Loans

3 Months Ended

Mar. 31, 2017

Loans and Leases Receivable Disclosure [Abstract]

Loans

Loans

The composition of the loan portfolio, by class of loan, as of March 31, 2017 and December 31, 2016 was as follows:

	March 31, 2017						December 31, 2016
(In thousands)	Loan Balance		Accrued Interest Receivable		Recorded Investment		Loan Balance		Accrued Interest Receivable		Recorded Investment
Commercial, financial and agricultural *	$	995,377	$	3,898	$	999,275	$	994,619	$	3,558	$	998,177
Commercial real estate *	1,187,395		3,870		1,191,265		1,155,703		4,161		1,159,864
Construction real estate:
Commercial	112,015		338		112,353		135,343		398		135,741
Mortgage	48,193		110		48,303		48,699		106		48,805
Installment	5,026		14		5,040		4,903		17		4,920
Residential real estate:
Commercial	396,663		924		397,587		406,687		940		407,627
Mortgage	1,156,543		1,246		1,157,789		1,169,495		1,459		1,170,954
HELOC	211,311		820		212,131		212,441		853		213,294
Installment	18,734		53		18,787		19,874		67		19,941
Consumer	1,178,736		3,118		1,181,854		1,120,850		3,385		1,124,235
Leases	3,648		58		3,706		3,243		29		3,272
Total loans	$	5,313,641	$	14,449	$	5,328,090	$	5,271,857	$	14,973	$	5,286,830

* Included within each of commercial, financial and agricultural loans and commercial real estate loans is an immaterial amount of consumer loans that are not broken out by class.

Loans are shown net of deferred origination fees, costs and unearned income of $11.7 million at March 31, 2017 and $11.1 million at December 31, 2016, which represented a net deferred income position in both periods.

Overdrawn deposit accounts of $2.0 million and $2.9 million had been reclassified to loans at March 31, 2017 and December 31, 2016, respectively, and are included in the commercial, financial and agricultural loan class above.

Credit Quality

The following tables present the recorded investment in nonaccrual loans, accruing troubled debt restructurings ("TDRs"), and loans past due 90 days or more and still accruing by class of loan as of March 31, 2017 and December 31, 2016:

	March 31, 2017
(In thousands)	Nonaccrual Loans		Accruing Troubled Debt Restructurings		Loans Past Due 90 Days or More and Accruing		Total Nonperforming Loans
Commercial, financial and agricultural	$	18,767	$	3,825	$	10	$	22,602
Commercial real estate	18,474		4,258		—		22,732
Construction real estate:
Commercial	1,649		392		—		2,041
Mortgage	—		103		—		103
Installment	58		92		—		150
Residential real estate:
Commercial	22,715		88		—		22,803
Mortgage	17,632		9,983		804		28,419
HELOC	1,683		849		26		2,558
Installment	577		630		—		1,207
Consumer	2,739		1,003		1,046		4,788
Total loans	$	84,294	$	21,223	$	1,886	$	107,403

	December 31, 2016
(In thousands)	Nonaccrual Loans		Accruing Troubled Debt Restructurings		Loans Past Due 90 Days or More and Accruing		Total Nonperforming Loans
Commercial, financial and agricultural	$	20,057	$	600	$	15	$	20,672
Commercial real estate	19,169		5,305		—		24,474
Construction real estate:
Commercial	1,833		393		—		2,226
Mortgage	—		104		—		104
Installment	61		95		12		168
Residential real estate:
Commercial	23,013		89		—		23,102
Mortgage	18,313		9,612		887		28,812
HELOC	1,783		673		25		2,481
Installment	644		609		60		1,313
Consumer	2,949		748		1,139		4,836
Total loans	$	87,822	$	18,228	$	2,138	$	108,188

The following table provides additional information regarding those nonaccrual loans and accruing TDR loans that were individually evaluated for impairment and those collectively evaluated for impairment as of March 31, 2017 and December 31, 2016.

	March 31, 2017						December 31, 2016
(In thousands)	Nonaccrual and Accruing TDRs		Loans Individually Evaluated for Impairment		Loans Collectively Evaluated for Impairment		Nonaccrual and Accruing TDRs		Loans Individually Evaluated for Impairment		Loans Collectively Evaluated for Impairment
Commercial, financial and agricultural	$	22,592	$	22,542	$	50	$	20,657	$	20,624	$	33
Commercial real estate	22,732		22,732		—		24,474		24,474		—
Construction real estate:
Commercial	2,041		2,041		—		2,226		2,226		—
Mortgage	103		—		103		104		—		104
Installment	150		—		150		156		—		156
Residential real estate:
Commercial	22,803		22,803		—		23,102		23,102		—
Mortgage	27,615		—		27,615		27,925		—		27,925
HELOC	2,532		—		2,532		2,456		—		2,456
Installment	1,207		—		1,207		1,253		—		1,253
Consumer	3,742		9		3,733		3,697		—		3,697
Total loans	$	105,517	$	70,127	$	35,390	$	106,050	$	70,426	$	35,624

All of the loans individually evaluated for impairment were evaluated using the fair value of the underlying collateral or the present value of expected future cash flows as the measurement method.

The following table presents loans individually evaluated for impairment by class of loan, together with the related allowance recorded, as of March 31, 2017 and December 31, 2016.

	March 31, 2017						December 31, 2016
(In thousands)	Unpaid Principal Balance		Recorded Investment		Allowance for Loan Losses Allocated		Unpaid Principal Balance		Recorded Investment		Allowance for Loan Losses Allocated
With no related allowance recorded:
Commercial, financial and agricultural	$	37,260	$	21,001	$	—	$	41,075	$	19,965	$	—
Commercial real estate	22,553		22,094		—		23,961		23,474		—
Construction real estate:
Commercial	1,499		1,471		—		3,662		2,226		—
Residential real estate:
Commercial	22,924		22,302		—		24,409		22,687		—
With an allowance recorded:
Commercial, financial and agricultural	6,419		1,541		596		810		659		152
Commercial real estate	695		638		179		1,014		1,000		309
Construction real estate:
Commercial	1,956		570		32		—		—		—
Residential real estate:
Commercial	516		501		275		427		415		87
Consumer	9		9		9		—		—		—
Total	$	93,831	$	70,127	$	1,091	$	95,358	$	70,426	$	548

Management’s general practice is to proactively charge down loans individually evaluated for impairment to the fair value of the underlying collateral. At March 31, 2017 and December 31, 2016, there were $17.4 million and $24.7 million, respectively, of partial charge-offs on loans individually evaluated for impairment with no related allowance recorded and $6.3 million and $0.2 million, respectively, of partial charge-offs on loans individually evaluated for impairment that also had a specific reserve allocated.

 The allowance for loan losses included specific reserves related to loans individually evaluated for impairment at March 31, 2017 and December 31, 2016 of $1.1 million and $0.5 million, respectively. These loans with specific reserves had a recorded investment of $3.3 million and $2.1 million as of March 31, 2017 and December 31, 2016, respectively.

Interest income on nonaccrual loans individually evaluated for impairment is recognized on a cash basis only when Park expects to receive the entire recorded investment of the loan. Interest income on accruing TDRs individually evaluated for impairment continues to be recorded on an accrual basis. The following table presents the average recorded investment and interest income recognized subsequent to impairment on loans individually evaluated for impairment as of and for the three months ended March 31, 2017 and March 31, 2016:

	Three Months Ended March 31, 2017						Three Months Ended March 31, 2016
(In thousands)	Recorded Investment as of March 31, 2017		Average Recorded Investment		Interest Income Recognized		Recorded Investment as of March 31, 2016		Average Recorded Investment		Interest Income Recognized
Commercial, financial and agricultural	$	22,542	$	19,471	$	220	$	28,596	$	29,858	$	238
Commercial real estate	22,732		23,297		231		18,068		17,100		180
Construction real estate:
Commercial	2,041		2,096		15		6,888		6,814		13
Residential real estate:
Commercial	22,803		23,081		345		24,619		24,897		1,965
Consumer	9		5		—		—		—		—
Total	$	70,127	$	67,950	$	811	$	78,171	$	78,669	$	2,396

The following tables present the aging of the recorded investment in past due loans as of March 31, 2017 and December 31, 2016 by class of loan. 

	March 31, 2017
(In thousands)	Accruing Loans Past Due 30-89 Days		Past Due  Nonaccrual Loans and Loans Past Due 90 Days or More and  Accruing (1)		Total Past Due		Total Current (2)		Total Recorded Investment
Commercial, financial and agricultural	$	541	$	2,272	$	2,813	$	996,462	$	999,275
Commercial real estate	135		2,591		2,726		1,188,539		1,191,265
Construction real estate:
Commercial	—		24		24		112,329		112,353
Mortgage	—		—		—		48,303		48,303
Installment	210		49		259		4,781		5,040
Residential real estate:
Commercial	170		2,067		2,237		395,350		397,587
Mortgage	7,566		9,391		16,957		1,140,832		1,157,789
HELOC	632		1,017		1,649		210,482		212,131
Installment	197		178		375		18,412		18,787
Consumer	7,734		1,806		9,540		1,172,314		1,181,854
Leases	—		—		—		3,706		3,706
Total loans	$	17,185	$	19,395	$	36,580	$	5,291,510	$	5,328,090

(1) Includes $1.9 million of loans past due 90 days or more and accruing. The remaining are past due nonaccrual loans.

(2) Includes $66.8 million of nonaccrual loans which are current in regards to contractual principal and interest payments.

	December 31, 2016
(in thousands)	Accruing Loans Past Due 30-89 Days		Past Due  Nonaccrual Loans and Loans Past Due 90 Days or More and  Accruing (1)		Total Past Due		Total Current (2)		Total Recorded Investment
Commercial, financial and agricultural	$	371	$	4,113	$	4,484	$	993,693	$	998,177
Commercial real estate	355		2,499		2,854		1,157,010		1,159,864
Construction real estate:
Commercial	—		541		541		135,200		135,741
Mortgage	559		—		559		48,246		48,805
Installment	223		64		287		4,633		4,920
Residential real estate:
Commercial	330		3,631		3,961		403,666		407,627
Mortgage	10,854		9,769		20,623		1,150,331		1,170,954
HELOC	970		1,020		1,990		211,304		213,294
Installment	350		319		669		19,272		19,941
Consumer	12,579		2,094		14,673		1,109,562		1,124,235
Leases	—		—		—		3,272		3,272
Total loans	$	26,591	$	24,050	$	50,641	$	5,236,189	$	5,286,830

(1) Includes $2.1 million of loans past due 90 days or more and accruing. The remaining are past due nonaccrual loans.

(2) Includes $65.9 million of nonaccrual loans which are current in regards to contractual principal and interest payments.

Credit Quality Indicators

Management utilizes past due information as a credit quality indicator across the loan portfolio. Past due information as of March 31, 2017 and December 31, 2016 is included in the tables above. The past due information is the primary credit quality indicator within the following classes of loans: (1) mortgage loans and installment loans in the construction real estate segment; (2) mortgage loans, HELOC and installment loans in the residential real estate segment; and (3) consumer loans. The primary credit indicator for commercial loans is based on an internal grading system that grades commercial loans on a scale from 1 to 8. Credit grades are continuously monitored by the responsible loan officer and adjustments are made when appropriate. A grade of 1 indicates little or no credit risk and a grade of 8 is considered a loss. Commercial loans that are pass-rated (graded an 1 through a 4) are considered to be of acceptable credit risk. Commercial loans graded a 5 (special mention) are considered to be watch list credits and a higher loan loss reserve percentage is allocated to these loans. Loans classified as special mention have potential weaknesses that require management’s close attention. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the loan or of Park’s credit position at some future date. Commercial loans graded 6 (substandard), also considered to be watch list credits, are considered to represent higher credit risk and, as a result, a higher loan loss reserve percentage is allocated to these loans. Loans classified as substandard are inadequately protected by the current sound worth and paying capacity of the obligor or the value 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 Park will sustain some loss if the deficiencies are not corrected. Commercial loans that are graded a 7 (doubtful) are shown as nonaccrual and Park generally charges these loans down to their fair value by taking a partial charge-off or recording a specific reserve. 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. Certain 6-rated loans and all 7-rated loans are placed on nonaccrual status and included within the impaired category. A loan is deemed impaired when management determines the borrower's ability to perform in accordance with the contractual loan agreement is in doubt. Any commercial loan graded an 8 (loss) is completely charged off.

The tables below present the recorded investment by loan grade at March 31, 2017 and December 31, 2016 for all commercial loans:

	March 31, 2017
(In thousands)	5 Rated		6 Rated		Nonaccrual and Accruing Troubled Debt Restructurings		Pass-Rated		Recorded Investment
Commercial, financial and agricultural *	$	1,394	$	179	$	22,592	$	975,110	$	999,275
Commercial real estate *	5,873		268		22,732		1,162,392		1,191,265
Construction real estate:
Commercial	90		116		2,041		110,106		112,353
Residential real estate:
Commercial	1,061		216		22,803		373,507		397,587
Leases	—		—		—		3,706		3,706
Total commercial loans	$	8,418	$	779	$	70,168	$	2,624,821	$	2,704,186

 * Included within each of commercial, financial and agricultural loans and commercial real estate loans is an immaterial amount of consumer loans that are not broken out by class.

	December 31, 2016
(In thousands)	5 Rated		6 Rated		Nonaccrual and Accruing Troubled Debt Restructurings		Pass-Rated		Recorded Investment
Commercial, financial and agricultural *	$	5,826	$	—	$	20,657	$	971,694	$	998,177
Commercial real estate *	7,548		190		24,474		1,127,652		1,159,864
Construction real estate:
Commercial	287		118		2,226		133,110		135,741
Residential real estate:
Commercial	1,055		124		23,102		383,346		407,627
Leases	—		—		—		3,272		3,272
Total Commercial Loans	$	14,716	$	432	$	70,459	$	2,619,074	$	2,704,681

* Included within each of commercial, financial and agricultural loans and commercial real estate loans is an immaterial amount of consumer loans that are not broken out by class.

Troubled Debt Restructurings ("TDRs")

Management classifies loans as TDRs when a borrower is experiencing financial difficulties and Park has granted a concession to the borrower as part of a modification or in the loan renewal process. In order to determine whether a borrower is experiencing financial difficulty, an evaluation is performed of the probability that the borrower will be in payment default on any of the borrower's debt in the foreseeable future without the modification. This evaluation is performed in accordance with the Company’s internal underwriting policy. Management’s policy is to modify loans by extending the term or by granting a temporary or permanent contractual interest rate below the market rate, not by forgiving debt. A court's discharge of a borrower's debt in a Chapter 7 bankruptcy is considered a concession when the borrower does not reaffirm the discharged debt.

Certain loans which were modified during the three-month periods ended March 31, 2017 and March 31, 2016 did not meet the definition of a TDR as the modification was a delay in a payment that was considered to be insignificant. Management considers a forbearance period of up to three months or a delay in payment of up to 30 days to be insignificant. TDRs may be classified as accruing if the borrower has been current for a period of at least six months with respect to loan payments and management expects that the borrower will be able to continue to make payments in accordance with the terms of the restructured note. Management reviews all accruing TDRs quarterly to ensure payments continue to be made in accordance with the modified terms.

Quarterly, management reviews renewals/modifications of loans previously identified as TDRs to consider if it is appropriate to remove the TDR classification. If the borrower is no longer experiencing financial difficulty and the renewal/modification did not contain a concessionary interest rate or other concessionary terms, management considers the potential removal of the TDR classification. If deemed appropriate, the TDR classification is removed as the borrower has complied with the terms of the loan at the date of the renewal/modification and there was a reasonable expectation that the borrower would continue to comply with the terms of the loan subsequent to the date of the renewal/modification. The majority of these TDRs were originally considered restructurings in a prior year as a result of a renewal/modification with an interest rate that was not commensurate with the risk of the underlying loan at the time of the renewal/modification. There were no TDR classifications removed during the three-month period ended March 31, 2017. The TDR classification was removed on $806,000 of loans during the three-month period ended March 31, 2016, respectively.

At March 31, 2017 and December 31, 2016, there were $47.8 million and $46.9 million, respectively, of TDRs included in the nonaccrual loan totals. At March 31, 2017 and December 31, 2016, $40.2 million and $38.0 million, respectively, of these nonaccrual TDRs were performing in accordance with the terms of the restructured note. As of March 31, 2017 and December 31, 2016, loans with a recorded investment of $21.2 million and $18.2 million, respectively, were included in accruing TDR loan totals. Management will continue to review the restructured loans and may determine it appropriate to move certain nonaccrual TDRs to accrual status in the future.

At March 31, 2017 and December 31, 2016, Park had commitments to lend $1.1 million and $0.7 million, respectively, of additional funds to borrowers whose outstanding loan terms had been modified in a TDR.

There were $0.5 million and $0.2 million of specific reserves related to TDRs at March 31, 2017 and December 31, 2016, respectively. Modifications made in 2016 and 2017 were largely the result of renewals and extending the maturity date of the loan at terms consistent with the original note. These modifications were deemed to be TDRs primarily due to Park’s conclusion that the borrower would likely not have qualified for similar terms through another lender. Many of the modifications deemed to be TDRs were previously identified as impaired loans, and thus were also previously evaluated for impairment under Accounting Standards Codification (ASC) 310.  Additional specific reserves of $280,000 and $25,000 were recorded during the three-month periods ended March 31, 2017 and March 31, 2016, respectively, as a result of TDRs identified in the respective periods.

The terms of certain other loans were modified during the three-month periods ended March 31, 2017 and March 31, 2016 that did not meet the definition of a TDR. Modified substandard commercial loans which did not meet the definition of a TDR had a total recorded investment as of March 31, 2017 of $113,000. There were no modified substandard commercial loans which did not meet the definition of a TDR at March 31, 2016. The renewal/modification of these loans: (1) resulted in a delay in a payment that was considered to be insignificant, or (2) resulted in Park obtaining additional collateral or guarantees that improved the likelihood of the ultimate collection of the loan such that the modification was deemed to be at market terms.  Modified consumer loans which did not meet the definition of a TDR had a total recorded investment of $1.4 million and $2.0 million, as of March 31, 2017 and March 31, 2016, respectively. Many of these loans were to borrowers who were not experiencing financial difficulties but who were looking to reduce their cost of funds.

The following tables detail the number of contracts modified as TDRs during the three-month periods ended March 31, 2017 and March 31, 2016, as well as the recorded investment of these contracts at March 31, 2017 and March 31, 2016. The recorded investment pre- and post-modification is generally the same due to the fact that Park does not typically provide for forgiveness of principal.

	Three Months Ended March 31, 2017
(In thousands)	Number of Contracts	Accruing		Nonaccrual		Total Recorded Investment
Commercial, financial and agricultural	6	$	3,079	$	1,019	$	4,098
Commercial real estate	4	—		379		379
Construction real estate:
Commercial	—	—		—		—
Mortgage	—	—		—		—
Installment	—	—		—		—
Residential real estate:
Commercial	3	—		2,140		2,140
Mortgage	9	—		608		608
HELOC	3	200		6		206
Installment	1	34		—		34
Consumer	57	272		348		620
Total loans	83	$	3,585	$	4,500	$	8,085

	Three Months Ended March 31, 2016
(In thousands)	Number of Contracts	Accruing		Nonaccrual		Total Recorded Investment
Commercial, financial and agricultural	7	$	131	$	716	$	847
Commercial real estate	—	—		—		—
Construction real estate:
Commercial	—	—		—		—
Mortgage	—	—		—		—
Installment	—	—		—		—
Residential real estate:
Commercial	2	—		617		617
Mortgage	5	99		217		316
HELOC	6	64		122		186
Installment	—	—		—		—
Consumer	64	52		511		563
Total loans	84	$	346	$	2,183	$	2,529

Of those loans which were modified and determined to be a TDR during the three-month period ended March 31, 2017, $2.6 million were on nonaccrual status as of December 31, 2016. Of those loans which were modified and determined to be a TDR during the three-month period ended March 31, 2016, $922,000 were on nonaccrual status as of December 31, 2015.

The following tables present the recorded investment in financing receivables which were modified as TDRs within the previous 12 months and for which there was a payment default during the three-month periods ended March 31, 2017 and March 31, 2016, respectively. For these tables, a loan is considered to be in default when it becomes 30 days contractually past due under the modified terms. The additional allowance for loan loss resulting from the defaults on TDR loans was immaterial.

	Three Months Ended March 31, 2017			Three Months Ended March 31, 2016
(In thousands)	Number of Contracts	Recorded Investment		Number of Contracts	Recorded Investment
Commercial, financial and agricultural	6	$	198	1	$	1
Commercial real estate	5	838		—	—
Construction real estate:
Commercial	—	—		—	—
Mortgage	—	—		—	—
Installment	—	—		—	—
Residential real estate:
Commercial	3	49		1	90
Mortgage	8	631		8	516
HELOC	—	—		—	—
Installment	1	3		1	25
Consumer	29	268		44	463
Leases	—	—		—	—
Total loans	52	$	1,987	55	$	1,095

Of the $2.0 million in modified TDRs which defaulted during the three months ended March 31, 2017, $60,000 were accruing loans and $1.9 million were nonaccrual loans. Of the $1.1 million in modified TDRs which defaulted during the three months ended March 31, 2016, $37,000 were accruing loans and $1.1 million were nonaccrual loans.