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Loans And Leases
9 Months Ended
Sep. 30, 2021
Loans And Leases [Abstract]  
Loans And Leases NOTE 4 – LOANS AND LEASES

The following table presents the recorded investment in loans and leases by portfolio segment. The recorded investment in loans and leases includes the principal balance outstanding adjusted for purchase premiums and discounts, and deferred loan fees and costs.

September 30, 2021

December 31, 2020

(unaudited)

Commercial (1)

$

293,542

$

338,286

Real estate:

Single-family residential

288,976

147,860

Multi-family residential

88,745

45,375

Commercial

359,995

277,028

Construction

82,488

80,426

Consumer:

Home equity lines of credit

23,050

20,962

Other

2,403

2,429

Subtotal

1,139,199

912,366

Less: ALLL

(15,487)

(17,022)

Loans and leases, net

$

1,123,712

$

895,344

(1)Includes $21,620 and $4,133 of commercial leases at September 30, 2021 and December 31, 2020, respectively.

Included in Commercial loans at September 30, 2021 and December 31, 2020, were $442 and $105,269, respectively, of loans originated under the Small Business Administration (“SBA”) Paycheck Protection Program (“PPP”). The Coronavirus Aid, Relief, and Economic Security Act of 2020, as amended (the “CARES Act”) authorized the SBA to temporarily guarantee loans under a new 7(a) loan program, the PPP, to provide funding to small businesses to pay certain payroll costs and benefits, and other expenses, during the COVID-19 pandemic. These loans are 100% guaranteed by the SBA and the full principal amount of the loans may qualify for forgiveness. The loans we originated have a maturity of two years, an interest rate of 1.00% and loan payments were deferred for the initial six months (which deferral period was subsequently extended to 10 months pursuant to the Paycheck Protection Program Flexibility Act of 2020). The majority of these loans have been pledged as collateral for borrowings by the Company under the FRB Paycheck Protection Program Lending Facility (“PPPLF”). See Note 8- FHLB Advances and Other Debt for additional information.

Mortgage Purchase Program

CFBank previously participated in a Mortgage Purchase Program with Northpointe Bank (Northpointe), a Michigan banking corporation, from December 2012 until CFBank discontinued its participation in the program in the first quarter of 2021. Pursuant to the terms of a participation agreement, CFBank purchased participation interests in loans made by Northpointe related to fully underwritten and pre-sold mortgage loans originated by various prescreened mortgage brokers located throughout the U.S.  The underlying loans were individually (MERS) registered loans which were held until funded by the end investor. The mortgage loan investors included Fannie Mae and Freddie Mac, and other major financial institutions.  This process on average took approximately 14 days.  Given the short-term holding period of the underlying loans, common credit risks (such as past due, impairment and TDR, nonperforming, and nonaccrual classification) were substantially reduced. Therefore, no allowance was allocated by CFBank to these loans. These loans were 100% risk rated for CFBank capital adequacy purposes. Under the participation agreement, CFBank agreed to purchase a 95% ownership/participation interest in each of the aforementioned loans, and Northpointe maintained a 5% ownership interest in each loan it participated. CFBank exited this program during the first quarter 2021. At September 30, 2021 and December 31, 2020, CFBank held $0 and $15,713, respectively, of such loans which have been included in single-family residential loan totals above.

Allowance for Loan and Lease Losses

The ALLL is a valuation allowance for probable incurred credit losses in the loan portfolio based on management’s evaluation of various factors including past loan loss experience, the nature and volume of the portfolio, information about specific borrower situations and estimated collateral values, economic conditions and other factors. A provision for loan and lease losses is charged to operations based on management’s periodic evaluation of these and other pertinent factors described in Note 1 to the 2020 Audited Financial Statements.

The following tables present the activity in the ALLL by portfolio segment for the three and nine months ended September 30, 2021:

Three months ended September 30, 2021 (unaudited)

Real Estate

Consumer

Commercial

Single-family

Multi-family

Commercial

Construction

Home Equity lines of credit

Other

Total

Beginning balance

$

3,377

$

2,431

$

777

$

6,834

$

1,679

$

236

$

161

$

15,495

Addition to (reduction in) provision for loan losses

200

365

150

(550)

(200)

25

10

-  

Charge-offs

-  

(17)

-  

-  

-  

-  

-  

(17)

Recoveries

-  

4

-  

-  

-  

5

-  

9

Ending balance

$

3,577

$

2,783

$

927

$

6,284

$

1,479

$

266

$

171

$

15,487

Nine months ended September 30, 2021 (unaudited)

Real Estate

Consumer

Commercial

Single-family

Multi-family

Commercial

Construction

Home Equity lines of credit

Other

Total

Beginning balance

$

3,426

$

1,299

$

467

$

9,184

$

2,254

$

276

$

116

$

17,022

Addition to (reduction in) provision for loan losses

95

1,490

460

(2,900)

(775)

(25)

55

(1,600)

Charge-offs

-  

(17)

-  

-  

-  

-  

-  

(17)

Recoveries

56

11

-  

-  

-  

15

-  

82

Ending balance

$

3,577

$

2,783

$

927

$

6,284

$

1,479

$

266

$

171

$

15,487

The following table presents the activity in the ALLL by portfolio segment for the three and nine months ended September 30, 2020:

Three months ended September 30, 2020 (unaudited)

Real Estate

Consumer

Commercial

Single-family

Multi-family

Commercial

Construction

Home Equity lines of credit

Other

Total

Beginning balance

$

2,664

$

999

$

567

$

4,534

$

1,024

$

263

$

56

$

10,107

Addition to (reduction in) provision for loan losses

610

500

-  

4,400

250

-  

(10)

5,750

Charge-offs

-  

(350)

-  

-  

-  

(21)

-  

(371)

Recoveries

-  

1

-  

-  

-  

5

-  

6

Ending balance

$

3,274

$

1,150

$

567

$

8,934

$

1,274

$

247

$

46

$

15,492


Nine months ended September 30, 2020 (unaudited)

Real Estate

Consumer

Commercial

Single-family

Multi-family

Commercial

Construction

Home Equity lines of credit

Other

Total

Beginning balance

$

2,054

$

948

$

447

$

2,604

$

759

$

265

$

61

$

7,138

Addition to (reduction in) provision for loan losses

1,330

605

120

6,330

515

(10)

(15)

8,875

Charge-offs

(110)

(408)

-  

-  

-  

(21)

-  

(539)

Recoveries

-  

5

-  

-  

-  

13

-  

18

Ending balance

$

3,274

$

1,150

$

567

$

8,934

$

1,274

$

247

$

46

$

15,492

The following table presents the balance in the ALLL and the recorded investment in loans and leases by portfolio segment and based on the impairment method as of September 30, 2021 (unaudited):

Real Estate

Consumer

Commercial

Single-
family

Multi-
family

Commercial

Construction

Home Equity
lines of credit

Other

Total

ALLL:

Ending allowance balance attributable to loans:

Individually evaluated for impairment

$

-  

$

-  

$

-  

$

23 

$

-  

$

-  

$

-  

$

23 

Collectively evaluated for impairment

3,577 

2,783 

927 

6,261 

1,479 

266 

171 

15,464 

Total ending allowance balance

$

3,577 

$

2,783 

$

927 

$

6,284 

$

1,479 

$

266 

$

171 

$

15,487 

Loans:

Individually evaluated for impairment

$

230 

$

100 

$

-  

$

2,680 

$

-  

$

-  

$

-  

$

3,010 

Collectively evaluated for impairment

293,312 

288,876 

88,745 

357,315 

82,488 

23,050 

2,403 

1,136,189 

Total ending loan balance

$

293,542 

$

288,976 

$

88,745 

$

359,995 

$

82,488 

$

23,050 

$

2,403 

$

1,139,199 

The following table presents the balance in the ALLL and the recorded investment in loans and leases by portfolio segment and based on the impairment method as of December 31, 2020:

Real Estate

Consumer

Commercial

Single-
family

Multi-
family

Commercial

Construction

Home Equity
lines of credit

Other

Total

ALLL:

Ending allowance balance attributable to loans:

Individually evaluated for impairment

$

-  

$

-  

$

-  

$

23 

$

-  

$

-  

$

-  

$

23 

Collectively evaluated for impairment

3,426 

1,299 

467 

9,161 

2,254 

276 

116 

16,999 

Total ending allowance balance

$

3,426 

$

1,299 

$

467 

$

9,184 

$

2,254 

$

276 

$

116 

$

17,022 

Loans:

Individually evaluated for impairment

$

268 

$

104 

$

-  

$

2,718 

$

-  

$

-  

$

-  

$

3,090 

Collectively evaluated for impairment

338,018 

147,756 

45,375 

274,310 

80,426 

20,962 

2,429 

909,276 

Total ending loan balance

$

338,286 

$

147,860 

$

45,375 

$

277,028 

$

80,426 

$

20,962 

$

2,429 

$

912,366 

The following table presents loans individually evaluated for impairment by class of loans as of and for the period ended September 30, 2021. The unpaid principal balance is the contractual principal balance outstanding. The recorded investment is the unpaid principal balance adjusted for partial charge-offs, purchase premiums and discounts, and deferred loan fees and costs. The table presents accrual basis interest income recognized during the three and nine months ended September 30, 2021. Cash payments of interest on these loans during the three and nine months ended September 30, 2021 totaled $38 and $127, respectively.

Three months ended

Nine months ended

As of September 30, 2021

September 30, 2021

September 30, 2021

(unaudited)

(unaudited)

(unaudited)

Unpaid Principal Balance

Recorded Investment

ALLL Allocated

Average Recorded Investment

Interest Income Recognized

Average Recorded Investment

Interest Income Recognized

With no related allowance recorded:

Real estate:

Commercial:

Owner occupied

$

-  

$

-  

$

-  

$

-  

$

-  

$

-  

$

-  

Total with no allowance recorded

-  

-  

-  

-  

-  

-  

-  

With an allowance recorded:

Commercial (1)

494 

230 

-  

235 

2 

247 

7 

Real estate:

Single-family residential (1)

100 

100 

-  

101 

2 

102 

4 

Commercial:

Non-owner occupied

2,680 

2,680 

23 

2,682 

37 

2,695 

112 

Total with an allowance recorded

3,274 

3,010 

23 

3,018 

41 

3,044 

123 

Total

$

3,274 

$

3,010 

$

23 

$

3,018 

$

41 

$

3,044 

$

123 

(1)Allowance recorded in an amount less than $1 has been rounded down to zero.

The following table presents loans individually evaluated for impairment by class of loans as of December 31, 2020. The unpaid principal balance is the contractual principal balance outstanding. The recorded investment is the unpaid principal balance adjusted for partial charge-offs, purchase premiums and discounts, and deferred loan fees and costs. The table presents accrual basis interest income recognized during the three and nine months ended September 30, 2020. Cash payments of interest during the three and nine months ended September 30, 2020 totaled $51 and $105, respectively.

Three months ended

Nine months ended

As of December 31, 2020

September 30, 2020

September 30, 2020

(unaudited)

(unaudited)

Unpaid Principal Balance

Recorded Investment

ALLL Allocated

Average Recorded Investment

Interest Income Recognized

Average Recorded Investment

Interest Income Recognized

With no related allowance recorded:

Commercial:

Owner occupied

$

-  

$

-  

$

-  

$

-  

$

-  

$

-  

$

-  

Total with no allowance recorded

-  

-  

-  

-  

-  

-  

-  

With an allowance recorded:

Commercial (1)

533 

268 

-  

80 

2 

111 

8 

Real estate:

Single-family residential (1)

104 

104 

-  

105 

1 

106 

3 

Commercial:

Non-owner occupied

2,718 

2,718 

23 

2,728 

38 

2,730 

113 

Total with an allowance recorded

3,355 

3,090 

23 

2,913 

41 

2,947 

124 

Total

$

3,355 

$

3,090 

$

23 

$

2,913 

$

41 

$

2,947 

$

124 

The following table presents the recorded investment in nonperforming loans by class of loans:

September 30, 2021

December 31, 2020

(unaudited)

Loans past due over 90 days still on accrual

$

-  

$

-  

Nonaccrual loans:

Commercial

155

190

Real estate:

Single-family residential

659

421

Consumer:

Home equity lines of credit:

Originated for portfolio

153

12

Purchased for portfolio

44

72

Total nonaccrual

1,011

695

Total nonaccrual and nonperforming loans

$

1,011

$

695

Nonaccrual loans include both smaller balance single-family mortgage and consumer loans that are collectively evaluated for impairment and individually classified impaired loans. There were no loans 90 days or more past due and still accruing interest at September 30, 2021 or December 31, 2020.

The following table presents the aging of the recorded investment in past due loans and leases by class of loans as of September 30, 2021 (unaudited):

30 - 59 Days Past Due

60 - 89 Days Past Due

Greater than 90 Days Past Due

Total Past Due

Loans Not Past Due

Nonaccrual Loans Not > 90 days Past Due

Commercial

$

276

$

-  

$

-  

$

276

$

293,266

$

155

Real estate:

Single-family residential

-  

1,039

563

1,602

287,374

96

Multi-family residential

-  

-  

-  

-  

88,745

-  

Commercial:

Non-owner occupied

-  

-  

-  

-  

196,592

-  

Owner occupied

-  

-  

-  

-  

123,160

-  

Land

-  

-  

-  

-  

40,243

-  

Construction

-  

-  

-  

-  

82,488

-  

Consumer:

Home equity lines of credit:

Originated for portfolio

-  

-  

153

153

22,724

-  

Purchased for portfolio

-  

-  

44

44

129

-  

Other

-  

-  

-  

-  

2,403

-  

Total

$

276

$

1,039

$

760

$

2,075

$

1,137,124

$

251

The following table presents the aging of the recorded investment in past due loans and leases by class of loans as of December 31, 2020:

30 - 59 Days Past Due

60 - 89 Days Past Due

Greater than 90 Days Past Due

Total Past Due

Loans Not Past Due

Nonaccrual Loans Not > 90 days Past Due

Commercial

$

-  

$

-  

$

-  

$

-  

$

338,286

$

190

Real estate:

Single-family residential

1,747

-  

315

2,062

145,798

106

Multi-family residential

-  

-  

-  

-  

45,375

-  

Commercial:

Non-owner occupied

-  

78

-  

78

159,835

-  

Owner occupied

-  

-  

-  

-  

90,049

-  

Land

-  

-  

-  

-  

27,066

-  

Construction

-  

-  

-  

-  

80,426

-  

Consumer:

Home equity lines of credit:

Originated for portfolio

-  

-  

-  

-  

20,773

12

Purchased for portfolio

-  

-  

46

46

143

26

Other

-  

-  

-  

-  

2,429

-  

Total

$

1,747

$

78

$

361

$

2,186

$

910,180

$

334

Short-term Loan Deferrals

Under the CARES Act, as amended by the Consolidated Appropriations Act, 2021, financial institutions are permitted to not classify loan modifications as TDRs that were related to the impact of COVID-19 if:

The modifications were made between March 1, 2020 and the earlier of January 1, 2022 or 60 days after the end of the public health emergency, and

The underlying loans were not more than 30 days past due as of December 31, 2019.

We implemented a loan modification program in accordance with the CARES Act to provide temporary relief to borrowers that meet the requirements under the CARES Act. The program allows for deferral of payments for up to 90 days, which we may extend for up to an additional 90 days at our option. The deferred payments and accrued interest during the deferral period are due and payable on or before the maturity of the loans. At September 30, 2021, there were no loans remaining on temporary deferrals under this program.

Troubled Debt Restructurings (TDRs):

From time to time, the terms of certain loans are modified as TDRs, where concessions are granted to borrowers experiencing financial difficulties. The modification of the terms of such loans may have included one or a combination of the following: a reduction of the stated interest rate of the loan; an increase in the stated rate of interest lower than the current market rate for new debt with similar risk; an extension of the maturity date; or a change in the payment terms.

As of September 30, 2021 and December 31, 2020, TDRs totaled $3,010 and $3,090, respectively. The Company allocated $23 and $23 of specific reserves to loans whose terms had been modified in TDRs as of September 30, 2021 and December 31, 2020, respectively. The Company had not committed to lend any additional amounts as of September 30, 2021 or December 31, 2020 to customers with outstanding loans classified as nonaccrual TDRs.

During the three and nine months ended September 30, 2021 and September 30, 2020, there were no loans modified as a TDR.

There were no TDRs in payment default or that became nonperforming during the quarters ended September 30, 2021 and September 30, 2020. A loan is considered to be in payment default once it is 90 days contractually past due under the modified terms, at which time the loan is re-evaluated to determine whether an impairment loss should be recognized, either through a write-off or specific valuation allowance, so that the loan is reported, net, at the present value of estimated future cash flows, or at the fair value of collateral, less cost to sell, if repayment is expected solely from the collateral.

In order to determine whether a borrower is experiencing financial difficulty, an evaluation is performed of the probability that the borrower will be in payment default on any of its debt in the foreseeable future without the modification. This evaluation is performed under the Company’s internal underwriting policy.

Nonaccrual loans include loans that were modified and identified as TDRs and the loans are not performing. At September 30, 2021 and at December 31, 2020, nonaccrual TDRs were as follows:

September 30, 2021

December 31, 2020

(unaudited)

Commercial

$

155

$

190

Total

$

155

$

190

Nonaccrual loans at September 30, 2021 and December 31, 2020 do not include $2,855 and $2,900, respectively, of TDRs where customers have established a sustained period of repayment performance, generally six months, the loans are current according to their modified terms and repayment of the remaining contractual payments is expected. These loans are included in total impaired loans.

Credit Quality Indicators:

The Company categorizes loans into risk categories based on relevant information about the ability of borrowers to service their debt, such as current financial information, historical payment experience, credit documentation, public information and current economic trends, among other factors. Management analyzes loans individually by classifying the loans as to credit risk. This analysis includes commercial, commercial real estate and multi-family residential real estate loans. Internal loan reviews for these loan types are performed at least annually, and more often for loans with higher credit risk. Adjustments to loan risk ratings are made based on the reviews and at any time information is received that may affect risk ratings. The following definitions are used for risk ratings:

Special Mention. Loans classified as special mention have a potential weakness that deserves management’s close attention. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the loan or of CFBank’s credit position at some future date.

Substandard. Loans classified as substandard are inadequately protected by the current net worth and paying capacity of the obligor or of the collateral pledged, if any. Loans so classified have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt. They are characterized by the distinct possibility that there will be some loss if the deficiencies are not corrected.

Doubtful. Loans classified as doubtful have all the weaknesses inherent in those classified as substandard, with the added characteristic that the weaknesses make collection or liquidation in full, on the basis of currently existing facts, conditions and values, highly questionable and improbable.

Loans not meeting the criteria to be classified into one of the above categories are considered to be not rated or pass-rated loans. Loans listed as not rated are primarily groups of homogeneous loans. Past due information is the primary credit indicator for groups of homogenous loans. Loans listed as pass-rated loans are loans that are subject to internal loan reviews and are determined not to meet the criteria required to be classified as special mention, substandard or doubtful.

The recorded investment in loans and leases by risk category and by class of loans and leases as of September 30, 2021 and based on the most recent analysis performed follows.

(unaudited)

Not Rated

Pass

Special Mention

Substandard

Doubtful

Total

Commercial

$

-  

$

293,298

$

-  

$

89

$

155

$

293,542

Real estate:

Single-family residential

288,317

-  

-  

659

-  

288,976

Multi-family residential

-  

88,745

-  

-  

-  

88,745

Commercial:

Non-owner occupied

-  

187,454

6,458

2,680

-  

196,592

Owner occupied

-  

120,434

1,939

787

-  

123,160

Land

-  

40,243

-  

-  

-  

40,243

Construction

-  

81,949

539

-  

-  

82,488

Consumer:

Home equity lines of credit:

Originated for portfolio

22,724

-  

-  

153

-  

22,877

Purchased for portfolio

129

-  

-  

44

-  

173

Other

2,403

-  

-  

-  

-  

2,403

$

313,573

$

812,123

$

8,936

$

4,412

$

155

$

1,139,199

The recorded investment in loans and leases by risk category and by class of loans and leases as of December 31, 2020 follows.

Not Rated

Pass

Special Mention

Substandard

Doubtful

Total

Commercial

$

1

$

337,110

$

664

$

321

$

190

$

338,286

Real estate:

Single-family residential

147,439

-  

-  

421

-  

147,860

Multi-family residential

-  

45,249

-  

126

-  

45,375

Commercial:

Non-owner occupied

57

150,084

7,054

2,718

-  

159,913

Owner occupied

-  

87,636

1,537

876

-  

90,049

Land

-  

27,066

-  

-  

-  

27,066

Construction

-  

80,247

179

-  

-  

80,426

Consumer:

Home equity lines of credit:

Originated for portfolio

20,746

-  

-  

27

-  

20,773

Purchased for portfolio

118

-  

-  

71

-  

189

Other

2,429

-  

-  

-  

-  

2,429

$

170,790

$

727,392

$

9,434

$

4,560

$

190

$

912,366

Leases:

The following lists the components of the net investment in direct financing leases (1):

September 30, 2021

December 31, 2020

(unaudited)

Total minimum lease payments to be received

$

23,884

$

4,459

Less: unearned income

(2,324)

(326)

Plus: Indirect initial costs

60

-

Net investment in direct financing leases

$

21,620

$

4,133

The following summarizes the future minimum lease payments receivable in fiscal year 2021 and in subsequent fiscal years:

2021, excluding the nine months ended September 30, 2021

$

1,537

2022

5,514

2023

5,456

2024

5,089

2025

4,342

Thereafter

1,946

$

23,884