Exhibit 99
PRESS RELEASE
FOR IMMEDIATE RELEASE
DATE: October 21, 2005
COMPANY: Central Federal Corporation
2923 Smith Road
Fairlawn, Ohio 44333
CONTACT: Mark S. Allio
Vice Chairman, President and CEO
PHONE: 330.576.1334 FAX: 330.666.7959
CENTRAL FEDERAL CORPORATION ANNOUNCES 3RD QUARTER AND YEAR TO DATE
PERFORMANCE
Fairlawn, Ohio -- October 21, 2005 -- Central Federal Corporation (Nasdaq: GCFC)
announced a net loss for the third quarter of 2005 of ($2.1 million) or ($.94)
per diluted share compared to a net loss for the third quarter of 2004 of
($665,000) or ($.33) per diluted share. The net loss for the nine months ended
September 30, 2005 totaled ($2.6 million) or ($1.19) per diluted share compared
to a net loss of ($1.2 million) or ($.61) per diluted share for the prior year
period ended September 30, 2004.
Core performance for the third quarter of 2005, excluding a $1.9 million
after-tax impairment charge discussed below, totaled ($175,000) or ($.08) per
diluted share compared to ($665,000) or ($.33) per diluted share for the third
quarter of 2004, representing a 74% improvement in core performance. The core
loss for the nine months ended September 30, 2005 totaled ($734,000) or ($.33)
per diluted share compared to ($1.2 million) or ($.61) per diluted share for the
prior year period, representing a 40% improvement in core performance. See the
Non-GAAP Financial Measures paragraph and Reconciliation of GAAP Net Loss to
Core Loss below for a more detailed explanation of core performance.
The loss for the quarter and year-to-date periods in 2005 included a previously
announced non-cash after-tax impairment loss of $1.9 million or $.86 per diluted
share to write-off the value of goodwill and other intangible assets related to
the October 2004 acquisition of Reserve Mortgage Services, Inc. in accordance
with Statement of Financial Accounting Standards No. 142, "Goodwill and Other
Intangible Assets". Recognition of the impairment loss had no effect on the
regulatory capital ratios of CFBank or tangible book value of the Company.
The Company continued to execute its growth plan. Commercial, commercial real
estate and multi-family loans increased $12.2 million or 23.0% during the first
nine months of 2005 and totaled $64.9 million at September 30, 2005. Home equity
lines of credit increased $8.0 million or 134.7% during the first nine months of
2005 and totaled $13.9 million at September 30, 2005. Deposits increased $19.1
million or 18.8% during the first nine months of 2005 and totaled $120.7 million
at September 30, 2005.
This growth positively impacted the Company's net interest income which
increased 16.5% and 27.4% and totaled $1.2 million and $3.6 million for the
three and nine months ended September 30, 2005 compared to $1.1 million and $2.9
million for the prior year periods.
Total assets at December 31, 2004 included $30.0 million in overnight
investments at a positive spread to the Federal Home Loan Bank advances used to
fund the investment. As short term interest rates increased and the spread
between the investment and borrowing declined, the cash was withdrawn to repay
the advances during the first quarter of 2005. The $13.1 million decline in
total assets to $157.9 million at September 30, 2005 from $171.0 million at
December 31, 2004 was the result of the $30.0 million reduction in cash and
borrowings associated with the arbitrage transaction and the $2.0 million
pre-tax impairment charge discussed above, offset by $12.1 million growth in
commercial loans and $8.0 million growth in home equity lines of credit. Loan
growth was funded by $19.1 million in deposit growth.
In a transaction with Freddie Mac in the second quarter of 2005, the Company
securitized single-family residential mortgage loans held in its portfolio with
an outstanding principal balance of $18.6 million. The securitization increased
liquidity as the securities retained are readily marketable, eliminated credit
risk on the loans and reduced the bank's risk-based capital requirement.
Loans totaled $107.0 million at September 30, 2005 compared to $108.1 million at
December 31, 2004. Not considering the securitization transaction which reduced
net mortgage balances by $18.5 million, overall loan balances increased 16.1%
largely driven by growth in commercial, commercial real estate and multi-family
loans which is an integral focus of the Company's strategic growth plan.
The 18.8% growth in deposits during the first nine months of 2005 was due to
growth of $17.7 million in certificate of deposit accounts and $4.5 million in
demand deposit accounts offset by a $3.1 million decline in traditional savings
account balances.
The loss for the quarter and year-to-date periods ended September 30, 2005 was
due to $2.0 million and $2.1 million net operating losses of Reserve Mortgage
Services (Reserve), the Company's mortgage services division, which included the
$1.9 million after-tax impairment charge discussed above. Losses were also
caused by the expense associated with increasing the reserve for loan losses and
operating costs necessary to support growth.
The Company continued to provide for appropriate reserves for loan losses in
response to growth in commercial, commercial real estate and multi-family loan
portfolios. The provision for loan losses totaled $50,000 and $402,000 for the
three months and nine months ended September 30, 2005 compared to $296,000 and
$366,000 for the prior year periods. There were no nonperforming commercial
loans at September 30, 2005. The ratio of the allowance for loan losses to total
loans increased to 1.13% at September 30, 2005 compared to .90% at December 31,
2004 and .77% at September 30, 2004.
Noninterest income increased $105,000 and $391,000 and totaled $161,000 and
$673,000 for the three and nine months ended September 30, 2005 compared to
$56,000 and $282,000 for the prior year periods. Mortgage loan originations and
sales increased and gains on sales totaled $54,000 and $361,000 during the
current year periods compared to $19,000 and $63,000 during the prior year
periods.
Noninterest expense declined $156,000 and totaled $1.7 million for the current
year quarter compared to $1.8 million during the prior year quarter. Noninterest
expense during the prior year quarter included approximately $320,000 related to
employee severance expenses, post-retirement life insurance benefits associated
with bank owned life insurance and expenses recognized in connection with the
servicing of loans and internal operating account write-offs. Noninterest
expense increased $446,000 and totaled $5.1 million for the nine months ended
September 30, 2005 compared to $4.7 million for the prior year period. Operating
costs related to Reserve, which was acquired in October 2004, totaled $185,000
and $681,000 for current year quarter and year-to-date periods.
ABOUT CENTRAL FEDERAL CORPORATION AND CFBANK
Central Federal Corporation (Nasdaq: GCFC), the holding company for CFBank, was
organized as a Delaware corporation in September 1998 in connection with the
bank's conversion from a mutual to stock organization, which was completed on
December 30, 1998. CFBank is a community-oriented financial services company
founded in 1892. Its home office is in Fairlawn, Ohio. It operates two
additional offices in Columbiana County, Ohio, and one in Columbus, Ohio, as
well as a mortgage services office in Akron, Ohio.
Non-GAAP Financial Measures
In addition to results presented in accordance with Generally Accepted
Accounting Principles (GAAP), this press release contains certain non-GAAP
financial measures. Specifically, we have provided financial measures which are
based on core performance rather than net income (loss). Ratios and other
financial measures with the word "core" in their title were computed using core
earnings (loss) rather than net income (loss). Core performance excludes
expense, gains and losses that are unusual, not reflective of ongoing operations
or not expected to reoccur. We believe that this information is useful to both
investors and to management and can aid them in understanding the Company's
current performance, trends and financial condition. Core performance should not
be considered a substitute for GAAP basis measures and results. Our non-GAAP
measures may not be comparable to the non-GAAP measures of other companies. A
reconciliation of GAAP results to the non-GAAP measures of core performance is
shown with the selected financial ratios and other data.
This release contains certain forward-looking statements within the meaning of
Section 21E of the Securities Exchange Act of 1934, as amended. We intend these
forward-looking statements to be subject to the safe harbor created by that
provision. These forward-looking statements involve risks and uncertainties and
include, but are not limited to, statements regarding future events and our
plans, goals and objectives. Our actual results may differ materially from these
statements. Although we believe the assumptions underlying the forward-looking
statements are reasonable, any of the assumptions could prove to be inaccurate.
Therefore, we can give no assurances that the results contemplated in these
forward-looking statements will be realized. The inclusion of this
forward-looking information should not be regarded as a representation by our
Company or by any person that the future events, plans or expectations
contemplated by our Company will be achieved. Furthermore, past performance in
operations and share price is not necessarily predictive of future performance.
<Table>
<Caption>
Selected Financial Condition Data September 30, December 31,
($ in thousands) 2005 2004 % change
------------- ------------ --------
(unaudited)
Total assets $ 157,853 $ 171,005 -8%
Cash and cash equivalents 2,335 32,675 -93%
Securities available for sale* 33,321 13,508 147%
Loans, net* 106,999 108,149 -1%
Allowance for loan losses 1,225 978 25%
Nonperforming loans 606 286 112%
Foreclosed assets, net 33 132 -75%
Goodwill -- 1,749 -100%
Other intangible assets -- 299 -100%
Deposits 120,745 101,624 19%
Federal Home Loan Bank advances 13,945 41,170 -66%
Subordinated debentures 5,155 5,155 0%
Total shareholders' equity 17,182 19,507 -12%
</Table>
*note: single-family residential mortgage loans with an outstanding principal
balance of $18.6 million were securitized with Freddie Mac in June 2005 and
transferred from loans to securities available for sale.
<Table>
<Caption>
Summary of Operations Three months ended Nine months ended
($ in thousands, except per share data) September 30, September 30,
-------------------- --------------------
(unaudited) 2005 2004 % change 2005 2004 % change
------- ------- -------- ------- ------- --------
Total interest income $ 2,187 $ 1,617 35% $ 6,223 $ 4,260 46%
Total interest expense 960 564 70% 2,585 1,405 84%
------- ------- ------- -------
Net interest income 1,227 1,053 17% 3,638 2,855 27%
Provision for loan losses 50 296 -83% 402 366 10%
------- ------- ------- -------
Net interest income after provision for loan losses 1,177 757 55% 3,236 2,489 30%
Noninterest income
Net loss on sales of securities -- (36) n/m -- (55) n/m
Net gains on sales of loans 54 19 184% 361 63 473%
Other 107 73 47% 312 274 14%
------- ------- ------- -------
Noninterest income 161 56 188% 673 282 139%
Impairment loss on goodwill and intangibles 1,966 -- n/m 1,966 -- n/m
Noninterest expense 1,677 1,833 -9% 5,117 4,671 10%
------- ------- ------- -------
Loss before income taxes (2,305) (1,020) 126% (3,174) (1,900) 67%
Income tax benefit (237) (355) -33% (547) (683) -20%
------- ------- ------- -------
Net loss $(2,068) $ (665) 211% $(2,627) $(1,217) 116%
======= ======= ======= =======
Basic loss per share $ (0.94) $ (0.33) 184% $ (1.19) $ (0.61) 96%
Diluted loss per share (0.94) (0.33) 184% (1.19) (0.61) 96%
Core loss $ (175) $ (665) -74% $ (734) $(1,217) -40%
======= ======= ======= =======
Basic core loss per share $ (0.08) $ (0.33) -76% $ (0.33) $ (0.61) -45%
Diluted core loss per share (0.08) (0.33) -76% (0.33) (0.61) -45%
</Table>
<Table>
<Caption>
Selected Financial Ratios and Other Data At or for the three months ended At or for the nine months ended
(unaudited) September 30, September 30,
-------------------------------- ---------------------------------
2005 2004 2005 2004
--------------- ------------ --------------- -------------
GAAP Performance Ratios:
Return on average assets (5.24%) (1.89%) (2.19%) (1.30%)
Return on average equity (44.50%) (14.23%) (18.22%) (8.48%)
Average yield on interest-earnings assets 6.15% 5.03% 5.78% 5.04%
Average rate paid on interest-bearing liabilities 2.90% 1.91% 2.60% 1.84%
Average interest rate spread 3.25% 3.12% 3.18% 3.20%
Net interest margin, fully taxable equivalent 3.45% 3.27% 3.38% 3.38%
Interest-earning assets to interest-bearing liabilities 107.85% 109.19% 108.41% 110.88%
Efficiency ratio 262.46% 160.09% 164.30% 146.33%
Noninterest expense to average assets 9.23% 5.20% 5.91% 4.98%
Dividend payout ratio n/m n/m n/m n/m
Core Performance Ratios:
Core return on average assets (0.44%) (1.89%) (0.61%) (1.30%)
Core return on average equity (3.64%) (14.23%) (5.04%) (8.48%)
Core efficiency ratio 120.82% 160.09% 118.70% 146.33%
Core noninterest expense to average assets 4.23% 5.20% 4.26% 4.98%
Capital Ratios:
Equity to total assets at end of period 10.88% 12.39% 10.88% 12.39%
Average equity to average assets 11.77% 13.25% 12.02% 15.30%
Asset Quality Ratios:
Nonperforming loans to total loans 0.56% 0.17% 0.56% 0.17%
Nonperforming assets to total assets 0.40% 0.56% 0.40% 0.56%
Allowance for loan losses to total loans 1.13% 0.77% 1.13% 0.77%
Allowance for loan losses to nonperforming loans 202.23% 451.55% 202.23% 451.55%
Net charge-offs to average loans 0.25% 0.06% 0.18% 0.06%
Per Share Data:
Dividends declared $ 0.09 $ 0.09 $ 0.27 $ 0.27
Tangible book value per share at end of period 7.66 8.92 7.66 8.92
Reconciliation of GAAP Net Loss to Core Loss:
GAAP Net loss $ (2,068) $ (665) $ (2,627) $ (1,217)
Impairment loss on goodwill and intangibles, net of tax 1,893 -- 1,893 --
Core loss (175) (665) (734) (1,217)
</Table>
- ----------
n/m - not meaningful