 Central Federal Corporation
Investment Overview |
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Disclaimer This Investor Presentation (“Presentation”) has been
produced by Central Federal Corporation (“CFC”) solely for use at this investor presentation held in connection with the
rights offering and public offering of Common Stock of CFC (together, the
“Offering”), and may not be reproduced or redistributed, in whole or in part, to any other person.
CFC has filed a registration statement (“Registration Statement”),
including a prospectus (“Prospectus”) with the Securities and Exchange Commission (“SEC”) for the
Offering of its Common Stock to which this Presentation relates. Before you
decide whether to invest, you should read the Prospectus in that registration statement for more
complete information about CFC and this Offering. You may obtain
these documents for free by visiting EDGAR on the SEC Website at www.sec.gov. Alternatively, CFC or
ParaCap Group, LLC, financial advisor and information agent, will arrange to send
to you the Prospectus if you request by calling (866) 719-5037.
Statements contained in, or incorporated by reference into this Presentation 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 common share, capital structure and
other financial items; (2) plans and objectives of CFC’s or CFBank’s
management or Boards of Directors; (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 factors could cause such differences: a continuation of current high
unemployment rates and difficult economic conditions or adverse changes in general economic
conditions and economic conditions in the markets we serve, any of which may
affect, among other things, our level of nonperforming assets, charge-offs, and provision for
loan loss expense; changes in interest rates that may reduce net interest margin
and impact funding sources; our ability to maintain sufficient liquidity to continue to fund
our operations; our ability to reduce our high level of nonperforming assets and
operating expenses; 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 CFC and CFBank by the
Regulators, including the possibility that the Regulators may, among other things, require CFBank to
increase its allowance for loan losses or write-down assets; our ability to
meet the requirements of the CFC and CFBank Cease and Desist Orders issued by Regulators; our
ability to generate profits in the future is unlikely without additional capital;
the uncertainties arising from CFC’s participation in the TARP Capital Purchase Program,
including the impact on employee recruitment and retention and other business and
practices, and uncertainties concerning the potential redemption by us of Treasury’s
preferred stock investment under the program, including the timing of, regulatory
approvals for, and conditions placed upon, any such redemption; changes in tax laws, rules
and regulations; various monetary and fiscal policies and regulations, including
those determined by the Fed, the FDIC and the OCC; competition with other local and regional
commercial banks, savings banks, credit unions and other non-bank financial
institutions; our ability to grow our core businesses; 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.
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. CFC 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 the Presentation speak only as of the date of the Presentation. 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. |
 Executive Summary |
 Why
Invest in a Community Bank Today? Which Community Banks Are and Will Be
Successful? Why CFBK?
Executive Summary
1
2
3
4 |
 Changes at CFBK in the Past Two Years
1
2
3
4
5
6
7
5
Promoted
new
CEO
and
President
in
May
2010
Engaged two different independent loan review firms and a consulting firm to
assess asset quality, workout strategies and performance
Began process of reducing nonperforming assets
Strengthened allowance for loan losses
Re-engineered credit and workout operations
Retained a financial advisor to explore strategic alternatives
Attracted Timothy O’Dell, Thad Perry and Bob Hoeweler to lead the
Company’s recapitalization |
 Improved Asset Quality
Non-Performing Assets
6
NPAs at 3/31/12 were down 43% from peak levels at 12/31/10
|
 Strengthened Reserves
Loan Loss Reserves / Gross Loans
7 |
 Asset
Quality Considerations •
Over the last five quarters, CFBK has reduced its non-performing
assets by more than 40%, or $6.3 million
•
Fresh capital should help accelerate the workout process
•
Because of the Company’s present situation, lending has largely
been curtailed and the existing loan portfolio is well seasoned
•
There is an opportunity to further improve asset quality ratios
simply by addressing pent up loan demand and reallocating excess
liquidity
8 |
 7,133,000
$
Preferred stock (net of the discount associated with the warrant
valuation) 217,000
Value of warrant (included in paid in capital on balance sheet)
609,000
Accrued dividends (included in other liabilities on balance sheet)
7,959,000
Total TARP obligation at 3/31/12
3,000,000
$
Amount to be paid to Treasury
4,959,000
$
Discount on TARP retirement (after-tax)
6.01
$
Pre-money per share equity equivalent
TARP Discount
Notes: Amounts are as of 3/31/12 and TARP discount is predicated on a
$22.5MM capital raise. Central Federal deferred but accrued another TARP
dividend payment of approximately $90,300 in May. The impact of the TARP
discount on Central Federal’s capital ratios is explained on the subsequent slide.
9 |
 Pro
Forma Capital Ratios 10
TARP
CFBK
Offering
Repurchase
CFBK
(dollars in thousands)
3/31/2012
Adjustments (1)
Adjustments
Pro Forma
Consolidated Financial Summary
1
Total Reserves
5,641
$
-
$
-
$
5,641
$
2
Total Goodwill and Intangibles
79
-
-
79
3
Trust Preferred
5,155
-
-
5,155
4
Stockholders' Equity:
5
Preferred Stock
7,133
-
(7,133)
-
6
Unrealized Gain
493
-
-
493
7
Common Stock
1,595
20,836
4,742
27,173
8
Total Stockholders' Equity
9,221
20,836
(2,391)
27,666
9
Total Capitalization
14,376
$
20,836
$
(2,391)
$
32,821
$
Consolidated Financial Data
10
Consolidated Tangible Common Equity to Assets
0.83%
10.64%
11
Common Book Value Per Share
2.53
$
1.75
$
12
Tangible Common Book Value Per Share (2)
2.43
$
1.74
$
13
Offering Price / Tangible Book Value Per Share (2)
61.65%
86.05%
CFBank Regulatory Capital Ratios
14
Tier 1 Capital to Tangible Assets
5.39%
10.44%
15
Tier 1 Capital to Risk Weighted Assets
9.27%
18.25%
16
Total Risk-Based Capital to Risk Weighted Assets
10.55%
19.49%
Ownership
17
Shares Outstanding
825.710
15,000.000
0.000
15,825.710
(1)
(2) Pre-money book value and price to tangible book do not include the
impact of the expected $6.01 per share TARP discount. Assumes gross proceeds of
$22.5 million and an offering price of $1.50 per share, net of assumed fees and other transaction expenses. |
 I. Why Invest in a Community
Bank Today?
11 |
 Why
Invest in a Community Bank Today? 12
Favorable year-over-year dynamics in the real estate market and
economy There are numerous attractive potential customers up for grabs,
particularly small and medium-sized businesses, executives and
professionals Strong
business
model
if
derivatives
and
other
complex
financial
instruments
are avoided
Major deterioration in public perception of big banks
1
2
3
4 |
 Public Backlash Against Big Banks
Management believes:
•
The financial crisis has caused a severe backlash against
the country’s Too Big To Fail banks.
•
There has been a significant deterioration of the public’s,
investors’
and regulators’
perception of these institutions.
•
Both business and retail customers have experienced
deteriorating service levels, long decision periods and
high uncertainty in dealing with the larger banks.
•
As a result, many Americans have called for a return to
smaller community banks through protests and organized
events such as the National Bank Transfer Day.
Stock Performance –
Last Twelve Months (%)
Too Big To Fail List as defined by the G-20 Financial Stability Board;
Includes: Bank of America, Citi, Goldman Sachs, Wells Fargo,
State Street, Bank of New York Mellon, JP Morgan, and Morgan Stanley
13
Source: SNL
S&P Bank Index
Too Big To Fail List |
 Favorable Economic Trends
•
Ohio has posted the fourth largest increase in jobs of all 50 states, on
a year-over-year basis from May 2011, according to the Bureau of
Labor Statistics •
Since May 2011, Ohio has added 75,700 jobs, trailing only Texas, New York
and California.
•
All of CFBank’s markets have witnessed a notable decline in the
unemployment rate over the last year:
In the East Liverpool-Salem MSA, the improving manufacturing base and
increased investment in the
Utica
Shale
region
have
caused
the
unemployment
rate
to
decrease
from
10.0%
to
8.3%
year-
over-year, nearly two times greater than the
year-over-year rate of decline of the
national unemployment rate.
The Akron MSA’s diverse economic base has also led to relatively strong job
growth. Akron’s unemployment
rate
declined
from
8.4%
to
7.0%
year-over-year,
a
stronger
decline
than
occurred statewide and nationally.
The Columbus MSA’s unemployment rate has been consistently lower than the
state and national averages throughout the recession. In April, the
Columbus MSA’s unemployment rate was
6.4%,
significantly
better
than
state
and
national
figures.
14 |
 Las
Vegas -61.1%
Phoenix
-51.3%
Miami
-48.4%
Detroit
-46.4%
Tampa
-45.7%
Los Angeles
-39.8%
San Francisco
-39.6%
San Diego
-39.2%
Chicago
-36.9%
Atlanta
-36.9%
Minneapolis
-33.1%
Seattle
-29.1%
Portland
-28.0%
Washington DC
-27.0%
New York
-26.0%
Cleveland
-20.1%
Boston
-16.8%
Charlotte
-16.2%
Denver
-8.6%
Dallas
-6.2%
Housing Market Stabilizing
Case-Shiller Home Price Index:
Cleveland versus National Average
Case-Shiller Percent
Decline From Market Peak
15
Ohio did not have as much of a housing bubble as some other parts of the
country. Management believes that the real estate market is stabilizing in
the Bank’s market area. |
 Opportunity to Attract Customers & Talent
Akron MSA
Columbus MSA
East Liverpool MSA
Source: 2011 FDIC Deposit Market Share Data
1.
2.
3.
4.
5.
1.
2.
3.
4.
5.
1.
2.
3.
4.
5.
16
Top 5 Deposit Market Share Leaders in CFBK’s Markets
|
 Industry Valuations Remain at
Historic Lows
17
Price /Book and Price/LTM Earnings Multiples for SNL Bank Index
Historic P/BV Multiples
Historic P/E Multiples |
 II.
Which Community Banks Are and Will Be Successful?
|
 Which
Community Banks Are and Will Be Successful?
19
1
2
3
4
5
Strong, experienced leadership, focused on stakeholder values and balanced
risk/returns
Directors and management willing to put their own money and relationships on
the line
Large
enough
to
be
relevant,
small
enough
to
provide
exceptional
service
and
maintain strong long term relationships and competitive advantage
Attractive markets offering reasonable growth potential
Ample capital to take advantage of market opportunities
|
 Strong, Experienced Leadership
Timothy T. O’Dell –
Proposed Chief Executive Officer
Currently the owner of the Chetwood Group, which provides advisory services to a
number of privately held enterprises in construction, health care, real
estate and professional services Prior to founding Chetwood in 2003, Mr.
O’Dell 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
For 10 of his years with Fifth Third –
Central Ohio, Mr. O’Dell also served as a senior lender and managed its
commercial banking and residential and commercial real estate
divisions 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
B.B.A. –
Marshall University
20 |
 Strong, Experienced Leadership
Robert
E.
Hoeweler,
Jr.
–
Proposed
Chairman
Chief Executive Officer of a diverse group of companies owned by
the Hoeweler family, including manufacturing,
communication, distribution, business services and venture capital entities
Served as Vice Chairman of Winton Financial, Inc., a $550 million
Cincinnati-based S&L, from its initial public offering in 1988
through its ultimate sale in 2005 to WesBanco, Inc. for 209% of tangible book value
Has served on the boards of directors of one of the country’s largest
privately owned waste and recycling companies since 1986 and a privately
owned commercial bakery since 1988 Director of Skipjack Financial Services,
a provider of payment processing services that the Hoeweler family led from its
inception through its sale to a super-regional banking company, from 1996
through 2009 B.S. –
University of Cincinnati
Thad
R.
Perry
–
Proposed
President
Senior Partner with Accenture for over 30 years where he was involved in
consulting, transaction structuring, and management of operations.
He operated the firm’s Columbus, Ohio practice and developed its regulated industries
practice. From 1988 through 1998, Mr. Perry managed Accenture’s German,
Austrian and Swiss practices, which accounted for nearly $1 billion in
gross revenues Former Chief Operating Officer of Western Europe operations,
and served on Accenture’s European Management Board
and the Global Strategic Planning, Management, Markets, Executive, Outsourcing,
and Technology Committees His experiences in banking include the
transformation of both the technical and business processes for credit card,
internet banking and security, stock and trading exchanges, international banking
and customer relationship management
M.B.A. –
The Ohio State University
B.S. –
The Ohio State University
21 |
 Strong, Experienced Leadership
James
Howard
Frauenberg,
II
–
Proposed
Director
Principal owner of Addison Holding, LLC which manages investments of private
individuals Active in opening new franchises for two retail chains, Five
Guys Burgers and Fries and Flip Flops Senior officer with Check Smart
Financial in Dublin, Ohio from 1995 to 2008 Donal
Malenick
–
Proposed
Director
Chief Executive Officer of Columbus Steel Castings from 2003 through 2008
President of Worthington Steel from 1976 to 1999
Former board member of Max and Ermas Restaurants of Columbus, Ohio from 2006
until it was sold in 2008 Member of KeyBank’s advisory board from 2001
to 2005 Private investor since 2008
22 |
 Strong, Experienced Leadership
Eloise L. Mackus –
Current Chief Executive Officer
Named CEO in February 2011, after becoming Interim CEO in May 2010; will continue
as General Counsel Joined CFBank in July 2003 as Senior Vice
President, General Counsel and Corporate Secretary, and became Executive
Vice President of both institutions in January 2009
20 years of banking related experience
Previously served as Vice President and General Manager of International
Operations and Assistant General Counsel for J.M. Smucker Company, and
Partner at Brouse McDowell Executive Studies –
Harvard and Thunderbird Universities
J.D. –
University of Akron School of Law
B.A. –
Calvin College
Therese Ann Liutkus –
Current President, Treasurer and Chief Financial Officer
Named President in June 2010; will continue as CFO
Joined CFBank as Chief Financial Officer in November 2003
25 years of banking experience
Previously served as CFO and Treasurer of First Place Financial Corp. and FFY
Financial Corp. B.B.A. –
Cleveland State University
23 |
 Strong, Experienced Leadership
Timothy
R.
Fitzwater
–
Senior
Commercial
Officer
Joined CFBank in June 2010
39 years of banking experience
Previously worked for National City Bank (now PNC) for 36 years,
rising to President of the Northeast Region
Managed approximately $3 billion in assets and $1 billion commercial loan
portfolio B.S. –
Bowling Green State University
Keith
D.
Anderson
–
Senior
Credit
Officer
Joined CFBank in June 2005
33 years of banking experience
Previously served as Senior Credit Officer for over six years with Champaign
National Bank in Bath, Ohio, and Senior Credit Officer of Summit Bank,
headquartered in Fairlawn, Ohio for six years
B.S. –
University of Akron
Kemper
C.
Allison
–
Vice
President
of
Commercial
Loan
Workout
Joined CFBank in February 2010
22 years of banking experience
Previously served as Senior Vice President and Chief Lending Officer of Advantage
Bank in Worthington, Ohio for nearly eight years, and held positions at
Bank One, Akron, N.A. and State Savings Bank B.S.B.A. –
The Ohio State University
24 |
 Existing
Intended
Ownership
Purchase
Current Directors and Executive Officers
$60,940
$258,500
Proposed New Directors and Executive Officers
-
2,300,000
Proposed Other Standby Purchasers
-
2,200,000
Current Directors, Executive Officers and Standby Purchasers as a Group
$60,940
$4,758,500
Directors/Management Personally Invested
25 |
 Competitive Size & Community Orientation
•
CFBK operates four branches in three attractive
markets
•
CFBK
is
focused
on
consumers
and
small
businesses in the communities it serves and does
not deal in derivatives, capital markets operations
or loan syndications
•
The Company is committed to offering a level of
customer service that bigger banks cannot deliver
while providing the services and technology that
today’s customers desire
26 |
 Unemployment Rate By
County
–
May
2012
CFBank Locations (4)
27
Market Opportunity |
 Market Opportunity
Source: SNL
28
Household
Income
($000s)
Did not
Completed High
School
High School
Diploma
Some College
Associate
Degree
Bachelors
Degree
Graduate
Degree
< 25
25 < 49
50 < 99
100 < 199
> 200
Household
Income
($000s) |
 Market Opportunity
29 |
 Market Opportunity –
Shale Activity
30
•
CFBank’s Columbiana County branches are located in and
serve communities that are deeply impacted by the
development of the Utica Shale formation in Eastern Ohio
•
By 2015, Ohio’s natural gas and crude oil industries are
expected
to
generate
more
than
$34
billion
in
exploration
and development, midstream, royalty and lease expenditures
•
It
is
estimated
that
approximately
2,800
new
wells
will
be
drilled
and
completed
by
2015,
leading
to
the
creation
of
more
than
200,000
new
jobs
and
$12
billion
in
annual
salaries and personal income to Ohioans
•
Of
the
33
drilling
permits
issued
in
the
Mahoning
Valley
in
2012,
28
were
issued
in Columbiana County
•
Studies suggest that employment in the natural gas production industry will
increase
by
approximately
260%
by
2035,
placing
Ohio
fifth
in
the
nation
for
employment in this field
Kleinhenz
&
Associates
–
Economic
Impact
Study,
September
2011
IHS Global Insight, June 2012
The Ohio Department of Natural Resources |
 III. Why CFBK? |
 •
Solid platform for quality growth
•
CFBK listed and traded on NASDAQ
•
Presence in two metro markets plus two more community branch
banks
•
Akron (Fairlawn HQ)
Springboard to Cleveland metro market
•
Columbus
Existing presence with untapped potential
Historical banking relationships
•
Wellsville and Calcutta Community Branch Banks
Solid core deposits
Utica Shale opportunities
•
Cincinnati
Future expansion
Why CFBK?
32 |
 Model Focused on Diversification
33
•
Diversified balance sheet, less reliance on real estate loans, greater focus on
non-credit fee income •
Expanding on community banking foundation
•
Focusing on high quality small and middle market businesses, plus the private
banking needs of executives and entrepreneurs who own them
•
Leveraging state of the art technology to compete against the regional bank
players and to create operational efficiency
•
Delivered to customers by senior business and private bankers
Community
Bank
Business
Bank
Private
Banking |
 34
•
Committed to building and developing a highly qualified team
•
Management and the Board will have “skin in the game”
•
Hands-on management style that stresses accountability for results
•
Simple plan with a focus on execution
•
Strong controls and risk management processes
•
Diversified business and asset mix
•
Focus on increasing product offerings and developing core deposits
•
Building a culture that strives for excellence and drives stakeholder value
Key Operating Tenets |
 CFBK: A Unique Opportunity for
Creating Stakeholder Value |
 To
request additional information, please contact our Information
Agent, ParaCap Group LLC, at
(866) 719-5037 |