Loans And Leases

6 Months Ended

Jun. 30, 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.


	June 30, 2025			December 31, 2024
	(unaudited)
Commercial (1)	$	421,809		$	418,804
Real estate:
Single-family residential		437,659			465,517
Multi-family residential		156,634			150,434
Commercial		506,621			460,064
Construction		204,835			202,166
Consumer:
Home equity lines of credit		42,805			39,520
Other		3,567			2,988
Subtotal		1,773,930			1,739,493
Less: ACL – Loans		(19,122	)		(17,474	)
Loans and leases, net	$	1,754,808		$	1,722,019

(1)

Includes $4,990 and $7,680 of commercial leases at June 30, 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 Company monitors the concentration in any one industry and geographic area and has established limits relative to capital.

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 loan 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 and six months ended June 30, 2025 and 2024 (unaudited).


	Three Months Ended June 30, 2025 (unaudited)
			Real Estate									Consumer
	Commercial		Single- family		Multi- family		Commercial		Construction		Home equity lines of credit		Other		Total

Allowance for credit losses
Balances, April 1, 2025	$	7,830	$	2,493	$	1,211	$	3,874	$	1,752	$	391	$	252	$	17,803
Provision (reversal) for credit losses		1,357		(143)		(150)		(6)		244		(7)		75		1,370
Recoveries on loans		4		10		—		—		—		-		—		14
Loans charged off		(65)		—		—		—		—		—		-		(65)
Balances, June 30, 2025	$	9,126	$	2,360	$	1,061	$	3,868	$	1,996	$	384	$	327	$	19,122


	Six Months Ended June 30, 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		2,188			(419	)		(321	)		(50	)		255			12		57		1,722
Recoveries on loans		65			19			—			—			—			1		—		85
Loans charged off		(132	)		(27	)		—			—			—			—		—		(159	)
Balances, June 30, 2025	$	9,126		$	2,360		$	1,061		$	3,868		$	1,996	$		384	$	327	$	19,122


	Three Months Ended June 30, 2024 (unaudited)
			Real Estate									Consumer
	Commercial		Single-family		Multi-family		Commercial		Construction		Home equity lines of credit		Other		Total

Allowance for credit losses
Balances, April 1, 2024	$	7,518	$	3,331	$	1,147	$	4,298	$	1,279	$	335	$	290	$	18,198
Provision (reversal) for credit losses		3,105		(32)		(132)		(10)		(43)		46		261		3,195
Recoveries on loans		6		7		—		—		—		2		—		15
Loans charged off		(1,873)		—		—		—		—		—		(250)		(2,123)
Balances, June 30, 2024	$	8,756	$	3,306	$	1,015	$	4,288	$	1,236	$	383	$	301	$	19,285


	Six Months Ended June 30, 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		4,733			(80	)		(216	)		183		(471	)			45		318			4,512
Recoveries on loans		12			15			—			—		—				4		—			31
Loans charged off		(1,873	)		—			—			—		—				—		(250	)		(2,123	)
Balances, June 30, 2024	$	8,756		$	3,306		$	1,015		$	4,288	$	1,236		$		383	$	301		$	19,285

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.


	June 30, 2025 (unaudited)
	Residential Real Estate		Other		Total		Allowance on Collateral Dependent Loans
Commercial	$	—	$	9,814	$	9,814	$	3,862
Real estate:
Single-family residential		83		—		83		—
Commercial:
Owner occupied		—		694		694		—
Total	$	83	$	10,508	$	10,591	$	3,862


	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 June 30, 2025 (unaudited):


	Nonaccrual Loans		Nonaccrual Loans with no Allowance for Credit Losses
Commercial	$	14,577	$	651
Real estate:
Single-family residential		1,255		1,255
Commercial:
Owner occupied		694		694
Consumer:
Home equity lines of credit		106		106
Total nonaccrual loans	$	16,632	$	2,706

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 $16.6 million and $14.5 million of nonaccrual loans at June 30, 2025 and December 31, 2024, respectively, $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 were no loans 90 days or more past due and still accruing interest at June 30, 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 June 30, 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	$	2,225	$	1,110	$	10,021	$	13,356	$	408,453	$	4,556
Real estate:
Single-family residential		—		—		1,095		1,095		436,564		160
Multi-family residential		—		—		—		—		156,634		—
Commercial:
Non-owner occupied		—		—		—		—		264,382		—
Owner occupied		—		—		694		694		208,699		—
Land		—		—		—		—		32,846		—
Construction		—		—		—		—		204,835		—
Consumer:
Home equity lines of credit		-		—		95		95		42,710		11
Other		—		—		—		—		3,567		—
Total	$	2,225	$	1,110	$	11,905	$	15,240	$	1,758,690	$	4,727

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 and six months ended June 30, 2025, the Company did not modify any loans to borrowers experiencing financial difficulties. During the three and six months ended June 30, 2024, the Company modified one commercial loan, with an amortized cost basis totaling $4.4 million, where the borrower was experiencing financial difficultly. The amortized cost basis of this loan represented 1.0% of commercial loans at June 30, 2025. The loan was modified to increase the interest rate by 75bps, extend the maturity date by six months, and allow for an amortization holiday and deferred interest option. The loan was not past due during the six months ended June 30, 2024.

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 June 30, 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	$	41,818	$	32,105	$	24,170	$	57,174	$	72,229	$	45,979	$	129,866	$	1,925	$	405,266
Special Mention		—		—		139		—		57		2,849		—		—		3,045
Substandard		—		1,328		—		7,000		4,321		414		50		—		13,113
Doubtful		—		—		—		385		—		—		—		—		385
Total Commercial		41,818		33,433		24,309		64,559		76,607		49,242		129,916		1,925		421,809
Gross charge-offs during the six months ended June 30, 2025		—		—		—		—		132		—		—		—		132
Real estate loans:
Single-family residential
Payment performance
Performing		5,544		28,500		27,387		110,168		209,874		54,930		—		—		436,403
Nonperforming		—		—		—		371		160		725		—		—		1,256
Total Single-family residential loans		5,544		28,500		27,387		110,539		210,034		55,655		—		—		437,659
Gross charge-offs during the six months ended June 30, 2025		—		—		27		—		—		—		—		—		27
Multi-family residential
Pass		—		30,506		31,856		11,316		52,113		22,046		—		—		147,837
Special Mention												8,797						8,797
Total Multi-family residential loans		—		30,506		31,856		11,316		52,113		30,843		—		—		156,634
Commercial:
Non-owner occupied
Pass		37,794		8,454		45,790		40,188		71,462		60,694		—		—		264,382
Total Non-owner occupied loans		37,794		8,454		45,790		40,188		71,462		60,694		—		—		264,382
Owner occupied
Pass		5,521		18,194		41,779		58,332		43,627		40,568		—		—		208,021
Substandard		—		—		—		694		—		678		—		—		1,372
Total Owner occupied loans		5,521		18,194		41,779		59,026		43,627		41,246		—		—		209,393
Land
Pass		4,186		20,764		3,195		—		4,701		—		—		—		32,846
Total Land loans		4,186		20,764		3,195		—		4,701		—		—		—		32,846
Construction
Not Rated		273		532		—		—		—		—		—		—		805
Pass		16,933		76,295		58,718		43,816		4,737		3,531		—		—		204,030
Total Construction loans		17,206		76,827		58,718		43,816		4,737		3,531		—		—		204,835
Total Real Estate loans		70,251		183,245		208,725		264,885		386,674		191,969		—		—		1,305,749
Consumer:
Home equity lines of credit:
Payment performance
Performing		—		—		—		—		—		—		41,779		919		42,698
Nonperforming		—		—		—		—		—		—		95		12		107
Total Home equity lines of credit		—		—		—		—		—		—		41,874		931		42,805
Other
Performing		—		479		—		—		—		166		2,922		—		3,567
Total Other consumer loans		—		479		—		—		—		166		2,922		—		3,567
Total loans	$	112,069	$	217,157	$	233,034	$	329,444	$	463,281	$	241,377	$	174,712	$	2,856	$	1,773,930
Total gross charge-offs during the six months ended June 30, 2025	$	—	$	—	$	27	$	—	$	132	$	—	$	—	$	—	$	159

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:


	June 30, 2025			December 31, 2024
	(unaudited)
Total minimum lease payments to be received	$	5,161		$	8,009
Less: Unearned income		(174	)		(336	)
Plus: Indirect initial costs		3			7
Net investment in direct financing leases	$	4,990		$	7,680

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


2025, excluding the six months ended June 30, 2025	$	2,248
2026		2,400
2027		467
2028		46
2029		—
Thereafter		—
Total future minimum payments	$	5,161