BCOW 10-Q Quarter ended March 31, 2020

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

☒	QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2020

OR

☐	TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File No. 001-38778

1895 Bancorp of Wisconsin, Inc.

(Exact Name of Registrant as Specified in Its Charter)

Federal		83-3178316
(State or Other Jurisdiction of Incorporation or Organization)		(I.R.S. Employer Identification No.)
7001 West Edgerton Avenue Greenfield, Wisconsin		53220
(Address of Principal Executive Offices)		(Zip Code)

(414) 421-8200

(Registrant’s Telephone Number, Including Area Code)

N/A

(Former Name, Former Address and Former Fiscal Year, if Changed Since Last Report)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class		Trading Symbol(s)		Name of each exchange on which registered
Common Stock, par value $0.01 per share		BCOW		The NASDAQ Stock Market, LLC

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such requirements for the past 90 days.    YES  ☒    NO  ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    YES  ☒    NO  ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one)

Large accelerated filer		☐		Accelerated filer		☐
Non-accelerated filer		☒		Smaller reporting company		☒
				Emerging growth company		☒

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    YES  ☐    NO  ☒

4,876,677 shares of the Registrant’s common stock, par value $0.01 per share, were issued and outstanding as of March 31, 2020.

1895 Bancorp of Wisconsin, Inc.

Form 10-Q

Table of Contents

				Page
PART I. FINANCIAL INFORMATION
Item 1.		Financial Statements			1
		Consolidated Balance Sheets at March 31, 2020 (unaudited) and December 31, 2019			1
		Consolidated Statements of Operations for the Three Months Ended March 31, 2020 and 2019 (unaudited)			2
		Consolidated Statements of Comprehensive Income (Loss) for the Three Months Ended March 31, 2020 and 2019 (unaudited)			3
		Consolidated Statement of Stockholders’ Equity for the Three Months Ended March 31, 2020 (unaudited)			4
		Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2020 and 2019 (unaudited)			5
		Notes to Financial Statements (unaudited)			6
Item 2.		Management’s Discussion and Analysis of Financial Condition and Results of Operations			29
Item 3.		Quantitative and Qualitative Disclosures About Market Risk			39
Item 4.		Controls and Procedures			39
PART II. OTHER INFORMATION
Item 1.		Legal Proceedings			40
Item 1A.		Risk Factors			40
Item 2.		Unregistered Sales of Equity Securities and Use of Proceeds			41
Item 3.		Defaults Upon Senior Securities			41
Item 4.		Mine Safety Disclosures			41
Item 5.		Other Information			41
Item 6.		Exhibits			41
		SIGNATURES			42

PART I – FINANCIAL INFORMATION

Item 1.

Financial Statements

1895 BANCORP OF WISCONSIN, INC.

CONSOLIDATED BALANCE SHEETS

(In thousands, except share and per share data)

		March 31, 2020				December 31, 2019
		(unaudited)
Assets
Cash and due from banks		$	40,460			$	11,507
Fed funds sold			1,448				200
Cash and cash equivalents			41,908				11,707
Available for sale securities, stated at fair value			66,905				71,375
Marketable equity securities, stated at fair value			2,044				2,553
Loans held for sale			1,248				685
Loans, net of allowance for loan losses of $2,008 and $2,000 respectively			302,968				310,674
Premises and equipment, net			6,616				6,681
Mortgage servicing rights, net			1,936				2,172
Federal Home Loan Bank stock, at cost			2,503				913
Accrued interest receivable			970				963
Cash value of life insurance			13,184				13,085
Other assets			7,629				7,201
TOTAL ASSETS		$	447,911			$	428,009
Liabilities and Stockholders’ Equity
Deposits			324,222				344,596
Advance payments by borrowers for taxes and insurance			5,422				1,681
Federal Home Loan Bank advances			55,614				17,623
Accrued interest payable			372				385
Other liabilities			3,610				5,059
Total liabilities			389,240				369,344
Common stock, $0.01 par value, 90,000,000 shares authorized, 4,876,677 shares issued as of March 31, 2020 and December 31, 2019, respectively			49				49
Additional paid-in capital			19,982				19,981
Unallocated common stock of Employee Stock Ownership Plan, 166,752 and 168,507 shares at March 31, 2020 and December 31, 2019, respectively			(1,668	)			(1,685	)
Less treasury stock, 17,500 and 0 shares at cost, at March 31, 2020 and December 31, 2019, respectively			(175	)			—
Retained earnings			40,500				40,213
Accumulated other comprehensive income (loss), net of income taxes			(17	)			107
Total stockholders’ equity			58,671				58,665
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY		$	447,911			$	428,009

See accompanying notes to the consolidated financial statements.

1

1895 BANCORP OF WISCONSIN, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share amounts) - Unaudited

		Three months ended March 31,
		2020				2019
Interest and dividend income:
Loans, including fees		$	3,413			$	3,988
Securities, taxable			407				392
Other			41				65
Total interest and dividend income			3,861				4,445
Interest expense:
Interest-bearing deposits			850				1,180
Borrowed funds			110				123
Total interest expense			960				1,303
Net interest income			2,901				3,142
Provision for loan losses			—				—
Net interest income after provision for loan losses			2,901				3,142
Noninterest income:
Service charges and other fees			203				186
Loan servicing, net			(14	)			222
Net gain on sale of loans			654				124
Net gain on sale of securities			7				—
Increase in cash surrender value of insurance			99				100
Other			(343	)			118
Total noninterest income			606				750
Noninterest expense:
Salaries and employee benefits			1,684				2,427
Foreclosed assets, net			(9	)			7
Advertising and promotions			32				56
Data processing			183				206
Occupancy and equipment			373				458
FDIC assessment			19				93
Other			791				1,325
Total noninterest expense			3,073				4,572
Income (loss) before income taxes			434				(680	)
Income tax expense (benefit)			147				(209	)
Net income (loss)		$	287			$	(471	)
Earnings per common share:
Basic		$	0.06			$	(0.10	)
Diluted		$	0.06			$	(0.10	)
Average common shares outstanding:
Basic			4,704,660				4,701,149
Diluted			4,705,531				4,701,149

See accompanying notes to the consolidated financial statements.

2

1895 BANCORP OF WISCONSIN, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(In thousands) - Unaudited

		Three months ended March 31,
		2020				2019
Net income (loss)		$	287			$	(471	)
Other comprehensive income (loss):
Unrealized holding gains (losses) arising during the period			(163	)			969
Reclassification adjustment for gains realized in net income			(7	)			—
Other comprehensive income (loss) before tax effect			(170	)			969
Tax effect of other comprehensive income (loss) items			(46	)			262
Other comprehensive income (loss), net of tax			(124	)			707
Comprehensive income		$	163			$	236

See accompanying notes to the consolidated financial statements.

3

1895 BANCORP OF WISCONSIN, INC.

CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY

(In thousands) - Unaudited

		Common stock				Additional paid-in capital				Treasury Stock				Unallocated common stock of ESOP				Retained earnings				Accumulated other comprehensive income (loss)				Total
Balance as of January 1, 2019		$	—			$	—			$	—			$	—			$	39,764			$	(1,583	)		$	38,181
Net loss			—				—				—				—				(471	)			—				(471	)
Other comprehensive income			—				—				—				—				—				707				707
Net proceeds from stock offering (4,876,677 shares issued)			49				19,980				—				—				—				—				20,029
Purchase of ESOP (175,528 shares purchased)			—				—				—				(1,755	)			—				—				(1,755	)
Balance as of March 31, 2019		$	49			$	19,980			$	—			$	(1,755	)		$	39,293			$	(876	)		$	56,691
Balance as of January 1, 2020		$	49			$	19,981			$	—			$	(1,685	)		$	40,213			$	107			$	58,665
Net income			—				—				—				—				287				—				287
1895 Bancorp of Wisconsin, Inc. common stock held by PyraMax Bank reclassified to treasury stock			—				—				(175	)			—				—				—				(175	)
Other comprehensive income			—				—				—				—				—				(124	)			(124	)
ESOP shares committed to be released (1,755 shares)			—				1				—				17				—				—				18
Balance as of March 31, 2020		$	49			$	19,982			$	(175	)		$	(1,668	)		$	40,500			$	(17	)		$	58,671

See accompanying notes to the consolidated financial statements.

4

1895 BANCORP OF WISCONSIN, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands) - Unaudited

		Three months ended March 31,
		2020				2019
		(unaudited)
Cash flows from operating activities:
Net income (loss)		$	287			$	(471	)
Adjustments to reconcile net loss to net cash from operating activities:
Net amortization of investment securities			68				63
Depreciation			167				172
Net (gain) loss on sale of premises and equipment			33				(97	)
Change in fair value of equity securities			324				—
Net gain on sale of available for sale securities			(7	)			—
Provision for (benefit from) deferred income tax			186				(203	)
Originations of mortgage loans held for sale			(27,365	)			(17,201	)
Proceeds from sales of mortgage loans held for sale			27,580				16,863
Net gain on sale of mortgage loans held for sale			(654	)			(124	)
ESOP compensation			18				—
Net change in cash value of life insurance			(99	)			(100	)
Changes in operating assets and liabilities:
Mortgage servicing rights			236				(14	)
Accrued interest receivable and other assets			(566	)			(106	)
Accrued interest payable and other liabilities			(1,462	)			80
Net cash (used in) provided by operating activities			(1,254	)			(1,138	)
Cash Flows From Investing Activities
Proceeds from sales of available for sale securities			279				—
Maturities, prepayments, and calls of available for sale securities			3,961				1,942
Net decrease in loans			7,582				9,747
Net capital receipts (expenditures) for premises and equipment			(135	)			396
Cash paid, net of cash received for sale of branch			—				(3,490	)
Net decrease (increase) in Federal Home Loan Bank stock			(1,590	)			277
Net cash provided by (used in) investing activities			10,097				8,872
Cash Flows From Financing Activities
Net (decrease) increase in deposits			(20,374	)			3,018
Net increase in advance payments by borrowers for taxes and insurance			3,741				3,093
Proceeds from stock offering			—				18,274
Proceeds from issuance of Federal Home Loan Bank advances			38,000				—
Principal payments on Federal Home Loan Bank advances			(9	)			(5,359	)
Net cash (used in) provided by financing activities			21,358				19,026
Net increase (decrease) in cash and cash equivalents			30,201				26,760
Cash and cash equivalents at beginning of period			11,707				7,923
Cash and cash equivalents at end of period		$	41,908			$	34,683
Supplemental cash flow information:
Cash paid during the year for interest		$	952			$	1,172
Noncash activities:
Loans transferred to loans held for sale		$	124			$	—
1895 Bancorp of Wisconsin, Inc. common stock held by PyraMax Bank reclassified to treasury stock			175				—
On January 4, 2019, the Company sold its West Mitchell Street branch. The sale consisted of premises and equipment and related deposit accounts at the branch. The Company received a premium of $114. In conjunction with the sale, the values of assets and liabilities were as follows:
Cash						$	3,490
Premises and equipment							686
Deposits							4,290

See accompanying notes to the consolidated financial statements.

5

NOTE 1 – NATURE OF OPERATIONS AND BASIS OF PRESENTATION

1895 Bancorp of Wisconsin, Inc. (the “Company,” “we” or “our”) was incorporated under federal law on January 8, 2019 as part of the mutual holding company reorganization of PyraMax Bank, FSB (“PyraMax Bank”), for the purpose of becoming the savings and loan holding company of PyraMax Bank. The Company completed its stock offering in connection with the mutual holding company reorganization of PyraMax Bank on January 8, 2019. The Company sold 2,145,738 shares of common stock at $10.00 per share in its subscription offering for gross proceeds of approximately $21.5 million, including 175,528 shares purchased by the Company’s employee stock ownership plan. In connection with the reorganization, the Company also issued 48,767 shares of common stock to 1895 Bancorp of Wisconsin Community Foundation, Inc. and 2,682,172 shares of common stock to 1895 Bancorp of Wisconsin, MHC, the federally-chartered mutual holding company. Shares of the Company’s common stock began trading on January 9, 2019 on the Nasdaq Capital Market under the trading symbol “BCOW.”

PyraMax Bank is a stock savings bank headquartered in Greenfield, Wisconsin. PyraMax Bank operates as a full-service financial institution, providing a full range of financial services, including the granting of commercial, residential, and consumer loans and acceptance of deposits from individual customers and small businesses in the metropolitan Milwaukee, Wisconsin, area. PyraMax Bank is subject to competition from other financial and nonfinancial institutions providing financial products. In addition, PyraMax Bank is subject to the regulations of certain regulatory agencies and undergoes periodic examination by those regulatory agencies.

The accompanying unaudited interim financial statements and the notes thereto have been prepared in accordance with generally accepted accounting principles in the United States (“GAAP”). In the opinion of management, the accompanying unaudited interim financial statements contain all normal recurring adjustments necessary to present fairly the financial positions results of operations, changes in equity and cash flows for the periods presented.

The accompanying unaudited financial statements and related notes should be read in conjunction with the audited annual financial statements and the notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2019, as filed with the Securities and Exchange Commission on March 30, 2020.

In preparing financial statements in conformity with GAAP, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities as of the date of the balance sheet, and reported amounts of revenues and expenses during the reporting period. Material estimates that are particularly susceptible to significant change in the near term relate to the determination of the allowance for loan losses, the fair values of securities, financial instruments and mortgage servicing rights, and the valuation of deferred income tax assets. Actual results could differ from those estimates.

The Company has evaluated subsequent events for potential recognition and/or disclosure through the date of the unaudited consolidated financial statements included in this Quarterly Report on Form 10-Q were issued. On March 11, 2020, the World Health Organization declared the outbreak of a novel coronavirus (“COVID-19”) as a global pandemic, which continues to spread throughout the United States and around the world. The declaration of a global pandemic indicates that almost all public commerce and related business activities must be, to varying degrees, curtailed with the goal of decreasing the rate of new infections. The outbreak of COVID-19 could adversely impact a broad range of industries in which the Company’s customers operate and impair their ability to fulfill their financial obligations to the Company. On March 3, 2020, the Federal Open Market Committee reduced the target federal funds rate by 50 basis points to 1.00% to 1.25%. This rate was further reduced to a target range of 0% to 0.25% on March 16, 2020. These reductions in interest rates and other effects of the COVID-19 outbreak may adversely affect the Company’s financial condition and results of operations. As a result of the spread of the COVID-19 coronavirus, economic uncertainties have arisen which are likely to negatively impact its business, financial condition, results of operations and cash flows.

On April 5, 2012, the Jumpstart Our Business Startups Act (the “JOBS Act”) was signed into law. The JOBS Act contains provisions that, among other things, reduce certain reporting requirements for qualifying public companies and define an “emerging growth company.” As an emerging growth company, the Company may delay adoption of new or revised financial accounting standards until such date that the standards are required to be adopted by non-issuer companies. If such standards would not apply to non-issuer companies, no deferral would be applicable. The Company intends to take advantage of the benefits of the extended transition periods allowed under the JOBS Act.

Accordingly, the Company’s financial statements may not be comparable to those of public companies that adopt new or revised financial accounting standards as of an earlier date. The effective dates of the following recent accounting standards reflect those that relate to non-issuer companies.

6

NOTE 2 – RECENT ACCOUNTING STANDARDS

The following ASUs have been issued by the FASB and may impact the Company’s financial statements in future reporting periods:

ASU 2016-13, Financial Instruments – Credit Losses: Measurement of Credit Losses on Financial Instruments (Topic 326). ASU 2016-13 requires organizations to measure all expected credit losses for financial instruments held at the reporting date based on historical experience, current conditions and reasonable and supportable forecasts. The guidance is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2021. Early adoption will be permitted for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018. On November 15, 2019, the FASB issued ASU 2019-10, Financial Instruments – Credit Losses (Topic 326), Derivatives and Hedging (Topic 815), and Leases (Topic 842): Effective Dates, amending the effective date for this standard. ASU 2016-13 will be effective for reporting periods beginning after December 15, 2022. Management has elected to defer adoption to the new effective date and is currently evaluating the impact of adopting ASU 2016-13 on the Company’s consolidated financial statements.

ASU 2016-02, Leases (Topic 842). This ASU affects any entity that enters into a lease, and is intended to increase the transparency and comparability of financial reporting. The ASU requires, among other changes, a lessee to recognize on its balance sheet a lease asset and a lease liability for those leases previously classified as operating leases. The lease asset will represent the right to use the underlying asset for the lease term, and the lease liability will represent the discounted value of the required lease payments to the lessor. The ASU will also require entities to disclose key information about leasing arrangements. ASU 2016-02 is effective for interim and annual reporting periods beginning after December 15, 2019. Early adoption is permitted. On November 15, 2019, the FASB issued ASU 2019-10, Financial Instruments – Credit Losses (Topic 326), Derivatives and Hedging (Topic 815), and Leases (Topic 842): Effective Dates, amending the effective date for this standard. ASU 2016-02 will be effective for reporting periods beginning after December 15, 2021. Management has elected to defer adoption to the new effective date and is currently evaluating the impact of adopting ASU 2016-02 on the Company’s consolidated financial statements.

7

NOTE 3 – AVAILABLE FOR SALE SECURITIES

The amortized costs and fair values of securities available-for-sale were as follows:

		March 31, 2020
		Amortized Cost				Gross Unrealized Gains				Gross Unrealized Losses				Fair Value
		(in thousands)
Obligations of states and political subdivisions		$	9,485			$	57			$	(77	)		$	9,465
Government-sponsored mortgage-backed securities			53,213				507				(485	)			53,235
Corporate collateralized mortgage obligations			271				—				(39	)			232
Asset-backed securities			2,253				—				(68	)			2,185
Certificates of deposit			1,707				81				—				1,788
Total		$	66,929			$	645			$	(669	)		$	66,905

		December 31, 2019
		Amortized Cost				Gross Unrealized Gains				Gross Unrealized Losses				Fair Value
		(in thousands)
Obligations of states and political subdivisions		$	9,779			$	67			$	(20	)		$	9,826
Government-sponsored mortgage-backed securities			56,975				416				(357	)			57,034
Corporate collateralized mortgage obligations			284				5				—				289
Asset-backed securities			2,484				—				(19	)			2,465
Certificates of deposit			1,707				54				—				1,761
Total		$	71,229			$	542			$	(396	)		$	71,375

Available for sale securities with a carrying value of $2,683 and $2,956 were pledged as collateral at March 31, 2020 and December 31, 2019, respectively.

The amortized costs and fair values of securities available-for-sale, by contractual maturity, are shown below. Actual maturities may differ from contractual maturities because issuers may have the right to call or prepay obligations with or without call or prepayment penalties. In addition, expected maturities will differ from contractual maturities for mortgage-backed securities and asset-backed securities, as the expected repayment terms may be less than the underlying mortgage pool contractual maturities. Therefore, these securities are not included in the maturity categories in the maturity summary below.

		March 31, 2020
		Amortized Cost				Fair Value
		(in thousands)
Debt and other securities:
Due in one year or less		$	577			$	578
Due after one through 5 years			6,874				6,924
Due after 5 through 10 years			2,411				2,458
Due after 10 years			1,330				1,293
Total debt and other securities			11,192				11,253
Mortgage-related securities			53,484				53,467
Asset-backed securities			2,253				2,185
Total		$	66,929			$	66,905

8

NOTE 3 – AVAILABLE FOR SALE SECURITIES (continued)

Gross unrealized losses on securities available-for-sale and the fair values of the related securities, aggregated by investment category and the length of time that individual securities have been in a continuous unrealized loss position were as follows:

		March 31, 2020
		Less than 12 months								12 months or longer								Total
		Fair Value				Unrealized Loss				Fair Value				Unrealized Loss				Fair Value				Unrealized Loss
		(in thousands)
Obligations of states and political subdivisions		$	5,018			$	(49	)		$	317			$	(28	)		$	5,335			$	(77	)
Government-sponsored mortgage-backed securities			18,543				(322	)			12,631				(163	)			31,174				(485	)
Asset-backed securities			2,138				(68	)			47				—				2,185				(68	)
Corporate collateralized obligations			231				(39	)			—				—				231				(39	)
Total		$	25,930			$	(478	)		$	12,995			$	(191	)		$	38,925			$	(669	)

		December 31, 2019
		Less than 12 months								12 months or longer								Total
		Fair Value				Unrealized Loss				Fair Value				Unrealized Loss				Fair Value				Unrealized Loss
		(in thousands)
Obligations of states and political subdivisions		$	2,052			$	(14	)		$	667			$	(6	)		$	2,719			$	(20	)
Government-sponsored mortgage-backed securities			15,830				(106	)			16,747				(251	)			32,577				(357	)
Asset-backed securities			2,394				(18	)			71				(1	)			2,465				(19	)
Total		$	20,276			$	(138	)		$	17,485			$	(258	)		$	37,761			$	(396	)

At March 31, 2020 and December 31, 2019, respectively, the Company had 36 and 30 debt securities with unrealized losses representing aggregate depreciation of approximately 1.7% and 1.0% from their respective amortized cost bases. These unrealized losses relate principally to changes in interest rates and were not caused by changes in the financial condition of the issuers, the quality of any underlying assets or applicable credit enhancements. In analyzing whether unrealized losses on debt securities are other-than-temporary, management considers whether the securities are issued by a government body or agency, whether a rating agency has downgraded the securities, industry analysts’ reports, the financial condition and performance of the issuer and the quality of any underlying assets or credit enhancements. As management has the intent and ability to hold these debt securities to projected recovery, none of these declines are deemed to be other-than-temporary.

The following table provides a summary of the proceeds from sales of securities available-for-sale, as well as gross gains and losses, for the periods presented:

		Three Months ended March 31,
		2020				2019
		(in thousands)
Proceeds from sales of securities available-for-sale		$	279			$	—
Gross realized gains			7				—
Gross realized losses			—				—

9

NOTE 4 – LOANS

Major classifications of loans are summarized as follows:

		March 31, 2020				December 31, 2019
		(in thousands)
Commercial:
Real estate		$	179,799			$	178,882
Land development			1,598				1,623
Other			33,449				34,072
Residential real estate:
First mortgage			58,493				65,450
Construction			1,793				2,041
Consumer:
Home equity and lines of credit			29,005				29,691
Other			532				611
Subtotal			304,669				312,370
Net deferred loan fees			307				304
Allowance for loan losses			(2,008	)			(2,000	)
Loans, net		$	302,968			$	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 March 31, 2020 and December 31, 2019, respectively, the Company had transferred $27,750 and $26,153 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, 2020
		31-89 Days Past Due				90 Days or More Past Due				Total Past Due				Current				Total Loans
		(in thousands)
Commercial:
Real estate		$	371			$	—			$	371			$	179,428			$	179,799
Land development			—				—				—				1,598				1,598
Other			—				—				—				33,449				33,449
Residential real estate:
First mortgage			1,295				227				1,522				56,971				58,493
Construction			—				—				—				1,793				1,793
Consumer:
Home equity and lines of credit			28				7				35				28,970				29,005
Other			—				—				—				532				532
Total		$	1,694			$	234			$	1,928			$	302,741			$	304,669

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NOTE 4 – LOANS (continued)

		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 March 31, 2020 or December 31, 2019.

A summary of activity in the allowance for loan losses for the three months ended March 31, 2020 and 12 months ended December 31, 2019 is presented below:

		Commercial				Residential				Consumer				Total
		(in thousands)
Three months ended March 31, 2020
Allowance for loan losses
Beginning balance		$	1,235			$	573			$	192			$	2,000
Provision (credit) for loan losses			—				—				—				—
Loans charged-off			—				—				(5	)			(5	)
Recoveries			6				—				7				13
Ending balance		$	1,241			$	573			$	194			$	2,008
Three months ended March 31, 2019
Allowance for loan losses
Beginning balance		$	1,448			$	1,250			$	564			$	3,262
Provision (credit) for loan losses			—				—				—				—
Loans charged-off			—				(37	)			(1	)			(38	)
Recoveries			196				—				6				202
Ending balance		$	1,644			$	1,213			$	569			$	3,426

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NOTE 4 – LOANS (continued)

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

		March 31, 2020
		Commercial				Residential				Consumer				Total
		(in thousands)
Loans:
Individually evaluated for impairment		$	6,693			$	661			$	32			$	7,386
Collectively evaluated for impairment			208,153				59,625				29,505				297,283
Total loans		$	214,846			$	60,286			$	29,537			$	304,669
Allowance for loan losses:
Individually evaluated for impairment		$	—			$	62			$	5			$	67
Collectively evaluated for impairment			1,241				511				189				1,941
Total allowance for loan losses		$	1,241			$	573			$	194			$	2,008

		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.

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NOTE 4 – LOANS (continued)

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

		March 31, 2020
		Pass				Watch and Special Mention				Substandard				Total
		(in thousands)
Commercial:
Real estate		$	169,812			$	4,627			$	5,360			$	179,799
Land development			—				1,598				—				1,598
Other			25,603				7,045				801				33,449
Total		$	195,415			$	13,270			$	6,161			$	214,846

		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 March 31, 2020 and December 31, 2019.

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, 2020
		Performing				Non Performing				Total
		(in thousands)
Residential real estate:
First mortgage		$	57,012			$	1,481			$	58,493
Construction			1,793				—				1,793
Consumer:
Home equity and lines of credit			28,865				140				29,005
Other			532				—				532
Total		$	88,202			$	1,621			$	89,823

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NOTE 4 – LOANS (continued)

		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 Three Months Ended March 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			62				62				62				62				—
Construction			—				—				—				—				—
Consumer:
Home equity and lines of credit			5				6				5				5				—
Other			—				—				—				—				—
Total impaired loans with reserve			67				68				67				67				—
Impaired loans with no reserve:
Commercial:
Real estate			5,838				5838				NA				5,855				67
Land development			—				—				NA				—				—
Other			855				855				NA				835				17
Residential real estate:
First mortgages			599				870				NA				720				85
Construction			—				—				NA				—				—
Consumer:
Home equity and lines of credit			27				56				NA				27				1
Other			—				—				NA				—				—
Total impaired loans with no reserve			7,319				7,619				NA				7,437				170
Total impaired loans		$	7,386			$	7,687			$	67			$	7,504			$	170

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