10-K

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, 2017

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

CENTRAL FEDERAL CORPORATION

(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	Nasdaq® Capital Market
(Title of Class)	(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 and posted on its corporate Website, if any, every Interactive Data File required to be submitted and posted 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 and post such files.)

YES[X]    NO [  ]

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K(Section 229.405 of this chapter) is not contained herein, and will not be contained, to the best of the registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.  []

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.  (Check one):

Large accelerated filer [  ]Accelerated filer [  ]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 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, 2017was $33.9 million  based upon the closing price as reported on the Nasdaq® Capital Market for that date.

As of March10, 2018, there were 23,313,547 shares of the registrant’s Common Stock outstanding.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the registrant’s Annual Report to Stockholders  for its fiscal year ended December 31, 2017,  included as Exhibit 13.1 to this Form 10-K,and its Proxy Statement for the Annual Meeting of Stockholders  to be held on  May302018,are incorporated herein by reference into Parts II and III, respectively, of this Form 10-K.

INDEX

PART I
Item 1.	Business	3
Item 1A.	Risk Factors	31
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.	Selected Financial Data	39
Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	39
Item 7A.	Quantitative and Qualitative Disclosures About Market Risk	39
Item 8.	Financial Statements and Supplementary Data	39
Item 9.	Changes in and Disagreements With Accountants on Accounting and Financial Disclosure	39
Item 9A.	Controls and Procedures	39
Item 9B.	Other Information	39
PART III
Item 10.	Directors, Executive Officers and Corporate Governance	40
Item 11.	Executive Compensation	41
Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	41
Item 13.	Certain Relationships and Related Transactions, and Director Independence	41
Item 14.	Principal Accounting Fees and Services	41
PART IV
Item 15.	Exhibits and Financial Statement Schedules	42
Item 16.	Form 10-K Summary	43
SIGNATURES		44

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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 Central Federal Corporation (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.  The Holding Company, including its wholly-owned subsidiary, CFBank (together referred to as the “Company”) believes it has 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 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.

PART I

Item 1.  Business.

General

Central Federal Corporation (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.  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 Central Federal Corporation and its subsidiaries, unless the context indicates to the contrary.

The consolidated financial statements include the Holding Company and CFBank (together referred to as the “Company”).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.  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, 2017, the Company’s assets totaled $481.4 million and stockholders’ equity totaled $40.3 million. 

CFBank is a community-oriented national bank offering a variety of financial services to meet the needs of the communities we serve.  Our business model emphasizes personalized service, customer access to decision makers, quick execution, and the convenience of online internet banking, mobile banking, remote deposit and corporate treasury management.  In addition, CFBank provides residential lending and full service retail banking services and products.  We attract retail and business deposits from the general public and use the deposits, together with borrowings and other funds, primarily to originate commercial and commercial real estate loans, single-family and multi-family residential mortgage loans and home equity lines of credit.  The majority of our customers are small businesses, small business owners and consumers. 

Revenues are derived principally from the generation of interest and fees on loans originated and, to a lesser extent, interest and dividends on securities.  Ourprimary 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.

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Our principal market area for loans and deposits includes the following Ohio counties: Franklin County through our office in Worthington, Ohio; Hamilton County through our office in Glendale, Ohio,Summit County through our office in Fairlawn, Ohio;Columbiana County through our offices in Calcutta and Wellsville, Ohio; and Cuyahoga County, through our agency office in Woodmere, Ohio.  We originate commercial and residential real estate loans and business loans primarily throughout Ohio.

Regulatory Matters

From May 2011 until 2014, the Holding Company and CFBank each were subject to Cease and Desist Orders (the “Holding Company Order” and the “CFBank Order”, respectively, and collectively, the “Orders”) with the Federal Reserve Board (the “FRB”), as successor to the Office of Thrift Supervision (the “OTS”) as the primary regulator of the Holding Company and CFBank.  The Orders imposed significant directives applicable to the Holding Company and CFBank, including requirements that we maintain heightened capital levels, reduce the level of our classified and criticized assets, achieve growth and operating metrics in line with an approved business plan, and comply with restrictions on brokered deposits and on certain types of lending and prohibitions on dividends and repurchases of our capital stock.

The OCC released and terminated the CFBank Order effective as of January 23, 2014.  On May 15, 2014, the FRB announced the termination of the Holding Company Order, effective as of May 9, 2014.  Notwithstanding the termination of the Holding Company Order, the Holding Company was required to continue to adhere to certain requirements and restrictions based on commitments made to the FRB in connection with the termination of the Holding Company Order.  These commitments required the Holding Company, among other things, to continue to implement certain actions in accordance with the capital plan previously submitted to the FRB; not declare or pay dividends on its stock, purchase or redeem its stock, or accept dividends or other capital distributions from CFBank without the prior written approval of the FRB; not incur, increase or guarantee any debt without the prior written consent of the FRB; and provide prior written notice to the FRB with respect to certain changes in directors and senior executive officers.  The foregoing commitments remained in place until January 8, 2016.

Although we are no longer subject to the Orders or the regulatory commitments made following the release of the Orders, we remain subject to extensive supervision and regulation by our regulators and it is possible that regulatory compliance expenses could continue to have an adverse impact on us in the future.

Dividend Restrictions

Banking regulations limit the amount of dividends that may be paid without prior approval of regulatory agencies.  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.  Future dividend payments by CFBank to the Holding Company would be based on future earnings and, if necessary, regulatory approval. 

Market Area and Competition

Ourprimary market areas in Ohio are competitive markets for financial servicesand 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

Loan and Lease Portfolio Composition.  The 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.It also consists of a portfolio of residential mortgage loans totaling $37.7 millionas a result of participation in the Northpointe Mortgage Purchase Program.  See Note 4 to the Consolidated Financial Statements included in our 2017 Annual Report to Stockholders, included as Exhibit 13.1 to this Form 10-K, for additional information regarding the Northpointe Mortgage Purchase Program.  CFBank also finances a variety of commercial and residential construction projects.At December 31, 2017,grossloans receivable totaled  $413.4 million and increased approximately $60.3 million, or 17.1% from $353.1 million at December 31, 2016.  Commercial, commercial real estate and multi-family mortgage loans, including related construction loans,in the aggregate totaled $276.2 million and represented 66.8%  of the gross loan portfolio at December 31, 2017as compared to62.7% of the gross loan portfolioat December 31, 2016.Commercial, commercial real estate and multi-family mortgage loan balances, including related construction loans,increased  $54.8 million, or 24.8% during 2017.Portfoliosingle-family residential mortgage loans, including related construction loans and residential mortgage loans originated throughthe Northpointe Mortgage Purchase Program, totaled $111.7 million and represented 27.0% of total gross loans at year-end 2017,compared to 30.6% at year-end 2016.The remainder of our loan portfolio consists ofconsumer loans, whichtotaled$25.4 million, or 6.2% of gross loans receivable, at year-end 2017.

4

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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The following table sets forth the composition of the loan and lease portfolio in dollar amounts andas a percentage of the portfolio at the dates indicated.

	December 31,
	2017			2016			2015			2014			2013
			Percent			Percent			Percent			Percent			Percent
	Amount		of Total	Amount		of Total	Amount		of Total	Amount		of Total	Amount		of Total
	(Dollars in thousands)
Real estate mortgage loans:
Single-family	$	95,578	23.12%	$	92,544	26.21%	$	81,985	27.00%	$	51,445	19.53%	$	32,219	15.13%
Multi-family		35,665	8.63%		34,291	9.71%		28,950	9.53%		28,790	10.93%		32,197	15.12%
Construction		42,862	10.37%		25,822	7.31%		24,662	8.12%		23,641	8.98%		11,465	5.39%
Commercial real estate		111,866	27.06%		105,313	29.83%		96,488	31.78%		91,119	34.58%		83,752	39.34%
Total real estate mortgage loans		285,971	69.18%		257,970	73.06%		232,085	76.43%		194,995	74.02%		159,633	74.99%
Consumer loans:
Home equity loans		224	0.05%		479	0.14%		504	0.17%		549	0.21%		352	0.17%
Home equity lines of credit		25,054	6.06%		23,109	6.55%		21,837	7.19%		16,898	6.42%		14,851	6.98%
Automobile		-	0.00%		-	0.00%		65	0.02%		122	0.05%		77	0.04%
Other		152	0.04%		158	0.04%		5,449	1.79%		4,305	1.63%		431	0.20%
Total consumer loans		25,430	6.15%		23,746	6.73%		27,855	9.17%		21,874	8.31%		15,711	7.38%
Commercial loans (1)		101,975	24.67%		71,334	20.21%		43,744	14.40%		46,532	17.67%		37,526	17.63%
Total loans receivable		413,376	100.0%		353,050	100.0%		303,684	100.0%		263,401	100.0%		212,870	100.0%
Less:
Allowance for loan and lease losses		(6,970)			(6,925)			(6,620)			(6,316)			(5,729)
Loans receivable, net	$	406,406		$	346,125		$	297,064		$	257,085		$	207,141

⁽¹⁾ Includes $6,008and $2,874 of commercial leases at December 31, 2017 and December 31, 2016, respectively.

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Loan Maturity.  The following table shows the remaining contractual maturity of the loan portfolio at December 31, 2017.  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, 2017
	Real Estate Mortgage Loans(1)		Consumer Loans		Commercial Loans		Total Loans Receivable
	(Dollars in thousands)
Amounts due:
Within one year	$	71,582	$	113	$	15,316	$	87,011
After one year:
More than one year to three years		39,933		66		17,300		57,299
More than three years to five years		54,505		-		23,091		77,596
More than five years to 10 years		52,939		1,989		20,007		74,935
More than 10 years to 15 years		10,544		1,524		26,261		38,329
More than 15 years		56,468		21,738		-		78,206
Total due after 2018		214,389		25,317		86,659		326,365
Total amount due	$	285,971	$	25,430	$	101,975	$	413,376

⁽¹⁾ Real estate mortgage loans include single-family, multi-family and commercial real estate loans and construction loans.

The following table sets forth at December 31, 2017, the dollar amount of total loans and leases receivable contractually due after December 31, 2018, and whether such loans have fixed interest rates or adjustable interest rates.

	Due After December 31, 2018
	Fixed		Adjustable		Total
Real estate mortgage loans(1)	$	128,235	$	86,154	$	214,389
Consumer loans		41		25,276		25,317
Commercial loans		34,388		52,271		86,659
Total loans	$	162,664	$	163,701	$	326,365

⁽¹⁾ Real estate mortgage loans include single-family, multi-family and commercial real estate loans and construction loans.

Origination of Loans and Leases.Lending activities are conducted through ouroffices located in Franklin, Cuyahoga,Summit, Hamilton and Columbiana Counties, Ohio. We originate commercial, commercial real estate and multi-family mortgage loans and also expanded into business financial services in theColumbus,Cleveland,Cincinnati, and AkronOhio markets.

Commercial, commercial real estate and multi-family loans are originated with fixed, floating and ARM interest rates.  Fixed-rate loans are generally limited to terms of three to five years.Historically, 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 20 to the Consolidated Financial Statementsincluded in our 2017 Annual Report to Stockholders, included as Exhibit 13.1 to this Form 10-K (our “2017 Annual Report”), for additional information on interest-rate swaps.  

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CFBank participates in various loan programs offered by the Small Business Administration (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 90%. 

A majority of oursingle-family mortgage loan originations are fixed-rate loans.  Current originations of long-term, fixed-rate single-family mortgages are generally sold rather than retained in portfolio in order to minimize investment in long-term, fixed-rate assets that have the potential to expose the Company to long-term interest rate risk.  Although we currently expect that most of our long-term, fixed-rate mortgage loan originations will continue to be sold, primarily on a servicing-released basis, a portion of these loans may be retained for portfolio within our interest rate risk and profitability guidelines. 

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 ourprimary market area. Loan originations are primarily obtained 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 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.  

We currently sell the majority of the single-family mortgage loans that we originateon a servicing released basis.  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  adirect 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). 

For the year ended December 31, 2017, single-family mortgage loansoriginated for sale totaled $22.8million,  adecrease of $1.4 million, or 6.0%,compared to $24.2 million that was originated in 2016.The decrease in originations was partially due to lower sales activity.  The volume of refinance activity, which is very sensitive to market mortgage interest rates,wasa significant factor that impacted the level of residential loan originations in 2017.If market mortgage rates increase, our mortgage production, and the resultant gains on sales of loans, could decrease.

For the year endedDecember 31, 2017, portfolio single-family mortgage loans originated by CFBank totaled $10.2 million, or 2.5% of total loans. Ourpolicy is to originate single-family residential mortgage loans for portfolio in amounts up to 85%  of the lower of the appraised value or the purchase price of the property securing the loan, without requiring private mortgage insurance.  Loans in excess of 85% of the lower of the appraised value or purchase price of the property securing the loan require private mortgage insurance.  Mortgage loans generally include due-on-sale clauses which provide uswith the contractual right to deem the loan immediately due and payable in the event the borrower transfers ownership of the property without ourconsent. 

Portfolio single-family residential ARM loans, which totaled $23.7million, or 24.8% of the single-family mortgage loan portfolio at December 31, 2017, 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 has participated in a Mortgage Purchase Program with Northpointe Bank (Northpointe), a Michigan banking corporation, since December 2012.  Pursuant to the terms of a participation agreement, CFBank purchases participation interests in loans made by Northpointe related to fully underwritten and pre-sold mortgage loans originated by various prescreened mortgage brokers located throughout the U.S.  The underlying loans are individually (MERS) registered loans which are held until funded by the end investor.

The mortgage loan investors include Fannie Mae and Freddie Mac, and other major financial institutions.  This process on average takes approximately 14 days.  Given the short-term holding period of the underlying loans, common credit risks (such as past due, impairment and TDR, nonperforming, and nonaccrual classification) are substantially reduced.  Therefore, no allowance is allocated by CFBank to these loans.  These loans are 100% risk rated for CFBank capital adequacy purposes.  Under the participation agreement, CFBank agrees to purchase a 95% ownership/participation interest in each of the aforementioned loans, and Northpointe maintains a 5% ownership interest in each loan it participates.See Note 4 to the Consolidated Financial Statements included in our 2017 Annual Report.

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Commercial Real Estate and Multi-Family ResidentialMortgage Lending.Origination of commercial real estate and multi-family residential mortgage loanscontinues to be a  significant portion of CFBank’s lending activity.Commercial real estate and multi-family residential mortgage loan balances  increased $7.9 million to $147.5 million at December 31, 2017. This represented an increase of 5.7% over the $139.6 million balance at December 31, 2016.  

Weoriginate 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 propertiesgenerally 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 theappraised value or purchase price of the property.An independent appraisal of the property is required on all loans greater than or equal to $250,000. 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 loansto 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 20 to the Consolidated Financial Statements  included in our 2017 Annual Report 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 25 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 criteriathat require such loans to be qualified at origination with sufficient debt coverage ratios under increasing interest rate 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 loans 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 propertyowners and/or guarantors.

Commercial Lending.  The origination of commercial loans continues to be a significant component of our lending activity.During 2017, commercial lending activity increased by $30.6 million, or 43.0%, to $102.0 million at year-end 2017.  Weoriginate commercial loans primarily to businesses located within our primary market area.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 generally limited to a maximum term of five years.  Adjustable-rate loans are tied to various market indices and generally adjust monthly or annually.  

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.

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Construction and Land Lending.With economic improvement in our market areas, there was also an increase in commercial building activity. During 2017, construction loans increased by $17.0 million, or 66.0%, to $42.9 million compared to the $25.8 million in the portfolio at year-end 2016.  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.

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 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, wemay 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, automobile loans, home improvement loans and loans secured by deposits.  At December 31, 2017, the consumer loan portfolio totaled $25.4 million, which was 6.2% of gross loans receivable. During 2017, the consumer loan portfolio increased  $1.7 million, or 7.1% over the year-end 2016 balance of $23.7 million.

Home equity lines of credit include those purchased in the past and loans we originate for our portfolio.  We offer a  variable rate home equity line of creditproduct which we originate for our portfolio.  The interest rateadjusts 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 ofpast 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 therepossession 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 ascurrent financial information, historical payment experience, credit documentation, public information and current economic trends, among other factors.  In accordance with regulations, problem 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 mentionpossess 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

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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 exit that could potentially warrant a specific reserve to be established.

See the section titled “Financial Condition -Allowance for loan losses”and Notes 1and4  to the Consolidated Financial Statements included in our 2017 Annual Report for detailed information on criticized and classified loans as of December 31, 2017 and 2016. 

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, 2017, but exhibit weaknesses that could lead to nonaccrual status in the future.  

	# of Loans		Balance
Commercial	1	$	162
Single-family residential real estate	2		8
Multi-family residential real estate	1		163
Commercial real estate	3		1,158
Home equity lines of credit	2		76
Total	9	$	1,567

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The following tablesets forth information concerning delinquent loans in dollar amounts and as a percentage of the total loan portfolio.  The amounts presented in the table below represent the total remaining balances of the loans rather than the actual payment amounts which are overdue. Loans shown as 90 days or more delinquent include nonaccrual loans, regardless of delinquency.

	December 31, 2017						December 31, 2016						December 31, 2015
	60-89 Days			90 Days or More			60-89 Days			90 Days or More			60-89 Days			90 Days or More
	Number of Loans	Balance of Loans		Number of Loans	Balance of Loans		Number of Loans	Balance of Loans		Number of Loans	Balance of Loans		Number of Loans	Balance of Loans		Number of Loans	Balance of Loans
	(Dollars in thousands)						(Dollars in thousands)						(Dollars in thousands)
Real estate loans:
Single-family	2	$	27	6	$	253	1	$	49	8	$	397	-	$	-	12	$	640
Multi-family	-		-	-		-	-		-	-		-	-		-	-		-
Commercial	-		-	-		-	1		600	-		-	-		-	1		446
Consumer loans:
Home equity lines of credit	-		-	2		102	1		15	1		44	-		-	2		115
Home equity loans	-		-	-		-	-		-	-		-	-		-	-		-
Automobile	-		-	-		-	-		-	-		-	-		-	-		-
Other	-		-	-		-	-		-	-		-	-		-	-		-
Commercial loans	-		-	1		115	-		-	3		263	1		9	3		224
Total delinquent loans	2	$	27	9	$	470	3	$	664	12	$	704	1	$	9	18	$	1,425
Delinquent loans as a percent of total loans			.01%			.11%			.19%			.20%			.00%			.47%

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	December 31, 2014						December 31, 2013
	60-89 Days			90 Days or More			60-89 Days			90 Days or More
	Number of Loans	Balance of Loans		Number of Loans	Balance of Loans		Number of Loans	Balance of Loans		Number of Loans	Balance of Loans
	(Dollars in thousands)						(Dollars in thousands)
Real estate loans:
Single-family	2	$	46	9	$	549	1	$	36	10	$	479
Multi-family	-		-	-		-	-		-	1		1,701
Commercial	-		-	1		477	-		-	5		2,943
Consumer loans:
Home equity lines of credit	-		-	2		153	-		-	1		52
Home equity loans	-		-	-		-	-		-	-		-
Automobile	-		-	-		-	-		-	-		-
Other	2		10	-		-	-		11	-		-
Commercial loans	-		-	3		369	-		-	2		563
Total delinquent loans	4	$	56	15	$	1,548	1	$	47	19	$	5,738
Delinquent loans as a percent of total loans			.02%			.59%			.02%			2.78%

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Nonperforming Assets.  The following table contains information regarding nonperforming loans andrepossessed assets.  CFBank’s policy isto stop accruing interest on loans 90 daysor more past due unless the loan principal and interest are determined by management to be fully secured and in the process of collection. All interest accrued but not received for loans placed on nonaccrual is reversed against interest income.

	At December 31,
	2017		2016		2015		2014		2013
	(Dollars in thousands)
Loans past due over 90 days still on accrual	$	-	$	-	$	-	$	-	$	-
Nonaccrual loans:
Single-family real estate		253		397		640		549		479
Multi-family real estate		-		-		-		-		1,701
Commercial real estate		-		-		446		477		2,943
Consumer		102		44		115		153		52
Commercial		115		263		224		369		563
Total nonaccrual loans		470		704		1,425		1,548		5,738
Total nonperforming loans		470		704		1,425		1,548		5,738
REO		-		204		1,636		1,636		1,636
Other foreclosed assets		-		-		-		-		-
Total nonperforming assets		470		908		3,061		3,184		7,374
Troubled Debt Restructurings (1)		3,271		2,986		4,920		5,233		3,517
Total nonperforming and troubled debt restructurings	$	3,741	$	3,894	$	7,981	$	8,417	$	10,891
Nonperforming loans to total loans		0.11%		0.20%		0.47%		0.59%		2.70%
Nonperforming assets to total assets		0.10%		0.21%		0.87%		1.01%		2.88%

⁽¹⁾ Reflects TDRs 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.

The $234,000decrease in nonperforming loans in 2017compared to 2016was primarily due to loan payments and payoffs.There were  $107,000 in loans that became nonperforming in 2017 related to onesingle-family residential loanand two consumer loans.

CFBank has seen steady improvement in the credit quality of its level of nonperforming loans over the last five years.For the year ended December 31, 2017, 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 $31,000.  There was no interest income recognized on nonaccrual loans in 2017, except for $54,000 of interest income that was collected from the payoff of a commercial real estate 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”). Loans restructured in 2017 identified as TDRs totaled $831,000.

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As a component of management’s focus on the workout 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 $115,000in TDRs at December 31, 2017, while non-accrual loans included $144,000 of TDRs at December 31, 2016.

At year-end 2017 there were a total of $3.4 million of TDRs,including$3.0 million in commercial real estate loans, $162,000in commercial loans,  and $116,000 in single family residential 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” and Notes 1and 4  to the Consolidated Financial Statements included in our 2017 Annual Report for additional information on nonperforming loans and TDRs as of December 31, 2017 and 2016. 

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 our 2017 Annual Report for a detailed discussion of management’s methodology for determining the appropriate level of the ALLL.

The ALLL totaled $7.0 million at December 31, 2017, and increased $45,000, or 0.6%, from $6.9million at December 31, 2016.  The increase in the ALLL is due to net recoveries during the twelve months ended December 31, 2017.  The ratio of the ALLL to total loans was 1.69% at December 31, 2017, compared to 1.96% at December 31, 2016.  In addition, the ratio of the ALLL to nonperforming loans was1483.0% at December 31, 2017, compared to 983.7% at December 31, 2016.

We believe the ALLL is adequate to absorb probable incurred credit losses in the loan portfolio as of December 31, 2017; 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.

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The following table sets forth activity in the ALLL for the years ended December 31:

	2017		2016		2015		2014		2013
ALLL, beginning of period	$	6,925	$	6,620	$	6,316	$	5,729	$	5,237
Charge-offs:
Real estate loans:
Single-family		-		147		40		-		164
Multi-family		-		-		-		-		59
Commercial real estate		-		-		25		5		6
Consumer loans:
Home equity		-		53		41		26		17
Other		-		1		10		-		6
Commercial loans		-		123		8		44		-
Total charge-offs		-		324		124		75		252
Recoveries on loans previously charged off:
Recoveries
Real estate loans:
Single-family		20		42		1		4		3
Multi-family		-		143		-		-		88
Commercial real estate		-		145		33		349		66
Consumer loans:
Home equity		23		69		113		24		29
Automobile		-		-		-		2		8
Other		-		-		6		-		13
Commercial loans		2		-		25		5		41
Total recoveries		45		399		178		384		248
Net charge-offs (recoveries)		(45)		(75)		(54)		(309)		4
Provision for loan and lease losses		-		230		250		278		496
Reclassification of ALLL on loan-related commitments		-		-		-		-		-
ALLL, end of period	$	6,970	$	6,925	$	6,620	$	6,316	$	5,729
ALLL to total loans and leases		1.69%		1.96%		2.18%		2.39%		2.69%
ALLL to nonperforming loans		1483.00%		983.66%		464.56%		408.01%		99.85%
Net charge-offs (recoveries) to ALLL		-0.65%		-1.08%		-0.82%		-4.89%		0.07%
Net charge-offs (recoveries) to average loans and leases		-0.01%		-0.02%		-0.02%		-0.13%		0.00%

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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 portfoliosmay 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.

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 chargedoff.

	At December 31,
	2017				2016				2015
	Amount		% of Allowance in each Category to Total Allowance	% of Loans in each Category	Amount		% of Allowance in each Category to Total Allowance	% of Loans in each Category	Amount		% of Allowance in each Category to Total Allowance	% of Loans in each Category
	(Dollars in thousands)
Real estate loans:
Single-family	$	912	13.08%	23.12%	$	735	10.61%	26.21%	$	691	10.44%	27.00%
Multi-family		660	9.47%	8.63%		716	10.34%	9.71%		705	10.65%	9.53%
Commercial real estate		2,143	30.75%	27.06%		2,727	39.38%	29.83%		2,710	40.94%	31.78%
Construction		672	9.64%	10.37%		580	8.38%	7.31%		561	8.47%	8.12%
Consumer loans:
Home equity lines of credit		597	8.57%	6.06%		486	7.02%	6.55%		474	7.16%	7.19%
Other		2	.03%	.09%		34	.49%	.18%		99	1.50%	1.98%
Commercial loans		1,984	28.46%	24.67%		1,647	23.78%	20.21%		1,380	20.84%	14.40%
Total ALLL	$	6,970	100.00%	100.00%	$	6,925	100.00%	100.00%	$	6,620	100.00%	100.00%

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	At December 31,
	2014				2013
	Amount		% of Allowance in each Category to Total Allowance	% of Loans in each Category	Amount		% of Allowance in each Category to Total Allowance	% of Loans in each Category
	(Dollars in thousands)
Real estate loans:
Single-family	$	634	10.04%	19.51%	$	120	2.09%	15.13%
Multi-family		818	12.95%	10.93%		1,262	22.03%	15.12%
Commercial real estate		2,541	40.23%	34.60%		2,325	40.58%	39.34%
Construction		442	7.00%	8.98%		119	2.08%	5.39%
Consumer loans:
Home equity lines of credit		441	6.98%	6.42%		139	2.43%	6.98%
Other		94	1.49%	1.90%		5	.09%	.41%
Commercial loans		1,346	21.31%	17.66%		1,759	30.70%	17.63%
Total ALLL	$	6,316	100.00%	100.00%	$	5,729	100.00%	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, 2017 and $204,000 at December 31, 2016.See the section titled “Financial Condition -Foreclosed Assets”and Note 5  to the Consolidated Financial Statementsin our 2017 Annual Report for information regarding foreclosed assets at December 31, 2017.  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 theBoard of Directors is designed to provide and maintain adequate liquidity, generate a favorable return on investmentwithout 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’sguidelines, 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. 

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At December 31, 2017, the securities portfolio totaled $11.8 million.  At December 31, 2017, all mortgage-backed securities and collateralized mortgage obligations in the securities portfolio were insured or guaranteed by Ginnie Mae, Freddie Mac or Fannie Mae.

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.See Notes  1and 3  to the Consolidated Financial Statements contained in our 2017 Annual Report for a detailed discussion of management’s evaluation of securities for OTTI.

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

	At December 31,
	2017				2016				2015
Securities Available For Sale	Amortized Cost		Fair Value		Amortized Cost		Fair Value		Amortized Cost		Fair Value
Issued by U.S. government-sponsored entities and agencies:
U.S. Treasury	$	11,499	$	11,417	$	13,521	$	13,505	$	8,575	$	8,536
Mortgage-backed securities - residential		236		244		345		357		463		481
Collateralized mortgage obligations		110		112		189		196		339		351
Total	$	11,845	$	11,773	$	14,055	$	14,058	$	9,377	$	9,368

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The following table sets forth information regarding the amortized cost, weighted average yield and contractual maturity dates of debt securities as ofDecember 31, 2017.

				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
Issued by U.S. government-sponsored entities and agencies:
U.S. Treasury	$	3,002	1.08%	$	8,497	1.50%	$	-	0.00%	$	-	0.00%	$	11,499	1.39%
Mortgage-backed securities - residential		-	0.00%		36	6.90%		147	3.61%		53	7.01%		236	4.87%
Collateralized mortgage obligations		-	0.00%		-	0.00%		-	0.00%		110	4.04%		110	4.04%
Total	$	3,002	1.08%	$	8,533	1.52%	$	147	3.61%	$	163	5.01%	$	11,845	1.49%

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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.  Any future dividend payments by CFBank to the Holding Company would be based on future earnings and, if necessary, regulatory approval.See Note 2 to the Consolidated Financial Statements included in our 2017 Annual Report.

The Holding Company’s available cash and cash equivalents totaled $523,000 at December 31, 2017.  Management believes that the Holding Company had adequate funds at December 31, 2017 to meet its current and anticipated operating needs at this time.See the section titled “Liquidity and Capital Resources” and Note 2  to the Consolidated Financial Statements contained in our 2017 Annual Report 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 includingsavings accounts, retail and businesschecking 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 totaled45.7%  of average deposit balances in 2017.  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 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, 2017, CFBank had $46.9 million in brokered deposits with maturity dates from January 2018 through September 2022. At December 31, 2017, cash, unpledged securities and deposits in other financial institutions totaled $46.8 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 up to approximately $50 million of FDIC insurance coverage through these innovative products. Both CDARS and ICS balances are considered brokered deposits by regulation.  Customer balances in the CDARS and ICS programs totaled $13.6 million at December 31, 2017 and increased $4.0 million, or 41.4%, from $9.6 million at December 31, 2016. 

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Certificate accounts in amounts of $100,000 or more totaled $137.4 million at December 31, 2017,  maturing as follows:

Maturity Period	Amount		Weighted Average Rate
	(Dollars in thousands)
Three months or less	$	29,216	1.21%
Over 3 through 6 months		16,030	1.20%
Over 6 through 12 months		24,155	1.35%
Over 12 months		68,032	1.90%
Total	$	137,433

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,
	2017				2016				2015
	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	$	7,757	2.10%	0.09%	$	7,245	2.29%	0.03%	$	8,793	3.23%	0.02%
Money market accounts		99,166	26.87%	0.75%		90,512	28.67%	0.78%		72,819	26.78%	0.75%
Savings accounts		16,876	4.57%	0.10%		16,398	5.19%	0.10%		16,478	6.06%	0.10%
Certificates of deposit		168,443	45.65%	1.36%		156,084	49.44%	1.24%		142,320	52.34%	1.16%
Noninterest-bearing deposits:
Demand deposits		76,810	20.81%	-		45,468	14.41%	-		31,503	11.59%	-
Total Average Deposits	$	369,052	100.00%	1.05%	$	315,707	100.00%	0.98%	$	271,913	100.00%	0.92%

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The following table presents, by various rate categories, the amount of certificate accounts outstanding at the dates indicated and the periods to maturity of the certificate accounts outstanding at December 31, 2017.

	Period to Maturity from December 31, 2017								At December 31,
	Less than		One to		Two to		Over
	One Year		Two Years		Three Years		Three Years		2017		2016		2015
	(Dollars in thousands)
Certificate accounts:
0 to 0.99%	$	12,614	$	3,282	$	377	$	84	$	16,357	$	26,047	$	40,782
1.00 to 1.99%		80,460		28,534		8,782		5,253		123,029		132,902		89,905
2.00 to 2.99%		141		1,934		11,201		29,569		42,845		13,360		11,658
3.00 to 3.99%		-		-		-		-		-		-		100
4.00 to 4.99%		-		-		-		-		-		-		-
5.00% and above		-		-		-		-		-		-		499
Total certificate accounts	$	93,215	$	33,750	$	20,360	$	34,906	$	182,231	$	172,309	$	142,944

See the sections titled “Financial Condition – Deposits”  and “Liquidity and Capital Resources” contained in our 2017 Annual Report to Stockholders 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, commercial real estate 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 $13.5 million at December 31, 2017.  Based on the collateral pledged and CFBank’s holdings of FHLB stock, CFBank was eligible to borrow up to a total of $65.0 million at year-end 2017.

In addition to access to FHLB advances, CFBank hasborrowing capacity available with the Federal Reserve Bank through the Borrower in Custody program.  The borrowings are collateralized by commercial loansand commercial real estate loans.  Based on the collateral pledged, CFBank was eligible to borrow up to a total of $40.4 million at year-end 2017.  There were no amounts outstanding from the Federal Reserve Bank at December 31, 2017.  CFBank also had$8.0 million available in an unsecured line of credit with a  commercial bank at December 31, 2017.  Interest on this line accrues daily and is variable based on the commercial bank’s cost of funds and current market returns.There was no amount outstanding on this line of credit at December 31, 2017.See the section titled “Liquidity and Capital Resources” contained in our 2017 Annual Report to Stockholders for additional information.

See the section titled “Financial Condition - Subordinated Debentures” contained in our 2017 Annual Report for information regarding subordinated debentures issued by the Company in 2003.

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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,
	2017		2016		2015
Short-term FHLB advances and other borrowings:
Average balance outstanding	$	325	$	385	$	5
Maximum amount outstanding at any month-end during the period		11,100		6,000		-
Balance outstanding at end of period		-		-		-
Weighted average interest rate during the period		1.29%		0.59%		0.45%

Subsidiary Activities

As of December 31, 2017,  we maintained CFBank and the Trust as wholly owned subsidiaries. 

Personnel

As of December 31, 2017,  the Company had 62full-time and 4part-time employees. 

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.

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 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 FDIC’s Deposit Insurance Fund.  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.

Effective as of December 1, 2016, CFBank converted from a federal savings association to a national bank and, in connection with that conversion, the Holding Company became a registered bank holding company and elected financial holding company status. 

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 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”).  CFBank has also been and continues to be 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.

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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 policyto 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 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 it;

· 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.

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 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 Federal Reserve Board.  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 Federal Reserve Board 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 Community Reinvestment Act 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

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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.

Transactions with Affiliates, Directors, Executive Officers and Shareholders

Sections 23A and 23B of the Federal Reserve Act and Federal Reserve Board 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 substantially the same, or at least as favorable to the bank or subsidiary, as those provided to a non-affiliate.

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 the affiliate, the purchase of assets from the affiliate, the issuance of a guarantee on behalf of the affiliate, the purchase of securities issued by the affiliate and other similar types of transactions.

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.   

The risk-based capital guidelines adopted by the federal banking agencies are based on the “International Convergence of Capital Measurement and Capital Standard” (Basel I), published by the Basel Committee on Banking Supervision (the “Basel Committee”).  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 phase in from January 1, 2016 through January 1, 2019, and most deductions from common equity tier 1 capital will phase in from January 1, 2015 through January 1, 2019.

The rules include (a) a minimumcommon 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 includes common stock (plus related surplus) and retained earnings, plus limited amounts of minority interests in the form of common stock, less the majority of certain regulatory deductions.        

Tier 1 capital 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, includes certain capital instruments (such as subordinated debt) and

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limited amounts of the allowance for loan and lease losses, subject to new 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).  The deductions phase in from 2015 through 2019. 

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 rules also place restrictions on the payment of capital distributions, including dividends, and certain discretionary bonus payments to executive officers if the company 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.  The capital conservation buffer phases in starting on January 1, 2016, at .625% and is currently 1.875%. 

In September 2017, the Federal Reserve Board, along with other bank regulatory agencies, proposed amendments to their capital requirements to simplify certain aspects of the capital rules for community banks, including CFBank, in an attempt to reduce the regulatory burden for smaller financial institutions.  Because the amendments were proposed with a request for comments and have not been finalized, we do not yet know what effect the final rules will have on CFBank and its regulatory capital calculations.  In November 2017, the federal bank regulatory agencies extended for community banks the existing capital requirements for certain items that were scheduled to change effective January 1, 2018, in light of the simplification amendments being considered.

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, 2017.

Because the Holding Company’s total consolidated assets are less than $1 billion, the Holding Company 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.

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 deposit insurance fund, 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 Deposit Insurance Fund (“DIF”).  Pursuant to the Dodd-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

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minimum DRR to 1.35% from the former statutory minimum of 1.15%.  Although the FDIC’s new 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 reaches 1.35%.  The rules also provide assessment credits to banks with assets of less than $1 billion for the portion of their assessments that contribute to the increase of the DRR to 1.35%.  The 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.

In addition, all FDIC-insured institutions are required to pay assessments to fund interest payments on bonds issued by the Financing Corporation, which was established by the government to recapitalize a predecessor to the DIF. These assessments will continue until the Financing Corporation bonds mature in 2019.

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 thegreaterof 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.  

The ability of the Holding Company to pay dividends on its common stock is generally dependent upon the receipt of dividends and other distributions from CFBank.  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 requirements, 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, and the Holding Company must also be in compliance, and not in default, under all applicable covenants and requirements imposed by third-party lenders to the Holding company.See Note 2-Regulatory Matters and Note 19-Regulatory Capital Matters to the Consolidated Financial Statements included in our 2017 Annual Report for additional information.

Federal income tax laws provided 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 total $473 at year-end 2017. 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 Community Reinvestment Act and the member’s record of lending to first-time home buyers.

Community Reinvestment Act

The Community Reinvestment Act 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 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.

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Consumer Protection Laws and Regulations

Banks are subject to regular examination to ensure compliance with federal consumer 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.

Patriot Act

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.

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

In June 2010, the Federal Reserve Board, the OCC and the FDIC issued joint interagency guidance on incentive compensation policies (the “Joint Guidance”) 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. This principles-based 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.

In 2011, federal banking regulatory agencies jointly issued proposed rules on incentive-based compensation arrangements under applicable provisions of the Dodd-Frank Act (the “First Proposed Joint Rules”).  The First Proposed Joint Rules generally would have applied to financial institutions with $1.0 billion or more in assets that maintain incentive-based compensation arrangements for certain covered employees.

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In May 2016, the federal bank regulatory agencies approved a second joint notice of proposed rules (the “Second Proposed Joint Rules”) designed to prohibit incentive-based compensation arrangements that encourage inappropriate risks at financial institutions.  The Second Proposed Joint Rules would apply to covered financial institutions with total assets of $1 billion or more. The requirements of the Second Proposed Joint Rules would differ for each of three categories of financial institutions:

· Level 1 consists of institutions with assets of $250 billion or more;

· Level 2 consists of institutions with assets of at least $50 billion and less than $250 billion; and

· Level 3 consists of institutions with assets of at least $1 billion and less than $50 billion.

Some of the requirements would apply only to Level 1 and Level 2 institutions. For all covered institutions, however, the Second Proposed Joint Rules would (A) prohibit incentive-based compensation arrangements that are “excessive” or “could lead to material financial loss; (B) require incentive-based compensation that is consistent with a balance of risk and reward, effective management and control of risk, and effective governance; and (C) require board oversight, recordkeeping and disclosure to the appropriate regulatory agency.  So long as CFBank’s total assets are less than $1 billion, CFBank would not be subject to the express requirements of the Second Proposed Joint Rules.  However, the potential application to CFBank cannot be fully determined until final rules have been adopted.

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.

Federal and State Taxation

Federal TaxationGeneral.Wereport 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, 2017 that no valuation allowance was required against the net deferred tax asset.On December 22, 2017, the “Tax Cuts and Jobs Act” was enacted into law reducing the federal corporate tax rate to 21%, effective January 1, 2018.  The Company conducted a revaluation of its existing deferred tax asset (DTA) to reflect the impact of the new tax rates, which resulted in the Company recording an additional tax expense in the fourth quarter of 2017 in the amount of $979,000.

In 2012, a recapitalization program through the sale of $22.5 million 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 2017, the Company had net operating loss carryforwards of $23.1 million, which expire at various dates from 2024 to 2033. As a result of the ownership change, the Company's ability to utilize carryforwards that arose before the 2012 stock offering closed is limited to $163,000 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 2017.  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 14 to the Consolidated Financial Statements included in our 2017 Annual Report to Stockholders, included as Exhibit 13.1 to this Form 10-K, for additional information.

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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 FITis 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.CFBankonline.com.  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.

Item 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 thisForm 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.

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, money supply and other factors beyond our control can adversely affect our asset quality, deposit levels and loan demand and, therefore, our earnings and our capital.  The election of a new United States President in 2016 has resulted in substantial changes in economic and political conditions for the United States and the rest of the world.  Economic turmoil in Europe and Asia and changes in oil production in the Middle East affect the economy and stock prices in the United States, which can affect our earnings and capital and 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 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, 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; Columbiana County, and contiguous counties through our officesin Wellsville and Calcutta, Ohio.   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.

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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, 2014, our total net loans have grown by $200.5 million, or 94.2%, and our total assets have grown by $225.7 million, or 88.2%.  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.

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.  The lingering nature of the decline in the national economy and 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.

We may make, or be required to make, further increases in our provision for loan losses and to charge off additional loans in the future, which could adversely affect our results of operations.

As a result of changes in balances and composition of the loan portfolio, changes in economic and market conditions that occur from time to time and other factors specific to a borrower’s circumstances, the level of nonperforming assets will fluctuate.  If housing and real estate markets resume decline, we may experience increased delinquencies and credit losses.  An increase in our nonperforming assets, credit losses or our provision for loan losses would adversely affect 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.

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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 principal source of funds to support its operations, pay dividends on its common shares and service its debt is dividends from CFBank.  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.  Under these laws and regulations, the amount of dividends that may be paid by CFBank in any calendar year is generally limited to the current year’s net profits, combined with the retained net profits of the preceding two years.  In addition, the FRB has issued policy statements that provide that insured banks and bank and savings holding companies should generally only pay dividends out of current operating earnings.  Thus, 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.

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

The Deposit Insurance Fund (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.

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 volumes and refinancing 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.

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.

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

The financial services industry is extensively regulated.  We are subject to extensive state and federal regulation, supervision and legislation that govern almost all aspects of our operations.  These laws and regulations are primarily intended for the protection of consumers, depositors, borrowers and the deposit insurance fund, not to benefit our shareholders.  Changes to laws and regulations or other actions by regulatory agencies may negatively impact us, possibly limiting the services we provide, increasing the ability of non-banks to compete with us or requiring us to change the way we operate.  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.

In light of conditions in the global financial markets and the global economy that occurred in the last decade, regulators increased their focus on the regulation of the financial services industry.  In the last several years, Congress and the federal bank regulators have acted on an unprecedented scale in responding to the stresses experienced in the global financial markets.  Some of the laws enacted by Congress and regulations promulgated by federal bank regulators subject us and other financial institutions to additional restrictions, oversight and costs that may have an adverse impact on our business and results of operations.  In addition to laws, regulations and supervisory and enforcement actions directed at the operations of banks, proposals to reform the housing finance market contemplate winding down Fannie Mae and Freddie Mac, which could negatively affect our sales of loans.

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 implementation of the Basel III Capital Rules result in 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 will be phased in over time, becoming fully effective on January 1, 2019, and will consist of an additional amount of common equity equal to 2.5% of risk-weighted assets.  The Basel III Capital Rules revised 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 will be fully phased in by January 1, 2019.  Although the implementation of Basel III, once fully phased in, is not expected to have a material impact on our capital ratios, any future changes to capital requirements could have such an effect.

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, Summit, and ColumbianaCounties, Ohio, and make loans generally throughout Ohio.  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 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.

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. 

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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 50,000,000 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.

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 may 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.

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.

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 our taxes could have a material adverse effect on our results of operations.  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.

On December 22, 2017, H.R.1, formally known as the "Tax Cuts and Jobs Act," was enacted into law.  This new tax legislation, among other changes, limits the amount of state, federal and local taxes that taxpayers are permitted to deduct on their individual tax returns and eliminates other deductions in their entirety.  Such limits and eliminations could result in customer defaults on loans we have made and decrease the value of mortgage-backed securities in which we have invested.

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 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.

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We are exposed to cyber-security risks, including hacking and identity theft.

We rely heavily on communications and information systems to conduct our business. A failure, interruption or breach in security of these systems could result in disruptions to our accounting, deposit, loan and other systems, and could adversely affect our customer relationships. While we have implemented policies and procedures designed to prevent or limit the effect of these possible events, there can be no assurance that any such failure, interruption or security breach will not occur or, if any does occur, that it can be sufficiently remediated. 

There have been increasing efforts on the part of third parties, including through cyber attacks, to breach data security at financial institutions or with respect to financial transactions. There have been several recent instances involving financial services and consumer-based companies reporting the unauthorized disclosure of client or customer information or the destruction or theft of corporate data, by both private individuals and foreign governments.  In addition, because the techniques used to cause such security breaches change frequently, often are not recognized until launched against a target and may originate from less regulated and remote areas around the world, we may be unable to proactively address these techniques or to implement adequate preventative measures.

Cyber threats are rapidly evolving and we may not be able to anticipate or prevent all such attacks.  We may incur increasing costs in an effort to minimize these risks or in the investigation of such cyber-attacks or related to the protection of our customers from identity theft as a result of such attacks.  Nevertheless, the occurrence of any failure, interruption or security breach of our systems, or of our third-party service providers, particularly if widespread or resulting in financial losses to customers, could also seriously damage our reputation, result in a loss of customer business, subject it to additional regulatory scrutiny, or expose it to civil litigation and financial liability.

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.

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.

Although publicly traded, our Common Stock has substantially 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 substantially 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 fluctuate in the future, and this volatility may be unrelated to our performance. General market price declines or overall market swings in the future could adversely affect the price of our common stock, and the current market price may not be indicative of future market prices.

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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.

Item 1B.  Unresolved Staff Comments

Not Applicable

Item 2.Properties.

We conduct our business through four branch offices located in Franklin, Hamilton, Summit and Columbiana Counties, Ohio, and anagencyoffice located in Cuyahoga County, Ohio.  The net book value of the Company’s properties totaled $3.1 million at December 31, 2017.  CFBank also leases its branch offices in Fairlawn, Ohio and Glendale, Ohio and its agency office located in Woodmere, Ohio in Cuyahoga County.  See Note 8 to the Consolidated Financial Statements included in our 2017 Annual Report for further discussion.

Locations

Administrative Office (owned facility):

7000 N. High Street

Worthington, Ohio 43085

Branch Offices:

Worthington Branch (owned facility)

7000 N. High Street

Worthington, Ohio 43085

Glendale Branch (leased facility)

38 Village Square

Glendale, Ohio 44122

Fairlawn Branch (leased facility)

3009 Smith Road, Suite 100

Fairlawn, Ohio 44333

Wellsville Branch (owned facility)

601 Main Street

Wellsville, Ohio 43968

Calcutta Branch (owned facility)

49028 Foulks Drive

Calcutta, Ohio 43920

Agency Office (leased facility):

28879 Chagrin Blvd.

Woodmere, Ohio 44122

37

Item 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.

Item 4.Mine Safety Disclosures.

Not Applicable

PART II

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

(a) None

(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, 2017. 

Period	Total number of common shares purchased (1)	Average price paid per common share			Total number of common shares purchased as part of publicly announced plans or programs		Maximum number of common shares that may yet be purchased under the plans or programs (2)
October 1 through October 31, 2017	-		-		-	459,426
November 1 through November 30, 2017	7,126	$	2.38	(3)	7,126	-
December 1 through December 31, 2017	12,226		2.62	(4)	12,226	-
Total	19,352	$	2.53		19,352

⁽¹⁾ Represents shares of common stock surrendered by officers and employees of the Company for payment of taxes upon vesting of restricted stock granted under the 2009 Equity Compensation Plan.

⁽²⁾ In May 2016, the Company announced that its Board of Directors adopted a stock repurchase program pursuant to which the Company was authorized to repurchase up to 3% of the Company’s common stock (480,726 shares).  The stock repurchase program expired in November 2017.  Pursuant to the stock repurchase program, the Company purchased a total of 21,300 shares of common stock.

⁽³⁾ Represents the closing price of the Company’s common stock on November 3, 2017, which was the vesting date of the restricted stock surrendered for payment of taxes.

⁽⁴⁾ Represents the closing price of the Company’s common stock on December 21, 2017, which was the vesting date of the restricted stock surrendered for payment of taxes.

The market information required by Item 201(a), the stockholders information required by Item 201(b) and the dividend information required by Item 201(c) of Regulation S-K are incorporated herein by reference from our 2017 Annual Report; the information appears under the caption “Management’s Discussion and Analysis of Financial Condition and Results of Operations−Market Prices and Dividends Declared.”

38

Item 6.Selected Financial Data.

Information required by Item 301 of Regulation S-K is incorporated herein by reference from our 2017 Annual Report; the information appears under the caption “Selected Financial and Other Data” therein.

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

Information required by Item 303 of Regulation S-K is incorporated herein by reference from our2017 Annual Report; the information appears under the caption “Management’s Discussion and Analysis of Financial Condition and Results of Operations”therein.

Item  7A.Quantitative and Qualitative Disclosures About Market Risk.

Information required by Item 305 of Regulation S-K is incorporated herein by reference from our 2017 Annual Report; the information appears under the caption “Management’s Discussion and Analysis of Financial Condition and Results of Operations−Quantitative and Qualitative Disclosures about Market Risks” therein.

Item  8.Financial Statements and Supplementary Data.

The consolidated financial statements required by Article 8 of Regulation S-X are incorporated by reference to our 2017 Annual Report; the consolidated financial statements appear under the caption “Financial Statements”  therein and include the following: 

Management’s Report on Internal Control over Financial Reporting

Report of Independent Registered Public Accounting Firm

Consolidated Balance Sheets

Consolidated Statements of Income

Consolidated Statements of Comprehensive Income

Consolidated Statements of Changes in Stockholders’ Equity

Consolidated Statements of Cash Flows

Notes to Consolidated Financial Statements

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

None

Item  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, 2017, 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, 2017were effective.

Management’s Report on Internal Control Over Financial Reporting.  Information required by Item 308 of Regulation S-K is incorporated herein by reference from our 2017 Annual Report;the information appears under the caption “Management’s Report on Internal Control over Financial Reporting”  therein.

Changes in internal control over financial reporting.  We made 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 2017that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Item  9B.Other Information.

None

39

PART III

Item  10.  Directors,Executive Officers and Corporate Governance.

Directors.  Information required by Item 401 of Regulation S-K with respect to our directorsis incorporated herein by reference from our definitive Proxy Statement for our2018 Annual Meeting of Stockholders to be filed with the Commission pursuant to SEC Regulation 14A (the “2018 Proxy Statement”), under the caption “PROPOSAL 1.  ELECTION OF DIRECTORS.”

Executive Officers of the Registrant.  Provided below is information regarding our executive officers:

Name	Age at December 31, 2017	Position held with the Holding Company and/or Subsidiaries
Robert E. Hoeweler	70	Chairman of the Holding Company and CFBank
Timothy T. O’Dell	64	President and Chief Executive Officer of the Holding Company and CFBank
John W. Helmsdoerfer	59	Chief Financial Officer of the Holding Company and CFBank; Treasurer of the Holding Company

Mr. Hoeweler is the Chairman of the Board of CFBank and the Holding Company.  Mr. Hoeweler is the Chief Executive Officer of a diverse group of companies owned by the Hoeweler family, including manufacturing, communications, distribution, business services and venture capital entities.  He serves on the boards of a major waste management company and large commercial bakery.  He previously has been the Chairman of two family led businesses in financial services, a midsized community bank and a major payment processing services company.

Mr. O’Dell is the President and CEO and Director of CFBank and the Holding Company.  Prior to joining CFBank in 2012, Mr. O’Dell owned and operated a consulting company specializing in providing advisory services to a number of privately held enterprises in construction, health care, real estate and professional services.  Mr. O’Dell previously spent 22 years at Fifth Third Bank, and was a senior executive with Fifth Third’s Central Ohio operations for 12 of those years, concluding his tenure serving as President and Chief Executive Officer. At Fifth Third’s Central Ohio Affiliate, Mr. O’Dell also served as Executive Vice President and senior lender and managed its commercial banking and residential, commercial real estate divisions.  Previously he managed the Asset Based Lending Division for Fifth Third Bank engaged in financing growth companies and acquisition financing.  During his tenure, Fifth Third’s Central Ohio division grew by $4 billion in deposits and $5 billion in loans from organic growth and through strategic acquisitions.  Mr. O’Dell served on the board of the Columbus Chamber of Commerce and The Ohio State University Medical Center, and he was a founding investor in the Ohio TechAngel Venture Fund.  Mr. O'Dell holds a B.B.A. from Marshall University.

Mr. Helmsdoerferhas been the CFO of the Holding Company and CFBank since March 2013.  As a CPA with over 35 years of financial experience, which includes Big Four public accounting and 25 years as a CFO, he has a diverse finance and operations background in addition to his financial services background.  Prior to joining CFBank, Mr. Helmsdoerfer spent 18 years with Fifth Third Bank where he held positions as both a CFO and Regional CFO for the Central Ohio affiliate and region.   He also served as CFO for Nationwide Bank and Wilmington Savings Bank during his career.   Mr. Helmsdoerfer holds a B.S.B.A degree from Miami University where he graduated cum laude. 

Compliance with Section 16(a) of the Exchange Act.  Information required by Item 405 of Regulation S-K is incorporated herein by reference from our2018 ProxyStatement, under the caption “BENEFICIAL OWNERSHIP OF COMPANY COMMON STOCK– SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE.”Copies of Forms 3, 4 and 5 filed under section 16(a) of the Exchange Act are available on our website, www.CFBankonline.com,  under the tab “Investor Relations – Section 16 Filings.”

Code of Ethics.  We have adopted a Code of Ethics and Business Conduct, whichapplies to all employees, includingourprincipal 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 Conductis available on our website, www.CFBankonline.com 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. 

40

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 2018 ProxyStatement, under the captions  “CORPORATE GOVERNANCE” and “AUDIT COMMITTEE MATTERS.”

Item  11.Executive Compensation.

Information required by Item 402 of Regulation S-K is incorporated herein by reference from our 2018Proxy Statement, under the captions “COMPENSATION OF EXECUTIVE OFFICERS” and “2017 COMPENSATION OF DIRECTORS.”

Item  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-Kis incorporated hereinby reference from our2018 Proxy Statement under the caption “BENEFICIAL OWNERSHIP OF COMPANY COMMON STOCK.”  

Related Stockholder Matters – Equity Compensation Plan Information.  Information required by Item 201(d) of Regulation S-K is incorporated herein by reference from our 2018 Proxy Statement, under the caption “COMPENSATION OF EXECUTIVE OFFICERS-Equity  Compensation  Plan  Information,” and from our 2017 Annual Report, where the information appears under the caption “Note 16 – Stock-Based Compensation” therein. 

Item 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 2018 Proxy Statement, under the caption“CORPORATEGOVERNANCE–Certain Relationships and Related Transactions”  and “CORPORATE GOVERNANCE–Director  Independence.”  

Item 14.Principal Accounting Fees and Services.

Information required by this Item 14 is incorporated by reference from our2018Proxy Statement, under the caption “AUDIT COMMITTEE MATTERS.”

41

PART IV

Item  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 October28, 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 June30, 2009, filed with the commission on August14, 2009 (File No. 0-25045))
3.4	Amendment to Certificate of Incorporation of the registrant (incorporated by reference to Exhibit 3.5 to the registrant’s Quarterly Report on Form 10-Q for the fiscal quarter ended September30, 2011, filed with the Commission on November10, 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 May4, 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 May7, 2014 and filed with the Commission on May13, 2014. (File No. 0-25045))
3.7	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 December31, 2007, filed with the Commission on March27, 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 September23, 1998)
4.2	Form of Certificate for the Series B Preferred Stock of Central Federal Corporation (incorporated by reference to Exhibit 4.1 to the registrant’s Current Report on Form 8-K dated May7, 2014 and filed with the Commission on May13, 2014 (File No. 0-25045))
4.3	Form of Warrant for the purchase of common stock of Central Federal Corporation (incorporated by reference to Exhibit 4.2 to the registrant’s Current Report on Form 8-K dated May7, 2014 and filed with the Commission on May13, 2014 (File No. 0-25045))
4.4	Form of Registration Rights Agreement (incorporated by reference to Exhibit 4.3 to the registrant’s Current Report on Form 8-K dated May7, 2014 and filed with the Commission on May13, 2014 (File No. 0-25045))
4.5	Agreement to furnish instruments defining rights of holders of long-term debt
10.1*	1999 Stock-Based Incentive Plan (as Amended and Restated) (incorporated by reference to Appendix A to the registrant’s Definitive Proxy Statement filed with the Commission on March21, 2000)
10.2*	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 March31, 2009)
10.3*	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 April11, 2013)
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 December31, 2012, filed with the Commission on April1, 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 December31, 2012, filed with the Commission on April1, 2013 (File No. 0-25045)
10.6*	Form of Employee Restricted Stock Award Agreement (incorporated by reference to Exhibit 10.3 to the registrant’s Current Report on Form 8-K filed with the Commission on November3, 2015 (File No. 0-25045))
10.7*	Form of Director Restricted Stock Award Agreement (incorporated by reference to Exhibit 10.4 to the registrant’s Current Report on Form 8-K filed with the Commission on November3, 2015 (File No. 0-25045))

42

10.8*	Employment Agreement, dated August15, 2016, 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 August16, 2016 (File No. 0-25045))
10.9*	Amendment to Employment Agreement, dated April 30, 2017, by and among Central Federal Corporation, CFBank and Timothy T. O’Dell (incorporated by reference to Exhibit 10.1 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))
10.10*	Employment Agreement, dated August15, 2016, by and among Central Federal Corporation, CFBank and John W. Helmsdoerfer (incorporated by reference to Exhibit 10.2 to the registrant’s Current Report on Form 8-K filed with the Commission on August16, 2016 (File No. 0-25045))
10.11*	Amendment to Employment Agreement, dated April 30, 2017, by and among Central Federal Corporation, CFBank and John W. Helmsdoerfer (incorporated by reference to Exhibit 10.2 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))
10.12*	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 August16, 2016 (File No. 0-25045))
11.1	Statement Re:  Computation of Per Share Earnings
13.1	Annual Report to Security Holders for the Fiscal Year Ended December31, 2017
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 Chief Financial Officer
32.1	Section 1350 Certifications of the Chief Executive Officer and Chief Financial Officer
101.1	Interactive Data File (XBRL)

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

Item 16.  Form 10-K Summary

Not Applicable

43

SIGNATURES

Pursuant to the requirements ofSection 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

CENTRAL FEDERAL CORPORATION

/s/ Timothy T. O’Dell

Timothy T. O’Dell

President and Chief Executive Officer

Date: March 15, 2018

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 15, 2018
Robert E. Hoeweler
/s/ Timothy T. O’Dell	Director, President and Chief Executive Officer	March 15, 2018
Timothy T. O’Dell
/s/ Thomas P. Ash	Director	March 15, 2018
Thomas P. Ash
/s/ James H. Frauenberg II	Director	March 15, 2018
James H. Frauenberg II
/s/ Edward W. Cochran	Director	March 15, 2018
Edward W. Cochran
/s/ Robert H. Milbourne	Director	March 15, 2018
Robert H. Milbourne

44

EX-4.5

Exhibit 4.5

March 15, 2018

Securities and Exchange Commission

100 F Street, NE

Washington, D.C. 20549

Re: Central Federal Corporation —Annual Report on Form 10-K for the fiscal year ended December 31, 2017.

Ladies and Gentlemen:

Central Federal Corporation, a Delaware  corporation,is today filing with the Securities and Exchange Commission (the "SEC") its Annual Report on Form 10-K of Central Federal Corporation for the fiscal year ended December 31, 2017.

Pursuant to the instructions relating to the Exhibits in Item 601(b)(4)(iii) of Regulation S-K, Central Federal Corporation hereby agrees to furnish to the SEC, upon request, copies of instrumentsdefining the rights of holders of long-term debt and of the long-term debt of its consolidated subsidiaries, which are not being filed as exhibits to Central Federal Corporation’s 2017 Annual Report on Form 10-K. None of such long-term debt exceeds 10% of the total assets of Central Federal Corporation and its subsidiaries on a consolidatedbasis.

Very truly yours,

CENTRAL FEDERAL CORPORATION

/s/Timothy T. O’Dell

Timothy T. O’Dell

President and Chief Executive Officer

EX-11.1

Exhibit 11.1

Computation of Per Share Earnings

The information regarding Computation of Per Share Earnings is incorporated by reference from the Company’s 2017 Annual Report to Stockholders distributed to stockholders and furnished to the Commission under Rules 14a-3(b) and (c) of the Exchange Act; the computation appears under the caption “Note 23 - Earnings (Loss) Per Common Share” therein.

EX-13.1

Exhibit 13.1

Annual Report to Security Holders For the Fiscal Year ended December 31, 2017

TABLE OF CONTENTS

	Page
MESSAGE TO STOCKHOLDERS
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Selected Financial and Other Data	1
Forward-Looking Statements	3
Business Overview	4
Regulatory Matters	4
Dividend Restrictions	5
Financial Condition	5
Comparison of Results of Operations for 2017 and 2016	9
Comparison of Results of Operations for 2016 and 2015	12
Quantitative and Qualitative Disclosures about Market Risk	15
Liquidity and Capital Resources	16
Impact of Inflation	18
Critical Accounting Policies	18
Market Prices and Dividends Declared	20
FINANCIAL STATEMENTS
Management’s Report on Internal Control Over Financial Reporting	1
Report of Independent Registered Public Accounting Firm	2
Consolidated Financial Statements	3
Notes to Consolidated Financial Statements	8
BOARD OF DIRECTORS AND OFFICERS	48
CFBANK LOCATIONS	48
CORPORATE DATA	49
Annual Report	49
Annual Meeting	49
Shareholder Services	49

Dear Shareholders,

Your CFBank continued to build upon our solid base during 2017, generating strong loan and deposit growth as well as expanding our geographic footprint.  We added Cincinnati as our 4th major metro Ohio market presence which also includes Columbus, Cleveland, and Akron- Canton, to complement our Columbiana County Region.  Added growth opportunities from our expanded footprint, coupled with our expanding Commercial Banking and Mortgage Lending Pipelines, causes us to remain very bullish about our growth and business prospects for 2018!

Performance highlights for this recent year include:

· Earnings per share (as adjusted to exclude the additional tax expense related to the Tax Cuts and Jobs Act, as described in our Annual Report to Shareholders), would have been $0.09 per share vs. $0.05 per share the previous year.

· Pretax Earnings growth of 42% for 2017.

· Loan growth exceeded 17% for 2017, while Credit Quality remains strong.

· Our outstanding shares of Series B Preferred Stock were converted into shares of common stock effective October 6, 2017, which results in the elimination of the annualized $750,000 preferred dividend going forward beginning with the 4th quarter of 2017.

· CFBank expanded our footprint to Cincinnati with the opening of a full service banking office in the Glendale area.

· CFBank started the process of expanding our Mortgage Lending Platform with the objective of building a National Mortgage Lending business and franchise.

During 2018, our leadership team remains committed to executing upon our strategic growth and expansion plans which we laid out up front. We have remained true to these fundamentals and they have served us well. Earnings growth and expansion is grounded in successful organic growth, driven through an effective sales culture and by recruiting top business development talent. Additionally, we have expanded our product offerings for business customers to include equipment leasing, interest rate swaps, expanded SBA lending expertise, along with upgrading our cash management platform with enhanced product offerings. We also expect our mortgage lending division to contribute increased fee income for 2018.

With the backdrop of a strengthening economic environment, we believe that the competitive landscape in our markets presents favorable opportunities for us. The vast majority of our customers are experiencing revenue growth and improving earnings in their businesses.  Several of our smaller bank competitors in Columbus and Cleveland have been acquired opening to us increased business opportunities. Additionally, the larger regional bank competitors continue to push up stream focusing on large business loans. This also serves to widen our niche and business opportunities. It is heartening to us when we receive feedback coming from both prospects and customers that CFBank is uniquely equipped to service the banking needs of successful entrepreneurs and closely held businesses.

We remain diligently focused on driving increased Shareholder and Franchise value. As we enter 2018, we are bullish about our opportunities and business prospects for taking our earnings and performance to the next level.

On behalf of our CFBank Team, and Board of Directors, we thank you our Shareholders for your continued support!

/s/ Timothy T. O’Dell

Timothy T. O’Dell

President and Chief Executive Officer

/s/ Robert E. Hoeweler

Robert E. Hoeweler

Chairman of the Board

Management’s Discussion and Analysis of Financial Condition and Results of Operations

SELECTED FINANCIAL AND OTHER DATA

The information in the following tables 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,
	2017		2016		2015		2014		2013
		(Dollars in thousands)
Selected Financial Condition Data:
Total assets	$	481,425	$	436,112	$	351,293	$	315,588	$	255,748
Cash and cash equivalents		45,498		57,941		25,895		28,207		19,160
Securities available for sale		11,773		14,058		9,368		10,445		9,672
Loans held for sale		1,124		2,812		889		3,505		3,285
Loans and Leases, net (1)		406,406		346,125		297,064		257,085		207,141
Allowance for loan and lease loss (ALLL)		6,970		6,925		6,620		6,316		5,729
Nonperforming assets		470		908		3,061		3,184		7,374
Foreclosed assets		-		204		1,636		1,636		1,636
Deposits		419,028		375,364		290,467		258,315		208,309
FHLB advances		13,500		13,500		14,500		14,500		10,000
Other secured borrowings		-		-		-		-		6,526
Subordinated debentures		5,155		5,155		5,155		5,155		5,155
Total stockholders' equity		40,261		39,292		38,312		34,509		22,864

		At December 31,
	2017		2016		2015		2014		2013
		(Dollars in thousands)
Summary of Operations:
Total interest income	$	17,207	$	14,409	$	12,405	$	10,611	$	7,500
Total interest expense		3,534		3,096		2,608		1,889		2,113
Net interest income		13,673		11,313		9,797		8,722		5,387
Provision for loan and lease losses		-		230		250		278		496
Net interest income after provision for loan and lease losses		13,673		11,083		9,547		8,444		4,891
Noninterest income:
Net loss on sale of securities		-		-		(12)		-		-
Other		743		1,177		1,360		1,492		1,893
Total noninterest income		743		1,177		1,348		1,492		1,893
Noninterest expense		10,955		9,823		9,611		9,457		7,702
Income (loss) before income taxes		3,461		2,437		1,284		479		(918)
Income tax expense (benefit)		2,115		810		(3,193)		-		-
Net income (loss)	$	1,346	$	1,627	$	4,477	$	479	$	(918)
Dividends on Series B preferred stock and accretion of discount		(666)		(857)		(857)		(421)		-
Net income (loss) available to common stockholders	$	680	$	770	$	3,620	$	58	$	(918)

1

Management’s Discussion and Analysis of Financial Condition and Results of Operations

		At December 31,
	2017		2016		2015		2014		2013
		(Dollars in thousands)
Selected Financial Ratios and Other Data:
Performance Ratios (2)
Return on average assets		0.31%		0.43%		1.36%		0.17%		(0.39%)
Return on average equity		3.36%		4.19%		12.84%		1.67%		(4.04%)
Average yield on interest-earning assets (3)		4.25%		4.09%		4.06%		4.03%		3.51%
Average rate paid on interest-bearing liabilities		1.14%		1.06%		1.00%		0.85%		1.12%
Average interest rate spread (4)		3.11%		3.03%		3.06%		3.18%		2.39%
Net interest margin, fully taxable equivalent (5)		3.38%		3.21%		3.21%		3.31%		2.52%
Average interest-earning assets to interest bearing liabilities		130.09%		121.04%		117.42%		119.19%		113.05%
Efficiency ratio (6)		75.99%		78.65%		86.14%		92.59%		105.11%
Noninterest expenses to average assets		2.54%		2.60%		2.92%		3.31%		3.26%
Common stock dividend payout ratio		n/m		n/m		n/m		n/m		n/m
Capital Ratios: (2)
Equity to total assets at end of period		8.36%		9.01%		10.91%		10.93%		8.94%
Average equity to average assets		9.28%		10.27%		10.60%		10.05%		9.60%
Tangible capital ratio (7)		n/a		n/a		n/a		11.03%		9.34%
Tier 1 (core) capital to adjusted total assets (Leverage ratio) (7)		9.37%		9.66%		11.12%		11.03%		9.34%
Total capital to risk weighted assets (7)		11.91%		12.46%		13.67%		14.18%		12.08%
Tier 1 (core) capital to risk weighted assets (7)		10.65%		11.20%		12.40%		12.92%		10.81%
Common equity tier 1 capital to risk weighted assets (7)		10.65%		11.20%		12.40%		n/a		n/a
Asset Quality Ratios: (2)
Nonperforming loans to total loans (8)		0.11%		0.20%		0.47%		0.59%		2.70%
Nonperforming assets to total assets (9)		0.10%		0.21%		0.87%		1.01%		2.88%
Allowance for loan and lease losses to total loans		1.69%		1.96%		2.18%		2.39%		2.69%
Allowance for loan and lease losses to nonperforming loans (8)		1482.98%		983.66%		464.56%		408.01%		99.85%
Net charge-offs (recoveries) to average loans		(0.01%)		(0.02%)		(0.02%)		(0.13%)		0.00%
Per Share Data: (10)
Basic earnings (loss) per common share	$	0.04	$	0.05	$	0.23	$	0.00	$	(0.06)
Diluted earnings (loss) per common share		0.04		0.05		0.20		0.00		(0.06)
Dividends declared per common share		-		-		-		-		-
Tangible book value per common share at end of period		1.72		1.67		1.64		1.42		1.44

(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 of 34%.
(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.
	n/m - not meaningful

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Management’s Discussion and Analysis of Financial Condition and Results of Operations

FORWARD 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 share of common stock, capital structure and other financial items; (2) plans and objectives of the management or Boards of Directors of Central Federal Corporation (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.  The following, among other factors, could cause such differences:

· 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;

· changes in interest rates that may reduce net interest margin and impact funding sources;

· the possibility that our allowance for loan losses may not be adequate to cover and/or we will need to make increased provisions for loan andlease losses;

· our ability to maintain sufficient liquidity to continue to fund our operations;

· our ability to effectively manage our growth;

· changes in market rates and prices, including real estate values, which may adversely impact the value of financial products including securities, loans and deposits;

· the possibility of other-than-temporary impairment of securities held in our securities portfolio;

· results of examinations of the Holding Company and CFBank by the regulators, including the possibility that the regulators may, among other things, require CFBank to increase its allowance for loan and lease losses or write-down assets;

· our ability to continue to meet regulatory requirements and guidelinesto which we are subject;

· our ability to raise additional capital if and when necessary in the future;

· changes in tax laws, rules and regulations;

· increases in deposit insurance rates or premiums;

· legislative and regulatory changes which may increase compliance costs and burdens;

· unexpected losses of key management;

· various monetary and fiscal policies and regulations, including those determined by the Board of Governors of the Federal Reserve System (the “FRB”), the Federal Deposit Insurance Corporation (the “FDIC”) and the Office of the Comptroller of the Currency (the “OCC”);

· further increases in competition from other local and regional commercial banks, savings banks, credit unions and other non-bank financial institutions;

· efforts to minimize cyber-security risks may increase our costs, and a failure, interruption or breach of security of our systems could disrupt our business and adversely affect our reputation and customer relationships;

· technological factors which may affect our operations, pricing, products and services;

· unanticipated litigation, claims or assessments; and

· Management's ability to manage these and other risks.

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Management’s Discussion and Analysis of Financial Condition and Results of Operations

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.  The Holding Company, including its subsidiaries (together referred to as the “Company”) believes it has 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 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.

Our filings with the Securities and Exchange Commission (the “SEC”) detail other risks, all of which are difficult to predict and many of which are beyond our control.

Business Overview

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

CFBank, with the opening of its Glendale branch in the Cincinnati market during the third quarter of 2017, has a presence in four major metro Ohio markets – Columbus, Cleveland, Cincinnati and Akron, as well as its two locations in Columbiana County, Ohio.  CFBank provides personalized Business Banking products and services including commercial loans and leases, commercial and residential real estate loans and treasury management depository services.  As a full service commercial bank, our business, along with our products and services, is focused on serving the banking and financial needs of closely held businesses.  Our business model emphasizes personalized service, customer access to decision makers, quick execution, and the convenience of online internet banking, mobile banking, remote deposit and corporate treasury management.  In addition, CFBank provides residential lending and full service retail banking services and products.  Most of our deposits and loans come from our market area.  Because of CFBank’s concentration of business activities in Ohio, the Company’s financial condition and results of operations depend in large part upon economic conditions in Ohio.

Our principal market area for loans and deposits includes the following Ohio counties: Franklin County through our office in Worthington, Ohio; Summit County through our office in Fairlawn, Ohio; Hamilton County through our office in Glendale, Ohio; Columbiana County through our offices in Calcutta and Wellsville, Ohio; and Cuyahoga County, through our agency office in Woodmere, Ohio.  We originate commercial and residential real estate loans and business loans primarily throughout Ohio.

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, 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.

Regulatory Matters

From May 2011 until 2014, the Holding Company and CFBank each were subject to Cease and Desist Orders (the “Holding Company Order” and the “CFBank Order”, respectively, and collectively, the “Orders”) with the FRB, as successor to the Office of Thrift Supervision (the “OTS”) as the primary regulator of the Holding Company and CFBank. Effective as of January 23, 2014, the OCC released and terminated the CFBank Order based upon the improved capital position of CFBank, among other factors.  On May 15, 2014, the FRB announced the termination of the Holding Company Order, effective as of May 9, 2014.  Following the termination of the Holding Company Order, the Holding Company was required to continue to adhere to certain requirements and restrictions based on commitments made to the FRB in connection with the termination of the Holding Company Order.  These commitments required the Holding Company, among other things, to continue to implement certain actions in accordance with the capital plan previously

4

Management’s Discussion and Analysis of Financial Condition and Results of Operations

submitted to the FRB; not declare or pay dividends on its stock, purchase or redeem its stock, or accept dividends or other capital distributions from CFBank without the prior written approval of the FRB; not incur, increase or guarantee any debt without the prior written consent of the FRB; and provide prior written notice to the FRB with respect to certain changes in directors and senior executive officers.  The foregoing commitments remained in place until January 8, 2016.  See Note 2 to the consolidated financial statements included in this annual report for additional information regarding the Orders.

Although we are no longer subject to the Orders or the regulatory commitments made following the release of the Orders, we remain subject to extensive supervision and regulation by our regulators and it is possible that regulatory compliance expenses could continue to have an adverse impact on us in the future.

Dividend Restrictions

Banking regulations limit the amount of dividends that may be paid without prior approval of regulatory agencies.  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.  Future dividend payments by CFBank to the Holding Company would be based on future earnings and, if necessary, regulatory approval. 

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.

Financial Condition

General.Assets totaled $481.4 million at December 31, 2017 and increased $45.3 million, or 10.4%, from $436.1 million at December 31, 2016.  The increase was primarily due to a $60.3 million increase in net loan balances, partially offset by a $12.4 million decrease in cash and cash equivalents and a $2.3 million decrease in securities available for sale.

Cash and cash equivalents.Cash and cash equivalents totaled $45.5 million at December 31, 2017, and decreased $12.4 million, or 21.5%, from $57.9 million at December 31, 2016.  The decrease in cash and cash equivalents was primarily a result of funding loan growth.

Securities.Securities available for sale totaled $11.8 million at December 31, 2017, and decreased $2.3 million, or 16.3%, compared to $14.1 million at December 31, 2016.  The decrease was primarily due to scheduled maturities and repayments.

Loans and Leases.Net loans and leases totaled $406.4 million at December 31, 2017, and increased $60.3 million, or 17.4%, from $346.1 million at December 31, 2016. The increase was primarily due to a $30.6 million increase in commercial loan balances, a $17.0 million increase in construction loan balances, a $6.6 million increase in commercial real estate loan balances, a $3.0 million increase in single-family residential loan balances, a $1.7 million increase in total consumer loan balances, and a $1.4 million increase in multi-family residential loan balances.  The increases in the aforementioned loan balances were primarily due to increased sales activity and new relationships.

CFBank has participated in a Mortgage Purchase Program with Northpointe Bank (Northpointe), a Michigan banking corporation, since December 2012.  Pursuant to the terms of a participation agreement, CFBank purchases participation interests in loans made by Northpointe related to fully underwritten and pre-sold mortgage loans originated by various prescreened mortgage brokers located throughout the U.S.  The underlying loans are individually (MERS) registered loans which are held until funded by the end investor.  The mortgage loan investors include Fannie Mae and Freddie Mac, and other major financial institutions.  This process on average takes approximately 14 days.  Given the short-term holding period of the underlying loans, common credit risks (such as past due, impairment and TDR, nonperforming, and nonaccrual classification) are substantially reduced.  Therefore, no allowance is allocated by CFBank to these loans.  These loans are 100% risk rated for CFBank capital adequacy purposes.  Under the participation agreement, CFBank agrees to purchase a 95% ownership/participation interest in each of the aforementioned loans, and Northpointe maintains a 5% ownership interest in each loan it participates.  During the twelve months ended December 31, 2017 and December 31, 2016, loan origination activity totaled $677.5 and $824.7 million, respectively, and payoffs for the same period totaled $686.7 and $821.3 million, respectively.  At December 31, 2017 and December 31, 2016, CFBank held $37.7 million and $46.9 million, respectively, of such loans which are included in single-family residential loan totals.

Allowance for loan and  lease losses (ALLL).  The allowance for loan and lease losses totaled $7.0 million at December 31, 2017, and increased $45,000, or 0.6%, from $6.9 million at December 31, 2016.  The increase in the ALLL is due to net recoveries during the twelve months ended December 31, 2017.  The ratio of the ALLL to total loans was 1.69% at December 31, 2017, compared to 1.96% at December 31, 2016.  In addition, the ratio of the ALLL to nonperforming loans improved to 1483.0% at December 31, 2017, compared to 983.7% at December 31, 2016. 

5

Management’s Discussion and Analysis of Financial Condition and Results of Operations

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

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

Individually impaired loans totaled $3.6 million at December 31, 2017, and increased $127,000, or 3.7%, from $3.4 million at December 31, 2016.  The increase was primarily due toone commercial real estate loan in the amount of $831,000 that was modified as a TDR during the second quarter of 2017, partially offset by six commercial loans that paid off totaling $540,000, and other loan repayments.The amount of the ALLL specifically allocated to individually impaired loans totaled $26,000 at December 31, 2017 and $22,000 at December 31, 2016.  The increase 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, decreased $234,000, or 33.2%, and totaled $470,000 at December 31, 2017, compared to $704,000 at December 31, 2016.The ratio of nonperforming loans to total loans was 0.11% at December 31, 2017, compared to 0.20% at December 31, 2016.

The following table presents information regarding the number and balance of nonperforming loans at December 31, 2017 and December 31, 2016.

	December 31, 2017			December 31, 2016
	# of loans	Balance			# of loans	Balance
	(dollars in thousands)
Commercial	1	$	115		3	$	263
Single-family residential real estate	6		253		8		397
Home equity lines of credit	2		102		1		44
Total	9	$	470		12	$	704

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Management’s Discussion and Analysis of Financial Condition and Results of Operations

Nonaccrual loans include some nonperforming loans that were previously modified and identified as TDRs.  TDRs included in nonaccrual loans totaled $115,000 at December 31, 2017 and $144,000 at December 31, 2016.The decrease in TDRs included in nonaccrual loans was primarily due to loan repayments.

Nonaccrual loans at December 31, 2017 and December 31, 2016 do not include $3.3 million and $3.0million, 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 to our consolidated financial statements included in this annual report for additional information regarding impaired loans and nonperforming loans.

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

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

The level of total criticized and classified loans decreased by $1.3 million during the twelve months ended December 31, 2017 due to management’s ongoing efforts to improve credit quality and continued payments by customers.  Loans designated as special mention increased $2.4 million, or 67.2%, and totaled $6.0 million at December 31, 2017, compared to $3.6 million at December 31, 2016.  Loans classified as substandard decreased $3.7 million, or 64.4%, and totaled $2.0 million at December 31, 2017, compared to $5.7 million at December 31, 2016.  No loans were classified as doubtful at December 31, 2017 and December 31, 2016.  See Note 4 to our consolidated financial statements included in this annual report 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 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 $308,000, or 19.8%, and totaled $1.9 million at December 31, 2017, compared to $1.6 million at December 31, 2016.  Past due loans totaled 0.5% of the loan portfolio at December 31, 2017, compared to 0.4% at December 31, 2016.See Note 4 to our consolidated financial statements included in this annual report 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.

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Management’s Discussion and Analysis of Financial Condition and Results of Operations

Unsecured commercial loans may present a higher risk of non-collection than secured commercial loans.  Unsecured commercial loans totaled $8.6 million, or 8.5% of the commercial loan portfolio, at December 31, 2017 and $3.3 million, or 4.6% of the commercial loan portfolio, at December 31, 2016. The unsecured loans are primarily lines of credit to small businesses in CFBank’s market area and are guaranteed by the small business owners.  At December 31, 2017 and December 31, 2016, none of the unsecured loans were 30 days or more delinquent.

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 $31.6 million, or 30.9% of the commercial loan portfolio, at December 31, 2017 compared to $19.9 million, or 27.9%, at December 31, 2016.  Given the recessionary effects of the economy in the past several years, the collateral that secures the home equity lines of credit may have experienced a deterioration in value since the loan was originated, increasing the risk to CFBank. Interest only home equity lines of credit totaled $22.5 million, or 90.0% of total home equity lines of credit, at December 31, 2017 compared to $20.7 million, or 89.6%, at December 31, 2016.

We believe the ALLL is adequate to absorb probable incurred credit losses in the loan portfolio as of December 31, 2017; however, future additions to the allowance may be necessary based on factors including, but not limited to, further 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 and lease 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.  Foreclosed assets totaled $0 at December 31, 2017 compared to $204,000 at December 31, 2016.  Foreclosed assets at December 31, 2016 consisted of one single-family residential property that was transferred into REO at fair value in December 2016.  This property was sold during the second quarter of 2017.  The level of foreclosed assets and charges to foreclosed assets expense may increase 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 $3.5 million at December 31, 2017, andincreased  $104,000, or 3.0%, from $3.4 million at December 31, 2016.  See Note 8 – Premises and Equipment to our consolidated financial statements included in this annual report for additional information.

Deposits.Deposits totaled $419.0 million at December 31, 2017, an increase of $43.7 million, or 11.6%, from $375.4 million at December 31, 2016.  The increase is primarily attributed to a $23.8 million increase in checking account balances, a $9.9 million increase in certificate of deposit account balances, a $9.0 million increase in money market account balances, and a $1.0 million increase in savings account balances.  The majority of the deposit increase was a result of management’s focused sales and marketing efforts to grow core deposits to fund loan growth.  

Noninterest bearing checking account balances totaled $89.6 million at December 31, 2017 and increased $16.8 million, or 23.1%, compared to $72.8 million at December 31, 2016.  The majority of this increase is attributable to our focused sales efforts to grow core deposits and to expand our relationship opportunities with our customers.

CFBank is a participant in the Certificate of Deposit Account Registry Service® (CDARS) and Insured Cash Sweep (ICS) programs offered through Promontory Interfinancial Network. Promontory works with a network of banks to offer products that can provide up to approximately $50 million of FDIC insurance coverage through these innovative products.  Both CDARS and ICS balances are considered brokered deposits by regulation.  Brokered deposits, including CDARS and ICS balances, totaled $46.9 million at December 31, 2017, and increased $17.2 million, or 57.9%, from $29.7 million at December 31, 2016.  Customer balances in the CDARS and ICS program totaled $13.6 million at December 31, 2017 anddecreased $4.0 million, or 41.4%, from $9.6 million at December 31, 2016.

FHLB advances.FHLB advances totaled $13.5 million at December 31, 2017 and remained constant compared to $13.5 million at December 31, 2016.See the section titled “Liquidity and Capital Resources”  for additional information regarding FHLB advances.

8

Management’s Discussion and Analysis of Financial Condition and Results of Operations

Subordinated debentures.Subordinated debentures totaled $5.2 million at both December 31, 2017 and December 31, 2016.  These debentures were issued in 2003 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 payment were current at December 31, 2017 and December 31, 2016.

Stockholders’ equity.Stockholders’ equity totaled $40.3 million at December 31, 2017, an increase of $969,000, or 2.5%, from $39.3 million at December 31, 2016.  The increase in total stockholders’ equity was primarily attributed to net income, which was partially offset by the dividend paid on the Company’s Series B Preferred Stock.  See Note17 to theconsolidated financial statements included in this annual report for additional information.

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. Also, CFBank has the flexibility to manage its balance sheet size as a result of the short duration of the assets as discussed with the Northpointe mortgage program, as well as to deploy those assets into higher earning assets to improve net interest income as the opportunity presents itself.

Conversion of Preferred Stock to Common Stock

On September 29, 2017, the Company announced the conversion of its Series B Preferred Stock into shares of Common Stock of the Company.  The conversion was effective October 6, 2017, and resulted in the conversion of all 480,000 of the Company’s issued and outstanding shares of Series B Preferred Stock into approximately 6,857,143 shares of Common Stock. 

The conversion of the Series B Preferred Stock results in the elimination of the non-cumulative preferred dividend payments on the Series B Preferred Stock beginning with the 4th quarter of 2017.  The preferred dividends, in the aggregate amount of approximately $187,500 quarterly, or approximately $750,000 annually, will not be payable by the Company going forward.

Stock Repurchase Program

In May 2016, the Company announced that its Board of Directors adopted a stock repurchase program pursuant to which the Company was authorized to repurchase up to 3% of the Company’s common stock over the subsequent six-month period.  The Board of Directors subsequently approved the continuation of this stock repurchase program through November 10, 2017.  Pursuant to the stock repurchase program in 2016, the Company repurchased a total of 21,300 shares of common stock for an aggregate purchase price of $30,000.  No shares were repurchased in 2017.  All repurchased shares are held by the Company as treasury stock.

Comparison of Results of Operations for 2017 and 2016

General.The Company’s income before income tax expense for the year ended December 31, 2017 totaled $3.5 million and increased $1.1 million, or 42.0%, from $2.4 million at December 31, 2016.  The increase in income before income tax expense was due to a $2.4 million increase in net interest income and a $230,000 decrease in provision expense, partially offset by a $1.1 million increase in noninterest expense, and a $434,000 decrease in noninterest income.

Net income for the year ended December 31, 2017 totaled $1.3 million and decreased $281,000, compared to net income of $1.6 million for the year ended December 31, 2016.  The decrease in net income was due to a $1.3 million increase in tax expense, a $1.1 million increase in noninterest expense, and a $434,000 decrease in noninterest income, partially offset by a $2.4 million increase in net interest income and a $230,000 decrease in provision expense.  Excluding the impact of the additional income tax expense recorded in the fourth quarter related to the enactment of the Tax Cuts and Jobs Act, as discussed below, net income for the year ended December 31, 2017 would have been $2.3 million, reflecting an increase of $698,000, or 42.9%, compared to the year ended December 31, 2016.

Net income attributable to common stockholders for the year ended December 31, 2017, totaled $680,000, or $0.04 per diluted common share, and decreased $90,000, compared to net income attributable to common stockholders of $770,000, or $0.05 per diluted common share, for the year ended December 31, 2016.  For the year ended December 31, 2017, preferred dividends on the Company’s Series B Preferred Stock and accretion of discount reduced net income attributable to common stockholders by $666,000 compared to $857,000 for the year ended December 31, 2016.  The decrease in the preferred dividends on the Series B preferred stock and accretion of discount is due to the Company’s conversion of its Preferred Stock into shares of Common Stock of the Company, effective October 6, 2017, resulting in the elimination of the preferred stock dividend payments beginning with the fourth quarter of 2017 of approximately $187,500 quarterly.  Excluding the impact of the additional income tax expense recorded in the fourth quarter related to the enactment of the Tax Cuts and Jobs Act, as discussed below, net income attributable to common stockholders for the year ended December 31, 2017 would have been $1.7 million, or $0.09 per share.

9

Management’s Discussion and Analysis of Financial Condition and Results of Operations

Impact of Tax Cuts and Jobs Act

On December 22, 2017, the “Tax Cuts and Jobs Act” was enacted into law reducing the federal corporate tax rate to 21%, effective January 1, 2018.  The Company conducted a revaluation of its existing deferred tax asset (DTA) to reflect the impact of the new tax rates, which resulted in the Company recording an additional tax expense in the fourth quarter of 2017 in the amount of $979,000, which impacts comparability of net income (after tax) between periods. The tables below summarize the impact of the additional tax expense related to the new tax law on the Company’s full year 2017 reported net income:

	Twelve Months Ended December 31,
	2017		2016		Var $	Var %
As Reported (GAAP):
Income before income tax expense	$	3,461	$	2,437	1,024	42%
Income tax expense		2,115		810	1,305	161%
Net income (loss)	$	1,346	$	1,627	(281)	-17%
Dividends on Series B preferred stock and accretion of discount		(666)		(857)	191	-22%
Earnings (loss) attributable to common stockholders	$	680	$	770	(90)	-12%
Diluted earnings (loss) per common share	$	0.04	$	0.05	(0.01)
Excluding impact of new tax legislation (non-GAAP):
Income before income tax expense	$	3,461	$	2,437	1,024	42%
Income tax expense (1)		1,136		810	326	40%
Net income (loss)	$	2,325	$	1,627	698	43%
Dividends on Series B preferred stock and accretion of discount		(666)		(857)	191	-22%
Earnings (loss) attributable to common stockholders	$	1,659	$	770	889	115%
Diluted earnings (loss) per common share	$	0.09	$	0.05	0.04
(1) Impact of new tax legislation:	Full Year 2017
Income tax expense as reported	$	2,115
Impact of new tax legislation due to revaluation of DTA		979
Income tax expense, excluding impact of new tax legislation	$	1,136
Note: Certain tax legislation amounts are considered reasonable estimates as of December 31, 2017.

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 $13.7 million for the year ended December 31, 2017 and increased $2.4 million, or 20.9%, compared to $11.3 million for the year ended December 31, 2016.  The increase in net interest income was primarily due to a $2.8 million, or 19.4%, increase in interest income, partially offset by a $438,000, or 14.1%, increase in interest expense.  The increase in interest income was primarily attributed to a $52.8 million, or 15.0%, increase in average interest-earnings assets outstanding, and a 16bps increase in average yield on interest-earning assets.  The increase in interest expense was attributed to a $20.4 million, or 7.0%, increase in average interest-bearing liabilities outstanding and a 8bps increase in the average cost of funds on interest-bearing liabilities.  As a result, net interest margin of 3.38% for the year ended December 31, 2017 increased 17 bps compared to net interest margin of 3.21% for the year ended December 31, 2016.

Interest income totaled $17.2 million and increased $2.8 million, or 19.4%, for the twelve months ended December 31, 2017, compared to $14.4 million for the twelve months ended December 31, 2016.  The increase in interest income was primarily due to a $44.9 million, or 14.3%, increase in average loans and loans held for sale balances from $313.5 million at December 31, 2016, to $358.4 million at December 31, 2017.

Interest expense totaled $3.5 million and increased $438,000, or 14.1%, for the year ended December 31, 2017, compared to $3.1 million for the year ended December 31, 2016.  The increase in interest expense resulted primarily from increased deposit costs due to a $22.0million, or 8.1%, increase in average interest-bearing deposit balances. The overall cost of funds on total interest-bearing deposits increased 7bps to105bps at December 31, 2017 compared to 98bps at December 31, 2016.

10

Management’s Discussion and Analysis of Financial Condition and Results of Operations

Provision for loan and lease losses.The provision for loan and lease losses totaled $0 for the twelve months ended December 31, 2017 and decreased $230,000, compared to $230,000 for the twelve months ended December 31, 2016.  The decrease in the provision for loan and lease losses for the year ended December 31, 2017 was primarily due to continued improved credit quality, favorable trends in certain qualitative factors and net recoveries for the twelve months ended December 31, 2017.  Net recoveries for the year ended December 31, 2017 totaled $45,000 compared to net recoveries of $75,000 for the year ended December 31, 2016.  The ratio of the ALLL to nonperforming loans at December 31, 2017 was 1483.0% compared to 983.7% at December 31, 2016.

The following table presents information regarding net charge-offs for 2017 and 2016.

	2017		2016
(Dollars in thousands)	Charge-offs (recoveries)
Commercial	$	(2)	$	123
Single-family residential real estate		(20)		105
Multi-family residential real estate		-		(143)
Commercial real estate		-		(145)
Home equity lines of credit		(23)		(16)
Other consumer loans		-		1
Total	$	(45)	$	(75)

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, 2017 totaled $743,000, and decreased $434,000, or 36.9%, compared to $1.2 million for the year ended December 31, 2016.  The decrease was primarily due to a $332,000 decrease in service charges on deposit accounts, a $59,000 decrease in net gains on sales of loans, and a $45,000 decrease in other noninterest income.  The decrease in service charges on deposit accounts was primarily related to a decrease in overdraft fee income.  The decrease in net gains on sales of loans was due to low sales volume.  The decrease in other noninterest income was due to decreased activity related to the Company’s joint ventures.

Noninterest expense.Noninterest expense for the year ended December 31, 2017 totaled $11.0 million and increased $1.1 million, or 11.5%, compared to $9.8 million for the year ended December 31, 2016.  The overall increase in operating expenses is primarily attributed to a $1.1 million increase in salaries and employee benefits.  The increase in salaries and employee benefits was due to an increase in experienced commercial lenders and treasury management sales personnel, coupled with an increase in personnel in operations, credit, finance, and information technology to support our growth, infrastructure and risk management practices.  Also, there was an increase in personnel associated with the opening of our Glendale office in the third quarter of 2017, as we expanded into the Cincinnati market.

Income taxes.Income tax expense totaled $2.1 million for year ended December 31, 2017, an increase of $1.3 million, or 161.1%, compared to $810,000 for the year ended December 31, 2016.  As previously mentioned, the Company recorded an additional tax expense of $979,000 during the fourth quarter of 2017 due to a revaluation of the Company’s deferred tax asset to reflect the impact of the new tax rates. As a result, the effective tax rate for the year ended December 31, 2017 increased to approximately 61.1%, as compared to approximately 33.2% for the year ended December 31, 2016.

Our deferred tax assets are composed of U.S. net operating losses (“NOLs”), and other temporary book to tax differences.    When determining the amount of deferred tax assets that are more-likely-than-not to be realized, and therefore recorded as a benefit, the Company conducts a regular assessment of all available information. This information includes, but is not limited to, taxable income in prior periods, projected future income and projected future reversals of deferred tax items.  Based on these criteria, the Company determined as of December 31, 2017 that no valuation allowance was required against the net deferred tax asset.  However, as discussed above, the Company performed a revaluation of its deferred tax asset during the fourth quarter of 2017 to reflect the impact of the new tax rates under the Tax Cuts and Jobs Act, which resulted in a decrease in the deferred tax asset andthe recording of an additional tax expense by the Company in the fourth quarter of 2017 in the amount of $979,000.

11

Management’s Discussion and Analysis of Financial Condition and Results of Operations

Comparison of Results of Operations for 2016 and 2015

General.Income before income tax expense for the twelve months ended December 31, 2016 totaled $2.4 million and increased $1.1 million, or 89.8%, compared to income before income tax expense of $1.3 million for the twelve months ended December 31, 2015.  The increase in income before income tax expense was due a $1.5 million increase in net interest income and a $20,000 decrease in provision expense, partially offset by a $171,000 decrease in noninterest income and a $212,000 increase in noninterest expense.

The Company reversed its deferred tax valuation allowance during the fourth quarter of 2015 and began recording income tax expense for 2016, which impacted the comparability of net income (after tax) between periods.  Net income for the twelve months ended December 31, 2016 totaled $1.6 million and decreased $2.9 million compared to net income of $4.5 million for the twelve months ended December 31, 2015.  The decrease in net income was primarily due to a $4.0 million increase in income tax expense (due to the $3.2 million credit to income tax expense as a result of the reversal of the deferred tax valuation allowance in 2015, compared to income tax expense of $810,000 for the year ended December 31, 2016), a $171,000 decrease in other noninterest income, and a $212,000 increase in noninterest expense, which was partially offset by a $1.5 million increase in net interest income, and a $20,000 decrease in provision expense. 

Net income attributable to common stockholders totaled $770,000, or $0.05 per diluted common share, for the year ended December 31, 2016, compared to net income attributable to common stockholders of $3.6 million, or $0.20 per diluted common share, for the year ended December 31, 2015.  For the years ended December 31, 2016 and 2015, preferred dividends on the Series B Preferred Stock and accretion of discount reduced net income attributable to common stockholders by $857,000 for each period.

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 $11.3 million for the year ended December 31, 2016 and increased $1.5 million, or 15.5%, compared to $9.8 million for the year ended December 31, 2015.  The increase in net interest income was primarily due to a $2.0 million, or 16.2%, increase in interest income, partially offset by a $488,000, or 18.7%, increase in interest expense.  The increase in interest income was primarily attributed to a $46.7 million, or 15.3%, increase in average interest-earnings assets outstanding, and a 3bps increase in average yield on interest-earning assets.  The increase in interest expense was attributed to a $30.8 million, or 11.8%, increase in average interest-bearing liabilities outstanding and a 6bps increase in the average cost of funds on interest-bearing liabilities.  Net interest margin was 3.21% and 3.21% for the years ended December 31, 2016 and December 31, 2015, respectively.

Interest income totaled $14.4 million and increased $2.0 million, or 16.2%, for the twelve months ended December 31, 2016, compared to $12.4 million for the twelve months ended December 31, 2015. The increase in interest income was primarily due to a $42.5 million, or 15.7%, increase in average loans and loans held for sale balances from $270.9 million at December 31, 2015, to $313.5 million at December 31, 2016. 

Interest expense totaled $3.1 million and increased $488,000, or 18.7%, for the year ended December 31, 2016, compared to $2.6 million for the year ended December 31, 2015.  The increase in interest expense resulted primarily from increased deposit costs due to a $29.8 million, or 12.4%, increase in average interest-bearing deposit balances. The overall cost of funds on total interest-bearing deposits increased 6bps to 98bps at December 31, 2016 compared to 92bps at December 31, 2015.

Provision for loan and lease losses.  The provision for loan and lease losses totaled $230,000 for the twelve months ended December 31, 2016 and decreased $20,000, or 8.0%, compared to $250,000 for the twelve months ended December 31, 2015.  The decrease in the provision for loan and lease losses for the year ended December 31, 2016 was primarily due to improved credit quality, a continued decrease in the majority of historical loss rates and favorable trends in certain qualitative factors and net recoveries.  Net recoveries for the year ended December 31, 2016 totaled $75,000 compared to net recoveries of $54,000 for the year ended December 31, 2015.The ratio of the ALLL to nonperforming loans at December 31, 2016 improved to 983.7% compared to 464.6% at December 31, 2015.

12

Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following table presents information regarding net charge-offs for 2016 and 2015.

	2016		2015
(Dollars in thousands)	Charge-offs (recoveries)
Commercial	$	123	$	(17)
Single-family residential real estate		105		39
Multi-family residential real estate		(143)		-
Commercial real estate		(145)		(8)
Home equity lines of credit		(16)		(72)
Other consumer loans		1		4
Total	$	(75)	$	(54)

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, 2016 totaled $1.2 million, and decreased $171,000, or 12.7%, compared to $1.3 million for the year ended December 31, 2015.  The decrease was primarily due to a $243,000 decrease in other noninterest income, and a $191,000 decrease in net gains on sales of loans, partially offset by a $250,000 increase in service charges on deposit accounts.  The decrease in other noninterest income was due to decreased activity related to the Company’s joint ventures.  The decrease in the net gains on sales of loans was primarily due to lower residential mortgage sales activity.  The increase in service charges on deposit accounts was related to increased pricing, deposit growth and activity and new account relationships. 

Noninterest expense.Noninterest expense for the year ended December 31, 2016 totaled $9.8 million and increased $212,000, or 2.2%, compared to $9.6 million for the year ended December 31, 2015.  The overall increase in operating expenses is primarily attributed to a $212,000 increase in salaries and employee benefits, a $192,000 increase in professional fees, partially offset by  a $199,000 decrease in FDIC premiums.  Salaries and benefit expenses increased primarily due to an increase in personnel in the commercial lending, credit administration, operations and information technology areas.  The increase in professional fees was primarily due to increases in recruiting fees, general legal expense related to certain one-time projects and legal expenses related to loan workout activity.  The decrease in FDIC premiums was due to lower assessment factors charged based on CFBank’s improved performance.

Income taxes.  Income tax expense totaled $810,000 for the year ended December 31, 2016, an increase of $4.0 million compared to a  $3.2 million credit to income tax expense for year ended December 31,2015.  With the reversal of the deferred tax valuation allowance as of December 31, 2015, as discussed below, the Company is now recording income tax expense based on the federal statutory rate adjusted for the effect of bank owned life insurance and other miscellaneous items.  The effective tax rate for the year ended December 31, 2016, was approximately 33.2%which management believes is a reasonable estimate for the effective tax rate.

Our deferred tax assets are composed of U.S. net operating losses (“NOLs”), and other temporary book to tax differences.  The Company recorded a deferred tax valuation allowance which reduced the Company’s deferred tax asset to zero beginning in 2009 and continuing up until the fourth quarter of 2015; the Company maintained this valuation allowance against the net deferred tax assets during this period based on its estimate of future reversal and utilization.  As a result, there was no income tax benefit recorded during the first three quarters of 2015.

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, 2015, in part because the Company had achieved seven consecutive quarters of pretax income, that it was no longer necessary to maintain a full valuation allowance against the entire net deferred tax asset.  As a result, the valuation allowance on the deferred tax asset was reversed which resulted in a credit to income tax expense of $3.2 million.  With the reversal of the deferred tax valuation allowance, the Company is now recording income tax expense based on the federal statutory rate adjusted for the effect of other items such as incentive stock expense, bank owned life insurance, and other miscellaneous items.

13

Management’s Discussion and Analysis of Financial Condition and Results of Operations

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,
	2017					2016					2015
	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)	$	13,192	$	183	1.39%	$	9,806	$	125	1.28%	$	9,542	$	131	1.38%
Loans and loans held for sale (3)		358,423		16,487	4.60%		313,472		14,050	4.48%		270,939		12,126	4.48%
Other earning assets		30,351		383	1.26%		26,839		156	0.58%		22,953		70	0.30%
FHLB and FRB stock		2,890		154	5.33%		1,942		78	4.02%		1,942		78	4.02%
Total interest-earning assets		404,856		17,207	4.25%		352,059		14,409	4.09%		305,376		12,405	4.06%
Noninterest-earning assets		26,413					25,761					23,808
Total assets	$	431,269				$	377,820				$	329,184
Interest-bearing liabilities:
Deposits	$	292,242		3,059	1.05%	$	270,239		2,657	0.98%	$	240,410		2,212	0.92%
FHLB advances and other borrowings		18,979		475	2.50%		20,621		439	2.13%		19,660		396	2.01%
Total interest-bearing liabilities		311,221		3,534	1.14%		290,860		3,096	1.06%		260,070		2,608	1.00%
Noninterest-bearing liabilities		80,019					48,158					34,236
Total liabilities		391,240					339,018					294,306
Equity		40,029					38,802					34,878
Total liabilities and equity	$	431,269				$	377,820				$	329,184
Net interest-earning assets	$	93,635				$	61,199				$	45,306
Net interest income/interest rate spread			$	13,673	3.11%			$	11,313	3.03%			$	9,797	3.06%
Net interest margin					3.38%					3.21%					3.21%
Average interest-earning assets to average interest-bearing liabilities		130.09%					121.04%					117.42%
(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.

14

Management’s Discussion and Analysis of Financial Condition and Results of Operations

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, 2017						December 31, 2016
	Compared to Year Ended						Compared to Year Ended
	December 31, 2016						December 31, 2015
	Increase (decrease) due to						Increase (decrease) due to
	Rate		Volume		Net		Rate		Volume		Net
	(Dollars in thousands)
Interest-earning assets:
Securities (1)	$	11	$	47	$	58	$	(10)	$	4	$	(6)
Loans and loans held for sale		377		2,060		2,437		18		1,906		1,924
Other earning assets		205		22		227		72		14		86
FHLB and FRB stock		30		46		76		-		-		-
Total interest-earning assets		623		2,175		2,798		80		1,924		2,004
Interest-bearing liabilities:
Deposits		178		224		402		159		286		445
FHLB advances and other borrowings		73		(37)		36		24		19		43
Total interest-bearing liabilities		251		187		438		183		305		488
Net change in net interest income	$	372	$	1,988	$	2,360	$	(103)	$	1,619	$	1,516

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

Quantitative 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 20 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, 2017, 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.

15

Management’s Discussion and Analysis of Financial Condition and Results of Operations

Economic Value of Equity
as a Percent of Assets
(CFBank only)
Basis Point	Economic
Change in Rates	Value Ratio
+400	9.2%
+300	9.7%
+200	10.2%
+100	10.7%
0	10.9%
(100)	10.6%
(200)	10.0%

In evaluating CFBank’s exposure to interest rate risk, certain shortcomings 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.

We continue to originate the majority of fixed-rate single-family residential real estate loans for sale rather than retain long-term, low fixed-rate loans in portfolio.  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 and multi-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.

Liquidity and Capital Resources

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

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

16

Management’s Discussion and Analysis of Financial Condition and Results of Operations

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 line of credit. 

The following table summarizes CFBank’s cash available from liquid assets and borrowing capacity at December 31, 2017 and 2016.

	December 31, 2017		December 31, 2016
	(Dollars in thousands)
Cash, unpledged securities and deposits in other financial institutions	$	46,767	$	63,734
Additional borrowing capacity at the FHLB		51,503		30,998
Additional borrowing capacity at the FRB		40,448		31,846
Unused commercial bank line of credit		8,000		1,000
Total	$	146,718	$	127,578

Cash, unpledged securities and deposits in other financial institutions decreased $16.9 million, or 26.6%, to $46.8 million at December 31, 2017 compared to $63.7 million at December 31, 2016.  The decrease is primarily due to a decrease in cash from funding loan growth.

CFBank’s additional borrowing capacity with the FHLB increased $20.5 million, or 66.1%, to $51.5 million at December 31, 2017 compared to $31.0 million at December 31, 2016.  The increase in additional borrowing capacity is a result of additional collateral pledged due to the increase in loans. 

CFBank’s additional borrowing capacity at the FRB increased $8.6 million, or 27.0%, to $40.4 million at December 31, 2017from $31.8 million at December 31, 2016.  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 including, 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 $8.0 million of availability in an unused line of credit with a commercial bank at December 31, 2017 and a $1.0 million unused line of credit with a different commercial bank at December 31, 2016.  During the first quarter of 2017, the Company added a $8.0 line of credit for potential liquidity purposes. The previous $1.0 million line of credit,with a different institution, was closed during the second quarter of 2017.

Deposits are obtained predominantly from the marketsin which CFBank’s offices are located. We rely primarily on a willingness to pay market-competitive interest rates to attract and retain retail deposits. Accordingly, rates offered by competing financial institutions may affect our ability to attract and retain deposits. 

CFBank relies on competitive interest rates, customer service,and relationships with customers toretain deposits.To promote and stabilize liquidity inthe bankingand financialservices sector, the FDIC, pursuant to the provisions ofthe Dodd-Frank Wall Street Reform and Consumer Protection Act, permanently increased deposit insurance coverage from$100,000to $250,000 per depositor.

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

Management believes that the Holding Company had adequate funds at December 31, 2017 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.  The Company may elect to pay dividends on its common stock, if and when declared by the Board of Directors.

17

Management’s Discussion and Analysis of Financial Condition and Results of Operations

Currently, annual debt service on the subordinated debentures, underlying the Company’s trust preferred securities, is approximately $234,000.  The subordinated debentures have a variable rate of interest, reset quarterly, equal to the three-month LIBOR plus 2.85%.  The total rate in effect was  4.54% at December 31, 2017.  An increase in the three-month LIBOR would increase the debt service requirement of the subordinated debentures. 

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.Any future dividend payments by CFBank to the Holding Company would be based on future earnings and, if necessary, regulatory approval. 

The ability of the Holding Company to pay dividends on its common stock and Series B Preferred Stock is generally dependent upon the receipt of dividends and other distributions from CFBank.  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 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. 

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 at year-end 2017.  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.

Impact 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.

Critical Accounting Policies

We follow financial accounting and reporting policies that are in accordance with U.S. generally accepted accounting principles and conform to general practices within the banking industry.  These policies are presented in Note 1 to our 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 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.

18

Management’s Discussion and Analysis of Financial Condition and Results of Operations

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 to our consolidated financial statements.

Valuation of the deferred tax asset.

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, 2017 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 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 2016, the Company had net operating loss carryforwards of $23.1 million, which expire at various dates from 2024 to 2033. As a result of the ownership change, the Company's ability to utilize carryforwards that arose before the 2012 stock offering closed is limited to $163,000 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 2017.  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.

At December 31, 2017, the Company had a deferred tax asset recorded in the amount of $1.6 million.  At December 31, 2016, the Company had a deferred tax asset recorded in the amount of $2.6 million.  At December 31, 2017 and December 31, 2016, 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 2014.  Additional information is included in Notes 1 and 14 to our consolidated financial statements.

19

Management’s Discussion and Analysis of Financial Condition and Results of Operations

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 to our consolidated financial statements.

Market Prices and Dividends Declared

The common stock of Central Federal Corporation trades on the Nasdaq® Capital Market under the symbol “CFBK.”  As of December 31, 2017, there were 23,349,613 shares of common stock outstanding and held by approximately534shareholders of record.

The following table shows the quarterly reported high and low sales prices of our common stock during 2017 and 2016.  There were no dividends declared or paid on our common stock during 2017 or 2016.

2017	High		Low
First Quarter	$	3.10	$	1.63
Second Quarter	$	2.39	$	1.95
Third Quarter	$	2.67	$	2.02
Fourth Quarter	$	2.75	$	2.37

2016	High		Low
First Quarter	$	1.45	$	1.11
Second Quarter	$	1.40	$	1.28
Third Quarter	$	1.41	$	1.31
Fourth Quarter	$	1.79	$	1.38

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, the Holding Company’s ability to pay dividends on its common stock is conditioned upon certain payments on the subordinated debentures underlying the Holding Company’s trust preferred securities.  Additional information is contained in the section titled “Financial Condition - Stockholders’ equity” and in Notes 2 and 17 to our consolidated financial statements.

20

CENTRAL FEDERAL CORPORATION

Worthington, Ohio

ANNUAL REPORT

December 31, 2017 and 2016

CONTENTS
	Page
Management’s Report on Internal Control Over Financial Reporting	1
Report of Independent Registered Public Accounting Firm	2
Consolidated Balance Sheets	3
Consolidated Statements of Income	4
Consolidated Statements of Comprehensive Income	5
Consolidated Statements of Changes in Stockholders’ Equity	6
Consolidated Statements of Changes of Cash Flows	7
Notes to Consolidated Financial Statements	8

CENTRAL FEDERAL CORPORATION

MANAGEMENT’S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING

The management of Central Federal Corporation 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, 2017.  In making this assessment, management used the criteria for effective internal control over financial reporting as described in the 2013 Internal Control-Integrated Frameworkissued 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, 2017.  

This annual report does not contain an audit report of the Company’s registered public accounting firm regarding internal control over financial reporting.  Management’s report was not subject to audit by the Company’s registered public accounting firm pursuant to rules of the Securities and Exchange Commission that permit the Company to provide only management’s report in this annual report.

/s/ Timothy T. O’Dell

Timothy T. O’Dell

President and Chief Executive Officer

/s/ John W. Helmsdoerfer

John W. Helmsdoerfer, CPA

Chief Financial Officer and Treasurer

March 15, 2018

1

Report of Independent Registered Public Accounting Firm

To the Shareholders, Board of Directors and Audit Committee

Central Federal Corporation

Worthington, Ohio

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of Central Federal Corporation (the "Company") as of December 31, 2017, the related consolidated statements of income, comprehensive income, changes in stockholders' equity and changes in cash flows for each of the years in the two-year period ended December 31, 2017 and the related notes  (collectively referred to as the "financial statements").  In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2017 and 2016 and the results of its operations and its cash flows for each of the years in the two-year period ended December 31, 2017 in conformity with accounting principles generally accepted in the United States of America.

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 Public Company Accounting Oversight Board (United States) ("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 audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.  The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting.  As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting.  Accordingly, we express no such opinion.

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.

/s/ BKD, LLP

BKD, LLP

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

Indianapolis, Indiana

March 15, 2018

2

CENTRAL FEDERAL CORPORATION

CONSOLIDATED BALANCE SHEETS

December 31, 2017 and 2016

(Dollars in thousands, except per share data)

	December 31,		December 31,
	2017		2016
ASSETS
Cash and cash equivalents	$	45,498	$	57,941
Interest-bearing deposits in other financial institutions		100		100
Securities available for sale		11,773		14,058
Loans held for sale, at fair value		1,124		2,812
Loans and leases, net of allowance of $6,970 and $6,925		406,406		346,125
FHLB and FRB stock		3,227		1,942
Foreclosed assets, net		-		204
Premises and equipment, net		3,533		3,429
Bank owned life insurance		5,065		4,930
Accrued interest receivable and other assets		4,699		4,571
Total assets	$	481,425	$	436,112
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits
Noninterest bearing	$	89,588	$	72,779
Interest bearing		329,440		302,585
Total deposits		419,028		375,364
FHLB advances		13,500		13,500
Advances by borrowers for taxes and insurance		489		408
Accrued interest payable and other liabilities		2,992		2,393
Subordinated debentures		5,155		5,155
Total liabilities		441,164		396,820
Commitments and contingent liabilities		-		-
Stockholders' equity
Common stock, $.01 par value;
shares authorized: 50,000,000;
shares issued: 23,501,972 at December 31, 2017 and 16,427,917 at December 31, 2016		235		164
Series B Preferred stock, $0.01 par value; 480,000 shares authorized;
0 issued at December 31, 2017 and 480,000 at December 31, 2016		-		5
Additional paid-in capital		60,484		60,163
Accumulated deficit		(17,087)		(17,767)
Accumulated other comprehensive income (loss)		(47)		2
Treasury stock, at cost; 152,359 shares of common stock at December 31, 2017 and133,007 shares at December 31, 2016		(3,324)		(3,275)
Total stockholders' equity		40,261		39,292
Total liabilities and stockholders' equity	$	481,425	$	436,112

See accompanying notes to consolidated financial statements.

3

CENTRAL FEDERAL CORPORATION

CONSOLIDATED STATEMENTS OF INCOME

Years ended December 31, 2017  and 2016

(Dollars in thousands, except per share data)

	2017		2016
Interest and dividend income
Loans and leases, including fees	$	16,487	$	14,050
Securities		183		125
FHLB and FRB stock dividends		154		78
Federal funds sold and other		383		156
		17,207		14,409
Interest expense
Deposits		3,059		2,657
FHLB advances and other debt		263		254
Subordinated debentures		212		185
		3,534		3,096
Net interest income		13,673		11,313
Provision for loan and lease losses		-		230
Net interest income after provision for loan and lease losses		13,673		11,083
Noninterest income
Service charges on deposit accounts		409		741
Net gains on sales of loans		75		134
Earnings on bank owned life insurance		135		133
Other		124		169
		743		1,177
Noninterest expense
Salaries and employee benefits		6,074		4,965
Occupancy and equipment		671		579
Data processing		995		1,116
Franchise and other taxes		366		358
Professional fees		988		1,148
Director fees		312		228
Postage, printing and supplies		175		168
Advertising and promotion		154		125
Telephone		118		123
Loan expenses		170		141
Foreclosed assets, net		18		65
Depreciation		208		211
FDIC premiums		282		222
Regulatory assessment		127		62
Other insurance		92		109
Other		205		203
		10,955		9,823
Income before incomes taxes		3,461		2,437
Income tax expense		2,115		810
Net income		1,346		1,627
Dividends on Series B preferred stock and accretion of discount		(666)		(857)
Net income attributable to common stockholders	$	680	$	770
Earnings per common share:
Basic	$	0.04	$	0.05
Diluted	$	0.04	$	0.05

See accompanying notes to consolidated financial statements.

4

CENTRAL FEDERAL CORPORATION

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

Years ended December 31, 2017  and 2016

(Dollars in thousands, except per share data)

	2017		2016
Net income	$	1,346	$	1,627
Other comprehensive income (loss):
Unrealized holding gains (losses) arising during the period related to investment securities available for sale, net of tax of ($25) and $1:		(49)		11
Other comprehensive income (loss), net of tax		(49)		11
Comprehensive income	$	1,297	$	1,638

See accompanying notes to consolidated financial statements.

5

CENTRAL FEDERAL CORPORATION

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

Years ended December 31, 2017  and 2016

(Dollars in thousands, except per share data)

									Accumulated
			Series B		Additional				Other				Total
	Common		Preferred		Paid-In		Accumulated		Comprehensive		Treasury		Stockholders'
	Stock		Stock		Capital		Deficit		Income		Stock		Equity
Balance at January 1, 2016	$	161	$	5	$	59,937	$	(18,537)	$	(9)	$	(3,245)	$	38,312
Net income								1,627						1,627
Other comprehensive income										11				11
Issuance of 292,000 stock based incentive plan shares, net of forfeitures		3				(3)								-
Restricted stock expense, net of forfeitures						96								96
Stock option expense, net of forfeitures						26								26
Purchase of 21,300 treasury shares												(30)		(30)
Cash dividends declared on Series B preferred stock and accretion of discount						107		(857)						(750)
Balance at December 31, 2016		164		5		60,163		(17,767)		2		(3,275)		39,292
Net income								1,346						1,346
Other comprehensive loss										(49)				(49)
Issuance of 215,500 stock based incentive plan shares, net of forfeitures		2				(2)								-
Restricted stock expense, net of forfeitures						246								246
Acquisition of 19,352 treasury shares surrendered upon vesting of restricted stock for payment of taxes												(49)		(49)
Conversion of Series B preferred stock to common stock		69		(5)		(64)								-
Exercise of warrants to common stock						38								38
Cash dividends declared on Series B preferred stock and accretion of discount						103		(666)						(563)
Balance at December 31, 2017	$	235	$	-	$	60,484	$	(17,087)	$	(47)	$	(3,324)	$	40,261

See accompanying notes to consolidated financial statements.

6

CENTRAL FEDERAL CORPORATION

CONSOLIDATED STATEMENTS OF CHANGES OF CASH FLOWS

Years ended December 31, 2017  and 2016

(Dollars in thousands, except per share data)

	2017		2016
Net income	$	1,346	$	1,627
Adjustments to reconcile net income to net cash from operating activities:
Provision for loan losses and leases		-		230
Depreciation		208		211
Amortization, net		(92)		(66)
Deferred income tax (benefit)		3		623
Revaluation of net deferred tax assets		979		-
Net loss on sales of securities		-		-
Originations of loans held for sale		(22,777)		(24,219)
Proceeds from sale of loans held for sale		24,540		22,430
Net gains on sales of loans		(75)		(134)
Loss on disposal of premises and equipment		-		16
Gain (loss) on sale of foreclosed assets		7		(4)
Earnings on bank owned life insurance		(135)		(133)
Stock-based compensation expense		246		122
Net change in:
Accrued interest receivable and other assets		(594)		899
Accrued interest payable and other liabilities		295		190
Net cash from operating activities		3,951		1,792
Cash flows from investing activities:
Net increase in interest-bearing deposits in other financial institutions		-		(100)
Available-for-sale securities:
Maturities, prepayments and calls		2,687		1,261
Purchases		(504)		(5,981)
Loan and lease originations and payments, net		(59,964)		(49,056)
Proceeds from the sale of loans		-		1,124
Additions to premises and equipment		(312)		(47)
Purchase of FRB Stock		(1,285)		-
Proceeds from the sale of foreclosed assets		-		200
Net cash used by investing activities		(59,378)		(52,599)
Cash flows from financing activities:
Net change in deposits		43,664		84,881
Proceeds from FHLB advances		34,250		37,700
Repayments on FHLB advances		(34,250)		(38,700)
Net change in advances by borrowers for taxes and insurance		81		(248)
Cash dividends paid on Series B preferred stock		(750)		(750)
Exercise of warrants to common stock		38		-
Acquisition of treasury shares surrendered upon vesting of restricted stock for payment of taxes		(49)		-
Purchase of treasury shares		-		(30)
Net cash from financing activities		42,984		82,853
Net change in cash and cash equivalents		(12,443)		32,046
Beginning cash and cash equivalents		57,941		25,895
Ending cash and cash equivalents	$	45,498	$	57,941
Supplemental cash flow information:
Interest paid	$	3,534	$	3,061
Income tax paid		1,230		70
Supplemental noncash disclosures:
Transfers from loans to repossessed assets	$	-	$	204
Loans issued to finance the sale of repossessed assets		197		1,440
Dividends payable on Series B preferred stock		-		187
Investment payable on limited partnerships		492		-

See accompanying notes to consolidated financial statements.

7

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except per share data)

NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Nature of Operations and Principles of Consolidation: 

The consolidated financial statements include Central Federal Corporation (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.  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, Fairlawn, Glendale, Calcutta, and Wellsville,Ohio, and through its agency office in Woodmere, 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.

Interest-Bearing Deposits in Other Financial Institutions:  Interest‑bearing deposits in other financial institutions mature in April, 2019 and are carried at cost.  As of December 31, 2017 and December 31, 2016, there was $100 inan interest-bearing deposit in other financial institutions.

Securities:  Debt securities are classified as available for sale when they might be sold before maturity. Equity securities with readily determinable fair values are classified as available for sale.  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.

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.

8

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except per share data)

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

9

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 historical 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 include loans to businesses generally located within our primary market area. Those 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.  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 located within and outside of 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 single-family residential real estate loans for portfolio in amounts up to 85% of the lower of the appraised value or the purchase price of the property securing the loan, without requiring private mortgage insurance.  Loans in excess of 85% of the lower of the appraised value or purchase price of the property securing the loan require private mortgage insurance.  CFBank has not engaged in subprime lending or used option adjustable-rate mortgage products.

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 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 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.

10

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except per share data)

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 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 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 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 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, 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, and auto and credit card 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.

11

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except per share data)

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 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 a fund that assists 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.

Joint Ventures:  The Holding Company 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 funding for the joint ventures is related to shorter term operating activities and is related to the development of single family real estate in the form of condominiums.  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. The balance outstanding in joint ventures at December 31, 2017 and December 31, 2016 was $325 and $325, respectively.  Income recognized on the joint ventures was $20 and $100, respectively, for 2017 and 2016.

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 to 40 years. Furniture, fixtures and equipment are depreciated using the straight‑line method with useful lives ranging from 2 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 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 purchased life insurance policies on certain directors and employees in 2002.  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.  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.

12

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except per share data)

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 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.

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:  Basic earnings per common share is net income available to common stockholders divided by the weighted average number of common shares outstanding during the period.  All outstanding unvested share-based payment awards that contain rights to nonforfeitable dividends are considered participating securities for this calculation.  Diluted earnings per common share includes the dilutive effect of additional potential common shares issuable under stock options. 

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.

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 are any such matters that will have a material effect on the financial statements.  See Note 24 – Contingent Liabilities.

Restrictions on Cash:  Cash on hand or on deposit with the Federal Reserve Bank (FRB) is required to meet regulatory reserve and clearing requirements. The reserve requirement at December 31, 2017 and December 31, 2016 was $718 and $267, respectively.  Cash on deposit with the FHLB includes $3,300 pledged as collateral for FHLB advances. 

Equity:  Treasury stock is carried at cost. The carrying value of preferred stock and the common stock warrant is based on allocation of issuance proceeds, net of issuance costs, in proportion to their relative fair values.  Preferred stock is carried net of the discount established through the allocation of proceeds.

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 and Series B Preferred Stock is generally dependent upon the receipt of dividends and other distributions from CFBank.  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. 

13

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except per share data)

Effective October 6, 2017, all of its outstanding shares of Series B Preferred Stock were converted into shares of Common Stock of the Company.  The conversion of the Series B Preferred Stock resulted in the elimination of the non-cumulative preferred dividend payments on the Series B Preferred Stock beginning with the 4th quarter of 2017.

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.

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 loss or stockholders’ equity.

Adoption of New Accounting Standards:

In May 2014 the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2014-09, Revenue from Contracts with Customers (Topic 606).  The topic of Revenue Recognition had become broad with several other regulatory agencies issuing standards, which lacked cohesion.  The new guidance establishes a “comprehensive framework” and “reduces the number of requirements to which an entity must consider in recognizing revenue” and yet provides improved disclosures to assist stakeholders reviewing financial statements.  ASU No. 2014-09 provides that an entity should recognize revenue to depict the transfer of promised goods or services.  The guidance provides steps to follow to achieve the core principle.  An entity should disclose sufficient information to enable users of financial statements to understand the nature, amount, and uncertainty of revenue and cash flows arising from contracts with customers.

Guidance in ASU No. 2014-09 has been clarified by the following ASUs:

· ASU No. 2016-08, “Revenue from Contracts with Customers (Topic 606): Principal versus Agent Considerations (Reporting Revenue Gross versus Net)”

· ASU No. 2016-10, “Revenue from Contracts with Customers (Topic 606): Identifying Performance Obligations and Licensing”

· ASU No. 2016-12, “Revenue from Contracts with Customers (Topic 606): Narrow Scope Improvements and Practical Expedients”

· ASU No. 2016-20, “Revenue from Contracts with Customers (Topic 606): Technical Corrections and Improvements to Topic 606”

As extended by ASU No. 2015-14, Revenue from Contracts with Customers (Topic 606): Deferral of the Effective Date, ASU No. 2014-09 and the clarifying ASUs are effective for public companies for annual reporting periods beginning after December 15, 2017, including interim periods within that reporting period.  Transitional guidance is included in the updates.  Earlier adoption is permitted only as of annual reporting periods beginning after December 15, 2016, including interim reporting periods within that reporting period.  While interest income is specifically out of scope of this standard, management hasevaluated the revenue streams within “noninterest income” to assess the applicability of this standard.  Based on our review, management has concluded that adoption of ASU No. 2015-14 will not have a significant effect on the Company’s consolidated financial statements, including disclosures.

In January 2016, the FASB issued ASU No. 2016-01, Financial Instruments—Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities.  ASU 2016-01 amends the guidance in U.S. GAAP on the accounting for equity investments, financial liabilities under the fair value option and the presentations and disclosure requirements of financial instruments.  ASU 2016-01 is effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years.  Early adoption is permitted for the accounting guidance on financial liabilities under the fair value option.  The Company will adopt the methodologies prescribed by the ASU by the date required.  Adoption of ASU No. 2016-01 did not have a significant effect on the Company’s consolidated financial statements.

On February 25, 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842).  Under the new ASU, lessees will recognize lease assets and liabilities on their balance sheets for all leases with terms of more than 12 months.  The new lessee accounting model retains two types of leases, and is consistent with the lessee accounting model under existing GAAP.  One type of lease (finance leases) will be accounted for in substantially the same manner as capital leases are accounted for today.  The other type of lease (operating leases) will be accounted for (both in the income statement and statement of cash flows) in a manner consistent with today’s operating leases.  Lessor accounting under the new standard is fundamentally consistent with existing GAAP.  Lessees and

14

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except per share data)

lessors would be required to provide additional qualitative and quantitative disclosures to help financial statement users assess the amount, timing, and uncertainty of cash flows arising from leases.  These disclosures are intended to supplement the amounts recorded in the financial statements so that users can understand more about the nature of an organization’s leasing activities.  For public business entities, the final lease standard will be effective for fiscal years beginning after December 15, 2018 including interim periods within those fiscal years.  Early application is permitted.  The Company continues to evaluate the provision of the new lease standard and although we have not yet reasonably determined the estimated financial statement impact, due to the small number of lease agreements presently in effect for the Company, we believe the new guidance will not have a significant impact on the Company’s consolidated financial statements, including disclosures.

In March 2016, the FASB issued ASU No. 2016-07, Investments—Equity Method and Joint Ventures (Topic 323): Simplifying the Transition to the Equity Method of Accounting.  ASU No. 2016-07 affects all entities that have an investment that becomes qualified for the equity method of accounting as a result of an increase in the level of ownership interest or degree of influence.  The amendments in this update eliminate the requirement that, when an investment qualifies for use of the equity method, an investor must adjust the investment, results of operations, and retained earnings retroactively on a step-by-step basis as if the equity method had been in effect during all previous periods that the investment had been held.  ASU No. 2016-07 requires that the equity method investor add the cost of acquiring the additional interest in the investee to the current basis of the investor’s previously held interest and adopt the equity method of accounting as of the date the investment becomes qualified for equity method accounting.  The amendments also require that an entity that has an available-for-sale equity security that becomes qualified for the equity method of accounting recognize through earnings the unrealized holding gain or loss in accumulated other comprehensive income at the date the investment becomes qualified for use of the equity method.  The amendments in ASU No. 2016-07 are effective for all entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2016.  Adoption of ASU No. 2016-07 did not have a significant effect on the Company’s consolidated financial statements.

In March 2016, the FASB issued ASU No. 2016-09, Compensation—Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting.  ASU No. 2016-09 affects all entities that issue share-based payment awards to their employees.  The new guidance involves several aspects of the accounting for share-based payment transactions, including income tax consequences, classification of awards as either equity or liabilities, and classification on the statement of cash flows.  Under ASU No. 2016-09, any excess tax benefits or tax deficiencies should be recognized as income tax expense or benefit in the income statement.  Excess tax benefits are to be classified as an operating activity in the statement of cash flows.  In accruing compensation cost, an entity can make an entity-wide accounting policy election to either estimate the number of awards that are expected to vest, as required under current guidance, or account for forfeitures when they occur.  For an award to qualify for equity classification, an entity cannot partially settle the award in excess of the employer's maximum statutory withholding requirements.  Such cash paid by an employer when directly withholding shares for tax withholding purposes should be classified as a financing activity in the statement of cash flows.  The amendments in ASU No. 2016-09 are effective for public business entities for fiscal years, and for interim periods within those fiscal years, beginning after December 15, 2016.  Adoption of ASU No. 2016-07 did not have a significant effect on the Company’s consolidated financial statements as of December 31, 2017.

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 No. 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 No. 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 No. 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 No. 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.  ASU No. 2016-13 will take effect for U.S. Securities and Exchange Commission (SEC) filers for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019.  Early application will be permitted for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018.  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

15

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except per share data)

and disclosures.  Management is currently assessing any additional data and system requirements necessary for adoption.  At this time, the estimated financial statement, including disclosures, impact cannot be reasonably determined.

In August 2016, the FASB issued ASU 2016-15, Statement of Cash Flows: Classification of Certain Cash Receipts and Cash Payments which may change how an entity classifies certain cash receipts and cash payments on its statement of cash flows to reduce diversity in practice.  The update also provides guidance on when an entity should separate cash flows and classify them into more than one class and when an entity should classify the aggregate of those cash flows into a single class based on the predominance principle.  The guidance in this ASU will become effective for interim and annual reporting periods beginning after December 15, 2017, with early adoption permitted.  Management has reviewed the applicability of this ASU and has concluded that this will not have a material impact on its consolidated financial statements.

The FASB has issued ASU 2017-08, Receivables—Nonrefundable Fees and Other Costs (Subtopic 310-20), Premium Amortization on Purchased Callable Debt Securities. The ASU shortens the amortization period for certain callable debt securities held at a premium to the earliest call date. Under current GAAP, entities normally amortize the premium as an adjustment of yield over the contractual life of the instrument. Stakeholders have expressed concerns with the current approach on the basis that current GAAP excludes certain callable debt securities from consideration of early repayment of principal even if the holder is certain that the call will be exercised. As a result, upon the exercise of a call on a callable debt security held at a premium, the unamortized premium is recorded as a loss in earnings. Further, there is diversity in practice (1) in the amortization period for premiums of callable debt securities, and (2) in how the potential for exercise of a call is factored into current impairment assessments.  Another issue is that the practice in the United States is to quote, price, and trade callable debt securities assuming a model that incorporates consideration of calls (also referred to as “yield-to-worst” pricing).  The ASU shortens the amortization period for certain callable debt securities held at a premium and requires the premium to be amortized to the earliest call date.  However, the amendments do not require an accounting change for securities held at a discount; the discount continues to be amortized to maturity.  The amendments are effective for public business entities for annual periods beginning after December 15, 2018, including interim periods within those annual periods.  Early adoption is permitted. The Company has decided to adopt this ASU early and adoption did not have a material impact the Company’s consolidated financial statements as there were no callable debt securities held at a premium at the date of adoption.

The FASB has issued ASU No. 2017-09, Compensation—Stock Compensation (Topic 718): Scope of Modification Accounting.  ASU 2017-09 applies to entities that change the terms or conditions of a share-based payment award.  The FASB adopted ASU 2017-09 to provide clarity and reduce diversity in practice as well as cost and complexity when applying the guidance in Topic 718, Compensation—Stock Compensation, to the modification of the terms and conditions of a share-based payment award.  The amendments are effective for all entities for annual periods, and interim periods within those annual periods, beginning after December 15, 2017.  Early adoption is permitted, including adoption in any interim period for: (a) public business entities for reporting periods for which financial statements have not yet been issued, and (b) all other entities for reporting periods for which financial statements have not yet been made available for issuance.  The amendments should be applied prospectively to an award modified on or after the adoption date. Adoption of ASU No. 2017-09 is not expected to have a significant impact on the Company’s consolidated financial statements.

The FASB has issued ASU No. 2017-12, Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities.  The new standard is intended to improve and simplify accounting rules around hedge accounting.  The new standard refines and expands hedge accounting for both financial (e.g., interest rate) and commodity risks.  Its provisions create more transparency around how economic results are presented, both on the face of the financial statements and in the footnotes, for investors and analysts.  The new standard takes effect for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018, for public companies and for fiscal years beginning after December 15, 2019 (and interim periods for fiscal years beginning after December 15, 2020), for private companies. Early adoption is permitted in any interim period or fiscal years before the effective date of the standard.  Adoption of ASU No. 2017-12 is not expected to have a significant impact on the Company’s consolidated financial statements.

The FASB issued ASU No. 2018-02, Income Statement—Reporting Comprehensive Income (Topic 220)—Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income.  The ASU provides financial statement preparers with an option to reclassify stranded tax effects within AOCI to retained earnings in each period in which the effect of the change in the U.S. federal corporate income tax rate in the Tax Cuts and Jobs Act (or portion thereof) is recorded.

The ASU requires financial statement preparers to disclose:

· A description of the accounting policy for releasing income tax effects from AOCI;

· Whether they elect to reclassify the stranded income tax effects from the Tax Cuts and Jobs Act; and

· Information about the other income tax effects that are reclassified.

The amendments affect any organization that is required to apply the provisions of Topic 220, Income Statement—Reporting Comprehensive Income, and has items of other comprehensive income for which the related tax effects are presented in other

16

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except per share data)

comprehensive income as required by GAAP.  The amendments are effective for all organizations for fiscal years beginning after December 15, 2018, and interim periods within those fiscal years. Early adoption is permitted. Adoption of ASU No. 2018.-02 is not expected to have a material impact on the Company’s consolidated financial statements. 

NOTE 2- REGULATORY MATTERS

Regulatory Matters:  

From May 2011 until 2014, the Holding Company and CFBank each were subject to Cease and Desist Orders (the “Holding Company Order” and the “CFBank Order”, respectively, and collectively, the “Orders”) with the FRB, as successor to the Office of Thrift Supervision (the “OTS”) as the primary regulator of the Holding Company and CFBank.  The Orders imposed significant directives applicable to the Holding Company and CFBank, including requirements that we maintain heightened capital levels, reduce the level of our classified and criticized assets, achieve growth and operating metrics in line with an approved business plan, and comply with restrictions on brokered deposits and on certain types of lending and prohibitions on dividends and repurchases of our capital stock.

The OCC released and terminated the CFBank Order effective as of January 23, 2014.  On May 15, 2014, the FRB announced the termination of the Holding Company Order, effective as of May 9, 2014.  Notwithstanding the termination of the Holding Company Order, the Holding Company was required to continue to adhere to certain requirements and restrictions based on commitments made to the FRB in connection with the termination of the Holding Company Order.  These commitments required the Holding Company, among other things, to continue to implement certain actions in accordance with the capital plan previously submitted to the FRB; not declare or pay dividends on its stock, purchase or redeem its stock, or accept dividends or other capital distributions from CFBank without the prior written approval of the FRB; not incur, increase or guarantee any debt without the prior written consent of the FRB; and provide prior written notice to the FRB with respect to certain changes in directors and senior executive officers.  The foregoing commitments remained in place until January 8, 2016.

Although we are no longer subject to the Orders or the regulatory commitments made following the release of the Orders, we remain subject to extensive supervision and regulation by our regulators and it is possible that regulatory compliance expenses could continue to have an adverse impact on us in the future.

Dividend Restrictions:

The ability of the Holding Company to pay dividends on its outstanding stock is generally dependent upon the receipt of dividends and other distributions from CFBank.  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. 

Effective October 6, 2017, all of its outstanding shares of Series B Preferred Stock were converted into shares of Common Stock of the Company.  The conversion of the Series B Preferred Stock resulted in the elimination of the non-cumulative preferred dividend payments on the Series B Preferred Stock beginning with the 4th quarter of 2017.  See Note 17 toour consolidated financial statements included in this annual report for additional information regarding the conversion of the Series B Preferred Stock.

17

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except per share data)

NOTE 3 – SECURITIES

The following table summarizes the amortized cost and fair value of the available-for-sale securities portfolio at December 31, 2017 and December31, 2016 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, 2017
Issued by U.S. government-sponsored entities and agencies:
U.S. Treasury	$	11,499	$	-	$	82	$	11,417
Mortgage-backed securities - residential		236		8		-		244
Collateralized mortgage obligations		110		2		-		112
Total	$	11,845	$	10	$	82	$	11,773

	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
December 31, 2016
Issued by U.S. government-sponsored entities and agencies:
U.S. Treasury	$	13,521	$	11	$	27	$	13,505
Mortgage-backed securities - residential		345		12		-		357
Collateralized mortgage obligations		189		7		-		196
Total	$	14,055	$	30	$	27	$	14,058

There was no other-than-temporary impairment recognized in accumulated other comprehensive income (loss) for securities available for sale at December 31, 2017 or December 31, 2016.

There were no sales of securities for the years ended December 31, 2017 or December 31, 2016.

The amortized cost and fair value of debt securities at December 31, 2017 and December 31, 2016 are shown 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, 2017				December 31, 2016
	Amortized Cost		Fair Value		Amortized Cost		Fair Value
Due in one year or less	$	3,002	$	2,993	$	2,518	$	2,518
Due from one to five years		8,497		8,424		11,003		10,987
Mortgage-backed securities - residential		236		244		345		357
Collateralized mortgage obligations		110		112		189		196
Total	$	11,845	$	11,773	$	14,055	$	14,058

18

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except per share data)

Fair value of securities pledged was as follows:

	2017		2016
Pledged as collateral for:
FHLB advances	$	4,641	$	2,327
Public deposits		2,018		2,043
Interest-rate swaps		145		195
Total	$	6,804	$	4,565

At year end 2017 and 2016, there were no holdings of securities of any one issuer, other than U.S. Treasuries and U.S. government-sponsored entities and agencies, in an amount greater than 10% of stockholders’ equity.

The following table summarizes securities with unrealized losses at December 31, 2017 and December 31, 2016 aggregated by major security type and length of time in a continuous unrealized loss position.

December 31, 2017	Less than 12 Months				12 Months or More				Total
Description of Securities	Fair Value		Unrealized Loss		Fair Value		Unrealized Loss		Fair Value		Unrealized Loss
Issued by U.S. government-sponsored entities and agencies:
U.S. Treasury	$	6,947	$	51	$	4,470	$	31	$	11,417	$	82
Total temporarily impaired	$	6,947	$	51	$	4,470	$	31	$	11,417	$	82

December 31, 2016	Less than 12 Months				12 Months or More				Total
Description of Securities	Fair Value		Unrealized Loss		Fair Value		Unrealized Loss		Fair Value		Unrealized Loss
Issued by U.S. government-sponsored entities and agencies:
U.S. Treasury	$	10,492	$	27	$	-	$	-	$	10,492	$	27
Mortgage-backed securities - residential (1)		1		-		-		-		1		-
Total temporarily impaired	$	10,493	$	27	$	-	$	-	$	10,493	$	27

⁽¹⁾ Securities with an unrealized loss were less than $1 resulting in rounding to zero.

The unrealized losses in U.S. Treasuries at December 31, 2017 and U.S. Treasuries and Mortgage-backed securities at December 31, 2016, are related to multiple securities.  Because the decline in fair value is attributable to changes in market conditions, and not credit quality, and because the Company does not have the intent to sell these securities and will 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, 2017 and December 31, 2016.

19

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except per share data)

NOTE 4 – LOANSAND 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, 2017		December 31, 2016
Commercial (1)	$	101,975	$	71,334
Real estate:
Single-family residential		95,578		92,544
Multi-family residential		35,665		34,291
Commercial		111,866		105,313
Construction		42,862		25,822
Consumer:
Home equity lines of credit		25,054		23,109
Other		376		637
Subtotal		413,376		353,050
Less: ALLL		(6,970)		(6,925)
Loans and Leases, net	$	406,406	$	346,125

⁽¹⁾ Includes $6,008 and $2,874 of commercial leases at December 31, 2017 and December 31, 2016, respectively.

Mortgage Purchase Program:

CFBank has participated in a Mortgage Purchase Program with Northpointe Bank (Northpointe), a Michigan banking corporation, since December 2012.  Pursuant to the terms of a participation agreement, CFBank purchases participation interests in loans made by Northpointe related to fully underwritten and pre-sold mortgage loans originated by various prescreened mortgage brokers located throughout the U.S.  The underlying loans are individually (MERS) registered loans which are held until funded by the end investor. The mortgage loan investors include Fannie Mae and Freddie Mac, and other major financial institutions.  This process on average takes approximately 14 days.  Given the short-term holding period of the underlying loans, common credit risks (such as past due, impairment and TDR, nonperforming, and nonaccrual classification) are substantially reduced.  Therefore, no allowance is allocated by CFBank to these loans.These loans are 100% risk rated for CFBank capital adequacy purposes.  Under the participation agreement,  CFBank agrees to purchase a95%ownership/participation interest in each of the aforementioned loans, and Northpointe maintains a 5% ownership interest in each loan it participates.  At December 31, 2017 and 2016, CFBank held $37,665 and $46,919, 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 of the Notes to Consolidated Financial Statements.

The following tables present the activity in the ALLL by portfolio segment for the years ended December 31, 2017 and 2016:

	December 31, 2017
			Real Estate								Consumer
	Commercial		Single-family		Multi-family		Commercial		Construction		Home Equity lines of credit		Other		Total
Beginning balance	$	1,647	$	735	$	716	$	2,727	$	580	$	486	$	34	$	6,925
Addition to (reduction in) provision for loan losses		335		157		(56)		(584)		92		88		(32)		-
Charge-offs		-		-		-		-		-		-		-		-
Recoveries		2		20		-		-		-		23		-		45
Ending balance	$	1,984	$	912	$	660	$	2,143	$	672	$	597	$	2	$	6,970

20

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except per share data)

	December 31, 2016
			Real Estate								Consumer
	Commercial		Single-family		Multi-family		Commercial		Construction		Home Equity lines of credit		Other		Total
Beginning balance	$	1,380	$	691	$	705	$	2,710	$	561	$	474	$	99	$	6,620
Addition to (reduction in) provision for loan losses		390		149		(132)		(128)		19		(4)		(64)		230
Charge-offs		(123)		(147)		-		-		-		(53)		(1)		(324)
Recoveries		-		42		143		145		-		69		-		399
Ending balance	$	1,647	$	735	$	716	$	2,727	$	580	$	486	$	34	$	6,925

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, 2017:  

			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	$	-	$	-	$	-	$	26	$	-	$	-	$	-	$	26
Collectively evaluated for impairment		1,984		912		660		2,117		672		597		2		6,944
Total ending allowance balance	$	1,984	$	912	$	660	$	2,143	$	672	$	597	$	2	$	6,970
Loans:
Individually evaluated for impairment	$	277	$	116	$	-	$	3,183	$	-	$	-	$	-	$	3,576
Collectively evaluated for impairment		101,698		95,462		35,665		108,683		42,862		25,054		376		409,800
Total ending loan balance	$	101,975	$	95,578	$	35,665	$	111,866	$	42,862	$	25,054	$	376	$	413,376

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, 2016:  

			Real Estate								Consumer
	Commercial		Single- family		Multi- family		Commercial		Construction		Home Equity lines of credit		Other		Total
ALLL:
Ending allowance balance attributable to loans:
Individually evaluated for impairment	$	1	$	-	$	-	$	21	$	-	$	-	$	-	$	22
Collectively evaluated for impairment		1,646		735		716		2,706		580		486		34		6,903
Total ending allowance balance	$	1,647	$	735	$	716	$	2,727	$	580	$	486	$	34	$	6,925
Loans:
Individually evaluated for impairment		557	$	122	$	37	$	2,732	$	-	$	-	$	-	$	3,448
Collectively evaluated for impairment		70,777		92,422		34,254		102,581		25,822		23,109		637		349,602
Total ending loan balance	$	71,334	$	92,544	$	34,291	$	105,313	$	25,822	$	23,109	$	637	$	353,050

21

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except per share data)

The following table presents loans individually evaluated for impairment by class of loans as of and for the year ended December 31, 2017. 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. 2017 totaled $190.

	Unpaid Principal Balance		Recorded Investment		ALLL Allocated		Average Recorded Investment		Interest Income Recognized
With no related allowance recorded:
Real estate:
Commercial:
Owner occupied	$	391	$	137	$	-	$	142	$	26
Land		-		-		-		-		-
Total with no allowance recorded		391		137		-		142		26
With an allowance recorded:
Commercial		277		277		-		291		9
Real estate:
Single-family residential		116		116		-		118		6
Commercial:
Non-owner occupied		2,856		2,856		24		2,882		154
Owner occupied		190		190		2		194		9
Total with an allowance recorded		3,439		3,439		26		3,485		178
Total	$	3,830	$	3,576	$	26	$	3,627	$	204

The following table presents loans individually evaluated for impairment by class of loans as of and for the year ended December 31, 2016. 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. 2016 totaled $216.

	Unpaid Principal Balance		Recorded Investment		ALLL Allocated		Average Recorded Investment		Interest Income Recognized
With no related allowance recorded:
Commercial	$	476	$	358	$	-	$	436	$	13
Real estate:
Multi-family residential		37		37		-		41		2
Commercial:
Non-owner occupied		112		112		-		114		8
Owner occupied		871		350		-		360		46
Total with no allowance recorded		1,496		857		-		951		69
With an allowance recorded:
Commercial		199		199		1		232		9
Real estate:
Single-family residential		122		122		-		125		7
Commercial:
Non-owner occupied		2,068		2,068		19		2,086		126
Owner occupied		202		202		2		208		10
Total with an allowance recorded		2,591		2,591		22		2,651		152
Total	$	4,087	$	3,448	$	22	$	3,602	$	221

22

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except per share data)

The following table presents the recorded investment in nonperforming loans by class of loans as of December 31, 2017 and 2016:

	2017		2016
Loans past due over 90 days still on accrual	$	-	$	-
Nonaccrual loans:
Commercial		115		263
Real estate:
Single-family residential		253		397
Consumer:
Home equity lines of credit:
Originated for portfolio		-		44
Purchased for portfolio		102		-
Total nonaccrual		470		704
Total nonperforming loans	$	470	$	704

Nonaccrual loans include both smaller balance single-family mortgage and consumer loans that are collectively evaluated for impairment and individually classified impaired loans. There were no loans 90 days or more past due and still accruing interest at December 31, 2017 or December 31, 2016.  

The following table presents the aging of the recorded investment in past due loans and leases by class of loans as of December 31, 2017:

	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	$	-	$	-	$	-	$	-	$	101,975	$	115
Real estate:
Single-family residential		1,610		27		104		1,741		93,837		149
Multi-family residential		-		-		-		-		35,665		-
Commercial:
Non-owner occupied		-		-		-		-		67,792		-
Owner occupied		-		-		-		-		38,787		-
Land		-		-		-		-		5,287		-
Construction		-		-		-		-		42,862		-
Consumer:
Home equity lines of credit:
Originated for portfolio		-		-		-		-		24,592		-
Purchased for portfolio		-		-		102		102		360		-
Other		24		-		-		24		352		-
Total	$	1,634	$	27	$	206	$	1,867	$	411,509	$	264

23

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except per share data)

The following table presents the aging of the recorded investment in past due loans and leases by class of loans as of December 31, 2016:  

	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	$	-	$	-	$	119	$	119	$	71,215	$	144
Real estate:
Single-family residential		284		49		106		439		92,105		291
Multi-family residential		-		-		-		-		34,291		-
Commercial:
Non-owner occupied		-		-		-		-		60,936		-
Owner occupied		269		600		-		869		34,891		-
Land		-		-		-		-		8,617		-
Construction		48		-		-		48		25,774		-
Consumer:
Home equity lines of credit:
Originated for portfolio		-		15		-		15		22,440		44
Purchased for portfolio		69		-		-		69		585		-
Other		-		-		-		-		637		-
Total	$	670	$	664	$	225	$	1,559	$	351,491	$	479

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, 2017 and December 31, 2016, TDR’s totaled $3,386 and $3,130, respectively.  The Company allocated $25 and $22 of specific reserves to loans modified in TDRs as of December 31, 2017 and 2016, respectively. The Company had not committed to lend additional amounts as of December 31, 2017 or 2016 to customers with outstanding loans that wereclassified as nonaccrual TDRs.

There was one commercial real estate loan in the amount of $841 that was modified as a TDR during the year ended December 31, 2017,  where concessions were granted to a borrower experiencing financial difficulty.  The loan was re-written at a lower interest rate than otherwise would have been offered on this credit grade in the current market. There was onecommercialloan in the amount of $239 that was modified as TDRs during the year ended December 31, 2016, where concessions were granted to a  borrower experiencing financial difficulties.   

The following table presents loans modified as TDRs by class of loans during the year ended December 31, 2017:

	Number of Loans		Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment
Commercial		1	$	841	$	841
Total		1	$	841	$	841

24

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except per share data)

The following table presents loans modified as TDRs by class of loans during the year ended December 31, 2016:

	Number of Loans		Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment
Commercial		1	$	339	$	339
Total		1	$	339	$	339

The TDRs described above resulted in nocharge-offs during the years ended December 31, 2017 and 2016, respectively.

There wereno TDR’s that went into payment default during the year ended December 31, 2017.  There wasonenonperforming TDR that went into payment default during the year ending December 31, 2016. 

The terms of certain other loans were modified during the year ended December 31, 2017 and 2016 that did not meet the definition of a TDR. These loans had a total recorded investment of $46,731 and $33,294 as of December 31, 2017 and 2016, respectively. The modification of these loans involved either a modification of the terms of a loan to borrowers who were not experiencing financial difficulties, a delay in a payment that was considered to be insignificant or there were no concessions granted.

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

Nonaccrual loans include loans that were modified and identified as TDRs and the loans are not performing.  At December 31, 2017 and 2016, nonaccrual TDRs were as follows: 

	2017		2016
Commercial	$	115	$	144
Total	$	115	$	144

Nonaccrual loans at December 31, 2017 and 2016 did not include $3,271 and $2,986, respectively, of TDRs where customers have established a sustained period of repayment performance, generally six months, the loans are current according to their modified terms and repayment of the remaining contractual payments is expected.  These loans are included in total impaired loans.

Credit Quality Indicators:

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

25

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except per share data)

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, 2017 and based on the most recent analysis performed follows.  There were no loans rated doubtful at December 31, 2017. 

	Not Rated		Pass		Special Mention		Substandard		Total
Commercial	$	-	$	98,829	$	2,869	$	277	$	101,975
Real estate:
Single-family residential		95,317		-		-		261		95,578
Multi-family residential		-		35,036		466		163		35,665
Commercial:
Non-owner occupied		88		65,161		1,711		832		67,792
Owner occupied		-		37,453		1,008		326		38,787
Land		-		5,287		-		-		5,287
Construction		2,239		40,623		-		-		42,862
Consumer:
Home equity lines of credit:
Originated for portfolio		24,516		-		-		76		24,592
Purchased for portfolio		360		-		-		102		462
Other		376		-		-		-		376
	$	122,896	$	282,389	$	6,054	$	2,037	$	413,376

The recorded investment in loans and leases by risk category and class of loans as of December 31, 2016 follows.  There were no loans rated doubtful at December 31, 2016.

	Not Rated		Pass		Special Mention		Substandard		Total
Commercial	$	47	$	70,444	$	286	$	557	$	71,334
Real estate:
Single-family residential		92,130		-		-		414		92,544
Multi-family residential		-		33,615		505		171		34,291
Commercial:
Non-owner occupied		115		58,183		1,782		856		60,936
Owner occupied		-		33,493		1,048		1,219		35,760
Land		-		6,380		-		2,237		8,617
Construction		1,997		23,825		-		-		25,822
Consumer:
Home equity lines of credit:
Originated for portfolio		22,328		-		-		127		22,455
Purchased for portfolio		512		-		-		142		654
Other		637		-		-		-		637
	$	117,766	$	225,940	$	3,621	$	5,723	$	353,050

26

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except per share data)

NOTE 5 – FORECLOSED ASSETS

Foreclosed assets at year-end were as follows:

	2017		2016
Commercial real estate	$	-	$	-
Single-family residential		-		204
Subtotal		-		204
Valuation Allowance		-		-
Total	$	-	$	204

There was no activity in the valuation allowance account or any write-downs during the years ended December 31, 2017 and 2016.

Expenses related to foreclosed assets include:

	2017		2016
Net loss (gain) on sales	$	7	$	(4)
Operating expenses, net of rental income		11		69
	$	18	$	65

There were noforeclosed assets at December 31, 2017.  Foreclosed assets at December 31, 2016consisted ofonesingle-family property that was transferred into REO at fair value at the time of transfer in December 2016.Foreclosed asset expensesincurred during 2017was related to light rehabilitation incurred to ready the property to sell.  Foreclosed asset expense incurred during 2016was related to light rehabilitation and maintenance expense incurred to ready the property to sell, increase occupancy levels, and certain other operating costs.

NOTE 6 – FAIR VALUE

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

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

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

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

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

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

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

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.

27

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except per share data)

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, 2017 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	$	11,417
Mortgage-backed securities - residential		244
Collateralized mortgage obligations		112
Total securities available for sale	$	11,773
Loans held for sale	$	1,124
Yield maintenance provisions (embedded derivatives)	$	56
Interest rate lock commitments	$	11
Financial Liabilities:
Interest-rate swaps	$	56

28

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except per share data)

	Fair Value Measurements at December 31, 2016 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	$	13,505
Mortgage-backed securities - residential		357
Collateralized mortgage obligations		196
Total securities available for sale	$	14,058
Loans held for sale	$	2,812
Yield maintenance provisions (embedded derivatives)	$	122
Interest rate lock commitments	$	9
Financial Liabilities:
Interest-rate swaps	$	122

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, 2017 or December 31, 2016.  There were no transfers of assets or liabilities measured at fair value between levels during 2017 or 2016.

Assets measured at fair value on a non-recurring basis are summarized below:

Fair Value Measurements at December 31, 2017 Using
Significant Unobservable Inputs (Level 3)
Impaired loans:
Commercial	$	115
Real Estate:
Single-family residential		116
Commercial:
Non-owner occupied		2,832
Total impaired loans	$	3,063

Fair Value Measurements at December 31, 2016 Using
Significant Unobservable Inputs (Level 3)
Impaired loans:
Commercial	$	130
Real Estate:
Single-family residential		122
Multi-family residential		37
Commercial:
Non-owner occupied		2,161
Owner occupied		200
Total impaired loans	$	2,650

29

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except per share data)

The Company had no assets or liabilities measured at fair value on a non-recurring basis that were measured using Level 1 or 2 inputs at December 31, 2017 or December 31, 2016.

Impaired loans that are measured for impairment using the fair value of the collateral for collateral dependent loans, had a principal balance of $3,087, with a valuation allowance of $24 at December 31, 2017.  Impaired loans that are measured for impairment using the fair value of the collateral for collateral dependent loans, had a principal balance of $2,672 with a valuation allowance of $21 at December 31, 2016. 

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, 2017:

	Fair Value		Valuation Technique(s)	Unobservable Inputs	(Range) Weighted Average
Impaired loans:
Commercial	$	115	Comparable sales approach	Adjustment for differences between the comparable market transactions	3.48%
Real estate:
Single-family residential		116	Comparable sales approach	Adjustment for differences between the comparable market transactions	(1.81%, 3.61%)  2.91%
Commercial:
Non-owner occupied		2,832	Comparable sales approach	Adjustment for differences between the comparable market transactions	(3.48%, 9.64%) 5.15%

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, 2016:

	Fair Value		Valuation Technique(s)	Unobservable Inputs	(Range) Weighted Average
Impaired loans:
Commercial	$	130	Comparable sales approach	Adjustments by management to reflect current discount rates	3.48%
Real estate:
Single -family residential		122	Comparable sales approach	Adjustment for differences between the comparable market transactions	(1.81% , 3.61%)  2.91%
Multi-family residential		37	Comparable sales approach	Adjustment for differences between the comparable market transactions	9.64%
Commercial:
Non-owner occupied		2,161	Comparable sales approach	Adjustment for differences between the comparable market transactions	(1.10%, 5.74%) 1.35%
Owner occupied		200	Comparable sales approach	Adjustment for differences between the comparable market transactions	-4.46%

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 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, 2017 or December 31, 2016. 

30

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except per share data)

As of December 31, 2017 and December 31, 2016, the aggregate fair value, contractual balance and gain or loss of loans held for sale were as follows:

	December 31, 2017		December 31, 2016
Aggregate fair value	$	1,124	$	2,812
Contractual balance		1,120		2,801
Gain		4		11

The total amount of gains and losses from changes in fair value included in earnings for the year ended December 31, 2017 and 2016 for loans held for sale were:

	2017		2016
Interest income	$	68	$	60
Interest expense		-		-
Change in fair value		(7)		6
Total change in fair value	$	61	$	66

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

	Fair Value Measurements at December 31, 2017 Using:
	Carrying
	Value		Level 1		Level 2		Level 3		Total
Financial assets
Cash and cash equivalents	$	45,498	$	45,498	$	-	$	-	$	45,498
Interest-bearing deposits in other financial institutions		100		100		-		-		100
Securities available for sale		11,773		-		11,773		-		11,773
Loans held for sale		1,124		-		1,124		-		1,124
Loans and leases, net		406,406		-		-		402,719		402,719
FHLB and FRB stock		3,227		n/a		n/a		n/a		n/a
Accrued interest receivable		1,326		27		38		1,261		1,326
Yield maintenance provisions (embedded derivatives)		56		-		56		-		56
Interest rate lock commitments		11		-		11		-		11
Financial liabilities
Deposits	$	(419,028)	$	(236,797)	$	(181,659)	$	-	$	(418,456)
FHLB advances and other borrowings		(13,500)		-		(13,466)		-		(13,466)
Advances by borrowers for taxes and insurance		(489)		-		-		(489)		(489)
Subordinated debentures		(5,155)		-		(4,094)		-		(4,094)
Accrued interest payable		(79)		(6)		(73)		-		(79)
Interest-rate swaps		(56)		-		(56)		-		(56)

31

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except per share data)

The carrying amounts and estimated fair values of financial instruments at December 31, 2016 were as follows:

	Fair Value Measurements at December 31, 2016 Using:
	Carrying
	Value		Level 1		Level 2		Level 3		Total
Financial assets
Cash and cash equivalents	$	57,941	$	57,941	$	-	$	-	$	57,941
Interest-bearing deposits in other financial institutions		100		100		-		-		100
Securities available for sale		14,058		-		14,058		-		14,058
Loans held for sale		2,812		-		2,812		-		2,812
Loans and leases, net		346,125		-		-		343,523		343,523
FHLB stock		1,942		n/a		n/a		n/a		n/a
Accrued interest receivable		1,054		13		40		1,001		1,054
Yield maintenance provisions (embedded derivatives)		122		-		122		-		122
Interest rate lock commitments		9		-		9		-		9
Financial liabilities
Deposits	$	(375,364)	$	(202,158)	$	(171,967)	$	-	$	(374,125)
FHLB advances and other borrowings		(13,500)		-		(13,597)		-		(13,597)
Advances by borrowers for taxes and insurance		(408)		-		-		(408)		(408)
Subordinated debentures		(5,155)		-		(3,411)		-		(3,411)
Accrued interest payable		(78)		(2)		(76)		-		(78)
Interest-rate swaps		(122)		-		(122)		-		(122)

The methods and assumptions used to estimate fair value are described as follows.

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

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

FHLB and FRB Stock

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

Loans and Leases

Fair values of loans and leases, excluding loans held for sale, are estimated 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.  Impaired loans are valued at the lower of cost or fair value as described previously. The methods utilized to estimate the fair value of loans do not necessarily represent an exit price.

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.

Other Borrowings

The fair values of the Company’s long-term FHLB 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.

32

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except per share data)

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, 2017		December 31, 2016
Mortgage loans serviced for Freddie Mac	$	3,319	$	4,261

Custodial escrow balances maintained in connection with serviced loans were $74 and $119 at year-end 2017 and 2016, respectively.

NOTE 8- PREMISES AND EQUIPMENT

Year-end premises and equipment were as follows:

	December 31, 2017		December 31, 2016
Land and land improvements	$	1,293	$	1,293
Buildings		3,938		3,832
Furniture, fixtures and equipment		2,316		2,150
		7,547		7,275
Less: Accumulated Depreciation		(4,014)		(3,846)
	$	3,533	$	3,429

Depreciation expense for 2017 and 2016 totaled $208 and$211, respectively.

Operating Leases:

The Company leases certain branch and loan office property space under three operating leases. Each lease requires CFBank to absorb its pro rata share of building operating expenses and utilities based on square footage. The Company entered into a lease agreement to open CFBank’s Glendale branch office in the Cincinnati market, which openedduring the third quarter of 2017.  The Glendale lease is for a 60-month term commencing on July 1, 2017, with three renewal options for additional consecutive terms of five years, five years, and four years.  The Company leases acommercial banking agency  office in Woodmere, Ohio, which opened in January of 2014.  The Woodmere lease is for a 128-month term commencing January 1, 2014 with no renewal options. The Company leases CFBank’s Fairlawn branch office pursuant to a  ten year operating lease beginning in 2014 with annual rent increases each year. There is one five-year renewal option on this lease.  Lease expense for the years ended December 31, 2017 and 2016 totaled $325 and $311, respectively.  Leasehold improvements are depreciated straight line over the lease term before consideration of renewal options.

33

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except per share data)

Lease expense is recognized evenly over the lease term to account for lease incentives.  Rent commitments, before renewal options, are as follows:

2018	$	350
2019		355
2020		356
2021		357
2022		342
Thereafter		532
	$	2,292

NOTE 9 – DEPOSITS

Time deposits of $100 or more were $137,433 and $128,185 at year-end 2017 and 2016, respectively.  Time deposits of $250 or more were $50,048 and $38,575 at year-end 2017 and 2016, respectively.

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

2018	$	93,215
2019		33,750
2020		20,360
2021		7,737
2022		27,169
Thereafter		-
Total	$	182,231

Brokereddeposits at year-end 2017 and 2016 totaled $46,945 and  $29,738, respectively. 

NOTE 10 –FHLB ADVANCES

Fixed Rate Advances from the FHLB were as follows:

	Weighted
	Average Rate	December 31, 2017		December 31, 2016
Fixed Rate Advances
Maturities:
2017	-	$	-	$	2,500
2018	-		-		-
2019	1.62%		3,500		3,500
2020	1.98%		4,500		3,500
2021	2.32%		4,000		4,000
2022	2.05%		1,500		-
Total		$	13,500	$	13,500

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

34

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except per share data)

The advances were collateralized as follows:

	December 31, 2017		December 31, 2016
Single-family mortgage loans	$	49,616	$	38,342
Multi-family mortgage loans		15,125		14,854
Commercial real estate loans (1-4 family)		5,348		2,793
Home equity lines of credit		7,061		-
Securities		4,641		2,327
Cash		3,300		3,300
Total	$	85,091	$	61,616

Based on the collateral pledged to the FHLB and CFBank’s holdings of FHLB stock, CFBank was eligible to borrow up to a total of $65,003 from the FHLB at December 31, 2017. 

Payments due to the FHLB over the next five years are as follows:

	December 31, 2017
2018	$	-
2019		3,500
2020		4,500
2021		4,000
2022		1,500
	$	13,500

NOTE 11 - OTHER BORROWINGS

There were no outstanding borrowings with the Federal Reserve Bank (the “FRB”) at December 31, 2017 or at December 31, 2016. 

Assets pledged as collateral with the FRB were as follows:

	2017		2016
Commercial loans	$	18,491	$	16,380
Commercial real estate loans		43,518		39,230
	$	62,009	$	55,610

Based on the collateral pledged, CFBank was eligible to borrow up to $40,448 from the FRB at year-end 2017.

CFBank had $8.0million of availability in an unused line of credit at a commercial bank at December 31, 2017 and a $1.0 million unused line of credit with a different commercial bank at December 31, 2016.  During the first quarter of 2017, the Company added an$8.0million line of credit for potential liquidity purposes. The previous $1.0 million line of credit, with a different institution, was closed during the second quarter of 2017. There were no outstanding borrowings on these lines of credit at December 31, 2017 or December 31, 2016.  If CFBank were to borrow on this line of credit, interest would accrue daily at a variable rate based on the commercial bank’s cost of funds and current market returns.

NOTE 12 – 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

35

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except per share data)

trust is not consolidated in the Company’s financial statements, but rather the subordinated debentures are shown as a liability.  The Holding Company’s investment in the common stock of the trust was $155 and is included in other assets.

The Holding Company may redeem the subordinated debentures, in whole or in part, in a principal amount with integral multiples of $1, on or after December 30, 2008 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 4.54% at year-end 2017 and 3.85% at year-end 2016.

NOTE 13 – 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 unfunded liability under the Pentegra DB Plan at June 30, 2017 totaled  $36 and at June 30, 2016 was $53.  CFBank’s contributions for the plan years ending June 30, 2017 and June 30, 2016, totaled $32,  and $42, 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 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, 2017 and 2016 was 96.54% and94.90%, respectively. 

Total contributions made to the Pentegra DB Plan, as reported on Form 5500 of the Pentegra DB Plan, totaled $153,186 and $163,138 for the plan years ended June 30, 2016 and June 30, 2015, respectively.CFBank’s contributions to the Pentegra DB Plan were not more than 5% of the total contributions to the Pentegra DB Plan.

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 25% of the first 8% of the compensation contributed.  Expense for 2017 and 2016 was $57  and$49, respectively.

Salary Continuation Agreement:

In 2004, CFBank entered into a nonqualified salary continuation agreement with itsformer 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 $10 and$10 in 2017 and 2016, respectively. The accrual is included in accrued interest payable and other liabilities in the consolidated balance sheets and totaled $203 at year-end 2017 and $218 at year-end 2016. 

36

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except per share data)

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 ($19) and($3) in 2017 and 2016, 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 $191 at year-end 2017 and $210 at year-end 2016.

NOTE 14 – INCOME TAXES

Income tax expense was as follows:

	December 31, 2017		December 31, 2016
Current federal	$	1,133	$	187
Deferred federal (1)		3		623
Revaluation of net deferred tax assets		979		-
Total	$	2,115	$	810

⁽¹⁾ Includes tax benefit of operating loss carryforwards of  $52 and  $717 for the years ended December 31, 2017 and 2016, respectively.

Effective tax rates differ from the federal statutory rate of 34% applied to income (loss) before income taxes due to the following:

	December 31, 2017		December 31, 2016
Federal Statutory rate times financial statement income (loss)	$	1,177	$	829
Effect of:
Stock compensation		(49)		6
Bank owned life insurance income		(46)		(45)
Revaluation of net deferred tax assets		979		-
Other		54		20
	$	2,115	$	810
Effective tax rate		61%		33%

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

	2017		2016
Deferred tax assets:
Allowance for loan and lease losses	$	997	$	1,575
Compensation related issues		274		353
Deferred loan fees		100		155
AMT Credit		-		50
Nonaccrual interest		45		41
Net operating loss carry forward		501		863
Other		42		70
		1,959		3,107
Deferred tax liability:
FHLB stock dividend		226		366
Mortgage servicing rights		1		2
Depreciation		36		47
Prepaid expenses		51		63
Mark-to-market loans		-		2
		314		480
Net deferred tax asset	$	1,645	$	2,627

37

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except per share data)

At December 31, 2017, the Company had a deferred tax asset recorded of approximately $1,600.  At December 31, 2016, the Company had a deferred tax asset recorded of approximately $2,600.  At December 31, 2017 and December 31, 2016, 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 2014. 

On December 22, 2017, the United States enacted tax reform legislation through the Tax Cuts and Jobs Act, which significantly changes the existing U.S. tax laws, including a reduction in the corporate tax rate from 35% to 21%, as well as other changes. As a result of enactment of the legislation, the Company incurred additional one-time income tax expense of $979,000 during the fourth quarter of 2017, related to the remeasurement of the Company's deferred tax assets and liabilities.

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, 2017 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 2017, the Company had net operating loss carryforwards of $23,059, which expire at various dates from 2024 to 2033. As a result of the ownership change, the Company's ability to utilize carryforwards that arose before the 2012 stock offering closed is limited to $163 per year. Due to this limitation, management determined it is more likely than not that $20,520 of net operating loss carryforwards will expire unutilized. As required by accounting standards, the Company reduced the carrying value of deferred tax assets, and the corresponding valuation allowance, by the $6,977 tax effect of this lost realizability.

Federal income tax laws provided additional deductions, totaling $2,250, for thrift bad debt reserves established before 1988.  Accounting standards do not require a deferred tax liability to be recorded on this amount, which otherwise would have totaled$473 at year-end 2017.  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.

On December 22, 2017, the “Tax Cuts and Jobs Act” was enacted into law reducing the federal corporate tax rate to 21%, effective January 1, 2018.  The Company conducted a revaluation of its existing deferred tax asset (DTA) to reflect the impact of the new tax rates, which resulted in the Company recording an additional tax expense in the fourth quarter of 2017 in the amount of $979.

NOTE 15 – RELATED-PARTY TRANSACTIONS

Loans to principal officers, directors and their affiliates during 2017were as follows:

Beginning balance	$	2,399
New loans		4,442
Effect of changes in composition of related parties		-
Repayments		(177)
Ending balance	$	6,664

All loans to related parties were made 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 at year-end 2017 and 2016 were $487 and$274, respectively.

38

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except per share data)

NOTE 16 – STOCK-BASED COMPENSATION

The Company has issued awards under three stock-based compensation plans (collectively, the “Plans”), as described below.  Total compensation cost that has been charged against income for those Plans totaled $246 and $122 for 2017 and 2016, respectively.  The total income tax benefit was $84 and $35 for 2017 and 2016, respectively.

The Plans are all stockholder-approved and authorize stock option grants and restricted stock awards to be made to directors, officers and employees. The 1999 Stock-Based Incentive Plan, which expired July 13, 2009, provided 38,778 shares of common stock for stock option grants and 15,511 shares of common stock for restricted stock awards.  The 2003 Equity Compensation Plan (the “2003 Plan”), as amended and restated, provided an aggregate of 100,000 shares for stock option grants and restricted stock awards, of which up to 30,000 shares could be awarded in the form of restricted stock awards.  The 2009 Equity Compensation Plan (the “2009 Plan”), which was approved by stockholders on May 21, 2009, replaced the 2003 Plan and provided for 200,000 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 1,500,000. 

Stock Options:

The Plans permit the grant of stock options to directors, officers and employees of the Holding Company and CFBank.  Option awards are granted with an exercise price equal to the market price of the Company’s common stock on the date of grant, generally have vesting periods ranging from one to three years, and are exercisable for ten years from the date of grant.  Unvested stock options immediately vest upon a change of control. 

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

There were no stock options granted or exercised during the years ended December 31, 2017 and December 31, 2016. 

A summary of stock option activity in the Plans for 2017 follows:

	Shares	Weighted Average Exercise Price		Weighted Average Remaining Contractual Term (Years)	Intrinsic Value
Outstanding at beginning of year	542,746	$	1.46
Expired	(300)		36.75
Cancelled or forfeited	(3,190)		1.70
Outstanding at end of period	539,256	$	1.44	5.4	$	731,080
Expected to vest	-	$	-	-	$	-
Exercisable at end of period	539,256	$	1.44	5.4	$	731,080

During the year ended December 31, 2017, there were 3,190 stock options canceled or forfeited.  Expense associated with unvested forfeited shares is reversed. As of December 31, 2017,all stock options granted under the Plans were vested.

39

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except per share data)

Restricted Stock Awards:

The Plans also permit the grant of restricted stock awards to directors, officers and employees. Compensation is recognized over the vesting period of the awards based on the fair value of the stock at grant date.  The fair value of the stock is determined using the closing share price on the date of grant and shares generally have vesting periods of one to three years.  There were 215,500 shares of restricted stock issued in 2017 and292,000 shares of restricted stock issued in 2016. 

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, 2017	425,666	$	1.56
Granted	215,500		2.56
Vested	(157,172)		1.53
Forfeited	(19,333)		1.58
Nonvested at December 31, 2017	464,661	$	2.03

As of December 31, 2017 and 2016, the unrecognized compensation cost related to nonvested shares granted under the Plans was $918 and $642, respectively.   There were 157,172 shares that vested during the year ended December 31, 2017.  

There were 347,115 shares remaining available for stock option grants and restricted stock awards under the 2009 Plan at December 31, 2017.

NOTE 17 – PREFERRED STOCK

Series B Preferred Stock:

Commencing in April 2014, the Company conducted a private placement of up to 480,000 shares of its 6.25% Non-Cumulative Convertible Perpetual Preferred Stock, Series B (“Series B Preferred Stock”) for an offering price of $25.00 per share (the “Private Placement”).  Pursuant to the Private Placement, the Company sold an aggregate of 480,000 shares of Series B Preferred Stock on May 12, 2014 and July 15, 2014, for an aggregate offering price of $12,000.  After payment of approximately $482 in placement fees and approximately $149 of other offering expenses, the Company’s net proceeds from its sale of the 480,000 shares of Series B Preferred Stock in the Private Placement were approximately $11,369.  

For each share of Series B Preferred Stock sold in the Private Placement, the Company also issued, at no additional charge, a Warrant to purchase common stock of the Company.  See Note 18-Common Stock Warrants for additional information.

Conversion of Series B Preferred Stock to Common Stock:

On September 29, 2017, the Company announced the conversion of its Series B Preferred Stock into shares of Common Stock of the Company.  The conversion was effective October 6, 2017, and resulted in the conversion of all 480,000 of the Company’s issued and outstanding shares of Series B Preferred Stock into approximately 6,857,143 shares of Common Stock.   

The conversion of the Series B Preferred Stock resulted in the elimination of the non-cumulative preferred dividend payments on the Series B Preferred Stock beginning with the 4th quarter of 2017. The preferred dividends, in the aggregate amount of approximately $187,500 quarterly, or approximately $750,000 annually, will not be payable by the Company going forward.

40

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except per share data)

NOTE 18 – COMMON STOCK WARRANTS

Series B Preferred Stock – Warrants:

For each share of Series B Preferred Stock issued by the Company in the Private Placement, the Company also issued, at no additional charge, a Warrant to purchase (i) 2.00 shares of common stock of the Company if the purchaser purchased less than $700  (28,000 shares) of Series B Preferred Stock in the Private Placement, or (ii) 3.25 shares of common stock if the purchaser purchased $700  (28,000 shares) or more of Series B Preferred Stock in the Private Placement.  Warrants to purchase an aggregate of 1,152,125 shares of common stock were issued by the Company to the purchasers of the 480,000 shares of Series B Preferred Stock sold in the Private Placement.  Subject to certain limitations, the Warrants are exercisable for a period of approximately five (5) years expiring on July 15, 2019, at a cash purchase price of $1.85 per share of common stock.  As of December 31, 2017 there were 469,600 warrants outstanding.

NOTE 19 – 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 will be phased in over time, becoming fully effective on January 1, 2019, and will consist of an additional amount of common equity equal to2.5% 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 will be fully phased in by 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.

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

The implementation of the capital conservation buffer began on January 1, 2016 at the 0.625% level and will be phased in over a four-year period increasing by increments of that amount on each subsequent January 1 until it reaches 2.5% on January 1, 2019.  The capital conservation buffer is currently 1.875%.  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.

41

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except per share data)

The following tables present actual and required capital ratios as of December 31, 2017 and December 31, 2016 for CFBank under the Basel III Capital Rules.  The minimum required capital amounts presented include the minimum required capital levels as of December 31, 2017, based on the phase-in provisions of the Basel III Capital Rules and the minimum required capital levels as of January 1, 2019 when the Basel III Capital Rules have been fully phased-in.  Capital levels required to be considered well capitalized are based upon prompt corrective action regulations, as amended to reflect the changes under the Basel III Capital Rules.

	Actual			Minimum Capital Required-Basel III Phase-In Schedule			Minimum Capital Required-Basel III Fully Phased-In			To Be Well Capitalized Under Applicable Regulatory Capital Standards
	Amount		Ratio	Amount		Ratio	Amount		Ratio	Amount		Ratio
December 31, 2017
Total Capital to risk weighted assets	$	48,271	11.91%	$	37,492	9.25%	$	42,559	10.50%	$	40,532	10.00%
Tier 1 (Core) Capital to risk weighted assets		43,179	10.65%		29,386	7.25%		34,452	8.50%		32,426	8.00%
Common equity tier 1 capital to risk-weighted assets		43,179	10.65%		23,306	5.75%		28,372	7.00%		26,346	6.50%
Tier 1 (Core) Capital to adjusted total assets (Leverage ratio)		43,179	9.37%		18,432	4.00%		18,432	4.00%		23,040	5.00%

	Actual			Minimum Capital Required-Basel III Phase-In Schedule			Minimum Capital Required-Basel III Fully Phased-In			To Be Well Capitalized Under Applicable Regulatory Capital Standards
	Amount		Ratio	Amount		Ratio	Amount		Ratio	Amount		Ratio
December 31, 2016
Total Capital to risk weighted assets	$	45,118	12.46%	$	31,256	8.63%	$	38,029	10.50%	$	36,218	10.00%
Tier 1 (Core) Capital to risk weighted assets		40,556	11.20%		24,013	6.63%		30,785	8.50%		28,974	8.00%
Common equity tier 1 capital to risk-weighted assets		40,556	11.20%		18,580	5.13%		25,353	7.00%		23,542	6.50%
Tier 1 (Core) Capital to adjusted total assets (Leverage ratio)		40,556	9.66%		16,792	4.00%		16,792	4.00%		20,991	5.00%

Effective December 1, 2016, CFBank converted from a federal savings association to a national bank and, as a result, is no longer subject to the Qualified Thrift Lender (QTL) requirements.  Previously, the Qualified Thrift Lender test required CFBank to maintain at least 65% of assets in housing-related finance and other specified areas. 

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.

42

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except per share data)

Dividend Restrictions:

The Holding Company’s principal source of funds for dividend payments is dividends received from CFBank.  Banking regulations limit the amount of dividends that may be paid without prior approval of regulatory agencies. Under these regulations, the amount of dividends that may be paid in any calendar year is limited to the current year’s net profits, combined with the retained net profits of the preceding two years, subject to the capital requirements described above.  Any future dividend payments by CFBank to the Holding Company would be based on future earnings and, if necessary, regulatory approval. 

The Holding Company’s ability to pay dividends on its stock is also conditioned upon the payment, on a current basis, of quarterly interest payments on the subordinated debentures underlying the Company’s trust preferred securities.  Additionally, so long as the Company’s Series B Preferred Stock remains outstanding, the Holding Company is prohibited from paying dividends (other than dividends payable solely in shares) on the Company’s common stock for the then-current dividend period, unless full dividends on the Series B Preferred Stock have been paid or set aside for payment. 

Effective October 6, 2017, the Company caused the conversion of all of its outstanding shares of Series B Preferred Stock into shares of Common Stock of the Company.  The conversion of the Series B Preferred Stock results in the elimination of the non-cumulative preferred dividend payments on the Series B Preferred Stock beginning with the 4th quarter of 2017. 

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 14-Income taxes.

NOTE 20 – 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 $2,185 at December 31, 2017 and $2,280 at December 31, 2016.

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

Contingent Features:

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, 2017, CFBank had $645 in securities and cash pledged as collateral for these derivatives. Should the liability increase beyond the collateral value, CFBank will be required to pledge additional collateral. 

Additionally, CFBank’s interest-rate swap instruments contain provisions that require CFBank to remain well capitalized under regulatory capital standards. The interest-rate swaps may be called by the counterparty if CFBank fails to maintain well-capitalized status under regulatory capital standards.  As of December 31, 2017, CFBank was well-capitalized under regulatory capital standards.

43

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except per share data)

Summary information about the derivative instruments is as follows:

	2017		2016
Notional amount	$	2,185	$	2,280
Weighted average pay rate on interest-rate swaps		3.75%		3.74%
Weighted average receive rate on interest-rate swaps		1.52%		0.75%
Weighted average maturity (years)		2.1		3.1
Fair value of interest-rate swaps	$	(56)	$	(122)
Fair value of yield maintenance provisions	$	56	$	122

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 2017 or 2016.

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 $2,390 and $2,164of interest rate lock commitments related to residential mortgage loans at December 31, 2017 and 2016, respectively.  The fair value of these mortgage banking derivatives was reflected by a derivative asset of $11 and $8  at December 31, 2017 and 2016, 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. Net gains (losses) recognized in earnings related to these mortgage banking derivatives totaled $5 and7 in 2017 and2016, respectively.

NOTE 21 – 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:

	2017				2016
	Fixed Rate		Variable Rate		Fixed Rate		Variable Rate
Commitments to make loans	$	15,856	$	21,716	$	21,335	$	22,171
Unused lines of credit	$	8,068	$	38,760	$	3,714	$	29,621
Standby letters of credit	$	1,115	$	-	$	991	$	-

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 5.88% and maturities ranging from 21 months to 30 years at December 31, 2017. The fixed-rate loan commitments had interest rates ranging from 1.75% to 6.50% and maturities ranging from2 months to 30 years at December 31, 2016.

44

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except per share data)

NOTE 22 – PARENT COMPANY ONLY CONDENSED FINANCIAL INFORMATION

Condensed financial information of Central Federal Corporation follows:

	2017		2016
Assets
Cash and cash equivalents	$	523	$	2,197
Investment in banking subsidiary		43,633		41,448
Investment in and advances to other subsidiary		228		225
Other assets		1,232		901
Total assets	$	45,616	$	44,771
Liabilities and Equity
Subordinated debentures	$	5,155	$	5,155
Accrued expenses and other liabilities		200		324
Stockholders' equity		40,261		39,292
Total liabilities and stockholders' equity	$	45,616	$	44,771

	2017		2016
Interest income	$	4	$	2
Other income		48		131
Interest expense		212		185
Other expense		815		646
Loss before income tax and undistributed subsidiary income		(975)		(698)
Tax effect		330		236
Gain (loss) after income tax and undistributed subsidiary income		(645)		(462)
Equity in undistributed subsidiary income		1,991		2,089
Net income	$	1,346	$	1,627
Comprehensive income	$	1,297	$	1,638

	2017		2016
Cash flows from operating activities
Net Income	$	1,346	$	1,627
Adjustments:
Effect of subsidiaries' operations		(1,991)		(2,089)
Change in other assets and other liabilities		(268)		766
Net cash from (used by) operating activities		(913)		304
Cash flows from financing activities
Acquisition of treasury shares surrendered upon vesting of restricted stock for payment of taxes		(49)		-
Purchase of treasury shares		-		(30)
Exercise of warrants to common stock		38		-
Dividends paid on Series B preferred stock		(750)		(750)
Net cash from (used by) financing activities		(761)		(780)
Net change in cash and cash equivalents		(1,674)		(476)
Beginning cash and cash equivalents		2,197		2,673
Ending cash and cash equivalents	$	523	$	2,197

45

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except per share data)

NOTE 23 – EARNINGS (LOSS) 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 unvested share-based payment awards according to dividends declared (or accumulated) and participation rights in undistributed earnings.  The factors used in the earnings per share computation follow:

	December 31, 2017		December 31, 2016
Basic
Net income	$	1,346	$	1,627
Dividends on Series B  preferred stock and accretion of discount		(666)		(857)
Net income allocated to common stockholders	$	680	$	770
Weighted average common shares outstanding including unvested share-based payment awards		17,928,141		16,020,847
Less: Unvested share-based payment awards		-		-
Average shares		17,928,141		16,020,847
Basic earnings per common share	$	0.04	$	0.05
Diluted
Net earnings allocated to common stockholders	$	680	$	770
Add back: Preferred Dividends on Series B stock and accretion of discount		-		-
Net earnings allocated to common stockholders	$	680	$	770
Weighted average common shares outstanding for basic earnings per common share		17,928,141		16,020,847
Add: Dilutive effects of assumed exercises of stock options		216,486		38,184
Add: Dilutive effects of assumed exercises of stock warrants		1,141,725		-
Average shares and dilutive potential common shares		19,286,352		16,059,031
Diluted earnings per common share	$	0.04	$	0.05

The following potential common shares were anti-dilutive and not considered in computing diluted earnings (loss) per common share.

	2017	2016
Stock options	5,399	282,971
Series B preferred stock	-	6,857,143
Stock warrants	-	1,152,125

NOTE 24 - 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.

46

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except per share data)

NOTE 25 - ACCUMULATED OTHER COMPREHENSIVE INCOME

The following table summarizes the changes within each classification of accumulated other comprehensive income, net of tax, for the year ended December 31, 2017 and December 31, 2016 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, 2017 and 2016  (1)
	Unrealized Gains and Losses on Available-for-Sale Securities
	2017		2016
Accumulated other comprehensive income (loss), beginning of period	$	2	$	(9)
Other comprehensive gain (loss) before reclassifications		(49)		11
Less amount reclassified from accumulated other comprehensive loss (2)		-		-
Net current-period other comprehensive income (loss)		(49)		11
Accumulated other comprehensive income (loss), end of period	$	(47)	$	2

⁽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 year ended December 31, 2017 and December 31, 2016. 

NOTE 26- SUBSEQUENT EVENT

In February 2018, the Holding Company entered into a credit facility with a third-party bank pursuant to which the Holding Company may borrow up to an aggregate principal amount of $6,000.  The purpose of the credit facility is to provide an additional source of liquidity for the Holding Company and to provide potential funds, as needed, for the Holding Company to downstream as additional capital to the Bank to support growth.  Loans under the credit facility will bear interest at a rate equal to the Prime Rate plus 0.75%.  The credit facility is secured by a pledge of the Holding Company’s stock of CFBank.  The credit facility will expire in February 2020 unless extended or replaced.

47

Central Federal Corporation and CFBank	Central Federal Corporation Officers
Board of Directors
	Timothy T. O’Dell
Robert E. Hoeweler	President and Chief Executive Officer
Chief Executive Officer, Hoeweler Holdings
Chairman of the Board, Central Federal Corporation and CFBank	John W. Helmsdoerfer, CPA
	Executive Vice President,
Thomas P. Ash	Chief Financial Officer and Treasurer
Director of Governmental Relations
Buckeye Association of School Administrators	Barbara Pyke
	Corporate Secretary
Edward W. Cochran
Attorney
	CFBank Executive Officers
James H. Frauenberg II
Principal Owner,	Timothy T. O’Dell
Addison Holdings LLC	President and Chief Executive Officer
Robert H. Milbourne	John W. Helmsdoerfer, CPA
RHM Advisors	Executive Vice President and
	Chief Financial Officer
Timothy T. O’Dell
President and Chief Executive Officer,
CFBank
CFBankOffice Locations
(Markets Served)
Worthington, Ohio (Greater Columbus)*	Glendale, Ohio (Cincinnati)*
7000 North High Street	38 Village Square
Worthington, Ohio 43085	Glendale, Ohio 45246
614-334-7979	513-772-0263
Woodmere, Ohio (Greater Cleveland)**	Wellsville, Ohio (Columbiana County)*
28879 Chagrin Blvd.	601 Main Street
Woodmere, Ohio 44122	Wellsville, Ohio 43968
216-468-3100	330-532-1517
Fairlawn, Ohio (Akron/Canton)*	Calcutta, Ohio (Columbiana County)*
3009 Smith Road, Suite 100	49028 Foulks Drive
Fairlawn, Ohio 44333	Calcutta, Ohio 43920
330-666-7979	330-385-4323

* Full service branch

** Agency office

48

Corporate Data

Annual Report

A  COPY OF THE ANNUAL REPORT ON FORM 10-K FILED WITH THE SECURITIES AND EXCHANGE COMMISSION IS AVAILABLE WITHOUT CHARGE UPON WRITTEN REQUEST TO:

John W. Helmsdoerfer, CPA

Executive Vice President and Chief Financial Officer

Central Federal Corporation

7000 North High Street

Worthington, Ohio 43085

Phone: 614-318-4661

Fax: 614-334-7980

Email: Johnhelmsdoerfer@cfbankmail.com

Annual Meeting

The Annual Meeting of Shareholders of Central Federal Corporation will be held at 10 a.m., local time, on Wednesday, May 30, 2018, at the New Albany Country Club, 1 Club Lane, New Albany, Ohio 43054.

Shareholder Services

Computershare, Inc. serves as transfer agent for Central Federal Corporation shares. Communications regarding change of address, transfer of shares or lost certificates should be sent to:

Computershare, Inc.

250 Royall Street

Canton, MA 02021

Phone: 1-800-368-5948

49

EX-21.1

Exhibit 21.1

Subsidiaries of the Registrant

CFBank, National Association

Central Federal Capital Trust I

EX-23.1

Exhibit 23.1

Consent of Independent Registered Public Accounting Firm

We consent to the incorporation by reference in the Registration Statements of Central Federal Corporation on Form S-8 (File Nos. 333-84817, 333-114025,  333-163102 and 333-207354), Form S-3 (File Nos. 333-216922, 333-221607, 333-110218, 333-124323 and 333-156564) and Form S-1/A (File No. 333-177434) of our report dated March 15, 2018, on our audits of the consolidated financial statements of Central Federal Corporation as of December 31, 2017 and 2016, and for each of the two years in the period ended December 31, 2017, which report is included in this Annual Report on Form 10-K.

/s/ BKD, LLP

BKD, LLP

Indianapolis, Indiana

March 15, 2018

EX-31.1

Exhibit 31.1

Rule 13a-14(a) Certifications

I, Timothy T. O’Dell, certify, that:

1. I have reviewed this report on Form 10-K of Central Federal Corporation;

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

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

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

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

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

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

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

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

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

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

Date: March 15, 2018	/s/ Timothy T. O’Dell
	Timothy T. O’Dell
	President and Chief Executive Officer

EX-31.2

Exhibit 31.2

Rule 13a-14(a) Certifications

I, John W. Helmsdoerfer, certify, that:

1. I have reviewed this report on Form 10-K of Central Federal Corporation;

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

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

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

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

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

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

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

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

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

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

Date:  March 15, 2018	/s/ John W. Helmsdoerfer
	John W. Helmsdoerfer, CPA
	Treasurer and Chief Financial Officer

EX-32.1

Exhibit 32.1

Section 1350 Certifications

In connection with the Annual Report of Central Federal Corporation (the “Company”) on Form 10-K for the fiscal year ended December 31, 2017 as filed with the Securities and Exchange Commission (the “Report”), the undersigned, Timothy T. O’Dell, President and Chief Executive Officer of the Company and John W. Helmsdoerfer,Treasurer and Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. §1350, as added by Section 906 of the Sarbanes-Oxley Act of 2002, that:

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

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

/s/ Timothy T. O’Dell

Timothy T. O’Dell

President and Chief Executive Officer

/s/ John W. Helmsdoerfer

John W. Helmsdoerfer, CPA

Treasurer and Chief Financial Officer

Date:March 15, 2018

XML

Document And Entity Information - USD ($) $ in Millions	12 Months Ended
	Dec. 31, 2017	Mar. 10, 2018	Jun. 30, 2017
Document And Entity Information [Abstract]
Document Type	10-K
Amendment Flag	false
Document Period End Date	Dec. 31, 2017
Document Fiscal Year Focus	2017
Document Fiscal Period Focus	FY
Trading Symbol	cfbk
Entity Registrant Name	CENTRAL FEDERAL CORP
Entity Central Index Key	0001070680
Current Fiscal Year End Date	--12-31
Entity Filer Category	Smaller Reporting Company
Entity Voluntary Filers	No
Entity Well-known Seasoned Issuer	No
Entity Current Reporting Status	Yes
Entity Public Float			$ 33.9
Entity Common Stock, Shares Outstanding		23,313,547

XML

Consolidated Balance Sheets - USD ($) $ in Thousands	Dec. 31, 2017	Dec. 31, 2016
ASSETS
Cash and cash equivalents	$ 45,498	$ 57,941
Interest-bearing deposits in other financial institutions	100	100
Securities available for sale	11,773	14,058
Loans held for sale, at fair value	1,124	2,812
Loans and leases, net of allowance of $6,970 and $6,925	406,406	346,125
FHLB and FRB stock	3,227	1,942
Foreclosed assets, net		204
Premises and equipment, net	3,533	3,429
Bank owned life insurance	5,065	4,930
Accrued interest receivable and other assets	4,699	4,571
Total assets	481,425	436,112
Deposits
Noninterest bearing	89,588	72,779
Interest bearing	329,440	302,585
Total deposits	419,028	375,364
FHLB advances	13,500	13,500
Advances by borrowers for taxes and insurance	489	408
Accrued interest payable and other liabilities	2,992	2,393
Subordinated debentures	5,155	5,155
Total liabilities	441,164	396,820
Commitments and Contingent Liabilities
Stockholders' equity
Common stock, $.01 par value; shares authorized: 50,000,000; shares issued: 23,501,972 at December 31, 2017 and 16,427,917 at December 31, 2016	235	164
Series B Preferred stock, $0.01 par value; 480,000 shares authorized; 0 issued at December 31, 2017 and 480,000 at December 31, 2016		5
Additional paid-in capital	60,484	60,163
Accumulated deficit	(17,087)	(17,767)
Accumulated other comprehensive income (loss)	(47)	2
Treasury stock, at cost; 152,359 shares of common stock at December 31, 2017 and 133,007 shares at December 31, 2016	(3,324)	(3,275)
Total stockholders' equity	40,261	39,292
Total liabilities and stockholder's equity	$ 481,425	$ 436,112

XML

Consolidated Balance Sheets (Parenthetical) - USD ($) $ in Thousands	Dec. 31, 2017	Dec. 31, 2016
Loans, allowance	$ 6,970	$ 6,925
Common stock, par value	$ 0.01	$ 0.01
Common stock, shares authorized	50,000,000	50,000,000
Common stock, shares issued	23,501,972	16,427,917
Treasury stock, shares	152,359	133,007
Series B Preferred Stock [Member]
Preferred stock, par value	$ 0.01	$ 0.01
Preferred stock, share authorized	480,000	480,000
Preferred stock, share issued	0	480,000

XML

Consolidated Statements Of Income - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016
Interest and dividend income
Loans and leases, including fees	$ 16,487	$ 14,050
Securities	183	125
FHLB and FRB stock dividends	154	78
Federal funds sold and other	383	156
Total interest and dividend income	17,207	14,409
Interest expense
Deposits	3,059	2,657
FHLB advances and other debt	263	254
Subordinated debentures	212	185
Total interest expense	3,534	3,096
Net interest income	13,673	11,313
Provision for loan losses and leases		230
Net interest income after provision for loan and lease losses	13,673	11,083
Noninterest income
Service charges on deposit accounts	409	741
Net gains on sales of loans	75	134
Net loss on sales of securitites
Earnings on bank owned life insurance	135	133
Other	124	169
Total noninterest income	743	1,177
Noninterest expense
Salaries and employee benefits	6,074	4,965
Occupancy and equipment	671	579
Data processing	995	1,116
Franchise and other taxes	366	358
Professional fees	988	1,148
Director fees	312	228
Postage, printing and supplies	175	168
Advertising and promotion	154	125
Telephone	118	123
Loan expenses	170	141
Foreclosed assets, net	18	65
Depreciation	208	211
FDIC premiums	282	222
Regulatory assessment	127	62
Other insurance	92	109
Other	205	203
Total noninterest expense	10,955	9,823
Income before incomes taxes	3,461	2,437
Income tax expense	2,115	810
Net income	1,346	1,627
Dividends on Series B preferred stock and accretion of discount	(666)	(857)
Net income attributable to common stockholders	$ 680	$ 770
Earnings per common share:
Basic	$ 0.04	$ 0.05
Diluted	$ 0.04	$ 0.05

XML

Consolidated Statements Of Comprehensive Income - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016
Consolidated Statements Of Comprehensive Income [Abstract]
Net income	$ 1,346	$ 1,627
Other comprehensive income (loss):
Unrealized holding gains (losses) arising during the period related to investment securities available for sale, net of tax of ($25) and $1:	(49)	11
Other comprehensive income (loss), net of tax	(49)	11
Comprehensive income	$ 1,297	$ 1,638

XML

Consolidated Statements Of Comprehensive Income (Parenthetical) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016
Consolidated Statements Of Comprehensive Income [Abstract]
Unrealized holding gains (losses) arising during the period related to investment securities available for sale, tax	$ (25)	$ 1

XML

Consolidated Statements Of Changes In Stockholders' Equity - USD ($) $ in Thousands	Common Stock [Member]	Additional Paid-In Capital [Member]	Accumulated Deficit [Member]	Accumulated Other Comprehensive Income [Member]	Treasury Stock [Member]	Series B Preferred Stock [Member]	Total
Balance at Dec. 31, 2015	$ 161	$ 59,937	$ (18,537)	$ (9)	$ (3,245)	$ 5	$ 38,312
Net income			1,627				1,627
Other comprehensive income (loss)				11			11
Issuance of stock based incentive plan shares, net of forfeitures	3	(3)
Restricted stock expense, net of forfeitures		96					96
Stock option expense, net of forfeitures		26					26
Purchase of treasury shares					(30)		(30)
Cash dividends declared on Series B preferred stock and accretion of discount		107	(857)				(750)
Balance at Dec. 31, 2016	164	60,163	(17,767)	2	(3,275)	5	39,292
Net income			1,346				1,346
Other comprehensive income (loss)				(49)			(49)
Issuance of stock based incentive plan shares, net of forfeitures	2	(2)
Restricted stock expense, net of forfeitures		246					246
Purchase of treasury shares					(49)		(49)
Conversion of Series B preferred stock to common stock	69	(64)				$ (5)
Exercise of warrants to common stock		38					38
Cash dividends declared on Series B preferred stock and accretion of discount		103	(666)				(563)
Balance at Dec. 31, 2017	$ 235	$ 60,484	$ (17,087)	$ (47)	$ (3,324)		$ 40,261

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Consolidated Statements Of Changes In Stockholders' Equity (Parenthetical) - shares	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016
Consolidated Statements Of Changes In Stockholders' Equity [Abstract]
Stock based incentive plan, shares issued	215,500	292,000
Treasury Stock, Shares, Acquired	19,352	21,300

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Consolidated Statements Of Changes Of Cash Flows - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016
Consolidated Statements Of Changes Of Cash Flows [Abstract]
Net income	$ 1,346	$ 1,627
Adjustments to reconcile net income to net cash from operating activities:
Provision for loan losses and leases		230
Depreciation	208	211
Amortization, net	(92)	(66)
Deferred income tax (benefit)	3	623
Revaluation of net deferred tax asset	979
Net loss on sales of securities
Originations of loans held for sale	(22,777)	(24,219)
Proceeds from sale of loans held for sale	24,540	22,430
Net gains on sales of loans	(75)	(134)
Loss on disposal of premises and equipment		16
Gain (loss) on sale of foreclosed assets	7	(4)
Earnings on bank owned life insurance	(135)	(133)
Stock-based compensation expense	246	122
Net change in:
Accrued interest receivable and other assets	(594)	899
Accrued interest payable and other liabilities	295	190
Net cash from operating activities	3,951	1,792
Cash flows from investing activities:
Net increase in interest-bearing deposits in other financial institutions		(100)
Available-for-sale securities:
Maturities, prepayments and calls	2,687	1,261
Purchases	(504)	(5,981)
Loan and lease originations and payments, net	(59,964)	(49,056)
Proceeds from the sale of loans		1,124
Additions to premises and equipment	(312)	(47)
Purchase of FRB Stock	(1,285)
Proceeds from the sale of foreclosed assets		200
Net cash used by investing activities	(59,378)	(52,599)
Cash flows from financing activities:
Net change in deposits	43,664	84,881
Proceeds from FHLB advances	34,250	37,700
Repayments on FHLB advances	(34,250)	(38,700)
Net change in advances by borrowers for taxes and insurance	81	(248)
Cash dividends paid on Series B preferred stock	(750)	(750)
Exercise of warrants to common stock	38
Acquisition of treasury shares surrendered upon vesting of restricted stock for payment of taxes	(49)
Purchase of treasury shares		(30)
Net cash from financing activities	42,984	82,853
Net change in cash and cash equivalents	(12,443)	32,046
Beginning cash and cash equivalents	57,941	25,895
Ending cash and cash equivalents	45,498	57,941
Supplemental cash flow information:
Interest paid	3,534	3,061
Income tax paid	1,230	70
Supplemental noncash disclosures:
Transfers from loans to repossessed assets		204
Loans issued to finance the sale of repossessed assets	197	1,440
Dividends payable on Series B preferred stock		$ 187
Investment payable on limited partnerships	$ 492

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Summary Of Significant Accounting Policies

12 Months Ended

Dec. 31, 2017

Summary Of Significant Accounting Policies [Abstract]

Summary Of Significant Accounting Policies

NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Nature of Operations and Principles of Consolidation: 

The consolidated financial statements include Central Federal Corporation (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.  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, Fairlawn, Glendale, Calcutta, and Wellsville,Ohio, and through its agency office in Woodmere, 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.

Interest-Bearing Deposits in Other Financial Institutions:  Interest‑bearing deposits in other financial institutions mature in April, 2019 and are carried at cost.  As of December 31, 2017 and December 31, 2016, there was $100 inan interest-bearing deposit in other financial institutions.

Securities:  Debt securities are classified as available for sale when they might be sold before maturity. Equity securities with readily determinable fair values are classified as available for sale.  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.

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

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

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

The general reserve component covers non‑impaired loans of all classes and is based on historical loss experience adjusted for current factors.  The historical loss experience is determined by loan class and is based on the actual loss history experienced by the Company over a three-year period.  The general component is calculated based on CFBank’s loan balances and actual historical 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 include loans to businesses generally located within our primary market area. Those 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.  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 located within and outside of 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 single-family residential real estate loans for portfolio in amounts up to 85% of the lower of the appraised value or the purchase price of the property securing the loan, without requiring private mortgage insurance.  Loans in excess of 85% of the lower of the appraised value or purchase price of the property securing the loan require private mortgage insurance.  CFBank has not engaged in subprime lending or used option adjustable-rate mortgage products.

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 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 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 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 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 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 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, 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, and auto and credit card 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 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 a fund that assists 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.

Joint Ventures:  The Holding Company 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 funding for the joint ventures is related to shorter term operating activities and is related to the development of single family real estate in the form of condominiums.  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. The balance outstanding in joint ventures at December 31, 2017 and December 31, 2016 was $325 and $325, respectively.  Income recognized on the joint ventures was $20 and $100, respectively, for 2017 and 2016.

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 to 40 years. Furniture, fixtures and equipment are depreciated using the straight‑line method with useful lives ranging from 2 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 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 purchased life insurance policies on certain directors and employees in 2002.  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.  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 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.

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:  Basic earnings per common share is net income available to common stockholders divided by the weighted average number of common shares outstanding during the period.  All outstanding unvested share-based payment awards that contain rights to nonforfeitable dividends are considered participating securities for this calculation.  Diluted earnings per common share includes the dilutive effect of additional potential common shares issuable under stock options. 

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.

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 are any such matters that will have a material effect on the financial statements.  See Note 24 – Contingent Liabilities.

Restrictions on Cash:  Cash on hand or on deposit with the Federal Reserve Bank (FRB) is required to meet regulatory reserve and clearing requirements. The reserve requirement at December 31, 2017 and December 31, 2016 was $718 and $267, respectively.  Cash on deposit with the FHLB includes $3,300 pledged as collateral for FHLB advances. 

Equity:  Treasury stock is carried at cost. The carrying value of preferred stock and the common stock warrant is based on allocation of issuance proceeds, net of issuance costs, in proportion to their relative fair values.  Preferred stock is carried net of the discount established through the allocation of proceeds.

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 and Series B Preferred Stock is generally dependent upon the receipt of dividends and other distributions from CFBank.  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. 

Effective October 6, 2017, all of its outstanding shares of Series B Preferred Stock were converted into shares of Common Stock of the Company.  The conversion of the Series B Preferred Stock resulted in the elimination of the non-cumulative preferred dividend payments on the Series B Preferred Stock beginning with the 4th quarter of 2017.

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.

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 loss or stockholders’ equity.

Adoption of New Accounting Standards:

In May 2014 the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2014-09, Revenue from Contracts with Customers (Topic 606).  The topic of Revenue Recognition had become broad with several other regulatory agencies issuing standards, which lacked cohesion.  The new guidance establishes a “comprehensive framework” and “reduces the number of requirements to which an entity must consider in recognizing revenue” and yet provides improved disclosures to assist stakeholders reviewing financial statements.  ASU No. 2014-09 provides that an entity should recognize revenue to depict the transfer of promised goods or services.  The guidance provides steps to follow to achieve the core principle.  An entity should disclose sufficient information to enable users of financial statements to understand the nature, amount, and uncertainty of revenue and cash flows arising from contracts with customers.

Guidance in ASU No. 2014-09 has been clarified by the following ASUs:

· ASU No. 2016-08, “Revenue from Contracts with Customers (Topic 606): Principal versus Agent Considerations (Reporting Revenue Gross versus Net)”

· ASU No. 2016-10, “Revenue from Contracts with Customers (Topic 606): Identifying Performance Obligations and Licensing”

· ASU No. 2016-12, “Revenue from Contracts with Customers (Topic 606): Narrow Scope Improvements and Practical Expedients”

· ASU No. 2016-20, “Revenue from Contracts with Customers (Topic 606): Technical Corrections and Improvements to Topic 606”

As extended by ASU No. 2015-14, Revenue from Contracts with Customers (Topic 606): Deferral of the Effective Date, ASU No. 2014-09 and the clarifying ASUs are effective for public companies for annual reporting periods beginning after December 15, 2017, including interim periods within that reporting period.  Transitional guidance is included in the updates.  Earlier adoption is permitted only as of annual reporting periods beginning after December 15, 2016, including interim reporting periods within that reporting period.  While interest income is specifically out of scope of this standard, management has evaluated the revenue streams within “noninterest income” to assess the applicability of this standard.  Based on our review, management has concluded that adoption of ASU No. 2015-14 will not have a significant effect on the Company’s consolidated financial statements, including disclosures.

In January 2016, the FASB issued ASU No. 2016-01, Financial Instruments—Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities.  ASU 2016-01 amends the guidance in U.S. GAAP on the accounting for equity investments, financial liabilities under the fair value option and the presentations and disclosure requirements of financial instruments.  ASU 2016-01 is effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years.  Early adoption is permitted for the accounting guidance on financial liabilities under the fair value option.  The Company will adopt the methodologies prescribed by the ASU by the date required.  Adoption of ASU No. 2016-01 did not have a significant effect on the Company’s consolidated financial statements.

On February 25, 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842).  Under the new ASU, lessees will recognize lease assets and liabilities on their balance sheets for all leases with terms of more than 12 months.  The new lessee accounting model retains two types of leases, and is consistent with the lessee accounting model under existing GAAP.  One type of lease (finance leases) will be accounted for in substantially the same manner as capital leases are accounted for today.  The other type of lease (operating leases) will be accounted for (both in the income statement and statement of cash flows) in a manner consistent with today’s operating leases.  Lessor accounting under the new standard is fundamentally consistent with existing GAAP.  Lessees and lessors would be required to provide additional qualitative and quantitative disclosures to help financial statement users assess the amount, timing, and uncertainty of cash flows arising from leases.  These disclosures are intended to supplement the amounts recorded in the financial statements so that users can understand more about the nature of an organization’s leasing activities.  For public business entities, the final lease standard will be effective for fiscal years beginning after December 15, 2018 including interim periods within those fiscal years.  Early application is permitted.  The Company continues to evaluate the provision of the new lease standard and although we have not yet reasonably determined the estimated financial statement impact, due to the small number of lease agreements presently in effect for the Company, we believe the new guidance will not have a significant impact on the Company’s consolidated financial statements, including disclosures.

In March 2016, the FASB issued ASU No. 2016-07, Investments—Equity Method and Joint Ventures (Topic 323): Simplifying the Transition to the Equity Method of Accounting.  ASU No. 2016-07 affects all entities that have an investment that becomes qualified for the equity method of accounting as a result of an increase in the level of ownership interest or degree of influence.  The amendments in this update eliminate the requirement that, when an investment qualifies for use of the equity method, an investor must adjust the investment, results of operations, and retained earnings retroactively on a step-by-step basis as if the equity method had been in effect during all previous periods that the investment had been held.  ASU No. 2016-07 requires that the equity method investor add the cost of acquiring the additional interest in the investee to the current basis of the investor’s previously held interest and adopt the equity method of accounting as of the date the investment becomes qualified for equity method accounting.  The amendments also require that an entity that has an available-for-sale equity security that becomes qualified for the equity method of accounting recognize through earnings the unrealized holding gain or loss in accumulated other comprehensive income at the date the investment becomes qualified for use of the equity method.  The amendments in ASU No. 2016-07 are effective for all entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2016.  Adoption of ASU No. 2016-07 did not have a significant effect on the Company’s consolidated financial statements.

In March 2016, the FASB issued ASU No. 2016-09, Compensation—Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting.  ASU No. 2016-09 affects all entities that issue share-based payment awards to their employees.  The new guidance involves several aspects of the accounting for share-based payment transactions, including income tax consequences, classification of awards as either equity or liabilities, and classification on the statement of cash flows.  Under ASU No. 2016-09, any excess tax benefits or tax deficiencies should be recognized as income tax expense or benefit in the income statement.  Excess tax benefits are to be classified as an operating activity in the statement of cash flows.  In accruing compensation cost, an entity can make an entity-wide accounting policy election to either estimate the number of awards that are expected to vest, as required under current guidance, or account for forfeitures when they occur.  For an award to qualify for equity classification, an entity cannot partially settle the award in excess of the employer's maximum statutory withholding requirements.  Such cash paid by an employer when directly withholding shares for tax withholding purposes should be classified as a financing activity in the statement of cash flows.  The amendments in ASU No. 2016-09 are effective for public business entities for fiscal years, and for interim periods within those fiscal years, beginning after December 15, 2016.  Adoption of ASU No. 2016-07 did not have a significant effect on the Company’s consolidated financial statements as of December 31, 2017.

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 No. 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 No. 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 No. 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 No. 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.  ASU No. 2016-13 will take effect for U.S. Securities and Exchange Commission (SEC) filers for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019.  Early application will be permitted for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018.  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 is currently assessing any additional data and system requirements necessary for adoption.  At this time, the estimated financial statement, including disclosures, impact cannot be reasonably determined.

In August 2016, the FASB issued ASU 2016-15, Statement of Cash Flows: Classification of Certain Cash Receipts and Cash Payments which may change how an entity classifies certain cash receipts and cash payments on its statement of cash flows to reduce diversity in practice.  The update also provides guidance on when an entity should separate cash flows and classify them into more than one class and when an entity should classify the aggregate of those cash flows into a single class based on the predominance principle.  The guidance in this ASU will become effective for interim and annual reporting periods beginning after December 15, 2017, with early adoption permitted.  Management has reviewed the applicability of this ASU and has concluded that this will not have a material impact on its consolidated financial statements.

The FASB has issued ASU 2017-08, Receivables—Nonrefundable Fees and Other Costs (Subtopic 310-20), Premium Amortization on Purchased Callable Debt Securities. The ASU shortens the amortization period for certain callable debt securities held at a premium to the earliest call date. Under current GAAP, entities normally amortize the premium as an adjustment of yield over the contractual life of the instrument. Stakeholders have expressed concerns with the current approach on the basis that current GAAP excludes certain callable debt securities from consideration of early repayment of principal even if the holder is certain that the call will be exercised. As a result, upon the exercise of a call on a callable debt security held at a premium, the unamortized premium is recorded as a loss in earnings. Further, there is diversity in practice (1) in the amortization period for premiums of callable debt securities, and (2) in how the potential for exercise of a call is factored into current impairment assessments.  Another issue is that the practice in the United States is to quote, price, and trade callable debt securities assuming a model that incorporates consideration of calls (also referred to as “yield-to-worst” pricing).  The ASU shortens the amortization period for certain callable debt securities held at a premium and requires the premium to be amortized to the earliest call date.  However, the amendments do not require an accounting change for securities held at a discount; the discount continues to be amortized to maturity.  The amendments are effective for public business entities for annual periods beginning after December 15, 2018, including interim periods within those annual periods.  Early adoption is permitted. The Company has decided to adopt this ASU early and adoption did not have a material impact the Company’s consolidated financial statements as there were no callable debt securities held at a premium at the date of adoption.

The FASB has issued ASU No. 2017-09, Compensation—Stock Compensation (Topic 718): Scope of Modification Accounting.  ASU 2017-09 applies to entities that change the terms or conditions of a share-based payment award.  The FASB adopted ASU 2017-09 to provide clarity and reduce diversity in practice as well as cost and complexity when applying the guidance in Topic 718, Compensation—Stock Compensation, to the modification of the terms and conditions of a share-based payment award.  The amendments are effective for all entities for annual periods, and interim periods within those annual periods, beginning after December 15, 2017.  Early adoption is permitted, including adoption in any interim period for: (a) public business entities for reporting periods for which financial statements have not yet been issued, and (b) all other entities for reporting periods for which financial statements have not yet been made available for issuance.  The amendments should be applied prospectively to an award modified on or after the adoption date. Adoption of ASU No. 2017-09 is not expected to have a significant impact on the Company’s consolidated financial statements.

The FASB has issued ASU No. 2017-12, Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities.  The new standard is intended to improve and simplify accounting rules around hedge accounting.  The new standard refines and expands hedge accounting for both financial (e.g., interest rate) and commodity risks.  Its provisions create more transparency around how economic results are presented, both on the face of the financial statements and in the footnotes, for investors and analysts.  The new standard takes effect for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018, for public companies and for fiscal years beginning after December 15, 2019 (and interim periods for fiscal years beginning after December 15, 2020), for private companies. Early adoption is permitted in any interim period or fiscal years before the effective date of the standard.  Adoption of ASU No. 2017-12 is not expected to have a significant impact on the Company’s consolidated financial statements.

The FASB issued ASU No. 2018-02, Income Statement—Reporting Comprehensive Income (Topic 220)—Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income.  The ASU provides financial statement preparers with an option to reclassify stranded tax effects within AOCI to retained earnings in each period in which the effect of the change in the U.S. federal corporate income tax rate in the Tax Cuts and Jobs Act (or portion thereof) is recorded.

The ASU requires financial statement preparers to disclose:

· A description of the accounting policy for releasing income tax effects from AOCI;

· Whether they elect to reclassify the stranded income tax effects from the Tax Cuts and Jobs Act; and

· Information about the other income tax effects that are reclassified.

The amendments affect any organization that is required to apply the provisions of Topic 220, Income Statement—Reporting Comprehensive Income, and has items of other comprehensive income for which the related tax effects are presented in other comprehensive income as required by GAAP.  The amendments are effective for all organizations for fiscal years beginning after December 15, 2018, and interim periods within those fiscal years. Early adoption is permitted. Adoption of ASU No. 2018.-02 is not expected to have a material impact on the Company’s consolidated financial statements. 

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Regulatory Matters

12 Months Ended

Dec. 31, 2017

Regulatory Matters [Abstract]

Regulatory Matters

NOTE 2- REGULATORY MATTERS

Regulatory Matters:  

From May 2011 until 2014, the Holding Company and CFBank each were subject to Cease and Desist Orders (the “Holding Company Order” and the “CFBank Order”, respectively, and collectively, the “Orders”) with the FRB, as successor to the Office of Thrift Supervision (the “OTS”) as the primary regulator of the Holding Company and CFBank.  The Orders imposed significant directives applicable to the Holding Company and CFBank, including requirements that we maintain heightened capital levels, reduce the level of our classified and criticized assets, achieve growth and operating metrics in line with an approved business plan, and comply with restrictions on brokered deposits and on certain types of lending and prohibitions on dividends and repurchases of our capital stock.

The OCC released and terminated the CFBank Order effective as of January 23, 2014.  On May 15, 2014, the FRB announced the termination of the Holding Company Order, effective as of May 9, 2014.  Notwithstanding the termination of the Holding Company Order, the Holding Company was required to continue to adhere to certain requirements and restrictions based on commitments made to the FRB in connection with the termination of the Holding Company Order.  These commitments required the Holding Company, among other things, to continue to implement certain actions in accordance with the capital plan previously submitted to the FRB; not declare or pay dividends on its stock, purchase or redeem its stock, or accept dividends or other capital distributions from CFBank without the prior written approval of the FRB; not incur, increase or guarantee any debt without the prior written consent of the FRB; and provide prior written notice to the FRB with respect to certain changes in directors and senior executive officers.  The foregoing commitments remained in place until January 8, 2016.

Although we are no longer subject to the Orders or the regulatory commitments made following the release of the Orders, we remain subject to extensive supervision and regulation by our regulators and it is possible that regulatory compliance expenses could continue to have an adverse impact on us in the future.

Dividend Restrictions:

The ability of the Holding Company to pay dividends on its outstanding stock is generally dependent upon the receipt of dividends and other distributions from CFBank.  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. 

Effective October 6, 2017, all of its outstanding shares of Series B Preferred Stock were converted into shares of Common Stock of the Company.  The conversion of the Series B Preferred Stock resulted in the elimination of the non-cumulative preferred dividend payments on the Series B Preferred Stock beginning with the 4th quarter of 2017.  See Note 17 toour consolidated financial statements included in this annual report for additional information regarding the conversion of the Series B Preferred Stock.

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Securities

12 Months Ended

Dec. 31, 2017

Securities [Abstract]

Securities

NOTE 3 – SECURITIES

The following table summarizes the amortized cost and fair value of the available-for-sale securities portfolio at December 31, 2017 and December31, 2016 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, 2017
Issued by U.S. government-sponsored entities and agencies:
U.S. Treasury	$	11,499	$	-	$	82	$	11,417
Mortgage-backed securities - residential		236		8		-		244
Collateralized mortgage obligations		110		2		-		112
Total	$	11,845	$	10	$	82	$	11,773

	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
December 31, 2016
Issued by U.S. government-sponsored entities and agencies:
U.S. Treasury	$	13,521	$	11	$	27	$	13,505
Mortgage-backed securities - residential		345		12		-		357
Collateralized mortgage obligations		189		7		-		196
Total	$	14,055	$	30	$	27	$	14,058

There was no other-than-temporary impairment recognized in accumulated other comprehensive income (loss) for securities available for sale at December 31, 2017 or December 31, 2016.

There were no sales of securities for the years ended December 31, 2017 or December 31, 2016.

The amortized cost and fair value of debt securities at December 31, 2017 and December 31, 2016 are shown 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, 2017				December 31, 2016
	Amortized Cost		Fair Value		Amortized Cost		Fair Value
Due in one year or less	$	3,002	$	2,993	$	2,518	$	2,518
Due from one to five years		8,497		8,424		11,003		10,987
Mortgage-backed securities - residential		236		244		345		357
Collateralized mortgage obligations		110		112		189		196
Total	$	11,845	$	11,773	$	14,055	$	14,058

Fair value of securities pledged was as follows:

	2017		2016
Pledged as collateral for:
FHLB advances	$	4,641	$	2,327
Public deposits		2,018		2,043
Interest-rate swaps		145		195
Total	$	6,804	$	4,565

At year end 2017 and 2016, there were no holdings of securities of any one issuer, other than U.S. Treasuries and U.S. government-sponsored entities and agencies, in an amount greater than 10% of stockholders’ equity.

The following table summarizes securities with unrealized losses at December 31, 2017 and December 31, 2016 aggregated by major security type and length of time in a continuous unrealized loss position.

December 31, 2017	Less than 12 Months				12 Months or More				Total
Description of Securities	Fair Value		Unrealized Loss		Fair Value		Unrealized Loss		Fair Value		Unrealized Loss
Issued by U.S. government-sponsored entities and agencies:
U.S. Treasury	$	6,947	$	51	$	4,470	$	31	$	11,417	$	82
Total temporarily impaired	$	6,947	$	51	$	4,470	$	31	$	11,417	$	82

December 31, 2016	Less than 12 Months				12 Months or More				Total
Description of Securities	Fair Value		Unrealized Loss		Fair Value		Unrealized Loss		Fair Value		Unrealized Loss
Issued by U.S. government-sponsored entities and agencies:
U.S. Treasury	$	10,492	$	27	$	-	$	-	$	10,492	$	27
Mortgage-backed securities - residential (1)		1		-		-		-		1		-
Total temporarily impaired	$	10,493	$	27	$	-	$	-	$	10,493	$	27

⁽¹⁾ Securities with an unrealized loss were less than $1 resulting in rounding to zero.

The unrealized losses in U.S. Treasuries at December 31, 2017 and U.S. Treasuries and Mortgage-backed securities at December 31, 2016, are related to multiple securities.  Because the decline in fair value is attributable to changes in market conditions, and not credit quality, and because the Company does not have the intent to sell these securities and will 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, 2017 and December 31, 2016.

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Loans And Leases

12 Months Ended

Dec. 31, 2017

Loans And Leases [Abstract]

Loans And Leases

NOTE 4 – LOANSAND 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, 2017		December 31, 2016
Commercial (1)	$	101,975	$	71,334
Real estate:
Single-family residential		95,578		92,544
Multi-family residential		35,665		34,291
Commercial		111,866		105,313
Construction		42,862		25,822
Consumer:
Home equity lines of credit		25,054		23,109
Other		376		637
Subtotal		413,376		353,050
Less: ALLL		(6,970)		(6,925)
Loans and Leases, net	$	406,406	$	346,125

⁽¹⁾ Includes $6,008 and $2,874 of commercial leases at December 31, 2017 and December 31, 2016, respectively.

Mortgage Purchase Program:

CFBank has participated in a Mortgage Purchase Program with Northpointe Bank (Northpointe), a Michigan banking corporation, since December 2012.  Pursuant to the terms of a participation agreement, CFBank purchases participation interests in loans made by Northpointe related to fully underwritten and pre-sold mortgage loans originated by various prescreened mortgage brokers located throughout the U.S.  The underlying loans are individually (MERS) registered loans which are held until funded by the end investor. The mortgage loan investors include Fannie Mae and Freddie Mac, and other major financial institutions.  This process on average takes approximately 14 days.  Given the short-term holding period of the underlying loans, common credit risks (such as past due, impairment and TDR, nonperforming, and nonaccrual classification) are substantially reduced.  Therefore, no allowance is allocated by CFBank to these loans.These loans are 100% risk rated for CFBank capital adequacy purposes.  Under the participation agreement, CFBank agrees to purchase a 95% ownership/participation interest in each of the aforementioned loans, and Northpointe maintains a 5% ownership interest in each loan it participates.  At December 31, 2017 and 2016, CFBank held $37,665 and $46,919, 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 of the Notes to Consolidated Financial Statements.

The following tables present the activity in the ALLL by portfolio segment for the years ended December 31, 2017 and 2016:

	December 31, 2017
			Real Estate								Consumer
	Commercial		Single-family		Multi-family		Commercial		Construction		Home Equity lines of credit		Other		Total
Beginning balance	$	1,647	$	735	$	716	$	2,727	$	580	$	486	$	34	$	6,925
Addition to (reduction in) provision for loan losses		335		157		(56)		(584)		92		88		(32)		-
Charge-offs		-		-		-		-		-		-		-		-
Recoveries		2		20		-		-		-		23		-		45
Ending balance	$	1,984	$	912	$	660	$	2,143	$	672	$	597	$	2	$	6,970

	December 31, 2016
			Real Estate								Consumer
	Commercial		Single-family		Multi-family		Commercial		Construction		Home Equity lines of credit		Other		Total
Beginning balance	$	1,380	$	691	$	705	$	2,710	$	561	$	474	$	99	$	6,620
Addition to (reduction in) provision for loan losses		390		149		(132)		(128)		19		(4)		(64)		230
Charge-offs		(123)		(147)		-		-		-		(53)		(1)		(324)
Recoveries		-		42		143		145		-		69		-		399
Ending balance	$	1,647	$	735	$	716	$	2,727	$	580	$	486	$	34	$	6,925

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, 2017:  

			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	$	-	$	-	$	-	$	26	$	-	$	-	$	-	$	26
Collectively evaluated for impairment		1,984		912		660		2,117		672		597		2		6,944
Total ending allowance balance	$	1,984	$	912	$	660	$	2,143	$	672	$	597	$	2	$	6,970
Loans:
Individually evaluated for impairment	$	277	$	116	$	-	$	3,183	$	-	$	-	$	-	$	3,576
Collectively evaluated for impairment		101,698		95,462		35,665		108,683		42,862		25,054		376		409,800
Total ending loan balance	$	101,975	$	95,578	$	35,665	$	111,866	$	42,862	$	25,054	$	376	$	413,376

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, 2016:  

			Real Estate								Consumer
	Commercial		Single- family		Multi- family		Commercial		Construction		Home Equity lines of credit		Other		Total
ALLL:
Ending allowance balance attributable to loans:
Individually evaluated for impairment	$	1	$	-	$	-	$	21	$	-	$	-	$	-	$	22
Collectively evaluated for impairment		1,646		735		716		2,706		580		486		34		6,903
Total ending allowance balance	$	1,647	$	735	$	716	$	2,727	$	580	$	486	$	34	$	6,925
Loans:
Individually evaluated for impairment		557	$	122	$	37	$	2,732	$	-	$	-	$	-	$	3,448
Collectively evaluated for impairment		70,777		92,422		34,254		102,581		25,822		23,109		637		349,602
Total ending loan balance	$	71,334	$	92,544	$	34,291	$	105,313	$	25,822	$	23,109	$	637	$	353,050

The following table presents loans individually evaluated for impairment by class of loans as of and for the year ended December 31, 2017. 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. 2017 totaled $190.

	Unpaid Principal Balance		Recorded Investment		ALLL Allocated		Average Recorded Investment		Interest Income Recognized
With no related allowance recorded:
Real estate:
Commercial:
Owner occupied	$	391	$	137	$	-	$	142	$	26
Land		-		-		-		-		-
Total with no allowance recorded		391		137		-		142		26
With an allowance recorded:
Commercial		277		277		-		291		9
Real estate:
Single-family residential		116		116		-		118		6
Commercial:
Non-owner occupied		2,856		2,856		24		2,882		154
Owner occupied		190		190		2		194		9
Total with an allowance recorded		3,439		3,439		26		3,485		178
Total	$	3,830	$	3,576	$	26	$	3,627	$	204

The following table presents loans individually evaluated for impairment by class of loans as of and for the year ended December 31, 2016. 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. 2016 totaled $216.

	Unpaid Principal Balance		Recorded Investment		ALLL Allocated		Average Recorded Investment		Interest Income Recognized
With no related allowance recorded:
Commercial	$	476	$	358	$	-	$	436	$	13
Real estate:
Multi-family residential		37		37		-		41		2
Commercial:
Non-owner occupied		112		112		-		114		8
Owner occupied		871		350		-		360		46
Total with no allowance recorded		1,496		857		-		951		69
With an allowance recorded:
Commercial		199		199		1		232		9
Real estate:
Single-family residential		122		122		-		125		7
Commercial:
Non-owner occupied		2,068		2,068		19		2,086		126
Owner occupied		202		202		2		208		10
Total with an allowance recorded		2,591		2,591		22		2,651		152
Total	$	4,087	$	3,448	$	22	$	3,602	$	221

The following table presents the recorded investment in nonperforming loans by class of loans as of December 31, 2017 and 2016:

	2017		2016
Loans past due over 90 days still on accrual	$	-	$	-
Nonaccrual loans:
Commercial		115		263
Real estate:
Single-family residential		253		397
Consumer:
Home equity lines of credit:
Originated for portfolio		-		44
Purchased for portfolio		102		-
Total nonaccrual		470		704
Total nonperforming loans	$	470	$	704

Nonaccrual loans include both smaller balance single-family mortgage and consumer loans that are collectively evaluated for impairment and individually classified impaired loans. There were no loans 90 days or more past due and still accruing interest at December 31, 2017 or December 31, 2016.  

The following table presents the aging of the recorded investment in past due loans and leases by class of loans as of December 31, 2017:

	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	$	-	$	-	$	-	$	-	$	101,975	$	115
Real estate:
Single-family residential		1,610		27		104		1,741		93,837		149
Multi-family residential		-		-		-		-		35,665		-
Commercial:
Non-owner occupied		-		-		-		-		67,792		-
Owner occupied		-		-		-		-		38,787		-
Land		-		-		-		-		5,287		-
Construction		-		-		-		-		42,862		-
Consumer:
Home equity lines of credit:
Originated for portfolio		-		-		-		-		24,592		-
Purchased for portfolio		-		-		102		102		360		-
Other		24		-		-		24		352		-
Total	$	1,634	$	27	$	206	$	1,867	$	411,509	$	264

The following table presents the aging of the recorded investment in past due loans and leases by class of loans as of December 31, 2016:  

	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	$	-	$	-	$	119	$	119	$	71,215	$	144
Real estate:
Single-family residential		284		49		106		439		92,105		291
Multi-family residential		-		-		-		-		34,291		-
Commercial:
Non-owner occupied		-		-		-		-		60,936		-
Owner occupied		269		600		-		869		34,891		-
Land		-		-		-		-		8,617		-
Construction		48		-		-		48		25,774		-
Consumer:
Home equity lines of credit:
Originated for portfolio		-		15		-		15		22,440		44
Purchased for portfolio		69		-		-		69		585		-
Other		-		-		-		-		637		-
Total	$	670	$	664	$	225	$	1,559	$	351,491	$	479

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, 2017 and December 31, 2016, TDR’s totaled $3,386 and $3,130, respectively.  The Company allocated $25 and $22 of specific reserves to loans modified in TDRs as of December 31, 2017 and 2016, respectively. The Company had not committed to lend additional amounts as of December 31, 2017 or 2016 to customers with outstanding loans that were classified as nonaccrual TDRs.

There was one commercial real estate loan in the amount of $841 that was modified as a TDR during the year ended December 31, 2017, where concessions were granted to a borrower experiencing financial difficulty.  The loan was re-written at a lower interest rate than otherwise would have been offered on this credit grade in the current market. There was onecommercial loan in the amount of $239 that was modified as TDRs during the year ended December 31, 2016, where concessions were granted to a borrower experiencing financial difficulties.   

The following table presents loans modified as TDRs by class of loans during the year ended December 31, 2017:

	Number of Loans		Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment
Commercial		1	$	841	$	841
Total		1	$	841	$	841

The following table presents loans modified as TDRs by class of loans during the year ended December 31, 2016:

	Number of Loans		Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment
Commercial		1	$	339	$	339
Total		1	$	339	$	339

The TDRs described above resulted in no charge-offs during the years ended December 31, 2017 and 2016, respectively.

There were no TDR’s that went into payment default during the year ended December 31, 2017.  There wasonenonperforming TDR that went into payment default during the year ending December 31, 2016. 

The terms of certain other loans were modified during the year ended December 31, 2017 and 2016 that did not meet the definition of a TDR. These loans had a total recorded investment of $46,731 and $33,294 as of December 31, 2017 and 2016, respectively. The modification of these loans involved either a modification of the terms of a loan to borrowers who were not experiencing financial difficulties, a delay in a payment that was considered to be insignificant or there were no concessions granted.

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

Nonaccrual loans include loans that were modified and identified as TDRs and the loans are not performing.  At December 31, 2017 and 2016, nonaccrual TDRs were as follows: 

	2017		2016
Commercial	$	115	$	144
Total	$	115	$	144

Nonaccrual loans at December 31, 2017 and 2016 did not include $3,271 and $2,986, respectively, of TDRs where customers have established a sustained period of repayment performance, generally six months, the loans are current according to their modified terms and repayment of the remaining contractual payments is expected.  These loans are included in total impaired loans.

Credit Quality Indicators:

The Company categorizes loans into risk categories based on relevant information about the ability of borrowers to service their debt, such as current financial information, historical payment experience, credit documentation, public information and current economic trends, among other factors.  Management analyzes loans individually by classifying the loans as to credit risk.  This analysis includes commercial, commercial real estate and multi-family residential real estate loans.  Internal loan reviews for these loan types are performed at least annually, and more often for loans with higher credit risk. Adjustments to loan risk ratings are 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, 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, 2017 and based on the most recent analysis performed follows.  There were no loans rated doubtful at December 31, 2017. 

	Not Rated		Pass		Special Mention		Substandard		Total
Commercial	$	-	$	98,829	$	2,869	$	277	$	101,975
Real estate:
Single-family residential		95,317		-		-		261		95,578
Multi-family residential		-		35,036		466		163		35,665
Commercial:
Non-owner occupied		88		65,161		1,711		832		67,792
Owner occupied		-		37,453		1,008		326		38,787
Land		-		5,287		-		-		5,287
Construction		2,239		40,623		-		-		42,862
Consumer:
Home equity lines of credit:
Originated for portfolio		24,516		-		-		76		24,592
Purchased for portfolio		360		-		-		102		462
Other		376		-		-		-		376
	$	122,896	$	282,389	$	6,054	$	2,037	$	413,376

The recorded investment in loans and leases by risk category and class of loans as of December 31, 2016 follows.  There were no loans rated doubtful at December 31, 2016.

	Not Rated		Pass		Special Mention		Substandard		Total
Commercial	$	47	$	70,444	$	286	$	557	$	71,334
Real estate:
Single-family residential		92,130		-		-		414		92,544
Multi-family residential		-		33,615		505		171		34,291
Commercial:
Non-owner occupied		115		58,183		1,782		856		60,936
Owner occupied		-		33,493		1,048		1,219		35,760
Land		-		6,380		-		2,237		8,617
Construction		1,997		23,825		-		-		25,822
Consumer:
Home equity lines of credit:
Originated for portfolio		22,328		-		-		127		22,455
Purchased for portfolio		512		-		-		142		654
Other		637		-		-		-		637
	$	117,766	$	225,940	$	3,621	$	5,723	$	353,050

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Foreclosed Assets

12 Months Ended

Dec. 31, 2017

Foreclosed Assets [Abstract]

Foreclosed Assets

NOTE 5 – FORECLOSED ASSETS

Foreclosed assets at year-end were as follows:

	2017		2016
Commercial real estate	$	-	$	-
Single-family residential		-		204
Subtotal		-		204
Valuation Allowance		-		-
Total	$	-	$	204

There was no activity in the valuation allowance account or any write-downs during the years ended December 31, 2017 and 2016.

Expenses related to foreclosed assets include:

	2017		2016
Net loss (gain) on sales	$	7	$	(4)
Operating expenses, net of rental income		11		69
	$	18	$	65

There were no  foreclosed assets at December 31, 2017.  Foreclosed assets at December 31, 2016 consisted ofonesingle-family property that was transferred into REO at fair value at the time of transfer in December 2016.Foreclosed asset expensesincurred during 2017 was related to light rehabilitation incurred to ready the property to sell.  Foreclosed asset expense incurred during 2016was related to light rehabilitation and maintenance expense incurred to ready the property to sell, increase occupancy levels, and certain other operating costs.

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Fair Value

12 Months Ended

Dec. 31, 2017

Fair Value [Abstract]

Fair Value

NOTE 6 – FAIR VALUE

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

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

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

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

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

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

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

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, 2017 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	$	11,417
Mortgage-backed securities - residential		244
Collateralized mortgage obligations		112
Total securities available for sale	$	11,773
Loans held for sale	$	1,124
Yield maintenance provisions (embedded derivatives)	$	56
Interest rate lock commitments	$	11
Financial Liabilities:
Interest-rate swaps	$	56

	Fair Value Measurements at December 31, 2016 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	$	13,505
Mortgage-backed securities - residential		357
Collateralized mortgage obligations		196
Total securities available for sale	$	14,058
Loans held for sale	$	2,812
Yield maintenance provisions (embedded derivatives)	$	122
Interest rate lock commitments	$	9
Financial Liabilities:
Interest-rate swaps	$	122

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, 2017 or December 31, 2016.  There were no transfers of assets or liabilities measured at fair value between levels during 2017 or 2016.

Assets measured at fair value on a non-recurring basis are summarized below:

Fair Value Measurements at December 31, 2017 Using
Significant Unobservable Inputs (Level 3)
Impaired loans:
Commercial	$	115
Real Estate:
Single-family residential		116
Commercial:
Non-owner occupied		2,832
Total impaired loans	$	3,063

Fair Value Measurements at December 31, 2016 Using
Significant Unobservable Inputs (Level 3)
Impaired loans:
Commercial	$	130
Real Estate:
Single-family residential		122
Multi-family residential		37
Commercial:
Non-owner occupied		2,161
Owner occupied		200
Total impaired loans	$	2,650

The Company had no assets or liabilities measured at fair value on a non-recurring basis that were measured using Level 1 or 2 inputs at December 31, 2017 or December 31, 2016.

Impaired loans that are measured for impairment using the fair value of the collateral for collateral dependent loans, had a principal balance of $3,087, with a valuation allowance of $24 at December 31, 2017.  Impaired loans that are measured for impairment using the fair value of the collateral for collateral dependent loans, had a principal balance of $2,672 with a valuation allowance of $21 at December 31, 2016. 

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, 2017:

	Fair Value		Valuation Technique(s)	Unobservable Inputs	(Range) Weighted Average
Impaired loans:
Commercial	$	115	Comparable sales approach	Adjustment for differences between the comparable market transactions	3.48%
Real estate:
Single-family residential		116	Comparable sales approach	Adjustment for differences between the comparable market transactions	(1.81%,  3.61%)  2.91%
Commercial:
Non-owner occupied		2,832	Comparable sales approach	Adjustment for differences between the comparable market transactions	(3.48%,  9.64%) 5.15%

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, 2016:

	Fair Value		Valuation Technique(s)	Unobservable Inputs	(Range) Weighted Average
Impaired loans:
Commercial	$	130	Comparable sales approach	Adjustments by management to reflect current discount rates	3.48%
Real estate:
Single -family residential		122	Comparable sales approach	Adjustment for differences between the comparable market transactions	(1.81% , 3.61%)  2.91%
Multi-family residential		37	Comparable sales approach	Adjustment for differences between the comparable market transactions	9.64%
Commercial:
Non-owner occupied		2,161	Comparable sales approach	Adjustment for differences between the comparable market transactions	(1.10%,  5.74%) 1.35%
Owner occupied		200	Comparable sales approach	Adjustment for differences between the comparable market transactions	-4.46%

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 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, 2017 or December 31, 2016. 

As of December 31, 2017 and December 31, 2016, the aggregate fair value, contractual balance and gain or loss of loans held for sale were as follows:

	December 31, 2017		December 31, 2016
Aggregate fair value	$	1,124	$	2,812
Contractual balance		1,120		2,801
Gain		4		11

The total amount of gains and losses from changes in fair value included in earnings for the year ended December 31, 2017 and 2016 for loans held for sale were:

	2017		2016
Interest income	$	68	$	60
Interest expense		-		-
Change in fair value		(7)		6
Total change in fair value	$	61	$	66

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

	Fair Value Measurements at December 31, 2017 Using:
	Carrying
	Value		Level 1		Level 2		Level 3		Total
Financial assets
Cash and cash equivalents	$	45,498	$	45,498	$	-	$	-	$	45,498
Interest-bearing deposits in other financial institutions		100		100		-		-		100
Securities available for sale		11,773		-		11,773		-		11,773
Loans held for sale		1,124		-		1,124		-		1,124
Loans and leases, net		406,406		-		-		402,719		402,719
FHLB and FRB stock		3,227		n/a		n/a		n/a		n/a
Accrued interest receivable		1,326		27		38		1,261		1,326
Yield maintenance provisions (embedded derivatives)		56		-		56		-		56
Interest rate lock commitments		11		-		11		-		11
Financial liabilities
Deposits	$	(419,028)	$	(236,797)	$	(181,659)	$	-	$	(418,456)
FHLB advances and other borrowings		(13,500)		-		(13,466)		-		(13,466)
Advances by borrowers for taxes and insurance		(489)		-		-		(489)		(489)
Subordinated debentures		(5,155)		-		(4,094)		-		(4,094)
Accrued interest payable		(79)		(6)		(73)		-		(79)
Interest-rate swaps		(56)		-		(56)		-		(56)

The carrying amounts and estimated fair values of financial instruments at December 31, 2016 were as follows:

	Fair Value Measurements at December 31, 2016 Using:
	Carrying
	Value		Level 1		Level 2		Level 3		Total
Financial assets
Cash and cash equivalents	$	57,941	$	57,941	$	-	$	-	$	57,941
Interest-bearing deposits in other financial institutions		100		100		-		-		100
Securities available for sale		14,058		-		14,058		-		14,058
Loans held for sale		2,812		-		2,812		-		2,812
Loans and leases, net		346,125		-		-		343,523		343,523
FHLB stock		1,942		n/a		n/a		n/a		n/a
Accrued interest receivable		1,054		13		40		1,001		1,054
Yield maintenance provisions (embedded derivatives)		122		-		122		-		122
Interest rate lock commitments		9		-		9		-		9
Financial liabilities
Deposits	$	(375,364)	$	(202,158)	$	(171,967)	$	-	$	(374,125)
FHLB advances and other borrowings		(13,500)		-		(13,597)		-		(13,597)
Advances by borrowers for taxes and insurance		(408)		-		-		(408)		(408)
Subordinated debentures		(5,155)		-		(3,411)		-		(3,411)
Accrued interest payable		(78)		(2)		(76)		-		(78)
Interest-rate swaps		(122)		-		(122)		-		(122)

The methods and assumptions used to estimate fair value are described as follows.

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

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

FHLB and FRB Stock

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

Loans and Leases

Fair values of loans and leases, excluding loans held for sale, are estimated 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.  Impaired loans are valued at the lower of cost or fair value as described previously. The methods utilized to estimate the fair value of loans do not necessarily represent an exit price.

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.

Other Borrowings

The fair values of the Company’s long-term FHLB 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.

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Loan Servicing

12 Months Ended

Dec. 31, 2017

Loan Servicing [Abstract]

Loan Servicing

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, 2017		December 31, 2016
Mortgage loans serviced for Freddie Mac	$	3,319	$	4,261

Custodial escrow balances maintained in connection with serviced loans were $74 and $119 at year-end 2017 and 2016, respectively.

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Premises And Equipment

12 Months Ended

Dec. 31, 2017

Premises And Equipment [Abstract]

Premises And Equipment

NOTE 8- PREMISES AND EQUIPMENT

Year-end premises and equipment were as follows:

	December 31, 2017		December 31, 2016
Land and land improvements	$	1,293	$	1,293
Buildings		3,938		3,832
Furniture, fixtures and equipment		2,316		2,150
		7,547		7,275
Less: Accumulated Depreciation		(4,014)		(3,846)
	$	3,533	$	3,429

Depreciation expense for 2017 and 2016 totaled $208 and $211, respectively.

Operating Leases:

The Company leases certain branch and loan office property space under three operating leases.  Each lease requires CFBank to absorb its pro rata share of building operating expenses and utilities based on square footage.  The Company entered into a lease agreement to open CFBank’s Glendale branch office in the Cincinnati market, which opened during the third quarter of 2017.  The Glendale lease is for a 60-month term commencing on July 1, 2017, with three renewal options for additional consecutive terms of five years, five years, and four years.  The Company leases a commercial banking agency office in Woodmere, Ohio, which opened in January of 2014.  The Woodmere lease is for a 128-month term commencing January 1, 2014 with no renewal options.  The Company leases CFBank’s Fairlawn branch office pursuant to a  ten year operating lease beginning in 2014 with annual rent increases each year. There is one five-year renewal option on this lease.  Lease expense for the years ended December 31, 2017 and 2016 totaled $325 and $311, respectively.  Leasehold improvements are depreciated straight line over the lease term before consideration of renewal options.

Lease expense is recognized evenly over the lease term to account for lease incentives.  Rent commitments, before renewal options, are as follows:

2018	$	350
2019		355
2020		356
2021		357
2022		342
Thereafter		532
	$	2,292

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Deposits

12 Months Ended

Dec. 31, 2017

Deposits [Abstract]

Deposits

NOTE 9 – DEPOSITS

Time deposits of $100 or more were $137,433 and $128,185 at year-end 2017 and 2016, respectively.  Time deposits of $250 or more were $50,048 and $38,575 at year-end 2017 and 2016, respectively.

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

2018	$	93,215
2019		33,750
2020		20,360
2021		7,737
2022		27,169
Thereafter		-
Total	$	182,231

Brokereddeposits at year-end 2017 and 2016 totaled $46,945 and  $29,738, respectively. 

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FHLB Advances

12 Months Ended

Dec. 31, 2017

FHLB Advances [Abstract]

FHLB Advances

NOTE 10 –FHLB ADVANCES

Fixed Rate Advances from the FHLB were as follows:

	Weighted
	Average Rate	December 31, 2017		December 31, 2016
Fixed Rate Advances
Maturities:
2017	-	$	-	$	2,500
2018	-		-		-
2019	1.62%		3,500		3,500
2020	1.98%		4,500		3,500
2021	2.32%		4,000		4,000
2022	2.05%		1,500		-
Total		$	13,500	$	13,500

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

The advances were collateralized as follows:

	December 31, 2017		December 31, 2016
Single-family mortgage loans	$	49,616	$	38,342
Multi-family mortgage loans		15,125		14,854
Commercial real estate loans (1-4 family)		5,348		2,793
Home equity lines of credit		7,061		-
Securities		4,641		2,327
Cash		3,300		3,300
Total	$	85,091	$	61,616

Based on the collateral pledged to the FHLB and CFBank’s holdings of FHLB stock, CFBank was eligible to borrow up to a total of $65,003 from the FHLB at December 31, 2017. 

Payments due to the FHLB over the next five years are as follows:

	December 31, 2017
2018	$	-
2019		3,500
2020		4,500
2021		4,000
2022		1,500
	$	13,500

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Other Borrowings

12 Months Ended

Dec. 31, 2017

Other Borrowings [Abstract]

Other Borrowings

NOTE 11 - OTHER BORROWINGS

There were no outstanding borrowings with the Federal Reserve Bank (the “FRB”) at December 31, 2017 or at December 31, 2016. 

Assets pledged as collateral with the FRB were as follows:

	2017		2016
Commercial loans	$	18,491	$	16,380
Commercial real estate loans		43,518		39,230
	$	62,009	$	55,610

Based on the collateral pledged, CFBank was eligible to borrow up to $40,448 from the FRB at year-end 2017.

CFBank had $8.0million of availability in an unused line of credit at a commercial bank at December 31, 2017 and a $1.0 million unused line of credit with a different commercial bank at December 31, 2016.  During the first quarter of 2017, the Company added an$8.0million line of credit for potential liquidity purposes. The previous $1.0 million line of credit, with a different institution, was closed during the second quarter of 2017. There were no outstanding borrowings on these lines of credit at December 31, 2017 or December 31, 2016.  If CFBank were to borrow on this line of credit, interest would accrue daily at a variable rate based on the commercial bank’s cost of funds and current market returns.

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Subordinated Debentures

12 Months Ended

Dec. 31, 2017

Subordinated Debentures [Abstract]

Subordinated Debentures

NOTE 12 – 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.

The Holding Company may redeem the subordinated debentures, in whole or in part, in a principal amount with integral multiples of $1, on or after December 30, 2008 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 4.54% at year-end 2017 and 3.85% at year-end 2016.

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Benefit Plans

12 Months Ended

Dec. 31, 2017

Benefit Plans [Abstract]

Benefit Plans

NOTE 13 – 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 unfunded liability under the Pentegra DB Plan at June 30, 2017 totaled  $36 and at June 30, 2016 was $53.  CFBank’s contributions for the plan years ending June 30, 2017 and June 30, 2016, totaled $32, and $42, 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 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, 2017 and 2016 was 96.54% and94.90%, respectively. 

Total contributions made to the Pentegra DB Plan, as reported on Form 5500 of the Pentegra DB Plan, totaled $153,186 and $163,138 for the plan years ended June 30, 2016 and June 30, 2015, respectively.  CFBank’s contributions to the Pentegra DB Plan were not more than 5% of the total contributions to the Pentegra DB Plan.

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 25% of the first 8% of the compensation contributed.  Expense for 2017 and 2016 was $57  and $49, 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 $10 and $10 in 2017 and 2016, respectively. The accrual is included in accrued interest payable and other liabilities in the consolidated balance sheets and totaled $203 at year-end 2017 and $218 at year-end 2016. 

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 ($19) and ($3) in 2017 and 2016, 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 $191 at year-end 2017 and $210 at year-end 2016.

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Income Taxes

12 Months Ended

Dec. 31, 2017

Income Taxes [Abstract]

Income Taxes

NOTE 14 – INCOME TAXES

Income tax expense was as follows:

	December 31, 2017		December 31, 2016
Current federal	$	1,133	$	187
Deferred federal (1)		3		623
Revaluation of net deferred tax assets		979		-
Total	$	2,115	$	810

⁽¹⁾ Includes tax benefit of operating loss carryforwards of  $52 and  $717 for the years ended December 31, 2017 and 2016, respectively.

Effective tax rates differ from the federal statutory rate of 34% applied to income (loss) before income taxes due to the following:

	December 31, 2017		December 31, 2016
Federal Statutory rate times financial statement income (loss)	$	1,177	$	829
Effect of:
Stock compensation		(49)		6
Bank owned life insurance income		(46)		(45)
Revaluation of net deferred tax assets		979		-
Other		54		20
	$	2,115	$	810
Effective tax rate		61%		33%

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

	2017		2016
Deferred tax assets:
Allowance for loan and lease losses	$	997	$	1,575
Compensation related issues		274		353
Deferred loan fees		100		155
AMT Credit		-		50
Nonaccrual interest		45		41
Net operating loss carry forward		501		863
Other		42		70
		1,959		3,107
Deferred tax liability:
FHLB stock dividend		226		366
Mortgage servicing rights		1		2
Depreciation		36		47
Prepaid expenses		51		63
Mark-to-market loans		-		2
		314		480
Net deferred tax asset	$	1,645	$	2,627

At December 31, 2017, the Company had a deferred tax asset recorded of approximately $1,600.  At December 31, 2016, the Company had a deferred tax asset recorded of approximately $2,600.  At December 31, 2017 and December 31, 2016, 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 2014. 

On December 22, 2017, the United States enacted tax reform legislation through the Tax Cuts and Jobs Act, which significantly changes the existing U.S. tax laws, including a reduction in the corporate tax rate from 35% to 21%, as well as other changes. As a result of enactment of the legislation, the Company incurred additional one-time income tax expense of $979,000 during the fourth quarter of 2017, related to the remeasurement of the Company's deferred tax assets and liabilities.

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, 2017 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 2017, the Company had net operating loss carryforwards of $23,059, which expire at various dates from 2024 to 2033.   As a result of the ownership change, the Company's ability to utilize carryforwards that arose before the 2012 stock offering closed is limited to $163 per year.  Due to this limitation, management determined it is more likely than not that $20,520 of net operating loss carryforwards will expire unutilized.  As required by accounting standards, the Company reduced the carrying value of deferred tax assets, and the corresponding valuation allowance, by the $6,977 tax effect of this lost realizability.

Federal income tax laws provided additional deductions, totaling $2,250, for thrift bad debt reserves established before 1988.  Accounting standards do not require a deferred tax liability to be recorded on this amount, which otherwise would have totaled $473 at year-end 2017.  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. 

On December 22, 2017, the “Tax Cuts and Jobs Act” was enacted into law reducing the federal corporate tax rate to 21%, effective January 1, 2018.  The Company conducted a revaluation of its existing deferred tax asset (DTA) to reflect the impact of the new tax rates, which resulted in the Company recording an additional tax expense in the fourth quarter of 2017 in the amount of $979.

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Related-Party Transactions

12 Months Ended

Dec. 31, 2017

Related-Party Transactions [Abstract]

Related-Party Transactions

NOTE 15 – RELATED-PARTY TRANSACTIONS

Loans to principal officers, directors and their affiliates during 2017 were as follows:

Beginning balance	$	2,399
New loans		4,442
Effect of changes in composition of related parties		-
Repayments		(177)
Ending balance	$	6,664

All loans to related parties were made 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 at year-end 2017 and 2016 were $487 and$274, respectively.

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Stock-Based Compensation

12 Months Ended

Dec. 31, 2017

Stock-Based Compensation [Abstract]

Stock-Based Compensation

NOTE 16 – STOCK-BASED COMPENSATION

The Company has issued awards under three stock-based compensation plans (collectively, the “Plans”), as described below.  Total compensation cost that has been charged against income for those Plans totaled $246 and $122 for 2017 and 2016, respectively.  The total income tax benefit was $84 and $35 for 2017 and 2016, respectively.

The Plans are all stockholder-approved and authorize stock option grants and restricted stock awards to be made to directors, officers and employees. The 1999 Stock-Based Incentive Plan, which expired July 13, 2009, provided 38,778 shares of common stock for stock option grants and 15,511 shares of common stock for restricted stock awards.  The 2003 Equity Compensation Plan (the “2003 Plan”), as amended and restated, provided an aggregate of 100,000 shares for stock option grants and restricted stock awards, of which up to 30,000 shares could be awarded in the form of restricted stock awards.  The 2009 Equity Compensation Plan (the “2009 Plan”), which was approved by stockholders on May 21, 2009, replaced the 2003 Plan and provided for 200,000 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 1,500,000. 

Stock Options:

The Plans permit the grant of stock options to directors, officers and employees of the Holding Company and CFBank.  Option awards are granted with an exercise price equal to the market price of the Company’s common stock on the date of grant, generally have vesting periods ranging from one to three years, and are exercisable for ten years from the date of grant.  Unvested stock options immediately vest upon a change of control. 

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

There were no stock options granted or exercised during the years ended December 31, 2017 and December 31, 2016. 

A summary of stock option activity in the Plans for 2017 follows:

	Shares	Weighted Average Exercise Price		Weighted Average Remaining Contractual Term (Years)	Intrinsic Value
Outstanding at beginning of year	542,746	$	1.46
Expired	(300)		36.75
Cancelled or forfeited	(3,190)		1.70
Outstanding at end of period	539,256	$	1.44	5.4	$	731,080
Expected to vest	-	$	-	-	$	-
Exercisable at end of period	539,256	$	1.44	5.4	$	731,080

During the year ended December 31, 2017, there were 3,190 stock options canceled or forfeited.  Expense associated with unvested forfeited shares is reversed. As of December 31, 2017, 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 215,500 shares of restricted stock issued in 2017 and292,000 shares of restricted stock issued in 2016. 

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, 2017	425,666	$	1.56
Granted	215,500		2.56
Vested	(157,172)		1.53
Forfeited	(19,333)		1.58
Nonvested at December 31, 2017	464,661	$	2.03

As of December 31, 2017 and 2016, the unrecognized compensation cost related to nonvested shares granted under the Plans was $918 and $642, respectively.   There were 157,172 shares that vested during the year ended December 31, 2017.  

There were 347,115 shares remaining available for stock option grants and restricted stock awards under the 2009 Plan at December 31, 2017.

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Preferred Stock

12 Months Ended

Dec. 31, 2017

Preferred Stock [Abstract]

Preferred Stock

NOTE 17 – PREFERRED STOCK

Series B Preferred Stock:

Commencing in April 2014, the Company conducted a private placement of up to 480,000 shares of its 6.25% Non-Cumulative Convertible Perpetual Preferred Stock, Series B (“Series B Preferred Stock”) for an offering price of $25.00 per share (the “Private Placement”).  Pursuant to the Private Placement, the Company sold an aggregate of 480,000 shares of Series B Preferred Stock on May 12, 2014 and July 15, 2014, for an aggregate offering price of $12,000.  After payment of approximately $482 in placement fees and approximately $149 of other offering expenses, the Company’s net proceeds from its sale of the 480,000 shares of Series B Preferred Stock in the Private Placement were approximately $11,369.  

For each share of Series B Preferred Stock sold in the Private Placement, the Company also issued, at no additional charge, a Warrant to purchase common stock of the Company.  See Note 18-Common Stock Warrants for additional information.

Conversion of Series B Preferred Stock to Common Stock:

On September 29, 2017, the Company announced the conversion of its Series B Preferred Stock into shares of Common Stock of the Company.  The conversion was effective October 6, 2017, and resulted in the conversion of all 480,000 of the Company’s issued and outstanding shares of Series B Preferred Stock into approximately 6,857,143 shares of Common Stock.   

The conversion of the Series B Preferred Stock resulted in the elimination of the non-cumulative preferred dividend payments on the Series B Preferred Stock beginning with the 4th quarter of 2017. The preferred dividends, in the aggregate amount of approximately $187,500 quarterly, or approximately $750,000 annually, will not be payable by the Company going forward.

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Common Stock Warrants

12 Months Ended

Dec. 31, 2017

Common Stock Warrants [Abstract]

Common Stock Warrants

NOTE 18 – COMMON STOCK WARRANTS

Series B Preferred Stock – Warrants:

For each share of Series B Preferred Stock issued by the Company in the Private Placement, the Company also issued, at no additional charge, a Warrant to purchase (i) 2.00 shares of common stock of the Company if the purchaser purchased less than $700  (28,000 shares) of Series B Preferred Stock in the Private Placement, or (ii) 3.25 shares of common stock if the purchaser purchased $700  (28,000 shares) or more of Series B Preferred Stock in the Private Placement.  Warrants to purchase an aggregate of 1,152,125 shares of common stock were issued by the Company to the purchasers of the 480,000 shares of Series B Preferred Stock sold in the Private Placement.  Subject to certain limitations, the Warrants are exercisable for a period of approximately five (5) years expiring on July 15, 2019, at a cash purchase price of $1.85 per share of common stock.  As of December 31, 2017 there were 469,600 warrants outstanding.

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Regulatory Capital Matters

12 Months Ended

Dec. 31, 2017

Regulatory Capital Matters [Abstract]

Regulatory Capital Matters

NOTE 19 – 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 will be phased in over time, becoming fully effective on January 1, 2019, and will consist of an additional amount of common equity equal to2.5% 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 will be fully phased in by 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.

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

The implementation of the capital conservation buffer began on January 1, 2016 at the 0.625% level and will be phased in over a four-year period increasing by increments of that amount on each subsequent January 1 until it reaches 2.5% on January 1, 2019.  The capital conservation buffer is currently 1.875%.  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, 2017 and December 31, 2016 for CFBank under the Basel III Capital Rules.  The minimum required capital amounts presented include the minimum required capital levels as of December 31, 2017, based on the phase-in provisions of the Basel III Capital Rules and the minimum required capital levels as of January 1, 2019 when the Basel III Capital Rules have been fully phased-in.  Capital levels required to be considered well capitalized are based upon prompt corrective action regulations, as amended to reflect the changes under the Basel III Capital Rules.

	Actual			Minimum Capital Required-Basel III Phase-In Schedule			Minimum Capital Required-Basel III Fully Phased-In			To Be Well Capitalized Under Applicable Regulatory Capital Standards
	Amount		Ratio	Amount		Ratio	Amount		Ratio	Amount		Ratio
December 31, 2017
Total Capital to risk weighted assets	$	48,271	11.91%	$	37,492	9.25%	$	42,559	10.50%	$	40,532	10.00%
Tier 1 (Core) Capital to risk weighted assets		43,179	10.65%		29,386	7.25%		34,452	8.50%		32,426	8.00%
Common equity tier 1 capital to risk-weighted assets		43,179	10.65%		23,306	5.75%		28,372	7.00%		26,346	6.50%
Tier 1 (Core) Capital to adjusted total assets (Leverage ratio)		43,179	9.37%		18,432	4.00%		18,432	4.00%		23,040	5.00%

	Actual			Minimum Capital Required-Basel III Phase-In Schedule			Minimum Capital Required-Basel III Fully Phased-In			To Be Well Capitalized Under Applicable Regulatory Capital Standards
	Amount		Ratio	Amount		Ratio	Amount		Ratio	Amount		Ratio
December 31, 2016
Total Capital to risk weighted assets	$	45,118	12.46%	$	31,256	8.63%	$	38,029	10.50%	$	36,218	10.00%
Tier 1 (Core) Capital to risk weighted assets		40,556	11.20%		24,013	6.63%		30,785	8.50%		28,974	8.00%
Common equity tier 1 capital to risk-weighted assets		40,556	11.20%		18,580	5.13%		25,353	7.00%		23,542	6.50%
Tier 1 (Core) Capital to adjusted total assets (Leverage ratio)		40,556	9.66%		16,792	4.00%		16,792	4.00%		20,991	5.00%

Effective December 1, 2016, CFBank converted from a federal savings association to a national bank and, as a result, is no longer subject to the Qualified Thrift Lender (QTL) requirements.  Previously, the Qualified Thrift Lender test required CFBank to maintain at least 65% of assets in housing-related finance and other specified areas. 

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:

The Holding Company’s principal source of funds for dividend payments is dividends received from CFBank.  Banking regulations limit the amount of dividends that may be paid without prior approval of regulatory agencies. Under these regulations, the amount of dividends that may be paid in any calendar year is limited to the current year’s net profits, combined with the retained net profits of the preceding two years, subject to the capital requirements described above.  Any future dividend payments by CFBank to the Holding Company would be based on future earnings and, if necessary, regulatory approval. 

The Holding Company’s ability to pay dividends on its stock is also conditioned upon the payment, on a current basis, of quarterly interest payments on the subordinated debentures underlying the Company’s trust preferred securities.  Additionally, so long as the Company’s Series B Preferred Stock remains outstanding, the Holding Company is prohibited from paying dividends (other than dividends payable solely in shares) on the Company’s common stock for the then-current dividend period, unless full dividends on the Series B Preferred Stock have been paid or set aside for payment. 

Effective October 6, 2017, the Company caused the conversion of all of its outstanding shares of Series B Preferred Stock into shares of Common Stock of the Company.  The conversion of the Series B Preferred Stock results in the elimination of the non-cumulative preferred dividend payments on the Series B Preferred Stock beginning with the 4th quarter of 2017. 

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 14-Income taxes.

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Derivative Instruments

12 Months Ended

Dec. 31, 2017

Derivative Instruments [Abstract]

Derivative Instruments

NOTE 20 – 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 $2,185 at December 31, 2017 and $2,280 at December 31, 2016.

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

Contingent Features:

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, 2017, CFBank had $645 in securities and cash pledged as collateral for these derivatives. Should the liability increase beyond the collateral value, CFBank will be required to pledge additional collateral. 

Additionally, CFBank’s interest-rate swap instruments contain provisions that require CFBank to remain well capitalized under regulatory capital standards. The interest-rate swaps may be called by the counterparty if CFBank fails to maintain well-capitalized status under regulatory capital standards.  As of December 31, 2017, CFBank was well-capitalized under regulatory capital standards.

Summary information about the derivative instruments is as follows:

	2017		2016
Notional amount	$	2,185	$	2,280
Weighted average pay rate on interest-rate swaps		3.75%		3.74%
Weighted average receive rate on interest-rate swaps		1.52%		0.75%
Weighted average maturity (years)		2.1		3.1
Fair value of interest-rate swaps	$	(56)	$	(122)
Fair value of yield maintenance provisions	$	56	$	122

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 2017 or 2016.

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 $2,390 and $2,164 of interest rate lock commitments related to residential mortgage loans at December 31, 2017 and 2016, respectively.  The fair value of these mortgage banking derivatives was reflected by a derivative asset of $11 and $8  at December 31, 2017 and 2016, 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. Net gains (losses) recognized in earnings related to these mortgage banking derivatives totaled $5 and7 in 2017 and2016, respectively.

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Loan Commitments And Other Related Activities

12 Months Ended

Dec. 31, 2017

Loan Commitments And Other Related Activities [Abstract]

Loan Commitments And Other Related Activities

NOTE 21 – 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:

	2017				2016
	Fixed Rate		Variable Rate		Fixed Rate		Variable Rate
Commitments to make loans	$	15,856	$	21,716	$	21,335	$	22,171
Unused lines of credit	$	8,068	$	38,760	$	3,714	$	29,621
Standby letters of credit	$	1,115	$	-	$	991	$	-

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 5.88% and maturities ranging from 21 months to 30 years at December 31, 2017. The fixed-rate loan commitments had interest rates ranging from 1.75% to 6.50%and maturities ranging from2 months to 30 years at December 31, 2016.

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Parent Company Only Condensed Financial Information

12 Months Ended

Dec. 31, 2017

Parent Company Only Condensed Financial Information [Abstract]

Parent Company Only Condensed Financial Information

NOTE 22 – PARENT COMPANY ONLY CONDENSED FINANCIAL INFORMATION

Condensed financial information of Central Federal Corporation follows:

	2017		2016
Assets
Cash and cash equivalents	$	523	$	2,197
Investment in banking subsidiary		43,633		41,448
Investment in and advances to other subsidiary		228		225
Other assets		1,232		901
Total assets	$	45,616	$	44,771
Liabilities and Equity
Subordinated debentures	$	5,155	$	5,155
Accrued expenses and other liabilities		200		324
Stockholders' equity		40,261		39,292
Total liabilities and stockholders' equity	$	45,616	$	44,771

	2017		2016
Interest income	$	4	$	2
Other income		48		131
Interest expense		212		185
Other expense		815		646
Loss before income tax and undistributed subsidiary income		(975)		(698)
Tax effect		330		236
Gain (loss) after income tax and undistributed subsidiary income		(645)		(462)
Equity in undistributed subsidiary income		1,991		2,089
Net income	$	1,346	$	1,627
Comprehensive income	$	1,297	$	1,638

	2017		2016
Cash flows from operating activities
Net Income	$	1,346	$	1,627
Adjustments:
Effect of subsidiaries' operations		(1,991)		(2,089)
Change in other assets and other liabilities		(268)		766
Net cash from (used by) operating activities		(913)		304
Cash flows from financing activities
Acquisition of treasury shares surrendered upon vesting of restricted stock for payment of taxes		(49)		-
Purchase of treasury shares		-		(30)
Exercise of warrants to common stock		38		-
Dividends paid on Series B preferred stock		(750)		(750)
Net cash from (used by) financing activities		(761)		(780)
Net change in cash and cash equivalents		(1,674)		(476)
Beginning cash and cash equivalents		2,197		2,673
Ending cash and cash equivalents	$	523	$	2,197

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Earnings (Loss) Per Common Share

12 Months Ended

Dec. 31, 2017

Earnings (Loss) Per Common Share [Abstract]

Earnings (Loss) Per Common Share

NOTE 23 – EARNINGS (LOSS) 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 unvested share-based payment awards according to dividends declared (or accumulated) and participation rights in undistributed earnings.  The factors used in the earnings per share computation follow:

	December 31, 2017		December 31, 2016
Basic
Net income	$	1,346	$	1,627
Dividends on Series B  preferred stock and accretion of discount		(666)		(857)
Net income allocated to common stockholders	$	680	$	770
Weighted average common shares outstanding including unvested share-based payment awards		17,928,141		16,020,847
Less: Unvested share-based payment awards		-		-
Average shares		17,928,141		16,020,847
Basic earnings per common share	$	0.04	$	0.05
Diluted
Net earnings allocated to common stockholders	$	680	$	770
Add back: Preferred Dividends on Series B stock and accretion of discount		-		-
Net earnings allocated to common stockholders	$	680	$	770
Weighted average common shares outstanding for basic earnings per common share		17,928,141		16,020,847
Add: Dilutive effects of assumed exercises of stock options		216,486		38,184
Add: Dilutive effects of assumed exercises of stock warrants		1,141,725		-
Average shares and dilutive potential common shares		19,286,352		16,059,031
Diluted earnings per common share	$	0.04	$	0.05

The following potential common shares were anti-dilutive and not considered in computing diluted earnings (loss) per common share.

	2017	2016
Stock options	5,399	282,971
Series B preferred stock	-	6,857,143
Stock warrants	-	1,152,125

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Contingent Liabilities

12 Months Ended

Dec. 31, 2017

Contingent Liabilities [Abstract]

Contingent Liabilities

NOTE 24 - 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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Accumulated Other Comprehensive Income

12 Months Ended

Dec. 31, 2017

Accumulated Other Comprehensive Income [Abstract]

Accumulated Other Comprehensive Income

NOTE 25 - ACCUMULATED OTHER COMPREHENSIVE INCOME

The following table summarizes the changes within each classification of accumulated other comprehensive income, net of tax, for the year ended December 31, 2017 and December 31, 2016 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, 2017 and 2016  (1)
	Unrealized Gains and Losses on Available-for-Sale Securities
	2017		2016
Accumulated other comprehensive income (loss), beginning of period	$	2	$	(9)
Other comprehensive gain (loss) before reclassifications		(49)		11
Less amount reclassified from accumulated other comprehensive loss (2)		-		-
Net current-period other comprehensive income (loss)		(49)		11
Accumulated other comprehensive income (loss), end of period	$	(47)	$	2

⁽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 year ended December 31, 2017 and December 31, 2016. 

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Subsequent Events

12 Months Ended

Dec. 31, 2017

Subsequent Events [Abstract]

Subsequent Events

NOTE 26- SUBSEQUENT EVENT

In February 2018, the Holding Company entered into a credit facility with a third-party bank pursuant to which the Holding Company may borrow up to an aggregate principal amount of $6,000.  The purpose of the credit facility is to provide an additional source of liquidity for the Holding Company and to provide potential funds, as needed, for the Holding Company to downstream as additional capital to the Bank to support growth.  Loans under the credit facility will bear interest at a rate equal to the Prime Rate plus 0.75%.  The credit facility is secured by a pledge of the Holding Company’s stock of CFBank.  The credit facility will expire in February 2020 unless extended or replaced.

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Summary of Significant Accounting Policies (Policy)

12 Months Ended

Dec. 31, 2017

Summary Of Significant Accounting Policies [Abstract]

Nature of Operations and Principles of Consolidation

Nature of Operations and Principles of Consolidation: 

The consolidated financial statements include Central Federal Corporation (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.  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, Fairlawn, Glendale, Calcutta, and Wellsville,Ohio, and through its agency office in Woodmere, 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

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 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.

Interest-Bearing Deposits in Other Financial Institutions

Interest-Bearing Deposits in Other Financial Institutions:  Interest‑bearing deposits in other financial institutions mature in April, 2019 and are carried at cost.  As of December 31, 2017 and December 31, 2016, there was $100 inan interest-bearing deposit in other financial institutions.

Securities

Securities:  Debt securities are classified as available for sale when they might be sold before maturity. Equity securities with readily determinable fair values are classified as available for sale.  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.

Loans Held for Sale

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 Lease

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

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,  Columbianaandcontiguous 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)

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

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

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

The general reserve component covers non‑impaired loans of all classes and is based on historical loss experience adjusted for current factors.  The historical loss experience is determined by loan class and is based on the actual loss history experienced by the Company over a three-year period.  The general component is calculated based on CFBank’s loan balances and actual historical 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 include loans to businesses generally located within our primary market area. Those 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.  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 located within and outside of 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 single-family residential real estate loans for portfolio in amounts up to 85% of the lower of the appraised value or the purchase price of the property securing the loan, without requiring private mortgage insurance.  Loans in excess of 85% of the lower of the appraised value or purchase price of the property securing the loan require private mortgage insurance.  CFBank has not engaged in subprime lending or used option adjustable-rate mortgage products.

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 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 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 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 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 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 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, 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, and auto and credit card 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:  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

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 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

Low Income Housing Tax Credits (LIHTC):  The Company has invested in low income housing tax credits through a fund that assists 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.

Joint Ventures

Joint Ventures:  The Holding Company 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 funding for the joint ventures is related to shorter term operating activities and is related to the development of single family real estate in the form of condominiums.  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. The balance outstanding in joint ventures at December 31, 2017 and December 31, 2016 was $325 and $325, respectively.  Income recognized on the joint ventures was $20 and $100, respectively, for 2017 and 2016.

Premises and Equipment

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 to 40 years. Furniture, fixtures and equipment are depreciated using the straight‑line method with useful lives ranging from 2 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

Federal Home Loan Bank (FHLB) stock:  CFBank is a member of the FHLB system.  Members are required to own a certain amount of 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

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

Bank Owned Life Insurance:  CFBank purchased life insurance policies on certain directors and employees in 2002.  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

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

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

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.  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

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 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.

Income Taxes

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

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

Earnings Per Common Share:  Basic earnings per common share is net income available to common stockholders divided by the weighted average number of common shares outstanding during the period.  All outstanding unvested share-based payment awards that contain rights to nonforfeitable dividends are considered participating securities for this calculation.  Diluted earnings per common share includes the dilutive effect of additional potential common shares issuable under stock options. 

Comprehensive Income (Loss)

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.

Loss Contingencies

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 are any such matters that will have a material effect on the financial statements.  See Note 24 – Contingent Liabilities.

Restrictions on Cash

Restrictions on Cash:  Cash on hand or on deposit with the Federal Reserve Bank (FRB) is required to meet regulatory reserve and clearing requirements. The reserve requirement at December 31, 2017 and December 31, 2016 was $718 and $267, respectively.  Cash on deposit with the FHLB includes $3,300 pledged as collateral for FHLB advances. 

Equity

Equity:  Treasury stock is carried at cost. The carrying value of preferred stock and the common stock warrant is based on allocation of issuance proceeds, net of issuance costs, in proportion to their relative fair values.  Preferred stock is carried net of the discount established through the allocation of proceeds.

Dividend Restriction

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 and Series B Preferred Stock is generally dependent upon the receipt of dividends and other distributions from CFBank.  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. 

Effective October 6, 2017, all of its outstanding shares of Series B Preferred Stock were converted into shares of Common Stock of the Company.  The conversion of the Series B Preferred Stock resulted in the elimination of the non-cumulative preferred dividend payments on the Series B Preferred Stock beginning with the 4th quarter of 2017.

Fair Value of Financial Instruments

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.

Operating Segments

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

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 loss or stockholders’ equity.

Adoption of New Accounting Standards

Adoption of New Accounting Standards:

In May 2014 the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2014-09, Revenue from Contracts with Customers (Topic 606).  The topic of Revenue Recognition had become broad with several other regulatory agencies issuing standards, which lacked cohesion.  The new guidance establishes a “comprehensive framework” and “reduces the number of requirements to which an entity must consider in recognizing revenue” and yet provides improved disclosures to assist stakeholders reviewing financial statements.  ASU No. 2014-09 provides that an entity should recognize revenue to depict the transfer of promised goods or services.  The guidance provides steps to follow to achieve the core principle.  An entity should disclose sufficient information to enable users of financial statements to understand the nature, amount, and uncertainty of revenue and cash flows arising from contracts with customers.

Guidance in ASU No. 2014-09 has been clarified by the following ASUs:

· ASU No. 2016-08, “Revenue from Contracts with Customers (Topic 606): Principal versus Agent Considerations (Reporting Revenue Gross versus Net)”

· ASU No. 2016-10, “Revenue from Contracts with Customers (Topic 606): Identifying Performance Obligations and Licensing”

· ASU No. 2016-12, “Revenue from Contracts with Customers (Topic 606): Narrow Scope Improvements and Practical Expedients”

· ASU No. 2016-20, “Revenue from Contracts with Customers (Topic 606): Technical Corrections and Improvements to Topic 606”

As extended by ASU No. 2015-14, Revenue from Contracts with Customers (Topic 606): Deferral of the Effective Date, ASU No. 2014-09 and the clarifying ASUs are effective for public companies for annual reporting periods beginning after December 15, 2017, including interim periods within that reporting period.  Transitional guidance is included in the updates.  Earlier adoption is permitted only as of annual reporting periods beginning after December 15, 2016, including interim reporting periods within that reporting period.  While interest income is specifically out of scope of this standard, management has evaluated the revenue streams within “noninterest income” to assess the applicability of this standard.  Based on our review, management has concluded that adoption of ASU No. 2015-14 will not have a significant effect on the Company’s consolidated financial statements, including disclosures.

In January 2016, the FASB issued ASU No. 2016-01, Financial Instruments—Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities.  ASU 2016-01 amends the guidance in U.S. GAAP on the accounting for equity investments, financial liabilities under the fair value option and the presentations and disclosure requirements of financial instruments.  ASU 2016-01 is effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years.  Early adoption is permitted for the accounting guidance on financial liabilities under the fair value option.  The Company will adopt the methodologies prescribed by the ASU by the date required.  Adoption of ASU No. 2016-01 did not have a significant effect on the Company’s consolidated financial statements.

On February 25, 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842).  Under the new ASU, lessees will recognize lease assets and liabilities on their balance sheets for all leases with terms of more than 12 months.  The new lessee accounting model retains two types of leases, and is consistent with the lessee accounting model under existing GAAP.  One type of lease (finance leases) will be accounted for in substantially the same manner as capital leases are accounted for today.  The other type of lease (operating leases) will be accounted for (both in the income statement and statement of cash flows) in a manner consistent with today’s operating leases.  Lessor accounting under the new standard is fundamentally consistent with existing GAAP.  Lessees and lessors would be required to provide additional qualitative and quantitative disclosures to help financial statement users assess the amount, timing, and uncertainty of cash flows arising from leases.  These disclosures are intended to supplement the amounts recorded in the financial statements so that users can understand more about the nature of an organization’s leasing activities.  For public business entities, the final lease standard will be effective for fiscal years beginning after December 15, 2018 including interim periods within those fiscal years.  Early application is permitted.  The Company continues to evaluate the provision of the new lease standard and although we have not yet reasonably determined the estimated financial statement impact, due to the small number of lease agreements presently in effect for the Company, we believe the new guidance will not have a significant impact on the Company’s consolidated financial statements, including disclosures.

In March 2016, the FASB issued ASU No. 2016-07, Investments—Equity Method and Joint Ventures (Topic 323): Simplifying the Transition to the Equity Method of Accounting.  ASU No. 2016-07 affects all entities that have an investment that becomes qualified for the equity method of accounting as a result of an increase in the level of ownership interest or degree of influence.  The amendments in this update eliminate the requirement that, when an investment qualifies for use of the equity method, an investor must adjust the investment, results of operations, and retained earnings retroactively on a step-by-step basis as if the equity method had been in effect during all previous periods that the investment had been held.  ASU No. 2016-07 requires that the equity method investor add the cost of acquiring the additional interest in the investee to the current basis of the investor’s previously held interest and adopt the equity method of accounting as of the date the investment becomes qualified for equity method accounting.  The amendments also require that an entity that has an available-for-sale equity security that becomes qualified for the equity method of accounting recognize through earnings the unrealized holding gain or loss in accumulated other comprehensive income at the date the investment becomes qualified for use of the equity method.  The amendments in ASU No. 2016-07 are effective for all entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2016.  Adoption of ASU No. 2016-07 did not have a significant effect on the Company’s consolidated financial statements.

In March 2016, the FASB issued ASU No. 2016-09, Compensation—Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting.  ASU No. 2016-09 affects all entities that issue share-based payment awards to their employees.  The new guidance involves several aspects of the accounting for share-based payment transactions, including income tax consequences, classification of awards as either equity or liabilities, and classification on the statement of cash flows.  Under ASU No. 2016-09, any excess tax benefits or tax deficiencies should be recognized as income tax expense or benefit in the income statement.  Excess tax benefits are to be classified as an operating activity in the statement of cash flows.  In accruing compensation cost, an entity can make an entity-wide accounting policy election to either estimate the number of awards that are expected to vest, as required under current guidance, or account for forfeitures when they occur.  For an award to qualify for equity classification, an entity cannot partially settle the award in excess of the employer's maximum statutory withholding requirements.  Such cash paid by an employer when directly withholding shares for tax withholding purposes should be classified as a financing activity in the statement of cash flows.  The amendments in ASU No. 2016-09 are effective for public business entities for fiscal years, and for interim periods within those fiscal years, beginning after December 15, 2016.  Adoption of ASU No. 2016-07 did not have a significant effect on the Company’s consolidated financial statements as of December 31, 2017.

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 No. 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 No. 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 No. 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 No. 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.  ASU No. 2016-13 will take effect for U.S. Securities and Exchange Commission (SEC) filers for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019.  Early application will be permitted for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018.  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 is currently assessing any additional data and system requirements necessary for adoption.  At this time, the estimated financial statement, including disclosures, impact cannot be reasonably determined.

In August 2016, the FASB issued ASU 2016-15, Statement of Cash Flows: Classification of Certain Cash Receipts and Cash Payments which may change how an entity classifies certain cash receipts and cash payments on its statement of cash flows to reduce diversity in practice.  The update also provides guidance on when an entity should separate cash flows and classify them into more than one class and when an entity should classify the aggregate of those cash flows into a single class based on the predominance principle.  The guidance in this ASU will become effective for interim and annual reporting periods beginning after December 15, 2017, with early adoption permitted.  Management has reviewed the applicability of this ASU and has concluded that this will not have a material impact on its consolidated financial statements.

The FASB has issued ASU 2017-08, Receivables—Nonrefundable Fees and Other Costs (Subtopic 310-20), Premium Amortization on Purchased Callable Debt Securities. The ASU shortens the amortization period for certain callable debt securities held at a premium to the earliest call date. Under current GAAP, entities normally amortize the premium as an adjustment of yield over the contractual life of the instrument. Stakeholders have expressed concerns with the current approach on the basis that current GAAP excludes certain callable debt securities from consideration of early repayment of principal even if the holder is certain that the call will be exercised. As a result, upon the exercise of a call on a callable debt security held at a premium, the unamortized premium is recorded as a loss in earnings. Further, there is diversity in practice (1) in the amortization period for premiums of callable debt securities, and (2) in how the potential for exercise of a call is factored into current impairment assessments.  Another issue is that the practice in the United States is to quote, price, and trade callable debt securities assuming a model that incorporates consideration of calls (also referred to as “yield-to-worst” pricing).  The ASU shortens the amortization period for certain callable debt securities held at a premium and requires the premium to be amortized to the earliest call date.  However, the amendments do not require an accounting change for securities held at a discount; the discount continues to be amortized to maturity.  The amendments are effective for public business entities for annual periods beginning after December 15, 2018, including interim periods within those annual periods.  Early adoption is permitted. The Company has decided to adopt this ASU early and adoption did not have a material impact the Company’s consolidated financial statements as there were no callable debt securities held at a premium at the date of adoption.

The FASB has issued ASU No. 2017-09, Compensation—Stock Compensation (Topic 718): Scope of Modification Accounting.  ASU 2017-09 applies to entities that change the terms or conditions of a share-based payment award.  The FASB adopted ASU 2017-09 to provide clarity and reduce diversity in practice as well as cost and complexity when applying the guidance in Topic 718, Compensation—Stock Compensation, to the modification of the terms and conditions of a share-based payment award.  The amendments are effective for all entities for annual periods, and interim periods within those annual periods, beginning after December 15, 2017.  Early adoption is permitted, including adoption in any interim period for: (a) public business entities for reporting periods for which financial statements have not yet been issued, and (b) all other entities for reporting periods for which financial statements have not yet been made available for issuance.  The amendments should be applied prospectively to an award modified on or after the adoption date. Adoption of ASU No. 2017-09 is not expected to have a significant impact on the Company’s consolidated financial statements.

The FASB has issued ASU No. 2017-12, Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities.  The new standard is intended to improve and simplify accounting rules around hedge accounting.  The new standard refines and expands hedge accounting for both financial (e.g., interest rate) and commodity risks.  Its provisions create more transparency around how economic results are presented, both on the face of the financial statements and in the footnotes, for investors and analysts.  The new standard takes effect for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018, for public companies and for fiscal years beginning after December 15, 2019 (and interim periods for fiscal years beginning after December 15, 2020), for private companies. Early adoption is permitted in any interim period or fiscal years before the effective date of the standard.  Adoption of ASU No. 2017-12 is not expected to have a significant impact on the Company’s consolidated financial statements.

The FASB issued ASU No. 2018-02, Income Statement—Reporting Comprehensive Income (Topic 220)—Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income.  The ASU provides financial statement preparers with an option to reclassify stranded tax effects within AOCI to retained earnings in each period in which the effect of the change in the U.S. federal corporate income tax rate in the Tax Cuts and Jobs Act (or portion thereof) is recorded.

The ASU requires financial statement preparers to disclose:

· A description of the accounting policy for releasing income tax effects from AOCI;

· Whether they elect to reclassify the stranded income tax effects from the Tax Cuts and Jobs Act; and

· Information about the other income tax effects that are reclassified.

The amendments affect any organization that is required to apply the provisions of Topic 220, Income Statement—Reporting Comprehensive Income, and has items of other comprehensive income for which the related tax effects are presented in other comprehensive income as required by GAAP.  The amendments are effective for all organizations for fiscal years beginning after December 15, 2018, and interim periods within those fiscal years. Early adoption is permitted. Adoption of ASU No. 2018.-02 is not expected to have a material impact on the Company’s consolidated financial statements

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Securities (Tables)

12 Months Ended

Dec. 31, 2017

Securities [Abstract]

Amortized cost and fair value of available-for-sale securities portfolio

	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
December 31, 2017
Issued by U.S. government-sponsored entities and agencies:
U.S. Treasury	$	11,499	$	-	$	82	$	11,417
Mortgage-backed securities - residential		236		8		-		244
Collateralized mortgage obligations		110		2		-		112
Total	$	11,845	$	10	$	82	$	11,773

	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
December 31, 2016
Issued by U.S. government-sponsored entities and agencies:
U.S. Treasury	$	13,521	$	11	$	27	$	13,505
Mortgage-backed securities - residential		345		12		-		357
Collateralized mortgage obligations		189		7		-		196
Total	$	14,055	$	30	$	27	$	14,058

Securities Classified By Maturity Date

	December 31, 2017				December 31, 2016
	Amortized Cost		Fair Value		Amortized Cost		Fair Value
Due in one year or less	$	3,002	$	2,993	$	2,518	$	2,518
Due from one to five years		8,497		8,424		11,003		10,987
Mortgage-backed securities - residential		236		244		345		357
Collateralized mortgage obligations		110		112		189		196
Total	$	11,845	$	11,773	$	14,055	$	14,058

Fair value of securities pledged

	2017		2016
Pledged as collateral for:
FHLB advances	$	4,641	$	2,327
Public deposits		2,018		2,043
Interest-rate swaps		145		195
Total	$	6,804	$	4,565

Securities with unrealized losses

December 31, 2017	Less than 12 Months				12 Months or More				Total
Description of Securities	Fair Value		Unrealized Loss		Fair Value		Unrealized Loss		Fair Value		Unrealized Loss
Issued by U.S. government-sponsored entities and agencies:
U.S. Treasury	$	6,947	$	51	$	4,470	$	31	$	11,417	$	82
Total temporarily impaired	$	6,947	$	51	$	4,470	$	31	$	11,417	$	82

December 31, 2016	Less than 12 Months				12 Months or More				Total
Description of Securities	Fair Value		Unrealized Loss		Fair Value		Unrealized Loss		Fair Value		Unrealized Loss
Issued by U.S. government-sponsored entities and agencies:
U.S. Treasury	$	10,492	$	27	$	-	$	-	$	10,492	$	27
Mortgage-backed securities - residential (1)		1		-		-		-		1		-
Total temporarily impaired	$	10,493	$	27	$	-	$	-	$	10,493	$	27

⁽¹⁾ Securities with an unrealized loss were less than $1 resulting in rounding to zero.

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Loans And Leases (Tables)

12 Months Ended

Dec. 31, 2017

Loans And Leases [Abstract]

Recorded Invetment In Loans By Portfolio Segment

	December 31, 2017		December 31, 2016
Commercial (1)	$	101,975	$	71,334
Real estate:
Single-family residential		95,578		92,544
Multi-family residential		35,665		34,291
Commercial		111,866		105,313
Construction		42,862		25,822
Consumer:
Home equity lines of credit		25,054		23,109
Other		376		637
Subtotal		413,376		353,050
Less: ALLL		(6,970)		(6,925)
Loans and Leases, net	$	406,406	$	346,125

⁽¹⁾ Includes $6,008 and $2,874 of commercial leases at December 31, 2017 and December 31, 2016, respectively.

Activity in ALLL by portfolio segment

	December 31, 2017
			Real Estate								Consumer
	Commercial		Single-family		Multi-family		Commercial		Construction		Home Equity lines of credit		Other		Total
Beginning balance	$	1,647	$	735	$	716	$	2,727	$	580	$	486	$	34	$	6,925
Addition to (reduction in) provision for loan losses		335		157		(56)		(584)		92		88		(32)		-
Charge-offs		-		-		-		-		-		-		-		-
Recoveries		2		20		-		-		-		23		-		45
Ending balance	$	1,984	$	912	$	660	$	2,143	$	672	$	597	$	2	$	6,970

	December 31, 2016
			Real Estate								Consumer
	Commercial		Single-family		Multi-family		Commercial		Construction		Home Equity lines of credit		Other		Total
Beginning balance	$	1,380	$	691	$	705	$	2,710	$	561	$	474	$	99	$	6,620
Addition to (reduction in) provision for loan losses		390		149		(132)		(128)		19		(4)		(64)		230
Charge-offs		(123)		(147)		-		-		-		(53)		(1)		(324)
Recoveries		-		42		143		145		-		69		-		399
Ending balance	$	1,647	$	735	$	716	$	2,727	$	580	$	486	$	34	$	6,925

Balance in ALLL and recorded investment in loans by portfolio segment and based on impairment method

The following table presents the balance in the ALLL and the recorded investment in loans and leases by portfolio segment and based on impairment method as of December 31, 2017:  

			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	$	-	$	-	$	-	$	26	$	-	$	-	$	-	$	26
Collectively evaluated for impairment		1,984		912		660		2,117		672		597		2		6,944
Total ending allowance balance	$	1,984	$	912	$	660	$	2,143	$	672	$	597	$	2	$	6,970
Loans:
Individually evaluated for impairment	$	277	$	116	$	-	$	3,183	$	-	$	-	$	-	$	3,576
Collectively evaluated for impairment		101,698		95,462		35,665		108,683		42,862		25,054		376		409,800
Total ending loan balance	$	101,975	$	95,578	$	35,665	$	111,866	$	42,862	$	25,054	$	376	$	413,376

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, 2016:  

			Real Estate								Consumer
	Commercial		Single- family		Multi- family		Commercial		Construction		Home Equity lines of credit		Other		Total
ALLL:
Ending allowance balance attributable to loans:
Individually evaluated for impairment	$	1	$	-	$	-	$	21	$	-	$	-	$	-	$	22
Collectively evaluated for impairment		1,646		735		716		2,706		580		486		34		6,903
Total ending allowance balance	$	1,647	$	735	$	716	$	2,727	$	580	$	486	$	34	$	6,925
Loans:
Individually evaluated for impairment		557	$	122	$	37	$	2,732	$	-	$	-	$	-	$	3,448
Collectively evaluated for impairment		70,777		92,422		34,254		102,581		25,822		23,109		637		349,602
Total ending loan balance	$	71,334	$	92,544	$	34,291	$	105,313	$	25,822	$	23,109	$	637	$	353,050

Individually evaluated for impairment by class of loans

The following table presents loans individually evaluated for impairment by class of loans as of and for the year ended December 31, 2017. 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. 2017 totaled $190.

	Unpaid Principal Balance		Recorded Investment		ALLL Allocated		Average Recorded Investment		Interest Income Recognized
With no related allowance recorded:
Real estate:
Commercial:
Owner occupied	$	391	$	137	$	-	$	142	$	26
Land		-		-		-		-		-
Total with no allowance recorded		391		137		-		142		26
With an allowance recorded:
Commercial		277		277		-		291		9
Real estate:
Single-family residential		116		116		-		118		6
Commercial:
Non-owner occupied		2,856		2,856		24		2,882		154
Owner occupied		190		190		2		194		9
Total with an allowance recorded		3,439		3,439		26		3,485		178
Total	$	3,830	$	3,576	$	26	$	3,627	$	204

The following table presents loans individually evaluated for impairment by class of loans as of and for the year ended December 31, 2016. 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. 2016 totaled $216.

	Unpaid Principal Balance		Recorded Investment		ALLL Allocated		Average Recorded Investment		Interest Income Recognized
With no related allowance recorded:
Commercial	$	476	$	358	$	-	$	436	$	13
Real estate:
Multi-family residential		37		37		-		41		2
Commercial:
Non-owner occupied		112		112		-		114		8
Owner occupied		871		350		-		360		46
Total with no allowance recorded		1,496		857		-		951		69
With an allowance recorded:
Commercial		199		199		1		232		9
Real estate:
Single-family residential		122		122		-		125		7
Commercial:
Non-owner occupied		2,068		2,068		19		2,086		126
Owner occupied		202		202		2		208		10
Total with an allowance recorded		2,591		2,591		22		2,651		152
Total	$	4,087	$	3,448	$	22	$	3,602	$	221

Recorded investment in nonaccrual loans by class of loans

	2017		2016
Loans past due over 90 days still on accrual	$	-	$	-
Nonaccrual loans:
Commercial		115		263
Real estate:
Single-family residential		253		397
Consumer:
Home equity lines of credit:
Originated for portfolio		-		44
Purchased for portfolio		102		-
Total nonaccrual		470		704
Total nonperforming loans	$	470	$	704

Aging of recorded investment in past due loans by class of loans

The following table presents the aging of the recorded investment in past due loans and leases by class of loans as of December 31, 2017:

	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	$	-	$	-	$	-	$	-	$	101,975	$	115
Real estate:
Single-family residential		1,610		27		104		1,741		93,837		149
Multi-family residential		-		-		-		-		35,665		-
Commercial:
Non-owner occupied		-		-		-		-		67,792		-
Owner occupied		-		-		-		-		38,787		-
Land		-		-		-		-		5,287		-
Construction		-		-		-		-		42,862		-
Consumer:
Home equity lines of credit:
Originated for portfolio		-		-		-		-		24,592		-
Purchased for portfolio		-		-		102		102		360		-
Other		24		-		-		24		352		-
Total	$	1,634	$	27	$	206	$	1,867	$	411,509	$	264

The following table presents the aging of the recorded investment in past due loans and leases by class of loans as of December 31, 2016:  

	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	$	-	$	-	$	119	$	119	$	71,215	$	144
Real estate:
Single-family residential		284		49		106		439		92,105		291
Multi-family residential		-		-		-		-		34,291		-
Commercial:
Non-owner occupied		-		-		-		-		60,936		-
Owner occupied		269		600		-		869		34,891		-
Land		-		-		-		-		8,617		-
Construction		48		-		-		48		25,774		-
Consumer:
Home equity lines of credit:
Originated for portfolio		-		15		-		15		22,440		44
Purchased for portfolio		69		-		-		69		585		-
Other		-		-		-		-		637		-
Total	$	670	$	664	$	225	$	1,559	$	351,491	$	479

Loans modified as TDRs by class of loans

The following table presents loans modified as TDRs by class of loans during the year ended December 31, 2017:

	Number of Loans		Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment
Commercial		1	$	841	$	841
Total		1	$	841	$	841

The following table presents loans modified as TDRs by class of loans during the year ended December 31, 2016:

	Number of Loans		Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment
Commercial		1	$	339	$	339
Total		1	$	339	$	339

Schedule of debtor troubled debt restructuring, subsequent periods

	2017		2016
Commercial	$	115	$	144
Total	$	115	$	144

Financing receivable credit quality indicators

The recorded investment in loans and leases by risk category and by class of loans as of December 31, 2017 and based on the most recent analysis performed follows.  There were no loans rated doubtful at December 31, 2017. 

	Not Rated		Pass		Special Mention		Substandard		Total
Commercial	$	-	$	98,829	$	2,869	$	277	$	101,975
Real estate:
Single-family residential		95,317		-		-		261		95,578
Multi-family residential		-		35,036		466		163		35,665
Commercial:
Non-owner occupied		88		65,161		1,711		832		67,792
Owner occupied		-		37,453		1,008		326		38,787
Land		-		5,287		-		-		5,287
Construction		2,239		40,623		-		-		42,862
Consumer:
Home equity lines of credit:
Originated for portfolio		24,516		-		-		76		24,592
Purchased for portfolio		360		-		-		102		462
Other		376		-		-		-		376
	$	122,896	$	282,389	$	6,054	$	2,037	$	413,376

The recorded investment in loans and leases by risk category and class of loans as of December 31, 2016 follows.  There were no loans rated doubtful at December 31, 2016.

	Not Rated		Pass		Special Mention		Substandard		Total
Commercial	$	47	$	70,444	$	286	$	557	$	71,334
Real estate:
Single-family residential		92,130		-		-		414		92,544
Multi-family residential		-		33,615		505		171		34,291
Commercial:
Non-owner occupied		115		58,183		1,782		856		60,936
Owner occupied		-		33,493		1,048		1,219		35,760
Land		-		6,380		-		2,237		8,617
Construction		1,997		23,825		-		-		25,822
Consumer:
Home equity lines of credit:
Originated for portfolio		22,328		-		-		127		22,455
Purchased for portfolio		512		-		-		142		654
Other		637		-		-		-		637
	$	117,766	$	225,940	$	3,621	$	5,723	$	353,050

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Foreclosed Assets (Tables)

12 Months Ended

Dec. 31, 2017

Foreclosed Assets [Abstract]

Foreclosed assets

	2017		2016
Commercial real estate	$	-	$	-
Single-family residential		-		204
Subtotal		-		204
Valuation Allowance		-		-
Total	$	-	$	204

Expenses related to foreclosed assets

	2017		2016
Net loss (gain) on sales	$	7	$	(4)
Operating expenses, net of rental income		11		69
	$	18	$	65

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Fair Value (Tables)

12 Months Ended

Dec. 31, 2017

Fair Value [Abstract]

Assets and liabilities measured at fair value on a recurring basis, including financial assets and liabilities

	Fair Value Measurements at December 31, 2017 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	$	11,417
Mortgage-backed securities - residential		244
Collateralized mortgage obligations		112
Total securities available for sale	$	11,773
Loans held for sale	$	1,124
Yield maintenance provisions (embedded derivatives)	$	56
Interest rate lock commitments	$	11
Financial Liabilities:
Interest-rate swaps	$	56

	Fair Value Measurements at December 31, 2016 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	$	13,505
Mortgage-backed securities - residential		357
Collateralized mortgage obligations		196
Total securities available for sale	$	14,058
Loans held for sale	$	2,812
Yield maintenance provisions (embedded derivatives)	$	122
Interest rate lock commitments	$	9
Financial Liabilities:
Interest-rate swaps	$	122

Assets measured at fair value on a non-recurring basis

Fair Value Measurements at December 31, 2017 Using
Significant Unobservable Inputs (Level 3)
Impaired loans:
Commercial	$	115
Real Estate:
Single-family residential		116
Commercial:
Non-owner occupied		2,832
Total impaired loans	$	3,063

Fair Value Measurements at December 31, 2016 Using
Significant Unobservable Inputs (Level 3)
Impaired loans:
Commercial	$	130
Real Estate:
Single-family residential		122
Multi-family residential		37
Commercial:
Non-owner occupied		2,161
Owner occupied		200
Total impaired loans	$	2,650

Financial instruments measured at fair value on a non-recurring basis

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, 2017:

	Fair Value		Valuation Technique(s)	Unobservable Inputs	(Range) Weighted Average
Impaired loans:
Commercial	$	115	Comparable sales approach	Adjustment for differences between the comparable market transactions	3.48%
Real estate:
Single-family residential		116	Comparable sales approach	Adjustment for differences between the comparable market transactions	(1.81%,  3.61%)  2.91%
Commercial:
Non-owner occupied		2,832	Comparable sales approach	Adjustment for differences between the comparable market transactions	(3.48%,  9.64%) 5.15%

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, 2016:

	Fair Value		Valuation Technique(s)	Unobservable Inputs	(Range) Weighted Average
Impaired loans:
Commercial	$	130	Comparable sales approach	Adjustments by management to reflect current discount rates	3.48%
Real estate:
Single -family residential		122	Comparable sales approach	Adjustment for differences between the comparable market transactions	(1.81% , 3.61%)  2.91%
Multi-family residential		37	Comparable sales approach	Adjustment for differences between the comparable market transactions	9.64%
Commercial:
Non-owner occupied		2,161	Comparable sales approach	Adjustment for differences between the comparable market transactions	(1.10%,  5.74%) 1.35%
Owner occupied		200	Comparable sales approach	Adjustment for differences between the comparable market transactions	-4.46%

Aggregate fair value, contractual balance (including accrued interest) and gain or loss

	December 31, 2017		December 31, 2016
Aggregate fair value	$	1,124	$	2,812
Contractual balance		1,120		2,801
Gain		4		11

Amount of gains and losses from changes in fair value included in earnings

	2017		2016
Interest income	$	68	$	60
Interest expense		-		-
Change in fair value		(7)		6
Total change in fair value	$	61	$	66

Carrying amounts and estimated fair values of financial instruments

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

	Fair Value Measurements at December 31, 2017 Using:
	Carrying
	Value		Level 1		Level 2		Level 3		Total
Financial assets
Cash and cash equivalents	$	45,498	$	45,498	$	-	$	-	$	45,498
Interest-bearing deposits in other financial institutions		100		100		-		-		100
Securities available for sale		11,773		-		11,773		-		11,773
Loans held for sale		1,124		-		1,124		-		1,124
Loans and leases, net		406,406		-		-		402,719		402,719
FHLB and FRB stock		3,227		n/a		n/a		n/a		n/a
Accrued interest receivable		1,326		27		38		1,261		1,326
Yield maintenance provisions (embedded derivatives)		56		-		56		-		56
Interest rate lock commitments		11		-		11		-		11
Financial liabilities
Deposits	$	(419,028)	$	(236,797)	$	(181,659)	$	-	$	(418,456)
FHLB advances and other borrowings		(13,500)		-		(13,466)		-		(13,466)
Advances by borrowers for taxes and insurance		(489)		-		-		(489)		(489)
Subordinated debentures		(5,155)		-		(4,094)		-		(4,094)
Accrued interest payable		(79)		(6)		(73)		-		(79)
Interest-rate swaps		(56)		-		(56)		-		(56)

The carrying amounts and estimated fair values of financial instruments at December 31, 2016 were as follows:

	Fair Value Measurements at December 31, 2016 Using:
	Carrying
	Value		Level 1		Level 2		Level 3		Total
Financial assets
Cash and cash equivalents	$	57,941	$	57,941	$	-	$	-	$	57,941
Interest-bearing deposits in other financial institutions		100		100		-		-		100
Securities available for sale		14,058		-		14,058		-		14,058
Loans held for sale		2,812		-		2,812		-		2,812
Loans and leases, net		346,125		-		-		343,523		343,523
FHLB stock		1,942		n/a		n/a		n/a		n/a
Accrued interest receivable		1,054		13		40		1,001		1,054
Yield maintenance provisions (embedded derivatives)		122		-		122		-		122
Interest rate lock commitments		9		-		9		-		9
Financial liabilities
Deposits	$	(375,364)	$	(202,158)	$	(171,967)	$	-	$	(374,125)
FHLB advances and other borrowings		(13,500)		-		(13,597)		-		(13,597)
Advances by borrowers for taxes and insurance		(408)		-		-		(408)		(408)
Subordinated debentures		(5,155)		-		(3,411)		-		(3,411)
Accrued interest payable		(78)		(2)		(76)		-		(78)
Interest-rate swaps		(122)		-		(122)		-		(122)

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Loan Servicing (Tables)

12 Months Ended

Dec. 31, 2017

Loan Servicing [Abstract]

Principal Balances of Mortgage Loans at Year-End

	December 31, 2017		December 31, 2016
Mortgage loans serviced for Freddie Mac	$	3,319	$	4,261

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Premises And Equipment (Tables)

12 Months Ended

Dec. 31, 2017

Premises And Equipment [Abstract]

Year-End Premises and Equipment

	December 31, 2017		December 31, 2016
Land and land improvements	$	1,293	$	1,293
Buildings		3,938		3,832
Furniture, fixtures and equipment		2,316		2,150
		7,547		7,275
Less: Accumulated Depreciation		(4,014)		(3,846)
	$	3,533	$	3,429

Rent Commitments

2018	$	350
2019		355
2020		356
2021		357
2022		342
Thereafter		532
	$	2,292

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Deposits (Tables)

12 Months Ended

Dec. 31, 2017

Deposits [Abstract]

Scheduled Maturities of Time Deposits

2018	$	93,215
2019		33,750
2020		20,360
2021		7,737
2022		27,169
Thereafter		-
Total	$	182,231

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FHLB Advances (Tables)

12 Months Ended

Dec. 31, 2017

FHLB Advances [Abstract]

Advances from the FHLB

	Weighted
	Average Rate	December 31, 2017		December 31, 2016
Fixed Rate Advances
Maturities:
2017	-	$	-	$	2,500
2018	-		-		-
2019	1.62%		3,500		3,500
2020	1.98%		4,500		3,500
2021	2.32%		4,000		4,000
2022	2.05%		1,500		-
Total		$	13,500	$	13,500

Schedule Of Federal Home Loan Advances Pledged By Assets

	December 31, 2017		December 31, 2016
Single-family mortgage loans	$	49,616	$	38,342
Multi-family mortgage loans		15,125		14,854
Commercial real estate loans (1-4 family)		5,348		2,793
Home equity lines of credit		7,061		-
Securities		4,641		2,327
Cash		3,300		3,300
Total	$	85,091	$	61,616

Federal Home Loan Advances Outstanding Maturity Period

	December 31, 2017
2018	$	-
2019		3,500
2020		4,500
2021		4,000
2022		1,500
	$	13,500

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Other Borrowings (Tables)

12 Months Ended

Dec. 31, 2017

Other Borrowings [Abstract]

Assets pledged as collateral with FRB

	2017		2016
Commercial loans	$	18,491	$	16,380
Commercial real estate loans		43,518		39,230
	$	62,009	$	55,610

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Income Taxes (Tables)

12 Months Ended

Dec. 31, 2017

Income Taxes [Abstract]

Income Tax Expense

	December 31, 2017		December 31, 2016
Current federal	$	1,133	$	187
Deferred federal (1)		3		623
Revaluation of net deferred tax assets		979		-
Total	$	2,115	$	810

⁽¹⁾ Includes tax benefit of operating loss carryforwards of  $52 and  $717 for the years ended December 31, 2017 and 2016, respectively.

Effective Tax Rates Differ from Federal Statutory Rate

	December 31, 2017		December 31, 2016
Federal Statutory rate times financial statement income (loss)	$	1,177	$	829
Effect of:
Stock compensation		(49)		6
Bank owned life insurance income		(46)		(45)
Revaluation of net deferred tax assets		979		-
Other		54		20
	$	2,115	$	810
Effective tax rate		61%		33%

Deferred Tax Assets and Liabilities

	2017		2016
Deferred tax assets:
Allowance for loan and lease losses	$	997	$	1,575
Compensation related issues		274		353
Deferred loan fees		100		155
AMT Credit		-		50
Nonaccrual interest		45		41
Net operating loss carry forward		501		863
Other		42		70
		1,959		3,107
Deferred tax liability:
FHLB stock dividend		226		366
Mortgage servicing rights		1		2
Depreciation		36		47
Prepaid expenses		51		63
Mark-to-market loans		-		2
		314		480
Net deferred tax asset	$	1,645	$	2,627

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Related-Party Transactions (Tables)

12 Months Ended

Dec. 31, 2017

Related-Party Transactions [Abstract]

Loans to Principal Officers, Directors and Affiliates

Beginning balance	$	2,399
New loans		4,442
Effect of changes in composition of related parties		-
Repayments		(177)
Ending balance	$	6,664

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Stock-Based Compensation (Tables)

12 Months Ended

Dec. 31, 2017

Stock-Based Compensation [Abstract]

Summary Of Stock Option Activity

	Shares	Weighted Average Exercise Price		Weighted Average Remaining Contractual Term (Years)	Intrinsic Value
Outstanding at beginning of year	542,746	$	1.46
Expired	(300)		36.75
Cancelled or forfeited	(3,190)		1.70
Outstanding at end of period	539,256	$	1.44	5.4	$	731,080
Expected to vest	-	$	-	-	$	-
Exercisable at end of period	539,256	$	1.44	5.4	$	731,080

Summary of changes in the Company's nonvested restricted shares

Nonvested Shares	Shares	Weighted Average Grant-Date Fair Value
Nonvested at January 1, 2017	425,666	$	1.56
Granted	215,500		2.56
Vested	(157,172)		1.53
Forfeited	(19,333)		1.58
Nonvested at December 31, 2017	464,661	$	2.03

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Regulatory Capital Matters (Tables)

12 Months Ended

Dec. 31, 2017

Regulatory Capital Matters [Abstract]

Actual and required capital amounts and ratios of CFBank

	Actual			Minimum Capital Required-Basel III Phase-In Schedule			Minimum Capital Required-Basel III Fully Phased-In			To Be Well Capitalized Under Applicable Regulatory Capital Standards
	Amount		Ratio	Amount		Ratio	Amount		Ratio	Amount		Ratio
December 31, 2017
Total Capital to risk weighted assets	$	48,271	11.91%	$	37,492	9.25%	$	42,559	10.50%	$	40,532	10.00%
Tier 1 (Core) Capital to risk weighted assets		43,179	10.65%		29,386	7.25%		34,452	8.50%		32,426	8.00%
Common equity tier 1 capital to risk-weighted assets		43,179	10.65%		23,306	5.75%		28,372	7.00%		26,346	6.50%
Tier 1 (Core) Capital to adjusted total assets (Leverage ratio)		43,179	9.37%		18,432	4.00%		18,432	4.00%		23,040	5.00%

	Actual			Minimum Capital Required-Basel III Phase-In Schedule			Minimum Capital Required-Basel III Fully Phased-In			To Be Well Capitalized Under Applicable Regulatory Capital Standards
	Amount		Ratio	Amount		Ratio	Amount		Ratio	Amount		Ratio
December 31, 2016
Total Capital to risk weighted assets	$	45,118	12.46%	$	31,256	8.63%	$	38,029	10.50%	$	36,218	10.00%
Tier 1 (Core) Capital to risk weighted assets		40,556	11.20%		24,013	6.63%		30,785	8.50%		28,974	8.00%
Common equity tier 1 capital to risk-weighted assets		40,556	11.20%		18,580	5.13%		25,353	7.00%		23,542	6.50%
Tier 1 (Core) Capital to adjusted total assets (Leverage ratio)		40,556	9.66%		16,792	4.00%		16,792	4.00%		20,991	5.00%

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Derivative Instruments (Tables)

12 Months Ended

Dec. 31, 2017

Derivative Instruments [Abstract]

Summary of derivative instruments

	2017		2016
Notional amount	$	2,185	$	2,280
Weighted average pay rate on interest-rate swaps		3.75%		3.74%
Weighted average receive rate on interest-rate swaps		1.52%		0.75%
Weighted average maturity (years)		2.1		3.1
Fair value of interest-rate swaps	$	(56)	$	(122)
Fair value of yield maintenance provisions	$	56	$	122

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Loan Commitments And Other Related Activities (Tables)

12 Months Ended

Dec. 31, 2017

Loan Commitments And Other Related Activities [Abstract]

Contractual Amounts of Financial Instruments with Off-Balance-Sheet Risk

	2017				2016
	Fixed Rate		Variable Rate		Fixed Rate		Variable Rate
Commitments to make loans	$	15,856	$	21,716	$	21,335	$	22,171
Unused lines of credit	$	8,068	$	38,760	$	3,714	$	29,621
Standby letters of credit	$	1,115	$	-	$	991	$	-

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Parent Company Only Condensed Financial Information (Tables)

12 Months Ended

Dec. 31, 2017

Parent Company Only Condensed Financial Information [Abstract]

Condensed Balance Sheets

	2017		2016
Assets
Cash and cash equivalents	$	523	$	2,197
Investment in banking subsidiary		43,633		41,448
Investment in and advances to other subsidiary		228		225
Other assets		1,232		901
Total assets	$	45,616	$	44,771
Liabilities and Equity
Subordinated debentures	$	5,155	$	5,155
Accrued expenses and other liabilities		200		324
Stockholders' equity		40,261		39,292
Total liabilities and stockholders' equity	$	45,616	$	44,771

Condensed Statements of Operations

	2017		2016
Interest income	$	4	$	2
Other income		48		131
Interest expense		212		185
Other expense		815		646
Loss before income tax and undistributed subsidiary income		(975)		(698)
Tax effect		330		236
Gain (loss) after income tax and undistributed subsidiary income		(645)		(462)
Equity in undistributed subsidiary income		1,991		2,089
Net income	$	1,346	$	1,627
Comprehensive income	$	1,297	$	1,638

Condensed Statements of Cash Flows

	2017		2016
Cash flows from operating activities
Net Income	$	1,346	$	1,627
Adjustments:
Effect of subsidiaries' operations		(1,991)		(2,089)
Change in other assets and other liabilities		(268)		766
Net cash from (used by) operating activities		(913)		304
Cash flows from financing activities
Acquisition of treasury shares surrendered upon vesting of restricted stock for payment of taxes		(49)		-
Purchase of treasury shares		-		(30)
Exercise of warrants to common stock		38		-
Dividends paid on Series B preferred stock		(750)		(750)
Net cash from (used by) financing activities		(761)		(780)
Net change in cash and cash equivalents		(1,674)		(476)
Beginning cash and cash equivalents		2,197		2,673
Ending cash and cash equivalents	$	523	$	2,197

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Earnings (Loss) Per Common Share (Tables)

12 Months Ended

Dec. 31, 2017

Earnings (Loss) Per Common Share [Abstract]

Computation of Earnings Per Share

	December 31, 2017		December 31, 2016
Basic
Net income	$	1,346	$	1,627
Dividends on Series B  preferred stock and accretion of discount		(666)		(857)
Net income allocated to common stockholders	$	680	$	770
Weighted average common shares outstanding including unvested share-based payment awards		17,928,141		16,020,847
Less: Unvested share-based payment awards		-		-
Average shares		17,928,141		16,020,847
Basic earnings per common share	$	0.04	$	0.05
Diluted
Net earnings allocated to common stockholders	$	680	$	770
Add back: Preferred Dividends on Series B stock and accretion of discount		-		-
Net earnings allocated to common stockholders	$	680	$	770
Weighted average common shares outstanding for basic earnings per common share		17,928,141		16,020,847
Add: Dilutive effects of assumed exercises of stock options		216,486		38,184
Add: Dilutive effects of assumed exercises of stock warrants		1,141,725		-
Average shares and dilutive potential common shares		19,286,352		16,059,031
Diluted earnings per common share	$	0.04	$	0.05

Summary of Anti-Dilutive Options or Warrants

	2017	2016
Stock options	5,399	282,971
Series B preferred stock	-	6,857,143
Stock warrants	-	1,152,125

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Accumulated Other Comprehensive Income (Tables)

12 Months Ended

Dec. 31, 2017

Accumulated Other Comprehensive Income [Abstract]

Schedule of Accumulated Other Comprehensive Income

Changes in Accumulated Other Comprehensive Income by Component
For the Year Ended December 31, 2017 and 2016  (1)
	Unrealized Gains and Losses on Available-for-Sale Securities
	2017		2016
Accumulated other comprehensive income (loss), beginning of period	$	2	$	(9)
Other comprehensive gain (loss) before reclassifications		(49)		11
Less amount reclassified from accumulated other comprehensive loss (2)		-		-
Net current-period other comprehensive income (loss)		(49)		11
Accumulated other comprehensive income (loss), end of period	$	(47)	$	2

⁽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 year ended December 31, 2017 and December 31, 2016. 

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Summary of Significant Accounting Policies (Details) $ in Thousands	12 Months Ended
	Dec. 31, 2017 USD ($) store	Dec. 31, 2016 USD ($)
Significant Accounting Policies [Line Items]
Number of full-service banking offices | store	5
Interest-bearing deposits in other financial institutions	$ 100	$ 100
Minimum balance of loans individually evaluated for impairment	250
Total original investment into joint ventures	325	325
Incentive payment recognized as income	$ 20	100
Tax benefit greater than being realized on examination	50.00%
FRB regulatory reserve requirement	$ 718	267
Collateral pledged to secure advances	85,091	61,616
Cash [Member]
Significant Accounting Policies [Line Items]
Collateral pledged to secure advances	$ 3,300	3,300
Minimum [Member] | Buildings and related components [Member]
Significant Accounting Policies [Line Items]
Estimated useful life	3 years
Minimum [Member] | Furniture, fixtures and equipment [Member]
Significant Accounting Policies [Line Items]
Estimated useful life	2 years
Maximum [Member]
Significant Accounting Policies [Line Items]
Home equity lines of credit combined with the balance of the prior mortgage liens	89.90%
Maximum [Member] | Buildings and related components [Member]
Significant Accounting Policies [Line Items]
Estimated useful life	40 years
Maximum [Member] | Furniture, fixtures and equipment [Member]
Significant Accounting Policies [Line Items]
Estimated useful life	25 years
Single-Family Mortgage Loans [Member]
Significant Accounting Policies [Line Items]
Collateral pledged to secure advances	$ 49,616	38,342
Single-Family Mortgage Loans [Member] | Maximum [Member]
Significant Accounting Policies [Line Items]
Lending amount up to the percentage of collateral	85.00%
Multi-Family Mortgage Loans [Member]
Significant Accounting Policies [Line Items]
Collateral pledged to secure advances	$ 15,125	14,854
Multi-Family Mortgage Loans [Member] | Minimum [Member]
Significant Accounting Policies [Line Items]
Fixed rates loans limit, period	3 years
Multi-Family Mortgage Loans [Member] | Maximum [Member]
Significant Accounting Policies [Line Items]
Lending amount up to the percentage of collateral	85.00%
Fixed rates loans limit, period	5 years
Commercial Real Estate [Member]
Significant Accounting Policies [Line Items]
Collateral pledged to secure advances	$ 5,348	$ 2,793
Commercial Real Estate [Member] | Minimum [Member]
Significant Accounting Policies [Line Items]
Fixed rates loans limit, period	3 years
Commercial Real Estate [Member] | Maximum [Member]
Significant Accounting Policies [Line Items]
Lending amount up to the percentage of collateral	85.00%
Fixed rates loans limit, period	5 years
Construction Loans [Member] | Maximum [Member]
Significant Accounting Policies [Line Items]
Lending amount up to the percentage of collateral	80.00%
Maturity of construction loans convert to permanent loans	30 years

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Securities (Narrative) (Details) - USD ($)	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016
Schedule of Available-for-sale Securities [Line Items]
Other-than-temporary impairment	$ 0	$ 0
Sales of securities	$ 0	$ 0
Issued by U.S. Government-Sponsored Entities and Agencies [Member]
Schedule of Available-for-sale Securities [Line Items]
Minimum percentage of securities held	10.00%	10.00%

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Securities (Amortized Cost And Fair Value Of Available-For-Sale Securities Portfolio) (Details) - USD ($) $ in Thousands	Dec. 31, 2017	Dec. 31, 2016
Schedule of Available-for-sale Securities [Line Items]
Amortized Cost	$ 11,845	$ 14,055
Gross Unrealized Gains	10	30
Gross Unrealized Losses	82	27
Fair Value	11,773	14,058
U.S. Treasury [Member]
Schedule of Available-for-sale Securities [Line Items]
Amortized Cost	11,499	13,521
Gross Unrealized Gains		11
Gross Unrealized Losses	82	27
Fair Value	11,417	13,505
Mortgage-Backed Securities - Residential [Member]
Schedule of Available-for-sale Securities [Line Items]
Amortized Cost	236	345
Gross Unrealized Gains	8	12
Gross Unrealized Losses
Fair Value	244	357
Collateralized Mortgage Obligations [Member]
Schedule of Available-for-sale Securities [Line Items]
Amortized Cost	110	189
Gross Unrealized Gains	2	7
Gross Unrealized Losses
Fair Value	$ 112	$ 196

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Securities (Securities Classified By Maturity Date) (Details) - USD ($) $ in Thousands	Dec. 31, 2017	Dec. 31, 2016
Schedule Of Available For Sale Securities [Line Items]
Due in one year or less, Amortized Cost	$ 3,002	$ 2,518
Due from one to five years, Amortized Cost	8,497	11,003
Amortized Cost	11,845	14,055
Due in one year or less, Fair Value	2,993	2,518
Due from one to five years, Fair Value	8,424	10,987
Available-for-sale Securities, Total	11,773	14,058
Mortgage-Backed Securities - Residential [Member]
Schedule Of Available For Sale Securities [Line Items]
Amortized Cost	236	345
Available-for-sale Securities, Total	244	357
Collateralized Mortgage Obligations [Member]
Schedule Of Available For Sale Securities [Line Items]
Amortized Cost	110	189
Available-for-sale Securities, Total	$ 112	$ 196

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Securities (Fair value Of Securities Pledged) (Details) - USD ($) $ in Thousands	Dec. 31, 2017	Dec. 31, 2016
Pledged as collateral for:
FHLB advances	$ 4,641	$ 2,327
Public deposits	2,018	2,043
Interest-rate swaps	145	195
Total	$ 6,804	$ 4,565

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Securities (Securities With Unrealized Losses) (Details) - USD ($) $ in Thousands		Dec. 31, 2017	Dec. 31, 2016
Schedule of Available-for-sale Securities [Line Items]
Less than 12 Months, Fair Value		$ 6,947	$ 10,493
Less than 12 Months, Unrealized Loss		51	27
12 Months or More, Fair Value		4,470
12 Months or More, Unrealized Loss		31
Total, Fair Value		11,417	10,493
Total, Unrealized Loss		82	27
U.S. Treasury [Member]
Schedule of Available-for-sale Securities [Line Items]
Less than 12 Months, Fair Value		6,947	10,492
Less than 12 Months, Unrealized Loss		51	27
12 Months or More, Fair Value		4,470
12 Months or More, Unrealized Loss		31
Total, Fair Value		11,417	10,492
Total, Unrealized Loss		$ 82	27
Mortgage-Backed Securities - Residential [Member]
Schedule of Available-for-sale Securities [Line Items]
Less than 12 Months, Fair Value	[1]		1
Less than 12 Months, Unrealized Loss	[1]
12 Months or More, Fair Value	[1]
12 Months or More, Unrealized Loss	[1]
Total, Fair Value	[1]		1
Total, Unrealized Loss	[1]

[1] Securities with an unrealized loss were less than $1 resulting in rounding to zero.

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Loans And Leases (Narrative) (Details) $ in Thousands	12 Months Ended
	Dec. 31, 2017 USD ($) loan	Dec. 31, 2016 USD ($) loan
Accounts Notes And Loans Receivable [Line Items]
Loans	$ 406,406	$ 346,125
Loans 90 days or more past due and still accruing interest
Total TDR's	3,386	3,130
Allocated specific reserves to modified TDRs	$ 25	$ 22
Number of loans modified as a TDR | loan	1	1
TDR's charge-offs	$ 0	$ 0
Number of TDRs in payment default | loan		1
Cash payments of interest	$ 190	$ 216
Northpointe [Member] | Mortgage Purchase Program [Member]
Accounts Notes And Loans Receivable [Line Items]
Percent of loans risk rated for capital adequacy	100.00%
Percent of participation agreement interest	95.00%
Ownership interest in each loan is participates	5.00%
Nonaccrual [Member] | Commitments to Lend Additional Amounts [Member]
Accounts Notes And Loans Receivable [Line Items]
Total TDR's	$ 0	0
Single-Family Mortgage Loans [Member] | Northpointe [Member] | Mortgage Purchase Program [Member]
Accounts Notes And Loans Receivable [Line Items]
Loans	37,665	46,919
Other Loans [Member]
Accounts Notes And Loans Receivable [Line Items]
Total TDR's	46,731	33,294
Accruing [Member]
Accounts Notes And Loans Receivable [Line Items]
Total TDR's	$ 3,271	$ 2,986
Commercial [Member]
Accounts Notes And Loans Receivable [Line Items]
Number of loans modified as a TDR | loan	1	1
TDR's charge-offs	$ 841	$ 239

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Loans And Leases (Recorded Investment In Loans By Portfolio Segment) (Details) - USD ($) $ in Thousands		Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
Accounts Notes And Loans Receivable [Line Items]
Subtotal		$ 413,376	$ 353,050
Less: ALLL		(6,970)	(6,925)	$ (6,620)
Loans and leases, net		406,406	346,125
Commercial [Member]
Accounts Notes And Loans Receivable [Line Items]
Subtotal	[1]	101,975	71,334
Less: ALLL		(1,984)	(1,647)	(1,380)
Single-Family Mortgage Loans [Member]
Accounts Notes And Loans Receivable [Line Items]
Subtotal		95,578	92,544
Less: ALLL		(912)	(735)	(691)
Multi-Family Mortgage Loans [Member]
Accounts Notes And Loans Receivable [Line Items]
Subtotal		35,665	34,291
Less: ALLL		(660)	(716)	(705)
Commercial Real Estate [Member]
Accounts Notes And Loans Receivable [Line Items]
Subtotal		111,866	105,313
Less: ALLL		(2,143)	(2,727)	(2,710)
Construction Loans [Member]
Accounts Notes And Loans Receivable [Line Items]
Subtotal		42,862	25,822
Less: ALLL		(672)	(580)	(561)
Home Equity Lines of Credit [Member]
Accounts Notes And Loans Receivable [Line Items]
Subtotal		25,054	23,109
Less: ALLL		(597)	(486)	(474)
Other Financing Receivable [Member]
Accounts Notes And Loans Receivable [Line Items]
Subtotal		376	637
Less: ALLL		(2)	(34)	$ (99)
Commercial Leases [Member]
Accounts Notes And Loans Receivable [Line Items]
Subtotal		$ 6,008	$ 2,874

[1] Includes $6,008 and $2,874 of commercial leases at December 31, 2017 and December 31, 2016, respectively.

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Loans And Leases (Activity In ALLL By Portfolio Segment) (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016
Financing Receivable, Allowance for Credit Losses [Line Items]
Beginning balance	$ 6,925	$ 6,620
Addition to (reduction in) provision for loan losses		230
Charge-offs		(324)
Recoveries	45	399
Ending balance	6,970	6,925
Commercial [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Beginning balance	1,647	1,380
Addition to (reduction in) provision for loan losses	335	390
Charge-offs		(123)
Recoveries	2
Ending balance	1,984	1,647
Single-Family Mortgage Loans [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Beginning balance	735	691
Addition to (reduction in) provision for loan losses	157	149
Charge-offs		(147)
Recoveries	20	42
Ending balance	912	735
Multi-Family Mortgage Loans [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Beginning balance	716	705
Addition to (reduction in) provision for loan losses	(56)	(132)
Charge-offs
Recoveries		143
Ending balance	660	716
Commercial Real Estate [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Beginning balance	2,727	2,710
Addition to (reduction in) provision for loan losses	(584)	(128)
Charge-offs
Recoveries		145
Ending balance	2,143	2,727
Construction Loans [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Beginning balance	580	561
Addition to (reduction in) provision for loan losses	92	19
Charge-offs
Ending balance	672	580
Home Equity Lines of Credit [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Beginning balance	486	474
Addition to (reduction in) provision for loan losses	88	(4)
Charge-offs		(53)
Recoveries	23	69
Ending balance	597	486
Other Financing Receivable [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Beginning balance	34	99
Addition to (reduction in) provision for loan losses	(32)	(64)
Charge-offs		(1)
Ending balance	$ 2	$ 34

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Loans And Leases (Balance In ALLL And Recorded Investment In Loans By Portfolio Segment And Based On Impairment Method) (Details) - USD ($) $ in Thousands		Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
Financing Receivable, Allowance for Credit Losses [Line Items]
Individually evaluated for impairment		$ 26	$ 22
Collectively evaluated for impairment		6,944	6,903
Total ending allowance balance		6,970	6,925	$ 6,620
Individually evaluated for impairment		3,576	3,448
Collectively evaluated for impairment		409,800	349,602
Subtotal		413,376	353,050
Commercial [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Individually evaluated for impairment			1
Collectively evaluated for impairment		1,984	1,646
Total ending allowance balance		1,984	1,647	1,380
Individually evaluated for impairment		277	557
Collectively evaluated for impairment		101,698	70,777
Subtotal	[1]	101,975	71,334
Single-Family Mortgage Loans [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Collectively evaluated for impairment		912	735
Total ending allowance balance		912	735	691
Individually evaluated for impairment		116	122
Collectively evaluated for impairment		95,462	92,422
Subtotal		95,578	92,544
Multi-Family Mortgage Loans [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Collectively evaluated for impairment		660	716
Total ending allowance balance		660	716	705
Individually evaluated for impairment			37
Collectively evaluated for impairment		35,665	34,254
Subtotal		35,665	34,291
Commercial Real Estate [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Individually evaluated for impairment		26	21
Collectively evaluated for impairment		2,117	2,706
Total ending allowance balance		2,143	2,727	2,710
Individually evaluated for impairment		3,183	2,732
Collectively evaluated for impairment		108,683	102,581
Subtotal		111,866	105,313
Construction Loans [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Collectively evaluated for impairment		672	580
Total ending allowance balance		672	580	561
Collectively evaluated for impairment		42,862	25,822
Subtotal		42,862	25,822
Home Equity Lines of Credit [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Collectively evaluated for impairment		597	486
Total ending allowance balance		597	486	474
Collectively evaluated for impairment		25,054	23,109
Subtotal		25,054	23,109
Other Financing Receivable [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Collectively evaluated for impairment		2	34
Total ending allowance balance		2	34	$ 99
Collectively evaluated for impairment		376	637
Subtotal		$ 376	$ 637

[1] Includes $6,008 and $2,874 of commercial leases at December 31, 2017 and December 31, 2016, respectively.

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Loans And Leases (Individually Evaluated For Impairment By Class Of Loans) (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016
Financing Receivable, Impaired [Line Items]
Impaired Financing Receivable, with No Related Allowance, Unpaid Principal Balance	$ 391	$ 1,496
Impaired Financing Receivable, with Related Allowance, Unpaid Principal Balance	3,439	2,591
Impaired Financing Receivable, Unpaid Principal Balance, Total	3,830	4,087
Impaired Financing Receivable, with No Related Allowance, Recorded Investment	137	857
Impaired Financing Receivable, with Related Allowance, Recorded Investment	3,439	2,591
Impaired Financing Receivable, Recorded Investment, Total	3,576	3,448
Impaired Financing Receivable, Allocated Loans and Leases	26	22
Impaired Financing Receivable, with No Related Allowance, Average Recorded Investment	142	951
Impaired Financing Receivable, with Related Allowance, Average Recorded Investment	3,485	2,651
Impaired Financing Receivable, Average Recorded Investment, Total	3,627	3,602
Impaired Financing Receivable, with no Related Allowance, Interest Income Recognized	26	69
Impaired Financing Receivable, with Related Allowance, Interest Income Recognized	178	152
Impaired Financing Receivable, Interest Income Recognized, Total	204	221
Commercial [Member]
Financing Receivable, Impaired [Line Items]
Impaired Financing Receivable, with No Related Allowance, Unpaid Principal Balance		476
Impaired Financing Receivable, with Related Allowance, Unpaid Principal Balance	277	199
Impaired Financing Receivable, with No Related Allowance, Recorded Investment		358
Impaired Financing Receivable, with Related Allowance, Recorded Investment	277	199
Impaired Financing Receivable, Allocated Loans and Leases		1
Impaired Financing Receivable, with No Related Allowance, Average Recorded Investment		436
Impaired Financing Receivable, with Related Allowance, Average Recorded Investment	291	232
Impaired Financing Receivable, with no Related Allowance, Interest Income Recognized		13
Impaired Financing Receivable, with Related Allowance, Interest Income Recognized	9	9
Single-Family Mortgage Loans [Member]
Financing Receivable, Impaired [Line Items]
Impaired Financing Receivable, with Related Allowance, Unpaid Principal Balance	116	122
Impaired Financing Receivable, with Related Allowance, Recorded Investment	116	122
Impaired Financing Receivable, with Related Allowance, Average Recorded Investment	118	125
Impaired Financing Receivable, with Related Allowance, Interest Income Recognized	6	7
Multi-Family Mortgage Loans [Member]
Financing Receivable, Impaired [Line Items]
Impaired Financing Receivable, with No Related Allowance, Unpaid Principal Balance		37
Impaired Financing Receivable, with No Related Allowance, Recorded Investment		37
Impaired Financing Receivable, with No Related Allowance, Average Recorded Investment		41
Impaired Financing Receivable, with no Related Allowance, Interest Income Recognized		2
Real Estate, Commercial, Non-Owner Occupied [Member]
Financing Receivable, Impaired [Line Items]
Impaired Financing Receivable, with No Related Allowance, Unpaid Principal Balance		112
Impaired Financing Receivable, with Related Allowance, Unpaid Principal Balance	2,856	2,068
Impaired Financing Receivable, with No Related Allowance, Recorded Investment		112
Impaired Financing Receivable, with Related Allowance, Recorded Investment	2,856	2,068
Impaired Financing Receivable, Allocated Loans and Leases	24	19
Impaired Financing Receivable, with No Related Allowance, Average Recorded Investment		114
Impaired Financing Receivable, with Related Allowance, Average Recorded Investment	2,882	2,086
Impaired Financing Receivable, with no Related Allowance, Interest Income Recognized		8
Impaired Financing Receivable, with Related Allowance, Interest Income Recognized	154	126
Real Estate, Commercial, Owner Occupied [Member]
Financing Receivable, Impaired [Line Items]
Impaired Financing Receivable, with No Related Allowance, Unpaid Principal Balance	391	871
Impaired Financing Receivable, with Related Allowance, Unpaid Principal Balance	190	202
Impaired Financing Receivable, with No Related Allowance, Recorded Investment	137	350
Impaired Financing Receivable, with Related Allowance, Recorded Investment	190	202
Impaired Financing Receivable, Allocated Loans and Leases	2	2
Impaired Financing Receivable, with No Related Allowance, Average Recorded Investment	142	360
Impaired Financing Receivable, with Related Allowance, Average Recorded Investment	194	208
Impaired Financing Receivable, with no Related Allowance, Interest Income Recognized	26	46
Impaired Financing Receivable, with Related Allowance, Interest Income Recognized	$ 9	$ 10

XML

Loans And Leases (Recorded Investment In Nonaccrual Loans By Class Of Loans) (Details) - USD ($) $ in Thousands	Dec. 31, 2017	Dec. 31, 2016
Financing Receivable, Recorded Investment, Past Due [Line Items]
Loans past due over 90 days still on accrual
Total nonaccrual and nonperforming loans	470	704
Commercial [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total nonaccrual and nonperforming loans	115	263
Single-Family Mortgage Loans [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total nonaccrual and nonperforming loans	253	397
Home Equity Line of Credit, Originated Portfolio [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total nonaccrual and nonperforming loans		44
Home Equity Line of Credit, Purchased Portfolio [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total nonaccrual and nonperforming loans	102
Nonaccrual [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total nonaccrual and nonperforming loans	$ 470	$ 704

XML

Loans And Leases (Aging Of Recorded Investment In Past Due Loans By Class Of Loans) (Details) - USD ($) $ in Thousands	Dec. 31, 2017	Dec. 31, 2016
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Past Due	$ 1,867	$ 1,559
Loans Not Past Due	411,509	351,491
Nonaccrual Loans Not > 90 Days Past Due	264	479
30 to 59 Days Past Due [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Past Due	1,634	670
60 to 89 Days Past Due [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Past Due	27	664
Greater Than 90 Days Past Due [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Past Due	206	225
Commercial [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Past Due		119
Loans Not Past Due	101,975	71,215
Nonaccrual Loans Not > 90 Days Past Due	115	144
Commercial [Member] | Greater Than 90 Days Past Due [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Past Due		119
Single-Family Mortgage Loans [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Past Due	1,741	439
Loans Not Past Due	93,837	92,105
Nonaccrual Loans Not > 90 Days Past Due	149	291
Single-Family Mortgage Loans [Member] | 30 to 59 Days Past Due [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Past Due	1,610	284
Single-Family Mortgage Loans [Member] | 60 to 89 Days Past Due [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Past Due	27	49
Single-Family Mortgage Loans [Member] | Greater Than 90 Days Past Due [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Past Due	104	106
Multi-Family Mortgage Loans [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Loans Not Past Due	35,665	34,291
Real Estate, Commercial, Non-Owner Occupied [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Loans Not Past Due	67,792	60,936
Real Estate, Commercial, Owner Occupied [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Past Due		869
Loans Not Past Due	38,787	34,891
Real Estate, Commercial, Owner Occupied [Member] | 30 to 59 Days Past Due [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Past Due		269
Real Estate, Commercial, Owner Occupied [Member] | 60 to 89 Days Past Due [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Past Due		600
Real Estate, Commercial, Land [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Loans Not Past Due	5,287	8,617
Construction Loans [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Past Due		48
Loans Not Past Due	42,862	25,774
Construction Loans [Member] | 30 to 59 Days Past Due [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Past Due		48
Home Equity Line of Credit, Originated Portfolio [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Past Due		15
Loans Not Past Due	24,592	22,440
Nonaccrual Loans Not > 90 Days Past Due		44
Home Equity Line of Credit, Originated Portfolio [Member] | 60 to 89 Days Past Due [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Past Due		15
Home Equity Line of Credit, Purchased Portfolio [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Past Due	102	69
Loans Not Past Due	360	585
Home Equity Line of Credit, Purchased Portfolio [Member] | 30 to 59 Days Past Due [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Past Due		69
Home Equity Line of Credit, Purchased Portfolio [Member] | Greater Than 90 Days Past Due [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Past Due	102
Other Financing Receivable [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Past Due	24
Loans Not Past Due	352	$ 637
Other Financing Receivable [Member] | 30 to 59 Days Past Due [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Past Due	$ 24

XML

Loans And Leases (Loans Modified As TDRs By Class Of Loans) (Details) $ in Thousands	12 Months Ended
	Dec. 31, 2017 USD ($) loan	Dec. 31, 2016 USD ($) loan
Financing Receivable, Modifications [Line Items]
Number of Loans | loan	1	1
Pre-Modification Outstanding Recorded Investment	$ 841	$ 339
Post-Modification Outstanding Recorded Investment	$ 841	$ 339
Commercial [Member]
Financing Receivable, Modifications [Line Items]
Number of Loans | loan	1	1
Pre-Modification Outstanding Recorded Investment	$ 841	$ 339
Post-Modification Outstanding Recorded Investment	$ 841	$ 339

XML

Loans And Leases (Schedule of Debtor Troubled Debt Restructuring, Subsequent Periods) (Details) - USD ($) $ in Thousands	Dec. 31, 2017	Dec. 31, 2016
Financing Receivable, Modifications [Line Items]
Nonaccrual Troubled Debt Restructurings, Total	$ 115	$ 144
Commercial [Member]
Financing Receivable, Modifications [Line Items]
Nonaccrual Troubled Debt Restructurings, Total	$ 115	$ 144

XML

Loans And Leases (Financing Receivables Credit Quality Indicators) (Details) - USD ($) $ in Thousands		Dec. 31, 2017	Dec. 31, 2016
Financing Receivable, Recorded Investment [Line Items]
Loans		$ 413,376	$ 353,050
Not Rated [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans		122,896	117,766
Pass [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans		282,389	225,940
Special Mention [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans		6,054	3,621
Substandard [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans		2,037	5,723
Doubtful [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans		0	0
Commercial [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans	[1]	101,975	71,334
Commercial [Member] | Not Rated [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans			47
Commercial [Member] | Pass [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans		98,829	70,444
Commercial [Member] | Special Mention [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans		2,869	286
Commercial [Member] | Substandard [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans		277	557
Single-Family Mortgage Loans [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans		95,578	92,544
Single-Family Mortgage Loans [Member] | Not Rated [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans		95,317	92,130
Single-Family Mortgage Loans [Member] | Substandard [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans		261	414
Multi-Family Mortgage Loans [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans		35,665	34,291
Multi-Family Mortgage Loans [Member] | Pass [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans		35,036	33,615
Multi-Family Mortgage Loans [Member] | Special Mention [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans		466	505
Multi-Family Mortgage Loans [Member] | Substandard [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans		163	171
Commercial Real Estate [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans		111,866	105,313
Real Estate, Commercial, Non-Owner Occupied [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans		67,792	60,936
Real Estate, Commercial, Non-Owner Occupied [Member] | Not Rated [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans		88	115
Real Estate, Commercial, Non-Owner Occupied [Member] | Pass [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans		65,161	58,183
Real Estate, Commercial, Non-Owner Occupied [Member] | Special Mention [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans		1,711	1,782
Real Estate, Commercial, Non-Owner Occupied [Member] | Substandard [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans		832	856
Real Estate, Commercial, Owner Occupied [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans		38,787	35,760
Real Estate, Commercial, Owner Occupied [Member] | Pass [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans		37,453	33,493
Real Estate, Commercial, Owner Occupied [Member] | Special Mention [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans		1,008	1,048
Real Estate, Commercial, Owner Occupied [Member] | Substandard [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans		326	1,219
Real Estate, Commercial, Land [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans		5,287	8,617
Real Estate, Commercial, Land [Member] | Pass [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans		5,287	6,380
Real Estate, Commercial, Land [Member] | Substandard [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans			2,237
Construction Loans [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans		42,862	25,822
Construction Loans [Member] | Not Rated [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans		2,239	1,997
Construction Loans [Member] | Pass [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans		40,623	23,825
Home Equity Lines of Credit [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans		25,054	23,109
Home Equity Line of Credit, Originated Portfolio [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans		24,592	22,455
Home Equity Line of Credit, Originated Portfolio [Member] | Not Rated [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans		24,516	22,328
Home Equity Line of Credit, Originated Portfolio [Member] | Substandard [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans		76	127
Home Equity Line of Credit, Purchased Portfolio [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans		462	654
Home Equity Line of Credit, Purchased Portfolio [Member] | Not Rated [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans		360	512
Home Equity Line of Credit, Purchased Portfolio [Member] | Substandard [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans		102	142
Other Financing Receivable [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans		376	637
Other Financing Receivable [Member] | Not Rated [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans		$ 376	$ 637

[1] Includes $6,008 and $2,874 of commercial leases at December 31, 2017 and December 31, 2016, respectively.

XML

Foreclosed Assets (Narrative) (Details) - property	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016
Multi-Family Mortgage Loans [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Number of Properties transferred into REO		1
Single-Family Mortgage Loans [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Number of Properties transferred into REO	0

XML

Foreclosed Assets (Foreclosed Assets) (Details) - USD ($) $ in Thousands	Dec. 31, 2017	Dec. 31, 2016
Accounts, Notes, Loans and Financing Receivable [Line Items]
Foreclosed assets		$ 204
Valuation Allowance
Foreclosed assets, net		204
Single-Family Mortgage Loans [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Foreclosed assets		$ 204

XML

Foreclosed Assets (Expenses Related To Foreclosed Assets) (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016
Foreclosed Assets [Abstract]
Net loss (gain) on sales	$ 7	$ (4)
Operating expenses, net of rental income	11	69
Foreclosed assets, net	$ 18	$ 65

XML

Fair Value (Narrative) (Details) - USD ($) $ in Thousands	Dec. 31, 2017	Dec. 31, 2016
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Unpaid principal balance of impairment loan at collateral	$ 3,087	$ 2,672
Valuation allowance	24	21
Fair Value, Inputs, Level 2 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets measured at fair value on a nonrecurring basis	0	0
Liabilities measured at fair value on a nonrecurring basis	0	0
Fair Value, Inputs, Level 1 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets measured at fair value on a recurring basis	0	0
Liabilities measured at fair value on a recurring basis	0	0
Assets measured at fair value on a nonrecurring basis	0	0
Liabilities measured at fair value on a nonrecurring basis	0	0
Fair Value, Inputs, Level 3 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets measured at fair value on a recurring basis	0	0
Liabilities measured at fair value on a recurring basis	$ 0	$ 0

XML

Fair Value (Assets And Liabilities Measured At Fair Value On A Recurring Basis, Including Financial Assets And Liabilities) (Details) - USD ($) $ in Thousands	Dec. 31, 2017	Dec. 31, 2016
Financial Assets:
Total securities available for sale	$ 11,773	$ 14,058
Loans held for sale	1,124	2,812
Yield maintenance provisions (embedded derivatives)	56	122
Fair Value, Measurements, Recurring [Member] | Fair Value, Inputs, Level 2 [Member]
Financial Assets:
Total securities available for sale	11,773	14,058
Loans held for sale	1,124	2,812
Fair Value, Measurements, Recurring [Member] | U.S. Treasury [Member] | Fair Value, Inputs, Level 2 [Member]
Financial Assets:
Total securities available for sale	11,417	13,505
Fair Value, Measurements, Recurring [Member] | Mortgage-Backed Securities - Residential [Member] | Fair Value, Inputs, Level 2 [Member]
Financial Assets:
Total securities available for sale	244	357
Fair Value, Measurements, Recurring [Member] | Collateralized Mortgage Obligations [Member] | Fair Value, Inputs, Level 2 [Member]
Financial Assets:
Total securities available for sale	112	196
Fair Value, Measurements, Recurring [Member] | Yield maintenance provisions (embedded derivatives) [Member] | Fair Value, Inputs, Level 2 [Member]
Financial Assets:
Yield maintenance provisions (embedded derivatives)	56	122
Fair Value, Measurements, Recurring [Member] | Interest Rate Lock Commitments [Member] | Fair Value, Inputs, Level 2 [Member]
Financial Assets:
Interest rate lock commitments	11	9
Fair Value, Measurements, Recurring [Member] | Interest Rate Swaps [Member] | Fair Value, Inputs, Level 2 [Member]
Financial Liabilities:
Interest-rate swaps	$ 56	$ 122

XML

Fair Value (Assets Measured At Fair Value On A Non-Recurring Basis) (Details) - USD ($) $ in Thousands	Dec. 31, 2017	Dec. 31, 2016
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Total impaired loans	$ 3,830	$ 4,087
Financial instruments measured at fair value on a non-recurring basis [Member] | Fair Value, Inputs, Level 3 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Total impaired loans	3,063	2,650
Commercial [Member] | Financial instruments measured at fair value on a non-recurring basis [Member] | Fair Value, Inputs, Level 3 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Total impaired loans	115	130
Single-Family Mortgage Loans [Member] | Financial instruments measured at fair value on a non-recurring basis [Member] | Fair Value, Inputs, Level 3 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Total impaired loans	116	122
Multi-Family Mortgage Loans [Member] | Financial instruments measured at fair value on a non-recurring basis [Member] | Fair Value, Inputs, Level 3 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Total impaired loans		37
Real Estate, Commercial, Non-Owner Occupied [Member] | Financial instruments measured at fair value on a non-recurring basis [Member] | Fair Value, Inputs, Level 3 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Total impaired loans	$ 2,832	2,161
Real Estate, Commercial, Owner Occupied [Member] | Financial instruments measured at fair value on a non-recurring basis [Member] | Fair Value, Inputs, Level 3 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Total impaired loans		$ 200

XML

Fair Value (Financial Instruments Measured At Fair Value On A Non-Recurring Basis) (Details) - Financial instruments measured at fair value on a non-recurring basis [Member] - Comparable Sales Approach [Member] - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016
Commercial [Member]
Fair Value Measurements, Recurring and Nonrecurring, Valuation Techniques [Line Items]
Fair Value	$ 115	$ 130
Valuation Technique(s)	Comparable sales approach
Unobservable Inputs	Adjustment for differences between the comparable market transactions
Commercial [Member] | Weighted Average [Member]
Fair Value Measurements, Recurring and Nonrecurring, Valuation Techniques [Line Items]
(Range) Weighted Average	3.48%	3.48%
Single-Family Mortgage Loans [Member]
Fair Value Measurements, Recurring and Nonrecurring, Valuation Techniques [Line Items]
Fair Value	$ 116	$ 122
Valuation Technique(s)	Comparable sales approach
Unobservable Inputs	Adjustment for differences between the comparable market transactions
Single-Family Mortgage Loans [Member] | Minimum [Member]
Fair Value Measurements, Recurring and Nonrecurring, Valuation Techniques [Line Items]
(Range) Weighted Average	1.81%	1.81%
Single-Family Mortgage Loans [Member] | Maximum [Member]
Fair Value Measurements, Recurring and Nonrecurring, Valuation Techniques [Line Items]
(Range) Weighted Average	3.61%	3.61%
Single-Family Mortgage Loans [Member] | Weighted Average [Member]
Fair Value Measurements, Recurring and Nonrecurring, Valuation Techniques [Line Items]
(Range) Weighted Average	2.91%	2.91%
Multi-Family Mortgage Loans [Member]
Fair Value Measurements, Recurring and Nonrecurring, Valuation Techniques [Line Items]
Fair Value		$ 37
Multi-Family Mortgage Loans [Member] | Weighted Average [Member]
Fair Value Measurements, Recurring and Nonrecurring, Valuation Techniques [Line Items]
(Range) Weighted Average		9.64%
Real Estate, Commercial, Non-Owner Occupied [Member]
Fair Value Measurements, Recurring and Nonrecurring, Valuation Techniques [Line Items]
Fair Value	$ 2,832	$ 2,161
Valuation Technique(s)	Comparable sales approach
Unobservable Inputs	Adjustment for differences between the comparable market transactions
Real Estate, Commercial, Non-Owner Occupied [Member] | Minimum [Member]
Fair Value Measurements, Recurring and Nonrecurring, Valuation Techniques [Line Items]
(Range) Weighted Average	3.48%	1.10%
Real Estate, Commercial, Non-Owner Occupied [Member] | Maximum [Member]
Fair Value Measurements, Recurring and Nonrecurring, Valuation Techniques [Line Items]
(Range) Weighted Average	9.64%	5.74%
Real Estate, Commercial, Non-Owner Occupied [Member] | Weighted Average [Member]
Fair Value Measurements, Recurring and Nonrecurring, Valuation Techniques [Line Items]
(Range) Weighted Average	5.15%	1.35%
Real Estate, Commercial, Owner Occupied [Member]
Fair Value Measurements, Recurring and Nonrecurring, Valuation Techniques [Line Items]
Fair Value		$ 200
Real Estate, Commercial, Owner Occupied [Member] | Weighted Average [Member]
Fair Value Measurements, Recurring and Nonrecurring, Valuation Techniques [Line Items]
(Range) Weighted Average		(4.46%)

XML

Fair Value (Aggregate Fair Value, Contractual Balance (Including Accrued Interest) And Gain Or Loss) (Details) - USD ($) $ in Thousands	Dec. 31, 2017	Dec. 31, 2016
Fair Value [Abstract]
Aggregate fair value	$ 1,124	$ 2,812
Contractual balance	1,120	2,801
Gain	$ 4	$ 11

XML

Fair Value (Amount Of Gains And Losses From Changes In Fair Value Included In Earnings) (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016
Fair Value [Abstract]
Interest income	$ 68	$ 60
Interest expense
Change in fair value	(7)	6
Total change in fair value	$ 61	$ 66

XML

Fair Value (Carrying Amounts And Estimated Fair Values Of Financial Instruments) (Details) - USD ($) $ in Thousands	Dec. 31, 2017	Dec. 31, 2016
Financial assets
Securities available for sale	$ 11,773	$ 14,058
Loans held for sale	1,124	2,812
Yield maintenance provisions (embedded derivatives)	56	122
Financial liabilities
Advances by borrowers for taxes and insurance	(489)	(408)
Carrying Value [Member]
Financial assets
Cash and cash equivalents	45,498	57,941
Interest-bearing deposits in other financial institutions	100	100
Securities available for sale	11,773	14,058
Loans held for sale	1,124	2,812
Loans and leases, net	406,406	346,125
FHLB and FRB stock	3,227	1,942
Accrued interest receivable	1,326	1,054
Yield maintenance provisions (embedded derivatives)	56	122
Interest rate lock commitments	11	9
Financial liabilities
Deposits	(419,028)	(375,364)
FHLB advances and other borrowings	(13,500)	(13,500)
Advances by borrowers for taxes and insurance	(489)	(408)
Subordinated debentures	(5,155)	(5,155)
Accrued interest payable	(79)	(78)
Interest-rate swaps	(56)	(122)
Fair Value [Member]
Financial assets
Cash and cash equivalents	45,498	57,941
Interest-bearing deposits in other financial institutions	100	100
Securities available for sale	11,773	14,058
Loans held for sale	1,124	2,812
Loans and leases, net	402,719	343,523
Accrued interest receivable	1,326	1,054
Yield maintenance provisions (embedded derivatives)	56	122
Interest rate lock commitments	11	9
Financial liabilities
Deposits	(418,456)	(374,125)
FHLB advances and other borrowings	(13,466)	(13,597)
Advances by borrowers for taxes and insurance	(489)	(408)
Subordinated debentures	(4,094)	(3,411)
Accrued interest payable	(79)	(78)
Interest-rate swaps	(56)	(122)
Fair Value [Member] | Fair Value, Inputs, Level 1 [Member]
Financial assets
Cash and cash equivalents	45,498	57,941
Interest-bearing deposits in other financial institutions	100	100
Accrued interest receivable	27	13
Financial liabilities
Deposits	(236,797)	(202,158)
Accrued interest payable	(6)	(2)
Fair Value [Member] | Fair Value, Inputs, Level 2 [Member]
Financial assets
Interest-bearing deposits in other financial institutions
Securities available for sale	11,773	14,058
Loans held for sale	1,124	2,812
Accrued interest receivable	38	40
Yield maintenance provisions (embedded derivatives)	56	122
Interest rate lock commitments	11	9
Financial liabilities
Deposits	(181,659)	(171,967)
FHLB advances and other borrowings	(13,466)	(13,597)
Subordinated debentures	(4,094)	(3,411)
Accrued interest payable	(73)	(76)
Interest-rate swaps	(56)	(122)
Fair Value [Member] | Fair Value, Inputs, Level 3 [Member]
Financial assets
Interest-bearing deposits in other financial institutions
Loans and leases, net	402,719	343,523
Accrued interest receivable	1,261	1,001
Financial liabilities
Advances by borrowers for taxes and insurance	$ (489)	$ (408)

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Loan Servicing (Narrative) (Details) - USD ($) $ in Thousands	Dec. 31, 2017	Dec. 31, 2016
Loan Servicing [Abstract]
Custodial escrow balances maintained in connection with serviced loans	$ 74	$ 119

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Loan Servicing (Principal Balances of Mortgage Loans at Year-End) (Details) - USD ($) $ in Thousands	Dec. 31, 2017	Dec. 31, 2016
Loan Servicing [Abstract]
Mortgage loans serviced for Freddie Mac	$ 3,319	$ 4,261

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Premises And Equipment (Narrative) (Details) $ in Thousands	12 Months Ended
	Dec. 31, 2017 USD ($) contract	Dec. 31, 2016 USD ($)
Property, Plant and Equipment [Line Items]
Depreciation	$ 208	$ 211
Number of operating leases | contract	3
Lease expenses	$ 325	$ 311
Woodmere Lease [Member]
Property, Plant and Equipment [Line Items]
Operating lease term	128 months
Fairlawn Branch [Member]
Property, Plant and Equipment [Line Items]
Operating lease term	10 years
Renewal option term	5 years

XML

Premises And Equipment (Year-End Premises and Equipment) (Details) - USD ($) $ in Thousands	Dec. 31, 2017	Dec. 31, 2016
Premises And Equipment [Abstract]
Land and land improvements	$ 1,293	$ 1,293
Buildings	3,938	3,832
Furniture, fixtures and equipment	2,316	2,150
Premises and equipment, gross	7,547	7,275
Less: Accumulated Depreciation	(4,014)	(3,846)
Premises and equipment, net	$ 3,533	$ 3,429

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Premises And Equipment (Rent Commitments) (Details) $ in Thousands	Dec. 31, 2017 USD ($)
Premises And Equipment [Abstract]
2018	$ 350
2019	355
2020	356
2021	357
2022	342
Thereafter	532
Total	$ 2,292

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Deposits (Narrative) (Details) - USD ($) $ in Thousands	Dec. 31, 2017	Dec. 31, 2016
Deposits [Abstract]
Time deposits, $100,000 or more	$ 137,433	$ 128,185
Time deposits, $250,000 or more	50,048	38,575
Brokered deposits	$ 46,945	$ 29,738

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Deposits (Scheduled Maturities of Time Deposits) (Details) $ in Thousands	Dec. 31, 2017 USD ($)
Deposits [Abstract]
2018	$ 93,215
2019	33,750
2020	20,360
2021	7,737
2022	27,169
Thereafter
Total	$ 182,231

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FHLB Advances (Narrative) (Details) $ in Thousands	Dec. 31, 2017 USD ($)
FHLB Advances [Abstract]
Amount available of FHLB	$ 65,003

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FHLB Advances (Advances From FHLB) (Details) - USD ($) $ in Thousands	Dec. 31, 2017	Dec. 31, 2016
FHLB Advances [Abstract]
2019, Weighted Average Rate	1.62%
2020, Weighted Average Rate	1.98%
2021, Weighted Average Rate	2.32%
2022, Weighted Average Rate	2.05%
Due in one year		$ 2,500
Due in two years	$ 3,500
Due in three years	4,500	3,500
Due in four years	4,000	3,500
Due in five years	1,500	4,000
Total	$ 13,500	$ 13,500

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FHLB Advances (Schedule Of Federal Home Loan Advances Pledged By Assets) (Details) - USD ($) $ in Thousands	Dec. 31, 2017	Dec. 31, 2016
Federal Home Loan Bank, Advances, Branch of FHLB Bank [Line Items]
Collateral pledged to secure advances	$ 85,091	$ 61,616
Securities [Member]
Federal Home Loan Bank, Advances, Branch of FHLB Bank [Line Items]
Collateral pledged to secure advances	4,641	2,327
Cash [Member]
Federal Home Loan Bank, Advances, Branch of FHLB Bank [Line Items]
Collateral pledged to secure advances	3,300	3,300
Single-Family Mortgage Loans [Member]
Federal Home Loan Bank, Advances, Branch of FHLB Bank [Line Items]
Collateral pledged to secure advances	49,616	38,342
Multi-Family Mortgage Loans [Member]
Federal Home Loan Bank, Advances, Branch of FHLB Bank [Line Items]
Collateral pledged to secure advances	15,125	14,854
Commercial Real Estate [Member]
Federal Home Loan Bank, Advances, Branch of FHLB Bank [Line Items]
Collateral pledged to secure advances	5,348	$ 2,793
Home Equity Lines of Credit [Member]
Federal Home Loan Bank, Advances, Branch of FHLB Bank [Line Items]
Collateral pledged to secure advances	$ 7,061

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FHLB Advances (Federal Home Loan Advances Outstanding Maturity Period) (Details) - USD ($) $ in Thousands	Dec. 31, 2017	Dec. 31, 2016
FHLB Advances [Abstract]
2018		$ 2,500
2019	$ 3,500
2020	4,500	3,500
2021	4,000	3,500
2022	1,500	4,000
Total	$ 13,500	$ 13,500

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Other Borrowings (Narrative) (Details) - USD ($)	Dec. 31, 2017	Dec. 31, 2016
Debt Disclosure [Line Items]
Unused line of credit	$ 8,000,000	$ 1,000,000
Maximum borrowing for line of credit	8,000,000	1,000,000
Line of credit with a commercial bank	0	0
Federal Reserve Bank Advances [Member]
Debt Disclosure [Line Items]
Outstanding borrowings	0	$ 0
Debt instrument maximum borrowing capacity amount	$ 40,448,000

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Other Borrowings (Assets Pledged As Collateral With FRB) (Details) - USD ($) $ in Thousands	Dec. 31, 2017	Dec. 31, 2016
Accounts, Notes, Loans and Financing Receivable [Line Items]
Assets pledged as collateral with the FRB	$ 62,009	$ 55,610
Commercial [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Assets pledged as collateral with the FRB	18,491	16,380
Commercial Real Estate [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Assets pledged as collateral with the FRB	$ 43,518	$ 39,230

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Subordinated Debentures (Details) - USD ($) $ / shares in Units, $ in Thousands	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2008	Dec. 31, 2003
Subsidiary, Sale of Stock [Line Items]
Subordinated debentures	$ 5,155	$ 5,155		$ 5,155
Holding Company's investment in the common stock	$ 155
Holding Company may redeem the subordinated debentures in a principal amount with integral multiples			$ 1
Percentage in which holding company redeem subordinated debentures			100.00%
Private Placement [Member]
Subsidiary, Sale of Stock [Line Items]
Holding Company, closed a pooled private offering				5,000
Trust preferred securities with a liquidation amount				$ 1
Subordinated Debentures Maturing On December 30,2033 [Member]
Subsidiary, Sale of Stock [Line Items]
Maturity date of subordinated debentures	Dec. 30, 2033
Trust preferred securities and subordinated debentures have a stated percentage	4.54%	3.85%
Subordinated [Member]
Subsidiary, Sale of Stock [Line Items]
Number of years with no principal repayment	5 years
Maximum number of years for deferred interest payments	5 years
London Interbank Offered Rate [Member]
Subsidiary, Sale of Stock [Line Items]
Trust preferred securities and subordinated debentures have a variable rate of interest	2.85%	2.85%

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Benefit Plans (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2017	Jun. 30, 2017	Dec. 31, 2016	Jun. 30, 2016	Jun. 30, 2015
Life Insurance Benefits [Member]
Defined Benefit Plans and Other Postretirement Benefit Plans Table Text Block [Line Items]
Benefit plan expense	$ (19)		$ (3)
Accrued interest payable and other liabilities Total	$ 191		210
401 (k) plan [Member]
Defined Benefit Plans and Other Postretirement Benefit Plans Table Text Block [Line Items]
Percentage of amount allowable under federal tax regulations	25.00%
Percentage of compensation contributed under federal tax regulations	8.00%
Benefit plan expense	$ 57		49
Salary Continuation Agreement [Member]
Defined Benefit Plans and Other Postretirement Benefit Plans Table Text Block [Line Items]
Benefit plan expense	10		10
Accrued interest payable and other liabilities Total	203		$ 218
Annual benefit for 20 years	$ 25
Duration of Annual benefit	20 years
Multi-employer pension plan [Member]
Defined Benefit Plans and Other Postretirement Benefit Plans Table Text Block [Line Items]
Unfunded liability		$ 36		$ 53
CFBank's contributions		$ 32		42
Funded status		96.54%			94.90%
Total contributions made to Pentegra DB Plan				$ 153,186	$ 163,138
Percentage of amount allowable under federal tax regulations				5.00%	5.00%

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Income Taxes (Narrative) (Details) - USD ($)	12 Months Ended
	Dec. 31, 2018	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2012
Proceeds from sale of common stock					$ 22,500,000
Net operating loss carry forwards		$ 23,059,000
Alternative minimum tax credit carryforwards			$ 50,000
Carryforwards utilize limit before the stock offering closed		163,000
Unutilized operating loss carryforwards that will expire		20,520,000
Reduced deferred tax assets and valuation allowance		6,977,000
Deferred tax liability to be recorded		$ 473,000
Federal income tax rate		34.00%	34.00%	34.00%
Additional bad debt deductions provided by Federal income tax laws		$ 2,250,000
Deferred tax asset		1,645,000	$ 2,627,000
Deferred tax asset, valuation allowance		0
Unrecognized tax benefits		0	$ 0
Revaluation of net deferred tax asset		$ 979,000
Scenario, Plan [Member]
Federal income tax rate	21.00%
Minimum [Member]
Net operating loss carryforwards expiration year		2024
Maximum [Member]
Net operating loss carryforwards expiration year		2033
Federal income tax rate		35.00%

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Income Taxes (Income Tax Expense) (Details) - USD ($) $ in Thousands		12 Months Ended
		Dec. 31, 2017	Dec. 31, 2016
Operating Loss Carryforwards [Line Items]
Current federal		$ 1,133	$ 187
Deferred federal	[1]	3	623
Revaluation of net deferred tax assets		979
Total		2,115	810
Operating Loss Carryforwards [Member]
Operating Loss Carryforwards [Line Items]
Deferred federal		$ 52	$ 717

[1] Includes tax benefit of operating loss carryforwards of $52 and $717 for the years ended December 31, 2017 and 2016, respectively.

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Income Taxes (Effective Tax Rates Differ from Federal Statutory Rate) (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
Income Taxes [Abstract]
Federal income tax rate	34.00%	34.00%	34.00%
Federal statutory rate times financial statement income (loss)	$ 1,177	$ 829
Stock compensation	(49)	6
Bank owned life insurance income	(46)	(45)
Revaluation of net deferred tax asset	979
Other	54	20
Total	$ 2,115	$ 810
Effective tax rate	61.00%	33.00%

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Income Taxes (Deferred Tax Assets and Liabilities) (Details) - USD ($) $ in Thousands	Dec. 31, 2017	Dec. 31, 2016
Deferred tax assets:
Allowance for loan and lease losses	$ 997	$ 1,575
Compensation related issues	274	353
Deferred loan fees	100	155
ATM Credit		50
Nonaccrual interest	45	41
Net operating loss carryforward	501	863
Other	42	70
Gross deferred tax assets	1,959	3,107
Deferred tax liabilities:
FHLB stock dividend	226	366
Mortgage servicing rights	1	2
Depreciation	36	47
Prepaid expenses	51	63
Mark-to-market loans		2
Deferred tax liabilities	314	480
Net deferred tax asset	$ 1,645	$ 2,627

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Related-Party Transactions (Narrative) (Details) - USD ($) $ in Thousands	Dec. 31, 2017	Dec. 31, 2016
Related-Party Transactions [Abstract]
Deposits from principal officers, directors, and their affiliates	$ 487	$ 274

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Related-Party Transactions (Loans to Principal Officers, Directors and Affiliates) (Details) $ in Thousands	12 Months Ended
	Dec. 31, 2017 USD ($)
Related-Party Transactions [Abstract]
Beginning balance	$ 2,399
New loans	4,442
Effect of changes in composition of related parties
Repayments	(177)
Ending balance	$ 6,664

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Stock-Based Compensation (Narrative) (Details) $ in Thousands	12 Months Ended
	Dec. 31, 2017 USD ($) ShareBasedCompensationPlan shares	Dec. 31, 2016 USD ($) shares
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Number of stock-based compensation plans | ShareBasedCompensationPlan	3
Compensation cost | $	$ 246	$ 122
Total income tax (expense) benefit | $	$ 84	$ 35
Shares cancelled or forfeited	3,190
Shares Granted	0	0
Shares, Vested	157,172
2003 Equity Compensation Plan [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Number of Shares Authorized	100,000
2009 Equity Compensation Plan [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Shares available to be issued	1,500,000
Share-based Compensation Arrangement by Share-based Payment Award, Number of Shares Available for Grant	347,115
Stock Options [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Vesting periods exercisable from date of grant	10 years
Stock Options [Member] | 1999 Stock-Based Incentive Plan [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Number of Shares Authorized	38,778
Stock Options [Member] | 2009 Equity Compensation Plan [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Number of Shares Authorized	200,000
Stock Options [Member] | Minimum [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Vesting periods	1 year
Stock Options [Member] | Maximum [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Vesting periods	3 years
Restricted Stock [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Shares available to be issued	215,500	292,000
Unrecognized compensation cost | $	$ 918	$ 642
Restricted Stock [Member] | 1999 Stock-Based Incentive Plan [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Number of Shares Authorized	15,511
Restricted Stock [Member] | 2003 Equity Compensation Plan [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Number of Shares Authorized	30,000
Restricted Stock [Member] | Minimum [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Vesting periods	1 year
Restricted Stock [Member] | Maximum [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Vesting periods	3 years

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Stock-Based Compensation (Summary Of Stock Option Activity) (Details) $ / shares in Units, $ in Thousands	12 Months Ended
	Dec. 31, 2017 USD ($) $ / shares shares
Stock-Based Compensation [Abstract]
Shares, Outstanding at beginning of year | shares	542,746
Shares, Expired | shares	(300)
Shares Cancelled or forfeited | shares	(3,190)
Shares, Outstanding at end of year | shares	539,256
Shares, Exercisable at end of period | shares	539,256
Weighted Average Exercise Price, Beginning Balance | $ / shares	$ 1.46
Weighted Average Exercise Price, Expired | $ / shares	36.75
Weighted Average Exercise Price, Cancelled or forfeited | $ / shares	1.70
Weighted Average Exercise Price, Ending Balance | $ / shares	1.44
Weighted Average Exercise Price, Exercisable at end of period | $ / shares	$ 1.44
Weighted average remaining contractual term ,Outstanding at end of period	5 years 4 months 24 days
Weighted average remaining contractual term , Exercisable at end of period	5 years 4 months 24 days
Intrinsic value, Outstanding at end of year | $	$ 731,080
Intrinsic Value Exercisable at end of period | $	$ 731,080

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Stock-Based Compensation (Summary Of Changes In Company's Nonvested Restricted Shares) (Details)	12 Months Ended
	Dec. 31, 2017 $ / shares shares
Stock-Based Compensation [Abstract]
Shares, Nonvested at January 1, 2017 | shares	425,666
Shares, Granted | shares	215,500
Shares, Vested | shares	(157,172)
Shares, Forfeited | shares	(19,333)
Shares, Nonvested at December 31, 2017 | shares	464,661
Weighted Average Grant date Fair Value, Nonvested at January 1, 2017 | $ / shares	$ 1.56
Weighted Average Grant date Fair Value, Granted | $ / shares	2.56
Weighted Average Grant date Fair Value, Vested | $ / shares	1.53
Weighted Average Grant date Fair Value, Forfeited | $ / shares	1.58
Weighted Average Grant date Fair Value, Nonvested at December 31, 2017 | $ / shares	$ 2.03

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Preferred Stock (Details) - USD ($) $ / shares in Units, $ in Thousands	3 Months Ended	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2017	Dec. 31, 2014	Dec. 31, 2016
Schedule of Capitalization, Equity [Line Items]
Aggregate value				$ 5
Series B Preferred Stock [Member]
Schedule of Capitalization, Equity [Line Items]
Issuance of preferred stock	0	0		480,000
Share conversion, original shares converted	480,000
Stock conversion, estimated preferred stock dividends eliminated quarterly	$ 187,500
Stock conversion, estimated preferred stock dividends eliminated annually	$ 750
Series B Preferred Stock [Member] | McDonald Partners, LLC [Member] | Private Placement [Member]
Schedule of Capitalization, Equity [Line Items]
Issuance of preferred stock			480,000
Preferred stock rate		6.25%
Share Price	$ 25.00	$ 25.00
Aggregate value			$ 12,000
Placement fees			482
Other offering expenses			149
Net proceeds from issuance of Series B preferred stock			$ 11,369
Common Stock [Member]
Schedule of Capitalization, Equity [Line Items]
Shares issued upon conversion	6,857,143

XML

Common Stock Warrants (Details) - USD ($) $ / shares in Units, $ in Thousands	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2014
Class of Warrant or Right [Line Items]
Warrant, shares	469,600
Series B Preferred Stock [Member]
Class of Warrant or Right [Line Items]
Issuance of preferred stock	0	480,000
Common Stock [Member]
Class of Warrant or Right [Line Items]
Warrants issued	1,152,125
Warrant exercise period	5 years
Exercise price of warrant	$ 1.85
Private Placement [Member] | McDonald Partners, LLC [Member] | Series B Preferred Stock [Member]
Class of Warrant or Right [Line Items]
Number of shares issuable per warrant	2.00
Issuance of preferred stock			480,000
Private Placement [Member] | McDonald Partners, LLC [Member] | Series B Preferred Stock [Member] | Maximum [Member]
Class of Warrant or Right [Line Items]
Purchase threshold amount	$ 700
Purchase threshold shares	28,000
Private Placement [Member] | McDonald Partners, LLC [Member] | Common Stock [Member]
Class of Warrant or Right [Line Items]
Number of shares issuable per warrant	3.25
Private Placement [Member] | McDonald Partners, LLC [Member] | Common Stock [Member] | Minimum [Member]
Class of Warrant or Right [Line Items]
Purchase threshold amount	$ 700
Purchase threshold shares	28,000

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Regulatory Capital Matters (Narrative) (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016
Regulatory Capital Matters [Abstract]
Future percent of common equity to risk-weighted assets	2.50%
Percent of Qualified Thrift Lender test requires		65.00%
Opening balance in liquidation account	$ 14,300

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Regulatory Capital Matters (Actual And Required Capital Amounts And Ratios Of CFBank) (Details) - USD ($) $ in Thousands	Dec. 31, 2017	Dec. 31, 2016
Compliance with Regulatory Capital Requirements under Banking Regulations [Line Items]
Total Capital to risk weighted assets, Actual Amount	$ 48,271	$ 45,118
Tier 1 (Core) Capital to risk weighted assets, Actual Amount	43,179	40,556
Common equity tier 1 capital to risk-weighted assets, Actual Amount	43,179	40,556
Tier 1 (Core) Capital to adjusted total assets, Actual Amount	$ 43,179	$ 40,556
Total Capital to risk weighted assets, Actual Ratio	11.91%	12.46%
Tier 1 (Core) Capital to risk weighted assets, Actual Ratio	10.65%	11.20%
Common equity tier 1 capital to risk-weighted assets, Actual Ratio	10.65%	11.20%
Tier 1 (Core) Capital to adjusted total assets, Actual Ratio	9.37%	9.66%
Capital Required to be Well Capitalized	$ 40,532	$ 36,218
Tier One Risk Based Capital Required to be Well Capitalized	32,426	28,974
Common equity tier 1 capital to risk-weighted assets, To Be Well Capitalized Under Applicable Regulatory Action Regulations Amount	26,346	23,542
Tier One Leverage Capital Required to be Well Capitalized	$ 23,040	$ 20,991
Capital Required to be Well Capitalized to Risk Weighted Assets	10.00%	10.00%
Tier One Risk Based Capital Required to be Well Capitalized to Risk Weighted Assets	8.00%	8.00%
Common equity tier 1 capital to risk-weighted assets, To Be Well Capitalized Under Applicable Regulatory Action Regulations Ratio	6.50%	6.50%
Tier One Leverage Capital Required to be Well Capitalized to Average Assets	5.00%	5.00%
Basel III Phase-In Schedule [Member]
Compliance with Regulatory Capital Requirements under Banking Regulations [Line Items]
Total Capital to risk weighted assets, For Capital Adequacy Purposes Amount	$ 37,492	$ 31,256
Tier 1 (Core) Capital to risk weighted assets, For Capital Adequacy Purposes Amount	29,386	24,013
Common equity tier 1 capital to risk-weighted assets, For Capital Adequacy Purposes Amount	23,306	18,580
Tier 1 (Core) Capital to adjusted total assets, For Capital Adequacy Purposes Amount	$ 18,432	$ 16,792
Total Capital to risk weighted assets, For Capital Adequacy Purposes Ratio	9.25%	8.63%
Tier 1 (Core) Capital to risk weighted assets, For Capital Adequacy Purposes Ratio	7.25%	6.63%
Common equity tier 1 capital to risk-weighted assets, For Capital Adequacy Purposes Ratio	5.75%	5.13%
Tier 1 (Core) Capital to adjusted total assets, For Capital Adequacy Purposes Ratio	4.00%	4.00%
Basel III Fully Phased-In [Member]
Compliance with Regulatory Capital Requirements under Banking Regulations [Line Items]
Total Capital to risk weighted assets, For Capital Adequacy Purposes Amount	$ 42,559	$ 38,029
Tier 1 (Core) Capital to risk weighted assets, For Capital Adequacy Purposes Amount	34,452	30,785
Common equity tier 1 capital to risk-weighted assets, For Capital Adequacy Purposes Amount	28,372	25,353
Tier 1 (Core) Capital to adjusted total assets, For Capital Adequacy Purposes Amount	$ 18,432	$ 16,792
Total Capital to risk weighted assets, For Capital Adequacy Purposes Ratio	10.50%	10.50%
Tier 1 (Core) Capital to risk weighted assets, For Capital Adequacy Purposes Ratio	8.50%	8.50%
Common equity tier 1 capital to risk-weighted assets, For Capital Adequacy Purposes Ratio	7.00%	7.00%
Tier 1 (Core) Capital to adjusted total assets, For Capital Adequacy Purposes Ratio	4.00%	4.00%

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Derivative Instruments (Narrative) (Details) - USD ($)	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016
Derivative [Line Items]
Notional amount	$ 2,185,000	$ 2,280,000
Derivative assets	56,000	122,000
Net gain/loss recognised of fair value of yield maintenance provisions	0	0
Net gains (losses) recognized in earnings	5,000	7,000
Interest Rate Swaps [Member]
Derivative [Line Items]
Notional amount	2,185,000	2,280,000
Interest-rate swaps	645,000
Interest Rate Lock Commitments [Member]
Derivative [Line Items]
Derivative assets	11,000	8,000
Interest rate lock commitments related to residential mortgage loans	$ 2,390,000	$ 2,164,000

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Derivative Instruments (Summary Of Derivative Instruments) (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016
Derivative Instruments [Abstract]
Notional amount	$ 2,185	$ 2,280
Weighted average pay rate on interest-rate swaps	3.75%	3.74%
Weighted average receive rate on interest-rate swaps	1.52%	0.75%
Weighted average maturity (years)	2 years 1 month 6 days	3 years 1 month 6 days
Fair value of interest-rate swaps	$ (56)	$ (122)
Yield maintenance provisions (embedded derivatives)	$ 56	$ 122

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Loan Commitments and Other Related Activities (Narrative) (Details)	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016
Contractual Commitments Contingencies And Off Balance Sheet Arrangements [Line Items]
Period for commitments and construction loan commitments	60 days
Construction Loans [Member]
Contractual Commitments Contingencies And Off Balance Sheet Arrangements [Line Items]
Period for commitments and construction loan commitments	1 year
Minimum [Member]
Contractual Commitments Contingencies And Off Balance Sheet Arrangements [Line Items]
Interest rates for fixed rate loan commitments	2.00%	1.75%
Maturities for fixed rate loan commitments	21 months	2 months
Maximum [Member]
Contractual Commitments Contingencies And Off Balance Sheet Arrangements [Line Items]
Interest rates for fixed rate loan commitments	5.88%	6.50%
Maturities for fixed rate loan commitments	30 years	30 years

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Loan Commitments and Other Related Activities (Contractual Amounts of Financial Instruments with Off-Balance-Sheet Risk) (Details) - USD ($) $ in Thousands	Dec. 31, 2017	Dec. 31, 2016
Commitments To Make Loans [Member]
Other Contingencies And Commitments [Line Items]
Fixed Rate	$ 15,856	$ 21,335
Variable Rate	21,716	22,171
Unused Lines Of Credit [Member]
Other Contingencies And Commitments [Line Items]
Fixed Rate	8,068	3,714
Variable Rate	38,760	29,621
Standby Letters Of Credit [Member]
Other Contingencies And Commitments [Line Items]
Fixed Rate	$ 1,115	$ 991

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Parent Company Only Condensed Financial Information (Condensed Balance Sheets) (Details) - USD ($) $ in Thousands	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2003
ASSETS
Cash and cash equivalents	$ 45,498	$ 57,941	$ 25,895
Other assets	4,699	4,571
Total assets	481,425	436,112
Liabilities and Equity
Subordinated debentures	5,155	5,155		$ 5,155
Stockholders' equity	40,261	39,292	38,312
Total liabilities and stockholder's equity	481,425	436,112
Parent Company [Member]
ASSETS
Cash and cash equivalents	523	2,197	$ 2,673
Investment in banking subsidiary	43,633	41,448
Investment in and advances to other subsidiary	228	225
Other assets	1,232	901
Total assets	45,616	44,771
Liabilities and Equity
Subordinated debentures	5,155	5,155
Accrued expenses and other liabilities	200	324
Stockholders' equity	40,261	39,292
Total liabilities and stockholder's equity	$ 45,616	$ 44,771

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Parent Company Only Condensed Financial Information (Condensed Statements Of Operations) (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016
Interest income	$ 17,207	$ 14,409
Other income	124	169
Interest expense	3,534	3,096
Loss before income tax and undistributed subsidiary income	3,461	2,437
Tax effect	2,115	810
Net income	1,346	1,627
Comprehensive income	1,297	1,638
Parent Company [Member]
Interest income	4	2
Other income	48	131
Interest expense	212	185
Other expense	815	646
Loss before income tax and undistributed subsidiary income	(975)	(698)
Tax effect	330	236
Gain (loss) after income tax and undistributed subsidiary income	(645)	(462)
Equity in undistributed subsidiary income	1,991	2,089
Net income	1,346	1,627
Comprehensive income	$ 1,297	$ 1,638

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Parent Company Only Condensed Financial Information (Condensed Statements Of Cash Flows) (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016
Cash flows from operating activities
Net income	$ 1,346	$ 1,627
Net cash from operating activities	3,951	1,792
Cash flows from financing activities:
Acquisition of treasury shares surrendered upon vesting of restricted stock for payment of taxes	(49)
Purchase of treasury shares		(30)
Exercise of warrants to common stock	38
Dividends paid on Series B preferred stock	(750)	(750)
Net cash from financing activities	42,984	82,853
Net change in cash and cash equivalents	(12,443)	32,046
Beginning cash and cash equivalents	57,941	25,895
Ending cash and cash equivalents	45,498	57,941
Parent Company [Member]
Cash flows from operating activities
Net income	1,346	1,627
Effect of subsidiaries' operations	(1,991)	(2,089)
Change in other assets and other liabilities	(268)	766
Net cash from operating activities	(913)	304
Cash flows from financing activities:
Acquisition of treasury shares surrendered upon vesting of restricted stock for payment of taxes	(49)
Purchase of treasury shares		(30)
Exercise of warrants to common stock	38
Dividends paid on Series B preferred stock	(750)	(750)
Net cash from financing activities	(761)	(780)
Net change in cash and cash equivalents	(1,674)	(476)
Beginning cash and cash equivalents	2,197	2,673
Ending cash and cash equivalents	$ 523	$ 2,197

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Earnings (Loss) Per Common Share (Computation of Earnings Per Share) (Details) - USD ($) $ / shares in Units, $ in Thousands	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016
Basic
Net income	$ 1,346	$ 1,627
Dividends on Series B preferred stock and accretion of discount	(666)	(857)
Net income attributable to common stockholders	$ 680	$ 770
Weighted average common shares outstanding including unvested share-based payment awards	17,928,141	16,020,847
Less: Unvested share-based payment awards
Average shares	17,928,141	16,020,847
Basic earnings per common share	$ 0.04	$ 0.05
Diluted
Add back: Preferred Dividends on Series B stock and accretion of discount
Net earnings allocated to common stockholders	$ 680	$ 770
Add: Dilutive effects of assumed exercises of stock options	216,486	38,184
Add: Dilutive effects of assumed exercises of stock warrants	1,141,725
Average shares and dilutive potential common shares	19,286,352	16,059,031
Diluted earning per common share	$ 0.04	$ 0.05

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Earnings (Loss) Per Common Share (Summary of Anti-Dilutive Options or Warrants) (Details) - shares	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016
Stock Options [Member]
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Anti-dilutive shares	5,399	282,971
Series B Preferred Stock [Member]
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Anti-dilutive shares		6,857,143
Stock Warrants [Member]
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Anti-dilutive shares		1,152,125

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Accumulated Other Comprehensive Income (Details) - USD ($) $ in Thousands		12 Months Ended
		Dec. 31, 2017	Dec. 31, 2016
Accumulated Other Comprehensive Income (Loss) [Line Items]
Accumulated other comprehensive income (loss), beginning of period		$ 2
Other comprehensive income (loss), net of tax		(49)	$ 11
Accumulated other comprehensive income (loss), end of period		(47)	2
Unrealized Gains and Losses on Available-for-Sale Securities [Member]
Accumulated Other Comprehensive Income (Loss) [Line Items]
Accumulated other comprehensive income (loss), beginning of period	[1]	2	(9)
Other comprehensive gain (loss) before reclassifications	[1]	(49)	11
Less amount reclassified from accumulated other comprehensive loss	[1],[2]
Other comprehensive income (loss), net of tax	[1]	(49)	11
Accumulated other comprehensive income (loss), end of period	[1]	$ (47)	$ 2

[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 year ended December 31, 2017 and December 31, 2016. NOTE 26- SUBSEQUENT EVENTIn February 2018, the Holding Company entered into a credit facility with a third-party bank pursuant to which the Holding Company may borrow up to an aggregate principal amount of $6,000. The purpose of the credit facility is to provide an additional source of liquidity for the Holding Company and to provide potential funds, as needed, for the Holding Company to downstream as additional capital to the Bank to support growth. Loans under the credit facility will bear interest at a rate equal to the Prime Rate plus 0.75%. The credit facility is secured by a pledge of the Holding Company's stock of CFBank. The credit facility will expire in February 2020 unless extended or replaced.

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Subsequent Events (Details) - USD ($)	1 Months Ended
	Feb. 28, 2018	Dec. 31, 2017	Dec. 31, 2016
Subsequent Event [Line Items]
Maximum borrowing for line of credit		$ 8,000,000	$ 1,000,000
Subsequent Event [Member]
Subsequent Event [Line Items]
Maximum borrowing for line of credit	$ 6,000,000
Subsequent Event [Member] | Prime Rate [Member]
Subsequent Event [Line Items]
Variable rate spread	0.75%