Note 4 – Loans

The composition of the loan portfolio, by class of loan, as of June 30, 2011 and December 31, 2010 was as follows:


	June 30, 2011						December 31, 2010
	Loan balance		Accrued interest receivable		Recorded investment		Loan balance		Accrued interest receivable		Recorded investment
(In thousands)
Commercial, financial and agricultural *	$	755,793	$	2,626	$	758,419	$	737,902	$	2,886	$	740,788

Commercial real estate *		1,257,292		4,775		1,262,067		1,226,616		4,804		1,231,420
Construction real estate:
Vision commercial land and development *		111,054		235		111,289		171,334		282		171,616
Remaining commercial		181,422		453		181,875		195,693		622		196,315
Mortgage		21,367		69		21,436		26,326		95		26,421
Installment		16,489		74		16,563		13,127		54		13,181
Residential real estate
Commercial		454,864		1,353		456,217		464,903		1,403		466,306
Mortgage		950,782		1,771		952,553		906,648		2,789		909,437
HELOC		254,860		967		255,827		260,463		1,014		261,477
Installment		53,062		219		53,281		60,195		255		60,450
Consumer		651,250		2,938		654,188		666,871		3,245		670,116
Leases		2,278		34		2,312		2,607		56		2,663
Total loans	$	4,710,513	$	15,514	$	4,726,027	$	4,732,685	$	17,505	$	4,750,190

* Included within commercial, financial and agricultural loans, commercial real estate loans, and Vision commercial land and development loans are an immaterial amount of consumer loans that are not broken out by class.

The following tables present the recorded investment in nonaccrual, restructured, and loans past due 90 days or more and still accruing by class of loans as of June 30, 2011 and December 31, 2010:


	June 30, 2011
(In thousands)	Nonaccrual loans		Restructured loans		Loans past due 90 days or more and accruing		Total nonperforming loans
Commercial, financial and agricultural	$	24,008	$	-	$	25	$	24,033
Commercial real estate		47,243		-		-		47,243
Construction real estate:
Vision commercial land and development		47,761		-		-		47,761
Remaining commercial		33,685		-		-		33,685
Mortgage		-		-		-		-
Installment		427		-		-		427
Residential real estate:
Commercial		48,594		-		861		49,455
Mortgage		32,459		34		1,676		34,169
HELOC		1,418		-		-		1,418
Installment		1,169		-		1		1,170
Consumer		1,926		-		629		2,555
Leases		-		-		-		-
Total loans	$	238,690	$	34	$	3,192	$	241,916


	December 31, 2010
(In thousands)	Nonaccrual loans		Restructured loans		Loans past due 90 days or more and accruing		Total nonperforming loans
Commercial, financial and agricultural	$	19,276	$	-	$	-	$	19,276
Commercial real estate		57,941		-		20		57,961
Construction real estate:
Vision commercial land and development		87,424		-		-		87,424
Remaining commercial		27,080		-		-		27,080
Mortgage		354		-		-		354
Installment		417		-		13		430
Residential real estate:
Commercial		60,227		-		-		60,227
Mortgage		32,479		-		2,175		34,654
HELOC		964		-		149		1,113
Installment		1,195		-		277		1,472
Consumer		1,911		-		1,059		2,970
Leases		-		-		-		-
Total loans	$	289,268	$	-	$	3,693	$	292,961

The following table provides additional information regarding those nonaccrual loans that are individually evaluated for impairment and those collectively evaluated for impairment as of June 30, 2011 and December 31, 2010.


	June 30, 2011						December 31, 2010
(In thousands)	Nonaccrual loans		Loans individually evaluated for impairment		Loans collectively evaluated for impairment		Nonaccrual loans		Loans individually evaluated for impairment		Loans collectively evaluated for impairment
Commercial, financial and agricultural	$	24,008	$	24,008	$	-	$	19,276	$	19,205	$	71
Commercial real estate		47,243		47,243		-		57,941		57,930		11
Construction real estate:
Vision commercial land and development		47,761		46,847		914		87,424		86,491		933
Remaining commercial		33,685		33,685		-		27,080		27,080		-
Mortgage		-		-		-		354		-		354
Installment		427		-		427		417		-		417
Residential real estate:
Commercial		48,594		48,594		-		60,227		60,227		-
Mortgage		32,459		-		32,459		32,479		-		32,479
HELOC		1,418		-		1,418		964		-		964
Installment		1,169		-		1,169		1,195		-		1,195
Consumer		1,926		23		1,903		1,911		-		1,911
Leases		-		-		-		-		-		-
Total loans	$	238,690	$	200,400	$	38,290	$	289,268	$	250,933	$	38,335

All of the loans individually evaluated for impairment were evaluated using the fair value of the collateral or present value of expected future cash flows as the measurement method.

The following table presents loans individually evaluated for impairment by class of loans as of June 30, 2011 and December 31, 2010.


	June 30, 2011						December 31, 2010
	Unpaid principal balance		Recorded investment		Allowance for loan losses allocated		Unpaid principal balance		Recorded investment		Allowance for loan losses allocated
(in thousands)
With no related allowance recorded
Commercial, financial and agricultural	$	14,086	$	11,125	$	-	$	9,347	$	8,891	$	-
Commercial real estate		44,827		31,624		-		21,526		17,170		-
Construction real estate:
Vision commercial land and development		23,627		8,723		-		11,206		7,847		-
Remaining commercial		24,403		20,963		-		12,305		11,743		-
Residential real estate:
Commercial		38,326		35,283		-		46,344		43,031		-
Consumer		-		-		-		-		-		-

With an allowance recorded
Commercial, financial and agricultural		15,996		12,883		7,367		11,801		10,314		3,028
Commercial real estate		16,232		15,619		10,050		44,789		40,760		12,652
Construction real estate:
Vision commercial land and development		72,912		38,124		15,076		103,937		78,644		39,887
Remaining commercial		21,918		12,722		5,129		23,563		15,337		5,425
Residential real estate:
Commercial		16,740		13,311		5,152		19,716		17,196		5,912
Consumer		23		23		23		-		-		-

Total	$	289,090	$	200,400	$	42,797	$	304,534	$	250,933	$	66,904

Management's general practice is to proactively charge down loans individually evaluated for impairment to the fair value of the underlying collateral. At June 30, 2011 and December 31, 2010, there were $37.6 million and $12.0 million, respectively, of partial charge-offs on loans individually evaluated for impairment with no related allowance recorded and $51.1 million and $41.6 million, respectively, of partial charge-offs on loans individually evaluated for impairment that also had a specific reserve allocated.

The allowance for loan losses included specific reserves related to loans individually evaluated for impairment at June 30, 2011 and December 31, 2010, of $42.8 million and $66.9 million, respectively, related to loans with a recorded investment of $92.7 million and $162.3 million.

The following table presents the average recorded investment and interest income recognized on loans individually evaluated for impairment for the three and six months ended June 30, 2011:


			Three months ended June 30, 2011				Six months ended June 30, 2011
	Recorded investment as of June 30, 2011		Average recorded investment		Interest income recognized		Average recorded investment		Interest income recognized
(in thousands)
Commercial, financial and agricultural	$	24,008	$	20,688	$	41	$	20,203	$	106
Commercial real estate		47,243		51,359		54		53,619		124
Construction real estate:
Vision commercial land and development		46,847		71,682		-		77,711		-
Remaining commercial		33,685		27,998		136		27,616		214
Residential real estate:
Commercial		48,594		55,096		14		57,269		153
Consumer		23		5		1		12		1
Total	$	200,400	$	226,828	$	246	$	236,430	$	598

The following tables present the aging of the recorded investment in past due loans as of June 30, 2011 and December 31, 2010 by class of loans.


	June 30, 2011
	Accruing loans past due 30-89 days		Past due nonaccrual loans and loans past due 90 days or more and accruing*		Total past due		Total current		Total recorded investment
(In thousands)
Commercial, financial and agricultural	$	6,007	$	21,096	$	27,103	$	731,316	$	758,419
Commercial real estate		3,106		36,369		39,475		1,222,592		1,262,067
Construction real estate:
Vision commercial land and development		309		41,860		42,169		69,120		111,289
Remaining commercial		99		13,757		13,856		168,019		181,875
Mortgage		402		-		402		21,034		21,436
Installment		393		386		779		15,784		16,563
Residential real estate:
Commercial		3,014		18,461		21,475		434,742		456,217
Mortgage		17,041		22,893		39,934		912,619		952,553
HELOC		770		664		1,434		254,393		255,827
Installment		1,120		781		1,901		51,380		53,281
Consumer		9,313		1,994		11,307		642,881		654,188
Leases		-		-		-		2,312		2,312
Total loans	$	41,574	$	158,261	$	199,835	$	4,526,192	$	4,726,027

* Includes $3.2 million of loans past due 90 days or more and accruing.


	December 31, 2010
	Accruing loans past due 30-89 days		Past due nonaccrual loans and loans past due 90 days or more and accruing*		Total past due		Total current		Total recorded investment
(In thousands)
Commercial, financial and agricultural	$	2,247	$	15,622	$	17,869	$	722,919	$	740,788
Commercial real estate		9,521		53,269		62,790		1,168,630		1,231,420
Construction real estate:
Vision commercial land and development		2,406		65,130		67,536		104,080		171,616
Remaining commercial		141		19,687		19,828		176,487		196,315
Mortgage		479		148		627		25,794		26,421
Installment		235		399		634		12,547		13,181
Residential real estate:
Commercial		3,281		26,845		30,126		436,180		466,306
Mortgage		17,460		24,422		41,882		867,555		909,437
HELOC		1,396		667		2,063		259,414		261,477
Installment		1,018		892		1,910		58,540		60,450
Consumer		11,204		2,465		13,669		656,447		670,116
Leases		5		-		5		2,658		2,663
Total loans	$	49,393	$	209,546	$	258,939	$	4,491,251	$	4,750,190

* Includes $3.6 million of loans past due 90 days or more and accruing.

Management's policy is to initially place all renegotiated loans (troubled debt restructurings) on nonaccrual status. At June 30, 2011 and December 31, 2010, there were $72.6 million and $80.7 million, respectively, of troubled debt restructurings included in nonaccrual loan totals. Many of these troubled debt restructurings are performing under the renegotiated terms. At June 30, 2011 and December 31, 2010, $47.9 million and $50.3 million of the total troubled debt restructurings were included within current loans above. Management will continue to review the renegotiated loans and may determine it appropriate to move certain of the loans back to accrual status in the future. At June 30, 2011 and December 31, 2010, Park had commitments to lend $502,000 and $434,000, respectively, of additional funds to borrowers whose terms had been modified in a troubled debt restructuring.

Management utilizes past due information as a credit quality indicator across the loan portfolio. The past due information is the primary credit quality indicator within the following classes of loans: (1) mortgage loans and installment loans in the construction real estate segment; (2) mortgage loans, HELOC and installment loans in the residential real estate segment; and (3) throughout the consumer loan segment. The primary credit indicator for commercial loans is based on an internal grading system that grades all commercial loans from 1 to 8. Credit grades are continuously monitored by the respective 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 with grades of 1 to 4 (pass-rated) 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 loan loss reserve percentage is allocated to these loans. Loans classified as special mention have potential weaknesses that deserve management's close attention. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the loans or of the institution's credit position at some future date. Commercial loans graded 6 (substandard), also considered watch list credits, are considered to represent higher credit risk and, as a result, a higher loan loss reserve percentage is allocated to these loans. Loans classified as substandard loans are inadequately protected by the current sound net worth and paying capacity of the obligor or 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 the institution will sustain some loss if the deficiencies are not corrected. Commercial loans that are graded a 7 (doubtful) are shown as nonperforming 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. Any commercial loan graded an 8 (loss) is completely charged-off. The tables below present the recorded investment by loan grade at June 30, 2011 and December 31, 2010 for all commercial loans.


	June 30, 2011
(in thousands)	5 Rated		6 Rated		Nonaccrual		Pass Rated		Recorded Investment
Commercial, financial and agricultural	$	18,067	$	12,540	$	24,008	$	703,804	$	758,419

Commercial real estate		57,223		26,431		47,243		1,131,170		1,262,067

Construction real estate:
Vision commercial land and development		9,943		4,803		47,761		48,782		111,289
Remaining commercial		8,495		22,340		33,685		117,355		181,875

Residential real estate:
Commercial		22,779		17,398		48,594		367,446		456,217

Leases		-		-		-		2,312		2,312

Total Commercial Loans	$	116,507	$	83,512	$	201,291	$	2,370,869	$	2,772,179


	December 31, 2010
(in thousands)	5 Rated		6 Rated		Nonaccrual		Pass Rated		Recorded Investment
Commercial, financial and agricultural	$	26,322	$	11,447	$	19,276	$	683,743	$	740,788

Commercial real estate		57,394		26,992		57,941		1,089,093		1,231,420

Construction real estate:
Vision commercial land and development		10,220		7,941		87,424		66,031		171,616
Remaining commercial		14,021		39,062		27,080		116,152		196,315

Residential real estate:
Commercial		29,206		18,117		60,227		358,756		466,306

Leases		-		-		-		2,663		2,663

Total Commercial Loans	$	137,163	$	103,559	$	251,948	$	2,316,438	$	2,809,108