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ALLOWANCE FOR LOAN LOSSES
 12 Months Ended
Dec. 31, 2020
Receivables [Abstract]  
ALLOWANCE FOR LOAN LOSSES ALLOWANCE FOR LOAN LOSSES
The Allowance for loan losses, reported as a reduction of outstanding loan balances, totaled $81.2 million and $72.0 million at December 31, 2020 and 2019, respectively.
Beginning in the first quarter of 2020, the Company made a change to the loan portfolio segmentation as it relates to
the Allowance for loan losses in which Commercial and industrial and Commercial tax-exempt loans were bifurcated given
their different underlying risk characteristics. For the periods ended December 31, 2019 and December 31, 2018, the Provision/(credit) for loan losses and related allowance balance in the Allowance for loan losses for tax-exempt Commercial and industrial loans is included within Commercial and industrial loans. Beginning in the second quarter of 2020, the Company made a change to the loan portfolio segmentation as it relates to the Allowance for loan losses, adding the segment Paycheck Protection Program. For the periods ended December 31, 2019 and December 31, 2018, there were no loans in this segment as the SBA initiated the program in the second quarter of 2020 in response to the COVID-19 pandemic.
The following tables present a summary of the changes in the Allowance for loan losses for the periods indicated:
As of and for the year ended December 31,
202020192018
(In thousands)
Allowance for loan losses, beginning of year:
Commercial and industrial$10,048 $15,912 $11,735 
Paycheck Protection Program— n/an/a
Commercial tax-exempt6,016 n/an/a
Commercial real estate40,765 41,934 46,820 
Construction and land5,119 6,022 4,949 
Residential8,857 10,026 9,773 
Home equity778 1,284 835 
Consumer and other399 134 630 
Total Allowance for loan losses, beginning of year$71,982 $75,312 $74,742 
Impact of adopting ASU 2016-13:
Commercial and industrial$(565)n/an/a
Paycheck Protection Program— n/an/a
Commercial tax-exempt(4,409)n/an/a
Commercial real estate(14,455)n/an/a
Construction and land(2,158)n/an/a
Residential685 n/an/a
Home equity(535)n/an/a
Consumer and other1,052 n/an/a
Total impact of adopting ASU 2016-13$(20,385)n/an/a
Allowance for loan losses, beginning of period, net$51,597 $75,312 $74,742 
Loans charged-off:
Commercial and industrial$(1,590)$(645)$(709)
Paycheck Protection Program— n/an/a
Commercial tax-exempt— n/an/a
Commercial real estate— — (135)
Construction and land— — — 
Residential— — (16)
Home equity(1,157)(562)— 
Consumer and other(83)(22)(39)
Total charge-offs$(2,830)$(1,229)$(899)
Recoveries on loans previously charged-off:
Commercial and industrial$170 $891 $680 
Paycheck Protection Program— n/an/a
Commercial tax-exempt— n/an/a
As of and for the year ended December 31,
202020192018
(In thousands)
Commercial real estate160 429 2,389 
Construction and land— — — 
Residential— 100 429 
Home equity132 10 1 
Consumer and other11 33 168 
Total recoveries$473 $1,463 $3,667 
Provision/(credit) for loan losses:
Commercial and industrial$922 $(94)$4,206 
Paycheck Protection Program159 n/an/a
Commercial tax-exempt943 n/an/a
Commercial real estate24,691 (1,598)(7,140)
Construction and land1,080 (903)1,073 
Residential3,322 (1,269)(160)
Home equity1,075 46 448 
Consumer and other(194)254 (625)
Total provision/(credit) for loan losses$31,998 $(3,564)$(2,198)
Allowance for loan losses, end of year:
Commercial and industrial$8,985 $16,064 $15,912 
Paycheck Protection Program159 n/an/a
Commercial tax-exempt2,550 n/an/a
Commercial real estate51,161 40,765 41,934 
Construction and land4,041 5,119 6,022 
Residential12,864 8,857 10,026 
Home equity293 778 1,284 
Consumer and other1,185 399 134 
Total Allowance for loan losses, end of year$81,238 $71,982 $75,312 
The balance of the Allowance for loan losses of $81.2 million as of December 31, 2020 represents an increase of $9.3 million from December 31, 2019. During the twelve months ended December 31, 2020, 2019, and 2018, the Company recognized a Provision expense of $32.0 million, a Provision credit of $3.6 million, and a Provision credit of $2.2 million, respectively. The increase in the Allowance for loan losses for the twelve months ended December 31, 2020 was primarily driven by the change in Allowance for loan losses methodology from the incurred loss model to the current expected credit loss model, the current reasonable and supportable economic forecast deterioration as a result of the COVID-19 pandemic, and the net change in qualitative factors to account for risks and assumptions related to our loan portfolio not incorporated in the forecasts.
The balance of reserve for unfunded loan commitments of $6.5 million as of December 31, 2020 represents an increase of $5.4 million from December 31, 2019. The change was driven by a change in Allowance for loan losses methodology, an increase in the reserve ratios as a result of the current reasonable and supportable economic forecasts due to the COVID-19 pandemic, and an increase in the balance of loan commitments. Changes in the balance of reserve for unfunded loan commitments are recognized as Other expense within Total operating expense.
Upon the adoption of ASU 2016-13 on January 1, 2020, the Company recognized a decrease in the Allowance for loan losses of $20.4 million. The adoption amount was driven primarily by the portfolio composition, the short-term nature of many Commercial loans, estimated prepayments and curtailments, a change to the loan portfolio segmentation in which Commercial and industrial and Commercial tax-exempt loans were bifurcated given the different underlying risk characteristics, and reasonable and supportable economic forecasts at the time of adoption. Upon the adoption of ASU 2016-13, the Company recognized an increase in the reserve of $1.4 million in the unfunded loan commitments. The net, after-tax impact of the $20.4 million decrease in the Allowance for loan losses and the $1.4 million increase in the reserve for unfunded loan commitments was an increase to Retained earnings of $13.5 million.
The Allowance for loan losses is an estimate of the inherent risk of loss in the loan portfolio as of the Consolidated Balance Sheet dates. Management estimates the level of the Allowance for loan losses based on all relevant information available. Changes to the required level in the Allowance for loan losses result in either a provision for loan loss expense, if an increase is required, or a credit to the provision, if a decrease if required. Loan losses are charged to the Allowance for loan losses when available information confirms that specific loans or portions thereof, are uncollectable. Recoveries on loans previously charged-off are added back to the Allowance for loan losses when received in cash or when the Bank takes possession of other assets.
The following tables present the Company’s Allowance for loan losses and loan portfolio at December 31, 2020 and 2019 by portfolio segment, disaggregated by method of impairment analysis. The Company had no loans acquired with deteriorated credit quality at December 31, 2020 or 2019.
December 31, 2020
Individually Evaluated
for Impairment		Collectively Evaluated
for Impairment		Total
Recorded
investment
(loan balance)		Allowance
for loan
losses		Recorded
investment
(loan balance)		Allowance
for loan
losses		Recorded
investment
(loan balance)		Allowance
for loan
losses
(In thousands)
Commercial and industrial$4,315 $279 $554,028 $8,706 $558,343 $8,985 
Paycheck Protection Program— — 312,356 159 312,356 159 
Commercial tax-exempt— — 442,159 2,550 442,159 2,550 
Commercial real estate5,262 50 2,752,113 51,111 2,757,375 51,161 
Construction and land— — 159,204 4,041 159,204 4,041 
Residential14,942 54 2,662,522 12,810 2,677,464 12,864 
Home equity623 17 76,741 276 77,364 293 
Consumer and other— — 120,044 1,185 120,044 1,185 
Total$25,142 $400 $7,079,167 $80,838 $7,104,309 $81,238 

December 31, 2019
Individually Evaluated
for Impairment		Collectively Evaluated
for Impairment		Total
Recorded
investment
(loan balance)		Allowance
for loan
losses		Recorded
investment
(loan balance)		Allowance
for loan
losses		Recorded
investment
(loan balance)		Allowance
for loan
losses
(In thousands)
Commercial and industrial$724 $146 $1,141,237 $15,918 $1,141,961 $16,064 
Commercial real estate733 — 2,550,541 40,765 2,551,274 40,765 
Construction and land— — 225,983 5,119 225,983 5,119 
Residential15,900 67 2,823,255 8,790 2,839,155 8,857 
Home equity1,830 22 81,827 756 83,657 778 
Consumer and other— — 134,674 399 134,674 399 
Total$19,187 $235 $6,957,517 $71,747 $6,976,704 $71,982