Loans And Leases

3 Months Ended

Mar. 31, 2025

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.


	March 31, 2025			December 31, 2024
	(unaudited)
Commercial (1)	$	414,685		$	418,804
Real estate:
Single-family residential		441,595			465,517
Multi-family residential		143,337			150,434
Commercial		514,833			460,064
Construction		208,577			202,166
Consumer:
Home equity lines of credit		41,994			39,520
Other		2,921			2,988
Subtotal		1,767,942			1,739,493
Less: ACL – Loans		(17,803	)		(17,474	)
Loans and leases, net	$	1,750,139		$	1,722,019

(1)

Includes $6,242 and $7,680 of commercial leases at March 31, 2025 and December 31, 2024, respectively.

Allowance for Credit Losses on Loans (ACL – Loans)

The ACL - Loans is a valuation account that is deducted from the amortized cost basis of loans and leases to present the net amount expected to be collected on loans over the contractual term. Loans and leases are collectively referred to as “loans” for the purpose of discussing the allowance for credit losses. The ACL - Loans is adjusted by the provision for credit losses, which is reported in earnings, and reduced by charge offs for loans, net of recoveries. Provision for credit losses on loans reflects the totality of actions taken on all loans for a particular period including any necessary increases or decreases in the allowance related to changes in credit loss expectations associated with specific loans or pools of loans. Loans are charged off against the allowance when the uncollectibility of the loan is confirmed. Expected recoveries do not exceed the aggregate of amounts previously charged off and expected to be charged off.

The ACL - Loans represents the Company's best estimate of current expected credit losses (CECL) on loans using relevant available information, from internal and external sources, related to past events, current conditions, and reasonable and supportable forecasts. Historical credit loss experience provides the basis for the estimation of expected credit losses. The CECL calculation is performed and evaluated quarterly and losses are estimated over the expected life of the loan. The level of the ACL - Loans is believed to be adequate to absorb all expected future losses inherent in the loan portfolio at the measurement date.

In calculating the ACL - Loans, the loan portfolio was pooled into loan segments with similar risk characteristics. Common characteristics include the type or purpose of the loan, underlying collateral and historical/expected credit loss patterns. In developing the loan segments, the Company analyzed the degree of correlation in how loans within each portfolio respond when subjected to varying economic conditions and scenarios as well as other portfolio stress factors.

The expected credit losses are measured over the life of each loan segment utilizing the average charge-off methodology combined with economic forecast models to estimate the current expected credit loss inherent in the loan portfolio. This approach is also leveraged to estimate the expected credit losses associated with non-cancellable unfunded loan commitments incorporating expected utilization rates.

The Company sub-segmented certain commercial portfolios by risk level where appropriate. The Company utilized a one-year reasonable and supportable economic forecast period.

The Company qualitatively adjusts model results for risk factors that are not inherently considered in the historical losses, but are nonetheless relevant in assessing the expected credit losses within the loan portfolio. These adjustments may increase or decrease the estimate of expected credit losses based upon the assessed level of risk for each qualitative factor. The various risks that may be considered in making qualitative adjustments include, among other things, the impact of (i) changes in economic conditions, (ii) changes in the nature and volume of the loan portfolio, (iii) changes in the existence, growth and effect of any concentrations in credit, (iv) changes in lending policies and procedures, including changes in underwriting standards and practices for collections, write-offs, and recoveries, (v) changes in the quality of the credit review function, (vi) changes in the experience, ability and depth of lending management and staff, (vii) changes in the volume and severity of past due and adversely classified loans and the volume of nonaccrual loans, (viii) changes in the value of underlying collateral for collateral-dependent loans, and (ix) other environmental factors such as regulatory, legal and technological considerations, as well as competition.

In some cases, management may determine that an individual loan exhibits unique risk characteristics which differentiate the loan from other loans within the loan segments. In such cases, the loans are evaluated for expected credit losses on an individual basis and excluded from the collective evaluation. Specific reserves in the allowance for credit losses are determined by analyzing the borrower's ability to repay amounts owed, collateral deficiencies, the relative risk grade of the loan and economic conditions affecting the borrower's industry, among other things. A loan is considered to be collateral dependent when, based upon management's assessment, the borrower is experiencing financial difficulty and repayment is expected to be provided substantially through the operation or sale of the collateral. In such cases, expected credit losses are based on the fair value of the collateral at the measurement date, adjusted for estimated selling costs if satisfaction of the loan depends on the sale of the collateral. The fair value of collateral supporting collateral dependent loans is evaluated on a quarterly basis.

The following tables present the activity in the ACL - Loans by portfolio segment for the three months ended March 31, 2025 and 2024 (unaudited).


	Three Months Ended March 31, 2025 (unaudited)
				Real Estate												Consumer
	Commercial			Single- family			Multi- family			Commercial			Construction		Home equity lines of credit			Other			Total
Allowance for credit losses
Balances, January 1, 2025	$	7,005		$	2,787		$	1,382		$	3,918		$	1,741	$		371	$	270		$	17,474
Provision (reversal) for credit losses		831			(276	)		(171	)		(44	)		11			19		(18	)		352
Recoveries on loans		61			9			—			—			—			1		—			71
Loans charged off		(67	)		(27	)		—			—			—			—		—			(94	)
Balances, March 31, 2025	$	7,830		$	2,493		$	1,211		$	3,874		$	1,752	$		391	$	252		$	17,803


	Three Months Ended March 31, 2024 (unaudited)
			Real Estate												Consumer
	Commercial		Single-family			Multi-family			Commercial		Construction			Home equity lines of credit				Other		Total
Allowance for credit losses
Balances, January 1, 2024	$	5,884	$	3,371		$	1,231		$	4,105	$	1,707		$		334		$	233	$	16,865
Provision (reversal) for credit losses		1,628		(48	)		(84	)		193		(428	)			(1	)		57		1,317
Recoveries on loans		6		8			—			—		—				2			—		16
Loans charged off		—		—			—			—		—				—			—		-
Balances, March 31, 2024	$	7,518	$	3,331		$	1,147		$	4,298	$	1,279		$		335		$	290	$	18,198

Determining fair value for collateral dependent loans requires obtaining a current independent appraisal of the collateral and applying a discount factor, which includes selling costs if applicable, to the value. The fair value of real estate is generally based on appraisals by qualified licensed appraisers. The appraisers typically determine the value of the real estate by utilizing an income or market valuation approach. If an appraisal is not available, the fair value may be determined by using a cash flow analysis. The fair value of other collateral such as business assets is typically ascertained by assessing, either singularly or some combination of, asset appraisals, accounts receivable aging reports, inventory listings and/or customer financial statements. Both appraised values and values based on the borrower’s financial information are discounted as considered appropriate based on age and quality of the information and current market conditions.

The tables below present the amortized cost basis of collateral dependent loans by loan class and their respective collateral types, which are individually evaluated to determine expected credit losses.


	March 31, 2025 (unaudited)
	Residential Real Estate		Other		Total		Allowance on Collateral Dependent Loans
Commercial	$	—	$	8,486	$	8,486	$	2,471
Real estate:
Single-family residential		84		—		84		—
Total	$	84	$	8,486	$	8,570	$	2,471


	December 31, 2024
	Residential Real Estate		Other		Total		Allowance on Collateral Dependent Loans
Commercial	$	—	$	8,486	$	8,486	$	1,397
Real estate:
Single-family residential		86		—		86		—
Total	$	86	$	8,486	$	8,572	$	1,397

The following table presents the recorded investment in nonaccrual loans by class of loans at March 31, 2025 (unaudited):


	Nonaccrual Loans		Nonaccrual Loans with no Allowance for Credit Losses
Commercial	$	13,291	$	628
Real estate:
Single-family residential		1,095		1,095
Consumer:
Home equity lines of credit		108		108
Total nonaccrual loans	$	14,494	$	1,831

The following table presents the recorded investment in nonaccrual loans by class of loans at December 31, 2024.


	Non-Accrual Loans		Non-Accrual Loans with no Allowance for Credit Losses
Commercial	$	12,876	$	135
Real estate:
Single-family residential		1,649		1,649
Consumer:
Home equity lines of credit		13		13
Total nonaccrual loans	$	14,538	$	1,797

Of the $14.5 million of nonaccrual loans at March 31, 2025 and December 31, 2024, $1.5 million was guaranteed by the Small Business Administration (SBA).

Nonaccrual loans include both smaller balance single-family mortgage loans, consumer loans and commercial loans and leases that are collectively evaluated for impairment and individually evaluated loans. There was one loan, totaling $69 that was 90 days or more past due and still accruing interest at March 31, 2025. There were two loans, totaling $509 that were 90 days or more past due and still accruing interest at December 31, 2024.

The following table presents the aging of the recorded investment in past due loans and leases by class of loans as of March 31, 2025 (unaudited):


	30 - 59 Days Past Due		60 - 89 Days Past Due		90 Days or more Past Due		Total Past Due		Loans Not Past Due		Nonaccrual Loans Not 90 days or more Past Due
Commercial	$	42	$	173	$	8,652	$	8,867	$	405,818	$	4,708
Real estate:
Single-family residential		838		—		934		1,772		439,823		161
Multi-family residential		—		—		—		—		143,337		—
Commercial:
Non-owner occupied		—		—		—		—		272,096		—
Owner occupied		—		177		—		177		209,485		—
Land		—		—		—		—		33,075		—
Construction		—		—		—		—		208,577		—
Consumer:
Home equity lines of credit		510		—		96		606		41,388		12
Other		—		—		—		—		2,921		—
Total	$	1,390	$	350	$	9,682	$	11,422	$	1,756,520	$	4,881

The following table presents the aging of the recorded investment in past due loans and leases by class of loans as of December 31, 2024:


	30 - 59 Days Past Due		60 - 89 Days Past Due		90 Days or more Past Due		Total Past Due		Loans Not Past Due		Nonaccrual Loans Not 90 days or more Past Due
Commercial	$	3,231	$	202	$	5,948	$	9,381	$	409,423	$	7,256
Real estate:
Single-family residential		1,112		—		1,649		2,761		462,756		—
Multi-family residential		—		—		—		—		150,434		—
Commercial:
Non-owner occupied		—		—		—		—		229,831		—
Owner occupied		—		—		181		181		205,030		—
Land		—		—		—		—		25,022		—
Construction		—		—		—		—		202,166		—
Consumer:
Home equity lines of credit:
Originated for portfolio		—		—		—		—		—		—
Purchased for portfolio		—		109		—		109		39,411		13
Other		41		—		—		41		2,947		—
Total	$	4,384	$	311	$	7,778	$	12,473	$	1,727,020	$	7,269

Loan Modifications:

During the three months ended March 31, 2025 and March 31, 2024, the Company did not modify any loans to borrowers experiencing financial difficulties.

Upon the Company’s determination that a modified loan (or portion of a loan) has subsequently been deemed uncollectible, the loan (or portion of the loan), is charged-off. Therefore, the amortized cost basis of the loan is reduced by the uncollectible amount and the allowance for credit losses is adjusted by the same amount.

Credit Quality Indicators:

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

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

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

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

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

The following table summarizes the risk grading of the Company’s loan portfolio by loan class and by year of origination for the years indicated as of March 31, 2025. Consumer and Single-family residential loans are not risk graded. For purposes of this disclosure, those loans are classified in the following manner: loans that are 89 days or less past due and accruing are “performing” loans and loans greater than 89 days past due or in nonaccrual are “nonperforming” loans.


	Term Loans (amortized cost basis by origination year)
(unaudited)	2025		2024		2023		2022		2021		Prior		Revolving loans amortized cost basis		Revolving loans converted to term		Total
Commercial
Pass	$	14,185	$	34,102	$	24,978	$	63,366	$	77,279	$	48,299	$	136,008	$	1,827	$	400,044
Special Mention		—		—		—		—		—		2,850		—		—		2,850
Substandard		—		—		—		7,079		4,277		—		50		—		11,406
Doubtful		—		—		—		385		—		—		—		—		385
Total Commercial		14,185		34,102		24,978		70,830		81,556		51,149		136,058		1,827		414,685
Gross charge-offs during the three months ended March 31, 2025		—		—		—		—		67		—		—		—		67
Real estate loans:
Single-family residential
Payment performance
Performing		897		29,181		29,040		112,207		212,703		56,472		—		—		440,500
Nonperforming		—		—		—		371		161		563		—		—		1,095
Total Single-family residential loans		897		29,181		29,040		112,578		212,864		57,035		—		—		441,595
Gross charge-offs during the three months ended March 31, 2025		—		—		27		—		—		—		—		—		27
Multi-family residential
Pass		—		30,537		24,781		7,588		49,420		22,190		—		—		134,516
Special Mention												8,821						8,821
Total Multi-family residential loans		—		30,537		24,781		7,588		49,420		31,011		—		—		143,337
Commercial:
Non-owner occupied
Pass		30,897		9,283		48,805		43,852		72,493		63,432		—		—		268,762
Special Mention		—		—		—		—		—		2,829		—		—		2,829
Substandard		—		—		—		—		—		505		—		—		505
Total Non-owner occupied loans		30,897		9,283		48,805		43,852		72,493		66,766		—		—		272,096
Owner occupied
Pass		251		18,306		42,002		58,816		46,099		42,927		—		—		208,401
Special Mention		—		—		—		—		—		582		—		—		582
Substandard		—		—		—		—		—		679		—		—		679
Total Owner occupied loans		251		18,306		42,002		58,816		46,099		44,188		—		—		209,662
Land
Pass		6,742		18,132		3,194		—		5,007		—		—		—		33,075
Total Land loans		6,742		18,132		3,194		—		5,007		—		—		—		33,075
Construction
Not Rated		—		532		—		—		—		—		—		—		532
Pass		5,509		68,873		63,755		53,576		12,801		3,531		—		—		208,045
Total Construction loans		5,509		69,405		63,755		53,576		12,801		3,531		—		—		208,577
Total Real Estate loans		44,296		174,844		211,577		276,410		398,684		202,531		—		—		1,308,342
Consumer:
Home equity lines of credit:
Payment performance
Performing		—		—		—		—		—		—		40,986		900		41,886
Nonperforming		—		—		—		—		—		—		96		12		108
Total Home equity lines of credit		—		—		—		—		—		—		41,082		912		41,994
Other
Payment performance																		—
Performing		—		484		—		—		—		172		2,265		—		2,921
Total Other consumer loans		—		484		—		—		—		172		2,265		—		2,921
Total loans	$	58,481	$	209,430	$	236,555	$	347,240	$	480,240	$	253,852	$	179,405	$	2,739	$	1,767,942
Total gross charge-offs during the three months ended March 31, 2025	$	—	$	—	$	27	$	—	$	67	$	—	$	—	$	—	$	94

The following table summarizes the risk grading of the Company’s loan portfolio by loan class and by year of origination for the years indicated as of December 31, 2024. Consumer and Single-family residential loans are not risk graded. For purposes of this disclosure, those loans are classified in the following manner: loans that are 89 days or less past due and accruing are “performing” loans.


	Term Loans (amortized cost basis by origination year)
	2024		2023		2022		2021		2020		Prior		Revolving loans amortized cost basis		Revolving loans converted to term		Total
Commercial
Pass	$	39,955	$	26,619	$	67,069	$	82,579	$	43,556	$	8,224	$	132,853	$	—	$	400,855
Special Mention		—		—		285		—		—		2,922		2,966		—		6,173
Substandard		—		—		7,085		4,256		—		—		50		—		11,391
Doubtful		—		—		385		—		—		—		—		—		385
Total Commercial		39,955		26,619		74,824		86,835		43,556		11,146		135,869		—		418,804
Gross charge-offs for the year ended December 31, 2024		—		—		1,755		3,568		—		—		—		—		5,323
Real estate loans:
Single-family residential
Payment performance
Performing		29,278		33,749		121,984		215,330		42,272		21,255		—		—		463,868
Nonperforming		—		547		371		168		—		563		—		—		1,649
Total Single-family residential loans		29,278		34,296		122,355		215,498		42,272		21,818		—		—		465,517
Multi-family residential
Pass		30,570		24,798		7,628		49,647		2,520		26,424		—		—		141,587
Special Mention										4,252		4,595						8,847
Total Multi-family residential loans		30,570		24,798		7,628		49,647		6,772		31,019		—		—		150,434
Commercial:
Non-owner occupied
Pass		10,169		49,053		33,204		67,360		14,019		52,679		—		—		226,484
Special Mention		—		—		—		—		—		2,842		—		—		2,842
Substandard		—		—		—		—		—		505		—		—		505
Total Non-owner occupied loans		10,169		49,053		33,204		67,360		14,019		56,026		—		—		229,831
Owner occupied
Pass		18,424		42,191		51,788		47,174		17,707		26,659		—		—		203,943
Special Mention		—		—		—		—		589		—		—		—		589
Substandard		—		—		—		—		—		679		—		—		679
Total Owner occupied loans		18,424		42,191		51,788		47,174		18,296		27,338		—		—		205,211
Land
Pass		16,853		3,190		—		4,979		—		—		—		—		25,022
Total Land loans		16,853		3,190		—		4,979		—		—		—		—		25,022
Construction
Performing		420		—		—		1,607		—		—		—		—		2,027
Pass		51,031		57,409		68,536		19,632		3,531		—		—		—		200,139
Total Construction loans		51,451		57,409		68,536		21,239		3,531		—		—		—		202,166
Total Real Estate loans		156,745		210,937		283,511		405,897		84,890		136,201		—		—		1,278,181
Consumer:
Home equity lines of credit:
Payment performance
Performing		—		—		—		—		—		—		36,253		3,254		39,507
Nonperforming		—		—		—		—		—		—		—		13		13
Total Home equity lines of credit		—		—		—		—		—		—		36,253		3,267		39,520
Other
Payment performance
Performing		488		—		—		—		6		178		2,316		—		2,988
Nonperforming		—		—		—		—		—		—		—		-		-
Total Other consumer loans		488		—		—		-		6		178		2,316		-		2,988
Gross charge-offs for the year ended December 31, 2024		—		—		—		—		—		—		280		—		280
Total loans	$	197,188	$	237,556	$	358,335	$	492,732	$	128,452	$	147,525	$	174,438	$	3,267	$	1,739,493
Total gross charge-offs during the year ended December 31, 2024	$	—	$	—	$	1,755	$	3,568	$	—	$	—	$	280	$	—	$	5,603

Direct Financing Leases:

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


	March 31, 2025			December 31, 2024
	(unaudited)
Total minimum lease payments to be received	$	6,481		$	8,009
Less: Unearned income		(244	)		(336	)
Plus: Indirect initial costs		5			7
Net investment in direct financing leases	$	6,242		$	7,680

The following summarizes the future minimum lease payments receivable in fiscal year 2025 and in subsequent fiscal years:


2025, excluding the three months ended March 31, 2025	$	3,489
2026		2,472
2027		474
2028		46
2029		—
Thereafter		—
Total future minimum payments	$	6,481