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Allowance for Loan Losses
12 Months Ended
Dec. 31, 2023
Financing Receivable, Allowance for Credit Loss, Writeoff, after Recovery [Abstract]  
Allowance for Credit Losses [Text Block] Allowance for Credit Losses
The ACL is an estimate of the expected credit losses on financial assets measured at amortized cost, which is measured using relevant information about past events, including historical credit loss experience on financial assets with similar risk characteristics, current conditions, and reasonable and supportable forecasts that affect the collectability of the remaining cash flows over the contractual term of the financial assets. A provision for credit 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.
During the first quarter of 2023, Park adopted ASU 2022-02. This standard was adopted using a modified retrospective transition method on January 1, 2023, resulting in a $383,000 increase to the ACL. A cumulative effect adjustment resulting in a $303,000 decrease to retained earnings and an $80,000 increase to deferred tax assets was also recorded as a result of the adoption of ASU 2022-02.

Quantitative Considerations
The ACL is primarily calculated utilizing a DCF model. Key inputs and assumptions used in this model are discussed below:

Forecast model - For each portfolio segment, a LDA was performed in order to identify appropriate loss drivers and create a regression model for use in forecasting cash flows. The LDA analysis utilized Park's own FFIEC Call Report data for the commercial, financial and agricultural and residential real estate portfolio segments. Peer data was incorporated into the analysis for the commercial real estate, construction real estate, and consumer portfolio segments. Park updated the LDA in the fourth quarter of 2023. Per review of the correlation of data and subsequent results, management refined the peer group in the LDA and maintained the exclusion of periods impacted by COVID-19. Management reviewed and considered the impact of the inclusion of periods impacted by COVID-19 as part of the LDA update, but the correlation of the inclusion of COVID-19 periods was lower.
Probability of default – PD is the probability that an asset will be in default within a given time frame. Park has defined default to be when a charge-off has occurred, a loan is placed on nonaccrual, or a loan is greater than 90 days past due. Whenever possible, Park utilizes its own loan-level PDs for the reasonable and supportable forecast period. When loan-level data is not available reflecting the forecasted economic conditions, the LDA is utilized to estimate PDs. In all cases, the LDA is then utilized to determine the long-term historical average, which is reached over the reversion period.
Loss given default – LGD is the percentage of the asset not expected to be collected due to default. Whenever possible, Park utilizes its own loan-level LGDs for the reasonable and supportable forecast period. When it is not possible to use Park's own LGDs, the LGD is derived using a method referred to as Frye Jacobs. In all cases, the Frye Jacobs method is utilized to calculate LGDs during the reversion period and long-term historical average.
Prepayments and curtailments – Prepayments and curtailments are calculated based on Park’s own data utilizing a three-year average. This analysis is updated annually in the fourth quarter and was last updated in the fourth quarter of 2023.
Forecast and reversion – Park has established a one-year reasonable and supportable forecast period with a one-year straight line reversion to the long-term historical average.
Economic forecast - Park utilizes a third party to provide economic forecasts under various scenarios, which are weighted in order to reflect model risk in the current economic environment. The scenario weighting is evaluated by management on a quarterly basis.
As of December 31, 2022, the "most likely" scenario forecasted Ohio unemployment between 4.14% and 4.36% during the next four quarters. In determining the appropriate weighting of scenarios at December 31, 2022, management considered the range of forecasted unemployment as well as a number of economic indicators. The continued high levels of inflation, historically low consumer confidence, rising interest rates, geopolitical conflict (including the conflict between Russia and Ukraine), and workforce and supply chain challenges continued to cause uncertainty to the overall economic environment. Considering these factors, management determined it was appropriate to maintain the existing weighting, and weigh the "most likely" scenario 50% and the "moderate recession" scenario 50% at December 31, 2022.
As of December 31, 2023, the "most likely" scenario forecasted Ohio unemployment between 4.05% and 4.66% during the next four quarters. In determining the appropriate weighting of scenarios at December 31, 2023, management considered the range of forecasted unemployment as well as a number of economic indicators. The continued elevated levels of inflation, volatile levels of consumer confidence, continued elevated interest rates, financial system stress and geopolitical conflict (including the conflicts between Russia and Ukraine and between Israel and Hamas) and stress in the commercial real estate sector, continued to cause uncertainty as to the overall economic environment. Considering these factors, management determined it was appropriate to maintain the existing weighting, and weigh the "most likely" scenario 50% and the "moderate recession" scenario 50% at December 31, 2023. Changes in forecasts, updates to the LDA model and prepayment and curtailment assumptions, as well as changes in the loan mix, resulted in an 11 basis point decrease in the weighted quantitative allowance from December 31, 2022.
Qualitative Considerations
Park reviews various internal and external factors to consider the need for any qualitative adjustments to the quantitative model. Factors considered include the following:
The nature and volume of Park’s financial assets; the existence, growth, and effect of any concentrations of credit and the volume and severity of past due financial assets, the volume of nonaccrual assets, and the volume and severity of adversely classified or graded assets. Specifically, management considers:
Trends (e.g., growth, reduction) in specific categories of the loan portfolio, as well as adjustments to the types of loans offered by Park.
Level of and trend in loan delinquencies, troubled loans, commercial watch list loans and nonperforming loans.
Level of and trend in new nonaccrual loans.
Level of and trend in loan charge-offs and recoveries.
Park's lending policies and procedures, including changes in lending strategies, underwriting standards and practices for collections, charge-offs, and recoveries.
The quality of Park’s credit review function.
The experience, ability, and depth of Park’s lending, investment, collection, and other relevant management and staff.
The effect of other external factors such as the regulatory, legal and technological environments; competition; geopolitical conflict; and events such as natural disasters or pandemics.
Actual and expected changes in international, national, regional, and local economic and business conditions and developments in the markets in which Park operates that affect the collectability of financial assets.
Where the U.S. economy is within a given credit cycle.
The extent that there is government assistance (stimulus).

Qualitative adjustments amounted to $417,000 and $384,000 at December 31, 2023 and December 31, 2022, respectively.

Other Considerations
At December 31, 2023 and 2022, Park had $2.1 million and $4.2 million, respectively, of PPP loans which were included in the commercial, financial and agricultural portfolio segment. These loans are guaranteed by the SBA and thus have not been reserved for using the same methodology as the rest of Park’s loan portfolio. A 10 basis point reserve was calculated for these loans to reflect minimal credit risk at December 31, 2023 and December 31, 2022.
ACL Activity
The activity in the allowance for credit losses for the years ended December 31, 2023, 2022, and 2021 is summarized in the following tables.

Year ended December 31, 2023
(In thousands)Commercial, financial and agriculturalCommercial real estateConstruction real estateResidential real estateConsumerLeasesTotal
Allowance for credit losses:
Beginning balance$16,987 $17,829 $5,550 $16,831 $28,021 $161 $85,379 
Impact of adopting ASU 2022-02222 181  (20)  383 
  Charge-offs1,226 754 546 44 8,293  10,863 
  Recoveries(292)(240)(548)(482)(4,379)(1)(5,942)
Net charge-offs (recoveries)934 514 (2)(438)3,914 (1)4,921 
(Recovery of) provision for credit losses(779)(1,122)(325)1,569 3,606 (45)2,904 
         Ending balance$15,496 $16,374 $5,227 $18,818 $27,713 $117 $83,745 
 
Year ended December 31, 2022
(In thousands)Commercial, financial and agriculturalCommercial real estateConstruction real estateResidential real estateConsumerLeasesTotal
Allowance for credit losses:
Beginning balance$14,025 $25,466 $5,758 $11,424 $26,286 $238 $83,197 
Charge-offs2,056 1,578 33 81 5,343 42 9,133 
Recoveries(826)(627)(1,343)(164)(3,767)(31)(6,758)
Net charge-offs (recoveries)1,230 951 (1,310)(83)1,576 11 2,375 
Provision for (recovery of) credit losses4,192 (6,686)(1,518)5,324 3,311 (66)4,557 
        Ending balance16,987 17,829 5,550 16,831 28,021 161 85,379 

Year ended December 31, 2021
(In thousands)Commercial, financial and agriculturalCommercial real estateConstruction real estateResidential real estateConsumerLeasesTotal
Allowance for credit losses:
Beginning balance$25,608 $23,480 $7,288 $11,363 $17,418 $518 $85,675 
Impact of adopting ASC 326(8,257)2,119 (1,898)3,121 10,925 80 6,090 
     Charge-offs957 35 — 49 4,052 — 5,093 
  Recoveries(639)(802)(2,299)(941)(3,759)(1)(8,441)
Net charge-offs (recoveries)318 (767)(2,299)(892)293 (1)(3,348)
Recovery of credit losses(3,008)(900)(1,931)(3,952)(1,764)(361)(11,916)
Ending balance$14,025 $25,466 $5,758 $11,424 $26,286 $238 $83,197 

ACL Summary
Loans collectively evaluated for impairment in the following tables include all performing loans at December 31, 2023 and December 31, 2022, 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 ACL. Loans individually evaluated for impairment include all internally classified commercial nonaccrual loans at December 31, 2023 and all loans internally classified as commercial nonaccrual loans and TDRs at December 31, 2022, which are evaluated for impairment in accordance with U.S. GAAP (See Note 1-Significant Accounting Policies).
The composition of the ACL at December 31, 2023 and December 31, 2022 was as follows:
 
 December 31, 2023
(In thousands)Commercial,
financial and
agricultural
Commercial
real estate
Construction
real estate
Residential
real estate
ConsumerLeasesTotal
ACL:       
Ending allowance balance attributed to loans:       
Individually evaluated for impairment$4,980$3$$$$$4,983
Collectively evaluated for impairment10,51616,3715,22718,81827,71311778,762
Accruing acquired with deteriorated credit quality
Total ending allowance balance$15,496$16,374$5,227$18,818$27,713$117$83,745
Loan balance:
Loans individually evaluated for impairment$21,228$20,740$504$2,670$$73$45,215
Loans collectively evaluated for impairment1,274,3901,853,383303,9692,026,5371,945,93623,9567,428,171
Accruing loans acquired with deteriorated credit quality221,8706263172,835
Total ending loan balance$1,295,640$1,875,993$305,099$2,029,524$1,945,936$24,029$7,476,221
ACL as a percentage of loan balance:
Loans individually evaluated for impairment23.46 %0.01 % % % % %11.02 %
Loans collectively evaluated for impairment0.83 %0.88 %1.72 %0.93 %1.42 %0.49 %1.06 %
Accruing loans acquired with deteriorated credit quality % % % % % % %
Total1.20 %0.87 %1.71 %0.93 %1.42 %0.49 %1.12 %
 December 31, 2022
(In thousands)Commercial,
financial and
agricultural
Commercial
real estate
Construction
real estate
Residential
real estate
ConsumerLeasesTotal
ACL:       
Ending allowance balance attributed to loans:       
Individually evaluated for impairment$3,426$131$$$$9$3,566
Collectively evaluated for impairment13,56117,6985,55016,83128,02115281,813
Accruing acquired with deteriorated credit quality
Total ending allowance balance$16,987$17,829$5,550$16,831$28,021$161$85,379
Loan balance:
Loans individually evaluated for impairment$41,307$32,423$1,712$2,191$$708$78,341
Loans collectively evaluated for impairment1,259,5241,758,118323,0431,794,3021,904,98118,9297,058,897
Accruing loans acquired with deteriorated credit quality1023,5136603784,653
Total ending loan balance$1,300,933$1,794,054$325,415$1,796,871$1,904,981$19,637$7,141,891
ACL as a percentage of loan balance:
Loans individually evaluated for impairment8.29 %0.40 %— %— %— %1.27 %4.55 %
Loans collectively evaluated for impairment1.08 %1.01 %1.72 %0.94 %1.47 %0.80 %1.16 %
Accruing loans acquired with deteriorated credit quality— %— %— %— %— %— %— %
Total1.31 %0.99 %1.71 %0.94 %1.47 %0.82 %1.20 %