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Allowance for Loan Losses | 12 Months Ended
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Dec. 31, 2022
Financing Receivable, Allowance for Credit Loss, Writeoff, after Recovery [Abstract] |
Allowance for Credit Losses [Text Block] | Allowance for Credit LossesThe 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 2021, Park adopted ASU 2016-13, including the CECL methodology for estimating the ACL. This standard was adopted prospectively on January 1, 2021, resulting in a $6.1 million increase to the ACL and a $3.9 million increase to the allowance for unfunded credit losses. A cumulative effect adjustment resulting in an $8.0 million decrease to retained earnings and a $2.1 million increase to deferred tax assets was also recorded as of the adoption of ASU 2016-13. 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 2022 with data through September 30, 2022. After considering the impact of the inclusion of periods impacted by COVID, as well as analysis of the ongoing applicability of the selected peer group, management decided it was appropriate to continue to utilize the LDA analysis from the fourth quarter of 2019 as the correlation of the LDA was higher. •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, a forecast model is utilized to estimate PDs. •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. •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 2022. •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, 2021, the "most likely" scenario forecasted Ohio unemployment to decrease, to a range between 3.32% and 3.97%, during the next four quarters. In determining the appropriate weighting of scenarios at December 31, 2021, management considered the range of forecasted unemployment as well as a number of economic indicators. While some economic indications appeared to be optimistic, the Omicron variant, rising inflation, volatility in consumer confidence, employment, supply chain and workforce challenges continued to cause uncertainty to the overall economic environment. Considering these factors, management determined it was appropriate to weigh the "most likely" scenario 50% and the "moderate recession" scenario 50% at December 31, 2021. ◦A s 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, 20 22. Deteriorating forecasts, largely in the "moderate recession" scenario, resulted in a 10 basis point increase in the weighted quantitative allowance from December 31, 2021. 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, write-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 collectibility of financial assets. •Where the U.S. economy is within a given credit cycle. •The extent that there is government assistance (stimulus). During 2020, Park added an additional reserve for three industries at particularly high risk due to the COVID-19 pandemic: hotels and accommodations; restaurants and food service; and strip shopping centers. These industries experienced high levels of deferrals and had been particularly impacted by shut downs of non-essential businesses, increased health department regulations, and changes in consumer behavior. Management expected that a relatively higher percentage of the 4-rated credits in these portfolios would eventually migrate to special mention, substandard, or individually evaluated status. In adopting CECL, management determined it was appropriate to retain this qualitative adjustment as this adjustment took into account the additional risk in these portfolios, which was not captured in the quantitative calculation. As COVID cases began to decline during the first quarter of 2022, travel increased, restrictions lifted, and consumers began increasing restaurant visits and shopping in person and these industries began to show signs of recovery. Beginning in the first quarter of 2022, management began decreasing these reserves 25% each quarter to take into account improvements in these industry sectors. In the fourth quarter 2022, these industries continued to show positive trends and COVID-19 has become less impactful to day-to-day life. Therefore, management deemed it appropriate to reduce the factors the remaining 25%, taking this qualitative adjustment to zero. A breakout of the 4-rated balances within these portfolios and the additional reserve related to these portfolios, as of December 31, 2021, is detailed in the following table:
|  | December 31, 2021
(In thousands) |  | 4-Rated Balance |  | Additional Reserve
Hotels and accommodations |  | $ | 148,018 |  |  | $ | 2,226 |
Restaurants and food service |  | 40,648 |  |  | 917 |
Strip shopping centers |  | 184,171 |  |  | 2,033 |
Total |  | $ | 372,837 |  |  | $ | 5,176 |
Additionally, at December 31, 2021, management applied a 1.00% reserve to all hotels and accommodations loans in the collectively evaluated population to account for increased valuation risk. At December 31, 2021, Park's collectively evaluated hotels and accommodation loans had a balance of $203.9 million with an additional reserve related to valuation risks of $2.0 million. With improvement in occupancy and revenue in Park's hotel and accommodations portfolio, management concluded it appropriate to decrease the hotel and accommodations valuation reserve to zero at December 31, 2022. At December 31, 2022 and 2021, Park had $4.2 million and $74.4 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, 2022 and December 31, 2021. ACL Activity The activity in the allowance for credit losses for the years ended December 31, 2022, 2021, and 2020 is summarized in the following tables.
|  | Year ended December 31, 2022
(In thousands) |  | Commercial, financial and agricultural |  | Commercial real estate |  | Construction real estate |  | Residential real estate |  | Consumer |  | Leases |  | Total
Allowance for credit losses: |  |  |  |  |  |  |  |  |  |  |  |
Beginning balance |  | $ | 14,025 |  |  | $ | 25,466 |  |  | $ | 5,758 |  |  | $ | 11,424 |  |  | $ | 26,286 |  |  | $ | 238 |  |  | $ | 83,197 |
Charge-offs |  | 2,056 |  |  | 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 (recovery) |  | 4,192 |  |  | (6,686) |  |  | (1,518) |  |  | 5,324 |  |  | 3,311 |  |  | (66) |  |  | 4,557 |
Ending balance |  | $ | 16,987 |  |  | $ | 17,829 |  |  | $ | 5,550 |  |  | $ | 16,831 |  |  | $ | 28,021 |  |  | 161 |  |  | $ | 85,379 |
|  | Year ended December 31, 2021
(In thousands) |  | Commercial, financial and agricultural |  | Commercial real estate |  | Construction real estate |  | Residential real estate |  | Consumer |  | Leases |  | Total
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-offs |  | 957 |  |  | 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) Provision |  | (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 |
|  | Year ended December 31, 2020
(In thousands) |  | Commercial, financial and agricultural |  | Commercial real estate |  | Construction real estate |  | Residential real estate |  | Consumer |  | Leases |  | Total
Allowance for credit losses: |  |  |  |  |  |  |  |  |  |  |  |
Beginning balance |  | $ | 20,203 |  |  | $ | 10,229 |  |  | $ | 5,311 |  |  | $ | 8,610 |  |  | $ | 12,211 |  |  | $ | 115 |  |  | $ | 56,679 |
Charge-offs |  | 1,468 |  |  | 1,824 |  |  | 6 |  |  | 356 |  |  | 6,634 |  |  | 16 |  |  | 10,304 |
Recoveries |  | (20,765) |  |  | (738) |  |  | (1,122) |  |  | (991) |  |  | (3,629) |  |  | (1) |  |  | (27,246) |
Net (recoveries) charge-offs |  | (19,297) |  |  | 1,086 |  |  | (1,116) |  |  | (635) |  |  | 3,005 |  |  | 15 |  |  | (16,942) |
(Recovery) Provision |  | (13,892) |  |  | 14,337 |  |  | 861 |  |  | 2,118 |  |  | 8,212 |  |  | 418 |  |  | 12,054 |
Ending balance |  | $ | 25,608 |  |  | $ | 23,480 |  |  | $ | 7,288 |  |  | $ | 11,363 |  |  | $ | 17,418 |  |  | $ | 518 |  |  | $ | 85,675 |
ACL Summary Loans collectively evaluated for impairment in the following tables include all performing loans at December 31, 2022 and December 31, 2021, 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 loans internally classified as commercial nonaccrual loans and TDRs at December 31, 2022 and December 31, 2021, 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, 2022 and December 31, 2021 was as follows:
| December 31, 2022
(In thousands) | Commercial, financial and agricultural |  | Commercial real estate |  | Construction real estate |  | Residential real estate |  | Consumer |  | Leases |  | Total
ACL: |  |  |  |  |  |  |  |  |  |  |  |  |
Ending allowance balance attributed to loans: |  |  |  |  |  |  |  |  |  |  |  |  |
Individually evaluated for impairment | $ | 3,426 |  | $ | 131 |  | $ | — |  | $ | — |  | $ | — |  | $ | 9 |  | $ | 3,566
Collectively evaluated for impairment | 13,561 |  | 17,698 |  | 5,550 |  | 16,831 |  | 28,021 |  | 152 |  | $ | 81,813
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 impairment | 1,259,524 |  | 1,758,118 |  | 323,043 |  | 1,794,302 |  | 1,904,981 |  | 18,929 |  | 7,058,897
Loans acquired with deteriorated credit quality | 102 |  | 3,513 |  | 660 |  | 378 |  | — |  | — |  | 4,653
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 impairment | 8.29 | % |  | 0.40 | % |  | — | % |  | — | % |  | — | % |  | 1.27 | % |  | 4.55 | %
Loans collectively evaluated for impairment | 1.08 | % |  | 1.01 | % |  | 1.72 | % |  | 0.94 | % |  | 1.47 | % |  | 0.80 | % |  | 1.16 | %
Loans acquired with deteriorated credit quality | — | % |  | — | % |  | — | % |  | — | % |  | — | % |  | — | % |  | — | %
Total | 1.31 | % |  | 0.99 | % |  | 1.71 | % |  | 0.94 | % |  | 1.47 | % |  | 0.82 | % |  | 1.20 | %
| December 31, 2021
(In thousands) | Commercial, financial and agricultural |  | Commercial real estate |  | Construction real estate |  | Residential real estate |  | Consumer |  | Leases |  | Total
ACL: |  |  |  |  |  |  |  |  |  |  |  |  |
Ending allowance balance attributed to loans: |  |  |  |  |  |  |  |  |  |  |  |  |
Individually evaluated for impairment | $ | 1,385 |  | $ | 188 |  | $ | — |  | $ | — |  | $ | — |  | $ | 43 |  | $ | 1,616
Collectively evaluated for impairment | 12,640 |  | 25,278 |  | 5,758 |  | 11,424 |  | 26,286 |  | 195 |  | $ | 81,581
Acquired with deteriorated credit quality | — |  | — |  | — |  | — |  | — |  | — |  | $ | —
Total ending allowance balance | $ | 14,025 |  | $ | 25,466 |  | $ | 5,758 |  | $ | 11,424 |  | $ | 26,286 |  | $ | 238 |  | $ | 83,197
Loan balance: |  |  |  |  |  |  |  |  |  |  |  |  |
Loans individually evaluated for impairment | $ | 22,666 |  | $ | 47,820 |  | $ | 222 |  | $ | 2,606 |  | $ | — |  | $ | 1,188 |  | $ | 74,502
Loans collectively evaluated for impairment | 1,275,783 |  | 1,748,854 |  | 320,608 |  | 1,735,226 |  | 1,689,679 |  | 19,321 |  | 6,789,471
Loans acquired with deteriorated credit quality | 177 |  | 5,118 |  | 956 |  | 875 |  | — |  | 23 |  | 7,149
Total ending loan balance | $ | 1,298,626 |  | $ | 1,801,792 |  | $ | 321,786 |  | $ | 1,738,707 |  | $ | 1,689,679 |  | $ | 20,532 |  | $ | 6,871,122
ACL as a percentage of loan balance: |  |  |  |  |  |  |  |  |  |  |  |  |
Loans individually evaluated for impairment | 6.11 | % |  | 0.39 | % |  | — | % |  | — | % |  | — | % |  | 3.62 | % |  | 2.17 | %
Loans collectively evaluated for impairment | 0.99 | % |  | 1.45 | % |  | 1.80 | % |  | 0.66 | % |  | 1.56 | % |  | 1.01 | % |  | 1.20 | %
Loans acquired with deteriorated credit quality | — | % |  | — | % |  | — | % |  | — | % |  | — | % |  | — | % |  | — | %
Total | 1.08 | % |  | 1.41 | % |  | 1.79 | % |  | 0.66 | % |  | 1.56 | % |  | 1.16 | % |  | 1.21 | %

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