Loans | NOTE 4 – LOANS Major classifications of loans are summarized as follows: September 30, December 31, (in thousands) Commercial: Real estate $ 183,089 $ 189,291 Land development 1,426 1,492 Other 43,311 46,184 Residential real estate: First mortgage 82,411 68,968 Construction 3,732 2,954 Consumer: Home equity and lines of credit 18,563 22,348 Other 160 361 Subtotal 332,692 331,598 Net deferred loan costs 406 178 Allowance for loan losses (2,788 ) (2,703 ) Loans, net $ 330,310 $ 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 September 30, 2021 and December 31, 2020, respectively, the Company had transferred $32.3 million and $29.6 million in participation loans which were eligible for sales treatment to other financial institutions, all of which continue to be serviced by the Company. An analysis of past due loans is presented below: September 30, 2021 30-89 Days 90 Days or Total Past Current Total Loans (in thousands) Commercial: Real estate $ 427 $ 276 $ 703 $ 182,386 $ 183,089 Land development — — — 1,426 1,426 Other — — — 43,311 43,311 Residential real estate: First mortgage 230 — 230 82,181 82,411 Construction — — — 3,732 3,732 Consumer: Home equity and lines of credit — — — 18,563 18,563 Other — — — 160 160 Total $ 657 $ 276 $ 933 $ 331,759 $ 332,692 December 31, 2020 30-89 Days 90 Days or Total Past 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 September 30, 2021 or December 31, 2020. A summary of activity in the allowance for loan losses for the three and nine months ended September 30, 2021 and September 30, 2020 is presented below: Commercial Residential Consumer Total (in thousands) Three months ended September 30, 2021 Allowance for loan losses Beginning balance $ 1,618 $ 745 $ 369 $ 2,732 Provision (credit) for loan losses 30 — — 30 Loans charged-off — — (1 ) (1 ) Recoveries 4 — 23 27 Ending balance $ 1,652 $ 745 $ 391 $ 2,788 Three months ended September 30, 2020 Allowance for loan losses Beginning balance $ 1,243 $ 573 $ 298 $ 2,114 Provision (credit) 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 Commercial Residential Consumer Total (in thousands) Nine months ended September 30, 2021 Allowance for loan losses Beginning balance $ 1,609 $ 745 $ 349 $ 2,703 Provision (credit) for loan losses 30 — — 30 Loans charged-off — — (18 ) (18 ) Recoveries 13 — 60 73 Ending balance $ 1,652 $ 745 $ 391 $ 2,788 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 A summary of the allowance for loan losses for loans evaluated individually and collectively for impairment is presented below: September 30, 2021 Commercial Residential Consumer Total (in thousands) Loans: Individually evaluated for impairment $ 6,510 $ 880 $ — $ 7,390 Collectively evaluated for impairment 221,316 85,263 18,723 325,302 Total loans $ 227,826 $ 86,143 $ 18,723 $ 332,692 Allowance for loan losses: Individually evaluated for impairment $ — $ — $ — $ — Collectively evaluated for impairment 1,652 745 391 2,788 Total allowance for loan losses $ 1,652 $ 745 $ 391 $ 2,788 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 Watch and Special Mention Substandard Doubtful A summary of the Company’s internal risk ratings of loans is presented below: September 30, 2021 Pass Watch and Substandard Total (in thousands) Commercial: Real estate $ 164,407 $ 13,253 $ 5,428 $ 183,089 Land development 1,426 — — 1,426 Other 41,459 568 1,284 43,311 Total $ 207,292 $ 13,821 $ 6,712 $ 227,826 December 31, 2020 Pass Watch and 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 September 30, 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: September 30, 2021 Performing Non Total (in thousands) Residential real estate: First mortgage $ 81,457 $ 954 $ 82,411 Construction 3,733 — 3,733 Consumer: Home equity and lines of credit 18,479 84 18,563 Other 160 — 160 Total $ 103,829 $ 1,038 $ 104,867 December 31, 2020 Performing Non 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 Nine Months Ended September 30, 2021 Recorded Unpaid Reserve Average Interest (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 5,226 5,226 NA 5,872 161 Land development — — NA 979 32 Other 1,284 1,335 NA 1,611 24 Residential real estate: First mortgages 880 964 NA 734 18 Construction — — NA — — Consumer: Home equity and lines of credit — — NA 10 22 Other — — NA — — Total impaired loans with no reserve 7,390 7,525 NA 9,206 257 Total impaired loans $ 7,390 $ 7,525 $ — $ 9,206 $ 257 As of and for the Year Ended December 31, 2020 Recorded Unpaid Reserve Average Interest (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 September 30, 2021 and December 31, 2020. Nonperforming loans are as follows: September 30, December 31, (in thousands) Nonaccrual loans, other than troubled debt restructurings $ 1,120 $ 1,068 Nonaccrual loans, troubled debt restructurings 193 219 Total nonperforming loans (NPLs) $ 1,313 $ 1,287 Troubled debt restructurings, accruing $ 421 $ 432 There were no loans modified as troubled debt restructurings during the nine months ended September 30, 2021 and year ended December 31, 2020, respectively. The provisions of the 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 COVID-19 The Company considers a troubled debt restructuring in default if it becomes past due more than 90 days. There were no Information on non-accrual September 30, December 31, (in thousands) Commercial: Real estate $ 275 $ — Land development — — Other — — Residential real estate: First mortgages 954 1,151 Construction — — Consumer: Home equity and lines of credit 84 136 Other — — Total non-accrual $ 1,313 $ 1,287 Total non-accrual 0.40 % 0.39 % Total non-accrual 0.24 % 0.25 % |