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Loans
 9 Months Ended
Sep. 30, 2020
Receivables [Abstract]  
Loans
NOTE 4 – LOANS
Major classifications of loans are summarized as follows:
 
   
September 30,
2020
   
December 31,
2019
 
   
(in thousands)
 
Commercial:
    
Real estate
  $183,377   $178,882 
Land development
   1,524    1,623 
Other
   59,793    34,072 
Residential real estate:
    
First mortgage
   59,456    65,450 
Construction
   2,965    2,041 
Consumer:
    
Home equity and lines of credit
   24,379    29,691 
Other
   421    611 
  
 
 
   
 
 
 
Subtotal
   331,915    312,370 
Net deferred loan costs (fees)
   (445)    304 
Allowance for loan losses
   (2,650)    (2,000) 
  
 
 
   
 
 
 
Loans, net
  $328,820   $310,674 
  
 
 
   
 
 
 
The Company provides several types of loans to its customers, including commercial, residential, construction and consumer loans. Significant loan concentrations are considered to exist 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 Company’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 Company 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, 2020 and December 31, 2019, respectively, the Company had transferred $28.6 million and $26.2 million in participation loans which were eligible for sales treatment to other financial institutions, all of which were being serviced by the Company.
An analysis of past due loans is presented below:
 
   
September 30, 2020
 
   
31-89 Days

Past Due
   
90 Days or
More Past
Due
   
Total Past
Due
   
Current
   
Total Loans
 
   
(in thousands)
 
Commercial:
          
Real estate
  $—     $—     $—     $183,377   $183,377 
Land development
   —      —      —      1,524    1,524 
Other
   —      —      —      59,793    59,793 
Residential real estate:
          
First mortgage
   664    51    715    58,741    59,456 
Construction
   —      —      —      2,965    2,965 
Consumer:
          
Home equity and lines of credit
   28    28    56    24,323    24,379 
Other
   —      —      —      421    421 
  
 
 
   
 
 
   
 
 
   
 
 
   
 
 
 
Total
  $692   $79   $771   $331,144   $331,915 
  
 
 
   
 
 
   
 
 
   
 
 
   
 
 
 
 
   
December 31, 2019
 
   
31-89 Days

Past Due
   
90 Days or
More Past
Due
   
Total Past
Due
   
Current
   
Total Loans
 
   
(in thousands)
 
Commercial:
          
Real estate
  $—     $180   $180   $178,702   $178,882 
Land development
   —      —      —      1,623    1,623 
Other
   148    —      148    33,924    34,072 
Residential real estate:
          
First mortgage
   1,059    537    1,596    63,854    65,450 
Construction
   —      —      —      2,041    2,041 
Consumer:
          
Home equity and lines of credit
   13    —      13    29,678    29,691 
Other
   —      —      —      611    611 
  
 
 
   
 
 
   
 
 
   
 
 
   
 
 
 
Total
  $1,220   $717   $1,937   $310,433   $312,370 
  
 
 
   
 
 
   
 
 
   
 
 
   
 
 
 
There were no loans 90 days or more past due and accruing interest as of September 30, 2020 or December 31, 2019.
A summary of activity in the allowance for loan losses for the three and nine months ended September 30, 2020 and September 30, 2019 is presented below:
 
   
Commercial
   
Residential
   
Consumer
   
Total
 
   
(in thousands)
 
Three months ended September 30, 2020
        
Allowance for loan losses
        
Beginning balance
  $1,243   $573   $298   $2,114 
Provision for loan losses
   360    100    40    500 
Loans
charged-off
   —      (60)    (2)    (62) 
Recoveries
   2    88    8    98 
  
 
 
   
 
 
   
 
 
   
 
 
 
Ending balance
  $1,605   $701   $344   $2,650 
  
 
 
   
 
 
   
 
 
   
 
 
 
Three months ended September 30, 2019
        
Allowance for loan losses
        
Beginning balance
  $1,445   $1,172   $570   $3,187 
Provision for loan losses
   —      —      —      —   
Loans
charged-off
   —      —      (181)    (181) 
Recoveries
   6    —      6    12 
  
 
 
   
 
 
   
 
 
   
 
 
 
Ending balance
  $1,451   $1,172   $395   $3,018 
  
 
 
   
 
 
   
 
 
   
 
 
 
   
Commercial
   
Residential
   
Consumer
   
Total
 
   
(in thousands)
 
Nine months ended September 30, 2020
        
Allowance for loan losses
        
Beginning balance
  $1,235   $573   $192   $2,000 
Provision (credit) for loan losses
   360    100    40    500 
Loans
charged-off
   —      (60)    (7)    (67) 
Recoveries
   10    88    119    217 
  
 
 
   
 
 
   
 
 
   
 
 
 
Ending balance
  $1,605   $701   $344   $2,650 
  
 
 
   
 
 
   
 
 
   
 
 
 
Nine months ended September, 2019
        
Allowance for loan losses
        
Beginning balance
  $1,448   $1,250   $564   $3,262 
Provision (credit) for loan losses
   —      —      —      —   
Loans
charged-off
   (214)    (83)    (186)    (483) 
Recoveries
   217    5    17    239 
  
 
 
   
 
 
   
 
 
   
 
 
 
Ending balance
  $1,451   $1,172   $395   $3,018 
  
 
 
   
 
 
   
 
 
   
 
 
 
A summary of the allowance for loan losses for loans evaluated individually and collectively for impairment is presented below:
 
   
September 30, 2020
 
   
Commercial
   
Residential
   
Consumer
   
Total
 
   
(in thousands)
 
Loans:
        
Individually evaluated for impairment
  $11,529   $517   $27   $12,073 
Collectively evaluated for impairment
   233,165    61,904    24,773    319,842 
  
 
 
   
 
 
   
 
 
   
 
 
 
Total loans
  $244,694   $62,421   $24,800   $331,915 
  
 
 
   
 
 
   
 
 
   
 
 
 
Allowance for loan losses:
        
Individually evaluated for impairment
  $—     $—     $5   $5 
Collectively evaluated for impairment
   1,605    701    339    2,645 
  
 
 
   
 
 
   
 
 
   
 
 
 
Total allowance for loan losses
  $1,605   $701   $344   $2,650 
  
 
 
   
 
 
   
 
 
   
 
 
 
   
December 31, 2019
 
   
Commercial
   
Residential
   
Consumer
   
Total
 
   
(in thousands)
 
Loans:
        
Individually evaluated for impairment
  $6,931   $1,078   $32   $8,041 
Collectively evaluated for impairment
   207,646    66,413    30,270    304,329 
  
 
 
   
 
 
   
 
 
   
 
 
 
Total loans
  $214,577   $67,491   $30,302   $312,370 
  
 
 
   
 
 
   
 
 
   
 
 
 
Allowance for loan losses:
        
Individually evaluated for impairment
  $—     $62   $5   $67 
Collectively evaluated for impairment
   1,235    511    187    1,933 
  
 
 
   
 
 
   
 
 
   
 
 
 
Total allowance for loan losses
  $1,235   $573   $192   $2,000 
  
 
 
   
 
 
   
 
 
   
 
 
 
 
The Company regularly evaluates various attributes of loans to determine the appropriateness of the allowance for loan 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.
Doubtful
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 unlikely.
A summary of the Company’s internal risk ratings of loans is presented below:
 
   
September 30, 2020
 
   
Pass
   
Watch and
Special
Mention
   
Substandard
   
Total
 
   
(in thousands)
 
Commercial:
        
Real estate
  $150,199   $27,047   $6,131   $183,377 
Land development
   —      —      1,524    1,524 
Other
   43,372    12,769    3,652    59,793 
  
 
 
   
 
 
   
 
 
   
 
 
 
Total
  $193,571   $39,816   $11,307   $244,694 
  
 
 
   
 
 
   
 
 
   
 
 
 
   
December 31, 2019
 
   
Pass
   
Watch and
Special
Mention
   
Substandard
   
Total
 
   
(in thousands)
 
Commercial:
        
Real estate
  $168,834   $4,418   $5,630   $178,882 
Land development
   —      1,623    —      1,623 
Other
   27,522    5,517    1,033    34,072 
  
 
 
   
 
 
   
 
 
   
 
 
 
Total
  $196,356   $11,558   $6,663   $214,577 
  
 
 
   
 
 
   
 
 
   
 
 
 
There were no loans rated Doubtful or Loss as of September 30, 2020 or December 31, 2019, respectively.
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, 2020
 
   
Performing
   
Non
Performing
   
Total
 
   
(in thousands)
 
Residential real estate:
      
First mortgage
  $58,182   $1,274   $59,456 
Construction
   2,965    —      2,965 
Consumer:
      
Home equity and lines of credit
   24,236    143    24,379 
Other
   421    —      421 
  
 
 
   
 
 
   
 
 
 
Total
  $85,804   $1,417   $87,221 
  
 
 
   
 
 
   
 
 
 
   
December 31, 2019
 
   
Performing
   
Non
Performing
   
Total
 
   
(in thousands)
 
Residential real estate:
      
First mortgages
  $63,760   $1,690   $65,450 
Construction
   2,041    —      2,041 
Consumer:
      
Home equity and lines of credit
   29,548    143    26,691 
Other
   611    —      611 
  
 
 
   
 
 
   
 
 
 
Total
  $95,960   $1,833   $97,793 
  
 
 
   
 
 
   
 
 
 
Information regarding impaired loans is presented below:
 
   
As of and for the Nine Months Ended September 30, 2020
 
   
Recorded
Investment
   
Unpaid
Principal
   
Reserve
   
Average
Investment
   
Interest
Recognized
 
   
(in thousands)
 
Impaired loans with reserve:
          
Commercial:
          
Real estate
  $—     $—     $—     $—     $—   
Land development
   —      —      —      —      —   
Other
   —      —      —      —      —   
Residential real estate:
          
First mortgages
   —      —      —      48    —   
Construction
   —      —      —      —      —   
Consumer:
          
Home equity and lines of credit
   5    6    5    5    —   
Other
   —      —      —      —      —   
  
 
 
   
 
 
   
 
 
   
 
 
   
 
 
 
Total impaired loans with reserve
   5    6    5    53    —   
  
 
 
   
 
 
   
 
 
   
 
 
   
 
 
 
Impaired loans with no reserve:
          
Commercial:
          
Real estate
   6,352    6,352    NA    6,257    275 
Land development
   1,525    1,525    NA    169    17 
Other
   3,652    3,789    NA    1,983    89 
Residential real estate:
          
First mortgages
   517    641    NA    620    254 
Construction
   —      —      NA    —      —   
Consumer:
          
Home equity and lines of credit
   22    51    NA    24    2 
Other
   —      —      NA    —      —   
  
 
 
   
 
 
   
 
 
   
 
 
   
 
 
 
Total impaired loans with no reserve
   12,068    12,358    NA    9,053    637 
  
 
 
   
 
 
   
 
 
   
 
 
   
 
 
 
Total impaired loans
  $12,073   $12,364   $5   $9,106   $637 
  
 
 
   
 
 
   
 
 
   
 
 
   
 
 
 
   
As of and for the Year Ended December 31, 2019
 
   
Recorded
Investment
   
Unpaid
Principal
   
Reserve
   
Average
Investment
   
Interest
Recognized
 
   
(in thousands)
 
Impaired loans with reserve:
          
Commercial:
          
Real estate
  $—     $—     $—     $—     $—   
Land development
   —      —      —      —      —   
Other
   —      —      —      —      —   
Residential real estate:
          
First mortgages
   62    62    62    43    —   
Construction
   —      —      —      —      —   
Consumer:
          
Home equity and lines of credit
   5    6    5    16    —   
Other
   —      —      —      —      —   
  
 
 
   
 
 
   
 
 
   
 
 
   
 
 
 
Total impaired loans with reserve
   67    68    67    59    —   
  
 
 
   
 
 
   
 
 
   
 
 
   
 
 
 
Impaired loans with no reserve:
          
Commercial:
          
Real estate
   5,840    5,840    NA    1,824    87 
Land development
   —      —      NA    126    —   
Other
   1,091    1,091    NA    488    23 
Residential real estate:
          
First mortgages
   1,016    1,350    NA    1,056    18 
Construction
   —      —      NA    —      —   
Consumer:
          
Home equity and lines of credit
   27    56    NA    29    —   
Other
   —      —      NA    —      —   
  
 
 
   
 
 
   
 
 
   
 
 
   
 
 
 
Total impaired loans with no reserve
   7,974    8,337    NA    3,523    128 
  
 
 
   
 
 
   
 
 
   
 
 
   
 
 
 
Total impaired loans
  $8,041   $8,405   $67   $3,582   $128 
  
 
 
   
 
 
   
 
 
   
 
 
   
 
 
 
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, 2020 and December 31, 2019.
Nonperforming loans are as follows:
 
   
September 30,
2020
   
December 31,
2019
 
   
(in thousands)
 
Nonaccrual loans, other than troubled debt restructurings
  $1,093   $1,416 
Nonaccrual loans, troubled debt restructurings
   324    597 
  
 
 
   
 
 
 
Total nonperforming loans (NPLs)
  $1,417   $2,013 
  
 
 
   
 
 
 
Troubled debt restructurings, accruing
  $435   $466 
  
 
 
   
 
 
 
There were no loans modified as troubled debt restructurings during the nine months ended September 30, 2020 and year ended December 31, 2019.
The provisions of the March 2020 Coronavirus Aid, Relief and Economic Security (“CARES”) Act included an election to not apply the guidance on accounting for troubled debt restructurings to loan modifications, such as extensions or deferrals, related to
COVID-19
made between March 1, 2020 and the earlier of (i) December 31, 2020 or (ii) 60 days after the end of the
COVID-19
national emergency. The relief can only be applied to modifications for loans that were not more than 30 days past due as of December 31, 2019. The Company elected to adopt these provisions of the CARES Act. As of September 30, 2020, the Company had 1 to 3 month deferrals of approximately $155,000 in interest, escrow, and principal payments on $16.4 million in outstanding loans.
The Company considers a troubled debt restructuring in default if it becomes past due more than 90 days. There were no
troubled debt restructurings within the past twelve months for which there was a default during the nine months ended September 30, 2020 and 2019.
Information on
non-accrual
loans is presented below:
 
   
September 30,
2020
  
December 31,
2019
 
   
(in thousands)
 
Commercial:
   
Real estate
  $—    $180 
Land development
   —     —   
Other
   —     —   
Residential real estate:
   
First mortgages
   1,274   1,690 
Construction
   —     —   
Consumer:
   
Home equity and lines of credit
   143   143 
Other
   —     —   
  
 
 
  
 
 
 
Total
non-accrual
loans
  $1,417  $2,013 
  
 
 
  
 
 
 
Total
non-accrual
loans to total loans
   0.43%   0.64% 
Total
non-accrual
loans to total assets
   0.28%   0.47%