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LOANS
 6 Months Ended
Jun. 30, 2021
LOANS [Abstract]  
LOANS
NOTE  3 - LOANS

Major classifications of loans at June 30, 2021 and December 31, 2020 are summarized as follows:

  
2021
    
2020
  
Residential real estate
  
$
379,647
    
$
378,659
  
Multifamily real estate
    
37,593
      
37,978
  
Commercial real estate:
                
Owner occupied
    
171,281
      
164,706
  
Non-owner occupied
    
339,418
      
329,031
  
Commercial and industrial
    
83,961
      
90,062
  
SBA PPP
    
73,404
      
61,169
  
Consumer
    
21,505
      
23,984
  
Construction and land
    
103,591
      
92,648
  
All other
    
35,561
      
36,141
  
   
$
1,245,961
    
$
1,214,378
  

Activity in the allowance for loan losses by portfolio segment for the six months ended June 30, 2021 was as follows:

Loan Class
  
Balance
December 31, 2020
    
Provision (credit)
for loan losses
    
Loans
charged-off
    
Recoveries
    
Balance
June 30, 2021
  
                               
Residential real estate
  
$
2,071
    
$
301
    
$
(175
)
  
$
12
    
$
2,209
  
Multifamily real estate
    
184
      
(17
)
    
-
      
-
      
167
  
Commercial real estate:
                                        
Owner occupied
    
2,874
      
(184
)
    
(214
)
    
3
      
2,479
  
Non-owner occupied
    
5,129
      
964
      
(856
)
    
-
      
5,237
  
Commercial and industrial
    
1,538
      
(129
)
    
(90
)
    
12
      
1,331
  
Consumer
    
226
      
(4
)
    
(44
)
    
18
      
196
  
Construction and land
    
946
      
152
      
-
      
4
      
1,102
  
All other
    
548
      
(7
)
    
(50
)
    
48
      
539
  
Total
  
$
13,516
    
$
1,076
    
$
(1,429
)
  
$
97
    
$
13,260
  

Activity in the allowance for loan losses by portfolio segment for the six months ended June 30, 2020 was as follows:

Loan Class
  
Balance
December 31, 2019
    
Provision (credit)
for loan losses
    
Loans
charged-off
    
Recoveries
    
Balance
June 30, 2020
  
                               
Residential real estate
  
$
1,711
    
$
288
    
$
(94
)
  
$
10
    
$
1,915
  
Multifamily real estate
    
1,954
      
161
      
-
      
-
      
2,115
  
Commercial real estate:
                                        
Owner occupied
    
2,441
      
590
      
(566
)
    
5
      
2,470
  
Non-owner occupied
    
3,184
      
1,200
      
(77
)
    
3
      
4,310
  
Commercial and industrial
    
1,767
      
(247
)
    
(5
)
    
39
      
1,554
  
Consumer
    
281
      
14
      
(99
)
    
34
      
230
  
Construction and land
    
1,724
      
(529
)
    
-
      
38
      
1,233
  
All other
    
480
      
113
      
(94
)
    
62
      
561
  
Total
  
$
13,542
    
$
1,590
    
$
(935
)
  
$
191
    
$
14,388
  

Activity in the allowance for loan losses by portfolio segment for the three months ended June 30, 2021 was as follows:

Loan Class
  
Balance
March 31, 2021
    
Provision (credit)
for loan losses
    
Loans
charged-off
    
Recoveries
    
Balance
June 30, 2021
  
                               
Residential real estate
  
$
2,111
    
$
202
    
$
(115
)
  
$
11
    
$
2,209
  
Multifamily real estate
    
166
      
1
      
-
      
-
      
167
  
Commercial real estate:
                                        
Owner occupied
    
2,970
      
(279
)
    
(214
)
    
2
      
2,479
  
Non-owner occupied
    
5,628
      
465
      
(856
)
    
-
      
5,237
  
Commercial and industrial
    
1,385
      
(34
)
    
(27
)
    
7
      
1,331
  
Consumer
    
205
      
(5
)
    
(18
)
    
14
      
196
  
Construction and land
    
1,022
      
78
      
-
      
2
      
1,102
  
All other
    
540
      
-
      
(22
)
    
21
      
539
  
Total
  
$
14,027
    
$
428
    
$
(1,252
)
  
$
57
    
$
13,260
  

Activity in the allowance for loan losses by portfolio segment for the three months ended June 30, 2020 was as follows:

Loan Class
  
Balance
March 31, 2020
    
Provision (credit)
for loan losses
    
Loans
charged-off
    
Recoveries
    
Balance
June 30, 2020
  
                               
Residential real estate
  
$
1,838
    
$
72
    
$
(1
)
  
$
6
    
$
1,915
  
Multifamily real estate
    
2,104
      
11
      
-
      
-
      
2,115
  
Commercial real estate:
                                        
Owner occupied
    
2,220
      
248
      
-
      
2
      
2,470
  
Non-owner occupied
    
3,642
      
721
      
(53
)
    
-
      
4,310
  
Commercial and industrial
    
1,817
      
(269
)
    
(5
)
    
11
      
1,554
  
Consumer
    
241
      
12
      
(30
)
    
7
      
230
  
Construction and land
    
1,412
      
(180
)
    
-
      
1
      
1,233
  
All other
    
582
      
(25
)
    
(20
)
    
24
      
561
  
Total
  
$
13,856
    
$
590
    
$
(109
)
  
$
51
    
$
14,388
  

Purchased Impaired Loans

The Company holds purchased loans for which there was, at their acquisition date, evidence of deterioration of credit quality since their origination and it was probable, at acquisition, that all contractually required payments would not be collected.  The carrying amount of those loans is as follows at June 30, 2021 and December 31, 2020.
  
2021
    
2020
  
Residential real estate
  
$
1,904
    
$
2,092
  
Commercial real estate
                
Owner occupied
    
658
      
1,012
  
Non-owner occupied
    
1,948
      
2,357
  
Commercial and industrial
    
-
      
16
  
Consumer
    
2
      
9
  
Construction and land
    
334
      
368
  
All other
    
39
      
110
  
Total carrying amount
  
$
4,885
    
$
5,964
  
Contractual principal balance
  
$
7,746
    
$
9,267
  
                 
Carrying amount, net of allowance
  
$
4,885
    
$
5,964
  

For those purchased loans disclosed above, the Company did not increase the allowance for loan losses during the three and six months ended June 30, 2021 and June 30, 2020.

For those purchased loans disclosed above, where the Company can reasonably estimate the cash flows expected to be collected on the loans, a portion of the purchase discount is allocated to an accretable yield adjustment based upon the present value of the future estimated cash flows versus the current carrying value of the loan and the accretable yield portion is being recognized as interest income over the remaining life of the loan.

Where the Company cannot reasonably estimate the cash flows expected to be collected on the loans, it has continued to account for those loans using the cost recovery method of income recognition.  As such, no portion of a purchase discount adjustment has been determined to meet the definition of an accretable yield adjustment on those loans accounted for using the cost recovery method.  If, in the future, cash flows from the borrower(s) can be reasonably estimated, a portion of the purchase discount would be allocated to an accretable yield adjustment based upon the present value of the future estimated cash flows versus the current carrying value of the loan and the accretable yield portion would be recognized as interest income over the remaining life of the loan.  Until such accretable yield can be calculated, under the cost recovery method of income recognition, all payments will be used to reduce the carrying value of the loan and no income will be recognized on the loan until the carrying value is reduced to zero.  Any loan accounted for under the cost recovery method is also still included as a non-accrual loan in the amounts presented in the tables below.

The accretable yield, or income expected to be collected, on the purchased loans above is as follows at June 30, 2021 and June 30, 2020.

  
2021
    
2020
  
Balance at January 1
  
$
277
    
$
619
  
New loans purchased
    
-
      
-
  
Accretion of income
    
(137
)
    
(59
)
Loans placed on non-accrual
    
(19
)
    
-
  
Income recognized upon full repayment
    
(11
)
    
(65
)
Reclassifications to accretable difference
    
231
      
(190
)
Disposals
    
-
      
-
  
Balance at June 30
  
$
341
    
$
305
  

Past Due and Non-performing Loans

The following tables present the recorded investment in nonaccrual and loans past due over 90 days still on accrual by class of loans as of June 30, 2021 and December 31, 2020.  The recorded investment in non-accrual loans is less than the principal owed on non-accrual loans due to discounts applied to the carrying value of the loan at time of their acquisition and interest payments made by the borrower which have been used to reduce the recorded investment in the loan rather than recognized as interest income.

June 30, 2021
  
Principal Owed
on Non-accrual
Loans
    
Recorded
Investment in
Non-accrual Loans
    
Loans Past Due
Over 90 Days,
still accruing
  
                   
Residential real estate
  
$
4,050
    
$
3,086
    
$
984
  
Commercial real estate
                        
Owner occupied
    
3,375
      
3,105
      
-
  
Non-owner occupied
    
6,434
      
5,231
      
83
  
Commercial and industrial
    
992
      
422
      
-
  
Consumer
    
114
      
73
      
1
  
Construction and land
    
10
      
8
      
-
  
Total
  
$
14,975
    
$
11,925
    
$
1,068
  

December 31, 2020
  
Principal
Owed on Non-
accrual Loans
    
Recorded
Investment in
Non-accrual Loans
    
Loans Past Due
Over 90 Days,
still accruing
  
                   
Residential real estate
  
$
5,144
    
$
3,955
    
$
1,348
  
Commercial real estate
                        
Owner occupied
    
2,601
      
2,103
      
7
  
Non-owner occupied
    
3,305
      
2,230
      
975
  
Commercial and industrial
    
1,173
      
604
      
-
  
Consumer
    
168
      
94
      
1
  
Construction and land
    
12
      
10
      
1
  
Total
  
$
12,403
    
$
8,996
    
$
2,332
  

Nonaccrual loans and impaired loans are defined differently. Some loans may be included in both categories, and some may only be included in one category.  Nonaccrual loans include both smaller balance homogeneous loans that are collectively evaluated for impairment and individually classified impaired loans.

The following table presents the aging of the recorded investment in past due loans as of June 30, 2021 by class of loans:

Loan Class
  
Total
Loans
    
30-89 Days
Past Due
    
Greater than
90 Days
Past Due
    
Total
Past Due
    
Loans Not
Past Due
  
                               
Residential real estate
  
$
379,647
    
$
3,419
    
$
2,218
    
$
5,637
    
$
374,010
  
Multifamily real estate
    
37,593
      
-
      
-
      
-
      
37,593
  
Commercial real estate:
                                        
Owner occupied
    
171,281
      
21
      
1,874
      
1,895
      
169,386
  
Non-owner occupied
    
339,418
      
835
      
2,120
      
2,955
      
336,463
  
Commercial and industrial
    
83,961
      
398
      
304
      
702
      
83,259
  
SBA PPP
    
73,404
      
-
      
-
      
-
      
73,404
  
Consumer
    
21,505
      
161
      
7
      
168
      
21,337
  
Construction and land
    
103,591
      
963
      
3
      
966
      
102,625
  
All other
    
35,561
      
-
      
-
      
-
      
35,561
  
Total
  
$
1,245,961
    
$
5,797
    
$
6,526
    
$
12,323
    
$
1,233,638
  

The following table presents the aging of the recorded investment in past due loans as of December 31, 2020 by class of loans:

Loan Class
  
Total
Loans
    
30-89 Days
Past Due
    
Greater than
90 Days
Past Due
    
Total
Past Due
    
Loans Not
Past Due
  
                               
Residential real estate
  
$
378,659
    
$
3,978
    
$
3,190
    
$
7,168
    
$
371,491
  
Multifamily real estate
    
37,978
      
32
      
-
      
32
      
37,946
  
Commercial real estate:
                                        
Owner occupied
    
164,706
      
1,197
      
814
      
2,011
      
162,695
  
Non-owner occupied
    
329,031
      
987
      
2,196
      
3,183
      
325,848
  
Commercial and industrial
    
90,062
      
75
      
476
      
551
      
89,511
  
SBA PPP
    
61,169
      
-
      
-
      
-
      
61,169
  
Consumer
    
23,984
      
190
      
38
      
228
      
23,756
  
Construction and land
    
92,648
      
-
      
5
      
5
      
92,643
  
All other
    
36,141
      
23
      
-
      
23
      
36,118
  
Total
  
$
1,214,378
    
$
6,482
    
$
6,719
    
$
13,201
    
$
1,201,177
  

The following table presents the balance in the allowance for loan losses and the recorded investment in loans by portfolio segment and based on impairment method as of June 30, 2021:

  
Allowance for Loan Losses
    
Loan Balances
  
Loan Class
  
Individually
Evaluated for
Impairment
    
Collectively
Evaluated for
Impairment
    
Acquired with
Deteriorated
Credit Quality
    
Total
    
Individually
Evaluated for
Impairment
    
Collectively
Evaluated for
Impairment
    
Acquired with
Deteriorated
Credit Quality
    
Total
  
                                                 
Residential real estate
  
$
-
    
$
2,209
    
$
-
    
$
2,209
    
$
54
    
$
377,689
    
$
1,904
    
$
379,647
  
Multifamily real estate
    
-
      
167
      
-
      
167
      
-
      
37,593
      
-
      
37,593
  
Commercial real estate:
                                                                
Owner occupied
    
-
      
2,479
      
-
      
2,479
      
3,267
      
167,356
      
658
      
171,281
  
Non-owner occupied
    
352
      
4,885
      
-
      
5,237
      
5,139
      
332,331
      
1,948
      
339,418
  
Commercial and industrial
    
276
      
1,055
      
-
      
1,331
      
389
      
83,572
      
-
      
83,961
  
SBA PPP
    
-
      
-
      
-
      
-
      
-
      
73,404
      
-
      
73,404
  
Consumer
    
-
      
196
      
-
      
196
      
-
      
21,503
      
2
      
21,505
  
Construction and land
    
-
      
1,102
      
-
      
1,102
      
-
      
103,257
      
334
      
103,591
  
All other
    
-
      
539
      
-
      
539
      
-
      
35,522
      
39
      
35,561
  
Total
  
$
628
    
$
12,632
    
$
-
    
$
13,260
    
$
8,849
    
$
1,232,227
    
$
4,885
    
$
1,245,961
  

The following table presents the balance in the allowance for loan losses and the recorded investment in loans by portfolio segment and based on impairment method as of December 31, 2020:

  
Allowance for Loan Losses
    
Loan Balances
  
Loan Class
  
Individually
Evaluated for
Impairment
    
Collectively
Evaluated for
Impairment
    
Acquired with
Deteriorated
Credit Quality
    
Total
    
Individually
Evaluated for
Impairment
    
Collectively
Evaluated for
Impairment
    
Acquired with
Deteriorated
Credit Quality
    
Total
  
                                                 
Residential real estate
  
$
-
    
$
2,071
    
$
-
    
$
2,071
    
$
57
    
$
376,510
    
$
2,092
    
$
378,659
  
Multifamily real estate
    
-
      
184
      
-
      
184
      
-
      
37,978
      
-
      
37,978
  
Commercial real estate:
                                                                
Owner occupied
    
240
      
2,634
      
-
      
2,874
      
1,981
      
161,713
      
1,012
      
164,706
  
Non-owner occupied
    
385
      
4,744
      
-
      
5,129
      
1,843
      
324,831
      
2,357
      
329,031
  
Commercial and industrial
    
374
      
1,164
      
-
      
1,538
      
548
      
89,498
      
16
      
90,062
  
SBA PPP
    
-
      
-
      
-
      
-
      
-
      
61,169
      
-
      
61,169
  
Consumer
    
-
      
226
      
-
      
226
      
-
      
23,975
      
9
      
23,984
  
Construction and land
    
-
      
946
      
-
      
946
      
-
      
92,280
      
368
      
92,648
  
All other
    
-
      
548
      
-
      
548
      
-
      
36,031
      
110
      
36,141
  
Total
  
$
999
    
$
12,517
    
$
-
    
$
13,516
    
$
4,429
    
$
1,203,985
    
$
5,964
    
$
1,214,378
  

In the tables below, total individually evaluated impaired loans include certain purchased loans that were acquired with deteriorated credit quality that are still individually evaluated for impairment.

The following table presents loans individually evaluated for impairment by class of loans as of June 30, 2021.  The table includes $73,000 of loans acquired with deteriorated credit quality for which the Company cannot reasonably estimate cash flows such that they are accounted for on the cost recovery method and are still individually evaluated for impairment.

  
Unpaid
Principal
Balance
    
Recorded
Investment
    
Allowance for
Loan Losses
Allocated
  
With no related allowance recorded:
                  
Residential real estate
  
$
171
    
$
54
    
$
-
  
Commercial real estate
                        
Owner occupied
    
3,535
      
3,267
      
-
  
Non-owner occupied
    
3,270
      
2,358
      
-
  
Commercial and industrial
    
509
      
-
      
-
  
     
7,485
      
5,679
      
-
  
With an allowance recorded:
                        
Commercial real estate
                        
Non-owner occupied
    
3,139
      
2,854
      
352
  
Commercial and industrial
    
435
      
389
      
276
  
     
3,574
      
3,243
      
628
  
Total
  
$
11,059
    
$
8,922
    
$
628
  

The following table presents loans individually evaluated for impairment by class of loans as of December 31, 2020.  The table includes $689,000 of loans acquired with deteriorated credit quality for which the Company cannot reasonably estimate cash flows such that they are accounted for on the cost recovery method and are still individually evaluated for impairment.

  
Unpaid
Principal
Balance
    
Recorded
Investment
    
Allowance for
Loan Losses
Allocated
  
With no related allowance recorded:
                  
Residential real estate
  
$
175
    
$
57
    
$
-
  
Commercial real estate
                        
Owner occupied
    
2,295
      
1,815
      
-
  
Non-owner occupied
    
1,638
      
743
      
-
  
Commercial and industrial
    
509
      
-
      
-
  
     
4,617
      
2,615
      
-
  
With an allowance recorded:
                        
Commercial real estate
                        
Owner occupied
    
506
      
490
      
240
  
Non-owner occupied
    
1,638
      
1,465
      
385
  
Commercial and industrial
    
581
      
548
      
374
  
     
2,725
      
2,503
      
999
  
Total
  
$
7,342
    
$
5,118
    
$
999
  

The following table presents the average balance of loans individually evaluated for impairment and interest income recognized on these loans for the six months ended June 30, 2021 and June 30, 2020.  The table includes loans acquired with deteriorated credit quality that are still individually evaluated for impairment.

  
Six Months Ended June 30, 2021
    
Six Months Ended June 30, 2020
  
Loan Class
  
Average
Recorded
Investment
    
Interest
Income
Recognized
    
Cash Basis
Interest
Recognized
    
Average
Recorded
Investment
    
Interest
Income
Recognized
    
Cash Basis
Interest
Recognized
  
                                     
Residential real estate
  
$
56
    
$
-
    
$
-
    
$
62
    
$
-
    
$
-
  
Multifamily real estate
    
-
      
-
      
-
      
3,744
      
-
      
-
  
Commercial real estate:
                                                
Owner occupied
    
3,123
      
155
      
155
      
2,191
      
6
      
4
  
Non-owner occupied
    
3,871
      
-
      
-
      
4,376
      
72
      
36
  
Commercial and industrial
    
446
      
1
      
1
      
738
      
2
      
2
  
Construction and land
    
-
      
-
      
-
      
353
      
-
      
-
  
Total
  
$
7,496
    
$
156
    
$
156
    
$
11,464
    
$
80
    
$
42
  

The following table presents the average balance of loans individually evaluated for impairment and interest income recognized on these loans for the three months ended June 30, 2021 and June 30, 2020.  The table includes loans acquired with deteriorated credit quality that are still individually evaluated for impairment.

  
Three months ended June 30, 2021
    
Three months ended June 30, 2020
  
Loan Class
  
Average
Recorded
Investment
    
Interest
Income
Recognized
    
Cash Basis
Interest
Recognized
    
Average
Recorded
Investment
    
Interest
Income
Recognized
    
Cash Basis
Interest
Recognized
  
                                     
Residential real estate
  
$
55
    
$
-
    
$
-
    
$
61
    
$
-
    
$
-
  
Multifamily real estate
    
-
      
-
      
-
      
3,753
      
-
      
-
  
Commercial real estate:
                                                
Owner occupied
    
3,532
      
3
      
3
      
1,785
      
3
      
1
  
Non-owner occupied
    
4,703
      
-
      
-
      
4,429
      
36
      
-
  
Commercial and industrial
    
395
      
-
      
-
      
768
      
1
      
1
  
Construction and land
    
-
      
-
      
-
      
314
      
-
      
-
  
Total
  
$
8,685
    
$
3
    
$
3
    
$
11,110
    
$
40
    
$
2
  

Troubled Debt Restructurings

A loan is classified as a troubled debt restructuring ("TDR") when loan terms are modified due to a borrower's financial difficulties and a concession is granted to a borrower that would not have otherwise been considered. Most of the Company’s loan modifications involve a restructuring of loan terms prior to maturity to temporarily reduce the payment amount and/or to require only interest for a temporary period, usually up to six months.  These modifications generally do not meet the definition of a TDR because the modifications are considered to be an insignificant delay in payment.  The determination of an insignificant delay in payment is evaluated based on the facts and circumstances of the individual borrower(s).

The following table presents TDR’s as of June 30, 2021 and December 31, 2020:

June 30, 2021
  
TDR’s on
Non-accrual
    
Other
TDR’s
    
Total
TDR’s
  
                   
Residential real estate
  
$
1
    
$
211
    
$
212
  
Commercial real estate
                        
Owner occupied
    
-
      
184
      
184
  
Total
  
$
1
    
$
395
    
$
396
  

December 31, 2020
  
TDR’s on
Non-accrual
    
Other
TDR’s
    
Total
TDR’s
  
                   
Residential real estate
  
$
19
    
$
203
    
$
222
  
Commercial real estate
                        
Owner occupied
    
-
      
195
      
195
  
Non-owner occupied
    
856
      
-
      
856
  
Total
  
$
875
    
$
398
    
$
1,273
  

At June 30, 2021, no specific reserves were allocated to loans that had restructured terms.  However, deterioration of a TDR that was charged-off during the three months ended June 30, 2021 resulted in a provision for loan losses of $550,000 for the three months ended June 30, 2021 and $580,000 for the six months ended June 30, 2021.  This compares to a provision for loan losses on restructured loans of $10,000 for the three months ended June 30, 2020 and $213,000 for the six months ended June 30, 2020.  At December 31, 2020, $276,000 in specific reserves were allocated to loans that had restructured terms.  There were no commitments to lend additional amounts to these borrowers.

There were no new TDR’s that occurred during the three and six months ended June 30, 2021 and June 30, 2020.

During the three and six months ended June 30, 2021 and June 30, 2020, there were no TDR’s for which there as a payment default within twelve months following the modification.

A loan is considered to be in payment default once it is 90 days contractually past due under the modified terms.

The Coronavirus Aid, Relief and Economic Security (“CARES”) Act was signed into law at the end of March 2020.  Provisions of the CARES Act permit certain loan payment modifications by banks that would normally be considered TDR’s to be exempt from the TDR rules.  To date, management has exercised these provisions of the CARES Act on some loan modifications on an individually requested basis.


The following table presents the status of the remaining loans as of June 30, 2021 with some degree of payment modification under the CARES Act.

June 30, 2021
  
Modified to
Interest Only
Payment
    
Modified to Defer
Principal and
Interest Payment
    
Total
  
                   
Commercial real estate
                  
Owner occupied
  
$
967
    
$
-
    
$
967
  
Non-owner occupied
    
3,839
      
-
      
3,839
  
Construction and land
    
1,920
      
-
      
1,920
  
Total
  
$
6,726
    
$
-
    
$
6,726
  

December 31, 2020
  
Modified to
Interest Only
Payment
    
Modified to Defer
Principal and
Interest Payment
    
Total
  
                   
Residential real estate
  
$
560
    
$
338
    
$
898
  
Multifamily real estate
    
667
      
-
      
667
  
Commercial real estate
                        
Owner occupied
    
10,567
      
396
      
10,963
  
Non-owner occupied
    
17,659
      
214
      
17,873
  
Commercial and industrial
    
-
      
898
      
898
  
Consumer
    
7
      
19
      
26
  
Construction and land
    
2,472
      
3,849
      
6,321
  
Total
  
$
31,932
    
$
5,714
    
$
37,646
  

Credit Quality Indicators:

The Company categorizes loans into risk categories based on relevant information about the ability of borrowers to service their debt such as:  current financial information, historical payment experience, credit documentation, public information, and current economic trends, among other factors.  The Company analyzes non-homogeneous loans, such as commercial, commercial real estate, multifamily residential and commercial purpose loans secured by residential real estate, on a monthly basis.  For consumer loans, including consumer loans secured by residential real estate, and smaller balance non-homogeneous loans, the analysis involves monitoring the performing status of the loan.  At the time such loans become past due by 90 days or more, the Company evaluates the loan to determine if a change in risk category is warranted. The Company uses the following definitions for risk ratings:

Special Mention.  Loans classified as special mention have a potential weakness that deserves management's close attention. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the loan or of the institution's credit position at some future date.

Substandard.  Loans classified as substandard are inadequately protected by the current net worth and paying capacity of the obligor or of the collateral pledged, if any. Loans so classified have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt. They are characterized by the distinct possibility that the institution will sustain some loss if the deficiencies are not corrected.

Doubtful.  Loans classified as doubtful have all the weaknesses inherent in those classified as substandard, with the added characteristic that the weaknesses make collection or liquidation in full, on the basis of currently existing facts, conditions, and values, highly questionable and improbable.

Loans not meeting the criteria above that are analyzed individually as part of the above described process are considered to be pass rated loans.

As of June 30, 2021, and based on the most recent analysis performed, the risk category of loans by class of loans is as follows:

Loan Class
  
Pass
    
Special
Mention
    
Substandard
    
Doubtful
    
Total
Loans
  
                               
Residential real estate
  
$
368,576
    
$
2,401
    
$
8,670
    
$
-
    
$
379,647
  
Multifamily real estate
    
36,526
      
1,067
      
-
      
-
      
37,593
  
Commercial real estate:
                                        
Owner occupied
    
163,510
      
4,424
      
3,347
      
-
      
171,281
  
Non-owner occupied
    
309,471
      
24,188
      
5,759
      
-
      
339,418
  
Commercial and industrial
    
79,815
      
2,999
      
1,147
      
-
      
83,961
  
SBA PPP
    
73,404
      
-
      
-
      
-
      
73,404
  
Consumer
    
21,411
      
-
      
94
      
-
      
21,505
  
Construction and land
    
98,943
      
4,590
      
58
      
-
      
103,591
  
All other
    
35,535
      
26
      
-
      
-
      
35,561
  
Total
  
$
1,187,191
    
$
39,695
    
$
19,075
    
$
-
    
$
1,245,961
  

As of December 31, 2020, and based on the most recent analysis performed, the risk category of loans by class of loans is as follows:

Loan Class
  
Pass
    
Special
Mention
    
Substandard
    
Doubtful
    
Total
Loans
  
                               
Residential real estate
  
$
365,397
    
$
3,093
    
$
10,169
    
$
-
    
$
378,659
  
Multifamily real estate
    
35,412
      
2,566
      
-
      
-
      
37,978
  
Commercial real estate:
                                        
Owner occupied
    
155,707
      
4,686
      
4,313
      
-
      
164,706
  
Non-owner occupied
    
312,139
      
13,959
      
2,933
      
-
      
329,031
  
Commercial and industrial
    
84,948
      
3,747
      
1,367
      
-
      
90,062
  
SBA PPP
    
61,169
      
-
      
-
      
-
      
61,169
  
Consumer
    
23,837
      
5
      
142
      
-
      
23,984
  
Construction and land
    
88,587
      
3,833
      
228
      
-
      
92,648
  
All other
    
36,141
      
-
      
-
      
-
      
36,141
  
Total
  
$
1,163,337
    
$
31,889
    
$
19,152
    
$
-
    
$
1,214,378
  

As of June 30, 2021 and December 31, 2020, there were no loans with payment deferrals under the CARES Act that were delinquent or on nonaccrual status. As of June 30, 2021, one non-owner occupied loan totaling $3,839,000 was risk rated special mention.  As of December 31, 2020, one non-owner occupied loan totaling $3,839,000 was risk rated special mention and one residential real estate loan totaling $38,000 was risk rated substandard. The Company evaluates its deferred loans after a deferral period expires to determine if a further deferment should be granted and if a downgrade in risk rating is appropriate. Otherwise, loans are returned to their original payment terms.