What changed in CF BANKSHARES INC.'s 10-K — 2024 vs 2025

Item 1C. “Cybersecurity” in Part I of this Form 10-K . These SEC rules, and any other regulatory guidance, are in addition to notification and disclosure requirements under state and federal banking law and regulations. State regulators have also been increasingly active in implementing privacy and cybersecurity standards and regulations.

Recently, several states have adopted regulations requiring certain financial institutions to implement cybersecurity programs and providing detailed requirements with respect to these programs, including data encryption requirements. Many states have also recently implemented or modified their data breach notification and data privacy requirements.

The Company expects this trend of state-level activity in those areas to continue, and is continually monitoring developments in the states in which our customers are located. In the ordinary course of business, the Company relies on electronic communications and information systems to conduct its operations and to store sensitive data.

The Company employs significant resources, processes and technology to manage and maintain 22 Table of Contents cybersecurity controls. The Company employs a variety of preventative and detective tools to monitor, block, and provide alerts regarding suspicious activity, as well as to report on any suspected advanced persistent threats.

Notwithstanding the strength of the Company’s defensive measures, the threat from cyber attacks is severe, attacks are sophisticated and increasing in volume, and attackers respond rapidly to changes in defensive measures.

Effect of Environmental Regulation Compliance with federal, state and local provisions regulating the discharge of materials into the environment, or otherwise relating to the protection of the environment, has not had a material effect upon the capital expenditures, earnings or competitive position of the Company.

In the opinion of management, the Company does not have exposure to material costs associated with compliance with environmental laws and regulations or material expenditures related to environmental hazardous waste mitigation or cleanup. The Company believes its primary exposure to environmental risk is through the lending activities of CFBank.

In cases where management believes environmental risk potentially exists, CFBank mitigates its environmental risk exposure by requiring environmental site assessments at the time of loan origination to confirm collateral quality as to commercial real estate parcels posing higher than normal potential for environmental impact, as determined by reference to present and past uses of the subject property and adjacent sites.

In addition, environmental assessments are typically required prior to any foreclosure activity involving non-residential real estate collateral. Federal and State Taxation Federal Taxation General. We report income on a calendar year, consolidated basis using the accrual method of accounting, and we are subject to federal income taxation in the same manner as other corporations, with some exceptions discussed below.

The following discussion of tax matters is intended only as a summary and does not purport to be a comprehensive description of the tax rules applicable to the Company and CFBank. Our deferred tax assets are composed of U.S. net operating losses (“NOLs”), and other temporary book to tax differences.

When determining the amount of deferred tax assets that are more-likely-than-not to be realized, and therefore recorded as a benefit, the Company conducts a regular assessment of all available information. This information includes, but is not limited to, taxable income in prior periods, projected future income and projected future reversals of deferred tax items.

Based on these criteria, the Company determined as of December 31, 2024 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 2023, the Company had net operating loss carryforwards of $21.9 million, which expire at various dates from 2024 to 2032.

As a result of the ownership change, the Company's ability to utilize carryforwards that arose before the 2012 stock offering closed is limited to $163,000 per year. Due to this limitation, management determined it is more likely than not that $20.5 million of net operating loss carryforwards will expire unutilized.

As required by accounting standards, the Company reduced the carrying value of deferred tax assets, and the corresponding valuation allowance, by the $7.0 million tax effect of this lost realizability. Federal income tax laws provided additional deductions, totaling $2.3 million, for thrift bad debt reserves established before 1988.

Accounting standards do not require a deferred tax liability to be recorded on this amount, which otherwise would have totaled $473,000 at year-end 2024. However, if CFBank were wholly or partially liquidated or otherwise ceases to be a bank, or if tax laws were to change, this amount would have to be recaptured and a tax liability recorded.

Additionally, any distributions in excess of CFBank’s current or accumulated earnings and profits would reduce amounts allocated to its bad debt reserve and create a tax liability for CFBank. See Note 13 in the accompanying Notes to Consolidated Financial Statements for additional information. Distributions.

Under the Small Business Job Protection Act of 1996, if CFBank makes “non-dividend distributions” to the Company, such distributions will be considered to have been made from CFBank’s unrecaptured tax bad debt reserves (including the balance of its reserves as of December 31, 1987) to the extent thereof, and then from CFBank’s supplemental reserve for losses on loans, to the extent thereof, and an amount based on the amount distributed (but not in excess of the amount of such reserves) will be included in CFBank’s taxable income.

Non-dividend distributions include distributions in excess of CFBank’s current and accumulated earnings and profits, as calculated for federal income tax purposes, distributions in redemption of stock, and distributions in partial or complete liquidation.

Dividends paid out of CFBank’s current or accumulated earnings and profits will not be so included in CFBank’s taxable income. 23 Table of Contents Ohio Taxation The consolidated organization is subject to the Ohio Financial Institutions Tax (“Ohio FIT”). The Ohio FIT is a business privilege tax for financial institutions doing business or domiciled in the State of Ohio.

The three-tier structure charges financial institutions based on total capital at the prior calendar year-end based on regulatory reporting requirements. Indiana Taxation The consolidated organization is subject to the Indiana Financial Institution Tax (“Indiana FIT”).

The Indiana FIT is a franchise tax measured by a taxpayer's apportioned income imposed on corporations for the privilege of exercising their franchise or transacting the business of a financial institution in Indiana.

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

Available Information Our website address is www.CF.Bank (this uniform resource locator, or URL, is an inactive textual reference only and is not intended to incorporate our website into this Form 10-K) .

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 SEC.

These reports can be found on our website under the caption “Investor – SEC Filings.” Investors also can obtain copies of our filings from the SEC website at www.sec.gov. Ite m 1A. Risk Factors. The following are certain risk factors that could impact our business, financial condition and/or results of operations.

Investing in our common stock involves risks, including those described below. These risk factors should be considered by prospective and current investors in our common stock when evaluating the disclosures contained in this Form 10-K and in other reports that we file with the SEC.

These risk factors could cause actual results and conditions to differ materially from those projected in forward-looking statements.

If any of the events described in the following risk factors actually occur, or if additional risks and uncertainties not presently known to us or that we believe are immaterial do materialize, then our business, financial condition and/or results of operations could be materially adversely impacted.

In addition, the trading price of our common stock could decline due to any of the events described in these risk factors.

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

Our success depends to a significant extent upon local and national economic and political conditions, as well as governmental fiscal and monetary policies.

Conditions such as inflation, recession, unemployment, changes in interest rates, fiscal and monetary policy, an increasing federal government budget deficit, the failure of the federal government to raise the federal debt ceiling and/or possible future U.S. government shutdowns over budget disagreements, slowing gross domestic product, tariffs, a U.S. withdrawal from or significant renegotiation of trade agreements, trade wars, and other factors beyond our control may adversely affect CFBank’s deposit levels and composition, the quality of investment securities available for purchase, demand for loans, the ability of CFBank’s borrowers to repay their loans, and the value of the collateral securing loans made by CFBank.

The ongoing political turmoil and military conflict in Ukraine and the Middle East are likely to result in substantial changes in economic and political conditions for the U.S. and the remainder of the world.

Disruptions in U.S. and global financial markets, and changes in oil production and supply in the Middle East and Russia, also affect the economy and stock prices in the U.S., which can affect our earnings and/or capital, as well as the ability of our customers to repay loans.

Because we have a significant amount of real estate loans, decreases in real estate values could adversely affect the value of property used as collateral and our ability to sell the collateral upon foreclosure.

Adverse changes in the economy 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 counties: Franklin County through our office in Columbus, Ohio; Delaware County through our Polaris office in Columbus, Ohio; Cuyahoga County through our office in Orange Village, Ohio and our Ohio City office in Cleveland, Ohio; Hamilton County through our offices in Blue Ash, Ohio and our Red Bank office in Cincinnati, Ohio; Summit County through our office in Fairlawn, Ohio; and Marion County, Indiana through our office in Indianapolis .

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 24 Table of Contents adversely impact our earnings and cash flows. Changing interest rates may decrease our earnings and asset values.

Management is unable to accurately predict future market interest rates, which are affected by many factors, including, but not limited to inflation, recession, changes in employment levels, changes in the money supply and domestic and international disorder and instability in domestic and foreign financial markets. Changes in the interest rate environment may reduce our profits.

Net interest income is a significant component of our net income, and consists of the difference, or spread, between interest income generated on interest-earning assets and interest expense incurred on interest-bearing liabilities. Net interest spreads are affected by the difference between the maturities and repricing characteristics of interest-earning assets and interest-bearing liabilities.

Although certain interest-earning assets and interest-bearing liabilities may have similar maturities or periods to which they reprice, they may react in different degrees to changes in market interest rates. In addition, residential mortgage loan origination and refinancing volumes are affected by market interest rates on loans.

Rising interest rates generally are associated with a lower volume of loan originations and refinancings, while falling interest rates are usually associated with higher loan originations and refinancings. Our ability to generate gains on sales of mortgage loans is significantly dependent on the level of originations. Cash flows are affected by changes in market interest rates.

Generally, in rising interest rate environments, loan prepayment rates are likely to decline, and in falling interest rate environments, loan prepayment rates are likely to increase.

A majority of our commercial, commercial real estate and multi-family residential real estate loans are adjustable rate loans and an increase in the general level of interest rates may adversely affect the ability of some borrowers to pay the interest on and principal of their obligations, especially borrowers with loans that have adjustable rates of interest.

Changes in interest rates, prepayment speeds and other factors may also cause the value of our loans held for sale to change.

Accordingly, changes in levels of market interest rates could materially and adversely affect our net interest spread, loan volume, asset quality, value of loans held for sale and cash flows, as well as the market value of our securities portfolio and overall profitability. Interest rates are highly sensitive to many factors that are beyond our control.

The Company’s management uses various measures to monitor interest rate risk and believes it has implemented effective asset and liability management strategies to reduce the potential adverse effects of changes in interest rates on the Company’s financial condition and results of operations. Management also periodically adjusts the mix of assets and liabilities to manage interest rate risk.

However, any significant, unexpected, prolonged change in market interest rates could have a material adverse effect on our financial condition and results of operations. Defaults by other financial institutions could adversely affect our business, earnings and financial condition.

Many financial institutions and their related operations are closely intertwined, and the soundness of such financial institutions may, to some degree, be interdependent.

Several high-profile bank failures in 2023, including Silicon Valley Bank, Signature Bank and Silvergate Capital, resulted in some degree of public panic and caused widespread questions about potential concerns in the financial institutions industry, which in turn impacted stock market prices of financial institutions in general.

These failed banks were engaged in activities, such as lending focused on tech startups and cryptocurrency, that are significantly different than the activities and risk profile of community banks such as the Company, and at this time it does not appear that these bank failures were connected to any systematic risks or problems in the financial institutions industry in general.

Nevertheless, concerns about, or a default or threatened default by, other financial institutions could lead to significant market-wide liquidity problems and/or losses or defaults by other financial institutions. Risks Related to Our Lending Activities Our allowance for credit losses may not be adequate to absorb the expected, lifetime losses in our loan portfolio.

We maintain an allowance for credit losses that is believed to be a reasonable estimate of the expected losses based on management's quarterly analysis of our loan portfolio.

The determination of the allowance for credit losses requires management to make various assumptions and judgments about the collectability of CFBank’s loans, including the creditworthiness of its borrowers and the value of the real estate and other assets serving as collateral for the repayment of loans.

Additional information regarding our allowance for credit losses methodology and the sensitivity of the estimates can be found in the discussion of "CECL Implementation" included in Management’s Discussion and Analysis of Financial Condition and Results of Operations in Item 7 of this Form 10-K.

Our estimation of future credit losses is susceptible to changes in economic, operating and other conditions, including changes in regulations and interest rates, which may be beyond our control, and the losses may exceed current estimates. We cannot be assured of the amount or timing of losses, nor whether the allowance for credit losses will be adequate in the future.

If our assumptions prove to be incorrect, our allowance for credit losses may not be sufficient to cover the expected losses from our loan portfolio, resulting in the need for additions to the allowance for credit losses which could have a material adverse impact on our financial condition and results of operations.

In addition, bank regulators periodically review our allowance for credit losses as part of their examination process and may require management to increase the allowance or recognize further loan charge-offs based on judgments different than those of management. 25 Table of Contents On June 16, 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standard Update (“ASU”) 2016-13 “Financial Instruments - Credit Losses”, which replaces the incurred loss model with an expected loss model, which is referred to as the current expected credit loss (“CECL”) model, which we adopted effective January 1, 2023.

Under the CECL model, we are required to use historical information, current conditions and reasonable and supportable forecasts to estimate the expected credit losses.

If the methodologies and assumptions that we use in the CECL model prove to be incorrect or inadequate, the allowance for credit losses may not be sufficient, resulting in the need for additional allowance for credit losses to be established, which could have a material adverse impact on our financial condition and results of operations.

Additionally, the time horizon over which we are required to estimate future credit losses expanded under CECL, which could result in increased volatility in future provisions for credit losses.

We may also experience a higher or more volatile provision for credit losses due to higher levels of nonperforming loans and net charge-offs if commercial and consumer customers are unable to make scheduled loan payments. The Company’s one-time cumulative effect adjustment to the allowance for credit losses upon adoption in the first quarter of 2023 was $49,000.

Our emphasis on commercial, commercial real estate and multi-family residential real estate lending may expose us to increased lending risks. Because payments on commercial loans are dependent on successful operation of the borrowers’ business enterprises, repayment of such loans may be subject to a greater extent to adverse conditions in the economy.

Because payments on loans secured by commercial real estate properties are dependent on successful operation or management of the properties, repayment of commercial real estate loans may be subject to a greater extent to adverse conditions in the real estate market or the economy.

Commercial real estate and multi-family residential mortgage loans also have larger loan balances to single borrowers or groups of related borrowers compared to single-family residential mortgage loans. Some of our borrowers also have more than one commercial real estate or multi-family residential mortgage loan outstanding with us. Additionally, some loans may be collateralized by junior liens.

Consequently, an adverse development involving one or more loans or credit relationships can expose us to significantly greater risk of loss compared to an adverse development involving a single-family residential mortgage loan. Our adjustable-rate loans may expose us to increased lending risks.

While adjustable-rate loans better offset the adverse effects of an increase in interest rates as compared to fixed-rate loans, the increased payments required of adjustable-rate loan borrowers upon an interest rate adjustment in a rising interest rate environment could cause an increase in delinquencies and defaults.

The marketability of the underlying property also may be adversely affected in a rising interest rate environment. In addition, although adjustable-rate loans help make our asset base more responsive to changes in interest rates, the extent of this interest sensitivity is limited by the annual and lifetime interest rate adjustment limits.

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

When we sell a mortgage loan, we may agree to repurchase or substitute a mortgage loan if we are later found to have breached any representation or warranty we made about the loan or if the borrower is later found to have committed fraud in connection with the origination of the loan.

While we have underwriting policies and procedures designed to avoid breaches of representations and warranties as well as borrower fraud, there can be no assurance that no breach or fraud will ever occur. Required repurchases, substitutions or indemnifications could have an adverse effect on our liquidity, results of operations and financial condition.