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Allowance For Loan Losses | 9 Months Ended
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Sep. 30, 2018
Allowance for Loan and Lease Losses Write-offs, Net [Abstract] |
Allowance For Loan Losses | Allowance for Loan Losses The allowance for loan losses ("ALLL") 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 the Notes to Consolidated Financial Statements included in Park’s 2017 Annual Report. Loss factors are reviewed quarterly and updated at least annually to reflect recent loan loss history and incorporate current risks and trends which may not be recognized in historical data. The following are factors management reviews on a quarterly or annual basis.
• | Historical Loss Factor: Management updated the historical loss calculation during the fourth quarter of 2017, incorporating net charge-offs plus changes in specific reserves through December 31, 2017. With the addition of 2017 historical losses, management extended the historical loss period to 96 months from 84 months. The 96-month historical loss period captures all annual periods subsequent to June 2009, the end of the most recent recession, thus encompassing the full economic cycle to date.
• | Loss Emergence Period Factor: At least annually, management calculates the loss emergence period for each commercial loan segment. The loss emergence period is calculated based upon the average period of time it takes from the probable occurrence of a loss event to the credit being moved to nonaccrual. If the loss emergence period for any commercial loan segment is greater than one year, management applies additional general reserves to all performing loans within that segment of the commercial loan portfolio. The loss emergence period was last updated in the fourth quarter of 2017.
• | Loss Migration Factor: Park’s commercial loans are individually risk graded. If loan downgrades occur, the probability of default increases, and accordingly, management allocates a higher percentage reserve to those accruing commercial loans graded special mention and substandard. Annually, management calculates a loss migration factor for each commercial loan segment for special mention and substandard credits based on a review of losses over the period of time a loan takes to migrate from pass-rated to impaired. The loss migration factor was last updated in the fourth quarter of 2017.
• | Environmental Loss Factor: Management has identified certain macroeconomic factors that trend in accordance with losses in Park’s commercial loan portfolio. These macroeconomic factors are reviewed quarterly and the adjustments made to the environmental loss factor impacting each segment in the performing commercial loan portfolio correlate to changes in the macroeconomic environment. There was no change to the environmental loss factor during the third quarter of 2018.
Loans acquired as part of the acquisition of NewDominion were recorded at fair value on the date of acquisition, July 1, 2018. An allowance is only established on these NewDominion loans as a result of credit deterioration post acquisition. As of September 30, 2018, there was no allowance related to acquired NewDominion loans. The activity in the allowance for loan losses for the three-month and nine-month periods ended September 30, 2018 and September 30, 2017 is summarized in the following tables.
| Three Months Ended September 30, 2018
(In thousands) | Commercial, financial and agricultural |  | Commercial real estate |  | Construction real estate |  | Residential real estate |  | Consumer |  | Leases |  | Total
Allowance for loan losses: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Beginning balance | $ | 14,478 |  |  | $ | 9,406 |  |  | $ | 4,652 |  |  | $ | 9,245 |  |  | $ | 11,671 |  |  | $ | — |  |  | $ | 49,452 |
Charge-offs | 993 |  |  | 23 |  |  | 26 |  |  | 61 |  |  | 2,371 |  |  | — |  |  | 3,474 |
Recoveries | 136 |  |  | 27 |  |  | 156 |  |  | 130 |  |  | 875 |  |  | 4 |  |  | 1,328 |
Net charge-offs/(recoveries) | 857 |  |  | (4 | ) |  | (130 | ) |  | (69 | ) |  | 1,496 |  |  | (4 | ) |  | 2,146 |
Provision/(recovery) | 1,394 |  |  | 337 |  |  | (187 | ) |  | (212 | ) |  | 1,612 |  |  | (4 | ) |  | 2,940 |
Ending balance | $ | 15,015 |  |  | $ | 9,747 |  |  | $ | 4,595 |  |  | $ | 9,102 |  |  | $ | 11,787 |  |  | $ | — |  |  | $ | 50,246 |
| Three Months Ended September 30, 2017
(In thousands) | Commercial, financial and agricultural |  | Commercial real estate |  | Construction real estate |  | Residential real estate |  | Consumer |  | Leases |  | Total
Allowance for loan losses: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Beginning balance | $ | 16,746 |  |  | $ | 10,451 |  |  | $ | 4,677 |  |  | $ | 10,319 |  |  | $ | 11,629 |  |  | $ | — |  |  | $ | 53,822 |
Charge-offs | 626 |  |  | 628 |  |  | 78 |  |  | 217 |  |  | 2,828 |  |  | — |  |  | 4,377 |
Recoveries | 115 |  |  | 13 |  |  | 303 |  |  | 1,061 |  |  | 1,011 |  |  | 1 |  |  | 2,504 |
Net charge-offs/(recoveries) | 511 |  |  | 615 |  |  | (225 | ) |  | (844 | ) |  | 1,817 |  |  | (1 | ) |  | 1,873 |
Provision/(recovery) | 1,742 |  |  | 336 |  |  | 499 |  |  | (1,078 | ) |  | 1,785 |  |  | (1 | ) |  | 3,283 |
Ending balance | $ | 17,977 |  |  | $ | 10,172 |  |  | $ | 5,401 |  |  | $ | 10,085 |  |  | $ | 11,597 |  |  | $ | — |  |  | $ | 55,232 |
| Nine Months Ended September 30, 2018
(In thousands) | Commercial, financial and agricultural |  | Commercial real estate |  | Construction real estate |  | Residential real estate |  | Consumer |  | Leases |  | Total
Allowance for loan losses: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Beginning balance | $ | 15,022 |  |  | $ | 9,601 |  |  | $ | 4,430 |  |  | $ | 9,321 |  |  | $ | 11,614 |  |  | $ | — |  |  | $ | 49,988 |
Charge-offs | 1,929 |  |  | 252 |  |  | 57 |  |  | 279 |  |  | 7,123 |  |  | — |  |  | 9,640 |
Recoveries | 994 |  |  | 203 |  |  | 435 |  |  | 734 |  |  | 2,942 |  |  | 4 |  |  | 5,312 |
Net charge-offs/(recoveries) | 935 |  |  | 49 |  |  | (378 | ) |  | (455 | ) |  | 4,181 |  |  | (4 | ) |  | 4,328 |
Provision/(recovery) | 928 |  |  | 195 |  |  | (213 | ) |  | (674 | ) |  | 4,354 |  |  | (4 | ) |  | 4,586 |
Ending balance | $ | 15,015 |  |  | $ | 9,747 |  |  | $ | 4,595 |  |  | $ | 9,102 |  |  | $ | 11,787 |  |  | $ | — |  |  | $ | 50,246 |
| Nine Months Ended September 30, 2017
(In thousands) | Commercial, financial and agricultural |  | Commercial real estate |  | Construction real estate |  | Residential real estate |  | Consumer |  | Leases |  | Total
Allowance for loan losses: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Beginning balance | $ | 13,434 |  |  | $ | 10,432 |  |  | $ | 5,247 |  |  | $ | 10,958 |  |  | $ | 10,553 |  |  | $ | — |  |  | $ | 50,624 |
Charge-offs | 1,283 |  |  | 1,050 |  |  | 105 |  |  | 987 |  |  | 7,706 |  |  | — |  |  | 11,131 |
Recoveries | 647 |  |  | 368 |  |  | 686 |  |  | 1,688 |  |  | 3,609 |  |  | 1 |  |  | 6,999 |
Net charge-offs/(recoveries) | 636 |  |  | 682 |  |  | (581 | ) |  | (701 | ) |  | 4,097 |  |  | (1 | ) |  | 4,132 |
Provision/(recovery) | 5,179 |  |  | 422 |  |  | (427 | ) |  | (1,574 | ) |  | 5,141 |  |  | (1 | ) |  | 8,740 |
Ending balance | $ | 17,977 |  |  | $ | 10,172 |  |  | $ | 5,401 |  |  | $ | 10,085 |  |  | $ | 11,597 |  |  | $ | — |  |  | $ | 55,232 |
Loans collectively evaluated for impairment in the following tables include all performing loans at September 30, 2018 and December 31, 2017, 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 September 30, 2018 and December 31, 2017, which are evaluated for impairment in accordance with U.S. GAAP (see Note 1 of the Notes to Consolidated Financial Statements included in Park’s 2017 Annual Report). The composition of the allowance for loan losses at September 30, 2018 and December 31, 2017 was as follows:
| September 30, 2018
(In thousands) | Commercial, financial and agricultural |  | Commercial real estate |  | Construction real estate |  | Residential real estate |  | Consumer |  | Leases |  | Total
Allowance for loan losses: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Ending allowance balance attributed to loans: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Individually evaluated for impairment | $ | 1,716 |  |  | $ | 71 |  |  | $ | — |  |  | $ | 59 |  |  | $ | — |  |  | $ | — |  |  | $ | 1,846 |
Collectively evaluated for impairment | 13,299 |  |  | 9,676 |  |  | 4,595 |  |  | 9,043 |  |  | 11,787 |  |  | — |  |  | 48,400 |
Acquired with deteriorated credit quality | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |
Total ending allowance balance | $ | 15,015 |  |  | $ | 9,747 |  |  | $ | 4,595 |  |  | $ | 9,102 |  |  | $ | 11,787 |  |  | $ | — |  |  | $ | 50,246 |
Loan balance: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Loans individually evaluated for impairment | $ | 16,023 |  |  | $ | 25,747 |  |  | $ | 2,016 |  |  | $ | 2,912 |  |  | $ | — |  |  | $ | — |  |  | $ | 46,698 |
Loans collectively evaluated for impairment | 1,015,072 |  |  | 1,273,337 |  |  | 217,681 |  |  | 1,778,027 |  |  | 1,287,382 |  |  | 2,632 |  |  | 5,574,131 |
Loans acquired with deteriorated credit quality | 405 |  |  | 3,546 |  |  | 499 |  |  | 44 |  |  | — |  |  | — |  |  | 4,494 |
Total ending loan balance | $ | 1,031,500 |  |  | $ | 1,302,630 |  |  | $ | 220,196 |  |  | $ | 1,780,983 |  |  | $ | 1,287,382 |  |  | $ | 2,632 |  |  | $ | 5,625,323 |
Allowance for loan losses as a percentage of loan balance: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Loans individually evaluated for impairment | 10.71 | % |  | 0.28 | % |  | — | % |  | 2.03 | % |  | — | % |  | — | % |  | 3.95 | %
Loans collectively evaluated for impairment | 1.31 | % |  | 0.76 | % |  | 2.11 | % |  | 0.51 | % |  | 0.92 | % |  | — | % |  | 0.87 | %
Loans acquired with deteriorated credit quality | — | % |  | — | % |  | — | % |  | — | % |  | — | % |  | — | % |  | — | %
Total | 1.46 | % |  | 0.75 | % |  | 2.09 | % |  | 0.51 | % |  | 0.92 | % |  | — | % |  | 0.89 | %
Recorded investment: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Loans individually evaluated for impairment | $ | 16,026 |  |  | $ | 25,805 |  |  | $ | 2,016 |  |  | $ | 2,913 |  |  | $ | — |  |  | $ | — |  |  | $ | 46,760 |
Loans collectively evaluated for impairment | 1,020,675 |  |  | 1,278,448 |  |  | 218,321 |  |  | 1,781,908 |  |  | 1,291,155 |  |  | 2,672 |  |  | 5,593,179 |
Loans acquired with deteriorated credit quality | 405 |  |  | 3,546 |  |  | 499 |  |  | 44 |  |  | — |  |  | — |  |  | 4,494 |
Total ending recorded investment | $ | 1,037,106 |  |  | $ | 1,307,799 |  |  | $ | 220,836 |  |  | $ | 1,784,865 |  |  | $ | 1,291,155 |  |  | $ | 2,672 |  |  | $ | 5,644,433 |
|  | December 31, 2017
(In thousands) |  | Commercial, financial and agricultural |  | Commercial real estate |  | Construction real estate |  | Residential real estate |  | Consumer |  | Leases |  | Total
Allowance for loan losses: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Ending allowance balance attributed to loans: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Individually evaluated for impairment |  | $ | 681 |  |  | $ | 2 |  |  | $ | — |  |  | $ | 1 |  |  | $ | — |  |  | $ | — |  |  | $ | 684 |
Collectively evaluated for impairment |  | 14,341 |  |  | 9,599 |  |  | 4,430 |  |  | 9,320 |  |  | 11,614 |  |  | — |  |  | 49,304 |
Total ending allowance balance |  | $ | 15,022 |  |  | $ | 9,601 |  |  | $ | 4,430 |  |  | $ | 9,321 |  |  | $ | 11,614 |  |  | $ | — |  |  | $ | 49,988 |
Loan balance: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Loans individually evaluated for impairment |  | $ | 18,034 |  |  | $ | 18,131 |  |  | $ | 1,322 |  |  | $ | 19,058 |  |  | $ | — |  |  | $ | — |  |  | $ | 56,545 |
Loans collectively evaluated for impairment |  | 1,035,419 |  |  | 1,149,476 |  |  | 180,148 |  |  | 1,706,166 |  |  | 1,241,736 |  |  | 2,993 |  |  | 5,315,938 |
Total ending loan balance |  | $ | 1,053,453 |  |  | $ | 1,167,607 |  |  | $ | 181,470 |  |  | $ | 1,725,224 |  |  | $ | 1,241,736 |  |  | $ | 2,993 |  |  | $ | 5,372,483 |
Allowance for loan losses as a percentage of loan balance: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Loans individually evaluated for impairment |  | 3.78 | % |  | 0.01 | % |  | — | % |  | 0.01 | % |  | — | % |  | — | % |  | 1.21 | %
Loans collectively evaluated for impairment |  | 1.39 | % |  | 0.84 | % |  | 2.46 | % |  | 0.55 | % |  | 0.94 | % |  | — | % |  | 0.93 | %
Total |  | 1.43 | % |  | 0.82 | % |  | 2.44 | % |  | 0.54 | % |  | 0.94 | % |  | — | % |  | 0.93 | %
Recorded investment: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Loans individually evaluated for impairment |  | $ | 18,039 |  |  | $ | 18,142 |  |  | $ | 1,324 |  |  | $ | 19,059 |  |  | $ | — |  |  | $ | — |  |  | $ | 56,564 |
Loans collectively evaluated for impairment |  | 1,039,827 |  |  | 1,153,748 |  |  | 180,693 |  |  | 1,709,737 |  |  | 1,245,544 |  |  | 3,029 |  |  | 5,332,578 |
Total ending recorded investment |  | $ | 1,057,866 |  |  | $ | 1,171,890 |  |  | $ | 182,017 |  |  | $ | 1,728,796 |  |  | $ | 1,245,544 |  |  | $ | 3,029 |  |  | $ | 5,389,142 |

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