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Allowance for Loan Losses
12 Months Ended
Dec. 31, 2017
Allowance For Loan Losses [Abstract]  
Allowance for Loan Losses
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 the 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 - Summary of Significant Accounting Policies.

Loss factors are reviewed quarterly and updated at least annually to reflect recent loan loss history and incorporate current risk and trends which may not be recognized in historical data.  The following are factors management reviews on a quarterly or annual basis.

Historical Loss Factor: Management updated the historical loss calculation during the fourth quarter of 2017, incorporating annualized net charge-offs plus changes in specific reserves through December 31, 2017.  With the addition of 2017 historical losses, management extended the historical loss period to 96 months from 84 months. The 96 month historical loss period captures all annual periods subsequent to June 2009, the end of the most recent recession, thus encompassing the full economic cycle to date.

Loss Emergence Period Factor: At least annually, management calculates the loss emergence period for each commercial loan segment. This loss emergence period is calculated based upon the average period of time it takes from the probable occurrence of a loss event to the credit being moved to nonaccrual. If the loss emergence period for any commercial loan segment is greater than one year, management applies additional general reserves to all performing loans within that segment of the commercial loan portfolio. The loss emergence period was last updated in the fourth quarter of 2017.

Loss Migration Factor: Park’s commercial loans are individually risk graded. If loan downgrades occur, the probability of default increases, and accordingly, management allocates a higher percentage reserve to those accruing commercial loans graded special mention and substandard. Annually, management calculates a loss migration factor for each commercial loan segment for special mention and substandard credits based on a review of losses over the period of time a loan takes to migrate from pass-rated to impaired. The loss migration factor was last updated in the fourth quarter of 2017.

Environmental Loss Factor: Management has identified certain macroeconomic factors that trend in accordance with losses in Park’s commercial loan portfolio. These macroeconomic factors are reviewed quarterly and the adjustments made to the environmental loss factor impacting each segment in the performing commercial loan portfolio correlate to changes in the macroeconomic environment. The environmental loss factor was reduced by 0.025% during the first quarter of 2017 due to improved consumer confidence, as measured by the Conference Board Consumer Confidence Index.

The activity in the allowance for loan losses for the years ended December 31, 2017, 2016, and 2015 is summarized in the following tables.

 
 
Year ended December 31, 2017
(In thousands)
 
Commercial, financial and agricultural
 
Commercial real estate
 
Construction real estate
 
Residential real estate
 
Consumer
 
Leases
 
Total
Allowance for credit losses:
 
 
 
 
 
 
 
 
 
 
 
 
Beginning balance
 
$
13,434

 
$
10,432

 
$
5,247

 
$
10,958

 
$
10,553

 
$

 
$
50,624

     Charge-offs
 
6,017

 
1,798

 
105

 
1,208

 
10,275

 

 
19,403

  Recoveries
 
(809
)
 
(810
)
 
(2,124
)
 
(1,863
)
 
(4,603
)
 
(1
)
 
(10,210
)
Net charge-offs (recoveries)
 
5,208

 
988

 
(2,019
)
 
(655
)
 
5,672

 
(1
)
 
9,193

Provision (Recovery)
 
6,796

 
157

 
(2,836
)
 
(2,292
)
 
6,733

 
(1
)
 
8,557

         Ending balance
 
$
15,022

 
$
9,601

 
$
4,430

 
$
9,321

 
$
11,614

 

 
$
49,988

 
 
 
Year ended December 31, 2016
(In thousands)
 
Commercial, financial and agricultural
 
Commercial real estate
 
Construction real estate
 
Residential real estate
 
Consumer
 
Leases
 
Total
Allowance for credit losses:
 
 
 
 
 
 
 
 
 
 
 
 
Beginning balance
 
$
13,694

 
$
9,197

 
$
8,564

 
$
13,514

 
$
11,524

 
$
1

 
$
56,494

     Charge-offs
 
5,786

 
412

 
1,436

 
3,014

 
10,151

 

 
20,799

  Recoveries
 
(1,259
)
 
(3,671
)
 
(8,559
)
 
(2,446
)
 
(4,094
)
 
(1
)
 
(20,030
)
Net charge-offs (recoveries)
 
4,527

 
(3,259
)
 
(7,123
)
 
568

 
6,057

 
(1
)
 
769

Provision (Recovery)
 
4,267

 
(2,024
)
 
(10,440
)
 
(1,988
)
 
5,086

 
(2
)
 
(5,101
)
        Ending balance
 
$
13,434

 
$
10,432

 
$
5,247

 
$
10,958

 
$
10,553

 
$

 
$
50,624



 
 
Year ended December 31, 2015
(In thousands)
 
Commercial, financial and agricultural
 
Commercial real estate
 
Construction real estate
 
Residential real estate
 
Consumer
 
Leases
 
Total
Allowance for credit losses:
 
 
 
 
 
 
 
 
 
 
 
 
Beginning balance
 
$
10,719

 
$
8,808

 
$
8,652

 
$
14,772

 
$
11,401

 
$

 
$
54,352

Charge-offs
 
2,478

 
348

 
470

 
2,352

 
8,642

 

 
14,290

Recoveries
 
(1,373
)
 
(2,241
)
 
(2,092
)
 
(2,438
)
 
(3,295
)
 
(3
)
 
(11,442
)
Net charge-offs (recoveries)
 
1,105

 
(1,893
)
 
(1,622
)
 
(86
)
 
5,347

 
(3
)
 
2,848

Provision (Recovery)
 
4,080

 
(1,504
)
 
(1,710
)
 
(1,344
)
 
5,470

 
(2
)
 
4,990

Ending balance
 
$
13,694

 
$
9,197

 
$
8,564

 
$
13,514

 
$
11,524

 
$
1

 
$
56,494



Loans collectively evaluated for impairment in the following tables include all performing loans at December 31, 2017 and 2016, 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 December 31, 2017 and 2016, which are evaluated for impairment in accordance with GAAP (see Note 1 - Summary of Significant Accounting Policies).
The composition of the allowance for loan losses at December 31, 2017 and 2016 was as follows: 

 
 
December 31, 2017
(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
 
$
681

 
$
2

 
$

 
$
1

 
$

 
$

 
$
684

      Collectively evaluated for impairment
 
14,341

 
9,599

 
4,430

 
9,320

 
11,614

 

 
49,304

    Total ending allowance balance
 
$
15,022

 
$
9,601

 
$
4,430

 
$
9,321

 
$
11,614

 
$

 
$
49,988

Loan Balance:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
    Loans individually evaluated for impairment
 
$
18,034

 
$
18,131

 
$
1,322

 
$
19,058

 
$

 
$

 
$
56,545

    Loans collectively evaluated for impairment
 
1,035,419

 
1,149,476

 
180,148

 
1,706,166

 
1,241,736

 
2,993

 
5,315,938

Total ending loan balance
 
$
1,053,453

 
$
1,167,607

 
$
181,470

 
$
1,725,224

 
$
1,241,736

 
$
2,993

 
$
5,372,483

Allowance for loan losses as a percentage of loan balance:
 
 
 
 
 
 
 
 
    Loans individually evaluated for impairment
 
3.78
%
 
0.01
%
 
%
 
0.01
%
 
%
 
%
 
1.21
%
    Loans collectively evaluated for impairment
 
1.39
%
 
0.84
%
 
2.46
%
 
0.55
%
 
0.94
%
 
%
 
0.93
%
Total
 
1.43
%
 
0.82
%
 
2.44
%
 
0.54
%
 
0.94
%
 
%
 
0.93
%
Recorded Investment:
 
 
 
 
 
 
 
 
 
 
 
 
    Loans individually evaluated for impairment
 
$
18,039

 
$
18,142

 
$
1,324

 
$
19,059

 
$

 
$

 
$
56,564

    Loans collectively evaluated for impairment
 
1,039,827

 
1,153,748

 
180,693

 
1,709,737

 
1,245,544

 
3,029

 
5,332,578

Total ending recorded investment
 
$
1,057,866

 
$
1,171,890

 
$
182,017

 
$
1,728,796

 
$
1,245,544

 
$
3,029

 
$
5,389,142

 
 
 
December 31, 2016
(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
 
$
152

 
$
309

 
$

 
$
87

 
$

 
$

 
$
548

      Collectively evaluated for impairment
 
13,282

 
10,123

 
5,247

 
10,871

 
10,553

 

 
50,076

    Total ending allowance balance
 
$
13,434

 
$
10,432

 
$
5,247

 
$
10,958

 
$
10,553

 
$

 
$
50,624

Loan Balance:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
    Loans individually evaluated for impairment
 
$
20,622

 
$
24,465

 
$
2,226

 
$
23,102

 
$

 
$

 
$
70,415

    Loans collectively evaluated for impairment
 
973,997

 
1,131,238

 
186,719

 
1,785,395

 
1,120,850

 
3,243

 
5,201,442

Total ending loan balance
 
$
994,619

 
$
1,155,703

 
$
188,945

 
$
1,808,497

 
$
1,120,850

 
$
3,243

 
$
5,271,857

Allowance for loan losses as a percentage of loan balance:
 
 
 
 
 
 
 
 
    Loans individually evaluated for impairment
 
0.74
%
 
1.26
%
 
%
 
0.38
%
 
%
 
%
 
0.78
%
    Loans collectively evaluated for impairment
 
1.36
%
 
0.89
%
 
2.81
%
 
0.61
%
 
0.94
%
 
%
 
0.96
%
Total
 
1.35
%
 
0.90
%
 
2.78
%
 
0.61
%
 
0.94
%
 
%
 
0.96
%
Recorded Investment:
 
 
 
 
 
 
 
 
 
 
 
 
    Loans individually evaluated for impairment
 
$
20,624

 
$
24,474

 
$
2,226

 
$
23,102

 
$

 
$

 
$
70,426

    Loans collectively evaluated for impairment
 
977,553

 
1,135,390

 
187,240

 
1,788,714

 
1,124,235

 
3,272

 
5,216,404

Total ending recorded investment
 
$
998,177

 
$
1,159,864

 
$
189,466

 
$
1,811,816

 
$
1,124,235

 
$
3,272

 
$
5,286,830