BCOW 10-Q Quarter ended Sept. 30, 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 September 30, 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  ☒

4,769,952 shares of the Registrant’s common stock, par value $0.01 per share, were outstanding as of November 12, 2020.

1895 Bancorp of Wisconsin, Inc.

Form 10-Q

Table of Contents

				Page
PART I. FINANCIAL INFORMATION
Item 1.		Financial Statements			3
		Consolidated Balance Sheets at September  30, 2020 (unaudited) and December 31, 2019			3
		Consolidated Statements of Operations for the Three Months and Nine Months Ended September 30, 2020 and 2019 (unaudited)			4
		Consolidated Statements of Comprehensive Income (Loss) for the Three Months and Nine Months Ended September 30, 2020 and 2019 (unaudited)			5
		Consolidated Statement of Stockholders’ Equity for the Three and Nine Months Ended September 30, 2020 (unaudited)			6
		Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2020 and 2019 (unaudited)			8
		Notes to Financial Statements (unaudited)			9
Item 2.		Management’s Discussion and Analysis of Financial Condition and Results of Operations			33
Item 3.		Quantitative and Qualitative Disclosures About Market Risk			46
Item 4.		Controls and Procedures			46
PART II. OTHER INFORMATION
Item 1.		Legal Proceedings			47
Item 1A.		Risk Factors			47
Item 2.		Unregistered Sales of Equity Securities and Use of Proceeds			47
Item 3.		Defaults Upon Senior Securities			47
Item 4.		Mine Safety Disclosures			47
Item 5.		Other Information			47
Item 6.		Exhibits			47
		SIGNATURES			49

PART I – FINANCIAL INFORMATION

Item 1.

Financial Statements

1895 BANCORP OF WISCONSIN, INC.

CONSOLIDATED BALANCE SHEETS

(In thousands, except share and per share data)

		September 30, 2020				December 31, 2019
		(unaudited)
Assets
Cash and due from banks		$	78,042			$	11,507
Fed funds sold			856				200
Cash and cash equivalents			78,898				11,707
Available for sale securities, stated at fair value			58,428				71,375
Marketable equity securities, stated at fair value			2,693				2,553
Loans held for sale			5,062				685
Loans, net of allowance for loan losses of $2,650 and $2,000 respectively			328,820				310,674
Premises and equipment, net			6,380				6,681
Mortgage servicing rights, net			1,615				2,172
Federal Home Loan Bank stock, at cost			3,032				913
Accrued interest receivable			997				963
Cash value of life insurance			13,384				13,085
Other assets			5,543				7,201
TOTAL ASSETS		$	504,852			$	428,009
Liabilities and Stockholders’ Equity
Deposits			354,985				344,596
Advance payments by borrowers for taxes and insurance			11,428				1,681
Federal Home Loan Bank advances			68,884				17,623
Accrued interest payable			208				385
Other liabilities			9,707				5,059
Total liabilities			445,212				369,344
Common stock (par value $0.01 per share) Authorized - 90,000,000 shares at September 30, 2020 and December 31, 2019 Issued - 4,876,677 at September 30, 2020 and December 31, 2019 Outstanding - 4,769,952 at September 30, 2020 and 4,876,677 at December 31, 2019			49				49
Additional paid-in capital			20,076				19,981
Unallocated common stock of Employee Stock Ownership Plan, 163,242 and 168,507 shares at September 30, 2020 and December 31, 2019, respectively			(1,632	)			(1,685	)
Less treasury stock, 124,225 and 0 shares at cost, at September 30, 2020 and December 31, 2019, respectively			(1,199	)			—
Retained earnings			41,106				40,213
Accumulated other comprehensive income, net of income taxes			1,240				107
Total stockholders’ equity			59,640				58,665
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY		$	504,852			$	428,009

See accompanying notes to the consolidated financial statements.

3

1895 BANCORP OF WISCONSIN, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share amounts) – Unaudited

		Three months ended September 30								Nine months ended September 30
		2020				2019				2020				2019
Interest and dividend income:
Loans, including fees		$	3,617			$	3,840			$	10,228			$	11,699
Securities, taxable			304				406				1,092				1,198
Other			17				133				65				289
Total interest and dividend income			3,938				4,379				11,385				13,186
Interest expense:
Interest-bearing deposits			480				1,210				1,946				3,664
Borrowed funds			207				51				516				236
Total interest expense			687				1,261				2,462				3,900
Net interest income			3,251				3,118				8,923				9,286
Provision for loan losses			500				—				500				—
Net interest income after provision for loan losses			2,751				3,118				8,423				9,286
Noninterest income:
Service charges and other fees			215				223				578				632
Loan servicing, net			252				166				112				754
Net gain on sale of loans			936				513				2,665				423
Net gain on sale of securities			1,014				—				1,022				—
Increase in cash surrender value of insurance			101				99				299				300
Net gain on death benefit			—				—				—				158
Other			241				10				312				146
Total noninterest income			2,759				1,011				4,988				2,413
Noninterest expense:
Salaries and employee benefits			2,419				2,281				6,506				7,011
Foreclosed assets, net			—				(101	)			(8	)			(86	)
Advertising and promotions			31				35				103				135
Data processing			206				171				573				574
Occupancy and equipment			319				392				1,016				1,269
FDIC assessment			31				—				81				—
Other			887				780				2,670				3,007
Total noninterest expense			3,893				3,558				10,941				11,910
Income (loss) before income taxes			1,617				571				2,470				(211	)
Income tax expense (benefit)			1,205				135				1,577				(167	)
Net income (loss)		$	412			$	436			$	893			$	(44	)
Earnings (loss) per common share:
Basic		$	0.09			$	0.09			$	0.20			$	(0.01	)
Diluted		$	0.09			$	0.09			$	0.20			$	(0.01	)
Average common shares outstanding:
Basic			4,481,625				4,704,660				4,494,234				4,702,904
Diluted			4,519,626				4,704,660				4,529,967				4,702,904

See accompanying notes to the consolidated financial statements.

4

1895 BANCORP OF WISCONSIN, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(In thousands) - Unaudited

		Three months ended September 30								Nine months ended September 30
		2020				2019				2020				2019
Net income (loss)		$	412			$	436			$	893			$	(44	)
Other comprehensive income (loss):
Unrealized holding gains arising during the period			233				679				2,574				2,744
Reclassification adjustment for gains realized in net income			(1,014	)			—				(1,022	)			—
Other comprehensive income (loss) before tax effect			(781	)			679				1,552				2,744
Tax effect of other comprehensive income (loss) items			(211	)			183				419				741
Other comprehensive income (loss), net of tax			(570	)			496				1,133				2,003
Comprehensive income (loss)		$	(158	)		$	932			$	2,026			$	1,959

See accompanying notes to the consolidated financial statements.

5

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, 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 loss			—				—				—				—				—				(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
Net income			—				—				—				—				194				—				194
Other comprehensive income			—				—				—				—				—				1,827				1,827
Repurchase of 1895 Bancorp of Wisconsin, Inc. common stock (25,476 shares repurchased)			—				—				(231	)			—				—				—				(231	)
ESOP shares committed to be released (1,755 shares)							(4	)							18												14
Stock compensation expense			—				44				—				—				—				—				44
Balance as of June 30, 2020		$	49			$	20,022			$	(406	)		$	(1,650	)		$	40,694			$	1,810			$	60,519
Net income			—				—				—				—				412				—				412
Other comprehensive loss			—				—				—				—				—				(570	)			(570	)
Repurchase of 1895 Bancorp of Wisconsin, Inc. common stock (81,249 shares repurchased)			—				—				(793	)			—				—				—				(793	)
ESOP shares committed to be released (1,755 shares)							(1	)							18												17
Stock compensation expense			—				55				—				—				—				—				55
Balance as of September 30, 2020		$	49			$	20,076			$	(1,199	)		$	(1,632	)		$	41,106			$	1,240			$	59,640

See accompanying notes to the consolidated financial statements.

6

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
Net loss			—				—				—				—				(9	)			—				(9	)
Other comprehensive income			—				—				—				—				—				800				800
ESOP shares committed to be released (3,511 shares)			—				(2	)			—				35				—				—				33
Balance as of June 30, 2019		$	49			$	19,978			$	—			$	(1,720	)		$	39,284			$	(76	)		$	57,515
Net income			—				—				—				—				436				—				436
Other comprehensive income			—				—				—				—				—				496				496
ESOP shares committed to be released (1,755 shares)			—				—				—				18				—				—				18
Balance as of September 30, 2019		$	49			$	19,978			$	—			$	(1,702	)		$	39,720			$	420			$	58,465

See accompanying notes to the consolidated financial statements.

7

1895 BANCORP OF WISCONSIN, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands) - Unaudited

		Nine months ended September 30,
		2020				2019
		(unaudited)
Cash flows from operating activities:
Net income (loss)		$	893			$	(44	)
Adjustments to reconcile net loss to net cash from operating activities:
Net amortization of investment securities			180				198
Depreciation			494				512
Provision for loan losses			500				—
Net loss (gain) on sale of premises and equipment			33				(96	)
Change in fair value of marketable equity securities			(315	)			—
Net gain on sale of available for sale securities			(1,022	)			—
Stock compensation expense			99				—
Impairment of mortgage servicing rights			575				—
Provision for deferred income tax			1,814				216
Originations of mortgage loans held for sale			(158,442	)			(65,629	)
Proceeds from sales of mortgage loans held for sale			156,730				62,828
Net gain on sale of mortgage loans held for sale			(2,665	)			(423	)
Gain on death benefit			—				(158	)
ESOP compensation			49				51
Net change in cash value of life insurance			(299	)			(199	)
Net gain on sale of foreclosed assets			—				(103	)
Changes in operating assets and liabilities:
Mortgage servicing rights			(18	)			(98	)
Accrued interest receivable and other assets			(609	)			698
Accrued interest payable and other liabilities			(651	)			(487	)
Net cash used in operating activities			(2,654	)			(2,734	)
Cash Flows From Investing Activities
Proceeds from sales of available for sale securities			19,283				—
Maturities, prepayments, and calls of available for sale securities			51,697				6,885
Purchases of available for sale securities			(50,517	)			(6,743	)
Net (increase) decrease in loans			(18,646	)			44,884
Net proceeds from sales of premises			—				1,627
Net capital expenditures for premises and equipment			(226	)			(1,408	)
Proceeds from life insurance policies			—				772
Proceeds from sale of foreclosed assets			—				237
Net (increase) decrease in Federal Home Loan Bank stock			(2,119	)			348
Net cash (used in) provided by investing activities			(528	)			46,602
Cash Flows From Financing Activities
Net increase (decrease) in deposits			10,389				(48,162	)
Net increase in advance payments by borrowers for taxes and insurance			9,747				10,830
Proceeds from stock offering			—				20,029
Purchase of ESOP shares			—				(1,755	)
Proceeds from issuance of Federal Home Loan Bank advances			52,000				—
Principal payments on Federal Home Loan Bank advances			(739	)			(22,377	)
Purchases of treasury stock			(1,024	)			—
Net cash provided by (used in) financing activities			70,373				(41,435	)
Net increase in cash and cash equivalents			67,191				2,433
Cash and cash equivalents at beginning of period			11,707				7,923
Cash and cash equivalents at end of period		$	78,898			$	10,356
Supplemental cash flow information:
Cash paid during the year for interest		$	2,639			$	3,853
Noncash activities:
Loans transferred to loans held for sale		$	124			$	134
1895 Bancorp of Wisconsin, Inc. common stock held by PyraMax Bank reclassified to treasury stock			175				—
Increase in net unsettled security purchases			5,122				—

See accompanying notes to the consolidated financial statements.

8

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.

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.

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.

Impact of COVID-19

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 continue to 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%. 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 continue to 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 may negatively impact our business, financial condition, results of operations and cash flows.

Subsequent Events

The Company has evaluated subsequent events for potential recognition and/or disclosure through the date the unaudited consolidated financial statements included in this quarterly report on Form 10-Q were issued. There were no significant subsequent events for the quarter ended September 30, 2020 through the issuance date of these unaudited consolidated financial statements that warranted adjustment to or disclosure in the unaudited consolidated financial statements.

9

NOTE 2 – RECENT ACCOUNTING STANDARDS

The following Accounting Standards Updates (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 fiscal years beginning after December 15, 2022, and interim periods within those fiscal years. 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. On June 3, 2020, the FASB issued ASU 2020-05, Revenue from Contracts with Customers (Topic 606) and Leases (Topic 842): Effective Dates for Certain Entities, updating the effective date for fiscal years beginning after December 15, 2021, and interim periods within fiscal years 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 2016-02 on the Company’s consolidated financial statements.

10

NOTE 3 – AVAILABLE FOR SALE SECURITIES

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

		September 30, 2020
		Amortized Cost				Gross Unrealized Gains				Gross Unrealized Losses				Fair Value
		(in thousands)
Obligations of states and political subdivisions		$	7,659			$	250			$	—			$	7,909
Government-sponsored mortgage-backed securities			40,007				1,312				—				41,319
Corporate collateralized mortgage obligations			237				—				(2	)			235
Asset-backed securities			7,369				16				(7	)			7,378
Certificates of deposit			1,458				129				—				1,587
Total		$	56,730			$	1,707			$	(9	)		$	58,428

		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 $2.1 million and $3.0 million were pledged as collateral at September 30, 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.

		September 30, 2020
		Amortized Cost				Fair Value
		(in thousands)
Debt and other securities:
Due in one year or less		$	326			$	326
Due after one through 5 years			6,462				6,682
Due after 5 through 10 years			1,329				1,444
Due after 10 years			1,000				1,044
Total debt and other securities			9,117				9,496
Mortgage-related securities			40,244				41,554
Asset-backed securities			7,369				7,378
Total		$	56,730			$	58,428

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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:

		September 30, 2020
		Less than 12 months								12 months or longer								Total
		Fair Value				Unrealized Loss				Fair Value				Unrealized Loss				Fair Value				Unrealized Loss
		(in thousands)
Asset-backed securities		$	436			$	(1	)		$	1,509			$	(6	)		$	1,945			$	(7	)
Corporate collateralized obligations			145				(2	)			—				—				145				(2	)
Total		$	581			$	(3	)		$	1,509			$	(6	)		$	2,090			$	(9	)

		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 September 30, 2020 and December 31, 2019, respectively, the Company had 5 and 30 debt securities with unrealized losses representing aggregate depreciation of approximately 0.4% 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 September 30,								Nine months ended September 30,
		2020				2019				2020				2019
		(in thousands)								(in thousands)
Proceeds from sales of securities available-for-sale		$	19,005			$	—			$	19,283			$	—
Gross realized gains			1,014				—				1,022				—
Gross realized losses			—				—				—				—

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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

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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 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

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