Loans | Loans The composition of the loan portfolio, by class of loan, as of June 30, 2015 and December 31, 2014 was as follows: June 30, 2015 December 31, 2014 (In thousands) Loan balance Accrued interest receivable Recorded investment Loan balance Accrued interest receivable Recorded investment Commercial, financial and agricultural * $ 848,808 $ 3,042 $ 851,850 $ 856,535 $ 3,218 $ 859,753 Commercial real estate * 1,087,107 3,633 1,090,740 1,069,637 3,546 1,073,183 Construction real estate: SEPH commercial land and development * 2,141 — 2,141 2,195 — 2,195 Remaining commercial 105,229 222 105,451 115,139 300 115,439 Mortgage 31,493 86 31,579 31,148 72 31,220 Installment 7,108 21 7,129 7,322 23 7,345 Residential real estate: Commercial 417,077 1,024 418,101 417,612 1,038 418,650 Mortgage 1,209,638 1,789 1,211,427 1,189,709 1,548 1,191,257 HELOC 213,301 799 214,100 216,915 803 217,718 Installment 24,705 88 24,793 27,139 97 27,236 Consumer 951,263 2,976 954,239 893,160 2,967 896,127 Leases 3,104 29 3,133 3,171 17 3,188 Total loans $ 4,900,974 $ 13,709 $ 4,914,683 $ 4,829,682 $ 13,629 $ 4,843,311 * Included within commercial, financial and agricultural loans, commercial real estate loans, and SEPH commercial land and development loans is 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 $10.0 million at June 30, 2015 and $9.4 million at December 31, 2014, which represented a net deferred income position in both periods. Overdrawn deposit accounts of $2.1 million and $2.3 million have been reclassified to loans at June 30, 2015 and December 31, 2014, respectively. Credit Quality The following tables present the recorded investment in nonaccrual loans, accruing troubled debt restructurings, and loans past due 90 days or more and still accruing by class of loan as of June 30, 2015 and December 31, 2014 : June 30, 2015 (In thousands) Nonaccrual loans Accruing troubled debt restructurings Loans past due 90 days or more and accruing Total nonperforming loans Commercial, financial and agricultural $ 19,288 $ 1,143 $ 71 $ 20,502 Commercial real estate 14,999 2,648 — 17,647 Construction real estate: SEPH commercial land and development 2,047 — — 2,047 Remaining commercial 5,979 53 — 6,032 Mortgage 29 91 30 150 Installment 130 116 — 246 Residential real estate: Commercial 24,048 393 — 24,441 Mortgage 21,744 10,017 719 32,480 HELOC 1,556 820 34 2,410 Installment 1,692 718 — 2,410 Consumer 4,227 597 721 5,545 Total loans $ 95,739 $ 16,596 $ 1,575 $ 113,910 December 31, 2014 (In thousands) Nonaccrual loans Accruing troubled debt restructurings Loans past due 90 days or more and accruing Total nonperforming loans Commercial, financial and agricultural $ 18,826 $ 297 $ 229 $ 19,352 Commercial real estate 19,299 2,690 — 21,989 Construction real estate: SEPH commercial land and development 2,078 — — 2,078 Remaining commercial 5,558 51 — 5,609 Mortgage 59 94 9 162 Installment 115 125 — 240 Residential real estate: Commercial 24,336 594 — 24,930 Mortgage 21,869 10,349 1,329 33,547 HELOC 1,879 630 9 2,518 Installment 1,743 779 — 2,522 Consumer 4,631 723 1,133 6,487 Total loans $ 100,393 $ 16,332 $ 2,709 $ 119,434 The following table provides additional information regarding those nonaccrual and accruing troubled debt restructured loans that were individually evaluated for impairment and those collectively evaluated for impairment as of June 30, 2015 and December 31, 2014 . June 30, 2015 December 31, 2014 (In thousands) Nonaccrual and accruing troubled debt restructurings Loans individually evaluated for impairment Loans collectively evaluated for impairment Nonaccrual and accruing troubled debt restructurings Loans individually evaluated for impairment Loans collectively evaluated for impairment Commercial, financial and agricultural $ 20,431 $ 20,429 $ 2 $ 19,123 $ 19,106 $ 17 Commercial real estate 17,647 17,647 — 21,989 21,989 — Construction real estate: SEPH commercial land and development 2,047 2,047 — 2,078 2,078 — Remaining commercial 6,032 6,032 — 5,609 5,609 — Mortgage 120 — 120 153 — 153 Installment 246 — 246 240 — 240 Residential real estate: Commercial 24,441 24,441 — 24,930 24,930 — Mortgage 31,761 — 31,761 32,218 — 32,218 HELOC 2,376 — 2,376 2,509 — 2,509 Installment 2,410 — 2,410 2,522 — 2,522 Consumer 4,824 — 4,824 5,354 — 5,354 Total loans $ 112,335 $ 70,596 $ 41,739 $ 116,725 $ 73,712 $ 43,013 All of the loans individually evaluated for impairment were evaluated using the fair value of the underlying collateral or the present value of expected future cash flows as the measurement method. The following table presents loans individually evaluated for impairment by class of loan as of June 30, 2015 and December 31, 2014 . June 30, 2015 December 31, 2014 (In thousands) Unpaid principal balance Recorded investment Allowance for loan losses allocated Unpaid principal balance Recorded investment Allowance for loan losses allocated With no related allowance recorded: Commercial, financial and agricultural $ 20,070 $ 6,314 $ — $ 30,601 $ 17,883 $ — Commercial real estate 13,188 12,916 — 27,923 20,696 — Construction real estate: SEPH commercial land and development 10,837 2,047 — 11,026 2,078 — Remaining commercial 1,172 194 — 1,427 391 — Residential real estate: Commercial 22,857 21,153 — 25,822 23,352 — Consumer — — — — — — With an allowance recorded: Commercial, financial and agricultural 18,314 14,115 2,570 1,251 1,223 981 Commercial real estate 4,830 4,731 688 1,310 1,293 262 Construction real estate: SEPH commercial land and development — — — — — — Remaining commercial 5,838 5,838 2,358 5,218 5,218 1,812 Residential real estate: Commercial 3,471 3,288 981 1,578 1,578 605 Consumer — — — — — — Total $ 100,577 $ 70,596 $ 6,597 $ 106,156 $ 73,712 $ 3,660 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, 2015 and December 31, 2014 , there were $25.5 million and $32.4 million , respectively, of partial charge-offs on loans individually evaluated for impairment with no related allowance recorded and $4.5 million and $45,000 , 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, 2015 and December 31, 2014 of $6.6 million and $3.7 million , respectively. These loans with specific reserves had a recorded investment of $28.0 million and $9.3 million as of June 30, 2015 and December 31, 2014 , respectively. Interest income on loans individually evaluated for impairment is recognized on a cash basis only when Park expects to receive the entire recorded investment of the loan. The following table presents the average recorded investment and interest income recognized subsequent to impairment on loans individually evaluated for impairment as of and for the three and six months ended June 30, 2015 and June 30, 2014 : Three Months Ended Three Months Ended (In thousands) Recorded investment as of June 30, 2015 Average recorded investment Interest income recognized Recorded investment as of June 30, 2014 Average recorded investment Interest income recognized Commercial, financial and agricultural $ 20,429 $ 18,220 $ 140 $ 17,628 $ 18,867 $ 75 Commercial real estate 17,647 16,850 123 35,138 35,638 282 Construction real estate: SEPH commercial land and development 2,047 2,068 — 4,378 4,329 66 Remaining commercial 6,032 5,611 6 9,954 10,150 7 Residential real estate: Commercial 24,441 24,443 273 28,775 30,212 307 Consumer — — — 132 667 — Total $ 70,596 $ 67,192 $ 542 $ 96,005 $ 99,863 $ 737 Six Months Ended Six Months Ended (In thousands) Recorded investment as of June 30, 2015 Average recorded investment Interest income recognized Recorded investment as of June 30, 2014 Average recorded investment Interest income recognized Commercial, financial and agricultural $ 20,429 $ 18,830 $ 271 $ 17,628 $ 19,456 $ 136 Commercial real estate 17,647 18,058 286 35,138 38,163 535 Construction real estate: SEPH commercial land and development 2,047 2,072 8 4,378 4,439 122 Remaining commercial 6,032 5,644 11 9,954 10,227 54 Residential real estate: Commercial 24,441 24,864 528 28,775 30,577 570 Consumer — — — 132 723 — Total $ 70,596 $ 69,468 $ 1,104 $ 96,005 $ 103,585 $ 1,417 The following tables present the aging of the recorded investment in past due loans as of June 30, 2015 and December 31, 2014 by class of loan. June 30, 2015 (In thousands) 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 Commercial, financial and agricultural $ 558 $ 4,055 $ 4,613 $ 847,237 $ 851,850 Commercial real estate 563 1,080 1,643 1,089,097 1,090,740 Construction real estate: SEPH commercial land and development 94 2,043 2,137 4 2,141 Remaining commercial 41 84 125 105,326 105,451 Mortgage 15 30 45 31,534 31,579 Installment 98 79 177 6,952 7,129 Residential real estate: Commercial 534 17,148 17,682 400,419 418,101 Mortgage 11,065 10,022 21,087 1,190,340 1,211,427 HELOC 421 111 532 213,568 214,100 Installment 656 324 980 23,813 24,793 Consumer 9,394 2,813 12,207 942,032 954,239 Leases — — — 3,133 3,133 Total loans $ 23,439 $ 37,789 $ 61,228 $ 4,853,455 $ 4,914,683 * Includes $1.6 million of loans past due 90 days or more and accruing. The remaining are past due, nonaccrual loans and accruing troubled debt restructurings. December 31, 2014 (in thousands) 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 Commercial, financial and agricultural $ 6,482 $ 7,508 $ 13,990 $ 845,763 $ 859,753 Commercial real estate 808 8,288 9,096 1,064,087 1,073,183 Construction real estate: SEPH commercial land and development — 2,068 2,068 127 2,195 Remaining commercial 166 77 243 115,196 115,439 Mortgage 39 68 107 31,113 31,220 Installment 21 25 46 7,299 7,345 Residential real estate: Commercial 250 19,592 19,842 398,808 418,650 Mortgage 11,146 10,637 21,783 1,169,474 1,191,257 HELOC 262 387 649 217,069 217,718 Installment 596 464 1,060 26,176 27,236 Consumer 11,304 3,818 15,122 881,005 896,127 Leases — — — 3,188 3,188 Total loans $ 31,074 $ 52,932 $ 84,006 $ 4,759,305 $ 4,843,311 * Includes $2.7 million of loans past due 90 days or more and accruing. The remaining are past due, nonaccrual loans and accruing troubled debt restructurings. Credit Quality Indicators Management utilizes past due information as a credit quality indicator across the loan portfolio. Past due information as of June 30, 2015 and December 31, 2014 is included in the tables above. 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 on a scale from 1 to 8. Credit grades are continuously monitored by the responsible 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 that are pass-rated (graded a 1 through a 4) 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 require management’s close attention. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the loan or of the Park’s credit position at some future date. Commercial loans graded 6 (substandard), also considered to be 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 are inadequately protected by the current sound worth and paying capacity of the obligor or the value 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 Park will sustain some loss if the deficiencies are not corrected. Commercial loans that are graded a 7 (doubtful) are shown as nonaccrual 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. Certain 6-rated loans and all 7-rated loans are included within the impaired category. A loan is deemed impaired when management determines the borrower's ability to perform in accordance with the contractual loan agreement is in doubt. Any commercial loan graded an 8 (loss) is completely charged off. The tables below present the recorded investment by loan grade at June 30, 2015 and December 31, 2014 for all commercial loans: June 30, 2015 (In thousands) 5 Rated 6 Rated Impaired Pass-Rated Recorded Investment Commercial, financial and agricultural * $ 3,113 $ 509 $ 20,431 $ 827,797 $ 851,850 Commercial real estate * 12,376 1,716 17,647 1,059,001 1,090,740 Construction real estate: SEPH commercial land and development * — — 2,047 94 2,141 Remaining commercial 2,616 251 6,032 96,552 105,451 Residential real estate: Commercial 4,632 628 24,441 388,400 418,101 Leases — — — 3,133 3,133 Total commercial loans $ 22,737 $ 3,104 $ 70,598 $ 2,374,977 $ 2,471,416 * Included within commercial, financial and agricultural loans, commercial real estate loans, and SEPH commercial land and development loans is an immaterial amount of consumer loans that are not broken out by class. December 31, 2014 (In thousands) 5 Rated 6 Rated Impaired Pass-Rated Recorded Investment Commercial, financial and agricultural * $ 1,874 $ 1,201 $ 19,123 $ 837,555 $ 859,753 Commercial real estate * 8,448 1,712 21,989 1,041,034 1,073,183 Construction real estate: SEPH commercial land and development * — — 2,078 117 2,195 Remaining commercial 3,349 57 5,609 106,424 115,439 Residential real estate: Commercial 2,581 598 24,930 390,541 418,650 Leases — — — 3,188 3,188 Total Commercial Loans $ 16,252 $ 3,568 $ 73,729 $ 2,378,859 $ 2,472,408 * Included within commercial, financial and agricultural loans, commercial real estate loans, and SEPH commercial land and development loans is an immaterial amount of consumer loans that are not broken out by class. Troubled Debt Restructurings (TDRs) Management classifies loans as TDRs when a borrower is experiencing financial difficulties and Park has granted a concession to the borrower as part of a modification or in the loan renewal process. In order to determine whether a borrower is experiencing financial difficulty, an evaluation is performed of the probability that the borrower will be in payment default on any of the borrower's debt in the foreseeable future without the modification. This evaluation is performed in accordance with the Company’s internal underwriting policy. Management’s policy is to modify loans by extending the term or by granting a temporary or permanent contractual interest rate below the market rate, not by forgiving debt. Certain loans which were modified during the three-month and six-month periods ended June 30, 2015 and June 30, 2014 did not meet the definition of a TDR as the modification was a delay in a payment that was considered to be insignificant. Management considers a forbearance period of up to three months or a delay in payment of up to 30 days to be insignificant. TDRs may be classified as accruing if the borrower has been current for a period of at least six months with respect to loan payments and management expects that the borrower will be able to continue to make payments in accordance with the terms of the restructured note. Management reviews all accruing TDRs quarterly to ensure payments continue to be made in accordance with the modified terms. Management reviews renewals/modifications of loans previously identified as TDRs to consider if it is appropriate to remove the TDR classification. If the borrower is no longer experiencing financial difficulty and the renewal/modification does not contain a concessionary interest rate or other concessionary terms, management considers the potential removal of the TDR classification. If deemed appropriate, the TDR classification is removed as the borrower has complied with the terms of the loan at the date of the renewal/modification and there was a reasonable expectation that the borrower would continue to comply with the terms of the loan subsequent to the date of the renewal/modification. The majority of these TDRs were originally considered restructurings in a prior year as a result of a renewal/modification with an interest rate that was not commensurate with the risk of the underlying loan at the time of the renewal/modification. The TDR classification was not removed on any loans during the three -month and six-month periods ended June 30, 2015 . During the three -month and six-month periods ended June 30, 2014 , Park removed the TDR classification on $0.6 million and $1.6 million of loans that met the requirements discussed above. At June 30, 2015 and December 31, 2014 , there were $40.1 million and $47.5 million , respectively, of TDRs included in the nonaccrual loan totals. At June 30, 2015 and December 31, 2014 , $18.1 million and $15.7 million of these nonaccrual TDRs were performing in accordance with the terms of the restructured note. As of June 30, 2015 and December 31, 2014 , there were $16.6 million and $16.3 million , respectively, of TDRs included in accruing loan totals. Management will continue to review the restructured loans and may determine it appropriate to move certain of the loans back to accrual status in the future. At June 30, 2015 and December 31, 2014 , Park had commitments to lend $1.9 million and $1.4 million , respectively, of additional funds to borrowers whose outstanding loan terms had been modified in a TDR. The specific reserve related to TDRs at June 30, 2015 and December 31, 2014 was $3.5 million and $2.4 million , respectively. Modifications made in 2014 and 2015 were largely the result of renewals and extending the maturity date of the loan at terms consistent with the original note. These modifications were deemed to be TDRs primarily due to Park’s conclusion that the borrower would likely not have qualified for similar terms through another lender. Many of the modifications deemed to be TDRs were previously identified as impaired loans, and thus were also previously evaluated for impairment under ASC 310. Additional specific reserves of $104,000 and $961,000 were recorded during the three-month and six-month periods ended June 30, 2015 , respectively, as a result of TDRs identified in 2015. Additional specific reserves of $261,000 and $279,000 were recoded during the three-month and six-month periods ended June 30, 2014 , respectively, as a result of TDRs identified in 2014. The terms of certain other loans were modified during the six -month periods ended June 30, 2015 and June 30, 2014 that did not meet the definition of a TDR. Modified substandard commercial loans which did not meet the definition of a TDR had a total recorded investment as of June 30, 2015 and June 30, 2014 of $112,000 and $1.6 million , respectively. The renewal/modification of these loans: (1) involved a renewal/modification of the terms of a loan to a borrower who was not experiencing financial difficulties, (2) resulted in a delay in a payment that was considered to be insignificant, or (3) resulted in Park obtaining additional collateral or guarantees that improved the likelihood of the ultimate collection of the loan such that the modification was deemed to be at market terms. Modified consumer loans which did not meet the definition of a TDR had a total recorded investment as of June 30, 2015 and June 30, 2014 of $10.4 million and $12.5 million , respectively. Many of these loans were to borrowers who were not experiencing financial difficulties but who were looking to reduce their cost of funds. The following tables detail the number of contracts modified as TDRs during the three-month and six -month periods ended June 30, 2015 and June 30, 2014 , as well as the recorded investment of these contracts at June 30, 2015 and June 30, 2014 . The recorded investment pre- and post-modification is generally the same due to the fact that Park does not typically provide for forgiveness of principal. Three Months Ended (In thousands) Number of Contracts Accruing Nonaccrual Total Recorded Investment Commercial, financial and agricultural 12 $ 896 $ 893 $ 1,789 Commercial real estate — — — — Construction real estate: SEPH commercial land and development — — — — Remaining commercial — — — — Mortgage — — — — Installment 1 — 20 20 Residential real estate: Commercial 6 — 832 832 Mortgage 8 39 502 541 HELOC 6 37 37 74 Installment 3 — 57 57 Consumer 90 40 626 666 Total loans 126 $ 1,012 $ 2,967 $ 3,979 Three Months Ended (In thousands) Number of Contracts Accruing Nonaccrual Total Recorded Investment Commercial, financial and agricultural 5 $ — $ 294 $ 294 Commercial real estate 3 — 315 315 Construction real estate: SEPH commercial land and development — — — — Remaining commercial 2 — 549 549 Mortgage — — — — Installment 1 — 3 3 Residential real estate: Commercial — — — — Mortgage 13 357 375 732 HELOC 5 108 168 276 Installment 2 93 4 97 Consumer 88 360 266 626 Total loans 119 $ 918 $ 1,974 $ 2,892 Of those loans which were modified and determined to be a TDR during the three-month period ended June 30, 2015 , $301,000 were on nonaccrual status as of December 31, 2014 . Of those loans which were modified and determined to be a TDR during the three-month period ended June 30, 2014 , $789,000 were on nonaccrual status as of December 31, 2013 . Six Months Ended (In thousands) Number of Contracts Accruing Nonaccrual Total Recorded Investment Commercial, financial and agricultural 25 $ 1,107 $ 1,399 $ 2,506 Commercial real estate 6 — 1,291 1,291 Construction real estate: SEPH commercial land and development — — — — Remaining commercial — — — — Mortgage 1 — 20 20 Installment 1 — 21 21 Residential real estate: Commercial 9 — 1,266 1,266 Mortgage 15 365 704 1,069 HELOC 16 228 114 342 Installment 3 — 57 57 Consumer 156 53 791 844 Total loans 232 $ 1,753 $ 5,663 $ 7,416 Six Months Ended (In thousands) Number of Contracts Accruing Nonaccrual Total Recorded Investment Commercial, financial and agricultural 10 $ 158 $ 194 $ 352 Commercial real estate 6 — 996 996 Construction real estate: SEPH commercial land and development — — — — Remaining commercial 2 — 208 208 Mortgage — — — — Installment 1 — 3 3 Residential real estate: Commercial 2 — 48 48 Mortgage 20 457 864 1,321 HELOC 5 108 168 276 Installment 6 95 3 98 Consumer 159 562 289 851 Total loans 211 $ 1,380 $ 2,773 $ 4,153 Of those loans which were modified and determined to be a TDR during the six-month period ended June 30, 2015 , $1.3 million were on nonaccrual status as of December 31, 2014 . Of those loans which were modified and determined to be a TDR during the six-month period ended June 30, 2014 , $1.7 million were on nonaccrual status as of December 31, 2013 . The following tables present the recorded investment in financing receivables which were modified as TDRs within the previous 12 months and for which there was a payment default during the three-month and six -month periods ended June 30, 2015 and June 30, 2014 , respectively. For these tables, a loan is considered to be in default when it becomes 30 days contractually past due under the modified terms. The additional allowance for loan loss resulting from the defaults on TDR loans was immaterial. Three Months Ended Three Months Ended (In thousands) Number of Contracts Recorded Investment Number of Contracts Recorded Investment Commercial, financial and agricultural 5 $ 56 6 $ 370 Commercial real estate 2 250 4 939 Construction real estate: SEPH commercial land and development — — — — Remaining commercial — — — — Mortgage — — — — Installment 1 20 1 3 Residential real estate: Commercial 1 102 1 29 Mortgage 13 793 18 1,249 HELOC 1 5 1 168 Installment 3 60 4 162 Consumer 60 441 49 380 Leases — — — — Total loans 86 $ 1,727 84 $ 3,300 Of the $1.7 million in modified TDRs which defaulted during the three months ended June 30, 2015 , $118,000 were accruing loans and $1.6 million were nonaccrual loans. Of the $3.3 million in modified TDRs which defaulted during the three months ended June 30, 2014 , $138,000 were accruing loans and $3.2 million were nonaccrual loans. Six Months Ended Six Months Ended (In thousands) Number of Contracts Recorded Investment Number of Contracts Recorded Investment Commercial, financial and agricultural 5 $ 56 7 $ 374 Commercial real estate 2 250 4 939 Construction real estate: SEPH commercial land and development — — — — Remaining commercial — — — — Mortgage — — — — Installment 1 20 1 3 Residential real estate: Commercial 1 102 1 29 Mortgage 14 796 21 1,379 HELOC 1 5 1 168 Installment 3 60 5 185 Consumer 64 464 54 416 Leases — — — — Total loans 91 $ 1,753 94 $ 3,493 Of the $1.8 million in modified TDRs which defaulted during the six months ended June 30, 2015 , $118,000 were accruing loans and $1.7 million were nonaccrual loans. Of the $3.5 million in modified TDRs which defaulted during the six months ended June 30, 2014 , $297,000 were accruing loans and $3.2 million were nonaccrual loans. |