5. LOANS

The composition of the loan portfolio is as follows:

December 31 (In thousands)	2010		2009
Commercial, financial and agricultural	$	737,902	$	751,277
Real estate:
Commercial		1,226,616		1,130,672
Construction		406,480		495,518
Residential		1,692,209		1,555,390
Consumer		666,871		704,430
Leases		2,607		3,145
Total loans	$	4,732,685	$	4,640,432

The composition of the loan portfolio, by class of loan, as of December 31, 2010 is as follows:

			Accrued
	Loan		Interest		Recorded
(In thousands)	Balance		Receivable		Investment
Commercial, financial and agricultural*	$	737,902	$	2,886	$	740,788
Commercial real estate*		1,226,616		4,804		1,231,420
Construction real estate:
Vision commercial land and development		171,334		282		171,616
Remaining commercial		195,693		622		196,315
Mortgage		26,326		95		26,421
Installment		13,127		54		13,181
Residential real estate:
Commercial		464,903		1,403		466,306
Mortgage		906,648		2,789		909,437
HELOC		260,463		1,014		261,477
Installment		60,195		255		60,450
Consumer		666,871		3,245		670,116
Leases		2,607		56		2,663
Total loans	$	4,732,685	$	17,505	$	4,750,190

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

Loans are shown net of deferred origination fees, costs and unearned income of $6.7 million at December 31, 2010 and $6.3 million at December 31, 2009.

Overdrawn deposit accounts of $2.6 million and $3.3 million have been reclassified to loans at December 31, 2010 and 2009, respectively.

Nonperforming loans are summarized as follows at December 31, 2009:

December 31 (In thousands)	2009
Impaired loans:
Nonaccrual	$	201,001
Restructured (accruing)		142
Total impaired loans		201,143
Other nonaccrual loans		32,543
Total nonaccrual and restructured loans	$	233,686
Loans past due 90 days or more and accruing		14,773
Total nonperforming loans	$	248,459

The following table presents the recorded investment in nonaccrual, restructured, and loans past due 90 days or more and still accruing by class of loans as of December 31, 2010:

			Loans Past Due
			Accruing		90 Days		Total
	Nonaccrual		Restructured		or More		Nonperforming
(In thousands)	Loans		Loans		and Accruing		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 at December 31, 2010.

			Loans		Loans
			Individually		Collectively
			Evaluated for		Evaluated for
(In thousands)	Nonaccrual		Impairment		Impairment
Commercial, financial and agricultural	$	19,276	$	19,205	$	71
Commercial real estate		57,941		57,930		11
Construction real estate:
Vision commercial land and development		87,424		86,491		933
Remaining commercial		27,080		27,080		—
Mortgage		354		—		354
Installment		417		—		417
Residential real estate:
Commercial		60,227		60,227		—
Mortgage		32,479		—		32,479
HELOC		964		—		964
Installment		1,195		—		1,195
Consumer		1,911		—		1,911
Leases		—		—		—
Total loans	$	289,268	$	250,933	$	38,335

The majority 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.

Impaired loans were as follows at December 31, 2009:

December 31 (In thousands)	2009
Year-end loans with no allocated allowance for loan losses	$	77,487
Year-end loans with allocated allowance for loan losses		123,656
Total	$	201,143
Amount of the allowance for loan losses allocated	$	36,721

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

	Unpaid				Allowance for
	Principal		Recorded		Loan Losses
(In thousands)	Balance (Restated)		Investment (Restated)		Allocated (Restated)
With no related allowance recorded
Commercial, financial and agricultural	$	9,347	$	8,891	$	—
Commercial real estate		21,526		17,170		—
Construction real estate:
Vision commercial land and development		11,206		7,847		—
Remaining commercial		12,305		11,743		—
Residential real estate:
Commercial		46,344		43,031		—
With an allowance recorded
Commercial, financial and agricultural		11,801		10,314		3,028
Commercial real estate		44,789		40,760		12,652
Construction real estate:
Vision commercial land and development		103,937		78,644		39,887
Remaining commercial		23,563		15,337		5,425
Residential real estate:
Commercial		19,716		17,196		5,912
Total	$	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 December 31, 2010, there were $12.0 million in partial charge-offs on loans individually evaluated for impairment with no related allowance recorded and an additional $41.6 million 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 December 31, 2010 and 2009, of $66.9 million and $36.7 million, respectively, related to loans with a recorded investment of $162.3 million and $123.7 million.

The average balance of loans individually evaluated for impairment was $210.4 million, $184.7 million and $130.6 million for 2010, 2009 and 2008, respectively.

Interest income on loans individually evaluated for impairment is recognized on a cash basis after all past due and current principal payments have been made. For the year ended December 31, 2010, the Corporation recognized a net reversal to interest income of $1.3 million, consisting of $948,000 in interest recognized at PNB and $2.2 million in interest reversed at Vision, on loans that were individually evaluated for impairment as of the end of the year. For the year ended December 31, 2009, the Corporation recognized a net reversal to interest income of $1.3 million, consisting of $1.8 million in interest recognized at PNB and $3.1 million in interest reversed at Vision, on loans that were individually evaluated for impairment as of the end of the year. For the year ended December 31, 2008, the Corporation recognized $0.9 million in interest income, consisting of $2.8 million in interest recognized at PNB and $1.9 million in interest reversed at Vision.

The following table presents the aging of the recorded investment in past due loans as of December 31, 2010 by class of loans.

			Past Due
			Nonaccrual
	Accruing		Loans and Loans
	Loans		Past Due 90						Total
	Past Due		Days or More		Total		Total		Recorded
(In thousands)	30–89 Days		and Accruing		Past Due		Current		Investment
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

Management's policy is to initially place all renegotiated loans (troubled debt restructurings) on nonaccrual status. At December 31, 2010, there were $80.7 million of troubled debt restructurings included in nonaccrual loan totals. Many of these troubled debt restructurings are performing under the renegotiated terms. At December 31, 2010, of the $80.7 million in troubled debt restructurings, $50.3 million were included within current loans presented above. Management will continue to review the renegotiated loans and may determine it appropriate to move certain of these loans back to accrual status in the future. At December 31, 2010, Park had commitments to lend $434,000 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) consumer loans. 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 loan 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 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 table below presents the recorded investment by loan grade at December 31, 2010 for all commercial loans:

							Pass		Recorded
(In thousands)	5 Rated		6 Rated		Nonaccrual		Rated		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

Management transfers a loan to other real estate owned at the time that Park takes possession of the asset. At December 31, 2010 and 2009, Park had $41.7 million and $41.2 million, respectively, of other real estate owned. Other real estate owned at Vision Bank has decreased from $35.2 million at December 31, 2009 to $33.3 million at December 31, 2010.

Certain of the Corporation's executive officers and directors are loan customers of the Corporation's two banking subsidiaries. As of December 31, 2010 and 2009, loans and lines of credit aggregating approximately $53.6 million and $56.8 million, respectively, were outstanding to such parties. During 2010, $2.1 million of new loans were made to these executive officers and directors and repayments totaled $5.3 million. New loans and repayments for 2009 were $27.9 million and $9.5 million, respectively. Additionally, during 2009, $20.8 million in loans were removed from the aggregate amount reported due to the resignation of certain directors.