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Loans | 9 Months Ended
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Sep. 30, 2013
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.
| September 30, |  | December 31,
| 2013 |  | 2012
Commercial | $ | 31,509 |  | $ | 25,408
Real estate: |  |  |  |  |
Single-family residential |  | 30,885 |  |  | 43,058
Multi-family residential |  | 26,464 |  |  | 21,576
Commercial |  | 65,093 |  |  | 54,291
Construction |  | 7,530 |  |  | 14
Consumer: |  |  |  |  |
Home equity lines of credit |  | 14,141 |  |  | 12,963
Other |  | 874 |  |  | 970
Subtotal |  | 176,496 |  |  | 158,280
Less: ALLL |  | (6,171) |  |  | (5,237)
Loans, net | $ | 170,325 |  | $ | 153,043
Commercial loans included $13,334 and $11,782, respectively, of commercial lines of credit which required interest only payments at September 30, 2013 and December 31, 2012. Home equity lines of credit included $12,056 and $10,447, respectively, of loans which required interest only payments at September 30, 2013 and December 31, 2012. Mortgage Purchase Program On December 11, 2012, CF Bank entered into a Mortgage Purchase Program with Northpointe Bank (Northpointe), a Michigan banking corporation. At September 30, 2013 and December 31, 2012, CFBank held $11,462 and $25,373, respectively, of such loans which have been included in single family residential loan totals above. The decline is due to a softening in the mortgage market. Through a participation agreement, CFBank agreed to purchase from Northpointe an 80% interest in fully underwritten and pre-sold mortgage loans originated by various prescreened mortgage brokers located throughout the U.S. The participation agreement provides for CFBank to purchase individually (MERS registered) loans from Northpointe and hold them until funded by the end investor. The mortgage loan investors include Fannie Mae and Freddie Mac, and other major financial institutions such as Wells Fargo Bank. This process on average takes approximately 14 days. Given the short term nature of each of these individual loans, common credit risks such as past due, impairment and trouble debt restructure (TDR), nonperforming, and nonaccrual classification are substantially reduced. The maximum aggregate purchase interest shall not exceed $45,000. Northpointe maintains a 20% ownership interest in each loan it participates. The agreement further calls for full control to be relinquished by the b roker to Northpointe and its participants with recourse to the broker after 120 days, at the sole discretion of Northpointe. As such, these purchased loans are classified as portfolio loans. These loans are 100% risk rated for CFBank capital adequacy purposes. 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 to the Consolidated Financial Statements contained in the Company’s 2012 Annual Report that was filed as Exhibit 13.1 to the Company’s Form 10-K for the year ended December 31, 2012. The following tables present the activity in the ALLL by portfolio segment for the three and nine months ended September 30, 2013:
| Three months ended September 30, 2013
|  |  |  | Real Estate |  |  |  |  | Consumer |  |  |
|  |  | Single- |  | Multi- |  |  |  |  |  | Home Equity |  |  |  |
| Commercial |  | family |  | family |  | Commercial |  | Construction |  | lines of credit |  | Other |  | Total
Beginning balance | $ | 1,449 |  | $ | 368 |  | $ | 1,730 |  | $ | 2,157 |  | $ | 19 |  | $ | 331 |  | $ | 11 |  | $ | 6,065
Addition to (reduction in) provision for loan losses |  | 159 |  |  | (93) |  |  | 19 |  |  | 44 |  |  | 62 |  |  | (113) |  |  | (2) |  |  | 76
Charge-offs |  | - |  |  | - |  |  | - |  |  | - |  |  | - |  |  | - |  |  | - |  |  | -
Recoveries |  | 9 |  |  | 1 |  |  | 1 |  |  | 4 |  |  | - |  |  | 13 |  |  | 2 |  |  | 30
Ending balance | $ | 1,617 |  | $ | 276 |  | $ | 1,750 |  | $ | 2,205 |  | $ | 81 |  | $ | 231 |  | $ | 11 |  | $ | 6,171
| Nine months ended September 30, 2013
|  |  |  | Real Estate |  |  |  |  | Consumer |  |  |
|  |  | Single- |  | Multi- |  |  |  |  |  | Home Equity |  |  |  |
| Commercial |  | family |  | family |  | Commercial |  | Construction |  | lines of credit |  | Other |  | Total
Beginning balance | $ | 1,311 |  | $ | 332 |  | $ | 1,396 |  | $ | 1,946 |  | $ | - |  | $ | 241 |  | $ | 11 |  | $ | 5,237
Addition to (reduction in) provision for loan losses |  | 271 |  |  | (59) |  |  | 267 |  |  | 197 |  |  | 81 |  |  | (11) |  |  | (20) |  |  | 726
Charge-offs |  | - |  |  | - |  |  | - |  |  | - |  |  | - |  |  | (17) |  |  | - |  |  | (17)
Recoveries |  | 35 |  |  | 3 |  |  | 87 |  |  | 62 |  |  | - |  |  | 18 |  |  | 20 |  |  | 225
Ending balance | $ | 1,617 |  | $ | 276 |  | $ | 1,750 |  | $ | 2,205 |  | $ | 81 |  | $ | 231 |  | $ | 11 |  | $ | 6,171
The following tables present the activity in the ALLL by portfolio segment for the three and nine months ended September 30, 2012:
| Three months ended September 30, 2012
|  |  |  | Real Estate |  |  |  |  | Consumer |  |  |
|  |  | Single- |  | Multi- |  |  |  |  |  | Home Equity |  |  |  |
| Commercial |  | family |  | family |  | Commercial |  | Construction |  | lines of credit |  | Other |  | Total
Beginning balance | $ | 1,386 |  | $ | 245 |  | $ | 1,370 |  | $ | 2,130 |  | $ | - |  | $ | 286 |  | $ | 17 |  | $ | 5,434
Addition to (reduction in) provision for loan losses |  | (370) |  |  | (15) |  |  | 544 |  |  | 510 |  |  | - |  |  | (115) |  |  | (11) |  |  | 543
Charge-offs |  | - |  |  | - |  |  | - |  |  | (536) |  |  | - |  |  | - |  |  | - |  |  | (536)
Recoveries |  | - |  |  | 1 |  |  | - |  |  | - |  |  | - |  |  | 3 |  |  | 6 |  |  | 10
Reclass of ALLL on loan -related commitments (1) |  | (9) |  |  | - |  |  | - |  |  | - |  |  | - |  |  | - |  |  | - |  |  | (9)
Ending balance | $ | 1,007 |  | $ | 231 |  | $ | 1,914 |  | $ | 2,104 |  | $ | - |  | $ | 174 |  | $ | 12 |  | $ | 5,442
(1) Reclassified from (to) accrued interest payable and other liabilities in the consolidated balance sheet
| Nine months ended September 30, 2012
|  |  |  | Real Estate |  |  |  |  | Consumer |  |  |
|  |  | Single- |  | Multi- |  |  |  |  |  | Home Equity |  |  |  |
| Commercial |  | family |  | family |  | Commercial |  | Construction |  | 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 |  | (1,467) |  |  | 23 |  |  | 856 |  |  | 1,570 |  |  | - |  |  | (51) |  |  | 12 |  |  | 943
Charge-offs |  | (99) |  |  | (7) |  |  | (434) |  |  | (1,467) |  |  | - |  |  | (60) |  |  | (34) |  |  | (2,101)
Recoveries |  | 292 |  |  | 8 |  |  | 22 |  |  | 138 |  |  | - |  |  | 13 |  |  | 17 |  |  | 490
Reclass of ALLL on loan -related commitments (1) |  | - |  |  | - |  |  | - |  |  | - |  |  | - |  |  | - |  |  | - |  |  | -
Ending balance | $ | 1,007 |  | $ | 231 |  | $ | 1,914 |  | $ | 2,104 |  | $ | - |  | $ | 174 |  | $ | 12 |  | $ | 5,442
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 September 30, 2013:
|  |  |  | 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 |  | 602 |  |  | 109 |  |  | 634 |  |  | 139 |  |  | - |  |  | - |  |  | - |  | $ | 1,484
Collectively evaluated for impairment |  | 1,015 |  |  | 167 |  |  | 1,116 |  |  | 2,066 |  |  | 81 |  |  | 231 |  |  | 11 |  |  | 4,687
Total ending allowance balance | $ | 1,617 |  | $ | 276 |  | $ | 1,750 |  | $ | 2,205 |  | $ | 81 |  | $ | 231 |  | $ | 11 |  | $ | 6,171
Loans: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Individually evaluated for impairment | $ | 1,030 |  | $ | 476 |  | $ | 2,028 |  | $ | 5,547 |  | $ | - |  | $ | - |  | $ | - |  | $ | 9,081
Collectively evaluated for impairment |  | 30,479 |  |  | 30,409 |  |  | 24,436 |  |  | 59,546 |  |  | 7,530 |  |  | 14,141 |  |  | 874 |  |  | 167,415
Total ending loan balance | $ | 31,509 |  | $ | 30,885 |  | $ | 26,464 |  | $ | 65,093 |  | $ | 7,530 |  | $ | 14,141 |  | $ | 874 |  | $ | 176,496
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, 2012:
|  |  |  |  | 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 |  | $ | 609 |  | $ | 71 |  | $ | 24 |  | $ | 126 |  | $ | - |  | $ | - |  | $ | - |  | $ | 830
Collectively evaluated for impairment |  |  | 702 |  |  | 261 |  |  | 1,372 |  |  | 1,820 |  |  | - |  |  | 241 |  |  | 11 |  |  | 4,407
Total ending allowance balance |  | $ | 1,311 |  | $ | 332 |  | $ | 1,396 |  | $ | 1,946 |  | $ | - |  | $ | 241 |  | $ | 11 |  | $ | 5,237
Loans: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Individually evaluated for impairment |  |  | 1,091 |  |  | 129 |  |  | 2,167 |  |  | 6,467 |  |  | - |  |  | - |  |  | - |  |  | 9,854
Collectively evaluated for impairment |  |  | 24,317 |  |  | 42,929 |  |  | 19,409 |  |  | 47,824 |  |  | 14 |  |  | 12,963 |  |  | 970 |  |  | 148,426
Total ending loan balance |  | $ | 25,408 |  | $ | 43,058 |  | $ | 21,576 |  | $ | 54,291 |  | $ | 14 |  | $ | 12,963 |  | $ | 970 |  | $ | 158,280
The following table presents loans individually evaluated for impairment by class of loans at September 30, 2013. 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. The table presents accrual basis interest income recognized during the three and nine months ended September 30, 2013. Cash payments of interest during the three and nine months ended September 30, 2013 totaled $54 and $169, respectively.
| As of September 30, 2013 |  | Three months ended September 30, 2013 |  | Nine months ended September 30, 2013
| 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 | $ | 135 |  | $ | 121 |  | $ | - |  | $ | 248 |  | $ | - |  | $ | 297 |  | $ | -
Real estate: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Single-family residential |  | - |  |  | - |  |  | - |  |  | - |  |  | - |  |  | - |  |  | -
Multi-family residential |  | 176 |  |  | 176 |  |  | - |  |  | 178 |  |  | - |  |  | 187 |  |  | -
Commercial: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Non-owner occupied |  | 2,159 |  |  | 1,492 |  |  | - |  |  | 1,496 |  |  | - |  |  | 1,905 |  |  | -
Owner occupied |  | 2,066 |  |  | 1,115 |  |  | - |  |  | 1,370 |  |  | - |  |  | 1,418 |  |  | -
Total with no allowance recorded |  | 4,536 |  |  | 2,904 |  |  | - |  |  | 3,292 |  |  | - |  |  | 3,807 |  |  | -
With an allowance recorded: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Commercial |  | 909 |  |  | 909 |  |  | 602 |  |  | 793 |  |  | 7 |  |  | 831 |  |  | 20
Real estate: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Single-family residential |  | 476 |  |  | 476 |  |  | 109 |  |  | 477 |  |  | 2 |  |  | 478 |  |  | 6
Multi-family residential |  | 1,974 |  |  | 1,852 |  |  | 634 |  |  | 1,866 |  |  | 1 |  |  | 1,903 |  |  | 3
Commercial: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Non-owner occupied |  | 2,172 |  |  | 2,172 |  |  | 120 |  |  | 2,177 |  |  | 35 |  |  | 2,199 |  |  | 104
Owner occupied |  | 402 |  |  | 402 |  |  | 7 |  |  | 162 |  |  | 6 |  |  | 163 |  |  | 18
Land |  | 411 |  |  | 366 |  |  | 12 |  |  | 368 |  |  | 5 |  |  | 377 |  |  | 17
Total with an allowance recorded |  | 6,344 |  |  | 6,177 |  |  | 1,484 |  |  | 5,843 |  |  | 56 |  |  | 5,951 |  |  | 168
Total | $ | 10,880 |  | $ | 9,081 |  | $ | 1,484 |  | $ | 9,135 |  | $ | 56 |  | $ | 9,758 |  | $ | 168
The following table presents loans individually evaluated for impairment by class of loans at December 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. The table presents accrual basis interest income recognized during the three and nine months ended September 30, 2012. Cash payments of interest during the three and nine months ended September 30, 2012 totaled $120 and $289, respectively.
| As of December 31, 2012 |  | Three months ended September 30, 2012 |  | Nine months ended September 30, 2012
| 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 | $ | 136 |  | $ | 121 |  | $ | - |  | $ | 130 |  | $ | - |  | $ | 137 |  | $ | -
Real estate: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Single-family residential |  | - |  |  | - |  |  | - |  |  | - |  |  | - |  |  | - |  |  | -
Multi-family residential |  | 2,001 |  |  | 1,879 |  |  | - |  |  | 2,032 |  |  | - |  |  | 2,170 |  |  | -
Commercial: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Non-owner occupied |  | 3,000 |  |  | 2,195 |  |  | - |  |  | 1,869 |  |  | - |  |  | 2,357 |  |  | -
Owner occupied |  | 2,195 |  |  | 1,244 |  |  | - |  |  | 1,360 |  |  | - |  |  | 1,400 |  |  | -
Total with no allowance recorded |  | 7,332 |  |  | 5,439 |  |  | - |  |  | 5,391 |  |  | - |  |  | 6,064 |  |  | -
With an allowance recorded: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Commercial |  | 970 |  |  | 970 |  |  | 609 |  |  | 672 |  |  | 8 |  |  | 686 |  |  | 30
Real estate: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Single-family residential |  | 129 |  |  | 129 |  |  | 71 |  |  | 129 |  |  | 1 |  |  | 131 |  |  | 1
Multi-family residential |  | 288 |  |  | 288 |  |  | 24 |  |  | 1,996 |  |  | 61 |  |  | 2,002 |  |  | 103
Commercial: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Non-owner occupied |  | 2,239 |  |  | 2,239 |  |  | 105 |  |  | 2,670 |  |  | 40 |  |  | 2,684 |  |  | 127
Owner occupied |  | 396 |  |  | 396 |  |  | 7 |  |  | 402 |  |  | 6 |  |  | 406 |  |  | 19
Land |  | 438 |  |  | 393 |  |  | 14 |  |  | 416 |  |  | 6 |  |  | 452 |  |  | 19
Total with an allowance recorded |  | 4,460 |  |  | 4,415 |  |  | 830 |  |  | 6,285 |  |  | 122 |  |  | 6,361 |  |  | 299
Total | $ | 11,792 |  | $ | 9,854 |  | $ | 830 |  | $ | 11,676 |  | $ | 122 |  | $ | 12,425 |  | $ | 299
The following table presents the recorded investment in nonaccrual loans by class of loans:
| September 30, |  | December 31,
| 2013 |  | 2012
Nonaccrual loans: |  |  |  |  |
Commercial | $ | 573 |  | $ | 714
Real estate: |  |  |  |  |
Single-family residential |  | 190 |  |  | 113
Multi-family residential |  | 1,968 |  |  | 2,082
Commercial: |  |  |  |  |
Non-owner occupied |  | 1,492 |  |  | 2,195
Owner occupied |  | 1,115 |  |  | 1,243
Consumer: |  |  |  |  |
Home equity lines of credit: |  |  |  |  |
Originated for portfolio |  | 53 |  |  | -
Purchased for portfolio |  |  |  |  | 9
Total nonaccrual and nonperforming loans | $ | 5,391 |  | $ | 6,356
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, 2013 or December 31, 2012. The following table presents the aging of the recorded investment in past due loans by class of loans as of September 30, 2013:
| 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 | $ | - |  | $ | - |  | $ | 121 |  | $ | 121 |  | $ | 31,388 |  | $ | 452
Real estate: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Single-family residential |  | 1,048 |  |  | 51 |  |  | 46 |  |  | 1,145 |  |  | 29,740 |  |  | 144
Multi-family residential |  | - |  |  | - |  |  | - |  |  | - |  |  | 26,464 |  |  | 1,968
Commercial: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Non-owner occupied |  | - |  |  | - |  |  | 949 |  |  | 949 |  |  | 34,318 |  |  | 543
Owner occupied |  | - |  |  | - |  |  | - |  |  | - |  |  | 25,023 |  |  | 1,115
Land |  | - |  |  | 441 |  |  | - |  |  | 441 |  |  | 4,362 |  |  | -
Construction |  | - |  |  | - |  |  | - |  |  | - |  |  | 7,530 |  |  | -
Consumer: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Home equity lines of credit: |  | - |  |  | - |  |  | - |  |  |  |  |  |  |  |  |
Originated for portfolio |  | - |  |  | - |  |  | - |  |  | - |  |  | 12,247 |  |  | 53
Purchased for portfolio |  | 125 |  |  | - |  |  | - |  |  | 125 |  |  | 1,769 |  |  | -
Other |  | 6 |  |  | - |  |  | - |  |  | 6 |  |  | 868 |  |  | -
Total | $ | 1,179 |  | $ | 492 |  | $ | 1,116 |  | $ | 2,787 |  | $ | 173,709 |  | $ | 4,275
The following table presents the aging of the recorded investment in past due loans by class of loans as of December 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 | $ | - |  | $ | 65 |  | $ | 121 |  | $ | 186 |  | $ | 25,222 |  | $ | 593
Real estate: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Single-family residential |  | 1,105 |  |  | 122 |  |  | 74 |  |  | 1,301 |  |  | 41,757 |  |  | 39
Multi-family residential |  | - |  |  | - |  |  | - |  |  | - |  |  | 21,576 |  |  | 2,082
Commercial: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Non-owner occupied |  | 40 |  |  | - |  |  | 1,611 |  |  | 1,651 |  |  | 28,299 |  |  | 583
Owner occupied |  | - |  |  | - |  |  | - |  |  | - |  |  | 19,774 |  |  | 1,244
Land |  | - |  |  | - |  |  | - |  |  | - |  |  | 4,568 |  |  | -
Construction |  | - |  |  | - |  |  | - |  |  | - |  |  | 14 |  |  | -
Consumer: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Home equity lines of credit: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Originated for portfolio |  | 20 |  |  | - |  |  | - |  |  | 20 |  |  | 10,699 |  |  | -
Purchased for portfolio |  | - |  |  | - |  |  | 9 |  |  | 9 |  |  | 2,235 |  |  | -
Other |  | 18 |  |  | - |  |  | - |  |  | 18 |  |  | 951 |  |  | -
Total | $ | 1,183 |  | $ | 187 |  | $ | 1,815 |  | $ | 3,185 |  | $ | 155,095 |  | $ | 4,541
Troubled Debt Restructurings (TDRs): As of September 30, 2013 and December 31, 2012, TDRs totaled $6.6 million and $7.0 million, respectively. The Company allocated $1.5 million and $830 of specific reserves to loans whose terms had been modified in TDRs as of September 30, 2013 and December 31, 2012, respectively. The Company had not committed to lend any additional amounts as of September 30, 2013 or December 31, 2012 to customers with outstanding loans classified as nonaccrual TDRs. During the three months ended September 30, 2013, there were two commercial loans modified as a TDR, where concessions were granted to a borrower experiencing financial difficulties. The modified terms included converting a revolving line of credit to a 10-month term loan with a 36-month amortization and a change in the stated interest rate of the loan from 4.75% to 6.75%. The other modification consolidated two existing TDRs into one loan with a 5 year term amortizing over 15 years and a change in the stated interest rates, of 6% and 5.5%, to 5%. These TDRs had associated reserves of $76. During the nine months ended September 30, 2013, the terms of three loans were modified as TDRs where concessions were granted to borrowers experiencing financial difficulties. In addition to the loans described in the preceding paragraph, one single-family residential loan was modified as a TDR. The modified terms included a reduction in the stated interest rate of the loan from 6.5% to 3.5%, for a period of six months, and a deferral of two interest payments to the end of the loan. The impact to the income statement was approximately $5. These TDRs had associated reserves of $143. During the quarter ended September 30, 2012, no loans were modified as a TDR, where concessions were granted to a borrower experiencing financial difficulties. During the nine months ended September 30, 2012, the terms of two loans were modified as TDRs, where concessions were granted to borrowers experiencing financial difficulties. One non-owner occupied commercial real estate loan included an extension of the maturity date from May 31, 2012 to September 30, 2012 and required a $50 principal repayment at the date of modification. O ne single-family residential loan was modified as a TDR during the nine months ended September 30, 2012 and 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. There were no TDRs in payment default or that became nonperforming during the period ended September 30, 2013 and 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, 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 quarter ended September 30, 2013 and 2012 that did not meet the definition of a TDR. These loans had a total recorded investment of $4,026 and $9,235 as of September 30, 2013 and 2012, respectively. 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. Nonaccrual loans include loans that were modified and identified as TDRs and the loans are not performing. At September 30, 2013 and December 31, 2012, nonaccrual TDRs were as follows:
| September 30, |  | December 31,
| 2013 |  | 2012
Commercial | $ | 452 |  | $ | 528
Real estate: |  |  |  |  |
Multi-family residential |  | 1,968 |  |  | 2,082
Commercial: |  |  |  |  |
Non-owner occupied |  | - |  |  | 388
Owner occupied |  | 252 |  |  | 288
Total | $ | 2,672 |  | $ | 3,286
Nonaccrual loans at September 30, 2013 and December 31, 2012 do not include $3,933 and $3,684, 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 by risk category and by class of loans as of September 30, 2013 and based on the most recent analysis performed follows. There were no loans rated doubtful at September 30, 2013 and December 31, 2012.
| Not Rated |  | Pass |  | Special Mention |  | Substandard |  | Total
Commercial | $ | 220 |  | $ | 27,026 |  | $ | 3,061 |  | $ | 1,202 |  | $ | 31,509
Real estate: |  |  |  |  |  |  |  |  |  |  |  |  |  | -
Single-family residential |  | 30,649 |  |  | - |  |  | - |  |  | 236 |  |  | 30,885
Multi-family residential |  |  |  |  | 21,223 |  |  | 2,435 |  |  | 2,806 |  |  | 26,464
Commercial: |  |  |  |  |  |  |  |  |  |  |  |  |  | -
Non-owner occupied |  | 169 |  |  | 28,125 |  |  | 2,333 |  |  | 4,640 |  |  | 35,267
Owner occupied |  | - |  |  | 21,702 |  |  | 589 |  |  | 2,732 |  |  | 25,023
Land |  | 89 |  |  | 1,335 |  |  | 441 |  |  | 2,938 |  |  | 4,803
Construction |  | - |  |  | 7,530 |  |  | - |  |  | - |  |  | 7,530
Consumer: |  |  |  |  |  |  |  |  |  |  |  |  |  |
Home equity lines of credit: |  |  |  |  |  |  |  |  |  |  |  |  |  |
Originated for portfolio |  | 12,093 |  |  | - |  |  | - |  |  | 154 |  |  | 12,247
Purchased for portfolio |  | 1,475 |  |  | - |  |  | 419 |  |  | - |  |  | 1,894
Other |  | 874 |  |  | - |  |  | - |  |  | - |  |  | 874
| $ | 45,569 |  | $ | 106,941 |  | $ | 9,278 |  | $ | 14,708 |  | $ | 176,496
The recorded investment in loans by risk category and by class of loans as of December 31, 2012 follows.
| Not Rated |  | Pass |  | Special Mention |  | Substandard |  | Total
Commercial | $ | 285 |  | $ | 21,013 |  | $ | 2,637 |  | $ | 1,473 |  | $ | 25,408
Real estate: |  |  |  |  |  |  |  |  |  |  |  |  |  |
Single-family residential |  | 42,945 |  |  | - |  |  | - |  |  | 113 |  |  | 43,058
Multi-family residential |  | - |  |  | 12,846 |  |  | 5,790 |  |  | 2,939 |  |  | 21,575
Commercial: |  |  |  |  |  |  |  |  |  |  |  |  |  |
Non-owner occupied |  | 322 |  |  | 21,147 |  |  | 2,995 |  |  | 5,486 |  |  | 29,950
Owner occupied |  | - |  |  | 16,385 |  |  | 762 |  |  | 2,627 |  |  | 19,774
Land |  | 119 |  |  | 987 |  |  | 434 |  |  | 3,028 |  |  | 4,568
Construction |  | - |  |  | 14 |  |  | - |  |  | - |  |  | 14
Consumer: |  |  |  |  |  |  |  |  |  |  |  |  |  |
Home equity lines of credit: |  |  |  |  |  |  |  |  |  |  |  |  |  |
Originated for portfolio |  | 10,719 |  |  | - |  |  | - |  |  | - |  |  | 10,719
Purchased for portfolio |  | 1,800 |  |  | - |  |  | 435 |  |  | 9 |  |  | 2,244
Other |  | 970 |  |  | - |  |  | - |  |  | - |  |  | 970
| $ | 57,160 |  | $ | 72,392 |  | $ | 13,053 |  | $ | 15,675 |  | $ | 158,280

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