Loans

3 Months Ended

Mar. 31, 2012

Loans [Abstract]

LOANS

NOTE 4 – LOANS

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

	March 31,			December 31,
	2012			2011
Commercial	$	21,500		$	25,994
Real estate:
Single-family residential		16,918			18,214
Multi-family residential		24,894			27,163
Commercial		66,849			69,757
Consumer:
Home equity lines of credit		14,590			14,921
Other		1,172			1,221
Subtotal		145,923			157,270
Less: ALLL		(5,641	)		(6,110	)
Loans, net	$	140,282		$	151,160

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 losses is charged to operations based on management’s periodic evaluation of these and other pertinent factors described in Note 1 of the Notes to Consolidated Financial Statements contained in the Company’s 2011 Annual Report that was filed as Exhibit 13.1 to the Company’s Form 10-K for the year ended December 31, 2011.

The following tables present the activity in the ALLL by portfolio segment for the three months ended March 31, 2012:

				Real Estate									Consumer
	Commercial			Single-family			Multi-family			Commercial			Home equity lines of credit			Other			Total
Beginning balance	$	2,281		$	207		$	1,470		$	1,863		$	272		$	17		$	6,110
Addition to (reduction in) provision for loan losses		(508	)		(19	)		370			347			19			(9	)		200
Charge-offs		(15	)		—			(416	)		(434	)		(20	)		—			(885	)
Recoveries		44			2			22			136			3			9			216
Ending balance	$	1,802		$	190		$	1,446		$	1,912		$	274		$	17		$	5,641

The following tables present the activity in the ALLL by portfolio segment for the three months ended March 31, 2011:

				Real Estate												Consumer
	Commercial			Single-family			Multi-family			Commercial			Construction			Home equity lines of  credit			Other			Total
Beginning balance	$	1,879		$	241		$	2,520		$	4,719		$	74		$	303		$	22		$	9,758
Addition to (reduction in) provision for loan losses		1,705			(3	)		218			(372	)		(40	)		(104	)		15			1,419
Charge-offs		(500	)		(7	)		(800	)		(500	)		—			—			(18	)		(1,825	)
Recoveries		71			2			1			1			—			2			2			79
Reclass of ALLL on loan-related commitments (1)		(14	)		—			—			—			—			—			—			(14	)
Ending balance	$	3,141		$	233		$	1,939		$	3,848		$	34		$	201		$	21		$	9,417

⁽¹⁾  Reclassified from (to) accrued interest payable and other liabilities in the consolidated balance sheet

The following table presents the balance in the ALLL and the recorded investment in loans by portfolio segment and based on the impairment method as of March 31, 2012:

			Real Estate						Consumer
	Commercial		Single-family		Multi-family		Commercial		Home equity lines of credit		Other		Total
ALLL:
Ending allowance balance attributable to loans:
Individually evaluated for impairment	$	573	$	—	$	13	$	286	$	—	$	—	$	872
Collectively evaluated for impairment		1,229		190		1,433		1,626		274		17		4,769
Total ending allowance balance	$	1,802	$	190	$	1,446	$	1,912	$	274	$	17	$	5,641
Loans:
Individually evaluated for impairment	$	831	$	132	$	4,053	$	6,388	$	135	$	—	$	11,539
Collectively evaluated for impairment		20,669		16,786		20,841		60,461		14,455		1,172		134,384
Total ending loan balance	$	21,500	$	16,918	$	24,894	$	66,849	$	14,590	$	1,172	$	145,923

The following table presents the balance in the ALLL and the recorded investment in loans by portfolio segment and based on the impairment method as of December 31, 2011:

			Real Estate						Consumer
	Commercial		Single-family		Multi-family		Commercial		Home equity lines  of credit		Other		Total
ALLL:
Ending allowance balance attributable to loans:
Individually evaluated for impairment	$	624	$	—	$	11	$	262	$	—	$	—	$	897
Collectively evaluated for impairment		1,657		207		1,459		1,601		272		17		5,213
Total ending allowance balance	$	2,281	$	207	$	1,470	$	1,863	$	272	$	17	$	6,110
Loans:
Individually evaluated for impairment	$	821	$	—	$	5,090	$	6,085	$	135	$	—	$	12,131
Collectively evaluated for impairment		25,173		18,214		22,073		63,672		14,786		1,221		145,139
Total ending loan balance	$	25,994	$	18,214	$	27,163	$	69,757	$	14,921	$	1,221	$	157,270

The following table presents loans individually evaluated for impairment by class of loans at March 31, 2012. 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, deferred loan fees and costs and includes accrued interest. There was no cash-basis interest income recognized during the three months ended March 31, 2012.

							For the three months ended March 31, 2012
	Unpaid Principal Balance		Recorded Investment		ALLL Allocated		Average Recorded Investment		Interest Income Recognized
With no related allowance recorded:
Commercial	$	686	$	146	$	—	$	67	$	—
Real estate:
Multi-family residential		4,970		3,961		—		4,244		10
Commercial:
Non-owner occupied		2,625		2,069		—		1,367		—
Owner occupied		852		422		—		429		—
Land		480		454		—		224		1
Consumer:
Home equity lines of credit:
Originated for portfolio		135		135		—		135		—
Total with no allowance recorded		9,748		7,187		—		6,466		11
With an allowance recorded:
Commercial		685		685		573		696		13
Real estate:
Single-family residential		132		132		—		90		—
Multi-family residential		92		92		13		92		1
Commercial:
Non-owner occupied		2,657		2,657		264		2,340		57
Owner occupied		407		407		7		736		6
Land		398		379		15		384		6
Total with an allowance recorded		4,371		4,352		872		4,338		83
Total	$	14,119	$	11,539	$	872	$	10,804	$	94

The following table presents loans individually evaluated for impairment by class of loans at December 31, 2011. 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, deferred loan fees and costs and includes accrued interest. There was no cash-basis interest income recognized during the three months ended March 31, 2011.

							For the three months ended March 31, 2011
	Unpaid Principal Balance		Recorded Investment		ALLL Allocated		Average Recorded Investment		Interest Income Recognized
With no related allowance recorded:
Commercial	$	573	$	47	$	—	$	144	$	—
Real estate:
Single-family residential		—		—		—		95		—
Multi-family residential		6,742		4,996		—		—		—
Commercial:
Non-owner occupied		2,177		1,755		—		77		—
Owner occupied		876		446		—		—		—
Land		—		—		—		694		10
Consumer:
Home equity lines of credit:
Originated for portfolio		135		135		—		137		—
Total with no allowance recorded		10,503		7,379		—		1,147		10
With an allowance recorded:
Commercial		796		774		624		1,862		—
Real estate:
Multi-family residential		94		94		11		3,719		—
Commercial:
Non-owner occupied		2,823		2,823		210		2,253		—
Owner occupied		411		411		20
Land		766		650		32		1,051		—
Total with an allowance recorded		4,890		4,752		897		8,885		—
Total	$	15,393	$	12,131	$	897	$	10,032	$	10

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

	March 31, 2012		December 31, 2011
Nonaccrual loans:
Commercial	$	145	$	47
Real estate:
Single-family residential		619		736
Multi-family residential		2,053		4,996
Commercial:
Non-owner occupied		2,069		1,910
Owner occupied		422		446
Land		372		—
Consumer:
Home equity lines of credit:
Originated for portfolio		135		157
Purchased for portfolio		9		9
Other consumer		29		—
Total nonaccrual and nonperforming loans	$	5,853	$	8,301

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 March 31, 2012 or December 31, 2011.

The following table presents the aging of the recorded investment in past due loans by class of loans as of March 31, 2012:

	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	$	75	$	—	$	9	$	84	$	21,416	$	136
Real estate:
Single-family residential		674		315		101		1,090		15,828		518
Multi-family residential		—		—		2,053		2,053		22,841		—
Commercial:
Non-owner occupied		326		—		201		527		33,763		1,868
Owner occupied		—		—		422		422		26,969		—
Land		—		—		372		372		4,796		—
Consumer:
Home equity lines of credit:
Originated for portfolio		—		—		135		135		11,908		—
Purchased for portfolio		—		—		9		9		2,538		—
Other		33		—		—		33		1,139		29
Total	$	1,108	$	315	$	3,302	$	4,725	$	141,198	$	2,551

The following table presents the aging of the recorded investment in past due loans by class of loans as of December 31, 2011:

	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	$	103	$	—	$	—	$	103	$	25,891	$	47
Real estate:
Single-family residential		714		474		491		1,679		16,535		245
Multi-family residential		—		—		3,065		3,065		24,098		1,931
Commercial:
Non-owner occupied		173		275		68		516		35,899		1,842
Owner occupied		—		—		—		—		27,900		446
Land		—		—		—		—		5,442		—
Consumer:
Home equity lines of credit:
Originated for portfolio		22		—		135		157		12,126		22
Purchased for portfolio		—		—		9		9		2,629		—
Other		—		30		—		30		1,191		—
Total	$	1,012	$	779	$	3,768	$	5,559	$	151,711	$	4,533

Troubled Debt Restructurings (TDRs):

The Company has allocated $872 and $897 of specific reserves to loans whose terms have been modified in TDRs as of March 31, 2012 and December 31, 2011. The Company has not committed to lend additional amounts as of March 31, 2012 or December 31, 2011 to customers with outstanding loans that are classified as nonaccrual TDRs.

During the quarter ended March 31, 2012, the terms of one loan was modified as a TDR, where concessions were granted to a borrower experiencing financial difficulties. The modification of the terms of this single-family residential loan included a reduction in the stated interest rate of the loan from 10% to 5%, a waiver of a portion of the accrued and unpaid interest, addition of the remaining accrued and unpaid interest to the principal balance and extension of the maturity date from 2034 to 2042. This modification involved a reduction in the stated interest rate of the loan for a period of 30 years.

The following table presents loans modified as TDRs by class of loans during the three months ended March 31, 2012:

	Number of Loans		Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment
Real estate:
Single-family residential		1	$	132	$	138
Total		1	$	132	$	138

The TDR described did not impact the ALLL and did not result in a charge-off during the three months ended March 31, 2012.

There were no TDRs in payment default or that became nonperforming during the period ended March 31, 2012, that had been modified within the twelve months ended March 31, 2012. 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.

The terms of certain other loans were modified during the three months ended March 31, 2012 that did not meet the definition of a TDR. These loans had a total recorded investment as of March 31, 2012 of $2,815. The modification of these loans involved either a modification of the terms of a loan to borrowers who were not experiencing financial difficulties, a delay in a payment that was considered to be insignificant or there were no concessions granted.

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.

There were no loans which were modified during the three months ended March 31, 2012 that did not meet the definition of a TDR due to a delay in payment that was considered to be insignificant.

Nonaccrual loans include loans that were modified and identified as TDRs and the loans are not performing. At March 31, 2012 and December 31, 2011, nonaccrual TDRs were as follows:

	March 31, 2012		December 31, 2011
Commercial	$	9	$	47
Real estate:
Single-family residential		132		—
Multi-family residential		—		2,527
Commercial:
Owner occupied		422		446
Total	$	563	$	3,020

Nonaccrual loans at March 31, 2012 and December 31, 2011 do not include $6,211 and $4,597, respectively, of TDRs where customers have established a sustained period of repayment performance, generally six months, 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 by risk category and by class of loans as of March 31, 2012 and based on the most recent analysis performed follows. There were no loans rated doubtful at March 31, 2012.

	Not Rated		Pass		Special Mention		Substandard		Total
Commercial	$	424	$	15,142	$	1,663	$	4,271	$	21,500
Real estate:
Single-family residential		16,299		—		—		619		16,918
Multi-family residential		—		14,188		5,870		4,836		24,894
Commercial:
Non-owner occupied		351		21,539		5,764		6,636		34,290
Owner occupied		—		23,703		1,378		2,310		27,391
Land		930		710		—		3,528		5,168
Consumer:
Home equity lines of credit:
Originated for portfolio		11,908		—		—		135		12,043
Purchased for portfolio		2,096		—		442		9		2,547
Other		1,143		—		—		29		1,172
	$	33,151	$	75,282	$	15,117	$	22,373	$	145,923

The recorded investment in loans by risk category and by class of loans as of December 31, 2011 follows.

	Not Rated		Pass		Special Mention		Substandard		Doubtful		Total
Commercial	$	432	$	19,591	$	2,062	$	3,909	$	—	$	25,994
Real estate:
Single-family residential		17,478		—		—		736		—		18,214
Multi-family residential		—		15,395		4,539		6,822		407		27,163
Commercial:
Non-owner occupied		365		22,159		5,717		8,176		—		36,417
Owner occupied		—		22,526		3,474		1,898		—		27,898
Land		954		1,123		—		3,365		—		5,442
Consumer:
Home equity lines of credit:
Originated for portfolio		12,126		—		—		157		—		12,283
Purchased for portfolio		2,182		—		447		9		—		2,638
Other		1,221		—		—		—		—		1,221
	$	34,758	$	80,794	$	16,239	$	25,072	$	407	$	157,270