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Allowance For Loan Losses
 6 Months Ended
Jun. 30, 2019
Financing Receivable, Allowance for Credit Loss, Writeoff, after Recovery [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 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 2018 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 2018, incorporating 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. 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 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. No change was made to the environmental loss factor during the six months ended June 30, 2019.

The activity in the allowance for loan losses for the three-month and six-month periods ended June 30, 2019 and June 30, 2018 is summarized in the following tables.
 
 
Three Months Ended
June 30, 2019
(In thousands)
Commercial,
financial and
agricultural
 
Commercial
real estate
 
Construction
real estate
 
Residential
real estate
 
Consumer
 
Leases
 
Total
Allowance for loan losses:
 

 
 

 
 

 
 

 
 

 
 

 
 

Beginning balance
$
17,337

 
$
10,193

 
$
4,564

 
$
9,170

 
$
12,104

 
$
—

 
$
53,368

Charge-offs
715

 
339

 
—

 
62

 
1,812

 
—

 
2,928

Recoveries
164

 
55

 
23

 
160

 
1,241

 
1

 
1,644

Net charge-offs/(recoveries)
551

 
284

 
(23
)
 
(98
)
 
571

 
(1
)
 
1,284

Provision/(recovery)
584

 
468

 
478

 
(399
)
 
732

 
56

 
1,919

Ending balance
$
17,370

 
$
10,377

 
$
5,065

 
$
8,869

 
$
12,265

 
$
57

 
$
54,003

 
 
Three Months Ended
June 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
$
14,077

 
$
9,488

 
$
4,463

 
$
9,415

 
$
11,526

 
$
—

 
$
48,969

Charge-offs
287

 
182

 
31

 
102

 
2,114

 
—

 
2,716

Recoveries
206

 
89

 
220

 
244

 
1,054

 
—

 
1,813

Net charge-offs/(recoveries)
81

 
93

 
(189
)
 
(142
)
 
1,060

 
—

 
903

Provision/(recovery)
482

 
11

 
—

 
(312
)
 
1,205

 
—

 
1,386

Ending balance
$
14,478

 
$
9,406

 
$
4,652

 
$
9,245

 
$
11,671

 
$
—

 
$
49,452


 
Six Months Ended
June 30, 2019
(In thousands)
Commercial,
financial and
agricultural
 
Commercial
real estate
 
Construction
real estate
 
Residential
real estate
 
Consumer
 
Leases
 
Total
Allowance for loan losses:
 

 
 

 
 

 
 

 
 

 
 

 
 

Beginning balance
$
16,777

 
$
9,768

 
$
4,463

 
$
8,731

 
$
11,773

 
$
—

 
$
51,512

Charge-offs
913

 
393

 
—

 
91

 
4,518

 
—

 
5,915

Recoveries
580

 
114

 
111

 
542

 
2,641

 
1

 
3,989

Net charge-offs/(recoveries)
333

 
279

 
(111
)
 
(451
)
 
1,877

 
(1
)
 
1,926

Provision/(recovery)
926

 
888

 
491

 
(313
)
 
2,369

 
56

 
4,417

Ending balance
$
17,370

 
$
10,377

 
$
5,065

 
$
8,869

 
$
12,265

 
$
57

 
$
54,003

 
 
Six Months Ended
June 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
936

 
229

 
31

 
218

 
4,752

 
—

 
6,166

Recoveries
858

 
176

 
279

 
604

 
2,067

 
—

 
3,984

Net charge-offs/(recoveries)
78

 
53

 
(248
)
 
(386
)
 
2,685

 
—

 
2,182

(Recovery)/provision
(466
)
 
(142
)
 
(26
)
 
(462
)
 
2,742

 
—

 
1,646

Ending balance
$
14,478

 
$
9,406

 
$
4,652

 
$
9,245

 
$
11,671

 
$
—

 
$
49,452


Loans collectively evaluated for impairment in the following tables include all performing loans at June 30, 2019 and December 31, 2018, 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, 2019 and December 31, 2018, 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 2018 Annual Report).

The composition of the allowance for loan losses at June 30, 2019 and December 31, 2018 was as follows:
 
 
June 30, 2019
(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
$
2,279

 
$
48

 
$
3

 
$
21

 
$
—

 
$
28

 
$
2,379

Collectively evaluated for impairment
15,091

 
10,329

 
5,062

 
8,848

 
12,265

 
29

 
51,624

Acquired with deteriorated credit quality (1)
—

 
—

 
—

 
—

 
—

 
—

 
—

Total ending allowance balance
$
17,370

 
$
10,377

 
$
5,065

 
$
8,869

 
$
12,265

 
$
57

 
$
54,003

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Loan balance:
 

 
 

 
 

 
 

 
 

 
 

 
 

Loans individually evaluated for impairment
$
19,586

 
$
26,432

 
$
2,243

 
$
1,873

 
$
—

 
$
91

 
$
50,225

Loans collectively evaluated for impairment
1,135,656

 
1,571,913

 
310,321

 
1,892,083

 
1,363,183

 
30,329

 
6,303,485

Loans acquired with deteriorated credit quality (1)
3,814

 
13,946

 
1,383

 
3,247

 
3

 
634

 
23,027

Total ending loan balance
$
1,159,056

 
$
1,612,291

 
$
313,947

 
$
1,897,203

 
$
1,363,186

 
$
31,054

 
$
6,376,737

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Allowance for loan losses as a percentage of loan balance:
 

 
 

 
 

 
 

 
 

 
 

 
 

Loans individually evaluated for impairment
11.64
%
 
0.18
%
 
0.13
%
 
1.12
%
 
—
%
 
30.77
%
 
4.74
%
Loans collectively evaluated for impairment
1.33
%
 
0.66
%
 
1.63
%
 
0.47
%
 
0.90
%
 
0.10
%
 
0.82
%
Loans acquired with deteriorated credit quality
—
%
 
—
%
 
—
%
 
—
%
 
—
%
 
—
%
 
—
%
Total
1.50
%
 
0.64
%
 
1.61
%
 
0.47
%
 
0.90
%
 
0.18
%
 
0.85
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Recorded investment:
 

 
 

 
 

 
 

 
 

 
 

 
 

Loans individually evaluated for impairment
$
19,586

 
$
26,461

 
$
2,243

 
$
1,874

 
$
—

 
$
91

 
$
50,255

Loans collectively evaluated for impairment
1,141,030

 
1,577,436

 
311,425

 
1,896,671

 
1,367,321

 
30,347

 
6,324,230

Loans acquired with deteriorated credit quality (1)
3,836

 
14,055

 
1,405

 
3,265

 
3

 
634

 
23,198

Total ending recorded investment
$
1,164,452

 
$
1,617,952

 
$
315,073

 
$
1,901,810

 
$
1,367,324

 
$
31,072

 
$
6,397,683

  (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 $888,000, a recorded investment of $890,000, and a $3,000 allowance as of June 30, 2019.
 
 
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 no allowance as of December 31, 2018.