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Loans
 12 Months Ended
Dec. 31, 2020
Receivables [Abstract]  
Loans
NOTE 4 — Loans
Major classifications of loans are as follows:
 
   
As of December 31,
 
   
2020
   
2019
 
Commercial:
          
Real estate
  $189,291   $178,882 
Land development
   1,492    1,623 
Other
   46,184    34,072 
Residential real estate:
          
First mortgage
   68,968    65,450 
Construction
   2,954    2,041 
Consumer:
          
Home equity and lines of credit
   22,348    29,691 
Other
   361    611 
   
 
 
   
 
 
 
Subtotal
   331,598    312,370 
Net deferred loan costs
   178    304 
Allowance for loan losses
   (2,703)    (2,000) 
   
 
 
   
 
 
 
Net loans
  $329,073   $310,674 
   
 
 
   
 
 
 
Deposit accounts in an overdrawn position and reclassified as loans totaled $141 and $114 at December 31, 2020 and 2019, respectively.
The Coronavirus Aid, Relief and Economic Security (“CARES”) Act authorized the Small Business Administration (“SBA”) to temporarily guarantee loans under a new loan program called the Paycheck Protection Program (“PPP”). As a qualified SBA lender, we were automatically authorized to originate PPP loans. The Company actively participated in assisting our customers with applications for resources through the program until its closing on August 8, 2020. PPP loans originated by the Company have: (a) an interest rate of 1.0%, (b)
two-year
and five-year loan terms to maturity; and (c) principal and interest payments deferred for ten months after the end date of the borrowers forgiveness period. The SBA will guarantee 100% of the PPP loans made to eligible borrowers. The entire principal amount of the borrower’s PPP loan, including any accrued interest, is eligible to be reduced by the loan forgiveness amount under the PPP. As of December 31, 2020, we have funded 246 PPP loans with outstanding balances totaling $17.2 million, included within the commercial loan balances above.
The Company provides several types of loans to its customers, including commercial, residential, construction and consumer loans. Significant loan concentrations are considered to exist 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 credit risks tend to be geographically concentrated in the Company’s metropolitan Milwaukee market area, and while a significant portion of the Company’s loan portfolio is secured by commercial and residential real estate, there are no significant concentrations whose primary sources of repayment are reliant upon an individual or group 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 December 31, 2020 and December 31, 2019, respectively, the Company had transferred $29.6 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.
A summary of the activity in the allowance for loan losses by portfolio segment is as follows:
 
December 31, 2020
  
Commercial
   
Residential
   
Consumer
   
Total
 
Beginning balance
  $1,235   $573   $192   $2,000 
Provision for loan losses
   360    100    40    500 
Loans charged off
   —      (60)    (8)    (68) 
Recoveries of loans previously charged off
   14    132    125    271 
   
 
 
   
 
 
   
 
 
   
 
 
 
Total ending allowance balance
  $1,609   $745   $349   $2,703 
   
 
 
   
 
 
   
 
 
   
 
 
 
     
December 31, 2019
  
Commercial
   
Residential
   
Consumer
   
Total
 
Beginning balance
  $1,448   $1,250   $564   $3,262 
Provision (credit) for loan losses
   (222)    (599)    (211)    (1,032) 
Loans charged off
   (214)    (83)    (269)    (566) 
Recoveries of loans previously charged off
   223    5    108    336 
   
 
 
   
 
 
   
 
 
   
 
 
 
Total ending allowance balance
  $1,235   $573   $192   $2,000 
   
 
 
   
 
 
   
 
 
   
 
 
 
Information about how loans were evaluated for impairment and the related allowance for loan losses follows:
 
December 31, 2020
  
Commercial
   
Residential
   
Consumer
   
Total
 
Loans:
                    
Individually evaluated for impairment
  $10,573   $411   $21   $11,005 
Collectively evaluated for impairment
   226,394    71,511    22,688    320,593 
   
 
 
   
 
 
   
 
 
   
 
 
 
Total loans
  $236,967   $71,922   $22,709   $331,598 
   
 
 
   
 
 
   
 
 
   
 
 
 
Allowance for loan losses:
                    
Individually evaluated for impairment
  $—     $—     $—     $—   
Collectively evaluated for impairment
   1,609    745    349    2,703 
   
 
 
   
 
 
   
 
 
   
 
 
 
Total allowance for loan losses
  $1,609   $745   $349   $2,703 
   
 
 
   
 
 
   
 
 
   
 
 
 
 
December 31, 2019
  
Commercial
   
Residential
   
Consumer
   
Total
 
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 
   
 
 
   
 
 
   
 
 
   
 
 
 
Information regarding impaired loans follows:
 
   
Recorded
Investment
   
Principal
Balance
   
Related
Allowance
   
Average
Investment
   
Interest
Recognized
 
December 31, 2020
                         
Loans with no related allowance for loan losses:
 
                    
Commercial:
                         
Real estate
  $6,277   $6,277    NA   $6,268   $332 
Land development
   1,492    1,492    NA    503    40 
Other
   2,804    2,804    NA    2,301    138 
Residential real estate and consumer:
                         
First mortgage
   411    495    NA    568    261 
Home equity and lines of credit
   21    51    NA    24    3 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
 
Total loans with no related allowance for loan losses
   11,005    11,119    NA    9,664    774 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
 
Loans with related allowance for loan losses:
                         
Residential real estate and consumer:
                         
First mortgage
   —      —      —      36    —   
Home equity and lines of credit
   —      —      —      4    —   
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
 
Total loans with related allowance for loan losses
   —      —      —      40    —   
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
 
Grand totals
  $11,005   $11,119   $—     $9,704   $774 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
 
December 31, 2019
                         
Loans with no related allowance for loan losses:
 
                    
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 and consumer:
                         
First mortgage
   1,016    1,350    NA    1,056    18 
Home equity and lines of credit
   27    56    NA    29    —   
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
 
Total loans with no related allowance for loan losses
   7,974    8,337    NA    3,523    128 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
 
Loans with related allowance for loan losses:
                         
Residential real estate and consumer:
                         
First mortgage
   62    62    62    43    —   
Home equity and lines of credit
   5    6    5    16    —   
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
 
Total loans with related allowance for loan losses
   67    68    67    59    —   
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
 
Grand totals
  $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 December 31, 2020 and 2019, respectively.
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 / 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, and collectability of the contractual loan payments is unlikely.
Information regarding the credit quality indicators most closely monitored for commercial loans by class follows:
 
December 31, 2020
  
Pass
   
Watch and Special
Mention
   
Substandard
   
Total
 
Real estate
  $163,961   $19,272   $6,058   $189,291 
Land development
   —      —      1,492    1,492 
Other
   37,675    5,705    2,804    46,184 
   
 
 
   
 
 
   
 
 
   
 
 
 
Total
  $201,636   $24,977   $10,354   $236,967 
   
 
 
   
 
 
   
 
 
   
 
 
 
     
December 31, 2019
  
Pass
   
Watch and Special
Mention
   
Substandard
   
Total
 
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 as doubtful at December 31, 2020 and December 31, 2019.
 
Residential real estate and consumer loans are generally evaluated based on whether or not the loan is performing according to the contractual terms of the loan.
Information regarding the credit quality indicators most closely monitored for residential real estate and consumer loans by class follows:
 
December 31, 2020
  
Performing
   
Non
Performing
   
Total
 
Residential real estate:
               
First mortgages
  $67,817   $1,151   $68,968 
Construction
   2,954    —    2,954 
Consumer:
               
Home equity and lines of credit
   22,212    136    22,348 
Other
   361    —    361 
   
 
 
   
 
 
   
 
 
 
Total
  $93,344   $1,287   $94,631 
   
 
 
   
 
 
   
 
 
 
    
December 31, 2019
  
Performing
   
Non
Performing
   
Total
 
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    29,691 
Other
   611    —    611 
   
 
 
   
 
 
   
 
 
 
Total
  $95,960   $1,833   $97,793 
   
 
 
   
 
 
   
 
 
 
Loan aging and
non-accrual
information follows:
 
December 31, 2020
  
Current
Loans
   
Loans Past
Due
30-89

Days
   
Loans Past
Due 90+ Days
   
Total Loans
  
Non-accrual

Loans
     
Commercial:
                        
Real estate
  $189,050   $241   $—     $189,291  $—        
Land development
   1,492    —      —     1,492   —        
Other
   46,151    33    —     46,184   —        
Residential real estate:
                        
First mortgage
   68,147    684    137   68,968   1,151      
Construction
   2,954    —      —     2,954   —        
Consumer:
                        
Home equity and lines of credit
   22,204    121    23   22,348   136      
Other
   361    —      —     361   —        
   
 
 
   
 
 
   
 
 
   
 
  
 
 
      
Total
  $330,359   $1,079   $160   $331,598  $1,287      
   
 
 
   
 
 
   
 
 
   
 
  
 
 
      
    
         Total
non-accrual
loans to total loans		    0.39% 
         Total
non-accrual
loans to total assets		    0.25% 
 
December 31, 2019
  
Current
Loans
   
Loans Past
Due
30-89

Days
   
Loans Past
Due 90+
Days
   
Total
Loans
   
Non-accrual

Loans
     
Commercial:
                         
Real estate
  $178,702   $—     $180   $178,882   $180      
Land development
   1,623    —      —      1,623    —        
Other
   33,924    148    —      34,072    —        
Residential real estate:
                         
First mortgage
   63,854    1,059    537    65,450    1,690      
Construction
   2,041    —      —      2,041    —        
Consumer:
                         
Home equity and lines of credit
   29,678    13    —      29,691    143      
Other
   611    —      —      611    —        
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
      
Total
  $310,433   $1,220   $717   $312,370   $2,013      
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
      
    
         Total
non-accrual
loans to total loans		    0.64% 
         Total
non-accrual
loans to total assets		    0.47% 
There are no loans 90 or more days past due and accruing interest as of December 31, 2020 or 2019.
Non-performing
loans are as follows:
 
   
Years ended December 31,
 
   
2020
   
2019
 
Non-accrual
loans, other than troubled debt restructurings
  $1,068   $1,416 
Non-accrual
loans, troubled debt restructurings
   219    597 
   
 
 
   
 
 
 
Total
non-performing
loans (NPLs)
  $1,287   $2,013 
   
 
 
   
 
 
 
Restructured loans, accruing
  $432   $446 
   
 
 
   
 
 
 
There were no loans modified as troubled debt restructurings during years ended December 31, 2020 and December 31, 2019.
The provisions of the March 2020 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 December 31, 2020, the Company had deferrals of $308 in interest, escrow and principal payments on $14.1 million in outstanding loans.
The Company considers a troubled debt restructuring in default if it becomes past due more than 90 days. No troubled debt restructurings defaulted within twelve months of their modification date during the years ended December 31, 2020 and 2019.