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, 2021 are not necessarily indicative of the operating results to be anticipated for the year ending December 31, 2021.
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 consolidated condensed balance sheets, consolidated condensed statements of income, consolidated condensed statements of comprehensive income, consolidated condensed statements of changes in shareholders’ equity and consolidated condensed statements of cash flows in conformity with U.S. GAAP. These financial statements should be read in conjunction with the consolidated financial statements included in Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA in the Annual Report on Form 10-K of Park National Corporation for the fiscal year ended December 31, 2020 ("Park's 2020 Form 10-K"). Certain prior period amounts have been reclassified to conform to the current period presentation.
Park’s significant accounting policies are described in Note 1 Summary of Significant Accounting Policies of the Notes to Consolidated Financial Statements included in Park’s 2020 Form 10-K. 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.
The COVID-19 pandemic has caused significant, unprecedented disruption around the world that has affected daily living and negatively impacted the global economy. The effects of the COVID-19 pandemic may meaningfully impact significant estimates such as the allowance for credit losses, goodwill, mortgage servicing rights, and pension plan obligations and related expenses. Additionally, the pandemic may particularly impact certain loan concentrations in the hotel and accommodations, restaurant and food service, and strip shopping center industries.
Note 2 - Adoption of New Accounting Pronouncements and Issued But Not Yet Effective Accounting Standards
The following is a summary of new accounting pronouncements impacting Park's consolidated financial statements:
Adoption of New Accounting Pronouncements
ASU 2016-13 - Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments: Effective January 1, 2021, Park adopted ASU 2016-13 - Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments ("ASU 2016-13") ("ASC 326") as amended. The new accounting guidance in this ASU replaces the incurred loss methodology with an expected loss methodology, which is referred to as the current expected credit loss ("CECL") methodology. The CECL methodology is applicable to the measurement of credit losses on financial assets measured at amortized cost, including loan receivables, HTM 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 methodology requires an entity to estimate credit losses over the life of an asset or off-balance sheet credit exposure. The new accounting guidance was to have been effective for Park for annual reporting periods and interim reporting periods within those annual periods, beginning after December 15, 2019.
Section 4014 of the CARES Act provided financial institutions with optional temporary relief from having to comply with ASU 2016-13 including the CECL methodology for estimating the allowance for credit losses. This temporary relief was set to expire on the earlier of the date on which the national emergency concerning COVID-19 terminated or December 31, 2020, with adoption being effective retrospectively as of January 1, 2020.
Section 540 of the Consolidated Appropriations Act, 2021, amended Section 4014 of the CARES Act by extending the relief period provided in the CARES Act. The Consolidated Appropriations Act, 2021, modifies the CARES Act so that temporary
relief will expire on the earlier of the first day of the fiscal year that begins after the date on which the national emergency concerning COVID-19 terminates or January 1, 2022.
Park elected to delay the implementation of ASU 2016-13 following the approval of the CARES Act and continued to use the incurred loss methodology for estimating the allowance for credit losses in 2020. ASU 2016-13 requires financial institutions to calculate an allowance utilizing a reasonable and supportable forecast period which Park has established as a one-year period. In the unprecedented circumstance surrounding the COVID-19 pandemic and the response thereto, Park believed that adopting ASU 2016-13 in the first quarter of 2020 would have added an unnecessary level of subjectivity and volatility to the calculation of the allowance for credit losses. With the approval of the Consolidated Appropriations Act, 2021, management elected to further delay adoption of ASU 2016-13 to January 1, 2021. This allowed Park to utilize the CECL standard for the entire year of adoption.
Park adopted ASU 326 using the modified retrospective method for all financial assets measured at amortized cost and off-balance sheet credit exposures. Results for reporting periods beginning after January 1, 2021 are presented under ASC 326 while prior period amounts continue to be reported in accordance with the then applicable U.S. GAAP. Park recorded a net decrease to retained earnings of $8.0 million as of January 1, 2021 for the cumulative effect of adopting ASC 326.
Park adopted ASC 326 using the prospective transition approach for financial assets PCD that were previously classified as PCI and accounted for under ASC 310-30. In accordance with ASC 326, management did not reassess whether PCI assets met the criteria of PCD assets as of the date of adoption. On January 1, 2021, the amortized cost basis of the PCD assets was adjusted to reflect the addition of $52,000 to the allowance for credit losses. The remaining noncredit discount (based on the adjusted amortized cost basis) will be accreted into interest income at the effective interest rate as of January 1, 2021.
As permitted by ASC 326, Park elected to maintain pools of loans accounted for under ASC 310-30. In accordance with the standard, management did not reassess whether modifications to individual acquired financial assets accounted for in pools were TDRs as of the date of adoption.
The following table illustrates the impact of ASC 326:
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January 1, 2021
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(In thousands)
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As Reported Under ASC 326
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Pre-ASC 326 Adoption
|
Impact of ASC 326 Adoption
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Assets:
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Loans
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|
$
|
7,177,666
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|
$
|
7,177,785
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|
$
|
(119)
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|
|
|
|
|
ACL on loans
|
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|
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|
Commercial, financial and agricultural
|
|
17,351
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|
25,608
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|
(8,257)
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|
Commercial real estate
|
|
25,599
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|
23,480
|
|
2,119
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|
Construction real estate:
|
|
5,390
|
|
7,288
|
|
(1,898)
|
|
Residential real estate:
|
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14,484
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|
11,363
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|
3,121
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|
Consumer
|
|
28,343
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|
17,418
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|
10,925
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Leases
|
|
598
|
|
518
|
|
80
|
|
Total ACL on loans
|
|
$
|
91,765
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$
|
85,675
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$
|
6,090
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|
|
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|
|
Liabilities:
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|
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|
ACL on off-balance sheet commitments
|
|
$
|
3,982
|
|
$
|
116
|
|
$
|
3,866
|
|
|
|
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|
|
Net deferred tax liability
|
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$
|
777
|
|
$
|
2,892
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|
$
|
(2,115)
|
|
|
|
|
|
|
Shareholders' equity:
|
|
$
|
1,032,300
|
|
$
|
1,040,256
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$
|
(7,956)
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ACL - AFS Debt Securities
For AFS debt securities in an unrealized loss position, Park first assesses whether it intends to sell, or it is more likely than not that it will be required to sell, the security before recovery of its amortized cost basis. If either of the criteria regarding intent or requirement to sell is met, the security's amortized cost basis is written down to fair value through income. For AFS debt securities that do not meet the aforementioned criteria, Park evaluates whether the decline in fair value has resulted from credit losses or other factors. In making this assessment, management considers the extent to which fair value is less than amortized cost, any changes to the rating of the security by a rating agency, and adverse conditions specifically related to the security, among other factors. If this assessment indicates that a credit loss exists, the present value of cash flows expected to be collected from the security are compared to the amortized cost basis of the security. If the present value of cash flows expected to be collected is less than the amortized cost basis, a credit loss exists and an allowance for credit losses is recorded for the credit loss, limited by the amount that the fair value is less than the amortized cost basis. Any impairment that has not been recorded through an allowance for credit losses is recognized in other comprehensive income, net of applicable taxes.
Changes in the ACL are recorded as a provision for (or recovery of) credit loss expense. Losses are charged against allowance when management believes that uncollectibility of an AFS debt security is confirmed or when either of the criteria regarding intent or requirement to sell is met.
Accrued interest receivable on AFS debt securities totaled $3.9 million at March 31, 2021 and is excluded from the estimate of credit losses.
ACL - HTM Debt Securities
Management measures expected credit losses on HTM debt securities on a collective basis by major security type. The estimate
of expected credit losses considers historical credit loss information that is adjusted for current conditions and reasonable and supportable forecasts. Park does not currently hold any HTM debt securities.
ACL - Loans
The ACL is a valuation account that is deducted from the loans' amortized cost basis to present the net amount expected to be collected on the loans. Loans are charged off against the allowance when management believes that the uncollectibility of a loan balance is confirmed. Expected recoveries do not exceed the aggregate of amounts previously charged-off and expected to be charged-off.
Management estimates the allowance balance using relevant available information, from internal and external sources, relating to past events, current conditions, and reasonable and supportable forecasts. Historical credit loss experience provides the basis for the estimation of expected credit losses. Adjustments to historical loss information are made for differences in current loan-specific risk characteristics such as differences in underwriting standards, portfolio mix, delinquency level, or term as well as changes in environmental conditions, such as changes in unemployment rates, property values, or other relevant factors.
Accrued interest receivable on loans totaled $19.7 million at March 31, 2021 and is excluded from the estimate of credit losses.
ACL - Loans - Collectively Evaluated
The ACL is measured on a collective pool basis when similar risk characteristics exist. Park has identified the following portfolio segments and measures the allowance for credit losses using the following methods:
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Portfolio Segment
|
Measurement Method
|
Loss Driver
|
Commercial, financial and agricultural
|
Discounted Cash Flow
|
Ohio Unemployment, Ohio GDP
|
PPP loans
|
Other
|
N/A
|
Overdrafts
|
Historical Loss Experience
|
N/A
|
Commercial real estate
|
Discounted Cash Flow
|
Ohio Unemployment, Ohio GDP
|
Construction real estate:
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|
|
Commercial
|
Discounted Cash Flow
|
Ohio Unemployment, Ohio GDP
|
Retail
|
Discounted Cash Flow
|
Ohio Unemployment, Ohio GDP
|
Residential real estate:
|
|
|
Commercial
|
Discounted Cash Flow
|
Ohio Unemployment, Ohio HPI
|
Mortgage
|
Discounted Cash Flow
|
Ohio Unemployment, Ohio HPI
|
HELOC
|
Discounted Cash Flow
|
Ohio Unemployment, Ohio HPI
|
Installment
|
Discounted Cash Flow
|
Ohio Unemployment, Ohio HPI
|
Consumer
|
Discounted Cash Flow
|
Ohio Unemployment, Ohio GDP
|
GFSC
|
Discounted Cash Flow
|
Ohio Unemployment, Ohio GDP
|
Check loans
|
Historical Loss Experience
|
N/A
|
Leases
|
Remaining Life
|
N/A
|
Expected credit losses are estimated over the contractual term of the loans, adjusted for prepayments when appropriate. The contractual term excludes extensions, renewals, and modifications unless either of the following applies: management has a reasonable expectation at the reporting date that a TDR will be executed with an individual borrower or the extension or renewal options are included in the original or modified contract at the reporting date and are not unconditionally cancellable by Park.
In general, Park utilized a DCF method to estimate the quantitative portion of the allowance for credit losses for loans evaluated on a collective polled basis. For each segment, a LDA was performed in order to identify appropriate loss drivers and create a regression model for use in forecasting cash flows. The LDA analysis utilized Park's own Federal Financial Institutions Examination Councils's ("FFIEC") Call Report data for the commercial, financial and agricultural and residential real estate segments. Peer data was incorporated into the analysis for the commercial real estate, construction real estate, and consumer segments.
In creating the DCF model, Park has established a one-year reasonable and supportable forecast period with a one-year straight line reversion to the long-term historical average. Park's policy is to utilize its own data, which includes loan-level loss data from 2013 through March 31, 2021, whenever possible. Peer data is utilized when there are not sufficient defaults for a statistically sound calculation, or if Park does not have its own loan-level detail reflecting similar economic conditions as the forecasted loss drivers.
Key inputs into the DCF model include loan-level detail, including the amortized cost basis of individual loans, payment structure, and loss history, and forecasted loss drivers. Park utilizes a third party to provide economic forecasts under various scenarios, which are weighted in order to reflect model risk in the current economic environment. The weighting of the scenarios is evaluated on a quarterly basis considering the various scenarios in the context of the current economic environment and presumed risk of loss.
Additional key assumptions in the DCF model include the PD, LGD, and prepayment/curtailment rates. When possible, Park utilizes its own PDs for the reasonable and supportable forecast period. When it is not possible to use Park's own PDs, the LDA is utilized to determine PDs based on the forecasted economic factors. In all cases, the LDA is then utilized to determine the long-term historical average which is reached over the reversion period. When possible, Park's utilizes its own LGDs for the reasonable and supportable forecast period. When it is not possible to use Park's own LGDs, the LGD is derived using a method referred to as Frye Jacobs. The Frye Jacobs method is a mathematical formula that traces the relationship between
LGD and PD over time and projects the LGD based on the level of PD forecasted. In all cases, the Frye Jacobs method is utilized to calculate LGDs during the reversion period and long-term historical average. Prepayment and curtailment rates were calculated based on Park's own data utilizing a three-year average.
When the discounted cash flow method is used to determine the allowance for credit losses, management adjusts the effective interest rate used to discount expected cash flows to incorporate expected prepayments.
Qualitative factors considered in the ACL methodology include the following:
•The nature and volume of Park’s financial assets;
•The existence, growth, and effect of any concentrations of credit;
•The volume and severity of past due financial assets, the volume of nonaccrual assets, and the volume and severity of adversely classified or graded assets;
•Park’s lending policies and procedures, including changes in lending strategies, underwriting standards and practices for collections, write-offs, and recoveries;
•The quality of Park's credit review function;
•The experience, ability, and depth of Park’s lending, investment, collection, and other relevant management and staff;
•The effect of other external factors such as the regulatory, legal and technological environments, competition, and events such as natural disasters or pandemics; and
•Actual and expected changes in international, national, regional, and local economic and business conditions and developments in which Park operates that affect the collectibility of financial assets.
ACL - Loans - Individually Evaluated
Loans that do not share risk characteristics are evaluated on an individual basis and are excluded from the collective evaluation. Park has determined that any commercial loans which have been placed on nonaccrual status or classified as TDRs will be individually evaluated and are labeled as impaired. Individual analysis will establish a specific reserve for loans in scope. Specific reserves on impaired commercial loans are typically based on management’s best estimate of the fair value of collateral securing these loans, adjusted for selling costs as appropriate.
ACL - Purchased Credit Deteriorated Loans
The Company has purchased loans, some of which have shown evidence of credit deterioration since origination. Upon adoption of ASC 326, Park elected to maintain pools of loans that were previously accounted for under ASC 310-30 and will continue to account for these pools as a unit of account. Loans are only removed from the existing pools if they are written off, paid off, or sold. Upon adoption of ASC 326, the allowance for credit losses was determined for each pool and added to the pool's carrying amount to establish a new amortized cost basis. The difference between the unpaid principal balance of the pool and the new amortized cost basis is the noncredit premium or discount which will be amortized into interest income over the remaining life of the pool. Changes to the allowance for credit losses after adoption are recorded through provision expense.
ACL - Off-Balance Sheet Credit Exposures
Park estimates expected credit losses over the contractual period in which Park is exposed to credit risk via a contractual obligation to extend credit, unless that obligation is unconditionally cancellable by Park. The allowance for credit losses on off-balance sheet credit exposure is adjusted as a provision for credit loss expense. The estimate includes consideration of the likelihood that funding will occur and an estimate of expected credit losses on commitments expected to be funded over its estimated life. Funding rates are based on a historical analysis of Park's portfolio, while estimates of credit losses are determined using the same loss rates as funded loans.
ASU 2018-14 - Compensation - Retirement Benefits - Defined Benefit Plans - General (Subtopic 715-20): Disclosure Framework - Changes to the Disclosure Requirements for Defined Benefit Plans: In August 2018, the FASB issued ASU 2018-14 - Compensation - Retirement Benefits - Defined Benefit Plans - General (Subtopic 715-20): Disclosure Framework - Changes to the Disclosure Requirements for Defined Benefit Plans. The amendments in this ASU modify the disclosure requirements for employers that sponsor defined benefit pension or other postretirement plans by removing disclosures that are no longer considered cost beneficial, clarifying the specific requirements of disclosures and adding disclosure requirements identified as relevant. The amendments in ASU 2018-14 are effective for fiscal years ending after December 15, 2020. The adoption of this guidance on January 1, 2021 did not have an impact on Park’s consolidated financial statements, but will impact annual disclosures.
ASU 2019-20 - Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes: In December 2019, the FASB issued ASU 2019-20 - Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes. ASU 2019-20 includes amendments to simplify accounting for income taxes by removing certain exceptions and adding requirements with the intention of simplifying and clarifying existing guidance. The amendments in ASU 2019-20 are effective for fiscal years, and
interim periods within those fiscal years, beginning after December 15, 2020. The adoption of this guidance on January 1, 2021, did not have a material impact on Park's consolidated financial statements.
ASU 2020-01 - Investments - Equity Securities (Topic 321), Investments - Equity Method and Joint Ventures (Topic 323), and Derivatives and Hedging (Topic 815) - Clarifying the Interactions between Topic 321, Topic 323, and Topic 815: In January 2020, the FASB issued ASU 2020-01 - Investments - Equity Securities (Topic 321), Investments - Equity Method and Joint Ventures (Topic 323), and Derivatives and Hedging (Topic 815) - Clarifying the Interactions between Topic 321, Topic 323, and Topic 815. ASU 2020-01 represents changes to clarify certain interactions between the guidance to account for certain equity securities under Topic 321, the guidance to account for investments under the equity method of accounting in Topic 323, and the guidance in Topic 815. These amendments improve current U.S. GAAP by reducing diversity in practice and increasing comparability of the accounting for these transactions. The amendments in ASU 2020-01 are effective for fiscal years beginning after December 15, 2020, and interim periods within those fiscal years. The adoption of this guidance on January 1, 2021 did not have a material impact on Park's consolidated financial statements.
ASU 2020-08 - Codification Improvements to Subtopic 310-20, Receivables - Nonrefundable Fees and Other Costs: In October 2020, the FASB issued ASU 2020-08 - Codification Improvements to Subtopic 310-20, Receivables - Nonrefundable Fees and Other Costs. ASU 2020-08 clarifies that an entity should reevaluate whether a callable debt security is within the scope of paragraph 310-20-35-33 for each reporting period. The amendments in ASU 2020-08 are effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2020. Early application was not permitted. The adoption of this guidance on January 1, 2021, did not have a material impact on Park's consolidated financial statements.
Issued But Not Yet Effective Accounting Standards
There are no issued by not yet effective accounting standards impacting Park as of March 31, 2021.
Note 3 – Investment Securities
Investment securities at March 31, 2021 and December 31, 2020, were as follows:
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Debt securities AFS (In thousands)
|
|
Amortized
Cost
|
|
Gross
Unrealized
Holding
Gains
|
|
Gross
Unrealized
Holding
Losses
|
|
Fair Value
|
March 31, 2021:
|
|
|
|
|
|
|
|
|
Obligations of states and political subdivisions
|
|
$
|
278,676
|
|
|
$
|
19,637
|
|
|
$
|
—
|
|
|
$
|
298,313
|
|
U.S. Government sponsored entities' asset-backed securities
|
|
800,312
|
|
|
20,955
|
|
|
6,358
|
|
|
814,909
|
|
Corporate debt securities
|
|
2,000
|
|
|
62
|
|
|
—
|
|
|
2,062
|
|
Total
|
|
$
|
1,080,988
|
|
|
$
|
40,654
|
|
|
$
|
6,358
|
|
|
$
|
1,115,284
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Debt securities AFS (In thousands)
|
|
Amortized
Cost
|
|
Gross
Unrealized
Holding
Gains
|
|
Gross
Unrealized
Holding
Losses
|
|
Fair Value
|
December 31, 2020:
|
|
|
|
|
|
|
|
|
Obligations of states and political subdivisions
|
|
$
|
279,245
|
|
|
$
|
25,973
|
|
|
$
|
—
|
|
|
$
|
305,218
|
|
U.S. Government sponsored entities' asset-backed securities
|
|
726,589
|
|
|
26,248
|
|
|
728
|
|
|
752,109
|
|
Corporate debt securities
|
|
2,000
|
|
|
14
|
|
|
—
|
|
|
2,014
|
|
Total
|
|
$
|
1,007,834
|
|
|
$
|
52,235
|
|
|
$
|
728
|
|
|
$
|
1,059,341
|
|
Park’s U.S. Government sponsored entities' asset-backed securities consist primarily of 15-year residential mortgage-backed securities and collateralized mortgage obligations.
Investment securities in an unrealized loss position at March 31, 2021, were as follows:
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized loss position for less than 12 months
|
|
Unrealized loss position for 12 months or longer
|
|
Total
|
(In thousands)
|
|
Fair value
|
|
Unrealized
losses
|
|
Fair value
|
|
Unrealized
losses
|
|
Fair
value
|
|
Unrealized
losses
|
Debt securities AFS
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Government sponsored entities' asset-backed securities
|
|
$
|
220,681
|
|
|
$
|
6,326
|
|
|
$
|
4,255
|
|
|
$
|
32
|
|
|
$
|
224,936
|
|
|
$
|
6,358
|
|
Total
|
|
$
|
220,681
|
|
|
$
|
6,326
|
|
|
$
|
4,255
|
|
|
$
|
32
|
|
|
$
|
224,936
|
|
|
$
|
6,358
|
|
Investment securities in an unrealized loss position at December 31, 2020, were as follows:
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized loss position for less than 12 months
|
|
Unrealized loss position for 12 months or longer
|
|
Total
|
(In thousands)
|
|
Fair value
|
|
Unrealized
losses
|
|
Fair value
|
|
Unrealized
losses
|
|
Fair
value
|
|
Unrealized
losses
|
Debt securities AFS
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Government sponsored entities' asset-backed securities
|
|
$
|
86,393
|
|
|
$
|
695
|
|
|
$
|
4,727
|
|
|
$
|
33
|
|
|
$
|
91,120
|
|
|
$
|
728
|
|
Total
|
|
$
|
86,393
|
|
|
$
|
695
|
|
|
$
|
4,727
|
|
|
$
|
33
|
|
|
$
|
91,120
|
|
|
$
|
728
|
|
Unrealized losses on U.S. Government sponsored entities' asset-based securities have not been recognized into income as they represent negative adjustments to fair value relative to the rate of interest paid on the securities and not losses related to the creditworthiness of the issuer. Management does not intend to sell, and it is not more likely than not that management would be required to sell, the securities prior to their anticipated recovery. Management believes the value will recover as the securities approach maturity or market rates change.
There was no allowance for credit losses recorded for AFS debt securities at March 31, 2021. Additionally, for the three-months ended March 31, 2021 and 2020, there were no credit-related investment impairment losses recognized.
The amortized cost and estimated fair value of investments in debt securities at March 31, 2021, 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.
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Debt securities AFS (In thousands)
|
|
Amortized
cost
|
|
Fair value
|
|
Tax equivalent yield (1)
|
|
|
|
|
|
|
|
U.S. Government sponsored entities' asset-backed securities
|
|
$
|
800,312
|
|
|
$
|
814,909
|
|
|
1.92
|
%
|
|
|
|
|
|
|
|
Corporate debt securities
|
|
|
|
|
|
|
Due five through ten years
|
|
$
|
2,000
|
|
|
$
|
2,062
|
|
|
4.00
|
%
|
|
|
|
|
|
|
|
Obligations of state and political subdivisions:
|
|
|
|
|
|
|
Due five through ten years
|
|
$
|
96,354
|
|
|
$
|
103,192
|
|
|
3.75
|
%
|
Due over ten years
|
|
182,322
|
|
|
195,121
|
|
|
3.67
|
%
|
Total (1)
|
|
$
|
278,676
|
|
|
$
|
298,313
|
|
|
3.70
|
%
|
(1) The tax equivalent yield for certain obligations of state and political subdivisions includes the effects of a taxable equivalent adjustment using a 21% federal corporate income tax rate.
There were no sales of AFS debt securities during the three-month periods ended March 31, 2021 or 2020.
Investment securities having an amortized cost of $747 million and $691 million at March 31, 2021 and December 31, 2020, 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 4 – Other Investment Securities
Other investment securities consist of stock investments in the FHLB, the FRB, and equity securities. The FHLB and FRB stock investments are carried at their redemption value. Equity securities with a readily determinable fair value are carried at fair value. Equity securities without a readily determinable fair value are recorded at cost, minus impairment, if any, plus or minus changes resulting from observable price changes in orderly transactions ("modified cost"). Park's portfolio of equity investments in limited partnerships which provide mezzanine funding ("Partnership Investments") are valued using the NAV practical expedient in accordance with ASC 820.
The carrying amounts of other investment securities at March 31, 2021 and December 31, 2020 were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In thousands)
|
|
March 31, 2021
|
|
December 31, 2020
|
FHLB stock
|
|
$
|
17,807
|
|
|
$
|
22,090
|
|
FRB stock
|
|
14,653
|
|
|
14,653
|
|
Equity investments carried at fair value
|
|
2,012
|
|
|
2,511
|
|
Equity investments carried at modified cost (1)
|
|
4,689
|
|
|
4,689
|
|
Equity investments carried at NAV
|
|
21,795
|
|
|
21,522
|
|
Total other investment securities
|
|
$
|
60,956
|
|
|
$
|
65,465
|
|
1) There have been no impairments, downward adjustments, or upward adjustments made to equity investments carried at modified cost.
During the three months ended March 31, 2021 and 2020, the FHLB repurchased 42,833 and 12,163 shares, respectively, of FHLB stock with a book value of $4.3 million and $1.2 million, respectively. No shares of FRB stock were purchased during the three months ended March 31, 2021 or 2020.
During the three months ended March 31, 2021 and 2020, $435,000 and $(769,000), respectively, of gains (losses) on equity investments carried at fair value were recorded within "Gain (loss) on equity securities, net" on the Consolidated Condensed Statements of Income.
During the three months ended March 31, 2021 and 2020, $1.4 million and $(204,000), respectively, of gains (losses) on equity investments carried at NAV were recorded within “Gain (loss) on equity securities, net” on the Consolidated Condensed Statements of Income.
Note 5 – Loans
The composition of the loan portfolio, by class of loan, at March 31, 2021 and December 31, 2020 was as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2021
|
|
|
December 31, 2020
|
(In thousands)
|
Amortized Cost
|
|
|
Amortized Cost
|
Accrued Interest Receivable
|
Recorded Investment
|
Commercial, financial and agricultural: (1)
|
|
|
|
$
|
1,588,989
|
|
$
|
6,528
|
|
$
|
1,595,517
|
|
Commercial, financial and agricultural (1)
|
$
|
1,198,615
|
|
|
|
(2)
|
(2)
|
(2)
|
PPP loans
|
386,990
|
|
|
|
(2)
|
(2)
|
(2)
|
Overdrafts
|
2,373
|
|
|
|
(2)
|
(2)
|
(2)
|
Commercial real estate (1)
|
1,756,921
|
|
|
|
1,748,189
|
|
6,017
|
|
1,754,206
|
|
Construction real estate:
|
|
|
|
|
|
|
Commercial
|
223,318
|
|
|
|
226,991
|
|
572
|
|
227,563
|
|
Retail
|
114,110
|
|
|
|
116,430
|
|
235
|
|
116,665
|
|
Residential real estate:
|
|
|
|
|
|
|
Commercial
|
541,968
|
|
|
|
526,222
|
|
1,161
|
|
527,383
|
|
Mortgage
|
1,077,696
|
|
|
|
1,096,358
|
|
947
|
|
1,097,305
|
|
HELOC
|
171,388
|
|
|
|
182,028
|
|
647
|
|
182,675
|
|
Installment
|
7,601
|
|
|
|
8,436
|
|
22
|
|
8,458
|
|
Consumer:
|
|
|
|
1,659,704
|
|
4,510
|
|
1,664,214
|
|
Consumer
|
1,657,874
|
|
|
|
(2)
|
(2)
|
(2)
|
Guardian ("GFSC")
|
5,225
|
|
|
|
(2)
|
(2)
|
(2)
|
Check loans
|
2,109
|
|
|
|
(2)
|
(2)
|
(2)
|
Leases
|
22,557
|
|
|
|
24,438
|
|
14
|
|
24,452
|
|
Total
|
$
|
7,168,745
|
|
|
|
$
|
7,177,785
|
|
$
|
20,653
|
|
$
|
7,198,438
|
|
Allowance for credit losses
|
(86,886)
|
|
|
|
(85,675)
|
|
|
|
Net loans
|
$
|
7,081,859
|
|
|
|
$
|
7,092,110
|
|
|
|
(1) Included within each of commercial, financial and agricultural loans and commercial real estate loans is an immaterial amount of consumer loans that were not broken out by class.
(2) Results for reporting periods beginning after January 1, 2021 are presented under ASC 326, while prior period amounts continue to be reported in accordance with previously applicable U.S. GAAP. Category was not broken out as a separate class at December 31, 2020.
In order to support customers, Park participated in the CARES Act Paycheck Protection Program ("PPP"). PPP loans were broken out as a separate class as of March 31, 2021. Included within commercial, financial and agricultural loans as of December 31, 2020 were $331.6 million PPP loans. For its assistance in originating the first round of PPP loans during 2020, Park received an aggregate of $20.2 million in fees from the SBA, of which $4.2 million and $13.7 million were recognized during the three months ended March 31, 2021 and the twelve months ended December 31, 2020, respectively. There were no PPP related fees recognized during the three months ended March 31, 2020. For its assistance in originating additional PPP loans during 2021, Park expects to receive an aggregate of $11.4 million in fees from the SBA, of which $397,000 was recognized within interest income during the three months ended March 31, 2021.
Loans are shown net of deferred origination fees, costs and unearned income of $28.1 million at March 31, 2021, and of $23.6 million at December 31, 2020, which represented a net deferred income position in both years. At March 31, 2021 and December 31, 2020, included in the net deferred origination fees, costs and unearned income was $10.0 million and $6.5 million, respectively, in net origination fees related to PPP loans. At March 31, 2021 and December 31, 2020, loans included purchase accounting adjustments of $6.4 million and $7.2 million, respectively, which represented a net deferred income position at each date. This fair market value purchase accounting adjustment related to loans which are not PCI, is expected to be recognized into interest income on a level yield basis over the remaining expected life of the loans.
Overdrawn deposit accounts of $2.4 million and $2.0 million had been reclassified to loans at March 31, 2021 and December 31, 2020, respectively. As of March 31, 2021, overdrafts were within their own class and as of December 31, 2020, were included in the commercial, financial and agricultural loan class above.
Credit Quality
The following table presents the amortized cost of nonaccrual loans, accruing TDRs, and loans past due 90 days or more and still accruing, by class of loan, at March 31, 2021:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2021
|
(In thousands)
|
|
Nonaccrual
Loans
|
|
Accruing
TDRs
|
|
Loans Past Due
90 Days
or More
and Accruing
|
|
Total
Nonperforming
Loans
|
Commercial, financial and agricultural:
|
|
|
|
|
|
|
|
|
Commercial, financial and agricultural
|
|
$
|
21,121
|
|
|
$
|
590
|
|
|
$
|
—
|
|
|
$
|
21,711
|
|
PPP loans
|
|
—
|
|
|
—
|
|
|
18
|
|
|
18
|
|
Overdrafts
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Commercial real estate
|
|
66,353
|
|
|
2,545
|
|
|
24
|
|
|
68,922
|
|
Construction real estate:
|
|
|
|
|
|
|
|
|
Commercial
|
|
2,962
|
|
|
—
|
|
|
—
|
|
|
2,962
|
|
Retail
|
|
13
|
|
|
28
|
|
|
—
|
|
|
41
|
|
Residential real estate:
|
|
|
|
|
|
|
|
|
Commercial
|
|
5,119
|
|
|
284
|
|
|
—
|
|
|
5,403
|
|
Mortgage
|
|
14,090
|
|
|
7,806
|
|
|
491
|
|
|
22,387
|
|
HELOC
|
|
1,438
|
|
|
825
|
|
|
—
|
|
|
2,263
|
|
Installment
|
|
185
|
|
|
1,772
|
|
|
—
|
|
|
1,957
|
|
Consumer:
|
|
|
|
|
|
|
|
|
Consumer
|
|
1,754
|
|
|
949
|
|
|
239
|
|
|
2,942
|
|
GFSC
|
|
198
|
|
|
18
|
|
|
30
|
|
|
246
|
|
Check loans
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Leases
|
|
1,475
|
|
|
—
|
|
|
—
|
|
|
1,475
|
|
Total loans
|
|
$
|
114,708
|
|
|
$
|
14,817
|
|
|
$
|
802
|
|
|
$
|
130,327
|
|
The following table presents the recorded investment in nonaccrual loans, accruing TDRs, and loans past due 90 days or more and still accruing, by class of loan, at December 31, 2020:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2020
|
(In thousands)
|
|
Nonaccrual
Loans
|
|
Accruing
TDRs
|
|
Loans Past Due 90 Days or More and Accruing
|
|
Total
Nonperforming
Loans
|
Commercial, financial and agricultural
|
|
$
|
23,261
|
|
|
$
|
5,619
|
|
|
$
|
—
|
|
|
$
|
28,880
|
|
Commercial real estate
|
|
67,426
|
|
|
2,931
|
|
|
377
|
|
|
70,734
|
|
Construction real estate:
|
|
|
|
|
|
|
|
|
Commercial
|
|
3,110
|
|
|
—
|
|
|
—
|
|
|
3,110
|
|
Mortgage
|
|
14
|
|
|
31
|
|
|
—
|
|
|
45
|
|
Residential real estate:
|
|
|
|
|
|
|
|
|
Commercial
|
|
4,304
|
|
|
253
|
|
|
—
|
|
|
4,557
|
|
Mortgage
|
|
14,016
|
|
|
8,400
|
|
|
416
|
|
|
22,832
|
|
HELOC
|
|
1,286
|
|
|
909
|
|
|
77
|
|
|
2,272
|
|
Installment
|
|
184
|
|
|
1,728
|
|
|
—
|
|
|
1,912
|
|
Consumer
|
|
2,172
|
|
|
1,017
|
|
|
724
|
|
|
3,913
|
|
Leases
|
|
1,595
|
|
|
—
|
|
|
—
|
|
|
1,595
|
|
Total loans
|
|
$
|
117,368
|
|
|
$
|
20,888
|
|
|
$
|
1,594
|
|
|
$
|
139,850
|
|
The following table provides additional detail on nonaccrual loans and the related ACL, by class of loan, at March 31, 2021:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2021
|
(In thousands)
|
|
Nonaccrual Loans With No ACL
|
|
Nonaccrual Loans With an ACL
|
|
Related ACL
|
Commercial, financial and agricultural:
|
|
|
|
|
|
|
Commercial, financial and agricultural
|
|
$
|
15,166
|
|
|
$
|
5,955
|
|
|
$
|
4,276
|
|
PPP loans
|
|
—
|
|
|
—
|
|
|
—
|
|
Overdrafts
|
|
—
|
|
|
—
|
|
|
—
|
|
Commercial real estate
|
|
59,563
|
|
|
6,790
|
|
|
384
|
|
Construction real estate:
|
|
|
|
|
|
|
Commercial
|
|
2,962
|
|
|
—
|
|
|
—
|
|
Retail
|
|
—
|
|
|
13
|
|
|
—
|
|
Residential real estate:
|
|
|
|
|
|
|
Commercial
|
|
4,815
|
|
|
304
|
|
|
22
|
|
Mortgage
|
|
—
|
|
|
14,090
|
|
|
136
|
|
HELOC
|
|
—
|
|
|
1,438
|
|
|
194
|
|
Installment
|
|
—
|
|
|
185
|
|
|
39
|
|
Consumer
|
|
|
|
|
|
|
Consumer
|
|
—
|
|
|
1,754
|
|
|
570
|
|
GFSC
|
|
—
|
|
|
198
|
|
|
23
|
|
Check loans
|
|
—
|
|
|
—
|
|
|
—
|
|
Leases
|
|
558
|
|
|
917
|
|
|
232
|
|
Total loans
|
|
$
|
83,064
|
|
|
$
|
31,644
|
|
|
$
|
5,876
|
|
Nonaccrual commercial loans are evaluated on an individual basis and are excluded from the collective evaluation. Management’s general practice is to proactively charge down loans individually evaluated to the fair value of the underlying collateral. Nonaccrual consumer loans are collectively evaluated based on similar risk characteristics.
The following table presents loans individually evaluated for impairment by class of loan as of December 31, 2020:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12/31/2020
|
(In thousands)
|
|
Unpaid Principal Balance
|
|
Recorded Investment
|
|
ACL Allocated
|
With no related allowance recorded
|
|
|
|
|
Commercial, financial and agricultural
|
|
$
|
23,316
|
|
|
$
|
22,970
|
|
|
$
|
—
|
|
Commercial real estate
|
|
63,639
|
|
|
63,467
|
|
|
—
|
|
Construction real estate:
|
|
|
|
|
|
|
Commercial
|
|
3,110
|
|
|
3,110
|
|
|
—
|
|
Residential real estate:
|
|
|
|
|
|
|
Commercial
|
|
4,522
|
|
|
4,448
|
|
|
—
|
|
Leases
|
|
568
|
|
|
568
|
|
|
—
|
|
With an allowance recorded
|
|
|
|
|
|
|
Commercial, financial and agricultural
|
|
5,881
|
|
|
5,866
|
|
|
3,758
|
|
Commercial real estate
|
|
6,890
|
|
|
6,890
|
|
|
1,316
|
|
Construction real estate:
|
|
|
|
|
|
|
Commercial
|
|
—
|
|
|
—
|
|
|
—
|
|
Residential real estate:
|
|
|
|
|
|
|
Commercial
|
|
109
|
|
|
109
|
|
|
16
|
|
Leases
|
|
1,027
|
|
|
1,027
|
|
|
344
|
|
Total
|
|
$
|
109,062
|
|
|
$
|
108,455
|
|
|
$
|
5,434
|
|
The following table provides the amortized cost basis of collateral-dependent loans by class of loan, as of March 31, 2021:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2021
|
(In thousands)
|
|
Real Estate
|
|
Business Assets
|
|
Other
|
Total
|
Commercial, financial and agricultural
|
|
|
|
|
|
|
|
Commercial, financial and agricultural
|
|
$
|
8,482
|
|
|
$
|
12,288
|
|
|
$
|
1,204
|
|
$
|
21,974
|
|
Commercial real estate
|
|
67,253
|
|
|
8,482
|
|
|
60
|
|
75,795
|
|
Construction real estate:
|
|
|
|
|
|
|
|
Commercial
|
|
3,946
|
|
|
—
|
|
|
—
|
|
3,946
|
|
Residential real estate:
|
|
|
|
|
|
|
|
Commercial
|
|
6,880
|
|
|
—
|
|
|
—
|
|
6,880
|
|
Mortgage
|
|
383
|
|
|
—
|
|
|
—
|
|
383
|
|
HELOC
|
|
136
|
|
|
—
|
|
|
—
|
|
136
|
|
Leases
|
|
—
|
|
|
1,577
|
|
|
—
|
|
1,577
|
|
Total loans
|
|
$
|
87,080
|
|
|
$
|
22,347
|
|
|
$
|
1,264
|
|
$
|
110,691
|
|
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 in the loans. Interest income on accruing TDRs individually evaluated for impairment continues to be recorded on an accrual basis. The following table presents interest income recognized on nonaccrual loans for the three-month period ended March 31, 2021:
|
|
|
|
|
|
|
|
|
(In thousands)
|
|
Interest Income Recognized
|
Commercial, financial and agricultural:
|
|
|
Commercial, financial and agricultural
|
|
$
|
57
|
|
PPP loans
|
|
—
|
|
Overdrafts
|
|
—
|
|
Commercial real estate
|
|
515
|
|
Construction real estate:
|
|
|
Commercial
|
|
33
|
|
Retail
|
|
1
|
|
Residential real estate:
|
|
|
Commercial
|
|
46
|
|
Mortgage
|
|
79
|
|
HELOC
|
|
4
|
|
Installment
|
|
1
|
|
Consumer:
|
|
|
Consumer
|
|
23
|
|
GFSC
|
|
5
|
|
Check loans
|
|
—
|
|
Leases
|
|
20
|
|
Total loans
|
|
$
|
784
|
|
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, 2020:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended
March 31, 2020
|
(In thousands)
|
|
Recorded Investment as of March 31, 2020
|
|
Average Recorded Investment
|
|
Interest Income Recognized
|
Commercial, financial and agricultural
|
|
$
|
29,542
|
|
|
$
|
31,657
|
|
|
$
|
204
|
|
Commercial real estate
|
|
50,147
|
|
|
44,457
|
|
|
481
|
|
Construction real estate:
|
|
|
|
|
|
|
Commercial
|
|
452
|
|
|
424
|
|
|
4
|
|
Residential real estate:
|
|
|
|
|
|
|
Commercial
|
|
5,581
|
|
|
2,925
|
|
|
23
|
|
Leases
|
|
129
|
|
|
132
|
|
|
—
|
|
Total
|
|
$
|
85,851
|
|
|
$
|
79,595
|
|
|
$
|
712
|
|
The following table presents the aging of the amortized cost in past due loans at March 31, 2021 by class of loan:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2021
|
(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
Amortized Cost
|
Commercial, financial and agricultural:
|
|
|
|
|
|
|
|
|
|
Commercial, financial and agricultural
|
$
|
4,197
|
|
|
$
|
11,328
|
|
|
$
|
15,525
|
|
|
$
|
1,183,090
|
|
|
$
|
1,198,615
|
|
PPP loans
|
—
|
|
|
18
|
|
|
18
|
|
|
386,972
|
|
|
386,990
|
|
Overdrafts
|
—
|
|
|
—
|
|
|
—
|
|
|
2,373
|
|
|
2,373
|
|
Commercial real estate
|
2,099
|
|
|
795
|
|
|
2,894
|
|
|
1,754,027
|
|
|
1,756,921
|
|
Construction real estate:
|
|
|
|
|
|
|
|
|
|
Commercial
|
—
|
|
|
25
|
|
|
25
|
|
|
223,293
|
|
|
223,318
|
|
Retail
|
—
|
|
|
—
|
|
|
—
|
|
|
114,110
|
|
|
114,110
|
|
Residential real estate:
|
|
|
|
|
|
|
|
|
|
Commercial
|
16
|
|
|
395
|
|
|
411
|
|
|
541,557
|
|
|
541,968
|
|
Mortgage
|
4,491
|
|
|
6,902
|
|
|
11,393
|
|
|
1,066,303
|
|
|
1,077,696
|
|
HELOC
|
57
|
|
|
663
|
|
|
720
|
|
|
170,668
|
|
|
171,388
|
|
Installment
|
71
|
|
|
68
|
|
|
139
|
|
|
7,462
|
|
|
7,601
|
|
Consumer:
|
|
|
|
|
|
|
|
|
|
Consumer
|
1,854
|
|
|
543
|
|
|
2,397
|
|
|
1,655,477
|
|
|
1,657,874
|
|
GFSC
|
241
|
|
|
160
|
|
|
401
|
|
|
4,824
|
|
|
5,225
|
|
Check loans
|
6
|
|
|
—
|
|
|
6
|
|
|
2,103
|
|
|
2,109
|
|
Leases
|
133
|
|
|
41
|
|
|
174
|
|
|
22,383
|
|
|
22,557
|
|
Total loans
|
$
|
13,165
|
|
|
$
|
20,938
|
|
|
$
|
34,103
|
|
|
$
|
7,134,642
|
|
|
$
|
7,168,745
|
|
(1) Includes an aggregate of $0.8 million of loans past due 90 days or more and accruing. The remaining loans were past due nonaccrual loans.
(2) Includes an aggregate of $94.6 million of nonaccrual loans which were current in regards to contractual principal and interest payments.
The following table presents the aging of the recorded investment in past due loans at December 31, 2020 by class of loan:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2020
|
(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
|
$
|
7,372
|
|
|
$
|
13,968
|
|
|
$
|
21,340
|
|
|
$
|
1,574,177
|
|
|
$
|
1,595,517
|
|
Commercial real estate
|
82
|
|
|
972
|
|
|
1,054
|
|
|
1,753,152
|
|
|
1,754,206
|
|
Construction real estate:
|
|
|
|
|
|
|
|
|
|
Commercial
|
—
|
|
|
39
|
|
|
39
|
|
|
227,524
|
|
|
227,563
|
|
Mortgage
|
77
|
|
|
—
|
|
|
77
|
|
|
115,647
|
|
|
115,724
|
|
Installment
|
12
|
|
|
—
|
|
|
12
|
|
|
929
|
|
|
941
|
|
Residential real estate:
|
|
|
|
|
|
|
|
|
|
Commercial
|
17
|
|
|
493
|
|
|
510
|
|
|
526,873
|
|
|
527,383
|
|
Mortgage
|
9,538
|
|
|
7,814
|
|
|
17,352
|
|
|
1,079,953
|
|
|
1,097,305
|
|
HELOC
|
805
|
|
|
810
|
|
|
1,615
|
|
|
181,060
|
|
|
182,675
|
|
Installment
|
67
|
|
|
71
|
|
|
138
|
|
|
8,320
|
|
|
8,458
|
|
Consumer
|
5,496
|
|
|
1,213
|
|
|
6,709
|
|
|
1,657,505
|
|
|
1,664,214
|
|
Leases
|
186
|
|
|
984
|
|
|
1,170
|
|
|
23,282
|
|
|
24,452
|
|
Total loans
|
$
|
23,652
|
|
|
$
|
26,364
|
|
|
$
|
50,016
|
|
|
$
|
7,148,422
|
|
|
$
|
7,198,438
|
|
(1) Includes an aggregate of $1.6 million of loans past due 90 days or more and accruing. The remaining loans were past due nonaccrual loans.
(2) Includes an aggregate of $92.6 million of nonaccrual loans which were current in regards to contractual principal and interest payments.
Credit Quality Indicators
Management utilizes past due information as a credit quality indicator across the loan portfolio. Past due information at March 31, 2021 and December 31, 2020 is included in the previous tables. The past due information is the primary credit quality indicator within the following classes of loans: (1) overdrafts in the commercial, financial and agricultural portfolio segment; (2) retail loans in the construction real estate portfolio segment; (3) mortgage loans, HELOC and installment loans in the residential real estate portfolio segment; (4) consumer loans, GFSC loans, and check loans in the consumer portfolio segment. The primary credit indicator for commercial loans is based on an internal grading system that grades all commercial loans on a scale from 1 to 8. Credit grades are continuously monitored by the responsible loan officer and adjustments are made when appropriate. A grade of 1 indicates little or no credit risk and a grade of 8 is considered a loss. Commercial loans that are pass-rated (graded a 1 through a 4) are considered to be of acceptable credit risk. Commercial loans graded a 5 (special mention) are considered to be watch list credits and a higher PD is applied to these loans. Loans classified as special mention have potential weaknesses that require management’s close attention. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the loan or of Park’s credit position at some future date. Commercial loans graded a 6 (substandard), also considered watch list credits, are considered to represent higher credit risk and, as a result, a higher PD is applied 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 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, and is individually evaluated, 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.
Based on the most recent analysis performed, the risk category of loans by class of loans as of March 31, 2021 follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2021
|
Term Loans Amortized Cost Basis by Origination Year
|
|
|
(In thousands)
|
2021
|
2020
|
2019
|
2018
|
2017
|
Prior
|
Revolving Loans Amortized Cost Basis
|
Total
|
Commercial, financial and agricultural: Commercial, financial and agricultural (1)
|
|
|
|
|
|
|
Risk rating
|
|
|
|
|
|
|
|
|
Pass
|
$
|
64,238
|
|
$
|
274,617
|
|
$
|
152,264
|
|
$
|
81,010
|
|
$
|
57,500
|
|
$
|
101,673
|
|
$
|
431,548
|
|
$
|
1,162,850
|
|
Special Mention
|
—
|
|
2,650
|
|
906
|
|
485
|
|
675
|
|
48
|
|
9,612
|
|
14,376
|
|
Substandard
|
671
|
|
983
|
|
2,110
|
|
2,665
|
|
735
|
|
7,750
|
|
797
|
|
15,711
|
|
Doubtful
|
1,490
|
|
34
|
|
—
|
|
240
|
|
2,028
|
|
1,386
|
|
500
|
|
5,678
|
|
Total
|
$
|
66,399
|
|
$
|
278,284
|
|
$
|
155,280
|
|
$
|
84,400
|
|
$
|
60,938
|
|
$
|
110,857
|
|
$
|
442,457
|
|
$
|
1,198,615
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial, financial and agricultural: PPP
|
|
|
|
|
|
|
Risk rating
|
|
|
|
|
|
|
|
|
Pass
|
$
|
198,993
|
|
$
|
187,997
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
386,990
|
|
Special Mention
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
Substandard
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
Doubtful
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
Total
|
$
|
198,993
|
|
$
|
187,997
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
386,990
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial real estate (1)
|
|
|
|
|
|
|
|
|
Risk rating
|
|
|
|
|
|
|
|
|
Pass
|
$
|
78,310
|
|
$
|
461,291
|
|
$
|
284,715
|
|
$
|
203,496
|
|
$
|
132,084
|
|
$
|
419,891
|
|
$
|
14,667
|
|
$
|
1,594,454
|
|
Special Mention
|
272
|
|
8,999
|
|
36,259
|
|
9,666
|
|
8,265
|
|
24,458
|
|
3,589
|
|
91,508
|
|
Substandard
|
—
|
|
5,656
|
|
15,227
|
|
4,900
|
|
15,347
|
|
17,835
|
|
536
|
|
59,501
|
|
Doubtful
|
—
|
|
—
|
|
—
|
|
6,258
|
|
—
|
|
5,200
|
|
—
|
|
11,458
|
|
Total
|
$
|
78,582
|
|
$
|
475,946
|
|
$
|
336,201
|
|
$
|
224,320
|
|
$
|
155,696
|
|
$
|
467,384
|
|
$
|
18,792
|
|
$
|
1,756,921
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2021
|
Term Loans Amortized Cost Basis by Origination Year
|
|
|
(In thousands)
|
2021
|
2020
|
2019
|
2018
|
2017
|
Prior
|
Revolving Loans Amortized Cost Basis
|
Total
|
Construction real estate: Commercial
|
|
|
|
|
|
|
Risk rating
|
|
|
|
|
|
|
|
|
Pass
|
$
|
14,483
|
|
$
|
113,857
|
|
$
|
50,274
|
|
$
|
11,832
|
|
$
|
2,679
|
|
$
|
7,100
|
|
$
|
16,012
|
|
$
|
216,237
|
|
Special Mention
|
—
|
|
2,971
|
|
—
|
|
163
|
|
—
|
|
—
|
|
—
|
|
3,134
|
|
Substandard
|
—
|
|
96
|
|
8
|
|
1,010
|
|
—
|
|
—
|
|
256
|
|
1,370
|
|
Doubtful
|
—
|
|
—
|
|
—
|
|
2,577
|
|
—
|
|
—
|
|
—
|
|
2,577
|
|
Total
|
$
|
14,483
|
|
$
|
116,924
|
|
$
|
50,282
|
|
$
|
15,582
|
|
$
|
2,679
|
|
$
|
7,100
|
|
$
|
16,268
|
|
$
|
223,318
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential Real Estate: Commercial
|
|
|
|
|
|
|
Risk rating
|
|
|
|
|
|
|
|
|
Pass
|
$
|
40,074
|
|
$
|
194,242
|
|
$
|
77,477
|
|
$
|
60,448
|
|
$
|
35,732
|
|
$
|
108,139
|
|
$
|
16,402
|
|
$
|
532,514
|
|
Special Mention
|
—
|
|
150
|
|
—
|
|
—
|
|
2,131
|
|
336
|
|
281
|
|
2,898
|
|
Substandard
|
—
|
|
—
|
|
1,140
|
|
3,522
|
|
320
|
|
1,054
|
|
—
|
|
6,036
|
|
Doubtful
|
—
|
|
—
|
|
—
|
|
43
|
|
216
|
|
30
|
|
231
|
|
520
|
|
Total
|
$
|
40,074
|
|
$
|
194,392
|
|
$
|
78,617
|
|
$
|
64,013
|
|
$
|
38,399
|
|
$
|
109,559
|
|
$
|
16,914
|
|
$
|
541,968
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Leases
|
|
|
|
|
|
|
Risk rating
|
|
|
|
|
|
|
|
|
Pass
|
$
|
1,263
|
|
$
|
7,397
|
|
$
|
5,391
|
|
$
|
3,665
|
|
$
|
1,378
|
|
$
|
1,576
|
|
$
|
—
|
|
$
|
20,670
|
|
Special Mention
|
—
|
|
245
|
|
66
|
|
—
|
|
42
|
|
—
|
|
—
|
|
353
|
|
Substandard
|
—
|
|
477
|
|
—
|
|
60
|
|
26
|
|
54
|
|
—
|
|
617
|
|
Doubtful
|
—
|
|
519
|
|
213
|
|
45
|
|
64
|
|
76
|
|
—
|
|
917
|
|
Total
|
$
|
1,263
|
|
$
|
8,638
|
|
$
|
5,670
|
|
$
|
3,770
|
|
$
|
1,510
|
|
$
|
1,706
|
|
$
|
—
|
|
$
|
22,557
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Commercial Loans
|
|
|
|
|
|
|
Risk rating
|
|
|
|
|
|
|
|
|
Pass
|
$
|
397,361
|
|
$
|
1,239,401
|
|
$
|
570,121
|
|
$
|
360,451
|
|
$
|
229,373
|
|
$
|
638,379
|
|
$
|
478,629
|
|
$
|
3,913,715
|
|
Special Mention
|
272
|
|
15,015
|
|
37,231
|
|
10,314
|
|
11,113
|
|
24,842
|
|
13,482
|
|
112,269
|
|
Substandard
|
671
|
|
7,212
|
|
18,485
|
|
12,157
|
|
16,428
|
|
26,693
|
|
1,589
|
|
83,235
|
|
Doubtful
|
1,490
|
|
553
|
|
213
|
|
9,163
|
|
2,308
|
|
6,692
|
|
731
|
|
21,150
|
|
Total
|
$
|
399,794
|
|
$
|
1,262,181
|
|
$
|
626,050
|
|
$
|
392,085
|
|
$
|
259,222
|
|
$
|
696,606
|
|
$
|
494,431
|
|
$
|
4,130,369
|
|
(1) 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.
The table below presents the recorded investment by loan grade at December 31, 2020 for all commercial loans:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12/31/2020
|
(In thousands)
|
|
5 Rated
|
|
6 Rated
|
|
Nonaccrual and Accruing TDRs
|
|
Purchased Credit Impaired
|
|
Pass-Rated
|
|
Recorded
Investment
|
Commercial, financial and agricultural (1)
|
|
$
|
14,638
|
|
|
$
|
—
|
|
|
$
|
28,880
|
|
|
$
|
337
|
|
|
$
|
1,551,662
|
|
|
$
|
1,595,517
|
|
Commercial real estate (1)
|
|
87,439
|
|
|
117
|
|
|
70,357
|
|
|
7,461
|
|
|
1,588,832
|
|
|
1,754,206
|
|
Construction real estate:
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial
|
|
164
|
|
|
—
|
|
|
3,110
|
|
|
1,002
|
|
|
223,287
|
|
|
227,563
|
|
Residential real estate:
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial
|
|
798
|
|
|
22
|
|
|
4,557
|
|
|
1,510
|
|
|
520,496
|
|
|
527,383
|
|
Leases
|
|
331
|
|
|
—
|
|
|
1,595
|
|
|
112
|
|
|
22,414
|
|
|
24,452
|
|
Total Commercial Loans
|
|
$
|
103,370
|
|
|
$
|
139
|
|
|
$
|
108,499
|
|
|
$
|
10,422
|
|
|
$
|
3,906,691
|
|
|
$
|
4,129,121
|
|
(1) Included within each of commercial, financial and agricultural loans and commercial real estate loans is an immaterial amount of consumer loans that were not broken out by class.
Park considers the performance of the loan portfolio and its impact on the allowance for credit losses. For residential and consumer loan classes, Park also evaluates credit quality based on the aging status of the loan, which was previously presented, and by performing status. The following tables present the amortized cost in residential and consumer loans based on performing status. Park defines a loan as nonperforming if it is on nonaccrual status, designated as an accruing TDR, or is greater than 90 days past due and accruing.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2021
|
Term Loans Amortized Cost Basis by Origination Year
|
|
|
(In thousands)
|
2021
|
2020
|
2019
|
2018
|
2017
|
Prior
|
Revolving Loans Amortized Cost Basis
|
Total
|
Commercial, financial and agricultural: Overdrafts
|
|
|
|
|
|
|
Performing
|
$
|
2,373
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
2,373
|
|
Nonperforming
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
Total
|
$
|
2,373
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
2,373
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Construction Real Estate: Retail
|
|
|
|
|
|
|
Performing
|
$
|
7,246
|
|
$
|
85,363
|
|
$
|
12,652
|
|
$
|
3,888
|
|
$
|
2,061
|
|
$
|
2,783
|
|
$
|
76
|
|
$
|
114,069
|
|
Nonperforming
|
—
|
|
—
|
|
—
|
|
—
|
|
17
|
|
24
|
|
—
|
|
41
|
|
Total
|
$
|
7,246
|
|
$
|
85,363
|
|
$
|
12,652
|
|
$
|
3,888
|
|
$
|
2,078
|
|
$
|
2,807
|
|
$
|
76
|
|
$
|
114,110
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential Real Estate: Mortgage
|
|
|
|
|
|
|
Performing
|
$
|
83,060
|
|
$
|
220,655
|
|
$
|
154,818
|
|
$
|
96,678
|
|
$
|
78,671
|
|
$
|
421,427
|
|
$
|
—
|
|
$
|
1,055,309
|
|
Nonperforming
|
—
|
|
—
|
|
640
|
|
724
|
|
990
|
|
20,033
|
|
—
|
|
22,387
|
|
Total
|
$
|
83,060
|
|
$
|
220,655
|
|
$
|
155,458
|
|
$
|
97,402
|
|
$
|
79,661
|
|
$
|
441,460
|
|
$
|
—
|
|
$
|
1,077,696
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential Real Estate: HELOC
|
|
|
|
|
|
|
Performing
|
$
|
—
|
|
$
|
—
|
|
$
|
151
|
|
$
|
23
|
|
$
|
231
|
|
$
|
3,502
|
|
$
|
165,218
|
|
$
|
169,125
|
|
Nonperforming
|
—
|
|
—
|
|
—
|
|
—
|
|
83
|
|
1,419
|
|
761
|
|
2,263
|
|
Total
|
$
|
—
|
|
$
|
—
|
|
$
|
151
|
|
$
|
23
|
|
$
|
314
|
|
$
|
4,921
|
|
$
|
165,979
|
|
$
|
171,388
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential Real Estate: Installment
|
|
|
|
|
|
|
Performing
|
$
|
—
|
|
$
|
100
|
|
$
|
713
|
|
$
|
180
|
|
$
|
1,453
|
|
$
|
3,198
|
|
$
|
—
|
|
$
|
5,644
|
|
Nonperforming
|
—
|
|
16
|
|
2
|
|
49
|
|
97
|
|
1,793
|
|
—
|
|
1,957
|
|
Total
|
$
|
—
|
|
$
|
116
|
|
$
|
715
|
|
$
|
229
|
|
$
|
1,550
|
|
$
|
4,991
|
|
$
|
—
|
|
$
|
7,601
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consumer: Consumer
|
|
|
|
|
|
|
|
|
Performing
|
$
|
162,761
|
|
$
|
684,477
|
|
$
|
377,476
|
|
$
|
186,795
|
|
$
|
112,054
|
|
$
|
107,435
|
|
$
|
23,934
|
|
$
|
1,654,932
|
|
Nonperforming
|
27
|
|
327
|
|
796
|
|
576
|
|
374
|
|
842
|
|
—
|
|
2,942
|
|
Total
|
$
|
162,788
|
|
$
|
684,804
|
|
$
|
378,272
|
|
$
|
187,371
|
|
$
|
112,428
|
|
$
|
108,277
|
|
$
|
23,934
|
|
$
|
1,657,874
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consumer: GFSC
|
|
|
|
|
|
|
|
|
Performing
|
$
|
—
|
|
$
|
535
|
|
$
|
3,008
|
|
$
|
1,061
|
|
$
|
293
|
|
$
|
(99)
|
|
$
|
181
|
|
$
|
4,979
|
|
Nonperforming
|
—
|
|
4
|
|
130
|
|
71
|
|
34
|
|
7
|
|
—
|
|
246
|
|
Total
|
$
|
—
|
|
$
|
539
|
|
$
|
3,138
|
|
$
|
1,132
|
|
$
|
327
|
|
$
|
(92)
|
|
$
|
181
|
|
$
|
5,225
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consumer: Check loans
|
|
|
|
|
|
|
|
|
Performing
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
2,109
|
|
$
|
2,109
|
|
Nonperforming
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
Total
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
2,109
|
|
$
|
2,109
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Consumer Loans
|
|
|
|
|
|
|
|
|
Performing
|
$
|
255,440
|
|
$
|
991,130
|
|
$
|
548,818
|
|
$
|
288,625
|
|
$
|
194,763
|
|
$
|
538,246
|
|
$
|
191,518
|
|
$
|
3,008,540
|
|
Nonperforming
|
27
|
|
347
|
|
1,568
|
|
1,420
|
|
1,595
|
|
24,118
|
|
—
|
|
29,075
|
|
Total
|
$
|
255,467
|
|
$
|
991,477
|
|
$
|
550,386
|
|
$
|
290,045
|
|
$
|
196,358
|
|
$
|
562,364
|
|
$
|
191,518
|
|
$
|
3,037,615
|
|
Loans and Leases Acquired with Deteriorated Credit Quality
In conjunction with the NewDominion acquisition, Park acquired loans with a book value of $277.9 million as of the July 1, 2018 acquisition date. These loans were recorded at the initial fair value of $272.8 million. Loans acquired with deteriorated credit quality (ASC 310-30) with a book value of $5.1 million were recorded at the initial fair value of $4.9 million. In conjunction with the Carolina Alliance acquisition, Park acquired loans and leases with a book value of $589.7 million as of the April 1, 2019 acquisition date. These loans and leases were recorded at the initial fair value of $578.6 million. Loans and leases acquired with deteriorated credit quality (ASC 310-30) with a book value of $19.9 million were recorded at the initial fair value of $18.4 million.
Upon adoption of CECL on January 1, 2021, $52,000 of credit mark on PCD loans was reclassified to the allowance for credit losses. At March 31, 2021, there was no allowance for credit losses on PCD loans. The carrying amount of loans acquired with deteriorated credit quality at March 31, 2021 and December 31, 2020 was $10.3 million and $11.2 million, respectively.
Troubled Debt Restructurings
Management typically 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.
Additionally, Park is working with borrowers impacted by the COVID-19 pandemic and providing modifications to include either interest only deferral or principal and interest deferral, in each case, for initial periods up to 90 days. As necessary, Park is making available a second 90-day interest only deferral or principal and interest deferral bringing the total potential deferral period to six months. A majority of these modifications are excluded from TDR classification under Section 4013 of the CARES Act or under applicable interagency guidance of the federal banking regulators. In accordance with this guidance, such modified loans will be considered current and will continue to accrue interest during the deferral period.
Certain other loans which were modified during the three-month periods ended March 31, 2021 and 2020 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.
At March 31, 2021 and December 31, 2020, there were $23.8 million and $25.8 million, respectively, of TDRs included in the nonaccrual loan totals. At March 31, 2021 and December 31, 2020, $13.9 million and $12.9 million, respectively, of these nonaccrual TDRs were performing in accordance with the terms of the restructured notes. At March 31, 2021 and December 31, 2020, loans totaling $14.8 million and $20.9 million, respectively, were included in accruing TDR loan totals. Management will continue to review the restructured loans and may determine it is appropriate to move certain nonaccrual TDRs to accrual status in the future.
At March 31, 2021 and December 31, 2020, Park had commitments to lend $10.3 million and $6.7 million, respectively, of additional funds to borrowers whose outstanding loan terms had been modified in a TDR.
At March 31, 2021 and December 31, 2020, there were $0.3 million and $0.2 million, respectively, of specific reserves related to TDRs. Modifications made in 2021 and 2020 were largely the result of renewals and extending the maturity date of the loans at terms consistent with the original notes. These modifications were deemed to be TDRs primarily due to Park’s conclusion that the borrower would likely not have qualified for similar terms through another lender. Many of the modifications deemed to be TDRs were previously identified as impaired loans, and thus were also previously evaluated for impairment under ASC 310. There were no additional specific reserves recorded during either the three-month period ended March 31, 2021 or 2020 as a result of TDRs identified in the period.
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 and the terms of the renewal/modification are considered
to be market terms based on the current risk characteristics of the borrower, management considers the potential removal of the TDR classification. If deemed appropriate, the TDR classification is removed if the borrower has complied with the terms of the loan at the date of the renewal/modification and there was a reasonable expectation that the borrower will continue to comply with the terms of the loan subsequent to the date of the renewal/modification. The majority of these TDRs were originally considered restructurings in a prior year as a result of a renewal/modification with an interest rate that was not commensurate with the risk of the underlying loan at the time of the renewal/modification. The TDR classification was removed on $3.9 million of loans during the three-month period ended March 31, 2021. There were no TDR classifications removed during the three-month period ended March 31, 2020.
The terms of certain other loans were modified during the three-month period ended March 31, 2021 and 2020 that did not meet the definition of a TDR. Excluding COVID-19 related modifications, there were no substandard commercial loans modified during the three-month period ended March 31, 2021, which did not meet the definition of a TDR. There were $0.1 million of substandard commercial loans modified during the three-month period ended March 31, 2020 which did not meet the definition of a TDR. Excluding COVID-19 related modifications, consumer loans modified during the three-month periods ended March 31, 2021 and 2020 which did not meet the definition of a TDR had a total recorded investment of $9.8 million and $12.2 million, respectively. Many of these loans were to borrowers who were not experiencing financial difficulties but who were looking to reduce their cost of funds.
During the fifteen months ended March 31, 2021, Park modified 5,120 consumer loans, with an aggregate balance of $96.3 million, and modified 1,405 commercial loans, with an aggregate balance of $573.3 million, in each case related to a hardship caused by the COVID-19 pandemic and responses thereto. Of the $96.3 million in consumer COVID-19 related modifications, $2.1 million were already classified as TDRs due to previous modifications and $974,000 were classified as TDRs due to the COVID-19 modification. Of the $573.3 million in commercial COVID-19 related modifications, $6.4 million were already classified as TDRs due to previous modifications and $77,000 were classified as TDRs due to the COVID-19 modification. The remaining loans met the exclusion criteria for TDR accounting either in Section 4013 of the CARES Act or in applicable interagency guidance.
The following tables detail the number of contracts modified as TDRs during the three-month periods ended March 31, 2021 and 2020, as well as the amortized cost/recorded investment of these contracts at March 31, 2021 and 2020. The amortized cost/recorded investment pre- and post-modification is generally the same due to the fact that Park does not typically forgive principal.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
March 31, 2021
|
(In thousands)
|
Number of
Contracts
|
|
Accruing
|
|
Nonaccrual
|
|
Total Amortized Cost
|
Commercial, financial and agricultural
|
|
|
|
|
|
|
|
Commercial, financial and agricultural
|
1
|
|
|
$
|
—
|
|
|
$
|
200
|
|
|
$
|
200
|
|
PPP loans
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Overdrafts
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Commercial real estate
|
5
|
|
|
272
|
|
|
1,353
|
|
|
1,625
|
|
Construction real estate:
|
|
|
|
|
|
|
|
Commercial
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Retail
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Residential real estate:
|
|
|
|
|
|
|
|
Commercial
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Mortgage
|
6
|
|
|
137
|
|
|
139
|
|
|
276
|
|
HELOC
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Installment
|
5
|
|
|
118
|
|
|
28
|
|
|
146
|
|
Consumer:
|
|
|
|
|
|
|
|
Consumer
|
34
|
|
|
72
|
|
|
287
|
|
|
359
|
|
GFSC
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Check loans
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Leases
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Total loans
|
51
|
|
|
$
|
599
|
|
|
$
|
2,007
|
|
|
$
|
2,606
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
March 31, 2020
|
(In thousands)
|
Number of
Contracts
|
|
Accruing
|
|
Nonaccrual
|
|
Total
Recorded
Investment
|
Commercial, financial and agricultural
|
4
|
|
|
$
|
—
|
|
|
$
|
1,094
|
|
|
$
|
1,094
|
|
Commercial real estate
|
2
|
|
|
1,136
|
|
|
60
|
|
|
1,196
|
|
Construction real estate:
|
|
|
|
|
|
|
|
Commercial
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Mortgage
|
1
|
|
|
11
|
|
|
—
|
|
|
11
|
|
Installment
|
1
|
|
|
15
|
|
|
—
|
|
|
15
|
|
Residential real estate:
|
|
|
|
|
|
|
|
Commercial
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Mortgage
|
6
|
|
|
111
|
|
|
280
|
|
|
391
|
|
HELOC
|
3
|
|
|
101
|
|
|
9
|
|
|
110
|
|
Installment
|
8
|
|
|
110
|
|
|
17
|
|
|
127
|
|
Consumer
|
57
|
|
|
112
|
|
|
352
|
|
|
464
|
|
Total loans
|
82
|
|
|
$
|
1,596
|
|
|
$
|
1,812
|
|
|
$
|
3,408
|
|
Of those loans which were modified and determined to be a TDR during the three-month period ended March 31, 2021, $1.7 million were on nonaccrual status at December 31, 2020. Of those loans which were modified and determined to be a TDR during the three-month period ended March 31, 2020, $0.3 million were on nonaccrual status at December 31, 2019.
The following tables present the amortized cost/recorded investment in loans 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, 2021 and 2020, 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 ACL resulting from the defaults on TDR loans was immaterial.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
March 31, 2021
|
|
|
Three Months Ended
March 31, 2020
|
(In thousands)
|
Number of
Contracts
|
|
Amortized Cost
|
|
|
Number of
Contracts
|
|
Recorded
Investment
|
Commercial, financial and agricultural:
|
|
|
|
|
|
2
|
|
|
$
|
4,068
|
|
Commercial, financial and agricultural
|
—
|
|
|
$
|
—
|
|
|
|
(1)
|
|
(1)
|
PPP loans
|
—
|
|
|
—
|
|
|
|
(1)
|
|
(1)
|
Overdrafts
|
—
|
|
|
—
|
|
|
|
(1)
|
|
(1)
|
Commercial real estate
|
—
|
|
|
—
|
|
|
|
—
|
|
|
—
|
|
Construction real estate:
|
|
|
|
|
|
|
|
|
Commercial
|
—
|
|
|
—
|
|
|
|
—
|
|
|
—
|
|
Mortgage
|
—
|
|
|
—
|
|
|
|
2
|
|
|
92
|
|
Residential real estate:
|
|
|
|
|
|
|
|
|
Commercial
|
—
|
|
|
—
|
|
|
|
—
|
|
|
—
|
|
Mortgage
|
10
|
|
|
763
|
|
|
|
4
|
|
|
443
|
|
HELOC
|
—
|
|
|
—
|
|
|
|
4
|
|
|
71
|
|
Installment
|
2
|
|
|
36
|
|
|
|
1
|
|
|
17
|
|
Consumer
|
|
|
|
|
|
36
|
|
|
369
|
|
Consumer
|
19
|
|
|
210
|
|
|
|
(1)
|
|
(1)
|
GFSC
|
5
|
|
|
25
|
|
|
|
(1)
|
|
(1)
|
Check loans
|
—
|
|
|
—
|
|
|
|
(1)
|
|
(1)
|
Leases
|
—
|
|
|
—
|
|
|
|
—
|
|
|
—
|
|
Total loans
|
36
|
|
|
$
|
1,034
|
|
|
|
49
|
|
|
$
|
5,060
|
|
(1) Results for reporting periods beginning after January 1, 2021 are presented under ASC 326, while prior period amounts continue to be reported in accordance with previously applicable U.S. GAAP. Category was not broken out as a separate class at December 31, 2020.
Of the $1.0 million in modified TDRs which defaulted during the three-month period ended March 31, 2021, $0.3 million were accruing loans and $0.7 million were nonaccrual loans. Of the $5.1 million in modified TDRs which defaulted during the three-month period ended March 31, 2020, $4.5 million were accruing loans and $0.5 million were nonaccrual loans.
Note 6 – Allowance for Credit Losses
The ACL is an estimate of the expected credit losses on financial assets measured at amortized cost, which is measured using relevant information about past events, including historical credit loss experience on financial assets with similar risk characteristics, current conditions, and reasonable and supportable forecasts that affect the collectability of the remaining cash flows over the contractual term of the financial assets. A provision for credit losses is charged to operations based on management’s periodic evaluation of these and other pertinent factors as discussed within Note 2 – Adoption of New Accounting Pronouncements and Issued But Not Yet Effective Accounting Standards of the Notes to the Consolidated Condensed Financial Statements included in this Form 10-Q.
During the first quarter of 2021, Park adopted ASU 2016-13, including the CECL methodology for estimating the ACL. This standard was adopted prospectively on January 1, 2021, resulting in a $6.1 million increase to the ACL and a $3.9 million increase to the allowance for unfunded credit losses. A cumulative effect adjustment resulting in an $8.0 million decrease to retained earnings and a $2.1 million increase to deferred tax assets was also recorded as of the adoption of ASU 2016-13.
Quantitative Considerations
The ACL is primarily calculated utilizing a DCF model. Key inputs and assumptions used in this model are discussed below:
•Forecast model - For each portfolio segment, a LDA was performed in order to identify appropriate loss drivers and create a regression model for use in forecasting cash flows. The LDA analysis utilized Park's own FFIEC Call Report data for the commercial, financial and agricultural and residential real estate portfolio segments. Peer data was incorporated into the analysis for the commercial real estate, construction real estate, and consumer portfolio segments. Park plans to update the LDA annually; however, due to the impact of COVID-19, the LDA analysis was last updated in the fourth quarter of 2019.
•Probability of default – PD is the probability that an asset will be in default within a given time frame. Park has defined default as when a charge-off has occurred, a loan is nonaccrual, or a loan is greater than 90 days past due. Whenever possible, Park utilizes its own loan-level PDs for the reasonable and supportable forecast period. When loan level-data is not available reflecting the forecasted economic conditions, a forecast model is utilized to estimate PDs.
•Loss given default – LGD is the percentage of the asset not expected to be collected due to default. Whenever possible, Park utilizes its own loan-level LGDs for the reasonable and supportable forecast period. When it is not possible to use Park's own LGDs, the LGD is derived using a method referred to as Frye Jacobs.
•Prepayments and curtailments – Prepayments and curtailments are calculated based on Park’s own data utilizing a three-year average. This analysis is updated annually in the fourth quarter and was last updated in the fourth quarter of 2020.
•Forecast and reversion – Park has established a one-year reasonable and supportable forecast period with a one-year straight line reversion to the long-term historical average.
•Economic forecast - Park utilizes a third party to provide economic forecasts under various scenarios, which are weighted in order to reflect model risk in the current economic environment. As of January 1, 2021, the date of CECL adoption, Park weighted a "most likely" scenario 80%, a "slower near-term growth" scenario 10%, and a "moderate recession" scenario 10%. As of January 1, 2021, the "most likely" scenario forecasted Ohio unemployment to range between 5.31% and 5.79% during the next four quarters. As of March 31, 2021, the "most likely" scenario forecasted Ohio unemployment to decrease significantly, to a range between 3.70% and 4.93% during the next four quarters. In determining the appropriate weighting of scenarios at March 31, 2021, management considered this improved economic forecast while balancing the risk associated with the COVID-19 pandemic, including the risk of pandemic-related losses lagging behind the projected improvement in unemployment. Management determined it was appropriate to weight the "most likely" scenario 50% and the "moderate recession" scenario 50%. Management believes that the resulting quantitative reserve appropriately balances economic improvement with the ongoing risks.
Qualitative Considerations
In addition to the quantitative model, management considers the need for qualitative adjustment for risks not considered in the DCF. Factors that are considered by management in determining loan collectability and the appropriate level of the ACL are listed below:
•The nature and volume of Park’s financial assets; the existence, growth, and effect of any concentrations of credit and the volume and severity of past due financial assets, the volume of nonaccrual assets, and the volume and severity of adversely classified or graded assets. Specifically management considers:
◦Trends (e.g., growth, reduction) in specific categories of the loan portfolio, as well as adjustments to the types of loans offered by PNB and GFSC.
◦Level of and trend in loan delinquencies, troubled loans, commercial watch list and nonperforming loans.
◦Level of and trend in new nonaccrual loans.
◦Level of and trend in loan charge-offs and recoveries.
•Park's lending policies and procedures, including changes in lending strategies, underwriting standards and practices for collections, write-offs, and recoveries.
•The quality of the Park’s credit review function.
•The experience, ability, and depth of Park’s lending, investment, collection, and other relevant management and staff.
•The effect of other external factors such as the regulatory, legal and technological environments; competition; and events such as natural disasters or pandemics.
•Actual and expected changes in international, national, regional, and local economic and business conditions and developments in which Park operates that affect the collectibility of financial assets.
•Where the U.S. economy is within a given credit cycle.
•The extent that there is government assistance (stimulus).
During 2020, Park added an additional reserve for three industries at particularly high risk due to the pandemic: hotels and accommodations; restaurants and food service; and strip shopping centers. These industries have experienced high levels of deferrals and have been particularly impacted by shut downs of non-essential businesses, increased health department
regulations, and changes in consumer behavior. Management expects that a high percentage of the 4-rated credits in these portfolios will eventually migrate to special mention, substandard, or impaired status. In adopting CECL, management determined it was appropriate to retain this qualitative adjustment as this adjustment takes into account the additional risk in these portfolios, which is not captured in the quantitative calculation. As of March 31, 2021, additional reserves totaling $4.5 million were added for these portfolios on top of the quantitative reserve already calculated. A breakout of the 4-rated balances within these portfolios and the additional reserve related to these portfolios is detailed in the following table.
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2021
|
(in thousands)
|
4-Rated Balance
|
|
Additional Reserve
|
Hotels and accommodations
|
$
|
116,076
|
|
|
$
|
1,745
|
|
Restaurants and food service
|
30,414
|
|
|
687
|
|
Strip shopping centers
|
185,159
|
|
|
2,045
|
|
Total
|
$
|
331,649
|
|
|
$
|
4,477
|
|
Additionally, management applied a 1% reserve to all hotels and accommodations loans in the collectively evaluated population to account for increased valuation risk. At March 31, 2021, Park's originated hotels and accommodation loans had a balance of $189.0 million with an additional reserve related to valuation risks of $1.9 million.
There is still a significant amount of uncertainty related to the economic impact of COVID-19, including the duration of the pandemic, future government programs that may be established in response to the pandemic, and the resiliency of the U.S. economy. Management will continue to evaluate its estimate of expected credit losses as new information becomes available.
As of March 31, 2021, Park had $387.0 million of PPP loans which were included in the commercial, financial and agricultural portfolio segment. These loans are guaranteed by the SBA and thus have not been reserved for using the same methodology as the rest of Park’s loan portfolio. A 10 basis point reserve was calculated for these loans to reflect minimal credit risk.
ACL Activity
The activity in the ACL for the three-month periods ended March 31, 2021 and March 31, 2020 is summarized in the following tables.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
March 31, 2021
|
(In thousands)
|
Commercial,
financial and
agricultural
|
|
Commercial
real estate
|
|
Construction
real estate
|
|
Residential
real estate
|
|
Consumer
|
|
Leases
|
|
Total
|
ACL:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Beginning balance, prior to adoption of ASC 326
|
$
|
25,608
|
|
|
$
|
23,480
|
|
|
$
|
7,288
|
|
|
$
|
11,363
|
|
|
$
|
17,418
|
|
|
$
|
518
|
|
|
$
|
85,675
|
|
Impact of adopting ASC 326
|
(8,257)
|
|
|
2,119
|
|
|
(1,898)
|
|
|
3,121
|
|
|
10,925
|
|
|
80
|
|
|
6,090
|
|
Charge-offs
|
146
|
|
|
—
|
|
|
—
|
|
|
11
|
|
|
1,544
|
|
|
—
|
|
|
1,701
|
|
Recoveries
|
123
|
|
|
86
|
|
|
252
|
|
|
62
|
|
|
1,154
|
|
|
—
|
|
|
1,677
|
|
Net charge-offs/(recoveries)
|
$
|
23
|
|
|
$
|
(86)
|
|
|
$
|
(252)
|
|
|
$
|
(51)
|
|
|
$
|
390
|
|
|
$
|
—
|
|
|
$
|
24
|
|
(Recovery of) provision for credit loss
|
(1,049)
|
|
|
(1,198)
|
|
|
171
|
|
|
(498)
|
|
|
(2,224)
|
|
|
(57)
|
|
|
(4,855)
|
|
Ending balance
|
$
|
16,279
|
|
|
$
|
24,487
|
|
|
$
|
5,813
|
|
|
$
|
14,037
|
|
|
$
|
25,729
|
|
|
$
|
541
|
|
|
$
|
86,886
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
March 31, 2020
|
(In thousands)
|
Commercial,
financial and
agricultural
|
|
Commercial
real estate
|
|
Construction
real estate
|
|
Residential
real estate
|
|
Consumer
|
|
Leases
|
|
Total
|
ACL:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Beginning balance
|
$
|
20,203
|
|
|
$
|
10,229
|
|
|
$
|
5,311
|
|
|
$
|
8,610
|
|
|
$
|
12,211
|
|
|
$
|
115
|
|
|
$
|
56,679
|
|
Charge-offs
|
523
|
|
|
—
|
|
|
6
|
|
|
71
|
|
|
2,085
|
|
|
—
|
|
|
2,685
|
|
Recoveries
|
700
|
|
|
300
|
|
|
230
|
|
|
96
|
|
|
1,030
|
|
|
—
|
|
|
2,356
|
|
Net (recoveries)/charge-offs
|
$
|
(177)
|
|
|
$
|
(300)
|
|
|
$
|
(224)
|
|
|
$
|
(25)
|
|
|
$
|
1,055
|
|
|
$
|
—
|
|
|
$
|
329
|
|
Provision for (recovery of) credit loss
|
1,164
|
|
|
1,062
|
|
|
(42)
|
|
|
382
|
|
|
2,572
|
|
|
15
|
|
|
5,153
|
|
Ending balance
|
$
|
21,544
|
|
|
$
|
11,591
|
|
|
$
|
5,493
|
|
|
$
|
9,017
|
|
|
$
|
13,728
|
|
|
$
|
130
|
|
|
$
|
61,503
|
|
ACL Summary
Loans collectively evaluated for impairment in the following tables include all performing loans at March 31, 2021 and December 31, 2020, as well as nonperforming loans internally classified as consumer loans. Nonperforming consumer loans are not typically individually evaluated for impairment, but receive a portion of the statistical allocation of the ACL. Loans individually evaluated for impairment include all impaired loans internally classified as commercial loans at March 31, 2021 and December 31, 2020, which are evaluated for impairment in accordance with U.S. GAAP (see Note 1 - Summary of Significant Accounting Policies of the Notes to Consolidated Financial Statements included in Park’s 2020 Form 10-K).
The composition of the ACL at March 31, 2021 and December 31, 2020 was as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2021
|
(In thousands)
|
Commercial,
financial and
agricultural
|
|
Commercial
real estate
|
|
Construction
real estate
|
|
Residential
real estate
|
|
Consumer
|
|
Leases
|
|
Total
|
ACL:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending allowance balance attributed to loans:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Individually evaluated for impairment
|
$
|
4,324
|
|
|
$
|
384
|
|
|
$
|
—
|
|
|
$
|
22
|
|
|
$
|
—
|
|
|
$
|
232
|
|
|
$
|
4,962
|
|
Collectively evaluated for impairment
|
11,955
|
|
|
24,103
|
|
|
5,813
|
|
|
14,015
|
|
|
25,729
|
|
|
309
|
|
|
81,924
|
|
Acquired with deteriorated credit quality
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Total ending allowance balance
|
$
|
16,279
|
|
|
$
|
24,487
|
|
|
$
|
5,813
|
|
|
$
|
14,037
|
|
|
$
|
25,729
|
|
|
$
|
541
|
|
|
$
|
86,886
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loan balance:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans individually evaluated for impairment
|
$
|
21,670
|
|
|
$
|
68,898
|
|
|
$
|
2,961
|
|
|
$
|
5,403
|
|
|
$
|
—
|
|
|
$
|
1,475
|
|
|
$
|
100,407
|
|
Loans collectively evaluated for impairment
|
1,566,004
|
|
|
1,681,126
|
|
|
333,482
|
|
|
1,791,254
|
|
|
1,665,208
|
|
|
20,980
|
|
|
7,058,054
|
|
Loans acquired with deteriorated credit quality
|
304
|
|
|
6,897
|
|
|
985
|
|
|
1,996
|
|
|
—
|
|
|
102
|
|
|
10,284
|
|
Total ending loan balance
|
$
|
1,587,978
|
|
|
$
|
1,756,921
|
|
|
$
|
337,428
|
|
|
$
|
1,798,653
|
|
|
$
|
1,665,208
|
|
|
$
|
22,557
|
|
|
$
|
7,168,745
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ACL as a percentage of loan balance:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans individually evaluated for impairment
|
19.95
|
%
|
|
0.56
|
%
|
|
—
|
%
|
|
0.41
|
%
|
|
—
|
%
|
|
15.73
|
%
|
|
4.94
|
%
|
Loans collectively evaluated for impairment
|
0.76
|
%
|
|
1.43
|
%
|
|
1.74
|
%
|
|
0.78
|
%
|
|
1.55
|
%
|
|
1.47
|
%
|
|
1.16
|
%
|
Loans acquired with deteriorated credit quality
|
—
|
%
|
|
—
|
%
|
|
—
|
%
|
|
—
|
%
|
|
—
|
%
|
|
—
|
%
|
|
—
|
%
|
Total
|
1.03
|
%
|
|
1.39
|
%
|
|
1.72
|
%
|
|
0.78
|
%
|
|
1.55
|
%
|
|
2.40
|
%
|
|
1.21
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2020
|
(In thousands)
|
|
Commercial,
financial and
agricultural
|
|
Commercial
real estate
|
|
Construction
real estate
|
|
Residential
real estate
|
|
Consumer
|
|
Leases
|
|
Total
|
ACL:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending allowance balance attributed to loans:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Individually evaluated for impairment
|
|
$
|
3,758
|
|
|
$
|
1,316
|
|
|
$
|
—
|
|
|
$
|
16
|
|
|
$
|
—
|
|
|
$
|
344
|
|
|
$
|
5,434
|
|
Collectively evaluated for impairment
|
|
21,809
|
|
|
22,093
|
|
|
7,288
|
|
|
11,292
|
|
|
17,418
|
|
|
174
|
|
|
80,074
|
|
Acquired with deteriorated credit quality
|
|
41
|
|
|
71
|
|
|
—
|
|
|
55
|
|
|
—
|
|
|
—
|
|
|
167
|
|
Total ending allowance balance
|
|
$
|
25,608
|
|
|
$
|
23,480
|
|
|
$
|
7,288
|
|
|
$
|
11,363
|
|
|
$
|
17,418
|
|
|
$
|
518
|
|
|
$
|
85,675
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loan balance:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans individually evaluated for impairment
|
|
$
|
28,811
|
|
|
$
|
70,334
|
|
|
$
|
3,110
|
|
|
$
|
4,557
|
|
|
$
|
—
|
|
|
$
|
1,595
|
|
|
$
|
108,407
|
|
Loans collectively evaluated for impairment
|
|
1,559,842
|
|
|
1,670,510
|
|
|
339,312
|
|
|
1,806,126
|
|
|
1,659,704
|
|
|
22,731
|
|
|
7,058,225
|
|
Loans acquired with deteriorated credit quality
|
|
336
|
|
|
7,345
|
|
|
999
|
|
|
2,361
|
|
|
—
|
|
|
112
|
|
|
11,153
|
|
Total ending loan balance
|
|
$
|
1,588,989
|
|
|
$
|
1,748,189
|
|
|
$
|
343,421
|
|
|
$
|
1,813,044
|
|
|
$
|
1,659,704
|
|
|
$
|
24,438
|
|
|
$
|
7,177,785
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ACL as a percentage of loan balance:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans individually evaluated for impairment
|
|
13.04
|
%
|
|
1.87
|
%
|
|
—
|
%
|
|
0.35
|
%
|
|
—
|
%
|
|
21.57
|
%
|
|
5.01
|
%
|
Loans collectively evaluated for impairment
|
|
1.40
|
%
|
|
1.32
|
%
|
|
2.15
|
%
|
|
0.63
|
%
|
|
1.05
|
%
|
|
0.77
|
%
|
|
1.13
|
%
|
Loans acquired with deteriorated credit quality
|
|
12.20
|
%
|
|
0.97
|
%
|
|
—
|
%
|
|
2.33
|
%
|
|
—
|
%
|
|
—
|
%
|
|
1.50
|
%
|
Total
|
|
1.61
|
%
|
|
1.34
|
%
|
|
2.12
|
%
|
|
0.63
|
%
|
|
1.05
|
%
|
|
2.12
|
%
|
|
1.19
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Recorded investment:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans individually evaluated for impairment
|
|
$
|
28,836
|
|
|
$
|
70,357
|
|
|
$
|
3,110
|
|
|
$
|
4,557
|
|
|
$
|
—
|
|
|
$
|
1,595
|
|
|
$
|
108,455
|
|
Loans collectively evaluated for impairment
|
|
1,566,344
|
|
|
1,676,388
|
|
|
340,116
|
|
|
1,808,892
|
|
|
1,664,214
|
|
|
22,745
|
|
|
7,078,699
|
|
Loans acquired with deteriorated credit quality
|
|
337
|
|
|
7,461
|
|
|
1,002
|
|
|
2,372
|
|
|
—
|
|
|
112
|
|
|
11,284
|
|
Total ending recorded investment
|
|
$
|
1,595,517
|
|
|
$
|
1,754,206
|
|
|
$
|
344,228
|
|
|
$
|
1,815,821
|
|
|
$
|
1,664,214
|
|
|
$
|
24,452
|
|
|
$
|
7,198,438
|
|
Note 7 – Loans Held For Sale
Mortgage loans held for sale are carried at their fair value. At March 31, 2021 and December 31, 2020, respectively, Park had $17.8 million and $31.7 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 portfolio segment in Note 5 - Loans, and Note 6 - Allowance for Credit Losses. The contractual balance was $17.5 million and $30.9 million at March 31, 2021 and December 31, 2020, respectively. The gain expected upon sale was $247,000 and $753,000 at March 31, 2021 and December 31, 2020, respectively. None of these loans were 90 days or more past due or on nonaccrual status as of March 31, 2021 or December 31, 2020.
Note 8 – Goodwill and Other Intangible Assets
The following tables show the activity in goodwill and other intangible assets for the three-month periods ended March 31, 2021 and 2020.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in thousands)
|
|
Goodwill
|
|
Other
intangible assets
|
|
Total
|
December 31, 2019
|
|
$
|
159,595
|
|
|
$
|
11,523
|
|
|
$
|
171,118
|
|
Amortization
|
|
—
|
|
|
606
|
|
|
606
|
|
March 31, 2020
|
|
$
|
159,595
|
|
|
$
|
10,917
|
|
|
$
|
170,512
|
|
|
|
|
|
|
|
|
December 31, 2020
|
|
$
|
159,595
|
|
|
$
|
9,260
|
|
|
$
|
168,855
|
|
Amortization
|
|
—
|
|
|
479
|
|
|
479
|
|
March 31, 2021
|
|
$
|
159,595
|
|
|
$
|
8,781
|
|
|
$
|
168,376
|
|
Park evaluates goodwill for impairment during the second quarter of each year, with financial data as of March 31. Based on the analysis performed as of April 1, 2020, the Company determined that goodwill for Park's reporting unit, PNB, was not impaired. During each of the second, third and fourth quarters of 2020, management determined that the deterioration in general economic conditions as a result of the COVID-19 pandemic and responses thereto represented a triggering event prompting an evaluation of goodwill impairment. Based on the qualitative analysis performed during each of the second, third and fourth quarters of 2020, the Company determined that goodwill was not impaired. Management continues to monitor economic factors, including economic conditions as a result of the COVID-19 pandemic and responses thereto, to evaluate goodwill impairment.
Acquired Intangible Assets
The following table shows the balance of acquired intangible assets as of March 31, 2021 and December 31, 2020.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2021
|
|
December 31, 2020
|
(in thousands)
|
|
Gross Carrying Amount
|
|
Accumulated Amortization
|
|
Gross Carrying Amount
|
|
Accumulated Amortization
|
Other intangible assets:
|
|
|
|
|
|
|
|
|
Core deposit intangible assets
|
|
$
|
14,456
|
|
|
$
|
5,675
|
|
|
$
|
14,456
|
|
|
$
|
5,196
|
|
Trade name intangible assets
|
|
1,300
|
|
|
1,300
|
|
|
1,300
|
|
|
1,300
|
|
Total
|
|
$
|
15,756
|
|
|
$
|
6,975
|
|
|
$
|
15,756
|
|
|
$
|
6,496
|
|
Core deposit intangible assets are being amortized, on an accelerated basis, over a period of ten years. Aggregate amortization expense was $479,000 and $606,000 for the three months ended March 31, 2021 and 2020, respectively.
Estimated amortization expense related to core deposit intangible assets for each of the next five years follows:
|
|
|
|
|
|
|
|
|
(in thousands)
|
|
Total
|
Nine months ending December 31, 2021
|
|
$
|
1,319
|
|
2022
|
|
1,487
|
|
2023
|
|
1,323
|
|
2024
|
|
1,215
|
|
2025
|
|
1,042
|
|
Note 9 – 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 its 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 at March 31, 2021 and December 31, 2020.
|
|
|
|
|
|
|
|
|
|
|
|
(in thousands)
|
|
March 31, 2021
|
December 31, 2020
|
Affordable housing tax credit investments
|
|
$
|
54,168
|
|
$
|
56,024
|
|
Unfunded commitments
|
|
23,204
|
|
29,298
|
|
Commitments are funded when capital calls are made by the general partner. Park expects that the current commitments will be funded between 2021 and 2031.
Park recognized amortization expense of $1.9 million and $1.8 million for the three months ended March 31, 2021 and 2020, respectively, which was included within the provision for income taxes. Additionally, during the three months ended March 31, 2021 and 2020, Park recognized tax credits and other benefits from its affordable housing tax credit investments of $2.9 million and $1.7 million, respectively, which was included within the provision for income taxes.
Note 10 – Foreclosed and Repossessed Assets
Park typically transfers a loan to OREO at the time that Park takes deed/title to the real estate property asset. The carrying amounts of foreclosed real estate properties held at March 31, 2021 and December 31, 2020 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, 2021
|
|
December 31, 2020
|
OREO:
|
|
|
|
|
Commercial real estate
|
|
$
|
31
|
|
|
$
|
625
|
|
Construction real estate
|
|
—
|
|
|
—
|
|
Residential real estate
|
|
813
|
|
|
806
|
|
Total OREO
|
|
$
|
844
|
|
|
$
|
1,431
|
|
|
|
|
|
|
Loans in process of foreclosure:
|
|
|
|
|
Residential real estate
|
|
$
|
1,129
|
|
|
$
|
1,643
|
|
In addition to real estate, Park may also repossess different types of collateral. As of March 31, 2021 and December 31, 2020, Park had $3.8 million and $3.6 million, respectively, in other repossessed assets which are included in "Other assets" on the Consolidated Condensed Balance Sheets. As of both dates presented, the other repossessed assets largely consisted of an aircraft acquired as part of a loan workout.
Note 11 – Loan Servicing
Park serviced sold mortgage loans of $2.04 billion at March 31, 2021, $1.97 billion at December 31, 2020 and $1.47 billion at March 31, 2020. At March 31, 2021, $2.3 million of the sold mortgage loans were sold with recourse, compared to $1.7 million at December 31, 2020 and $2.3 million at March 31, 2020. Management closely monitors the delinquency rates on the mortgage loans sold with recourse. At March 31, 2021 and December 31, 2020, management had established reserves of $61,000 and $30,000, respectively, to account for expected losses on loan repurchases.
When Park sells mortgage loans with servicing rights retained, these servicing rights are initially recorded at fair value. Park has 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 with respect to the underlying loan. At the end of each reporting period, the carrying value of MSRs is assessed for impairment with a comparison to fair value. MSRs are carried at the lower of their amortized cost or fair value. The amortization of MSRs is included within "Other service income" in the Consolidated Condensed Statements of Income.
Activity for MSRs and the related valuation allowance follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
March 31,
|
|
(In thousands)
|
|
2021
|
|
2020
|
|
Mortgage servicing rights:
|
|
|
|
|
|
Carrying amount, net, beginning of period
|
|
$
|
12,210
|
|
|
$
|
10,070
|
|
|
Additions
|
|
1,678
|
|
|
731
|
|
|
Amortization
|
|
(1,105)
|
|
|
(507)
|
|
|
Change in valuation allowance
|
|
852
|
|
|
(1,526)
|
|
|
Carrying amount, net, end of period
|
|
$
|
13,635
|
|
|
$
|
8,768
|
|
|
|
|
|
|
|
|
Valuation allowance:
|
|
|
|
|
|
Beginning of period
|
|
$
|
3,189
|
|
|
$
|
825
|
|
|
Change in valuation allowance
|
|
(852)
|
|
|
1,526
|
|
|
End of period
|
|
$
|
2,337
|
|
|
$
|
2,351
|
|
|
Servicing fees included in other service income were $1.3 million and $0.9 million for the three months ended March 31, 2021 and 2020, respectively.
Note 12 - Leases
Park is a lessee in several noncancellable operating lease arrangements, primarily for retail branches, administrative and warehouse buildings, ATMs, and certain office equipment within its Ohio, North Carolina, South Carolina, and Kentucky markets. Certain of these leases contain renewal options for periods ranging from one to five years. Park’s leases generally do not include termination options for either party to the lease or restrictive financial or other covenants. Payments due under the lease contracts include fixed payments plus, for many of Park’s real estate leases, variable payments such as Park's proportionate share of property taxes, insurance, and common area maintenance.
Park elected the practical expedient, by class of underlying asset, to not separate non-lease components from the associated lease components. Additionally, Park has elected not to recognize ROU assets and lease liabilities for short-term leases that have a lease term of 12 months or less. The Company recognizes the lease payments associated with its short-term leases as an expense on a cash basis.
Management determines if an arrangement is or contains a lease at contract inception. If an arrangement is determined to be or contain a lease, Park recognizes a ROU asset and a lease liability at the lease commencement date. Leases are classified as operating or finance leases at the lease commencement date. At March 31, 2021 and December 31, 2020, all of Park's leases were classified as operating leases.
Park’s lease liability is initially and subsequently measured at the present value of the unpaid lease payments at the lease commencement date. Key estimates and judgments related to the lease liability include how management determines (1) the discount rate it uses to discount the unpaid lease payments to present value, (2) the lease term, and (3) lease payments.
•ASC 842 requires a lessee to discount its unpaid lease payments using the interest rate implicit in the lease or, if that rate cannot be readily determined, its incremental borrowing rate. Generally, management cannot determine the interest rate implicit in the lease because it does not have access to the lessor’s estimated residual value or the amount of the lessor’s deferred initial direct costs. Therefore, Park utilizes its incremental borrowing rate as the discount rate for leases. Park’s incremental borrowing rate for a lease is the rate of interest Park would have to pay on a collateralized basis to borrow an amount equal to the lease payments under similar terms. To manage its capital and liquidity needs, Park periodically obtains wholesale funding from the FHLB on an over-collateralized basis. The impact of utilizing an interest rate on an over-collateralized borrowing versus a fully collateralized borrowing is not material. Therefore, the FHLB yield curve was selected by management as a baseline to determine Park’s discount rates for leases.
•The lease term for all of the Company’s leases includes the noncancellable period of the lease plus any additional periods covered by either Park's option to extend (or not to terminate) the lease that the Company is reasonably certain
to exercise, or an option to extend (or not to terminate) the lease controlled by the lessor. If a lease contract contains multiple renewal options, management generally models lease cash flows through the first renewal option period unless the contract contains economic incentives or other conditions that increase the likelihood that additional renewals are reasonably certain to be exercised.
•Lease payments included in the measurement of the lease liability are comprised of the following:
–Fixed payments, including in-substance fixed payments, owed over the lease term;
–For certain of Park's gross real estate leases, non-lease components such as real estate taxes, insurance, and common area maintenance; and
–Variable lease payments that depend on an index or rate, initially measured using the index or rate at the lease commencement date.
The ROU asset is initially measured at cost, which comprises the initial amount of the lease liability adjusted for lease payments made at or before the lease commencement date, plus any initial direct costs incurred less any lease incentives received. For operating leases, the ROU asset is subsequently measured throughout the lease term at the carrying amount of the lease liability, plus initial direct costs, plus (minus) any prepaid (accrued) lease payments, less the unamortized balance of lease incentives received. Lease expense for lease payments is recognized on a straight-line basis over the lease term.
Park's operating lease ROU asset and lease liability are presented in “Operating lease right-of-use asset" and "Operating lease liability," respectively, on Park's Consolidated Condensed Balance Sheets. The carrying amounts of Park's ROU asset and lease liability at March 31, 2021 were $14.2 million and $15.4 million, respectively. At December 31, 2020, the carrying amounts of Park's ROU asset and lease liability were $15.1 million and $16.1 million, respectively. Park's operating lease expense is recorded in "Occupancy expense" on the Company's Consolidated Condensed Statements of Income.
Other information related to operating leases for the three months ended March 31, 2021 and 2020 was as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
(in thousands)
|
March 31, 2021
|
|
March 31, 2020
|
Lease cost
|
|
|
|
Operating lease cost
|
$
|
721
|
|
|
$
|
848
|
|
Sublease income
|
(63)
|
|
|
(97)
|
|
Total lease cost
|
$
|
658
|
|
|
$
|
751
|
|
|
|
|
|
Other information
|
|
|
|
Cash paid for amounts included in the measurement of lease liabilities:
|
Operating cash flows from operating leases
|
$
|
782
|
|
|
$
|
872
|
|
ROU assets obtained in exchange for new operating lease liabilities
|
$
|
—
|
|
|
$
|
7,755
|
|
Reductions to ROU assets resulting from reductions to lease obligations
|
$
|
(694)
|
|
|
$
|
(756)
|
|
At March 31, 2021 and December 31, 2020, Park's operating leases had a weighted average remaining term of 7.1 years and 7.2 years, respectively. The weighted average discount rate of Park's operating leases was 2.3% at both March 31, 2021 and December 31, 2020.
Undiscounted cash flows included in lease liabilities have expected contractual payments as follows:
|
|
|
|
|
|
(in thousands)
|
March 31, 2021
|
9 months ending December 31, 2021
|
$
|
2,281
|
|
2022
|
2,955
|
|
2023
|
2,840
|
|
2024
|
1,755
|
|
2025
|
1,415
|
|
Thereafter
|
5,404
|
|
Total undiscounted minimum lease payments
|
$
|
16,650
|
|
Present value adjustment
|
(1,291)
|
|
Total lease liabilities
|
$
|
15,359
|
|
Note 13 – 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.
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 consisted of customer accounts and securities which are pledged on an individual security basis.
At March 31, 2021 and December 31, 2020, Park's repurchase agreement borrowings totaled $280 million and $317 million, respectively. These borrowings were collateralized with U.S. government and agency securities with a fair value of $333 million and $366 million at March 31, 2021 and December 31, 2020, respectively. Declines in the value of the collateral would require Park to pledge additional securities. As of March 31, 2021 and December 31, 2020, Park had $462 million and $439 million, respectively, of available unpledged securities.
The table below shows the remaining contractual maturity of repurchase agreements by collateral pledged at March 31, 2021 and December 31, 2020:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2021
|
(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
|
|
$
|
280,385
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
280,385
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2020
|
(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
|
|
$
|
317,230
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
317,230
|
|
Note 14 - Derivatives
Park uses certain derivative financial instruments (or "derivatives") to meet the needs of its clients while managing the interest rate risk associated with certain transactions. Park does not use derivatives for speculative purposes. A summary of derivative instruments utilized by Park follows.
Interest Rate Swaps
Park utilizes interest rate swap agreements as part of its asset liability management strategy to help manage its interest rate risk position and as a means to meet the financing, interest rate and other risk management needs of qualifying commercial banking customers. The notional amount of the interest rate swaps does not represent the amount exchanged by the parties. The amount exchanged is determined by reference to the notional amount and the other terms of the individual interest rate swap agreements.
Borrowing Derivatives: Interest rate swaps with notional amounts totaling $25.0 million at both March 31, 2021 and December 31, 2020 were designated as cash flow hedges of certain FHLB advances.
Loan Derivatives: In conjunction with the Carolina Alliance acquisition, Park acquired interest rate swaps related to certain commercial loans. These interest rate swaps were simultaneously hedged by offsetting interest rate swaps that Carolina Alliance executed with a third party, such that Carolina Alliance minimized its net interest rate risk exposure resulting from such transactions. These interest rate swaps had a notional amount totaling $32.8 million and $33.3 million at March 31, 2021 and December 31, 2020, respectively.
All of the Company's interest rate swaps were determined to be fully effective during each of the three-month periods ended March 31, 2021 and March 31, 2020. As such, no amount of ineffectiveness has been included in net income. Therefore, the aggregate fair value of the swaps is recorded in other assets and other liabilities with changes in fair value recorded in other comprehensive income. The amount included in accumulated other comprehensive income would be reclassified to current earnings should the hedges no longer be considered effective. Park expects the hedges to remain fully effective during the remaining respective terms of the swaps.
Summary information about Park's interest rate swaps as of March 31, 2021 and December 31, 2020 follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2021
|
|
December 31, 2020
|
(In thousands, except weighted average data)
|
|
Borrowing Derivatives
|
|
Loan Derivatives
|
|
Borrowing Derivatives
|
|
Loan Derivatives
|
Notional amounts
|
|
$
|
25,000
|
|
|
$
|
32,827
|
|
|
$
|
25,000
|
|
|
$
|
33,310
|
|
Weighted average pay rates
|
|
2.595
|
%
|
|
4.698
|
%
|
|
2.595
|
%
|
|
4.695
|
%
|
Weighted average receive rates
|
|
0.223
|
%
|
|
4.698
|
%
|
|
0.218
|
%
|
|
4.695
|
%
|
Weighted average maturity (years)
|
|
1.2
|
|
9.1
|
|
1.5
|
|
9.3
|
Unrealized losses
|
|
$
|
727
|
|
|
$
|
—
|
|
|
$
|
885
|
|
|
$
|
—
|
|
Interest expense recorded on swap transactions was $148,000 and $46,000 for the three-month periods ended March 31, 2021 and 2020, respectively.
Interest Rate Swaps
The following table presents the net gains (losses), net of income taxes, recorded in AOCI and the Consolidated Condensed Statements of Income related to interest rate swaps for the three-month periods ended March 31, 2021 and 2020.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
March 31, 2021
|
(In thousands)
|
|
Amount of Gain (Loss) Recognized in OCI (Effective Portion)
|
Amount of Gain (Loss) Reclassified from OCI to Interest Income
|
Amount of Gain (Loss) Recognized in Other Non-interest Income (Ineffective Portion)
|
Interest rate contracts
|
|
$
|
125
|
|
$
|
—
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
March 31, 2020
|
(In thousands)
|
|
Amount of Gain (Loss) Recognized in OCI (Effective Portion)
|
Amount of Gain (Loss) Reclassified from OCI to Interest Income
|
Amount of Gain (Loss) Recognized in Other Non-interest Income (Ineffective Portion)
|
Interest rate contracts
|
|
$
|
(483)
|
|
$
|
—
|
|
$
|
—
|
|
The following tables reflect the interest rate swaps included in the Consolidated Condensed Balance Sheets as of March 31, 2021 and December 31, 2020.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In thousands)
|
|
March 31, 2021
|
|
December 31, 2020
|
|
Notional Amount
|
|
Fair Value
|
|
Notional Amount
|
|
Fair Value
|
Included in other assets:
|
|
|
|
|
|
|
|
|
Borrowing derivatives - interest rate swaps related to FHLB advances
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Loan derivatives - instruments associated with loans
|
|
|
|
|
|
|
|
|
Matched interest rate swaps with borrower
|
|
32,827
|
|
|
2,278
|
|
|
33,310
|
|
|
3,934
|
|
Matched interest rate swaps with counterparty
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Total included in other assets
|
|
$
|
32,827
|
|
|
$
|
2,278
|
|
|
$
|
33,310
|
|
|
$
|
3,934
|
|
|
|
|
|
|
|
|
|
|
Included in other liabilities:
|
|
|
|
|
|
|
|
|
Borrowing derivatives - interest rate swaps related to FHLB advances
|
|
$
|
25,000
|
|
|
$
|
(727)
|
|
|
$
|
25,000
|
|
|
$
|
(885)
|
|
Loan derivatives - instruments associated with loans
|
|
|
|
|
|
|
|
|
Matched interest rate swaps with borrower
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Matched interest rate swaps with counterparty
|
|
32,827
|
|
|
(2,278)
|
|
|
33,310
|
|
|
(3,934)
|
|
Total included in other liabilities
|
|
$
|
57,827
|
|
|
$
|
(3,005)
|
|
|
$
|
58,310
|
|
|
$
|
(4,819)
|
|
Mortgage Banking Derivatives
Commitments to fund mortgage loans (interest rate locks) to be sold into the secondary market and forward commitments for the future delivery of these mortgage loans are accounted for as free standing derivatives. In order to hedge the change in interest rates resulting from its commitments to fund the loans, the Company enters into forward commitments for the future delivery of mortgage loans when interest rate locks are entered into. These mortgage banking derivatives are not designated as hedge relationships. The fair value of the interest rate lock is recorded at the time the commitment to fund the mortgage loan is executed and is adjusted for the expected exercise of the commitment before the loan is funded. Fair values of these mortgage banking derivatives are estimated based on changes in mortgage interest rates from the date the interest on the loan is locked. Changes in the fair values of these derivatives are included in "Other service income" in the Condensed Consolidated Statements of Income.
At March 31, 2021 and December 31, 2020, Park had $41.5 million and $58.2 million, respectively, of interest rate lock commitments. The fair value of these mortgage banking derivatives was reflected by a derivative asset of $1.1 million and $1.5 million at March 31, 2021 and December 31, 2020, respectively.
Other Derivatives
In connection with the sale of Park’s Class B Visa shares during 2009, Park entered into a swap agreement with the purchaser of the shares. The swap agreement adjusts for dilution in the conversion ratio of Class B Visa shares resulting from certain Visa litigation. At both March 31, 2021 and December 31, 2020, the fair value of the swap liability of $226,000 was an estimate of the exposure based upon probability-weighted potential Visa litigation losses.
Note 15 – Accumulated Other Comprehensive Income (Loss)
Other comprehensive income (loss) components, net of income tax, are shown in the following table for the three-month periods ended March 31, 2021 and 2020:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in thousands)
|
|
Changes in pension plan assets and benefit obligations
|
|
Unrealized net holding gain (loss) on cash flow hedge
|
|
Unrealized gains (losses) on AFS debt securities
|
|
Total
|
Beginning balance at January 1, 2021
|
|
$
|
(34,421)
|
|
|
$
|
(698)
|
|
|
$
|
40,690
|
|
|
$
|
5,571
|
|
|
Other comprehensive income (loss) before reclassifications
|
|
—
|
|
|
125
|
|
|
(13,597)
|
|
|
(13,472)
|
|
Net current period other comprehensive income (loss)
|
|
—
|
|
|
125
|
|
|
(13,597)
|
|
|
(13,472)
|
|
Ending balance at March 31, 2021
|
|
$
|
(34,421)
|
|
|
$
|
(573)
|
|
|
$
|
27,093
|
|
|
$
|
(7,901)
|
|
|
|
|
|
|
|
|
|
|
|
Beginning balance at January 1, 2020
|
|
$
|
(26,674)
|
|
|
$
|
(454)
|
|
|
$
|
17,539
|
|
|
$
|
(9,589)
|
|
|
Other comprehensive (loss) income before reclassifications
|
|
—
|
|
|
(483)
|
|
|
18,176
|
|
|
17,693
|
|
Net current period other comprehensive (loss) income
|
|
—
|
|
|
(483)
|
|
|
18,176
|
|
|
17,693
|
|
Ending balance at March 31, 2020
|
|
$
|
(26,674)
|
|
|
$
|
(937)
|
|
|
$
|
35,715
|
|
|
$
|
8,104
|
|
During the three-month periods ended March 31, 2021 and 2020, there were no reclassifications out of accumulated other comprehensive income (loss).
Note 16 – 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, 2021 and 2020.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
March 31,
|
|
(In thousands, except share and per common share data)
|
|
2021
|
|
2020
|
|
Numerator:
|
|
|
|
|
|
Net income
|
|
$
|
42,831
|
|
|
$
|
22,372
|
|
|
Denominator:
|
|
|
|
|
|
Weighted-average common shares outstanding
|
|
16,314,987
|
|
|
16,303,602
|
|
|
Effect of dilutive PBRSUs and TBRSUs
|
|
124,933
|
|
|
122,279
|
|
|
Weighted-average common shares outstanding adjusted for the effect of dilutive PBRSUs and TBRSUs
|
|
16,439,920
|
|
|
16,425,881
|
|
|
Earnings per common share:
|
|
|
|
|
|
Basic earnings per common share
|
|
$
|
2.63
|
|
|
$
|
1.37
|
|
|
Diluted earnings per common share
|
|
$
|
2.61
|
|
|
$
|
1.36
|
|
|
Park awarded 61,890 and 62,265 PBRSUs to certain employees during the three months ended March 31, 2021 and 2020, respectively.
Park repurchased an aggregate of 76,000 common shares during the three months ended March 31, 2020, to fund the PBRSUs, the TBRSUs and common shares to be awarded to directors of Park and to directors of Park's subsidiary PNB (and its divisions) and pursuant to Park's previously announced stock repurchase authorizations. No common shares were repurchased during the three months ended March 31, 2021.
Note 17 – Segment Information
The Corporation is a financial holding company headquartered in Newark, Ohio. The reportable segment for the Corporation is its chartered national bank subsidiary, PNB (headquartered in Newark, Ohio). "All Other", which primarily consists of Park as the "Parent Company", GFSC and SEPH, is shown to reconcile the segment totals to the Consolidated Condensed Statements of Income.
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 one reportable segment, as: (i) discrete financial information is available for this reportable segment and (ii) the segment is aligned with internal reporting to Park’s Chief Executive Officer, who is the chief operating decision maker.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating Results for the three months ended March 31, 2021
|
(In thousands)
|
|
PNB
|
|
All Other
|
|
Total
|
Net interest income (expense)
|
|
$
|
82,086
|
|
|
$
|
(1,352)
|
|
|
$
|
80,734
|
|
Recovery of credit losses
|
|
(4,194)
|
|
|
(661)
|
|
|
(4,855)
|
|
Other income
|
|
32,800
|
|
|
1,289
|
|
|
34,089
|
|
Other expense
|
|
63,576
|
|
|
4,289
|
|
|
67,865
|
|
Income (loss) before income taxes
|
|
$
|
55,504
|
|
|
$
|
(3,691)
|
|
|
$
|
51,813
|
|
Income tax expense (benefit)
|
|
10,382
|
|
|
(1,400)
|
|
|
8,982
|
|
Net income (loss)
|
|
$
|
45,122
|
|
|
$
|
(2,291)
|
|
|
$
|
42,831
|
|
|
|
|
|
|
|
|
Assets (at March 31, 2021)
|
|
$
|
9,884,055
|
|
|
$
|
30,014
|
|
|
$
|
9,914,069
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating Results for the three months ended March 31, 2020
|
(In thousands)
|
|
PNB
|
|
All Other
|
|
Total
|
Net interest income
|
|
$
|
75,214
|
|
|
$
|
1,069
|
|
|
$
|
76,283
|
|
Provision for (recovery of) loan losses
|
|
5,534
|
|
|
(381)
|
|
|
5,153
|
|
Other income (loss)
|
|
23,481
|
|
|
(995)
|
|
|
22,486
|
|
Other expense
|
|
61,368
|
|
|
4,908
|
|
|
66,276
|
|
Income (loss) before income taxes
|
|
$
|
31,793
|
|
|
$
|
(4,453)
|
|
|
$
|
27,340
|
|
Income tax expense (benefit)
|
|
5,885
|
|
|
(917)
|
|
|
4,968
|
|
Net income (loss)
|
|
$
|
25,908
|
|
|
$
|
(3,536)
|
|
|
$
|
22,372
|
|
|
|
|
|
|
|
|
Assets (at March 31, 2020)
|
|
$
|
8,673,683
|
|
|
$
|
45,608
|
|
|
$
|
8,719,291
|
|
The operating results 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, 2021 and 2020. The reconciling amounts for consolidated total assets for the periods ended March 31, 2021 and 2020 consisted of the elimination of intersegment borrowings and the assets of the Parent Company, GFSC and SEPH which were not eliminated.
Note 18 - 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 made equity-based awards and cash-based awards available for grant to participants (who
could have been employees or non-employee directors) in the form of incentive stock options, nonqualified stock options, SARs, restricted common shares (“Restricted Stock”), restricted stock unit awards that may be settled in common shares, cash or a combination of the two (“Restricted Stock Units”), unrestricted common shares (“Other Stock-Based Awards”) and cash-based awards. Under the 2013 Incentive Plan, 600,000 common shares were authorized to be delivered in connection with grants under the 2013 Incentive Plan. The common shares to be delivered under the 2013 Incentive Plan are to 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. As of March 31, 2021, there were 2,130 common shares subject to PBRSUs issued under the 2013 Incentive Plan, which represented the only awards outstanding under the 2013 Incentive Plan.
The Park National Corporation 2017 Long-Term Incentive Plan for Employees (the "2017 Employees LTIP") was adopted by the Board of Directors of Park on January 23, 2017 and was approved by Park's shareholders at the Annual Meeting of Shareholders on April 24, 2017. The 2017 Employees LTIP makes equity-based awards and cash-based awards available for grant to employee participants in the form of incentive stock options, nonqualified stock options, SARs, Restricted Stock, Restricted Stock Units, Other Stock-Based Awards and cash-based awards. Under the 2017 Employees LTIP, 750,000 common shares are authorized to be delivered in connection with grants under the 2017 Employees LTIP. The common shares to be delivered under the 2017 Employees LTIP are to 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. At March 31, 2021, 463,110 common shares were available for future grants under the 2017 Employees LTIP.
The Park National Corporation 2017 Long-Term Incentive Plan for Non-Employee Directors (the "2017 Non-Employee Directors LTIP") was adopted by the Board of Directors of Park on January 23, 2017 and was approved by Park's shareholders at the Annual Meeting of Shareholders on April 24, 2017. The 2017 Non-Employee Directors LTIP makes equity-based awards and cash-based awards available for grant to non-employee director participants in the form of nonqualified stock options, SARs, Restricted Stock, Restricted Stock Units, Other Stock-Based Awards, and cash-based awards. Under the 2017 Non-Employee Directors LTIP, 150,000 common shares are authorized to be delivered in connection with grants under the 2017 Non-Employee Directors LTIP. The common shares to be delivered under the 2017 Non-Employee Directors LTIP are to 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. At March 31, 2021, 100,250 common shares were available for future grants under the 2017 Non-Employee Directors LTIP.
The 2017 Employees LTIP and the 2017 Non-Employee Directors LTIP have replaced the provisions of the 2013 Incentive Plan with respect to the grant of future awards. As a result of the approval of the 2017 Employees LTIP and the 2017 Non-Employee Directors LTIP, Park has not granted and will not grant any additional awards under the 2013 Incentive Plan after April 24, 2017. Awards made under the 2013 Incentive Plan prior to April 24, 2017 will remain in effect in accordance with their respective terms.
During the three months ended March 31, 2021, the Compensation Committee of the Board of Directors of Park granted awards of PBRSUs, under the 2017 Employees LTIP, covering an aggregate of 61,890 common shares to certain employees of Park and its subsidiaries. During the three months ended March 31, 2020, the Compensation Committee of the Board of Directors of Park granted awards of PBRSUs, under the 2017 Employees LTIP, covering an aggregate of 62,265 common shares to certain employees of Park and its subsidiaries.
As of March 31, 2021, Park has nonvested PBRSUs as well as TBRSUs. The number of PBRSUs earned or settled will depend on the level of achievement with respect to certain performance criteria over a three year period and are also subject to subsequent service-based vesting. The number of TBRSUs earned or settled will be subject to service-based vesting.
A summary of changes in the common shares subject to nonvested PBRSUs and TBRSUs for the three months ended March 31, 2021 follows:
|
|
|
|
|
|
|
Common shares subject to PBRSUs and TBRSUs
|
Nonvested at January 1, 2021
|
204,108
|
|
Granted
|
61,890
|
|
Vested
|
(35,872)
|
|
Forfeited
|
(843)
|
|
Adjustment for performance conditions of PBRSUs (1)
|
(2,535)
|
|
Nonvested at March 31, 2021 (2)
|
226,748
|
|
(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.
(2) Nonvested amount herein represents the maximum number of nonvested PBRSUs and TBRSUs. As of March 31, 2021, an aggregate of 210,110 PBRSUs and TBRSUs are expected to vest.
During the three months ended March 31, 2021, an aggregate of 35,872 of the PBRSUs granted in 2017 and 2018 vested in full due to the level of achievement with respect to certain performance criteria and the satisfaction of the service-based vesting requirement. A total of 14,108 common shares were withheld to satisfy employee income tax withholding obligations. This resulted in a net number of 21,764 common shares being issued to employees of Park. During the three months ended March 31, 2020, 36,674 of the PBRSUs granted in 2016 and 2017 vested in full due to the level of achievement with respect to certain performance criteria and the satisfaction of the service-based vesting requirement. A total of 11,646 common shares were withheld to satisfy employee income tax withholding obligations. This resulted in a net number of 25,028 common shares being issued to employees of Park.
Share-based compensation expense of $1.8 million and $1.3 million was recognized for the three-month periods ended March 31, 2021 and 2020, respectively.
The following table details expected additional share-based compensation expense related to PBRSUs and TBRSUs outstanding at March 31, 2021:
|
|
|
|
|
|
|
|
|
(In thousands)
|
|
|
Nine months ending December 31, 2021
|
|
$
|
3,741
|
|
2022
|
|
4,089
|
|
2023
|
|
2,612
|
|
2024
|
|
1,069
|
|
2025
|
|
170
|
|
Total
|
|
$
|
11,681
|
|
Note 19 – Benefit Plans
Park has a noncontributory defined benefit pension plan (the "Pension Plan") covering substantially all of its employees. The Pension Plan provides benefits based on an employee’s years of service and compensation.
There were no Pension Plan contributions for either of the three-month periods ended March 31, 2021 and 2020.
The following table shows the components of net periodic pension benefit expense:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
March 31,
|
|
Affected Line Item in the Consolidated
Condensed Statements of Income
|
(In thousands)
|
|
2021
|
|
2020
|
|
Service cost
|
|
$
|
2,479
|
|
|
$
|
2,080
|
|
|
Employee benefits
|
Interest cost
|
|
1,340
|
|
|
1,320
|
|
|
Other components of net
periodic pension benefit income
|
Expected return on plan assets
|
|
(3,933)
|
|
|
(3,602)
|
|
|
Other components of net
periodic pension benefit income
|
Recognized net actuarial loss and prior service costs
|
|
555
|
|
|
294
|
|
|
Other components of net
periodic pension benefit income
|
Net periodic pension benefit expense
|
|
$
|
441
|
|
|
$
|
92
|
|
|
|
Park has entered into Supplemental Executive Retirement Plan Agreements (the “SERP Agreements”) with certain key officers of the Corporation and its subsidiaries which provide defined pension benefits in excess of limits imposed by federal tax law. The expense for the Corporation related to the SERP Agreements for the three months ended March 31, 2021 and 2020 was as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
March 31,
|
|
Affected Line Item in the Consolidated
Condensed Statement of Income
|
(In thousands)
|
|
2021
|
|
2020
|
|
Service cost
|
|
$
|
204
|
|
|
$
|
364
|
|
|
Employee benefits
|
Interest cost
|
|
149
|
|
|
134
|
|
|
Miscellaneous expense
|
Total SERP expense
|
|
$
|
353
|
|
|
$
|
498
|
|
|
|
Note 20 – 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 (exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction 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 individually evaluated collateral dependent 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, 2021 using:
|
(In thousands)
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Balance at March 31, 2021
|
Assets
|
|
|
|
|
|
|
|
|
Investment securities:
|
|
|
|
|
|
|
|
|
Obligations of states and political subdivisions
|
|
$
|
—
|
|
|
$
|
298,313
|
|
|
|
|
$
|
298,313
|
|
U.S. Government sponsored entities’ asset-backed securities
|
|
—
|
|
|
814,909
|
|
|
—
|
|
|
814,909
|
|
Corporate debt securities
|
|
—
|
|
|
2,062
|
|
|
—
|
|
|
2,062
|
|
Equity securities
|
|
1,522
|
|
|
—
|
|
|
490
|
|
|
2,012
|
|
Mortgage loans held for sale
|
|
—
|
|
|
17,766
|
|
|
—
|
|
|
17,766
|
|
Mortgage IRLCs
|
|
—
|
|
|
1,080
|
|
|
—
|
|
|
1,080
|
|
Loan interest rate swaps
|
|
—
|
|
|
2,278
|
|
|
—
|
|
|
2,278
|
|
|
|
|
|
|
|
|
|
|
Liabilities
|
|
|
|
|
|
|
|
|
Fair value swap
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
226
|
|
|
$
|
226
|
|
Borrowing interest rate swap
|
|
—
|
|
|
727
|
|
|
—
|
|
|
727
|
|
Loan interest rate swaps
|
|
—
|
|
|
2,278
|
|
|
—
|
|
|
2,278
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair Value Measurements at December 31, 2020 using:
|
(In thousands)
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Balance at December 31, 2020
|
Assets
|
|
|
|
|
|
|
|
|
Investment securities:
|
|
|
|
|
|
|
|
|
Obligations of states and political subdivisions
|
|
$
|
—
|
|
|
$
|
305,218
|
|
|
$
|
—
|
|
|
$
|
305,218
|
|
U.S. Government sponsored entities’ asset-backed securities
|
|
—
|
|
|
752,109
|
|
|
—
|
|
|
752,109
|
|
Corporate debt securities
|
|
—
|
|
|
2,014
|
|
|
—
|
|
|
2,014
|
|
Equity securities
|
|
2,026
|
|
|
—
|
|
|
485
|
|
|
2,511
|
|
Mortgage loans held for sale
|
|
—
|
|
|
31,666
|
|
|
—
|
|
|
31,666
|
|
Mortgage IRLCs
|
|
—
|
|
|
1,545
|
|
|
—
|
|
|
1,545
|
|
Loan interest rate swaps
|
|
—
|
|
|
3,934
|
|
|
—
|
|
|
3,934
|
|
|
|
|
|
|
|
|
|
|
Liabilities
|
|
|
|
|
|
|
|
|
Fair value swap
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
226
|
|
|
$
|
226
|
|
Borrowing interest rate swap
|
|
—
|
|
|
885
|
|
|
—
|
|
|
885
|
|
Loan interest rate swaps
|
|
—
|
|
|
3,934
|
|
|
—
|
|
|
3,934
|
|
The following methods and assumptions were used by the Company in determining the fair value of the financial assets and liabilities discussed above:
Interest rate swaps: The fair values of interest rate swaps are based on valuation models using observable market data as of the measurement date (Level 2).
Investment securities: Fair values for investment securities are based on quoted market prices, where available (Level 1). If quoted market prices are not available, fair values are based on quoted market prices of comparable instruments (Level 2).
For securities where quoted prices or market prices of similar securities are not available, fair values are calculated using discounted cash flows (Level 3).
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: 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 market prices for similar product types and, therefore, are classified in Level 2.
The tables below present a reconciliation of the beginning and ending balances of the Level 3 inputs for the three months ended March 31, 2021 and 2020, for financial instruments measured on a recurring basis and classified as Level 3:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Level 3 Fair Value Measurements
|
Three months ended March 31, 2021 and 2020
|
(In thousands)
|
|
Equity
Securities
|
|
Fair value
swap
|
Balance at January 1, 2021
|
|
$
|
485
|
|
|
$
|
(226)
|
|
Total gains (losses)
|
|
|
|
|
Included in other income
|
|
5
|
|
|
—
|
|
Balance at March 31, 2021
|
|
$
|
490
|
|
|
$
|
(226)
|
|
|
|
|
|
|
Balance at January 1, 2020
|
|
$
|
456
|
|
|
$
|
(226)
|
|
Total gains (losses)
|
|
|
|
|
Included in other income
|
|
7
|
|
|
—
|
|
Balance at March 31, 2020
|
|
$
|
463
|
|
|
$
|
(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 as described below:
Impaired Loans: When 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 credit 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 the 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.
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 received by the Company: real estate appraisals, income approach appraisals, and lot development loan appraisals. 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.
Other repossessed assets: Other repossessed assets are initially recorded at fair value less costs to sell when acquired. The carrying value of other repossessed assets 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. As of March 31, 2021 and December 31, 2020, other repossessed assets primarily consisted of aircraft acquired as part of a loan workout. Fair value is based on Aircraft Bluebook and VREF Aircraft Value Reference values based on the model of aircraft and adjustments for flight hours, features and other variables. Such adjustments result in a Level 3 classification of the inputs for determining fair value.
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 secured by real estate are carried at fair value if they have been charged down to fair value or if a specific valuation allowance has been established. As of March 31, 2021 and December 31, 2020, there were no PCD loans carried at fair value. 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 with respect to the property's value subsequent to the initial measurement.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair Value Measurements at March 31, 2021 using:
|
(In thousands)
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Balance at March 31, 2021
|
Impaired loans recorded at fair value:
|
|
|
|
|
|
|
|
|
Commercial real estate
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
7,151
|
|
|
$
|
7,151
|
|
Residential real estate
|
|
—
|
|
|
—
|
|
|
333
|
|
|
333
|
|
Total impaired loans recorded at fair value
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
7,484
|
|
|
$
|
7,484
|
|
|
|
|
|
|
|
|
|
|
MSRs
|
|
$
|
—
|
|
|
$
|
13,307
|
|
|
$
|
—
|
|
|
$
|
13,307
|
|
|
|
|
|
|
|
|
|
|
OREO recorded at fair value:
|
|
|
|
|
|
|
|
|
Residential real estate
|
|
—
|
|
|
—
|
|
|
735
|
|
|
735
|
|
Total OREO recorded at fair value
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
735
|
|
|
$
|
735
|
|
|
|
|
|
|
|
|
|
|
Other repossessed assets
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
3,164
|
|
|
$
|
3,164
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair Value Measurements at December 31, 2020 using:
|
(In thousands)
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Balance at December 31, 2020
|
Impaired loans recorded at fair value:
|
|
|
|
|
|
|
|
|
Commercial real estate
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
6,749
|
|
|
$
|
6,749
|
|
Residential real estate
|
|
—
|
|
|
—
|
|
|
175
|
|
|
175
|
|
Total impaired loans recorded at fair value
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
6,924
|
|
|
$
|
6,924
|
|
|
|
|
|
|
|
|
|
|
MSRs
|
|
$
|
—
|
|
|
$
|
12,179
|
|
|
$
|
—
|
|
|
$
|
12,179
|
|
|
|
|
|
|
|
|
|
|
OREO recorded at fair value:
|
|
|
|
|
|
|
|
|
Residential real estate
|
|
—
|
|
|
—
|
|
|
735
|
|
|
735
|
|
Total OREO recorded at fair value
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
735
|
|
|
$
|
735
|
|
|
|
|
|
|
|
|
|
|
Other repossessed assets
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
3,164
|
|
|
$
|
3,164
|
|
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 1) loans which are not collateral dependent, 2) loans which are not secured by real estate, and 3) 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, 2021
|
(In thousands)
|
|
Loan Balance
|
|
Prior Charge-Offs
|
|
Specific Valuation Allowance
|
|
Carrying Balance
|
Impaired loans recorded at fair value
|
|
$
|
7,890
|
|
|
$
|
203
|
|
|
$
|
406
|
|
|
$
|
7,484
|
|
Remaining impaired loans
|
|
92,517
|
|
|
386
|
|
|
4,556
|
|
|
87,961
|
|
Total impaired loans
|
|
$
|
100,407
|
|
|
$
|
589
|
|
|
$
|
4,962
|
|
|
$
|
95,445
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2020
|
(In thousands)
|
|
Recorded Investment
|
|
Prior Charge-Offs
|
|
Specific Valuation Allowance
|
|
Carrying Balance
|
Impaired loans recorded at fair value
|
|
$
|
8,256
|
|
|
$
|
269
|
|
|
$
|
1,332
|
|
|
$
|
6,924
|
|
Remaining impaired loans
|
|
100,199
|
|
|
386
|
|
|
4,102
|
|
|
96,097
|
|
Total impaired loans
|
|
$
|
108,455
|
|
|
$
|
655
|
|
|
$
|
5,434
|
|
|
$
|
103,021
|
|
The income (expense) from credit adjustments related to impaired loans carried at fair value was $0.9 million and $(57,000) for the three-month periods ended March 31, 2021 and 2020, respectively.
MSRs totaled $13.6 million at March 31, 2021. Of this $13.6 million MSR carrying balance, $13.3 million was recorded at fair value and included a valuation allowance of $2.3 million. The remaining $328,000 was recorded at cost, as the fair value exceeded cost at March 31, 2021. At December 31, 2020, MSRs totaled $12.2 million. Of this $12.2 million MSR carrying balance, $12.2 million was recorded at fair value and included a valuation allowance of $3.2 million. The remaining $31,000 was recorded at cost, as the fair value exceeded cost at December 31, 2020. The income/(expense) related to MSRs carried at fair value during the three months ended March 31, 2021 and 2020 was $852,000 and $(1.5) million, respectively.
Total OREO held by Park at March 31, 2021 and December 31, 2020 was $844,000 and $1.4 million, respectively. Approximately 87% and 51% of OREO held by Park at March 31, 2021 and December 31, 2020, respectively, was carried at fair value due to fair value adjustments made subsequent to the initial OREO measurement. At both March 31, 2021 and December 31, 2020, OREO held at fair value, less estimated selling costs, amounted to $735,000. There was no expense related to OREO fair value adjustments for the three-month period ended March 31, 2021. The net expense related to OREO fair value adjustments was $2,000 for the three-month period ended March 31, 2020.
Other repossessed assets totaled $3.8 million at March 31, 2021, of which $3.2 million was recorded at fair value. Other repossessed assets totaled $3.6 million at December 31, 2020, of which $3.2 million was recorded at fair value. There was no
expense related to fair value adjustments on other repossessed assets for either of the three-month periods ended March 31, 2021 and 2020.
The following tables present qualitative information about Level 3 fair value measurements for financial instruments measured at fair value on a nonrecurring basis at March 31, 2021 and December 31, 2020:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2021
|
(In thousands)
|
|
Fair Value
|
|
Valuation Technique
|
|
Unobservable Input(s)
|
|
Range
(Weighted Average)
|
Impaired loans:
|
|
|
|
|
|
|
|
|
Commercial real estate
|
|
$
|
7,151
|
|
|
Sales comparison approach
|
|
Adj to comparables
|
|
0.0% - 139.0% (12.2%)
|
|
|
|
|
Income approach
|
|
Capitalization rate
|
|
8.5% (8.5%)
|
|
|
|
|
Cost approach
|
|
Entrepreneurial profit
|
|
10.0% (10.0%)
|
|
|
|
|
Cost approach
|
|
Accumulated depreciation
|
|
1.0% - 4.3% (1.7%)
|
|
|
|
|
|
|
|
|
|
Residential real estate
|
|
$
|
333
|
|
|
Sales comparison approach
|
|
Adj to comparables
|
|
2.0% - 47.8% (22.1%)
|
|
|
|
|
|
|
|
|
|
Other real estate owned:
|
|
|
|
|
|
|
|
|
Residential real estate
|
|
$
|
735
|
|
|
Sales comparison approach
|
|
Adj to comparables
|
|
1.2% - 54.1% (31.4%)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2020
|
(In thousands)
|
|
Fair Value
|
|
Valuation Technique
|
|
Unobservable Input(s)
|
|
Range
(Weighted Average)
|
Impaired loans:
|
|
|
|
|
|
|
|
|
Commercial real estate
|
|
$
|
6,749
|
|
|
Sales comparison approach
|
|
Adj to comparables
|
|
0.0% - 139.0% (11.8%)
|
|
|
|
|
Income approach
|
|
Capitalization rate
|
|
9.3% - 20.0% (10.3%)
|
|
|
|
|
Cost approach
|
|
Entrepreneurial profit
|
|
10.0% (10.0%)
|
|
|
|
|
Cost approach
|
|
Accumulated depreciation
|
|
2.6% (2.6%)
|
|
|
|
|
|
|
|
|
|
Residential real estate
|
|
$
|
175
|
|
|
Sales comparison approach
|
|
Adj to comparables
|
|
2.0% - 47.8% (11.9%)
|
|
|
|
|
|
|
|
|
|
Other real estate owned:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential real estate
|
|
$
|
735
|
|
|
Sales comparison approach
|
|
Adj to comparables
|
|
7.8% - 9.9% (8.9%)
|
Assets Measured at Net Asset Value:
Park's portfolio of equity investments in limited partnerships which provide mezzanine funding ("Partnership Investments") are valued using the NAV practical expedient in accordance with ASC 820.
At March 31, 2021 and December 31, 2020, Park had Partnership Investments with a NAV of $15.6 million and $15.4 million, respectively. At both March 31, 2021 and December 31, 2020, Park had $6.2 million in unfunded commitments related to these Partnership Investments. For the three-month periods ended March 31, 2021 and 2020, Park recognized income (expense) of $1.4 million and $(0.2) million, respectively, related to these Partnership Investments.
The fair value of certain financial instruments at March 31, 2021 and December 31, 2020, was as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2021
|
|
|
|
|
Fair Value Measurements
|
(In thousands)
|
|
Carrying value
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Total fair value
|
Financial assets:
|
|
|
|
|
|
|
|
|
|
|
Cash and money market instruments
|
|
$
|
943,275
|
|
|
$
|
943,275
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
943,275
|
|
Investment securities (1)
|
|
1,115,284
|
|
|
—
|
|
|
1,115,284
|
|
|
—
|
|
|
1,115,284
|
|
Other investment securities (2)
|
|
2,012
|
|
|
1,522
|
|
|
—
|
|
|
490
|
|
|
2,012
|
|
|
|
|
|
|
|
|
|
|
|
|
Mortgage loans held for sale
|
|
17,766
|
|
|
—
|
|
|
17,766
|
|
|
—
|
|
|
17,766
|
|
Mortgage IRLCs
|
|
1,080
|
|
|
—
|
|
|
1,080
|
|
|
—
|
|
|
1,080
|
|
Impaired loans carried at fair value
|
|
7,484
|
|
|
—
|
|
|
—
|
|
|
7,484
|
|
|
7,484
|
|
Other loans, net
|
|
7,055,529
|
|
|
—
|
|
|
—
|
|
|
7,079,812
|
|
|
7,079,812
|
|
Loans receivable, net
|
|
$
|
7,081,859
|
|
|
$
|
—
|
|
|
$
|
18,846
|
|
|
$
|
7,087,296
|
|
|
$
|
7,106,142
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial liabilities:
|
|
|
|
|
|
|
|
|
|
|
Time deposits
|
|
$
|
822,195
|
|
|
$
|
—
|
|
|
$
|
827,039
|
|
|
$
|
—
|
|
|
$
|
827,039
|
|
Other
|
|
2,776
|
|
|
2,776
|
|
|
—
|
|
|
—
|
|
|
2,776
|
|
Deposits (excluding demand deposits)
|
|
$
|
824,971
|
|
|
$
|
2,776
|
|
|
$
|
827,039
|
|
|
$
|
—
|
|
|
$
|
829,815
|
|
|
|
|
|
|
|
|
|
|
|
|
Short-term borrowings
|
|
$
|
305,385
|
|
|
$
|
—
|
|
|
$
|
305,385
|
|
|
$
|
—
|
|
|
$
|
305,385
|
|
Long-term debt
|
|
30,000
|
|
|
—
|
|
|
$
|
29,413
|
|
|
$
|
—
|
|
|
$
|
29,413
|
|
Subordinated notes
|
|
187,881
|
|
|
—
|
|
|
186,951
|
|
|
—
|
|
|
186,951
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivative financial instruments - assets:
|
|
|
|
|
|
|
|
|
|
|
Loan interest rate swaps
|
|
2,278
|
|
|
—
|
|
|
2,278
|
|
|
—
|
|
|
2,278
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivative financial instruments - liabilities:
|
|
|
|
|
|
|
|
|
|
|
Fair value swap
|
|
226
|
|
|
—
|
|
|
—
|
|
|
226
|
|
|
226
|
|
Borrowing interest rate swap
|
|
727
|
|
|
—
|
|
|
727
|
|
|
—
|
|
|
727
|
|
Loan interest rate swaps
|
|
2,278
|
|
|
—
|
|
|
2,278
|
|
|
—
|
|
|
2,278
|
|
(1) Includes AFS debt securities.
(2) Excludes FHLB stock and FRB stock which are carried at their respective redemption values, investment securities accounted for at modified cost as these investments do not have a readily determinable fair value, and Partnership Investments valued using the NAV practical expedient.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2020
|
|
|
|
|
Fair Value Measurements
|
(In thousands)
|
|
Carrying value
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Total fair value
|
Financial assets:
|
|
|
|
|
|
|
|
|
|
|
Cash and money market instruments
|
|
$
|
370,474
|
|
|
$
|
370,474
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
370,474
|
|
Investment securities (1)
|
|
1,059,341
|
|
|
—
|
|
|
1,059,341
|
|
|
—
|
|
|
1,059,341
|
|
Other investment securities (2)
|
|
2,511
|
|
|
2,026
|
|
|
—
|
|
|
485
|
|
|
2,511
|
|
|
|
|
|
|
|
|
|
|
|
|
Mortgage loans held for sale
|
|
31,666
|
|
|
—
|
|
|
31,666
|
|
|
—
|
|
|
31,666
|
|
Mortgage IRLCs
|
|
1,545
|
|
|
—
|
|
|
1,545
|
|
|
—
|
|
|
1,545
|
|
Impaired loans carried at fair value
|
|
6,924
|
|
|
—
|
|
|
—
|
|
|
6,924
|
|
|
6,924
|
|
Other loans, net
|
|
7,051,975
|
|
|
—
|
|
|
—
|
|
|
7,072,339
|
|
|
7,072,339
|
|
Loans receivable, net
|
|
$
|
7,092,110
|
|
|
$
|
—
|
|
|
$
|
33,211
|
|
|
$
|
7,079,263
|
|
|
$
|
7,112,474
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial liabilities:
|
|
|
|
|
|
|
|
|
|
|
Time deposits
|
|
$
|
864,573
|
|
|
$
|
—
|
|
|
$
|
870,804
|
|
|
—
|
|
|
$
|
870,804
|
|
Other
|
|
1,379
|
|
|
1,379
|
|
|
—
|
|
|
—
|
|
|
1,379
|
|
Deposits (excluding demand deposits)
|
|
$
|
865,952
|
|
|
$
|
1,379
|
|
|
$
|
870,804
|
|
|
$
|
—
|
|
|
$
|
872,183
|
|
|
|
|
|
|
|
|
|
|
|
|
Short-term borrowings
|
|
$
|
342,230
|
|
|
$
|
—
|
|
|
$
|
342,230
|
|
|
$
|
—
|
|
|
$
|
342,230
|
|
Long-term debt
|
|
32,500
|
|
|
—
|
|
|
31,376
|
|
|
—
|
|
|
31,376
|
|
Subordinated notes
|
|
187,774
|
|
|
—
|
|
|
179,147
|
|
|
—
|
|
|
179,147
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivative financial instruments - assets:
|
|
|
|
|
|
|
|
|
|
|
Loan interest rate swaps
|
|
3,934
|
|
|
—
|
|
|
3,934
|
|
|
—
|
|
|
3,934
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivative financial instruments - liabilities:
|
|
|
|
|
|
|
|
|
|
|
Fair value swap
|
|
$
|
226
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
226
|
|
|
$
|
226
|
|
Borrowing interest rate swap
|
|
885
|
|
|
—
|
|
|
885
|
|
|
—
|
|
|
885
|
|
Loan interest rate swaps
|
|
3,934
|
|
|
—
|
|
|
3,934
|
|
|
—
|
|
|
3,934
|
|
(1) Includes AFS debt securities.
(2) Excludes FHLB stock and FRB stock which are carried at their respective redemption values, investment securities accounted for at modified cost as these investments do not have a readily determinable fair value, and Partnership Investments valued using the NAV practical expedient.
Note 21 - Revenue from Contracts with Customers
All of Park's revenue from contracts with customers within the scope of ASC 606 is recognized within "Other income" in the Consolidated Condensed Statements of Income. The following table presents the Corporation's sources of other income by revenue stream and operating segment for the three-month periods ended March 31, 2021 and March 31, 2020.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
March 31, 2021
|
Revenue by Operating Segment (in thousands)
|
|
PNB
|
|
All Other
|
|
Total
|
Income from fiduciary activities
|
|
|
|
|
|
|
Personal trust and agency accounts
|
|
$
|
2,387
|
|
|
$
|
—
|
|
|
$
|
2,387
|
|
Employee benefit and retirement-related accounts
|
|
2,301
|
|
|
—
|
|
|
2,301
|
|
Investment management and investment advisory agency accounts
|
|
3,009
|
|
|
—
|
|
|
3,009
|
|
Other
|
|
476
|
|
|
—
|
|
|
476
|
|
Service charges on deposit accounts
|
|
|
|
|
|
|
Non-sufficient funds (NSF) fees
|
|
1,134
|
|
|
—
|
|
|
1,134
|
|
Demand deposit account (DDA) charges
|
|
789
|
|
|
—
|
|
|
789
|
|
Other
|
|
131
|
|
|
—
|
|
|
131
|
|
Other service income (1)
|
|
|
|
|
|
|
Credit card
|
|
580
|
|
|
—
|
|
|
580
|
|
HELOC
|
|
89
|
|
|
—
|
|
|
89
|
|
Installment
|
|
34
|
|
|
—
|
|
|
34
|
|
Real estate
|
|
8,438
|
|
|
—
|
|
|
8,438
|
|
Commercial
|
|
418
|
|
|
58
|
|
|
476
|
|
Debit card fee income
|
|
6,086
|
|
|
—
|
|
|
6,086
|
|
Bank owned life insurance income (2)
|
|
1,085
|
|
|
80
|
|
|
1,165
|
|
ATM fees
|
|
530
|
|
|
—
|
|
|
530
|
|
Loss on sale of OREO, net
|
|
(33)
|
|
|
—
|
|
|
(33)
|
|
Gain on equity securities, net (2)
|
|
834
|
|
|
976
|
|
|
1,810
|
|
Other components of net periodic pension benefit income (2)
|
|
1,987
|
|
|
51
|
|
|
2,038
|
|
Miscellaneous (3)
|
|
2,525
|
|
|
124
|
|
|
2,649
|
|
Total other income
|
|
$
|
32,800
|
|
|
$
|
1,289
|
|
|
$
|
34,089
|
|
(1) Of the $9.6 million of aggregate revenue included within "Other service income", approximately $1.3 million is within the scope of ASC 606, with the remaining $8.3 million consisting primarily of residential real estate loan fees which are out of scope.
(2) Not within the scope of ASC 606.
(3) "Miscellaneous" income includes brokerage income, safe deposit box rentals, and miscellaneous bank fees totaling $2.6 million, all of which are within scope of ASC 606.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
March 31, 2020
|
Revenue by Operating Segment (in thousands)
|
|
PNB
|
|
All Other
|
|
Total
|
Income from fiduciary activities
|
|
|
|
|
|
|
Personal trust and agency accounts
|
|
$
|
2,171
|
|
|
$
|
—
|
|
|
$
|
2,171
|
|
Employee benefit and retirement-related accounts
|
|
1,916
|
|
|
—
|
|
|
1,916
|
|
Investment management and investment advisory agency accounts
|
|
2,642
|
|
|
—
|
|
|
2,642
|
|
Other
|
|
384
|
|
|
—
|
|
|
384
|
|
Service charges on deposit accounts
|
|
|
|
|
|
|
Non-sufficient funds (NSF) fees
|
|
1,615
|
|
|
—
|
|
|
1,615
|
|
Demand deposit account (DDA) charges
|
|
761
|
|
|
—
|
|
|
761
|
|
Other
|
|
152
|
|
|
—
|
|
|
152
|
|
Other service income (1)
|
|
|
|
|
|
|
Credit card
|
|
596
|
|
|
1
|
|
|
597
|
|
HELOC
|
|
98
|
|
|
—
|
|
|
98
|
|
Installment
|
|
53
|
|
|
—
|
|
|
53
|
|
Real estate
|
|
2,647
|
|
|
—
|
|
|
2,647
|
|
Commercial
|
|
371
|
|
|
—
|
|
|
371
|
|
Debit card fee income
|
|
4,960
|
|
|
—
|
|
|
4,960
|
|
Bank owned life insurance income (2)
|
|
1,166
|
|
|
82
|
|
|
1,248
|
|
ATM fees
|
|
412
|
|
|
—
|
|
|
412
|
|
Loss on sale of OREO, net
|
|
(196)
|
|
|
—
|
|
|
(196)
|
|
Gain (loss) on equity securities, net (2)
|
|
166
|
|
|
(1,139)
|
|
|
(973)
|
|
Other components of net periodic pension benefit income (2)
|
|
1,940
|
|
|
48
|
|
|
1,988
|
|
Miscellaneous (3)
|
|
1,627
|
|
|
13
|
|
|
1,640
|
|
Total other income
|
|
$
|
23,481
|
|
|
$
|
(995)
|
|
|
$
|
22,486
|
|
(1) Of the $3.8 million of aggregate revenue included within "Other service income", approximately $1.3 million is within the scope of ASC 606, with the remaining $2.5 million consisting primarily of residential real estate loan fees which are out of scope.
(2) Not within the scope of ASC 606.
(3) "Miscellaneous" income includes brokerage income, safe deposit box rentals, and miscellaneous bank fees totaling $1.6 million, all of which are within scope of ASC 606.
A description of Park's material revenue streams accounted for under ASC 606 follows:
Income from fiduciary activities (gross): Park earns fiduciary fee income and investment brokerage fees from its contracts with trust customers for various fiduciary and investment-related services. These fees are earned over time as the Company provides the contracted monthly and quarterly services and are generally assessed based on the market value of the trust assets.
Service charges on deposit accounts and ATM fees: The Corporation earns fees from its deposit customers for transaction-based, account maintenance, and overdraft services. Transaction-based fees, which include services such as ATM use fees, stop payment charges, statement rendering, and ACH fees, are recognized at the time the transaction is executed as that is the point in time the Corporation fulfills the customer's request. Account maintenance fees, which relate primarily to monthly maintenance, are generally recognized at the end of the month, representing the period over which the Corporation satisfies the performance obligation. Overdraft fees are recognized at the point in time that the overdraft occurs. Service charges on deposits are withdrawn from the customer's account balance.
Other service income: Other service income includes income from (1) the sale and servicing of loans sold to the secondary market, (2) incentive income from third-party credit card issuers, and (3) loan customers for various loan-related activities and services. Income related to the sale and servicing of loans sold to the secondary market is included within Other service income, but is not within the scope of ASC 606. Services that fall within the scope of ASC 606 are recognized as revenue when the Company satisfies its performance obligation to the customer.
Debit card fee income: Park earns interchange fees from debit cardholder transactions conducted primarily through the Visa payment network. Interchange fees from cardholder transactions represent a percentage of the underlying transaction value and are recognized daily, net of card network fees, concurrently with the transaction processing services provided to the cardholder.
Gain or loss on sale of OREO, net: The Corporation records a gain or loss from the sale of OREO when control of the property transfers to the buyer, which generally occurs at the time of delivery of an executed deed. When Park finances the sale of OREO to the buyer, the Corporation assesses whether the buyer is committed to perform the buyer's obligation under the contract and whether collectability of the transaction price is probable. Once these criteria are met, the OREO asset is derecognized and the gain or loss on sale is recorded upon the transfer of control of the property to the buyer. In determining the gain or loss on the sale, the Corporation adjusts the transaction price and related gain (loss) on sale if a significant financing component is present.