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Loans | 6 Months Ended
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Jun. 30, 2014
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.
| June 30, |  | December 31,
| 2014 |  | 2013
Commercial | $ | 49,808 |  | $ | 37,526
Real estate: |  |  |  |  |
Single-family residential |  | 40,638 |  |  | 32,219
Multi-family residential |  | 28,271 |  |  | 32,197
Commercial |  | 91,234 |  |  | 83,752
Construction |  | 24,620 |  |  | 11,465
Consumer: |  |  |  |  |
Home equity lines of credit |  | 16,071 |  |  | 14,851
Other |  | 2,904 |  |  | 860
Subtotal |  | 253,546 |  |  | 212,870
Less: ALLL |  | (5,871) |  |  | (5,729)
Loans, net | $ | 247,675 |  | $ | 207,141
Commercial loans included $22,896 and $12,918, respectively, of commercial lines of credit which required interest only payments at June 30, 2014 and December 31, 2013. Home equity lines of credit included $14,296 and $12,144, respectively, of loans which required interest only payments at June 30, 2014 and December 31, 2013. Mortgage Purchase Program On December 11, 2012, CFBank entered into a Mortgage Purchase Program with Northpointe Bank (Northpointe), a Michigan banking corporation. Through a participation agreement, CFBank agreed to purchase an 80% interest from Northpointe of 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 TDR, nonperforming and nonaccrual classification) are substantially reduced and, therefore no allowance is allocated to these loans. Northpointe maintains a 20% ownership interest in each loan it participates. The participation agreement further calls for full control to be relinquished by the mortgage broker 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. At June 30, 2014 and December 31, 2013, CFBank held $19,984 and $12,743, respectively, of such loans which have been included in single-family residential loan totals above. 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 in the Company’s 2013 Annual Report to Stockholders incorporated by reference into our on Form 10-K for the year ended December 31, 2013. The following table presents the activity in the ALLL by portfolio segment for the three and six months ended June 30, 2014:
| Three months ended June 30, 2014
|  |  |  | Real Estate |  |  |  |  | Consumer |  |  |
| Commercial |  | Single-family |  | Multi-family |  | Commercial |  | Construction |  | Home Equity lines of credit |  | Other |  | Total
Beginning balance | $ | 1,587 |  | $ | 159 |  | $ | 1,458 |  | $ | 2,064 |  | $ | 378 |  | $ | 109 |  | $ | 8 |  | $ | 5,763
Addition to (reduction in) provision for loan losses |  | 18 |  |  | 37 |  |  | (247) |  |  | 165 |  |  | 96 |  |  | 7 |  |  | 32 |  |  | 108
Charge-offs |  | - |  |  | - |  |  | - |  |  | (2) |  |  | - |  |  | (9) |  |  | - |  |  | (11)
Recoveries |  | - |  |  | - |  |  | - |  |  | 4 |  |  | - |  |  | 6 |  |  | 1 |  |  | 11
Ending balance | $ | 1,605 |  | $ | 196 |  | $ | 1,211 |  | $ | 2,231 |  | $ | 474 |  | $ | 113 |  | $ | 41 |  | $ | 5,871
| Six month ended June 30, 2014
|  |  |  | Real Estate |  |  |  |  | Consumer |  |  |
| Commercial |  | Single-family |  | Multi-family |  | Commercial |  | Construction |  | Home Equity lines of credit |  | Other |  | Total
Beginning balance | $ | 1,759 |  | $ | 120 |  | $ | 1,262 |  | $ | 2,325 |  | $ | 119 |  | $ | 139 |  | $ | 5 |  | $ | 5,729
Addition to (reduction in) provision for loan losses |  | (157) |  |  | 75 |  |  | (51) |  |  | (100) |  |  | 355 |  |  | (28) |  |  | 34 |  |  | 128
Charge-offs |  | - |  |  | - |  |  | - |  |  | (2) |  |  | - |  |  | (9) |  |  | - |  |  | (11)
Recoveries |  | 3 |  |  | 1 |  |  | - |  |  | 8 |  |  | - |  |  | 11 |  |  | 2 |  |  | 25
Ending balance | $ | 1,605 |  | $ | 196 |  | $ | 1,211 |  | $ | 2,231 |  | $ | 474 |  | $ | 113 |  | $ | 41 |  | $ | 5,871
The following table presents the activity in the ALLL by portfolio segment for the three and six months ended June 30, 2013:
| Three months ended June 30, 2013
|  |  |  | Real Estate |  |  |  |  | Consumer |  |  |
| Commercial |  | Single-family |  | Multi-family |  | Commercial |  | Construction |  | Home Equity lines of credit |  | Other |  | Total
Beginning balance | $ | 1,409 |  | $ | 239 |  | $ | 1,604 |  | $ | 2,197 |  | $ | 1 |  | $ | 220 |  | $ | 12 |  | $ | 5,682
Addition to (reduction in) provision for loan losses |  | 31 |  |  | 128 |  |  | 69 |  |  | (44) |  |  | 18 |  |  | 125 |  |  | (3) |  |  | 324
Charge-offs |  | - |  |  | - |  |  | - |  |  | - |  |  | - |  |  | (17) |  |  | - |  |  | (17)
Recoveries |  | 9 |  |  | 1 |  |  | 57 |  |  | 4 |  |  | - |  |  | 3 |  |  | 2 |  |  | 76
Ending balance | $ | 1,449 |  | $ | 368 |  | $ | 1,730 |  | $ | 2,157 |  | $ | 19 |  | $ | 331 |  | $ | 11 |  | $ | 6,065
| Six month ended June 30, 2013
|  |  |  | Real Estate |  |  |  |  | Consumer |  |  |
| Commercial |  | Single-family |  | Multi-family |  | Commercial |  | Construction |  | Home Equity 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 |  | 112 |  |  | 34 |  |  | 248 |  |  | 153 |  |  | 19 |  |  | 102 |  |  | (18) |  |  | 650
Charge-offs |  | - |  |  | - |  |  | - |  |  | - |  |  | - |  |  | (17) |  |  | - |  |  | (17)
Recoveries |  | 26 |  |  | 2 |  |  | 86 |  |  | 58 |  |  | - |  |  | 5 |  |  | 18 |  |  | 195
Ending balance | $ | 1,449 |  | $ | 368 |  | $ | 1,730 |  | $ | 2,157 |  | $ | 19 |  | $ | 331 |  | $ | 11 |  | $ | 6,065
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 June 30, 2014:
|  |  |  |  | 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 |  | $ | 416 |  | $ | 1 |  | $ | 337 |  | $ | 85 |  | $ | - |  | $ | - |  | $ | - |  | $ | 839 |
Collectively evaluated for impairment |  |  | 1,189 |  |  | 195 |  |  | 874 |  |  | 2,146 |  |  | 474 |  |  | 113 |  |  | 41 |  |  | 5,032 |
Total ending allowance balance |  | $ | 1,605 |  | $ | 196 |  | $ | 1,211 |  | $ | 2,231 |  | $ | 474 |  | $ | 113 |  | $ | 41 |  | $ | 5,871 |
Loans: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Individually evaluated for impairment |  | $ | 889 |  | $ | 306 |  | $ | 1,692 |  | $ | 4,480 |  | $ | - |  | $ | - |  | $ | - |  | $ | 7,367 |
Collectively evaluated for impairment |  |  | 48,919 |  |  | 40,332 |  |  | 26,579 |  |  | 86,754 |  |  | 24,620 |  |  | 16,071 |  |  | 2,904 |  |  | 246,179 |
Total ending loan balance |  | $ | 49,808 |  | $ | 40,638 |  | $ | 28,271 |  | $ | 91,234 |  | $ | 24,620 |  | $ | 16,071 |  | $ | 2,904 |  | $ | 253,546 |
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, 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 |  | $ | 532 |  | $ | - |  | $ | 402 |  | $ | 191 |  | $ | - |  | $ | - |  | $ | - |  | $ | 1,125
Collectively evaluated for impairment |  |  | 1,227 |  |  | 120 |  |  | 860 |  |  | 2,134 |  |  | 119 |  |  | 139 |  |  | 5 |  |  | 4,604
Total ending allowance balance |  | $ | 1,759 |  | $ | 120 |  | $ | 1,262 |  | $ | 2,325 |  | $ | 119 |  | $ | 139 |  | $ | 5 |  | $ | 5,729
Loans: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Individually evaluated for impairment |  |  | 992 |  | $ | 317 |  | $ | 1,759 |  | $ | 5,845 |  | $ | - |  | $ | - |  | $ | - |  | $ | 8,913
Collectively evaluated for impairment |  |  | 36,534 |  |  | 31,902 |  |  | 30,438 |  |  | 77,907 |  |  | 11,465 |  |  | 14,851 |  |  | 860 |  |  | 203,957
Total ending loan balance |  | $ | 37,526 |  | $ | 32,219 |  | $ | 32,197 |  | $ | 83,752 |  | $ | 11,465 |  | $ | 14,851 |  | $ | 860 |  | $ | 212,870
The following table presents loans individually evaluated for impairment by class of loans at June 30, 2014. 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 six months ended June 30, 2014. Cash payments of interest during the three and six months ended June 30, 2014 totaled $51 and $106.
|  |  |  |  |  |  |  |  |  | Three months ended |  | Six months ended
| As of June 30, 2014 |  | June 30, 2014 |  | June 30, 2014
| 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 |  | $ | 120 |  | $ | - |  | $ | 120 |  | $ | - |  | $ | 120 |  | $ | -
Real estate: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Single-family residential |  | 342 |  |  | 181 |  |  | - |  |  | 182 |  |  | - |  |  | 183 |  |  | -
Multi-family residential |  | - |  |  | - |  |  | - |  |  | - |  |  | - |  |  | - |  |  | -
Commercial: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Non-owner occupied |  | 604 |  |  | 504 |  |  | - |  |  | 508 |  |  | - |  |  | 515 |  |  | -
Owner occupied |  | 1,969 |  |  | 1,018 |  |  | - |  |  | 1,026 |  |  | - |  |  | 1,035 |  |  | -
Land |  | - |  |  | - |  |  | - |  |  | - |  |  | - |  |  |  |  |  |
Total with no allowance recorded |  | 3,050 |  |  | 1,823 |  |  | - |  |  | 1,836 |  |  | - |  |  | 1,853 |  |  | -
With an allowance recorded: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Commercial |  | 769 |  |  | 769 |  |  | 416 |  |  | 781 |  |  | 4 |  |  | 799 |  |  | 12
Real estate: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Single-family residential |  | 125 |  |  | 125 |  |  | 1 |  |  | 125 |  |  | 1 |  |  | 126 |  |  | 3
Multi-family residential |  | 1,692 |  |  | 1,692 |  |  | 337 |  |  | 1,704 |  |  | 1 |  |  | 1,720 |  |  | 2
Commercial: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Non-owner occupied |  | 2,102 |  |  | 2,102 |  |  | 43 |  |  | 2,107 |  |  | 33 |  |  | 2,115 |  |  | 66
Owner occupied |  | 389 |  |  | 389 |  |  | 14 |  |  | 390 |  |  | 6 |  |  | 392 |  |  | 11
Land |  | 512 |  |  | 467 |  |  | 28 |  |  | 592 |  |  | 5 |  |  | 662 |  |  | 10
Total with an allowance recorded |  | 5,589 |  |  | 5,544 |  |  | 839 |  |  | 5,699 |  |  | 50 |  |  | 5,814 |  |  | 104
Total | $ | 8,639 |  | $ | 7,367 |  | $ | 839 |  | $ | 7,535 |  | $ | 50 |  | $ | 7,667 |  | $ | 104
The following table presents loans individually evaluated for impairment by class of loans at December 31, 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 six months ended June 30, 2013. Cash payments of interest during the three and six months ended June 30, 2013 totaled $57 and $114, respectively.
|  |  | Three months ended |  | Six months ended
| As of December 31, 2013 |  | June 30, 2013 |  | June 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 |  | $ | 120 |  | $ | - |  | $ | 165 |  | $ | - |  | $ | 169 |  | $ | -
Real estate: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Single-family residential |  | 352 |  |  | 191 |  |  | - |  |  | - |  |  | - |  |  | - |  |  | -
Multi-family residential |  | - |  |  | - |  |  | - |  |  | 188 |  |  | - |  |  | 192 |  |  | -
Commercial: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Non-owner occupied |  | 2,022 |  |  | 1,453 |  |  | - |  |  | 1,510 |  |  | - |  |  | 1,913 |  |  | -
Owner occupied |  | 2,021 |  |  | 1,070 |  |  | - |  |  | 1,174 |  |  | - |  |  | 1,197 |  |  | -
Land |  | - |  |  | - |  |  | - |  |  | - |  |  | - |  |  | - |  |  | -
Total with no allowance recorded |  | 4,530 |  |  | 2,834 |  |  | - |  |  | 3,037 |  |  | - |  |  | 3,471 |  |  | -
With an allowance recorded: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Commercial |  | 872 |  |  | 872 |  |  | 532 |  |  | 849 |  |  | 5 |  |  | 866 |  |  | 11
Real estate: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Single-family residential |  | 126 |  |  | 126 |  |  | - |  |  | 127 |  |  | 3 |  |  | 127 |  |  | 5
Multi-family residential |  | 1,759 |  |  | 1,759 |  |  | 402 |  |  | 1,900 |  |  | 1 |  |  | 1,922 |  |  | 2
Commercial: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Non-owner occupied |  | 2,158 |  |  | 2,158 |  |  | 46 |  |  | 2,191 |  |  | 34 |  |  | 2,211 |  |  | 69
Owner occupied |  | 397 |  |  | 397 |  |  | 7 |  |  | 390 |  |  | 6 |  |  | 392 |  |  | 12
Land |  | 812 |  |  | 767 |  |  | 138 |  |  | 377 |  |  | 6 |  |  | 381 |  |  | 11
Total with an allowance recorded |  | 6,124 |  |  | 6,079 |  |  | 1,125 |  |  | 5,834 |  |  | 55 |  |  | 5,899 |  |  | 110
Total | $ | 10,654 |  | $ | 8,913 |  | $ | 1,125 |  | $ | 8,871 |  | $ | 55 |  | $ | 9,370 |  | $ | 110
The following table presents the recorded investment in nonaccrual loans by class of loans:
| June 30, 2014 |  | December 31, 2013
Nonaccrual loans: |  |  |  |  |
Commercial | $ | 513 |  | $ | 563
Real estate: |  |  |  |  |
Single-family residential |  | 537 |  |  | 479
Multi-family residential |  | 1,636 |  |  | 1,701
Commercial: |  |  |  |  |
Non-owner occupied |  | 504 |  |  | 1,453
Owner occupied |  | 1,018 |  |  | 1,070
Land |  | 140 |  |  | 420
Consumer: |  |  |  |  |
Home equity lines of credit: |  |  |  |  |
Originated for portfolio |  | 52 |  |  | 52
Total nonaccrual and nonperforming loans | $ | 4,400 |  | $ | 5,738
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 June 30, 2014 or December 31, 2013. The following table presents the aging of the recorded investment in past due loans by class of loans as of June 30, 2014:
| 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 |  | $ | 49,687 |  | $ | 392
Real estate: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Single-family residential |  | 124 |  |  | 112 |  |  | 289 |  |  | 525 |  |  | 40,113 |  |  | 248
Multi-family residential |  | - |  |  | - |  |  | - |  |  | - |  |  | 28,271 |  |  | 1,636
Commercial: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Non-owner occupied |  | - |  |  | - |  |  | - |  |  | - |  |  | 47,776 |  |  | 504
Owner occupied |  | - |  |  | - |  |  | 808 |  |  | 808 |  |  | 37,798 |  |  | 210
Land |  | - |  |  | - |  |  | 140 |  |  | 140 |  |  | 4,712 |  |  | -
Construction |  | - |  |  | - |  |  | - |  |  | - |  |  | 24,620 |  |  | -
Consumer: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Home equity lines of credit: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Originated for portfolio |  | - |  |  | - |  |  | 52 |  |  | 52 |  |  | 14,244 |  |  | -
Purchased for portfolio |  | 120 |  |  | - |  |  | - |  |  | 120 |  |  | 1,655 |  |  | -
Other |  | 42 |  |  | - |  |  | - |  |  | 42 |  |  | 2,862 |  |  | -
Total | $ | 286 |  | $ | 112 |  | $ | 1,410 |  | $ | 1,808 |  | $ | 251,738 |  | $ | 2,990
The following table presents the aging of the recorded investment in past due loans by class of loans as of December 31, 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 |  | $ | 37,405 |  | $ | 442
Real estate: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Single-family residential |  | 352 |  |  | 268 |  |  | 247 |  |  | 867 |  |  | 31,352 |  |  | 232
Multi-family residential |  | - |  |  | - |  |  | - |  |  | - |  |  | 32,197 |  |  | 1,701
Commercial: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Non-owner occupied |  | - |  |  | - |  |  | 923 |  |  | 923 |  |  | 42,199 |  |  | 530
Owner occupied |  | - |  |  | - |  |  | - |  |  | - |  |  | 35,202 |  |  | 1,070
Land |  | - |  |  | - |  |  | 420 |  |  | 420 |  |  | 5,008 |  |  | -
Construction |  | - |  |  | - |  |  | - |  |  | - |  |  | 11,465 |  |  | -
Consumer: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Home equity lines of credit: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Originated for portfolio |  | 52 |  |  | - |  |  | - |  |  | 52 |  |  | 12,930 |  |  | 52
Purchased for portfolio |  | 123 |  |  | - |  |  | - |  |  | 123 |  |  | 1,746 |  |  | -
Other |  | 2 |  |  | 11 |  |  | - |  |  | 13 |  |  | 847 |  |  | -
Total | $ | 529 |  | $ | 279 |  | $ | 1,711 |  | $ | 2,519 |  | $ | 210,351 |  | $ | 4,027
Troubled Debt Restructurings (TDRs): As of June 30, 2014 and December 31, 2013, TDRs totaled $5.8 million and $6.1 million, respectively. The Company allocated $817 and $998 of specific reserves to loans whose terms had been modified in TDRs as of June 30, 2014 and December 31, 2013, respectively. The Company had not committed to lend any additional amounts as of June 30, 2014 or December 31, 2013 to customers with outstanding loans classified as nonaccrual TDRs. During the three and six months ended June 30, 2014, no loans were modified as a TDR, where concessions were granted to a borrower experiencing financial difficulties. During the three and six months ended June 30, 2013, there was one single-family residential loan modified as a TDR, where concessions were granted to a borrower experiencing financial difficulties. 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 loans. There were no TDRs in payment default or that became nonperforming during the period ended June 30, 2014 and 2013. 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 quarter ended June 30, 2014 and 2013 that did not meet the definition of a TDR. These loans had a total recorded investment of $8,567 and $6,350 as of June 30, 2014 and 2013, 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 payments 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 June 30, 2014 and December 31, 2013, nonaccrual TDRs were as follows:
| June 30, 2014 |  | December 31, 2013
Commercial | $ | 392 |  | $ | 442
Real estate: |  |  |  |  |
Single-family residential |  | 181 |  |  | 190
Multi-family residential |  | 1,636 |  |  | 1,701
Commercial: |  |  |  |  |
Non-owner occupied |  | - |  |  | -
Owner occupied |  | 211 |  |  | 238
Total | $ | 2,420 |  | $ | 2,571
Nonaccrual loans at June 30, 2014 and December 31, 2013 do not include $3,375 and $3,517, 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 June 30, 2014 and based on the most recent analysis performed follows. There were no loans rated doubtful at June 30, 2014.
| Not Rated |  | Pass |  | Special Mention |  | Substandard |  | Total
Commercial | $ | 689 |  | $ | 48,180 |  | $ | 78 |  | $ | 861 |  | $ | 49,808
Real estate: |  |  |  |  |  |  |  |  |  |  |  |  |  |
Single-family residential |  | 40,053 |  |  | - |  |  | - |  |  | 585 |  |  | 40,638
Multi-family residential |  | - |  |  | 25,819 |  |  | - |  |  | 2,452 |  |  | 28,271
Commercial: |  |  |  |  |  |  |  |  |  |  |  |  |  |
Non-owner occupied |  | 222 |  |  | 43,518 |  |  | 505 |  |  | 3,531 |  |  | 47,776
Owner occupied |  | - |  |  | 35,182 |  |  | 848 |  |  | 2,576 |  |  | 38,606
Land |  | 79 |  |  | 1,800 |  |  | - |  |  | 2,973 |  |  | 4,852
Construction |  | 11,227 |  |  | 13,393 |  |  | - |  |  | - |  |  | 24,620
Consumer: |  |  |  |  |  |  |  |  |  |  |  |  |  |
Home equity lines of credit: |  |  |  |  |  |  |  |  |  |  |  |  |  |
Originated for portfolio |  | 14,143 |  |  | - |  |  | - |  |  | 153 |  |  | 14,296
Purchased for portfolio |  | 1,204 |  |  | - |  |  | 405 |  |  | 166 |  |  | 1,775
Other |  | 2,904 |  |  | - |  |  | - |  |  | - |  |  | 2,904
| $ | 70,521 |  | $ | 167,892 |  | $ | 1,836 |  | $ | 13,297 |  | $ | 253,546
The recorded investment in loans by risk category and by class of loans as of December 31, 2013 follows. There were no loans rated doubtful at December 31, 2013.
| Not Rated |  | Pass |  | Special Mention |  | Substandard |  | Total
Commercial | $ | 228 |  | $ | 35,424 |  | $ | 921 |  | $ | 953 |  | $ | 37,526
Real estate: |  |  |  |  |  |  |  |  |  |  |  |  |  |
Single-family residential |  | 31,685 |  |  | - |  |  | - |  |  | 534 |  |  | 32,219
Multi-family residential |  | - |  |  | 29,667 |  |  | - |  |  | 2,530 |  |  | 32,197
Commercial: |  |  |  |  |  |  |  |  |  |  |  |  |  |
Non-owner occupied |  | 3,170 |  |  | 34,834 |  |  | 556 |  |  | 4,561 |  |  | 43,121
Owner occupied |  | - |  |  | 31,489 |  |  | 1,045 |  |  | 2,669 |  |  | 35,203
Land |  | 87 |  |  | 2,023 |  |  | - |  |  | 3,318 |  |  | 5,428
Construction |  | 2,115 |  |  | 9,350 |  |  | - |  |  | - |  |  | 11,465
Consumer: |  |  |  |  |  |  |  |  |  |  |  |  |  |
Home equity lines of credit: |  |  |  |  |  |  |  |  |  |  |  |  |  |
Originated for portfolio |  | 12,828 |  |  | - |  |  | - |  |  | 154 |  |  | 12,982
Purchased for portfolio |  | 1,285 |  |  | - |  |  | 414 |  |  | 170 |  |  | 1,869
Other |  | 860 |  |  | - |  |  | - |  |  | - |  |  | 860
| $ | 52,258 |  | $ | 142,787 |  | $ | 2,936 |  | $ | 14,889 |  | $ | 212,870

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