XML 36 R16.htm IDEA: XBRL DOCUMENT v3.10.0.1
Allowance for Loan Losses
 12 Months Ended
Dec. 31, 2018
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 2018, incorporating annualized net charge-offs plus changes in specific reserves through December 31, 2018.  With the addition of 2018 historical losses, management extended the historical loss period to 108 months from 96 months. The 108 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 2018.

•
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 2018.

•
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 increased by 0.05% during the fourth quarter of 2018 due to consideration of the current economic environment in association to the 108 month historical loss period.

The activity in the allowance for loan losses for the years ended December 31, 2018, 2017, and 2016 is summarized in the following tables.

 
 
Year ended December 31, 2018
(In thousands)
 
Commercial, financial and agricultural
 
Commercial real estate
 
Construction real estate
 
Residential real estate
 
Consumer
 
Leases
 
Total
Allowance for credit losses:
 
 
 
 
 
 
 
 
 
 
 
 
Beginning balance
 
$
15,022

 
$
9,601

 
$
4,430

 
$
9,321

 
$
11,614

 
$
—

 
$
49,988

     Charge-offs
 
2,796

 
281

 
72

 
441

 
9,962

 
—

 
13,552

  Recoveries
 
(1,221
)
 
(272
)
 
(712
)
 
(844
)
 
(4,078
)
 
(4
)
 
(7,131
)
Net charge-offs (recoveries)
 
1,575

 
9

 
(640
)
 
(403
)
 
5,884

 
(4
)
 
6,421

Provision (Recovery)
 
3,330

 
176

 
(607
)
 
(993
)
 
6,043

 
(4
)
 
7,945

         Ending balance
 
$
16,777

 
$
9,768

 
$
4,463

 
$
8,731

 
$
11,773

 
—

 
$
51,512

 
 
 
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



Loans collectively evaluated for impairment in the following tables include all performing loans at December 31, 2018 and 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 December 31, 2018 and 2017, 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, 2018 and 2017 was as follows: 

 
December 31, 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
$
2,169

 
$
86

 
$
—

 
$
18

 
$
—

 
$
—

 
$
2,273

Collectively evaluated for impairment
14,608

 
9,682

 
4,463

 
8,713

 
11,773

 
—

 
49,239

Acquired with deteriorated credit quality
—

 
—

 
—

 
—

 
—

 
—

 
—

Total ending allowance balance
$
16,777

 
$
9,768

 
$
4,463

 
$
8,731

 
$
11,773

 
$
—

 
$
51,512

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Loan balance:
 
 
 
 
 
 
 
 
 
 
 
 
 
Loans individually evaluated for impairment
$
15,119

 
$
28,418

 
$
1,866

 
$
2,732

 
$
—

 
$
—

 
$
48,135

Loans collectively evaluated for impairment
1,057,520

 
1,251,579

 
245,909

 
1,790,637

 
1,292,136

 
2,273

 
5,640,054

Loans acquired with deteriorated credit quality (1)
147

 
3,048

 
499

 
249

 
—

 
—

 
3,943

Total ending loan balance
$
1,072,786

 
$
1,283,045

 
$
248,274

 
$
1,793,618

 
$
1,292,136

 
$
2,273

 
$
5,692,132

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Allowance for loan losses as a percentage of loan balance:
 
 
 
 
 
 
 
 
 
 
 
 
 
Loans individually evaluated for impairment
14.35
%
 
0.30
%
 
—
%
 
0.66
%
 
—
%
 
—
%
 
4.72
%
Loans collectively evaluated for impairment
1.38
%
 
0.77
%
 
1.81
%
 
0.49
%
 
0.91
%
 
—
%
 
0.87
%
Loans acquired with deteriorated credit quality
—
%
 
—
%
 
—
%
 
—
%
 
—
%
 
—
%
 
—
%
Total
1.56
%
 
0.76
%
 
1.80
%
 
0.49
%
 
0.91
%
 
—
%
 
0.90
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Recorded investment:
 
 
 
 
 
 
 
 
 
 
 
 
 
Loans individually evaluated for impairment
$
15,120

 
$
28,426

 
$
1,866

 
$
2,732

 
$
—

 
$
—

 
$
48,144

Loans collectively evaluated for impairment
1,062,121

 
1,256,310

 
246,864

 
1,794,207

 
1,295,892

 
2,299

 
5,657,693

Loans acquired with deteriorated credit quality (1)
148

 
3,059

 
503

 
251

 
—

 
—

 
3,961

Total ending recorded investment
$
1,077,389

 
$
1,287,795

 
$
249,233

 
$
1,797,190

 
$
1,295,892

 
$
2,299

 
$
5,709,798

 (1) Excludes loans acquired with deteriorated credit quality which are individually evaluated for impairment due to additional credit deterioration post acquisition. These loans had a balance of $475,000, a recorded investment of $475,000, and zero allowance as of December 31, 2018.
 
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