Allowance for Loan Losses

The allowance for loan losses is that amount management believes is adequate to absorb probable incurred credit losses in the loan portfolio based on management’s evaluation of various factors including overall growth in the loan portfolio, an analysis of individual loans, prior and current loss experience, and current economic conditions. A provision for loan losses is charged to operations based on management’s periodic evaluation of these and other pertinent factors as discussed within Note 1 of the Notes to Consolidated Financial Statements included in Park’s 2012 Annual Report.

The activity in the allowance for loan losses for the three and six months ended June 30, 2013 and June 30, 2012 is summarized below.



	Three Months Ended June 30, 2013
(In thousands)	Commercial, financial and agricultural		Commercial real estate		Construction real estate			Residential real estate			Consumer		Leases			Total
Allowance for loan losses:
Beginning balance	$	15,417	$	11,070	$	7,556		$	14,634		$	6,638	$	—		$	55,315
Charge-offs	776		742		153			648			1,520		—			3,839
Recoveries	728		222		421			1,142			448		1			2,962
Net charge-offs/(recoveries)	48		520		(268		)	(494		)	1,072		(1		)	877
Provision (releases)	22		475		(692		)	(481		)	1,350		(1		)	673
Ending balance	$	15,391	$	11,025	$	7,132		$	14,647		$	6,916	$	—		$	55,111



	Three Months Ended June 30, 2012
(In thousands)	Commercial, financial and agricultural		Commercial real estate		Construction real estate			Residential real estate		Consumer		Leases		Total
Allowance for loan losses:
Beginning balance	$	18,328	$	12,006	$	9,747		$	13,868	$	5,809	$	—	$	59,758
Charge-offs	5,423		935		1,009			1,701		996		—		10,064
Recoveries	124		247		1,699			1,187		507		—		3,764
Net charge-offs / (recoveries)	5,299		688		(690		)	514		489		—		6,300
Provision	2,191		638		1,256			452		701		—		5,238
Ending balance	$	15,220	$	11,956	$	11,693		$	13,806	$	6,021	$	—	$	58,696



	Six Months Ended June 30, 2013
(In thousands)	Commercial, financial and agricultural		Commercial real estate		Construction real estate			Residential real estate			Consumer		Leases			Total
Allowance for loan losses:
Beginning balance	$	15,635	$	11,736	$	6,841		$	14,759		$	6,566	$	—		$	55,537
Charge-offs	3,484		1,076		1,671			1,322			2,794		—			10,347
Recoveries	917		262		1,848			4,640			1,251		1			8,919
Net charge-offs/(recoveries)	2,567		814		(177		)	(3,318		)	1,543		(1		)	1,428
Provision (releases)	2,323		103		114			(3,430		)	1,893		(1		)	1,002
Ending balance	$	15,391	$	11,025	$	7,132		$	14,647		$	6,916	$	—		$	55,111



	Six Months Ended June 30, 2012
(In thousands)	Commercial, financial and agricultural		Commercial real estate		Construction real estate		Residential real estate		Consumer		Leases		Total
Allowance for loan losses:
Beginning balance	$	16,950	$	15,539	$	14,433	$	15,692	$	5,830	$	—	$	68,444
Charge-offs	9,961		5,869		5,329		5,623		2,249		—		29,031
Recoveries	592		339		1,766		1,796		1,214		—		5,707
Net charge-offs	9,369		5,530		3,563		3,827		1,035		—		23,324
Provision	7,639		1,947		823		1,941		1,226		—		13,576
Ending balance	$	15,220	$	11,956	$	11,693	$	13,806	$	6,021	$	—	$	58,696

Loans collectively evaluated for impairment in the following tables include all performing loans at June 30, 2013 and December 31, 2012, as well as nonperforming loans internally classified as consumer loans. Nonperforming consumer loans are not typically individually evaluated for impairment, but receive a portion of the statistical allocation of the allowance for loan losses. Loans individually evaluated for impairment include all impaired loans internally classified as commercial loans at June 30, 2013 and December 31, 2012, which are evaluated for impairment in accordance with U.S. GAAP (see Note 1 of the Notes to Consolidated Financial Statements included in Park’s 2012 Annual Report).

The composition of the allowance for loan losses at June 30, 2013 and December 31, 2012 was as follows:



	June 30, 2013
(In thousands)	Commercial, financial and agricultural			Commercial real estate			Construction real estate			Residential real estate			Consumer			Leases		Total
Allowance for loan losses:
Ending allowance balance attributed to loans:
Individually evaluated for impairment	$	3,210		$	703		$	2,580		$	973		$	—		$	—	$	7,466
Collectively evaluated for impairment	12,181			10,322			4,552			13,674			6,916			—		47,645
Total ending allowance balance	$	15,391		$	11,025		$	7,132		$	14,647		$	6,916		$	—	$	55,111

Loan balance:
Loans individually evaluated for impairment	$	20,154		$	42,117		$	27,598		$	35,412		$	799		$	—	$	126,080
Loans collectively evaluated for impairment	786,555			1,071,134			128,270			1,705,350			690,093			3,234		4,384,636
Total ending loan balance	$	806,709		$	1,113,251		$	155,868		$	1,740,762		$	690,892		$	3,234	$	4,510,716

Allowance for loan losses as a percentage of loan balance:
Loans individually evaluated for impairment	15.93		%	1.67		%	9.35		%	2.75		%	—			—		5.92		%
Loans collectively evaluated for impairment	1.55		%	0.96		%	3.55		%	0.80		%	1.00		%	—		1.09		%
Total ending loan balance	1.91		%	0.99		%	4.58		%	0.84		%	1.00		%	—		1.22		%

Recorded investment:
Loans individually evaluated for impairment	$	20,154		$	42,128		$	27,609		$	35,412		$	799		$	—	$	126,102
Loans collectively evaluated for impairment	789,739			1,074,812			128,664			1,709,371			692,887			3,262		4,398,735
Total ending loan balance	$	809,893		$	1,116,940		$	156,273		$	1,744,783		$	693,686		$	3,262	$	4,524,837



	December 31, 2012
(In thousands)	Commercial, financial and agricultural			Commercial real estate			Construction real estate			Residential real estate			Consumer			Leases		Total
Allowance for loan losses:
Ending allowance balance attributed to loans:
Individually evaluated for impairment	$	3,180		$	1,540		$	2,277		$	1,279		$	—		$	—	$	8,276
Collectively evaluated for impairment	12,455			10,196			4,564			13,480			6,566			—		47,261
Total ending allowance balance	$	15,635		$	11,736		$	6,841		$	14,759		$	6,566		$	—	$	55,537

Loan balance:
Loans individually evaluated for impairment	$	22,523		$	44,267		$	34,814		$	35,616		$	18		$	—	$	137,238
Loans collectively evaluated for impairment	801,404			1,047,897			130,714			1,678,029			651,912			3,128		4,313,084
Total ending loan balance	$	823,927		$	1,092,164		$	165,528		$	1,713,645		$	651,930		$	3,128	$	4,450,322

Allowance for loan losses as a percentage of loan balance:
Loans individually evaluated for impairment	14.12		%	3.48		%	6.54		%	3.59		%	—			—		6.03		%
Loans collectively evaluated for impairment	1.55		%	0.97		%	3.49		%	0.80		%	1.01		%	—		1.10		%
Total ending loan balance	1.90		%	1.07		%	4.13		%	0.86		%	1.01		%	—		1.25		%

Recorded investment:
Loans individually evaluated for impairment	$	22,587		$	44,278		$	34,834		$	35,622		$	18		$	—	$	137,339
Loans collectively evaluated for impairment	804,316			1,051,725			131,176			1,681,449			654,747			3,157		4,326,570
Total ending loan balance	$	826,903		$	1,096,003		$	166,010		$	1,717,071		$	654,765		$	3,157	$	4,463,909