Loans | Loans The composition of the loan portfolio, by class of loan, as of September 30, 2015 and December 31, 2014 was as follows: September 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 * $ 909,025 $ 3,478 $ 912,503 $ 856,535 $ 3,218 $ 859,753 Commercial real estate * 1,091,578 4,239 1,095,817 1,069,637 3,546 1,073,183 Construction real estate: SEPH commercial land and development 2,069 — 2,069 2,195 — 2,195 Remaining commercial 115,987 279 116,266 115,139 300 115,439 Mortgage 35,554 78 35,632 31,148 72 31,220 Installment 6,762 19 6,781 7,322 23 7,345 Residential real estate: Commercial 412,294 883 413,177 417,612 1,038 418,650 Mortgage 1,216,221 1,840 1,218,061 1,189,709 1,548 1,191,257 HELOC 213,488 755 214,243 216,915 803 217,718 Installment 24,297 79 24,376 27,139 97 27,236 Consumer 969,586 2,949 972,535 893,160 2,967 896,127 Leases 3,051 53 3,104 3,171 17 3,188 Total loans $ 4,999,912 $ 14,652 $ 5,014,564 $ 4,829,682 $ 13,629 $ 4,843,311 * Included within commercial, financial and agricultural loans and commercial real estate 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 $10.3 million at September 30, 2015 and $9.4 million at December 31, 2014, which represented a net deferred income position in both periods. Overdrawn deposit accounts of $1.7 million and $2.3 million have been reclassified to loans at September 30, 2015 and December 31, 2014, respectively, and are included in the commercial, financial and agricultural loan class above. Credit Quality The following tables present the recorded investment in nonaccrual loans, accruing troubled debt restructurings (TDRs), and loans past due 90 days or more and still accruing by class of loan as of September 30, 2015 and December 31, 2014 : September 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 $ 18,142 $ 1,015 $ — $ 19,157 Commercial real estate 14,565 3,097 — 17,662 Construction real estate: SEPH commercial land and development 2,045 — — 2,045 Remaining commercial 5,746 247 — 5,993 Mortgage 28 91 — 119 Installment 126 113 — 239 Residential real estate: Commercial 23,787 583 — 24,370 Mortgage 19,529 9,915 469 29,913 HELOC 1,685 806 17 2,508 Installment 1,845 680 4 2,529 Consumer 3,497 654 1,065 5,216 Total loans $ 90,995 $ 17,201 $ 1,555 $ 109,751 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 loans and accruing TDR loans that were individually evaluated for impairment and those collectively evaluated for impairment as of September 30, 2015 and December 31, 2014 . September 30, 2015 December 31, 2014 (In thousands) Nonaccrual loans and accruing TDRs Loans individually evaluated for impairment Loans collectively evaluated for impairment Nonaccrual loans and accruing TDRs Loans individually evaluated for impairment Loans collectively evaluated for impairment Commercial, financial and agricultural $ 19,157 $ 19,154 $ 3 $ 19,123 $ 19,106 $ 17 Commercial real estate 17,662 17,662 — 21,989 21,989 — Construction real estate: SEPH commercial land and development 2,045 2,045 — 2,078 2,078 — Remaining commercial 5,993 5,993 — 5,609 5,609 — Mortgage 119 — 119 153 — 153 Installment 239 — 239 240 — 240 Residential real estate: Commercial 24,370 24,370 — 24,930 24,930 — Mortgage 29,444 — 29,444 32,218 — 32,218 HELOC 2,491 — 2,491 2,509 — 2,509 Installment 2,525 — 2,525 2,522 — 2,522 Consumer 4,151 — 4,151 5,354 — 5,354 Total loans $ 108,196 $ 69,224 $ 38,972 $ 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 September 30, 2015 and December 31, 2014 . September 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 $ 18,724 $ 4,758 $ — $ 30,601 $ 17,883 $ — Commercial real estate 12,285 12,044 — 27,923 20,696 — Construction real estate: SEPH commercial land and development 10,835 2,045 — 11,026 2,078 — Remaining commercial 2,242 1,263 — 1,427 391 — Residential real estate: Commercial 23,940 22,264 — 25,822 23,352 — With an allowance recorded: Commercial, financial and agricultural 18,573 14,396 2,495 1,251 1,223 981 Commercial real estate 5,618 5,618 488 1,310 1,293 262 Construction real estate: SEPH commercial land and development — — — — — — Remaining commercial 4,730 4,730 2,118 5,218 5,218 1,812 Residential real estate: Commercial 2,225 2,106 637 1,578 1,578 605 Total $ 99,172 $ 69,224 $ 5,738 $ 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 September 30, 2015 and December 31, 2014 , there were $25.7 million and $32.4 million , respectively, of partial charge-offs on loans individually evaluated for impairment with no related allowance recorded and $4.3 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 of $5.7 million and $3.7 million related to loans individually evaluated for impairment at September 30, 2015 and December 31, 2014 , respectively. These loans with specific reserves had a recorded investment of $26.9 million and $9.3 million as of September 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 nine months ended September 30, 2015 and September 30, 2014 : Three Months Ended Three Months Ended (In thousands) Recorded investment as of September 30, 2015 Average recorded investment Interest income recognized Recorded investment as of September 30, 2014 Average recorded investment Interest income recognized Commercial, financial and agricultural $ 19,154 $ 19,793 $ 35 $ 23,186 $ 18,764 $ 68 Commercial real estate 17,662 17,453 132 21,303 30,644 327 Construction real estate: SEPH commercial land and development 2,045 2,068 — 2,097 3,653 12 Remaining commercial 5,993 6,059 2 5,970 8,561 2 Residential real estate: Commercial 24,370 24,560 240 23,640 27,765 255 Consumer — — — 35 68 — Total $ 69,224 $ 69,933 $ 409 $ 76,231 $ 89,455 $ 664 Nine Months Ended Nine Months Ended (In thousands) Recorded investment as of September 30, 2015 Average recorded investment Interest income recognized Recorded investment as of September 30, 2014 Average recorded investment Interest income recognized Commercial, financial and agricultural $ 19,154 $ 19,056 $ 306 $ 23,186 $ 19,362 $ 204 Commercial real estate 17,662 17,857 418 21,303 35,458 862 Construction real estate: SEPH commercial land and development 2,045 2,073 8 2,097 4,130 134 Remaining commercial 5,993 5,771 13 5,970 9,587 56 Residential real estate: Commercial 24,370 24,784 768 23,640 29,632 825 Consumer — — — 35 521 — Total $ 69,224 $ 69,541 $ 1,513 $ 76,231 $ 98,690 $ 2,081 The following tables present the aging of the recorded investment in past due loans as of September 30, 2015 and December 31, 2014 by class of loan. September 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 $ 213 $ 3,619 $ 3,832 $ 908,671 $ 912,503 Commercial real estate 917 796 1,713 1,094,104 1,095,817 Construction real estate: SEPH commercial land and development — 2,043 2,043 26 2,069 Remaining commercial 40 84 124 116,142 116,266 Mortgage 77 8 85 35,547 35,632 Installment 81 78 159 6,622 6,781 Residential real estate: Commercial 257 18,292 18,549 394,628 413,177 Mortgage 10,064 9,295 19,359 1,198,702 1,218,061 HELOC 796 153 949 213,294 214,243 Installment 240 535 775 23,601 24,376 Consumer 9,716 3,109 12,825 959,710 972,535 Leases — — — 3,104 3,104 Total loans $ 22,401 $ 38,012 $ 60,413 $ 4,954,151 $ 5,014,564 * Includes $1.6 million of loans past due 90 days or more and accruing. The remaining are past due nonaccrual loans. 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. Credit Quality Indicators Management utilizes past due information as a credit quality indicator across the loan portfolio. Past due information as of September 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 an 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 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 September 30, 2015 and December 31, 2014 for all commercial loans: September 30, 2015 (In thousands) 5 Rated 6 Rated Impaired Pass-Rated Recorded Investment Commercial, financial and agricultural * $ 8,734 $ 1,674 $ 19,157 $ 882,938 $ 912,503 Commercial real estate * 14,676 5,317 17,662 1,058,162 1,095,817 Construction real estate: SEPH commercial land and development — — 2,045 24 2,069 Remaining commercial 2,881 — 5,993 107,392 116,266 Residential real estate: Commercial 2,490 2,035 24,370 384,282 413,177 Leases — — — 3,104 3,104 Total commercial loans $ 28,781 $ 9,026 $ 69,227 $ 2,435,902 $ 2,542,936 * Included within commercial, financial and agricultural loans and commercial real estate 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 and commercial real estate 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 nine -month periods ended September 30, 2015 and September 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 nine -month periods ended September 30, 2015 . During the three -month and nine -month periods ended September 30, 2014 , Park removed the TDR classification on $0.9 million and $2.5 million of loans that met the requirements discussed above. At September 30, 2015 and December 31, 2014 , there were $41.9 million and $47.5 million , respectively, of TDRs included in the nonaccrual loan totals. At September 30, 2015 and December 31, 2014 , $19.0 million and $15.7 million of these nonaccrual TDRs were performing in accordance with the terms of the restructured note. As of September 30, 2015 and December 31, 2014 , there were $17.2 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 September 30, 2015 and December 31, 2014 , Park had commitments to lend $3.3 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 September 30, 2015 and December 31, 2014 was $3.3 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 Accounting Standards Codification (ASC) 310. Additional specific reserves of $212,000 and $1.2 million were recorded during the three-month and nine -month periods ended September 30, 2015 , respectively, as a result of TDRs identified in 2015. Additional specific reserves of $258,000 and $537,000 were recoded during the three-month and nine -month periods ended September 30, 2014 , respectively, as a result of TDRs identified in 2014. The terms of certain other loans were modified during the nine -month periods ended September 30, 2015 and September 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 September 30, 2015 and September 30, 2014 of $245,000 and $443,000 , 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 of $12.8 million and $17.6 million , as of September 30, 2015 and September 30, 2014 , 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 nine -month periods ended September 30, 2015 and September 30, 2014 , as well as the recorded investment of these contracts at September 30, 2015 and September 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 8 $ 245 $ 3,818 $ 4,063 Commercial real estate 5 — 1,512 1,512 Construction real estate: SEPH commercial land and development — — — — Remaining commercial 1 196 — 196 Mortgage — — — — Installment — — — — Residential real estate: Commercial 1 200 — 200 Mortgage 9 — 748 748 HELOC 5 16 31 47 Installment 1 — 4 4 Consumer 61 51 412 463 Total loans 91 $ 708 $ 6,525 $ 7,233 Three Months Ended (In thousands) Number of Contracts Accruing Nonaccrual Total Recorded Investment Commercial, financial and agricultural 14 $ 776 $ 1,025 $ 1,801 Commercial real estate 2 — 622 622 Construction real estate: SEPH commercial land and development — — — — Remaining commercial — — — — Mortgage — — — — Installment — — — — Residential real estate: Commercial 2 — 312 312 Mortgage 11 508 356 864 HELOC 2 — 29 29 Installment 3 133 9 142 Consumer 87 415 344 759 Total loans 121 $ 1,832 $ 2,697 $ 4,529 Of those loans which were modified and determined to be a TDR during the three-month period ended September 30, 2015 , $160,000 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 September 30, 2014 , $205,000 were on nonaccrual status as of December 31, 2013 . Nine Months Ended (In thousands) Number of Contracts Accruing Nonaccrual Total Recorded Investment Commercial, financial and agricultural 33 $ 1,014 $ 5,168 $ 6,182 Commercial real estate 11 — 2,525 2,525 Construction real estate: SEPH commercial land and development — — — — Remaining commercial 1 196 — 196 Mortgage 1 — 20 20 Installment — — — — Residential real estate: Commercial 10 200 1,144 1,344 Mortgage 24 325 1,199 1,524 HELOC 21 242 105 347 Installment 4 — 36 36 Consumer 217 71 748 819 Total loans 322 $ 2,048 $ 10,945 $ 12,993 Nine Months Ended (In thousands) Number of Contracts Accruing Nonaccrual Total Recorded Investment Commercial, financial and agricultural 24 $ 776 $ 1,065 $ 1,841 Commercial real estate 8 — 905 905 Construction real estate: SEPH commercial land and development — — — — Remaining commercial 2 — 207 207 Mortgage — — — — Installment — — — — Residential real estate: Commercial 4 — 333 333 Mortgage 31 749 1,104 1,853 HELOC 7 93 195 288 Installment 9 228 12 240 Consumer 246 726 460 1,186 Total loans 331 $ 2,572 $ 4,281 $ 6,853 Of those loans which were modified and determined to be a TDR during the nine -month period ended September 30, 2015 , $1.0 million were on nonaccrual status as of December 31, 2014 . Of those loans which were modified and determined to be a TDR during the nine -month period ended September 30, 2014 , $1.0 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 nine -month periods ended September 30, 2015 and September 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 7 $ 821 3 $ 62 Commercial real estate — — — — Construction real estate: SEPH commercial land and development — — — — Remaining commercial — — — — Mortgage — — — — Installment — — — — Residential real estate: Commercial 1 603 2 194 Mortgage 13 902 18 1,205 HELOC — — 1 166 Installment 1 28 2 115 Consumer 50 310 54 486 Leases — — — — Total loans 72 $ 2,664 80 $ 2,228 Of the $2.7 million in modified TDRs which defaulted during the three months ended September 30, 2015 , $61,000 were accruing loans and $2.6 million were nonaccrual loans. Of the $2.2 million in modified TDRs which defaulted during the three months ended September 30, 2014 , $160,000 were accruing loans and $2.1 million were nonaccrual loans. Nine Months Ended Nine Months Ended (In thousands) Number of Contracts Recorded Investment Number of Contracts Recorded Investment Commercial, financial and agricultural 7 $ 821 4 $ 111 Commercial real estate — — — — Construction real estate: SEPH commercial land and development — — — — Remaining commercial — — — — Mortgage — — — — Installment — — — — Residential real estate: Commercial 1 603 2 194 Mortgage 13 902 21 1,354 HELOC — — 1 166 Installment 1 28 3 118 Consumer 55 356 65 564 Leases — — — — Total loans 77 $ 2,710 96 $ 2,507 Of the $2.7 million in modified TDRs which defaulted during the nine months ended September 30, 2015 , $61,000 were accruing loans and $2.6 million were nonaccrual loans. Of the $2.5 million in modified TDRs which defaulted during the nine months ended September 30, 2014 , $261,000 were accruing loans and $2.2 million were nonaccrual loans. |