The Company has an established methodology to determine the adequacy of the allowance for loan losses that assesses the risks and losses inherent in the loan portfolio. At a minimum, the adequacy of the allowance for loan losses is reviewed by management on a quarterly basis. For purposes of determining the allowance for loan losses, the Company has segmented the loans in its portfolio by loan type. Loans are segmented into the following pools: SBA 7(a), commercial, residential mortgages, and consumer loans. Certain portfolio segments are further broken down into classes based on the associated risks within those segments and the type of collateral underlying each loan. Commercial loans are divided into the following five classes: commercial real estate, commercial real estate construction, unsecured business line of credit, commercial other, and SBA 504. Consumer loans are divided into two classes as follows: home equity and other.

The standardized methodology used to assess the adequacy of the allowance includes the allocation of specific and general reserves. The same standard methodology is used, regardless of loan type. Specific reserves are made to individual impaired loans and TDRs (see Note 1 for additional information on this term). The general reserve is set based upon a representative average historical net charge-off rate adjusted for the following environmental factors: delinquency and impairment trends, charge-off and recovery trends, volume and loan term trends, changes in risk and underwriting policy trends, staffing and experience changes, national and local economic trends, industry conditions and credit concentration changes. Within the five-year historical net charge-off rate, the Company weights the past three years more heavily as it believes it is more indicative of future charge-offs. All of the environmental factors are ranked and assigned a basis points value based on the following scale: low, low moderate, moderate, high moderate and high risk. Each environmental factor is evaluated separately for each class of loans and risk weighted based on its individual characteristics.

According to the Company’s policy, a loss (“charge-off”) is to be recognized and charged to the allowance for loan losses as soon as a loan is recognized as uncollectable. All credits which are 90 days past due must be analyzed for the Company’s ability to collect on the credit. Once a loss is known to exist, the charge-off approval process is immediately expedited. This charge-off policy is followed for all loan types.

The allocated allowance is the total of identified specific and general reserves by loan category. The allocation is not necessarily indicative of the categories in which future losses may occur. The total allowance is available to absorb losses from any segment of the portfolio.

The following tables detail the activity in the allowance for loan losses by portfolio segment for the three and six months ended June 30, 2020 and 2019:

For the three months ended June 30, 2020

SBA held

for

(In thousands)

investment

Commercial

Residential

Consumer

Total

Balance, beginning of period

1,005

10,129

4,763

1,479

17,376

Charge-offs

—

(219)

—

(219)

Recoveries

502

—

577

Net recoveries

283

—

358

Provision for (credit to) loan losses charged to expense

(76)

1,924

676

(24)

2,500

Balance, end of period

1,004

12,336

5,439

1,455

20,234


	For the three months ended June 30, 2019
	SBA held
	for
(In thousands)	investment		Commercial		Residential		Consumer		Total
Balance, beginning of period	$	1,678	$	8,793	$	4,016	$	1,197	$	15,684
Charge-offs		(84)		—		—		—		(84)
Recoveries		1		4		—		10		15
Net (charge-offs) recoveries		(83)		4		—		10		(69)
Provision for (credit to) loan losses charged to expense		(274)		347		182		95		350
Balance, end of period	$	1,321	$	9,144	$	4,198	$	1,302	$	15,965

For the six months ended June 30, 2020

SBA held

for

(In thousands)

investment

Commercial

Residential

Consumer

Total

Balance, beginning of period

1,079

9,722

4,254

1,340

16,395

Charge-offs

(25)

(519)

(200)

—

(744)

Recoveries

503

—

583

Net recoveries (charge-offs)

(16)

(200)

—

(161)

Provision (credit) for loan losses charged to expense

(130)

2,630

1,385

115

4,000

Balance, end of period

1,004

12,336

5,439

1,455

20,234


	For the six months ended June 30, 2019
	SBA held
	for
(In thousands)	investment		Commercial		Residential		Consumer		Total
Balance, beginning of period	$	1,655	$	8,705	$	3,900	$	1,228	$	15,488
Charge-offs		(393)		(1)		—		(1)		(395)
Recoveries		3		9		—		10		22
Net (charge-offs) recoveries		(390)		8		—		9		(373)
Provision for loan losses charged to expense		56		431		298		65		850
Balance, end of period	$	1,321	$	9,144	$	4,198	$	1,302	$	15,965

The following tables present loans and their related allowance for loan losses, by portfolio segment, as of June 30, 2020 and December 31, 2019:

June 30, 2020

SBA held

for

(In thousands)

investment

Commercial

Residential

Consumer

Total

Allowance for loan losses ending balance:

Individually evaluated for impairment

177

413

256

—

846

Collectively evaluated for impairment

827

11,923

5,183

1,455

19,388

Total

1,004

12,336

5,439

1,455

20,234

Loan ending balances:

Individually evaluated for impairment

2,056

1,097

6,192

505

9,850

Collectively evaluated for impairment

170,949

791,655

463,795

145,656

1,572,055

Total

173,005

792,752

469,987

146,161

1,581,905


	December 31, 2019
	SBA held
	for
(In thousands)	investment		Commercial		Residential		Consumer		Total
Allowance for loan losses ending balance:
Individually evaluated for impairment	$	41	$	373	$	—	$	—	$	414
Collectively evaluated for impairment		1,038		9,349		4,254		1,340		15,981
Total	$	1,079	$	9,722	$	4,254	$	1,340	$	16,395
Loan ending balances:
Individually evaluated for impairment	$	1,105	$	1,234	$	—	$	—	$	2,339
Collectively evaluated for impairment		34,662		763,798		467,706		143,524		1,409,690
Total	$	35,767	$	765,032	$	467,706	$	143,524	$	1,412,029

Changes in Methodology

The Company did not make any changes to its allowance for loan losses methodology in the current period.

Reserve for Unfunded Loan Commitments

In addition to the allowance for loan losses, the Company maintains a reserve for unfunded loan commitments at a level that management believes is adequate to absorb estimated probable losses. Adjustments to the reserve are made through other expense and applied to the reserve which is classified as other liabilities. At June 30, 2020, a $281 thousand commitment reserve was reported on the balance sheet as an “other liability”, compared to a $273 thousand commitment reserve at December 31, 2019, due to a larger loan portfolio requiring a larger general reserve.