The parent company of CFBank was consistently losing money when Chief Executive Eloise “Elly” Mackus took over Central Federal Corp. in May 2010. And less than two weeks ago, the bank told shareholders it needed financial help or it might not be able to meet operating expenses.
Previous management at the Fairlawn-based bank with four branches had left in a resignation and retirement, and the bank had posted a loss every year but 2008 since 2003.
The bank, founded in 1892, had commercial loans in difficulty and had become a victim of the recession, its leaders say in retrospect. It also was working under a notice that an enforcement order was coming from federal regulators.
For two years, the bank continued to report losses, though the amounts got smaller. “The best we could do was say our losses decreased. What any CEO would prefer to say is our profits increased,” Mackus said. “But for the last two years, we’ve had to focus on improving our assets to stem losses.”
This week, the bank got new life. It raised money in a common stock offering to allow an investor group to complete a purchase. The group is led by the former chief executive of Fifth Third Bank’s Columbus operations, and the agreement calls for three of the investors to take over management. It also allows the bank to repay an $8 million federal government obligation from the TARP program created during the recession for $3 million.
CF has just $225.6 million in assets and $198.3 million in deposits. On Tuesday, the bank said it sold 15 million shares of stock at $1.50 each, raising $22.5 million before expenses. That included $4.5 million in shares purchased by Tim O’Dell’s investor group.
O’Dell retired as president and chief executive of Fifth Third Bank of Central Ohio in 2003.
At a Thursday board meeting, new management — approved by federal regulators — moved into place. O’Dell is chief executive; Thad Perry, a former partner of Accenture with a banking and financial services background, is president; and Bob Hoeweler, chief executive of a group of companies owned by his family and who also has a background on a bank board of directors, is chairman.
Mackus will be leaving. But another CF veteran, Therese “Terri” Liutkus, will remain.
Liutkus will be chief financial officer and treasurer and Jerry Whitmer, who was chairman, will remain a member of the board, which has been expanded from five to 10 members.
The remaining two seats are for O’Dell’s two other investors: James Frauenberg II and Donal Malenick.
Frauenberg is principal owner of a company that manages investments and is the country’s second largest franchisee of Five Guys Burgers and Fries (not in this area) and Flip Flops, a high-end retailer. Malenick is chief executive of Columbus Steel Castings and president of Worthington Steel.
Mackus was offered the option to stay on as general counsel and said she would have been happy to if she had not received a new opportunity. She will leave Sept. 12 and in October take over as president and chief executive of Security Bank in Springfield, Ill. Mackus, who has been in Northeast Ohio off and on since 1979 and said she was the first woman to become chief executive of a publicly traded bank in Northeast Ohio, said she is looking forward to the new challenge.
Meanwhile, the future is bright for the bank, O’Dell said during an interview at CFBank’s Fairlawn headquarters with other bank executives.
“The point is to grow and expand and build the market in Columbus and Eastern Ohio and other markets,” he said.
While the group of investors looked at about six to 12 possible investments, CFBank seemed to be a good fit, Hoeweler said.
Perry said CFBank was brave in tackling its problems.
“The way we saw it was this is some place that has gone through the valley like a lot of banks. This is some place that’s done something about it,” he said. “We see this as a solid platform to move forward because of what they’ve done.”
Mackus and Liutkus said the bank restructured some loans, took writeoffs and moved on some foreclosures. “It’s been hard work — borrower by borrower, loan by loan,” said Liutkus.
There were many low points, Mackus said, but she and Liutkus took turns encouraging one another.
The bank primarily focuses on commercial loans with a smaller consumer and retail operation. O’Dell said the focus of the bank will be to grow in its existing markets — with branches in Columbus and eastern Ohio, in Calcutta and Wellsville.
O’Dell and his managers say they believe small to medium businesses have been underserved by regional banks, which he sees as his main competitors.
The bank employs 65 and had no layoffs. O’Dell said the plan is to grow and add employees.
O’Dell, Perry and Hoeweler, who live in Columbus and Cincinnati, say that while they will spend some time at the Fairlawn headquarters, they will spend most of their time building the business by visiting customers throughout the state.
Mackus said the success of the stock offering was a “vote of confidence in the work that’s been accomplished over the last two years as well as a vote of confidence in the bolstered management.”
“To have a locally headquartered community bank that’s publicly traded is something we believe has always been an asset to this community,” she said. “The fact that it’s not only going to survive, remain here, but thrive is important for all of us.”
Betty Lin-Fisher can be reached at 330-996-3724 or firstname.lastname@example.org.