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Allowance For Loan Losses
 9 Months Ended
Sep. 30, 2018
Allowance for Loan and Lease Losses Write-offs, Net [Abstract]  
Allowance For Loan Losses
Allowance for Loan Losses
 
The allowance for loan losses ("ALLL") 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 2017 Annual Report.

Loss factors are reviewed quarterly and updated at least annually to reflect recent loan loss history and incorporate current risks 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 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. The 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. There was no change to the environmental loss factor during the third quarter of 2018.

Loans acquired as part of the acquisition of NewDominion were recorded at fair value on the date of acquisition, July 1, 2018.  An allowance is only established on these NewDominion loans as a result of credit deterioration post acquisition.  As of September 30, 2018, there was no allowance related to acquired NewDominion loans.


The activity in the allowance for loan losses for the three-month and nine-month periods ended September 30, 2018 and September 30, 2017 is summarized in the following tables.
 
 
Three Months Ended
September 30, 2018
(In thousands)
Commercial,
financial and
agricultural
 
Commercial
real estate
 
Construction
real estate
 
Residential
real estate
 
Consumer
 
Leases
 
Total
Allowance for loan losses:
 

 
 

 
 

 
 

 
 

 
 

 
 

Beginning balance
$
14,478

 
$
9,406

 
$
4,652

 
$
9,245

 
$
11,671

 
$
—

 
$
49,452

Charge-offs
993

 
23

 
26

 
61

 
2,371

 
—

 
3,474

Recoveries
136

 
27

 
156

 
130

 
875

 
4

 
1,328

Net charge-offs/(recoveries)
857

 
(4
)
 
(130
)
 
(69
)
 
1,496

 
(4
)
 
2,146

Provision/(recovery)
1,394

 
337

 
(187
)
 
(212
)
 
1,612

 
(4
)
 
2,940

Ending balance
$
15,015

 
$
9,747

 
$
4,595

 
$
9,102

 
$
11,787

 
$
—

 
$
50,246

 
 
Three Months Ended
September 30, 2017
(In thousands)
Commercial,
financial and
agricultural
 
Commercial
real estate
 
Construction
real estate
 
Residential
real estate
 
Consumer
 
Leases
 
Total
Allowance for loan losses:
 

 
 

 
 

 
 

 
 

 
 

 
 

Beginning balance
$
16,746

 
$
10,451

 
$
4,677

 
$
10,319

 
$
11,629

 
$
—

 
$
53,822

Charge-offs
626

 
628

 
78

 
217

 
2,828

 
—

 
4,377

Recoveries
115

 
13

 
303

 
1,061

 
1,011

 
1

 
2,504

Net charge-offs/(recoveries)
511

 
615

 
(225
)
 
(844
)
 
1,817

 
(1
)
 
1,873

Provision/(recovery)
1,742

 
336

 
499

 
(1,078
)
 
1,785

 
(1
)
 
3,283

Ending balance
$
17,977

 
$
10,172

 
$
5,401

 
$
10,085

 
$
11,597

 
$
—

 
$
55,232


 
Nine Months Ended
September 30, 2018
(In thousands)
Commercial,
financial and
agricultural
 
Commercial
real estate
 
Construction
real estate
 
Residential
real estate
 
Consumer
 
Leases
 
Total
Allowance for loan losses:
 

 
 

 
 

 
 

 
 

 
 

 
 

Beginning balance
$
15,022

 
$
9,601

 
$
4,430

 
$
9,321

 
$
11,614

 
$
—

 
$
49,988

Charge-offs
1,929

 
252

 
57

 
279

 
7,123

 
—

 
9,640

Recoveries
994

 
203

 
435

 
734

 
2,942

 
4

 
5,312

Net charge-offs/(recoveries)
935

 
49

 
(378
)
 
(455
)
 
4,181

 
(4
)
 
4,328

Provision/(recovery)
928

 
195

 
(213
)
 
(674
)
 
4,354

 
(4
)
 
4,586

Ending balance
$
15,015

 
$
9,747

 
$
4,595

 
$
9,102

 
$
11,787

 
$
—

 
$
50,246

 
 
Nine Months Ended
September 30, 2017
(In thousands)
Commercial,
financial and
agricultural
 
Commercial
real estate
 
Construction
real estate
 
Residential
real estate
 
Consumer
 
Leases
 
Total
Allowance for loan losses:
 

 
 

 
 

 
 

 
 

 
 

 
 

Beginning balance
$
13,434

 
$
10,432

 
$
5,247

 
$
10,958

 
$
10,553

 
$
—

 
$
50,624

Charge-offs
1,283

 
1,050

 
105

 
987

 
7,706

 
—

 
11,131

Recoveries
647

 
368

 
686

 
1,688

 
3,609

 
1

 
6,999

Net charge-offs/(recoveries)
636

 
682

 
(581
)
 
(701
)
 
4,097

 
(1
)
 
4,132

Provision/(recovery)
5,179

 
422

 
(427
)
 
(1,574
)
 
5,141

 
(1
)
 
8,740

Ending balance
$
17,977

 
$
10,172

 
$
5,401

 
$
10,085

 
$
11,597

 
$
—

 
$
55,232



Loans collectively evaluated for impairment in the following tables include all performing loans at September 30, 2018 and December 31, 2017, 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 September 30, 2018 and December 31, 2017, 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 2017 Annual Report).

The composition of the allowance for loan losses at September 30, 2018 and December 31, 2017 was as follows:
 
 
September 30, 2018
(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
$
1,716

 
$
71

 
$
—

 
$
59

 
$
—

 
$
—

 
$
1,846

Collectively evaluated for impairment
13,299

 
9,676

 
4,595

 
9,043

 
11,787

 
—

 
48,400

Acquired with deteriorated credit quality
—

 
—

 
—

 
—

 
—

 
—

 
—

Total ending allowance balance
$
15,015

 
$
9,747

 
$
4,595

 
$
9,102

 
$
11,787

 
$
—

 
$
50,246

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Loan balance:
 

 
 

 
 

 
 

 
 

 
 

 
 

Loans individually evaluated for impairment
$
16,023

 
$
25,747

 
$
2,016

 
$
2,912

 
$
—

 
$
—

 
$
46,698

Loans collectively evaluated for impairment
1,015,072

 
1,273,337

 
217,681

 
1,778,027

 
1,287,382

 
2,632

 
5,574,131

Loans acquired with deteriorated credit quality
405

 
3,546

 
499

 
44

 
—

 
—

 
4,494

Total ending loan balance
$
1,031,500

 
$
1,302,630

 
$
220,196

 
$
1,780,983

 
$
1,287,382

 
$
2,632

 
$
5,625,323

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Allowance for loan losses as a percentage of loan balance:
 

 
 

 
 

 
 

 
 

 
 

 
 

Loans individually evaluated for impairment
10.71
%
 
0.28
%
 
—
%
 
2.03
%
 
—
%
 
—
%
 
3.95
%
Loans collectively evaluated for impairment
1.31
%
 
0.76
%
 
2.11
%
 
0.51
%
 
0.92
%
 
—
%
 
0.87
%
Loans acquired with deteriorated credit quality
—
%
 
—
%
 
—
%
 
—
%
 
—
%
 
—
%
 
—
%
Total
1.46
%
 
0.75
%
 
2.09
%
 
0.51
%
 
0.92
%
 
—
%
 
0.89
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Recorded investment:
 

 
 

 
 

 
 

 
 

 
 

 
 

Loans individually evaluated for impairment
$
16,026

 
$
25,805

 
$
2,016

 
$
2,913

 
$
—

 
$
—

 
$
46,760

Loans collectively evaluated for impairment
1,020,675

 
1,278,448

 
218,321

 
1,781,908

 
1,291,155

 
2,672

 
5,593,179

Loans acquired with deteriorated credit quality
405

 
3,546

 
499

 
44

 
—

 
—

 
4,494

Total ending recorded investment
$
1,037,106

 
$
1,307,799

 
$
220,836

 
$
1,784,865

 
$
1,291,155

 
$
2,672

 
$
5,644,433

 
 
 
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