CFBK — Q2 2026 Financial Report Analysis

Overview

CF Bankshares, the Columbus, Ohio parent of CFBank (a commercial bank of about $2.2 billion in assets operating in Columbus, Cleveland, Cincinnati, Akron and Indianapolis), reported second-quarter 2026 net income of $5.9 million, or $0.90 per diluted share, up from $5.0 million ($0.77) a year earlier. Most of the improvement came from the bank's core lending spread widening: interest paid on deposits fell faster than interest earned on loans. But the earnings gain was larger than the revenue gain, because the quarter also set aside less money for bad loans and paid a lower tax rate — while the stock of loans that bank examiners would call "problem" loans kept rising.

At a glance

• Net interest margin 2.93%, up from 2.83% a year ago and 2.69% last quarter — but 7 basis points (0.07 percentage points) of that came from a one-time $370,000 prepayment fee on a loan that was paid off early.
• Net income +17.4% vs. revenue +6.2%: the gap came from a smaller loan-loss provision ($944,000 vs. $1.4 million) and a lower effective tax rate (18.6% vs. 21.3%).
• Nonaccrual loans $20.8 million (1.15% of loans), up from $16.6 million a year ago, and criticized/classified loans rose 123% in six months — reserves now cover only 93% of nonperforming loans, down from 115% a year ago.

Key figures

A few terms, since they drive everything below. Net interest income is what a bank earns on its loans and securities minus what it pays depositors and lenders — the bulk of CFBank's revenue. The net interest margin (NIM) expresses that as a percentage of the bank's interest-earning assets: at 2.93%, CFBank keeps about $2.93 a year for every $100 it lends or invests, after paying for its funding. The efficiency ratio is operating costs divided by revenue — lower is better; 50.4% means about 50 cents of every revenue dollar goes to running the bank. CET1 (common equity tier 1) is the core capital regulators measure a bank's loss-absorbing cushion with. The company does not report a separate return on tangible common equity; because it carries no goodwill or other intangible assets (its tangible book value per share equals its book value per share, $29.04), the 12.31% return on average equity shown above is the comparable figure. The CET1 ratio shown is the bank subsidiary's, as the company reports it.

Where the revenue came from

The margin story this quarter is about funding costs. Compared with Q2 2025, total interest income actually fell 1.1% to $30.0 million, because the average yield on interest-earning assets dropped 21 basis points to 5.92% (loan yields slipped from 6.34% to 6.24% and cash held at other institutions earned 3.72% vs. 4.50% as short-term rates came down). But interest expense fell faster — down 7.2% to $15.2 million — as the average rate paid on interest-bearing liabilities dropped 37 basis points to 3.79%. Interest-bearing deposits cost 3.71%, down from 4.15%. The result was net interest income up $843,000, or 6.0%.

Against the prior quarter the jump looks bigger (NIM up 24 basis points from 2.69%), but the company itself notes that a $370,000 prepayment penalty from a commercial loan that paid off early added 7 basis points to this quarter's margin. Strip that out and the margin was roughly 2.86% — only a few basis points above a year ago.

Noninterest income (fees) rose 7.7% to $1.7 million, mainly from a $196,000 increase in service charges on deposit accounts; swap fees from commercial borrowers who lock in fixed rates were $214,000. Fees are still only about 10% of revenue, so they do not move the overall picture much.

On the balance sheet, gross loans grew $38.1 million (2.1%) in the quarter to $1.82 billion, almost entirely commercial real estate (+$52.9 million), while single-family mortgages shrank by $10.9 million — a deliberate shift, per management, away from low-rate residential loans that are expensive to fund. Within commercial real estate, industrial/warehouse balances rose from $65.6 million to $85.3 million and multifamily from $227.6 million to $244.1 million. Noninterest-bearing deposits (checking balances the bank pays nothing for) grew $33.0 million, or 14%, in the quarter to $273.6 million, but are still below the $296.3 million of a year ago.

What the headline numbers hide

• Most of the earnings growth came from below the revenue line. Pre-provision, pre-tax net revenue — earnings before loan-loss charges and tax, a non-GAAP measure the company reports — rose only 4.9% to $8.2 million. Net income rose 17.4% because the provision for credit losses fell to $944,000 from $1.4 million and the effective tax rate dropped to 18.6% from 21.3% (income tax expense was flat at $1.35 million on higher pre-tax income). Neither of those is a durable source of growth.
• Costs grew faster than revenue. Noninterest expense rose 7.5% to $8.3 million, driven by a $371,000 increase in salaries and benefits (mostly incentive pay) and a $90,000 loss from closing the Ohio City branch. That is why the efficiency ratio edged up to 50.40% from 49.77% despite the margin improvement.
• Credit is the open question. Nonaccrual loans (loans no longer accruing interest because repayment is in doubt) were $20.8 million, up from $15.3 million at December 31, 2025 — the increase includes a $5.0 million commercial loan the company describes as "non-core (non-customer)"; $5.1 million of the nonaccrual total is guaranteed by the SBA. Loans 30+ days past due rose to $20.4 million from $12.9 million at year-end. The 10-Q discloses that criticized and classified loans rose $35.4 million, or 123%, in the first half, mostly from three downgraded relationships, with special-mention loans up from $18.5 million to $48.4 million. The allowance for credit losses covers 93% of nonperforming loans, down from 115% a year ago. Actual losses so far are negligible — the quarter had a $106,000 net recovery — but the pipeline of watched loans has grown sharply.
• Prior-year comparison is clean for Q2, not for the full year. Q3 2025 included $7.1 million of net charge-offs (1.62% of average loans annualized) and a $5.1 million provision, which cut that quarter's net income to $2.3 million. That will flatter the Q3 2026 year-over-year comparison.
• Cash conversion is fine. Operating cash flow for the first half was $9.8 million against $10.9 million of net income.
• Funding mix. Brokered deposits fell $66.5 million since year-end to $334.1 million, which is a positive for funding quality, but about 32.0% of deposits now exceed the FDIC insurance limit, up from 29.5% at year-end.

Takeaway: CFBank's 17% earnings growth overstates how much the core business improved — underlying pre-provision earnings grew about 5%, and 7 of the margin's 24-basis-point quarterly gain was a one-off fee. The number to watch is the 123% rise in criticized and classified loans: so far it has produced almost no losses, but reserves now cover less than all of the nonperforming loans.

Outlook

Management gave no numerical guidance. CEO Timothy O'Dell said he expects a larger balance sheet, supported by "strong Commercial Loan Pipelines," to add to core earnings in the second half of 2026, and that residential mortgage sale volumes should add fee income. He was also explicit that "NIM is expected to remain a challenge" as loan pricing gets more competitive, and said the bank has begun requiring borrowers to keep deposits with it in return for loans. Commercial loan fundings were $135 million in the quarter, for net commercial loan growth of $52 million.

Our read: with interest-bearing deposits still costing 3.71% and loan yields drifting down, further margin gains will depend on growing free checking balances (noninterest-bearing deposits were about 20% of commercial loans at June 30, per management) rather than on rate moves. The next two quarters' asset-quality numbers matter more than the margin: if the downgraded relationships turn into charge-offs, the provision will have to rise from this quarter's $944,000 and the lower-provision tailwind behind this quarter's EPS growth reverses. Capital is not a constraint — CFBank's CET1 ratio is 13.55% and its Tier 1 leverage ratio 11.64% — and the board extended its share buyback authorization (270,356 shares remaining at June 30) to March 15, 2027.

Source: CF Bankshares Form 10-Q for the quarter ended June 30, 2026, and the company's Q2 2026 earnings release (8-K Exhibit 99.1, July 28, 2026).