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Loans
 12 Months Ended
Dec. 31, 2011
Loans [Abstract]  
LOANS

NOTE 4 – LOANS

Loans at year-end were as follows:

 

                 
    2011     2010  

Commercial

   $ 25,994     $ 38,194  

Real estate:

                

Single-family residential

     18,214       23,273  

Multi-family residential

     27,163       35,308  

Commercial

     69,757       80,725  

Construction

     —         4,919  

Consumer:

                

Home equity lines of credit

     14,921       16,316  

Other

     1,221       1,790  
   

 

 

    

 

 

  

Subtotal

     157,270       200,525  

Less: ALLL

     (6,110 )      (9,758 ) 
   

 

 

    

 

 

  

Loans, net

   $ 151,160     $ 190,767  
   

 

 

    

 

 

  

There were no construction loans at December 31, 2011. Construction loans include $2,324 in single-family residential real estate loans and $2,595 in commercial real estate loans at December 31, 2010.

 

 

 

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.

The following table presents the activity in the ALLL by portfolio segment for the year ended December 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

     1,481       83       2,108       (406 )      (74 )      183       —         3,375  

Charge-offs

     (1,296 )      (124 )      (3,167 )      (2,652 )      —         (241 )      (18 )      (7,498 ) 

Recoveries

     214       7       9       202       —         27       13       472  

Reclass of ALLL on loan-related commitments (1)

     3       —         —         —         —         —         —         3  
   

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Ending balance

   $ 2,281     $ 207     $ 1,470     $ 1,863     $ —       $ 272     $ 17     $ 6,110  
   

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

 

(1 ) 

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

Activity in the ALLL was as follows:

 

                 
    2010     2009  

Beginning balance

   $ 7,090     $ 3,119  

Provision for loan losses

     8,468       9,928  

Reclassification of ALLL on loan-related commitments (1)

     10       (36 ) 

Loans charged-off

     (6,165 )      (6,264 ) 

Recoveries

     355       343  
   

 

 

    

 

 

  

Ending balance

   $ 9,758     $ 7,090  
   

 

 

    

 

 

  

 

(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 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 the balance in the ALLL and the recorded investment in loans by portfolio segment and based on impairment method as of December 31, 2010:

 

                                                                 
          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

   $ 332     $ —       $ 1,296     $ 1,276     $ —       $ —       $ —       $ 2,904  

Collectively evaluated for impairment

     1,547       241       1,224       3,443       74       303       22       6,854  
   

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total ending allowance balance

   $ 1,879     $ 241     $ 2,520     $ 4,719     $ 74     $ 303     $ 22     $ 9,758  
   

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Loans:

                                                                

Individually evaluated for impairment

   $ 2,223     $ 142     $ 3,985     $ 4,250     $ —       $ 138     $ —       $ 10,738  

Collectively evaluated for impairment

     35,971       23,131       31,323       76,475       4,919       16,178       1,790       189,787  
   

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total ending loan balance

   $ 38,194     $ 23,273     $ 35,308     $ 80,725     $ 4,919     $ 16,316     $ 1,790     $ 200,525  
   

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

 

The following table presents loans individually evaluated for impairment by class of loans as of and for the year ended 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 year ended December 31, 2011.

 

                                         
    Unpaid Principal
Balance		     Recorded
Investment		     ALLL
Allocated		     Average Recorded
Investment		     Interest
Income
Recognized		  

With no related allowance recorded:

                                        

Commercial

   $ 573     $ 47     $ —       $ 1,171     $ —    

Real estate:

                                        

Single-family residential

     —         —         —         23       —    

Multi-family residential

     6,742       4,996       —         3,396       —    

Commercial:

                                        

Non-owner occupied

     2,171       1,755       —         1,446       —    

Owner occupied

     876       446       —         1,017       —    

Land

     —         —         —         —         —    

Consumer:

                                        

Home equity lines of credit:

                                        

Originated for portfolio

     135       135       —         136       —    
   

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total with no allowance recorded

     10,503       6,379       —         7,189       —    
           

With an allowance recorded:

                                        

Commercial

     796       774       624       428       30  

Real estate:

                                        

Multi-family residential

     94       94       11       48       3  

Commercial:

                                        

Non-owner occupied

     2,823       2,823       210       1,322       85  

Owner occupied

     411       411       20       211       43  

Land

     766       650       32       681       42  
   

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total with an allowance recorded

     4,890       4,752       897       2,690       203  
   

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total

   $ 15,393     $ 12,131     $ 897     $ 9,879     $ 203  
   

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

 

The following table presents loans individually evaluated for impairment by class of loans as of December 31, 2010:

 

                         
    Unpaid
Principal
Balance		     Recorded
Investment		     ALLL
Allocated		  

With no related allowance recorded:

                        

Commercial

   $ 937     $ 587     $ —    

Real estate:

                        

Single-family residential

     461       142       —    

Commercial:

                        

Owner occupied

     78       78       —    

Land

     695       700       —    

Consumer:

                        

Home equity lines of credit:

                        

Originated for portfolio

     138       138       —    
   

 

 

    

 

 

    

 

 

  

Total with no allowance recorded

     2,309       1,645       —    
       

With an allowance recorded:

                        

Commercial

     2,035       1,636       332  

Real estate:

                        

Multi-family residential

     3,996       3,985       1,296  

Commercial:

                        

Non-owner occupied

     2,551       2,419       1,244  

Owner occupied

     1,055       1,053       32  
   

 

 

    

 

 

    

 

 

  

Total with an allowance recorded

     9,637       9,093       2,904  
   

 

 

    

 

 

    

 

 

  

Total

   $ 11,946     $ 10,738     $ 2,904  
   

 

 

    

 

 

    

 

 

  

 

                 
    2010     2009  

Average of individually impaired loans during the year

   $ 11,722     $ 7,341  

Interest income recognized during impairment

     41       —    

There was no cash basis interest income recognized during the years ended December 31, 2010 or 2009.

 

The following table presents the recorded investment in nonaccrual loans by class of loans as of December 31, 2011 and 2010:

 

                 
    2011     2010  

Nonaccrual loans:

                

Commercial

   $ 47     $ 2,084  

Real estate:

                

Single-family residential

     736       266  

Multi-family residential

     4,996       3,986  

Commercial:

                

Non-owner occupied

     1,910       2,419  

Owner occupied

     446       1,131  

Consumer:

                

Home equity lines of credit:

                

Originated for portfolio

     157       161  

Purchased for portfolio

     9       —    

Other consumer

     —         10  
   

 

 

    

 

 

  

Total nonaccrual and nonperforming loans

   $ 8,301     $ 10,057  
   

 

 

    

 

 

  

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 December 31, 2011 or 2010.

 

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  
   

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

The following table presents the aging of the recorded investment in past due loans by class of loans as of December 31, 2010:

 

                                                 
    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

   $ 449     $ —       $ —       $ 449     $ 37,745     $ 2,084  

Real estate:

                                                

Single-family residential

     1,104       444       266       1,814       21,459       —    

Multi-family residential

     —         —         1,242       1,242       34,066       2,744  

Commercial:

                                                

Non-owner occupied

     1,188       —         2,419       3,607       36,687       —    

Owner occupied

     —         —         1,053       1,053       33,516       78  

Land

     —         —         —         —         5,862       —    

Construction

     —         —         —         —         4,919       —    

Consumer:

                                                

Home equity lines of credit:

                                                

Originated for portfolio

     1       54       —         55       12,850       161  

Purchased for portfolio

     —         —         —         —         3,411       —    

Other

     23       41       —         64       1,726       10  
   

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total

   $ 2,765     $ 539     $ 4,980     $ 8,284     $ 192,241     $ 5,077  
   

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

 

TDRs:

The Company has allocated $897 and $714 of specific reserves to loans whose terms have been modified in TDRs as of December 31, 2011 and 2010. The Company has not committed to lend additional amounts as of December 31, 2011 or 2010 to customers with outstanding loans that are classified as TDRs.

During the year ended December 31, 2011, the terms of certain loans were modified as TDRs, where concessions had been 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.

Modifications involving a reduction of the stated interest rate of the loan were for periods ranging from 1 to 7 years. Modifications involving an extension of the maturity date were for periods ranging from 2 months to 10 years.

The following table presents loans modified as TDRs by class of loans during the year ended December 31, 2011:

 

                         
    Number of
Loans		     Pre-Modification
Outstanding
Recorded
Investment		     Post-Modification
Outstanding Recorded
Investment		  

TDR’s:

                        

Commercial

     4     $ 1,127     $ 1,105  
       

Real estate:

                        

Multi-family residential

     2       2,507       2,051  

Commercial:

                        

Non-owner occupied

     5       2,710       2,710  

Owner occupied

     3       1,355       1,355  

Land

     7       655       655  
   

 

 

    

 

 

    

 

 

  

Total

     21     $ 8,354     $ 7,876  
   

 

 

    

 

 

    

 

 

  

The TDRs described above increased the allowance for loan losses by $897 and resulted in charge-offs of $699 during the year ended December 31, 2011.

There was one commercial loan with a total recorded investment of $47 at December 31, 2011 which had been modified as a TDR in May 2011 for which there was a payment default within twelve months following the modification during the year ended December 31, 2011. 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 TDR that subsequently defaulted resulted in a charge-off of $126 during the year ended December 31, 2011.

 

The terms of certain other loans were modified during the year ended December 31, 2011 that did not meet the definition of a TDR. These loans had a total recorded investment of $17,498 as of December 31, 2011. 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.

Certain loans which were modified during the year ended December 31, 2011 did not meet the definition of a TDR as the modification was a delay in a payment that was considered to be insignificant. These modifications involved delays in payment ranging from 15 days to 6 months.

Nonaccrual loans include loans that were modified and identified as TDRs and the loans are not performing. At December 31, 2011 and 2010, nonaccrual troubled debt restructurings were as follows:

 

                 
    2011     2010  

Commercial

   $ 47     $ 1,597  

Real estate:

                

Single-family residential

     —         142  

Multi-family residential

     2,527       2,744  

Commercial:

                

Owner occupied

     446       —    
   

 

 

    

 

 

  

Total

   $ 3,020     $ 4,483  
   

 

 

    

 

 

  

Nonaccrual loans at December 31, 2011 and 2010 do not include $4,597 and $839, respectively, in troubled debt restructurings where customers have established a sustained period of repayment performance, 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. Adjustment to loan risk ratings are 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, condition 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 included in 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, doubtful or loss. The recorded investment in loans by risk category and by class of loans as of December 31, 2011 and based on the most recent analysis performed 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  
   

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

 

The recorded investment in loans by risk category and class of loans as of December 31, 2010 follows: There were no loans rated doubtful at December 31, 2010.

 

      Special Mention       Special Mention       Special Mention       Special Mention       Special Mention  
    Not Rated     Pass     Special Mention     Substandard     Total  

Commercial

   $ 473     $ 26,102     $ 6,281     $ 5,338     $ 38,194  
           

Real Estate:

                                        

Single-family residential

     23,007       —         —         266       23,273  

Multi-family residential

     —         21,021       4,529       9,758       35,308  

Commercial:

                                        

Non-owner occupied

     91       27,412       4,247       8,544       40,294  

Owner occupied

     499       27,253       5,090       1,727       34,569  

Land

     1,089       1,985       —         2,788       5,862  

Construction

     —         4,919       —         —         4,919  
           

Consumer:

                                        

Home equity lines of credit:

                                        

Originated for portfolio

     12,744       —         —         161       12,905  

Purchased for portfolio

     2,572       —         839       —         3,411  

Other

     1,780       —         —         10       1,790  
   

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  
    $ 42,255     $ 108,692     $ 20,986     $ 28,592     $ 200,525