Loans | Loans The composition of the loan portfolio, by class of loan, as of March 31, 2018 and December 31, 2017 was as follows: March 31, 2018 December 31, 2017 (In thousands) Loan Balance Accrued Interest Receivable Recorded Investment Loan Balance Accrued Interest Receivable Recorded Investment Commercial, financial and agricultural * $ 1,000,786 $ 4,243 $ 1,005,029 $ 1,053,453 $ 4,413 $ 1,057,866 Commercial real estate * 1,156,563 4,047 1,160,610 1,167,607 4,283 1,171,890 Construction real estate: Commercial 126,561 375 126,936 125,389 401 125,790 Mortgage 51,379 119 51,498 52,203 133 52,336 Installment 3,244 11 3,255 3,878 13 3,891 Residential real estate: Commercial 389,766 1,043 390,809 393,094 1,029 394,123 Mortgage 1,097,166 1,327 1,098,493 1,110,426 1,516 1,111,942 HELOC 194,158 904 195,062 203,178 974 204,152 Installment 17,570 49 17,619 18,526 53 18,579 Consumer 1,252,251 3,462 1,255,713 1,241,736 3,808 1,245,544 Leases 2,905 46 2,951 2,993 36 3,029 Total loans $ 5,292,349 $ 15,626 $ 5,307,975 $ 5,372,483 $ 16,659 $ 5,389,142 * Included within each of 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 $12.3 million at March 31, 2018 and $12.2 million at December 31, 2017 , which represented a net deferred income position in both periods. Overdrawn deposit accounts of $1.4 million and $1.9 million had been reclassified to loans at March 31, 2018 and December 31, 2017 , 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 March 31, 2018 and December 31, 2017 : March 31, 2018 (In thousands) Nonaccrual Loans Accruing TDRs Loans Past Due 90 Days or More and Accruing Total Nonperforming Loans Commercial, financial and agricultural $ 25,985 $ 1,088 $ — $ 27,073 Commercial real estate 14,213 4,770 — 18,983 Construction real estate: Commercial 960 433 — 1,393 Mortgage — 16 — 16 Installment 43 6 — 49 Residential real estate: Commercial 2,674 222 — 2,896 Mortgage 16,856 10,022 669 27,547 HELOC 1,482 882 47 2,411 Installment 527 695 — 1,222 Consumer 3,411 623 690 4,724 Total loans $ 66,151 $ 18,757 $ 1,406 $ 86,314 December 31, 2017 (In thousands) Nonaccrual Loans Accruing TDRs Loans Past Due 90 Days or More and Accruing Total Nonperforming Loans Commercial, financial and agricultural $ 16,773 $ 1,291 $ — $ 18,064 Commercial real estate 12,979 5,163 — 18,142 Construction real estate: Commercial 986 338 — 1,324 Mortgage 8 92 — 100 Installment 52 — — 52 Residential real estate: Commercial 18,835 224 — 19,059 Mortgage 16,841 10,766 568 28,175 HELOC 1,593 1,025 14 2,632 Installment 586 616 7 1,209 Consumer 3,403 662 1,256 5,321 Total loans $ 72,056 $ 20,177 $ 1,845 $ 94,078 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 March 31, 2018 and December 31, 2017 . March 31, 2018 December 31, 2017 (In thousands) Nonaccrual and Accruing TDRs Loans Individually Evaluated for Impairment Loans Collectively Evaluated for Impairment Nonaccrual and Accruing TDRs Loans Individually Evaluated for Impairment Loans Collectively Evaluated for Impairment Commercial, financial and agricultural $ 27,073 $ 27,050 $ 23 $ 18,064 $ 18,039 $ 25 Commercial real estate 18,983 18,983 — 18,142 18,142 — Construction real estate: Commercial 1,393 1,393 — 1,324 1,324 — Mortgage 16 — 16 100 — 100 Installment 49 — 49 52 — 52 Residential real estate: Commercial 2,896 2,896 — 19,059 19,059 — Mortgage 26,878 — 26,878 27,607 — 27,607 HELOC 2,364 — 2,364 2,618 — 2,618 Installment 1,222 — 1,222 1,202 — 1,202 Consumer 4,034 — 4,034 4,065 — 4,065 Total loans $ 84,908 $ 50,322 $ 34,586 $ 92,233 $ 56,564 $ 35,669 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, together with the related allowance recorded, as of March 31, 2018 and December 31, 2017 . March 31, 2018 December 31, 2017 (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 $ 27,201 $ 22,255 $ — $ 19,899 $ 14,704 $ — Commercial real estate 18,370 17,901 — 18,974 18,060 — Construction real estate: Commercial 1,264 1,265 — 2,788 1,324 — Residential real estate: Commercial 3,107 2,786 — 19,346 19,012 — With an allowance recorded: Commercial, financial and agricultural 7,082 4,795 1,165 5,394 3,335 681 Commercial real estate 1,524 1,082 29 137 82 2 Construction real estate: Commercial 1,592 128 8 — — — Residential real estate: Commercial 123 110 5 47 47 1 Consumer — — — — — — Total $ 60,263 $ 50,322 $ 1,207 $ 66,585 $ 56,564 $ 684 Management’s general practice is to proactively charge down loans individually evaluated for impairment to the fair value of the underlying collateral. At March 31, 2018 and December 31, 2017 , there were $5.8 million and $7.9 million , respectively, of partial charge-offs on loans individually evaluated for impairment with no related allowance recorded and $4.2 million and $2.1 million , 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 March 31, 2018 and December 31, 2017 of $1.2 million and $0.7 million , respectively. These loans with specific reserves had a recorded investment of $6.1 million and $3.5 million as of March 31, 2018 and December 31, 2017 , respectively. Interest income on nonaccrual loans individually evaluated for impairment is recognized on a cash basis only when Park expects to receive the entire recorded investment of the loan. Interest income on accruing TDRs individually evaluated for impairment continues to be recorded on an accrual basis. 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 months ended March 31, 2018 and March 31, 2017 : Three Months Ended Three Months Ended (In thousands) Recorded Investment as of March 31, 2018 Average Recorded Investment Interest Income Recognized Recorded Investment as of March 31, 2017 Average Recorded Investment Interest Income Recognized Commercial, financial and agricultural $ 27,050 $ 20,078 $ 174 $ 22,542 $ 19,471 $ 220 Commercial real estate 18,983 18,193 202 22,732 23,297 231 Construction real estate: Commercial 1,393 1,377 14 2,041 2,096 15 Residential real estate: Commercial 2,896 11,215 31 22,803 23,081 345 Consumer — — — 9 5 — Total $ 50,322 $ 50,863 $ 421 $ 70,127 $ 67,950 $ 811 The following tables present the aging of the recorded investment in past due loans as of March 31, 2018 and December 31, 2017 by class of loan. March 31, 2018 (In thousands) Accruing Loans Past Due 30-89 Days Past Due Nonaccrual Loans and Loans Past Due 90 Days or More and Accruing (1) Total Past Due Total Current (2) Total Recorded Investment Commercial, financial and agricultural $ 1,483 $ 13,100 $ 14,583 $ 990,446 $ 1,005,029 Commercial real estate 210 2,748 2,958 1,157,652 1,160,610 Construction real estate: Commercial — — — 126,936 126,936 Mortgage 84 — 84 51,414 51,498 Installment 49 3 52 3,203 3,255 Residential real estate: Commercial 413 1,023 1,436 389,373 390,809 Mortgage 9,465 8,010 17,475 1,081,018 1,098,493 HELOC 570 729 1,299 193,763 195,062 Installment 268 215 483 17,136 17,619 Consumer 7,567 1,798 9,365 1,246,348 1,255,713 Leases — — — 2,951 2,951 Total loans $ 20,109 $ 27,626 $ 47,735 $ 5,260,240 $ 5,307,975 (1) Includes $1.4 million of loans past due 90 days or more and accruing. The remaining loans were past due nonaccrual loans. (2) Includes $39.9 million of nonaccrual loans which were current in regards to contractual principal and interest payments. December 31, 2017 (in thousands) Accruing Loans Past Due 30-89 Days Past Due (1) Total Past Due Total Current (2) Total Recorded Investment Commercial, financial and agricultural $ 145 $ 1,043 $ 1,188 $ 1,056,678 $ 1,057,866 Commercial real estate 856 2,360 3,216 1,168,674 1,171,890 Construction real estate: Commercial 29 — 29 125,761 125,790 Mortgage 256 — 256 52,080 52,336 Installment 54 19 73 3,818 3,891 Residential real estate: Commercial 16 1,586 1,602 392,521 394,123 Mortgage 11,515 9,232 20,747 1,091,195 1,111,942 HELOC 616 876 1,492 202,660 204,152 Installment 239 253 492 18,087 18,579 Consumer 11,515 2,407 13,922 1,231,622 1,245,544 Leases — — — 3,029 3,029 Total loans $ 25,241 $ 17,776 $ 43,017 $ 5,346,125 $ 5,389,142 (1) Includes $1.8 million of loans past due 90 days or more and accruing. The remaining loans were past due nonaccrual loans. (2) Includes $56.1 million of nonaccrual loans which were current in regards to contractual principal and interest payments. Credit Quality Indicators Management utilizes past due information as a credit quality indicator across the loan portfolio. Past due information as of March 31, 2018 and December 31, 2017 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 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 a 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 placed on nonaccrual status and 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 March 31, 2018 and December 31, 2017 for all commercial loans: March 31, 2018 (In thousands) 5 Rated 6 Rated Nonaccrual and Accruing TDRs Pass-Rated Recorded Investment Commercial, financial and agricultural * $ 475 $ 130 $ 27,073 $ 977,351 $ 1,005,029 Commercial real estate * 2,176 — 18,983 1,139,451 1,160,610 Construction real estate: Commercial — 344 1,393 125,199 126,936 Residential real estate: Commercial 412 — 2,896 387,501 390,809 Leases — — — 2,951 2,951 Total commercial loans $ 3,063 $ 474 $ 50,345 $ 2,632,453 $ 2,686,335 * Included within each of 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, 2017 (In thousands) 5 Rated 6 Rated Nonaccrual and Accruing TDRs Pass-Rated Recorded Investment Commercial, financial and agricultural * $ 17,272 $ 153 $ 18,064 $ 1,022,377 $ 1,057,866 Commercial real estate * 5,322 457 18,142 1,147,969 1,171,890 Construction real estate: Commercial 278 — 1,324 124,188 125,790 Residential real estate: Commercial 216 1 19,059 374,847 394,123 Leases — — — 3,029 3,029 Total Commercial Loans $ 23,088 $ 611 $ 56,589 $ 2,672,410 $ 2,752,698 * Included within each of 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. A court's discharge of a borrower's debt in a Chapter 7 bankruptcy is considered a concession when the borrower does not reaffirm the discharged debt. Certain loans which were modified during the three-month periods ended March 31, 2018 and March 31, 2017 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. Quarterly, 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 did 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 if 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 removed on $324,000 of loans during the three-month period ended March 31, 2018 . There were no TDR classifications removed during the three -month period ended March 31, 2017 . At March 31, 2018 and December 31, 2017 , there were $24.0 million and $38.5 million , respectively, of TDRs included in the nonaccrual loan totals. At March 31, 2018 and December 31, 2017 , $18.5 million and $32.4 million , respectively, of these nonaccrual TDRs were performing in accordance with the terms of the restructured note. As of March 31, 2018 and December 31, 2017 , loans with a recorded investment of $18.8 million and $20.2 million , respectively, were included in accruing TDR loan totals. Management will continue to review the restructured loans and may determine it is appropriate to move certain nonaccrual TDRs to accrual status in the future. At March 31, 2018 and December 31, 2017 , Park had commitments to lend $0.8 million and $1.3 million , respectively, of additional funds to borrowers whose outstanding loan terms had been modified in a TDR. There were $0.7 million and $0.5 million of specific reserves related to TDRs at March 31, 2018 and December 31, 2017 , respectively. Modifications made in 2017 and 2018 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 $10,000 and $280,000 were recorded during the three -month periods ended March 31, 2018 and March 31, 2017 , respectively, as a result of TDRs identified in the respective periods. The terms of certain other loans were modified during the three -month periods ended March 31, 2018 and March 31, 2017 that did not meet the definition of a TDR. There were no modified substandard commercial loans which did not meet the definition of a TDR at March 31, 2018 . Modified substandard commercial loans which did not meet the definition of a TDR had a total recorded investment of $113,000 at March 31, 2017 . The renewal/modification of these loans: (1) resulted in a delay in a payment that was considered to be insignificant, or (2) resulted in Park obtaining additional collateral or guarantees that improved the likelihood of the ultimate collection of the loans such that each modification was deemed to be at market terms. Consumer loans modified during the three -month periods ended March 31, 2018 and March 31, 2017 which did not meet the definition of a TDR had a total recorded investment of $6.0 million and $1.4 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 periods ended March 31, 2018 and March 31, 2017 , as well as the recorded investment of these contracts at March 31, 2018 and March 31, 2017 . The recorded investment pre- and post-modification is generally the same due to the fact that Park does not typically forgive principal. Three Months Ended (In thousands) Number of Contracts Accruing Nonaccrual Total Recorded Investment Commercial, financial and agricultural 4 $ — $ 55 $ 55 Commercial real estate 3 — 249 249 Construction real estate: Commercial 1 63 — 63 Mortgage — — — — Installment — — — — Residential real estate: Commercial — — — — Mortgage 9 — 650 650 HELOC 2 251 88 339 Installment 5 102 13 115 Consumer 50 13 351 364 Total loans 74 $ 429 $ 1,406 $ 1,835 Three Months Ended (In thousands) Number of Contracts Accruing Nonaccrual Total Recorded Investment Commercial, financial and agricultural 6 $ 3,079 $ 1,019 $ 4,098 Commercial real estate 4 — 379 379 Construction real estate: Commercial — — — — Mortgage — — — — Installment — — — — Residential real estate: Commercial 3 — 2,140 2,140 Mortgage 9 — 608 608 HELOC 3 200 6 206 Installment 1 34 — 34 Consumer 57 272 348 620 Total loans 83 $ 3,585 $ 4,500 $ 8,085 Of those loans which were modified and determined to be a TDR during the three -month period ended March 31, 2018 , $0.5 million were on nonaccrual status as of December 31, 2017 . Of those loans which were modified and determined to be a TDR during the three -month period ended March 31, 2017 , $2.6 million were on nonaccrual status as of December 31, 2016 . The following table presents 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 periods ended March 31, 2018 and March 31, 2017 , respectively. For this table, 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 3 $ 207 6 $ 198 Commercial real estate 1 114 5 838 Construction real estate: Commercial — — — — Mortgage — — — — Installment — — — — Residential real estate: Commercial 1 17 3 49 Mortgage 7 536 8 631 HELOC 3 174 — — Installment — — 1 3 Consumer 41 329 29 268 Leases — — — — Total loans 56 $ 1,377 52 $ 1,987 Of the $1.4 million in modified TDRs which defaulted during the three -month period ended March 31, 2018 , $72,000 were accruing loans and $1.3 million were nonaccrual loans. Of the $2.0 million in modified TDRs which defaulted during the three -month period ended March 31, 2017 , $60,000 were accruing loans and $1.9 million were nonaccrual loans. |