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Loans

9 Months Ended

Sep. 30, 2021

Loans and Leases Receivable Disclosure [Abstract]

The composition of the loan portfolio at September 30, 2021 and December 31, 2020 was as follows:


	September 30, 2021		December 31, 2020
(In thousands)	Amortized Cost		Amortized Cost		Accrued Interest Receivable		Recorded Investment
Commercial, financial and agricultural: (1)			$	1,588,989	$	6,528	$	1,595,517
Commercial, financial and agricultural (1)	$	1,179,354	(2)		(2)		(2)
PPP loans	131,483		(2)		(2)		(2)
Overdrafts	4,033		(2)		(2)		(2)
Commercial real estate (1)	1,761,596		1,748,189		6,017		1,754,206
Construction real estate:
Commercial	231,210		226,991		572		227,563
Retail	111,677		116,430		235		116,665
Residential real estate:
Commercial	527,151		526,222		1,161		527,383
Mortgage	1,052,093		1,096,358		947		1,097,305
HELOC	166,454		182,028		647		182,675
Installment	6,410		8,436		22		8,458
Consumer:			1,659,704		4,510		1,664,214
Consumer	1,710,608		(2)		(2)		(2)
GFSC	2,624		(2)		(2)		(2)
Check loans	2,092		(2)		(2)		(2)
Leases	21,632		24,438		14		24,452
Total	$	6,908,417	$	7,177,785	$	20,653	$	7,198,438
Allowance for credit losses	(88,129)		(85,675)
Net loans	$	6,820,288	$	7,092,110

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

(2) Results for reporting periods beginning after January 1, 2021 are presented under ASC 326, while prior period amounts continue to be reported in accordance with previously applicable U.S. GAAP. Category was not broken out as a separate class at December 31, 2020.

In order to support customers, Park participated in the CARES Act Paycheck Protection Program ("PPP"). PPP loans were broken out as a separate class as of September 30, 2021. Included within commercial, financial and agricultural loans as of December 31, 2020 were $331.6 million of PPP loans. For its assistance in originating the first round of PPP loans during 2020, Park received an aggregate of $20.2 million in fees from the SBA, and for its assistance in originating additional PPP loans during 2021, Park received an aggregate of $12.9 million in fees from the SBA. During the three months ended September 30, 2021 and September 30, 2020, $4.3 million and $3.8 million, respectively, of PPP fee income were recognized within loan interest income. During the nine months ended September 30, 2021 and September 30, 2020, $14.0 million and $6.6 million, respectively, of PPP fee income were recognized within loan interest income.

Loans are shown net of deferred origination fees, costs and unearned income of $22.7 million at September 30, 2021, and of $23.6 million at December 31, 2020, which represented a net deferred income position in both years. At September 30, 2021 and December 31, 2020, included in the net deferred origination fees, costs and unearned income were $5.2 million and $6.5 million, respectively, in net origination fees related to PPP loans. At September 30, 2021 and December 31, 2020, loans included purchase accounting adjustments of $4.8 million and $7.2 million, respectively, which represented a net deferred income position at each date. This fair market value purchase accounting adjustment is expected to be recognized into interest income on a level yield basis over the remaining expected life of the loans.

Overdrawn deposit accounts of $4.0 million and $2.0 million were reclassified to loans at September 30, 2021 and December 31, 2020, respectively. As of September 30, 2021, overdrafts were within their own class and as of December 31, 2020, were included in the commercial, financial and agricultural loan segment in the previous table.

Credit Quality

The following table presents the amortized cost of nonaccrual loans, accruing TDRs, and loans past due 90 days or more and still accruing, by class of loan, at September 30, 2021:


	September 30, 2021
(In thousands)	Nonaccrual Loans		Accruing TDRs		Loans Past Due 90 Days or More and Accruing		Total Nonperforming Loans
Commercial, financial and agricultural:
Commercial, financial and agricultural	$	18,245	$	3,812	$	—	$	22,057
PPP loans	—		—		—		—
Overdrafts	—		—		—		—
Commercial real estate	46,803		3,740		—		50,543
Construction real estate:
Commercial	61		380		—		441
Retail	12		10		—		22
Residential real estate:
Commercial	4,614		243		—		4,857
Mortgage	13,122		7,387		—		20,509
HELOC	1,683		697		—		2,380
Installment	113		1,661		29		1,803
Consumer:
Consumer	1,650		857		243		2,750
GFSC	82		10		12		104
Check loans	—		—		—		—
Leases	1,406		—		—		1,406
Total loans	$	87,791	$	18,797	$	284	$	106,872

The following table presents the recorded investment in nonaccrual loans, accruing TDRs, and loans past due 90 days or more and still accruing, by class of loan, at December 31, 2020:


	December 31, 2020
(In thousands)	Nonaccrual Loans		Accruing TDRs		Loans Past Due 90 Days or More and Accruing		Total Nonperforming Loans
Commercial, financial and agricultural	$	23,261	$	5,619	$	—	$	28,880
Commercial real estate	67,426		2,931		377		70,734
Construction real estate:
Commercial	3,110		—		—		3,110
Mortgage	14		31		—		45
Residential real estate:
Commercial	4,304		253		—		4,557
Mortgage	14,016		8,400		416		22,832
HELOC	1,286		909		77		2,272
Installment	184		1,728		—		1,912
Consumer	2,172		1,017		724		3,913
Leases	1,595		—		—		1,595
Total loans	$	117,368	$	20,888	$	1,594	$	139,850

The following table provides additional detail on nonaccrual loans and the related ACL, by class of loan, at September 30, 2021:


	September 30, 2021
(In thousands)	Nonaccrual Loans With No ACL		Nonaccrual Loans With an ACL		Related ACL
Commercial, financial and agricultural:
Commercial, financial and agricultural	$	13,270	$	4,975	$	3,190
PPP loans	—		—		—
Overdrafts	—		—		—
Commercial real estate	46,121		682		180
Construction real estate:
Commercial	61		—		—
Retail	—		12		—
Residential real estate:
Commercial	4,614		—		—
Mortgage	—		13,122		84
HELOC	—		1,683		110
Installment	—		113		26
Consumer
Consumer	—		1,650		470
GFSC	—		82		12
Check loans	—		—		—
Leases	930		476		103
Total loans	$	64,996	$	22,795	$	4,175

Nonaccrual commercial loans are evaluated on an individual basis and are excluded from the collective evaluation. Management’s general practice is to proactively charge down loans individually evaluated to the fair value of the underlying collateral. Nonaccrual consumer loans are collectively evaluated based on similar risk characteristics.

The following table presents loans individually evaluated for impairment by class of loan as of December 31, 2020:


	12/31/2020
(In thousands)	Unpaid Principal Balance		Recorded Investment		ACL Allocated
With no related allowance recorded
Commercial, financial and agricultural	$	23,316	$	22,970	$	—
Commercial real estate	63,639		63,467		—
Construction real estate:
Commercial	3,110		3,110		—
Residential real estate:
Commercial	4,522		4,448		—
Leases	568		568		—
With an allowance recorded
Commercial, financial and agricultural	5,881		5,866		3,758
Commercial real estate	6,890		6,890		1,316
Construction real estate:
Commercial	—		—		—
Residential real estate:
Commercial	109		109		16
Leases	1,027		1,027		344
Total	$	109,062	$	108,455	$	5,434

The following table provides the amortized cost basis of collateral-dependent loans by class of loan, as of September 30, 2021:


	September 30, 2021
(In thousands)	Real Estate		Business Assets		Other		Total
Commercial, financial and agricultural
Commercial, financial and agricultural	$	9,386	$	12,232	$	651	$	22,269
Commercial real estate	56,722		300		47		57,069
Construction real estate:
Commercial	1,407		—		—		1,407
Residential real estate:
Commercial	5,250		—		—		5,250
Mortgage	375		—		—		375
HELOC	144		—		—		144
Leases	—		1,455		—		1,455
Total loans	$	73,284	$	13,987	$	698	$	87,969

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 in the loans. Interest income on accruing TDRs individually evaluated for impairment continues to be recorded on an accrual basis. The following table presents interest income recognized on nonaccrual loans for the three-month and nine-month periods ended September 30, 2021:


	Interest Income Recognized
(In thousands)	Three months ended September 30, 2021		Nine months ended September 30, 2021
Commercial, financial and agricultural:
Commercial, financial and agricultural	$	40	$	147
PPP loans	—		—
Overdrafts	—		—
Commercial real estate	458		1,480
Construction real estate:
Commercial	1		38
Retail	—		1
Residential real estate:
Commercial	60		180
Mortgage	90		233
HELOC	2		12
Installment	—		2
Consumer:
Consumer	23		71
GFSC	3		11
Check loans	—		—
Leases	17		61
Total loans	$	694	$	2,236

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 and nine months ended September 30, 2020:


			Three months ended September 30, 2020				Nine months ended September 30, 2020
(In thousands)	Recorded Investment as of September 30, 2020		Average Recorded Investment		Interest Income Recognized		Average Recorded Investment		Interest Income Recognized
Commercial, financial and agricultural	$	33,098	$	29,481	$	159	30,426		543
Commercial real estate	72,519		58,195		526		50,479		1,416
Construction real estate:
Commercial	3,142		1,212		6		743		14
Residential real estate:
Commercial	4,897		5,061		65		4,271		166
Leases	2,524		2,079		—		909		—
Total	$	116,180	$	96,028	$	756	$	86,828	$	2,139

The following table presents the aging of the amortized cost in past due loans at September 30, 2021 by class of loan:


	September 30, 2021
(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 Amortized Cost
Commercial, financial and agricultural:
Commercial, financial and agricultural	$	3,210	$	10,909	$	14,119	$	1,165,235	$	1,179,354
PPP loans	1		—		1		131,482		131,483
Overdrafts	—		—		—		4,033		4,033
Commercial real estate	—		1,009		1,009		1,760,587		1,761,596
Construction real estate:
Commercial	815		—		815		230,395		231,210
Retail	1,202		12		1,214		110,463		111,677
Residential real estate:
Commercial	—		413		413		526,738		527,151
Mortgage	5,931		5,884		11,815		1,040,278		1,052,093
HELOC	487		997		1,484		164,970		166,454
Installment	37		93		130		6,280		6,410
Consumer:
Consumer	2,436		404		2,840		1,707,768		1,710,608
GFSC	196		57		253		2,371		2,624
Check loans	8		—		8		2,084		2,092
Leases	53		576		629		21,003		21,632
Total loans	$	14,376	$	20,354	$	34,730	$	6,873,687	$	6,908,417

(1) Includes an aggregate of $0.3 million of loans past due 90 days or more and accruing. The remaining loans were past due nonaccrual loans.

(2) Includes an aggregate of $67.7 million of nonaccrual loans which were current in regards to contractual principal and interest payments.

The following table presents the aging of the recorded investment in past due loans at December 31, 2020 by class of loan:


	December 31, 2020
(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	$	7,372	$	13,968	$	21,340	$	1,574,177	$	1,595,517
Commercial real estate	82		972		1,054		1,753,152		1,754,206
Construction real estate:
Commercial	—		39		39		227,524		227,563
Mortgage	77		—		77		115,647		115,724
Installment	12		—		12		929		941
Residential real estate:
Commercial	17		493		510		526,873		527,383
Mortgage	9,538		7,814		17,352		1,079,953		1,097,305
HELOC	805		810		1,615		181,060		182,675
Installment	67		71		138		8,320		8,458
Consumer	5,496		1,213		6,709		1,657,505		1,664,214
Leases	186		984		1,170		23,282		24,452
Total loans	$	23,652	$	26,364	$	50,016	$	7,148,422	$	7,198,438

(1) Includes an aggregate of $1.6 million of loans past due 90 days or more and accruing. The remaining loans were past due nonaccrual loans.

(2) Includes an aggregate of $92.6 million of nonaccrual loans which were 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 at September 30, 2021 and December 31, 2020 is included in the previous tables. The past due information is the primary credit quality indicator within the following classes of loans: (1) overdrafts in the commercial, financial and agricultural portfolio segment; (2) retail loans in the construction real estate portfolio segment; (3) mortgage loans, HELOC and installment loans in the residential real estate portfolio segment; and (4) consumer loans, GFSC loans, and check loans in the consumer portfolio segment. The primary credit indicator for commercial loans is based on an internal grading system that grades all 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 a 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 PD is applied 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 a 6 (substandard), also considered watch list credits, are considered to represent higher credit risk and, as a result, a higher PD is applied 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 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, and is individually evaluated, 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.

Based on the most recent analysis performed, the risk category of loans by class of loans as of September 30, 2021 follows:


September 30, 2021	Term Loans Amortized Cost Basis by Origination Year
(In thousands)	2021		2020		2019		2018		2017		Prior		Revolving Loans Amortized Cost Basis		Total
Commercial, financial and agricultural: Commercial, financial and agricultural (1)
Risk rating
Pass	$	195,565	$	225,189	$	111,003	$	58,680	$	47,081	$	74,703	$	439,145	$	1,151,366
Special Mention	—		1,711		477		390		101		—		6,916		9,595
Substandard	612		787		593		1,371		680		8,084		404		12,531
Doubtful	1,167		912		372		321		1,903		496		691		5,862
Total	$	197,344	$	228,599	$	112,445	$	60,762	$	49,765	$	83,283	$	447,156	$	1,179,354


Commercial, financial and agricultural: PPP
Risk rating
Pass	$	117,405	$	14,078	$	—	$	—	$	—	$	—	$	—	$	131,483
Special Mention	—		—		—		—		—		—		—		—
Substandard	—		—		—		—		—		—		—		—
Doubtful	—		—		—		—		—		—		—		—
Total	$	117,405	$	14,078	$	—	$	—	$	—	$	—	$	—	$	131,483


Commercial real estate (1)
Risk rating
Pass	$	274,406	$	453,316	$	251,647	$	167,526	$	120,190	$	345,899	$	11,767	$	1,624,751
Special Mention	1,571		12,615		34,376		10,602		7,725		18,777		3,590		89,256
Substandard	1,429		3,866		4,679		12,175		8,486		15,587		439		46,661
Doubtful	—		—		245		—		47		636		—		928
Total	$	277,406	$	469,797	$	290,947	$	190,303	$	136,448	$	380,899	$	15,796	$	1,761,596


Construction real estate: Commercial
Risk rating
Pass	$	65,351	$	85,633	$	43,410	$	5,308	$	1,900	$	5,250	$	22,951	$	229,803
Special Mention	—		—		98		699		—		—		282		1,079
Substandard	—		54		7		267		—		—		—		328
Doubtful	—		—		—		—		—		—		—		—
Total	$	65,351	$	85,687	$	43,515	$	6,274	$	1,900	$	5,250	$	23,233	$	231,210


Residential Real Estate: Commercial
Risk rating
Pass	$	106,322	$	172,182	$	65,248	$	46,258	$	29,798	$	86,348	$	14,615	$	520,771
Special Mention	96		—		413		80		—		507		337		1,433
Substandard	615		22		809		1,977		64		1,026		166		4,679
Doubtful	—		—		—		—		244		24		—		268
Total	$	107,033	$	172,204	$	66,470	$	48,315	$	30,106	$	87,905	$	15,118	$	527,151


Leases
Risk rating
Pass	$	5,179	$	6,398	$	4,017	$	2,652	$	907	$	1,057	$	—	$	20,210
Special Mention	—		—		—		—		—		—		—		—
Substandard	—		792		—		41		—		75		—		908
Doubtful	—		76		354		21		47		16		—		514
Total	$	5,179	$	7,266	$	4,371	$	2,714	$	954	$	1,148	$	—	$	21,632


September 30, 2021	Term Loans Amortized Cost Basis by Origination Year
(In thousands)	2021	2020	2019	2018	2017	Prior	Revolving Loans Amortized Cost Basis	Total


Total Commercial Loans
Risk rating
Pass	$	764,228	$	956,796	$	475,325	$	280,424	$	199,876	$	513,257	$	488,478	$	3,678,384
Special Mention	1,667		14,326		35,364		11,771		7,826		19,284		11,125		101,363
Substandard	2,656		5,521		6,088		15,831		9,230		24,772		1,009		65,107
Doubtful	1,167		988		971		342		2,241		1,172		691		7,572
Total	$	769,718	$	977,631	$	517,748	$	308,368	$	219,173	$	558,485	$	501,303	$	3,852,426

(1) 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.

The table below presents the recorded investment by loan grade at December 31, 2020 for all commercial loans:


	December 31, 2020
(In thousands)	5 Rated		6 Rated		Nonaccrual and Accruing TDRs		PCI		Pass-Rated		Recorded Investment
Commercial, financial and agricultural (1)	$	14,638	$	—	$	28,880	$	337	$	1,551,662	$	1,595,517
Commercial real estate (1)	87,439		117		70,357		7,461		1,588,832		1,754,206
Construction real estate:
Commercial	164		—		3,110		1,002		223,287		227,563
Residential real estate:
Commercial	798		22		4,557		1,510		520,496		527,383
Leases	331		—		1,595		112		22,414		24,452
Total Commercial Loans	$	103,370	$	139	$	108,499	$	10,422	$	3,906,691	$	4,129,121

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

Park considers the performance of the loan portfolio and its impact on the allowance for credit losses. For residential and consumer loan classes, Park also evaluates credit quality based on the aging status of the loan, which was previously presented, and by performing status. The following tables present the amortized cost in residential and consumer loans based on performing status. Park defines a loan as nonperforming if it is on nonaccrual status, designated as an accruing TDR, or is greater than 90 days past due and accruing.


September 30, 2021	Term Loans Amortized Cost Basis by Origination Year
(In thousands)	2021		2020		2019		2018		2017		Prior		Revolving Loans Amortized Cost Basis		Total
Commercial, financial and agricultural: Overdrafts
Performing	$	4,033	$	—	$	—	$	—	$	—	$	—	$	—	$	4,033
Nonperforming	—		—		—		—		—		—		—		—
Total	$	4,033	$	—	$	—	$	—	$	—	$	—	$	—	$	4,033


Construction Real Estate: Retail
Performing	$	47,057	$	49,942	$	7,649	$	3,045	$	1,556	$	2,326	$	80	$	111,655
Nonperforming	—		—		—		—		—		22		—		22
Total	$	47,057	$	49,942	$	7,649	$	3,045	$	1,556	$	2,348	$	80	$	111,677


Residential Real Estate: Mortgage
Performing	$	195,203	$	217,391	$	123,465	$	75,441	$	63,593	$	356,491	$	—	$	1,031,584
Nonperforming	—		629		814		861		841		17,364		—		20,509
Total	$	195,203	$	218,020	$	124,279	$	76,302	$	64,434	$	373,855	$	—	$	1,052,093


Residential Real Estate: HELOC
Performing	$	299	$	—	$	158	$	22	$	43	$	2,490	$	161,062	$	164,074
Nonperforming	—		—		—		39		70		1,878		393		2,380
Total	$	299	$	—	$	158	$	61	$	113	$	4,368	$	161,455	$	166,454


Residential Real Estate: Installment
Performing	$	—	$	7	$	553	$	142	$	1,231	$	2,674	$	—	$	4,607
Nonperforming	—		13		2		43		85		1,660		—		1,803
Total	$	—	$	20	$	555	$	185	$	1,316	$	4,334	$	—	$	6,410


Consumer: Consumer
Performing	$	544,465	$	558,784	$	293,738	$	138,496	$	77,438	$	72,314	$	22,623	$	1,707,858
Nonperforming	129		482		772		426		243		698		—		2,750
Total	$	544,594	$	559,266	$	294,510	$	138,922	$	77,681	$	73,012	$	22,623	$	1,710,608


Consumer: GFSC
Performing	$	—	$	333	$	1,581	$	452	$	110	$	(81)	$	125	$	2,520
Nonperforming	—		—		70		19		15		—		—		104
Total	$	—	$	333	$	1,651	$	471	$	125	$	(81)	$	125	$	2,624


Consumer: Check loans
Performing	$	—	$	—	$	—	$	—	$	—	$	—	$	2,092	$	2,092
Nonperforming	—		—		—		—		—		—		—		—
Total	$	—	$	—	$	—	$	—	$	—	$	—	$	2,092	$	2,092


Total Consumer Loans
Performing	$	791,057	$	826,457	$	427,144	$	217,598	$	143,971	$	436,214	$	185,982	$	3,028,423
Nonperforming	129		1,124		1,658		1,388		1,254		21,622		393		27,568
Total	$	791,186	$	827,581	$	428,802	$	218,986	$	145,225	$	457,836	$	186,375	$	3,055,991

Loans and Leases Acquired with Deteriorated Credit Quality

In conjunction with the NewDominion acquisition, Park acquired loans with a book value of $277.9 million as of the July 1, 2018 acquisition date. These loans were recorded at the initial fair value of $272.8 million. Loans acquired with deteriorated credit quality (ASC 310-30) with a book value of $5.1 million were recorded at the initial fair value of $4.9 million. In conjunction with the Carolina Alliance acquisition, Park acquired loans and leases with a book value of $589.7 million as of the April 1, 2019 acquisition date. These loans and leases were recorded at the initial fair value of $578.6 million. Loans and leases acquired with deteriorated credit quality (ASC 310-30) with a book value of $19.9 million were recorded at the initial fair value of $18.4 million.

Upon adoption of CECL on January 1, 2021, $52,000 of the credit discount on PCD loans was reclassified to the allowance for credit losses. At September 30, 2021, there was no allowance for credit losses on PCD loans. The carrying amount of loans acquired with deteriorated credit quality at September 30, 2021 and December 31, 2020 was $8.7 million and $11.2 million, respectively.

Troubled Debt Restructurings

Management typically 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.

During the twenty-one months ended September 30, 2021, Park modified 5,131 consumer loans, with an aggregate balance of $79.5 million, and modified 1,406 commercial loans, with an aggregate balance of $513.3 million, in each case related to a hardship caused by the COVID-19 pandemic and responses thereto. Park has worked with borrowers impacted by the COVID-19 pandemic and provided modifications to include either interest only deferral or principal and interest deferral, in each case, for initial periods of up to 90 days. As necessary, Park made available a second 90-day interest only deferral or principal and interest deferral bringing the total potential deferral period to six months. A majority of these modifications were excluded from TDR classification under Section 4013 of the CARES Act or under applicable interagency guidance of the federal banking regulators. In accordance with this guidance, such modified loans are considered current and continue to accrue interest during the deferral period.

Certain other loans which were modified during the three-month and nine-month periods ended September 30, 2021 and 2020 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.

At September 30, 2021 and December 31, 2020, there were $26.1 million and $25.8 million, respectively, of TDRs included in the nonaccrual loan totals. At September 30, 2021 and December 31, 2020, $16.2 million and $12.9 million, respectively, of these nonaccrual TDRs were performing in accordance with the terms of the restructured notes. At September 30, 2021 and December 31, 2020, loans totaling $18.8 million and $20.9 million, respectively, were included in accruing TDR loan totals. Management will continue to review the restructured loans and may determine it is appropriate to move certain nonaccrual TDRs to accrual status in the future.

At September 30, 2021 and December 31, 2020, Park had commitments to lend $6.8 million and $6.7 million, respectively, of additional funds to borrowers whose outstanding loan terms had been modified in a TDR.

At September 30, 2021 and December 31, 2020, there were $0.5 million and $0.2 million, respectively, of specific reserves related to TDRs. Modifications made in 2021 and 2020 were largely the result of renewals and extending the maturity date of the loans at terms consistent with the original notes. These modifications were deemed to be TDRs primarily due to Park’s conclusion that the respective borrowers 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 ASC 310. There were $156,000 and $174,000 of additional specific reserves recorded during the three-month and nine-month periods ended September 30, 2021, respectively, as a result of TDRs identified in the period. There were no

additional specific reserves recorded during either the three-month or nine-month periods ended September 30, 2020 as a result of TDRs identified in the period.

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 and the terms of the renewal/modification are considered to be market terms based on the current risk characteristics of the borrower, management considers the potential removal of the TDR classification. If deemed appropriate, the TDR classification is removed if 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 will 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 $58,000 and $4.0 million of TDR classifications removed during the three-month and nine-month periods ended September 30, 2021, respectively. The TDR classification was removed on $709,000 and $1.6 million of loans during the three-month and nine-month periods ended September 30, 2020, respectively.

The terms of certain other loans were modified during the three-month and nine-month periods ended September 30, 2021 and 2020 that did not meet the definition of a TDR. Excluding COVID-19 related modifications, there were no substandard commercial loans modified during the three-month and nine-month periods ended September 30, 2021 and September 30, 2020, which did not meet the definition of a TDR. Excluding COVID-19 related modifications, consumer loans modified during the three-month and nine-month periods ended September 30, 2021 which did not meet the definition of a TDR had a total recorded investment of $2.0 million and $4.8 million, respectively. Excluding COVID-19 related modifications, consumer loans modified during the three-month and nine-month periods ended September 30, 2020 which did not meet the definition of a TDR had a total recorded investment of $16.7 million and $58.2 million, 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 September 30, 2021 and 2020, as well as the amortized cost/recorded investment of these contracts at September 30, 2021 and 2020. The amortized cost/recorded investment pre- and post-modification is generally the same due to the fact that Park does not typically forgive principal.


	Three Months Ended September 30, 2021
(In thousands)	Number of Contracts	Accruing		Nonaccrual		Total Amortized Cost
Commercial, financial and agricultural
Commercial, financial and agricultural	5	$	383	$	868	$	1,251
PPP loans	—	—		—		—
Overdrafts	—	—		—		—
Commercial real estate	5	—		5,053		5,053
Construction real estate:
Commercial	—	—		—		—
Retail	—	—		—		—
Residential real estate:
Commercial	2	96		125		221
Mortgage	3	—		102		102
HELOC	1	33		—		33
Installment	1	55		—		55
Consumer:
Consumer	28	15		250		265
GFSC	—	—		—		—
Check loans	—	—		—		—
Leases	—	—		—		—
Total loans	45	$	582	$	6,398	$	6,980


	Three Months Ended September 30, 2020
(In thousands)	Number of Contracts	Accruing		Nonaccrual		Total Recorded Investment
Commercial, financial and agricultural	3	$	35	$	117	$	152
Commercial real estate	4	—		359		359
Construction real estate:
Commercial	—	—		—		—
Mortgage	—	—		—		—
Installment	—	—		—		—
Residential real estate:
Commercial	—	—		—		—
Mortgage	5	258		109		367
HELOC	1	21		—		21
Installment	3	12		7		19
Consumer	64	109		479		588
Total loans	80	$	435	$	1,071	$	1,506

Of those loans which were modified and determined to be a TDR during the three-month period ended September 30, 2021, $4.5 million were on nonaccrual status at December 31, 2020. Of those loans which were modified and determined to be a TDR during the three-month period ended September 30, 2020, $0.1 million were on nonaccrual status at December 31, 2019.

The following tables detail the number of contracts modified as TDRs during the nine-month periods ended September 30, 2021 and 2020, as well as the amortized cost/recorded investment of these contracts at September 30, 2021 and 2020. The amortized cost/recorded investment pre- and post-modification is generally the same due to the fact that Park does not typically forgive principal.


	Nine Months Ended September 30, 2021
(In thousands)	Number of Contracts	Accruing		Nonaccrual		Total Amortized Cost
Commercial, financial and agricultural
Commercial, financial and agricultural	9	$	383	$	899	$	1,282
PPP loans	—	—		—		—
Overdrafts	—	—		—		—
Commercial real estate	13	1,571		6,137		7,708
Construction real estate:						—
Commercial	1	98		—		98
Retail	—	—		—		—
Residential real estate:						—
Commercial	5	96		528		624
Mortgage	13	148		377		525
HELOC	5	80		106		186
Installment	7	93		27		120
Consumer:						—
Consumer	104	137		379		516
GFSC	—			—		—
Check loans	—			—		—
Leases	1			351		351
Total loans	158	$	2,606	$	8,804	$	11,410


	Nine Months Ended September 30, 2020
(In thousands)	Number of Contracts	Accruing		Nonaccrual		Total Recorded Investment
Commercial, financial and agricultural	10	$	117	$	1,110	$	1,227
Commercial real estate	8	1,136		2,068		3,204
Construction real estate:
Commercial	—	—		—		—
Mortgage	1	10		—		10
Installment	1	—		14		14
Residential real estate:
Commercial	1	—		8		8
Mortgage	24	735		1,005		1,740
HELOC	6	25		18		43
Installment	16	191		63		254
Consumer	177	235		655		890
Total loans	244	$	2,449	$	4,941	$	7,390

Of those loans which were modified and determined to be a TDR during the nine-month period ended September 30, 2021, $6.1 million were on nonaccrual status at December 31, 2020. Of those loans which were modified and determined to be a TDR during the nine-month period ended September 30, 2020, $0.4 million were on nonaccrual status at December 31, 2019.

The following tables present the amortized cost/recorded investment in loans which were modified as TDRs within the previous 12 months and for which there was a payment default during the three-month and nine-month periods ended September 30, 2021 and 2020, 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 ACL resulting from the defaults on TDR loans was immaterial.


	Three Months Ended September 30, 2021			Three Months Ended September 30, 2020
(In thousands)	Number of Contracts	Amortized Cost		Number of Contracts	Recorded Investment
Commercial, financial and agricultural:				—	$	—
Commercial, financial and agricultural	—	$	—	(1)	(1)
PPP loans	—	—		(1)	(1)
Overdrafts	—	—		(1)	(1)
Commercial real estate	—	—		1	50
Construction real estate:
Commercial	—	—		—	—
Retail	—	—		1	14
Residential real estate:
Commercial	—	—		—	—
Mortgage	4	330		4	365
HELOC	1	95		1	16
Installment	1	4		1	16
Consumer				26	263
Consumer	15	122		(1)	(1)
GFSC	—	—		(1)	(1)
Check loans	—	—		(1)	(1)
Leases	—	—		—	—
Total loans	21	$	551	34	$	724

(1) Results for reporting periods beginning after January 1, 2021 are presented under ASC 326, while prior period amounts continue to be reported in accordance with previously applicable U.S. GAAP. Category was not broken out as a separate class at December 31, 2020.

Of the $0.6 million in modified TDRs which defaulted during the three-month period ended September 30, 2021, $29,000 were accruing loans and $0.5 million were nonaccrual loans. Of the $0.7 million in modified TDRs which defaulted during the three-month period ended September 30, 2020, $65,000 were accruing loans and $0.7 million were nonaccrual loans.


	Nine Months Ended September 30, 2021			Nine Months Ended September 30, 2020
(In thousands)	Number of Contracts	Amortized Cost		Number of Contracts	Recorded Investment
Commercial, financial and agricultural:				2	89
Commercial, financial and agricultural	—	—		(1)	(1)
PPP loans	—	—		(1)	(1)
Overdrafts	—	—		(1)	(1)
Commercial real estate	—	—		2	278
Construction real estate:
Commercial	—	—		—	—
Retail	—	—		1	14
Residential real estate:
Commercial	—	—		1	8
Mortgage	6	396		8	768
HELOC	1	95		1	16
Installment	2	32		2	28
Consumer				32	365
Consumer	16	128		(1)	(1)
GFSC	—	—		(1)	(1)
Check loans	—	—		(1)	(1)
Leases	1	351		—	—
Total loans	26	$	1,002	49	$	1,566

Of the $1.0 million in modified TDRs which defaulted during the nine-month period ended September 30, 2021, $29,000 were accruing loans and $1.0 million were nonaccrual loans. Of the $1.6 million in modified TDRs which defaulted during the nine-month period ended September 30, 2020, $621,000 were accruing loans and $945,000 were nonaccrual loans.