities, partially offset by a $198.5 million, or 22.4%, increase in average interest-bearing liabilities. The net interest margin of 3.04% for the year ended December 31, 2021 increased 49bps compared to the net interest margin of 2.55% for the year ended December 31, 2020.

Interest income totaled $52.3 million for the twelve months ended December 31, 2021, and increased $9.9 million, or 23.5%, compared to $42.4 million for the twelve months ended December 31, 2020. The increase in interest income was primarily attributed to a $233.5 million, or 29.2%, increase in average loans outstanding and a $31.0 million, or 14.5%, increase in average loans held for sale outstanding, partially offset by a 64bps decrease in the average yield on loans held for sale and a 3bps decrease in the average yield on loans.

Interest expense totaled $10.3 million for the twelve months ended December 31, 2021, and decreased $4.3 million, or 29.3%, compared to $14.6 million for the twelve months ended December 31, 2020. The decrease in interest expense was primarily attributed to a 79bps decrease in the average rate of interest-bearing deposits, partially offset by a $238.8 million, or 32.3%, increase in average interest-bearing deposits.

Provision for loan and lease losses. The provision for loan and lease losses expense for the year ended December 31, 2021 was ($1.6) million compared to $10.9 million in provision for loan and lease losses expense for the year ended December 31, 2020. The decrease in the provision for loan and lease losses was based on the improved economic outlook and continued strong credit quality of our loan portfolio. Net recoveries for the year ended December 31, 2021 totaled $86,000, compared to net charge-offs of $1.0 million for the year ended December 31, 2020.

The following table presents information regarding net charge-offs (recoveries) for 2021 and 2020.

| 2021 |  | 2020
(Dollars in thousands) | Net charge-offs (recoveries)
Commercial | $ | (56) |  | $ | 633
Single-family residential real estate |  | (9) |  |  | 394
Home equity lines of credit |  | (21) |  |  | 4
Total | $ | (86) |  | $ | 1,031

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

Noninterest income. Noninterest income for the year ended December 31, 2021 totaled $11.6 million and decreased $48.4 million, or 80.6%, compared to $60.0 million for the year ended December 31, 2020. The decrease was primarily due to a $52.4 million decrease in net gain on sale of loans, partially offset by a $1.9 million increase in gain on sale of deposits and a $1.4 million increase in the net gain on sales of SBA loans. As previously discussed, the decrease is the result of the Company’s decision to strategically scale down its Residential Mortgage Business in response to the shift in the mortgage industry. The increase in the net gain on sale of deposits was a result of the sale of CFBank’s two Columbiana County branches that closed on July 16, 2021.

Noninterest expense. Noninterest expense for the year ended December 31, 2021 totaled $32.5 million and decreased $8.1 million, or 20.1%, compared to $40.6 million for the year ended December 31, 2020. The decrease in noninterest expense during the year ended December 31, 2021 was primarily due to a $5.0 million decrease in salaries and employee benefits expense, a $2.6 million decrease in advertising and promotion expense and a $722,000 decrease in professional fees expense, partially offset by a $650,000 increase in FDIC premiums. The decreases in salaries and employee benefits, advertising and promotion expense and professional fees expense were primarily the result of the scaling down of our mortgage lending business. The increase in FDIC expense was related to increased asset and deposit levels.

Income taxes. Income tax expense was $4.4 million for the year ended December 31, 2021, a decrease of $2.3 million, compared to $6.7 million for the year ended December 31, 2020. The effective tax rate for the year ended December 31, 2021 was approximately 19.1%, as compared to approximately 18.4% for the year ended December 31, 2020. The effective tax rate for the year ended December 31, 2020 was favorably impacted by the recognition of approximately $1.0 million of historic tax credits.

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

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Company conducts a regular assessment of all available information. This information includes, but is not limited to, taxable income in prior periods, projected future income and projected future reversals of deferred tax items. Based on these criteria, the Company determined as of December 31, 2021 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, historic tax credits, bank owned life insurance and other miscellaneous items.

Com parison of Results of Operations for 2020 and 2019

General. Net income for the year ended December 31, 2020 totaled $29.6 million (or $4.47 per diluted common share) and increased $20.0 million, or 208.4%, compared to net income of $9.6 million (or $2.03 per diluted common share) for the year ended December 31, 2019. Net income for the year ended December 31, 2020 is net of provision for loan loss expense of $10.9 million versus no provision expense during 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 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 $27.8 million for the year ended December 31, 2020 and increased $6.1 million, or 28.1%, compared to net interest income of $21.7 million for the year ended December 31, 2019. The increase in net interest income was primarily due to a $7.3 million, or 20.7%, increase in interest income, partially offset by a $1.2 million, or 8.8%, increase in interest expense. The increase in interest income was primarily attributed to a $385.2 million, or 54.7%, increase in average interest-earning assets outstanding, resulting primarily from an increase in net loans and loans held for sale, partially offset by a 109bps decrease in average yield on interest-earning assets. The increase in interest expense was attributed to a $324.5 million, or 57.6%, increase in average interest-bearing liabilities, partially offset by a 74bps decrease in the average cost of funds on interest-bearing liabilities. The net interest margin of 2.55% for the year ended December 31, 2020 decreased 53bps compared to the net interest margin of 3.08% for the year ended December 31, 2019.

Interest income totaled $42.4 million for the twelve months ended December 31, 2020, and increased $7.3 million, or 20.7%, compared to $35.1 million for the twelve months ended December 31, 2019. The increase in interest income was primarily attributed to a $202.0 million, or 33.9%, increase in average loans outstanding and a $152.9 million, or 249.3%, increase in loans held for sale outstanding, partially offset by an 84bp decrease in average yield on loans.

Interest expense totaled $14.6 million for the twelve months ended December 31, 2020, and increased $1.2 million, or 8.8%, compared to $13.4 million for the twelve months ended December 31, 2019. The increase in interest expense was primarily attributed to a $213.6 million, or 40.6%, increase in average interest-bearing deposits, partially offset by a 61bps 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 year ended December 31, 2020 was $10.9 million compared to no provision for loan and lease losses expense for the year ended December 31, 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 year ended December 31, 2020 totaled $1.0 million, compared to net recoveries of $126,000 for the year ended December 31, 2019.

The following table presents information regarding net charge-offs (recoveries) for 2020 and 2019.

| 2020 |  | 2019
(Dollars in thousands) | Net charge-offs (recoveries)
Commercial | $ | 633 |  | $ | -
Single-family residential real estate |  | 394 |  |  | (7)
Commercial real estate |  | - |  |  | (105)
Home equity lines of credit |  | 4 |  |  | (50)
Other consumer loans |  | - |  |  | 36
Total | $ | 1,031 |  | $ | (126)

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

Noninterest income. Noninterest income for the year ended December 31, 2020 totaled $60.0 million and increased $48.3 million, or 411.9%, compared to $11.7 million for the year ended December 31, 2019. The increase was primarily due to a $47.6 million increase in net gain on sale of loans, coupled with a $489,000 increase in swap fee income. The increase in net gain on sale of loans was

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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 year ended December 31, 2020 totaled $40.6 million and increased $19.2 million, or 89.9%, compared to $21.4 million for the year ended December 31, 2019. The increase in noninterest expense during the year ended December 31, 2020 was primarily due to a $10.8 million increase in salaries and employee benefits expense, a $3.2 million increase in professional fees expense, and a $2.8 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, coupled with increased advertising focused on increasing core deposits.

Income taxes. Income tax expense was $6.7 million for the year ended December 31, 2020, an increase of $4.3 million, compared to $2.4 million for the year ended December 31, 2019. The effective tax rate for the year ended December 31, 2020 was approximately 18.4%, as compared to approximately 20.3% for the year ended December 31, 2019. The effective tax rate for the year ended December 31, 2020 was favorably impacted by the recognition of approximately $1.0 million of historic tax credits.

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

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

| For the Years Ended December 31,
| 2021 |  | 2020 |  | 2019
| Average |  | Interest |  | Average |  | Average |  | Interest |  | Average |  | Average |  | Interest |  | Average
| Outstanding |  | Earned/ |  | Yield/ |  | Outstanding |  | Earned/ |  | Yield/ |  | Outstanding |  | Earned/ |  | Yield/
| Balance |  | Paid |  | Rate |  | Balance |  | Paid |  | Rate |  | Balance |  | Paid |  | Rate
|  | (Dollars in thousands)
Interest-earning assets: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Securities (1) (2) | $ | 19,311 |  | $ | 756 |  | 3.93% |  | $ | 10,285 |  | $ | 161 |  | 1.59% |  | $ | 9,460 |  | $ | 172 |  | 1.82%
Loans held for sale |  | 245,164 |  |  | 5,572 |  | 2.27% |  |  | 214,177 |  |  | 6,231 |  | 2.91% |  |  | 61,311 |  |  | 2,153 |  | 3.51%
Loans and leases (3) |  | 1,032,075 |  |  | 45,684 |  | 4.43% |  |  | 798,572 |  |  | 35,620 |  | 4.46% |  |  | 596,532 |  |  | 31,625 |  | 5.30%
Other earning assets |  | 79,017 |  |  | 102 |  | 0.13% |  |  | 61,451 |  |  | 175 |  | 0.28% |  |  | 33,169 |  |  | 947 |  | 2.86%
FHLB and FRB stock |  | 6,220 |  |  | 234 |  | 3.76% |  |  | 5,006 |  |  | 199 |  | 3.98% |  |  | 3,790 |  |  | 207 |  | 5.46%
Total interest-earning assets |  | 1,381,787 |  |  | 52,348 |  | 3.79% |  |  | 1,089,491 |  |  | 42,386 |  | 3.89% |  |  | 704,262 |  |  | 35,104 |  | 4.98%
Noninterest-earning assets |  | 79,393 |  |  |  |  |  |  |  | 55,597 |  |  |  |  |  |  |  | 35,081 |  |  |  |  |
Total assets | $ | 1,461,180 |  |  |  |  |  |  | $ | 1,145,088 |  |  |  |  |  |  | $ | 739,343 |  |  |  |  |
Interest-bearing liabilities: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Deposits | $ | 978,258 |  |  | 8,014 |  | 0.82% |  | $ | 739,462 |  |  | 11,911 |  | 1.61% |  | $ | 525,818 |  |  | 11,684 |  | 2.22%
FHLB advances and other borrowings |  | 108,637 |  |  | 2,295 |  | 2.11% |  |  | 148,887 |  |  | 2,667 |  | 1.79% |  |  | 38,021 |  |  | 1,720 |  | 4.52%
Total interest-bearing liabilities |  | 1,086,895 |  |  | 10,309 |  | 0.95% |  |  | 888,349 |  |  | 14,578 |  | 1.64% |  |  | 563,839 |  |  | 13,404 |  | 2.38%
Noninterest-bearing liabilities |  | 255,855 |  |  |  |  |  |  |  | 164,337 |  |  |  |  |  |  |  | 120,858 |  |  |  |  |
Total liabilities |  | 1,342,750 |  |  |  |  |  |  |  | 1,052,686 |  |  |  |  |  |  |  | 684,697 |  |  |  |  |
Equity |  | 118,430 |  |  |  |  |  |  |  | 92,402 |  |  |  |  |  |  |  | 54,646 |  |  |  |  |
Total liabilities and equity | $ | 1,461,180 |  |  |  |  |  |  | $ | 1,145,088 |  |  |  |  |  |  | $ | 739,343 |  |  |  |  |
Net interest-earning assets | $ | 294,892 |  |  |  |  |  |  | $ | 201,142 |  |  |  |  |  |  | $ | 140,423 |  |  |  |  |
Net interest income/interest rate spread |  |  |  | $ | 42,039 |  | 2.84% |  |  |  |  | $ | 27,808 |  | 2.25% |  |  |  |  | $ | 21,700 |  | 2.60%
Net interest margin |  |  |  |  |  |  | 3.04% |  |  |  |  |  |  |  | 2.55% |  |  |  |  |  |  |  | 3.08%
Average interest-earning assets to average interest-bearing liabilities |  | 127.13% |  |  |  |  |  |  |  | 122.64% |  |  |  |  |  |  |  | 124.90% |  |  |  |  |
(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.

| Year Ended |  | Year Ended
| December 31, 2021 |  | December 31, 2020
| Compared to Year Ended |  | Compared to Year Ended
| December 31, 2020 |  | December 31, 2019
| Increase (decrease) due to |  |  |  |  | Increase (decrease) due to |  |  |
| Rate |  | Volume |  | Net |  | Rate |  | Volume |  | Net
| (Dollars in thousands)
Interest-earning assets: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Securities (1) | $ | 373 |  | $ | 222 |  | $ | 595 |  | $ | (24) |  | $ | 13 |  | $ | (11)
Loans held for sale |  | (1,482) |  |  | 823 |  |  | (659) |  |  | (428) |  |  | 4,506 |  |  | 4,078
Loans and leases |  | (274) |  |  | 10,338 |  |  | 10,064 |  |  | (5,559) |  |  | 9,554 |  |  | 3,995
Other earning assets |  | (114) |  |  | 41 |  |  | (73) |  |  | (1,226) |  |  | 454 |  |  | (772)
FHLB and FRB stock |  | (11) |  |  | 46 |  |  | 35 |  |  | (64) |  |  | 56 |  |  | (8)
Total interest-earning assets |  | (1,508) |  |  | 11,470 |  |  | 9,962 |  |  | (7,301) |  |  | 14,583 |  |  | 7,282
Interest-bearing liabilities: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Deposits |  | (6,994) |  |  | 3,097 |  |  | (3,897) |  |  | (3,741) |  |  | 3,968 |  |  | 227
FHLB advances and other borrowings |  | 427 |  |  | (799) |  |  | (372) |  |  | (1,559) |  |  | 2,506 |  |  | 947
Total interest-bearing liabilities |  | (6,567) |  |  | 2,298 |  |  | (4,269) |  |  | (5,300) |  |  | 6,474 |  |  | 1,174
Net change in net interest income | $ | 5,059 |  | $ | 9,172 |  | $ | 14,231 |  | $ | (2,001) |  | $ | 8,109 |  | $ | 6,108

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

Liqu idity 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.

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The following table summarizes CFBank’s cash available from liquid assets and borrowing capacity at December 31, 2021 and 2020.

| December 31, 2021 |  | December 31, 2020
| (Dollars in thousands)
Cash, unpledged securities and deposits in other financial institutions | $ | 168,953 |  | $ | 212,654
Additional borrowing capacity at the FHLB |  | 113,077 |  |  | 53,609
Additional borrowing capacity at the FRB |  | 72,195 |  |  | 81,508
Unused commercial bank lines of credit |  | 65,000 |  |  | 65,000
Total | $ | 419,225 |  | $ | 412,771

Cash, unpledged securities and deposits in other financial institutions decreased $43.7 million, or 20.6%, to $169.0 million at December 31, 2021, compared to $212.7 million at December 31, 2020. The decrease is primarily attributed to an increase in loans and leases, partially offset by an increase in deposits.

CFBank’s additional borrowing capacity with the FHLB increased $59.5 million, or 110.9%, to $113.1 million at December 31, 2021, compared to $53.6 million at December 31, 2020. The increase is primarily attributed to an increase in pledged collateral.

CFBank’s additional borrowing capacity at the FRB decreased $9.3 million, or 11.4%, to $72.2 million at December 31, 2021 from $81.5 million at December 31, 2020. 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 $65.0 million of availability in unused lines of credit with two commercial banks at December 31, 2021 and December 31, 2020.

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 co m petitive interest rates, custo m er service, and relationships with custo m ers to retain d e posits. In 2010, the FDIC, pursuant to the provisions of t he Dodd-Fr a nk Wall Street Reform and Consumer Protection Act p e r m anently increas e d d e posit insur a nce c ov e r a ge from $100,000 t o $250,000 p e r d e positor.

The Holding Company has more limited sources of liquidity than CFBank. In general, in addition to its existing liquid assets, sources of liquidity include funds raised in the securities markets through debt or equity offerings, funds borrowed from third party banks or other lenders, dividends received from CFBank or the sale of assets.

Management believes that the Holding Company had adequate funds at December 31, 2021 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 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 $158,000. 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 3.07% at December 31, 2021.

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%.

Prior to May 21, 2021, the Holding Company had a term loan in the original principal amount of $5.0 million with an additional $10.0 million revolving line-of-credit with a third-party bank. That credit facility was refinanced into a new $35.0 million facility on May 21, 2021. The credit facility is revolving until May 21, 2024 at which time any then-outstanding balance will be converted to a 10-year term note on a graduated 10-year amortization. Borrowings on the credit facility bear interest at a fixed rate of 3.85% until May 21, 2026, and the interest rate then converts to a floating rate equal to PRIME with a floor of 3.75%. 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. At December 31, 2021, the Company had an outstanding balance, net of unamortized debt issuance costs, of $24.3 million on the facility.

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The ability of the Holding Company to pay dividends on its common stock is dependent upon the amount of cash and liquidity available at the Holding Company level, as well as the receipt of dividends and other distributions from CFBank to the extent necessary to fund such dividends.

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 2021. 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.

Imp act of Inflation

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

Item 7A. Quant itative and Qualitative Disclosures about Market Risk

Market risk is the risk of loss from adverse changes in market prices and interest rates. We have not engaged in and, accordingly, have no risk related to trading accounts, commodities or foreign exchange. Our hedging policy allows hedging activities, such as interest-rate swaps, up to a notional amount of 10% of total assets and a value at risk of 10% of core capital. Disclosures about our hedging activities are set forth in Note 18 to our consolidated financial statements. The Company’s market risk arises primarily from interest rate risk inherent in our lending, investing, deposit gathering and borrowing activities. The measurement of market risk associated with financial instruments is meaningful only when all related and offsetting on- and off-balance-sheet transactions are aggregated and the resulting net positions are identified. Disclosures about fair value are set forth in Note 6 to our consolidated financial statements.

Management actively monitors and manages interest rate risk. The primary objective in managing interest rate risk is to limit, within established guidelines, the adverse impact of changes in interest rates on our net interest income and capital. We measure the effect of interest rate changes on CFBank’s economic value of equity (EVE), which is the difference between the estimated market value of its assets and liabilities under different interest rate scenarios. The change in the EVE ratio is a long-term measure of what might happen to the market value of financial assets and liabilities over time if interest rates changed instantaneously and CFBank did not change existing strategies. At December 31, 2021, CFBank’s EVE ratios, using interest rate shocks ranging from a 400 bps rise in rates to a 200 bps decline in rates, are shown in the following table. All values are within the acceptable range established by CFBank’s Board of Directors.

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Economic Value of Equity
as a Percent of Assets
(CFBank only)
Basis Point |  | Economic
Change in Rates |  | Value Ratio
+400 |  | 8.6%
+300 |  | 9.4%
+200 |  | 10.3%
+100 |  | 11.2%
0 |  | 11.8%
-100 |  | 11.9%
-200 |  | 11.8%

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

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

Residential mortgage loan origination volumes are affected by market interest rates on loans. Rising interest rates generally are associated with a lower volume of loan originations, while falling interest rates are usually associated with higher loan originations. Our ability to generate gains on sales of mortgage loans is significantly dependent on the level of originations. Changes in interest rates, prepayment speeds and other factors may also cause the value of our loans held for sale to change.

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

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

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CF BANKSHARES INC.

Ite m 8. Financial Statements and Supplementary Data.

MANAGE MENT’S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING

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

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

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

Management assessed the effectiveness of the Company’s internal control over financial reporting as of December 31, 2021. In making this assessment, management used the criteria for effective internal control over financial reporting as described in the 2013 Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Based on our assessment and those criteria, management concluded that the Company maintained effective internal control over financial reporting as of December 31, 2021.

BKD, LLP, independent registered public accounting firm, has issued an audit report on the effectiveness of the Company’s internal control over financial reporting as of December 31, 2021.

/s/ Timothy T. O’Dell

Timothy T. O’Dell

President and Chief Executive Officer

/s/ Kevin J. Beerman

Kevin J. Beerman

Executive Vice President and Chief Financial Officer

March 16, 2022

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Report of Independent Registered Public Accounting Firm

To the Shareholders, Board of Directors and Audit Committee

CF Bankshares Inc.

Worthington, Ohio

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of CF Bankshares Inc. (the “Company”) as of December 31, 2021 and 2020, the related consolidated statements of income, comprehensive income, changes in stockholders’ equity and changes of cash flows for each of the years in the three-year period ended December 31, 2021, and the related notes (collectively referred to as the “financial statements”). In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2021 and 2020, and the results of its operations and its cash flows for each of the years in the three-year period ended December 31, 2021, in conformity with accounting principles generally accepted in the United States of America.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the Company’s internal control over financial reporting as of December 31, 2021, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) and our report dated March 16, 2022, expressed an unqualified opinion.

Basis for Opinion

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

We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures include examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matter

The critical audit matters communicated below are matters arising from the current-period audit of the financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relates.

As described in Note 4 to the consolidated financial statements, the Company’s consolidated allowance for loan and lease losses (ALLL) was $15.5 million at December 31, 2021. The Company also describes in Note 1 of the consolidated financial statements the “Allowance for Loan Losses” accounting policy around this estimate. The allowance for loan losses is evaluated on a regular basis by management and is based on management’s periodic review of the collectability of the loans in light of historical experiences, the nature and volume of the loan portfolio, adverse situations that may affect the borrower’s ability to repay, estimated value of any underlying collateral, and prevailing economic conditions. The allowance consists of specific, and general components. The specific component relates to loans that are classified as impaired and an allowance is established when the discounted cash flows (or collateral value) of the impaired loan is lower than the carrying

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Report of Independent Registered Public Accounting Firm

value of that loan. The general component covers non-classified loans and is based on historical loss experience adjusted for qualitative factors.

The primary reason for our determination that the allowance for loan losses is a critical audit matter is that it involved significant judgement and complex review as there is a high degree of subjectivity in evaluating management’s estimate, such as evaluating management’s assessment of economic conditions and other environmental factors, evaluating the adequacy of specific allowances associated with impaired loans and assessing the appropriateness of loan grades.

Our audit procedures related to the estimated allowance for loan losses included:

Testing the design and operating effectiveness of internal controls, including those related to technology, over the ALLL including data completeness and accuracy, classifications of loans by loan segment, historical loss data, the calculation of a loss rate, the establishment of qualitative adjustments, grading and risk classification of loans and establishment of specific reserves on impaired loans.

Testing clerical and computational accuracy of the formulas within the Company’s ALLL calculation.

Testing of completeness and accuracy of the underlying data utilized in the ALLL.

Testing of the loan review function and the reasonableness of loan grades determined. Specifically, utilizing internal loan review professionals to assist us in evaluating the appropriateness of loan grades and to assess the reasonableness of specific impairments on loans.

Evaluating the overall reasonableness of qualitative factor adjustments including economic conditions and other environmental factors to historical loss and the appropriateness of their direction and magnitude and the Company’s support for the direction and magnitude compared to previous years.

/s/ BKD, LLP

BKD, LLP

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

Indianapolis, Indiana

March 16, 2022

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CF BANKSHARES INC.

CONSOLIDATED BALANCE SHEETS

December 31, 2021 and 2020

(Dollars in thousands, except per share data)

| December 31, |  | December 31,
| 2021 |  | 2020
ASSETS |  |  |  |  |
Cash and cash equivalents | $ | 166,591 |  | $ | 221,594
Interest-bearing deposits in other financial institutions |  | 100 |  |  | 100
Securities available for sale |  | 16,347 |  |  | 8,701
Equity securities |  | 5,000 |  |  | 5,000
Loans held for sale, at fair value |  | 27,988 |  |  | 283,165
Loans and leases, net of allowance of $15,508 and $17,022 |  | 1,214,149 |  |  | 895,344
FHLB and FRB stock |  | 7,315 |  |  | 5,847
Premises and equipment, net |  | 5,869 |  |  | 3,730
Operating lease right-of-use assets |  | 1,925 |  |  | 1,387
Bank owned life insurance |  | 25,743 |  |  | 17,490
Accrued interest receivable and other assets |  | 24,562 |  |  | 34,637
Total assets | $ | 1,495,589 |  | $ | 1,476,995
LIABILITIES AND STOCKHOLDERS' EQUITY |  |  |  |  |
Deposits |  |  |  |  |
Noninterest bearing | $ | 284,935 |  | $ | 198,675
Interest bearing |  | 961,417 |  |  | 914,395
Total deposits |  | 1,246,352 |  |  | 1,113,070
FHLB advances and other debt |  | 89,727 |  |  | 214,426
Advances by borrowers for taxes and insurance |  | 2,752 |  |  | 1,029
Operating lease liabilities |  | 2,032 |  |  | 1,532
Accrued interest payable and other liabilities |  | 14,513 |  |  | 21,884
Subordinated debentures |  | 14,883 |  |  | 14,844
Total liabilities |  | 1,370,259 |  |  | 1,366,785
Commitments and contingent liabilities |  | - |  |  | -
Stockholders' equity |  |  |  |  |
Common stock, $0.01 par value; |  |  |  |  |
shares authorized: 9,090,909, including 1,260,700 shares of non-voting common stock |  |  |  |  |
Voting common stock, $0.01 par value; shares issued: 5,485,980 at December 31, 2021 and 5,399,702 at December 31, 2020 |  | 55 |  |  | 54
Non-voting common stock, $0.01 par value; |  |  |  |  |
shares issued: 1,260,700 at December 31, 2021 and 1,260,700 at December 31, 2020 |  | 13 |  |  | 13
Series C preferred stock, $0.01 par value; 12,607 shares authorized; |  |  |  |  |
0 issued at December 31, 2021 and 0 shares issued at December 31, 2020 |  | - |  |  | -
Additional paid-in capital |  | 88,528 |  |  | 87,637
Retained earnings |  | 44,084 |  |  | 26,479
Accumulated other comprehensive income (loss) |  | (170) |  |  | 96
Treasury stock, at cost; 246,432 shares of voting common stock at December 31, 2021 and 96,098 shares of voting common stock at December 31, 2020 |  | (7,180) |  |  | (4,069)
Total stockholders' equity |  | 125,330 |  |  | 110,210
Total liabilities and stockholders' equity | $ | 1,495,589 |  | $ | 1,476,995

See accompanying notes to consolidated financial statements.

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CF BANKSHARES INC.

CONSOLIDATED STATEMENTS OF INCOME

Years ended December 31, 2021, 2020 and 2019

(Dollars in thousands, except per share data)

| 2021 |  | 2020 |  | 2019
Interest and dividend income |  |  |  |  |  |  |  |
Loans and leases, including fees | $ | 51,256 |  | $ | 41,851 |  | $ | 33,778
Securities |  | 756 |  |  | 161 |  |  | 172
FHLB and FRB stock dividends |  | 234 |  |  | 199 |  |  | 207
Federal funds sold and other |  | 102 |  |  | 175 |  |  | 947
|  | 52,348 |  |  | 42,386 |  |  | 35,104
Interest expense |  |  |  |  |  |  |  |
Deposits |  | 8,014 |  |  | 11,911 |  |  | 11,684
FHLB advances and other debt |  | 1,398 |  |  | 1,729 |  |  | 704
Subordinated debentures |  | 897 |  |  | 938 |  |  | 1,016
|  | 10,309 |  |  | 14,578 |  |  | 13,404
Net interest income |  | 42,039 |  |  | 27,808 |  |  | 21,700
Provision for loan and lease losses |  | (1,600) |  |  | 10,915 |  |  | -
Net interest income after provision for loan and lease losses |  | 43,639 |  |  | 16,893 |  |  | 21,700
Noninterest income |  |  |  |  |  |  |  |
Service charges on deposit accounts |  | 845 |  |  | 633 |  |  | 553
Net gains on sales of residential mortgage loans |  | 5,916 |  |  | 58,298 |  |  | 10,767
Net gains on sales of SBA loans |  | 1,443 |  |  | 68 |  |  | -
Gain on redemption of life insurance policies |  | 383 |  |  | - |  |  | -
Earnings on bank owned life insurance |  | 532 |  |  | 145 |  |  | 142
Gain on sale of deposits |  | 1,893 |  |  | - |  |  | -
Swap fee Income |  | 194 |  |  | 651 |  |  | -
Other |  | 434 |  |  | 198 |  |  | 258
|  | 11,640 |  |  | 59,993 |  |  | 11,720
Noninterest expense |  |  |  |  |  |  |  |
Salaries and employee benefits |  | 16,948 |  |  | 21,987 |  |  | 11,170
Occupancy and equipment |  | 1,120 |  |  | 1,077 |  |  | 965
Data processing |  | 2,086 |  |  | 1,812 |  |  | 1,350
Franchise and other taxes |  | 975 |  |  | 740 |  |  | 454
Professional fees |  | 4,348 |  |  | 5,070 |  |  | 1,855
Director fees |  | 622 |  |  | 648 |  |  | 547
Postage, printing and supplies |  | 146 |  |  | 172 |  |  | 225
Advertising and marketing |  | 3,061 |  |  | 5,624 |  |  | 2,829
Telephone |  | 263 |  |  | 219 |  |  | 201
Loan expenses |  | 352 |  |  | 304 |  |  | 232
Foreclosed assets, net |  | - |  |  | - |  |  | (9)
Depreciation |  | 435 |  |  | 381 |  |  | 316
FDIC premiums |  | 1,238 |  |  | 588 |  |  | 529
Regulatory assessment |  | 261 |  |  | 181 |  |  | 165
Other insurance |  | 158 |  |  | 106 |  |  | 99
Other |  | 448 |  |  | 1,694 |  |  | 451
|  | 32,461 |  |  | 40,603 |  |  | 21,379
Income before incomes taxes |  | 22,818 |  |  | 36,283 |  |  | 12,041
Income tax expense |  | 4,365 |  |  | 6,675 |  |  | 2,440
Net income |  | 18,453 |  |  | 29,608 |  |  | 9,601
Accretion of discount and value of warrants exercised related to Series B preferred stock |  | - |  |  | - |  |  | 219
Earnings allocated to participating securities (Series C preferred stock) |  | - |  |  | (2,280) |  |  | (430)
Net income attributable to common stockholders | $ | 18,453 |  | $ | 27,328 |  | $ | 9,390
Earnings per common share: |  |  |  |  |  |  |  |
Basic | $ | 2.84 |  | $ | 4.53 |  | $ | 2.05
Diluted | $ | 2.77 |  | $ | 4.47 |  | $ | 2.03

See accompanying notes to consolidated financial statements.

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CF BANKSHARES INC.

CONSOLIDATED STATEMENTS OF COMREHENSIVE INCOME

Years ended December 31, 2021, 2020 and 2019

(Dollars in thousands, except per share data)

| 2021 |  | 2020 |  | 2019
Net income | $ | 18,453 |  | $ | 29,608 |  | $ | 9,601
Other comprehensive income: |  |  |  |  |  |  |  |
Unrealized holding gains (losses) arising during the period related to investment securities available for sale, net of tax of ($71), $18 and $27: |  | (266) |  |  | 68 |  |  | 101
Other comprehensive income (loss), net of tax |  | (266) |  |  | 68 |  |  | 101
Comprehensive income | $ | 18,187 |  | $ | 29,676 |  | $ | 9,702

See accompanying notes to consolidated financial statements.

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CF BANKSHARES INC.

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

Years ended December 31, 2021, 2020 and 2019

(Dollars in thousands, except per share data)

|  |  |  | Non-voting |  | Additional |  | Retained Earnings |  | Accumulated Other |  |  |  |  | Total
| Common |  | Common |  | Paid-In |  | (Accumulated |  | Comprehensive |  | Treasury |  | Stockholders'
| Stock |  | Stock |  | Capital |  | Deficit) |  | Income (Loss) |  | Stock |  | Equity
Balance at January 1, 2019 | $ | 44 |  | $ | - |  | $ | 61,706 |  | $ | (12,752) |  | $ | (73) |  | $ | (3,366) |  | $ | 45,559
Net income |  |  |  |  |  |  |  |  |  |  | 9,601 |  |  |  |  |  |  |  |  | 9,601
Other comprehensive income |  |  |  |  |  |  |  |  |  |  |  |  |  | 101 |  |  |  |  |  | 101
Issuance of 73,738 stock based incentive plan shares, net of forfeitures |  | 1 |  |  |  |  |  | (1) |  |  |  |  |  |  |  |  |  |  |  | -
Restricted stock expense, net of forfeitures |  |  |  |  |  |  |  | 527 |  |  |  |  |  |  |  |  |  |  |  | 527
Acquisition of 1,705 treasury shares surrendered upon vesting of restricted stock for payment of taxes |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | (23) |  |  | (23)
Exercise of warrants to common stock |  | 1 |  |  |  |  |  | 1,257 |  |  |  |  |  |  |  |  |  |  |  | 1,258
Accretion of discount and value of warrants exercised |  |  |  |  |  |  |  | (219) |  |  | 219 |  |  |  |  |  |  |  |  | -
Proceeds from the issuance of 12,337 shares from the preferred stock private placement, net of $805 in offering expenses. |  |  |  |  |  |  |  | 14,000 |  |  |  |  |  |  |  |  |  |  |  | 14,000
Proceeds from the issuance of 849,615 shares from the common stock private placement, net of $554 in offering expenses. |  | 8 |  |  |  |  |  | 9,633 |  |  |  |  |  |  |  |  |  |  |  | 9,641
Balance at December 31, 2019 |  | 54 |  |  | - |  |  | 86,903 |  |  | (2,932) |  |  | 28 |  |  | (3,389) |  |  | 80,664
Net income |  |  |  |  |  |  |  |  |  |  | 29,608 |  |  |  |  |  |  |  |  | 29,608
Other comprehensive income |  |  |  |  |  |  |  |  |  |  |  |  |  | 68 |  |  |  |  |  | 68
Issuance of 19,660 stock based incentive plan shares, net of forfeitures |  | - |  |  |  |  |  | - |  |  |  |  |  |  |  |  |  |  |  | -
Restricted stock expense, net of forfeitures |  |  |  |  |  |  |  | 711 |  |  |  |  |  |  |  |  |  |  |  | 711
Stock options exercised |  |  |  |  |  |  |  | 36 |  |  |  |  |  |  |  |  |  |  |  | 36
Acquisition of 2,158 treasury shares surrendered upon vesting of restricted stock for payment of taxes |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | (32) |  |  | (32)
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) |  |  |  |  |  |  |  |  |  |  |  | -
Dividends declared ( $0.03 per share) |  |  |  |  |  |  |  |  |  |  | (197) |  |  |  |  |  |  |  |  | (197)
Balance at December 31, 2020 |  | 54 |  |  | 13 |  |  | 87,637 |  |  | 26,479 |  |  | 96 |  |  | (4,069) |  |  | 110,210
Net income |  |  |  |  |  |  |  |  |  |  | 18,453 |  |  |  |  |  |  |  |  | 18,453
Other comprehensive loss |  |  |  |  |  |  |  |  |  |  |  |  |  | (266) |  |  |  |  |  | (266)
Issuance of 69,960 stock based incentive plan shares, net of forfeitures |  | 1 |  |  |  |  |  | (1) |  |  |  |  |  |  |  |  |  |  |  | -
Restricted stock expense, net of forfeitures |  |  |  |  |  |  |  | 707 |  |  |  |  |  |  |  |  |  |  |  | 707
Stock options exercised |  |  |  |  |  |  |  | 185 |  |  |  |  |  |  |  |  |  |  |  | 185
Acquisition of 2,261 treasury shares surrendered upon vesting of restricted stock for payment of taxes |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | (43) |  |  | (43)
Acquisition of 4,522 treasury shares surrendered upon exercise of stock options for payment of taxes and exercise price |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | (96) |  |  | (96)
Purchase of 143,551 treasury shares |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | (2,972) |  |  | (2,972)
Dividends declared ( $0.13 per share) |  |  |  |  |  |  |  |  |  |  | (848) |  |  |  |  |  |  |  |  | (848)
Balance at December 31, 2021 | $ | 55 |  | $ | 13 |  | $ | 88,528 |  | $ | 44,084 |  | $ | (170) |  | $ | (7,180) |  | $ | 125,330

See accompanying notes to consolidated financial statements.

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CF BANKSHARES INC.

CONSOLIDATED STATEMENTS OF CHANGES OF CASH FLOWS

Years ended December 31, 2021, 2020 and 2019

(Dollars in thousands, except per share data)

| 2021 |  | 2020 |  | 2019
Net income | $ | 18,453 |  | $ | 29,608 |  | $ | 9,601
Adjustments to reconcile net income to net cash from operating activities: |  |  |  |  |  |  |  |
Provision for loan and lease losses |  | (1,600) |  |  | 10,915 |  |  | -
Depreciation |  | 435 |  |  | 381 |  |  | 316
Amortization, net |  | (2,505) |  |  | (1,510) |  |  | (96)
Deferred income tax (benefit) |  | 773 |  |  | (3,045) |  |  | (187)
Originations of loans held for sale |  | (2,358,511) |  |  | (2,229,042) |  |  | (726,208)
Proceeds from sale of loans held for sale |  | 2,602,993 |  |  | 2,130,712 |  |  | 625,509
Net gains on sales of residential mortgage loans |  | (5,916) |  |  | (58,298) |  |  | (10,454)
Net gains on sales of SBA loans |  | (1,443) |  |  | (68) |  |  | (313)
Gain on sale of deposits |  | (1,893) |  |  | - |  |  | -
Write-down of premises and equipment |  | 17 |  |  | 265 |  |  | -
Gain on sale of foreclosed assets |  | - |  |  | - |  |  | (12)
Earnings on bank owned life insurance |  | (532) |  |  | (145) |  |  | (142)
Gain on redemption of life insurance policies |  | (383) |  |  | - |  |  | -
Stock-based compensation expense |  | 707 |  |  | 711 |  |  | 527
Net change in: |  |  |  |  |  |  |  |
Accrued interest receivable and other assets |  | 17,880 |  |  | (18,451) |  |  | (3,412)
Operating lease right-of-use asset |  | 461 |  |  | 393 |  |  | 404
Operating lease right-of-use liability |  | (498) |  |  | (428) |  |  | (408)
Accrued interest payable and other liabilities |  | (15,135) |  |  | 14,537 |  |  | 1,337
Net cash from (used by) operating activities |  | 253,303 |  |  | (123,465) |  |  | (103,538)
Cash flows from investing activities: |  |  |  |  |  |  |  |
Available-for-sale securities: |  |  |  |  |  |  |  |
Maturities, prepayments and calls |  | 5,030 |  |  | 5,091 |  |  | 3,576
Purchases |  | (13,070) |  |  | (5,552) |  |  | (1,494)
Purchase of equity securities |  | - |  |  | (5,000) |  |  | -
Purchase of bank owned life insurance |  | (8,000) |  |  | (12,000) |  |  | -
Loan and lease originations and payments, net |  | (311,232) |  |  | (241,102) |  |  | (118,467)
Purchase of loans and leases |  | (18,677) |  |  | - |  |  | -
Proceeds from the sale of loans |  | 33,361 |  |  | 1,439 |  |  | 6,547
Additions to premises and equipment |  | (2,962) |  |  | (385) |  |  | (443)
Purchase of FRB and FHLB stock |  | (1,468) |  |  | (1,839) |  |  | (532)
Purchase of other investments |  | (1,500) |  |  | (1,000) |  |  | (734)
Return of investment- joint ventures |  | 756 |  |  | 594 |  |  | 95
Proceeds from the sale of foreclosed assets |  | - |  |  | - |  |  | 50
Proceeds from the redemption of life insurance policies |  | 661 |  |  | - |  |  | -
Proceeds from the sale of premises and equipment |  | 371 |  |  | - |  |  | -
Net cash used by investing activities |  | (316,730) |  |  | (259,754) |  |  | (111,402)
Cash flows from financing activities: |  |  |  |  |  |  |  |
Net change in deposits |  | 237,593 |  |  | 366,747 |  |  | 166,537
Cash paid for assumption of deposits in branch sale |  | (102,418) |  |  | - |  |  | -
Proceeds from FHLB advances and other debt |  | 174,277 |  |  | 575,137 |  |  | 766,700
Repayments on FHLB advances and other debt |  | (228,964) |  |  | (452,224) |  |  | (764,700)
Net change in warehouse line of credit |  | (70,013) |  |  | 70,013 |  |  | -
Net change in advances by borrowers for taxes and insurance |  | 1,723 |  |  | 100 |  |  | 102
Cash dividends paid on common stock |  | (848) |  |  | (195) |  |  | -
Proceeds from exercise of stock options |  | 185 |  |  | 36 |  |  | -
Net proceeds from issuance of Series C preferred stock in private placement |  | - |  |  | - |  |  | 14,000
Net proceeds from issuance of common stock in private placement |  | - |  |  | - |  |  | 9,641
Exercise of warrants to common stock |  | - |  |  | - |  |  | 1,258
Acquisition of treasury shares surrendered upon vesting of restricted stock and exercised options for payment of taxes and exercise proceeds |  | (139) |  |  | (32) |  |  | (23)
Purchase of treasury shares |  | (2,972) |  |  | (648) |  |  | -
Net cash from financing activities |  | 8,424 |  |  | 558,934 |  |  | 193,515
Net change in cash and cash equivalents |  | (55,003) |  |  | 175,715 |  |  | (21,425)
Beginning cash and cash equivalents |  | 221,594 |  |  | 45,879 |  |  | 67,304
Ending cash and cash equivalents | $ | 166,591 |  | $ | 221,594 |  | $ | 45,879

‎

See accompanying notes to consolidated financial statements.

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CF BANKSHARES INC.

CONSOLIDATED STATEMENTS OF CHANGES OF CASH FLOWS

Years ended December 31, 2021, 2020 and 2019

(Dollars in thousands, except per share data)

| 2021 |  | 2020 |  | 2019
Supplemental cash flow information: |  |  |  |  |  |  |  |
Interest paid | $ | 10,579 |  | $ | 14,296 |  | $ | 13,427
Income tax paid |  | 3,850 |  |  | 10,300 |  |  | 2,510
Supplemental noncash disclosures: |  |  |  |  |  |  |  |
Loans transferred from held for sale to portfolio | $ | 16,611 |  | $ | 1,725 |  | $ | 657
Investment payable on limited liability corporation and limited partnership |  | 7,764 |  |  | 500 |  |  | 1,170
Transfer of other liability to operating lease right-of-use asset |  | - |  |  | - |  |  | 184
Initial recognition of operating right-of-use lease asset |  | 999 |  |  | - |  |  | 2,368
Initial recognition of operating right-of-use lease liability |  | 999 |  |  | - |  |  | 2,368
Loans held for sale funded with other debt, net of repayments |  | - |  |  | (7,517) |  |  | 7,517
Dividends payable |  | - |  |  | 2 |  |  | -

See accompanying notes to consolidated financial statements.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except per share data)

NO TE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Nature of Operations and Principles of Consolidation:

The consolidated financial statements include CF Bankshares, Inc. (the “Holding Company”) and its wholly-owned subsidiary, CFBank, National Association (“CFBank”). On December 1, 2016, CFBank converted from a federal savings institution to a national bank. Prior to December 1, 2016, the Holding Company was a registered savings and loan holding company. Effective as of December 1, 2016 and in conjunction with the conversion of CFBank to a national bank, the Holding Company became a registered bank holding company and elected financial holding company status with the FRB. Effective as of July 27, 2020, the Company changed its name from Central Federal Corporation to CF Bankshares Inc. The Holding Company and CFBank are sometimes collectively referred to herein as the “Company”. Intercompany transactions and balances are eliminated in consolidation.

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

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

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

Cash in Excess of FDIC Limits: At December 31, 2021, the Company’s cash accounts exceeded federally insured limits by approximately $160.3 million. Approximately $152.7 million of that amount was held by either the Federal Reserve Bank or the Federal Home Loan Bank of Cincinnati, which is not federally insured.

Interest-Bearing Deposits in Other Financial Institution: Interest-bearing deposits in other financial institutions mature in April, 2022 and are carried at cost. As of December 31, 2021 and December 31, 2020, there was $100 in interest-bearing deposits in other financial institutions.

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

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

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

Equity Securities: Equity securities without a readily determinable fair value are held at cost minus impairment, if any, plus or minus changes resulting from observable price changes in orderly transactions for the identical or a similar investment of the same issuer. For equity securities measured under the practicability exception under Accounting Standards Update (“ASU”) 2016-01, the Company performs a qualitative assessment for equity securities without readily determinable fair values considering impairment indicators to evaluate whether an impairment exists. If an impairment exists, the Company will recognize a loss based on the difference between carrying value and fair value.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except per share data)

Loans Held for Sale: Mortgage loans originated and intended for sale in the secondary market are carried at fair value, as determined by outstanding commitments from investors. Mortgage loans held for sale are generally sold with servicing rights released. The carrying value of mortgage loans sold is reduced by the amount allocated to the servicing rights when mortgage loans held for sale are sold with servicing rights retained. Loans originated as construction loans, that were subsequently transferred to held for sale, are carried at the lower of cost or market. Gains and losses on sales of mortgage loans are based on the difference between the selling price and the carrying value of the related loan sold.

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

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

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

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

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

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

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

All substandard loans within the commercial, multi-family residential, commercial real estate and construction segments 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.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except per share data)

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

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

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

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

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

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

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

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

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except per share data)

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

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

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

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

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

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

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

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

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

Historic Tax Credits: In June 2019, the Company made an equity investment as a non-managing member in an entity that received historic tax credits (HTC) pursuant to Section 47 of the Internal Revenue Code. The Company received 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 $0 at December 31, 2021 and 2020 due to the realization of the HTC in 2020. The maximum exposure to loss related to these investments was $0 at December 31, 2021, representing the Company’s investment balance.

Joint Ventures: The Holding Company has contributed funds into a series of joint ventures (equity stake) for the purpose of allocating excess liquidity into higher earning assets while diversifying its revenue sources. The joint ventures are engaged in shorter term operating activities related to single family real estate developments. Income is recognized based on a rate of return on the outstanding investment balance. As units are sold, the Holding Company receives an additional incentive payment, which is recognized as income. Under ASU 2016-15, the Company has elected the nature of distribution approach to recognize returns from equity method investments. Returns on investment are classified as cash flows from operating activities and returns of investment are classified as investing activities. The balance outstanding in joint ventures at December 31, 2021 and December 31, 2020 was $2,150 and $1,406, respectively. Income recognized on the joint ventures was $224, $173 and $57, respectively, for 2021, 2020 and 2019.

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

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

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

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

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

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

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

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

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

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

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

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

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

Earnings Per Common Share: 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.

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

Loss Contingencies: Loss contingencies, including claims and legal actions arising in the ordinary course of business, are recorded as liabilities when the likelihood of loss is probable and an amount or range of loss can be reasonably estimated. Management does not believe there were any such matters at December 31, 2021 that will have a material effect on the financial statements. See Note 23 – Contingent Liabilities.

Restrictions on Cash: Cash on deposit with the FHLB included $3,300 pledged as collateral for FHLB advances at December 31, 2021.

Equity: Treasury stock is carried at cost. Shares sold out of treasury are valued based on the weighted average cost.

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

Fair Value of Financial Instruments: Fair values of financial instruments are estimated using relevant market information and other assumptions, as more fully disclosed in Note 6 – Fair Value. Fair value estimates involve uncertainties and matters of significant judgment regarding interest rates, credit risk, prepayments, and other factors, especially in the absence of broad markets for particular items. Changes in assumptions or in market conditions could significantly affect these estimates.

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

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

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

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.

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 noninterest income, are as follows:

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

NOTE 3 – SECURITIES

The following tables summarize the amortized cost and fair value of the available-for-sale securities portfolio at December 31, 2021 and December 31, 2020 and the corresponding amounts of unrealized gains and losses recognized in accumulated other comprehensive income (loss):

| Amortized Cost |  | Gross Unrealized Gains |  | Gross Unrealized Losses |  | Fair Value
December 31, 2021 |  |  |  |  |  |  |  |  |  |  |
Corporate debt | $ | 9,976 |  | $ | - |  | $ | 226 |  | $ | 9,750
Issued by U.S. government-sponsored entities and agencies: |  |  |  |  |  |  |  |  |  |  |
U.S. Treasury |  | 6,551 |  |  | 31 |  |  | 21 |  |  | 6,561
Mortgage-backed securities - residential |  | 35 |  |  | 1 |  |  | - |  |  | 36
Total | $ | 16,562 |  | $ | 32 |  | $ | 247 |  | $ | 16,347

| Amortized Cost |  | Gross Unrealized Gains |  | Gross Unrealized Losses |  | Fair Value
December 31, 2020 |  |  |  |  |  |  |  |  |  |  |
Issued by U.S. government-sponsored entities and agencies: |  |  |  |  |  |  |  |  |  |  |
U.S. Treasury | $ | 8,517 |  | $ | 119 |  | $ | - |  | $ | 8,636
Mortgage-backed securities - residential |  | 62 |  |  | 3 |  |  | - |  |  | 65
Total | $ | 8,579 |  | $ | 122 |  | $ | - |  | $ | 8,701

There was no other-than-temporary impairment recognized in accumulated other comprehensive income (loss) for securities available for sale at December 31, 2021 or December 31, 2020.

There were no sales of securities during the years ended December 31, 2021, December 31, 2020 and December 31, 2019.

The amortized cost and fair value of debt securities at December 31, 2021 and December 31, 2020 are shown in the table below by contractual maturity. Expected maturities may differ from contractual maturities if borrowers have the right to call or prepay obligations with or without call or prepayment penalties. Securities not due at a single maturity date are shown separately.

|  | December 31, 2021 |  | December 31, 2020
|  | Amortized Cost |  | Fair Value |  | Amortized Cost |  | Fair Value
Due in one year or less |  | $ | 3,504 |  | $ | 3,518 |  | $ | 5,011 |  | $ | 5,033
Due from one to five years |  |  | 3,047 |  |  | 3,043 |  |  | 3,506 |  |  | 3,603
Due from five to ten years |  |  | 9,976 |  |  | 9,750 |  |  | - |  |  | -
Mortgage-backed securities - residential |  |  | 35 |  |  | 36 |  |  | 62 |  |  | 65
Total |  | $ | 16,562 |  | $ | 16,347 |  | $ | 8,579 |  | $ | 8,701

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Fair value of securities pledged was as follows:

| At December 31,
| 2021 |  | 2020 |  | 2019
Pledged as collateral for: |  |  |  |  |  |  |  |
FHLB advances | $ | 1,016 |  | $ | 1,017 |  | $ | 3,074
Public deposits |  | 501 |  |  | 3,060 |  |  | 2,015
Mortgage banking derivatives |  | 1,504 |  |  | 3,016 |  |  | 1,500
Interest-rate swaps |  | - |  |  | - |  |  | 77
Total | $ | 3,021 |  | $ | 7,093 |  | $ | 6,666

At year end 2021,2020 and 2019, there were no holdings of securities of any one issuer in an amount greater than 10% of stockholders’ equity.

The following table summarizes securities with unrealized losses at December 31, 2021 aggregated by major security type and length of time in a continuous unrealized loss position.

|  | Less than 12 Months |  | 12 Months or More |  | Total
Description of Securities |  | Fair Value |  | Unrealized Loss |  | Fair Value |  | Unrealized Loss |  | Fair Value |  | Unrealized Loss
Corporate debt |  | $ | 9,750 |  | $ | 226 |  | $ | - |  | $ | - |  | $ | 9,750 |  | $ | 226
U.S. Treasury |  |  | 3,024 |  |  | 21 |  |  | - |  |  | - |  |  | 3,024 |  |  | 21
Total temporarily impaired |  | $ | 12,774 |  | $ | 247 |  | $ | - |  | $ | - |  | $ | 12,774 |  | $ | 247

The unrealized losses at December 21, 2021 were related to one Corporate debt security and multiple U.S. Treasuries. Because the decline in fair value was attributable to changes in market conditions, and not credit quality, and because the Company did not have the intent to sell these securities and would unlikely be required to sell these securities before their anticipated recovery, the Company did not consider these securities to be other-than-temporarily impaired at December 31, 2021.

There were no securities with unrealized losses at December 31, 2020.

NOTE 4 – LOANS AND LEASES

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

| December 31, 2021 |  | December 31, 2020
Commercial (1) | $ | 336,881 |  | $ | 338,286
Real estate: |  |  |  |  |
Single-family residential |  | 346,797 |  |  | 147,860
Multi-family residential |  | 76,785 |  |  | 45,375
Commercial |  | 359,562 |  |  | 277,028
Construction |  | 83,360 |  |  | 80,426
Consumer: |  |  |  |  |
Home equity lines of credit |  | 24,228 |  |  | 20,962
Other |  | 2,044 |  |  | 2,429
Subtotal |  | 1,229,657 |  |  | 912,366
Less: ALLL |  | (15,508) |  |  | (17,022)
Loans and Leases, net | $ | 1,214,149 |  | $ | 895,344

(1)Includes $23,157 and $4,133 of commercial leases at December 31, 2021 and December 31, 2020, respectively.

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Included in Commercial loans at December 31, 2021 and December 31, 2020, were $445 and $105,269, respectively, of loans originated under the Small Business Administration (“SBA”) Paycheck Protection Program (“PPP”). The Coronavirus Aid, Relief, and Economic Security Act of 2020, as amended (the “CARES Act”), authorized the SBA to temporarily guarantee PPP loans to provide funding to small businesses to pay certain payroll costs and benefits, and other expenses, during the COVID-19 pandemic. These loans are 100% guaranteed by the SBA and the full principal amount of the loans 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 (which deferral period was subsequently extended to 10 months pursuant to the Paycheck Protection Program Flexibility Act of 2020). The majority of these loans have been pledged as collateral on borrowings under the FRB’s Paycheck Protection Program Lending Facility (“PPPLF”). See Note 10 - FHLB Advances and Other Debt for additional information.

Mortgage Purchase Program:

CFBank previously participated in a Mortgage Purchase Program with Northpointe Bank (Northpointe), a Michigan banking corporation, from December 2012 until CFBank discontinued its participation in the program in the first quarter of 2021. Pursuant to the terms of a participation agreement, CFBank purchased 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 were individually (MERS) registered loans which were held until funded by the end investor. The mortgage loan investors included Fannie Mae and Freddie Mac, and other major financial institutions. This process on average took 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) were substantially reduced. Therefore, no allowance was allocated by CFBank to these loans. These loans were 100% risk rated for CFBank capital adequacy purposes. Under the participation agreement, CFBank agreed to purchase a 95% ownership/participation interest in each of the aforementioned loans, and Northpointe maintained a 5% ownership interest in each loan it participated. CFBank exited this program during the first quarter of 2021. At December 31, 2021 and 2020, CFBank held $0 and $15,713, respectively, of such loans which have been included in single-family residential loan totals above.

Allowance for Loan and Lease Losses:

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

The following tables present the activity in the ALLL by portfolio segment for the years ended December 31, 2021, 2020 and 2019:

| December 31, 2021
|  |  |  | Real Estate |  |  |  |  | Consumer |  |  |
| Commercial |  | Single-family |  | Multi-family |  | Commercial |  | Construction |  | Home Equity lines of credit |  | Other |  | Total
Beginning balance | $ | 3,426 |  | $ | 1,299 |  | $ | 467 |  | $ | 9,184 |  | $ | 2,254 |  | $ | 276 |  | $ | 116 |  | $ | 17,022
Addition to (reduction in) ‎provision for loan losses |  | 645 |  |  | 2,040 |  |  | 360 |  |  | (4,150) |  |  | (510) |  |  | (25) |  |  | 40 |  |  | (1,600)
Charge-offs |  | - |  |  | (17) |  |  | - |  |  | - |  |  | - |  |  | - |  |  | - |  |  | (17)
Recoveries |  | 56 |  |  | 26 |  |  | - |  |  | - |  |  | - |  |  | 21 |  |  | - |  |  | 103
Ending balance | $ | 4,127 |  | $ | 3,348 |  | $ | 827 |  | $ | 5,034 |  | $ | 1,744 |  | $ | 272 |  | $ | 156 |  | $ | 15,508

| December 31, 2020
|  |  |  | 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 |  | 2,005 |  |  | 745 |  |  | 20 |  |  | 6,580 |  |  | 1,495 |  |  | 15 |  |  | 55 |  |  | 10,915
Charge-offs |  | (648) |  |  | (425) |  |  | - |  |  | - |  |  | - |  |  | (21) |  |  | - |  |  | (1,094)
Recoveries |  | 15 |  |  | 31 |  |  | - |  |  | - |  |  | - |  |  | 17 |  |  | - |  |  | 63
Ending balance | $ | 3,426 |  | $ | 1,299 |  | $ | 467 |  | $ | 9,184 |  | $ | 2,254 |  | $ | 276 |  | $ | 116 |  | $ | 17,022

‎

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| December 31, 2019
|  |  |  | Real Estate |  |  |  |  | Consumer |  |  |
| Commercial |  | Single-family |  | Multi-family |  | Commercial |  | Construction |  | Home Equity lines of credit |  | Other |  | Total
Beginning balance | $ | 1,819 |  | $ | 1,061 |  | $ | 612 |  | $ | 2,274 |  | $ | 739 |  | $ | 410 |  | $ | 97 |  | $ | 7,012
Addition to (reduction in) ‎provision for loan losses |  | 235 |  |  | (120) |  |  | (165) |  |  | 225 |  |  | 20 |  |  | (195) |  |  | - |  |  | -
Charge-offs |  | - |  |  | - |  |  | - |  |  | - |  |  | - |  |  | - |  |  | (36) |  |  | (36)
Recoveries |  | - |  |  | 7 |  |  | - |  |  | 105 |  |  | - |  |  | 50 |  |  | - |  |  | 162
Ending balance | $ | 2,054 |  | $ | 948 |  | $ | 447 |  | $ | 2,604 |  | $ | 759 |  | $ | 265 |  | $ | 61 |  | $ | 7,138

The following table presents the balance in the ALLL and the recorded investment in loans and leases by portfolio segment and based on impairment method as of December 31, 2021:

|  |  |  |  | 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 |  | $ | - |  | $ | - |  | $ | - |  | $ | 20 |  | $ | - |  | $ | - |  | $ | - |  | $ | 20 |
Collectively evaluated for impairment |  |  | 4,127 |  |  | 3,348 |  |  | 827 |  |  | 5,014 |  |  | 1,744 |  |  | 272 |  |  | 156 |  |  | 15,488 |
Total ending allowance balance |  | $ | 4,127 |  | $ | 3,348 |  | $ | 827 |  | $ | 5,034 |  | $ | 1,744 |  | $ | 272 |  | $ | 156 |  | $ | 15,508 |
Loans: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Individually evaluated for impairment |  | $ | 221 |  | $ | 99 |  | $ | - |  | $ | 2,658 |  | $ | - |  | $ | - |  | $ | - |  | $ | 2,978 |
Collectively evaluated for impairment |  |  | 336,660 |  |  | 346,698 |  |  | 76,785 |  |  | 356,904 |  |  | 83,360 |  |  | 24,228 |  |  | 2,044 |  |  | 1,226,679 |
Total ending loan balance |  | $ | 336,881 |  | $ | 346,797 |  | $ | 76,785 |  | $ | 359,562 |  | $ | 83,360 |  | $ | 24,228 |  | $ | 2,044 |  | $ | 1,229,657 |

The following table presents the balance in the ALLL and the recorded investment in loans and leases by portfolio segment and based on impairment method as of December 31, 2020:

|  |  |  |  | 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 |  | $ | - |  | $ | - |  | $ | - |  | $ | 23 |  | $ | - |  | $ | - |  | $ | - |  | $ | 23
Collectively evaluated for impairment |  |  | 3,426 |  |  | 1,299 |  |  | 467 |  |  | 9,161 |  |  | 2,254 |  |  | 276 |  |  | 116 |  |  | 16,999
Total ending allowance balance |  | $ | 3,426 |  | $ | 1,299 |  | $ | 467 |  | $ | 9,184 |  | $ | 2,254 |  | $ | 276 |  | $ | 116 |  | $ | 17,022
Loans: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Individually evaluated for impairment |  |  | 268 |  | $ | 104 |  | $ | - |  | $ | 2,718 |  | $ | - |  | $ | - |  | $ | - |  | $ | 3,090
Collectively evaluated for impairment |  |  | 338,018 |  |  | 147,756 |  |  | 45,375 |  |  | 274,310 |  |  | 80,426 |  |  | 20,962 |  |  | 2,429 |  |  | 909,276
Total ending loan balance |  | $ | 338,286 |  | $ | 147,860 |  | $ | 45,375 |  | $ | 277,028 |  | $ | 80,426 |  | $ | 20,962 |  | $ | 2,429 |  | $ | 912,366

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except per share data)

The following tables present loans individually evaluated for impairment by class of loans as of and for the year ended December 31, 2021, 2020 and 2019. The unpaid principal balance is the contractual principal balance outstanding. The recorded investment is the unpaid principal balance adjusted for partial charge-offs, purchase premiums and discounts, deferred loan fees and costs. Cash payments of interest on these loans during the twelve months ended December 31, 2021, 2020 and 2019 totaled $169, $159 and $168, respectively.

At or for the year ended December 31, 2021: |  |  |
| Unpaid Principal Balance |  | Recorded Investment |  | ALLL Allocated |  | 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) |  | 485 |  |  | 221 |  |  | - |  |  | 241 |  |  | 9
Real estate: |  |  |  |  |  |  |  |  |  |  |  |  |  |
Single-family residential (1) |  | 99 |  |  | 99 |  |  | - |  |  | 101 |  |  | 6
Commercial: |  |  |  |  |  |  |  |  |  |  |  |  |  |
Non-owner occupied |  | 2,658 |  |  | 2,658 |  |  | 20 |  |  | 2,688 |  |  | 150
Total with an allowance recorded |  | 3,242 |  |  | 2,978 |  |  | 20 |  |  | 3,030 |  |  | 165
Total | $ | 3,242 |  | $ | 2,978 |  | $ | 20 |  | $ | 3,030 |  | $ | 165

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

At or for the year ended December 31, 2020: |  |  |
| Unpaid Principal Balance |  | Recorded Investment |  | ALLL Allocated |  | 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) |  | 533 |  |  | 268 |  |  | - |  |  | 489 |  |  | 10
Real estate: |  |  |  |  |  |  |  |  |  |  |  |  |  |
Single-family residential (1) |  | 104 |  |  | 104 |  |  | - |  |  | 106 |  |  | 4
Commercial: |  |  |  |  |  |  |  |  |  |  |  |  |  |
Non-owner occupied |  | 2,718 |  |  | 2,718 |  |  | 23 |  |  | 2,728 |  |  | 150
Total with an allowance recorded |  | 3,355 |  |  | 3,090 |  |  | 23 |  |  | 3,323 |  |  | 164
Total | $ | 3,355 |  | $ | 3,090 |  | $ | 23 |  | $ | 3,323 |  | $ | 164

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

‎

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(Dollars in thousands, except per share data)

At or for the year ended December 31, 2019: |  |  |  |  |  |  |  |  |  |  |  |  |  |
| Unpaid Principal Balance |  | Recorded Investment |  | ALLL Allocated |  | Average Recorded Investment |  | Interest Income Recognized
With no related allowance recorded: |  |  |  |  |  |  |  |  |  |  |  |  |  |
Real estate: |  |  |  |  |  |  |  |  |  |  |  |  |  |
Commercial: |  |  |  |  |  |  |  |  |  |  |  |  |  |
Owner occupied | $ | - |  | $ | - |  | $ | - |  | $ | 111 |  | $ | 6
Total with no allowance recorded |  | - |  |  | - |  |  | - |  |  | 111 |  |  | 6
With an allowance recorded: |  |  |  |  |  |  |  |  |  |  |  |  |  |
Commercial |  | 85 |  |  | 85 |  |  | 1 |  |  | 92 |  |  | -
Real estate: |  |  |  |  |  |  |  |  |  |  |  |  |  |
Single-family residential |  | 107 |  |  | 107 |  |  | 1 |  |  | 108 |  |  | 6
Multi-family residential |  | - |  |  | - |  |  | - |  |  | - |  |  | -
Commercial: |  |  |  |  |  |  |  |  |  |  |  |  |  |
Non-owner occupied |  | 4,420 |  |  | 4,420 |  |  | 33 |  |  | 4,194 |  |  | 154
Total with an allowance recorded |  | 4,612 |  |  | 4,612 |  |  | 35 |  |  | 4,394 |  |  | 160
Total | $ | 4,612 |  | $ | 4,612 |  | $ | 35 |  | $ | 4,505 |  | $ | 166

The following table presents the recorded investment in nonperforming loans by class of loans as of December 31, 2021 and 2020:

| 2021 |  | 2020
Loans past due over 90 days still on accrual | $ | - |  | $ | -
Nonaccrual loans: |  |  |  |  |
Commercial |  | 147 |  |  | 190
Real estate: |  |  |  |  |
Single-family residential |  | 656 |  |  | 421
Commercial: |  |  |  |  |
Consumer: |  |  |  |  |
Home equity lines of credit: |  |  |  |  |
Originated for portfolio |  | 153 |  |  | 12
Purchased for portfolio |  | 41 |  |  | 72
Total nonaccrual |  | 997 |  |  | 695
Total nonperforming loans | $ | 997 |  | $ | 695

Nonaccrual loans include both single-family mortgage and consumer loans that are collectively evaluated for impairment and individually classified impaired loans. There were no loans 90 days or more past due and still accruing interest at December 31, 2021 or December 31, 2020.

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(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, 2021:

| 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 | $ | - |  | $ | - |  | $ | - |  | $ | - |  | $ | 336,881 |  | $ | 147
Real estate: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Single-family residential |  | 2,144 |  |  | 652 |  |  | 563 |  |  | 3,359 |  |  | 343,438 |  |  | 93
Multi-family residential |  | - |  |  | - |  |  | - |  |  | - |  |  | 76,785 |  |  | -
Commercial: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Non-owner occupied |  | - |  |  | - |  |  | - |  |  | - |  |  | 185,130 |  |  | -
Owner occupied |  | - |  |  | - |  |  | - |  |  | - |  |  | 134,352 |  |  | -
Land |  | - |  |  | - |  |  | - |  |  | - |  |  | 40,080 |  |  | -
Construction |  | - |  |  | - |  |  | - |  |  | - |  |  | 83,360 |  |  | -
Consumer: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Home equity lines of credit: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Originated for portfolio |  | 2 |  |  | - |  |  | 153 |  |  | 155 |  |  | 23,909 |  |  | -
Purchased for portfolio |  | - |  |  | - |  |  | 41 |  |  | 41 |  |  | 123 |  |  | -
Other |  | - |  |  | - |  |  | - |  |  | - |  |  | 2,044 |  |  | -
Total | $ | 2,146 |  | $ | 652 |  | $ | 757 |  | $ | 3,555 |  | $ | 1,226,102 |  | $ | 240

The following table presents the aging of the recorded investment in past due loans and leases by class of loans as of December 31, 2020:

| 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 | $ | - |  | $ | - |  | $ | - |  | $ | - |  | $ | 338,286 |  | $ | 190
Real estate: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Single-family residential |  | 1,747 |  |  | - |  |  | 315 |  |  | 2,062 |  |  | 145,798 |  |  | 106
Multi-family residential |  | - |  |  | - |  |  | - |  |  | - |  |  | 45,375 |  |  | -
Commercial: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Non-owner occupied |  | - |  |  | 78 |  |  | - |  |  | 78 |  |  | 159,835 |  |  | -
Owner occupied |  | - |  |  | - |  |  | - |  |  | - |  |  | 90,049 |  |  | -
Land |  | - |  |  | - |  |  | - |  |  | - |  |  | 27,066 |  |  | -
Construction |  | - |  |  | - |  |  | - |  |  | - |  |  | 80,426 |  |  | -
Consumer: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Home equity lines of credit: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Originated for portfolio |  | - |  |  | - |  |  | - |  |  | - |  |  | 20,773 |  |  | 12
Purchased for portfolio |  | - |  |  | - |  |  | 46 |  |  | 46 |  |  | 143 |  |  | 26
Other |  | - |  |  | - |  |  | - |  |  | - |  |  | 2,429 |  |  | -
Total | $ | 1,747 |  | $ | 78 |  | $ | 361 |  | $ | 2,186 |  | $ | 910,180 |  | $ | 334

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except per share data)

Short-term Loan Deferrals

Under the CARES Act, financial institutions are permitted to not classify loan modifications as TDRs 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 December 31, 2021, there were no loans remaining on temporary deferrals under this program. At December 31, 2020, loans with an outstanding balance of approximately $528 were on temporary deferrals.

Troubled Debt Restructurings (TDRs):

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

As of December 31, 2021 and December 31, 2020, TDR’s totaled $2,978 and $3,090, respectively. The Company allocated $20 and $23 of specific reserves to loans modified in TDRs as of December 31, 2021 and 2020, respectively. The Company had no t committed to lend any additional amounts as of December 31, 2021 or 2020 to customers with outstanding loans that were classified as nonaccrual TDRs.

During the year ended December 31, 2021, there were no loans modified as a TDR. During the year ended December 31, 2020, one commercial loan in the amount of $190 was modified as a TDR, where concessions were granted to a borrower experiencing financial difficulties.

The TDR described above resulted in a $264 charge off during the year ended December 31, 2020.

There were no TDR’s that went into payment default during the years ended December 31, 2021 and December 31, 2020.

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

Nonaccrual loans include loans that were modified and identified as TDRs and the loans are not performing. At December 31, 2021 and 2020, nonaccrual TDRs were as follows:

| 2021 |  | 2020
Commercial | $ | 147 |  | $ | 190
Total | $ | 147 |  | $ | 190

Nonaccrual loans at December 31, 2021 and 2020 did not include $2,831 and $2,900, respectively, of TDRs where customers had established a sustained period of repayment performance, generally six months, the loans were current according to their modified terms and repayment of the remaining contractual payments was 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 typically performed annually, and more often for loans with higher credit risk. Adjustments to loan risk ratings are based on the reviews and at any time information is received that may affect risk ratings. The following definitions are used for risk ratings:

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(Dollars in thousands, except per share data)

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

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

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

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

The recorded investment in loans and leases by risk category and by class of loans as of December 31, 2021 and based on the most recent analysis performed follows.

| Not Rated |  | Pass |  | Special Mention |  | Substandard |  | Doubtful |  | Total
Commercial | $ | - |  | $ | 336,660 |  | $ | - |  | $ | 74 |  | $ | 147 |  | $ | 336,881
Real estate: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Single-family residential |  | 346,141 |  |  | - |  |  | - |  |  | 656 |  |  | - |  |  | 346,797
Multi-family residential |  | - |  |  | 76,785 |  |  | - |  |  | - |  |  | - |  |  | 76,785
Commercial: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Non-owner occupied |  | - |  |  | 182,472 |  |  | - |  |  | 2,658 |  |  | - |  |  | 185,130
Owner occupied |  | - |  |  | 132,470 |  |  | 1,882 |  |  | - |  |  | - |  |  | 134,352
Land |  | - |  |  | 40,080 |  |  | - |  |  | - |  |  | - |  |  | 40,080
Construction |  | - |  |  | 82,825 |  |  | 535 |  |  | - |  |  | - |  |  | 83,360
Consumer: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Home equity lines of credit: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Originated for portfolio |  | 23,911 |  |  | - |  |  | - |  |  | 153 |  |  | - |  |  | 24,064
Purchased for portfolio |  | 123 |  |  | - |  |  | - |  |  | 41 |  |  | - |  |  | 164
Other |  | 2,044 |  |  | - |  |  | - |  |  | - |  |  | - |  |  | 2,044
| $ | 372,219 |  | $ | 851,292 |  | $ | 2,417 |  | $ | 3,582 |  | $ | 147 |  | $ | 1,229,657

The recorded investment in loans and leases by risk category and class of loans as of December 31, 2020 follows.

| Not Rated |  | Pass |  | Special Mention |  | Substandard |  | Doubtful |  | Total
Commercial | $ | 1 |  | $ | 337,110 |  | $ | 664 |  | $ | 321 |  | $ | 190 |  | $ | 338,286
Real estate: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Single-family residential |  | 147,439 |  |  | - |  |  | - |  |  | 421 |  |  | - |  |  | 147,860
Multi-family residential |  | - |  |  | 45,249 |  |  | - |  |  | 126 |  |  | - |  |  | 45,375
Commercial: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Non-owner occupied |  | 57 |  |  | 150,084 |  |  | 7,054 |  |  | 2,718 |  |  | - |  |  | 159,913
Owner occupied |  | - |  |  | 87,636 |  |  | 1,537 |  |  | 876 |  |  | - |  |  | 90,049
Land |  | - |  |  | 27,066 |  |  | - |  |  | - |  |  | - |  |  | 27,066
Construction |  | - |  |  | 80,247 |  |  | 179 |  |  | - |  |  | - |  |  | 80,426
Consumer: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Home equity lines of credit: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Originated for portfolio |  | 20,746 |  |  | - |  |  | - |  |  | 27 |  |  | - |  |  | 20,773
Purchased for portfolio |  | 118 |  |  | - |  |  | - |  |  | 71 |  |  | - |  |  | 189
Other |  | 2,429 |  |  | - |  |  | - |  |  | - |  |  | - |  |  | 2,429
| $ | 170,790 |  | $ | 727,392 |  | $ | 9,434 |  | $ | 4,560 |  | $ | 190 |  | $ | 912,366

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(Dollars in thousands, except per share data)

Leases:

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

| December 31, 2021 |  | December 31, 2020
Total minimum lease payments to be received | $ | 25,488 |  | $ | 4,459
Less: unearned income |  | (2,385) |  |  | (326)
Plus: Indirect initial costs |  | 54 |  |  | -
Net investment in direct financing leases | $ | 23,157 |  | $ | 4,133

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

2022 |  |  | 6,303
2023 |  |  | 6,186
2024 |  |  | 5,780
2025 |  |  | 4,844
2026 |  |  | 2,101
Thereafter |  |  | 274
|  | $ | 25,488

NOTE 5 – FORECLOSED ASSETS

There were no foreclosed assets at December 31, 2021 and December 31, 2020.

There was no activity in the valuation allowance account or any write-downs during the years ended December 31, 2021 and 2020.

Expenses related to foreclosed assets include:

| 2021 |  | 2020 |  | 2019
Net loss (gain) on sales | $ | - |  | $ | - |  | $ | (12)
Operating expenses, net of rental income |  | - |  |  | - |  |  | 3
| $ | - |  | $ | - |  | $ | (9)

Foreclosed asset expenses incurred during 2019 were related to maintenance expense to ready the property to sell.

NOTE 6 – FAIR VALUE

F air 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).

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(Dollars in thousands, except per share data)

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

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

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

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

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

| Fair Value Measurements at December 31, 2021 Using Significant Other Observable Inputs
| (Level 2)
Financial Assets: |  |
Securities available for sale: |  |
Corporate debt | $ | 9,750
Issued by U.S. government-sponsored entities and agencies: |  |
U.S. Treasury |  | 6,561
Mortgage-backed securities - residential |  | 36
Total securities available for sale | $ | 16,347
Loans held for sale | $ | 27,988
Derivative assets | $ | 538
Interest rate lock commitments | $ | 555
Financial Liabilities: |  |
Derivative liabilities | $ | 538
TBA mortgage-backed securities | $ | 73

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(Dollars in thousands, except per share data)

| Fair Value Measurements at December 31, 2020 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 | $ | 8,636
Mortgage-backed securities - residential |  | 65
Total securities available for sale | $ | 8,701
Loans held for sale | $ | 283,165
Yield maintenance provisions (embedded derivatives) | $ | 1,944
Interest rate lock commitments | $ | 18,101
Financial Liabilities: |  |
Interest-rate swaps | $ | 1,944
TBA mortgage-backed securities | $ | 2,690

The Company had no assets or liabilities measured at fair value on a recurring basis that were measured using Level 1 or Level 3 inputs at December 31, 2021 or December 31, 2020. There were no transfers of assets or liabilities measured at fair value between levels during 2021 or 2020.

There were no assets or liabilities measured at fair value on a non-recurring basis at December 31, 2021. Assets and liabilities measured at fair value on a non-recurring basis at December 31, 2020 are summarized below:

Fair Value Measurements at December 31, 2020 Using
Significant Unobservable Inputs (Level 3)
Impaired loans: |  |
Commercial | $ | 190
Total impaired loans | $ | 190

The Company had no material assets or liabilities measured at fair value on a non-recurring basis that were measured using Level 1 or 2 inputs at December 31, 2021 or December 31, 2020.

There were no write downs of impaired collateral dependent loans during the year ended December 31, 2021. Impaired loans that are measured for impairment using the fair value of the collateral for collateral dependent loans, had a principal balance of $190 with a valuation allowance of $0 at December 31, 2020.

There were no assets or liabilities measured at fair value on a non-recurring basis at December 31, 2021. 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, 2020:

| Fair Value |  | Valuation Technique(s) |  | Unobservable Inputs |  | (Range) Weighted Average
Impaired loans: |  |  |  |  |  |  |  |
Commercial | $ | 190 |  | Comparable sales approach |  | Adjustment for differences between the stated value and net realizable value |  | 65.00%

Financial Instruments Recorded Using Fair Value Option:

The Company has elected the fair value option for loans held for sale. These loans are intended for sale and the Company believes that the fair value is the best indicator of the resolution of these loans. Loans originated as construction loans, that were subsequently transferred to held for sale, are carried at the lower of cost or market and are not included. Interest income is recorded based on the contractual terms of the loan and in accordance with the Company’s policy on loans held for investment. None of these loans were 90 days or more past due or on nonaccrual as of December 31, 2021 or December 31, 2020.

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(Dollars in thousands, except per share data)

As of December 31, 2021 and December 31, 2020, the aggregate fair value, contractual balance and gain or loss of loans held for sale were as follows:

| December 31, 2021 |  | December 31, 2020 |
Aggregate fair value | $ | 27,988 |  | $ | 283,165 |
Contractual balance |  | 27,632 |  |  | 274,401 |
Gain |  | 356 |  |  | 8,764 |

The total amount of gains and losses from changes in fair value included in earnings for the years ended December 31, 2021, 2020 and 2019 for loans held for sale were:

| 2021 |  | 2020 |  | 2019
Interest income | $ | 5,572 |  | $ | 6,231 |  | $ | 2,153
Interest expense |  | - |  |  | - |  |  | -
Change in fair value |  | (8,408) |  |  | 7,046 |  |  | 1,341
Total change in fair value | $ | (2,836) |  | $ | 13,277 |  | $ | 3,494

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

| Fair Value Measurements at December 31, 2021 Using:
| Carrying |  |  |  |  |  |  |  |  |  |  |  |
| Value |  | Level 1 |  | Level 2 |  | Level 3 |  | Total
Financial assets |  |  |  |  |  |  |  |  |  |  |  |  |  |
Cash and cash equivalents | $ | 166,591 |  | $ | 166,591 |  | $ | - |  | $ | - |  | $ | 166,591
Interest-bearing deposits in other financial institutions |  | 100 |  |  | 100 |  |  | - |  |  | - |  |  | 100
Securities available for sale |  | 16,347 |  |  | - |  |  | 16,347 |  |  | - |  |  | 16,347
Equity securities |  | 5,000 |  |  | - |  |  | 5,000 |  |  | - |  |  | 5,000
Loans held for sale |  | 27,988 |  |  | - |  |  | 27,988 |  |  | - |  |  | 27,988
Loans and leases, net |  | 1,214,149 |  |  | - |  |  | - |  |  | 1,231,228 |  |  | 1,231,228
FHLB and FRB stock |  | 7,315 |  |  | n/a |  |  | n/a |  |  | n/a |  |  | n/a
Accrued interest receivable |  | 4,143 |  |  | 2 |  |  | 91 |  |  | 3,947 |  |  | 4,040
Derivative assets |  | 538 |  |  | - |  |  | 538 |  |  | - |  |  | 538
Interest rate lock commitments |  | 555 |  |  | - |  |  | 555 |  |  | - |  |  | 555
Financial liabilities |  |  |  |  |  |  |  |  |  |  |  |  |  |
Deposits | $ | (1,246,352) |  | $ | (661,818) |  | $ | (585,214) |  | $ | - |  | $ | (1,247,032)
FHLB advances and other debt |  | (89,727) |  |  | - |  |  | (90,670) |  |  | - |  |  | (90,670)
Advances by borrowers for taxes and insurance |  | (2,752) |  |  | - |  |  | - |  |  | (2,752) |  |  | (2,752)
Subordinated debentures |  | (14,883) |  |  | - |  |  | (16,051) |  |  | - |  |  | (16,051)
Accrued interest payable |  | (228) |  |  | - |  |  | (228) |  |  | - |  |  | (228)
Derivative liabilities |  | (538) |  |  | - |  |  | (538) |  |  | - |  |  | (538)
TBA mortgage-backed securities |  | (73) |  |  | - |  |  | (73) |  |  | - |  |  | (73)

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(Dollars in thousands, except per share data)

The carrying amounts and estimated fair values of financial instruments were as follows:

| Fair Value Measurements at December 31, 2020 Using:
| Carrying |  |  |  |  |  |  |  |  |  |  |  |
| Value |  | Level 1 |  | Level 2 |  | Level 3 |  | Total
Financial assets |  |  |  |  |  |  |  |  |  |  |  |  |  |
Cash and cash equivalents | $ | 221,594 |  | $ | 221,594 |  | $ | - |  | $ | - |  | $ | 221,594
Interest-bearing deposits in other financial institutions |  | 100 |  |  | 100 |  |  | - |  |  | - |  |  | 100
Securities available for sale |  | 8,701 |  |  | - |  |  | 8,701 |  |  | - |  |  | 8,701
Equity securities |  | 5,000 |  |  | - |  |  | - |  |  | 5,000 |  |  | 5,000
Loans held for sale |  | 283,165 |  |  | - |  |  | 283,165 |  |  | - |  |  | 283,165
Loans and leases, net |  | 895,344 |  |  | - |  |  | - |  |  | 905,030 |  |  | 905,030
FHLB and FRB stock |  | 5,847 |  |  | n/a |  |  | n/a |  |  | n/a |  |  | n/a
Accrued interest receivable |  | 4,584 |  |  | 1 |  |  | 36 |  |  | 4,547 |  |  | 4,584
Yield maintenance provisions (embedded derivatives) |  | 1,944 |  |  | - |  |  | 1,944 |  |  | - |  |  | 1,944
Interest rate lock commitments |  | 18,101 |  |  | - |  |  | 18,101 |  |  | - |  |  | 18,101
Financial liabilities |  |  |  |  |  |  |  |  |  |  |  |  |  |
Deposits | $ | (1,113,070) |  | $ | (554,650) |  | $ | (565,089) |  | $ | - |  | $ | (1,119,739)
FHLB advances and other debt |  | (214,426) |  |  | - |  |  | (215,531) |  |  | - |  |  | (215,531)
Advances by borrowers for taxes and insurance |  | (1,029) |  |  | - |  |  | - |  |  | (1,029) |  |  | (1,029)
Subordinated debentures |  | (14,844) |  |  | - |  |  | (16,325) |  |  | - |  |  | (16,325)
Accrued interest payable |  | (498) |  |  | - |  |  | (498) |  |  | - |  |  | (498)
Interest-rate swaps |  | (1,944) |  |  | - |  |  | (1,944) |  |  | - |  |  | (1,944)
TBA mortgage-backed securities |  | (2,690) |  |  | - |  |  | (2,690) |  |  | - |  |  | (2,690)

The methods and assumptions used to estimate fair value 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.

Equity Securities

Equity securities without a readily determinable fair value are held at cost minus impairment, if any, plus or minus changes resulting from observable price changes in orderly transactions for the identical or a similar investment of the same issuer. For equity securities measured under the practicability exception under Accounting Standards Update (“ASU”) 2016-01, the Company performs a qualitative assessment for equity securities without readily determinable fair values considering impairment indicators to evaluate whether an impairment exists. If an impairment exists, the Company will recognize a loss based on the difference between carrying value and fair value. This method results in a Level 3 classification.

FHLB and FRB Stock

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

Loans and Leases

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

Deposits

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

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(Dollars in thousands, except per share data)

FHLB Advances and Other Debt

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

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

Accrued Interest Receivable/Payable

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

Advances by Borrowers for Taxes and Insurance

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

Off-Balance-Sheet Instruments

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

NOTE 7 – LOAN SERVICING

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

| December 31, 2021 |  | December 31, 2020
Mortgage loans serviced for Freddie Mac | $ | 1,598 |  | $ | 1,875

Custodial escrow balances maintained in connection with serviced loans were $40 and $94 at year-end 2021 and 2020, respectively.

NOTE 8- PREMISES AND EQUIPMENT AND OPERATING LEASES

Year-end premises and equipment were as follows:

| December 31, 2021 |  | December 31, 2020
Land and land improvements | $ | 1,406 |  | $ | 1,293
Buildings |  | 4,414 |  |  | 4,140
Furniture, fixtures and equipment |  | 2,737 |  |  | 2,971
|  | 8,557 |  |  | 8,404
Less: accumulated depreciation |  | (2,688) |  |  | (4,674)
| $ | 5,869 |  | $ | 3,730

Depreciation expense for 2021, 2020 and 2019 totaled $435, $381, and 316, respectively.

Operating Leases:

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

The leases in which the Company is the lessee are comprised of real estate property for branches and offices and for equipment with terms extending through 2032. 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 amounts 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

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(Dollars in thousands, except per share data)

utilizes its incremental borrowing rate at lease inception, on a collateralized basis, over a similar term. At December 31, 2021, the weighted-average remaining lease term for the Company’s operating leases was 4.6 years and the weighted-average discount rate was 5.62%.

The Company’s operating lease costs were $461, $393, and $404 for the years ended December 31, 2021, 2020 and 2019, respectively. The variable lease costs totaled $292, $244, and $231 for the years ended December 31, 2021, 2020 and 2019, respectively. As the Company elected not to separate lease and non-lease components for all classes of underlying assets and instead to account for them as a single lease component, the variable lease cost primarily represents variable payments such as common area maintenance and utilities.

Future minimum operating lease payments as of December 31, 2021 are as follows:

2022 | $ | 692
2023 |  | 553
2024 |  | 458
2025 |  | 209
2026 |  | 114
Thereafter |  | 275
Total future minimum rental commitments |  | 2,301
Less - amounts representing interest |  | (269)
Total operating lease liabilities | $ | 2,032

NOTE 9 – DEPOSITS

Time deposits of $100 or more were $508,940 and $461,401 at year-end 2021 and 2020, respectively. Time deposits of $250 or more were $236,056 and $244,840 at year-end 2021 and 2020, respectively.

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

2022 | $ | 398,452
2023 |  | 118,836
2024 |  | 43,046
2025 |  | 9,597
2026 |  | 14,603
Thereafter |  | -
Total | $ | 584,534

Brokered deposits at year-end 2021 and 2020 totaled $278,092 and $168,708, respectively.

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(Dollars in thousands, except per share data)

NOTE 10 –FHLB ADVANCES AND OTHER DEBT

FHLB advances and other debt were as follows:

| Weighted |  |  |  |
| Average Rate |  | December 31, 2021 |  | December 31, 2020
FHLB fixed rate advances |  |  |  |  |  |  |
Maturities: |  |  |  |  |  |  |
2021 | - |  |  | - |  |  | 7,500
2022 | 1.16% |  |  | 10,000 |  |  | 10,000
2023 | 0.92% |  |  | 3,500 |  |  | 3,500
2024 | 1.46% |  |  | 18,500 |  |  | 6,500
2026 | 1.45% |  |  | 16,000 |  |  | -
Thereafter | 1.69% |  |  | 17,000 |  |  | -
Total FHLB fixed rate advances |  |  |  | 65,000 |  |  | 27,500
Fixed rate other debt: |  |  |  |  |  |  |
FRB PPPLF advances | 0.35% |  |  | 450 |  |  | 107,413
Variable rate other debt: |  |  |  |  |  |  |
Holding Company credit facility | 3.85% |  |  | 24,277 |  |  | 9,500
Warehouse facility | - |  |  | - |  |  | 70,013
Total variable rate other debt |  |  |  | 24,277 |  |  | 79,513
Total |  |  | $ | 89,727 |  | $ | 214,426

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

The advances were collateralized as follows:

| December 31, 2021 |  | December 31, 2020
Single-family mortgage loans | $ | 203,627 |  | $ | 87,076
Multi-family mortgage loans |  | 21,650 |  |  | 10,970
Commercial real estate loans (1-4 family) |  | 9,801 |  |  | 5,750
Home equity lines of credit |  | 2,951 |  |  | 2,838
Securities |  | 1,006 |  |  | 1,017
Cash |  | 3,300 |  |  | 3,300
Total | $ | 242,335 |  | $ | 110,951

Based on the collateral pledged to the FHLB, CFBank was eligible to borrow up to a total of $178,377 from the FHLB at December 31, 2021.

Payments due on FHLB advances and other debt over the next five years are as follows: |  |
| December 31, 2021
2022 | $ | 10,000
2023 |  | 3,500
2024 |  | 18,500
2025 |  | -
2026 |  | 16,000
| $ | 48,000

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(Dollars in thousands, except per share data)

Prior to May 21, 2021, the Holding Company had a term loan in the original principal amount of $5,000 with an additional $10,000 revolving line-of-credit with a third-party bank. That credit facility was refinanced into a new $35 million facility on May 21, 2021. The credit facility is revolving until May 21, 2024, at which time any then-outstanding balance will be converted to a 10-year term note on a graduated 10-year amortization. Borrowings on the credit facility bear interest at a fixed rate of 3.85% until May 21, 2026, and the interest rate then converts to a floating rate equal to PRIME with a floor of 3.25%. The purpose of the credit facility is to provide an additional source of liquidity for the Holding Company and to provide funds for the Holding Company to downstream as additional capital to CFBank to support growth. As of December 31, 2021, the Company had an outstanding balance, net of unamortized debt issuance costs, of $24,277 on the credit facility. At December 31, 2020, the Company had an outstanding balance of $9,500 on the credit facility.

At December 31, 2021, CFBank had availability in unused lines of credit at two commercial banks in amounts of $50,000 and $15,000. There were no outstanding borrowings on either line at December 31, 2021 and December 31, 2020. 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 2019, CFBank entered into a $25,000 warehouse facility with a commercial bank. The warehouse facility was used to periodically fund loans held for sale from the close (funding) date until they were sold in the secondary market. Borrowings on the facility bore interest at the greater of (a) the 30-day LIBOR plus 2.00% or (b) 4.00% and were secured by the specific loans that were funded. This warehouse facility, which was closed during the third quarter of 2021, had no outstanding balance at December 31, 2021 and December 31, 2020.

During 2020, CFBank entered into an additional $75,000 warehouse facility with a commercial bank. The purpose of the warehouse facility was to periodically fund loans held for sale from the close (funding) date until sold in the secondary market. Borrowings on the facility bore interest at the greater of (a) the 30-day LIBOR plus 2.35% or (b) 2.90% and were secured by the specific loans that were funded. This warehouse facility, which was closed during the second quarter of 2021, had no outstanding balance at December 31, 2021 and December 31, 2020.

The CARES Act amended the SBA loan program, in which CFBank participates, to create the PPP as a guaranteed, unsecured loan program to fund operational costs of eligible businesses, organizations and self-employed persons during COVID-19. During 2020, CFBank processed 558 PPP loans totaling approximately $126 million. To support the effectiveness of the PPP, the Federal Reserve Board (the “FRB”) 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. If a PPP loan pays off early, the corresponding PPPLF borrowing must be paid off as well. At December 31, 2021, the Company’s PPP loans and related PPPLF funding had a weighted average life of approximately 0.2 years. At December 31, 2021, the principal balance of PPPLF advances outstanding was $450. At December 31, 2020, the Company’s PPP loans and related PPPLF funding had a weighted average life of approximately 1.2 years. At December 31, 2020, the principal balance of PPPLF advances outstanding was $107,413.

Other than the PPPLF borrowing, there were no outstanding borrowings with the FRB at December 31, 2021 and December 31, 2020.

Assets pledged as collateral with the FRB were as follows:

| 2021 |  | 2020
Commercial loans | $ | 59,605 |  | $ | 39,914
Commercial real estate loans |  | 72,580 |  |  | 85,655
| $ | 132,185 |  | $ | 125,569

Based on the collateral pledged, CFBank was eligible to borrow up to $72,195 from the FRB at year-end 2021.

NOTE 11 – SUBORDINATED DEBENTURES

2003 Subordinated Debentures:

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

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(Dollars in thousands, except per share data)

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

The subordinated debentures have a variable rate of interest, reset quarterly, equal to the three-month London Interbank Offered Rate plus 2.85%, which was 3.07% at year-end 2021 and 3.09% at year-end 2020.

2018 Fixed-to-floating rate subordinated notes:

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

The Notes initially bear interest at 7.00%, from and including December 20, 2018, to but excluding December 30, 2023, payable semi-annually in arrears on June 30 and December 30 of each year. From and including December 30, 2023, to but excluding December 30, 2028 or the earlier redemption of the notes, the interest rate will reset quarterly to an interest rate equal to the then current three-month LIBOR (but not less than zero) plus 4.14%, payable quarterly in arrears on March 30, June 30, September 30, and December 30 of each year. The Holding Company may, at its option, redeem the notes beginning on December 30, 2023 and on any scheduled interest payment date thereafter. After payment of approximately $388 of debt issuance costs, the Holding Company’s net proceeds were approximately $9,612. At December 31, 2021, the balance of the subordinated notes, net of unamortized debt issuance costs, was $9,728.

NOTE 12 – BENEFIT PLANS

Multi-employer pension plan:

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

The funding shortfall (surplus) of the Pentegra DB Plan at June 30, 2021 was ($8) and at June 30, 2020 was $104. CFBank’s contributions for the plan years ending June 30, 2021, June 30, 2020, and June 30, 2019 totaled $22, $29, and $59, respectively. Contributions to the plan may vary from period to period due to the change in the plan's unfunded liability. The unfunded liability is primarily related to the change in plan assets and the change in plan liability from one year to the next. The change in plan assets is based on contributions deposited, benefits paid and the actual rate of return earned on those assets. The change in plan liability is based on demographic changes and changes in the interest rates used to determine plan liability. In the event the actual rate of return earned on plan assets declines, the value of the plan assets will decline. In the event the interest rates used to determine plan liability decrease, plan liability will increase. The combined effect of each change determines the change in the unfunded liability and the change in the employer contributions.

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

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

Funded status (market value of plan assets divided by funding target) based on valuation reports as of July 1, 2021 and 2020 was 100.81% and 90.19%, respectively.

Total contributions made to the Pentegra DB Plan, as reported on Form 5500 of the Pentegra DB Plan, totaled $253,199 and $138,322 for the plan years ended June 30, 2020 and June 30, 2019, respectively. CFBank’s contributions to the Pentegra DB Plan were not more than 5% of the total contributions to the Pentegra DB Plan.

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(Dollars in thousands, except per share data)

401(k) Plan:

The Company sponsors a 401(k) plan that allows employee contributions up to the maximum amount allowable under federal tax regulations, which are currently matched in an amount equal to 50% of the first 8% of the compensation contributed. Total expense for matching contributions for 2021, 2020 and 2019 was $343, $293 and $188, respectively.

Salary Continuation Agreement:

In 2004, CFBank entered into a nonqualified salary continuation agreement with its former Chairman Emeritus. Benefits provided under the plan are unfunded, and payments are made by CFBank. Under the plan, CFBank pays him, or his beneficiary, a benefit of $25 annually for 20 years, beginning 6 months after his retirement date, which was February 28, 2008. The expense related to this plan totaled $7, $7 and $8 in 2021, 2020 and 2019, respectively. The accrual is included in accrued interest payable and other liabilities in the consolidated balance sheets and totaled $134 at year-end 2021 and $152 at year-end 2020.

Life Insurance Benefits:

CFBank has entered into agreements with certain employees, former employees and directors to provide life insurance benefits which are funded through life insurance policies purchased and owned by CFBank. The expense related to these benefits totaled $13, ($16) and ($12) in 2021, 2020 and 2019, respectively. The accrual for CFBank’s obligation under these agreements is included in accrued interest payable and other liabilities in the consolidated balance sheets and totaled $141 at year-end 2021 and $154 at year-end 2020.

NOTE 13 – INCOME TAXES

Income tax expense was as follows:

| December 31, 2021 |  | December 31, 2020 |  | December 31, 2019
Current federal | $ | 3,592 |  | $ | 9,720 |  | $ | 2,627
Deferred federal (1) |  | 773 |  |  | (3,045) |  |  | (187)
Total | $ | 4,365 |  | $ | 6,675 |  | $ | 2,440

(1)Includes tax benefit of operating loss carryforwards of $34, $34, and $34 for the years ended December 31, 2021, 2020 and 2019, respectively.

Effective tax rates differ from the federal statutory rate of 21% for 2021, 2020 and 2019 applied to income before income taxes due to the following:

| December 31, 2021 |  | December 31, 2020 |  | December 31, 2019
Federal Statutory rate times financial statement income | $ | 4,792 |  | $ | 7,619 |  | $ | 2,529
Effect of: |  |  |  |  |  |  |  |
Stock compensation |  | (50) |  |  | (19) |  |  | (18)
Bank owned life insurance income |  | (112) |  |  | (30) |  |  | (30)
Gain on redemption of life insurance policies |  | (80) |  |  | - |  |  | -
Historic tax credits |  | - |  |  | (807) |  |  | -
Low income housing tax credits |  | (154) |  |  | (106) |  |  | (59)
Other |  | (31) |  |  | 18 |  |  | 18
| $ | 4,365 |  | $ | 6,675 |  | $ | 2,440
Effective tax rate |  | 19% |  |  | 18% |  |  | 20%

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(Dollars in thousands, except per share data)

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

| 2021 |  | 2020
Deferred tax assets: |  |  |  |  |
Allowance for loan and lease losses | $ | 3,336 |  | $ | 3,407
Compensation related items |  | 456 |  |  | 1,815
Deferred loan fees |  | 184 |  |  | 293
Nonaccrual interest |  | 60 |  |  | 57
Net operating loss carry forward |  | 364 |  |  | 398
Operating lease liabilities |  | 423 |  |  | 322
Unrealized mark-to-market loss |  | 39 |  |  | -
|  | 4,862 |  |  | 6,292
Deferred tax liabilities: |  |  |  |  |
FHLB stock dividend |  | 226 |  |  | 226
Depreciation |  | 82 |  |  | 15
Operating lease right-of-use assets |  | 404 |  |  | 291
Unrealized mark-to-market gain |  | - |  |  | 935
Other |  | 1 |  |  | 2
Prepaid expenses |  | 105 |  |  | 76
|  | 818 |  |  | 1,545
Net deferred tax asset | $ | 4,044 |  | $ | 4,747

At December 31, 2021, the Company had a deferred tax asset recorded of approximately $4,044. At December 31, 2020, the Company had a deferred tax asset recorded of approximately $4,747. At December 31, 2021 and December 31, 2020, 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 2018.

Our deferred tax assets are composed of U.S. net operating losses (“NOLs”), and other temporary book to tax differences. When determining the amount of deferred tax assets that are more-likely-than-not to be realized, and therefore recorded as a benefit, the Company conducts a regular assessment of all available information. This information includes, but is not limited to, taxable income in prior periods, projected future income and projected future reversals of deferred tax items. Based on these criteria, the Company determined as of December 31, 2021 that no valuation allowance was required against the net deferred tax asset.

In 2012, a recapitalization program through the sale of $22,500 in common stock improved the capital levels of CFBank and provided working capital for the Holding Company. The result of the change in stock ownership associated with the stock offering, however, was that the Company incurred an ownership change within the guidelines of Section 382 of the Internal Revenue Code of 1986. At year-end 2021, the Company had net operating loss carryforwards of $22,253, which expire at various dates from 2024 to 2032. 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 2021. However, if CFBank were wholly or partially liquidated or otherwise ceases to be a bank, or if tax laws were to change, this amount would have to be recaptured and a tax liability recorded. Additionally, any distributions in excess of CFBank’s current or accumulated earnings and profits would reduce amounts allocated to its bad debt reserve and create a tax liability for CFBank.

‎

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(Dollars in thousands, except per share data)

NOTE 14 – RELATED-PARTY TRANSACTIONS

Loans to principal officers, directors and their affiliates during 2021 and 2020 were as follows:

| Year ended December 31,
| 2021 |  | 2020
Beginning balance | $ | 10,277 |  | $ | 6,113
New loans |  | 2,843 |  |  | 4,193
Repayments |  | (2,983) |  |  | (29)
Ending balance | $ | 10,137 |  | $ | 10,277

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

Deposits from principal officers, directors, and their affiliates totaled $8,282 and $3,844 at year-end 2021 and 2020, respectively.

NOTE 15 – STOCK-BASED COMPENSATION

The Company has two stock-based compensation plans (collectively, the “Plans”), as described below, under which awards are outstanding or may be granted in the future. Total compensation cost that has been charged against income for those Plans totaled $707, $711, and $527 for 2021, 2020 and 2019, respectively. The total income tax benefit was $148, $149, and $111 for 2021, 2020 and 2019, respectively.

Both Plans are stockholder-approved and authorize stock option grants and restricted stock awards to be made to directors, officers and employees. The 2009 Equity Compensation Plan (the “2009 Plan”), which was approved by stockholders on May 21, 2009, replaced the Company’s 2003 equity compensation plan (the “2003 Plan”) and provided for 36,363 shares, plus any remaining shares available to grant or that are later forfeited or expire under the 2003 Plan, to be made available to be issued as stock option grants, stock appreciation rights or restricted stock awards. On May 16, 2013, the Company’s stockholders approved the First Amendment to the 2009 Plan to increase the number of shares of common stock reserved for stock option grants and restricted stock awards thereunder to 272,727. The 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.

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. There were 184,921 shares remaining available for awards of stock option grants, stock appreciation rights, restricted stock awards or restricted stock units under the 2019 Plan at December 31, 2021.

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 year to three years, and are exercisable for ten years from the date of grant. Unvested stock options immediately vest upon a change of control.

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

There were no stock options granted during the years ended December 31, 2021 and December 31, 2020. There were 24,996 options exercised during the year ended December 31, 2021 and 4,545 options exercised during the year ended December 31, 2020.

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(Dollars in thousands, except per share data)

A summary of stock option activity in the Plans for 2021 follows:

| Shares |  | Weighted Average Exercise Price |  | Weighted Average Remaining Contractual Term (Years) |  | Intrinsic Value
Outstanding at beginning of year | 90,442 |  | $ | 7.57 |  |  |  |  |
Exercised | (24,996) |  |  | 7.42 |  |  |  |  |
Expired | - |  |  | - |  |  |  |  |
Cancelled or forfeited | (1,454) |  |  | 7.87 |  |  |  |  |
Outstanding at end of period | 63,992 |  | $ | 7.43 |  | 1.5 |  | $ | 838
Exercisable at end of period | 63,992 |  | $ | 7.43 |  | 1.5 |  | $ | 838

During the year ended December 31, 2021, stock options to purchase a total of 1,454 common shares were canceled, forfeited or expired. Stock options to purchase a total of 451 common shares were cancelled, forfeited or expired during the year ended December 31, 2020. Expense associated with unvested forfeited shares is reversed. As of December 31, 2021 and 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 69,960 shares of restricted stock granted in 2021 and 19,660 shares of restricted stock granted in 2020.

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

Nonvested Shares | Shares |  | Weighted Average Grant-Date Fair Value
Nonvested at January 1, 2021 | 59,802 |  | $ | 12.12
Granted | 69,960 |  |  | 17.82
Vested | (31,189) |  |  | 12.27
Forfeited | (8,678) |  |  | 13.97
Nonvested at December 31, 2021 | 89,895 |  | $ | 16.32

As of December 31, 2021 and 2020, the unrecognized compensation cost related to nonvested shares granted under the Plans was $1,041 and $623, respectively.

There were 31,189 shares that vested during the year ended December 31, 2021 and 55,877 shares that vested during the year ended December 31, 2020. There were 8,678 and 6,897 shares of restricted stock forfeited during the years ended December 31, 2021 and December 31, 2020, respectively. .

NOTE 16 – 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 is also 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.

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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 Incorporation”), 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 authorize 1,260,700 shares of Non-Voting Common Stock. Effective as of the close of business on May 28, 2020, all 1,260,700 authorized shares of Non-Voting Common Stock were issued upon conversion of the 12,607 outstanding 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 into 100 shares of Non-Voting Common Stock at such time.

NOTE 17 – 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.

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%); 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%); 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%); and 4) a minimum Leverage Ratio of 4.0%.

The capital conservation buffer is designed to absorb losses during periods of economic stress. Failure to maintain the minimum Common Equity Tier 1 capital ratio plus the capital conservation buffer will result in potential restrictions on a banking institution’s ability to pay dividends, repurchase stock and/or pay discretionary compensation to its employees.

The following tables present actual and required capital ratios as of December 31, 2021 and December 31, 2020 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.

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(Dollars in thousands, except per share data)

| Actual |  | Minimum Capital Required-Basel III Fully Phased-In |  | To Be Well Capitalized Under Applicable ‎Regulatory Capital Standards
| Amount |  | Ratio |  | Amount |  | Ratio |  | Amount |  | Ratio
December 31, 2021 |  |  |  |  |  |  |  |  |  |  |  |  |  |
Total Capital to risk weighted assets | $ | 170,392 |  | 14.02% |  | $ | 127,588 |  | 10.50% |  | $ | 121,512 |  | 10.00%
Tier 1 (Core) Capital to risk weighted assets |  | 155,195 |  | 12.77% |  |  | 103,286 |  | 8.50% |  |  | 97,210 |  | 8.00%
Common equity tier 1 capital to risk-weighted assets |  | 155,195 |  | 12.77% |  |  | 85,059 |  | 7.00% |  |  | 78,983 |  | 6.50%
Tier 1 (Core) Capital to adjusted total assets (Leverage ratio) |  | 155,195 |  | 11.29% |  |  | 54,984 |  | 4.00% |  |  | 68,730 |  | 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, 2020 |  |  |  |  |  |  |  |  |  |  |  |  |  |
Total Capital to risk weighted assets | $ | 136,683 |  | 14.31% |  | $ | 100,298 |  | 10.50% |  | $ | 95,522 |  | 10.00%
Tier 1 (Core) Capital to risk weighted assets |  | 124,678 |  | 13.05% |  |  | 81,194 |  | 8.50% |  |  | 76,418 |  | 8.00%
Common equity tier 1 capital to risk-weighted assets |  | 124,678 |  | 13.05% |  |  | 66,866 |  | 7.00% |  |  | 62,089 |  | 6.50%
Tier 1 (Core) Capital to adjusted total assets (Leverage ratio) |  | 124,678 |  | 9.74% |  |  | 51,187 |  | 4.00% |  |  | 63,984 |  | 5.00%

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

Dividend Restrictions:

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

Additionally, CFBank does not intend to make distributions to the Holding Company that would result in a recapture of any portion of its thrift bad debt reserve as discussed in Note 13-Income Taxes.

NOTE 18 – 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 $44,887, $46,474 and $12,039 at December 31, 2021, 2020 and 2019, respectively.

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

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(Dollars in thousands, except per share data)

bifurcated from the host loan contract and, as such, the swaps and embedded derivatives are not designated as hedges. Accordingly, both instruments are carried at fair value and changes in fair value are reported in current period earnings. CFBank currently does not have any derivatives designated as hedges.

The counterparty to CFBank’s interest-rate swaps is exposed to credit risk whenever the interest-rate swaps are in a liability position. At December 31, 2021, CFBank had $2,724 in cash pledged as collateral for these derivatives. Should the liability increase beyond the collateral value, CFBank may be required to pledge additional collateral.

Additionally, CFBank’s interest-rate swap instruments contain provisions that require CFBank to remain well capitalized under regulatory capital standards and to comply 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 December 31, 2021, 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:

| 2021 |  | 2020 |  | 2019
Notional amount | $ | 44,887 |  | $ | 46,474 |  | $ | 12,039
Weighted average pay rate on interest-rate swaps |  | 4.21% |  |  | 4.19% |  |  | 4.66%
Weighted average receive rate on interest-rate swaps |  | 3.00% |  |  | 3.08% |  |  | 4.63%
Weighted average maturity (years) |  | 6.9 |  |  | 7.4 |  |  | 7.3
Fair value of derivative asset | $ | 538 |  | $ | 1,944 |  | $ | 12
Fair value of derivative liability | $ | (538) |  | $ | (1,944) |  | $ | (12)

The fair value of the yield maintenance provisions and interest-rate swaps is recorded in other assets and other liabilities, respectively, in the consolidated balance sheet. Changes in the fair value of the yield maintenance provisions and interest-rate swaps are reported currently in earnings, as other noninterest income in the consolidated statements of income. There were no net gains or losses recognized in earnings related to yield maintenance provisions and interest-rate swaps in 2021, 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 $50,312, $1,048,613, and $297,454 of interest rate lock commitments related to residential mortgage loans at December 31, 2021, 2020, and 2019, respectively. The fair value of these mortgage banking derivatives was reflected by a derivative asset of $555, $18,100, and $3,104 at December 31, 2021, 2020 and 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 $53,250, $506,750, and $225,500 of TBA mortgage-backed securities at December 31, 2021, 2020 and 2019, respectively. The fair value of these TBA mortgage-backed securities was ($73), ($2,690) and ($350) at December 31, 2021, 2020 and 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.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except per share data)

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

| December 31, 2021 |  | December 31, 2020 |  | December 31, 2019
| Notional Amount |  | Fair Value |  | Notional Amount |  | Fair Value |  | Notional Amount |  | Fair Value
Assets (Liabilities): |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Interest rate commitments | $ | 50,312 |  | $ | 555 |  | $ | 1,048,613 |  | $ | 18,100 |  | $ | 297,454 |  | $ | 3,104
TBA mortgage-back securities |  | 53,250 |  |  | (73) |  |  | 506,750 |  |  | (2,690) |  |  | 225,500 |  |  | (350)

As of December 31, 2021, CFBank had minimum collateral posting thresholds with certain of its derivative counterparties and has posted cash collateral of $4,847.

The following table represents the notional amount of loans sold during the years ended December 31, 2021, 2020 and 2019:

| December 31, 2021 |  | December 31, 2020 |  | December 31, 2019
Notional amount of loans sold | $ | 2,358,510 |  | $ | 2,229,042 |  | $ | 411,257

The following table represents the revenue recognized on mortgage activities for the years ended December 31, 2021, 2020 and 2019:

| December 31, 2021 |  | December 31, 2020 |  | December 31, 2021
Gain on loans sold | $ | 21,646 |  | $ | 61,147 |  | $ | 9,603
Gain (loss) from change in fair value of loans held-for-sale |  | (8,408) |  |  | 7,046 |  |  | 1,341
Gain (loss) from change in fair value of derivatives |  | (7,322) |  |  | (9,895) |  |  | (490)
| $ | 5,916 |  | $ | 58,298 |  | $ | 10,454

NOTE 19 – LOAN COMMITMENTS AND OTHER RELATED ACTIVITIES

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

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

| 2021 |  | 2020
| Fixed Rate |  | Variable Rate |  | Fixed Rate |  | Variable Rate
Commitments to make loans | $ | 86,001 |  | $ | 135,429 |  | $ | 1,072,963 |  | $ | 31,239
Unused lines of credit | $ | 33,620 |  | $ | 73,812 |  | $ | 20,395 |  | $ | 65,788
Standby letters of credit | $ | 4,851 |  | $ | - |  | $ | 3,997 |  | $ | -

Commitments to make loans are generally made for periods of 60 days or less, except for construction loan commitments, which are typically for a period of one year, and loans under a specific drawdown schedule, which are based on the individual contracts. The fixed-rate loan commitments had interest rates ranging from 2.00% to 8.0% and maturities ranging from 1 month to 30 years at December 31, 2021. The fixed-rate loan commitments had interest rates ranging from 2.00% to 6.50% and maturities ranging from 1 month to 30 years at December 31, 2020.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except per share data)

NOTE 20 – PARENT COMPANY ONLY CONDENSED FINANCIAL INFORMATION

Condensed financial information of CF Bankshares Inc. follows:

| 2021 |  | 2020
Assets |  |  |  |  |
Cash and cash equivalents | $ | 819 |  | $ | 1,785
Equity securities |  | 5,000 |  |  | 5,000
Investment in banking subsidiary |  | 155,391 |  |  | 125,172
Investment in and advances to other subsidiary |  | 243 |  |  | 241
Other assets |  | 3,374 |  |  | 2,533
Total assets | $ | 164,827 |  | $ | 134,731
Liabilities and Equity |  |  |  |  |
Subordinated debentures | $ | 14,883 |  | $ | 14,844
Other borrowings |  | 24,277 |  |  | 9,500
Accrued expenses and other liabilities |  | 337 |  |  | 177
Stockholders' equity |  | 125,330 |  |  | 110,210
Total liabilities and stockholders' equity | $ | 164,827 |  | $ | 134,731

| 2021 |  | 2020 |  | 2019
Interest income | $ | 414 |  | $ | - |  | $ | -
Other income |  | 230 |  |  | 178 |  |  | 70
Interest expense |  | 1,527 |  |  | 1,209 |  |  | 1,353
Other expense |  | 851 |  |  | 830 |  |  | 758
Loss before income tax and before undistributed subsidiary income |  | (1,734) |  |  | (1,861) |  |  | (2,041)
Tax effect |  | 407 |  |  | 390 |  |  | 427
Loss after income tax and before undistributed subsidiary income |  | (1,327) |  |  | (1,471) |  |  | (1,614)
Equity in undistributed subsidiary income |  | 19,780 |  |  | 31,079 |  |  | 11,215
Net income | $ | 18,453 |  | $ | 29,608 |  | $ | 9,601
Comprehensive income | $ | 18,187 |  | $ | 29,676 |  | $ | 9,702

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except per share data)

| 2021 |  | 2020 |  | 2019
Cash flows from operating activities |  |  |  |  |  |  |  |
Net Income | $ | 18,453 |  | $ | 29,608 |  | $ | 9,601
Adjustments: |  |  |  |  |  |  |  |
Effect of subsidiaries' operations |  | (19,780) |  |  | (31,079) |  |  | (11,215)
Amortization, net |  | 39 |  |  | 38 |  |  | 39
Change in other assets and other liabilities |  | (681) |  |  | (480) |  |  | (939)
Net cash used by operating activities |  | (1,969) |  |  | (1,913) |  |  | (2,514)
Cash flows from investing activities |  |  |  |  |  |  |  |
Investments in banking subsidiary |  | (10,000) |  |  | (5,000) |  |  | (14,000)
Purchase of equity securities |  | - |  |  | (5,000) |  |  | -
Net cash used by investing activities |  | (10,000) |  |  | (10,000) |  |  | (14,000)
Cash flows from financing activities |  |  |  |  |  |  |  |
Proceeds from other borrowings |  | 19,277 |  |  | 15,000 |  |  | 4,000
Repayments of other borrowings |  | (4,500) |  |  | (10,500) |  |  | (5,000)
Net proceeds from the issuance of preferred stock private placement |  | - |  |  | - |  |  | 14,000
Net proceeds from the issuance of common stock private placement |  | - |  |  | - |  |  | 9,641
Proceeds from exercise of stock options |  | 185 |  |  | 36 |  |  | -
Acquisition of treasury shares surrendered upon vesting of restricted stock for payment of taxes and exercise proceeds |  | (139) |  |  | (32) |  |  | (23)
Purchase of treasury shares |  | (2,972) |  |  | (648) |  |  | -
Dividends paid |  | (848) |  |  | (195) |  |  | 1,258
Net cash from financing activities |  | 11,003 |  |  | 3,661 |  |  | 23,876
Net change in cash and cash equivalents |  | (966) |  |  | (8,252) |  |  | 7,362
Beginning cash and cash equivalents |  | 1,785 |  |  | 10,037 |  |  | 2,675
Ending cash and cash equivalents | $ | 819 |  | $ | 1,785 |  | $ | 10,037

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except per share data)

NOTE 21 – EARNINGS PER COMMON SHARE

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

| Year Ended
| December 31, 2021 |  | December 31, 2020 |  | December 31, 2019
Basic |  |  |  |  |  |  |  |
Net income | $ | 18,453 |  | $ | 29,608 |  | $ | 9,601
Accretion of discount and value of warrants exercised related to Series B preferred stock (1) |  | - |  |  | - |  |  | 219
Earnings allocated to participating securities (Series C preferred stock) (2) |  | - |  |  | (2,280) |  |  | (430)
Net income allocated to common stockholders | $ | 18,453 |  | $ | 27,328 |  | $ | 9,390
Weighted average common shares outstanding including unvested share-based payment awards |  | 6,605,278 |  |  | 6,072,829 |  |  | 4,582,997
Less: Unvested share-based payment awards-2019 Plan |  | (97,122) |  |  | (43,732) |  |  | (1,532)
Average shares |  | 6,508,156 |  |  | 6,029,097 |  |  | 4,581,465
Basic earnings per common share | $ | 2.84 |  | $ | 4.53 |  | $ | 2.05
Diluted |  |  |  |  |  |  |  |
Net earnings allocated to common stockholders | $ | 18,453 |  | $ | 27,328 |  | $ | 9,390
Add back: Preferred Dividends on Series B stock and accretion of discount |  | - |  |  | - |  |  | -
Net earnings allocated to common stockholders | $ | 18,453 |  | $ | 27,328 |  | $ | 9,390
Weighted average common shares outstanding for basic earnings per common share |  | 6,508,156 |  |  | 6,029,097 |  |  | 4,581,465
Add: Dilutive effects of assumed exercises of stock options |  | 45,169 |  |  | 34,158 |  |  | 38,620
Add: Dilutive effects of assumed exercises of stock warrants |  | - |  |  | - |  |  | 6,947
Add: Dilutive effects of unvested share-based payment awards-2019 Plan |  | 97,122 |  |  | 43,732 |  |  | 1,532
Average shares and dilutive potential common shares |  | 6,650,447 |  |  | 6,106,987 |  |  | 4,628,564
Diluted earnings per common share | $ | 2.77 |  | $ | 4.47 |  | $ | 2.03

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

(2)12,607 outstanding shares of Series C preferred stock were converted into a total of 1,260,700 shares of the Company’s Non-Voting Common Stock effective as of the close of business on May 28, 2020.

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

|  | 2021 |  |  | 2020 |  |  | 2019
Stock options |  | - |  |  | 331 |  |  | 463

NOTE 22 - CONTINGENT LIABILITIES

General Litigation:

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

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except per share data)

NOTE 23 - ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)

The following table summarizes the changes within each classification of accumulated other comprehensive income, net of tax, for the years ended December 31, 2021, 2020 and 2019 and summarizes the significant amounts reclassified out of each component of accumulated other comprehensive income:

Changes in Accumulated Other Comprehensive Income by Component
For the Year Ended December 31, 2021, 2020 and 2019 (1)
|  | Unrealized Gains and Losses on Available-for-Sale Securities
|  | 2021 |  | 2020 |  | 2019
Accumulated other comprehensive gain (loss), beginning of period |  | $ | 96 |  | $ | 28 |  | $ | (73)
Other comprehensive gain (loss) before reclassifications |  |  | (266) |  |  | 68 |  |  | 101
Less amount reclassified from accumulated other comprehensive loss (2) |  |  | - |  |  | - |  |  | -
Net current-period other comprehensive income (loss) |  |  | (266) |  |  | 68 |  |  | 101
Accumulated other comprehensive income (loss), end of period |  | $ | (170) |  | $ | 96 |  | $ | 28

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

(2)There were no amounts reclassified out of other comprehensive income for years ended December 31, 2021, 2020 and 2019.

NOTE 24 - BRANCH SALE

On December 29, 2020, CFBank entered into a Branch Purchase and Assumption Agreement (the “P&A Agreement”) with Consumers National Bank (“Consumers”) providing for the acquisition by Consumers of two branches of CFBank in Columbiana County, Ohio – CFBank’s drive-up branch location in Wellsville, Ohio and CFBank’s branch location in Calcutta, Ohio (the “Branches”).

On July 16, 2021, CFBank completed its sale to Consumers of certain assets and liabilities associated with the Branches. Pursuant to the terms of the P&A Agreement, Consumers assumed certain deposit liabilities and acquired certain loans, as well as cash, real property, personal property and other fixed assets associated with the Branches.

During the third quarter of 2021, the Company recognized a combined gain on sale of deposits of $1.9 million related to the sale of the Branches.

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

None

Ite m 9A. Controls and Procedures.

Evaluation of disclosure controls and procedures. Management is responsible for establishing and maintaining effective disclosure controls and procedures, as defined under Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934. Management's assessment of the effectiveness of internal control over financial reporting is expressed at the level of reasonable assurance because a control system, no matter how well designed and operated, can provide only reasonable, but not absolute, assurance that the control system's objectives will be met. As of December 31, 2021, an evaluation was performed under the supervision and with the participation of management, including the Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures. Based on that evaluation, management concluded that our internal controls over financial reporting as of December 31, 2021 were effective.

Management’s Report on Internal Control Over Financial Reporting. “Management’s Report on Internal Control Over Financial Reporting” required by Item 308(a) of SEC Regulation S-K is included on page 57 of this Form 10-K.

Attestation Report of Independent Registered Public Accounting Firm. The “Report of Independent Registered Accounting Firm on Effectiveness of Internal Control Over Financial Reporting” required by Item 308(b) of SEC Regulation S-K is included on page 58 of this Form 10-K.

Changes in internal control over financial reporting. There were no changes in our internal controls over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act) in the fourth quarter of 2021 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Ite m 9B. Other Information.

None

I tem 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections

Not Applicable

PA RT III

Ite m 10. Directors, Executive Officers and Corporate Governance.

Directors. Information required by Item 401 of Regulation S-K with respect to our directors is incorporated herein by reference from our definitive Proxy Statement for our 2021 Annual Meeting of Stockholders to be filed with the Commission pursuant to SEC Regulation 14A (the “2022 Proxy Statement”), under the caption “PROPOSAL 1. ELECTION OF DIRECTORS.”

Executive Officers of the Registrant. Information required by Item 401 of Regulation S-K with respect to our executive officers is incorporated herein by reference from our 2022 Proxy Statement under the caption “EXECUTIVE OFFICERS.”

Compliance with Section 16(a) of the Exchange Act. Information required by Item 405 of Regulation S-K is incorporated herein by reference from our 2022 Proxy Statement under the caption “BENEFICIAL OWNERSHIP OF COMPANY COMMON STOCK – DELINQUENT SECTION 16(a) REPORTS.”

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

Corporate Governance. Information required by Items 407(c)(3), (d)(4) and (d)(5) of Regulation S-K is incorporated herein by reference from our 2022 Proxy Statement, under the captions “CORPORATE GOVERNANCE” and “AUDIT COMMITTEE MATTERS.”

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Ite m 11. Executive Compensation.

Information required by Item 402 of Regulation S-K is incorporated herein by reference from our 2022 Proxy Statement, under the captions “COMPENSATION OF EXECUTIVE OFFICERS” and “2021 COMPENSATION OF DIRECTORS.”

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

Security Ownership of Certain Beneficial Owners and Management. Information required by Item 403 of Regulation S-K is incorporated herein by reference from our 2022 Proxy Statement under the caption “BENEFICIAL OWNERSHIP OF COMPANY COMMON STOCK.”

Related Stockholder Matters – Equity Compensation Plan Information. The following table shows the number of shares of our common stock subject to outstanding stock option awards and remaining available for awards under the Company’s Equity Incentive Plans at December 31, 2021.

Equity Compensation Plan Information
Plan Category |  | (a) ‎Number of Common Shares to be issued upon exercise of all outstanding options, warrants and rights (a) |  | (b) ‎Weighted-average exercise price of outstanding options, warrants and rights (b) |  | (c) ‎Number of Common Shares remaining available for future issuance under equity compensation plans (excluding common shares reflected in column (a))
Equity compensation plans approved by shareholders |  | 63,992 |  | $ | 7.43 |  | 184,921
Equity compensation plans not approved by shareholders |  | - |  |  | - |  | -
Total |  | 63,992 |  | $ | 7.43 |  | 184,921

It em 13. Certain Relationships and Related Transactions, and Director Independence.

Information required by Items 404 and 407(a) of Regulation S-K is incorporated herein by reference from our 2022 Proxy Statement under the captions “CORPORATE GOVERNANCE – Certain Relationships and Related Party Transactions” and “CORPORATE GOVERNANCE – Director Independence.”

It em 14. Principal Accounting Fees and Services.

Our independent registered public accounting firm is BKD, LLP, Indianapolis, IN, Auditor Firm ID 686.

Information required by this Item 14 is incorporated by reference from our 2022 Proxy Statement under the caption “AUDIT COMMITTEE MATTERS.”

PA RT IV

Ite m 15. Exhibits and Financial Statement Schedules

EXHIBIT INDEX

Exhibit No. | Description of Exhibit
3.1 | Certificate of Incorporation of the registrant (incorporated by reference to Exhibit 3.1 to the registrant’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2017, filed with the Commission on November 9, 2017 (File No. 0-25045))
3.2 | Amendment to Certificate of Incorporation of the registrant (incorporated by reference to Exhibit 3.2 to the registrant’s Registration Statement on Form S-2 (File No. 333-129315), filed with the Commission on October 28, 2005)
3.3 | Amendment to Certificate of Incorporation of the registrant (incorporated by reference to Exhibit 3.4 to the registrant’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2009, filed with the commission on August 14, 2009 (File No. 0-25045))

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3.4 | Amendment to Certificate of Incorporation of the registrant (incorporated by reference to Exhibit 3.5 to the registrant’s Quarterly Report on Form 10-Q for the fiscal quarter ended 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 (File No. 333-177434), filed with the Commission on May 4, 2012)
3.6 | Certificate of Designations to Certificate of Incorporation of the registrant (incorporated by reference to Exhibit 3.1 to the registrant’s Current Report on Form 8-K dated 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 | Certificate of 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 May 29, 2020, filed with the Commission on June 2, 2020 (File No. 0-25045))
3.10 | Second Amended and Restated Bylaws of the registrant (incorporated by reference to Exhibit 3.3 to the registrant’s Annual Report on Form 10-K for the fiscal year ended December 31, 2007, filed with the Commission on March 27, 2008 (File No. 0-25045))
4.1 | Form of Stock Certificate of Central Federal Corporation (incorporated by reference to Exhibit 4.0 to the registrant’s Registration Statement on Form SB-2 (File No. 333-64089), filed with the Commission on September 23, 1998)
4.2 | Form of Subordinated Note Purchase Agreement by and between the Company and several Purchasers, dated December 20,2018 (incorporated by reference to Exhibit 10.1 to the registrants Current Report on Form 8-K filed with the Commission on December 21, 2018 (File No. 0-25045))
4.3 | Form of 7.0% Fixed-to-Floating Rate Subordinated Note due 2028 (incorporated by reference to Exhibit 10.2 to the registrants Current Report on Form 8-K filed with the Commission on December 21, 2018 (File No. 0-25045))
4.4 | Description of Capital Stock (incorporated by reference to Exhibit 4.5 to the registrant’s Annual Report on Form 10-K for the fiscal year ended December 31, 2020, filed with the Commission on March 23, 2021 (File No. 0-25045))
4.5 | Agreement to furnish instruments defining rights of holders of long-term debt
10.1* | Central Federal Corporation 2009 Equity Compensation Plan (incorporated by reference to Appendix A to the registrant’s Definitive Proxy Statement filed with the Commission on March 31, 2009)
10.2* | First Amendment to the Central Federal Corporation 2009 Equity Compensation Plan (incorporated by reference to Appendix A to the registrant’s Definitive Proxy Statement filed with the Commission on April 11, 2013)
10.3* | Central Federal Corporation 2019 Equity Compensation Plan (incorporated by reference to Annex A to the registrant’s Definitive Proxy Statement filed with the Commission on April 26, 2019)
10.4* | Form of Incentive Stock Options Award Agreement under the Central Federal Corporation 2009 Equity Compensation Plan (incorporated by reference to Exhibit 10.3 to the registrant’s Annual Report on Form 10-K for the fiscal year ended December 31, 2012, filed with the Commission on April 1, 2013 (File No. 0-25045)
10.5* | Form of Non-Qualified Stock Option Award Agreement under the Central Federal Corporation 2009 Equity Compensation Plan (incorporated by reference to Exhibit 10.4 to the registrant’s Annual Report on Form 10-K for the fiscal year ended December 31, 2012, filed with the Commission on April 1, 2013 (File No. 0-25045)
10.6* | Form of Employee Restricted Stock Award Agreement under the Central Federal Corporation 2009 Equity Compensation Plan (incorporated by reference to Exhibit 10.3 to the registrant’s Current Report on Form 8-K filed with the Commission on November 3, 2015 (File No. 0-25045))
10.7* | Form of Director Restricted Stock Award Agreement under the Central Federal Corporation 2009 Equity Compensation Plan (incorporated by reference to Exhibit 10.4 to the registrant’s Current Report on Form 8-K filed with the Commission on November 3, 2015 (File No. 0-25045))
10.8* | Form of Employee Restricted Stock Award Agreement under the Central Federal Corporation 2019 Equity Compensation Plan (incorporated by reference to Exhibit 10.8 to the registrant’s Annual Report on Form 10-K for the fiscal year ended December 31, 2019, filed with the Commission on March 16, 2020 (File No. 0-25045))
10.9* | Form of Director Restricted Stock Award Agreement under the Central Federal Corporation 2019 Equity Compensation Plan (incorporated by reference to Exhibit 10.9 to the registrant’s Annual Report on Form 10-K for the fiscal year ended December 31, 2019, filed with the Commission on March 16, 2020 (File No. 0-25045))

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10.10* | Employment Agreement, dated April 22, 2019, by and among Central Federal Corporation, CFBank and Timothy T. O’Dell (incorporated by reference to Exhibit 10.1 to the registrant’s Current Report on Form 8-K filed with the Commission on April 26, 2019 (File No. 0-25045))
10.11* | Central Federal Corporation Incentive Compensation Plan (incorporated by reference to Exhibit 10.3 to the registrant’s Current Report on Form 8-K filed with the Commission on August 16, 2016 (File No. 0-25045))
21.1 | Subsidiaries of the Registrant
23.1 | Consent of Independent Registered Public Accounting Firm
31.1 | Rule 13a-14(a) Certifications of the Chief Executive Officer
31.2 | Rule 13a-14(a) Certifications of the Principal Financial Officer
32.1 | Section 1350 Certifications of the Chief Executive Officer and Principal Financial Officer
101.1 | Interactive Data File ( Inline XBRL)
104 | Cover Page Interactive Data File, formatted in Inline XBRL and contained in Exhibit 101

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

I tem 16. Form 10-K Summary

Not Applicable

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SIGN ATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorize

| CF BANKSHARES INC.
| /s/ Timothy T. O’Dell
| Timothy T. O’Dell
| President and Chief Executive Officer
| Date: March 16, 2022

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

Name | Title | Date
/s/ Robert E. Hoeweler | Chairman | March 16, 2022
Robert E. Hoeweler |  |
/s/ Timothy T. O’Dell | Director, President and Chief Executive Officer | March 16, 2022
Timothy T. O’Dell |  |
/s/ Thomas P. Ash | Director | March 16, 2022
Thomas P. Ash |  |
/s/ James H. Frauenberg II | Director | March 16, 2022
James H. Frauenberg II |  |
/s/ Edward W. Cochran | Director | March 16, 2022
Edward W. Cochran |  |
/s/ David L. Royer | Director | March 16, 2022
David L. Royer |  |
/s/ Sundeep Rana | Director | March 16, 2022
Sundeep Rana |  |

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