Allowance For Loan Losses

6 Months Ended

Jun. 30, 2011

Allowance For Loan Losses

Allowance For Loan Losses

Note 5 – 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 Park's 2010 Annual Report.

The activity in the allowance for loan losses for the three and six months ended June 30, 2011 and June 30, 2010 is summarized. As noted below, management included a reallocation of the beginning allowance for credit losses balance, which primarily impacted the commercial loan segments of the loan portfolio. At December 31, 2010, management's allowance calculation was performed in the aggregate for all commercial loans and then allocated across each segment of the commercial loan portfolio on a pro rata basis. During the first quarter of 2011, management determined that it would be more appropriate to perform the allowance calculation at the segment level and has provided an adjusted beginning balance for the allowance for credit losses in the six months ended June 30, 2011 table below.

	Three months ended June 30, 2011
	Commercial, financial and agricultural		Commercial real estate		Construction real estate		Residential real estate		Consumer		Leases		Total
(In thousands)
Allowance for credit losses
Beginning balance:	$	11,791	$	22,574	$	53,672	$	31,553	$	7,265	$	4	$	126,859
Charge-offs		5,030		6,565		23,679		4,789		1,942		-		42,005
Recoveries		327		22		117		390		577		-		1,433
Net Charge-offs		4,703		6,543		23,562		4,399		1,365		-		40,572
Provision		5,519		6,439		5,170		4,951		1,821		-		23,900
Ending balance	$	12,607	$	22,470	$	35,280	$	32,105	$	7,721	$	4	$	110,187

	Six months ended June 30, 2011
	Commercial, financial and agricultural			Commercial real estate			Construction real estate		Residential real estate		Consumer			Leases			Total
(In thousands)
Allowance for credit losses
Beginning balance:	$	13,584		$	28,515		$	46,194	$	25,845	$	7,228		$	31		$	121,397
Reallocation of allowance		(1,888	)		(6,604	)		5,759		2,948		(189	)		(26	)		-
Adjusted beginning balance:		11,696			21,911			51,953		28,793		7,039			5			121,397
Charge-offs		5,764			8,350			27,099		7,276		3,915			-			52,404
Recoveries		896			824			213		891		967			3			3,794
Net Charge-offs		4,868			7,526			26,886		6,385		2,948			(3	)		48,610
Provision		5,779			8,085			10,213		9,697		3,630			(4	)		37,400
Ending balance	$	12,607		$	22,470		$	35,280	$	32,105	$	7,721		$	4		$	110,187

The activity in the allowance for loan losses for the three and six months ended June 30, 2010 is summarized as follows:

(In thousands)	Three months ended June 30, 2010		Six months ended June 30, 2010
Allowance for credit losses
Beginning balance:	$	119,674	$	116,717
Charge-offs		13,273		28,851
Recoveries		1,025		3,010
Net Charge-offs		12,248		25,841
Provision		13,250		29,800
Ending balance	$	120,676	$	120,676

The composition of the allowance for loan losses at June 30, 2011 and December 31, 2010 was as follows:

	June 30, 2011
	Commercial, financial and agricultural			Commercial real estate			Construction real estate			Residential real estate			Consumer			Leases			Total
(In thousands)
Allowance for loan losses:
Ending allowance balance attributed to loans:
Individually evaluated for impairment	$	3,265		$	9,213		$	15,372		$	4,960		$	-		$	-		$	32,810
Collectively evaluated for impairment		9,342			13,257			19,908			27,145			7,721			4			77,377
Total ending allowance balance	$	12,607		$	22,470		$	35,280		$	32,105		$	7,721		$	4		$	110,187
Loan Balance:
Loans individually evaluated for impairment	$	24,008		$	47,243		$	80,532		$	48,594		$	23		$	-		$	200,400
Loans collectively evaluated for impairment		731,785			1,210,049			249,800			1,664,974			651,227			2,278			4,510,113
Total ending loan balance	$	755,793		$	1,257,292		$	330,332		$	1,713,568		$	651,250		$	2,278		$	4,710,513
Allowance for loan losses as a percentage of loan balance:
Loans individually evaluated for impairment		13.60	%		19.50	%		19.09	%		10.21	%		-			-			16.37	%
Loans collectively evaluated for impairment		1.28	%		1.10	%		7.97	%		1.63	%		1.19	%		0.18	%		1.72	%
Total ending loan balance		1.67	%		1.79	%		10.68	%		1.87	%		1.19	%		0.18	%		2.34	%
Recorded Investment:
Loans individually evaluated for impairment	$	24,008		$	47,243		$	80,532		$	48,594		$	23		$	-		$	200,400
Loans collectively evaluated for impairment		734,411			1,214,824			250,631			1,669,284			654,165			2,312			4,525,627
Total ending loan balance	$	758,419		$	1,262,067		$	331,163		$	1,717,878		$	654,188		$	2,312		$	4,726,027

	December 31, 2010
	Commercial, financial and agricultural			Commercial real estate			Construction real estate			Residential real estate			Consumer			Leases			Total
(In thousands)
Allowance for loan losses:
Ending allowance balance attributed to loans:
Individually evaluated for impairment	$	3,028		$	10,001		$	26,387		$	4,043		$	-		$	-		$	43,459
Collectively evaluated for impairment		10,556			18,514			19,807			21,802			7,228			31			77,938
Total ending allowance balance	$	13,584		$	28,515		$	46,194		$	25,845		$	7,228		$	31		$	121,397
Reallocated allowance for loan losses:
Ending allowance balance attributed to loans:
Individually evaluated for impairment	$	3,028		$	10,001		$	26,387		$	4,043		$	-		$	-		$	43,459
Collectively evaluated for impairment		8,668			11,910			25,566			24,750			7,039			5			77,938
Total ending allowance balance	$	11,696		$	21,911		$	51,953		$	28,793		$	7,039		$	5		$	121,397
Loan Balance:
Loans individually evaluated for impairment	$	19,205		$	57,930		$	113,571		$	60,227		$	-		$	-		$	250,933
Loans collectively evaluated for impairment		718,697			1,168,686			292,909			1,631,982			666,871			2,607			4,481,752
Total ending loan balance	$	737,902		$	1,226,616		$	406,480		$	1,692,209		$	666,871		$	2,607		$	4,732,685
Reallocated allowance for loan losses as a percentage of loan balance:
Loans individually evaluated for impairment		15.77	%		17.26	%		23.23	%		6.71	%		-			-			17.32	%
Loans collectively evaluated for impairment		1.21	%		1.02	%		8.73	%		1.52	%		1.06	%		0.19	%		1.74	%
Total ending loan balance		1.59	%		1.79	%		12.78	%		1.70	%		1.06	%		0.19	%		2.57	%
Recorded Investment:
Loans individually evaluated for impairment	$	19,205		$	57,930		$	113,571		$	60,227		$	-		$	-		$	250,933
Loans collectively evaluated for impairment		721,583			1,173,490			293,962			1,637,443			670,116			2,663			4,499,257
Total ending loan balance	$	740,788		$	1,231,420		$	407,533		$	1,697,670		$	670,116		$	2,663		$	4,750,190

Loans collectively evaluated for impairment above include all performing loans at June 30, 2011 and December 31, 2010, 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, 2011 and December 31, 2010, which are evaluated for impairment in accordance with GAAP (see Note 1 of Park's 2010 Annual Report).