Loans

9 Months Ended

Sep. 30, 2018

Receivables [Abstract]

Loans

NOTE 4 – LOANS

Major classifications of loans are summarized as follows:

	September 30, 2018			December 31, 2017
	(in thousands)
Commercial:
Real estate	$	184,953		$	156,991
Land		2,169			2,687
Other		32,846			19,715
Residential real estate:
First mortgages		108,061			106,120
Construction		4,785			3,358
Consumer:
Home equity and lines of credit		37,850			42,344
Other		2,036			2,495
Subtotal		372,700			333,710
Net deferred loan fees		515			589
Allowance for loan and lease losses		(3,242	)		(3,093	)
Loans, net	$	369,973		$	331,206

The Bank provides several types of loans to its customers, including commercial, residential, construction and consumer loans. Significant loan concentrations are considered to exit for a financial institution when there are amounts loaned to one borrower or to multiple borrowers engaged in similar activities that would cause them to be similarly impacted by economic or other conditions. While the Bank’s credit risks are geographically concentrated within the metropolitan Milwaukee, Wisconsin area, there are no concentrations with individual borrowers or groups of related borrowers.

During the normal course of business, the Bank may transfer a portion of a loan as a participation loan to another financial institution in order to manage portfolio risk. In order to be eligible for sales treatment, all cash flows from the loan must be divided proportionately, and rights of each loan holder must have the same priority, the loan holders must have no recourse to the transferor other than standard representations and warranties, and no loan holder can have the right to pledge or exchange the entire loan. As of September 30, 2018 and December 31, 2017, respectively, the Bank had transferred $6,200 and $9,074 in participation loans to other financial institutions, all of which were being serviced by the Bank.

An analysis of past due loans is presented below:

	September 30, 2018
	30-89 Days Past Due		90 Days or More Past Due		Total Past Due		Current		Total Loans
	(in thousands)
Commercial:
Real estate	$	—	$	—	$	—	$	184,953	$	184,953
Land		—		303		303		1,866		2,169
Other		—		—		—		32,846		32,846
Residential real estate:
First mortgages		277		414		691		107,370		108,061
Construction		—		—		—		4,785		4,785
Consumer:
Home equity and lines of credit		80		25		105		37,745		37,850
Other		3		—		3		2,033		2,036
Total	$	360	$	742	$	1,102	$	371,598	$	372,700

	December 31, 2017
	30-89 Days Past Due		90 Days or More Past Due		Total Past Due		Current		Total Loans
	(in thousands)
Commercial:
Real estate	$	6	$	—	$	6	$	156,985	$	156,991
Land		—		303		303		2,384		2,687
Other		—		—		—		19,715		19,715
Residential real estate:
First mortgages		2,156		56		2,212		103,908		106,120
Construction		—		—		—		3,358		3,358
Consumer:
Home equity and lines of credit		526		124		650		41,694		42,344
Other		11		1		12		2,483		2,495
Total	$	2,699	$	484	$	3,183	$	330,527	$	333,710

There were no loans 90 days or more past due and accruing interest as of September 30, 2018 or December 31, 2017.

A summary of activity in the allowance for loan and lease losses for the three and nine months ended September 30, 2018 and 2017 is presented below:

	Commercial		Residential		Consumer			Total
	(in thousands)
Three months ended September 30, 2018
Allowance for loan and lease losses
Beginning balance	$	1,380	$	1,250	$	462		$	3,092
Provision for loan and lease losses		—		—		—			—
Loans charged-off		—		—		(84	)		(84	)
Recoveries		49		—		185			234
Ending balance	$	1,429	$	1,250	$	563		$	3,242
Three months ended September 30, 2017
Allowance for loan and lease losses
Beginning balance	$	1,355	$	1,230	$	463		$	3,048
Provision for loan and lease losses		—		—		—			—
Loans charged-off		—		—		(26	)		(26	)
Recoveries		5		5		37			47
Ending balance	$	1,360	$	1,235	$	474		$	3,069
Nine months ended September 30, 2018
Allowance for loan and lease losses
Beginning balance	$	1,368	$	1,247	$	478		$	3,093
Provision for loan and lease losses		—		—		—			—
Loans charged-off		—		—		(118	)		(118	)
Recoveries		61		3		203			267
Ending balance	$	1,429	$	1,250	$	563		$	3,242
Nine months ended September 30, 2017
Allowance for loan and lease losses
Beginning balance	$	1,344	$	1,225	$	439		$	3,008
Provision for loan and lease losses		—		—		—			—
Loans charged-off		—		—		(34	)		(34	)
Recoveries		16		10		69			95
Ending balance	$	1,360	$	1,235	$	474		$	3,069

A summary of the allowance for loan and lease losses for loans evaluated individually and collectively for impairment is presented below:

	September 30, 2018
	Commercial		Residential		Consumer		Total
	(in thousands)
Loans:
Individually evaluated for impairment	$	938	$	1,322	$	—	$	2,260
Collectively evaluated for impairment		219,030		111,524		39,886		370,440
Total loans	$	219,968	$	112,846	$	39,886	$	372,700
Allowance for loan and lease losses:
Individually evaluated for impairment	$	—	$	12	$	—	$	12
Collectively evaluated for impairment		1,429		1,238		563		3,230
Total allowance for loan and lease losses	$	1,429	$	1,250	$	563	$	3,242

	December 31, 2017
	Commercial		Residential		Consumer		Total
	(in thousands)
Loans:
Individually evaluated for impairment	$	2,529	$	1,888	$	—	$	4,417
Collectively evaluated for impairment		176,864		107,590		44,839		329,293
Total loans	$	179,393	$	109,478	$	44,839	$	333,710
Allowance for loan and lease losses:
Individually evaluated for impairment	$	—	$	230	$	—	$	230
Collectively evaluated for impairment		1,368		1,017		478		2,863
Total allowance for loan and lease losses	$	1,368	$	1,247	$	478	$	3,093

The Bank regularly evaluates various attributes of loans to determine the appropriateness of the allowance for loan and lease losses. The credit quality indicators monitored differ depending on the class of loan.

Pass ratings are assigned to loans with adequate collateral and debt service ability such that collectability of the contractual loan payments is highly probable.

Watch and Special Mention ratings are assigned to loans where management has some concern that the collateral or debt service ability may not be adequate, though the collectability of the contractual loan payments is still probable.

Substandard ratings are assigned to loans that do not have adequate collateral and/or debt service ability such that collectability of the contractual loan payments is no longer probable.

A summary of the Bank’s internal risk ratings of loans is presented below:

	September 30, 2018
	Pass		Watch and Special Mention		Substandard		Total
	(in thousands)
Commercial:
Real estate	$	179,127	$	4,423	$	1,403	$	184,953
Land		1,826		40		303		2,169
Other		27,971		4,707		168		32,846
Total	$	208,924	$	9,170	$	1,874	$	219,968
	December 31, 2017
	Pass		Watch and Special Mention		Substandard		Total
	(in thousands)
Commercial:
Real estate	$	144,763	$	9,786	$	2,442	$	156,991
Land		2,384		—		303		2,687
Other		14,505		5,178		32		19,715
Total	$	161,652	$	14,964	$	2,777	$	179,393

There were no loans rated Doubtful or Loss as of September 30, 2018 and December 31, 2017.

Residential real estate and consumer loans are generally evaluated based on whether or not loans are performing in accordance with their contractual terms. Information regarding the credit quality indicators most closely monitored for residential real estate and consumer loans is presented below:

	September 30, 2018
	Performing		Non Performing		Total
	(in thousands)
Residential real estate:
First mortgages	$	106,941	$	1,120	$	108,061
Construction		4,785		—		4,785
Consumer:
Home equity and lines of credit		37,661		189		37,850
Other		2,036		—		2,036
Total	$	151,423	$	1,309	$	152,732
	December 31, 2017
	Performing		Non Performing		Total
	(in thousands)
Residential real estate:
First mortgages	$	105,083	$	1,037	$	106,120
Construction		3,358		—		3,358
Consumer:
Home equity and lines of credit		41,819		525		42,344
Other		2,493		2		2,495
Total	$	152,753	$	1,564	$	154,317

Information regarding impaired loans is presented below:

	As and for the Nine Months Ended September 30, 2018
	Recorded Investment		Unpaid Principal		Reserve		Average Investment		Interest Recognized
	(in thousands)
Impaired loans with reserve:
Commercial:
Real estate	$	—	$	—	$	—	$	—	$	—
Land		—		—		—		—		—
Other		—		—		—		—		—
Residential real estate:
First mortgages		97		97		12		72		—
Construction		—		—		—		—		—
Consumer:
Home equity and lines of credit		—		—		—		11		—
Other		—		—		—		190		6
Total impaired loans with reserve	$	97	$	97	$	12	$	272	$	6
Impaired loans with no reserve:
Commercial:
Real estate	$	635	$	635	$	N/A	$	665	$	33
Land		303		303		N/A		303		—
Other		—		—		N/A		25		—
Residential real estate:
First mortgages		1,225		1,502		N/A		1,254		19
Construction		—		—		N/A		—		—
Consumer:
Home equity and lines of credit		—		—		N/A		—		—
Other		—		—		N/A		—		—
Total impaired loans with no reserve	$	2,163	$	2,440	$	N/A	$	2,247	$	52
Total impaired loans	$	2,260	$	2,537	$	12	$	2,319	$	52

	As and for the Year Ended December 31, 2017
	Recorded Investment		Unpaid Principal		Reserve		Average Investment		Interest Recognized
	(in thousands)
Impaired loans with reserve:
Commercial:
Real estate	$	—	$	—	$	—	$	—	$	—
Land		—		—		—		—		—
Other		—		—		—		—		—
Residential real estate:
First mortgages		378		392		230		394		15
Construction		—		—		—		—		—
Consumer:
Home equity and lines of credit		—		—		—		—		—
Other		—		—		—		—		—
Total impaired loans with reserve	$	378	$	392	$	230	$	394	$	15
Impaired loans with no reserve:
Commercial:
Real estate	$	2,024	$	2,024	$	—	$	2,192	$	148
Land		303		303		—		303		—
Other		202		202		—		138		3
Residential real estate:
First mortgages		1,510		1,785		—		1,838		89
Construction		—		—		—		—		—
Consumer:
Home equity and lines of credit		—		—		—		—		—
Other		—		—		—		—		—
Total impaired loans with no reserve	$	4,039	$	4,314	$	—	$	4,471	$	240
Total impaired loans	$	4,417	$	4,706	$	230	$	4,865	$	255

Management regularly monitors impaired loan relationships. In the event facts and circumstances change, additional reserves may be necessary.

There were no additional funds committed to impaired loans as of September 30, 2018 and December 31, 2017.

Information regarding troubled debt restructurings is presented below:

	September 30, 2018
	Accruing				Non-accruing				Total
	Amount		Number		Amount		Number		Amount		Number
	(in thousands)
Commercial:
Real estate	$	—	$	—	$	—	$	—	$	—	$	—
Land		—		—		—		—		—		—
Other		—		—		—		—		—		—
Residential real estate:
First mortgages		462		2		644		5		1,106		7
Construction		—		—		—		—		—		—
Consumer:
Home equity and lines of credit		—		—		32		1		32		1
Other		—		—		—		—		—		—
Total	$	462	$	2	$	676	$	6	$	1,138	$	8
	December 31, 2017
	Accruing				Non-accruing				Total
	Amount		Number		Amount		Number		Amount		Number
	(in thousands)
Commercial:
Real estate	$	—	$	—	$	—	$	—	$	—	$	—
Land		—		—		—		—		—		—
Other		—		—		—		—		—		—
Residential real estate:
First mortgages		729		4		795		5		1,524		9
Construction		—		—		—		—		—		—
Consumer:
Home equity and lines of credit		—		—		34		1		34		1
Other		—		—		—		—		—		—
Total	$	729	$	4	$	829	$	6	$	1,558	$	10

There were no loans modified as troubled debt restructurings during the three or nine months ended September 30, 2018 and 2017.

There were no troubled debt restructurings within the past twelve months for which there was a default during the three or nine months ended September 30, 2018 and 2017. The Bank considers a troubled debt restructuring in default if it becomes past due more than 90 days.

Information on non-accrual loans is presented below:

	September 30, 2018			December 31, 2017
	(in thousands)
Non-accrual loans:
Commercial:
Real estate	$	—		$	—
Land		303			303
Other		20			32
Residential real estate:
First mortgages		1,120			1,128
Construction		—			—
Consumer:
Home equity and lines of credit		189			420
Other		—			4
Total non-accrual loans	$	1,632		$	1,887
Total non-accrual loans to total loans		0.44	%		0.57	%
Total non-accrual loans to total assets		0.34	%		0.40	%