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Loans
 3 Months Ended
Mar. 31, 2021
Receivables [Abstract]  
Loans
NOTE 4 – LOANS
Major classifications of loans are summarized as follows:
 
   
March 31,
2021
   
December 31,
2020
 
   
(in thousands)
 
Commercial:
          
Real estate
  $184,400   $189,291 
Land development
   1,475    1,492 
Other
   43,915    46,184 
Residential real estate:
          
First mortgage
   77,934    68,968 
Construction
   2,042    2,954 
Consumer:
          
Home equity and lines of credit
   19,955    22,348 
Other
   273    361 
   
 
 
   
 
 
 
Subtotal
   329,994    331,598 
Net deferred loan costs
   270    178 
Allowance for loan losses
   (2,699)    (2,703) 
   
 
 
   
 
 
 
Loans, net
  $327,565   $329,073 
   
 
 
   
 
 
 
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 March 31, 2021 and December 31, 2020, respectively, the Company had transferred $31.8 million and $29.6 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:
 
   
March 31, 2021
 
   
30-89 Days

Past Due
   
90 Days or
More Past
Due
   
Total Past
Due
   
Current
   
Total Loans
 
   
(in thousands)
 
Commercial:
                         
Real estate
  $—     $—     $—     $184,400   $184,400 
Land development
   —      —      —      1,475    1,475 
Other
   —      —      —      43,915    43,915 
Residential real estate:
                         
First mortgage
   918    —      918    77,016    77,934 
Construction
   —      —      —      2,042    2,042 
Consumer:
                         
Home equity and lines of credit
   28    5    33    19,922    19,955 
Other
   —      —      —      273    273 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
 
Total
  $946   $5   $951   $329,043   $329,994 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
 

 
   
December 31, 2020
 
   
30-89 Days

Past Due
   
90 Days or
More Past
Due
   
Total Past
Due
   
Current
   
Total Loans
 
   
(in thousands)
 
Commercial:
                         
Real estate
  $241   $—     $241   $189,050   $189,291 
Land development
   —      —      —      1,492    1,492 
Other
   33    —      33    46,151    46,184 
Residential real estate:
                         
First mortgage
   684    137    821    68,147    68,968 
Construction
   —      —      —      2,954    2,954 
Consumer:
                         
Home equity and lines of credit
   121    23    144    22,204    22,348 
Other
   —      —      —      361    361 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
 
Total
  $1,079   $160   $1,239   $330,359   $331,598 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
 
There were no loans 90 days or more past due and accruing interest as of March 31, 2021 or December 31, 2020.
A summary of activity in the allowance for loan losses for the three months ended March 31, 2021 and March 31, 2020 is presented below:
 
   
Commercial
   
Residential
   
Consumer
  
Total
 
   
(in thousands)
 
Three months ended March 31, 2021
                   
Allowance for loan losses
                   
Beginning balance
  $1,609   $745   $349  $2,703 
Provision for loan losses
   —      —      —     —   
Loans
charged-off
   —      —      (16)   (16) 
Recoveries
   5    —      7   12 
   
 
 
   
 
 
   
 
 
  
 
 
 
Ending balance
  $1,614   $745   $340  $2,699 
   
 
 
   
 
 
   
 
 
  
 
 
 
Three months ended March 31, 2020
                   
Allowance for loan losses
                   
Beginning balance
  $1,235   $573   $192  $2,000 
Provision for loan losses
   —      —      —     —   
Loans
charged-off
   —      —      (5)   (5) 
Recoveries
   6    —      7   13 
   
 
 
   
 
 
   
 
 
  
 
 
 
Ending balance
  $1,241   $573   $194  $2,008 
   
 
 
   
 
 
   
 
 
  
 
 
 

 
A summary of the allowance for loan losses for loans evaluated individually and collectively for impairment is presented below:
 
   
March 31, 2021
 
   
Commercial
   
Residential
   
Consumer
   
Total
 
   
(in thousands)
 
Loans:
                    
Individually evaluated for impairment
  $9,815   $625   $21   $10,461 
Collectively evaluated for impairment
   219,975    79,351    20,207    319,533 
   
 
 
   
 
 
   
 
 
   
 
 
 
Total loans
  $229,790   $79,976   $20,228   $329,994 
   
 
 
   
 
 
   
 
 
   
 
 
 
Allowance for loan losses:
                    
Individually evaluated for impairment
  $—     $—     $—     $—   
Collectively evaluated for impairment
   1,614    745    340    2,699 
   
 
 
   
 
 
   
 
 
   
 
 
 
Total allowance for loan losses
  $1,614   $745   $340   $2,699 
   
 
 
   
 
 
   
 
 
   
 
 
 
 
   
December 31, 2020
 
   
Commercial
   
Residential
   
Consumer
   
Total
 
   
(in thousands)
 
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 
   
 
 
   
 
 
   
 
 
   
 
 
 
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:
 
   
March 31, 2021
 
   
Pass
   
Watch and
Special
Mention
   
Substandard
   
Total
 
   
(in thousands)
 
Commercial:
                    
Real estate
  $160,045   $17,985   $6,370   $184,400 
Land development
   —      —      1,475    1,475 
Other
   36,658    5,287    1,970    43,915 
   
 
 
   
 
 
   
 
 
   
 
 
 
Total
  $196,703   $23,272   $9,815   $229,790 
   
 
 
   
 
 
   
 
 
   
 
 
 
 
   
December 31, 2020
 
   
Pass
   
Watch and
Special
Mention
   
Substandard
   
Total
 
   
(in thousands)
 
Commercial:
                    
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 
   
 
 
   
 
 
   
 
 
   
 
 
 
There were no loans rated Doubtful or Loss as of March 31, 2021 or December 31, 2020, 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:
 
   
March 31, 2021
 
   
Performing
   
Non
    Performing    
   
Total
 
   
(in thousands)
 
Residential real estate:
               
First mortgage
  $76,804   $1,130   $77,934 
Construction
   2,042    —      2,042 
Consumer:
               
Home equity and lines of credit
   19,840    115    19,955 
Other
   273    —      273 
   
 
 
   
 
 
   
 
 
 
Total
  $98,959   $1,245   $100,204 
   
 
 
   
 
 
   
 
 
 

 
   
December 31, 2020
 
   
Performing
   
Non
Performing
   
Total
 
   
(in thousands)
 
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 
   
 
 
   
 
 
   
 
 
 
Information regarding impaired loans is presented below:
 
   
As of and for the Three Months Ended March 31, 2021
 
   
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
   —      —      —      —      —   
Construction
   —      —      —      —      —   
Consumer:
                         
Home equity and lines of credit
   —      —      —      —      —   
Other
   —      —      —      —      —   
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
 
Total impaired loans with reserve
   —      —      —      —      —   
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
 
Impaired loans with no reserve:
                         
Commercial:
                         
Real estate
   6,370    6,370    NA    6,402    59 
Land development
   1,475    1,475    NA    1,481    11 
Other
   1,970    1,977    NA    2,178    11 
Residential real estate:
                         
First mortgages
   625    708    NA    626    4 
Construction
   —      —      NA    —      —   
Consumer:
                         
Home equity and lines of credit
   21    51    NA    22    —   
Other
   —      —      NA    —      —   
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
 
Total impaired loans with no reserve
   10,461    10,581    NA    10,709    85 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
 
Total impaired loans
  $10,461   $10,581   $—     $10,709   $85 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
 

 
   
As of and for the Year Ended December 31, 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
   —      —      —      36    —   
Construction
   —      —      —      —      —   
Consumer:
                         
Home equity and lines of credit
   —      —      —      4    —   
Other
   —      —      —      —      —   
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
 
Total impaired loans with reserve
   —      —      —      40    —   
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
 
Impaired loans with no reserve:
                         
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:
                         
First mortgages
   411    495    NA    568    261 
Construction
   —      —      NA    —      —   
Consumer:
                         
Home equity and lines of credit
   21    51    NA    24    3 
Other
   —      —      NA    —      —   
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
 
Total impaired loans with no reserve
   11,005    11,119    NA    9,664    774 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
 
Total impaired loans
  $11,005   $11,119   $—     $9,704   $774 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
 
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 March 31, 2021 and December 31, 2020.
Nonperforming loans are as follows:
 
   
March 31,
2021
   
December 31,
2020
 
   
(in thousands)
 
Nonaccrual loans, other than troubled debt restructurings
  $1,028   $1,068 
Nonaccrual loans, troubled debt restructurings
   217    219 
   
 
 
   
 
 
 
Total nonperforming loans (NPLs)
  $1,245   $1,287 
   
 
 
   
 
 
 
Troubled debt restructurings, accruing
  $428   $432 
   
 
 
   
 
 
 

 
There were no loans modified as troubled debt restructurings during the three months ended March 31, 2021 and year ended December 31, 2020.
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 March 31, 2021, the Company had deferrals of $354,000 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. There were no
troubled debt restructurings within the past twelve months for which there was a default during the three months ended March 31, 2021 and 2020.
Information on
non-accrual
loans is presented below:
 
   
March 31,
2021
  
December 31,
2020
 
   
(in thousands)
 
Commercial:
         
Real estate
  $—    $—   
Land development
   —     —   
Other
   —     —   
Residential real estate:
         
First mortgages
   1,130   1,151 
Construction
   —     —   
Consumer:
         
Home equity and lines of credit
   115   136 
Other
   —     —   
   
 
 
  
 
 
 
Total
non-accrual
loans
  $1,245  $1,287 
   
 
 
  
 
 
 
Total
non-accrual
loans to total loans
   0.38%   0.39% 
Total
non-accrual
loans to total assets
   0.24%   0.25%