NOTES TO UNAUDITED CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
Note 1 –
Basis of Presentation
The accompanying unaudited consolidated condensed financial statements included in this report have been prepared for Park National Corporation (sometimes also referred to as the “Registrant”) and its subsidiaries. Unless the context otherwise requires, references to "Park", the "Corporation" or the "Company" and similar terms mean Park National Corporation and its subsidiaries. In the opinion of management, all adjustments (consisting of normal recurring accruals) necessary for a fair presentation of the results of operations for the interim periods included herein have been made. The results of operations for the three-month period ended March 31, 2017 are not necessarily indicative of the operating results to be anticipated for the fiscal year ending December 31, 2017.
The accompanying unaudited consolidated condensed financial statements have been prepared in accordance with the instructions for Form 10-Q and, therefore, do not include all information and footnotes necessary for a fair presentation of the condensed balance sheets, condensed statements of income, condensed statements of comprehensive income, condensed statements of changes in shareholders’ equity and condensed statements of cash flows in conformity with United States ("U.S.") generally accepted accounting principles (“U.S. GAAP”). These financial statements should be read in conjunction with the consolidated financial statements incorporated by reference in the Annual Report on Form 10-K of Park for the fiscal year ended December 31, 2016 from Park’s 2016 Annual Report to Shareholders (“Park's 2016 Annual Report”). Certain prior period amounts have been reclassified to conform to the current period presentation.
Park’s significant accounting policies are described in Note 1 of the Notes to Consolidated Financial Statements included in Park’s 2016 Annual Report. For interim reporting purposes, Park follows the same basic accounting policies, as updated by the information contained in this report, and considers each interim period an integral part of an annual period.
Note 2 –
Recent Accounting Pronouncements
ASU 2014-09 - Revenue from Contracts with Customers (Topic 606):
In May 2014, the Financial Accounting Standards Board (the "FASB") issued ASU 2014-09,
Revenue from Contracts with Customers (Topic 606).
The ASU creates a new topic, Topic 606, to provide guidance on revenue recognition for entities that enter into contracts with customers to transfer goods or services or enter into contracts for the transfer of nonfinancial assets. The core principle of the guidance is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. Additional disclosures are required to provide quantitative and qualitative information regarding the nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers. The new guidance is effective for annual reporting periods, and interim reporting periods within those annual periods, beginning after December 15, 2017. While interest income is specifically out of scope of this guidance, management is currently evaluating the revenue streams within "Other income" to assess the applicability of this guidance. Specifically, management is evaluating the impact of this new guidance on deposit fees recorded within "Service charges on deposit accounts" and trust income within "Income from fiduciary activities."
ASU 2016-01 - Financial Instruments - Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities.
In January 2016, the FASB issued ASU 2016-01
- Financial Instruments - Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities.
Changes to the current U.S. GAAP model primarily affect the accounting for equity investments, financial liabilities under the fair value option, and the presentation and disclosure requirements for financial instruments. In addition, the ASU clarifies guidance related to the valuation allowance assessment when recognizing deferred tax assets resulting from unrealized losses on available-for-sale securities. The new guidance is effective for annual reporting periods and interim reporting periods within those annual periods, beginning after December 15, 2017. The adoption of this guidance is not expected to have a material impact on Park's consolidated financial statements.
ASU 2016-02 - Leases (Topic 842):
In February 2016, the FASB issued ASU 2016-02 -
Leases (Topic 842)
. The ASU will require all organizations that lease assets to recognize on the balance sheet the assets and liabilities for the rights and obligations created by those leases. Additional qualitative and quantitative disclosures will be required so that users can understand more about the nature of an entity’s leasing activities. The new guidance is effective for annual reporting periods and interim reporting periods within those annual periods, beginning after December 15, 2018. Early adoption is permitted. Management is currently analyzing data on leased assets. The adoption of this guidance is expected to increase both assets and liabilities, but is not expected to have a material impact on Park's consolidated statement of income.
ASU 2016-09 - Compensation - Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting:
In March 2016, FASB issued ASU 2016-09 -
Compensation - Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting
. The ASU provides simplification for several aspects of accounting for share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities, and classification on the statement of cash flows. The new guidance was effective for annual reporting periods and interim reporting periods within those annual periods, beginning after December 15, 2016. Early adoption was permitted. The adoption of this guidance on January 1, 2017 did not have a material impact on Park's consolidated financial statements.
ASU 2016-13 - Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments:
In June 2016, FASB issued
ASU 2016-13 - Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments
. The new guidance replaces the incurred loss model with an expected loss model, which is referred to as the current expected credit loss ("CECL") model. The CECL model is applicable to the measurement of credit losses on financial assets measured at amortized cost, including loan receivables, held-to-maturity debt securities, and reinsurance receivables. It also applies to off-balance sheet credit exposures not accounted for as insurance (loan commitments, standby letters of credit, financial guarantees, and other similar instruments) and net investments in leases recognized by a lessor. The CECL model requires an entity to estimate the credit losses over the life of an asset or off-balance sheet exposure. The new guidance is effective for annual reporting periods and interim reporting periods within those annual periods, beginning after December 15, 2019. Early adoption is permitted for annual reporting periods and interim reporting periods within those annual periods, beginning after December 15, 2018.
Management is currently evaluating the impact of the adoption of this guidance on Park's consolidated financial statements. We anticipate that the adoption of the CECL model will result in a material increase to Park's allowance for loan losses. Management has established a committee to oversee the implementation of CECL. This committee is currently assessing the data and system requirements necessary for adoption. Management plans to run our current incurred loss model and a CECL model concurrently for 12 months prior to the adoption of this guidance on January 1, 2020.
ASU 2016-15 - Statement of Cash Flows (Topic 203): Classification of Certain Cash Receipts and Cash Payments (a consensus of the Emerging Issues Task Force):
In August 2016, the FASB issued ASU 2016-15,
Statement of Cash Flows (Topic 203): Classification of Certain Cash Receipts and Cash Payments (a consensus of the Emerging Issues Task Force)
. This ASU provides guidance on eight specific cash flow issues where current U.S. GAAP is either unclear or does not include specific guidance. The new guidance is effective for annual reporting periods, and interim reporting periods within those annual periods, beginning after December 15, 2017. As such transactions arise, management will utilize the updated guidance within Park’s consolidated statements of cash flows.
ASU 2017-04 - Intangibles - Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment:
In January 2017, the FASB issued ASU 2017-04,
Intangibles - Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment.
This ASU eliminates Step 2 from the goodwill impairment test. Instead, under the new guidance, an entity is to perform its annual goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount. An impairment charge would be recognized for the amount by which the carrying amount exceeds the reporting unit's fair value. The new guidance is effective for annual reporting periods, and interim reporting periods within those annual periods, beginning after December 15, 2019. Early adoption is permitted for interim or annual goodwill impairment tests performed on testing dates after January 1, 2017. The adoption of this guidance is not expected to have an impact on Park's consolidated financial statements.
ASU 2017-07 - Compensation - Retirement Benefits (Topic 715): Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost:
In March 2017, the FASB issued
ASU 2017-07 - Compensation - Retirement Benefits (Topic 715): Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost.
This ASU requires that an employer report the service cost component in the same line item or items as other compensation costs arising from services rendered by the pertinent employees during the period. The other components of net benefit cost are required to be presented in the income statement separately from the service cost component. The new guidance is effective for annual reporting periods, and interim reporting periods within those annual periods, beginning after December 15, 2017. Early adoption is permitted for interim or annual periods. The adoption of this guidance is not expected to have a material impact on Park's consolidated financial statements.
ASU 2017-08 - Receivables - Nonrefundable Fees and Other Costs (Subtopic 310-20): Premium Amortization on Purchased Callable Debt Securities:
In March 2017, the FASB issued
ASU 2017-08 - Receivables - Nonrefundable Fees and Other Costs (Subtopic 310-20): Premium Amortization on Purchased Callable Debt Securities.
This ASU amends the amortization period for certain purchased callable debt securities held at a premium. It shortens the amortization period for the premium to the earliest call date. Under current U.S. GAAP, premiums on callable debt securities generally are amortized to the
maturity date. The new guidance is effective for annual reporting periods, and interim reporting periods within those annual periods, beginning after December 15, 2018. Early adoption is permitted for interim or annual periods. The adoption of this guidance is not expected to have a material impact on Park's consolidated financial statements.
Note 3 –
Loans
The composition of the loan portfolio, by class of loan, as of
March 31, 2017
and
December 31, 2016
was as follows:
|
|
|
|
|
|
|
|
|
|
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2017
|
|
|
December 31, 2016
|
(In thousands)
|
Loan
Balance
|
|
Accrued
Interest
Receivable
|
|
Recorded
Investment
|
|
|
Loan
Balance
|
|
Accrued
Interest
Receivable
|
|
Recorded
Investment
|
Commercial, financial and agricultural *
|
$
|
995,377
|
|
|
$
|
3,898
|
|
|
$
|
999,275
|
|
|
|
$
|
994,619
|
|
|
$
|
3,558
|
|
|
$
|
998,177
|
|
Commercial real estate *
|
1,187,395
|
|
|
3,870
|
|
|
1,191,265
|
|
|
|
1,155,703
|
|
|
4,161
|
|
|
1,159,864
|
|
Construction real estate:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial
|
112,015
|
|
|
338
|
|
|
112,353
|
|
|
|
135,343
|
|
|
398
|
|
|
135,741
|
|
Mortgage
|
48,193
|
|
|
110
|
|
|
48,303
|
|
|
|
48,699
|
|
|
106
|
|
|
48,805
|
|
Installment
|
5,026
|
|
|
14
|
|
|
5,040
|
|
|
|
4,903
|
|
|
17
|
|
|
4,920
|
|
Residential real estate:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial
|
396,663
|
|
|
924
|
|
|
397,587
|
|
|
|
406,687
|
|
|
940
|
|
|
407,627
|
|
Mortgage
|
1,156,543
|
|
|
1,246
|
|
|
1,157,789
|
|
|
|
1,169,495
|
|
|
1,459
|
|
|
1,170,954
|
|
HELOC
|
211,311
|
|
|
820
|
|
|
212,131
|
|
|
|
212,441
|
|
|
853
|
|
|
213,294
|
|
Installment
|
18,734
|
|
|
53
|
|
|
18,787
|
|
|
|
19,874
|
|
|
67
|
|
|
19,941
|
|
Consumer
|
1,178,736
|
|
|
3,118
|
|
|
1,181,854
|
|
|
|
1,120,850
|
|
|
3,385
|
|
|
1,124,235
|
|
Leases
|
3,648
|
|
|
58
|
|
|
3,706
|
|
|
|
3,243
|
|
|
29
|
|
|
3,272
|
|
Total loans
|
$
|
5,313,641
|
|
|
$
|
14,449
|
|
|
$
|
5,328,090
|
|
|
|
$
|
5,271,857
|
|
|
$
|
14,973
|
|
|
$
|
5,286,830
|
|
* 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
$11.7 million
at
March 31, 2017
and
$11.1 million
at
December 31, 2016
, which represented a net deferred income position in both periods.
Overdrawn deposit accounts of
$2.0 million
and
$2.9 million
had been reclassified to loans at
March 31, 2017
and
December 31, 2016
, 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, 2017
and
December 31, 2016
:
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2017
|
(In thousands)
|
|
Nonaccrual
Loans
|
|
Accruing Troubled Debt Restructurings
|
|
Loans Past Due
90 Days or More
and Accruing
|
|
Total
Nonperforming
Loans
|
Commercial, financial and agricultural
|
|
$
|
18,767
|
|
|
$
|
3,825
|
|
|
$
|
10
|
|
|
$
|
22,602
|
|
Commercial real estate
|
|
18,474
|
|
|
4,258
|
|
|
—
|
|
|
22,732
|
|
Construction real estate:
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial
|
|
1,649
|
|
|
392
|
|
|
—
|
|
|
2,041
|
|
Mortgage
|
|
—
|
|
|
103
|
|
|
—
|
|
|
103
|
|
Installment
|
|
58
|
|
|
92
|
|
|
—
|
|
|
150
|
|
Residential real estate:
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial
|
|
22,715
|
|
|
88
|
|
|
—
|
|
|
22,803
|
|
Mortgage
|
|
17,632
|
|
|
9,983
|
|
|
804
|
|
|
28,419
|
|
HELOC
|
|
1,683
|
|
|
849
|
|
|
26
|
|
|
2,558
|
|
Installment
|
|
577
|
|
|
630
|
|
|
—
|
|
|
1,207
|
|
Consumer
|
|
2,739
|
|
|
1,003
|
|
|
1,046
|
|
|
4,788
|
|
Total loans
|
|
$
|
84,294
|
|
|
$
|
21,223
|
|
|
$
|
1,886
|
|
|
$
|
107,403
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2016
|
(In thousands)
|
|
Nonaccrual
Loans
|
|
Accruing Troubled Debt Restructurings
|
|
Loans Past Due
90 Days or More
and Accruing
|
|
Total
Nonperforming
Loans
|
Commercial, financial and agricultural
|
|
$
|
20,057
|
|
|
$
|
600
|
|
|
$
|
15
|
|
|
$
|
20,672
|
|
Commercial real estate
|
|
19,169
|
|
|
5,305
|
|
|
—
|
|
|
24,474
|
|
Construction real estate:
|
|
|
|
|
|
|
|
|
|
|
|
Commercial
|
|
1,833
|
|
|
393
|
|
|
—
|
|
|
2,226
|
|
Mortgage
|
|
—
|
|
|
104
|
|
|
—
|
|
|
104
|
|
Installment
|
|
61
|
|
|
95
|
|
|
12
|
|
|
168
|
|
Residential real estate:
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial
|
|
23,013
|
|
|
89
|
|
|
—
|
|
|
23,102
|
|
Mortgage
|
|
18,313
|
|
|
9,612
|
|
|
887
|
|
|
28,812
|
|
HELOC
|
|
1,783
|
|
|
673
|
|
|
25
|
|
|
2,481
|
|
Installment
|
|
644
|
|
|
609
|
|
|
60
|
|
|
1,313
|
|
Consumer
|
|
2,949
|
|
|
748
|
|
|
1,139
|
|
|
4,836
|
|
Total loans
|
|
$
|
87,822
|
|
|
$
|
18,228
|
|
|
$
|
2,138
|
|
|
$
|
108,188
|
|
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, 2017
and
December 31, 2016
.
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2017
|
|
|
December 31, 2016
|
(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
|
|
$
|
22,592
|
|
|
$
|
22,542
|
|
|
$
|
50
|
|
|
|
$
|
20,657
|
|
|
$
|
20,624
|
|
|
$
|
33
|
|
Commercial real estate
|
|
22,732
|
|
|
22,732
|
|
|
—
|
|
|
|
24,474
|
|
|
24,474
|
|
|
—
|
|
Construction real estate:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial
|
|
2,041
|
|
|
2,041
|
|
|
—
|
|
|
|
2,226
|
|
|
2,226
|
|
|
—
|
|
Mortgage
|
|
103
|
|
|
—
|
|
|
103
|
|
|
|
104
|
|
|
—
|
|
|
104
|
|
Installment
|
|
150
|
|
|
—
|
|
|
150
|
|
|
|
156
|
|
|
—
|
|
|
156
|
|
Residential real estate:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial
|
|
22,803
|
|
|
22,803
|
|
|
—
|
|
|
|
23,102
|
|
|
23,102
|
|
|
—
|
|
Mortgage
|
|
27,615
|
|
|
—
|
|
|
27,615
|
|
|
|
27,925
|
|
|
—
|
|
|
27,925
|
|
HELOC
|
|
2,532
|
|
|
—
|
|
|
2,532
|
|
|
|
2,456
|
|
|
—
|
|
|
2,456
|
|
Installment
|
|
1,207
|
|
|
—
|
|
|
1,207
|
|
|
|
1,253
|
|
|
—
|
|
|
1,253
|
|
Consumer
|
|
3,742
|
|
|
9
|
|
|
3,733
|
|
|
|
3,697
|
|
|
—
|
|
|
3,697
|
|
Total loans
|
|
$
|
105,517
|
|
|
$
|
70,127
|
|
|
$
|
35,390
|
|
|
|
$
|
106,050
|
|
|
$
|
70,426
|
|
|
$
|
35,624
|
|
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, 2017
and
December 31, 2016
.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2017
|
|
|
December 31, 2016
|
(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
|
|
$
|
37,260
|
|
|
$
|
21,001
|
|
|
$
|
—
|
|
|
|
$
|
41,075
|
|
|
$
|
19,965
|
|
|
$
|
—
|
|
Commercial real estate
|
|
22,553
|
|
|
22,094
|
|
|
—
|
|
|
|
23,961
|
|
|
23,474
|
|
|
—
|
|
Construction real estate:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial
|
|
1,499
|
|
|
1,471
|
|
|
—
|
|
|
|
3,662
|
|
|
2,226
|
|
|
—
|
|
Residential real estate:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial
|
|
22,924
|
|
|
22,302
|
|
|
—
|
|
|
|
24,409
|
|
|
22,687
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
With an allowance recorded:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial, financial and agricultural
|
|
6,419
|
|
|
1,541
|
|
|
596
|
|
|
|
810
|
|
|
659
|
|
|
152
|
|
Commercial real estate
|
|
695
|
|
|
638
|
|
|
179
|
|
|
|
1,014
|
|
|
1,000
|
|
|
309
|
|
Construction real estate:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial
|
|
1,956
|
|
|
570
|
|
|
32
|
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Residential real estate:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial
|
|
516
|
|
|
501
|
|
|
275
|
|
|
|
427
|
|
|
415
|
|
|
87
|
|
Consumer
|
|
9
|
|
|
9
|
|
|
9
|
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Total
|
|
$
|
93,831
|
|
|
$
|
70,127
|
|
|
$
|
1,091
|
|
|
|
$
|
95,358
|
|
|
$
|
70,426
|
|
|
$
|
548
|
|
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, 2017
and
December 31, 2016
, there were
$17.4 million
and
$24.7 million
, respectively, of partial charge-offs on loans individually evaluated for impairment with no related allowance recorded and
$6.3 million
and
$0.2 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, 2017
and
December 31, 2016
of
$1.1 million
and
$0.5 million
, respectively. These loans with specific reserves had a recorded investment of
$3.3 million
and
$2.1 million
as of
March 31, 2017
and
December 31, 2016
, 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, 2017
and
March 31, 2016
:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
March 31, 2017
|
|
|
Three Months Ended
March 31, 2016
|
(In thousands)
|
Recorded Investment as of March 31, 2017
|
|
Average
Recorded
Investment
|
|
Interest
Income
Recognized
|
|
|
Recorded Investment as of March 31, 2016
|
|
Average
Recorded
Investment
|
|
Interest
Income
Recognized
|
Commercial, financial and agricultural
|
$
|
22,542
|
|
|
$
|
19,471
|
|
|
$
|
220
|
|
|
|
$
|
28,596
|
|
|
$
|
29,858
|
|
|
$
|
238
|
|
Commercial real estate
|
22,732
|
|
|
23,297
|
|
|
231
|
|
|
|
18,068
|
|
|
17,100
|
|
|
180
|
|
Construction real estate:
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial
|
2,041
|
|
|
2,096
|
|
|
15
|
|
|
|
6,888
|
|
|
6,814
|
|
|
13
|
|
Residential real estate:
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial
|
22,803
|
|
|
23,081
|
|
|
345
|
|
|
|
24,619
|
|
|
24,897
|
|
|
1,965
|
|
Consumer
|
9
|
|
|
5
|
|
|
—
|
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Total
|
$
|
70,127
|
|
|
$
|
67,950
|
|
|
$
|
811
|
|
|
|
$
|
78,171
|
|
|
$
|
78,669
|
|
|
$
|
2,396
|
|
The following tables present the aging of the recorded investment in past due loans as of
March 31, 2017
and
December 31, 2016
by class of loan.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2017
|
(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
|
$
|
541
|
|
|
$
|
2,272
|
|
|
$
|
2,813
|
|
|
$
|
996,462
|
|
|
$
|
999,275
|
|
Commercial real estate
|
135
|
|
|
2,591
|
|
|
2,726
|
|
|
1,188,539
|
|
|
1,191,265
|
|
Construction real estate:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial
|
—
|
|
|
24
|
|
|
24
|
|
|
112,329
|
|
|
112,353
|
|
Mortgage
|
—
|
|
|
—
|
|
|
—
|
|
|
48,303
|
|
|
48,303
|
|
Installment
|
210
|
|
|
49
|
|
|
259
|
|
|
4,781
|
|
|
5,040
|
|
Residential real estate:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial
|
170
|
|
|
2,067
|
|
|
2,237
|
|
|
395,350
|
|
|
397,587
|
|
Mortgage
|
7,566
|
|
|
9,391
|
|
|
16,957
|
|
|
1,140,832
|
|
|
1,157,789
|
|
HELOC
|
632
|
|
|
1,017
|
|
|
1,649
|
|
|
210,482
|
|
|
212,131
|
|
Installment
|
197
|
|
|
178
|
|
|
375
|
|
|
18,412
|
|
|
18,787
|
|
Consumer
|
7,734
|
|
|
1,806
|
|
|
9,540
|
|
|
1,172,314
|
|
|
1,181,854
|
|
Leases
|
—
|
|
|
—
|
|
|
—
|
|
|
3,706
|
|
|
3,706
|
|
Total loans
|
$
|
17,185
|
|
|
$
|
19,395
|
|
|
$
|
36,580
|
|
|
$
|
5,291,510
|
|
|
$
|
5,328,090
|
|
(1) Includes
$1.9 million
of loans past due 90 days or more and accruing. The remaining are past due nonaccrual loans.
(2) Includes
$66.8 million
of nonaccrual loans which are current in regards to contractual principal and interest payments.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2016
|
(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
|
$
|
371
|
|
|
$
|
4,113
|
|
|
$
|
4,484
|
|
|
$
|
993,693
|
|
|
$
|
998,177
|
|
Commercial real estate
|
355
|
|
|
2,499
|
|
|
2,854
|
|
|
1,157,010
|
|
|
1,159,864
|
|
Construction real estate:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial
|
—
|
|
|
541
|
|
|
541
|
|
|
135,200
|
|
|
135,741
|
|
Mortgage
|
559
|
|
|
—
|
|
|
559
|
|
|
48,246
|
|
|
48,805
|
|
Installment
|
223
|
|
|
64
|
|
|
287
|
|
|
4,633
|
|
|
4,920
|
|
Residential real estate:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial
|
330
|
|
|
3,631
|
|
|
3,961
|
|
|
403,666
|
|
|
407,627
|
|
Mortgage
|
10,854
|
|
|
9,769
|
|
|
20,623
|
|
|
1,150,331
|
|
|
1,170,954
|
|
HELOC
|
970
|
|
|
1,020
|
|
|
1,990
|
|
|
211,304
|
|
|
213,294
|
|
Installment
|
350
|
|
|
319
|
|
|
669
|
|
|
19,272
|
|
|
19,941
|
|
Consumer
|
12,579
|
|
|
2,094
|
|
|
14,673
|
|
|
1,109,562
|
|
|
1,124,235
|
|
Leases
|
—
|
|
|
—
|
|
|
—
|
|
|
3,272
|
|
|
3,272
|
|
Total loans
|
$
|
26,591
|
|
|
$
|
24,050
|
|
|
$
|
50,641
|
|
|
$
|
5,236,189
|
|
|
$
|
5,286,830
|
|
(1) Includes
$2.1 million
of loans past due 90 days or more and accruing. The remaining are past due nonaccrual loans.
(2) Includes
$65.9 million
of nonaccrual loans which are 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, 2017
and
December 31, 2016
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 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, 2017
and
December 31, 2016
for all commercial loans:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2017
|
(In thousands)
|
5 Rated
|
|
6 Rated
|
|
Nonaccrual and Accruing Troubled Debt Restructurings
|
|
Pass-Rated
|
|
Recorded
Investment
|
Commercial, financial and agricultural *
|
$
|
1,394
|
|
|
$
|
179
|
|
|
$
|
22,592
|
|
|
$
|
975,110
|
|
|
$
|
999,275
|
|
Commercial real estate *
|
5,873
|
|
|
268
|
|
|
22,732
|
|
|
1,162,392
|
|
|
1,191,265
|
|
Construction real estate:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial
|
90
|
|
|
116
|
|
|
2,041
|
|
|
110,106
|
|
|
112,353
|
|
Residential real estate:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial
|
1,061
|
|
|
216
|
|
|
22,803
|
|
|
373,507
|
|
|
397,587
|
|
Leases
|
—
|
|
|
—
|
|
|
—
|
|
|
3,706
|
|
|
3,706
|
|
Total commercial loans
|
$
|
8,418
|
|
|
$
|
779
|
|
|
$
|
70,168
|
|
|
$
|
2,624,821
|
|
|
$
|
2,704,186
|
|
* 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, 2016
|
(In thousands)
|
5 Rated
|
|
6 Rated
|
|
Nonaccrual and Accruing Troubled Debt Restructurings
|
|
Pass-Rated
|
|
Recorded
Investment
|
Commercial, financial and agricultural *
|
$
|
5,826
|
|
|
$
|
—
|
|
|
$
|
20,657
|
|
|
$
|
971,694
|
|
|
$
|
998,177
|
|
Commercial real estate *
|
7,548
|
|
|
190
|
|
|
24,474
|
|
|
1,127,652
|
|
|
1,159,864
|
|
Construction real estate:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial
|
287
|
|
|
118
|
|
|
2,226
|
|
|
133,110
|
|
|
135,741
|
|
Residential real estate:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial
|
1,055
|
|
|
124
|
|
|
23,102
|
|
|
383,346
|
|
|
407,627
|
|
Leases
|
—
|
|
|
—
|
|
|
—
|
|
|
3,272
|
|
|
3,272
|
|
Total Commercial Loans
|
$
|
14,716
|
|
|
$
|
432
|
|
|
$
|
70,459
|
|
|
$
|
2,619,074
|
|
|
$
|
2,704,681
|
|
* 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, 2017
and
March 31, 2016
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 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. There were
no
TDR classifications removed during the three-month period ended
March 31, 2017
. The TDR classification was removed on
$806,000
of loans during the
three
-month period ended
March 31, 2016
, respectively.
At
March 31, 2017
and
December 31, 2016
, there were
$47.8 million
and
$46.9 million
, respectively, of TDRs included in the nonaccrual loan totals. At
March 31, 2017
and
December 31, 2016
,
$40.2 million
and
$38.0 million
, respectively, of these nonaccrual TDRs were performing in accordance with the terms of the restructured note. As of
March 31, 2017
and
December 31, 2016
, loans with a recorded investment of
$21.2 million
and
$18.2 million
, respectively, were included in accruing TDR loan totals. Management will continue to review the restructured loans and may determine it appropriate to move certain nonaccrual TDRs to accrual status in the future.
At
March 31, 2017
and
December 31, 2016
, Park had commitments to lend
$1.1 million
and
$0.7 million
, respectively, of additional funds to borrowers whose outstanding loan terms had been modified in a TDR.
There were
$0.5 million
and
$0.2 million
of specific reserves related to TDRs at
March 31, 2017
and
December 31, 2016
, respectively. Modifications made in
2016
and
2017
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
$280,000
and
$25,000
were recorded during the
three
-month periods ended
March 31, 2017
and
March 31, 2016
, 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, 2017
and
March 31, 2016
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
March 31, 2017
of
$113,000
. There were
no
modified substandard commercial loans which did not meet the definition of a TDR at
March 31, 2016
. 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 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
$1.4 million
and
$2.0 million
, as of
March 31, 2017
and
March 31, 2016
, 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, 2017
and
March 31, 2016
, as well as the recorded investment of these contracts at
March 31, 2017
and
March 31, 2016
. 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
March 31, 2017
|
(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
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
March 31, 2016
|
(In thousands)
|
Number of
Contracts
|
|
Accruing
|
|
Nonaccrual
|
|
Total
Recorded
Investment
|
Commercial, financial and agricultural
|
7
|
|
|
$
|
131
|
|
|
$
|
716
|
|
|
$
|
847
|
|
Commercial real estate
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Construction real estate:
|
|
|
|
|
|
|
|
Commercial
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Mortgage
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Installment
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Residential real estate:
|
|
|
|
|
|
|
|
Commercial
|
2
|
|
|
—
|
|
|
617
|
|
|
617
|
|
Mortgage
|
5
|
|
|
99
|
|
|
217
|
|
|
316
|
|
HELOC
|
6
|
|
|
64
|
|
|
122
|
|
|
186
|
|
Installment
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Consumer
|
64
|
|
|
52
|
|
|
511
|
|
|
563
|
|
Total loans
|
84
|
|
|
$
|
346
|
|
|
$
|
2,183
|
|
|
$
|
2,529
|
|
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
. Of those loans which were modified and determined to be a TDR during the
three
-month period ended
March 31, 2016
,
$922,000
were on nonaccrual status as of
December 31, 2015
.
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 periods ended
March 31, 2017
and
March 31, 2016
, 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
March 31, 2017
|
|
|
Three Months Ended
March 31, 2016
|
|
(In thousands)
|
Number of
Contracts
|
|
Recorded
Investment
|
|
|
Number of
Contracts
|
|
Recorded
Investment
|
|
Commercial, financial and agricultural
|
6
|
|
|
$
|
198
|
|
|
|
1
|
|
|
$
|
1
|
|
|
Commercial real estate
|
5
|
|
|
838
|
|
|
|
—
|
|
|
—
|
|
|
Construction real estate:
|
|
|
|
|
|
|
|
|
|
|
|
Commercial
|
—
|
|
|
—
|
|
|
|
—
|
|
|
—
|
|
|
Mortgage
|
—
|
|
|
—
|
|
|
|
—
|
|
|
—
|
|
|
Installment
|
—
|
|
|
—
|
|
|
|
—
|
|
|
—
|
|
|
Residential real estate:
|
|
|
|
|
|
|
|
|
|
|
|
Commercial
|
3
|
|
|
49
|
|
|
|
1
|
|
|
90
|
|
|
Mortgage
|
8
|
|
|
631
|
|
|
|
8
|
|
|
516
|
|
|
HELOC
|
—
|
|
|
—
|
|
|
|
—
|
|
|
—
|
|
|
Installment
|
1
|
|
|
3
|
|
|
|
1
|
|
|
25
|
|
|
Consumer
|
29
|
|
|
268
|
|
|
|
44
|
|
|
463
|
|
|
Leases
|
—
|
|
|
—
|
|
|
|
—
|
|
|
—
|
|
|
Total loans
|
52
|
|
|
$
|
1,987
|
|
|
|
55
|
|
|
$
|
1,095
|
|
|
Of the
$2.0 million
in modified TDRs which defaulted during the
three
months ended
March 31, 2017
,
$60,000
were accruing loans and
$1.9 million
were nonaccrual loans. Of the
$1.1 million
in modified TDRs which defaulted during the
three
months ended
March 31, 2016
,
$37,000
were accruing loans and
$1.1 million
were nonaccrual loans.
Note 4 –
Allowance for Loan Losses
The allowance for loan losses ("ALLL") is that amount management believes is adequate to absorb probable incurred credit losses in the loan portfolio based on management’s evaluation of various factors including overall growth in the loan portfolio, an analysis of individual loans, prior and current loss experience, and current economic conditions. A provision for loan losses is charged to operations based on management’s periodic evaluation of these and other pertinent factors as discussed within Note 1 of the Notes to Consolidated Financial Statements included in Park’s 2016 Annual Report.
Loss factors are reviewed quarterly and updated at least annually to reflect recent loan loss history and incorporate current risk and trends which may not be recognized in historical data. Several enhancements were made in the third quarter of 2016 as a result of management's quarterly review.
|
|
•
|
Management updated the historical loss calculation during the third quarter of 2016, incorporating annualized net charge-offs plus changes in specific reserves through September 30, 2016. Additionally, management removed net charge-offs plus changes in specific reserves for the year ended December 31, 2009. Management's belief has been that historical losses should encompass the complete economic cycle. However, given the extended length of the recovery, management determined that 2009 data was no longer reflective of the current portfolio. Management has taken the look back period into consideration in the quarterly evaluation of environmental loss factors.
|
|
|
•
|
As part of this mid-year historical loss update, management determined that it was no longer appropriate to more heavily weight those years with higher losses in the historical loss calculation and applied equal percentages to each of the years in this calculation. The trends that existed when management adopted this weighting no longer appear to exist, resulting in the adjustment back to equal weightings of all years evaluated.
|
|
|
•
|
As part of the normal quarterly process, management reviewed and updated the environmental loss factors applied to the commercial portfolio in order to incorporate changes in the macroeconomic environment. Additionally, management updated the calculation of the loss emergence period utilizing a more granular process.
|
The impact of the changes described above resulted in a decrease of
$3.8 million
in the ALLL at September 30, 2016, compared to what the ALLL would have been had the calculation, and related assumptions, used at June 30, 2016 remained constant.
The historical loss factors were updated again in the fourth quarter of 2016 to incorporate losses through December 31, 2016. As part of the normal quarterly process, during the first quarter of 2017, management reviewed and updated the environmental loss factors applied to the commercial portfolio in order to incorporate changes in the macroeconomic environment.
The activity in the allowance for loan losses for the
three
months ended
March 31, 2017
and
March 31, 2016
is summarized below.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
March 31, 2017
|
(In thousands)
|
Commercial,
financial and
agricultural
|
|
Commercial
real estate
|
|
Construction
real estate
|
|
Residential
real estate
|
|
Consumer
|
|
Leases
|
|
Total
|
Allowance for loan losses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Beginning balance
|
$
|
13,434
|
|
|
$
|
10,432
|
|
|
$
|
5,247
|
|
|
$
|
10,958
|
|
|
$
|
10,553
|
|
|
$
|
—
|
|
|
$
|
50,624
|
|
Charge-offs
|
339
|
|
|
112
|
|
|
27
|
|
|
480
|
|
|
2,750
|
|
|
—
|
|
|
3,708
|
|
Recoveries
|
369
|
|
|
114
|
|
|
58
|
|
|
291
|
|
|
1,298
|
|
|
—
|
|
|
2,130
|
|
Net (recoveries)/charge-offs
|
(30
|
)
|
|
(2
|
)
|
|
(31
|
)
|
|
189
|
|
|
1,452
|
|
|
—
|
|
|
1,578
|
|
(Recovery)/provision
|
(27
|
)
|
|
(153
|
)
|
|
(910
|
)
|
|
(24
|
)
|
|
1,990
|
|
|
—
|
|
|
876
|
|
Ending balance
|
$
|
13,437
|
|
|
$
|
10,281
|
|
|
$
|
4,368
|
|
|
$
|
10,745
|
|
|
$
|
11,091
|
|
|
$
|
—
|
|
|
$
|
49,922
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
March 31, 2016
|
(In thousands)
|
Commercial,
financial and
agricultural
|
|
Commercial
real estate
|
|
Construction
real estate
|
|
Residential
real estate
|
|
Consumer
|
|
Leases
|
|
Total
|
Allowance for loan losses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Beginning balance
|
$
|
13,694
|
|
|
$
|
9,197
|
|
|
$
|
8,564
|
|
|
$
|
13,514
|
|
|
$
|
11,524
|
|
|
$
|
1
|
|
|
$
|
56,494
|
|
Charge-offs
|
274
|
|
|
1
|
|
|
—
|
|
|
747
|
|
|
2,379
|
|
|
—
|
|
|
3,401
|
|
Recoveries
|
427
|
|
|
218
|
|
|
939
|
|
|
471
|
|
|
890
|
|
|
—
|
|
|
2,945
|
|
Net (recoveries)/charge-offs
|
(153
|
)
|
|
(217
|
)
|
|
(939
|
)
|
|
276
|
|
|
1,489
|
|
|
—
|
|
|
456
|
|
Provision/(recovery)
|
393
|
|
|
38
|
|
|
(816
|
)
|
|
150
|
|
|
1,145
|
|
|
—
|
|
|
910
|
|
Ending balance
|
$
|
14,240
|
|
|
$
|
9,452
|
|
|
$
|
8,687
|
|
|
$
|
13,388
|
|
|
$
|
11,180
|
|
|
$
|
1
|
|
|
$
|
56,948
|
|
Loans collectively evaluated for impairment in the following tables include all performing loans at
March 31, 2017
and
December 31, 2016
, as well as nonperforming loans internally classified as consumer loans. Nonperforming consumer loans are not typically individually evaluated for impairment, but receive a portion of the statistical allocation of the allowance for loan losses. Loans individually evaluated for impairment include all impaired loans internally classified as commercial loans at
March 31, 2017
and
December 31, 2016
, which are evaluated for impairment in accordance with U.S. GAAP (see Note 1 of the Notes to Consolidated Financial Statements included in Park’s 2016 Annual Report).
The composition of the allowance for loan losses at
March 31, 2017
and
December 31, 2016
was as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2017
|
(In thousands)
|
Commercial,
financial and
agricultural
|
|
Commercial
real estate
|
|
Construction
real estate
|
|
Residential
real estate
|
|
Consumer
|
|
Leases
|
|
Total
|
Allowance for loan losses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending allowance balance attributed to loans:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Individually evaluated for impairment
|
$
|
596
|
|
|
$
|
179
|
|
|
$
|
32
|
|
|
$
|
275
|
|
|
$
|
9
|
|
|
$
|
—
|
|
|
$
|
1,091
|
|
Collectively evaluated for impairment
|
12,841
|
|
|
10,102
|
|
|
4,336
|
|
|
10,470
|
|
|
11,082
|
|
|
—
|
|
|
48,831
|
|
Total ending allowance balance
|
$
|
13,437
|
|
|
$
|
10,281
|
|
|
$
|
4,368
|
|
|
$
|
10,745
|
|
|
$
|
11,091
|
|
|
$
|
—
|
|
|
$
|
49,922
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loan balance:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans individually evaluated for impairment
|
$
|
22,541
|
|
|
$
|
22,708
|
|
|
$
|
2,039
|
|
|
$
|
22,802
|
|
|
$
|
9
|
|
|
$
|
—
|
|
|
$
|
70,099
|
|
Loans collectively evaluated for impairment
|
972,836
|
|
|
1,164,687
|
|
|
163,195
|
|
|
1,760,449
|
|
|
1,178,727
|
|
|
3,648
|
|
|
5,243,542
|
|
Total ending loan balance
|
$
|
995,377
|
|
|
$
|
1,187,395
|
|
|
$
|
165,234
|
|
|
$
|
1,783,251
|
|
|
$
|
1,178,736
|
|
|
$
|
3,648
|
|
|
$
|
5,313,641
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allowance for loan losses as a percentage of loan balance:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans individually evaluated for impairment
|
2.64
|
%
|
|
0.79
|
%
|
|
1.57
|
%
|
|
1.21
|
%
|
|
—
|
%
|
|
—
|
%
|
|
1.56
|
%
|
Loans collectively evaluated for impairment
|
1.32
|
%
|
|
0.87
|
%
|
|
2.66
|
%
|
|
0.59
|
%
|
|
0.94
|
%
|
|
—
|
%
|
|
0.93
|
%
|
Total
|
1.35
|
%
|
|
0.87
|
%
|
|
2.64
|
%
|
|
0.60
|
%
|
|
0.94
|
%
|
|
—
|
%
|
|
0.94
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Recorded investment:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans individually evaluated for impairment
|
$
|
22,542
|
|
|
$
|
22,732
|
|
|
$
|
2,041
|
|
|
$
|
22,803
|
|
|
$
|
9
|
|
|
$
|
—
|
|
|
$
|
70,127
|
|
Loans collectively evaluated for impairment
|
976,733
|
|
|
1,168,533
|
|
|
163,655
|
|
|
1,763,491
|
|
|
1,181,845
|
|
|
3,706
|
|
|
5,257,963
|
|
Total ending recorded investment
|
$
|
999,275
|
|
|
$
|
1,191,265
|
|
|
$
|
165,696
|
|
|
$
|
1,786,294
|
|
|
$
|
1,181,854
|
|
|
$
|
3,706
|
|
|
$
|
5,328,090
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2016
|
(In thousands)
|
|
Commercial,
financial and
agricultural
|
|
Commercial
real estate
|
|
Construction
real estate
|
|
Residential
real estate
|
|
Consumer
|
|
Leases
|
|
Total
|
Allowance for loan losses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending allowance balance attributed to loans:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Individually evaluated for impairment
|
|
$
|
152
|
|
|
$
|
309
|
|
|
$
|
—
|
|
|
$
|
87
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
548
|
|
Collectively evaluated for impairment
|
|
13,282
|
|
|
10,123
|
|
|
5,247
|
|
|
10,871
|
|
|
10,553
|
|
|
—
|
|
|
50,076
|
|
Total ending allowance balance
|
|
$
|
13,434
|
|
|
$
|
10,432
|
|
|
$
|
5,247
|
|
|
$
|
10,958
|
|
|
$
|
10,553
|
|
|
$
|
—
|
|
|
$
|
50,624
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loan balance:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans individually evaluated for impairment
|
|
$
|
20,622
|
|
|
$
|
24,465
|
|
|
$
|
2,226
|
|
|
$
|
23,102
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
70,415
|
|
Loans collectively evaluated for impairment
|
|
973,997
|
|
|
1,131,238
|
|
|
186,719
|
|
|
1,785,395
|
|
|
1,120,850
|
|
|
3,243
|
|
|
5,201,442
|
|
Total ending loan balance
|
|
$
|
994,619
|
|
|
$
|
1,155,703
|
|
|
$
|
188,945
|
|
|
$
|
1,808,497
|
|
|
$
|
1,120,850
|
|
|
$
|
3,243
|
|
|
$
|
5,271,857
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allowance for loan losses as a percentage of loan balance:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans individually evaluated for impairment
|
|
0.74
|
%
|
|
1.26
|
%
|
|
—
|
%
|
|
0.38
|
%
|
|
—
|
%
|
|
—
|
%
|
|
0.78
|
%
|
Loans collectively evaluated for impairment
|
|
1.36
|
%
|
|
0.89
|
%
|
|
2.81
|
%
|
|
0.61
|
%
|
|
0.94
|
%
|
|
—
|
%
|
|
0.96
|
%
|
Total
|
|
1.35
|
%
|
|
0.90
|
%
|
|
2.78
|
%
|
|
0.61
|
%
|
|
0.94
|
%
|
|
—
|
%
|
|
0.96
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Recorded investment:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans individually evaluated for impairment
|
|
$
|
20,624
|
|
|
$
|
24,474
|
|
|
$
|
2,226
|
|
|
$
|
23,102
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
70,426
|
|
Loans collectively evaluated for impairment
|
|
977,553
|
|
|
1,135,390
|
|
|
187,240
|
|
|
1,788,714
|
|
|
1,124,235
|
|
|
3,272
|
|
|
5,216,404
|
|
Total ending recorded investment
|
|
$
|
998,177
|
|
|
$
|
1,159,864
|
|
|
$
|
189,466
|
|
|
$
|
1,811,816
|
|
|
$
|
1,124,235
|
|
|
$
|
3,272
|
|
|
$
|
5,286,830
|
|
Note 5 –
Other Real Estate Owned ("OREO")
Park typically transfers a loan to OREO at the time that Park takes deed/title to the asset. The carrying amounts of foreclosed properties held at March 31, 2017 and December 31, 2016 are listed below, as well as the recorded investment of loans secured by residential real estate properties for which formal foreclosure proceedings were in process at those dates.
|
|
|
|
|
|
|
|
|
|
(in thousands)
|
|
March 31, 2017
|
|
December 31, 2016
|
OREO:
|
|
|
|
|
Commercial real estate
|
|
$
|
7,642
|
|
|
$
|
7,642
|
|
Construction real estate
|
|
4,633
|
|
|
4,624
|
|
Residential real estate
|
|
1,418
|
|
|
1,660
|
|
Total OREO
|
|
$
|
13,693
|
|
|
$
|
13,926
|
|
|
|
|
|
|
Loans in process of foreclosure:
|
|
|
|
|
Residential real estate
|
|
$
|
3,456
|
|
|
$
|
3,250
|
|
Note 6 –
Earnings Per Common Share
The following table sets forth the computation of basic and diluted earnings per common share for the three months ended
March 31, 2017
and
2016
.
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
March 31,
|
(In thousands, except share and per common share data)
|
|
2017
|
|
2016
|
Numerator:
|
|
|
|
|
|
|
Net income
|
|
$
|
20,267
|
|
|
$
|
18,686
|
|
Denominator:
|
|
|
|
|
|
|
Weighted-average common shares outstanding
|
|
15,312,059
|
|
|
15,330,813
|
|
Effect of dilutive performance-based restricted stock units
|
|
120,710
|
|
|
75,695
|
|
Weighted-average common shares outstanding adjusted for the effect of dilutive performance-based restricted stock units
|
|
15,432,769
|
|
|
15,406,508
|
|
Earnings per common share:
|
|
|
|
|
|
|
Basic earnings per common share
|
|
$
|
1.32
|
|
|
$
|
1.22
|
|
Diluted earnings per common share
|
|
$
|
1.31
|
|
|
$
|
1.21
|
|
Park awarded
45,788
and
41,550
performance-based restricted stock units ("PBRSUs") to certain employees during the three months ended March 31, 2017 and 2016, respectively. As of March 31, 2017,
119,587
PBRSUs were outstanding. The PBRSUs vest based on service and performance conditions. The dilutive effect of the outstanding PBRSUs was the addition of
120,710
and
75,695
common shares for the three months ended March 31, 2017 and 2016, respectively.
Park repurchased
50,000
common shares during the three months ended March 31, 2017 to fund the PBRSUs and common shares awarded to directors of Park and to directors of Park's subsidiary PNB (and its divisions). Park did
no
t repurchase any common shares during the three months ended March 31, 2016.
Note 7 –
Segment Information
The Corporation is a financial holding company headquartered in Newark, Ohio. The operating segments for the Corporation are its chartered national bank subsidiary, The Park National Bank (headquartered in Newark, Ohio) (“PNB”), SE Property Holdings, LLC (“SEPH”), and Guardian Financial Services Company (“GFSC”).
Management is required to disclose information about the different types of business activities in which a company engages and also information on the different economic environments in which a company operates, so that the users of the financial statements can better understand the company’s performance, better understand the potential for future cash flows, and make more informed judgments about the company as a whole. Park has
three
operating segments, as: (i) discrete financial information is available for each operating segment and (ii) the segments are aligned with internal reporting to Park’s Chief Executive Officer and President, who is the chief operating decision maker.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating Results for the three months ended March 31, 2017
|
(In thousands)
|
|
PNB
|
|
GFSC
|
|
SEPH
|
|
All Other
|
|
Total
|
Net interest income (expense)
|
|
$
|
57,480
|
|
|
$
|
1,478
|
|
|
$
|
201
|
|
|
$
|
(207
|
)
|
|
$
|
58,952
|
|
Provision for (recovery of) loan losses
|
|
720
|
|
|
437
|
|
|
(281
|
)
|
|
—
|
|
|
876
|
|
Other income (loss)
|
|
17,711
|
|
|
—
|
|
|
—
|
|
|
(204
|
)
|
|
17,507
|
|
Other expense
|
|
43,803
|
|
|
736
|
|
|
776
|
|
|
2,147
|
|
|
47,462
|
|
Income (loss) before income taxes
|
|
$
|
30,668
|
|
|
$
|
305
|
|
|
$
|
(294
|
)
|
|
$
|
(2,558
|
)
|
|
$
|
28,121
|
|
Federal income taxes (benefit)
|
|
9,182
|
|
|
107
|
|
|
(103
|
)
|
|
(1,332
|
)
|
|
7,854
|
|
Net income (loss)
|
|
$
|
21,486
|
|
|
$
|
198
|
|
|
$
|
(191
|
)
|
|
$
|
(1,226
|
)
|
|
$
|
20,267
|
|
|
|
|
|
|
|
|
|
|
|
|
Assets (as of March 31, 2017)
|
|
$
|
7,667,288
|
|
|
$
|
34,574
|
|
|
$
|
24,727
|
|
|
$
|
18,101
|
|
|
$
|
7,744,690
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating Results for the three months ended March 31, 2016
|
(In thousands)
|
|
PNB
|
|
GFSC
|
|
SEPH
|
|
All Other
|
|
Total
|
Net interest income (expense)
|
|
$
|
57,155
|
|
|
$
|
1,504
|
|
|
$
|
1,161
|
|
|
$
|
(1
|
)
|
|
$
|
59,819
|
|
Provision for (recovery of) loan losses
|
|
1,533
|
|
|
527
|
|
|
(1,150
|
)
|
|
—
|
|
|
910
|
|
Other income
|
|
17,223
|
|
|
—
|
|
|
34
|
|
|
132
|
|
|
17,389
|
|
Other expense
|
|
41,360
|
|
|
3,798
|
|
|
1,404
|
|
|
3,337
|
|
|
49,899
|
|
Income (loss) before income taxes
|
|
$
|
31,485
|
|
|
$
|
(2,821
|
)
|
|
$
|
941
|
|
|
$
|
(3,206
|
)
|
|
$
|
26,399
|
|
Federal income taxes (benefit)
|
|
9,741
|
|
|
(985
|
)
|
|
329
|
|
|
(1,372
|
)
|
|
7,713
|
|
Net income (loss)
|
|
$
|
21,744
|
|
|
$
|
(1,836
|
)
|
|
$
|
612
|
|
|
$
|
(1,834
|
)
|
|
$
|
18,686
|
|
|
|
|
|
|
|
|
|
|
|
|
Assets (as of March 31, 2016)
|
|
$
|
7,347,378
|
|
|
$
|
34,637
|
|
|
$
|
34,592
|
|
|
$
|
11,578
|
|
|
$
|
7,428,185
|
|
The operating results of the Parent Company in the “All Other” column are used to reconcile the segment totals to the consolidated condensed statements of income for the three-month periods ended
March 31, 2017
and
2016
. The reconciling amounts for consolidated total assets for the periods ended
March 31, 2017
and
2016
consisted of the elimination of intersegment borrowings and the assets of the Parent Company which were not eliminated.
Note 8 –
Loans Held For Sale
Mortgage loans held for sale are carried at their fair value. At
March 31, 2017
and
December 31, 2016
, respectively, Park had approximately
$6.7 million
and
$10.4 million
in mortgage loans held for sale. These amounts are included in loans on the consolidated condensed balance sheets and in the residential real estate loan segments in Note 3 and Note 4. The contractual balance was
$6.6 million
and
$10.3 million
at
March 31, 2017
and
December 31, 2016
, respectively. The gain expected upon sale was
$86,000
and
$131,000
at
March 31, 2017
and
December 31, 2016
, respectively. None of these loans were 90 days or more past due or on nonaccrual status as of
March 31, 2017
or
December 31, 2016
.
Note 9 –
Investment Securities
The amortized cost and fair value of investment securities are shown in the following tables. Management performs a quarterly evaluation of investment securities for any other-than-temporary impairment. For the three month periods ended March 31, 2017 and 2016, there were
no
investment securities deemed to be other-than-temporarily impaired.
Investment securities at
March 31, 2017
, were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Securities Available-for-Sale (In thousands)
|
|
Amortized
Cost
|
|
Gross
Unrecognized
Holding
Gains
|
|
Gross
Unrecognized
Holding
Losses
|
|
Estimated
Fair Value
|
Obligations of U.S. Treasury and other U.S. Government sponsored entities
|
|
$
|
270,000
|
|
|
$
|
—
|
|
|
$
|
1,579
|
|
|
$
|
268,421
|
|
U.S. Government sponsored entities' asset-backed securities
|
|
951,328
|
|
|
6,044
|
|
|
9,793
|
|
|
947,579
|
|
Other equity securities
|
|
1,119
|
|
|
2,278
|
|
|
—
|
|
|
3,397
|
|
Total
|
|
$
|
1,222,447
|
|
|
$
|
8,322
|
|
|
$
|
11,372
|
|
|
$
|
1,219,397
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Securities Held-to-Maturity (In thousands)
|
|
Amortized
Cost
|
|
Gross
Unrecognized
Holding
Gains
|
|
Gross
Unrecognized
Holding
Losses
|
|
Estimated
Fair Value
|
U.S. Government sponsored entities' asset-backed securities
|
|
$
|
65,221
|
|
|
$
|
1,019
|
|
|
$
|
77
|
|
|
$
|
66,163
|
|
Obligations of states and political subdivisions
|
|
219,239
|
|
|
1,698
|
|
|
$
|
3,945
|
|
|
216,992
|
|
Total
|
|
$
|
284,460
|
|
|
$
|
2,717
|
|
|
$
|
4,022
|
|
|
$
|
283,155
|
|
Investment securities with unrecognized losses at
March 31, 2017
, were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrecognized loss position for less than 12 months
|
|
Unrecognized loss position for 12 months or longer
|
|
Total
|
(In thousands)
|
|
Fair value
|
|
Unrecognized
losses
|
|
Fair value
|
|
Unrecognized
losses
|
|
Fair
value
|
|
Unrecognized
losses
|
Securities Available-for-Sale
|
|
|
|
|
|
|
|
|
|
|
|
|
Obligations of U.S. Treasury and other U.S. Government sponsored entities
|
|
$
|
248,525
|
|
|
$
|
1,475
|
|
|
$
|
19,896
|
|
|
$
|
104
|
|
|
$
|
268,421
|
|
|
$
|
1,579
|
|
U.S. Government sponsored entities' asset-backed securities
|
|
576,446
|
|
|
9,488
|
|
|
$
|
26,282
|
|
|
305
|
|
|
$
|
602,728
|
|
|
9,793
|
|
Total
|
|
$
|
824,971
|
|
|
$
|
10,963
|
|
|
$
|
46,178
|
|
|
$
|
409
|
|
|
$
|
871,149
|
|
|
$
|
11,372
|
|
Securities Held-to-Maturity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Government sponsored entities' asset-backed securities
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
7,509
|
|
|
$
|
77
|
|
|
$
|
7,509
|
|
|
$
|
77
|
|
Obligations of states and political subdivisions
|
|
118,439
|
|
|
$
|
3,945
|
|
|
—
|
|
|
—
|
|
|
$
|
118,439
|
|
|
3,945
|
|
Total
|
|
$
|
118,439
|
|
|
$
|
3,945
|
|
|
$
|
7,509
|
|
|
$
|
77
|
|
|
$
|
125,948
|
|
|
$
|
4,022
|
|
Investment securities at
December 31, 2016
, were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Securities Available-for-Sale (In thousands)
|
|
Amortized
Cost
|
|
Gross
Unrecognized
Holding
Gains
|
|
Gross
Unrecognized
Holding
Losses
|
|
Estimated
Fair Value
|
Obligations of U.S. Treasury and other U.S. Government sponsored entities
|
|
$
|
270,000
|
|
|
$
|
—
|
|
|
$
|
2,467
|
|
|
$
|
267,533
|
|
U.S. Government sponsored entities' asset-backed securities
|
|
991,642
|
|
|
5,372
|
|
|
9,842
|
|
|
987,172
|
|
Other equity securities
|
|
1,119
|
|
|
2,315
|
|
|
—
|
|
|
3,434
|
|
Total
|
|
$
|
1,262,761
|
|
|
$
|
7,687
|
|
|
$
|
12,309
|
|
|
$
|
1,258,139
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Securities Held-to-Maturity (In thousands)
|
|
Amortized
Cost
|
|
Gross
Unrecognized
Holding
Gains
|
|
Gross
Unrecognized
Holding
Losses
|
|
Estimated
Fair Value
|
Obligations of states and political subdivision
|
|
$
|
188,622
|
|
|
$
|
977
|
|
|
$
|
5,148
|
|
|
$
|
184,451
|
|
U.S. Government sponsored entities' asset-backed securities
|
|
71,211
|
|
|
1,097
|
|
|
87
|
|
|
72,221
|
|
Total
|
|
$
|
259,833
|
|
|
$
|
2,074
|
|
|
$
|
5,235
|
|
|
$
|
256,672
|
|
Investment securities with unrecognized losses at
December 31, 2016
, were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrecognized loss position for less than 12 months
|
|
Unrecognized loss position for 12 months or longer
|
|
Total
|
(In thousands)
|
|
Fair value
|
|
Unrecognized
losses
|
|
Fair value
|
|
Unrecognized
losses
|
|
Fair value
|
|
Unrecognized
losses
|
Securities Available-for-Sale
|
|
|
|
|
|
|
|
|
|
|
|
|
Obligations of U.S. Treasury and other U.S. Government sponsored entities
|
|
$
|
247,695
|
|
|
$
|
2,305
|
|
|
$
|
19,838
|
|
|
$
|
162
|
|
|
$
|
267,533
|
|
|
$
|
2,467
|
|
U.S. Government sponsored entities' asset-backed securities
|
|
612,321
|
|
|
9,473
|
|
|
27,325
|
|
|
369
|
|
|
639,646
|
|
|
9,842
|
|
Total
|
|
$
|
860,016
|
|
|
$
|
11,778
|
|
|
$
|
47,163
|
|
|
$
|
531
|
|
|
$
|
907,179
|
|
|
$
|
12,309
|
|
Securities Held-to-Maturity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Obligations of states and political subdivision
|
|
$
|
134,909
|
|
|
$
|
5,148
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
134,909
|
|
|
$
|
5,148
|
|
U.S. Government sponsored entities' asset-backed securities
|
|
—
|
|
|
—
|
|
|
7,564
|
|
|
87
|
|
|
7,564
|
|
|
87
|
|
Total
|
|
$
|
134,909
|
|
|
$
|
5,148
|
|
|
$
|
7,564
|
|
|
$
|
87
|
|
|
$
|
142,473
|
|
|
$
|
5,235
|
|
Management does not believe any of the unrecognized losses at
March 31, 2017
or
December 31, 2016
represented other-than-temporary impairment. Should the impairment of any of these securities become other-than-temporary, the cost basis of the investment will be reduced and the resulting loss recognized within net income in the period the other-than-temporary impairment is identified.
Park’s U.S. Government sponsored entities' asset-backed securities consist of
15
-year residential mortgage-backed securities and collateralized mortgage obligations.
The amortized cost and estimated fair value of investments in debt securities at
March 31, 2017
, are shown in the following table by contractual maturity, except for asset-backed securities, which are shown as a single total, due to the unpredictability of the timing of principal repayments.
|
|
|
|
|
|
|
|
|
|
|
|
|
Securities Available-for-Sale (In thousands)
|
|
Amortized
cost
|
|
Fair value
|
|
Tax equivalent yield
|
Obligations of U.S. Treasury and other U.S. Government sponsored entities' obligations:
|
|
|
|
|
|
|
|
|
Due less than one year
|
|
$
|
50,000
|
|
|
$
|
49,927
|
|
|
0.96
|
%
|
Due one through five years
|
|
220,000
|
|
|
218,494
|
|
|
1.24
|
%
|
Total
|
|
$
|
270,000
|
|
|
$
|
268,421
|
|
|
1.18
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Government sponsored entities' asset-backed securities:
|
|
$
|
951,328
|
|
|
$
|
947,579
|
|
|
2.10
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Securities Held-to-Maturity (In thousands)
|
|
Amortized
cost
|
|
Fair value
|
|
Tax equivalent yield
(1)
|
Obligations of state and political subdivisions:
|
|
|
|
|
|
|
Due over ten years
|
|
$
|
219,239
|
|
|
$
|
216,992
|
|
|
4.52
|
%
|
Total
(1)
|
|
$
|
219,239
|
|
|
$
|
216,992
|
|
|
4.52
|
%
|
|
|
|
|
|
|
|
U.S. Government sponsored entities' asset-backed securities
|
|
$
|
65,221
|
|
|
$
|
66,163
|
|
|
3.28
|
%
|
(1) The tax equivalent yield for obligations of state and political subdivisions includes the effects of a taxable equivalent adjustment using a
35%
rate. The aggregate taxable equivalent adjustment was
$786,000
for the three months ended March 31, 2017.
All of Park’s securities shown in the table above as obligations of U.S. Treasury and other U.S. Government sponsored entities' notes are callable notes. These callable notes have final maturities of
0.6
years to
3
years. Of the
$268.4 million
reported at
March 31, 2017
,
none
were expected to be called. The remaining average life of the entire investment portfolio is estimated to be
4.4
years.
There were
no
sales of investment securities during the three-month periods ended
March 31, 2017
or 2016.
Investment securities having an amortized cost of
$1,062 million
and
$937 million
at
March 31, 2017
and December 31, 2016, respectively, were pledged to collateralize government and trust department deposits in accordance with federal and state requirements, to secure repurchase agreements sold and as collateral for FHLB advance borrowings.
Note 10 –
Other Investment Securities
Other investment securities consist of stock investments in the Federal Home Loan Bank ("FHLB"), the Federal Reserve Bank ("FRB") and other equities carried at cost. The FHLB and FRB restricted stock investments are carried at their redemption value.
|
|
|
|
|
|
|
|
|
|
|
|
March 31,
2017
|
|
December 31, 2016
|
(In thousands)
|
|
|
FHLB stock
|
|
$
|
50,086
|
|
|
$
|
50,086
|
|
FRB stock
|
|
8,225
|
|
|
8,225
|
|
Other equity investments carried at cost
|
|
3,500
|
|
|
3,500
|
|
Total other investment securities
|
|
$
|
61,811
|
|
|
$
|
61,811
|
|
Note 11 -
Share-Based Compensation
The Park National Corporation 2013 Long-Term Incentive Plan (the "2013 Incentive Plan") was adopted by the Board of Directors of Park on January 28, 2013 and was approved by Park's shareholders at the Annual Meeting of Shareholders on April 22, 2013. The 2013 Incentive Plan makes equity-based awards and cash-based awards available for grant to participants in the form of incentive stock options, nonqualified stock options, stock appreciation rights, restricted common shares, restricted stock unit awards that may be settled in common shares, cash or a combination of the two, unrestricted common shares and cash-based awards. Under the 2013 Incentive Plan,
600,000
common shares are authorized to be delivered in connection with grants under the 2013 Incentive Plan. The common shares to be delivered under the 2013 Incentive Plan may consist of either common shares currently held or common shares subsequently acquired by Park as treasury shares, including common shares purchased in the open market or in private transactions. No awards may be made under the 2013 Incentive Plan after April 22, 2023. At March 31, 2017,
429,889
common shares were available for future grants under the 2013 Incentive Plan.
During the three months ended March 31, 2017 and 2016, the Compensation Committee of the Board of Directors of Park granted awards of performance-based restricted stock units ("PBRSUs") covering an aggregate of
45,788
and
41,550
common shares, respectively, to certain employees of Park and its subsidiaries. The number of PBRSUs earned or settled will depend on the level of achievement with respect to certain performance criteria and are also subject to subsequent service-based vesting.
A summary of changes in the common shares subject to nonvested PBRSUs for the three months ended March 31, 2017 follows:
|
|
|
|
|
Common shares subject to PBRSUs
|
Nonvested at January 1, 2017
|
85,425
|
|
Granted
|
45,788
|
|
Vested
|
9,674
|
|
Forfeited
|
150
|
|
Adjustment for performance conditions of PBRSUs
(1)
|
(1,802
|
)
|
Nonvested at March 31, 2017
|
119,587
|
|
(1) The number of PBRSUs earned depends on the level of achievement with respect to certain performance criteria. Adjustment herein represents the difference between the maximum number of common shares which could be earned and the actual number earned for those PBRSUs as to which the performance period was completed.
On March 31, 2017,
9,674
PBRSUs granted in 2014 vested. A total of
3,293
common shares were withheld to pay employee income taxes. This resulted in a net amount of
6,381
common shares being issued to employees of Park.
Share-based compensation expense of
$826,000
and
$468,000
was recognized for the three-month periods ended March 31, 2017 and 2016, respectively.
The following table details expected additional share-based compensation expense related to PBRSUs currently outstanding:
|
|
|
|
|
|
(In thousands)
|
|
|
Nine months ending December 31, 2017
|
|
$
|
2,247
|
|
2018
|
|
2,641
|
|
2019
|
|
1,964
|
|
2020
|
|
890
|
|
2021
|
|
149
|
|
Total
|
|
$
|
7,891
|
|
Note 12 –
Pension Plan
Park has a noncontributory defined benefit pension plan covering substantially all of its employees. The plan provides benefits based on an employee’s years of service and compensation.
There were
no
pension plan contributions for the three-month periods ended
March 31, 2017
and
2016
.
The following table shows the components of net periodic benefit income:
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
March 31,
|
(In thousands)
|
|
2017
|
|
2016
|
Service cost
|
|
$
|
1,317
|
|
|
$
|
1,264
|
|
Interest cost
|
|
1,271
|
|
|
1,217
|
|
Expected return on plan assets
|
|
(2,863
|
)
|
|
(2,737
|
)
|
Amortization of prior service cost
|
|
—
|
|
|
—
|
|
Recognized net actuarial loss
|
|
144
|
|
|
193
|
|
Net periodic benefit income
|
|
$
|
(131
|
)
|
|
$
|
(63
|
)
|
Note 13 –
Loan Servicing
Park serviced sold mortgage loans of
$1.33 billion
at each of
March 31, 2017
and
December 31, 2016
and
$1.27 billion
at
March 31, 2016
. At
March 31, 2017
,
$3.6 million
of the sold mortgage loans were sold with recourse, compared to
$4.1 million
at December 31, 2016 and
$4.9 million
at
March 31, 2016
. Management closely monitors the delinquency rates on the mortgage loans sold with recourse. At
March 31, 2017
and December 31, 2016, management had established reserves of
$287,000
and
$266,000
, respectively, to account for expected losses on loan repurchases.
When Park sells mortgage loans with servicing rights retained, servicing rights are initially recorded at fair value. Park selected the “amortization method” as permissible within U.S. GAAP, whereby the servicing rights capitalized are amortized in proportion to and over the period of estimated future servicing income of the underlying loan. At the end of each reporting period, the carrying value of mortgage servicing rights (“MSRs”) is assessed for impairment with a comparison to fair value. MSRs are carried at the lower of their amortized cost or fair value.
Activity for MSRs and the related valuation allowance follows:
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
March 31,
|
(In thousands)
|
|
2017
|
|
2016
|
Mortgage servicing rights:
|
|
|
|
|
Carrying amount, net, beginning of period
|
|
$
|
9,266
|
|
|
$
|
9,008
|
|
Additions
|
|
354
|
|
|
316
|
|
Amortization
|
|
(358
|
)
|
|
(375
|
)
|
Changes in valuation allowance
|
|
59
|
|
|
—
|
|
Carrying amount, net, end of period
|
|
$
|
9,321
|
|
|
$
|
8,949
|
|
|
|
|
|
|
Valuation allowance:
|
|
|
|
|
Beginning of period
|
|
$
|
735
|
|
|
$
|
542
|
|
Changes in valuation allowance
|
|
(59
|
)
|
|
—
|
|
End of period
|
|
$
|
676
|
|
|
$
|
542
|
|
Servicing fees included in other service income were
$0.9 million
for the three months ended March 31, 2017 and
$0.8 million
for the same period of 2016.
Note 14 –
Fair Value
The fair value hierarchy requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The three levels of inputs that Park uses to measure fair value are as follows:
|
|
•
|
Level 1: Quoted prices (unadjusted) for identical assets or liabilities in active markets that Park has the ability to access as of the measurement date.
|
|
|
•
|
Level 2: Level 1 inputs for assets or liabilities that are not actively traded. Also consists of an observable market price for a similar asset or liability. This includes the use of “matrix pricing” to value debt securities absent the exclusive use of quoted prices.
|
|
|
•
|
Level 3: Consists of unobservable inputs that are used to measure fair value when observable market inputs are not available. This could include the use of internally developed models, financial forecasting and similar inputs.
|
Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability between market participants at the balance sheet date. When possible, the Company looks to active and observable markets to price identical assets or liabilities. When identical assets and liabilities are not traded in active markets, the Company looks to observable market data for similar assets and liabilities. However, certain assets and liabilities are not traded in observable markets and Park must use other valuation methods to develop a fair value. The fair value of impaired loans is typically based on the fair value of the underlying collateral, which is estimated through third-party appraisals in accordance with Park's valuation requirements under its commercial and real estate loan policies.
Assets and Liabilities Measured at Fair Value on a Recurring Basis
:
The following table presents assets and liabilities measured at fair value on a recurring basis:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair Value Measurements at March 31, 2017 using:
|
(In thousands)
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Balance at March 31, 2017
|
Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Obligations of U.S. Treasury and other U.S. Government sponsored entities
|
|
$
|
—
|
|
|
$
|
268,421
|
|
|
$
|
—
|
|
|
$
|
268,421
|
|
U.S. Government sponsored entities’ asset-backed securities
|
|
—
|
|
|
947,579
|
|
|
—
|
|
|
947,579
|
|
Equity securities
|
|
2,621
|
|
|
—
|
|
|
776
|
|
|
3,397
|
|
Mortgage loans held for sale
|
|
—
|
|
|
6,722
|
|
|
—
|
|
|
6,722
|
|
Mortgage IRLCs
|
|
—
|
|
|
234
|
|
|
—
|
|
|
234
|
|
|
|
|
|
|
|
|
|
|
Liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair value swap
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
226
|
|
|
$
|
226
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair Value Measurements at December 31, 2016 using:
|
(In thousands)
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Balance at December 31, 2016
|
Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Obligations of U.S. Treasury and other U.S. Government sponsored entities
|
|
$
|
—
|
|
|
$
|
267,533
|
|
|
$
|
—
|
|
|
$
|
267,533
|
|
U.S. Government sponsored entities’ asset-backed securities
|
|
—
|
|
|
987,172
|
|
|
—
|
|
|
987,172
|
|
Equity securities
|
|
2,644
|
|
|
—
|
|
|
790
|
|
|
3,434
|
|
Mortgage loans held for sale
|
|
—
|
|
|
10,413
|
|
|
—
|
|
|
10,413
|
|
Mortgage IRLCs
|
|
—
|
|
|
124
|
|
|
—
|
|
|
124
|
|
|
|
|
|
|
|
|
|
|
Liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair value swap
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
226
|
|
|
$
|
226
|
|
There were no transfers between Level 1 and Level 2 during the
three
months ended
March 31, 2017
or
2016
. Management’s policy is to transfer assets or liabilities from one level to another when the methodology to obtain the fair value changes such that there are more or fewer unobservable inputs as of the end of the reporting period.
The following methods and assumptions were used by the Company in determining the fair value of the financial assets and liabilities discussed above:
Investment securities:
Fair values for investment securities are based on quoted market prices, where available. If quoted market prices are not available, fair values are based on quoted market prices of comparable instruments. For securities where quoted prices or market prices of similar securities are not available, fair values are calculated using discounted cash flows.
Fair value swap:
The fair value of the swap agreement entered into with the purchaser of the Visa Class B shares represents an internally developed estimate of the exposure based upon probability-weighted potential Visa litigation losses.
Mortgage Interest Rate Lock Commitments (IRLCs):
Mortgage IRLCs are based on current secondary market pricing and are classified as Level 2.
Mortgage loans held for sale:
Mortgage loans held for sale are carried at their fair value. Mortgage loans held for sale are estimated using security prices for similar product types and, therefore, are classified in Level 2.
The tables below are a reconciliation of the beginning and ending balances of the Level 3 inputs for the three months ended
March 31, 2017
and
2016
, for financial instruments measured on a recurring basis and classified as Level 3:
Level 3 Fair Value Measurements
Three months ended
March 31, 2017
and
2016
|
|
|
|
|
|
|
|
|
|
(In thousands)
|
|
Equity
Securities
|
|
Fair value
swap
|
Balance at January 1, 2017
|
|
$
|
790
|
|
|
$
|
(226
|
)
|
Total gains/(losses)
|
|
|
|
|
|
|
Included in other comprehensive income
|
|
(14
|
)
|
|
—
|
|
Balance at March 31, 2017
|
|
$
|
776
|
|
|
$
|
(226
|
)
|
|
|
|
|
|
Balance at January 1, 2016
|
|
$
|
769
|
|
|
$
|
(226
|
)
|
Total gains/(losses)
|
|
|
|
|
|
|
Included in other comprehensive income
|
|
44
|
|
|
—
|
|
Balance at March 31, 2016
|
|
$
|
813
|
|
|
$
|
(226
|
)
|
Assets and Liabilities Measured at Fair Value on a Nonrecurring Basis:
The following methods and assumptions were used by the Company in determining the fair value of assets and liabilities measured at fair value on a nonrecurring basis described below:
Impaired Loans:
At the time a loan is considered impaired, it is valued at the lower of cost or fair value. Collateral dependent impaired loans carried at fair value have been partially charged-off or receive specific allocations of the allowance for loan losses. For collateral dependent loans, fair value is generally based on real estate appraisals. These appraisals may utilize a single valuation approach or a combination of approaches including the comparable sales approach and the income approach. Adjustments are routinely made in the appraisal process by the independent appraisers to adjust for differences between the comparable sales and income data available. Such adjustments result in a Level 3 classification of the inputs for determining fair value. Collateral is then adjusted or discounted based on management’s historical knowledge, changes in market conditions from the time of the valuation, and management’s expertise and knowledge of the client and client’s business, resulting in a Level 3 fair value classification. Impaired loans are evaluated on a quarterly basis for additional impairment and adjusted accordingly. Additionally, updated independent valuations are obtained annually for all impaired loans in accordance with Company policy.
Other Real Estate Owned ("OREO"):
Assets acquired through or in lieu of loan foreclosure are initially recorded at fair value less costs to sell when acquired. The carrying value of OREO is not re-measured to fair value on a recurring basis, but is subject to fair value adjustments when the carrying value exceeds the fair value, less estimated selling costs. Fair value is based on recent real estate appraisals and is updated at least annually. These appraisals may utilize a single valuation approach or a combination of approaches including the comparable sales approach and the income approach. Adjustments are routinely made in the appraisal process by the independent appraisers to adjust for differences between the comparable sales and income data available. Such adjustments result in a Level 3 classification of the inputs for determining fair value.
Appraisals for both collateral dependent impaired loans and OREO are performed by licensed appraisers. Appraisals are generally obtained to support the fair value of collateral. In general, there are three types of appraisals, real estate appraisals, income approach appraisals, and lot development loan appraisals, received by the Company. These are discussed below:
|
|
•
|
Real estate appraisals typically incorporate measures such as recent sales prices for comparable properties. Appraisers may make adjustments to the sales prices of the comparable properties as deemed appropriate based on the age, condition or general characteristics of the subject property. Management generally applies a
15%
discount to real
|
estate appraised values which management expects will cover all disposition costs (including selling costs). This
15%
discount is based on historical discounts to appraised values on sold OREO properties.
|
|
•
|
Income approach appraisals typically incorporate the annual net operating income of the business divided by an appropriate capitalization rate, as determined by the appraiser. Management generally applies a
15%
discount to income approach appraised values which management expects will cover all disposition costs (including selling costs).
|
|
|
•
|
Lot development loan appraisals are typically performed using a discounted cash flow analysis. Appraisers determine an anticipated absorption period and a discount rate that takes into account an investor’s required rate of return based on recent comparable sales. Management generally applies a
6%
discount to lot development appraised values, which is an additional discount above the net present value calculation included in the appraisal, to account for selling costs.
|
MSRs:
MSRs are carried at the lower of cost or fair value. MSRs do not trade in active, open markets with readily observable prices. For example, sales of MSRs do occur, but precise terms and conditions typically are not readily available. As such, management, with the assistance of a third-party specialist, determines fair value based on the discounted value of the future cash flows estimated to be received. Significant inputs include the discount rate and assumed prepayment speeds. The calculated fair value is then compared to market values where possible to ascertain the reasonableness of the valuation in relation to current market expectations for similar products. Accordingly, MSRs are classified as Level 2.
The following tables present assets and liabilities measured at fair value on a nonrecurring basis. Collateral dependent impaired loans are carried at fair value if they have been charged down to fair value or if a specific valuation allowance has been established. A new cost basis is established at the time a property is initially recorded in OREO. OREO properties are carried at fair value if a devaluation has been taken to the property's value subsequent to the initial measurement.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair Value Measurements at March 31, 2017 using:
|
(In thousands)
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Balance at March 31, 2017
|
Impaired loans recorded at fair value:
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial real estate
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
2,647
|
|
|
$
|
2,647
|
|
Construction real estate
|
|
—
|
|
|
—
|
|
|
561
|
|
|
561
|
|
Residential real estate
|
|
—
|
|
|
—
|
|
|
1,111
|
|
|
1,111
|
|
Total impaired loans recorded at fair value
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
4,319
|
|
|
$
|
4,319
|
|
|
|
|
|
|
|
|
|
|
Mortgage servicing rights
|
|
$
|
—
|
|
|
$
|
6,892
|
|
|
$
|
—
|
|
|
$
|
6,892
|
|
|
|
|
|
|
|
|
|
|
OREO:
|
|
|
|
|
|
|
|
|
Commercial real estate
|
|
—
|
|
|
—
|
|
|
2,644
|
|
|
2,644
|
|
Construction real estate
|
|
—
|
|
|
—
|
|
|
3,331
|
|
|
3,331
|
|
Residential real estate
|
|
—
|
|
|
—
|
|
|
853
|
|
|
853
|
|
Total OREO recorded at fair value
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
6,828
|
|
|
$
|
6,828
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair Value Measurements at December 31, 2016 using:
|
(In thousands)
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Balance at December 31, 2016
|
Impaired loans recorded at fair value:
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial real estate
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
3,057
|
|
|
$
|
3,057
|
|
Construction real estate
|
|
—
|
|
|
—
|
|
|
541
|
|
|
541
|
|
Residential real estate
|
|
—
|
|
|
—
|
|
|
2,385
|
|
|
2,385
|
|
Total impaired loans recorded at fair value
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
5,983
|
|
|
$
|
5,983
|
|
|
|
|
|
|
|
|
|
|
Mortgage servicing rights
|
|
$
|
—
|
|
|
$
|
6,769
|
|
|
$
|
—
|
|
|
$
|
6,769
|
|
|
|
|
|
|
|
|
|
|
OREO:
|
|
|
|
|
|
|
|
|
Commercial real estate
|
|
—
|
|
|
—
|
|
|
2,644
|
|
|
2,644
|
|
Construction real estate
|
|
—
|
|
|
—
|
|
|
3,322
|
|
|
3,322
|
|
Residential real estate
|
|
—
|
|
|
—
|
|
|
931
|
|
|
931
|
|
Total OREO recorded at fair value
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
6,897
|
|
|
$
|
6,897
|
|
The table below provides additional detail on those impaired loans which are recorded at fair value as well as the remaining impaired loan portfolio not included above. The remaining impaired loans consist of loans which are not collateral dependent as well as loans carried at cost as the fair value of the underlying collateral or the present value of expected future cash flows on each of the loans exceeded the book value for each respective credit.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2017
|
(In thousands)
|
|
Recorded Investment
|
|
Prior Charge-Offs
|
|
Specific Valuation Allowance
|
|
Carrying Balance
|
Impaired loans recorded at fair value
|
|
$
|
4,805
|
|
|
$
|
2,593
|
|
|
$
|
486
|
|
|
$
|
4,319
|
|
Remaining impaired loans
|
|
65,322
|
|
|
21,138
|
|
|
605
|
|
|
64,717
|
|
Total impaired loans
|
|
$
|
70,127
|
|
|
$
|
23,731
|
|
|
$
|
1,091
|
|
|
$
|
69,036
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2016
|
(In thousands)
|
|
Recorded Investment
|
|
Prior Charge-Offs
|
|
Specific Valuation Allowance
|
|
Carrying Balance
|
Impaired loans recorded at fair value
|
|
$
|
6,379
|
|
|
$
|
3,681
|
|
|
$
|
396
|
|
|
$
|
5,983
|
|
Remaining impaired loans
|
|
64,047
|
|
|
21,262
|
|
|
152
|
|
|
63,895
|
|
Total impaired loans
|
|
$
|
70,426
|
|
|
$
|
24,943
|
|
|
$
|
548
|
|
|
$
|
69,878
|
|
The expense from credit adjustments related to impaired loans carried at fair value during the three months ended
March 31, 2017
and
2016
was
$0.3 million
and
$0.6 million
, respectively.
MSRs totaled
$9.3 million
at
March 31, 2017
. Of this
$9.3 million
MSR carrying balance,
$6.9 million
was recorded at fair value and included a valuation allowance of
$0.7 million
. The remaining
$2.4 million
was recorded at cost, as the fair value of the MSRs exceeded cost at
March 31, 2017
. At
December 31, 2016
, MSRs totaled
$9.3 million
. Of this
$9.3 million
MSR carrying balance,
$6.8 million
was recorded at fair value and included a valuation allowance of
$0.7 million
. The remaining
$2.5 million
was recorded at cost, as the fair value exceeded cost at
December 31, 2016
. The income related to MSRs carried at fair value during the three months ended
March 31, 2017
was
$59,000
. There was
no
income or expense related to MSRs carried at fair value during the three months ended March 31, 2016.
Total OREO held by Park at
March 31, 2017
and
December 31, 2016
was
$13.7 million
and
$13.9 million
, respectively. Approximately
50%
of OREO held by Park at each of
March 31, 2017
and
December 31, 2016
was carried at fair value due to fair value adjustments made subsequent to the initial OREO measurement. At
March 31, 2017
and
December 31, 2016
, OREO held at fair value, less estimated selling costs, amounted to
$6.8 million
and
$6.9 million
, respectively. The net expense related
to OREO fair value adjustments was
$73,000
and
$118,000
for the
three
-month periods ended
March 31, 2017
and
2016
, respectively.
The following tables present qualitative information about Level 3 fair value measurements for financial instruments measured at fair value on a non-recurring basis at
March 31, 2017
and
December 31, 2016
:
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2017
|
(In thousands)
|
|
Fair Value
|
|
Valuation Technique
|
|
Unobservable Input(s)
|
|
Range
(Weighted Average)
|
Impaired loans:
|
|
|
|
|
|
|
|
|
|
Commercial real estate
|
|
$
|
2,647
|
|
|
Sales comparison approach
|
|
Adj to comparables
|
|
0.0% - 90.0% (21.3%)
|
|
|
|
|
Income approach
|
|
Capitalization rate
|
|
9.0% - 10.6% (10.0%)
|
|
|
|
|
Cost approach
|
|
Accumulated depreciation
|
|
17.0% - 90.1% (60.5%)
|
|
|
|
|
|
|
|
|
|
Construction real estate
|
|
$
|
561
|
|
|
Sales comparison approach
|
|
Adj to comparables
|
|
0.0% - 4.8% (0.7%)
|
|
|
|
|
Bulk sale approach
|
|
Discount rate
|
|
10.0% (10.0%)
|
|
|
|
|
|
|
|
|
|
Residential real estate
|
|
$
|
1,111
|
|
|
Sales comparison approach
|
|
Adj to comparables
|
|
0.3% - 110.0% (16.5%)
|
|
|
|
|
Income approach
|
|
Capitalization rate
|
|
10.5% (10.5%)
|
|
|
|
|
|
|
|
|
|
Other real estate owned:
|
|
|
|
|
|
|
|
|
Commercial real estate
|
|
$
|
2,644
|
|
|
Sales comparison approach
|
|
Adj to comparables
|
|
0.0% - 68.4% (26.5%)
|
|
|
|
|
Income approach
|
|
Capitalization rate
|
|
13.0% - 14.0% (13.1%)
|
|
|
|
|
|
|
|
|
|
Construction real estate
|
|
$
|
3,331
|
|
|
Sales comparison approach
|
|
Adj to comparables
|
|
0.0% - 90.0% (24.7%)
|
|
|
|
|
Bulk sale approach
|
|
Discount rate
|
|
15.0% (15.0%)
|
|
|
|
|
|
|
|
|
|
Residential real estate
|
|
$
|
853
|
|
|
Sales comparison approach
|
|
Adj to comparables
|
|
0.6% - 79.7% (35.0%)
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2016
|
(In thousands)
|
|
Fair Value
|
|
Valuation Technique
|
|
Unobservable Input(s)
|
|
Range
(Weighted Average)
|
Impaired loans:
|
|
|
|
|
|
|
|
|
|
Commercial real estate
|
|
$
|
3,057
|
|
|
Sales comparison approach
|
|
Adj to comparables
|
|
0.0% - 90.0% (20.2%)
|
|
|
|
|
Income approach
|
|
Capitalization rate
|
|
9.0% - 10.6% (10.1%)
|
|
|
|
|
Cost approach
|
|
Accumulated depreciation
|
|
17.0% - 18.0% (17.8%)
|
|
|
|
|
|
|
|
|
|
Construction real estate
|
|
$
|
541
|
|
|
Sales comparison approach
|
|
Adj to comparables
|
|
0.0% - 11.1% (1.6%)
|
|
|
|
|
Bulk sale approach
|
|
Discount rate
|
|
10.0% (10.0%)
|
|
|
|
|
|
|
|
|
|
Residential real estate
|
|
$
|
2,385
|
|
|
Sales comparison approach
|
|
Adj to comparables
|
|
0.3% - 110.0% (17.0%)
|
|
|
|
|
Income approach
|
|
Capitalization rate
|
|
10.0% (10.0%)
|
|
|
|
|
|
|
|
|
|
Other real estate owned:
|
|
|
|
|
|
|
|
|
Commercial real estate
|
|
$
|
2,644
|
|
|
Sales comparison approach
|
|
Adj to comparables
|
|
0.0% - 68.4% (26.5%)
|
|
|
|
|
Income approach
|
|
Capitalization rate
|
|
13.0% - 14.0% (13.1%)
|
|
|
|
|
|
|
|
|
|
Construction real estate
|
|
$
|
3,322
|
|
|
Sales comparison approach
|
|
Adj to comparables
|
|
0.0% - 90.0% (24.7%)
|
|
|
|
|
Bulk sale approach
|
|
Discount rate
|
|
15.0% (15.0%)
|
|
|
|
|
|
|
|
|
|
Residential real estate
|
|
$
|
931
|
|
|
Sales comparison approach
|
|
Adj to comparables
|
|
3.2% - 79.7% (30.6%)
|
The following methods and assumptions were used by Park in estimating its fair value disclosures for assets and liabilities not discussed above:
Cash and cash equivalents:
The carrying amounts reported in the consolidated condensed balance
sheets for cash and short-term instruments approximate those assets’ fair values.
Other investments:
FHLB and FRB stock within "Other investments" are carried at their respective redemption values as it is not practical to calculate their fair values. Additional investments within "Other investments" are carried at their cost basis as these investments do not have a readily determinable fair value and Park does not have the ability to influence the operating or financial decisions of the investee.
Loans receivable:
For variable-rate loans that reprice frequently and with no significant change in credit risk, fair values are based on carrying values. The fair values for certain mortgage loans (e.g., one-to-four family residential) are based on quoted market prices of similar loans sold in conjunction with securitization transactions, adjusted for differences in loan characteristics. The fair values for other loans are estimated using discounted cash flow analyses, based upon interest rates currently being offered for loans with similar terms to borrowers of similar credit quality. The methods utilized to estimate the fair value do not necessarily represent an exit price.
Off-balance sheet instruments:
Fair values for Park’s loan commitments and standby letters of credit are based on the fees currently charged to enter into similar agreements, taking into account the remaining terms of the agreements and the counterparties’ credit standing. The carrying amount and fair value are not material.
Deposit liabilities:
The fair values disclosed for demand deposits (e.g., interest and non-interest checking, savings, and money market accounts) are, by definition, equal to the amounts payable on demand at the reporting date (i.e., their carrying amounts). The carrying amounts for variable-rate, fixed-term certificates of deposit approximate their fair values at the reporting date. Fair values for fixed-rate certificates of deposit are estimated using a discounted cash flow calculation that applies interest rates currently being offered on certificates to a schedule of aggregated expected monthly maturities of time deposits.
Short-term borrowings:
The carrying amounts of federal funds purchased, borrowings under repurchase agreements and other short-term borrowings approximate their fair values.
Long-term debt:
Fair values for long-term debt are estimated using a discounted cash flow calculation that applies interest rates currently being offered on long-term debt to a schedule of monthly maturities.
Subordinated notes:
Fair values for subordinated notes are estimated using a discounted cash flow calculation that applies interest rate spreads currently being offered on similar debt structures to a schedule of monthly maturities.
The fair value of financial instruments at
March 31, 2017
and
December 31, 2016
, was as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2017
|
|
|
|
|
Fair Value Measurements
|
(In thousands)
|
|
Carrying value
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Total fair value
|
Financial assets:
|
|
|
|
|
|
|
|
|
|
|
Cash and money market instruments
|
|
$
|
391,772
|
|
|
$
|
391,772
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
391,772
|
|
Investment securities
(1)
|
|
1,503,857
|
|
|
2,621
|
|
|
1,499,155
|
|
|
776
|
|
|
1,502,552
|
|
Accrued interest receivable - securities
|
|
4,179
|
|
|
—
|
|
|
4,179
|
|
|
—
|
|
|
4,179
|
|
Accrued interest receivable - loans
|
|
14,449
|
|
|
—
|
|
|
—
|
|
|
14,449
|
|
|
14,449
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans held for sale
|
|
6,722
|
|
|
—
|
|
|
6,722
|
|
|
—
|
|
|
6,722
|
|
Mortgage IRLCs
|
|
234
|
|
|
—
|
|
|
234
|
|
|
—
|
|
|
234
|
|
Impaired loans carried at fair value
|
|
4,319
|
|
|
—
|
|
|
—
|
|
|
4,319
|
|
|
4,319
|
|
Other loans, net
|
|
5,252,444
|
|
|
—
|
|
|
—
|
|
|
5,185,883
|
|
|
5,185,883
|
|
Loans receivable, net
|
|
$
|
5,263,719
|
|
|
$
|
—
|
|
|
$
|
6,956
|
|
|
$
|
5,190,202
|
|
|
$
|
5,197,158
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Noninterest bearing checking accounts
|
|
$
|
1,548,363
|
|
|
$
|
1,548,363
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
1,548,363
|
|
Interest bearing transactions accounts
|
|
1,310,575
|
|
|
1,310,575
|
|
|
—
|
|
|
—
|
|
|
1,310,575
|
|
Savings accounts
|
|
1,928,507
|
|
|
1,928,507
|
|
|
—
|
|
|
—
|
|
|
1,928,507
|
|
Time deposits
|
|
1,130,409
|
|
|
—
|
|
|
1,133,360
|
|
|
—
|
|
|
1,133,360
|
|
Other
|
|
2,706
|
|
|
2,706
|
|
|
—
|
|
|
—
|
|
|
2,706
|
|
Total deposits
|
|
$
|
5,920,560
|
|
|
$
|
4,790,151
|
|
|
$
|
1,133,360
|
|
|
$
|
—
|
|
|
$
|
5,923,511
|
|
|
|
|
|
|
|
|
|
|
|
|
Short-term borrowings
|
|
$
|
219,863
|
|
|
$
|
—
|
|
|
$
|
219,863
|
|
|
$
|
—
|
|
|
$
|
219,863
|
|
Long-term debt
|
|
745,840
|
|
|
—
|
|
|
760,798
|
|
|
—
|
|
|
760,798
|
|
Subordinated notes
|
|
45,000
|
|
|
—
|
|
|
43,786
|
|
|
—
|
|
|
43,786
|
|
Accrued interest payable – deposits
|
|
901
|
|
|
46
|
|
|
855
|
|
|
—
|
|
|
901
|
|
Accrued interest payable – debt/borrowings
|
|
1,288
|
|
|
—
|
|
|
1,288
|
|
|
—
|
|
|
1,288
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivative financial instruments:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair value swap
|
|
$
|
226
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
226
|
|
|
$
|
226
|
|
(1) Investment securities excludes the category "Other investments." This category consists of
FHLB and FRB stock carried at their respective redemption values as it is not practical to calculate their fair values. Additional investments within "Other Investments" are carried at their cost basis as these investments do not have a readily determinable fair value and Park does not have the ability to influence the operating or financial decisions of the investee.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2016
|
|
|
|
|
Fair Value Measurements
|
(In thousands)
|
|
Carrying value
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Total fair value
|
Financial assets:
|
|
|
|
|
|
|
|
|
|
|
Cash and money market instruments
|
|
$
|
146,466
|
|
|
$
|
146,466
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
146,466
|
|
Investment securities
(1)
|
|
1,517,972
|
|
|
2,644
|
|
|
1,511,377
|
|
|
790
|
|
|
1,514,811
|
|
Accrued interest receivable - securities
|
|
3,849
|
|
|
—
|
|
|
3,849
|
|
|
—
|
|
|
3,849
|
|
Accrued interest receivable - loans
|
|
14,973
|
|
|
—
|
|
|
—
|
|
|
14,973
|
|
|
14,973
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans held for sale
|
|
10,413
|
|
|
—
|
|
|
10,413
|
|
|
—
|
|
|
10,413
|
|
Mortgage IRLCs
|
|
124
|
|
|
—
|
|
|
124
|
|
|
—
|
|
|
124
|
|
Impaired loans carried at fair value
|
|
5,983
|
|
|
—
|
|
|
—
|
|
|
5,983
|
|
|
5,983
|
|
Other loans, net
|
|
5,204,713
|
|
|
—
|
|
|
—
|
|
|
5,161,919
|
|
|
5,161,919
|
|
Loans receivable, net
|
|
$
|
5,221,233
|
|
|
$
|
—
|
|
|
$
|
10,537
|
|
|
$
|
5,167,902
|
|
|
$
|
5,178,439
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Noninterest bearing checking accounts
|
|
$
|
1,523,417
|
|
|
$
|
1,523,417
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
1,523,417
|
|
Interest bearing transactions accounts
|
|
1,174,448
|
|
|
1,174,448
|
|
|
—
|
|
|
—
|
|
|
1,174,448
|
|
Savings accounts
|
|
1,704,920
|
|
|
1,704,920
|
|
|
—
|
|
|
—
|
|
|
1,704,920
|
|
Time deposits
|
|
1,117,870
|
|
|
—
|
|
|
1,122,598
|
|
|
—
|
|
|
1,122,598
|
|
Other
|
|
1,301
|
|
|
1,301
|
|
|
—
|
|
|
—
|
|
|
1,301
|
|
Total deposits
|
|
$
|
5,521,956
|
|
|
$
|
4,404,086
|
|
|
$
|
1,122,598
|
|
|
$
|
—
|
|
|
$
|
5,526,684
|
|
|
|
|
|
|
|
|
|
|
|
|
Short-term borrowings
|
|
$
|
394,795
|
|
|
$
|
—
|
|
|
$
|
394,795
|
|
|
$
|
—
|
|
|
$
|
394,795
|
|
Long-term debt
|
|
694,281
|
|
|
—
|
|
|
712,958
|
|
|
—
|
|
|
712,958
|
|
Subordinated notes
|
|
45,000
|
|
|
—
|
|
|
40,903
|
|
|
—
|
|
|
40,903
|
|
Accrued interest payable – deposits
|
|
900
|
|
|
82
|
|
|
818
|
|
|
—
|
|
|
900
|
|
Accrued interest payable – debt/borrowings
|
|
1,251
|
|
|
1
|
|
|
1,250
|
|
|
—
|
|
|
1,251
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivative financial instruments:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair value swap
|
|
$
|
226
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
226
|
|
|
$
|
226
|
|
(1) Investment securities excludes the category "Other investments." This category consists of
FHLB and FRB stock carried at their respective redemption values as it is not practical to calculate their fair values. Additional investments within "Other Investments" are carried at their cost basis as these investments do not have a readily determinable fair value and Park does not have the ability to influence the operating or financial decisions of the investee.
Note 15 –
Other Comprehensive Income
Other comprehensive income components, net of tax, are shown in the following table for the three-month periods ended
March 31, 2017
and
2016
:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in thousands)
|
|
Changes in pension plan assets and benefit obligations
|
|
Unrecognized gains and losses on available for sale securities
|
|
Total
|
Beginning balance at January 1, 2017
|
|
$
|
(14,740
|
)
|
|
$
|
(3,005
|
)
|
|
$
|
(17,745
|
)
|
|
Other comprehensive income before reclassifications
|
|
—
|
|
|
1,022
|
|
|
1,022
|
|
|
Amounts reclassified from accumulated other comprehensive loss
|
|
—
|
|
|
—
|
|
|
—
|
|
Net current period other comprehensive income
|
|
—
|
|
|
1,022
|
|
|
1,022
|
|
Ending balance at March 31, 2017
|
|
$
|
(14,740
|
)
|
|
$
|
(1,983
|
)
|
|
$
|
(16,723
|
)
|
|
|
|
|
|
|
|
|
Beginning balance at January 1, 2016
|
|
$
|
(15,351
|
)
|
|
$
|
(292
|
)
|
|
$
|
(15,643
|
)
|
|
Other comprehensive income before reclassifications
|
|
—
|
|
|
11,680
|
|
|
11,680
|
|
|
Amounts reclassified from accumulated other comprehensive loss
|
|
—
|
|
|
—
|
|
|
—
|
|
Net current period other comprehensive income
|
|
—
|
|
|
11,680
|
|
|
11,680
|
|
Ending balance at March 31, 2016
|
|
$
|
(15,351
|
)
|
|
$
|
11,388
|
|
|
$
|
(3,963
|
)
|
During the three-month periods ended
March 31, 2017
and 2016, there were
no
reclassifications out of accumulated other comprehensive loss.
Note 16 –
Investment in Qualified Affordable Housing
Park makes certain equity investments in various limited partnerships that sponsor affordable housing projects. The purposes of these investments are to achieve a satisfactory return on capital, help create affordable housing opportunities, and assist the Company to achieve our goals associated with the Community Reinvestment Act.
The table below details the balances of Park’s affordable housing tax credit investments and related unfunded commitments as of March 31, 2017 and December 31, 2016.
|
|
|
|
|
|
|
|
|
(in thousands)
|
|
March 31, 2017
|
December 31, 2016
|
Affordable housing tax credit investments
|
|
$
|
51,083
|
|
$
|
52,947
|
|
Unfunded commitments
|
|
14,282
|
|
14,282
|
|
Commitments are funded when capital calls are made by the general partner. Park expects that the current commitments will be funded between 2017 and 2027.
During the three months ended March 31, 2017 and 2016, Park recognized amortization expense of
$1.9 million
and
$1.8 million
, respectively, which was included within the provision for income taxes. Additionally, during the three months ended March 31, 2017 and 2016, Park recognized tax credits and other benefits from its affordable housing tax credit investments of
$2.4 million
and
$2.3 million
, respectively.
Note 17 –
Repurchase Agreement Borrowings
Securities sold under agreements to repurchase ("repurchase agreements") with customers represent funds deposited by customers, generally on an overnight basis, that are collateralized by investment securities owned by Park. Repurchase agreements with customers are included in short-term borrowings on the consolidated condensed balance sheets. Park's repurchase agreements with a third-party financial institution are classified as long-term debt on the consolidated condensed balance sheets.
All repurchase agreements are subject to terms and conditions of repurchase/security agreements between Park and the client and are accounted for as secured borrowings. Park's repurchase agreements reflected in short-term borrowings consisted of customer accounts and securities which are pledged on an individual security basis.
At
March 31, 2017
and
December 31, 2016
, Park's repurchase agreement borrowings totaled
$520 million
and
$510 million
, respectively. At both
March 31, 2017
and
December 31, 2016
,
$300 million
of Park's repurchase agreement borrowings were classified as long-term debt with the remaining amount being classified as short-term debt on the consolidated condensed balance sheets. These borrowings were collateralized with U.S. government and agency securities with a carrying value of
$594 million
and
$569 million
at
March 31, 2017
and
December 31, 2016
, respectively. Declines in the value of the collateral would require Park to pledge additional securities. As of
March 31, 2017
and
December 31, 2016
, Park had
$570 million
and
$640 million
, respectively, of available unpledged securities.
The table below shows the remaining contractual maturity of repurchase agreements by collateral pledged at
March 31, 2017
and
December 31, 2016
:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2017
|
(in thousands)
|
|
Remaining Contractual Maturity of the Agreements
|
|
|
Overnight and Continuous
|
|
Up to 30 days
|
|
30 - 90 days
|
|
Greater than 90 days
|
|
Total
|
U.S. government and agency securities
|
|
$
|
218,759
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
301,104
|
|
|
$
|
519,863
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2016
|
(in thousands)
|
|
Remaining Contractual Maturity of the Agreements
|
|
|
Overnight and Continuous
|
|
Up to 30 days
|
|
30 - 90 days
|
|
Greater than 90 days
|
|
Total
|
U.S. government and agency securities
|
|
$
|
208,691
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
301,104
|
|
|
$
|
509,795
|
|
On November 30, 2012, Park restructured
$300 million
in repurchase agreements with a third-party financial institution and paid a
$25 million
prepayment penalty. The penalty is included in long-term debt and is being amortized as an adjustment to interest expense over the remaining term of the repurchase agreements using the effective interest method. Of the
$25 million
prepayment penalty,
$3.5 million
and
$4.7 million
remained unamortized as of
March 31, 2017
and
December 31, 2016
, respectively.
Note 18 –
Contingent Liabilities
The Company is a defendant in lawsuits and other adversary proceedings arising in the ordinary course of business. Legal costs incurred in connection with the resolution of claims and lawsuits are generally expensed as incurred, and the Company establishes accruals for the outcome of litigation where losses are deemed probable and reasonably estimable. The Company’s assessment of the current exposure could change in the event of the discovery of additional facts with respect to legal matters pending against the Company or determinations by judges, juries, administrative agencies or other finders of fact that are not in accordance with the Company’s evaluation of claims.
As of March 31, 2017, the Company had accrued charges of approximately
$2.3 million
for legal contingencies related to various legal and other adversary proceedings.
Note 19 –
Subsequent Events
On April 24, 2017, Park prepaid in full the
$30.0 million
outstanding aggregate principal amount of the
7%
Subordinated Notes due April 20, 2022 (the "2012 Notes"), plus accrued interest on the 2012 Notes in the aggregate amount of
$140,000
. The 2012 Notes were originally issued on April 20, 2012 to 56 purchasers, all of whom were accredited investors. April 21, 2017 was the earliest repayment date allowable under terms of the Note Purchase Agreement, dated April 20, 2012, under which the 2012 Notes were originally issued.